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United States District Court, Southern District of New York

July 22, 2003


The opinion of the court was delivered by: Shira Scheindlin, District Judge


Hernan Rey-Willis brings two causes of action against Citibank, N.A. ("Citibank") for damages caused by Citibank's actions in connection with the conversion of Rey-Willis' United States dollars to Argentinian pesos. Rey-Willis alleges that Citibank engaged in commercial bad faith when it influenced the adoption of the unconstitutional measures that led to the conversion of Rey-Willis' accounts. In addition, Rey-Willis claims that Citibank employed deceptive business practices by failing to disclose certain information before he transferred funds from New York to Argentina. Citibank now moves to dismiss the action for improper venue pursuant to Rule 12(b)(3) of the Federal Rules of Civil Procedure. In the alternative, Citibank moves to dismiss both causes of action for failure to state a claim pursuant to Rule 12(b)(6). For the reasons set forth below, Citibank's motion to dismiss is granted. [ Page 2]


A. The Parties*fn1

Rey-Willis is a citizen of Argentina and a resident of Buenos Aires. Complaint ("Compl.") ¶ 12. Citibank, a national banking association with its principal place of business in New York, New York, is the consumer and corporate banking arm of the financial services company Citigroup, Inc. Id. ¶¶ 13, 14. Citibank operates in over 40 countries, including Argentina ("the Argentina Branch"). Id. ¶ 15. The Argentina Branch is a branch of Citibank; it is not a subsidiary of Citibank. Id. ¶ 16.

B. The Accounts and Transfer

In 1994, Rey-Willis opened a savings account in the Argentina Branch. Id. ¶ 49. Approximately three years later, in 1997, Rey-Willis opened an account with Citibank in New York. Id. Rey-Willis has maintained his accounts with Citibank since opening them and has regularly transferred money between his New York account and his Argentina account. Id. ¶¶ 18, 19. Rey-Willis transferred U.S. dollars to the Argentina Branch account with the expectation that he would be able to withdraw that money in U.S. dollars or transfer the funds back to his U.S. account. Id. ¶ 20.

Banks in Argentina offer a choice of either a U.S. [ Page 3]

dollar account or an Argentinean peso account. Id. ¶ 21. U.S. dollar accounts offer a lower interest rate in recognition of the lower risk level presented by the currency. Id. Despite the lower interest rate, Rey-Willis chose a dollar account for the ease of transferring funds between his two Citibank accounts and the stability of U.S. currency. Id. ¶ 22.

In early October 2001, Argentina passed a law preventing the confiscation of deposits. Id. ¶¶ 26. Later that month, after the law was passed, Rey-Willis transferred $950,000 from his New York account to his savings account in Argentina. Id. ¶ 27. The money was invested in a fixed-term deposit ("CD") denominated in U.S. dollars for six months. Id. ¶ 27. The CD was to mature on April 2, 2002. Id. ¶ 28.

C. El Corralito and Citibank's Conversion

In November 2001, there was a run on the banks in Argentina, with investors withdrawing $1.8 billion in U.S. dollars. Id. ¶ 29. In response, the Argentinean government passed a series of executive orders in December 2001, known as "El Corralito." Id. ¶ 30. These orders included a temporary freeze on withdrawals that limited the weekly withdrawal amount. Id. In January 2002, the new Argentinean government devalued the peso and converted the dollar denominated bank deposits and loans into pesos ("pesofication") at a rate of 1.4 pesos to one U.S. dollar. Id. ¶ 31. [ Page 4]

In February 2002, Rey-Willis contacted the Argentina Branch, requesting that he receive the full amount of his CD on time and in the agreed upon currency. Id. ¶ 33. A few weeks later, Rey-Willis received a letter from the Argentina Branch stating that Citibank would not be able to satisfy his request due to the measures taken by the Argentinean government. Id. ¶ 34. In March, 2002, Rey-Willis received a written notice from the Argentina Branch that his $950,000 CD had been converted to pesos, and would be paid in 24 installments beginning September 2003, instead of April 2002 as originally agreed. Id. ¶¶ 35, 46. Rey-Willis never authorized Citibank to make these changes. Id. ¶ 46.

