Professional Documents
Culture Documents
18-3195
_______________________________________________________________
Plaintiff / Appellant,
v. PLAINTIFF / APPELLANT'S
Defendants / Appellees.
_______________________________________________________________
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SUMMARY OF THE CASE / REQUEST FOR ORAL ARGUMENT
market manipulation and securities frauds.1 Starting in 2013, the Frost gang
committed a pump and dump (P&D) securities fraud at a company called BioZone
(now Defendant CoCrystal).2 Leading up to the P&D fraud, the Frost gang looted
so, they lied to and manipulated Plaintiff Lee Pederson to the detriment of
Pederson and others. Pederson brings tort claims against Frost and others for fraud
This case presents a complex and outrageous set of facts. The Defendants
After briefing and oral arguments in the district court were concluded, the
SEC filed charges against Frost and his gang for securities fraud. 4 The SEC
charges bring a fresh clarity and perspective about the Frost gang and their actions
that was not available to the district court. The Eighth Circuit reviews the issue of
1
Complaint, para 3.
2
Complaint, generally.
3
Complaint, para 91 et seq.
4
SEC v Honig et al. (see Procedural Note in addendum)
2
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I. TABLE OF CONTENTS
A. Introduction ………………………………………………….. 13
……………... 13
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II. TABLE OF AUTHORITIES
Cases:
Int’l Shoe Co. v. Wash., 326 U.S. 310, 316 (1945) ………………….. 8, 16
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Juelich v. Yamazaki Mazak Optonics Corp., 682 N.W.2d 565
(Minn. 2004) …………………………………………………………. 15
K-V Pharm. Co. v. J. Uriach & CIA, S.A., 648 F.3d 588
(8th Cir. 2011) ……………………………………………………….. 8, 14
Myers v. Casino Queen, Inc., 689 F.3d 904 (8th Cir. 2012) …..……. 16, 33
Walden v. Fiore, 134 S.Ct. 1115 (2014) ………………….……… 17, 25, 28, 34
Wiles v. Capitol Indem. Corp., 280 F.3d 868 (8th Cir. 2002) ...………. 30
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Statute:
Rules:
Commentary:
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III. JURISDICTIONAL STATEMENT
Plaintiff / Appellant asserts that the district court has personal jurisdiction over the
Defendants based upon the Minnesota long-arm statute, Minn. Stat. 543.19
dismissed for lack of personal jurisdiction, which is the sole issue on appeal.
B. The case is on appeal from the United States District Court of Minnesota.
district court on September 27, 2018. Plaintiff filed a timely Notice of Appeal on
D. This appeal is from a final order and judgment of the district court that
The only issue on appeal is whether the Defendants are subject to specific
personal jurisdiction in Minnesota under the Minnesota long-arm statute for the
tortious actions alleged in the complaint. The Eighth circuit reviews the issue of
jurisdiction de novo.
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K-V Pharm. Co. v. J. Uriach & CIA, S.A., 648 F.3d 588, 591-92 (8th Cir. 2011)
Dever v. Henzen Coatings, Inc., 380 F.3d 1070, 1073-74 (8th Cir. 2004)
This case arises out of a pump and dump (P&D) securities fraud carried out
by the Defendants and others (the "Frost gang").5 In conjunction with the P&D
fraud, Defendants Frost, Keller and Opko looted the assets of Defendant CoCrystal
(formerly known as BioZone) for the benefit of Frost, Opko and others. 6 During
this looting of assets and in order to carry out their scheme, Defendants lied to and
manipulated Plaintiff Pederson over the course of a year. 7 The lies and
in about 2000.10 Pederson wrote and prosecuted patent applications for BioZone
5
SEC v Honig et al.
6
Complaint, para 91 et seq.,for example.
7
Complaint, para 45, for example.
8
Complaint, paras 286 et seq., for example.
9
Complaint, para 21.
10
Complaint, para 22.
8
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on a drug delivery technology called QuSomes®. 11 In addition, Pederson worked
By about 2010, BioZone had revenues of about $15 million per year.15 New
and BioZone sought investments to help fund expansion. 16 Patents were a key
about 100 domestic and international patents and patent applications for
BioZone.17
Billionaire Phillip Frost targeted BioZone for a takeover so that Frost and his
gang could use BioZone for a pump and dump (P&D) securities fraud and make
investment capital, Pederson traveled from Minnesota to Miami in early 2011 for a
11
Complaint, para 25.
