Opposition Brief — Stauffacher v. Bennett

J2='712

No. 92-##2

In The

Supreme Court of the United States

October Term, 1992

¢

DAVID G. STAUFFACHER and JOHN P. STAUFFACHER,

Petitioners,

JOHN A. BENNETT and FIRST HERITAGE

SAVINGS CREDIT UNION,

Respondents.

*

On Petition For Writ Of Certiorari

To The United States Court Of Appeals

For The Seventh Circuit

¢

BRIEF IN RESPONSE TO PETITION FOR

WRIT OF CERTIORARI

*

James R. Troupis

(Counsel of Record)

STEVEN P. MEANS

MICHAEL, Best & FRIEDRICH

Suite 900

One South Pinckney Street

P.O. Box 1806

Madison, WI 53701-1806

(608) 257-3501

COCKLE LAW BRIEF PRINTING CO), (800) 225.6964

OR CALL COLLECT (402) 342-2831

a

QUESTIONS PRESENTED FOR REVIEW

Respondents First Heritage Savings Credit Union

(“First Heritage”) and John Alexander Bennett (“Ben-

nett”) object to both the form and substance of the “Ques-

tions Presented” in pp. i-vi of the Petition for Writ of

Certiorari to the United States Court of Appeals for the

Seventh Circuit (“Petition”) and believe the issue should

be stated as follows:

Did the Seventh Circuit err in concluding that

the United States District Court for the Western

District of Wisconsin could not exercise personal

jurisdiction over First Heritage and Bennett?

PARTIES

Respondents First Heritage and Bennett do not object

to the “List of Parties” at p. vii of the Petition.

ili

TABLE OF CONTENTS

Page

JURISDICTIONAL STATEMENT ................... 1

os 8 88s I 1

STATEMENT OF THE CASE....................... 1

SUMMARY OF ARGUMENT....................... 4

eee sea k ba e'c.bis a a0sndvansrcas 4

I ee 5

I. THE SEVENTH CIRCUIT DECIDED THE CASE

UNDER STATE LAW - NOT DUE PROCESS.. 6

Il. DUE PROCESS WOULD NOT ALLOW THE

DISTRICT COURT TO EXERCISE PERSONAL

ign 60 vikn ki 44s ecceseedecsacace 7

A. Neither First Heritage Nor Bennett Had

Minimum Contacts With Wisconsin Suffi-

cient To Meet Either Constitutional Due

a eee 8

B. Stauffachers’ Hypothetical Arguments Rely

On Unestablished Factual Assertions And

Must Be Rejected As A Basis For Jurisdic-

oo er een 11

1. First Heritage and Bennett did not Con-

sent to Jurisdiction............... eee a |

2. Stauffachers Did Not Establish A Fac-

tual Basis For a Conspiracy ........... 14

Ill. FEDERAL SECURITIES LAW DOES NOT PRO-

VIDE A STATUTORY BASIS FOR PERSONAL

i655 05 50% os db ae cb awaceses 17

A. RICO Jurisdiction is Determined Under

State Law Which in Wisconsin Would Not

Bring Bennett or First Heritage Within the

RE NE gg cc cree eccuccce 17

B. Personal Jurisdiction is not Supported by

the Federal Securities Law................ 18

ae hs os on ckee iss vccscceces 19

iv

TABLE OF AUTHORITIES

Page

CASES

Bishop v. Wood, 426 U.S. 341 (1976)................5-: 6

Branti v. Finkel, 445 U.S. 507 (1980) ................. 13

Brink’s Mat Ltd. v. Diamond, 906 F.2d 1519 (11th

Oe | Peer rey rrr rT ree rr yr Try ery rer 17

Burger King Corp. v. Rudzewicz, 471 U.S. 462 (1985)

