Societe d'Assurance de l'Est SPRL et al v. Citigroup Inc.
Filing
41
MEMORANDUM OPINION AND ORDER re: 28 MOTION to Dismiss for Lack of Jurisdiction and on the grounds of forum non conveniens. filed by Citigroup Inc., Citibank, N.A., Citigroup Congo S.A.R.L. The Court has carefully considered all of the parti es' arguments, and to the extent not expressly addressed, they are either moot or without merit. Accordingly, the motion to dismiss is granted. The Clerk is directed to enter Judgment dismissing the second amended complaint and closing this case. The Clerk is also directed to close Docket No. 28. (Signed by Judge John G. Koeltl on 9/13/2011) (djc)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
────────────────────────────────────
SOCIÉTÉ D’ASSURANCE DE L’EST SPRL
AND CABINET MAÎTRE SYLVANUS MUSHI
BONANE,
Plaintiffs,
- against -
10 Civ. 4754 (JGK)
MEMORANDUM OPINION
AND ORDER
CITIGROUP INC., CITIBANK, N.A., AND
CITIGROUP CONGO S.A.R.L.,
Defendants.
────────────────────────────────────
JOHN G. KOELTL, District Judge:
The plaintiffs, Société d’Assurance de l’Est SPRL
(“Assurest”) and Cabinet Maître Sylvanus Mushi Bonane (“Bonane”)
bring this action for breach of contract against defendants
Citigroup Inc. (“Citigroup”), Citibank, N.A. (“Citibank”), and
Citigroup Congo S.A.R.L. (“Citigroup Congo”).
The defendants
have moved to dismiss the complaint pursuant to Federal Rule of
Civil Procedure 12(b)(1), for lack of subject matter
jurisdiction; Federal Rule of Civil Procedure 12(b)(2), for lack
of personal jurisdiction as against defendant Citigroup Congo;
Federal Rule of Civil Procedure 12(b)(6), for failure to state a
claim as against defendants Citigroup and Citibank; and the
doctrine of forum non conveniens.
I.
Plaintiff Assurest is an insurance company organized and
existing under the laws of the Democratic Republic of the Congo
(“DR-Congo”).
Second Amended Complaint (“Compl.”) ¶ 12.
Plaintiff Bonane is a law firm whose principal place of business
is in the DR-Congo.
Compl. ¶ 13.
Defendant Citigroup is a
corporation organized under the laws of Delaware and with its
principal place of business in New York.
Compl. ¶ 11(a).
Defendant Citibank is a nationally chartered bank, and
Citigroup’s principal subsidiary; it has its principal place of
business in New York.
Compl. ¶ 11(b).
Defendant Citigroup
Congo is a wholly owned subsidiary of Citibank, organized and
operating in the DR-Congo.
Compl. ¶ 11(c).
In broad terms, the Second Amended Complaint (the
“Complaint”) alleges that the defendants, acting in concert,
improperly removed $588,727 from the Citigroup Congo account of
plaintiff Assurest and withheld $341,470 from the Citigroup
Congo account of plaintiff Bonane, in breach of the plaintiffs’
contracts with the defendants.
Compl. ¶¶ 53, 59.
While most of
the funds withheld from Bonane’s account were ultimately paid,
the funds removed from Assurest’s account remain missing.
Compl. ¶¶ 65-67.
2
According to the Complaint, Sylvanus Mushi Bonane (“Mr.
Bonane”), the principal of Bonane, instituted an action through
plaintiff Bonane against the Office des Douanes et Accises
(“OFIDA”), an agency of the DR-Congo, on behalf of a client,
Estagri SPRL (“Estagri”).
Compl. ¶¶ 7, 57.
Judgment was
rendered in the action in favor of Estagri, but payment was not
made by OFIDA.
Compl. ¶ 8.
Thereafter, Estagri forced
Defendant Citigroup Congo to turn over payment of the judgment
amount by means of a writ of attachment, levied on an account
held by OFIDA.
Compl. ¶ 8.
