Opinion
12 Civ. 3238 (GBD)
01-04-2013
ROBERT E. WILSON, III, Plaintiff, v. DANIEL VALENTE DANTAS, OPPORTUNITY EQUITY PARTNERS, Ltd., OPPORTUNITY EQUITY PARTNERS, L.P., OPPORTUNITY INVEST II, Inc., CITIBANK, N.A., INTERNATIONAL EQUITY INVESTMENTS, Inc., CITIGROUP VENTURE CAPITAL INTERNATIONAL BRASIL, L.L.C., CITIGROUP VENTURE CAPITAL INTERNATIONAL BRASIL, L.P., Defendants.
MEMORANDUM DECISION AND ORDER
:
Plaintiff Robert E. Wilson, III brings this action for breach of contract and breach of various equitable duties against Daniel Valente Dantas and his related business entities (the "Opportunity Defendants") and Citibank, N.A., and several related Citibank entities (the "Citibank Defendants"). Although Wilson's Complaint states nine counts, its gravamen is that Wilson had an agreement with Dantas and OEP Ltd. (his former employer) to pay him 5% of the carried interest in the private equity funds that OEP Ltd. managed, and that they failed to do so.
Dantas, Opportunity Equity Partners, Ltd., (f/k/a CVC/Opportunity Equity Partners, Ltd.) ("OEP Ltd."), Opportunity Equity Partners, L.P. (f/k/a CVC/Opportunity Equity Partners LP) ("OEP LP"), and Opportunity Invest II, Inc. ("OI-II") are collectively the Opportunity Defendants. Citibank N.A. ("Citibank"), International Equity Investments, Inc. ("IEII"), Citigroup Venture Capital International Brasil, L.L.C. ("CVC LLC"), and Citigroup Venture Capital International Brasil, L.P. ("CVC LP") are collectively the Citibank Defendants.
Plaintiff originally filed a functionally identical complaint relating to the same dispute on March 21, 2011 before Judge Deborah A. Batts. (See No. 11 Civ. 1936). Plaintiff alleged there that jurisdiction was proper pursuant to the diversity statute, 28 U.S.C. § 1332(a). Judge Batts, however, found that she lacked subject matter jurisdiction to hear the case because Plaintiff was an American citizen domiciled in Brazil, and that § 1332(a) does not extend to American citizens domiciled abroad. Judge Batts dismissed Wilson's complaint sua sponte on November 9, 2011, without prejudice.
Wilson then brought this action in New York state court on March 23, 2012. Citibank removed the action back into federal court pursuant to the Edge Act, 12 U.S.C. § 632 a month later. The Edge Act permits removal of civil actions where one party to the suit is an American corporation and the suit arises out of international or foreign banking or financial operations. Id. Although Wilson initially challenged removal (see Dkt. No. 25), he withdrew his Motion to Remand at oral argument. (Oral Arg. Tr. at 18, July 31, 2012).
Removal was proper because Citibank is a federally chartered U.S. bank, and Wilson's claims against Citibank pertain, in part, to Citibank's involvement in an international investment program. Citibank was involved in providing capital and investment advisory services, both of which courts have recognized as falling within the definition of banking services or financial operations. See Stamm v. Barclays Bank of New York, 960 F. Supp. 724, 728 (S.D.N.Y. 1997); United States v. Philadelphia Nat'l Bank, 374 U.S. 321, 327 n.5 (1963). Certain of Wilson's claims arise out of Citibank's banking or financial activities because Wilson alleges that Citibank took on fiduciary duties to Wilson by virtue of its contribution of capital and activities related to the management of the Fund.
The Opportunity Defendants and the Citibank Defendants each moved to dismiss Wilson's complaint for failure to state a claim (both sets of defendants) and lack of personal jurisdiction (Opportunity Defendants only). Citibank's Motion to Dismiss is GRANTED. Granting Citibank's Motion to Dismiss eliminates the claims and parties over which this Court had original jurisdiction. Pursuant to 28 U.S.C. § 1367(c)(3), this Court declines to exercise supplemental jurisdiction over the remaining claims against the Opportunity Defendants. The remaining case is REMANDED to state court.
Background
The events giving rise to Wilson's complaint began in the late 1990s when Wilson was an employee at Citibank. (Compl. at 2). Wilson devised an investment program through which Citibank could make private equity investments in large Brazilian companies that were beginning to privatize. Id. At that time, the Office of the Comptroller of the Currency prohibited Citibank from managing these types of investments directly, so Wilson got in touch with Dantas, and assisted in creating OEP Ltd. Id. ¶ 19. OEP Ltd. was the first manager and General Partner ("GP") of the underlying funds into which Citibank and the other investors placed money for OEP Ltd. to invest. Id. Citibank, in its role as a limited partner ("LP") and investor, invested $750 into the Offshore Fund, one of the underlying funds that OEP Ltd. managed. Id.
