AIG Europe, S.A., as assignee and/or subrogee of v. MIH Scrap Metals International, LLC; et al

Filing 71

DECISIION AND ORDER granting 27 Motion to Amend or Correct; denying 31 Motion to Dismiss; finding as moot 9 Motion to Dismiss; denying 18 Motion to Dismiss for Lack of Jurisdiction. Signed by Hon. Richard J. Arcara on 7/6/2010. (JMB)

Download PDF
AIG Europe, S.A., as assignee and/or subrogee of v. MIH Scrap Metals International, LLC; et al Doc. 71 UNITED STATES DISTRICT COURT W E S T E R N DISTRICT OF NEW YORK A IG EUROPE, S.A., as assignee and/or subrogee of Luvata Buffalo, Inc., Luvata Oy f/k/a Luvata Holding Oy and Luvata International Oy and LUVATA BUFFALO, INC., P la in tiffs , D E C IS IO N AND ORDER 0 9 -C V -6 1 2 A v. MIH SCRAP METALS INTERNATIONAL, LLC et al., D e fe n d a n ts . I. IN T R O D U C T IO N P e n d in g before the Court are motions to dismiss by defendants MIH Scrap M e ta ls International, LLC, and MIH Cathode Trading, LLC ("MIH" collectively); a n d by defendants Intertek Group PLC, Intertek Agri Services, Intertek Caleb B re tt, Intertek Testing Services, and Intertek Testing Services (East Africa) (Pty) L td . ("Intertek" collectively).1 Intertek seeks dismissal from the case for reasons The Court grants Intertek's motion (Dkt. No 27) to amend its motion to d is m is s , and will consider the amended motion (Dkt. No. 31) as having s u p e rs e d e d the original motion (Dkt. No. 9). The amendments have caused no p re ju d ic e to plaintiffs since they had not responded to the original motion when th e amended motion was filed. 1 Dockets.Justia.com including a lack of subject-matter jurisdiction, forum non conveniens, and a lack o f specificity in the fraud and negligent-misrepresentation allegations against it. Both Intertek and MIH have asserted that this Court lacks personal jurisdiction o ve r them. Plaintiffs AIG Europe, S.A. ("AIG") and Luvata Buffalo, Inc. ("Luvata") re s p o n d that their respective complaints are sufficiently specific to preserve their c la im s and their choice of forum. The Court held oral argument on June 24, 2 0 1 0 . For the reasons below, the Court will deny the motions. II. B AC K G R O U N D 2 T h is case concerns plaintiffs' attempt to determine how a shipment certified in Tanzania as 500 metric tons of industrially pure copper became a shipment of w o rth le s s rocks, sand, and debris by the time it approached its final destination in B u ffa lo . Plaintiff Luvata is a Delaware corporation with its principal place of b u s in e s s in Buffalo, New York. On or around March 20, 2007, Luvata entered a c o n tra c t with MIH for 1,500 metric tons of 99.99% pure copper cathodes. The c o n tra c t specified that Intertek would inspect any shipments under the contract, c e rtify that any shipping containers used contained pure copper, and seal the c o n ta in e rs to allow Luvata to know whether any containers had been tampered p o s t- in s p e c tio n . Because plaintiffs' allegations must be taken as true for purposes of the p e n d in g motions, the Court here will avoid repeated use of the word "alleged." 2 2 Sometime after Luvata and MIH signed the contract, they arranged for a s h ip m e n t of the first 500 metric tons of copper. Meanwhile, Luvata took out an in s u ra n c e policy from AIG that would cover any losses sustained in connection w ith the shipment, including losses resulting from criminal theft or fraud. On or a b o u t July 21, 2007, Intertek transmitted to Luvata a survey report confirming an in s p e c tio n of that shipment and providing details of the inspection. Relying on th a t survey report and various documents from MIH, Luvata transmitted to MIH a p a ym e n t for the shipment that exceeded $3.7 million. Throughout the pendency o f the transaction, the parties exchanged e-mail messages concerning the status o f the shipment. T h e shipment of copper cathodes traveled from its loading in Tanzania to M o n tre a l and then Toronto. The shipment traveled in the form of 25 numbered s h ip p in g containers, with seals from Intertek that bore their own numbers. All 25 c o n ta in e rs arrived in Toronto without any evidence of tampering. The container a n d seal numbers on the containers