In re Lifetrade Litigation

Filing 266

OPINION AND ORDER: re: (97 in 1:17-cv-07034-JPO-KHP) MOTION for Judgment on the Pleadings . filed by Wells Fargo Delaware Trust Company, Wells Fargo Bank Northwest, N.A., Wells Fargo Bank, N.A., ATC Realty Fifteen, Inc., (142 in 1:17-cv-06087-JPO-KHP) MOTION to Amend/Correct . filed by Nelida I. Vazquez, Blambus Group Inc., Maria Pia Saure, Ricardo Juan Garbarino, Maria Cristina Villanueva, Maria Beatriz Lopez Provera, Beatriz Julia Megy, Anna Maria Jorgelina Noguerol, Martin Arturo Carmona, Jorge Luis Germino, Ana Ester Giordani, Jose Rispau Vinas, Manual Atilio Iturralde, Antonio Emilio Pergomet, Diana Ana Maria Severin, Daniel Alberto Passaro, Fernando Raul Benedetto, Iject, Inc., Eduardo Maximo Del Torto, Plaza Asset Management Co., LTD, Graciela Cassutti, Maria Rita Lopez Provera, Francisco Miguel, (116 in 1:18-cv-00128-JPO-KHP) MOTION to Amend/Correct . filed by Diego Milberg, Carlos Alberto Mastronardi, Luis Angel Parenti, Dario Osmar Ascune, Marcelo Mario De Angelis, Silvia Del Rosal, Roxana Tagliaferro, Virginia Maria Ravenna, Juan Jose Etala, Miguel Angel Lecuna, Random Corp., Sabino Alvarez Salgueiro, Maximiliano Calp, Francisco Alberto Di Maio, Walter A. Tagliavini, Ricardo Simon Rodriguez, Martin Lizaso Bilbao, Tomas Ramon Zapata, Hugo Basilotta, Martin Rodrigo Pardo, Frederico Alvarez, Rodolfo Jorge Solis, Flint Consultant Ltd., Jorge Esteves, Patricia Boorman De Solari Loudet, Maria De La Caridad Gurnbaum, Fernando Lucas Luis Garcia Urrutia, Eva M.V. Berkes de Kolb, Marta Susana Cadario, Luis Tiphaine, Eduardo Pedro Martin, Maria Carmen Parise, Martin Furlong, Ida Alicia Sasso de Fernandez, Maria Balsano, Antonia Peyrani, Sandra Griselda Mendez, Bryant Line Corp., Jorge Lopez Nunez, Jose Ramon Rey, Nancy Carlota Bain, Graciela Villanueva, Edith Karina Volkmann, Miguel Angel Lopez, Jorge Enrique Gilardi, Juan Jose Comerio, Cristina Alicia Morrone, E-Sense Ltd., Elida Alicia Taramasso, Roracio Rotta, Alejandra Maria Bossetti, Santos Oscar Sarnari, Daniel Esteban Martin, Jelifl Corp., Adriano Gino Venturi Aravena, Jorge Raccoursier Heisinger, Marcela Nora Tacchella, Sabino Javier Alvarez, Adriana Cappone, Daniel Nicolas Juansaras, Maximiliano Costa, Ana Maria Pereira, Alan Jose Horwitz, Gladys Leoni, Miguel Gregorio Podrzaj, Eva Friedman, Margarita Munoz Vargas, Roberto Mario Pugliese, Viviana Rut Minteguiaga, Beatriz Edith De La Torre, Jurge Luis Fernandez, Ana Maria Rogatti, Carlos Jorge Campioni, Maria Celina Pilato, David Fabian Huberman, Gustavo Cachiarelli, Pablo Fabian Gomez, Mystic Point Holding, Arnaldo Manuel Gomez, Maria Isabel Jankowski de Sym Smith, Ricardo Jose Hermida, Enrique Juan Carlos Paborell, Laura Beatriz Rosso Lastra, Claudia Isabel Morrone, Fabian Eduardo Angelilli, Alberto Ruben Santos, Selltas Trader Inc., Miriam Beatriz Fratini, Rafael Perez De La Fuente, Ana Orsola Moretti, Carlos Jose Benassi, Diego Esteban Chami, Nestor Perez Ponsa, Roberto Eduardo Wubbe, Ines Maria Iturraldo, Delia Haydee Schiappapietra, Osvaldo J. Barrionuevo, Lucas Gustavo De Feo, Amanda Ana Zocchi, Foxtom Assets Inc., CBM Agente de Valores S.A.,, Rut Veronica Ladanyi, Alfonso Eduardo Espino Paz, Miguel A. Morello, Alfredo M. De Baisio, Carlos Armando Donino, Juan Gregorio Navarro Floria, Antonio Ivan Podrzaj, Fernando Juan Fernandez, Elena Pedotti, Daniel Gustavo Tedesco, Ruth Naomi Ladner, Edgardo Luis Spina, Miguel