Kaliannan et al v. Liang

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IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NORTH DAKOTA
Panircelvan Kaliannan, et. al., 	)
)
Plaintiffs, 	) 	ORDER DENYING DEFENDANT
) 	EE HOONG LIANG’S MOTIONS
vs. 	) 	TO DISMISS COMPLAINT
)
EE Hoong Liang, 	)
)
Defendant. 	) 	Case No. 3:17-cv-090
Before the Court are several pro se motions to dismiss the Plaintiffs’ complaint filed by the
Defendant, EE Hoong Liang. See Docket Nos. 13, 18, and 21. For the reasons set forth below,
the motions are denied.
I. 	BACKGROUND
The Plaintiffs filed this action in the wake of proceedings filed against North Dakota
Developments, LLC (“NDD”), Robert Gavin, Daniel Hogan, and relief Defendants by the United
States Securities and Exchange Commission, alleging NDD, Gavin, and Hogan fraudulently raised
more than $62 million from investors through the sale of interests in North Dakota man camps.
See Case No. 4:15-cv-053 (D.N.D. May 5, 2015). 	In their complaint, the Plaintiffs allege EE
Hoong Liang actively assisted NDD in offering and selling, unregistered, nonexempt, and
fraudulent securities from May 2012 to April 2015. See Docket No. 8. Specifically, the Plaintiffs
allege claims against EE Hoong Liang, by separate counts, for violations of Section 12(a)(2) of
the Securities Act of 1933 (15 U.S.C. § 771(a)(2)); violations of N.D.C.C. § 10-04-17 by offering
and selling unregistered securities, selling securities as an unlicensed agent, and making untrue
statements and omissions; as well as negligence.
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After filing an answer, Liang filed a motion to dismiss pursuant to Rule 12(b) of the Federal
Rules of Civil Procedure on August 17, 2017. See Docket No. 13. Liang filed an amended motion
to dismiss on August 29, 2017, and a subsequent motion to dismiss on September 18, 2017. See
Docket Nos. 18 and 21. 	The Plaintiffs filed responses in opposition to Liang’s motions on
September 1, 2017, and October 10, 2017. See Docket Nos. 19 and 30.
II. 	LEGAL DISCUSSION
In the memorandum in support of the motions to dismiss (Docket No. 22), Liang asserts
the Court lacks jurisdiction over the matter, the venue of this action is improper, and the complaint
fails to state a claim upon which relief can be granted. 	The Plaintiffs disagree, contending this
Court has jurisdiction, the complaint satisfies the Rule 8 pleading requirement, and the venue is
proper.
A. 	RULE 12(b)(2)
In the memorandum in support of the motion to dismiss, Liang contends the Court lacks
personal jurisdiction over him and the claims against him should be dismissed pursuant to Rule
12(b)(2) of the Federal Rules of Civil Procedure. To defeat a motion to dismiss for lack of personal
jurisdiction, the Plaintiffs need only establish a prima facie showing of personal jurisdiction over
Liang. 	Epps v. Stewart Info. Servs. Corp., 327 F.3d 642, 647 (8th Cir. 2003). 	The Plaintiffs’
prima facie showing is analyzed “not by the pleadings alone, but by the affidavits and exhibits
presented with the motions and in opposition thereto.” Dever v. Hentzen Coatings, Inc., 380 F.3d
1070, 1072 (8th Cir. 2004). The party seeking to establish that a court has in personam jurisdiction
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carries the burden of proof, and the burden does not shift to the party challenging jurisdiction.
Epps, 327 F.3d at 647.
This Court may properly exercise personal jurisdiction over a party if a two-step inquiry is
satisfied. First, the party must be amenable to service of process under the appropriate long-arm
statute. 	See Int’l Shoe Co. v. Washington, 326 U.S. 310, 316 (1945). 	Second, the party
challenging personal jurisdiction must have engaged in activities which satisfy the minimum
contacts requirement of the Due Process Clause. Id. The jurisdiction of North Dakota courts is
governed by the North Dakota long-arm statute set forth in Rule 4(b)(2) of the North Dakota Rules
of Civil Procedure. The North Dakota Supreme Court has held that Rule 4(b)(2) “authorizes North
Dakota courts to exercise personal jurisdiction over nonresident defendants to the fullest extent
permitted by due process.” Hansen v. Scott, 2002 ND 101, ¶ 16, 645 N.W.2d 223. The Eighth
Circuit Court of Appeals has held that when a state construes its long-arm statute to grant
jurisdiction to the fullest extent permitted by the Constitution, the Court must determine whether
the exercise of personal jurisdiction comports with due process. Johnson v. Woodcock, 444 F.3d
953, 955 (8th Cir. 2006).
