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Robert Handler, Not Individually But As Court Appointed Receiver For v. Nick Heidenry

June 25, 2012


The opinion of the court was delivered by: Hon. George W. Lindberg


Before the Court are motions to dismiss filed by defendants Alicia Eliscu ("Eliscu") [35], the Edward H. Eliscu Marital Trust ("Eliscu Trust") [57], and JPMorgan Chase Bank, N.A. ("Chase"), as trustee of the Antonina B. Meyer Trust ("Meyer Trust") [97]. For the reasons set forth more fully below, the motions to dismiss are denied.

I. Relevant Facts

In May 2008, this Court appointed Robert P. Handler to act as Receiver ("Receiver") for Hyatt Johnson Capital, LLC ("HJ Capital") in SEC v. Hyatt, et al., 08 C 2224. In July 2011, the Receiver initiated the instant action against fifteen named defendants alleging Illinois state law claims for unjust enrichment (Count I), constructive fraudulent transfer (Count II), and fraudulent conveyance (Count III). This Court has supplemental jurisdiction over this case pursuant to 28 U.S.C. § 1367. See Scholes v. Lehmann, 56 F.3d 750, 753 (7th Cir. 1995).

According to the complaint, the Receiver is suing these fifteen defendants for their individual shares of $2,043,953.00 that HJ Capital paid out to them in July, August, and October of 2007. Defendants' individual shares of the $2,043,953 payment constituted a full repayment of each defendant's initial investment in Hyatt Johnson A3 2003, LLC ("HJ A3"), an investment LLC managed by HJ Capital. According to the complaint, Jason Hyatt ("Hyatt") and Jay Johnson ("Johnson") created HJ Capital in 2002 to manage various investment LLCs, including HJ A3. Hyatt and Johnson, through HJ Capital and the related investment LLCs, solicited funds from individuals to invest in commercial aircraft. However, according to the complaint, investor funds were never directly or indirectly invested in commercial aircraft.

In exchange for the investment funds, investors, including these defendants, received membership interests in various investment LLCs managed by HJ Capital. The defendants in this case each received a membership in HJ A3. While these fifteen defendants recovered 100% of their initial investment in HJ A3, to date, other HJ Capital investors have only recovered approximately 6% of their initial investments in other investment LLCs. If the Receiver is successful in recovering these funds, he plans to redistribute them on a pro rata basis to all eligible HJ Capital investors. The Receiver's state law claims are based on the theory that it was unjust/fraudulent for the fifteen named defendants to recover 100% of their initial investments, while other HJ Capital investors only recovered 6% of their initial investments.

II. Legal Analysis

Defendants Eliscu and the Eliscu Trust move to dismiss the complaint as to them based on a lack of personal jurisdiction, improper venue and failure to state a claim upon which relief can be granted.*fn1 Chase moves to dismiss the complaint against the Meyer Trust solely under the theory that the complaint fails to state a claim upon which relief can be granted.

A. Personal Jurisdiction

First, the Court turns to Eliscu and the Eliscu Trust's arguments related to personal jurisdiction. The Receiver bears the burden of demonstrating that this court has personal jurisdiction over Eliscu and the Eliscu Trust. RAR, Inc. v. Turner Diesel, Ltd., 107 F.3d 1272, 1276 (7th Cir. 1997). "When [a] district court rules on a defendant's motion to dismiss based on the submission of written materials, without the benefit of an evidentiary hearing, . . . the plaintiff need only make out a prima facie case of personal jurisdiction." Purdue Research Foundation v. Sanofi-Synthelabo, S.A., 338 F.3d 773, 782 (7th Cir. 2003). The court resolves any factual disputes in the pleadings and affidavits in the Receiver's favor. Riddell, Inc. v. Monica, 03 C 2003, 2003 WL 21799935, *1 (N.D. Ill. July 25, 2003).

The issue before the Court is whether Eliscu and the Eliscu Trust have sufficient minimum contacts with Illinois to require them to defend a lawsuit in the Northern District of Illinois ("this district"). To determine whether this Court has personal jurisdiction over Eliscu and the Eliscu Trust, the Court examines three sources: "(1) state statutory law; (2) state constitutional law; and (3) federal constitutional law." RAR, Inc. v. Turner Diesel, Ltd., 107 F.3d 1272, 1276 (7th Cir. 1997). The Illinois long-arm statute provides that an Illinois court "may . . . exercise jurisdiction on any basis . . . now or hereafter permitted by the Illinois Constitution and the Constitution of the United States." 735 ILCS 5/2-209(c). Because the relevant Illinois statute authorizes personal jurisdiction to the constitutional limits, this Court is only required to examine constitutional law. RAR, Inc., 107 F.3d at 1276.

The Due Process Clause of the Fourteenth Amendment limits when a state can assert in personam jurisdiction over a nonresident individual. See Pennoyer v. Neff, 95 U.S. 714, 733 (1878). A defendant must have "certain minimum contacts with [the state] such that the maintenance of this suit does not offend 'traditional notions of fair play and substantial justice.'" RAR, Inc., 107 F.3d at 1277 (quoting International Shoe Co. v. Washington, 326 U.S. 310, 316 (1945)). The meaning of "minimum contacts" for "a particular case depends on whether the state asserts 'general' or 'specific' jurisdiction." RAR, Inc., 107 F.3d at 1277. The Receiver does not argue that this Court has general jurisdiction over Eliscu and the Eliscu Trust. Therefore, the Court will only examine whether the Receiver has made a prima facie showing of specific jurisdiction.

"Specific jurisdiction refers to jurisdiction over a defendant in a suit "arising out of or related to the defendant's contacts with the forum." Id. (quoting Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 414 n. 8 (1984)). The Court must decided whether Eliscu and the Eliscu Trust have "purposely established minimum contact within [Illinois]" sufficient that they "should reasonably anticipate being haled into court [in Illinois]." Burger King Corp. v. Rudzewicz, 471 U.S. 462, 474 (1985). In order to establish such minimum contacts, the Receiver must show that "the conduct underlying the claims was purposely directed at the forum state," thus invoking the benefits and protections of Illinois law. Tamburo v. Dworkin, 601 F.3d 693, 702 (7th Cir. 2010). "In all cases the point of the purposeful-direction requirement is to 'ensure that an out-of-state defendant is not bound to appear to account for merely 'random, fortuitous, or attenuated contacts' with the forum state." Tamburo, 601 F.3d at 702 (quoting Dudnikov v. Chalk & Vermilion Fine Arts, Inc., 514 F.3d 1063, 1071 (10th Cir. 2008)).

Telephone, wire, and mail contacts into the forum can be sufficient to establish personal jurisdiction. FMC Corp. v. Varonos, 892 ...

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