matched the numbers listed in the survey re p o rt and shipping documents. Once the containers arrived in Toronto, a s a m p le of four containers were transported to their final destination at the L u va ta 's facility in Buffalo. Luvata opened these four containers and found, to its s u rp ris e , that the containers held no copper at all. Instead, these four containers c o n ta in e d worthless rocks, sand, and debris. Meanwhile, United States customs a g e n ts stopped and rejected the next four containers that were making their way 3 from Toronto to Buffalo, because they too were found to contain worthless materials and no copper. Luvata arranged for an inspection of the remaining 17 c o n ta in e rs still in Toronto. None of those containers held any copper. Luvata s u b m itte d a claim to AIG under the policy that it purchased to cover the shipment. AIG reimbursed Luvata in full. On or about September 19, 2008, Luvata a s s ig n e d its rights relating to its loss to AIG, thereby giving AIG subrogation r ig h ts . AIG and Luvata subsequently filed essentially identical complaints on July 1 , 2009 and February 16, 2010. Plaintiffs have asserted seven claims against M IH and five against Intertek, accusing each of breach of contract, fraud, and n e g lig e n t misrepresentation. In short, plaintiffs have alleged that MIH and In te rte k never intended to fill the shipping containers with copper and knew from th e beginning of the transaction that the containers would hold no copper, but p re te n d e d otherwise to induce payment from Luvata. On October 5, 2009, MIH filed a motion to dismiss for lack of personal ju ris d ic tio n (Dkt. No. 18). In support of this motion, MIH asserts that it has no o ffic e s , bank accounts, or regular clients in New York, meaning that it has no c o n tin u o u s or systematic course of doing business in New York within the m e a n in g of New York's rules for "long-arm" personal jurisdiction. MIH asserts fu rth e r that it does not have an ongoing contractual relationship with Luvata, and n e ith e r negotiated the contract in New York nor traveled to New York to meet with 4 Luvata to form the contract. In opposition to this motion, plaintiffs assert that MIH d id have an ongoing business relationship with Luvata because it knew that this firs t shipment of 500 metric tons was destined for Buffalo and because it knew th a t the remaining 1,000 metric tons would be delivered to Buffalo at some future tim e . Plaintiffs assert further that MIH has engaged in tortious conduct that c a u s e d damages within New York. O n January 6, 2010, Intertek filed an amended motion to dismiss on m u ltip le grounds (Dkt. No. 31). Intertek has made an argument about a lack of p e rs o n a l jurisdiction that is essentially identical to the argument that MIH made. Additionally, Intertek asserts that its inspection contract limits its maximum lia b ility, and thus the maximum amount in controversy concerning it, to under $ 2 0 ,0 0 0 in U.S. currency, well below the $75,000 threshold needed for diversity c a s e s . Intertek seeks dismissal as against certain "service lines" named as d e fe n d a n ts in plaintiffs' complaints because they are not actual entities that can b e sued. Intertek also seeks dismissal under the doctrine of forum non c o n v e n ie n s , claiming that litigating in Buffalo is inconvenient compared to T a n z a n ia , where the shipment was loaded, or England, a forum selected by In te rte k and a third party allegedly acting on Luvata's behalf. Finally, Intertek s e e k s dismissal of the fraud and negligent misrepresentation claims against it for la c k of particularity. In short, plaintiffs respond to these arguments by asserting th a t Intertek and Luvata negotiated and communicated directly with each other for 5 a shipment that Intertek knew would arrive in Buffalo. Plaintiffs assert further that th e ir complaints set forth a detailed theory of fraud in which the only allegations m a d e upon information and belief concern details that currently lie within In te rte k 's exclusive control. III. D IS C U S S IO N M IH and Intertek have made several arguments for dismissal. Each argument requires a different analysis. To the