Hilgeman v. Nat'l Ins. Co. of Am., 547 F.2d 298 (5th Cir. 1977). · Go Syfert
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Hilgeman v. Nat'l Ins. Co. of Am., 547 F.2d 298 (5th Cir. 1977). Cases Citing This Book View Copy Cite
122 citation events (28 in the last 25 years) across 36 distinct courts.
Strongest positive: Tang v. Eastman Kodak Co., No. 3:20-cv-10462, 2021 WL 2155057 (D.N.J. May 27, 2021) · Strongest negative: Great W. United Corp. v. Kidwell, 577 F.2d 1256 (5th Cir. 1978)
Treatment trajectory · 1977 → 2026 · click a year to view as-of
1977 2001 2026
Statutes interpreted (leading-cases list)
#1 15 U.S.C. § 78v cited 1× in this case · 3 total citations of statute
How cited ↗
Cited for
At page 301 Defining material importance to fraudulent scheme14 citing cases“the 'act' contemplated by the statute need not be crucial, nor must 'the fraudulent scheme be hatched in the forum district.”5 citing courts quote it
  • Tang v. Eastman Kodak Co., No. 3:20-cv-10462, 2021 WL 2155057 (D.N.J. May 27, 2021).
    (The ‘act’ contemplated by the statute need not be crucial.)
  • In re Eastman Kodak Co. Sec. Litig., No. 6:21-cv-06418 (W.D.N.Y. May 27, 2021).
    (The ‘act’ contemplated by the statute need not be crucial.)
  • Ramzan v. GDS Holdings Ltd., No. 1:19-cv-09154 (S.D.N.Y. Sept. 30, 2019).
    Co. of Am., 547 F. 2d 298, 301 (5th Cir. 1977)).
  • Catholic Order of Foresters v. U.S. Bancorp Piper Jaffray, Inc., 337 F. Supp. 2d 1148 (N.D. Iowa 2004).published
    Indeed, the Ninth Circuit Court of Appeals explained some time ago that “ ‘[t]he “act” contemplated by the statute need not be crucial, nor must “the fraudulent scheme be hatched in the forum district.” ’ ” Securities Investor Protection C…
  • G.R.M. v. Equine Inv. & Mgmt. Grp., 596 F. Supp. 307 (S.D. Tex. 1984).published 3 cites
    Hilgeman, 547 F.2d at 301-302; Hooper v. Mountain States Securities Corp., 282 F.2d 195, 205 (5th Cir.1960), cert. denied 365 U.S. 814 , 81 S.Ct. 695 , 5 L.Ed.2d 693 (1961).
  • Bamford v. Hobbs, 569 F. Supp. 160 (S.D. Tex. 1983).published
    See id; Hilgeman v. National Insurance Co. of America, 547 F.2d 298, 301 (5th Cir.1977); cf. DeJames v. Magnificence Carriers, Inc., 491 F.Supp. 1276, 1282-83 (D.N.J.1980), affd. 654 F.2d 280 (3d Cir.1981) (accepting the national contacts…
  • Hill v. Turner, 492 F. Supp. 61 (M.D. Pa. 1980).published 2 cites
    Hilgeman v. National Insurance Company, 547 F.2d at 301; Bath Industries, Inc. v. Blot, 427 F.2d at 114 .
  • A. L. Black v. Acme Markets, Inc., 564 F.2d 681 (1st Cir. 1977).published 2 cites
    Co. of America, 547 F.2d 298, 301 (5th Cir. 1977); Oxford First Corp. v. PNC Liquidating Corp., 372 F.Supp. 191, 192 (E.D.Pa.1974); Kramer v. Scientific Control Corp., 365 F.Supp. 780, 787 (E.D.Pa.1973); Emerson v. Falcon Mfg.
  • Miller v. Asensio, 101 F. Supp. 2d 395 (D.S.C. 2000).published
    See Hilgeman, 547 F.2d at 302 (finding that “the sending of [a] premium payment notice into [the forum state] was a step of material importance to [the] ... consummation of the ongoing scheme”); Mariash v. Morrill, 496 F.2d 1138, 1144 (2d…
