Jorge Yarur BascuñáN, Tarascona Corp. v. Daniel Yarur Elsaca, CristiáN Jara Taito, Oscar BretóN Dieguez, GM & E Asset Mgmt. S.A., Fintair Fin. Corp.

• Citation: 874 F.3d 806
• Decision Date: 30 October 2017
• Docket Number: No. 16-3626-cv August Term 2016.,16-3626-cv August Term 2016.
• Parties: Jorge Yarur BASCUÑÁN, Tarascona Corp., Hofstra Corp., Inmobiliaria Milano S.A., Inmobiliaria E Inversiones Tauro S.A., and Inversiones T & V S.A., Plaintiffs-Appellants, v. Daniel Yarur ELSACA, Cristián Jara Taito, Oscar Bretón Dieguez, GM & E Asset Management S.A., Fintair Finance Corp., Euweland Corp., Hay's Finance Corp., Cary Equity's Corp., Agrícola E Inmobiliaria Chauquén Limitada, John Does 1-10, and Alapinjdp Investing Corp., Defendants-Appellees.
• Court: United States Courts of Appeals. United States Court of Appeals (2nd Circuit)

874 F.3d 806

Jorge Yarur BASCUÑÁN, Tarascona Corp., Hofstra Corp., Inmobiliaria Milano S.A., Inmobiliaria E Inversiones Tauro S.A., and Inversiones T & V S.A., Plaintiffs-Appellants,
v.
Daniel Yarur ELSACA, Cristián Jara Taito, Oscar Bretón Dieguez, GM & E Asset Management S.A., Fintair Finance Corp., Euweland Corp., Hay's Finance Corp., Cary Equity's Corp., Agrícola E Inmobiliaria Chauquén Limitada, John Does 1-10, and Alapinjdp Investing Corp., Defendants-Appellees.^†

No. 16-3626-cv August Term 2016.

United States Court of Appeals, Second Circuit.

Argued: April 28, 2017
Decided: October 30, 2017

Robin L. Alperstein (Jesse T. Conan, on the brief), Becker, Glynn, Muffly, Chassin & Hosinski LLP, New York, NY, for Plaintiffs-Appellants.

Jennifer M. Selendy (William B. Adams, on the brief), Quinn Emanuel Urquhart & Sullivan, LLP, New York, NY, for Defendants-Appellees.

Before: Cabranes, Livingston, Circuit Judges, and Pauley, Judge.^*

JOSÉ A. CABRANES, Circuit Judge:

The question presented in this appeal is whether the plaintiffs have plausibly alleged "a domestic injury" to their business or property within the meaning of Section 1964(c) of the Racketeer Influenced and Corrupt Organizations Act ("RICO"), the provision commonly referred to as civil RICO.¹ This question is one of first impression—in this (or any) Court of Appeals—arising from the Supreme Court's decision in RJR Nabisco, Inc. v. European Community .²

In RJR Nabisco , the Supreme Court held, among other things, that Section 1964(c) of the RICO statute, which gives a private right of action to "[a]ny person injured in his business or property by reason of a violation of [RICO's substantive provisions, codified in Section 1962]," does not apply extraterritorially.³ Accordingly, the Supreme Court explained that " Section 1964(c) requires a civil RICO plaintiff to allege and prove a domestic injury to business or property and does not allow recovery for foreign injuries."⁴ The Supreme Court did not explain, however, how to determine whether an alleged injury is domestic or foreign.

Plaintiff-appellant Jorge Bascuñán, a citizen and resident of Chile, brought an action under civil RICO in the United States District Court for the Southern District of New York (George B. Daniels, Judge ) against his cousin, defendant-appellee Daniel Elsaca, also a citizen and resident of Chile. Bascuñán alleged that Elsaca, who had power of attorney over Bascuñán's finances, stole millions of dollars from Bascuñán through several fraudulent financial schemes.

In the District Court, Elsaca moved to dismiss Bascuñán's complaint on the ground that he failed to allege a domestic injury as required by RJR Nabisco . The District Court granted the motion and, characterizing Bascuñán's injury broadly as a $64 million "economic loss," held that, because individual plaintiffs suffer economic injuries at their place of residence and because Bascuñán was a resident of Chile, Bascuñán alleged only foreign injuries. Its holding set forth, in sum and substance,

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the following rule: a foreign plaintiff who suffered an "economic loss" due to a RICO violation cannot, absent extraordinary circumstances, allege a domestic injury. On appeal, Bascuñán argues that the District Court erred in relying exclusively on his place of residence to determine that he alleged only foreign injuries. He asserts that, because he alleged injuries to property located within the United States, he satisfied civil RICO's domestic injury requirement. We agree.

