Carney v. Horion Invs. Ltd.

• Decision Date: 13 May 2015
• Docket Number: No. 3:13–cv–660 (SRU).,3:13–cv–660 (SRU).
• Citation: 107 F.Supp.3d 216
• Court: U.S. District Court — District of Connecticut
• Parties: John J. CARNEY, in his capacity as Court–Appointed Receiver for Highview Point Partners, LLC, et al., Plaintiff, v. HORION INVESTMENTS LTD., et al., Defendants.

107 F.Supp.3d 216

John J. CARNEY, in his capacity as Court–Appointed Receiver for Highview Point Partners, LLC, et al., Plaintiff,

v.HORION INVESTMENTS LTD., et al., Defendants.

No. 3:13–cv–660 (SRU).

United States District Court, D. Connecticut.

Signed May 13, 2015.

Ona Theresa Wang, Baker & Hostetler LLP, New York, NY, for Plaintiff.

Adam L. Schwartz, Kevin P. Jacobs, Luis E. Delgado, Homer Bonner Jacobs, P.A., Miami, FL, Daniel E. Wenner, Day Pitney LLP, Hartford, CT, for Defendants.

RULING ON MOTION TO DISMISS

STEFAN R. UNDERHILL, District Judge.

This case is ancillary to a U.S. Securities and Exchange Commission ("SEC") enforcement proceeding against Francisco Illarramendi ("Illarramendi") for violation of federal securities laws. The United States District Court for the District of Connecticut created a receivership estate and appointed John J. Carney (the "Receiver") as receiver.¹ In this action, the Receiver filed a complaint² against numerous defendants to recover property for the benefit of the receivership estate. Those defendants are Piero Enrique Montelli Torres ("Montelli"), Inverplus Sociedad de Corretaje de Titulos Valores, C.A. ("Inverplus"), IVP Overseas Ltd. ("IVP") (collectively, the "Montelli Defendants"), Romeo Mikael Mouawad, Jespa Mawad de Mouawad, Miguel Antonio Mouawad Mawad, Tania Mouawad Mawad, Horion Investment Ltd., Grimsel Group Ltd. ("Grimsel"), and M. Holding S.A. ("M. Holding") (collectively, the "Mouawad–Mawad Defendants"). The Receiver alleges that Montelli helped Illarramendi conceal the scheme and conspired with Illarramendi even after the SEC sued Illarramendi, assisting him in his attempt to circumvent the SEC's pending asset freeze. In exchange, the Receiver alleges, Montelli received or directed fraudulent transfers from receivership entities on his or his affiliates' behalf, and facilitated fraudulent transfers for the benefit of the Mouawad–Mawad Defendants.

Defendants Miguel Mouawad Mawad ("Mawad") and M. Holding move to dismiss the complaint, alleging inadequate service of process, lack of personal jurisdiction, lack of subject-matter jurisdiction, lack of standing, and forum non conveniens. Further, defendants argue that the Receiver's claims are time-barred and that the Receiver's common law claims are insufficiently pled. For the reasons stated below, defendants' motion to dismiss (doc. # 52) is granted in part and denied in part.

I. Standard of Review

A. Lack of Subject–Matter Jurisdiction Under Rule 12(b)(1)

Under Rule 12(b)(1) of the Federal Rules of Civil Procedure, "[a] case is properly dismissed for lack of subject matter jurisdiction ... when the district court lacks the statutory or constitutional power to adjudicate it." Makarova v. United States, 201 F.3d 110, 113 (2d Cir.2000). The party who seeks to invoke a court's jurisdiction bears the burden of establishing that jurisdiction. Thompson v. Cnty. of Franklin, 15 F.3d 245, 249 (2d Cir.1994)(citing Warth v. Seldin, 422 U.S. 490, 518, 95 S.Ct. 2197, 45 L.Ed.2d 343 (1975) ). To survive a motion brought under Rule 12(b)(1), a plaintiff must allege facts demonstrating that the plaintiff is a proper party to seek judicial resolution of the dispute. Id. "When considering a party's standing, we ‘accept as true all material allegations of the complaint, and must construe the complaint in favor of the complaining party.’ " Thompson, 15 F.3d at 249 (quoting Warth v. Seldin, 422 U.S. 490, 501, 95 S.Ct. 2197, 45 L.Ed.2d 343 (1975) ). If a plaintiff has failed to allege facts supportive of standing, it is within the court's discretion to allow or to require the plaintiff to supply, by amendment to the complaint or by affidavits, further particularized allegations of fact supportive of standing. Id.

B. Lack of Personal Jurisdiction Under Rule 12(b)(2)

On a motion to dismiss for lack of personal jurisdiction under Rule 12(b)(2), the plaintiff bears the burden of establishing that the court has jurisdiction over the defendant. See Thomas v. Ashcroft, 470 F.3d 491, 495 (2d Cir.2006). A plaintiff may initially carry this burden "by pleading in good faith ... legally sufficient allegations of jurisdiction, i.e., by making a ‘prima facie showing’ of jurisdiction." Jazini v. Nissan Motor Co., Ltd., 148 F.3d 181, 184 (2d Cir.1998) (quoting Ball v. Metallurgie Hoboken–Overpelt, S.A., 902 F.2d 194, 197 (2d Cir.1990) ). A plaintiff can make this showing through his "own affidavits and supporting materials," Marine Midland Bank, N.A. v. Miller, 664 F.2d 899, 904 (2d Cir.1981), containing "an averment of facts that, if credited ..., would suffice to establish jurisdiction over the defendant." Metropolitan Life Ins. Co. v. Robertson–Ceco Corp., 84 F.3d 560, 567 (2d Cir.1996) (quoting Ball, 902 F.2d 194, 197 (2d Cir.1990) ).