extent, however, that the arguments require an assessment of the allegations in plaintiffs' complaint, the Court will proceed through each argument by "accepting all factual allegations in the complaint as true, and drawing all reasonable inferences in the plaintiff's favor." Peter F. Gaito Architecture, LLC v. Simone Dev. Corp., 602 F.3d 57, 61 (2d Cir. 2010) (internal quotation marks and citation omitted). A. M IH 's Motion to Dismiss for Lack of Personal Jurisdiction "In deciding a pretrial motion to dismiss for lack of personal jurisdiction a d is tric t court has considerable procedural leeway. It may determine the motion o n the basis of affidavits alone; or it may permit discovery in aid of the motion; or it may conduct an evidentiary hearing on the merits of the motion. If the court c h o o s e s not to conduct a full-blown evidentiary hearing on the motion, the plaintiff n e e d make only a prima facie showing of jurisdiction through its own affidavits a n d supporting materials. Eventually, of course, the plaintiff must establish ju ris d ic tio n by a preponderance of the evidence, either at a pretrial evidentiary 6 hearing or at trial. But until such a hearing is held, a prima facie showing suffices, n o tw ith s ta n d in g any controverting presentation by the moving party, to defeat the m o tio n ." Marine Midland Bank, N.A. v. Miller, 664 F.2d 899, 904 (2d Cir. 1981) (c ita tio n s omitted). Here, the parties have not requested an evidentiary hearing re g a rd in g personal jurisdiction over MIH. The parties instead have chosen to s u b m it extensive briefing with exhibits. The papers now in the docket suffice to d e te rm in e whether plaintiffs have at least made a prima facie showing that this C o u rt has personal jurisdiction over MIH. Cf. Parker Waichman Alonso LLP v. O rla n d o Firm, P.C., No. 09 Civ. 7401, 2010 W L 1956871, at *5 (S.D.N.Y. May 14, 2 0 1 0 ) ("Because personal jurisdiction is inherently a matter requiring the re s o lu tio n of factual issues outside of the pleadings . . . all pertinent d o c u m e n ta tio n submitted by the parties may be considered in deciding the m o tio n .") (internal quotation marks and citations omitted). Consequently, the C o u rt will assess MIH's motion using that standard. "D is tric t courts resolving issues of personal jurisdiction must . . . engage in a two-part analysis. First, a district court must determine whether, under the laws o f the forum state (New York in this case), there is jurisdiction over the defendant. Second, [it] must determine whether an exercise of jurisdiction under these laws is consistent with federal due process requirements." Grand River Enters. Six N a tio n s , Ltd. v. Pryor, 425 F.3d 158, 165 (2d Cir. 2005) (alterations in original) (in te rn a l quotation marks and citations omitted). 7 1. L a w s of the Forum State F e d e ra l Rule of Civil Procedure ("FRCP") 4(h), by way of FRCP 4(e)(1), a llo w e d plaintiffs to serve MIH "following state law for serving a summons in an a c tio n brought in courts of general jurisdiction in the state where the district court is located or where service is made." That rule allows for the use of N.Y. CPLR 3 0 2 (a ), which permits plaintiffs to establish "long-arm" jurisdiction in any of four d iffe re n t ways, two of which are relevant to this case: (1 ) E s ta b lis h in g that MIH "transacts any business within the state or c o n tra c ts anywhere to supply goods or services in the state," CPLR 3 0 2 (a )(1 ); or (2 ) E s ta b lis h in g that MIH "commits a tortious act without the state c a u s in g injury to person or property within the state . . . if [it] (i) re g u la rly does or solicits business, or engages in any other p e rs is te n t course of conduct, or derives substantial revenue from g o o d s used or consumed or services rendered, in the state, or (ii) e x p e c ts or should reasonably expect the act to have consequences in the state and derives substantial revenue from interstate or in te rn a tio n a l commerce," CPLR 302(a)(3). "B y this `single act statute' . . . proof of one transaction in New York is sufficient to in vo k e jurisdiction, even though the defendant never enters New York, so long as th e defendant's