Haskin v. Corporacion Insular de Seguros
| Decision Date | 04 August 1987 |
| Docket Number | Civ. No. 86-0769(RLA). |
| Parties | Eugene HASKIN, Leon Fishman, and Frederick Horwin, Plaintiffs, v. CORPORACION INSULAR DE SEGUROS, Benj. Acosta, Inc., ABC Insurance Company, Jose Alfredo Cruz Barreto, Angela Vigo Sanchez, Raymond Rodriguez Leon, and Eugenio Torres Diaz, Defendants. |
| Court | U.S. District Court — District of Puerto Rico |
Carlos A. Piovanetti, Hato Rey, P.R., Patrick H. Stiehm, Washington, D.C., for plaintiffs.
Arturo Diaz Angueira, Cancio Nadal & Rivera, José Luis Ubarri, Law Offices of Benjamin Acosta, Jr., San Juan, P.R., Arturo Negrón García, Santurce, P.R., for defendants.
The present case is a diversity and federal question action for wrongful denial of insurance coverage, fraud, and violation of the RICO statute (18 U.S.C. § 1961 et seq.).
Plaintiffs, equal owners of Financial Fidelity of Puerto Rico, Inc. ("FFPR"), a Florida accounts receivable factoring organization with principal operations in Puerto Rico, filed this suit in their capacities as assignees of FFPR's instant claims. They allege that defendants Cruz, Vigo, Rodriguez and Torres, former employees of FFPR, defrauded the company of a substantial amount of money and that one of them, Cruz, illegally used FFPR's United States Post Office box in such a way as to incur in a RICO violation. Plaintiffs' main allegation, however, is against Corporación Insular de Seguros ("CIS") for what they argue was the insurance company's wrongful denial of plaintiffs' claim under an insurance policy. The policy provided plaintiffs with "crime coverage" or insurance against loss of money resulting from fraudulent or dishonest acts committed by an employee. In short, plaintiffs are suing the natural defendants for damages caused by fraud and they are suing the corporate defendant1 for not indemnifying them against these losses.
The jurisdiction of the Court is premised primarily on diversity of citizenship, 28 U.S.C. § 1332. Though FFPR is a Puerto Rico corporation and defendants are all residents of Puerto Rico, FFPR assigned its claims to plaintiffs, all three of whom are citizens of the State of Florida and thus the opposing parties are of diverse citizenship for purposes of our diversity jurisdiction. Our federal question jurisdiction is primarily premised on the single RICO, 18 U.S.C. § 1961, et seq., claim against defendant Cruz.
Before the Court is defendant CIS's motion to dismiss and/or for summary judgment based on lack of jurisdiction pursuant to Fed. R. Civ. P. 12 and 56. The other defendants have adopted CIS's motion. An opposition, reply, and surreply have been dutifully filed.
Defendants' jurisdictional attack is twofold. First, they claim that there is no diversity jurisdiction in this case because of the collusive joinder of the plaintiffs to gain access to the federal court in violation of the provisions of 28 U.S.C. § 1359. Second, they argue against federal question jurisdiction on the basis that the RICO violation imputed to defendant Cruz does not state a claim upon which relief may be granted. Lastly, defendants also attack the sufficiency of plaintiffs' pleadings of fraud pursuant to Fed. R. Civ. P. 9(b). Defendants, therefore, request that the complaint be dismissed. Plaintiffs, on the other hand, deny that the assignment of FFPR's claims to them was a collusive attempt to gain diversity jurisdiction. Respecting the RICO claim, plaintiffs allege that defendants are not questioning the Court's federal question jurisdiction, but rather that they are arguing a defect in the pleading which plaintiffs can easily rectify through amendments to the complaint if necessary.
For the reasons stated below, we hold that diversity jurisdiction does exist in the present case and that the non-RICO fraud claims are properly plead but that the RICO claim must be dismissed for failure to state a cause of action. Therefore, we will deny defendants' motion regarding the diversity issue and grant it regarding the RICO issue.
The following material facts, except for the last one, are uncontested. The last one, which deals with plaintiffs' Florida domicile, is amply supported by exhibits and affidavits filed by plaintiffs.
1. FFPR is a Florida corporation whose principal place of business is in the Commonwealth of Puerto Rico. (Paragraph 4 of the complaint.)
2. FFPR is an accounts receivable factoring organization which purchases accounts receivable from its clients, at discounted
percentages of the face value of such accounts, with recourse to require its clients to repurchase accounts that are not timely paid. (Paragraph 10 of the complaint.)