According to the Complaint, on June 27, 2007, the
defendants notified Mr. Bonane that the accounts of Bonane and
Assurest would be closed on July 13, 2007.
Compl. ¶ 41.
On
June 29, 2007, $599,965 was debited from Assurest’s account.
Compl. ¶ 45.
On July 23, 2007, the plaintiffs were notified
that each of their accounts was subject to attachment pursuant
to a judgment (“RC 96.136”) issued in an action brought by OFIDA
against Citigroup Congo, in which neither of the plaintiffs was
a party, that declared the previous attachment by Estagri
invalid.
Compl. ¶¶ 47, 56.
On August 3, 2007, the defendants
and OFIDA entered into an agreement to attempt jointly to
enforce the judgment against Estagri, Assurest and “all of their
associates’ accounts.”
Compl. ¶ 58 & Ex. E.
3
On August 6, 2007, $599,895 was debited from Assurest’s
account, the same amount was credited, perhaps twice, and
$588,727 was finally debited.
Compl. ¶¶ 50-53.
All of these
transactions took place despite the attachment on the account,
and without Assurest’s authorization.
Compl. ¶¶ 50-53.
The
following day, the defendants refused a request by Mr. Bonane to
withdraw the balance of the Bonane account, in the amount of
$341,470.
Compl. ¶ 59.
On August 7, 2008, the Supreme Court of Justice of the DRCongo found that the judge who had rendered RC 96.136 had
committed fraud by declaring Estagri’s prior attachment invalid.
Compl. ¶ 63.
On September 23, 2008, Citigroup Congo agreed to
pay Bonane $341,300 by reactivating its account.
Compl. ¶ 65.
The defendants also agreed to restore the funds removed from the
Assurest account, but the funds have not been restored.
¶ 67.
Compl.
On April 17, 2009, the defendants closed the plaintiffs’
accounts.
Compl. ¶ 68.
From July 23, 2007, through the date
the accounts were closed, the defendants continued to charge the
plaintiffs fees for administering their accounts.
Compl. ¶ 62.
On June 17, 2010, the plaintiffs brought suit in this
Court.
The defendants moved to dismiss the complaint and the
plaintiffs filed an amended complaint on September 7, 2010.
The
Court denied the motion to dismiss as moot and granted the
plaintiffs the opportunity to file a second amended complaint,
4
but warned that if the second amended complaint were dismissed,
it would be dismissed with prejudice.
20, 2010.
See Order dated September
The second amended complaint that is the subject of
this motion to dismiss was filed on October 1, 2010.
II.
In defending a motion to dismiss for lack of subject matter
jurisdiction pursuant to Federal Rule of Civil Procedure
12(b)(1), the plaintiff bears the burden of proving the Court’s
jurisdiction by a preponderance of the evidence.
Makarova v.
United States, 201 F.3d 110, 113 (2d Cir. 2000).
In considering
such a motion, the Court generally must accept the material
factual allegations in the complaint as true.
See J.S. ex rel.
N.S. v. Attica Cent. Schs., 386 F.3d 107, 110 (2d Cir. 2004).
The Court does not, however, draw all reasonable inferences in
the plaintiff’s favor.
Id.; Graubart v. Jazz Images, Inc., No.
02 Civ. 4645, 2006 WL 1140724, at *2 (S.D.N.Y. Apr. 27, 2006).
Indeed, where jurisdictional facts are disputed, the Court has
the power and the obligation to consider matters outside the
pleadings, such as affidavits, documents, and testimony, to
determine whether jurisdiction exists.
See Anglo-Iberia
Underwriting Mgmt. Co. v. P.T. Jamsostek (Persero), 600 F.3d
171, 175 (2d Cir. 2010); APWU v. Potter, 343 F.3d 619, 627 (2d
5
Cir. 2003); Filetech S.A. v. France Telecom S.A., 157 F.3d 922,
932 (2d Cir. 1998); Kamen v. Am. Tel. & Tel. Co., 791 F.2d 1006,
1011 (2d Cir. 1986).
