Daly v. Castro Llanes
| Decision Date | 10 December 1998 |
| Docket Number | No. 98 Civ. 1196(AGS).,98 Civ. 1196(AGS). |
| Citation | 30 F.Supp.2d 407 |
| Parties | James P. DALY and James P. Daly, as Executor of the Estate of Ramon Gimeno Ibars, a/k/a Ramon Gimeno, Plaintiff, v. Orlando CASTRO LLANES, Orlando Castro Castro, Jorge Castro Barredo, Calixto E. Lanauze, Nereida H. Brito Vegas, Banco Progreso Internacional De Puerto Rico, Inc., and Banco Progreso, S.A.C.A., Defendants. |
| Court | U.S. District Court — Southern District of New York |
Randall David Bartlett, Bartlett, Bartlett & Ziegler, P.C., New York City, for plaintiff.
Barbara W. Bernstein, Jean E. Kalicki, Cleary, Gottlieb, Steen & Hamilton, Banco Progreso S.A.C.A., Washington, DC, Calixto E. Lanauze, defendant pro se.
Plaintiff brings this action on behalf of himself and as the duly appointed executor of the Estate of Ramon Gimeno to recover funds allegedly fraudulently obtained by defendants in violation of the laws of the United States and of the State of New York. The case is before the Court on (1) defendant Calixto E. Lanauze's ("Lanauze") motion to dismiss the complaint as against him for lack of personal jurisdiction, and (2) defendant Banco Progreso, S.A.C.A.'s ("BPSACA") motion to dismiss the complaint as against it for (a) failure to plead with particularity, (b) invalid service of process, and (c) lack of subject matter jurisdiction. For the reasons stated herein, (1) defendant Lanauze's motion is granted in its entirety, and (2) defendant BPSACA's motion is granted in part and denied in part.
Plaintiff James P. Daly ("Plaintiff" or "Daly") at all relevant times was and is a resident of the State and City of New York. (Complaint at ¶ 2.) Defendants Orlando Castro Llanes ("Castro Llanes"), Orlando Castro Castro ("Castro Castro"), and Jorge Castro Barredo ("Castro Barredo") are individuals presently incarcerated in the State of New York. (Id. at ¶¶ 3, 4, 5.) Castro Llanes is the father of Castro Castro, and the grandfather of Castro Barredo. (Id. at ¶ 14.) Plaintiff alleges that these three defendants (the "Castro Defendants") owned and operated various banks, financial services, businesses, and insurance companies in Venezuela, Puerto Rico, and the Dominican Republic. (Id. at ¶ 13.)
Defendant BPSACA was a business entity authorized under the laws of Venezuela to engage in banking and the provision of financial services. (Id. at ¶ 9.) Plaintiff alleges that, at the time of the events complained of, the Castro Defendants owned and controlled BPSACA and BPSACA's wholly owned subsidiary codefendant Banco Progreso Internacional de Puerto Rico ("BPIPR"). (Id. at ¶¶ 16, 17, 21.) BPIPR was a business entity authorized under the laws of Puerto Rico to engage in banking and the provision of financial services. (Id. at ¶¶ 8, 17.)
Castro Castro was the president and director of various businesses owned by the Castro family, including BPSACA. (Id. at ¶ 17.) Castro Barredo also acted as president and director of various businesses owned by the Castro family, including BPIPR. (Id. at ¶ 18.) Defendant Calixto E. Lanauze, an individual residing in Puerto Rico, was the Executive Vice President of BPIPR. (Id. at ¶¶ 6, 18.) Defendant Nereida H. Brito Vegas ("Brito"), an individual residing in Caracas, Venezuela, acted as BPIPR's Operations Manager. (Id. at ¶¶ 7, 20.)
Plaintiff and Ramon Gimeno ("Gimeno") deposited funds into BPSACA in December, 1992, at which time BPSACA correctly listed the accounts in the name of Gimeno, or jointly in the names of Daly and Gimeno. (Plaintiff's Rico Statement ("Pl.'s RICO") at 1, 2, 4.) The funds, with plaintiff's and Gimeno's consent, were then transferred to BPSACA's subsidiary BPIPR by defendant Brito, the Manager of Operations of BPIPR, in October, 1993. (Id. at 1, 2, 4.)
Between April, 1993 and September, 1994, BPSACA and/or BPIPR mailed monthly statements of accounts to plaintiff and Gimeno, which represented that the funds were secure and accruing interest. (Id. at 4.) Defendants also represented to plaintiff and Gimeno that BPIPR was a financial institution that would make high quality and safe investments for plaintiff and Gimeno, and that the bank would provide services including loans and checking accounts. (Complaint at ¶¶ 23, 25.) Defendants further represented to plaintiff and Gimeno that Puerto Rico, and BPIPR by implication, were stable, used the United States Dollar as currency, and afforded greater regulation of banks than other off-shore financial centers. (Id. at ¶ 24.)
