Benitez-Navarro v. Gonzalez-Aponte, Civil Action No. 09-1366 (GAG).

• Decision Date: 24 September 2009
• Docket Number: Civil Action No. 09-1366 (GAG).
• Citation: 660 F.Supp.2d 185
• Parties: Roberto BENITEZ-NAVARRO, et al., Plaintiffs, v. Evaristo GONZALEZ-APONTE, et al., Defendants.
• Court: U.S. District Court — District of Puerto Rico

660 F.Supp.2d 185

Roberto BENITEZ-NAVARRO, et al., Plaintiffs, v. Evaristo GONZALEZ-APONTE, et al., Defendants.

Civil Action No. 09-1366 (GAG).

United States District Court, D. Puerto Rico.

September 24, 2009.

COPYRIGHT MATERIAL OMITTED

Etienne Totti-Del-Toro, Etienne Totti-Del-Valle, Totti & Rodriguez Diaz, Hato Rey, PR, for Plaintiffs.

Frank La Fontaine, Roberto C. Quinones-Rivera, McConnell Valdes, Jaime E. Toro-Monserrate, Toro, Colon, Mullet, Rivera & Sifre, Jesus R. Rabell-Mendez, Rabell Mendez CSP, Harold D. Vicente-Gonzalez, Nelson N. Cordova-Morales, Vicente & Cuebas, Jairo A. Mellado-Villarreal, Mellado & Mellado Villareal, San Juan, PR, for Defendants.

OPINION AND ORDER

GUSTAVO A. GELPÍ, District Judge.

This matter is before the court on various defendants' motions to compel arbitration and dismiss the action. (Docket Nos. 38, 39, 56, 59.) Plaintiffs Roberto Benítez-Navarro Edith Perales Rodriguez and the Roberto and Edith Benítez Conjugal Partnership commenced this action after Plaintiffs allegedly suffered pecuniary losses as a result of an alleged misrepresentation by defendant Evaristo González-Aponte in the management of funds which were to be deposited into a Knights of Columbus retirement annuity plan.

Co-defendants (1) Knights of Columbus; (2) the Supreme Council of the Knights of Columbus; (3) Miguel Ramos-Díaz; (4) the alleged Ramos-Ramos conjugal partnership; (5) Joe Martínez Jr.; (6) the alleged Martínez-Doe conjugal partnership; (7) Carl A. Anderson; (8) the alleged Anderson-Anderson conjugal partnership; (9) James DiVasto; and (10) the alleged Divasto-Doe conjugal partnership (collectively, the "Knights Defendants") moved to dismiss pursuant to Section 4 of the Federal Arbitration Act, 9 U.S.C § 4, ("FAA") compelling arbitration of plaintiffs' claims. (See Doc. 38.) Further, the Knights Defendants, joined by co-defendants Popular, Inc ("Popular"); Doral Bank ("Doral"); Westernbank Puerto Rico ("Western"); and RG Premier Bank ("RG") moved for dismissal based on a lack of federal jurisdiction. (Doc. Nos. 39, 56, 59, 63.)

After reviewing the pleadings and pertinent law, the court GRANTS the defendants' motion to compel arbitration and consequently GRANTS the defendants' motions to dismiss based on lack of jurisdiction.

I. Standard of Review

Under the Federal Arbitration Act, "[i]f suit is brought in a U.S. Court with regards to a claim which according to an arbitration agreement should be referred to arbitration, the Court must, upon request to that effect by one of the parties, stay the action until arbitration has concluded." Sanchez-Santiago v. Guess, Inc., 512 F.Supp.2d 75, 78 (D.P.R.2007); see also 9 U.S.C. § 3. In order to obtain an order compelling arbitration, the party seeking the order, must establish "that a valid agreement to arbitrate exists, that the movant is entitled to invoke the arbitration clause, that the other party is bound by that clause, and that the claim asserted comes within the clause's scope." InterGen N.V. v. Grina, 344 F.3d 134, 142 (1st Cir.2003).

Under Rules 12(b)(1) and 12(b)(6), a defendant may move to dismiss an action against him for lack of federal subject-matter jurisdiction or for failure to state a claim upon which relief can be granted. See Fed.R.Civ.P. 12(b)(1); Fed.R.Civ.P. 12(b)(6). When considering a motion to dismiss, the court must decide whether the complaint alleges enough facts to "raise a right to relief above the speculative level." See Bell Atl. Corp. v. Twombly, 550 U.S. 544, 127 S.Ct. 1955, 1965, 167 L.Ed.2d 929 (2007). The court accepts as true all well-pleaded facts and draws all reasonable inferences in the plaintiff's favor. See id.; Parker v. Hurley, 514 F.3d 87, 90 (1st Cir.2008). However, "the tenet that a court must accept as true all of the allegations contained in a complaint is inapplicable to legal conclusions." Ashcroft v. Iqbal, ___ U.S. ___, 129 S.Ct. 1937, 1949, 173 L.Ed.2d 868 (2009). "Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice." Id. (citing Twombly, 550 U.S. at 555, 127 S.Ct. 1955). "[W]here the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct, the complaint has alleged— but it has not `show[n]'—`that the pleader is entitled to relief.'" Iqbal, 129 S.Ct. at 1950 (quoting Fed.R.Civ.P. 8(a)(2)).