In so doing, the Court is guided by the
body of decisional law that has developed under Federal Rule of
Civil Procedure 56.
Kamen, 791 F.2d at 1011; see also Leyse v.
Bank of Am., N.A., No. 09 Civ. 7654, 2010 WL 2382400, at *1
(S.D.N.Y. June 14, 2010).
In the Complaint, the plaintiffs allege that this Court has
subject matter jurisdiction over this action solely on the basis
of diversity jurisdiction under 28 U.S.C. § 1332.
Compl. ¶ 11.
However, there is no diversity between the parties “where on one
side there are citizens and aliens and on the opposite side
there are only aliens.”
Universal Licensing Corp. v. Paola del
Lungo S.P.A., 293 F.3d 579, 581 (2d Cir. 2002); see also Ariel
(UK) Ltd. V. Reuters Grp. PLC, No. 05 Civ. 9646, 2006 WL 3161467
(S.D.N.Y. Oct. 31, 2006).
As alleged in the Complaint,
defendant Citigroup Congo and both of the plaintiffs are
citizens of DR-Congo.
Compl. ¶¶ 11-13.
There is thus no
diversity jurisdiction.
In their brief, the plaintiffs argued that the Court could
dismiss defendant Citigroup Congo, pursuant to Federal Rule of
Civil Procedure 21, in order to preserve diversity jurisdiction.
See Herrick Co., Inc. v. SCS Commc’ns, Inc., 251 F.3d 315, 329
(2d Cir. 2001)(citing Newman-Green, Inc. v. Alfonzo-Larrain, 490
6
U.S. 826, (1989)).
The plaintiffs did not raise this argument
during oral argument of the motion to dismiss, and with good
reason.
Such dismissal is only permitted where, pursuant to
Rule 19(b), “in equity and good conscience” the action should
proceed among the existing parties rather than be dismissed.
See Curley v. Brignoli, Curley & Roberts Assocs., 915 F.2d 81,
89 (2d Cir. 1990).
When determining whether a case should be
dismissed in the absence of a required party, the court should
consider:
(1) the extent to which a judgment rendered in the
person's absence might prejudice that person or the
existing parties; (2) the extent to which any
prejudice could be lessened or avoided by protective
provisions in the judgment, [by] shaping the relief,
or [by] other measures; (3) whether a judgment
rendered in the person's absence would be adequate;
and (4) whether the plaintiff would have an adequate
remedy if the action were dismissed for nonjoinder.
Fed. R. Civ. P. 19(b).
As discussed in greater detail below,
Citigroup Congo is unquestionably the principal defendant in
this action.
Indeed, only Citigroup Congo is a proper defendant
in this case with respect to the allegations in the complaint.
In cases where, as here, the plaintiffs attempt to hold a
parent company liable for the actions of its subsidiary through
piercing the corporate veil, the action should be dismissed if
the subsidiary cannot be joined because of the critical role
that the subsidiary should play in the lawsuit.
See Freeman v.
N.W. Acceptance Corp., 754 F.2d 553, 559-60 (5th Cir.
7
1985)(where a plaintiff seeks to impose liability on a parent
corporation for the actions of the subsidiary, joinder of the
subsidiary is required); Glenny v. Am. Metal Climax, Inc., 494
F.2d 651, 653-654 (10th Cir. 1974)(subsidiary with interest in
the litigation is indispensable despite presence of parent
corporation); Hi-Tech Gaming.com Ltd. v. IGT, No. 08 cv. 00244,
2008 WL 4952208, at *6 (D. Nev. Nov. 18, 2008); see also Vedder
Price Kaufman & Kammholz v. First Dynasty Mines, Ltd., No. 01
Civ. 3970, 2001 WL 1190996, at *3 (S.D.N.Y. Oct. 9, 2001);
Travelers Indem. Co. v. Household Int'l, Inc., 775 F. Supp. 518,
527 (D. Conn. 1991).
This case concerns the alleged improper activities of
Citigroup Congo in allegedly breaching its contracts with the
plaintiffs.