Initially, with the devaluation of the peso, Rey-Willis lost approximately 30 percent of the value of his deposit in the Argentina Branch. Id. ¶ 36. The peso has, however, continued to devalue, losing over 70 percent of its value. Id. ¶ 37. The exchange rate is currently 3.5 to 1. Id. ¶ 46. As a result of Citibank's refusal to return his U.S. dollars, Rey-Willis has lost approximately 60 percent of the value of his Argentina Branch account, approximately $500,000 plus interest. Id. ¶¶ 37, 46. In addition, Rey-Willis suffered the loss of use of his money due to the extended time frame for the pay out of the CD. Id. ¶ 46. Rey-Willis was never informed that he would be unable to transfer money between his accounts. Id. ¶ 47. [ Page 5]

In February 2002, the Argentinean Supreme Court held that the partial banking freeze was unconstitutional and has loosened the freeze for some accounts. Id. ¶ 38. However, account holders' funds remained returnable in pesofied installments over several years. Id. Then, in March, 2003, the Argentinean Supreme Court held that the pesofication of accounts was an unconstitutional violation of property rights. Id. ¶ 39. Citibank, however, has not rescinded its actions in the wake of the court's decision. Id.

D. Allegations of Wrongdoing

Rey-Willis alleges that Citibank influenced the Argentine government to pass the "El Corralito" orders through a scheme of lobbying and possible bribes by its New York employees. Id. ¶ 58. He has also alleged that Citibank had inside information that the Argentinean government was going to impose limits on bank withdrawals in Argentina. Id. ¶ 41. In fact, Citibank is being investigated for funneling billions of dollars out of Argentina to protect some of its bigger clients in the days prior to the country's financial crisis. Id. ¶ 42. Furthermore, Citibank has refused to honor the remaining, smaller dollar deposit accounts in Argentina, choosing instead to pesofy and freeze the accounts. Id. ¶ 43. Citibank also protected its larger clients by lobbying for, and succeeding in, allowing its "Global Securities" clients to maintain cash accounts when [ Page 6]

Argentinean authorities required all bank customers to close their savings accounts and transfer assets to new "special" accounts. Id. ¶ 44. Unlike Citibank, other banks in Argentina chose not to freeze and/or convert U.S. dollar accounts and suffered no penalties from that decision. Id. ¶ 45. In contrast, Citibank's action exploited an opportunity that inured to Citibank's economic benefit — resulting in harm to Rey-Willis and the unjust enrichment of Citibank.*fn2 Id.

E. The Claims

On March 20, 2003, Rey-Willis brought two causes of action against Citibank.*fn3 First, Rey-Willis alleges that Citibank engaged in commercial bad faith by influencing the Argentine government to pass the "El Corralito" orders and by protecting the accounts of some, but not all, of its customers when it transferred billions of dollars out of Argentina in the days leading up to the banking crisis. Id. ¶¶ 58, 59. Second, Rey-Willis contends that Citibank employed deceptive business [ Page 7]

practices by selling fixed term deposits with the knowledge that the Argentinean government was going to enact the "El Corralito" orders; Rey-Willis further contends that Citibank knew that the orders would adversely affect the funds he transferred to the Argentina Branch. Id. ¶¶ 66, 67. Rey-Willis asserts that Citibank's acts, or failure to act, took place in New York and constituted an unlawful deceptive act or practice under Article 22-A, section 349 of the General Business Law of New York ("GBL"). Id. ¶ 69.

F. Defendant's Motions to Dismiss

Citibank has moved to dismiss for improper venue pursuant to Rule 12(b)(3), arguing that this action is precluded by the forum selection clauses contained in Rey-Willis' contracts with the Argentina Branch. In the alternative, Citibank moves to dismiss both causes of action for failure to state a claim pursuant to Rule 12(b)(6), asserting that Rey-Willis' claims are deficient as a matter of law as the Complaint fails to plead fraudulent behavior with particularity as required by Federal Rule of Civil Procedure 9(b).

