Seidel v. Ritter

UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
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In re: 	:
:
KINBRACE CORPORATION, 	: 	Chapter 7
: 	Case No. 12-12517 (SMB)
:
Debtor. 	:
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:
BARRY N. SEIDEL, Chapter 7 Trustee of 	:
Kinbrace Corporation, 	:
:
Plaintiff, 	:
: 	Adv. Pro. No. 15-01432 (SMB)
- against - 	:
:
DR. PETER RITTER, 	:
:
Defendant. 	:
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MEMORANDUM DECISION GRANTING
DEFENDANT’S MOTION TO DISMISS
A P P E A R A N C E S:
BLANK ROME LLP
Attorneys for Plaintiff, Barry N. Seidel,
Trustee of Kinbrace Corporation
1825 Eye Street, NW
Washington, D.C. 20006
Jeffrey Rhodes, Esq.
Of Counsel
--and—
405 Lexington Avenue
New York, NY 10174
Evan J. Zucker, Esq.
Of Counsel
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PHILLIPS LYTLE LLP
Attorneys for Defendant Dr. Peter Ritter
620 Eighth Avenue, 23rd Floor
New York, NY 10018
Allan L. Hill, Esq.
Nickolas Karavolas, Esq.
Of Counsel
STUART M. BERNSTEIN
United States Bankruptcy Judge:
Defendant Dr. Peter Ritter, a Liechtenstein resident, served as the sole director,
president, secretary and treasurer of Kinbrace Corporation (“Kinbrace”), a Liberian
corporation, before Kinbrace was placed into involuntary chapter 7 in this Court. After
the Court ordered relief, the chapter 7 trustee for Kinbrace, Barry N. Seidel
(the “Trustee”), brought this adversary proceeding. He alleges, in substance, that Ritter
breached his fiduciary duty and aided and abetted the breach of another’s fiduciary
duty, resulting in a significant prepetition default judgment entered against Kinbrace.
(Complaint, dated Dec. 24, 2015 (“Complaint”) (ECF Doc. # 1).)
Ritter has moved to dismiss the Complaint arguing that this Court lacks personal
jurisdiction over him, or alternatively, that this Court should dismiss the Complaint
pursuant to the doctrine of forum non conveniens. Ritter also contends that a decision
by the Supreme Court of the State of New York, New York County dismissing claims
against Ritter on forum non conveniens grounds in a related action precludes the
Trustee under collateral estoppel and the Rooker-Feldman doctrine from contesting the
issue here. For the reasons that follow, Ritter’s motion to dismiss based on forum non
conveniens is granted.
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BACKGROUND 1
Kinbrace was organized under Liberian law on July 7, 1986. (Complaint, Ex. A.)
At all relevant times, Ritter, a Liechtenstein resident, served as the sole director,
president, secretary and treasurer of Kinbrace. (Id. at ¶ 12.) Munyan was a New York
attorney, and at the relevant time, was working at the New York law firm of Riad &
Associates. (Id. at ¶ 16.) Munyan has since passed away. (See Letter from Barry N.
Seidel to the Court, dated Sept. 10, 2015, at 2 (ECF/Main Case Doc. # 33).)
During the same period that Ritter managed Kinbrace, he also served as the
director of five Liechtenstein entities—Establishment Finapart, Establishment Figest,
Establishment Gour-Sande, Establishment Elatia and Establishment Sundekon
(collectively, the “Establishments”).2 (Complaint at ¶ 18.) In this capacity, Ritter
appointed Munyan as the attorney-in-fact for each of the Establishments, as well as the
Protector of four Liechtenstein trusts (the “Trusts”) that ostensibly owned the
Establishments.3 (Id. at ¶ 19.)
1 	“ECF” refers to the electronic docket in this adversary proceeding, and “ECF/Main Case” refers to
the electronic docket in Kinbrace’s bankruptcy case.
2 	An Establishment is a type of legal entity unique to Liechtenstein that has trust-like attributes,
such as named beneficiaries, but is similar to a corporate entity in that it has its own separate legal
existence, is governed by by-laws and is managed by a board of directors. (See Declaration of Nickolas
Karavolas, Esq. in Support of Defendant’s Motion to Dismiss Adversary Proceeding, dated Sept. 30,
2016 (“Karavolas Declaration”), Ex. C (the “State Court Dismissal Order”), at 2 (ECF Doc. # 17).)
