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LONG-ARM JURISDICTION DID NOT REACH AN AUDITING FIRM IN THE UK AND CONVERSION CAUSES OF ACTION FAILED BECAUSE THE CONVERTED FUNDS WERE NOT IDENTIFIABLE AFTER THEY HAD BEEN INVESTED.

In affirming Supreme Court’s dismissal of several complaints stemming from the defendants’ alleged involvement with investments managed by Bernard Madoff, the First Department determined New York jurisdiction did not extend to a firm in the UK (KPMG UK) which allegedly negligently audited Madoff Securities, and further determined conversion causes of action failed because the funds allegedly converted were not sufficiently identifiable after they had been invested:

 

The motion court correctly found that New York lacks personal jurisdiction over KPMG UK pursuant to CPLR 302(a)(3)(ii). While plaintiffs allege that KPMG UK committed a tort outside the state (negligently auditing nonparty Madoff Securities International, Ltd. [MSIL] in the United Kingdom), and their causes of action arise out of that tort, KPMG UK’s act did not cause injury to a person or property within the state. “[T]he situs of commercial injury is where the original critical events associated with the action or dispute took place, not where any financial loss or damages occurred”… .  * * *

Where, as here, a plaintiff alleges that a defendant converted money, the money “must be specifically identifiable and be subject to an obligation to be returned or to be otherwise treated in a particular manner” … . [Plaintiff] sent her money to Beacon Associates, which sent it to Madoff, who deposited it at JPMorgan. Even if, arguendo, [plaintiff’s] money was specifically identifiable when she sent it to Beacon Associates, there is no indication that Beacon Associates segregated it when it sent investors’ money to Madoff. By the time Madoff deposited investors’ money at JPMorgan, [plaintiff’s] investments would not have been specifically identifiable. McBride v KPMG Intl., 2016 NY Slip Op 00306, 1st Dept 1-19-16

 

CIVIL PROCEDURE (NEW YORK JURISDICTION DID NOT REACH UK FIRM ALLEGED TO HAVE NEGLIGENTLY AUDITED MADOFF SECURITIES)/CONVERSION (ALLEGEDLY CONVERTED FUNDS MUST BE IDENTIFIABLE, FUNDS NO LONGER IDENTIFIABLE AFTER INVESTMENT)

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