Dennis v. JPMorgan Chase & Co.

439 F.Supp.3d 256

Richard DENNIS, et al., Plaintiffs,

v.JPMORGAN CHASE & CO., et al., Defendants.

16-cv-6496 (LAK)

United States District Court, S.D. New York.

Signed February 13, 2020

Vincent Briganti, Geoffrey M. Horn, Peter D. St. Phillip, Raymond Girnys, Christian Levis, Roland R. St. Louis, III, Lowey Dannenberg, P.C. (White Plains, NY), Christopher Lovell, Victor E. Stewart, Benjamin M. Jaccarino, Lovell Stewart Halebian Jacobson LLP (New York, NY), Todd Seaver, Carl N. Hammarskjold, Berman Tabacco (San Francisco, CA), Patrick T. Egan, Berman Tabacco (Boston, MA), Attorneys for Plaintiffs.

Nowell D. Bamberger, Cleary Gottlieb Steen & Hamilton LLP (New York, NY), Nowell D. Bamberger, Cleary Gottlieb Steen & Hamilton LLP (Washington, DC), Attorneys for Defendants HSBC Holdings plc and HSBC Bank Australia Limited.

Kenneth I. Schacter, Elizabeth Buechner, Morgan Lewis & Bockius LLP (New York, NY), Jon R. Roellke, Anthony R. Van Vuren, Morgan Lewis & Bockius LLP (Washington, DC), Attorneys for Defendants Morgan Stanley and Morgan Stanley Australia Limited.

David H. Braff, Matthew J. Porpora, Stephen H. O. Clarke, Sullivan & Cromwell LLP (New York, NY), Attorneys for Defendant National Australia Bank Limited.

Penny Shane, Sullivan & Cromwell LLP (New York, NY), Christopher M. Viapiano, Sullivan & Cromwell LLP (Washington, DC), Attorneys for Defendant Australia and New Zealand Banking Group Ltd..

Jeffrey T. Scott, Mark A. Popovsky, Sullivan & Cromwell LLP (New York, NY), Attorneys for Defendant Commonwealth Bank of Australia.

Jayant W. Tambe, Stephen J. Obie, Kelly A. Carrero, Jones Day (New York, NY), Attorneys for Defendant BNP Paribas, S.A..

David G. Januszewski, Herbert S. Washer, Elai Katz, Sheila C. Ramesh, Adam S. Mintz, Cahill Gordon & Reindel LLP (New York, NY), Attorneys for Defendant Credit Suisse AG.

Thomas J. Perrelli, Jenner & Block (Washington, DC), Stephen L. Ascher, Andrew J. Lichtman, Jenner & Block (New York, NY), Attorneys for Defendant Deutsche Bank AG.

Marshall H. Fishman, Christine V. Sama, Elizabeth M. Zito, Goodwin Procter LLP (New York, NY), Attorneys for Defendants Royal Bank of Canada and RBC Capital Markets LLC.

Fraser L. Hunter, Jr., David S. Lesser, Jamie S. Dycus, Wilmer Cutler Pickering Hale and Dorr LLP (New York, NY), Attorneys for Defendants The Royal Bank of Scotland Group plc, The Royal Bank of Scotland plc, RBS Group (Australia) Pty Ltd., and RBS N.V..

Mark A. Kirsch, Eric J. Stock, Jefferson E. Bell, Gibson Dunn & Crutcher LLP (New York, NY), Attorneys for Defendant UBS AG.

Daniel Slifkin, Michael A. Paskin, Timothy G. Cameron, Cravath Swaine & Moore LLP (New York, NY), Attorneys for Defendant Westpac Banking Corporation.

MEMORANDUM OPINION

Lewis A. Kaplan, District Judge.

Every spring, the bar-tailed godwit makes an astounding 7,000 mile journey from Australia to its native Alaska. This avian odyssey takes roughly nine days, during which the remarkable twelve-ounce land bird does not stop for food or even to rest its tiny wings. Its nonstop flight is the longest known migration of any bird on earth.¹

New York is to complex commercial lawsuits what Alaska is to bar-tailed godwits. Even in the face of serious obstacles – though of the jurisdictional, rather than the geographical sort – such cases flock to New York courts as though guided by natural instinct. Like the bar-tailed godwit, this complex commercial lawsuit seeks to journey home from Australia.

The Bank Bill Swap Rate ("BBSW") is a benchmark interest rate that is intended to reflect the rate of interest paid on prime bank bills traded on the Australian money market. Although BBSW is set in Australia, it is used to price financial derivatives in many countries, including the United States. It thus is similar in concept to the London Interbank Offered Rate ("LIBOR").

Plaintiffs are investors that engaged in U.S.-based transactions for financial derivatives making use of BBSW. They accuse defendants, which are financial institutions based all over the world, of conspiring to manipulate BBSW. They assert claims for damages under the Clayton Act, the Commodity Exchange Act ("CEA"), the Racketeer Influenced and Corrupt Organizations Act ("RICO"), and the common law theories of unjust enrichment and breach of the implied covenant of good faith and fair dealing.

