Avianca, Inc. v. Corriea

• Decision Date: 06 February 1989
• Docket Number: Civ. A. No. 85-3277(RCL).
• Citation: 705 F. Supp. 666
• Court: U.S. District Court — District of Columbia
• Parties: AVIANCA, INC., Helicopteros Nacionales de Columbia, S.A., Sociedad Aeronautica de Medellin Consolidada, S.A., and North American Air Service Company, Inc., Plaintiffs, v. Mark F. CORRIEA, Martin J. Tierney, and Corriea & Tierney, Defendants.

705 F. Supp. 666

AVIANCA, INC., Helicopteros Nacionales de Columbia, S.A., Sociedad Aeronautica de Medellin Consolidada, S.A., and North American Air Service Company, Inc., Plaintiffs, v. Mark F. CORRIEA, Martin J. Tierney, and Corriea & Tierney, Defendants.

Civ. A. No. 85-3277(RCL).

United States District Court, District of Columbia.

February 6, 1989.

COPYRIGHT MATERIAL OMITTED

Gary E. Cross (argued), Dunaway & Cross, Washington, D.C. (Mac S. Dunaway and Kevin M. Rooney with him, on the briefs), for plaintiffs.

John H. Spellman (argued), Hamel & Park, Washington, D.C. (Robert F. Reklaitis and Maureen Duignan with him, on the briefs), for defendants.

MEMORANDUM OPINION

LAMBERTH, District Judge.

Plaintiffs Avianca, S.A., the major airline and flagship international carrier of the Republic of Colombia, and its related Colombian and United States companies and subsidiaries, brought this action against their former attorney, Mark Corriea, a District of Columbia licensed practitioner, and his partner and law firm, for breach of fiduciary duty, fraudulent misrepresentation, and civil violations of Title IX of the Organized Crime Control Act of 1970, the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. §§ 1961 et seq. More particularly, plaintiffs allege that after having entered into an on-going attorney-client relationship with one or more of the plaintiff companies in 1980, for which defendants were paid over $1,000,000.00 in legal fees over the next five years, defendants breached their ethical and fiduciary obligations to plaintiffs by, among other things, misappropriating client funds, acquiring and maintaining undisclosed financial interests in transactions involving plaintiffs, and secretly dealing with the then president of plaintiff Avianca, S.A. Plaintiffs seek a full accounting, disgorgement of all profits, and return of all attorneys fees paid over the five year period. Defendants first deny that there was an on-going, continuous attorney-client relationship, and instead characterize their services as "occasional." Defendants then categorically deny any breach of ethical or fiduciary duty which may have been owed to plaintiffs, and maintain that they acted with the full knowledge and tacit approval of plaintiffs. Finally, defendants counterclaim for libel and slander, interference with their prospective advantage, breach of contract, and indemnification. Jurisdiction for both the complaint and counterclaim is properly grounded in 28 U.S.C. § 1332(a)(3), there being complete diversity of citizenship between the parties.

The record in this case is extensive and complex, comprising several hundred docket entries, thousands of pages of court record, and nearly seventy motions. The case comes before this Court presently on eight motions and cross-motions, including plaintiffs' motion to compel production of documents, defendants' motion for reconsideration of the magistrate's order to produce documents, plaintiffs' motion to compel Andres Cornelissen to answer the amended complaint, defendants' motion for summary judgment on the complaint, defendants' motion for partial summary judgment on count 1 (defamation) of the counterclaim, plaintiffs' cross-motion for summary judgment on count 1 (breach of fiduciary duty) of the complaint, plaintiffs' cross-motion for summary judgment on count 1 (defamation) of the counterclaim, and plaintiffs' motion to compel defendant Corriea to answer interrogatories and produce documents with respect to his medical condition and financial statements.

I. FACTS

Notwithstanding the legal morass created by the parties, most of the essential facts underlying this case are undisputed or beyond serious dispute. Where there is significant disagreement is in regard to the legal interpretation or appropriate characterization of these underlying facts.

A. Parties

Plaintiff Aerovias Nacionales de Colombia, S.A. ("Avianca, S.A.") is a corporation organized and existing under the laws of the Republic of Colombia. It operates Avianca airlines, providing domestic and international service from Colombia. Plaintiff Avianca, Inc., is a New York corporation wholly owned by Avianca, S.A., and serves as the airline's general agent in the United States. Plaintiff Helicopteros Nacionales de Colombia, S.A. ("Helicol"), is a Colombian corporation operating a fleet of helicopters and fixed-wing aircraft in Colombia and other South American countries. Plaintiff Sociedad Aeronautica de Medellin Consolidada, S.A. ("SAM"), is a Colombian corporation providing domestic air service within Colombia. Avianca, S.A. is the majority shareholder of both Helicol and SAM. Plaintiff North American Air Service Company, Inc. ("Norasco"), is a Delaware corporation wholly owned by Avianca, Inc. Norasco was created to take advantage of a bilateral treaty provision, Relief From Double Taxation on Earnings From Operation of Ships and Aircraft, 12 U.S.T. 3141, T.I.A.S. No. 4916 (1961), which exempts Colombian withholding taxes of approximately 45%, and serves as a conduit for lease payments made by Avianca, S.A., Helicol, and SAM to aircraft lessors in the United States.

