Trupin, 835 F. Supp. 126, 135 (S.D.N.Y. 1993). Simply put, "providing important services to a racketeering enterprise is not the same as directing the affairs of an enterprise." Arthur Andersen, 924 F. Supp. at 466 (S.D.N.Y. 1996). This is true even when the provision of services is "essential to the operation of the RICO enterprise itself." De Wit v. Firstar Corp., 879 F. Supp. 947, 966 (N.D. Iowa 1995).
The Plaintiff alleges, however, that beyond merely providing legal services, Ortoli was substantially involved in the affairs of the enterprise.
But even this fails to establish liability under § 1962(c). See, e.g., Biofeedtrac, 832 F. Supp. at 587-89 (no liability even though RICO enterprise was attorney's sole client and attorney incorporated two corporate defendants involved in scheme and then served as director and officer for both corporations); see also Hayden v. Paul, Weiss, Rifkind, Wharton & Garrison, 955 F. Supp. 248, 254-55 (S.D.N.Y. 1997) (collecting cases). Nor do allegations that Ortoli knowingly concealed the fraudulent activities of the enterprise change this result. See, e.g., Baumer v. Pachl, 8 F.3d 1341, 1342-44 (9th Cir. 1993) (no liability where attorney prepared letters to state officials "to forestall and cover-up the fraud by minimizing or mischaracterizing the [enterprise's] allegedly improper activities"). Indeed, even claims that Ortoli recommended certain courses of fraudulent behavior, or that he had "substantial persuasive power to induce management to take certain actions," are insufficient to establish § 1962(c) liability. Strong & Fisher Ltd. v. Maxima Leather, Inc., 1993 U.S. Dist. LEXIS 10080, No. 91 CIV. 1799, 1993 WL 277205, at *1 (S.D.N.Y. July 22, 1993); see also Arthur Andersen, 924 F. Supp. at 467. Accordingly, the Court dismisses the § 1962(c) claim against Ortoli, R&B and RKB.
Baltimore advances a claim analogous to Ortoli's, relying on Reves to argue that it did not participate in the operation or management of the alleged enterprise. The Court agrees.
Baltimore was incorporated in 1988 to serve as the trustee for the Hastings Trusts I-V. (Compl. P 50.) Ortoli apparently has been its sole director. (Id. P 17.) The factual predicates for Ms. Madanes' claim that Baltimore directed the enterprise are essentially three. First, she cites Baltimore's involvement in covering up her rightful ownership of the Artworks. (Id. PP 66, 68, 72.) Second, she cites Baltimore's repeated refusal to respond to requests for information (Id. P 78.) And third, she identifies Baltimore's refusal to provide an accounting. (Id. PP 152, 154.)
The foregoing allegations are insufficient to establish Baltimore's liability under § 1962(c). Ms. Madanes merely points to evidence which, if true, demonstrates that Baltimore has helped cover up the scheme directed by the Madanes Brothers. Indeed, the Complaint itself alleges that "at all times relevant hereto, [Baltimore] has been under the control of the Madanes Brothers." (Id. P 17.) In addition, the Complaint states that it was the Madanes Brothers who "requested that Ortoli assist them in their scheme to falsify the ownership of the Artworks." (Compl. P 67.) Accordingly, the requisite element of management is missing. See, e.g., Baumer, 8 F.3d at 1342-44 (merely forestalling discovery of fraud insufficient for § 1962(c) liability); Amalgamated Bank v. Marsh, 823 F. Supp. 209, 220-21 (S.D.N.Y. 1993) (mere acceptance of fraudulent proceeds insufficient to show "operation or management").
In summary, the § 1962(c) claim is dismissed with respect to Ortoli, R&B, RKB and Baltimore, but maintained as against the remaining Defendants.
C. RICO § 1962(d)
The Defendants also argue that the Plaintiff has failed to state a claim under RICO § 1962(d). This contention is without merit.
Section 1962(d) prohibits conspiring to violate either § 1962(a), (b) or (c). "When read in conjunction with the language of § 1962(c), RICO's conspiracy provision proscribes an agreement 'to conduct or participate, directly or indirectly, in the conduct of such enterprise's affairs through a pattern of racketeering activity.'" United States v. Viola, 35 F.3d 37, 43 (2d Cir. 1994) (citation omitted), cert. denied, 513 U.S. 1198, 131 L. Ed. 2d 148, 115 S. Ct. 1270 (1995). Accordingly, the RICO conspiracy charge "is proven if the defendant 'embraced the objective of the alleged conspiracy,' and agreed to commit two predicate acts in furtherance thereof." Id. (citation omitted).
