MANN v. EUROPEAN AMERICAN INVESTMENT BANK AG
Filing
26
MEMORANDUM OPINION AND RECOMMENDATION OF UNITED STATES MAGISTRATE JUDGE signed by MAG/JUDGE JOE L. WEBSTER on 02/24/2014; that the motion to dismiss for lack of personal jurisdiction pursuant to Federal Rule of Civil Procedure 12 (b)(2) (Docket Entry 16 ) be GRANTED and the action be DISMISSED. (Garland, Leah)
IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF NORTH CAROLINA
RICI{,A,RD Sí. MANN,
)
)
)
)
)
)
)
)
)
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Plaintiff,
V
E.UROPE,AN AMERICÂN
INVE,STMENT BANK AG,
Defendant.
1:11CV516
MEMORANDUM OPINION AND RECOMMENDATION
OF UNITED STATES MAGISTRATE JUDGE
This matter is before the court on Defendant's motion to dismiss for lack of petsonal
judsdiction pursuant to Federal Rule
of Civil Ptocedute 12þ)Ø and 1,2þ)Q).
(Docket
Entry 16.) Plaintiff has filed a response in opposition to the motion. (Docket F;rrtty
21,.)
For the following reasons, the coutt will recommend that Defendant's motion to dismiss be
gtanted.
I.
FACTUAL BACKGROUND
Plaintiff filed the Complaint in this action onJune
against Defendant European,\medcan Investment Bank
28,20'1.'1,, alleging causes
of action
AG ("Euram Bank') for breach of
contract, negligence, fraud, breach of the fiduciary duty of good fatth ard fair dealing, bteach
of
contract constituting professional rnalpractce, breach
inducement.
engaged
(See, generally,
Compl., Docket Entry
1.) As
of
waranty, and ftaudulent
alleged by Plaintiff,
tn 2002 he
in a "Creative Financial Solutfon" transaction (i.e., tax shelter) desþed
and
promoted by Eutam Bank, called the "Euram Rowan Strategy." Plaintiff alleges he paid
Defendant $875,000 "to engage in the súategy." Qd.ll
e.y .A.ccording to the allegations of
the Complaint, Defendant "provided a cashless paper entty loan of $7 million to allow
Plaintiff to inctease the size of the ttansaction to the tatgeted loan amount of $17 million."
(Id.
n 9.) Ultimately, the transaction was disallowed by the Intetnal Revenue Service
Plaintiff was
assessed tax penalties
in the amount of $911,869.00.
and
(1d.1110.)
Euram Bank, the only Defendant named in the Complaint, is an Austrian company
with its principal place of business in Vienna, Âustria.
(See
Affrdavit of Senta Penner fl 2,
Docket E.rtty 17-1,.) According to Penner, Euram Bank's fotmet Chief Financial Officet
and Maraqing Board Member, Euram Bank does not conduct
United States, has no affiliates
in the United
States,
or solicit
business
in the
is not incorpotated ot licensed to
business in the United States, has no offices or bank accounts in the United States, owns of
leases
no property in the United States, and pays rio taxes in or to the United States. (Id.Ífl
4-8.)
Plaintiff alleges that the prrrr,ary contact between Euram Bank and this forum was the
loan obtained by Plaintiff from Euram Bank. (Compl.
\
9;
see
Declaration of Ântonio E.
Lewis, Ex. A, Loar. Agreement, Docket E.rtry 18-1.) In his afftdavit, Plaintiff avetred that
he was contacted at his home in
Nonh Caroltna by Eutam Bank with information tegarding
the Rowan tax strategy. €1." Âff. 1[ 2, Docket Entty 21,-7.) Plaintiff also alleges that
"Defendant used Pali Capital to assist in the U.S. matketing effotts" and that "Tom Seck,
1 For the purposes of this modon, it is not necessary
to go into detail about the tax strategy Plaintiff
alleges he employed. As descdbed by Plaintiff in his affrdavrt, the tax sttategy "followed scripted
steps to generate a deductible loss for the paticipants," Euram "provided the foreþ currency
option trading to ptoduce apptoximately $17.5 million USD in deductible ttading loss," and the tax
strategy that he paid $875,000 to engage in did not work. @1.'s Aff. TT 5-7, Docket E ttty 21-7.)
