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finding no jurisdiction because the heart of the matter was the defendants' defrauding the plaintiff, causing him to wire funds to banks accounts in their control, but the fact the defendants' accounts were in European banks was "incidental" and not "legally significant" (citing Bank of New York , 861 F.Supp. at 232 )
Summary of this case from Luby's Fuddruckers Restaraunts, LLC v. Visa Inc.Opinion
11 CV 2740 (VB)
12-19-2011
SAMUEL WEISS, Plaintiff, v. SOLOMON HAGER, IRVING GOLDSTEIN, PHILIP PISCITELLO, SAMUEL RABINOWITZ, PETER LOETSCHER, and CAPITAL ONE, N.A., Defendants.
MEMORANDUM DECISION :
Plaintiff Samuel Weiss brings this action alleging fraud, conspiracy to commit fraud, conversion, negligent misrepresentation, breach of fiduciary duty, breach of contract, negligent supervision, negligent failure to train, negligence per se, and violations of New York General Business Law Section 349. Defendants have filed a motion to dismiss (Doc. #7), and plaintiff filed a motion to remand this action to the Supreme Court of New York, Rockland County. (Doc. #19.) For the reasons set forth below, plaintiff's motion to remand is GRANTED and defendants' motion to dismiss is DENIED as moot.
BACKGROUND
For purposes of ruling on the motions, the Court accepts all factual allegations of plaintiff's complaint as true.
Plaintiff opened bank accounts at the Williamsburg, New York, branch of defendant Capital One. Defendant Solomon Hager was employed by Capital One as a "business concierge."
Among other things, Hager's responsibilities included establishing, on Capital One's behalf, long-term personal relationships with large depositors by performing various complimentary services for such depositors, and advising them on their banking needs, goals, and comfort levels. Hager accessed Capital One's customer account information to identify customers whom Capital One believed should be targeted for business concierge attention. Hager sat at a desk at the front of the Williamsburg branch of Capital One and greeted customers as an authorized representative of Capital One.
Consistent with his responsibilities, Hager introduced himself to plaintiff during plaintiff's visit to Capital One and established a personal relationship with him. Eventually, Hager called plaintiff to discuss certain issues relating to plaintiff's account at the Capital One. Hager represented that he could provide advice regarding investments.
Hager suggested that he and plaintiff meet with defendant Irving Goldstein to discuss investment opportunities. Hager assured plaintiff that Goldstein was a highly trustworthy individual with strong connections to the financial world. In reliance on Hager's assurances, plaintiff met with Hager and Goldstein.
During the meeting, Hager and Goldstein advised plaintiff that they were a position to help him invest in an exclusive, lucrative, and low-risk, investment. Hager and Goldstein told plaintiff that to be eligible to invest in the program they recommended, plaintiff would have to provide detailed personal and Capital One account information to various government entities. Hager faxed to Goldstein confidential information about plaintiff's Capital One accounts.
Hager and Goldstein told plaintiff they would help him apply to an overseas securities trading program. However, according to plaintiff, Hager and Goldstein did not have access to any trading programs. Hager and Goldstein provided this, and other, fraudulent investment advice to plaintiff in a series of phone calls.
Hager and Goldstein introduced plaintiff to the other defendants, and based on the individual defendants' various fraudulent misrepresentations plaintiff (1) entered into a purported joint venture with a company that did not exist; (2) put up his money, held in Capital One accounts, approximately $40 million, as security for trading done by the joint venture; (3) wired substantial sums of money to various European bank accounts, which were controlled by defendants, concerning various purported financial and legal issues related to the purported trading programs; (4) sent $12 million to fund a real estate venture in Florida; (5) wired $2.5 million to various accounts as "release fees" for Reuven Malek, who was falsely represented to plaintiff as a financial expert and the nephew of Alan Greenspan; and (6) wired Malek $350,000 to an account in an Israeli bank.
Throughout this time period, individual defendants continued to tell plaintiff that his trading accounts were making large profits. However, according to plaintiff, this was untrue and defendants fraudulently obtained, in total, $22 million from plaintiff.
On November 12, 2010, plaintiff filed a complaint in the Supreme Court of New York, Rockland County. Capital One filed a notice of removal on April 21, 2011. On April 28, Capital One filed a motion to dismiss. On June 20, plaintiff filed a motion for remand to the State court.
