Goel et al v. American Digital University, Inc. et al

Filing 64

OPINION & ORDER re: (102 in 1:14-cv-02053-KBF) MOTION for Sanctions filed by Bunge, Ltd., Bunge S.A., Grains and Industrial Products PTE LTD. As discussed above, this Court finds that plaintiffs' RICO claim is bar red by the applicable statute of limitations and that defendant SBI is entitled to sovereign immunity. Accordingly, defendants' motions for summary judgment are GRANTED. As also discussed above, the Bunge Defendants' motion for sanc tions is DENIED. The Clerk of Court is directed to terminate the motions at ECF Nos. 89 and 102 and to terminate the actions at both 14-cv-1895 and 14-cv-2053. (As further set forth in this Opinion & Order.) (Signed by Judge Katherine B. Forrest on 3/21/2017) Filed In Associated Cases: 1:14-cv-02053-KBF, 1:14-cv-01895-KBF(mro)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
--------------------------------------------------------------------- X
:
VIKAS GOEL AND RAINFOREST TRADING
:
LTD.,
:
:
Plaintiffs,
:
:
-v:
:
:
AMERICAN DIGITAL UNIVERSITY, INC.,
INTERNATIONAL MARITIME UNIVERSITY, :
:
LLC, TELEDATA MARINE SYSTEMS LLC,
TELEDATA SYSTEMS AND SERVICES, LLC, :
BUNGE LIMITED, BUNGE S.A., GRAINS AND :
INDUSTRIAL PRODUCTS PTE LTD., ANUSH :
:
RAMCHANDRAN AND STATE BANK OF
:
INDIA
:
Defendants.
:
:
--------------------------------------------------------------------- X
KATHERINE B. FORREST, District Judge:

USDC SDNY
DOCUMENT
ELECTRONICALLY FILED
DOC #: _________________
DATE FILED: March 21, 2017

14-cv-2053 (KBF)
14-cv-1895 (KBF)
OPINION & ORDER

On January 2, 2014, plaintiffs Vikas Goel and Rainforest Trading Ltd.
commenced this action against American Digital University, Inc. (“ADU”),
International Maritime University, LLC (“IMU”), Teledata Marine Systems, LLC
(“Teledata Marine”), Teledata Systems and Services, LLC (“Teledata Services”),
Bunge Limited (“Bunge Ltd.”), Bunge S.A., Grains and Industrial Products PTE
Ltd. (“GRIPT”), Anush Ramachandran, and the State Bank of India (“SBI”) in the
Supreme Court of the State of New York, Westchester County. (Notice of Removal,
ECF No. 1.)1 Plaintiffs allege that defendants carried out a racketeering scheme, in

In March 2014, defendants removed this action to the United States District Court for the Southern
District of New York. On August 19, 2014, Judge Karas consolidated what had been separate cases
against SBI and against the Bunge defendants. On March 6, 2015, this action was reassigned to the
1

violation of 18 U.S.C. §§ 1962(a), 1962(c), and 1962(d) of the Racketeer Influenced
and Corrupt Organizations Act (“RICO”), designed to mislead and defraud
plaintiffs. The complaint also includes state law claims for aiding and abetting
fraud, money had and received, and establishing liability to parent company Bunge
Ltd. on the basis of piercing the corporate veil liability.
Pending before the Court are two motions for summary judgment—one from
Bunge Ltd., Bunge S.A., and GRIPT (collectively, the “Bunge Defendants”), and one
from SBI. (ECF Nos. 21, 25.)2 For the reasons set forth below, both motions are
GRANTED. The undisputed facts demonstrate that plaintiffs’ RICO claim is
untimely—thus eliminating the sole basis for federal jurisdiction. In addition, as to
SBI, the Court separately finds that it is immune from suit pursuant to the Foreign
Sovereign Immunities Act.
Also before the Court is a motion by the Bunge Defendants for sanctions
against plaintiffs under Rule 11 of the Federal Rules of Civil Procedure. For the
reasons described below, this motion is DENIED.
I.

BACKGROUND
The facts of this case are somewhat complex. In sum, and as described in

more detail below, plaintiffs assert that Goel was fraudulently induced by a nonparty (Teledata Informatics, Ltd. (“Teledata India”)) to transfer a majority stake in

undersigned. This Court’s citations to docket entries correspond with case number 14-cv-2053, the
lead case.
Defendants initially moved to dismiss plaintiffs’ complaint pursuant to Federal Rule of Civil
Procedure 12(b)(6). The Court has converted those motions to motions for summary judgment. (ECF
No. 88.)
2

2

his company—eSys Technologies Pte Ltd (“eSys”)—to Rainforest Trading Ltd.
(“Rainforest”). Funds transferred to Rainforest in connection with that transfer
were then allegedly improperly transferred in furtherance of a fraudulent mail and
wire fraud scheme perpetrated by Teledata India and the other defendants.
Ultimately, these transfers drained available financial resources from eSys and the
company failed. Plaintiffs, in particular Goel, have commenced various actions in
various places for injuries arising from that failure.
The procedural history of this action and related actions is also somewhat
complex. However, the important facts are: (1) in a foreign proceeding that
plaintiffs discuss in their instant complaint, Goel submitted an affidavit in which he
acknowledged knowing of various fraudulent conduct that put plaintiffs on actual
(or inquiry) notice as of 2007; (2) Goel and Rainforest commenced an action in New
York State Court in 2010 against some but not all of the defendants herein, on
materially the same facts and overlapping claims; and (3) the RICO claims here
asserted, along with joinder of additional defendants, appears to be an attempt to
get plaintiffs claims into federal court and improve their chances of recovery. As
described below, while it may be that plaintiffs had a real RICO claim, the time to
bring such claim in federal court has run.
A.

The Parties

Plaintiff Vikas Goel was the founder, Chairman, Managing Director, and
99.9% shareholder of eSys Technologies Pte Ltd. (“eSys”), a computer equipment
distribution company. (Compl. ¶ 50.) Plaintiff Rainforest Trading, Ltd.
(“Rainforest”) was a corporation established as a holding company to facilitate
3

payment by non-party Teledata Informatics, Ltd. (“Teledata India”) for 51% of
Goel’s eSys shares. (Id. ¶¶ 51, 141.)
Defendants in this action can be separated into the following three groups: (1)
Anush Ramachandran and his related entities; (2) the “Bunge Defendants”; and (3)
the State Bank of India (“SBI”).
Ramachandran was the Chief Executive Officer of Teledata India, a
non-party to this suit, who is presently in arbitration with plaintiffs in Singapore.
(Id. ¶¶ 52, 59-61.) Ramachandran also allegedly owned and controlled American
Digital University, Inc. (“ADU”), International Maritime University, LLC (“IMU”),
Teledata Marine Systems, LLC (“Teledata Marine”), and Teledata Systems and
Services, LLC (“Teledata Services”). (Id. ¶ 52.) ADU purported to be an online
university, and IMU was a division of ADU. (Id. ¶ 53.) However, both entities
allegedly had a total of just three employees, their address was Ramachandran’s
home in Scarsdale, and there were no professors or students. (Id. ¶¶ 12, 53-54.)
Plaintiff alleges that they were sham companies used to illegally transfer funds as a
part of the racketeering scheme. (Id. ¶¶ 12-13, 54.) Teledata Marine and Teledata
Services were also allegedly sham companies, purporting to sell software, used in
the scheme to fraudulently inflate Teledata India’s sales and revenue. (Id. ¶¶ 1721, 55-58.)
The Bunge Defendants include Bunge Ltd., Bunge S.A., and Grains and
Industrial Products PTE Ltd. (“GRIPT”). (Id. ¶¶ 62-67.) Bunge Ltd. is a publicly
traded agribusiness company with headquarters in White Plains, NY. (Id. ¶ 62.)

4

Bunge S.A., headquartered in Geneva, Switzerland, and GRIPT, headquartered in
Singapore, are subsidiaries of Bunge Ltd. that purport to be agricultural products
trading enterprises. (Id. ¶¶ 66-67.) Plaintiffs allege that Bunge Ltd. used those two
subsidiaries to further the racketeering scheme. (Id. ¶ 64.)
SBI is the State Bank of India. (Id. at ¶ 68.) It has a branch in New York
(“SBI-NY”), which it allegedly used to transfer substantial sums of money in
support of the racketeering scheme. (Id.)
B.

