Transfer $8 Million Out Of Accounts In New York? That Action Alone Is Not Sufficient To Establish Personal Jurisdiction

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In Henkel v. Masiero, Index No. 650425/2012 (N.Y. Sup. Ct., N.Y. Cnty. Mar. 18, 2013) (the “Opinion”), the Supreme Court (J. Bransten) granted the defendants’ motion to dismiss for lack of personal jurisdiction on the grounds that one telephone call with a bank was not sufficient to establish jurisdiction under Section 302(a)(1) of the CPLR, even though almost all of the assets of a corporation were transferred as a result of that call.

In 2006, Annibale Raglione (“Raglione”) established Bidone Nero Ltd. (“Bidone”), a corporation organized under the laws of the British Virgin Islands, to hold cash and investments for himself, his sister, Defendant Floriana Raglione Masiero (“Floriana”), Floriana’s son, Defendant Adrian Salvador Masiero (“Adriano”), and Raglione’s great niece, Plaintiff Ana Paula Henkel (“Henkel”). Raglione, Floriana, Adriano, and Henkel jointly owned Bidone, but Raglione and Floriana were its only directors. All of Bidone’s owners and directors were Brazilian citizens domiciled in Brazil. Shortly after being incorporated, Bidone opened accounts at HSBC in New York City and deposited its assets into those accounts.

On March 15, 2010, Raglione died and his interests in Bidone were distributed equally among Floriana, Adriano, and Henkel. As of March 31, 2010, Bidone had almost $9 million in cash and investments in its accounts at HSBC. Shortly after her brother’s death, Floriana sent HSBC a “Signing Resolution” designating her husband, Defendant Giuliano Masiero, as an authorized signatory on the HSBC accounts. Henkel alleged that Defendants also “commenced a systematic looting of the Bidone [a]ccounts without [Henkel’s] knowledge or consent” including: (1) incurring $86,000 in credit card charges; (2) transferring $310,000 to companies in Florida and China; (3) transferring $50,000 to relatives and friends in Italy; and (4) transferring almost $8 million, all cash and investments in the Bidone accounts, to two other HSBC accounts in New York. Henkel alleged that the $8 million transfer was made by a single telephone call with Mr. Moises Chami.

Henkel asserted jurisdiction under CPLR § 302(a)(1), which provides that “[a]s to a cause of action arising from any of the acts enumerated in this section, a court may exercise personal jurisdiction over any non-domiciliary … who … transacts any business within the state ….” Since that statute is a single act statute, the court may exercise personal jurisdiction if the defendant’s activities “‘were purposeful and there is a substantial relationship between the transaction and the claim asserted.” Opinion, at 4 (quoting Kreutter v. McFadden Oil Corp., 71 N.Y.2d 460, 467 (1988)). As the Court of Appeals held in Fischbarg v. Doucet, 9 N.Y.3d 375, 380 (2007), “[p]urposeful activities are those with which a defendant, through volitional acts, avails itself of the privilege of conducting activities within the forum State, thus invoking the benefits and protections of its laws.” Opinion at 4.

In attempting to defeat the motion, Henkel, relying upon Deutsche Bank Securities, Inc. v. Montana Board of Investments., 7 N.Y.3d 65 (2006), and L.F. Rothschild, Unterberg, Towbin v. Thompson, 78 A.D.2d 795 (1st Dep’t 1980), asserted that a non-domiciliary can be subject to personal jurisdiction under CPLR § 302(a)(1) by opening and actively maintaining a brokerage account in New York. Opinion at 5. Justice Bransten discussed those cases and pointed out that they involved the negotiation and purchase or sale of a large volume of securities and, therefore, they were not on point. In contrast, Henkel alleged that Floriana made one telephone call to HSBC authorizing the $8 million transfer. Justice Bransten held that such activity was not sufficient to demonstrate that Floriana purposeful availed herself of the benefits and protections of New York’s laws. Opinion at 6. Because Henkel attempted to assert jurisdiction over Giuliano and Adriano as “co-conspirators” and that was based on whether the Court had jurisdiction over Floriana, Justice Bransten granted their motion to dismiss as well.

This case is a reminder that courts focus on the specifics on particular activities that are alleged to provide the basis for the exercise of long-arm jurisdiction under CPLR § 302(a)(1). In evaluating the activities, courts tend to focus on the number of contacts with New York relating to the activities, the amount of money that was connected with the activities, and the sophistication of the party alleged to be conducting business in New York. For a more detailed discussion of personal jurisdiction cases, see our New York Law Journal articles from 2007, 2008, 2009, and 2013.

Topics:  HSBC, Money Transfer, Personal Jurisdiction

Published In: Business Organization Updates, Civil Procedure Updates, Finance & Banking Updates, International Trade Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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