Before leaving Citibank to assume his new position as a principal and shareholder of OEP Ltd., Wilson began to negotiate his compensation directly with Dantas. Id. ¶ 32. Wilson sent Dantas a contract term sheet on July 15, 1997 that laid out the terms Wilson appears to have thought he had negotiated: salary of $750,000 per year, living, education, and relocation expenses, and most importantly for this matter, 5% of OEP Ltd.'s carried interest. (See Battles Decl. Ex. D). Wilson claims that Dantas agreed to these terms, however Wilson has been unable to produce a copy of the term sheet that both parties signed. The only copy produced was signed by Wilson only—not Dantas.
In December 1997 the relationships between Wilson, Dantas, OEP Ltd., OEP Ltd.'s other shareholders, and Citibank (and other investors in the funds) were formalized in a series of agreements they signed in New York: the Operating Agreement ("OA"), the Limited Partnership Agreement ("LPA"), and the Shareholder Agreement ("SA"). The OA governed the way the GP was to make investment decisions as it managed the three underlying funds into which investors contributed capital. (Haller Decl. Ex. C at 1). The LPA governed OEP Ltd. and Citibank's rights and obligations as GP and LP, respectively, while OEP Ltd. (as GP) managed the money that Citibank contributed as an investor in the Offshore Fund. (Haller Decl. Ex. A). Wilson signed both the OA and LPA in his capacity as a principal of OEP Ltd. He did not sign either in his personal capacity, nor is he listed as a party or third party beneficiary to either contract.
The only agreement Wilson signed in his personal capacity was the SA, which governed the structure and ownership of OEP Ltd. (Haller Decl. Ex. B). The SA gave single shares to four individual shareholders—Wilson, Rodrigo Andrade, Luis Demarco, and Arthur Carvalho—and 96 shares to OI-II, an entity controlled by Dantas. Id. ¶ 4(1)(c). The parties to the SA included the four individual shareholders, Dantas, OI-II, and OEP Ltd. Citibank was not a party to the SA. The SA contained an integration clause stating that the SA was the "entire agreement" and "supersedes any previous agreement between the parties hereto in relation to such matters." It expressly disclaimed that OEP Ltd. was a partnership. Id. ¶¶ 20(9), 20(11). It also contained provisions that contemplated an "irrevocable put" option, whereby any individual shareholder could sell his single share to OI-II "according to terms and conditions to be agreed pursuant to Annex A." Id. ¶ 11(3). Annex A was left blank at the time Wilson signed the SA and never completed.
Relations between Citibank and OEP Ltd., and among OEP Ltd.'s principals, appeared fraught with tension from the beginning. In 1999, OEP Ltd. terminated Demarco. Demarco then brought suit against OEP Ltd. to enforce a prior oral contract he alleged he had with Dantas governing his share of the carried interest (similar to the separate agreement Wilson alleges he made here). (Compl. ¶ 33, Haller Decl. Ex. D at 3-4). That litigation wound its way through the Cayman Islands legal system for two years and resulted in a settlement. As part of the settlement, Citibank guaranteed a $7.5 million payment to Demarco, although it is not clear that Citibank ever had the legal obligation to do so. (Compl. ¶ 37).
Wilson does not allege that Citibank was named as a defendant in Demarco's suit, and it does not appear that Citibank was. See Gusy Ex. B.
In 2005, Citibank terminated OEP Ltd. as GP and brought suit in the Southern District of New York against Dantas. (Compl. ¶ 39). This litigation was extremely contentious. Citibank alleged that Dantas engaged in self-dealing by using his leverage as manager of OEP Ltd. to force portfolio companies to make concessions that benefitted Dantas himself, rather than the underlying funds into which Citibank and others had invested considerable money. Citibank claimed that Dantas and OEP Ltd. obtained capital from Citibank under false pretenses in violation of contractual and fiduciary duties. (See generally Compl., Dkt. No. 44 in No. 05 Civ. 2745). That litigation resulted in numerous injunctions against Dantas which were appealed no fewer than five times to the Second Circuit before Opportunity Defendants and the Citibank Defendants reached a confidential settlement agreement in 2008. (Compl. ¶ 48).