II. Relevant Factual & Procedural Background

The following factual summary is taken from Plaintiffs' complaint (Docket No. 1). Plaintiffs purchased and acquired a retirement annuity plan from Knights of Columbus on October 22, 2001 through its agent Ramos-Díaz. (Id. at ¶ 19.) Plaintiffs also purchased and acquired a life insurance policy from Knights of Columbus on October 24, 2001 through Ramos-Díaz. (Id. at ¶ 20.) From April 23, 2004 through October 9, 2007, Plaintiffs deposited various checks with Knights of Columbus for investment, for which defendant González-Aponte, an agent for Knights of Columbus, issued receipts in the name of Knights of Columbus. (Id. at ¶ 21.) The total amount of funds deposited by Plaintiffs with Knights of Columbus during this period was $285,500.00. (Id.)

At all times, defendant González Aponte presented himself to Plaintiffs as an authorized agent of Knights of Columbus, with the credentials, uniform and documentation that supported this representation. (Id. at ¶ 34.) Unbeknownst to Plaintiffs, defendant González-Aponte was no longer an authorized agent of Knights of Columbus, nor was he registered as an agent with the Office of the Commissioner of Insurance of Puerto Rico, when he issued the Certificate of Deposit allegedly guaranteed by "Knights of Columbus." (Id. at ¶ 23.) The Knight Defendants failed to notify Plaintiffs of the fact that González-Aponte was no longer authorized to represent Knights of Columbus. (Id. at ¶ 27.) The Knight Defendants knew, or by exercising reasonable care should have known, that González-Aponte was still in contact and dealing with Plaintiffs representing himself as an authorized agent of Knights of Columbus. (Id. at ¶ 28.)

Defendant Ramos-Díaz informed Plaintiffs through an email dated May 8, 2008, that defendant González-Aponte allegedly used some of the funds he received from Plaintiffs to make loans to various unknown defendants. (Id. at ¶ 32.) Defendant González-Aponte also deposited Plaintiffs' checks in various accounts with PI and RG instead of remitting them to Knights of Columbus for investment in the Church Loan Fund or the Retirement Annuity. (Id. at ¶ 24.) Defendants PI and RG allowed defendant González-Aponte to deposit Plaintiffs' funds in Knights of Columbus accounts or defendant González-Aponte's personal accounts without the necessary endorsements. (Id. at ¶ 25.)

Plaintiffs filed suit on April 21, 2009, alleging twelve causes of action against the abovementioned defendants resulting from the injuries alleged. (Id. at ¶¶ 35-68.) On June 29, 2009, the Knight Defendants moved to compel arbitration based upon a clause found in the contracts which incorporated a document that prescribed the sole means to present and resolve grievances resulting from ownership of Knights of Columbus financial products. (See Docket No. 38.) Based upon the applicability of this arbitration clause, both the Knight Defendants as well as the other co-defendants (Popular, Doral, Western, RG) moved to have the remaining cases against them dismissed for lack of jurisdiction. (See Docket Nos. 38, 39, 56, 59, 63.)

III. Legal Analysis

A. Motion to Compel Arbitration

Knights Defendant's argue that Plaintiffs' claims should be dismissed because all of the claims against them must be submitted to arbitration as required by the Dispute Resolution Clause ("DRC") found in Section 86 of the Laws Governing Supreme Council of the Knights of Columbus ("By-Laws").¹ Knight Defendant's further contend that the Plaintiffs subjected themselves to governance under this arbitration clause by knowingly signing the contracts containing the statements which incorporated the By-Laws by reference.²

Under the FAA, 9 U.S.C. § 1, a written agreement to arbitrate a dispute arising out of a "transaction involving commerce" is judicially enforceable. Medika Int'l, Inc. v. Scanlan Intern, Inc., 830 F.Supp. 81, 84 (D.P.R.1993). The Supreme Court has consistently favored arbitration when facing an issue concerning the arbitrability of a dispute. Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24-25, 103 S.Ct. 927, 74 L.Ed.2d 765. "[A]s a matter of federal law, any doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration, whether the problem at hand is the construction of the contract language itself or an allegation of waiver, delay, or a like defense to arbitrability." Id.

"A party who attempts to compel arbitration must show that [1] a valid agreement to arbitrate exists, [2] that the movant is entitled to invoke the arbitration clause, [3] that the other party is bound by that clause, and that [4] the claim asserted comes within the clause's scope." Inter-Gen N.V., 344 F.3d at 142. The court must first look to a valid contract to determine if it contains an arbitration clause. Once such a clause is found to exist the court must then determine whether the dispute arising under the contract falls within the scope of the arbitration clause. Cardona Tirado v. Shearson Lehman Am. Express, Inc., 634 F.Supp. 158, 159 (D.P.R. 1986). If a valid clause is found, and the controversy in fact falls under the scope of the clause, the court will direct the parties to proceed to arbitration unless the party compelling arbitration has waived the right to do so, or there exists grounds for revocation of the contractual agreement. See Combined Energies v. CCI Inc., 514 F.3d 168, 171 (1st Cir.2008) (quoting Bangor Hydro-Elec. Co. v. New Eng. Tel. & Tel. Co., 62 F.Supp.2d 152, 155-56 (D.Me. 1999)); see also 9 U.S.C. § 2.

In the...