| Lawati v Montague Morgan Slade Ltd. |
| 2013 NY Slip Op 00032 [102 AD3d 427] |
| January 8, 2013 |
| Appellate Division, First Department |
| Abdul Hussain Jaffar Rahmat Allah Al Lawati,Respondents-Appellants, v Montague Morgan Slade Ltd. et al., Defendants, andPeter Rigby, Appellant-Respondent, and JST Lawyers et al., Respondents, et al.,Nominal Counterclaim Defendants. |
—[*1] Schlam Stone & Dolan LLP, New York (Samuel L. Butt of counsel), forrespondents-appellants. D'Amato & Lynch, LLP, New York (David A. Boyar of counsel), for JST Lawyers,respondent. Kissel Hirsch & Wilmer LLP, Tarrytown (Frederick J. Wilmer of counsel), for KeithPark Solicitors, respondent.
Order, Supreme Court, New York County (Melvin L. Schweitzer, J.), enteredJanuary 25, 2012, which granted so much of defendant Rigby's motion to dismiss assought dismissal of plaintiff's Racketeer Influenced and Corrupt Organizations (RICO)claims, and denied so much of Rigby's motion as sought to dismiss the complaint for lackof personal jurisdiction and forum non conveniens, or, in the alternative, to dismiss thecommon-law fraud claims; order, same court, Justice, and date of entry, which granteddefendant Keith Park Solicitors' (KPS) motion to dismiss the complaint as against themfor lack of personal jurisdiction; order, same court and Justice, entered January 26, 2012,which granted defendant JST Lawyers' (JST) motion to dismiss the complaint as againstthem for lack of personal jurisdiction; and order, same court and Justice, entered January26, 2012, which, to the extent appealed from, denied plaintiffs' motion for a defaultjudgment against certain corporate defendants, unanimously affirmed, without costs.[*2]
The complaint sufficiently alleges jurisdictionover Rigby under CPLR 302 (a) (2) insofar as the complaint pleads that Rigby was a partof a conspiracy involving the commission of several overt tortious acts in New York(see Best Cellars Inc. v Grape Finds at Dupont, Inc., 90 F Supp 2d 431, 446 [SDNY 2000] [for purposes of personal jurisdiction, "(t)he requisite relationship between thedefendant and its New York co-conspirators is established by a showing that (a) thedefendant had an awareness of the effects in New York of its activity; (b) the activity ofthe co-conspirators in New York was to the benefit of the out-of-state conspirators; and(c) the co-conspirators acting in New York acted at the direction or under the control, orat the request of or on behalf of the out-of-state defendant" (internal quotation marksomitted)]; Cleft of the Rock Found. v Wilson, 992 F Supp 574, 582-583 [ED NY1998]). Specifically, the complaint, the allegations of which on a motion to dismiss wemust deem to be true (Sokoloff v Harriman Estates Dev. Corp., 96 NY2d 409,414 [2001]; Cron v Hargro Fabrics, 91 NY2d 362, 366 [1998]), pleads thatdefendants Montague Morgan Slade LTD (MMS), albeit through a virtual office,predominantly existed in New York and committed the torts underpinning the conspiracythere. The complaint further pleads that Rigby, to further the conspiracy and to dissuadeplaintiffs from taking any action against the defendants, communicated with theplaintiffs, telling them that their investments were safe and that redemptions would soonbe paid, and reassured plaintiffs that he was in communication with MMS's New Yorkoffice. While the complaint alleges that Rigby was acting under the control and at thebehest of MMS and the co-conspirators, rather than directing MMS to commit tortiousacts in New York, jurisdiction is nonetheless established since the complaint alleges thatRigby was aware of the torts being committed by MMS and other defendants in NewYork (Dixon v Mack, 507 F Supp 345, 351-352 [SD NY 1980] [last prong of thetest set out in Best Cellars Inc. (90 F Supp 2d at 446) is satisfied when it isalleged that the out-of-state co-conspirator has knowledge of the tortious acts beingperpetrated in New York]). Here, the existence of the virtual office in New York createssufficient "minimum contacts" with the State such that assertion of jurisdiction overRigby does not violate "traditional notions of fair play and substantial justice"(International Shoe Co. v Washington, 326 US 310, 316 [1945] [internalquotation marks omitted]; Banco Nacional Ultramarino v Chan, 169 Misc 2d182, 187 [Sup Ct, NY County 1996], affd 240 AD2d 253 [1st Dept 1997]). Wealso note that insofar as plaintiffs pleaded that Rigby, for purposes of furthering the fraudof his co-conspirators, repeatedly reassured plaintiffs that he was communicating withMMS's New York office, he "[b]y joining the conspiracy with the knowledge that overtacts in furtherance of the conspiracy had taken place in New York . . .purposely [availed himself] of the privilege of conducting activities within [New York]"(Cleft of the Rock, 992 F Supp at 585 [second alteration in original and internalquotation marks omitted]). Accordingly, he should not be surprised or heard to complainabout being sued here.