  • Sec. Inv. Prot. Corp. v. Vigman, 764 F.2d 1309 (9th Cir. 1985).published
    See also, Hilgeman v. National Insurance Co. of America, 547 F.2d 298, 301 (5th Cir.1977); Mariash v. Morrill, 496 F.2d at 1142 ; accord, GRM v. Equine Investment and Management, 596 F.Supp. 307, 311 (S.D.
Show 4 more citing cases
  • Sec. Inv. Prot. Corp. v. Vigman, 764 F.2d 1309 (1st Cir. 1985).published
    See also, Hilgeman v. National Insurance Co. of America, 547 F.2d 298, 301 (5th Cir.1977); Mariash v. Morrill, 496 F.2d at 1142 ; accord, GRM v. Equine Investment and Management, 596 F.Supp. 307, 311 (S.D.Tex.1984); Clement v. Pehar, 575 F…
  • Allegaert v. Warren, 480 F. Supp. 817 (S.D.N.Y. 1979).published
    See, e. g., Hilgeman v. National Insurance Co. of America, 547 F.2d 298, 301 (5th Cir. 1977); Mariash v. Morrill, supra, 496 F.2d at 1144-45 ; Hooper v. Mountain States Securities Corp., 282 F.2d 195, 204-05 (5th Cir. 1960), cert. denied,…
  • Clement v. Pehar, 575 F. Supp. 436 (N.D. Ga. 1983).published
  • In re Triton Ltd. Sec. Litig., 70 F. Supp. 2d 678 (E.D. Tex. 1999).published
At page 300 Affirming dismissal for improper service of process13 citing casesáffirming dismissal for lack of proper service of process where the state statute, as interpreted by the court, was not meant to cover the situation involved in the case1 citing court put it this way · 9 listed here
  • Scott v. Bluegreen Vacations Unlimited, Inc., No. 1:19-cv-01807 (E.D. Cal. June 18, 2020).
    Corp., 583 F.2d at 430–32 (citing Hilgeman v. National Insurance Co. 7 of America, 547 F.2d 298, 300 (5th Cir. 1977)); see also, Salameh v. Tarsadia Hotel, 726 F.3d 8 1124, 1132 (9th Cir. 2013) (affirming dismissal of claims under state an…
  • Gary Cooper v. Dao Hung, 485 F. App'x 680 (5th Cir. 2012).unpublished
    Co. of Am., 547 F.2d 298, 300 (5th Cir.1977)).
  • Carole Hyman Burstein v. State Bar of California, 659 F.2d 670 (5th Cir. 1981).published
    (áffirming dismissal for lack of proper service of process where the state statute, as interpreted by the court, was not meant to cover the situation involved in the case)
  • Meason v. Bank of Miami, 652 F.2d 542 (5th Cir. 1981).published 2 cites
    See Williamson v. Tucker, 645 F.2d 404 (5th Cir. 1981); Bell v. Health-Mor, Inc., 549 F.2d 342, 344 (5th Cir. 1977); Hilgeman v. National Insurance Co. of America, 547 F.2d 298, 300 (5th Cir. 1977).
  • Griffin v. United States, 637 F.2d 308 (5th Cir. 1981).published 2 cites
    “the claim is clearly foreclosed by prior decisions of the Supreme Court”
  • Fadjo v. Coon, 633 F.2d 1172 (5th Cir. 1981).published 2 cites
    Hilgeman v. National Insurance Co. of America, 547 F.2d 298, 300 (5th Cir. 1977).
  • Gutierrez v. Raymond Int'l, Inc., 484 F. Supp. 241 (S.D. Tex. 1979).published
    Co. of America, 547 F.2d 298, 300-01 (5th Cir. 1977).
  • Amfac Mortg. Corp. v. Arizona Mall of Tempe, Inc., 583 F.2d 426 (9th Cir. 1978).published 2 cites
