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United States District Court, S.D. New York

August 5, 2005.

In re PARMALAT SECURITIES LITIGATION. This document relates to: 05 Civ. 4015. ENRICO BONDI, Plaintiff,

The opinion of the court was delivered by: LEWIS KAPLAN, District Judge


Defendant Banc of America Securities Limited ("BASL")*fn1 moves to dismiss this action for lack of personal jurisdiction.*fn2 The case is described in detail in a separate opinion issued today (the "Main Opinion"), familiarity with which is assumed.


  The following facts are taken from the complaint and presumed true.

  BASL is a limited liability company organized under the laws of the United Kingdom with its principal place of business in London. It is a wholly-owned subsidiary of Bank of America Corporation.*fn3 Like all of the BoA*fn4 defendants, BASL's "finances, policies and business practices . . . were dominated, controlled and directed by the Bank of America entities and their officers and employees headquartered in North Carolina."*fn5

  BoA maintains an "integrated global organization."*fn6 The Bank's website states that BoA's Global Corporate and Investment Banking group provides a broad range of financial services through a network of offices in 31 countries.*fn7 BoA does not break down the revenue from Global Corporate and Investment Banking by business unit, but reports the revenue as a consolidated figure.*fn8

  BASL played supporting roles — roles that the complaint does not always spell out clearly — in several of the international financial transactions at issue, in particular the December 1997 $80 million credit arrangement with a Venezuelan Parmalat subsidiary,*fn9 the September 1998 $100 million credit agreement with a Brazilian Parmalat subsidiary,*fn10 the October 1999 $25 million agreement with a Mexican Parmalat subsidiary,*fn11 and the December 2001 $80 million loan.*fn12

  BoA employee Luca Sala devised and helped implement some of the transactions at issue,*fn13 including the September 1998 $80 million credit agreement with the Venezuelan subsidiary,*fn14 the $300 million equity investment in Administracao,*fn15 and the December 2001 $80 million loan.*fn16 Sala "received the support of" and "was supervised by" Bank of America employees in a number of locations, including North Carolina, New York, Chicago, and London.*fn17 There is, however, no indication that Sala worked for BASL, as opposed to some other BoA entity.

  More generally, "the conduct, transactions, acts and omissions that form the basis of th[e] complaint were structured, overseen, implemented and monitored by . . . the Bank of American [sic] entities and their officers and employees headquartered in North Carolina."*fn18 The transactions were "approved at the top levels of Bank of America and required the coordination of" BoA management committees in locations throughout the world, including North Carolina, New York, England, and Italy.*fn19

  The transactions in question allegedly had effects in North Carolina. Investors in North Carolina purchased Parmalat's securities and were harmed by the frauds.*fn20 Furthermore, the complaint alleges that BoA's conduct "has substantially affected Parmalat's operations in North Carolina, including without limitation its dairy operations and its ability to conduct financial operations in North Carolina."*fn21 Discussion

  A. Standards

  On a motion to dismiss for lack of personal jurisdiction, the plaintiff bears the burden of showing jurisdiction. The applicable standard depends upon the procedural context in which the jurisdictional challenge is raised.*fn22 Where, as here, no discovery has taken place, the plaintiff need make only a prima facie showing of jurisdiction "by pleading in good faith, see Fed.R.Civ.P. 11, legally sufficient allegations of jurisdiction."*fn23 If affidavits are submitted, the Court is to resolve factual disputes in the plaintiff's favor.*fn24

  BASL has submitted an affidavit stating in substance that it has no office or property in North Carolina, never has filed documents with the Office of the Secretary of State of North Carolina, and complies with United Kingdom regulatory requirements regarding corporate governance "by having an independent Board of Directors that establishes the approval process for all business it conducts."*fn25 The affidavit does not contradict the allegations in the complaint.

  Analysis of personal jurisdiction requires a two-step inquiry. A court first must determine whether the law of the state in which the action was commenced would permit the exercise of personal jurisdiction by courts of general jurisdiction in that state. Second, the court must determine whether the exercise of jurisdiction in such a case would be permissible under the Due Process Clause of the Fourteenth Amendment.*fn26

  This action was filed in the Western District of North Carolina and then transferred here for pretrial proceedings by the Judicial Panel on Multidistrict Litigation. The relevant state law therefore is that of North Carolina, not New York.

  The parties assume that the allegations against BASL satisfy the requirements of North Carolina's long-arm statute, which the North Carolina courts have held should be construed to extend to the fullest extent permitted by the Fourteenth Amendment's Due Process Clause.*fn27 The only issue therefore is whether a North Carolina court's exercise of personal jurisdiction over BASL would comport with due process.*fn28

  The question whether due process permits an exercise of jurisdiction requires "an analysis consisting of two components: the `minimum contacts' test and the `reasonableness' inquiry."*fn29 The former looks to "whether the defendant has certain minimum contacts [with the forum] . . . such that the maintenance of the suit does not offend traditional notions of fair play and substantial justice."*fn30 The latter asks "whether it is reasonable under the circumstances of the particular case" to assert personal jurisdiction.*fn31

  B. Minimum Contacts

  Contacts with the forum state may confer two types of jurisdiction — specific and general.*fn32 Specific jurisdiction exists when a state "exercises personal jurisdiction over a defendant in a suit arising out of or related to the defendant's contacts with the forum."*fn33 General jurisdiction, on the other hand, "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."*fn34 The plaintiff argues that the complaint alleges facts that establish both specific and general jurisdiction. 1. Specific Jurisdiction

  Minimum contacts for purposes of specific jurisdiction exist "where the defendant `purposefully availed' itself of the privilege of doing business in the forum and could foresee being `haled into court' there."*fn35 Close examination of the complaint reveals that the only North Carolina contact in connection with the events giving rise to this suit is that the transactions in which BASL played a part were designed, overseen, and coordinated by BoA entities and individuals in North Carolina. In other words, BASL at most accepted instructions from North Carolina in connection with the four transactions to which it was a party.

