Absolute Activist Value Master Fund Limited et al v. Devine
Filing
521
OPINION AND ORDER denying 254 defendant's Motion to Strike Plaintiffs' Amended Complaint; granting in part and denying in part 253 defendant's Request for Judicial Notice of Exhibits Attached to Motion to Dismiss Plaintiffs' ; Amended Complaint; granting in part and denying in part 252 defendant's Motion to Dismiss Amended Complaint. Plaintiffs may file a Second Amended Complaint within twenty-one (21) days of the date of this Opinion and Order. See Opinion and Order for details. Signed by Judge John E. Steele on 2/8/2017. (AMB)
UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF FLORIDA
FORT MYERS DIVISION
ABSOLUTE
ACTIVIST
VALUE
MASTER
FUND
LIMITED,
ABSOLUTE
EAST
WEST
FUND
LIMITED, ABSOLUTE EAST WEST
MASTER
FUND
LIMITED,
ABSOLUTE EUROPEAN CATALYST
FUND
LIMITED,
ABSOLUTE
GERMANY
FUND
LIMITED,
ABSOLUTE INDIA FUND LIMITED,
ABSOLUTE
OCTANE
FUND
LIMITED,
ABSOLUTE
OCTANE
MASTER FUND LIMITED, and
ABSOLUTE RETURN EUROPE FUND
LIMITED,
Plaintiffs,
v.
Case No: 2:15-cv-328-FtM-29MRM
SUSAN ELAINE DEVINE,
Defendant.
OPINION AND ORDER
This matter comes before the Court on review of defendant’s
Motion to Dismiss Amended Complaint (Doc. #252) filed on February
12,
2016. 1
1
Plaintiffs
filed
a
Memorandum
in
Opposition
to
Defendant filed a corrected version of the Motion to Dismiss
Amended Complaint (Doc. #304-1) on February 26, 2016.
The only
difference between the corrected version and the initial version
is a change to the margins and font. (Doc. #304.) The corrected
version is otherwise identical to the initial motion to dismiss.
Throughout this Opinion and Order, the Court cites to the initial
Motion to Dismiss.
Defendant's Motion to Dismiss Amended Complaint (Doc. #318) on
March 11, 2016, to which defendant filed a Reply (Doc. #336) on
March 25, 2016, and plaintiffs filed a Surreply (Doc. #351) on
April 11, 2016.
The parties have also submitted supplemental
briefing regarding the effect of a recent Supreme Court decision
on defendant’s Motion to Dismiss (Docs. ##426, 427, 429, 449, 451)
and supplemental authority (Docs. ##472, 466, 467, 479, 483, 487,
489, 492, 512, 515).
Also
before
the
Court
are
defendant’s
Motion
to
Strike
plaintiffs’ Amended Complaint (Doc. #254), plaintiffs’ Memorandum
in Opposition thereto (Doc. #319), Reply (Doc. #337), and Surreply
(Doc. #352).
Defendant also filed a Request for Judicial Notice
of Exhibits Attached to Motion to Dismiss Plaintiffs’ Amended
Complaint (Doc. #253), to which plaintiffs filed a Memorandum in
Opposition (Doc. #320).
I.
Plaintiffs’
Amended
Complaint
(Doc.
#196)
contains
the
following allegations:
Plaintiffs
Absolute
Activist
Value
Master
Fund
Limited,
Absolute East West Fund Limited, Absolute East West Master Fund
Limited, Absolute European Catalyst Fund Limited, Absolute Germany
Fund Limited, Absolute India Fund Limited, Absolute Octane Fund
Limited, Absolute Octane Master Fund Limited, and Absolute Return
Europe Fund Limited (the “Funds” or “plaintiffs”) are nine (9)
2
Cayman Islands companies previously operated as mutual (hedge)
funds that invested in a variety of asset classes on behalf of
hundreds of investors around the world, including many investors
in the United States. (Doc. #196, ¶ 9.)
Each Fund is a citizen of
the Cayman Islands, is incorporated in the Cayman Islands, and has
its principal place of business in the Cayman Islands.
(Id.)
The
Funds hired Absolute Capital Management Holdings Limited (“ACM”)
to act as its investment manager pursuant to a written Investment
Management Agreement. (Id. ¶¶ 12, 40.)
Fund
a
monthly
management
fee
of
2%
ACM typically charged each
per
annum
based
on
the
particular Fund’s net asset value (“NAV”) and a monthly performance
fee of 20% of the increase in value of the Fund’s NAV. (Id. ¶ 40.)
Florian Wilhelm Jürgen Homm (“Homm”) was the Chief Investment
Officer at ACM and, in that capacity, was granted discretionary
trading authority by the Funds. (Id. ¶ 41.) Conspiring with others
from at least September 2004 to September 2007, Homm used the Funds
as vehicles for a massive market manipulation scheme (the “Penny
Stock Scheme”) that caused the Funds to suffer losses of more than
$200 million while generating enormous profits for Homm and those
that assisted Homm in executing the Penny Stock Scheme. 2
2
(Id. ¶¶
For the sake of brevity, the Court only briefly discusses
the mechanics of the Penny Stock Scheme.
Details regarding the
Penny Stock Scheme are set forth in detail in plaintiffs’ Amended
Complaint. (Doc. #196.)
The Amended Complaint provides an example
3
29, 42-84.)
A number of manipulative techniques were utilized
including placing matched orders, placing orders that marked the
close or otherwise set the closing price for the day, conducting
wash sales, and backdating trades.
(Id. ¶ 47.)
A. The Origins of the Money Laundering Enterprise
In May 2006, after an email authored by a former ACM employee
under
a
pseudonym
(“Arness
Email”)
was
distributed
alleging
fraudulent activity by Homm, Homm recognized that the Penny Stock
Scheme could soon be exposed. (Id. ¶¶ 85-88.)
Homm and his former
wife, defendant Susan Elaine Devine (“Devine” or “defendant”),
established a criminal enterprise to conceal the proceeds of the
Penny Stock Scheme (the “Money Laundering Enterprise”).
The
Money
Laundering
Enterprise
was
intended
“to
(Id. ¶ 3.)
conceal
and
preserve the ill-gotten gains as a ‘multigenerational fortune’ for
the Devine-Homm family.”
(Id. ¶ 95.)
Over the years, Devine has taken numerous steps to advance the
objectives of the Money Laundering Enterprise, such as entering
into a sham divorce with Homm in Florida and jointly filing false
financial affidavits with the court; moving the proceeds of the
Penny Stock Scheme through a complex network of bank accounts around
the world; forming entities in various foreign countries through
of the manipulative tactics in action in regard to the fraudulent
trading in ProElite. (Id. ¶¶ 54-66.)
4
which fraud proceeds were funneled; creating and using accounts for
which
her
children,
Conrad
and
Isabella,
were
the
nominal
beneficiaries; using the fraud proceeds to purchase difficult-totrace gold, fine art, and other assets; engaging in simulated cash
transactions to disguise account-to-account transfers of fraud
proceeds; moving millions of dollars of fraud proceeds out of
accounts in advance of the imposition of freezes by the Swiss
against those accounts; and providing false testimony to the Office
of the Attorney General of Switzerland (the “Swiss Prosecutor’s
Office”) regarding her role in the Money Laundering Enterprise.
(Id. ¶¶ 3, 7.)
As a result of the Penny Stock Scheme, Devine has amassed
extraordinary wealth. (Id. ¶ 7.) Assets purchased by Devine since
the establishment of the Money Laundering Enterprise include, but
are not limited to:
the $2.2 million dollar house in Naples,
Florida in which she currently resides; an $8.5 million villa in
Marbell, Spain (which was purchased with Homm after their sham
divorce); a $4.1 million property in Mallorca, Spain; and more than
$1 million in gold coins.
(Id. ¶¶ 7, 189-90.)
Devine controls,
or has controlled, at least 20 bank accounts holding the equivalent
of tens of millions of dollars in the United States, Switzerland,
Singapore, and Uruguay.
(Id. ¶ 143.)
5
1.
The Persons and Entities Involved in the Money Laundering
Enterprise
Devine is a citizen of the United States and Brazil, and
currently resides in Naples, Florida.
(Id. ¶ 10.)
Devine has only performed unpaid work.
Since 1989,
(Id. ¶ 143.)
Devine and Homm would not have been able to launder the Penny
Stock
Scheme
proceeds
(“Meisterhans”).
(Id.
without
¶
the
14.)
help
of
Urs
Meisterhans,
a
Meisterhans
resident
of
Switzerland, is the founder and principal of the financial services
company Sinitus AG.
(Id.)
The Swiss Financial Market Supervisory
Authority, the Swiss equivalent of the Securities and Exchange
Commission
(SEC),
took
control
of
Sinitus
investigation, put it into liquidation.
since filed for bankruptcy.
AG
(Id.)
and,
after
an
The liquidator has
(Id.)
From at least 2006 through 2008, Meisterhans assisted Devine
and Homm in the laundering of the proceeds from the Penny Stock
Scheme.
(Id.)
According
to
the
Swiss
Report,
Meisterhans
transferred at least $17 million to accounts accessible by Homm
while he was in hiding in 2007 and 2008.
(Id.)
He also facilitated
Devine’s money laundering activities by sending Penny Stock Scheme
proceeds via complex routes through at least a dozen countries,
employing false identities, using offshore companies, and executing
transactions in cash, gold, and fine art.
(Id.)
Swiss authorities
have estimated that, between May 2006 and October 2007, Devine and
6
Homm transferred assets valued at approximately $65.9 million to
companies controlled by Meisterhans.
(Id.)
On May 20, 2015, the
Swiss Prosecutor’s Office indicted Meisterhans for a number of
crimes, including aggravated money laundering, based on Meisterhans
role in laundering Penny Stock Scheme proceeds controlled by Homm
and Devine.
(Id.)
Sinitus Limited (“Sinitus”) is an affiliate of Sinitus AG
incorporated in Mauritius.
(Id. ¶ 15.)
Sinitus’s account at
Investee Bank Limited in Australia was a central exchange point for
the laundering of Penny Stock Scheme proceeds.
transferred
through
Foundation
(“Floma”),
Devine.
(Id.)
this
one
account
of
the
was
many
used
to
(Id.)
fund
entities
the
Money
Floma
controlled
by
The Swiss authorities have frozen four Sinitus-
related accounts holding more than 24 million Swiss francs (“CHF”).
(Id.)
Marcel Eichmann (“Eichmann”), a resident of Switzerland, was
a banker at CBH Compagnie Bancaire Helvétique SA, formerly known
as Banque SCS Alliance SA (collectively, “CBH”), before co-founding
PHZ Privat-und Handelsbank (“PHZ”) in Zurich. (Id. ¶ 16.) Eichmann
was the personal banker for Homm and Devine, and Devine and her
children were shareholders of PHZ.
(Id.)
As the head of CBH’s
Zurich branch, Eichmann managed and monitored Devine and Homm’s
accounts in 2006 and 2007, which amounted to 25% of Eichmann’s
overall business at the time.
(Id.)
7
The Swiss Report states that
in 2006 and 2007, Eichmann accepted almost $20 million worth of
Penny Stock Scheme proceeds into Homm’s account at CBH.
(Id.)
After transferring Devine and Homm’s assets to PHZ, Eichmann was
responsible for at least four accounts controlled by Devine that
held over €15 million in assets.
(Id.)
Between 2007 and 2009,
Eichmann facilitated and verified over one dozen cash transactions
on behalf of Devine and Homm to assist in their concealment of
assets
from
law enforcement
and
potential
judgment
creditors,
including simulated transactions falsely and unlawfully recorded
as cash withdrawals followed by immediate cash deposits to other
accounts at the same bank in order to limit the paper trail.
(Id.)
In violation of bank policy, Eichmann regularly used a private
email address to receive instructions from Devine.
currently
the
target
of
a
aggravated money laundering.
Swiss
criminal
(Id.)
He is
investigation
for
(Id.)
Pascal Frei (“Frei”) is a banker who resides in Switzerland.
