United States District Court, D. Minnesota
Ritchie Capital Management, Ltd., Ritchie Special Credit Investments, Ltd., Plaintiffs,
Costco Wholesale Corporation, Defendant.
Gassman-Pines, Esq., Lawrence M. Shapiro, Esq., and Sybil L.
Dunlop, Esq., Greene Espel PLLP, counsel for Plaintiffs.
W. Anthony, Esq., Peter McElligott, Esq., Steven M Pincus,
Esq., Anthony Ostlund Baer & Louwagie PA, counsel for
MEMORANDUM OPINION AND ORDER
DONOVAN W. FRANK UNITED STATES DISTRICT JUDGE
plaintiffs in this case are financiers who were defrauded as
part of a Ponzi scheme, whereby the fraudsters fabricated
purchase orders for the financiers to fund. The defendant in
this case is the business that the fraudsters falsely told
the plaintiffs was placing the orders. Long after the fraud
was uncovered, the plaintiffs filed suit against the
defendant alleging violations of the Minnesota Consumer Fraud
Act and the Minnesota Uniform Deceptive Trade Practices Act.
The defendant moved to dismiss. For the reasons discussed
below, the Court grants the defendant's motion in part.
case begins and ends with Tom Petters's notorious Ponzi
scheme. In short, Petters would convince financiers (like
Plaintiffs) to fund fabricated purchase orders from
wholesalers. Petters would then repay the financiers by
convincing other financiers to fund new fabricated purchase
orders. One of Petters's companies, Petters Company, Inc.
(“PCI”) purportedly operated as intermediary that
bought goods from manufacturers and resold them to
wholesalers (like Defendant Costco Wholesale Corporation).
This type of business existed to circumvent
manufacturers' desire to not sell goods to Costco because
it would dilute the manufacturers' brands. Manufacturers
would allegedly be on the lookout for their product in
Costco's stores, so Costco had to “sanitize”
the goods by, among other things, scraping off original
shipping labels and SKUs, removing the goods from original
packaging, and creating false purchase orders, bills of sale,
bills of lading, and other shipping documents. As a result of
this process, consumers have allegedly bought counterfeit
goods from Costco. (Compl. ¶ 17.)
convinced Plaintiffs that it was one of Costco's
intermediaries. On March 21, 2008, PCI offered Plaintiffs the
opportunity to fund a $31 million purchase order ostensibly
from Costco for Playstation3 videogame consoles. PCI provided
a fabricated purchase order. On June 6, 2008, Petters
represented to Plaintiffs that the PS3s had been shipped. On
September 24, 2008, the FBI raided Petters's home and
businesses. The search-warrant affidavit explained PCI's
scheme. On December 2010, Petters was sentenced to 50 years
April 19, 2017, Plaintiffs filed suit against Costco in
Minnesota state court alleging claims for: (1) violating the
Minnesota's Consumer Fraud Act (“MCFA”),
Minnesota Statute § 325F.69; and (2) violating the
Minnesota Uniform Deceptive Trade Practices Act
(“MUDTPA”), Minnesota Statute § 325D.44.
Costco removed the case to federal court and now has moved to
dismiss for lack of personal jurisdiction and for failure to
state a claim.
Motion to Dismiss for Lack of Personal Jurisdiction
seeks to dismiss Plaintiffs' claims for lack of personal
jurisdiction. To survive a motion to dismiss for lack of
personal jurisdiction, a plaintiff must make a prima facie
showing that personal jurisdiction exists. That is, a
plaintiff must allege facts to support a reasonable inference
that defendant may be subjected to jurisdiction in the chosen
forum. Steinbuch v. Cutler, 518 F.3d 580, 585 (8th
Cir. 2008) (citing Dever v. Hentzen Coatings, Inc.,
380 F.3d 1070, 1072 (8th Cir. 2004)). If, as is the case
here, the defendant denies jurisdiction, the plaintiff bears
the burden of proving facts supporting personal jurisdiction.
See Wells Dairy, Inc. v. Food Movers Int'l,
Inc., 607 F.3d 515, 518 (8th Cir. 2010) (quotation
omitted). Once a defendant offers affidavits to challenge
personal jurisdiction, “facts, not mere allegations,
must be the touchstone” in determining whether personal
jurisdiction exists. Dever, 380 F.3d at 1072
(citation omitted); see also Abbasi v. Leading
Edge Aviation Servs., Inc., Civ. No. 16-295, 2016 WL
4007571, at *3 (D. Minn. July 26, 2016).
The Court has ...