Bank of America Corp. v. Lemgruber
| Decision Date | 05 January 2005 |
| Docket Number | No. 02 Civ.1041(DAB).,02 Civ.1041(DAB). |
| Parties | BANK OF AMERICA CORPORATION; Bank of America, N.A.; Bank of America Overseas Corporation; and Bankamerica International Financial Corporation, Plaintiffs, v. Antonio Carlos Braga LEMGRUBER; Goldbeach Holdings Corporation; Powerstone Corporation; Timber Springs Corporation; Tiger International Overseas Corp.; American Versailles Fund; Santa Escolastica, Inc.; Interbrett Investec Group; Blue Water Capital; Agropastoril Aventura Ltda.; Delaware Asset Management Adm Financiera E Consultoria; Rio Aventura, Inc.; and SP Funds LLC, Defendants. |
| Court | U.S. District Court — Southern District of New York |
Stephen James Marzen, Stuart J. Baskin, Shearman & Sterling, LLP, Washington, DC, for Plaintiffs.
James A. Philpott, Jr., Lexington, KY, for Defendants.
Plaintiffs Bank of America Corporation ("BAC"), Bank of America, N.A. ("BNA"), Bank of America Overseas Corporation ("BAOC"), and BankAmerica International Financial Corporation ("BIFC") (collectively "Plaintiffs") bring this action alleging fraudulent inducement, conversion, breach of fiduciary duty, and breach of contract. Defendants, Antonio Carlos Braga Lemgruber ("Lemgruber"), Agropastoril Aventura Ltda. ("Agropastoril"), Rio Aventura, Inc. ("Rio Aventura"), and SP Funds LLC ("SP Funds") (collectively, the "Lemgruber Defendants" or "Defendants")1 now move to dismiss the Complaint for lack of subject matter jurisdiction, lack of standing to sue, failure to state a legally sufficient claim, and failure to join real parties in interest pursuant to Rules 8(c), 9(b), 12(b)(1), 12(b)(6), 12(b)(7), and 19 of the Federal Rules of Civil Procedure, and on grounds of forum non conveniens.2 For the reasons stated below, the Lemgruber Defendants' motion is GRANTED IN PART and DENIED IN PART.
The present action arises out of Plaintiffs' three-phase purchase of the stock of a Brazilian bank, Banco Liberal S.A. ("BL Brazil"), and several of its affiliates, including a Liberal Banking Corporation, Ltd., a Bahamian Bank ("BL Bahamas"), (collectively the "BL Banks"3), from Defendant Lemburger and former Defendants Floris and De Luca, who allegedly took part in a scheme to defraud Plaintiffs by embezzling millions of dollars from the BL Banks and concealing from Plaintiffs both the embezzlement and other information that depreciated the value of the stock and assets that Plaintiffs acquired.
Plaintiff BAC is a multi-bank holding company incorporated in Delaware with its headquarters in North Carolina. (Compl.¶ 8). BAC is the successor in interest to NationsBank Corporation ("NationsBank"), who originally contracted with Defendants to purchase the BL Banks in 1998. (Id. ¶¶ 8, 17). Plaintiff BNA is an indirect wholly-owned subsidiary of BAC, headquartered in North Carolina, and is the successor by merger to NationsBank, National Association. (Id. ¶ 9). BNA was formed as a national bank organized under the laws of the United States and thus its presence as a party to this action would satisfy the first requirement for the Court's exercise of subject matter jurisdiction under the Edge Act.4 (Id.) Plaintiff BAOC, a wholly-owned subsidiary of BNA, was formed in 1980 as an Edge Act Corporation under the laws of the United States5 and is headquartered in Charlotte, North Carolina. (Id. ¶ 10). Plaintiff BIFC was also formed as an Edge Act corporation and is headquartered in San Francisco, CA. (Id. ¶ 11). BNA, BAOC, and BIFC are hereinafter collectively referred to as the "Edge Act Plaintiffs."
