Opinion ID: 658792
Heading Depth: 1
Heading Rank: 2

Heading: analysis

Text: 5 Section 27 of the 1934 Securities Exchange Act, as amended, grants subject matter jurisdiction to a district court where any act or transaction constituting the violation occurred. 15 U.S.C. Sec. 78aa (West Supp.1993). 3 In an effort to dodge the jurisdiction of the Southern District of Texas, Buchman tries to distance itself from Barrister's nationwide marketing of the limited partnership interests. Buchman argues that because it drafted the documents in New York for a promoter in New York, it is not responsible for Barrister's subsequent nationwide mailing of the prospectus. But this parochial view of the facts belies the realities of the business transaction. 6 Buchman drafted the tax opinion and the confidential memorandum, knowing that both would be included in the prospectus. And Buchman knew that Barrister intended to market the securities nationwide, which it did. Given that the only attractive feature of the limited partnership investment was its tax-sheltering effect, Buchman had to know that investors would rely on its tax opinion. While Buchman ostensibly made representations about the tax effects of the partnership interests to Barrister (both documents were addressed to Barrister), in reality, Buchman was representing the tax advantages of the investments to all potential investors. True, Barrister mailed the prospectus, but Buchman's tax opinion and offering memorandum were the crux of the sales pitch; the investors were actually relying on Buchman's representations about the tax-sheltering effects of the securities. 7 Buchman knew that the prospectus would be marketed nationwide, and Busch received the prospectus in Houston and relied upon Buchman's representations when he purchased the securities. Therefore, the Southern District of Texas has jurisdiction under Sec. 78aa.
8 Once a case is filed in an appropriate district under Sec. 78aa, the statute gives the district court the authority to serve defendants nationwide. Congress' grant of this power under Sec. 78aa is limited only by the constraints of constitutional due process. 9 This is not the first time we have dealt with a federal court's ability to get personal jurisdiction over a defendant when the suit is based upon a federal statute providing nationwide service of process. In Federal Trade Comm'n v. Jim Walters Corp., we held that due process requires only that a defendant in a federal suit have minimum contacts with the United States. 651 F.2d 251, 256 (5th Cir.1981). We grounded our holding on the understanding that [t]he doctrine [of personal jurisdiction] arises out of the limitations inherent in concepts of sovereignty. Id. 10 The Supreme Court, however, rejected this sovereignty analysis in Insurance Corp. of Ireland, Ltd. v. Compagnie des Bauxites, 456 U.S. 694, 701, 102 S.Ct. 2099, 2104, 72 L.Ed.2d 492 (1982) (stating that the requirement of personal jurisdiction protects an individual liberty interest grounded in the Due Process Clause, and not on notions of sovereignty). But, even under the due process rationale of Bauxites, the holding of Jim Walters remains. 11 A court can exercise personal jurisdiction over a defendant if the defendant has had minimum contacts with the forum and the maintenance of the suit in the forum will not offend traditional notions of fair play and substantial justice. Asahi Metal Indus. v. Superior Court of Calif., 480 U.S. 102, 113, 107 S.Ct. 1026, 1033, 94 L.Ed.2d 92 (1987). From Bauxites, we know that this jurisdictional limitation flows not from notions of sovereignty, but from the Due Process Clause. Bauxites, 456 U.S. at 701, 102 S.Ct. at 2104. Sovereignty, however, may remain germane because it defines the scope of the due process analysis. 12 In cases where a state is attempting to get extraterritorial jurisdiction over a defendant, the inquiry is whether the defendant has had minimum contacts with the state. International Shoe Co. v. Washington, 326 U.S. 310, 315, 66 S.Ct. 154, 158, 90 L.Ed. 95 (1945). And, when a federal court is attempting to exercise personal jurisdiction over a defendant in a suit based upon a federal statute providing for nationwide service of process, the relevant inquiry is whether the defendant has had minimum contacts with the United States. United Liberty Life Ins. Co. v. Ryan, 985 F.2d 1320, 1330 (6th Cir.1993); United Electrical, Radio & Machine Workers of Am. v. 163 Pleasant St. Corp., 960 F.2d 1080, 1085 (1st Cir.1992); Go-Video Inc. v. Akai Elec. Co., Ltd., 885 F.2d 1406, 1414-16 (9th Cir.1989) (rejecting argument that Bauxites prohibits national contacts approach); Lisak v. Mercantile Bancorp, Inc., 834 F.2d 668, 671-72 (7th Cir.1987), cert. denied, 485 U.S. 1007, 108 S.Ct. 1472, 99 L.Ed.2d 700 (1988); Securities Investor Protection Corp. v. Vigman, 764 F.2d 1309, 1315-16 (9th Cir.1985), rev'd on other grounds sub nom., --- U.S. ----, 112 S.Ct. 1311, 117 L.Ed.2d 532 (1992); Texas Trading & Milling Corp. v. Federal Republic of Nigeria, 647 F.2d 300, 314-15 (2d Cir.1981), cert. denied, 454 U.S. 1148, 102 S.Ct. 1012, 71 L.Ed.2d 301 (1982). 4 Thus, while the Due Process Clause must be satisfied if a forum is to acquire personal jurisdiction over a defendant, sovereignty defines the scope of the due process test. 13 Here, the due process concerns of the Fifth Amendment are satisfied. Given that the relevant sovereign is the United States, it does not offend traditional notions of fair play and substantial justice to exercise personal jurisdiction over a defendant residing within the United States. Cf. Burnham v. Superior Court of Calif., 495 U.S. 604, 620, 110 S.Ct. 2105, 2116, 109 L.Ed.2d 631 (1990).