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MAHMOUD FUSTOK v. BANQUE POPULAIRE SUISSE

September 8, 1982

MAHMOUD FUSTOK, Plaintiff,
v.
BANQUE POPULAIRE SUISSE (also known as Swiss Volksbank), ADVICORP ADVISORY AND FINANCIAL CORPORATION, S.A., ALAIN BRUSSARD, MICHEL BLATTMANN, ROGER GUEX, PIERRE-ALAIN HIRSCHI, JEAN-JACQUES BALLY, ANTOINE ASFOUR and PAUL BISOFFI, Defendants



The opinion of the court was delivered by: WEINFELD

EDWARD WEINFELD, D.J.

 Plaintiff, Mahmoud Fustok, a citizen of Saudi Arabia and a resident of London, England, commenced this action against other foreign citizens and nonresidents charging them with having defrauded him of $250,000,000 in connection with transactions in the trading of silver futures contracts and deliveries of physical silver. The defendants against whom the charge is leveled are: Banque Populaire Suisse ("Banque"), a Swiss banking corporation; three officers and employees of Banque, Alain Brussard, Michel Blattmann and Roger Guex; Advicorp Advisory and Financial Corporation, S.A. ("Advicorp"), a Swiss financial management company; and four officers of Advicorp, Pierre-Alain Hirschi, Jean-Jacques Bally, Antoine Asfour and Paul Bisoffi.

 Banque moves to dismiss the complaint on the ground of forum non conveniens. The individual defendants, Brussard, Blattmann and Guex make a similar motion. *fn1" The other defendants either have not been served or have not appeared.

 Banque has its head office in Berne, Switzerland with branch offices in Geneva and other Swiss cities. It maintains no branches or offices anywhere in the United States nor is it registered to do business anywhere in the United States. Brussard, Blattmann and Guex are citizens of Switzerland and residents of Geneva. Advicorp's only office is in Geneva; its officers Hirschi and Bally are citizens of Switzerland and residents of Geneva; Bisoffi is a resident of France; and Asfour is a citizen of Lebanon and, apparently, a resident of England.

 Advicorp was organized early in 1978, at which time Fustok authorized Asfour to represent him in its formation and to subscribe for shares in the new company. Asfour was elected a director of Advicorp. Shortly after Advicorp's organization in April, 1978, Fustok opened an account at Banque with a deposit of $2,000,000 and authorized Asfour to instruct Banque with respect to investments on his behalf. In June, 1978, Fustok also authorized Advicorp to manage, on a discretionary basis, his deposits at Banque and to make investments. Until the middle of 1979, investments made on behalf of Fustok were of a non-speculative nature, mainly in the purchase and sale of securities. In August, 1979, Fustok extended the authorization to Advicorp specifically to include silver futures contracts transactions and deposited additional funds for that purpose with Banque. In connection with Fustok's silver futures trading activities, Banque extended a $45,000,000 line of credit to secure which Fustok pledged certain of his Swiss assets. On instruction from Advicorp and Asfour, Banque invested Fustok's funds in silver futures contracts and the purchase of physical silver. Banque carried out the transactions on behalf of Fustok and other Banque customers through "omnibus" accounts held in the sole name of Banque, using the European offices of American commodity brokers, Merrill Lynch, Pierce, Fenner & Smith, Incorporated, Conti Commodity Services, Inc. and ACLI International Commodity Services, Inc. The purchases and sales occurred in New York and Chicago both on and off the Commodity Exchange, Inc. ("Comex") and the Chicago Board of Trade.

 Fustok charges that the defendants engaged in a scheme to defraud him and other customers of Banque in violation of the Commodity Exchange Act by executing silver transactions through its omnibus accounts maintained with various brokers. The complaint alleges, among other matters, that the defendants implemented their fraudulent scheme in that

 
[Banque] did not immediately enter such transactions on its books and records as transactions for the account of specific [Banque] customers. Subsequently, after a lapse of time which permitted defendants to evaluate whether such transactions were likely to be profitable or unprofitable, defendants caused [Banque] to assign unprofitable transactions to customers of [Banque] and to assign profitable transactions to accounts maintained with [Banque] under code names but which, on information and belief, were accounts maintained for the benefit of one or more of the defendants and persons acting in concert with them. Sometimes, even after transactions were assigned to specific accounts on the books and records of [Banque], transactions which subsequently became profitable were retroactively reassigned from customers of [Banque] to the aforementioned code name accounts, and transactions which subsequently became unprofitable were retroactively reassigned from code name accounts to customers of [Banque]. *fn2"

 The gravamen of all claims, no matter how variously stated, is the switching of transactions by the use of the omnibus accounts whereby unprofitable transactions were assigned to plaintiff or other customers of Banque and profitable transactions transferred to the defendants or their associates.

