Dorchester Financial Securities, Inc. v. Banco BRJ, S.A.

Filing 280

OPINION & ORDER re: 271 FIRST MOTION to Dismiss for Lack of Jurisdiction dismissing a thrid-party complaint with prejudice; FIRST MOTION to Strike Document No. 268 striking that third-party complaint from the record with prejud ice, filed by Dorchester Financial Holdings Corporation. For the foregoing reasons, Dorchester's motion to dismiss is DENIED. If either party wishes to file a motion for judgment on the pleadings, pursuant to Federal Rule of Civil Procedure 12(c), it shall do so on or before July 22, 2016. This Opinion & Order resolves docket entry 271. (As further set forth in this Opinion) (Motions due by 7/22/2016.) (Signed by Judge Kimba M. Wood on 7/8/2016) (kl)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
---------------------------------------------------------------X
DORCHESTER FINANCIAL HOLDINGS CORP.
f/k/a DORCHESTER FINANCIAL SECURITIES,
INC.,
Plaintiff,

11-CV-1529 (KMW)
OPINION & ORDER

-againstBANCO BRJ, S.A.,
Defendant.
--------------------------------------------------------------LYNDON M. TRETTER,
Third-Party Plaintiff,
-againstDORCHESTER FINANCIAL HOLDINGS CORP.
f/k/a DORCHESTER FINANCIAL SECURITIES,
INC.,
Third-Party Defendant
---------------------------------------------------------------X
WOOD, United States District Judge:
Third-Party Defendant Dorchester Financial Holdings Corporation (“Dorchester”) has
filed a motion to dismiss the Third-Party Complaint of Lyndon M. Tretter, former counsel to
Defendant Banco BRJ, S.A. (“BRJ”), arguing that the Court lacks subject matter jurisdiction
over the Third-Party Action. (Mot. to Dismiss, [Doc. No. 272]).
For the reasons discussed below, the Court DENIES Dorchester’s motion.
I.

RELEVANT BACKGROUND
The Third-Party Action arose out of BRJ’s filing of two declarations in support of a

motion to dismiss (the “2011 Declarations”). See (Aug. 10, 2011 Decl. of Luiz Augusto de
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Queiroz, [Doc. No. 13]); (Aug. 29, 2011 Reply Decl. of Luiz Augusto de Queiroz, [Doc. No.
22]). BRJ later learned that the declarations contained certain inaccuracies, at which point BRJ
filed corrected declarations and sought leave to amend its answer to reflect those changes. Id.;
(Mot. to Amend, [Doc. No. 125]); (July 29, 2014 Decl. of Luiz Augusto de Queiroz, [Doc. No.
127]). On September 14, 2014, Magistrate Judge Fox granted the motion to amend, [Doc. No.
159], and on January 13, 2015, this Court affirmed Judge Fox’s order, over Dorchester’s
objections, [Doc. No. 193]. See (Mot. to Intervene, 4).
On May 5, 2015, T.J. Morrow, former counsel to Plaintiff in this action,1 filed suit on
behalf of Dorchester against Tretter and his former law firm, Hogan Lovells LLP (“Hogan
Lovells”), in the Eastern District of New York (the “E.D.N.Y. Action”). (Mot. to Intervene, 1
[Doc. No. 241]). Dorchester alleged that Tretter and Hogan Lovells, as former counsel to BRJ,
knowingly submitted documents containing misrepresentations to the Court, in violation of New
York Judiciary Law § 487. Id.; (Pl.’s Mem. of Law in Opp’n to Tretter’s Mot. to Intervene, 1
[Doc. No. 249]). Dorchester’s complaint asserted that the filings were made in bad faith and that
Tretter and Hogan Lovells “were aware that both declarations contained materially false
representations” at the time they were filed. (Riccardi Decl., Ex. B at 4 (E.D.N.Y. Compl. ¶ 14)
[Doc. No. 240-4]). On August 18, 2015 during a pre-motion conference, Judge Margo K. Brodie
dismissed the E.D.N.Y. Action for lack of subject matter jurisdiction because the parties lacked
complete diversity.2 See (Reply Mem. of Law in Supp. Tretter’s Mot. to Intervene, 2 n.2 [Doc.
No. 253]).

