UNITED STATES COURT OF APPEALS Filed 6/28/96
Tenth Circuit
Byron White United States Courthouse
1823 Stout Street
Denver, Colorado 80294
(303) 844-3157
Patrick J. Fisher, Jr. Elisabeth A. Shumaker
Clerk Chief Deputy Clerk
June 28, 1996
TO: ALL RECIPIENTS OF THE CAPTIONED OPINION
RE: 95-1425 SEC v. Knowles
June 20, 1996 by The Honorable Michael R. Murphy
Please be advised of the following correction to the captioned decision:
Due to formatting problems, the previously filed opinion is withdrawn and
the accompanying opinion substituted. The content of the opinion has not
changed.
Please discard existing copies of the opinion and substitute the corrected
version.
Very truly yours,
Patrick Fisher, Clerk
Beth Morris
Deputy Clerk
encl.
PUBLISH
UNITED STATES COURT OF APPEALS
TENTH CIRCUIT
In the Matter of an Application
to Enforce Administrative Subpoenas
Duces Tecum of the
SECURITIES AND EXCHANGE
COMMISSION,
Applicant-Appellee,
No. 95-1425
v.
GAYE B. KNOWLES,
Respondent-Appellant.
Appeal from the United States District Court
for the District of Colorado
(D.C. No. 95-B-2036)
Raymond L. Robin, Olle, Macaulay & Zorrilla, Miami, Florida, (David W. Stark,
Amy J. Griffin, Otten, Johnson, Robinson, Neff & Ragonetti, P.C., Denver,
Colorado, with him on the briefs), for Respondent-Appellant.
Robert M. Fusfeld, Securities and Exchange Commission, Denver, Colorado,
(Simon M. Lorne, General Counsel, Jacob H. Stillman, Associate General
Counsel, Katherine B. Gresham, Assistant General Counsel, Catherine A.
Broderick, Counsel to the Assistant General Counsel, Securities and Exchange
Commission, Washington, D.C., Paul Gonson, Solicitor, Of Counsel, on the
brief), for Applicant-Appellee.
Before SEYMOUR, BRORBY, and MURPHY, Circuit Judges.
MURPHY, Circuit Judge.
This case arises out of the enforcement by the district court against the
appellant, a foreign national, of two administrative subpoenas duces tecum issued
by the Securities and Exchange Commission. The appellant argues that the
district court lacked personal jurisdiction to enforce the subpoenas. The district
court held that it did not need personal jurisdiction over the appellant to do so.
The question presented is whether the appellant has the requisite minimum
contacts to justify the district court’s exercise of personal jurisdiction over him.
This court holds that he does and that the district court properly enforced the
subpoenas.
I. BACKGROUND AND PROCEDURAL SETTING
On June 14, 1995, and again on June 30, 1995, the Securities and Exchange
Commission (the “SEC”) issued administrative subpoenas duces tecum in the
name of the appellant, Gaye B. Knowles. The SEC served Knowles with the first
subpoena by hand at LaGuardia Airport in New York City. It later served the
-2-
second on Knowles’s counsel in Miami, Florida. These subpoenas were issued in
connection with the Formal Order of Investigation in the nonpublic investigation
conducted by the SEC out of its Denver, Colorado, office, In the Matter of the
Rockies Fund, Inc., Redwood Microcap Fund, Inc., and Combined Penny Stock
Fund, Inc., et al. 1 The SEC issued these subpoenas pursuant to its authority under
15 U.S.C. §§ 77s(b), 78u(b), and 80a-41(b).
Knowles is presently a Bahamian citizen and resident and has been so since
1951. He is an independent investment consultant and, at the times the subpoenas
were served on him, was also the president of two Bahamian companies, Global
Petrol Trading and Swiss EuroFund, Inc. 2 In the investigation, the SEC sought to
determine whether bank accounts in the names of these two companies were used
to bribe brokers in the United States to sell certain stock of American companies
in violation of federal securities laws. The first subpoena directed Knowles to
appear at a deposition and to produce certain personal documents and documents
relating to the bank accounts of Global Petrol Trading. The second subpoena
directed the same and called for Knowles to produce documents relating to the
1
The Formal Order of Investigation is not a part of the record in this case; the
SEC claims that it is a nonpublic document. The Formal Order was available to
the district court for in camera inspection, but its scope and contents are in no
way related to the issues here on appeal.
2
Since that time, Knowles has been advised that his employment with Global
Petrol Trading and Swiss EuroFund, Inc., has been terminated. [App. at 66]
-3-
bank accounts of Swiss EuroFund, Inc.
