Opinion
Case No. 03-81026-CIV-RYSKAMP/VITUNAC
March 22, 2004
ORDER DENYING MOTION TO REMAND AND PARTIALLY GRANTING MOTION TO DISMISS
THIS CAUSE comes before the Court pursuant to the following motions:
• Plaintiffs' Motion to Remand, filed December 8, 2003 [DE 8]. Defendants Boston Securities, S.A., Fleet National Bank and the International Bancorp of Miami, Inc. responded on January 29, 2004 (DE 35, 36). Plaintiffs replied on February 10, 2004 [DE 43].
• Defendant International Bank of Miami, N.A.'s Motion to Dismiss, filed December 19, 2003 [DE 13]. Plaintiffs responded on February 9, 2004 [DE 41]. Defendant International Bancorp of Miami, Inc. replied on February 23, 2004 [DE 48].
• Defendants Boston Securities, S.A. and Fleet National Bank's Motion to Dismiss, filed December 29, 2003 [DE 15]. Plaintiffs responded on February 9, 2004 [DE 40]. Defendants Boston Securities, S.A. and Fleet National Bank replied on March 3, 2004 [DE 51].
These motions are ripe for adjudication.
1. BACKGROUND
A. IntroductionCarlos and Carolina Waiter ("Plaintiffs" or "Warters") bring this action against Boston Securities, S.A. ("BSEC"); Fleet National Bank ("FLEET"); International Bancorp of Miami, Inc. ("IBOM"); Mario Rossi ("Rossi"); Eduardo Scuderi ("Scuderi"); Xavier Capdevielle ("Capdevielle"); and Patricio Pusso ("Pusso") for, inter alia, alleged embezzlement of Plaintiffs' funds invested with BSEC, an Argentine securities brokerage.
Plaintiffs filed this action in the Circuit Court of the Fifteenth Circuit, in and for Palm Beach County, Florida on May 30, 2003. Plaintiffs filed an Amended Complaint on September 29, 2003. BSEC. FLEET and IBOM removed the action to this Court on November 7, 2003 pursuant to 12 U.S.C. § 632, the Edge Act.
B. The Parties
BSEC is a foreign corporation with its principal place of business in Buenos Aires, Argentina. (Am. Compl. ¶ 2.) FLEET is a national bank chartered under federal law. On February 1, 2000, FLEET merged with BANKBOSTON, N.A. ("BBNA"); the Bank of Boston-Florida, National Association, Boca Raton, Florida ("BKB-Florida"); Fleet Trust and Investment Services Company, National Association, Stuart, Florida ("Fleet Trust") and Fleet Bank, F.S.B., Boca Raton, Florida ("Fleet-FSB"). The pre-merger companies and FLEET are now one and the same entity, FLEET. Both before and after the merger, BBNA did business in Argentina through a branch licenced under Argentine law, known as BankBoston Argentina. Although BankBoston Argentina is registered or licensed in Argentina, it and FLEET are the same corporation. (Am. Compl. ¶¶ 3-4.)
Plaintiffs allege that this Court has jurisdiction over BSEC, FLEET, Pusso and Rossi pursuant to Fl. Stat. § 48.193, the Florida long arm statute, in that these Defendants either committed tortious conduct in Florida, established the requisite minimum contacts with Florida, or both. IBOM is a Florida corporation conducting business in Florida. (Am. Compl. ¶ 11.) Scuderi and Capdevielle reside in Florida. (Am. Compl. ¶¶ 9-10.) Plaintiffs are residents of Dade County, Florida. (Am. Compl. ¶ 1.)
C. Factual Background
In early 1992, Pusso introduced the Waiters to Linstal Securities, S.A. (""Linstal"), an Argentine securities brokerage. (Am. Compl. ¶ 23.) Pusso solicited the Waiters for securities investing through Linstal, telling them that any monies they forwarded would be used to purchase and sell repos and other securities in Argentine markets. (Am. Compl. ¶¶ 24, 31 A.) The Waiters invested at least $600,000.00 in Linstal in an account titled Gulden S.A. ("Gulden"). (Am. Compl. ¶ 23.) Although not averred in the Amended Complaint, the parties agree that Gulden is a Uruguayan corporation solely owned by the Waiters. Pusso was the account executive assigned to the Warters' account. (Am. Compl. ¶ 23.) Linstal became BSEC in 1993, when FLEET purchased a 51 percent interest in Linstal. (Am. Compl. ¶¶ 13, 23.) Pusso continued as an account executive, and all of the Waiters' assets were transferred to BSEC into an account titled Gulden S.A. (Account # 403) ("Gulden 403"). (Am. Compl. ¶ 23.)
As an account executive, Pusso had the authority to solicit new customers for BSEC, give customers investment advice, open BSEC accounts, deposit cash with BSEC on behalf of customers, give wiring instructions to customers desiring to invest in BSEC, process BSEC account withdrawal requests, prepare BSEC account documentation, purchase and sell securities in customers' BSEC accounts, distribute BSEC literature, meet with customers in BSEC's office to discuss their investments, instruct BSEC employees to perform tasks in customers' accounts, act as a conduit for monthly statements and financial status reports from BSEC to its clients and represent himself as a BSEC agent. (Am. Compl. ¶ 15.) In approximately May of 1995, due to problems with a BSEC account, BSEC asked Pusso to resign. BSEC, through Rossi and/or others, allowed Pusso to retain control over his accounts and to continue as an off-site financial consultant with authority to manage BSEC accounts. (Am. Compl. ¶ 18.)
