Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

FIA Leveraged Fund Ltd. v. Grant Thornton LLP

Supreme Court of New York, First Department

May 16, 2017

FIA Leveraged Fund Ltd., et al., Plaintiffs-Appellants,
v.
Grant Thornton LLP, Defendant-Respondent, EisnerAmper LLP, et al., Defendants. Massachusetts Bay Transportation Authority Retirement Fund, et al., Plaintiffs-Appellants-Respondents,
v.
Citco Fund Services (Cayman Islands) Ltd., Defendant-Respondent, Citco Fund Services (Suisse) SA, Defendant, Citco Group Ltd., et al., Defendants-Respondents-Appellants.

          Reid Collins & Tsai LLP, New York (Rachel S. Fleishman of counsel), for appellants and appellants-respondents.

          Paul, Weiss, Rifkind, Wharton & Garrison LLP, New York (Robert N. Kravitz of counsel), for Citco Fund Services (Cayman Islands) Ltd., respondent, and respondents-appellants.

          Morrison & Foerster LLP, New York (Grant J. Esposito of counsel), for Grant Thornton LLP, respondent.

          Tom, J.P., Acosta, Richter, Kahn, JJ.

         Judgment, Supreme Court, New York County (Eileen Bransten, J.), entered May 12, 2016, to the extent appealed from as limited by the briefs, dismissing the complaint as against defendant Grant Thornton LLP, unanimously affirmed without costs. Appeal from order, same court and Justice, entered January 20, 2016, which, inter alia, granted Grant Thornton's motion to dismiss the complaint as against it pursuant to CPLR 3211, unanimously dismissed, without costs, as subsumed in the appeal from the judgment. Orders, same court and Justice, entered May 10, 2016, which, to the extent appealed from as limited by the briefs, denied the motions of defendants Citco Trading, Inc., Citco Global Custody (N.A.) N.V., Citco Banking Corp., SFT Bank N.V., Ermanno Unternaehrer, and Citco Group Limited to dismiss the complaint pursuant to CPLR 3211(a)(8), and granted all defendants' motions to dismiss the first through fifteenth causes of action pursuant to CPLR 3211(a)(1) and (7), unanimously modified, on the law, to deny Citco Fund Services (Cayman Islands) Ltd.'s (Citco Cayman) motion to dismiss the eleventh and twelfth causes of action as against it, to grant Citco Global's motion to dismiss for lack of personal jurisdiction, to deny Unternaehrer's motion to dismiss the eighth cause of action, and to deny Citco Cayman's, Citco Trading, Citco Bank and SFT's, and Citco Group's motions to dismiss the fifteenth cause of action as against them, and otherwise affirmed, without costs.

         Citco Cayman does not contest New York's jurisdiction over it. However, Citco Group (Citco Cayman's parent) is not subject to New York jurisdiction simply because Citco Cayman is (see e.g. FIMBank P.L.C. v Woori Fin. Holdings Co. Ltd., 104 A.D.3d 602');">104 A.D.3d 602 [1st Dept 2013]; Richbell Info. Servs. v Jupiter Partners, 309 A.D.2d 288, 308 [1st Dept 2003]). Plaintiffs failed to satisfy the four factors set out in Volkswagenwerk AG. v Beech Aircraft Corp. (751 F.2d 117 [2d Cir 1984]), which we have adopted (see e.g. FIMBank, 104 A.D.3d at 603). For example, Citco Group's subsidiaries are not financially dependent on it; rather, since Citco Group is a holding company, it is financially dependent on its subsidiaries (see Porter v LSB Indus., 192 A.D.2d 205, 214 [4th Dept 1993]).

         If Citco Cayman's New York contacts cannot be imputed to its parent, a fortiori, they cannot be imputed to its siblings, Citco Trading, Citco Global, Citco Bank, and SFT (see Matter of Ski Train Fire in Kaprun, Austria on Nov. 11, 2000, 230 F.Supp.2d 403, 409 n 9 [SD NY 2002]).

         Unternaehrer, who is allegedly a high-ranking Citco executive (plaintiffs use "Citco" to refer to all Citco defendants), is a defendant in four causes of action relating to something the complaint calls the FIP Transaction. In opposition to defendants' motions to dismiss, plaintiffs submitted emails between Unternaehrer, on the one hand, and nonparty Alphonse Fletcher Jr. (Mr. Fletcher), the investment manager of those plaintiffs that are hedge funds, and an employee of nonparty Fletcher Asset Management (FAM), Mr. Fletcher's New York-based company, on the other, discussing how to structure the FIP Transaction, and a wire transfer instruction showing that Unternaehrer received payment in the FIP Transaction via a transfer to a New York bank. This is sufficient for specific personal jurisdiction under CPLR 302(a)(1) (see e.g. Licci v Lebanese Can. Bank, SAL, 20 N.Y.3d 327, 330-332, 339-341 [2012]; C. Mahendra [NY], LLC v National Gold & Diamond Ctr., Inc., 125 A.D.3d 454, 457 [1st Dept 2015]). In light of Unternaehrer's numerous other contacts with New York (e.g., leasing New York apartments from 1996 through 2005, meeting with Mr. Fletcher and other FAM employees in New York on many occasions between January 1999 and March 2007, and attending a FAM event in September 2007), it does not violate due process to exercise jurisdiction over him (see generally Rushaid v Pictet & Cie, 28 N.Y.3d 316, 330 [2016]).