“Due Process requires ‘minimum contacts’ between [a] non-resident defendant and the
forum state such that ‘maintenance of the suit does not offend traditional notions of fair play and
substantial justice.’” 	Dever, 380 F.3d at 1073 (quoting World-Wide Volkswagen Corp. v.
Woodson, 444 U.S. 286, 291-92 (1980)). A non-resident defendant’s contacts with a forum state,
for example, must be sufficient to cause the defendant to “reasonably anticipate being haled into
court there.” Epps, 327 F.3d at 648. There are two categories of minimum contacts with a state
that may subject a defendant to jurisdiction in that forum: general jurisdiction and specific
jurisdiction. With respect to general personal jurisdiction over a defendant, “a defendant may be
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subject to the forum state’s exercise of personal jurisdiction if contacts with the state are
continuous and systematic.” Id. A state has specific personal jurisdiction over a defendant when
the suit arises out of, or is related to, the defendant’s contacts with the forum state. Johnson, 444
F.3d at 956.
The Eighth Circuit has established a five-factor test for measuring minimum contacts for
purposes of asserting personal jurisdiction over a defendant:
(1) the nature and quality of a defendant’s contacts with a forum state; (2) the
quantity of such contacts; (3) the relation of the cause of action to the contacts; (4)
the interest of the forum state in providing a forum for its residents; and (5) the
convenience of the parties.
Dever, 380 F.3d at 1073-74. In determining whether a defendant has sufficient contacts with the
forum state to exercise personal jurisdiction, the court must consider all of the contacts in the
aggregate and examine the totality of the circumstances. 	Northrup King Co. v. Compania
Productora Semillas Algodoneras Selectas, S.A., 51 F.3d 1383, 1388 (8th Cir. 1995). However,
the Eighth Circuit directs courts to give “significant weight” to the first three factors. Romak USA,
Inc. v. Rich, 384 F.3d 979, 984 (8th Cir. 2004). 	The Eighth Circuit’s five-part test essentially
“blends” the tests for general and specific jurisdiction. See Northrup King Co., 51 F.3d at 1388.
Under the test outlined above, the Plaintiffs have the burden of proving facts to support
personal jurisdiction. Dever, 380 F.3d at 1072. The Plaintiffs need not prove personal jurisdiction
by a preponderance of the evidence until a court holds an evidentiary hearing or until trial. Dakota
Indus., Inc. v. Dakota Sportswear, Inc., 946 F.2d 1384, 1387 (8th Cir. 1991). Absent a hearing,
the Court will consider the facts in the light most favorable to the non-moving party and resolve
all conflicts in favor of that party. Romak USA, Inc., , 384 F.3d at 983-84.
Here, Liang contends the Court lacks jurisdiction over him because neither the Plaintiffs
nor the Defendant are citizens of the United States; the Plaintiffs and the Defendants do not operate
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businesses in North Dakota, do not possess a North Dakota mailing address, and do not hold North
Dakota assets or property. See Docket No. 22, p. 5. However, applying the five-factor test for
minimum contacts to Liang, the Court concludes it has personal jurisdiction over Liang.
a) 	NATURE AND QUALITY OF CONTACTS
In examining the nature and quality of the contacts, the primary issue is whether the non-
resident defendant has “fair warning that a particular activity may subject a person to the
jurisdiction of a foreign sovereign.” 	Gould v. P.T. Krakatau Steel, 957 F.2d 573, 576 (8th Cir.
1992). 	In his memorandum in support of a motion to dismiss, Liang asserts this Court lacks
jurisdiction over the matter because:
A. 	Plaintiffs and the defendant are non USA citizens
B. 	Plaintiffs and defendant have no USA or North Dakota business activities
C. 	Plaintiffs and defendant have no USA or North Dakota mailing addresses
D. 	Plaintiffs and defendant have no USA or North Dakota Assets
E. 	Plaintiffs and defendant have no USA or North Dakota properties
F. 	Moreover plaintiffs and defendant that bought NDD hotel room units
[h]ave gone into liquidations and that all money proceeds were already paid
to plaintiffs since March/April 2017 period.
See Docket No. 22, p. 5. Even assuming such statements as facts, none of these facts preclude the
Court from exercising jurisdiction over this case.
In their Complaint, the Plaintiffs allege:
This Court has personal jurisdiction over Defendant because, among other things,
Defendant: actively recruited investors to invest in a North Dakota company;
brokered the sale of interests in North Dakota real property and of North Dakota-
issued securities; received fraudulent offering documents from North Dakota and
directed communications to North Dakota, pertaining to their fraudulent sales of
NDD securities; received commissions from North Dakota in connection with their
sales; directed investor funds and investment-related paperwork to be sent to a
North Dakota law firm in connection with the sales; communicated extensively
with various North Dakota entities in connection with the sales; travelled to North
Dakota specifically for the purpose of marketing and selling the investments to
Plaintiffs and other investors, and on such trips taking video and still photographs
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as “evidence” of and for the purpose of, due diligence that the NDD buildings were
functioning and the oil business as thriving as advertised; and, acted as a necessary
intermediary in connection with a fraud emanating from North Dakota.
