Sands Harbor Marina Corp. v. Wells Fargo Insurance Services of Oregon, Inc.
156 F. Supp. 3d 348
E.D.N.Y2016Background
- Plaintiffs (Sands Harbor entities and Eagle Plaintiffs) allege a multi‑defendant scheme in which defendants created EVMC (a shell), used false Wells Fargo letterhead and other documents, and funneled over $44 million from plaintiffs through Tisdale & Nicholson’s trust account to conspirators.
- Key defendants include Michael Reis (Wells Fargo employee alleged to have produced false proof‑of‑funds letters), Wells Fargo entities, Tisdale & Nicholson and its partners, and the Esacoves (alleged masterminds).
- Plaintiffs plead RICO and multiple state law claims; earlier orders dismissed some RICO and other claims and the TAC was filed in August 2014. Several motions to dismiss and for judgment on the pleadings were then filed by Reis, Wells Fargo, and the T&N defendants.
- Moving Defendants argued lack of personal jurisdiction over Reis, lack of capacity/standing for the dissolved Florida LLC plaintiffs, application of in pari delicto to Eagle, improper damages for lost profits, duplicative negligence claims, and deficient cross‑claims for indemnity/contribution.
- The Court (E.D.N.Y.) denied dismissal for lack of personal jurisdiction over Reis (finding New York long‑arm jurisdiction under CPLR §302(a)(3) based on injury situs), allowed the LLCs to proceed for the limited purpose of winding up (subject to future proof), rejected in pari delicto as to Eagle, dismissed Wells Fargo’s duplicative common‑law negligence claim with prejudice, and granted Wells Fargo leave to amend deficient cross‑claims against Reis.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Personal jurisdiction over Reis | Reis’ contacts (emails, letters, phone calls) to New York caused injury in New York; jurisdiction exists. | Reis argued lack of personal jurisdiction. | Court: jurisdiction exists under CPLR §302(a)(3) (situs of injury = New York). |
| Venue | (implicitly) venue proper in E.D.N.Y. given communications into district. | Reis sought transfer to Oregon/ dismissal for improper venue. | Court: venue already decided in prior order; E.D.N.Y. proper. |
| Capacity/standing of dissolved Florida LLCs | LLCs may sue to wind up affairs; suit accrued before dissolution; capacity governed by forum law. | Defendants said LLCs were administratively dissolved and lack capacity; argued N.Y. LLC Law §808 issue. | Court: LLC plaintiffs may proceed for limited winding‑up purpose; denial without prejudice to later summary judgment challenge. |
| In pari delicto re: Eagle | Eagle not barred; his unrelated fraud is separate from defendants’ scheme. | Defendants: Eagle’s own fraud bars his recovery under in pari delicto. | Court: in pari delicto does not apply — Eagle was not a participant in defendants’ scheme. |
| Sufficiency of Wells Fargo cross‑claims (indemnity/contribution) against Reis | Wells Fargo: Reis was agent; entitled to contribution/indemnity; should be permitted to amend. | Reis: cross‑claims are boilerplate and fail Rule 8; should be dismissed. | Court: original cross‑claim dismissed for failure to plead; Wells Fargo granted leave to amend. |
| Damages for lost profits / consequential damages | Plaintiffs assert various consequential damages beyond lost profits. | Defendants argue lost profits not recoverable on fraud/ negligent misrepresentation. | Court: not ripe to resolve now; denied dismissal on damages theory at this stage. |
| Negligence vs negligent misrepresentation (Wells Fargo) | Plaintiffs included both claims; negligence includes negligent hiring/supervision. | Wells Fargo: negligence claim duplicates negligent misrepresentation and should be dismissed. | Court: common‑law negligence claim dismissed with prejudice as duplicative; negligent misrepresentation remains. |
Key Cases Cited
- Ashcroft v. Iqbal, 556 U.S. 662 (pleading plausibility standard)
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (pleading must state a plausible claim)
- Bank Brussels Lambert v. Fiddler Gonzalez & Rodriguez, 171 F.3d 779 (situs‑of‑injury test for §302(a)(3) fraud jurisdiction)
- LaMarca v. Pak‑Mor Mfg. Co., 95 N.Y.2d 210 (elements for CPLR §302(a)(3) personal jurisdiction)
- Makarova v. United States, 201 F.3d 110 (Rule 12(b)(1) jurisdictional burden)