Petition for Writ of Certiorari — Limon v. Kansas

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SU Ue

‘ 6 COUT,

FILED

(1) 02 858 DEC 2 2002

OFFICE OF THE CLERK

: | In The

Supreme Court of the Anited States

THOMAS CACCIOLA, et ux., et al.,

Petitioners,

SIMS COMMUNICATIONS, INC., et al.,

Respondents.

On Petition For A Writ Of Certiorari To The

Court Of Appeals, State Of Washington, Division I

‘o

PETITION FOR A WRIT OF CERTIORARI

JOHN M. KEEFE

Counsel of Record

1120 Fremont Avenue

South Pasadena, CA 91030

(626) 441-3263

Counsel for Petitioners

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COCKLE LAW BRIEF PRINTING CO. (800) 225-6964

OR CALL COLLECT (402) 342-2831

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QUESTIONS PRESENTED

1. Does the Washington Supreme Court’s order of

September 4, 2002, constitute a final judgment under 28

U.S.C. § 1257, where petitioners have no functional defenses

to entry of a substantial judgment in the absence of their

federal claims that in personam jurisdiction may be

exercised over a Washington qualified foreign corporation

whose rich contacts with the forum are constitutionally

sufficient to satisfy the Due Process Clause of the Four-

teenth Amendment, and where the state courts have

finally adjudicated the issues of in personam jurisdiction

and under the Securities Act of 1933, as it relates to the

dismissal of these claims.

2. Whether Washington constitutionally may exer-

cise in personam jurisdiction under the Due Process

Clause of the Fourteenth Amendment over a Delaware

corporation that was doing business in Washington for a

year-and-a-half, was registered to transact business in the

state, maintained a registered agent in the forum for

service of process, and was subject under an agreement

with petitioners to a choice-of-forum provision in Washing-

ton.

3. Whether the capricious dismissal of the Securities

Act of 1933 as a theory of relief in this case, and the

present inability of petitioners to assert their claims under

Rule 144 because of the dismissal of the 1933 Act by the

state courts, has deprived petitioners of due process of law

guaranteed by the Fourteenth Amendment.

————————_— =

PARTIES TO PROCEEDINGS

The following list identifies all parties to the proceed-

ings in the Washington Supreme Court:

Thomas Cacciola & Marlene Cacciola

Peter Vetrano & Lena Vetrano

SIMS Communications, Inc., James Caprio,

Melvin Leiner, Darren M. Marks

iii

CONCLUSION ......... tactesseeneesnceessnsesscsossssessseassessenees

TABLE OF CONTENTS

Page

ME RIOT bid civccinvcssscsvcdsrccuessvceceocsccsciventees 1

I ss . ssahalameheenbocnntannedeneouanses 1

STATUTES AND CONSTITUTIONAL PROVI-

ESO I EP os cvcnddnavccchsbbosidepstessasdencageonseers 1

BPE IE 0 GE EAs CARRIED ec cceuscccccscsesccesceccsoeseces 1

I ek ac pesginihapacouanebaenneyees 1

SRE ELAN IEEE DROS CALS

Decisions on Appeal ................sssssssscssescseseeseeseeseees 4

REASONS FOR GRANTING THE PETITION ......... 6

I. THE DECISION OF THE WASHINGTON

COURT OF APPEALS IS REVIEWABLE BY

THIS COURT PURSUANT TO 28 U.S.C.

§ 1257(a), UNDER THIS COURTS DECI-

SION IN COX BROADCASTING CORP. v.

CE, 480 UG. SSB CIGD) occ ssccicvescessccsencezes 7

Il. THE DECISION RAISES IMPORTANT

QUESTIONS OF FEDERAL CONSTITU-

TIONAL LAW, AND CONFLICTS WITH

THE REASONING OF THIS COURT'S DE-

CISIONS IN THE HELICOPTEROS, PER-

KINS, NEIRBO, BURGER KING, AND

BY GRD oars sncciidedepatatiiiochevinieodsneddeees 11

Ill. THE DECISION RAISES IMPORTANT

QUESTIONS OF FEDERAL LAW, AND

CONFLICTS WITH THE REASONING OF

THIS COURTS DUE PROCESS DECI-

SIONS IN THE RICHARDS, LOGAN, BELL,

PEED BORER Ey CIOS siiciknccisisarocvevecoecessovesenes 25

TABLE OF AUTHORITIES

Page

CASES

Amalgamet, Inc. v. Ledoux & Co., 645 F.Supp. 248

CFs te I Gichcicssisshacticrpniadseadld nie Lanntenbiasibhcdiesenpinniainegniiegs 18

American Motorists Ins. Co. v. Starnes, 425 U.S.

iii inert sescaaesiattchns ential ticidiaiiahcininitaieiaininteinadacntaaad 7

Armstrong v. Manzo, 380 U.S. 545 (1965).............cssscssseees 30

Asahi Metal Industry Co. v. Superior Court, 480

Ta Se Ie Psiitciccda <cssaitnsciantecantaiezonsinnioneses 11, 19, 20, 24

Bane v. Netlink, Inc., 925 F.2d 637 (3d Cir. 1991)............. 18

Banton v. Opryland, U.S.A, Inc., 53 Wn. App. 409,

FOE Fee SD tdiceoncecthciinincdenecthentnisidnentiinass 13, 15, 16

Bell v. Burson, 402 U.S. 535 (1971)..............cccceeeeeeees passim

Boddie v. Connecticut, 401 U.S. 371 (1971)......... 5, 6, 27, 30

Burger King Corp. v. Rudzewicz, 471 U.S. 462

[Fie is+ ssixetinsteipssienescctensnicsiccesenibadmdintduaamsnennaadckoindontaaten passim

Carnival Cruise Lines, Inc. v. Shute, 499 U.S. 585

CHIE AD: snitaseciiebicoeenincinencsiiiasinesbadpianientiincntelaasecaiants passim

Celotex Corp. v. Catrett, 477 U.S. 317 (1986) ................00 29

Chan v. Society Expeditions, Inc., 39 F.3d 1398 (9th

COE ROG cvicewvscccclascdaesosccineecsbingeactbacteiahittbabanes 3, 5, 24

Conner v. Conticarriers and Terminals, 944 S.W.2d

MID CO RII, FD vrevincsscicviansticccnskapendibicbsbsonenseiiees 18

Cowan v. Ford Motor Co., 694 F.2d 104 (5th Cir.

1982), question certified on reh’g, 713 F.2d 100

(5th Cir.), rev’d & action remanded, 719 F.2d 785

CE SO ID sceccanoncinienitiscidtitiinndisaaiietbiabcatbiiteinisinicnacene 18

TABLE OF AUTHORITIES — Continued

| Page

Cox Broadcasting Corp. v. Cohn, 420 U.S. 469

a a iscavininitissdnntaptnisstinninsrsinininiiaeimdiiiinnns 6, 7, 8, 9, 10

Crosfield Hastech, Inc. v. Harris Corp., 672 F.Supp.

a ED iaiiasetsihosninincanvisentnciecnecendniubiebeaneneiesins 18

Crose v. Volkswagenwerk Aktiengesellschaft, 88

Wn. 2d 50, GES PB 764 (1977)......ccccresessccsserocsccsoscsososees 12

Deutsch v. West Coast Mach. Co., 80 Wn.2d 707, 497

TG SEE 0 eI i snicordh schinnihsarsiinantbacéedbihenigiaietbpiennionietantenenn 19

Duquesne Light Co. v. Barasch, 488 U.S. 299 (1989)......... 9

Fischman v. Fischman, 470 F.Supp. 980 (E.D. Pa.

TIE visitiisinnnasiepecssititcilaiihtdeisisibaadliah itches vianimpmabiannpseiieien 18

Florida v. Thomas, 532 U.S. 774 (2001)............cssssceseseseeees 9

Freeman v. Dist. Ct., 1 P.3d 963 (Nev. 2000) ...................4 18

Goodyear Tire v. Ruby, 312 Md. 413, 540 A.2d 482

COE, BO Soncciascteceenatcncdpcepiletasacbsadidntaabiotedeneiciaedsonaiocs 18

Hanson v. Denckla, 357 U.S. 235 (1958) ..............cccceeeeeeees 19

Hartley v. American Bridge League, 61 Wn. App.

EN, BEE FE Fare CRO cvsclecoiceviccscciversctscncesceuse 13, 15, 16

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

BD Ws GO Cae ovncs snvicscactecncbivinsbcsvtbecnss 5, 6, 11, 15, 17

Hewitt v. Hewitt, 78 Wn. App. 447, 896 P.2d 1312

Ei icccssiuacaciasasvceeccsinanecdstissicbivchsdeabacscintpetctebiasonmamccnbbte 8

Holloway v. Wright & Morrissey, Inc., 739 F.2d 695

ERIE Mai PUIG R ccsastvecsssbolclewestcepnincocscbsnetcassiocinbbberettiesés 18, 19

Honda Motor Co. v. Oberg, 512 U.S. 415 (1994).............0. 30 -

Honey v. Davis, 131 Wn.2d 212, 930 P.2d 908 (1997)........ 29

‘

TABLE OF AUTHORITIES — Continued

Page

Insurance Corp. v. Compagnie des Bauxites, 456

Tes Re CI sai sccckctiesceisscsccnessccnivinnnsttnenentevethidtstbiniion 21

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

CRUG Diss sedeepiciiiccersenssepsvesscees onmensinemaabashtvabebuatnissichiakin passim

Kulko v. Superior Court, 436 U.S. 84 (1978)... 15

Kyle v. Days Inn-of America, Inc., 550 F.Supp. 368

CRE DD, 270. TIGRD vcesccessstncescecigachadscarelinbasuaetabaisinaiatiieesbtas 18

Kysar v. Lambert, 76 Wn. App. 470, 887 P.2d 431

(Div. ID), rev. denied, 126 Wn.2d 1019 (1995) .............0 21

LaCorte Elec. Const. v. Centron Sec. Systems, Inc.,

894 F. Supp. 80 (N.D.N.Y. 1995) ........sccccccccssssssssececeeesees 18 ,

Litho Color, Inc. v. Pac. Employers Ins. Co., 98 Wn.

App. 286, 991 P.2d 638 (1999)...............cccssssssesseesessees 5, 26

Logan v. Zimmerman Brush Co., 455 U.S: 422

(TIPU): <i vsbennsdicazescccoesinaisnsecunscsbysonessnuibubeenaeabaibniantuted passim

Market Street R. Co. v. Railroad Comm’n of Cal.,

BOG Tie: BCG vs cite cicacciiclscdismenpienrenanstsesinbicsnsenven 7

Martinez v. California, 444 U.S. 277 (1980)..............e0eee 29

Metropolitan Life Ins. Co. v. Robertson-Ceco Corp.,

84 F.3d 560 (2nd Cir.) cert. denied, 519 U.S. 1006

CR iivcksssscosdesiacccciainceceisnssancbeuaibeniganledenaabanlnmesiaabetanoes 18

Mittelstadt v. Rouzer, 213 Neb. 178, 328 N.W.2d 467

CR Ris snlasossvitpncensienapulveceobvuisatathiehonbiebsidoveisbastubsouiacbanene 18

Mills v. Alabama, 384 U.S. 214 (1966) ............ccccsssseeeees 8,9

Mullane v. Central Hanover Bank & Trust Co., 339

Isceth AEE 1 Ai canchoviniceennennsuntancdnionsienncebantnndamans 26, 27, 30

Neirbo v. Bethlehem Corp., 308 U.S. 165 (1939) .....6, 17, 18

Vii

TABLE OF AUTHORITIES — Continued

Page

Organization for a Better Austin v. Keefe, 402 U.S.