Pe Per eee fee Tere Tere TT ory TTT ee 7,9, 14

Chrysler Corp. v. Fedders Corp., 643 F.2d 1229 (6th

Cir. 1981), cert. denied 454 U.S. 893 (1981)......... 16

First Chicago Int'l v. United Exchange Co., 836 F.2d

OR i a ME oni an oo oo wv cnncaata so vnns 16

Giotis v. Apollo of the Ozarks, Inc., 800 F.2d 660 (7th

Cir. 1986), cert. denied, 479 U.S. 1092 (1987) ........ 5

Helicopteros Nacionales de Columbia, S.A. v. Hall, 466

oh eg Se eee ee Perr pass be ae ere 8

International Shoe Co. v. Washington, 326 U.S. 310

LF eer ree re ere 7,9

Lisak v. Mercantile Bancorp, Inc., 834 F.2d 668 (7th

Cir. 1987), cert. denied 485 U.S. 1007 (1988)........ 17

Securities & Exchange Comm'n v. International Swiss

Investments Corp., 895 F.2d 1272 (9th Cir. 1990).... 18

Shafer v.. Tietiner, G55 UD. 106 (1977)... 22s s cs ecwcass )

Turnock v. Cope, 816 F.2d 332 (7th Cir. 1987).......... 8

World-Wide Volkswagon Corp. v. Woodson, 444 US.

ee SN kee V ons Wn k WRU Urea sea bass aie eos ae

rece eel

TABLE OF AUTHORITIES - Continued

Page

STATUTES

Reh res Ae Ps Aw oan sw kha vand as eee eau ea ee 18

ee | | PP re ee ee 17

a ee rr rr rea 1

Pee Ce SIRS Vk isywedesakaceus Un exuesn s olen 5

eG re re re ae 3

Wee, es: Se ID a cock awk sun e aud heaneddana beau 3

OTHER AUTHORITIES

POP eee rere eee errs ee ree er ms ete: 6

SR OD is vince cance hacn en ene eee 1

JURISDICTIONAL STATEMENT

Respondents First Heritage and Bennett do not object

to the jurisdiction of this Court under 28 U.S.C. § 1254(1),

but do not accept the characterization of the jurisdiction

of the lower courts as set forth at pp. 2-6 of the Petition.

+

STATUTES INVOLVED

For purposes of responding to the Petition, First Her-

itage and Bennett do not dispute that the statutes listed at

p. 7 of the Petition relate to the arguments set forth in the

Petition. First Heritage and Bennett do not, however,

concede the applicability of these statutes to the issues

properly before this Court or accept the characterizations

of those statutes in the Petition.

6

STATEMENT OF THE CASE

First Heritage and Bennett object to the Statement of

the Case at pp. 7-28 of the Petition on grounds that it is

not “concise” as required by Sup. Ct. R. 14(g) and con-

tains “facts” that are not supported by the record and

which are contrary to the facts found by the courts below.

First Heritage and Bennett further object that the State-

ment of the Case in the Petition contains pages of mate-

rial that are not relevant to the questions of personal

jurisdiction that are at issue. The following is a more

concise and accurate statement of the case:

Petitioners David G. Stauffacher and John P.

Stauffacher (“Stauffachers”) filed an action in the United

States District Court for the Western District of Wisconsin

to recover damages allegedly suffered as the result of

their investment in two Canadian joint ventures involv-

ing gold-mine leases. (Petition at 7-8) Among the defen-

dants named were First Heritage, a Canadian credit

union with a branch facility in Hope, British Columbia,

Canada and Bennett, the branch manager of First Heri-

tage’s Hope branch. (Id.) The Stauffachers’ investment

involved two joint venture agreements with Donald

Dolan in which some of the invested money was depos-

ited at First Heritage. (Id. at 8-9) As part of a trust

arrangement, Bennett agreed to hold title to the gold-

mine leases as a trustee. (Jd. at 15, 24-25)

Neither First Heritage, nor Bennett, conducted any

activity within the State of Wisconsin. (Id. at 3a-4a,

16a-17a) Bennett made one or two phone calls into Wis-

consin to speak with the Stauffachers, but neither call

involved solicitation. (Id.) Bennett may also have mailed

documents to Stauffachers in Wisconsin but no such doc-

uments involved solicitation. (Id.)

