Summary
noting that 18 U.S.C. § 1346 does not have private right of action
Summary of this case from Hooten v. Greggo & Ferrara Co.Opinion
No. 04 CV 9407 (TPG).
March 30, 2006
OPINION
Plaintiff brings this pro se action to recover certain profits allegedly owed to her by a securities trading business she established together with Robert J. Pierot Sr. ("Pierot Sr."). Plaintiff alleges that defendants, children and associates of Pierot Sr., have refused to honor a written agreement between plaintiff and Pierot Sr. which allegedly entitles her to more than $20 million in profits from their joint business.
Defendants Robert Jacobus Pierot, Jr., Edward Guinot Pierot, Felicia Pierot Choi Brody, Catherine Pierot Chen Zicherman, Pierot Enterprises, Inc., and Palm Beach Trading Enterprises, Inc. (collectively the "Pierot Defendants") have moved to dismiss the complaint pursuant to Rules 9(b), 12(b)(1), and 12(b)(6) of the Federal Rules of Civil Procedure.
Defendants Angel Garcia-Cordero ("Cordero") and Anta Internacional Asesoramiento Financiero, S.L. ("Anta") join in the Pierot Defendants' motion, and also move separately to dismiss the complaint pursuant to Rules 9(b), 12(b)(1), 12(b)(2) and 12(b)(6).
The Pierot Defendants' motion to dismiss is granted. The motion to dismiss by Cordero and Anta is granted in part and denied in part as described below.
THE COMPLAINT
The following allegations are drawn from the complaint. Plaintiff is a money manager and investment banker. Defendants Robert Jacobus Pierot, Jr., Edward Guinot Pierot, Felicia Pierot Choi Brody, and Catherine Pierot Chen Zicherman are children of Pierot Sr. Defendant Cordero is a business associate of Pierot Sr. and the CEO of Anta.
Plaintiff first met Pierot Sr. in 1987, at which time she advised him with respect to a certain business acquisition. In August 1993, the two began working together informally in a global securities trading and IPO flipping business (the "Venture"). IPO flipping is defined in the complaint as "the acquisition of newly issued stock in an initial public offering and the intra-day resale of such stock."
During the latter half of 1993, plaintiff and Pierot Sr. had a number of conversations regarding the operations of the Venture and how the Venture's profits and losses would be shared between them. These conversations were formalized in a January 20, 1994 written agreement signed by both plaintiff and Pierot Sr. (the "Agreement"). Plaintiff has appended the Agreement to her complaint. The Agreement, written in first person by Pierot Sr., states, in pertinent part:
As I am funding this business either through my own funds or funds belonging to friends and family and will be doing the administration and you will be using your "market expertise and business contacts," the gross profits of this global securities trading and IPO flipping operation . . . will be split 50/50 between both of us each carrying our own expenses. You will not be personally liable for any losses incurred either by you or any of the traders.
The Agreement also provided that, in the event of Pierot Sr.'s death, plaintiff would take over day-to-day management of the Venture and would have the "first right of refusal to carry on the business."
The complaint alleges that the Venture was highly successful. The Venture was allegedly involved several hundred IPO flipping deals and hundreds of trades each week. According to the complaint, from 1994 through Pierot Sr.'s death in November 1997, the Venture's annual trading volume exceeded $1 billion, and trading gains "ranged up to and well over $10 million per year."
The complaint alleges that plaintiff contributed greatly to the Venture's success. According to the complaint, plaintiff performed extensive research and financial analysis in connection with the Venture's securities transactions, and utilized her extensive global industry contacts "to obtain pricing information on deals coming into the new issue fundraising pipeline, and to establish valuable connections with traders."
Plaintiff and Pierot Sr. both maintained their profits in the Venture in order to keep the Venture sufficiently capitalized to sustain its highly profitable large volume trading. Plaintiff's share of the profits, which allegedly totaled more than $20 million, accumulated in bank accounts belonging to the Venture.