In response to the subpoenas, Knowles appeared for deposition in Miami,
Florida, on July 12, 1995. Knowles produced certain corporate documents
pursuant to the subpoenas but objected to producing monthly banking statements
and other banking documents of the two companies. In order to enforce the
subpoenas, the SEC applied to the district court in the judicial district where it is
conducting the investigation, as authorized in 15 U.S.C. §§ 77v(b), 78u(c), and
80a-41(c).
The SEC filed an Ex Parte Application for an Order to Show Cause and
Application for an Order Compelling Compliance with Administrative Subpoenas
Duces Tecum. The United States District Court for the District of Colorado
subsequently issued an Order to Show Cause. Thereafter, the SEC served
Knowles with the Order to Show Cause outside his home in Nassau, Bahamas.
Knowles responded to the Order to Show Cause and moved the district court to
dismiss the SEC’s application for lack of personal jurisdiction over him.
In an Amended Memorandum Order and Opinion, the district court held
that it did not need personal jurisdiction over Knowles in order to enforce the
subpoenas against him. It held, instead, that judicial enforcement of an
administrative subpoena may be had where the agency can show that: (1) the
inquiry is conducted pursuant to a lawfully authorized, legitimate purpose; (2) it
-4-
is reasonably relevant to an investigation which the agency has authority to
conduct; and (3) all administrative prerequisites have been met. See United States
v. Powell, 379 U.S. 48, 57-58 (1964); SEC v. Blackfoot Bituminous, Inc., 622 F.2d
512, 514 (10th Cir.), cert. denied, 449 U.S. 955 (1980). The district court
determined that the SEC met this three-pronged burden and that Knowles had
adduced no evidence to the contrary. It therefore ordered Knowles to comply
with the subpoenas within ten days. This court subsequently granted Knowles’s
Motion to Stay the Amended Memorandum Order and Opinion pending appeal.
This appeal followed.
On appeal, Knowles argues that the district court erred when it determined
it did not need personal jurisdiction over him in order to enforce the subpoenas.
He also argues that the district court could not properly exercise jurisdiction over
him because of his lack of personal contacts with the United States. In response,
the SEC maintains that the district court had personal jurisdiction over Knowles
based upon sufficient minimum contacts with the United States in relation to: (1)
the subpoenas; (2) the matters under investigation by the SEC; and (3) his general
business. In the alternative, the SEC argues that the minimum contacts analysis is
not required because the district court had personal jurisdiction over Knowles
based upon the SEC’s service of the subpoenas on Knowles within the territorial
limits of the United States. The SEC does not argue that personal jurisdiction is
-5-
not required in order to enforce the subpoenas, as the district court held.
II. JURISDICTION
This court has jurisdiction to review the Amended Memorandum Order and
Opinion under 28 U.S.C. § 1291. The district court’s ruling on personal
jurisdiction involves a question of law that is reviewed de novo. Taylor v.
Phelan, 912 F.2d 429, 431 (10th Cir. 1990), cert. denied, 498 U.S. 1068 (1991).
The issue here is a narrow one: whether the district court had personal
jurisdiction over Knowles to enforce the administrative subpoenas duces tecum.
The court notes at the outset that Knowles does not contend the SEC lacked the
authority to issue the subpoenas under the tripartite test set out in Powell and
Blackfoot. He does not challenge the methods or places of service of process
employed in serving either the subpoenas or the Order to Show Cause. Moreover,
Knowles does not seriously contend that he lacked capacity to produce corporate
records in his possession or that the SEC could only secure production of the
documents through service of subpoenas on Knowles’s former corporate
employers. 3 Therefore, we do not address these issues and limit this opinion to
3
Over the course of this enforcement action, Knowles has hinted at possible
problems or objections he may have with the scope of the subpoenas. For
instance, at his deposition, Knowles conceded that some of the documents
requested in the subpoenas were in his possession, control, and custody and would
be found at his residence, which also functioned as his office. But Knowles has
also noted that since he was terminated as president, he has been instructed to
return all the documents belonging to Global Petrol Trading and Swiss EuroFund,
-6-
the question of the jurisdiction of the district court, based upon the extraterritorial
service of the Order to Show Cause, to enforce the SEC’s subpoenas duces tecum
Inc. Furthermore, Knowles’s counsel stated at Knowles’s deposition that the
objection to the request for corporate documents was based on the fact that these
were “private documents in a corporation.” He explained the subpoenas reflected
that the corporations were not under investigation and that he thus believed the
corporations were “outside the scope of the subpoena[s] issued by the SEC to
compel documents from a Bahamian bank.” He therefore asserted a general
privacy interest in “proprietary private information.” Knowles also indicated that
he chose not to produce the requested documents because he was not a signatory
on the bank accounts requested in the subpoenas and thus had no control over
them.
