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ALTHOUGH THIS SHAREHOLDERS’ DERIVATIVE ACTION AGAINST A SWISS CORPORATION REQUIRES THE APPLICATION OF SWISS LAW, NEW YORK IS THE PROPER FORUM; MOST ON THE BOARD OF DIRECTORS ARE RESIDENTS OF NEW YORK AND THE ALLEGATIONS IN THE COMPLAINT REFLECT A SUBSTANTIAL NEXUS TO NEW YORK (FIRST DEPT).

The First Department, reversing Supreme Court, determined New York, not Switzerland, was the proper forum for this shareholders’ derivative action against a Swiss corporation, despite the need to apply Swiss law:

Defendants did not establish that in the interest of substantial justice, this action should be heard in another forum, namely, Switzerland (see generally CPLR 327[a] …). Adjudication of plaintiffs’ claims, which are undisputedly governed by Swiss law, will not place an undue burden on New York courts … . New York courts are frequently called on to apply the laws of foreign jurisdictions and in this case, there is no indication that the relevant law, which is from only one foreign jurisdiction, is in dispute or is distinctly abstruse … . That plaintiffs seek certain nonmonetary relief that may not be available or enforceable in Switzerland does not cut in favor of dismissal because defendants can seek to limit the damages sought and plaintiffs are now willing to withdraw their requests for nonmonetary relief as against [defendant corporation].

Defendants do not claim that litigation in New York will cause them any hardship and although this matter could be litigated in Switzerland, Swiss courts do not permit trial by jury, which could pose some hardship to plaintiffs … . Moreover, most of defendant-board members are residents of New York and none are residents of Switzerland … . The allegations in the complaint make clear that this action has a substantial nexus to New York and at this point, it appears that the majority of the witnesses and evidence will be located in the United States, principally New York … . Wormwood Capital LLC v Mulleady, 2022 NY Slip Op 01526, First Dept 3-10-22

​Practice Point: Although this shareholders’ derivative action is against a Swiss corporation and requires the application of Swiss law, New York is the proper forum. Most of the directors live in New York, most of the witnesses are in the US and New York, most of the evidence is located in New York, and allegations in the complaint demonstrate a substantial nexus to New York. Defendants did not show they will suffer any prejudice if the suit is heard here.

 

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