The Waiters continued to transfer funds to BSEC. From 1992 through 1999, they transferred funds via wire to BSEC through FLEET in New York for BSEC Account #272-7290, Gulden 403, or others. (Am. Compl. ¶ 23.) By 1999, the Waiters had invested at least $5,000,000.00 with BSEC. (Am. Compl. ¶ 23.)
From 1993 through 1995, the Waiters met several times with Pusso and BSEC manager Eugenio G. Schettini ("Schettini"). Schettini reassured the Waiters of the safety and security of their investments. (Am. Compl. ¶ 23.) Several times each month for a period of approximately seven years, Pusso communicated to the Waiters the status of the securities alleged to have been purchased with their money. (Am. Compl. ¶ 31B.) From 1993 through 1999, BSEC sent monthly account statements to the Waiters in Florida. (Am. Compl. ¶ 23.) As of May 31, 1999, the Waiters believed their investments had grown to approximately $33,000,000.00. (Am. Compl. ¶ 29.)
Sometime after May 31, 1999, the Waiters received an anonymous letter warning them about the security of their investments. (Am. Compl. ¶ 29.) When Carlos Waiter called BSEC to inquire about the status of his investments, BSEC comptroller Pedro Espinosa informed him that his accounts either did not exist or were inactive. (Am. Compl. ¶ 65.) Pusso offered to transfer the Waiters' funds to an account outside of Argentina that he would create on their behalf. (Am. Compl. ¶ 65.) The Waiters declined Pusso's offer and requested that he transfer the funds to their Swiss bank account. (Am. Compl. ¶ 65.) Pusso never transferred the funds to the Swiss account.
Relations between the Waiters and Pusso deteriorated. Over the next several months, they were told that the money was safe in a neighboring country and that it would be returned if they surrendered all BSEC account statements and papers. (Am. Compl. ¶ 29.) The Waiters were told that they should not say a word to anyone or all would be lost. (Am. Compl. ¶ 29.) Pusso allegedly told the Waiters "not to talk to anybody" and to "keep quiet" about the matter. (Am. Compl. ¶ 66.) The Waiters received anonymous, threatening phone calls stating such things as: `'don't rattle the wasp hive," "they'll find you six feet underground, in plastic bags, unrecognizable," "we know where your kids go to school," "be careful, there could be poison in the fish you ate last night," and, to Carolina Waiter, "your new baby will be fatherless." (Am. Compl. ¶ 66.)
Carlos Warter wrote to BankBoston and/or BSEC's Massachusetts headquarters demanding compensation for the alleged losses. (Am. Compl. ¶ 67.) Plaintiffs allege that BankBoston, through BSEC, used this letter as a basis for filing a criminal complaint against Carlos Waiter in Argentina. (Am. Compl. ¶ 67.) The Warters claim that the phone calls and the filing of the criminal complaint caused Carlos Warter to develop gastrointestinal problems, a colectomy and severe depression. Carolina Warter also claims that she has suffered emotional distress. (Am. Compl. ¶¶ 69, 71.)
Plaintiffs allege that Pusso falsified records pertaining to their investments to hide withdrawals and show fictitious gains. (Am. Compl. ¶ 25.) Pusso allegedly used the Waiters' funds to cover other investors' demands for payment of fictitious gains, to satisfy withdrawal requests of other investors, or to cover the losses in other investors' accounts by virtue of his embezzlement of said accounts. (Am. Compl. ¶ 25.) The Warters also allege that Pusso laundered money stolen from them through IBOM and then commingled millions in investor funds prior to paying the monies to a Pusso controlled entity, Boston Investment Holdings. (Am. Compl. ¶¶ 57-62.)
The Warters claim that, unbeknownst to them, Pusso had a history of unethical behavior as an account executive for BSEC. Plaintiffs allege that, in 1994, Pusso submitted a falsified request for a $20,000.00 cash withdrawal from the Gulden 403 account. Although BSEC manager Mario Rossi ("Rossi") reversed the transaction, he took no further action against Pusso and did not inform the Warters of Pusso's conduct. (Am. Compl. ¶ 17.) In approximately February of 1997. BSEC and Rossi discovered shortfalls in another client's account due to embezzlement by Pusso. BSEC and Rossi supposedly allowed Pusso to make up the shortfalls with other clients' funds. (Am. Compl. ¶ 20.) The Warters were not informed of Pusso's alleged embezzlement. (Am. Compl. ¶ 21.) The Warters were also not informed of Pusso's 1995 change in status from full BSEC employee to BSEC consultant. (Am. Compl. ¶ 18.)
The Waiters bring a six-count Amended Complaint against Defendants. Count I alleges fraud against BSEC and Pusso for Pusso's alleged false representations concerning their investments. (Am. Compl. ¶¶ 30-35.) Count II alleges negligence against BSEC for, inter alia, failing to stop Pusso from making unauthorized withdrawals and embezzling client funds, allowing Pusso to act as its employee and agent when it knew or should have known of his alleged wrongdoing, and failing to inform the Waiters of either the change in Pusso's employment status or Pusso's alleged prior thefts of client funds. (Am. Compl. ¶¶ 36-43.) Count III alleges negligence against FLEET and Rossi. The Waiters seek to hold FLEET liable for BSEC's negligence on the theory that a "special relationship" existed between BSEC and FLEET in that Rossi was a high-ranking employee of both entities, BSEC employees reported to FLEET throughout the transactions herein, and FLEET exercised control over BSEC policy. (Am. Compl. ¶¶ 44-51.) Count IV is a claim for fraudulent conversion against Pusso, Scuderi, Capdevielle, Rossi and IBOM. Scuderi and Capdevielle allegedly assisted Pusso with his IBOM money laundering scheme. (Am. Compl. ¶¶ 52-62.) Count V is a claim for intentional infliction of emotional distress against BSEC, Pusso, Rossi and FLEET. (Am. Compl. ¶¶ 63-73.) Count VI alleges that Pusso, Rossi, BSEC and FLEET conspired to commit the fraud alleged herein. (Am. Compl. ¶¶ 74-90.)