Knowles, however, indicated in his testimony that some of the subpoenaed
banking documents of which he was not the signatory were in his possession. He
did not produce these documents. In his appellate filings before this court,
Knowles does not elaborate on either the documents that are still in his possession
or the “privilege” asserted in his deposition colloquy. Instead, Knowles only
employs the alleged differences between his personal capacity and the corporate
capacities of both Global Petrol Trading and Swiss EuroFund, Inc., in order to
make the argument that the corporate contacts are not his own personal contacts.
We discuss this issue below.
Furthermore, the district court did not address the issue of what Knowles
must produce or his general claims of corporate “privilege.” Although Knowles’s
“privilege” arguments are somewhat oblique, as we discern them they fail. We
note that a corporation possesses no right to exercise a privilege against self-
incrimination and that a corporate officer cannot refuse to produce corporate
documents on the ground of self-incrimination. United States v. Rice, 52 F.3d
843, 846 (10th Cir. 1995); United States v. Hansen Niederhauser Co., 522 F.2d
1037, 1039 (10th Cir. 1975). To the extent that Knowles asserts that the SEC
lacks the power to require production of documents stored outside the territorial
boundaries of the United States, this issue has also been decided against his
position. Commodity Futures Trading Comm’n v. Nahas, 738 F.2d 487, 492 &
n.11 (D.C. Cir. 1984) (citing cases).
-7-
against Knowles. 4
A. Minimum Contacts
Under the due process clause of the Fifth Amendment, personal jurisdiction
over a party does not exist unless that party has sufficient “minimum contacts”
with the jurisdiction. International Shoe Co. v. Washington, 326 U.S. 310, 316
(1945). 5 The exercise of jurisdiction must not “offend ‘traditional notions of fair
play and substantial justice.’” Id. (quoting Milliken v. Meyer, 311 U.S. 457, 463
(1940)). Furthermore, the party’s activities within the jurisdiction must render it
4
Nor do we consider the issue of whether the district court acquired personal
jurisdiction over Knowles as a result of his attendance at the scheduled deposition
pursuant to the subpoenas. The SEC does not contend that Knowles’s attendance
and production of some responsive documents waived his objections to the
personal jurisdiction of the district court to enforce the subpoenas. Therefore,
this court will not address the issue of waiver.
5
The SEC argues, in the alternative, that the minimum contacts analysis of
International Shoe is unnecessary because the SEC served the administrative
subpoenas on Knowles within the boundaries of the United States. See Burnham
v. Superior Court, 495 U.S. 604 (1990). Although language in decisions of other
circuits arguably provides some support for the SEC’s theory, we have no need to
consider the issue and whether Burnham, which involved service of a summons in
the forum state, controls. See Mark Rich & Co. v. United States (In re Mark Rich
& Co.), 707 F.2d 663, 668 (2d Cir.), cert. denied, 463 U.S. 1215 (1983); FTC v.
Compagnie de Saint-Gobain-Pont-a-Mousson, 636 F.2d 1300, 1324 (D.C. Cir.
1980). Therefore, we express no opinion on whether an administrative agency,
which must apply to a court in order to enforce its subpoenas, may itself secure
personal jurisdiction over a person solely through service of subpoenas within the
United States and then may rely upon that jurisdiction to enforce compliance with
those subpoenas in a district court. Rather, we hold that Knowles independently
has sufficient minimum contacts with the United States to support the district
court’s exercise of personal jurisdiction enforcing the subpoenas.
-8-
foreseeable that the party should reasonably anticipate being haled into the forum
court. World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297 (1980).
Under Federal Rule of Civil Procedure 4(k)(2), the service of a summons
with respect to a claim under federal law in which Congress has authorized
worldwide service establishes personal jurisdiction over the defendant, subject to
constitutional limits. The Securities Exchange Act permits the exercise of
personal jurisdiction to the limits of the Due Process Clause of the Fifth
Amendment. SEC v. Unifund SAL, 910 F.2d 1028, 1033 (2d Cir. 1990). Congress
has provided for worldwide service of process in cases of the enforcement of
subpoenas issued by the SEC. 15 U.S.C. § 77v(a). The language of § 77v(a)
authorizes the service of process on a defendant in any district “of which the
defendant is an inhabitant or wherever the defendant may be found.” Id.; see also
15 U.S.C. §§ 78u(c), 80a-41(c) (employing language to permit service “wherever
[the defendant] may be found”); accord 15 U.S.C. § 78aa. Under § 80a-41(c), the
SEC is entitled to invoke the aid of the district court in which it is conducting its
investigation.