Defendant Lemgruber is a resident and citizen of Brazil. (Compl.¶ 12). Prior to Plaintiffs' purchase of the BL Banks' stock, Lemgruber owned significant minority stakes in both BL Brazil and BL Bahamas. (Id.) In addition, during the time period relevant to this action, he was an officer and director of both BL Banks with primary responsibility for managing operations of BL Brazil's overseas' affiliates, including BL Bahamas. (Id.; Declaration of Jared Goldstein ["Goldstein Decl."], Ex. D (Management Agreement Between BAC, the BL Banks, and Lemburger, dated January 23, 1998)6).
The remaining Defendants are entities that Plaintiffs allege were either directly controlled by Defendant Lemgruber or, in the alternative, were sufficiently independent to have conspired with Lemgruber to engage in the allegedly fraudulent transactions that gave rise to this action. (Compl.¶ 13). Defendants Goldbeach Holdings Corporation ("Goldbeach"), Powerstone Corporation ("Powerstone"), Timber Springs Corporation ("Timber Springs"), and Tiger International Overseas Corporation ("TIOC") are incorporated in the British Virgin Islands. (Id.). Defendants Agropastoril Aventura Ltda. and Delaware Asset Management Adm. Financiera e Consultoria ("Delaware Asset") are incorporated in Brazil. (Id.). Defendant Blue Water Capital is incorporated and headquartered in Virginia (Goldstein Decl. ¶ 9, Exs. J and K), while Defendants Santo Escolastica, Inc. and Rio Aventura Stables, Inc. are incorporated and headquartered in the state of Kentucky. (Compl. ¶ 13; Goldstein Decl. ¶ 8, Exs. F and G). Defendant SP Fund is also incorporated in Kentucky with its principal place of business located in Versailles, Kentucky. .7
In 1998, BAC, then NationsBank, decided to expand its presence in the investment banking market through the purchase of a majority stake in the BL Banks. (Compl.¶ 17). At that time, Former Defendants Floris and De Luca and Defendant Lemgruber (collectively referred to as "Sellers") owned or controlled all shares and managed the operations of the BL Banks. (Id. ¶¶ 18-19).
On January 13, 1998, BAC entered into a Stock Purchase Agreement (hereinafter the "1998 Stock Purchase Agreement") with the Sellers8 through which Plaintiffs acquired 51% of the stock of the BL Banks9 for approximately $115 million. (Compl. ¶ 20; Declaration of Chaya F. Weinberg-Brodt ["Weinberg-Brodt Decl."]10 Ex. B (Fully executed Copy of the 1998 Stock Purchase Agreement)). BAC, as a successor to Nationsbank, is the only plaintiff who was a party. (Weinberg-Brodt Decl., Ex. B at 1). The 1998 Stock Purchase Agreement permitted NationsBank (now BAC) or "one or more of its indirect subsidiaries" to acquire not less than 51% of the shares of the BL Brazil, and 51% of the shares of BL Bahamas. (Id. at 1). In addition, section 11.2 of the Agreement contained a call option granting BAC, or one of its subsidiaries, the right to purchase the remaining shares of the BL Banks at a price to be determined according to the BL Banks' financial statements at the time of sale. (Compl. ¶ 30; Weinberg-Brodt Decl., Ex. B at 60).
The 1998 Stock Purchase Agreement also contained many representations and warranties certified by the Sellers regarding the financial condition of and other important information about the BL Banks. For example:
— In § 3.4 of the Agreement, the Sellers certified that the Balance Sheets and Interim Balance Sheets they provided to NationsBank "fairly present the financial condition ... of the [BL Banks]." (Compl. ¶ 22; Weinberg-Brodt Decl., Ex. B at 22-23).
— In § 3.10, Sellers certified that the BL Banks had "no undisclosed liabilities or obligations of any nature (whether known or unknown and whether absolute accrued, contingent or otherwise) except for liabilities or obligations reflected or reserved against in the Balance Sheets or the Interim Balance Sheets ..." (Compl. ¶ 23; Weinberg-Brodt Decl., Ex. B at 26).