Angel Cirio, Norma Beatriz Cianciarulo, Basic Fly Ltd., Marcelo Carlos Nacucchio, Mario Rafael De Dona, Daniel Enrique De Cabo, Hugo Baquerin, Erika Bienek, Haydee Noemi Tacta de Rodino, Dora N. Escribano, Ramon Tuma, Raul Oscar Ferrari, Graciela Roldan Perez, Enrique Alberto Fuertes, Mario Alberto Yampolsky, Micaela Puig, Aldo Bertolozzi, Juan Carlos Guaita, Maria Clotilde Josefi Lami Hernandez, Jose Alberto Picado, Claudio Daniel Husain, Alejo Gonzalez Garano, Flowyard Overseas Ltd., Mario Oscar Varela Ortiz, Mirta Garcia De La Fuente, Enrique Pedro Coscia, Kim Dai San, Joaquin Martinez Tenreiro, Hugo Benjamin Nicolli, Claudio Javier Glazman, Daniel Rodolfo Lugo, Diego H. Pulgar, (112 in 1:18-cv-02416-JPO-KHP) MOTION to Amend/Correct . filed by Osvaldo H. Scandola, Alicia S. Negreira, Monica Patricia Morena, Maria Cristina Fabricant, Torcuato Luis Battaglia, Martina Galli, Veronica Balbiani, Maria Candela D'Angelo, Nicolas Eduardo Bowen, York Venture Capital, Carlos Alfredo Grimaldi, Southern Services Company Corp., Luis Maria Games, Jorge Carlos Macellaro, Claudio Bruno Bartoli, Milda Beatriz Maseras, San Goal, Cecilia Inchausti, Jorge Norberto Garcia Cozzi, Maria Laura Travella, Daniel Floreal Fognini, Adriana Mabel Nieto, Maria Teresa Borrell Fortuny, Gonzalo Blaquier, Paz Veronica Chartier Campagne, Diego Grimaldi, Sonia Maricel Baravalle, Hector Jorge Areco, Mirta Edit Longhini, Maria DeMiguel, Maria Fabiana Zanelli, Dante Leone, Norberto Rene Serenelli, Alejandro Molina Carranza, (78 in 1:18-cv-02416-JPO-KHP) MOTION for Judgment on the Pleadings . filed by Wells Fargo Bank N.A., ATC Realty Fifteen, Inc, Wells Fargo Delaware Trust Company, Wells Fargo Bank Northwest N.A., (209 in 1:17-cv-02987-JPO-KHP, 209 in 1:17-cv-02987-JPO-KHP) MOTION to Strike Document No. (175) or. MOTION to Dismiss The Third Amended and Consolidated Class Action Complaint. filed by Wells Fargo Delaware Trust Company, NA, Wells Fargo Bank, N.A., ATC Realty Fifteen, Inc., Wells Fargo Bank NorthWest, N.A., (128 in 1:17-cv-02987-JPO-KHP) MOTION for Judgment on the Pleadings . filed by Wells Fargo Delaware Trust Company, NA, Wells Fargo Bank, N.A., ATC Realty Fifteen, Inc., Wells Fargo Bank NorthWest, N.A., (134 in 1:17-cv-07034-JPO-KHP) MOTION to Amend/Correct . filed by Alex Adolfo Sraier, Marcelo Redlich, Silvano Luis Arnaldi, Pablo Maccarone, Delmo Francisco Cadario, Maria Irma Gonzalez, Magdalena Maria Becu, Julio Garcia Garcia, Vicente Di Loreto, Veronica Micaela Barbera, Matias Juan Mendy, Pedro Charquia Aguirre, Mario Alejandro Speroni, Emilio Enrique Martinez Granados, Norberto Fermani, Eduardo Sogno, Rafael Argul, Concepcion Marta Grillo, Warne Financial Corp., Oscar Alberto Varde, Felipe Fiorellino, Carlos Adrian Rodriguez, Luis Sebastian Mogno, Eduardo Rodriguez, Juan Manuel Vaquer, Jorge Aidar Bestene, Congrats Networking Corp., Roberto Omar Ricci, Laura Cecilia Wrobel, Leonardo Juan Ionfrida, Zulema Noemi Ramona Romano, Horacio Nestor Acebedo, Eduardo Jorge Gnecco, Guilermo Omar Iribarren, Juan Pablo Perez Candreva, Jose Luis Ghiggia, Maria Ines Ernestina Bossisio Verdaguer, Raul Daniel Fernandez, Gustavo Armando Figuerola, Renato Salvador Materia, Norberto Oscar Tonanti, Alfredo Federico Rossi, Celia Maria Perez, Sergio Daniel Fermani, Lentaun S.A., Ricardo Hector Valls, Jorge Perez Jureidini, Jose Mesropian, Victor Angel Di Buccio, Federico Bersaiz, Humberto Nebar