See Docket No. 8, pp. 4-5 (internal citations omitted). Based upon a review of the record, it is also
evident Liang transacted business with North Dakota entities on several occasions. Liang’s contact
with North Dakota is not random, fortuitous, and attenuated. 	The nature and quality of these
contacts support the exercise of personal jurisdiction over Liang.
b) 	QUANTITY OF CONTACTS
Quantity is a consideration when general jurisdiction is alleged. Lakin v. Prudential Sec,
Inc., 348 F.3d 704, 712 (8th Cir. 2003). It is well-established that specific jurisdiction can arise
from a single contact with the forum state. Fulton v. Chicago, Rock Island & P.R. Co., 481 F.2d
326, 334-36 (8th Cir. 1973). The Plaintiffs presented prima facie evidence in their complaint that
Liang traveled to North Dakota to facilitate business with NDD. See Docket No. 8. Such contact
satisfies the single contact needed to give rise to personal jurisdiction over Liang. 	Moreover,
Liang’s contact with Plaintiffs to facilitate the sale of unregistered, fraudulent NDD securities
related to North Dakota real estate more than satisfies the quantity of contacts needed to support
personal jurisdiction.
c) 	RELATION OF CONTACTS TO CAUSE OF ACTION
Defendant Liang’s contact with North Dakota directly relates to this cause of action. The
Plaintiffs allege Liang solicited for sale and sold unregistered, fraudulent North Dakota securities,
related to North Dakota real estate. The Plaintiffs further allege:
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81. 	Defendant worked closely with the NDD Scheme perpetrators, in North
Dakota 	and 	elsewhere, 	to 	prepare 	marketing 	materials 	targeting
Plaintiffs and offering the unregistered NDD securities.
82. 	Defendant negotiated with the NDD Scheme perpetrators and accepted a
compensation based on sales commissions for his sales of unregistered
NDD securities to Plaintiffs.
83. 	Defendant’s compensation was exorbitant: upon information and belief
Defendant received as much as 20% of Plaintiffs’ investments, in sales
commissions.
84. 	Such sales commissions were never disclosed to Plaintiffs.
85. 	The sales commissions would have been material to Plaintiffs’ investment
decision because they substantially diminished the amounts available
to 	be 	invested 	and 	to 	generate 	the 	promised 	investment 	returns 	to
Plaintiffs.
86. 	Defendant approached each and every Plaintiff and offered to them the
NDD “investment opportunity.”
87. 	Defendant gave each and every Plaintiff investment-related brochures and
pamphlets that described the NDD investment opportunity, and described
the NDD investment opportunities based on the information in those
pamphlets and brochures.
88. 	Defendant travelled to North Dakota and took photographs and videos,
which he then transmitted to Plaintiffs and other potential investors. These
photographs and videos were meant to persuade investors that the NDD
properties were operational and that the oil 	industry 	activity 	in 	the
vicinity 	of 	Williston 	was 	of 	sufficient 	volume 	to 	make 	the 	NDD
properties profitable. See Figures 1 and 2, which depict Defendant near
buildings identified 	as 	NDD 	development, 	and 	in 	front 	of 	an 	oil
operation, respectively.
See Docket No. 8, pp. 16-17. These actions form the base of the Plaintiffs’ claims against Liang
and were directly related to North Dakota. Consequently, the Court finds it has jurisdiction over
Liang to adjudicate claims arising out of the sale or solicitation of unregistered, fraudulent North
Dakota securities related to real property located in North Dakota. 	The Court notes that some
statements contained within Liang’s memorandum in support of the motion to dismiss appear to
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contradict specific factual underpinnings of allegations in the complaint (e.g. percentage of
commission received by Liang from North Dakota Developments). 	However, these statements
alone are not sufficient to divest the Court of jurisdiction over this matter.
d) 	INTEREST OF THE FORUM STATE AND CONVENIENCE OF
THE PARTIES
It is well-established in the Eighth Circuit that the first three factors as outlined above are
of “primary importance,” and the last two factors are of “secondary importance.” Stanton v. St.
Jude Med., Inc., 340 F.3d 690, 694 (8th Cir. 2003). The fourth factor is the interest in the forum
state in adjudicating the cause of action. The Court finds it is in the interests of North Dakota to
adjudicate the sale of unregistered, fraudulent securities tied to real property located in North
Dakota. 	The Plaintiffs’ claims relate to the regulation of securities in North Dakota and to the
disposition of real property within North Dakota. 	These specific claims are local in nature.