  This is insufficient. "Jurisdiction over a parent corporation," the Supreme Court has noted, does not "automatically establish jurisdiction over a wholly owned subsidiary. Each defendant's contacts with the forum State must be assessed individually."*fn36 In this case, there is no indication that BASL, as opposed to its parent, conducted any business in North Carolina in connection with the events at issue, purposefully directed its activities at North Carolina residents, or otherwise availed itself of the privileges of North Carolina's laws. The plaintiff's statement that BASL "took `direct actions to create a connection with North Carolina' by participating as agent and as the recipient of a guarantee in transactions that were conducted by a North Carolina resident (its parent corporation) and which originated from . . . North Carolina"*fn37 is unpersuasive and not supported by the case law that he cites.*fn38 Accepting instructions from persons based in North Carolina, without more, is hardly equivalent, as the plaintiff seemingly would have it, to giving instructions to persons based in North Carolina. It is not clear whether the latter circumstance would suffice for specific jurisdiction in this case, but the former does not.

  The allegations of injury suffered in North Carolina also are insufficient. The alleged injury to investors is irrelevant. The Main Opinion dismissed this action insofar as it seeks recovery on behalf of investors. The hypothesized and entirely unspecified injury to Parmalat's North Carolina operations also is irrelevant. The plaintiff seeks recovery on behalf of the foreign entities in Extraordinary Administration in Italy, not Parmalat's United States subsidiaries. It is the United States subsidiaries, not the foreign ones, that are alleged to distribute products in North Carolina.*fn39 While it is possible to imagine a connection between the financial woes of the Parmalat Debtors overseas and the financial health of any United States subsidiaries with operations in North Carolina, no such connection is alleged, let alone specified, in the complaint.

  2. General Jurisdiction

  A state may assert general jurisdiction over a corporation if the corporation has maintained "continuous and systematic general business contacts" with that forum.*fn40 Bondi seeks to establish such jurisdiction based on the allegations that BASL is dominated and controlled by BoA's North Carolina headquarters and that BoA operates an integrated global organization of which BASL is a part.

  In weighing the sufficiency of these allegations, the Court is guided by the Supreme Court's leading decision on continuous and systematic general business contacts, Perkins v. Benguet Consolidated Mining Co.*fn41 In that case, the defendant company's mining properties all were located in the Philippine Islands. During the Japanese occupation of the Philippines, however, the company's president, who was also its general manager and principal stockholder, returned home to Ohio. There he ran the company's business, kept its files, conducted correspondence, held directors' meetings, drew checks in favor of himself and his secretaries, and dispatched funds to purchase machinery for the rehabilitation of the properties in the Philippines.*fn42 The Supreme Court found that the corporation's conduct of "a continuous and systematic, but limited, part of its general business"*fn43 in Ohio meant that an Ohio court's exercise of jurisdiction over the company did not offend the Fourteenth Amendment.

  Drawing all reasonable inferences in the plaintiff's favor, this case may come within Perkins. If true, the allegations of dominance and control over BASL by BoA's North Carolina headquarters and of a lack of distinction among BoA's worldwide units suggest that a "continuous and systematic, but limited, part of [BASL's] general business" — namely, management and supervision of the enterprise — has been conducted from BoA's headquarters in North Carolina.*fn44 As the Court cannot exclude the possibility that the plaintiff could prove facts under this complaint that would bring BASL within the rationale of Perkins, the continuous and systematic conduct prong is satisfied as a matter of pleading sufficiency.

  C. Reasonableness

  If the plaintiff makes the requisite showing of contacts, the exercise of jurisdiction "may be defeated where the defendant presents `a compelling case that the presence of some other considerations would render jurisdiction unreasonable.'"*fn45 At least the following five factors enter into the reasonableness inquiry:

"(1) the burden that the exercise of jurisdiction will impose on the defendant; (2) the interests of the forum state in adjudicating the case; (3) the plaintiff's interest in obtaining convenient and effective relief; (4) the interstate judicial system's interest in obtaining the most efficient resolution of the controversy; and (5) the shared interest of the states in furthering substantive social policies."*fn46
  Assuming the existence of the requisite contacts, none of these factors would require dismissal. BASL would suffer no material burden from this litigation, assuming the correctness of Bondi's theory that BASL is merely an alter ego or extension of other BoA entities. North Carolina has at least some interest in adjudicating allegations that a major North Carolina-based financial institution — of which, by hypothesis, BASL is but an extension — assisted fraud and related wrongdoing. Bondi's interest in obtaining convenient and effective relief, and the judicial system's interest in obtaining efficient resolution, both point in favor of retaining BASL because it allegedly played a role in some of the same transactions on which the allegations against the other BoA defendants are based. It would be highly inefficient for Bondi to proceed separately against BASL. Finally, the shared interest of the states in furthering substantive social policies is not a major issue here, except that, as discussed above, North Carolina has some interest in adjudicating this dispute. Conclusion

  As the complaint alleges facts which, construed broadly in the plaintiff's favor, establish personal jurisdiction over BASL, the motion to dismiss is denied — albeit without prejudice to renewal upon a factual record fully developed with respect to the factors bearing on the issue of personal jurisdiction.


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