12
Complaint, para 45.
13
Complaint, para 28.
14
Complaint, para 27.
15
Complaint, para 36.
16
Complaint, para 29.
17
Complaint, para 71.
18
Complaint, generally.
9
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series of meeting with Frost and his gang. 19 Pederson was one of five BioZone
The result of the Miami meetings was a fraudulent promise by Frost and his
for total funding to BioZone of $15 million.21 Based on that fraudulent promise
(the "Big Lie") and with the cooperation of BioZone insider Brian Keller, Frost and
his gang took control of BioZone by mid-2011.22 Frost and Keller then used the
never materialized. 24
In late February of 2012, Frost and his gang executed a fraudulent transfer of
and his gang were intent on pursuing their fraudulent scheme, so Pederson had no
choice other than to resign from representation of BioZone in about June of 2012. 27
19
Complaint, paras 31-33, for example.
20
Complaint para 35.
21
Complaint, para 37.
22
Complaint, para 42 et seq.
23
Complaint, generally.
24
Complaint, generally.
25
Complaint, paras 99 et seq.
26
Complaint, paras 116, 117.
27
Complaint, paras 118 et seq.
10
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Frost and his gang began their P&D securities fraud at BioZone in
September of 2013,28 resulting in millions of dollars of illegal profits for the Frost
gang.29 BioZone was just one of a number of companies where the Frost gang
carried out similar P&D securities frauds. 30 Frost and his gang committed many
frauds against many people in the course of their P&D securities fraud
operations. 31 Pederson is one of many individuals harmed by Frost and his gang.
Complex frauds like the BioZone P&D take a long time to develop, and
investigation, on September 7, 2018, the SEC filed charges against Frost and his
gang for securities frauds at BioZone and other companies. 32 The facts alleged in
the SEC complaint against Defendants Frost, Keller, and Opko (among other SEC
business relationship against the Defendants. Pederson initiated the present lawsuit
in late 2017 by serving Defendant Keller under the Minnesota Rules of Civil
Procedure. The Defendants then removed the case to Minnesota District Court and
28
Complaint, para 118, for example.
29
Complaint, para 39, for example.
30
SEC press release. (see Procedural Note in addendum)
31
Complaint, para 278.8, for example.
32
SEC press release and SEC v Honig et al.
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jurisdiction. Plaintiff Pederson filed a declaration in support of a finding of
jurisdiction. After briefing and oral arguments, the District Court dismissed the
case for lack of jurisdiction. Plaintiff has appealed to the Eighth Circuit.
Pederson has alleged claims of (1) fraud and (2) tortious interference with a
declaration provide detailed support for all the elements of Pederson's claims. The
District Court did not rule on the validity of Pederson's underlying claims.
The Eighth Circuit reviews the sole issue of jurisdiction de novo. In doing
so, the Court must view the Plaintiff's allegations in a light most favorable to the
Plaintiff, including (1) Pederson's allegations of the Frost gang's P&D operations at
33
Complaint, para 8 and SEC v Honig et al., generally.
34
Complaint, generally.
35
Complaint, generally.
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(4) Pederson's allegations of Defendants' acts supporting a finding that Minnesota
long-arm statute because they committed acts outside Minnesota causing injury or
presumed to be true by this Court, the issue of jurisdiction comes down to a due
VII. ARGUMENT
A. Introduction
included hundreds of emails and phone calls based upon the Big Lie. 37
under Fed. R. Civ. P. 12(b)(2), a plaintiff must make a prima facie showing of
36
Complaint, paras 14.1 - 14.6, for example.
37
Complaint, para 278.13, for example.
13
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personal jurisdiction by pleading sufficient facts to support a “reasonable inference
that the defendants can be subjected to jurisdiction within the state.” K-V Pharm.
Co. v. J. Uriach & CIA, S.A., 648 F.3d 588, 591-92 (8th Cir. 2011). “Although the
evidentiary showing required at the prima facie stage is minimal, the showing must
be tested, not by the pleadings alone, but by the affidavits and exhibits supporting
or opposing the motion.” Id. at 592 (internal citation and quotation marks omitted).