In two prior opinions, familiarity with which is assumed, the Court dismissed the majority of plaintiffs' claims.² Many were dismissed for lack of personal jurisdiction. Plaintiffs then filed a second amended complaint, which various defendants now move to dismiss in three separate motions. In addition to opposing these motions, plaintiffs move for jurisdictional discovery. This opinion resolves all four motions.

Analysis

I. Defendants' Motion to Dismiss the Second Amended Class Action Complaint for Lack of Personal Jurisdiction, Improper Venue, and Failure to State a Claim [DI-298]

A. Personal Jurisdiction

Largely for the reasons discussed in the Court's prior opinion, all plaintiffs except the newly added Orange County Employees Retirement System ("OCERS") again have failed to demonstrate that the Court may assert personal jurisdiction over the sixteen defendants participating in this motion. The new allegations in second amended complaint do not cure the defects the Court already has discussed at length.³

A different analysis applies to OCERS's claims against these sixteen defendants. For this purpose, defendants fall into three groups.

The first group is the nine "Consent Defendants."⁴ In a prior opinion, the Court concluded that defendant Macquarie Bank Ltd. had consented to personal jurisdiction in New York for claims brought by plaintiff FrontPoint Asian Event Driven Fund.⁵ The consent came via a master agreement governing BBSW transactions between the two parties, by which Macquarie had agreed to submit to jurisdiction of a New York state or federal court over "any suit, action, or proceedings related to [the master agreement]."⁶

OCERS alleges that it entered into similar agreements with the Consent Defendants. Under these alleged master agreements, each of these defendants consented to jurisdiction of courts in New York over any claims "arising out of or in connection with [the master agreement]"⁷ or to "any suit, action, or other proceedings relating to the agreement, any FX transaction or any Option."⁸ This language is identical in substance to that of the agreement between FrontPoint and Macquarie. And as FrontPoint alleged for Macquarie, OCERS alleges that it and the Consent Defendants engaged in BBSW-based transactions covered by their master agreements during the class period. These alleged master agreements make a prima facie showing that the Consent Defendants consented to personal jurisdiction in this forum with respect to all of OCERS's claims against them.

The next group is the three "Corporate Family Defendants."⁹ OCERS alleges that it signed master agreements similar to those described above with nonparties HSBC Bank USA, N.A. and Morgan Stanley & Co. LLC. It alleges also that HSBC Bank USA and defendant HSBC Bank Australia Limited are subsidiaries of defendant HSBC Holdings plc, and that HSBC Bank USA therefore is an "affiliate" of the commonly owned HSBC Bank Australia Limited. OCERS contends further that Morgan Stanley & Co. LLC and defendant Morgan Stanley Australia Limited are subsidiaries of defendant Morgan Stanley and that Morgan Stanley & Co. LLC therefore is an "affiliate" of the commonly owned Morgan Stanley Australia Limited. OCERS argues that the nonparties' alleged consent to personal jurisdiction in New York should apply also to the Corporate Family Defendants.

"[A]n agency relationship between a parent corporation and a subsidiary that sells securities on the parent's behalf could establish personal jurisdiction over the parent in a state in which the parent ‘indirectly’ sells the securities."¹⁰ But for a court to impute a broker-dealer's contacts to an alleged parent, the plaintiff must do more than "generally allege[ ] that [the parent] controlled or otherwise directed or materially participated in the operations of the broker-dealer[ ], and reaped proceeds or other financial benefits from the broker-dealer['s] sales of [the relevant] financial instruments."¹¹ The Second Circuit has credited allegations of principal-agent relationships, for example, where a plaintiff alleged that corporate officers "benefitted from [the] corporation's in-forum activities and exercised extensive control over [the] corporation in the transaction underlying the suit."¹²

The second amended complaint alleges that the nonparties and Corporate Family Defendants worked together in business that included the sale of BBSW-based derivatives. But it does not permit a reasonable inference that the Corporate Family Defendants controlled the nonparties with respect to the alleged sales to OCERS. Without more, the Court cannot properly impute the nonparties' alleged contacts to the Corporate Family Defendants.

In fact, of the three Corporate Family Defendants, only HSBC Holdings plc is alleged to be a parent corporation of one of the nonparties that OCERS believes consented to personal jurisdiction in New York. With respect to HSBC Bank Australia and Morgan Stanley Australia Limited, OCERS alleges merely that these defendants and their affiliated nonparties are subsidiaries of the same parent corporation. OCERS has offered no theory allowing the Court to attribute the contacts of one corporation to another under such circumstances.¹³

OCERS does not allege that any master agreement governs its claims against the remaining four defendants.¹⁴ The Court lacks personal jurisdiction over these defendants with respect to OCERS's claims for the same reason it lacks personal jurisdiction over them with respect to the other plaintiffs' claims.

In sum, the claims of all plaintiffs except OCERS against the sixteen moving defendants are dismissed for lack of personal jurisdiction. For the...