UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF OHIO

WESTERN DIVISION AT DAYTON

AMERICAN POWER, LLC,

Plaintiff,

vs.

DOUGLAS O. HARRIS, et al.

Defendants.

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Case No. 3:17-cv-00347

District Judge Walter H. Rice

Magistrate Judge Sharon L. Ovington

REPORT AND RECOMMENDATIONS1

Plaintiff American Power, LLC brings this action seeking to impose liability on 

Defendants Michael T. Morley, Scott Larson, and others for purported violations of the 

Securities Exchange Act of 1934 and state common law. The case is presently before the

Court upon Morley’s and Larson’s Motions to Dismiss (Doc. #s 21, 22), Plaintiff’s 

Memoranda in Opposition (Doc. #s 34, 35), and the record as a whole.

Both Morley and Larson contend that this Court lacks personal jurisdiction over 

them under Ohio’s long-arm statute and the Fourteenth Amendment’s Due Process 

Clause. Plaintiff asserts that this Court has personal jurisdiction over Defendants under 

15 U.S.C. § 78aa. 

Plaintiff’s Complaint alleges the following basic information about Defendants 

Morley and Larson. Morley is a Member-Manager of two other Defendants–Dektrix 

 1 Attached is a NOTICE to the parties regarding objections to this Report and Recommendations.
2

LLC and Dektrix Transportation Services LLC (Dektrix Transportation). Morley’s 

personal residence is in Spanish Fork, Utah. He is a citizen of Utah. (Doc. #1, ¶ 16). 

Defendant Larson is the Comptroller, employee, and/or agent of Dektrix LLC and 

Dektrix Transportation. Larson’s personal residence is in Midvale, Utah. He is a citizen 

of Utah. Id. at ¶ 17.

The principal office apparently shared by Dektrix LLC and Dektrix Transportation 

is in Salt Lake City, Utah. Dektrix LLC is incorporated in the State of Nevada; Dektrix 

Transportation is incorporated in the State of Utah. Id. at ¶s 11-12.

Plaintiff has the burden to establish that this Court may exercise personal 

jurisdiction over “each Defendant independently.” Days Inns Worldwide, Inc. v. 

Patel, 445 F.3d 899, 904 (6th Cir. 2006) (citing Burger King Corp. v. Rudzewicz, 471 

U.S. 462, 475, 105 S.Ct. 2174 (1985)); see CompuServe, Inc. v. Patterson, 89 F.3d 1257, 

1261-62 (6th Cir. 1996). No evidentiary hearing was held on Defendants Morley’s and 

Larson’s Motions and, as a result, Plaintiff “need only make a prima facie showing of 

jurisdiction.” Patterson, 89 F.3d 1262; see Neogen Corp. v. Neo Gen Screening, Inc., 

282 F.3d 883, 887 (6th 2002). “Under these circumstances, th[e] court will not consider 

facts proffered by the defendant that conflict with those offered by the plaintiff and will 

construe the facts in the light most favorable to the nonmoving party [here, Plaintiff]....” 

Neogen Corp., 282 F.3d at 887 (internal citation omitted); see Beydoun v. Wataniya 

Restaurants Holding, Q.S.C., 768 F.3d 499, 504 (6th Cir. 2014).

Defendants Morley and Larson mistakenly rely on Ohio’s long-arm statute and the

Fourteenth Amendment’s Due Process Clause because Plaintiff’s Complaint asserts that
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they violated §§ 10(b) and 20(a) of the Securities Exchange Act and accompanying

Rules. (Doc. #1, PageID #s 24-28). “Nationwide service of process is available

under Section 78aa of the Securities Exchange Act, which ‘confers personal jurisdiction

in any federal district court over any defendant with minimum contacts to the United

States.’” Zobel v. Contech Enters., 170 F. Supp. 3d 1041, 1045 (S.D. Ohio 2016)

(quoting United Liberty Life Ins. Co. v. Ryan, 985 F.2d 1320, 1330 (6th Cir. 1993)).

Plaintiff’s Complaint sufficiently alleges that both Morley and Larson reside in Utah and 

both are citizens of the State of Utah. They, therefore, have minimum contacts with the 

United States, triggering this Court’s proper exercise of personal jurisdiction over them.

See id.

Defendant Morley also maintains that Plaintiff’s claims against him should be

dismissed for failing to state claims against him that satisfy Fed. R. Civ. P. 8, 12(b)(6),

and 9(b). He incorporates by reference the arguments and authorities pressed by Dektrix

LLC and the other Dektrix Defendants in their separately filed Motion to Dismiss. He

also argues:

Plaintiff’s conclusory and group-pled allegations that the

individual Defendants ‘acted as controlling persons for Dektrix’ ([Doc.

