UK LAW REQUIRING COURT PERMISSION TO BRING A SHAREHOLDER DERIVATIVE ACTION WAS PROCEDURAL AND THEREFORE DID NOT APPLY IN THIS NEW YORK ACTION AGAINST LONDON-BASED HSBC FOR FAILURE TO IMPLEMENT MONEY-LAUNDERING PROTECTIONS, COMPLAINT DEMONSTRATED THE FUTILITY OF FIRST SEEKING REDRESS FROM THE CORPORATION, DOCTRINE OF FORUM NON CONVENIENS DID NOT APPLY, COMPLAINT SHOULD NOT HAVE BEEN DISMISSED (SECOND DEPT).

The Second Department, reversing Supreme Court, determined the shareholder derivative action against HSBC (bank) alleging breach of a fiduciary duty to implement money laundering prevention safeguards should not have been dismissed. The nominal defendant, HSBC Holdings, is organized under the laws of the United Kingdom and is headquartered in London. The motion to dismiss alleged the failure to seek permission for the action from the English High Court, as well as the failure to demonstrate the futility of seeking redress from the corporation, and the doctrine of forum non conveniens, required dismissal of the complaint. The Second Department held that the rule requiring permission of the English court was procedural and therefore the law of the forum (New York), not the United Kingdom, applied. The Second Department further held that the complaint demonstrated the futility of first seeking redress from the corporation and New York was the proper forum:

… [T]he Court of Appeals decided Davis v Scottish Re Group Ltd. (30 NY3d 247), which held that a Cayman Islands court rule requiring plaintiffs in shareholder derivative actions to first apply to the Cayman Islands Grand Court for leave to continue the action is a procedural rule of the Cayman Islands, and “therefore does not apply where, as here, a plaintiff seeks to litigate his derivative claims in New York” … . … Based upon the analysis set forth in Davis, we find that the judicial-permission requirement set forth in the UK Companies Act is a procedural rule applicable only in England and Wales, or Northern Ireland. …

As an alternative ground for affirmance … , the nominal defendants contend that the plaintiff lacks standing under New York law pursuant to Business Corporation Law § 626(c) because the amended complaint fails to allege that the plaintiff made efforts to secure initiation of the action by the board itself or set forth the reasons for not making such effort … . * * *

In view of the illegal purpose, magnitude, and duration of the alleged wrongdoing, as well as the identity of beneficiaries to the transactions, the allegations were such that the transactions should have come to the attention of senior management and the board of directors … . * * *

… [G]iven that the allegations of wrongdoing occurred in New York, that only 21 of the 75 individual defendants live and work outside of New York, and that 3 of the nominal defendants are either incorporated or headquartered in New York, the Supreme Court providently exercised its discretion in determining that the nominal defendants were not entitled to dismissal on the ground of forum non conveniens [CPLR 327]. Mason-Mahon v Flint, 2018 NY Slip Op 07716, Second Dept 11-14-18