After considering the relevant factors (see Islamic Republic of Iran v Pahlavi,62 NY2d 474, 478-479 [1984], cert denied 469 US 1108 [1985]), the courtprovidently exercised its discretion in declining to dismiss the action against Rigby onforum non conveniens grounds (see CPLR 327 [a]; Pahlavi, 62 NY2d at479). We note that defendants MMS, Montague Morgan Slade Absolute PerformanceFund PLC, Montague Morgan Slade Highly Diversified Fund PLC, and MontagueMorgan Slade 1095 Fund PLC have stipulated to jurisdiction and venue in New York.Further, the motion court declined to dismiss the action as asserted against Rigby'sco-conspirators on forum non conveniens grounds, based on the fact that this is amultijurisdictional action with no single convenient forum amenable to all the parties.[*3]
The complaint sufficiently alleges a claim forfraud against Rigby based on the various statements concerning the redemptions ofplaintiffs' investments (seeEurycleia Partners, LP v Seward & Kissel, LLP, 12 NY3d 553, 559 [2009]).The allegations that Rigby had told one of the plaintiff investors that he wascommunicating with the New York office to resolve an issue concerning the contractnotes, and had made references to operations in that office, while a New York office didnot actually exist, permit a reasonable inference that he knew the statements related to theinvestment redemptions were false (see Pludeman v Northern Leasing Sys., Inc., 10 NY3d 486,492-493 [2008]). Further, the complaint sufficiently alleges that the statements causedplaintiff to delay seeking redemption and initiating legal proceedings, thereby permittingdefendants to funnel monies to themselves in the interim.
Plaintiffs also stated a claim for fraud against Rigby based on the false statementsconcerning the Wall Street office, the amount of funds under MMS's management, theMMS Funds' past performance, the investment of the monies, the guaranteed returns, andthe valuations of the investments. Although the complaint does not allege that Rigby hadmade these misrepresentations, the allegations support a claim for fraud against hisco-conspirators (see Eurycleia Partners, 12 NY3d at 559), and Rigby can beconnected to the false statements, given the allegations of a conspiracy (see Brackettv Griswold, 112 NY 454, 466-467 [1889]; SRW Assoc. v Bellport Beach Prop.Owners, 129 AD2d 328, 332-333 [2d Dept 1987]).
The court properly dismissed plaintiffs' civil RICO claims (18 USC § 1962) asbarred by the Private Securities Litigation Reform Act of 1995 (PSLRA) (18 USC§ 1964 [c], as added by Pub L 104-67, tit I, § 107, 109 US Stat 737; seeMLSMK Inv. Co. v JP Morgan Chase & Co., 651 F3d 268, 273-274 [2d Cir 2011]).Contrary to plaintiffs' contention, the PSLRA also bars the RICO claims insofar as theyare predicated on the acts of money laundering and unlawful money transfers, as suchalleged acts were part of the same fraudulent scheme (see Seippel v Jenkens &Gilchrist, P.C., 341 F Supp 2d 363, 373-374 [SD NY 2004]; Gilmore vGilmore, 2011 WL 3874880, *6, 2011 US Dist LEXIS 99441, *17 [SD NY, Sept. 1,2011, No. 09 Civ 6230 (WHP)], affd 2012 WL 5935341, 2012 US App LEXIS24403 [2d Cir, Nov. 28, 2012, No. 11-4091-CV]).
The court properly dismissed the action as asserted against defendants KPS and JSTfor lack of personal jurisdiction. The allegations that Rigby had used the law firms'letterheads and email addresses to communicate with plaintiffs are insufficient to showthat the firms had control over Rigby in the matter, or that Rigby had acted with thefirms' knowledge and consent (see generally Kreutter v McFadden Oil Corp., 71NY2d 460, 467 [1988]; Morganv A Better Chance, Inc., 70 AD3d 481, 482 [1st Dept 2010]). Nor does MMS'sunilateral wiring of a small amount of money to JST's account sufficiently demonstrateknowledge or consent of Rigby's alleged unlawful acts. Plaintiffs' assertion that otherindividuals from KPS and JST had communicated with plaintiffs is unavailing, asplaintiffs failed to allege that any JST or KPS lawyer, aside from Rigby, hadcommunicated with plaintiffs about MMS. Further, there is no indication that anycommunication was made on behalf of the firms, independent of Rigby, or with thefirms' knowledge of the fraud.
Based on the allegations in the complaint, it is unclear as to whether jurisdictioncould be exercised over the alleged defaulting parties so as to enable the court to grant adefault judgment (see Royal Zenith Corp. v Continental Ins. Co., 63 NY2d 975,977 [1984]; Bleier v Koegler, 28 AD2d 835, 836 [1st Dept 1967]).[*4]
We have reviewed the appealing parties'remaining contentions for affirmative relief and find them unavailing.Concur—Friedman, J.P., Sweeny, Moskowitz, Freedman and Román, JJ.