#1,] ¶ 86) are belied by detailed factual allegations to the contrary. 

Specifically, the MPA [Membership Purchase Agreement] which

Plaintiff incorporated into the Complaint clearly states that only

Defendants Harris and Crane are managing members of Dektrix LLC. 

See Doc. 1-1, p. 89-114 at p. 97.2

 And there is no allegation supporting

 2 This maladroit citation is unhelpful because it does not identify “PageID #s” in the record and because the page 

numbers it cites do not match the page numbers of the Membership Purchase Agreement or its location in the 

record. Having reviewed the entire Membership Purchase Agreement for references to Morley and his position with 

Dektrix LLC, it appears that he relies on his signature as “Michael T. Morley, Member” as support for his argument 

that only Crane and Harris were member managers. See Doc. #1, PageID #172.
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any reason to believe otherwise. Certainly there is no factual allegation

supporting Plaintiff’s conclusory allegation.

(Doc. #21, PageID # 286) (footnote added). These contentions lack merit.

Accepting as true the factual allegations raised in Plaintiff’s Complaint and 

construing it “in the light most favorable to Plaintiff...,” Doshi v. General Cable 

Corporation, 823 F.3d 1032, 1039 (6th Cir. 2016); see Frank v. Dana Corp., 646 F.3d 

954, 958 (6th Cir. 2011), reveals repeated allegations that Defendant Morley is a 

member-manager of Dektrix LLC and Dektrix Transportation. See Doc. #1, ¶s 8, 16, 18. 

Dektrix LLC’s Private Placement Memorandum attached to the Complaint provides 

details about Morley’s management role and authority. It states:

Management The Company [Dektrix LLC] is managed by a 

Board of Managers (the ‘Board’). As of the 

dates of this Memorandum, the Board is 

comprised of Murray J. Crane, Douglas O. 

Harris and Michael T. Morley....

(Doc. #1, PageID #50 (emphasis in original)).

Although Morley signed the Membership Purchase Agreement as a “member” of 

Dektrix LLC (this apparently what Morley’s argument and maladroit citation refer to, see 

supra, n.2), this does not alter the fact that Dektrix LLC’s Private Placement 

Memorandum listed him as a member of its Board of Managers. The Private Placement 

Memorandum later explains the broad-sweeping duties held by Dektrix LLC’s Board of 

Managers—including Morley:

[Dektrix LLC] is managed by a board of managers (the “Board”). As of the 

date of this Memorandum, the Board consisted [sic] of Murray J. Crane and 

Michael T. Morley. The Board has the exclusive management and control 

of all aspects of the business of [Dektrix LLC]. In the course of its 
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management, the Board may, in its absolute discretion, acquire, hold title to, 

sell, re-lease or otherwise dispose of equipment and interests therein when 

and upon such terms as it determines to be in the best interest of [Dektrix 

LLC]....

Id. at 84.

Read together and construed in Plaintiff’s favor, the Complaint and the 

Private Placement Memorandum contain specific and cogent information that rises

above mere conclusory allegations. Since, according to these materials, Morley was 

on Dektrix LLC’s Board of Directors—which had broad-sweeping management 

power—Morley held a managerial role and some managerial control over Dektrix. 

The fact that he minimized or downplayed his role and control by signing the 

Membership Purchase Agreement as a “Member” does not erase the fact he was on 

the Board of Directors and held the managerial power attached to such incumbency. 

Id. at 172.

Accordingly, Defendant Morley’s and Larson’s Motions to Dismiss lack 

merit.

IT IS THEREFORE RECOMMENDED THAT:

1. Defendant Morley’s Motion to Dismiss (Doc. #21) be denied; and

2. Defendant Larson’s Motion to Dismiss (Doc. #22) be denied.

August 2, 2018 s/Sharon L. Ovington

Sharon L. Ovington

United States Magistrate Judge
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NOTICE REGARDING OBJECTIONS

Pursuant to Fed. R. Civ. P. 72(b), any party may serve and file specific, written 

objections to the proposed findings and recommendations within FOURTEEN days after 

being served with this Report and Recommendations. Such objections shall specify the 

portions of the Report objected to and shall be accompanied by a memorandum of law in 

support of the objections. If the Report and Recommendation is based in whole or in part 

upon matters occurring of record at an oral hearing, the objecting party shall promptly 

arrange for the transcription of the record, or such portions of it as all parties may agree 

upon or the Magistrate Judge deems sufficient, unless the assigned District Judge 

otherwise directs. A party may respond to another party’s objections within 

FOURTEEN days after being served with a copy thereof. 

Failure to make objections in accordance with this procedure may forfeit rights on 

appeal. See Thomas v. Arn, 474 U.S. 140 (1985); United States v. Walters, 638 F.2d 947, 

949-50 (6th Cir. 1981).