City of Philadelphia Bd. of Pensions & Ret. v. Winters

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2022 NY Slip Op 34589(U)

THE CITY OF PHILADELPHIA BOARD OF PENSIONS AND RETIREMENT, as Trustee for THE CITY OF PIDLADELPHIA PUBLIC EMPLOYEES RETIREMENT SYSTEM, Derivatively on Behalf of STANDARD CHARTERED PLC and STANDARD CHARTERED HOLDINGS, LTD., Plaintiff, v. WILLIAM WINTERS, CBE, JOSE VINALS, DR. LOUIS CHEUNG, CHRISTINE HODGSON, NAGUIB KHERAJ, DR. BYRON GROTE, ANDREW HALFORD, JASMINE WHITBREAD, GAY HUEY EV ANS, DAVID CONNER, DR. NGOZI OKONJOIWEALA, MARK SMITH, EV AN MERVYN DA VIES, CBE, JOHN PEACE, PETER SANDS, GARETH BULLOCK, VALERIE GOODING, CBE, RUDOLPH MARKHAM, RUTH MARKLAND, SUNIL MITTAL, MICHAEL DENOMA, RICHARD MEDDINGS, SIR CHUNG KONG CHOW, PAUL SKINNER, OLIVER STOCKEN, LORD JONATHAN TURNER, KAIKHUSHRU SHIA VAX NARGOLWALA, STEFANO BERTAMINI, ALUN MICHAEL REES, JASPAL BINDRA, DR. HAN SEUNG-SOO, SIMON LOWTH, MARGARET EWING, VISWANATHAN SHANKAR, DR. LARS THUNELL, OM BHATT, DR. KURT CAMPBELL, and TRACY JAYNE CLARKE, Defendants, and STANDARD CHARTERED PLC, and STANDARD CHARTERED HOLDINGS, LTD., Nominal Defendants.

Index No. 601438-20, Motion Seq. No. 4

Supreme Court, Nassau County

February 2, 2022

Unpublished Opinion

Submission Date: 12/2/21

Present: HON. TIMOTHY S. DRISCOLL Justice

HON TIMOTHY S. DRISCOLL J.S.C.

Papers Read on these Motions:

Memorandum of Law in Support.....................................................................................x Affirmations in Support with Exhibits............................................................................x

Memorandum of Law in Opposition................................................................................x

Affirmations in Opposition with Exhibits.......................................................................x

Reply Memorandum of Law.............................................................................................x

Reply Affirmation with Exhibits......................................................................................x

Presently pending before the Court is the motion filed by nominal defendant Standard Chatered pic ("SC"). For the following reasons, SC's motion is granted.

BACKGROUND

A. Relief Requested

SC moves for an Order dismissing the Amended Complaint without leave to replead 1) under CPLR § 3211(a)(2), (3), and (7) based on lack of subject-matter jurisdiction and Plaintiffs lack of standing to bring derivative or multiple derivative claims on behalf of the Nominal Defendants, 2) alternatively, under CPLR § 327 and the doctrine of forum non conveniens in favor of a more convenient and suitable alternative forum for this action, namely, the English High Court, or 3) alternatively, under CPLR § 3211(a)(8) with respect to claims asserted on behalf of S.C. based on lack of personal jurisdiction.

B. The Parties' History

The Amended Complaint alleges, in relevant part, as follows:

SC is a publicly-owned multinational banking and financial services company registered and organized under the laws of England and Wales and headquartered in London. S.C. is a registered Bank Holding Company under the Bank Holding Company Act and is regulated in the United States by the Federal Reserve.

Standard Chartered Holdings, Ltd. ("SCH"), a holding company with no employees, is a wholly-owned subsidiary of SC. Standard Chartered Bank ("SCB") is, in turn, a wholly-owned subsidiary of SCH. S.C. indirectly owns and controls its bank operating subsidiary SCB through SCH. S.C. exercises complete control over SCH, and SCH's three current directors are also directors of SC.

SCB is a financial institution registered and organized under the laws of England and Wales and headquartered in London. It is one of the world's largest international banks, with operations in more than sixty markets around the world.

Since 1976, SCB has held a license issued by New York State to operate as a foreign bank branch in New York, New York. SCB New York provides United States dollar ("USD") clearing services for international wire payments, which can involve, among other things, the conversion of payments from a foreign currency into USD. SCB New York is subject to oversight and regulation by the Federal Reserve, as well as the New York State Department of Financial Services ("DFS").

