Firefighters' Retirement System et al v. Royal Bank of Scotland PLC
Filing
78
RULING: Accordingly, although RBS is subject to nationwide service of process, the Court concludes that RBSs contacts with the United States are not of a character and quality to satisfy constitutional due process. In light of the Remand from the F ifth Circuit Court of Appeals, RBSs Motion for Reconsideration Due to Lack of Subject Matter Jurisdiction is DENIED. Royal Bank of Scotland PLC. is hereby dismissed for lack of personal jurisdiction. Signed by Judge Shelly D. Dick on 8/3/2017. (LLH)
UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF LOUISIANA
FIREFIGHTERS’ RETIREMENT
SYSTEM, ET AL.
CIVIL ACTION
VERSUS
15-482-SDD-EWD
ROYAL BANK OF SCOTLAND PLC.
RULING
This matter comes before the Court on Remand from United States Court of
Appeals for the Fifth Circuit directing this Court to determine whether Defendant, Royal
Bank of Scotland, PLC (“RBS”) is subject to nationwide service provisions of Bankruptcy
Rule 7004(d).1 For the reasons set forth below, the Court finds that RBS is subject to the
nationwide service provision of Bankruptcy Rule 7004(d), but the Court lacks personal
jurisdiction over RBS.
I.
PROCEDURAL BACKGROUND2
This Court granted a Rule 12(b)(2) Motion to Dismiss filed by Defendant, RBS Rule
12(b)(2) for lack of personal jurisdiction.3 Plaintiffs moved for reconsideration of the
Court’s dismissal of RBS for want of personal jurisdiction.4 The Court granted Plaintiffs’
Motion for Reconsideration, or Alternatively, Motion to Alter or Amend Judgment.5 RBS
1
Rec. Doc. 75.
The Court adopts the factual background in Rec. Doc. 45.
3
Rec. Doc. 45, amended to a dismissal without prejudice in Rec. Doc. 50.
4
Rec. Doc. 51.
5
Rec. Doc. 63. The Court denied as untimely Plaintiffs’ motion under Federal Rule of Civil Procedure 59(e)
filed on to alter or amend the Court’s judgment but considered the plaintiff’s Motion as having been brought
2
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moved the Court to reconsider its grant of reconsideration of its prior dismissal of RBS
arguing that the Court lacked subject matter jurisdiction to reconsider its earlier Ruling
due to an intervening appeal by RBS. RBS argued that the Court did not have subject
matter jurisdiction to enter the December 12, 2016 Order granting reconsideration
because Plaintiffs’ filing of a notice of appeal on July 15, 20166 divested the Court of
further jurisdiction. RBS maintains that, “[a]s a result of plaintiffs’ notice of appeal, this
Court does not have subject matter jurisdiction to grant relief from the judgment under
Federal Rule 60(b).”7 In response, Plaintiffs filed a Motion to Remand.8 The Court of
Appeal remanded this matter “to the district court for determination as to whether RBS is
subject to the nationwide service provisions of Bankruptcy Rule 7004(d).”9
II.
LAW AND ANALYSIS
A. Legal Standard for Personal Jurisdiction
Suit was originally filed in state court. RBS filed a Notice of Removal10 in which it
asserted that the federal court had bankruptcy “related to jurisdiction” for purposes of 28
U.S.C. §§ 452(a) and 1334(b). In its removal pleadings, RBS asserted that “the State
Court Action relates to three separate bankruptcy cases arising under title 11 of the United
States Code (the ‘Bankruptcy Code’), all of which are pending in the United States
Bankruptcy Court for the Southern District of New York (the ‘Bankruptcy Court’)”,
pursuant to Federal Rule of Civil Procedure 60(b)(5), The Court agreed to reconsider its dismissal of RBS
for want of personal jurisdiction based on its Ruling in a related matter (Firefighters’ Retirement Systems et
al. v. Citco Group Limited, et al., Case No. 3:13-cv-373-SDD-EWD), which analyzed the effect of nationwide
service rules under Bankruptcy Rule 7004(d) on in personam jurisdiction.
6
Rec. Doc. 52.
7
Rec. Doc. 64-1.
8
Rec. Doc. 72.
9
Rec. Doc. 75.
10
Rec. Doc. 1.
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concluding that “this Court has jurisdiction under 28 U.S.C. § 1334(b) and removal is
proper under 28 U.S.C. § 1452(a).”11
As has been discussed by this Court in extenso in related proceedings,12 the
question before the Court is whether RBS has purposeful and meaningful contacts with
the United States per the federal bankruptcy statutory scheme which authorizes
nationwide service of process to the forum of the United States, not the State of Louisiana.