3 	The Establishments argued that, as the Protector, Munyan had exceptionally broad powers over
the trustees such that he was able to exercise de facto control over the Trusts. (See Karavolas
Declaration, Ex. B (the “State Court Complaint”), at ¶¶ 56-58.)
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Ritter and Munyan established a bank account on Kinbrace’s behalf at Citibank,
N.A. (“Citibank”) in New York, as well as at banks in Switzerland, Paris and Bermuda.
(Id. at ¶ 21.) In connection with the Citibank account, Ritter executed various
documents in Liechtenstein and sent them to Munyan in New York. (See Declaration of
Evan J. Zucker in Opposition to Defendant’s Motion to Dismiss Adversary Complaint,
dated Nov. 18, 2016, Exs. E & H (ECF Doc. # 19).) The documents granted Ritter and
Munyan signatory authority over the Citibank account, (Complaint, Ex. D), and Ritter
also granted Munyan signatory authority over the bank accounts of the Establishments
and the Trusts. (Id. at ¶ 20.) From 1997 to 2007, Munyan allegedly transferred millions
of dollars from the Establishments’ bank accounts into Kinbrace’s Citibank account, and
then used that money for his personal expenses. (Id. at ¶ 21 & Ex. E.)
On April 14, 2004, Citibank grew troubled with Kinbrace’s “operating and
receiving wire transfers from high risk countries, coupled with managing expenses for
unknown international entities” without Kinbrace having any agreements with those
entities. (Id. at ¶ 23.) As a result, Citibank emailed Munyan on May 12, 2004 to inform
him that it intended to close the account unless he provided certain information to
explain and reconcile the suspicious account activity. (Id. at ¶ 24.) Munyan then wrote
a letter to Ritter to inform him that Citibank had concerns about the account activity,
and solicited ideas as to how to handle the situation. (Id. at ¶ 25.) Munyan was
apparently unable to provide the requested information, and Citibank closed the
account on June 29, 2004. (Id. at ¶ 26.)
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After Citibank closed Kinbrace’s account, Munyan tried to open an account with
JPMorgan Chase in New York (“Chase”), and sent account opening documents to Ritter,
but Chase refused to open the account after hearing that Citibank had closed the
account. (Id. at ¶ 27.) The Trustee has not supplied evidence that Ritter ever executed
and returned the Chase documents. Furthermore, the schedule of transfers attached to
the Complaint does not show any transfers from the Establishments’ accounts to a
Chase account maintained by Kinbrace. (Id., Ex. E.)
In June 2007, Mr. Riad—Munyan’s boss at Riad & Associates—discovered that
Munyan had transferred millions of dollars of the Establishments’ funds into his own
personal bank account, fired Munyan and alerted Ritter. (Id. at ¶ 28; State Court
Dismissal Order at 6.) Despite the warning, Ritter took no actions to remove Munyan
as Kinbrace’s attorney-in-fact until the end of 2007. (Complaint at ¶ 30.) After June
2007, $11,382.13 was transferred from an account at Nethou owned by one of the
Establishments or a related company, (id. at ¶ 21), t0 Kinbrace’s Citibank account. (Id.,
Ex. E, Pt. 2, at 3.)
A. 	The State Court Action
On April 9, 2009, the Establishments commenced an action against Kinbrace,
Ritter, Munyan and others in the Supreme Court, New York County (“State Court
Action”) relating to Munyan’s improper transfer and misuse of at least $15.5 million of
the Establishments’ funds. The State Court Complaint alleged, inter alia, that Ritter
and Kinbrace had aided and abetted Munyan’s breach of fiduciary duty to the
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Establishments, (State Court Complaint at ¶¶ 148-54; 166-71), and Ritter had breached
his own fiduciary duty to the Establishments, (id. at ¶¶ 187-92), and acted negligently.
(Id. at ¶ 193-97.) Finally, the State Court Complaint alleged that Kinbrace was unjustly
enriched and had converted the Establishments’ assets. (Id. at ¶¶ 225-38.)
