Giunta v. Dingman
893 F.3d 73
2d Cir.2018Background
- Gordon (New York) negotiated with Dingman (Bahamian resident) in New York in Nov 2013 for a 50% equity stake in Out West Hospitality Ltd. (OWH); the agreement was oral and not reduced to writing.
- Gordon wired multiple investments from his New York bank account to Dingman (totaling at least $343,000) and received acknowledgment letters on OWH letterhead delivered in New York.
- Dingman repeatedly represented OWH and its subsidiaries were profitable and that shares would be issued to Gordon; later Gordon learned other equity holders existed and OWH was closed.
- Plaintiffs alleged §10(b) Exchange Act fraud based on these representations; the district court dismissed for lack of subject-matter jurisdiction under Morrison, finding no "domestic transaction" because Bahamian approval was required for share issuance.
- On appeal the Second Circuit assumed the complaint true, reviewed de novo, and considered whether irrevocable liability was incurred in the U.S. (making the transaction "domestic") and whether the claim was nonetheless impermissibly extraterritorial.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the investment agreement constituted a "domestic transaction" under Morrison/Absolute Activist | Gordon argues the parties formed a binding contract in New York and irrevocable liability was incurred there when he wired funds and Dingman accepted | Dingman argues that share issuance required Bahamian approval, making liabilities revocable and the transaction foreign | Held for Gordon: the SAC plausibly alleges a domestic transaction because the agreement and irrevocable liability arose in New York despite later foreign approvals being a condition subsequent |
| Whether a condition (Bahamian approval) defeats irrevocable liability | Gordon: a condition subsequent does not mean parties could revoke; obligations were fixed once funds and acceptance occurred | Dingman: foreign approval was a condition precedent/closing requirement making the deal non-binding until approved | Court: Condition subsequent/foreign approval does not render liabilities "revocable" in any meaningful sense; Absolute Activist and Choi support that irrevocable liability can exist despite later foreign steps |
| Whether the claims are impermissibly extraterritorial because the dispute is predominantly foreign | Gordon: substantial domestic contacts (negotiations, wire transfers, letters, parties U.S. citizens) make the claim domestic | Dingman: operations, incorporation, witnesses, records, and share issuance are Bahamian; U.S. courts cannot override Bahamian regulatory approvals | Court: The case is not predominantly foreign like Parkcentral; domestic contacts suffice to avoid extraterritoriality dismissal |
| Whether dismissal for lack of subject-matter jurisdiction was proper | Gordon: district court applied wrong standard; if §10(b) alleged, federal question exists and merits dismissal should be under Rule 12(b)(6) if deficient | Dingman: urged lack of domesticity supports jurisdictional dismissal | Court: District court erred to treat this as jurisdictional defect; vacated dismissal and remanded — plaintiff plausibly stated a domestic §10(b) claim requiring merits-stage adjudication |
Key Cases Cited
- Morrison v. National Australia Bank Ltd., 561 U.S. 247 (2010) (Exchange Act applies only to domestic transactions or securities listed domestically)
- Absolute Activist Value Master Fund Ltd. v. Ficeto, 677 F.3d 60 (2d Cir. 2012) (defines "domestic transaction" by irrevocable liability or title passing in U.S.)
- Choi v. Tower Research Capital LLC, 890 F.3d 60 (2d Cir. 2018) (later foreign clearing does not negate irrevocable liability incurred upon matching in U.S.)
- Parkcentral Global HUB Ltd. v. Porsche Automobile Holdings SE, 763 F.3d 198 (2d Cir. 2014) (even a domestic transaction may be impermissibly extraterritorial if facts are predominantly foreign)
- Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007) (plausibility pleading standard)
- Ashcroft v. Iqbal, 556 U.S. 662 (2009) (pleading must permit reasonable inference of liability)