In response, Rey-Willis argues that the forum selection clauses do not apply to the acts that took place in New York prior to the transfer of his funds to Argentina. Accordingly, Rey-Willis contends that this action has been brought in the proper venue. Rey-Willis further argues that his claims of [ Page 8]

commercial bad faith and deceptive business practices are not "allegations of fraud" and therefore need not meet the heightened pleading requirements of Rule 9(b). As such, Rey-Willis asserts that his claims have been sufficiently pled in accordance with Rule 8.


A. Motion to Dismiss Pursuant to Rule 12(b)(3)

When considering a motion to dismiss for improper venue pursuant to Rule 12(b)(3), the Court must accept the facts alleged in the complaint as true and draw all reasonable inferences in the plaintiff's favor. See Central National-Gottesman, Inc. v. M.V. "GERTRUDE OLDENDORF", 204 F. Supp.2d 675, 677 (S.D.N.Y. 2002) (citation omitted). See also Fed.R.Civ.P. 12(b)(3). In making such a determination, courts may consider materials outside of the pleadings. See Brennan v. Phyto-Riker Pharmaceuticals, Ltd., No. 01 Civ. 11815, 2002 WL 1349742, at *1 n. 2 (S.D.N.Y. June 20, 2002).

Plaintiff bears the burden of proving that venue is proper. See Central National-Gottesman, 204 F. Supp.2d at 677 (citation omitted). When a plaintiff brings suit in a forum other than the one designated by a forum selection clause, the plaintiff must make a strong showing in order to overcome the presumption of enforceability of the clause. See New Moon Shipping Co., LTD. v. MAN B & W Diesel AG, 121 F.3d 24, 29 (2d. [ Page 9]

Cir. 1997). Failure to meet this preliminary burden may foreclose suit in the venue of plaintiff's choice. See id. In most instances, when a forum selection clause employs "mandatory venue language . . . the clause will be enforced." John Boutari & Sons, Wines & Spirits, S.A. v. Attiki Importers & Distrib., Inc., 22 F.3d 51, 53 (2d Cir. 1994).

B. Motion to Dismiss Pursuant to Rule 12(b)(6)

"Given the Federal Rules' simplified standard for pleading, `[a] court may dismiss a complaint only if it is clear that no relief could be granted under any set of facts that could be proved consistent with the allegations.'" Swierkiewicz v. Sorema N.A., 534 U.S. 506, 514 (2002) (quoting Hishon v. King & Spalding, 467 U.S. 69, 73 (1984)). Thus, a plaintiff need only plead "`a short and plain statement of the claim' that will give the defendant fair notice of what the plaintiff's claim is and the grounds upon which it rests." Conley v. Gibson, 355 U.S. 41, 47 (1957). A plaintiff need not, in other words, plead the elements of a claim. See In re Initial Public Offering Sec. Litig., 241 F. Supp.2d 281, 323 (S.D.N.Y. 2003) ("Rule 8(a) does not require plaintiffs to plead the legal theory, facts or elements underlying their claim.").

When deciding a motion to dismiss pursuant to Rule 12(b)(6), courts must accept all factual allegations in the complaint as true and draw all reasonable inferences in [ Page 10]

plaintiff's favor. See Chambers v. Time Warner, Inc., 282 F.3d 147, 152 (2d Cir. 2002). At the motion to dismiss stage, the issue "`is not whether a plaintiff is likely to prevail ultimately, but whether the claimant is entitled to offer evidence to support the claims. Indeed it may appear on the face of the pleading that a recovery is very remote and unlikely but that is not the test.'" Phelps v. Kapnolas, 308 F.3d 180, 184-85 (2d Cir. 2002) (per curiam) (quoting Chance v. Armstrong, 143 F.3d 698, 701 (2d Cir. 1998)). The task of the court in ruling on a Rule 12(b)(6) motion is "`merely to assess the legal feasibility of the complaint, not to assay the weight of the evidence which might be offered in support thereof.'" Pierce v. Marano, No. 01 Civ. 3410, 2002 WL 1858772, at *3 (S.D.N.Y. Aug. 13, 2002) (quoting Saunders v. Coughlin, No. 92 Civ. 4289, 1994 WL 98108, at *2 (S.D.N.Y. Mar. 15, 1994)).