1. 	Ritter’s Dismissal from the State Court Action
Ritter moved to dismiss the State Court Action directed against him based on lack
of personal jurisdiction, and alternatively, on forum non conveniens grounds. The New
York Court denied the first prong of Ritter’s motion. The State Court Complaint alleged
that Ritter had transacted business in New York on behalf of Kinbrace within the
meaning of N.Y.C.P.L.R. § 302(a)(1). He appointed Munyan as Kinbrace’s attorney-in-
fact, he authorized the opening of the New York bank accounts and he completed and
sent corporate documents to Munyan in New York for delivery to Citibank. (State Court
Dismissal Order at 21-22.) 	These allegations, taken as true, demonstrated that the
Establishments’ jurisdictional claims were not frivolous and that discovery was
necessary. (Id. at 22.)
The New York Court nonetheless dismissed Ritter from the State Court Action on
forum non conveniens grounds. (Id. at 22-23.) It observed that the plaintiff
Establishments were entities with corporate structures unique to Liechtenstein, Ritter
was also a Liechtenstein resident, and the transaction occurred in Liechtenstein. (Id. at
23.) Additionally, certain of the Establishments had already commenced proceedings in
Liechtenstein against Ritter pursuant to Liechtenstein law, and Liechtenstein clearly
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had a strong interest in policing the activities of the Establishments’ directors. (Id.)
Finally, maintaining the State Court Action against Ritter would be burdensome given
the foreign parties, documents, witnesses and controlling law. (Id.)
2. 	State Court Judgment against Kinbrace
For unexplained reasons, Ritter never caused Kinbrace to defend the State Court
Action, and the New York Court eventually entered a default judgment in the sum of
$13,747,555.20 (the “Judgment”) in favor of the Establishments and against Kinbrace
on July 14, 2011. (Complaint at ¶ 14.)
B. 	The Bankruptcy Proceeding
On June 12, 2012, the Establishments filed an involuntary chapter 7 petition
against Kinbrace, and the Court ordered relief on October 18, 2012. (ECF/Main Case
Doc. #s 1, 5.) 	The interim chapter 7 trustee filed Schedules A-H on behalf of Kinbrace
on March 28, 2013. (ECF/Main Case Doc. # 11.) The only creditors listed in Kinbrace’s
Schedules were the Establishments, which collectively held an unsecured nonpriority
claim in the sum of $13,747,555.00 on account of the Judgment. (ECF/Main Case Doc.
# 11.) As the sole creditors, the Establishments elected Seidel as the permanent Trustee
on August 2, 2013 pursuant to Bankruptcy Code § 702. (See Report of the United States
Trustee Regarding Undisputed Election of Chapter 7 Trustee, dated Aug. 8, 2013, at 3
(ECF/Main Case Doc. # 22).)
The Trustee subsequently commenced this adversary proceeding against Ritter in
December 2015, asserting that Ritter had breached his fiduciary duty, aided and abetted
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Munyan’s breach of his own fiduciary duty to Kinbrace and failed to exercise
appropriate oversight over Kinbrace’s bank accounts and over Munyan, resulting in the
Judgment against Kinbrace. The Trustee’s factual assertions largely mirrored those
made by the Establishments in the State Court Complaint — Ritter knowingly
participated in Munyan’s scheme to steal Kinbrace’s assets, failed to monitor Munyan’s
activity after providing him with signatory powers over Kinbrace’s and the
Establishments’ bank accounts, and failed to monitor Kinbrace’s financial health.
(Complaint at ¶¶ 36-50; see State Court Complaint at ¶¶ 148-154, 187-197.)
Ritter filed the instant motion to dismiss on September 30, 2016 pursuant to
Rules 12(b)(2) and 12(b)(3) of the Federal Rules of Civil Procedures made applicable to
this adversary proceeding by Rule 7012 of the Federal Rules of Bankruptcy Procedure.
(Memorandum in Support of Defendant’s Motion to Dismiss Adversary Complaint,
dated Sept. 30, 2016 (“Ritter Memorandum”) (ECF Doc. # 15).) He contends that the
Court lacks general or specific personal jurisdiction over him, (id. at 6-16), or
alternatively, the Complaint should be dismissed based on forum non conveniens. (Id.
at 22-29.) He further maintains that the Trustee is precluded from contesting the forum
non conveniens issue based on collateral estoppel and the Rooker-Feldman doctrine
given Ritter’s prior dismissal from the State Court Action. (Id. at 16-22.)