Plaintiffs have moved to remand this action to the Fifteenth Circuit. Defendants BSEC, FLEET and IBOM assert that this Court has jurisdiction pursuant to the Edge Act and request that this Court dismiss the Amended Complaint.
II. MOTION TO REMAND
A. The Edge ActThe Edge Act grants this Court original jurisdiction over actions arising out of transactions involving international or foreign banking or financial operations when one of the parties is a corporation organized under the laws of the United States. The statute provides in pertinent part:
Notwithstanding any other provision of law, all suits of a civil nature at common law or in equity to which any corporation organized under the laws of the United States shall be a party, arising out of transactions involving international or foreign banking, or banking in a dependency of insular possession of the United States, or out of the other international or foreign financial operations, either directly or through the agency, ownership, or control of branches of local institutions in dependencies or insular possessions of the United States or in foreign countries, shall be deemed to arise under the laws of the United States, and the district Courts of the United States shall have original jurisdiction of all such suits; and any defendant in any such suit may, at any time before the trial thereof, remove such suits from a State court into the district court of the United States for the proper district by following the procedure for the removal of causes otherwise provided by law.12 U.S.C. § 632. Jurisdiction lies under the Edge Act if (a) the action is civil; (b) one of the parties is a federally chartered corporation; and (c) the suit arises out of either international banking or financial operations. See Pinto v. Bank One Corp., No. 02 Civ. 8477 NRB, 2003 WL 21297300, at *2 (S.D.N.Y. Jun. 4, 2003); First Nat'l Bank v. Promatek Med. Sys., Inc., 870 F. Supp. 234, 237(N.D. Ill. 1994). See also Bank of N.Y. v. Bank of Am., 861 F. Supp. 225, 232 (S.D.N.Y. 1994) ("in order for [the Edge Act] to apply (1) one of the parties to a suit must be a federally chartered corporation, and (2) the suit must arise out of a transaction involving international or foreign banking or financial operations."). Although "[s]ection 632 should be construed narrowly . . . a federal court should be cautious about remands, lest it erroneously deprive a defendant of its right to a federal forum." Consorcio de Fomento Industrial v. First National Bank of Chicago, No. 93 C 0272, 1993 WL 291706, at *3 (N.D. Ill. Aug. 3, 1993) (quoting Contitrade Services Corp v. Eddie Bauer, Inc., 794 F. Supp. 514, 516 (S.D.N.Y. 1992)).
B. Discussion
It is undisputed that the first two prongs of the test for Edge Act jurisdiction are satisfied. This action is civil, and FLEET is a corporation organized under the laws of the United States. (Am. Compl. ¶ 3.) The parties disagree as to whether this lawsuit arises out of "international or foreign banking . . . or out of other international or foreign financial operations." 12 U.S.C. § 632.
1. Banking Activities
In determining whether an action involves international banking activities for purposes of conferring Edge Act jurisdiction,
[c]ourts have interpreted the Act narrowly to encompass only those transactions characterized as traditional banking activities, such as transactions involving mortgage foreclosures, letters of credit, letters of guaranty when the bank relied on the letter in granting a loan, and transactions involving Federal Reserve Banks.Telecredit Service Center v. First National Bank of the Florida Keys, 679 F. Supp. 1101, 1103 (S.D. Fla. 1988) (citations omitted). See also Nacional Financiera v. The Chase Manhattan Bank, No. 00 CIV 1571 JSM, 2001 WL 327159, at *3 (S.D.N.Y. Apr. 4, 2001) ("Courts have generally required that the bank transactions at issue arise from `traditional' banking activities, such as loan agreements, letters of credit, mortgage agreements, or payment and processing of drafts.") (citations omitted)); darken v. Citicorp Diner's Club, Inc., No. 01 C 5123, 2001 WL 1263366, at *1 (N.D. Ill. Oct. 22, 2001) (same) (citations omitted)).
The Edge Act does not grant federal jurisdiction over all cases in which a bank is a party. See Diaz v. Pan American Federal Savings Loan Ass'n, 635 F.2d 30, 32 (1st Cir. 1980) (had Congress intended that result, "it could have stated its intent more easily" in the statute). Nevertheless, "`[a] suit satisfies the jurisdictional requisites of Section 632 if any part of it arises out of transactions involving international or foreign banking." In re Lloyd's American Trust Fund Litigation, 928 F. Supp. 333, 338 (S.D.N.Y. 1996).