Bellocchio, Florencia Maria Murray, Vera Dorotea Baylon, Ernesto Fernandez LLorente, Fernando Nicolas Serra Rojas, Estela Susana Elena, Teresa Moschini, Emiliano Chaud, Aldo Pedro Duscher, Jose Maria Pena Fernandez, Clide Esther Martinez, Adrien Vicente Aspromonte, Maria Rosa LaPlacette, Anibel Ratibel, Emiliano Rodriguez, Patricia Noemi Delistovich, Patricio Devoto, Lucas Matias Licht, Roberto Raul Zapata, Enrique Jose Goldaracena, Roberto Raul Sanjuro, Saul Raznoszczyk, Jorge Luis Speroni, Gabriel Marino, Beatriz Gladys Gualdoni, Maria Cristina Frova, Carlos Daniel Gandulfo, Romina Fermani, Vincenzo Aspromonte, Matias Sebastian Mena, (77 in 1:18-cv-00128-JPO-KHP) MOTION for Judgment on the Pleadings . filed by Wells Fargo Bank, N.A., Wells Fargo Delaware Trust Company, ATC Realty Fifteen Inc., Wells Fargo Bank Northwest N.A., (98 in 1:17-cv-06087-JPO-KHP) MOTION for Judgment on the Pleadings . filed by Wells Fargo Delaware Trust Company, NA, Wells Fargo Bank, N.A., ATC Realty Fifteen, Inc., Wells Fargo Bank NorthWest, N.A., (215 in 1:17-cv-02987-JPO-KHP) MOTION to Amend/Correct . filed by Fundacion Fiorenzo, Roberto Jose Materia, Jose Luis Patrignani, Dario Osmar Ascune, Jorge Luis Germino, Ricardo Osvaldo Bluthgen, Alehandro Jose Laborde, Marcelo Mario De Angelis, Silvano Luis Arnaldi, Luis Felipe Lopez Blanco, Juan Jose Etala, Pablo Maccarone, Delmo Francisco Cadario, Jorge Alfredo Elias, Matias Luis Coll, Gustavo Canil, Sabino Alvarez Salgueiro, Marcelo Herman Loffreda, Magdalena Maria Becu, Francisco Alberto Di Maio, Adrian Roberto Materia, Francisco Miguel, Vicente Di Loreto, Alejandro Jose Laborde, Matias Juan Mendy, Tafina Establishment, Liliana Noemi Stellato, Hortensia Dominga Teresa Gutierrez Posse, Frederico Alvarez, Haisan Samman, Emilio Enrique Martinez Granados, Flint Consultant Ltd., Anna Maria Jorgelina Noguerol, Maria Cristina Rodriguez, Jorge Esteves, Patricia Boorman De Solari Loudet, Eduardo Sogno, Susana Mariel Alonso, Guillermo Ariel Pereyra, Concepcion Marta Grillo, Antonio Emilio Pergomet, Guillermo Walter Benelli, Gustavo Materia, Jorge Goyes, Silvana Montefiore, Martin Rodolfo Castro, Maria De La Caridad Gurnbaum, Marta Susana Cadario, Oscar Alberto Varde, KP Ventures S.A., Maria Balsano, Ulises Daniel Varela Damboriana, Carlos Adrian Rodriguez, Luis Sebastian Mogno, Rafael Leonardo De La Torre Mendoza, Natalia LOYATO, Fraida Kahan, Alejandro Enrique Julio Berger, Nancy Carlota Bain, Pablo Gabriel Potokski, Miguel Carlos Blanco, Marcelo De Leo, Gabriel Manuel Fernandez, Roberto Omar Ricci, Carlos A. Menendez, Jose Maria Cabrera, Jorge Enrique Gilardi, Laura Cecilia Wrobel, Leonardo Juan Ionfrida, Maria Concepcion Teresa Muller, Narja Investments Corp., Oscar Alberto Frei, Maria Teresa Del Carmen Correa Avila, Cristian Iturralde, Zulema Noemi Ramona Romano, Javier Jorge Oscar Silva, Felix Luis LEBORGNE,, Horacio Nestor Acebedo, Christine Alice Marie Marcelle Verse, Melburne S.A., Santos Di Giambattista, Gabriel Alejandro Del Campo, Diego Cuesta Silva, Jelifl Corp., Juan Pablo Perez Candreva, Jose Luis Ghiggia, Nelida I. Vazquez, Maria Ines Ernestina Bossisio Verdaguer, Raul Daniel Fernandez, Luis Miguel Girardotti, Ana Maria Krieger, Jorge A. Moyana, Ana Cecilia Materia, Sabino Javier Alvarez, Juan Jesus Gil Juncal, Adriana Cappone, Victor Miguel Jamui, Daniel Nicolas Juansaras, Martin Miranda, Daniel Alberto Aramburu, Ulan Bator Project Ltd,

