I think I'll go ahead and post this now, in advance. You, the public, have a right to know what is happening.
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Case No. A102812, Division Three
IN THE
COURT OF APPEAL
FOR THE FIRST DISTRICT OF THE STATE OF CALIFORNIA
OLIVIER L. F. ASSER,
Plaintiff and Appellant,
vs.
CHRISTOPHER REA and TRADING PLACES, INC.,
Defendants and Respondents.
Appeal of Order Granting Motion of Christopher Rea and Trading Places, Inc. to Quash Service of Process and Dismiss on Personal Jurisdiction Grounds
Superior Court Case No. 413497
Unfair Competition Case (See Cal. Codes §§17200, 17203 and 1750)
Hon. Ronald E. Quidachay, Presiding Judge
OLIVIER L. F. ASSER
Appellant in propria persona
__________________________________________________
ARGUMENT
I. Respondents’ motion to quash and dismiss is founded upon unmistakable perjury
Defendant Christopher Rea (“Rea”) has at this early stage already committed multiple acts of perjury before the Superior Court. His and Trading Places, Inc.’s (“Trading Places,” and collectively “Respondents”) argument against jurisdiction in California is based almost exclusively upon an eagerness to falsify the factual record rather than face a trial by jury in this State. Thus far, Respondents have been successful.
Further compounding the effect of Respondent perjury, the Brokerage Defendants have before this Court introduced copies of Rea’s perjured declaration as exhibits in support of their opposition to Appellant’s two writ petitions. It is therefore apparent that the defendants do both value and rely on Mr. Rea’s mendacity before the trial court.
A. Preposterously, and under oath, Rea claims neither he nor Trading Places ever gave investment advice
As alleged in the Complaint, Rea and Trading Places charged their clients up to $500 monthly for securities recommendations, investment advice they claimed was independent and unbiased. Rea and his counsel of record made the following patentedly false statements in support of the motion to quash:
“Trading Places never had any advisory function whatsoever.”
Appellant’s Appendix, Ex. IV: Reply Memorandum Supporting Christopher Rea’s Motion to Quash and Trading Places, Inc.’s Motion to Quash or to Dismiss on Forum non Conveniens Grounds at Supplemental Declaration of Christopher Rea Supporting Motion to Quash or Dismiss on Forum non Conveniens Grounds, p.105, no.3.
“I declare under penalty of perjury under the laws of the States of California and Illinois that the foregoing is true and correct.”
DATED: February 13, 2003
[Signature of Christopher Rea]
Id, p.108.
“Contrary to Plaintiff’s Opposition, Trading Places was not a ‘day trading advisory site.’ [citation omitted] Also, contrary to Plaintiff’s Opposition, Plaintiff was not ‘given trading recommendations on securities transactions’ at that site.” [citation omitted]
Id, p.94, 2.
“In fact, Trading Places had no advisory function whatsoever.”
Id, p.94, fn. 1.
Compare these statements with the following, an article written by the Pulitzer Prize-winning journalist of the New York Times, Ms. Gretchen Morgenson, published October 15, 2000:
“The bottom line is, we call stocks on an hourly, minute-to-minute basis, and our only intention is to offer an advantage and opportunity for our members to make money. That is what we strive for and live for.” – Christopher Rea
Ex. VI: The New York Times: “Chat Room Guru’s Stature Drops with the Technology Sector,” p.112, 6.
As Trading-Places's membership grew, so did Mr. Rea's ability to move stock prices. In early February 1999, for example, he recommended shares of two discount brokerage firms, J. B. Oxford Holdings and Siebert Financial. His throng of followers, by then more than 100, helped to push Siebert from $19.13 to $49.50 in two days and to propel Oxford from $12 to $25.75 in one session. Id, p.114, 8.
Mr. Rea recalled recommending RMI stock at around $7, where it was trading at the beginning of February, and predicting that it would rise to $90. Id, p.118, 4.
So, quite contrary to the declarations he sworn out under penalty of perjury before the Superior Court, in fact Rea has previously in the New York Times admitted to making securities recommendations to his clients.
However, there is far more than newspaper articles alone to disprove Rea and defense counsel’s statements. One need merely review the statements Respondents published on their very own website. The following exhibit is an official Trading Places “Desk Log,” or recorded transcript of Respondent investment advisory operations. Ex. VII: Trading Places “Trade Desk” Transcript: October 2, 1999. Falling squarely within the timeframe alleged in the Complaint, it is a record of some 129 pages, containing hundreds of securities recommendations made by both Rea, a.k.a. “Merlin,” and Trading Places. In the first hour alone, Respondents issued no less than 67 separate recommendations to their clients – an average of one recommendation every 54 seconds.
