SPV Osus Ltd. v. UBS AG et al
Filing
43
OPINION AND ORDER: For the foregoing reasons, the Court hereby grants the UBS Defendants' motion to dismiss for lack of personal jurisdiction. With respect to the Hill Action, No. 14-cv-9744, the Clerk of the Court is directed to enter final judgment dismissing the complaint with prejudice and to close the case in its entirety. With respect to the SPV Action, No. 15-cv-619, the Clerk of the Court is directed to close document number 18 and to terminate defendants UBS AG, UBS (Luxembourg) S.A., UBS Fund Services (Luxembourg) S.A., and UBS Third Party Management Company, S.A. Counsel for the remaining parties in the SPV OSUS action are directed to call the Court within three business days of the date of this Opinion and Order to schedule further proceedings. UBS Fund Services (Luxembourg) S.A., UBS Third Party Management Company S.A., UBS (Luxembourg) S.A. and UBS AG terminated. (Signed by Judge Jed S. Rakoff on 7/20/2015) (kl)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
-------------------------------------x
SPV osus LTD.
I
Plaintiff,
-v-
UBS AG, UBS (LUXEMBOURG) S.A.,
UBS FUND SERVICES (LUXEMBOURG) S.A.,
UBS THIRD PARTY MANAGEMENT
COMPANY S.A., AIA LLC, ACCESS
INTERNATIONAL ADVISORS EUROPE
LIMITED, ACCESS INTERNATIONAL
ADVISORS LTD., ACCESS PARTNERS
(SUISSE) S.A., ACCESS MANAGEMENT
LUXEMBOURG S.A.; ACCESS PARTNERS
S.A. (LUXEMBOURG), PATRICK LITTAYE,
CLAUDINE MAGON DE LA VILLEHUCHET
A/K/A CLAUDINE DE LA VILLEHUCHET,
EXECUTRIX, CLAUDINE MAGON DE LA
VILLEHUCHET A/K/A CLAUDINE DE LA
VILLEHUCHET,INDIVIDUALLY, PIERRE
DELANDMETER, AND THEODORE DUMBAULD,
15-cv-619 (JSR)
Defendants.
-------------------------------------x
STEPHEN HILL, LEYLA HILL, and PAUL
SHAPIRO,
Plaintiffs,
14-cv-9744 (JSR)
-v-
OPINION AND ORDER
UBS AG, UBS (LUXEMBOURG) S.A., UBS
FUND SERVICES (LUXEMBOURG) S.A., and
UBS THIRD PARTY MANAGEMENT COMPANY
S.A.
I
Defendants.
-------------------------------------x
JED S. RAKOFF, U.S.D.J.
1
Plaintiffs in these two actions allege that they were
customers of the notorious Bernard L. Madoff Investment
Securities ("BLMIS"). On December 10, 2014, plaintiffs Stephen
Hill, Leyla Hill, and Paul Shapiro filed a putative class action
(the "Hill Action") asserting on behalf of themselves and other
BLMIS customers various state law claims against defendants UBS
AG, UBS (Luxembourg) S.A.
(Luxembourg) S.A.
Company, S. A.
("UBS SA"), UBS Fund Services
("UBS FSL"), and UBS Third Party Management
("UBS TPM") . 1 See Class Action Complaint dated
December 10, 2014, No. 14-cv-9744, ECF No. 1 ("Hill Compl.")
~~
102-70. They allege, broadly speaking, that the UBS Defendants
acted as accomplices to BLMIS and its eponymous founder by
sponsoring international "feeder funds" -
in particular,
Luxalpha SICAV ("Luxalpha") and Groupement Financier Ltd.
("Groupement Financier")
2
-
that funneled billions of dollars'
worth of new investments into BLMIS's Ponzi scheme. Id.
On December 11, 2014, plaintiff SPV OSUS Ltd.
~~
2-4.
("SPV"), a
Bahamian corporation that claims to be the assignee of BLMIS
investor Optimal Strategic US Equity Ltd., filed a complaint in
New York Supreme Court in Manhattan asserting substantially
These entities are referred to collectively as the "UBS
Defendants."
1
Luxalpha and Groupement Financier are referred to collectively
as the "Feeder Funds."
