Sound Foundation v. SCI Fund II, LLC

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF OREGON

SOUND FOUNDATION, a foreign No. 3:20-cv-01190-HZ

corporation,

OPINION & ORDER

Plaintiff,

v.

SCI Fund II, LLC, a Delaware limited

liability company, and HERBERT P.

WILKINS, JR., a Maryland resident,

Defendants.

Britta E. Warren

Colin G. Andries

Black Helterline LLP

805 SW Broadway, Suite 1900

Portland, OR 97205

Attorneys for Plaintiff

Shannon Armstrong

Kristin Asai

Alex Hadduck

Holland & Knight LLP

601 SW Second Ave., Suite 180

Portland, OR 97204

Attorneys for Defendants

HERNÁNDEZ, District Judge:

Plaintiff Sound Foundation brings six claims against SCI Fund II, LLC (“Defendant Fund

II”) and Herbert P. Wilkins, Jr. (“Defendant Wilkins”), individually and collectively. Against

Defendant Fund II, Plaintiff brings a breach of contract claim. Against Defendant Wilkins,

Plaintiff alleges securities violations under Oregon Revised Statute (“O.R.S.”) §§ 59.115(1)(b) &

59.115(3), and securities fraud under O.R.S. §59.135. Against both Defendants, Plaintiff brings

claims for fraudulent transfer under the Uniform Fraudulent Transfer Act, O.R.S. 95.200 et seq.

and unjust enrichment.

Defendants move to dismiss all claims for lack of personal jurisdiction. Defs.’ Second

Mot. to Dismiss at 1, ECF 34. Alternatively, Defendants move to dismiss all claims for failure to

state a claim, except the breach of contract claim. Id. For the following reasons, the Court grants

in part and denies in part Defendant’s Second Motion to Dismiss.

BACKGROUND

This case concerns an unpaid promissory note between Plaintiff Sound Foundation and

Defendant Fund II. Plaintiff is a foreign corporation registered in the Cook Islands founded by

Dennis and Derek Sivers. Pl.’s First Am. Compl. (“Am. Compl.) ¶¶ 2, 9. During the period

relevant to this motion, Dennis Sivers lived in Oregon and his son, Derek Sivers, lived outside of

the United States. Id. at ¶ 9; Supp. Warren Decl. Ex. 1 (“Wilkins Dep.”) at 31:14-20.

Defendant Herbert P. Wilkins is a Maryland resident. Am. Compl. ¶ 4; Wilkins Dep. at

7:16-20. He is the managing director of SCI Management, Inc. (“SCI Management”), a venture

capital management firm based in Delaware. Asai Decl. Ex. 2; Wilkins Dep. at 8:14-9:3. He does

not own property in Oregon and does not have an address, professional license, or bank account

in Oregon. Declaration of Herbert Wilkins ¶ 3 (“Wilkins Decl.”), ECF 24. SCI Management

manages three separate investment portfolios: SCI Management, LLC (“Fund I”), SCI Fund II,

LLC (Defendant Fund II), and SCI Fund III, LLC (“Fund III”) (collectively “SCI Funds”).

Wilkins Dep. 11:10-12:1; 15:23-16:3.

Defendant SCI Fund II is a venture capital fund registered in Delaware. Id. 9:6-8; 9:18-

10:21; Am Compl. ¶ 3; Asai Decl. Ex. 3, ECF 35-3. It has an investment portfolio comprised of

multiple companies. Wilkins Dep. 9:6-8; 9:18-10:21. One of those is Maya Cinemas, a

California corporation. Id. 10:14-20. Defendant Wilkins and Dennis Sivers are board members of

Maya Cinemas. Id. 16:16-20.

In January 2017, Defendant Wilkins contacted Dennis Sivers to ask if his son Derek

Sivers would loan money to Defendant Fund II. Am Compl. ¶ 8. Derek Sivers had lent money to

Maya Cinemas in the past. Wilkins Dep. 39:3-5, 17:12-17. Dennis Sivers told Defendant Wilkins

to “give [Derek Sivers] a call and ask him.” Id. 17:10-20. Defendant Wilkins has never met

Derek Sivers. Id. 48:3-5. The two have only communicated via phone and email. Id. 17:6-9.

Derek Sivers agreed to loan Defendant Wilkin’s venture capital fund, Defendant Fund II,

$700,000. Am. Compl. ¶ 10. Derek’s father, Dennis, facilitated the transaction from Oregon.

Supp. Warren Decl. Ex. 5. The parties memorialized this agreement in a promissory note on

January 10, 2017. Am. Compl. ¶ 10. The Note listed Derek Sivers as payee and Defendant Fund

II as debtor. Id.; Am. Compl. Ex. 1 (“Promissory Note”) at 1. The Promissory Note lists Derek

Sivers with a Portland, Oregon address, and Defendant Fund II with a Baltimore, Maryland

address. Promissory Note at 4. Defendant Wilkins signed the Promissory Note as managing

member of Defendant Fund II. Id. The Promissory Note listed “Portland, OR” in the top right-

hand corner, stated that Defendant Fund II was to pay Derek Sivers “at such address” listed “or

at such other place as may be designated,” contained a Choice of Law clause stating that the note

“shall be governed and construed under the laws of Oregon,” and that all remedies for default

shall be provided by Oregon Law. Promissory Note, 1-4.

Derek Sivers wire transferred $700,000 to Defendant Fund II the same day they executed

the Promissory Note. Am. Compl. ¶ 11. Defendant Fund II secured the loan by providing Derek

Sivers with shares in Maya Cinemas stock. Promissory Note at 2. Defendant Fund II agreed to

pay Derek Sivers the loan back, plus interest, on or before January 10, 2018. Id. at 1.

The same day Derek Sivers and Defendant Wilkins signed the Promissory Note,

Defendant Wilkins executed a promissory note between Defendant Fund II and Fund III for

$700,000. Am. Compl. ¶ 12. Defendant Wilkins then transferred the $700,000 to Fund III. Am.

Compl. ¶ 12; Wilkins Dep. 39:3-9; 40:24-41:19. Fund III then made staggered investments into a

Delaware holding company, Morris Medical, LLC, (“Morris Medical”). Id. 43:2-25. Morris

Medical is the holding company for Morris Medical Oregon, LLC (“Morris Oregon”), another

Delaware company. Id. 42:3-11. Morris Medical then transferred the money to Morris Oregon.