BSEC, FLEET and IBOM argue that this action involves international banking activities. The Warters allege that Pusso instructed them to wire funds that would be invested with BSEC, that they wired funds through FLEET'S predecessor in New York to BSEC in Argentina, and that, also pursuant to Pusso's instructions, they and other BSEC customers wired money to IBOM. (Am. Compl. ¶ 23, 31, 53, 58, 84.) The Amended Complaint also alleges that the Warters deposited at least $5,000,000.00 with BSEC and that Pusso had the authority to give clients "deposit instructions" and deposit cash. (Am. Compl. ¶¶ 13-15.) Finally, the Warters allege that Pusso provided fraudulent investment advice in furtherance of embezzling their funds. (Am. Compl. ¶¶ 14-15; 82(C)). The Warters allege that BSEC and FLEET remained silent to allow Pusso time to manipulate client accounts and give said fraudulent investment advice. (Am. Compl. ¶¶ 82(C)).
Courts have held that wire transfers, maintaining deposits for customers, and providing investment advice are banking activities. InNacional Financiera, the Court held that a bank's alleged wrongful retention of miswired funds to set off another debt owed it was a traditional banking activity for purposes of Section 632. 2001 WL 327159, at *1, *4. A Mexican bank loaned $10 million of credit to a Mexican construction corporation. Id. at * 1. To satisfy the debt, the construction corporation ordered Chase Manhattan to transfer funds from its New York account to the Mexican bank's Deutche Bank account, also located in New York. Id. Chase miswired the funds to the construction company's account at Bank of America, a national bank located in California, which retained the funds to offset a separate debt owed it by the construction company. Id. The Mexican bank sued Chase for breach of contract and negligence and Bank of America for unjust enrichment and conversion. Id. The Court held that, even if Bank of America had not entered into a foreign banking transaction with the Mexican construction company, Edge Act "jurisdiction arguably exists based on the wire agreement between [the Mexican bank] and Chase" because "[t]he wire agreement constitutes a traditional banking activity." Id. at *4. Maintaining deposits for customers and providing investment advice are also banking activities. See Lloyd's, 928 F. Supp. at 339 (holding that a dispute in which a bank, inter alia, maintained accounts, kept account records, executed orders to transfer funds to and from accounts and invested funds held in the accounts constituted traditional banking activities); Consorcio, 1993 WL 291706, at *4 ("financial advising services . . . seem to fall under the broad headings of `international or foreign banking' and `international or foreign financial operations'");U.S. v. Philadelphia National Bank, 374 U.S. 321, 327, 83 S.Ct. 1715, 1721 n. 5 (1963) ("banking services" includes "investment advice"). Thus, the allegations of the Amended Complaint demonstrate that this action involves international banking activities.
Plaintiffs argue that their action is entirely based on Pusso's alleged embezzlement — which they claim is not a banking activity — and citeDiaz and Telecredit for the proposition that the mere presence of a bank or a banking transaction is insufficient to confer Edge Act jurisdiction. Neither case supports Plaintiffs' position, however. InDiaz, the Court ruled that it lacked Edge Act jurisdiction over an action for malicious prosecution of a criminal complaint based on the alleged circulation of bad checks. 635 F.2d at 31-32. Thus, the issue before the Court was one of malicious prosecution, not banking. Id. In Telecredit, the Court held that the nature of the transaction at issue, fraudulent charge backs on credit card invoices for sales of travel club memberships in the Bahamas, was strictly a contractual dispute and therefore was unrelated to banking activities. 679 F. Supp. at 1105, 1106-07. See also Bank of N.Y., 861 F. Supp. at 232-33 (suit involving whether the parties had entered into an agreement for the purchase of loans was primarily contractual and therefore did not give rise to federal jurisdiction pursuant to the Edge Act). In contrast. Edge Act jurisdiction exists in this case because the facts underlying Plaintiffs' claims, wire transfers, managing deposits, and providing investment advice, constitute banking activities. That the Amended Complaint sounds in tort is no basis for discounting the centrality of banking activity to this action. See Conjugal Society Composed of Juvenal Rosa v. Chicago Title Ins. Co., 690 F.2d 1, 4-5 (1st Cir. 1982) (Edge Act jurisdiction exists in action in which Plaintiffs were allegedly fraudulently induced to refinance a mortgage even though the complaint sounded in negligence and conspiracy because the refinancing was a banking activity).
Plaintiffs' reliance on Lazard Freres Co. v. First National Bank, No. 91 Civ. 0628 (KMW), 1991 WL 221087, (S.D.N.Y. Oct. 15, 1991) is also unpersuasive. InLazard, Plaintiffs brought suit on a contract for the sale and leaseback of an airplane in which financial institutions held an equitable interest for failure to pay service fees. Id. at *1. The Court granted Plaintiffs' motion to remand on the grounds that the agreement on which the suit was predicated was "between solely American entities." Id. at *2. In contrast, it is manifest from the Amended Complaint that the transactions at issue in this case were international.
Plaintiffs also attempt to distinguish this action from Clarken, 2001 WL 1263366, at *1, which held that the issuance of a credit card and currency conversion were traditional banking functions, and Pinto, 2003 WL 21297300, at *3. which held that the issuance of a credit card is a traditional banking function. Plaintiffs' basis for distinguishing their case from Clarken and Pinto is merely that their case does not involve credit cards. Plaintiffs cite no law for the proposition that banking activities are limited to transactions relating to credit cards, however.
Since this action involves the international banking activities of wire transfers, the provision of investment advice, and client account management, this Court has jurisdiction pursuant to the Edge Act.
2. Financial Operations
Even if this action did not involve international banking activities, this Court would still have jurisdiction pursuant to the Edge Act because this action involves international financial operations.