Bunge’s “Sham Contracts”

Plaintiffs allege that the Bunge Defendants illegally loaned money to
Teledata India for the purpose of profiting from India’s high interest rates. (Compl.
¶¶ 1-2.) Plaintiffs claim that it was illegal for the Bunge Defendants to lend money
to Indian companies because they were not authorized lenders under India’s
Foreign Exchange Management Act of 1999. (Id. ¶ 3.) In order to sidestep Indian
law, Bunge Ltd. allegedly disguised its loans by using subsidiaries Bunge S.A. and
GRIPT to enter into contracts for the purchase and sale of fictional goods with
Teledata India. (Id. ¶ 4.) Bunge S.A. and GRIPT entered into more than twenty
“sham contracts” with Teledata India over a two-year period, valued at an excess of
$150 million. (Id.) On their face, the purchase and sale contracts appeared to be
genuine, detailing the purchase price, product to be sold, and delivery terms. (Id.
¶ 5.) In these contracts, the Bunge Defendants agreed to buy a product from
Teledata India, for which delivery would be due in one year. (Id.) Despite over
$150 million in such contracts, the Bunge Defendants allegedly never bought, took
delivery of, or asked Teledata India to deliver a single product. (Id.) Instead,
5

Teledata India would repay the money with interest to the Bunge Defendants at the
one-year delivery date. (Id.)
The Bunge Defendants forwarded these “sham sales and purchase contracts”
to banks (including SBI), which would in turn issue “advance payment” guarantees.
(Id. ¶¶ 6-7.) These guarantees were, in effect, loans—the banks would compensate
the Bunge Defendants for the money advanced if Teledata India failed to deliver the
contracted-for goods. In the event that Teledata India failed to pay the Bunge
Defendants back, the Bunge Defendants could fraudulently represent to the banks
that Teledata India had failed to deliver the products and demand the guarantee of
the advance payments. The bank guarantees made the loans essentially risk-free to
the Bunge Defendants, allowing them to profit from the difference between the
interest rates on the loans they borrowed from investors outside India and the
repayments by Teledata India at the Indian interest rate, which was significantly
higher. (Id. ¶ 9.)
Teledata India had to appear to be a profitable business to obtain the
guarantees. (Id. ¶ 7.) Thus, the false purchase and sale contracts allegedly served
the additional purpose of allowing Teledata India to inflate its revenue to $238
million in their March 2007 annual report, $130 million of which reportedly came
from the fictitious sales to Bunge S.A. (Id. ¶ 16.)
C.

ADU and IMU Aid Teledata India’s Illicit Repayment of Loans

Indian currency regulations mandate that an authorized bank, which reports
to the Reserve Bank of India (“RBI”), must approve the transfer of money out of
India to repay loans. (Compl. ¶ 10.) While money could not legally be transferred
6

out of India to repay loans, money could be transferred out of India to pay for
services rendered. Thus, in order to repay the loans, Ramachandran-controlled
Teledata India allegedly evaded Indian currency restrictions by using false invoices
to transfer in excess of $127 million during 2006 and 2007 to the New York bank
accounts of Ramachandran-controlled AMU and IMU as supposed payment for
imports and consulting charges. (Id. ¶¶ 11-13.)
Ramachandran then allegedly transferred a portion of the funds out of ADU
and IMU’s New York bank accounts to GRIPT and Bunge S.A. in payment of the
Bunge Defendants’ loans to Teledata India. (Id. ¶ 14.) ADU and IMU transferred
more than $54 million from their accounts to the Bunge Defendants, either directly
or indirectly through other Ramachandran companies, in around 55 transfers
between 2006 and 2007. (Id.) ADU and IDU transferred these funds, despite not
buying any products or having a contractual relationship with GRIPT or Bunge S.A.
Rather, ADU and IMU allegedly issued false invoices through international wires
and/or mails in order to pay off the loans. (Id. ¶¶ 15, 117.)
In addition to transferring money to GRIPT and Bunge S.A., ADU and IMU
allegedly transferred other funds that it had received from Teledata India—at least
$62.5 million in 2006 and 2007—to Teledata Marine and Teledata Services, also
pursuant to invoices for fictitious consulting services. (Id. ¶ 19.) Teledata Marine
and Teledata Services then transferred funds back to Teledata India, as payment
for fictitious purchases. (Id. ¶ 20.) Thus, Ramachandran allegedly mislead the
banks as well as plaintiffs into believing Teledata India was a profitable business by

7

using “sham” sale and purchase invoices between Teledata India, ADU, IMU,
Teledata Marine, and Teledata Services to transfer Teledata India’s own funds back
to it, in order to create the false appearance of revenue. (Id. ¶¶ 21-21.)
D.

SBI’s Role in Effecting the Transfers

Teledata India allegedly transferred funds to ADU and IMU, pursuant to the
invoices for fictitious consulting services and imports, using SBI accounts. (Compl.
¶ 173.) Indian banking regulations required SBI to inspect each transaction to
determine whether the transfer of funds was genuinely made in payment for
imports of goods or services into India. (Id.) SBI approved all of Teledata India’s
transfers to ADU and IMU. (Id.)
Plaintiffs allege that SBI intentionally sought to further the scheme of
transferring funds to the Bunge Defendants, through approval of the transfers,
because SBI had an interest in relieving itself of potential liability on its guarantees
of the “sham” Bunge contracts that it had previously issued. (Id. ¶ 174.) As of
November 2006, SBI had allegedly issued guarantees of Bunge “purchase and sale”
contracts valued at around $116 million, and had open guarantees of at least $84
million that SBI would be obligated to honor if Teledata India failed to repay the
Bunge Defendants. (Id. ¶ 175.)
E.

The Enterprise Begins to Unravel

Plaintiffs allege that the scheme operated similarly to a Ponzi scheme.
Because Teledata India allegedly had no legitimate revenue from sales to repay the
Bunge Defendants, the scheme’s profitability depended on being able to obtain new
loans to pay the old loans. Due to the risk that Teledata India might default in
8

repayment, there was also a risk that the Bunge defendants would not be able to
get investors to fund new loans without obtaining bank guarantees of their fictitious
purchase and sale contracts.
In late 2006, the Reserve Bank of India (“RBI”) allegedly began investigating
illegal transactions of the type described above. (Compl. ¶ 131.) RBI sent official
written notice to all commercial banks in India, including SBI, that parties were
using purchase and sale agreement transactions to profit from interest rate
arbitrage, rather than for the purpose of genuine import and export. (Id.; Compl.
Ex. B.) RBI directed banks to “carry out due diligence and verify the track record of
such exporters to assess their ability to execute such orders.” (Compl. Ex. B.)
As a consequence of the RBI notice, SBI stopped providing guarantees of the
Bunge Defendants’ purchase and sale agreements. (Compl. ¶ 131.) Teledata India
allegedly had to find a new source of money from which to repay the Bunge
Defendants. (Id.)
F.

Plaintiffs are Defrauded

In 2006, eSys (plaintiff Goel’s company) allegedly needed to raise $100
million in order to pay creditors and remain in business after the termination of a
major distribution deal. (Compl. ¶ 135.) In late 2006, Credit Suisse made a
proposal to invest tens of millions of dollars in eSys and conduct an IPO. (Id.
¶ 136.) However, around November 2006, a Teledata India representative
contacted Goel and expressed interest in investing in and acquiring shares of eSys.
(Id. ¶ 137.) Plaintiffs allege that Ramachandran and Teledata India
misrepresented Teledata India’s annual revenue as $238 million in order to
9

fraudulently induce Goel to sell half of his shares in eSys. (Id. ¶¶ 137-38.) Relying
on those misrepresentations, Goel forewent the Credit Suisse opportunity and
entered into a Stock Purchase Agreement (“SPA” or “Agreement”) with Teledata
India on November 29, 2006, selling 51% of his shares in eSys to Teledata India in
exchange for a sum of $105 million. (Id. ¶ 140.) This exchange was to take place
through use of Rainforest, a special purpose vehicle set up by eSys. (Id. ¶ 141.)
Goel was to transfer all his shares in eSys to Rainforest, and Teledata India would
then deposit $105 million into Rainforest’s bank account in exchange for the 51% of
the shares in Rainforest. (Id.) Consequently, eSys would become a wholly owned
subsidiary of Rainforest, with Teledata India and Goel owning 51% and 49% of the
shares, respectively.
Teledata India secured an $80 million loan from SBI to finance the bulk of
the acquisition. (Id. ¶ 142.) However, a significant portion of these funds were
allegedly routed out of the Rainforest account through ADU and IMU and
transferred to Bunge S.A. and GRIPT as payment for their loans to Teledata India.
(Id. ¶ 143.)3
Teledata India’s first payment on the $80 million loan from SBI was due in
August 2007 but Teledata India did not have the funds to pay it. (Id. ¶ 180.) To
avoid default, Teledata India and SBI allegedly “arranged” for SBI to issue a
“working capital loan” of $12.5 million to eSys on August 14, 2007. (Id. ¶ 181.) In