"However, Rule 9(b) requires that `circumstances constituting fraud . . . be stated with particularity.'" Wight v. Bankamerica Corp., 219 F.3d 79 (2d Cir. 2000) (quoting Fed.R.Civ.P. 9(b)). The Second Circuit has construed Rule 9(b) to require a complaint alleging fraud to "allege the time, place, speaker and sometimes even the content of the alleged misrepresentation." Ouaknine v. MacFarlane, 897 F.2d 75, 79 (2d Cir. 1990) (citations omitted). "Malice, intent, knowledge, and other condition of mind of a person may be averred generally." [ Page 11]

Fed.R.Civ.P. 9(b). Furthermore, Rule 9(b) "must be read together with rule 8(a)." Ouaknine, 897 F.2d at 79 (citations omitted).


A. Venue in This Court Is Proper

Citibank relies on two forum selection clauses in bringing its motion to dismiss for lack of venue. First, the forum selection clause within the Argentina Branch "Application Terms and Conditions" contract — which Rey-Willis signed in 1996*fn4 — requires that:

All accounts and their movements are governed by standards of BCRA, laws or regulations, present or future, of proper authorities of Argentina and subject to the exclusive jurisdiction of the Courts of Argentina. . . . Client waives any right to proceed against or obtain payment from or at any office, branch or affiliate of Citibank outside Argentina.
App. Terms at 3. (emphasis added). If this clause is controlling, Rey-Willis is precluded from suing in New York. Second, the CD, which Rey-Willis purchased after transferring his money out of his New York account, is governed by a contract that includes an Argentina forum selection clause and an express waiver of any right to seek payment of the CD outside of [ Page 12]

Argentina.*fn5 See Defendant's Memorandum in Support of Defendant's Motion to Dismiss ("Def. Mem.") at 3.

1. Validity of Forum Selection Clauses

Since its decision in M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 10 (1972), the United States Supreme Court has [ Page 13]

consistently held that forum selection clauses are presumptively valid and enforceable. See also Mediterranean Shipping Co. S.A. Geneva v. POL — Atlantic, 229 F.3d 397, 405 n. 14 (2d Cir. 2000) ("[T]here is a heavy presumption in favor of [forum selection] clauses. . . ."); Bear, Stearns & Co. v. Bennett, 938 F.2d 31, 32 (2d Cir. 1991) ("In the almost two decades that have elapsed since the Supreme Court decided [The Bremen], the prima facie validity of forum-selection clauses has been recognized consistently by both the Supreme Court and this court."). Later, in Carnival Cruise Lines, Inc. v. Shute, 499 U.S. 585 (1991), the Supreme Court held forum selection clauses in standard-form contracts to be enforceable, provided that the clauses are "reasonable" and survive "judicial scrutiny for fundamental fairness." Id. at 591, 595. Accordingly, forum selection clauses should be upheld unless a party "could clearly show that enforcement would be unreasonable and unjust, or that the clause was invalid for such reasons as fraud or overreaching." The Bremen, 407 U.S. at 17.

Rey-Willis is not contesting the validity of the forum selection clauses. Rather, he argues that they are inapplicable to the claims he is asserting. See Pl. Mem. at 5. The only question, then, is whether the claims raised in this lawsuit fall within the scope of the instant forum selection clauses. [ Page 14]

2. Applicability of the Forum Selection Clauses

Rey-Willis maintains that the Argentinean contract does not control his New York account, which is governed by a separate contract.*fn6 See Pl. Mem. at 1 n. 2. He then argues that Citibank's wrongful actions in New York arose in connection with activities in his New York account. See id. at 1, 5.

Rey-Willis' claims for commercial bad faith and deceptive business practices arise from actions taken by New York Citibank employees prior to his transferring of funds from his New York account. See id. at 2. These claims arise from alleged tortious behavior in connection with Citibank's handling of Rey-Willis' New York account. Accordingly, the terms of Rey-Willis' Argentinean account contract, including the forum selection clause, do not apply.

Furthermore, the forum selection clause contained in the CD contract with the Argentina Branch only governs claims for the payment of the fixed term deposit. See CD Certificate. Neither of Rey-Willis' claims seeks payment of his CD. Rather, [ Page 15]

Rey-Willis seeks damages arising from Citibank's tortious activities prior to the purchase of the CD.

