Aldabe v. Sullivan & Cromwell LLP

• Docket Number: 23 Civ. 850 (AT) (GWG)
• Decision Date: 10 October 2023
• Parties: FERMIN ALDABE, Plaintiff, v. SULLLIVAN & CROMWELL LLP, JAMES L. BROMLEY, and FABIO WEINBERG-CROCCO, Defendants.
• Court: U.S. District Court — Southern District of New York

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FERMIN ALDABE, Plaintiff, v. SULLLIVAN & CROMWELL LLP, JAMES L. BROMLEY, and FABIO WEINBERG-CROCCO, Defendants.

No. 23 Civ. 850 (AT) (GWG)

United States District Court, S.D. New York

October 10, 2023

REPORT & RECOMMENDATION

GABRIEL W. GORENSTEIN, UNITED STATES MAGISTRATE JUDGE

Pro se plaintiff Fermin Aldabe has brought suit against defendants Sullivan & Cromwell, LLP (“Sullivan &amp Cromwell”), James L. Bromley, and Fabio Weinberg-Crocco based on the defendants' representation of an entity called “Atlantic International Bank” (“AIB”). See Notice of Removal, filed Feb. 1, 2023 (Docket # 1) (“Not. of Removal”) Complaint, annexed as Exhibit 2 to Not. of Removal (Docket # 1-3), at 4-19 (“Orig. Compl.”); Complaint, filed Mar. 14, 2023 (Docket # 27) (“SAC”). Defendants now move to dismiss the complaint under Fed.R.Civ.P 12(b)(6).^[1] For the reasons stated below, the motion should be granted.

I. BACKGROUND

A. Facts Alleged in the SAC

The following factual allegations taken from the complaint are assumed to be true for the purposes of this motion to dismiss. See Stadnick v. Vivint Solar, Inc., 861 F.3d 31, 35 (2d Cir. 2017).

Aldabe traded on a carbon emissions market through an account with AIB that was opened in the name of Palma Efuus Ltd (“Palma”). See SAC ¶¶ 6-7. Palma was a depositor at AIB, id. ¶ 6, that agreed to act as Aldabe's broker on the carbon emissions market, id. ¶ 7, and has purportedly “assigned to plaintiff the right to sue defendants for damages sustained by the conversion of monies held by it on his behalf at” AIB. Id. ¶ 1.

Aldabe “sold approximately $94,000 worth of carbon emission credits whose proceeds were deposited into Palma's account.” Id. ¶ 7. AIB was in litigation with the “FTC” (presumably the Federal Trade Commission), and because of this litigation, the central bank of Belize put AIB into “liquidation” on May 13, 2019 and assigned AIB a “liquidator.” Id. ¶ 8. AIB and the liquidator hired defendants Bromley and Weinberg-Crocco “to advise them on the liquidation in Florida of AIB's assets located in the US.” See id. ¶ 11; see also ¶ 14.

In addition to suing Bromley and Weinberg-Crocco, Aldabe is also suing their employer, defendant Sullivan & Cromwell, for acts that Bromley and Weinberg-Crocco did “within the scope of their employment[,] which included advising and acting for” AIB and the liquidator. Id. at 6 n.2.

The day after Belize put AIB into liquidation, Bromley and Weinberg-Crocco directed the liquidator to file a court document including a copy of a Belizean law that “imposes on AIB and the liquidator a statutory duty owed to depositors, and beneficiaries including Palma and plaintiff to pay them fully before paying unsecured depositors like the FTC.” Id. ¶ 9. About a week later, the defendants directed AIB and the liquidator to write AIB's depositors via email that the liquidator's duties “include . . . receiving and determining claims filed by depositors and other creditors; . . . [and] distribution of funds according to the priorities provided for by law.” Id. ¶ 10.

At some unstated date, defendants “designed and planned [a] legal strategy” to use the money depositors held in AIB to settle AIB's litigation with the FTC and recommended this as AIB's “best option to settle the litigation with the FTC.” Id. ¶ 14. Ultimately, AIB and the liquidator took $13,000,000 of depositors' assets to pay the FTC. Id. ¶¶ 14-15. Because of this payment to the FTC, plaintiff lost $22,834.75 he was owed from the Palma account. Id. ¶ 17. The loss of this money and resulting impact on Aldabe's relationship with his family caused him “severe emotional distress” and physical harm, including “premature aging, thickening of the heart walls, high blood pressure, sleeping disorder, irate spells, [and] sweating of palms.” Id.

B. Procedural History

Aldabe filed this suit originally in the Supreme Court of the State of New York for New York County on September 25, 2022, and made various tort claims against the defendants relating to fraudulent misrepresentation. See Orig. Compl.

