A U.K. and Swiss Company Allegedly Bribed Congolese, Nigerian, and Venezuelan Official
On July 31, 2020, Judge Wigenton of the District Court for the District of New Jersey dismissed a class action filed against Glencore PLC, Church VI v. Glencore PLC et al., which was brought on behalf of investors that traded Glencore’s unsponsored ADRs in the New York OTC market. While Glencore is incorporated in the United Kingdom, trades on the London Stock Exchange, and is headquartered in Switzerland, the Plaintiffs had brought suit in New Jersey; however, because Glencore had no ties with New Jersey, and because none of the events relevant to the litigation occurred in New Jersey, Judge Wigenton dismissed on grounds of forum non conveniens. Thus, Glencore investors who purchased ADRs on the OTC market were denied a U.S. forum for relief, even though the case may have been strong on the merits. Indeed, several plaintiffs firms are investigating bringing foreign suits against Glencore, suggesting the claims may have some merit.
Plaintiffs Allege that Glencore Bribed Congolese, Nigerian,
and Venezuelan Officials
The case was filed two years ago, in the wake of
investigations into bribery by Glencore in the Congo, Nigeria, and Venezuela.
Specifically, the investigations examined whether Glencore—which operates mines
across the world, and trades the commodities that those mines produce—violated
the Foreign Corrupt Practices Act, by bribing officials during the purchase,
sale, and operation of its various mines. The Plaintiffs allege that, from its
Swiss headquarters or U.K location, Glencore’s executives ordered or facilitated
these pay-offs, including bribes to President Kabila of the Congo and to
employees of a Venezuelan state-owned energy company. The Plaintiffs further
allege that, in spite of these bribes, Glencore made statements that it “takes
ethics and compliance very seriously” and is “committed to complying with or
exceeding” legal requirements, and that Glencore failed to disclose material
facts relating to its mining operations—namely, the fact that those operations
were facilitated in part through bribery. Based on these facts, the Plaintiffs
allege violations of Section 10(b) of the Exchange Act and Rule 10b-5, and
violations of Section 20(a) of the Exchange Act.
As these facts demonstrate, this case centers on events that
occurred in the United Kingdom and Switzerland, or perhaps the Congo, Nigeria,
or Venezuela. But, regardless of which of these locations takes primacy, the
Defendants’ Motion to Dismiss pointed out that none of these locales have any
connection to the United States, much less New Jersey. For this reason, the
Defendants argued (among other things) that: (1) New Jersey lacked personal
jurisdiction over Glencore; (2) the claims are impermissibly extraterritorial
under Morrison v. National Australia Bank Ltd.; and (3) the District of New Jersey
was an improper venue for the lawsuit.
The Court Found That New Jersey was an Improper Forum for
the Dispute
Considering these arguments in his July 31 opinion, Judge
Wigenton was indeed concerned that the case lacked any connection with New
Jersey (or the broader United States). However, he was able to sidestep the
issues of personal jurisdiction and extraterritoriality (along with the
Defendants’ other grounds for dismissal) by first examining whether or not,
considering the parties’ convenience and the interests of justice, the District
of New Jersey was the proper venue to hear this dispute. This analysis—formally
known as the doctrine of forum non conveniens—led Judge Wigenton to consider
four factors, before dismissing the case:
The amount of deference to be granted to the plaintiffs’ choice of forum — In analyzing this factor, the Judge considered where the parties are located, and where the relevant evidence and events are centered; if either of those places is New Jersey (or close thereto), it would weigh in favor of granting more deference to a plaintiff’s choice to file in New Jersey. Here, the Plaintiffs appear to be from Florida, while Glencore has ties to the United Kingdom and Switzerland. Similarly, the alleged bribery stems from decisions made by Glencore in the United Kindom and Switzerland, which is also where Glencore made the allegedly fraudulent statements regarding such bribery.
The adequacy of other forums to adjudicate the dispute —
Other forums are only “adequate” under two conditions: first, Glencore must be
capable of being sued in that forum, and second, that forum’s laws must afford
a remedy to the plaintiffs for their claims. Here, Judge Wigenton determined
that Switzerland was an adequate alternative forum, because Glencore had
consented to being sued in Switzerland, and because Switzerland has its own
robust system of securities fraud law under which the Plaintiffs can seek
redress.
The parties’ private interests — Like deference to the
plaintiff’s choice of forum, the analysis of private interests mostly comes
down to where the case’s relevant evidence and witnesses are located. Here, as
in the deference analysis, the Court found that the evidence and witnesses had
no connection to New Jersey. Instead, it appears that the only connection to
the United States (let alone New Jersey) is that Glencore’s shares were traded
in New York; however, those shares were unsponsored, and traded
over-the-counter, demonstrating that the shares were not traded at Glencore’s
behest or with Glencore’s involvement.
The public’s interests — In evaluating the public’s
interests, the Court primarily relied on a simple heuristic: that the place
where the conduct occurred has the greatest public interest in the litigation.
Under this heuristic, the Court explained that Switzerland (or perhaps the
United Kingdom) have the greatest interest in hosting the litigation; in
contrast, none of the conduct occurred in New Jersey. Also weighing against New
Jersey, Judge Wigenton mentioned that the District of New Jersey has one of the
busiest dockets in the country, and that New Jersey courts would be forced to
apply Swiss law, with which they are generally unfamiliar.
Because each of these factors indicated that holding the
trial in New Jersey was neither convenient for the parties, nor in service of
the interests of justice, Judge Wigenton dismissed the case. The Plaintiffs
have now passed their deadline to file an appeal, and will need to refile the
case, whether elsewhere in the U.S. or abroad. Should the Plaintiffs be forced
to file abroad, this could mean that their available relief will change:
Although Switzerland may be an “adequate alternative forum” under Judge
Wigenton’s analysis, that does not mean that Swiss law will offer the same
types and amounts of relief that would otherwise be available under U.S. law,
nor that Swiss courts will adjudicate the issue in the same way a U.S. court
would.
Going Forward, These Plaintiffs May Face Other Difficulties
Suing in the United States
While Judge Wigenton declined to reach the merits of
Glencore’s personal jurisdiction, extraterritoriality, and other grounds for
dismissal, his opinion may give the Plaintiffs pause before choosing to refile
in the United States. Throughout the opinion, Judge Wigenton was consistently
skeptical that the United States had any interest in the suit, for example
noting that “other than Plaintiffs’ location in the United States, and their
purchase of Glencore securities on an OTC market from within the United States,
Plaintiffs do not dispute that the witnesses or evidence relevant to their
claims are located abroad.” He also alludes to some of the issues that the
Plaintiffs would have in demonstrating personal jurisdiction, explaining that
jurisdiction was “not entirely clear where, as here, Plaintiffs purchased ADRs
or foreign shares listed on an OTC market.”
On this point, Judge Wigenton’s skepticism does not fully
comport with other courts nationwide. Specifically, the Ninth Circuit in the
Toshiba case determined that ADR trades—even of unsponsored ADRs—are “domestic”
transactions, as required by Morrison. Additionally, as we’ve reported in the
past, in February 2020 the District Court for the Central District of
California held that unsponsored ADRs, traded in the New York OTC market, could
form the basis for a plausible allegation that a foreign company was liable in
the United States. Judge Wigenton’s
decision in Glencore threatens to undercut these ruling by providing foreign
companies with ADRs that trade in the U.S. an additional ground for dismissal
of cases brought in a U.S. forum.
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