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WALDOCK v. M.J. SELECT GLOBAL

October 6, 2004.

JOHN H. WALDOCK, solely as Trustee of the John H. Waldock Trust, et al., Plaintiffs,
v.
M.J. SELECT GLOBAL, LTD., a Bahamian investment company now in Liquidation, et al., Defendants.



The opinion of the court was delivered by: AMY J. ST. EVE, District Judge

MEMORANDUM OPINION AND ORDER

Plaintiffs have filed a First Amended Complaint ("FAC") against multiple Defendants alleging a fraudulent investment scheme in connection with the purchase of shares in M.J. Select Global, Ltd. ("M.J. Select"), a Bahamian mutual fund. Plaintiffs have sued Defendants Oceanic Bank and Trust, Ltd., Kenneth Clowes, Terah Rahming and others for losses resulting from their investments in the fund. Defendants Oceanic, Clowes and Rahming have moved to dismiss the FAC. The Oceanic Defendants seek to dismiss the FAC for lack of personal jurisdiction, lack of standing and failure to state a claim. The Court grants their motion in part and denies it in part.

BACKGROUND

  This case is related to Zurich Capital Markets Inc. v. Coglianese, et al., No. 03 C 7960, (the "ZCM Case"), also pending before this Court. The Court recently addressed similar motions in that case. See Zurich Capital Markets Inc. v. Coglianese, et al., No. 03 C 7960, 2004 WL 2191596 (N.D. Ill. Sept. 22, 2004). (the "September 22, 2004 Opinion") and Zurich Capital Markets Inc. v. Coglianese, et al., No. 03 C 7960, 2004 WL 1881782 (N.D. Ill. Aug. 2, 2004) (the "August 2, 2004 Opinion"). Although the ZCM Case involves different plaintiffs and a different complaint, because many of the allegations are similar to the ones in this case and because both cases are based on investments in the same allegedly fraudulent scheme, the Court's reasoning in its September 22, 2004 and August 2, 2004 Opinions applies equally to many of the issues in this case.

  I. The Plaintiffs

  The Plaintiffs in this case all invested in M.J. Select, and lost all or substantial portions of their investments. Plaintiffs include: John H. Waldock, solely as Trustee of the John H. Waldock Trust; Mary Jane S. Hill and John E. Rosino, solely as Trustees of the Andrew W. Waldock Trust, John H. Waldock, Jr. Trust, Julia Wright Waldock Trust, Cameron Douglas Waldock Trust, Gary Phillip Liebenthal, II Trust, Samuel Louis Waldock Trust, Benjamin Nicholas Waldock Trust, Dustin J. Houck Trust, Daniel R. Houck Trust, Erik J. VanDootingh Trust, Ian A. VanDootingh Trust, John H. Waldock, II Trust, Andrew W. Waldock, Jr. Trust, Christopher J. Waldock Trust; 766347 Ontario Ltd., a Canadian corporation; The James F. Boughner Foundation, a Canadian corporation; Ed Pettegrew, Sr., a citizen of Florida; David Miller a citizen of California, John A. Copeland, as Trustee under a trust agreement dated April 18, 1988; Jack C. Kenning and Barbara Straka-Kenning, citizens of Ohio; Robert M. Warner, Sr. individually and as beneficiary of Independent Trust Corporation Trust, for Adam Scott Warner and for Robert Warner, Account No. 263 in the name of Adam S. Warner and Account No. 264 in the name of Andrew Robert Warner; and George Lukas, a citizen of New Jersey. Collectively, Plaintiffs are referred to as the "Waldock Plaintiffs" or "Plaintiffs." II. The Oceanic Defendants

  Plaintiffs have sued multiple Defendants, including Oceanic Bank and Trust Limited ("Oceanic"), Terah Rahming and Kenneth Clowes. Defendants Oceanic, Clowes, and Rahming are collectively referred to as the "Oceanic Defendants." Oceanic is a bank and trust company with its principal offices located in Nassau, Bahamas. It acquired New World Trustees Limited, effective May 1, 1998. Effective December 31, 1999, Oceanic and New World merged under the name of Oceanic Bank and Trust Limited.

  Rahming was an officer and employee of Oceanic. In 1997, Oceanic appointed Rahming as its Manager of Fund Services. She also served as a director of M.J. Select, and administered its affairs. She is a graduate of Florida Memorial Collect and licensed as a certified public accountant by the Board of Accountancy of the State of Colorado.

  Clowes was the Chief Operating Officer of Oceanic. In addition, he served as a director of M.J. Select, and administered its affairs.

  III. The Alleged Scheme*fn1

  The Waldock Plaintiffs allege that Defendants participated in a complex scheme to defraud M.J. Select's investors. They contend that Defendants used false and misleading offering materials to induce Plaintiffs to invest in M.J. Select. Plaintiffs allege that Defendants falsely represented that M.J. Select followed a "market neutral" trading approach and that its investors could redeem their investments on fifteen days notice. Plaintiffs further allege that Defendants funneled their investments through a series of foreign entities, and then illegally placed them into illiquid investments. In total, Plaintiffs assert that they lost approximately $9.8 million through the allegedly fraudulent scheme.

  Plaintiffs allege that Defendants violated Section 10(b) of the Securities Exchange Act of 1934 (the "Exchange Act"), 15 U.S.C. § 78j(b), Rule 10b-5 promulgated thereunder, Section 20(a) of the Exchange Act, the Investment Company Act of 1940, 15 U.S.C. §§ 80a-7, 80a-46 and 80a-47, and various state law claims. The Oceanic Defendants seek to dismiss each of the claims stated against them.

  ANALYSIS

  I. Legal Standards

  The Oceanic Defendants bring this motion pursuant to Rules 12(b)(2) and 12(b)(6). A Rule 12(b)(2) motion to dismiss for lack of personal jurisdiction tests whether a federal court has personal jurisdiction over a defendant. See Fed.R. Civ. P. 12(b)(2). A plaintiff has the burden of demonstrating the existence of personal jurisdiction over a defendant. Jennings v. AC Hydraulic A/S, No. 03-2157, 2004 WL 1965661, at *1 (7th Cir. Sept. 2, 2004); RAR, Inc. v. Turner Diesel, Ltd., 107 F.3d 1272, 1276 (7th Cir. 1997). A plaintiff need only make a prima facie case that jurisdiction over a defendant is proper. Hyatt Int'l Corp. v. Coco, 302 F.3d 707, 713 (7th Cir. 2002). In determining whether a plaintiff has met this burden, a court may consider affidavits from both parties. Turnock v. Cope, 816 F.2d 332, 333 (7th Cir. 1987).

  A Rule 12(b)(6) "test[s] the sufficiency of the complaint." Triad Assocs., Inc. v. Chicago Housing Auth., 892 F.2d 583, 586 (7th Cir. 1989). When deciding a motion to dismiss pursuant to Rule 12(b)(6), the Court views "the complaint in the light most favorable to the plaintiff, taking as true all well-pleaded factual allegations and making all possible inferences from those allegations in his or her favor." Lee v. City of Chicago, 330 F.3d 456, 459 (7th Cir. 2003). Dismissal is appropriate only where it appears beyond doubt that ...


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