(Id. ¶ 17.)
with
Frei worked for Eichmann at CBH and PHZ, and assisted
Devine
Specifically,
and
Homm’s
Frei
worked
money
laundering
with Eichmann
to
activities.
(Id.)
facilitate
certain
withdrawals and deposits on behalf of Devine and Homm.
(Id.)
Frei
is also the target of a Swiss criminal investigation for aggravated
money laundering involving Homm and Devine’s assets.
(Id.)
Sammy Kapleta (“Kapleta”) is a Belgian citizen and former
resident of Florida.
(Id. ¶ 18.)
8
Devine and Homm used accounts
in Switzerland, Luxembourg, Panama, and Spain in the names of
Kapleta and Fairland Consulting, a vehicle controlled by Kapleta,
to launder more than $6 million in Penny Stock Scheme proceeds.
(Id.)
According to the Swiss Report, Kapleta is a target of the
Swiss money laundering investigation, and the Swiss have frozen a
Credit Suisse account in his name.
(Id.)
The Swiss have also
convicted Kapleta of procuring false Irish passports.
Phillipe
Switzerland.
Meyer
(“Meyer”)
(Id. ¶ 19.)
Meisterhans and Sinitus.
is
an
attorney
who
(Id.)
resides
in
Meyer has extensive connections with
(Id.)
In 2007 and 2008, he assisted
Devine in the establishment of, and the subsequent transfer of
funds out of, Floma through Singapore, Ireland, and the Czech
Republic
under
investments.
the
guise
of
real
estate
and
precious
metal
(Id.)
Jürg Brand (“Brand”), a Swiss attorney, ostensibly served as
one of Devine’s lawyers in connection with her divorce from Homm.
(Id. ¶ 20.)
Through an account Brand held at CBH, millions of
dollars in Penny Stock Scheme proceeds were transferred to accounts
controlled by Devine in Florida and elsewhere.
(Id.)
Brand’s
account at CBH also served as a conduit for proceeds arising from
the sale of 5.2 million ACM shares in August and September 2007.
(Id.)
9
2.
Concealment of Art and Furniture
Shortly after the Arness Email, Devine took steps to conceal
valuable art and furniture located at her and Homm’s home in
Mallorca, Spain.
(Id. ¶ 96.)
Between May 18 and May 23, 2006,
Devine created an inventory of art and furniture with an estimated
value exceeding €2.2 million.
(Id.)
Andreas Schaer (“Schaer”), a
personal assistant to Homm and Devine, emailed this inventory to
Meisterhans on May 23, 2006.
(Id.)
That same day, Meisterhans
emailed Schaer a fraudulent loan agreement, backdated for May 10,
2004, and signed by Meisterhans on behalf of New York Art Trading
Limited (“New York Art Trading”), to be signed by Devine.
97.)
(Id. ¶
By means of this agreement, New York Art Trading purported
to lend Devine art and furniture with an estimated value of €2
million, itemized on an “inventory list to be updated on a regular
basis.”
(Id.)
Devine signed the backdated agreement, which gave
the false appearance that the valuable property inventoried by
Devine was lent to her, rather than owned by her and Homm.
(Id.)
In September 2007, Devine directed Meisterhans to transport
the inventoried art and furniture from Spain to Switzerland for
safekeeping.
(Id. ¶ 98.)
This property was stored in Switzerland
until June 2008, when Devine directed Meisterhans to move it back
to Mallorca, Spain.
(Id.)
10
3.
Devine and Homm’s Strategic Divorce
In August 2006, Devine and Homm initiated a strategic divorce
in Florida.
(Id. ¶ 100.)
The divorce gave Devine a legal pretext
to obtain control of certain proceeds from the Penny Stock Scheme
while ostensibly distancing herself from the allegations in the
Arness Email.
(Id.)
The divorce also provided the pretext for
Devine and Homm to repeatedly change the beneficiary structure of
CSI, allowing the couple, when it suited their purposes, to hide
the tainted proceeds behind an entity purporting to benefit Devine
and their children, and to distance Homm from CSI while CSI sold
off
ACM
shares.
(Id.)
In
reality,
throughout
the
divorce
proceedings and thereafter, Devine and Homm continued to interact
as spouses – sending each other personal and intimate emails,
purchasing a home together, living together, traveling together,
and moving money between each other.
i.
(Id. ¶ 101.)
The Divorce Proceedings
On August 7, 2006, Devine and Homm petitioned for divorce in
the Circuit Court for the Twentieth Judicial Circuit in and for
Collier County, Florida (the “Florida Circuit Court”).
103.)
(Id. ¶
With their petition for divorce, Devine and Homm were
required to file Family Law Financial Affidavits stating the value
of their assets owned individually and jointly.
(Id.)
Devine and
Homm stated in their affidavits that their total assets amounted
to only $1.64 million.
(Id.)
The affidavits, however, were
11
brazenly false.
(Id.)
Indeed, on August 7, 2006, the same day the
petition was filed, Meisterhans informed Devine and Homm that New
York Art Trading had received wire transfers totaling €16.6 million
and $2.05 million, which “we are managing and holding on your
behalf.”
(Id.)
Devine
later
testified
before
the
Swiss
Prosecutor’s Office that Homm was worth roughly $200 million at
that time.
(Id.)
Furthermore, Devine and Homm did not identify
any real estate holdings in their affidavits even though they owned
real
property
worth
millions
Luxembourg, and England.
of
dollars
in
Spain,
France,
(Id.)
On September 18, 2006, Devine and Homm entered into a Marital
Separation Agreement, the stated purpose of which was to “settle
[between
Devine
and
Homm],
now
and
forever,
their
respective
rights, duties, and obligations regarding property, liabilities,
and children.” (Id. ¶ 104) (alteration in original). The agreement
mandated that Homm make an “equalizing payment” of $1.5 million to
Devine, which was made on August 1, 2006.
(Id. ¶ 105.)
The money
used to make the payment came directly from Hunter 3 and was wired
to an account controlled by Devine at Deutsche Bank Alex.Brown in
the United States. 4
(Id. ¶ 105.)
3
Hunter is a California corporation used by Homm and Todd
Ficeto to effectuate the Penny Stock Scheme. (Id. ¶ 32.)
4
On February 28, 2014, a federal seizure warrant was issued
for all funds and securities on deposit in this account. (Id. ¶
105.)
12
The
Florida
Circuit
Court
entered
a
Final
Judgment
of
Dissolution of Marriage (the “Divorce Judgment”) on May 21, 2007.
(Id. ¶ 106.)
The terms and conditions set forth in the Marital
Settlement Agreement were confirmed by the Divorce Judgment, and
Devine and Homm were ordered to comply with those terms.
(Id.)
By
causing the filing of this public document declaring that they were
no
longer
married,
Devine
and
Homm
were
able
to
modify
the
beneficiary structure of CSI to capitalize on ACM’s inflated share
price,
and
were
further
able
to
conceal
laundering of Penny Stock Scheme proceeds.
ii.
and
facilitate
the
(Id. ¶¶ 106-07.)
Modifications to CSI’s Beneficiary Structure
During the 12-month period following March 3, 2007, CSI, as
well as all persons connected to CSI, were not to dispose of their
ACM shares without prior notice to and consultation with the
nominated advisor, the broker, and the Chairman of ACM’s Board of
Directors.
(Id. ¶ 109.)
The restrictions on the assignment of ACM
shares held by CSI did not, however, apply to Homm’s wife and
children. 5
(Id.)
5
The restrictions memorialized in the Lock-In Deed were
intended to prevent Homm from using CSI to sell shares of a company
for which he was the controlling shareholder and a key employee.
(Id.) These restrictions were essential to protect ACM as it went
public because any precipitous sales by its largest shareholder
would have had a dramatic impact on the trading price of ACM shares.
(Id.)
The document admitting ACM to the AIM, a London Stock
Exchange market, cited the Lock-In Deed. (Id.)
13
In March 2007, immediately after the first set of restrictions
in the Lock-In Deed had been lifted, CSI began to liquidate its ACM
shares without providing the notice required by the Lock-In Deed,
thereby capitalizing on ACM’s inflated share price.
(Id. ¶ 112.)
Between March 2007 and September 18, 2007, the date Homm resigned
from ACM, CSI sold or transferred approximately 12 million ACM
shares for proceeds of at least £20,161,668.
(Id.)
In the days
immediately after Homm’s resignation, CSI unloaded another 13.2
million ACM shares.
Evidently
(Id.)
satisfied
that
their
backdated
arrangement
had
served its purpose, Devine and Homm entered into a new Property
Settlement
Agreement
on
August
21,
2007,
which
upended
the
previously negotiated divorce terms and once again changed the
beneficiary status of CSI.
(Id. ¶ 120.)
Kravitz, a Florida
attorney who is Homm’s longtime friend and who at various times
served as legal counsel to both Homm and Devine, represented both
Devine and Homm in connection with this agreement.
120.)
(Id. ¶¶ 113(b),
The agreement, which was governed by Florida law, cancelled
the June 19, 2007 agreement and restored Homm’s status as the sole
beneficiary of CSI.
(Id. ¶ 120.)
As part of the agreement, Homm
agreed to give Devine €3.1 million and 4 million ACM shares.
(Id.)
On August 22, 2007, Devine wrote to CSI director Kranz to confirm
the terms of the new agreement and asked him to inform Eichmann of
the changes.
(Id.)
14
On August 30, 2007 and September 7, 2007, a total of €3.1
million was transferred to an account at CBH in the name of Jürg
Brand (the “Brand Account”), of which Devine was the beneficial
owner.
(Id. ¶ 121.)
Although this account was in Brand’s name,
Eichmann regularly accepted instructions on this account directly
from Devine.
(Id.)
On August 24, 2007, Homm transferred a total
of 4 million ACM shares to the Brand Account.
(Id.)
Bank records
indicate that these transfers were identified as relating to the
Property Settlement Agreement.
(Id.)
Then, on September 26, 2007,
Homm transferred to the Brand Account an additional 1.2 million ACM
shares that were not required by the Property Settlement Agreement.
(Id.)
Between August 2007 and February 2008, all of those ACM
shares were sold for a total of £4,112,013 and €754,252, and the
proceeds were transferred to Devine’s account at PHZ.
(Id.)
iii. Evidence that Devine and Homm Remained Close after
their Divorce
Evidence shows that Devine and Homm remained extremely close
after their formal divorce, both financially and in their shared
personal life, and never intended to alter their relationship
beyond the paperwork dissolving their legal status and establishing
the facade of asset separation.
(Id. ¶ 123.)
For example, on
August 1, 2006, just six days before the divorce petition was filed,
Devine addressed Homm as “Gorgeous” in an email and signed off, “A
big big hug. I love you.”
(Id. ¶ 124.)
15
On September 5, 2006, one
month
after
the
divorce
petition,
Devine
emailed
Homm:
“Hi
Gorgeous, I have to be very reserved when I reply to your e-mails.
Can I be a little bit soppy??? No I shall resist.”
After
the
Marital
Settlement
Agreement
was
(Id. ¶ 125.)
executed
on
September 18, 2006, the spouses continued to contemplate joint
financial investments.
2007
to
November
(Id. ¶ 126.)
19,
2010,
Devine
For example, from January 4,
transferred
approximately
€240,000 to Homm for expenses related to a property in Burgundy,
France.
(Id.)
In February 2007, Devine and Homm shopped together
for a property in Marbella, Spain, which they eventually purchased.
(Id.)
In an email to Homm dated February 24, 2007, a real estate
broker in Marbella noted that he had shown properties to “you and
your wife Susan,” and Homm responded in part, “Red house, too dark
for susan, off list.”
(Id.)
In connection with the purchase of
the Marbella property, Devine sent wire instructions to her bank
in March of 2007 on “Susan Devine Homm” stationery and signed the
instructions “Susan Devine Homm.”
(Id.)
On April 23, 2007, Homm
received an email advising him that a painting by the Norwegian
artist Hans Dahl was available for purchase for £52,000.
(Id.)
Homm forwarded that email to Devine, noting that he was “[p]assing
this on to my wife.”
(Id.)
