District Court Asserts General personal Jurisdiction over Non-U.S. Companies on Finding that they were “Mere Departments” of Affiliated U.S. Company

The World in U.S. Courts: Summer and Fall 2016 - Personal Jurisdiction/Forum Non Conveniens/ Foreign Sovereign Immunity Act (FSIA) | June.29.2016

SPV Osus Ltd. v. AIA LLC, U.S. District Court for the Southern District of New York, May 24, 2016

Plaintiff SPV sued AIA LLC and several affiliates (the “Access Defendants”) for aiding and abetting in Bernie Madoff’s Ponzi scheme.  Defendants Patrick Littaye and Therry Magon de la Villehuchet co-owned AIA LLC.  While the Court ultimately dismissed the case for failure to state a claim, it first found that the Access defendants were subject to the Court’s personal jurisdiction despite being incorporated in foreign nations.

AIA LLC was a Delaware corporation with its principal place of business in New York and was thus subject to the New York Court’s jurisdiction.  But none of the Access Defendants was incorporated in the U.S.  The District Court in New York thus considered whether personal jurisdiction could be asserted against the defendants based on either of two theories.  First general personal jurisdiction could apply to a defendant whose contacts were so substantial and continuous that it was essentially “at home” in the forum.  Alternatively, specific personal jurisdiction would attach with a less demanding showing—one of minimum contacts—but would require that the claims arise out of those contacts.

As regards general jurisdiction, none of the Access Defendants met the usual test—whether it was a corporation organized under or having its principal place of business in New York.  But the Court also considered whether any was a “mere-department” or “alter ego” of another entity over which jurisdiction could be asserted.  The Court described that inquiry as requiring an examination of (1) the financial interdependence of the entities, (2) interference in personnel selection and assignment, (3) the extent to which corporate formalities are observed, and (4) the degree of control over marketing and operational policies.

The Court found that each of the four Access Defendants was at least 80% owned by Littave and Villehuchet, despite being incorporated in various foreign nations.  None of the Access Defendants had any employees and were entirely managed by Littave and Villehuchet personally or by employees from the AIA LLC office in New York.  In fact, all marketing and operational decisions were coordinated through the New York office.  Also, the plaintiff provided evidence that the Access Defendants held themselves out as a single integrated firm based in New York City, with employees divided not by office, but by function. Thus, the Court held that the plaintiff made a prima facie showing that the Access defendants were all mere departments of AIA LLC, which was enough to survive a motion to dismiss on jurisdictional grounds.  

The Court also considered specific personal jurisdiction, and concluded that held that Littaye’s alleged meetings with Madoff in New York on a quarterly basis satisfied the test for “minimum contacts,” and made the assertion of jurisdiction over him fair.

RETURN TO Summer and Fall 2016 Edition

RETURN TO The World in U.S. Courts Home Page

U.S. Laws Discussed

Editorial Board