Id. 39:10-13; 42:3-11. Morris Oregon then invested those funds into Trellis Holdings OP – 3242

NE 82nd Avenue, LLC (“Trellis”), an Oregon company that holds cannabis investments in

Oregon. Id. 12:20-14:4; 42:6-8. Over five months, Fund III invested the entire $700,000 into

Trellis. Id. 37:16-38:10; Asai Decl. Ex. 6.1

In February 2018, Defendant Wilkins requested more time to repay the loan. Am.

Compl. ¶ 14. Derek Sivers agreed to extend the repayment deadline. Am. Compl. ¶ 15. The

parties executed another promissory note to memorialize the extension. Id.; Ex. 2 (“Amended

Note”). The Amended Note replaced the original Promissory Note and extended Defendant Fund

II’s time to repay the loan to December 31, 2018. Am. Promissory Note at 1. In all other

respects, the Amended Note contained the same provisions and information as the original

Promissory Note, including the references to Oregon state. See Am. Promissory Note.

Afterward, Defendant Wilkins sent Derek Sivers quarterly updates on the operations and

performance of the cannabis companies that Derek Sivers’ funds were invested into. Supp.

Warren Decl. Ex. 4; Declaration of Derek Sivers, Ex. A, ECF 21-1. Each update included a

section on investments in Oregon state. Id. The last quarterly update occurred on September 30,

2019. Supp. Warren Decl. Ex. 4 at 15.

Defendants failed to repay the loan by the amended deadline. Am Compl. ¶ 24. Plaintiff

alleges that Defendant Wilkins, through Fund III, used the entire $700,000 to invest in cannabis

companies in Oregon and Maryland, which caused Defendant Fund II to have insufficient funds

to repay its obligation. Id. ¶¶ 13-14.

On or about January 29, 2020, Derek Sivers assigned his rights, titles, and interests in the

Amended Note and in Defendant Fund II’s collateral stock shares to Plaintiff Sound Foundation.

1 A diagram of these transactions provided by Plaintiff is attached as Appendix A to this Opinion

and Order. The Court notes that Defendants object to the accuracy of this diagram because it

suggests that Defendant Wilkins is the only director of SCI Management when there are three

directors.

Am. Compl. ¶¶ 22, 23; Am. Compl. Ex. 3. Defendant Wilkins signed the Assignment of Debt

Agreement. Am. Compl. Ex. 3 at 3. The Agreement also includes an Oregon choice of law

provision. Id.

Plaintiff Sound Foundation filed its initial Complaint in July 2020 alleging breach of

contract and unjust enrichment against Defendant Fund II only. Complaint (“Compl.”) 1, ECF 1.

Plaintiff named Defendant Wilkins in its Amended Complaint after settlement discussions with

Defendant Fund II failed. Am. Compl. 1. Unopposed Mot. for Extension to Resp. to Compl. at 2,

ECF 6; Unopposed Mot. for Extension to Resp. to Compl. at 2, ECF 8. Defendants moved to

dismiss Plaintiff’s Amended Complaint for lack of personal jurisdiction and Defendant Wilkins

alternatively moved to dismiss the Amended Complaint for failure to state a claim. Def. Fund

II’s Mot. Dismiss for Lack of Jurisdiction, ECF 14; Def. Wilkins’ Mot. Dismiss for Lack of

Jurisdiction and Failure to State a Claim, ECF 23. Plaintiff opposed both motions and requested

jurisdictional discovery to address personal jurisdiction issues. Pl.’s Resp. to Def. Fund II’s First

Mot. Dismiss at 15, ECF 19.

The Court granted Plaintiff’s request and struck Defendants’ initial motions to dismiss.

Order, ECF 31. The parties conducted jurisdictional discovery and Defendants jointly renewed

their motions to dismiss. Defs.’ Second Mot. Dismiss. Plaintiff opposes Defendants’ motions.

Pl.’s Resp. to Defs.’ Second Mot. Dismiss (“Pl.’s Resp.”), ECF 39.

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DISCUSSION

I. Motion to Dismiss for Lack of Personal Jurisdiction

A. Standards

Under Federal Rule of Civil Procedure 12(b)(2), a defendant may move for dismissal on

the grounds that the court lacks personal jurisdiction. Plaintiff has the burden of showing

personal jurisdiction. Boschetto v. Hansing, 539 F.3d 1011, 1015 (9th Cir. 2008).

If the district court decides the motion without an evidentiary hearing, which is the

case here, then the plaintiff need only make a prima facie showing of the

jurisdictional facts. Absent an evidentiary hearing this court only inquires into

whether the plaintiff's pleadings and affidavits make a prima facie showing of

personal jurisdiction. Uncontroverted allegations in the plaintiff's complaint must

be taken as true. Conflicts between the parties over statements contained in

affidavits must be resolved in the plaintiff's favor.

Id. (citations, internal quotation marks, and brackets omitted).

In diversity cases, the court looks to the law of the state in which it sits to determine

whether it has personal jurisdiction over the non-resident defendant. W. Helicopters, Inc. v.

Rogerson Aircraft Corp., 715 F. Supp. 1486, 1489 (D. Or. 1989); see also Boschetto, 539 F.3d at

1015 (“When no federal statute governs personal jurisdiction, the district court applies the law of

the forum state.”).

Oregon Rule of Civil Procedure (ORCP) 4 governs personal jurisdiction issues in

Oregon. Because Oregon's long-arm statute confers jurisdiction to the extent permitted by due

process, Gray & Co. v. Firstenberg Mach. Co., 913 F.2d 758, 760 (9th Cir. 1990) (citing ORCP

4L; and Oregon ex rel. Hydraulic Servocontrols Corp. v. Dale, 294 Or. 381, 657 P.2d 211

(1982)), the court may proceed directly to the federal due process analysis. See Harris Rutsky &

Co. Ins. Servs. v. Bell & Clements Ltd., 328 F.3d 1122, 1129 (9th Cir. 2003) (when state long-

arm statute reaches as far as the Due Process Clause, the court need only analyze whether the

exercise of jurisdiction complies with due process); see also Millennium Enters., Inc. v.

Millennium Music, LP, 33 F. Supp. 2d 907, 909 (D. Or. 1999) (because Oregon’s catch-all

jurisdictional rule confers personal jurisdiction coextensive with due process, the analysis

collapses into a single framework and the court proceeds under federal due process standards).

To comport with due process, “the nonresident generally must have ‘certain minimum

contacts [with the forum state] such that the maintenance of the suit does not offend traditional

notions of fair play and substantial justice.’” Walden v. Fiore, 571 U.S. 277, 283 (2014) (quoting

Int’l Shoe Co. v. Wash., 326 U.S. 310, 316 (1945)). The forum state may exercise either general

or specific jurisdiction over a non-resident defendant. Boschetto, 539 F.3d at 1016.