On July 12, 2007, less than two months after the Divorce
Judgment, Homm executed a will devising half of his estate to
Devine. (Id. ¶ 128.) The same day, Devine executed a will devising
16
her estate exclusively to her children.
(Id.)
wills were found in Meisterhans’s office.
Copies of both
(Id.)
The divorce also caused no change in the ownership of Devine
and Homm’s jointly-owned property in London, an asset that is not
mentioned in any of the divorce filings.
(Id. ¶ 129.)
As of April
2015, that property was still owned jointly by Devine and Homm.
(Id.)
Finally, the evidence shows that when Homm was arrested in
Florence, Italy on March 8, 2013, he was vacationing with Devine
and their son.
4.
(Id. ¶ 130.)
Homm’s Promise of a “Multigenerational Fortune”
After the divorce was finalized and Homm had again become the
sole beneficiary of CSI, he prepared to escape and bury the Penny
Stock Scheme proceeds for use by himself and his family well into
the future.
(Id. ¶ 131.)
At that time, he wrote two revelatory
emails to Devine, assuring her that she and their children would
always be well taken care of.
(Id.)
On August 28, 2007, Homm promised Devine in an email: “If I
can succeed the children and you will sit on a multigenerational
fortune.”
(Id. ¶ 132.)
In the same email, he assured her that,
even if he was not successful, she was “fantastically protected
already, the optimal outcome has been achieved in that regard.”
(Id.)
Homm sent Devine another email later that day, informing her
that he had “sold a good part of [his] soul and health to protect
17
you and our children under the most extreme business and lifestyle
duress for 18 months.”
(Id. ¶ 133) (alteration in original).
Homm
would resign from ACM and go into hiding less than a month later.
(Id. ¶ 134.)
B. Devine’s Use, Transfer, and Concealment of Penny Stock Scheme
Proceeds
In collaboration with Homm and her other co-conspirators,
Devine steered a breathtaking amount of Penny Stock Scheme proceeds
into at least 20 bank accounts under her control around the world,
from Florida to Switzerland to Uruguay to Singapore, and used the
proceeds
to
purchase
assets.
(Id. ¶ 143.)
real
property,
gold,
and
other
valuable
The Funds have identified 85 transactions
that Devine used to launder the Penny Stock Scheme proceeds.
(Doc.
#196, App. I.)
1.
Transfers from Homm to Devine
The Arness Email triggered an urgent need for Devine and Homm
to begin liquidating their ACM shares and laundering the proceeds.
(Id. ¶ 151.)
On May 9, 2006, just four days after Homm learned of
the Arness Email, Homm transferred €6.2 million from an account at
CBH in the name of Ridgeville Investment Inc. (the “Ridgeville
Account”) to an account at CBH in the name of Loyr Stiftung (the
“Loyr
Account”). 6
(Id.)
The
6
funds
transferred
out
of
the
Homm was the beneficial owner of the Ridgeville Account and
Devine was the beneficial owner of the Loyr Account. (Id. ¶ 152.)
18
Ridgeville Account originated from CSI’s account at VP Bank in
Lichtenstein, which held dividends from ACM and proceeds from the
sales
of
ACM
shares.
(Id.)
On
May
22,
2006,
Meisterhans
coordinated, together with Devine and Homm, the transfer of the
assets in the Loyr Account (approximately €8 million) to an account
in the name of Ocean Offshore Bank SA (the “Ocean Account”) at
Commerzbank (South East Asia) Limited in Singapore.
(Id.)
Bank
records state that the entirety of assets in the Loyr Account were
transferred to the Ocean Account on May 25, 2006, for the purchase
of a hotel.
(Id.)
Homm and Devine, however, both denied knowledge
of a hotel investment when questioned by the Swiss Prosecutor’s
Office.
(Id.)
On June 1, 2006, CSI transferred €1.4 million in cash from its
account at VP Bank in Liechtenstein to an account in the name of
Hosifa Stiftung (the “Hosifa Account”) at EFG Bank von Ernst in
Liechtenstein, pursuant to a payment order signed by Homm.
157.)
(Id. ¶
This amount came from the proceeds of the ACM shares sold
between February 23, 2006 and May 4, 2006, and was transferred to
the Hosifa Account for the benefit of Devine and her children.
(Id.)
The Hosifa Account was transferred to PHZ on April 30, 2009,
and the funds in the account were frozen by the Swiss on January
14, 2014.
(Id. ¶ 144(h)).
On October 6, 2006, Homm transferred €510,000 from CSI’s
account at CBH to another CBH account in the name of Brek Stiftung
19
(the “Brek Account”).
(Id. ¶ 202.)
owner of the Brek Account.
Devine was the beneficial
(Id. ¶ 215.)
Homm transferred an
additional €8,386,000 and €5,308,000 from CSI’s account at CBH to
the Brek Account on March 30, 2007 and May 10, 2007, respectively.
(Id. ¶ 202.)
The funds in the Brek Account consisted at least in
substantial part of proceeds from the Penny Stock Scheme, including
dividends from ACM and proceeds from the sale of ACM shares.
(Id.)
In 2009, funds in the Brek Account at CBH were transferred to the
Brek Account at PHZ, and the funds in the account were frozen by
the Swiss in June 2014.
(Id. ¶¶ 201-02.)
As previously discussed, pursuant to the Property Settlement
Agreement, Homm transferred €3.1 million and 4 million ACM shares
to the Brand Account in August and September of 2007.
(Id. ¶ 155.)
Then, on September 26, 2007, Homm transferred an additional 1.2
million ACM shares that were not part of the Property Settlement
Agreement to the Brand Account.
(Id.)
The funds in the Brand
account were transferred to Devine’s account at PHZ in September
and October 2009, and an amount of €7,086,790 was seized by the
Swiss on January 13, 2012.
2.
(Id. ¶¶ 206-07.)
Post-Divorce Transactions
Following the entry of the Divorce Judgment on May 21, 2007,
Devine, acting in concert with Homm, Meisterhans, Eichmann, Meyer,
and others, continued to launder funds throughout the world. (Id.
¶ 159.)
20
i.
Devine’s Purchase and Improvement of Real Property
In April 2008, Devine purchased a waterfront property in
Naples,
Florida
Property”).
for
approximately
(Id. ¶ 179.)
$2.2
million
(the
“Naples
Bank records reflect that the Naples
Property was paid for through two transfers from the Brand Account
at CBH.
(Id. ¶ 180.)
The first transfer occurred on March 26,
2008, when $170,000 was wired from the Brand Account to an account
with Citibank N.A. in New York in the name of First Title of Naples,
Inc. (“First Title”), a title insurance company located in Naples,
Florida.
(Id. ¶ 182.)
The second transaction occurred on April
4, 2008, when $1,982,000 was transferred from the Brand Account to
First Title’s Citibank account in New York.
(Id. ¶ 183.)
A
memorandum line in the bank records cites the address of the Naples
Property.
Devine
(Id.)
thereafter
directed
Eichmann
to
make
additional
transfers from the Brand Account, purportedly for the purpose of
renovating and furnishing the Naples Property, as follows:
On May
8, 2008, Devine requested by email that $250,000 be wired to her
Bank of America account in Naples, Florida “for renovation and
furniture purchase of the house [she] just purchased.”
184(a)) (alteration in original).
(Id. ¶
On September 1, 2008, Devine
confirmed by email a request for $150,000 to be wired to her Bank
of America account.
(Id. ¶ 184(b)).
A handwritten note on this
email indicates that the stated reason for this wire was to pay for
21
property renovations.
(Id.)
On June 4, 2009, Devine requested via
email that $60,000 be wired to her Bank of America account in order
to pay for a “[n]ew roof and other expenses.”
(alteration in original).
(Id. ¶ 184(c))
In total, Devine spent nearly $3 million
of Penny Stock Scheme proceeds on the Naples property.
(Id. ¶
185.)
Devine also used the Penny Stock Scheme proceeds to purchase
two
properties
in
Spain,
in
both
instances
entities that helped conceal her involvement.
through
corporate
(Id. ¶ 188.)
Devine transferred a total of €5,086,600 from the Brek Account
at CBH to an account at Banco de Andalucia in the name of Leo
Propiedades S.L. on March 21 and 22, 2007.
(Id. ¶ 189.)
Leo
Propiedades S.L. was owned by Benley International S.A., a Panama
company controlled by Homm.
(Id.)
The memorandum lines on the
bank records state that the purpose of the wired money was buying
property. (Id.) These funds, along with an additional €1.3 million
from Homm’s account at CBH, were used to purchase a large seaside
villa in Marbella, on the Southern coast of Spain.
(Id.)
As
discussed above, Devine and Homm shopped for this property together
even as their divorce was being finalized.
(Id.)
Around the same time, Devine used another entity to buy a
property in Mallorca, Spain.
(Id. ¶ 190.)
Malon Consulting AG
(“Malon”), a Swiss company registered on November 22, 2006, opened
an account with UBS in Switzerland on May 23, 2007, just two days
22
after the Divorce Judgment.
(Id.)
According to the Swiss Report,
Devine is the beneficial owner of this account.
(Id.)
On May 24, 2007, less than a week after Malon’s UBS account
was opened, Devine transferred €3.2 million from the Brek account
at CBH to Malon’s UBS account.
(Id. ¶ 191.)
The payment order,
signed by Devine, indicates that the purpose of the transfer was
to purchase real estate in Mallorca.
(Id.)
The €3.2 million
originated from transfers from CSI’s account with CBH to the Brek
Account.
(Id.)
From that amount, €3.1 million was transferred
shortly thereafter from Malon’s UBS account to the account of
Vatulele S.L. at Caja de Ahorros Bank in order to purchase the
Mallorca property.
ii.
(Id.)
The Floma Account
On June 20, 2006, Devine transferred approximately €4 million
from
the
Australia.
Brek
Account,
(Id. ¶ 158.)
to
Sinitus’s
account
at
Investec
in
These funds consisted at least in part
of the Penny Stock Scheme proceeds.
(Id.)
In August 2007, Devine established Floma, an entity organized
under Panamanian law.
(Id. ¶ 160.)
Atica Nominees S.A. (“Atica”),
a British Virgin Islands company operated by Meyer and his law
partner, served as the foundation council member of Floma.
(Id.)
Originally, Meisterhans was to assist Devine with Floma, but much
of the work was done by Meyer, at Meisterhans’ suggestion.
161.)
23
(Id. ¶
On January 16, 2008, a bank account in the name of Floma (the
“Floma Account”) was opened at EFG Bank in Singapore.
(Id. ¶ 163.)
On January 21, 2008, Meisterhans sent a payment order by email for
the wire of €3.9 million from Sinitus’s account to the Floma
Account.
(Id. ¶ 164.)
Devine maintained complete control over Floma’s assets and
instructed Meyer and his colleagues from an email address using the
alias “Julia Brown.”
(Id. ¶ 165.)
On June 29, 2009, Devine, using
the “Julia Brown” email account, advised Meyer that she was “making
a large investment” and directed him to wire €1 million from the
Floma Account to an account in the name of DC Fragments at HSBC in
Germany. (Id. ¶ 167.) On August 28, 2009, Devine, using the “Julia
Brown” email account, directed Meyer to wire €1 million from the
Floma Account to the account of Check Republis at Unicredit Bank
in Czech Republic.
Devine:
(Id. ¶ 168.)
On August 31, 2009, Meyer emailed
“Please give us also details, for what the funds are used.
We need to have an explanation due to banking rules.” (Id.) Devine
responded: “I gave a message to your assistant saying that the
funds are for an investment.
Metals to be exact.”
(Id.)
On November 5, 2009, Devine, using the “Julia Brown” email
account, instructed Meyer to close the Floma EFG Account:
“I am
purchasing a property and will be needing the remainder of the
money
from
my
account.”
(Id.
¶
169.)
Meyer
subsequently
transferred €1,876,769.43 to the same Check Republis account to
24
which Devine had sent funds for a “metals” investment two months
earlier.
(Id.)
iii. Devine’s Purchase of Gold Coins
On
August
20,
2007,
Levanne
Stiftung,
a
Liechtenstein
foundation, opened an account at CBH for the benefit of Devine (the
“Levanne Account”).
on
August
21,
(Id. ¶ 144(e)).
