The opinion of the court was delivered by: GEORGE DANIELS, District Judge
MEMORANDUM OPINION & ORDER
Plaintiffs bring suit alleging several claims under common law,
breach of contract and a violation of the Racketeer Influenced
and Corrupt Organizations Act (RICO), 18 U.S.C. § 1964 et. seq.
This Court previously dismissed the suit against defendants
Pricewaterhouse Coopers LLP ("PWC") and Arthur Andersen LLP
("Andersen") pursuant to Federal Rule of Civil Procedure 12(b)(6)
and 12(b)(7). Nuevo Mundo Holdings v. Pricewaterhouse Coopers
LLP, 2004 U.S. Dist. LEXIS 780 (S.D.N.Y. Jan. 22, 2004). The
remaining defendant Luis Cortavarria Checkley ("Checkley") now
moves to dismiss pursuant to Federal Rule of Civil Procedure
12(b)(1), 12(b)(2), 12(b)(6), 12(b)(7), and 19. For the reasons
stated below, the action is dismissed for lack of subject matter
jurisdiction and lack of personal jurisdiction.
Plaintiffs Nuevo Mundo Holdings S.A., et al. are the foreign
shareholders and directors of Banco Neuvo Mundo S.A. ("Nuevo
Mundo"). Defendant Checkley is the former Superintendent of
Banking and Insurance ("SBS") of Peru. The facts of the case are
as stated by this Court in Nuevo Mundo Holdings v.
Pricewaterhouse Coopers LLP, 2004 U.S. Dist. LEXIS 780, *2-5
(S.D.N.Y. Jan. 22, 2004). Plaintiffs allege that Checkley in his role as the superintendent of SBS conspired with
the Peruvian affiliates of defendants PWC and Andersen to seize
control of Neuvo Mundo. Based upon these allegations, plaintiffs
assert claims against Checkley for violations of RICO, fraud,
tortious interference, prima facie tort, and punitive damages.
Plaintiffs allege that Nuevo Mundo Holdings, S.A. is a
corporation organized under the laws of Panama. (Compl. ¶ 1.) The
remaining plaintiffs are Peruvian directors and investors of
Nuevo Mundo. Id. ¶¶ 2-10. There is no allegation that any of
the plaintiffs are United States citizens or reside in the United
States. Defendant Checkley was the Peruvian Superintendent of
Banking and Insurance from July 28, 2000 to June 23, 2002. Id.
¶ 13. He now resides in Maryland and works in Washington D.C.
(Checkley Decl. ¶ 2.)
A. Plaintiffs Have Failed to Establish Subject Matter
Defendant Checkley argues that this Court lacks subject matter
jurisdiction over this case. There are no longer any U.S.
entities in the case. The sole basis for subject matter
jurisdiction is founded upon the federal claim of RICO. Checkley
argues that because the complaint alleges that a foreign
defendant engaged in conduct violating RICO on foreign soil
against foreign victims, RICO does not apply. (Mot. to Dismiss
at 8-9.) Plaintiffs maintain that the application of the RICO
statute is appropriate because the actions of the defendant, as
Superintendent of SBS, had effects in New York since "New York
investors lost their investment, their notes payable in New
York." (Opp'n at 8.) Plaintiffs' sole allegation upon which they base federal
jurisdiction is their RICO claim against remaining defendant
Checkley. Plaintiffs allege that Checkley, working in concert
with dismissed defendants PWC and Andersen participated in a
pattern of racketeering activities and corrupt practices. (Mot.
to Dismiss at 8-9.) Plaintiffs' claims, however, involve foreign
acts by foreign parties in violation of foreign law and to the
detriment of foreign victims. Federal jurisdiction on this matter
is dependent, therefore, on finding that the United States civil
RICO statute should be applied in this case.
Plaintiffs, as parties "seeking to invoke the subject matter
jurisdiction of the district court," bears the burden of
demonstrating that there is subject matter jurisdiction in the
case. Scelsa v. City Univ. of New York, 76 F.3d 37, 40 (2d Cir.
1996). Federal courts "need not accept as true contested
jurisdictional allegations" in considering a motion to dismiss
for lack of subject matter jurisdiction under Federal Rule of
Civil Procedure 12(b)(1). Jarvis v. Cardillo, 1999 U.S. Dist.
LEXIS 4310, at *7 (S.D.N.Y. Apr. 5, 1999). A court may resolve
disputed jurisdictional facts by referring to evidence outside
the pleadings, including affidavits. See Zappai Middle E.
Constr. Co. v. Emerate of Abu Dhabi, 215 F.3d 247, 253 (2d Cir.
The RICO statute is silent as to any extraterritorial
application. See North South Fin. Corp. v. Al-Turki,
100 F.3d 1046, 1051 (2d Cir. 1996). Although "a corporate defendant that
is a foreign entity is not for that reason alone shielded from
the reach of RICO," the Second Circuit has acknowledged the
ambiguity as to the "character and amount of activity in the
United States that will justify RICO subject matter jurisdiction
over a foreign entity." Id. at 1052 (citing Alfadda v. Fenn,
935 F.2d 475, 479 (2d Cir. 1991)). While the Second Circuit has
not expressed a specific test for determining the extraterritorial applications of RICO, the court in North South
Fin. stated that the "ultimate inquiry is . . . whether
`Congress would have wished the precious resources of the United
States courts and law enforcement agencies to be devoted to
[foreign transactions] rather than leave the problem to foreign
countries.'" Id. (quoting Bersch v. Drexel Firestone, Inc.,
519 F.2d 974, 985 (2d Cir. 1975)). The Second Circuit has further
noted that "guidance [regarding the extraterritorial application
of RICO] is furnished by precedents concerning subject matter
jurisdiction for international securities transactions and
antitrust matters." Id.