Plaintiffs allege that SBI knew about and facilitated these transfers. They further allege that SBI
did not restrict the use of funds to their intended purpose under the loan agreement (i.e. solely as
payment for 51% of the eSys shares) because it wanted the Bunge Defendants to be paid so that SBI
would not be liable for the guarantees.
3

10

contravention of SBI’s own sanction letter, which stated that the loan was to be
used only to fund eSys India’s supplier and inventory requirements, SBI allegedly
made accounting entries that had the effect of routing $5 million from the eSys
account to a Teledata account. (Id. ¶¶ 182-83.) The funds were then allegedly used
to pay SBI for the first installment of the $80 million loan. (Id. ¶¶ 183-84.)
As part of its payment obligation to plaintiffs, Teledata India also caused $55
million to be transferred into the Rainforest account in February 2007. (Id. ¶ 144.)
Plaintiffs allege that Teledata India then lied to plaintiffs that those sums needed to
be transferred out of Rainforest for legitimate business reasons and would be
returned shortly. (Id.) According to plaintiffs, the sums were then transferred from
the Rainforest account to affiliates of Ramachandran and Teledata India (and
Bunge S.A. directly) as a loan. (Id. ¶ 145.)
By 2008, Teledata India had depleted the funds allegedly stolen from
plaintiffs, and had no money to repay GRIPT and Bunge S.A. for outstanding loans
(i.e. the sham contracts). (Id. ¶ 33.) Consequently, the Bunge Defendants, or the
investors to which they had sold the loans, made claims on the guarantees,
fraudulently representing to banks that the purchased goods had not been delivered
pursuant to the contract terms. (Id. ¶¶ 33, 157-59.) Banks, including HSBC and
Canara Bank, honored the demands and paid “tens of millions of dollars.”4 (Id.
¶¶ 157, 162, 164.)

For instance, in September 2008, an assignee on behalf of Bunge S.A. made a $9.9 million demand
to HSBC. (Compl. ¶ 157.) When HSBC demanded further assurances regarding the grounds for the
demand, Bunge S.A. allegedly represented that Teledata India had failed to meet their obligations
under the purchase and sale agreement. (Id. ¶ 158.) HSBC and other banks have subsequently
4

11

Throughout this time period, plaintiffs allege that Teledata India continued
to make promises that they would repay money transferred out of Rainforest for
purported business reasons. (Id. ¶ 191.) Plaintiffs allege that it was not until
late-2009, after plaintiffs’ relationship with Teledata India had encountered
difficulties, that plaintiffs wrote to Bunge Ltd. and Bunge S.A. asking for an
explanation of why funds had been transferred out of the Rainforest accounts to the
Bunge Defendants. (Id.) In a letter dated January 13, 2010, Bunge representatives
allegedly misrepresented to plaintiffs that the payments were “in respect of certain
contracts for the sale and purchase of goods between Teledata and Bunge S.A.” (Id.)
Bunge allegedly did not disclose that the contracts were between Teledata India
and GRIPT until January 2012, when the court in the New York State action
directed Bunge to produce the contracts. (Id. ¶ 193.) Plaintiffs also allege that the
Bunge Defendants misrepresented the true nature of the contracts, which were for
the purposes of repaying the illegal loans. (Id. ¶¶ 193-94.) As a consequence of
these “cover-up” efforts, plaintiffs allege that they did not become aware of the
racketeering enterprise until June 2012 when Ramachandran produced documents
in response to discovery requests made in the New York State action.
In 2010, SBI initiated foreclosure proceedings on the Rainforest shares that
Teledata India had pledged to SBI in connection with the $80 million loan taken out
to finance Teledata India’s acquisition of eSys. (Id. 37.) Deprived of needed cash as

sought to recover additional damages from Teledata India related to the guarantees, though with
little success. The banks’ lawsuits to recover money from Teledata India forced Teledata India into
insolvency proceedings in India, rendering them unable to pay plaintiffs money owed. (Id. ¶ 168.)

12

a result of Teledata India and SBI’s alleged diversion of funds in connection with
the $80 million loan and Teledata India’s subsequent insolvency, eSys’s revenue
plummeted from $1.9 billion to below $75 million by 2010. (Id.) Plaintiffs lost their
ownership interest in eSys, which had been valued by Credit Suisse at between
$411 and $588 million in 2006.
II.

PROCEDURAL HISTORY5
A.

Proceedings in Singapore6

In 2009, Goel and Rainforest brought a proceeding in Singapore against
Teledata India and its affiliates, based on allegations of fraud and breach of the
Stock Purchase Agreement. (See Declaration of Jennifer L. Achilles in Support of
the Bunge Defendants’ Motion to Dismiss (“Achilles Decl.”) Ex. I, ECF No. 27-36;
see also Achilles Decl. Ex. C-5, ECF No. 27-29, at 62-64.)
SBI also initiated foreclosure proceedings against the Rainforest shares in
Singapore. By letter dated March 25, 2010, SBI declared that “an event of default
had occurred under the Facility Agreement” made in connection with its $80 million
loan to Teledata India to finance the acquisition of the Rainforest shares. (Affidavit

Plaintiffs argue that this Court should deny the motions for summary judgment as premature
under Rule 56(d) of the Federal Rules of Civil Procedure. (Declaration of Robert C. Sentner in
Opposition to Summary Judgment ¶¶ 33, 46, ECF No. 89.) That request is DENIED. As set forth
below, the Court’s decision depends on facts within plaintiffs’ control or as to which specific discovery
has not been sought.
5

Goel brought additional proceedings against Teledata India and its affiliates in India in 2009,
alleging that Teledata India had “maliciously taken an injunction” against Rainforest, Goel, and
eSys, by submitting a forged document and committing perjury in a November 2009 action brought
by Teledata India against Goel and eSys. (Achilles Decl. Ex. C-5, at 62-64.) Additionally, eSys filed
“winding up” and/or bankruptcy proceedings against Teledata India for money allegedly owed to
eSys. (See id.)
6

13

of Pradeep Pillai (“Pillai Aff.”) Ex. 27 ¶¶ 31, 38, ECF No. 24-2.) SBI stated that a
sum of $41,989,189.91 USD plus interest that had accrued from the date of default
was due by April 2, 2010. (Id. ¶ 23.) As Teledata India failed to make the payment
within the deadline, SBI sought to enforce its security in the pledged eSys shares
towards repayment of the debt. In response, Goel and Rainforest alleged that SBI’s
security interest in the pledged shares was tainted by fraud, forgery, and bribery.
(Id. ¶ 31; see also ECF No. 24-6.)
On April 8, 2011, the High Court of the Republic of Singapore concluded that
the fraud allegations were without merit, that an event of default had occurred, and
that SBI was “entitled to enforce its security by selling the pledged shares.” (Pillai
Aff. Ex. 2 ¶ 30.) On March 21, 2012, a three judge panel of the Singapore Court of
Appeals affirmed the High Court’s judgment. (See Pillai Aff. Ex. 4, ECF No. 24-4.)
In post-judgment proceedings, the High Court appointed Deloitte to determine the
value of the eSys shares. Deloitte determined that eSys had been technically
insolvent since March 2009, and hence, the equity value of the eSys shares pledged
to SBI was “nil.” (See Pillai Aff. Ex. 5, ECF No. 24-5.)
B.

New York State Action

In late-2010, plaintiffs filed an action against Ramachandran, Bunge Ltd.,
and Bunge S.A. in New York Supreme Court, Westchester County (“Goel I”),
asserting a claim of fraud against Ramachandran; claims of tortious interference
with contract, money had and received, unjust enrichment, and aiding and abetting

7

This exhibit is a certified copy of the judgment issued in the Singapore foreclosure proceedings.