2007,
€6.15
million
Bank records indicate that
and
CHF
1.47
million
were
withdrawn in cash from the Brek Account at CBH in Zurich, and
immediately deposited in the Levanne Account at CBH.
(Id. ¶ 171.)
The two cash withdrawal forms were signed by Devine.
(Id.)
These
bank records, however, were falsified by Devine and Eichmann,
presumably to conceal the origin of the funds.
(Id.)
A CBH
compliance officer explained to the Swiss Prosecutor’s Office that
the treasury of the Zurich branch of CBH did not have this amount
of cash in August 2007, and that such simulated cash transactions,
which were invisible to the bank’s headquarters in Geneva, would
have been possible only if the counterparts both had accounts at
CBH.
in
(Id.)
May
2012
Devine testified before the Swiss Prosecutor’s Office
that
she
engaged
Eichmann’s recommendation. 7
in
these
cash
transactions
on
(Id.)
7
These and other simulated cash transactions are a basis for
a separate Swiss criminal money laundering investigation targeting
Eichmann and Frei. (Id.)
25
Between October 2007 and March 2008, Devine transferred more
than CHF 1.4 million from the Levanne Account to the account of
Marius Grossenbacher (“Grossenbacher”) at UBS through six separate
deposits.
(Id. ¶ 172.)
Eichmann received commission from Levanne
for each of these transfers.
(Id.)
Throughout the same period,
Grossenbacher purchased approximately CHF 1.38 million in gold
coins through cash transactions.
(Id.)
Devine testified before
the Swiss Prosecutor’s Office in May 2012 that the gold coins were
placed in a safety deposit box outside of Switzerland.
(Id. ¶
174.)
3.
Transfers to Avoid Swiss Freeze Orders
On May 31, 2011, the Swiss Prosecutor’s Office sent PHZ
requests for information regarding certain accounts.
(Id. ¶ 201.)
Beginning in January 2012, the Swiss Prosecutor’s Office issued
freeze
orders
relating
to
numerous
accounts
in
Switzerland,
including the following five accounts in Devine’s name or for which
Devine or her children are the stated beneficiaries:
the Brek
Account at PHZ; an account in the name of Susan Devine (the “Devine
Account”) at PHZ; the Hosifa Account at PHZ; the Malon Account at
PHZ; and an account in the name of Susan Devine at Trafina Bank,
for which Homm is the beneficial owner.
(Id. ¶ 198.)
Swiss authorities learned upon further investigation that,
between their initial requests for information from PHZ and the
issuance of the freeze orders, Devine directed multiple transfers
26
of millions of dollars out of three of the PHZ accounts to other
accounts, most of which were under her control and located outside
of Switzerland, effectively placing those funds beyond the reach
of the freeze.
i.
(Id. ¶ 199.)
The Brek Account at PHZ
The Brek Account at PHZ was opened on August 18, 2009, for the
benefit
of
Devine.
(Id.
¶
144(g)).
In
late
2009,
Devine
transferred more than €8 million in money and securities from the
Brek Account at CBH to the Brek Account at PHZ.
202(a)-(c)).
(Id. ¶¶ 144(g),
The funds in the Brek Account at PHZ consisted, at
least in substantial part, of proceeds from the Penny Stock Scheme,
including dividends from ACM and proceeds from sales of ACM shares.
(Id. ¶ 202.)
Between May 31, 2011, the date of the Swiss authorities’ first
request to PHZ, and January 13, 2012, the date of the freeze order,
Devine directed at least 14 transfers from the Brek Account at PHZ.
(Id. ¶ 203.)
Specifically, Devine transferred $4.55 million and
€815,000 to accounts in France, Spain, Singapore, Uruguay, and the
United States.
(Id. ¶¶ 204-05.)
Devine emailed the instructions
for these transfers to Eichmann’s personal email account.
(Id. ¶
203.)
On January 13, 2012, after the Swiss Prosecutor’s Office had
analyzed the origin of the assets on the account, a freeze order
27
was issued for the Brek Account at PHZ, resulting in a freeze of
€7,581,770.
ii.
(Id. ¶ 201.)
The Devine Account at PHZ
The Devine Account at PHZ was opened on August 15, 2008, for
the benefit of Devine.
(Id. ¶ 144(f)).
The funds in this account
originated from the Brand Account at CBH and Devine’s own account
at CBH, and consisted of Penny Stock Scheme proceeds, specifically
dividends from ACM and proceeds from sales of ACM shares.
(Id.)
Between June 14, 2011, the date PHZ first provided information
to the Swiss authorities about Devine’s PHZ account, and January
13, 2012, the date of the freeze order, Devine directed 11 transfers
from her PHZ account, totaling $920,766 and €660,000.
(Id. ¶ 208.)
One of the transfers was made to Klueger & Stein, a Los Angeles law
firm that touts its expertise in “[c]reative asset protection.”
(Id. ¶ 210 (alteration in original)).
On January 13, 2012, the Swiss issued a freeze order for this
account, resulting in the freeze of €7,086,790.
(Id. ¶ 206.)
iii. The Hosifa Account at PHZ
The Hosifa Account at PHZ was opened on April 30, 2009, for
the benefit of Devine’s children.
(Id. ¶ 144(h)).
Bank records
reveal that CSI transferred €1.4 million in cash to the Hosifa
Account at EFG Bank von Ernst on June 1, 2006.
(Id. ¶ 213.)
This
amount came from the proceeds of the ACM shares sold between
February 23, 2006 and May 4, 2006, and was transferred to the Hosifa
28
Account for the benefit of Devine and her children.
(Id.)
Hosifa Account was transferred to PHZ on April 30, 2009.
144(h)).
The
(Id. ¶
On January 14, 2014, €518,820 were seized by the Swiss.
(Id. ¶ 212.)
Between January 13, 2012, the date of the freeze order for the
Brek and Devine Accounts at PHZ, and January 14, 2014, the date the
Hosifa Account was frozen, Devine directed at least four transfers
out of the Hosifa Account, totaling over CHF 1.4 million.
215)
(Id. ¶
PHZ’s records indicate that one of the transfers was made
because Devine “doesn’t trust Switzerland regarding her lawsuit
and, for this reason, wants to transfer a portion of her children’s
assets to the accounts of her children in London.
have an account set up with Pershing LLC.”
The children
(Id. ¶ 215(d)).
C. The Underlying Litigation
On
June
1,
2015,
plaintiffs
filed
a
six-count
Complaint
against Ms. Susan Devine (“Devine”) alleging that Devine engaged
in a money laundering enterprise with her ex-husband, Florian Homm,
to conceal tens of millions of dollars fraudulently taken from the
plaintiffs pursuant to an illegal “Penny Stock Scheme.”
(Doc. #2.)
Plaintiffs’ Complaint, and now Amended Complaint 8 (Doc. #196),
asserts claims against Devine for: (1) Violation of RICO, 18 U.S.C.
8
On January 14, 2016, plaintiffs filed an Amended Complaint
(Doc. #196), which is the operative pleading currently before the
Court.
29
§ 1962(c); (2) RICO Conspiracy, 18 U.S.C. § 1962(d); (3) Florida
RICO and Civil Remedies for Criminal Activities; (4) Florida RICO
and Florida Civil Remedies for Criminal Activities—Conspiracy; (5)
Unjust Enrichment; and (6) Constructive Trust.
(Docs. ##2, 196.)
Currently before the Court are defendant’s Motion to Strike
plaintiffs’
Amended
Complaint,
Motion
for
Judicial
Notice
of
Documents Attached to Motion to Dismiss Amended Complaint, and
Motion to Dismiss.
(Docs. ##252, 253, 254.)
II. Motion to Strike
Defendant moves to strike plaintiffs’ Amended Complaint and
dismiss
plaintiffs’
claims
with
prejudice
on
the
plaintiffs’ Amended Complaint is a shotgun pleading.
basis
that
(Doc. #254.)
Defendant asserts that plaintiffs have once again incorporated all
232 paragraphs into each subsequent count “mak[ing] it difficult,
if not impossible for Ms. Devine to file a streamlined motion to
dismiss because, to this day, Plaintiffs’ claims and legal theories
are unclear and amendable to shifting.”
(Id. at 9.)
Defendant’s motion is not really a motion to strike under
Federal Rule of Civil Procedure 12(f), but rather a motion to
dismiss.
While there are a large number of background paragraphs
incorporated into the subsequent counts of plaintiffs’ Amended
Complaint, these paragraphs provide a succinct summary of the
extremely complex scheme in which Ms. Devine and her husband were
allegedly involved.
The incorporated information is pertinent to
30
each of the subsequent counts, and therefore the pleading is not
properly characterized as a shotgun complaint.
Court denies defendant’s Motion to Strike.
Accordingly, the
(Doc. #254.)
III. Motion for Judicial Notice
Defendant requests that the Court take judicial notice of the
exhibits
referenced
Specifically,
in
defendant
its
Motion
requests
to
that
Dismiss.
the
(Doc.
Court take
#253.)
Judicial
Notice of portions of the “Homm Book,” London Stock Exchange notices
and news articles, the Marital Settlement Agreement, the pleadings
and stay filings related to the SDNY Action, a letter written to
Devine, and pages of the Swiss Report related to CSI beneficiaries.
(Id.)
Defendant argues that because these items were referenced
and relied on by plaintiffs in the Amended Complaint, they are the
proper subject for judicial notice and the Court should take
judicial notice of them pursuant to Federal Rule of Civil Procedure
10(c) or Federal Rule of Evidence 201. (See id.)
Plaintiffs object
to most of the items, but do not oppose the use of some exhibits
for limited purposes.
(Doc. #320.)
“The court may take judicial notice at any stage of the
proceeding.”
Fed. R. Evid. 201(d).
Federal Rule of Evidence 201
governs judicial notice of adjudicative facts.
Fed. R. Evid.
201(a).
“Adjudicative facts are simply the facts of the particular
case.”
Fed. R. Evid. 201(a) advisory committee’s notes to 1972
proposed rules.
Courts can take judicial notice of certain facts
31
where the fact is not subject to reasonable dispute because it: (1)
is
generally
known
within
the
trial
court’s
territorial
jurisdiction; or (2) can be accurately and readily determined from
sources whose accuracy cannot reasonably be questioned.
Fed. R.
Evid. 201(b).
The Eleventh Circuit has urged caution when taking judicial
notice of facts because the judicial notice process “bypasses the
safeguards which are involved with the usual process of proving
facts by competent evidence in district court.”
120 F.3d 211, 214 (11th Cir. 1997).
Shahar v. Bowers,
“[T]he kinds of things about
which courts ordinarily take judicial notice are (1) scientific
facts: for instance, when does the sun rise or set; (2) matters of
geography: for instance, what are the boundaries of a state; or (3)
matters of political history: for instance, who was president in
1958.”
Id.
Under limited circumstances, a court can look beyond the four
corners of the complaint and its attached exhibits when ruling on
a motion to dismiss, without converting it into a motion for summary
judgment. One circumstance is where a district court takes judicial
notice of certain facts.
Universal Express v. S.E.C., 177 F. App’x
52, 53 (11th Cir. 2006) (citation omitted).
Another recognized by
the Eleventh Circuit is that a district court “may consider a
document attached to a motion to dismiss without converting the
motion into one for summary judgment if the attached document is
32
(1) central to the plaintiff’s claim and (2) undisputed.”
Taylor, 400 F.3d 1272, 1276 (11th Cir. 2005).
Day v.
Undisputed in this
sense means that its authenticity is not challenged.
Id.
“[A]
document need not be physically attached to a pleading to be
incorporated by reference into it . . . .” Id. (citations omitted).
Accordingly, “if the document’s contents are alleged in a complaint
and no party questions those contents, [the court] may consider
such a document provided it meets the centrality requirement.” Id.
(citing Harris v. Ivax Corp., 182 F.3d 799, 802 n.2 (11th Cir.
1999)).
Accordingly, the Court may consider information beyond the
four corners of a Complaint on a motion to dismiss if the Court
takes judicial notice of the information or if the document is
central to the complaint and undisputed in terms of authenticity.
