defendants knew or had reason to know their allegedly false information would be read and relied upon by potential plaintiffs. In fact, while defendant Fogarty had no reason to know who in fact would read and rely on his false statement, it can be inferred that the St. Claire defendants knew that Oxford First in Philadelphia was reading and relying on the information provided by the St. Claire defendants to Old Paragon.
The St. Claire defendants argue that even if they knew that their financial statements would be sent to and relied upon by Oxford First in Philadelphia, such knowledge will not sustain venue (and hence, on plaintiffs' theory, in personam jurisdiction under § 27), since it is not an "act within the forum district representing more than an immaterial part of the allegedly illegal event." Prettner v. Aston, 339 F. Supp. 273, 280 (D. Del. 1972). But the "allegedly illegal event" in the instant case includes alleged material misrepresentations by the St. Claire defendants that the plaintiffs' claim injured them, and the St. Claire defendants' knowledge that such misrepresentations would be seen and used by Oxford First in Philadelphia is more than an immaterial part of such alleged fraud on the plaintiffs. Even if the St. Claire defendants did not control or intend to benefit by Old Paragon's deal with Oxford First, their (alleged) act of knowingly letting their false representations be sent to and relied on by Oxford First in Philadelphia was not an immaterial part of the "allegedly illegal event" which culminated in Philadelphia. Although the facts here are not as strong as those in Stern v. Gobeloff and Texas Gulf Sulphur, supra, on which plaintiffs rely, we believe that they are sufficient for us to conclude at this stage that the St. Claire defendants caused financial information (claimed to be false or misleading) to be sent into this judicial district, and that venue properly lies in this Court.
C. In Personam Jurisdiction
1. Are There Due Process Limitations Upon the Congressional Grant of (Nationwide) Extra-Territorial Service of Process Under the Securities Acts?
The final argument made by the St. Claire defendants is that even if there is proper venue and service of process, this court would still lack in personam jurisdiction over them because they have not had the minimum contacts with this district necessary to meet the constitutional requirements of due process embodied in International Shoe Company v. State of Washington, 326 U.S. 310, 66 S. Ct. 154, 90 L. Ed. 95 (1945). This contention raises the vexatious question of whether there exist due process limitations upon the congressional grant of (nationwide) extraterritorial service under the securities acts
and under other acts.
Most courts and commentators assume or find some federal due process limits on federal service of process. See Fraley v. Chesapeake and Ohio Ry., 397 F.2d 1 (3d Cir. 1968) (applies International Shoe test in FELA case); Lone Star Package Car Co. v. Balt. & Ohio R.R., 212 F.2d 147 (5th Cir. 1954) (and cases therein) (applies a basic fairness test to federal law of process); Getter v. Dickinson & Co., 366 F. Supp. 559 (S.D. Iowa 1973) (found sufficient contacts with Iowa to justify in personam jurisdiction under due process test where financials prepared by defendants traveled to Iowa and where one of the defendant accountants made a trip to Iowa in connection with disputed financials); Leasco Data Processing Equipment Corp. v. Maxwell, 319 F. Supp. 1256 (S.D.N.Y. 1970), vacated on other grounds, 468 F.2d 1326 (2d Cir. 1972) (applied minimum contacts test of due process to section 27 of 1934 Exchange Act); Dijulio v. Digicon, Inc., 325 F. Supp. 963 (D. Md. 1971) (found defendant underwriter whose name was in prospectus used by other defendants in Maryland had met requirements of Section 22(a) of the 1933 Act and of due process); Abraham, "Constitutional Limits on Territorial Reach of Federal Process," 8 Vill. L. Rev. 520 (1963). Professor Abraham's article argues forcefully that the Fifth Amendment due process clause imposes some (though indefinite) constitutional limits on federal service of process. Id. at 531-536. Indeed, Professor Abraham concludes:
The due process clause of the Fourteenth Amendment has been construed to protect an individual from inconvenient state litigation. There are indications that the courts consider at least part of the basis of this protection of the federal litigant to be the parallel provisions of the Fifth Amendment.