The complaint alleges that in late 1996 and early 1997, in conjunction with a decline in Pierot Sr.'s health, defendants began to transfer the assets of the Venture first to Palm Beach Trading, Inc., and then to overseas entities jointly owned and controlled by Pierot Sr.'s children and Cordero. According to the complaint, Cordero executed many of these transfers. These transfers allegedly occurred without plaintiff's knowledge.
In late 1996, plaintiff expressed concerns to Pierot Sr. regarding her share of the Venture's profits, none of which had yet been paid to her. Pierot Sr. wrote back to plaintiff on February 5, 1997. In the letter, which plaintiff has appended to her complaint, Pierot Sr. stated that "the amount owed to you is well in excess of US$20 million and will be paid to you per the attached agreement dated January 20, 1994." Pierot Sr. explained that payment was delayed because he was in the process of restructuring his finances and assets overseas so that plaintiff could receive "what is rightfully yours without having to pay taxes." The letter also contained the following:
In case I die or become mentally disabled before this, give this letter to my son Bobby who will make sure that all money (including other money owed to you) is properly paid to you. In case Bobby and/or the children decide not to honor my business agreements with you, approach Angel Garcia Cordero directly. He can use this letter as his authorization to pay you up to US$20 million immediately from the funds I have structured overseas.
The complaint further alleges that, in early 1997, Pierot Sr. assured her that a complete audit of the Venture had been initiated, and that plaintiff would receive payment upon completion of the audit. According to the complaint, following the death of Pierot Sr. in November 1997, Edward Guinot Pierot assured plaintiff that the audit would soon be completed and the funds distributed to her.
The complaint alleges that, in March 1998, plaintiff returned from a trip abroad to discover that Edward Guinot Pierot had taken over management of the Palm Beach office and terminated several traders. At the same time, plaintiff discovered that Felicia Pierot Choi Brody was "engaged in activities that violated longstanding trading practices of the Venture and created undue risk."
The complaint asserts that on several other occasions throughout 1998 the Pierot children promised to pay plaintiff the money owed to her under the Agreement. Then, in December 1998, the Pierot children formally reneged on these promises and refused to pay plaintiff any money. Plaintiff was never informed of the results of the audit.
Plaintiff's Prior Lawsuit
On September 24, 1999, plaintiff filed a nearly identical action in this court. The 1999 complaint named essentially the same defendants, and contained precisely the same factual allegations as the present complaint. The present complaint differs only in that it omits certain RICO causes of action contained in the 1999 complaint, and adds two new claims for quantum meruit and equitable estoppel. The Pierot Defendants were served in the prior action. It is unclear whether Cordero and Anta were ever served in that action.
The present complaint replaces the Estate of Robert Jacobus Pierot Sr., named in the 1999 Complaint, with Robert Jacobus Pierot, Jr. in his capacity as the Executor of the Estate of Robert Jacobus Pierot Sr., and in his capacity as the trustee to the Trust of Julie Pierot Ziegler for the benefit of her son Dustin Ziegler.
On January 31, 2000, the Pierot Defendants filed a motion to dismiss the 1999 Action. Defendants Cordero and Anta did not join in that motion. Despite being granted numerous extensions over a nine month period, plaintiff failed to respond to the Pierot Defendants' motion. As a result, on November 20, 2000, the court issued an order dismissing the 1999 action as to the Pierot Defendants pursuant to Local Civil Rule 7.1, subject to the right of plaintiff to seek leave by motion to vacate the dismissal within 45 days. The order directed the Clerk to enter judgment in favor of the Pierot Defendants if plaintiff failed to so move. Plaintiff failed to move within the required time, and, on January 17, 2001, a judgment was entered against plaintiff and in favor of the Pierot Defendants.
Local Civil Rule 7.1 provides, in pertinent part:
All motions and all oppositions thereto shall be supported by a memorandum of law, setting forth the points and authorities relied upon in support of or in opposition to the motion, and divided, under appropriate headings, into as many parts as there are points to be determined. Willful failure to comply with this rule may be deemed sufficient cause for the denial of a motion or for the granting of a motion by default.