B. Analysis

Defendants argue that this Court lacks personal jurisdiction over them because Plaintiff

cannot show the necessary contacts with Oregon to subject Defendants to personal jurisdiction in

Oregon. Defs.’ Second Mot. Dismiss 1. Plaintiff Sound Foundation contends that this Court has

specific jurisdiction over Defendant Wilkins and that it may exercise personal jurisdiction over

Defendant Fund II because it may impute Defendant Wilkins’s contacts to Fund II under an

alter-ego theory. Pl.’s Resp. at 9. Plaintiff does not argue Defendants are subject to general

jurisdiction. The Court thus begins by analyzing specific jurisdiction.

The plaintiff bears the burden of making a prima facie showing of personal jurisdiction.

Boschetto, 539 F.3d at 1015. “[U]ncontroverted allegations in [the plaintiff’s] complaint must be

taken as true, and conflicts between the facts contained in the parties’ affidavits must be resolved

in [the plaintiff’s] favor.” Rio Props., Inc. v. Rio Int’l Interlink, 284 F.3d 1007, 1019 (9th Cir.

2002). “[A]n affidavit or declaration used to support or oppose a motion must be made on

personal knowledge, set out facts that would be admissible in evidence, and show that the affiant

or declarant is competent to testify on the matters stated.” Mulato v. Wells Fargo Bank, N.A., 76

F. Supp. 3d 929, 946 (N.D. Cal. 2014).

A court has specific personal jurisdiction where “the defendant has purposefully directed

his activities at residents of the forum, and the litigation results from alleged injuries that arise

out of or relate to those activities.” Burger King Corp. v. Rudzewicz, 471 U.S. 462, 472 (1985)

(internal quotation marks and citations omitted).

The Ninth Circuit uses a three-part test to determine whether an out-of-state defendant

has sufficient minimum contacts to be subject to specific personal jurisdiction:

(1) The non-resident defendant must purposefully direct his activities or consummate some

transaction with the forum or resident thereof; or perform some act by which he

purposefully avails himself of the privilege of conducting activities in the forum, thereby

invoking the benefits and protections of its laws;

(2) the claim must be one which arises out of or relates to the defendant's forum-related

activities; and

(3) the exercise of jurisdiction must comport with fair play and substantial justice, i.e., it

must be reasonable.

Picot v. Weston, 780 F.3d 1206, 1211 (9th Cir. 2015) (quoting Schwarzenegger v. Fred Martin

Motor Co., 374 F.3d 797, 802 (9th Cir. 2004)). The plaintiff bears the burden on the first two

parts of the test. Id. If the plaintiff succeeds, “the burden shifts to the defendant to ‘set forth a

“compelling case” that the exercise of jurisdiction would not be reasonable.’” Id. at 1212

(quoting CollegeSource, Inc. v. AcademyOne, Inc., 653 F.3d 1066, 1076 (9th Cir. 2011)). The

first prong of the Ninth Circuit’s test to establish specific jurisdiction can be satisfied in two

ways: either the non-resident defendant must purposefully direct his activities at the forum state,

or the defendant must purposefully avail himself of the privilege of conducting activities in the

forum. Picot, 780 F.3d at 1212. Purposeful availment is most often applied to contract claims,

while purposeful direction is most often applied to tort claims. Id. (citing Schwarzenegger, 374

F.3d at 802). Here, Plaintiff brings contract and tort claims. The thrust of Plaintiff’s case

concerns a breach of contract claim. Accordingly, the Court begins by analyzing whether it has

personal jurisdiction over Defendants based on Plaintiff’s contract claim.

i. Purposeful Availment

The purposeful availment test for contract claims analyzes “whether a defendant has

‘purposefully availed [itself] of the privilege of conducting activities within the forum State, thus

invoking the benefits and protections of its laws.’” Picot, 780 F.3d at 1212 (quoting

Schwarzenegger, 374 F. 3d at 802). A defendant purposefully avails itself of conducting

activities within the forum if it performed some type of affirmative conduct that allows or

promotes the transaction of business within the forum state. Burger King, 471 U.S. at 475

(noting that the relationship with the forum “must arise out of contacts that the defendant himself

creates with the forum”) (emphasis in original).

Plaintiff can show that a defendant purposefully availed itself of the “privilege of doing

business in a forum” by producing “evidence of defendant’s actions in the forum, such as

executing or performing a contract there.” Schwarzenegger, 374 F.3d at 802. But “a contract

alone does not automatically establish minimum contacts in the plaintiff’s home forum.”

Boschetto, 539 F.3d at 1017. This is true even when parties include choice-of-law provisions in a

contract because courts should also consider “prior negotiations and contemplated future

consequences, along with the terms of the contract and the parties’ actual course of dealing.”

Burger King, 471 U.S. at 478–479, 482.

In Burger King, the Supreme Court found personal jurisdiction in Florida over an out-of-

state defendant-franchisee who contracted with a Florida corporation. 471 U.S. at 479. First, the

Court found a “substantial connection” to Florida because the defendant negotiated the franchise

agreement with plaintiff for a long-term franchise and the benefits derived from the contract. Id.

The contract involved a “carefully structured 20-year relationship that envisioned continuing and

wide-reaching contacts,” and the Court held that the “quality and nature” of this relationship

could “in no sense be viewed as random, fortuitous, or attenuated.” Id (quotations and citations

omitted). Next, the Court found that the defendant’s actions caused foreseeable injuries to the

plaintiff. Id. Finally, the agreement between the parties contained a Florida choice-of-law

provision and an arbitration provision that provided for binding arbitration in Miami, Florida. Id.

at 483. The combination of these factors demonstrated the defendant’s “deliberate affiliation”

with Florida and the “reasonable foreseeability of possible litigation there.” Id. at 482.