The Court addresses each item in turn.
A. Exhibit 1:
Defendant
Homm Book
requests
the
Court
to
take
judicial
notice
of
portions of a book written by her ex-husband that have been attached
to defendant’s Motion to Dismiss as Exhibit 1.
253, pp. 3-8.)
(Docs. ##252-1;
Defendant asserts that portions of the book were
referenced and relied upon in plaintiffs’ Amended Complaint and
attached to plaintiffs’ request for a temporary restraining order,
thus making judicial notice appropriate.
The Court disagrees.
33
(Doc. #253, pp. 4, 6-7.)
The Homm Book was referenced in plaintiffs’ Amended Complaint
in two brief areas.
(See Doc. #196, ¶¶ 141, 229(h)).
Plaintiffs
cite to the Homm Book for statements Florian Homm made about his
abrupt departure in 2007 and about defendant’s involvement in
Florian Homm’s first company.
(Id.)
The Court finds that these
portions of the Homm Book are not central to plaintiffs’ claims
and, even if they were, Exhibit 1 to defendant’s Motion to Dismiss
is admittedly only a portion of the Homm Book, and does not even
contain the portions referenced in plaintiffs’ Amended Complaint.
(Doc. #252-1.)
Additionally, the Court declines to take judicial notice of
the excerpts of the Homm Book pursuant to Federal Rule of Evidence
201(b) because the “facts” fail the “not subject to reasonable
dispute” component of Rule 201(b).
The portion of the Homm Book
of
notice
which
defendant
seeks
judicial
contains
information
regarding the “sham” marriage between Susan Devine and Florian
Homm, a matter which is disputed by the parties.
seeking
judicial
information.
notice
must
supply
the
Fed. R. Evid. 201(c)(2).
Court
Further, a party
with
necessary
The only information
supplied to the Court is that the Homm Book was referenced in the
Complaint.
This is insufficient information to support the Court’s
taking of judicial notice.
Accordingly, the Court declines to take
judicial notice of Exhibit 1, the Homm Book excerpts.
34
B. Exhibits 2, 3, 4, 6, and 13:
and News Articles
London Stock Exchange Notices
Defendant requests the Court take judicial notice of the
existence of three London Stock Exchange Notices dated February 15,
2006, November 10, 2006, and September 6, 2007 (Docs. ##252-2; 2523; 252-13; 253, pp. 8-13), and two news articles (Docs. ##252-4;
252-6; 253, pp. 8-13).
Defendant does not request judicial notice
of the truth of the matters within the notices and articles.
#253, pp. 8-13.)
seeking
to
(Doc.
Plaintiffs respond that defendant is really
improperly
use
statements they contain.
these
items
for
the
(Doc. #320, pp. 11-12.)
truth
of
the
Plaintiffs do
not dispute the fact that these documents are currently available
on the internet, but otherwise oppose the Court taking judicial
notice of the documents.
(Id. at 12.)
The Court will take judicial notice of the fact that these
notices and articles now exist, but not the truth of the matters
asserted therein. The Court will not, however, take judicial notice
of when and where these notices and articles were published, since
defendant
has
not
carried
its
burden
of
establishing
this
information to the Court.
C. Exhibits 7, 8, 9, 12, and 14: SDNY Documents
Defendant
requests
the
Court
to
take
judicial
notice
of
certain documents filed in a federal action brought in the Southern
District of New York (“SDNY Action”) by plaintiffs against Florian
35
Homm and others allegedly involved in the “Penny Stock Scheme,” and
a public corporate disclosure filing made by plaintiffs in the
United States Court of Appeals for the Second Circuit in connection
with the SDNY Action.
(Docs. ##252-7; 252-8; 252-9; 252-12; 252-
14; 253, pp. 2-6, 15.)
Specifically, defendant requests the Court
take judicial notice of the Complaint, Amended Complaint, and
Declaration of Stephen A. Cazares in Support of Government’s Motion
to Intervene and Motion to Stay Discovery because these documents
were referenced in plaintiffs’ Complaint.
(Doc. #253, pp. 2-8.)
Defendant also requests the Court take judicial notice of the
Corporate Disclosure Statement filed by plaintiffs because it is a
court filing and thus a proper subject for judicial notice.
(Id.
at 15.)
Plaintiffs argue against the Court taking judicial notice of
the facts contained within the SDNY documents, as they are disputed.
(Doc. #320, p. 14.)
Plaintiffs agree to the Court taking judicial
notice that:
the SDNY Action was filed in October 2009; the complaint
was first amended one month after that; a second amended
complaint was filed on July 6, 2012; each of the
complaints in the SDNY Actions included “Doe” defendants;
the Funds did not oppose the prosecutors’ request for a
stay of discovery in that action; discovery is currently
stayed in that action; and the action contains securities
fraud claims.
(Id. at 16.)
36
Plaintiffs’ Amended Complaint refers to their lawsuit against
Florian Homm and others in the Southern District of New York and
that the action is currently stayed.
31-33, 149.)
(See, e.g., Doc. #196, ¶¶ 12,
Defendant also references the SDNY Action within her
Motion to Dismiss. (See Doc. #252, pp. 20-21, 34, 56, 59.)
The facts contained within the documents are clearly disputed
by the parties and it would therefore be inappropriate to take
judicial notice of facts contained in the documents.
See United
States v. Jones, 29 F.3d 1549, 1553 (11th Cir. 1994) (“[A] court
may take judicial notice of a document filed in another court not
for the truth of the matters asserted in the other litigation, but
rather
to
establish
the
fact
of
filings.” (citation omitted)).
such
litigation
and
related
Accordingly, the Court will take
judicial notice of the existence of the complaint, first amended
complaint, second amended complaint, and stay in the SDNY Action,
and the Corporate Disclosure Statement in the Second Circuit Court
of Appeals in connection with the SDNY Action, but not the truth
of the matters asserted therein.
D. Exhibit 10: 2006 Marital Settlement Agreement
Defendant also requests that the Court take judicial notice
of the Marital Settlement Agreement between defendant Susan Devine
and Florian Homm.
(Docs. ##252-10; 253, pp. 3-8.)
In support,
defendant points to the fact that the Marital Settlement Agreement
was referenced in plaintiffs’ Amended Complaint and attached to
37
plaintiffs’ Motion for Temporary Restraining Order. (Doc. #253, p.
5.)
Plaintiffs
do
not
dispute the
existence of
the
Marital
Settlement Agreement or the words contained within the Marital
Settlement Agreement, but instead dispute the circumstances under
which the Agreement was entered.
(Doc. #320, p. 18.)
The Court finds that the Marital Settlement Agreement is
referenced in the Complaint, is central to the plaintiffs’ claims,
and
its
authenticity
has
not
been
disputed.
Therefore,
its
existence and content can be considered when ruling on defendant’s
Motion to Dismiss.
The Court will take judicial notice of the
existence and content of the Marital Settlement Agreement, but
nothing further.
E. Exhibit 11 9: Letter to Devine
Defendant also requests that the Court take judicial notice
of correspondence in the SDNY action from plaintiffs’ counsel to
defendant dated July 3, 2013 requesting that defendant retain
copies of records in her possession related to her divorce, the
Penny
Stock
Scheme,
etc.
(Docs.
##252-11;
253,
pp.
14-15.)
Plaintiffs oppose this, arguing that the letter does not establish
that plaintiffs were aware of their claims against Devine and, even
9
Defendant’s Motion for Judicial Notice refers to this
correspondence as Exhibit 13 to its Motion to Dismiss when it is
actually Exhibit 11.
38
if it does, the date of the letter is well within the statute of
limitations.
(Doc. #320, pp. 19-20.)
The Court finds that the letter is not a proper subject for
judicial notice and therefore denies defendant’s request.
The
letter is not central to plaintiffs’ case, although it may have
relevance to an affirmative defense.
F. Exhibit 5: Swiss Report
Defendant next requests that the Court take judicial notice
of three pages of the Swiss Report because it was referenced in
plaintiffs’ Amended Complaint.
(Docs. ##252-5; 253, pp. 3-8.)
Plaintiffs assert that the Court should decline to take judicial
notice of the pages from the Swiss Report because the facts are
disputed.
(Doc. #320, pp. 12-14.)
The Court declines to take judicial notice of the three pages
of the Swiss Report.
It appears that defendant is seeking to
introduce the portion of the Swiss Report to show that some language
within
it
divorce.”
translates
to
“sham
decision”
as
opposed
to
“sham
The translation of the phrase in question is disputed
and the Court declines to take judicial notice of the preferred
translation or the document at this stage of the proceedings.
IV. Motion to Dismiss
Under Federal Rule of Civil Procedure 8(a)(2), a Complaint
must contain a “short and plain statement of the claim showing that
the pleader is entitled to relief.”
39
Fed. R. Civ. P. 8(a)(2).
This
obligation
“requires
more
than
labels
and
conclusions,
and
a
formulaic recitation of the elements of a cause of action will not
do.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (citation
omitted).
To survive dismissal, the factual allegations must be
“plausible” and “must be enough to raise a right to relief above
the speculative level.”
Id.
See also Edwards v. Prime Inc., 602
F.3d 1276, 1291 (11th Cir. 2010).
unadorned,
This requires “more than an
the-defendant-unlawfully-harmed-me
accusation.”
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citations omitted).
In deciding a Rule 12(b)(6) motion to dismiss, the Court must
accept all factual allegations in a complaint as true and take them
in the light most favorable to plaintiff, Erickson v. Pardus, 551
U.S. 89 (2007), but “[l]egal conclusions without adequate factual
support are entitled to no assumption of truth,” Mamani v. Berzain,
654
F.3d
1148,
1153
(11th
Cir.
2011)
(citations
omitted).
“Threadbare recitals of the elements of a cause of action, supported
by mere conclusory statements, do not suffice.” Iqbal, 556 U.S. at
678.
“Factual allegations that are merely consistent with a
defendant’s liability fall short of being facially plausible.”
Chaparro v. Carnival Corp., 693 F.3d 1333, 1337 (11th Cir. 2012)
(internal quotation marks and citations omitted).
engages
in
a
two-step
approach:
“When
there
Thus, the Court
are
well-pleaded
factual allegations, a court should assume their veracity and then
40
determine whether they plausibly give rise to an entitlement to
relief.”
Iqbal, 556 U.S. at 679.
The standards set forth in Iqbal and Twombly are altered for
RICO claims dealing with fraud.
Miccosukee Tribe of Indians of
Fla. v. Cypress, 814 F.3d 1202, 1212 (11th Cir. 2015).
When a plaintiff asserts RICO and RICO conspiracy claims,
the court must look at the underlying allegations of
racketeering predicates to determine the nature of the
alleged wrongdoing.
When the underlying allegations
assert claims that are akin to fraud, the heightened
pleading standards of Rule 9(b) apply to the RICO claims.
As such, the pleading requirements do not extend merely
to plausibility, they demand plausibility based upon Rule
9(b)'s heightened degree of specificity. To satisfy the
Rule 9(b) standard, RICO complaints must allege: (1) the
precise statements, documents, or misrepresentations
made; (2) the time and place of and person responsible
for the statement; (3) the content and manner in which
the statements misled the Plaintiffs; and (4) what the
Defendants gained by the alleged fraud.
Id. (internal citation and quotations marks omitted).
A. Federal RICO and RICO Conspiracy, 18 U.S.C. § 1962(c), (d)
Section 1962(c) of the RICO Act makes it unlawful “for any
person employed by or associated with any enterprise engaged in,
or the activities of which affect, interstate or foreign commerce,
to conduct or participate, directly or indirectly, in the conduct
of such enterprise’s affairs through a pattern of racketeering
activity.”
18 U.S.C. § 1962(c).
To establish a federal civil RICO
violation under section 1962(c), the plaintiff must allege and
ultimately prove (1) conduct (2) of an enterprise (3) through a
pattern (4) of racketeering activity and (5) injury to “business
41
or property” (6) that was “by reason of” the substantive RICO
violation.
