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Carlos P. Aguinaga, Maria Christina Aguinaga & D.A.S. Trading, Inc v. Ubs Ag & Ubs (Bahamas) Ltd

December 14, 2010


The opinion of the court was delivered by: Richard J. Holwell, District Judge:


Before the Court is defendants' UBS AG ("UBS") and UBS (Bahamas) Ltd. ("UBS Bahamas") (collectively the "UBS defendants") motion to dismiss [37] pursuant to Federal Rules of Civil Procedure 17(a) and 19, and pursuant to certain forum selection clauses. In 2006, Global Management Enterprises, Ltd. ("Global") opened an account with UBS Bahamas. D.A.S. Trading, Inc. ("DAS") was the investment manager for that account. In 2009, DAS signed a collateral security agreement ("CSA") with UBS Bahamas pledging certain property owned by its sole shareholder Carlos P. Aguinaga as collateral for a loan Global owed to UBS Bahamas (the "Global loan"). Plaintiffs allege that UBS Bahamas undertook unauthorized transactions regarding, and applied certain unauthorized fees and expenses to, the Global loan, unlawfully increasing the balance Global owed on that loan. The UBS defendants contend that Global, who is not party to this litigation, is the real party in interest; that Global is an indispensable but diversity-spoiling party; and that The Bahamas is the exclusive forum for any litigation arising out of the Global loan. For the reasons stated below, the Court finds that Global is the real party in interest for plaintiffs' second, third, fourth, and fifth claims; but that plaintiffs are the real parties in interest for their first claim; that Global is not a required party under Rule 19(a) for plaintiffs' first claim; and that The Bahamas is not the exclusive forum for plaintiffs' first claim. The Court therefore GRANTS in part and DENIES in part the UBS defendants' motion.


The following facts are taken from the second amended complaint ("SAC") and the relevant submissions of the parties.*fn1 These facts are taken as true for the purposes of the present motion.

A. The Parties

The plaintiffs in this case are Carlos P. Aguinaga ("Aguinaga"), Maria Christina Aguinaga (collectively the "Aguinagas"), and DAS. The Aguinagas are citizens of Brazil and New York. (SAC ¶ 1.) Aguinaga is also the sole shareholder of DAS. (Id. ¶ 11.) DAS is a Delaware corporation with its principal place of business in New York. (Id. ¶ 4.) DAS is an investment management company and managed a portfolio owned by Global and held by UBS Bahamas. (Id. ¶¶ 12-13.) That portfolio consisted primarily of shares of a company called Ideiasnet, S.A. ("Ideiasnet"). (Id. ¶ 14.)

Defendants are UBS and UBS Bahamas. UBS is a Swiss corporation with its principal place of business in Switzerland and offices in New York. (Id. ¶ 5.) UBS Bahamas, a wholly-owned subsidiary of UBS, is a Swiss corporation with its principal place of business in The Bahamas and that does business in New York. (Id. ¶ 6.)

Several entities involved in plaintiffs' factual allegations are missing from the litigation. First is Global. Global is a British Virgin Islands corporation with its principal place of business in the British Virgin Islands. (Id. ¶ 3.) Global's sole director is another British Virgin Islands company called H.T.M. Services, Ltd. ("HTM"). (Def.'s Mem. at 2.) Also involved is Ideiasnet. Ideiasnet is a Brazilian company whose stock trades on BM&F Bovespa, the Sao Paolo, Brazil, stock exchange. (Id. at 3.) During the relevant period Aguinaga was the Chairman of the Board of Ideiasnet. (SAC ¶ 14.)

B. DAS Becomes Global's Investment Manager

On November 15, 2002, DAS and Global executed an "Investment Management Agreement." (Aguinaga Decl. attach. 1 ("IMA") at 1.) Pursuant to that agreement, DAS was "for all purposes herein . . . deemed to be an independent contractor and shall except as expressly provided herein have no authority to act for or represent [Global] in any way or otherwise be deemed an agent of [Global]." (Id. § 1.2.) All assets managed by DAS were "held by [DAS] in [Global's] name." (Id. § 3.) DAS took an annual fee of one percent of Global's assets calculated on December 15 of each year. (Aguinaga Decl. attach. 1 at 9.)*fn2 DAS would also not be liable, "in the absence of negligence, willful default or fraud on its part . . . for any act or omission in the course of or in connection with the service rendered by it hereunder or for any decline in the price or value of income from any of the assets of [Global]." (IMA § 6.)

DAS "agree[d] to assume the obligations and responsibilities set forth [in the IMA]." (Id. § 1.1). Those included trading in securities; managing investments and cash; keeping Global's records under review; providing Global with account statements; accounting to Global for income received and rights conferred regarding Global's assets, and for any transaction enacted on Global's behalf; advising Global regarding investment trends; managing Global's bank and brokerage accounts; and borrowing money on behalf of Global and securing those loans with Global's assets. (Id. §§ 2.1(a)-(h), 2.2, 2.3.) DAS was expressly prohibited, however, from making any withdrawals from any account, or "transact[ing] with related parties." (Id. § 2.4(a)-(c).) The IMA did not expressly provide DAS any right to bring suit on Global's behalf, or any ability to effect Global's litigation rights generally.

C. Global Opens an Account with UBS Bahamas

Global opened an account with UBS Bahamas on August 9, 2006. (Dexter Decl.Ex. A ("Account Application") at 1.) In doing so, Global executed several agreements with UBS Bahamas. The first, UBS Bahamas's "Application for the Opening of an Account," lists Global as the "Account Holder." (Id.) The application contained several "General Conditions" including one entitled "No trusts" which states:

Where a client is acting as a trustee or in any other fiduciary capacity or where the rights of the client against the Bank are subject to any encumbrance, equity or third party interest, then, notwithstanding any actual notice of the same to the Bank, the Bank shall be entitled to disregard the same and to treat the client as absolute beneficial and unencumbered owner subject to any written directions from the client to the Bank properly made in accordance with these regulations and the relevant account opening agreement. This provision and all other provisions of these Conditions and the relevant account opening agreement shall be binding upon all third parties claiming an interest in the account. (Id. ¶ 11.) The agreement also allowed UBS Bahamas to adjust interest rates, exchange rates, and commissions (Id. ¶ 13); and required Global to not hold liable and to indemnify UBS Bahamas for losses, liabilities, and expenses incurred "as a result of the relationship," other than those incurred through UBS Bahamas's own fraud. (Id. ¶ 14.) The agreement was governed by the laws of The Bahamas and made The Bahamas the exclusive forum for all proceedings against UBS Bahamas brought thereunder. (Id. ¶ 15.)*fn3

Global and UBS Bahamas also executed a "Letter of Lien and Set-off." (Dexter Decl. Ex. B ("LOL") at 1, 4.) By this agreement, UBS Bahamas was entitled to take a lien on all securities held in Global's account as security for any loan owed by Global to UBS Bahamas. (Id. ¶ 1.) UBS was also entitled to sell those securities and apply the proceeds to any such loans. (Id. ¶ 8.a.) The parties also executed a third agreement entitled "Basic Agreement for Collateral Loans," (Dexter Decl. Ex. C ("CLA") at 1), setting forth further loan conditions. Both agreements were governed by the laws of The ...

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