Because neither forum selection clause governs these claims, Rey-Willis is not barred from suing in New York. Accordingly, the motion to dismiss based on a claim of improper venue is denied.

B. Rey-Willis Fails to State a Claim Under Rule 9(b)

Citibank contends that both causes of action must be pled with particularity under Rule 9(b). See Def. Mem. at 11, 13. Citibank further argues that Rey-Willis' claims fail to meet this heightened pleading standard and therefore are deficient as a matter of law. See id.

1. Commercial Bad Faith

Under New York law, a claim for commercial bad faith lies "[w]here a depository bank acts dishonestly — where it has actual knowledge of facts and circumstances that amount to bad faith, thus itself becoming a participant in a fraudulent scheme. . . ." Prudential-Bache Sec., Inc. v. Citibank, N.A., 539 N.Y.S.2d 699, 706 (1989) (emphasis added). Because commercial bad faith requires fraudulent activity, "[a] commercial bad faith claim is subject to the requirement of Rule 9(b) that the circumstances of the alleged fraud be alleged with particularity." Nigerian Nat'l Petroleum Corp. v. Citibank, N.A., No. 98 Civ. 4960, 1999 WL 558141, at *7 (S.D.N.Y. July 30, [ Page 16]

1999) (citing Williams v. Bank Leumi Trust Co., No. 96 Civ. 6695, 1998 WL 397887, at *9 (S.D.N.Y. July 15, 1998)).

Rey-Willis fails to state a claim for commercial bad faith because he makes no allegation that Citibank has engaged in any "fraudulent scheme." In fact, Rey-Willis specifically concedes that he "did not allege fraud on the part of the defendant." See Pl. Mem. at 9. Rather, as support for his commercial bad faith claim, Rey-Willis alleges that Citibank executives lobbied and possibly bribed the Argentine government to pass the "El Corralito" orders. Compl. ¶¶ 57, 58. Such allegations do not state a claim for fraud. See, e.g., Cougar Audio Inc. v. Reich, No. 99 Civ. 4498, 2000 WL 420546, at *7 (S.D.N.Y. April 18, 2000) (finding that an allegation of bribery is not an allegation of fraud); Benedict v. Amaducci, No. 92 Civ. 5239, 1995 WL 413206, at *10 (S.D.N.Y. July 12, 1995) (holding that plaintiff's bribery claim "need not satisfy the strict pleadings requirements of Rule 9(b), which applies only to fraud or mistake"). Because Rey-Willis has failed to allege that Citibank knowingly became a participant in a fraudulent scheme, he has failed to state a claim for commercial bad faith.

Even if Rey-Willis' claims of bribery did constitute fraudulent behavior, his conclusory allegations of commercial bad faith are insufficient under Rule 9(b). Rey-Willis' assertion that Citibank employees unlawfully influenced the Argentine [ Page 17]

government "[t]hrough a scheme of lobbying and possible bribes," Compl. ¶ 58, fails to allege the time, place, or speaker with any specificity. As such, Rey-Willis' commercial bad faith claim is not pled with sufficient particularity and therefore must be dismissed.

2. Deceptive Business Practices

Rey-Willis also claims that Citibank engaged in deceptive business practices. Citibank again argues that such a claim requires allegations of fraud and must therefore be pled with particularity in accordance with Rule 9(b).

The elements of a claim for deceptive business practices under section 349 of the GBL are: (1) an alleged practice that was misleading in a material respect; and (2) a resulting injury to the claimant. See P. Kaufmann, Inc. v. Americraft Fabrics, Inc., 232 F. Supp.2d 220 (S.D.N.Y. 2002). Section 349 is designed to address "broad consumer-protection concerns." Gaidon v. Mutual Life Ins. Co. of Am., 94 N.Y.2d 330, 343 (1999). Section 349 claims "have been aptly characterized as similar to fraud claims," but "are critically different" in one respect. Id. A plaintiff bringing claims under section 349 must, "at the threshold, charge conduct that is consumer oriented. . . . [D]efendant's acts or practices must have a broad impact on consumers at large." New York Univ. v. Cont'l Ins. Company, 87 N.Y.2d 308, 318 (1995); see also MaGee v. Paul Revere Life [ Page 18]