In resolving the personal jurisdiction issue, a court must "construe the pleadings and affidavits in the light most favorable to [the plaintiff], resolving all doubts in his favor." A.I. Trade Finance, Inc. v. Petra Bank, 989 F.2d 76, 79–80 (2d Cir.1993). When deciding a motion to dismiss for lack of personal jurisdiction, the court may consider affidavits and other evidence submitted by the parties. Ensign–Bickford Co. v. ICI Explosives USA, Inc., 817 F.Supp. 1018, 1026 (D.Conn.1993) ("[T]he plaintiff must make a ‘prima facie showing’ through affidavits or other evidence that the defendant's conduct was sufficient for the court to exercise personal jurisdiction.").

C. Improper Venue Under Rule 12(b)(3)

"The same standard of review is applied to a motion to dismiss for improper venue under Fed.R.Civ.P. 12(b)(3) as is applied to dismissals for lack of personal jurisdiction pursuant to Fed.R.Civ.P. 12(b)(2)." Marcus v. Am. Contract Bridge League, 562 F.Supp.2d 360, 362–63 (D.Conn.2008) (citing Gulf Ins. Co. v. Glasbrenner, 417 F.3d 353, 355 (2d Cir.2005) ). In defending against a motion to dismiss for improper venue, plaintiffs bear the burden of proving that venue is proper. Indymac Mortgage Holdings, Inc. v. Reyad, 167 F.Supp.2d 222, 237 (D.Conn.2001). When deciding a motion to dismiss for improper venue, courts may consider materials outside the pleadings. See, e.g., New Moon Shipping Co., Ltd. v. MAN B & W Diesel AG, 121 F.3d 24, 26 (2d Cir.1997). Pursuant to 28 U.S.C. § 1406(a), the court may transfer or dismiss the case if venue is not proper. Should the defendant prevail on its motion, the court still retains discretion to decline to dismiss the case in favor of a transfer to any district where the case could initially have been brought. See id. (citing Minnette v. Time Warner, 997 F.2d 1023, 1026 (2d Cir.1993) ).

D. Service of Process Under Rule 12(b)(5)

"Under Rule 12(b)(5), a party may file a motion to dismiss due to insufficiency of service of process." Rzayeva v. United States, 492 F.Supp.2d 60, 74 (D.Conn.2007) (citing Fed.R.Civ.P. 12(b)(5) ; Greene v. Wright, 389 F.Supp.2d 416, 426 n. 2 (D.Conn.2005) ). "A motion to dismiss pursuant to Rule 12(b)(5) must be granted if the plaintiff fails to serve a copy of the summons and complaint on the defendants pursuant to Rule 4 of the Federal Rules, which sets forth the federal requirements for service." Id. (citing Cole v. Aetna Life & Cas., 70 F.Supp.2d 106, 110 (D.Conn.1999) ). "Once validity of service has been challenged, it becomes the plaintiff's burden to prove that service of process was adequate." Id. (citation omitted).

E. Failure to State a Claim Under Rule 12(b)(6)

A motion to dismiss for failure to state a claim pursuant to Rule 12(b)(6) is designed "merely to assess the legal feasibility of a complaint, not to assay the weight of evidence which might be offered in support thereof." Ryder Energy Distribution Corp. v. Merrill Lynch Commodities, Inc., 748 F.2d 774, 779 (2d Cir.1984) (quoting Geisler v. Petrocelli, 616 F.2d 636, 639 (2d Cir.1980) ).

When deciding a motion to dismiss pursuant to Rule 12(b)(6), the court must accept the material facts alleged in the complaint as true, draw all reasonable inferences in favor of the plaintiffs, and decide whether it is plausible that plaintiffs have a valid claim for relief. Ashcroft v. Iqbal, 556 U.S. 662, 678–79, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) ; Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555–56, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) ; Leeds v. Meltz, 85 F.3d 51, 53 (2d Cir.1996).

Under Twombly, "[f]actual allegations must be enough to raise a right to relief above the speculative level," and assert a cause of action with enough heft to show entitlement to relief and "enough facts to state a claim to relief that is plausible on its face." 550 U.S. at 555, 570, 127 S.Ct. 1955 ; see also Iqbal, 556 U.S. at 679, 129 S.Ct. 1937 ("While legal conclusions can provide the framework of a complaint, they must be supported by factual allegations."). The plausibility standard set forth in Twombly and Iqbal obligates the plaintiff to "provide the grounds of his entitlement to relief" through more than "labels and conclusions, and a formulaic recitation of the elements of a cause of action." Twombly, 550 U.S. at 555, 127 S.Ct. 1955 (quotation marks omitted). Plausibility at the pleading stage is nonetheless distinct from probability, and "a well-pleaded complaint may proceed even if it strikes a savvy judge that actual proof of [the claims] is improbable, and ... recovery is very remote and unlikely." Id. at 556, 127 S.Ct. 1955 (quotation marks omitted).

II. Background³

This is an action to recover receivership property that Illarramendi diverted in order to sustain his Ponzi scheme. The Receiver alleges that Mawad, M. Holding, and Horion received more than $71 million in fraudulent transfers from receivership entities. The Receiver alleges that Mawad and his family, often in concert with Illarramendi's childhood friend, Montelli, established shell companies to enrich themselves and the entities they control.

A. The Defendants

1. Montelli

Montelli is a Venezuelan public accountant who facilitated Illarramendi's scheme by...