It appears as though Wilson's role as a manager of the underlying funds ceased when Citibank terminated OEP Ltd. as GP. Wilson states that upon termination, CVC LLC took over management of the funds. (Compl. ¶ 39) ("After the substitution of General Partners, a Citibank employee in New York was designated to Manage CVC [] LP through CVC [] LLC. The operations of both entities were administered by Citibank employees in New York.") Although he alleges that Dantas remained in routine contact with Citibank regarding the funds' investments, Wilson does not allege that he continued to play any role himself. Id. Thus, it appears that upon OEP Ltd.'s termination as manager and GP of the funds, Wilson's role as an investment manager also ended.
In addition to settling the allegations of self-dealing and breaches of contract and fiduciary duty, Wilson alleges that the settlement agreement divided up the carried interest between OEP Ltd., the former GP, and CVC LLC, the successor GP, controlled by Citibank. Wilson was not a party to that litigation and was never privy to the terms of the confidential settlement. Wilson claims that Dantas reassured him in 2008 that he would receive his 5% stake in OEP Ltd.'s carried interest after the settlement, but has not paid him any portion to date.
In February 2011, Wilson sought to exercise the irrevocable put option contemplated in the SA. Dantas refused to buy Wilson's share, contending that because Annex A was never completed, the irrevocable put option was void. Wilson demanded to see a copy of the settlement agreement, presumably to determine how much Citibank had agreed to pay OEP Ltd. for its share of the carried interest so that Wilson could value his share. Dantas (and Citibank) refused. Wilson then brought this suit against the Opportunity and Citibank Defendants to recover the compensation that he claims Dantas and OEP Ltd. agreed to pay him.
Wilson does not allege that Dantas or Citibank did anything to diminish the overall amount of money made by the private equity investments. To the contrary, Wilson alleges that these investments were hugely profitable. (Compl. ¶ 30) (stating that the investments resulted in "billions of dollars in profits."). Although upon termination of OEP Ltd. as GP, CVC LLC took on fiduciary duties to OEP Ltd. to maximize the value of the portfolio of investments it inherited, Wilson does not claim that his injury arose out of any mismanagement of those assets.
Legal Standard
A complaint must have "enough facts to state a claim to relief that is plausible on its face" to survive a motion to dismiss for failure to state a claim. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). "Where a complaint pleads facts that are 'merely consistent with' a defendant's liability, it 'stops short of the line between possibility and plausibility of entitlement to relief.'" Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Twombly, 550 U.S. at 557). Plausibility requires "more than labels and conclusions." Id., at 555. Legal conclusions must be supported by well-pleaded factual allegations. Iqbal, 556 U.S. at 679. Threadbare recitals of the elements of a cause of action followed by conclusory statements do not suffice. Id. at 678.
Breach of Fiduciary Duty (Count 1A)
To make out a prima facie case of breach of fiduciary duty under New York law, Wilson must allege (1) the existence of a fiduciary duty, (2) breach of that duty by the defendant and (3) damages. Thermal Imaging, Inc. v. Sandgrain Sec. Inc., 158 F. Supp. 2d 335, 343 (S.D.N.Y. 2001). Wilson's complaint against Citibank must be dismissed because Citibank did not owe him any fiduciary duties.
A fiduciary duty arises "when one is under a duty to act for or to give advice for the benefit of another upon matters within the scope of the relation." Flickinger v. Harold C. Brown & Co., 947 F.2d 595, 599 (2d Cir. 1991) (quoting Mandelblatt v. Devon Stores, Inc., 521 N.Y.S.2d 672 (1st Dep't 1987)). For Wilson to sufficiently allege that Citibank owed him fiduciary duties, Wilson must allege that Citibank was under a duty to act for Wilson, or give advice for his benefit. Wilson alleges no fewer than four ways in which Citibank allegedly took on this burden: (1) by its status as his former employer, (2) by becoming an investor and LP in the underlying fund that OEP Ltd. managed, (3) by hiring attorneys to draft the OA, LPA, and SA, and (4) by terminating OEP Ltd. as the GP in 2005. None of these actions by Citibank ever gave rise to a duty on the part of Citibank to act for Wilson or give advice for his benefit.
Wilson first argues that Citibank owed him fiduciary duties because of his status as a former employee of seven years. (Compl. ¶ 53). This relationship is insufficient to create fiduciary duties because "employment relationships do not create fiduciary relationships." Rather v. CBS Corp., 886 N.Y.S.2d 121, 125 (1st Dep't 2009) (collecting cases). The relationship that Wilson outlines in his complaint is nothing more than a standard, arm's length prior employment relationship that does not give rise to fiduciary duties. Schenkman v. New York Coll. of Health Profs., 815 N.Y.S.2d 159, 161 (2d Dep't 2006). If employers owe current employees no fiduciary duties, then they similarly do not owe such duties to former employees.