activities here were purposeful and there is a substantial 8 relationship between the transaction and the claim asserted." Deutsche Bank Secs., Inc. v. Montana Bd. of Invs., 850 N.E.2d 1140, 1142 (N.Y. 2006) (internal q u o ta tio n marks and citation omitted). H e re , MIH entered a contract with Luvata whose first page lists the buyer a s "Luvata Buffalo, Inc.," "whose appointed domicilium is 70 Sayre Street, B u ffa lo , NY 14240, USA." (Dkt. No. 1-2 at 2; Dkt. No. 50-2 at 2.) Under the c o n tra c t, MIH was to contact Luvata directly to provide a market price for the c o p p e r. (Dkt. No. 1-2 at 3; Dkt. No. 50-2 at 3.) MIH corresponded directly with L u va ta on numerous occasions concerning the copper purchase. (See Dkt. No. 5 0 -4 at 23; Dkt. No. 50-5 at 2; Dkt. No 50-6; Dkt. No. 50-7; Dkt. No. 50-8; Dkt. N o . 50-9; Dkt. No. 50-10.) The final invoice from MIH, bearing MIH letterhead, e xp lic itly lists Luvata as the buyer and lists a Buffalo mailing address. (Dkt. No. 5 0 -7 at 79.) Luvata paid that invoice with Purchase Order No. 30077. (Dkt. No. 5 4 -3 at 7.) Regardless of whether third-party intermediaries helped with the lo g is tic s necessary to bring the copper shipment to Buffalo, the evidence a va ila b le in the docket makes obvious that MIH and Luvata communicated d ire c tly with each other at all stages of the purchase. Throughout those c o m m u n ic a tio n s , MIH obviously knew that Luvata was the buyer, that Luvata was lo c a te d in Buffalo, and that Luvata wanted the copper to arrive ultimately where it w a s located--in Buffalo. The evidence also implies that MIH and Luvata would h a ve had to continue their communications in the future, because 1,000 metric 9 tons of copper still needed to be shipped. Under these circumstances, plaintiffs h a ve made a prima facie showing that MIH contracted to supply goods within N e w York's borders, within the meaning of CPLR 302(a)(1). Cf. Deutsche Bank S e c s ., 850 N.E.2d at 1143 ("[Defendant] is a sophisticated institutional trader that e n te re d New York to transact business here by knowingly initiating and pursuing a negotiation with [plaintiff's] employee in New York that culminated in the sale of $ 1 5 million in bonds. Negotiating substantial transactions such as this one was a m a jo r aspect of [defendant's] mission--`part of its principal reason for being.'") (c ita tio n omitted). Additionally, and accepting the allegations in the complaint as tru e , MIH's failure to load the shipping containers with the contractually agreed-to p ro d u c t injured Luvata and its operations in Buffalo, within the meaning of CPLR 3 0 2 (a )(3 ). Plaintiffs thus have made a prima facie showing of personal ju ris d ic tio n under New York law. 2. F e d e ra l Due Process Requirements W ith respect to the requirements for personal jurisdiction under the Due P ro c e s s Clause of the Fourteenth Amendment, "the constitutional touchstone re m a in s whether the defendant purposefully established `minimum contacts' in th e forum State." Burger King Corp. v. Rudzewicz, 471 U.S. 462, 474 (1985) (c ita tio n omitted). "So long as it creates a `substantial connection' with the forum, e ve n a single act can support jurisdiction." Id. at 476 n.18 (citation omitted). "Although territorial presence frequently will enhance a potential defendant's 10 affiliation with a State and reinforce the reasonable foreseeability of suit there, it is an inescapable fact of modern commercial life that a substantial amount of b u s in e s s is transacted solely by mail and wire communications across state lines, th u s obviating the need for physical presence within a State in which business is c o n d u c te d . So long as a commercial actor's efforts are `purposefully directed' to w a rd residents of another State, we have consistently rejected the notion that a n absence of physical contacts can defeat personal jurisdiction there." Id. at 476 (c ita tio n s omitted). Here, MIH contracted with Luvata specifically to bring 1,500 metric tons of c o p p e r to Buffalo. The shipment of one-third of that copper cost almost $4 m illio n , with, presumably, two shipments and two similar payments to follow in the fu tu re . MIH communicated