In re Banco Santander Sec.-Optimal Litig..

Decision Date30 July 2010
Docket NumberCase Nos. 09-MD-02073-CIV,Case Nos. 09-CV-20215-CIV
Citation732 F.Supp.2d 1305
PartiesIn re BANCO SANTANDER SECURITIES-OPTIMAL LITIGATION.
CourtU.S. District Court — Southern District of Florida

Jack Reise, Paul Jeffrey Geller, Douglas Scott Wilens, Michael Lewis Greenwald, Robbins Geller Rudman & Dowd LLP, Boca Raton, FL, James I. Jaconette,Julie A. Kearns, Michael F. Ghozland, Robbins Geller Rudman & Dowd LLP, San Diego, CA, Javier Bleichmar, Joel H. Bernstein, Alan I. Ellman, Christopher J. Keller, Donald P. Delaney, Labaton Sucharow LLP, Daniel P. Chiplock, David S. Stellings, Steven E. Fineman, Lieff Cabraser Heimann & Bernstein LLP, New York, NY, Michael A. Hanzman, Hanzman Gilbert LLP, Coral Gables, FL, Kevin Bruce Love, Criden & Love PA, Michael Elliot Criden, Hanzman Criden & Love PA, South Miami, FL, Richard Heimann, Lieff Cabraser Heimann & Bernstein, San Francisco, CA, for Plaintiffs.

Gustavo Javier Membiela, Paulo R. Lima, Samuel Alberto Danon, Hunton & Williams LLP, Harry Richard Schafer, Kenny Nachwalter, P.A., Jason Daniel Joffe, Squire Sanders & Dempsey LLP, Benjamine Reid, Carlton Fields, Alan Graham Greer, Manuel Antonio Garcia-Linares, Melissa Fernandez, Richman Greer Weil Brumbaugh Mirabito & Christensen, Miami, FL, Paulo Roberto Lima, Shawn Patrick Regan, Hunton & Williams, Antony L. Ryan, Thomas G. Rafferty, Cravath Swaine & Moore LLP, Evan A. Davis, Charles J. Keeley, Joaquin P. Terceno, Cleary Gottlieb Steen & Hamilton, LLP, Anne K. Small, Fraser L. Hunter, Jr., Wilmer Cutler Pickering Hale & Dorr, James W. Haldin, James H.R. Windels, Michael P. Carroll, Michael S. Flynn, Davis Polk & Wardell LLP, Brittan J. Strangways, Dennis H. Tracey, III, Laura Besvinick, Sanford M. Litvack, Hogan Lovells US LLP, New York, NY, Traci Hope Rollins, Squire Sanders & Dempsey LLP, West Palm Beach, FL, Howard M. Shapiro, Wilmer Cutler Pickering Hale & Dorr LLP, Washington, DC, Samuel Joseph Salario, Jr., Carlton Fields, Tampa, FL, for Defendants.

ORDER GRANTING MOTIONS TO DISMISS FOR LACK OF PERSONAL JURISDICTION AND DISMISSING CASE FOR FORUM NON CONVENIENS

PAUL C. HUCK, District Judge.

This case, arising out of foreign investors' purchases of securities in off-shore investment funds closed to American investors, is before the Court on ten motions to dismiss by various Defendants. The Court has reviewed and considered the motions and associated briefing, the pertinent portions of the record, heard the argument of counsel on July 8, 2010, and is otherwise duly advised. For the reasons set forth below, the Court grants six Defendants' motions to dismiss for lack of personal jurisdiction. The Court also finds that this case should be dismissed under the doctrine of forum non conveniens because Ireland is a more convenient forum to try this case.

I. Introduction

This hydra-like litigation, in which the main actors are non-United States citizens litigating over non-United States securities, involves numerous interdependent issues of civil procedure, federal subject matter jurisdiction, personal jurisdiction, and conflicts of law.

Six Plaintiffs (two British Virgin Islands corporations, a Chilean company, and individuals residing in Mexico, Argentina, and Spain) filed a consolidated class action complaint against various banks and financial services institutions. The Plaintiffs invested in Bahamian investment funds, which in turn invested with a firm run by Bernard L. Madoff. As is now well known, Madoff did not actually invest the Bahamian funds' money because he wasrunning a Ponzi scheme.1 After the Bahamian funds lost their money in Madoff's scheme, these Plaintiffs and others filed lawsuits against various defendants.2 None of the plaintiffs in the potential class are citizens or residents of the United States. In fact, citizens and residents of the United States were not permitted to invest in the funds at issue.

