Centauro Liquid Opportunities Master Fund, L.P. v. Bazzoni, et al.

Filing 208

MEMORANDUM OPINION AND ORDER: re: 175 MOTION to Dismiss (Corrected filed by CT Energia Ltd. d/b/a Elemento Ltd. For the foregoing reasons, Elemento's motion to dismiss the Amended Complaint is denied. This Memorandum Opinion and Order resolves docket entry no. 175. This case remains referred to Magistrate Judge Netburn for general pre-trial management. SO ORDERED. (Signed by Judge Laura Taylor Swain on 7/20/2018) (ama)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
-------------------------------------------------------x
CENTAURO LIQUID OPPORTUNITIES
MASTER FUND, L.P.,
Plaintiff,
-v-

No. 15 CV 9003-LTS-SN

ALESSANDRO BAZZONI, et al.,
Defendants.
-------------------------------------------------------x
MEMORANDUM OPINION AND ORDER
Plaintiff Centauro Liquid Opportunities Master Fund, L.P. (“Centauro”) brings
this action for fraud and breach of contract arising principally from a Promissory Note executed
by two of the named corporate defendants: Cinque Terre Financial Group Ltd. (“CTFG”) and CT
Energia Ltd. (“CTEL”). This action is stayed as against CTFG because of an active bankruptcy
proceeding, and nothing in this Memorandum Opinion and Order constitutes an adjudication of
CTFG’s rights or defenses. This Court has subject matter jurisdiction pursuant to 28 U.S.C.
§ 1332.
On September 30, 2016, this Court granted in part and denied in part motions to
dismiss filed by then-named Defendants Alessandro Bazzoni, CT Energia Holding, Ltd. (“CT
Energia Holding”), CT Energy Holding SRL, and CTVEN Investments SRL (“CTVEN”). (See
docket entry no. 107, the “September Opinion.”) Among other things, the Court dismissed the
Complaint as against Bazzoni, CT Energia Holding, CT Energy Holding SRL, and CTVEN
because the Complaint did not establish that the Court had personal jurisdiction over those
defendants. (Id. at 13.) The Court also granted Centauro permission to file a motion for leave to

CENTAURO - ELEMENTO MTD.DOCX

VERSION JULY 20, 2018

1

amend its Complaint in light of the dismissals. (Id.) On August 28, 2017, the Court granted in
part and denied in part Centauro’s motion for leave to amend, permitting Centauro to file a
proposed Amended Complaint asserting claims against Bazzoni and CT Energia Ltd. d/b/a
Elemento Ltd. (“Elemento”) as alter egos of CTEL. (See docket entry no. 126, the “August
Opinion.”) Centauro filed its Amended Complaint on September 8, 2017. (Docket entry no.
129, the “AC.”) The Amended Complaint asserts breach of contract and fraudulent inducement
claims against CTFG, CTEL, Bazzoni, and Elemento. (Id. ¶¶ 50-72.)
Elemento now moves to dismiss the Amended Complaint pursuant to Federal
Rules of Civil Procedure 12(b)(2) and 12(b)(6). (Docket entry no. 175.) The Court has reviewed
carefully the parties’ submissions and, for the reasons stated below, Elemento’s motion to
dismiss is denied.
BACKGROUND
The Court assumes the parties’ familiarity with the background of this case,
which is laid out in detail in the August and September Opinions. (September Opinion at. 3-5;
August Opinion at 2-4.) The allegations of fact underlying Centauro’s claims for alter ego
liability are materially unchanged from the proposed Amended Complaint filed in connection
with Centauro’s motion for leave to amend, and the Court adopts the factual recitation from the
August Opinion relating to those claims. Specifically, Centauro alleges that this Court has
personal jurisdiction over Bazzoni and Elemento because they are alter egos of Defendant CTEL,
which consented to the jurisdiction of New York courts in the Promissory Note. (AC ¶¶ 5-6.)
With respect to Elemento, the AC alleges that CTEL and Elemento are principally engaged in the
same oil trading ventures, using the same offices, email accounts, revenue streams, and
personnel, including Richard Rothenberg, Mark Walker, and Albert Alpha. (AC ¶¶ 43, 46.) The