2
2
similar factual and legal claims against the UBS Defendants (the
"SPV Action") . See Complaint dated December 11, 2014, No. 15-cv619, ECF No. 1, Ex. A ("SPV Compl."). In addition, SPV named as
co-defendants Access International Advisors Ltd. and affiliated
entities that they allege played various roles with respect to
the Feeder Funds, such as portfolio advisor, administrative
agent, and investment manager, as well as various individuals
whom they allege served, inter alia, as the Feeder Funds'
partners, directors, and officers. 3 Id.
~~
20-30. On February 1,
2015, the UBS Defendants removed the SPV Action to this Court,
which accepted it as related to the Hill Action. See SPV Action,
No. 15-cv-619, ECF No. 1. By Order dated March 27, 2015, the
Court denied SPV's motion to remand to state court. See ECF Nos.
41-42. Currently pending before the Court is the UBS Defendants'
motion to dismiss both actions. 4
Specifically, SPV named as co-defendants: AIA LLC, Access
International Advisors Europe Limited, Access International
Advisors Ltd., Access Partners (Suisse) S.A., Access Management
Luxembourg S.A., Access Partners S.A. (Luxembourg), Patrick
Littaye, Claudine Magon de la Villehuchet a/k/a Claudine de la
Villehuchet, individually and as executrix of the will of
Thierry Magon de la Villehuchet a/k/a Rene Thierry de la
Villehuchet, Pierre Delandmeter, and Theodore Dumbauld. These
entities and individuals are referred to collectively, as the
"Access Defendants."
3
At the time this motion was filed, the Access Defendants had
not yet been served, and they are not parties to this motion.
4
3
The pertinent allegations of the two complaints are
substantially similar, and may be summarized as follows.
Plaintiffs allege that Madoff pretended to invest his customers'
funds in a basket of common stocks within the S&P 100 Index
pursuant to his so-called "split strike conversionn strategy,
and to hedge his stock purchases with S&P 100 Index option
contracts. Hill Compl.
~
22; SPV Compl.
~~
33-34. BLMIS further
issued fabricated statements showing that securities were held
in or had been traded through customer accounts. Hill Compl.
23; SPV Compl.
~~
~
35-37. In reality, BLMIS never purchased a
single security and instead used the principal from later
customers to pay earlier customers. Hill Compl.
Compl.
~~
~~
25-26; SPV
39-42. Madoff was arrested on December 11, 2008 and
subsequently pled guilty to an eleven-count criminal
information. Hill Compl.
~
27; SPV Compl.
~~
45-46.
Plaintiffs further allege that the UBS Defendants, through
their due diligence efforts, discovered numerous indicia of
Madoff's fraud, and consequently declined to assume any material
exposure to BLMIS or to recommend BLMIS-related funds to their
private clients. Hill Compl.
~~
30-52; SPV Compl.
~~
75-99, 181-
223. Nonetheless, plaintiffs allege, the UBS Defendants
enthusiastically helped to create, promote, and manage the
Feeder Funds in exchange for over $80 million in fees. Hill
Compl.
~
4; SPV Compl.
~~
1-3.
4
Specifically, plaintiffs allege that the UBS Defendants
undertook the following roles vis-a-vis the Feeder Funds:
UBS AG. Plaintiffs allege that UBS AG served as "promoter"
of Luxalpha, which touted UBS AG's role in its prospectuses,
leading the public to believe that one of the world's largest
financial institutions stood behind the fund. Hill Compl. 53;
SPV Compl.
~~
102-03. Furthermore, UBS AG's role as promoter
allowed Luxalpha to receive regulatory approval in Luxembourg.
Hill
~
54.
UBS SA. Plaintiffs allege that UBS SA also helped Luxalpha
to obtain regulatory approval in Luxembourg by serving as its
outward sponsor. Hill Compl.
~
57; SPV Compl.
~
105. UBS SA also
served as the fund's custodian, distributor, and portfolio
manager, functions which it allegedly delegated entirely to
BLMIS, while continuing to collect fees. Hill Compl.
Compl.
~~
~
58; SPV
17, 106-07. Plaintiffs allege that Luxalpha's funds
were held in a BLMIS account in the name of UBS SA, and that the
account opening papers and agreements were completed and
executed by UBS SA employees and delivered to BLMIS in New York.
