Expeditors Int'l of Wash. v. Santillana
| Decision Date | 26 October 2020 |
| Docket Number | 2:20-00349-RAJ-BAT |
| Court | U.S. District Court — Western District of Washington |
| Parties | EXPEDITORS INTERNATIONAL OF WASHINGTON INC, Plaintiff, v. ARMANDO CADENA SANTILLANA, Defendant. |
Defendant Armando Cadena Santillana (“Mr. Cadena”) brings a motion to dismiss pursuant to Federal Rules of Civil Procedure 12(b)(1), 12(b)(2), and 12(b)(6). Dkt. 23. Mr Cadena contends that (1) this Court lacks personal jurisdiction over him as he is a Mexican citizen who was employed by a Mexican subsidiary of Plaintiff Expeditors International of Washington, Inc. (“Expeditors Washington”); (2) Expeditors Washington, as a third-party to the underlying dispute, lacks standing to assert its claims; and (3) the Complaint does not state plausible claims for conversion and imposition of a constructive trust.
Expeditors Washington contends that a contractual forum-selection clause contained in Mr. Cadena's stock option agreements establishes personal jurisdiction as to its declaratory judgment claim and that the Court should exercise pendent personal jurisdiction as to its conversion and constructive trust claims. Dkt. 26.
The undersigned recommends that the motion to dismiss be granted.
On February 27, 2020, Wells Fargo, N.A. (“Wells Fargo”) filed a Complaint for Interpleader, naming Mr. Cadena and Expeditors Washington as defendants. See Wells Fargo Bank, N.A. v Armando Cadena et al., W.D.Wash. No. 2:20-cv-00317-RAJ-BAT (the “Interpleader Action”).
On March 3, 2020, Expeditors Washington filed the Complaint the instant motion seeks to dismiss, bringing claims for (1) conversion (Dkt. 1, ¶¶ 23-27); (2) the imposition of a constructive trust over the Wells Fargo Account and Expeditors of Washington common stock subject to the Expeditors Employee Stock Purchase Plan (the “ESPP”) (id. ¶¶ 28-31); and (3) a judgment declaring the rights and obligations of the parties under the ESPP, including Mr. Cadena's right to exercise stock options granted under the ESPP (id. ¶¶ 18-22).
Underlying both actions are claims that Mr. Cadena, a former employee of Expeditors International de Mexico S.A. de C.V. (“Expeditors Mexico”) engaged in financial misconduct. The misconduct alleged is Mr. Cardena's submission of fraudulent invoices for services rendered to Expeditors Mexico by Agentes Aduanales Al Servicio Del Comercio Exterior, SA.DE C.V. (“AASCE”), a company in which Mr. Cadena is a shareholder. Expeditors Washington claims that the amount of monies fraudulently invoiced to Expeditors Mexico exceeds $2.85 million. See Dkt. 1 (Complaint in Expeditors Action). The Interpleader Action was initiated by Wells Fargo after Expeditors Washington alerted Wells Fargo to a wire transfer from Defendant Cadena's personal account in a Mexican bank to a Wells Fargo account, with a balance in excess of $1 million. Id.
On April 15, 2020, the Court entered a Stipulation and Order for Interpleader of Funds and Dismissal (the “Interpleader Order”) in the Interpleader Action. See Dkt. 13. In relevant part, the Interpleader Order (a) authorized Wells Fargo, N.A. to deposit certain funds in the Registry of the Court, and (b) dismissed Wells Fargo with prejudice. Pursuant to the Interpleader Order, Wells Fargo deposited the sum of $1, 109, 437.23 (the “Interpleaded Funds”) into the Court Registry on April 30, 2020. On August 31, 2020, the Court granted Expeditors Washington's Motion to Stay the Interpleader Action “until such time as the rightful owner of the Interpleaded Funds is determined.” Dkt. #21.
Before the Interpleader Action or this case was initiated, Mr. Cadena filed suit on January 6, 2020, against Expeditors Mexico in Mexican Labor Court for violations of Mexican law. See Armando Cadena Santillana v. Expeditors International De Mexico, S.A. de C.V., No. 53/2020 (Special Labor Board No. 15, Mexico City). According to Kevin Osborn, Vice President, Associate General Counsel, and Chief Ethics & Compliance Officer for Plaintiff Expeditors of Washington, Expeditors Mexico has not yet been served with a complaint. Dkt. 27, ¶ 15.
Mr. Cadena was Regional Comptroller of Expeditors Mexico, a Mexican company headquartered in Mexico City (see Dkt. 25, Declaration of Joshua D. Harms (“Harms Decl.”) Ex. A (Expeditors Mexico Corp. Deed) at 2) until termination of his employment.[1] Dkt. 1, ¶¶ 7, 12. Expeditors Mexico is a wholly-owned subsidiary of Expeditors Washington, a global logistics and freight-forwarding company headquartered in Seattle, Washington. Id. ¶ 7.
Mr. Cadena was and continues to be a shareholder of AASCE, a Mexican company headquartered in Mexico City that provides Expeditors Mexico with customs brokerage services. See id. ¶ 9.
