38 F. Supp. 3d 436
S.D.N.Y.2014Background
- Plaintiffs Otto Reich and ORA sue Derwick Associates’ principals—Betancourt, Trebbau, and D’Agostino—for injuries to their property and reputation under RICO and various state-law claims.
- Derwick Associates allegedly secured inflated contracts with PDVSA, CORPOELEC, and CVG and subcontracted work to U.S. companies, with profits routed back to the defendants.
- Defendants allegedly concealed illicit activities by filing defamation lawsuits against critics; Reich and ORA were targeted when Banco Venezolano and its officials faced recall and reputational pressure.
- In late 2012, Reich began providing consulting to Banco Venezolano; defendants allegedly offered Reich money to stop, which he rejected, and the defendants later harmed ORA/Reich by spreading false information.
- Plaintiffs allege two 2012 phone calls containing false information were used to induce clients to terminate relations with ORA, causing a $40,000 monthly revenue loss.
- The district court grants in part and denies in part defendants’ Rule 12(b)(6) and 12(b)(2) motions, dismissing the RICO counts and severing some jurisdictional issues while allowing jurisdictional discovery against two defendants.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Travel Act and FCPA acts qualify as RICO predicates | Travel Act (subsuming FCPA) provides predicates; travel/foreign conduct sufficient. | FCPA not an independent RICO predicate; counting both double-counts predicates. | Travel Act predicates sufficed; FCPA subsumed; predicates not double-counted |
| Whether the predicate acts are domestic enough to satisfy extraterritoriality under RICO | Domestic nexus exists via United States-origin communications and bank transfers. | Travel Act and wire fraud do not apply extraterritorially; extraterritorial conduct barred. | Sufficient domestic conduct alleged; extraterritorial concerns do not bar at this stage |
| Whether plaintiffs plead a cognizable RICO injury and standing | Wire fraud caused concrete economic harm; injury includes loss of clients and revenue. | Injury is primarily reputational; no intent to obtain property; no scheme to defraud. | Injury shown but no scheme to obtain property; RICO standing not satisfied |
| Whether plaintiffs plead a pattern of racketeering activity | Bribery and wire fraud are connected as a unified scheme to obtain contracts. | Acts have dissimilar victims and no single coherent objective; insufficient continuity. | Predicates lack sufficient relatedness/continuity; pattern not proven |
| Whether court has personal jurisdiction over Betancourt and Trebbau | New York contacts and domicile indicators show jurisdiction; discovery needed to confirm domicile. | No domicile in NY; NY contacts are insufficient; no general or specific jurisdiction. | Lacks prima facie jurisdiction; jurisdictional discovery warranted |
Key Cases Cited
- Ashcroft v. Iqbal, 556 U.S. 662 (U.S. 2009) (pleading sufficient factual allegations required; legal conclusions not enough)
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (U.S. 2007) (plausibility standard; allegations must raise right to relief above speculative level)
- H.J. Inc. v. Northwest Bell Tel. Co., 492 U.S. 229 (U.S. 1989) (pattern requires relatedness and continuity of predicate acts)
- Sedima S.P.R.L. v. Imrex Co., 473 U.S. 479 (U.S. 1985) (core RICO standing and injury principles)
- European Cmty. v. RJR Nabisco, Inc., 764 F.3d 129 (2d Cir. 2014) (extraterritorial reach of RICO predicates; focus on pattern and consequences)
- Daimler AG v. Bauman, 134 S. Ct. 746 (U.S. 2014) (home-state doctrine; limits on general jurisdiction)
- Licci v. Lebanese Canadian Bank, 673 F.3d 54 (2d Cir. 2012) (arising-out-of and nexus requirements under New York long-arm statute)
- PDK Labs, Inc. v. Fried-Lander, 103 F.3d 1109 (2d Cir. 1997) (touches on personal jurisdiction and contacts via New York counsel)
- Kadic v. Karadzic, 70 F.3d 232 (2d Cir. 1995) (personal jurisdiction and service rules under 4(e))
- Cofacredit, S.A. v. Windsor Plumbing Supply Co., Inc., 187 F.3d 229 (2d Cir. 1999) (continuity and pattern requirements for RICO)