— In § 3.14(a)(i), Sellers certified that since 1993 the BL Banks had been "in full compliance with each Legal Requirement that is or was applicable to it or to the conduct or operation of its business." (Compl. ¶ 24; Weinberg Brodt Decl., Ex. B at 30).
— In § 3.15(a), Sellers certified that to their knowledge "no Proceeding has been threatened, and no event has occurred or circumstances exists that may give rise to or serve as the basis for the commencement of any such Proceedings." (Compl. ¶ 25; Weinberg-Brodt Decl., Ex. B at 31).
— In § 3.24(c), Sellers certified that "[t]here is no fact known to any of the Sellers ... that materially adversely affects, or as far as any Seller can reasonably foresee, materially threatens, the business, operations, properties, prospects, assets, liabilities or condition" of the BL Banks. (Compl. ¶ 26; Weinberg-Brodt Decl., Ex. B at 41).
— In § 3.25, Sellers certified that neither Sellers nor any other related person "has, or has had any interest in any property ... used in or pertaining to the [BL Banks'] businesses," or except as disclosed has "(i) made any loan to or received any loan from, [the BL Banks], (ii) had any business dealings or any material financial interest in any transaction with [the BL Banks] other than in ordinary course of business with the [BL Banks] at substantially prevailing Market rates." (Compl. ¶ 27; Weinberg-Brodt Decl., Ex. B at 41-42).
The Agreement also contains an indemnification provision. Under section 10.2 of the Agreement, Sellers agreed to indemnify BAC and its affiliates for "any loss, liability, claim, damage..., expense ... or diminution in value, whether or not involving a third-party claim ... arising directly or indirectly, from or in connection with: (a) any Breach of any representation or warranty made by Seller or [BL Brazil] in this Agreement... or any other certificate or document delivered by Sellers or the Brazilian Bank pursuant to the Agreement; or (b) any Breach by any Seller or the Brazilian Bank of any covenant or obligations of such Seller or the Brazilian Bank in this agreement." (Compl. ¶ 34; Weinberg-Brodt Decl., Ex. B at 52-53).
While BAC was a...
To continue reading
Request your trial
-
Sheehy v. New Century Mortg. Corp.
...Lumbermens Mut. Cas. Co. v. Franey Muha Alliant Ins. Serv., 388 F.Supp.2d 292, 305 (S.D.N.Y.2005) (quoting Bank of Am. Corp. v. Lemgruber, 385 F.Supp.2d 200, 224 (S.D.N.Y.2005)) (finding triable issues of fact regarding existence of a fiduciary relationship); AHA Sales, Inc. v. Creative Bat......
-
Solution Trust v. 2100 Grand LLC (In re AWTR Liquidation Inc.)
...the long-term and the short-term interests of the corporation and its shareholders[.]") (emphasis added); Bank of Am. Corp. v. Lemgruber, 385 F.Supp.2d 200, 224 (S.D.N.Y.2005)( "A corporate officer or director generally owes a fiduciary duty only to the corporation over which he exercises m......
-
Henneberry v. Sumitomo Corp. of America
...this allegation, on its face, fails to establish plaintiff's standing to bring suit as an individual. Cf. Bank of Am. Corp. v. Lemgruber, 385 F.Supp.2d 200, 224 (S.D.N.Y.2005) (holding that an officer or director "generally owes a fiduciary duty only to the corporation over which he exercis......
-
Strategic Value Master v. Cargill Financ. Services, 05 Civ. 8546(PKL).
...Plaintiffs recovering millions of dollars of lost investments.'" (Pl.'s Mem. Law Opp'n Mot. at 22) (quoting Bank of Am. Corp. v. Lemgruber, 385 F.Supp.2d 200, 238 (S.D.N.Y.2005).) While this Court is free to disagree with the reasoning of another court in this district, Hawkins v. Steingut,......