Bankruptcy Code 7004(f) establishes that service is proper “if it is effective to establish
personal jurisdiction over the person of any defendant with respect to a case under the
code or civil proceeding arising under the code, arising in or relating to a case under the
code.”13
However, service of process under Rule 7004(d) gives rise to personal
jurisdiction over the defendant in a related Bankruptcy Code case only “if the exercise of
jurisdiction is consistent with the Constitution and laws of the United States,”14 specifically,
the due process clause.
As the Supreme Court noted in Walden v. Fiore, “a Court’s exercise of personal
jurisdiction over a non-resident defendant is consistent with the due process clause if the
defendant has sufficient purposeful minimum contacts with the forum such that requiring
the defendant to defend its interest in the forum does not ‘offend traditional notions of fair
play and substantial justice.’”15 The Supreme Court instructs that “the proper question is
whether the defendant’s conduct connects him to the forum in a meaningful way.”16 When
11
Rec. Doc. 1, pp. 4 -7
See Firefighter Retirement Systems, et al. v. Citgo Group, Ltd., et al., Case No. 3:13-cv-373-SDD-EWD,
Rec. Doc. 325, p. 6, 2016 WL 1254366, at *3 (M.D.La., Sep. 30, 2016).
13
Federal Rules of Bankruptcy Procedure, Rule 7004(f).
14
Id.
15
134 S.Ct. 115, 118 (2014).
16
Id.
12
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a federal statute provides for nationwide service of process, the relevant forum to which
the minimum contacts analysis is applied is the entire United States.17
Plaintiffs bear the burden to make a prima facie showing that personal jurisdiction
is proper.18 Defendants argue that “the inclusion of related to bankruptcy jurisdiction in
the notice of removal as an alternative basis for federal jurisdiction does not alter the
conclusion that a federal court sitting in diversity may exercise jurisdiction over a nonresident only if the long arm statute provides and it does not offend the due process clause
of the Fourteenth Amendment.”19 In Firefighters’ Retirement Systems, et al. v. Citco
Group Limited, et al., the Fifth Circuit issued a Mandate wherein the court held that
“removal was proper based on the Chapter 11 proceedings, such that the district court
had subject matter jurisdiction at the time of removal.”20 Because the present litigation is
related to a bankruptcy proceeding governed by Title 11 of the United States Bankruptcy
Code, Bankruptcy Rule 7004(d), which provides for nationwide service of process, applies
to the present litigation.21 In Bush v. Buchman, Buchman & O’Brien, Law Firm, the Fifth
Circuit held that, “when a federal court is attempting to exercise personal jurisdiction over
a defendant in a suit based upon a federal statute providing for nationwide service of
process, the relevant inquiry is whether the defendant had minimum contacts with the
United States.”22 The question before the Court is whether RBS “has sufficient contacts
17
Busch v. Buchman, Buchman, and O’Brien, 11 F.3d 1255 (5th. Cir. 1994); Lentz v. Trinchard, 730
F.Supp.2d 567, 578 (E.D. La. Aug. 2, 2010); (“When a suit is in federal court on ‘related to’ bankruptcy
jurisdiction… the sovereign exercising authority is the United States not the particular state where it was
originally filed.”) In Re Enron Corp. Securities Sec., 2011 WL3516292, *3 (S.D. Tx. Aug. 11, 2011).
18
Monkton Ins. Srvs. Ltd. vs. Ritter, 768 F.3d 429, 431 (5th Cir. 2014) (internal citations omitted).
19
Rec. Doc. 69, p. 3.
20
13-cv-373-SDD-EWD, Rec. Doc. 222, p. 14, 796 F.3d 520, 528 (5th Cir. 2015).
21
See Lentz v. Trinchard, 730 F.Supp.2d 567, 577 (“Bankruptcy Rule 7004(d) provides for nationwide
service of process in adversary proceedings arising Under Title 11 of the United States Code.”).
22
11 F.3d 1255, 1258 (5th Cir. 1994).
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with the United States to support the fairness of the exercise of jurisdiction over [it] by a
United States court.”23
In Goodyear Dunlop Tires Operations, S.A. v. Brown,24 the Supreme Court set
forth the “essentially at home” test in connection with a foreign international defendant,
holding: “[a] court may assert general jurisdiction over a foreign sister state or foreign
country corporation’s to hear any and all claims against them when their affiliations with
the state are so ‘continuous and systematic’ as to render them essentially at home in the
forum state.”25 Where, as here, the court’s subject matter jurisdiction arises because it is
“related to” a bankruptcy proceeding, the forum state is the United States.