The Waiters claim that their BSEC funds were for the purchase of securities and that FLEET had oversight over, and allegedly participated in, a conspiracy regarding their investment of funds for the purchase of securities. (Am. Compl. ¶¶ 25, 46, 75-86.) "International financial operations" includes the sale of securities. See Travis v. Nat'l City Bank, 23 F. Supp. 363 (D.C.N.Y. 1938); Stamm v. Barclays Bank of New York, 960 F. Supp. 724 (S.D.N.Y. 1997). In Travis. Plaintiff, holder of mortgage gold bonds of a German company, brought an action against a federal bank for alleged breach of its duty as trustee in state court. Id. 23 F. Supp. at 365. Defendant removed, but the Court denied the motion to remand on the grounds that issuance of securities by the German corporation to American buyers constituted foreign financial operations under the Edge Act. Id. at 367. The Travis court held that the "sale and distribution of . . . securities to American holders . . . is an international financial operation" pursuant to the Edge Act. Id. at 366. In Stamm, Plaintiffs, investors in English insurance syndicates, purchased investment contracts to underwrite certain risks. Plaintiffs posted shares of stock and guarantees to Lloyd's as collateral to ensure payment of potential liabilities. 960 F. Supp. at 726-27. The Court held that federal jurisdiction was proper under the Edge Act because Plaintiffs' investments and pledge of capital were the "equivalent to the purchase of a security" and that "the sale of securities for the purpose of raising capital is a kind of financial operation." Id. at 728 (citingTravis, 23 F. Supp. at 363; Lloyd's, 928 F. Supp. at 341). See also Lloyd's, 928 F. Supp. at 339, 341 (bank's maintaining accounts, keeping account records, executing orders to transfer funds to and from accounts, and investing funds held in accounts were financial operations as well as banking activities).
The Warters argue that the securities transactions at issue represented "pure securities transactions" because the transactions were not part of a corporation's efforts to raise capital. As such, the securities transactions were not "`financial operations" under the statute. This distinction finds no basis in either Stamm or Travis, and Plaintiffs cite no law for this proposition. The purpose of the securities transactions is not legally relevant to determining whether the transactions were financial in nature.
The Waiters also argue that conferring Edge Act jurisdiction in this matter "would open the flood gate of litigation in the federal courts" to all securities cases involving foreign brokers. (Motion to Remand, 18.) The mere presence of a foreign securities broker is insufficient to warrant federal jurisdiction pursuant to the Edge Act, however, as the Edge Act also requires the presence of a nationally chartered bank as a condition of removal. Significantly, it was the Warters' decision to "open the flood gate" and name FLEET as a defendant, thereby subjecting this action to federal jurisdiction.
The allegations in the Amended Complaint involve activities constituting foreign financial operations in that Plaintiffs allege duties and conspiracies involving millions of dollars in allegedly fake sales of securities. Because this civil action involving a nationally chartered bank arises from both international banking activities and financial operations, this Court has jurisdiction pursuant to 12 U.S.C. § 632. Plaintiffs' Motion to Remand is denied.
III. MOTIONS TO DISMISS
Having denied Plaintiffs' Motion to Remand, the Court will address the removing Defendants' Motions to Dismiss.
A. Legal Standard
Rule 8(a) of the Federal Rules of Civil Procedure requires a "short and plain statement of the claim" that "will give the defendant fair notice of what the plaintiff's claim is and the ground upon which it rests." When examining a motion to dismiss, this Court considers whether the plaintiff has alleged facts sufficient to state a claim for relief. A motion to dismiss should not be granted unless the plaintiff can prove no set of facts in support of its claim entitling it to relief. Conley v. Gibson, 355 U.S. 41, 45-46 (1957). "When considering a motion to dismiss, all facts set forth in the plaintiff's complaint `are to be accepted as true and the court limits its consideration to the pleadings and exhibits attached thereto.'" Grossman v. Nationsbank, 225 F.3d 1228, 1231 (11th Cir. 2000) (quoting GSW. Inc. v. Long County, 999 F.2d 1508. 1510 (11th Cir. 1993)).
B. Discussion
1. Standing
BSEC, FLEET and IBOM move to dismiss the entire Amended Complaint for lack of standing on the grounds that all of Plaintiffs' funds were invested in the Gulden 403 account. Consequently, the alleged financial injury was to Gulden, not Plaintiffs. Neither Uruguay nor Florida law allows a shareholder of a corporation to bring individual claims against third parties for harm suffered by the corporation. See Affidavit of Alvaro Tarabal, ¶ 3 (Uruguayan law forbids claims of individual shareholders filed on behalf of the corporation against third parties); Hill v. Brady, 737 So.2d 1243, 1244 (Fla. 5th DC A 1999) (shareholder had no right to bring individual action when alleged injury was directly tied to alleged corporate losses); Alario v. Miller, 354 So.2d 925, 926 (Fla. 2d DCA 1978) ("[i]f the damages are only indirectly sustained by the stockholder as a result of injury to the corporation, the stockholder does not have a cause of action as an individual.") (citing 13 W. Fletcher, Cyclopedia of the Law of Private Corporations, §§ 5911, 5924, 5926, 5928 (rev. ed. 1970));Citizens Nat. Bank of St. Petersburg v. Peters, 175 So.2d 54, 56 (Fla. 2d DCA 1965) (same).
The Court need not determine whether Uruguay or Florida law governs the standing question because both bodies of law are substantively identical on this point. Plaintiffs admit that Florida law does not allow individual shareholder suits brought to redress corporate injuries. Plaintiffs do not contest that the same is true under Uruguayan law. Whereas plaintiff has not alleged the applicability of Uruguayan law, the Court may presume it to be the same as Florida law. See Stone v. Wall, 135 F.3d 1438, 1442 (11th Cir. 1998) ("Foreign law is a fact to be pleaded and proved; and when the contrary is not alleged, the law of the sister state will be assumed to be the same as Florida law.") (citation omitted).
