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ARNDT v. UBS AG

November 1, 2004.

ANDREAS ARNDT, MAGUS VERWALTUNGS GmbH, and TRUSTEES OF I.G. FARBEN AKTIONARSVEREINIGUNG e. V., Plaintiffs,
v.
UBS AG, a/k/a UNION BANK OF SWITZERLAND, a/k/a UBS (USA) INC., a/k/a UBS PAINE WEBBER, successors in interest to asserts of I.G. FARBEN AG of Germany in Switzerland, the assets of I.G. CHEMIE AG a shell, cloaked or alter-ego company and/or a subsidiary, daughter, managed, controlled by I.G. FARBEN AG, successors in interest to assets of INTERNATIONALE INDUSTRIE und HANDELSBETEILIGUNGEN AG a/k/a INTERHANDEL, Basel a/k/a INTERNATIONAL HOLDINGS in INDUSTRY and COMMERCE, and UNITED STATES OF AMERICA, Defendants.



The opinion of the court was delivered by: I. LEO GLASSER, Senior District Judge

MEMORANDUM & ORDER

Plaintiffs bring this action against defendant UBS AG ("UBS" or "Defendant") for an accounting, imposition of a constructive trust, fraud, misrepresentation, spoliation of evidence, and unjust enrichment. Plaintiffs name the United States as a party to this case in an effort to obtain certain documents from the Government to support its claims against UBS. In sum, Plaintiffs contend that UBS, as a successor-in-interest to I.G. Farben ("Farben"), a German company which profited during the Nazi regime, failed to turn over assets which rightfully belong to Holocaust victims. Pursuant to, inter alia, Fed.R. Civ. P. 12(b)(1) and 12(b)(6), UBS now moves to dismiss the Amended Complaint ("Am. Compl.") for the following reasons: (1) the Court lacks subject matter jurisdiction over the claims; (2) Plaintiffs do not have standing to assert the claims in the Amended Complaint; (3) under principles of comity, the Court should give preclusive effect to the judgment of a German court dismissing the same claims alleged in this case; and (4) the political question doctrine precludes litigation of the non-justiciable questions presented in the Amended Complaint.

In addition, pursuant to 28 U.S.C. § 1651(a), the All-Writs Act, Defendant requests the Court to enjoin the plaintiffs in a related, and virtually identical case, Makro Capital of Am., Inc. v. UBS AG, et al., Index No. 04-21917, pending in the Southern District of Florida, filed well after Plaintiffs initiated this action, from taking any further action to prosecute that case and directing that the Makro action be dismissed voluntarily and refiled in this District as related to this case.

  Finally, Plaintiffs have filed a motion for "preservation, identification, inventorying and production of certain specific documents relevant" to their claims (the "Preservation Motion"), and the Trustees of Farben have filed a motion pursuant to Fed.R.Civ. P. 41(a)(1)(i) for voluntary dismissal of the Amended Complaint without prejudice.

  For the reasons set forth below, Defendant's motion to dismiss the Amended Complaint for lack of subject matter jurisdiction is granted, and therefore it is unnecessary to address Defendant's alternate arguments.*fn1 The Court dismisses the claims against the Trustees of Farben without prejudice pursuant to Fed.R. Civ. P. 41(a)(1)(i). Moreover, the Court denies Defendant's motion pursuant to 28 U.S.C. § 1651(a). In addition, the Court denies the Preservation Motion as moot in light of its dismissal of the Amended Complaint.

  BACKGROUND

  Plaintiffs Andreas Arndt, an individual, and Magus Verwaltungs, a business entity, are German citizens and shareholders of I.G. Farben ("Farben"), a company incorporated under the laws of Germany in 1929. (Am. Compl. ¶¶ 1, 2, 23-25.) Plaintiff Ludwig Koch was appointed trustee of Farben by a German court on June 25, 2004. (Carroll Supp. Decl. Ex. B.)

