Puerto Rico Clean Energy Corp. et al v. Hatton-Gotay et al

Filing 16

OPINION AND ORDER re 10 Motion to Dismiss for Failure to State a Claim. Defendants' motion to dismiss is GRANTED. The federal RICO claim is DISMISSED WITH PREJUDICE. There being no federal claims remaining on which to ground them, plaintiffs' state law claims are DISMISSED WITHOUT PREJUDICE. Judgment shall be entered accordingly. Signed by Judge Francisco A. Besosa on 07/23/2015. (brc)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF PUERTO RICO
PUERTO RICO CLEAN ENERGY CORP.,
et al.,
Plaintiffs,
v.

Civil No. 14-1761 (FAB)

ROBERT HATTON-GOTAY, et al.,
Defendants.

OPINION AND ORDER1
BESOSA, District Judge.
Before the Court is defendants’ motion to dismiss, (Docket
No. 10), which plaintiffs oppose, (Docket No. 13). For the reasons
discussed below, the motion is GRANTED.

Plaintiffs’ complaint,

(Docket No. 1), is DISMISSED.
BACKGROUND
Plaintiffs are Ramon A. Cacho-Perez (“Cacho”), his businesses,
Utuado Management & Development Company, Inc. (“Utuado Management”)
and Puerto Rico Clean Energy Corporation (“Clean Energy”), his real
estate appraiser, Mario Dumont-Collazo (“Dumont”) and the DumontSanchez conjugal partnership.

(Docket No. 1.)

On October 14,

2014, plaintiffs filed a complaint against Robert Hatton-Gotay
(“Hatton”)
1

and

his

conjugal

partnership

(collectively,

Rachel L. Hampton, a second-year student at the University of
Michigan Law School, assisted in the preparation of this Opinion
and Order.

Civil No. 14-1761 (FAB)
“defendants”).

Id.

2

The complaint alleges that Hatton and his

enterprise - consisting of his son, Ricardo Hatton-Rentas (“Ricardo
Hatton”), his business partner, Edwin Loubriel-Ortiz (“Loubriel”),
his

business,

(“Fountainbleu”),

Fountainbleu
and

his

Plaza

attorneys,

Development
Efrain

E.

Corporation
Rivera-Perez

(“Rivera”) and Ruben T. Nigaglioni (“Nigaglioni”) - engaged in a
pattern of extortion acts in an illegal racketeering scheme in
violation of the Racketeer Influenced and Corrupt Organizations Act
(“RICO”), 18 U.S.C. §§ 1962(b)-(d).

Id.

The complaint also

includes supplemental claims for malicious prosecution and abuse of
process pursuant to Puerto Rico’s general torts statute.
Ann. tit. 31, § 5141.

P.R.Laws

Id.

On February 23, 2015, defendants moved pursuant to Federal
Rule of Civil Procedure 12(b)(6) to dismiss the complaint. (Docket
No. 10.)
dismiss.

On March 31, 2015, plaintiffs opposed the motion to
(Docket No. 13.)
FACTUAL ALLEGATIONS

As is customary on a Rule 12(b)(6) motion to dismiss, the
Court takes as true the facts alleged in the complaint and recites
them in a light most favorable to the non-moving party, here,
plaintiffs. See Ocasio-Hernandez v. Fortuno-Burset, 640 F.3d 1, 12
(1st Cir. 2011).

Civil No. 14-1761 (FAB)

3

The July 2003 Agreement
The alleged acts of extortion begin with a stock option
agreement made on July 23, 2003 (the “July 2003 Agreement”),
between Cacho and Hatton by which Cacho transferred all of his
shares in Utuado Management to Hatton in exchange for $850,000.
(Docket No. 1 at ¶ 22.)

Pursuant to this agreement, Hatton was to

obtain a permit to extract sand from Utuado Management’s land in
order to increase the value of the property.

Id.

According to

plaintiffs, Cacho retained the option to buy back his shares, which
he planned to exercise once Hatton received the sand extraction
permit.

Id.

Alas, Hatton never sought the permit, so Utuado

Management’s property never increased in value.

Id.

Cacho was

therefore unable to exercise his option and, as a result, lost
title to Utuado Management.

Id. at ¶ 23.

Plaintiffs allege, in

not so many words, that Hatton took the money and ran.
The Nullity and Damages Action
Vexed by Hatton’s breach, Cacho filed a civil complaint at the
Puerto Rico Superior Court, Ponce Division, on July 28, 2005 (the
“Nullity and Damages Action”).

(Docket No. 1 at ¶¶ 23-24.)