B. General Jurisdiction
RBS is incorporated under the laws of Scotland and has its principle place of
business in London, England.26 “Although [RBS] was served pursuant to Louisiana’s
long-arm statute, the Bankruptcy rules provide for nationwide service of process.
Bankruptcy Rule 7004(b) provides service of process by virtually the same manner and
means as service of a non-Louisiana resident under Louisiana’s long-arm statute.”27
There are a several factors that weigh in favor of finding that RBS has minimum
contacts with the United States.
RBS has physical offices in the United States in
23
In Re Federal Fountain, Inc., 165 F.3d 600, 602 (8th Cir. 1999)(citing, Fitzsimmons v. Barton, 589 F. 2d
330, 333 (7th Cir. 1979)).
24
564 US 915, 919, 131 S.Ct. 2846, 2851, 180 L.Ed.2d (2011).
25
Id. at 519.
26
Rec. Doc. 1-2, p. 2.
27
Firefighters’ Retirement System, et al. v. Citgo Group, Ltd., et al., 13-373 2016 WL 4942004 at *2 (M.D.
La., Sep. 16, 2016) (citing LA R.S. 12-3204, which requires that a “certified copy of a contradictory motion,
rule to show cause, or other pleading filed by Plaintiff… shall be sent to the Defendant by registered or
certified mail, or actually delivered to the Defendant by commercial courier.” Comparing Federal Rules of
Bankruptcy Procedure, Rule 7004(b) requiring service by first class mail).
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Connecticut, Illinois, New Jersey, and New York.28 RBS has a designated agent for
service of process in the United States.29 RBS allegedly received approximately $24.7
million from the Louisiana funds in connection with an agreement executed by an
intermediary.30 Lastly, RBS’s counsel, William Dougherty, executed his declaration in the
United States, specifically Connecticut.31 However, a general jurisdiction analysis is not
merely a tallying of a defendant’s contacts with the relevant forum state. As noted by
Justice Sotomayor in her concurring opinion in Daimler AG v. Bauman, “[g]eneral
jurisdiction instead calls for an appraisal of a corporation's activities in their entirety,
nationwide and worldwide.”32
The Supreme Court in Perkins v. Benguet Consolidated Mining Company,33 held
that a foreign corporation may be subject to general personal jurisdiction in the United
States despite being incorporated under the laws of a foreign jurisdiction.34 The Perkins
court found that the corporation’s engagement in director’s meetings, business
correspondence, banking, payment of salaries, and purchasing of machinery in the United
States constituted sufficient contacts to give rise to general jurisdiction.35 Although RBS’s
offices in four states conceivably also have meetings, correspondence, banking, the
payment of salaries, and the purchasing of equipment, the Perkins case is distinguishable
28
Rec. Doc. 1, p. 2, ¶ 3.
See Rec. Doc. 1-2, p. 2.
30
Rec. Doc. 1-2, ¶ 51.
31
Rec. Doc. 14-8.
32
134 S.Ct. 746, 763; 187 L.Ed.2d 624 (2014).
33
342 U.S. 437, 440; 72 S.Ct. 413, 415; 96 L.Ed. 485 (1952).
34
Id.
35
Id at 447-449.
29
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insofar as it involved a foreign mining corporation that completely halted its operations
abroad and was, during the relevant time, run entirely out of one United States office.36
In Patterson v. Aker Solutions Incorporated, the Fifth Circuit held that it would be
“an exceptional case” to exercise general personal jurisdiction over a foreign corporation
with its principle place of business in a foreign country.37 Even a business operating three
plants in Louisiana was found to have insufficient contacts with the forum to justify an
exceptional case of general personal jurisdiction.38 Therefore, RBS’s four branches and
offices in the United States do not provide a sufficient basis for general jurisdiction in the
relevant forum, the United States.
RBS’s transactions with the Louisiana funds are also insufficient to give rise to
general jurisdiction based upon the Fifth Circuit’s holding in Patterson. In Patterson, the
court “refused to find general personal jurisdiction over a Norwegian company, Aker Sub
Sea, which entered into eleven secondary agreements with a business based in the
United States.”39
By contrast, RBS’s one alleged transaction,40 executed by
intermediaries, is a fortiori, more attenuated than the eleven second agreements that
were primarily entered by the defendant in Patterson. As both the Supreme Court and
the Fifth Circuit have held, it is an extremely exceptional case wherein a federal court
would have general personal jurisdiction over a foreign corporation that transacts
36
Patterson, 826 F. 3d 234. See Daimler, 134 S.Ct. at 761, n.19 (“We do not foreclose the possibility that
an exceptional case, See e.g. Perkins v. Van Gogh Counsel Mining Co., 342 U.S. 437, 72 S.Ct. 413, 96
LED. 485 (1952)… a corporation’s operations in a forum other than its formal place of incorporation or
principle place of business may be so substantial and of such nature as to render the corporation at home
in that state.”).