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
LUIS RAMIRO AVILES et al.,
Plaintiffs,
17-CV-2987 (JPO)

-vS&P GLOBAL, INC. et al.,
Defendants.
FERNANDO RAUL BENEDETTO et al.,
Plaintiffs,
-v-

17-CV-6087 (JPO)

ATC REALTY FIFTEEN, INC. et al.,
Defendants.
HORACIO NESTOR ACEBEDO et al.,
Plaintiffs,
-v-

17-CV-7034 (JPO)

ATC REALTY FIFTEEN, INC. et al.,
Defendants.
FREDERICO ALVAREZ et al.,
Plaintiffs,
-v18-CV-128 (JPO)

ATC REALTY FIFTEEN, INC. et al.,
Defendants.
HECTOR JORGE ARECO et al.,
Plaintiffs,
-v-

18-CV-2416 (JPO)

ATC REALTY FIFTEEN, INC. et al.,
Defendants.

OPINION AND ORDER

1

J. PAUL OETKEN, District Judge:
In these five related cases, a putative class of investors in three mutual funds seeks relief
for losses they suffered after each of the mutual funds transferred the fund’s entire portfolio of
assets to a bank for far less than its value, resulting in insolvency. In a previous opinion, this
Court dismissed some of the claims, leaving, as relevant here, derivative claims brought on
behalf of the funds and direct claims arising under foreign law. A subset of the defendants have
filed a motion to dismiss for failure to state a claim and a motion for judgment on the pleadings.
For the reasons that follow, the motions are granted in part and denied in part.
I.

Background
Because the Court assumes familiarity with the facts of the case as set forth in its prior

opinion, see Aviles v. S & P Global, Inc., 380 F. Supp. 3d 221 (S.D.N.Y. 2019), the following
recitation provides only those facts that are particularly relevant to this Opinion and Order.
These facts are taken from the operative complaint (Dkt. No. 175 (“Compl.”)) and are assumed
true for purposes of this motion for judgment on the pleadings.
Plaintiffs in these five cases are investors who lost millions of dollars after purchasing
shares in the Lifetrade Fund, B.V., LTrade Plus Ltd., and LTrade Fixed Capital (BVI) Ltd
(collectively, “Lifetrade”), which are three mutual funds that deal in life-insurance policies.
(Compl. ¶¶ 18, 38–40.) Because of financial difficulty, in 2008 Lifetrade entered into an
agreement with a predecessor to Wells Fargo Bank, N.A. (“Wells Fargo”) that, as amended,
assured Lifetrade a $500 million credit line secured by its assets. (Compl. ¶¶ 114–15.) Under
the agreement, failure to pay back any advances by June 15, 2012, would result in default and
foreclosure on Lifetrade’s portfolio of life-insurance policies. (Compl. ¶ 114.)
Lifetrade eventually defaulted on its obligations under the agreement. (Compl. ¶¶ 131–
32.) Accordingly, Wells Fargo sought a settlement agreement in which it would obtain
2

Lifetrade’s life-insurance policies. Wells Fargo negotiated such an agreement with two Lifetrade
executives, Roy G. Smith and John Marcum, under which Lifetrade agreed to transfer its entire
portfolio of life-insurance policies to a subsidiary of Wells Fargo. (Compl. ¶ 134.) Smith and
Marcum agreed to this settlement agreement out of fear that they would be personally liable to
Wells Fargo for Lifetrade’s debt under Curaçaoan law. (Compl. ¶ 140.) The agreement entirely
wiped out Plaintiffs’ investments in Lifetrade. (Id.) At the time, however, Smith and Marcum
gave no notice to Lifetrade investors that the settlement had occurred. (Compl. ¶ 139.)
Lifetrade investors first learned of the settlement agreement in 2016. (Compl. ¶ 170.)
Litigation ensued. In 2017 and 2018, Plaintiffs initiated these five actions — “identical in
virtually all material respects,” Aviles, 380 F. Supp. 3d at 254 — bringing a bevy of state,
federal, and foreign law claims. In 2019, this Court partially granted a motion to dismiss,
leaving intact, as relevant here, claims for unconscionability and aiding and abetting a breach of
fiduciary duty, brought derivatively on behalf of Lifetrade (Compl. ¶¶ 190–98, 247–63), and
direct claims brought under Argentine and Japanese law. See id. at 307–09. Defendants were
instructed to answer these remaining claims. See id. at 309.
One set of Defendants — the Wells Fargo Defendants 1 — filed an answer and moved for
judgment on the pleadings under Federal Rule of Civil Procedure 12(c). (Dkt. Nos. 127–128.)
Plaintiffs then amended the complaint to bring new foreign-law claims. (Dkt. No. 175.) The
Wells Fargo Defendants moved to dismiss the new claims under Federal Rule of Civil Procedure
12(b)(6) and to strike the claims under Federal Rule of Civil Procedure 12(f). (Dkt. No. 209.)

