Pollux Holding Ltd. v. Chase Manhattan Bank
| Decision Date | 01 May 2003 |
| Docket Number | No. 01-7488.,No. 01-7492.,01-7488.,01-7492. |
| Citation | 329 F.3d 64 |
| Parties | POLLUX HOLDING LTD., Plaintiff-Appellant, v. THE CHASE MANHATTAN BANK, Defendant-Appellee. Springwell Navigation Corporation, Plaintiff-Appellant, v. The Chase Manhattan Bank, Defendant-Appellee. |
| Court | U.S. Court of Appeals — Second Circuit |
Mark S. Arisohn, New York, New York (Barry Michael Okun, Goodkind Labaton Rudoff & Sucharow LLP, New York, New York, of counsel), for Plaintiff-Appellant Pollux Holding Ltd.
Erik S. Jaffe, Erik S. Jaffee, P.C., Washington, D.C. (Stephen D. Hoffman, Siller Wilk LLP, New York, New York, of counsel), for Plaintiff-Appellant Springwell Navigation Corp.
Thomas C. Rice, New York, New York (Jennifer N. Colao, Laura W. Sawyer, Hillary C. Mintz, Simpson Thacher & Bartlett, New York, New York; Michael A. O'Connor, J.P. Morgan Chase & Co., Legal Department, New York, New York, of counsel), for Defendant-Appellee The Chase Manhattan Bank.
Before: WALKER, Chief Judge, CARDAMONE, and STRAUB, Circuit Judges.
On this appeal we revisit the doctrine of forum non conveniens. That doctrine affords a trial court discretion in a case over which it has jurisdiction to decline to exercise it, whenever it appears that such case may be more appropriately tried in another forum, either for the convenience of the parties or to serve the ends of justice. The focus of any forum non conveniens inquiry, as the term itself suggests, is to ensure that the place where a trial is held is convenient, that is, that the forum fits the needs and is suitable to the circumstances of the case.
Plaintiff Pollux Holding Ltd. (Pollux) and plaintiff Springwell Navigation Corporation (Springwell) (collectively plaintiffs or appellants), are Liberian corporations that serve as personal investment vehicles for wealthy Greek individuals. Each filed a separate complaint against The Chase Manhattan Bank (Chase or bank) in the United States District Court for the Southern District of New York in December 1999 before Judge Kimba M. Wood. The complaints allege numerous causes of action — including negligent misrepresentation, fraud, breach of contract, breach of fiduciary duty, negligence, negligent supervision, and violations of English statutory law — all of which are connected to losses stemming from plaintiffs' investments in derivative securities sold by Chase. Judge Wood granted defendant Chase's motion to dismiss both complaints on the grounds of forum non conveniens, concluding that England was a more appropriate forum. Plaintiffs filed timely appeals that we heard in tandem.
Pollux and Springwell are both organized under the laws of Liberia and each maintains its principal place of business in Greece. Both plaintiffs are personal investment companies serving wealthy Greek nationals engaged in the shipping business; Pollux for Diamantis Diamantides, and Springwell for Adam and Spiros Polemis.
Chase is a New York banking corporation headquartered in New York City, but with numerous overseas branches through which it conducts business. One such branch is located in London (Chase London). Chase is also affiliated with a number of banking companies including: Chase Investment Bank Limited (Chase Limited), a United Kingdom (U.K.) affiliate engaged in emerging market sales; Chase Manhattan International Limited (Chase International Limited), also a U.K. affiliate that took over managing emerging markets-based trading from Chase Limited in 1993; Chase Manhattan Securities (C.I.) Limited (Chase Securities), a Jersey, Channel Islands affiliate; and Chase Manhattan Bank International (Chase International), a bank organized under the laws of Russia. Chase also operates Private Bank, headquartered in New York, with a branch in London.
Both Diamantides and the Polemises have been banking with Chase for many years. In 1990 Diamantides established a relationship with Chase's Private Bank in London. Diamantides also opened an account with Chase London. The Polemis family, which has been in the shipping business for more than 100 years, has been a client of Chase's Global Shipping Group for almost 50 years. When Springwell was established by Adam and Spiros Polemis in 1986, it also established a banking relationship with Chase London. The Polemises also have a relationship with Chase's Private Bank in London that began in the late 1980s.