Leaving aside for the moment the § 1962(d) liability of Ortoli
and Baltimore, there is no question that the Complaint states a § 1962(d) claim against the remaining Defendants. Indeed, the principal argument advanced by the Defendants -- that the RICO conspiracy claim must fail because the underlying substantive claim is deficient -- is obviously flawed in light of the Court's sustaining the Plaintiff's § 1962(c) claim against all of the Defendants except Ortoli, R&B, RKB and Baltimore. Moreover, our prior analysis makes clear that the Complaint provides a substantial factual basis from which to infer an agreement among these Defendants. E.g., Spira, 876 F. Supp. at 560-61 (requirement of agreement to commit at least two acts of racketeering activity satisfied by conscious adherence to fraudulent scheme pursuant to which two mailings in furtherance of scheme were foreseeable); see also Hecht v. Commerce Clearing House, Inc., 897 F.2d 21, 26 n.4 (2d Cir. 1990) (noting that Rule 9(b) applies only to fraud or mistake, not conspiracy, and thus pleading of conspiracy, apart from underlying acts of fraud, is properly measured under more liberal pleading requirements of Rule 8(a)).
With respect to Ortoli and Baltimore, the question is whether someone can be guilty of a RICO conspiracy even if he cannot be characterized as an operator or manager of a RICO enterprise under Reves. In the Second Circuit, the answer is yes. See Viola, 35 F.3d at 43 ("A defendant can be guilty of conspiring to violate a law, even if he is not among the class of persons who could commit the crime directly."); see also MCM Partners, Inc. v. Andrews-Bartlett & Assocs., 62 F.3d 967, 980 (7th Cir. 1995); United States v. Starrett, 55 F.3d 1525, 1547-48 (11th Cir. 1995); United States v. Quintanilla, 2 F.3d 1469, 1484-85 (7th Cir. 1993). But see United States v. Antar, 53 F.3d 568, 580-82 (3d Cir. 1995) (stating that while conspiring to operate or manage an enterprise establishes 1962(d) violation, conspiring with someone who is an operator or manager of enterprise does not).
In Viola, the defendant's § 1962(c) conviction was overturned in the wake of Reves ' because the defendant was merely a "janitor and handyman" for the enterprise's actual operators and managers. 35 F.3d at 43. The court found, however, that reversal of the defendant's substantive RICO conviction on grounds that he did not participate in the operation or management of the enterprise did not require automatic reversal of his § 1962(d) conviction. Thus, the court proceeded to inquire as to whether the defendant was a co-conspirator under § 1962(d) on the basis of his two criminal acts of transporting stolen beer and lamps. Id. (noting that defendant's acts were undertaken "without the exercise of appreciable discretionary authority"). It wrote:
In this case, there was a conspiracy to conduct the Viola enterprise's affairs through a pattern of racketeering activity, and [the defendant] committed two crimes that qualify as RICO predicate acts. The narrow issue thus presented is whether the government produced sufficient evidence to convince a jury beyond a reasonable doubt that [the defendant] knowingly associated with the Viola enterprise by agreeing to commit the predicate acts.
Id. at 43-44 (characterizing defendant's acts as discrete stolen property crimes and finding no conspiratorial liability where record was devoid of evidence that defendant knew he was part of larger enterprise).
Assuming that the allegations in the Complaint are true, Ortoli has committed at least two crimes that qualify as RICO predicate acts. For instance, according to Ms. Madanes, Ortoli committed mail fraud when he sent to Pablo Madanes fraudulent paperwork concerning the Instruments of Trust for Hastings Trusts I-V, the creation of which helped establish the framework to defraud Ms. Madanes (Compl. P 56.) The Plaintiff also alleges that Ortoli committed wire fraud when he sent a telefax to the Madanes Brothers stating that he would assist them in their scheme to falsify the ownership of the Artworks for the purpose of defrauding Ms. Madanes of her ownership rights therein.
Thus, the issue for the Court is whether Ortoli knowingly associated with the "enterprise" by agreeing to commit these predicate acts. To demonstrate a RICO conspirator's knowledge of the RICO conspiracy, it is sufficient to show that "the defendant know[s] the general nature of the enterprise and know[s] that the enterprise extends beyond his general role." United States v. Rastelli, 870 F.2d 822, 828 (2d Cir.), cert. denied, 493 U.S. 982 (1989). Moreover, "it is axiomatic that the proof required to show that a defendant knowingly associated with an existing conspiracy 'need not be overwhelming.'" Viola, 35 F.3d at 44 (citation omitted). Indeed, participation in the conspiracy can be shown entirely through circumstantial evidence. Id.