Id. All redemption requests from UBS SA were processed through
UBS AG's Stamford branch. Id.
UBS SA also allegedly served as Prime Bank for Groupement
Financier and custodian of a related fund. Hill Compl.
Compl.
~~
17, 109. In that role, it received the fund's
5
~
61; SPV
subscription monies and transferred them to the Bank of Bermuda,
BLMIS's beneficiary bank, throu9h HSBC Bank USA in New York as a
correspondent bank. Hill Compl.
~
61. UBS SA was also
responsible for mirror book-keeping of all transactions reported
by Groupement Financier so that UBS FSL could calculate that
fund's net asset value ("NAV"). SPV Compl.
~
110.
UBS FSL. Plaintiffs allege that UBS FSL served as
administrator for both Luxalpha and Groupement Financier, a role
which required it to handle accounting, calculation of the
funds' NAV, and preparation of financial statements. Hill Compl.
~
63; SPV Compl.
~~
18, 111. UBS FSL allegedly calculated the
funds' NAV based on information provided by BLMIS, without any
independent verification. Id.
UBS TPM. Plaintiffs allege that UBS TPM served as manager
of Luxalpha from August 2006 to November 2008, in which capacity
it was responsible for management and administration of the fund
and monitoring of investment policies. Hill Compl.
Compl.
~~
~
64; SPV
19, 112. In reality, plaintiffs allege, it delegated
all these functions to BLMIS. Id.
Plaintiffs allege that the above-described conduct of the
UBS Defendants provided the Feeder Funds with a public "fa9ade
of legitimacy," which in turn "enabled and perpetuated the
Madoff fraud." Hill Compl.
~~
55, 66; SPV Compl.
~~
103, 114.
Moreover, plaintiffs allege, the failure of the UBS Defendants
6
to exercise meaningful oversight of Luxalpha and Groupement
Financier's operations enabled Madoff's fraud to 90 undetected.
Hill Compl.
~
92; SPV Compl.
~
144.
On the basis of these allegations, the plaintiffs in both
actions assert state law claims for aiding and abetting fraud,
aiding and abetting breach of fiduciary duty, aiding and
abetting conversion, and knowing participation in a breach of
trust. The Hill Plaintiffs additionally assert claims for unjust
enrichment and aiding and abetting embezzlement.
The UBS Defendants have moved to dismiss on four grounds:
that plaintiffs' claims are precluded by the Securities
Litigation Uniform Standards Act ("SLUSAn), 15 U.S.C.
§
78bb(f) (1); that the Court lacks personal jurisdiction over the
UBS Defendants; that plaintiffs fail to state a claim upon which
relief may be granted; and that plaintiffs' claims are barred by
the applicable statutes of limitations.
The Court first considers the UBS Defendants' challenge to
personal jurisdiction. 5 On a pre-discovery motion to dismiss
Where federal subject-matter jurisdiction is not based solely
on SLUSA's removal provision, 15 U.S.C. §§ 77p(c), 78bb(f) (2),
SLUSA is a "preemption defense and, as such, one of a number of
preliminary grounds for dismissal, among which a judge has
discretion to choose when deciding whether to dismiss a case.n
Lasala v. Bank of Cyprus Pub. Co., 510 F. Supp. 2d 246, 254
(S.D.N.Y. 2007). In this case, the Court has diversity
jurisdiction over the Hill Action pursuant to 28 U.S.C. § 1332
and bankruptcy jurisdiction over the SPV Action pursuant to 28
U.S.C § 1334. Accordingly, the Court has discretion to decide
5
7
pursuant to Federal Rule of Civil Procedure 12 (b) ( 2) , the
plaintiff bears the burden to make a prima facie showin9 that
the Court has personal jurisdiction over a defendant. King
Cnty., Wash. v. IKB Deutsche Industriebank, AG, 769 F. Supp. 2d
309, 313
(S.D.N.Y. 2011). Although ambiguities in the pleadings
should be resolved in the plaintiff's favor,
"conclusory non-
fact-specific jurisdictional allegations or a legal conclusion
couched as a factual allegation will not establish a prima facie
showing of jurisdiction." Tamam v. Fransabank Sal, 677 F. Supp.