The court must view the evidence in a light most favorable to the plaintiff and
resolve factual conflicts in the plaintiff’s favor; however, plaintiff carries the
burden of proof and that burden does not shift to defendants. Epps v. Stewart Info.
Pederson met this burden with his complaint and declaration, so the
Defendants' Rule 12(b)(2) motion should have failed. However, the Defendants
misled the district court with a false narrative, and the district court granted the
affording the Plaintiff's right to have his allegations viewed in a favorable light will
Federal Rule of Civil Procedure 4(k)(1)(A) provides that a court can exercise
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§Subdivision 1. Personal jurisdiction. As to a cause of action arising
from any acts enumerated in this subdivision, a court of this state with
jurisdiction of the subject matter may exercise personal jurisdiction
over any foreign corporation or any nonresident individual, or the
individual's personal representative, in the same manner as if it were a
domestic corporation or the individual were a resident of this state.
This section applies if, in person or through an agent, the foreign
corporation or nonresident individual:
(1) owns, uses, or possesses any real or personal property situated in
this state; or
(2) transacts any business within the state; or
(3) commits any act in Minnesota causing injury or property damage;
or
(4) commits any act outside Minnesota causing injury or property
damage in Minnesota, subject to the following exceptions when no
jurisdiction shall be found:
(i) Minnesota has no substantial interest in providing a forum; or
(ii) the burden placed on the defendant by being brought under the
state's jurisdiction would violate fairness and substantial justice.
statute. In Rilley v Money Mutual, 884 N.W.2d 321 (Minnesota 2016), the Court
said,
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Clause of the federal constitution allows.” Valspar Corp. v. Lukken
Color Corp., 495 N.W.2d 408, 410 (Minn. 1992). Therefore, “when
analyzing most personal jurisdiction questions, Minnesota courts may
simply apply the federal case law.” Rilley at 326-327.
F.3d 904, 911 (8th Cir. 2012). Under this standard, if a defendant can reasonably
authorized. Id.
The Defendants lied to and manipulated Pederson for over a year regarding
and representation of clients. It was reasonably foreseeable that such lies and
Minnesota Statute 543.19(4). Since section 543.19(4)(i) is not at issue, the sole
issue before the Court is due process under section 543.19(4)(ii). As the
Minnesota Supreme Court stated in Rilley, the federal case law applies.
requires that the defendant have certain minimum contacts with the state, such that
the maintenance of the suit does not offend “traditional notions of fair play and
substantial justice.” Int’l Shoe Co. v. Wash., 326 U.S. 310, 316 (1945).
16
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Specific, or “conduct-linked,” jurisdiction involves suits “arising out of or
related to the defendant’s contacts with the forum.” Daimler AG v. Bauman, 571
U.S. (2014); Helicopteros Nacionales de Columbia, S.A. v. Hall, 466 U.S. 408,
414 n.8 (1984). For a Minnesota court to exercise specific jurisdiction over an out-
by the Minnesota long-arm statute; and 2) the reach of the long-arm statute must
comport with due process. Viasystems, Inc. v. EBM-Papst St. George Gmbh & Co.,
646 F.3d 589, 593-94 (8th Cir. 2011). Minnesota’s long-arm statute authorizes,
inter alia, personal jurisdiction over defendants who either in person or through an
agent commit a tort causing injury within the state. Minn. Stat. § 543.19.
forum State.” Walden v. Fiore, 134 S.Ct. 1115, 1121 (2014). In other words, “the
relationship must arise out of contacts that the "defendant himself’ creates with the
forum State.” Id. at 1122 (quoting Burger King v. Rudzewicz, 471 U.S. 462, 475
(1985)).
forum state’s long-arm statute, jurisdiction can be asserted only if it comports with
the strictures of the Due Process Clause.” Viasystems, 646 F.3d at 594. “The
17
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sufficient minimum contacts with [the forum state] such that the maintenance of
the suit does not offend traditional notions of fair play and substantial justice.” Id.
The facts as alleged show that Defendants conspired together to carry out a
P&D securities fraud that generated millions of dollars in illegal profits for the
Defendants and their associates.39 In conjunction with the P&D fraud, the
looting included the fraudulent transfer of rights to drug delivery technologies and
formulations.41
38
Pederson declaration of February 2018.
39
Complaint, paras 4-5, for example.
40
Complaint, paras 91 et seq.
