Koehler v. The Bank of Bermuda (NY) Ltd., Docket No. 98-9624
| Decision Date | 01 August 1999 |
| Docket Number | Docket No. 98-9624 |
| Parties | (2nd Cir. 2000) LEE N. KOEHLER, Plaintiff-Appellant, v. THE BANK OF BERMUDA (NEW YORK) LIMITED, a New York Corporation, THE BANK OF BERMUDA LIMITED, a Bermuda Corporation, REEFS BEACH CLUB LIMITED, a Bermuda Corporation and A. DAVID DODWELL, a Bermuda citizen, Defendants-Appellees |
| Court | U.S. Court of Appeals — Second Circuit |
BRIAN G. WEST, Towson, Maryland (Paul F. Newhouse, Towson, Maryland, of counsel), for Plaintiff-Appellant Lee N. Koehler.
GREGOR F. GREGORICH, New York, New York (Laurie R. Rockett, Hollyer Brady Smith Troxell Barrett Rockett Hines & Mone, LLP, New York, New York, of counsel), for Defendant-Appellee The Bank of Bermuda Limited.
J. LAWRENCE BLADES, Salisbury, Connecticut (c/o Intrac Group, New York, New York, of counsel), for Defendants-Appellees Reefs Beach Club Limited and A. David Dodwell.
SANDRA G. BEHRLE, New York, New York (Cooper, Brown & Behrle, P.C., New York, New York, of counsel), for Defendant-Appellee The Bank of Bermuda (New York) Limited.
Before: NEWMAN, CARDAMONE, and JACOBS, Circuit Judges.
Plaintiff Lee N. Koehler appeals from a judgment and two orders of the United States District Court for the Southern District of New York (Keenan, J.). On February 19, 1998 the court granted defendant's, Bank of Bermuda, New York Ltd. (New York Bank), motion to dismiss plaintiff's complaint against it for failure to state a cause of action. On September 4, 1998 the district court granted remaining defendants', Bank of Bermuda, Ltd. (Bank Bermuda, Ltd.), A. David Dodwell, and The Reefs Beach Club Ltd. (The Reefs Ltd.), motion to dismiss plaintiff's federal securities cause of action for failure to state a claim, and the remaining counts for lack of subject matter jurisdiction, and dismissed the case. On November 12, 1998 it denied plaintiff leave to amend his federal securities complaint.
The issues on appeal are whether the district court correctly dismissed the claims against New York Bank and the federal securities claims for failure to state a claim; whether 28 U.S.C. 1332 extends federal court jurisdiction to a dispute between a United States individual and a Bermuda individual and corporations, i.e., whether alienage jurisdiction is available; and whether the district court acted within its discretion in denying leave to plaintiff to amend his complaint a second time.
We affirm the district court's dismissal of the complaint and its denial of leave to amend.
Plaintiff Lee N. Koehler met defendant A. David Dodwell in July 1977 when Dodwell was the general manager of a Bermuda resort hotel called "The Reefs." At Dodwell's suggestion, the two began to consider forming a Bermuda pest control business. These efforts had not progressed very far when Dodwell learned in 1980 that The Reefs Ltd., the parent company of The Reefs resort, was for sale. This information turned Dodwell and Koehler's attention from pest control to resort hotels.
In 1981 Dodwell, Koehler, and Haussner's Restaurant, Inc., a Maryland corporation, acquired The Reefs Ltd. Dodwell acquired 51 percent of the equity and 60 percent of the voting rights; Koehler acquired 29 percent of the equity and 24 percent of the voting rights; and Haussner's acquired the remaining 20 percent of the equity and 16 percent of the voting rights. Although the amended complaint is vague as to the financing of the acquisition, it appears that defendant Bank Bermuda, Ltd. was a creditor of The Reefs Ltd. before its acquisition and remained one thereafter.
Eight years later, in early 1989, Koehler and Dodwell formed a Nevis, West Indies corporation called Windward Properties Ltd. (Windward) to acquire the Nisbet Plantation Inn, a resort on the island of Nevis. On May 2, 1989 the Bank of Bermuda's Luxembourg subsidiary, Bank of Bermuda (Luxembourg) S.A. (Luxembourg Bank) made loans in the aggregate amount of $5.5 million to finance the acquisition. The financing comprised three separate loans together termed the Nisbet loans. First, a $2 million mortgage on Windward's real and personal property was secured by individual personal guarantees of $1 million each from Dodwell and Koehler, and by a joint guarantee from both for $1 million. Second, a $1.75 million personal loan to Koehler (Luxembourg loan) was secured by a letter of credit from Bank Bermuda, Ltd. to Luxembourg Bank. The letter of credit was in turn secured by a pledge of all of Koehler's stock in The Reefs Ltd. Third, a $1.75 million personal loan to Dodwell was apparently secured in the same way. The amounts obtained from the personal loans were promptly reloaned to Windward.
