MANN v. EUROPEAN AMERICAN INVESTMENT BANK AG, No. 1:2011cv00516 - Document 26 (M.D.N.C. 2014)
Court Description: MEMORANDUM OPINION AND RECOMMENDATION OF UNITED STATES MAGISTRATE JUDGE signed by MAG/JUDGE JOE L. WEBSTER on 02/24/2014; that the motion to dismiss for lack of personal jurisdiction pursuant to Federal Rule of Civil Procedure 12 (b)(2) (Docket Entry 16 ) be GRANTED and the action be DISMISSED. (Garland, Leah)
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IN THE UNITED STATES DISTRICT COURT FOR THE MIDDLE DISTRICT OF NORTH CAROLINA RICI{,A,RD SÃ. MANN, ) ) ) ) ) ) ) ) ) ) Plaintiff, V E.UROPE,AN AMERICà N INVE,STMENT BANK AG, Defendant. 1:11CV516 MEMORANDUM OPINION AND RECOMMENDATION OF UNITED STATES MAGISTRATE JUDGE This matter is before the court on Defendant's motion to dismiss for lack of petsonal judsdiction pursuant to Federal Rule of Civil Ptocedute 12þ)à and 1,2þ)Q). (Docket Entry 16.) Plaintiff has filed a response in opposition to the motion. (Docket F;rrtty 21,.) For the following reasons, the coutt will recommend that Defendant's motion to dismiss be gtanted. I. FACTUAL BACKGROUND Plaintiff filed the Complaint in this action onJune against Defendant European,\medcan Investment Bank 28,20'1.'1,, alleging causes of action AG ("Euram Bank') for breach of contract, negligence, fraud, breach of the fiduciary duty of good fatth ard fair dealing, bteach of contract constituting professional rnalpractce, breach inducement. engaged (See, generally, Compl., Docket Entry 1.) As of waranty, and ftaudulent alleged by Plaintiff, tn 2002 he in a "Creative Financial Solutfon" transaction (i.e., tax shelter) desþed and promoted by Eutam Bank, called the "Euram Rowan Strategy." Plaintiff alleges he paid Defendant $875,000 "to engage in the súategy." Qd.ll e.y .A.ccording to the allegations of the Complaint, Defendant "provided a cashless paper entty loan of $7 million to allow Plaintiff to inctease the size of the ttansaction to the tatgeted loan amount of $17 million." (Id. n 9.) Ultimately, the transaction was disallowed by the Intetnal Revenue Service Plaintiff was assessed tax penalties in the amount of $911,869.00. and (1d.1110.) Euram Bank, the only Defendant named in the Complaint, is an Austrian company with its principal place of business in Vienna, à ustria. (See Affrdavit of Senta Penner fl 2, Docket E.rtty 17-1,.) According to Penner, Euram Bank's fotmet Chief Financial Officet and Maraqing Board Member, Euram Bank does not conduct United States, has no affiliates in the United States, or solicit business in the is not incorpotated ot licensed to business in the United States, has no offices or bank accounts in the United States, owns of leases no property in the United States, and pays rio taxes in or to the United States. (Id.à fl 4-8.) Plaintiff alleges that the prrrr,ary contact between Euram Bank and this forum was the loan obtained by Plaintiff from Euram Bank. (Compl. \ 9; see Declaration of à ntonio E. Lewis, Ex. A, Loar. Agreement, Docket E.rtry 18-1.) In his afftdavit, Plaintiff avetred that he was contacted at his home in Nonh Caroltna by Eutam Bank with information tegarding the Rowan tax strategy. ¬1." à ff. 1[ 2, Docket Entty 21,-7.) Plaintiff also alleges that "Defendant used Pali Capital to assist in the U.S. matketing effotts" and that "Tom Seck, 1 For the purposes of this modon, it is not necessary to go into detail about the tax strategy Plaintiff alleges he employed. As descdbed by Plaintiff in his affrdavrt, the tax sttategy "followed scripted steps to generate a deductible loss for the paticipants," Euram "provided the foreþ currency option trading to ptoduce apptoximately $17.5 million USD in deductible ttading loss," and the tax strategy that he paid $875,000 to engage in did not work. @1.'s Aff. TT 5-7, Docket E ttty 21-7.) 2 (ocated in Chadotte, North Catolina) worked in design, marketing and implementation of tax strategies, including the Euram Rowan sttategy." (Compl. 1112.) II. DISCUSSION -,{. Jutisdiction On a Rule 12þ)(2) motion, a plaintiff has the butden "to ptove gtounds for judsdiction by a prepondetance of the evidence." Aþlan F.3d 56, 59-60 (4th Cir. 1,993) (citing Combs u. l-^aboratories, Inc. a. Akqo, N.V., 2 Bakker,886 F.2d 673, 616 (4th Cir. 1989)). Flowever, where the court does not conduct an evidentiary heartng and relies only on the pleadings and afftdavits, a plaintiff need only make a þrinafacie showing of judsdiction. In re (4th Cir. '1997). The district court, in considedng such a Celotex Corþ., 124 tr.3d 61,9, 628 motion, must draw all reasonable infetences adsing from the ptoof, and tesolve all. factual disputes, in the plaintiffls favor. 