In the early 1990s, plaintiffs began to invest in emerging market securities. These emerging market investment products were sold to them by Justin Atkinson, a London-based salesperson who was employed first at Chase Limited and, later, at Chase International Limited. Plaintiffs initially focused on Latin American investments, but subsequently expanded their portfolio to include investments in Russian securities.
In 1996 Chase International Limited developed a complex derivative instrument (Notes) based on Gosudarstvenniye Kratkosrochniye Beskuponniye Obligatsii (GKOs), short-term, zero coupon, rouble denominated bonds issued by the Russian Ministry of Finance. The Notes, which were issued by defendant's affiliate Chase Securities, were linked to the performance of a particular issue of GKOs and incorporated forward foreign exchange contracts that hedged against devaluation of the rouble. Plaintiffs allege these GKOs were a pyramid scheme where the funds from the sale of new Notes were used to redeem those that matured. Chase Securities did not purchase the underlying GKOs itself; instead, investments in GKOs were made by Chase International Limited which had a special account with Chase International and other Russian banks that allowed it to purchase GKOs as a foreign investor.
Pollux purchased 17 Notes between April 1997 and April 1998 and Springwell purchased 42 Notes between April 1996 and July 1998. Initially plaintiffs purchased the Notes outright, but later financed 60 to 70 percent of the purchase price — including all of the Notes at issue in this litigation — through Chase London. In connection with this financing plaintiffs executed repurchase agreements, under the terms of which Pollux and Springwell bought the Notes, but immediately resold them to Chase London. The agreements further provided that plaintiffs would repurchase the Notes at maturity for the same price paid for them by Chase London, plus a finance charge. After purchasing the Notes in London, plaintiffs transferred the purchase funds to Chase Securities' account at Chase in New York. The purchase confirmations and related documentation for the Notes were generated by the New York bank and New York officials were involved in various aspects of the sales of the Notes.
Both the Notes themselves and the repurchase agreements contain language relevant to issues of choice of law and jurisdiction. The Notes elect both English law and exclusive English jurisdiction, stating
This Note shall be governed by, and construed and interpreted in accordance with, the laws of England. Any legal action or proceeding with respect to this Note ... may be instituted exclusively in the English courts and, by execution and delivery of this Note, the parties hereto irrevocably submit to the exclusive jurisdiction of such court in any such action or proceeding ...
The confirmation documents generated for each Note contain a summary "terms and conditions" sheet that specifies English law as governing law, but does not address forum selection. The repurchase agreements designate English law as controlling and provide for the parties' consent to submit to English courts' jurisdiction, but not to the exclusion of courts "of any other country of competent jurisdiction."
Plaintiffs' initial investments in the Notes were profitable, yielding returns of 11 to 14 percent for Pollux and, 15 percent on average, for Springwell. In August 1998 the GKO market collapsed because the Russian government defaulted on its internal debt, devalued the rouble, and restricted the exchange of roubles into United States dollars. Pollux's losses on the devalued Notes exceed $40 million; Springwell lost almost $88 million. Following this failure, defendant attempted to negotiate a restructuring of the transactions and a settlement with plaintiffs through various personal meetings in London, and through facsimile messages and telephone conversations.
When these efforts proved unsuccessful, plaintiffs on December 7, 1999 filed complaints against Chase. Their claims fall into two categories: (1) allegations and causes of action involving the malfeasance of the bank and its agents in recommending and selling the Notes, and (2) the bank's alleged failure to manage the Notes and related hedge contracts, after the collapse, in a manner designed to minimize plaintiffs' losses. Plaintiffs seek damages, declaratory relief, an accounting and rescission of the repurchase agreements.
Defendant moved to dismiss on the grounds of forum non conveniens asserting that England is a more convenient forum for this litigation. Plaintiffs, in response, moved for discovery on issues related to defendant's motion to dismiss, but that motion was denied. In a subsequent judgment entered on April 5, 2001, the district court granted defendant's motion to dismiss both complaints on the grounds of forum non conveniens.
On appeal plaintiffs urge that the district court erred by not giving their choice of forum sufficient deference, and by improperly weighing the private and public interest factors that are typically considered in forum non conveniens cases. Inasmuch as plaintiffs have misconstrued our recent forum non conveniens decisions, and have failed to identify any clear error in the trial court's balancing of the various convenience factors, we affirm.
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