37
826 F. 3d. 231, 234 (5th Cir. 2016).
38
See Normand H&E Equipment Services, Inc., 14-367, 2015 WL 1281989 (M.D. La. Mar. 20, 2015).
39
Firefighters’ v. Citgo, Ltd., 13-737, 2016 WL 4942004 at *4, 13-373-SDD-EWD (M.D. La. Sep. 9, 2016).
40
The Priority Payment Agreement, discussed infra pp. 10-11.
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business with the United States. The Court finds that the pleadings do not demonstrate
that the instant case is such an extremely exceptional case. Accordingly, the Court finds
that it does not have general personal jurisdiction over RBS.41
C. Specific Jurisdiction
Even when the defendant lacks “continuous and systematic contacts” to support
general jurisdiction, the court may still exercise specific jurisdiction “in a suit arising out of
or related to the defendants’ contacts with the forum.”42 Specific jurisdiction “focuses on
the relationship among the defendant, the forum, and the litigation.”43 “T[o] exercise
jurisdiction consistent with due process, the defendant’s suit-related conduct must create
a substantial connection with the forum [the United States].”44
The Fifth Circuit employs a three step analysis for a jurisdictional inquiry: (1)
whether the defendant has minimum contacts with the forum state, i.e., whether it
purposely directed its activities towards the forum or purposely availed itself of the
privileges of conducting activities there; (2) whether the plaintiff’s cause of action arising
out of or results from the defendant’s forum related contacts; and (3) whether the exercise
of personal jurisdiction is fair and reasonable.45 If the plaintiff can establish the first two
41
The Court also notes that RBS being registered as a foreign corporation with the Louisiana Secretary of
State’s office is not enough to establish general personal jurisdiction. See DNH, LLC v. In and Out Burgers,
381 F. Supp. 2d. 559, 565 (5th Cir. 2005) (“Qualifying to do business in a state and appointing an agent for
service of process there do not amount to a ‘general business presence’ of a corporation that can sustain
an assertion of general jurisdiction”).
42
Luvin’ Care v. Insta-Mix, Inc., 438 F. 2d 465, 469 (5th Cir. 2006)(quoting Helicopteros Nacionales de
Colombia, S.A. v. Hall, 466 U.S. 408, 415; 104 S.Ct. 1868; 80 L.Ed.2d 404 (1984)).
43
Walden, 134 S. Ct. at 1121 (quoting Keeton v. Hustler Magazine, Inc., 465 U.S. 770, 775 (1984)).
44
Id. at 1121.
45
See Monkton Ins. Services, Ltd. v. Ritter, 768 F. 3d. 429, 433 (5th Cir. 2014)(quoting Seiferth v.
Helicopteros Atuneros, Inc., 472 F. 3d. 266, 271 (5th Cir. 2006)).
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prongs, the burden shifts to the defendant to show that exercising jurisdiction would be
unfair or unreasonable.46
“T[he] relationship must arise out of contacts that the ‘defendant himself’ creates
with the forum state.”47 In other words, the Plaintiff must show the non-resident defendant
directed specific acts toward the forum. The minimum contacts inquiry cannot be satisfied
“by demonstrating contacts between the plaintiff (or third parties) and the forum state.”48
“Due process requires the Defendant be hailed into court in a forum state based on his
own affiliation with the state, not based on the ‘random fortuitous or attenuated’ contacts
he makes by interacting with other persons affiliated with the state.”49 Here, the relevant
forum is the United States.
Plaintiffs identify several allegations in their Petition in an attempt to demonstrate
that a prima facia case for the exercise of specific jurisdiction exists.50 The Court accepts
uncontroverted facts as true; however, the Court assigns no weight to conclusory
allegations even if uncontroverted.51 The specific facts identified by the Plaintiffs in their
Opposition memoranda are largely conclusory and to some degree speculative.52
Therefore, the Court cannot credit such allegations in assessing whether Plaintiffs have
made their prima facia case.
46
Seiferth, 472 F. 3d. at 271 (internal citations omitted).
