Victory for James River Group in Complex Securities Fraud Dispute

The firm recently secured a complete victory for James River Group Holdings, Ltd. and its executives in a high-stakes federal securities fraud action brought by Fleming Intermediate Holdings LLC in connection with its $300 million acquisition of a James River subsidiary.  On July 17, 2025, the U.S. District Court for the Southern District of New York granted James River’s motion to dismiss in its entirety, dismissing all federal securities claims with prejudice and declining to exercise supplemental jurisdiction over the remaining state law claims.

            The dispute arose from Fleming’s November 2023 acquisition of JRG Reinsurance Company Ltd., a Bermuda-based reinsurance subsidiary of James River.  Fleming, a Cayman Islands insurance company majority-owned by private equity firm Altamont Capital Partners, alleged that James River made material misrepresentations in the Stock Purchase Agreement and breached various covenants.  Fleming brought claims under Sections 10(b) and 20(a) of the Securities Exchange Act against James River and its CEO and CFO, along with state law fraud and breach of contract claims.

            The Court’s decision rested on the extraterritoriality doctrine established by the Supreme Court in Morrison v. National Australia Bank and refined by the Second Circuit in subsequent cases including Parkcentral Global Hub Ltd. v. Porsche Automobile Holdings SE and Cavello Bay Reinsurance Ltd. v. Stein.  Although Fleming argued that the transaction was sufficiently domestic because James River was headquartered in North Carolina and the agreement was negotiated and executed in the United States, the Court found that Fleming’s claims were “so predominantly foreign as to be impermissibly extraterritorial.”

            The Court emphasized several key factors that rendered the case predominantly foreign: (1) the transaction involved foreign parties on both sides and shares of a privately held Bermuda company not traded on any U.S. exchange; (2) many of Fleming’s alleged misrepresentations were premised on purported violations of Bermuda law; (3) the entire transaction was conditioned on approval by the Bermuda Monetary Authority; and (4) there were parallel foreign regulatory proceedings involving the same conduct alleged in the complaint.  The Court noted that Fleming’s Exchange Act claims would require this Court “first [to] have to find a predicate violation of Bermuda’s Insurance Act, Insurance Code, or Companies Act,” creating exactly the type of “potential for incompatibility between U.S. and foreign law” as in Morrison and Parkcentral.

            The Court found the Second Circuit’s decision in Cavello Bay directly on point.  Like Cavello Bay, this case involved “a private agreement for a private offering between a Bermudan investor … and a Bermudan issuer,” with shares “not listed on a U.S. exchange and not otherwise traded in the United States.”  The Court rejected Fleming’s attempts to distinguish Cavello Bay, noting that Fleming’s arguments about U.S.-based executives, negotiations, and financing were “remarkably similar to the allegations deemed inadequate in Cavello Bay.”

            Having dismissed all federal claims with prejudice based on extraterritoriality, the Court declined to exercise supplemental jurisdiction over Fleming’s state law fraud and breach of contract claims.  The Court noted that “the case is at a relatively early stage” and “there are already pending state law proceedings,” concluding that “holding parallel state and federal proceedings would not serve judicial economy or convenience.”

            This victory demonstrates the continued vitality of Morrison’s extraterritoriality doctrine in complex cross-border transactions and provides important guidance on how courts will analyze cases involving foreign parties, foreign securities, and claims that depend on alleged violations of foreign law—even where significant negotiation and execution activities occur in the United States.