1

The Wells Fargo Defendants are Wells Fargo Bank, N.A., Wells Fargo Bank Northwest,
N.A., Wells Fargo Delaware Trust Company, N.A., and ATC Realty Fifteen, Inc. (Dkt. No. 129
at 1.)

3

Plaintiffs opposed this motion and, in the alternative, sought leave to amend the complaint to
include the new claims. (Dkt. No. 215.)
II.

Legal Standard
To withstand a motion to dismiss under Rule 12(b)(6), a plaintiff must plead sufficient

factual allegations “to state a claim to relief that is plausible on its face.” Bell Atl. Corp. v.
Twombly, 550 U.S. 544, 570 (2007). A claim is plausible if the well-pleaded factual allegations
of the complaint, presumed true, permit the court to “draw the reasonable inference that the
defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)
(citing Twombly, 550 U.S. at 556).
Federal Rule of Civil Procedure 12(c) authorizes the Court to grant judgment on the
pleadings “where material facts are undisputed and where a judgment on the merits is possible
merely by considering the contents of the pleadings.” Sellers v. M.C. Floor Crafters, Inc., 842
F.2d 639, 642 (2d Cir. 1988). The movant must show that she “is entitled to judgment as a
matter of law.” Burns Int’l Sec. Serv., Inc. v. Int’l Union, United Plant Guard Workers, 47 F.3d
14, 16 (2d Cir. 1995). To determine whether the movant has made this showing, the Court
applies the “same standard” it would apply to a motion to dismiss, “‘accept[ing] all factual
allegations in the complaint as true and draw[ing] all reasonable inferences’ in favor of the
counter-claimant.” Bank of N.Y. v. First Millennium, Inc., 607 F.3d 905, 922 (2d Cir. 2010)
(quoting Hayden v. Paterson, 594 F.3d 150, 160 (2d Cir. 2010)).
III.

Discussion
Plaintiffs’ surviving claims against the Wells Fargo Defendants encompass both

derivative common-law claims and direct foreign-law claims. The Wells Fargo Defendants have
moved under Rules 12(b)(6), 12(c), and 12(f). Each set of claims is discussed in turn.

4

A.

Derivative Common-Law Claims

Plaintiffs, on behalf of Lifetrade, first bring common-law claims against the Wells Fargo
Defendants. (Compl. ¶¶ 190–98, 247–63.) Plaintiffs seek rescission of the settlement agreement
between Lifetrade and the Wells Fargo Defendants on the ground of unconscionability.
Plaintiffs also seek recovery from the Wells Fargo Defendants for aiding and abetting Smith and
Marcum’s plot to execute the settlement agreement and to conceal its terms from Plaintiffs.
In response, the Wells Fargo Defendants argue that they are entitled to judgment on these
claims because of the in pari delicto doctrine, under which “the courts will not intercede to
resolve a dispute between two wrongdoers.” Kirschner v. KPMG LLP, 938 N.E.2d 941, 950
(N.Y. 2010). In the context of corporate law, the doctrine bars a company that has committed
wrongdoing from suing another party who has participated in the wrongdoing. See id. at 950–52.
Here, under traditional principles of agency law, the wrongful acts of Smith and Marcum would
ordinarily be imputed to Lifetrade. Id. at 950. Thus, the Wells Fargo Defendants argue,
Plaintiffs are barred from bringing claims on behalf of Lifetrade (a wrongdoer) against the Wells
Fargo Defendants (another wrongdoer).
But there is a relevant exception. The in pari delicto doctrine has no application if the
agent of the company has “totally abandoned” the company’s interests and is acting “entirely for
h[er] or another’s purposes.” Id. at 952 (quoting Center v. Hampton Affiliates, Inc., 488 N.E.2d
828, 830 (N.Y. 1985)). The agent’s conduct must constitute something akin to “outright theft or
looting or embezzlement.” Id. If this “adverse-interest” exception applies, then the agent’s acts
are not imputed to the company, and shareholders may pursue a derivative action on behalf of
the company against the third-party wrongdoers. See id.
To prevail under the in pari delicto doctrine, then, the Wells Fargo Defendants must
show that the adverse-interest exception lacks application. The pleadings, however, indicate the
5

