Stevenson v. Thornburgh

Background

Gregory A. Stevenson and Nicole Lawtone-Bowles filed two actions on behalf of a proposed class of Credit Suisse Group AG shareholders. The actions were consolidated, and Stevenson’s amended complaint became the operative pleading. The plaintiffs alleged that Credit Suisse officers, directors, U.S.-based subsidiaries, KPMG LLP, and KPMG-related individuals participated in years of mismanagement and misconduct that caused Credit Suisse’s share value to decline from $33.84 to $2.01 during the alleged class period.

The complaint asserted three causes of action. Count One alleged that the defendants violated provisions of the Swiss Code of Obligations governing corporate management, directors’ duties, and auditor liability. Count Two alleged a substantive civil claim under the Racketeer Influenced and Corrupt Organizations Act (RICO), based on alleged predicate acts including mail fraud, wire fraud, bank fraud, visa-related fraud, and money laundering. Count Three alleged a conspiracy to violate RICO. The defendants filed several motions to dismiss, including motions based on failure to state a claim, lack of personal jurisdiction, and the doctrine allowing dismissal when another country is a more appropriate forum.

RICO Claims

Judge McMahon dismissed Counts Two and Three under Federal Rule of Civil Procedure 12(b)(6), which permits dismissal when a complaint does not adequately state a legal claim. First, the court held that the plaintiffs lacked standing to bring their RICO claims. Their alleged injury was the decline in the value of Credit Suisse stock caused by alleged corporate mismanagement. The court ruled that this was an injury to the corporation, shared by its shareholders, and therefore could generally be pursued only through a derivative action rather than an individual or class RICO action.

The court rejected the plaintiffs’ argument that Swiss law gave them a separate injury or independent duty sufficient to avoid that rule. It concluded that the duties described under the Swiss Code of Obligations were owed both to the corporation and to its shareholders and did not make the decline in share value a separate shareholder injury. The court also noted that all proposed class members alleged the same type of loss, which did not satisfy the exception for an injury distinct from the corporation’s injury.

The court gave additional independent reasons for dismissing the RICO claims. It held that the plaintiffs had not plausibly alleged a RICO enterprise because the complaint did not adequately describe the relationships among the alleged members, contained contradictory descriptions of the enterprise, and did not identify a common purpose supported by specific facts. The court further held that the allegations did not adequately connect KPMG LLP or the KPMG RICO defendants to racketeering acts. In particular, the court found that the complaint improperly relied on generalized references to prior criminal proceedings and did not plead fraud with the particularity required by Rule 9(b). It also concluded that the alleged “Steal the List” conduct could not serve as the required wire-fraud predicate because controlling precedent held that the regulatory information involved was not property for purposes of the federal wire-fraud statute.

Finally, the court held that the Private Securities Litigation Reform Act barred the RICO claims to the extent they relied on conduct that would have been actionable as securities fraud. The court reasoned that the complaint’s theory centered on alleged concealment of Credit Suisse’s mismanagement and resulting losses from holding or selling securities. Because the substantive RICO claim failed, the RICO conspiracy claim in Count Three also failed.

Swiss-Law Claim and Forum

The court treated Count One separately. It did not decide the disputed merits questions under Swiss law, including whether the plaintiffs stated a viable claim against KPMG LLP or particular KPMG-related defendants. Instead, it applied the doctrine of forum non conveniens, which allows a court to dismiss a case when another available forum is substantially more appropriate and convenient.

The court concluded that Switzerland was an adequate alternative forum for the Swiss-law dispute. It reasoned that the claim concerned the management and governance of a Swiss corporation, arose under Swiss law, and involved evidence, witnesses, corporate records, and legal issues substantially connected to Switzerland. The court also concluded that the absence of U.S.-style procedures—such as class actions, contingent-fee arrangements, broad discovery, and jury trials—did not make Switzerland legally inadequate for this dispute. The court gave limited weight to the plaintiffs’ choice of New York, finding that the case had been brought there in part to avoid the consequences of an earlier state-court dismissal involving similar Swiss-law claims.

The dismissal of Count One was conditional. All defendants were required to consent in writing to jurisdiction in Switzerland within 20 days, and a Swiss court also had to accept jurisdiction. The defendants were required to waive statute-of-limitations defenses that accrued after May 30, 2023, when the operative complaint was filed in the United States. The court stated that any statute-of-limitations defense existing by that date could still be decided by the Swiss court. The consent was limited to the First Cause of Action and did not concede that the claim was legally sufficient under Swiss law.

Disposition

Judge Colleen McMahon granted the defendants’ motions to dismiss. Count One was conditionally dismissed on forum non conveniens grounds. Counts Two and Three were dismissed with prejudice and without leave to amend. The court also dismissed the claims against three unserved individual defendants, Richard Cerutti, Urs Rohner, and Albert Sohn, because the court’s rulings established that the complaint could not proceed against them.