Second, Wilson alleges that Citibank took on fiduciary duties to him when Citibank invested $750 million in the funds that it charged OEP Ltd. with managing. (Compl. ¶¶ 19, 23, 42). Entrusting investment capital with OEP Ltd. certainly gave rise to fiduciary duties—Wilson simply has their direction reversed. The LPA, the agreement governing Citibank's investment in OEP LP, expressly imposed fiduciary duties on OEP Ltd. owed to Citibank. (See LPA at Art. 6.1.5, stating "The General Partner [i.e. OEP Ltd.] acknowledges, and each Principal [i.e. Wilson] by its execution of this Agreement acknowledges, that it is a fiduciary to the Limited Partner," i.e. Citibank). Citibank was the party that placed its trust in Wilson and OEP Ltd., not the other way around.
Third, unable to point to any language in the agreements themselves, Wilson claims that the mere fact that Citibank's attorneys drafted the SA, OA, and LPA gave rise to fiduciary duties that Citibank owed Wilson. (Compl. ¶ 53). Wilson cites no caselaw for that proposition. Wilson was not personally a party to any agreement with Citibank. Wilson, in his own complaint, states that he negotiated his compensation package directly with Dantas. Id. ¶ 32. That Citibank may have retained attorneys to draft the contracts does not place it in a position where it was obligated to act on Wilson's behalf or for his benefit.
Finally, Wilson alleges that Citibank took on fiduciary duties to him when it ousted OEP Ltd. as the GP in 2005 and replaced OEP Ltd. with an entity it controlled, CVC LLC. (Compl. ¶¶ 40, 41, 44, 53). CVC LLC, as the new GP, took on the obligation to maximize the assets of the underlying funds for the benefit of its investors and the former GP, OEP Ltd. (See LPA § 7.5.4) (guaranteeing that the removed GP—here, OEP Ltd.—retains its right to receive carried interest from the Fund investments). But undertaking a duty to maximize the value of the underlying funds' investments for the benefit of OEP Ltd. did not mean that Citibank took on the alleged contractual obligations that OEP Ltd. owed to its employees or shareholders. OEP Ltd. and Dantas's failure to pay Wilson is the alleged proximate cause of his injury, not Citibank's failure to properly manage the investments as GP. Any fiduciary duty undertaken would have only run to OEP Ltd. in its capacity as the removed GP, not to its shareholders. See, Bank of America Corp. v. Lemgruber, 385 F. Supp. 2d 200, 224-225 (S.D.N.Y. 2005) (fiduciary duties by a corporate fiduciary run to a corporation, not its shareholders).
Wilson also contends that ¶ 1.9(b), which states "The General Partner and any former General Partner shall have unlimited liability for the repayment and discharge of all debts and obligations of the Fund . . ." requires CVC LLC to pay carried interest to the shareholders of OEP Ltd. (LPA ¶ 1.9(b) at 4). Wilson seems to misread this clause. The LPA defines the "Fund" as OEP LP. (LPA, preamble at 1). OEP Ltd. was the GP and manager of OEP LP; OEP LP did not ever incur the obligation to pay OEP Ltd.'s shareholders. That obligation belonged solely to OEP Ltd. (and potentially to Dantas).
Wilson also relies on ¶ 1.9(b) of the LPA for his breach of contract claim against CVC LLC (as successor GP to OEP Ltd.), arguing that it obligated CVC LLC to assume his compensation. (Count 7, Compl. ¶¶ 97-105). Wilson, however, never had any contract with CVC LLC or any other Citibank Defendant. Just as ¶ 1.9(b) was insufficient to create any fiduciary duties between Wilson and CVC LLC, it did not create a contract between them, and in no way obligated CVC LLC to pay him. Wilson's compensation was never an obligation of the Fund. Wilson was never a party to the LPA. Citibank was never a party to any contract that Wilson signed in his personal capacity. Further, Wilson cannot be an intended third party beneficiary under the LPA because that contract expressly disclaims the existence of any third party beneficiaries. See LPA ¶ 13.15 (stating that "no other Person [apart from the GP and LP] will have any rights" under the LPA).
As no Citibank Defendant ever owed Wilson any fiduciary duty, it was not possible for Citibank to breach any fiduciary owed. What and whether to pay Wilson was an obligation of the Opportunity defendants, not the Citibank defendants. Wilson's equitable claims against the Citibank defendants for breach of fiduciary duties fail to state a claim.
