Exeed Industries LLC et al v. Younis et al
Filing
116
MEMORANDUM Opinion and Order: For the reasons stated in the accompanying Memorandum Opinion and Order, Defendant's Motion to Dismiss 104 is granted. Count I is dismissed as to all Defendants. Signed by the Honorable James B. Zagel on 11/8/2016. Mailed notice(ep, )
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
EXEED INDUSTRIES, LLC, EXEED
ELECTROCAB, LLC,
Plaintiffs,
No. 15 C 14
Judge James B. Zagel
v.
OMAR YOUNIS a/k/a “Brian Kamal” a/k/a
“Alex M. Nessar,” MOHAMMAD YOUNIS,
MOHAMED FAYYAD AL-HASSAN
RIYAL, WABEL INTERNATIONAL FOR
ELECTRIC AND ELECTRONIC
MATERIALS LLC,
Defendants.
MEMORANDUM OPINION AND ORDER
Before the Court is Defendant Riyal’s Motion to Dismiss For Failure to State a Claim
Pursuant to FED. R. CIV. P. 12(b)(1), 12(b)(2), 12(b)(5), and 12(b)(6), combined pursuant TO FED.
R. CIV. P. 12(g). For the following reasons, Defendant’s Motion is granted.
I. BACKGROUND
Plaintiff Exeed Industries is a limited liability company incorporated and based in the
United Arab Emirates (“UAE”), where it specializes in industrial building materials, agriculture,
and international industrial investments. Plaintiff Exeed Electrocab is Exeed Industries’
subsidiary, likewise incorporated in the UAE.
Defendant Mohamed Fayyad Al-Hassan Riyal is the father-in-law of Defendant Omar
Younis, who, along with his brother, Defendant Mohammed Younis, are former employees of
Exeed Electrocab. Plaintiffs have sued the brothers as well as Riyal and the Younis family’s coowned company Wabel International, which is based in Jordan (collectively “Defendants”).
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However only the first count—violation of the RICO statute—applies to Defendant Riyal.
On January 2, 2015, Plaintiffs filed their complaint in this court, alleging violations of the
Racketeer Influenced and Corrupt Organizations Act (“RICO”) by Riyal and the Younis
brothers. Plaintiffs allege that Riyal’s role was to act as a fraudulent “agent” during supplier
agreements, to transfer the proceeds derived from an illegal kickback scheme in and out of the
United States by use of his bank account, and to assist Defendants Mohammed and Omar Younis
in purchasing real estate using these illegal proceeds.
According to Plaintiffs, Defendants set up a secret illegal kickback scheme no later than
July 2005 while the two brothers were employed by Exeed. In furtherance of the scheme,
Defendants allegedly inflated contract prices and duped some of Plaintiff’s suppliers into paying
fraudulent invoices. In some cases, payments were made directly to the Younis brothers; in
others, they were either made to their company Wabel International, with Defendant Riyal at
times falsely acting as an “agent” of the company, or to a nonexistent company, “Mohamed
Riyal Engineering and Marketing Consulting Co.” (“MREMC”). Plaintiffs allege that payments
made to MREMC were actually made to Riyal’s personal bank account, as were some of the
payments supposedly made to Wabel. On several occasions, these payments were made via wire
transfer from suppliers with offices in the U.S., and two of the transfers originated from banks in
Chicago. Plaintiffs allege that the total amount of illegal proceeds deposited into Riyal’s account
exceeded 15 million dollars.
Plaintiffs allege that in 2006, some of the illegal proceeds deposited in Defendant Riyal’s
account were moved via wire transfer into U.S. bank accounts that were ultimately used by
Defendant Omar Younis to purchase land in California and Illinois. Although Defendants Omar
Younis and Mohammed Younis are now alleged to live in the United States, Defendant Riyal is
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believed to reside in Jordan.
On April 8, 2015, this Court authorized email service on Riyal pursuant to Federal Rule
of Civil Procedure 4(f)(3). Plaintiffs attempted to provide Riyal with service of process via an
email address obtained from Defendant Omar Younis; however, they received a response that the
email could not be delivered to that address. After engaging in limited discovery, Plaintiffs
obtained a different email address for Riyal from Defendant Omar Younis, which they used to
successfully serve Riyal on September 24, 2015. Plaintiffs’ Motion to Deem Service Effective
was granted on June 1, 2016.