         Plaintiffs established that Unternaehrer was acting as the agent of Citco Trading, Citco Bank, and SFT, and therefore that New York can exercise jurisdiction over them. Plaintiffs showed that Unternaehrer "engaged in purposeful activities in this State in relation to [the] transaction [sued upon] for the benefit of and with the knowledge and consent of [these other] defendants and that they exercised some control over [him] in the matter" (Kreutter v McFadden Oil Corp., 71 N.Y.2d 460, 467 [1988]; see generally New Media Holding Co. LLC v Kagalovsky, 97 A.D.3d 463, 463-464 [1st Dept 2012]). Although Citco Trading's sale of nonparty Richcourt Holding Inc. (a British Virgin Islands company) was mostly conducted from London and closed in Monaco, Unternaehrer admitted that he had some email and telephone communications with representatives of Fletcher (Mr. Fletcher and his various companies) during the sales process. Indeed, Unternaehrer was both the manager for Citco's relationship with Fletcher and the Managing Director/CEO of Richcourt Holding and a director of six of its subsidiaries.

         The claims against Citco Bank and SFT arise out of loans they made to plaintiff FIA Leveraged Fund Ltd. (Leveraged) and the manner in which those loans were repaid. The complaint alleges that Citco Bank and SFT "communicated regularly with FAM and [Mr.] Fletcher in New York via e-mail, phone, and mail regarding Leveraged, the loans to Leveraged, and repayment of the loans. The Citco Lender Defendants directed... their demands for repayment... to [Mr.] Fletcher and FAM at their offices at 48 Wall Street." Neither Citco Bank nor SFT denied this in the affirmations they submitted in support of their motions to dismiss. In addition, Unternaehrer admitted that he had communications with Fletcher representatives about the loans.

         New York does not have specific personal jurisdiction, however, over Citco Global. Citco Global's involvement in this case is that it provided consents on behalf of non-Series N investors in Leveraged to subordinate their interests to those of Series N so that three nonparty Louisiana pension funds would invest in Series N in 2008. In opposition to defendants' motion, plaintiffs submitted two documents from 2009. Neither has anything to do with the consents, and neither shows that Unternaehrer engaged in purposeful activity in New York in connection with the Citco Global consents.

         Plaintiffs allege that Citco Group is the alter ego of other Citco companies that actually committed the wrongdoing. Although the complaint alleges in conclusory terms that Unternaehrer acted as the agent of all of the named Citco defendants, we decline to find that he acted as Citco Group's agent. That would make it too easy for plaintiffs to get around the parent-subsidiary test for jurisdiction.

         The remaining possibility for obtaining jurisdiction over defendants-appellants is conspiracy jurisdiction (see e.g. Lawati v Montague Morgan Slade Ltd., 102 A.D.3d 427');">102 A.D.3d 427 [1st Dept 2013]). Defendants contend that the complaint does not allege an agreement by the Citco defendants to participate in a conspiracy to defraud Massachusetts Bay Transportation Authority Retirement Fund (MBTARF) and that MBTARF failed to identify an overt act. However, we find that the complaint contains factual allegations from which such an agreement can be inferred (see Abrahami v UPC Constr. Co., 176 A.D.2d 180');">176 A.D.2d 180 [1st Dept 1991]). It also alleges an overt act, namely, that alleged co-conspirators Mr. Fletcher and FAM took $7.1 million of MBTARF's investment in nonparty Fletcher Fixed Income Alpha Fund, Ltd. (Alpha) and used it in violation of Alpha's offering memorandum as partial repayment of Leveraged's loan to Citco Bank and SFT (see Weinberg v Mendelow, 113 A.D.3d 485, 487 [1st Dept 2014]).

         Turning to the additional requirements for conspiracy jurisdiction (see Lawati, 102 A.D.3d at 428), we must examine Leveraged's and Fletcher Income Arbitrage Fund Ltd. (Arbitrage)'s conspiracy claims with respect to personal jurisdiction. Leveraged and Arbitrage's conspiracy claims allege that Mr. Fletcher and FAM fraudulently transferred cash from plaintiff Fletcher International, Ltd. to Unternaehrer in the FIP Transaction. The transfer was made by instructing SFT to transfer money from FIP's account to Citco Bank's account at HSBC New York, for further credit to SFT, for further credit to Unternaehrer. Using a New York bank account for a fraudulent ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.