Schur v. Dougan

Background

Peter Schur and Hohimer Wealth Management LLC filed separate proposed class actions concerning Credit Suisse Group AG’s U.S.-dollar-denominated Additional Tier One, or AT1, bonds. The proposed class consisted of persons and entities that held covered Credit Suisse AT1 bonds during the period from January 12, 2023, through March 19, 2023. The complaints named nine former Credit Suisse directors and executives as defendants.

The plaintiffs alleged that the defendants negligently breached statutory duties under Articles 716a, 716b, 717, 754, and 759 of the Swiss Code of Obligations. According to the complaints, the defendants failed to properly manage Credit Suisse, oversee its risks, and maintain appropriate financial controls and a responsible risk culture. The plaintiffs alleged that these failures contributed to Credit Suisse’s collapse and the loss of the AT1 bonds’ value.

In March 2023, Switzerland’s Financial Market Supervisory Authority, known as FINMA, ordered all outstanding Credit Suisse AT1 bonds written down to zero while facilitating Credit Suisse’s merger with UBS Group AG. The plaintiffs alleged that the FINMA order was the immediate mechanism for the write-down but argued that the defendants’ earlier mismanagement caused the losses.

Defendants’ motions and forum non conveniens

The defendants moved to dismiss both complaints on several grounds, including forum non conveniens. Forum non conveniens is a doctrine that allows a court to dismiss a case, even when it has jurisdiction, when another available forum would be substantially more suitable for resolving the dispute.

The court applied a three-part analysis: the amount of deference owed to the plaintiffs’ choice of forum, whether an adequate alternative forum existed, and whether private and public interest factors strongly favored the alternative forum.

The court gave the plaintiffs’ choice of the Southern District of New York only minimal deference. Although the named plaintiffs and defendants were connected to the United States, the court found that the proposed class was worldwide and that the core dispute concerned the management of a Swiss corporation, the application of Swiss law, and a write-down ordered by a Swiss regulator.

The court found Switzerland to be an adequate alternative forum. The plaintiffs’ submissions did not argue that Switzerland was inadequate for resolving their Swiss-law claims involving Credit Suisse’s directors and officers.

Interest factors

The court concluded that the private-interest factors favored Switzerland. The court reasoned that disputed evidence concerning the FINMA order, Credit Suisse’s board decisions, communications with Swiss regulators, and the circumstances leading to the bond write-down would likely be located in Switzerland. Potential witnesses included current and former employees of Credit Suisse and UBS, FINMA officials, and officials from other Swiss government institutions. Obtaining testimony and documents from those witnesses in New York could require cumbersome procedures under international evidence rules.

The court also found that the public-interest factors favored Switzerland. Switzerland had the stronger interest in regulating a Swiss bank and resolving a dispute arising from a Swiss regulator’s order. The claims were governed exclusively by Swiss law, and resolving them in New York would require an American court to interpret Swiss statutes and other foreign legal materials.

The court further noted that the bonds contained a forum-selection clause identifying Zurich as the exclusive location for actions relating to cancellation of the notes. Although the parties disagreed about the clause’s scope, the court found that it further weakened the plaintiffs’ argument for litigating in New York.

Disposition

After balancing the relevant factors, the court held that the cases should be litigated in Switzerland. The court stated that dismissal was without prejudice so that the plaintiffs could sue there. Although the court believed the defendants were subject to suit in Zurich, it conditioned dismissal on the defendants’ filing written consents to Zurich’s jurisdiction within fourteen days.

The court granted the defendants’ motions to dismiss both complaints and directed that the case files not be closed until further order. The court did not decide whether the plaintiffs’ underlying Swiss-law claims had merit.