    Hilgeman v. National Insurance Co. of America, 547 F.2d 298, 300 (5th Cir. 1977). 5 THE SECURITY ISSUE The term “security” is defined broadly under both the Securities Act of 1933 and the Securities Exchange Act of 1934.
  • A. L. Black v. Acme Markets, Inc., 564 F.2d 681 (1st Cir. 1977).published 2 cites
    Co. of America, 547 F.2d 298, 301 (5th Cir. 1977); Oxford First Corp. v. PNC Liquidating Corp., 372 F.Supp. 191, 192 (E.D.Pa.1974); Kramer v. Scientific Control Corp., 365 F.Supp. 780, 787 (E.D.Pa.1973); Emerson v. Falcon Mfg.
At page 302 Establishing venue based on premium payment notice mailing5 citing casessending a premium payment notice to Alabama found sufficient to establish venue in Alabama where the notice was part of a *405 scheme designed to extract ongoing annual payments from a plaintiff who had been fraudulently induced to purchase a security1 citing court put it this way
  • Luallen v. McConnell, 277 F. App'x 402 (5th Cir. 2008).unpublished 2 cites
    (sending a premium payment notice to Alabama found sufficient to establish venue in Alabama where the notice was part of a *405 scheme designed to extract ongoing annual payments from a plaintiff who had been fraudulentl…)
  • In re AES Corp. Sec. Litig., 240 F. Supp. 2d 557 (E.D. Va. 2003).published
    (plaintiff sent check in response to annual premium notice)
  • Abeloff v. Barth, 119 F.R.D. 315 (D. Mass. 1988).published 2 cites
    Hilgeman, supra at 302, n. 12 (5th Cir.1977) See also Bertozzi v. King Louie International, Inc., supra, 420 F.Supp. at 1171 .
  • Hill v. Turner, 492 F. Supp. 61 (M.D. Pa. 1980).published 2 cites
    Hilgeman v. National Insurance Company, 547 F.2d at 301; Bath Industries, Inc. v. Blot, 427 F.2d at 114 .
  • Miller v. Asensio, 101 F. Supp. 2d 395 (D.S.C. 2000).published
    (finding that “the sending of [a] premium payment notice into [the forum state] was a step of material importance to [the] ... consummation of the ongoing scheme)
At page 303 district court should set forth reasons for refusing to permit amendment1 citing case1 citing court put it this way
  • Truehart v. Blandon, 684 F. Supp. 1368 (E.D. La. 1988).published
    (district court should set forth reasons for refusing to permit amendment)
Other citing cases5 with no pin cite or quoted language on record
Retrieving the full opinion text from the archive…
Edward W. HILGEMAN, on behalf of himself and all other purchasers of "Security Charter Contracts" Issued and Sold by National Insurance Company of America, a North Dakota Corporation
v.
NATIONAL INSURANCE COMPANY OF AMERICA, etc.
No. 75-1724.
Court of Appeals for the Fifth Circuit.
Feb 18, 1977.
Published opinion
547 F.2d 298
1977 U.S. App. LEXIS 14666
J. Vernon Patrick, Jr., Barton S. Sacher, Birmingham, Ala., for plaintiff-appellant., Alan W. Heldman, Birmingham, Ala., for defendants-appellees.
Godbold, McCree, Tjoflat.
Cited by 25 opinions  |  Published
1 passages pin-cited by 2 cases
Pinpoint authority: bottom 21%
Citer courts: D. New Jersey (1) · W.D. New York (1)
GODBOLD, Circuit Judge:

