United States District Court, D. Minnesota
F. Gaughan, ERICKSON, BELL, BECKMAN & QUINN, P.A., and
Richard C. Ebeling, LANZA REICH & DANIEL, LLP, for
Gregory Simpson, Robert W.Vaccaro, and Timothy R. Schupp,
MEAGHER & GEER, PLLP, for defendants.
R. TUNHEIM CHIEF JUDGE
Kevin Garnett brings this action against Welenken CPAs and
Michael A. Wertheim (“Defendants”) alleging
professional malpractice, breach of fiduciary duty, and
aiding and abetting. Each of the allegations is related to
Defendants' role in the oversight of a business
relationship between Garnett and a man named Charles A.
Banks, IV (“Banks”). Defendants now bring a
Motion to Dismiss for lack of personal jurisdiction. Because
Garnett has established that Defendants had sufficient
minimum contacts with Minnesota and exercising personal
jurisdiction over them would not be unreasonable, the Court
will deny the motion.
Garnett's career as a professional basketball player,
Banks was a “long-term trusted wealth manager,
confidant, and personal friend” to Garnett. (Notice of
Removal ¶ 1, Ex. A (“Compl.”) ¶ 6,
Sept. 5, 2018, Docket No. 1-1.) In 2010, Banks hired Michael
Wertheim-a CPA and partner of Welenken CPAs-on behalf of
Garnett. (Id. ¶¶ 3, 10.) Originally,
Wertheim was hired to file income tax returns, but he ended
up taking a much larger role in Garnett's financial life
and in the businesses in which Garnett had an interest.
(Id. ¶¶ 11-12.) For instance, Wertheim
prepared financial statements, became the registered agent
for businesses in which Garnett had an interest, and created
budgets and spending limits for Garnett. (Id. ¶
12.) Ultimately, instead of simply preparing income tax
returns, Defendants “provided accounting services to
Banks, Garnett, and virtually all of the businesses Garnett
shared with Banks.” (Id. ¶ 6.) Although
Wertheim represented Garnett, he took direction from Banks
and had little to no direct contact with Garnett.
(Id. ¶ 10.)
2017, Banks “was sentenced to federal prison for
admittedly defrauding” a different professional
basketball player. (Id. ¶ 6.) Seeking to
investigate Banks for himself, Garnett and his counsel
obtained records from Defendants and discovered evidence that
Banks had also been defrauding Garnett. (Id.
¶¶ 6-7.) For instance, Banks had siphoned money
from a joint investment venture between Banks and Garnett
called Hammer Holdings, LLC, (“Hammer”) a
California company. (Id. ¶¶ 8-9.) Banks
was Hammer's managing member, but Garnett had been led to
believe that he and Banks each owned half of Hammer, and that
all the contributions made by Garnett were being matched by
Banks. (Id.) In reality, Banks used Hammer as an
individual bank account. At one point he transferred over $14
million from Garnett's personal bank accounts into Hammer
and then borrowed almost $8 million for himself.
(Id. ¶ 15.) Banks also used Hammer's funds
to pay his own credit cards, pay his mortgages, hire private
jets, and make personal investments unrelated to Hammer.
(Id. ¶ 25.) Banks further invested Hammer's
funds into valueless entities in which he had a personal
financial interest. (Id. ¶¶ 22-23.)
alleges that Wertheim was fully aware of Banks's actions.
For example, Garnett alleges that Wertheim was aware of
Banks's $8 million loan, and that Banks was
misappropriating Hammer's funds. (Id.
¶¶ 15, 27). Nevertheless, Wertheim never alerted
Garnett to any of Banks's actions. (Id.
¶¶ 13, 16, 19, 21, 27.) To the contrary, Garnett
alleges that Wertheim actively worked with Banks to conceal
Banks's actions from Garnett. (Id. ¶¶
sister, Sonya Garnett, “serve[s] as [Garnett's]
primary point of contact for entities and persons involved in
[his] business endeavors.” (Decl. of Sonya Garnett
(“Garnett Decl.”) ¶ 1, Oct. 31, 2018, Docket
No. 35.) Accordingly, while Wertheim had little contact with
Garnett, he interacted hundreds of times with Sonya. (See
Id. ¶ 3.) They contacted one another primarily
through email, but they also met once in person on January 6,
2016, at Ms. Garnett's home in Minnesota. (Id.
¶¶ 3, 8.) At that meeting, Wertheim and Ms. Garnett
discussed a budget that Wertheim and Banks had prepared for
Garnett. (Id. ¶ 8.) Wertheim notified her that
Garnett was overspending and told her that Garnett needed to
follow the proposed budget. (Id.) After the meeting,
Ms. Garnett and Wertheim attended a Minnesota Timberwolves
game to see Garnett play, and Wertheim spent the night in a
hotel in Minneapolis. (Id. ¶ 9.) Notably,
although Garnett alleges that Wertheim was aware of
Banks's fraud at the time of the meeting, Wertheim did
not discuss Banks's actions with Ms. Garnett. (See
Id. ¶ 10.)
the time that Defendants served as accountants for Hammer and
Garnett, Defendants mailed at least one invoice to Garnett in
Minnesota and addressed that invoice to Ms. Garnett's
attention. (Id. ¶ 11, Ex. A, Nov. 1, 2018,
Docket No. 36.) The invoice described the work Welenken did
for Garnett as “tax return planning, consultation,
government correspondence, personal financial statement,
bookkeeping and general business consultation,
discovering Banks's fraud, Garnett brought an action
against Defendants in Hennepin County District Court.
(Compl.) Defendants removed the case to this Court on
September 5, 2018. (Notice of Removal, Sept. 5, 2018, Docket
No. 1.) Garnett contends that Defendants breached their
fiduciary duty to him, committed professional malpractice,
and aided and abetted Banks in breaching his fiduciary duties
to Garnett. (Compl. ¶¶ 31-49.) Defendants have now
filed Motion to Dismiss for lack of personal jurisdiction.
(Mot. to Dismiss, Sept. 26, 2018, Docket No. 10.)
STANDARD OF REVIEW
Rule of Civil Procedure 12(b)(2) provides that a party may
move to dismiss claims for lack of personal jurisdiction.
“To defeat a motion to dismiss for lack of personal
jurisdiction, the nonmoving party need only make a prima
facie showing of jurisdiction.” Epps v. Stewart
Info. Servs. Corp., 327 F.3d 642, 647 (8th
Cir. 2003) (citing Falkirk Min. Co. v. Japan Steel Works,
Ltd., 906 F.2d 369, 373 (8th Cir. 1990);
Watlow Elec. Mfg. v. Patch Rubber Co., 838 F.2d 999,
1000 (8th Cir. 1988)). As long as there is
“some evidence upon which a prima facie showing of
jurisdiction may be found to exist, ” the Rule 12(b)(2)
motion will be denied. Pope v. Elabo GmbH, 588
F.Supp.2d 1008, 1014 (D. Minn. 2008) (quoting Aaron Ferer
& Sons Co. v. Diversified Metals Corp., 564 F.2d
1211, 1215 (8thCir. 1977)). The party seeking to
establish personal jurisdiction bears the burden of proof,
and the burden does not shift to the party ...