SPV Osus Ltd. v. UBS AG et al

Filing 77

OPINION AND ORDER re: 50 MOTION to Dismiss the Complaint filed by Patrick Littaye, Access Partners (Suisse) S.A., Access Partners S.A. (Luxembourg), AIA L.L.C., Access Management Luxembourg S.A., Access International Advisors Ltd. Accordingly, for the foregoing reasons, the Court hereby grants the Access Defendants' motion to dismiss and dismisses plaintiff's claims with prejudice. In addition, the Court dismisses plaintiff's claims against the non-movin g defendants -- Access International Advisors Europe Limited and Theodore Dumbauld -- for the same reasons it dismisses those claims against the moving defendants. See Almeciga v. Ctr. for Investigative Reporting, Inc., 2016 WL 2621131, at *6 (S.D.N. Y. May 6, 2016) (exercising the Court's "ample authority" to dismiss claims against non-moving defendants sua sponte in such circumstances). There is nothing in the Complaint to distinguish either of these defendants from the moving d efendants for purposes of pleading proximate causation. The Clerk of the Court is thus directed to enter final judgment dismissing the Complaint with prejudice and to close the case in its entirety. (As further set forth in this Order.) (Signed by Judge Jed S. Rakoff on 5/24/2016) (kko)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
-------------------------------------x
SPV OSUS LTD.,
Plaintiff,

15-cv-619 (JSR)

-v-

OPINION AND ORDER
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, AND THEODORE DUMBAULD,
Defendants.

-------------------------------------x
JED S. RAKOFF, U.S.D.J.
Plaintiff SPV OSUS Ltd.

("SPV")

Optimal Strategic US Equity Ltd.

is the alleged assignee of

("OSUS"), a customer of Bernard

L. Madoff Investment Securities LLC ("BLMIS")

and a victim of

Bernard Madoff's colossal Ponzi scheme. On December 11, 2014,
SPV filed a complaint in New York Supreme Court asserting four
common law claims against defendant AIA LLC and affiliated
entities and individuals

(the "Access Defendants") and four

common law claims against UBS AG and affiliated entities

(the

"UBS Defendants"). In particular, plaintiff alleged that both
sets of defendants knowingly aided and abetted Madoff's fraud by
supporting a network of international "feeder funds," including
Luxalpha SICAV ("Luxalpha") and Groupement Financier Ltd.

1

("Groupement Financier"), that funneled billions of dollars into
Madoff's Ponzi scheme. See Compl.

~~

49-50,

63-65, ECF No. 1-1.

The UBS Defendants removed the action to this Court and the
Court denied plaintiff's motion to remand. See Order dated March
27, 2015, ECF No.

41. On July 21, 2015, the Court granted the

UBS Defendants' motion to dismiss -- which was filed before any
of the Access Defendants had been served -- on the basis that
the Court lacked personal jurisdiction over those defendants.

1

See SPV OSUS Ltd. v. UBS AG, 114 F. Supp. 3d 161, 171 (S.D.N.Y.
2015). SPV later voluntarily dismissed certain defendants from
the action. See Notice of Voluntary Dismissal, ECF No.

66. Only

the Access Defendants remain, and, with the exception of two
defendants who do not join the motion, they now move to dismiss
plaintiff's Complaint in its entirety.

2

For the reasons discussed

1

The Court's July 21, 2015 Opinion and Order also dismissed a
related action bringing substantially similar claims against the
UBS Defendants on behalf of a putative class of BLMIS customers.
See Hill et al. v. UBS AG et al., 14-cv-9744 (S.D.N.Y.). The
plaintiffs in the Hill action did not sue the Access Defendants
and the Court's July 21, 2015 Opinion and Order thus directed
the closure of that action in its entirety. See SPV OSUS Ltd. v.
UBS AG, 114 F. Supp. 3d 161, 164-65, 171 (S.D.N.Y. 2015).
2

The moving defendants are AIA LLC; Access International
Advisors Ltd.; Access Partners (Suisse) S.A.; Access Management
Luxembourg S.A.; Access Partners S.A. (Luxembourg); and Patrick
Littaye. Although the moving defendants claim that one of the
non-moving defendants, Access International Advisors Europe
Limited, was voluntarily dismissed from this action by plaintiff
without prejudice -- and plaintiff does not contest that
assertion -- there is no evidence on the docket of such
dismissal. As for defendant Theodore Dumbauld, an alleged
partner at AIA LLC who was served some two weeks before the
2

below, the Court grants the motion and dismisses this action
with prejudice against all remaining defendants.
The details of Madoff's fraud are well-documented and
widely known. See In re Bernard L. Madoff Inv. Sec. LLC,
F.3d 229, 231-33

(2d Cir. 2011)

654

(detailing the fraud). To

briefly summarize, Madoff purported to invest funds in a basket
of common stocks within the S&P 100 Index pursuant to a socalled "split strike conversion strategy," and to hedge his
stock purchases with S&P 100 option contracts. Compl.