390, 396 (4th Cir. Carefrst of Md., Inc. u. CarefrstPregnantl Ctrs., Inc.,334F.3d 2003). Once a defendant has ptovided specific denials coîûaLry to a plaintifPs assertion of facts suppotting jurisdiction, a plarnttffs "bare allegations that the defendants had had significant contacts with the [forum] state" ate insuffìcient to establish jurisdiction by a pteponderance of the evidence. Id. at 402-03. The court must perform a two-step analysis when determining if it has personal judsdiction over a non-tesident defendant. Christian Sci. Bd. of Dirs. of tlte First Charch of Chri:t, Sdentist u. No/an,259 F.3d 209,21,5 (4th Cir. 2001). "First, the exercise of jurisdiction must be authodzed by the long-arm statute of the fotum state, and second, the exetcise of personal judsdiction must also compott requirements." Id. North with Fourteenth -,\mendment due process Carolina's long-arm statute states that the state has jurisdiction -) over a defendant "engaged in substantial activity within this State, whethet such activity is wholly intetstate, intrastate, ot otherwise." N.C. Gen. Stat. S 1-75.4(1)(d) (2013). Notth Carolina's long-arm statute "has been interpreted to extend to the outer limits allowed by the Due Process Clause." L.e Bleu Corp. u. Standard Capital Grp., Inc., 11 F.,{.pp'x377,379 (4th Cir. 2001). "Thus, the dual jurisdictional requirements collapse into a single inquiry as to whethet the defendant has such 'minimal contacts'with the forum state that'maintenance the suit does not offend 'ttadittonal notions F .3d 209 , 215 (4th Clt. 2001) (citing Int'l of fatt play and substantial justice."' S ltoe Co. u. If,/asltington, 326 U .5. 31,0, 316 of Nolan, 259 (1 945). Second, the court must determine that the exercise of jurisdiction complies with the tequirements of the Due Process Clause. "Due process requires that in otder to subject a defendant to personal jurisdiction, the defendant must have 'certaln minimum contacts with [the forum state] such that the maintenance of the suit does not offend traditional notions falr play and substantial justice."' Nichols a. G.D. Searle dz Co.,991, F.2d 1195, (4th Ctt. 326 U.S. at 31,6). "These contacts must be of such a level that they 1,993) (quoting Int'l are equivalent to physical Shoe, 1,1,99 of ptesence in the fotum state so that it would be fair to hale a defendant into court in the forum based on âny claim taised against the defendant no matter where the facts undetþing the claim arose." løb. Corp. of Am. Holdings u. Schurnann,474F. Srrpp. 2d758,761 (à 4.D.N.C. 2006) (citation omitted). Since International Shoe was decided, courts have distinguished between genetal and specific judsdiction. Gooþear Dønlop Tires Operations, S.A. u. Brown, 131 S. Ct.2846,2853 Q011). Specific, or case-linked, judsdiction "depends on an'af[tha:d.ofn] between the forum and the undetþing controversy' .that takes place 4 in the fotum State and is thetefote subject to the State's A Adjødicate: Sugested regrtlaljLon." Id. (quoting Von Mehren & Truatman, Jarisdiction to Anaþsis,19 Harv. L. Rev. 1,'1,21,,1136 (1.996)). Genetal judsdiction, on the othet hand, may be asserted over a corporation of another state "when their affiliations with the State are so 'continuous and systematic' forum State." Scan, Inc. u. Goodlear, 131 S. Ct. at 2851, as to rendet them essentially at home in the (citng Int'l Shoe, 326 U.S. at 317); see also AI-S Digital Seru. Consaltants, Inc., 293 tr.3d 707 ,71,2 (4th Cir. 2002). Here, Plaintiff has conceded that thete is no basis fot this cotlrt to exercise genetal jurisdiction. à l." Mem. at 1,6-17.) The Court, therefore, will limit its discussion to the issue of specific jurisdiction. B. If SpecificJutisdiction a cause of action atises out of or relates to a defendant's contacts with the fotum State, the court can exercise specific jurisdiction. jurisdiction so as to subject A defendant has minimum contacts with it to specific judsdiction in the forum state if "the defendant's conduct and connection with the fotum State are such that he should teasonably being haled into coutt (1990); see a there." Il/orld-ll/ide also Burger King u. Rød7gwic7,471 anldLcipate Volkswagen Corp. u. IYoodson, 444 U.S- 286, 297 U.S. 462,474 0985). Under this standard, "it is essential in each case that there be some actby which the defendant pulposefully avails itself of the pdvilege of conducting activities within the forum State, thus invoking the benefits and protections of its laws." Hanson u. Denckla,357 U.S. 235,253 (1958). To determine the existence of specific jurisdiction, then, a court