Aiding and Abetting the Opportunity Defendants' Breach of Fiduciary Duty (Count 1B)
Wilson alleges that the Citibank Defendants aided and abetted the breach of fiduciary duties that the Opportunity Defendants allegedly owed him. Wilson claims that Citibank did this by negotiating for a confidential settlement in 2008 and by instructing Dantas not to pay him. (Compl. ¶¶ 46-48, 56). Neither allegation states a claim. Citibank had no duty to act with Wilson in mind when it negotiated the settlement of litigation to which Wilson was not involved, and it is an insufficient, conclusory allegation that Citibank caused Dantas to not pay him.
As it is not germane to this Order, this Court states no opinion as to whether the Opportunity Defendants owed Wilson the duties Wilson alleges they did, or that they breached those duties.
A claim for aiding and abetting a breach of fiduciary duty under New York law requires, "(1) a breach by a fiduciary of obligations to another, (2) that the defendant knowingly induced or participated in the breach, and (3) that plaintiff suffered damage as a result of the breach." Johnson v. Nextel Communs., Inc., 660 F.3d 131, 142 (2d Cir. 2011) (quoting Kaufman v. Cohen, 760 N.Y.S.2d 157, 169 (1st Dep't 2003). To plausibly allege that Citibank knowingly induced or participated, Wilson must allege specifically how Citibank substantially assisted in the Opportunity Defendants' breach. Id. at 170. The defendant must "affirmatively assist, help[] conceal, or fail[] to act when required to do so, thereby enabling the breach to occur." Id. This substantial assistance must be the proximate cause of Wilson's injury. In re Optimal U.S. Litig., 813 F. Supp. 2d 383, 402 (S.D.N.Y. 2011) (citing Kolbeck v. LIT Am., 939 F. Supp. 240, 249 (S.D.N.Y. 1996)).
Wilson offers no plausible reason why Citibank should have included him or looked out for his interests in the 2008 settlement negotiations. Wilson was merely a former Citibank employee and principal of OEP Ltd., an entity adverse to Citibank in that litigation. Wilson was not a party. The settlement negotiations consisted of Citibank and Dantas bargaining to reach an agreement to end the dispute between them. Adversarial bargaining to achieve Citibank's own goals cannot be simultaneously construed as assisting Citibank's opponent, Dantas, in breaching a duty he owed to Wilson.
Wilson's claim that Citibank assisted Dantas's breach by instructing Dantas not to pay Wilson is not plausibly alleged because it is not conceivable that Citibank controlled Dantas. Citibank had just ousted Dantas and replaced OEP Ltd. as GP of the fund that Dantas started. Citibank and Dantas were engaged in years of hostile litigation in which Citibank accused Dantas of breaching agreements and acting to Citibank's detriment. In this environment, it is implausible that Citibank still somehow controlled the way Dantas compensated his employees, or that Citibank cared how Dantas divided up whatever monies he received in the settlement agreement. Dantas failing to show the settlement agreement to Wilson and failing to pay him might allegedly be the proximate cause of any injury Wilson sustained, not Citibank's litigating and negotiation positions.
Constructive Fraud and Fraudulent Concealment (Count 2)
Wilson alleges that Citibank's negotiation of the confidential settlement agreement amounted to constructive fraud and fraudulent concealment. (Compl. ¶¶ 58-66). Under New York law, constructive fraud requires that "(1) a representation was made, (2) the representation dealt with a material fact, (3) the representation was false, (4) the representation was made with the intent to make the other party rely upon it, (5) the other party did, in fact, rely on the representation without knowledge of its falsity, (6) injury resulted and (7) the parties are in a fiduciary or confidential relationship." Del Vecchio v. Nassau Co., 499 N.Y.S.2d 765, 768 (2d Dep't 1986). Wilson's constructive fraud claim fails for the simple reason that he was not in any fiduciary or confidential relationship with Citibank.
Fraudulent concealment requires alleging "(1) failure to discharge a duty to disclose; (2) an intention to defraud, or scienter; (3) reliance; and (4) damages. TVT Records v. Island Def Jam Music Group, 412 F.3d 82, 90-91 (2d Cir. 2005) (citing Brass v. Am. Film Tech., Inc., 987 F.2d 142, 152 (2d Cir. 1993)). Wilson's claim fails because Citibank owed Wilson no duty to disclose. Although Dantas may have had a duty to Wilson, as a shareholder in OEP Ltd., to disclose the settlement agreement, Citibank did not. Further, he does not and cannot plausibly allege that Citibank ever had any motive or intent to defraud him. Citibank's motive was to end nearly four years of contentious litigation with Dantas and ensure that Dantas was not squandering its investment. Wilson offers no plausible allegations that Citibank's motivation was to keep him—a former employee and shareholder in OEP Ltd.—from being compensated.