This record can also be located at the following Internet address:
web.archive.org
It can be located there, unless defendant Rea has blocked access to the historical record, as it appears he has already blocked access to the entire Trading-Places.net website. See Ex. VIII: Trading Places Archive Blocked by Owner. However, before the records were blocked – indeed before he filed this action – Appellant recorded much of the Trading-Places.net website relevant to Respondent operations. This includes a number of documents demonstrating the nature of Rea and Trading Places’ investment advisory function. See Ex. IX: Trading Places Performance Claims. Before it was deleted, this document was located at trading-places.net. In relevant part, it states:
94% Accuracy On All Plays
NYSE & NASDAQ Plays
Real Time Stock Alerts
Short Call Specialists
Real time stock play alerts
Nasdaq market specialists
All plays directed by Merlin
Long, Short, Hold and Sell Alerts in real time
Furthermore, in an official Trading Places transcript dated July 10, 2000, Rea stated as follows:
12:19:21 [Merlin] URGENT: All Traders Consider BUY: MRVC Always use a stop loss
12:19:21 [Merlin] OK for new members the above alert means you should buy some MRVC
12:27:43 [Merlin] point here is that nothing has changed I can show you logs from a year ago, with exact same setup…I have always posted alerts and singular stock symbols
Ex. X: Trading Places ‘Trade Desk’ Transcript: July 10, 2000, pp.252-253.
Thus did Respondents most certainly give investment advice, contrary to their many false statements, including a number made under penalty of perjury, sworn and signed by Rea. Furthermore, contrary to any supposed “disclaimers” Respondents might claim would nullify the cause and effect of the investment advice, controlling legal precedent holds that Rea and Trading Places are to be regarded as investment advisers. In SEC v. Park, the infamous online guru Sun Yoo Oh Park, a.k.a. “Tokyo Joe,” attempted a similar defense. According to a litigation release published by the Securities and Exchange Commission on March 8, 2001:
“Before submitting his settlement offer, Park moved to dismiss the Commission's Complaint, arguing primarily that, since he dispensed his stock picks and investment advice over the Internet, he was not an "investment adviser" within the meaning of the Advisers Act and that the antifraud provisions of that Act could not be constitutionally applied to him. The District Court denied Park's motion to dismiss in its entirety and held that the Commission's Complaint sufficiently alleged that Park was an "investment adviser" under the Advisers Act and that Park was subject to that Act's antifraud provisions. SEC v. Park, 99 F. Supp. 2d 889 (N.D. Ill. 2000). Efforts by Park to seek interlocutory review of the District Court's ruling were rejected by the Seventh Circuit. “
Ex. XI: SEC Litigation Release 16925, p.257, 2.
Therefore, it is beyond reasonable dispute that Respondents did issue investment advice to their clients. Having established this critical fact, the question is whether or not Respondent operations are subject to California jurisdiction. They are.
II. Respondents deliberately targeted California
A. Respondents have at no time denied that many of their clients were residents of this State
Appellant has filed claims on behalf of the General Public in this action, pursuant to California Codes §§17200, 17203 and 1750. Respondents did not only damage Appellant; they damaged thousands of others, many of whom were and are their California-resident clients. They have never denied successfully targeting California and its residents for their operations. In and of itself, this fact is more than sufficient cause to establish jurisdiction over Respondents.
B. Respondents have conceded doing business in California, both off and on the Internet
1. Respondents conducted ongoing business in California by generating kickback revenues from commissions paid in California
In their motion to quash, Respondents attempted to refute Appellant’s allegations, yet they thereby did concede conducting ongoing business in California:
“6. Trading Places’ site included advertisements for broker-dealers and links to them. But contrary to Plaintiff’s claims, these connections were paid for by the broker-dealers on a flat-fee basis that was not related to commissions generated by customers.”
Ex. I : Memorandum Supporting Christopher Rea’s Motion to Quash and Trading Places, Inc.’s Motion to Quash or Dismiss on Forum non Conveniens Grounds, at Declaration of Christopher Rea Supporting Motion to Quash or Dismiss on Forum non Conveniens Grounds, p.34, no.6.