See Gadd v. Pearson, 351 F. Supp. 895, 906 (M.D. Fla. 1972) (allowing plaintiff to submit memoranda and affidavits as to whether Bahamian law mandated that claim be brought on behalf of the corporation prior to deciding issues raised in motion to dismiss).
Thus, if the Amended Complaint alleged that all of the Waiters' investments were deposited in the Gulden 403 account, the Warters would lack standing. Yet it is not clear from the Amended Complaint whether the Gulden 403 account is the only account the Warters had with BSEC. The Amended Complaint states that "[b]etween 1992 and 1999, the WARTERS liquidated other assets and transferred other funds from various sources to BSEC through the BANKBOSTON in New York for credit of the BSEC Account #272-7290 or Account # 403 (Gulden, S.A.), or others, (Am. Compl. ¶ 23, emphasis added.) The Amended Complaint also states that Carlos Waiter "was given printouts on several of their accounts." (Am. Compl. ¶ 23, (emphasis added.) On the other hand, the Amended Complaint repeatedly refers to the Waiters' BSEC account in the singular. See e.g. Am. Compl. ¶ 17 (referring to "the WARTERS' account, Account # 403"); ¶ 19 ("[a]t no time after the WARTERS opened their BSEC account" were they informed that Pusso was only a BSEC consultant); ¶ 23 (referring to "printouts of the WARTERS' account"). The Court is therefore unable to determine, based on the Amended Complaint, whether the Gulden 403 account was the only account the Warters had with BSEC.
Whether the Gulden 403 account was the Waiters only account with BSEC is not necessary for resolution of the standing question, however. The Amended Complaint alleges that monies the Warters gave to BSEC may never have been deposited in any of their accounts, including the Gulden 403 account. The Amended Complaint alleges that "[o]n several occasions, PUSSO made representations to the WARTERS that funds wired according to his instructions would be invested in their BSEC account. In fact on many occasions the money was stolen and, ultimately, all of the WARTERS' money was stolen." Am. Compl. ¶ 31(C). Even if Plaintiffs' only account was Gulden 403, if discovery demonstrates that none of their monies were deposited in that account, the resulting injury would be to the Warters themselves rather than Gulden. On the other hand, if discovery reveals that Plaintiffs only had corporate accounts (of whatever number) with BSEC, and that all of their funds were deposited into one or more of these accounts, they will lack standing to bring this action. Unless and until such has been proven through discovery, the Warters will retain standing.
Plaintiffs argue that they would have standing even if the Gulden 403 account was their only BSEC account, and even if all of their funds were deposited in that account. Plaintiffs assert that they may still bring a cause of action because Pusso and BSEC owed them a personal duty and that the alleged breach thereof caused them to suffer an injury separate and distinct from that suffered by other shareholders. See Braun v. Buyers Choice Mortgage Corp., 851 So.2d 199, 203 (Fla. 4th DC A 2003) (noting that "a shareholder cannot sue in the shareholder's name for injuries to a corporation unless there is a special duty between the wrongdoer and the shareholder, and the shareholder has suffered an injury separate and distinct from that suffered by other shareholders). The Amended Complaint does not plead that Defendants owed Plaintiffs a special duty. Even if the Amended Complaint alleged the existence of such a duty, the Warters still do not have separate standing to bring a claim based upon solely corporate losses. The Warters' status as the sole shareholder of Gulden does not exempt them from the rule that claims for corporate damages must be brought derivatively. See U.S. v. Palmer, 578 F.2d 144, 145-46 (5th Cir. 1978) (the "law is clear that only a corporation and not its shareholders, not even a sole shareholder, can complain of an injury sustained by, or a wrong done to, the corporation."); Schaffer v. Universal Rundle Corp., 397 F.2d 893, 896 (5th Cir. 1968) (only a corporation may sue for its own losses even "in cases where the individual is the sole stockholder"); Lincoln Oldsmobile. Inc. v. Branch, 574 So.2d 1111, 1114 (Fla. 2d DCA 1990) (rule applies "even where the individual is the sole stockholder of the corporation") (citingSchaffer and Gutierrez v. Shaffer, 490 So.2d 1299, 1299 (Fla. 3d DCA 1986)). If all of the Warters' funds were invested in the Gulden 403 account, the Warters will lack standing to bring this action because they will not have sustained any personal damages separate and apart from the damage allegedly suffered by Gulden.
2. Intentional Infliction of Emotional Distress
BSEC and FLEET argue that the Warters' claim for intentional infliction of emotional distress should be dismissed for four reasons: (1) the alleged conduct is not sufficiently outrageous, (2) the tort of malicious prosecution supercedes the tort of intentional infliction of emotional distress, (3) the alleged conduct of BSEC and FLEET is privileged insofar as it relates to the intentional infliction of emotional distress claim, and (4) Plaintiffs do not allege that the objectionable conduct came from BSEC or FLEET.
