Bank Brussels Lambert v. Fiddler Gonzalez & Rodriguez

Decision Date26 March 1999
Docket NumberDocket No. 98-7706
Citation171 F.3d 779
PartiesBANK BRUSSELS LAMBERT, Plaintiff-Appellant, v. FIDDLER GONZALEZ & RODRIGUEZ, Defendant-Appellee.
CourtU.S. Court of Appeals — Second Circuit

LANCE GOTTHOFFER, Oppenheimer Wolff & Donnelly, New York, N.Y. (Peter A. Stroili, of counsel), for Plaintiff-Appellant.

ROBERT E. KUSHNER, D'Amato & Lynch, New York, N.Y. (Thomas M. Gandolfo, Ann G. Kayman, of counsel), for Defendant-Appellee.

Before: JACOBS and SOTOMAYOR, Circuit Judges, and SAND, * District Judge.

SOTOMAYOR, Circuit Judge:

Plaintiff-appellant Bank Brussels Lambert appeals from an order of the United States District Court for the Southern District of New York (McKenna, J.) granting defendant's Rule 12(b)(2) motion to dismiss the complaint for lack of personal jurisdiction. Plaintiff brought suit for fraud, breach of fiduciary duty and breach of the implied contractual duties of candor and full disclosure, all in connection with legal services performed on its behalf by defendant-appellee law firm Fiddler Gonzalez & Rodriguez. The district court held that personal jurisdiction over the defendant was unwarranted under New York's long-arm statute, C.P.L.R. § 302(a) subsections (1), (2) and (3), and under the common law co-conspirator and aider and abettor doctrines. Bank Brussels Lambert v. Fiddler Gonzalez & Rodriguez, No. 96 Civ. 7233(LMM), 1998 WL 182434 (S.D.N.Y. Apr. 17, 1998). We agree with all of the court's jurisdictional rulings but one. The district court erred by finding that the "injury" alleged in this case occurred outside of New York, and that jurisdiction under § 302(a)(3) was inappropriate on that ground. From the record on appeal, it is, however, unclear whether plaintiff has even averred sufficient facts to establish a tort, as is required for jurisdiction under § 302(a)(3). We therefore remand to the district court to determine whether plaintiff has sufficiently alleged an actionable tort and whether plaintiff has met the other requirements for jurisdiction under subparts (i) or (ii) of § 302(a)(3).

BACKGROUND

Bank Brussels Lambert ("BBL") is a banking corporation organized and existing under the laws of Belgium, with its principal place of business in Brussels Fiddler Gonzalez & Rodriguez ("Fiddler") is a law firm with its principal place of business in San Juan, Puerto Rico. Many New York corporations, as well as corporations from around the world, retain Fiddler to address issues of Puerto Rican law, and Fiddler appears to derive a substantial percentage of its income from these out-of-state clients. Often, these clients seek Fiddler's services because of referrals from other clients. The parties dispute whether Fiddler also solicits some business from New York clients through telefaxes. Although most of Fiddler's assets are located in Puerto Rico, and although Fiddler performs most of its services on the island, Fiddler owns an apartment in Manhattan, which it claims as a business expense on its tax forms, and which at least two partners have used for business trips that were subsequent and unrelated to the transactions in this case.

Belgium. BBL has a New York branch registered with the United States Comptroller of Currency, and BBL conducted all of the relevant activities in this case through its New York branch.

In November 1989, BBL joined a five-member lending group (collectively, the "banks") that was negotiating a secured $245,000,000 revolving credit agreement ("RCA") with two affiliated oil companies, known collectively as "Arochem." Arochem has its principal place of business in Stamford, Connecticut. The lending group was headed by The Chase Manhattan Bank, N.A. ("Chase New York"), and all five lenders were either New York domiciliaries or sought to participate in the loan through their New York branches. As principal collateral for the loan, Arochem offered a security interest in one of its main oil refineries, which was located in Puerto Rico, as well as certain of its inventories.

Before accepting the collateral and closing on the loan, the banks required an opinion from a Puerto Rican law firm concerning the validity and enforceability of the security interests they were acquiring. Chase New York recommended Fiddler for the job, largely because Fiddler had performed well over the course of a long-standing attorney-client relationship with the Chase Manhattan branch in Puerto Rico ("Chase Puerto Rico"). Fiddler was subsequently contacted to help execute the relevant security documents and to provide the needed opinion. In the process, the banks sent Fiddler a draft RCA, which described the contemplated loan transaction and stated that Fiddler's opinion would be a condition precedent to the loan disbursements as follows:

Initial Loan. The obligation of any Bank to make its initial Loan or the issuance of the initial Letter of Credit hereunder is subject to the receipt by the Agent of the following documents, each of which shall be satisfactory to the Agent in form and substance:

. . . . .

