Mogollon v. Bank of N.Y. Mellon

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SERGIO MOGOLLON, et al., Plaintiffs, v. BANK OF NEW YORK MELLON, Defendant.

Civil Action No. 3:19-CV-3070-N

United States District Court, N.D. Texas, Dallas Division

August 9, 2023

MEMORANDUM OPINION & ORDER

David C. Godbey, Chief United States District Judge

This Order addresses Defendant Bank of New York Mellon's (“BNYM”) motion to dismiss [20]. For the reasons set forth below, the Court denies the motion.

I. Origins of the Motion

This case arises out of the Ponzi scheme perpetrated by R. Allen Stanford, his associates, and various entities under his control (collectively, “Stanford”). The facts of Stanford's scheme are well-established, see, e.g. Janvey v. Democratic Senatorial Campaign Committee Inc., 712 F.3d 185, 188-89 (5th Cir. 2013), and are not recounted in great detail here. Reduced to its essence Stanford's scheme involved the sale of fraudulent certificates of deposit (“CDs”) issued by Stanford International Bank, Ltd. (“SIBL”), an offshore bank based in Antigua. Although Stanford represented to investors that CD proceeds were invested in only low risk high return funds, in reality the CD proceeds were used to finance Stanford's own extravagant lifestyle and pay off previous investors.

In March 2019, Plaintiffs Sergio Mogollon and Colleen Lowe brought this suit in istrict of New Jersey, aspiring to represent a class of CD investors against BNYM. Compl. 1 [1]. Plaintiffs allege that in various ways, primarily tied to its association the clearing firm Pershing LLC, BNYM aided and abetted the Stanford Ponzi scheme. ecember 2019, the Judicial Panel on Multidistrict Litigation (“JPML”) transferred this to the Northern District of Texas. JPML Transfer Order [15]. BNYM subsequently a motion to dismiss, which the Court granted based on New Jersey's statute of ations. Order Granting Mot. Dismiss [40]. However, the Fifth Circuit reversed. ollon v. Bank of New York Mellon, 2022 WL 17716332, at * 1 (5th Cir. 2022). Now, ourt considers the remaining arguments from BNYM's initial motion to dismiss: (1) the District of New Jersey lacks personal jurisdiction over BNYM; (2) that venue is oper in the District of New Jersey; and (3) that Plaintiffs fail to state claims for aiding abetting fraud and aiding and abetting breach of fiduciary duty.

I. The District of New Jersey Has Personal Jurisdiction Over BNYM

In a multidistrict litigation, a transferee court must establish whether jurisdiction venue were proper in the transferor court. See In re Sterling Foster & Co., Inc. rities Litig., 222 F.Supp.2d 289, 300 (E.D.N.Y. 2002). Here, BNYM argues that the ict of New Jersey lacks personal jurisdiction over BNYM. The Court disagrees; tiffs have established specific jurisdiction in the District of New Jersey.

A. Personal Jurisdiction Standard^[1]

“To exercise personal jurisdiction over a defendant, a federal court sitting in diversity must undertake a two-step inquiry.” WorldScape, Inc. v. Sails Capital Mgmt., 2011 WL 3444218, at *3 (D.N.J. 2011) (citing IMO Indus., Inc. v. Kierkert, AG, 155 F.3d 254, 259 (3d Cir.1998)). The first step requires courts to apply the state's long-arm statute, while the second step requires courts to apply principles of due process. Id. In New Jersey, this inquiry conflates to a single analysis because “the New Jersey long-arm rule extends to the limits of the Fourteenth Amendment Due Process protection.” Id. (internal citations omitted.)

Due process permits the exercise of personal jurisdiction over a nonresident defendant when the defendant maintains minimum contracts with the forum such that a suit would not offend “traditional notions of fair play and substantial justice. Id. (quoting Provident Nat'l Bank v. Cal. Fed. Sav. & Loan Ass'n, 819 F.2d 434, 437 (3d Cir.1987)). Plaintiffs bear the burden of establishing personal jurisdiction. D'Jamoos ex rel. Estate of Weingeroff v. Pilatus Aircraft Ltd., 566 F.3d 94, 102 (3d Cir. 2009). However, in the absence of an evidentiary hearing, a plaintiff need only establish a prima facie case of personal jurisdiction and is entitled to have his allegations taken as true and all factual disputes drawn in his favor. Miller Yacht Sales, Inc. v. Smith, 384 F.3d 93, 97 (3d Cir. 2004).^[2] Finally, a plaintiff may show either general or specific jurisdiction. WorldScape, 2011 WL 3444218, at *3. Here, Plaintiffs allege only specific jurisdiction. Pls.' Resp. Br. 3 [32].

