Personal Jurisdiction Over Brazilian Bank Executive Based On His Approval Of A Press Release Used In SEC Filings

The World in U.S. Courts: Winter 2018 - Personal Jurisdiction/Forum Non Conveniens | September.29.2017

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In re Banco Bradesco S.A. Securities Litigation, US District Court for the Southern District of New York, September 29, 2017

In this securities class action, plaintiffs sued Banco Bradesco S.A. and several of the Bank’s senior executives, including Domingos Figueiriedo de Abreu, alleging violations of the Securities and Exchange Act of 1934. Brazilian prosecutors had previously indicted the Bank and several executives for violations of Brazilian anti-corruption law stemming from a complicated bribery scheme aimed at securing favorable tax rulings from a Brazilian tax tribunal. The complaint in this case claimed that statements made by the Bank were misleading in light of the previously-charged crimes and other bribery schemes, and violated the US securities laws In connection with purchases of preferred American Depositary Shares of the Bank. As relevant here, defendant Abreu moved to dismiss the claims against him for lack of personal jurisdiction.

The District Court in New York rejected Abreu’s argument. The Court noted that that the Exchange Act extends personal jurisdiction “to the limit of the Due Process Clause,” and so the only relevant test was that under the US Constitution: i) whether Abreu had sufficient “minimum contacts” and ii) whether exercising personal jurisdiction over Abreu would comport with “traditional notions of fair play and substantial justice.” On the first factor, the Court noted that because the Exchange Act authorizes worldwide service of process, Abreu’s contacts with the US as a whole, not just with the forum State, were to be considered. The plaintiffs were required to show that Abreu had “purposefully availed” himself of the privilege of doing business in, or directed his actions toward, the US, and the Court found their proffers sufficient: The allegation that Abreu was aware of the Bank’s bribery scheme when he signed off on a press release that was filed with the SEC and his senior positions with the Bank supported the inference that he knew the statements would be relied upon by US investors. Because the allegedly misleading statement formed a core component of the plaintiffs’ claim, the Court also concluded their claim arose from Abreu’s contacts with the US.

As to fairness, the Court noted that once minimum contacts have been established, a defendant must demonstrate “a compelling case” that jurisdiction would be unreasonable in order to defeat personal jurisdiction. Abreu in fact made no such assertion, but the Court independently reviewed the facts and found the assertion of jurisdiction reasonable. First, it concluded that personal jurisdiction would not impose a significant burden on Abreu (especially as he made no argument on this point). Second, it noted that, as plaintiffs were suing under federal law, the US judicial system had an obvious interest in resolving the case in the US, and that the plaintiffs’ interest in a convenient and efficient resolution was likewise “self-evidently strong.”

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