1

Mr. Morrow was disqualified as counsel to Dorchester. See (Order Granting Mot. to Disqualify, [Doc. No.
113]); (Order Overruling Objections to Disqualification, [Doc. No. 191]).
2
Both Hogan Lovells and Dorchester are Florida citizens. (Riccardi Decl., Ex. C at 1-2 [Doc. No. 240-6]).

2

On July 31, 2015, Tretter filed his motion to intervene as a defendant in this action
pursuant to Federal Rule of Civil Procedure 24(b), in order to defend against the claims raised by
Dorchester in the E.D.N.Y. Action. See (Mot. to Intervene, 1-2). On March 2, 2016, this Court
granted Tretter’s motion, but ordered that he re-cast his pleading as a complaint by a third-party
plaintiff seeking declaratory relief. See Dorchester Fin. Holdings Corp. v. Banco BRJ, S.A., No.
11-CV-1529, 2016 WL 845333, at *4 (S.D.N.Y. Mar. 2, 2016) (Wood, J.). Tretter did so, filing
his Third-Party Complaint on March 17, 2016. [Doc. No. 268].
Dorchester then filed its motion to dismiss the Third-Party Complaint for lack of subject
matter jurisdiction pursuant to Federal Rule of Civil Procedure 12(b)(1). (Mot. to Dismiss, [Doc.
No. 272]).3
II.

LEGAL STANDARD
Under Rule 12(b)(1), an action must be dismissed for lack of subject matter jurisdiction

when the district court lacks the statutory or constitutional power to adjudicate the case. Fed. R.
Civ. P. 12(b)(1). The party asserting subject matter jurisdiction carries the burden of establishing,
by a preponderance of the evidence, that jurisdiction exists. Morrison v. Nat’l Australia Bank
Ltd., 547 F.3d 167, 170 (2d Cir. 2008), aff’d, 561 U.S. 247 (2010) (quoting Makarova v. United
States, 201 F.3d 110, 113 (2d Cir. 2000)). On a Rule 12(b)(1) motion challenging the district
court’s subject matter jurisdiction, evidence outside of the pleadings may be considered by the
court to resolve any disputed jurisdictional fact issues. Zappia Middle E. Constr. Co. v. Emirate
of Abu Dhabi, 215 F.3d 247, 253 (2d Cir. 2000); see also Morrison, 547 F.3d at 170 (citing

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Dorchester also labels its motion as one to strike the Third-Party Complaint, pursuant to Federal Rule of
Civil Procedure 14(a)(4). However, nowhere in its motion papers does Dorchester mention Rule 14(a)(4) or offer
any arguments in support of such a motion. Moreover, Dorchester’s motion ignores the Court’s prior ruling
expressly permitting Tretter to file the Third-Party Complaint. See Dorchester Fin. Holdings Corp. v. Banco BRJ,
S.A., No. 11-CV-1529, 2016 WL 845333, at *4 (S.D.N.Y. Mar. 2, 2016) (Wood, J.). Therefore, the Court declines to
strike the Third-Party Complaint.

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Makarova, 201 F.3d at 113). When evaluating a motion to dismiss for lack of subject matter
jurisdiction, the court accepts all material factual allegations in the complaint as true but does not
necessarily draw inferences from the complaint favorable to the plaintiff. J.S. ex rel. N.S. v.
Attica Cent. Schs., 386 F.3d 107, 110 (2d Cir. 2004) (citing Shipping Fin. Servs. Corp. v.
Drakos, 140 F.3d 129, 131 (2d Cir. 1998)).
III.

