District Court Concludes That Substantive Geographical Limitations on Securities Laws Do Not Affect Personal Jurisdiction Analysis

The World in U.S. Courts: Winter 2015 - Securities Law

Securities and Exchange Commission v. Spencer Pharmaceutical, Inc., U.S. District Court for the District of Massachusetts, November 14, 2014

The defendant Jean-Francois Amyot, a Canadian citizen, was alleged by the SEC to have engaged in securities fraud in connection with the establishment of Spencer Pharmaceutical and the promotion and sale of its stock. Amyot argued that the Court lacked personal jurisdiction over him. The SEC’s claim was based on an alleged violation of a federal statute providing for nationwide service of process and for venue in any district any act or transaction constituting the violation occurred. In such cases, the Court observed, personal jurisdiction over the defendant required that he have minimum contacts with the U.S. as a whole, not with the district where the trial would take place. Against this background, the Court had little difficulty in concluding that the conduct Amyot was alleged to have engaged in—including the establishment of U.S. companies, the maintenance of U.S. offices, and the allegedly fraudulent U.S. press releases—satisfied the U.S. constitutional requirement that the claim at issue be “related” to the defendant’s U.S.-based conduct, and that the conduct reveal that the defendant had “purposefully and voluntarily” directed his activities toward the U.S. so that he should expect that he might be held accountable for them in a U.S. Court.

Amyot’s principal argument was that the U.S. Supreme Court’s 2010 decision in Morrison v. National Australian Bank Ltd. established a higher threshold for personal jurisdiction. In that case, the Supreme Court identified limitations on the applicability of the U.S. securities laws to conduct occurring wholly or partially outside the U.S. The District Court disagreed, noting that Morrison related to the substantive elements of a violation, not whether a Court could exercise personal jurisdiction over a particular defendant. The Court thus denied Amyot’s motion to dismiss the complaint on grounds of personal jurisdiction, and reserved for trial further issues relating to the elements of a violation that the SEC would be required to prove.

[Editor’s Note: The Spencer Pharmaceutical case is also addressed in the Personal Jurisdiction section of this report.]

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