2d 720, 725 (S.D.N.Y. 2010)
marks omitted) . Moreover,
(citation and internal quotation
"resolving all doubts in the
plaintiff's favor is not the same as blindly crediting all
allegations regardless of their factual support." Melnick v.
Adelson-Melnick, 346 F. Supp. 2d 499, 502 n.17
However, in reviewing a Rule 12(b) (2) motion,
(S.D.N.Y. 2004)
"a court may
consider documents beyond the pleadings in determining whether
personal jurisdiction exists." Greatship (India) Ltd. v. Marine
the UBS Defendants' challenge to personal jurisdiction before
reaching the issue of SLUSA preemption. In addition, even if
SLUSA preemption were a question of subject-matter jurisdiction,
the Court has discretion to address a "straightforward personal
jurisdiction issue presenting no complex question of state law"
before reaching an "alleged defect in subject-matter
jurisdiction" that, as here, "raises a difficult and novel
question." Ruhrgas AG v. Marathon Oil Co., 526 U.S. 574, 588
(1999) .
8
Logistics Solutions (Marsol) LLC, No. 11-cv-420, 2012 WL 204102,
at *2 (S.D.N.Y. Jan. 24 1 2012).
"Since International Shoe Co. v. Washington, the touchstone
due process principle has been that, before a court may exercise
jurisdiction over a person or an organization ... that person or
entity must have sufficient 'minimum contacts' with the forum
'such that the maintenance of the suit does not offend
"traditional notions of fair play and substantial justice."'"
Gucci Am., Inc. v. Weixing Li, 768 F.3d 122, 134
(2d Cir. 2014)
(quoting International Shoe Co. v. Washington, 326 U.S. 310, 316
(1945)). In assessing whether a defendant has the requisite
"minimum contacts" with the forum, courts distinguish between
"general" and "specific" personal jurisdiction. See In re
Terrorist Attacks on Sept. 11, 2001, 714 F.3d 659, 673
(2d Cir.
2013). General jurisdiction "permits a court to hear 'any and
all claims' against an entity." Gucci, 768 F.3d at 134
Daimler AG v. Bauman, 134 S. Ct. 746, 755
(quoting
(2014)). Specific
jurisdiction, by contrast, permits the court to exercise
jurisdiction "only over issues that 'arise out of or relate to
the entity's contacts with the forum.'" Id.
(quoting
Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408,
414 n.8
(1984))
(alterations omitted)-.
Turning first to general jurisdiction, general jurisdiction
over foreign corporations exists when those corporations'
9
"affiliations with the State are so 'continuous and systematic'
as to render them essentially at home in the forum State." In re
Roman Catholic Diocese of Albany, New York, Inc., 745 F.3d 30,
38 (2d Cir. 2014)
(per curiam)
(quoting Goodyear Dunlop Tires
Operations, S.A. v. Brown, 131 S. Ct. 2846, 2851 (U.S. 2011))
In the recent case of Daimler AG v. Bauman, 134 S. Ct. 746
(2014), the Supreme Court announced a more stringent standard
for finding a corporation to be "essentially at home" in a
foreign jurisdiction. In that case, the defendant was
DaimlerChrysler Aktiengesellschaft ("Daimler"), the German
company that manufactures Mercedes-Benz vehicles in Germany. Id.
at 750-51. Daimler's indirect subsidiary, MBUSA, operated
multiple facilities in California, was the largest supplier of
luxury vehicles to the California market, and accounted for 2.4%
of Daimler's worldwide sales. Id. at 752. These contacts, the
Court held, were insufficient to establish general jurisdiction
over Daimler. Id.
The Court rejected plaintiffs' proposed test for general
jurisdiction -- whether the corporation "engages in a
substantial, continuous, and systematic course of business"
as "unacceptably grasping." Id. at 761. The Court explained
that, as a matter of course, a corporation is subject to general
jurisdiction only in its formal place of incorporation or
principal place of business. Id. Only in the "exceptional case"
10
would a corporation's operations in another forum be "so
substantial and of such a nature as to render the corporation at
home in that State." Id. at 761 n.19.
