SPV Osus Ltd. v. UBS AG

• Decision Date: 09 February 2018
• Docket Number: August Term, 2016,Docket No. 16-2173
• Citation: 882 F.3d 333
• Parties: SPV OSUS LTD., Plaintiff–Appellant, v. UBS AG, UBS (Luxembourg) S.A., UBS FUnd Services (Luxembourg) S.A., UBS Third Party Management Company S.A., AIA LLC, Access Partners (Suisse) S.A., Access Management Luxembourg S.A., Access Partners S.A. (Luxembourg), Patrick Littaye, Access International Advisors Ltd., Theodore Dumbauld, Defendants–Appellees.
• Court: U.S. Court of Appeals — Second Circuit

882 F.3d 333

SPV OSUS LTD., Plaintiff–Appellant,

v.UBS AG, UBS (Luxembourg) S.A., UBS FUnd Services (Luxembourg) S.A., UBS Third Party Management Company S.A., AIA LLC, Access Partners (Suisse) S.A., Access Management Luxembourg S.A., Access Partners S.A. (Luxembourg), Patrick Littaye, Access International Advisors Ltd., Theodore Dumbauld, Defendants–Appellees.¹

Docket No. 16-2173

August Term, 2016

United States Court of Appeals, Second Circuit.

Argued: June 14, 2017

Decided: February 9, 2018

CHRISTIAN WARD, Yetter Coleman LLP (Collin J. Cox, on the brief), Houston, TX, for Plaintiff–Appellant SPV Osus Ltd.

MARSHALL L. KING, Gibson, Dunn & Crutcher LLP (Gabriel Hermann, on the brief), New York, NY, for Defendants–Appellees UBS AG, UBS (Luxembourg) S.A., UBS Fund Services (Luxembourg) S.A., and UBS Third Party Management Company S.A.

ANTHONY L. PACCIONE, Katten Muchen Rosenman LLP (Brian L. Muldrew, on the brief), New York, NY, for Defendants–Appellees AIA LLC, Access Partners (Suisse) S.A., Access Management Luxembourg S.A., Access Partners S.A. (Luxembourg), Patrick Littaye, Access International Advisors Ltd.

Before: CALABRESI and POOLER, Circuit Judges, and RAMOS, District Judge.²

Judge Calabresi concurs in the judgment and opinion of the Court, except for Part III, and files a concurring opinion.

POOLER, Circuit Judge

This case presents yet another chapter in the Bernie Madoff saga. SPV Osus Ltd. is the putative assignee of Optimal Strategic U.S. Equity Ltd (collectively, "SPV"). Optimal invested money directly with Bernard L. Madoff Investment Securities LLC ("BLMIS"). When BLMIS turned out to be a massive Ponzi scheme, see In reBernard L. Madoff Inv. Sec. LLC , 654 F.3d 229, 231–33 (2d Cir. 2011), Optimal suffered losses it alleges totaled roughly $2.9 billion.

Seeking a fresh path to recovery, SPV sued UBS AG and its affiliated entities (collectively, "UBS") and AIA LLC and its affiliated entities and individuals (collectively, "Access") in New York state court. The gravamen of SPV's complaint is that UBS and Access aided and abetted BLMIS and Madoff by sponsoring, and providing support for, two European-based feeder funds— Luxalpha SICAV and Groupement Financier Ltd. SPV alleges that the feeder funds in turn channeled billions of dollars to Madoff and BLMIS, allowing them to further their fraud. SPV alleges UBS and Access were involved with the feeder funds despite being aware of numerous signs of fraudulent activity on the part of Madoff and BLMIS. Absent such assistance from UBS and Access, SPV alleges, Madoff and BLMIS could not have continued to operate their Ponzi scheme.

UBS removed the state court action to the United States District Court for the Southern District of New York. SPV moved to remand. The district court denied the motion, finding federal jurisdiction proper pursuant to 28 U.S.C. § 1334, which provides federal courts with "original but not exclusive jurisdiction of all civil proceedings arising under title 11, or arising in or related to cases under title 11." 28 U.S.C. § 1334(b). See SPV OSUS Ltd. v. UBS AG , 2015 WL 4079079 (S.D.N.Y. July 1, 2015) (" SPV I "). The district court then granted UBS's motion to dismiss the complaint for lack of personal jurisdiction. See SPV OSUS Ltd. v. UBS AG , 114 F.Supp.3d 161 (S.D.N.Y. 2015) (" SPV II "). Finally, the district court granted a separate motion by the Access Defendants to dismiss the complaint against them, in relevant part, on the ground that SPV's complaint failed to adequately allege that actions by the Access Defendants proximately caused SPV's loss. See SPV OSUS Ltd. v. UBS AG , 2016 WL 3039192 (S.D.N.Y. May 26, 2016) (" SPV III ").

On appeal, SPV primarily argues that the district court erred in (1) not granting SPV's motion to remand, as the instant litigation is not "related to" the Madoff/BLMIS bankruptcies and the federal courts lack jurisdiction; (2) finding it lacked personal jurisdiction over UBS; and (3) finding it failed to adequately plead proximate cause. For the reasons detailed below, we affirm the district court's decisions in all respects.