Bennett had no other contacts with Wisconsin or the

United States. (/d.; id. at 9a) First Heritage had no other

contact except receipt of deposits from several State of

Washington residents, just over the Canadian border. (Id.

at 9a) The number of depositors and the amount depos-

ited was not set forth in the record. ((d.) / ° er considering

affidavits and proofs submitted on thie iss »2, the United

States District Court for the Western District of Wisconsin

dismissed the Stauffachers’ action against 3ennett and

First Heritage because of a lack of personal jurisdiction

over them. (Id. at 11a-32a) In dismissing this action, the

District Court made specific findings of fact, resolving all

inferences and disputes of fact in favor of the

Stauffachers, and concluded that it could not exercise

personal jurisdiction over these defendants. (Id. at

13a-18a) On appeal, the Seventh Circuit affirmed the Dis-

trict Court. (Id. at 1a-10a)

The Seventh Circuit first set forth the relevant facts

and then discussed whether Wisconsin’s long-arm statute

would allow personal jurisdiction to be exercised. (Id. at

la-2a) It concluded that the contacts with Wisconsin did

not satisfy the requirement of “substantial and not iso-

lated activities within this state” as required by Wis. Stat.

§ 801.05(1)(d). (Petition at 2a) It then concluded that there

had been no solicitation within Wisconsin as required by

Wis. Stat. § 801.05(4)(a). (Petition at 4a) Finally, it stated,

“there are other provisions of the long-arm statute but

none remotely applicable.” (Id. at 4a)

The Seventh Circuit followed its holding with a rejec-

tion of various arguments made by Stauffachers to

enhance the extent of First Heritage’s and Bennett’s con-

tacts with Wisconsin. The court held that a “consent to

jurisdiction” clause was inapplicable because First Heri-

tage and Bennett were not parties to the agreement which

contained it. (Id. at 5a) It also rejected Stauffachers argu-

ment that the contacts of certain alleged coconspirators

could be attributed to First Heritage and Bennett, noting

that no conspiracy had been established and that, if it

had, there were no allegations that anyone with contact

with Wisconsin was an agent of the conspiracy. (Id. at

7a-8a)

Finally, the court concluded that the international

service provisions of federal securities law would not

authorize personal jurisdiction because the “totality of

First Heritage’s U.S. contacts is too scarce to bring it

within the grasp of the U.S. courts”. (Jd. at 9a)

¢

SUMMARY OF ARGUMENT

The Petition should be denied because it seeks

review of state law issues resolved by the lower courts

and because it argues legal issues based on a set of facts

not supported by the record or found by the lower courts.

Certiorari is not the proper vehicle for review of either

state law or factual issues.

INTRODUCTION

Respondents Bennett and First Heritage, by their

attorneys Michael, Best & Friedrich by James R. Troupis

and Steven P. Means, submit the following arguments

and authorities in response to the Petition submitted by

Stauffachers.

Before the Seventh Circuit, Stauffachers stated the

relevant issue as follows:

Does the trial court in the Western District of

Wisconsin have personal jurisdiction under the

factual circumstances of this case, over Cana-

dian Defendants First Heritage Savings Credit

Union and John Alexander Bennett?

(Brief of Plaintiffs-Appellants, at 1) In their Petition, this

single, straight-forward issue has ballooned to a six page

statement of issues with nearly twenty subparts. (Petition

at i-vi) However, distilled to their essence, the multiple

issues raised by Stauffachers come down to a garden-

variety question of personal jurisdiction over foreign

defendants.

As with any jurisdictional issue a two level analysis

is required. Giotis v. Apollo of the Ozarks, Inc., 800 F.2d 660,

665 (7th Cir. 1986), cert. denied, 479 U.S. 1092 (1987). The

first level is whether there is a statutory basis for jurisdic-

tion. Here, Stauffachers have relied on the Wisconsin

long-arm statute, Wis. Stat. § 801.05, and Federal Securi-

ties law to meet the first test. Assuming one meets the

first level requirement, the second level of analysis is a

determination whether due process will allow jurisdic-

tion to be exercised in a particular case. Both the District

Court and the Seventh Circuit Court of Appeals rejected

the Stauffachers’ jurisdictional arguments and this Brief

in Response to Petition for Writ of Certiorari

(“Response”) discusses the basis for that conclusion.