PE CE Di ciiiiiniienensnitnsnstanahtbitlibeiiaitebpehsietinenieamminevnened 8,9

Parker v. BankAmerica Corp., 50 F.3d 757 (9th Cir.

ee eiiaincincian nities Rispseidanciabncaecaneiinestdaunbbepveenpiaciuncens 3, 5, 24

Pennsylvania Fire Ins. Co. v. Gold Issue Mining

Co., 243 U.S. 93 (1917).........eseerssssersrerssecsccsesercereees 17, 18

Pennsylvania v. Ritchie, 480 U.S. 39 (1987)..............000 7,10

Perkins v. Benguet Consolidated Mining Co., 342

ee Mae A ape Gilentnackiphninehinenisinininadsncdetistasecceciaieoteotes passim

Radio Station WOW, Inc. v. Johnson, 326 U.S. 120

Scitech ait lea ital hdisidine bcddinbebibdaiiicenadtnanbtenedatbpsstbansennees 7

Ratliff v. Cooper Laboratories, Inc., 444 F.2d 745

SR IE TTD inchs coishdiibtableiscilebbetenednaliaangpoebennmeneggonniee 18

Raymond v. Robinson, 104 Wn. App. 627, 15 P.3d

SENET TTI ctelatiiinisdcraenntehunniantiaiinnoiaceindemse 12, 13, 15, 16

Richards v. Jefferson County, 517 U.S. 793

RE itis abiapiibliilitsiinetentidbtttivctittrcnscnserece 5, 6, 26, 30

Rosenberg Bros. & Co. v. Curtis Brown Co., 260

UB B16 (RBBB) .oceecennesrreeseeresrvcrcacosnvvererenencosecntecessesecncoses 15

Sandstrom v. Chemlawn Corp., 904 F.2d 83 (1st

SEs PEIN. carts Aesiedibbidch dicince din ceaitglipanennghbeenncbansnatioseeseneteqons 18

Schreiber v. Allis-Chalmers Corp., 611 F.2d 790

II hilt inicio id cnieianiennineiseniiniiiaaiigebiaetipameasee 18

Societe Internationale v. Rogers, 357 U.S. 197

RES SP ria it Gc ied St ER aa ak 27

Sondergard v. Miles, Inc., 985 F.2d 1389 (8th Cir.

see

TABLE OF AUTHORITIES — Continued

Page

Speck v. Mutual Serv. Life Ins. Co., 65 Ohio App.3d

SID, SSE PETE.BE GOD (IGS) wccececccrcccccescscsessccrsescseescestoeses 18

Sternberg v. O’Neal, 550 A.2d 1105 (Del. 1988)........... 18, 19

The Bremen v. Zapata Off-Shore Co., 407 U.S. 1

ccc inictnvsscenseninchtvieyivncveccidinetaketuasuniabnetiaidniaiieal passim

Turner v. Wexler, 14 Wn. App. 143, 538 P.2d 877

(RBTE) vaiccensstsscesscesccccsdeevtesennsiptvegvisiettilitehatsncbiicsmmatatncents 24

Vogel v. Tenneco Oil Co., 276 F.Supp. 1008 (D.D.C.

BNE Virciacdekideviiiistninsinatiiviiecbcibesbinaiaalcibiubnitieaibbietbiaonsiaee 18

Voicelink Data v. Datapulse, 86 Wn. App. 613, 937

BE RI) vissitincntesnewistininieaeniishsitansisictecmuorneriers 8

Washington Equip. v. Concrete Placing, 85 Wn.

App. 240, 931 P.2d 170 (1997).............ssscsecsressssssssseesees 18

Washington v. Superior Court, 169 Wash. 688, 15

Wenche Siemer v. Learjet Acquisition Corp., 966

F.2d 179 (5th Cir. 1992), cert. denied, 506 U.S.

eR i retencittinnssttneitiinenaniinnsbisaaiinncmineje 18

Western Helicopters v. Bell Helicopter Co., 929

F.Supp. 59 (D. Puerto Rico 1996)...........ssscssssesssreesees 18

White v. Pepsico, Inc., 568 So.2d 886 (Fla. 1990) .............. 18

World-Wide Volkswagen Corp. v. Woodson, 444 U.S.

Se cthatinteteicitissicdsiniitenssdin Siéiditseintincadseervadetnciaiik 23, 24

CONSTITUTIONAL PROVISIONS, STATUTES AND RULES

UB. Geen. ; SING TF ..ceciccccesecesesncetsnstsccssecieesbitrsoneste 8

U.S. Const., Amendment V................cessscccssssssesssssssseeseees 27

U.S. Const., Amendment STD iccnicnenneeabirrdinniciainieiiine passim

TABLE OF AUTHORITIES -— Continued

Page

TS UG. 6 Tea OE CBG cececececnccvcesocecccocvcvccesevccesevsccsvece passim

DTIC. B SE TIGD cccncesecccsccccssocccvecesccsoesvoconvevseecees 1, 6, 7, 10

Rule 144, 17 C.F.R. § 280.144.0000... :cscccseceeeseeseeeeeees passim

Rule 144, 17 C.F.R. § 230.144(a)(1) ........ceecesseeeereeseeneeees 28

Rule 144, 17 C.F.R. § 230.144(d)(1) ...........cesecsscerrreseeereeeeee 28

Release No. 33-5223 (January 11, 1972) [37 Fed.

OSE) ARBRE OE STE 27

Release No. 33-7390 (February 28, 1997) [62 Fed.

Rag, 9B42-48)....cccerorererecccoccccsscorcercevsvevecrccssnssescoscosevsesvees 28

Revised Code Washington 4.16.040...........::cccccssssseeeeeeeeees 23

Revised Code Washington 4.16.080......s..ssssssssssssssssssssee 23

Revised Code Washington 4.28.010(10)...........cccsessseeeeeeees 12

Revised Code Washington 4.28.185(5)..........0::sssssssssesessseees 8

Revised Code Washington 21.20 et Seq ............:sssseeeeeees 4,10

Revised Code Washington 23B.15.030 ............ccssseseseeeeeees 12

Revised Code Washington 23B.15.050(2) ...........::seseeeees 12

Washington Civil Rule-30(D\(6).............cssssseseeeeeeereeneseeees 3

Washington Civil Rule 56(C) ..........::ccccesseeeseereeeesrereeesenenes 29

OTHER AUTHORITIES

Steinberg & Kempler, The Application and Effec-

tiveness of SEC Rule 144, 49 Ohio Stat. L. Rev.

BI EE aia cedacccccsneaitcsssusreinnnsecoceovecccitosereseenionsenceresoneees 28

PETITION FOR A WRIT OF CERTIORARI

The petitioners hereby respectfully petition for a writ

of certiorari to review the judgment of the Court of Ap-

peals, State of Washington, Division I.

OPINIONS BELOW

The December 17, 2001, judgment of the Court of

Appeals of the State of Washington is unreported and is

reproduced in the appendix. (App., infra, pp. la-15a).

JURISDICTION

The judgment of the Supreme Court of Washington

was entered on September 4, 2002. (App., infra, 18a). The

jurisdiction of this Court is invoked under 28 U.S.C.

§ 1257(a).

STATUTES AND CONSTITUTIONAL

PROVISIONS INVOLVED

Fourteenth Amendment to the U.S. Constitution:

“No State... shall deprive any person of life,

liberty, or property, without due process of law

x**e* 7

28 U.S.C. Section 1257(a):

“Final judgments or decrees rendered by the

highest court of a State in which a decision could

be had, may be reviewed by the Supreme Court

by writ of certiorari where ... any title, right,

privilege, or immunity is specially set up or

claimed under the Constitution or the treaties or

statutes of ... the United States.”

STATEMENT OF THE CASE

Introduction. This case arises out of earlier proceed-

ings between the petitioners and Kochcapital, Inc., a

former securities broker-dealer, other parties, and Melvin

Leiner, James Caprio, and Darren Marks. In September

1995, the latter parties settled with the plaintiffs in a

settlement agreement for cash and stock in SIMS Com-

munications, Inc. On October 26, 1995, SIMS issued

55,554 shares of stock to Thomas Cacciola and Peter

Vetrano under the agreement.’ The certificates are signed

by Mel Leiner as President and by James Caprio as

Secretary of the corporation. The certificates have a

restrictive legend as defined in Rule 144 and may not be

sold prior to February 10, 1997. (R. 532, 295, 300, 308).

At the time of the agreement, SIMS was selling its

securities on the NASDAQ National Market System, and

its stock was published in the Wall Street Journal. (R.

321). Approximately six months later (March 1996), SIMS

effected a 10 for 1 reverse split of its common stock. (R.

495, 507, 512). In May 1997, petitioners discovered that

their shares had been reduced to 2,777 shares each

through the reverse split in March 1996. (R. 298, 306). In

February 1998, SIMS again split its stock in a 4 for 1

reverse split of the company’s stock. (R. 527). They discov-

ered the second reverse split of their stock eight or nine

months later. (R. 299, 306-07).

Current Action. This case was filed in September

1997. A few months later, SIMS filed motions to dismiss

the complaint, primarily arguing that it is not subject to

jurisdiction in Washington, has never transacted business

* The agreement defines corporation to mean SIMS Communica-

tions in which the defendants are “employees, officers and/or directors,”

and a default thereunder occurs by any failure of SIMS to pay the fair

market value of the securities subject to the holding period under Rule

144. The agreement also provides, “The parties each represent and

warrant that they have legal capacity and actual authority to enter into

this [a]greement and to carry out all actions required of them by this

[a]jgreement.” In addition, Washington law and jurisdiction in King

County, Washington govern the agreement, and there is a provision for

attorney fees and costs to the party(ies) who substantially prevail in

proceedings arising out of the agreement. (R. 310-13). _

in the state, and does not have minimum contacts with

Washington state. (R. 31 & 33-34). In January 1998, a

motion continuing the motion to dismiss, based on pending

discovery, was granted. (R. 51-52). A briefing of the issues

demonstrated that jurisdiction over SIMS existed in this

case.’ (R. 62-66).

Discovery established that SIMS was doing business

in Washington between January 1995 and May 1996

under a Certificate of Authority, and was conducting

business and rental cellular telephone operations by

automated dispensing machines at Alamo Rent-A-Car

locations in this 17-month period. (R. 425, 483). Docu-

ments produced included a SIMS prospectus showing that

it was doing business nationally (R._ 386), and financial

statements relating that its operations were generating

seven figure revenues across the country. (R. 357).

In October 1998, the depositions of SIMS CR 30(b)(6)

designate, James Caprio, Mel Leiner and Darren Marks

were taken in Florida. From the depositions, it became

clear that the stock issued under the agreement could not

be traced to a prior owner (R. 942-958, 960-978, 990-1001),

and that the shares originated from SIMS, as opposed to

shares owned or controlled by them. (R. 1027-28).

* See, e.g., Carnival Cruise Lines, Inc. v. Shute, 499 U.S. 585

(1991); Burger King Corp. v. Rudzewicz, 471 U.S. 462 (1985); and The

Bremen v. Zapata Off-Shore Co., 407 U.S. 1 (1972). The briefings in

essence argued that the forum clause in the agreement establishes

consent to jurisdiction in Washington, and is prima facie valid and

enforceable. The same result is reached under state law. The stock

certificates that were signed by the President and Secretary of SIMS,

on behalf of SIMS, and the issuance of stock as required by the agree-

ment collectively constitute an agreement or contract between SIMS,

the defendants and the plaintiffs. See Parker v. BankAmerica Corp., 50

F.3d 757, 763 (9th Cir. 1995). Additionally, an agency relationship is

material to the jurisdictional issue, and will subject a non-resident

entity like SIMS to in personam jurisdiction in Washington state. See

Chan v. Society Expeditions, Inc., 39 F.3d 1398, 1405-07 (9th Cir. 1994).

In November 1998, a second amended complaint was

filed in essence alleging that as of September 1995, SIMS

was incurring substantial losses, and had losses from its

formation in 1991 (as of 9/94, losses of $4,867,000, and as

of 9/95, $2 million in additional losses). It is alleged that

these facts were not disclosed at the time of the agree-

ment, and violate the Washington Securities Act. The com-

plaint also alleges that their shares were issued in viola-

tion of Rule 144, 17 C.F.R. § 230.144, and that they were

not given notice of the reverse splits of their stock. (R. 344,

373, 284-85, 297).