Tortious Interference with Contract or Business Expectancy (Count 3)
Wilson claims that Citibank tortiously interfered with his compensation agreement with Dantas by negotiating the confidential settlement agreement in 2008 that excluded Wilson. (Compl. ¶¶ 67-72). To allege tortious interference with contract, Wilson's complaint must allege "(1) the existence of a valid contract between plaintiff and a third party; (2) the defendant's knowledge of that contract; (3) the defendant's intentional procuring of the breach, and (4) damages." White Plains Coat & Apron Co. v. Cintas Corp, 460 F.3d 281, 285 (2d Cir. 2006) (citing Foster v. Churchill, 87 N.Y.2d 744, 749-50 (1996)). The standard for intentional procurement of the breach is high: it must be intentional and unjustified. See Oddo Asset Mgt. v. Barclays Bank PLC, 19 N.Y.3d 584 (2012).
Even assuming the existence of a valid compensation agreement between Wilson and Dantas that survived the integration clause of the SA, Wilson fails to state a claim because he does not plausibly allege that Citibank intentionally procured any breach. Nothing that Citibank did in excluding Wilson in its negotiation calculus was unjustified. Wilson was, at most, a former employee and shareholder of OEP, Ltd., Citibank's opponent in the litigation. It would be paradoxical to require Citibank to take the shareholders of its adversary into account when considering its own bargaining position.
It is not necessary for the purposes of this Order to determine whether the alleged oral contract between Wilson and Dantas survived the SA given its integration clause.
As Citibank's settlement position was nothing more than normal economic self-interest, Wilson cannot maintain a cause of action for intentional interference with business relations. To do so, Citibank's conduct must have been either for the "sole purpose of inflicting intentional harm" on Wilson, or otherwise unlawful. Carvel Corp. v. Noonan, 3 N.Y.3d 182, 190 (2004); c.f. Catskill Dev. LLC v. Park Place Entm't Corp., 547 F.3d 115, 137 (2d Cir. 2008). Wilson's complaint alleges only skeletal legal conclusions that Citibank was motivated by malice. (Compl. ¶ 70). It alleges no plausible facts that the agreement Citibank negotiated to end almost four years of litigation was solely motivated by the desire to inflict harm on Wilson, a non-party to that litigation.
Quasi-Contract Claims (Counts 4 and 8)
Unable to allege that Citibank actually breached any contract to which Wilson was a party, he next alleges a series of quasi-contract claims: unjust enrichment, quantum meruit, monies had and received, and promissory estoppel. (Compl. ¶¶ 73-84, 106-112). All lack merit.
Wilson claims that Citibank was unjustly enriched when it excluded him from the settlement agreement in 2008. To state a claim for unjust enrichment, Wilson must allege that he performed services for Citibank that resulted in its unjust enrichment. Michele Pommier Models v. Men Women NY Model Mgt., 14 F. Supp. 2d 331 338 (S.D.N.Y. 1998) (citing Kagan v. K-Tel Entertainment, Inc., 568 N.Y.S.2d 756, 757 (1st Dep't 1991). The services performed must not have merely benefitted the enriched party, but must have been performed at its behest. Heller v. Kurz, 643 N.Y.S.2d 580, 581 (1st Dep't 1996). Citibank's unjust enrichment must have been at Wilson's expense. Lightfoot v. Union Carbide Corp., 110 F.3d 898, 905 (2d Cir. 1997) (citing Chadirjian v. Kanian, 506 N.Y.S.2d 880, 882 (2d Dep't 1986).
Wilson's claims for unjust enrichment and quantum meruit fail because the services Wilson performed were not done at Citibank's behest. While the services that Wilson previously performed in managing the portfolio of investments certainly benefitted Citibank, Wilson was an employee of OEP Ltd., and performed work under its direction. Although Wilson does allege that Citibank asked Wilson to leave its employment and work for OEP Ltd. in 1997, after that point, any services Wilson provided were at the behest of the Opportunity Defendants, not Citibank. It is not plausible that Wilson continued to work for OEP Ltd. for over a decade after he left Citibank just because Citibank asked him to.
Further, while Dantas and OEP Ltd. may have been unjustly enriched at Wilson's expense by the settlement agreement, Citibank was not. Wilson alleges that he is owed 5% of the carried interest earned by OEP Ltd. The 2008 settlement agreement purportedly divided up the carried interest between OEP Ltd., as former GP, and Citibank, as successor GP. Any unjust enrichment that took place did not take place at the time of the settlement, but only took place after OEP Ltd. failed to pay Wilson. Even assuming Wilson's prior compensation agreement is valid, it only entitles him to 5% of the carried interest that OEP Ltd. earned. As Citibank was never obligated to pay Wilson—either contractually or otherwise—it could not have become unjustly enriched at Wilson's expense, regardless of the share of the overall carried interest it obtained in the settlement.
