United States District Court, S.D. New York
April 28, 2004.
ATSI COMMUNICATIONS, INC., Plaintiff; -against- THE SHAAR FUND, LTD., et al., Defendants
The opinion of the court was delivered by: LEWIS KAPLAN, District Judge
Pending before the Court are three motions to dismiss a securities
fraud action for lack of personal jurisdiction or, in the alternative,
for failure to plead fraud with particularity. The motions were filed on
behalf of defendants (1) Wim Langeveld, (2) Hugo Van Neutegem, (3)
InterCaribbean Services, Ltd. ("InterCaribbean"), and (4) Citco. Fund
Services (Curacao) N.V. ("Citco").*fn1
According to the amended complaint (the "Complaint"), plaintiff ATSI
Communications, Inc. ("ATSI") is a Delaware corporation traded on the
NASDAQ. Cpt. ¶¶ 1, 79. The Complaint alleges that defendant Samuel
Levinson defrauded ATSI into selling convertible preferred securities to
The Shaar Fund, Ltd. ("Shaar"), a British Virgin Islands corporation that
Levinson supposedly controlled. Id. ¶¶ 2, 44-45, 105. Levinson allegedly
induced ATSI to sell the preferred at meetings in New York. Id. ¶ 44.
The Complaint alleges that Levinson and the other defendants then
manipulated the price of ATSI common stock downward in order to benefit
from more favorable rates of conversion of the preferred. Id. ¶¶ 35, 69.
The defendants whose motions are the subject of this order are foreign
entities and individuals against whom ATSI has alleged, inter alia,
control person liability under Section 20(a) of the Securities Exchange
Act of 1934 (the "Exchange Act"). Defendants Neutegem and Langeveld are,
according to their affidavits, citizens and residents of the Netherlands
Antilles. Neutegem Aff. ¶ 2; Langeveld Aff. ¶ 2. It is uncontested that
Neutegem and Langeveld worked as managing directors of Shaar Advisory Services N.V. ("Shaar Advisory"), which is a
Netherlands Antilles company. See Neutegem Aff. ¶ 3; Langeveld Aff, ¶
3; Cpt. ¶ 105. The Complaint alleges that Shaar Advisory served both as
a signatory for and the "principal advisor" to The Shaar Fund. Cpt. ¶¶ 4,
105. Plaintiff has submitted public filings containing documents that
Shaar Advisory signed on behalf of Shaar. Koerner Aff. Exs. B, C, D;
Peronti Aff. Ex. 2.
InterCaribbean is a British Virgin Islands company that was either the
director or the sole director of Shaar. Fenlon Aff. ¶¶ 2, 6; Cpt. ¶¶ 12,
105. Plaintiff has submitted public filings containing documents that
InterCaribbean signed on Shaar's behalf. Peronti Aff. Exs. 3, 5.
InterCaribbean asserts that it does not have offices or conduct business
in the United States. Fenlon Aff. ¶ 4.
Citco. is a Netherlands Antilles company and is the parent of
InterCaribbean. Quilligan Aff. ¶¶ 2, 5; Cpt. ¶ 105. Citco concedes that a
"small percentage" of its clients are U.S. entities, but maintains that
all of its services are performed in the Netherlands Antilles. Citco
On a motion to dismiss under Rule 12(b)(2) for lack of personal
jurisdiction, the plaintiff bears the burden of showing jurisdiction. The
standard applicable to plaintiff's burden depends upon the procedural
context in which the jurisdictional challenge is raised. Ball v.
Metallurgie Hoboken Overpelt, S.A., 902 F.2d 194, 197 (2d Cir.), cert.
denied, 498 U.S. 854 (1990).
A district court deciding a Rule 12(b)(2) motion has "considerable
procedural leeway." Marine Midland Bank, N. A. v. Miller, 664 F.2d 899,
904 (2d Cir. 1981). The court "may determine the motion on the basis of
affidavits alone; or it may permit discovery in aid of the motion; or it
may conduct an evidentiary hearing on the merits of the motion." Id.
(citing cases). Where, as here, no discovery has taken place, the
plaintiff need only make a prima facie showing of jurisdiction "by
pleading in good faith, see Fed.R.Civ.P. 11, legally sufficient
allegations of jurisdiction." Jazini v. Nissan Motor Co., Ltd.,
148 F.3d 181, 184 (2d Cir. 1998) (quoting Ball, 902 F.2d at 197).
The Exchange Act allows the exercise of personal jurisdiction to the
limits of the Due Process Clause of the Fifth Amendment. S.E.C. v.
Unifund SAL, 910 F.2d 1028, 1033 (2d Cir. 1990) (citing Bersch v. Drexel
Firestone, Inc., 519 F.2d 974, 998 (2d Cir.), cert. denied, 423 U.S. 1018
(1975)). The due process analysis under the Fifth Amendment looks at the
defendant's minimum contacts with the United States as a whole. In re Magnetic Audiotape
Antitrust Litig., 334 F.3d 204, 207 (2d Cir. 2003) (citing Go Video
Inc. v. Akai Elec. Co., 885 F.2d 1406, 1414-15 (9th Cir. 1989)).
Under the minimum contacts analysis, contacts with the forum may confer
two types of jurisdiction specific and general. Metropolitan Life Ins.