14

fraud against Bunge Ltd. and Bunge S.A.; and claims of liability against Bunge Ltd.
because of its corporate relationship with Bunge S.A. (See Achilles Decl. Ex. C.)
On October 24, 2011, Bunge Ltd. and Bunge S.A. moved to dismiss for lack of
personal jurisdiction and failure to state a claim. (Id. at 9.) On April 4, 2012,8 the
court dismissed plaintiffs’ claim against Bunge Ltd. and Bunge S.A. for tortious
interference with contract as time-barred, but allowed other claims to proceed. Goel
v. Ramachandran, 2012 WL 10095460 (N.Y. Sup. Ct. Apr. 4, 2012). On November
20, 2013, the Appellate Division, Second Department, reversed in part and
dismissed the claims against the Bunge Defendants, holding that plaintiffs had
failed to state a claim for money had and received, unjust enrichment, aiding and
abetting fraud, and piercing the corporate veil. See Goel v. Ramachandran, 975
N.Y.S.2d 428, 437-39 (N.Y. App. Div. 2d Dep’t 2013).
At this point, only a fraud claim against Ramachandran remained. On
December 16, 2013, the New York Supreme Court, Westchester County, held a
conference with the parties during which plaintiffs informed Judge Sheinkman that
they had a “new pleading” regarding the Bunge Defendants that would remedy the
pleading deficiency highlighted by the Appellate Division. (12/16/13 Conference
Transcript9 at 7:13-8:12.) Judge Sheinkman expressed a desire to move forward
with the claim against Ramachandran but noted that plaintiffs could file a new case

The case was removed from, and then remanded back to, state court. See Goel v. Ramachandran,
823 F. Supp. 2d 206 (S.D.N.Y. 2011).
8

9

The Transcript is attached as Exhibit H to Achilles Declaration (ECF No. 27-35).

15

against the Bunge Defendants. (Id. at 9:6-11:15.) Plaintiffs and Ramachandran
subsequently entered into a stipulation of discontinuance, dismissing the action
without prejudice. On January 2, 2014, plaintiffs then filed the instant actions with
their “new pleading.”
C.

Proceedings Before This Court and the Second Circuit

By Opinion & Order dated August 6, 2015, this Court dismissed this action
pursuant to Rule 12(b)(6), finding that plaintiffs’ RICO claim was time barred.10
(ECF No. 59.)11 On April 28, 2016, the Second Circuit vacated that decision and
remanded the action. See Goel v. Bunge, Ltd., 820 F.3d 554 (2d Cir. 2016). In
pertinent part, the Second Circuit determined that this Court improperly reviewed
materials outside of the four corners of the complaint. Id. at 558-60. The Second
Circuit noted that while this Court had stated that it was able to take judicial notice
of certain materials, and that other materials were integral to the complaint, these
determinations were in error. Id. The Second Circuit also noted that review of such
materials required conversion of the motion to dismiss to a motion for summary
judgment. Id.
The mandate issued on May 20, 2016. Thereafter, defendants informed the
Court that they would like the opportunity to move for summary judgment. The
Court allowed such motions.

10

As previously noted, this action was initial brought in state court and was then removed in 2014.

The Court issued a Corrected Opinion & Order on August 26, 2015, remanding plaintiffs’ state law
claims to the New York Supreme Court, Westchester County. (ECF No. 63.)
11

16

In connection with the current motions for summary judgment—one from
Bunge Ltd., Bunge S.A., and GRIPT, and one from SBI—the Court has before it a
number of submissions from both sides. All parties have received notice of the fact
that the motion is made pursuant to Rule 56 and have had an opportunity to be
heard.
For the reasons set forth below, the two pending motions for summary
judgment are GRANTED. Plaintiffs’ RICO claim is barred by the applicable statute
of limitations. In addition, defendant SBI is entitled to sovereign immunity as a
foreign state under the Foreign Sovereign Immunities Act. The Court declines to
exercise supplemental jurisdiction over plaintiffs’ state-law claims and remands
such claims to the Supreme Court, Westchester County.
III.

SUMMARY JUDGMENT STANDARD
“The court shall grant summary judgment if the movant shows that there is

no genuine dispute as to any material fact and the movant is entitled to judgment
as a matter of law.” Fed. R. Civ. P. 56(a). The moving party bears the initial
burden of demonstrating “the absence of a genuine issue of material fact.” Celotex
Corp. v. Catrett, 477 U.S. 317, 323 (1986). When the moving party does not bear
the ultimate burden on a particular claim or issue, it need only make a showing
that the non-moving party lacks evidence from which a reasonable jury could find in
the non-moving party’s favor at trial. Id. at 322-23.
In making a determination on summary judgment, the court must “construe
all evidence in the light most favorable to the nonmoving party, drawing all
inferences and resolving all ambiguities in its favor.” Dickerson v. Napolitano, 604
17

F.3d 732, 740 (2d Cir. 2010). Once the moving party has discharged its burden, the
opposing party must set out specific facts showing a genuine issue of material fact
for trial. Wright v. Goord, 554 F.3d 255, 266 (2d Cir. 2009). “[A] party may not rely
on mere speculation or conjecture as to the true nature of the facts to overcome a
motion for summary judgment,” as “[m]ere conclusory allegations or denials cannot
by themselves create a genuine issue of material fact where none would otherwise
exist.” Hicks v. Baines, 593 F.3d 159, 166 (2d Cir. 2010) (internal citations
omitted). In addition, “[o]nly admissible evidence need be considered by the trial
court in ruling on a motion for summary judgment.” Porter v. Quarantillo, 722 F.3d
94, 97 (2d Cir. 2013) (internal quotation marks and citation omitted).
Only disputes relating to material facts—i.e., “facts that might affect the
outcome of the suit under the governing law”—will properly preclude the entry of
summary judgment. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986); see
also Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 586
(1986) (stating that the nonmoving party “must do more than simply show that
there is some metaphysical doubt as to the material facts”). The Court should not
accept evidence presented by the nonmoving party that is so “blatantly contradicted
by the record . . . that no reasonable jury could believe it.” Scott v. Harris, 550 U.S.
372, 380 (2007); see also Zellner v. Summerlin, 494 F.3d 344, 371 (2d Cir. 2007)
(“Incontrovertible evidence relied on by the moving party . . . should be credited by
the court on [a summary judgment] motion if it so utterly discredits the opposing

18

party’s version that no reasonable juror could fail to believe the version advanced by
the moving party.”).
IV.

DISCUSSION
A.

Plaintiffs’ RICO Claim

In its decision, the Second Circuit agreed with this Court that the statute of
limitations with regard to plaintiffs’ RICO claim is governed by federal law and is
therefore not subject to New York’s savings statute. Goel, 820 F.3d at 558. “RICO
claims are subject to a four-year statute of limitations.” Koch v. Christie’s Int’l
PLC, 699 F.3d 141, 148 (2d Cir. 2012). Here, the undisputed facts in the record
indicate that more than four years passed between the time that plaintiffs were
injured and had notice of their potential claim and this lawsuit. Accordingly,
plaintiffs’ RICO claim is barred by the statute of limitations.
1.

Plaintiffs’ Injury

In RICO cases, the Court applies the “discovery accrual rule, under which the
limitations period begins to run ‘when the plaintiff discovers or should have
discovered the RICO injury.’” Cohen v. S.A.C. Trading Corp., 711 F.3d 353, 361 (2d
Cir. 2013) (quoting In re Merrill Lynch Ltd. Partnerships Litig., 154 F.3d 56, 58 (2d
Cir. 1998)). “In other words, ‘the limitations period does not begin to run until [the
plaintiff has] actual or inquiry notice of the injury.’” (Id.) (alteration in original).
Accordingly, “the first step in the statute of limitations analysis is to determine
when the plaintiff sustained the alleged injury for which the plaintiff seeks
redress.” Koch, 699 F.3d at 150.

