Opinion ID: 1732178
Heading Depth: 3
Heading Rank: 2

Heading: Investment fraud

Text: The investment fraud allegedly occurred when certain defendants induced AHAT and BHS to invest in ROA, beginning in January 2001 and thereafter, through the exchange of AHAT's and BHS's equity in the trust for ROA securities and the subsequent capital calls. For example, AHAT's complaint alleges: On September 14-17, 2000, at a meeting of the Trustees and Board[ ] of . . . [the trust] . . ., Patterson made [a] presentation to induce Plaintiffs to merge or combine with ROA, which included some or all of [the] aforesaid material misrepresentations regarding the financial condition of . . . [ROA and] FVR. . . . Also attending this meeting were . . . Hudgins . . . and James Olzacki,[ [10] ] Executive Vice President of Gen Re. ¶ 57. It also alleges: With regard to the . . . three individual Gen Re defendants (Reindel, Seeger . . . and Kellogg), they were intimately involved for a period of many years in the conspiratorial schemes which were intended to, and did, deceive and mislead the Alabama [Department of Insurance] and persons in Alabama doing business with ROA and its units . . ., with respect to ROA's . . . financial condition and operations, and with their knowledge and consent their co-conspirators, such as Crews, Patterson, . . . Hudgins, and others at ROA did business with and carried on contacts with the Plaintiffs and others in Alabama, as part of carrying out the joint conspiratorial schemes. Moreover, their actual and de facto agents, such as . . . Ken Patterson of ROA, personally came to Alabama to make presentations to the Plaintiffs with respect to Gen Re, in the context of AHAT doing business with ROA. ¶ 36(ii) (emphasis added). Finally, it alleges:  Gen Re (1) regularly did large amounts of business in Alabama, including dealings with various Plaintiffs and reinsurance provided by Gen Re to AHAT, . . . (2) made substantial amounts of premiums, profits and other benefits off of doing business with and for both Plaintiffs and ROA and its affiliated entities and [Patterson, Crews, and Hudgins]; . . . [and 3] knew and foresaw that its widely publicized reinsurance backing of ROA would be relied upon by passive investors and equity subscriber interest holders like [AHAT]. . . . Gen Re, acting through individual defendants Reindel, Kellogg and Seeger, was not only aware of but fully approved the AHAT acquisition and the resulting inclusion of Plaintiffs' surplus in ROA's financial system, and the resulting issuance of subscriber equity accounts to Plaintiffs, and, through such individual defendants, it was also aware of and fully approved the making of the 2002 capital call offers to the Plaintiffs. . . .  ¶ 435 (emphasis added). Under AHAT's theory of jurisdiction, the actions and omissions of [individuals such as] Crews, [Patterson, and Hudgins] are imputed and attributable to [all] the other defendants, such as the petitioners. ¶ 395 (emphasis added). The petitioners contend that the exercise of jurisdiction on the basis of such a theory does not comport with the due-process requirements of International Shoe Co. v. Washington, 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95 (1945), and its progeny. More specifically, they contend that AHAT's theory unconstitutionally dispenses with the `purposeful availment requirement[, which] assures that a defendant will not be haled into a jurisdiction as a result of `the unilateral activity of another person or a third person.'' Ex parte Dill, Dill, Carr, Stonbraker & Hutchings, P.C., 866 So.2d at 525-26 (quoting Elliott, 830 So.2d at 731, quoting in turn Burger King Corp., 471 U.S. at 475, 105 S.Ct. 2174). For that proposition, they cite cases from other jurisdictions refusing to recognize conspiracy-based jurisdiction. See, e.g., Karsten Mfg. Corp. v. United States Golf Ass'n, 728 F.Supp. 1429, 1434 (D.Ariz.1990); Mansour v. Superior Court, 38 Cal.App.4th 1750, 46 Cal. Rptr.2d 191 (1995). AHAT and BHS rely on general principles of conspiracy liability; [11] on cases from other jurisdictions, see, e.g., United Phosphorus, Ltd., v. Angus Chem. Co., 43 F.Supp.2d 904 (N.D.Ill.1999); Kentucky Speedway, LLC v. National Ass'n of Stock Car Auto Racing, Inc., 410 F.Supp.2d 592 (E.D.Ky.2006); Chenault v. Walker, 36 S.W.3d 45 (Tenn.2001); and on recent cases in which this Court recognized, at least in theory, the concept of conspiracy jurisdiction. See Ex parte United Ins. Cos., 936 So.2d 1049 (Ala. 2006); Ex parte Bufkin, 936 So.2d 1042 (Ala.2006); and Ex parte McInnis, 820 So.2d 795 (Ala.2001). United Insurance involved claims by Patricia Jackson against her health insurer, MEGA Life and Health Insurance Company (MEGA), and various foreign entities, which, she alleged, had conspired with MEGA to mislead Jackson regarding, among other things, the `true nature of the relationship between the Defendants, [and] . . . the full and true nature and manner in which premiums and premium increases would be determined and/or calculated for [Jackson].' 936 So.2d at 1051. The alleged foreign conspirators sought a writ of mandamus directing the trial court to vacate its order denying their motions to dismiss the complaint against them and to grant their motions to dismiss for lack of personal jurisdiction. 936 So.2d at 1052. We denied the petition, holding that Jackson's complaint pleaded the existence of a conspiracy with sufficient specificity to entitle her to engage in jurisdictional discovery. 936 So.2d at 1056. The result in Bufkin was similar. That case arose out of an automobile accident in Tennessee involving George Roberts, and John Bufkin, a Mississippi resident, who, at the time of the accident, was operating a vehicle belonging to Alabama resident Byron Williamson. 936 So.2d at 1044. Roberts's complaint against Bufkin and Williamson alleged that `[a]t the time of the accident complained of, [the foreign defendant] was the agent, servant or employee of [the Alabama defendant] and/or was involved in a joint venture with [the Alabama defendant]. ' 936 So.2d at 1046 (emphasis added). Bufkin sought a writ of mandamus directing the trial court to vacate its order denying his motion to dismiss for lack of personal jurisdiction. We denied the petition, concluding that Roberts had `at least alleg[ed] facts that would support a colorable claim of jurisdiction,' 936 So.2d at 1047, and was, therefore, entitled to discovery on the jurisdictional issue. In neither Bufkin nor United Insurance were we compelled to define the contours of conspiracy jurisdiction. Neither are we compelled to do so in this case. This is so, because, as AHAT points out, although the petitioners submitted affidavits in support of their motions, . . . the affidavits did not rebut, or even address, the key factual allegations on which [AHAT's] argument for jurisdiction is based. AHAT's brief, at 19 (emphasis added). AHAT and BHS argue, in essence, that they met their threshold showing that jurisdiction is proper and that the petitioners failed to make their prima facie showing that the exercise of jurisdiction would be improper. We agree.