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Reynolds v. Henderson

United States District Court, D. Colorado

October 14, 2014



LEWIS T. BABCOCK, District Judge.

This matter is before me on Defendants Henderson & Lyman and Douglas E. Arend's (collectively, "H&L") Motion to Dismiss for Lack of Personal Jurisdiction, or in the Alternative, to Transfer Venue [Doc #13]. In its motion, H&L moves to dismiss this legal malpractice suit for lack of personal jurisdiction. Alternatively, H&L moves to transfer venue to the United States District Court for the Northern District of Illinois ("Northern District of Illinois") pursuant to 28 U.S.C. § 1404. I have considered the motion and all related pleadings and exhibits. Oral argument would not materially assist me in determining the motion. For the following reasons, I DENY the motion to dismiss, GRANT the motion to transfer pursuant to 28 U.S.C. § 1631 rather than 28 U.S.C. § 1404, and TRANSFER this case to the Northern District of Illinois.

I. Factual Background

Unless otherwise noted, the following facts are undisputed. Plaintiff Bryan Reynolds is a Colorado resident. B. Reynolds Aff. ¶ 1 [Doc #19-1]. Mr. Reynolds co-founded three Colorado limited liability companies that operated as broker-dealers: Paradigm Capital Markets LLC ("Paradigm"), Arjent Capital Markets LLC, and Chicago Trading Partners U.S. LLC. Id. ¶ 3. Mr. Reynolds was the managing member of these companies at all relevant times. Id. ¶ 4. Defendant Henderson & Lyman is a law firm organized as an Illinois general partnership with its principal place of business in Chicago, Illinois. D. Arend Aff. ¶ 1 [Doc #13, Ex. A]. Defendant Douglas Arend is a partner of the firm and an Illinois resident. Id. ¶ 2.

H&L began advising Paradigm in 2006 and the other two broker-dealers (collectively, "the LLCs") at some unspecified time thereafter. Id. ¶¶ 9-11. H&L did not solicit the LLCs' business. Rather, one of the LLCs' co-founders, Spencer Montgomery, approached Mr. Arend about providing legal advice related to Paradigm's broker-dealer operations in Chicago, which Paradigm operated in association with the Chicago Board Options Exchange and the National Futures Association there. D. Arend Aff. ¶ 12 [Doc #13, Ex. A]; J. Henderson Aff. ¶ 10 [Doc #13, Ex. B]. Specifically, Mr. Arend explains that "H&L was retained to assist in forming certain investment vehicles which I understood would be used for raising funds in a joint back office agreement that [Mr. Montgomery] already had in place with Goldman Sachs Execution and Clearing." D. Arend Aff. ¶ 9 [Doc #13, Ex. A]. H&L's representation continued through 2009 (according to H&L) or 2010 (according to Mr. Reynolds). B. Reynolds Aff. ¶ 6 [Doc #19-1]; Mot. at 1 [Doc #13].

In 2012, the U.S. Commodity Futures Trading Commission ("CFTC") sued Mr. Reynolds in federal court in New York, claiming that he had defrauded investors by issuing account statements for certain commodity pools that failed to reflect debits in the LLCs' capital accounts. Compl. ¶ 20 [Doc #1]. Mr. Reynolds settled that lawsuit in 2013. Id. ¶ 21. Mr. Reynolds (but not the LLCs) now brings this suit against H&L for negligence, breach of contract, and breach of fiduciary duty. Among other things, Mr. Reynolds alleges that H&L improperly advised him that it was unnecessary to disclose certain debits in the LLCs' capital accounts. Id. ¶ 23(c).

In its motion, H&L points out that it did not reach out to Colorado to solicit the business at issue here; rather, the LLCs approached H&L, as described above. Further, H&L was retained to advise the LLCs regarding their broker-dealer operations in Chicago, as is also described above. H&L performed all of its work for the LLCs in Illinois; nobody from the firm traveled to Colorado in connection with the representation. D. Arend Aff. ¶ 13 [Doc #13, Ex. A]; J. Henderson Aff. ¶ 12 [Doc #13, Ex. B]. The firm does not have an office, employees, or property in Colorado; it does not maintain accounts or pay taxes in Colorado; and it does not advertise or solicit business in Colorado. J. Henderson Aff. ¶¶ 4-7 [Doc #13, Ex. B]. Mr. Arend likewise owns no property in Colorado; does not maintain accounts or pay taxes in Colorado; is not licensed to practice law in Colorado; has never appeared in a Colorado court; and has never advertised or solicited business in Colorado. D. Arend Aff. ¶¶ 4-7 [Doc #13, Ex. A].

