FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

SECURITIES AND EXCHANGE 

COMMISSION,

Plaintiff-Appellee,

and

Nos. 05-35541 THOMAS F. LENNON, as appointed

05-35542 receiver for Alpha Telcom, Inc.;

05-35544 an Oregon Corporation; American

05-35545 Telecommunication Company,

05-35546 Inc., a Nevada Corporation;

05-35547 Strategic Partnership Alliance,

05-35552 LLC.; a Nevada Limited Liability

05-35554 Company; SPA Marketing, LLC, a

05-35555 Nevada Limited Liability  05-35559 Company,

05-35577 Receiver-Appellee,

05-35578

v. 05-35580

PRISCILLA ROSS; KEVIN M. RIMPLE; 05-35663

BRUCE F. RUARK; DENNIS L. D.C. No.

BAUGHER; MICHAEL E. GIROUARD; CV-01-01283-OMP

LANCE LIPOUFSKI; SAMIR K. GHOSH;

OPINION ROBERT TRIPODE; RICHARD WILSON;

HAROLD C. NORRIS; THOMAS O.

PARK; JOE BRANDENBURG; ERNEST

BUSTOS; THELL G. PRUITT,

Intervenors-Appellants. 

Appeal from the United States District Court

for the District of Oregon

Owen M. Panner, Senior Judge, Presiding

Argued and Submitted

February 6, 2007—Portland, Oregon

13905
Filed October 15, 2007

Before: Dorothy W. Nelson, Andrew J. Kleinfeld, and

Jay S. Bybee, Circuit Judges.

Opinion by Judge Bybee

13906 SEC v. ROSS
COUNSEL

Ernest Bustos, San Antonio, Texas, pro se, as the intervenorappellant. 

David R. Zaro, Allen Matkins Leck Gamble & Mallory LLP,

Los Angeles, California, for the receiver-appellee. 

Christopher Paik, Esq., Securities & Exchange Commission,

Washington, DC, for the plaintiff-appellee. 

OPINION

BYBEE, Circuit Judge: 

Ernest Bustos and sixteen other Intervenor-Defendants

(collectively, “Bustos”) appeal the district court’s order

requiring them to disgorge commissions they received

SEC v. ROSS 13909
through the sale of interests in pay phones being offered by

Alpha Telcom, Inc. and related companies (collectively,

“Alpha Telcom”). This disgorgement order issued in a summary proceeding ancillary to an enforcement action brought

by the Securities and Exchange Commission (“SEC”) against

Alpha Telcom and its owner, Paul S. Rubera, alleging various

securities law violations arising from the sale of these interests. See SEC v. Rubera, 350 F.3d 1084 (9th Cir. 2003). Bustos challenges the disgorgement order on several grounds,

including lack of personal jurisdiction, improper venue, insufficiency of service of process, and due process violations arising from the district court’s use of summary proceedings. He

also appeals the district court’s calculation of the amount of

disgorgement. We hold that the district court lacked in personam jurisdiction over Bustos and, therefore, erred when it

entered the order of disgorgement against him. 

Because the theories advanced in the disgorgement action

are novel, and the proceedings are complicated, we will

recount the facts and proceedings in some detail. 

I. FACTS AND PROCEEDINGS

Bustos worked as a sales agent for Alpha Telcom, selling

investments styled as purchases of pay telephones and management services from Alpha Telcom and its affiliates. In

fact, as detailed in our Rubera opinion, while Alpha Telcom’s

business plan was curiously anachronistic—selling service

contracts on pay phones—its business model was timeless:

the Ponzi scheme. See Rubera, 350 F.3d at 1087-89. As in all

Ponzi schemes, expenses far exceeded revenues, and “returns” to investors were funded by monies obtained from

more recent investors. On August 24, 2001, Alpha Telcom

filed voluntary petitions for bankruptcy. 

A. The SEC Enforcement Action

On August 27, 2001, the SEC commenced a civil enforcement action against Alpha Telcom for violations of the federal

13910 SEC v. ROSS
securities laws. On the same day, the district court appointed

a receiver (“Receiver”) to manage the corporation and preserve its assets for eventual distribution to the injured investors. The Receiver’s appointment was confirmed on

September 6, 2001. 

In the underlying enforcement action, the district court held

that the “investment opportunity” offered by Alpha Telcom

was actually a security for purposes of the Securities Act of

19331 (“the Act”) and that Alpha Telcom had violated § 5 of

the Act by failing to register the securities with the SEC prior

to selling them in interstate commerce. SEC v. Alpha Telcom,

Inc., 187 F. Supp. 2d 1250, 1258 (D. Or. 2002). The district

court granted equitable relief against Rubera, the sole owner

of Alpha Telcom, in the form of a permanent injunction

against future violations of the securities laws and disgorgement in the amount of $3,750,707.66, representing “gross

wages, shareholder compensation, shareholder loans, and

other payments to Rubera and his family.” Id. at 1262-63.

However, the court declined to impose civil penalties under

§ 20 of the Act, concluding that they were “not warranted”

given that this offense was Rubera’s first violation and “his

conduct did not amount to fraud, deceit, manipulation, or the

like.” Id. at 1263. We affirmed the district court in all

respects. See SEC v. Rubera, 350 F.3d 1084 (9th Cir. 2003).

B. The Disgorgement Motion and Subsequent Proceedings

On December 23, 2003, approximately two weeks after we

decided Rubera, the Receiver filed a motion to disgorge $21

million in commissions on the sales of these unregistered

1The district court applied the three-part test set forth in SEC v. W.J.

Howey Co., 328 U.S. 293 (1946). In Howey, the Supreme Court held that

for purposes of the Act, a security was defined as “(1) an investment of

money; (2) in a common enterprise; (3) with the expectation of profits to

be derived from the efforts of others.” Alpha Telcom, 187 F. Supp. 2d at

1258 (citing Howey, 328 U.S. at 298-99). 

SEC v. ROSS 13911
securities from Alpha Telcom’s sales agents.2

 In its motion,

which the SEC joined, the Receiver styled its requested relief

as “[r]equiring all Agents to disgorge Commissions received

for their unlawful sale of unregistered securities in violation

of Sections 5(a) and 5(c) of the Securities Act of 1933 . . . .”

Citing our decisions in SEC v. Wencke, 783 F.2d 829 (9th Cir.

1989), and SEC v. Hardy, 803 F.2d 1034 (9th Cir. 1986), the

Receiver further requested the court to allow it to proceed

“through summary proceedings,” an approach he argued was

permissible “in equity receivership cases such as this.” The

Receiver asserted that the district court had broad powers to

order disgorgement of “ill-gotten gains” and that the commissions, which were paid “to compensate and reward the Agents

for their illegal sale of unregistered securities to investors,”

were “in fact the ill-gotten gains received from these investors

. . . .” According to the Receiver, “the Agents provided no

benefit to Alpha other than to facilitate the process of luring

in additional new investors.” The Receiver asserted that it was

beyond dispute that “the money used to pay the Commissions

to the Agents were ill-gotten gains from the sales of unregistered securities to unsuspecting investors.” Because “the

Commissions were paid to [the Agents] specifically for their

role in these illegal sales of the unregistered securities,” the

agents had “no legitimate claim to the Commissions.”

3

2The Receiver identified approximately 650 sales agents and commissions totaling approximately $39 million. Some number of these sales

agents could not be located or had died, and the Receiver determined that

it would be inefficient to pursue agents who had earned less than $25,000

in commissions. It appears that the total commissions earned by the

remaining agents totaled approximately $21 million. 

3The Receiver also argued that the commissions represented fraudulent

transfers because the agents provided no value in exchange for the monies

received as commissions. Having accepted the Receiver’s unjust enrichment theory, the district court declined to address the fraudulent transfer

theory, which it described as unpersuasive, given that the agents had actually provided value in exchange for those commissions. The Receiver does

not pursue this theory on appeal. 