The thrust of the complaint is that the Defendants, who are financial services institutions connected in some way with the Bahamian funds, failed to perform adequate due diligence on Madoff's transactions with the funds or otherwise breached their duties to the Plaintiffs by ignoring obvious red flags that should have raised alarm about Madoff's activities. The Defendants, twelve in all from seven different countries (Spain, the Bahamas, Bermuda, Ireland, the United Kingdom, the United States, and Switzerland), are variously sued for securities fraud under federal securities law, breach of contract, breach of fiduciary duty, negligence, and other common law torts. Only two of the twelve defendants are American citizens. One of them is Banco Santander International (Banco Miami), located in Miami. Banco Miami is an Edge Act corporation and a subsidiary of Defendant Banco Santander, S.A., a major Spanish bank. The other is PricewaterhouseCoopers (PWC) LLP, a New York-based auditing firm with offices throughout the Untied States. As reflected in the allegations in the complaint, these domestic Defendants had only a tangential connection to the relevant transactions in this lawsuit, which primarily concern the diligence (or lack thereof) conducted in connection with the Bahamian funds.

In addition to arguing that the Plaintiffs' allegations fail to state a cause of action, the Defendants argue that this case should be dismissed in whole or in part because of forum selection clauses, lack of subject matter jurisdiction, lack of personal jurisdiction, and forum non conveniens. The Defendants contend that it would be far more convenient to try this case in Ireland because more parties and witnesses are located there than any other country, most of the other relevant parties and witnesses are located in Europe, only two (minor) parties are located in the United States, and it makes little sense for a United States court to try an action where choice of law rules dictate that foreign law will supply the rules of decision for the Plaintiffs' common law claims.3 In addition, all the Defendants have consented to personal jurisdiction in Ireland while half of the Defendants challenge the personal jurisdiction of this Court. The Plaintiffs claim that the United States is a more convenient forum for trying this case because Madoff, the center of the fraud, was located in New York, Madoff's documents and relevant witnesses are located in the United States, the United States has an interest in applying its securities laws to thistransaction, and choice of law rules dictate that New York law governs the Plaintiffs' common law claims.

Because the jurisdictional and choice of law limitations incumbent upon this Court are designed to ensure that federal courts do not exercise jurisdiction or apply local law to defendants and controversies with little connection to this forum, the Plaintiffs have encountered a great deal of difficulty fitting their claims within established frameworks for applying federal securities law, exercising personal jurisdiction, and applying local law. For example, despite the Supreme Court's recent holding that the Securities and Exchange Act lacks language sufficient to override the judicial presumption against extraterritorial application of a federal statute, the Plaintiffs rely on a strained reading of both that holding and other Supreme Court precedents in arguing that fraud in connection with foreign investors' purchases in a Bahamian fund is nonetheless actionable under federal securities law.

Similarly, the Plaintiffs' personal jurisdiction allegations against many of the Defendants are not based on the Defendants' own contacts but on those of other corporations or individuals. Because the record indicates that half of the Defendants lack jurisdictionally sufficient contacts with the United States, Plaintiffs essentially ask the Court to ignore the corporate form and, without establishing a legal basis for doing so, impute to these Defendants the contacts of other entities and Defendants. Plaintiffs further claim that the Defendants are attempting to play a "corporate shell game," which justifies the imputation of others' contacts to the various Defendants for personal jurisdiction purposes. The Supreme Court, however, has described the legal distinction between a corporation and its shareholders as "[a] basic tenet of American corporate law." Dole Food Co. v. Patrickson, 538 U.S. 468, 474, 123 S.Ct. 1655, 155 L.Ed.2d 643 (2003); see also First Nat'l City Bank v. Banco Para El Comercio Exterior de Cuba, 462 U.S. 611, 625, 103 S.Ct. 2591, 77 L.Ed.2d 46 (1983) ("Separate legal personality has been described as 'an almost indispensable aspect of the public corporation.' "). The Plaintiffs fail to substantiate their jurisdictional claims with evidence of agency or alter ego relationships sufficient to impute the conduct of other persons or entities to the Defendants challenging personal jurisdiction. The burden-shifting framework established by the Eleventh Circuit for evaluating motions to dismiss for personal jurisdiction requires the plaintiff to produce competent evidence in support of his jurisdictional claims once the defendant has rebutted the jurisdictional allegations in the complaint. Plaintiffs have not produced such evidence. Their failure to rebut, with some admissible evidence, the statements in the various Defendants' affidavits explaining how the Defendants acted as separate legal entities, fatally undermines the Plaintiffs' case for personal jurisdiction over half of the Defendants in this case. Courts have found that the Defendants' remaining contacts, which consist mostly of telephonic, fax, and e-mail communications, or wire transfers through affiliate banks, do not, on their own, suffice to establish personal jurisdiction.

Since the Court lacks personal jurisdiction over half (and apparently some of the most important) of the Defendants in this action, including the Bahamian funds' auditor, custodian, administrator, and a director, it makes little sense to try anexpensive and...

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