Walden, 134 S. Ct. at 1122 [emphasis original].
48
Id.
49
Id. at 1123 (quoting Burger King Corp. v. Rudzewicz, 471 U.S. 462, 475, 105 S. Ct. 2174 (1985)(internal
quotations omitted).
50
Rec. Doc. 21, pp. 13-14.
51
Panda Brandy Wine Corp. v. Potomac Electric Power Company, 253 F. 3d. 865, 869 (5th Cir. 2001).
52
For instance, Plaintiffs speculation that RBS must have agreed to a subordination of Leveraged shares
is contradicted by the offering memorandum itself. The offering memorandum indicates that Leveraged
had the autonomy to “issue additional classes of shares which may differ in terms of, among other things,
denomination of currency, the fees charged, the minimum subscription amounts, redemption rights, and
other rights.” See Rec. Doc. 14-7, p. 22.
47
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In order to be subject to specific personal jurisdiction, RBS must have directed
contacts towards the United States regarding the investment transaction that gave rise to
Plaintiffs’ claims. Although Plaintiffs experienced financial harm in the United States,
injury in the forum is not a sufficient means of connecting RBS to the United States.53
The Petition in this case reveals that these specific activities were not directed by RBS to
the Plaintiffs. It was Leveraged, not RBS, who negotiated the transaction at issue.
Plaintiffs have alleged that there were meetings between Leveraged and CGS in Baton
Rouge, Louisiana regarding the purchase of the contested Series N shares.54 In the
Petition, the Plaintiffs actually define the “Offering Memorandum” as the “Leveraged
Confidential Memorandum dated April 1, 2008, used by Leveraged to market the Series
N shares.”55 Absent from the Petition are any allegations that RBS directly communicated
with the Plaintiffs, or negotiated the investment opportunity. The only link between RBS
and the United States in this case is the “Priority Payment Agreement.”
In the Priority Payment Agreement, RBS allegedly agreed to the terms set forth in
the Offering Memorandum which was presented by Leveraged to the Plaintiffs.
Defendants allege they relied upon the Priority Payment Agreement in entering the
agreement with Leveraged. According to Plaintiffs, “[a]s a third party beneficiary to the
agreement, the Louisiana Funds are entitled to enforce the terms of the agreement
because it relied upon those agreements in purchasing the Series N Shares.56 Plaintiffs’
53
Pitts v. Ford Motor Company, 14-396, 2015 WL 5256838, *6 (S.D. Miss. Aug. 26, 2015)(quoting Walden,
134 S.Ct. at 1125)(“… mere injury to a forum resident is not a sufficient connection with the forum… an
injury is jurisdictionally relevant only insofar as it shows the defendant has formed a contact with the forum
state. The proper question is not whether plaintiff experienced a particular injury or effect but whether the
defendant’s conduct connects him to the forum in a meaningful way.”).
54
Rec. Doc. 1-2, p. 4, ¶ 4; p. 5, ¶ 11.
55
Rec. Doc. 1-2, p. 3(m).
56
Rec. Doc. 1-2, p. 10, ¶ 32.
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Petition focuses on RBS’s interaction with Leveraged.
Rather than identifying the
contacts that RBS has made with the United States, Plaintiffs have attempted to make
their prima facia case by focusing on RBS’s interaction with Leveraged, which, based
upon the allegations plead in this case, directed its actions and communications toward
the United States.
In Walden, the Supreme Court warned against relying upon such
interactions to establish specific personal jurisdiction. “Due process requires the
Defendant be hailed into a court in a forum state based upon his own affiliation with the
[forum], not based upon the random fortuitous, or attenuated contacts he makes by
interacting with other persons affiliated with the [forum].”57
In this case, the Court finds that the minimum contacts necessary to exercise
specific personal jurisdiction over RBS do not exist.
III.
CONCLUSION
Accordingly, although RBS is subject to nationwide service of process, the Court
concludes that RBS’s contacts with the United States are not of a character and quality
to satisfy constitutional due process. In light of the Remand from the Fifth Circuit Court
of Appeals, RBS’s Motion for Reconsideration Due to Lack of Subject Matter Jurisdiction58
is DENIED. Royal Bank of Scotland PLC. is hereby dismissed for lack of personal
jurisdiction.
IT IS SO ORDERED.
Baton Rouge, Louisiana, this 3rd day of August, 2017.
S
57
58
JUDGE SHELLY D. DICK
UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF LOUISIANA
Walden, 134 S. Ct. at 1123.
Rec. Doc. 64.
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