FIA Leveraged Fund Ltd. v. Grant Thornton LLP
150 A.D.3d 492
N.Y. App. Div.2017Background
- Multiple hedge-fund plaintiffs sued Grant Thornton and a group of Citco-related defendants and individuals alleging fraud, breach of contract, fraudulent conveyance, and conspiracy arising from fund-investment, loan, and repayment arrangements involving series of funds (including Series N, Leveraged, Arbitrage, and FIP) and transfers through New York banks.
- Citco Fund Services (Cayman) Ltd. (Citco Cayman) did not contest New York jurisdiction; several other Citco entities (parent Citco Group and sibling companies Citco Global, Citco Trading, Citco Bank, SFT Bank) contested jurisdiction and sought dismissal.
- Plaintiffs relied on contacts (emails, bank transfers to New York banks, meetings) involving Citco executive Ermanno Unternaehrer and New York–based Fletcher Asset Management and Alphonse Fletcher Jr. to establish New York jurisdiction and to impute Unternaehrer’s contacts to other Citco entities via agency, alter-ego, or conspiracy theories.
- Procedurally, the trial court dismissed claims against Grant Thornton and dismissed many causes of action; the appellate court reviewed personal jurisdiction issues, conspiracy jurisdiction, agency/alter-ego allegations, and choice-of-law and in pari delicto defenses to contract and tort claims.
- The Appellate Division affirmed dismissal as to Grant Thornton, modified jurisdiction rulings: upheld jurisdiction over Unternaehrer and several Citco affiliates via agency or conspiracy theories, refused to impute Citco Cayman’s contacts to Citco Group or to Citco Global in certain respects, reinstated some contract and conspiracy claims and Arbitrage’s fraudulent-conveyance claim, and held Cayman law governs the in pari delicto defense to contract claims.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Citco parent/siblings are subject to New York jurisdiction via imputation from Citco Cayman | Citco Cayman’s New York contacts should be imputed to parent/siblings (alter ego/agency) | Parent and sibling companies are not subject to New York jurisdiction merely because Citco Cayman is; plaintiffs fail Volkswagenwerk factors | Court: Cannot impute Citco Cayman’s contacts to Citco Group or siblings; Volkswagenwerk factors not satisfied for Citco Group; Citco Global also lacks specific jurisdiction |
| Whether New York has specific jurisdiction over Unternaehrer | Unternaehrer’s emails, meetings with New York-based Fletcher, and receipt of a New York wire support jurisdiction | Defendants argued contacts insufficient | Court: Unternaehrer’s purposeful activities directed at NY (emails, meetings, wire to NY bank) suffice for CPLR 302(a)(1); jurisdiction consistent with due process |
| Whether agency/conspiracy can establish jurisdiction over Citco Trading, Citco Bank, SFT, and Citco Group | Plaintiffs: Unternaehrer acted as agent for these entities; conspiracy with Fletcher/FAM supports jurisdiction | Defendants: Agency/conspiracy allegations conclusory; insufficient overt acts tying entities to NY | Court: Agency shown as to Citco Trading, Citco Bank, SFT (contacts and control); conspiracy jurisdiction sustained for MBTARF claims as to Citco Cayman, Citco Trading, Citco Bank, SFT, and Citco Group; not for Citco Global |
| Whether in pari delicto bars plaintiffs’ contract and tort claims and which law governs that defense | Plaintiffs: New York law governs imputation and in pari delicto issues; plaintiffs not in pari delicto or fall within exceptions | Defendants: In pari delicto bars certain claims; contracts contain Cayman choice-of-law governing substantive defenses | Court: Choice-of-law clause makes Cayman law govern in pari delicto as to contract claims; Cayman law does not require dismissal; New York law governs imputation for tort claims (internal affairs doctrine inapplicable); in pari delicto bars some claims by Leveraged and Arbitrage but not MBTARF; Arbitrage’s fraudulent conveyance reinstated (in pari delicto not a defense) |
Key Cases Cited
- Licci v Lebanese Canadian Bank, 20 N.Y.3d 327 (N.Y. 2012) (specific jurisdiction analysis under CPLR 302(a)(1))
- Rushaid v. Pictet & Cie, 28 N.Y.3d 316 (N.Y. 2016) (due process and jurisdictional inference considerations)
- Kirschner v. KPMG LLP, 15 N.Y.3d 446 (N.Y. 2010) (in pari delicto and whether wrongdoer’s acts were for or against the corporation)
- Volkswagenwerk AG v. Beech Aircraft Corp., 751 F.2d 117 (2d Cir.) (factors for imputing subsidiary contacts to parent for jurisdiction)
- Kreutter v. McFadden Oil Corp., 71 N.Y.2d 460 (N.Y. 1988) (agency-based personal jurisdiction standard)
- Indosuez Int’l Fin. v. Nat’l Reserve Bank, 98 N.Y.2d 238 (N.Y. 2002) (choice-of-law analysis: most significant relationship test)
- Welsbach Elec. Corp. v. MasTec N. Am., Inc., 7 N.Y.3d 624 (N.Y. 2006) (foreign-law defense barred if application would offend fundamental public policy)
- Matter of Ski Train Fire in Kaprun, Austria, 230 F. Supp. 2d 403 (S.D.N.Y. 2002) (limits on imputing a subsidiary’s contacts to non-parent affiliates)