Lelchook v. Société Générale De Banque Au Liban S.A.L.Lelchook v. Société Générale De Banque Au Liban S.A.L.
* The Clerk of Court is directed to amend the case caption to conform to the above.
Before: RAGGI, WESLEY, and CARNEY, Circuit Judges.
Plaintiffs-Appellants are 21 U.S. citizens who were harmed, and the estate and family members of a U.S. citizen who was killed, in rocket attacks carried out in Israel in 2006 by the terrorist organization Hizbollah. Plaintiffs allege that the Lebanese Canadian Bank (“LCB“) provided extensive financial assistance to Hizbollah in the years leading up to the attacks. In 2011, Defendant-Appellee Societe Generale de Banque au Liban SAL (“SGBL“) acquired all of LCB‘s assets and liabilities in a transaction conducted under the laws of Lebanon. Plaintiffs sue for damages under the Anti-Terrorism Act of 1990 and seek to hold SGBL liable as LCB‘s successor. The United States District Court for the Eastern District of New York (Dearie, J.) dismissed the complaint, concluding that SGBL did not inherit LCB‘s status for purposes of personal jurisdiction when it acquired LCB‘s assets and liabilities. Because we conclude that Plaintiffs’ successor-jurisdiction theory raises an important and unresolved issue under New York law, we certify two questions to the New York Court of Appeals.
QUESTIONS CERTIFIED.
ROBERT J. TOLCHIN, The Berkman Law Office, LLC, Brooklyn, NY, for Appellants.
BRIAN J. LESKE (Michael J. Sullivan, on the brief), Ashcroft Law Firm, LLC, Boston, MA, for Appellee.
This appeal concerns the implications, for purposes of specific personal jurisdiction, of an entity‘s acquisition of all of another entity‘s assets and liabilities. Plaintiffs-Appellants are 21 U.S. citizens who were harmed, and the estate and family members of a U.S. citizen who was killed, in rocket attacks perpetrated in Israel in 2006 by the terrorist organization Hizbollah. Plaintiffs allege that the Lebanese Canadian Bank (“LCB“) provided extensive financial assistance to Hizbollah in the years leading up to the attacks. In parallel litigation against LCB, we have held that LCB is subject to personal jurisdiction in New York for claims related to the 2006 attacks, see Licci v. Lebanese Canadian Bank, SAL, 732 F.3d 161, 174 (2d Cir. 2013), and that factual allegations similar to those here, brought against LCB, state a plausible claim under the Anti-Terrorism Act of 1990 (“ATA“),
The district court granted SGBL‘s motion to dismiss for lack of personal jurisdiction under
- Under New York law, does an entity that acquires all of another entity‘s liabilities and assets, but does not merge with that entity, inherit the
acquired entity‘s status for purposes of specific personal jurisdiction?
- In what circumstances will the acquiring entity be subjeсt to specific personal jurisdiction in New York?
BACKGROUND
I. Factual background1
Plaintiffs are the estate and family members of a U.S. citizen-David Martin Lelchook-who was killed, and 21 other U.S. citizens who were harmed, in rocket attacks carried out by the Hizbollah terrorist organization against civilian population centers in Israel between July 12 and August 14, 2006 (the “2006 attacks“). Plaintiffs allege that LCB, a corporation organized under the laws of Lebanon and headquartered in Beirut, Lebanon, provided extensive banking services to Hizbollah in the period leading up to the 2006 attacks. SGBL is a private joint stock company incorporated in Lebanon and with headquarters in Beirut.
In February 2011, the U.S. Department of the Treasury designated LCB as a financial institution of “primary money laundering concern,” citing LCB‘s extensive involvement with and support for Hizbollah. App‘x at 51. About four months later, in June 2011, SGBL and LCB executed a “Purchase Agreement.” The Purchase Agreement provided that, in exchange for a payment to LCB of $580 million (to occur upon a “Completion Date“), “the Seller [LCB] shall transfer, convey, and assign... to the Purchaser [SGBL],... and the Purchaser shall receive and assume from the Sеller, all of the Seller‘s Assets and Liabilities.” App‘x at 52, 61, 140. Importantly, it provided further:
The Assumed Liabilities consist inter alia of any and all of the Seller‘s liabilities and/or obligations and/or debts of any kind, character or description, absolute or contingent, accrued or unaccrued, disputed or undisputed, liquidated or unliquidated, secured or unsecured, joint or several, due or to become due, vested or unvested, determined, determinable or otherwise, to the extent they relate to the Seller‘s Business, all as at the Completion Date.