~~

33-34.

In reality, the trades never occurred and the profits Madoff
reported were bogus. See id.

~~

36-37. Instead, Madoff used

investor funds to fulfill requests for redemptions. See id.

~~

39-41. Madoff was arrested on December 11, 2008 and subsequently
pled guilty to an eleven-count criminal information. See id.
~~

45-46.
SPV alleges that the Access Defendants knew about or were

willfully blind to Madoff's fraud and facilitated it by
funneling billions of dollars from primarily European investors
into BLMIS via Luxalpha and Groupement Financier. See id.

~~

57,

instant motion was filed, no attorney has appeared on his
behalf. For the sake of simplicity, and because the Court
ultimately dismisses the claims against Access International
Advisors Europe Limited and Dumbauld for the same reasons as it
dismisses the claims against the moving defendants, the Court
generally refers to the "Access Defendants" collectively in this
Opinion and Order.
3

60, 267-69. Specifically, the Access Defendants allegedly
provided a host of services to Luxalpha and Groupement
Financier, including marketing the funds to European investors
and "serving as promoter, portfolio advisor, administrative
agent, investment manager, investment advisor, and portfolio
manager for [the funds],

thereby providing the infrastructure

for more than a billion dollars in investments into BLMIS." Id.
~

269; see also id.

~~

20-30. On the basis of these allegations,

even though its assignor was not a customer of the Access
Defendants or an investor in Groupement Financier or Luxalpha,
SPV asserts state law claims against the Access Defendants for
aiding and abetting fraud (Count Five), aiding and abetting
breach of fiduciary duty (Count Six), aiding and abetting
conversion (Count Seven), and knowing participation in a breach
of trust

(Count Eight).

The Access Defendants move to dismiss the action on two
grounds: first,

they argue that the Court lacks personal

jurisdiction over each moving defendant with the exception of
AIA LLC (a Delaware corporation with its principal place of
business in New York). Second, the Access Defendants submit that
the Complaint fails to state a claim.
In order to survive a Rule 12(b) (2) motion to dismiss for
lack of personal jurisdiction, "a plaintiff must make a prima
facie showing that jurisdiction exists." Thomas v. Ashcroft, 470
4

F.3d 491, 495

(2d Cir. 2006). While defendants are permitted to

submit affidavits and documents outside the pleadings in
bringing a Rule 12(b) (2) motion, district courts have
"considerable procedural leeway" in resolving such motions:
courts "may determine the motion on the basis of affidavits
alone; or [they] may permit discovery in aid of the motion; or
[they] may conduct an evidentiary hearing on the merits of the
motion." Marine Midland Bank, N.A. v. Miller,

664 F.2d 899,

904

(2d Cir. 1981).
Where the Court "chooses not to conduct a full-blown
evidentiary hearing" however, "plaintiffs need only make a prima
facie showing of personal jurisdiction over the defendant."
Porina v. Marward Shipping Co.,

521 F.3d 122, 126 (2d Cir. 2008)

(internal quotation marks omitted); Marine Midland Bank,
F.2d at 904

664

("Eventually, of course, the plaintiff must

establish jurisdiction by a preponderance of the evidence,
either at a pretrial evidentiary hearing or at trial. But until
such a hearing is held, a prima facie showing suffices,
notwithstanding any controverting presentation by the moving
party, to defeat the motion."). A plaintiff can make this
showing through its "own affidavits and supporting materials,
containing an averment of facts that, if credited, would suffice
to establish jurisdiction over the defendant." S. New England
Tel. Co. v. Glob. NAPs Inc.,

624 F.3d 123, 138
5

(2d Cir. 2010)

(internal quotation marks omitted). And "[i]n evaluating whether
the requisite showing has been made,