Although Wilson's brief advanced no argument for monies had and received, it fails for substantially the same reason. Citibank never received any money that ever belonged to Wilson. See Aaron Ferer & Sons, Ltd. v. Chase Manhattan Bank, N.A., 731 F.2d 112, 125 (2d Cir. 1984) (citing Miller v. Schloss, 218 N.Y. 400, 407 (1916) for the proposition that to state a claim, a plaintiff must claim that the defendant received money that actually belonged to him).
Wilson's promissory estoppel cause of action is based on Citibank's guarantee of Demarco's payment in his 2002 litigation. Wilson claims that Citibank's decision to pay the amount owed Demarco in his settlement induced Wilson to think that Citibank would someday make the same arrangement with him. (Compl. ¶ 107). To state a claim for promissory estoppel Wilson must allege (1) a clear promise, (2) reasonable and foreseeable reliance on that promise by the person to whom the promise was made, (3) unconscionable injury to the reliant party. Readco, Inc., v. Marine Midland Bank, 81 F.2d 295, 301 (2d Cir. 1996) (citing Ripple's of Clearview, Inc. v. Le Havre Assoc., 452 N.Y.S.2d 447, 449 (2d Dep't 1982). Wilson fails to allege that Citibank made any promise directly to him. Citibank may have made promises to Demarco and some or all of the Opportunity Defendants, but none to Wilson that could serve as the foundation for this common law claim.
Wilson also alleges that Citibank somehow took on fiduciary duties to Wilson when it guaranteed the payment from OEP Ltd. to Demarco in his Cayman Islands litigation. (Compl. ¶¶ 37, 53). Wilson claims that by inducing his "detrimental reliance" on Citibank's promise to Demarco, it somehow "acknowledged the fiduciary obligations running among it and OEP Ltd. and its individual shareholders." Even if Wilson had included more than this threadbare recital and conclusory allegation, this relationship still would not be sufficient to state a claim for relief. No action Citibank took in guaranteeing Demarco's payment gave rise to a duty on the part of Citibank to act for Wilson.
Wilson's remaining counts against Citibank must also be dismissed. Count 5 alleges a cause of action for civil conspiracy (Compl. ¶¶ 85-89), but New York Law does not recognize such a substantive tort. See Anesthesia Assoc. of Mount Kisco, LLP v. Northern Westchester Hosp. Center, 59 A.D.3d 473, 479 (2d Dep't 2009). Count 9 (Compl. ¶¶ 113-116) seeks a declaratory judgment and is wholly duplicative of all of the other counts in the indictment, all of which are dismissed.
Remand of Claims Against the Opportunity Defendants
This Court had removal jurisdiction in this action over the claims that arose out of international banking and financial operations against Citibank by virtue of the Edge Act, 12 U.S.C §632, a "unique form of federal question jurisdiction." State of New Mexico ex rel Foy v. Vanderbilt Capital Advisors, LLC, No Civ. 09-0178, 2009 U.S. Dist. LEXIS 105528 (D.N.M Apr. 13 2009). Section 632 states that Federal District Courts shall have original jurisdiction in a civil suit when (1) any party is a corporation organized under the laws of the U.S., and (2) the cause of action arises out of international or foreign banking, or international or foreign financial operations. In accordance with the way other Courts in this district have read the Edge Act, jurisdiction over the claims against Citibank Defendants that did not arise out of international banking and financial operations and all ancillary claims against the Opportunity Defendants (none of which are corporations organized under the laws of the United States) was then proper pursuant to 28 U.S.C. § 1367. See Am. Int'l Grp., Inc. v. Bank of Am. Corp., No. 11 Civ. 6212, 2012 U.S. Dist. LEXIS 147733 (S.D.N.Y. Dec 20, 2011) (exercising supplemental jurisdiction over claims involving 345 domestic mortgages when original jurisdiction under the Edge Act only obtained over claims involving lending in relation to four foreign mortgages); Bank of Am. Corp. v . Braga Lemgruber, 385 F. Supp. 2d 200, 217 (S.D.N.Y 2005) (exercising supplemental jurisdiction over a fraudulent inducement claim when only a breach of contract claim pertained to international banking). The limited available case law indicates that the Edge Act does not give this Court original jurisdiction over the entire suit, but only over those claims and parties that could have initially come before a Federal Court. See Corporacion Venezolana de Fomento v. Vintero Sales Corp., 629 F.2d 786, 793-94 (2d Cir. 1980) (discussing the availability of ancillary jurisdiction over parties and claims that did not have original jurisdiction in Federal Court under the Edge Act); see also Firstar Bank, N.A. v. Wells Fargo Bank, N.A., No 02 C 186, 2004 U.S. Dist. LEXIS 10767 (N.D. Ill. June 14, 2004); First Nat'l Bank v. Colonial Bank, 898 F. Supp. 1220 (N.D. Ill. 1995); Lee Constr. Co., Inc. v. Fed. Reserve Bank of Richmond, 558 F. Supp. 165, 173 (D. Md. 1982) Having dismissed all of the claims over which this court had original jurisdiction, this Court declines to exercise its discretionary supplemental jurisdiction over the claims pertaining to the Opportunity Defendants—all of which are purely matters of state law.