App‘x at 53, 61.2 Plaintiffs allege that, in February 2017, “after SGBL‘s purchase of LCB‘s assets and assumption of its liabilities, LCB represented to the United States Supreme Court that it had been rendered ‘defunct, insolvent, and unable to pay any judgment rendered against it.‘” App‘x at 54. It appears LCB continues to exist, however, at least for the purpose of defending related litigation in this Court. See Kaplan v. Lebanese Canadian Bank, SAL, 999 F.3d 842, 866-67 (2d Cir. 2021) (concluding that the plaintiffs had stated a plausible ATA claim against LCB). In 2020, the United States District Court for the Eastern District of New York found, in similar litigation based on the record before it, that “LCB continues to exist as an entity and is litigating in the Kaplan case currently before
II. The Licci/Kaplan litigation
The factual allegations in Plaintiffs’ amended complaint closely track the allegations made in the separate, long-running action brought in 2008 against LCB by substantially the same set of plaintiffs (the “Licci/Kaplan” litigation).
In the instant case, Plaintiffs rely heavily on our holdings in prior appeals in the Licci/Kaplan litigation. As mentioned above, that litigation also involves claims under the ATA seeking damages related to the 2006 attacks. We have detailed the protracted course of that litigation in four prior opinions:
- Licci v. Lebanese Canadian Bank, SAL, 673 F.3d 50 (2d Cir. 2012) (”Licci II“)
- Licci v. Lebanese Canadian Bank, SAL, 732 F.3d 161 (2d Cir. 2013) (”Licci IV“)
- Licci v. Lebanese Canadian Bank, SAL, 834 F.3d 201 (2d Cir. 2016) (”Licci VI“)
- Kaplan v. Lebanese Canadian Bank, SAL, 999 F.3d 842 (2d Cir. 2021) (”Kaplan v. LCB II“)3
Accordingly, we describe that history now only to the extent relevant to the jurisdictional issue before us.4
First, we have found that LCB is subject to specific personal jurisdiction in New York for ATA claims related to the 2006 attacks. In Licci II, we certified two related questions regarding New York‘s law of personal jurisdiction to the New York Court of Appeals, namely: (1) whether “a foreign bank‘s maintenance of a correspondent bank account at a financial institution in New York, and use of that account to effect dozens of wire transfers on behalf of a foreign client, constitute a transaction of business in New York within the meaning of [New York‘s long-arm statute,]
business in New York within the meaning of
With the benefit of that decision, we then held that the exercise of personal jurisdiction over LCB in New York comports with due process protections provided by the U.S. Constitution. See Licci IV, 732 F.3d at 165. Thus, we concluded, LCB is subject to personal jurisdiction in New York for claims stemming from its alleged connections to Hizbollah in the period leading to the 2006 attacks.
Second, in Kaplan v. LCB II, we held that the Licci/Kaplan plaintiffs’ factual allegations-which, again, virtually mirror those made by Plaintiffs in this case-state a plausible claim for damages against LCB under the ATA regime, as modified in 2016 by the Justice Against Sponsors of Terrorism Act (“JASTA“),
These two aspects of our prior decisions serve as the foundation of Plaintiffs’ claims here. The first underlies Plaintiffs’ theory of personal jurisdiction over SGBL: we have found that LCB is subject to jurisdiction in New York for claims that are materially identical to those at issue in this case, and Plaintiffs submit that SGBL inherited that jurisdictional status from LCB. And the second forms the basis for Plaintiffs’ theory of liability against SGBL: we have found that it is plausible to assert that LCB is liable for damages stemming from the 2006 attacks, and Plaintiffs allege that SGBL acquired that liability from LCB.
III. Procedural history
In January 2019, Plaintiffs filed this action, naming as defendants SGBL and numerous other parties. In December 2019, Plaintiffs filed an amended complaint-the operative complaint in this appeal-naming only SGBL. The amended complaint asserts claims against SGBL under the ATA, as amended by JASTA, on the theory that “SGBL assumed and bears successor liability for LCB‘s liability to the plaintiffs.” App‘x at 58. As discussed, the amended complaint asserts that SGBL is subject to personal jurisdiction in New York on the sole ground that “SGBL assumed and bears successor liability for LCB‘s conduct... and so is also subject to personal jurisdiction in New York.” App‘x аt 23.
SGBL moved to dismiss the complaint for want of jurisdiction and for failure to state a claim, see
jurisdiction over SGBL did not lie.5 The district court did not reach
Plaintiffs timely appealed.