The facts of this case are set forth in our earlier decision, Hilgeman v. National Insurance Company, 444 F.2d 446 (CA5, 1971). In that appeal we were unable to determine the basis upon which the district court dismissed Hilgeman’s complaint, and we remanded the case for clarification of the dismissal order.

[*300] The only additional facts of relevance to the disposition of the case before us are that while plaintiff resided in Alabama NI-COA sent to him what it termed a “premium” notice and he paid that “premium.”

On remand the district court added to its earlier dismissal order by holding that the Security Charter Contracts were not “securities” within the meaning of the federal Securities Acts and thus the court lacked subject matter jurisdiction. The district court has not reconciled its dismissal for lack of subject matter jurisdiction with the teachings of Bell v. Hood, 327 U.S. 678, 66 S.Ct. 773, 90 L.Ed. 939 (1946), as required by our earlier decision, 444 F.2d at 446. As we noted in Mobil Oil Corp. v. Kelley, 493 F.2d 784, 786 (CA5), cert. denied, 419 U.S. 1022, 95 S.Ct. 498, 42 L.Ed.2d 296 (1974), Bell v. Hood establishes the principle that “a complaint that alleges the existence of a federal question establishes jurisdiction, even though the court ultimately decides that the plaintiff’s federal rights were not violated.” Dismissal for lack of jurisdiction is appropriate only where the court decides that the federal claim is insubstantial, i. e., frivolous, or where the claim is clearly foreclosed by prior decisions of the Supreme Court. Mays v. Kirk, 414 F.2d 131, 135 (CA5, 1969). Plaintiff’s claim has not been foreclosed by any decision of the Supreme Court, nor is it so lacking in plausibility that it can be said to be frivolous.[1] Therefore, the complaint cannot be dismissed for lack of subject matter jurisdiction. Nonetheless, if the contracts are not “securities” plaintiff’s claims could still be dismissed for failure to state a claim upon which relief can be granted. Therefore, we reverse the dismissal by the district court with directions that it reconsider its decision in light of our holding today in Grainger v. State Security Insurance Co. (CA5, 1977) No. 75-3061, 547 F.2d 303.

The district court went on to say that assuming that the Security Charter Contracts were securities, it would still dismiss the plaintiff’s complaint on the following grounds: (a) lack of sufficient service of process on NICOA, Moody and Sando; (b) lack of personal jurisdiction over NICOA, Sando and Moody; (c) lack of proper venue as to the claims against NICOA, Moody and Sando; and (d) failure to state a claim upon which relief can be granted against Moody and Empire on the ground that those two defendants did not become controlling persons of NICOA until two years after the alleged misrepresentations were made to the plaintiff.[2] Plaintiff appeals from the court’s clarifying order as well as from its denial of plaintiff’s motion to be allowed to amend its complaint to allege violations of the 1940 Investment Company Act.

Service of process was made on NI-COA and Empire by substituted service upon the Alabama Superintendent of Insurance pursuant to state law.[3] Service of process under the Alabama Unauthorized Insurers Process Act is limited to suits, actions or proceedings “arising out of” contracts of insurance. While the courts of Alabama have not interpreted the “arising out of” language in the statute, the Alabama legislature in its statement of the Act’s purpose, declared that “it is a subject of concern that many residents of this state hold policies of insurance issued or delivered in this state by insurers while not authorized to do business in this state, thus presenting to such residents the often insuperable obstacle of resorting to distant forums for the purpose of asserting legal rights under [*301] the policy.”[4] [Emphasis supplied.] The appellant does not assert that he holds an insurance policy and that the policy gives rise to enforceable rights. Instead, he maintains that he was sold a “security” within the meaning of the federal Securities Acts, and that he has a cause of action arising under those Acts.[5] The Alabama statute used by plaintiff was meant to cover the former situation, not the latter.[6] The court below was correct in dismissing the claims against Empire and NICOA for lack of proper service of process.

Service of process was made on Moody and Sando by U.S. marshals pursuant to the service of process provisions of the federal Securities Acts, 15 U.S.C. §§ 78v, 78aa. The court below held that service was insufficient because neither Moody nor Sando is “found or is an inhabitant or transacts business in Alabama nor is the suit based upon an offer or sale that took place in Alabama.” Service of process under the 1933 and 1934 Acts is nationwide, and may be served “in any . . . district of which the defendant is an inhabitant or wherever the defendant may be found.” Id. The language referred to by the district court is the language governing venue and in personam jurisdiction under the 1933 Act. Therefore, the court’s conclusion that there was no adequate service of process upon Moody and Sando is incorrect.