opposite. This Court has already determined, in a prior opinion, that “[t]he complaint establishes
that this exception could plausibly apply here.” 380 F. Supp. 3d at 302. Specifically, the
complaint “alleges that Lifetrade could have . . . h[eld] the Wells Fargo Defendants to the
foreclosure procedures . . . set out in the [original] Loan Agreement,” which would have resulted
in “hundreds of millions of dollars . . . flow[ing] back into Lifetrade’s coffers.” Id. Rather than
pursuing this possibility, Smith and Marcum, “motivated by personal concerns, . . . elected to
negotiate a new agreement — the Settlement Agreement — that . . . produced no . . . benefit for
the company.” Id. Given these factual allegations, this Court denied Defendants’ Rule 12(b)(6)
motion to dismiss under the in pari delicto doctrine. See id.
The Wells Fargo Defendants now seek, in essence, reconsideration of that decision. “The
standard for addressing a Rule 12(c) motion for judgment on the pleadings is the same as that for
a Rule 12(b)(6) motion to dismiss for failure to state a claim.” Cleveland v. Caplaw Enter., 448
F.3d 518, 521 (2d Cir. 2006). And although a litigant is “permitted” to bring successive motions
challenging the sufficiency of a claim, first under Rule 12(b)(6) and then under Rule 12(c), 5C
Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure § 1385, at 483 (3d
2004), a Rule 12(c) motion for judgment on the pleadings that challenges the sufficiency of a
complaint on the same ground as an already-denied Rule 12(b)(6) motion to dismiss should meet
an identical fate. See, e.g., Adamou v. Doyle, No. 12-CV-7789, 2017 WL 5508916, at *2
(S.D.N.Y. Mar. 9, 2017), rev’d on other grounds, 707 F. App’x 745 (2d Cir. 2018) (summary
order). In this case, the Wells Fargo Defendants’ motion for judgment on the pleadings cites no
new law and adduces no new evidence that would require a different outcome. Cf. Drapkin v.
Mafco Consol. Grp., Inc., 818 F. Supp. 2d 678, 696 (S.D.N.Y. 2011) (“Motions for
reconsideration are properly granted only if there is a showing of: (1) an intervening change in

6

controlling law; (2) the availability of new evidence or (3) a need to correct a clear error or
prevent manifest injustice.”). Accordingly, the Court declines the Wells Fargo Defendants’
request for a second bite at the apple. 2
The motion for judgment on the pleadings is denied with respect to Plaintiffs’
shareholder derivative claims. 3
B.

Foreign-Law Claims

The Wells Fargo Defendants also challenge Plaintiffs’ foreign-law claims, both old and
new. They seek judgment on the pleadings on Plaintiffs’ previously pleaded foreign-law claims,
which arise under Argentine and Japanese law. (Dkt. No. 207 at 4–6.) They also seek dismissal

2

Even if the Court were inclined to revisit its prior decision, it would reach the same
conclusion. According to the complaint, if Smith and Marcum had made use of the foreclosure
provisions in the original Loan Agreement, Lifetrade would have been left with millions of
dollars. (Compl. ¶ 133.) Instead, Smith and Marcum — motivated by fear that they would be
held personally liable for Lifetrade’s debt — opted to negotiate a new agreement with Wells
Fargo that absolved them of personal liability but left Lifetrade insolvent. (Compl. ¶¶ 134, 140.)
From those allegations, one can plausibly infer that the new agreement constituted “outright theft
or looting or embezzlement,” triggering application of the adverse-interest exception. Kirschner,
938 N.E.2d at 952.
The Wells Fargo Defendants disagree, arguing that the new agreement, although
depriving Lifetrade of millions of dollars, nonetheless benefitted Lifetrade in three ways: by
extinguishing Lifetrade’s debt without risk of further exposure, by giving Lifetrade a period to
buy back the life-insurance policies at issue, and by obligating Wells Fargo to share with
Lifetrade the proceeds of any profitable sale of the policies within a year. (Dkt. No. 207 at 6.)
The Court is skeptical that any of those relatively speculative benefits outweighs the certain loss
of millions of dollars. Cf. In re Platinum-Beechwood Litig., No. 18-CV-6685, 2019 WL
2569653, at *13 (S.D.N.Y. June 21, 2019) (“To hold that any amount of cash received is a
benefit, even if that cash pales in comparison to the value of the assets for which it was
exchanged, would render the term ‘benefit’ meaningless.”). But, in any event, the Wells Fargo
Defendants have merely identified a “question of fact” as to “[w]hether [Lifetrade] retained a
benefit from [Smith and Marcum’s] fraud.” In re Bonnanzio, 91 F.3d 296, 303 (2d Cir. 1996).
Thus, judgment on the pleadings would be inappropriate.
3

In their opening brief, the Wells Fargo Defendants also argued that they were entitled to
judgment on the common-law claims because Plaintiffs lacked derivative standing. (Dkt. No.
129 at 19–21.) They have since abandoned that argument. (Dkt. No. 207 at 10 n.8.)

