Hohimer Wealth Management LLC v. Dougan

Background

Hohimer Wealth Management LLC and Peter Schur brought separate proposed class actions on behalf of holders of Credit Suisse U.S.-dollar-denominated Additional Tier One bonds held during the period from January 12, 2023, through March 19, 2023. The complaints named nine defendants who were former Credit Suisse executives or board members: Brady W. Dougan, Eric Varvel, James Amine, Timothy O’Hara, David Miller, Brian Chin, Robert Shafir, Richard Thornburgh, and Michael Klein.

The plaintiffs alleged one cause of action under Swiss law. They claimed 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 helped create or failed to correct a culture of excessive risk-taking and inadequate controls at Credit Suisse. The plaintiffs alleged that this conduct contributed to Credit Suisse’s collapse and the loss of their bond investments.

In March 2023, the Swiss Financial Market Supervisory Authority ordered Credit Suisse’s outstanding Additional Tier One bonds written down to zero as part of the forced merger of Credit Suisse into UBS. The plaintiffs alleged that the regulatory order was the immediate mechanism for the loss but that the defendants’ earlier mismanagement was the legal cause.

Issues and Parties’ Arguments

The defendants moved to dismiss on several grounds, including forum non conveniens. Forum non conveniens is a doctrine that allows a court to dismiss a case when another available country is substantially more appropriate for resolving it. The defendants argued that Switzerland was an adequate alternative forum because the claims involved Swiss law, a Swiss corporation, Swiss regulators, and bonds containing a forum-selection clause identifying Zurich as the exclusive location for actions relating to cancellation of the notes.

The plaintiffs argued that New York had significant connections to the dispute. They pointed to the United States citizenship of the named parties, alleged conduct involving Credit Suisse’s New York investment-banking operations, the use of the Depository Trust Company, and the presence of potential witnesses in the United States. They also argued that requiring the plaintiffs to litigate in Switzerland would create substantial expense and hardship.

Court’s Analysis

The court applied the three-step forum non conveniens analysis used in the Second Circuit: the degree of deference owed to the plaintiffs’ forum choice, 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 plaintiffs were U.S. residents and the defendants were U.S. citizens, the court found that the core dispute concerned alleged mismanagement of a Swiss bank, violations of Swiss law, and a Swiss regulator’s decision to write down the bonds. The proposed class was also worldwide in scope, and the bond documents contained a Zurich forum-selection clause.

The court found Switzerland to be an adequate alternative forum. The plaintiffs did not argue in their opposition papers that Switzerland was inadequate, and the court relied in part on its prior ruling that Swiss courts could adjudicate similar Swiss-law claims involving Credit Suisse directors and officers.

The private-interest factors favored Switzerland because important evidence and witnesses were likely located there. The court identified potential witnesses from Credit Suisse, UBS, the Swiss Financial Market Supervisory Authority, the Swiss government, and the Swiss National Bank. It also concluded that documents concerning the regulatory decision, the treatment of employee contingent-capital instruments, and communications with Swiss regulators were likely to be in Switzerland. Obtaining evidence from Swiss witnesses and documents for a New York case could require procedures under the Hague Evidence Convention and create added expense and delay.

The public-interest factors also favored Switzerland. The court found that New York jurors had, at most, a limited connection to the central issues; Switzerland had the stronger interest in regulating a Swiss bank and reviewing the conduct of its financial regulator; and the case was governed exclusively by Swiss law. Applying Swiss law in New York would require the court to interpret and translate foreign legal materials and resolve potentially conflicting expert testimony.

The court emphasized that it was not deciding whether the plaintiffs’ Swiss-law claims had merit. Its decision rested on the conclusion that the dispute should be litigated in Switzerland rather than in the Southern District of New York.

Disposition

The court granted the defendants’ motions to dismiss both complaints on forum non conveniens grounds. The complaints were dismissed as against all defendants without prejudice, so the plaintiffs could pursue the claims in Switzerland. The court conditioned the dismissals on the defendants’ filing written consents to jurisdiction in Zurich within fourteen days. The clerk was instructed not to close the case files until further order, although the motions were to be removed from the court’s list of open motions.