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Dorchester Financial Securities, Inc. v. Banco Brj

January 24, 2012


The opinion of the court was delivered by: Kimba M. Wood, U.S.D.J.:


Plaintiff Dorchester Financial Securities, Inc. ("Dorchester")*fn1 brings this diversity action against Defendant Banco BRJ, S.A. ("BRJ") for breach of contract and fraud in connection with a letter of credit it alleges was extended to it by BRJ. BRJ moves to dismiss Dorchester's claims, arguing that: (1) this Court lacks personal jurisdiction over BRJ, pursuant to Federal Rule of Civil Procedure 12(b)(2) ("Rule 12(b)(2)"); (2) this Court lacks subject matter jurisdiction over the action, pursuant to Federal Rule of Civil Procedure 12(b)(1); and (3) Dorchester's claims are time-barred by the New York statute of limitations governing actions sounding in contract and fraud, such that they must be dismissed pursuant to Federal Rule of Civil Procedure 12(b)(6). For the following reasons, the Court GRANTS BRJ's motion to dismiss.

I. Background

A. Facts*fn2

BRJ is a foreign financial institution located in Rio de Janeiro, Brazil. (Compl. ¶ 2.) Dorchester is a Florida corporation with an office in New York. (Compl. ¶ 3.) Dorchester alleges that it was incorporated for the sole purpose of obtaining a letter of credit from BRJ, which would be used to "raise capital for an affiliated company to perform an insurance project." (Affirmation of TJ Morrow in Support of Pl.'s Opp. to Def.'s Mot. to Dismiss (hereinafter "Morrow Aff.") ¶ 2.) Dorchester states that it was first introduced to BRJ by a company called Africa Capital Partners Investments Limited ("ACP"), which offered to lend Dorchester certain of its assets as security for a $100 million letter of credit from BRJ, in return for a share of the capital Dorchester raised. (Morrow Aff. ¶ 4).

Dorchester, through an affidavit submitted by its accountant, Robert Cox ("Cox"), states that it was "concerned about [BRJ's] capitalization and assets relative to the proposed size of the letter of credit." (Decl. of Robert Cox in Supp. of Pl.'s Opp. to Def.'s Mot. to Dismiss (hereinafter "Cox Decl.") ¶ 3). Dorchester therefore requested a conference call with BRJ officers to discuss this issue, among others. (Morrow Aff. ¶ 4.) According to Dorchester, an ACP officer "arranged a conference call with a Mr. Quieroz and Mr. Alcazar, both [BRJ] officers." (Morrow Aff. ¶ 5.) During that call, Alcazar identified himself as the BRJ officer in charge of international banking. (Morrow Aff. ¶ 5.) He "discussed [BRJ's] willingness to issue the letter of credit but that the fee must be paid in advance." (Id.) Alcazar stated that they were "willing to hold ACP assets as security to issue the letter of credit . . . . [because] ACP accounts were substantial" and "[BRJ] had the necessary comfort from the relationship to act in that way." (Id.) The man who identified himself as Quieroz stated that he was "a [BRJ] board member as well as an officer." (Id. at ¶ 6). Quieroz "conducted himself like Mr. Alcazar was in charge and running the deal," and "at no time did he call into question Mr. Alcazar's authority as the chief international officer." (Id.)

Thereafter, Dorchester decided to move forward with the transaction on the condition that the parties sign a letter agreement ("the Agreement"). (Id. at ¶ 7.) ACP drafted the Agreement, which Dorchester reviewed and approved after making several changes, including the addition of a forum selection clause. (Id.) The Agreement, dated October 3, 2001, provided that ACP would apply for the $100 million letter of credit from BRJ, but that Dorchester would be the beneficiary. (Mem. of Law in Opp. to Def.'s Mot. to Dismiss (hereinafter "Pl.'s Mem."), Ex G.) The Agreement further provided that Dorchester was to pay ACP a $500,000 fee upon execution of the contract, prior to BRJ's issuance of the letter of credit. (Id.) The Agreement is signed by "Thierry Cominassi, Director, ACP Investments Ltd.," "Stanley Ford, President, Dorchester Financial Securities, Inc.," and "Luis Alcazar, Senior Manager, International Department, Banco BRJ, S.A." (Id.)