Williams v. Mohawk Indus., 465 F.3d 1277, 1282 (11th
Cir. 2006) (citing 18 U.S.C. §§ 1962(c), 1964(c)), abrogated on
other grounds as recognized in, Simpson v. Sanderson Farms, Inc.
744 F.3d 702, 714 (11th Cir. 2014).
To establish a federal civil
RICO conspiracy violation under section 1962(d), a plaintiff must
allege and ultimately prove that defendant conspired with another
to violate section 1962(c).
18 U.S.C. § 1962(d).
“To establish a
RICO conspiracy, a plaintiff must show either agreement with the
objective of the conspiracy or agreement to commit two racketeering
predicates.”
Rajput v. City Trading, LLC, 476 F. App’x 177, 180
(11th Cir. 2012).
Defendant moves to dismiss plaintiffs’ Amended Complaint on
the basis that plaintiffs have failed to state federal RICO claims
because: (1) the Private Securities Litigation Reform Act of 1995
(“PSLRA”) bars plaintiffs’ claims, (2) RICO has no extraterritorial
reach, (3) a “marriage” is not a RICO enterprise, (4) plaintiffs
have
failed
to
adequately
plead
a
“pattern
of
racketeering
activity,” and (5) plaintiffs have failed to adequately plead
causation under RICO.
(Doc. #252, pp. 31-58.)
Plaintiffs disagree
with each assertion.
1.
Private Securities Litigation Reform Act of 1995
Defendant Devine contends that the PSLRA bars plaintiffs’ RICO
claims because the RICO claims are predicated on securities law
42
violations.
(Id. at 31-35.)
Defendant argues that the predicate
acts plaintiffs rely on are “all premised on the alleged Penny
Stock Scheme and, thus, rely on conduct ‘actionable as fraud in the
purchase
or
sale
of
securities,’”
(id.
at
33),
and
because
plaintiffs “expressly rely upon conduct that constitutes securities
fraud,” their federal RICO claims are barred by the PSLRA, (id. at
34).
Plaintiffs respond that their RICO claims are not within the
PSLRA bar because “Devine’s alleged conduct is not ‘actionable as
securities fraud.’”
(Doc. #318, p. 15.)
Section 107 of the PSLRA, enacted as an amendment to the
federal civil RICO statute, provides that “no person may rely upon
any conduct that would have been actionable as fraud in the purchase
or sale of securities to establish a violation of section 1962”
unless the person who committed the fraud has been criminally
convicted.
18 U.S.C. § 1964(c).
The Conference Committee Report
accompanying the PSLRA states that the amendment was intended not
only “to eliminate securities fraud as a predicate offense in a
civil RICO action,” but also to prevent a plaintiff from “pleading
other specified offenses, such as mail or wire fraud, as predicate
acts under civil RICO if such offenses are based on conduct that
would have been actionable as securities fraud.”
H.R. Rep. No.
104-396, at 47 (1995) (Conf. Rep.).
“[C]ourts have applied the RICO bar in § 1964(c) broadly,
regardless
of
whether
the
plaintiff
43
explicitly
relied
upon
securities fraud as a predicate act or even had standing to pursue
a securities fraud claim.”
Licht v. Watson, 567 F. App'x 689, 693
(11th Cir. 2014) (citing Bald Eagle Area Sch. Dist. v. Keystone
Fin., Inc., 189 F.3d 321, 330 (3d Cir. 1999)).
“[A] plaintiff
cannot avoid the RICO Amendment’s bar by pleading mail fraud, wire
fraud and bank fraud as predicate offenses in a civil RICO action
if the conduct giving rise to those predicate offenses amounts to
securities fraud.”
Bald Eagle Area Sch. Dist., 189 F.3d at 330.
See also MLSMK Inv. Co. v. JP Morgan Chase & Co., 651 F.3d 268, 277
(2d Cir. 2011) (holding that the PSLRA bar applies “even where a
plaintiff cannot itself pursue a securities fraud action against
the defendant”); Howard v. Am. Online, Inc., 208 F.3d 741, 749 (9th
Cir. 2000) (holding that the RICO bar applies even where the
plaintiff does not have standing to bring a securities fraud
action).
As the Eleventh Circuit recently stated, “[a] plaintiff
may not dodge this bar by pleading other offenses as predicate acts
in a civil RICO action if the claim is based on conduct that would
have been actionable as securities fraud.”
Dusek v. JPMorgan Chase
& Co., 832 F.3d 1243, 1249 (11th Cir. 2016) (citation omitted).
It
is
convicted.
undisputed
that
Devine
has
not
been
criminally
As such, the question becomes whether the RICO causes
of action alleged in Counts I and II rely on conduct that “would
have been actionable as fraud in the purchase or sale of securities”
44
within the meaning of section 1964(c).
If so, the RICO counts are
barred.
The gravamen of plaintiffs’ Amended Complaint is that after
her husband’s securities fraud scheme was disclosed in May 2006,
Devine performed acts and conspired with her husband and others to
hide and launder the proceeds of the securities fraud scheme.
It
is alleged that Devine and her co-conspirators established the
Money Laundering Enterprise “to conceal and preserve the ill-gotten
gains as a ‘multigenerational fortune’ for the Devine-Home family.”
(Doc. #196, ¶ 95.)
Plaintiffs also state that the “objective of
the scheme to defraud was to preserve the ill-gotten funds for
Devine, Homm, and their family, and to continue to deprive the
Funds of the money that was wrongfully taken from them by means of
the Penny Stock Scheme.”
(Id. ¶ 265.)
The RICO predicate acts attributed to defendant all flow from
the efforts to conceal and preserve the proceeds of the successful
securities fraud scheme:
(1) Money Laundering in Violation of 18
U.S.C. § 1956(a)(1)(B)(i) 10; (2) Money Laundering in Violation of
10
Plaintiffs’ Amended Complaint alleges that the “property
involved in those financial transactions was in fact derived from
specified unlawful activity within the meaning of 18 U.S.C. §
1956(a)(1) and (c)(7) — namely, the Penny Stock Scheme . . . which
violated inter alia, Section 10(b) of the Securities Exchange Act
of 1934 . . . .” (Doc. #196, ¶ 244.)
45
18 U.S.C. § 1956(a)(1)(A)(i) 11; (3) Money Laundering in Violation
of 18 U.S.C. § 1956(a)(2)(A) 12; (4) Money Laundering in Violation
of 18 U.S.C. § 1956(a)(2)(B)(i) 13; (5) Monetary Transactions in
Property Derived from Unlawful Activity in Violation of 18 U.S.C.
§ 1957 14; (6) Transportation of Stolen, Converted, or FraudulentlyTaken Goods, Securities, or Money in Violation of 18 U.S.C. §
2314 15; (7) Receipt, Possession, Concealment, Sale, or Disposal of
Stolen, Converted, or Taken Goods in Violation of 18 U.S.C. §
11
Plaintiffs’ Amended Complaint alleges that the property
involved was "derived from specified unlawful activity within the
meaning of 18 U.S.C. § 1956(a)(1) and (c)(7) — namely, the Penny
Stock Scheme . . . which violated inter alia, Section 10(b) of the
Exchange Act.” (Id. ¶ 244F.)
12
Plaintiffs’ Amended Complaint alleges that Devine “knowingly
transported, transmitted, or transferred monetary instruments or
funds to a place in the United States from or through a place
outside the United States. . . . with the intent to promote the
carrying on of . . . the Money Laundering Enterprise.” (Id. ¶¶
248-49.)
13
Plaintiffs’
Amended
Complaint
alleges
that
Devine
transferred “the proceeds of some form of unlawful activity —
namely, the Penny Stock Scheme” as a basis for this predicate act.
(Id. ¶ 252.)
14
Plaintiffs’ Amended Complaint alleges that the money was
“derived from specific unlawful activity within the meaning of 18
U.S.C. § 1957(a) and (f)(3) — namely, the Penny Stock Scheme . .
., which violated, inter alia, Section 10(b) of the Exchange Act.”
(Id. ¶ 254.)
15
Plaintiffs’
Amended
Complaint
alleges
that
Devine
“transported, transmitted, or transferred goods, securities, or
money, of a value of $5,000 or more — namely, proceeds of the Penny
Stock Scheme” as a basis for this predicate act. (Id. ¶ 258.)
46
2315 16; and (8) Wire Fraud in Violation of 18 U.S.C. § 1343. 17
(Id.
¶¶ 241-66.)
While the RICO predicate acts against Devine are certainly
related to the Penny Stock Scheme, the conduct alleged is not
“conduct that would . . . [be] actionable as fraud in the purchase
or sale of securities.”
after
the
purchase
laundering
is
an
underlying
criminal
or
The alleged conduct at issue took place
sale
offense
to
offense,
of
be
it
securities.
punished
cannot
“Because
separately
occur
predicate crime becomes a completed offense.”
until
[m]oney
from
the
after
the
United States v.
Gross, --- F. App’x ----, No. 15-11780, 2016 WL 5929206, at *9
(11th Cir. Oct. 12, 2016) (alteration in original) (citing United
States v. Nolan, 223 F.3d 1311, 1315 (11th Cir. 2000)).
“By
definition, the injury caused by an offense such as money laundering
cannot occur until money is received by the perpetrator.
Yet
Congress has recognized that money laundering and other postinvestment
offenses
may
constitute
predicate
acts
causing
racketeering injury for which damages may be recovered under §
1964.”
Maiz v. Virani, 253 F.3d 641, 674 (11th Cir. 2001) (citing
18 U.S.C. § 1961(1)(B)).
16
Plaintiffs premise this predicate act on the Penny Stock
Scheme proceeds being stolen, unlawfully converted, and/or taken.
(Id. ¶ 261.)
17
The wire fraud predicate act involves proceeds of Penny
Stock Scheme. (Id. ¶ 266.)
47
The Court finds that the predicate acts alleged as part of the
pattern of racketeering activity in this case are not based on
conduct that would be actionable as fraud in the purchase or sale
of securities.
Counts I and II are therefore not barred by the
PSLRA.
2.
Extraterritorial Application of Federal RICO
Defendant next asserts that plaintiffs’ federal RICO claims
fail because the federal RICO statute has no extraterritorial
application and plaintiffs have not alleged a domestic injury as
required by RJR Nabisco, Inc. v. European Community, 136 S. Ct.
2090 (2016).
(Doc. #427.)
Plaintiffs respond that they have
sufficiently alleged a domestic injury under RJR Nabisco, Inc.
(Doc. #426.) 18
This Court previously held that plaintiffs’ Amended Complaint
contained sufficient allegations to show that their claims “are not
solely based on extra-territorial activities.”
(Doc. #368, pp. 20-
21.) RJR Nabisco, Inc. requires a fresh look at this determination.
Section 1964(c) allows for a private right of action for “[a]ny
person injured in his business or property by reason of a violation
of
section
1962.”
18
U.S.C.
§
1964(c).
RJR
Nabisco,
Inc.
considered whether RICO applies extraterritorially — “that is, to
18
The parties have also alerted the Court as to supplemental
authority regarding the RJR Nabisco, Inc. decision. (See Docs. ##
466, 467, 472, 479, 483, 487, 489, 492, 512, 515.)
48
events occurring and injuries suffered outside the United States.”
136 S. Ct. at 2096.
related
but
This required the Court to determine two
importantly
distinct
issues:
(1)
“[D]o
RICO's
substantive prohibitions, contained in [section] 1962, apply to
conduct that occurs in foreign countries?”; and (2) “[D]oes RICO's
private right of action, contained in [section] 1964(c), apply to
injuries that are suffered in foreign countries?”
As
to
substantive
the
first issue,
prohibitions
of
the
Supreme
section
1962
Court
do
Id. at 2099.
held
that
“appl[y]
to
the
some
foreign racketeering activity.” Id. at 2103. To be included within
the
“some,”
the
foreign
racketeering
activity
must
violate
a
predicate statute which itself has extraterritorial application.
Id.
As the Supreme Court stated, “[a] violation of [section] 1962
may be based on a pattern of racketeering that includes predicate
offenses committed abroad, provided that each of those offenses
violates a predicate statute that is itself extraterritorial.”
Id.