There is no plausible way that any judgment would
not directly affect Citigroup Congo and there is no plausible
way to fashion a judgment to minimize the effect on Citigroup
Congo.
No judgment in the absence of Citigroup Congo would be
adequate.
See Glenny, 494 F.2d at 654.
Moreover, the
plaintiffs have an obvious alternative remedy to seek relief
from the primary defendant, namely a suit against Citigroup
Congo in DR-Congo where the allegedly wrongful activities
occurred and where Citigroup Congo is located.
Accordingly, the
Court cannot dismiss Citigroup Congo in an effort to preserve
its diversity jurisdiction.
8
In their brief in opposition to the motion to dismiss, the
plaintiffs raise for the first time the argument that the Court
has original subject matter jurisdiction over this dispute under
the “Edge Act,” 12 U.S.C. § 632, which provides:
Notwithstanding any other provision of law, all suits
of a civil nature at common law or in equity to which
any corporation organized under the law of the United
States shall be a party, arising out of transactions
involving international or foreign banking, . . . or
out of any other international or foreign financial
operations, either directly or through the agency,
ownership,
or
control
of
branches
or
local
institutions in . . . foreign countries, shall be
deemed to arise under the laws of the United States,
and the district courts of the United States shall
have original jurisdiction of all such suits.
Id.
The plaintiffs argue that this provision vests the Court
with jurisdiction over this dispute because Citibank is a
nationally chartered bank.
However, Edge Act jurisdiction is not proper in this case.
In order to find jurisdiction under the Edge Act, a court must
be satisfied that a plaintiff’s claims “really involve[] a
banking arrangement between a federally chartered bank and a
foreign party.”
Lazard Freres & Co. v. First Nat’l Bank of Md.,
No. 91 Civ. 0628, 1991 WL 221087, at *2 (S.D.N.Y. Oct. 15,
1991).
Edge Act jurisdiction will not lie “merely because there
was a federally chartered bank involved, there were bankingrelated activities, and there were foreign parties.”
Bank of
N.Y. v. Bank of Am., 861 F. Supp. 225, 232 (S.D.N.Y. 1994)
9
(internal quotation marks and citation omitted).
Jurisdiction
under the Edge Act “will lie only if [a national bank defendant]
has potential liability to the plaintiff.”
Papadopoulos v.
Chase Manhattan Bank, N.A., 791 F. Supp. 72, 74 n.4 (S.D.N.Y.
1990) (granting motion to dismiss for lack of subject matter
jurisdiction).
Here, the plaintiffs have failed to meet their
burden of establishing the subject matter jurisdiction of this
Court by a preponderance of the evidence, because the
uncontroverted evidence indicates that Citibank is not
potentially liable to the plaintiffs.
The only claims brought by the plaintiffs are for breach of
contract.
The parties have agreed that New York law applies to
the breach of contract claim and have cited only New York law
with respect to this claim. The Court can accept that agreement
as to applicable law.
See Wm. Passalacqua Builders, Inc. v.
Resnick Developers S., Inc., 933 F.2d 131, 137 (2d Cir. 1991);
Interstate Foods, Inc. v. Lehmann, 06 Civ. 13469, 2009 WL
4042774, at *2 (S.D.N.Y. Nov. 23, 2009).
In order to plead a
claim for breach of contract in New York, a plaintiff must
allege: “(1) formation of a contract between the parties; (2)
performance by plaintiff; (3) defendants’ failure to perform;
and (4) resulting damage.”
Castorino v. Citibank, N.A., No. 07
Civ. 10606, 2008 WL 4114482, at *2 (S.D.N.Y. Dec. 5,
2008)(internal quotations omitted).
10
To maintain such a claim, a
plaintiff must allege that the defendant was a party to the
contract at issue.
See Leber Assocs., LLC v. Entm’t Grp. Fund,
Inc., No. 00 Civ. 3759, 2003 WL 21750211, at *15-16 (S.D.N.Y.
