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In re Citigroup Inc. Securities Litigation

United States District Court, S.D. New York

February 6, 2014

CITIGROUP, INC., SANFORD I. WEILL, CHARLES O. PRINCE, III, ROBERT E. RUBIN, and VIKRAM PANDIT, Defendants. RENTOKIL-INITIAL PENSION SCHEME, Individually and on Behalf of All Others This document relates to: Similarly Situated, Plaintiff, No. 12 Civ. 6653 (SHS)


SIDNEY H. STEIN, District Judge.

This litigation features a United Kingdom-based plaintiff suing New York-based defendants for alleged misrepresentations in connection with Euro Notes promoted in England and listed on Luxembourg and Copenhagen stock exchanges. Defendants have moved to dismiss this action on forum non conveniens grounds; that is, defendants urge that this action should be dismissed on the grounds that the courts of the United Kingdom offer a more appropriate forum for the litigation of the parties' dispute. Because the U.K. courts represent an adequate forum for this dispute, and because the United Kingdom has a greater interest in the dispute than does New York, the Court grants defendants' motion to dismiss this action.


Plaintiff Rentokil-Initial Pension Scheme brings this putative class action on behalf of itself and the other purchasers of 21 medium-term Euro Notes issued and sold by defendant Citigroup, Inc., between October 12, 2005, and February 25, 2009. Plaintiff is a United Kingdom-based employee pension plan for a United Kingdom-based business services firm, Rentokil Initial plc. (First Am. Class Action Compl., Dkt. No. 39, at ¶ 21.) Defendant Citigroup is a financial services corporation incorporated in Delaware with its principal place of business in New York. ( Id. ¶ 22.) The four individual defendants-Sanford I. Weill, Charles O. Prince, III, Robert E. Rubin, and Vikram Pandit-are all former directors or officers of Citigroup who reside in New York. ( Id. ¶¶ 23-26.)

In its First Amended Class Action Complaint ("FAC"), Rentokil alleges that defendants intentionally misled investors by downplaying Citigroup's exposure to various investment risks. In particular, plaintiff accuses Citigroup of: (1) failing to disclose the full extent of its vulnerability to the risks of residential mortgage-backed securities ("RMBSs") and of collateralized debt obligations ("CDOs") that were backed by RMBSs ( see, e.g., FAC ¶¶ 7-8); (2) failing to maintain adequate loan loss reserves in light of the poor and deteriorating quality of its loan portfolio ( see, e.g., id. ¶ 8); (3) claiming to be "well-capitalized" when, in reality, Citigroup's borrowing exceeded its market capitalization by "astonishing" amounts ( id. ¶ 10); (4) omitting from its balance sheet until November 2007 assets held in structured investment vehicles ("SIVs"), which included subprime RMBSs, CDOs, and commercial mortgagebacked securities ( see, e.g., id. ¶ 11); (5) misrepresenting the quality of those SIVs after disclosing them in November 2007 ( see, e.g., id. ); and (6) violating disclosure rules of the U.S. Securities and Exchange Commission ("SEC") and Generally Accepted Accounting Principles in its financial statements ( see, e.g., id. ¶ 12).

According to the FAC, those misrepresentations were part of the offering documents for the 21 Euro Notes underlying this action, because Citigroup incorporated its misleading disclosures to the SEC into those offering documents. ( Id. ¶¶ 27, 57.) Citigroup issued the Euro Notes, along with three related Base Prospectuses, in the European Economic Area. ( Id. ¶ 58.) According to the FAC, the Euro Notes and offering documents were therefore governed by the European Parliament's "Prospectus Directive, " which delegates regulatory oversight for securities to European Union member states. ( Id. ) Under this European Parliament legislation, Luxembourg regulators were responsible for approving the Euro Notes and the accompanying prospectuses. ( Id. ) Because the United Kingdom is a member of the European Union, it recognizes offering documents that have been approved by a fellow European Union member state under the Prospectus Directive. ( See Thewes Decl., Dkt. No. 32, at ¶ 10; Hubble Decl., Dkt. No. 33, at ¶ 60.)

Each Euro Note was listed on either the Luxembourg Stock Exchange or the Copenhagen Stock Exchange. (FAC ¶ 58.) The Euro Notes were denominated in three currencies: Euros, Pounds Sterling, and Danish Kroner. ( Id. ¶ 2.) Even after their approval in Luxembourg and recognition in the other European Union member states, the Euro Notes were subject to ongoing obligations embodied in the European Union's Transparency Directive and Market Abuse Directive, which are incorporated into U.K. law through the U.K. Listing Rules. (Moore Decl., Dkt. No. 28, at ¶ 40(m).)

Plaintiff, allegedly induced by the misrepresentations in Citigroup's offering documents, invested in the medium-term Euro Notes in 2005 through 2009. ( Id. ¶¶ 21, 171.) In early 2009, according to the FAC, investors learned of Citigroup's financial woes. ( Id. ¶¶ 16, 172.) As a consequence, the FAC alleges, "the previously hidden risk inherent in [the Euro Notes] began to materialize, and investors feared the possibility of default by Citigroup." ( Id. ¶ 173.) In the same time frame, the Euro Notes plummeted in value, losing $9 billion from an aggregate face value of $25 billion. ( Id. ¶ 172; see also id. ¶¶ 15-16.)

Rentokil filed its Class Action Complaint, which alleged solely violations of U.K. law, in August 2012 and filed the FAC approximately nine months later. The FAC contains the same substantive allegations as the original Class Action Complaint, but, rather than asserting solely violations of U.K. law, it asserts violations only of the Luxembourg Civil Code. ( See FAC ¶¶ 183, 190, 201, 211.)

Defendants have now moved to dismiss the FAC under the doctrine of forum non conveniens. Their motion also offers two additional, alternative theories for dismissal, namely that (1) Luxembourg law does not apply to this dispute and (2) plaintiff's claims are time-barred.


A. The doctrine of forum non conveniens balances public and private interests.

The doctrine of forum non conveniens provides that a court "may decline to exercise its jurisdiction, even though the court has jurisdiction and venue, when it appears that the convenience of the parties and the court and the interests of justice indicate that the action should be tried in another forum." Piper Aircraft Co. v. Reyno, 454 U.S. 235, 250 (1981). A district court applies federal law in determining whether to dismiss an action on the basis of forum non conveniens. See Blanco v. Banco Indus. De Venezuela, S.A., 997 F.2d 974, 982 (2d Cir. 1993); cf. Am. Dredging Co. v. Miller, 510 U.S. 443, 449 n.2 (1994).

The ultimate question of whether to dismiss for forum non conveniens "requires great flexibility, " Scottish Air Int'l, Inc. v. British Caledonian Grp., PLC, 81 F.3d 1224, 1234 (2d Cir. 1996), with "each case turn[ing] on its facts, " Piper Aircraft Co., 454 U.S. at 249. "The decision to dismiss a case on forum non conveniens grounds lies wholly within the broad discretion of the district court." Iragorri v. United Techs. Corp., 274 F.3d 65, 72 (2d Cir. 2001) (en banc); s ee Piper Aircraft Co., 454 U.S. at 235. Nonetheless, several required analytical steps guide the exercise of the Court's discretion.

In the first analytical step, the Court decides what amount of deference is owed the plaintiff's choice of forum. See Iragorri, 274 F.3d at 73. The Court next determines whether an adequate alternative forum exists. Id. Third, if an adequate alternative forum exists, the Court balances the public and private interest factors enumerated by the United States Supreme Court in ...

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