“Accordingly, conduct occurring in foreign countries may violate
Section 1962, and thus give rise to criminal liability or a civil
enforcement proceeding, when the state or federal statutes setting
forth the underlying predicate offenses overcome the presumption
against extraterritoriality.”
City of Almaty v. Ablyazov, No. 15-
CV-5345 (AJN), 2016 WL 7756629, at *4 (S.D.N.Y. Dec. 23, 2016).
Applying this to the case at hand, there is extraterritorial
jurisdiction over conduct prohibited by section 1956 if the conduct
49
is by a United States citizen and it involves funds exceeding
$10,000. 18 U.S.C. § 1956(f). This principle also determines the
extraterritorial
reach
of
conspiracy
charges relating to section 1956.
and
aiding
and
abetting
United States v. Belfast, 611
F.3d 783, 813 (11th Cir. 2010) (“[E]xtraterritorial jurisdiction
over a conspiracy charge exists whenever the underlying substantive
crime applies to extraterritorial conduct.”); United States v.
Yakou, 428 F.3d 241, 252 (D.C. Cir. 2005) (“The aiding and abetting
statute, however, is not so broad as to expand the extraterritorial
reach of the underlying statute.”).
The prohibition against engaging in monetary transactions in
criminally derived property predicate act has also been held to
apply extraterritorially.
See 18 U.S.C. § 1957(d)(2) (providing
that statute applies where “the offense under this section takes
place outside the United States and under special jurisdiction, but
the defendant is a United States person”); RJR Nabisco, Inc., 136
S. Ct. at 2101 (finding 18 U.S.C. § 1957(d)(2) applies to “at least
some foreign conduct”).
Plaintiffs also allege predicate acts of
transportation of stolen, converted, or fraudulently-taken goods,
securities, or money in violation of 18 U.S.C. § 2314; receipt,
possession, concealment, sale, or disposal of stolen, converted or
taken goods in violation of 18 U.S.C. § 2315; and wire fraud in
violation of 18 U.S.C. § 1343.
While the Second Circuit has held
that 18 U.S.C. § 1343 does not have extraterritorial application,
50
European Cmty. v. RJR Nabisco, Inc.(RJR Nabsico, Inc. 2d Cir.), 764
F.3d 129, 140-41 (2d Cir. 2014) (finding the wire fraud statute
does not overcome the presumption against extraterritoriality),
rev’d on other grounds, RJR Nabisco, Inc., 136 S. Ct. 2090, other
courts have held to the contrary, see United States v. Georgiou,
777 F.3d 125, 137-38 (3d Cir. 2015);
United States v. Lyons, 740
F.3d 702, 718 (1st Cir. 2014), and it does not appear that the
Eleventh Circuit has opined on the issue.
Additionally, 18 U.S.C. § 2314 and 18 U.S.C. § 2315 both
contain
language
that
could
extraterritorial application.
transports,
transmits,
or
arguably
be
interpreted
to
have
See 18 U.S.C. § 2314 (“Whoever
transfers
in
interstate
or
foreign
commerce any goods, wares, merchandise, securities or money, of the
value of $5,000 or more, knowing the same to have been stolen . .
. .” (emphasis added)); 18 U.S.C. § 2315 (“Whoever receives,
possesses, conceals, stores, barters, sells, or disposes any goods,
wares, or merchandise, securities, or money of the value of $5,000
or more . . . which have crossed a State or United States boundary
after being stolen . . . .” (emphasis added)).
While 18 U.S.C. §
2314 mentions “foreign commerce,” some courts have held that this
in and of itself is insufficient to overcome the presumption against
extraterritoriality.
See Morrison v. Nat’l Australia Bank Ltd.,
561 U.S. 247, 263 (2010) (“The general reference to foreign commerce
in the definition of ‘interstate commerce’ does not defeat the
51
presumption against extraterritoriality.”); RJR Nabsico, Inc. 2d
Cir., 764 F.3d at 141 (“We conclude that the references to foreign
commerce in these statutes . . . do not indicate a congressional
intent that the statutes apply extraterritorially.”); United States
v. Hayes, 99 F. Supp. 2d 409, 419-20 (S.D.N.Y. 2015).
Georgiou,
777
F.3d
125,
137-38
(citing
Pasquantino
But see
v.
United
States, 554 U.S. 349, 371-72 (2005)); Lyons, 740 F.3d 702, 718 (1st
Cir. 2014).
However, without drawing a line as to whether these predicate
acts apply extraterritorially, plaintiffs have alleged domestic
conduct sufficient to support these predicate act violations at
this time.
(Doc. #196, ¶¶ 257-66.)
Accordingly, the predicate
acts in and of themselves do not violate the presumption against
extraterritoriality.
On the second issue, the Supreme Court found that “the civil
remedy
is
not
coextensive
with
[section]
1962’s
substantive
prohibitions,” RJR Nabisco, Inc., 136 S. Ct. at 2108, and held that
“[i]rrespective of any extraterritorial application of [section]
1962 . . . [section] 1964(c) does not overcome the presumption
against
extraterritoriality,”
id.
at
2106.
For
this
reason,
“[s]ection 1964(c) requires a civil RICO plaintiff to allege and
prove a domestic injury to business or property and does not allow
recovery for foreign injuries.”
Id. at 2111.
52
The Supreme Court
dismissed plaintiffs' RICO claims because they “rest[ed] entirely
on injury suffered abroad.”
The
courts
Supreme
in
Court
analyzing
foreign in nature.
Id.
admittedly
whether
provided
injuries
little guidance
alleged
are
domestic
to
or
Id. (“The application of this rule in any given
case will not always be self-evident, as disputes may arise as to
whether a particular alleged injury is ‘foreign’ or ‘domestic.’
But we need not concern ourselves with that question in this
case.”).
A few district courts have examined whether the alleged
injuries
constituted
Nabisco,
Inc.,
domestic
applying
or
varying
foreign
and
injuries
evolving
under
standards.
RJR
See
Ablyazov, 2016 WL 7756629, at *7-10; Exceed Indus., LLC v. Younis,
No 15C14, 2016 WL 6599949, at *3 (N.D. Ill. Nov. 8, 2016); Garcia
v.
Lion
Mexico
Consol.,
L.P.,
No.
5:15-CV-1116-DAE,
2016
WL
6157436, at *3 (W.D. Tex. Oct. 21, 2016); Bascuñan v. Elsaca, No.
15-cv-2009 (GBD), 2016 WL 5475998, at *1 (S.D.N.Y. Sept. 28, 2016);
Elsevier, Inc. v. Grossman, No. 12 Civ. 5121 (KPF), 2016 U.S. Dist.
LEXIS 103444, at *1 (S.D.N.Y. Aug. 4, 2016).
Plaintiffs assert that “in the context of federal RICO, the
location of a plaintiff’s economic injury is the place where the
acts producing the injury occurred,” (Doc. #426, p. 6), and that
the Amended Complaint asserts sufficient facts to allege that
“Devine’s
injury-causing
conduct
occurred
in
the
U.S.”
(id.).
Plaintiffs point to personal jurisdiction cases for the proposition
53
that the economic injury occurred “where the original events that
caused the alleged injury took place.”
omitted).
(Id. at 8) (citation
Alternatively, plaintiffs assert the location of the
injury is the location of the property at issue when it was harmed. 19
(Id. at 9-12.)
In support of this proposition, plaintiffs cite
cases dealing with the conversion of property.
Plaintiffs
argue
that
“Devine
caused
injury
(Id. at 9-10.)
to
the
Funds
by
directing specific proceeds to the U.S. and then dissipating those
proceeds so that the Funds could never secure them.”
(Id. at 10.)
Defendant, on the other hand, asserts that the essential
inquiry focuses on the “locus of the injury, and not the predicate
activity.”
(Doc. #427, p. 5.)
Defendant asserts that each one of
the plaintiffs’ alleged injuries occurred outside of the United
States and, alternatively, were caused by the Penny Stock Scheme
and not Devine’s actions.
(Id. at 6-13.)
Defendant also asserts
that plaintiffs cannot recover for the predicate acts that the
Supreme Court held do not apply extraterritorially.
(Id. at 13-
14.)
Defendant is correct to the extent she argues that the focus
of
the
matter
is
the
geographic
19
location
of
the
injury
to
Plaintiffs also discuss the constructive trust and the
location of the constructive trust as the place where the injury
occurred.
The Court summarily rejects this argument, since the
constructive trust is the legal fiction this lawsuit seeks to
create.
54
plaintiffs, not the location of a defendant’s wrongful acts.
RJR
Nabisco, Inc., 136 S. Ct. at 2108; Bascuñan, 2016 WL 5475998, at
*5-6.
Defendant is also correct that plaintiffs cannot recover for
injuries which occur outside the United States, even if there may
be other injuries for which recovery is permissible.
RJR Nabisco,
Inc., 136 S. Ct. at 2111.
It is clear that the Amended Complaint has only alleged
economic injuries.
The Amended Complaint alleges the following
injuries:
the lost opportunity to recover certain money through
mechanisms available in the Swiss proceedings resulting
from Devine’s transfers from Swiss accounts to evade
imminent freeze orders; the lost opportunity to recover
certain money that Devine has dissipated or used to
purchase functionally untraceable assets (such as gold);
the costs associated with attempting to trace Devine’s
hidden assets around the world; recoupment of the Penny
Stock Scheme proceeds; and the continued deprivation of
money taken from the Funds by means of the Penny Stock
Scheme.
(Doc. #196, ¶ 269.)
The Court finds that these economic injuries
were suffered by the plaintiffs in the only location where the
plaintiffs were located – in the Cayman Islands. 20
(See id. ¶ 9.)
Even under plaintiffs’ proposed focus - the place where the
acts producing the injury occurred or the location of the property
20
The Court notes the Supreme Court’s statement that “[t]his
does not mean that foreign plaintiffs may not sue under RICO.” RJR
Nabisco, Inc., 136 S. Ct. at 2110 n.12. There are no allegations
in the Amended Complaint which would allow the foreign plaintiffs
in this case to sue under RICO.
55
at issue when it was harmed – Counts I and II are essentially
gutted.
The Amended Complaint alleges many acts of misconduct
which took place entirely outside the United States and therefore
cannot form the basis of RICO recovery.
For example, it is alleged
that defendant concealed valuable art and furniture at a home in
Mallorca, Spain, (id. ¶¶ 96-98), and that eighteen of the twenty
bank accounts allegedly used by defendant to carry out the Money
Laundering Enterprise are foreign bank accounts, (id. ¶ 144).
The
two United States accounts are alleged to have been the consistent
recipient of proceeds from the Penny Stock Scheme.
(p)).
(Id. ¶ 144(k),
Many of the allegedly wrongful acts by Devine are pleaded
in such a manner in which it is not possible to determine if they
were committed domestically or abroad, although it appears that
abroad was the more typical situation.
At best, under any test for
determining domestic injury, the Amended Complaint does not set
forth plausible civil RICO claims.
Given the intervening decision in RJR Nabisco Inc., the Court
will allow plaintiffs to file a second amended complaint to attempt
to state plausible RICO claims.
The Court declines to address the
remaining arguments in light of the ruling on this issue.
56
B. Florida RICO
Activities 21
and
Florida
Civil
Remedies
for
Criminal
Defendant Devine moves to dismiss plaintiffs’ Florida RICO and
Florida Civil Remedies for Criminal Activities counts on the same
grounds that it presented for dismissing plaintiffs’ federal RICO
counts.
1.
(Doc. #252, pp. 31-58.)
PSLRA
Devine summarily asserts that “given that Plaintiffs’ state
RICO claims are based entirely on federal predicates to which the
PSLRA applies, those claims are barred, too, for there is no basis
to provide relief under Florida law greater than that afforded
under federal law.”
(Id. at 35) (citation omitted).
The Court is
not convinced, even if the federal RICO claims had been dismissed
as barred by the PSLRA.
The plain language of the PSLRA does not impact a state RICO
claim: “[N]o person may rely upon any conduct that would have been
actionable as fraud in the purchase or sale of securities to
establish a violation of section 1962.”