DISCUSSION
We review de novo a district court‘s decision to dismiss a complaint for lack of personal jurisdiction, construing the pleadings in the light most favorable to the plaintiffs. Chloe, 616 F.3d at 163. To survive a motion to dismiss, “Plaintiffs need only make a prima facie showing of personal jurisdiction over the defendant.” Id. (alterations and internal quotation marks omitted).
A federal court exercising personal jurisdiction over a defendant “must [have] a statutory basis for personal jurisdiction that renders... service of process effective.” Licci II, 673 F.3d at 59.
federal courts for serving process. Id. Plaintiffs’ primary jurisdictional theory relies on
We understand
defendant comports with due process protections established under the United States Constitution.” Id.
I. Inherited-Jurisdiction Theory
According to Plaintiffs, SGBL is subject to liability under the ATA as LCB‘s “successor.” Appellants’ Br. at 16. We have explained that “[u]nder both New York law and traditional common law, a corporation that purchases the assets of another corporation is generally not liable for the seller‘s liabilities.” New York v. Nat‘l Serv. Indus., Inc., 460 F.3d 201, 209 (2d Cir. 2006) (Sotomayor, J.). Even so, it is established that “[b]oth New York law and traditional common law... recognize certain exceptions to this rule.” Id.9 Thus, we have held that
a buyer of a corporation‘s assets will be liable as its successor if: (1) it expressly or impliedly assumed the predecessor‘s tort liability, (2) there was a consolidation or merger of seller and purchaser, (3) the purchasing corporation was a mere continuation of the selling corporation, or (4) the transaction is entered into fraudulently to escape such obligations.
Id. (quoting Schumacher v. Richards Shear Co., 59 N.Y.2d 239, 245 (1983)). Plaintiffs contend that the first exception covers SGBL because, under the Purchase Agreement, SGBL “expressly assumed” LCB‘s liabilities. Appellants’ Br. at 17. And they submit that, when a successor in interest is covered by any one of these enumerated exceptions—and in particular the first, for express assumption of tort liability—that successor inherits not only its predecessor‘s liability, but also its predecessor‘s “jurisdictional status.” Appellants’ Br. at 17-18 (citing LiButti v. United States, 178 F.3d 114 (2d Cir. 1999)).
At the first step of the
In SGBL‘s efforts to defeat jurisdiction, SGBL relies (as did the district court) on decisions of the New York appellate courts and federal courts that do not address the particular theory that Plaintiffs advance. And in their efforts to claim jurisdiction, Plaintiffs, in turn, rely on decisions that do not apply New York law and are otherwise inapposite. We review this authority below in some detail because it appears to us
After such review, we are compelled to conclude that this issue of New York law has yet to be definitively resolved and that we cannot predict its resolution with confidence. We think that definitive clarification by the New York Court of Appeals is needed.
II. New York state court decisions provide only limited guidance on Plaintiffs’ jurisdictional theory
The parties have not identified any decision of the New Yоrk Court of Appeals addressing Plaintiffs’ inherited-jurisdiction theory. Three Appellate Divisions have
issued rulings relevant to the theory, but, on inspection, we find that these rulings provide only limited guidance.
A. Semenetz
In Semenetz v. Sherling & Walden, Inc., 21 A.D.3d 1138, 1140-41 (3d Dep‘t 2005) (quoting Societe Generale v. Fla. Health Scis. Ctr., Inc., No. 03-cv-615 (MGC), 2003 WL 22852656, at *4 (S.D.N.Y. Dec. 1, 2003)), aff‘d on other grounds, 7 N.Y.3d 194 (2006), the Third Department “recognize[d] that in certain circumstances a successor corporation ‘may inherit its predecessor‘s jurisdictional status.‘” But it found this doctrine inapplicable because Semenetz involved the “product line” and “continuing enterprise” exceptions to the general rule that corporations are not liable for the torts of their predecessors. Id. The court explained that these two exceptions “do not and cannot confer [in personam] jurisdiction over the successor in the first instance” because they “deal with the concept of tort liability, not jurisdiction.” Id. at 1139.10 And on close examination, the authority cited by the Semenetz court falls short of establishing the proposition advanced by Plaintiffs here.
The Semenetz court cited four cases in support of the general proposition that “in certain circumstances” a successor “may” inherit its predecessor‘s jurisdictional status.