DISCUSSION
Because plaintiff's motion to remand challenges the Court's subject matter jurisdiction to hear this case, the Court will address it first. See Bank of N.Y. v. Bank of Am., 861 F. Supp. 225, 227-28 (S.D.N.Y. 1994). When considering a motion to remand, the district court accepts as true all relevant allegations contained in the complaint and construes all factual ambiguities in favor of the plaintiff. See Fed'l Ins. Co. v. Tyco Int'l Ltd., 422 F. Supp. 2d 357, 391 (S.D.N.Y. 2006).
A party may remove a case from state court to federal court only if the action is one over which the federal court would have had original jurisdiction. 28 U.S.C. § 1441(a). In order to demonstrate that removal is proper, the removing party bears the burden of showing the existence of federal jurisdiction. The rules regarding removal are to be strictly construed. In re Methyl Tertiary Butyl Ether Prods. Liab. Litig., 342 F. Supp. 2d 147, 151 (S.D.N.Y. 2004). "[F]ederal courts are courts of limited jurisdiction and lack the power to disregard such limits as have been imposed by the Constitution or Congress." Durant, Nichols, Houston, Hodgson, & Cortese-Costa, P.C. v. Dupont, 565 F.3d 56, 62 (2d Cir. 2009). Once the question of jurisdiction is raised, the burden of establishing subject matter jurisdiction rests on the party asserting such jurisdiction. Thomson v. Gaskill, 315 U.S. 442, 446 (1942).
Capital One argues that this Court has jurisdiction over this case under the Edge Act, which provides for federal jurisdiction where one of the parties is a federally chartered bank and the suit is "of a civil nature at common law or in equity . . . arising out of transactions involving international or foreign banking . . . ." 12 U.S.C. § 632. There is no dispute that defendant is a United States chartered bank. The present legal dispute concerns whether this suit "arises out of transactions involving international or foreign banking."
Capital One asserts two main arguments in support of this Court's jurisdiction over this case: plaintiff's case directly arises out of international banking operations and, alternatively, even if this Court finds that plaintiff's claims are only indirectly connected to international banking operations, the Court still has jurisdiction because the Edge Act broadly applies to claims that involve, in any way, international banking transactions or financial operations. Plaintiff argues his claims only incidentally implicate international banking, and, therefore, Edge Act jurisdiction does not exist over this case.
The Second Circuit interpreted and applied Section 632 in Corporacion Venezolana de Fomento v. Vintero Sales Corp., 629 F.2d 786 (2d Cir. 1980). That case involved complex financial arrangements among Venezuelan, Swiss, and Canadian entities, as well as a United States chartered bank. Id. at 791-92. The Second Circuit found that the "banking" aspect of Section 632 was not met when the transaction in question was a private placement between foreign, non-bank corporations. Id. at 792. Further, the Court questioned whether a foreign corporation's "mere sale" of notes in the United States to a Canadian bank could be considered "foreign banking." Id.; see Lazard Freres & Co. v. First Nat'l Bank of Md., 1991 WL 221087, at *1 (S.D.N.Y. Oct. 15, 1991) (holding that Venezolana "rejected an expansive reading" of the Edge Act's jurisdictional provision).
"[A] district court cannot find that it has § 632 jurisdiction merely because there was a federally chartered bank involved, there were banking-related activities, and there were foreign parties." Lazard Freres & Co., 1991 WL 221087, at *2. Courts must carefully examine the nature of the transaction said to ground Section 632 jurisdiction. Bank of N.Y. v. Bank of Am., 861 F. Supp. at 232.
The Court holds that the international banking transactions alleged in plaintiff's complaint are not legally significant, and thus plaintiff's claims do not arise out of international banking transactions as required by the Edge Act. On the contrary, plaintiff's claims arise out of various alleged frauds perpetrated against him in the United States. Plaintiff claims he was defrauded by Hager at a Capital One branch in New York and through various phone conversations with Hager and the other defendants. Plaintiff's claims rest solely on state law and relate to international banking only insofar as the defendants fraudulently convinced plaintiff to wire money to various European bank accounts which were controlled by defendants.
This connection is incidental, or as plaintiff argues, fortuitous; the defendants could have convinced plaintiff to send his money anywhere. That plaintiff sent money to European bank accounts is not integral to his claims. The basis of plaintiff's claims is that he gave defendants money because of defendants' allegedly false promises. Capital One is sued because of its alleged negligence in, among other things, failing to supervise its employee or agent and for failing to protect the confidentiality of plaintiff's personal and account information. This case involves no banking law issues, and none of the European banks that received plaintiff's money are sued in the complaint.