July 29, 2003).
The plaintiffs allege simply that they entered
into banking contracts with the defendants, without
differentiating between them.
Compl. ¶¶ 36-37.
However,
account statements attached as exhibits to the Complaint
indicate that the plaintiffs’ accounts were held by Citigroup
Congo alone.
See Compl. Exs. B & C.1
Accordingly, the
plaintiffs have failed to establish a contractual relationship
between Citibank and the plaintiffs by a preponderance of the
evidence.
The plaintiffs argue that, as an alternative to direct
liability, Citibank may be held liable for the wrongful acts of
its subsidiary on a theory of corporate veil-piercing.
The
remedy of veil-piercing requires a showing (1) that “‘the owners
exercised complete domination of the corporation in respect to
the transaction attacked; and (2) that such domination was used
to commit a fraud or wrong against the plaintiff which resulted
1
The plaintiffs argue that “[i]t is well settled that a home
office, here Citibank, is liable when its foreign branch closes
or wrongfully refuses to return a deposit.” Mem. of L. in
Opposition (“Mem. Opp.”) at 7. However, it is not even alleged
that Citigroup Congo is a branch of Citibank; rather, all
parties agree that it is a subsidiary corporation. See Compl. ¶
11(c). Accordingly, the cases cited by the plaintiffs for the
proposition that a bank may be held liable for the wrongful acts
of its branch offices abroad are inapposite.
11
in plaintiff’s injury.’”
Novak v. Scarborough Alliance Corp.,
481 F. Supp. 2d 289, 293 (S.D.N.Y. 2007) (quoting Morris v. N.Y.
State Dep’t of Taxation & Fin., 623 N.E.2d 1157 (N.Y. 1993)).
Determining whether a parent corporation completely dominated a
subsidiary is a fact-specific inquiry, and courts considering
whether to pierce the corporate veil consider a number of
factors, including:
(1) disregard of corporate formalities; (2) inadequate
capitalization;
(3)
intermingling
of
funds;
(4)
overlap
in
ownership,
officers,
directors,
and
personnel; (5) common office space, address and
telephone numbers of corporate entities; (6) the
degree of discretion shown by the allegedly dominated
corporation; (7) whether the dealings between the
entities
are
at
arms
length;
(8)
whether
the
corporations
are
treated
as
independent
profit
centers; (9) payment or guarantee of the corporation’s
debts by the dominating entity; and (10) intermingling
of property between the entities.
Oppenheimer & Co. v. Deutsche Bank AG, No. 09 Civ. 8154, 2010 WL
743915, at *4 (S.D.N.Y. Mar. 2, 2010).
Disregard of the corporate form is warranted only in
“extraordinary circumstances,” and conclusory allegations of
dominance and control will not suffice to defeat a motion to
dismiss.
See EED Holdings v. Palmer Johnson Acquisition Corp.,
228 F.R.D. 508, 511-12 (S.D.N.Y. 2005).
Moreover, as the
Supreme Court has noted, “it is hornbook law that the exercise
of the control which stock ownership gives to the stockholders
. . . will not create liability beyond the assets of the
12
subsidiary.”
United States v. Bestfoods, 524 U.S. 51, 61-62
(1998) (internal quotation marks and citation omitted).
For
these purposes, “control” includes “the election of directors,
the making of by-laws, and the doing of all other acts incident
to the legal status of stockholders.
Nor will duplication of
some or all of the directors or executive officers be fatal.”
Id. at 62(internal quotation marks and citation omitted).
Indeed, the Court of Appeals for the Second Circuit has found
piercing the veil of a corporate subsidiary to be unwarranted
where the parent “incorporate[s the subsidiary] into its own
organizational and decision-making structure.”
Thomson-CSF,
S.A. v. Am. Arbitration Ass’n, 64 F.3d 773, 778 (2d Cir. 1995).
The majority of the allegations in the Complaint with
respect to Citibank’s alleged domination of Citigroup Congo are
conclusory.