Subsequently, the Second Circuit noted that Daimler
"expressly cast doubt on previous Supreme Court and New York
Court of Appeals cases that permitted general jurisdiction on
the basis that a foreign corporation was doing business through
a local branch office in the forum." Gucci Am., Inc. v. Weixing
Li, 768 F.3d 122, 135 (2d Cir. 2014). It held that the district
court could not properly exercise general jurisdiction over
defendant, Bank of China, which had branch offices in New York
but was "incorporated and headquartered elsewhere" and conducted
only a small portion of its worldwide business within the forum.
Id. at 135.
Turning to the instant case, UBS AG is incorporated and has
its principal place of business in Switzerland. See Declaration
of John Connors dated February 25, 2015, ECF No. 17,
~
2.
Plaintiffs argue that UBS AG has off ices in New York, conducts
substantial business here, has a registered agent here, and has
been the subject of many suits in New York courts.
6
However, at
Plaintiffs' allegations that UBS has a "headquarters" in New
York and has twenty-one locations here impermissibly conflates
UBS AG's contacts with the forum with those of other, non-party
UBS entities. See Declaration of Gabriel Herrmann dated March
27, 2015, ECF No. 25, Exs. 1 & 2; Rush v. Savchuck, 444 U.S.
320, 331-32 (1980) (rejecting "attempt[] to attribute [one
6
11
most, the contacts alleged by plaintiffs amount to "a
substantial, continuous, and systematic course of business,"
which the Supreme Court expressly held to be insufficient in
Daimler. See 134 S. Ct. at 760. Plaintiffs fail to establish
that this is the "exceptional case" in which a corporation is
"essentially at home" in a foreign forum such that the Court may
exercise general jurisdiction over it. Id. at 761 n.19.
Accordingly, this Court lacks general jurisdiction over UBS AG. 7
The remaining UBS Defendants, UBS SA, UBS FSL, and UBS TPM,
have no presence in New York at all. They are all incorporated
in Luxembourg and have their principal places of business there.
See Declaration of Martin Baumert dated February 26, 2015, ECF
No. 15 ("Baumert Deel.")
~
2; Declaration of Pierre-Antonie
Boulat dated February 25, 2015, ECF No. 16 ("Boulat Deel.")
~
2;
Declaration of Mark Porter dated February 25, 2015, ECF No. 18
("Porter Deel.")
~
2. None has any physical presence or
employees in the United States, nor does any of them directly or
defendant's] contacts to [another defendant] by considering the
'defending parties' together and aggregating their forum
contacts").
This conclusion is also consistent with the recent holding of
the District Court for the Northern District of California that
"UBS AG is not subject to general jurisdiction in this District
(or anywhere in the United States) because it is incorporated in
Switzerland and its principal place of business is in
Switzerland." AM Trust v. UBS AG, No. 14-cv-4125, 2015 WL
395465, at *6 (N.D. Cal. Jan. 29, 2015)
7
12
purposefully solicit, market, or otherwise seek out business
from potential customers located in the United States. Baumert
Deel. ~~ 2-3; Boulat Deel. ~~ 2-3; Porter Deel. ~~ 2-3.
Plaintiffs do not dispute these facts, arguing instead that
the Court has general jurisdiction over UBS SA, UBS FSL, and UBS
TPM because they are "mere departments" of UBS AG. However, the
"mere department" analysis applies only if the parent company is
subject to general jurisdiction in the forum. See Volkswagenwerk
Aktiengesellschaft v. Beech Aircraft Corp., 751 F.2d 117, 120
(2d Cir. 1984). As the Court has determined that UBS AG is not
subject to general jurisdiction in New York, this issue is
irrelevant and none of the UBS Defendants is subject to general
jurisdiction in New York.B
Turning to specific jurisdiction, the existence of specific
jurisdiction depends on the relationship "among the defendant,
Even if UBS AG were subject to general jurisdiction, however,
plaintiffs fall far short of establishing that the remaining UBS
Defendants are "mere departments" of it. This determination
depends on four factors: (1) common ownership; (2) financial
interdependence; (3) interference with personnel and disregard
for corporate formalities; and (4) control over operational and
marketing policies. See id. at 120. Plaintiffs argue that UBS AG
directly owns 100% of UBS SA and UBS FSL, and took over
ownership of UBS TPM from another UBS entity in 2009. After
that, a single Group Executive Board was created to supervise
and govern UBS AG and its subsidiaries. See Declaration of
Andrew J. Entwistle dated March 20, 2015, ECF No. 23, Ex. 27.