Mr. Reynolds does not dispute these facts. He says the LLCs were "based" in Colorado but does not deny that H&L performed its legal work in Illinois and in support of the LLCs' broker-dealer operations there. B. Reynolds Aff. ¶ 3 [Doc #19-1]. Mr. Reynolds does not identify any matters in Colorado-such as litigations or transactions-with respect to which H&L represented the LLCs. Rather, Mr. Reynolds focuses on the fact that he and certain other representatives of the LLCs were in Colorado when H&L communicated with them. Mr. Reynolds spoke on the phone with Mr. Arend "around 10 times, " "corresponded via email around 10 times, " and "was courtesy copied on numerous other emails" throughout the representation. Id. ¶ 7. Mr. Reynolds was in Colorado when all of these communications took place. Id. Mr. Reynolds also identifies "numerous" other email and phone conversations that Mr. Arend had with other people associated with the LLCs, including Mr. Montgomery, who were in Colorado during the conversations. Id. ¶¶ 8-9. Finally, Mr. Reynolds argues that H&L "collected substantial fees paid by the Colorado companies" and that "the effects of [H&L's] representation were all felt more in Colorado than anywhere else." Pl.'s Opp'n at 7, 10 [Doc #19].

The parties dispute whether Mr. Reynolds himself was H&L's client. Id. ¶¶ 8-11, 14; B. Reynolds Aff. ¶¶ 5-6 [Doc #19-1]. They also dispute whether, in addition to the LLCs, certain other Colorado companies that Mr. Reynolds co-founded were H&L's clients. Reply at 1-2 [Doc #22]. For purposes of resolving the instant motion, however, these disputes do not appear to matter.

II. Motion to Dismiss

A. Burden of Proof

A defendant may move to dismiss a complaint for lack of personal jurisdiction under Federal Rule of Civil Procedure 12(b)(2). When a defendant does so, the plaintiff has the burden of establishing that the court has personal jurisdiction over the defendant. Soma Med. Int'l v. Standard Chartered Bank, 196 F.3d 1292, 1295 (10th Cir. 1999). Where the court does not conduct an evidentiary hearing, as here, "the plaintiff need only make a prima facie showing of personal jurisdiction to defeat the motion." Id. (quoting OMI Holdings, Inc. v. Royal Ins. Co. of Canada, 149 F.3d 1086, 1090 (10th Cir. 1998)). The court must "resolve all factual disputes in favor of the plaintiff in determining whether plaintiff has made a prima facie showing." Benton v. Cameco Corp., 375 F.3d 1070, 1074-75 (10th Cir. 2004) (quoting Far W. Capital, Inc. v. Towne, 46 F.3d 1071, 1075 (10th Cir. 1995)). But only "well pled facts, '" as opposed to "conclusory allegations, must be accepted as true.'" Wenz v. Memery Crystal, 55 F.3d 1503, 1505 (10th Cir. 1995) (citing Ten Mile Indus. Park v. W. Plains Serv. Corp., 810 F.2d 1518, 1523 (10th Cir. 1987)).

B. Personal Jurisdiction in Diversity Cases

Federal courts sitting in diversity-which is the only basis for jurisdiction alleged here, see Compl. ¶ 5-may only exercise personal jurisdiction over a nonresident defendant where both state law and federal due process are satisfied. See, e.g., Doering v. Copper Mountain, Inc., 259 F.3d 1202, 1209 (10th Cir. 2001); Taylor v. Phelan, 912 F.2d 429, 431 (10th Cir. 1990). "Colorado's long arm statute is coextensive with constitutional limitations imposed by the due process clause. Therefore, if jurisdiction is consistent with the due process clause, Colorado's long arm statute authorizes jurisdiction over a nonresident defendant." Benton, 375 F.3d at 1075 (quoting Day v. Snowmass Stables, Inc., 810 F.Supp. 289, 291 (D. Colo 1993)); accord Keefe v. Kirschenbaum & Kirschenbaum, P.C., 40 P.3d 1267, 1270 (Colo. 2002) (citing Colo. Rev. Stat. §§ 13-1-124(1)(a)-(b) (2007)). Accordingly, the only question here is whether exercising personal jurisdiction over H&L comports ...

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