769 F. Supp. 2d 309
S.D.N.Y.2011Background
- Plaintiffs King County and Iowa Student Loan Liquidity Corporation sue Rhinebridge-related defendants for common law fraud over misrated Senior Notes.
- Rhinebridge was a SIV created in June 2007 to sell toxic assets and move losses off IKB’s balance sheet.
- Plaintiffs allege top-credit ratings on Rhinebridge Senior Notes misrepresented safety between June 27, 2007 and October 18, 2007.
- Defendants include IKB Deutsche Bank and IKB CAM, plus credit-rating firms and Morgan Stanley entities; two individuals, Reinke (former IKB CAM CEO) and Ortseifen (former IKB Bank CEO and IKB CAM Chairman).
- Reinke and Ortseifen move to dismiss under Rule 12(b)(6) and 12(b)(2) for failure to state a claim and lack of personal jurisdiction.
- Court concludes plaintiffs have not established personal jurisdiction over Reinke or Ortseifen; grants their motions to dismiss.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the court has specific jurisdiction over Reinke under CPLR 302(a)(1). | Reinke transacted in New York via Rhinebridge role and meetings related to Rhinebridge. | Contacts were insufficiently connected to the fraud; meetings were generalized and directed abroad. | No specific jurisdiction over Reinke. |
| Whether the court has specific jurisdiction over Ortseifen under CPLR 302(a)(1). | Ortseifen's New York activities as Rhinebridge decision-maker establish transacting business in NY. | No minority nexus between NY contacts and the alleged fraud; meetings lacked a direct relation. | No specific jurisdiction over Ortseifen. |
| Whether agency liability can support personal jurisdiction over the individuals. | Rhinebridge actions could be imputed to Reinke and Ortseifen as IKB agents. | Plaintiffs fail to show personal benefits, control, or directed acts in New York by the individuals. | Agency theory fails; cannot establish jurisdiction. |
| Whether due process bars exercising jurisdiction over the individuals. | Forum NY interest and plaintiffs’ convenience justify jurisdiction over the individual officers. | Significant burden, lack of NY connection, and comity with Germany favor dismissal. | Due process bars jurisdiction over the individuals. |
Key Cases Cited
- CutCo Indus., Inc. v. Naughton, 806 F.2d 361 (2d Cir.1986) (out-of-state officers may be subject to jurisdiction if they personally transacted in NY)
- Bank Brussels Lambert v. Fiddler Gonzalez & Rodriguez, 305 F.3d 120 (2d Cir.2002) (minimum contacts and relatedness required for due process)
- Burger King Corp. v. Rudzewicz, 471 U.S. 462 (U.S. 1985) (purposeful availment and fair play in jurisdictional analysis)
- International Shoe Co. v. Washington, 326 U.S. 310 (U.S. 1945) (established minimum contacts and due process framework)
- Best Van Lines, Inc. v. Walker, 490 F.3d 239 (2d Cir.2007) (defining transactional activity and NY contact requirements)
- Tamam v. Fransabank Sal, 677 F. Supp. 2d 720 (S.D.N.Y.2010) (jurisdictional discovery standards and sufficiency of allegations)
- Jazini v. Nissan Motor Co., 148 F.3d 181 (2d Cir.1998) (requirement for actual facts over conclusory statements in jurisdictional showing)
- Merck & Co., Inc. v. Mediplan Health Consulting, Inc., 425 F. Supp. 2d 402 (S.D.N.Y.2006) (control and agency principles in imputing NY activities)