In analyzing Defendants’ contacts with respect to Plaintiff’s contract claim, the Court

relies on the Burger King factors to guide its analysis. These are: “prior negotiations and

contemplated future consequences,” “the terms of the contract and the parties' actual course of

dealing.” Picot, 780 F.3d at 1212 (quoting Burger King, 471 U.S. at 479).2

2 Plaintiff asks the Court to impute Defendant Wilkins contacts to Defendant II using alter ego

principles. Defendant Wilkins is a managing member of Defendant Fund II and a “managing

director of SCI Management,” which “manages Fund II.” Wilkins Decl. ¶ 3; Def. Mot. to

Dismiss at 3. He is thus an agent of Defendant Fund II and acts on its behalf. See James D. Cox

and Thomas Lee Hazen, 1 Treatise on the law of Corporations § 1:11 (3rd ed. December 2020

Update) (“[I]n member-managed LLCs, each of the members is an agent of the LLC and has the

authority to bind it in the ordinary course of business.”) Accordingly, where appropriate the

Court considers Defendant Fund II as acting through its agent, Defendant Wilkins. The Supreme

Court explained this well-established rule in Daimler: “Agency relationships, we have

recognized, may be relevant to the existence of specific jurisdiction. ‘[T]he corporate

personality,’ International Shoe Co. v. Washington, 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95

(1945), observed, ‘is a fiction, although a fiction intended to be acted upon as though it were a

fact.’ Id., at 316, 66 S.Ct. 154. See generally 1 W. Fletcher, Cyclopedia of the Law of

Corporations § 30, p. 30 (Supp.2012–2013) (“A corporation is a distinct legal entity that can act

only through its agents.”). As such, a corporation can purposefully avail itself of a forum by

directing its agents or distributors to take action there. Daimler AG v. Bauman, 571 U.S. 117,

135 n. 13 (2014) (citations omitted).” Thus, the Court need not rely on alter-ego principles to

attribute Defendant Wilkins contacts to Defendant Fund II, when the facts support that he was

acting on behalf of Defendant Fund II.

The parties’ prior negotiations support and cut against a finding of personal jurisdiction.

Neither party is a resident of Oregon and they negotiated the terms of the Note by email and

phone. However, Dennis Sivers facilitated the negotiations from Oregon. Wilkins Dep. 31:15-16.

Dennis Sivers, and his staff, drafted the terms and conditions of the Note. Emails show Oregon

resident Dennis Sivers communicated directly with Defendant Wilkins to finalize the terms.

Wilkins Dep. at 75-76; Supp. Warren Decl. Ex. 3. Derek Sivers is not copied on these

negotiation emails, though he was sent a final draft to review. Id.

Evidence of the parties’ contemplated future consequences suggests Defendants solicited

the funds from Derek Sivers with the intention that they would be invested in Oregon-based

businesses. The parties’ original intention was for Derek Sivers to loan funds to Morris Medical.

Wilkins Dep. 31:18-20; Supp. Warren Decl. Ex. 3 at 4-6. Morris Medical, LLC is based in

Maryland and is the sole member of Morris Medical, LLC, Oregon. Wilkins Dep. 31:22-32:2.

Morris Medical is a holding company for cannabis investments, including the Oregon based

Trellis entities. Id. 12:20-13:6. Ultimately, Morris Medical did not have sufficient assets to

collateralize the loan and Defendant Fund II became the debtor on the Note instead. Id. 31:18-20;

42:13-17. A 2018 email from Defendant Wilkins to Derek Sivers states: “The purpose of that

loan was to bridge an investment in two cannabis companies that the company was making. We

have completed both of those investments and both companies, after some delays, are operating

in their respective states.” Sivers Decl. Ex. A at 1. It then proceeds to provide an update on an

Oregon investment and a Maryland investment. Id. at 1–2.

The terms of the contract suggest that Defendant Wilkins and Defendant Fund II

understood that they would have continuing contacts in Oregon. The Amended Note listed Derek

Sivers’ address in Portland, Oregon, it instructed Defendants to pay Derek Sivers at the listed

Oregon address, and contained Oregon choice-of-law provisions. See Burger King Corp., 471

U.S. at 482 (finding that although a choice of law provision alone does not establish jurisdiction,

it supports finding “deliberate affiliation with the forum State and the reasonable foreseeability

of possible litigation there”). That the Original and Amended Note provided an Oregon

repayment address strongly supports finding jurisdiction. While the agreement indicated that the

location of the payment could be changed, no party designated a different address for repayment.

Defendants knowingly entered an agreement that required repayment in Oregon and the failure

by Defendants to repay Plaintiff at the Oregon address caused the alleged breach central to this

case.

The actual course of dealing demonstrates Defendants have intentionally conducted

business in Oregon and have regular contact with the state. See Ballard v. Savage, 65 F.3d 1495,

1499 (9th Cir. 1995) (“By intentionally doing business with California and U.S. residents, the

Bank “purposefully availed itself of the benefit and privilege of conducting activities in

California” and the United States.”). On the same day, Defendant Fund II executed the Note with

Derek Sivers, Defendant Wilkins executed a Promissory Note from Fund II to Fund III for the

exact amount Derek Sivers had lent Fund II. Asai Decl Ex. 5. Fund III then invested the full

$700,000 in Morris Medical, LLC, then Morris Medical Oregon, and then into the Oregon based

Trellis entities. Wilkins Dep. 39:3-25; 40:1-14. Through this investment, the holding company,

Morris Medical Oregon owns 25% of Trellis Holdings, OP, LCC which holds the Oregon based

Trellis cannabis businesses. Id. 12:19-20.

Defendant Wilkins through SCI Ventures sent Derek Sivers quarterly updates on the

investment. Each update included a section demarcated with the title “Oregon” and a description

of investments and market conditions in Oregon. Supp. Warren Decl. Ex. 4 at 1-16. These

updates appear to be based, at least in part, on information and financial statements Defendant

Wilkins solicited from a Trellis manager in Oregon. Wilkins Dep. 34:17, 37:19-38:15, 47:3-22.

Defendant Wilkins testified that he uses the name “SCI Ventures” to describe the three funds, so

these updates were presumably sent on behalf of debtor Fund II, as Defendants contend Plaintiff

and Derek Sivers have no formal connection to Fund III. Id. 15:23-16:3.

Defendant Wilkins also visited Oregon several times during the relevant period and

conducted business in Oregon on behalf of the Funds. He visited the Trellis farms in Oregon in

2017, 2018, and 2019. Id. at 49:7-11; 48:19-49:1. He met with corporate counsel in downtown

Portland in early 2017 to discuss the agreement for Trellis. Id. 24:8-25-26:1-8. He asked Oregon-

based Dennis Sivers to assist with the transfer from Fund III to Trellis in either 2019 or 2020. Id.

18:2-21. And finally, he authorized the filing of a UCC-1 statement in Oregon on behalf of Fund

III in late 2018. Id. 50:24-51:22.

Taken together, these contacts support a finding that Defendants have regular contact

with Oregon. Personal jurisdiction over Defendants is proper because Defendant Wilkins (acting

on behalf of Fund II) reached out beyond Maryland and Delaware by entering a contract that had

express ties to Oregon, including repayment of the loan at an Oregon address. Through a series

of transfers, the funds were invested in Oregon-based cannabis businesses. These investments

left the affiliated holding company with a 25% ownership stake in the holding company of the

Oregon-based cannabis operations. Defendant Wilkins then carefully monitored the Oregon

investments through regular remote and in-person communication and relayed that Oregon-

specific information to Derek Sivers. As a managing member and shareholder of a venture

capital firm, Defendant Wilkins engagement with the investment was more active than what

might be expected from a lay investor and created a significant contacts with Oregon.