The Trustee responded that this Court has specific personal jurisdiction over
Ritter based on Ritter’s hiring a New York attorney and signing and sending various
documents to New York. These facts, the Trustee argues, are sufficient to satisfy the
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minimum contacts requirement for this Court to exercise personal jurisdiction without
offending the traditional notions of fair play and substantial justice. (Opposition to
Defendant’s Motion to Dismiss Adversary Complaint, dated Nov. 18, 2016 (“Trustee
Opposition”), at 9-13 (ECF Doc. # 18).) Additionally, the Court should not dismiss the
case based on forum non conveniens because the Trustee’s forum selection is entitled to
significant deference, there is no evidence that a Liechtenstein forum could adequately
adjudicate the matter, and the balance of private and public interests weigh in favor of
hearing the matter in this Court. (Id. at 13-20.) Moreover, collateral estoppel and
Rooker-Feldman do not apply. (Id. at 21-24.)
DISCUSSION
Because of the Court’s ruling regarding forum non conveniens, I address the
parties’ other arguments briefly. I decline to dismiss the Complaint for lack of personal
jurisdiction for the same reasons articulated by the State Court. (See State Court
Dismissal Order at 21-22.) Ritter hired Munyan to serve as Kinbrace’s attorney-in-fact,
sent corporate and bank documents to Munyan in New York to allow Munyan to open
Kinbrace’s Citibank account, and Munyan used the Citibank account to commit tortious
acts within the state.
The Rooker-Feldman doctrine is inapplicable. “Rooker-Feldman bars the federal
courts from exercising jurisdiction over claims ‘brought by state-court losers
complaining of injuries caused by state-court judgments rendered before the district
court proceedings commenced and inviting district court review and rejection of those
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judgments.’” Sykes v. Mel S. Harris & Assocs. LLC, No. 13-2742-cv, 2015 WL 525904,
at *22 (2d Cir. Feb. 10, 2015) (quoting Exxon Mobil Corp. v. Saudi Basic Indus. Corp.,
544 U.S. 280, 284 (2005).) The Rooker-Feldman doctrine applies where the following
four elements are present:
First, the federal-court plaintiff must have lost in state court. Second, the
plaintiff must “complain[] of injuries caused by [a] state-court
judgment[.]” Third, the plaintiff must “invit[e] district court review and
rejection of [that] judgment[].” Fourth, the state-court judgment must
have been “rendered before the district court proceedings commenced.”
Hoblock v. Albany Cnty. Bd. of Elections, 422 F.3d 77, 85 (2d Cir. 2005) (quoting Exxon
Mobil, 544 U.S. at 284).
Ritter satisfied the first, second and fourth elements. Kinbrace, the Trustee’s
predecessor, lost in State Court, Kinbrace was injured by reason of the Judgment and
the State Court rendered the Judgment before the commencement of this bankruptcy
case and this adversary proceeding. However, the Trustee is not asking the Court to
review and reject the Judgment. Instead, the entry of the Judgment forms the basis of
the Trustee’s claim for damages against Ritter.
Nor does collateral estoppel apply. Under New York law, which applies by virtue
of 28 U.S.C. § 1738, the party invoking collateral estoppel must satisfy two elements:
First, the party seeking the benefit of collateral estoppel must prove that
the identical issue was necessarily decided in the prior action and is
decisive in the present action . . . . 	Second, the party to be precluded from
relitigating an issue must have had a full and fair opportunity to contest
the prior determination. The burden is on the party attempting to defeat
the application of collateral estoppel to establish the absence of a full and
fair opportunity to litigate.
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D’Arata v. N.Y. Central Mut. Fire Ins. Co., 564 N.E.2d 634, 636 (N.Y. 1990).
Kinbrace, the Trustee’s predecessor, was a party to the prior action. However,
Kinbrace did not assert claims against Ritter in the State Court Action, and the State
Court never decided whether any claims that Kinbrace might assert against Ritter were
subject to dismissal based on forum non conveniens. Instead, the State Court decided
that the Establishments’ claims were subject to dismissal based on forum non
conveniens. Furthermore, Ritter has not argued that the Judgment entered by default
against Kinbrace, which he caused by allowing Kinbrace to default in the State Court
Action, has any preclusive effect on the Trustee.