13912 SEC v. ROSS
Joining the Receiver’s motion, the SEC argued that “it is

well-established that District Courts may order disgorgement

by nonparties in Commission enforcement actions.” According to the SEC, Disgorgement was proper here because (1) the

court had already held that the investments were unregistered

securities and thus were sold in violation of § 5 of the Act,

rendering any proceeds “ill-gotten gains”; (2) the Agents had

“no legitimate claim to these funds, as there is no evidence

that they provided services to [Alpha Telcom] in exchange for

the commissions . . . .”; and (3) even if the Agents did “expend[ ] effort,” they have no legitimate claim “because they

offered and sold the securities in violation of the federal

securities laws.” 

In support of its motion, the Receiver submitted detailed

information about the financial condition of the Receivership

Entities and of commissions paid out to each of the sales

agents. On either December 24 or 31, 2003,4 it sent a Notice

of Hearing on the motion for disgorgement to “the interested

parties in this action” by first-class mail. The notice stated

that the hearing would be held in Portland, Oregon on February 18, 2004, and that any response to the motion had to be

filed and served within eleven days of service of the notice.

The district court entered an order permitting the agents to file

responses to the motion by February 2, 2004. 

On February 2, several of the agents, including Bustos and

10 other Appellants, preserving their jurisdictional objections,

moved to intervene as of right as defendants in the action

4The Notice itself was dated December 24, but the Certificate of Service

attached to the Notice is dated December 31. The Receiver appears to

have mailed additional documents on December 30, 2003: The “Proof of

Service” filed by the Receiver states that five documents were sent to the

agents: a notice of the hearing on the Receiver’s motion for disgorgement,

the motion itself, two supporting declarations, and a request for judicial

notice. In any event, as the district court noted, the Receiver did not even

deign to send the documents by certified mail and could not conclusively

establish whether all the agents had actually received the documents. 

SEC v. ROSS 13913
under FED. R. CIV. P. 24(a)(2), noting that, because the

Receiver was attempting to have the district court “summarily

adjudicate the Intervenors’ personal liability,” the agents had

“a direct financial interest in this case” that could be adequately represented only by each named agent; they also

requested an extension of time to respond. The Receiver

objected to the agents’ motion, arguing that there was “no

legal basis” for their request to intervene in the underlying

enforcement action. Moreover, because the agents had allegedly known of the Receiver’s intent to disgorge commissions

for over 18 months,5 the Receiver argued that the motion was

“nothing more than a delay tactic designed to hinder the

Receiver’s efforts to recover the ill-gotten gains received by

these Agents.” 

On February 11, the district court granted the motion to

intervene, stating that no formal answer was required and that

the intervenors could “assert any defenses by motion or in

their memoranda opposing the Receiver’s motion . . . .” However, “[d]ue to the advanced stage of [the] case,” the district

court conditioned intervention “on Intervenor’s agreement not

to revisit issues already adjudicated.” These issues presumably included the district court’s prior findings that the investments sold by the agents were unregistered securities.6

Despite the district court’s statement that no answer was

required, the now Intervenor-Defendants filed a brief answer

on February 18, 2004 and asserted several defenses, including

lack of personal jurisdiction, improper venue, “insufficient

process,” statute of limitations, and laches.7 They concurrently

5The Receiver asserted that it had sent demand letters to all of the

agents requesting that they voluntarily disgorge their commissions in July

and October 2002. 

6The court granted 26 additional individuals permission to intervene on

March 11, 2004. The six remaining Appellants belonged to this group. 

7They also asserted four substantive defenses to the disgorgement that

are not relevant to our disposition of this appeal. 

13914 SEC v. ROSS
filed Preliminary Objections to the Receiver’s disgorgement

motion setting forth the legal bases for their defenses. In

March, they filed a lengthy opposition to the disgorgement

motion, reiterating the procedural defenses raised in their Preliminary Objections and further objecting to the district

court’s use of summary proceedings; they also provided further arguments against the Receiver’s disgorgement request,

including challenges to the method of calculation. 

C. The Disgorgement Order 

The district court granted the Receiver’s disgorgement

motion on August 18, 2004, and resolved the major issues that

Bustos raises on appeal as follows. See In re Alpha Telcom,

2004 WL 3142555 (D. Or. Aug. 18, 2004). 

1. Personal jurisdiction and venue 

The district court concluded that it “necessarily ha[d] jurisdiction over matters pertaining to [the] Receivership, and the

assets thereof.” Moreover, the agents had entered into agreements with Alpha Telcom, headquartered in Oregon, and

those agreements specified that Oregon law would govern any

disputes. Finally, the court noted that the securities laws permitted nationwide service of process, and the agents’ contacts

with the United States alone were sufficient to support the

exercise of personal jurisdiction over them (citing, inter alia,

15 U.S.C. § 77v(a)). The court also concluded that venue was

proper because the agents were scattered across the country,

and it was more efficient to try the case in one location. 

2. Summary procedures and lack of service of process 

The district court rejected the agents’ argument that they

had not been properly served, holding that formal service was

required only to institute an action. Because the Receiver’s

disgorgement motion was not an independent action but simply “part of the Receivership proceeding” that sought to “reSEC v. ROSS 13915
cover funds the agents received from Alpha Telcom that they

allegedly have no legitimate claim to possess,” the agents

were “nominal defendants” who were entitled only to receive

notice of the motion and a reasonable opportunity to be heard.

The district court noted that the “more serious flaw” was

the fact that the Receiver could not prove that any particular

agent actually received notice of the motion because it had

failed to send the notice by certified mail. This flaw, however,

was remedied by the fact that the Receiver sent multiple mailings to the listed agents, that the court had required the

Receiver to send “a follow-up mailing to the agents,” the “rebuttable presumption that mail, properly addressed, has been

delivered,” and the fact that the agents appeared to be in regular contact with each other. Moreover, the court found, the

“vast majority” of the agents appeared to have received actual

notice of the motion, and presumably any agent who had not

received actual notice could collaterally attack the disgorgement order if he or she could prove lack of actual notice. 

3. Unjust enrichment 

The Receiver’s theory of unjust enrichment depended on

whether the agents had a “legitimate claim” to the commissions they received. The district court noted that the Receiver

had not formally alleged any wrongdoing on the part of the

agents and chided the Receiver for filling its papers with

accusations of wrongdoing that were not “germane to the

legal theories he advances.” The court declined to hold that

the commissions were analogous to disbursements in the typical gratuitous donee case, where a third party receives value

for no consideration from a wrongdoer, and expressly rejected

three theories put forth by the Receiver as to why the agents

had no legitimate claim to the commissions: (1) that Alpha

Telcom received no value for the agents’ services because the

company lost money on each sale, (2) that agents were willing

participants in a Ponzi scheme, and (3) that the agents’ services helped to perpetrate a fraud. Rather, the district court

13916 SEC v. ROSS
found the agents had no legitimate claim on the commissions

because “[t]he services provided by the agents were, in hindsight, illegal.” They had sold unregistered securities, which is

a strict liability offense. Because they “were paid for furnishing illegal services[, t]he law [would not] permit them to benefit from the sale of unregistered securities.”

8

4. Computation of disgorgement amount 

Having decided that the agents would be liable for the

funds, the district court detailed how it would handle claims

by remaining agents who contested the amounts claimed by

the Receiver and sought setoffs for expenses and taxes paid

on the commissions. The court found that many of the agents

had likely claimed personal expenses as business expenses on

their tax returns, and therefore, citing its discretionary powers,

established “a uniform setoff for expenses: 10 percent of the

first $50,000 in commissions received by an agent, and 5 percent of all commissions over that amount.” The court determined that it was not practicable—and was far too expensive

—to require the Receiver to evaluate each agent’s claimed

expenses and rejected objections, noting that “this is equity,

not rocket science.” Finally, the district court refused to grant

a setoff for income taxes paid on the commissions, noting that

this was “a matter between the agents and the IRS (or state

officials). The court will not interfere.” 

