Hong Leong Finance Ltd. v. Pinnacle Performance Ltd.
297 F.R.D. 69
| S.D.N.Y. | 2013Background
- HLF, a Singaporean company, sues Morgan Stanley and affiliates, asserting a Lanham Act claim and various state-law theories related to Pinnacle Notes.
- Notes were issued by Pinnacle Performance Limited (Pinnacle SPV) and funded by a CDS with Morgan Stanley Capital Services Inc.
- Pinnacle invested the note proceeds in underlying assets; HLF alleges these assets were risky synthetic CDOs, not the claimed safe, liquid assets.
- Defendants allegedly failed to disclose the riskiness of the underlying assets to distributors and customers who purchased the notes.
- Singapore High Court anti-suit injunctions were issued and later dissolved; Singapore discovery sought pre-action and related proceedings occurred.
- HLF filed this action in 2013; defendants moved for a protective order to stay discovery pending their motion to dismiss, which the court grants.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does diversity jurisdiction exist between the parties? | HLF alleges complete diversity between Singaporean and foreign entities on both sides. | Alter ego foreign entities defeat diversity; only Morgan Stanley remains domestic. | Diversity is likely lacking; substantial grounds for dismissal on diversity. |
| Does federal question jurisdiction exist via the Lanham Act claim? | Lanham Act claim stems from alleged false advertising related to the notes. | Securities are not “goods” under § 43(a) of the Lanham Act; no federal question. | Lanham Act claim not readily supported; substantial grounds exist to dismiss. |
| Should discovery be stayed pending dismissal? | HLF can limit discovery to materials already produced and coordinate with related case. | Staying discovery would prejudice defendants and magnify duplication risks; not necessary absent strong showing. | Discovery stayed pending disposition of the motion to dismiss. |
Key Cases Cited
- U.S. Sec. & Exchange Comm. v. Citigroup Global Mkts. Inc., 673 F.3d 158 (2d Cir. 2012) (strong likelihood of success standard for stays; antitrust similarities)
- Chrysler Capital Corp. v. Century Power Corp., 137 F.R.D. 209 (S.D.N.Y. 1991) (substantial grounds for dismissal required for stay)
- Flo res v. S. Peru Copper Corp., 203 F.R.D. 92 (S.D.N.Y. 2001) (strong showing that plaintiff's claim is meritorious standard cited)
- Giminez v. Law Offices of Hoffman & Hoffman, 2012 WL 2861014 (E.D.N.Y. 2012) (motion-to-stay standards require substantial grounds)
- Bozant v. Bank of New York, 156 F.2d 787 (2d Cir. 1946) (definition of goods and applicability across statutes; relevance to Lanham Act discussion)
- Finnegan v. Campeau Corp., 915 F.2d 824 (2d Cir. 1990) (goods as a variable content concept; not controlling for Lanham Act)
- Dastar Corp. v. Twentieth Century Fox Film Corp., 539 U.S. 23 (1993) (definitional approach to 'goods' under Lanham Act)