considets: "(1) the extent to which the defendant 'purposely avatled' itself of the ptivilege of conducting activities in the State; (2) whether the plaintiffs' claims adse out of those activities directed at the State; and (3) whether the exercise of personal iurisdiction would be constitutionally 'reasonable."' AI-S 5 Scan, 293 tr.3d at 71.2. When determining (1) whether a defendant has purposely availed itself of the privilege of doing business in the forum state, coutts consider a vanety of factots, including: [1] whether the defendant maintains offices or agents in the forum state; [2] whethet the defendant owns property in the forum state; t3] whether the defendant reached into the forum state to solicit ot initiate business; [4] whether the defendant deliberately engaged in significant ot long-tetm business activities in the forum state; [5] whether the parties contractually agreed that the law of the fotum state would govern disputes; [6] whether the defendant made in-petson contact with the resident of the fotum in the forum ste;te îegarding the business relationship; [7] the nature, quality and extent of the parties' communications about the business being transacted; and [8] whether the performance of the contractual duties was to occur within the forum. ConsøltingEng'rs Corþ. u. Geometric Software Solations, Ltd.,561, tr.3d 213,278 (4th Cir. 2009). "If, and only if, [a court] find[s] that the plaintiff has satisfied this fitst ptong of the test fot specific judsdiction need fthe court] move on to a considetation of prongs two and three." Sloane u. L^aliberre, No. 1:08CV381, (quoting Consalting Eng'rs, 561 tr.3d ^t 201,1, WL 29381,17, at x7 O4.D.N.C. July 1,9,201,1) 27 8). The Fourth Circuit has further explained that the second ptong of the analysis "requkes that the defendant's contacts with the forum state form the basis of the suit." Consølting Eng'rs,561 tr.3d ^t 278-79. The third prong requires consideration of additional factors to ensure the apptoptiateness of the forum: (1) the burden on the defendant of litigating in the fotum; (2) the intetest of the fotum state in adjudicating the dispute; (3) the plaintiffs interest in obtaining convenient and effective telief; (4) the shated interest of the states in 6 obtaining efficient resolution of disputes; and (5) the intetests of the states ln futthedng substantive social policies. Id. at279. Pørposeful auailrnent Euram Bank argues in its bdef that none of the "purposeful identifìed by the Fourth Circuit support a finding of availment" factots personal jurisdiction in this case. Qef.'s Mem. at 9, Docket Entry 17.) In suppott of its motion, Euram Bank submitted is an -,{.ustrian affidavits demonsttating that Euram Bank maintained a presence in Noth company which has nevet Catohna- no offices, no property, no employees, no agents, rio contracts and no advertising. pennet Aff. T1[4-8.) Additionally, Euram Bank, thtough Penner, states that law from doing it "does not provide aîy kind of tax advice and is ptohibited so." (1d.1[3.) In a tesponding affidavit, in support of Plaintiff asserts that "[w]ithout any effott on Noth by Austrian specific jurisdiction, þs] patt, þe] was corìtacted at þs] home in Carohna regarding the Rowan tax sttategy." @1.'s Mem. Opp. Mot. Dismiss, Richard Mann (hereinafter "Pl.'s Aff."), Docket Entry request letter Aff. of 21,-7.) Flowever, Plaintiff, Ãn aloan to Euram Bank dated November 20, 2002, stated that he had "not been by puram Bank] of ^ny of titE previously contacted, approached, representatives or affiliates of solicited in respect of the Loart Request but have made this tequest independertly." poan Request Lettet from Mann, Lewis Decl. Ex. B, Docket E.ttty 1,8-2.) Also in this letter, in which Plaintiff calls himself "a sophisticated investor," he states that he has "not received nor relied upon any representation, wanantft assurance fEuram Bank] ot ^ny ot guaraà úee from of [its] representatives or affiliates in making the Loan Request and no advice has been sought or ptoffered by Eutam Bank on or in relation to the sarne." (Id.) 7 Even if this Cout were to not consider this letter, written by Plaintiff, it is clear that Plaintiffs claims do not arise out of the Loan Agteement. Instead, Plaintifls allegations all assert that Euram Bank acted as an advisot to Plaintiff and that bad advice he teceived tesulted in his tax liability. Moreover, Plaintiff himself acknowledges in his memotandum opposing the motion to dismiss that he "was damaged by the tax strategy and not specifically by the Lo^n-" (Pl.'s Mem. ^t1,9.) If, by his own admission, the Loan -Agteement and corresponding