2
(ocated in Chadotte, North Catolina) worked in design, marketing and implementation of
tax strategies, including the Euram Rowan sttategy." (Compl. 1112.)
II.
DISCUSSION
-,{. Jutisdiction
On a Rule 12þ)(2) motion, a plaintiff has the butden "to ptove gtounds for
judsdiction by a prepondetance of the evidence." Aþlan
F.3d 56, 59-60 (4th Cir. 1,993) (citing
Combs u.
l-^aboratories,
Inc. a. Akqo,
N.V.,
2
Bakker,886 F.2d 673, 616 (4th Cir. 1989)).
Flowever, where the court does not conduct an evidentiary heartng and relies only on the
pleadings and afftdavits, a plaintiff need only make a þrinafacie showing of judsdiction. In
re
(4th Cir. '1997). The district court, in considedng such
a
Celotex Corþ., 124
tr.3d
61,9, 628
motion, must draw all reasonable infetences adsing from the ptoof, and tesolve all. factual
disputes,
in the plaintiffls favor.
390, 396 (4th Cir.
Carefrst of Md., Inc. u. CarefrstPregnantl Ctrs., Inc.,334F.3d
2003). Once a defendant
has ptovided specific denials coîûaLry
to
a
plaintifPs assertion of facts suppotting jurisdiction, a plarnttffs "bare allegations that the
defendants had had significant contacts with the [forum] state" ate insuffìcient to establish
jurisdiction by a pteponderance of the evidence. Id. at 402-03.
The court must perform a two-step analysis when determining
if it
has personal
judsdiction over a non-tesident defendant. Christian Sci. Bd. of Dirs. of tlte First Charch of Chri:t,
Sdentist u. No/an,259
F.3d 209,21,5 (4th Cir. 2001). "First, the exercise of jurisdiction must
be authodzed by the long-arm statute of the fotum state, and second, the exetcise of
personal judsdiction must also compott
requirements."
Id. North
with Fourteenth
-,\mendment due process
Carolina's long-arm statute states that the state has jurisdiction
-)
over a defendant "engaged in substantial activity within this State, whethet such activity is
wholly intetstate, intrastate, ot otherwise." N.C. Gen. Stat. S 1-75.4(1)(d) (2013). Notth
Carolina's long-arm statute "has been interpreted to extend to the outer limits allowed by the
Due Process Clause."
L.e Bleu Corp. u. Standard Capital Grp., Inc., 11
F.,{.pp'x377,379 (4th
Cir. 2001). "Thus, the dual jurisdictional requirements collapse into a single inquiry as to
whethet the defendant has such 'minimal contacts'with the forum state that'maintenance
the suit does not offend 'ttadittonal notions
F
.3d 209 , 215 (4th Clt. 2001) (citing Int'l
of fatt play and substantial justice."'
S ltoe
Co. u. If,/asltington, 326 U .5. 31,0, 316
of
Nolan, 259
(1
945).
Second, the court must determine that the exercise of jurisdiction complies with the
tequirements of the Due Process Clause. "Due process requires that in otder to subject
a
defendant to personal jurisdiction, the defendant must have 'certaln minimum contacts with
[the forum state] such that the maintenance of the suit does not offend traditional notions
falr play and substantial justice."' Nichols a. G.D. Searle dz Co.,991, F.2d 1195,
(4th Ctt.
326 U.S. at 31,6). "These contacts must be of such a level that they
1,993) (quoting
Int'l
are equivalent
to physical
Shoe,
1,1,99
of
ptesence
in the fotum
state so that
it would be fair to hale a
defendant into court in the forum based on âny claim taised against the defendant no matter
where the facts undetþing the claim arose." løb. Corp. of Am. Holdings u. Schurnann,474F.