D. Appellants’ Response and Appeal

The district court gave the agents 20 days to file an objection to the amount of disgorgement and then addressed each

agent’s individual objections in a detailed order dated February 1, 2005. The court subsequently entered a Judgment of

Disgorgement on March 31, 2005, and issued a “Notice to

Agents” on March 31, 2005, advising them of the proper

8The district court assumed for the purposes of the motion that the

agents had acted in good faith. 

SEC v. ROSS 13917
method for filing an appeal and waiving the normal fee for filing a notice of appeal. The Appellants timely appealed. 

On appeal, Bustos reiterates most of the objections made to

the district court, and these center on two sets of issues. The

first of these involves due process violations arising from the

district court’s lack of personal jurisdiction, the Receiver’s

failure to properly serve him with a summons and complaint,

and the use of summary proceedings to adjudicate the disgorgement motion. The second involves various contentions that

the district court abused its discretion in granting the motion

for disgorgement and calculating the amount to be disgorged.

Because we hold that Bustos’s due process rights were violated by the proceedings below, we address only the first set

of issues in this appeal. We begin with a brief review of the

principles of personal jurisdiction and the relationship

between jurisdiction and service of process.

II. JURISDICTION AND SERVICE OF PROCESS

In personam jurisdiction, simply stated, is the power of a

court to enter judgment against a person. In rem jurisdiction

is the court’s power over property. Before a court may exercise the state’s coercive authority over a person or property,

some statute must authorize the act. Sec. Investor Prot. Corp.

v. Vigman, 764 F.2d 1309, 1313-14 (9th Cir. 1985). For state

courts, generally a state long-arm statute supplies all the

authority that state courts require. By contrast, there is no general federal long-arm statute, so federal courts must look

either to the long-arm statutes of the state in which the court

sits, FED. R. CIV. P. 4(k)(1)(A), or to specific federal statutes,

FED. R. CIV. P. 4(k)(1)(B), (C), (D) to authorize the exercise

of jurisdiction. Since Pennoyer v. Neff, 95 U.S. 714, 733-34

(1877), the courts’ ability to exercise personal jurisdiction has

been constrained by the Due Process Clauses of the Fifth and

Fourteenth Amendments. The requirement that a court have

personal jurisdiction “represents a restriction on judicial

power not as a matter of sovereignty, but as a matter of indi13918 SEC v. ROSS
vidual liberty.” Ins. Corp. of Ireland, Ltd v. Compagnie des

Bauxites de Guinee, 456 U.S. 694, 702 (1982). 

We have stated that “a court may exercise personal jurisdiction over a defendant consistent with due process only if

he or she has ‘certain minimum contacts’ with the relevant

forum ‘such that the maintenance of the suit does not offend

“traditional notions of fair play and substantial justice.’ ”

Yahoo! Inc. v. La Ligue Contre Le Racisme et

L’Antisemitisme, 433 F.3d 1199, 1205 (9th Cir. 2006) (en

banc) (quoting Int’l Shoe Co. v. Washington, 326 U.S. 310,

316 (1945) (quoting Milliken v. Meyer, 311 U.S. 457, 463

(1940))). We have set forth a three-part test, derived from the

Due Process Clause, that examines the defendant’s purposeful

conduct towards the forum, the relation between his conduct

and the cause of action asserted against him, and the reasonableness of the exercise of jurisdiction. See id. at 1205-06;

Schwarzenegger v. Fred Martin Motor Co., 374 F.3d 797, 802

(9th Cir. 2004); Bancroft & Masters, Inc. v. Augusta Nat’l

Inc., 223 F.3d 1082, 1086 (9th Cir. 2000). 

The familiar “minimum contacts” test, coupled with statutory authorization, provides a basis for an exercise of jurisdiction, but “[s]ervice of process is the mechanism by which the

court [actually] acquires” the power to enforce a judgment

against the defendant’s person or property. United States v.

2,164 Watches, More or Less Bearing a Registered Trademark of Guess?, Inc., 366 F.3d 767, 771 (9th Cir. 2004)

(emphasis added). In other words, service of process is the

means by which a court asserts its jurisdiction over the person. See Benny v. Pipes, 799 F.2d 489, 492 (9th Cir. 1986)

(“A federal court is without personal jurisdiction over a

defendant unless the defendant has been served in accordance

with FED. R. CIV. P. 4.”); FED. R. CIV. P. 4(k) (stating that

“[s]ervice of a summons or filing a waiver of service is effective to establish jurisdiction over the person of a defendant”).

Service of process has its own due process component, and

must be “notice reasonably calculated . . . to apprise interested

SEC v. ROSS 13919
parties of the pendency of the action and afford them an

opportunity to present their objections.” Mullane v. Cent.

Hanover Bank & Trust Co., 339 U.S. 306, 314 (1950). 

Without a proper basis for jurisdiction, or in the absence of

proper service of process, the district court has no power to

render any judgment against the defendant’s person or property unless the defendant has consented to jurisdiction or

waived the lack of process. See Mason v. Genisco Tech.

Corp., 960 F.2d 849, 851 (9th Cir. 1992); see also Omni Capital Int’l v. Rudolf Wolff & Co., 484 U.S. 97, 104 (1987)

(“[B]efore a court may exercise personal jurisdiction over a

defendant, there must be more than notice to the defendant

and a constitutionally sufficient relationship between the

defendant and the forum. There also must be a basis for the

defendant’s amenability to service of summons. Absent consent, this means there must be authorization for service of

summons on the defendant.”). A judgment entered without

jurisdiction over the defendant is void. 

With these principles in mind, we turn to the bases for

jurisdiction asserted by the Receiver.

III. JURISDICTION IN SECURITIES RECEIVERSHIP

ACTIONS

Bustos argues that the district court violated his due process

rights by exercising personal jurisdiction over him despite the

failure of the Receiver to name him in the complaint.9 In

response, the Receiver asserts that the district court’s exercise

of jurisdiction was proper for three reasons: (1) the Securities

Act provides for nationwide service of process, and Bustos

9We note that the Receiver made no attempt to assert in rem jurisdiction

over any property belonging to Bustos. Exercising in rem jurisdiction

would have served to give notice to Bustos, but it would not have given

the court in personam jurisdiction over him. See Shaffer v. Heitner, 433

U.S. 186 (1977). 

13920 SEC v. ROSS
had the requisite minimum contacts with the United States;

(2) summary proceedings—moving for disgorgement against

Bustos without serving him with a summons and complaint—

were proper in the context of a federal receivership proceeding; and (3) Bustos consented to the court’s jurisdiction when

he intervened as of right under Rule 24(a)(2). We address

each argument in turn.10

A. Jurisdiction in Claims Arising Under the Securities Act

of 1933

1. Claims against Securities Act violators 

[1] The Receiver’s first argument is that the district court

had jurisdiction pursuant to the Securities Act of 1933

(“Securities Act”). Section 12 of the Securities Act, 15 U.S.C.

§ 77l, creates a private right of action for persons injured

through the sale of unregistered securities. Section 22 of the

Act provides that “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(a). 

[2] The Receiver argues that § 22 is a nationwide serviceof-process provision that authorizes the district court to exercise jurisdiction nationwide over any person who has minimum contacts with the United States. We agree that § 22

provides for nationwide service of process. The service of

process language of § 22 tracks almost word-for-word that of

the analogous provision in § 27 of the Securities and

Exchange Act. Compare 15 U.S.C. § 77v(a) (§ 22 of the Act)

with 15 U.S.C. § 78aa (§ 27 of the Act). In Sec. Investor Prot.