with Luvata throughout the pendency of the first s h ip m e n t-- c o m m u n ic a te d enough, in fact, to induce Luvata to transmit payment a n d to think that the shipment would arrive as certified. MIH would have to c o n tin u e communicating with Luvata over the course of several months or several ye a rs regarding the delivery to Buffalo of the remaining 1,000 metric tons s p e c ifie d in the contract. This evidence suffices for a prima facie showing that M IH purposefully directed significant commercial efforts toward New York so as to satisfy the Due Process Clause. Subject to an ultimate resolution of the issue a t trial, the Court will assert personal jurisdiction over MIH and deny MIH's motion to dismiss. 11 B. In te r te k 's Motions to Dismiss In te rte k 's motion contains five3 separate arguments for dismissal. The C o u rt will address each argument separately, but will address the argument a b o u t subject-matter jurisdiction first. "W h e re , as here, the defendant moves for d is m is s a l under Rule 12(b)(1), Fed. R. Civ. P., as well as on other grounds, the c o u rt should consider the Rule 12(b)(1) challenge first since if it must dismiss the c o m p la in t for lack of subject matter jurisdiction, the accompanying defenses and o b je c tio n s become moot and do not need to be determined." Rhulen Agency, In c . v. Ala. Ins. Guar. Ass'n, 896 F.2d 674, 678 (2d Cir. 1990) (internal quotation m a rk s and citations omitted). 1. L a c k of Subject-Matter Jurisdiction "The rule governing dismissal for want of jurisdiction in cases brought in the fe d e ra l court is that, unless the law gives a different rule, the sum claimed by the p la in tiff controls if the claim is apparently made in good faith. It must appear to a le g a l certainty that the claim is really for less than the jurisdictional amount to ju s tify dismissal. The inability of plaintiff to recover an amount adequate to give th e court jurisdiction does not show his bad faith or oust the jurisdiction. Nor d o e s the fact that the complaint discloses the existence of a valid defense to the c la im . But if, from the face of the pleadings, it is apparent, to a legal certainty, Intertek withdrew a sixth argument asserting insufficient service of p ro c e s s . (Dkt. No. 27 3.) 12 3 that the plaintiff cannot recover the amount claimed or if, from the proofs, the c o u rt is satisfied to a like certainty that the plaintiff never was entitled to recover th a t amount, and that his claim was therefore colorable for the purpose of c o n fe rrin g jurisdiction, the suit will be dismissed." St. Paul Mercury Indem. Co. v. R e d Cab Co., 303 U.S. 283, 28889 (1938). Here, Intertek asserts that it re c e ive d an inspection fee equivalent to $1,180, and that its inspection contract lim its its liability to 15 times the amount of its inspection fee. The complaint a lle g e s , inter alia, that Intertek is liable for the entire $3.7 million of loss claimed b e c a u s e it fraudulently induced Luvata to make that payment through a false s u rve y report and other inspection documents. Fraudulent inducement is a le g a lly cognizable claim, and Intertek has not suggested otherwise. The e vid e n c e available so far indicates that Intertek certified and sealed shipping c o n ta in e rs containing copper, that those containers arrived in Toronto u n ta m p e re d , and that the containers held worthless rocks, sand, and debris when o p e n e d . W h e th e r plaintiffs can prove at trial by a preponderance of the evidence th a t Intertek's inspection was fraudulent will become more apparent at the close o f discovery. Plaintiffs' likelihood of success currently, however, cannot be a s s e s s e d as a matter of law, so as to fulfill the requirement that the "legal im p o s s ib ility of recovery must be so certain as virtually to negative the plaintiff's g o o d faith in asserting the claim." Scherer v. Equitable Life Assurance Soc'y, 347 F .3 d 394, 397 (2d Cir. 2003) (internal quotation marks and citations omitted). 13 Consequently, the amount in controversy asserted against Intertek in the c o m p la in t controls, and the Court rejects this Intertek argument. 