We find that the Complaint states a valid § 1962(d) claim against Ortoli. Specifically, although Ortoli was not an operator or manager of the RICO enterprise, we find that the facts alleged evidence his knowing association with the Madanes Brothers' conspiracy to defraud the Plaintiff. The Court is satisfied that Ortoli's alleged actions -- ranging from the restructuring of family assets, to drafting paperwork intended to negate Ms. Madanes' interest in the Artworks, to issuing false denials regarding his status as the Trustee of Baltimore and Westchase -- are of the type that "logically would lead him to suspect" that he was part of a larger conspiracy. Id. at 44-45. That is, unlike the defendant in Viola who committed two isolated sales of stolen goods and had no reason to know he was part of a larger conspiracy, Ortoli's alleged acts all had the common theme of enriching the Madanes Brothers at the expense of Ms. Madanes. Given the knowledge Ortoli possessed, especially in light of his status as the family attorney since 1984, the Court finds that the present allegations are sufficient to establish Ortoli's conspiratorial liability. See, e.g., Morin v. Trupin, 835 F. Supp. 126, 133-36 (S.D.N.Y. 1993) (holding that although plaintiffs failed to state § 1962(c) claim against outside attorneys for directing principals in RICO enterprise to sign various legal documents, allegations that these same outside attorneys knowingly agreed with promoter of tax shelter to violate RICO and personally agreed to commit racketeering acts stated valid cause of action for conspiracy under § 1962(d)); cf. A.I. Credit Corp. v. Hartford Computer Group, Inc., 847 F. Supp. 588, 601-02 (N.D. Ill. 1994) (holding that although plaintiffs failed to adequately allege § 1962(c) claim against professional broker and its officer based on "operating or managing" enterprise, they adequately alleged RICO conspiracy to violate § 1962(a) against same defendants).
Baltimore is likewise liable under § 1962(d). As trustee for Hastings Trusts I-V, Baltimore had a unique vantage point to observe the fraud allegedly perpetrated against Ms. Madanes. Moreover, the Plaintiff has leveled specific allegations against Baltimore which establish the factual predicates necessary to show Baltimore's conspiratorial status. (Compl. PP 66-72, 78, 152-54.) For instance, Ms. Madanes explicitly alleges that Baltimore, along with its director Ortoli, participated in the scheme to defraud Ms. Madanes of her one-quarter undivided interest in the Artworks. (Id. P 72.) Thus, the Plaintiff has articulated facts sufficient to permit an inference of Baltimore's liability under § 1962(d). See, e.g., Spira, 876 F. Supp. at 560-61; 131 Main St., 897 F. Supp. at 1531 (finding § 1962(d) liability where plaintiff stated facts allowing inference that defendants knowingly embraced tax shelter fraud and agreed to commit acts in furtherance thereof).
D. Personal Jurisdiction
Defendants Leiser Madanes and Procida
have filed a Rule 12(b)(2) motion to dismiss the Complaint as against them for lack of personal jurisdiction. The Court rejects their arguments.
This Court authorized limited discovery on the issue of personal jurisdiction but has yet to hold an evidentiary hearing. In this scenario, the Second Circuit's rule is that the plaintiff must make a prima facie showing supported by an averment of facts that, if credited by the trier, would suffice to establish jurisdiction over the defendants. Ball v. Metallurgie Hoboken-Overpelt, S.A., 902 F.2d 194, 197 (2d Cir.), cert. denied, 498 U.S. 854, 112 L. Ed. 2d 116, 111 S. Ct. 150 (1990).
The RICO Act authorizes nationwide service of process. Accordingly, the jurisdictional inquiry under RICO focuses on the defendants' contacts with the entire United States, not just the forum state. Herbstein v. Bruetman, 768 F. Supp. 79, 81 (S.D.N.Y. 1991). Thus, due process requires only that the defendants had minimum contacts with the United States. Id. In the case of a defendant not present in the jurisdiction, such contacts may be demonstrated by: (1) doing business in the United States; (2) doing an act in the United States; or (3) causing an effect in the United States by an act done elsewhere. Id.
