Garza v. Citigroup Inc.

• Decision Date: 29 June 2016
• Docket Number: Civ. No. 15-537-SLR
• Citation: 192 F.Supp.3d 508
• Parties: Mario Alberto Lopez GARZA, The Executor of the Estate of Hans Jorg Schneider Sauter, Plaintiff, v. CITIGROUP INC., Defendant.
• Court: U.S. District Court — District of Delaware

192 F.Supp.3d 508

Mario Alberto Lopez GARZA, The Executor of the Estate of Hans Jorg Schneider Sauter, Plaintiff,

v.CITIGROUP INC., Defendant.

Civ. No. 15-537-SLR

United States District Court, D. Delaware.

Signed June 29, 2016

Thomas G. Macauley, Macauley LLC, Wilmington, DE, for Plaintiff.

Meghan Dougherty, Paul, Weiss, Rifkind, Wharton & Garrison LLP, Wilmington, DE, for Defendant.

MEMORANDUM

SUE L. ROBINSON, United States District Judge

At Wilmington this 29th day of June, 2016, having reviewed Citigroup Inc.'s motion for judgment on the pleadings (D.I. 40), and the papers filed in connection therewith; the court issues its decision based on the following reasoning:

1. Background.¹ On June 25, 2015, plaintiff Mario Alberto Lopez Garza ("Garza") initiated this instant lawsuit, as executor of the Estate of Hans Jorg Schneider Sauter (the "Estate"), against Citigroup Inc. ("Citigroup") seeking an accounting to determine whether Citigroup has information with respect to funds that may belong to the Estate. (D.I. 1) The court has jurisdiction over this matter pursuant to 28 U.S.C. § 1332.

2. Garza resides in Jalisco, Mexico and serves as the executor of the Estate of Hans Jorg Schneider Sauter, a Mexican national who died in Mexico in 2008. (D.I. 1 ¶¶ at 2-3) Citigroup is a global bank incorporated in the State of Delaware, with its principal place of business in New York, New York. (Id. at ¶ 4) Banco Nacional de Mexico, S.A. integrante del Grupo Financiero Banamex ("Banamex") is a wholly-owned, indirect subsidiary of Citigroup. (D.I. 11 at ¶ 5)

3. After the death of Mr. Schneider Sauter, the Estate initiated probate proceedings in Mexico to collect and account for decedent's assets deposited in Banamex. (D.I. 1 at ¶ 13) The Mexican probate proceedings were halted when Banamex filed new litigation under the "amparo" process, which is a process designed to resolve the presence or absence of constitutional violations.² (D.I. 49 at 5) After the Mexican probate proceedings were halted, the Estate brought suit in the United States District Court for the Southern District of New York against Citigroup, Banamex, and Banamex USA ("New York litigation"). (Id. ) The Estate voluntarily dismissed the New York litigation without prejudice after the court denied its motion seeking leave to file a proposed second amended complaint.³ Estate of Sauter v. Citigroup Inc. , Civ. No. 14–05812 LGS, 2015 WL 3429112, at *3 (S.D.N.Y. May 27, 2015). The Estate subsequently filed the instant complaint, claiming that Citigroup, Banamex's indirect corporate parent, must account for the funds Mr. Schneider Sauter allegedly deposited at its foreign subsidiary. (D.I. 1 at ¶¶ 17-19)

4. Standard. The court reviews a Rule 12(c) motion for judgment on the pleadings based on an allegation that the plaintiff has failed to state a claim "under the same standards that apply to a Rule 12(b)(6) motion." Ferrell v. Cmty. Mgmt. Servs., LLC , 2011 WL 1750452, at *1 (D.Del. May 6, 2011) (citing Revell v. Port Auth. of N.Y. & N.J. , 598 F.3d 128, 134 (3d Cir.2010) ). That is, the court must accept all factual allegations in a complaint as true and take them in the light most favorable to the plaintiff. See Erickson v. Pardus , 551 U.S. 89, 94, 127 S.Ct. 2197, 167 L.Ed.2d 1081 (2007) ; Christopher v. Harbury , 536 U.S. 403, 406, 122 S.Ct. 2179, 153 L.Ed.2d 413 (2002). A complaint must contain "a short and plain statement of the claim showing that the pleader is entitled to relief, in order to give the defendant fair notice of what the.... claim is and the grounds upon which it rests." Bell Atl. Corp. v. Twombly , 550 U.S. 544, 545, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) (interpreting Fed. R. Civ. P. 8(a) ) (internal quotations omitted). A complaint does not need detailed factual allegations; however, "a plaintiff's obligation to provide the ‘grounds' of his entitle[ment] to relief requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Id. at 545, 127 S.Ct. 1955 (alteration in original) (citation omitted). The "[f]actual allegations must be enough to raise a right to relief above the speculative level on the assumption that all of the complaint's allegations are true." Id. Furthermore, "[w]hen there are well-ple[d] factual allegations, a court should assume their veracity and then determine whether they plausibly give rise to an entitlement of relief." Ashcroft v. Iqbal , 556 U.S. 662, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009). Such a determination is a context-specific task requiring the court "to draw on its judicial experience and common sense." Id.