Id. at 1140-41. First, it quoted Florida Health Sciences Center, in which the United States District Court for the Southern District of New York observed that “a successor may inherit its predecessor‘s jurisdictional status in several situations: for example, if there was a de facto merger or consolidation of the two entities or if the successor is a ‘mere continuation’ of the predecessor.” 2003 WL 22852656, at *4 (quoting Kidz Cloz, Inc. v. Officially for Kids, Inc., No. 00-cv-6270, 2002 WL 1586877, at *4 (S.D.N.Y. July 17, 2002)). These two examples correspond to the second and third exceptions providing for successor liability as enumerated in National Service Industries, but the Florida Health Sciences Center court did not
Second, the Semenetz court cited Abbacor, Inc. v. Miller, No. 01-cv-0803 (JSM), 2001 WL 1006051 (S.D.N.Y. Aug. 31, 2001), as relevant to its discussion. In Abbacor, the plaintiff alleged that the defendant was an “alter ego” of a predecessor organization
that had jurisdictionally relevant contacts in New York. Id. at *4. The court wrote, “New York courts have frequently held that the pre-incorporation acts of a predeсessor corporation can be attributed to a successor corporation for the purpose of establishing long arm jurisdiction where the predecessor and the successor are one and the same.” Id. (internal quotation marks omitted). Because Plaintiffs do not allege that SGBL and LCB are “one and the same,” Abbacor is not instructive here.
Third, the Semenetz court cited Applied Hydro-Pneumatics, Inc. v. Bauer Mfg., 68 A.D.2d 42 (2d Dep‘t 1979). There, the Second Department considered a situation in which the defendant purchased the assets, including contract rights, of another company, and utilized the contract rights it had purchased, but refused to pay commissions to the plaintiff-the agent who brokered the contracted-for transaction. Id. at 43-45. The court held that the defendant‘s “voluntary election to complete the contracts constituted, in effect, a nunc pro tunc ratification and adoption of [the predecessor‘s] acts in New York [that] is sufficient to subject [the defendant] to personal jurisdiction in our courts on a cause of action arising out of transaction of business here between [the plaintiff] and [the defendant‘s] corporate predecessor.” Id. at 46. Applied Hydro-Pneumatics, too, thus involved circumstances differеnt from those presented here: the successor‘s performance of the predecessor‘s contracts subjected it to personal jurisdiction over disputes arising out of the contracts, just as if the successor had been the original contracting party. The holding is grounded in the law of contracts, more than any general doctrine of successor jurisdiction, and so is not relevant in the present tort case.
The fourth authority cited in Semenetz is Schenin v. Micro Copper Corp., 272 F. Supp. 523 (S.D.N.Y. 1967). In Schenin, a Nevada corporation, Vanura, sold all of its assets to the defendant, Micro, in exchange for shares of Micro common stock. Id. at 526. Vanura‘s stockholders received the Micro shares as a liquidating dividend, and Vanura
was then duly dissolved. See id. Over a year earlier, however, Vanura had accepted payment from the plaintiff, Schenin, for one million shares of Vanura. Id. at 525. Vanura failed to deliver the shares, and following Vanura‘s dissolution, Schenin sued Micro in New York. Schenin argued that, because Vanura would have been subject to personal jurisdiction under New York‘s long-arm statute, the court had personal jurisdiction over Micro as Vanura‘s “successor-in-interest.” Id. at 526. The district court was unpersuaded. It reasoned thаt “[t]he insurmountable hurdle in plaintiff‘s path is the sound distinction in law between a statutory merger and an acquisition of assets.” Id. In the district court‘s view, “There exist[ed] no basis in law or reason to impute to Micro, for jurisdictional purposes, activities of Vanura in New York,” and it was “untenable” to attribute Vanura‘s activities to Micro. Id. In concluding that it lacked personal jurisdiction over Micro, the Schenin court held in essence that successor jurisdiction lies only if there is either (1) a statutory merger or (2) fraud. See id.
To be sure, the Schenin court did briefly explain that because there had been “no statutory merger between Micro and Vanura,” the plaintiff‘s argument “must rest on an assumption of Vanura‘s liabilities by Micro.” Id. The court went on to reject that theory. But, to the extent its description of plaintiff‘s argument might be read to suggest that an assumption of liabilities would have supported the exercise of personal jurisdiction over Micro under a successor-jurisdiction theory, in the absence of any holding to that effect, Schenin sheds no more light on the validity of Plaintiffs’ inherited-jurisdiction theory than do cases like National Service Industries and Florida Health Sciences Center.
