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ALPA S.A. AGROINDUSTRIAL ALEMANO v. ACLI INTL. INC

November 2, 1983

ALPA S.A. AGROINDUSTRIAL ALEMANO, Plaintiff, against ACLI INTERNATIONAL INC., Defendant.


The opinion of the court was delivered by: GOETTEL

GOETTEL, D.J.:

This is an action by plaintiff Alpa S.A. Agroindustrial Alemano ("Alpa"), a Paraguayan corporation, seeking damages for claims allegedly arising under the Commodity Exchange Act, 7 U.S.C. ยงยง 1 et seq. (1982), as well as for pendent state claims against defendant ACLI International Commodity Services, Inc. ("ACLI"), a New York corporation. *fn1" The defendant moves to dismiss the complaint on various grounds. First, the defendant moves to dismiss the federal commodities causes of action for lack of subject matter jurisdiction. Second, the defendant moves to dismiss the entire action on the grounds of forum non conveniens. Lastly, the defendant moves to dismiss the complaint for failure to join parties under Rule 19 of the Federal Rules of Civil Procedure.

 For the reasons set forth below, the defendant's motion to dismiss is denied.

 FACTS

 Plaintiff Alpa is engaged in the business of buying Paraguayan soybeans from local farmers, processing the beans, and then selling the beans for export. Alpa used a German company, Poppe & Co. ("Poppe"), as its broker in the physical trading of the soybeans. To protect itself from the risks in the agribusiness, Alpa also employed Poppe to handle hedging arrangements through which futures contracts would be purchased on the Chicago Board of Trade. These arrangements were made through an employee of Poppe called Renner. Renner approached ACLI International Commodity Services GmbH ("ACLI Germany"), the defendant's affiliate in Germany, to arrange for Alpa's hedging transactions. ACLI Germany supplied Renner with defendant ACLI's various printed forms for opening a hedge account. In May of 1979, Alpa's then managing director, Ernst Greten, Jr., signed the defendant's forms in Germany to open the commodity account. In the spring of 1979, Renner started to conduct his hedging operations for Alpa and to trade in Alpa's account with ACLI.

 Alpa alleges that Renner engaged in unauthorized speculative trading in the Alpa account and that as a result it suffered approximately $850,000 in damages. Alpa claims that this could not have been accomplished without ACLI German's negligence or assistance in Renner's activities, as well as the negligence of defendant ACLI. In particular, Alpa alleges that ACLI's trading reports of Alpa's account were sent only to Renner contrary to ACLI's forms which provided for the reports to be sent to Alpa's offices in Paraguay and to an officer other than the person actually doing the trading. This allegedly enabled Renner to substitute his own trading reports for those of ACLI and to pass on to Alpa reports devoid of the speculative trades. Alpa also alleges that ACLI Germany made no attempt to notify Alpa of Renner's speculative trades which ACLI Germany should have known were unauthorized and in violation of the defendant's forms signed by Alpa.

 In addition to permitting Renner to speculate in Alpa's account, Alpa alleges that ACLI and/or ACLI Germany permitted Renner to transfer Alpa's funds to accounts owned or controlled by Poppe without Alpa's authorization and without informing Alpa. As a result, $164,267 was transferred from Alpa's account to third parties.

 Alpa alleges that the conduct and involvement of ACLI in the above speculation and conversion claims were in violation of the Commodity Exchange Act and the regulations promulgated thereunder as well as common law principles.

 DISCUSSION

 A. Subject Matter Jurisdiction

 Defendant ACLI moves to dismiss the Commodity Exchange Act claims for lack of subject matter jurisdiction since these causes of action allege predominantly foreign transactions. This Court concludes that it has jurisdiction over these claims.

 "When . . . a court is confronted with transactions that on any view are predominantly foreign, it must seek to determine whether Congress would have wished the precious resources of United States courts and law enforcement agencies to be devoted to them rather than leave the problem to foreign countries." Fidenas AG v. Compagnie Internationale Pour L'Informatique CII Honeywell Bull S.A., 606 F.2d 5, 9 (2d Cir. 1979) (quoting Bersch v. Drexel Firestone, Inc., 519 F.2d 974, 985 (2d Cir.), cert. denied, 423 U.S. 1018, 96 S. Ct. 453, 46 L. Ed. 2d 389 (1975)). Congress did not intend the United States to be used as a base for manufacturing fraudulent security devices for export, even when these are peddled to foreigners. IIT v. Vencap, Ltd., 519 F.2d 1001, 1017 (2d Cir. 1975). Under this theory, the courts have allowed for the possibility of subject matter Jurisdiction over a suit for damages by a defrauded foreigner. Fidenas, supra, 606 F.2d at 10.

 Most of the Second Circuit decisions finding subject matter jurisdiction in transnational situations have relied on conduct within the United States. Fidenas AG v. Honeywell Inc., 501 F. Supp. 1029, 1040 (S.D.N.Y. 1980) (citations omitted). "[J]urisdiction [based on activity in the United States] is limited to the perpetration of fraudulent acts themselves and does not extend to mere preparatory activities or the failure to prevent fraudulent acts where the bulk of the activity was performed in foreign countries. . . ." Vencap, supra, 519 F.2d at 1018. Thus, the issue becomes "whether the fraud [or the wrong] alleged has sufficient contacts with the United States to invoke the federal securities and commodity laws or whether it is "predominantly foreign" in nature." Mormels v. Girofinance, S.A., 544 F. Supp. 815, 817 (S.D.N.Y. 1982).

 The cases cited by the parties regarding the reach of the provisions of our securities and commodity laws with respect to transactions having substantial foreign elements are cases that charge the defendants with fraud and misrepresentation. See, e.g., IIT v. Cornfeld, 619 F.2d 909 (2d Cir. 1980); Fidenas AG v. Compagnie Internationale Pour L'Informatique CII Honeywell Bull S.A., 606 F.2d 5 (2d Cir. 1979); Bersch v. Drexel Firestone, Inc., 519 F.2d 974 (2d Cir.), cert. denied, 423 U.S. 1018, 96 S. Ct. 453, 46 L. Ed. 2d 389 (1975); IIT v. Vencap, Ltd., 519 F.2d 1001 (2d Cir. 1975); Psimenos v. E.F. Hutton & Co., Inc., 2 Comm. Fut. L. Rep. (CCH) P21,653 (S.D.N.Y. Feb. 1, 1983), Mormels V. Girofinance, S.A., 544 F. Supp. 815 (S.D.N.Y. 1982). In the instant case, however, Alpa is primarily charging ACLI with breach of contract and fiduciary obligations and only secondarily with fraud. Therefore, the above-cited cases should be used as guidelines and not simply blindly applied. In each of those cases, the court looked for the site of the activities essential to the alleged fraud. Similarly, in this case, the Court must look for the site of the activities essential to the alleged breach of contract ...


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