274 F.3d 610 (1st Cir. 2001), 00-2502, United States v. Swiss American Bank

Docket Nº:00-2502
Citation:274 F.3d 610
Party Name:UNITED STATES OF AMERICA, Plaintiff, Appellant, v. SWISS AMERICAN BANK, LTD., SWISS AMERICAN NATIONAL BANK, and INTER-MARITIME BANK, GENEVA, Defendants, Appellees.
Case Date:December 27, 2001
Court:United States Courts of Appeals, Court of Appeals for the First Circuit
 
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274 F.3d 610 (1st Cir. 2001)

UNITED STATES OF AMERICA, Plaintiff, Appellant,

v.

SWISS AMERICAN BANK, LTD., SWISS AMERICAN NATIONAL BANK, and INTER-MARITIME BANK, GENEVA, Defendants, Appellees.

No. 00-2502

United States Court of Appeals, First Circuit

December 27, 2001

Heard June 8, 2001

APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MASSACHUSETTS. Hon. William G. Young, U.S. District Judge

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Mia Levine, Trial Attorney, United States Department of Justice, with whom Gerald E. McDowell, Chief Trial Attorney, Karen Taylor, Trial Attorney, Donald K. Stern, United States Attorney, and Richard L. Hoffman, Assistant United States Attorney, were on brief, for appellant.

Howard Wilson, with whom Alan H. Scheiner, Rosenman & Colin LLP, Michael B. Keating, Sarah Cooleybeck, and Foley, Hoag & Eliot LLP were on brief, for appellees Swiss American Bank, Ltd. and Swiss American National Bank.

Wm. Shaw McDermott, with whom Irene C. Freidel, Aimee Bierman, and Kirkpatrick & Lockhart LLP were on brief, for appellee Inter-Maritime Bank, Geneva.

Before Torruella and Lipez, Circuit Judges, and Tauro,[*] District Judge.

TORRUELLA, Circuit Judge.

The United States government attempted to recover $7 million in drug proceeds that a Massachusetts resident deposited in an Antiguan bank and then forfeited to the United States as part of a plea agreement. After the bank did not turn over the funds, the United States filed a claim in the Massachusetts District Court for conversion, unjust enrichment, and breach of contract against Swiss American Bank and its alleged alter ego, Bank of New York-Inter-Maritime Bank. For the second time, the government appeals the court's dismissal of the case for lack of personal jurisdiction and its refusal to allow jurisdictional discovery. After completing a plenary review, we agree with the district court that the government failed to make a prima facie showing of specific or general jurisdiction, and conclude that the district court acted within its discretion to deny the government jurisdictional discovery. We therefore affirm the judgment.

I.

Between 1985 and 1987, John E. Fitzgerald, a resident of Massachusetts, deposited about $7 million in Swiss American Bank and Swiss American National Bank

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(collectively SAB), both organized under the laws of Antigua and Barbuda and located there. Fitzgerald deposited the money in accounts held in the name of shell corporations.1 When he made the deposits, SAB was the wholly owned subsidiary of Swiss American Holding Company,2 a Panamanian corporation, which in turn was wholly owned by Bank of New York-Inter-Maritime Bank (IMB), an institution organized under Swiss law and based in Geneva.

In 1993, Fitzgerald pled guilty to several counts of conspiracy for racketeering and attempted money laundering. He admitted that the funds deposited at SAB were drug proceeds that he had laundered through shell corporations organized with the help of Peter F. Herrington, then SAB's general manager. During some of the time that Fitzgerald deposited his money at SAB, his funds represented about one-third of the bank's total deposits. As part of his plea agreement, Fitzgerald agreed to forfeit the money in his SAB accounts to the United States government.

In November 1993, the U.S. District Court for the District of Massachusetts entered a preliminary order of forfeiture regarding the deposited funds. Beginning in January 1994, the United States made a series of requests to the Antiguan government seeking assistance in recovering the money. Meanwhile, notice of the impending forfeiture was published in the Antiguan Gazette and the Boston Globe. No competing claims were filed. However, on March 28, 1994, during the filing period, SAB sent a letter to the district court that stated:

[I]n the event of your action for forfeiture being successful, the banks have been instructed by the Government of Antigua and Barbuda to freeze all of the assets . . . in issue in your Petition, until the ultimate beneficial owners have been ascertained to the Government's satisfaction. This is a directive that the banks have to honor on pain of having their licences revoked and is a problem that you may well have to address on the successful conclusion of your litigation.