41
Complaint, paras 99 et seq.
42
Complaint, paras 91 et seq.
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defendant in SEC v Honig) together manipulated Pederson to carry out Defendants'
scheme.43 During the course of this manipulation Keller and Maza directed
attorney.44
The fraudulent manipulation of Pederson using the Big Lie caused out-of-
has sufficient minimum contacts with [the forum state] such that the maintenance
of the suit does not offend traditional notions of fair play and substantial justice.”
question is whether the actions of the defendant(s) should subject them to the
43
Complaint, para 278.2, for example.
44
Complaint, para 278.13, for example.
45
Complaint, para 81, for example.
46
Complaint, para 286 et seq, for example.
47
Complaint, para 286 et seq, for example.
19
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Plaintiff Pederson is a resident of Minnesota.48 Defendant Frost is an
in Minnesota. The fraudulent acts included hundreds of phone calls and emails
directed at Pederson.53
Plaintiff submits to this Court that a common-sense analysis could end right
here. Defendants were scattered around the country and they joined together to
defraud the Plaintiff in Minnesota. It should not offend any notion of fair play or
justice that the Defendants be held accountable in Minnesota for their purposely
Turning to legal analysis, but not away from common-sense, the following
48
Complaint, para 15.
49
Complaint, para 16.
50
Complaint, para 18.
51
Complaint, para 17.
52
Complaint, para 19.
53
Complaint, para 278.13 for example.
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1. Defendants directed hundreds of phone calls and emails to Pederson in order to
Minnesota. 55
Plaintiff.56
subsidiary.59
sufficient contacts exist to support the exercise of personal jurisdiction under the
Due Process clause. Dever v. Henzen Coatings, Inc., 380 F.3d 1070, 1073-74 (8th
54
. Complaint,
para 278.13 for example
55
Complaint, para 286 et seq.
56
Complaint, paras 14.1 - 14.5, for example.
57
Complaint, paras 15 and 21, for example.
58
Complaint, para 278.2, for example.
59
Opko Reg. with Minn. Sec. of State. (see Procedural Note in addendum)
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Cir. 2004); Dakota Indus., Inc. v. Dakota Sportswear, Inc., 946 F.2d 1384, 1390
(8th Cir. 1991). The five factors are: (1) the nature and quality of the contacts with
the forum state; (2) the quantity of the contacts; (3) the relationship
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 or inconvenience to the
parties. Dever, 380 F.3d at 1073-74 (quoting Burlington Indus., Inc. v. Maples
Indus., Inc., 97 F.3d 1100, 1102 (8th Cir. 1996)). Applying the five-factor test to
(1) The nature and quality of Defendant’s contacts with the forum state.
back to 2007, when Pederson began work for BioZone as a solo patent attorney. 60
Pederson and Keller had a close and trusting working relationship that developed
over a period of years.61 During the Big Lie period, Keller was in regular,
BioZone's patent and other legal issues while Keller was acting as an agent for
BioZone, Frost and Opko. 62 During the Big Lie period, Keller abused Pederson's
60
Complaint, para 22.
61
Complaint, para 24, for example.
62
Complaint, para 14.3, for example.
22
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trust and used the Big Lie to manipulate Pederson to the detriment of Pederson and
others.63
(b) Non-party Elliot Maza was in frequent contact with Pederson during the
Big Lie period as an officer of BioZone and as an agent of Frost and Opko. 64 Maza
(c) Both Keller and Maza acted as agents for Frost, Opko, and BioZone.66
Minnesota attorney, thereby purposely availing all the Defendants of the benefits
(f) Through its subsidiary Opko Labs, LLC, Defendant Opko was registered
63
Complaint, para 278.2, for example.
64
Complaint, para 278.2, for example.
65
Complaint, para 278.2, for example.
66
Complaint, paras 14.1 - 14.5, for example.
67
Complaint, paras 14.1 - 14.5, for example.
68
Complaint, para 106.
69
Opko Reg. with Minn. Sec. of State. (see Procedural Note in addendum)
23
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During the Big Lie period lasting over a year, Keller had hundreds of
telephone and email contacts with Pederson.70 Maza also had many contacts with
Pederson.71 Frost initiated contact with Pederson on one occasion. 72 All these
(3) The source and connection of the cause of action with those specific contacts.
