Giordano v. UBS, AG

Decision Date25 September 2015
Docket NumberNo. 14 Civ. 8252.,14 Civ. 8252.
Parties Susan GIORDANO, as Executrix of the Estate of Ida Giordano, Plaintiff, v. UBS, AG, Defendant.
CourtU.S. District Court — Southern District of New York

Ancona Associates, by: Dustin A. Levine, Esq., Mineola, NY, for Plaintiff.

Gibson, Dunn & Crutcher LLP, by: Gabriel Herrmann, Esq., New York, NY, for Defendant.

OPINION

SWEET

, District Judge.

Defendant UBS, AG ("UBS–AG" or the "Defendant") has moved pursuant to Rules 12(b)2

, 12(b)6 of the Federal Rules of Civil Procedure and the common law doctrine of forum non conveniens to dismiss the complaint of plaintiff Susan Giordano, executrix of the Estate of Ida Giordano ("Giordano" or the "Plaintiff") alleging breach of fiduciary duty, malpractice, breach of contract, disgorgement, and fraud. Based upon the conclusions set forth below, the motion of UBS–AG is granted, and the complaint is dismissed.

Prior Proceeding

Giordano filed her complaint on October 15, 2014 containing the following allegations. Plaintiff Susan Giordano, Executrix of the Estate of Ida Giordano, resides in Queens, New York. Compl. ¶ 6. From July 2000 to May 2009, Plaintiff and the now-deceased Ida Giordano maintained a joint account with UBS in Geneva, Switzerland (the "Swiss Account"). Id. at ¶ 13; Müller Aff. ¶¶ 6–7. UBS has a 152–year history as a Swiss financial institution. Müller Aff. ¶ 3. The present-day UBS was formed in 1998, when Union Bank of Switzerland and Swiss Bank Corporation merged to form a new company. Id. UBS is incorporated in and has its principal place of business in Switzerland. Id. It operates under Swiss law as an "Aktiengesellschaft," a corporation that has issued shares of common stock to investors. Id. Between May and July 2000, both Plaintiff and Ida Giordano personally executed several contractual account documents with UBS that governed the account relationship for the Swiss Account (collectively, the "Account Agreements"). The Account Agreements contain at least three provisions designating Swiss law as the governing law for the account relationship and designating Switzerland as the exclusive place of jurisdiction for "any disputes" arising out of the account relationship. Müller Aff. Exs. B, E–F. For example, the account opening document for the Swiss Account contains the following forum-selection and choice-of-law provisions:

The present Agreement and/or Declaration shall be exclusively governed by and construed in accordance with Swiss law. The place of performance of all obligations of both parties, the place of debt collection, the latter only for Customers domiciled outside Switzerland, as well as the exclusive place of jurisdiction for any disputes arising out of and in connection with the present Agreement and/or Declaration shall be Geneve.

Id. Ex. B at 2.

Plaintiff admits that, in years prior to 2009, she "failed to disclose [the] Swiss Account on her U.S. tax returns or pay tax on the income derived from the assets and transactions in the UBS Swiss Account." Compl. ¶ 52. Then, in October 2009, Plaintiff, as Executrix of the Estate of Ida Giordano, participated in the IRS Offshore Voluntary Disclosure Program ("VDP"), which afforded U.S. taxpayers who had hidden foreign income from the IRS an opportunity to admit their misconduct, pay fines and penalties, and receive amnesty from criminal prosecution. Compl. ¶ 15; see Declaration of Gabriel Herrmann ("Herrmann Decl.") Ex. 7. Plaintiff's allegation in this case is that UBS should be held responsible for the consequences of Plaintiff's concealment of the Swiss Account from the IRS, and her eventual participation in the VDP, given that she has since "been assessed and has paid back taxes, penalties, and interest to the IRS as a result of her ownership of the UBS Swiss Accounts." Compl. ¶¶ 15–18. The Complaint asserts that UBS "undertook a fiduciary duty" to advise the Giordanos of their U.S. tax obligations by entering into a tax treaty with the U.S. government (the Qualified Intermediary ("QI") Agreement). Compl. ¶ 20. Plaintiff further alleges that UBS breached its alleged fiduciary duty by failing to inform her of her U.S. tax obligations and failing to "prepare and deliver to the Plaintiff the QI agreed IRS Forms W–9 which would have identified [her] as someone who either needed to pay taxes on offshore assets" or needed to "withhold" a portion of the profits of the Swiss Account. Compl. ¶ 23.

Each year, U.S. taxpayers are required to complete an IRS Form 1040, which includes a Schedule B that must be completed if the taxpayer has (1) taxable interest or dividends from, (2) any sort of financial interest in, or (3) signature authority over, a foreign bank account. See Herrmann Decl. Ex. 2. Schedule B directs these taxpayers to answer the following straightforward question under penalty of perjury: "did you have a financial interest in or signature authority over a financial account (such as a bank account, securities account, or brokerage account) located in a foreign country?" Id.

