Pictet Funds (Europe) S.A. v. Emerging Managers Grp., L.P.

Decision Date01 December 2014
Docket Number14-cv-6854 (SAS)
CourtU.S. District Court — Southern District of New York



Pictet Funds (Europe) S.A. ("PFE") and Pictet Overseas Inc. ("Pictet Overseas") bring this action pursuant to the Federal Arbitration Act ("FAA")1 to enjoin a Financial Industry Regulatory Authority ("FINRA") arbitration in which they were named respondents by Emerging Managers Group, L.P. ("EMG") and EMG Capital, LLC ("EMG Capital"). The arbitration was commenced by the filing of a Statement of Claims and Demand for Arbitration ("SOC") in which EMG and EMG Capital bring a single claim for breach of contract against PFE andPictet Overseas.2 The Claim arises out of a contract entered into by PFE and nonparty Atlantic Financial Partners LLC ("AFP").3 The Agreement contains a general dispute resolution clause, as well as a provision permitting FINRA arbitration for disputes initiated by AFP "related solely to fees payable."4

Plaintiffs move to preliminarily enjoin the arbitration pursuant to Federal Rule of Civil Procedure 65(a). They contend that the arbitration cannot proceed against Pictet Overseas because it is not party to the Agreement, or against PFE, as the Claim is beyond the limited scope of the Agreement's arbitration clause.5

Defendants now move to dismiss this case for failure to state a claim pursuant to Federal Rule of Civil Procedure 12(b)(6) or, alternatively, to compel arbitration under the FAA. They argue that the arbitrator - not this Court - mustresolve the issues raised by plaintiffs, including the scope of the arbitration clause.6 Moreover, they assert that plaintiffs' action is time-barred under the statute of limitations set forth in section 7503(c) of New York's Civil Practice Law and Rules ("section 7503(c)").

During a telephone conference held on October 28, 2014, the parties agreed that an evidentiary hearing on the request for a preliminary injunction was not required. They contend that there are two dispositive issues that can be decided as a matter of law. For plaintiffs, this issue is whether the Claim is arbitrable; for defendants, whether the suit is time-barred by section 7503(c).

For the reasons discussed below, I conclude that the question of arbitrability is properly before this Court and that section 7503(c) does not bar plaintiffs' suit for injunctive relief. Based on the parties' submissions, I further conclude that plaintiffs are entitled to a preliminary injunction. Accordingly, plaintiffs' motion is GRANTED, and defendants' motion is DENIED.


A. The Parties

PFE is a Luxembourg corporation based in Luxembourg. Amongother things, PFE manages certain investment funds outside of the United States.7 It entered into the Agreement - with non-party AFP - in June 2010.8 PFE is not a member of FINRA.9

Pictet Overseas is a Canadian corporation based in Montreal, Canada.10 It is a member of FINRA, but it is not a party to the Agreement.11

EMG is a Delaware limited partnership with its principal place of business in New York.12 It is not a member of FINRA.13 AFP's members transferred their ownership interests to EMG in April 2012.14

EMG Capital is a Florida limited liability corporation with itsprincipal place of business in Miami, Florida.15 It is a FINRA member.16

B. The Agreement

Under the Agreement, AFP agreed to provide sales and support services to PFE, which included introducing and promoting PFE funds to broker-dealer networks - such as Merrill Lynch's Global Private Client Group - in the United States.17 AFP was paid fees and commissions for its services.18

The Agreement states that "[a]ny party may terminate this Agreement by the giving of no less than three months written notice to the other."19 However, PFE could terminate the Agreement with "immediate effect" if AFP failed to "observe or perform [its] obligations" under the "Investment Acquisition" and "Supporting Services" provisions of the Agreement.20 Likewise, AFP could terminate the agreement without notice if PFE failed to perform its obligationsunder the "Remuneration" provision.21

The Agreement further provides that:

In the case of termination of this Agreement by [PFE] due to AFP having breached any of its material obligations under this Agreement or otherwise materially jeopardizes [sic] the interests of [PFE], the latter shall be entitled to retain any earned but unpaid commissions.
In the event of termination of this Agreement by [PFE] which is not due to AFP's material breach of this Agreement, [PFE] shall continue to pay the remuneration for a period of 12 (twelve) months following the effective date of termination, based on the assets still held by the Distributors during that period.22

Thus, under the Agreement, termination based on material breach under section 8(b)(ii), as opposed to termination with notice under section 8(a), results in fifteen fewer monthly payments to AFP - three months for the notice period, and twelve months for the year following the effective date of termination.