[courts]

construe the

pleadings and any supporting materials in the light most
favorable to the plaintiffs." Licci ex rel. Licci v. Lebanese
Can ad i an Bank, SAL , 7 3 2 F . 3 d 1 61 , 1 6 7 ( 2 d Cir . 2 0 1 3 ) .
Under International Shoe Co. v. Washington,

326 U.S. 310

(1945), and its progeny, "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.,
Li,

768 F.3d 122, 134

U.S. at 316)

(2d Cir. 2014)

Inc. v. Weixing

(quoting Int'l Shoe, 326

(internal quotation marks omitted) . 3 In assessing

As the Court found in its July 1, 2015 Memorandum explaining
its denial of plaintiff's motion to remand, the Court has
"related to" jurisdiction over this action under 28 U.S.C.
§ 1334(b). SPV OSUS Ltd. v. UBS AG, 2015 WL 4079079, at *2-4
(S.D.N.Y. July 1, 2015). As a result, in accordance with Rule
7004(f) of the Federal Rules of Bankruptcy Procedure, this Court
has personal jurisdiction over each of the Access Defendants to
the extent allowed under the Constitution of the United States,
and reference to New York's long-arm statute is not required.
See, e.g., In re Celotex Corp., 124 F.3d 619, 630 (4th Cir.
1997) ("[W]hen an action is in federal court on 'related to'
jurisdiction .
[w]e need only ask whether [defendant] has
minimum contacts with the United States such that subjecting it
to personal jurisdiction does not offend the Due Process Clause
of the Fifth Amendment to the United States Constitution. Given
that [defendant] is a Delaware corporation with its principal
place of business in New York, we have no doubt that this is the
case." (citation omitted)).
3

6

whether a defendant has the requisite "minimum contacts" with
the forum,

courts distinguish between "general" jurisdiction and

"specific" jurisdiction. While the existence of general
jurisdiction "permits a court to hear 'any and all claims'
against an entity," Gucci Am., 768 F.3d at 134
AG v. Bauman, 134 S. Ct. 746, 754

(2014)),

(quoting Daimler

specific jurisdiction

is limited to claims that "arise out of or relate to the
entity's contacts with the forum," id.

(internal quotation marks

and alterations omitted).
"A court may assert general jurisdiction over foreign
corporations 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." Goodyear Dunlop Tires Operations, S.A. v. Brown, 564
U.S.

915,

919

(2011)

(quoting Int'l Shoe, 326 U.S. at 317). As

such, a corporation's "place of incorporation and principal
place of business are paradigm bases for general jurisdiction."
Daimler AG,

134 S. Ct. at 760

(internal quotation marks and

alterations omitted). In addition, where a Court has general
jurisdiction over an entity, foreign subsidiaries or affiliates
that are "mere departments" of that entity are subject to the
Court's jurisdiction as well. Volkswagenwerk Aktiengesellschaft
v. Beech Aircraft Corp., 751 F.2d 117, 120

(2d Cir. 1984).

Common ownership is "essential to the assertion of jurisdiction"
7

on a mere-department theory, id., and courts also look to (1)
the financial interdependence of the entities,
in personnel selection and assignment,

(2)

interference

(3) the extent to which

corporate formalities are observed, and (4) the degree of
control over marketing and operational policies, see id. at
120-22. 4
Turning to the merits, the Court finds that plaintiff has
met its burden of making a prima facie showing of jurisdiction
over the Access Defendants by adequately pleading that the
foreign entity defendants that join this motion (the "Foreign
Defendants") are "mere departments" of New York-based AIA LLC
and by adequately pleading that the Court has specific
jurisdiction over Patrick Littaye.
As a threshold matter, the Access Defendants do not argue
that the Court lacks general jurisdiction over AIA LLC, which,
according to the Complaint, is a Delaware corporation with its
principal place of business in New York City. See Compl.

~

20.

While AIA LLC was evidently not the parent company of the
Foreign Defendants,

5

SPV pleads that the firm's founders operated

4

Though technically a product of New York state law, the fact
that New York courts have long recognized the mere-department
theory of jurisdiction indicates that the exercise of
jurisdiction on this basis comports with the Constitution.
5

Contrary to the Access Defendants' assertion that the meredepartment theory is only viable where a foreign subsidiary is
alleged to be a mere department of a domestic parent company,
"jurisdiction has been found in cases other than a classic
8

the Access Defendants as "a single business enterprise" which
they "coordinated, dominated and controlled." Id.

