The opinion of the court was delivered by: LASKER
In this action brought under Section 10(b) of the Securities Exchange Act of 1934, as amended, and Rule 10b-5 of the Securities and Exchange Commission promulgated thereunder, Isidore Kerman, a defendant, moves for an order pursuant to Rule 12(b)(3), F.R. Civ. Proc., dismissing the complaint on the ground that the court lacks personal jurisdiction over him. The motion is granted.
This case stems from the much-publicized collapse of a merger agreement reached in 1969 between plaintiff Leasco Data Processing Equipment Corporation ("Leasco")
and defendant Robert Maxwell, a British businessman and Member of Parliament who controlled an international publishing group built around Pergamon Press, Ltd. ("Pergamon"), a United Kingdom company. Early in 1969 Maxwell and Saul Steinberg, Chairman of the Board of Leasco, began discussing the possibility of engaging in joint business ventures in Europe. Eventually they came to consider the possibility of having Leasco, an aggressive conglomerate concern, acquire Pergamon. Negotiations took place both in England and in New York. Two rounds of discussion are particularly important with respect to this motion: the first occurred in England, over a four-day period in early June 1969, and the second in New York shortly thereafter, from about June 11 to June 17. The negotiations culminated in an agreement executed by Leasco and Maxwell on June 17 in New York, providing in relevant part for (a) the purchase by Leasco of Pergamon stock from Maxwell; (b) a tender offer by Leasco for the stock of Pergamon held by the public; and (c) the sale by Leasco of its own securities to Maxwell in partial payment for its purchase of Pergamon stock. Following the execution of the June 17th agreement, Leasco purchased on the open market over 5,000,000 shares of Pergamon stock, at a cost of approximately $22 million.
In August of 1969 the Leasco-Pergamon courtship turned sour. Leasco gave public notice of its refusal to go forward with the June 17th agreement, trading on the London stock exchange of Pergamon shares was suspended, the British Board of Trade instituted an investigation into the business affairs of Pergamon, and a struggle was waged for control of Pergamon's board of directors, which resulted in the ouster of the Maxwell leadership. This suit followed.
The pleadings are fraught with charges and countercharges of fraud. Leasco alleges that during the negotiations leading to the June 17th agreement it was misled by defendants as to the financial status of Pergamon and other of Maxwell's companies and also as to the commercial relations between Pergamon and the other companies. It further alleges that defendants deceived it into making the post-June 17 purchases of Pergamon shares on the open market, and in particular, that 600,000 of those shares were secretly sold by the defendants themselves. Maxwell, in turn, has counterclaimed, charging that the Leasco companies and certain of their officers engaged in a conspiracy to defraud him, that their aim was to depress Pergamon's market price so that they could acquire control of Pergamon at a cost far below Pergamon's real value, and that, in pursuance of the conspiracy, they made false and misleading statements with regard to Leasco's financial status.
The movant Kerman's role in this battle between international business titans is, at most, peripheral. He is an English solicitor, the senior partner of a large London law firm which represents Pergamon and the Maxwell family interests, among numerous clients. During the period of the Leasco-Maxwell negotiations and until October 1969, he was a director of Pergamon. He is named as a co-conspirator in the complaint; and in plaintiff's answers to the defendants' interrogatories the acts which he is said to have performed in furtherance of the conspiracy consist of (1) making "numerous misrepresentations" to Leasco's representatives during the four days of negotiation in England in early June 1969, and (2) supplying N.M. Rothschild & Sons, an English banking firm, with a breakdown (presumably misleading) of the Maxwell interests' holdings of Pergamon shares and with information concerning the sale of Pergamon shares by the Maxwell family trust. It is further asserted, in affidavits submitted by Leasco's chairman Steinberg and other of its officers, that (1) in the New York negotiations culminating in the June 17th agreement "Maxwell represented that Kerman was involved in these transactions and that Maxwell was acting on his behalf also"; (2) during the four days of discussions in England in early June at which Kerman was present he gave Leasco's officers "reason to believe that he, Kerman, was aware of the previous meetings and communications which had taken place * * * and of the statements that had been made to plaintiffs by Maxwell and others * * * and appeared to be aware that Maxwell had acted and would continue to act with respect to these matters on Kerman's behalf as well"; (3) Kerman sent one of his law partners, Paul Di Biase, to New York to participate in the negotiations leading up to the June 17th agreement; (4) while Di Biase and Maxwell were conducting those negotiations, Kerman remained in London but received from them and sent to them "many communications" respecting the terms of the agreement. (This assertion is made upon information and belief and not from personal knowledge.) Plaintiffs' attorney further avers that "plaintiffs * * * have good reason to believe that Kerman was a trustee of Maxwell family trusts which sold some 600,000 shares of Pergamon to plaintiffs * * * [and that he] authorized Maxwell and Di Biase to act on his behalf in dealings with plaintiffs * * * in New York and elsewhere, * * *."