options ttansactions are not the basis fot Plaintiffs chim, it follows that specifìc judsdiction cannot dedve from the Loan à gteement and options transactions. à s noted by Defendant, the evidence of the Loan ,{.gteement and options transactions do not establish that Eutam Bank knew of or had advice. Plaintiff does not dispute Defendant's assertion that any involvement it in tax was ptohibited undet Austrian law ftom rendering tax advice. Moreovet, the documents submitted by Plaintiff simply do not support his assetion that Defendant purposefully availed itself of this forum such as to provide a basis fot the exercise of personal jurisdiction. Fot Attachment II, instance, in labeled by Plaintiff as "Marketing Materials Delivered to Plaintiff in Nonh Catohna," Plaintiff puts forward a "schematic overview of the Rowan strategy." (Pl.'s Mem. at 7.) With the exception of a photocopy of a business card of Thomas D. Seck, listing Noth Caroltna address, none a of the othet chatts, diagtams and othet matetials mentions Nonh Caroltna and in fact there is no context given fot the documents or the infotmation contained therein. Plaintiff also submitted copies of multiple transaction confirmations. (Pl.'s Mem., Attachment I, Docket Entry transactions simply do not support, ot suggest 8 21.-1, sheets and pp. 1-36.) These options inarryway,that the ttansactions wete based on any tax strategy recofiunended by, or promoted by, Eutam Bank. As noted by Pennet in his second affidavit, PlaintifPs investment advisots created the options term sheets and sent them to Euram Bank; the options were "drafted undet the industry standard agreements created by the International Swaps and Dedvatives Association ("ISDà ")." Qd Pennet -,{.ff. thl 11-13, Docket Enry 24-1,.) According to Penner, "Euram Bank's sole tole in the options ttansaction was to execute and book the contracts." (1d.1112.) The business card, as mentioned, is a photocopl, and identifìes Thomas Seck as the National Di-tectot, Client Services, fot "Euram Structured Products, a Division American Investment Group." Nowhere does it of the indicate that Seck is affiliated with, ot acting on behalf of, Euram Bank, the defendant here. Plaintiff himself appears to concede this fact, alleging that Seck was acting not on behalf of Eutam Bank but for othet entities. Penner's affidavit clearþ states that "Thomas Seck was never a 'matketing representative' of Eutam Bank . . . rìor did he ever act in any capacity on behalf of Eutam Bank." (2d Penner Aff. I 8, Docket E.rtry 24-1.) In Pennet's first affìdavit, he states that Defendant Euram Bank is not affiliated with Pali Capital or aîy entity in the Eutam Gtoup. (Penner Aff. 1[ 12.¡z Plaintiff simply makes rrraîy assertions about different entities, but fails to offer anything more than his own conclusoly allegations that Eutam Bank acted as 2 ^î advisot to Pl^1ntlf?s weak âttempt to satis$r its burden to establish specific judsdiction by "piercing the corporâte veil," raised for the fust time not in the Complaint but in his opposing Memotandum, is unavailing. (?1.'s Mem. zt 76.) Plaintiff has not met the standatd for pietcing tJre corporate veil, nor has he ptopedy pled such. See Glenn u. llløgner,313 N.C. 450,329 S.E.2d 326,330 (1985); see also Nchmond u. Indalex Lnc.,308 F.Supp.2d 648. 658 (à 4.D.N.C. 2004). Plaintiff has not presented any evidence, such as significant degtee of conttol, that would suggest tllat any othet individuals ot entities, including Thomas Seck and Pali Capital, wete instrumentalities of Eutam Bank. 9 Plaintiff or committed any acts which would give rise to a cause of action against Eutam Bank. Plaintiff canrìot rely on his own conclusory allegations to establish personal judsdiction. Carefirst, 334 F3d at 402-403. Plaintiffs own letter acknowledges that he afftrma:dvely reached out to Euram Bank. Additionally, Defendant offered specific affidavits demonstrating that Euram Bank had neither conducted business in this forum nor purposefully teached out to Plaintiff in North Caroltna. As such, Plaintiff has not met his buden of proving that Defendant purposefully availed itself of the pdvilege of doing business in Noth Carohna so as to form the basis of this court's exercise of petsonal jurisdiction. III. CONCLUSION For the foregoing reasons, this Court RECOMMENDS that the motion to dismiss for lack of personal judsdiction pursuant to Fedetal Rule of Civil Procedute 12þ)Q) (Docket Entty 16) be GRANTED and the action be DISMISSED. l- \f,'dxter Statu ltlagistrrtc Jutlge Dutham, North Caroltna February 24,2014 10
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