10“The jurisdictional limits to the district court’s power in equity receivership proceedings are issues of law, reviewed de novo.” SEC v. Am. Capital Invs., 98 F.3d 1133, 1142 (9th Cir. 1996). We also review de novo due

process challenges arising from claims that the district court lacked jurisdiction to enter an order in a federal equity receivership proceeding. Id. at

1146. 

SEC v. ROSS 13921
Corp. v. Vigman, 764 F.2d 1309 (9th Cir. 1985), we held that

§ 27 gave the district court the power to exercise personal

jurisdiction over any party with minimum contacts with the

United States and that the exercise of such jurisdiction comported with the principles of due process. Id. at 1315-16.

Given the near identity in the language between these two

provisions, we agree with the Receiver that, by empowering

the district court to serve process nationwide, § 22 of the

Securities Act permits district courts to obtain personal jurisdiction over parties who are properly served.11

[3] That the district court could have obtained jurisdiction

over Bustos tells us nothing about whether it actually did so.

The Receiver would apparently have us conclude that the

ability to obtain jurisdiction coupled with actual notice of an

intent to exercise jurisdiction gives birth to actual in personam jurisdiction over any interested party, whether or not that

party has been properly served. Nothing in our jurisprudence

supports such a remarkable extension of judicial power. The

power to exercise jurisdiction nationwide is not selfexecuting. Mere contacts with the jurisdiction, even when

coupled with some kind of actual notice, are not sufficient to

invest the district court with in personam jurisdiction over a

party-in-interest. As we discussed in the previous section, in

order for the court to assert personal jurisdiction over a partyin-interest, the party must be properly served. See FED. R. CIV.

P. 4(k). Bustos was not so served, and the district court’s

power over him remained nothing more than a potentiality. 

11As in Vigman, the question of whether the court can exercise personal

jurisdiction over a party is distinct from the question of whether venue will

properly lie in the court exercising jurisdiction. See Vigman, 764 F.2d at

1317-18. Section 22 of the Act provides that venue for a securities action

under § 12 lies “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.” 15 U.S.C. § 77v(a). Bustos has challenged venue in the District of Oregon. Because of our disposition on jurisdictional grounds, we do not reach this question. 

13922 SEC v. ROSS
It is true that we have described the service requirements of

Rule 4 as “a flexible rule that should be liberally construed so

long as a party receives sufficient notice of the complaint,”

Direct Mail Specialists, Inc. v. Eclat Computerized Techs.,

Inc., 840 F.2d 685, 688 (9th Cir. 1988) (discussing requirements for perfecting service against a corporation under FED.

R. CIV. P. 4(d)(3)), but such liberal construction would be

quite inappropriate in the circumstances of this case. First, we

have generally held that “neither actual notice nor simply

naming the defendant in the complaint will provide personal

jurisdiction without substantial compliance with Rule 4.”

Benny, 799 F.2d at 492; Direct Mail, 840 F.2d at 688 (stating

that only “substantial compliance with Rule 4” will provide

personal jurisdiction over the defendant). Given the complete

absence of any effort to serve Bustos with a summons or a

complaint, the Receiver cannot claim substantial compliance

with Rule 4. The Receiver’s failure even to attempt to comply

with Rule 4 is no “minor defect,” United Food & Commercial

Workers Union v. Alpha Beta Co., 736 F.2d 1371, 1382 (9th

Cir. 1984), that can be remedied by actual notice. 

[4] More importantly, the difficulty here runs deeper than

mere insufficient service of process. The Receiver never filed

a complaint and never named Bustos as a party. In other

words, the Receiver never commenced an action against Bustos, see FED. R. CIV. P. 3; it simply named Bustos in a motion

for the disgorgement of allegedly ill-gotten gains earned

through the sale of unregistered securities. See In re Alpha

Telcom, 2004 WL 3142555, at *1 (holding that a formal summons and complaint were unnecessary because “[t]he motion

before the court is not an independent action”). Prior to Bustos’s intervention in the action, the Receiver apparently

believed that he need not even obtain jurisdiction over Bustos.

When Bustos sought leave to intervene in the disgorgement

action, the Receiver took the position that Bustos’s involvement in the action was unnecessary because Bustos could

raise whatever objections he had on appeal. In other words, at

every stage of the proceedings, the Receiver fought to deprive

SEC v. ROSS 13923
Bustos of any opportunity to participate as a party. We will

not now permit the Receiver to claim that actual notice

received by Bustos cured the jurisdictional defects that the

Receiver himself created by failing to name Bustos in a complaint and effect service of that complaint and a summons

upon him. In sum, although § 22 of the Securities Act authorized the district court to exercise in personam jurisdiction

over Bustos, the Receiver failed to take steps consistent with

the Due Process Clause or Rule 4 to perfect the court’s potential jurisdiction. Section 22 does not supply the personal jurisdiction needed to support the judgment. 

2. Nominal defendants and summary proceedings 

The Receiver also argues (and the district court concluded)

that Bustos was wrongly in possession of receivership assets

and that Bustos was a nominal defendant or constructive

trustee and was, therefore, subject to disgorgement in a summary proceeding.12 We address each of these arguments in

turn. 

a. The nominal defendant designation

[5] We have recognized a truncated form of process vis-àvis “a non-party depository as a nominal defendant to effect

full relief in the marshaling of assets that are the fruit of the

underlying fraud.” SEC v. Colello, 139 F.3d 674, 677 (9th Cir.

1998). A nominal defendant is not a real party in interest

because he “has no legitimate claim to the disputed property.”

Id. at 676; SEC v. Cherif, 933 F.2d 403, 414 (7th Cir. 1991)

(stating that a nominal defendant “holds the subject matter of

12On appeal, the Receiver does not expressly argue that Bustos is a

nominal defendant, but he did make, and the district court accepted, this

characterization of Bustos’s status below. Moreover, on appeal, the

Receiver continues to argue that Bustos has no legitimate claim to the

allegedly ill-gotten gains, precisely the theory central to his attempt to

apply the nominal defendant designation to Bustos in the proceedings

below. 

13924 SEC v. ROSS
the litigation in a subordinate or possessory capacity as to

which there is no dispute” and is not a real party in interest

because “he has no interest in the subject matter litigated”

(internal quotation marks omitted)). Although the paradigmatic example of a nominal defendant is “a bank or trustee

[that] has only a custodial claim to the property,” Colello, 139

F.3d at 677, the term is broad enough to encompass persons

who are in possession of funds to which they have no rightful

claim, such as money that has been fraudulently transferred

by the defendant in the underlying securities enforcement

action. See id. at 675; SEC v. Hickey, 322 F.3d 1123, 1130-32

(9th Cir. 2003) (upholding the district court’s exercise of

jurisdiction over a corporation nominally owned by the defendant’s mother and into which the defendant had channeled

proceeds of his securities law violations); SEC v. Wencke, 783

F.2d 829, 838 (9th Cir. 1986) (holding that the district court

had jurisdiction over the assets of a corporation into which the

defendant in the underlying enforcement action had funneled

proceeds of his securities law violations); see also Cherif, 933

F.2d at 414. 

[6] Bustos, however, falls into none of these categories.

The Receiver has not established that Bustos holds any funds

in trust for the defendant in the underlying action, Rubera, or

that he received fraudulent transfers from the receivership

entity, Alpha Telcom; there is no evidence that he was a mere

puppet holding an account into which Alpha Telcom funneled

its fraudulent earnings. Indeed, as the district court correctly

perceived, Bustos appears to be no different from any other

employee or vendor: he received compensation in return for

services rendered. As such, he has presumptive title to those

commissions, and unless the Receiver can prove otherwise, it

is likely that the Receiver can disgorge those commissions

only by showing that Bustos has himself violated the securities laws. 