19

In this case, plaintiffs’ alleged RICO injuries occurred not later than 2007.
Based on plaintiffs’ complaint, the injurious conduct alleged is twofold: First,
plaintiffs allege that they were injured on November 29, 2006, when Ramachandran
and Teledata India fraudulently induced plaintiff Goel to enter into a Stock
Purchase Agreement and sell 51% of his ownership interest in eSys to Teledata
India.12 Second, plaintiffs allege that they were injured in February 2007 when
Teledata India fraudulently induced Rainforest into lending Teledata India $55
million—a loan that was never repaid—under the false pretense that Teledata
India needed the funds for business expenses. (See Compl. ¶¶ 144, 206(a), 208.)
In opposition to the instant motions, plaintiffs now allege that “the precise
timing of [their injury] creates an issue of fact, although it occurred well after the
Agreement was entered into.” (Memorandum of Law in Opposition to Defendants’
Motion to Dismiss (“Mem. in Opp.”), ECF No. 82, at 40.) The Court disagrees.
Plaintiffs rely on Bankers Trust Co. v. Rhoades, 859 F.2d 1096, 1106 (2d Cir.
1988), First Nationwide Bank v. Gelt Funding Corp., 27 F.3d 763, 767 (2d Cir.
1994), and Cruden v. Bank of New York, 957 F.2d 961, 977-78 (2d Cir.1992), for the

12

For example, plaintiffs state:

Based on the sham contract sales contracts with Bunge and the phony sales to Teledata
Marine and Teledata Services, Teledata India represented to various parties, including banks and
[plaintiffs] that it had over $238 million in annual revenue, when in fact it had virtually none.
Plaintiffs relied on this misrepresentation in agreeing to sell half of eSys to Teledata India and
foregoing the opportunity to do the transaction that had been proposed by Credit Suisse, among any
other opportunities. . . . The transaction which [p]laintiffs were induced to enter into with Teledata
India, for which [p]laintiffs were never paid, caused damage to [p]laintiffs . . . .
(Compl. ¶ 206.)

20

proposition that a RICO injury does not become ripe until “damages are definite and
ascertainable.” (Mem. in Opp. at 40-41.) Plaintiffs then argue that their “injury
was not fully realized until [] eSys’ revenue began to diminish, which destroyed it as
a company, and finally, when SBI forced [p]laintiffs through foreclosure proceedings
that ended in 2011, at which time SBI wrested from Goel the company he had on
his own developed, and displaced him as the owner of the shares, and Goel’s
ownership was lost.” (Id. at 41) The Court finds, however, that Bankers Trust,
Cruden, and First Nationwide are inapplicable.
Rather, this case is analogous to In re Merrill Lynch Ltd. Partnerships
Litigation, 154 F.3d 56, 59 (2d Cir. 1998). In this case, as in In re Merrill Lynch,
defendants conduct was allegedly fraudulent at the outset because “[it] could never
achieve the promised objectives.” In re Merrill Lynch, 154 F.3d at 59; see CSI Inv.
Partners II, L.P. v. Cendant Corp., 180 F. Supp. 2d 444, 458 (S.D.N.Y. 2001)
(holding that where the complaint alleged that defendants’ fraud induced plaintiffs
to enter into a purchase agreement on terms plaintiffs would not have accepted had
they known the undisclosed facts, the injury occurred when plaintiffs entered into
the purchase agreement on those terms). That is, according to the allegations in
plaintiffs’ complaint, defendants defrauded plaintiffs from the moment that Goel
entered into the Agreement and Rainforest lent Teledata India the initial $55
million; defendants actions with regards to Goel, eSys, and Rainforest were alleged
to be illegitimate from the start. Goel and Rainforest were injured when the

21

Agreement was consummated in November 2006 and defendants drained
Rainforest’s capital in February 2007.
Alternatively, plaintiffs argue that they were defrauded again and suffered
separate injuries sometime after 2007. (See Mem. in Opp. at 42-42 & n.8.) Under
the separate accrual rule, “a new claim accrues, triggering a new four-year
limitations period, each time plaintiff discovers, or should have discovered, a new
injury caused by the predicate RICO violations.” Bingham v. Zolt, 66 F.3d 553, 559
(2d Cir. 1995). However, “a continuing series of fraudulent transactions undertaken
within a common scheme can produce multiple injuries” so the injury must be “new
and independent to be actionable.” In re Merrill Lynch, 154 F.3d at 59 (holding that
the collection of subsequent fees was simply a consequence of the original
fraudulent investment rather than an independent injury); World Wrestling Entm’t,
Inc. v. Jakks Pac., Inc., 530 F. Supp. 2d 486, 527 (S.D.N.Y. 2007), aff’d, 328 F. App’x
695 (2d Cir. 2009) (refusing to extend the statute of limitations for plaintiff’s
continued below-market royalties because they were merely “subsequent costs
associated with the initial injury”). Similar to Merrill Lynch and World Wrestling,
any later “injuries” suffered by plaintiffs (e.g., the 2011 foreclosure of eSys shares)
were not “new and independent.”13

For example, the foreclosure was not a new and independent injury because SBI merely sought to
enforce its security interest in the eSys shares that were pledged to them in 2006 when it gave
Teledata India an $80 million loan to finance the bulk of its acquisition. The other actions taken by
defendants (and cited by plaintiffs) were part of the same alleged scheme identified above.
13

22

2.

Actual or Inquiry Notice of the Injury

As noted above, the Second Circuit has adopted a “discovery accrual rule,
under which the limitations period begins to run ‘when the plaintiff discovers or
should have discovered the RICO injury.’” Cohen, 711 F.3d at 361 (2d Cir. 2013)
(quoting In re Merrill Lynch, 154 F.3d at 58). Thus, having determined that
plaintiffs’ were injured by 2007, the Court must further determine when plaintiffs
had actual or inquiry notice of their injuries.14
In Lentell v. Merrill Lynch & Co., Inc., 396 F.3d 161 (2d Cir. 2005), the
Second Circuit set out a detailed description of when inquiry notice occurs:
Inquiry notice–often called ‘storm warnings’ in the securities context–
gives rise to a duty of inquiry “when the circumstances would suggest to an
investor of ordinary intelligence the probability that she has been
defrauded.” In such circumstances, the imputation of knowledge will be
timed in one of two ways: (i) ‘[i]f the investor makes no inquiry once the
duty arises, knowledge will be imputed as of the date the duty arose”; and
(ii) if some inquiry is made, “we will impute knowledge of what an investor
in the exercise of reasonable diligence[ ] should have discovered concerning
the fraud, and in such cases the limitations period begins to run from the
date such inquiry should have revealed the fraud.”
Id. at 168 (citations omitted). The Second Circuit has further noted that “[w]hile
inquiry notice as described in Lentell was developed in the context of securities
fraud cases, it applies equally in RICO cases.” Koch, 699 F.3d at 151.
This Court determines that plaintiffs had actual notice of their injuries by
2007. Several undisputed facts support this conclusion. First, Goel’s own

“The Second Circuit has held . . . that ‘the question of inquiry notice need not be left to a finder of
fact.’ In a RICO case, the Court may determine as a matter of law whether sufficient storm warnings
existed such that a reasonable investor would suspect fraud.” Rosenshein v. Kushner, No. 15-CV7397, 2016 WL 4508756, at *6 (S.D.N.Y. Aug. 26, 2016) (quoting In re Merrill Lynch, 154 F.3d at 60)
(other citations omitted).
14

23

deposition testimony from the New York State action,15 dated January 13, 2012,
makes it clear that plaintiffs were well aware of defendants’ alleged fraud as early
as 2007. In that deposition, Goel testified that in 2007 he had a meeting with a
Teledata India Managing Director, Mr. Padmanabhan, wherein Padmanabhan told
Goel that “there were no real sales, there was no real product, it was all fluff, a
story” and that the Bunge Defendants were “participating in a knowingly
intentional false contract.” (Jan. 13, 2012 Tr. at 465:18-467:25, attached as Ex. 2 to
the Declaration of Brian Rosner in Support of Motion to Dismiss the Complaint
(“Rosner Decl.”), ECF No. 23-2.)
Second, Goel subsequently confirmed having learned in 2007, during his
travels to Teledata India’s various locations,16 “that Teledata had no business, no
product, [and] no dealings of real products with Bunge.” (Id. at 468:01-469:07.)
Goel testified that he declined an offer to become Teledata India’s CEO because he
realized that Teledata “was absolutely a sham, zero, not even like 10 or 20 percent
real.” (Id. at 471:22-472:07.) Moreover, Goel testified that Teledata India
representatives continued telling him details of the scheme involving the Bunge
Defendants because they could no longer “roll over more transactions” and they
wanted Goel’s help to find another company that could “replace the Bunge kind of
false, fraudulent transactions.” (Id. at 469:08-470:5.)