Knowles was served by the SEC with the Order to Show Cause outside his
home in Nassau, Bahamas. When the personal jurisdiction of a federal court is
invoked based upon a federal statute providing for extraterritorial service, the
relevant inquiry is whether the respondent has had sufficient minimum contacts
-9-
with the United States. See, e.g., Busch v. Buchman, Buchman & O’Brien, 11
F.3d 1255, 1258 (5th Cir. 1994) (worldwide service under 15 U.S.C. § 78aa);
accord United Liberty Life Ins. v. Ryan, 985 F.2d 1320, 1330 (6th Cir. 1993); cf.
United Elec. Workers v. 163 Pleasant St. Corp., 960 F.2d 1080, 1085 (1st Cir.
1992) (nationwide service under 29 U.S.C. § 1132(e)(2)); Go-Video, Inc. v. Akai
Elec. Co., 885 F.2d 1406, 1414-16 (9th Cir. 1989) (worldwide service under 15
U.S.C. § 22). Specific contacts with the district in which enforcement is sought,
in this case Colorado, are unnecessary.
The question then before this court is whether Knowles has sufficient
minimum contacts with the United States to enable the district court to exercise
personal jurisdiction over him consistent with the Due Process Clause of the Fifth
Amendment. We thus look to the constitutional sufficiency of the contacts with
the United States which Knowles concedes. Knowles acknowledges the following
contacts: (1) that he visited the United States “on a number of occasions” for
purposes of meeting with investment clients; (2) that during his visits to Florida
to meet with the sole shareholder 6 of Global Petrol Trading and Swiss EuroFund,
Inc., “he signed a handful of letters and checks”; and (3) he opened a brokerage
6
The SEC’s affidavit evidence establishes that there is indeed only one
shareholder of Global Petrol Trading and Swiss EuroFund, Inc. Knowles refers
only to “the shareholder” of these corporations. Employing the SEC’s term “sole”
thus clarifies the issue and is not inconsistent with either the import or the
phraseology of Knowles’s concession.
-10-
trading account for Global Petrol Trading during one of his trips to Florida.
Here the SEC has produced affidavits outlining more extensive contacts
between Knowles and the United States, mainly in the forms of active trading
through additional American brokerage accounts and the wiring of proceeds from
stock sales to Bahamian banks. Knowles, however, generally contests these
alleged contacts. He argues that they are based on hearsay and expert opinions
concerning securities industry practices and handwriting identification which are
without foundation. He contends that his actions on behalf of Global Petrol
Trading and Swiss EuroFund, Inc., are limited to those he has admitted.
The district court did not resolve these disputed jurisdictional facts. As a
result, this court is hesitant to consider the evidence of contacts presented by the
SEC. Based only on the contacts Knowles admits, however, we hold that the
district court does have personal jurisdiction over him.
B. Analysis
The source of a federal district court’s jurisdiction may be twofold:
specific and general jurisdiction. Specific jurisdiction may be exercised where
the defendant has “purposefully directed” its activities toward the forum
jurisdiction and where the underlying action is based upon activities that arise out
of or relate to the defendant’s contacts with the forum. Burger King, 471 U.S. at
472; Helicopteros Nacionales, 466 U.S. at 414 & n.8. A nonresident defendant
-11-
may be subjected to the forum’s general jurisdiction even where the alleged
activities of the defendant upon which the claims are based are unrelated to his
contacts with the forum. Doe, 974 F.2d at 147. The forum court’s general
jurisdiction may be invoked over the defendant on any matter if the defendant’s
unrelated contacts are sufficiently “‘continuous and systematic’” that the exercise
of jurisdiction is “‘reasonable and just.’” Helicopteros Nacionales, 466 U.S. at
415 (quoting Perkins v. Benguet Consol. Mining Co., 342 U.S. 437, 438, 445
(1952)). Our focus here is on specific jurisdiction.
In this case, all of Knowles’s admitted contacts with the United States
concern his activities as the former president of Global Petrol Trading and Swiss
EuroFund, Inc. Those contacts involve activities that are the very source of the
SEC’s interest in the two corporations. The underlying investigation and this
subpoena enforcement action arise out of Knowles’s contacts with the United
States and thus support the exercise of specific jurisdiction in order to secure
enforcement.