7

of Plaintiffs’ newly pleaded foreign-law claims, which also arise under Argentine and Japanese
law. (Dkt. No. 210 at 6–11.) For both sets of claims, the Wells Fargo Defendants argue that
neither Japanese nor Argentine law applies to this case. Thus, their argument occasions a
choice-of-law analysis. Here, “[b]ecause both parties agree that New York choice of law rules
govern, for purposes of the . . . motion, this election governs.” Lewis Tree Serv., Inc. v. Lucent
Techs. Inc., 211 F.R.D. 228, 235–36 (S.D.N.Y. 2002); see Dkt. No. 216 at 5; Dkt. No. 219 at 2. 4
“In the context of tort law, New York utilizes interest analysis to determine which of two
competing jurisdictions has the greater interest in having its law applied in the litigation.”
Padula v. Lilarn Properties Corp., 644 N.E.2d 1001, 1002 (N.Y. 1994). If the conflict involves
a rule that is “conduct-regulating,” the law of the place of the tort generally governs. Id. If the
conflict involves a rule that is “loss allocating,” however, the choice of law is governed by the
principles articulated in Neumeier v. Kuehner, 31 N.Y.2d 121, 128 (1972). See Padula, 644
N.E.2d at 1003.
Here, as the parties agree, the rule is conduct regulating. (See Dkt. No. 177 at 17; Dkt.
No. 207 at 4.) Accordingly, the law that governs is lex loci delicti — that is, the law of the place
of the tort. See Padula, 644 N.E.2d at 1002. Ordinarily, in tort cases, “both the wrong and the
injury t[ake] place” in the same jurisdiction, which renders the locus delicti obvious. Babcock v.
Jackson, 191 N.E.2d 279, 280 n.2 (N.Y. 1963). But where, as here, the wrongful conduct and

4

The Wells Fargo Defendants initially raise (see Dkt. No. 207 at 4; Dkt. No. 210 at 8),
and then seemingly abandon (see Dkt. No. 219 at 2–7), the contention that because this Court’s
jurisdiction is premised on the Edge Act, 12 U.S.C. § 632, federal choice-of-law rules apply.
Although that was once the approach taken “[i]n decades past,” the Second Circuit has since
recognized that “the Supreme Court’s curtailment of federal common lawmaking . . . casts doubt
on the durability of the[] [prior] approach.” Loreley Fin. (Jersey) No. 3 Ltd. v. Wells Fargo Sec.,
LLC, 797 F.3d 160, 170 n.5 (2d Cir. 2015). In any event, the Court need not decide the issue
because the Wells Fargo Defendants ultimately appear to accede to the applicability of New
York choice-of-law rules.

8

the injury occur in different places, the Court must determine which of the two jurisdictions is
the locus delicti. The relevant test, as can be discerned from the body of case law, is the precise
nature of the “relation” between “the [wrongful] occurrence” and “the place of injury.”
Restatement (Second) of Conflict of Laws § 145 cmt. e (1971). When the wrongful conduct has
a direct relationship to the locus of the injury, the place of the injury “will usually have a
predominant, if not exclusive, concern.” Babcock, 191 N.E.2d at 284. But when the wrongful
conduct has a “purely adventitious,” id., or “merely fortuitous” relationship with the locus of the
injury, the place of the injury “has a minimal interest,” Dobelle v. Nat’l R.R. Passenger Corp.,
628 F. Supp. 1518, 1529 (S.D.N.Y. 1986); see Benefield v. Pfizer Inc., 103 F. Supp. 3d 449, 459
(S.D.N.Y. 2015) (noting that application of the law of the place of injury would not “accord[]
with the reasonable expectation of both parties” if “the location of the alleged injury [were] a
mere fortuity”). 5
Here, the allegedly wrongful conduct of the Wells Fargo Defendants has a “merely
fortuitous” relationship with the jurisdictions in which the injuries occurred. The Second Circuit
has held that this will usually be the case for conduct-regulating rules, as the place of the wrong
will “generally [have] superior ‘interests in protecting the reasonable expectations of the parties
who relied on [the laws of that place] to govern their primary conduct and in the admonitory
effect that applying its law will have on similar conduct in the future.’” Licci ex rel. Licci v.
Lebanese Canadian Bank, SAL, 739 F.3d 45, 51 (2d Cir. 2013) (per curiam) (internal quotation
marks omitted) (alteration in original) (quoting Schultz v. Boy Scouts of Am., Inc., 480 N.E.2d

5

See also Restatement (Second) of Conflict of Laws § 145 cmt. e (1971) (“[T]he place of
injury will not play an important role in the selection of the state of the applicable law . . . when
the place of the injury can be said to be fortuitous or when for other reasons it bears little relation
to the occurrence and the parties with respect to the particular issue.”).