15

The Court considers this a party admission.

These travels were part of a “round-the-world trip” that Goel took in response to Teledata India’s
offer that he become Teledata India’s CEO. (Jan. 13, 2012 Tr. at 468:02-25.)
16

24

As previously noted, plaintiffs also brought arbitration proceedings against
Teledata India—but not the defendants in this action—in Singapore in 2009 for its
alleged breach of the Agreement. In those arbitration proceedings, Goel again made
clear that he knew of the role that defendants played in the allegedly fraudulent
scheme. In an affidavit filed in the Singapore proceedings, dated April, 27, 2011,
Goel declared that Padmanabhan told him in early 2007 that Teledata India had
bribed various officers of SBI India to obtain the $80 million loan. (Goel Aff.
¶¶ 126-28, ECF No. 24-6.)17 Additionally, Goel stated that, around May 2007,
Ramachandran and Padmanabhan explained the scheme to him in detail, telling
him that there was an arrangement between Teledata India, Bunge Ltd. and Bunge
S.A., and SBI India, whereby Bunge Ltd. and Bunge S.A. would enter into fictitious
contracts with Teledata India, and for which SBI would issue guarantees. (Id. at
¶¶ 62-67.

Goel’s April 27, 2011, affidavit is attached as Exhibit 6-1 to the affidavit of Pradeep Pillai (ECF
No. 24) submitted in support of SBI’s motion to dismiss.

17

25

These undisputed facts18 lead to only one conclusion: plaintiffs had actual
knowledge (or, at least, inquiry notice)19 of the alleged fraudulent racketeering
scheme and the respective roles of the defendants by the end of 2007 at the latest.20
3.

Duty of Inquiry

Having determined that plaintiffs had actual notice of their injuries, the fouryear statute of limitations began to run by the end of 2007. Alternatively, even if
plaintiffs only had inquiry notice—and thus a duty of inquiry—as of late-2007, their
claims are still barred by the statute of limitations.
The Court begins by analyzing whether plaintiffs made an inquiry once the
duty of inquiry arose. If plaintiffs made “no inquiry once the duty [arose],
knowledge will be imputed as of the date the duty arose,” and if plaintiffs made

In opposition to defendants’ motions, plaintiffs attempt to discredit their prior testimony by
conclusory allegations made via affidavit. The Second Circuit has made clear, however, that
“[c]onclusory allegations cannot create a genuine issue of fact, nor may a party ‘create an issue of fact
by submitting an affidavit in opposition to a summary judgment motion that, by omission or
addition, contradicts the affiant's previous deposition testimony.’” Clayborne v. OCE Bus. Servs.,
381 F. App’x 32, 34 (2d Cir. 2010) (quoting Hayes v. N.Y. City Dep’t of Corr., 84 F.3d 614, 619 (2d
Cir. 1996) (other citation omitted).
18

19 Given plaintiffs knowledge of Teledata India’s alleged misrepresentations, lack of revenue, history
of fraudulent activity, as well as the transfer of funds out of Rainforest, a person of ordinary
intelligence would have been on inquiry notice by late-2007 that the defendants had likely defrauded
plaintiffs and that the transfers of funds from Rainforest were not truly being paid to suppliers.
20 Plaintiffs argue that even if the above-cited facts are sufficient to illustrate that plaintiffs were on
notice by late-2007 with regards to defendants Bunge Ltd., Bunge S.A, Teledata India, and SBI,
plaintiffs had no notice of defendant GRIPT’s involvement until plaintiffs received discovery in the
New York State Court action in 2012. (Mem. in Opp. at 29-30.) Accordingly, plaintiffs argue that
the four-year statute of limitations period began to run for GRIPT from that date. (Id.) They cite
JSC Foreign Econ. Ass’n Technostroyexport v. Weiss, No. 06 Civ. 6095 (JGK), 2007 WL 1159637, at
*5 (S.D.N.Y. Apr. 17, 2007), for the proposition that “the statute of limitations is triggered only as to
those defendants about whom the plaintiffs were on notice.” This case is inapposite as GRIPT is not
an independent defendant; its position is entirely dependent on that of its principal, Bunge Ltd.
Plaintiffs have not alleged that they suffered any independent injury traceable to GRIPT. Given the
relationship of the Bunge Defendants and the economic reality of plaintiffs claim, as alleged, GRIPS’
status as a subsidiary does not toll the statute of limitations in this case.

26

some inquiry, the Court “will impute knowledge of what [a plaintiff] in the exercise
of reasonable diligence[ ] should have discovered concerning the fraud, and . . . the
limitations period begins to run from the date such inquiry should have revealed
the fraud.” Lentell, 396 F.3d at 168 (internal quotation marks omitted).
Plaintiffs argue that they conducted a “reasonably diligent investigation”
from 2009 onwards and only discovered admissible evidence of their injuries in 2012
during the New York State action. The Court disagrees.
Even accepting that plaintiffs made some inquiry, plaintiffs RICO claims are
untimely. Plaintiffs waited two years from the time when they received inquiry
notice in 2007 to contact the Bunge Defendants regarding the nature of the
transactions at issue (i.e. plaintiffs waited until late-2009). (See Compl. ¶ 191.)
Plaintiffs then waited nearly three additional years to file suit and initiate the
discovery process in the New York State action. This does not constitute a
reasonably diligent investigation such that the four-year statute of limitations
should be extended, as plaintiffs seek. See Koch, 699 F.3d at 153 (holding no
reasonably diligent investigation where defendant did not begin to inquire for over
four years). Given the facts detailed above, reasonable diligence would have
disclosed by 2007 (or 2009 at the latest) plaintiffs’ injuries—it would have been
known that defendants fraudulently induced Goel to enter into the Agreement and
that defendants were fraudulently draining Rainforest’s funds. Accordingly,

27

knowledge of the injury is properly imputed as of the date the duty to inquire arose
in late-2007, or alternatively, 2009 at the latest.21
B.

SBI’s Sovereign Immunity under the FSIA

In its motion for summary judgment, the State Bank of India argues that it is
entitled to sovereign immunity. As discussed below, the Court agrees.
The Foreign Sovereign Immunities Act (“FSIA”) “provides the sole basis for
obtaining jurisdiction over a foreign state in federal court.” Argentine Republic v.
Amerada Hess Shipping Corp., 488 U.S. 428, 439 (1989). The Act defines the term
“foreign state” to include “a political subdivision of a foreign state or an agency or
instrumentality of a foreign state,” and further specifies that an “agency or
instrumentality of a foreign state” includes, inter alia, “an organ of a foreign state
or political subdivision thereof.” 28 U.S.C. §§ 1603(a), (b).
Under the Act, a foreign state is “presumptively immune from the jurisdiction
of United States courts.” Saudi Arabia v. Nelson, 507 U.S. 349, 355 (1993).
“Subject matter jurisdiction exists under the FSIA only if a specified exception to
that Act applies.” Chettri v. Nepal Rastra Bank, 834 F.3d 50, 55 (2d Cir. 2016)
(citing Nelson, 507 U.S. at 355). “A defendant seeking dismissal for lack of subject

Plaintiffs assert that they are entitled to equitable tolling of the statute of limitations on the basis
of defendants’ alleged fraudulent concealment. “Under federal common law, a statute of limitations
may be tolled due to the defendant’s fraudulent concealment if the plaintiff establishes that: (1) the
defendant wrongfully concealed material facts relating to defendant’s wrongdoing; (2) the
concealment prevented plaintiff’s ‘discovery of the nature of the claim within the limitations period’;
and (3) plaintiff exercised due diligence in pursuing the discovery of the claim during the period
plaintiff seeks to have tolled.” Koch, 699 F.3d at 156 (quoting Corcoran v. N.Y. Power Auth., 202 F.3d
530, 543 (2d Cir. 1999)). Here, plaintiffs cannot take advantage of the equitable tolling provision
because they knew the nature of their claim within the statutory period and, as discussed above,
they did not exercise reasonable diligence to uncover the alleged fraud. See Corcoran, 202 F.3d at
543.
21

