Lead
Judgе Calabresi concurs in the judgment and opinion of the Court, except for Part III, and files a concurring opinion.
This case presents yet another chapter in the Bernie Madoff saga. SPV Osus Ltd. is the putative assignee of Optimal Strategic U.S. Equity Ltd (collectively, “SPV”). Optimal invested money directly with Bernard L. Madoff Investment Securities LLC (“BLMIS”). When BLMIS turned out to be a massive Ponzi scheme, see In re Bernard L. Madoff Inv. Sec. LLC,
UBS removed the state court action to the United States District Court for the Southern District of New York. SPV moved to remand. The district court denied the motion, finding federal jurisdiction proper pursuant to 28 U.S.C. § 1334, which provides federal courts with “original but not exclusive jurisdiction of all civil proceedings arising under title 11, or arising in or related to cases under title 11.” 28 U.S.C. § 1334(b). See SPV OSUS Ltd. v. UBS AG,
On appeal, SPV primarily argues that the district court erred in (1) not granting SPV’s motion to remand, as the instant litigation is not “related to” the Ma-doff/BLMIS bankruptcies and the federal courts lack jurisdiction; (2) finding it lacked personal jurisdiction over UBS; and (3) finding it failed to adequately plead proximate cause. For the reasons detailed below, we affirm the district court’s decisions in all respects.
BACKGROUND
SPV is a Bahamian corporation that alleges is it the assignee of Optimal. Optimal invested directly with BLMIS, and its last statement from BLMIS in November 2008 reported roughly $2.9 billion in its accounts. Madoff was involuntarily forced into Chapter 7 in April 2009. In June 2009 the Madoff estate was consolidated with a separate bankruptcy proceeding against BLMIS that was filed under the Securities Investor Protection Act (“SIPA”). The order consolidating the bankruptcy proceedings states that the consolidated estate “shall be administered in accordance with SIPA and the Bankruptcy Code under the jurisdiction of’ the bankruptcy court, but “the Chapter 7 Trustee shall remain Chapter 7 trustee of the Madoff estate and shall continue to have all powers, rights, claims and interests of a Chapter 7 trustee[,] ... [and] all powers, rights, claims and interests of the Madoff estate are expressly preserved ... ”.
In December 2014, SPV filed suit in New York state court against UBS and AIA. SPV’s suit set forth claims for aiding and abetting fraud, breach of fiduciary duty, conversion, and knowing . participation in a breach of trust. In essence, SPV alleges that the defendants facilitated
UBS AG is a Swiss entity with its principal place of business in Switzerland. The remaining UBS entities were, at all times relevant, Luxembourg entities with their principal places of business in Luxembourg. Luxalpha was organized and located in Luxembourg; Groupement was organized and located in the British Virgin Islands. SPV alleges that it pleaded sufficient contacts to allow the exercise of personal jurisdiction by virtue of the UBS entities’ contacts with New York related to their interactions with the Luxalpha and Groupement feeder funds. SPV also sued AIA LLC; Access International Advisors Ltd.; Access Partners (Suisse) S.A.; Access Management Luxembourg S.A.; Access Partners S.A. (Luxembourg); and Patrick Littaye (together, the “Access Defendants”).
As described above, the district court denied SPV’s motion to remand the mattеr to state court, then granted separate motions to dismiss the complaint. This appeal followed.
DISCUSSION
I. Appellate Jurisdiction.
SPV’s notice of appeal designates its appeal as both from the judgment and from orders entered on July 21, 2015, July 24, 2015, May 26, 2016 and May 27, 2016. This list does not include the order and opinion denying the motion to remand. UBS argues that the failure to specify the remand order in the notice of appeal strips this Court of jurisdiction to consider an appeal from that order. We need not linger long over the issue, because even assuming arguendo that SPV waived its right to appeal, the denial of a motion to remand goes to this Court’s subject matter jurisdiction, which may be raised at any time. See In re Methyl Tertiary Butyl Ether (“MTBE”) Prod. Liability Litig., 488 F.8d 112, 123 (2d Cir. 2007). “Indeed, we have often taken it upon ourselves to determine whether removal jurisdiction existed even where that issue was not itself appealed.” Id. at 121. Satisfied that the appeal from the district court’s denial of the motion to remand is properly before us, we turn to the merits.