CJ[

49. SPV

further pleads that the Foreign Defendants "appear to have been
created merely to facilitate,

among other things, money

transfers and fund formation,

as well as ostensibly to perform

management and administration for the funds in the Bahamas,
Luxembourg and Switzerland," although no employees were located
in those countries.

Id.

~

51. Rather, "[m]anagement, marketing,

and operational decisions were coordinated through Access's New
York office" -- which directly implicates one of the factors in
the mere-department analysis -- "while back-office and
administrative functions were carried out by AIA Ltd. in
London." Id.

6

Moreover, SPV points to documents indicating that

parent-subsidiary relationship," such as in the case of a
dominated affiliate. Volkswagenwerk Aktiengesellschaft, 751 F.2d
at 120; see also Erick Van Egeraat Associated Architects B.V. v.
NBBJ LLC, 2009 WL 1209020, at *2 (S.D.N.Y. Apr. 29, 2009) ("A
foreign corporation may be subject to personal jurisdiction in
New York based on the presence and activities here of an
affiliated entity when .
. the New York entity is so fully
controlled by the foreign one as to be a 'mere department' of
it.")
The Access Defendants complain that SPV's references to
"Access's New York office" are intentionally vague. On the
contrary, SPV identifies AIA LLC and AIA Inc. as the "entities
that comprised Access's New York office." Pl. SPV OSUS Ltd.'s
Mem. of Law in Opp. to Access Defs.' Mot to Dismiss at 10, ECF
No. 67. Moreover, defendants' objection is undercut by their own
references to "the New York office" in their papers. See, e.g.,
The Access Defs.' Mem. of Law in Support of Their Mot. to
Dismiss the Compl. Pursuant to Federal Rules of Civil Procedure
8, 9 (b), (12) (b) (2) and 12 (b) (6) at 8, ECF No. 60.
6

9

the Access Defendants held themselves out as a single integrated
firm based in New York City, with employees divided not by
office but by function.
18, 2015
11,

See Deel. of Collin J. Cox dated Sept.

("Cox Deel."), Exs. 8, 10-12, ECF Nos.

68-8,

68-10,

68-

68-12; see Erick Van Egeraat Associated Architects B.V. v.

NBBJ LLC, 2009 WL 1209020, at *2

(S.D.N.Y. Apr. 29, 2009)

("The

conclusion that the various [defendant] entities function
together as a single firm is reinforced by numerous documents
that show that it both understands itself and holds itself out
to the public as one firm.").
Turning to the specific allegations against each defendant,
defendant Access International Advisors Ltd.

("AIA Ltd.")

is a

Bahamas corporation and was the alleged investment manager,
operator, sponsor, and investment advisor of Groupement
Financier. See Compl.

~

22. With respect to this defendant, the

requirement of nearly identical ownership is satisfied because,
at all relevant times, the entity appears to have been at least
93% ultimately owned by defendant Patrick Littaye and Thierry
Magon de la Villehuchet

(whom defendants do not dispute co-owned

AIA LLC). See Pl. SPV OSUS Ltd.'s Mem. of Law in Opp. to Access
Defs.' Mot. to Dismiss
also ESI,
1999)

("Pl.'s Opp.") at 10 n.3, ECF No.

Inc. v. Coastal Corp.,

61 F. Supp. 2d 35, 52

67; see

(S.O.N.Y.

(finding 90% common ownership to be sufficient). According

to an internal email, this entity's "prime purpose [was] the
10

receipt of fees on behalf of the group," it "[did] not actually
act as an investment manager," and it was nothing more than a
"money box." Cox Deel., Ex. 17. Moreover, plaintiff points to
evidence that AIA Ltd. had no employees and that its work was
performed by personnel in New York.

For example, various

"Monthly Manager Reports" for Groupement Financier and Luxalpha
explicitly state that they were "[p]repared by ACCESS

INTERNATIONAL ADVISORS, INC.

for ACCESS INTERNATIONAL ADVISORS

LIMITED." Cox Deel., Ex. 18 at 2, Ex. 19 at 2, Ex.
With respect to Access Partners

(Suisse)

S. A.

20 at 2.
("AP

(Suisse)"), a Swiss corporation, the requirement of nearly
identical ownership is also satisfied, as the parties appear to
agree that Littaye and/or Villehuchet ultimately owned at least
98% of the company outright at all times.
Littaye dated Sept. 4, 2015

See Deel. of Patrick

("Littaye Deel."), Ex.