The Receiver argues that Bustos is like the nominal defendants in Hickey, Colello, and Wencke, because the commisSEC v. ROSS 13925
sions he earned are “ill-gotten gains” to which he has “no

independent legitimate claim.” This argument borders on

sophistry. It is one thing to argue that a custodian or trustee

has no legitimate claim to receivership assets improperly or

fraudulently conveyed to her; it is quite another to assert that

Bustos has no legitimate claim to commissions earned for services rendered because Bustos himself has violated the securities laws. The former requires only an adjudication of

ownership; the latter, a determination that a non-party has violated the law. That a court may afford relief by ordering disgorgement in both cases does not mean that the parties

required to disgorge are entitled to the same amount of due

process. A mere custodian is generally entitled simply to

notice and an opportunity to be heard; a party alleged to have

violated the Securities Act must be treated as any other defendant and afforded process of law. 

[7] The district court noted the inconsistency in the Receiver’s position and criticized the Receiver for referring to Bustos’s wrongdoing while simultaneously naming him a

nominal defendant. The district court concluded, however,

that those allegations were not germane to the Receiver’s

claims. We respectfully disagree. The claim ultimately

accepted by the district court—unjust enrichment—turns on

Bustos’s own violations of the securities laws. As the district

court concluded, Bustos’s commissions could be deemed illgotten gains only because the services he provided—the sale

of the pay phone interests—were, “in hindsight, illegal.” The

Receiver’s equivocation as to Bustos’s status is both telling

and fatal to his claim. The Receiver sought to name Bustos as

a nominal defendant “while at the same time implying

strongly that [he] is a violator of the securities laws.” Cherif,

933 F.2d at 415. But nothing in the underlying action establishes that Bustos has violated the securities law. He was not

a party to that action and, so far as we can tell, had no reason

to know that his own activities in connection with Alpha Telcom were in question. We do not believe that the Constitution

permits the Receiver to use the nominal defendant designation

13926 SEC v. ROSS
to deprive one whose only plausible basis for liability is a violation of the securities laws of either his right to full and formal service of process or his right to fully litigate the question

of his own liability under the securities laws. 

b. Summary proceedings in securities actions

The Receiver also relies on Wencke for the related proposition that, where there has already been an underlying securities action, a district court may permit the receiver to obtain

relief through summary proceedings ancillary to the main

action. See Wencke, 783 F.2d 829. In other words, the

Receiver argues that where a securities proceeding has established liability, a receiver may simply file a motion for disgorgement in the underlying action against non-parties who also

may have violated the securities laws to effect relief.

Although Wencke provides some support for the Receiver’s

claim, ultimately we think it is distinguishable. 

Wencke arose out of summary proceedings ancillary to an

SEC enforcement action. The receiver alleged that the defendant in the underlying action, one Walter Wencke, had funneled the proceeds from his securities violations involving

certain corporations into the Ramapo Corporation, in which

Wencke held a 60-percent stake. The receiver filed an application for disgorgement against the Ramapo shareholders,

including deLusignan, a minority shareholder who held 25

percent of the stock, and Ramapo, seeking to disgorge the

shares from the former and the charter from the latter.13

Wencke, 783 F.2d at 832. Eventually, the receiver gained possession of 75 percent of Ramapo’s shares but continued to

13Meanwhile, the receiver also filed a complaint directly against deLusignan, the Hansa Trust (the Wencke-family trust in which Wencke held

his 60-percent stake), and Ramapo for disgorgement of the shares and the

establishment of a constructive trust over their holdings. The receiver later

removed Ramapo as a defendant from this action, and it appears that no

final judgment was entered. See Wencke, 783 F.2d at 832. 

SEC v. ROSS 13927
seek disgorgement of Ramapo’s assets and of deLusignan’s

shares. Id. at 832 & n.2. Ultimately, the district court deemed

Ramapo a constructive trustee for the benefit of the defrauded

shareholders of the other corporations and ordered Ramapo,

not deLusignan, to disgorge its assets. Id. at 833. This order,

although not directed at deLusignan, had the effect of destroying the value of deLusignan’s interest in Ramapo. He

appealed, contesting the use of summary proceedings and

arguing that the court did not have jurisdiction over him. 

We rejected the shareholder’s appeal. First, we noted that

we had previously approved the use of summary proceedings

in “adjudicating in summary post-judgment proceedings the

claims of nonparties to property claimed by securities receivers.” Id. at 836. Second, we noted that the district court’s disgorgement order was directed only at Ramapo, not at

deLusignan, and that deLusignan could still bring an action

asserting his rights as a minority shareholder. Id. at 839 n.10.

Third, we emphasized that because deLusignan had received

actual notice, participated in extensive discovery, had been

deposed, and was permitted to file briefs with the court, the

use of summary proceedings did not violate his due process

rights. Id. at 836-37. Finally, we noted that it was not necessary to the entry of the disgorgement order against the corporation to decide any issues or claims deLusignan might have

had based on fraud or breach of contract by Wencke. Id. at

839 n.10. 

Wencke differs from the instant case in several ways. First,

and most importantly, because the disgorgement order was

ultimately entered only against Ramapo Corporation, the district court did not need to obtain jurisdiction over deLusignan.14

DeLusignan’s objections were simply irrelevant to the ques14The receiver held 75 percent of Ramapo’s shares by the time of disgorgement, and it appears that Ramapo either waived any jurisdictional

objection or consented to the district court’s exercise of personal jurisdiction over it. 

13928 SEC v. ROSS
tion whether Ramapo’s assets should be disgorged, and as we

pointed out, his relief, if any, would come in the form of a

minority shareholder suit because deLusignan’s injury was

nothing more than the devaluation of his shares. 

Second, as in the nominal defendant cases noted earlier, the

receiver in Wencke alleged no wrongdoing against either

Ramapo or deLusignan; the only claim to the funds was that

Wencke had funneled the proceeds of his wrongdoing into the

corporation. Id. at 832-33. Consistent with this allegation, the

district court declared Ramapo a constructive trustee for the

benefit of the defrauded investors. Id. at 833. In other words,

the district court in Wencke was simply exercising its authority “to decide the legitimacy of ownership claims made by

non-parties to assets alleged to be proceeds from [the actual

defendant’s] securities laws violations.” Cherif, 933 F.2d at

414 n.11 (discussing Wencke, 783 F.2d 829). The use of summary proceedings in such cases is unremarkable because the

purpose is simply to “obtain equitable relief from a non-party

against whom no wrongdoing is alleged” and can succeed

only “if it is established that the non-party possesses illegally

obtained profits but has no legitimate claim to them.” Id.

(emphasis added). 

Despite the Receiver’s attempts to characterize it as such,

this case does not involve Bustos’s “claim[ ] . . . to [receivership] property claimed by” the Receiver. Wencke, 783 F.2d at

836. Rather, the case arises out of the Receiver’s claims

against Bustos for his alleged sale of unregistered securities.

As we stated above, because the Receiver’s disgorgement

claim turns on Bustos’s own violation of the securities laws,

the Receiver cannot treat Bustos as a nominal defendant, nor

can the Receiver plausibly claim that Bustos is a constructive

trustee on behalf of Alpha Telcom or the defrauded investors.

In other words, this is not a case involving the mere determination of who is entitled to possession of the funds where the

minimal notice requirements of Mullane would suffice.

Rather, the Receiver had to obtain the full in personam jurisSEC v. ROSS 13929
diction that would permit adjudication of Bustos’s substantive

liability. 