The Agreement's "Governing Law / Place of Jurisdiction" provision states that:

This Agreement including all matters related to its validity, construction, performance and enforcement shall be governed by the laws of the [sic] Switzerland. The Parties expressly agree that Geneva shall be the exclusive place of jurisdiction; provided, however, that in the event of a dispute related solely to fees payable, then AFP shall have the right to initiate an arbitration action to be settled by binding and non-appealable arbitration administered by FINRA Dispute Resolution, NY, in accordance with its securities arbitration rules then in force, and judgment upon such award may be entered in any court of competent jurisdiction.
Should the above mentioned dispute be initiated by [PFE], the latter shall have the choice about the appointment of the institution administering the international arbitration.23
C. The Parties' Dispute

On April 30, 2014, PFE terminated the Agreement - effective May 1 - citing, among other things, AFP's and EMG's poor performance.24 On May 29, defendants commenced the Arbitration by filing the SOC.25 The SOC alleges that "[b]ecause EMG [ ] performed all of its obligations under the Agreement . . . . [PFE's] purported termination of the Agreement" for cause - i.e., without notice - constitutes a breach by PFE.26

Defendants seek $339,000 in compensatory damages, the bulk of which represents the fifteen months of commissions defendants would havereceived had the Agreement been terminated with notice.27 They also seek attorneys' fees and punitive damages.


A. Preliminary Injunction28

"'The district court has wide discretion in determining whether to grant a preliminary injunction . . . .'"29 Nonetheless, "'[a] preliminary injunction is an extraordinary remedy never awarded as of right.'"30 "'A party seeking a preliminary injunction in this circuit must show: (1) irreparable harm in the absence of the injunction and (2) either (a) a likelihood of success on the merits or (b) sufficiently serious questions going to the merits to make them a fair ground forlitigation and a balance of hardships tipping decidedly in the movant's favor.'"31 "A preliminary injunction preserves the status quo pending final resolution of litigation."32

"'To satisfy the irreparable harm requirement, [petitioner] must demonstrate that absent a preliminary injunction [it] will suffer an injury that is neither remote nor speculative, but actual and imminent, and one that cannot be remedied if a court waits until the end of trial to resolve the harm.'"33 Moreover, irreparable harm by definition "'cannot be remedied by an award of monetary damages.'"34 In determining whether a plaintiff has demonstrated a likelihood of success on the merits of the "ultimate case, a court is not called upon finally to decide the merits of the controversy[;] . . . [i]t is necessary only that the court findthat the plaintiff has presented a strong prima facie case to justify the discretionary issuance of preliminary relief."35

B. Rule 12(b)(6) Motion to Dismiss
1. General Standard

In deciding a motion to dismiss pursuant to Rule 12(b)(6), the court must "construe the complaint liberally, accept all [non-conclusory] factual allegations in the complaint as true, and draw all reasonable inferences in the plaintiff's favor."36 "When there are well-pleaded factual allegations, a court should assume their veracity and then determine whether they plausibly give rise to an entitlement for relief."37 A claim is plausible "when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged."38 Plausibility requires "more than a sheer possibility that a defendant has acted unlawfully."39

When deciding a motion to dismiss, a district court may consider the facts alleged in the complaint, as well as "'documents attached to the complaint as exhibits[ ] and documents incorporated by reference in the complaint.'"40 A court may also consider a document that is not incorporated by reference "where the complaint 'relies heavily upon its terms and effect,' thereby rendering the document 'integral' to the complaint."41

2. Application to Statute of Limitations

"The lapse of a limitations period is an affirmative defense that a defendant must plead and prove."42 "However, a defendant may raise an affirmative defense in a pre-answer Rule 12(b)(6) motion if the defense appears on the face of the complaint."43 Thus, "[i]f the allegations . . . show that relief is barred by the applicable statute of limitations, the complaint is subject to dismissalfor failure to state a claim . . . ."44


A. Jurisdiction

As a threshold matter, I conclude that there is...

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