## Facts

- Saudi investors bought shares in Saudi European Investment Corporation, N.V. (“SEIC”) through a 1984 private placement conducted under a Subscription Agreement and Private Placement Memorandum (PPM).
- SEIC, incorporated in the Netherlands Antilles, invested Saudi capital in Western markets; its stock was not publicly traded.
- SEIC’s principal asset was Saudi European Bank (“SE Bank”), a French-licensed bank headquartered in Paris; SEIC’s operations were primarily in France, though SEIC had a New York office and SE Bank had a New York branch.
- SEIC was authorized to issue 40,000 voting shares; after a 30:1 split, SEIC had 600,000 issued shares and 600,000 authorized but unissued shares.
- The 1984 offering sought to sell the remaining 600,000 voting shares for $100 each, with nonvoting shares to issue if oversubscribed, and included representations about SEIC’s financial condition and business plan.
- Plaintiffs alleged defendants (including SEIC-related officers, banks, and affiliates) made misrepresentations and omissions about SEIC/SE Bank and concealed a later transaction transferring control of SE Bank to a U.S.-connected buyer (Lincoln Savings & Loan).
- Plaintiffs asserted federal securities-fraud claims (including § 10(b) and Rule 10b-5) plus related state-law and foreign-law claims premised on dilution/expropriation of value harming the 1984 investors.

## Issues

1. Whether the federal securities claims were barred by applicable statutes of limitation or repose based on when plaintiffs discovered or should have discovered the alleged fraud.
2. Whether plaintiffs produced sufficient evidence of material misstatements or omissions, scienter, reliance, and loss causation “in connection with” the 1984 purchases to survive summary judgment under Rule 10b-5 and related theories.
3. Whether the case should be dismissed on forum non conveniens grounds given the foreign parties, foreign operations, and overseas evidence, despite U.S.-based conduct/effects.
4. Whether related state-law and foreign-law claims could proceed after disposition of the federal claims.

## Decision

- The Second Circuit largely affirmed the district court’s summary judgment for defendants.
- The court treated subject-matter jurisdiction as settled (law of the case) based on substantial U.S. connections, including the Lincoln Savings & Loan transaction.
- The court agreed that many claims failed on timeliness and on lack of record evidence creating triable issues of falsity when made, scienter, reliance, and causation tied to the 1984 offering materials.
- The court did not endorse a categorical forum non conveniens dismissal, reiterating that dismissal is generally improper unless the balance of convenience strongly favors the foreign forum and noting that U.S. connections weighed against wholesale dismissal.
- The court upheld the district court’s disposition of pendent non-federal claims to the extent they rose or fell with the federal theories and/or were properly declined once the federal claims were resolved.

## Legal Principles

- Summary judgment requires specific, record-based evidence; conclusory allegations are insufficient, and evidence is viewed in the nonmovant’s favor only if it supports a genuine dispute of material fact.
- Rule 10b-5 liability requires proof of a material misstatement or omission, scienter, and a connection to the plaintiff’s purchase or sale of securities, plus reliance and causation.
- For limitations purposes, securities-fraud claims may be barred when the plaintiff discovered, or with reasonable diligence should have discovered, the alleged fraud outside the permissible period.
- Forum non conveniens dismissal generally requires that the balance of private and public interests strongly favor the foreign forum; the plaintiff’s forum choice is given less weight when the plaintiff is foreign.
- A court may decline to proceed with pendent non-federal claims after dismissal of federal claims, particularly where the dispute is heavily centered abroad.

## Conclusion

The Second Circuit largely affirmed summary judgment against foreign investors alleging fraud in a foreign private placement, holding that many claims were untimely and that the record did not support essential elements of federal securities fraud, while reiterating that forum non conveniens dismissal is not automatic in transnational cases when meaningful U.S. connections exist.


Alfadda v. Fenn, 159 F.3d 41 (2d Cir. 1998)