Deutsche Bank v. Mont. Bd. of Investments

• Decision Date: 06 June 2006
• Citation: 7 N.Y.3d 65,850 N.E.2d 1140
• Parties: DEUTSCHE BANK SECURITIES, INC., Respondent, v. MONTANA BOARD OF INVESTMENTS, Appellant.
• Court: New York Court of Appeals Court of Appeals

850 N.E.2d 1140

7 N.Y.3d 65

DEUTSCHE BANK SECURITIES, INC., Respondent, v. MONTANA BOARD OF INVESTMENTS, Appellant.

Court of Appeals of New York.

June 6, 2006.

Olshan Grundman Frome Rosenzweig & Wolosky LLP, New York City (Herbert C. Ross, Jr., of counsel), and Chris D. Tweeten, Chief Civil Counsel, Office of the Attorney General of Montana, admitted pro hac vice, for appellant.

Krantz & Berman LLP, New York City (Larry H. Krantz and Wendy E. Gerstmann of counsel), for respondent.

OPINION OF THE COURT

KAYE, Chief Judge.

This appeal concerns a March 25, 2002 bond transaction between plaintiff Deutsche Bank Securities, Inc. (DBSI) and defendant Montana Board of Investments (MBOI). DBSI, a Delaware corporation with its headquarters in New York, is (among other things) engaged in trading securities for its own account and for clients. MBOI is a Montana state agency charged with managing an investment program for public funds, the public retirement system and state compensation insurance fund assets. In the 13 months prior to the transaction at issue here, DBSI and MBOI had engaged in approximately eight other bond transactions with a face value totaling over $100 million. These transactions were principally negotiated between Stephen Williams, a director in the Global Markets Sales Division of DBSI in New York, and Robert Bugni, Senior Investment Officer-Fixed Income with MBOI in Montana.

On the morning of March 25, 2002, from New York City, Williams contacted Bugni to ask if MBOI was interested in swapping its Pennzoil-Quaker State Company 2009 bonds for DBSI's Toys R Us bonds, or selling the Pennzoil bonds to DBSI for a stated price. Williams communicated with Bugni electronically through the Bloomberg Messaging System, an instant messaging service provided to Bloomberg subscribers. Bugni responded that MBOI was not interested in the swap proposal. Williams countered that the Pennzoil bid looked good but Bugni replied that the bonds "will get a lot tighter" (increase in price) and MBOI wanted to hold onto them. Williams ended the exchange with a simple "THX" (thanks).

Approximately 10 minutes later, Bugni, knowing that Williams was in New York, sent him a new instant message asking whether the price originally quoted by Williams applied only to the swap, or if it would be the same for a cash purchase. Bugni indicated that MBOI had $15 million of Pennzoil bonds it might be interested in selling. Williams replied that DBSI would like to purchase $5 million of the bonds outright and could probably "trade the balance with one phone call." Bugni countered with a request that Williams investigate whether all $15 million could be sold at the price he quoted. After a DBSI colleague contacted some of his clients and found that DBSI had a sufficient market for all $15 million, Williams replied to Bugni that DBSI would purchase all $15 million at his quoted price, with a settlement date of March 28, 2002. Bugni agreed, and Williams sent a trade ticket and confirmation of the deal.

Hours after the parties concluded their agreement, on the evening of March 25, 2002, Shell Oil publicly announced that it had agreed to acquire Pennzoil-Quaker State Company, an announcement that would potentially increase the value of the bonds. The following day, MBOI advised DBSI that it was breaking the trade because it believed the buyer had inside information and the trade was "unethical & probably illegal." As a result of MBOI's cancellation, DBSI purchased the Pennzoil bonds elsewhere, paying an additional $1.6 million.

DBSI then commenced this action in Supreme Court, New York County, alleging breach of contract, and MBOI answered. After limited discovery, DBSI sought summary judgment as to liability as well as dismissal of MBOI's affirmative defenses. MBOI cross-moved for dismissal of the action based on its affirmative defenses of lack of personal jurisdiction, sovereign immunity and comity. Supreme Court granted MBOI's cross motion to dismiss the complaint for lack of personal jurisdiction and denied DBSI's motion for partial summary judgment. The Appellate Division in a comprehensive opinion unanimously reversed, dismissing MBOI's affirmative defenses and granting DBSI's motion for partial summary judgment as to liability.¹ We now affirm.

Discussion

MBOI contends that there is insufficient basis for the exercise of long-arm jurisdiction and thus the case must be dismissed for lack of personal jurisdiction. Additionally, MBOI urges that dismissal is mandated by principles of sovereign immunity and comity, and that in any event summary judgment is inappropriate because of triable issues of fact and a need for further discovery. We reject each contention.