The Plaintiff has asserted that Leiser had sufficient contacts with the United States. The Complaint alleges, inter alia, that Leiser transacted business in New York, committed predicate acts in New York, communicated through mail and wires with Ortoli in New York, and authorized Ortoli to act on his behalf in New York and elsewhere (Compl. PP 13, 23, 31, 34, 151.) These acts are all alleged to have been in furtherance of the Defendants' scheme to defraud Ms. Madanes, and the Plaintiff's offer of facts clearly supports her allegations. For instance, the Plaintiff submitted over twenty letters and memoranda demonstrating that Leiser was routinely consulted about the Madanes family's financial affairs in the United States. (See Kerr Aff. PP 18-19 and Exhs. 3-29.) One representative letter, sent from Leiser to Ortoli, explicitly directs Ortoli to undertake certain actions regarding investment property in New York. (Kerr. Exh. 24.) Such evidence suffices at this early stage of the litigation. See Cutco Indus. v. Naughton, 806 F.2d 361, 366 (2d Cir. 1986) (joint control of business enterprise, similar to that existing in partnership or joint venture, evidences agency sufficient to confer personal jurisdiction); Lancaster v. Zufle, 165 F.R.D. 38, 41 (S.D.N.Y. 1996) (noting that written power of attorney creates principal-agent relationship and finding personal jurisdiction where, among other things, defendant's attorney acted on defendant's behalf in banking transaction); cf. Koskotas, 1991 U.S. Dist. LEXIS 12169, 1991 WL 177287, at *2 (ownership of bank accounts in United States was factor contributing to finding of personal jurisdiction under RICO). Accordingly, we find it entirely consonant with traditional notions of fair play and substantial justice that Leiser be subject to the jurisdiction of this Court. See Burger King Corp. v. Rudzewicz, 471 U.S. 462, 477, 85 L. Ed. 2d 528, 105 S. Ct. 2174 (1985).
The case of Procida requires the Court to examine the co-conspirator theory of personal jurisdiction. It is well established under New York law that "the acts of a co-conspirator within the state may be attributed to an out-of-state defendant for the purposes of obtaining personal jurisdiction." Sierra Rutile Ltd. v. Katz, 1992 U.S. Dist. LEXIS 13518, No. 90 CIV. 4913, 1992 WL 236208, at *8 (S.D.N.Y. Sept. 8, 1992) (explaining that "agent" has been defined to include co-conspirators under N.Y. C.P.L.R. § 302(a)(2)). Specifically, to establish jurisdiction with respect to a foreign co-conspirator, the plaintiff must allege facts warranting the inference that the foreign defendant was a member of the conspiracy and that the defendant "had an awareness (a) of the affects of its activity in New York and (b) that the activity of the co-conspirators in New York was to the benefit of the out-of-state conspirators." Id.
The Plaintiff has alleged facts sufficient to establish Procida's co-conspirator status for purposes of conferring personal jurisdiction. Specifically, Ms. Madanes alleges that after she demanded information about the Madanes family's assets in July of 1993, Pablo directed the creation of Procida for the sole purpose of fraudulently hiding "the fact that funds held in and passing through the Procida Account were in fact owned and controlled by him." (Compl. P 133, 135.) She further alleges that among the funds passing through the Procida Account were the same funds of which she had been defrauded by the Madanes Brothers and Ortoli in New York. (Id. PP 134-39.) Thus, she alleges both that Procida was aware of its part in an elaborate scheme which originated in New York with torts committed by Procida's co-conspirators, and that Procida in fact benefitted from such torts. Accordingly, these claims justify asserting personal jurisdiction over Procida. See, e.g., Sierra Rutile, 1992 U.S. Dist. LEXIS 13518, 1992 WL 236208, at *10 (finding personal jurisdiction over out-of-state defendant where acts of co-conspirators included use of New York City banks and transactions with shipping companies in New York); cf. Hade v. Kott, No. 91 CIV. 5897, 1993 U.S. Dist. LEXIS 2714, at *26-30 (S.D.N.Y. Mar. 8, 1993) (personal jurisdiction established where out-of-state co-conspirator knowingly accepted benefits of stock fraud).
E. Princess Lida
The Defendants argue that in light of the prior pending action in Switzerland, this action should be dismissed for lack of subject matter jurisdiction under the Princess Lida doctrine. See Princess Lida of Thurn and Taxis v. Thompson, 305 U.S. 456, 83 L. Ed. 285, 59 S. Ct. 275 (1939). This claim is meritless.
The Princess Lida doctrine applies when there is prior pending litigation and two conditions are met. First, both actions are in rem or quasi in rem in nature; and second, the relief sought requires the second court to exercise control over property already under the jurisdiction of the first court. Id. at 280. In such a scenario, the second court must decline jurisdiction. Id.; see, e.g., Chesley v. Union Carbide Corp., 927 F.2d 60, 66-67 (2d Cir. 1991) (collecting cases).
Resolution of the Defendants' claim requires a comparison of the two actions. The Swiss suit is an in personam action against Pablo only, not Miguel or Leiser or any of the other Defendants here. (Baumgartner Decl. PP 7-8.) It asserts a contractual claim under Argentine law for Pablo's abuse of a mutual power of attorney and seeks solely money damages, not an accounting. (Id. P 12.) The basis of the Swiss Court's assertion of personal jurisdiction over Pablo is an order -- obtained by Ms. Madanes in a prior proceeding -- that attached Pablo's portion of the Artworks and certain Swiss bank accounts. (Id. PP 6-7.) The purpose of the order was to secure assets sufficient to satisfy a later judgment, and thus only the value of Pablo's assets are at issue in the subsequent action. (Id. PP 7-8, 12.) Accordingly, under Swiss law Pablo is free to release items specifically attached, including his one-quarter interest in the Artworks, provided that he posts a bond covering the value of the selected assets. (Id. P 7.)
