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

April 25, 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. On December 30, the court dismissed the complaint based on the forum selection clause in UBS's articles of association.
 
This ruling has important implications for non-U.S. companies. In the past two years, plaintiffs have tried to make New York state courts an international center for derivative actions against major non-U.S. firms to try to end-run their home forums.
 
In the UBS case, the plaintiff alleged that UBS's directors and officers engaged in a pattern of misconduct involving unrelated 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 have been filed against other non-U.S. companies, including Credit Suisse, Deutsche Bank, Barclays, Standard Chartered, Novartis and Volkswagen.

In April 2022, Judge Schecter denied a motion for reargument of her December 2021 dismissal order and sanctioned plaintiff on the basis that the motion was frivolous, stating that “[n]o reasonable attorney should have thought [plaintiff's] motion had any legal basis and defendants should not be forced to bear the costs of having to oppose it.”
 
The S&C team that represented UBS and the other defendants included Robert Giuffra, Amanda Davidoff and Justin DeCamp.