Third, Bustos did not receive all of the benefits of being

formally served with process and joined as a defendant in the

underlying action. As a condition for intervention, the district

court required him to waive any argument regarding whether

the pay phone investments constituted securities and whether

their sale violated § 12 of the Securities Act. Given the district

court’s ultimate conclusion that Bustos had to disgorge his

commissions because he had unlawfully sold unregistered

securities, this use of summary proceedings improperly

deprived him of the opportunity to fully litigate the question

of his liability. 

[8] In sum, given that the Receiver alleged that Bustos himself had violated the securities laws—and this is both the central allegation of the Receiver’s disgorgement motion and the

basis of the district court’s order—the Receiver could not

style Bustos as a nominal defendant or employ summary proceedings against him. The Receiver—and the SEC, to the

extent it is involved—had to decide whether Bustos merely

had no right to the funds because he was an empty vessel into

which the true wrongdoers funneled their proceeds or because

he had violated the securities laws. He has chosen the latter

(and given the district court’s skepticism of the fraudulent

conveyance claim, the Receiver likely had no other option).

Bustos is thus, as the Receiver admitted below, the real partyin-interest. The Receiver therefore had to proceed against

Bustos as a plaintiff would proceed against any defendant

potentially liable under § 12 of the Securities Act, “appris[ing

him] of the nature of the allegations against him and [permitting him to] make use of the possible defenses available to

him under the securities laws.”

15 Cherif, 933 F.2d at 415.

15For example, had the Receiver brought an action directly against Bustos, he might have challenged the Receiver’s standing to bring a § 12

action, argued that the Receiver’s claim was barred by the statute of limitations or by laches, or, as he attempted to do here, challenged the Receiver’s action on jurisdiction and venue grounds. 

13930 SEC v. ROSS
Because the Receiver did not so proceed, he failed to obtain

in personam jurisdiction over Bustos under the Securities Act.

B. Jurisdiction and Service of Process in Receivership

Actions

The Receiver also argues that, independent of the Securities

Act, formal service of process was not required here because

federal receivers have broad equitable powers and, pursuant

to those powers, they can use summary proceedings to

recover from third parties. See Hardy, 803 F.2d 1034; United

States v. Arizona Fuels Corp., 739 F.2d 455 (9th Cir. 1984);

SEC v. Universal Fin., 760 F.2d 1034 (9th Cir. 1985) (per

curiam). According to the Receiver, our cases—which rely on

28 U.S.C. §§ 754 and 1692—hold that actual notice with the

opportunity to “file responsive pleadings” satisfies the

requirements of due process. The Receiver insists that these

cases justify the use of summary proceedings here as well,

because obtaining jurisdiction over each sales agent would

unreasonably deplete the assets of the receivership and diminish returns to the investors. See Hardy, 803 F.2d at 1040 (noting efficiency as one rationale supporting the use of summary

proceedings). 

Congress has authorized federal receivers to exercise broad

powers in administering, retrieving, and disposing of assets

belonging to the receivership. In 28 U.S.C. § 754, Congress

has granted receivers authority to protect receivership “property, real, personal or mixed, situated in different districts.”

Once appointed, in order to preserve his claims, a receiver is

to “file copies of the complaint and [the] order of appointment

in the district court for each district in which the property is

located.” By doing so, a receiver obtains “complete jurisdiction and control” over receivership property in any district. Id.

However, failure to file in any given district within ten days

of the receiver’s appointment generally “divest[s] the receiver

of jurisdiction and control over all such property in that district.” Id. Section 1692 compliments § 754. It provides that

SEC v. ROSS 13931
when “a receiver is appointed for property, real, personal, or

mixed, situated in different districts, process may issue and be

executed in any such district as if the property lay wholly

within one district.” 28 U.S.C. § 1692. 

[9] Some courts have held that the interplay between § 754

and § 1692 operates analogously to statutes that confer the

power to effect service of process nationwide: Just as those

statutes permit the district court to exercise nationwide jurisdiction, §§ 754 and 1692 permit the district court to obtain

jurisdiction in a district where receivership property is located

so long as the receiver has properly filed pursuant to § 754.

See, e.g., SEC v. Bilzerian, 378 F.3d 1100 (D.C. Cir. 2004);

SEC v. Vision Comm’ns, Inc., 74 F.3d 287 (D.C. Cir. 1996);

Haile v. Henderson Nat’l Bank, 657 F.2d 816 (6th Cir. 1981).

We agree with the D.C. and Sixth Circuits that § 1692 extends

“the territorial jurisdiction of the appointing court . . . to any

district of the United States where property believed to be that

of the receivership estate is found, provided that the proper

documents have been filed in each such district as required by

§ 754.” Bilzerian, 378 F.3d at 1103-05; accord Haile, 657

F.2d at 823. As with the nationwide service provision in the

Securities Act, where a party has been properly served by the

Receiver, the Due Process Clause is satisfied because the

party has minimum contacts with the United States as a

whole. See Omni Capital Int’l, 484 U.S. at 104-06; see also

Haile, 657 F.2d at 824 (noting that “[i]n an action where service of process is effected pursuant to a federal statute which

provides for nationwide service of process, the strictures of

International Shoe do not apply”). 

The cases upon which the Receiver relies presume that the

district court has jurisdiction by virtue of the district court’s

investment of ownership and/or control of the receivership

entity in the receiver or by virtue of the receiver’s filing in

compliance with § 754. For example, in SEC v. Hardy, 803

F.2d 1034, non-party investors challenged the receiver’s

administration of receivership assets, claiming that the use of

13932 SEC v. ROSS
summary proceedings was inappropriate vis-à-vis the investors, because it deprived them of due process. Id. at 1040. We

rejected this argument, noting that the district court had the

authority to employ summary proceedings “to determine

appropriate relief in equity receiverships” where multiple

creditors laid claim to receivership assets. Id.; see also SEC

v. Universal Financial, 760 F.2d 1034, 1038-39 (9th Cir.

1985) (per curiam) (in an earlier piece of litigation in the

Hardy case, holding that the district court’s exercise of summary jurisdiction over claims to receivership assets presented

by non-party investors was proper). 

In SEC v. Am. Capital Invs., Inc., 98 F.3d 1133 (9th Cir.

1996), we rejected jurisdictional challenges by non-party partners to the forced sale of certain partnership assets, noting that

the receiver had obtained jurisdiction over the assets pursuant

to its § 754 filing, id. at 1142-43, and that its disposition of

the property was within the receiver’s powers to exercise the

“complete control” vested in it by that section. Id. at 1144.

We held that the receiver’s disposition of the property pursuant to this jurisdiction did not violate any rights of the partners because they had both actual notice and an opportunity

to be heard. Id.; see also In re San Vicente Med. Partners, 962

F.2d 1402 (9th Cir. 1992). 

[10] It should be obvious that these cases provide no basis

for the Receiver’s attempted use of summary proceedings

against Bustos. Even assuming the Receiver could overcome

the preliminary difficulty of establishing that Bustos’s earned

commissions are receivership assets, he has not given any evidence that the proceeds of these commissions are located in

the District of Oregon, or that he has attempted to establish

control over out-of-district assets pursuant to § 754. Absent

some evidence that he has obtained jurisdiction over these

assets, these cases cannot justify his use of summary proceedings. Furthermore, given his apparent failure to comply with

§ 754, it follows, a fortiori, that he could not have served process pursuant to § 1692. See Vision Commc’ns, Inc., 74 F.3d

SEC v. ROSS 13933
at 289, 291 (expressly rejecting the exercise of in personam

jurisdiction over a party in a district outside the district of

appointment because the receiver had failed to comply with

the filing requirements of § 754). In sum, the Receiver failed

to obtain in rem jurisdiction over any assets or in personam

jurisdiction over Bustos himself, and without such jurisdiction, the use of summary proceedings was improper. 