Dorchester alleges that it directed Cox to wire the fee to BRJ. Although the fee was ultimately sent to ACP, it is not clear, and Dorchester does not explain, why BRJ acted as an intermediary for the payment. Cox avers that he called "BRJ's main switchboard" and was ultimately referred to Quieroz, who in turn referred him to "a person in the international department," who supplied him with coordinates to an ACP account. (Cox Decl. ¶ 6.) Cox then wired the fee and received a receipt for the transfer. (Id.; Pl.'s Mem., Ex. F.)

Dorchester alleges that BRJ then sent a message to Chase Manhattan Bank through the Society for Worldwide Interbank Financial Telecommunication ("SWIFT"), which is a Belgian messaging service specializing in the transmission of financial messages, called "SWIFT messages," between banks and other financial institutions. (Compl., Prelim. Stmt.) The message was labeled "unauthenticated" and contained a warning that "If authentication is required -- do not process!!! Under no circumstances should a financial bearing transaction be processed in response to this message!!!" (Pl.'s Mem., Ex. J.) The text of the message stated that BRJ had issued the letter of credit and would reserve it from the date of issue to the date of expiration or maturity. The message further stated that it was signed by two BRJ bank officers, "Luiz Augusto de Quieroz," and "Luis Alcazar," and included their individual SWIFT codes. (Id.)

Dorchester alleges that it then received from BRJ a copy of the letter of credit, which stated that the amount of credit was $250 million, rather than the $100 million provided for in the Agreement. (Compl., Prelim. Stmt.) When Dorchester pointed out the error, "[BRJ] reassured Dorchester that as long as smaller amounts were sent to any lender . . . the large amount . . . would not become a problem." (Id.) Satisfied with this representation, Dorchester "acquiesced and made arrangements to use the letter of credit." (Id.)

On or about October 21, 2001, Dorchester attempted to use the letter of credit as collateral for a loan and requested that BRJ extend to it amounts of $25 million or less. (Morrow Aff. ¶ 8.) Dorchester alleges that BRJ demanded an additional $250,000 fee to perform the transaction. (Id.; Compl., Prelim. Stmt.) Dorchester states that it protested but ultimately paid $100,000 to BRJ. (Compl., Prelim. Stmt.; Morrow Aff. ¶ 8.) Dorchester further alleges that it thereafter demanded performance, from November 2001 until July 2002, but that BRJ "stalled and promised performance but did nothing . . . ." (Compl., Prelim. Stmt.) Dorchester states that on or about July 17, 2002, BRJ told Dorchester that it had canceled the letter of credit.

Dorchester then "did an investigation of [BRJ] and found that they were involved in several fraudulent transactions and accused of taking money for the issuance and/or assignment of banking instruments. . . . Before filing [an action with this Court in September 2002], Dorchester knew that [BRJ] was involved in many fraudulent and illegal activities and noticed that there were many documents circulating on the web incriminating [BRJ] as a purveyor of fraudulent documents and forgeries." (Compl., Prelim. Stmt.) In September 2002, Dorchester filed a complaint against BRJ in this Court. (Id.) By this time, it "had realized that the letter of credit was fraudulent." (Morrow Aff. ¶ 12.)

B. Procedural History

On September 17, 2002, Dorchester filed an action against BRJ and SWIFT in this Court based on the same events giving rise to the instant Complaint. See Dorchester Fin. Secs. v. Banco BRJ S.A. & Soc. for Worldwide Interbank Fin. Telecomm. (S.W.I.F.T.), No. 02 Civ. 7504 (S.D.N.Y. 2002). SWIFT appeared and successfully moved to dismiss the allegations against it. BRJ failed to appear in that action despite being properly served. This Court entered a default judgment against BRJ on November 7, 2002. Following an inquest, a final judgment was entered against BRJ in the amount of $112,279,452.05 on January 16, 2004. Upon attempting to enforce the judgment in Brazil, where BRJ is located, Dorchester learned that it would be unable to do so because a default judgment from a United States court is not enforceable against a Brazilian defendant unless process was served in that action by letters rogatory. Upon a showing by Dorchester that post-judgment service by letters rogatory could be perceived as tainted or unfair by the Brazilian legal system, this Court granted Dorchester's motion to vacate the default judgment it had secured, and it ...

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