However, mere ownership satisfies only the first factor, and the
fact that management personnel report up to the same Group
Executive Board does not demonstrate that any of the remaining
three factors are present.
8
13
the forum, and the litigation." Walden v. Fiore, 134 S. Ct.
1115 1 1122 (2014)
(internal quotation marks and citation
omitted) . The plaintiff must demonstrate that his "claim arises
out of or relates to [defendant's] contacts with [the forum
state]" and that the defendant "purposefully availed" himself of
"the privilege of doing business in" the forum state such that
he "could foresee being 'haled into court' there." Kernan v.
Kurz-Hastings, Inc., 175 F.3d 236, 243
(2d Cir. 1999)
(citations
omitted) .
In the Second Circuit, the strength of the causal
connection between defendant's forum-related contacts and
plaintiffs' claims that is required to establish specific
jurisdiction varies depending on the substantiality of such
contacts. If the defendant "has had only limited contacts with
the state it may be appropriate to say that he will be subject
to suit in that state only if the plaintiff's injury was
proximately caused by those contacts." Chew v. Dietrich, 143
F.3d 24, 29 (2d Cir. 1998). On the other hand, if the defendant
has substantial contacts with the forum,
the Court may find it
reasonable to exercise personal jurisdiction "even though the
acts within the state are not the proximate cause of the
plaintiff's injury." Id. In any event,
"the relatedness test is
but a part of a general inquiry which is designed to determine
whether the exercise of personal jurisdiction in a particular
14
case does or does not offend traditional notions of fair play
and substantial justice." Id.
Plaintiffs allege a variety of contacts between the UBS
Defendants and the United States. The defendant with the most
extensive contacts with the United States is UBS SA. Plaintiffs
allege that UBS SA formed Luxalpha in February 2004 and
immediately executed a board resolution to open an account with
New York-based BLMIS, then delivered the account opening
documents to BLMIS on Luxalpha's behalf, including a customer
agreement, an option agreement, a trading authorization, and a
sub-custodian agreement, each signed by a UBS SA representative.
See Entwistle Deel. Ex. 4. In addition, UBS SA allegedly
contracted with BLMIS to serve as Luxalpha's sub-custodian,
processed investor redemptions, and engaged in regular
communication with BLMIS concerning Luxalpha. Id. Exs. 6-9, 1112.
The alleged New York contacts of the other UBS Defendants
are far more attenuated. UBS FSL is alleged to have served as
administrator to the Feeder Funds, which in turn invested in
BLMIS, and to have provided services to them such as processing
subscriptions and redemptions, calculating NAV, and preparing
financial statements. Id. Exs. 14, 18. Similarly, plaintiffs
allege that UBS TPM served as management company for Luxalpha
from 2006 to 2008, and had contractual authority to make
15
investments on its behalf. SPV Compl.
~
112. Finally, plaintiffs
allege that UBS AG created and promoted Luxalpha, which in turn
invested in BLMIS, that it processed Luxalpha redemptions
through its Stamford, Connecticut branch, and that it performed
due diligence on Madoff. Id.
~~
80-85, 101, 108. Plaintiffs also
argue that the Court has jurisdiction over the UBS Defendants
via an agency theory, based on the Feeder Funds' activities in
New York.
All this is beside the point, however, because plaintiffs'
claims do not "arise[] out of or relate[]
to" the UBS
Defendants' alleged contacts with New York, or any other conduct
in which they allegedly engaged. Kernan, 175 F.3d at 243. As
discussed above, the Second Circuit has recognized that, where a
defendant's contacts with the forum are limited, it is
appropriate to require the plaintiff to establish that his
"injury was proximately caused by those contacts." Chew, 143
F.3d at 29. That proposition certainly applies here, where the
defendants are foreign banks alleged to have provided services
to foreign investment funds, acting entirely abroad and with
only sporadic or indirect contacts with the United States.