Pederson's claims are for fraud and tortious interference. After a decade of
trusted communication with Pederson, Keller joined with the Frost gang to defraud
Pederson.74 Keller contacted Pederson many times in order to lie to Pederson and
to manipulate Pederson, thereby forming the basis for Pederson's tort claims.
Frost and Maza also used the Big Lie to manipulate Pederson to help Frost
and Opko loot BioZone's corporate assets.76 Maza contacted Pederson in order to
lie to Pederson and manipulate Pederson, thereby forming the basis of Pederson's
The court in In Rilley v Money Mutual, 884 N.W.2d 321 (Minnesota 2016)
said, "This case raises the question of what contacts a defendant must have with
70
Complaint, para 278.13, for example.
71
Complaint, para 278.13, for example.
72
. Complaint, para 106
73
Complaint, para 106, for example.
74
Complaint, para 278.2, for example.
75
Complaint, generally.
76
Complaint, generally.
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Minnesota before our courts can exercise specific personal jurisdiction over that
and Google Adwords advertisements. Distinguishing the case from Walden, the
contacts with both Minnesota residents and the state of Minnesota." Riley at 329.
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sent follow-up emails encouraging prior applicants to seek additional
loans, MoneyMutual had sufficient information to know that the
applicants were Minnesota residents and that the emails likely were to
be opened in Minnesota.
Despite the electronic, email-based nature of these relationships, these
contacts demonstrate “purposeful direction” toward Minnesota and a
“purposeful availment” of the benefits of doing business in a
Minnesota forum—namely, a profitable pool of low-income
Minnesota residents that MoneyMutual could match with its payday-
lending network to generate lead fees. In other words, MoneyMutual
availed itself of a Minnesota forum because it profited by selling lead
information to payday lenders about Minnesota residents. These facts,
demonstrating a “purposeful availment” of the Minnesota forum,
should have caused MoneyMutual to reasonably anticipate being
haled into court in Minnesota. Thus, MoneyMutual's emails to
respondents are contacts with Minnesota that support the exercise of
personal jurisdiction." Rilley at 332-333 (footnotes omitted).
In finding that sufficient contacts existed to warrant jurisdiction in
26
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forum and should have “reasonably anticipate[d] being haled into
court” in Minnesota. Burger King, 471 U.S. at 474, 105 S.Ct. 2174.
These contacts alone are sufficient to support a finding of personal
jurisdiction." Rilley at 337.
forum for its residents that are harmed by conspiracies of out-of-state persons and
In considering the interests of the forum state, the court in Rilley said,
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special inconvenience to Defendants because of jurisdiction in Minnesota.
Each and every factor of the five-factor tests weighs heavily in favor of
Minnesota is that the contacts were used to commit intentional frauds against
Pederson and others. The contacts numbered in the hundreds. There is a direct
connection between the contacts and Pederson's underlying claims for fraud and
and persons similarly situated. Even the convenience of the parties factor weighs
does not “offend traditional notions of fair play and substantial justice” under the
In addition to the Eighth Circuit's five-factor test, when the cause of action
involves a tortious act, the court should consider the “effects test” of Calder v.
Jones, 465 U.S. 783, 789-90 (1984). See Walden, 134 S. Ct. at 1123. Under the
Calder effects test, a defendant’s tortious acts can serve as a source of personal
jurisdiction only where the plaintiff makes a prima facie showing that the
28
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defendant’s acts (1) were intentional, (2) were uniquely or expressly aimed at the
forum state, and (3) caused harm, the brunt of which was suffered—and which the
defendant knew was likely to be suffered—[in the forum state]. Johnson v. Arden,
614 F.3d 785, 796 (8th Cir. 2010). The Calder effects test does not replace the
Eighth Circuit’s five-factor test for personal jurisdiction, but “requires the
The cause of action here is based upon the commission of tortious acts.
Pederson alleges that Defendants used hundreds of emails and phone calls to
These allegations show that the Defendants directed fraudulent acts to Pederson in
Minnesota, with the intention that Pederson rely on the Big Lie when making
result, Pederson suffered injuries in Minnesota. The alleged contacts are more than
sufficient to hold the Defendants subject to hold the Defendants subject to legal
G. Purposeful availment
finding that the Minnesota court did not have jurisdiction over the Defendants.
