Rudersdal, EOOD v. Harris

Background

The plaintiffs alleged that numerous defendants participated in a conspiracy to fraudulently transfer approximately $65 million from a Bulgarian bank account to five Bulgarian companies. The funds allegedly came from the sale of Bulgarian land during bankruptcy proceedings involving a Bulgarian company. The plaintiffs filed suit in the Southern District of New York and relied on alleged connections to New York, including financing-related communications and agreements involving New York banks or New York forum provisions.

Many defendants moved to dismiss for lack of personal jurisdiction and forum non conveniens. Lack of personal jurisdiction asks whether the court has legal authority over a particular defendant. Forum non conveniens allows a court to dismiss when a foreign court is a more appropriate and convenient place to resolve the dispute. Magistrate Judge Robert W. Lehrburger recommended dismissing claims against the moving defendants on those grounds and denied the plaintiffs’ renewed request for jurisdictional discovery. The plaintiffs objected to the recommendation.

Personal Jurisdiction

The court adopted the recommendation in part but made exceptions concerning Bank of New York Mellon and jurisdiction under Federal Rule of Civil Procedure 4(k)(2).

The court granted Harris’s motion to dismiss for lack of personal jurisdiction. It rejected the plaintiffs’ argument that Harris’s contacts could be attributed to him through Ayr’s contacts because the plaintiffs had not alleged facts showing that Ayr was Harris’s alter ego. The court also found that Harris’s own contacts with New York did not establish jurisdiction under New York’s long-arm statute. The court noted that Harris was not a party to the agreement containing New York forum-selection and choice-of-law provisions.

The court granted the personal-jurisdiction motions filed by the Eaton Vance Defendants and the Bulgarian National Bank. It concluded that the Eaton Vance Defendants were not subject to general jurisdiction in New York and that the plaintiffs had not alleged a RICO violation against them that could provide a jurisdictional basis. As to the Bulgarian National Bank, the court held that the foreign-sovereign-immunity statute protected it from jurisdiction because the plaintiffs had not shown that the bank directly participated in the transfer decision or exercised sufficient control over the Bulgarian bank or conservators involved.

For the FIB Defendants, the Five Bulgarian Companies, the Peevski Defendants, and Bulgartabac, the court held the personal-jurisdiction motions in abeyance pending targeted briefing. The court agreed that the alleged original injury occurred in Bulgaria, not New York, and that the defendants’ direct United States contacts did not establish jurisdiction under Rule 4(k)(2). But it declined to adopt the recommendation concerning whether a conspiracy-jurisdiction theory could apply under Rule 4(k)(2). The court ordered additional briefing on whether contacts of alleged co-conspirators could support jurisdiction under the Second Circuit’s decision in Charles Schwab Corp. v. Bank of America Corp.

The court did not dismiss Bank of New York Mellon for lack of personal jurisdiction. Although it was described as a nominal defendant, the court found that it might still facilitate relief sought by the plaintiffs. It stated that BNYM could renew its motion after the other defendants were dismissed. The conclusion separately states that BNYM’s motion was denied without prejudice as to arguments other than forum non conveniens.

Forum Non Conveniens

The court granted the moving defendants’ motions to dismiss on forum non conveniens grounds, subject to conditions. It found that the plaintiffs’ choice of New York deserved little weight because the claims centered on Bulgarian land, Bulgarian companies, Bulgarian banks, Bulgarian funds, and alleged conduct by many Bulgarian persons and entities. It also found that most relevant witnesses, documents, and other evidence were in Bulgaria.

The court determined that Bulgaria was an adequate alternative forum because Bulgarian courts could hear related tort, criminal, and contract claims, even if they did not provide identical claims or remedies or a RICO equivalent. The court rejected the plaintiffs’ arguments that alleged corruption or bias made Bulgaria inadequate, finding that the evidence did not show corruption specifically targeted at a party in the case.

The court held that both private and public-interest factors favored Bulgaria. Private-interest considerations included access to evidence, witnesses, documents, and compulsory process. Public-interest considerations included Bulgaria’s local interest in the dispute, the likely application of Bulgarian law, and avoiding the burden of resolving a largely foreign dispute in New York.

The dismissal was conditioned on the defendants’ consent to personal jurisdiction in Bulgarian courts, waiver of statute-of-limitations defenses that arose after the New York action began, and acceptance of the case by Bulgarian courts. The court also issued an order requiring the plaintiffs to show why the complaint should not be dismissed on forum non conveniens grounds against defendants who had not moved to dismiss. The court noted that severance might be considered if some defendants were not amenable to suit in Bulgaria.

Jurisdictional Discovery and Amendment

The court reviewed the denial of jurisdictional discovery under the deferential standard applicable to a non-dispositive ruling and denied the plaintiffs’ request. It also directed the plaintiffs to file any motion for leave to amend concerning whether Ayr’s corporate veil could be pierced to establish jurisdiction over Harris within two weeks, unless Magistrate Judge Lehrburger ordered otherwise.

Disposition and Significance

The court granted the personal-jurisdiction motions of Harris, the Eaton Vance Defendants, and the Bulgarian National Bank. It held the personal-jurisdiction motions of the FIB Defendants, the Five Bulgarian Companies, the Peevski Defendants, and Bulgartabac in abeyance pending briefing on conspiracy jurisdiction. It granted the moving defendants’ forum non conveniens motions subject to the stated conditions, denied BNYM’s motion without prejudice as to arguments other than forum non conveniens, denied jurisdictional discovery, and required further proceedings concerning the non-moving defendants. Judge Woods did not decide the underlying allegations of fraud or entitlement to the funds.