233 F. Supp. 3d 1297
M.D. Fla.2017Background
- Nine Cayman Islands hedge funds (the Funds) allege Florian Homm ran a securities "Penny Stock Scheme" that defrauded the Funds and produced illicit proceeds. Plaintiffs are Cayman entities; defendant Susan Devine is a U.S./Brazil citizen alleged to have helped launder the proceeds.
- Plaintiffs allege Devine (with Homm and others) formed a Money Laundering Enterprise to hide and preserve fraud proceeds via sham divorce papers, offshore entities, transfers among dozens of foreign and some U.S. accounts, purchases of real estate, gold and art, and simulated cash transactions.
- Swiss investigations froze multiple accounts and indicted several alleged co-conspirators; plaintiffs identify numerous transfers and assets they say were traceable to the Scheme.
- Plaintiffs sued in June 2015 asserting: federal RICO (18 U.S.C. §1962(c)), RICO conspiracy (§1962(d)), Florida RICO/CRCA claims, unjust enrichment, and a constructive trust remedy. Devine moved to dismiss, to strike as a shotgun pleading, and for judicial notice of various documents.
- The Court denied the motion to strike, granted/denied judicial notice in part, dismissed federal and Florida RICO counts without prejudice (post‑RJR Nabisco) for failing to plead a domestic injury, allowed unjust enrichment to proceed, and dismissed the standalone constructive trust claim with prejudice. Plaintiffs may file a Second Amended Complaint.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Amended Complaint is a shotgun pleading | Complaint details complex scheme; incorporated facts are central to counts | Pleading incorp porates 232 paragraphs into each count, making defense impossible | Denied motion to strike; not a shotgun pleading |
| Judicial notice of various external documents | Plaintiffs relied on some documents; certain filings central and authentic | Many exhibits are disputed or not central; some translations disputed | Court took notice of some filings (LSE notices existence, SDNY filings' existence, Marital Settlement text) and declined others (Homm book excerpts, certain Swiss Report pages, a letter) |
| Whether federal RICO claims are barred by PSLRA | RICO predicates here are post‑investment money‑laundering acts, not conduct actionable as securities fraud | PSLRA bars reliance on conduct that would be actionable as securities fraud unless criminal conviction exists | PSLRA did not bar Counts I–II because predicates are post‑investment laundering and not securities‑fraud predicates |
| Whether RICO claims allege a domestic injury after RJR Nabisco | Plaintiffs contend injury occurred where acts producing injury occurred or where Plaintiffs (Cayman Funds) were located; some funds were routed to U.S. accounts | Defendant contends alleged injuries are foreign (Cayman/Europe) and RICO civil remedy requires domestic injury | Counts I–II (federal) and Counts III–IV (Florida) dismissed without prejudice for failing to plausibly allege a domestic injury under RJR Nabisco; leave to amend granted for federal counts |
| Extraterritorial reach of Florida RICO | Plaintiffs argue domestic injury alleged suffices | Defendant says Florida RICO has no extraterritorial reach and RJR Nabisco limits recovery | Florida RICO/CRCA claims dismissed without prejudice; Court finds Florida RICO does not apply extraterritorially and plaintiffs failed to plead domestic injury |
| Unjust enrichment and constructive trust remedy | Plaintiffs seek unjust enrichment and equitable disgorgement; request constructive trust as remedy | Defendant contends unjust enrichment is barred if premised on wrongful conduct and constructive trust is not a cause of action under Florida law | Unjust enrichment (Count V) survives dismissal; disgorgement is permissible remedy for unjust enrichment. Constructive trust (Count VI) dismissed with prejudice as a standalone cause of action |
Key Cases Cited
- Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (plausibility standard for Rule 8 pleading)
- Ashcroft v. Iqbal, 556 U.S. 662 (pleading standards; threadbare recitals not entitled to assumption of truth)
- RJR Nabisco, Inc. v. European Community, 136 S. Ct. 2090 (RICO civil remedy requires domestic injury; limits extraterritorial recovery)
- Day v. Taylor, 400 F.3d 1272 (11th Cir.) (documents central to complaint may be considered on motion to dismiss)
- Miccosukee Tribe of Indians of Fla. v. Cypress, 814 F.3d 1202 (11th Cir.) (Rule 9(b) heightened pleading applied to RICO claims alleging fraud)
- Maiz v. Virani, 253 F.3d 641 (11th Cir.) (post‑investment money‑laundering can be RICO predicate causing recoverable injury)
- Dusek v. JPMorgan Chase & Co., 832 F.3d 1243 (11th Cir.) (PSLRA bars RICO claims based on conduct actionable as securities fraud)