In December 1998, a second ‘motion for summary

judgment was denied. (R. 560-61). In June 1999, a third

motion for summary judgment was filed, and in this time

frame, plaintiffs filed a motion for partial summary

judgment under Rule 144. (R. 1255, 830). On a hotly

disputed record, the former motion was granted in August

1999. The order dismissed the complaint for failure to

raise an issue of fact in support of the claims, and dis-

missed the complaint against SIMS for lack of. personal

jurisdiction. (R. 1124). Re-notes of the motion for partial

summary judgment were filed in September. (R. 1127,

1179). In October 1999, a motion for attorney fees and

costs was granted in the defendants’ favor for $47,865.90.

(R. 1183). A motion for reconsideration was denied. The

order states that the partial summary judgment motion

was mooted by the grant of summary judgment. (R. 1597).

Decisions on Appeal. In November 1999, an appeal

was timely filed from these orders. During the appeal, a

supersedeas bond was set for $75,000 staying enforcement

of the judgment and covering the respondents’ attorney

fees in the appeal. In November 2001, oral argument was

presented, and on December 17, 2001, the Court of Ap-

peals issued a decision affirming the dismissal of SIMS for

lack of jurisdiction, reversing the dismissal of the claims

under the Washington Securities Act, and dismissing the

claims under the Securities Act of 1933, and associated,

but separate, claims under state law.

The affirmance for lack of personal jurisdiction deli-

cately speaks to the activities of SIMS Communications in

Washington for 17 months through its business and rental

cellular telephone operations at Alamo Rent-A-Car outlets

from January 1995 to May 1996, and its revenues in this

period ($12,000), but planing from its decision Helicopteros

Nacionales de Columbia, S.A. v. Hall, 466 U.S. 408 (1984),

states that these contacts are insufficient to support

general jurisdiction in this case. The decision discerns that

specific jurisdiction is also lacking because SIMS was not a

party to the agreement and, making no mention of the

Burger King, Bremen, Carnival Cruise Lines or of the

Parker and Chan cases, states that it is not subject to the

agreement's forum clause. (App., pp. 3a-6a).

The decision affirming the dismissal of petitioners’

claims under the 1933 Act is based on Litho Color, Inc. v.

Pac. Employers Ins. Co., 98 Wn. App. 286, 991 P.2d 638

(1999), and the absence of argument on the claims. (App.,

pp. 8a-9a, 14a). These claims are based on Rule 144, and

were extensively briefed in the appeal. (9/20/02 Motion for

Reconsideration, pg. 9, and Appendix C to Motion).

The constitutional arguments before the Washington

Supreme Court for the assertion of in personam jurisdic-

tion are in essence that SIMS contacts with Washington

state are inarguably sufficient to satisfy the requirements

of the Due Process Clause of the Fourteenth Amendment

under principles of general jurisdiction, Helicopteros, 466

U.S., at 414-18, and specific jurisdiction. Burger King, 471

U.S., at 472-82; The Bremen, 407 U.S. at 10-15. (Petition

for Review, pgs. 13-19).

The constitutional arguments as they concern the

Securities Act of 1933 are intrinsically based on the

dismissal of these claims contrary to due process consid-

erations and the holdings in Bell v. Burson, 402 U.S. 535

(1971), Richards v. Jefferson County, 517 U.S. 793 (1996),

Logan v. Zimmerman Brush Co., 455 U.S. 422 (1982), and

Boddie v. Connecticut, 401 U.S. 371 (1971). (9/20/02

Motion for Reconsideration, pgs. 9-10; Petition for Review,

pg. 20). It was in essence argued that thie important claim

had been dismissed, when argument was presented on

these issues, and that the claims under Rule 144 could not

be asserted as they stood in the appeal because of the

dismissal of the 1933 Act by the state courts.

On September 4, 2002, the Washington Supreme

Court, comprising a majority of five of the nine Justices of

the Court, dismissed the appeal. (App., 17a).

REASONS FOR GRANTING THE PETITION

Section I of this petition for certiorari explains that

this Court has jurisdiction to review the judgment of the

Washington Court of Appeals under 28 U.S.C. § 1257(a),

consistent with the standards in Cox Broadcasting Corp. v.

Cohn, 420 U.S. 469 (1975). Section II of this petition

explains that general jurisdiction in this case is present

under the principles of this Court’s decision in Helicop-

teros, and may more firmly be based on consent under the

holdings in Perkins v. Benguet Consolidated Mining Co.,

342 U.S. 437 (1952), and Neirbo v. Bethlehem Corp., 308

U.S. 165 (1939). This section discusses the importance of

the due process issues in these settings, and the conflict

between the decisions of the state courts that in personam

jurisdiction may not be exercised over a foreign corpora-

tion with rich connections with the forum state, and the

reasoning of this Court’s decisions and the decisions of

other federal and state courts. Section II also discusses the

importance of the due process issues in a specific jurisdic-

tional setting, and the conflict between the decisions below

and the rationale of the Court’s decisions in the Carnival

Cruise Lines, Burger King, and The Bremen cases.

Section III discusses the conflict between the decisions

of the state courts dismissing petitioners’ claims under the

Securities Act of 1933 and the due process decisions of this

Court in Bell v. Burson, Richards v. Jefferson County,

Logan v. Zimmerman Brush Co., and Boddie v. Connecti-

cut. :

THE DECISION OF THE WASHINGTON COURT

OF APPEALS IS REVIEWABLE BY THIS COURT

PURSUANT TO 28 U.S.C. § 1257(a), UNDER THIS

COURT’S DECISION IN COX BROADCASTING

CORP. v. COHN, 420 U.S. 469 (1975)

The appellate jurisdiction of this Court has been

invoked by the petitioners pursuant to 28 U.S.C. § 1257(a).

The statute requires that the judgment for which review is

sought be final. American Motorists Ins. Co. v. Starnes,

425 U.S. 637, 642 n.3 (1976). This has historically been

expressed by the Court to mean that finality is not nor-

mally satisfied if the state courts must conduct further

substantive proceedings before the federal issues are

resolved. Pennsylvania v. Ritchie, 480 U.S. 39, 47 (1987);

Market Street R. Co. v. Railroad Comm’n of Cal., 324 U.S.

548, 551 (1945).

In a classically older case with roots in a number of

recent cases, the Court observed that the finality doctrine

“as a legal concept ... has a penumbral area.” Radio

Station WOW, Inc. v. Johnson, 326 U.S. 120, 124 (1945).

The Court also recognized that the rule has not been

applied mechanically and that there are circumstances in

which there has been “a departure from [the] requirement of

finality for federal appellate jurisdiction.” Cox Broadcasting

Corp. v. Cohn, 420 U.S. 469, 477 (1975). In Cox, the Court

stated that there are at least four categories of cases

where it has found jurisdiction to be appropriate in the

presence of further proceedings in the state courts. In the

first category are cases where “the federal issue is conclu-

sive or the outcome of further proceedings preordained. In

these circumstances, because the case is for all practical

purposes concluded, the judgment of the state court on the

federal issue is deemed final.” In the third category, are

cases “where the federal claim has been finally decided,

with further proceedings ... in the state courts to come,

but in which later review of the federal issue cannot be

had, whatever the ultimate outcome of the case.” 420 U.S.,

at 479-81.

Mills v. Alabama, 384 U.S. 214 (1966), and Organiza-

tion for a Better Austin v. Keefe, 402 U.S. 415 (1971) are

examples of cases in the first category. In Mills, a claim

under the First Amendment to a statute proscribing the

publication of editorial promotion on an election day was

frustrated by the Alabama courts, thus nullifying the

defense in a trial that “would be no more than a few

formal gestures leading inexorably towards a conviction,”

384 U.S., at 217. In Austin, the Illinois Courts had af-

firmed a temporary injunction for distributing literature

on respondent’s real estate practices, and this Court found

that a permanent injunction on termination of the pro-

ceedings would “be little more than a formality.” 402 U.S.,

at 418. This case is practically no different. As in Mills and

Austin, the petitioners have no defenses to entry of an

order like the judgment entered in October 1999, which is

a formality in the absence of their federal claims that

personal jurisdiction over SIMS is constitutionally present

under the Fourteenth Amendment.’

* The Court of Appeals held that SIMS was not a party to the

agreement and therefore not subject to the forum clause (App. 6a), but

it clearly is a party to the agreement under its express provisions. See

infra, pp. 22-23. The basis of the liability is RCW 4.28.185(5), which

authorizes an award of attorneys’ fees to a non-resident defendant who

prevails in the action. Voicelink Data v. Datapulse, 86 Wn. App. 613,

627, 937 P.2d 1158 (1997); Hewitt v. Hewitt, 78 Wn. App. 447, 456-57,

896 P.2d 1312 (1995). This is the statutory basis for including SIMS in

the underlying judgment. Because the federal issue as it concerns

jurisdiction is conclusive, the outcome of the liability is predetermined.

Moreover, as more recently explained in Duquesne

Light Co. v. Barasch, 488 U.S. 299 (1989), the state courts

have finally adjudicated the issues of jurisdiction and

under the 1933 Act, “and so has left ‘the outcome of further

proceedings preordained.’” Jd., at 306. These issues were

decided on the merits by the state courts, review was

denied by the highest state court, and motions for recon-

sideration were filed in both courts, such that there can be

no trial with SIMS or on these issues, but rather, the

dormant possibility of another appeal in the state courts

for them to formally repeat the last word on what has

already been stated. The Court has treated state-court

judgments as final in these cases because the results of

this refracted process are inexcusable delay and “a com-

pletely unnecessary waste of time and energy in judicial

systems. ...” Mills, 384 U.S., at 217-18.

Also, of related importance, as in Austin, but unlike

Florida v. Thomas, 532 U.S. 774 (2001), there is no evi-

dence that the dismissals for lack of personal jurisdiction

and of the 1933 Act claims rest on a disputed question of

fact, Austin, 404 U.S., at 418, or that further fact-finding

is necessary in the remand. Thomas, 532 U.S., at 778. The

state-court judgment is final on the federal issues, and

quite analogously to Cox, if the final decision on the

federal issues is incorrect, federal law forecloses further

proceedings on a congruous judgment in the state courts,

but if the decision is correct, the litigation will terminate

in a decision by this Court on the merits.

This case also satisfies Cox’s third exception for cases

“where the federal claim has been finally decided, with

further proceedings on the merits in the state courts to

. come, but in which later review of the federal issue cannot

be had, whatever the ultimate outcome of the case.” 420

U.S., at 481. Resolution of the state-law claims in the

remand would effectively moot the federal issues raised

here. Significantly, as with the dismissed claims under the

1933 Act and Rule 144, the claims that have survived the

remand under the Washington Securities Act have been

similarly asserted in the same action with SIMS. In the

state-court proceedings, the respondents maintain that

they did not withhold material information from petition-

ers on the financial status of SIMS at the time of the

settlement agreement, and if they prevail on this narra-

tive of the facts, then the same claims involving SIMS will

also fail because they will have established that they are

not liable for petitioners’ losses under state law. In this

situe+ion, the petitioners’ claims will have been denied “on

state law grounds, thus foreclosing the federal issue.” See

420 U.S., at 482.

Alternatively, if petitioners prevail on the merits, they

will have no basis to seek review and the federal issues

will be mooted. See Ritchie, 480 U.S., at 48; Cox Broad-

casting Corp., 420 U.S., at 481. In this event, the ability of

petitioners to obtain review of the federal issues (which

have already been decided by the state courts) will depend

on respondents’ willingness to appeal. Should they appeal

a jury’ decision, the only method for preserving the

federal issues is by cross-appeal, and the only way this

Court will be able to reach the issues is if the respondents

file a petition for certiorari (assuming a verdict is not

reversed) and petitioners file a cross-petition. When a case

18 in this posture, the Court has considered it sufficiently

final to justify review. See Ritchie, 480 U.S., at 48.

_ The decisions of the state courts on the issues of in

personam jurisdiction and under the Securities Act of 1933

are unambiguously final under 28 U.S.C. § 1257(a). Also,

considering that the litigation could be terminated by a

decision on the federal issues, reaching the merits is

consistent with the pragmatic approach the Court has

followed in the past in determining finality.

Il.

