02/28/2012 – Trustees Memorandum of Law in Opposition to Motions to Dismiss filed in the Madoff Adversary Proceedings by Trotanoy Investment Company Ltd. et al before in the Southern District of New York (Manhattan) filed by Baker & Hostetler LLP (New York, NY) attorneys David J. Sheehan, Deborah H. Renner, Sarah Jane T.C. Truong, Samir K. Ranade, Sammantha E. Clegg, Constantine P. Economides and David Choi.
Irving H. Picard, as trustee (the “Trustee”) for the substantively consolidated liquidation of the business of Bernard L. Madoff Investment Securities LLC (“BLMIS”) and the estate of Bernard L. Madoff (“Madoff”), opposes the motions to dismiss for lack of personal jurisdiction filed by three foreign entities Palmer Fund Management Services Limited (“Palmer”), Hyposwiss Private Bank Genève S.A. (“Hyposwiss”), and Access International Advisors Ltd. (“AIA Ltd.”) (collectively, the “Moving Defendants”). The brief is notable for its use of jurisdictional expanding agency relationship and “mere department” relationship theories – forward, backward and through “commonly-controlled” entities. Registered users click here to see a copy of this brief.
The Trustee complaint named as defendants four entities. In addition to the Moving Defendants, the complaint named Trotanoy Investment Company Ltd. (“Trotanoy”). The complaint alleged that Trotanoy was the initial transferee of avoidable transfers from BLMIS. Trotanoy has not challenged personal jurisdiction.
The Trustee did not allege that any of the Moving Defendants was an initial recipient of any initial transfer from BLMIS. The Trustee’s avoidance claims against each Moving Defendant were based on such entity’s alleged status as a subsequent transferee and sought recovery of subsequent transfers from Trotancy. The Trustee also brought claims against the Moving Defendants for unjust enrichment, money had and received and conversion.
The Trustee alleges that each Moving Defendant played a role in supporting Trotanoy’s activities with BLMIS. The Trustee summarized its jurisdictional allegations with respect to each Defendant as follows:
AIA Ltd. purposefully directed activities to the United States to ensure that Trotanoy remained profitably invested with BLMIS, and it purposefully availed itself of the resulting privileges. Additionally, as one component of an integrated network of commonly-controlled Access entities, AIA Ltd. had numerous contacts with the United States through its New York-based affiliates. It engaged in a single business enterprise with these New York affiliates and could not have functioned without the services rendered to it by these New York affiliates in connection with the services it provided to Trotanoy.
Hyposwiss similarly directed activities to the United States. Its employees conducted all of Trotanoy’s activities related to soliciting foreign investors for, and investing with, BLMIS. Moreover, Hyposwiss was so interconnected with Trotanoy that the two entities were virtually indistinguishable, giving rise to agency and “mere department” theories of jurisdiction. Trotanoy effectively acted as Hyposwiss’s fee-generating agent in the United States. Hyposwiss, benefiting from this close relationship, utilized Trotanoy as its mere department.
Meanwhile, Palmer, a wholly-owned subsidiary of Hyposwiss, was controlled by Hyposwiss to such a degree that they were virtually the same entity. By performing Palmer’s work, Hyposwiss acted as Palmer’s agent. Palmer, in turn, was another mere department of Hyposwiss, which fully owned, coordinated, and controlled Palmer. The law is clear that personal jurisdiction exists when one company acts as the agent or mere department of another that is doing business or commits tortious acts in the United States, regardless of whether the corporate veil may be pierced for purposes of liability.