2. L a c k of Personal Jurisdiction T h e two-part legal standard governing Intertek's argument about personal ju ris d ic tio n is the same standard that the Court cited above for MIH's motion. For th e sake of brevity, that standard is incorporated into this section by reference. Here, Intertek prepared a survey report asserting that it attended the lo a d in g and 10% weighing of the copper shipment. (Dkt. No. 1-4; Dkt. No. 54-2.) The first page of that report explicitly lists the recipient of the report as Luvata at 7 0 Sayre Street in Buffalo. Among any other companies that perform inspection s e rvic e s , Intertek was chosen by MIH and Luvata themselves, as Section 4.1 of th e MIH-Luvata contract states explicitly. (Dkt. No. 1-2 at 4; Dkt. No. 50-2 at 4; D k t. No. 54-3 at 4.) During the pendency of the copper purchase, Intertek c o m m u n ic a te d with Luvata directly by email. (See Dkt. No. 54-5; Dkt. No. 54-6.) This information indicates that Intertek knew from the beginning of the transaction th a t Luvata was the buyer, that Luvata was located in Buffalo, that Luvata picked it to inspect the copper, and that Luvata had to send its survey report to Luvata in B u ffa lo . Intertek would have continued to communicate with Luvata and to p ro vid e inspection services in subsequent months and years for the 1,000 metric to n s of copper not addressed by the shipment in question. Under these c irc u m s ta n c e s , plaintiffs have made a prima facie showing that Intertek 14 contracted to supply services within New York's borders, within the meaning of C P L R 302(a)(1). Additionally, and accepting the allegations in the complaint as tru e , Intertek's false survey report injured Luvata and its operations in Buffalo, w ith in the meaning of CPLR 302(a)(3). Finally, Intertek's long-term relationship a n d communications with Luvata suffices for a prima facie showing of purposeful a c tivity in New York that satisfies federal due-process requirements. Subject to a n ultimate resolution of the issue at trial, the Court will assert personal ju ris d ic tio n over Intertek and reject this Intertek argument. 3. L a c k of Capacity to Be Sued In te rte k seeks dismissal against the named defendants Intertek Caleb B re tt, Intertek Agri Services, and Intertek Testing Services on the grounds that th e y are neither individuals nor organizational entities, but rather mere tra d e m a rk s or "service lines." In effect, Intertek is asserting that these named d e fe n d a n ts are intangible, inanimate objects. If so then the Court trusts the p a rtie s to stipulate to an amendment of the caption upon appropriate c o n firm a tio n , without the need for a ruling. The Court thus rejects this Intertek a rg u m e n t without prejudice to renew at the close of discovery if the issue remains in dispute. 4. F o ru m Non Conveniens "W e regard the Supreme Court's instructions that (1) a plaintiff's choice of h e r home forum should be given great deference, while (2) a foreign resident's 15 choice of a U.S. forum should receive less consideration, as representing c o n s is te n t applications of a broader principle under which the degree of d e fe re n c e to be given to a plaintiff's choice of forum moves on a sliding scale d e p e n d in g on several relevant considerations . . . . Stated differently, the greater th e plaintiff's or the lawsuit's bona fide connection to the United States and to the fo ru m of choice and the more it appears that considerations of convenience favor th e conduct of the lawsuit in the United States, the more difficult it will be for the d e fe n d a n t to gain dismissal for forum non conveniens." Iragorri v. United Techs. C o rp ., 274 F.3d 65, 7172 (2d Cir. 2001). Plaintiffs chose this District as the fo ru m for their litigation because Luvata is located here, the copper shipment was s u p p o s e d to arrive here, and Intertek knew that. Intertek communicated with L u va ta in Buffalo throughout the pendency of the transaction. Intertek would h a ve had to continue its connections to Buffalo when inspecting and certifying the 1 ,0 0 0 metric tons of copper that would have been delivered at a future time. Any d is c o ve ry and witnesses from Luvata are located in Buffalo. Any discovery and w itn