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However, the reasoning of the district court may have been unduly influenced by a
"threadbare recitals," and "mere conclusory statements," and by saying that courts
inferences and sweeping legal conclusions cast in the form of factual allegations.”
77
District Court document 62 at pp. 33-34
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Defendants furthered their false implication that Defendant Frost's wealth,
mischaracterize Plaintiff's allegations to the district court, both in their briefs and at
oral argument. Defendants intentionally presented the district court with a false
narrative in an effort to mislead the court into believing that the Plaintiff's
The SEC charged Defendants Frost, Keller and Opko with securities fraud
only after briefing and oral arguments were completed in the district court for the
78
Transcript, District Court document 79 at pp. 8-9.
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present case.79 Besides Frost, Keller and Opko, 17 other individuals and entities,
including Elliot Maza, were also charged by the SEC in the same case.80 The SEC
alleged that the Frost gang received at least $27 million from P&D securities
the timing, no evidence of the SEC complaint against Frost and others was
purposeful availment analysis used in the Fastpath case. The Defendants argued,
expect to be haled into court in that jurisdiction,"82 and the district court adopted
The district court's reliance on Fastpath was misplaced. The facts of the
present case are easily distinguished from the facts in Fastpath. Fastpath was a
79
SEC v Honig et al. was filed on September 7, 2018.
80
Frost, Keller and Opko are named as defendants in both the SEC complaint and
the Plaintiff's complaint. Frost is the trustee for SEC defendant Frost Gamma
Investment Trust. Frost is part-owner of SEC defendant Southern Biotech. Other
SEC defendants that are mentioned in the present complaint include Barry Honig,
Michael Brauser, Elliot Maza and John Ford.
81
Cocrystal/BioZone was referred to as "Company A" in the complaint.
82
District Court document 62, page 17.
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contract case between an Iowa plaintiff and California defendant, involving the
alleged breach of a mutual confidentiality agreement. Fastpath did not involve any
tort claims. There is practically no similarity between the facts of the present case
even a requirement for a finding of jurisdiction in the present case, which involves
intentional torts and section 4 of the Minnesota long arm statute.83 A 2013
the facts of the present case still satisfy such a standard. The Defendants' contacts
83
Myers v. Casino Queen, Inc., 689 F.3d 904 (8th Cir. 2012) involved both a claim
for negligence and the Missouri long-arm statute. In Myers, this court conducted a
due process analysis without even mentioning the concept of purposeful availment.
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340 F.3d at 693–94 (quoting Burger King v. Rudzewicz, 471 U.S. 462, 475, 105 S.
Ct. 2174, 2183, 85 L. Ed. 2d 528 (1985)). The Defendants' suit-related conduct
created a substantial connection with the forum State. Walden v. Fiore, 134 S. Ct
1115, 1121, 188 L. Ed. 2d 12 (2014). The relationship arose out of contacts that
the Defendants themselves created with the forum State. Id. at 1122 (quoting
Burger King, 471 U.S. at 475, 105 S. Ct. at 2183–84). The Defendants' phone calls
and emails were "purposefully directed" at the forum. See Rilley at 331. In the
present case, the Defendants conspired and acted together to commit torts against
Minnesota court.
The court in Rilley found purposeful availment in the facts of that case.
case, the Defendants purposely availed themselves of the benefits and protection of
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The district court's ruling was an anomaly, and very likely the result of the
false and misleading narrative put forth by the Defendants that the court did not
have to view the Plaintiff's allegations in a favorable light. In any event, the Eighth
Circuit reviews the issue of jurisdiction de novo, and is free to apply its own
analysis differently than the district court, while viewing the allegations in the light
subject to jurisdiction under the Minnesota long-arm state because they committed
has sufficient minimum contacts with Minnesota such that the maintenance of the
suit does not offend traditional notions of fair play and substantial justice.
Plaintiff / Appellant Pederson prays that the Court enter an order vacating
the district court's order and judgment and remanding this case to the district court
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IX. CERTIFICATES OF COMPLIANCE
Replies filed under Rule 27. The length of the Appeal Brief is 7,642 words. This
Appeal Brief was prepared using Microsoft Word 2010 and the word processing
program has been applied specifically to include all text, including headings,
I also certify under Rule 28 that the brief and addendum have been scanned
Respectfully submitted,
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