Bank Brussels Lambert v. Fiddler Gonzalez

• Decision Date: 20 September 2002
• Docket Number: Docket No. 01-9026.
• Citation: 305 F.3d 120
• Parties: BANK BRUSSELS LAMBERT, Plaintiff-Appellant, v. FIDDLER GONZALEZ & RODRIGUEZ, Defendant-Appellee.
• Court: U.S. Court of Appeals — Second Circuit

305 F.3d 120

BANK BRUSSELS LAMBERT, Plaintiff-Appellant, v. FIDDLER GONZALEZ & RODRIGUEZ, Defendant-Appellee.

Docket No. 01-9026.

United States Court of Appeals, Second Circuit.

Argued: April 25, 2002.

Decided: September 20, 2002.

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Lance Gotthoffer, Oppenheimer Wolff & Donnelly LLP, New York, New York (Christopher W. Jones, on the brief), for the appellant.

Robert E. Kushner, D'Amato & Lynch, New York, New York (Peter A. Stroili, on the brief), for the appellee.

Before: F.I. PARKER, STRAUB and SOTOMAYOR, Circuit Judges.

SOTOMAYOR, Circuit Judge.

This case returns to us a second time following proceedings on remand from this Court in the United States District Court for the Southern District of New York (McKenna, J.). In our prior opinion, we vacated the district court's dismissal of the complaint for lack of personal jurisdiction, holding that the district court erred when it determined that the situs of the alleged injury was outside of New York for purposes of CPLR § 302(a)(3), and we remanded for further consideration of the personal jurisdiction question. Bank Brussels Lambert v. Fiddler Gonzalez & Rodriguez, 171 F.3d 779, 794 (2d Cir.1999) ("BBL I"). On remand, the district court held that personal jurisdiction was proper under New York law but that the exercise of this jurisdiction over the defendant would not comport with federal due process constraints. Bank Brussels Lambert v. Fiddler Gonzalez & Rodriguez, No. 96 Civ. 7233, 2001 WL 893362 (S.D.N.Y. Aug. 8, 2001) ("BBL II"). While we agree with the district court that the New York long-arm statute provides jurisdiction over the defendant, we do not agree that the exercise of personal jurisdiction over the defendant in this case violates due process. Accordingly, we vacate and remand, again.

BACKGROUND

The underlying facts in the dispute in this case are laid out in detail in our prior opinion, familiarity with which is assumed. BBL I, 171 F.3d at 781-84.

In brief, in November 1989, plaintiff-appellant Bank Brussels Lambert ("BBL"), a Belgian banking corporation, joined a five-member lending group led by The Chase Manhattan Bank, N.A. ("Chase New York") that negotiated a secured $245 million revolving credit agreement with two oil companies, collectively known as "Arochem." The primary collateral put up by Arochem was to be its petroleum refinery in Puerto Rico. Chase New York recommended to the lending group that it retain defendant Fiddler Gonzalez & Rodriguez ("Fiddler"), a Puerto Rican law firm, as local counsel for the limited purpose of providing an opinion letter as to the validity and enforceability of the security interest being acquired by the lending group. Fiddler provided the requested opinion letter to the lending group, and the loan closed on January 17, 1990. Five days later, as per the terms of the credit agreement, BBL disbursed $75 million from its New York branch to Arochem.

On December 23, 1991, Arochem defaulted on the loan. Shortly thereafter, Will Harris, the president and majority shareholder of Arochem, was convicted of multiple counts of bank fraud, and during those proceedings it came to light that Arochem may have systematically misreported its assets to the lending group. BBL sued Chase New York for fraud and breach of contract, and during discovery in that case it inadvertently came to light that Fiddler had received documents in an unrelated representation of Chase Manhattan's Puerto Rico branch ("Chase Puerto Rico") which suggested that Arochem was fraudulently manipulating its accounting and financial reports. BBL then commenced the instant suit against Fiddler for breach of fiduciary duty and breach of contract.

Fiddler moved in the district court to dismiss the complaint for lack of personal jurisdiction, which the district court granted in an opinion and order dated April 17, 1998. The district court held that none of the bases for jurisdiction set out in New York's long-arm statute, CPLR § 302, were satisfied.

