Class 8 - 1-09-07 - Question - 3

Pat and Dan are students at a California law school. After graduation, they both take and pass the California Bar Examination. Dan returns to his home State of Texas, where he decides to become an investment counselor in Dallas. Pat remains in her home State of California. Years later, Pat calls Dan to let him know that she is coming to Texas to visit relatives. She goes to Dallas, meets Dan at his office, and learns about his work.

During dinner, Dan convinces Pat to invest in Deftco, a Texas corporation. Dan tells her that he can almost guarantee that Deftco stock was about to double in value, and that he had convinced some of their former classmates in California to purchase Deftco stock. After Pat returns home, she buys 50,000 shares of Deftco stock at $2.00 per share. The stock becomes worthless, but not before Dan sells all of his shares at a profit. Pat learns that Dan was Deftco's primary shareholder.

Pat files a diversity-based fraud suit against Dan in a California federal court. Dan timely attacks Pat's complaint for lack of personal jurisdiction, and an insufficient amount in controversy. His motion further asserts that this case should be tried in a Texas federal court. How should the court rule on Dan's motion?