3., ECF No.

51-3. 7 Allegedly created as a result of French regulatory
pressure, AP

(Suisse) was designated to become the investment

manager for Groupement Financier in mid-2007, but "never
received the necessary license to perform such services, and
indeed, never acted as investment manager or advisor to
Groupement." Littaye Deel.

~

10. In addition, as with AIA Ltd.,

7

By July 2008, Access Participations SA owned 100% of AP
(Suisse), but SPV claims -- and defendants do not rebut -- that
Littaye owned 99% of Access Participations SA. See Pl.'s Opp. at
14 n.7.
11

SPV points to evidence that AP (Suisse) had no employees.
According to Littaye, AP (Suisse) was managed by Villehuchet and
himself. See id.

~

15.

With respect to Access Management Luxembourg S.A.

("AML"),

a Luxembourg corporation that allegedly served as portfolio
manager for Luxalpha from November 17, 2008 until its
liquidation, see Compl.
identical ownership is

~

24, the requirement of nearly

(narrowly)

satisfied, as Littaye and

Villehuchet appear to have ultimately owned 80% of the company.
See Pl.'s Opp. at 11 n.5; compare Tsegaye v.
Corp., 2003 WL 221743, at *5

Impol Aluminum

(S.D.N.Y. Jan. 30, 2003)

(holding

that the common ownership requirement is "clearly met" by 90%
ownership), with In re Levant Line, S.A., 166 B.R. 221, 232
(Bankr. S.D.N.Y. 1994) (finding that a 52% "ownership interest is
not sufficient to establish the nearly identical ownership
interests required for personal jurisdiction under a mere
department theory"). As with the other Foreign Defendants, SPV
points to evidence that AML had no employees,

including an

internal report stating that "Luxembourg is only a legal
entity." Cox Deel., Ex. 12 at 13.
Finally, Access Partners S.A.

(Luxembourg)

("AP (Lux)"), a

Luxembourg company that allegedly served as Luxalpha's
investment advisor and which was also designated as Groupement
Financier's investment advisor,

is similarly situated to AML.
12

See Compl.

~

25. As with AML, Littaye and Villehuchet ultimately

owned at least 80% of the shares of AP (Lux). And, as with AML,
plaintiff proffers evidence that AP (Lux) was merely a legal
entity, operated from New York, without any employees.
Given plaintiff's allegations and supporting documentation
thereof, and drawing all reasonable inferences in plaintiff's
favor,

the Court finds that plaintiff has made a prima facie

showing (and only a prima facie showing) that the Foreign
Defendants are all "mere departments" of AIA LLC -- that is,
affiliated, commonly owned, and financially interdependent shell
entities that were effectively operated by a New York-based
affiliate that held itself out as the functional headquarters of
the Access Defendants' operations. SPV has likewise made a prima
facie showing that the Court has specific jurisdiction over
Littaye who allegedly met with Madoff in New York on a quarterly
basis and who allegedly shut down discussion of irregularities
at BLMIS at a 2006 meeting in New York. See Compl.

~~

61, 186-

97; Cox Deel., Ex. 7 at 23. These allegations are more than
sufficient to make out a prima facie case that SPV's claims
against Littaye "arise[] out of or relate[]
contacts with the forum." Gucci Am.,

to [Littaye's]

768 F.3d at 141.

To be sure, the Access Defendants vigorously contest SPV's
version of the jurisdictional facts. Littaye avers that the New
York off ice did not and could not "control or bind the various
13

Access entities .

. or make substantive decisions on their

behalf" and that "[e]ach of the Foreign Defendants was
independent of AIA LLC, having a separate corporate personality
and a distinct function." Littaye Deel.

~

7.

Indeed, according

to Littaye, the New York office was responsible for the Access
Defendants'

involvement with non-BLMIS funds,

see id.

8, while

~

a London-based affiliate handled BLMIS-related activity,
Reply Deel. of Patrick Littaye dated Sept. 25,
Reply Deel.")

~~

4-9, ECF No.

2015

see

("Littaye

69. Littaye, who claims that he

"worked almost exclusively in Europe," Littaye Deel.