+

DISCUSSION

The Petition is a paradigm of confusion. As a result,

in responding to the Petition, First Heritage and Bennett

have attempted to identify the issues being raised and

respond to them accordingly, following the outline of the

Seventh Circuit’s opinion.

The organizational confusion arises because

Stauffachers do not address the legal issue of personal

jurisdiction under the facts as found by both the District

Court and Seventh Circuit. Rather, Stauffachers continue

to argue a different version of the facts - a version which

has already been rejected by the two courts.

I. THE SEVENTH CIRCUIT DECIDED THE CASE

UNDER STAT. LAW - NOT DUE PROCESS

Stauffacher’s ““tition argues this case as if it

involved issues of duc process. However, the due process

issue was not addressed by the Seventh Circuit with

respect to the state law claims because no statutory (long-

arm) basis for jurisdiction was found. (Petition at 2a)

Because both the District and Appellate courts concluded

that the Wisconsin long-arm statute did not allow per-

sonal jurisdiction, they did not address the due process

issues, except by analogy.

The rules of this Court limit certiorari review to cases

where there are “special and important reasons therefor.”

Sup. Ct. R. 10. Here, the issue of the reach of Wisconsin’s

long-arm statute is a pure question of state law. See Bishop

v. Wood, 426 U.S. 341, 346 (1976) (“[T]his Court has

accepted the interpretation of state law in which the

District Court and the Court of Appeals have concurred

even if an examination of the state-law issue without

such guidance might have justified a different conclu-

sion.”). In Bishop, this court recognized that when both a

United States District Court familiar with a state’s laws

and a United States Court of Appeals agree on an inter-

pretation of state law, independent examination of the

state law issue by the Supreme Court is foreclosed.

Because the dismissal below was affirmed on

Stauffacher’s failure to demonstrate Wisconsin’s long-

arm jurisdiction, certiorari should be denied.

Il. DUE PROCESS WOULD NOT ALLOW THE DIS-

TRICT COURT TO EXERCISE PERSONAL JURIS-

DICTION.

Although the Seventh Circuit, for the most part,

steered clear of the due process issue, Stauffachers now

make due process a focus of the Petition.

Due process protects a party from being sued in a

forum unless the party has sufficient, meaningful “con-

tacts, ties, or relations” with that forum. Burger King Corp.

v. Rudzewicz, 471 U.S. 462, 471-72 (1985) (citing Interna-

tional Shoe Co. v. Washington, 326 U.S. 310, 319 (1945)). A

defendant must have certain minimum contacts with the

forum such that maintenance of the suit does not offend

traditional notions of fair play and substantial justice.

International Shoe Co. v. Washington, 326 U.S. 310, 316

(1945). A defendant’s conduct within the forum state

should be such that he could reasonably anticipate being

hailed into court there. World-Wide Volkswagon Corp. v.

Woodson, 444 U.S. 286, 297 (1980).

Although the Petition suggests that this long-

accepted minimum contacts analysis should be aban-

doned in favor of an expanded construction of due pro-

cess (Petition at 29), that suggestion is never followed up

and the arguments made, in fact, are based almost exclu-

sively on the continuing viability of the minimum con-

tacts standard. Thus, it is the minimum contacts standard

as it has evolved through this Court’s precedents that

should control the issues in this case.

A. Neither First Heritage Nor Bennett Had Mini-

mum Contacts With Wisconsin Sufficient To

Meet Either Constitutional Due Process Or

State Law.

The Memorandum and Order of the District Court

makes extensive and specific findings of fact based on the

written proofs it received on the personal jurisdiction

issue. (Petition at 13a-18a) Because the court received

proofs, it was not obligated to rely on the allegations of

the complaint where those allegations were contradicted.

Turnock v. Cope, 816 F.2d 332, 333 (7th Cir. 1987). Of

course, the “facts” under which the Seventh Circuit

decided the jurisdictional issue were the same as found

by the District Court, although the Seventh Circuit also

responded to some of the additional facts raised by

Stauffachers.!