For example, the Complaint alleges that: Citigroup
Congo was formed by Citigroup and Citibank for the sole purpose
of seeking to limit its liability for and carrying out its
illegal activities in the DR-Congo, Compl. ¶ 19; Citigroup Congo
has “no independence in its operations and operates[] under the
direct dominion and control of Defendants Citigroup and
Citibank,” Compl. ¶¶ 28, 35; Citigroup Congo is “a shield by
which Citigroup and Citibank seek to deflect liability,” in
misuse of the corporate form, Compl. ¶ 28; and Citigroup Congo
took the actions that underlie the plaintiffs’ claims “at the
13
behest of,” “on the authority of,” or “at the direction of”
Citigroup and Citibank, Compl. ¶¶ 9, 19.
These bare assertions,
offered without support or elaboration, are entitled to no
weight.
The plaintiffs also allege that the defendants “do not
emphasize independence in their corporate structure or actions,”
Compl. ¶ 23, and operate as “an integrated and cohesive whole,”
Compl. ¶ 35; and that Citibank operates its foreign offices as
if they were branches, Compl. ¶¶ 33-34, and exercises plenary
control under its bylaws over certain aspects of the operations
of its branches in foreign countries, Compl. ¶¶ 33-34.
They
further allege that “Defendant Citigroup Congo is supervised by
two officers appointed by Defendant Citigroup and managed by
individuals appointed by Citibank’s Board of Directors, and that
“[t]hese individuals are directly responsible for the
supervision of . . . Citigroup Congo’s employees.”
Compl. ¶ 20.
These allegations fall short of what is required for the
plaintiffs to sustain their burden on a motion under Rule
12(b)(1).
They allege, in essence, that Citibank exercises the
degree of control over Citigroup Congo that would be expected of
a corporate parent.
Notably, they do not allege that Citigroup
Congo failed to observe corporate formalities; that it was
inadequately capitalized; that its funds or property were
intermingled with those of Citibank; that it did not have
14
discretion to carry out its corporate affairs; that it did not
transact with Citibank at arms’ length; that Citibank paid or
guaranteed its debts; or any of the other factors that might
warrant a finding that Citigroup Congo was a mere alter ego of
Citibank, and that its corporate form should thus be
disregarded.
See Oppenheimer, 2010 WL 743915, at *4.
To the
contrary, the only evidence before the Court indicates that
Citigroup Congo maintains separate corporate formalities,
including its own board of directors, officers and management,
and its own books and records, see Declaration of Michel Losembe
(“Losembe Decl.”) ¶ 6 & Exs. 1 & 2, and that it was
independently capitalized, Losembe Decl. ¶ 6 & Ex. 2.
Moreover,
there are no plausible factual allegations that any control over
Citigroup Congo by Citibank was used to commit a fraud or wrong
against the plaintiffs.
The plaintiffs have failed to show, by a preponderance of
the evidence, that Citibank is potentially liable to the
plaintiffs in this breach of contract action.
Accordingly, the
Edge Act does not confer subject matter jurisdiction over the
suit in this Court.
Because the plaintiffs have failed to
demonstrate any ground for subject matter jurisdiction, the
Complaint is dismissed pursuant to Federal Rule of Civil
Procedure 12(b)(1).
15
III.
While the complaint should be dismissed for lack of subject
matter jurisdiction, the defendants have also moved to dismiss
each defendant on individual grounds. The defendants have moved
to dismiss the Complaint against Citigroup Congo for lack of
personal jurisdiction, pursuant to Federal Rule of Civil
Procedure 12(b)(2), and Citigroup and Citibank for failure to
state a claim, pursuant to Federal Rule of Civil Procedure
12(b)(6).
A.
On a motion to dismiss pursuant to Rule 12(b)(2), the
plaintiff bears the burden of showing that the court has
jurisdiction over the defendant.
In re Magnetic Audiotape
Antitrust Litig., 334 F.3d 204, 206 (2d Cir. 2003).
Prior to
discovery, a plaintiff may defeat a motion to dismiss based on
legally sufficient allegations of jurisdiction.