II. “Related to” jurisdiction
“On appeal from the denial of a motion to remand for lack of subject matter jurisdiction, we review the court’s legal conclusions de novo and its factual findings for clear error.” Blockbuster, Inc. v. Galeno,
In this Circuit, “a civil proceeding is related to a title 11 case if the
Here, the claims at issue arise in an action that does not directly involve the bankruptcy estates. “In determining whether potential claims by third party defendants against the debtor for either indemnification or contribution give rise to “related to” jurisdiction over litigation to which the debtor is not a party, courts in this circuit ... have generally found jurisdiction where there is a ‘reasonable’ legal basis for the claim.” In re WorldCom, Inc. Sec. Litig.,
The gravamen of SPV’s complaint is that defendants are joint tortfeasors with Ma-doff and BLMIS, which, if proven, would provide defendants with a putative contribution claim, to be asserted in the bankruptcy proceedings. SPV urges us to find that the district court erred in denying its motion to remand to state court because it erroneously found that UBS’s potential contribution claims sufficiently “related to” the Madoff/BLMIS bankruptcy proceedings to support federal jurisdiction. SPV contends that UBS’s potential claims are too remote from the bankruptcy proceedings to have any effect on the estates, making the exercise of federal jurisdiction improper. SPV argues that UBS’s potential claim for contribution in the bankruptcy proceedings is illusory, primarily because (1) the bar date tо assert claims against the Madoff and BLMIS estates 'expired, barring UBS from pursuing any claim in the bankruptcy proceeding; and (2) in any event, there is not enough money in either estate to pay out any such claims.
We agree with the district court that the failure to file claims prior to the bar date is not fatal to the potential claims at issue here. Bankruptcy courts are permitted to accept late proofs of claim. See, e.g., In re PT-1 Commc’ns, Inc.,
Conversely, “[a]n indemnification right arises at the time the indemnification agreement is executed, and it constitutes a claim under the Bаnkruptcy Code even if the act giving rise to indemnification has not yet occurred.” Allstate Ins. Co. v. Credit Suisse Sec. (USA) LLC,
Moreover, it is unclear whether the applicable bar date has passed. While a bar date was set and has passed in the SIPA action involving the BLMIS estate, no bar date was set in the Madoff estate. The consolidation order states only that the combined estate “shall be administered in accordance "with SIPA and the Bankruptcy Code.” If the SIPA bar date controls, as SPV argues, it cannot be waived. See In re Lehman Bros., Inc.,
We need not resolve the issue of which bar date controls. Even if the bar date set in the SIPA estate controls, simply settling the issue of whether a late claim is allowable would likely have an effect on the estate. Any attempt to file a late claim would result in the estate incurring costs. As the district court noted, even unsuccessful claims require evaluation by the trustee, who recovers fees for such work from the estate. See 11 U.S.C. § 704(a)(5) (trustee charged with “examining] proofs of claims and objecting] to the allowance of any claim that is improper”); 15 U.S.C. § 78fff(e) (“[a]ll costs and expenses of administration of the estate of the debtor ... shall be borne by the general estate of the debtor.”). Second, if SPV were successful in its claims against UBS, it would reduce the amount it is owed as a creditor of the BLMIS/Madoff estate. See, e.g., In re Adelphia Commc’ns Corp. Sec. & Deriv. Litig., No. 03 MDL 1529,
The need for litigation to settle the issue of whether a late claim would be permitted does not militate against finding this litigation “related to” the bankruptcy proceeding. SPV relies on Pacor, Inc. v. Higgins for the proposition that unless the underlying litigation “automatic[ally] creat[es] liability” for the bankruptcy estate, the connection between the underlying litigation аnd the bankruptcy proceedings is too remote to support “related to” jurisdiction.