The case at bar involves a question of “special”

rather than “general” jurisdiction, as the contacts urged

by the Petition relate directly to the cause of action. See

Helicopteros Nacionales de Columbia, S.A. v. Hall, 466 U.S.

408, 414 (1984). Therefore, the jurisdictional issue turns

1 It does not appear that Stauffachers ever appealed from

the District Court’s findings of fact. The notice of appeal refer-

enced only the portion of final judgment dismissing First Heri-

tage and Bennett and the Appellant’s Brief referred to whether

jurisdiction existed “under the factual circumstances of this

case.” The Statement of Facts in the Appellant’s Brief merely

repeated the fact arguments made to the District Court without

addressing the finding that those arguments were rejected.

Moreover, Stauffachers argued that the Seventh Circuit had de

novo review on appeal - a standard that is not applicable to

findings of fact.

on the relationship of defendants Bennett and First Heri-

tage with Wisconsin and the litigation. Id. (citing Shaffer v.

Heitner, 433 U.S. 186 (1977)). In the guiding precedent,

Burger King Corp. v. Rudzewicz, 471 U.S. 462 (1985), a

Florida franchisor sued a Michigan franchisee, in Florida,

for breach of the franchise agreement. Id. at 464. In

upholding the exercise of personal jurisdiction, this Court

clarified and restated the guidelines for resolving issues

of personal jurisdiction over nonresident defendants:

[T]he constitutional touchstone remains whether

the defendant purposefully established “mini-

mum contacts” in the forum State. International

Shoe Co. v Washington, supra, at 316, 90 L. Ed. 95,

66 S. Ct. 154, 161 ALR 1057. Although it has

been argued that foreseeability of causing injury

in another State should be sufficient to establish

such contacts there when policy considerations

so require, the Court has consistently held that

this kind of foreseeability is not a “sufficient

benchmark” for exercising personal jurisdiction.

World-Wide Volkswagen Corp. v Woodson, 444 US,

at 295, 62 L. Ed. 2d 490, 100 S. Ct. 559. Instead,

“the foreseeability that is critical to due process

analysis .. . is that the defendant’s conduct and

connection with the forum State are such that he

should reasonably anticipate being haled into

court there.” Id., at 297, 62 L. Ed. 2d 490, 100 S

Ct 559.

Id. at 474. In so holding, this Court emphasized that it is

the defendant’s contacts with the forum that are relevant

— not the plaintiff’s. Id. at 474-75.

The facts of this case, as stated by the Seventh Cir-

cuit, clearly take it beyond the Burger King jurisdictional

parameters. The only “contacts” with Wisconsin involved

10

the mailing of documents and one or two phone calls,

none of which involved any solicitation. (Petition at

3a-4a) These “contacts” were characterized by the court

as “occasional, unspecified and seemingly trivial.” (Id. at

3a) The District Court found likewise:

It is undisputed that First Heritage has no

offices or employees in Wisconsin. It is also

undisputed that Bennett has never been in the

State of Wisconsin. The transaction giving rise to

the dispute involves investments in mining ven-

tures in Canada. The situs of the property that is

the subject of the dispute is in Canada. Bennett’s

role in the venture was as trustee. His duties as

trustee were to be performed in Canada. . . . The

trust/escrow agreement and a subsequent docu-

ment entitled the Lease Record Title Transfer

were executed by Bennett in Canada, although

D. Stauffacher did execute his portion of the

lease title transfer document in Madison, Wis-

consin.

. . . Bennett placed one phone call to the

plaintiff, D. Stauffacher. (There is some indica-

tion that Bennett may have placed two calls but

the substance of only one call is known.) The

substance of the call was Bennett’s request that

he be allowed to withdraw from the trust

arrangement. Bennett mailed or caused to be

sent various documents to the plaintiffs.

(Id. at 16a-18a)

Clearly, Due Pracess would have compelled both the

District Court and the Seventh Circuit to dismiss this case

on the facts found. Stauffachers cannot - and don’t -

dispute this. Their tact is to argue new and different facts

11

and to argue the legal issue of personal jurisdiction only

under their alternate scenario.

