Dorchester Fin. Secs., Inc. v. Banco BRJ, S.A., No. 12-770-cv (2d Cir. July 3, 2013) [click for opinion]

Plaintiff Dorchester Financial Services, Inc. filed suit against Defendant Banco BRJ, S.A., a Brazilian bank, for breach of contract and fraud based on Defendant’s failure to honor a $250 million letter of credit.  Defendant failed to answer or appear, resulting in a default judgment against it for more than $112 million.  Several years later, Defendant moved to vacate the judgment, which was unenforceable in Brazil because Defendant was not served with process by letters rogatory.  The judgment was vacated, but the court permitted Plaintiff to file a new suit.

After Plaintiff filed its second action, Defendant moved to dismiss for lack of personal jurisdiction under Federal Rule of Civil Procedure 12(b)(2).  Plaintiff attached several pieces of evidence to its response, including: (1) a letter agreement in which Defendant agreed that the letter of credit would be governed by New York law, acknowledged the sufficiency of its contacts with New York, and consented to personal jurisdiction in New York for claims arising from the transaction; (2) the letter of credit identifying Plaintiff as beneficiary, at a New York address; (3) an unauthenticated message from Defendant to Plaintiff, sent in care of a New York bank by a messaging service that specializes in transmitting financial messages; and (4) a payment demand letter from Defendant to Plaintiff, directed to Plaintiff's New York address.  Defendant argued that each of these documents was a forgery, that it had no relationship with Plaintiff, that it did not conduct business in the U.S., and that it never issued financial instruments the size of the alleged $250 million letter of credit.  Moreover, Defendant presented documents from other courts in other states to show it had been the victim of other fraudulent schemes using documents much like the letter of credit here.

In its Rule 12(b)(2) analysis, the district court employed a standard enunciated by an earlier Southern District case.  The court concluded that Defendant had offered an overwhelming amount of direct, highly specific testimonial evidence showing that it lacked contacts with Plaintiff and the U.S., that the documents relied upon by Plaintiff were forgeries, and that Plaintiff had not sufficiently refuted such evidence.  The court, therefore, granted the motion to dismiss.

The Second Circuit declined to adopt the Southern District standard the district court used in deeming Plaintiff's allegations "refuted" and instead reiterated the Second Circuit's sliding scale for deciding a motion to dismiss for lack of personal jurisdiction: before discovery, a plaintiff's pleading of good faith, legally sufficient allegations of jurisdiction establishes a prima facie showing of jurisdiction; but after discovery, a plaintiff's prima facie showing of jurisdiction must be supported by an averment of facts that will establish jurisdiction over the defendant if credited by the trier of fact.  Therefore, the appellate court determined it need look no further than to the letter agreement Plaintiff attached to its response to establish that Plaintiff had made a sufficient showing to survive dismissal in the absence of an evidentiary hearing or trial.  While the authenticity of Plaintiff's evidence was clearly in dispute, the district court erred by resolving that factual dispute in Defendant's favor without an evidentiary hearing.  Accordingly, because Plaintiff's prima facie showing of personal jurisdiction was sufficient to survive a 12(b)(2) motion to dismiss where the district court did not hold an evidentiary hearing, the district court's decision was vacated and the case remanded.