DISCUSSION
Dorchester argues that the Court lacks subject matter jurisdiction over the Third-Party

Action because (1) Hogan Lovells—and not Tretter—is the true party in interest, and Hogan
Lovells is not diverse from Dorchester; (2) the amount in controversy requirement is not
satisfied; and (3) Tretter’s action is barred by Florida statute. The Court disagrees with each of
these contentions.
First, Dorchester argues that the Court lacks diversity jurisdiction over this action
because Hogan Lovells, rather than Tretter, is the real party to the controversy. See (Mot. to
Dismiss, 1).4 For diversity jurisdiction to be proper, the plaintiff must be a “real and substantial
party to the controversy.” Oscar Gruss & Son, Inc. v. Hollander, 337 F.3d 186, 193-94 (2d Cir.
2003) (quoting Navarro Sav. Ass’n v. Lee, 446 U.S. 458, 460 (1980)).5 A plaintiff is a “real and
substantial party to the controversy” if she or he is not a “mere conduit” or agent, but is instead
“an individual who has his [or her] own stake in the litigation.” Id. at 194; see also U.S. Bank
Nat. Ass’n v. Nesbitt Bellevue Prop. LLC, 859 F. Supp. 2d 602, 608 (S.D.N.Y. 2012) (Koeltl, J.).

4

The Declaratory Judgment Act does not confer an independent basis for subject matter jurisdiction;
instead, the operation of the Act is “procedural only.” See 10B Wright & Miller, Federal Practice and Procedure §
2766 (3d ed. 1998). “There must be an independent basis of jurisdiction, under statutes equally applicable to actions
for coercive relief, before a federal court may entertain a declaratory-judgment action.” Id.
5
This standard is similar to—but not precisely the same as—the real party in interest standard of Federal
Rule of Civil Procedure 17. The latter is a procedural requirement, but does not affect the subject matter jurisdiction
of the Court. See Navarro, 446 U.S. at 462 n.9; Airlines Reporting Corp. v. S and N Travel, Inc., 58 F.3d 857, 861
n.4 (2d Cir. 1995).

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Tretter has adequately shown that he has his own stake in the litigation. Tretter is not
acting here merely as the agent of Hogan Lovells, as Dorchester contends; on the contrary,
Tretter was named as a defendant in his individual capacity in the E.D.N.Y. Action, separate and
apart from Hogan Lovells. See (Mem. of Law in Opp’n, 3 [Doc. No. 273]). He therefore has
ample reason to seek a declaratory judgment to resolve that claim against him, and is properly
treated as a real and substantial party to the controversy for purposes of determining diversity
jurisdiction.
Second, Dorchester argues that Tretter has failed to allege that the amount in controversy
exceeds $75,000, as required by 18 U.S.C. § 1332. See (Mot. to Dismiss, 1). “In actions seeking
declaratory . . . relief, it is well established that the amount in controversy is measured by the
value of the object of the litigation.” Hunt v. Wash. State Apple Adver. Comm’n, 432 U.S. 333,
347 (1977). This amount is “calculated from the plaintiff’s standpoint; the value of the suit’s
intended benefit or the value of the right being protected or the injury being averted constitutes
the amount in controversy when damages are not requested.” Correspondent Servs. Corp. v.
First Equities Corp. of Fla., 442 F.3d 767, 769 (2d Cir. 2006) (quoting Kheel v. Port of New
York Auth., 457 F.2d 46, 49 (2d Cir. 1972)); see also Beacon Constr. Co. v. Matco Elec. Co., 521
F.2d 392, 399 (2d Cir. 1975) (“[T]he amount in controversy is not necessarily the money
judgment sought or recovered, but rather the value of the consequences which may result from
the litigation.”).
Tretter’s Third-Party Complaint properly alleges that the amount in controversy exceeds
$75,000. See (Third-Party Complaint ¶ 3). In determining this amount, Tretter relied on
Dorchester’s own assertion of the amount in controversy in the E.D.N.Y. Action, where

