UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF FLORIDA
MIAMI DIVISION
CASE NO.: 13-20190-CIV-GRAHAM/GOODMAN
AMIR A. KAMMONA,
Plaintiff,
v.
ONTECO CORPORATION, DROR
SVORI, HAIM MAYAN, JORGE
SCHCOLNIK AND ACTION STOCK
TRANSFER CORPORATION,
Defendants.
Background
The Plaintiff,Amir A Kammona,filed the lawsuit described above on the Defendants on 1/17/2013 for the fraud and/or tort actions that were the cause and/or the proximate cause for the injury to the Plaintiff's ownership, value and rights in the public corporation(Defendant Onteco Corporation).
Memorandum of Law
Summery of Defendant's arguments
Defendant Action Stock Transfer Corporation ("Action") based its argument
for the dismissal of the Plaintiffs complaint against the Defendant was based
on the following reasons:
1-That the complaint should be dismissed because the Plaintiff failed to state a claim upon which relief can be granted (FRCP (Federal Rules Of Civil Procedure) 12(b)6).
2-That the complaint should be dismissed because the Plaintiff failed to satisfy the particularity requirement for fraud claims (FRCP 9(b))
3-That the complaint should be dismissed because the court lack personal jurisdiction (FRCP 12(b)2)
Plaintiff's Answer:
The Defendant's motion should be denied. Here are the answers for the arguments raised by the Defendant
1-That the Plaintiff failed to state a claim upon which relief can be granted
(FRCP 12(b)6).
Defendant Action claim that the Plaintiff's complaint failed to state a claim upon which relief can be granted is false. The Plaintiff showed in point 55 and 56 in the complaint how according to Defendant Onteco Corporation the number of shares in the market was significantly increased with shares that were restricted. The Plaintiff also referred to a big increase in the trading volume and big decrease in the stock price in points like 45 and 49.Allowing such enormous number of restricted shares to enter the market and be freely tradeable there can clearly put a huge pressure on the price.A transfer agent is responsible for arranging for the restricted shares to inter the market. Based on what was reported by Defendant Onteco Corporation, Defendant Action,being the transfer agent of Defendant Onteco Corporation, violated the law by allowing restricted shares to enter the market before the elapse of the waiting period required by Securities and Exchange Commission ("SEC") under 17 C.F.R § 230.144 ("SEC Rule 144") and was a proximate cause for the price of the stock going down and in turn all the injury resulted from that to the Plaintiff.
The Plaintiff's complaint also showed in point 43,44 and 47 how the Plaintiff alone was able to buy in the open market shares that significantly exceed what Defendant Action should have allowed to be sold in the market according to SEC Rule 144.
2-That the Plaintiff failed to satisfy the particularity requirement for fraud
claims (FRCP 9(b))
Defendant Action claim that the Plaintiff's complaint should be dismissed because it did not satisfy the particularity pleading requirement of rule FRCP 9(b) should be denied for two reasons each one of them is sufficient by itself. These reasons are:
A-It makes false claim
B-It makes a wrong demand for its claim.
A-The Defendant making false claim
While the Plaintiff might have not mentioned Defendant Action more than twice,as the Defendant mentioned in its motion,the complaint alleged the necessary requirement to satisfy FRCP Rule 9 (b).I quote from the Defendant's motion:
["[i]n order to state a claim under §10(b) and Rule 10b-5, a plaintiff must show the following: „(1) a misstatement or omission, (2) of material fact, (3) made with scienter, (4) on which plaintiff relied, (5) that proximately caused his injury." Ziemba v. Cascade Intern., Inc., 256 F.3d 1194, 1202 (11th Cir. 2001) (quoting Bryant v. Avado Brands, Inc., 187 F.3d 1271 (11th Cir. 1999). ]
Below we take the five factors mentioned above in the same order they were mentioned in order to show that all of those five factors are obvious and implied from the allegations the Plaintiff made in his complaint.
(1) a misstatement or omission
As mentioned in the complaint Defendant Action,being the transfer agent of Defendant Onteco Corporation,violated the law by allowing restricted shares to enter and be sold in the market before the elapse of the waiting period requirement of SEC Rule 144.Since the Defendant was required to be restricted by the law in its work as a transfer agent, the violation of SEC Rule 144by Defendant Action meant that Defendant Action's acceptance to work as the transfer agent for Defendant Onteco Corporation became a misstatement or omission and/or containing misstatement or omission regarding this matter.
(2) of material fact
It is clear that information about Defendant's Action violation of the law by allowing that significant amount of restricted shares to enter the market is material fact to investors.
(3) made with scienter
The scienter intention is very probable since there is little probability that a transfer agent corporation would miss that it was allowing all those shares to enter the market before the elapse of the waiting period requirement of SEC Rule 144.