28

matter jurisdiction under the FSIA bears the burden of presenting a prima facie
case that it is a foreign sovereign. If the defendant meets this burden, the plaintiff
must then demonstrate that the foreign sovereign lacks immunity due to an FSIA
exception.” Id. (citations omitted).
As an initial matter, plaintiffs allege that SBI is a private commercial bank
and is not a foreign state under the FSIA. (Mem. in Opp. at 49-50.) This argument
is foreclosed by the uncontested record evidence. In support of its motion for
summary judgment, SBI has proffered evidence that SBI was created by the Indian
Government by an act of Parliament to provide a state-controlled and statesponsored organ for a banking system. (Declaration of Hadrian Tucker (“Tucker
Decl.” ¶ 3, ECF No. 22.)22 Since its inception, a majority stake in SBI has been
owned and controlled directly by the Indian Government. (Id. ¶ 4.) The Indian
Government also appoints a majority of directors to the SBI board. (Id.) Plaintiffs
have not proffered any contrary evidence. As a result, there is no triable issue on
the question of whether SBI is a foreign state under the FSIA. See Filler v. Hanvit
Bank, 378 F.3d 213, 217 (2d Cir. 2004). As a foreign state, SBI is presumptively
immune from suit under the FSIA. See Nelson, 507 U.S. at 355.23
More complicated is plaintiffs’ subsequent argument—that SBI lacks
sovereign immunity because the “commercial activity exception” applies in this

Tucker is the “Senior Compliance Officer for State Bank of India, United States Operations.”
(Tucker Del. ¶ 1.)
22

SBI’s eligibility for immunity as a foreign state has been recognized in this Circuit. See, e.g.,
Gosain v. State Bank of India, 414 Fed. App’x. 311, 313-14 (2d Cir. 2011).
23

29

case. Under the commercial activity exception set forth in Section 1605(a)(2) of the
FSIA, a foreign state lacks immunity under the FSIA when:
the action is based [1] upon a commercial activity carried on in the United
States by the foreign state; or [2] upon an act performed in the United
States in connection with a commercial activity of the foreign state
elsewhere; or [3] upon an act outside the territory of the United States in
connection with a commercial activity of the foreign state elsewhere and
that act causes a direct effect in the United States.
28 U.S.C. § 1605(a)(2); see Chettri, 834 F.3d at 55-56. “As is plain from the
language of the section, each of its three clauses describes different categories of
conduct for which the foreign state is denied immunity.” Guirlando v. T.C. Ziraat
Bankasi A.S., 602 F.3d 69, 74 (2d Cir. 2010). Plaintiffs rely solely upon the first and
third clauses. (See Mem. in Opp. at 51-53.) As the Court explains below, SBI is
entitled to immunity because neither of these grounds for invoking the commercial
activity exception applies here.
1.

Clause One: Commercial Activity in the United States

With respect to the first clause, this action is not “based upon a commercial
activity carried on in the United States” by SBI. “The ‘threshold step’ in assessing
the applicability of the commercial activity exception is always to ‘identify the act of
the foreign sovereign State that serves as the basis for plaintiffs’ claims.’” Chettri,
834 F.3d at 56 (quoting Garb v. Republic of Poland, 440 F.3d 579, 586 (2d Cir.
2006)). As the relevant commercial activity, plaintiffs allege that “SBI wiretransferred tens of millions of dollars belonging to Plaintiffs from a Teledata India
account to the New York accounts of defendants ADU and IMU, pursuant to

30

fraudulent invoices for non-existing imports and services.” (Mem. in Opp. at 51.)
This action, however, is not “based upon” those wire-transfers.
The term “‘based upon’ . . . calls for something more than a mere connection
with, or relation to, commercial activity.” Nelson, 507 U.S. at 358. The Supreme
Court recently made “clear that in assessing whether an action is ‘based upon’ acts
outside the United States, for FSIA purposes, we look not to the analysis of each
individual claim, but to the overall question where a lawsuit’s foundation is
geographically based. Atlantica Holdings v. Sovereign Wealth Fund SamrukKazyna JSC, 813 F.3d 98, 108 (2d Cir. 2016), cert. denied sub nom. Sovereign
Wealth Fund Samruk-Kazyna JSC v. Atl. Holdings, Inc., 137 S. Ct. 493 (2016)
(citing OBB Personenverkehr AG v. Sachs, 136 S. Ct. 390, 396 (2015)).
Furthermore, as the Second Circuit recently reiterated, “[i]n order for a cause of
action to be ‘based upon’ a commercial activity and thereby fit within the FSI
exception, there must exist a ‘degree of closeness . . . between the commercial
activity and the gravamen of the plaintiff’s complaint.’” Chettri, 834 F.3d at 56
(quoting Kensington Int’l Ltd. V. Itoua, 505 F.3d 147, 156 (2d Cir. 2007)); see also
Reiss v. Société Centrale du Groupe des Assurances Nationales, 235 F.3d 738, 747
(2d Cir. 2000) (noting that to sustain jurisdiction on this basis, there must be “a
significant nexus . . . between the commercial activity in this country upon which
the exception is based and a plaintiff’s cause of action”).
The gravamen of plaintiff’s complaint is that, on November 29, 2006,
Ramachandran and Teledata India fraudulently induced plaintiff Goel to enter into

31

a Stock Purchase Agreement and sell 51% of his ownership interest in eSys to
Teledata India. As previously noted, plaintiffs further allege that they were injured
in February 2007 when Teledata India fraudulently induced Rainforest into lending
Teledata India $55 million—a loan that was never repaid—under the false pretense
that Teledata India needed the funds to pay business expenses. The wire-transfers
made by SBI—i.e. the relevant “commercial activity” according to plaintiffs—are at
most related to, but are not the gravamen of, plaintiffs’ action.
The Court notes that even if plaintiffs’ challenge could be considered “based
upon” the wire-transfers made by SBI generally, it cannot be said to be “based
upon” wire-transfers or commercial activity “carried on in the United States,” as
required for the first clause of FSIA Section 1605(a)(2) to apply. SBI’s New York
branch (“SBI-NY”) “does not have, and never has had, an account relationship with
Defendants ADU, IMU, Teledata Marine or Teledata Services.” (Memorandum of
Law in Support of Defendant State Bank of India’s Motion to Dismiss the
Complaint, ECF No. 76, at 26 (citing Tucker Decl. ¶ 6).) Plaintiffs’ allege only that
SBI-NY served as a correspondent bank for the transmission of wire transfers from
accounts in India to accounts at JPMorgan Chase Bank, N.A. (“Chase”) in New
York. (See, e.g., Compl. ¶ 151; Compl. Ex. A.) Importantly, the statements
attached as Exhibit A to plaintiffs’ complaint demonstrate that SBI-NY acted as the
correspondent bank for only 12 out of an alleged 180 fraudulent wire transfers at
issue. (See ECF No. 12-2 at 10, 66, 78, 84; ECF No. 12-3 at 1.) Furthermore, these
12 transfers account for only $8,886,106 of the $127,000,000 in allegedly fraudulent

32

wire transfers (or 7%). These limited wire-transfers cannot be considered
commercial activity upon which plaintiffs’ action is based.24 See Human Rights in
China v. Bank of China, 02-cv-4361, 2005 WL 1278542, at *3 (S.D.N.Y. 2005)
(finding the first clause of the commercial activity exception inapplicable where
bank made incidental transfers in New York).
2.