9

679, 684–85 (N.Y. 1985)); see also Niedernhofer v. Wittels, No. 17-CV-4451, 2018 WL
3650137, at *8 (S.D.N.Y. July 31, 2018) (“[I]n the context of conduct-regulating rules, where the
wrongful conduct and the injury occur in different states, the law of the state where the conduct
occurred will typically apply.”). This is such a case. Here, Wells Fargo never dealt directly with
any of the Plaintiffs and did not engage in “deliberate efforts” to cause them harm in Argentina
and Japan. Benefield, 103 F. Supp. 3d at 459; cf. Oliver Wyman, Inc. v. Eielson, No. 15-CV5305, 2016 WL 5339549, at *4 (S.D.N.Y. Sept. 22, 2016) (Sullivan, J.) (applying the law of the
place of injury because the defendants “intended their actions to cause injury to Plaintiff in New
York”). Thus, under Licci, neither Argentina nor Japan has “the greatest interest in the
litigation,” Schultz, 480 N.E.2d at 684, which means that neither jurisdiction’s law governs.
Plaintiffs, of course, argue to the contrary. But Plaintiffs’ argument rests on the premise
that “the locus of the tort is generally deemed to be the place where harm was inflicted.” (Dkt.
No. 216 at 7.) That gets it exactly backward. See, e.g., Niedernhofer, 2018 WL 3650137, at *8
(“[I]n the context of conduct-regulating rules, where the wrongful conduct and the injury occur
in different states, the law of the state where the conduct occurred will typically apply.” (citing
Licci, 739 F.3d at 50)). And the cases cited by Plaintiffs are readily distinguishable. Some
involve torts in which the locus of the injury is “not a mere fortuity.” Benefield, 103 F. Supp. 3d
at 459. 6 Others are even further afield. 7 In any event, Plaintiffs fail to disturb the presumption,

6

See, e.g., Dkt. No. 216 at 6 n.13 (citing Bon Jour Grp., Ltd. v. Elan-Polo, Inc., No. 96CV-6705, 1997 WL 401814 (S.D.N.Y. July 16, 1997).) Bon Jour Group involved a claim that
the defendant fraudulently induced the plaintiff to sign a contract, causing the plaintiff to suffer
economic loss in New York. See 1997 WL 401814, at *4. Accordingly, it is a case where the
location of the injury was “the result of [the defendant’s] deliberate efforts to [induce the
plaintiff to sign the contract] in [New York].” Benefield, 103 F. Supp. 3d at 459.
7

See, e.g., Dkt. No. 216 at 6 n.13 (citing White Plains Coat & Apron Co. v. Cintas Corp.,
460 F.3d 281, 285 (2d Cir. 2006).) White Plains’s choice-of-law analysis expressly considers
where the wrongful conduct took place. Accordingly, “White Plains Coat & Apron Co. does not
10

under Licci, that it is the place of the wrongful conduct — and not the place of the injury — that
provides the governing law. See Licci, 739 F.3d at 50–51. 8
Because neither Argentine nor Japanese law applies in this action, the Wells Fargo
Defendants are entitled to judgment on the previously pleaded foreign-law claims. 9 Similarly,
Plaintiffs’ newly pleaded foreign-law claims are dismissed for failure to state a claim. 10
IV.

Conclusion
For the foregoing reasons, the Wells Fargo Defendants’ motion for judgment on the

pleadings is GRANTED in part and DENIED in part. The Wells Fargo Defendants’ motion to
dismiss for failure to state a claim is GRANTED. The Wells Fargo Defendants’ motion to strike
is DENIED as moot. Plaintiffs’ motion for leave to amend is DENIED.
The Clerk of Court is directed to close the following motions:
•

Docket Numbers 128, 209, and 215 in Aviles, No. 17-CV-2987;

•

Docket Numbers 98 and 142 in Benedetto, No. 17-CV-6087;

•

Docket Numbers 97 and 134 in Acebedo, No. 17-CV-7034;

stand for the proposition that the location in which a plaintiff was injured has a greater interest
than the location in which the wrongful conduct occurred.” Holborn Corp. v. Sawgrass Mut. Ins.
Co., 304 F. Supp. 3d 392, 399 (S.D.N.Y. 2018).
8

Plaintiffs argue that “Wells Fargo has made no showing that its tortious activities
occurred in New York.” (Dkt. No. 216 at 7.) Maybe so. But it remains true that Plaintiffs have
failed to plead that any wrongful conduct occurred in either Argentina or Japan. Thus, under
Licci, neither jurisdiction’s law applies.
9

Because the Court’s choice-of-law analysis indicates that the Wells Fargo Defendants
are entitled to judgment on the pleadings, the Court need not address their alternative argument
that neither Argentine nor Japanese law imposed a duty of disclosure on the Wells Fargo
Defendants. (See Dkt. No. 129 at 11–13.)
10

Because these claims are dismissed for failure to state a claim, the Wells Fargo
Defendants’ motion to strike the claims pursuant to Federal Rule of Civil Procedure 12(f) is
denied as moot. (Dkt. No. 209.) Similarly, Plaintiffs’ motion for leave to amend the complaint
to add the claims is denied as futile. (Dkt. No. 215.)

11

•

Docket Numbers 77 and 116 in Alvarez, No. 18-CV-128; and

•

Docket Numbers 78 and 112 in Areco, No 18-CV-2416.

SO ORDERED.
Dated: April 6, 2020
New York, New York
____________________________________
J. PAUL OETKEN
United States District Judge

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