United States District Court, N.D. Illinois, Eastern Division
MEMORANDUM OPINION AND ORDER
VALDEZ, United States Magistrate Judge
David Calzaretta brought this complaint against Defendant
Nicholas E. Rezny alleging violations of the Securities Act
of 1933, 15 U.S.C. § 77a et seq.; Illinois
Securities Law, 815 Ill. Comp. Stat. § 5/1 et
seq.; common law fraud; unjust enrichment; and
conversion, based upon business dealings between the parties.
This matter is now before the Court on Defendant's Motion
to Dismiss for Lack of Personal Jurisdiction [Doc. No. 18].
For the reasons that follow, the motion is denied.
complaint alleges that he met Defendant at an entrepreneur
forum group on March 16, 2016 and again on May 3, 2016 in
Chicago. Plaintiff is a resident of Illinois, and Defendant
is from Wisconsin. Defendant sent documents to Plaintiff on
May 16 regarding purchasing securities in the form of
property portfolio shares in the Milwaukee, Wisconsin area.
The two met at another entrepreneur forum in Rosemont,
Illinois on June 10, 2016, and on August 8, 2016, Defendant
sent Plaintiff financial information on various properties in
the Milwaukee area. On August 21, 2016, Defendant traveled
with his wife to Plaintiff's Illinois home to discuss the
potential investments with Plaintiff and his wife. Defendant
told Plaintiff that he owned several dozen properties and
managed more than 250 others.
investment discussed at the August 21 meeting related to the
purchase of ten properties in the Milwaukee area that were
owned by Riverwest Investments, LLC. Defendant indicated he
would form a new LLC to purchase the properties, and that LLC
would be owned 62% by Plaintiff and 38% by Defendant and his
wife. The price of the 62% ownership interest was to be $150,
000.00, and Defendant guaranteed Plaintiff a 15% return on
his investment for at least three years.
December 13, 2016, Plaintiff wired Defendant $150, 000.
Shortly thereafter, Plaintiff received a call from
Defendant's banker, who told Plaintiff that Defendant was
involved in three lawsuits with investors, that his
properties are overvalued, rent rolls were falsified, and
other properties were turned over to other investors with
hundreds of thousands of code violations and less than 15%
occupancy. In light of this phone call, Plaintiff attempted
to stop the wire transfer, but he was not successful.
Plaintiff convinced Defendant to return $100, 000 of the
investment, but $50, 000 had already been spent. Defendant
assured Plaintiff that the $50, 000 would be returned on
January 8, 2017, after he closed a different deal.
banker then informed Plaintiff that Defendant had copied
Plaintiff's signature onto certain documents used to
obtain financing for the deal. Plaintiff also learned that on
February 15, 2013, Defendant and his prior business had been
ordered to cease and desist securities transfer activities by
the Wisconsin Department of Financial Institutions Division
has refused to return the remaining $50, 000 of
Plaintiff's investment. Plaintiff alleges that Defendant
did not own several dozen properties, did not manage more
than 250 others, and had no intention of buying the
properties. According to the complaint, Defendant sought the
$150, 000 from him not to invest but to pay off other lenders
to whom he owed money for other properties.
moves to dismiss the complaint for lack of personal
jurisdiction pursuant to Federal Rule of Civil Procedure
12(b)(2) because he has insufficient contacts with
Illinois. But as Plaintiff points out, the complaint
alleges federal question jurisdiction and contains a claim
under the Securities Act. Therefore, its jurisdictional
Any such suit or action may be brought in the district
wherein the defendant is found or is an inhabitant or
transacts business, or in the district where the offer or
sale took place, if the defendant participated therein, and
process in such cases may be served in any other district of
which the defendant is an inhabitant or wherever the
defendant may be found.
15 U.S.C. § 77v.
reply brief plays lip service to the Securities Act's
jurisdictional provision but then discusses only minimum
contacts under Illinois state law. However, when there is
statutory authorization for nationwide service of process,
reference to state law long-arm jurisdiction is
“inappropriate.” Fitzsimmons v. Barton,
589 F.2d 330, 332 (7th Cir. 1979). The Securities Act
“confers personal jurisdiction in federal court over
defendants with minimum contacts with the United
States, as long as the mandates of constitutional due
process are met.'” Zurich Capital Markets, Inc.
v. Coglianese, 388 F.Supp.2d 847, 857 (N.D. Ill. 2004)
(quoting Lisak v. Mercantile Bancorp, Inc., 834 F.2d
668, 671 (7th Cir. 1987)) (emphasis in original) (discussing
the analogous jurisdictional provision in the Securities
Exchange Act); see Fitzsimmons, 589 F.2d at 332
(“[T]he only question before us is whether the Due
Process Clause imposes any restraints on this nationwide
service.”); Schaufenbuel v. InvestForClosures Fin.,
L.L.C., No. 09 C 1221, 2009 WL 3188222, at *2 (N.D. Ill.
Sept. 30, 2009) (“[W]here a statute authorizes
nationwide service of process and a defendant resides within
the territorial boundaries of the United States the
government's exercise of power over them in any of its
courts is justified.”); see also Fed. R. Civ.
P. 4(k)(1)(C) (“Serving a summons or filing a waiver of
service establishes personal jurisdiction over a defendant .
. . when authorized by a federal statute.”).
Seventh Circuit has held that in the context of nationwide
service, the fairness standard discussed in Shaffer v.
Heitner, 433 U.S. 186 (1977), “relates to the
fairness of the exercise of power by a particular sovereign,
not the fairness of imposing the burdens of litigating in a
distant forum.” Fitzsimmons, 589 F.2d at 333.
“Here the sovereign is the United States, and there can
be no question but that the defendant, a resident citizen of
the United States, has sufficient contacts with the United
States to support the fairness of the exercise of
jurisdiction over him by a United States court.”
Id.; see also Lisak, 834 F.2d at 671
(“[T]here is no constitutional obstacle to nationwide
service of process in the federal courts in federal-question
cases.”). Furthermore, because the Securities Act claim
confers personal jurisdiction, jurisdiction also exists over
Plaintiff's state law ...