Europe And Overseas Commodity Traders, S.A. v. Banque Paribas London

147 F.3d 118 (2d Cir. 1998)

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Nature of the Case

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Facts

P is a corporation in Panama. P's account at D was established in London in 1992. The 'Non-discretionary Investment Agreement' between P and D was executed on October 22, 1992, by P directors Ian F. Leger and Herbert W. Marvelly. In this agreement, P gave a corporate registration address in Panama and a mailing address in Monaco. The company also represented that its directors' meetings take place in Monaco, and named an agent for service of process in England. In October of 1993, Alan Carr, an agent of P, discussed investments with a John Arida (D) in London England. Carr left for Florida. In a series of telephone conversations with Carr in Florida, P claims that D misled him by conveying the following facts: (a) the Fund was overseen by D's proprietary trading desk; (b) the investors' capital in the Fund was traded along with D's own capital; and (c) the Fund traded securities based primarily on technical as opposed to fundamental considerations. From Florida Carr ordered P's first purchase of shares of the Fund on October 18, 1993. The transaction is entirely foreign except for the fact that P alleges that an offer to sell foreign securities was made over the telephone and fax to its sole shareholder and agent, Alan Carr, who was in Florida, and both parties agree that orders to purchase securities were placed from Florida. Carr was in Florida when he approved the investment over the phone and by fax. P suffered substantial losses and sued D under § 12(a)(1) of the Securities Act of 1933 for selling unregistered securities in the United States in violation of §5. P seeks rescission of its purchase and reimbursement of the money it invested in the Fund. Ds moved to dismiss under Fed. R. Civ. P. 12(b)(1) for lack of subject matter jurisdiction. The district court granted the motion and P appealed. P claims that the same 'conduct and effects test,' which this circuit applies to determine the extraterritorial scope of the fraud provisions of the federal securities laws, should be applied to determine the appropriate reach of the federal registration requirements.