To state a claim for intentional infliction of emotional distress, a plaintiff must show that "(1) [the] conduct was intentional or reckless . . .; (2) the conduct was outrageous . . .; (3) the conduct caused emotional distress; and (4) the emotional distress was severe." State Farm Mut. Auto Ins. Co. v. Novotny, 657 So.2d 1210, 1212 (Fla. 5th DC A 1995) (citation omitted). "It is not enough that the [defendant's] intent is tortious or criminal" or that the defendant "intended to inflict emotional distress." Id. at 1213. Rather, the conduct "must arouse resentment in an average member of the community, and cause him to exclaim `outrageous.'" Id. at 1212-13. "Whether the conduct complained of is sufficiently outrageous and extreme to withstand a motion to dismiss is purely a question of law for the Court to decide." Decius v. National Serv. Indus., Inc., No. 01-8320-CIV, 2001 WL 1621924, at *2 (S.D. Fla. Nov. 1, 2001) (citing Vance v. Southern Bell Telephone, 983 F.2d 1573, 1575 n. 7 (11th Cir. 1993)).
Conduct giving rise to a claim for intentional infliction of emotional distress must be extraordinarily shocking. For instance, in Vance, the Eleventh Circuit held that the hanging of a noose over an employee's work station, assigning the employee to supervise white women who attacked her, and transporting the employee to the wrong hospital when she had a breakdown was not sufficiently "outrageous" to support an intentional infliction of emotional distress claim. 983 F.2d at 1574n.2, 1575 n. 7).See also Martin v. Baer, 928 F.2d 1067, 1069-70, 1074 (11th Cir. 1991) (employer's failure to investigate properly rumors about an employee's sexual orientation and that employee had sexually harassed other employees was not "outrageous" under Florida law); Baker v. Florida Nat'l Bank, 559 So.2d 284, 285-87 (Fla. 4th DCA 1990) (mismanagement of trust funds in bonds and securities which led to a decrease in value was not actionable); Diamond v. Rosenfeld, 511 So.2d 1031, 1032, 1034-35 (Fla. 4th DCA 1987) (filing two criminal complaints and two civil complaints, in all of which plaintiff was acquitted, threatening to shoot pet, anti-Semitic remarks, and additional attempts to make plaintiffs' lives difficult did not constitute intentional infliction of emotional distress); De la Campa v. Grifols Am., Inc., 819 So.2d 940, 941, 943 (Fla. 3d DCA 2002) (party failed to state claim for intentional infliction of emotional distress where allegations were solely based on verbal abuse).
In light of this caselaw, it is evident that the Warters' allegations of intentional infliction of emotional distress are insufficient. The Warters allege that BSEC and FLEET filed a criminal complaint against Carlos Warter in Argentina with the knowledge that the complaint was meritless. Institution of legal proceedings, whether with or without merit, is insufficient to state a cause of action for intentional infliction of emotional distress. See Diamond, 511 So.2d at 1033-34. The Warters also allege that they received anonymous, threatening phone calls. The phone calls cannot support an intentional infliction of emotional distress claim against BSEC and FLEET because Plaintiffs do not allege that Pusso, BSEC or FLEET are responsible for the alleged phone calls, and because harassing phone calls are insufficient to state a cause of action for intentional infliction of emotional distress. See De la Campa, 819 So.2d at 941, 943. The Warters' claim against BSEC and FLEET for intentional infliction of emotional distress is dismissed. Whereas the alleged conduct forming the basis for the intentional infliction of emotional distress claim is insufficient to support the claim, the Court need not discuss BSEC and FLEET'S remaining arguments for dismissal.
3. Negligence
BSEC and FLEET argue that Florida's economic loss rule bars Plaintiffs' negligence claims because Plaintiffs have failed to allege that they suffered physical injury or property damage in addition to their alleged economic losses. Florida's economic loss doctrine provides that a party may not recover purely economic damages in a negligence action absent allegations of separate physical injury or property damage. See Monroe v. Sarasota Cty. School Bd., 746 So.2d 530, 530 (Fla. 2d DCA 1999) ("bodily injury or property damage is an essential element of a cause of action in negligence."). Whether a contract exists between the parties is irrelevant; a party may not assert a claim for negligence if the only damages claimed are economic losses. Sec GAF Corp. v. Zack Co., 445 So.2d 350, 351-52 (Fla. 3d DCA 1984) (roofing contractor who failed to allege separate personal injury or property defect and who lacked privity of contract with defendant manufacturer of defective product had no cause of action in either contract or tort).
The Waiters admit that they do not allege a separate physical injury or property damage apart from their economic losses. (Response to Motion to Dismiss, 18.) They argue that their negligence claims should proceed based on the exception to the economic loss rule expressed in Moransis v. Heathman, 744 So.2d 973 (Fla. 1999). Moransis held that the economic loss rule "does not bar a cause of action against a professional for his or her negligence even though the damages are purely economic in nature and the aggrieved party has entered into a contract with the professional's employer." Id. at 983-84.
The Waiters may not rely on this exception to the economic loss rule because their Amended Complaint does not allege that Pusso and BSEC are professionals. Sec In re Flagship Healthcare, Inc., 269 B.R. 721, 730 (S.D. Fla. 2001) (failure to allege defendants' professional status bars cause of action for negligence). Furthermore, a securities broker is not a "professional" for purposes of the economic loss rule because securities brokers are not required to obtain a four-year degree for licensing in Florida. See Medalie v. FSC Securities Corp., 87 F. Supp.2d 1295, 1302 (S.D. Fla. 2000) (investors' claim against brokerage firm is not a claim for professional malpractice that is exempt from the economic loss rule). Whereas the Warters have not alleged, and, indeed, are unable to allege, that the professional services exception to the economic loss rule should apply to Pusso, BSEC or FLEET, their negligence claims against BSEC and FLEET are dismissed.