In the matter before this Court, the Plaintiff has alleged multiple claims against multiple Defendants. Specifically, she seeks treble damages for the Defendants' violations of RICO, as well as compensatory and punitive damages for conversion, fraud and breach of fiduciary duties under New York law. Ms. Madanes also seeks restitution of the assets held in constructive trust by the Madanes Brothers, as well as a complete accounting. The Complaint asserts in personam jurisdiction over each of the individual Defendants. (Compl. P 8.)
These facts fail to establish either of the two requirements for application of the Princess Lida doctrine. First, the actions in both fora are not in rem or quasi in rem in nature. Specifically, the Swiss action is an in personam action for damages that does not seek an accounting. Although the Defendants are correct to point out that the Princess Lida doctrine generally applies to actions concerning the administration of trusts and marshelling of assets, not every such action invokes the doctrine. See, e.g., Southwestern Bank & Trust Co. v. Metcalf State Bank, 525 F.2d 140, 142-43 (10th Cir. 1975) (although state action to liquidate property subject to trust was clearly in rem, federal action was in personam where it consisted of damage claims "related entirely to the administration of the trust by the defendant trustee, and the performance of its obligations as trustee under the trust instruments," and thus Princess Lida doctrine was inapplicable). More precisely, there is a difference between an action to obtain money from a specific, limited fund, and an action that seeks damages against third parties for misdeeds potentially related to the fund. See Central States v. Old Sec. Life Ins. Co., 600 F.2d 671, 675 n.7 (7th Cir. 1979) (noting inapplicability of Princess Lida doctrine where complaint merely sought to enforce a personal liability and obtain a money judgment, not to obtain possession of res already under jurisdiction of prior court). To the extent that the factual determinations -- including fiscal calculations -- in each scenario may overlap, the Supreme Court in Princess Lida wrote:
[The fact that] if both courts were to proceed they would be required to cover the same ground. . . . [is] of itself not conclusive of the District Court's jurisdiction, for it is settled that where the judgment sought is strictly in personam, both the state court and the federal court, having concurrent jurisdiction, may proceed with the litigation at least until judgment is obtained in one of them which may be set up as res judicata in the other.
Princess Lida, 305 U.S. at 465-66; see also Markham v. Allen, 326 U.S. 490, 494, 90 L. Ed. 256, 66 S. Ct. 296 (1946).
Moreover, even assuming arguendo that both actions were quasi in rem in nature, the Court finds that according Ms. Madanes relief in this case is not inexorably linked to exercising control over res already under the jurisdiction of the Swiss District Court. Accordingly, this case is not analogous Chesley v. Union Carbide Corp., 927 F.2d 60 (2d Cir. 1991), upon which the Defendants place considerable reliance. The plaintiffs in Chesley were American attorneys who had previously brought suits in federal court on behalf of Indian victims of the Bhopal gas leak disaster in India. These cases were consolidated in the Southern District of New York, and then dismissed on grounds of forum non conveniens. Litigation in India eventually resulted in a $ 470 million settlement in favor of the Bhopal victims. Pursuant to the settlement agreement and at the direction of the Supreme Court of India, Union Carbide deposited the money into a settlement fund in an Indian Bank. Id. at 63. Although under the terms of the settlement agreement the Indian Supreme Court managed the disbursement of funds, the plaintiffs nevertheless brought suit in federal court requesting that the court: (1) order Union Carbide to submit to the district court a plan for the fund's distribution; and (2) compensate the lawyers in the Southern District litigation from that fund. Id. at 66. Ultimately, the Second Circuit dismissed the case under the Princess Lida doctrine. Id. at 67.
In contrast, this case does not necessarily require the Court to exert control over property already under the control of the Swiss District Court. Consider, for instance, Ms. Madanes' RICO claims, which seek treble damages for racketeering acts. All of the Defendants here are potentially liable, yet aside from Pablo, no other Defendant has even a fraction of his assets under attachment in Switzerland. Moreover, even with respect to Pablo's liability, the Plaintiff seeks to establish liability for a debt, not compel the relinquishment of specific, identifiable property in Switzerland. Indeed, although the Complaint asserts that stolen funds passed through Swiss accounts over which Pablo had control, it does not allege that such funds presently are in those same accounts.
