Von SCHönau-Riedweg v. Rothschild Bank AG

Citation95 Mass.App.Ct. 471,128 N.E.3d 96
Decision Date17 June 2019
Docket NumberNo. 17-P-787,17-P-787
CourtAppeals Court of Massachusetts
Parties Corinna VON SCHÖNAU-RIEDWEG & another v. ROTHSCHILD BANK AG & others.

Myles W. McDonough (Philip A. O'Connell, Jr., also present), Boston, for the plaintiffs.

R. Miles Clark, of the District of Columbia, for Rothschild Bank AG.

A. Neil Hartzell, Boston, for Continuum Energy Technologies, LLC, & others.

Present: Hanlon, Sullivan, & Desmond, JJ.

SULLIVAN, J.

Corinna von Schönau-Riedweg (von Schönau), a Swiss citizen, inherited a considerable fortune in the stock of Novartis International AG, a Swiss pharmaceutical company, upon her mother's death in 2002. She turned for advice to Baron Wilfrid von Plotho, a director of Rothschild Bank AG (Rothschild, RBZ, or bank), a Swiss bank, who suggested that he would assist in managing and investing her inheritance. She agreed, and von Plotho proposed, among other things, that she invest in various companies seeking private equity investors. Among the investments recommended were two Massachusetts-based companies, Continuum Energy Technologies, LLC (CET), a science-based technology company, and C Change Investments, LLC (CCI), a venture capital firm. CET and CCI claimed to be on the cusp of scientific breakthroughs that would, among other things, change the composition of base metals.3 Von Schönau and her holding company, Ebur Investments, LLC (collectively, von Schönau), invested approximately $ 39 million in these two companies. When her investments proved worthless, she sued (among others) CET, CCI, Rothschild, von Plotho, John Preston (a founder of both CET and CCI), and Michael Porter (a manager of CET).4

Default judgment entered against von Plotho and his holding company, ARA Management Corporation (ARA Management).5 After extensive motion practice, in which a judge of the Superior Court was deluged with a voluminous record and multiple briefs, Rothschild was dismissed for lack of personal jurisdiction. Later, a different judge granted summary judgment for CET, CCI, and Porter, and for Preston with respect to the CET- and CCI-related claims against him.6 Remaining claims concerning two other companies and Preston's involvement with those companies went to trial, resulting in a defendants' verdict.

Von Schönau appeals from so much of the final judgment as dismissed Rothschild for lack of personal jurisdiction, entered judgment for CET (and for Preston and Porter on the CET-related claims against them) on statute of limitations grounds, and entered summary judgment for CCI and Preston on the merits. Von Schönau does not appeal from the jury verdict. We vacate so much of the judgment as dismissed Rothschild for lack of personal jurisdiction, concluding that von Schönau has made a prima facie showing that von Plotho was Rothschild's agent, such that von Plotho's contacts with Massachusetts could be attributed to Rothschild. We remand for an evidentiary hearing or trial on the issue of personal jurisdiction. In all other respects, the judgment is affirmed.

Background. We summarize the evidence relevant to the dispositive motions in the light most favorable to von Schönau, reserving additional facts for later discussion. See Cepeda v. Kass, 62 Mass. App. Ct. 732, 737-738, 819 N.E.2d 979 (2004) (personal jurisdiction). See also Boazova v. Safety Ins. Co., 462 Mass. 346, 350, 968 N.E.2d 385 (2012) (summary judgment). Because the sequence of events is relevant to both personal jurisdiction over Rothschild and the applicability of the statute of limitations to the CET-related claims, we summarize the facts related to CET with particular attention to chronology. We summarize the facts concerning CCI's conduct separately.

1. Von Plotho, Rothschild, and von Schönau's investments in CET. In 2002, von Schönau inherited stock in Novartis worth approximately 573 million Swiss francs, an amount the parties estimate to be worth approximately $ 500 million or more in today's dollars. Von Plotho, a Swiss and German citizen, was an employee of Rothschild, and a long-time acquaintance of von Schönau's. While employed by Rothschild, von Plotho approached von Schönau about diversifying her holdings, selling some unspecified (but substantial) portion of her Novartis shares, and moving her money to Rothschild. Von Plotho advised her to invest in both CET and CCI.

