McBride v. KPMG Int'l
| Citation | 24 N.Y.S.3d 257,2016 N.Y. Slip Op. 00306,135 A.D.3d 576 |
| Decision Date | 19 January 2016 |
| Docket Number | -101616/09,16703,16704,650632/09,-16707,-101615/09,16706,650633/09,16702 |
| Court | New York Supreme Court Appellate Division |
| Parties | Donna M. McBRIDE, individually and derivatively on behalf of Beacon Associates LLC II, Plaintiff–Appellant, v. KPMG INTERNATIONAL et al., Defendants–Respondents, Beacon Associates Management Corp. et al., Defendants, Paul Konigsberg, Defendant–Respondent. Jay Wexler, individually and derivatively on behalf of Rye Select Broad Market Prime Fund, L.P., Plaintiff–Appellant, v. KPMG LLP, et al., Defendants, KPMG UK, et al., Defendants–Respondents. Daniel Ryan, et al., Plaintiffs–Appellants, v. Friehling & Horowitz, P.C., et al., Defendants, KPMG UK, et al., Defendants–Respondents. Matthew Greenberg, et al., Plaintiffs–Appellants, v. Friehling & Horowitz, P.C., et al., Defendants, KPMG UK, et al., Defendants–Respondents. |
135 A.D.3d 576
24 N.Y.S.3d 257
2016 N.Y. Slip Op. 00306
Donna M. McBRIDE, individually and derivatively on behalf of Beacon Associates LLC II, Plaintiff–Appellant,
v.
KPMG INTERNATIONAL et al., Defendants–Respondents,
Beacon Associates Management Corp. et al., Defendants,
Paul Konigsberg, Defendant–Respondent.
Jay Wexler, individually and derivatively on behalf of Rye Select Broad Market Prime Fund, L.P., Plaintiff–Appellant,
v.
KPMG LLP, et al., Defendants,
KPMG UK, et al., Defendants–Respondents.
Daniel Ryan, et al., Plaintiffs–Appellants,
v.
Friehling & Horowitz, P.C., et al., Defendants,
KPMG UK, et al., Defendants–Respondents.
Matthew Greenberg, et al., Plaintiffs–Appellants,
v.
Friehling & Horowitz, P.C., et al., Defendants,
KPMG UK, et al., Defendants–Respondents.
650632/09
-101615/09
-101616/09
650633/09
-16707
16706
16704
16703
16702
Supreme Court, Appellate Division, First Department, New York.
Jan. 19, 2016.
Cotchett, Pitre & McCarthy, LLP, New York (Alexander E. Barnett of counsel), for appellants.
Linklaters LLP, New York (James R. Warnot Jr. of counsel), for KPMG International, respondent.
Hogan Lovells U.S. LLP, New York (Ira M. Feinberg of counsel), for KPMG UK, respondent.
Wachtell, Lipton, Rosen & Katz, New York (Emil Kleinhaus of counsel), for JPMorgan Chase & Co., respondent.
Cleary Gottlieb Steen & Hamilton LLP, Washington DC (Nowell D. Bamberger of the bar of the State of Maryland, and the bar of the District of Columbia, admitted pro hac vice, of counsel), for the Bank of New York Mellon Corporation, respondent.
Ballard Spahr LLP, New York (Scott M. Himes of counsel), for Paul Konigsberg, respondent.
Fishkin Lucks LLP, New York (Zachary W. Silverman of counsel), for Frank Avellino, respondent.
Judgment, Supreme Court, New York County (Richard B. Lowe, III, J.), entered September 5, 2014, dismissing plaintiff Donna M. McBride's complaint as against Paul Konigsberg, KPMG UK, and KPMG International, unanimously affirmed without costs. Judgment, same court and Justice, entered September 5, 2014, dismissing plaintiff Jay Wexler's first amended complaint as against Konigsberg, KPMG UK, and KPMG International, unanimously affirmed, without costs. Judgment, same court and Justice, entered September 5,
2014, dismissing the Ryan plaintiffs' first amended complaint against Konigsberg, KPMG UK,
KPMG International, and Frank Avellino, unanimously affirmed, without costs. Judgment, same court and Justice, entered September 5, 2014, dismissing the Greenberg plaintiffs' complaint against Konigsberg, KPMG UK, and KPMG International, unanimously affirmed, without costs. Order, same court and Justice, entered on or about August 18, 2014, which, insofar as appealed from as limited by the briefs, granted defendants JP Morgan Chase & Co. and The Bank of New York Mellon's (BNY) motions to dismiss the claims for (1) aiding and abetting fraud, fraud in the inducement, and breach of fiduciary duty, (2) conversion, and (3) unjust enrichment, unanimously affirmed, without costs. Appeal from order, same court and Justice, entered on or about July 28, 2014, unanimously dismissed, without costs, as subsumed in the appeals from the judgments.
The motion court correctly found that New York lacks personal jurisdiction over KPMG UK pursuant to CPLR 302(a)(3)(ii). While plaintiffs allege that KPMG UK committed a tort outside the state (negligently auditing nonparty Madoff Securities International, Ltd. [MSIL] in the United Kingdom), and their causes of action arise out of that tort, KPMG UK's act did not cause injury to a person or property within the state. “[T]he situs of commercial injury is where the original critical events associated with the action or dispute took place, not where any financial loss or damages occurred” (CRT Invs., Ltd. v. BDO Seidman, LLP, 85 A.D.3d 470, 471–472, 925 N.Y.S.2d 439 1st Dept.2011 ).
The court providently exercised its discretion in denying plaintiffs' request for jurisdictional discovery since plaintiffs failed to submit affidavits specifying facts that might exist but could not then be stated that would support the exercise of personal jurisdiction over KPMG UK (CPLR 3211 [d]; see de Capriles v. Lugo, 293 A.D.2d 405, 406, 740 N.Y.S.2d 623 1st Dept.2002, lv. dismissed in part, denied in part 98 N.Y.2d 717, 748 N.Y.S.2d 897, 778 N.E.2d 547 2002 ).
Plaintiffs base their claims against KPMG International on the contention that KPMG International is vicariously liable for KPMG UK'S alleged misconduct. However, plaintiffs' allegations, even if true, would not establish a basis for imposing vicarious liability on KPMG International for KPMG UK'S acts, either on a theory that an actual principal-agent relationship existed or on a theory of apparent authority. Accordingly, the claims against KPMG International were correctly dismissed.
In April 2014, the court dismissed Wexler's claim against the Tremont defendants for fraudulently inducing him into investing in nominal defendant/derivative plaintiff Rye Select Broad Market Prime Fund L.P. Wexler appealed but withdrew his appeal with prejudice. Without an underlying fraudulent inducement claim, Wexler's claim that JPMorgan, BNY, and Konigsberg aided and abetted fraudulent inducement necessarily fails (see Kleinerman v. 245 E. 87 Tenants Corp., 74 A.D.3d 448, 449, 903 N.Y.S.2d 356 1st Dept.2010 ).
Like Wexler, McBride invested in a feeder fund. She became a member of nominal defendant/derivative plaintiff Beacon Associates LLC II (Beacon Fund), which is managed by defendant Beacon Associates Management Corp. (Beacon Associates). Beacon Associates “invested” most of the Beacon Fund's assets with nonparty Bernard L. Madoff Investment...
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