I nevertheless conclude that forum non conveniens requires dismissal of the
Trustee’s action subject to the limitations discussed later in this decision. “A federal
court has discretion to dismiss a case on the ground of forum non conveniens when an
alternative forum has jurisdiction to hear [the] case, and . . . trial in the chosen forum
would establish . . . oppressiveness and vexation to a defendant . . . out of all proportion
to plaintiff’s convenience, or . . . the chosen forum [is] inappropriate because of
considerations affecting the court’s own administrative and legal problems.” Sinochem
Int’l Co. Ltd. v. Malaysia Int’l Shipping Corp., 549 U.S. 422, 429 (2007) (citations and
internal quotations omitted). The forum non conveniens analysis calls for a three-step
approach. First, the court must determine the degree of deference to accord to the
plaintiff’s choice of forum. Second, it must consider whether the defendant’s proposed
forum is adequate to adjudicate the parties’ dispute. Third, the court must balance the
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private and public interests implicated in the choice of forum. Norex Petroleum Ltd. v.
Access Indus., Inc., 416 F.3d 146, 153 (2d Cir. 2005), cert. denied, 547 U.S. 1175 (2006);
Iragorri v. United Techs. Corp., 274 F.3d 65, 73-74 (2d Cir. 2001) (en banc). With
respect to a forum non conveniens analysis, “a court considers not only the allegations
of the pleadings but all evidence before it, and does not presume the facts pleaded to be
true.” Ramirez de Arellano v. Starwood Hotels & Resorts Worldwide, Inc., 448 F.
Supp. 2d 520, 522 (S.D.N.Y. 2006) (citing In re Livent Inc. Sec. Litig., 78 F. Supp. 2d
194, 200 (S.D.N.Y. 1999)). The defendant bears the burden of proof on all of the
elements of the motion. Bank of Credit Commerce Int’l (Overseas) Ltd. v. State Bank of
Pakistan, 273 F.3d 241, 246 (2d Cir. 2001).
1. 	Plaintiff’s Choice of Forum
A plaintiff’s forum choice is generally afforded deference, but there is no bright
line rule, and the degree of deference warranted “moves on a sliding scale depending on
several relevant considerations.” Iragorri, 274 F.3d at 71 (citing Koster v. (Am.)
Lumbermens Mut. Cas. Co., 330 U.S. 518, 524 (1947)). “Usually, the greatest deference
is afforded a plaintiff’s choice of its home forum,” N0rex, 416 F.3d at 154, “while ‘less
deference’ is afforded a foreign plaintiff’s choice of a United States forum.” Id. (citing
Iragorri, 274 F.3d at 72). This lesser deference applies even where the nominal plaintiff
is American, but is acting in a representative capacity for a foreign entity.
VictoriaTea.com, Inc. v. Cott Beverages, Canada, 239 F. Supp. 2d 377, 381 (S.D.N.Y.
2003) (“[W]here the local claimant is only nominally American, as in the case of an
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assignee of a foreign corporation, the courts have generally refused to give special
deference to plaintiff’s choice of forum.”) (citations and internal quotations omitted).
No one suggests that the Trustee has engaged in forum shopping; he sued in the
home bankruptcy court. Nevertheless, the Trustee has stepped into the shoes of
Kinbrace, a Liberian entity, and his status is akin to an assignee of Kinbrace.
Accordingly, his forum choice is entitled to diminished deference, but I assume that it
weighs in favor of retaining the litigation in this Court.
2. 	Adequate Alternative Forum
The second step in a forum non conveniens analysis is to determine whether an
adequate alternative forum exists. Ordinarily, “[a]n alternative forum is adequate if the
defendants are amenable to service of process there, and if it permits litigation of the
subject matter of the dispute.” Pollux Holding Ltd. v. Chase Manhattan Bank, 329 F.3d
64, 75 (2d Cir. 2003) (citing Piper, 454 U.S. at 254 n.22). Both requirements are
satisfied here.
