65 F.3d 1495 (9th Cir. 1995), 93-56724, Ballard v. Savage

Docket Nº:93-56724.
Citation:65 F.3d 1495
Party Name:D.A.R. 12,439 Elizabeth BALLARD, Plaintiff-Appellant, v. Michael E. SAVAGE, et al., Defendants, and Royal Trust Bank (Austria), Defendant-Appellee.
Case Date:September 15, 1995
Court:United States Courts of Appeals, Court of Appeals for the Ninth Circuit
 
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Page 1495

65 F.3d 1495 (9th Cir. 1995)

D.A.R. 12,439

Elizabeth BALLARD, Plaintiff-Appellant,

v.

Michael E. SAVAGE, et al., Defendants,

and

Royal Trust Bank (Austria), Defendant-Appellee.

No. 93-56724.

United States Court of Appeals, Ninth Circuit

September 15, 1995

Argued and Submitted May 10, 1995.

Page 1496

Philip H. Stillman, Flynn, Sheridan & Tabb, Rancho Santa Fe, CA, for plaintiff-appellant.

Amy D. Hogue, Pillsbury, Madison & Sutro, Los Angeles, CA, for defendant-appellee.

Appeal from the United States District Court for the Southern District of California.

Before: HALL and LEAVY, Circuit Judges, and MICHAEL R. HOGAN [*], District Judge.

CYNTHIA HOLCOMB HALL, Circuit Judge:

We are called upon to decide whether the district court had personal jurisdiction over an Austrian bank. The district court granted a motion to dismiss under Fed.R.Civ.P. 12(b)(2) for lack of jurisdiction. We reverse.

I.

Appellant Elizabeth Ballard ("Ballard") brought this class action lawsuit on behalf of herself and other victims of an alleged Ponzi scheme in which investors were promised a $10 million return for every $5,000 they invested. Known as the "Savage Program" after its founder and chief perpetrator Michael Savage, the bogus scheme took in millions of dollars before its eventual demise. 1 This action represents Ballard's effort to recover some of the money she and her fellow victims lost.

Only one defendant to Ballard's class action is involved in this appeal. That defendant is Royal Trust Bank ("Royal" or the "Bank"), an Austrian bank headquartered in Vienna. Ballard alleges in her complaint that Royal was a knowing participant in the Savage Program. According to Ballard, the Bank's role in the scheme was to take the ill-gotten money and hide it in Austria where it would remain beyond the reach of the American legal process when the fraud surfaced. She claims that Royal, among other things, lent its good name to the scheme to mislead investors into believing that Mr. Savage was running a legitimate business. For proof, she points to documents on Royal letterhead touting the Savage Program as a legitimate business venture. She also claims that Royal refunded $12,000 to a disgruntled investor from its own checking account at National Westminster Bank in New York. That Royal used its own funds to pay the refund presumably tends to show that Royal actively helped to cover the criminal tracks of Michael Savage and his cohorts.

Not surprisingly, Royal paints a very different picture of this case and its involvement in the Savage Program. It admits a limited relationship with Michael Savage, but claims that it was at most an innocent repository of funds generated by a criminal enterprise. It denies any allegation that it participated in the scheme to defraud American investors. As for the documents on Royal letterhead, the Bank claims that Mr. Savage forged them without its knowledge. Royal also points out that it assisted federal authorities

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in the criminal investigation of Mr. Savage and even sent an employee to testify against him at trial. Royal further notes that it never has been charged with any wrongdoing by American or Austrian authorities.

The dispute over Royal's involvement in the Savage Program was never resolved. In the very early stages of the litigation, the district court granted Royal's motion under Fed.R.Civ.P. 12(b)(2) to dismiss the case against it for want of personal jurisdiction. A final judgment dismissing the case was entered pursuant to Fed.R.Civ.P. 54(b). Ballard appeals the dismissal, arguing that the district court had both general and specific jurisdiction over the defendant Bank. We have jurisdiction of her appeal pursuant to 28 U.S.C. Sec. 1291.

II.

Many of the jurisdictional facts of this case are disputed, but this much is clear. Royal is an Austrian Bank organized and regulated under Austrian law. 2 Its principal place of business is in Vienna. It has no offices or employees in the United States, nor does it generally advertise or solicit business here. Royal does, however, depend on the United States for a substantial amount of its business. In 1992-93, for example, 3,500 of its approximately 5,700 depositors (some 60 percent) were U.S. residents or had U.S. mailing addresses. Royal also regularly extends loans to customers in the United States; in the most recent time period for which figures are available, approximately 13 percent of Royal's outstanding loans were held by U.S. residents. 3 The aggregate dollar value of these loans ranged from a low of $3.3 million in 1988 to a high of $7.5 million in 1990. It appears that these loans are negotiated in Austria, governed by Austrian law, and fully collateralized by assets located in Austria. Royal has therefore argued that it "should never have to file suit [in the United States] in order to collect on the loans or otherwise enforce [its] rights" with respect to these loans.

Although Royal claims not to advertise in the U.S., it admits that it does send prospective U.S. customers information about the Bank at their request. Royal also admits that it at least occasionally solicits new business from its existing U.S. customers by sending them promotional materials along with their regular account statements. In addition, Royal employees appear to be frequent visitors to the United States. Between 1989 and 1993, Royal officials made at least 24 separate business trips to the United States and California to meet with customers, attend conferences and seminars, and the like.

Royal also maintains brokerage accounts in New York and New Jersey. It uses these accounts to trade millions of dollars per year in the U.S. securities markets. It also has "correspondent accounts" at several U.S. banks. The parties dispute the purpose of these accounts, but it seems clear that at least one purpose is to simplify Royal's banking relationship with its U.S. customers. For example, an individual in Los Angeles who in 1991 wished to make a deposit in his Royal account could have walked down to a local branch of Union Bank, deposited $100,000 in Royal's correspondent account there, and had the money quickly posted to his account at Royal.

The question we must address is whether these contacts are sufficient to support an exercise of personal jurisdiction over Royal. The district court answered that question in the...

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