~

6,

further avers that each of the Foreign Defendants was
independently managed and administered outside the United States
and that none was financially dependent on any other entity, see
id.

~~

14-16, 20,

27-28,

32,

41,

43,

47,

53,

57.

If plaintiff's Complaint were not fatally deficient on an
independent ground,

jurisdictional discovery and an evidentiary

hearing would be warranted in order to determine whether SPV
could establish jurisdiction -- as opposed to simply make a
prima facie showing thereof -- when defendants'

evidence was

weighed against plaintiff's and when the Court was not required
to credit plaintiff's non-conclusory allegations and to construe
plaintiff's supporting materials in the light most favorable to
it. However, given that plaintiff's claims do fail on an
independent ground,

further inquiry into personal jurisdiction
14

would be a pointless exercise.

It is enough to say that SPV has

made a prima facie showing of personal jurisdiction such that
the Complaint can survive a motion to dismiss on that ground.a
Turning to the more persuasive prong of defendants' motion,
the Access Defendants argue that each of SPV's state law claims
must be dismissed because, among other reasons,

SPV fails to

plead proximate causation. To survive a Rule 12(b) (6) motion to
dismiss, "a complaint must contain sufficient factual matter,
accepted as true,

to 'state a claim to relief that is plausible

on its face.'" Ashcroft v.

Iqbal, 556 U.S.

(quoting Bell Atlantic Corp. v. Twombly,
(2007)).

In deciding such a motion,

662,

678

550 U.S.

(2009)

544,

570

the Court accepts all well-

pleaded factual allegations in the complaint as true and draws
all reasonable inferences in favor of the non-moving party. See
Duffey v. Twentieth Century Fox Film Corp.,

14 F. Supp.

3d 120,

126 (S.D.N.Y. 2014). However, the Court is not required to
credit "mere conclusory statements" or "threadbare recitals of
the elements of a cause of action," Iqbal,

556 U.S. at 678, and

"legal conclusions masquerading as factual conclusions will not
suffice," Achtman v. Kirby, Mcinerney & Squire, LLP,
328, 337

(2d Cir. 2006).

464 F.3d

In other words, plaintiffs are not

B While SPV also asserts that the Court has jurisdiction over the
Access Defendants on other bases, the Court need not address
these arguments given its conclusion.

15

entitled to proceed beyond the pleadings stage merely because
they recite the elements of a cause of action and claim that
their allegations somehow satisfy them.
As noted, SPV brings 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

(which is essentially an aiding and abetting claim) . Under

New York law, which the parties agree applies, "the elements of
aiding and abetting a breach of fiduciary duty, aiding and
abetting a conversion, and aiding and abetting a fraud are
substantially similar." Kirschner v. Bennett,
525, 533
Co.,

648 F. Supp. 2d

(S.D.N.Y. 2009); Fed. Ins. Co. v. Am. Home Assurance

639 F.3d 557, 566 (2d Cir. 2011)

("[W]here the parties

agree that New York law controls, this is sufficient to
establish choice of law."). "The claims require the existence of
a primary violation, actual knowledge of the violation on the
part of the aider and abettor, and substantial assistance."
Kirschner,

648 F. Supp. 2d at 533. Plaintiff's claim for knowing

participation in a breach of trust shares the same elements. See
In re Sharp Int'l Corp.,

403 F.3d 43,

49

(2d Cir. 2005)

(equating claim for knowing participation in a breach of trust
under New York law with claim for aiding and abetting breach of
fiduciary duty); In re Schantz, 221 B.R. 653,
1998)

658

(N.D.N.Y.

(same); Zamora v. JPMorgan Chase Bank, N.A., 2015 WL
16

4653234, at *3

(S.D.N.Y. July 31, 2015)

(describing claim of

knowing participation in a breach of trust as a "variation[] on
a theme of aiding and abetting liability").
The substantial assistance element of an aiding and
abetting claim is satisfied "when a defendant affirmatively
assists, helps conceal or fails to act when required to do so,
thereby enabling the breach to occur." Lerner v.
N.A.,

459 F.3d 273, 295

Fleet Bank,

(2d Cir. 2006). "Substantial assistance

requires the plaintiff to allege that the actions of the
aider/abettor proximately caused the harm on which the primary
liability is predicated." Cromer Fin. Ltd. v. Berger, 137
F. Supp. 2d 452, 470

(S.D.N.Y. 2001). Merely pleading "but-for"

causation is not enough: "aider and abettor liability requires
the injury to be a direct or reasonably foreseeable result of
the conduct." Id.; see also Kolbeck v. LIT Am.,
F. Supp. 240, 249

(S.D.N.Y. 1996)

Inc.,

939

("'But-for' causation does not

suffice; the breach must proximately cause the loss.")