CORPORATION LAW (UK LAW REQUIRING COURT PERMISSION TO BRING A SHAREHOLDER DERIVATIVE ACTION WAS PROCEDURAL AND THEREFORE DID NOT APPLY IN THIS NEW YORK ACTION AGAINST LONDON-BASED HSBC FOR FAILURE TO IMPLEMENT MONEY-LAUNDERING PROTECTIONS, COMPLAINT DEMONSTRATED THE FUTILITY OF FIRST SEEKING REDRESS FROM THE CORPORATION, DOCTRINE OF FORUM NON CONVENIENS DID NOT APPLY, COMPLAINT SHOULD NOT HAVE BEEN DISMISSED (SECOND DEPT))/CIVIL PROCEDURE (CORPORATION LAW, UK LAW REQUIRING COURT PERMISSION TO BRING A SHAREHOLDER DERIVATIVE ACTION WAS PROCEDURAL AND THEREFORE DID NOT APPLY IN THIS NEW YORK ACTION AGAINST LONDON-BASED HSBC FOR FAILURE TO IMPLEMENT MONEY-LAUNDERING PROTECTIONS, COMPLAINT DEMONSTRATED THE FUTILITY OF FIRST SEEKING REDRESS FROM THE CORPORATION, DOCTRINE OF FORUM NON CONVENIENS DID NOT APPLY, COMPLAINT SHOULD NOT HAVE BEEN DISMISSED (SECOND DEPT))/BANKING LAW  (UK LAW REQUIRING COURT PERMISSION TO BRING A SHAREHOLDER DERIVATIVE ACTION WAS PROCEDURAL AND THEREFORE DID NOT APPLY IN THIS NEW YORK ACTION AGAINST LONDON-BASED HSBC FOR FAILURE TO IMPLEMENT MONEY-LAUNDERING PROTECTIONS, COMPLAINT DEMONSTRATED THE FUTILITY OF FIRST SEEKING REDRESS FROM THE CORPORATION, DOCTRINE OF FORUM NON CONVENIENS DID NOT APPLY, COMPLAINT SHOULD NOT HAVE BEEN DISMISSED (SECOND DEPT))/FIDUCIARY DUTY (CORPORATION LAW, UK LAW REQUIRING COURT PERMISSION TO BRING A SHAREHOLDER DERIVATIVE ACTION WAS PROCEDURAL AND THEREFORE DID NOT APPLY IN THIS NEW YORK ACTION AGAINST LONDON-BASED HSBC FOR FAILURE TO IMPLEMENT MONEY-LAUNDERING PROTECTIONS, COMPLAINT DEMONSTRATED THE FUTILITY OF FIRST SEEKING REDRESS FROM THE CORPORATION, DOCTRINE OF FORUM NON CONVENIENS DID NOT APPLY, COMPLAINT SHOULD NOT HAVE BEEN DISMISSED (SECOND DEPT))/SHAREHOLDER DERIVATIVE ACTION (UK LAW REQUIRING COURT PERMISSION TO BRING A SHAREHOLDER DERIVATIVE ACTION WAS PROCEDURAL AND THEREFORE DID NOT APPLY IN THIS NEW YORK ACTION AGAINST LONDON-BASED HSBC FOR FAILURE TO IMPLEMENT MONEY-LAUNDERING PROTECTIONS, COMPLAINT DEMONSTRATED THE FUTILITY OF FIRST SEEKING REDRESS FROM THE CORPORATION, DOCTRINE OF FORUM NON CONVENIENS DID NOT APPLY, COMPLAINT SHOULD NOT HAVE BEEN DISMISSED (SECOND DEPT))/MONEY LAUNDERING (BANKING LAW, UK LAW REQUIRING COURT PERMISSION TO BRING A SHAREHOLDER DERIVATIVE ACTION WAS PROCEDURAL AND THEREFORE DID NOT APPLY IN THIS NEW YORK ACTION AGAINST LONDON-BASED HSBC FOR FAILURE TO IMPLEMENT MONEY-LAUNDERING PROTECTIONS, COMPLAINT DEMONSTRATED THE FUTILITY OF FIRST SEEKING REDRESS FROM THE CORPORATION, DOCTRINE OF FORUM NON CONVENIENS DID NOT APPLY, COMPLAINT SHOULD NOT HAVE BEEN DISMISSED (SECOND DEPT))/CPLR 327  (UK LAW REQUIRING COURT PERMISSION TO BRING A SHAREHOLDER DERIVATIVE ACTION WAS PROCEDURAL AND THEREFORE DID NOT APPLY IN THIS NEW YORK ACTION AGAINST LONDON-BASED HSBC FOR FAILURE TO IMPLEMENT MONEY-LAUNDERING PROTECTIONS, COMPLAINT DEMONSTRATED THE FUTILITY OF FIRST SEEKING REDRESS FROM THE CORPORATION, DOCTRINE OF FORUM NON CONVENIENS DID NOT APPLY, COMPLAINT SHOULD NOT HAVE BEEN DISMISSED (SECOND DEPT))/BUSINESS CORPORATION LAW 626 (UK LAW REQUIRING COURT PERMISSION TO BRING A SHAREHOLDER DERIVATIVE ACTION WAS PROCEDURAL AND THEREFORE DID NOT APPLY IN THIS NEW YORK ACTION AGAINST LONDON-BASED HSBC FOR FAILURE TO IMPLEMENT MONEY-LAUNDERING PROTECTIONS, COMPLAINT DEMONSTRATED THE FUTILITY OF FIRST SEEKING REDRESS FROM THE CORPORATION, DOCTRINE OF FORUM NON CONVENIENS DID NOT APPLY, COMPLAINT SHOULD NOT HAVE BEEN DISMISSED (SECOND DEPT))