Ninth Circuit Reluctant to Give Calif. Jurisdiction Over Swiss Bank

SAN FRANCISCO (CN) – The Ninth Circuit signaled on Monday that it will not allow a Bahamian trust belonging to former Indonesian Vice President Adam Malik to sue Swiss banking giant UBS AG in California solely because the bank operates two branches there.

Senior Circuit Judge Richard Clifton expressed incredulity toward AM Trust attorney Tom Easton’s request that the three-judge  panel carve out an exception to the rule on general personal jurisdiction in order to extend jurisdiction over UBS to California so the trust can sue there.

The judge reminded Easton that it is “well established” that a company is subject to general personal jurisdiction in its state of incorporation and in its principal place of business, “and California isn’t either one for this defendant,” he said.

More importantly, Clifton said, an exception would fly in the face of the Supreme Court’s 2014 decision in Daimler AG v. Bauman, which found that Daimler couldn’t be sued in California for injuries its Argentine subsidiary allegedly caused outside the United States.

“You’re basically asking us to carve an exception out the Supreme Court itself hasn’t suggested,” he told Easton, adding, “I’d have to go to the Supreme Court for that.”

AM Trust filed a putative class action in 2014 in the Northern District of California accusing Zurich-based UBS of shutting down the accounts of secret account-holders, including Malik’s, who had died or were absent for prolonged periods of time,  and of withholding or destroying internal records related to the accounts.

In 1997, it said, a night guard discovered that the Union Bank of Switzerland, a UBS predecessor, was destroying documents about dormant assets, including information about companies doing business during the Holocaust and real estate records for Berlin property seized by Nazis and put in Swiss accounts.

The cash-grab netted UBS billions of dollars, which it used for its own purposes, the trust said.

When beneficiaries ask about their accounts, the banks say no records existed for accounts that have been closed for 10 years, according to the trust. It says it has been trying to recover assets from the accounts for years, but has been stymied by similar responses.

U.S. District Judge Phyllis Hamilton dismissed the suit in 2015, ruling that the court had no general jurisdiction over a bank that is incorporated and primarily does business in Switzerland.

Pushing for reversal Monday, Easton said Daimler shouldn’t apply to banks with full-service branches like the two that UBS operates in San Francisco and Los Angeles.

“A bank with a branch is so deeply enmeshed in doing business that it satisfies the traditional due process concerns for general jurisdiction,” he said. “UBS AG is essentially ‘at home’ in every location it has a branch.”

The term “at home” refers to the location in which a company is incorporated and where it has its headquarters. In its brief to the court, AM Trust said that because the federal government regulates UBS, it is “at home” in the United States even though it is based in Switzerland, and has “impliedly consented” to general jurisdiction.

UBS contends in its own brief, however, that it isn’t at home in California because it isn’t incorporated in California, its headquarters aren’t in California and its California branches have nothing to do with the case.

“The legal standard for whether general personal jurisdiction is available is whether the defendant is at home in the jurisdiction,” UBS attorney Blaine Evanson said at the Monday hearing. “We know here UBS is at home in Switzerland, not in California. That is undisputed and the trust acknowledges it. We think this is a very straightforward application of Daimler.”

In response to a question from U.S. Circuit Judge Marsha Berzon, Evanson conceded that corporations can have dual headquarters and that they can be deemed to be at home in both. But “there is not a hint of a suggestion that UBS has a second headquarters or a surrogate headquarters,” he said.

“All of its headquarters are in Switzerland,” Evanson added. “There is no sense in which UBS is at home in the United States, and certainly not in California.”

Moreover, Evanson said, the regulations to which UBS is subject in the United States don’t amount to consent to jurisdiction.

“I don’t think there is a point at which a company is so regulated that it is at home in the jurisdiction,” he said.

Indonesia’s Adam Malik served as the country’s foreign minister and vice president, and was the 26th president of the U.N. General Assembly. Before his death in 1984, he had several Union Bank of Switzerland and UBS bank accounts, containing more than $5 million in cash and gold, according to the trust’s complaint.

Evanson is with Gibson, Dunn & Crutcher in Los Angeles. Easton practices in Springfield, Oregon.

Berzon and Clifton were joined on the panel by U.S. District Judge Robert Lasnik, sitting by designation from the Western District of Washington.

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