The Nisbet loans went into default almost immediately on August 2, 1989, and by early 1991 were several payments in arrears. On March 20, 1991 upon a call by Luxembourg Bank, Bank Bermuda, Ltd. paid the letter of credit for the Luxembourg loan and transferred the loan to Bank Bermuda, Ltd. Plaintiff's complaint suggests that the call was never made, or was not made in good faith, but offers no facts supporting this assertion. On May 2, 1991 Bank Bermuda, Ltd. sent Koehler a demand note for the unpaid Luxembourg loan principal with a cover letter requesting his assent to the new loan arrangement. On May 14, 1991 Koehler executed the demand note and cover letter.
Meanwhile, on November 2, 1989, Dodwell, Koehler, and another partner named Southworth formed the Mansion Club Limited Partnership (Mansion Partnership), a Maryland limited partnership, to acquire the Mansion Club, a private dining club in Phoenix, Arizona. Initially, Koehler owned 30 percent of the partnership and Malvern Properties, Ltd. (a corporation wholly owned by Dodwell) also owned 30 percent. New York Bank loaned $4.5 million to Mansion Partnership to finance its acquisition of the Mansion Club. This loan, called the New York loan, was secured by Mansion Partnership assets (including the Mansion Club), personal guarantees of Southworth, Koehler, Dodwell, and Malvern Properties in the respective amounts of $1.8 million, $1.35 million, $1.35 million, and $1.35 million, and a pledge of equity in two corporations not relevant to this action. The New York loan closed on December 22, 1989. Bank Bermuda, Ltd. employees were deeply involved in the structuring of both the Nisbet loans and the New York loan.
Koehler and Dodwell had several discussions regarding their financial difficulties and agreed on June 27, 1990 that any restructuring would require a pledge of their combined 80 percent equity interest in The Reefs Ltd. By early 1991 it was clear that the New York loan, like the Nisbet loans, was in trouble. On January 25, 1991 Koehler and Dodwell responded to Bank Bermuda, Ltd.'s request for a debt restructuring plan with the "Combined Equity Plan," which would include a pledge of their combined equity in The Reefs Ltd.
On April 18, 1991 Southworth filed for Chapter 11 bankruptcy on behalf of Mansion Partnership. Koehler contends this filing was "unauthorized." After the bankruptcy filing, Mansion Partnership hoped to sell its assets for $6.5 million, but an appraisal performed for New York Bank valued Mansion Partnership's assets at a more modest $4 to $4.5 million. The bank circulated this appraisal, over the partnership's objection, to prospective buyers. On October 8, 1991 New York Bank bought the Mansion Club for $3 million at the foreclosure sale, resulting in an alleged deficiency of over $2.5 million. The next day, New York Bank assigned the New York loan to Bank Bermuda, Ltd. Considerable negotiations between the principals in these resort ventures and the banks ensued.
On October 23 and 24, 1991 and again on December 16, 1991, Bank Bermuda, Ltd.'s chief executive officer expressed a preference for a refinancing arrangement consistent with Koehler and Dodwell's Combined Equity Plan. At some time between December 16, 1991 and Christmas 1991, he told Dodwell that he had "'a good idea for you [Dodwell]'" that he would disclose after the holidays. Several weeks later, on February 14, 1992 at a meeting attended by Dodwell (but apparently not by Koehler), the bank presented a debt restructuring plan that would pay off almost all of Dodwell's obligations but leave Koehler substantially in debt, and would transfer $5 million in new preferred shares in The Reefs Ltd. to a subsidiary of the bank. The proposal did not address the Nisbet loans.
A revised version of the plan was delivered to Koehler on February 17, 1992. Koehler expressed his opposition to it and his strong preference for the Combined Equity Plan in conversations with high-level bank officers (a senior vice-president and corporate counsel) on April 3, 1992 and May 3, 1992. In both conversations, these officers stated that Bank Bermuda, Ltd. intended to proceed with the recapitalization plan substantively as presented to Dodwell on February 17, 1992. On May 7, 1992 Dodwell wrote Koehler and stated that he would no longer participate in the Combined Equity Plan.
On July 21, 1992 pursuant to the collateral provisions of the Luxembourg loan, Bank Bermuda, Ltd. demanded and received all Koehler's shares in The Reefs Ltd. over Koehler's objection. In July 1993 Koehler stopped receiving governance and corporate information about The Reefs Ltd. The transfer instructions directed that one share be left in Koehler's name so that he would remain eligible to be a director. A revised version of the bank's February proposal (Macdonald Plan) was submitted to Koehler's lawyer by letter...
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