Knopick v. Ubs Fin. Servs., Inc.
| Decision Date | 13 April 2015 |
| Docket Number | CIVIL ACTION NO. 14-05639 |
| Court | U.S. District Court — Eastern District of Pennsylvania |
| Parties | NICHOLAS KNOPICK, individually and on behalf of those similarly situated, Plaintiff, v. UBS FINANCIAL SERVICES, INC., Defendant. |
MEMORANDUM
Nicholas Knopick ("Knopick") brings a putative class action on behalf of himself and those similarly situated seeking to recover for the loss of nearly all of his $12 million investment with the Swiss investment entity UBS Swiss Financial Advisors ("UBS SFA"), and its parent company, UBS AG. Defendant UBS Financial Services, Inc. ("UBS FS") asks the Court to enforce the forum selection clause in the parties' Master Account Agreement ("Master Agreement") and transfer this case to the Southern District of New York pursuant to 28 U.S.C. § 1404(a). Because the forum selection clause is inapplicable to Knopick's claims, the Court denies the motion to transfer.
In January 2007, Knopick opened a brokerage account with UBS FS. Prior to opening the account, Knopick signed a "Client Information and Agreement for Individuals" ("Client Agreement") with UBS FS. (Am. Compl. ¶ 97.) By signing the Client Agreement, Knopick "agree[d] to be bound by [the] terms and conditions [of the Master Agreement]" which was contained within. Knopick then placed several million dollars in the newly opened account. (Am. Compl. ¶ 76.) Susan Seifert ("Seifert"), a licensed securities broker in UBS FS'sBaltimore office, worked with Knopick to invest "conservatively in blue chip common stocks with high dividend yields."1 (Id. ¶¶ 16, 76.)
In March or April of 2007, Seifert introduced Knopick to Mr. Knöpfel2, a Swiss investment advisor with UBS SFA. UBS SFA, like UBS FS, is a subsidiary of UBS AG. (Id. ¶¶ 15, 17.) UBS SFA is registered as an investment advisor with the Securities and Exchange Commission ("SEC"). (Id. ¶ 17.) Seifert allegedly praised Knöpfel's "investment prowess" and this praise induced Knopick to open two accounts with UBS SFA (the "Swiss Accounts"). (Id. ¶¶ 77-78.) Knopick signed the requisite contracts with UBS SFA and UBS AG to open the Swiss Accounts. (Id. ¶¶ 108-19; 126-31.) Knopick then invested an additional $12 million in the Swiss Accounts after he "carefully explained his investment strategy to Mr. Knöpfel, in Ms. Seifert's presence." (Id. ¶ 78; see also id. ¶ 134.)
Knöpfel allegedly disregarded Knopick's investment strategy for the Swiss Accounts by investing widely and recklessly, trading Knopick's money into foreign currencies and purchasing an "inexplicable collection" of stocks and bonds in foreign currencies. (Id. ¶ 85.) Knöpfel was removed from his position at some point between August 2008 and October 2008. (Id. ¶ 88.) Knopick was never notified of Knöpfel's removal. (Id.) In September 2008, UBS SFA contacted Knopick to inform him that they needed to liquidate his account. (Id. ¶ 87.) By the end of 2008, Knopick's $12 million investment in the Swiss Accounts dwindled to roughly $900,000. (Id. ¶ 90).
Knopick asserts that UBS AG created UBS SFA, an entity authorized to conduct business in the United States, to redirect scrutiny while UBS AG engaged in a cross-border tax schemedesigned to help American citizens evade their tax obligations through undeclared Swiss accounts. (Id. ¶¶ 34, 44, 53.) UBS SFA was allegedly used to repatriate funds to the United States from the undeclared UBS AG accounts. (Id. ¶ 34.) UBS FS allegedly furthered this scheme by referring American clients to UBS SFA and arranging meetings with UBS SFA employees. (Id. ¶¶ 34, 146.) In making these referrals, UBS FS, through Seifert and other brokers, allegedly concealed the following facts: that UBS AG was under criminal investigation by the Department of Justice ("DOJ") in 2007 for an illegal cross-border business with United States citizens; that the SEC had contacted UBS AG in December 2007 regarding UBS AG's cross-border tax scheme; that UBS AG employees were detained or arrested in 2008; that UBS AG entered into a Deferred Prosecution Agreement with the DOJ in 2009; and that members of the UBS SFA team had been convicted of conspiracy to defraud the United States. (Id. ¶ 151.) Knopick alleges that UBS FS further conspired with UBS SFA and UBS AG to conceal the theft or loss of his money by failing to provide any information or explanation regarding Knöpfel's disappearance even though they allegedly have access to this information. (Id. ¶ 91.)
Knopick asserts claims against UBS FS for fraud, gross negligence, breach of fiduciary duty, unjust enrichment, breach of contract, violation of the Pennsylvania Unfair Trade Practices and Consumer Protection Law, violation of the New York General Business Law § 349, Civil RICO (18 U.S.C. § 1962(c)), and Conspiracy to Violate the Civil RICO Statute.