B. Stauffachers’ Hypothetical Arguments Rely On

Unestablished Factual Assertions, And Must Be

Rejected As A Basis For Jurisdiction.

The issues argued in the Petition all involve “facts”

that fall outside the findings of the two lower courts.

Review of these issues by writ of certiorari would be

improper because the “facts” argued by Stauffachers are

not supported by the record. Rather, they are speculative

arguments and characterizations that were not supported

by proofs submitted to the District Court and are clearly

refuted by the record below.”

1. First Heritage and Bennett did not Consent

to Jurisdiction.

The Petition argues that the Seventh Circuit should

have upheld personal jurisdiction based upon a “consent

to jurisdiction” clause in a contract. The Seventh Circuit,

however, expressly noted that “First Heritage and Ben-

nett are not parties” to this contract. (Petition at 5a)

Stauffachers do not dispute this. Rather, they argue that

the consent to jurisdiction clause was later “ratified” or

2 In the interest of clarity and brevity, Bennett and First

Heritage will only discuss some of the main issues in detail. This

should not be construed as a waiver of any other objections to

misstatements and misunderstandings in the Petition for Writ of

Certiorari.

12

“approved” by Bennett and First Heritage and that Ben-

nett and First Heritage are therefore bound by it.

This ratification argument is based on a series of

written contracts. Stauffachers invested in two separate

gold-mine mineral leases with Don Dolan (“Dolan”).

There was a separate joint venture agreement for each

lease. (Complaint, Exh. 1,3) The first such agreement

allegedly contained a consent to jurisdiction clause. (Id.,

Exh. 1) Bennett and First Heritage were not parties to

these agreements. (/d., Exh. 1,3) A separate trust agree-

ment was then entered into in British Columbia between

Dolan, Stauffachers and defendant Bennett under which

Bennett was to hold title to the first mineral lease as

trustee. (Id., Exh. 2) No consent to jurisdiction clause

appeared in this first trust agreement. (/d.)

The second joint venture agreement was to be supple-

mented by the terms of the first joint venture agreement and

further stated that, at Bennett’s election, it could serve as the

trust agreement for the second mineral lease. (Id., Exh. 3, {

4D) Instead, Bennett became a party to a “lease record title

transfer agreement” (/d., Exh. 4), under which he agreed to

hold title to the second mineral lease as Trustee. Again, there

was no consent to jurisdiction clause in any of these docu-

ments.

Both the District Court and the Seventh Circuit Court

of Appeals rejected the notion that these contracts

resulted in a waiver of Bennett’s and First Heritage’s

personal jurisdiction defense. The District Court stated:

Concerning the choice of law provision

found in the first investment contract the Court

is of the opinion that Bennett and First Heritage

are not bound by that provision because they

13

were not parties to that agreement and accord-

ingly could not have “availed themselves of the

law of the forum.”

(Petition at 26a) The Seventh Circuit likewise stated:

For the same reason the Stauffachers cannot

prevail by reference to the forum selection

clause in the [first] investment contract. It is true

that the provision is broadly worded. . . . And

such clauses are-enforceable. But the only

remaining defendants, First Heritage and Ben-

nett, are not parties to the agreement.

(Id. at 4a-5a) (citations omitted). Despite the dual rejec-

tion of this bizarre theory, Stauffachers persist in arguing

that there was a consent to jurisdiction clause applicable

to Bennett and First Heritage.

To reach the legal issue of whether such ratification

will create jurisdiction, this Court must first reverse the

lower courts’ factual conclusion that Bennett and First

Heritage did not ratify or approve the consent to jurisdic-

tion clause and then decide if such ratification was suffi-

cient to create jurisdiction under state law (an issue not

addressed below). However, this Court has made it clear

that a writ of certiorari will not be issued to review

factual determinations. See Branti v. Finkel, 445 U.S. 507,

512 n. 6 (1980) (absent the most exceptional circum-

stances, factual determinations in which the District

Court and Court of Appeals have concurred will not be

reviewed by the Supreme Court). In addition, as noted

above, the Court will not accept a certiorari request to

rule on state law issues. Finally, even if this Court were

inclined to review the factual determinations of the two

14

lower courts, the documents themselves refute

Stauffachers’ claim of ratification or approval.