THE DECISION RAISES IMPORTANT

QUESTIONS OF FEDERAL CONSTITUTIONAL

LAW, AND CONFLICTS WITH THE REASONING

OF THIS COURT’S DECISIONS IN THE

HELICOPTEROS, PERKINS, NEIRBO,

BURGER KING, AND BREMEN CASES

A. .

The exercise of personal jurisdiction by a state over a

non-resident entity is constitutionally determined by the

Due Process Clause of the Fourteenth Amendment. Heli-

copteros, 466 U.S., at 413-14. Due process requirements

are satisfied when in personam jurisdiction is asserted

over a nonresident entity that has “certain minimum

contacts with [the forum] such that the maintenance of the

suit does not offend ‘traditional notions of fair play and

substantial justice.” Id., at 414, quoting International

Shoe Co. v. Washington, 326 U.S. 310, 316 (1945). Histori-

cally and in recent cases, the Court has melded its holding

in International Shoe in specific and general jurisdictional

settings. Asahi Metal Industry Co. v. Superior Court, 480

U.S. 102, 113 (1987); Helicopteros, 466 U.S., at 414-18.

In this time-resistant framework, the Court has held

that general jurisdiction is determined by exploring

whether the nature of the contacts with the forum state

“constitute the kind of continuous and systematic general

business contacts” the Court has found present where the

activities in the forum are sufficient to support jurisdiction

over cases unrelated to those activities. Jd., at 414-16.

Applying these principles to the contacts that SIMS

Communications established in Washington, there is

engulfing record evidence that the due process require-

ments of general jurisdiction were satisfied in this case.

Summarizing the evidence below, SIMS was doing busi-

ness in Washington between January 1995 and May 1996

with state approval, and was conducting its business and

rental cellular telephone operations by automated dispens-

ing machines at Alamo Rent-A-Car locations in this year-

and-a-half period.

It is undisputed that SIMS was transacting business

in Washington pursuant to RCW 23B.15.030 of the Washing-

ton Business Corporations Act under a Certificate of Author-

ity filed in December 1995. As a Delaware corporation, SIMS

was authorized under state law, as a domestic corporation is

authorized, to transact business in Washington, and by

statute, had the same rights and privileges, and was

subject to the same duties, restrictions, and liabilities as

are imposed on a domestic corporation. RCW 23B.15.050(2).

Under its Certificate of Authority, SIMS consented to

the appointment of a registered agent in Washington for

service of process, and maintained a local address for mail

and corporate license materials. (R. 485-86). SIMS also

maintained a corporate account with the state (R. 489). As

a registered corporation, SIMS was subject to state taxa-

tion and reporting requirements (R. 489), and was subject

to state administrative actions for non-compliance with

state law. The existence of legal obligations in the forum is

a decisive factor under RCW 4.28.010(10) in determining

whether general jurisdiction exists. Crose v. Volkswagen-

werk Aktiengesellschaft, 88 Wn.2d 50, 54, 558 P.2d 764

(1977); Raymond v. Robinson, 104 Wn. App. 627, 633, 15

P.3d 697 (2001).

_ The physical presence maintained by SIMS in Wash-

ington is manifested by its business operations and dis-

pensing machines which occupied part of the premises at

Alamo rental car outlets in the state. It is clear. that

consideration passed by rental, lease or otherwise between

SIMS and Alamo Rent-A-Car to conduct its business

operations at Washington Alamo outlets. Their agree-

ments, written or otherwise, gave rise to legal obligations

between them and there is no doubt that a breach or a

default by the parties in their agreements would have

subjected them to legal obligations in Washington.

It is undisputed that SIMS conducted its business

operations in Washington by credit card (R. 376), and that |

every resident credit card it charged between January

1995 and May 1996 (and it may be surmised that there

were hundreds) gave rise to legal obligations in contract

(and potentially tort) with Washington residents.

Despite the prolific nature of these substantial juris-

dictional contacts, the decision nonetheless highlighted the

activities of SIMS in Washington for 17 months through

its business and rental cellular telephone operations at

Alamo rental car outlets from January 1995 to May 1996,

and its revenues in this period ($12,000), and held that

although these facts place this case somewhere between

the factual scenarios in Raymond v. Robinson, 104 Wn.

App. 627, 15 P.3d 697 (2001), Hartley v. American Bridge

League, 61 Wn. App. 600, 812 P.2d 109 (1991), and Banton

v. Opryland, U.S.A, Inc., 53 Wn. App. 409, 767 P.2d 584

(1989), these contacts are insufficient to support general

jurisdiction in this case. (App., 6a). Significantly, these

facts were decisively sufficient to withstand two motions

for summary judgment, and no new facts were presented

in the final summary judgment motion. Also, although

these cases appear to establish the basis of the jurisdic-

tional inquiry, the present case is more of a prismed applica-

tion of Perkins, though in a different context, than it is of

the cases on which the decision is based.

This case is like Perkins because there, as here, a

foreign corporation carried on in the forum state “a con-

tinuous and systematic, but limited part, of its general

business.” 342 U.S., at 438. In Perkins, petitioner filed

~ actions in Ohio against a mining company seeking divi-

dends due as a stockholder, and damages because of the

companys failure to issue her stock certificates. The

company’s mining properties were in the Philippines, but

its operations were halted during the Japanese occupation.

During that interim, the president maintained an office in

Ohio from which he conducted company activities, kept

company files and held directors meetings, distributed

salary checks to himself and to two secretaries drawn on

Ohio bank accounts, used an Ohio bank as a transfer

agent, and supervised policies dealing with its Philippine

properties. Id., at 447-48. This Court held that these

activities in the forum in this interim period were continu-

ous and systematic. Id., at 448.

The contacts established by SIMS Communications in

Washington are, on the one hind, comparably continuous

to the business activities in Perkins, and on the other, may

be more systematic than these activities. It is clear that

SIMS was conducting business nationally in car rental

agencies, airports, and hotels from Massachusetts and

New Jersey, through the Midwest and the South, to Puerto

Rico and Hawaii, to California at the time of the agree-

ment, and was also conducting business operations in

Washington in this period. As in Perkins, SIMS carried on

a limited part of its general business in the forum state. It

is unknown in Perkins the extent to which the activities in

the forum were carried on in an everyday and uninter-

rupted or continuous manner, but it is quantitatively

known in this case that these activities were being con-

ducted in Washington on a consistent, uninterrupted and

round-the-clock basis for a year-and-a-half. The “AC/DC”

units employed by SIMS were operated as automated

dispensing stations, and accepted funds through credit

cards or electronic funds transfer. (R. 385-86).

The systematic nature of the contacts in Perkins, two

state bank accounts and engaging a state bank to act as

transfer agent, are comparably demonstrated by the credit

card transactions and funds transfers from Washington

Alamo rental car locations, the corporate accounts it

maintained with the state, and by the state taxation and

reporting requirements that SIMS was subject to in

Washington. The qualitative character of affiliate contacts

in Perkins, the directors meetings, correspondence relating

to company business, and supervision of foreign properties

in the forum, are important in the minimum contacts

analysis, but may not be as substantial as the statutory

consent obtained by SIMS from Washington under its

Certificate of Authority to transact business in the state,

the registered agent it maintained in Washington for

service of process, the address it maintained for mail and

corporate license materials, the commercial agreements it

had with Alamo Rent-A-Car to conduct its business opera-

tions at its Washington outlets, and the legal obligations it

was subject to with state residents. As in Perkins, these

activities have a character cf continuity in them, but they

are innately systematic because they define the continuity

of the contacts in the forum.

Also, like Perkins, the contacts established by SIMS in

Washington are more substantial than the activities in

Helicopteros, where the contacts of Helicol, a Columbian

corporation, were held to be insufficient to satisfy the

requirements of due process. The Court based its holding

on the grounds that a trip to Texas by its CEO to negotiate

a contract was not a contact of a continuous or systematic

nature, as Perkins and International Shoe described it;

accepting checks into its New York bank drawn on a Texas

bank were of negligible significance because “such unilat-

eral activity ... is not an appropriate consideration when

determining whether a defendant has sufficient contacts

... to justify the assertion of jurisdiction,” citing Kulko v.

Superior Court, 436 U.S. 84, 93 (1978); and under

Rosenberg Bros. & Co. v.. Curtis Brown Co., 260 U.S. 516

(1923), the purchases of equipment from Texas and sending

personnel to Texas for training, standirg alone, was not a

sufficient basis for a State’s assertion of jurisdiction.

Helicopteros, 466 U.S., at 416-19. None of the activities in -

Helicopteros that were found to be unilateral or negligible

are present in this case.

The decision appears to have arched the balance

against the exercise of jurisdiction on the basis of the

Raymond, Hartley and Banton cases, and because the

appellants presented no evidence “that SIMS had offices,

employees or agents in this state,” but to the contrary, as

this case bears out, the polar opposite is true on the latter

point. Moreover, except for Hartley, these cases are en-

tirely inapposite.‘ In Hartley, the Court held that a bridge

league was subject to general jurisdiction because it:

organized bridge tournaments and sold and transported

bridge supplies in the state, charged and collected fees

from state residents, and determined which residents

could participate in tournaments. 61 Wn. App., at 606.

The differences between these cases and this case are

markedly clear. There is no mention in Raymond or

Banton (as is the case here) that the parties had offices,

maintained a physical business presence, a registered

agent, or had statutory consent to do business in the state.

These latter facts, a registered agent and statutory con-

sent, are as well lacking in Hartley. It also cannot be said

in these cases, as it can in the present case, and as it can

in Perkins and International Shoe, that the parties over

whom jurisdiction was sought maintained a continuous

business presence in the forum, or that they conducted

these activities on a regular basis in the state.

The federal questions on the seemingly clear presence

of general jurisdiction in this case are substantial because

* In Raymond, an Arizona company that installed RV accessories

with no offices or agents in Washington advertised its products to

Washington consumers through magazines and mailings, negotiated

sales with state consumers over the phone and through the mail,

authorized warranty repairs in Washington, and sent a technician to

Washington to service the unit at issue. The court held that these

contacts were not sufficient for the exercise of general jurisdiction. 104

Wn. App., at 633-36. In Banton, a Washington resident was injured

while visiting the Grand Ole Opry in Tennessee, and had visited

Opryland after going to a promotional presentation in Washington. The

Court held that presentations to solicit persons to visit Opryland,

occasional payment of commissions to travel agents, occasional

broadcasts of music, and reservations affecting a few state residents did

not suggest continuous involvement in Washington, and that these

activities wére insufficient to confer general jurisdiction. 53 Wn. App.,

at 417-18.

am ia ——————

they involve applications and permutations of Helicop-

teros, Perkins and International Shoe in difficult and

principally grey areas on which this Court has not defini-

tively or recently spoken. On related grounds, the jurisdic-

tional facts in this case go beyond the concise holdings in

these cases because SIMS was registered in Washington

under its Certificate of Authority to transact business in

the state, and maintained a registered agent in Washing-

ton for service of process.

This Court has held in a number of cases that a

foreign corporation which authorizes an agent for service

of p1.cess in compliance with a state registration statute

conse ats to the exercise of general personal jurisdiction in

that state. Neirbo Co. v. Bethlehem Corp., 308 U.S. 165,

166, 174-75 (1939); Pennsylvania Fire Ins. Co. v. Gold

Issue Mining Co., 243 U.S. 93, 95 (1917). In the latter case,

the Court held that Missouri could constitutionally exer-

cise general jurisdiction over a foreign corporation, and

“not deprive the defendant of due process,” even though its

only apparent contact with Missouri was its designation of

the Superintendent of Insurance as its registered agent in

compliance with state law. Ibid.

The Court has not directly examined its holdings in

the Neirbo and Pennsylvania Fire Ins. Co. cases since its

decision in International Shoe Co. v. Washington; however,

historical and more recent support for the recognition of

consent through statutory registration as a basis for

general jurisdiction is notably present in important cases

that have been decided after International Shoe. In Per-

kins, for example, the Court reaffirmed the principle that

there would have been no need to consider minimum

contacts if consent had been given: “Today if an authorized

representative of a foreign corporation be physically

| present in the state ... and be there engaged in activities

appropriate to accepting service ... there is no unfairness

in subjecting that corporation to the jurisdiction of the

courts of that state. ...” Perkins, 342 U.S., at 444.