e s s e s related to the arrival of the shipment in Montreal and Toronto are a va ila b le only a short distance from Buffalo. Documents from Intertek can be e xc h a n g e d electronically if necessary. Depositions of witnesses abroad could o c c u r by live videoconference or by taped video, which then could be played at tria l. Cf. DiRienzo v. Philip Servs. Corp., 294 F.3d 21, 30 (2d Cir. 2002) ("W h ile d e m e a n o r evidence is important when trying a fraud case before a jury, 16 videotaped depositions, obtained through letters rogatory, could afford the jury an o p p o rtu n ity to assess the credibility of these [foreign] witnesses.") (citation o m itte d ). In short, Intertek has not shown that preparing for trial in the city where o n e of its customers operated and received its services would be so inconvenient th a t the Court should disturb plaintiffs' choice of forum. The Court thus rejects th is Intertek argument. 5. L a c k of Particularity in the Eighth and Twelve Claims "In alleging fraud or mistake, a party must state with particularity the c irc u m s ta n c e s constituting fraud or mistake. Malice, intent, knowledge, and other c o n d itio n s of a person's mind may be alleged generally." FRCP 9(b). "A c o m p la in t of fraud satisfies Rule 9(b) if it sets forth who made the fraudulent s ta te m e n ts , the dates and places at which the alleged fraudulent statements were m a d e , the manner in which the statements were false and upon which statements p la in tiffs relied. Plaintiffs need not, at this stage, plead scienter with great s p e c ific ity, and conclusory allegations of scienter are adequate where a complaint p ro vid e s a minimal factual basis that gives rise to a strong inference of fraudulent in te n t. This `strong inference' may be demonstrated by showing that defendants h a d a motive and opportunity to commit fraud or strong circumstantial evidence of c o n s c io u s misbehavior. W h e n assessing the specificity of a fraud complaint, the re vie w in g court should read the complaint liberally, drawing all inferences in favor o f the non-moving party." M & T Mortg. Corp. v. Miller, 323 F. Supp. 2d 405, 412 17 (E.D.N.Y. 2004) (citations omitted). "Despite the generally rigid requirement that fra u d be pleaded with particularity, allegations may be based on information and b e lie f when facts are peculiarly within the opposing party's knowledge. This e xc e p tio n to the general rule must not be mistaken for license to base claims of fra u d on speculation and conclusory allegations. W h e re pleading is permitted on in fo rm a tio n and belief, a complaint must adduce specific facts supporting a strong in fe re n c e of fraud or it will not satisfy even a relaxed pleading standard." Wexner v . First Manhattan Co., 902 F.2d 169, 172 (2d Cir. 1990) (citations omitted). H e re , plaintiffs have made the following allegations in their complaint: (1 ) "In te rte k agreed to perform a quality and quantity pre-inspection of th e subject copper cathodes shipment prior to transit, and to seal e a c h container stuffed with copper cathodes to be loaded on board th e vessel, the Jade Trader." (Dkt. No. 1 27; Dkt. No. 36 23.) (2 ) "In te rte k provided an inspection report and related documents to L u v a ta -- c e rtifyin g that the quality and quantity of the goods loaded in to the shipping containers was 500 metric tons of copper cathodes a n d certifying that each of those containers was sealed and loaded a n d /o r to be transported for loading on board the vessel, the Jade T ra d e r." (Dkt. No. 1 28; Dkt. No. 36 24.) (3 ) "D e s p ite their certifications and reports provided as part of their in s p e c tio n services to Luvata (and upon which Intertek intended 18 Luvata to rely) guarantying to Luvata that `500.80' metric tons of `c o p p e r cathodes' were stuffed and sealed into shipping containers a n d loaded at the port of Dar es Salaam, Tanzania for transit on the o c e a n vessel, the `Jade Trader,' to Luvata, each and every shipping c o n ta in e r-- w ith the same container numbers as Intertek had certified to Luvata contained copper cathodes--held absolutely no copper u p o n delivery to Luvata in Buffalo, New York, but rather held w o rth le s s minerals or rocks." (Dkt. No. 1 29; Dkt. No. 36 25.) (4 ) "P u rs u a n t to the Contract, Intertek was to: inspect the copper c a th o d e s to be `stuffed' (i.e., loaded into shipping containers); seal th e containers; and certify same to Luvata." (Dkt. No. 1 42; Dkt. N o . 