9•

And

where a defendant owes no direct fiduciary duty to the
plaintiff, mere inaction cannot constitute substantial
assistance. See Lerner,

459 F.3d at 295.

9 The Second Circuit in Lerner identified Judge Mukasey's
decision in Kolbeck as the "leading opinion interpreting New
York law" with respect to aiding and abetting liability. Lerner,
459 F.3d at 292.

17

Critically, SPV does not plead that its assignor OSUS had
any dealings whatsoever with the Access Defendants, Groupement
Financier Ltd., or Luxalpha, let alone invested in Madoff
through them. Instead, OSUS appears to have been a direct
investor in BLMIS with its own customer account. See Notice of
Letter ("Pl.'s Suppl. Letter") at 4-8, ECF No. 71. Nonetheless,
SPV pleads that the Access Defendants' alleged assistance to
Madoff proximately caused its assignor's injury because
"[w]ithout the Access Defendants' assistance, Madoff and/or
BLMIS would not have been able to continue to operate the Ponzi
scheme." Compl.

~~

270, 277; see also id.

~

288. This is a

textbook example of a "but-for" theory of causation masquerading
as a theory of proximate causation. As such, SPV's theory of
proximate causation, as pled, is woefully deficient. See Cromer
Fin. Ltd., 137 F. Supp. 2d at 472

(granting motion to dismiss

aiding and abetting claims on substantial assistance grounds
because "[w]hile the Ponzi scheme may only have been possible
because of Bear Stearns' actions, or inaction, Bear Stearns'
conduct was not a proximate cause of the Ponzi scheme"). Indeed,
if any entity that injected massive sums into BLMIS could be
said to have aided and abetted Madoff's Ponzi scheme, OSUS,
which plaintiff claims invested $1.6 billion in BLMIS, would
presumably be subject to liability on the same theory. See Pl.'s
Suppl. Letter at 8.
18

It is not surprising, then,

that SPV pivots in its briefing

to two alternative theories of proximate causation, neither of
which can salvage its claims.
First, SPV argues that the Access Defendants' "misleading
marketing activities helped foster the illusion of legitimacy
surrounding BLMIS by misrepresenting that their endorsement of
BLMIS reflected 'extensive due diligence'

and meaningful

'controls, oversight and protections.'" Pl.'s Opp. at 30. Yet
SPV does not claim, except in the vaguest and most conclusory of
terms,

that OSUS relied on or was even aware of these alleged

misrepresentations.
Defendants'

10

The causal nexus between the Access

supposed misrepresentations and OSUS's injury is

thus entirely absent. That the Access Defendants allegedly
focused on the European market

(where OSUS's investment manager

was headquartered) makes no difference if the Access Defendants
played no role in OSUS's decision to invest in BLMIS.
Second, SPV contends that the Access Defendants' alleged
concealment of what they allegedly knew about Madoff's fraud
proximately caused OSUS's injury "because it caused the BLMIS
investment opportunity to be available." Pl.'s Opp. at 30. As an

Indeed, plaintiff's sole assertion of causality in this regard
is that the "loss to SPV-assignor OSUS resulted from OSUS's
being induced to make and retain its investment in BLMIS by
conduct including the substantial assistance by the Access
Defendants described [in plaintiff's supplemental letter]." See
Pl.'s Suppl. Letter at 10.
10

19

initial matter, this theory of causation is far too attenuated
to support a finding of proximate causation; it is simply a
repackaging of plaintiff's insufficient argument that but for
defendants'
harmed.

conduct, plaintiff's assignor would not have been

Significantly, "[t]he purpose of the proximate cause

requirement is to fix a legal limit on a person's
responsibility, even for wrongful acts." First Nationwide Bank
v. Gelt Funding Corp.,

27 F.3d 763,

769

(2d Cir. 1994). Indeed,

"[c]entral to the notion of proximate cause is the idea that a
person is not liable to all those who may have been injured by
his conduct, but only to those with respect to whom his acts
were 'a substantial factor in the sequence of responsible
causation.'" Id.
Inc.,

(quoting Hecht v. Commerce Clearing House,

897 F.2d 21, 23-24

(2d Cir.