 Against the foregoing background, we consider the motions to dismiss on the ground of forum non conveniens. In Gulf Oil Corporation v. Gilbert3 and its companion case, Koster v. Lumbermen's Mutual Casualty Company,4 the Supreme Court set forth a balancing test for resolving motions to dismiss on the basis of forum non conveniens. While the Court noted that a plaintiff's choice of forum should rarely be disturbed, it also stated that when an alternative forum has jurisdiction to hear a case and when trial in the chosen forum would "establish . . . oppressiveness and vexation to a defendant out of all proportion to the plaintiff's convenience," or when the "chosen forum is inappropriate because of considerations affecting the court's own administrative and legal problems," the court may, in the exercise of its sound discretion, dismiss the case. *fn5"

 To guide trial court discretion, the Supreme Court provided a list of "private interest" factors affecting the convenience of the litigants, and a list of "public interest" factors affecting the convenience of the forum. The private interest factors include the location of evidence and witnesses, the availability of process to compel attendance of unwilling witnesses, as well as other practical problems that make trial of a case easy, expeditious, and inexpensive. The public interest factors include the difficulty which arises when a forum must apply foreign choice of law rules and foreign law, the administrative problems which follow when litigation is added to existing heavy case loads in congested centers rather than being handled at its origin, and the imposition of jury duty upon a community which has no relation to the litigation. *fn6" In this case, both the private and the public interest factors overwhelmingly point toward dismissal.

 At the threshold of analysis is the fact that not only is an alternative forum available, but there is presently pending an action in the courts of Geneva which encompasses the major claims that plaintiff asserts in this action. Fustok's principal claim centers about transactions involving an exchange of 350 silver futures contracts for approximately 1,772,000 ounces of physical silver. *fn7" On July 3, 1981, three days before plaintiff instituted this action, *fn8" Banque commenced an action in the Geneva courts seeking recovery of $52,983,752, claiming that this amount was the negative balance in Fustok's account over and above the value of collateral deposited by him under the pledge agreement. Banque's complaint in the Geneva action traces the history of the relationship between it and Fustok and transactions with Advicorp, including the very items referred to above that are at the core of Fustok's suit here. There can be no serious dispute that Banque's action encompasses Fustok's claims in this action. *fn9"

 Simultaneously with the filing of its action, Banque applied for and obtained an attachment of Fustok's assets sufficient to satisfy the unsecured balance claimed to be due from him. It posted in the Geneva court, as directed, a guarantee of 4,500,000 Swiss francs. The attachment was executed against assets of Fustok held by various Geneva and Zurich banks. Fustok has the right to assert any counterclaim he may have, which obviously extends to all claims asserted in this action. Fustok appeared in the action by an attorney who opposed the attachment; an attorney also represented him in a conciliation proceeding as required by Swiss law. His lawyer stated that because of the large amount involved there was no prospect of settlement and the conciliation judge authorized that the lawsuit proceed. Any judgment rendered by the Swiss court against Fustok could be satisfied by his attached assets, or if he prevails upon any counterclaim by execution against the Banque's vast assets in Switzerland. In addition, the Swiss court has the power to compel the attendance of witnesses who are resident in Switzerland. *fn10" Since a full determination of all issues upon which plaintiff seeks recovery in this action can be resolved by the Geneva court and any judgment satisfied by property available there, this factor by itself weighs very heavily in favor of dismissal.

 In addition, other compelling factors counsel dismissal of this action in the exercise of sound discretion. All the parties and the material witnesses in this case are foreign. All Banque's officers and employees, including those named as individual defendants, live and work in Geneva. Similarly, of the Advicorp directors, officers and employees who are named as defendants, Hirschi and Bally live and work in Switzerland; Bisoffi is a resident of France; and the fourth, Asfour, lives in England. Further, potential third-party witnesses such as Banque's independent accountants, employees other than those named here as defendants, and Fustok's advisers also live in Switzerland or London, England and are beyond the subpoena process of this Court. *fn11" In addition to the expense and inconvenience of travel for these witnesses, if that were contemplated, many of them do not speak English as a primary language which would present an added obstacle to a smooth flowing trial in this District.

 To overcome the compelling force of the witness factor, plaintiff lists a variety of New York witnesses, such as employees of the New York brokers and Comex officials, whose testimony, he argues, is necessary to prove various aspects of the defendants' fraud. But not one of the transactions executed in the United States commodities markets is disputed. The fraud charged is not the sale or purchase of futures; it is the so-called switching of the transactions after they became fact. None of these witnesses possesses knowledge of the crucial factual issues in this case -- namely, how Banque, among other means, by the use of code name accounts or the retroactive reassignment of transactions, defrauded Fustok and other customers. The New York witnesses can testify only as to how undisputed trades were executed. These matters, if pertinent at all, are not even of secondary significance; *fn12" they are subordinate to the basic issue central to plaintiff's claims. There is no dispute the orders were executed in Banque's name through the omnibus accounts; the dispute is as to how the allocations were thereafter made of the executed orders whereby plaintiff claims he was mulcted of millions of dollars in profits. If, as plaintiff alleges, the fraudulent scheme was the switching of transactions previously consummated, this occurred in Geneva at Banque and Advicorp. Those who performed the fraudulent acts and issued directions in furtherance thereof did so there; the shift of profitable and unprofitable transactions from omnibus accounts were entered on the books and documents maintained in Geneva. A significant fact which emphasizes that Switzerland, particularly the Canton of Geneva, is the central location of all material witnesses and documents is the claim by Fustok that his accountants and other representatives unearthed the alleged fraudulent scheme after examining in Geneva records and documents of Banque ...


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