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FEDERAL TRADE COMMISSION v. 1492828 ONTARIO INC.

May 6, 2003

FEDERAL TRADE COMMISSION, PLAINTIFF,
v.
1492828 ONTARIO INC., D/B/A FIRST CAPITAL CONSUMERS GROUP, US GUARDIAN UNITED CONSUMERS, TRANS AMERICA UNITED BENEFITS GROUP, TRANSGLOBAL NATIONAL CONSUMERS GROUP, AND FIRST GUARDIAN NATIONAL BENEFITS, DAVID DALGLISH, LESLIE ANDERSON, LLOYD PRUDENZA, MARK LENNOX, DEFENDANTS



The opinion of the court was delivered by: Ronald A. Guzman, United States Judge

MEMORANDUM OPINION AND ORDER

Pending is Defendant Leslie Anderson's Rule 12(b)(2) Motion to Dismiss Due to Lack of Personal Jurisdiction. For the reasons set forth in this Memorandum Opinion and Order, Defendant's motion is denied.

FACTS

Defendant Anderson is a 50% owner and self-described president of First Capital, a closely-held corporation incorporated in Ontario, Canada on September 14th, 2001. (Pl.'s Response Attachment B 2). Upon suspicion of fraud (Def's Motion. 4), the United States Federal Trade Commission turned its attention to certain telemarketing methods employed by First Capital. (Pl's Response 6). FTC Investigator Alan Krause was assigned to inspect First Capital's business practices. (Pl.'s Response Attachment B 1). Sometime thereafter, the FTC elected to charge the associates of First Capital with various offenses involving a fraudulent telemarketing scheme. (Pl's Compl.).

On October 21, 2002, Defendant was arrested and charged with the offenses. (Def.'s Affidavit 3). Mr. Krause and Ms. Helen Czerniak, an investigator with the Ontario Ministry of Business and Consumer Services, approached Defendant while he was being held under arrest at 53 Division of the Toronto Police Services. (Pl.'s Response Attachment B 6). Ms. Czerniak handed Defendant his summons and complaint, which he accepted. (Def.'s Affidavit 3; Pl.'s Response Attachment B 6). The papers were subsequently taken away from Defendant because the size of the stack rendered them a potential weapon. (Pl.'s Response Attachment B 6). The summons and complaint were placed in his property bag at the jail along with his personal items (Pl.'s Response Attachment B 6), and the rest of the court documents remained with Mr. Krause and Ms. Czerniak. (Pl.'s Response Attachment B 6). Some time thereafter Gordon Goldman, who introduced himself as the attorney for the First Capital defendants, accepted the papers on Anderson's behalf (Pl.'s Response Attachment B 7). In the days that followed Defendant retained the services of the firm Schuyler, Roche & Zwirner, who apparently received the service of process from Goldman. (Def.'s Affidavit 4). Defendant alleges the summons and complaint were never received by him or his lawyers. (Def's Affidavit 4). The summons and complaint remained, according to Plaintiff, in the defendant's personal property bag. (Pl.'s Response Attachment B 7),

Defendant first asserts that he was not properly served under the Hague Convention and Ontario law. (Def.'s Motion 1-4). Second, he claims that as a passive investor he does not have the requisite business contacts to anticipate being tried in a United States court. (Def.'s Motion 4).

DISCUSSION

The burden of proving personal jurisdiction "lies with the party invoking the federal forum." Stuart-James Company v. Rossini, 736 F. Supp. 800, 805 (N.D. Ill. 1990). However, in order to defeat this motion to dismiss, the court "must construe all facts concerning jurisdiction, including factual disputes, in favor of the plaintiff" F. McConnell and Sons v. Target Data Systems, 84 F. Supp.2d 961, 966 (N.D.Ind. 1999) (citing Deluxe Ice Cream Co. v. R.C.H. Tool Corp., 726 F.2d 1209, 1215 (7th Cir. 1984)). Any conflicting evidence will therefore be resolved in support of the FTC. Turnock v. Cope, 816 F.2d 332, 333 (7th Cir. 1987).