36 38.) (5 ) "B y the Intertek certifications and reports dated July 21, 2007, In te rte k represented, certified and/or guaranteed to Luvata that: In te rte k `did attend Loading and 10% W e ig h in g of Copper Cathodes . . . between 16th and 19th July, 2007'; Intertek `did attend . . . on 1 8 th and 19th July, 2007' the `Loading/Tallying of Copper cathodes in to containers' finding `25' shipping containers were loaded with `5 0 0 .8 0 ' metric tons of `copper cathodes'; Intertek `did attend . . . on 1 8 th and 19th July, 2007' for purpose of `W itn e s s in g 10% W e ig h in g , S u p e rv is in g Loading and Sealing of Containers loaded with Copper 19 cathodes into containers' finding `25' shipping containers with s e p a ra te container numbers held `500.80' metric tons of `copper c a th o d e s ' that were sealed with both `Intertek Seals' and `Shipping S e a ls ' and/or were loaded at the port of Dar es Salaam, Tanzania for tra n s it on the ocean vessel, the `Jade Trader,' to Luvata." (Dkt. No. 1 50; Dkt. No. 36 46.) (6 ) "D e s p ite their certifications and reports provided as part of their p ro fe s s io n a l inspection services to Luvata (and upon which Intertek in te n d e d Luvata to rely) guarantying to Luvata that `500.80' metric to n s of `copper cathodes' were stuffed and sealed into shipping c o n ta in e rs and loaded at the port of Dar es Salaam, Tanzania for tra n s it on the vessel, the `Jade Trader,' each and every shipping c o n ta in e r-- w ith the same container numbers as Intertek had certified to Luvata contained copper cathodes--held absolutely no copper u p o n delivery to or discovery by Luvata in Buffalo, New York, but ra th e r held worthless minerals or rocks." (Dkt. No. 1 64; Dkt. No. 3 6 61.) T h e s e allegations were not pled upon information and belief. Together, they e s ta b lis h a comprehensive allegation that Intertek signed a survey report that in d u c e d Luvata to make payment, knowing that Luvata would not receive any 20 copper and knowing that Luvata would make payment anyway in reliance on In te rte k 's survey report. At this point, plaintiffs are missing only the details concerning who within In te rte k may have said what to whom. To that end, plaintiffs have alleged upon in fo rm a tio n and belief that Hilliard Potua signed the survey report, which appears to be true from the face of the survey report. The survey report does not state w h o performed the inspection or who completed the report. Plaintiffs c o m m u n ic a te d by email with only Hilliard Potua. Plaintiffs would not know from th o s e communications or from the survey report how many other Intertek officials o r employees played a role in the inspection and sealing. That information, c u rre n tly, is within Intertek's exclusive control and does not detract from the s p e c ific allegation that Intertek, as an artificial corporate person, made a s ta te m e n t on July 21, 2007 to Luvata in the form of a survey report that was fic titio u s and fraudulent. Under these circumstances, the complaint contains s u ffic ie n t particularity to put Intertek on notice as to what plaintiffs mean in their e ig h th and twelfth claims, thereby satisfying the requirements of FRCP 9(b). The C o u rt thus rejects this Intertek argument. 21 IV. C O N C L U S IO N F o r all of the foregoing reasons, the Court: (1 ) G ra n ts Intertek's motion to amend its motion to dismiss (Dkt. No. 27) a n d denies its original motion to dismiss (Dkt. No. 9) as superseded; (2 ) (2 ) D e n ie s Intertek's amended motion to dismiss (Dkt. No. 31); and D e n ie s MIH's motion to dismiss (Dkt. No. 18). T h e Intertek and MIH defendants shall answer the complaint within 20 days o f entry of this Order. SO ORDERED. s/ Richard J. Arcara HONORABLE RICHARD J. ARCARA UNITED STATES DISTRICT JUDGE DATED: July 6, 2010 22

Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.


Why Is My Information Online?