The courts in this circuit have applied two alternative tests
derived from transnational and antitrust cases the "conduct"
and "effects" tests to determine the applicability of RICO in
extraterritorial cases. Id. at 1051-52 (affirming the district
court's dismissal of RICO action for lack of subject matter
jurisdiction for absence of U.S. conduct material to fraud.);
see also Nasser v. Andersen Worldwide Societe Coop., 2003
U.S. Dist. LEXIS 16710 (S.D.N.Y. Sept. 23, 2003); See also
Wiwa v. Royal Dutch Petroleum Co., 2002 U.S. Dist. LEXIS 3293
(S.D.N.Y. Feb. 28, 2002). Under the conduct test:
We entertain suits by aliens only where conduct
material to the completion of the fraud occurred in
the United States. Mere preparatory activities, and
conduct far removed from the consummation of the
fraud, will not suffice to establish jurisdiction.
Only where conduct "within the United States directly
caused" the loss will a district court have
jurisdiction over suits by foreigners who have lost
money through sales abroad.
North South Fin., 100 F.3d at 1052 (citing Psimenos v. E.F.
Hutton & Co., 722 F.2d 1041
, 1046 (2d Cir. 1983) (internal
The alternative effects test is applied in two distinct ways.
The first, derived from securities cases, finds that jurisdiction
over a predominantly foreign entity exists when the entity's activities have "substantial effects within the
United States." Id. at 1052. "Transactions with only remote and
indirect effects in the United States do not qualify as
substantial." Id. The "effect" must be a "direct and
foreseeable result" of the conduct alleged. Consol. Gold Fields
PLC v. Minorco, S.A., 871 F.2d 252, 261-62 (2d Cir. 1989). The
second version of the effects test borrowed from antitrust cases
finds that liability attaches when the extraterritorial conduct
is "intended to and actually does have an effect on United States
imports or exports which the state reprehends." North South
Fin., 100 F.3d at 1052 (citing United States v. Aluminum Co. of
America, 148 F.2d 416, 443-44 (2d Cir. 1945)).
In order to apply RICO extraterritorially, plaintiffs must
satisfy the conducts test or either of the effects
tests.*fn1 Plaintiffs do not allege any fact of U.S. conduct
"material to the completion of the fraud." The complaint contains
allegations about defendant's actions in Peru as the
Superintendent of SBS charging that defendant Checkley ordered
unscheduled, irregular, and unprecedented inspections of Nuevo
Mundo which were aimed "intentionally to negatively affect Nuevo
Mundo's reputation and viability in the banking community in
Peru, for the ultimate purpose of taking over the operations of
[Nuevo Mundo] and selling its assets while depriving its
shareholders of their interest." (Compl. ¶ 34.) Further,
plaintiffs allege that this irregular inspection was just one "of
many actions taken by SBS and other departments, commissions and
officials of the Peruvian Government" in its pursuit of the
control of the bank. Id. Additionally, plaintiffs argue that
the SBS, under defendant Checkley's direction, placed Nuevo Mundo under its administration prematurely, and not "based upon
objective criteria, but . . . as part of a fraudulent and
malevolent scheme perpetrated by SBS, and other officials of the
Peruvian Government then in power, in concert and conspiracy with
and aided and abetted by the defendants." (Compl. ¶ 38.)
Plaintiffs allege that the SBS issued rules regarding the selling
and liquidation of Nuevo Mundo that were in violation of the
rights of shareholders. (Compl. ¶¶ 45-6.) Plaintiffs also allege
abuse of power and fraudulent reporting of Nuevo Mundo's
financial situation, including directing "Andersen-Peru" to
revise audit reports on the bank that led to the "wrongful
takeover and sale or liquidation" of Nuevo Mundo. (Compl. ¶¶ 46,
49, 53, 55, 59, 62.)
The only allegations of any actions in the United States are
those alleged against the original defendants PWC and Andersen.
Plaintiffs allege that defendants PWC and Andersen, accounting
firms that operate in the United States, were "responsible and
liable for the wrongful and corrupt practices of their respective
Peruvian affiliates . . . in complicity with the wrongful and
illegal acts of certain officials and/or administrators of the
Peruvian government." (Compl. ¶¶ 11, 12, 14, 130.) Defendants PWC
and Andersen have been dismissed from the action. See Nuevo
Mundo Holdings v. Pricewaterhouse Coopers LLP, 2004 U.S. Dist.
LEXIS 780 (S.D.N.Y. Jan. 22, 2004). Plaintiffs' allegations, even
with the inclusion of the charges against the dismissed
defendants, are devoid of any specific, supporting facts that can
identify what conduct material to the fraud occurred in the
United States. In fact, all material conduct is alleged to have
occurred in Peru. These allegations are insufficient to justify
extraterritorial application of RICO. Plaintiffs also fail to sufficiently allege effects in the
United States resulting from defendant's conduct. Plaintiffs
allege that U.S. effects arose in only one manner: "the corrupt
activities . . . affected foreign and U.S. Commerce because . . .
many investors . . . were U.S. citizens and/or residents, and
some . . . promissory ...