First, Ritter submits that he is amenable to service of process in Liechtenstein,
(Ritter Memorandum at 26), and in fact, is currently defending the Establishments’
lawsuit in that jurisdiction. Second, Ritter has demonstrated that the Liechtenstein
courts have subject matter jurisdiction over the Trustee’s claims. According to the
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affidavit of Christoph Bruckschweiger, LL.M.,4 a Liechtenstein attorney who represents
Ritter in the Liechtenstein litigation brought by the Establishments, (Bruckschweiger
Affidavit at ¶ 4), Bruckschweiger reviewed the Complaint, and concluded that the
claims brought against Ritter by the Trustee are almost identical to those brought
against Ritter by the Establishments. (Id. at ¶¶ 5-6.) Most importantly, he opined that
the claims brought by the Trustee against Ritter could be brought in Liechtenstein, and
the claims are available under Liechtenstein law. (Id. at ¶ 10.)
In rare circumstances, despite meeting these criteria, an alternative forum may
nonetheless be inadequate where such forum is “characterized by a complete absence of
due process and an inability of a plaintiff to obtain substantial justice.’” In re
Arbitration Between Monegasque De Reassurances S.A.M. (Monde Re) v. Nak
Naftogaz of Ukraine, 311 F.3d 488, 499 (2d Cir. 2002). 	This presents a high bar to the
litigant opposing a forum non conveniens dismissal because “considerations of comity
preclude a court from adversely judging the quality of a foreign justice system absent a
showing of inadequate procedural safeguards.” PT United Can Co. Ltd. v. Crown Cork
& Seal Co., Inc., 138 F.3d 65, 73 (2d Cir. 1998). The Trustee has not argued that a
Liechtenstein proceeding would not provide adequate procedural safeguards.
Accordingly, the Liechtenstein forum is adequate.
4 	See Affidavit of Christoph Bruckschweiger, L.L.M. in Support of Defendant’s Reply to Trustee's
Opposition to Defendant’s Motion to Dismiss Adversary Proceeding, sworn to Jan. 12, 2017
(“Bruckschweiger Affidavit”) (ECF Doc. # 22).
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The Trustee could nonetheless face obstacles litigating in Liechtenstein. In
particular, a significant amount of time has passed since the commission of the wrongful
acts alleged by the Trustee, and he could face a statute of limitations defense or other
procedural defenses under Liechtenstein law or jurisdictional objections by Ritter that
could foreclose the litigation in Liechtenstein. This problem is not unique to this case,
and a dismissal based on forum non conveniens can be made conditional. Bank of
Credit and Commerce Int’l, 273 F.3d at 247-48; see also Blanco v. Banco Indus. de
Venezuela, S.A., 997 F.2d 974, 984 (2d Cir. 1993) (“[F]orum non conveniens dismissals
are often appropriately conditioned to protect the party opposing dismissal.”) (citations
omitted). Thus, if the other factors point toward dismissal, the Court can impose
conditions which, if not met, could return the litigation to this Court.
3. 	Private and Public Interest Factors
The third step in the analysis requires the Court to balance the private and public
interest factors set forth in the seminal Supreme Court case Gulf Oil Corp. v. Gilbert,
330 U.S. 501, 508-09 (1947). The private interest factors include: (i) the relative ease of
access to sources of proof, (ii) availability of compulsory process for attendance of
unwilling witnesses, (iii) the cost of obtaining attendance of willing witnesses, (iv) issues
concerning enforceability of a judgment if one is obtained, and (v) all other practical
problems that make trial of a case easy, expeditious and inexpensive. Jacobs v. Terpitz
(In re Dewey & LeBoeuf LLP), 522 B.R. 464, 477 (Bankr. S.D.N.Y. 2014) (citing Gulf Oil
Corp., 330 U.S. at 508-09). “In assessing the private interest factors, ‘courts should
examine the specifics of the claims: rather than simply characterizing the case as one in
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negligence, contract, or some other area of law, the court should focus on the precise
issues that are likely to be actually tried.’” Id. (quoting Airflow Catalyst Sys., Inc. v.
Huss Techs. GMBH, No. 11 cv 6012 (CJS), 2011 WL 5326535, at *4 (W.D.N.Y. Nov. 3,
2011)).