Personal Jurisdiction

New York's long-arm statute provides that "a court may exercise personal jurisdiction over any non-domiciliary ... who in person or through an agent ... transacts any business within the state or contracts anywhere to supply goods or services in the state" (CPLR 302[a][1]). By this "`single act statute' ... proof of one transaction in New York is sufficient to invoke jurisdiction, even though the defendant never enters New York, so long as the defendant's activities here were purposeful and there is a substantial relationship between the transaction and the claim asserted" (Kreutter v. McFadden Oil Corp., 71 N.Y.2d 460, 467, 527 N.Y.S.2d 195, 522 N.E.2d 40 [1988]).

As we noted in Kreutter, the growth of national markets for commercial trade, as well as technological advances in communication, enable a party to transact enormous volumes of business within a state without physically entering it. Thus, we held that "[s]o long as a party avails itself of the benefits of the forum, has sufficient minimum contacts with it, and should reasonably expect to defend its actions there, due process is not offended if that party is subjected to jurisdiction even if not `present' in that State" (id. at 466, 527 N.Y.S.2d 195, 522 N.E.2d 40). We have in the past recognized CPLR 302(a)(1) long-arm jurisdiction over commercial actors and investors using electronic and telephonic means to project themselves into New York to conduct business transactions (see e.g. Parke-Bernet Galleries v. Franklyn, 26 N.Y.2d 13, 308 N.Y.S.2d 337, 256 N.E.2d 506 [1970]; Ehrlich-Bober & Co. v. University of Houston, 49 N.Y.2d 574, 427 N.Y.S.2d 604, 404 N.E.2d 726 [1980]), and we do so again here.

MBOI should reasonably have expected to defend its actions in New York. As distinct from an out-of-state individual investor making a telephone call to a stockbroker in New York (see Rothschild, Unterberg, Towbin v. McTamney, 59 N.Y.2d 651, 463 N.Y.S.2d 197, 449 N.E.2d 1275 [1983]), MBOI is a sophisticated institutional trader that entered New York to transact business here by knowingly initiating and pursuing a negotiation with a DBSI employee in New York that culminated in the sale of $15 million in bonds. Negotiating substantial transactions such as this one was a major aspect of MBOI's mission — "part of its principal reason for being" (21 A.D.3d 90, 95, 797 N.Y.S.2d 439 [2005]). Further, over the preceding 13 months, MBOI had engaged in approximately eight other bond transactions with DBSI's employee in New York, availing itself of the benefits of conducting business here, and thus had sufficient contacts with New York to authorize our courts to exercise jurisdiction over its person.² As Professor Siegel has observed, where a defendant "deals directly with the broker's New York office by phone or mail [or e-mail] in a number of transactions instead of dealing with the broker at the broker's local office outside New York, long-arm jurisdiction may be upheld" (Siegel, N.Y. Prac. § 86, at 152 [4th ed.]).

In short, when the requirements of due process are met, as they are here, a sophisticated institutional trader knowingly entering our state — whether electronically or otherwise — to negotiate and conclude a substantial transaction is within the embrace of the New York long-arm statute.

Sovereign Immunity and Comity

Before this Court, MBOI does not seriously press its claim of sovereign immunity, recognizing the controlling authority of Nevada v. Hall, 440 U.S. 410, 99 S.Ct. 1182, 59 L.Ed.2d 416 [1979] [states do not have immunity from suit in the courts of other states]. Rather, MBOI asks that, as a matter of comity, we honor its request for immunity from suit here.

Within its own borders, the State of Montana has waived immunity for breach of contract claims (Mont. Code Ann. § 18-1-404[1][a]), but specified that such claims can be brought only in the district courts of Montana (Mont. Code Ann. § 18-1-401). MBOI argues that New York should voluntarily defer to the Montana statute and dismiss this action. Our Court, however, has already rejected this argument in a strikingly similar case, Ehrlich-Bober, and we see no reason to depart from that precedent.

In Ehrlich-Bober, plaintiff, a New York City dealer in municipal and government securities, brought suit in New York State court against the University of Houston, a public institution and agency of the State of Texas, for breach of two reverse repurchase agreements. The University of Houston argued that the case should be dismissed on comity grounds because the relevant Texas statute, permitting suit against the University of Houston, provided that such suits could be brought only in two specified Texas counties.

In holding that the case should not be dismissed, we explained that comity is not a mandate, but rather a voluntary decision to defer to the policy of another state. We began by comparing the foreign legislation to our own public policy, determining that the Texas law was in the nature of a restriction on venue serving that state's administrative convenience, rather than a limitation on liability serving an essential governmental interest. Contrasting this administrative convenience with New York's interest in protecting...