Peterson v. Wallace

622 F. Supp. 2d 791, 2008 U.S. Dist. LEXIS 99953, 2008 WL 5172808
CourtDistrict Court, D. Minnesota
DecidedDecember 10, 2008
DocketCivil 08-1126 (DWF/AJB)
StatusPublished
Cited by5 cases

This text of 622 F. Supp. 2d 791 (Peterson v. Wallace) is published on Counsel Stack Legal Research, covering District Court, D. Minnesota primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Peterson v. Wallace, 622 F. Supp. 2d 791, 2008 U.S. Dist. LEXIS 99953, 2008 WL 5172808 (mnd 2008).

Opinion

*794 MEMORANDUM OPINION AND ORDER

DONOVAN W. FRANK, District Judge.

INTRODUCTION

This matter is before the Court upon the motion of Defendant Steven V. Sunderman (“Sunderman”) to dismiss the complaint of Plaintiff William Peterson (“Peterson”). Sunderman argues that this Court lacks personal jurisdiction over him. For the reasons set forth below, the Court grants Sunderman’s motion to dismiss.

BACKGROUND

This case concerns an alleged real estate investment scheme. Peterson alleges that Defendant Jerry Wallace (“Wallace”), Sunderman, and Defendant Creative Real Estate.Net (“Creative”) perpetrated the scam and took $500,000 from him. According to Peterson, he and Wallace were business associates, Wallace introduced Peterson to Sunderman in connection with the alleged fraud, and Creative is a company owned and controlled by Wallace.

Peterson alleges that he contacted Wallace in May 2005 about a real estate investment opportunity in Kentucky, about which Peterson read in a newspaper, and asked Wallace to investigate. The investment related to the Doe Valley Golf & Country Club in Brandenburg, Kentucky (the “Doe Valley Property”). Wallace reported he was familiar with the Doe Valley Property and thought it might be a good investment. Peterson traveled to Kentucky to meet with Wallace and, while there, he met Sunderman, whom Wallace introduced as Wallace’s partner. Peterson, Wallace, and Sunderman met with a representative of the Doe Valley Property’s owners and toured the Doe Valley Property, after which the three of them had lunch and decided to pursue the investment.

Wallace was to negotiate the purchase, and he represented that he was doing so until early June 2005. At that time, however, Wallace told Peterson he was discontinuing negotiations and that the “deal [was] dead” due to infighting among the property’s owners. (Doc. No. 1 ¶ 24.) On June 15, 2005, Wallace called Peterson and informed him that the deal was back on because the owners had resolved their differences and were ready to move forward.

Wallace represented to Peterson that the Doe Valley Property’s owners wished to sell 488 lots for a total of $1,725,000 and that the sale needed to close quickly. Wallace outlined a plan under which Peterson would invest $1,000,000, Wallace and his partners would invest $225,000, and the remaining $500,000 would be financed by the sellers. Peterson indicated he could only raise $500,000, but stated that he would contact a friend to raise the other $500,000. Peterson alleges he contacted a friend in Minneapolis, Ronald Olsen (“Olsen”), to raise this additional money, but Olsen wanted to conduct a due diligence review of the investment. Wallace, however, represented that there was no time for such a review because the sale had to close on June 24, 2005, and also represented that he had another partner who could contribute $500,000 so that the deal could close on time. Wallace subsequently contacted Peterson and directed him to wire $500,000 to an escrow account.

Peterson wired the $500,000 as directed. Wallace issued Peterson a note granting him a 42% interest in the venture. Over the next few months, Peterson and Wallace discussed various plans regarding the Doe Valley Property, including selling or trading the lots to a home builder. Ultimately, Wallace told Peterson that the home builder had proposed a trade for all 488 lots; in exchange for the lots, the investors would receive five houses in Ohio *795 and eight condominiums in Las Vegas (the “Hard Rock Properties”), as well as an account with $5,600,000 in escrowed funds. Peterson agreed to this exchange, and Wallace subsequently represented that the exchange had occurred. Wallace also told Peterson they had already earned $71,000 in interest on the escrow account.

In August or September 2005, Peterson decided to visit Las Vegas to view the Hard Rock properties. Wallace indicated he would send a package regarding the Hard Rock Properties to Peterson at his hotel in Las Vegas, but the package never arrived and, without documents identifying the Hard Rock Properties, Peterson was unable to view them. Peterson was unable to contact Wallace while in Las Vegas and he ultimately left without viewing the Hard Rock Properties and returned to Minnesota.

In late September, Wallace contacted Peterson and claimed that Federal Express lost the package sent to him in Las Vegas. Wallace represented he had sent another package to Minnesota, but this package failed to arrive as well. Peterson attempted to contact Wallace when he did not receive the second package, but was unable to reach Wallace until October 18, 2005. At that time, Wallace told Peterson he had transferred the money in the escrow account, now $5,671,000, from U.S. Bank because he was concerned about the bank’s solvency. He indicated that he transferred the funds to Bank of America, but that Bank of America placed the funds with a division of Refco, a commodities trading firm that had filed a petition for bankruptcy. Wallace indicated that the money was frozen due to the bankruptcy case.

Peterson looked into Refco’s bankruptcy and decided Wallace’s story did not make sense; he attempted to contact Wallace but was unable to reach him. Peterson called Sunderman. 1 According to Peterson, Sunderman stated that the lots in Kentucky had been purchased as promised but that Wallace handled all of the paperwork. Sunderman also stated that the lots were exchanged for the houses, condominiums, and the escrowed funds, as represented by Wallace, and that $5,671,000 was in an account with Bank of America. Peterson told Sunderman that he was lying, demanded the return of his money, and threatened to pursue criminal charges against Sunderman and Wallace. Peterson alleges Sunderman indicated he would contact Wallace and have Wallace respond to Peterson.

According to Peterson, Wallace then contacted him and admitted that no properties had ever been purchased, and there had not been a trade for houses, condominiums, and funds in a bank account. Wallace admitted that he used Peterson’s money for other real estate deals. Peterson alleges that Wallace lied about this as well; he alleges that Wallace invested some of the money in a foreign currency trading account with Refco. Peterson has pursued claims against Wallace and Sunderman to recover his funds, but alleges he has been able to recover only $194,000 of his investment.

In the motion before the Court, Sunder-man argues that this Court lacks jurisdiction over him. Sunderman contends that he has insufficient contacts with Minnesota to permit suit against him here. Peterson argues that Sunderman directed his activities toward Minnesota and also that Wallace’s contacts with Minnesota can be attributed to Sunderman because the two were involved in a conspiracy.

*796 DISCUSSION

I. Standard of Review

When a defendant challenges personal jurisdiction, the plaintiff has the burden to show that personal jurisdiction exists. Burlington Indus., Inc. v. Maples Indus., Inc., 97 F.3d 1100, 1102 (8th Cir. 1996) (citing

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Cite This Page — Counsel Stack

Bluebook (online)
622 F. Supp. 2d 791, 2008 U.S. Dist. LEXIS 99953, 2008 WL 5172808, Counsel Stack Legal Research, https://law.counselstack.com/opinion/peterson-v-wallace-mnd-2008.