Federal and state cases that have considered the due

process basis for the holdings in Neirbe and Pennsylvania

Fire Ins. Co. in light of International Shoe are divided

on this issue.’ Thus, a decision on this question goes

significantly beyond a single Washington statute. It

impacts the transacting business statutes of almost every

state, and does so on a subject about which this Court has

not recently spoken. Because the inquiry is far-reaching, a

significant federal question is presented.

* A number of federal and state courts have approved the rationale

of these cases. See, e.g., Holloway v. Wright & Morrissey, Inc., 739 F.2d

695, 697 (1st Cir. 1984) (Stewart, J., sitting by designation); Bane v.

Netlink, Inc., 925 F.2d 637, 640-41 (3d Cir. 1991); Cowan v. Ford Motor

Co., 694 F.2d 104, 105-06 (5th Cir. 1982), question certified on reh’g, 713

F.2d 100 (5th Cir.), rev’d & action remanded, 719 F.2d 785 (5th Cir.

1983); Sondergard v. Miles, Inc., 985 F.2d 1389, 1395-96 (8th Cir. 1993);

Schreiber v. Allis-Chalmers Corp., 611 F.2d 790, 793 (10th Cir. 1979);

Crosfield Hastech, Inc. v. Harris Corp., 672 F.Supp. 580, 585 (D.N.H.

1987); LaCorte Elec. Const. v. Centron Sec. Systems, Inc., 894 F. Supp.

80, 83 (N.D.N.Y. 1995); Amalgamet, Inc. v. Ledoux & Co., 645 F.Supp.

248, 249 (S.D.N.Y. 1986); Vogel v. Tenneco Oil Co., 276 F.Supp. 1008,

1012 (D..D.C. 1967); Kyle v. Days Inn of America, Inc., 550 F.Supp. 368,

369 (M.D. Pa. 1982); Fischman v. Fischman, 470 F.Supp. 980, 982 (E.D.

Pa. 1979); Sternberg v. O’Neal, 550 A:2d 1105, 1111 (Del. 1988);

Mittelstadt v. Rouzer, 213 Neb. 178, 328 N.W.2d 467, 469 (1982); White

v. Pepsico, Inc., 568 So.2d 886, 889-90 (Fla. 1990); Washington v.

Superior Court, 169 Wash. 688, 692-96, 15 P.2d 660 (1932). Other

courts have rejected the rationale of these cases. See, e.g., Sandstrom v.

Chemlawn Corp., 904 F.2d 83, 89 (ist Cir. 1990); Metropolitan Life Ins.

Co. v. Robertson-Ceco Corp., 84 F.3d 560, 566, 575 (2nd Cir.), cert.

denied, 519 U.S. 1006 (1996); Ratliff v. Cooper Laboratories, Inc., 444

F.2d 745, 748 (4th Cir. 1971); Wenche Siemer v. Learjet Acquisition

Corp., 966 F.2d 179, 182-83 (5th Cir. 1992), cert. denied, 506 U.S. 1080

(1993); Western Helicopters v. Bell Helicopter Co., 929 F.Supp. 59, 63 (D.

Puerto Rico 1996); Goodyear Tire v. Ruby, 312 Md. 413, 540 A.2d 482,

487 (Md. 1988); Freeman v. Dist. Ct., 1 P.3d 963, 968 (Nev. 2000); Speck

v. Mutual Serv. Life Ins. Co., 65 Ohio App.3d 812, 585 N.E.2d 509, 512

(1990); Conner v. Conticarriers and Terminals, 944 S.W.2d 405, 416

(Tex.Civ.App. 1997); Washington Equip. v. Concrete Placing, 85 Wn.

App. 240, 246, 931 P.2d 170 (1997).

Considering, however, the lucent reasoning of the

more recent decisions in Holloway v. Wright & Morrissey,

Inc., 739 F.2d 695 (1st Cir. 1984), Sondergard v. Miles,

Inc., 985 F.2d 1389 (8th Cir. 1993), and Sternberg v.

O’Neal, 550 A.2d 1105 (Del. 1988), and also considering

this Court’s incisive statement in Perkins, subsequent to

International Shoe, reaffirming the principle that there is

no unfairness in subjecting a corporation to the jurisdic-

tion of the courts of a state in this consensual setting,

there can be little doubt that SIMS has assented to the

jurisdiction of Washington courts in this case.

As explained in the previous section, personal juris-

diction is unequivocally measured by due process under

the Fourteenth Amendment. This is also true in a specific

jurisdictional setting, but the focus is measurably differ-

ent. The cornerstones of specific jurisdiction under this

Court’s cases encompass three indispensable inquiries:

whether an out-of-state corporation or non-resident

individual “purposefully established ‘minimum contacts’ in

the forum State,” whether the cause of action “arises out of

or relate[s] to” the activities with the forum, and whether

“the assertion of personal jurisdiction would comport with

‘fair play and substantial justice.’” Burger King Corp. v.

Rudzewicz, 471 U.S. 462, 472-76 (1985). This is also true

under state law. Deutsch v. West Coast Mach. Co., 80

Wn.2d 707, 711, 497 P.2d 1311 (1972).

Minimum contacts must have a basis in “some act by

which the defendant purposefully avails itself of the

privilege of conducting activities within the forum State,

thus invoking the benefits and protections of its laws.”

Asahi Metal Industry Co. v. Superior Court, 480 U.S. 102,

109 (1987) (citing Hanson v. Denckla, 357 U.S. 235, 253

(1958)). “Jurisdiction is proper ... where the contacts

proximately result from actions by the defendant himself

that create a ‘substantial connection’ with the forum.... ”

Burger King, 471 U.S., at 475.

The substantial connection between an out-of-state

corporation and the forum necessary for a finding of

minimum contacts comes about by an action of the entity

purposefully directed toward the forum State. Asahi Metal

Industry, 480 U.S., at 112. Even a single act can support

jurisdiction if it creates a substantial connection with the

forum. Burger King, 471 U.S., at 475 n.18. Jurisdiction

“may not be avoided merely because the defendant did not

physically enter the forum.... So long as a commercial

actor’s efforts are ‘purposefully directed’ toward ... an-

other State,” this Court has “consistently rejected the

notion that an absence of physical contacts can defeat

personal jurisdiction there.” Id., at 476.

In Burger King, the Court held that the assertion of

personal jurisdiction in Florida over a Michigan resident,

for the alleged breach of an agreement with Burger King,

a Florida corporation, did not offend due process. In

considering whether and to what extent a contract can

constitute a contact for purposes of due process analysis,

the Court observed, “The Court long ago rejected the

notion that personal jurisdiction might turn on ‘mechani-

cal’ tests, International Shoe Co. v. Washington.... In-

stead, we have emphasized the need for a ‘highly realistic’

approach that recognizes that a ‘contract’ is ‘ordinarily but

an intermediate step serving to tie up prior business

negotiations with future consequences which themselves

are the real object of the business transaction.’” 471 U.S.,

at 478-79.

The present case in a number of relevant aspects, as

explained in more depth below, is like Burger King be-

cause here, as there, the parties entered a structured

_ agreement with future consequences in the forum, and

like Burger King, the agreement here has a choice-of-law

provision providing that it is to be interpreted and en-

forced under the laws of Washington. Unlike Burger King,

and more like The Bremen and Carnival Cruise Lines

cases, the agreement has a forum clause providing for

lla errr eear errr sea era

jurisdiction in Washington, which solidifies the presence of

specific jurisdiction in this case.

There can be little doubt that SIMS Dommvententions

purposefully availed itself of the Washington market. The

record shows that it purposely delivered its products into

the stream of Washington commerce with the result that

its products were purchased by Washington consumers for

a year-and-a-half, and that it benefited from the Washing-

ton market. These facts are more than sufficient to sup-

port the exercise of general jurisdiction, but they are

immaterial as a basis for satisfying this requirement

because the causes of action in this case do not arise from

these facts. The more powerful ground that satisfies this

element is the parties’ agreement, and the execution by

SIMS of the stock certificates transferred under the

agreement.

The requirement of personal jurisdiction is based on due

process and is a right that can be waived. Insurance Corp. v.

Compagnie des Bauxites, 456 U.S. 694, 702-03 (1982). A

negotiated agreement with a forum clause that shows

consent to jurisdiction is enforceable unless it can be shown

that enforcement would be unreasonable and unjust, or that

it is invalid for fraud or overreaching. The Bremen v. Zapata

Off-Shore Co., 407 U.S. 1, 10-15 (1972); Kysar v. Lambert, 76

Wn. App. 470, 484-85, 887 P.2d 431 (Div. II), rev. denied, 126

Wn.2d 1019 (1995). As previously noted, the agreement has a

choice-of-forum provision in which jurisdiction is in the

courts of Washington. The respondents did not show in the

state court proceedings that the provision was invalid or

unreasonable, that there is serious inconvenience of the

contractual forum or that Washington is a “remote alien

forum.” The forum clause confirms consent by the individual

respondents to jurisdiction in Washington, and is prima

facie valid and enforceable. See Carnival Cruise Lines, Inc.

v. Shute, 499 U.S. 585, 591-95 (1991); Burger King, 471

U.S., at 472 n.14; The Bremen, 407 U.S., at 10, 15; Kysar,

76 Wn. App., at 484-85.

| apg

SIMS did, however, argue that Washington does not

have jurisdiction over it because it was not a party to the

agreement and cannot be bound by its terms, nothing

indicates that anyone signed anything on its behalf, and

that it does not have sufficient minimum contacts for the

exercise of jurisdiction in this case. (R. 31, 33-34). The

record discredits these assertions, and to the contrary as

argued by SIMS, its contentions overlook substantial

record evidence that it clearly knew it was affiliating itself

with an agreement having long-term consequences in

Washington. Burger King admonishes courts to carefully

consider prior negotiations and contemplated future

consequences, along with the terms of the contract and the

parties’ course of dealing, in evaluating whether a party

purposefully established minimum contacts with the

forum. 471 U.S., at 479.

The contract documents required the issuance of

50,000 shares of SIMS Communications stock, and explic-

itly state that a default under the agreement occurs by

any failure of SIMS to pay the fair market value of the

securities subject to the holding period of Rule 144. Also,

the agreement defines corporation to mean “SIMS Com-

munications ... in which Defendants are employees,

officers and/or directors,” and the stock certificates issued

under the agreement-were signed by the President and

Secretary of SIMS.°

by SIMS Communications or, as the respondents contended below, was

owned and/or controlled by the individual respondents is immaterial

because SIMS is liable for the obligation under the terms of the

certificates. The certificates provide in pertinent part, “SIMS COM-

MUNICATIONS, INC., INCORPORATED UNDER THE LAWS OF ...

DELAWARE, AUTHORIZED: 20,000,000 COMMON SHARES. .. . This

Certifies that ... is the owner of ... Fully Paid and NonAssessable

Common Stock ... of SIMS COMMUNICATIONS, INC. transferable

only on the books of the Corporation by the holder hereof in person or

by Attorney upon surrender of this Certificate properly endorsed. This

(Continued on following page)

iii aD

The terms of the agreement confirm that SIMS

became party to an agreement with future consequences

and legal obligations in Washington. The parties’ actual

course of dealing substantiates that the execution of

material documents required under the agreement by its

President and Secretary were preceded by negotiations

with their Florida counsel conducted by telephone and fax,

(R. 1027-28), that the stock certificates delivered under the

agreement were subject to a two-year holding period (Rule

144) pursuant to an agreement governed by Washington

law, and that the agreement and the certificates were

subject to three-year and six-year limitations periods of

state law under RCW 4.16.080 (tort actions) and RCW

4.16.040 (contract actions). The sum of these actions and

the legal obligations and consequences that SIMS was

subject to in Washington through the execution and

issuance of the securities and the default provisions under

the terms of the agreement decisively reinforce its deliber-

ate affiliation with the forum and the foreseeability of

litigation there. Through the agreement, its conduct and

specific connections with Washington confirm that it

should reasonably anticipate being haled into court there.

See World-Wide Volkswagen Corp. v. Woodson, 444 U.S.