Opinion of Special Puerto Rico Counsel to the Lender. An opinion of Fiddler, Gonzalez & Rodriguez, special Puerto Rico counsel to the Banks, substantially in the Form of Exhibit G hereto.

Draft RCA dated Dec. 19, 1989, at p 6.01(e). Exhibit G, which was also sent to Fiddler, was a model opinion concerning a security interest in Arochem's Puerto Rican oil refinery. The draft RCA specified that the agreement would be governed by New York law and contained a New York choice of forum provision. Shortly after receiving these materials, Fiddler agreed to act as the bank's special Puerto Rican counsel and perform the tasks indicated.

Fiddler performed all of its relevant legal research and writing in Puerto Rico and attended the closing of the relevant security documents on the island. Neither Fiddler's partners nor its agents entered New York in connection with any of these services. On occasion, however, Fiddler contacted one or more of the banks or Each of the banks was represented by separate counsel, but the primary liaison between all of the banks and Fiddler was the New York law firm of Milbank, Tweed, Hadley & McCloy ("Milbank Tweed"). After receiving Fiddler's first draft opinion, both Milbank Tweed and BBL's separate New York counsel contacted Fiddler to request that the opinion be addressed to all the banks. Fiddler agreed to address the final opinion to:

their counsel in New York to discuss the opinion drafting process or the security documents. Fiddler also responded to similar contacts from these parties. In December 1989, Fiddler completed its first draft opinion. The opinion acknowledged that Fiddler had agreed to act as special Puerto Rico counsel for the banks and that Fiddler was furnishing the opinion in connection with the RCA between Arochem and the banks. The draft opinion was, however, addressed only to Chase Puerto Rico in San Juan.

The Chase Manhattan bank, N.A. ("Chase") individually, and as Agent for the banks and other Lenders (the "Banks"), and to the Banks party to the Revolving Credit Agreement dated as of January 1, 1990 and to Chase as Intercreditor Agent for Chase, Drexel Burnham Lambert Trade Finance Inc. and the Banks under the Intercreditor Agreement dated as of January 1, 1990

1 Chase Manhattan Plaza

New York, New York

Fiddler Opinion at 1. The RCA did not list the addresses of each bank individually, and it is unclear from the record whether Fiddler knew that all five participating banks were either New York banks or New York branches of banks located elsewhere. The final opinion did, however, explicitly reference the RCA transaction and state that "[t]his opinion is being rendered ... for your exclusive benefit in connection with the transactions described herein." Id.

The final RCA was dated January 1, 1990, and the loan closed in New York on January 17, 1990. The agreement--just like the draft sent to Fiddler--contained New York choice of law and forum provisions. Disbursement of the loan was also still conditioned on Chase New York's receipt of Fiddler's opinion. Although the parties dispute whether Fiddler sent its final opinion to Chase in New York or delivered it to one of Chase New York's agents at the closing of the security documents in Puerto Rico, the opinion was received by January 22, 1990, and Fiddler addressed it to Chase New York, as agreed. On January 22, 1990, BBL disbursed $75,000,000 to Arochem, as was required under the RCA. BBL made this disbursement from an account in New York.

Nearly two years later, on December 23, 1991, Arochem defaulted on the RCA loan. Shortly thereafter, Will Harris, the president and majority shareholder of Arochem, was convicted of multiple counts of bank fraud, see United States v. Harris, 79 F.3d 223 (2d Cir.1996), and in these proceedings, it became apparent that Arochem may have systematically misreported the value of its assets to the RCA lenders, see id. at 226. In February 1992, Arochem filed for bankruptcy, and BBL subsequently sued Chase New York for fraud and breach of contract in connection with its role in closing the RCA transaction.

In the course of discovery, Fiddler inadvertently produced several attorney-client memoranda that Chase Puerto Puerto Rico had provided to Pedro Polanco, a Fiddler partner, on January 17, 1990. Although the memoranda were furnished to Polanco on the same day as the RCA closing, they related to a separate representation of Chase Puerto Rico, as Polanco was not involved in any way with the Arochem RCA. According to BBL, these exchanged memoranda suggested that Harris had been manipulating the company's accounting procedures and financial reports in order to purchase Arochem stock from a second shareholder at an artificially In light of these newly discovered documents, BBL commenced the present action against Fiddler. BBL complained that Fiddler's opinion merely followed the model Exhibit G and...

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