Accordingly, for its claim of breach of contract, Plaintiff has made a sufficient showing to

establish specific personal jurisdiction under the first prong of the relevant analysis.

ii. Arising Out of Forum-Related Activities

Defendant Fund II asserts it has no contacts with Oregon, and Defendant Wilkins asserts

that his Oregon contacts “are entirely unrelated to the unpaid loan.” Defs.’ Second Mot. Dismiss

at 13. Plaintiff asserts its breach of contract claim arises out of or relates to Defendant Wilkins’

Oregon contacts because those contacts caused Defendant Fund II to not have enough funds to

repay its loan obligation. Pl.’s Rsp. at 23-25.

To determine whether a claim arises out of forum-related activities, courts apply a “but

for” test. Ballard, 65 F.3d at 1500. Here, the Court must decide whether Plaintiff’s claims would

have arisen but for Defendants’ contacts with Oregon. Plaintiff argues that, but for Defendant

Wilkins making a string of transfers through Delaware corporations that ended up in Oregon,

Defendant Fund II would have sufficient funds to repay the loan. This argument is persuasive

because, without the Amended Note and series of transfers, Defendants likely would have been

able to repay Plaintiff. Additionally, the claims would not have arisen but for the parties signing

the Note and Amended Note, both of which have express ties to Oregon.

The Court finds that Plaintiff has established a prima facie case that Defendants

purposefully availed themselves of the benefits and protections of Oregon and that Plaintiff’s claim

arises out of those contacts.

iii. Reasonableness

The burden then shifts to Defendants to show that the exercise of jurisdiction in Oregon

is unreasonable. See Sher v. Johnson, 911 F.2d 1357, 1364 (9th Cir. 1990) (noting that once a

court finds purposeful availment, it must presume that jurisdiction would be reasonable).

Defendants must “present a compelling case that the presence of some other considerations

would render jurisdiction unreasonable.” Burger King, 471 U.S. at 477. In making this

determination, the Court weighs seven factors: (1) the extent of the defendants’ purposeful

injection into the forum state’s affairs, (2) the burden on the defendant of defending in the forum,

(3) the extent of the conflict with sovereignty of the defendant’s state; (4) the forum state’s

interest in adjudicating the dispute; (5) the most efficient judicial resolution of the controversy;

(6) the importance of the forum to the plaintiff’s interests in convenient and effective relief; and

(7) the existence of an alternative forum. Sher, 911 F.2d at 1364. Defendants did not address

these factors in their motion. They only asserted that it would be unreasonable to hale a

Maryland resident and Delaware corporation into litigation in Oregon. Defs.’ Reply to Pl.’s Rsp.

to Mot. to Dismiss at 8, ECF 43.

The analysis for the first factor, purposeful interjection, involves the same analysis as the

purposeful availment prong. Roth v. Garcia Marquez, 942 F.2d 617, 623 (9th Cir. 1991).

Because the Court has already found that Defendants purposefully availed themselves of the

privilege of conducting activities in Oregon, there is no need to analyze this factor further.

Concerning the second factor, Defendants contend that it is burdensome to require them

to litigate this case in a state across the country from their home state. Defendants have obtained

local counsel to represent them in this litigation and the record shows they have a continuing

relationship with an Oregon-based law firm. As such, Defendants have not shown that it is

unreasonable to ask them to litigate in Oregon. See Ting v. Orbit Commc’n Co., 105 F.3d 666,

No. 95–55838, 1997 WL 8470 *4 (9th Cir. 1997) (factor favors jurisdiction in light of

defendant’s contacts with forum state and retention of local counsel).

Defendants make no argument regarding the remaining factors, so the Court addresses

them briefly. On the third factor, there is no evidence in the record to indicate that this Court’s

exercise of jurisdiction in Oregon would conflict with the sovereignty of another state. See CE

Distribution, LLC v. New Sensor Corp., 380 F.3d 1107, 1112 (9th Cir. 2004) (noting that this

factor favors jurisdiction when there is no evidence to indicate conflicts with another state’s

sovereignty). On the fourth and fifth factors, there is no evidence that Oregon has a particular

interest in this dispute or that it would be more efficient to resolve this action in another state. On

the sixth factor, Plaintiff has already selected Oregon as its forum of choice, demonstrating

convenience and effectiveness of relief for Plaintiff in Oregon. Finally, regarding the seventh

factor, Plaintiff could have sued in any other state if it so desired.

Defendants have not presented a compelling case against the reasonableness of this

Court’s exercise of jurisdiction. Factors five and seven are neutral because alternative forums

exist and Plaintiff has not presented evidence that it would be inefficient to resolve this dispute in

another forum. Factors one, two, three, and six support that jurisdiction in Oregon is reasonable.

Factor four does not support jurisdiction because no party in this case in an Oregon resident.

Plaintiff has established a prima facie showing that Defendant Wilkins purposefully

availed himself of Oregon and that its breach of contract claim arose from his forum-related

activities. Defendants have not presented a compelling case showing otherwise. Accordingly, all

prongs of the Ninth Circuit’s specific jurisdiction test have been satisfied. The Court exercises

jurisdiction over Plaintiff’s breach of contract claim against Defendants.

iv. Pendent Jurisdiction

Under the “pendent personal jurisdiction” doctrine, a court may “assert pendent personal

jurisdiction over a defendant with respect to a claim for which there is no independent basis of

personal jurisdiction so long as it arises out of a common nucleus of operative facts with a claim

in the same suit over which the court does have personal jurisdiction.” Action Embroidery Corp.

v. Atlantic Embroidery, Inc., 369 F.3d 1174, 1181 (9th Cir. 2004). Under this doctrine, the

exercise of personal jurisdiction lies within the discretion of the district court and depends on

“considerations of judicial economy, convenience and fairness to litigants.” Id. (internal

quotations omitted).

Plaintiff’s tort claims arise out of the allegation that Defendant Wilkins undercapitalized

Defendant Fund II such that it could not repay its obligations. The exercise of personal

jurisdiction over all claims serves the interest of judicial economy because the facts related to

Plaintiff’s breach of contract claim relate to Plaintiff’s remaining tort claims. Additionally, as

explained above, Defendants have not established that the exercise of jurisdiction over them

would be unreasonable. Third, it is not unfair for Defendants to resolve their remaining claims in

the same suit because Plaintiff’s breach of contract claim shares a common nucleus of operative

facts with its remaining claims. Therefore, the Court exercises its discretion to assert pendent

personal jurisdiction over Defendants for all of Plaintiff’s remaining claims.