Respondents at no time denied that one of these firms is, as alleged in the Complaint, Brokerage Defendant Manhattan Beach Trading, Inc. (“MB Trading”). This firm is and was at all relevant times located in El Segundo, California. So Respondents conducted ongoing business in California, contracting with a California company for regular payments. These payments were not “flat-rate”; they were based on the commissions Respondents’ clients paid MB Trading, which were then, from California, kicked back to Respondents, as a reward for the false and excessive investment advice Respondents provided their unwitting clients, which generated those commissions in the first place. Furthermore, this scheme was not a one-time occurrence, but continued for quite some time, involving thousands of Respondent securities recommendations inducing thousands of Appellant securities transactions and, where the other MB Trading and Trading Places clients are concerned, in the aggregate, hundreds of thousands of transactions, if not more than one million. Therefore, as Respondents contracted with a California brokerage firm for a percentage of the commission payments made in California, whether by resident or non-resident clients, they conducted continuous and systematic business in California such that jurisdiction, both general and specific, is more than reasonable and proper.
2. Respondents agreed that their Internet-based services were performed in California and governed by California law
Rea himself concedes:
“9. For a brief period in 1999, Trading Places contracted with a California company to use its servers for the operation of Trading Places’ business.”
Ex. IV, p.106, no.9.
That company is ChatSpace, Inc., n.k.a. Akiva, Inc., of Carlsbad, California. Contrary to Respondent assertions, Trading Places did not merely employ the computer servers of ChatSpace; it also purchased investment advisory software specifically tailored to Trading Places specifications, through which Trading Places distributed its investment advisory services to its clients. It also billed its clients in California, through ChatSpace “e-commerce” software, also located on the same Carlsbad, California computer servers. Moreover, the End User License Agreement in effect at all relevant times between ChatSpace and investment advisers such as Respondents contained the following key clause:
“This Agreement shall be governed by and construed under California law as such law applies to agreements between California residents entered into and to be performed within California, except as governed by Federal law.”
Ex. III: Opposition to Motion of Christopher Rea and Trading Places to Quash or to Dismiss on Forum non Conveniens Grounds, p.83, 3.
Therefore, by purchasing and using ChatSpace software and computer servers in order to distribute its investment advice, Respondents agreed not only that these services would be performed in California, but that they would be governed by California law.
3. Respondents’ use of a California distributor is more
than sufficient to establish jurisdiction over them
An illustrative case is CompuServe vs. Patterson. In that case, a Texas resident using the Ohio computer servers of CompuServe, Inc. to distribute his products and services was held subject to Ohio jurisdiction. The Sixth Circuit Court of Appeals ruled that by disseminating Patterson’s products and services through their computer servers, CompuServe was effectively Patterson’s commercial distributor:
“…the crucial federal constitutional inquiry is whether, given the facts of the case, the nonresident defendant has sufficient contacts with the forum state that the district court's exercise of jurisdiction would comport with "traditional notions of fair play and substantial justice." International Shoe Co. v. Washington, 326 U.S. 310, 316, 90 L. Ed. 95, 66 S. Ct. 154 (1945) (quoting Milliken v. Meyer, 311 U.S. 457, 463, 85 L. Ed. 278, 61 S. Ct. 339 (1940)); Reynolds, 23 F.3d at 1116; Theunissen, 935 F.2d at 1459. This court has repeatedly employed three criteria to make this determination:
”First, the defendant must purposefully avail himself of the privilege of acting in the forum state or causing a consequence in the forum state. Second, the cause of action must arise from the defendant's activities there. Finally, the acts of the defendant or consequences caused by the defendant must have a substantial enough connection with the forum to make the exercise of jurisdiction over the defendant reasonable. Reynolds, 23 F.3d at 1116 (quoting In- Flight Devices, 466 F.2d at 226); see also Southern Mach. Co. v. Mohasco Indus., 401 F.2d 374, 381 (6th Cir. 1968) (adopting the above test for "determining the present outer limits of in personam jurisdiction based on a single act").
“We conclude that Patterson has knowingly made an effort--and, in fact, purposefully contracted--to market a product in other states, with Ohio-based CompuServe operating, in effect, as his distribution center. Thus, it is reasonable to subject Patterson to suit in Ohio, the state which is home to the computer network service he chose to employ.”
CompuServe, Inc. v. Patterson (1996), 89 F.3d 1257 ; 1996 U.S. App. LEXIS 17837 at 13.