Co. v. Roberts on Ceco. Corp., 84 F.3d 560, 567-68 (2d Cir.), cert
denied, 519 U.S. 1006(1996). Specific jurisdiction exists when a forum
"exercises personal jurisdiction over a defendant in a suit arising out
of or related to the defendant's contacts with the forum." Id. (quoting
Helicopteros Nationales de Colombia, S.A. v. Hall, 466 U.S. 408, 414-16
& nn.8-9 (1984)). By comparison, a court's general jurisdiction "is
based on the defendant's general business contacts with the forum state
and permits a court to exercise its power in a case where the subject
matter of the suit is unrelated to those contacts." Metropolitan Life, 84
F.3d at 568 (citing Helicopteros, 466 U.S. at 414-16 & nn. 8-9). To
establish general jurisdiction, the plaintiff must show that the
defendant has "continuous and systematic" contacts within the forum.
Id. (quoting Helicopteros, 466 U.S. at 416).*fn3
1. Langeveld and Neutegem
To show specific jurisdiction, plaintiff relies almost entirely on
allegations that Langeveld and Neutegem were managing directors of Shaar
Advisory and that, in this capacity, they signed documents on behalf of
Shaar. See Opp. to Langeveld Motion 8-9; Opp. to Citco. Motion 9-11. It
relies upon two public filings, each of which contains a document that
either Neutegem or Langeveld signed on behalf of Shaar. Koerner Aff. Ex.
C; Peronti Aff. Ex. 2. These documents, however, do not establish
specific jurisdiction because they relate to companies and events that are
unconnected to this litigation. Nor do they constitute the continuous and
systematic contacts that are required to support general jurisdiction.
Failing to show that Langeveld and Neutegem committed acts or caused
effects in the United States, plaintiff charges that Langeveld and
Neutegem controlled Shaar and that the contacts of Shaar should therefore
be imputed to them. See Opp. to Langeveld Motion 6; Opp to Citco. Motion
6. But the allegation that Langeveld and Neutegem controlled Shaar has no
factual support. It is based on the flawed assumption that an advisory
firm and its directors necessarily control the clients of the firm.*fn4 Plaintiff's allegation is too conclusory and
speculative, even at this preliminary stage, to permit this Court to
attribute the contacts of Shaar to Langeveld and Neutegem. See Jazini,
148 F.3d at 185 ("conclusory non fact specific jurisdictional
allegations" are insufficient to establish a prima facie case that would
subject a defendant to jurisdictional discovery). Otherwise, any foreign
entity that provides advisory services would be subject to the
jurisdiction of the United States based on the contacts of its clients.
Plaintiff has failed also to make any good faith allegations warranting
the exercise of general jurisdiction. According to their affidavits,
Langeveld and Neutegem are citizens and residents of the Netherlands
Antilles who do not conduct business or own property in the United
States. See Neutegem Aff. ¶ 2; Langeveld Aff. ¶ 2. Plaintiff does not
contest this, but instead reiterates its argument that the Court should
use the contacts of Shaar when analyzing the minimum contacts of
Langeveld and Neutegem. See Opp. to Langeveld Motion 6, 9-10; Opp. to
Citco. Motion 6, 10-11. This allegation fails for the reasons noted
The jurisdictional allegations against InterCaribbean are equally
deficient. Plaintiff relies primarily on allegations that
InterCaribbean, a British Virgin Islands company, was either a director
or the sole director of Shaar and signed certain documents on its
behalf; that InterCaribbean controlled Shaar and, through Shaar, invested
in other U.S. companies; and that schemes such as that alleged in the
Complaint typically involve the use of offshore accounts. See Cpt. ¶
105; Opp. to InterCaribbean Motion 7-8, 19-22.*fn5
These allegations, however, are too sparse to establish a prima facie
case of jurisdiction. InterCaribbean's status as the director of a
primary violator is not, by itself, sufficient to confer jurisdiction.
Cf. Calder v. Jones, 465 U.S. 783, 790 (1984) ("Each defendant's contacts
with the forum State must be assessed individually."); Keeton v. Hustler
Magazine, Inc., 465 U.S. 770, 781 n. 13 (1984) ("[J]urisdiction over an
employee does not automatically follow from jurisdiction over the
corporation which employs him. . . .") (citing cases). Moreover, the
allegation that InterCaribbean controlled Shaar is nothing more than a
restatement of a legal conclusion, which this Court is not bound to accept as true. See Jazini, 148 F.3d at 185
(courts are "not bound to accept as true a legal conclusion couched as a
factual allegation") (quoting Papasan v. Allain, 478 U.S. 265, 286
The jurisdictional case against Citco. is even more tenuous than that
against InterCaribbean. Plaintiff alleges that jurisdiction exists
because Citco. controlled InterCaribbean, which in turn controlled
Shaar. See Opp. to Citco. Motion 8-9. This argument fails. Plaintiff not
only has failed to establish jurisdiction against InterCaribbean, it has
failed to provide facts to support the conclusory allegation that Citco
For the foregoing reasons, the motions to dismiss [docket items 52,
76, 82] are granted for lack of personal jurisdiction pursuant to Rule
12(b)(2), albeit with leave to replead no later than May 17, 2004.
Accordingly, the remaining arguments for dismissal of the Complaint are
moot. As plaintiff has failed to make a prima facie case of personal
jurisdiction, plaintiffs request for jurisdictional discovery is denied.
See Jazini, 148 F.3d at 186 (plaintiffs not entitled to jurisdictional
discovery unless they make a prima facie case of jurisdiction).
It is ORDERED that counsel to whom this Order is sent is responsible
for faxing a copy to all counsel and retaining verification of such in
the case file. Do not fax such verification to Chambers.