1990)) . 11 Holding the Access

Defendants liable to investors in BLMIS regardless of whether
those investors had any relationship

(even indirectly) with the

Access Defendants, and regardless of whether those investors
were even aware of the Access Defendants and the feeder funds

The Second Circuit in First Nationwide Bank was discussing the
proximate cause requirement in the context of the Racketeer
Influenced and Corrupt Organizations Act, but the principles set
forth therein are broadly applicable. The Second Circuit has
reiterated these principles, for example, in discussing loss
causation in the securities fraud context, see AUSA Life Ins.
Co. v. Ernst & Young, 206 F.3d 202, 215 (2d Cir. 2000), and in
comparing the proximate cause standard to the traceability
requirement for Article III standing, see Rothstein v. UBS AG,
708 F.3d 82, 91 (2d Cir. 2013).
11

20

they supported (or vice versa), would fly in the face of these
principles and eviscerate the purpose of the proximate cause
requirement.
This theory of liability also fails for the independent
reason that the Access Defendants' alleged failure to reveal the
fraud cannot support a claim for aiding and abetting where, as
here, the Access Defendants owed no fiduciary duty directly to
plaintiff or its assignor. See Lerner,

459 F.3d at 295

("[M]ere

inaction of an alleged aider and abettor constitutes substantial
assistance only if the defendant owes a fiduciary duty directly
to the plaintiff."

(internal quotation mark omitted)); Musalli

Factory For Gold & Jewellry v. JPMorgan Chase Bank, N.A., 261
F.R.D. 13, 25

(S.D.N.Y. 2009)

("[T]o the extent that [plaintiff]

bases its aiding and abetting claim on JPMorgan's failure to
prevent the diversion [of plaintiff's investment funds]

by

failing to shut down the account or to inform [plaintiff] of the
account withdrawals, these omissions .

. do not rise to the

level of substantial assistance because there was no fiduciary
relationship between the bank and [plaintiff].").
Because plaintiff's Complaint fails on proximate causation
grounds, the Court need not reach the Access Defendants' several
alternative grounds for dismissal.

12

However, the Court notes that plaintiff failed to respond to
the Access Defendants' argument that plaintiff's claim for

12

21

While plaintiff seeks leave to amend, any amendment would
be futile.
190, 200

See Goodrich v. Long Island Rail Rd. Co.,

(2d Cir. 2011)

654 F.3d

("[R]equest to replead should be denied

in the event that repleading would be futile."). At the hearing
on the Access Defendants' motion to dismiss,

the Court granted

plaintiff leave to file a letter identifying the supplemental
allegations it would make in support of proximate causation if
it were granted leave to replead. Plaintiff's resulting
submission -- which the Court has considered in evaluating
defendants' motion

added little new beyond a chronology of

OSUS's investments in BLMIS and did nothing to tie those
investments to the Access Defendants. See Pl.'s Suppl. Letter.
Accordingly,

for the foregoing reasons, the Court hereby

grants the Access Defendants' motion to dismiss and dismisses
plaintiff's claims with prejudice. In addition, the Court
dismisses plaintiff's claims against the non-moving defendants
-- Access International Advisors Europe Limited and Theodore
Dumbauld -- for the same reasons it dismisses those claims
against the moving defendants. See Almeciga v. Ctr. for
Investigative Reporting,
May 6, 2016)

Inc., 2016 WL 2621131, at *6 (S.D.N.Y.

(exercising the Court's "ample authority" to

aiding and abetting conversion, which is subject to a three-year
statute of limitations, is time-barred. See Savino v. Lloyds TSB
Bank, PLC, 499 F. Supp. 2d 306, 312 (W.D.N.Y. 2007).
22

dismiss claims against non-moving defendants sua sponte in such
circumstances). There is nothing in the Complaint to distinguish
either of these defendants from the moving defendants for
purposes of pleading proximate causation. The Clerk of the Court
is thus directed to enter final judgment dismissing the
Complaint with prejudice and to close the case in its entirety.
SO ORDERED.
Dated:

New York, NY
May~, 2016

23