Srrpp. 2d758,761 (À4.D.N.C. 2006) (citation omitted).
Since International Shoe was decided, courts have distinguished between genetal and
specific judsdiction. Gooþear Dønlop Tires Operations, S.A. u. Brown, 131 S. Ct.2846,2853
Q011). Specific, or case-linked, judsdiction "depends on an'af[tha:d.ofn] between the forum
and the undetþing
controversy' .that
takes place
4
in the fotum
State and is thetefote
subject
to the State's
A
Adjødicate:
Sugested
regrtlaljLon."
Id. (quoting Von Mehren &
Truatman, Jarisdiction
to
Anaþsis,19 Harv. L. Rev. 1,'1,21,,1136 (1.996)). Genetal judsdiction, on
the othet hand, may be asserted over a corporation of another state "when their affiliations
with the State are so 'continuous and systematic'
forum State."
Scan, Inc. u.
Goodlear, 131 S. Ct.
at
2851,
as
to rendet them essentially at home in the
(citng Int'l
Shoe, 326
U.S. at 317);
see also
AI-S
Digital Seru. Consaltants, Inc., 293 tr.3d 707 ,71,2 (4th Cir. 2002). Here, Plaintiff has
conceded that thete is no basis fot this cotlrt to exercise genetal jurisdiction.
ßl."
Mem. at
1,6-17.) The Court, therefore, will limit its discussion to the issue of specific jurisdiction.
B.
If
SpecificJutisdiction
a cause
of action atises out of or relates to a defendant's contacts with the fotum
State, the court can exercise specific jurisdiction.
jurisdiction so as to subject
A defendant has minimum contacts with
it to specific judsdiction in the forum state if "the defendant's
conduct and connection with the fotum State are such that he should teasonably
being haled into coutt
(1990);
see
a
there." Il/orld-ll/ide
also Burger King u. Rød7gwic7,471
anldLcipate
Volkswagen Corp. u. IYoodson, 444 U.S- 286, 297
U.S. 462,474 0985). Under this standard,
"it
is
essential in each case that there be some actby which the defendant pulposefully avails itself
of the pdvilege of conducting activities within the forum
State, thus invoking the benefits
and protections of its laws." Hanson u. Denckla,357 U.S. 235,253 (1958). To determine the
existence
of
specific jurisdiction, then, a court considets: "(1) the extent
to which
the
defendant 'purposely avatled' itself of the ptivilege of conducting activities in the State; (2)
whether the plaintiffs' claims adse out
of
those activities directed at the State; and (3)
whether the exercise of personal iurisdiction would be constitutionally 'reasonable."' AI-S
5
Scan, 293
tr.3d at 71.2. When determining (1) whether a defendant has purposely availed
itself of the privilege of doing business in the forum state, coutts consider a vanety of
factots, including:
[1] whether the defendant maintains offices or agents in the forum
state; [2] whethet the defendant owns property in the forum state; t3]
whether the defendant reached into the forum state to solicit ot initiate
business; [4] whether the defendant deliberately engaged in significant
ot long-tetm business activities in the forum state; [5] whether the
parties contractually agreed that the law of the fotum state would
govern disputes; [6] whether the defendant made in-petson contact
with the resident of the fotum in the forum ste;te îegarding the
business relationship; [7] the nature, quality and extent of the parties'
communications about the business being transacted; and [8] whether
the performance of the contractual duties was to occur within the
forum.
ConsøltingEng'rs Corþ. u. Geometric Software Solations, Ltd.,561, tr.3d 213,278 (4th Cir. 2009).
"If, and only if, [a court] find[s]
that the plaintiff has satisfied this fitst ptong of the test fot
specific judsdiction need fthe court] move on to a considetation of prongs two and three."
Sloane u. L^aliberre,
No. 1:08CV381,
(quoting Consalting Eng'rs, 561 tr.3d
^t
201,1,
WL
29381,17,
at x7 O4.D.N.C. July
1,9,201,1)
27 8).