Further, when assessing how the New York Court of Appeals would resolve this issue, we hesitаte to give much weight to Schenin or Semenetz‘s citation to it. Schenin is not a New York state court decision, and the relevant portion of the opinion did not rely on any decisions of New York state courts. Although Semenetz cited Schenin, it did so in support of the general proposition—which Semenetz did not apply— that “in certain
circumstances a successor corporation may inherit its predecessor‘s jurisdictional status.” Semenetz, 21 A.D.3d at 1140-41 (internal quotation marks omitted). It thus did not directly endorse Schenin‘s limits on successor jurisdiction—namely, that such jurisdiction lies only in the event of a statutory merger or fraud. Indeed, Schenin appears to take a stricter view than do more recent decisions of when under New York law a corporation may be a successor for jurisdictional purposes.13
For these reasons, in our view, Semenetz and the cases it cites do not resolve the issue presented here; nor do they offer especially meaningful guidance.
B. BRG Corp.
The next relevant Appellate Division decision cited by Plaintiffs is BRG Corp. v. Chevron U.S.A., Inc., 163 A.D.3d 1495 (4th Dep‘t 2018). There, the “plaintiffs contend[ed] that personal jurisdiction exist[ed] over defendant because it ostensibly bears successor liability for a predecessor corporation that was itself subject to personal jurisdiction in New York.” Id. at 1496. The Fourth Department rejected
Semenetz‘s holding or its rationale, nor do they ask us to chart our own course on this novel and unsettled jurisdictional issue.” Id. (emphasis added).14
While the outcome in BRG superficially supports SGBL‘s position, the court‘s stated reasoning does nothing to shore up the inherited-jurisdiction theory. Instead, BRG simply followed Semenetz, apparently in light of the plaintiffs’ failure to argue it should not. Rather than suggest that New York law is clear about when a successor should be treated as having inherited a predecessor‘s jurisdictional status, the Fourth Department was of the view that the issue is “novel and unsettled.” Id. In expressing that view, it highlighted decisions of other courts whose holdings, if adopted by New York courts, would seem to provide for personal jurisdiction over SGBL in this case. But because BRG did not adopt those holdings, it is not decisive here on the inherited-jurisdiction theory; rather, it suggests the issue is unresolved in New York.
C. Gronich
The third relevant—and most recent—Appellate Division case is Matter of Gronich & Co. v. Simon Prop. Grp., Inc., 180 A.D.3d 541 (1st Dep‘t 2020). There, a judgment creditor sought “to enforce its judgment against the alleged successor corporation (and affiliates) of the judgment debtor.” Id. at 542. The First Department concluded that it had jurisdiction over one of the defendants because that defendant was a successor by merger of a company that had received a transfer of assets from the judgment debtor. See id. In so concluding, the First Department explained that the defendants’ “argument that jurisdictional contacts are not imputed to a successor by merger is misplaced. It is where the ‘successor’ has merely acquired the assets of the predecessor company that the contacts are not imputed.” Id. (emphasis added).
Gronich therefore did not address or resolve whether Plaintiffs’ inherited-jurisdiction theory is viable. As SGBL emphasizes,
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Our takeaway from the foregoing caselaw is that New York state courts have not spoken on the precise issue presented by this appeal. On one hand, New York courts have firmly held that an asset purchase alone is insufficient to confer personal jurisdiction over a successor. On the other hand, New York courts have also held that in some circumstances a successor does inherit its predecessor‘s jurisdictional status, including when there is a merger. But New York courts have not squarely addressed a situation in which a successor acquires all of a predecessor‘s assets and liabilities, but does not do so through either a statutory merger or a transaction that meets established standards for a de facto merger.
III. Federal court decisions do not resolve this issue of New York law
The parties also submit that federal court decisions resolve the jurisdictional issue. We are not persuaded.
