District Court Finds Personal Jurisdiction over Kazakh Bank Sued by Panamanian Corporations under the Securities and Exchange Act of 1934

The World in U.S. Courts: Spring 2015 - Personal Jurisdiction

Atlantica Holdings Inc. v. BTA Bank JSC, United States District Court for the Southern District of New York, January 12, 2015

Plaintiffs, all Panamanian corporations, purchased subordinated debt securities in Defendant BTA Bank, a Kazakh bank, in connection with restructurings BTA underwent in 2010 and 2012. Plaintiffs contended that information BTA distributed to creditors and investors during that time contained misrepresentations. When BTA Bank was discharged from bankruptcy, Plaintiffs sued for securities fraud. BTA moved to dismiss for reasons including lack of personal jurisdiction.

The District Court in New York observed that, for claims under the Securities Exchange Act, personal jurisdiction may be asserted to the full extent permitted under the Fifth Amendment's Due Process Clause. To assess whether that requirement has been met, a court must first conduct a "minimum contacts" test asking whether a defendant, through its conduct, could be seen as having intended to invoke the benefits and privileges of United States law. As the Exchange Act permits nationwide service of process, the court looks at contacts with the entire U.S., and not just the forum state, to see whether the test has been met. If sufficient contacts exist, the court then asks whether assertion of personal jurisdiction comports with "traditional notions of fair play and substantial justice."

Here, the court found that BTA had sufficient contacts with the U.S. to support personal jurisdiction. BTA made the allegedly inaccurate information available to creditors and investors within the U.S., and mailed that information directly to Plaintiffs' brokers in Miami. Furthermore, eighty percent of the securities BTA issued in connection with the 2010 restructuring were denominated in U.S. dollars, and those securities were offered for sale in New York. The District Court acknowledged that evidence might eventually show that BTA did not intentionally target the U.S. market, but found that Plaintiffs had made a prima facie showing that jurisdiction existed, which is all that is required to defeat a motion to dismiss for personal jurisdiction.

The court also found that exercising jurisdiction over BTA was fair and reasonable. While BTA is a Kazakh Bank with no U.S. offices, the District Court explained that the reasonableness inquiry is "largely academic" in non-diversity cases brought under a federal law which provides for nationwide service of process such as the Exchange Act, because of the strong federal interests involved.

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