The facts in this case are strikingly similar: here we have Respondents distributing their investment advice through the computer software and server infrastructure of the Carlsbad, California company, ChatSpace, and acknowledging that, through a similar End User License Agreement, distribution was to be performed in the State of California.
The Sixth Circuit continues:
“In fact, it is Patterson's relationship with CompuServe as a software provider and marketer that is crucial to this case. The district court's analysis misses the mark because it disregards the most salient facts of that relationship: that Patterson chose to transmit his software from Texas to CompuServe's system in Ohio, that myriad others gained access to Patterson's software via that system, and that Patterson advertised and sold his product through that system. Though all this happened with a distinct paucity of tangible, physical evidence, there can be no doubt that Patterson purposefully transacted business in Ohio. See Plus System, Inc. v. New England Network, Inc., 804 F. Supp. 111, 118-19 (D. Colo. 1992) (finding personal jurisdiction over a nonresident computer network defendant because, inter alia, that defendant benefited from the intangible computer services provided by the plaintiff's own computer network system); cf. United States v. Thomas, 74 F.3d 701, 706-07 (6th Cir. 1996) (upholding a conviction under federal obscenity laws where the defendants transmitted computer-generated images across state lines, despite the defendants' argument that the images were intangible), petition for cert. filed, 64 U.S.L.W. 3839 (U.S. June 10, 1996) (No. 95-1992).”
Id, at 19, 20.
The circumstances in the present case are yet again virtually identical: Respondents formed an ongoing relationship with a California company, their distributor, ChatSpace, to deploy its investment advisory software and computer servers so that they might continuously provide commercial services – i.e., the investment advice for which they charged their thousands of clients fees of up to $500 monthly – from California, to their clients, residents of many states across the country, including California.
4. Appellant’s trading platform approximated his physical presence in this State
Appellant is not a resident of the State of California. This fact apparently held great weight with the Superior Court. The Hon. Judge Ronald E. Quidachay alluded to this, when he stated:
“Oh, that’s right. The Plaintiff is in Maryland. That’s right. So the Plaintiff’s in Maryland.
“And I don’t think the State of California has any interest in this particular case to tell you the truth.”
Reporter’s Transcript of Proceedings (March 13, 2003), p.2, 4-5.
From this record, it appears the Superior Court failed to properly consider a number of critical facts: (1), that Respondents’ distributor was located in California; (2), that a substantial source of their revenues were derived from their business contact with the California firm MB Trading; (3), that hundreds if not thousands of Respondent clients were and are California residents; and, not least, (4), that virtually all of Appellant’s damages were sustained in the State of California, in his El Segundo, MB Trading account.
Indeed, the latter Appellant contact with the State of California approximates his physical presence in this State. For example, should any of the defendants have wished to file suit against Appellant in California, for whatever claims arising out of or relating to his trading activities, then by dint of those activities being performed in El Segundo, he would not have had a credible case against jurisdiction of the California Courts.
Appellant concedes that in CompuServe the Sixth Circuit notes that plaintiff CompuServe is an Ohio resident company. The Court is careful not to extend its holding to for example an Alaska-resident plaintiff claiming it received some random computer virus through Ohio servers. In this action, however, though Appellant is admittedly not a resident of this State, his allegations and claims do approximate his physical presence here. Therefore, CompuServe is on point. The vast majority of Appellant’s damage claims arose in California, in his MB Trading account, which could reasonably be described as his base of trading operations, or, in securities industry parlance, his “trading platform.” The California resident brokerage firm MB Trading provided Appellant access to the securities markets, for which it charged him substantial fees of hundreds of thousands of dollars that were paid in California, which were in turn kicked back to Respondents, as a reward for the false advice they provided. The foundation of his claims therefore lies in this State: he paid Respondents investment advisory fees here; the false investment advice was distributed here; and the kickback payments which induced the false investment advice originated here.
Contrary to indications of Judge Quidachay’s en banc ruling, whether or not Appellant was at the time a resident of California, though it likely would have been a supportive circumstance, is nevertheless not a requirement for jurisdiction in this action::
“The Supreme Court has noted, on more than one occasion, the confluence of the "increasing nationalization of commerce" and "modern transportation and communication," and the resulting relaxation of the limits that the Due Process Clause imposes on courts' jurisdiction. E.g., World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 293, 62 L. Ed. 2d 490, 100 S. Ct. 559 (1980) (quoting McGee v. International Life Ins. Co., 355 U.S. 220, 223, 2 L. Ed. 2d 223, 78 S. Ct. 199 (1957)). Simply stated, there is less perceived need today for the federal constitution to protect defendants from "inconvenient litigation," because all but the most remote forums are easily accessible for the pursuit of both business and litigation.” Id.