  In or about 1929, Farben founded I.G. Chemie ("Chemie"), a company organized under the laws of Switzerland, which it purportedly controlled at all times. (Am. Compl ¶¶ 1, 2). In the 1930's, Chemie, at the direction of Farben, acquired significant stakes in several United States companies, including General Aniline & Film Corporation ("GAF"). (Id. ¶ 3). After World War II, Chemie changed its name to Interhandel. (Id. ¶ 8). UBS AG, the Defendant, a Swiss bank, is a successor-in-interest to Interhandel. (Id. ¶ 31).

  In this action, Plaintiffs seek to recover GAF shares that were returned to Interhandel (referred to as the "Interhandel Assets") following a more than sixteen year litigation in the United States that concluded in a settlement in 1964 to which the United States was a party. See generally Societe Internationale Pour Participations Industrielles et Commerciales, S.A. v. McGranery, 111 F.Supp. 435 (D.D.C. 1953), order modified by, 225 F.2d 532 (1955), cert. denied, 350 U.S. 937 (1956). That suit arose out of the United States government's seizure of the Interhandel Assets in or about April, 1942, after the commencement of World War II, pursuant to the Trading with the Enemy Act ("TWEA"), 50 U.S.C. app. §§ 1-44. (Am. Compl. ¶ 21(e)). The government seized the assets claiming that because Farben effectively controlled Chemie, the assets belonging to Chemie had an enemy taint.*fn2 (Id.). The United States used the proceeds from those assets to compensate the United States for the cost of its war effort and post-war reconstruction. (Id.)

  In 1947, Interhandel (which had changed its name from Chemie in 1945) commenced litigation in the United States under section 9(a) of the TWEA to recover the Interhandel Assets, claiming to be a neutral Swiss company, rather than one controlled by Farben, a German company. (Am. Compl. ¶ 9.) Farben unsuccessfully attempted to intervene in the litigation. (Carroll Decl. Ex. F, attaching order denying motion for leave to intervene issued in Societe Internationale Pour Participations Industrielles et Commerciales, S.A. v. Rogers, No. 4360-48, at 1 (Dec. 19, 1958).) According to Plaintiffs, during the course of that litigation, Interhandel failed to produce a number of documents which reveal that Interhandel is in fact a successor-in-interest to Farben. (Am. Compl. ¶ 11.) After sixteen years of pre-trial proceedings, the United States and Interhandel ultimately reached a settlement pursuant to which the United States returned to Interhandel 40-45% of the 1966 auction value of the Interhandel Assets.*fn3 (Id. ¶ 12.)

  Farben was ordered liquidated and in 1983, sued the predecessor of UBS in a German court to determine which entity rightfully owned the Interhandel Assets. (Def. Mem. at 8.) There, Farben claimed that Interhandel was merely a front for Farben. In 1988, the Frankfurt court of appeals rejected Farben's claim and the German supreme court denied a petition for certiorari. (Id.; Carroll Decl. Ex. H (attaching Higher Regional Court decision) and Carroll Decl. Exh. I (attaching denial of certiorari petition)).

  During the 1990's, there were several mass lawsuits brought by and on behalf of victims of Nazi persecution against industrial and financial firms concerning their World War II-era activities, resulting, in particular, in the Swiss World War II Class Action Settlement pending before this Court and the German Foundation Initiative. See, e.g., In re Holocaust Victims Assets Litig., Nos. 96-4849, 96-5161, 97-461, 105 F. Supp. 2d 139 (E.D.N.Y. 2000) (approving settlement) (Korman, J.). Victims of Farben's forced labor programs are eligible for compensation from these settlements. Id.

  Plaintiffs now claim that UBS wrongfully withheld assets that can be traced directly to Farben and that should have been made available to restitution programs or used in accordance with the directive of the Nuremberg tribunals and German courts. (Am. Compl. ¶ 16.) According to Plaintiffs, UBS concealed, misrepresented, altered and/or destroyed evidence of its predecessor's connection to Farben. (Id.) By order to show cause, Plaintiffs ...


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