Plaintiff alleges that defendants did not maintain a secure and sound bank with highly regulated and safe investments. (Id. at ¶ 26.) Rather, the Castro Defendants illegally withdrew funds from Daly's, Gimeno's and other depositors' accounts for their personal use, as set forth below. (Pl.'s RICO at 2, 3.) For example, in November, 1993, plaintiff alleges that Castro Barredo withdrew over $50,000 from BPIPR, and in February and March, 1994, Castro Castro and Castro Barredo, respectively, unlawfully removed over $1,000,000 each from BPIPR. (Id. at 4.) Despite these withdrawals, on September 1, 1994, defendant Lanauze sent a letter on BPIPR letterhead to customers of BPIPR, including plaintiff and Gimeno, representing that BPIPR was a sound financial institution, and solicited greater use of its services by customers. (Id.)
Plaintiff alleges that the Castro Defendants used the proceeds from these and other fraudulent transfers for their personal use and investment in other Castro family enterprises engaged in foreign and interstate commerce. (Id. at 7.) Plaintiff alleges that, while representing to plaintiff and Gimeno that the funds were in Puerto Rico, defendants were simultaneously informing regulators and auditors that the funds were in Panama. (Complaint at ¶ 28.) Plaintiff alleges that depositors' funds, including those of plaintiff and Gimeno, were placed into speculative investments and high risk option trading resulting ultimately in losses of over six million dollars. (Id. at ¶¶ 29, 30.)
Plaintiff alleges that Daly's name was dropped from the accounts at BPIPR, and that Brito, aware of this fact, effectively delayed and ultimately thwarted Daly's attempts to settle the accounts and withdraw the funds from BPIPR. (Pl.'s RICO at 2, 3.) In January, 1995, "in response to Daly's attorney's several requests for release of funds, BPIPR's attorneys advised [him] only that they had `resigned' as BPIPR's counsel." (Id.) On March 3, 1995, BPIPR's receiver informed Daly's attorney that, as of January 25, 1995, the Financial Institutions Commission of Puerto Rico had ordered the receivership and liquidation of BPIPR. (Id.) BPIPR's depositors had lost over $15,000,000 by that date. (Id.)
Plaintiff represents that the Castro Defendants were each convicted in New York State courts, and are all currently incarcerated in the state of New York as a result of the aforementioned activities. (Id. at 5; Complaint at ¶¶ 3, 4, 5.) Plaintiff alleges that his and Gimeno's damages attributable to the unlawful and fraudulent actions on the part of defendants are $231,738.73 plus interest. (Complaint at ¶ 10.)
Plaintiff filed the present action, on behalf of himself and as executor of decedent Gimeno's estate, seeking to recover the funds that he was unable to remove from BPIPR, and triple damages for the alleged RICO violations. The complaint alleges that defendant Castro Llanes, as head of the Castro family business network, acted in concert with the other Castro defendants to defraud plaintiff and decedent Gimeno, under circumstances where the non-Castro defendants knew or should have known of the fraud. (Pl.'s RICO at 1-2.) Plaintiff alleges that BPSACA, wholly owned by the Castro Defendants, participated in defendants' fraudulent conversion of plaintiff's and Gimeno's funds. (Id.) Plaintiff further alleges that BPIPR, wholly owned in turn by BPSACA, was used by the Castro Defendants as a front for their fraudulent activities, and was an instrumentality for their unlawful conversion of plaintiff's and Gimeno's funds. (Id.)
The complaint asserts liability on the part of defendants on five legal bases: (1) the federal Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1961 et seq.; (2) conversion; (3) fraud; (4) misappropriation and unjust enrichment; and (5) the common law of contracts.
Defendant Lanauze moves to dismiss the complaint as against him for lack of jurisdiction over the person under Federal Rule of Procedure 12(b)(2).2 On a motion to dismiss pursuant to Rule 12(b)(2), all pleadings and affidavits must be construed in the light most favorable to the plaintiff, and all doubts resolved in that party's favor. Herbstein v. Bruetman, 768 F.Supp. 79, 81 (S.D.N.Y. 1991), citing CutCo Indus., Inc. v. Naughton, 806 F.2d 361, 365 (2d Cir.1986). In order to "withstand a 12(b)(2) motion to dismiss, a plaintiff need only make out a prima facie case of personal jurisdiction." Id. (citing Beacon Enterprises, Inc. v. Menzies, 715 F.2d 757, 768 (2d Cir.1983)).
Federal Rule of Civil Procedure 4(k) provides that service of a summons is effective to establish jurisdiction over the person of a defendant if, inter alia, that defendant "(A) could be subjected to the jurisdiction of a court of general jurisdiction in the state in which the district court is located, or ... (D) when authorized by a statute of the United States."
The New York long arm statute exerts jurisdiction over a non-domiciliary who:
(1) transacts business within the state ...; (2) commits a tortious act ... within the state; (3) commits a tortious act ... outside the state causing injury to person or property within the state, if such nondomiciliary regularly does or solicits business or engages in any other persistent course of conduct, or derives substantial revenue from goods used or...
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