Otto Candies, LLC v. Citigroup, Inc., No. 18-12663

• Decision Date: 01 July 2020
• Docket Number: No. 18-12663
• Citation: 963 F.3d 1331
• Parties: OTTO CANDIES, LLC, et al., Plaintiffs - Appellants, v. CITIGROUP, INC., Defendant - Appellee.
• Court: U.S. Court of Appeals — Eleventh Circuit

963 F.3d 1331

OTTO CANDIES, LLC, et al., Plaintiffs - Appellants,

v.CITIGROUP, INC., Defendant - Appellee.

No. 18-12663

United States Court of Appeals, Eleventh Circuit.

July 1, 2020

David M. Cooper, Quinn Emanuel Urquhart & Sullivan, LLP, New York, NY, Lauren H. Dickie, Juan Pablo Morillo, Daniel Pulecio-Boek, Derek L. Shaffer, Gabriel Soledad, A. William Urquhart, Quinn Emanuel Urqhart & Sullivan, LLP, Washington, DC, Peter Winslow Homer, Kevin Patrick Jacobs, Gregory J. Trask, Homer Bonner Jacobs, PA, Miami, FL, Terry L. Wit, Quinn Emanuel Urquhart Oliver & Hedges, LLP, San Francisco, CA, for Plaintiffs-Appellants Otto Candies, LLC, Candies Mexican Investments S. de R.L. de C.V., Ashmore Emerging Markets Corporate High Yield Fund Limited, Ashmore Emerging Markets Debt and Currency Fund Limited, Ashmore Emerging Markets High Yield Plus Fund Limited.

David M. Cooper, Quinn Emanuel Urquhart & Sullivan, LLP, New York, NY, Juan Pablo Morillo, Quinn Emanuel Urqhart & Sullivan, LLP, Washington, DC, Gregory J. Trask, Homer Bonner Jacobs, PA, Miami, FL, for Plaintiffs-Appellants Ashmore Sicav Emerging Markets Corporate Debt Fund, General Partner Ashmore Emerging Markets Special Situations Opportunities Fund (GP) Limited.

David M. Cooper, Quinn Emanuel Urquhart & Sullivan, LLP, New York, NY, Gregory J. Trask, Homer Bonner Jacobs, PA, Miami, FL, for Plaintiff-Appellant EIG Global Project Fund II, LTD.

David M. Cooper, Quinn Emanuel Urquhart & Sullivan, LLP, New York, NY, Juan Pablo Morillo, Derek L. Shaffer, Gabriel Soledad, Quinn Emanuel Urqhart & Sullivan, LLP, Washington, DC, Gregory J. Trask, Homer Bonner Jacobs, PA, Miami, FL, for Plaintiffs-Appellants Ashmore Emerging Markets Special Situations Opportunities Fund Limited Partnership, Ashmore Emerging Markets Tri Asset Fund Limited, Ashmore Sicav Emerging Markets Debt Fund, Ashmore Sicav Emerging Markets High Yield Corporate Debt Fund, Blue Marine Shipping II, S.A. de C.V., Calvi Shipping C.V., Coastline Maritime PTE. LTD., Cooperatieve Rabobank U.a., Copernico Capital Partners (Bermuda) LTD., Gulf Investments and Services LTD., Halani International LTD., Hoop Lobith International B.V., Ice 1 Em Clo Limited, Ice Focus Em Credit Master Fund Limited, Ice Global Credit Alpha Master Fund Limited, Ice Global Credit (DCAM) Master Fund Limited, Ice Oryx Alpha Master Fund Limited, Larrain Vial S.A. Sociedad Administradora de Fondos de Inversion, Marfield Maritime Inc., Moneda Dueda Latinoamericana Fondo de Inversion, Moneda International Inc., Moneda Latin American Corporate Debt, Moneda Renta Clp Fondo de Inversion, Moneda S.A. Administradora General de Fondos, Nordic Trustee Asa.

Juan Pablo Morillo, Derek L. Shaffer, Gabriel Soledad, Quinn Emanuel Urqhart & Sullivan, LLP, Washington, DC, Gregory J. Trask, Homer Bonner Jacobs, PA, Miami, FL, for Plaintiffs-Appellants Ocean Mexicana, S.A. de C.V., Padstow Financial Corp., Shanara International Sa., Shipyard de Hoop B.V., Waypoint Asset Management LLC.

Adam S. Hakki, Daniel C. Lewis, Stephen Fishbein, John Nathanson, Shearman & Sterling LLP, New York, NY, Manuel A. Garcia-Linares, Georgia A. Thompson, Day Pitney. LLP, Joshua Lee Spoont, Sodhi Spoont, PLLC, MIAMI, FL, Michael Patrick Mitchell, Shearman & Sterling, LLP, Washington, DC, for Defendant-Appellee.

Before JORDAN and NEWSOM, Circuit Judges, and HALL,^* District Judge.

JORDAN, Circuit Judge:

Two American plaintiffs. Thirty-seven foreign plaintiffs. One American defendant. A fraudulent scheme allegedly taking place here and in Mexico, with the American defendant allegedly engaging in fraudulent activity in the United States. Assumptions, but no evidence, about where the key documents and witnesses are located.