Id.
“Personal jurisdiction over a defendant in a diversity
action in the United States District Court for the Southern
District of New York is determined by reference to the relevant
jurisdictional statutes of the State of New York.”
Beacon
Enters., Inc. v. Menzies, 715 F.2d 757, 762 (2d Cir. 1983).
16
Similarly, where the underlying action is based on a federal
statute, the district court applies state personal jurisdiction
rules if the federal statute does not specifically provide for
national service of process, and the Edge Act does not.
See
Mareno v. Rowe, 910 F.2d 1043, 1046 (2d Cir. 1990) (citing Omni
Capital Int’l v. Rudolf Wolff & Co., 484 U.S. 97, 104-05
(1987)); see also Monroy v. Citibank, N.A., No. 84 Civ. 1040,
1985 U.S. Dist. LEXIS 18663, at *9-13 (S.D.N.Y. June 21, 1985)
(applying New York personal jurisdiction rules to action brought
under the Edge Act).
In this case, the plaintiffs argue that the Court has
personal jurisdiction over Citigroup Congo because it committed
acts within the scope of subsection (a)(1) of New York’s longarm statute, New York Civil Practice Law and Rules (“CPLR”)
§ 302.
Under Section 302(a)(1), the courts of New York have
jurisdiction over a foreign defendant if it “transacts any
business” in New York and its “transaction of business in New
York . . . bears a substantial relationship to the transaction
out of which the . . . cause of action arose.”
at 764 (internal quotation marks omitted).
Beacon, 715 F.2d
Finding jurisdiction
under Section 302(a)(1) requires “a strong nexus” and “a direct
relation” between the cause of action and the in-state conduct.
Id.
17
The plaintiffs have failed to allege sufficiently that this
Court has personal jurisdiction over Citigroup Congo under CPLR
§ 302(a)(1).
The plaintiffs argue that Citigroup Congo
transacted business in New York by employing correspondent bank
accounts in New York for the purpose of converting Congolese
Francs to United States dollars.
However, as the plaintiffs
acknowledge, merely maintaining correspondent bank accounts in
New York is not sufficient to establish personal jurisdiction.
See Daventree Ltd. v. Republic of Azerbaijan, 349 F. Supp. 2d
736, 762 (S.D.N.Y. 2004).
Rather, the plaintiffs must allege a
“direct” and “substantial” connection between those bank
accounts and the wrongful conduct that forms the basis of their
cause of action – namely, Citigroup Congo’s alleged wrongful
withdrawal of funds from the plaintiffs’ accounts.
The
plaintiffs have wholly failed to allege such a connection.2
2
The cases cited by the plaintiffs are distinguishable on this
basis. In Correspondent Servs. v. J.V.W. Invs. Ltd., 120 F.
Supp. 2d 401 (S.D.N.Y. 2000), a third-party plaintiff
corporation formed in the Dominican Republic alleged that a
Bahamian bank made unauthorized securities purchases with the
corporation’s money. Id. at 405. The district court asserted
jurisdiction over the bank pursuant to C.P.L.R. § 302(a)(1)
because the bank made the unauthorized purchases and delivered
the securities using the correspondent bank account in New York.
Id. at 404-05. There was thus a direct and substantial
connection between the wrongful conduct alleged – the
unauthorized purchase of securities – and the bank account.
Similarly, in Dale v. Banque SCS Alliance S.A., No. 02 Civ.
3592, 2005 WL 2347853 (S.D.N.Y. Sept. 22, 2005), the court found
personal jurisdiction over a foreign bank where the bank had
18
The plaintiffs also argue that “the decision to withdraw
the funds from plaintiffs’ accounts and the decision to seize
the accounts was made by Citigroup and Citibank and was carried
out by their agent Citigroup Congo,” and that this relationship
is sufficient to establish the in personam jurisdiction of the
Court over Citigroup Congo.
Mem. Opp. at 9.