4. IBOM's Motion to Dismiss Count IV
IBOM moves to dismiss Count IV, fraudulent conversion, on a variety of grounds. The Court will address each of IBOM's arguments individually.
1. Improperly Named Entity
IBOM moves to dismiss on the grounds that Plaintiffs have sued the wrong entity. Plaintiffs have sued "International Bancorp of Miami, Inc., a Florida corporation, d/b/a International Bank of Miami." This entity is a bank holding company, however, the wholly owned subsidiary of which is The International Bank of Miami, N.A., a federally chartered bank. The holding company and the bank are not one and the same, and the holding company does not conduct any banking activities. (Prestamo Aff. ¶¶ 4-5.) Whereas Plaintiffs have failed to state a claim against IBOM, its motion to dismiss is granted.
2. Failure to Plead Fraud With Particularity
IBOM also argues that Plaintiffs have failed to allege the factual basis of their fraudulent conversion claim with particularity. Despite the leniency of Rule 8's general pleading standards, Rule 9(b) requires that "the circumstances constituting fraud or mistake shall be stated with particularity." This rule serves to notify defendants in fraud actions as "to the `precise misconduct with which they are charged' and protecting defendants `against spurious charges of immoral and fraudulent behavior." Medalie, 87 F. Supp.2d at 1306 (quoting Durham v. Business Management Assocs., 847 F.2d 1505, 1511(11th Cir. 1988)). In the Eleventh Circuit, Rule 9(b) is satisfied if a plaintiff pleads the following:
(1) precisely what statements were made in what documents or oral representations or what omissions were made, and
(2) the time and place of each such statement and the person responsible for making (or, in the case of omissions, not making) same, and
(3) the context of such statements and the manner in which they mislead the plaintiff, and
(4) what the defendants obtained as a consequence of the fraud.Brooks v. Blue Cross and Blue Shield of Fla., 116 F.3d 1364, 1371 (11th Cir. 1997), reh'g denied 116 F.3d 1495 (11th Cir. 1997) (quotation omitted). See also Leonard v. Stuart-James Co., 742 F. Supp. 653, 659 (N.D. Ga. 1990) (motion to dismiss granted where complaint failed to allege "specifically when, where, by whom or specifically what the representation was.").
The only conduct attributed to IBOM is that it was aware that Pusso was supposedly using it to operate an investment company, that the transactions at issue were allegedly directed toward nonexistent or unidentifiable recipients, that IBOM had a duty to comply with Fl. Stat. § 670.207(1), that IBOM breached this duty, and that IBOM paid investors' funds to Boston Investment Holdings. (Am. Compl. ¶¶ 53, 58-60, 62.) The Amended Complaint fails to meet the pleading standards of Rule 9(b) in that it fails to provide the dates of the alleged transactions, what, if any statements were made in connection with the transactions and the context in which they were made, and what, if anything, IBOM gained from the alleged fraudulent conversion. See Brooks, 116 F.3d at 1371. Such inadequate pleading does not provide IBOM notice of the "precise misconduct with which [it is] charged." Medalie, 87 F. Supp.2d at 1306 (quoting Durham, 847 F.2d at 1511. IBOM's motion to dismiss for failure to allege fraud with particularity is granted.
3. Improper Reliance on Florida Law
The Waiters claim that IBOM violated Fl. Stat. § 670.207(1) by allegedly accepting via Fedwire payment orders that referred to a nonexistent or unidentifiable person or account. IBOM argues that 12 C.F.R. § 210 et. seq. governs this claim. The Court's review of both Fl. Stat. § 670.207(1) and § 4A-207 of Appendix B to Subpart B of Part 210 indicates that both provisions are identical, save that the subsections in each are designated differently. 12 C.F.R. § 210 et. seq. is governing law, however, as it specifically regulates the Fedwire system. Accordingly, Count IV is dismissed in that 12 C.F.R. § 210 preempts Plaintiffs' state statutory reference.
IV. CONCLUSION
THE COURT being fully advised and having considered the pertinent portions of the record, herebyORDERS AND ADJUDGES that Plaintiffs' Motion to Remand, filed December 8, 2003 [DE 8] is DENIED. It is further
ORDERED AND ADJUDGED that BSEC, FLEET and IBOM's Motions to Dismiss, filed December 19, 2003 [DE 13] and December 29, 2003 [DE 15] are GRANTED IN PART AND DENIED IN PART. Specifically,
• BSEC, FLEET and IBOM's motion to dismiss all counts for lack of standing is DENIED;
• BSEC's motion to dismiss Count II, negligence, is GRANTED pursuant to the economic loss rule;
• FLEET'S motion to dismiss Count III, negligence, is GRANTED pursuant to the economic loss rule;
• BSEC and FLEET'S motion to dismiss Count V, intentional infliction of emotional distress, is GRANTED for failure to allege sufficiently outrageous conduct; and
• IBOM's motion to dismiss Count IV, fraudulent conversion, is GRANTED for failure to name the proper entity, failure to allege fraud with particularity, and failure to cite the proper authority governing Fed wire transfers.
This dismissal is WITHOUT PREJUDICE and Plaintiffs are hereby granted leave to amend their Amended Complaint. It is further
ORDERED AND ADJUDGED that BSEC and FLEET'S Motion for Oral Argument on their Motion to Dismiss, filed December 29, 2003 [DE 14] is DENIED.
DONE AND ORDERED.