The district court, faced with this paradigm, granted the American defendant's motion to dismiss for forum non conveniens . After reviewing the record, and with the benefit of oral argument, we reverse and remand for further proceedings. First, the district court mistakenly gave only "reduced" deference to the American plaintiffs’ choice of forum. Second, the American defendant—which had the burden of persuasion—did not support its claims that most of the relevant documents and witnesses are located in Mexico.

I

In reviewing a motion to dismiss for forum non conveniens , we accept as true the factual allegations in the complaint to the extent they are uncontroverted by affidavits or other evidence, or have not been challenged in the context of an evidentiary hearing. We also draw all reasonable inferences in favor of the plaintiffs. See Delong Equip. Co. v. Washington Mills Abrasive Co. , 840 F.2d 843, 845 (11th Cir. 1988) (reviewing Rule 12(b) motions to dismiss for ineffective service of process, lack of personal jurisdiction, and improper venue). See also Shi v. New Mighty U.S. Tr. , 918 F.3d 944, 948 (D.C. Cir. 2019) (accepting the plaintiffs’ allegations of facts as true on a motion to dismiss for forum non conveniens ); Aguas Lenders Recovery Grp. v. Suez, S.A. , 585 F.3d 696, 697 (2d Cir. 2009) (explaining that, on appeal from a forum non conveniens dismissal without a factual hearing, the court accepts the plaintiff's facts as true). The following facts are taken from the plaintiffs’ amended complaint and have not been contested by affidavits or other evidence. We set them out in detail because of their importance.

A

Oceanografía S.A. de C.V., a now-bankrupt Mexican company, provided oil drilling services to Petròleos Mexicanos S.A. ("Pemex" for short), Mexico's state-owned oil and gas company. Grupo Financiero Banamex S.A. de C.V. (the "Banamex Group") is a wholly owned subsidiary of Citigroup and has its principal place of business in Mexico. Banco Nacional de México, S.A. ("Banamex" for short), also based in Mexico, is a wholly owned subsidiary of the Banamex Group. Banamex is therefore an indirect subsidiary of Citigroup.

In 2008, Citigroup established credit facilities within Banamex to provide cash advances to Oceanografía and fund its operations with Pemex. A division of Citigroup based in New York, called the Institutional Clients Group, was responsible for developing and overseeing the credit facilities, and Citigroup supervised the entire arrangement. In exchange for the cash advances, Citigroup charged Oceanografía a high interest rate and obtained the right to collect repayment directly from Pemex. Because Pemex is state-owned (and perhaps unlikely to default), Citigroup's credit facility was profitable and low risk. Citigroup increased its cash advances on several occasions, bloating Oceanografía with debt up to half of its annual net revenues and far exceeding the value of the underlying Pemex contracts.

Citigroup was aware that Oceanografía was overleveraged because Oceanografía sent audited financial statements and documents detailing its operational and financial condition. For each increase of the credit facility, Citigroup prepared a memorandum based on credit application forms that Oceanografía provided. The forms included work estimates for the Pemex contracts, as well as Pemex's signed authorizations, and were supposed to be subject to Citigroup's internal review procedures. Citigroup did not perform the review procedures, however, and granted advances knowing they were based on authorization documents with forged Pemex signatures.

Citigroup saved Oceanografía's credit forms to its internal network. Because Citigroup and Oceanografía communicated directly through Citigroup's servers in the United States, the falsified Pemex documents and related communications are also located in the United States and are in Citigroup's possession. Several Citigroup employees who oversaw the program and approved the cash advances are (or were) located in Miami and New York.

Citigroup knew about Oceanografía's unstable financial condition not only through the cash advance program, but also because it became intimately involved in other aspects of Oceanografía's business. Citigroup acted as the trustee and paying agent on Oceanografía's 2008 bond issuance, advised Oceanografía on plans to acquire assets, represented the company in pursuing investors, and supervised the creation of payment trusts for the benefit of its trade creditors.

In 2014, the Mexican government discovered that Oceanografía had failed to provide insurance policies for its Pemex contracts and banned it from executing new contracts with Pemex. The government then learned of the cash advance scheme and investigated further. Mexican banking regulators found that ten Citigroup employees had violated Mexican criminal laws, and Mexican authorities pursued charges against Citigroup employees for causing Banamex to violate banking laws.

The scandal began to unfold in Mexico but reverberated in the United States. It prompted Citigroup to conduct an internal review of its cash advance program, and Samuel Libnic, based in Miami as Citigroup's head of legal matters for Latin America, led the project with support from at least one other Miami-based employee. Citigroup publicly admitted that some its employees had been criminally involved in the fraudulent scheme and announced that it had terminated employees both "inside and outside" of Mexico.

The scandal also led the SEC and the Justice Department to open domestic investigations into Citigroup. Citigroup disclosed these investigations in its SEC annual report, stating that they had "included requests for documents and witness testimony." Several plaintiffs have now filed civil actions in the United States related to the fraudulent scheme.

B

In this case, thirty-nine plaintiffs—two American and thirty-seven foreign—sued Citigroup (and only Citigroup) in federal court. They claim that the fraudulent cash advances lured them into investing in or contracting with Oceanografía and that "Citigroup and/or Oceanografía" knowingly misrepresented Oceanografía's financial stability. They assert substantive and conspiracy claims under the RICO Act, 18 U.S.C. §§ 1962(c...