The private factors weigh heavily in favor of dismissal. The essence of the
Trustee’s claim is that Ritter, a Liechtenstein resident and Liberian fiduciary, breached
his own fiduciary duty and aided and abetted Munyan’s breach of his separate fiduciary
duty. Ritter’s acts of commission or omission occurred in Liechtenstein. He has
travelled to New York or the United States on just four occasions, the last time in 1992,
and none of these trips involved Kinbrace business. (Affidavit of Dr. Peter Ritter in
Support of Defendant’s Motion to Dismiss Adversary Proceeding, sworn to Sept. 26,
2016 (Ritter Affidavit”), at ¶¶ 20-22, 24 (ECF Doc. # 16).)5 Furthermore, he is 79 years
old, (id. at ¶ 3), and travelling to New York will present some degree of personal
hardship.
The Trustee argues that he will need documents and witnesses from Citibank,
and the bank’s employees are key witnesses. (Trustee Opposition at 15, 18.) The
transfers from the Establishments’ accounts to the Citibank account do not appear to be
in dispute. The Trustee presumably already has the necessary bank documents because
5 	In addition, Ritter had a one night layover in San Francisco on his way to Tahiti. (Ritter Affidavit
at ¶ 23.)
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the Complaint attached a detailed reconstruction of all those transfers. In any event, the
parties to the Liechtenstein proceeding have exchanged documents relating to the New
York bank transfers, including bank statements, (Bruckschweiger Affidavit at ¶ 8), and
access to this proof does not appear to present a problem. For this reason, the Trustee’s
contention that he needs the bank employees as key witnesses is unpersuasive since
their only purpose would be to identify the bank documents.
The Trustee also contends that Riad, who works in New York, is a key witness.
He allegedly discovered Munyan’s theft of the Establishments’ funds in June 2007, fired
Munyan and alerted Ritter, but Ritter did not take action against Munyan until the end
of 2007. (Trustee Opposition at 18.) This testimony could be important, but
Liechtenstein law allows the parties to take Riad’s deposition. (See Bruckschweiger
Affidavit at ¶ 8.) Thus, a trial in Liechtenstein does not seem to present any practical
problems with proof. Furthermore, Riad’s testimony is relevant to only a single transfer
amounting to slightly more than $11,000. Retaining the litigation in New York because
it may be more convenient to adduce Riad’s testimony when all of the other evidence
pointing to over $15 million in transfers is located in Liechtenstein (and the Trustee can
presumably take Riad’s deposition) is unwarranted.
Finally, Ritter does not own any property in the United States, and a New York
judgment against Ritter will be difficult to enforce in Liechtenstein. According to
Bruckschweiger, the Trustee would have to commence a new lawsuit in Liechtenstein,
and the New York judgment would be persuasive but only if it had been granted on the
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merits. (Bruckschweiger Affidavit at ¶ 11.) The New York judgment would not be
binding or enforceable under any circumstances, and it would be up to the Liechtenstein
judge in the exercise of his or her discretion to determine what issues, if any, decided in
this proceeding needed to be relitigated. (Id.)
A balance of the relevant public interest factors also weighs in favor of dismissal.
The public interest factors include (i) the administrative difficulties flowing from court
congestion, (ii) the local interest in having controversies decided at home, (iii) the
interest in having a trial in a forum that is familiar with the law governing the action,
(iv) the avoidance of unnecessary problems in conflicts of laws or in the application of
foreign law, and (v) the unfairness of burdening citizens in an unrelated forum with jury
duty. Dewey & LeBoeuf LLP, 522 B.R. at 479 (citing Gulf Oil Corp., 330 U.S. at 508-
09); accord RIGroup v. LLC v. Trefonisco Mgmt. Ltd., 949 F. Supp. 2d 546, 558
(S.D.N.Y. 2013) (citing Iragorri, 274 F.3d at 74).
Although Court congestion does not present a problem and Ritter did not
indicate in his motion that he intends to request a jury (the Trustee did not), the other
factors weigh in favor of dismissal. The underlying controversy involves the acts and
omissions of a Liechtenstein domiciliary, committed in Liechtenstein and relating to his
fiduciary duty owed to a Liberian corporation. The only scheduled creditors and the
only creditors that have thus far filed proofs of claim (no bar date has been set) are the
Establishments. In fact, the adversary proceeding duplicates the proceeding brought by
the Establishments in Liechtenstein.