We should note that although receivers usually obtain jurisdiction in the manner described above, in one case we held

that strict compliance with § 754 was not necessary even

where the property was located outside the district of appointment. However, we excused the failure to file under § 754

because an independent basis for the district court’s jurisdiction over the objecting party already existed. In United States

v. Arizona Fuels Corp., 739 F.2d 455 (9th Cir. 1984), the

receiver appointed to manage the assets of Arizona Fuels

moved for an order to show cause regarding certain assets

claimed by the receiver that were in the possession of Tenneco, one of Arizona Fuels’ suppliers. After Arizona Fuels

was placed into receivership, Tenneco had attempted to use

advance payments received from Arizona Fuels to offset prereceivership deficiencies. The receiver claimed that Tenneco

held those funds on behalf of Arizona Fuels against future

deliveries, and as such, upon appointment of the receiver, they

became receivership property. Id. at 458. The district court

applied the rule barring the use of receivership assets to set

off pre-receivership debts and, determining that the receiver

was entitled to possession of the funds, ordered Tenneco to

disgorge the funds. On appeal, Tenneco argued that the district court had erroneously ordered disgorgement after summary proceedings because, as a non-party, Tenneco was

entitled to full plenary proceedings “with all the procedural

trimmings” (including formal service of process). Id. Tenneco

also argued that the receiver lacked jurisdiction over the funds

because it did not comply with the filing requirements of 28

U.S.C. § 754. Id. at 458. 

13934 SEC v. ROSS
We rejected these arguments. First, we reasoned that the

use of summary proceedings against a non-party could be

proper “where the third person is made a party to the suit or

where the third person becomes sufficiently involved in the

receivership action, for example by intervening.” Id. at 459.

Tenneco had participated in the receivership proceedings

from their inception: it was specifically named in and served

with the receiver’s order of appointment and counsel had

appeared on its behalf at various hearings. Id. Because Tenneco had “ample opportunity” from the outset to participate

in the proceedings and to contest the receiver’s claims, the use

of summary procedures did not violate due process. 

More importantly, however, we held that through its active

participation, Tenneco had submitted to the in personam jurisdiction of the district court. Thus, even though Tenneco

claimed that it held the disputed proceeds in Houston, Texas,

the failure of the receiver, who was appointed by the District

of Arizona, to file in that district pursuant to § 754 did not

divest the district court of the jurisdiction it already exercised

over Tenneco itself. In this context, compliance with § 754

served no purpose other than to provide notice. Since Tenneco

had received actual notice and had participated in the proceedings, it had no due process claim. 

We think that Arizona Fuels does not govern this case.

Nothing in the record suggests that the district court ever

obtained in personam jurisdiction over Bustos. He was not

named as a party to the underlying proceedings, and although

he intervened, as we discuss in more detail below, that intervention did not constitute consent to the jurisdiction of the

district court. Moreover, the receiver in Arizona Fuels was

simply attempting to recover receivership assets—there was

no allegation that the legitimacy of Tenneco’s claim to the

assets depended on its liability for some illegal activity. The

Receiver in our case is alleging that Bustos himself violated

the Securities Act. Bustos thus does not fall within this exception to the filing requirements of § 754. 

SEC v. ROSS 13935
C. Intervention of Right as Consent to Jurisdiction

The Receiver has one remaining jurisdictional argument

that merits close attention. Bustos responded to notice of the

Receiver’s disgorgement motion by filing a motion to intervene as of right under FED. R. CIV. P. 24(a)(2). In his intervention motion, Bustos made clear that he contested the court’s

exercise of personal jurisdiction, the sufficiency of process he

had received, and the propriety of venue in the District of

Oregon. He filed similar objections in the first responsive

pleading (his answer) filed after the court granted his motion

to intervene. Nevertheless, the Receiver argues that by intervening Bustos consented to the jurisdiction of the district

court. Although there is some support for the Receiver’s view,

upon careful consideration of the framework governing intervention, we decline to adopt a per-se rule that an intervenor

consents to the court’s personal jurisdiction. We hold that

Bustos did not consent to the jurisdiction of the district court

when he intervened. 

Few courts have directly addressed whether a non-party

who intervenes in ongoing proceedings pursuant to Rule

24(a)(2) can raise personal jurisdiction objections in conjunction with a motion to intervene. However, those that have

addressed this question have generally concluded that a party

who intervenes, consents, as a matter of law, to the jurisdiction of the court permitting the intervention. See In re Ford

Motor Co., 471 F.3d 1233 (11th Cir. 2006); County Sec.

Agency v. Ohio Dept. of Commerce, 296 F.3d 477 (6th Cir.

2002); Pharm. Research & Mfrs. v. Thompson, 259 F. Supp.

2d 39 (D.D.C. 2003); City of Santa Clara v. Kleppe, 428 F.

Supp. 315, 317 (N.D. Cal. 1976). Wright and Miller concurs

in this view: “[T]he intervenor submits himself to the personal

jurisdiction of the court by seeking to intervene in the action

and cannot move to dismiss on that ground.” 7C WRIGHT,

MILLER & KANE, FEDERAL PRACTICE AND PROCEDURE, CIVIL 3D

§ 1920, at 612 (3d ed. 2007) (citing Kleppe, 428 F. Supp.

315). 

13936 SEC v. ROSS
These courts, and even Wright and Miller, devote little

space to analyzing this issue, but the conclusion derives from

the principle that a party cannot simultaneously seek affirmative relief from a court and object to that court’s exercise of

jurisdiction. In Ford Motor, the Eleventh Circuit held that a

party that intervened to challenge the district court’s injunction against a parallel state court proceeding had “acquiesced”

to the district court’s jurisdiction over its person. 471 F.3d at

1248. Similarly, in County Security Agency, the Sixth Circuit

dismissed the intervenor’s jurisdictional objections because “a

motion to intervene is fundamentally incompatible with an

objection to personal jurisdiction.” 296 F.3d at 483. The Eleventh Circuit suggested that as an alternative to intervention, a

third party can either file an amicus brief or ignore the proceedings and collaterally challenge the jurisdiction of the rendering court in his home jurisdiction when the prevailing

party attempts to enforce the judgment. Ford Motor, 471 F.3d

at 1248 n.34. 

It seems apparent to us that in some cases an intervenor

must necessarily acquiesce to the district court’s jurisdiction.

Indeed, in many cases an intervenor will have no objection to

the district court’s jurisdiction over her. On the other hand,

consent to jurisdiction sometimes occurs unwillingly or even

inadvertently. As the Court wrote in Insurance Corp. of Ireland, “[a] variety of legal arrangements have been taken to

represent express or implied consent to the personal jurisdiction of the court.” 456 U.S. at 703. For example, the parties

may consent to jurisdiction through a forum selection clause

in a contract, Nat’l Equip. Rental, Ltd. v. Szukhent, 375 U.S.

311, 315-16 (1964); Dow Chem. Co. v. Calderon, 422 F.3d

827, 831 (9th Cir. 2005); by filing a proof of claim in a bankruptcy proceeding, Tucker Plastics, Inc. v. Pay ‘N Pak Stores,

Inc., 99 F.3d 910, 911(9th Cir. 1996) (per curiam); or by filing an original complaint, a counterclaim or a crossclaim,

Adam v. Saenger, 303 U.S. 59, 67-68 (1938); Schnabel v. Lui,

302 F.3d 1023, 1037-38 & n.5 (9th Cir. 2002); cf. Smith v.

Salish Kootenai Coll., 434 F.3d 1127, 1138-40 (9th Cir. 2006)

SEC v. ROSS 13937
(en banc) (holding that a non-member who files a civil claim

in an Indian tribal court consents to tribal jurisdiction). 