While courts in this Circuit have examined the availability of supplemental jurisdiction over claims and parties not otherwise subject to Edge Act jurisdiction, at least one court elsewhere has stated that the Edge Act does not allow for pendent party jurisdiction at all. See People ex rel. Cosentino v Federal Reserve Bank, 579 F Supp 1261 (N.D. Ill 1984).
Section 1367 states that district courts can exercise jurisdiction over all claims that are so related to the claims over which the court has original jurisdiction that they form part of the same case or controversy. 28 U.S.C. § 1367(a). District courts may, however, decline to exercise supplemental jurisdiction over such claims if "the district court has dismissed all claims over which it had original jurisdiction." § 1367(c)(3). The decision regarding whether to exercise supplemental jurisdiction is "purely discretionary." Oneida Indian Nation v. Madison Cnty., 665 F.3d 408, 437 (2d Cir. 2011) (citing Carlsbad Tech., Inc. v. HIF Bio, Inc., 556 U.S. 635, 639 (2009)). In considering whether to exercise this discretion, courts in this Circuit must weigh considerations of "judicial economy, convenience, fairness, and comity." Jones v. Ford Motor Credit Co., 358 F.3d 205, 214 (2d Cir. 2004). In assessing these factors, the Second Circuit has held that in the typical case where all claims over which the district court had original jurisdiction are eliminated before trial (on summary judgment or a motion to dismiss), the balance of factors usually will weigh toward not exercising jurisdiction over the remaining claims. Kolari v. New York Presbyterian Hosp., 455 F.3d 118, 122 (2d Cir. 2006) (citing Carnegie-Mellon University v. Cohill, 484 U.S. 343. 350 (1988)). "Needless decisions of state law should be avoided both as a matter of comity and to promote justice between the parties, by procuring for them a surer-footed reading of applicable law." United Mine Workers v. Gibbs, 383 U.S. 715, 726 (1966).
As in the typical case, these factors here militate against exercising discretionary jurisdiction here. The remaining claims pertain to Wilson's employment in Brazil by a Cayman Islands company tasked with making investments in Brazilian corporations. The breach of the agreement he seeks to litigate, the SA, contains a non-exclusive forum selection clause of the Cayman Islands. (Battles Decl. ¶ 20(10)). Non-federal claims, which substantially predominate, are the only ones left. Comity and respect for New York state courts dictate that where possible, state courts should decide matters of state law, and that absent exceptional circumstances, this Court should decline to exercise supplemental jurisdiction over such claims. Weisbecker v. Sayville Union Free School Dist., -- F. Supp. 2d. --, 2012 WL 3975049 at *18 (E.D.N.Y. Sept. 12, 2012) (citing Walker v. Time Life Films, Inc., 784 F.2d 44, 53 (2d Cir. 1986)). Remanding Wilson's remaining common law claims at this early stage of the proceeding—far from trial and before substantial discovery has begun—does not create substantial unfairness or inconvenience to the parties. Id.
Conclusion
The Citibank Defendants' Motion to Dismiss is GRANTED (Dkt. No. 20). Granting the Citibank Defendants' Motion to Dismiss eliminates the claims and parties over which this Court had original subject matter jurisdiction. This Court declines to exercise supplemental jurisdiction over the remaining state law claims against the Opportunity Defendants. The remaining case is REMANDED to state court. The Clerk of the Court is directed to close all outstanding motions and this case. Dated: January 4, 2013
When a district court declines to exercise supplemental jurisdiction over parties and claims of a case that was initially brought in state court, the proper disposition is to remand the remainder of the case to state court. See Valencia v. Sung M. Lee, 316 F.3d 299, 308 (2d Cir. 2003) (citing Cohill, 484 U.S. at 357). --------
New York, New York
SO ORDERED:
/s/_________
GEORGE B. DANIELS
United States District Judge