Taxpayers who have any such interest in or authority over a foreign account typically must also identify the location of the foreign account and complete Form TD F 90–22.1, a form better known as the Report of Foreign Bank and Financial Accounts, or "FBAR." The FBAR's instructions provide that a taxpayer must file an FBAR if, as Plaintiff alleges here, he or she has more than $10,000 in foreign accounts. See, e.g., id. Ex. 5 at 6. The FBAR form also makes clear that failure to disclose may lead to severe criminal penalties. Id. at 1 ("Civil and criminal penalties, including in certain circumstances a fine of not more than $500,000 and imprisonment of not more than five years, are provided for failure to file a report, supply information, and for filing a false or fraudulent report.").

Plaintiff also makes reference to a Deferred Prosecution Agreement ("DPA") UBS entered into with the U.S. government in 2009, which acknowledged that UBS had participated in a scheme to "facilitate the evasion of U.S. taxes" by certain of its accountholders. Compl. ¶ 50. However, the DPA does not describe any misconduct directed at those UBS accountholders—it concerned steps that were undertaken to assist the efforts of certain UBS clients to conceal their income from the U.S. tax authorities, not a scheme by UBS to trick its own customers into committing tax violations (which would serve neither UBS's interests nor those of its clients). Notably, Plaintiff does not allege that UBS was ever engaged to provide her any tax advice, that it ever assisted her in preparing tax returns, that it ever advised her about what to report in her tax returns, or that it ever told her not to report the Swiss Account on her IRS Form 1040s or FBARs.

The UBS motion was heard and marked filed fully submitted on May 13, 2015.

The Applicable Standard

On a motion to dismiss pursuant to Rule 12(b)(6)

, all factual allegations in the complaint are accepted as true, and all inferences are drawn in favor of the pleader. Mills v. Polar Molecular Corp., 12 F.3d 1170, 1174 (2d Cir.1993). However, "a plaintiff's obligation to provide the grounds of his entitlement to relief requires more than labels and conclusions." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) (internal quotation marks omitted). A complaint must contain "sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’ " Ashcroft v. Iqbal, 556 U.S. 662, 663, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (quoting Twombly, 550 U.S. at 570, 127 S.Ct. 1955 ).

A claim is facially plausible when "the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Iqbal, 556 U.S. at 663, 129 S.Ct. 1937

(quoting Twombly, 550 U.S. at 556, 127 S.Ct. 1955 ). In other words, the factual allegations must "possess enough heft to show that the pleader is entitled to relief." Twombly, 550 U.S. at 557, 127 S.Ct. 1955 (internal quotation marks omitted).

The Forum Selection Clause is Enforceable

Courts, including the Court of Appeals for the Second Circuit, have recognized that a party may not maintain a suit in federal court when it has committed to litigate claims against its contract counter-party in another jurisdiction, such as the courts of a particular state or foreign nation. See, e.g., Martinez v. Bloomberg LP, 740 F.3d 211, 219 (2d Cir.2014)

(recognizing "a strong federal public policy supporting the enforcement of forum selection clauses" citing Atlantic Marine Const. Co. v. U.S. Dist. Court for W. Dist. of Texas, ––– U.S. ––––, 134 S.Ct. 568, 574, 187 L.Ed.2d 487 (2013)

, for the proposition that, "in all but the most unusual cases, the interest of justice is served by holding parties to their bargain" (internal quotation and alterations omitted)). Since at least 1972, when the Supreme Court issued its seminal decision in M/S Bremen v. Zapata Off–Shore Co., forum-selection clauses "are prima facie valid and should be enforced" absent extraordinary circumstances. 407 U.S. 1, 10, 92 S.Ct. 1907, 32 L.Ed.2d 513 (1972). In Atlantic Marine, the Supreme Court reconfirmed this principle and explained that "a valid forum-selection clause [should be] given controlling weight in all but the most exceptional cases." 134 S.Ct. at 581 (alteration in original) (internal quotation omitted); accord, e.g., Martinez, 740 F.3d at 219. Atlantic Marine clarified that, as a doctrinal matter, enforceability of forum-selection clauses should be analyzed under a modified version of the standard that governs forum non conveniens motions and it reaffirmed the principle that, "[w]hen parties have contracted in advance to litigate disputes in a particular forum, courts should not unnecessarily disrupt the parties' settled expectations." 134 S.Ct. at 583.

Courts in the Second Circuit "employ a four-part analysis" in determining whether to "dismiss[ ] a claim based...

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