The

proceeding continued until December 23, 2009, when the Superior
Court entered a judgment finding, inter alia, that the July 2003
Agreement effectively created a usurious loan.

Id. at ¶ 26.

The

court declared the July 2003 Agreement null and void, reverted

Civil No. 14-1761 (FAB)

4

control of Utuado Management to Cacho, and ordered Hatton to pay
over eight million dollars in compensatory damages.

Id. at ¶ 27.

On March 4, 2010, Hatton appealed the judgment to the Puerto
Rico Court of Appeals, Ponce Judicial Region, which affirmed the
factual and liability findings of the Superior Court, but reversed
the damages award and ordered a new trial on damages.
No. 1 at ¶¶ 28-29.)

(Docket

Hatton then filed a certiorari petition with

the Puerto Rico Supreme Court, which was denied on November 4,
2011.

Id. at ¶ 30.

On February 24, 2012, the Puerto Rico Supreme

Court denied Hatton’s motion for reconsideration.

Id.

The Acts of Extortion During the Nullity and Damages Action
Plaintiffs

allege

that

the

following

acts

of

extortion

occurred during the Nullity and Damages Action trial and subsequent
appeals:
On October 20, 2005, Cacho and his father appeared on behalf
of Utuado Management to execute a mortgage deed (the “2005 Mortgage
Deed”),

using

guarantee.

Utuado

Management’s

(Docket No. 1 at ¶ 25.)

real

estate

property

as

a

In response, Hatton filed two

civil complaints against Cacho in 2006, requesting that the Puerto
Rico Superior Court nullify the deed.

Id. at ¶¶ 46-50.

On August 10, 2010, Hatton filed a civil complaint against
Dumont, Cacho’s appraiser and expert witness in the Nullity and

Civil No. 14-1761 (FAB)
Damages

Action

opinion.
On

trial,

5
for

rendering

a

fraudulent

report

and

(Docket No. 1 at ¶¶ 51-56.)
October

14,

2010,

Hatton

and

his

business

partner,

Loubriel, filed criminal charges against Cacho and Cacho’s father
for appearing on behalf of Utuado Management to execute the 2005
Mortgage Deed.

(Docket No. 1 at ¶¶ 35-40.)

however, were ultimately dismissed.

The criminal charges,

Id. at ¶ 41.

On February 14, 2012, Hatton filed two professional conduct
complaints against Cacho in the Puerto Rico Supreme Court. (Docket
No. 1 at ¶ 42.)

The Puerto Rico Attorney General recommended

dismissal of the complaints on March 28, 2014.

Id. at ¶ 42-45.

The Acts of Extortion After the Nullity and Damages Action
After

the

Supreme

Court

denied

Hatton’s

motion

for

reconsideration in the Nullity and Damages Action on February 24,
2012, plaintiffs allege the following acts of extortion:
On August 20, 2012, Hatton filed an ethics complaint against
Judge Pedro Polanco-Bezares (“Judge Polanco”), the trial judge for
the Nullity and Damages Action, as well as a motion to disqualify
Judge Polanco from presiding over the new trial on damages.

See

Docket No. 1 at ¶¶ 63-66; see also Docket No. 13 at p. 15.

The

motion was denied on November 27, 2012.

(Docket No. 1 at ¶ 64.)

On November 1, 2012, Hatton filed criminal charges against
Dumont, Cacho’s expert witness, alleging that he committed perjury

Civil No. 14-1761 (FAB)

6

when he testified at the trial for the Nullity and Damages Action.
(Docket No. 1 at

¶¶ 57-62.)

As part of the Nullity and Damages Action, Utuado Management
obtained the court’s permission to enter into an agreement with
Terratek for the extraction and sale of sand from its property on
May 14, 2012.
Hatton

and

his

(Docket No. 1 at ¶ 67.)
agents

falsely

On November 20, 2012,

impersonated

public

officials,

invaded Utuado Management’s land, and used force and intimidation
to obstruct Terratek’s sand extraction operation. Id. at ¶¶ 68-69.
The Purpose of the Extortion
Plaintiffs aver that Hatton committed the above acts of
extortion for the purposes of:

(1) obtaining ownership of Utuado

Management; and (2) canceling the multimillion-dollar damages award
imposed in favor of Utuado Management and Cacho during the Nullity
and Damages Action.

(Docket No. 13 at p. 3.)
DISCUSSION
The RICO Claim

Congress originally enacted RICO to help fight organized crime
and combat enduring criminal conduct.

Home Orthopedics Corp. v.

Rodriguez, 781 F.3d 521, 527 (1st Cir. 2015).