In late 1979, defendant Mark Corriea, while representing his then client-employer, Itel Air Corporation, in a sale-leaseback transaction with plaintiff Avianca, S.A., met plaintiff Avianca S.A.'s then executive vice president, Andres Cornelissen. Apparently impressed with Corriea's work in the transaction, in early 1980, Andres Cornelissen began seeking Corriea's legal services for Avianca, S.A. After briefly representing Avianca and Itel contemporaneously, Corriea left Itel to become a sole practitioner. In 1982, Corriea and defendant Martin J. Tierney formed the defendant law partnership of Corriea & Tierney, which continued to represent plaintiffs in aircraft leasing, corporate financing, and government relations matters until August 1985. Martin Tierney is a licensed attorney, practicing in California. Subsequent to meeting Corriea in 1979, Andres Cornelissen became the president of Avianca, S.A., and then, following a shareholder dispute in 1985, resigned. Cornelissen is a Colombian citizen, who was earlier joined as a party defendant in this case. During the discovery phase of the case, he was ordered to respond to deposition questions regarding his finances and foreign bank accounts by the United States District Court for the Southern District of Florida. Because of his refusal to fully respond, Cornelissen is currently subject to arrest under an outstanding bench warrant issued by that court.

B. Attorney-Client Relationship and Breaches of Fiduciary Duty

By representing Avianca, S.A., and its related companies and subsidiaries, over a period of several years, Corriea, and later his law firm, certainly created and maintained an attorney-client relationship. Indeed, even defendants describe themselves as plaintiffs' "former counsel." Memorandum of Points and Authorities in Support of the Motion of Defendants-Counterplaintiffs for Summary Judgment (hereinafter "Defendants' Memorandum") at 1. Plaintiffs primarily rely on Corriea's undisputed actions in three transactions to demonstrate that Corriea breached his fiduciary duties of loyalty and full disclosure in his representation of plaintiffs.

1. Use of Norasco Funds.

One of Corriea's earliest services for Avianca, S.A., was the creation of Norasco. Corriea, as Avianca's attorney, incorporated Norasco and agreed to serve as Norasco's president and attorney. Avianca gave Corriea $7,000 in January 1980 to cover the cost of Norasco's stock, as well as Corriea's legal fees and incurred expenses. Pursuant to Avianca's instructions, Corriea registered legal title to the Norasco stock in his name, but endorsed the shares over to Avianca, Inc., and sent the certificates to Avianca, S.A. Over the next two years, while president of and attorney for Norasco, Corriea admittedly issued or caused to be issued over $240,000.00 in checks payable to cash, himself, his law firm, and Fund Sources International, Inc. ("FSI"), a company wholly owned by Corriea. Corriea does not dispute that the funds were often used for his personal expenses, including repairs to a Rolls Royce automobile jointly owned by Corriea and Cornelissen, and typically used without the consent or knowledge of the plaintiffs; rather, Corriea insists that as president and sole shareholder of Norasco, he was entitled to "use corporate assets as he sees fit and may even appropriate those assets for his own use." Defendants' Memorandum at 25.

2. American Aerospace, Limited.

Nearly a year after the creation of Norasco for Avianca, Corriea again incorporated a closely held company, this one an off-shore company for the sole benefit of Andres Cornelissen. The company, American Aerospace, Limited ("AAL"), was incorporated in Bermuda on August 3, 1981, with Corriea as its president, chairman and lawyer. Cornelissen, the sole beneficial owner, held no stock in his own name, nor a position in the company, and his connection with AAL was not disclosed to Avianca, S.A. until discovery in this case. AAL was only involved in one transaction prior to being dissolved in 1985. Soon after the creation of AAL, Cornelissen and Corriea, through FSI, arranged a lease of two Boeing 707 aircraft to Faucett Airlines, a Peruvian company, with aircraft maintenance to be provided by Avianca, S.A. Still not disclosing Cornelissen's interest in AAL, nor his own interest in FSI, when Faucett defaulted on the lease agreement a few months later, Corriea threatened Avianca, S.A. with litigation unless it returned some $149,000.00 in engine reserve funds it held in escrow for Faucett. Corriea claims that the documents involving AAL are covered by an attorney-client privilege between him and AAL, despite the fact that he was, for all intents and purposes, both the lawyer and the sole officer of the company.

3. Twin Otter Transaction.

At about...