Therefore, the interest of North Dakota in adjudicating these claims is heightened
The fifth factor pertains to the convenience of the parties. The Court finds that, although
none of the parties are residents of North Dakota, the State would be a convenient forum for this
dispute because the property related to the sale of unregistered, fraudulent securities is located in
North Dakota. Moreover, much of the activity related to the sale or solicitation of unregistered,
fraudulent securities. Therefore, this factor weighs in favor of exercising personal jurisdiction, but
as stated above, the last two factors are of secondary importance. See Stanton, 340 F.3d at 694;
Northrup King Co, 51 F.3d at 1388. Based on Liang’s contacts with North Dakota, and the totality
of the circumstances, the Court expressly finds that exercising personal jurisdiction over the
Defendant would not violate due process. See Nw. Airlines, Inc. v. Astraea Aviation Servs., Inc.,
111 F.3d 1386, 1390 (8th Cir. 1997). 	The exercise of personal jurisdiction would not offend
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traditional notions of fair play and substantial justice. The Plaintiffs have sustained their burden
of proof, and established the Court’s in personam jurisdiction. 	The Court finds it possesses
personal jurisdiction over Liang.
B. 	RULE 12(b)(3)
In the memorandum in support of the motion to dismiss, Liang also asserts the Plaintiffs’
complaint must be dismissed because it was filed in an improper venue. 	In support of his
contention, Liang states that none of the parties are citizens of the United States, only two sales
presentations were conducted by Robert Gavin in Singapore, and all contracts were issued from
the United Kingdom. See Docket No. 22, p. 4. Pursuant to 28 U.S.C. § 1391(b)(2), a civil action
may be brought in “a judicial district in which a substantial part of the events of omissions giving
rise to the claim occurred, or a substantial part of property that is the subject of the action is
situated.” 28 U.S.C. § 1391(b)(2). As the Court has previously discussed, the Plaintiffs’ claims
arise from the sale or solicitation of unregistered, fraudulent North Dakota securities related to real
property located in North Dakota. Without question, this Court is a proper venue to bring an action
because the Plaintiffs’ allegations relate to real property located in North Dakota. Therefore, the
Court concludes, even assuming none of the parties are citizens of the United States, pursuant to
28 U.S.C. § 1391(b)(2), venue of this action in North Dakota is proper.
C. 	RULE 12(b)(6)
Liang’s last contention is that the Plaintiffs’ complaint should be dismissed for failure to
state a claim upon which relief can be granted. In support of his contention, Liang states only that:
Plaintiffs claim must be dismissed because their legal claims are without Merit.
The defendant have no legal responsibility over the actions, operations, and
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Activities of NDD, Robert Gavin, Danny Hogan and Pearce & Durick as per
Plaintiffs case complaint from page 6 to page 23. Therefore the defendant cannot
be held liable to Plaintiffs investment Decisions and loses.
See Docket No. 22, p. 5. 	Rule 12(b)(6) of the Federal Rules of Civil Procedure mandates the
dismissal of a claim if there has been a failure to state a claim upon which relief can be granted.
In order to survive a motion to dismiss under Rule 12(b)(6), "a complaint must contain sufficient
factual matter, accepted as true, to state a claim to relief that is plausible on its face." Ashcroft v.
Iqbal, 556 U.S. 662, 678 (2009). A plaintiff must show that success on the merits is more than a
"sheer possibility." Id. A complaint is sufficient if its "factual content . . . allows the court to draw
the reasonable inference that the defendant is liable for the misconduct alleged." Id. The court
must accept all factual allegations as true, except for legal conclusions or "formulaic recitation of
the elements” of a cause of action. Id. at 681. A complaint does not "suffice if it tenders a naked
assertion devoid of further factual enhancement." Id. The determination of whether a complaint
states a claim upon which relief can be granted is "a context-specific task that requires the
reviewing court to draw on its judicial experience and common sense." Id. at 679. Dismissal will
not be granted unless it appears beyond doubt the plaintiff can prove no set of facts entitling the
plaintiff to relief. Ulrich v. Pope Cnty, 715 F.3d 1054, 1058 (8th Cir. 2013).
It is unquestionably clear the complaint here contains “sufficient factual matter, accepted
as true, to state a claim to relief that is plausible on its face” to satisfy Rule 8. Ashcroft, 556 U.S.
at 678. Consequently, the Court concludes Liang has failed to demonstrate dismissal pursuant to
Rule 12(b)(6) of the Federal Rules of Civil Procedure is warranted.
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III. 	CONCLUSION
The Court has carefully considered the entire record, the parties’ briefs, and the relevant
case law. For the reasons set forth above, the Court DENIES Liang’s motions to dismiss (Docket
Nos. 13, 18, and 21).
IT IS SO ORDERED.
Dated this 27th day of March, 2018.
/s/ Daniel L. Hovland
Daniel L. Hovland, Chief Judge
United States District Court
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