CompuServe, Inc. v. Patterson (1996), 89 F.3d 1257; 1996 U.S. App. LEXIS 17837 at 10.
In the not-too distant past, before the rapid growth of national communications infrastructure, the instantaneous execution of securities transactions through a California brokerage firm likely would have required Appellant’s physical presence in this State. For example, “instant execution” brokerage firms such as the defendants MB Trading and CyberTrader did not exist before 1997. In order to gain instant access to the markets before this time, a seat on one of the stock exchanges was an absolute prerequisite. The changes in the markets and their infrastructure after 1996 allowed the Brokerage and Investment Advisory Defendants to provide their clients this “instant access.” The exchange was brought home to the individual investor. Indeed, the defendants repeatedly compared brokerage “instant execution” infrastructure to an actual stock exchange, a case in point being the electronic communications route or “ECN” owned by the directors of Brokerage Defendant Terra Nova Trading, LLC, Archipelago, or “ARCA.” This order route, which grants instant access to the stock markets, has recently been granted exchange status. Clients were thus led to believe that they were virtual floor traders, with instant access to the securities markets, and a theoretical ability to for the first time compete with professionals, such as the staff traders and market-makers, or “MM’s,” of leading Wall Street investment banking institutions. In the past, this would have required the considerable expense of purchasing a seat on the exchange, and actual physical presence on the trading floor. No longer. Yet, though the Internet has facilitated long-distance access, the “floor” nevertheless remains the brokerage firm where the trades are, albeit now electronically, placed and sent to the markets. In this case, that firm was MB Trading, located at all relevant times in El Segundo, California. Appellant’s trading floor, then, was always located in California: both the adviser broadcasting advice on which transactions to make (Respondents) and the floor trader executing those transactions in the marketplace (Brokerage Defendant MB Trading).
In order to graphically demonstrate such a typical trading platform, Appellant attaches a number of actual photographs he took of his computer screen in June, 2000. Ex. XII: Trading Platform Photographs. These photographs demonstrate how a client of the Brokerage Defendants and of Respondents would view his trading floor, his access to the markets from what was termed a “remote trading location.”
In photograph no.1, page 258, on the left is the actual “instant execution” order entry software of Brokerage Defendant CyberTrader, “streaming live” during market hours. On the right, Respondent investment advisory “chat.” At the top right are the analysts, in blue. These are “C2,” Christopher Curran, former Vice-President of Trading Places and “Merlin,” Defendant Rea.
Defendant Rea, among his many perjured statements, swore to the truth of the following statement, under penalty of perjury:
“9. For a brief period in 1999, Trading Places contracted with a California company to use its servers for the operations of Trading Places’ business. Shortly afterwards, it switched to contractors in Illinois and then to its own servers.”
Ex. IV, p.106, no.9.
Photograph no. 1, p.258, clearly demonstrates the falsity of this statement. At the top right of the photograph is the following text:
“Your host is camelot trading server, running Chatspace 1.5…”
Ex. XII, p.258.
The California company, ChatSpace, Inc. Note the date on the fourth line, “6/9/2000” – more than a year later than Defendant Rea declared under penalty of perjury Trading Places operations were moved to Illinois.
Further note this text, in the center, lines 7 and 8:
“1. Contact CyberCorp @www.cybercorp.com/offer/digital.asp or MB Trading @www.mbtrading.com and arrange your Level 2 software needs.”
Note the keys at left, the order entry and “instant execution” software of Brokerage Defendant CyberTrader: “buy,” “sell,” “short, “cover.” These are keys for executing securities transactions.
The second photograph, p.259, contains, highlighted in yellow, a securities recommendation to purchase “JNPR,” the NASDAQ-listed company Juniper Networks, Inc. The green-highlighted statement, “Stock on the Move,” is intended to draw attention to a previous Respondent securities recommendation.
The third photograph, p.260, demonstrates the investment advisory nature of the statements made by Respondents. “Merlin,” a.k.a. defendant Rea, states, “I posted take the money on RHAT,” meaning he had advised Respondent clients to sell.
The fourth photograph, p.260, is a closer view of Respondent operations described above.
In all of the photographs, the black-lettered names, below the top-right Respondent securities analysts in blue, are Respondent clients. |
