EFTA01386026.pdf

August 2. 2001. (Id. Ex. D.) In connection with the Amended 1999 Note, Epstein and FTC also signed an agreement entitled "First Amendment to Note and Affirmation of Hypothecation Agreement and Certain Documents Referred to Therein" [the "first Extension Agreement") in which they reaffirmed the Amended 1999 Note in its entirety, the Hypothecation Agreement, and each document and term thereunder. (Id. Ex. E.) Each of these documents—the original 1999 Note, the 1999 hypothecation agreement, the Amended 1999 Note, and the first Extension Agreement—contains clauses stating that New York law would govern the "construction, validity, and performance" of the 1999 Note and the Amended 1999 Note. (Id. Ex. A at 8-9; Ex. B at 7-8; Ex. D at 10; Ex. Eat 2-3.) Sometime in the spring of 2001, Epstein and FTC discovered that the AIG Investment was "suddenly and rapidly deteriorating." (Pls.' Mem. Of Law in Opp'n to Mot. To Dismiss, Epstein Decl.1120.) According to the plaintiffs, FTC's advisors contacted Davison and other employees of Citibank. and requested Citibank's help in coordinating the replacement of the AIG fund's manager. (Id. 121; Schantz Declif 5.) In May 2001, Davison informed the plaintiffs that, in order to remove AIG as the fund manager, FTC would need sixty-six and two-thirds percent (662/3%) of the votes of income note holders. Because the plaintiffs did not know the identities or respective percentages of ownership of the other income note holders, they requested that Davison provide them with that information. The plaintiffs claim that Davison initially assured them that she would provide such information promptly, but later informed them that she was having difficulty obtaining the information from SSB. and recommended that they seek the information from Chase Manhattan. the Trustee of the fund. (Pls' Mem. Of Law in Opp'n to Mot, To Dismiss, Schantz Dec11[16-8. ) Chase Manhattan, however, referred the plaintiffs back to Citigroup. In June. the plaintiffs learned for the first time that AIG itself owned twenty-eight percent (28%) of the income notes of the AIG investment. Thus, plaintiffs would not need other income note holders with as much of an investment in the income notes as they originally had believed because AIG's interest would not count toward any vote to remove it as manager. In July 2001, the plaintiffs finally received the information they had requested from Citibank. (Id. ¶¶ 9-10.) At this time, Davison and SSB representatives urged the plaintiffs not to attempt to seek to remove AIG as the fund manager. In August 2001, FTC's attorney arranged a telephone conference with representatives from Citibank and SSB. Plaintiffs contend that during this conference they learned for the first time that Citibank could not assist them in seeking to remove AIG because SSB had an investment banking relationship with AIG that might be adversely affected by such an action. (Id. at ¶¶ 11-13.) On June 11. 2002, the plaintiffs filed their complaint in this Court. One month later on July 11, 2002, Citibank sued the plaintiffs in the Southern District of New York, alleging that they had defaulted on both the loan at issue here and a second $10 million loan.1 See Citibank, N.A. v. Epstein, Index No. 02-CV-5332-SHS (S.D.N.Y.2002). On November 27, 2002, I issued an order restraining Citibank and Citigroup from pursuing their New York lawsuit pending decisions on these motions. Financial Trust Co., Inc. v. Citibank. N.A., Order, Civ. No.2002-108 (D.V.I. Nov. 27, 2002). In light of subsequent events, however, I sua sponte vacated this prohibition. Financial Trust Co., Inc. v. Citibank. N.A., Order, Civ. No.2002-108 (D.V.I. Dec. 13, 2002). The defendants charge that plaintiffs' suit in the Virgin Islands is merely "a transparent attempt to launch a preemptive strike to hamper Citibank's efforts to recover the $20 million in promissory notes... upon which Epstein has defaulted." (Mem. Of Law in Support of Def.'s Mot. To Dismiss at 2.) The defendants move to dismiss this action under Federal Rule of Civil Procedure 12(b)(2) for lack of personal jurisdiction, or alternatively, to transfer this case to the Southern District of New York under 28 U.S.C. § 1404(a). Finally, the defendants aver that the amended complaint fails to state a cause of action upon which relief may be granted under Federal Rule of Civil Procedure 12(b)(6) and does not allege fraud with the requisite particularity as required by Federal Rule of Civil Procedure 9(b). I address each argument in turn. II. DISCUSSION A. THIS COURT HAS PERSONAL JURISDICTION OVER CITIBANK AND CITIGROUP The defendants maintain that Citibank discontinued its presence in the Virgin Islands in 1999 and that Citigroup is merely a holding company that "does not have and never has had any assets, offices or employees in the Virgin Islands." In addition, the defendants insist that the events giving rise to this cause of action have no connection with the Virgin Islands. (Mem. of Law in Support of Defs.' Mot. to Dismiss at 6.9.) The plaintiffs counter that the defendants are currently doing business in the Virgin Islands and that this Court has jurisdiction over the defendants under the Virgin Islands' Long- Arm Statute. The plaintiffs insist that the defendants' depiction of Citigroup as a "holding company" is belied by Citigroup's public disclosures that the plaintiffs claim do not identify Citibank as a separate subsidiary or affiliate of Citigroup. (Pls' Mem. Of Law in Opp'n to Mot. to Dismiss at 16-24.) I agree with the plaintiffs and find that this Court has personal jurisdiction over the defendants under the Virgin Islands Long-Arm Statute and that, under the United States Constitution, the defendants have had enough "minimum contacts" with the Virgin Islands to require them to defend a lawsuit in this jurisdiction. This Court sitting in diversity exercises personal jurisdiction over a non-resident defendant pursuant to the forum's long-arm statute and in compliance with the Due Process Clause of the Fourteenth Amendment's "minimum contacts" requirement. See In re Tutu Wells CONFIDENTIAL - PURSUANT TO FED. R. CRIM. P. 6(e) DB-SDNY-0087543 CONFIDENTIAL SDNY_GM_00233727 EFTA01386026