CENTAURO - ELEMENTO MTD.DOCX

VERSION JULY 20, 2018

2

AC also alleges that Bazzoni, the sole owner of CTEL, also owns and controls Elemento, an
entity that he formed after CTEL executed the Promissory Note in May 2015. (AC ¶ 43, 44.)
Centauro alleges that Bazzoni changed Elemento’s name from CT Energia Ltd. to Elemento in
July and August 2016, after this action was filed, to shield Elemento from liability to Centauro.
(AC ¶ 44.) Centauro also alleges that Elemento’s assets and profits ultimately flow back to
CTEL through Bazzoni, who has used CTEL’s accounts to purchase personal property and pay
for personal expenses. (AC ¶¶ 45, 48.)
DISCUSSION
Elemento’s Motion to Dismiss for Lack of Personal Jurisdiction
On a motion to dismiss a complaint for lack of personal jurisdiction, “[a] plaintiff
bears the burden of demonstrating personal jurisdiction over a person or entity against whom it
seeks to bring suit.” Troma Entm't, Inc. v. Centennial Pictures Inc., 729 F.3d 215, 217 (2d Cir.
2013) (internal quotation marks and citation omitted). Centauro alleges that Elemento is an alter
ego of CTEL, and is thus subject to personal jurisdiction under New York law. CTEL does not
contest that it is subject to personal jurisdiction under New York State law. (See September
Opinion at 6.) “[A]lter egos are treated as one entity” for jurisdictional purposes. Wm.
Passalacqua Builders, Inc. v. Resnick Developers South, Inc., 933 F.2d 131, 142-43 (2d Cir.
1991). Therefore, to resolve the issue of personal jurisdiction, the Court must determine whether
Plaintiff has sufficiently alleged that Elemento is an alter ego of CTEL.
The Court adopts by reference the explanation of the legal requirements for
establishing alter ego liability that was provided in detail in the September Opinion. (September
Opinion at 6-9.) In the September Opinion, the Court concluded that the law of the British
Virgin Islands (“BVI”), where CTEL is incorporated, governs the assessment of Plaintiff’s alter

CENTAURO - ELEMENTO MTD.DOCX

VERSION JULY 20, 2018

3

ego theory.1 (Id. at 7.) Under BVI law, a plaintiff seeking to pierce the corporate veil must
allege that defendant misused a corporate façade, and that the misuse occurred after the liability
arose. (See id.) Here, the AC alleges sufficient facts to make a prima facie showing that
Elemento is the alter ego of CTEL and its sole owner Bazzoni such that the exercise of personal
jurisdiction is appropriate. As the Court noted in the August Opinion, the AC alleges that
Elemento is wholly owned and controlled by Bazzoni, and that Bazzoni created Elemento after
the instant action was filed to divert resources from CTEL and shield that entity from liability to
Centauro. (AC ¶¶ 11, 44-46.) The AC also alleges that CTEL and Bazzoni are the ultimate
beneficiaries of the revenues and profits flowing to Elemento, and that Elemento and CTEL
“share offices, email accounts, personnel, financial accounts, and revenue streams from oil
transactions,” among other things. (AC ¶¶ 38, 45-46.) The AC further alleges that Bazzoni has
used the corporate assets of CTEL to pay for Bazzoni’s personal expenses and personal property.
(AC ¶ 48.)
Elemento proffers factual affidavits and other written material in support of its
argument that Elemento was never the alter ego of CTEL. These materials purport to
demonstrate that Elemento, originally named CT Energia Ltd., was established in October 2015
as a wholly owned subsidiary of non-Defendant CT Energia Holding. (Docket entry no. 168,
Sullivan Decl. Ex. GG; docket entry no. 171, Galindez Decl. ¶ 7.) Elemento argues that, at the

1

Elemento incorrectly argues that Maltese law governs the assessment of Plaintiff’s alter
ego theory because Elemento is incorporated under the laws of Malta. Elemento’s
argument misinterprets the AC, which asserts that Elemento is an alter ego of CTEL.
(See AC ¶ 12.) Thus, the relevant question is whether CTEL’s corporate form will be
disregarded, not Elemento’s. In this context, the law of the state where CTEL is
incorporated governs because “the state of incorporation has the greater interest in
determining when and if that insulation is to be stripped away.” See Kalb, Voorhis & Co.
v. Am. Fin. Corp., 8 F.3d 130, 132 (2d Cir. 1993) (internal quotation marks and citation
omitted).