Knopick originally commenced this action against UBS AG, UBS SFA, Rene Elste—the broker who replaced Knöpfel, UBS FS, and Seifert by filing a praecipe for writ of summons in the Dauphin County Court of Common Pleas on November 8, 2013. (Id. ¶ 102.) Knopick then sought pre-complaint discovery and, in response, UBS FS and Seifert moved to compel arbitration pursuant to the terms of the Master Agreement. (Id. ¶ 104.) The Common PleasCourt granted the motion and dismissed the writ as to UBS FS and Seifert. (Id. ¶ 105; Pl.'s Br. Ex. A., Doc. No. 25.) Knopick refiled his claims against UBS FS and Seifert in a FINRA arbitration proceeding in FINRA's Philadelphia district on August 27, 2014. (Am. Compl. ¶ 106.) Knopick initially filed the FINRA statement of claims as a class action and defendants objected on the basis that class action claims are excluded from arbitration. (Id. ¶ 107.) The parties' FINRA case manager determined that Knopick's FINRA claims were brought in his individual capacity and are thus eligible for arbitration. (Pl.'s Br. Ex. D.) The FINRA claims remain pending.
Knopick then initiated this action by filing a putative class action complaint on October 1, 2014 against UBS FS and Seifert.3 (Doc. No. 1.) The following day Knopick filed a substantially similar putative class action complaint against UBS SFA, Rene Elste, and UBS AG in the Dauphin County Court of Common Pleas. (Def.'s Mot. Transfer 3 n.3, Doc. No. 21.) That action was removed to the Middle District of Pennsylvania and is presently pending. (Id.)
UBS FS and Seifert moved to dismiss the complaint before the Court on December 19, 2014. (Doc. No. 8.) Knopick mooted the motion to dismiss on February 19, 2015 by filing an amended complaint. (Doc. No. 14.) The Court held a Rule 16 Conference with the parties on March 2, 2015. After the conference, the Court ordered the parties to brief whether venue is properly laid in the Eastern District of Pennsylvania, and, if venue is improper, why the caseshould not be transferred to the Middle District of Pennsylvania, an indisputably proper venue,4 pursuant to 28 U.S.C. § 1406. (Doc. No. 18.)
Before responding to the Court's Order, Knopick voluntarily dismissed Seifert to ensure venue in the Eastern District of Pennsylvania.5 (Doc. No. 19.) Knopick asserted that his voluntary dismissal of Seifert made venue proper in this District pursuant to 28 U.S.C. § 1391(b)(1). (Doc. No. 20.) UBS FS, in its response, conceded that venue is proper in this District, but argued that the forum selection clause contained in the "Applicable Law" section of the Master Agreement requires transfer under 28 U.S.C. § 1404(a) to the Southern District of New York. (Doc. No. 21.) Accordingly, the Court ruled that venue is proper in this District and construed UBS FS's argument as a motion to transfer pursuant to § 1404(a). (Doc. No. 23.) Knopick was granted a week to respond to the transfer motion. In response he challenged the applicability of the forum selection clause. The Court held oral argument on the motion on March 26, 2015.
A district court may transfer a civil action to any other district court where it might have been brought "[f]or the convenience of parties and witnesses" and "in the interest of justice." 28 U.S.C. § 1404(a). Ordinarily, a court evaluates a § 1404(a) motion by considering the relevant private and public interest factors. Atl. Marine Const. Corp. v. U.S. Dist. Ct. for W. Dist. Tex.,134 S. Ct. 568, 581 (2013). "The calculus changes, however, when the parties' contract contains a valid forum-selection clause, which 'represents the parties' agreement as to the most proper forum.'" Id. (quoting Stewart Org., Inc. v. Ricoh Corp., 487 U.S. 22, 31 (1988)). Unlike most challenges to the enforcement of a forum selection clause, however, the Court is not here tasked with deciding the clause's enforceability per se. Thus, the analysis set forth by the Supreme Court in Atlantic Marine is not controlling.6 See Atl. Marine Const. Co., 134 S. Ct. at 581-83. Rather, the Court must decide in first instance whether, given the specific language of the Master Agreement's Arbitration provision, the separate forum selection clause even applies to Knopick's claims.
When asked to interpret a contract, the Court must first decide, as a matter of law, whether the contractual language is ambiguous. Kass v. Kass, 696 N.E.2d 174, 180 (N.Y. 1998); Hutchinson v. Sunbeam Coal Corp., 519 A.2d 385, 390 (Pa. 1986).7 If the Court concludes that the language is unambiguous, the Court must determine its meaning by its contents alone. If the Court finds that the language is ambiguous, the fact-finder must decide its meaning. Brad H. v. City of New York, 951 N.E.2d 743,746 (N.Y. 2011); Ins. Adjustment Bureau, Inc. v. Allstate Ins. Co., 905 A.2d 462, 469 (Pa. 2006).
"A contract is ambiguous only if it is written so imperfectly that it is susceptible to more than one reasonable interpretation.'" Pacific Emp'rs Ins. Co., 693 F.3d at 426 (internal quotation marks omitted) (citing New York and Pennsylvania law). The parties' disagreement as to the proper construction of the contract...
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