Indeed, plaintiffs' claims fail even to meet the minimal
requirement of "but for" causation. Specifically, plaintiffs
fail to allege any meaningful connection whatsoever between
defendants' conduct (much less their forum-directed conduct) and
16
plaintiffs' injuries. Plaintiffs were not investors in the
Feeder Funds, nor were they customers of the UBS Defendants.
They were investors in BLMIS, and their injuries were caused by
BLMIS's Ponzi scheme. Plaintiffs do not allege that they relied
on the UBS Defendants' involvement with the Feeder Funds in
making their decision to invest in BLMIS, or even that they were
aware of such involvement. Nor do plaintiffs allege that the
creation of the Feeder Funds, or the Feeder Funds' investment in
BLMIS, somehow harmed them.
9
The Hill Plaintiffs suggested at oral argument that, had
the UBS Defendants declined to sponsor the Feeder Funds, the
Ponzi scheme would have collapsed before the Hill Plaintiffs
made their investments. See Transcript dated May 5, 2015, ECF
No. 26 ("Tr.") at 23. Putting aside the fact that the have pled
no factual support for that highly speculative proposition, it
would at most establish an attenuated form of "but for"
causation, which is insufficient given the sparse nature of the
UBS Defendants' contacts with the United States. See, e.g.,
Absolute Activist Master Value Fund, Ltd. v. Ficeto, No. 09-cv8862, 2013 WL 1286170, at *12 (S.D.N.Y. Mar. 28, 2013)
(finding
This jurisdictional defect is closely related to one aspect of
the UBS Defendants' challenge to the sufficiency of the
complaints, namely, failure to plausibly allege proximate
causation. However, the Court does not reach that argument here,
as it finds that it lacks personal jurisdiction over the UBS
Defendants.
9
17
no personal jurisdiction where defendants' forum-related conduct
were "at best, attenuated,
'but for'
causes of the injury" to
the plaintiffs) .
The SPV Plaintiff argued, by contrast, that if the UBS
Defendants had disclosed their knowledge of the fraud before
Madoff's arrest in December 2008, then SPV could have redeemed
its investments in BLMIS before the Ponzi scheme collapsed. See
Tr. 31. This, however, is a dubious proposition. The very nature
of a Ponzi scheme is that there is insufficient capital to
redeem all investors' investments. Had the UBS Defendants
announced to the world that Madoff was a fraud,
it is highly
unlikely that SPV would have been able to recover the full value
of its investment. And even if it had, any funds in excess of
the principal it invested would be subject to clawback by the
trustee of Madoff's bankrupt estate. See Sec. Investor Prat.
Corp. v. Bernard L. Madoff Inv. Sec. LLC, 476 B.R. 715, 729
(S.D.N.Y. 2012). Thus, even the fanciful hypotheticals posited
by plaintiffs at oral argument, and nowhere pled in their
respective complaints, fail to cure the deficiencies in
plaintiffs'
jurisdictional allegations.
In sum, given the scant contacts between the UBS Defendants
and the forum, combined with the utter lack of nexus between the
UBS Defendants' alleged conduct and plaintiffs' claims, the
Court finds that haling the UBS Defendants into court would
18
"of fend traditional notions of fair play and substantial
justice." Chew, 143 F.3d at 29 (internal quotation marks and
citation omitted) . Accordingly, plaintiffs' claims against the
UBS Defendants must be dismissed.
10
For the foregoing reasons, the Court hereby grants the UBS
Defendants' motion to dismiss for lack of personal jurisdiction.
With respect to the Hill Action, No. 14-cv-9744, the Clerk of
the Court is directed to enter final judgment dismissing the
complaint with prejudice and to close the case in its entirety.
With respect to the SPV Action, No. 15-cv-619, the Clerk of the
Court is directed to close document number 18 and to terminate
defendants UBS AG, UBS (Luxembourg) S.A., UBS Fund Services
(Luxembourg) S.A., and UBS Third Party Management Company, S.A.
Counsel for the remaining parties in the SPV OSUS action are
directed to call the Court within three business days of the
date of this Opinion and Order to schedule further proceedings.
SO ORDERED.
Dated:
~~D.J
New York, NY
July;)&, 2015
Because the Court finds that it lacks jurisdiction, it does
not reach the remaining arguments raised by the UBS Defendants.
10
19
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