286, 297 (1980). SIMS purposefully availed itself of the

benefits and protections of Washington’s laws by becoming

obligated under an agreement providing that its forum

and those laws would govern disputes, Burger King, 471

U.S., at 482, and has purposefully established contacts

Certificate is not valid until countersigned by the Transfer Agent. IN

WITNESS WHEREOF, the Corporation has caused this Certificate to

be signed by the facsimile signatures of its duly authorized officers and

to be sealed with the facsimile seal of the Corporation.” The certificates

are identical and equally state share ownership. Contrary to the

respondents’ arguments, however, the shares cannot be traced to a

prior owner. See infra, pg. 28.

with Washington that create a substantial connection with

the forum state. Asahi Metal Industry, 480 U.S., at 112.’

The decisions in the present case conflict with the

rationales of the Burger King, World-Wide Volkswagen,

The Bremen, and Carnival Cruise Lines cases. As in

Burger King, the parties entered a freely negotiated

agreement with future consequences and continuing legal

obligations- in the forum, and the agreements in like

manner have choice-of-law provisions. Congruous with

World-Wide Volkswagen, the execution and issuance of the

securities and the default provisions under the terms of

the agreement conclusively reinforce its deliberate affilia-

tion with the forum and the foreseeability of litigation

there. Moreover, like The Bremen and Carnival Cruise

Lines cases, the agreement has a forum clause providing

for jurisdiction in Washington, and the parties therefore

cannot reasonably claim the element of surprise at being

hailed to answer in Washington for defaults or breaches of

the agreement.

" Ninth Circuit decisions also provide a basis for concluding that

SIMS is a party to the agreement. Under Washington law, the stock

certificates that were signed by the President and Secretary of SIMS,

on behalf of SIMS, and the issuance of SIMS Communications stock as

required by the agreement, are “documents that relate to the same

subject matter and that were executed as part of the same transaction,”

and collectively would be construed as an agreement or contract

between SIMS, the respondents, and the plaintiffs. See Parker v.

BankAmerica Corp., 50 F.3d, at 763 (citing Turner v. Wexler, 14 Wn.

App. 143, 146, 538 P.2d 877 (1975)). Moreover, the individual respon-

dents were general agents of the corporation when the agreement was

entered in September 1995, and the certificates were executed by them

in representative capacities for the corporation. An agency relationship

is material to jurisdiction, and consistent with these facts, satisfies the

presence requirement and will subject a non-resident entity like SIMS

to jurisdiction in Washington. See Chan v. Society Expeditions, Inc., 39

F.3d, at 1405-07.

Despite the cogent grip of these jurisdictional facts,

the decision held that specific jurisdiction is lacking

because SIMS was not a party to the agreement. (App., 6a

n.2). Beyond this, even if the decisions were deemed not

necessarily to conflict with those cases, it nevertheless

raises an important issue of federal constitutional law that

should be resolved by this Court. While the above cases all

bear on this issue, this Court has never decided a case

raising the explicit question of the exercise of specific

jurisdiction and application of a forum clause to a party

like SIMS Communications in this case.

Finally, it should be stated that SIMS did not show in

the state courts that other factors outweigh the purposeful

contacts it established in Washington through the agree-

ment. There was no showing, for example, that the litiga-

tion in Washington severely impairs its ability to call

witnesses in support of its defenses. At the time of the

agreement, SIMS was doing business nationally (at least

20 states, R. 386), and it is no less convenient for it to

appear here than it is in these other statés. Also, the

respondents, as officers and directors of a public company,

are clearly seasoned in business, were represented by

Florida counsel throughout the negotiations consummat-

ing the agreement, and did not otherwise show how

jurisdiction in Washington would be fundamentally unfair.

The exercise of specific jurisdiction over SIMS in this case

is constitutional, and does not offend due process.

Iil.

THE DECISION RAISES IMPORTANT

QUESTIONS OF FEDERAL LAW, AND CONFLICTS

WITH THE REASONING OF THIS COURT’S

DUE PROCESS DECISIONS IN THE RICHARDS,

LOGAN, BELL, AND BODDIE CASES

The constitutional issues under the Securities Act of

1933 are based on the Due Process Clause of the Four-

teenth Amendment and the insular dismissal of these

claims contrary to due process considerations and this

Court’s holdings in a number of important cases. The

decision of the Washington Court of Appeals affirming the

dismissal of these claims is based on Litho Color, Inc. v.

Pac. Employers Ins. Co., 98 Wn. App. 286, 991 P.2d 638

(1999), and the absence of argument on the claims. (App.

8a). The claims under the Securities Act of 1933, however,

are based on Rule 144 and were extensively briefed in the

appeal. (Court of Appeals October 2000 brief). The decision

touches the arguments on Rule 144, but in the relevant

respect, declines to address the issues noting that the

latter argument was never before the trial court. (App., pp.

12a-13a). The status of this important claim is that it has

been dismissed, when argument was presented on these

issues.

“Many controversies have raged about ... the Due

Process Clause” but it is fundamental that “except in

emergency situations (and this is not one) due process

requires that when a State seeks to terminate an interest

such as that involved here, it must afford ‘notice and

opportunity for hearing appropriate to the nature of the

case’ before the termination becomes effective.” Bell v.

Burson, 402 U.S. 535, 542 (1971); Mullane v. Central

Hanover Bank & Trust Co., 339 U.S. 306, 313 (1950). The

inquiry under the Court’s holding in Mullane is whether

there has been a deprivation of a protected interest and, if

so, what process is due. Logan v. Zimmerman Brush Co.,

455 U.S. 422, 428 (1982).

In a number of this Court’s cases, it has been held

that a cause of action is a form of property protected by the

Due Process Clause of the Fourteenth Amendment. Rich-

ards v. Jefferson County, 517 U.S. 793, 804 (1996); Logan,

455 U.S., at 428. In Mullane, the Court held that a statute

providing for notice by publication in a newspaper to trust

beneficiaries, although sufficient for beneficiaries whose

interests or addresses were unknown to the trustee, was

not sufficient notice for known beneficiaries under the Due

Process Clause because the effect of the statute was to

terminate “every right which beneficiaries would other-

wise have against the trust company ... for improper

management of the common trust fund.” 339 U.S., at 311.

The Court held that this had the effect of depriving trust

beneficiaries of property because it “cut off their rights to

have the trustee answer for negligent or illegal impair-

ments of their interests.” Jd., at 313. Similarly, in Societe

Internationale v. Rogers, 357 U.S. 197 (1958), this Court

held that a party's claim could not be dismissed for non-

compliance with a discovery order, when the failure to

comply with the order was due to inability, and not to ~

willfulness, bad faith, or any fault of the party. This is

because the Due Process Clause of the Fifth Amendment

imposes “constitutional limitations upon the power of

courts, even in aid of their own valid processes, to dismiss

an action without affording a party the opportunity for a

hearing on the merits of his cause.” Jd., at 209-13.

The Court’s holdings in Mullane and Logan, of course,

have similarly interpreted the Due Process Clause of the

Fourteenth Amendment. Mullane, 339 U.S., at 311-15;

Logan, 455 U.S., at 433-37. In this framework, the Due

Process Clause has been held to prevent the States from

denying individuals the use of established adjudicatory

procedures, when the denial would be the “equivalent of

denying them an opportunity to be heard upon their

claimed right{s].” Id., at 429-30; Boddie v. Connecticut, 401

U.S. 371, 380 (1971). The rejection of these rights in this

case shares the characteristics of these cases. In this

respect, the right to established state procedures under

the Securities Act of 1933 and Rule 144 is guaranteed by

statute and court rules, and like a driver’s license or an

FEPA claim, is no less of an entitlement grounded in state

(and federal) law. See Bell, 402 U.S., at 539; Logan, 455

U.S., at 431.

Rule 144 was adopted in 1972 under the Securities

Act of 1933. Release No. 33-5223 (January 11, 1972)

(37 Fed. Reg. 591]. When the rule is complied with, a

safe harbor from liability exists under the registration

provisions of the Act for resales of restricted and control

securities. Release No. 33-7390 (February 28, 1997) [62

Fed. Reg. 9242-43]. The rule permits the public sale in

ordinary trading transactions of limited amounts of

securities owned by persons controlling, controlled by, or

under common control with the issuer (i.e., “affiliates”).°

Steinberg & Kempler, The Application and Effectiveness of

SEC Rule 144, 49 Ohio State L. Rev. 473, 474 (1988)

(citing Rule 144, 17 C.F.R. § 230.144 (1995)).

The merits of the claims under the 1933 Act and Rule

144 are substantial. Discovery preceding the motion for

partial summary judgment bears out that the certificates

issued under the agreement cannot be traced to a prior

owner, and that their shares originated from SIMS, as

opposed to shares owned or controlled by the respondents.”

* An affiliate of an issuer is a person that directly or indirectly

controls, or is controlled by, or is under common control with, such

issuer. 17 C.F.R. § 230.144(aX(1) (1995). At the time of the agreement,

the respondents’ collective holdings in SIMS constituted 27% (approxi-

mately 1,836,346 or 9% each) of the outstanding stock of the company.

(R. 989, 912-14). Respondents were clearly affiliates of SIMS and had

control positions in the company when the shares were transferred

under the agreement. (CP 996-97).

* Rule 144(d)(1) provides that restricted securities may be sold

under the rule only if they have been beneficially owned for at least two

years prior to the sale, and if the acquiror takes the securities by

purchase, the two year period does not begin to run until the full

purchase price or other consideration is paid or given by the person

acquiring the securities from the issuer or from an affiliate of the

issuer. 17 C.F.R. § 230.144(d\(1) (1995).

In their depositions, the respondents in essence stated that none of

the stock that was issued under the agreement came from them, that

they didn’t know who the stock came from (R. 952, 957-58), and that

they weren’t sure what shares were issued. (R. 942-46). In document

requests with the depositions, respondents were asked to produce all

documents showing that the shares were issued in accordance with

Rule 144. (R. 960-69). The response was that Rule 144 was not impli-

cated in the transactions under the agreement, and that no documents

(Continued on following page)

Even after lengthy discovery, the respondents cannot show

where the shares came from or when the shares in SIMS

were acquired they maintain were transferred under the

agreement. The substantiality of the evidence standard

described in Logan, 455 U.S., at 431, is comparable to a

summary judgment standard where the burden on the

moving party may be discharged by showing the absence

of a genuine issue of material fact. Celotex Corp. v. Catrett,

477 U.S. 317, 325 (1986); Washington Civil Rule 56(c);

Honey v. Davis, 131 Wn.2d 212, 217, 930 P.2d 908 (1997).

The Court’s holdings in Martinez v. California, 444 U.S.

277 (1980), and later in Logan, reflect that the burden of

proof as an element in a summary judgment setting is an

aspect of the property interest. See Martinez, 444 U.S., at

282 n.5; Logan, 455 U.S., at 433.

As the case presently stands, the pared dismissal of

the 1933 Act as a theory of relief bars the assertion of

these claims. That there can be no doubt about this mes-

merizing conclusion is decisively reinforced by the denial

of a motion for reconsideration on this very issue, in which

a clarification was sought that the claims under the 1933

Act and Rule 144 remain viable in this case. (1/7/02

Motion for Reconsideration). The decision on this issue is

in conflict with Bell v. Burson, supra, because it has

eliminated consideration of liability factors from its

decision contrary to due process. See 402 U.S., at 541.

There is no paramount difference between the termination

exist as to these requests. (R. 970-78). In discovery requests sent and

answered months later (February and June 1999), the answers state

that the shares were owned by the respondents prior to being trans-

ferred under the agreement, that the shares were acquired by them

when the company was founded, and on documentation of prior

ownership, no documents were identified or produced. (R. 990-95, 998-

01).

of the cause of action here, and the causes of action in the

Richards, Logan and Bell cases. The decision dismissing

the basis for relief in the present case involves some of

these same questions, but in a different context. The

similarity is that in those cases, a wrongful deprivation of

property occurred through an application of the law by the

state courts which deprived a party of a claim or chose in

action without the safeguards of due process. When the

absent procedures would have provided protection against

arbitrary and inaccurate adjudication, this Court has not

hesitated to find the proceedings violative of due process.