CENTAURO - ELEMENTO MTD.DOCX

VERSION JULY 20, 2018

4

time Elemento was established, Bazzoni was the sole shareholder of CT Energia Holding and,
therefore, the sole owner of Elemento. (Sullivan Decl. Ex. DD.) In January 2016, ownership of
Elemento was transferred to non-Defendant CT Energia Oil & Gas, Ltd. (“CTOG”). (Sullivan
Decl. Ex. HH; Galindez Decl. ¶ 7.) At the time of the transfer, CTOG was also wholly owned by
Bazzoni. (Sullivan Decl. Ex. DD.) In March 2016, Bazzoni caused CTOG to issue shares to an
individual named Francisco D’Agostino, at which time Elemento became jointly owned by
Bazzoni and D’Agostino. (Sullivan Decl. DD; Galindez Decl. ¶ 7.) Elemento also proffers
additional factual information regarding a $30 million financing of Elemento’s activities in
January 2016 by Cedaridge, an entity owned by Ricardo Cisneros. (See docket entry no. 169,
Cisneros Decl. ¶¶ 4, 10-12, 15; docket entry no. 170, Galanti Decl. ¶¶ 4-7; Galindez Decl. ¶¶ 89.) Elemento contends that it did not conduct any substantial business activity before receiving
the Cedaridge funding. (Galanti Decl. ¶ 6; Galindez Decl. ¶¶ 10-11.) Elemento also contends
that, in August 2016, Bazzoni and D’Agostino resigned as directors of CTOG and Elemento.
(Sullivan Decl. Ex. FF, JJ; Galindez Decl. ¶¶ 14-15.) Elemento alleges that Bazzoni and
D’Agostino’s ownership interest in Elemento was terminated in February 2017 when CTOG sold
its 100% ownership interest to CISA Holdings Limited, another company owned by Ricardo
Cisneros. (Sullivan Decl. Ex. KK; Cisneros Decl. ¶ 4; Galindez Decl. ¶ 17.) Elemento avers that
Mark Walker and Albert Alpha are not employed by Elemento and that, other than Richard
Rothenberg, there are no employees of Elemento who were also employees of CTEL. (Galindez
Decl. ¶ 28.)
Centauro does not directly controvert Elemento’s factual proffers, but argues that
consideration of Elemento’s factual material is improper at this stage. Centauro also argues that,
even if consideration of supplemental factual material were appropriate at this stage, Elemento’s

CENTAURO - ELEMENTO MTD.DOCX

VERSION JULY 20, 2018

5

affidavits are undermined by the deposition testimony of Bazzoni and Rothenberg, who both
invoked their Fifth Amendment privilege when asked about CTEL and Elemento’s structure,
finances, and relationship with one another, thus entitling Centauro to an adverse inference.
Although a court may consider materials outside the pleadings in connection with
a motion to dismiss for lack of personal jurisdiction, a district court “has considerable procedural
leeway” in deciding such motions. Dorchester Fin. Sec. Inc. v. Banco BRJ, S.A., 722 F.3d 81,
84 (2d Cir. 2013). Prior to the close of discovery, “a plaintiff challenged by a jurisdiction testing
motion may defeat the motion by pleading in good faith, legally sufficient allegations of
jurisdiction.” Id. at 85 (internal quotation marks and citation omitted). Because discovery had
not concluded at the time Elemento’s motion was filed, the Court declines to consider at this
stage the factual material proffered by Elemento in connection with its motion. Because
Centauro’s allegations are sufficient to make a prima facie showing that Elemento is the alter ego
of CTEL, Elemento’s motion to dismiss for lack of personal jurisdiction is denied at this time.

Elemento’s Motion to Dismiss for Failure to State a Claim
Elemento separately moves to dismiss the AC for failure to state a claim for alter
ego liability with respect to Elemento. Under the Rule 12(b)(6) standard, the Court accepts as
true the non-conclusory factual allegations in the complaint and draws all reasonable inferences
in the plaintiff's favor. Roth v. Jennings, 489 F.3d 499, 501 (2d Cir. 2007). To survive a motion
to dismiss, a complaint must plead “enough facts to state a claim to relief that is plausible on its
face.” Bell Atl. v. Twombly, 550 U.S. 544, 570 (2007).2 As explained above, the AC alleges

2

Elemento argues that, because Centauro’s alter ego claim sounds in fraud, it must also
meet Federal Rule of Civil Procedure 9(b)’s heightened pleading requirement. Although
Centauro alleges that Elemento was created by CTEL and Bazzoni for the purpose of
evading liability, Centauro does not allege that Elemento itself engaged in any fraudulent
conduct. Thus, Centauro’s alter ego claim is not subject to the particularly requirement

CENTAURO - ELEMENTO MTD.DOCX

VERSION JULY 20, 2018

6

sufficient facts to state a prima facie claim for alter ego liability. Accordingly, and for
substantially similar reasons, Elemento’s motion to dismiss the Amended Complaint for failure
to state a claim is denied.
CONCLUSION
For the foregoing reasons, Elemento’s motion to dismiss the Amended Complaint
is denied. This Memorandum Opinion and Order resolves docket entry no. 175. This case
remains referred to Magistrate Judge Netburn for general pre-trial management.

SO ORDERED.
Dated: New York, New York
July 20, 2018
/s/ Laura Taylor Swain
LAURA TAYLOR SWAIN
United States District Judge

of Rule 9(b). See McBeth v. Porges, 171 F. Supp. 3d 216, 234 (S.D.N.Y. 2016)
(“[W]here an alter ego claim does not sound in fraud, it is not subject to the particularity
requirement of Rule 9(b) of the Federal Rules of Civil Procedure.”).
CENTAURO - ELEMENTO MTD.DOCX

VERSION JULY 20, 2018

7