In early 2003, von Schönau met with von Plotho at a Rothschild office in Switzerland. Thereafter, in 2003 and 2004, she opened a total of six accounts at Rothschild. Only two of those accounts are at issue here. Account number 20200 (20200 account) was designated for private equity investments. Account number 12000 (12000 account) was designated for investment in European bonds, although it was also later used for private equity investments.

Von Schönau signed an "Asset Management Mandate" for the 12000 account in January 2003.7 She also signed an "Extension of the Asset Management Mandate," which stated:

"In addition to the above provisions of the Asset Management Mandate, the Account Holder gives the Bank the express authority to perform non-traditional investment types in its own discretion (such as for example Hedge Funds or similar investment instruments) including investment instruments which do not fall within the definition of the standard banking investment types pursuant to the Guidelines of the Swiss Bankers' Association" (emphasis added).

In May 2003, von Schönau opened the 20200 account and signed an "Asset Management Mandate" that did not include the above-quoted extension for nontraditional investments. Von Schönau paid fees to Rothschild in connection with both accounts. Although Rothschild submitted affidavits stating that private equity investments were not permitted for bank-managed assets (at least not without the written direction of the client), there is no indication in the record that Rothschild communicated this to von Schönau.

At the same time, in Massachusetts, Preston and a scientist named Christopher Nagel were working on establishing a new company called Atomic Ordered Materials LLC (AOM). Incorporated in 1999, AOM (later called CET)8 was in the business of "researching, developing, and attempting to commercialize experimental technologies based on electromagnetic chemistry and modification of the electronic structure of elements." In somewhat plainer English, the company's goal was to change the composition of base metals for commercial purposes.

At some point in 2003, von Plotho was introduced to Preston. In October 2003, von Plotho traveled to the Boston area to meet with Preston and others in Massachusetts regarding CET. Von Plotho was Preston's house guest for at least part of that trip. According to minutes from the meeting, "It was concluded that Baron von Plotho will investigate the possibility of a financing through one of his clients. If this is successful, it will satisfy the needs of the company." All told, over the next seven years, von Plotho made five separate visits to Massachusetts with von Schönau to investigate and monitor private equity investments in CET, CCI, and other companies.

After the October 2003 meeting, Preston sent a letter to von Plotho at his Rothschild business address in Zurich, to which he attached a description of CET "that should be appropriate for your discussion with the potential investor." By December 31, 2003, von Plotho had discussed a potential investment in CET with von Schönau.

On January 6, 2004, von Plotho sent a letter to Preston via a facsimile number in the 508 area code, in which he confirmed von Schönau's interest in investing $ 10 million in CET. On January 15, 2004, Preston sent a letter by facsimile to von Plotho at Rothschild offering to sell von Schönau a two percent interest in CET for $ 10 million.

On January 23, 2004, von Schönau entered into a share purchase agreement with CET by which she agreed to buy a two percent interest in CET for $ 10 million. At the time, according to von Schönau, although other employees at Rothschild "advised on other types of investments, ... only von Plotho was recommending private equity investments to her."

Prior to von Schönau's execution of the share purchase agreement, von Plotho told her that, according to Preston, CET had developed technology that could allow it to change elements in metals, and that the company was "roughly six-to-nine months or up to a year away" from generating profits. Accordingly, when von Schönau made her initial investment in CET, she was under the impression that the production and sale of products using its technology was "imminent."

Shortly thereafter, von Schönau met Preston in Switzerland for the first time. During that meeting, Preston told her that CET was "only one or two tests away from a ‘major breakthrough.’ " By February 10, 2004, her $ 10 million payment had been received by CET from the 20200 (private equity) account.

Sometime before March 1, 2004, the three managers of CET -- Preston, Nagel, and Porter -- offered share options to certain people, including CET's academic advisors and von Plotho. Preston also offered von Plotho membership on a CET advisory board. On March 3, 2004, von Plotho signed a mutual nondisclosure agreement with CET, including a choice of law clause stating that the agreement "shall be governed by the laws of the Commonwealth of Massachusetts with the exception of its conflict of laws rules." In an internal Rothschild memorandum dated April 21, 2004, von Plotho disclosed that he had been invited to join the CET advisory board and stated that he "agreed in princip[le] and subject to approval by [Rothschild's] Management Committee as well as Board."9

In May 2004, von Schönau and von Plotho traveled to Massachusetts and attended meetings in Fall River and Boston with Preston, Nagel, and Porter. Von Schönau discussed the CET investment with von Plotho on this trip.10 During the May 2004 meeting, von Schönau was again told...

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