However, the New
York long-arm statute “does not permit the acts of a principal
to be imputed to a foreign agent to confer jurisdiction over the
agent.”
See Int’l Customs Assocs., Inc. v. Ford Motor Co., 893
F. Supp. 1251, 1262 (S.D.N.Y. 1995); see also CPLR § 302(a).
Accordingly, the Court lacks jurisdiction over defendant
Citigroup Congo in this case.
B.
Citibank and Citigroup move to dismiss the claim against
them pursuant to Rule 12(b)(6).
In deciding a motion to dismiss
pursuant to Rule 12(b)(6), the allegations in the Complaint are
accepted as true, and all reasonable inferences must be drawn in
the plaintiff's favor.
McCarthy v. Dun & Bradstreet Corp., 482
F.3d 184, 191 (2d Cir. 2007).
The Court's function on a motion
to dismiss is “not to weigh the evidence that might be presented
used its correspondent bank accounts to launder money.
*1. There is no such allegation here.
19
Id. at
at a trial but merely to determine whether the complaint itself
is legally sufficient.”
(2d Cir. 1985).
Goldman v. Belden, 754 F.2d 1059, 1067
The Court should not dismiss the complaint if
the plaintiff has stated “enough facts to state a claim to
relief that is plausible on its face.”
Twombly, 550 U.S. 544, 570 (2007).
Bell Atl. Corp. v.
“A claim has facial
plausibility when the plaintiff pleads factual content that
allows the court to draw the reasonable inference that the
defendant is liable for the misconduct alleged.”
Iqbal, 129 S.Ct. 1937, 1949 (2009).
Ashcroft v.
While the Court should
construe the factual allegations in the light most favorable to
the plaintiff, “the tenet that a court must accept as true all
of the allegations contained in the complaint is inapplicable to
legal conclusions.”
Id.; see also Mallet v. Johnson, No. 09
Civ. 8430, 2011 WL 2652570, at *1 (S.D.N.Y. July 7, 2011).
As stated above, although the plaintiffs allege they
entered into banking contracts generally “with the defendants,”
the documents attached to the complaint clearly indicate the
plaintiffs’ accounts were held solely by Citigroup Congo.
Compl. Exs. B & C.
See
Therefore, the plaintiffs have failed
adequately to state a claim of direct liability of Citigroup or
Citibank for breach of contract.
Similarly, the allegations
contained in the plaintiff’s complaint do not support the
20
plaintiff’s veil-piercing theory.3
The complaint contains only
conclusory allegations of Citigroup Congo’s domination by
Citibank, and is devoid of any allegations that the alleged
relationship between Citigroup and/or Citibank and Citigroup
Congo was used to commit fraud.
The complaint is therefore
facially insufficient to state a claim based on veil-piercing.
See Apex Mar. Co., Inc. v. OHM Enters., Inc, No. 10 Civ. 8119,
2011 WL 1226377, at *3 (S.D.N.Y. Mar. 31, 2011)(“[p]urely
conclusory allegations cannot suffice to state a claim based on
veil-piercing”).4
3
On a motion to dismiss under Rule 12(b)(6), a court generally cannot
consider affidavits unless it transforms the motion into a motion for summary
judgment, which the Court declines to do. See Rule 12(d). Accordingly, the
defendants’ affidavits are not considered for the purposes of their motion to
dismiss pursuant to Rule 12(b)(6).
4
It is unnecessary to reach the defendants’ argument of forum non conveniens.
As the defendants conceded at argument on the motion, forum non conveniens
would apply only if the Court dismissed Citigroup and Citibank and was
otherwise prepared to allow the claim against Citigroup Congo to proceed.
21
CONCLUSION
The Court has carefully considered all of the parties'
arguments, and to the extent not expressly addressed, they are
either moot or without merit.
dismiss is granted.
Accordingly, the motion to
The Clerk is directed to enter Judgment
dismissing the second amended complaint and closing this case.
The Clerk is also directed to close Docket No. 28.
SO ORDERED.
Dated:
New York, New York
september/~' 2011
Judge
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