SPV also challenges the district court’s conclusiоn that it is “within the realm of possibility” for defendants to receive a distribution from the estate. SPV I,
Finally, there is a high degree of interconnectedness between this action and the Madoff bankruptcies: SPV can only proceed on these claims if it establishes that the Madoff fraud occurred. SPVs assignor invested directly with BLMIS. But for the automatic stay, it is difficult to imagine a scenario wherein SPV would not also sue Madoff and BLMIS, given that SPV alleges that UBS aided and abetted in their fraud. “The existence of strong interconnections between the third party action and the bankruptcy has been cited frequently by courts in concluding that the third party litigаtion is related to the bankruptcy proceeding.” See WorldCom,
III. Personal jurisdiction
“We review a district court’s dismissal of an action for want of personal jurisdiction de novo, construing all pleadings and affidavits in the light most favorable to the plaintiff and resolving all doubts in the plaintiffs favor.” Penguin Grp. (USA) Inc. v. Am. Buddha,
When a case is removed to federal court pursuant to 28 U.S.C. § 1452, personal jurisdiction is allowed to the extent permitted by the Constitution of the United States. Fed. R. Bankr. P. 7004(f). “To establish personal jurisdiction over a defendant, due process requires a plaintiff to allege (1) that a defendant has certain minimum contacts with the relevant forum, and (2) that the exercise of jurisdiction is reasonable in the circumstances.” In re Terrorist Attacks on September 11, 2001,
“Because general jurisdiction is not related to the events giving rise to the suit, courts impose a more stringent minimum contacts test, requiring the plaintiff to demonstrate the defendant’s continuous and systematic general business contacts.” Id. (internal quotation marks omitted). “For an individual, the paradigm forum for the exercise of general jurisdiction is the individual’s domicile; for a corporation, it is an equivalent place, one in which the corporation is fairly regarded as at home.” Goodyear Dunlop Tires Operations, S.A. v. Brown,
Our Court, in interpreting Daimler, noted that the case “expressly cast doubt on previous Supreme Court and New York Court of Appeals cases that permitted general jurisdiction on the basis that a foreign corporation was doing business through a local branch office in the forum.” Gucci Am., Inc. v. Weixing Li,
Here, UBS SA, UBS FSL and UBS TPM lack any presence in New York at all: each is incorporated, and hаs its principal place of business in, Luxembourg. None have any employees in the United States. UBS AG’s place of incorporation and principal place of business is in Switzerland. As the district court correctly adduced, Daimler bars the court’s exercise general jurisdiction over the UBS defendants. “[A]side from the truly exceptional case, a corporation is at home and subject to general jurisdiction only in its place of incorporation or principal place of business.” Brown v. Lockheed Martin Corp.,
Turning to the exercise of specific jurisdiction, “[t]he inquiry whether a forum State may assert specific jurisdiction over a nonresident defendant focuses on the relationship among the defendant, the forum, and the litigation.” Walden v. Fiore,
The Supreme Court has yet to address exactly how a defendant’s activities must be tied to the forum for a court to properly exercise specific personal jurisdiction over a defеndant. Some circuits require that the in-forum conduct to be the proximate cause of plaintiffs injuries, while others find the standard satisfied if the defendant’s activities are the “but for” cause of those injuries. See Chew v. Dietrich,
Where the defendant has had only limited contacts with the state it may be appropriate to say that he will be subject to suit in that state only if the plaintiffs injury was proximately caused by those contacts. Where the defendant’s contacts with the jurisdiction that relate to the cause of action arе more substantial, however, it is not unreasonable to say that the defendant is subject to personal jurisdiction even though the acts within the state are not the proximate cause of the plaintiffs injury.
Id.
