District Court Finds No Personal Jurisdiction over Foreign Nationals, Companies, and Trusts Connected to Failed Investment Arrangement Between NY Investment Broker and Deceased French Investor

The World in U.S. Courts: Fall 2015 - Personal Jurisdiction/Forum Non Conveniens | July.27.2015

Jonas v. Estate of Leven, U.S. District Court for the Southern District of New York, July 27, 2015

A New York investment broker, Stanley Jonas, brought suit in federal court in New York against eleven foreign individuals and entities for breach of an alleged oral investment agreement. The case arose out of investing activity by Gustave Leven, an individual associated with Perrier mineral water. Jonas alleges that Leven failed to invest the full USD550 million he had promised Jonas in a 2006 oral agreement. Leven has since died.

Jonas filed suit in 2013, asserting that the foreign individuals and entities are responsible for Leven's breach of contract under alter ego or "hidden principal" theories. Six of the eleven defendants in the action moved to dismiss on the basis that the Court lacked personal jurisdiction over them.

Reviewing the New York specific personal jurisdiction statute, the Court first found that none of the moving defendants transacted business in New York. The meetings to negotiate the investment took place in France and Switzerland, following Jonas's marketing of his investment strategy to Leven in Paris; the defendants who attended the meetings are citizens of France and Switzerland; the money for the investment was located in Switzerland and never flowed to New York. The Court concluded "[t]his factual recitation reveals the astonishing lack of allegations linking plaintiffs' [breach of contract claim] to New York." Instead, the only connection to New York was that it is plaintiff's place of business and the Court found that the occurrence of some communications from Europe to Jonas in New York was an inadequate basis for jurisdiction.

Second, the Court addressed the impact of a lawsuit filed in New York in 2008 related to the failed investment. The suit was filed by Barneli & Cie SA, a Panamanian corporation of which Leven was the disclosed principal, allegedly at Leven's behest. If the defendants in the present case were deemed to have been responsible for the 2008 suit, and if that suit was deemed sufficiently related to the present dispute, the Court suggested that the defendants might be seen to have waived and defense based on personal jurisdiction. But the Court concluded that the acts of Barneli were not attributable to the moving defendants because Barneli did not act as their agent or alter ego in the lawsuit. Critically, the Court noted that none of the four moving individual defendants benefitted from the lawsuit in New York. Although each was an officer or director of Barneli, none is alleged to have been a shareholder or owner. Similarly, the Court found no facts supporting Jonas's contention that the two other moving defendants, an Israeli charitable organization and a Swiss trustee of a trust established by Leven, had any ownership interest in Barneli. Finally, under the applicable Panamanian law, the Court concluded it should not pierce Barneli's corporate veil and find it was the alter ego of the moving defendants. Jonas had not made any factual showing that the moving defendants disregarded corporate formalities or otherwise abused the corporate form to perpetuate a fraud.

Third, the Court rejected Jonas's argument that the moving defendants were subject to personal jurisdiction based on alleged tortious acts causing injury inside the state of New York. Jonas's claims sound in breach of contract, and did not allege facts sufficient to plead the tort of fraud.

Fourth, the Court found that ownership of real property—a residential condominium—by two of the individual defendants did not create personal jurisdiction because Jonas's claims were not linked factually to the property.

Finally, the Court found no basis for jurisdiction as a consequence of Barneli's designation of an attorney for service of process in the 2008 New York action. Most critically, the Court held that the New York law authorizing service of process on such an attorney would have only applied during the 2008 New York action, which had concluded before this case was filed in 2013.

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