Personal Jurisdiction — Minimum Contracts Based on Cause of Action “Arising out of or Relating to” a Contract (Circuit Split) — Significance of Choice of Law Clause

SIPC v. Bernard L. Madoff Inv. Secs., 460 B.R. 106 (Bankr. S.D.N.Y. 2011):

The Second Circuit has indicated that entering into a contract with a New York choice of law clause is "a significant factor in a personal jurisdiction analysis because the parties . . . invoke the benefits and protections of New York law." Sunward Electronics, Inc. v. McDonald, 362 F.3d 17, 22-23 (2d Cir. 2004); AIG Financial Products Corp. v. Public Utility Dist. No. 1 of Snohomish County, Wash., 675 F. Supp. 2d 354, 364 (S.D.N.Y. 2009). Maxam Limited entered into and performed under the Investment Management Agreement, which included such a clause: "[t]his Agreement shall be governed by, and construed in accordance with, the substantive laws of New York applicable to contracts made and to be performed entirely therein without regard to any conflict of laws principles, and the parties hereto hereby consent to the non-exclusive jurisdiction of the New York courts." Declaration of Marc D. Powers in Support of Trustee's Application by Way of Order to Show Cause Why An Injunction Should Not Issue filed by Marc D. Powers on behalf of Irving H. Picard, Esq., Trustee for the Substantively Consolidated SIPA Liquidation of Bernard L. Madoff Investment Securities LLC and the Estate of Bernard L. Madoff [hereinafter "Powers Declaration"], Ex. I, ¶ 16 (Dkt. No. 42) (emphasis added).

***

[S]everal of the Trustee's claims "arise out of or relate to" these contacts with the United States such that Maxam Limited "should reasonably anticipate adjudication of these transactions to take place" here. Chais, 440 B.R. at 279 (Bankr. S.D.N.Y. 2010) (citing Burger King, 471 U.S. at 472). Without Maxam Limited's transferring assets to and from the United States, there could not be claims for subsequent transfers against it. Farmers Ins. Exch. v. Portage La Prairie Mut. Ins. Co., 907 F.2d 911, 914 (9th Cir.1990) ("An action arises out of contacts with the forum if, 'but for' those contacts, the cause would not have arisen."); In re Ski Train Fire in Kaprun, Austria on Nov. 11, 2000, 257 F.Supp.2d 717, 730 (S.D.N.Y. 2003) (citing the "but for" test for specific jurisdiction).

Footnote 3. While there is a split among circuits in the standard employed to determine whether a cause of action "arises out of or relates to" a defendant's contacts, Second Circuit cases have been summarized as holding that the degree of "relatedness" required varies in relation to the "overall picture" of the defendant's contacts. See Del Ponte v. Universal City Dev. Partners, Ltd., No. 07-CV-2360, 2008 U.S. Dist. LEXIS 3528, 2008 WL 169358, at *10 (S.D.N.Y. Jan. 16, 2008). Here, the causes of action are so related to the contacts at issue that specific jurisdiction is supported under any of these tests.

Share this article:

Share on facebook
Facebook
Share on twitter
Twitter
Share on linkedin
LinkedIn
Share on email
Email

Recent Posts

Archives