Jonas v. Estate of Leven

• Decision Date: 27 July 2015
• Docket Number: No. 14–Cv–3369 (SHS).,14–Cv–3369 (SHS).
• Citation: 116 F.Supp.3d 314
• Parties: Stanley JONAS and Dutch Book Partners, Plaintiffs, v. The ESTATE OF Gustave LEVEN; Jacques Cugny; Charles Broll; Tanya Tamone; Jean–Paul Croisier; Gestrust SA; Barneli & CIE SA; France Vendome ; The Redid Trust; and The Rashi Foundation, Defendants.
• Court: U.S. District Court — Southern District of New York

116 F.Supp.3d 314

Stanley JONAS and Dutch Book Partners, Plaintiffs,

v.The ESTATE OF Gustave LEVEN; Jacques Cugny; Charles Broll; Tanya Tamone; Jean–Paul Croisier; Gestrust SA; Barneli & CIE SA; France Vendome ; The Redid Trust; and The Rashi Foundation, Defendants.

No. 14–Cv–3369 (SHS).

United States District Court, S.D. New York.

Signed July 27, 2015.

Ethan York Leonard, The Law Offices of Neal Brickman, New York, NY, for Plaintiffs.

Kevin Anthony Burke, Sidley Austin LLP, Joseph Tripodi, Kranjac Tripodi & Partners LLP, Fran Marcia Jacobs, Duane Morris, LLP, Michael John Dell, Kramer Levin Naftalis & Frankel, LLP, New York, NY, David Andrew Gordon, Sidley Austin LLP, Chicago, IL, for Defendant.

OPINION & ORDER

SIDNEY H. STEIN, District Judge.

This is the story of an international business deal gone wrong. In 2006, Gustave Leven, the founder of the Perrier mineral water empire, and plaintiffs Stanley Jonas and his investment advisory firm Dutch Book Partners, LLC purportedly entered into an oral agreement by which Leven agreed to invest $500 million in a new Cayman Islands based investment portfolio to be managed by Jonas. After Leven failed to pay the $500 million investment and withdrew an additional $50 million of funds that he had in fact provided, plaintiffs filed this litigation in New York state court to recover the fees and profits they claim they would have earned on the original investment. This lawsuit is plaintiffs' desperate attempt to hold someone among eleven defendants accountable for the losses they allegedly sustained.

After removing this action to the Southern District of New York, various defendants filed motions to dismiss the complaint pursuant to Fed.R.Civ.P. 12(b)(2) for want of personal jurisdiction and Fed.R.Civ.P. 12(b)(6) for failure to state a claim upon which relief can be granted. The Court finds that it lacks personal jurisdiction over the moving defendants—all foreign nationals or corporations—on the grounds that they had essentially no connection with the state of New York. The Court therefore grants their respective motions to dismiss the complaint.

I. BACKGROUND ¹

In early 2006, Jonas, a New York investment broker, traveled to Paris, France to market his new "principal protected investment strategy," which enabled investors to speculate on interest rate movements while avoiding the loss of their principal investment. (SAC ¶¶ 1, 43, 45–46.) Leven attended Jonas's presentations in Paris to learn more about his investment strategy. (Id. ¶ 45.) According to Jonas, Leven had a "substantial amount of assets maintained in United States Treasuries and was seeking a way to hedge their principal risk should U.S. interest rates move substantially higher." (Id. )

Leven, then the head of France Vendome, a large financial holding company in France, approached Jonas through a former colleague of Jonas's, Jon Manual Rozan, one of France's leading options experts. (Id. ¶¶ 43–44.) Jonas was also introduced to Jacques Cugny, Leven's lawyer, and Claude Broil, who was Vice Chairman of France Vendome and a director of the Rashi Foundation, an Israeli charitable organization, and Gestrust SA, the Swiss trustee of a trust established by Leven. (Id. ¶¶ 21, 43.)

A. The Alleged $500 Million Oral Investment Agreement

During various meetings between Leven and Jonas in France, Jonas made oral and written presentations of his proposed "Dutchbook + Two Year Note Treasury Hedge Portfolio Strategy."² (SAC ¶ 47.) Ultimately, Leven made the following investment proposal to Jonas:

a. Leven would transfer a "seed investment" of $500,000,000 of United States Treasuries held at that time at Union Bank in Switzerland to a Cayman Islands based fund for a minimum of two years in order to create a track record of success for that portfolio, in which Leven would be the only investor;

b. In return, Leven would obtain a 50% interest in Jonas's Dutch Book Partners, a Delaware limited liability company;

c. Jonas would complete the formation and funding of Dutch Book Partners and the Cayman Islands based fund;

d. Jonas through Dutch Book Partners would manage the "Dutch Book + Two Year Note Treasury Hedge Portfolio" and Dutch Book Partners would receive two percent of funds under management for its expenses and services;

e. Dutch Book Partners would also retain 20% of the profits in the trading based on the increase in value of the assets under management;

f. After a track record of success had been established, Leven—through Aurel Leven³ and Gestrust—would help to market the fund; and

g. Leven and Partners would split any profit, losses, and costs at the end of each year of the agreement.

