Lizama maintains NMI court has jurisdiction over Texas law firm

Associate Judge Juan T. Lizama has maintained that the CNMI Superior Court has personal jurisdiction over a Texas-based law firm that was among many defendants sued by Bank of Saipan for their alleged involvement or for receiving benefits in the conspiracy to defraud the bank.

Lizama ruled that as he expressed in the November 2005 order, the BOS’ allegations are sufficient to establish personal jurisdiction over defendants Daniel Martens and Moseley Martens, LLP.

“While the Martens may encounter hardship in litigating in the CNMI, the Bank would encounter similar hardship in litigating in Texas,” said the judge in denying a motion for reconsideration filed by the Martens.

Lizama pointed out that the most significant information added by the BOS’ second amended complaint is the allegation that the Martens sent instruction to BOS to wire $4.5 million into their account.

He said there is also the allegation that the Martens represented that the money would be managed in accordance with the loan requirements.

Lizama said it is true that the bank’s claim against the Martens arose out of a loan improperly obtained by co-defendant Michael T. Wilson.

“However, according to the allegations, the Martens provided substantial, knowing assistance to Wilson in procuring the loan, and took a portion of the funds for their own use. The exercise of jurisdiction is reasonable,” he stressed.

“Given that the question of jurisdiction is wound up in the validity of the allegations, which are disputed matters of material fact, dismissal based on lack of jurisdiction is inappropriate at this time,” the judge added.

Court records show that BOS sued its former chief executive officer Tomas B. Aldan and his co-defendants Bert Douglas Montgomery, Wilson, the estate of Dusean Berkich, along with several other businessmen and lawyers from the U.S. mainland, including the Martens.

BOS sued the defendants for their alleged participation in a scheme that crippled the bank.

The Martens moved to dismiss the bank’s first amended complaint.

The court’s June 24, 2005 order suggested that the first amended complaint did not establish personal jurisdiction over the Martens, but granted the bank additional time for discovery.

BOS filed a proposed second amended complaint. Based on new allegations, the court’s Nov. 7, 2005 order denied the Martens’ motion.

The Martens, through counsel G. Anthony Long, then moved for reconsideration.

The first amended complaint alleged that Wilson secured a loan from the bank to acquire two credit card processing companies located in Texas.

The Martens allegedly assisted Wilson in this endeavor by helping him form two companies, Sweven Group, LLC, a Texas limited liability company, and FFS Transaction Corp., LLC, a Delaware limited liability company.

The loan was then obtained by either Wilson or the Sweven Group. Collateral for the loan was alleged to be a reserve account that Wilson maintained with Moseley Martens.

The loan was disbursed in two installments, one of $500,000 in November 2001 and one of $4.5 million in January 2002.

In both cases, the money was sent by wire transfer from BOS to a trust account managed by the Martens.

To facilitate the wire transfers, BOS alleged that its representative spoke repeatedly by telephone with Daniel Martens and or with his assistant.

The first amended complaint did not allege that the Martens had ever initiated contact with the Bank.

The court first concluded that there were insufficient contacts between the Martens and the CNMI for general jurisdiction to be found.

In the second amended complaint, it was explained that Wilson, and not the Martens received the $500,000 transfer into his account and wrongfully dispersed it.

It also alleged, among other things, that the Martens had previously represented Wilson in connection with a similar fraudulent schemes and failed to inform the bank of these transactions.

It alleged that defendants sent instruction to the bank to wire the $4.5 million into the Martens’ account, so the Martens could manage it.

After reviewing the second amended complaint, the court found that the minimum contacts requirement was satisfied by the volume of phone calls, the role the Martens played in arranging the wire transfer, the Martens’ knowledge of the bank’s role, and the Martens awareness that they would benefit from the transfer.

In their motion for reconsideration, the Martens argued that they cannot be subject to personal jurisdiction simply for being on the receiving end of phone calls placed by the bank. They asserted that the calls occurred after the transfer of funds.

But Lizama disagreed. He said the second amended complaint implies that the Martens were under an obligation to obtain permission from the bank before dispersing money to Wilson.

“This obligation presumably would have required the Martens to contact the bank. The bank representatives presumably made numerous phone calls because the Martens deliberately avoided their obligation,” Lizama said.

Lizama said the alleged concealment of what was happening to the funds after the transfer is one of the bases for the action.

The Martens, the judge noted, did not receive the $4.5 million wire transfer by chance. Rather, he said, they allegedly initiated the transfer by sending the bank wiring instructions.

“The Martens then allegedly availed themselves of some of the funds. This is sufficient activity to support a finding of personal jurisdiction,” he pointed out.

Grounds for fraud, the judge said, may also lie in the Martens’ alleged concealment of the use of the funds.