Expeditors Washington alleges that Mr. Cadena, in concert with at least three other Expeditors Mexico employees, “fraudulently invoiced higher amounts for services rendered [by AASCE] to Expeditors Mexico and then transferred the overprice to accounts for which the co-conspirators and/or their family members were personal beneficiaries.” Dkt. 7, Id. ¶ 9. Expeditors Washington contends that the fraudulently invoiced amounts to Expeditors Mexico exceeded $2.85 million.
On November 8, 2019 the Chief Financial Officer of Expeditors Washington contacted Wells Fargo, N.A. and demanded that it “freeze all of Armando Cadena's assets at Wells Fargo.” Interpleader Action Dkt. 1, ¶ 12. At that time, Mr. Cadena maintained a deposit account at Wells Fargo (Acct. #XXXXXX1567; the “Wells Fargo Account”). Id. ¶ 10. Expeditors Washington informed Wells Fargo of an alleged wire transfer from Mr. Cadena's account at CIBanco S.S. to the Wells Fargo Account in the amount of $59, 160.89 (roughly 5% of the $1, 115, 321.96 balance of Mr. Cadena's personal savings). See id. ¶¶ 12, 17. Wells Fargo froze the entire account.
On April 30, 2020, Wells Fargo deposited the balance of the Wells Fargo Account ($1, 109, 437.23), into the Court Registry (Receipt #SEA100717), representing the balance less the amount deducted for Wells Fargo's attorneys' fees and costs.
As an employee Expeditors Mexico (Dkt. 1 ¶ 7), Mr. Cadena participated in the Expeditors Employee Stock Purchase Plan (the “ESPP”) for many years. The stock option grants at issue here were received by Mr. Cardena in 2014, 2015, and 2016. Dkt. 27, Declaration of Kevin Osborn, ¶ 4. The grants were made pursuant to a written Expeditors Stock Option Plan and are governed by specific Stock Option Agreements. Id., ¶¶ 4, 5, 6 and Exs. B, C, and D. Each Stock Option Agreement states, in relevant part:
This Agreement and the [applicable] Plan set forth the entire understanding between the Company and the Optionee with respect to the Option and shall be construed and enforced under the laws of the State of Washington. Any action brought with respect to this Agreement or the Plan shall be brought in a court in King County, Washington.
Id., Ex. B (at ¶ 15), Ex. C (at ¶ 15), and Ex. D (at ¶ 15).
Paragraph 10 of the Stock Option Agreements governs the exercise of options and provides that each exercise of the option shall be by written notice delivered to Expeditors Washington in Seattle. Dkt. 27, Ex. B (at ¶ 10), Ex. C (at ¶ 10), and Ex. D (at ¶ 10). “Alternatively, the Optionee may pay for all or any portion of the exercise price by delivery of previously acquired shares of Common Stock with a fair market value equal to or greater than the full exercise price or by complying with any other payment mechanism which the Plan Administrator may approve at the time of exercise.” Id.
On January 29, 2020, Mr. Cadena sent a letter to Fidelity Stock Plan Services, seeking to make a cashless exercise of 5, 600 options of Expeditors common stock. Dkt. 1, ¶ 13.
Mr. Cadena is domiciled and resides in Mexico City, Mexico. Dkt. 24, Declaration of Armando Cadena Santillana (“Cadena Decl.”), ¶ 2. Mr. Cadena does not reside in Washington and has never been employed in Washington or by a Washington entity. Id. ¶ 11. Mr. Cadena does not own or lease real property in Washington (id. ¶ 4); does not maintain an office or keep files, or handle or receive correspondence in Washington (id. ¶¶ 5-7); and, has no employees or registered agents in Washington (id. ¶ 8).
Expeditors is a Washington corporation based in Seattle, with subsidiaries around the world and employs about 17, 750 persons globally. According to Kevin Osborn, the Vice President, Associate General Counsel, and Chief Ethics & Compliance Officer of Expeditors Washington, Expeditors has an established Code of Business Conduct (“Code”) that applies to every employee, director, and officer worldwide. Dkt. 27, Declaration of Kevin Osborn, ¶ 3. Mr. Osborn states that “in his capacity as regional controller for the Company's Mexican branches, and specifically as to accounting matters, [Mr.] Cadena reported directly to Bradley Powell, the Chief Financial Officer in Seattle. Id., ¶ 2.
The ESPP is administered by Fidelity Stock Plan Services, LLC (“Fidelity Services”), a Delaware company headquartered in Massachusetts. Id., Dkt. 25, Harms Decl., Ex. E (Fidelity Services 2020 Annual Report). The proceeds of the ESPP (i.e., Expeditors Washington stock, cash related to Mr. Cadena's participation in the ESPP, and earned income on such property, collectively “Stock Plan Proceeds”), is held in a trust named SPS Participant Trust - Expeditors International of Washington, Inc. (the “ESPP Trust”). The ESPP Trust has its situs in Massachusetts. Its trustee, the ...
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