A. U.S. Bank
First, SGBL contends that Plaintiffs’ jurisdictional theory is foreclosed by our decision in U.S. Bank Nat‘l Ass‘n v. Bank of Am. N.A., 916 F.3d 143 (2d Cir. 2019). There, in dicta, the panel majority examined “whether Bank of America, as the successor entity following its merger with LaSalle, is subject to personal jurisdiction where LaSalle‘s activities in relation to the events giving rise to liability would have subjected LaSalle to specific jurisdiction in a suit alleging breach of LaSalle‘s contracts.”15 Id. at 155. The majority discussed BRG, Semenetz, and Schenin, commenting that “[w]hat those New
York decisions reveal is that . . . whether liability as a successor in interest also entails being subject to personal jurisdiction where the actions of the predecessor would have made the predecessor subject . . . depends on the basis of the successor liability.” Id. at 156. “The fair inference of the precedents,” the panel majority continued, “is that, while successor liability based on acquisition of a predecessor‘s assets does not necessarily make the defendant also amenable to jurisdiction where the predecessor‘s actions would have made the predecessor subjеct to specific jurisdiction, the rule is different where the successor liability of the defendant derives from a
Even if its comments were not dicta, however, the U.S. Bank majority‘s analysis would not resolve the issue presented here. As with the New York precedents it discusses, the U.S. Bank majority distinguishes between asset acquisitions and mergers, but does not address the cloudy middle ground, where the two entities do not formally merge, but the one acquires the other‘s assets and, expressly, all of its liabilities, and the other continues as a corporate entity with assets from its sale. As the U.S. Bank majority noted, whether jurisdictional contacts are imputed to a successor “depends on the basis of the successor liability,” id., and neither U.S. Bank nor the New York cases address the basis presented here—the express assumption of all of the predecessor‘s liabilities.
B. Bartlett
Second, SGBL points to a district court decision addressing an issue nearly identical tо that presented here as persuasive authority for ruling that the court does not have personal jurisdiction over SGBL. Bartlett, 2020 WL 7089448. In Bartlett, the plaintiffs were individuals and their family members who were injured by Hizbollah terror attacks in Iraq between 2004 and 2011. Id. at *1. As relevant here, the plaintiffs brought a claim for successor liability against SGBL resulting from its assumption of LCB‘s assets and liabilities in the Purchase Agreement, and the plaintiffs argued that “SGBL inherited LCB‘s personal jurisdiction status.” Id. at *16.
The Bartlett district court rejected the plaintiffs’ theory, but on a record somewhat different from that here, and based on an analysis of New York law that, while thorough, was necessarily not definitive.16 Focusing on the distinction between an asset purchase and a merger, the Bartlett court found that it did not have personal jurisdiction over SGBL for the successor liability claim because the plaintiffs did not allege that a merger occurred, nor did they allege an essential element of a merger, “continuity of ownership.”17 Id. at *16–17. Crucially, relying on the dicta in U.S. Bank, the court reasoned that it was “only ‘because a successor by merger is deemed by operation of law to be both the surviving corporation and the absorbed corporation’ that the succеssor would incur the predecessor‘s jurisdictional status.” Id. at *16 (quoting U.S. Bank, 916 F.3d at 156) (emphasis added).18 But as discussed
Focusing on continuity of ownership, the Bartlett court also stated that “[e]ven if SGBL obtained all of LCB‘s liabilities, that does not necessarily confer jurisdiction.” 2020 WL 7089448, at *17. Because Bartlett did not definitively state whether an assumption of liabilities is sufficient to confer jurisdiction, the case does not provide clear guidance on the viability of Plaintiffs’ theory. In any event, the two cases it cites to distinguish between a sale and purchase of all assets and liabilities and a merger do not directly support the proposition that a merger is necessary to confer successor jurisdiction. The first citation is to the dicta in U.S. Bank, but even in its dicta, that court did not state that conclusion. The second citation is to National Service Industries, which addressed the de facto merger doctrine under New York law and successor liability but did not address the jurisdictional question that we face. See 460 F.3d at 212.
C. LiButti
Plaintiffs, for their part, argue that broad language from another two of our decisions apply here and support this novel inherited-jurisdiction theory. Again, we are not convinced.