3. Defendants are all corporate or natural citizens of Puerto Rico. The corporate defendant, Corporación Insular de Seguros ("CIS"), has its principal place of business in the Commonwealth of Puerto Rico and the natural defendants are all domiciled in Puerto Rico. (Paragraph 2 of the complaint.)
4. The plaintiffs herein, Eugene Haskin, Leon Fishman, and Frederick Horwin, are each one third owners of the stock of FFPR and are personally liable on the primary financial obligations of FFPR in substantial amounts. They are also the only directors and officers of FFPR. (Paragraph 5 of the complaint.)
5. The plaintiffs, in accordance with a document dated March 28, 1986, received from FFPR an assignment of the claims set forth in the complaint. (Paragraph 4 of the complaint.)
6. Plaintiffs are each named insureds in Policy No. SMP002349 issued by CIS on February 10, 1982.
7. At all times material to this action, FFPR and plaintiffs had an insurance policy with CIS which included, among other things, "crime coverage" insurance protection for fraudulent or dishonest acts committed by an employee, acting alone or in collusion with others. (Paragraph 15 of the complaint.)
8. Pursuant to said insurance policy, on June 27, 1985, FFPR filed a proof of loss with CIS for a series of losses it allegedly sustained as a result of a scheme of actions carried out by the individual defendants, while they were FFPR employees, and certain FFPR clients between September 1, 1984 and March 15, 1985 and of the actions of codefendant, José Alfredo Cruz Barreto (Cruz), while misrepresenting himself as an employee of FFPR between March 15, 1985 and June 30, 1985. (Paragraphs 12, 13, 14, and 16 of the complaint.)
9. CIS retained Benjamín Acosta, Inc. ("BA"), an insurance adjusting firm, and said firm thereupon proceeded to investigate the claim made by FFPR. (Paragraph 17 of the complaint.)
10. On July 5, 1985, BA rejected on behalf of CIS the document filed by FFPR but, under a strict reservation of rights, nevertheless undertook the investigation of FFPR's claim. Pursuant to said investigation, on April 24, 1986 CIS denied coverage of the losses alleged by FFPR in its claim. (Paragraph 19 of the complaint and Defendants' Exhibit No. 3.)
11. On February 26, 1986, attorney Robert J. Harris, wrote a letter to CIS on behalf of FFPR expressing his concern over the investigation made by BA and stating that if FFPR were forced to litigate its claim against CIS, it would assign its cause of action to its principals, Mr. Fishman, Mr. Haskin, and Mr. Horwin, who are residents of the State of Florida, in order to conduct such litigation in the federal court. (See Defendants' Exhibit No. 4.)
12. As consideration for the assignment to them by FFPR of the claims set forth herein, the plaintiffs have agreed to prosecute said claims at their own expense and to apply the proceeds therefrom, or as much of said proceeds as shall be necessary, to the retirement of debts of FFPR. (Paragraph 6 of the complaint.)
13. The acts performed between September 1, 1984 and March 15, 1985 by some or all of the individual defendants and certain clients of FFPR in furtherance of their scheme to defraud FFPR included inducing FFPR to purchase accounts from clients which did not qualify for purchase; falsifying credit, verification and status reports; assisting clients in preparing writings which purported to be new invoices but, in fact, represented very old and uncollectible accounts; and preparing and assisting others in preparing fraudulent invoices which did not represent bona fide accounts and/or contained overstated amounts and selling and/or assisting others in selling those invoices to FFPR. (Paragraph 12 of the complaint.)
14. The acts of fraud subsequently performed by codefendant Cruz on more than two (2) occasions between March 15, 1985 and June 15, 1985, consisted of misrepresenting himself as an employee of FFPR and fraudulently and illegally gaining access to the U.S. Post Office box maintained by FFPR and then taking several checks property of FFPR which he deposited into a commercial and/or personal banking account. (Paragraph 13 of the complaint.)
15. None of the clients that conspired with the individual defendants to conduct the comprehensive scheme of actions to defraud FFPR were brought in as codefendants in the action and none of those clients have been named or otherwise identified by plaintiffs.
16. Each of the plaintiffs is a resident of Florida. (Paragraph 1 of the complaint, plaintiffs' affidavits and exhibits attached to Reply filed January 20, 1987.)
Article III of the Constitution of the United States and the Judiciary Act of 1789 of the United States, Title 28 of the United States Code, establish and delineate the limited jurisdiction vested in the federal courts. A party which seeks access to a federal forum must meet the requirements of these laws and has the burden of establishing the existence of federal jurisdiction as to his claim.
Section 1332 of the Judicial Code reads in pertinent part as follows:
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