BACKGROUND

SPV is a Bahamian corporation that alleges is it the assignee of Optimal. Optimal invested directly with BLMIS, and its last statement from BLMIS in November 2008 reported roughly $2.9 billion in its accounts. Madoff was involuntarily forced into Chapter 7 in April 2009. In June 2009 the Madoff estate was consolidated with a separate bankruptcy proceeding against BLMIS that was filed under the Securities Investor Protection Act ("SIPA"). The order consolidating the bankruptcy proceedings states that the consolidated estate "shall be administered in accordance with SIPA and the Bankruptcy Code under the jurisdiction of" the bankruptcy court, but "the Chapter 7 Trustee shall remain Chapter 7 trustee of the Madoff estate and shall continue to have all powers, rights, claims and interests of a Chapter 7 trustee[,] ... [and] all powers, rights, claims and interests of the Madoff estate are expressly preserved ...".

In December 2014, SPV filed suit in New York state court against UBS and AIA. SPV's suit set forth claims for aiding and abetting fraud, breach of fiduciary duty, conversion, and knowing participation in a breach of trust. In essence, SPV alleges that the defendants facilitated BLMIS's fraud by moving billions of dollars from European investors to BLMIS by providing support to the Luxalpha and Groupement feeder funds. SPV alleges that by supporting the feeder funds, UBS and Access provided Madoff and BLMIS with a veneer of credibility that gave investors confidence in their decision to invest with Madoff and BLMIS, allowing the fraud to continue. SPV also alleges that UBS ignored certain "red flags" indicating Madoff and BLMIS were engaged in fraud, and continued to service the feeder funds so that it might pocket fees. All the while, SPV alleges, UBS protected itself and its clients by not marketing or recommending Madoff funds.

UBS AG is a Swiss entity with its principal place of business in Switzerland. The remaining UBS entities were, at all times relevant, Luxembourg entities with their principal places of business in Luxembourg. Luxalpha was organized and located in Luxembourg; Groupement was organized and located in the British Virgin Islands. SPV alleges that it pleaded sufficient contacts to allow the exercise of personal jurisdiction by virtue of the UBS entities' contacts with New York related to their interactions with the Luxalpha and Groupement feeder funds. SPV also sued AIA LLC; Access International Advisors Ltd.; Access Partners (Suisse) S.A.; Access Management Luxembourg S.A.; Access Partners S.A. (Luxembourg); and Patrick Littaye (together, the "Access Defendants").

As described above, the district court denied SPV's motion to remand the matter to state court, then granted separate motions to dismiss the complaint. This appeal followed.

DISCUSSION

I. Appellate Jurisdiction.

SPV's notice of appeal designates its appeal as both from the judgment and from orders entered on July 21, 2015, July 24, 2015, May 26, 2016 and May 27, 2016. This list does not include the order and opinion denying the motion to remand. UBS argues that the failure to specify the remand order in the notice of appeal strips this Court of jurisdiction to consider an appeal from that order. We need not linger long over the issue, because even assuming arguendo that SPV waived its right to appeal, the denial of a motion to remand goes to this Court's subject matter jurisdiction, which may be raised at any time. See In re Methyl Tertiary Butyl Ether ("MTBE") Prod. Liability Litig ., 488 F.3d 112, 123 (2d Cir. 2007). "Indeed, we have often taken it upon ourselves to determine whether removal jurisdiction existed even where that issue was not itself appealed." Id . at 121. Satisfied that the appeal from the district court's denial of the motion to remand is properly before us, we turn to the merits.

II. "Related to" jurisdiction

"On appeal from the denial of a motion to remand for lack of subject matter jurisdiction, we review the court's legal conclusions de novo and its factual findings for clear error." Blockbuster, Inc. v. Galeno , 472 F.3d 53, 56 (2d Cir. 2006). UBS removed to federal court pursuant to the general removal statute, 28 U.S.C. § 1452(a) and the bankruptcy removal statute, which grants federal courts "original but not exclusive jurisdiction of all civil proceedings arising under title 11, or arising in or related to cases under title 11." 28 U.S.C. § 1334(b). "Congress did not delineate the scope of ‘related to’ jurisdiction, but its choice of words suggests a grant of some breadth." Celotex Corp. v. Edwards , 514 U.S. 300, 307–08, 115 S.Ct. 1493, 131 L.Ed.2d 403 (1995).

In this Circuit, "a civil proceeding is related to a title 11 case if the action's outcome might have any conceivable effect on the bankrupt estate." Parmalat Capital Fin. Ltd. v. Bank of Am. Corp ., 639 F.3d 572, 579 (2d Cir. 2011) (internal quotation marks omitted). "If that question is answered affirmatively, the litigation falls within the ‘related to’ jurisdiction of the bankruptcy court." In re Cuyahoga Equip. Corp ., 980 F.2d 110, 114 (2d Cir. 1992). "Congress intended to grant comprehensive jurisdiction to the bankruptcy courts so that they might deal efficiently and expeditiously with all matters connected with the bankruptcy estate." Celotex , 514 U.S. at 308, 115 S.Ct. 1493. While "related to" jurisdiction is not "limitless," id. , it is fairly capacious, and includes "suits between third parties which have an effect on the bankruptcy estate." Id. at 307 n. 5, 115 S.Ct. 1493. "An action is related to bankruptcy if the outcome could alter the debtor's rights, liabilities, options, or freedom of action (either positively or negatively) and which in any way impacts upon the handling and administration of the bankrupt estate." Id. at 308 n. 6, 115 S.Ct. 1493.

Here, the claims at issue arise in an...