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Moreover, the Establishments rather than the Kinbrace estate are the injured
parties, and in truth, this bankruptcy case commenced by the Establishments never
served a purpose. The Kinbrace account was used as a conduit for the fraud perpetrated
against the Establishments. It received the funds that Munyan stole from them, and
Kinbrace never acquired title to that money. See SEC v. Universal Express, Inc., No. 04
Civ. 2322 (GEL), 2008 WL 1944803, at *3 (S.D.N.Y. Apr. 30, 2008) (“It is a long-
established general rule that ‘a thief cannot convey a good title to stolen property.’”)
(quoting Newton v. Porter, 69 N.Y. 133, 137 (1877)). When Munyan thereafter siphoned
the stolen funds from the Kinbrace account for his personal use, he stole the
Establishments’ money, not Kinbrace’s. Kinbrace will be injured only to the extent it
pays the Judgment but that seems unlikely. Kinbrace is bankrupt and has no assets.
Furthermore, under New York’s internal affairs doctrine, Ritter’s fiduciary duties
and any breach of those duties will be determined under Liberian law. See Marino v.
Grupo Mundial Tenedora, S.A., 810 F. Supp. 2d 601, 607 (S.D.N.Y. 2011) (“New York
applies the internal affairs doctrine to claims for breach of fiduciary duty and, thus,
applies the law of the state of incorporation to such claims.”) (citing Walton v. Morgan
Stanley & Co. Inc., 623 F.2d 796, 798 n.3 (2d Cir. 1980)); Davis v. Scottish Re Grp.,
Ltd., 28 N.Y.S.3d 18, 20 (N.Y. App. Div. 2016) (“Under the internal affairs doctrine,
claims concerning the relationship between the corporation, its directors, and a
shareholder are governed by the substantive law of the state or country of
incorporation . . . .”) (citing Hart v. General Motors Corp., 517 N.Y.S.2d 490 (N.Y. App.
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Div. 1987), leave to appeal denied, 515 N.E.2d 910 (N.Y. 1987)). Hence, Liberian law
will govern the Trustee’s claim for breach of fiduciary duty.6
Accordingly, the Court concludes based upon consideration of the relevant
factors that this case should be dismissed under the doctrine of forum non conveniens.
As noted, however, it is necessary to condition that dismissal to prevent prejudice to the
Trustee should Ritter assert a defense of lack of personal jurisdiction or similar defense
in Liechtenstein, or contend that the Trustee’s claims are foreclosed based on
procedural rules or the statute of limitations that would not present obstacles in this
Court. In the event that litigation of the Trustee’s claims is foreclosed in Liechtenstein
for these reasons, the Trustee can reopen this adversary proceeding provided he has
6 	The applicable law governing the aiding and abetting claim is less clear. As discussed in Official
Comm. of Unsecured Creditors of Hydrogen, L.L.C. v. Blomen (In re Hydrogen), 431 B.R. 337 (Bankr.
S.D.N.Y. 2010), case law in this district is split. Some courts have looked to the internal affairs doctrine
applicable to the primary breach of fiduciary duty violation; others have adhered to tort conflict of law
principles and looked to the jurisdiction with the greatest interest in the dispute. Id. at 350 (citing case
law). If New York law applies, the Trustee may face two obstacles. First, aiding and abetting by a
corporate fiduciary may be a breach of fiduciary duty itself rather than a separate aiding and abetting
claim. In that event, Liberian law will govern the claim. Second, any aiding and abetting claim may be
barred under Shearson Lehman Hutton, Inc. v. Wagoner, 944 F.2d 114, 120 (2d Cir. 1991) since Ritter’s
acts will be imputed to Kinbrace, and Kinbrace will be seeking to recover for its own wrongdoing.
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diligently pursued his rights in Liechtenstein. To avoid any doubt, Ritter is free to
defend the Trustee’s claims on the merits.
Settle order on notice.
Dated: 	New York, New York
April 17, 2017
/s/ Stuart M. Bernstein
STUART M. BERNSTEIN
United States Bankruptcy Judge
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