On May 4, 1994, the district court entered a final order decreeing the money in Fitzgerald's SAB account to be forfeited to the United States. In a November 13, 1995 letter, the Solicitor General of Antigua informed the United States that the bank records of Fitzgerald's account had been destroyed in a September 1995 hurricane and that the funds had been frozen by the Antiguan government. On November 20, 1995, the United States learned from a lawyer for Antigua that the SAB funds were "no longer available" because they had been transferred to the Antiguan government and used to pay off debts. It is undisputed that in either December 1994 or January 1995, after the final order of forfeiture was entered, SAB transferred $5 million from Fitzgerald's account to the Antiguan government and kept the remaining $2 million, apparently to pay off loans taken out by Fitzgerald. SAB and the Antiguan government agree that the funds were disbursed with the Antiguan government's approval.

On December 23, 1997, the United States filed a complaint in federal district court in Massachusetts suing SAB and

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IMB for conversion, unjust enrichment, and breach of contract. On September 30, 1998, the district court dismissed the government's case for lack of personal jurisdiction. See United States v. Swiss Am. Bank, Ltd., 23 F.Supp.2d 130 (D. Mass. 1998) (Swiss I). The court ruled that the government failed to show that the defendants were beyond the jurisdictional reach of any state court of general jurisdiction, as required by Federal Rule of Civil Procedure 4(k)(2). Id. at 136. The court also denied the government's request for discovery because of its failure to plead this element of personal jurisdiction. Id.

The government appealed, and we reversed the district court's dismissal for lack of jurisdiction under Rule 4(k)(2). See United States v. Swiss Am. Bank, Ltd., 191 F.3d 30 (1st Cir. 1999) (Swiss II). We said that three elements are required for the exercise of personal jurisdiction under Rule 4(k)(2): (1) the plaintiff's claim must arise under federal law; (2) the defendant must be beyond the jurisdictional reach of any state court of general jurisdiction (the "negation requirement"); and (3) the exercise of jurisdiction must not violate the defendant's rights under the Constitution or federal law. See id. at 38-39. We found that the government had satisfied the first element of this test, and directed the district court to apply a new burden-shifting framework to the negation requirement. See id. at 41. We also directed the court to reconsider the government's request for discovery in light of the new negation requirement analysis that we set forth. See id. at 46. Finally, we declined to rule on IMB's argument that the case against it should be dismissed on the merits, saying that this matter should await resolution of the jurisdictional issue. See id. at 46-47.

On remand, SAB and IMB renewed their motions to dismiss, and the government subsequently renewed its request for discovery. The district court held a hearing on these motions on March 30, 2000. The court's review included affidavits and related evidence submitted by both parties, including a report from the government's investigator, as well as the allegations contained in the pleadings. At the hearing, the court granted IMB's motion to dismiss for failure to adequately plead alter ego liability and for lack of personal jurisdiction. See United States v. Swiss Am. Bank, Ltd., 116 F.Supp.2d 217, (D. Mass. 2000) (Swiss III). Following the hearing, the court issued a written opinion dismissing the case against SAB for lack of personal jurisdiction. See id. at 225. Applying the burden-shifting framework set forth in Swiss II, the court found that the defendants had conceded the negation requirement. Id. at 220. It then turned to the third element under Rule 4(k)(2): whether jurisdiction would violate constitutional due process because the defendants lacked adequate contacts with the United States as a whole and because the exercise of jurisdiction would be unreasonable. Id. The court found that the government failed to show sufficient contacts under either a general or specific theory of personal jurisdiction. Id. at 222-25. Finding that the government's jurisdictional showing was "bootless" and did not amount to a colorable claim, the court also denied the request for jurisdictional discovery. Id. at 225.

II.

It is basic law that a court must have personal jurisdiction over the parties to hear a case, "that is, the power to require the parties to obey its decrees." Swiss II, 191 F.3d at 35. At the same time, "[d]etermining personal jurisdiction has always been more an art than a science." Donatelli v. Nat'l Hockey League, 893 F.2d 459, 468 n.7 (1st Cir. 1990). As Justice Marshall said, the jurisdictional determination

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"is one in which few answers will be written in black and white. The greys are dominant and even among them the shades are innumerable." Id. (quoting Kulko v. Super. Ct., 436 U.S. 84, 92 (1978)) (internal quotation marks and citations omitted).

The personal jurisdiction inquiry in federal question cases like this one differs from the inquiry in diversity cases. See 28 U.S.C. § 1332. Here, "the constitutional limits of the court's personal jurisdiction are fixed . . . not by the Fourteenth Amendment but by the Due Process Clause of the Fifth Amendment." United Elec., Radio & Mach....

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