The Court agrees with the reasoning of Judge Preska's decision in Bank of N.Y. v. Bank of Am., holding that the banking aspect of the jurisdictional transaction must be legally significant in the case. See 861 F. Supp. at 233. Here, the incidental wire transfers to various European bank accounts are not legally significant. Therefore, the Edge Act does not confer jurisdiction over this action.
The Court recognizes that Judge Sweet has disagreed with Judge Preska's decision in Bank of N.Y. v. Bank of Am. See In re Lloyd's Am. Trust Fund Litig., 928 F. Supp. 333, 340 (S.D.N.Y. 1996). Judge Sweet stated that Judge Preska's interpretation of Section 632 is inconsistent with the text of that section, and Section 632 jurisdiction applies "even in cases based on state law causes of action and containing only an incidental connection to banking law." See id. However, absent any controlling authority to the contrary, this Court agrees with Judge Preska that such an "interpretation - that a banking transaction need only appear somewhere in the chain of causation - makes federal jurisdiction turn on chance rather than substance." Bank of N.Y. v. Bank of Am., 861 F. Supp. at 233. The Court's view is consistent with the narrow construction of removal statutes. See In re Currency Conversion Fee Antitrust Litig., 2003 WL 22097502, at *1 (S.D.N.Y. Sept. 10, 2003) ("Removal statutes are construed narrowly and all uncertainties are resolved in favor of remand in order to promote the goals of federalism, restrict federal court jurisdiction, and support the plaintiff's right to choose the forum."); Contitrade Servs. Corp. v. Eddie Bauer Inc., 794 F. Supp. 514, 516 (S.D.N.Y. 1992); accord Somlyo v. J. Lu-Rob Enters., Inc., 932 F.2d 1043, 1045-46 (2d Cir. 1991) ("In light of the congressional intent to restrict federal court jurisdiction, as well as the importance of preserving the independence of state governments, federal courts construe the removal statute narrowly, resolving any doubts against removability.").
In any event, In re Lloyd's American Trust Fund Litigation involved Citibank's operation of bank trust accounts "for the benefit of and on instructions from individuals and entities all over the world." 928 F. Supp. at 339. In that type of case, as Judge Buchwald noted, when banking activities predominate, the disagreement between Judge Sweet and Judge Preska need not be resolved because jurisdiction will likely be found. See Pinto v. Bank One Corp., 2003 WL 21297300, at *5 (S.D.N.Y. June 4, 2003). The complaint in Pinto required the court to resolve under what conditions a bank could extend credit card loans to customers who were gambling over the internet and expect to have those loans paid back. See id. Banking activities were "indispensable to this legal analysis." Id. In the present case, banking activities do not predominate and are not indispensable to the case.
Furthermore, the only international aspect of this case involves an agreement "made in connection with another transaction that was international in character." Lazard Freres & Co., 1991 WL 221087, at *2. That plaintiff wired money to various European bank accounts is not integral to plaintiff's claims. Plaintiff's claims turn on whether plaintiff gave defendants money in reliance on their allegedly false promises of profits. The indirect connection between the claim giving rise to the suit and international banking does not suffice for jurisdiction under Section 632. See also Telecredit Serv. Ctr. v. First Nat'l Bank, 679 F. Supp. 1101, 1103 (S.D. Fla. 1988) (granting motion to remand after case was removed under Section 632 because the potential liability did "not stem from the supposed foreign aspect of the transaction, but from the alleged fraud of the domestic corporations" and "[o]ne could hardly say that the nature of the transaction [involved] international banking merely because the service being purchased [sale of travel club memberships] was to be consumed in a foreign land").
Accordingly, this Court finds that Capital One has not established its right to a federal forum.
CONCLUSION
For the foregoing reasons, plaintiff's motion to remand (Doc. #19) is GRANTED. Accordingly, defendants' motion to dismiss (Doc. #7) is DENIED as moot. The Clerk is instructed to terminate these motions.
The Clerk is ordered to dismiss this case and remand it to the Supreme Court of New York, Rockland County. Dated: December 19, 2011
White Plains, NY
SO ORDERED:
/s/_________
Vincent L. Briccetti
United States District Judge