The court below also held that it lacked personal jurisdiction over NICOA as well as Sando and Moody, and that venue was improper with respect to these three defendants. In doing so, the district court erred. Both the personal jurisdiction and venue issues are governed by § 27 of the Securities Exchange Act of 1934, 15 U.S.C. § 78aa.[7] According to § 27 any suit to enforce liability under the 1934 Act may be brought in the district where “any act or transaction constituting the violation occurred.”[8] The “act” contemplated by the statute need not be crucial, nor must “the fraudulent scheme be hatched in the forum district.” Hooper v. Mountain State Securities Corporation, 282 F.2d 195, 204 (CA5, 1960). But, as we pointed out in Hooper, the jurisdictional act cannot be trivial; it must be “of material importance to the consummation of the scheme.” Id. at 205.[9] According to the affidavits submitted by the plaintiff, NICOA sent an annual premium notice to the plaintiff at his home in the Northern District of Alabama, and the plaintiff paid the “premium” that was demanded by a check drawn on an Alabama[*302] bank. In spite of this mailing the district court concluded that “[n]o act or transaction constituting an important step in the transaction took place in [the Northern District of Alabama].” The court reached this conclusion not by examining the materiality of the “premium” notice, but by limiting the scope of plaintiff’s complaint to the alleged misrepresentations made in the state of Washington.[10]

The coverage of 10b-5 is not confined to misrepresentations and non-disclosures. 1 A. Bromberg, Securities Law: Fraud, § 4.3 (1975). Rule 10b-5 also prohibits any person from employing a “device, scheme or artifice to defraud” or from engaging in “any act, practice or course of business which operates or would operate as a fraud or deceit upon any person.” 17 C.F.R. § 240.10b-5 (1976). Reduced to its essentials, the injury of which the appellant complains is not simply that he was fraudulently induced to purchase a security by making one lump sum payment, as is the usual case. Instead he complains that he is the victim of an ongoing scheme whose ultimate aim was to extract a “premium” from him each year on a continuing basis. In other words, each payment to the defendants represented, in the words of Hooper, a yearly “consummation of the scheme.” Viewing the allegations in this manner, there can be little doubt that the sending of the premium payment notice into Alabama was a step of material importance to that year’s consummation of the ongoing scheme, i. e., extracting an annual payment from the plaintiff.[11] Thus, jurisdiction and venue are proper as to NICOA and under the “co-conspirator theory” proper as to its co-defendants.[12]

Finally, the court below dismissed the claims against Moody and Empire on the ground that they did not become controlling persons of NICOA until two years after the alleged misrepresentations took place. As we have already discussed, the Security Charter Contracts, if indeed they were securities, were not the usual type of security which is bought with a single payment. The arrangement allegedly made between the plaintiff and NICOA called for yearly payments. The plaintiff does maintain that Moody and Empire were controlling persons while these payments were being made, i. e., while NICOA was actively engaged in parting plaintiff from his money. Whether a defendant is a controlling person within the meaning of § 20 of the 1934 Act is a complex question of fact, Hill York Corp. v. American International Franchises, Inc., 448 F.2d 680, 694 n. 20 (CA5, 1971); Klapmeier v. Telecheck International, Inc., 315 F.Supp. 1360, 1361 (D.Minn.1970), and the facts of this case as developed may show that Moody and Empire[*303] were not controlling persons. Nevertheless, these two defendants cannot be eliminated as controlling parties merely by artificially limiting the scope of plaintiff’s complaint to the alleged fraudulent misrepresentations.

Plaintiff also challenges the validity of the district court’s refusal to allow him to amend his complaint to allege violations of the 1940 Investment Company Act. The district court set forth no reasons for its ruling. We will not speculate as to the district court’s reasoning. If upon remand of this case the district court wishes to adhere to its earlier position, it should set forth its reasons for doing so, bearing in mind the mandate of F.R.Civ.P. 15(a) that leave to amend “shall be freely given when justice so requires.”

AFFIRMED in part, REVERSED and REMANDED in part.

1

As Professors Wright and Miller have said,

“The test for dismissal is a rigorous one and if there is any foundation of plausibility to the claim federal jurisdiction exists.”

