Republic of Colombia v. Diageo North America Inc.

Citation531 F.Supp.2d 365
Decision Date19 June 2007
Docket NumberNo. 04-CV-4372 (NGG).,04-CV-4372 (NGG).
PartiesThe REPUBLIC OF COLOMBIA, et al., Plaintiffs, v. DIAGEO NORTH AMERICA INC., et al., Defendants.
CourtUnited States District Courts. 2nd Circuit. United States District Court (Eastern District of New York)

Andrew B. Sacks, John K. Weston, Sacks & Smith, LLC, Philadelphia, PA, Charles Arthur Acevedo, Kevin A. Malone, Krupnick, Campbell, Malone, Buser, Slama, Hancock, Mcnelis, Liberman & McKee, P.A., Fort Lauderdale, FL, for Plaintiffs.

Laurie U. Mathews, Marty L. Steinberg, Samuel A. Danon, Hunton & Williams, LLP, Miami, FL, Shawn Patrick Regan, Hunton & William, New York City, for Defendants.


GARAUFIS, District Judge.

The Republic of Colombia, Colombia's Capital District of Bogota, and a number of Departments of the Republic of Colombia (collectively, "Plaintiffs") bring a civil Racketeering Influenced and Corrupt Organizations Act ("RICO") claim and common law claims against Diageo North America Inc., United Distillers Manufacturing Inc., Diageo PLC, Seagram Export Sales Company Inc., Pernod Ricard USA LLC, and Pernod-Ricard S.A. (collectively, "Defendants"), Essentially, Plaintiffs allege that Defendants are members of a RICO enterprise composed of illegal narcotics traffickers and Defendants' distributors for the purpose of laundering the proceeds of illegal narcotics sales and illegally smuggling liquor into Colombia.

At this time, Defendants. Diageo North America Inc., United Distillers Manufacturing Inc., Seagram Export Sales Company Inc., and Pernod Ricard USA LLC move for dismissal on a number of grounds.1 First, Defendants assert that the action is barred by the revenue and penal rules. Second, Defendants move for dismissal under the doctrine of forum non conveniens. Third, Defendants request that this court abstain from hearing the action under the doctrine of international comity. Fourth, Defendants assert that this case is barred because it presents non-justiciable political questions. Fifth, Defendants argue that Plaintiffs' RICO claim should be dismissed because RICO should not be applied extraterritorially to the alleged conduct, which largely occurred outside of the United States. Sixth, Defendants argue that the RICO claim should be dismissed because the Second Amended Complaint fails to plead adequately a RICO claim. Finally, the Defendants assert that Plaintiffs' RICO claim is barred by the statute of limitations. For the reasons described below, Defendants' motion to dismiss on the ground that the revenue rule bars the instant action is granted in part and denied in part. Defendants' other motions are denied.


Defendants move to dismiss under Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6). With respect to Defendants' Rule 12(b)(6) motion, the court must accept all factual allegations in Plaintiffs' pleadings and must draw inferences from those allegations in the light most favorable to Plaintiffs. United States v. The Baylor Univ. Med. Ctr., 469 F.3d 263, 267 (2d Cir.2006). With respect to Defendants' Rule 12(b)(1) motion, the court must accept all undisputed factual allegations as true and draw all reasonable inferences in the light most favorable to Plaintiffs. Robinson v. Malaysia, 269 F.3d 133, 140 (2d Cir.2001). To the extent the parties dispute facts relevant to Defendants' Rule 12(b)(1) motion using evidentiary submissions, the court will consider the submitted evidence and, if necessary, decide the disputed factual questions. See id. at 140 n. 6 (in context of motion to dismiss for lack of subject matter jurisdiction under, the Foreign Sovereign Immunities Act, district court "must" consult factual submissions "if resolution of a proffered factual issue may result in the dismissal of the complaint for want of jurisdiction"). With very few exceptions, the material facts are undisputed. Where the court makes a factual finding, it will do so explicitly. That being said, this statement of facts is not intended to be a comprehensive description of all of the factual issues relevant to this motion. Rather, this section is limited to a description of Plaintiffs' claims. Other factual issues are discussed in detail in subsequent sections.


Plaintiffs are various Columbian national and regional governmental agencies. The Plaintiff Departments of the Republic of Colombia possess a "constitutional monopoly on the domestic manufacture and sale of liquor products." (Second Amended Complaint ("SAC") ¶ 1.) Some Plaintiffs manufacture and/or distill liquor and some of the Plaintiffs sell and distribute liquor in Colombia. (Id.) Plaintiffs "are by far the largest sellers and producers of liquor products within the Republic of Colombia." (Id.)


