544 B.R. 16
Bankr. S.D.N.Y.2015Background
- LBSF sued various noteholders and intermediaries to recover distributions made under credit-linked synthetic notes (the Federation Notes) after Lehman’s bankruptcies, alleging priority provisions (flip clauses) unlawfully favored noteholders over LBSF.
- The Federation Notes (Australian-dollar notes) were collateralized primarily by Investment Agreements with Rabobank and secondarily by a portfolio credit default swap (the Portfolio Swap) with LBSF; the Reference Portfolio consisted of U.S. RMBS.
- ANZ Nominees (an Australian entity with no employees) acted as a sub‑custodian for ANZ Bank for certain Australian beneficial holders; ANZ Bank provided the custodial staff and controlled operations under a Sub‑Custody Agreement.
- After LBHI/LBSF bankruptcy filings, the Trustee declared an early termination date for the Portfolio Swap; ANZ Nominees received AUD 17,166,217.40 and distributed it to the beneficial holders.
- Procedurally, ANZ Nominees moved to dismiss for lack of personal jurisdiction; LBSF argued (1) ANZ Nominees consented by filing a proof of claim, (2) ANZ Nominees is a mere department of ANZ Bank and thus reachable because ANZ Bank had contacts with the U.S., and (3) alternatively the court has in rem jurisdiction over estate property.
- The Court granted ANZ Nominees’ motion to dismiss for lack of personal jurisdiction but exercised in rem jurisdiction over LBSF’s property interests in the transaction documents and LBSF’s security interest in the Investment Agreements and other collateral.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether ANZ Nominees submitted to jurisdiction by filing a proof of claim | Claim No. 50672 shows ANZ Nominees consented to court jurisdiction | ANZ Nominees did not file or authorize Claim No. 50672; the claim is not theirs | Court: No submission — claim was not shown to be filed by ANZ Nominees |
| Whether ANZ Nominees is a "mere department" of ANZ Bank so jurisdiction over ANZ Bank reaches ANZ Nominees | ANZ Nominees is wholly owned, uses ANZ Bank staff, is financially dependent, and therefore is a department | ANZ Nominees maintains corporate formalities and is a separate Australian entity | Court: Beech factors (ownership, financial dependence, control over personnel/operations) support treating ANZ Nominees as a department for jurisdictional analysis |
| Whether ANZ Bank (and thus its departments) is subject to specific in personam jurisdiction in the U.S. | ANZ Bank’s custodial activities, knowledge of U.S. connections, and filed proofs of claim establish minimum contacts and consent | Proofs of claim were withdrawn/expunged or disallowed; custodial acts did not purposefully avail ANZ of U.S. jurisdiction and record lacks affirmative direction to Trustee | Court: No personal jurisdiction — (1) withdrawn/expunged claims do not establish consent for this adversary; (2) ANZ Bank lacked purposeful minimum contacts with the U.S.; alleged direction to Trustee not supported by record |
| Whether the court has in rem jurisdiction over the disputed property (Distributed Funds and LBSF property interests) | Alternatively, the court can exercise in rem jurisdiction because the dispute concerns property of the LBSF estate | ANZ Nominees argued in personam dismissal precludes extra‑territorial control over foreign property without personal jurisdiction over defendant | Court: Exercises in rem jurisdiction over LBSF’s property interests in (a) the transaction documents (executory contracts) and (b) LBSF’s security interest in the Investment Agreements and collateral; Distributed Funds and asserted senior priority are disputed interests and not the basis for in rem jurisdiction |
Key Cases Cited
- Int'l Shoe Co. v. State of Washington, 326 U.S. 310 (1945) (establishes minimum contacts test for personal jurisdiction)
- Burger King Corp. v. Rudzewicz, 471 U.S. 462 (1985) (purposeful availment and foreseeability in specific jurisdiction analysis)
- Daimler AG v. Bauman, 571 U.S. 117 (2014) (limits general jurisdiction to forums where a corporation is essentially "at home")
- Walden v. Fiore, 571 U.S. 277 (2014) (specific jurisdiction requires defendant’s own contacts with the forum; plaintiff’s forum connections insufficient)
- Volkswagenwerk Aktiengesellschaft v. Beech Aircraft Corp., 751 F.2d 117 (2d Cir. 1984) (factors for determining whether an entity is a mere department/agent)
- Germain v. Connecticut Nat'l Bank, 988 F.2d 1323 (2d Cir. 1993) (filing a proof of claim submits a creditor to bankruptcy court equity jurisdiction only for matters integral to the claims-allowance process)