Assuming that ratification of the consent to jurisdic-

tion clause was found, that ratification could carry no

more weight than an actual agreement to that effect. In

Burger King, this court expressly addressed the signifi-

cance of a similar provision addressing choice of law and

concluded that it was only one of many factors to con-

sider in determining the jurisdictional issue. 471 U.S. at

482. Thus, the issue is not one that needs to be addressed

by this Court on certiorari.

2. Stauffachers Did Not Establish a Factual

Basis For a Conspiracy.

As a backstop argument, the Stauffachers argue that

if First Heritage and Bennett do not themselves have

sufficient contacts with Wisconsin, the alleged acts of

agents and co-conspirators may be attributed to them in

order to support the exercise of personal jurisdiction.

Stauffachers have even alleged that their own acts can be

attributed to First Heritage and Bennett:

The requirement of a defendant’s “purpose-

ful availment of the benefits and protections of

the laws of the forum state”, Burger King v.

Rudzewicz, 471 U.S. 462, 475 (1985) can also be

satisfied by the activities of plaintiff within the

state, if the activities are subsequently ratified

by the defendant and do, in fact, benefit the

enterprise and conspiracy to which defendants

are alleged to belong.

(Petition at 35) Again, the Petition is woefully inadequate.

15

The question of whether an agent’s or co-conspira-

tor’s acts may be attributed to a defendant for purposes

of creating jurisdiction is only relevant if an agency rela-

tionship or conspiracy has been established. The Seventh

Circuit concluded that, under the law of Wisconsin,

Stauffachers have not done this. It stated:

All of this leaves out of account, however,

the possibility that [co-defendant] Livesey

might be deemed an agent of First Heritage; and

we may assume without having to decide that

his two visits to Wisconsin on promotional mis-

sions related to the gold mining venture were

enough to satisfy the requirement of “solicita-

tion” in the subsection just quoted. The problem

is that although the plaintiffs continue to argue

that Livesey was First Heritage’s agent, he was

Dolan’s agent. His activities may have sufficed

to make Dolan suable in Wisconsin — though the

question is academic, since Dolan brought him-

self directly within that jurisdiction by his visits

— but Dolan is not First Heritage.

(Petition at 4a)

In addition to arguing that Livesey was the agent of

First Heritage and Bennett, Stauffachers attempted to

argue that Livesey was part of a conspiracy or RICO

enterprise with Bennett and First Heritage. The Seventh

Circuit Court of Appeals refused to consider this issue

because it had not been raised in the District Court:

The problem goes deeper than a failure to make

a preliminary evidentiary showing. While alleg-

ing a broad conspiracy, the Stauffachers have

never claimed that Livesey was an agent of the

conspiracy. . . . When one of the judges sug-

gested this theory to the plaintiff’s counsel at

16

argument he naturally embraced it with alacrity

and even asked for permission to file a supple-

mentary brief elaborating it. But the time for

that was in the district court, and had passed.

(Id. at 8a). As the Seventh Circuit concluded:

The cases are unanimous that a bare allega-

tion of a conspiracy between the defendant and

a person within the personal jurisdiction of the

court is not enough.

... [T]he plaintiffs have made no attempts

to show that there was a conspiracy.

(Id. at 7a, 8a)

Moreover, the “split of authority” relied on by

Stauffachers involves the question of what is needed to

allege a conspiracy in other contexts, such as when a

prosecutor attempts to place a co-conspirator’s statement

into evidence. Even those cases agree that a bare allega-

tion of conspiracy without either some factual support or

some detail as to the basis for the allegation of conspiracy

is insufficient. See, e.g., First Chicago Int'l v. United

Exchange Co., 836 F.2d 1375, 1378 (D.C. Cir. 1988) (bare

allegation of conspiracy or agent is insufficient to estab-

lish personal jurisdiction); Chrysler Corp. v. Fedders Corp.,

643 F.2d 1229, 1237 (6th Cir.), cert denied, 454 U.S. 893

(1981) (“totally unsupported allegations of conspiracy

cannot constitute sufficient contacts . . . to justify an

exercise of personal jurisdiction. .. . ”).