Ins. Co., 954 F. Supp. 582, 586 (E.D.N.Y. 1997) ("[T]he injury must be to the public generally as distinguished from the plaintiff alone."); Gaidon, 94 N.Y.2d at 343 ("As a threshold matter, in order to satisfy General Business Law § 349 plaintiff's claims must be predicated on a deceptive act that is `consumer oriented.'") (quoting Oswego Laborers' Local 214 Pension Fund v. Marine Midland Bank, N.A., 85 N.Y.2d 20, 24-25 (1995)). Although this requirement has been construed liberally, "`private contract disputes unique to the parties . . . [do] not fall within the ambit of the statute.'" New York Univ., 87 N.Y.2d at 320 (quoting Oswego, 85 N.Y.2d at 25).*fn7

A cause of action for deceptive business practices requires some form of fraudulent behavior. The first element of the tort — that the business practice must be misleading in a material aspect — speaks to the very nature of fraud.*fn8 As such, [ Page 19]

"[a] plaintiff must plead with specificity the allegedly deceptive acts or practices that form the basis of a claim under the Consumer Protection Act."*fn9 Pelman v. McDonald's Corp., 237 F. Supp.2d 512, 526 (S.D.N.Y. 2003). See also Sichel v. Unum Provident Corp., 230 F. Supp.2d 325, 330-31 (S.D.N.Y. 2002) (dismissing a section 349 claim where the pleading was "not supported by specific and detailed factual allegations") (internal quotation marks and citation omitted); Weaver v. Chrysler Corp., 172 F.R.D. 96, 100 (S.D.N.Y. 1997) ("In pleading a claim under the Consumer Protection Act, a Plaintiff is required to set forth specific details regarding the allegedly deceptive acts or practices."). Accordingly, Rey-Willis' claim for deceptive business practices must be pled in accordance with Rule 9(b).

Rey-Willis fails to meet the heightened pleading standard of Rule 9(b) as his allegations are stated in conclusory terms. Rey-Willis states that "[d]efendant engaged in deceptive acts or practices in the sale of fixed term deposits with the knowledge that the Argentinean government was going to enact the El Corralito orders." Compl. ¶ 65. He further alleges that, in October of 2001, "[d]efendant transferred money from Plaintiff's New York account to Argentina with the knowledge that Plaintiff [ Page 20]

was going to lose a substantial amount of the value of his deposit, as well as the use of that money." Id. ¶¶ 27, 67.

Although the Complaint indicates the approximate date, place, and content of Citibank's fraudulent omission, it fails to identify the persons who made the alleged misrepresentation. While one could speculate that Rey-Willis is alleging fraud against the particular persons who transferred his funds to Argentina, Rule 9(b) requires specific and detailed pleadings. See Harsco Corp v. Segui, 91 F.3d 337, 347 (2d Cir. 1996) ("when a complaint charges fraud, it must . . . identify the speaker"). Here, Rey-Willis broadly directs his claims of fraud at the "defendant." Compl. ¶¶ 27, 65, 67. Because he does not specifically identify, by name or otherwise, the identity of the persons who engaged in fraudulent activity, Rey-Willis fails to meet the heightened pleading standard of Rule 9(b). Accordingly, his claim for deceptive business practice must be dismissed.


For the reasons stated above, Citibank's motion to dismiss is granted. However, Rey-Willis is given leave to amend his claims in a manner consistent with the principles expressed in this Opinion. See Acito v. IMCERA Group, Inc., 47 F.3d 47, 55 (2d Cir. 1995) ("Leave to amend should be freely granted, especially where dismissal of the complaint was based on Rule 9(b).") (citation omitted). If Rey-Willis chooses to amend his [ Page 21]

pleading, the Amended Complaint must be served no later than August 18, 2003. If an Amended Complaint is not filed and served by that date, the Clerk of the Court is directed to close this case. If an Amended Complaint is filed, a conference is scheduled for August 25, 2003 at 4:30.


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