In LiButti v. United States, the Internal Revenue Service (“IRS“) sought restitution from Margaux, a Kentucky limited liability company that had received an interest in a prize racehorse from Edith LiButti, the daughter of Robert LiButti, a delinquent taxpayer. See 178 F.3d at 116–17, 122–23. The United States District Court for the Northern District of New York held that it had neither in personam nor in rem jurisdiction over Margaux because Margaux did not have minimum contacts with New York. We affirmed those holdings. See id. at 122–23. The IRS, however, advanced as an “alternate theory” for personal jurisdiction in New York that Margaux was a successor in interest to the obligations of Edith LiButti, whom the district court had ordered to pay restitution.19 See id. at 123–24. The IRS grounded its alternate jurisdictional theory in two Federal Rules of Civil Procedure:
We rejected the IRS‘s jurisdictional theory in LiButti, but in doing so we spoke in somewhat unnecessarily expansive language about personal jurisdiction being transferred to a successor under
Thus, the language from LiButti that Plaintiffs point to—that “successors inherit the jurisdictional status of their predecessor, ‘simply as a consequence of their status as a successor in interest,‘” Appellants’ Br. at 17—was merely the Court‘s reading of “several cases involving the question of whether a person could be substituted or joined under
To be sure, LiButti‘s holding did not foreclose the possibility that, had Margaux been a successor in interest, it might have been subject to jurisdiction based on that status. But LiButti fell far short of holding
D. Transfield
In the second case that Plaintiffs rely on, Transfield ER Cape Ltd. v. Industrial Carriers, Inc., we considered whether a company was “found within the district” for the purpose of maritime attachment under federal law. 571 F.3d 221, 222 (2d Cir. 2009). We held that “if a corporation is registered with the New York Department of State—and is therefore ‘found within the district’ . . . - that corporation‘s alter egos are also ‘found within the district’ and, therefore, the property of those alter egos is not subject to maritime attachment.” Id. at 224. In reaching that conclusion, we observed that “in general, ‘alter egos are treated as one entity’ for jurisdictional purposes.” Id. (quoting Wm. Passalacqua Builders, Inc. v. Resnick Devs. S., Inc., 933 F.2d 131, 142–43 (2d Cir. 1991)). We also cited Patin v. Thoroughbred Power Boats Inc. in support of our assertion about jurisdiction over alter egos, quoting in a parenthetical that court‘s stаtement that “federal courts have consistently acknowledged that it is compatible with due process for a court to exercise personal jurisdiction over an individual or a corporation that would not ordinarily be subject to personal jurisdiction in that court when the individual or corporation is an alter ego or successor of a corporation that would be subject to personal jurisdiction in that court.” Transfield, 571 F.3d at 224 (quoting Patin v. Thoroughbred Power Boats Inc., 294 F.3d 640, 653 (5th Cir. 2002)).
As this discussion makes clear, Transfield arose in the context of federal maritime law, not New York law. What is more, it addressed jurisdiction over alter egos, rather than a purchaser of assets or liabilities, as evidenced by Transfield‘s discussion of Patin.23 Accordingly, Transfield, too, is inapposite to the question before us.
Plaintiffs emphasize that numerous federal district courts in New York have interpreted the broad language in LiButti and Transfield to hold that successors are subject to personal jurisdiction whenever they fall into an exception that renders them subject to substantive successor liability—even when ruling on a
* * *
Respectfully, in our view, LiButti and Transfield do not support the proposition that such a broad rule of personal jurisdiction is established under New York law. As described above, the two cases discussed distinct issues—
In light of the confusion prompted by our decisions in LiButti and Transfield, we emphasize now that they address successorship issues only in the circumstances in which they arose, and that they should not be read to resolve broad and open issues of personal jurisdiction under New York law. We do not express a view on whether New York law could support the rule of inherited jurisdiction that some district courts have adopted and that Plaintiffs urge on us here. Rather, in view of the observations set forth above, we conclude that those cases do not provide a sound basis for us to predict with confidence that New York would adopt those courts’ interpretations as the correct jurisdictional standard under New York law.
Accordingly, U.S. Bank, Bartlett, LiButti, and Transfield do not resolve whether SGBL is subject to personal jurisdiction in this action.
IV. Certification
Plaintiffs request that, if we do not rule in their favor, we certify the question whether New York law recognizes inherited jurisdiction to the New York Court of Appeals. We may certify a question of state law to a state‘s highest court if state law permits certification. See 2d Cir. Loc. R. 27.2(a). Under New York law, we may certify to the New York Court of Appeals “dispositive questions of law” in cases pending before us “for which no controlling precedent of the Court of Appeals exists.”
We find that each of these three factors weighs in favor of certification in this case. First, the Court of Appeals has not addressed the issue whether a successor inherits its predecessor‘s jurisdictional contacts when it assumes all of its predecessor‘s
Second, we think this issue is of importance to New York. As we explained in Licci II, determining the scope of personal jurisdiction under New York law is “a task that requires the exercise of value judgments and important public policy choices, best left to New York‘s highest court, if possible.” 673 F.3d at 74 (internal quotation marks omitted).
We explored some of those public policy choices in our 2019 decision in U.S. Bank. There, the panel majority discussed the jurisdictional impact of a business combination effected through a formal merger. The general rule, we said, is that “a successor by merger is deemed by operation of law to be both the surviving corporation and the absorbed corporation, subject to all the liabilities of the absorbed corporation.” U.S. Bank, 916 F.3d at 156 (citing James D. Cox & Thomas Lee Hazen, 4 Treatise of the Law of Corporations § 22:8) (emphasis added). We commented that, in light of that general rule, “we can see no reason why, in a suit to enforce a merger partner‘s contract, the entity that survives the merger should not be subject to personal jurisdiction in whatever court the actions of the merger partner in relation to the contrаct would have made the merger partner subject.” Id. at 155. Moreover, we warned, a different rule would allow “serious abuse” because “a corporation liable to suit in a state in which it does not wish to be sued could simply arrange a merger with a dummy corporation and thus avoid being subject to an undesired jurisdiction in the state where its actions incurred the liability.” Id. at 156.