RICO provides, in

relevant part, that it is unlawful for:
any person employed by or associated with any enterprise
engaged in, or the activities of which affect, interstate
or foreign commerce, to conduct or participate, directly

Civil No. 14-1761 (FAB)

7

or indirectly, in the conduct of such enterprise’s
affairs through a pattern of racketeering activity.
18 U.S.C. § 1962(c).

The elements of a RICO claim are: “(1)

conduct, (2) of an enterprise, (3) through a pattern, (4) of
racketeering activity.” Giuliano v. Fulton, 399 F.3d 381, 386 (1st
Cir. 2005).
In moving tor dismiss plaintiffs’ RICO claim, defendants argue
that the complaint neither alleges a pattern of racketeering nor an
ongoing enterprise.

(Docket No. 10.)

As discussed below, the

Court finds that the complaint fails on the pattern element, which
alone warrants dismissal.
RICO specifically enumerates the kinds of illegal acts that
count as “racketeering,” and includes the crime of extortion.
18 U.S.C. § 1961(1).2

See

Statutorily, the “pattern of racketeering”

element requires at least two acts of racketeering that occurred
within ten years of each other.

Id. § 1961(5).

The Supreme Court

has held that the pattern element additionally requires a showing

2

Puerto Rico’s extortion law provides:
Any person who, by means of violence or intimidation, or
under the pretext of rights as a public officer or
employee, compels another person to deliver property or
to perform, tolerate or omit acts which occur or are
executed after an act of violence, intimidation or under
pretext of authority shall be punished with imprisonment
for a fixed term of three (3) years.

P.R. Laws Ann. tit. 33, § 5261.

Civil No. 14-1761 (FAB)

8

that “the racketeering predicates are related, and that they amount
to or pose a threat of continued activity.”

Giuliano, 399 F.3d at

386-87 (quoting H.J. Inc. v. Nw. Bell Tel. Co., 492 U.S. 229, 239
(1989)).

This is known as the “continuity” requirement.

Home

Orthopedics, 781 F.3d at 528 (citing Giuliano, 399 F.3d at 386-87).
Defendants

argue

continuity requirement.

that

plaintiffs

fail

to

(Docket No. 10 at p. 9.)

be established in two ways:

satisfy

the

Continuity can

the “closed-ended” approach refers to

a closed period of repeated conduct, H.J., 492 U.S. at 241, while
the “open-ended” approach, in contrast, allows a plaintiff to state
a

claim without

waiting

for

a long-term

pattern

to

develop,

Giuliano, 399 F.3d at 387.
“Close-ended” Continuity
“Closed-ended” continuity is found through related predicates
over a considerable time period that amount to a “threat of
continued criminal activity.”

Giuliano, 399 F.3d at 387.

Neither

the Supreme Court nor the First Circuit Court of Appeals has
quantified the duration or number of predicate acts a plaintiff
must state to allege the pattern element satisfactorily.

Home

Orthopedics, 781 F.3d at 529. They have, however, established some
parameters.

On one end, a few sporadic predicate acts or activity

spanning only a “few weeks or months” cannot establish closed-ended
continuity.

Id.

On the other end, an extensive number of

Civil No. 14-1761 (FAB)

9

predicate acts over a considerable time period may “compel[] a
conclusion of continuity.”

Id.; accord Efron v. Embassy Suites

(P.R.), Inc., 223 F.3d 12, 18 (1st Cir. 2000).
Here, plaintiffs allege twelve predicate acts in a nine-year
period (2003-2012):

(1) the July 2003 Agreement; (2-3) the two

civil suits filed in 2006 against Cacho requesting nullification of
the 2005 Mortgage Deed; (4) the 2010 civil suit against Dumont for
rendering a fraudulent expert report during the Nullity and Damages
Action; (5-6) the 2010 criminal charges against Cacho and his
father

for

executing

the

2005

Mortgage

Deed;

(7-8)

the

two

professional disciplinary complaints filed against Cacho in 2012;
(9) the ethics complaint filed against Judge Polanco in 2012; (10)
the August 20, 2012 motion to disqualify Judge Polanco from the new
trial on damages for the Nullity and Damages Action; (11) the 2012
criminal perjury charges against Dumont; and (12) the interference
with Terratek’s sand extraction operation on November 20, 2012.
See Docket No. 1.

Civil No. 14-1761 (FAB)

10

Even accepting plaintiffs’ hyperbolic count,3 twelve predicate
acts over nine years does not automatically compel a finding of
close-ended continuity.

See Rojas-Buscaglia v. Taburno-Vasarely,

39 F. Supp. 3d 208, 214 (D.P.R. 2014) (Besosa, J.) (finding ten
predicate acts over ten years too few and too sporadic to give rise
automatically to close-ended continuity without first examining
other indicia).