Clause Three: Commercial Activity Elsewhere

In the alternative, plaintiffs claim that SBI is not entitled to immunity because
the third clause of the commercial activity exception applies—i.e., plaintiffs argue
that their action is based “upon an act outside the territory of the United States in
connection with a commercial activity of the foreign state elsewhere and that act
cause[d] a direct effect in the United States.” (Mem. in Opp. at 70.) The Court
disagrees.
For the third clause of the commercial activity exception to apply, “the lawsuit
for which jurisdiction is sought must be (1) ‘based . . . upon an act outside of the
territory of the United States’; (2) ‘that was taken in connection with a commercial
activity [of the foreign state] outside of this country’; and (3) ‘that caused a direct
effect in the United States.’” Virtual Countries, Inc. v. Republic of South Africa, 300

In opposition to SBI’s motion, plaintiffs cite Rosner v. Bank of China, 528 F. Supp. 2d 419, 423
(S.D.N.Y. 2007) for the proposition that “wire transfers from New York are commercial activity” such
that there is no FSIA immunity in a RICO case. (Mem. in Opp. at 69.) Although Rosner is similar to
this case in some regards, there are key factors that distinguish the instant action. Here, unlike in
Rosner, plaintiffs allege that SBI was a participant in a fraudulent scheme that took place almost
entirely outside of the United States. See Rosner, 528 F. Supp. 2d at 424-25. Importantly, this is “a
case in which a plaintiff is seeking to apply the commercial activity exception because a tangential
part of the alleged action took place in the United States.” Id. This difference is critical, as noted by
the Rosner Court. See id.
24

33

F.3d 230, 236 (2d Cir. 2002) (quoting Republic of Argentina v. Weltover, Inc., 504
U.S. 607, 611 (1992)).
“[A]n effect is direct if it follows as an immediate consequence of the defendant’s
activity.” Republic of Argentina v. Weltover, Inc., 504 U.S. 607, 618 (1992); accord
Martin v. Republic of S. Africa, 836 F.2d 91, 95 (2d Cir. 1987) (“The common sense
interpretation of a ‘direct effect’” within the meaning of § 1605(a)(2) “is one which
has no intervening element, but, rather, flows in a straight line without deviation or
interruption.”). The Second Circuit employs a “legally significant acts”
requirement, demanding that “the conduct having a direct effect in the United
States be legally significant conduct in order for the commercial activity exception
to apply.” Filetech S.A. v. Fr. Telecom S.A., 157 F.3d 922, 931 (2d Cir. 1998); see
also Guirlando v. T.C. Ziraat Bankasi A.S., 602 F.3d 69, 73-79 (2d Cir. 2010).
Assuming for the purpose of this motion that plaintiffs’ action is based upon
acts taken outside the United States in connection with commercial activity by SBI,
plaintiff has still failed to raise a triable issue that the acts had a “direct effect in
the United States.” First, “the financial losses allegedly suffered by [Rainforest], a
foreign corporation that is not present in the United States, do not meet the ‘direct
effect in the United States’ standard.” Itoua, 505 F.3d at 158. Additionally, the
transfer of funds out of a New York bank account is not itself sufficient to place the
effect of a defendant’s conduct in the United States within the meaning of the third
prong of the commercial activity exception. Guirlando, 602 F.3d at 80; see also
Antares Aircraft, L.P. v. Fed. Republic of Nigeria, 999 F.2d 33, 36 (2d Cir. 1993).

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3.

Waiver of Immunity

Under the FSIA, a foreign state is not immune from suit “in any case . . . in
which the foreign state has waived its immunity either explicitly or by implication.”
28 U.S.C. § 1605(a)(1). Plaintiffs argue that by virtue of the fact that SBI has
agreed to be bound by New York Banking Law, which requires consent to certain
jurisdictional issues for suits, it has waived its immunity under the FSIA. This is
incorrect.
An explicit waiver must be “clear and unambiguous.” Capital Ventures Int’l
v. Republic of Argentina, 552 F.3d 289, 293 (2d Cir. 2009) (quoting Libra Bank Ltd.
v. Banco Nacional de Costa Rica, S.A., 676 F.2d 47, 49 (2d Cir. 1982)). The purpose
of an “explicit” waiver requirement “is to preclude inadvertent, implied, or
constructive waiver in cases where the intent of the foreign state is equivocal or
ambiguous.” Id. SBI does not contest that it has agreed to comply with New York
Banking Law § 200-b. That agreement cannot, however, be construed as an explicit
waiver of FSIA immunity as a matter of law. And other than pointing to agreement
to comply with New York Banking laws, plaintiffs point to no evidence of an explicit
waiver.
The FSAI exception for implied waivers “must be construed narrowly.”
Cabiri v. Gov’t of Republic of Ghana, 165 F.3d 193, 201 (2d Cir. 1999). An implied
waiver may occur when a foreign sovereign has taken an action in relation to
specific litigation. Cf. Smith ex rel. Smith v. Socialist People’s Libyan Arab
Jamahiriya, 101 F.3d 239, 244 (2d Cir. 1996) (“Congress primarily expected courts
to hold a foreign state to an implied waiver of sovereign immunity by the state’s
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actions in relation to the conduct of litigation.”). This Court is not aware of, nor
have plaintiffs pointed to any, precedent finding that the type of consent included
generically in New York Banking law § 200-b is sufficient to constitute a waiver of
federally granted foreign immunity. Indeed, that is because such a position would
be incorrect.25
C.

Remaining State Law Claims

There is no dispute that, of the claims asserted in the complaint, only the
civil RICO claim arises under federal law. A district court “may decline to exercise
supplemental jurisdiction over a claim in subsection (a) if . . . the district court has
dismissed all claims over which it has original jurisdiction.” 28 U.S.C. § 1367(c)(3).
Accordingly, having dismissed plaintiffs’ federal claim, the Court declines to
exercise supplemental jurisdiction, and remands the state law claims to the New
York State Supreme Court, Westchester County, where this case was originally
filed. See Valencia ex rel. Franco v. Lee, 316 F.3d 299, 308 (2d Cir. 2003) (“Because
this case was commenced in state court, the district court should remand the action
to the state court in which it was originally filed.”).

This has been implicitly acknowledged by various decisions finding numerous sovereign banking
institutions doing business in New York nonetheless immune pursuant to the FSIA. See, e.g., Fir
Tree Capital Opportunity Master Fund, L.P. v. Anglo Irish Bank Corp., No. 11-Civ-0955, 2011 WL
6187077, at *7-8, 11-22 (S.D.N.Y. Nov. 28, 2011); Guilando v. T.C. Ziraat Bankasi, No. 07-Civ-10266,
2008 WL 5272195, at *3, 5 (Dec. 15, 2008), aff’d, 602 F.3d 69 (2d Cir. 2010); Brenntag International
Chemicals, Inc. v. Norddeutsche Landesbank GZ, 9 F. Supp. 2d 331, 333 & n.1 (S.D.N.Y. 1998), aff’d
sub nom, 175 F.3d 245 (2d Cir. 1999); ICC Chem. Corp. v. Indus. and Commercial Bank of China,
886 F. Supp. 1 (S.D.N.Y. 1995).
25

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V.

THE BUNGE DEFENDANTS’ MOTION FOR SANCTIONS
In addition to moving for summary judgment, the Bunge Defendants have

moved for sanctions pursuant to Rule 11 of the Federal Rules of Civil Procedure.
(ECF No. 102.) The Bunge Defendants’ principle argument is that plaintiffs should
have withdrawn their RICO claim, which defendants allege became frivolous
following the Supreme Court’s recent decision in RJR Nabisco, Inc. v. European
Cmty., 136 S. Ct. 2090 (2016), regarding the extraterritorial reach of the RICO
statute. This Court finds that Rule 11 sanctions are not warranted here.
RJR Nabisco is not on all fours with the conduct asserted here, and the Court
does not find that plaintiffs’ continued pursuit of their RICO claim was frivolous.
Therefore, the Court does not find a Rule 11 violation. Furthermore, the decision
whether to award sanctions is “committed to the district court’s discretion.” Ipcon
Collections LLC v. Costco Wholesale Corp., 698 F.3d 58, 63 (2d Cir. 2012). No
sanctions are appropriate here.
Accordingly, the Bunge Defendants’ motion for sanctions is DENIED.
VI.

CONCLUSION
As discussed above, this Court finds that plaintiffs’ RICO claim is barred by

the applicable statute of limitations and that defendant SBI is entitled to sovereign
immunity. Accordingly, defendants’ motions for summary judgment are
GRANTED.26 As also discussed above, the Bunge Defendants’ motion for sanctions
is DENIED.

The Court notes that defendants Ramachandran, ADU, IMU, Teledata Marine, and Teledata
Services are not represented by counsel in this action and were not parties to the instant motions for

26

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The Clerk of Court is directed to terminate the motions at ECF Nos. 89 and
102 and to terminate the actions at both 14-cv-1895 and 14-cv-2053.
SO ORDERED.
Dated:

New York, New York
March 21, 2017

__________________________________________
KATHERINE B. FORREST
United States District Judge

summary judgment. While the rationale of this Opinion applies to those defendants, who are
effectively included as related to the moving parties, the parties shall submit a letter not later than
April 8, 2017, if they believe that this case should not be terminated on account of those defendants’
non appearance in this action.

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