At some point, this Court may choose to address the

issue of what is needed to support a conspiracy allegation

for jurisdictional purposes. This case, however, is not the

17

proper vehicle, as nothing was offered in the courts

below to supplement the allegations.?

Ill. FEDERAL SECURITIES LAW DOES NOT PRO-

VIDE A STATUTORY BASIS FOR PERSONAL

JURISDICTION.

In addition to alleging that Wisconsin law authorizes

personal jurisdiction to be exercised over these defen-

dants, Stauffachers (at least on appeal) have argued that

federal racketeering and securities law also provide statu-

tory grounds for the exercise of personal jurisdiction. The

Seventh Circuit also rejected these arguments.

'

A. RICO Jurisdiction is Determined Under State

Law Which in Wisconsin Would Not Bring Ben-

nett or First Heritage Within the Court’s Juris-

diction.

_ Although RICO authorizes nationwide service of pro-

cess, it does not authorize service outside of the United

States. 18 U.S.C. § 1965(b); Lisak v. Mercantile Bancorp, Inc.,

834 F.2d 668, 671-73 (7th Cir. 1987), cert. denied, 485 U.S.

1007 (1988). For international service of process, such as

that involved in the present case, a RICO plaintiff must

rely on a state’s long-arm statute. Brink’s Mat Ltd. v.

Diamond, 906 F.2d 1519, 1521-23 (11th Cir. 1990). Because

3 Bennett and First Heritage do not concede that

Stauffachers sufficiently alleged a conspiracy of RICO enter-

prise that would include them.

ele

18

review of the exercise of personal jurisdiction under Wis-

consin law has been discussed above, the court is referred

to Sections I and II of this brief.

B. Personal Jurisdiction is not Supported by the

Federal Securities Law.

On appeal to the Seventh Circuit, Stauffachers

attempted to create personal jurisdiction under the Secu-

rities Exchange Act, 15 U.S.C. § 78aa. This provision has

been interpreted to allow service of process on a defen-

dant outside of the United States, see, e.g., Securities &

Exchange Comm'n v. International Swiss Investments Corp.,

895 F.2d 1272, 1275 (9th Cir. 1990), but nothing in that

statute changes the basic prerequisite of personal jurisdic-

tion.

Though there is great doubt that the Stauffachers had

ever properly raised securities law jurisdiction, nonethe-

less, the Seventh Circuit concluded that, in any event, the

exercise of personal jurisdiction would not be proper

because of a lack of sufficient contacts with the United

States. It stated:

Besides its trivial connection with Wisconsin, its

only other contact with the United States is that

a few of its depositors live across the national

boundary from it, in the State of Washington.

The totality of First Heritage’s U.S. contacts is

too sparse to bring it within the grasp of the

U.S. courts.

The suit was properly dismissed.

(Petition at 9a-10a)

a ee a er

19

The minimum contacts issue was discussed in Section

Il above, and need not be repeated here. The only new ©

“contacts” relevant to securities law involve the fact that

a few United States depositors have accounts with First

Heritage. Neither the number or amount of these

accounts was established below, nor is there any record

as to other contacts with the United States. With respect

to defendant Bennett, there were no additional contacts

alleged.

There is no adequate factual basis which supports a

further review. The jurisdictional issues were never

pleaded or preserved for review. Grant of the Petition

would therefore be inappropriate.

+

CONCLUSION

First Heritage and Bennett respectfully request that

the Petition for Writ of Certiorari be denied.

Dated this 23rd day of November, 1992.

MicHaeL, Best & FRIEDRICH

Attorneys for Respondents

James R. Troupts

(Counsel of Record)

STEVEN P. MEANS

MicHaeL, Best & FRIEDRICH

Suite 900

One South Pinckney Street

P.O. Box 1806

Madison, WI 53701-1806

(608) 257-3501