On March 30, 2001, in response to a letter by plaintiff, the court issued a further order confirming the dismissal and termination of the 1999 action. Plaintiff did not move to reopen the case or appeal from the judgment.
DISCUSSION
The Pierot Defendants' Motion to Dismiss
The doctrine of res judicata, also known as claim preclusion, holds that "a final judgment on the merits of an action precludes the parties or their privies from relitigating issues that were or could have been raised in that action."Allen v. McCurry, 449 U.S. 90, 94 (1980); Burgos v. Hopkins, 14 F.3d 787, 789 (2d Cir. 1994).
To invoke the res judicata rule, a party must show that (1) the previous action involved an adjudication on the merits; (2) the previous action involved the same parties or those in privity with them; and (3) the claims asserted in the subsequent action were, or could have been, raised in the prior action. Monahan v. New York City Dep't of Corrections, 214 F.3d 275, 285 (2d Cir. 2000).
Fed.R.Civ.P. 41(b) provides:
For failure of the plaintiff to prosecute or to comply with these rules or any order of court, a defendant may move for dismissal of an action or of any claim against the defendant. Unless the court in its order for dismissal otherwise specifies, a dismissal under this subdivision and any dismissal not provided for in this rule . . . operates as an adjudication upon the merits. (emphasis added)
Pursuant to Rule 41(b), the November 20, 2000 order dismissing the complaint, followed by the January 17, 2001 judgment operated as an adjudication on the merits for the purposes of res judicata. This is so despite the fact that the substantive issues of the case were never reached. See Saylor v. Lindsley, 391 F.2d 965, 968 (2d Cir. 1968); Carryl v. Columbia Univ. College of Physicians, 04-CV-2374, 2005 U.S. Dist. LEXIS 3813 (S.D.N.Y. March 9, 2005); White v. City Of New York, 85-CV-8127, 1986 U.S. Dist. LEXIS 25049 (S.D.N.Y. May 27, 1986).See also East 65 Street Realty Corp v. Rinzler, 98-CV-6555, 2000 U.S. Dist. LEXIS 3537 (S.D.N.Y. March 22, 2000) (dismissing with prejudice plaintiff's claim for failure to comply with Local Civil Rule 7.1).
The final two elements of the res judicata analysis are also present. The 1999 Action obviously involved the same parties. Furthermore, it is clear that the claims asserted in the present action were, or could have been, raised in the earlier action.
It is true that plaintiff has added two new claims in the present complaint. However, claims based upon different legal theories are barred provided they arise from the same transaction or occurrence. L-TEC Elecs. Corp. v. Cougar Elec. Org., Inc., 198 F.3d 85, 88 (2d Cir. 1999); NLRB v. United Technologies, 706 F.2d 1254, 1260 (2d Cir. 1988). As noted above, the factual allegations in the two complaints are nearly identical. All of plaintiff's claims were, or could have been brought in her prior action. Her claims against the Pierot Defendants are therefore barred by res judicata and dismissed.
Cordero's and Anta's Motion to Dismiss
Certain of plaintiff's claims appear to be directed only against the Pierot Defendants, while others are directed generally against all "defendants." Presumably, the latter claims are directed against Cordero and Anta, as well as the other defendants.
These claims are the First, Second, Third, Fifth, Sixth, Seventh, Eighth, Ninth, and Tenth causes of action for fraud, fraudulent conveyance, mail and wire fraud, breach of fiduciary duty, waste and diversion, conversion, quantum meruit, unjust enrichment, and equitable estoppel.
Plaintiff has withdrawn her claim for mail and wire fraud, acknowledging that there is no private right of action under the cited provisions. The Third Cause of Action, asserting this claim, is therefore dismissed.
Unlike the Pierot Defendants, Cordero and Anta did not move to dismiss the complaint in the 1999 action. Indeed, it is not clear whether Cordero and Anta were ever served in that action. The November 20, 2000 order dismissing the complaint, and the January 17, 2001 judgment, pertained only to the Pierot Defendants. Cordero and Anta may therefore not avail themselves of the res judicata defense.