I. Service by a Canadian Official was Proper

Defendant Anderson claims that service of process was improper, due to lack of service by the appropriate authority and failure to include the correct documents. (Def.'s Motion). Rule 4(f) of the Federal Rules of Civil Procedure provides that when a person outside the United States is to be served, that process may be accomplished "by any internationally agreed upon means reasonably calculated to give notice, such as those authorized by the Hague Convention on the Service Abroad of Judicial and Extrajudicial Documents." 28 U.S.C.A. Fed.R.Civ.P. 4(f) (1992) (herein after "Convention"). This Convention, of which both Canada and the United States are signatories, provides a uniform method of service of process for foreign defendants.

Defendant first claims that the Convention mandates service through a "Central Authority", which in this matter would be the Ministry of the Attorney General for Ontario. Helen Czerniak, an investigator for the Ontario Ministry of Consumer and Business Services, was admittedly not such an `authority'. Defendant, however, is erroneous in his narrow reading of the Convention. Article 10 of the Convention provides that "judicial officers, officials, or other competent persons of the State of destination" may serve a summons, "[p]rovided the State of destination does not object." Article 10(b). Ms. Czerniak, as a government employee of the MCBS, is certainly an official. Canada, when approving the Convention, "has not declared to object to methods of service of Article 10, sub-paragraphs b) and c)." Annex to the Convention, Canada III. "Canada's internal laws themselves are flexible about who is authorized to affect service of process. The laws of Ontario governing service of process do not proscribe government officials or even private persons from effecting service of process." U.S. v. Islip, 18 F. Supp.2d 1047, 1057 (CIT 1998).

Furthermore, assuming Ms. Czerniak is not a qualified official under the Convention, she is certainly a "competent person". Neither the Convention nor Ontario law defines competency in the context of service of process. However, the United States Court of International Trade defines "competent" as "any person who is not a party and who is at least 18 years of age." USCIT Rule 4(c). In Islip, the Court of International Trade applied this rule to find that a Canadian customs investigator properly served an Ontario defendant with a United States summons. 18 F. Supp.2d at 1057. Taking an expansive view of Canadian law, and considering United States precedent, Ms. Czerniak would be "competent" by virtue of being over the age of 18 and not a party to Defendant's case.

Defendant's claim of insufficient service of process must fail for several reasons. First, Canada did not raise an objection to the procedure in question; in fact, the government specifically authorized this method of process when consenting to the Convention. Second, the service was in full compliance of the laws of the State of Ontario, of which Defendant is a resident. See Consolidated Regulations of Ontario, R.R.O. 1990, Reg. 194, § 16.02 (Service of Documents — Personal Service). Third, Helen Czerniak, as an adult over the age of 18 and a government-employed investigator not affiliated with this case, was competent and qualified to serve Defendant with his court papers. Ontario law permits service by government officials and even private persons. U.S. v Islip, 18 F. Supp.2d 1047, 1057. The Convention was intended to provide a consistent and standardized procedure for service of process across borders, and to "simplify and expedite the procedure." Convention, Fed.R.Civ.P. Rule 4(f). The purpose of that agreement was not circumvented here. Defendant was served by a competent official; the process was efficient and effective; thus service was proper and in full compliance with the Hague Convention's rules.

Defendant next claims that he did not receive all the required papers for proper service, including the summons or complaint. (Def.'s Affidavit 4). Ms. Czerniak has attested, and Mr. Krause maintains, that the paperwork was complete and placed with Defendant's personal items at the jail. (Pl.'s Response 3). "The allegations in [plaintiffs] complaint are to be taken as true unless controverted by the defendants' affidavits; and any conflicts in the affidavits are to be resolved in [plaintiffs] favor." Turnock, 816 F.2d at 333 (citing O'Hare Intern Bank v. Hampton, 437 F.2d 1173, 1176 (7th Cir. ...


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