Thus, no identifiable bar precludes this Court from rendering appropriate relief to Ms. Madanes while still respecting the integrity of the Swiss action. See Central States, 600 F.2d at 675 n.7 (holding that where prior state court had in rem jurisdiction, district court could maintain in personam jurisdiction and simply deny requests for conflicting in rem relief because "district court is fully capable of preventing inappropriate conversion of the suit to a proceeding truly in rem"); cf. United States v. $ 3,000,000 Obligation, 810 F. Supp. 116, 117-18 (S.D.N.Y. 1993) (collecting cases and explaining that court exercising jurisdiction second does not lose powers to make orders which do not conflict with authority of first court). In short, absent the flawed presumption that payment of a judgment here would necessarily involve recourse to Pablo's Swiss assets, the Princess Lida doctrine is inapplicable.
F. International Comity
The Defendants further contend that principles of comity counsel dismissal of this action in favor of the Swiss proceeding. The Court is unpersuaded.
The Supreme Court has defined comity as:
the recognition which one nation allows within its Territory to the legislative, executive, or judicial acts of another nation, having due regard both to international duty and convenience, and to the rights of its own citizens or of other persons who are under the protection of its laws.
Hilton v. Guyot, 159 U.S. 113, 164, 40 L. Ed. 95, 16 S. Ct. 139 (1895).
The general rule of comity is that the domestic court should exercise jurisdiction concurrently with the foreign court. China Trade & Dev. Corp. v. M.V. Choong Yong, 837 F.2d 33, 36 (2d Cir. 1987). If a judgment is reached first in the foreign court, it may then be plead as res judicata in the domestic court. Id. Absent a final judgment from another court, surrender of jurisdiction is justified only under exceptional circumstances. Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 25-26, 74 L. Ed. 2d 765, 103 S. Ct. 927 (1983). Moreover, surrender necessarily entails a finding that the parties and issues in both litigations are the same or sufficiently similar such that the doctrine of res judicata may be asserted. Herbstein v. Bruetman, 743 F. Supp. 184, 188 (S.D.N.Y. 1990).
The Swiss District Court has not yet reached a final judgment that can be plead as res judicata here. Indeed, those proceedings remain in their preliminary stages. (Russenberger Decl. P 11.) Accordingly, this Court may not dismiss the Plaintiff's Complaint absent a showing of exceptional circumstances. See, e.g., Herbstein, 743 F. Supp. at 188 (finding Argentine case was at preliminary stage where formal investigation into possible misappropriation had just begun and there had not yet been any determination of actual wrongdoing).
The Defendants have failed to make a showing of exceptional circumstances. Neither the parties nor the issues are identical or substantially similar. The Swiss action identifies Pablo as the lone Defendant; by contrast, Ms. Madanes names ten Defendants in this action. See id. In addition, this action concerns activity that is not part of the Swiss action. Consider, for instance, the allegations concerning $ 7.5 million worth of fraudulent transfers from the New York Account, which are not part of the Swiss complaint The mere fact that "a number of similar issues need to be resolved" in both actions does not mandate dismissal; indeed, this is so even where "the circumstances out of which the two actions arise are identical." Eskofot A/S v. E.I. DuPont De Nemours & Co., 872 F. Supp. 81, 90 (S.D.N.Y. 1995) (holding that although underlying circumstances of two actions were identical, dismissal was not warranted where American company was not party to English action and plaintiff has stated claims relating to American antitrust law that would not be resolved in English action). The Court further notes that any determination by the Swiss District Court regarding Pablo's liability on Ms. Madanes' contractual claim would not dispose of the RICO claims in this action. For example, determining that Pablo is guilty on the contractual claim does not answer the question of whether he managed an international conspiracy; nor does a finding of innocence necessarily mean that no such conspiracy existed, especially among the other Defendants. See id.; Herbstein, 743 F. Supp. at 188 (holding that claim of misappropriation was distinguishable from claim of fraudulent inducement, even though underlying facts were same).
The principal cases upon which the Defendants rely are highly distinguishable. For instance, the Swiss action does not involve liquidation or bankruptcy proceedings of international significance. See, e.g, In re Maxwell Comm. Corp., 93 F.3d 1036, 1039-40 (2d Cir. 1996) (deference to English proceeding appropriate because death of media mogul Robert Maxwell had already resulted in establishment of "a unique judicial administration of the debtor corporation by parallel and cooperative proceedings in the courts of the United States and England aimed at harmonizing the laws of both countries and also aimed at maximizing the benefits to creditors and the prospects of rehabilitation"); Allstate Life Ins. Co. v. Linter Group Ltd., 994 F.2d 996, 998 (2d Cir.) (recognizing that comity is particularly important in context of foreign bankruptcy proceedings), cert. denied, 510 U.S. 945, 126 L. Ed. 2d 334, 114 S. Ct. 386 (1993). Nor does this litigation involve a scenario like that present in Caspian Invs., Ltd. v. Vicom Holdings, Ltd., 770 F. Supp. 880 (S.D.N.Y. 1991). There, after commencing suit abroad against a parent corporation, the plaintiff then filed suit in district court against the parent and its subsidiary. The court found that both actions "involved interpretation of the same loan agreements"; the plaintiff alleged exactly "the same violations by both defendants of identical contractual obligations and [sought] the same relief"; and most importantly, the defendant not named in the first action "agreed to submit to the jurisdiction of the Irish court and to be bound by any determination by that court." Id. at 884. Not only do Ms. Madanes' cases lack the similarity evidenced in Caspian, but no jurisdictional proffer has been made here. This latter fact is significant because the Swiss District Court lacks personal jurisdiction over several key Defendants in this action. (Baumgartner Decl. P 3.) Accordingly, the Swiss District Court would be unable to grant complete relief as against all the Defendants. See id. (stating that adequacy of relief available in alternative forum is important consideration).