While Bascuñán claims a total loss of $64 million, he alleged, in part, the misappropriation of specifically identifiable property that was located in the United States when it was stolen. In particular, he alleged the misappropriation of about $3 million held in a bank account in New York, and the theft of bearer shares, worth roughly $40 million, from a safety deposit box also in New York. Because this property was located within the United States when it was stolen, we conclude that Bascuñán has plausibly alleged a domestic injury notwithstanding the fact that he is a citizen and resident of Chile.

To be clear, we do not hold that a plaintiff's place of residence is never relevant to the domestic injury inquiry required by RJR Nabisco . Nor do we hold that any contact with the United States suffices to make an injury domestic. Indeed, with respect to Bascuñán's alleged injuries involving property located outside of the United States, the fact that Elsaca or his co-defendants transferred those stolen funds to (or through) the United States fails to transform an otherwise foreign injury into a domestic one. As noted, however, Bascuñán has alleged two injuries that have a sufficient relationship to the United States to qualify as "domestic" under the circumstances presented here.

Accordingly, we REVERSE the District Court's order granting Elsaca's motion to dismiss, we VACATE the District Court's order denying Bascuñán's motion for leave to file a second amended complaint, and we REMAND the cause to the District Court for further proceedings consistent with this opinion.

BACKGROUND

I. Factual Overview

We review de novo the grant of a motion to dismiss, "accept[ing] all factual allegations in the complaint as true and draw[ing] inferences from those allegations in the light most favorable to the plaintiff."⁵ The relevant facts, as presented in Bascuñán's Amended Complaint, are as follows:

Bascuñán, an only child, inherited a substantial fortune (the "Estate") from his parents after their deaths in the 1990s. The Estate includes various companies and assets owned (directly and indirectly) by Bascuñán, including shares in Banco de Credito e Inversiones ("BCI"), the third-largest bank in Chile, of which his father had been president.⁶ At the time of his parents' death, and for years afterward, Bascuñán, who was afflicted with a number of emotional and physical ailments including depression and acquired immunodeficiency syndrome ("AIDS"), was unable to manage his own finances. He relied instead

874 F.3d 811

on a financial manager originally hired by his parents.

In 1999, Bascuñán appointed his cousin Elsaca as a new financial manager to oversee the Estate. Elsaca, who was eight years Bascuñán's senior, was a trusted family member with a master of business administration ("MBA") degree from the London School of Economics and extensive financial experience. According to Bascuñán's complaint, Elsaca was "a licensed accountant, prominent Chilean economist, and [formerly] the head of the Superintendencia de Valores y Seguros (de Chile ), Chile's equivalent to the U.S. Securities and Exchange Commission."⁷ Bascuñán ultimately granted Elsaca a broad power of attorney, which included the power to engage in self-dealing transactions without Bascuñán's prior authorization.

Over the next ten years, and until Bascuñán fired him in 2010, Elsaca and his co-defendants⁸ allegedly engaged in a number of fraudulent financial schemes against Bascuñán, illegally transferring about $64 million from the Estate to entities and accounts under their own control. Specifically, Bascuñán claimed that Elsaca perpetrated four schemes: (1) the New York Trust Account Scheme; (2) the General Anacapri Investment Fraud Scheme; (3) the BCI Share Theft; and (4) the Dividend Scheme. We describe each scheme in turn, focusing on the injuries purportedly caused by each.

A. The New York Trust Account Scheme

In 1998, before he hired Elsaca to manage his finances, Bascuñán established the so-called Afghan Trust with money from the Estate. The Afghan Trust, a vehicle for Bascuñán's charitable giving, was organized under the laws of the Cayman Islands and is administered by the New York office of J.P. Morgan. Importantly, its funds are held in New York in a J.P. Morgan bank account.

In 2001, Elsaca, then in control of Bascuñán's finances, created a second trust: the Capri Star Trust. According to Bascuñán, the Capri Star Trust—the stated purpose of which was also to finance Bascuñán's charitable goals—was entirely redundant of the already-existing Afghan Trust, and "served no purpose other than to generate sham fees" for his cousin.⁹ The only difference between the two trusts was that the Capri Star Trust named Elsaca as an "Investment Advisor," which entitled him to receive an "Investment Advisor" fee of 1% of the total value of the Capri Star Trust's assets each year, notwithstanding the fact that UBS (not Elsaca) actively managed the Trust.¹⁰ According to Bascuñán, Elsaca transferred funds from the Afghan Trust's New York bank account into the Capri Star Trust solely to earn sham investment fees ($2.7 million in total), and to pay sham legal fees ($390,000 in total) to José Pedro Silva Prado, Elsaca's personal attorney and alleged co-conspirator.

874 F.3d 812

Like the Afghan Trust, the Capri Star Trust was established in the Cayman Islands and administered by the New York office of a banking and financial services institution (in this instance, UBS AG).

B. The General Anacapri Investment Fraud Scheme

The next purported scheme, which Bascuñán dubbed the Anacapri Investment Fraud...