Defendant Diageo North America is a Connecticut corporation authorized to do business in the State of New York. (Id. ¶ 11.) Defendant United Distillers Manufacturing is a Delaware Corporation authorized to do business in the State of New York with a principal place of business in Stamford, Connecticut. (Id. ¶ 12.) Diageo PLC is a British corporation that purchased United Distillers in 1997. (Id. ¶ 13.) Defendant Seagram Export Sales Co., Inc. is a New York corporation. (Id. ¶ 14.) Defendant Pernod Ricard USA, LLC is an Indiana corporation with a principal place of business in White Plains, New York. (Id. ¶ 15.) Defendant Pernod-Ricard S.A. is a French corporation with a principal place of business in France. (Id. ¶ 16.) Defendants manufacture, distill and/or distribute liquor, land other alcoholic' beverages on an international scale, including such well-known brands as Tanqueray gin, Smirnoff vodka, Seagram's 7, Guinness stout, and Baileys Original Irish Cream. (Id. ¶ 16; Declaration of Carlos Acevedo ("Acevedo Decl.") Exh. 2 at 9.)

The Enterprise

Plaintiffs allege that all of the Defendants were part of a single RICO enterprise. (SAC ¶ 108.) Although Defendants competed with each other, "they were well aware of each other's activities, copied each other's strategies when they were successful, and in most cases utilized the same distributors to conduct their illegal sales." (Id. ¶ 26.) Defendants' "co-conspirators, in the money laundering schemes, including associated distributors, shippers, currency dealers, wholesalers, money brokers, and other participants" were also members of the enterprise. (Id. ¶ 108.)

The Second Amended Complaint alleges that Defendants knowingly entered into a money-laundering enterprise with narcotics traffickers and, at all times, controlled the enterprise. Defendants "controlled every aspect of the financial transactions involving the purchase of their liquor products." (SAC ¶ 28.) "Defendants also controlled the exact methods and means by which they were paid for the liquor products." (Id.) Defendants controlled the distribution channels through which their liquor traveled. (Id. ¶ 30.) Defendants worked with their co-conspirators to create a "complex web of companies located in Aruba and Panama to disguise the true nature and origin of the criminal proceeds" that were being laundered. (Id. ¶¶ 31, 35.) "Defendants and their co-conspirators knew that the purpose and design of this system of seemingly unrelated parties to the financial transaction was to conceal, hide and/or disguise the true nature of the criminal proceeds they were accepting." (Id. ¶ 27(d).)

Although the Second Amended Complaint consists of 180 pages and 227 paragraphs, the Plaintiffs essentially allege that Defendants are part of illegal RICO enterprise engaged in money laundering, smuggling, tax evasion, as well as wire and mail fraud.

The Scheme

The alleged scheme begins with the United. States Dollars or other currency that a Colombian narcotics trafficking organization obtains from illegal drug sales. (Id. ¶ 27(e); Acevedo Decl. Exh. 6 at 13.) At least some of these moneys are deposited into bank accounts in the United States in small amounts. (SAC ¶ 27(c).) "A large percentage of the narcotics laundering process that occurs in regard to these narcotics sales occur in the Eastern District of New York. By virtue of demographics, population, and other factors, a large percentage of individuals involved in laundering these narcotics proceeds reside in and conduct their money-laundering activities in the Eastern District of New York." (Acevedo Decl. Exh. 6, Affidavit of Alvin C. James ("James Aff.") ¶ 12.) These cash deposits are in sufficiently small amounts so as to avoid detection by law enforcement authorities. (SAC ¶ 27(c).) A large number of individuals called "smurfs" are used to make these small bank deposits. "The key to the `smurf' system is the use of a lot of accounts — and a lot of smurfs." (Id.)

At this point, the Colombian narcotics organization must find a way to convert its United States Dollars into Colombian pesos without disclosing its illegal operation to law enforcement authorities. (James Aff. ¶¶ 15-6.) Because currency and banking laws preclude drug dealers from laundering their money through banks or other financial institutions, the drug traffickers and money launderers launder their unlawfully obtained funds primarily through the purchase and sale of commercial goods. (Id. ¶ 6.)

Ultimately, the proceeds from the illegal narcotics sales are transferred to Defendants. (SAC ¶ 27.) Precisely how this occurs is far less clear. Often, multiple intermediaries are used. (Id. ¶¶ 27(a), 29.) Defendants' Aruban distributors often serve as intermediaries. (Id. ¶¶ 27(f), 30.) Checks drawn from U.S. accounts in which cash proceeds from narcotics sales were deposited in small amounts appear to be paid directly to Defendants. (See id. ¶ 27(c) ("Checks are then drawn on these accounts — which represent narcotics proceeds — and...

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