One final factor weighs in favor of the Plaintiff. Ms. Madanes claims that she sought the attachment orders against the Madanes Brothers as a prudential measure to insure that funds were available to satisfy a subsequent judgment. Under Swiss law, a plaintiff must commence an action within ten days or risk automatic annulment of the attachment order. (Baumgartner Decl. PP 10-11.) Given the jurisdictional uncertainties the Plaintiff faced in commencing this action, the Court finds credible Ms. Madanes's claim that her litigation strategy was motivated in part by prudential concerns, especially in light of the manifestly Byzantine manner in which the Madanes Brothers allegedly have deployed the family assets. As was explained in an analogous context:
[The plaintiff] did reserve his rights to seek compensatory damages for [the defendant's] alleged wrongdoings merely to prevent the statute of limitations from expiring in Argentina. It was a "prudent" measure to ensure that [the plaintiff] would be able to recover some damages in the event that his planned suit in the United States was dismissed on procedural grounds. Such prudential filings cannot provide the basis for a finding of "duplicative litigation."
Herbstein, 743 F. Supp. at 188 (citing Department Econ. Dev. v. Arthur Andersen & Co., 683 F. Supp. 1463, 1485 (S.D.N.Y. 1988)). In light of the foregoing, the Defendants' motion for dismissal on grounds of international comity is denied.
G. Forum Non Conveniens
Finally, the Defendants maintain that this case should be dismissed on grounds of forum non conveniens, asserting that Argentina is a superior forum. Alternatively, the Defendants argue that Switzerland is a superior forum. In both instances, the Court disagrees.
Application of the doctrine of forum non conveniens requires a two-step inquiry. First, the district court must ascertain whether there exists an alternate forum that has jurisdiction to hear the case. Second, it must determine "the forum that will be most convenient and will best serve the ends of justice." Peregrine Myanmar Ltd. v. Segal, 89 F.3d 41, 46 (2d Cir. 1996). This latter assessment requires the court to weigh a variety of private and public considerations, as set forth in Gulf Oil Corp. v. Gilbert, 330 U.S. 501, 508-09, 91 L. Ed. 1055, 67 S. Ct. 839 (1947).
In weighing the Gilbert factors, the court "starts with a presumption in favor of the plaintiff's choice of forum, especially if the defendant resides in the chosen forum." Peregrine, 89 F.3d at 46. The defendant can overcome this burden only by establishing that the Gilbert factors, both private and public, tilt strongly in favor of the alternative forum. Id. The private factors include: the relative ease of access to sources of proof; the availability of compulsory process for attendance of unwilling witnesses; the cost of obtaining attendance of willing witnesses; and all other practical problems that could make the trial protracted, difficult or costly, such as choice of law issues and the need to translate documents. The public factors include: the administrative difficulties stemming from court congestion; the local interest in having controversies decided at home; the interest in having the trial in a forum that is familiar with the law governing the action; the avoidance of unnecessary problems in conflict of laws or in the application of foreign law; and the unfairness of burdening citizens in an unrelated forum with jury duty. Gilbert, 330 U.S. at 508-09; Murray v. British Broad. Corp., 81 F.3d 287, 293-94 (2d Cir. 1996).
At the outset, the Defendants' position is flawed due to their failure to establish that an adequate alternate forum exists. "Ordinarily, a foreign forum will be adequate when the defendant is subject to the jurisdiction of that forum." R. Maganlal & Co. v. M.G. Chem. Co., 942 F.2d 164, 167 (2d Cir. 1991). This requirement refers to all defendants, not just the "primary" ones. Watson v. Merrell Dow Pharms., Inc., 769 F.2d 354, 357 (6th Cir. 1985) (finding that district court erred in characterizing corporate defendants as primary defendants and thus dismissing litigation against other named defendants, who were not subject to jurisdiction of alternate forum, due to their "lesser" status). Here, the Plaintiff claims that an Argentine court would be unable to assert personal jurisdiction over any Defendants other than the Madanes Brothers. (Gebhardt Decl. P 5.) The Defendants dispute this assertion, and both sides have submitted affidavits purporting to demonstrate the veracity of their respective positions (Id.; see also Fiorito Reply Decl. PP 3-5.)