Defendant Riyal filed a motion to dismiss Count I of Plaintiff’s Amended Complaint on
August 12, 2016 based on several theories. First Riyal argues that this Court lacks personal
jurisdiction over Riyal because he lacks sufficient contacts with Illinois to establish either
general or specific personal jurisdiction, and thus Count I must be dismissed under Rule
12(b)(2). Second, Riyal argues that service of process on Riyal was inadequate, and thus Count I
must be dismissed under Rule 12(b)(5). Third, he argues that the Amended Complaint does not
allege a domestic injury as required under RJR Nabisco, Inc. v. European Cmty., 136 S. Ct. 2090,
2111 (2016) and thus Count I must be dismissed under Rules 12(b)(1) and 12(b)(6). Because
Defendant’s third argument is dispositive, I will begin there.
II. DISCUSSION
A. Legal Standard
A motion under Federal Rule of Civil Procedure 12(b)(6) “challenges the sufficiency of the
complaint to state a claim upon which relief may be granted.” Hallinan v. Fraternal Order of
Police of Chi. Lodge No. 7,570 F.3d 811, 820 (7th Cir. 2009). When reviewing a Rule
12(b)(6) motion to dismiss, the Court accepts as true all well-pleaded factual allegations in the
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complaint and draws all reasonable inferences in the non-movant’s favor. Erickson v.
Pardus, 551 U.S. 89, 94, 127 S. Ct. 2197, 167 L.Ed.2d 1081 (2007) (citing Bell Atl. Corp. v.
Twombly, 550 U.S. 544, 555, 127 S. Ct. 1955, 167 L.Ed.2d 929 (2007)).
A motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(1) asks the court
to dismiss an action over which it allegedly lacks subject matter jurisdiction. FED. R. CIV. P.
12(b)(1). “The burden of proof on a 12(b)(1) issue is on the party asserting jurisdiction.” United
Phosphorus, Ltd. v. Angus Chem. Co., 322 F.3d 942, 946 (7th Cir.2003), overruled on other
grounds by Minn–Chem, Inc. v. Agrium, Inc., 683 F.3d 845 (7th Cir.2012). All reasonable
inferences are drawn in favor of the plaintiff, and all well-pleaded allegations are accepted as
true. Long v. Shorebank Dev. Corp., 182 F.3d 548, 554 (7th Cir.1999). Finally, when considering
a Rule 12(b)(1) motion to dismiss, the court may look beyond the allegations of the complaint
and may consider other submitted evidence. See Johnson v. Apna Ghar, Inc., 330 F.3d 999, 1001
(7th Cir.2003) (quoting id.)
B. Domestic Injury
Section 1962(c) of RICO, invoked by Plaintiffs in this action, makes it unlawful for an
individual employed by or associated with an enterprise to conduct that enterprise’s affairs
through a pattern of racketeering activity. RJR Nabisco, Inc. v. European Cmty., 136 S. Ct. 2090,
2097, 195 L. Ed. 2d 476 (2016). Section 1964(c) creates a private cause of action allowing any
individual who is “injured in his business or property by reason of a violation of section 1962” to
sue in federal court and recover “treble damages, costs, and attorney’s fees.” 18 U.S.C. § 1964(c)
(2012). Earlier this year, however, the Supreme Court in RJR Nabisco held that Section 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.” RJR Nabisco, Inc. v. European Cmty., 136 S. Ct.
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2090, 2111, 195 L. Ed. 2d 476 (2016) (emphasis added).
The Court in RJR Nabisco introduced a two-prong test to determine whether a statute
applies extraterritorially. RJR Nabisco, Inc. v. European Cmty., 136 S. Ct. 2090, 2099-101
(2016). First, the underlying presumption against extraterritoriality must be overcome in explicit
terms. Id. Where there is no clearly expressed congressional intent to apply a statute
extraterritorially, the statute will be construed to apply only domestically. Id. at 2100. If the
statute is found not to be intrinsically extraterritorial at step one, courts examine whether the
conduct relevant to the focus of the statute occurred in the United States. Id. at 2101. Generally
speaking, where the conduct relevant to the focus of the statute “occurred in a foreign country,
then the case involves an impermissible extraterritorial application regardless of any other
conduct that occurred in U.S. territory.” Id. (emphasis added). The Court held that Section
1964(c) does not overcome the presumption against extraterritoriality, id. at 2106, and thus, a
plaintiff with claims under 1964(c) must demonstrate a domestic injury to his business or
property in order to apply RICO domestically. Id.
