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Rabbi Jacob Joseph School v. Allied Irish Banks

August 27, 2012

RABBI JACOB JOSEPH SCHOOL,
PLAINTIFF,
v.
ALLIED IRISH BANKS, P.L.C.,
DEFENDANT.



The opinion of the court was delivered by: Dora L. Irizarry, U.S. District Judge:

MEMORANDUM AND ORDER

Plaintiff Rabbi Jacob Joseph School ("RJJ") filed the instant action against defendant Allied Irish Banks, p.l.c. ("AIB"), asserting violations of English Law arising out of the purchase of a subordinated debt issued by AIB. AIB moves to dismiss the complaint pursuant to the doctrines of forum non conveniens and international comity. RJJ opposes the motion. For the reasons set forth below, AIB's motion to dismiss is granted.

BACKGROUND

RJJ is a religious school operating in Staten Island, New York. (Compl., Dkt. Entry 1-2, ¶ 1). AIB is a bank organized under the laws of Ireland. (Compl. ¶ 2; Decl. of Bryan Sheridan, Dkt. Entry 8 ("Sheridan Decl."), at ¶ 2).

In March 2010, AIB issued interesting bearing bonds with a nominal value of $177,096,000 (the "Notes"). (Compl. ¶ 5). The Notes were issued pursuant to an exchange offer, where AIB offered to exchange the Notes for bonds that it previously had issued in 2004 ("2004 Notes"). (Sheridan Decl. ¶ 6.) According to the Exchange Offer Memorandum issued in connection with the exchange, to participate in the exchange, each holder of the 2004 Notes had to represent that it was not a United States person or acting on behalf of a United States person.

(Id. Ex. 5, at 6-7.) The paying agents for the Notes were located in England, France, Luxembourg and Ireland. (Id. Ex. 6 at 6.) The Notes' terms were governed by English law, except that certain provisions relating to any wind-up of AIB were governed by Irish law. (Id. Ex. 7 at 28.) AIB also submitted itself to the jurisdiction of English courts for any disputes in connection with the Notes, and waived any argument that it would be an inconvenient forum. (Id.) The Notes were listed on the Irish Stock Exchange and any buyer of the Notes on the secondary market would have been required to purchase the Notes through clearing systems located in Belgium and Luxembourg. (Id. ¶ 11.) There were no procedures to settle and clear trades of the Notes in the United States. (Id.)

On or about November 16, 2010, RJJ purchased Notes with a face value of $600,000 on the secondary market through a third party broker. (Compl. ¶ 6; Decl. of Marvin Schick, Dkt. Entry 12 ("Schick Decl."), at ¶ 3). By late 2010, the financial crisis and the sovereign debt crisis in Europe left AIB and the Irish government facing worsening financial conditions, and they were in need of capital. (Sheridan Decl. ¶ 3.) To stabilize the Irish financial system, on November 28, 2010, the Irish government agreed to accept financial support from the European Union ("EU") and the International Monetary Fund ("IMF"), a portion of which was earmarked to provide capital to Irish banks, including AIB. (Id.)

On December 23, 2010, pursuant to the bailout from the EU and the IMF, as well as the subsequent domestic implementing legislation in Ireland, the Credit Institutions (Stabilisation) Act 2010 ("Act"), Ireland's High Court ordered AIB to issue billions of dollars of equity to a fund operated by the Irish government, effectively nationalizing the bank and injecting the bank with fresh capital. (Id. ¶ 4.) By July 2011, the Irish government had a 99.8% ownership interest in AIB. (Id.)

On April 14, 2011, pursuant to the Act, Ireland's High Court issued a Subordinated Liability Order ("SLO") amending the terms of AIB's subordinated debt, including the Notes. (Id. ¶ 12.) The Irish Minister for Finance announced that the SLO was intended to ensure that AIB's subordinated debt holders shared the burden of AIB's struggles and to reduce the amount of capital needed from Irish taxpayers. (Id. ¶ 12.)

Following the SLO, in May 2011, AIB announced its "intention to launch an offer to purchase for cash and a solicitation of consents" with respect to a number of outstanding securities, including the Notes (the "Offer/Solicitation"). (Compl. ¶ 7). In the Offer/Solicitation, AIB announced that it would repurchase the Notes at a discount of 25 cents per dollar of the Notes' face value, and, if any of the holders of the Notes did not accept this offer, it would cause the holders to consider an "Extraordinary Resolution" giving AIB the option to repurchase all of the Notes at a price of one cent for every $1,000 of the Notes' face value. (Id.) In other words, the Notes' investors were forced to accept 25 cents on the dollar, because otherwise the Notes essentially would be worthless. (Id. ¶ 9.) The Irish Minister for Finance explained that the Solicitation/Offer was made to ensure that AIB had the required capital and that holders of subordinated debt, such as the Notes, shared the burden with equity holders. (Sheridan Decl. ¶ 14.) On June 16, 2011, the Noteholders passed the Extraordinary Resolution at a meeting in London. (Id. ¶ 15; Compl. ¶ 8.)

RJJ did not sell its share of the Notes pursuant to the Offer/Solicitation. (Compl. ¶ 10.) Accordingly, following passage of the Extraordinary Resolution, AIB purported to purchase RJJ's Notes at a price of one cent for every $1,000 of the Notes' face value, which totaled six dollars. (Id. ¶ 11.)

RJJ brought this action challenging the validity of the Extraordinary Resolution. RJJ contends that, under English Law, AIB's purchase through the Extraordinary Resolution was: 1) invalid and ultra vires, as it allegedly is not within the power of AIB to amend the terms of the Notes; and 2) exercised in bad faith and was "oppressive and discriminatory" to the Noteholders who did not accept the Offer/Solicitation. (Id. ¶ 13). RJJ seeks a declaration that the Extraordinary Resolution was invalid and that it remains the holder of their Notes. (Id. ¶¶ 16-17.) RJJ also seeks damages. (Id. ¶¶ 18-19.)

AIB moved to dismiss the Complaint on forum non conveniens grounds. (See Mem. of Law in Supp. of Def.'s Mot. to Dismiss Compl., Dkt. Entry 6 ("AIB Mem.").)*fn1 AIB asserts that the deference to RJJ's choice of forum is overcome here because there is an adequate alternative forum, and all the public and private factors weigh in favor of dismissal. (See id. 7-18.) RJJ opposed the motion, asserting that the court has a strong interest in adjudicating the rights of a plaintiff located in this district and that it is not an inconvenient forum. (See Pl.'s Mem. in Opp'n to Def.'s Mot. to Dismiss, Dkt Entry 13 ("RJJ Opp'n"), 1-10.) RJJ also contends that AIB's motion is barred by the terms of the Trust Deed governing the rights and obligations of the Noteholders. (Id. 11-12.) For the reasons set forth below, AIB's motion is granted on forum non conveniens grounds and the action is dismissed.

DISCUSSION

I. Legal Standard -- Forum Non Conveniens

"The doctrine of forum non conveniens allows a district court to dismiss a case where the preferred venue is a foreign tribunal." Overseas Media, Inc. v. Skvortsov, 441 F. Supp. 2d 610, 614 (S.D.N.Y. 2006), aff'd, 277 F. App'x. 92 (2d Cir. 2008). The Second Circuit has applied a three-step ...


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