In BBL I, we agreed with the district court except with respect to § 302(a)(3), which applies to persons who commit a tortious act outside New York which causes injury inside the state. Id. at 786-93. Contrary to the district court, we determined that if BBL had sufficiently averred a tort by Fiddler, the situs of the injury alleged was New York, as the location where the "first effect of the tort" — namely, the disbursement of funds to Arochem by BBL's New York branch — took place. Id. at 790-93. We therefore remanded to the district court for it to determine: (1) whether BBL had sufficiently averred facts constituting a tort; (2) if so, whether the remaining requirements of CPLR § 302(a)(3) had been satisfied; and (3) if so, whether exercise of jurisdiction would comport with the requirements of federal due process. Id. at 794.

On remand, the district court determined, first, that BBL's complaint had made out a legally sufficient claim for legal malpractice under Puerto Rican law. BBL II, 2001 WL 893362, at *2-*3. Specifically, the district court held that Fiddler's duty of loyalty to its client BBL might have required Fiddler, upon learning of Arochem's financial manipulations, to either disclose that information or, if Fiddler could not do so because that information was privileged, to withdraw from representation of the lending group. Id. at *1. Although the district court expressed skepticism as to whether BBL could ever prove causation, it held sufficient BBL's allegation that, had Fiddler withdrawn BBL would have refused to participate in the credit agreement. Id. at *3.

Turning to the two subsections of CPLR § 302(a)(3), the district court next held that subsection (ii), which relates to whether the defendant should reasonably have expected its acts to have consequences in New York, was not satisfied because Fiddler had not sought out the representation and had therefore not purposefully affiliated itself with New York. Id. at *4. However, with respect to subsection (i), the district court held that Fiddler's longtime maintenance of an apartment in New York counted as a "persistent course of conduct" and that therefore personal jurisdiction under the long-arm statute had been established. Id. at *3.

Addressing the final question of federal due process, however, the district court held that it could exercise neither specific nor general jurisdiction over the defendant because the "minimum contacts" threshold had not been satisfied. Id. at *5-*7. With respect to general jurisdiction, the court held that Fiddler's contacts with New York were insufficiently continuous and systematic. Id. at *6-*7. With respect to specific jurisdiction, the court held that because Fiddler had not specifically sought out the representation which gave rise to the claim, Fiddler had not purposefully availed itself of the privilege of doing business in New York. Id. at *5. Because the district court found that the minimum-contacts test had not been satisfied, it did not reach the issue of whether the exercise of personal jurisdiction over Fiddler would be reasonable. Id. at *7. The district court, therefore, again dismissed the complaint for lack of personal jurisdiction, and this appeal followed.

DISCUSSION

With exceptions not relevant here, a district court sitting in a diversity action such as this may exercise personal jurisdiction to the same extent as the courts of general jurisdiction of the state in which it sits. Fed.R.Civ.P. 4(k)(1)(A). Accordingly, resolution of a motion to dismiss for lack of personal jurisdiction made in the Southern District of New York requires a two-step analysis. First, the court must determine if New York law would confer upon its courts the jurisdiction to reach the defendant, which in this case could only be possible under the New York long-arm statute, CPLR § 302. If there is a statutory basis for jurisdiction, the court must then determine whether New York's extension of jurisdiction in such a case would be permissible under the Due Process Clause of the Fourteenth Amendment. BBL I, 171 F.3d at 784. We review a district court's dismissal for want of personal jurisdiction de novo. Id.

I. Long-Arm Jurisdiction under CPLR § 302(a)(3)

As noted, the only statutory ground on which we remanded to the district court for further proceedings was CPLR § 302(a)(3). This provision states as follows:

As to a cause of action arising from any of the acts enumerated in this section, a court may exercise personal jurisdiction over any non-domiciliary, or his executor or administrator, who in person or through an agent:

....

3. commits a tortious act without the state causing injury to person or property within the state, except as to a cause of action for defamation of character arising from the act, if he

(i) regularly does or solicits business, or engages in any other persistent course of conduct, or derives substantial revenue from goods used or consumed or services rendered, in the state, or (ii) expects or should reasonably expect the act to have consequences in the state and derives substantial revenue from interstate or international commerce.

CPLR § 302. Because there is no dispute that the "act" forming the basis of the plaintiff's complaint, namely, the failure of Fiddler to either inform BBL of the Arochem allegations of which it became aware or to withdraw as counsel, took place outside New York, and because we held in our first opinion that the injury allegedly caused by this act occurred in New York for § 302(a)(3) purposes, BBL I, 171 F.3d at 792, it remained for the district court only to determine, first, whether plaintiff sufficiently alleged that the act was "tortious," and second, whether plaintiff satisfied either (or both) of subsections (i) and (ii).

In order to satisfy the first element, plaintiff had to aver facts constituting "a tort under the law of the pertinent jurisdiction." Id. at 786. Because both parties have...