Knowles, however, contends that the contacts of the two corporations
cannot be factored into the analysis of whether he has minimum contacts with the
United States. His argument is that the jurisdiction of the district court based
upon these corporate contacts does not extend to him. Knowles is mistaken. As
the Supreme Court held in Calder v. Jones, employees of a corporation that is
-12-
subject to the personal jurisdiction of the courts of the forum may themselves be
subject to jurisdiction if those employees were primary participants in the
activities forming the basis of jurisdiction over the corporation. Calder v. Jones,
465 U.S. 783, 790 (1984). That the subpoenas were served on Knowles without
explicit reference to his former capacity as president of the two corporations has
no bearing on whether the district court has jurisdiction over him with regard to
the corporate activities in which Knowles was a primary participant. Personal
jurisdiction over him would extend at least as far as matters relating to the
activities of the two corporations in the forum in which he was a primary
participant. See Calder, 465 U.S. at 790; Perkins, 342 U.S. at 445-46.
Knowles has purposefully directed his activities on behalf of Global Petrol
Trading and Swiss EuroFund, Inc., toward the United States. See Burger King,
471 U.S. at 472. Moreover, those activities are directly related to matters in the
underlying SEC investigation. As Knowles concedes, he was the individual who
took the actions on behalf of the two corporations that are the basis of
jurisdiction. Knowles was then a primary participant in these activities. See
Calder, 465 U.S. at 789-90. Based upon his admitted contacts, the exercise of
specific jurisdiction over him is reasonable and just and satisfies traditional
notions of fair play. See Perkins, 342 U.S. at 445; International Shoe, 326 U.S. at
316.
-13-
Even a single purposeful contact may be sufficient to meet the minimum
contacts standard when the underlying proceeding is directly related to that
contact. See McGee v. International Life Ins. Co., 355 U.S. 220, 223 (1957).
Those contacts admitted by Knowles involve an ongoing business relationship and
a brokerage account. They are sufficient to support the exercise of specific
personal jurisdiction because the underlying SEC investigation concerns these
admitted contacts. See SEC v. Gilbert, 82 F.R.D. 723, 725-26 (S.D.N.Y. 1979)
(exercising personal jurisdiction over a Swiss bank whose only contacts with the
United States were four brokerage accounts maintained at three securities
dealers); see also Unifund SAL, 910 F.2d at 1033 (upholding personal jurisdiction
over foreign investors alleged to have conducted insider trading in purchasing
securities of a United States corporation traded on a United States exchange);
Perez-Rubio v. Wyckoff, 718 F. Supp. 217, 229-31 (S.D.N.Y. 1989) (upholding
personal jurisdiction over a foreign investment house and its individual officers
because the purpose of the corporation was to purchase United States securities
on United States exchanges, in part for United States citizens).
Knowles’s contacts involve trading activities on behalf of an American
shareholder of the corporations that employed him as president, through an
American brokerage firm, that were “purposefully directed” toward the United
States. See Burger King, 471 U.S. at 472. Moreover, they represent a deliberate
-14-
affiliation with the forum that renders foreseeable the possibility of being haled
into court in the United States at least as to those specific contacts. See id. at
478-82; World-Wide Volkswagen, 444 U.S. at 297. The actions Knowles took on
behalf of Global Petrol Trading and Swiss EuroFund, Inc., indicate that Knowles,
through the corporations, purposefully availed himself of the benefits and
protections of the laws of the United States. See Hanson v. Denckla, 357 U.S.
235, 253 (1958).
From these contacts, Knowles and the two corporations enjoyed the
privileges of conducting activities within the United States and he could
reasonably anticipate being subject to the jurisdiction of the United States. See
World-Wide Volkswagen, 444 U.S. at 297. Knowles’s continuing investment
contacts with United States citizens, companies, and brokerage accounts were not
random, fortuitous, or attenuated. See Keeton v. Hustler Magazine, Inc., 465 U.S.
770, 774 (1984); World-Wide Volkswagen, 444 U.S. at 299. Rather, they were
purposeful, continuous, and systematic. See Burger King, 471 U.S. at 472;
Perkins, 342 U.S. at 446-48. The district court’s exercise of specific personal
jurisdiction over him thus comported with “‘traditional notions of fair play and
substantial justice.’” See International Shoe, 326 U.S. at 316 (quoting Milliken,
311 U.S. at 463).
-15-
For the foregoing reasons, the district court’s order to Knowles to comply
with the SEC’s administrative subpoenas duces tecum is AFFIRMED.
-16-