C. Wright and A. Miller, 13 Federal Practice and Procedure § 3504 at 428 (1975).

2

The district court also dismissed the claims against Moody and Empire on the ground that the court lacked “subject matter jurisdiction” because the two were not “controlling persons” at the relevant times. Our comments concerning the dismissal for lack of subject matter jurisdiction because the contracts were not “securities” have equal applicability here.

3

Ala.Code, Tit. 28A § 215 (Supp.1973), formerly Ala.Code, Tit. 28, § 413 (Recomp. 1958).

4

Ala.Code, Tit. 28A § 214 (Supp.1973).

5

We do not imply that a state’s provision for personal jurisdiction over insurance companies can never be used where federal securities claims are asserted. We base our decisions solely on our interpretation of the Alabama statute.

6

Cf. Ross v. American Income Life Ins. Co., 232 S.C. 433, 102 S.E.2d 743 (1958), where it was held that a similar statute containing “arising under” language did not cover suits for fraud in the inducement.

We have been given no explanation of why, given the liberal nationwide service of process provisions of the federal Securities Acts, particularly § 27 of the Securities Exchange Act of 1934, 15 U.S.C. § 78aa, the plaintiff made use of the Alabama insurance statute to effect service of process when the whole thrust of his action was that he held a security rather than an insurance policy. Plaintiff obtained service of process on the two non-corporate defendants under the federal statute.

7

While the plaintiff in this case states claims under the 1933 Securities Act as well as the t 1934 Act, the general rule' is that where a plaintiff states claims under both the ’33 and ’34 Acts, the less restrictive jurisdiction and venue provisions contained in § 27 of the 1934 Act are to be applied, e. g., Arpet Ltd. v. Homans, 390 F.Supp. 908, 911 (W.D.Pa.1975); Sohns v. Dahl, 392 F.Supp. 1208, 1214 (W.D.Va.1974); Burkhart v. Allson Realty Trust, 363 F.Supp. 1286, 1292 (N.D.Ill.1973); S.E.C. v. National Student Marketing Corp., 360 F.Supp. 284, 291 (D.D.C.1973).

9

Other courts have expressed this standard in slightly different terms, e. g., Bath Industries, Inc. v. Blot, 427 F.2d 97, 114 (CA7, 1970) (“All that is required is but one act within the forum district which represents more than an immaterial part of the allegedly illegal events.”) We see no significant difference between such a formulation and the “material importance” language in Hooper.

10

“It is clear from the complaint that the ‘offer and sale’ took place in the State of Washington. . . . The alleged securities law violation was misrepresentations allegedly made in Washington at the time of sale of the policy.” Hilgeman v. National Ins. Co. of North America, No. 69-602 (N.D.Ala., July 16, 1974).

11

To establish jurisdiction and venue under § 27 the defendant need not be physically present in the forum district nor need he commit more than a single act in the district if that act is important to the consummation of the scheme. E. g., Hooper v. Mountain States Securities, supra; Sarratt v. Walker, 405 F.Supp. 132 (D.S.C.1975); Mayer v. Development Corp. of America, 396 F.Supp. 917 (D.Del.1975); Oxford First Corp. v. PNC Liquidating Corp., 372 F.Supp. 191 (E.D.Pa.1974).

12

The “co-conspirator theory” was described by one court in the following terms:

“Plainly stated, this doctrine provides that in a multi-defendant securities proceeding, where a common scheme of acts or transactions to violate the securities act is alleged, if venue is established for any of the defendants in the forum district there is sufficient justification to establish venue as to the other defendants, even in the absence of any contact or substantial contact by any one defendant within that district.” (Footnote omitted.)

S.E.C. v. National Student Marketing Corp., 360 F.Supp. 284, 291-92 (D.D.C.1973). This theory has been adopted by many federal courts, including this circuit, e. g., Sargent v. Genesco, Inc., 492 F.2d 750, 759 (CA5, 1974); Klepper Krop, Inc. v. Hanford, 411 F.Supp. 276 (D.Neb.1976); Zorn v. Anderson, 263 F.Supp. 745 (S.D.N.Y. 1966).