Mr. Kerman's version of his role, as reflected in his affidavits, is vastly different. He stresses, first of all, that the last time he was in New York was in 1967 on wholly unrelated business, and that he performed no acts whatsoever in New York or the United States with respect to the Leasco-Maxwell transactions. He denies that he conspired or combined with anyone to defraud plaintiffs, denies that he had any personal interest in the outcome of the negotiations, denies making or knowing of any misrepresentations made at the one meeting which he acknowledges attending during the four-day early June meetings in England, and states that he personally had nothing to do with the supplying to Rothschild of the information concerning the Maxwell interests' sale of Pergamon stock. Moreover, he declares that he never authorized Maxwell to act for him or to represent that he could act for him, that Di Biase went to New York in his own capacity as the partner generally responsible for handling Pergamon's commercial matters, and that neither Maxwell nor Di Biase communicated with him as to the terms of the June 17th agreement. Rather, he avers that it was only after the agreement had been signed and Di Biase had returned to London that he learned of the result of the negotiations. Finally, he states that the only Maxwell settlements of which he is a trustee were nominal ones established in 1964 and dormant since then. He denies ever having been a trustee of any Maxwell family trust or having any connection with the sale of Pergamon shares to plaintiffs by such a trust.
In this motion to dismiss for lack of personal jurisdiction it is the plaintiff who shoulders the burden of proof, by a preponderance of the evidence. McNutt v. General Motors Acceptance Corp., 298 U.S. 178, 189, 56 S. Ct. 780, 80 L. Ed. 1135 (1936). The mere averment of jurisdiction does not establish it. Id. Nor may conclusory, unsupported statements contained in the accompanying affidavits be relied upon to demonstrate jurisdiction. Newmark v. Abeel, 102 F. Supp. 993, 994 (S.D.N.Y. 1952), Weinfeld, J.: "The statements * * * 'it is my understanding that [defendant] is doing business' and others of like tenor, are conclusory and unsupported by facts."
Just as, in summary judgment motions, affidavits based on personal knowledge are to be credited over contradictory allegations based merely upon information and belief, Schoenbaum v. Firstbrook, 405 F.2d 200, 209 (2d Cir. 1968), so, too, facts adduced in opposition to jurisdictional allegations are considered more reliable than mere contentions offered in support of jurisdiction. When, as here, the party opposing the motion to dismiss for lack of personal jurisdiction contends that an issue of fact has been raised so as to warrant the taking of depositions,
the purported factual issue must be made apparent by something more than a "very strained reading" of the affidavits. H.L. Moore Drug Exchange, Inc. v. Smith, Kline & French Laboratories, 384 F.2d 97, 98 (2d Cir. 1967).
B. Jurisdiction under § 27 of the Securities Exchange Act of 1934
Plaintiff Leasco contends that § 27 of the Securities Exchange Act of 1934, 15 U.S.C. § 78aa, confers personal jurisdiction upon defendant ...