Honda Motor Co. v. Oberg, 512 U.S. 415, 430 (1994). What

the Fourteenth Amendment requires, as the Court has

held in an important line of cases, is an opportunity

granted at a meaningful time and in a meaningful man-

ner, Armstrong v. Manzo, 380 U.S. 545, 552 (1965), for a

hearing appropriate to the nature of the case. Mullane,

339 U.S., at 313; Boddie v. Connecticut, 401 U.S., at 378.

This is the essential and constitutionally protected oppor-

tunity that has been denied by the dismissal of this

important claim in this case.

CONCLUSION

The petition for a writ of certiorari should be granted.

Respectfully submitted,

JOHN M. KEEFE

1120 Fremont Avenue

South Pasadena, CA 91030

(626) 441-3263

Counsel For Petitioner

A majority of the panel has

determined that this opinion

will not be printed in the

Washington Appellate reports

but will be filed for public record

pursuant to RCW 2.06.040. IT

IS SO ORDERED

/s/ Susan R. Agid

IN THE COURT OF APPEALS

OF THE STATE OF WASHINGTON

THOMAS A. CACCIOLA and _) NO. 45616-4-1

MARLENE CACCIOLA.

husband and wife: PETER ) DIVISION ONE

VETRANO and LENA

VETRANO, husband and wife,

Appellants,

v. ) Unpublished Opinion

SIMS COMMUNICATIONS, FILED: DEC 17 2001

INC., a Delaware corporation;

MELVIN LEINER and JANE

DOE LEINER, individually and

as a marital community;

DARREN N. MARKS and

JANE DOE MARKS, individu-

ally and as a marital community;

JAMES J. CAPRIO and JANE

DOE CAPRIO, individually and ?

as a marital community, )

)

Respondents. )

Nee eee ee ee ae

COLEMAN, J. — Appellants Thomas Cacciola, Peter

Vetrano, and their spouses come before this court on

appeal from dismissal of their claims against respondents

SIMS Communications, Inc., and several named individu-

als. The appellants argue that the trial court: (1) abused

its discretion by denying their discovery request for

original deposition recordings; (2) erred by granting

respondents’ motion for summary judgment; and (3) erred

by holding the appellants’ attorney jointly liable for

attorney fees and costs awarded to respondents. For the

reasons set forth below, we affirm the trial court’s dis-

missal of all but one of the appellants’ claims. The portion

of the trial court’s order dismissing the appellants’ state

Securities Act claim is reversed and remanded for further

proceedings consistent with this opinion. In addition, the

trial court’s order on the respondents’ motion for fees and

costs is reversed with directions to vacate or for entry of

findings sufficient to support an award against the appel-

lants’ attorney.

FACTS

This case arises out of the alleged wrongful conduct of

respondents SIMS Communications, Melvin Leiner, James

Caprio, and Darren Marks with respect to a settlement

agreement they entered into with appellants Thomas

Cacciola and Peter Vetrano. Pursuant to the agreement,

Leiner, Caprio, and Marks transferred 55,554 shares of

their personally held restricted SIMS stock to the appel-

lants (27,777 each) and paid them $17,500 in cash. At the

time of the settlement agreement, Leiner, Caprio,. and

Marks were corporate officers and directors of SIMS. At

that time, SIMS securities were traded on the NASDAQ

(National Association of Securities Dealers Automated

Quotation System). The agreement provided that it was to

be enforced under Washington law and in the event of

litigation, adjudicated in the state or federal courts in

King County.

3a.

Approximately six months after the parties entered

the settlement agreement, SIMS effected a 10 for 1 reverse

split of its common stock. Approximately two years later,

SIMS effected another reverse split, this time at a 4 for 1

ratio. As a result of these reverse splits, the appellants’

holdings were reduced from 27,777 to 694. Over the course

of these two and one-half years, the value of SIMS stock

decreased significantly.

In September 1997, appellants filed suit against

SIMS, Leiner, Caprio, and Marks alleging violations of the

Securities Act of Washington, fraud, negligent misrepre-

sentation, breach of fiduciary duty, violations of the

Securities Act of 1933, violations of 18 U.S.C. sec. 1962

(Racketeer Influence and Corrupt Organizations Act

(RICO)) and violations of Washington’s Consumer Protec-

tion Act. After the appellants’ claims were dismissed on

respondents’ summary judgment motion, appellants

initiated this appeal.

DISCUSSION

1. Jurisdiction

One of the bases for the trial court’s dismissal of the

appellants’ claims was its conclusion that it lacked per-

sonal jurisdiction over SIMS. Where the underlying facts

are undisputed, the trial court’s assertion of personal

jurisdiction is a question of law reviewable de novo. Lewis

v. Bours, 119 Wn.2d 667, 669, 835 P.2d 221 (1992). The

party asserting jurisdiction has the burden of proof. CTVC

of Hawaii, Co. v. Shinawatra, 82 Wn.App. 699, 708, 919

P.2d 1243 (1996).

Washington state courts may exercise either general or

specific personal jurisdiction over a nonresident defendant.

RCW 4.28.080(10)' MBM Fisheries, Inc. v. Bollinger Mach.

Shop & Shipyard, Inc., 60 Wn.App. 414, 418, 804 P.2d 627

(1991); “General jurisdiction over a nonresident defendant

is proper when the defendant's actions in the state are so

substantial and continuous that justice allows the exercise

of jurisdiction even for claims not arising from the defen-

dant’s contacts within the state.” Raymond v. Robinson,

104 Wn.App. 627, 633, 15 P.3d 697 (2001). Because the

exercise of general jurisdiction turns upon the extent of

the defendant's contacts with the forum state, jurisdiction

must be determined on a case-by-case basis.

In Raymond, the defendant company had no offices or

agents in Washington, but it advertised its products to

Washington consumers through mailings and magazines,

negotiated sales with Washington consumers over the

phone and through the mail, authorized warranty repairs

on its products in Washington, and sent technicians to

service its products in Washington. Raymond, 104

Wn.App. at 633-34. The court concluded that the defen-

dant’s contacts were not substantial enough to justify the

exercise of general jurisdiction.

* RCW 4.28.080 sets forth the requirements for service of sum-

monses in Washington and has been interpreted as the basis for

general jurisdiction:

The summons shall be served by delivering a copy thereof, as

follows:

(10) If the suit be against a foreign corporation or nonresident joint

stock company, partnership or association doing business within this

state, to any agent cashier or secretary thereof.

Similarly, in Banton v. Opryland, U.S.A., Inc., 53

Wn.App. 409, 767 P.2d 584 (1989), overruled on other

grounds, Shute v. Carnival Cruise Lines, 113 Wash.2d 763,

783 P.2d 78 (1989), this court held that the defendant

company’s contacts with Washington were not sufficient to

subject it to the general jurisdiction of the trial court. In

Banton, the court noted that cases affirming the exercise

of general jurisdiction “generally require extensive in-

volvement by the corporation within Washington.” Banton,

53 Wn.App. 416. There, a Washington resident was in-

jured during a visit to defendant Opry’s facilities in Nash-

ville, Tennessee and filed a claim against Opry in

Washington. Opry’s contacts with Washington included

promotional presentations, radio broadcasts, and commis-

sions paid to Washington travel agents who booked trips to

its Nashville facilities. The court concluded that these

contacts did not suggest continuous involvement by Opry

in Washington and were not enough to exercise general

jurisdiction. Banton, 53 Wn.App. at 418.

By contrast, the court in Hartley v. Am. Contract

Bridge League, 61 Wn.App. 600, 812 P.2d 109 (1991), held

that the defendant bridge league had sufficient contacts

with Washington to subject it to the general jurisdiction of -

the state courts. The court based its decision upon the

“continuous and substantial” activities of the league,

including organizing tournaments in Washington, selling

and transporting bridge supplies in Washington, charging

and collecting tournament fees from Washington resi-

dents, and determining which Washington residents could

participate in the bridge tournaments. Hartley, 61

Wn.App. at 606.

In this case, it is undisputed that SIMS rented cellu-

lar telephones via automated dispensing machines at

several Alamo car rental outlets in Washington from

January 1995 to May 1996. This 17-month rental opera-

tion, however, apparently defines the extent of SIMS’s

contact with Washington. The appellants have presented

no evidence that SIMS had offices, employees, or agents in

this state. The total amount of revenue gleaned from this

venture was less than $12,000. Although these facts place

this case somewhere between the factual scenarios in the

cases discussed above, we conclude that SIMS’s contacts

with this state are not sufficient to support the exercise of

general jurisdiction.” The trial ‘court’s dismissal of SIMS

for lack of personal jurisdiction is affirmed.

2. Appellants’ Discovery Request

A trial court’s discovery ruling “will not be disturbed

on review except on a clear showing of abuse of discretion,

that is, discretion manifestly unreasonable, or exercised on

untenable grounds, or for untenable reasons.” Doe v. Puget

Sound Blood Ctr., 117 Wn.2d 772, 778, 819 P.2d 370 (1991)

(quoting State ex rel. Carroll v. Junker, 79 Wn.2d 12, 26,

482 P.2d 775 (1971)). CR 26(b) dictates the scope and

limits of discovery:

* The appellants also argue that SIMS is subject to specific

jurisdiction in Washington courts under the settlement agreement’s

choice of forum clause. Because SIMS was not a party to the agreement,

however, the appellants’ argument fails. Specific jurisdiction over the

other individual respondents is proper. See Kysar v. Lambert, 76

Wn.App. 470, 484-85, 887 P.2d 431 (1995) (An agreement that shows

consent to personal jurisdiction is to be respected unless enforcement

would be unreasonable and unjust.).

(1) In General. Parties may obtain discovery

regarding any matter, not privileged which is

relevant to the subject matter involved in the

pending action. ... It is not ground for objection

that the information sought will be inadmissible

at the trial if the information sought appears

reasonably calculated to lead to the discovery of

admissible evidence.

The frequency or extent of use of the discov-

ery methods ... shall be limited by the court if it

determines that: (A) the discovery sought is un-

reasonably cumulative or duplicative, or is ob-

tainable from some other source that is more

convenient, less burdensome, or less expensive;

(B) the party seeking discovery has had ample

opportunity by discovery in the action to obtain

the infermation sought; or (C) the discovery is

unduly burdensome or expensive, taking into ac-

count the needs of the case, the amount in con-

troversy, limitations on the parties’ resources,

and the importance of the issues at stake in the

litigation[.]

The appellants moved the trial court for an order to

obtain the original recordings from the depositions of

Thomas Cacciola and Peter Vetrano. Appellants argued

that they needed access to the original recordings “[fJor

purposes of authenticity and any minor differences there

may be between the original recordings and the tran-

scribed versions[.]” Stating that the appellants had failed

to show good cause for production of the original re-

cordings, the trial court denied their motion.

The trial court did not abuse its discretion by denying

the appellants’ request for the original deposition re-

cordings. Because the appellants already had access to the

deposition transcripts, their request for the recordings was

duplicative. Furthermore, in light of the appellants’

admitted purpose in seeking the recordings — i.e., to look

for minor differences between the recordings and the

transcripts — their request was unduly burdensome and

unlikely to lead to information “relevant to the subject

matter in the pending action[.]” CR 26(b)(1). We uphold

the trial court’s denial of the appellants’ request for access

to the deposition recordings.

3. Respondents’ Motion for Summary Judgment

This court reviews orders of summary judgment de

novo and engages in the same inquiry as the trial court,

“treating all facts and reasonable inferences from the facts

in a light most favorable to the nonmoving party.” Enter.

Leasing, Inc. v. City of Tacoma, 139 Wn.2d 546, 551, 988

P.2d 961 (1999). Summary judgment should be granted

when there exist no genuine issues of material fact and

the moving party is entitled to judgment as a matter of

law. Kuhlman v. Thomas, 78 Wn.App. 115, 119, 897 P.

365 (1995).

The appellants assign error to the trial court's dis-

missal of their claims against SIMS and the named indi-

vidual defendants. A substantial impediment to their

success on appeal, however, is pesed by their complete

failure to present argument on all but one of their claims.