A month later, on October 25, 2022, the United States Bankruptcy Court for the Southern District of Florida issued an order resolving, inter alia, an application for a “Pre-Filing Screening Injunction Against Mr. Ferman Aldabe.” See Order Approving Foreign Representative's Final Report and Granting Motion for Entry of an Order (I) Issuing a Pre-filing Screening Injunction Against Mr. Fermin Aldabe, (II) Closing Chapter 15 Case, and (III) Granting Related Relief, dated October 25, 2022, annexed as Exhibit 1 to Porpora Decl. (Docket # 30-1) (“Florida Injunction”), at 1. The Florida Injunction prohibits plaintiff from “filing any . . . claim . . . relating to . . . the Belizean Liquidation Proceeding” against “present, former and future . . . attorneys” of AIB “in any court . . . without first obtaining leave from” the Bankruptcy Court. Id. at 3.

On January 13, 2023, Aldabe amended his complaint to add a claim that defendants aided and abetted the FTC in breaching the FTC's duty to plaintiff, a claim that the defendants aided AIB in various federal and Belizean statutory violations, and various other claims arising under federal statutes or state tort claims. See First Amended Complaint, annexed as Exhibit 3 to Not. of Removal (Docket # 1-4).

On February 1, 2023, the defendants removed the case to federal court pursuant to 28 U.S.C. §§ 1331, 1367, 1441, and 1446. See Not. of Removal.

On March 14, 2023, Aldabe filed the SAC, which omitted the federal claims in this case and instead seeks to make claims against defendants based on (1) conversion and (2) intentional infliction of emotional distress. See SAC at 10-12. The newest complaint also purports to contain a separate “Count 3” for punitive damages. Id. at 12.

Defendants have now filed the instant motion to dismiss the Second Amended Complaint.

III. SUPPLEMENTAL JURISDICTION

Before addressing the defendants' argument, we address the issue of subject matter jurisdiction. Defendants removed this action at a time it contained federal claims and thus invoked federal question subject matter jurisdiction under 28 U.S.C. § 1331 to do so. See Not. of Removal ¶ 1. They also invoked supplemental jurisdiction over Aldabe's state law claims under 28 U.S.C. § 1367. See id. While neither party has raised the issue, we conclude that we have subject matter jurisdiction over this action under § 1367 notwithstanding plaintiff's withdrawal of the federal claims in the SAC. Section 1367 provides that a district court “may decline to exercise supplemental jurisdiction” if “the district court has dismissed all claims over which it has original jurisdiction,” The Supreme Court has held that in exercising its discretion under section 1367, a court may consider “the values of judicial economy, convenience, fairness, and comity in order to decide whether to exercise” supplemental jurisdiction. Carnegie-Mellon Univ. v. Cohill, 484 U.S. 343, 349-50 (1988). It is true that “in the usual case in which all federal-law claims are eliminated before trial,” those factors “will point toward declining to exercise jurisdiction over the remaining state-law claims.” Id. at 350 n.7. However, where those considerations are not present (or lessened) and considerations of fairness are implicated, courts have opted to continue exercising jurisdiction. See, e.g., Harris v. Leon, 2023 WL 2051171, at *8 (S.D.N.Y. Feb. 16, 2023) (retaining jurisdiction over state claims after dismissing related federal claims because of efforts already undertaken by the parties and “the legal issues are relatively straightforward”); Phillips v. Delaney, 2020 WL 5898972, at *5 (S.D.N.Y. Oct. 2, 2020) (“[E]ven though Plaintiffs have withdrawn all federal claims, the Court may properly exercise its discretion to maintain subject-matter jurisdiction since removal was proper.”); Koul v. Strong Mem'l Hosp., 282 F.Supp.3d 569, 570-71 (W.D.N.Y. 2017) (retaining supplemental jurisdiction over a state law claim where declining to do so “would involve significant duplication of efforts not only by the attorneys but by a state court judge to whom the matter would be assigned,” the remaining claim “does not appear to be a novel or unsettled state law issue,” and “[t]his Court has already developed knowledge about the case and the respective positions of the parties.”). Indeed, “when a defendant removes a case to federal court based on the presence of a federal claim, an amendment eliminating the original basis for federal jurisdiction generally does not defeat jurisdiction.” Rockwell Int'l Corp. v. United States, 549 U.S. 457, 474 n.6 (2007). Given the claims through the various iterations of Aldabe's complaint all arise from the same facts, the lack of novelty in the remaining questions of state law, and considerations of fairness in light of the resources expended by the parties in litigating the case, it is appropriate to continue to exercise supplemental jurisdiction rather than send the parties back to state court to duplicate their efforts.

II. LEGAL STANDARD

A. Fed. R. Civ. P. 12(b)(6)^[2]

A party may move to dismiss a complaint pursuant to Federal Rule of Civil Procedure 12(b)(6) where the opposing party's pleading “fail[s] to state a claim upon which relief can be granted.” Fed.R.Civ.P. 12(b)(6). While a court must accept as true all of the allegations contained in a complaint, that principle does not apply to legal conclusions. See Ashcroft v. Iqbal, 556 U.S. 662 678 (2009); Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (“[A] plaintiff's obligation to provide the grounds of his entitlement to relief requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will...