18 U.S.C. § 1964(c)
(emphasis added). The Florida RICO count does not seek to establish
a violation of section 1962, and the Court declines to extend the
PSLRA bar to state RICO claims.
Additionally, the federal PSLRA
amended the federal RICO statute in 1995.
21
In the twenty-two years
The Act is actually called “Civil Remedies for Criminal
Practices Act.” Fla. Stat. § 772.101.
57
since its amendment, there has been no equivalent amendment to the
Florida RICO statute.
Accordingly, the Court declines to dismiss
plaintiffs’ Florida RICO and Florida Civil Remedies for Criminal
Activities claims as barred by the PSLRA even if the federal RICO
claims had been dismissed on that ground.
2.
Extraterritorial Application of Florida RICO
Defendant next asserts that plaintiffs’ Florida RICO claims
fail because the Florida RICO statute has no extraterritorial
application.
(Docs. ##252, p. 40; 427, p. 3 n.2.)
Defendant
asserts that the Supreme Court’s holding in RJR Nabisco, Inc. is
applicable to the Florida RICO statute and bars plaintiffs’ Florida
RICO claims.
(Docs. ##427, p. 3 n.2, p. 15 n.13; 449.)
Plaintiffs
respond that RJR Nabisco, Inc. does not apply to Florida RICO claims
and, even if it does apply, plaintiffs have sufficiently alleged a
domestic injury under RJR Nabisco, Inc.
(Doc. #426.)
As the Court held previously, Florida civil RICO does not
apply extraterritorially.
(Doc. #368, p. 17); see also Equitable
Life Assurance Soc’y of the U.S. v. McRee, 75 Fla. 257, 265 (1918)
(“It is manifest that the statute can have no force beyond the
limits of this State.”).
this determination.
Nothing in RJR Nabisco, Inc. undermines
With or without RJR Nabisco, Inc., the Florida
RICO statute does not apply extraterritorially.
Plaintiffs argue, however, that they have sufficiently alleged
a domestic injury to properly plead a Florida RICO claim.
58
The
federal RICO civil remedy provision and the Florida RICO civil
remedy provision are nearly identical, 22
and it is clear that the
Florida RICO Act is patterned after the federal RICO Act.
Arthur
v. JP Morgan Chase Bank, NA, 569 F. App’x 669, 679 (11th Cir. 2014);
Jackson v. BellSouth Tellecomms., 372 F.3d 1250, 1263 (11th Cir.
2004) (“We have explained that interpretation of Florida’s RICO law
is informed by case law interpreting the federal RICO statute . .
. on which Chapter 772 is patterned.” (alteration in original)
(citation omitted)); Lugo v. State, 845 So. 2d 74, 96 n.39 (Fla.
2003). As such, federal cases interpreting the federal RICO statute
have been found to be persuasive when interpreting the Florida RICO
Act.
See Jackson, 372 F.3d at 1263–64 (“[T]he analysis we apply
22
The federal RICO civil remedies provision provides in
pertinent part: “Any person injured in his business or property by
reason of a violation of section 1962 of this chapter may sue
therefore in any appropriate United States district court and shall
recover threefold the damages he sustains and the cost of the suit,
including a reasonable attorney’s fee . . . .” 18 U.S.C. § 1964(c).
The Florida RICO civil remedies provision titled “Civil cause
of action” provides:
Any person who proves by clear and convincing evidence
that he or she has been injured by reason of any violation
of the provisions of s. 772.103 shall have a cause of
action for threefold the actual damages sustained and,
in any such action, is entitled to a minimum damages in
the amount of $200, and reasonable attorney’s fees and
court costs in the trial and appellate courts.
Fla. Stat. § 772.104(1).
59
to the plaintiffs’ federal RICO claims is equally applicable to
their state RICO claims.” (citation omitted)); O’Malley v. St.
Thomas Univ., Inc., 599 So. 2d 999, 1000 (Fla. 3d DCA 1992) (“Since
Florida RICO is patterned after federal RICO, Florida courts have
looked to the federal courts for guidance in interpreting and
applying the act.
Therefore, federal decisions should be accorded
great weight.”). The Court finds that Florida courts would now
apply the holding of RJR Nabisco, Inc. to determine if a domestic
injury for Florida civil RICO claims is adequately pleaded.
As with the federal RICO claims, the Court finds that the
injuries alleged by plaintiffs in the Florida RICO claims were
either clearly suffered outside of the United States, or at least
were not plausibly alleged as domestic injuries.
Accordingly,
Counts III and IV of plaintiffs’ Amended Complaint are dismissed
without prejudice.
C. Plaintiffs’ Unjust Enrichment and “Constructive Trust” Claims
1.
Statute of Limitations
Defendant asserts that plaintiffs’ remaining claims are barred
by the statute of limitations.
(Doc. #252, pp. 58-61.)
Defendant
only discusses plaintiffs’ federal and Florida RICO claims being
barred by the statute of limitations, and completely fails to argue
or discuss how plaintiffs’ “other claims” are untimely.
(Id.)
“Generally, the existence of an affirmative defense will not
support a motion to dismiss,” Quiller v. Barclays Am./Credit, Inc.,
60
727 F.2d 1067, 1069 (11th Cir. 1984), aff’d on reh'g, 764 F.2d 1400
(11th
Cir.
opinion),
1985)
because
(en
banc)
(per
plaintiffs
are
curiam)
not
(reinstating
required
to
panel
negate
an
affirmative defense in their complaint, La Grasta v. First Union
Sec., Inc., 358 F.3d 840, 845 (11th Cir. 2004).
A complaint may
be dismissed, however, when the existence of an affirmative defense
“clearly appears on the face of the complaint.”
at 1069.
Quiller, 727 F.2d
See also La Grasta, 358 F.3d at 845 (“[A] Rule 12(b)(6)
dismissal on statute of limitations grounds is appropriate only if
it is ‘apparent from the face of the complaint’ that the claim is
time-barred” (quoting Omar ex rel. Cannon v. Lindsey, 334 F.3d
1246, 1251 (11th Cir. 2003))); Douglas v. Yates, 535 F.3d 1316,
1321 (11th Cir. 2008)(same).
The Court finds defendant has not shown that plaintiffs’
claims for unjust enrichment and constructive trust are barred by
the statute of limitations as clearly set forth in the Amended
Complaint.
Defendant
neither
discusses
what
the
applicable
statutes of limitations are for the “other claims” nor discusses
how the claims violate the applicable statute of limitations as
clearly set forth in the Amended Complaint.
Accordingly, the Court
declines to dismiss Counts V and VI on this basis.
2.
Constructive Trust as a Cause of Action
In defendant’s Reply, she asserts that Florida law does not
recognize a cause of action for constructive trust.
61
(Doc. #336,
p. 21.)
Plaintiffs argue that raising new arguments in a Reply is
improper, and that the Court has already addressed this issue.
(Doc. #351, pp. 24 n.20, 25.)
While asserting new arguments in a Reply brief is improper,
the parties previously argued this exact issue and the Court ruled
on it.
The Court finds no prejudice from the untimely assertion
of the issue.
The Court follows its prior determination that, at
least in the circumstances of this case, a “constructive trust is
not a cause of action, but an equitable remedy based upon an
established cause of action.”
(Doc. #368, pp. 24-25 (citing
Collinson v. Miller, 903 So. 2d 221, 228 (Fla. 2d DCA 2005)).
Plaintiffs have requested a constructive trust as a remedy to their
unjust
enrichment
cause
of
action,
and
therefore
the
Court
dismisses plaintiffs’ freestanding cause of action for constructive
trust.
3.
Accordingly, Count VI is dismissed with prejudice.
Unjust Enrichment
Also within her Reply, Devine asserts that plaintiffs’ claim
for unjust enrichment fails because it is premised upon wrongful
conduct.
improper
(Doc. #336, p. 21.)
to
raise
new
issues
Plaintiffs respond that it is
in
a
Reply,
plaintiffs’
unjust
enrichment claim is not predicated on wrongdoing, and, even if it
is, there is no distinction between unjust enrichment and wrongful
enrichment under Florida law.
(Doc. #351, pp. 24-25.)
62
As previously noted, it is improper to present new arguments
in a Reply.
Herring, 397 F.3d at 1342.
Despite the issue being
improperly raised, the Court previously ruled on this exact issue
in its Opinion and Order on Devine’s Motion to Dissolve Temporary
Restraining
Order.
(Doc.
#368,
pp.
21-23.)
As
previously
discussed, while alternative pleading is allowed, plaintiffs have
clearly incorporated paragraphs involving wrongdoing into their
unjust enrichment claim.
(Docs. ##196, ¶ 301; 368, p. 22.)
Also,
the Court cannot find, nor have the parties provided, any Florida
legal authority for the proposition that an unjust enrichment claim
under
Florida
law
cannot
be
premised
upon
wrongful
conduct.
Defendant relies on a footnote in Guyana Telephone & Telegraph Co.,
Ltd.
v.
Melbourne
International
Communications,
Ltd.
for
the
proposition that a claim of unjust enrichment cannot be premised
on wrongful conduct.
329 F.3d 1241, 1245 n.3 (11th Cir. 2003).
However, this statement relies upon a Law Review Article that is
not based on Florida law and is merely dicta.
Id.
See State Farm
Fire & Cas. Co. v. Silver Star Health & Rehab. Inc., No. 6:10–cv–
1103–Orl–31GJK, 2011 WL 6338496, at *6 (M.D. Fla. Dec. 19, 2011),
aff’d, 739 F.3d 579 (11th Cir. 2013).
on anyone for any purpose.”
“And dicta is not binding
Edwards, 602 F.3d at 1298 (citations
omitted).
Accordingly, the Court denies defendant’s Motion to Dismiss
as to Count V on this basis.
63
D. Remedy of Disgorgement
Defendant asserts that plaintiffs’ disgorgement remedy is not
a proper remedy under civil RICO.
(Doc. #252, p. 62.)
Devine
essentially reasserts its previous argument that plaintiffs’ claim
of unjust enrichment fails because it is based upon wrongful
conduct, therefore there is no cause of action to support the
disgorgement remedy.
(Id.)
Plaintiffs respond that challenging a
remedy is not within the proper scope of a motion to dismiss,
equitable
remedies
are
available
under
federal
RICO,
and
plaintiffs’ other claims support their disgorgement remedy. (Doc.
#318, pp. 60-62.)
The Court need not address whether plaintiffs’ disgorgement
remedy is available under their RICO claims as those claims have
been dismissed from the action. As to plaintiffs’ unjust enrichment
claim, the Court has already addressed whether plaintiffs’ unjust
enrichment
conduct.
claim
is
precluded
due
to
allegations
of
wrongful
Additionally the Court finds that disgorgement is an
appropriate measure of damages for an unjust enrichment claim.
Montage Grp., Ltd. v. Athle-Tech Comp. Sys., Inc., 889 So. 2d 180,
196
(Fla.
2d
DCA
2004)
(finding
application
of
remedy
of
disgorgement was appropriate for unjust enrichment claim).
Accordingly, defendant’s Motion to Dismiss Count V is denied.
Accordingly, it is now
ORDERED:
64
1.
Defendant’s
Motion
to
Strike
Plaintiffs’
Amended
Complaint (Doc. #254) is DENIED.
2.
Defendant’s
Request
for
Judicial
Notice
of
Exhibits
Attached to Motion to Dismiss Plaintiffs’ Amended Complaint (Doc.
#253) is GRANTED in part and DENIED in part, as set forth herein.
3.
Defendant’s Motion to Dismiss Amended Complaint (Doc.
#252) is GRANTED in part and DENIED in part.
a. Counts I and II of plaintiffs’ Amended Complaint are
dismissed without prejudice;
b. Counts III and IV of plaintiffs’ Amended Complaint are
dismissed without prejudice;
c. Defendant’s Motion to Dismiss is denied as to Count V;
and
d. Count VI is dismissed with prejudice.
4.
Plaintiffs may file a Second Amended Complaint within
twenty-one (21) days of the date of this Opinion and Order.
DONE AND ORDERED at Fort Myers, Florida, this __8th__ day of
February, 2017.
Copies:
Parties of record
65
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