However, Cordero and Anta move to dismiss the present action on numerous other grounds. In particular, Cordero and Anta assert that (1) the court lacks subject matter jurisdiction; (2) the court lacks personal jurisdiction over them; (3) plaintiff's claims are barred by the statute of limitations; (4) the fraud claims are not pleaded with the particularity required by Rule 9(b); and (5) the complaint fails to state claims against them upon which relief can be granted.
Rule 12(b)(1): Subject Matter Jurisdiction
Cordero and Anta argue that the court has no subject matter jurisdiction over the claims against them.
The only claim in the complaint that implicates federal law is the Third Cause of Action, which asserts mail and wire fraud claims under 18 U.S.C. §§ 1343 and 1346. As noted above, plaintiff has withdrawn this claim. Therefore, there is no longer a basis for asserting federal question jurisdiction.
As to diversity jurisdiction, with the Pierot Defendants now out of the case, the matter must be viewed as a suit by plaintiff against Cordero and Anta. Plaintiff has submitted an affidavit asserting that she is domiciled in New York. Plaintiff also alleges that Cordero is a citizen of Spain and that Anta has its principle place of business in Spain. Diversity jurisdiction thus properly exists under 28 U.S.C. § 1332(a)(2), which provides for jurisdiction over actions between "citizens of a State and citizens or subjects of a foreign state."
Rule 12(b)(2): Personal Jurisdiction
Cordero and Anta move to dismiss the complaint under Rule 12(b)(2) for lack of personal jurisdiction.
Cordero has submitted a declaration stating that he has no office, business operations, or employees in New York. He owns no real property in New York. Cordero does maintain a personal bank account with a New York institution. However, that fact alone is insufficient to subject him to jurisdiction. A.C.K. Sports, Inc. v. Doug Wilson Enterprises, Inc., 661 F. Supp. 386, 389 (S.D.N.Y. 1987).
Anta is not licensed to do business in New York, and has no office, business operations, employees or agents, or bank accounts in New York. While Anta does purchase and sell securities on the New York Stock Exchange, such activity is insufficient for the exercise of jurisdiction. See Schottenstein v. Schottenstein, 04-CV-5851, 2004 U.S. Dist. LEXIS 22648 (S.D.N.Y. November 8, 2004).
Nevertheless, the court finds that these defendants are subject to personal jurisdiction here under C.P.L.R. § 302, New York's long arm statute.
C.P.L.R. § 302(a)(1) provides jurisdiction over a non-domiciliary defendant in an action arising from such defendant's transaction of business within New York State.
In her affidavit, plaintiff asserts that Cordero and Anta bought and sold securities in New York on behalf of the Venture. Cordero and Anta received substantial revenue from these activities. Cordero also allegedly traveled to New York a number of times to discuss the Venture with plaintiff and Pierot Sr.'s children, and on several occasions "called plaintiff in New York to enlist her assistance and advice regarding Anta's purchase or sale of securities in New York."
Furthermore, plaintiff alleges that Cordero and Anta "helped to transfer millions of dollars of plaintiff's money away from the New York prime brokerage accounts controlled by the venture, with the specific intent to defraud plaintiff and steal her assets." Although plaintiff does not allege precisely what actions were taken by Cordero and Anta to effectuate these transfers, these withdrawals of funds from New York banking institutions would constitute the transaction of business in New York.
Plaintiff's claims are closely related to these activities. Jurisdiction over Cordero and Anta therefore exists under C.P.L.R. § 302(a)(1).
The court must also evaluate whether exercising jurisdiction over Cordero and Anta comports with due process requirements.A.I. Trade Fin., 989 F.2d at 82. Courts have noted that satisfaction of the § 302(a)(1) criteria will generally meet federal due-process requirements, Kelly v. MD Buyline, Inc., 2 F. Supp. 2d 420, 431 (S.D.N.Y. 1998). This observation holds true in the present case as well.