Plaintiffs urge this Court to adopt a broad “continued deprivation” standard in defining
domestic injury, focusing on the fact that Plaintiffs have been deprived of assets that are now—
and, without judicial intervention, will continue to be—tied up in the United States. See Maiz v.
Virani, 253 F.3d 641 (11th Cir. 2001) (implicitly applying this standard in a pre-RJR Nabisco
RICO case).
The few cases to address the issue of domestic injury post-RJR Nabsico have interpreted
it to mean that an injury arises where it was initially suffered by the plaintiff. E.g., Bascuñan v.
Daniel Yarur ELS Amended Complaint, No. 15-CV-2009 (GBD), 2016 WL 5475998, at *6
(S.D.N.Y. Sept. 28, 2016) (“Defendants' proposed test, which focuses on the plaintiff and where
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the alleged injury was suffered, is the appropriate approach to determine whether a plaintiff may
maintain a private cause of action under § 1964(c).”) (emphasis in original); see also Uthe Tech.
Corp v. Harry Allen & Aetrium, Inc., No. C 95-02377 WHA, 2016 WL 4492580, at *3 (N.D.
Cal. Aug. 26, 2016) (granting the defendants’ motion for summary judgment because “[n]o
injury occurred in the United States”); cf. United States v. Thomas, No. 15-10000, 2016 WL
4254990, at *1 (9th Cir. Aug. 12, 2016) (citing RJR Nabisco and finding a criminal RICO
indictment alleged sufficient contacts with the United States where: (1) the organization operated
principally in Las Vegas, (2) members dumped stolen credit and debit card data from the United
States, (3) sold personal data stolen from American victims, (4) manufactured and sold
counterfeit driver's licenses to members, and (5) used protected drop sites in the District of
Nevada to protect the criminal enterprise).
Here, the injury alleged was not initially suffered by Plaintiffs in the United States, nor
have Plaintiffs maintained a United States presence, either at the time of the alleged scheme or
now. Plaintiffs point to the fact that the illegally obtained kickback proceeds ultimately financed
land purchases in the United States, but these are downstream effects of the initial injury that
impacted Plaintiffs in the UAE, where their business and economic operations are centered.
In addition, the fact that two of the wire transfers to MREMC were initiated from
Chicago does not create a domestic injury. This U.S.-based conduct may be related to the central
scheme but it is not integral or pervasive enough to overcome the fact that the bulk of the illegal
racketeering activities are alleged to have occurred abroad. See RJR Nabisco, 136 S.Ct. 2090 at
2101 (“If the conduct relevant to the statute’s focus occurred in a foreign country, then the case
involves an impermissible extraterritorial application regardless of any other conduct that
occurred in U.S. territory.”) (emphasis added). Likewise, the fact that a large number of
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Plaintiff’s suppliers have offices in the United States does not speak to where the injury was felt
by the Plaintiffs themselves—that question can only be answered by looking to Plaintiffs’
business operations in the UAE.
In the context of Plaintiff’s Motion for Leave to Amend the Complaint, I gave more
weight to domestic links like the two Chicago wire transfers and concluded that, in that context
and at that time, Plaintiffs did establish sufficient links to support a domestic application of their
RICO claim. Since that opinion was issued in January 2016, RJR Nabisco has clarified the
analysis by which we determine whether a civil RICO plaintiff properly alleged domestic injury.
My analysis has changed accordingly and I now find that Plaintiffs have not suffered a domestic
injury to their business or property. Therefore, their RICO claim cannot be applied domestically
and Count I is dismissed as to all Defendants.
Because this issue is dispositive, I need not proceed to Defendant’s 12(b)(2) or 12(b)(5)
claims.
III. CONCLUSION
For the foregoing reasons, Defendant’s Motion to Dismiss is granted. Count I is
dismissed as to all Defendants.
ENTER:
James B. Zagel
United States District Judge
DATE: November 8, 2016
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