Here, the connections between the UBS Defendants, SPV’s claims, and its chosen New York forum are too tenuous to support the exercise of specific jurisdiction. None of the UBS Defendants are resident in New York. SPV’s complaint alleges the injuries suffered by OSUS were caused by Madoff and BLMIS. Missing
IV. Proximate cause
As to the Access Defendants, SPV alleges that they aided and abetted Madoff and BLMIS by luring investors into the feeder funds, which in turn invested funds in BLMIS, and those funds allowed BLMIS to continue to perpetuate its fraud. SPV asserted state law claims for aiding and abetting fraud, aiding and abetting breach of fiduciary duty, aiding and abetting conversion, and knowing participation in a breach of trust (which is essentially an aiding and abetting claim). As set forth in Lerner v. Fleet Bank, N.A., a claim for aiding and abetting a breach of fiduciary duty under New York law:
(1) a breach by a fiduciary of obligations to another, (2) that the defendant knowingly induced or рarticipated in the breach, and (3) that plaintiff suffered damage as a result of the breach. With respect to the second requirement, although a plaintiff is not required to allege that the aider and abettor had an intent to harm, there must be an allegation that such defendant had actual knowledge of the breach of duty. And a person knowingly participates in a breach of fiduciary duty only when he or she provides substantial assistance to the primary violator.
The district court dismissed SPWs state law claims against the Access Defendants after finding that SPV failed to adequately plead the “substantial assistance” element of its claims. SPV III,
SPV offers two different theories of proximate cause that it proposes to incorporate into an amended complaint. Neither theory can salvage SPV’s claims. The first alternate theory is that the Access Defendants, through misleading marketing materials, aided and abetted the BLMIS fraud by providing BLMIS an “air of legitimacy.” Appellant’s Br. at 64. SPV points to nothing showing OSUS relied on the marketing materials provided by the Access Defendants, was aware of the Access Defendants or even knew of the feeder funds at issue. As noted above, OSUS invested with BLMIS directly, and its investments began before the feeder funds were created. SPV’s second alternate theory is that the Access Defendants are liable because they fаiled to notify “the world at large and international investors in particular” of BLMIS’s fraud. Appellant’s Br. at 59. This theory of causation is unavailing because the Access Defendants owed neither OSUS nor SPV any fiduciary duty. See Lerner,
CONCLUSION
For the reasons given above, the judgment of the district court is AFFIRMED.
Concurrence Opinion
concurring
I join in the opinion except for its analysis of personal jurisdiction. It is not that I necessarily disagree with that analysis. But I believe the better course, in circumstances like those before us, is to assume personal jurisdiction аrguendo and direct a dismissal with prejudice for failure to state a claim. Our prior ease law allows us to do so.
Before Steel Co. v. Citizens for a Better Environment,
Steel Co. does not, however, undermine the appropriateness of our deciding the merits in the current case. Steel Co. was concerned with the judiciary’s powers under Article III. See id. at 95-98,
The relevant differences between personal and subject-matter jurisdiction are legion. Parties cannot stipulate to subject-matter jurisdiction, Great Southern Fire Proof Hotel Co. v. Jones,
Even if there is no difference in how personal jurisdiction and subject-matter jurisdiction are to be treated, the prior cases would allow us to assume jurisdiction in the circumstances before us. See Chevron Corp. v. Naranjo,
The Norton rule applies here as well. “[T]he outcome on the merits” against the UBS defendants “has been foreordained.” We already reached the merits in resolving the claims against the Access defendants, who are, except for the personal jurisdiction issue, identically placed to the UBS defendants. Thus, if we assume jurisdiction we would not be doing so “as a device for reaching a question of law that otherwise would have gone unaddressed,” but instead as a means of preventing waste of judicial resоurces.
We note that the Norton rule survived Steel Co. Steel Co. specifically distinguished Norton. Steel Co.,
For these reasons, I conclude that we can and should assume personal jurisdiction and reach the merits in this case.
Accordingly, while I fully join the rest of the court’s opinion, I do not join the discussion of personal jurisdiction as to the UBS defendants. Instead, I would hold in favor of Appellees on the merits, and dismiss the entire suit with prejudice.