This action arises from the systematic violation of the banking laws of the United States and the State of New York by SC, SCH, and SCB. SC, SCH, and SCB permitted countries, entities, and individuals sanctioned by the United States Department of the Treasury's Office of Foreign Assets Control ("OFAC"), including the Islamic Republic of Iran, unlawful access to the United States banking system and USDs.

New York was the focal point of SC's illicit activities that enabled Iran to evade United States sanctions provisions, providing Iran with illegal access to billions in USDs. As the seventh largest dollar clearer in the world - clearing almost $200 billion in payments per day through its New York banking operations - S.C. conducted thousands of funds transfers in dollar clearing transactions on behalf of Iran between 2001 and 2014.

DFS later determined that between 2001 and 2010, SC conducted approximately $250 billion of non-transparent Iranian USD transactions through its New York banking operations, in violation of United States and New York laws and regulations. Additionally, between June 2009 and June 2014, SC's banking subsidiary processed nearly 10,000 illegal payments, totaling more than $437 million, for the benefit of sanctioned Iranian parties. The majority of these transactions were processed in New York State.

The Individual Defendants are 1) current and former members of the Boards of Directors of the SC, SCH, and SCB, 2) members of the S.C. Board who were also employed as officers of SC, and 3) various officers of SC, who a) personally benefitted from the illegal transactions conducted on behalf of OFAC-sanctioned parties because their compensation was directly tied to SC's annual financial performance, and b) violated the Group Code of Conduct by causing and/or permitting S.C. and SCB to violate the applicable laws and regulations of the United States and the State of New York, causing S.C. and SCB to incur more than one billion dollars in fines, penalties, forfeitures, and defense and remediation costs.

Plaintiff asserts derivative claims under the United Kingdom Companies Act 2006 (c.46) ("UK Companies Act"), English common law, the New York Business Corporation Law ("BCL") and New York common law.

C. The Parties' Positions

SC argues that the Court lacks subject matter jurisdiction under BCL § 626. Under Section 626, a shareholder can sue derivatively on behalf of a foreign corporation in New York only if that corporation is "doing business" here. Plaintiff has not satisfied its burden of overcoming the presumption that S.C. and SCH, both foreign corporations incorporated in England, are doing business in their place of incorporation and not in New York.

SC further contends that Plaintiff lacks standing under English law to assert derivative claims on the Nominal Defendants' behalf. It asserts that, under the internal affairs doctrine, English law governs the substantive issue of Plaintiff s standing to step into the shoes of two English companies and litigate those companies' claims against their current and former directors. It further posits that while the UK Companies Act's "judicial permission" requirement does not apply in New York, this does not mean that Plaintiff automatically has standing to pursue derivative claims in New York on behalf of two English corporations. Nor does it mean that the law of a different jurisdiction governs standing.

SC avers that English common law governs the substantive question of Plaintiff s standing to sue. Thus, if a derivative claim falls outside of the UK Companies Act, it can proceed only if it satisfies the more stringent common law requirements. Accordingly, a derivative claim on behalf of an English company either 1) falls within Part 11 of the UK Companies Act and is subject to the judicial permission requirement, or 2) falls outside of Part 11 and is subject to the more demanding common-law requirements. Plaintiff cannot, according to SC, meet those "Foss" common-law requirements, as initially set forth in Foss v. Harbottle, 2 Hare 461 (Eng. 1843). Nor can Plaintiff meet those requirements to assert its "double" derivative claims on behalf of SCH.

SC contends that this action alternatively should be dismissed under the doctrine of' forum non conveniens. Plaintiffs claims lack a sufficient nexus with New York to justify burdening this Court. Plaintiff is a Pennsylvania pension fund seeking to assert claims under English law on behalf of two English corporations against Defendants who do not reside in New York. Moreover, neither the alleged conduct nor the alleged injury occurred here, and Plaintiffs choice of forum is entitled to little deference. Additionally, England is an adequate alternative forum with a superior interest in this action, Plaintiff concedes that English substantive law governs its claims, and the relevant witnesses and documents are in England.

SC argues that it is not subject to personal jurisdiction in New York. Plaintiff cannot possibly contend that S.C. is subject to general personal jurisdiction in New York, as S.C. is an English corporation headquartered in London. As to specific personal jurisdiction, Plaintiff does not allege that 1) the claims arise from any act by S.C. in New York or from SC's ownership, use, or possession of real property in the State, or that 2) S.C. committed a tortious act abroad that caused injury in New York. The Amended Complaint merely cites the presence and business operations of the S.C "Group" in New York, the...