Given the ramifications of this dispute, the Court concludes that it would be improper to dismiss the case absent a proffer by all of the Defendants that they would be willing to consent to the jurisdiction of the Argentine court, as well as agree to satisfy any judgment reached by that court. Cf. Mercier v. Sheraton Intern. Inc., 935 F.2d 419, 425-26 (1st Cir. 1991) (finding that affidavit of Turkish professor, which was inconclusive on question of whether Turkey recognized claim for breach of contract, was insufficient to establish that Turkey was an adequate alternative forum). No such proffer has been made. Nor, we note, would one alter this Court's conclusion that dismissal is unwarranted because, as demonstrated below, the Gilbert factors do not strongly favor the Argentine forum.
The private interest factors do not tilt strongly in favor of Argentina. First, regarding access to sources of proof, the Court finds the testimony of witnesses in New York is likely to be as important as the testimony of witnesses located in Argentina. Specifically, although the Madanes Brothers and various of their advisers reside in Argentina, Ortoli, a central figure in establishing the validity of transactions concerning the family's assets, is located in New York, as is everyone associated with the R&B and RKB firms. Second, most of the crucial legal documents appear to be located in New York, as are witnesses who can authenticate them.
Third, the travel costs for witnesses will be significant regardless of the location of this trial, given that important witnesses are located in the United States, Argentina and even Switzerland. Fourth, the necessity for extensive translation will exist both in Argentina and the United States; again, key documents and witnesses are found in both countries. Fifth, although the power-of-attorney issue appears to require application of Argentine law, other issues, such as the question of whether Ortoli satisfied his fiduciary responsibilities, will require the application of New York law. Even the Defendants appear to concede the existence of choice-of-law problems regardless of where the trial occurs; for instance, one defense expert explained that even though the Swiss action invokes contractual claims under Argentine law, "because [some of] the assets are located in Switzerland, Swiss law may govern certain of the legal issues in the action." (Russenberger Decl. P 13.) In sum, then, the Court believes that this trial will be difficult regardless of where it takes place, and thus the Gilbert private factors do not weigh strongly in favor of the Defendants. See, e.g., Peregrine, 89 F.3d at 46-47 (denying forum non conveniens motion in part because critical documents were located in New York and witnesses would be forced to travel regardless of where trial took place); Herbstein, 743 F.3d at 189 (finding that existence of American defendants, who committed acts of fraud in this country, weighed heavily in favor of maintaining action in United States); see also Maganlal, 942 F.2d at 168-89 (holding that need to apply foreign law was not dispositive factor, especially where key evidence regarding production and condition of goods was located in New York).
Neither do the public interest factors tilt strongly in favor of Argentina. First, a case "may not be dismissed simply because New York is a congested center of litigation, and defendants have made no showing that New York is prohibitively congested." Id. at 189 & n.4 (noting that Argentina is no less congested a legal forum than New York, and citing Argentine case in support of proposition that congestion in Argentine judicial system has even led to cases lasting for decades). Second, the United States "has a definite interest in correcting wrongs committed on its soil, and in deterring similar actions by other individuals and corporations." Id. at 188. Third, although the Plaintiff is from Argentina, that alone does not suggest that New York jurors do not have an interest in hearing this case; on the contrary, New York jurors have a strong interest in determining whether members of that state's local bar have abdicated their professional responsibilities. Fourth, as explained above, the choice-of-law issue may require application of foreign law regardless of where this case is litigated. Thus, the public interest factors do not weigh strongly in favor of Argentina. See, e.g., Peregrine, 89 F.3d at 47 (finding that New York had strong interest since several defendants lived there and key events occurred there); Herbstein, 743 F. Supp. at 190-91 (same); see also Maganlal, 942 F.2d at 169 (overruling district court's dismissal of action to India after determining that New York had significant interest in hearing breach of contract case where defendant was New York corporation and action was for breach of contract). Accordingly, even bearing in mind that a foreign plaintiff is not entitled to as much deference as a domestic plaintiff, Murray, 81 F.3d at 290, the Court believes that dismissal on grounds of forum non conveniens is unwarranted.
For the reasons stated above, the RICO § 1962(c) claim against Ortoli, R&B, RKB and Baltimore is dismissed. In all other respects, the Defendants' motions are denied. With regard to future proceedings, the parties are directed to confer with each other and submit a proposed discovery schedule by November 10, 1997.
Dated: October 8, 1997
New York, New York
Leonard B. Sand