[11] The rules governing consent are not as immutable as

they may appear. We have held that a party who files a compulsory counterclaim under Rule 13(a) does not thereby waive

any jurisdictional defenses he has previously or concurrently

asserted, Dragor Shipping Corp. v. Union Tank Car Co., 378

F.2d 241, 244 (9th Cir. 1967), nor has a party who files a permissive counterclaim under Rule 13(b) when objection to

“personal jurisdiction . . . [is] asserted in the same pleading.”

Gates Learjet Corp. v. Jensen, 743 F.2d 1325, 1330 n.1 (9th

Cir. 1984); cf. Teyseer Cement Co. v. Halla Mar. Corp., 794

F.2d 472 (9th Cir. 1986) (holding there was no consent to in

personam jurisdiction where the defendant’s counterclaim followed a restricted appearance in a quasi in rem admiralty proceeding). In general, we have held that a party has consented

to personal jurisdiction when the party took some kind of

affirmative act—accepting a forum selection clause, submitting a claim, filing an action—that fairly invited the court to

resolve the dispute between the parties. By contrast, where a

party has filed a timely and unambiguous objection to the

court’s jurisdiction, we have concluded that the party has not

consented to jurisdiction. This is true even if the party has

preserved its own options by simultaneously asserting whatever claims or defenses it has against the plaintiff. Our commonsense approach avoids the pitfalls of a more formalistic

era in which a defendant had to choose between contesting the

forum’s jurisdiction through a special appearance and entering a general appearance and defending himself on the merits.

See Gates Learjet Corp., 743 F.2d at 1330 n.1; LARRY L.

TEPLY & RALPH U. WHITTEN, CIVIL PROCEDURE 209-10 (3d ed.

2004). 

[12] We do not think that Bustos consented to the court’s

jurisdiction. To the contrary, Bustos “objected to in personam

jurisdiction as effectively as [he] could have” at every turn.

Teyseer Cement Co., 794 F.2d at 478. Bustos sought to inter13938 SEC v. ROSS
vene as of right because he correctly believed that “the disposition of the action [might] as a practical matter impair or

impede [his] ability to protect [his] interest” and that his interest was not “adequately represented by existing parties.” FED.

R. CIV. P. 24(a)(2). One means of protecting his interest—

perhaps his best—was to object to the court’s lack of jurisdiction over his person or to the propriety of venue, and he

objected to personal jurisdiction, venue and insufficiency of

service of process promptly and unambiguously when he filed

his answer in accord with Rule 12. See FED. R. CIV. P.

12(b)(2), (3), (5); see also Wencke, 783 F.2d at 835 (suggesting that appellant, who challenged the court’s personal jurisdiction, should have formally intervened). 

[13] We do not think that anything in the Federal Rules

suggests that a non-named party cannot intervene of right and

then contest the federal court’s exercise of in personam jurisdiction. First, in the standard alignment, where a plaintiff sues

a defendant, the defendant is entitled to object to the court’s

exercise of personal jurisdiction in its first responsive pleading. FED. R. CIV. P. 12(b)(2). Similarly, where the defendant

seeks to join a necessary party under Rule 19, joinder is premised on the district court’s ability to obtain jurisdiction over

that party. FED. R. CIV. P. 19(a) (“A person who is subject to

service of process and whose joinder will not deprive the

court of jurisdiction over the subject matter of the action shall

be joined as a party . . . .”). In the event that the court cannot

obtain jurisdiction, it must dismiss the case if it cannot be

tried without the third party. FED. R. CIV. P. 19(b) (“If a person as described in subdivision (a)(1)-(2) hereof cannot be

made a party, the court shall determine whether in equity and

good conscience the action should proceed among the parties

before it, or should be dismissed . . . .”). In these cases—

where either the plaintiff or a named defendant brings a partyin-interest to the action—the party may defend himself on

both jurisdictional and substantive grounds. 

SEC v. ROSS 13939
Rule 24 permits a third party to enter the proceedings in

order to protect his own interests. Rule 24(a) permits intervention of right where “the disposition of the action may as a

practical matter impair or impede the applicant’s ability to

protect that interest.” FED. R. CIV. P. 24(a). Rule 24(b) authorizes permissive intervention where there is some kind of

common question of law or fact.16 If the third party is intervening of right, as Bustos was here, we see little reason to

deprive him of any of his procedural defenses merely because

the original plaintiff failed to name him as a defendant or

because no other party sought to have him joined pursuant to

Rule 19. 

[14] We do not see why an intervenor should be considered

to have automatically consented to the jurisdiction of the

court. The intervenor has consented to something, but it is not

personal jurisdiction. Rather, the quid pro quo for his intervention is that he consents to have the district court determine

all issues in the case, including issues of jurisdiction, venue

and service of process. See Ins. Corp. of Ireland, 456 U.S. at

706 (“By submitting to the jurisdiction of the court for the

limited purpose of challenging jurisdiction, the defendant

agrees to abide by that court’s determination on the issue of

jurisdiction.”). Intervention of right simply puts the intervenor

into the position he would have been in had the plaintiff (or

another party) properly named him to begin with. 

This case demonstrates the wisdom of the rule. If the

Receiver had played the game straight-up, named Bustos as

a defendant, and served him with a complaint and summons

pursuant to Rule 4, Bustos could have objected to personal

jurisdiction in the district court, including in any appeal to this

court. He also could have made an informed decision between

(1) litigating both the jurisdictional and substantive issues in

the District of Oregon and the Ninth Circuit or (2) sitting out

16Our opinion is limited to the case where a party seeks to intervene of

right. 

13940 SEC v. ROSS
the Oregon proceedings and mounting a collateral challenge

to jurisdiction when the Receiver appeared in Texas with a

judgment in hand.17 The Receiver’s argument would leave

Bustos with the second option only.18 The Federal Rules do

not require, and the Due Process Clause ought not to countenance, such an unfair election of defenses. 

IV.

Our decision does not necessarily foreclose other avenues

of seeking disgorgement from Bustos, although we express no

views on the merits of such proceedings. The SEC may opt

to bring a civil enforcement action against Bustos. There may

be additional proceedings the Receiver can pursue under 28

U.S.C. §§ 754 and 1692. See Vision Commc’ns, Inc., 74 F.3d

at 291. Or, assuming he has standing to do so, the Receiver

may choose to bring suit against Bustos directly under § 12 of

the Securities Act. However the Receiver or the SEC chooses

to proceed, we admonish both to avoid improper shortcuts.

Unless they can articulate some theory of liability that does

not turn on Bustos’s own violation of the securities laws, they

must formally serve him with process, properly obtain in per17The risk of misunderstanding one’s options seems particularly high in

the context of receivership actions, where the line between in personam

and in rem jurisdiction is vanishingly thin. Here, the Receiver’s motion

contained two claims, one (disgorgement for violation of the securities

laws) that had to be asserted in personam and one (disgorgement of a

fraudulent conveyance) that could be asserted in rem. The Receiver also

requested the district court to approve summary proceedings, which, as we

have discussed, are generally used where the court has in rem jurisdiction

or the action is directed against a nominal defendant. Until the district

court rejected the fraudulent conveyance claim, Bustos could not have

determined with any certainty precisely what jurisdictional basis the

Receiver was using to assert his claim and thus could not determine

whether he could afford to risk sitting out the proceedings and mounting

a later, collateral attack on the court’s jurisdiction. 

18Although Bustos could also have sought to file an amicus brief, we

regard that option, in these circumstances, as an inadequate substitute for

party status. 

SEC v. ROSS 13941
sonam jurisdiction over him, permit him to litigate fully all

issues relating to both the fact and scope of his liability, and

do so, of course, subject to all available legal and equitable

defenses. To date, he has not been given that opportunity.

V.

The district court lacked jurisdiction to enter the disgorgement order against Bustos. We therefore VACATE the district

court’s order and REMAND for further proceedings consistent with this opinion.

VACATED and REMANDED. 

13942 SEC v. ROSS