The Fourth Circuit has further explained that the second ptong of the
analysis
"requkes that the defendant's contacts with the forum state form the basis of the suit."
Consølting
Eng'rs,561 tr.3d
^t
278-79. The third prong requires consideration of additional
factors to ensure the apptoptiateness of the forum:
(1) the burden on the defendant of litigating in the fotum; (2) the intetest of
the fotum state in adjudicating the dispute; (3) the plaintiffs interest in
obtaining convenient and effective telief; (4) the shated interest of the states in
6
obtaining efficient resolution of disputes; and (5) the intetests of the states ln
futthedng substantive social policies.
Id. at279.
Pørposeful auailrnent
Euram Bank argues
in its bdef that none of the "purposeful
identifìed by the Fourth Circuit support a finding
of
availment" factots
personal jurisdiction
in this case.
Qef.'s Mem. at 9, Docket Entry 17.) In suppott of its motion, Euram Bank submitted
is an -,{.ustrian
affidavits demonsttating that Euram Bank
maintained a presence in
Noth
company which has nevet
Catohna- no offices, no property, no employees, no agents,
rio contracts and no advertising. pennet Aff. T1[4-8.) Additionally, Euram Bank, thtough
Penner, states that
law from doing
it "does not provide aîy kind of tax advice and is ptohibited
so." (1d.1[3.) In a tesponding affidavit, in support of
Plaintiff asserts that "[w]ithout any effott on
Noth
by Austrian
specific jurisdiction,
þs] patt, þe] was corìtacted at þs]
home in
Carohna regarding the Rowan tax sttategy." @1.'s Mem. Opp. Mot. Dismiss,
Richard Mann (hereinafter "Pl.'s Aff."), Docket Entry
request letter
Aff. of
21,-7.) Flowever, Plaintiff, ín aloan
to Euram Bank dated November 20, 2002, stated that he had "not
previously contacted, approached,
representatives
or
affiliates
of
solicited
been
by puram Bank] of ^ny of
in respect of the Loart
titE
Request but have made this tequest
independertly." poan Request Lettet from Mann, Lewis Decl. Ex. B, Docket E.ttty
1,8-2.)
Also in this letter, in which Plaintiff calls himself "a sophisticated investor," he states that he
has "not received nor relied upon any representation, wanantft assurance
fEuram Bank] ot
^ny
ot
guaraÍúee from
of [its] representatives or affiliates in making the Loan Request and no
advice has been sought or ptoffered by Eutam Bank on or in relation to the sarne." (Id.)
7
Even
if
this Cout were to not consider this letter, written by Plaintiff, it is clear that
Plaintiffs claims do not arise out of the Loan Agteement. Instead, Plaintifls allegations all
assert that Euram Bank acted as an advisot
to Plaintiff and that bad advice he teceived
tesulted in his tax liability. Moreover, Plaintiff himself acknowledges in his memotandum
opposing the motion to dismiss that he "was damaged by the tax strategy and not specifically
by the Lo^n-" (Pl.'s Mem.
^t1,9.)
If, by his own
admission, the Loan -Agteement and
corresponding options ttansactions are not the basis
fot Plaintiffs chim, it follows that
specifìc judsdiction cannot dedve from the Loan Âgteement and options transactions.
Âs noted by Defendant, the evidence of the Loan ,{.gteement and options
transactions do not establish that Eutam Bank knew
of or had
advice. Plaintiff does not dispute Defendant's assertion that
any involvement
it
in
tax
was ptohibited undet
Austrian law ftom rendering tax advice. Moreovet, the documents submitted by Plaintiff
simply do not support his assetion that Defendant purposefully availed itself of this forum
such as
to provide a basis fot the exercise of personal jurisdiction. Fot
Attachment
II,
instance, in
labeled by Plaintiff as "Marketing Materials Delivered to Plaintiff in Nonh
Catohna," Plaintiff puts forward a "schematic overview of the Rowan strategy." (Pl.'s Mem.