The same warning seems apt here. LCB‘s existence may offer scant promise to the hopeful tort claimant notwithstanding LCB‘s status as a defendant in a lawsuit pending in New York. See Kaplan v. LCB II, 999 F.3d at 866–67. A fact-based rule that would allow LCB effectively to decouple its assets from its enforceable liabilities, for value, and SGBL to acquire “all assets and liabilities” but escape jurisdiction for claims asserting LCB‘s liabilities seems anomalous and pregnant with the same possibility for abuse that we identified in U.S. Bank, especially when significant aspects of the acquisition are not known.
Further, U.S. Bank arose in the context of a contract claim against a successor corporation, with sophisticated business entities on each side of the transaction. Here, where the claimants allege grave рersonal injury for which LCB may bear responsibility, the concern that an abuse of form (if any there be) could allow avoidance of liability seems even more compelling. In these circumstances, New York might choose to give even closer scrutiny to the facts of the combination than in cases past, and less weight to the label affixed by the parties, so as to avoid allowing the seller to shed its liabilities while shielding the acquirer from “being subject to an undesired jurisdiction in the state where [the seller‘s] actions incurred the liability.” See U.S. Bank, 916 F.3d at 156. Further factual development about the business combination that the parties undertook might be warranted.
To be sure, New York serves important state interests when it facilitates various forms of business combinations within its borders and adopts rules of liability and jurisdiction whose clarity makes them easy
This case thus calls for a close calibration of the differences, for purposes of successor jurisdiction in New York, between a formal merger and a complete acquisition of assets and liabilities for money in which one entity formally survives the other. We conclude, therefore, that the second factor weighs in favor of certification.24
Finally, for the third factor, the questions are potentially determinative of the claim at issue here: if New York does not recognize an inherited-jurisdiction theory under these circumstances, then the district court‘s judgment dismissing Plaintiffs’ claims must be affirmed.25
Accordingly, we certify to the New York Court of Appeals the following questions:
- Under New York law, does an entity that acquires all of another entity‘s liabilities and assets, but does not merge with that entity, inherit the
acquired entity‘s status for purposes of specific personal jurisdiction? - In what circumstances will the acquiring entity be subject to specific personal jurisdiction in New York?
Consistent with our standard practice, we do not constrain the scope of the Court of Appeals’ analysis through the formulation of the questions that we have adopted here. See 10 Ellicott Square Ct. Corp. v. Mountain Valley Indem. Co., 634 F.3d 112, 126 (2d Cir. 2011). We invite the Court of Appeals to expand upon or modify these questions as it deems appropriate, including by directing the parties to address other questions it finds relevant. Glob. Reinsurance Corp. of Am. v. Century Indem. Co., 843 F.3d 120, 128 (2d Cir. 2016), certified question accepted, 28 N.Y.3d 1129 (2017), and certified question answered, 30 N.Y.3d 508 (2017).
CONCLUSION
For the foregoing reasons, we certify the following questions to the New York Court of Appeals:
- Under New York law, does an entity that acquires all of another entity‘s liabilities and assets, but does not merge with that entity, inherit the acquired entity‘s status for purposes of specific personal jurisdiction?
- In what circumstances will the acquiring entity be subject to specific personal jurisdiction in New York?
It is hereby ORDERED that the Clerk of the Court transmit to the Clerk of the New York Court of Appeals a certificate in the form attached, together with a copy of this Opinion and a complete set of the briefs, appendices, and record filed by the parties in this Court. This panel will retain jurisdiction to decide the appeal once we have had the benefit of the views of the New York Court of Appeals or once that Court declines to accept certification.
CERTIFICATE
We hereby certify the foregoing questions to the New York Court of Appeals pursuant to Second Circuit Local Rule 27.2 and New York Compilation of Codes, Rules, and Regulations, title 22, section 500.27(a).
Notes
Transfer of Interest. In case of any transfer of interest, thе action may be continued by or against the original party, unless the court upon motion directs the person to whom the interest is transferred to be substituted in the action or joined with the original party.