Due process requires plaintiffs to allege jurisdictional facts sufficient to establish first, that the defendants had sufficient contacts with New York to justify the court's exercise of personal jurisdiction — known as the "minimum contacts" inquiry; and second, that asserting personal jurisdiction in light of the circumstances of this action "comports with `traditional notions of fair play and substantial justice" — the so-called "reasonableness" inquiry. International Shoe Co. v. Washington, 326 U.S. 310, 316 (1945).
Considering the extensive business activities conducted by Cordero and Anta in New York, and the substantial revenue they allegedly derived from those activities, the court finds that Cordero and Anta had sufficient contacts with New York to render foreseeable "the possibility of being haled into court here." Chew v. Dietrich, 143 F.3d 24, 28 (2d Cir. 1998).
Moreover, under the circumstances of this case, the exercise of jurisdiction over Cordero and Anta would be reasonable. Asahi Metal Indus. Co. v. Superior Court, 480 U.S. 102, 112 (1987). Where a plaintiff makes the threshold showing that a defendant has the required contacts with the forum state, the defendant must present a compelling case that the presence of some other considerations would render jurisdiction unreasonable. Bank Brussels Lambert v. Fiddler Gonzalez Rodriguez, 305 F.3d 120, 129 (2d Cir. 2002). No such showing has been made here. Jurisdiction over Cordero and Anta comports with due process and is therefore proper.
Statute of Limitations
As noted above, the present complaint contains precisely the same factual allegations as the complaint filed in the 1999 Action. Thus, all of the events plaintiff now relies upon had occurred and were known to her by September, 1999, the date she filed her complaint in the 1999 Action. The present action was filed on November 30, 2004.
The Fifth, Sixth, and Seventh Causes of Action, for breach of fiduciary duty, waste, and conversion, all of which have three year statutes of limitations, are therefore dismissed. See N.Y.C.P.L.R. § 214(4); Sotheby's Fin. Servs. v. Baran, 107 Fed. Appx. 235 (2d Cir. 2004) (breach of fiduciary duty); Powers Mercantile Corp. v. Feinberg, 109 A.D.2d 117 (N.Y.App.Div. 1985) (waste and diversion); N.Y.C.P.L.R. § 214(3); Sporn v. MCA Records, Inc., 58 N.Y.2d 482, 488 (1983) (conversion).
The remaining First, Second, Eighth, Ninth, and Tenth Causes of Action for fraud, fraudulent conveyance, quantum meruit, unjust enrichment, and equitable estoppel all have six year statutes of limitations. N.Y.C.P.L.R. § 213(8) (fraud); Quadrozzi Concrete Corp. v. Mastroianni, 392 N.Y.S.2d 687, 688 (N.Y.App.Div. 2d Dep't 1977) (fraud); Liberty Co. v. Boyle, 708 N.Y.S.2d 122, 125 (N.Y.App.Div. 2d Dep't 2000) (fraudulent conveyance);Eisen v. Feder, 763 N.Y.S.2d 279, 280 (N.Y.App.Div. 1st Dept. 2003) (quantum meruit); Congregation Yetev Lev D'Satmar, Inc. v. 26 Adar N.B. Corp., 596 N.Y.S.2d 435, 437 (N.Y.App.Div. 2d Dep't 1993) (unjust enrichment). See also N.Y.C.P.L.R. § 213(1) (proscribing a six year statute of limitations for any "action for which no limitation is specifically prescribed by law")
It is unclear from the complaint whether all of the events giving rise to these claims occurred more than six years before the filing of the present complaint. The complaint does not indicate when defendants completed their alleged wrongful transfer of the Venture's assets. Moreover, the complaint asserts that, throughout 1998, plaintiff was repeatedly reassured that she would receive her share of the profits, and that it was only in December 1998 that Pierot Sr.'s children formally refused to pay. Therefore, at this preliminary stage, the complaint does not permit a finding that plaintiff's remaining claims are barred by the statute of limitations.
