Ponsa-Rabell v. Santander Securities, L.L.C.
3:17-cv-02243
| D.P.R. | Jun 5, 2020Background
- Plaintiffs are purchasers of Puerto Rico municipal bonds (PRMBs) and PRMB-focused funds who bought securities from Santander Securities, LLC (SSLLC) between Dec. 1, 2012 and Oct. 31, 2013 and suffered losses after an October 2013 market collapse.
- Plaintiffs allege SSLLC (a Santander affiliate) was simultaneously reducing its own PRMB inventory—adopting a risk management plan after Moody’s downgrades—and nonetheless recommended and sold PRMB securities to plaintiffs while omitting material risk information.
- Defendants include SSLLC, Banco Santander Puerto Rico (BSPR), Santander Bancorp, Santander Holdings USA, and parent Banco Santander S.A. (BSSA); plaintiffs allege the entities acted in concert and disregarded corporate separateness.
- Plaintiffs asserted federal securities claims (Section 10(b)/Rule 10b-5 and Section 17(a)) and Puerto Rico law claims; defendants moved to dismiss under Rules 9(b), 12(b)(2) and 12(b)(6).
- The magistrate judge recommends dismissal: the court lacks personal jurisdiction over BSSA; Section 17(a) is abandoned by plaintiffs; Section 10(b)/Rule 10b-5 claims fail for inadequate pleading of actionable omissions and scienter under the PSLRA/Rule 9(b); and the court should decline supplemental jurisdiction over Puerto Rico claims.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Personal jurisdiction over BSSA | BSSA acted in concert with in‑forum subsidiaries and alter‑ego allegations suffice to confer specific jurisdiction | BSSA is a Spain‑based parent; subsidiary contacts do not automatically establish jurisdiction; plaintiffs offered only conclusory allegations | Dismiss for lack of personal jurisdiction over BSSA; plaintiffs failed to make a prima facie showing and sought no jurisdictional discovery |
| Private right of action under Section 17(a) | Plaintiffs initially pleaded Section 17(a) claims | Defendants moved to dismiss on grounds Section 17(a) lacks a private right in this context | Plaintiffs conceded; recommend dismissal of Section 17(a) claim |
| Adequacy of Section 10(b)/Rule 10b‑5 claims (omissions) | Omissions actionable because defendants withheld material information (Puerto Rico’s fiscal condition, Moody’s downgrades, SSLLC’s liquidation of inventory and trading‑desk closure) while soliciting purchases | Plaintiffs fail to specify the statements omitted or their content; no affirmative duty to disclose absent facts making affirmative statements misleading; scienter not pleaded with particularity under PSLRA/Rule 9(b) | Dismiss federal securities claims: complaint does not identify the statements omitted with required specificity and fails to plead a strong inference of scienter |
| Supplemental jurisdiction over Puerto Rico claims | Plaintiffs seek to keep state law claims if federal claims survive | Defendants urged dismissal of federal claims; courts should decline supplemental jurisdiction where federal claims are dismissed early | Court should decline supplemental jurisdiction and dismiss Puerto Rico law claims without prejudice |
Key Cases Cited
- Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (pleading must state a plausible entitlement to relief)
- Ashcroft v. Iqbal, 556 U.S. 662 (court need not accept legal conclusions; plausibility standard)
- Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308 (standard for scienter inference under PSLRA)
- Matrixx Initiatives, Inc. v. Siracusano, 563 U.S. 27 (no affirmative duty to disclose absent circumstances making statements misleading)
- Basic Inc. v. Levinson, 485 U.S. 224 (silence is not misleading under Rule 10b‑5 absent duty to disclose)
- Chiarella v. United States, 445 U.S. 222 (nondisclosure requires duty to speak)
- Greebel v. FTP Software, Inc., 194 F.3d 185 (Rule 9(b)/PSLRA particularity in securities fraud pleading)
- Brennan v. Zafgen, Inc., 853 F.3d 606 (elements of 10(b) claim and scienter evidence examples)
- Baskin‑Robbins Franchising LLC v. Alpenrose Dairy, Inc., 825 F.3d 28 (prima facie method for personal jurisdiction showing)
- United States v. Swiss Am. Bank, Ltd., 274 F.3d 610 (limits and standards for jurisdictional discovery)