In such “middle ground” cases, where the extent

and duration of the alleged conduct do not easily resolve the
issue, courts examine other indicia of continuity.
Giuliano, 399 F.3d at 387-88.

See, e.g.,

Other indicia of continuity may

include whether the controversy involves multiple schemes (or just
one scheme with a single objective), whether the scheme impacts
many victims (or only a closed, targeted group of people), and

3

Although the parties dispute it, the Court need not decide the
precise number of predicate acts to decide the pattern issue. The
Court assumes twelve acts for the sake of its analysis, but
acknowledges that this number is likely much lower. For example,
as defendants point out, the filing of litigation does not
typically constitute a predicate act. (Docket No. 10 at p. 15.)
While the First Circuit Court of Appeals has not spoken to this
matter, “[n]umerous courts have held that the filing of litigation
– no matter how lacking in merit – does not constitute a predicate
racketeering act of extortion.” Gabovitch v. Shear, 70 F.3d 1252
(1st Cir. 1995) (citations omitted); cf. I.S. Joseph Co. v. J.
Lauritzen A/S, 751 F.2d 265, 267-68 (8th Cir. 1984) (“[L]itigation
is as American as apple pie. If a suit is groundless or filed in
bad faith, the law of torts may provide a remedy. Resort to [RICO]
is unnecessary.”). Even if litigation does count as a predicate
act, the Court is dubious of plaintiffs’ efforts to stretch a
single lawsuit into multiple acts by counting one act for each
named defendant.

Civil No. 14-1761 (FAB)

11

whether the scheme has the potential to last indefinitely (or is
instead of a finite nature).

Home Orthopedics, 781 F.3d at 529.

The court does not rigidly evaluate these factors, but employs a
“natural

and

commonsense

approach”

to

determine

whether

the

specific facts of the case suggest the “kind of broad or ongoing
criminal behavior at which the RICO statute was aimed.”

Id.

(quoting Efron, 223 F.3d at 18).
Examining the other indicia of continuity, the Court finds
that plaintiffs’ allegations fall short.

To begin, that Hatton

“sought to accomplish a specific, narrow mission [ownership of
Utuado Management] - which stemmed from a single, discernible event
[the July 2003 Agreement] - clearly cuts against a conclusion [of]
a closed pattern.”

See id. at 530.

Although plaintiffs argue that

the scheme had two objectives - obtaining ownership of Utuado
Management and canceling the multimillion-dollar damages award
imposed against Hatton, see Docket No. 13 at pp. 5-6 - these dual
objectives are two sides of the same coin:

the disputed ownership

of Utuado Management is precisely the reason Hatton is liable for
millions of dollars in damages. In other words, Hatton’s desire to
escape this award is ancillary to his singular, narrow goal of
obtaining ownership of Utuado Management.
781

F.3d

at

529-30

(finding

single

See Home Orthopedics,

scheme

where

defendants

committed numerous criminal acts in an effort to collect consulting

Civil No. 14-1761 (FAB)

12

fees because all of acts had their origin in a single agreement);
Efron, 223 F.3d at 18 (finding single scheme where every alleged
act

of

deception

was

aimed

at

transforming

ownership

of

a

business).
Moreover, the alleged acts in this case impact only a closed
group of victims. Aside from Cacho and his businesses, the victims
include Dumont and Judge Polanco - or, in other words, the expert
witness and the judge who presided over the trial of the Nullity
and Damages Action.

The tie that binds these victims is the

litigation surrounding the July 2003 Agreement, the outcome of
which

determined

Management.

whether

Hatton

or

Cacho

would

own

Utuado

Other victims include Cacho’s father and Terratek,

both of whom appear to be pawns in Hatton’s game to acquire Utuado
Management:

filing of criminal charges against Cacho’s father as

retaliation for his role in executing the 2005 Mortgage Deed and
interfering with Terratek’s sand extraction operation on Utuado
Management’s

land

were

simply

efforts

realizing control of Utuado Management.
fact,

nothing

more

than

an

to

prevent

Cacho

from

The latter act is, in

extrajudicial

response,

albeit

nefarious, to the court’s decision to permit a sand extraction deal
between Cacho and Terratek during the Nullity and Damages Action.
See Docket No. 1 at ¶¶ 67-68.

Civil No. 14-1761 (FAB)

13

Finally, plaintiffs allege no facts indicating that defendants
are likely to employ this scheme in the future to obtain control
over other businesses.

As discussed infra, the nature of the

scheme is not one that has the potential to last indefinitely.