Other Issues Regarding Adequate Pleading Common Law Fraud
The First Cause of Action for fraud is alleged generally against all defendants. The court dismisses it with leave to re-plead a specific claim against Cordero and Anta in compliance with Fed.R.Civ.P. 9(b) if there is a reasonable basis for doing so.
Fraudulent Conveyance
Plaintiff brings her Second Cause of Action under N.Y. Debt. Cred. Law § 276, which provides that "every conveyance made and every obligation incurred with actual intent, as distinguished from intent presumed at law, to hinder, delay or defraud either present or future creditors, is fraudulent as to both present and future creditors."
Read in the light most favorable to plaintiff, the complaint alleges that Cordero assisted in transferring funds belonging to the Venture from New York bank accounts to overseas accounts controlled by him in order to frustrate plaintiff's ability to collect her share of the Venture's profits. These allegations find support in Pierot Sr.'s February 5, 1997 letter to plaintiff, which states:
In case Bobby and/or the children decide not to honor my business agreements with you, approach Angel Garcia Cordero directly. He can use this letter as his authorization to pay you up to US$20 million immediately from the funds I have structured overseas.
Although a claim for fraudulent conveyance is subject to the strictures of Rule 9(b), due to the difficulty of proving actual intent to hinder, delay, or defraud creditors, the pleader is allowed to rely on "badges of fraud" to support his case, i.e. circumstances so commonly associated with fraudulent transfers that their presence gives rise to an inference of intent. Wall St. Assocs. v. Brodsky, 257 A.D.2d 526, 529, 684 N.Y.S.2d 244, 247 (N.Y.App.Div. 1st Dep't 1999). These badges of fraud may include: a close relationship between the parties to the alleged fraudulent transaction; a questionable transfer not in the usual course of business; and inadequacy of the consideration. Id.;Dreieck Finanz Ag v. Sun, 89-CV-4347, 1990 U.S. Dist. LEXIS 1438 at *34 (S.D.N.Y. February 9, 1990).
The complaint has adequately alleged circumstances from which an inference may be drawn that Cordero acted with fraudulent intent. The large sum of money allegedly owed to plaintiff, the close working relationship between Cordero and the Pierot Defendants, and the unusual overseas transfer of "virtually all" of the Venture's assets for no consideration are sufficient to give rise to an inference of fraudulent intent.
However, the fraudulent conveyance claim is asserted with generality against all defendants. Plaintiff is directed to re-plead this claim, making specific allegations against Cordero and Anta if there is a reasonable basis for doing so.
Quantum Meruit and Unjust Enrichment
Plaintiff's claim for quantum meruit and unjust enrichment cannot survive because the complaint alleges an express written contract between plaintiff and Pierot Sr. covering the subject matter of these claims. Stissi v. Interstate Ocean Transp. Co. of Philadelphia, 814 F.2d 848, 851 (2d Cir. 1987) (quantum meruit); Weinreich v. Sandhaus, 850 F. Supp. 1169, 1182 (S.D.N.Y.) (quantum meruit); Superintendent of Ins. v. Ochs, 377 F.3d 209, 213 (2d Cir. 2004) (unjust enrichment). The Eighth and Ninth Causes of Action are therefore dismissed.
Equitable Estoppel
Plaintiff's equitable estoppel claim alleges that she was injured by virtue of her reliance upon the false promises contained in the Agreement. There is no distinct equitable estoppel cause of action under New York law. In any event, Cordero and Anta were not parties to the Agreement, and did not induce plaintiff's reliance upon it. The Tenth Cause of Action is therefore dismissed.
CONCLUSION
The Pierot Defendants' motion to dismiss is granted in its entirety. The motion to dismiss by Cordero and Anta is granted as to the Third through Tenth Causes of Action. The First Cause of Action for fraud is dismissed with leave to re-plead if there is a reasonable basis for doing so. The Second Cause of Action for fraudulent conveyance is not dismissed. However, plaintiff is directed to re-plead the Second Cause of Action, making specific allegations against Cordero and Anta if there is a reasonable basis for doing so.
SO ORDERED.