II. Motion to Dismiss for Failure to State a Claim

A. Standards

A motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) tests the sufficiency

of the claims. Navarro v. Block, 250 F.3d 729, 732 (9th Cir. 2001). When evaluating the

sufficiency of a complaint’s factual allegations, the court must accept all material facts alleged in

the complaint as true and construe them in the light most favorable to the non-moving party.

Wilson v. Hewlett-Packard Co., 668 F.3d 1136, 1140 (9th Cir. 2012). A motion to dismiss under

Rule 12(b)(6) will be granted if a plaintiff alleges the “grounds” of his “entitlement to relief”

with nothing “more than labels and conclusions, and a formulaic recitation of the elements of a

cause of action[.]” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). “Factual allegations

must be enough to raise a right to relief above the speculative level on the assumption that all the

allegations in the complaint are true (even if doubtful in fact)[.]” Id. (citations and footnote

omitted).

To survive a motion to dismiss, a complaint “must contain sufficient factual matter,

accepted as true, to state a claim to relief that is plausible on its face.” Ashcroft v. Iqbal, 556 U.S.

662, 678 (2009) (internal quotation marks omitted). A plaintiff must “plead[] factual content that

allows the court to draw the reasonable inference that the defendant is liable for the misconduct

alleged.” Id. In other words, a complaint must state a plausible claim for relief and contain “well-

pleaded facts” that “permit the court to infer more than the mere possibility of misconduct[.]” Id.

at 679.

B. Analysis

Plaintiff brings claims for breach of contract, piercing the corporate veil, fraudulent

transfer, unjust enrichment, and violations of Oregon securities law pursuant to ORS 59.115 and

ORS 59.135. Defendants move to dismiss all claims except the breach of contract claim against

Defendant Fund II.

The Court grants the motion to dismiss Plaintiff’s claim for piercing the corporate veil, as

this is a theory of liability, not an independent cause of action. The Complaint alleges sufficient

facts to support claims for fraudulent transfer and violations of Oregon securities laws and

therefore, the Court denies Defendant’s motion to dismiss these claims. Finally, the Court

dismisses Plaintiff’s claim for unjust enrichment because express contracts govern the loan.

//

i. Piercing the Corporate Veil

Defendant Wilkins moves to dismiss Plaintiff’s claim for piercing the corporate veil

arguing this is a remedy not a separate cause of action. Plaintiff contends the Court may assert

liability against Defendant Wilkins under a veil piercing theory at this stage in the litigation.

The Court agrees with Defendant that Plaintiff’s claim for piercing the corporate veil is

not an independent cause of action but is a theory of liability for the underlying breach of

contract claim and other claims in this action. See Swaidan Trading Co., LLC v. M/V

DONOUSA, No. 3:18-CV-00398-HZ, 2018 WL 3414317, at *4 (D. Or. July 13, 2018) (finding

the same). As such, the Court dismisses the claim for piercing the corporate veil. Plaintiff may

however continue to make alter ego allegations as a basis for liability related to the other

underlying substantive claims as this action proceeds. See Green Atlas Shipping S.A. v. United

States, 306 F. Supp. 2d 974, 977 (D. Or. 2003) (dismissing a claim for piercing the corporate veil

but allowing the plaintiff to proceed with its theory of liability).

ii. Fraudulent Transfer

Defendants move to dismiss Plaintiff’s claim for fraudulent transfer. They argue Plaintiff

has not alleged an intent to defraud or a lack of reasonably equivalent value. Plaintiff responds

that it has alleged both.

Under Oregon law, a transfer is fraudulent if it is made by a debtor “with actual intent to

hinder, delay, or defraud any creditor of the debtor.” ORS 95.230(1)(a). Analyzing fraudulent

intent under this section requires “a case-by-case factual determination” and is a subjective

analysis. Morris v. Nance, 132 Or. App. 216, 221–22, 888 P.2d 571, 575 (1994). ORS 95.230(2)

provides a list of non-exhaustive factors or “badges of fraud” that “allow[] the inference of actual

intent to be drawn from the presence of listed factors or other suspicious factual circumstances

surrounding the transfer.” Id. These include whether:

(a) The transfer or obligation was to an insider;

(b) The debtor had retained possession or control of the property

transferred after the transfer;

(c) The transfer or obligation was disclosed or concealed;

(d) Before the transfer was made or obligation was incurred, the debtor

was sued or threatened with suit;

(e) The transfer was of substantially all the debtor's assets;

(f) The debtor had absconded;

(g) The debtor had removed or concealed assets;

(h) The value of the consideration received by the debtor was reasonably

equivalent to the value of the asset transferred or the amount of the

obligation incurred;

(i) The debtor was insolvent or became insolvent shortly after the

transfer was made or the obligation was incurred;

(j) The transfer had occurred shortly before or shortly after a

substantial debt was incurred; and

(k) The debtor had transferred the essential assets of the business to a

lienor who had transferred the assets to an insider of the debtor.

See ORS § 95.230(2).

Plaintiff alleges a plausible claim for fraudulent transfer under the statute. Although

Plaintiff does not allege facts to support actual intent, it alleges facts that support the “inference

of actual intent to be drawn” from the existence of “badges of fraud” identified in the statute.

Morris, 132 Or. App. at 221, 888 P.2d at 575. Specifically, Plaintiff alleges Defendant Wilkins

concealed the transfer, the transfer left Defendant Fund II insolvent and undercapitalized, the

transfer occurred on the same day Defendant Fund II received the funds, and Defendant Fund II

did not receive consideration reasonably equivalent to the value of the asset transferred. Am.

Compl. ¶¶ 12, 16, 33–35, 40–41.

Defendants contend that Plaintiff has failed to state a cause of action because Defendant

Fund II received reasonably equivalent value in exchange for the transfer of the $700,000 to

Fund III. They rely on the Promissory Note between Defendant Fund II and Fund III executed by

Defendant Wilkins.

The statute defines “value” in § 95.220: “Value is given for a transfer or an obligation if

in exchange for the transfer or obligation property is transferred or an antecedent debt is secured

or satisfied, but value does not include an unperformed promise made otherwise than in the

ordinary course of the promisor's business to furnish support to the debtor or another person.”

ORS 95.220(1). Defendants rely on the negative to argue that under this definition “value”

includes unperformed promises made in the ordinary course of business.