B. Plaintiffs Have Established Specific Jurisdiction

The test for specific jurisdiction contains a three-part inquiry: (1) whether the defendant purposefully directed activities into the forum; (2) whether the litigation arises out of or relates to at least one of those activities; and (3) whether the exercise of jurisdiction otherwise comports with fair play and substantial justice. O'Connor v. Sandy Lane Hotel Co., Ltd., 496 F.3d 312, 317 (3d Cir. 2007) (internal citations omitted). Here, BNYM argues only that Plaintiffs have not alleged sufficient minimum contact with New Jersey and that Plaintiffs' claims do not arise from BNYM's activities in the state. The Court disagrees.

1. Plaintiffs Have Alleged Sufficient Minimum Contacts. - Plaintiffs have provided sufficient evidence and allegations that BNYM directed activities to New Jersey. Plaintiffs claim BNYM met with Stanford in New Jersey to “engag[e] in recruiting for Stanford, lend[] reputational enhancement, and solicit[] Stanford's business on behalf of itself and its sister company Pershing.” Pls.' Resp. Br. 7 (citing emails from Pershing to BNYM thanking BNYM for its participation in the Stanford meeting). BNYM allegedly met with Stanford in New Jersey a second time to review its custody services. Id. at 7-8. In addition to these in-person meetings, Plaintiffs allege that BNYM directed material communications to New Jersey regarding its relationships with Stanford. Id. at 8. These communications include due diligence emails, marketing materials, and conference calls. Id. at 8-9.

BNYM does not dispute these factual allegations. See Def.'s Reply Br. 4-5 [35]. And courts have previously held that physical contact with the state along with subsequent communications directed to the state are sufficient to establish personal jurisdiction. See e.g., Heartland Payment Sys., LLC v. Carr, 2019 WL 949120, at *7 (D.N.J. 2019) (finding that emails and phone calls directed to New Jersey provided sufficient minimum contact); Eaton Corp. v. Maslym Holding Co., 929 F.Supp. 792, 797 (D.N.J. 1996) (“[C]ommunications directed into New Jersey go a long way toward establishing minimum contacts.”); Carteret Savings Bank, FA v. Shushan, 954 F.2d 141, 147-48 (3d Cir.1992) (finding sufficient minimum contacts based on one meeting in New Jersey and several telephone calls directed to the state). Accordingly, the Court concludes that Plaintiffs have shown sufficient minimum contacts between BNYM and New Jersey.^[3] 2. Plaintiffs Have Shown That the Litigation Arises Out of BNYM's Contact With New Jersey. - For a defendant's contacts to satisfy the relatedness requirement, “there must be a strong relationship among the defendant, the forum, and the litigation.” Hepp v. Facebook, 14 F.4th 204, 208 (3d Cir. 2021) (internal citation omitted). BNYM argues that this “strong relationship” must include causation. Def.'s Supp. Br. 4-5 [67]; see also O'Connor, 496 F.3d at 323 (imposing a minimum showing of causation to satisfy the relatedness requirement). But the Supreme Court recently rejected the notion that a strict causal relationship is required, instead concluding that “some relationships will support jurisdiction without a causal showing.” Ford Motor Co. v. Mont. Eighth Jud. Dist. Ct., 141 S.Ct. 1017, 1026 (2021). This holding effectively overrules the Third Circuit's previous causation requirement. Rickman v. BMW of N. Am. LLC, 538 F.Supp.3d 429, 441 (D.N.J. 2021) (“[T]he Third Circuit's causation requirement cannot be reconciled with Ford.”). Thus, a plaintiff need only show that a defendant's contacts with a forum are “related enough” to the litigation. Ford Motor Co., 141 S.Ct. at 1031.

Here, Plaintiffs have shown that BNYM's contacts with New Jersey are sufficiently related to their claims for aiding and abetting fraud and aiding and abetting breach of fiduciary duty. Plaintiffs allege that BNYM aided Stanford by helping with recruiting, providing reputational enhancement, assisting with transferring funds, and soliciting Stanford's business. Pls.' Redacted Am. Compl. ¶¶ 82-83; 89-90 [13]. Plaintiffs further allege that these activities occurred in New Jersey through in-person meetings and by emails and phone calls to the state. Pls.' Resp. Br. 9. Thus, BNYM's contact with Stanford in New Jersey gave rise to Plaintiffs' aiding-and-abetting claims. Because Plaintiffs have established sufficient minimum contacts and relatedness to their claims, the Court concludes that the District Court of New Jersey has specific personal jurisdiction over BNYM.

III. Venue is Proper in the District of New Jersey

Under 28 U.S.C. § 1391(b), venue is proper in “a judicial district in which any defendant resides, if all defendants are residents of the State in which the district is located” or “a judicial district in which a substantial part of the events or omissions giving rise to the claim occurred.” 28 U.S.C. § 1391(b)(1)-(2). If no district satisfies the first two options, a suit may be brought in “any judicial district in which any defendant is subject to the court's personal jurisdiction with respect to such action.” 28 U.S.C. § 1391(b)(3). Here, the parties dispute whether a substantial part of the events that gave rise to this litigation took place in New Jersey. Regardless, however, venue is proper because BNYM is subject to personal jurisdiction in the ...