at 7.) With the exception of a photocopy of a business card of Thomas D. Seck, listing
Noth
Caroltna address, none
a
of the othet chatts, diagtams and othet matetials mentions
Nonh Caroltna and in fact there is no context given fot the documents or the infotmation
contained
therein. Plaintiff also submitted copies of multiple transaction
confirmations. (Pl.'s Mem., Attachment I, Docket Entry
transactions simply do not support,
ot
suggest
8
21.-1,
sheets and
pp. 1-36.) These options
inarryway,that the ttansactions wete
based
on any tax strategy recofiunended by, or promoted by, Eutam Bank. As noted by Pennet in
his second affidavit, PlaintifPs investment advisots created the options term sheets and sent
them to Euram Bank; the options were "drafted undet the industry standard agreements
created by the International Swaps and Dedvatives Association
("ISDÂ")." Qd Pennet
-,{.ff.
thl 11-13, Docket Enry 24-1,.) According to Penner, "Euram Bank's sole tole in the options
ttansaction was to execute and book the contracts." (1d.1112.)
The business card, as mentioned, is a photocopl, and identifìes Thomas Seck as the
National Di-tectot, Client Services, fot "Euram Structured Products, a Division
American Investment
Group." Nowhere
does
it
of the
indicate that Seck is affiliated with, ot
acting on behalf of, Euram Bank, the defendant here. Plaintiff himself appears to concede
this fact, alleging that Seck was acting not on behalf of Eutam Bank but for othet entities.
Penner's affidavit clearþ states that "Thomas Seck was never a 'matketing representative'
of
Eutam Bank . . . rìor did he ever act in any capacity on behalf of Eutam Bank." (2d Penner
Aff.
I
8, Docket E.rtry 24-1.) In Pennet's first affìdavit, he states that Defendant Euram
Bank is not affiliated with Pali Capital
or aîy entity in the Eutam Gtoup.
(Penner
Aff.
1[
12.¡z Plaintiff simply makes rrraîy assertions about different entities, but fails to offer
anything more than his own conclusoly allegations that Eutam Bank acted as
2
^î
advisot to
Pl^1ntlf?s weak âttempt to satis$r its burden to establish specific judsdiction by "piercing the
corporâte veil," raised for the fust time not in the Complaint but in his opposing Memotandum, is
unavailing. (?1.'s Mem. zt 76.) Plaintiff has not met the standatd for pietcing tJre corporate veil, nor
has he ptopedy pled such. See Glenn u. llløgner,313 N.C. 450,329 S.E.2d 326,330 (1985); see also
Nchmond u. Indalex Lnc.,308 F.Supp.2d 648. 658 (À4.D.N.C. 2004). Plaintiff has not presented any
evidence, such as significant degtee of conttol, that would suggest tllat any othet individuals ot
entities, including Thomas Seck and Pali Capital, wete instrumentalities of Eutam Bank.
9
Plaintiff or committed any acts which would give rise to a cause of action against Eutam
Bank.
Plaintiff canrìot rely on his own conclusory allegations to establish personal
judsdiction.
Carefirst, 334
F3d at 402-403. Plaintiffs own letter
acknowledges that he
afftrma:dvely reached out to Euram Bank. Additionally, Defendant offered specific affidavits
demonstrating that Euram Bank had neither conducted business
in this forum nor
purposefully teached out to Plaintiff in North Caroltna. As such, Plaintiff has not met his
buden of proving that Defendant purposefully availed itself of the pdvilege of doing
business
in Noth
Carohna so as
to form the basis of this court's exercise of
petsonal
jurisdiction.
III.
CONCLUSION
For the foregoing reasons, this Court RECOMMENDS that the motion to dismiss
for lack of personal judsdiction pursuant to Fedetal Rule of Civil Procedute 12þ)Q)
(Docket Entty 16) be GRANTED and the action be DISMISSED.
l- \f,'dxter
Statu ltlagistrrtc Jutlge
Dutham, North Caroltna
February 24,2014
10
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