(4) on which plaintiff relied
The Plaintiff, like any shareholder or potential buyer for the stock else, relies on that a transfer agent should be restricted by SEC Rule 144.
(5) that proximately caused his injury
The Plaintiff referred to a big increase in the trading volume and big decrease in the stock price in points like 45 and 49.The effect of very big number of shares entering the market without waiting the required period under SEC Rule 144 is a reasonable proximate cause for the price of the stock going down and causing injury to the Plaintiff. As an indication for the availability of those shares in the market The Plaintiff's complaint also showed in point 43,44 and 47 how the Plaintiff alone was able to buy in the open market shares that significantly exceed what Defendant Action should have allowed to be sold in the market according to SEC Rule 144.
B-The Defendant making wrong demand for its claim.
Even if the Plaintiff's complaint failed in satisfying the fraud pleading particularity requirement of FRCP Rule 9(b) that shouldn't lead to a dismissal.That is because the claims in the plaintiff's complaint against Defendant Action describes clear tort action or wrong done that was the proximate cause to the Plaintiff's injury on which the complaint can stand without the need for the fraud allegation.
In addition, there is also diversity jurisdiction for the court here based on the fact that the Plaintiff reside in different state from all the defendants and the value of the requested relief or the cost of $220233.57 the Plaintiff incurred to obtain his shares (this cost was not mentioned in the Plaintiff's complaint).
3-That the court lack personal jurisdiction (FRCP 12(b)2)
1-Court has personal jurisdiction under 15 USC & 78aa and FRCP 4(K)(1)(C).
The court has personal jurisdiction because of the Defendant's violation for the securities Law codified at 15 U.S.C. § 78a as described in point 1 above.The violation of 15 U.S.C. § 78a brings nationwide personal jurisdiction authorized by congress under 15 U.S.C. § 78aa.
See Leasco Data Processing Equip. Corp. v. Maxwell, 468 F.2d 1326, 1339 (2d Cir. 1972) (provision of Securities Exchange Act, 15 U.S.C. § 78aa, relating to jurisdiction and venue is intended to extend personal jurisdiction to full reach permitted by Due Process Clause).
See also
Busch v. Buchman, Buchman, & O’Brien, Law Firm, 11 F.3d 1255, 1258 (5th Cir. 1994) (when federal court is attempting to exercise personal jurisdiction over defendant in action based on federal statute providing for nationwide service of process, relevant inquiry is whether defendant has had minimum contacts with United States, not with forum state).
In addition,four out of the five defendants named in the complaint reside in the state of Florida.The Plaintiff himself is resident in the state of Tennessee.
2-The court also has personal jurisdiction over the defendant Action based on the combination of :
A- constitutionally sufficient minimum contact
B- sufficient satisfaction for the Florida long-arm requirement.
A-Satisfying the constitutionally minimum contact requirement
Defendant Onteco Corporation is located in Florida. Defendant Action was the transfer agent of Defendant Onteco Corporation.By accepting being the transfer agent for a corporation located in Florida Defendant Action clearly availed itself to the privilege of conducting activities in the state of Florida ,thus invokingthe benefits and protections of Florida's Law.In addition,the claims in the complaint filed by the Plaintiff are all resulted from Defendant's Action work as the transfer agent for Defendant Onteco Corporation.
B-Satisfying Florida's long-arm requirement
Satisfying Florida's long-arm requirement was met from these two paths each one of them is sufficient on it own.
1-Satisfying Florida's long- arm requirement through Fla. Stat. § 48.193 (1)(a)
Defendant Onteco Corporation maintains its main office in Florida.Defendant Action was the transfer agent of Defendant Onteco Corporation.Being the agent of Defendant Onteco Corporation meant that to the Plaintiff,who is a shareholder of Onteco Corporation,Defendant Action was the face and extension to Defendant Onteco Corporation in matters related to the transfer agent tasks to which the plaintiff's claims regarding Defendant Action belong.In other words,Defendant Action should be treated as if it was a corporation in Florida in matters related to the claims in Plaintiff's complaint because it represented a corporation in Florida in matters from which the Plaintiff's claims arise.
2-Satisfying the Florida long arm requirement through Fla. Stat. § 48.193(1)(b)
Defendant Action committed a tortious act against Defendant Onteco Corporation by violating the law allowing significant number of restricted shares to be sold in the market before the elapse of SEC Rule 144 waiting period requirement.That action helped in taking and keeping the stock price of the public corporation low and caused injury to the corporation.Since Onteco corporation is a resident of the State of Florida and the claims in the Plaintiff's complaint regarding Defendant Action were based on those same actions from Defendant Action,the long-arm requirement of the State of Florida apply here according to Fla. Stat. § 48.193(1)(b).
WHEREFORE, Plaintiff,Amir A Kammona , respectfully requests that the court deny the Defendant's motion. ??
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