See Litho Color, Inc. v. Pac. Employers Ins. Co., 98

Wn.App. 286, 297, 991 P.2d 638 (1999) (“An argument will

not be considered if it is inadequately briefed.”). Appel-

lants have complied with RAP 10.3(aX3) by assigning

error generally to the trial court's t of summary

judgment for respondents. Apparently, appellants intend

y. 9a

this sweeping assignment of error to be read to imply

particularized allegations of error as to each of their

claims. The appellants have failed, however, to proffer any

argument on all but one of their claims. Accordingly, we

the dismissal of appellants’ claims for fraud, negli-

misrepresentation, breach of fiduciary duty, violation

of Securities Act of 1933, violation of 18 U.S.C. sec. 1962

RICO), and violation of the Washington Consumer Protec-

tion Act.

A. Violation of Title 21 RCW: Securities Act of

Washington

Appellants claim that respondents Leiner, Marks, and

Caprio violated the Securities Act of Washington in the -

transfer of SIMS securities under the settlement agree-

ment. Specifically, appellants argue that respondents

violated RCW 21.20.010:

Unlawful offers, sales, purchases. It is

unlawful for any person, in connection with the

offer, sale, or purchase of any security, directly or

indirectly:

(1) To employ any device, scheme, or artifice

to defraud;

(2) To make any untrue statement of a mate-

rial fact or to omit to state a material fact neces-

sary in order to make the statemenis made, in

the light of the circumstances under which they

are made, not misleading; or

10a

(3) To engage in any act practice, or course of

business which operates or would operate as a

fraud or deceit upon any person.’

Appellants assert that the respondents failed to

disclose material facts regarding the true financial status

of SIMS at the time of the settlement agreement. While

neither Cacciola nor Vetrano have any personal knowledge

of the facts surrounding the negotiation of the settlement

agreement, their attorney, [appellant’s counsel], acted as

their agent‘ and filed a declaration on his clients’ behalf.

In his declaration, [appellant’s counsel] stated that he was

never informed “about SIMS’ losses or that it was not

profitable prior to, contemporaneously with, or subsequent

to the settlement agreement” and that his discussions with

respondents’ attorney “never addressed or touched on the

subject of SIMS’ financial condition and its losses, or its

recurring history of losses at that time.” [appellant’s

counsel] also stated that after the settlement agreement

was signed, he asked respondents for financial documents

about the SIMS company but was told that they were

being prepared but were not yet available.

* The terms ‘sale’ and ‘sell’ are defined to include ‘every contract of

sale of, contract to sell, or disposition of, a security interest in a security

for value. ...’ RCW 21.20.005(10).

* "Representations made to a third person with the intent that they

be shown or communicated to the complainant may properly be relied

on by the latter[.]” 37 C.J.S. Fraud sec. 46 (1997) (footnote omitted). See

also, Joseph v. Norman LaPorte Realty, Inc., 508 So. 2d 496, 497 (Fla.

App. 3d Dist. 1987) (The fact that alleged fraudulent misprepresenta-

tions were made to plaintiffs’ agent cannot negate the element of

reliance when the agent relied on the defendant’s mispresentations and

the plaintiffs in turn relied on their agent’s report.).

-lla

Respondents’ main argument in response to appel-

lants’ Securities Act claim is that Cacciola and Vetrano

lack personal knowledge regarding the settlement agree-

ment. Respondents dismiss the argument regarding

[appellant's counsel] involvement as appellants’ agent by

suggesting that he was informed of SIMS3 true financial

status but withheld that information from his clients. As

support for their position, respondents point to a letter

from respondent Leiner to his attorney requesting changes

to the proposed settlement agreement. Most importantly,

in that letter Leiner requests that the agreement be

changed to reflect the fact that SIMS was not profitable.

In his declaration filed in support of respondents’ motion

for summary judgment, counsel for respondents stated

that he specifically discussed this change with [appellant’s

counsel] and that [appellant’s counsel] complied with

Leiner’s request by removing language in the agreement

_ referencing the company’s profitability. In response,

[appellant’s counsel] argues that he was never made aware

of the proposed change and points out that the letter from

Leiner was dated the day after appellants signed the

settlement agreement.

These contrasting accounts of the events surrounding

the settlement agreement expose the existence of a dis-

puted issue of material fact: Did respondents withhold

information from the appellants pertaining to the financial

status of SIMS at the time of the settlement agreement?

This issue constitutes the backbone of appellants’ Securi-

ties Act claim —i.e., an omission of a material fact.* In light

* A fact is considered “material” if it consists of information to

which a reasonable person would attach importance in determining his

choice of action in a given transaction. Clausing v. DeHart, 83 Wn.2d

(Continued on following page)

12a

of this disputed issue of fact, the trial court’s dismissal of

appellants’ Securities Act claim is reversed.

B. Securities & Exchange Commission (SEC)

Rule 144

The appellants moved the trial court for partial

summary judgment under SEC Rule 144. Due to changes

in the case schedule, the motion was stricken and set to be

renoted at a later date. Before the appellants’ summary

judgment motion was renoted, however, the trial court

granted summary judgment for the respondents and

dismissed all of the appellants’ claims. In its order denying

the appellants’ motion for reconsideration, the trial court

stated that their motion for partial summary judgment

was made moot by the intervening order dismissing their

claims.

On appeal, the appellants have attempted to resurrect

their argument regarding respondents’ alleged violation of

SEC Rule 144 by assigning error to the trial court’s “fail-

ing to grant plaintiff’s motion for partial summary judg-

ment ... and [its] ruling that the motion was mooted by

the grant of summary judgment in the defendants’ favor.”

Brief of Appellants, at 1. But as the respondents are quick

to point out, the appellants’ argument regarding SEC Rule

144 is not properly before this court.

70, 515 P.2d 982 (1973). Appellants have stated that they would not

have accepted SIMS securities in the settlement agreement if they had

known that SIMS was not profitable. See Deposition of Cacciola, at

Clerk’s Papers 1447-48.

13a

The appellants’ argument regarding respondents’

alleged violation of SEC Rule 144 was not before the trial

court in its consideration of respondents’ motion for

summary judgment. Rather, it was first raised in the

appellants’ motion for partial summary judgment — which

was not noted on the trial court’s calendar until after the

court had granted -ummary judgment for the respondents.

Moreover, the appellants’ motion for partial summary

judgment was explicitly rejected by the trial court as moot

because all of their claims had already been dismissed.

Thus, because the appellants’ SEC Rule 144 argument was

never actually before the trial court, we decline to address

it on appeal. See RAP 9.12 (“On review of an order grant-

ing or denying a motion for summary judgment the appel-

late court will consider only evidence and issues called to

the attention of the trial court. ... ”).

5. Attorney Fees

In general, attorney fees are not recoverable by the

prevailing party absent a contract, statute, or recognized

ground of equity. Hillis v. Dept. of Ecology, 131 Wn.2d 373,

401, 932 P.2d 139 (1997). In addition, CR 11° and a court’s

inherent equitable powers authorize the award of attorney

fees in cases of bad faith. In Re Recall of Pearsall-Stipek,

136 Wn.2d 255, 267, 961 P2d 343 (1998). An award of

attorney fees is left to the trial court’s discretion and will

not be disturbed absent a clear showing of abuse. Fluke

* CR 11 authorizes the imposition of sanctions against a party or

attorney for filing pleadings or motions that are not grounded in fact or

law. Biggs v. Vail, 124 Wn.2d 193, 201, 876 P.2d 448 (1994).

14a

Capital & Mgmt. Servs. Co. v. Richmond, 106 Wn.2d 614,

625, 724 P.2d 356 (1986).

In this case, when the trial court entered its order on

respondents’ motion for summary judgment, it reserved its

ruling on attorney fees. The court also crossed out lan-

guage in the order relating to imposition of CR 11 sanc-

tions against the appellants’ attorney and, instead, noted

that “[clounsel’s arguments did not prevail but were not

frivolous; however, counsel is warnec vnat if this case were

to go further, he would be an essential witness, might have

a conflict of interest, and should consider advising his

clients to obtain separate counsel.” Approximately two

months later, the trial court ordered that “defendants are

awarded a judgment against the plaintiffs and/or their

attorney of record, John Keefe, in the sum of $47,865.90.”

Respondents argue that the trial court properly

imposed attorney fees against appellants’ counsel for bad

faith. In light of the trial court’s explicit rejection of CR 11

as a basis for sanctions against appellants’ counsel, how-

ever, the award is seemingly baseless. The trial court's

order on respondents’ motion for fees and costs is re-

manded with instructions to vacate or for entry of findings

sufficient to support an award against appellants’ attor-

ney.

Dismissal of appellants’ fraud, negligent misrep-

resentation, breach of fiduciary duty, Securities Act of

1933, 18 U.S.C. sec. 1962 (RICO), and Washington Con-

sumer Protection Act claims is affirmed. The portion of the

trial court’s order dismissing appellants’ state Securities

Act claim is reversed and remanded for further proceed-

ings consistent with this opinion. The trial court’s order on

the respondents’ motion for fees and costs is reversed with

15a

directions to vacate or for entry of findings sufficient to

support an award against appellants’ attorney.

/s/ Coleman, J

WE CONCUR:

/s/ Kennedy J /s/ Becker, A. C.J.

16a

THE SUPREME COURT

STATE OF WASHINGTON

[SEAL]

TEMPLE OF JUSTICE

P.O. BOX 40929

OLYMPIA, WA

98504-0929

(360) 357-2077

Fax (360) 357-2102

e-mail: su-

preme@courts,wa.gov

www.courts.wa.gov

September 20, 2002

C.J. MERRITT

SUPREME COURT CLERK

RONALD R. CARPENTER

DEPUTY CLERK/CHIEF

STAFF ATTORNEY

Mr. John Keefe Mr. David Kontos

Attorney at Law Attorney at Law

1120 Fremont Ave. 25422 74th Ave. South

South Pasadena, CA 91030 Kent, WA 98032

Hon. Richard Johnson, Court Admin/Clerk

Division I, Court of Appeals

One Union Square

600 University St

Seattle, WA 98101

Re: Supreme Court No. 72288-9 - Thomas & Marlene

Cacciola, et al. v. Sims Com., Inc., et al. Court of Ap-

peals No. 45616-4-1

Clerk & Counsel:

This will acknowledge receipt on September 20, 2062,

of the Petitioners’ “MOTION FOR RECONSIDERATION.”

17a

The pleading seeks reconsideration of this Court’s Sep-

tember 4, 2002 order denying the petition for review.

A denial of a petition for review is not subject to

reconsideration. The RULES OF APPELLATE PROCE-

DURE (RAP) provide that a party may file a motion for

reconsideration only of “a decision terminating review”,

see RAP 12.4(a). One element of “a decision terminating

review” is that it must be an opinion, order or judgment of

the appellate court filed after review is accepted, see RAP

12.3(a). A denial of a petition for review is an act declining

to accept review. As such, the Court’s decision on the

petition for review is not subject to reconsideration.

Accordingly, although the pleading has been placed in

the closed file, this court can take no further action on it.

Sincerely,

/s/ Ronald R. Carpenter

RONALD R. CARPENTER

Supreme Court Deputy Clerk

RRC:jaa

It is noted that the Department of the Court which denied the

petition for review was comprised of five of the nine Justices of this

Court, a majority of the Court.

18a’

THE SUPREME COURT OF WASHINGTON

THOMAS A. CACCIOLA and

MARLENE CACCIOLA,

husband and wife; PETER NO. 72288-9

VETRANO and LENA

VETRANO, husband and ORDER

wife. C/A NO. 45616-4-I

Petitioners, (Filed Sep. 4, 2002)

SIMS COMMUNICATIONS,

INC., a Delaware corporation;

MELVIN LEINER and JANE

DOE LEINER, individually and

as a marital community;

DARREN M. MARKS and JANE

DOE MARKS, individually and

as a marital community; and

JAMES J. CAPRIO and JANE

DOE CAPRIO, individually and

as a marital community,

ee ee ee ee ee ee ee ee a ee Le ae ee a a a

Respondents.

Department I of the Court (composed of Chief Justice

Alexander and Justices Smith, Madsen, Ireland and

Chambers) considered this matter at its September 4,

2002, Motion Calendar, and unanimously agreed that the

following order be entered.

IT IS ORDERED:

That the Petition for Review is denied.

19a

DATED at Olympia, Washington this 4th day of

September, 2002.

/s/ Gerry L. Alexander

CHIEF JUSTICE

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.