S&C Prevails for UBS in Key Derivative Action in New York State Court

January 13, 2022

UBS AG and certain of its subsidiaries, officers and directors prevailed on their motion to dismiss a derivative lawsuit filed in New York State Supreme Court. In a December 30 ruling, the court dismissed the complaint based on the forum selection clause in UBS's articles of association.
This ruling has critical implications for non-U.S. companies' exposure to fiduciary litigation in the United States. In the past two years, following two New York state appeals court rulings favorable to plaintiffs, litigants have attempted to make New York state courts an international center for derivative actions against major non-U.S. firms in an attempt to circumvent the requirements of these companies' respective home forums.
In the UBS case, the plaintiff alleged that UBS's directors and officers engaged in a pattern of misconduct involving a string of unrelated events, including investigations and settlements. He claimed that the defendants violated their fiduciary duties under Swiss law, and maintained that the case belonged in a New York court because, among other things, the cost of litigating in Switzerland would be prohibitive.
Justice Jennifer Schecter dismissed the complaint based on the forum selection clause in UBS's articles of association, which explicitly provides that “[j]urisdiction for any disputes arising out of the corporate relationship shall solely be at the registered office of the Corporation.” In holding that derivative suits fall squarely within this provision, the court reasoned that “it is logical for a Swiss company, like many Delaware companies, to mandate that its internal affairs disputes be adjudicated by a court with expertise in its corporate law.” The court further observed that plaintiff had essentially agreed to this forum selection clause when he purchased UBS's shares.
The ruling follows a dismissal of a similar action purportedly brought on behalf of Bayer AG, which a different judge dismissed on forum non conveniens and German law grounds. Similar actions against other non-U.S. companies, including Credit Suisse, Deutsche Bank, Barclays, Standard Chartered, and Volkswagen, remain pending.
The S&C team that represented UBS and the other defendants included Robert Giuffra Jr., Amanda Davidoff, Justin DeCamp and Elizabeth Young.