(See SAC ¶¶ 3, 53.)

In addition to the $500 million seed investment, which constituted the "Two Year Portfolio element," the alleged agreement also anticipated a $50 million investment by Leven, which was to function in some way as a hedge to the $500 million portfolio. (Id. ¶ 54.) This "Hedge Portfolio" was central to Jonas's investment strategy. (Id. ) Leven, Broil, and Cugny informed Jonas that the investment was "for and through the funding of Rashi." (Id. ¶ 52.) Leven promised that Broil, through Aurel–Leven and Gestrust, would help market the fund "once a sufficient track record had been acquired," and that Cugny, "Leven's Swiss agent," would set up the investment vehicle through which Leven would form the joint venture with Jonas. (Id. ¶¶ 56–57.) There is no writing that captures any part of this oral understanding.

In June 2006, Leven allegedly sought to modify the agreement. (Id. ¶ 59.) Instead of depositing $500 million in Dutch Book Partners' Cayman Islands fund, Leven sought to maintain the money in a segregated account at Union Bank in Switzerland ("UBS"). Leven still agreed to deposit $50 million as the "initial margin" with the agreed-upon clearing broker and reaffirmed that he would pay the above-outlined fees to Jonas. (Id. ¶¶ 59–60, 87.) However, the parties did not reduce this modification to writing.

B. The $50 Million Subscription Agreement between Barneli & Cie SA and Dutch Book Fund SPC, Ltd.

Certain parties entered into a written investment agreement regarding the $50 million investment in the summer of 2006.

In late June of that year, Jonas flew to Paris to meet with Leven at the office of France Vendome and at Leven's residence to finalize and execute a Subscription Agreement and Private Placement Memorandum.⁴ The Subscription Agreement concerned the purchase of $50 million worth of shares in the Dutch Book Segregated Portfolio I, a segregated portfolio of Dutch Book Fund SPC, Ltd. (the "Fund"), a Cayman Islands exempted company. (Ex. C to Burke Decl.) Before executing the agreement, Leven sought various changes concerning the lock-up period and the creation of a class of stock just for him. (SAC ¶ 61.) At this meeting, Leven and Cugny informed Jonas that Leven would invest "as the beneficiary of a trust"—the Redid Trust—which was formed for the benefit of Rashi and would be administered by Gestrust as trustee. (Id. )

Ultimately, Barneli & Cie SA, a Panamanian corporation of which Leven was the disclosed principal (id. ¶¶ 4, 15, 72, 85), entered into the Subscription Agreement to purchase $50 million of Class C shares of the Dutch Book Segregated Portfolio I. (Subscription Agreement at S–4, S–18, Ex. C to Burke Decl.) The Subscription Agreement and Information Memorandum provided that the shares would be managed as part of an investment program established by the investment adviser, Dutch Book Partners, LLC. (Information Memorandum at ii, v, Ex. C to Burke Decl.; SAC ¶ 48.)

"[W]hile acting on behalf of Barneli," Cugny sent the Subscription Agreement to Fortis, a bank in Ireland,⁵ which provided wire instructions regarding the investment. (SAC ¶¶ 63, 65, 75.) Indeed, Cugny executed the Subscription Agreement, in a "representative capacity," as the general attorney for Barneli. (Subscription Agreement at S–18, Ex. C to Burke Decl.) Cugny sent additional required documentation to Fortis using his personal email address, and Fortis sent wiring instructions to Cugny directly. (SAC ¶ 75.) In addition, Cugny, Tanya Tamone, treasurer and director of Barneli (id. ¶ 11), and Herve Pollet, signed the Subscription Agreement as "authorized signatories," i.e., persons authorized to give and receive instructions between the Fund and the subscriber, Barneli. (Subscription Agreement at S–6, Ex. C to Burke Decl.)

The Subscription Agreement included an indemnification clause, as follows:

The Subscriber hereby agrees to indemnify the Fund on behalf of the relevant Portfolio(s), its Directors and officers, the Administrator, the Investment Adviser and their respective directors, officers, employees, agents and representatives against any and all liability, costs, claims, and expenses (including, without limitation, reasonable attorneys['] fees for the investigation of and preparation of a defense to any such liability, claims, costs and expenses) resulting from a breach of any of the foregoing representations.

(Subscription Agreement at S–12, Ex. C to Burke Decl.)

The Subscription Agreement also provided that (1) "[n]either this Subscription Agreement nor any term hereof may be changed, waived, discharged, or terminated except with the written consent of the Subscriber and Fund's Board of Directors" and (2) Cayman Islands law shall govern the Subscription Agreement. (Id. at S–11.)

C. Subsequent Negotiations and Liquidation of Barneli's $50 Million Investment

Trading on the Fund began in August 2006. (SAC ¶ 79.) One month later, Jonas met with Leven and Rozan at Leven's home in Cannes, France. (Id. ¶ 80.) Leven allegedly reiterated his desire to invest more money with Jonas, but Leven was concerned about his other financial obligations and the tax implications of transferring $500 million from the UBS account in Switzerland to a French-controlled bank. (Id. ¶¶ 80–81, 92.) Jonas left France with "assurances that as soon as the technical issues could be solved,...