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Dorchester sought millions of dollars in damages. See (E.D.N.Y. Compl., 2, 25-26 [Doc. No.
268-1]). Tretter’s assertion of the amount in controversy is therefore sufficient.6
Finally, Dorchester argues that Tretter’s claim is barred by Florida Statute 607.1407,
which establishes procedures by which a dissolved corporation may “resolve payment of
unknown claims,” and sets a time limit for parties to bring claims once any of the statutory
procedures have been completed.7 Fla. Stat. Ann. § 607.1407. Dorchester argues that, because it
has complied with one of the procedures enumerated in the statute, Tretter’s claim is barred
because it was not commenced within four years. See id.; (Mot. to Dismiss, 1, 3).
The Court, however, agrees with Tretter that this provision of the Florida statute pertains
only to the payment of monetary claims against a dissolved corporation, and therefore does not
bar a suit for declaratory relief.8 In addition, a related provision of the Florida Business
Corporation Act specifically states that the dissolution of a corporation does not “[p]revent
commencement of a proceeding by or against a corporation in its corporate name.” Fla. Stat.
Ann. § 607.1405(e)(2).9 Courts interpreting this provision have repeatedly held that parties are
entitled to bring suit against a dissolved Florida corporation. See, e.g., Samples v. Conoco, Inc.,
165 F. Supp. 2d 1303, 1319-20 (N.D. Fla. 2001) (holding that “[u]ndisputably, Florida law
permits an aggrieved party to sue a dissolved corporation” even if the party has no expectation of

6
In the alternative, the Court would also have jurisdiction over the instant controversy under 28 U.S.C. §
1367(b), as the Court noted in its earlier decision. See Dorchester Fin. Holdings Corp. v. Banco BRJ, S.A., No. 11CV-1529, 2016 WL 845333, at *3 n.5 (S.D.N.Y. Mar. 2, 2016) (Wood, J.).
7
The capacity of a dissolved corporation to sue or be sued is determined by the law of the state of
incorporation. Fed. R. Civ. P. 17(b)(2).
8
The statutory text supports the Court’s conclusion that this provision applies only to monetary claims
against dissolved corporations. The first sentence of the provision explains that a dissolved corporation “may choose
to execute one of the following procedures to resolve payment of unknown claims.” Fla. Stat. Ann. § 607.1407
(emphasis added). And the final section provides that, notwithstanding the enumerated procedures, a claim may be
entered against the dissolved corporation “to the extent of its undistributed assets” and provides additional
procedures “if the assets have been distributed in liquidation.” Id.
9
In fact, Dorchester cites to this same provision as the source of authority that allows it to bring suit, (Mot.
to Dismiss, 1), even though it was dissolved in 2006, id. at 3.

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collecting funds from the corporation); Intelsat Corp. v. Multivision TV LLC, 736 F. Supp. 2d
1334, 1340 n.5 (S.D. Fla. 2010) (holding that a Florida corporation could be sued six years after
it was dissolved); Brown v. Sunrise Senior Living Servs. Inc., No. 09-69759-CIV, 2009 WL
2430900, at *2 (S.D. Fla. Aug. 7, 2009) (“[A] dissolved corporation may still be sued in
Florida.”); Ewert v. Poly Implant Protheses, No. Civ. A. H-07-3065, 2008 WL 4747206, at *2
(S.D. Tex. Oct. 27, 2008) (applying Florida law); Deleo v. Swirsky. No. 00-C-6917, 2001 WL
687458, at *9 (N.D. Ill. June 19, 2001) (same). In light of this authority, the Court concludes that
Tretter’s suit is not barred, but in fact is expressly permitted, by Florida law.
IV.

CONCLUSION
For the foregoing reasons, Dorchester’s motion to dismiss is DENIED. If either party

wishes to file a motion for judgment on the pleadings, pursuant to Federal Rule of Civil
Procedure 12(c), it shall do so on or before July 22, 2016.
This Opinion & Order resolves docket entry 271.

SO ORDERED.
DATED:

New York, New York
July 8, 2016
/s/
KIMBA M. WOOD
United States District Judge

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