Defendants are correct that the language of the statute may permit a finding that an

“unperformed promise” constitutes value so long as it was made in the ordinary course of the

promisor’s business. See e.g. Bowman v. El Paso CGP Co., 431 S.W.3d 781, 786 (Tex. App.

2014) (citing cases and finding the same); but see Howard J. Steinberg, Bankruptcy Litigation §

17:37 (Sept. 2021 Update) (noting a split of authority on “whether an unperformed promise to be

performed in the future can be reasonably equivalent value.”). However, even if the Court found

that the promissory note constituted “value” under the statute, this does not doom Plaintiff’s

claim. Under ORS 95.270(1), “[a] transfer or obligation is not voidable under ORS 95.230(1)(a)

as against a person who took in good faith and for a reasonably equivalent value [.]” See ORS

95.270(1). Plaintiff alleges facts that make the transaction suspicious, such that it may not have

been made in good faith. Accordingly, Plaintiff states a plausible claim for fraudulent transfer

under ORS 95.230(1)(a).

Defendants also argue that Plaintiff cannot show that the transfer left Defendant Fund II

insolvent because it still owned stock in Maya Cinemas. On the facts before it, the Court cannot

determine the fair value of this stock relative to Defendant Fund II’s obligations. See ORS

95.210(1) (“A debtor is insolvent if, at a fair valuation, the sum of the debtor's debts is greater

than all of the debtor's assets.”). Additionally, Plaintiff alleges that Defendant Fund II failed to

satisfy its obligation due under the Amended Note. Am. Compl. ¶ 24. These facts are sufficient

to allege insolvency under the statute. See ORS 95.210(2) (“A debtor who is generally not

paying debts of the debtor as they become due is presumed to be insolvent.”).

iii. Unjust Enrichment

Defendants move to dismiss Plaintiff’s claim for unjust enrichment. Plaintiff essentially

concedes that the claim cannot proceed against Defendant Fund II but argues it may proceed

against Defendant Wilkins as an individual.

Unjust enrichment is a quasi-contractual claim. Summer Oaks Ltd. P'ship v. McGinley,

183 Or. App. 645, 654, 55 P.3d 1100, 1104 (2002). The elements are: “a benefit conferred,

awareness by the recipient that a benefit has been received and, under the circumstances, it

would be unjust to allow retention of the benefit without requiring the recipient to pay for it.” Id.

(internal quotations and citation omitted).

The Court dismisses Plaintiff’s claim for unjust enrichment against Defendant Fund II

and Defendant Wilkins because express contracts govern the loan—the Promissory Note and the

Amended Note. See United States ex rel. Doughty v. Oregon Health & Scis. Univ., No. 3:13-CV-

01306-BR, 2017 WL 1364208, at *6 (D. Or. Apr. 11, 2017) (“A plaintiff may not recover on a

claim that is quasicontractual in nature in the face of an express contract that governs the matter

under dispute.”). Additionally, as Defendant points out, Plaintiff has not alleged facts showing

Defendant Wilkins received any personal benefit from the transaction. See Summer Oaks Ltd.

P'ship, 183 Or. App. at 654, 55 P.3d at 1104.

iv. Violations of Oregon Securities Law

Plaintiff brings claims for violations of Oregon securities laws pursuant to ORS 59.115

and ORS 59.135. Defendants contend that these claims fail as a matter of law because these

claims are not governed by Oregon law and argue that even if Oregon law applies, the

Promissory Note and Amended Note are not securities.

1. Choice of Law

As an initial matter, the Court addresses Defendants’ choice of law argument. A federal

court sitting in diversity applies the forum state's choice of law rules to determine what law

applies. Alaska Rent-A-Car, Inc. v. Avis Budget Grp., Inc., 738 F.3d 960, 975 (9th Cir. 2013).

Oregon has codified its choice-of-law rules. See ORS §§ 15.300-15.460.

Oregon law governs the Promissory Note and Amended Note because both agreements

contain Oregon choice of law provisions. See ORS § 15.350(1) (“the contractual rights and

duties of the parties are governed by the law or laws that the parties have chosen.”). Plaintiff

argues that these provisions control what law applies to its securities claims. In Oregon,

however, choice of law questions for non-contractual claims are governed by statute. See ORS

§§ 15.430, 15.440(1).

ORS § 15.440(3) governs this choice of law issue because the securities law claims are

noncontractual and the parties are domiciled in different states. Before getting to the merits

question of where the injurious conduct and resulting injury occurred, ORS§ 15.440(3) first asks

whether “the laws of those states on the disputed issues would produce a different outcome.”

Defendants do not address this threshold question in their choice of law argument. They do not

specify which state’s law should apply or explain how the application of a different state’s

securities laws would produce a different outcome. This is a significant oversight because on its

face, the likely alternative, Maryland securities law, appears to closely resemble Oregon

securities law. See, e.g., Md. Code Ann., Corps. & Ass'ns § 11-301 (West). Without argument

from the parties, the Court cannot confidently determine if Defendants’ liability and the

availability of damages would differ under another state’s laws. Defendants may renew this

argument at summary judgment, but without further development from the parties, the Court

declines to consider Defendant’s choice of law argument and dismiss the securities claims on this

basis.

2. Application of Oregon Securities Laws

Next, Defendants argue that Plaintiff cannot state a cause of action under Oregon

Securities law because it does not plausibly allege the Promissory Note and Amended Note were

securities.

Oregon courts rely on the Reves four-factor test to determine whether a note constitutes a

security. See Lahn v. Vaisbort, 276 Or. App. 468, 483, 369 P.3d 85, 95 (2016). There is a

presumption that a note is a security. Reves, 494 U.S. at 61. A party may rebut this presumption

by showing that the note falls into one of several judicially created exceptions or bears a strong

family resemblance to a judicial exceptions. Id. at 64. To make this determination, courts

consider: “(1) the motivations that would prompt a reasonable buyer and seller to enter into the

transaction in question; (2) the plan of distribution of the instrument; (3) the reasonable

expectations of the investing public; and (4) whether the existence of an alternate regulatory

scheme significantly reduces the risk of the instrument.” McNabb v. SEC, 298 F.3d 1125, 1131

(9th Cir. 2002). “[C]ourts, including the Oregon appellate courts, construe the definition of

‘security’ liberally, to protect the investing public.” Lahn, 276 Or. App. at 484, 369 P.3d at 95

(citation omitted).