See

Home Orthopedics, 781 F.3d at 530 (finding defendants’ conduct
finite in nature where nothing indicated that extortionate conduct
would continue after goal of receiving fees was obtained).
Employing a commonsense approach, the Court finds that the
facts of this case do not suggest the type of broad or ongoing
criminal behavior at which the RICO statute was aimed.
223 F.3d at 18.
pursued

See Efron,

Like Gollum pining for his precious ring, Hatton

ownership

of

Utuado

Mangement

with

tremendous

focus.

Considering the singularity and narrowness of Hatton’s mission,
which stemmed from one discernible event and was directed at one
individual (though others were harmed incidentally along the way),
plaintiffs’ allegations fail to establish a pattern of racketeering
under a theory of close-ended continuity.
“Open-ended” Continuity
A plaintiff may alternatively demonstrate a “pattern” of
racketeering

through

“open-ended”

continuity,

which

is

found

through a threat or realistic prospect of future criminal activity.
Home Orthopedics, 781 F.3d at 531.

In order to satisfy open-ended

continuity, a plaintiff must show that the racketeering acts “are

Civil No. 14-1761 (FAB)

14

part of an ongoing entity’s regular way of doing business” or that
they

include

indefinitely

a

“specific

into

the

threat

future.”

of
Id.

repetition
(quoting

extending

Feinstein

Resolution Trust Corp., 942 F.2d 34, 45 (1st Cir. 1991)).

v.

In this

inquiry, the nature of the enterprise and the nature of the
predicate acts are particularly relevant.

Cofacredit, S.A. v.

Windsor Plumbing Supply Co., 187 F.3d 229, 242 (2d Cir. 1999).
Plaintiffs fail to allege that Hatton’s racketeering acts are
part of his regular way of doing business.

They do not allege that

Hatton is likely to employ the same hyper-litigious extortion
scheme in his future business dealings.

See Efron, 223 F.3d at 19

(finding nothing to suggest “defendants would seek to repeat their
fraud in other partnerships or similar business settings” such that
the racketeering activity might be par for the business course).
To that end, plaintiffs likewise fail to allege that Hatton’s acts
pose a threat of future criminal activity.

The complaint provides

no indication that the scheme is likely to continue after the
dispute over the July 2003 Agreement and the issue of Utuado
Management’s ownership is resolved.

Indeed, most of the alleged

predicate acts of extortion are centered around the Nullity and
Damages

Action

indefiniteness.

litigation,

which

ipso

facto

precludes

See Gonzalez-Morales v. Hernandez-Arencibia, 221

F.3d 45, 51-52 (1st Cir. 2000) (assuming the “filing of frivolous

Civil No. 14-1761 (FAB)

15

lawsuits” constitutes RICO extortion, “the fact that local court
suits are still pending does not constitute long-term conduct
demonstrating a threat of future activity”).

Plaintiffs thus fail

to state a pattern of racketeering under a theory of “open-ended”
continuity.
For these reasons, the Court finds that plaintiffs do not
sufficiently

allege

a

“pattern

of

racketeering”

necessary

to

The Court therefore GRANTS defendants’

sustain their RICO claim.

motion to dismiss, (Docket No. 10), and DISMISSES WITH PREJUDICE
plaintiffs’ RICO claim.
State Claims
Defendants

additionally

ask

supplemental state law claims.

for

dismissal

of

plaintiffs’

(Docket No. 10 at p. 19.)

A court

may decline to exercise supplemental jurisdiction when it has
“dismissed all claims over which it has original jurisdiction.”
28

U.S.C.

§

supplemental

1367(c)(3).
jurisdiction,

In
the

deciding
court

whether

considers

a

to

decline

variety

of

factors, including fairness, judicial economy, convenience and
comity.
Having

Desjardins v. Willard, 777 F.3d 43, 45 (1st Cir. 2015).
dismissed

considered

plaintiffs’

these

jurisdiction.

factors,

The

Court

plaintiffs’ state law claims.

federal
the

thus

RICO

Court

claim

declines

DISMISSES

WITHOUT

and

having

to

retain

PREJUDICE

Civil No. 14-1761 (FAB)

16
CONCLUSION

For the reasons above, defendants’ motion to dismiss, (Docket
No. 10), is GRANTED.
PREJUDICE.

The federal RICO claim is DISMISSED WITH

There being no federal claims remaining on which to

ground them, plaintiffs’ state law claims are DISMISSED WITHOUT
PREJUDICE.
Judgment shall be entered accordingly.
IT IS SO ORDERED.
San Juan, Puerto Rico, July 23, 2015.

s/ Francisco A. Besosa
FRANCISCO A. BESOSA
UNITED STATES DISTRICT JUDGE