In a recent decision in Anderjaska v. Bank of America, N.A., et al., the Southern District of New York decided that three national banks were not subject to general jurisdiction in New York for allegedly aiding and abetting a Ponzi scheme.

Anderjaska highlights the utility of procedural mechanisms when defending against Ponzi-related allegations in a forum where a bank neither has its principal place of business nor its place of incorporation.  Such procedural tools should not be overlooked as a means to defend litigation.

I. The Facts of Anderjaska

Plaintiffs brought a class action against Bank of America, Capital One, Wells Fargo, JPMorgan Chase, and Citibank alleging that these financial institutions aided and abetted a fraudulent investment scheme operated by internet-based binary options trading platforms.

Bank of America, Capital One, and Wells Fargo each filed a motion to dismiss based on lack of personal jurisdiction.  The banks argued, and the court agreed, that each bank neither had been incorporated in New York nor had its principal place of business in New York, which are typically the only bases upon which general personal jurisdiction can be predicated for entity defendants.  Because the plaintiffs did not allege or argue that the underlying action arose out of activities in New York, specific personal jurisdiction could not be exercised over the banks, and the plaintiffs were required to carry the heavy burden of an exceptional circumstance to the general rule of general jurisdiction.

II. The Southern District of New York’s Decision

After weighing the parties’ arguments, the Court dismissed Bank of America, Capital One, and Wells Fargo, finding that the plaintiffs could not show that an “exceptional circumstance” existed to exercise general jurisdiction over them.  The court explained that exceptional circumstances exist for purposes of general jurisdiction where, for example, a foreign corporation is forced to temporarily relocate to another forum to operate.

While plaintiffs presented evidence that each bank had a “substantial number of physical banking locations and ATMs, a large office space, and a large workforce in New York,” the Court found that they “generally fail[ed] to compare those figures to each bank’s national or global presence.” For example, plaintiffs submitted evidence that Capital One’s commercial loan portfolio is concentrated in the tri-state area of New York, New Jersey, and Connecticut and that New York is the number one state for retail banking business.  However, overall, the evidence submitted by plaintiffs showed that only 1.3% of Capital One’s retail banking business is in New York, which the court found persuasive that exceptional circumstances were lacking.  Thus, general jurisdiction was not applicable.

III. Anderjaska’s Impact

This decision is an exemplar of the importance of civil procedure, demonstrating that even the nation’s largest banks are not amenable to suit anywhere solely because of a national presence.  It is an effective tool in litigation and one that should not be overlooked.  This is true in a case like Anderjaska where the plaintiff sought to lump numerous banks into one action in one forum.  In seeking to dismiss the case based on procedural issues, the banks were able to separate themselves and, if litigation is refiled in the appropriate forum, streamline the issues that relate directly to the bank at issue.