Star Colbert v. Dougan

Background

Three European investment funds—Star Colbert, Assenagon Credit SubDebt and Coco, and Axiom Lux SICAV—brought a proposed class action for Credit Suisse Additional Tier One bondholders. The plaintiffs alleged that eighteen former Credit Suisse directors and officers negligently breached duties imposed by Articles 716a, 716b, 717, 754, and 759 of the Swiss Code of Obligations. The alleged misconduct involved the management of Credit Suisse and its risk culture. The plaintiffs claimed that this conduct contributed to the bank’s collapse and to the March 19, 2023, order by Switzerland’s Financial Market Supervisory Authority requiring all outstanding Additional Tier One bonds to be written down to zero.

The bonds’ terms were governed by Swiss law and included a forum-selection clause identifying Zurich as the exclusive location for disputes based on the bonds, notes, or certificates, including disputes about cancellation. The plaintiffs filed the action in federal court in New York. The defendants moved to dismiss on several grounds, including forum non conveniens, a doctrine that allows a court to dismiss a case when another available court is substantially more appropriate for resolving it.

Court’s analysis

The court applied the usual three-step forum non conveniens analysis. First, it gave the plaintiffs’ choice of New York little deference. The plaintiffs were European investment funds, the proposed class was worldwide, the claim arose under Swiss law, and the alleged corporate mismanagement concerned a Swiss corporation. Although the plaintiffs pointed to alleged misconduct involving Credit Suisse’s New York investment banking operations and several defendants connected to New York, the court viewed the claim as concerning enterprise-wide decisions by the directors and officers of Credit Suisse’s Swiss parent company.

Second, the court found Switzerland to be an adequate alternative forum. Based on the expert submissions, the court concluded that the defendants could be sued in Zurich and that Swiss courts could hear claims against directors and officers for alleged violations of Swiss company law. The court also concluded that disagreements about Swiss statutes of limitations did not make Switzerland inadequate. It noted that Switzerland’s courts could address those questions and that the plaintiffs did not argue that the entire claim was time-barred there.

Third, the court weighed private and public interests and found that they strongly favored Switzerland. The court identified the following considerations:

- Important evidence, including Credit Suisse board records and information held by UBS, the Swiss government, and the Swiss regulator, was located in Switzerland or would be easier to obtain there. - Key nonparty witnesses, including current or former Credit Suisse and UBS employees and Swiss government officials, were likely connected to Switzerland. Obtaining their testimony in New York could require time-consuming procedures under the Hague Evidence Convention and might raise issues under Swiss law. - Switzerland had a strong interest in disputes concerning the management of a Swiss bank, the government-ordered bond write-down, and related proceedings involving the Financial Market Supervisory Authority. - The case involved only Swiss law, making Switzerland more familiar with the governing legal rules and reducing the need for a New York court to resolve complex issues of foreign law. - The court found that imposing jury service in New York would be unfair because the community had, at most, limited connections to the dispute. - The bond documents’ Zurich forum-selection clause and the lack of a treaty providing reciprocal recognition and enforcement of judgments between the United States and Switzerland also favored Switzerland.

The court rejected the plaintiffs’ arguments that New York’s connections to Credit Suisse’s investment banking operations and the presence of some defendants in New York outweighed the Swiss connections. The court stated that it was not deciding whether the plaintiffs’ causation theory was correct; instead, those issues had to be litigated in Switzerland.

Ruling

Judge Colleen McMahon granted the defendants’ motion to dismiss on forum non conveniens grounds and dismissed the amended complaint against all defendants. The dismissal included three defendants who had not been served and had not joined the motion. For the defendants who had appeared, the court conditioned the dismissal on their filing written consents to jurisdiction in Zurich within 14 days. The court stated that the dismissal of an unserved defendant did not depend on that defendant filing consent. The opinion did not decide whether the plaintiffs’ Swiss-law claims had merit.