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.
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.
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
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
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 ...