5. Analysis. Citigroup's motion for judgment on the pleadings is premised on its argument that Garza fails to state a claim for the relief of an accounting when it has alleged no substantive claim entitling the Estate to that remedy. (D.I. 41 at 1-2) According to Citigroup, Garza has also failed to allege any relationship between the Estate and Citigroup that supports any duty by Citigroup to provide an accounting. (Id. at 2) Under well-accepted Delaware law, "[a]n accounting is an equitable remedy that consists of the adjustment of accounts between parties and a rendering of a judgment for the amount ascertained to be due to either as a result." Albert v. Alex. Brown Mgmt. Servs., Inc. , Civ. No. 762–N, 2005 WL 2130607, at *11 (Del.Ch. Aug. 26, 2005). In other words, an accounting "reflects a request for a particular type of remedy, rather than an equitable claim in and of itself." Stevanov v. O'Connor , Civ. No. 3820–VCP, 2009 WL 1059640, at *15 (Del.Ch. Apr. 21, 2009) ; see also Addy v. Piedmonte , Civ. No. 3571–VCP, 2009 WL 707641, at *23 (Del.Ch. Mar. 18, 2009) (explaining that an accounting is "dependent on the viability and outcome of the underlying causes of action"); Rhodes v. Silkroad Equity, LLC , Civ. No. 2133–VCN, 2007 WL 2058736, at *11 (Del.Ch. July 11, 2007) ("An accounting is not so much a cause of action as it is a form of relief. Here, the demand for accounting is inherently dependent on the Court's decision on the fiduciary duty claims.").

6. Garza asserts that "the law makes clear that an accounting is an appropriate cause of action to plead, and the appropriate remedy to seek, when ‘the accounts are all on one side, but there are circumstances of great complication, or difficulties in the way of adequate relief at law.’ " (D.I. 49 at 7-8) In Kirschner v. West Company , 300 F.2d 133 (3d Cir.1962), the Third Circuit explained that, "[a] prayer for an accounting will not, in itself, render a complaint cognizable in equity.... [t]here must be some equitable ground for relief in addition to the mere demand for an account." Id. at 135–36 (citations omitted). The Third Circuit concluded that the legal remedies were adequate because there was a contractual relationship between the parties. Id. at 136 The court in Barkauskie v. Indian School District , 951 F.Supp. 519 (D.Del.2011), likewise characterized an accounting as "an equitable remedy which arises from the defendant's possession of money which he is obliged to surrender, due to some particular relationship between himself and the plaintiff." Id. at 543 ; see Am. Air Filter Co. v. McNichol , 527 F.2d 1297, 1300 (3d Cir.1975). For instance, "[a] fiduciary relationship is a relationship in which one person reposes special trust in another, o r ... which a special duty exists on the part of one person to protect the interests of another." Barkauskie , 951 F.Supp. at 543–44. Contrary to Garza's interpretation of the case as an example of a Delaware court allowing an accounting to be a stand-alone claim, defendant's claim for an accounting arose out of its fiduciary relationship with plaintiff and plaintiff's alleged breach of that fiduciary relationship. See id. In the case at bar, Garza's failure to plead any underlying substantive cause of action or fiduciary relationship renders its claim for an accounting legally invalid on its face under Delaware law.

7. Garza suggests that New York, rather than Delaware, law regarding accounting should apply in the instant case because it believes Citigroup's conduct in New York is at issue.⁴ (D.I. 49 at 7 n.2) However, applying New York law does not cure Garza's complaint because, under New York law, a fiduciary relationship must be alleged to sustain a freestanding claim of an accounting. See Haughton v. Cognisight, LLC , 953 F.Supp.2d 478, 491 (W.D.N.Y.2013) ("to make out such a claim [for accounting], plaintiff must allege (1) a fiduciary relationship with defendants (2) involving the entrustment of money or property, (3) that no other remedy exists, and (4) that plaintiff demanded and was refused an accounting") (citing In re Mary XX , 33 A.D.3d 1066, 822 N.Y.S.2d 659 (App.Div.2006) ).

8. In the complaint, Garza alleges that Citigroup has records and information in its possession that could establish whether Banamex holds the Estate's funds, but alleges no duty that would require Citigroup to provide these records and information to the Estate.⁵ (D.I. 1 at ¶ 15) Similarly, Garza alleges that Citigroup receives earnings on the deposits made through Banamex and that Citigroup's board of directors offers guidance in the activities of the Mexico operations. (Id. at ¶ 9) However, Garza does not allege that Citigroup possesses the Estate's funds or that Citigroup controlled the activities of the Mexico operations. (Id. ) In the briefing, Garza never specifically alleges any type of relationship, let alone a fiduciary relationship, between Citigroup and the Estate. (D.I. 49) In Garza's reply brief, he intimates (rather than argues) that the relationship between the Estate and Banamex should extend to Citigroup because Citigroup has oversight and control over the compliance and risk management procedures of its global operations,⁶ which include Banamex. (Id. at 6) At oral argument,⁷ Garza suggested that, because Citigroup is required to implement a...