The first factor, motivation for entering the transaction, supports a finding that the notes

are securities. Reves, 494 U.S. at 68. Plaintiff alleges Defendant Wilkins and Derek Sivers

discussed Defendants “borrowing certain funds on a short-term basis to use in the Fund’s

business operations.” Am. Compl. ¶ 8. In McNabb the Ninth Circuit stated that “a note is likely

to be a security ‘if the seller's purpose is to raise money for the general use of a business

enterprise or to finance substantial investments and the buyer is interested primarily in the profit

the note is expected to generate.’” 298 F.3d at 1131 (quoting Reves, 494 U.S. at 66).

Here, Plaintiff alleges Defendant Wilkins represented that his purpose was to raise funds

to support “business operations” and that he ultimately used the funds to “invest in high risk

cannabis enterprises.” Am. Compl. ¶¶ 8, 13; compare Raze v. Walbridge, No. 3:20-CV-00957-

AC, 2021 WL 2274194, at *4 (D. Or. Apr. 14, 2021), report and recommendation adopted in

part, rejected in part, No. 3:20-CV-957-AC, 2021 WL 2036660 (D. Or. May 21, 2021) (finding

the note was not a security when it was “executed for an exclusive commercial purpose, the

Defendants' purchase of the Mobile Home Park.”). Plaintiff did not lend money to an operating

commercial business, but to a venture capital fund that then used the funds to invest in other

businesses. Wilkins Dep. 9:6-8; 9:18-10:21; Am Compl. ¶ 66; Asai Decl. Ex. 3.

Defendants argue that the notes are not securities because Plaintiff was to receive interest,

not profits from Defendant Fund II. Defendants’ argument is unavailing. Courts have found that

receipt of interest qualifies as profit under the Reeves motivation factor. See Lahn, 276 Or. App.

at 487, 369 P.3d at 97 (“It is of no consequence that the profit took the form of interest.”); Battig

v. Simon, 237 F. Supp. 2d 1139, 1144 (D. Or. 2001) (It matters not . . . that the profit was in the

form of interest.”).

The second factor, the plan of distribution of the instrument, is neutral. Reves, 494 U.S. at

66. “If notes are sold to a broad segment of the public, then ‘common trading’ is established.”

McNabb, 298 F.3d at 1132 (citing Reeves, 494 U.S. at 68). Plaintiff has not established “common

trading” because it alleges that there was only one note and amended note executed by a private

individual and later assigned to Plaintiff. However, “the number of purchasing individuals is not

dispositive and must be weighed against the purchasing individual's need for the protection of

the securities laws.” Raze, No. 3:20-CV-00957-AC, 2021 WL 2274194, at *6 (citing McNabb,

298 F.3d at 1132). Derek Sivers is a private individual, not a financial institution. His level of

sophistication at the time of the transaction is not established in the Amended Complaint, but as

an individual “the protection provided by the Securities Acts would benefit” him. Id.

Under the third factor, the Court examines whether the notes would be reasonably

perceived by the investing public as a security. Reves, 494 U.S. at 66. This factor favors a finding

that the notes are securities. On this factor, the Court considers “whether a reasonable member of

the investing public would consider these notes as investments, ‘even where an economic

analysis of the circumstances of the particular transaction might suggest that the instruments are

not “securities” as used in that transaction.’” McNabb, 298 F.3d at 1132 (quoting Reves, 494

U.S. at 66). “This factor is closely related to the first factor—motivation for the transaction—and

thus the considerations discussed vis-a-vis that factor also come into play here.” S.E.C. v.

Wallenbrock, 313 F.3d 532, 539 (9th Cir. 2002).

At first blush, the initial Promissory Note has markers of a one-off, short term loan, as

Defendants contend. However, the other facts Plaintiff alleges cut against this finding. As

discussed above, the note had a high fixed interest rate of 12.75%, which is considered profit.

Battig, 237 F. Supp. 2d at 1144. It was also made to a venture capital fund versus an operating

business. At the time the Promissory Note was due, Plaintiff alleges Defendant Wilkins

requested an extension of time to repay the note and the parties rolled the obligation into the

Amended Note. See Lahn, 276 Or. App. at 488, 369 P.3d at 98 (emphasizing the significance of

loan rollovers); Wallenbrock, 313 F.3d at 539 (9th Cir. 2002) (same). This was not an automatic

rollover, but the renewal, in addition to Plaintiff’s allegations that the funds were ultimately used

as investments, support categorizing the notes as securities.

The fourth factor requires the Court to consider whether there were adequate risk-

reducing factors such as an alternate regulatory scheme that would “significantly reduce[ ] the

risk of the instrument” to the lender, “thereby rendering application of the Securities Acts

unnecessary.” Reves, 494 U.S. at 67. Under the Note and Amended Note, Defendant Fund II

offered as collateral “shares of Series B Preferred of Maya Cinemas North America Inc.,” and

“shares of Series B-1 Preferred of Maya Cinemas North America Inc.” Am. Compl. ¶ 17. As

other courts have acknowledged, collateralization obviously helps reduce the risk on a loan. See

Wallenbrock, 313 F.3d at 539; Lahn, 276 Or. App. at 488, 369 P.3d at 98. However, as Plaintiff

points out, the Notes here are secured by private stock that is not readily marketable.

Accordingly, this factor is neutral.

Considering the Reves factors together, the Court finds Plaintiff has alleged sufficient

facts to support a finding that the Note and Amended Notes are securities under Oregon law. The

Court denies Defendants’ motion to dismiss Plaintiff’s securities claims.

//

//

//

//

CONCLUSION

Defendants’ Motion to Dismiss [34] is GRANTED in part and DENIED in part.

IT IS SO ORDERED.

DATED:____J_a_n_u_a_r_y_ _2_5_, _2_0_2_2_____.

______________________________

MARCO A. HERNÁNDEZ

United States District Judge

ORGANIZATIONAL CHART

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SCI Management, Ine.

| A Delaware corporation

Managing Director: Herbert P. Wilkins, Jr. |

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SCI Management, LLC (Fund 1’) SCI Fund LL, LLC (“Fund II”) SCL IL LLC (Fund LL)

a Delaware limited lability company a Delaware limited liability company a Delaware limited liability company

Manager: Manager: Manager:

Herbert P, Wilkins, Jr. Herbert P. Wilkins. Ir. Herbert P. Wilkins, Jr.

□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□ = Morris Medical, 1.C

: Trust — Sole Member 100% a Delaware limited liability company

Trustee: Wilkins’ Mother !

| Beneficiaries: [erbert P. Wilkins, Jr, and Sisters |

Morris Medical Oregon, LLC.

a Delaware limited liability company

‘Trellis [loldings Oregon OP, LLC, 2808

an Oregon limited liability company

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George Road LLC, an Oregon Avenue Lie, an Oregon limited

limited liability company liability company

ORG Chart 99/2021