Jonas v. Estate of Leven, No. 14-cv-3369 (S.D.N.Y. July 27, 2015) [click for opinion]

According to Plaintiffs, Defendant Gustave Leven—founder of the Perrier mineral water empire—reneged on an oral agreement to invest $500 million in an investment portfolio managed by Plaintiffs.  After agreeing to the arrangement in principle, Leven sought to modify the oral agreement by maintaining the $500 million in a segregated UBS account while depositing a separate $50 million hedge with Plaintiffs as the initial margin to the portfolio.  

Plaintiffs, Defendant Barneli (a Panamanian corporation of which Leven was the disclosed principal), and several individual Defendants subsequently entered into an agreement regarding the $50 million investment (the “Subscription Agreement”).  Later, Leven requested that Plaintiffs liquidate the $50 million hedge portion of the portfolio, leading to a loss in the portfolio, and to Plaintiffs’ claims of damages for unreimbursed costs and management fees.

In 2008, after a dispute about the party responsible for the losses to the portfolio, Barneli sued Plaintiffs in New York state court, seeking to recover losses sustained on the $50 million investment.  Plaintiffs prevailed in that lawsuit and one year later, filed a breach of contract action against Defendants.  Defendants sought to dismiss Plaintiffs’ complaint for, inter alia, lack of personal jurisdiction.

The U.S. District Court for the Southern District of New York agreed with Defendants, holding that, under New York law, there was an absence of personal jurisdiction.  The court began by stating that Defendants were not subject to general personal jurisdiction under N.Y. C.P.L.R. § 301, because no Defendant systematically and continuously conducted business in New York.

The court then focused on whether Defendants transacted business in New York, such that it could assert specific personal jurisdiction under N.Y. C.P.L.R. § 302(a)(1).  The court found it could not.  All in-person meetings before and after the initial oral agreement occurred in France or Switzerland.  Neither the money for the $500 million initial investment nor the $50 million in additional funds ever flowed to New York.  Plaintiffs never argued that the oral or Subscription Agreement were negotiated in New York, or that Defendants ever traveled to New York to consummate the transaction.  And, while Plaintiffs alleged that they had a principal place of business in New York and hired personnel and performed trades in New York, the court found these allegations to be insufficient, as the unilateral acts of plaintiffs in the forum state do not support jurisdiction over a non-domiciliary defendant.

Plaintiffs acknowledged that Defendant Barneli had been dissolved, and thus service on it was ineffective.  Plaintiffs argued, however, that the 2008 Barneli litigation could provide a basis for jurisdiction over the remaining Defendants under an agency or alter ego theory.  The court rejected both theories.  Barneli, in bringing the 2008 lawsuit, was not the Defendants’ agent since, inter alia, none of the individual Defendants personally benefited from Barneli’s actions in bringing the lawsuit, or directed or controlled Barneli when it sued Plaintiffs.  Neither was the alter ego theory applicable, as Panamanian law, which governed the question, would not call for piercing of the corporate veil under these facts.

Plaintiffs also could not invoke personal jurisdiction over Defendants under C.P.LR. § 302(a)(3)(ii) since, under New York law, a breach of contract claim does not constitute a tortious act and cannot be the basis of long-arm jurisdiction in New York.  Merely alleging a tortious act did not allow Plaintiffs to convert a contract action to a tort action for jurisdictional purposes.

Finally, the court dismissed several of Plaintiffs’ other attempts to find personal jurisdiction over Defendants.  While several individual Defendants owned real property in New York, personal jurisdiction was not found on this ground since there was no relationship between the real property and the cause of action sued upon.  Plaintiffs could not argue that the designation of an attorney as an agent for service of process, under C.P.L.R. § 303, conferred jurisdiction over Defendants because not only does the statute itself not confer personal jurisdiction, but Plaintiffs did not serve the attorney in the 2008 Barneli lawsuit on behalf of the moving Defendants in the current lawsuit.

For the reasons stated above, the court held that it lacked personal jurisdiction over Defendants and granted their motion to dismiss the complaint with prejudice.

Adam Pascarella of the New York office contributed to this summary.