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Daccache v. Quiros

United States District Court, S.D. Florida, Miami Division

May 15, 2018

ALEXANDRE DACCACHE, on behalf of himself and all others similarly situated, Plaintiffs,
v.
ARIEL QUIROS; PEOPLE'S UNITED FINANCIAL, INC.; and PEOPLE'S UNITED BANK, Defendants.

          ORDER DISMISSING AMENDED COMPLAINT AGAINST QUIROS, PEOPLE'S UNITED FINANCIAL. INC., AND PEOPLE'S UNITED BANK

          FEDERICO A. UNITED STATE DISTRICT JUDGE.

         The Court dismisses the Amended Complaint against the remaining Defendants: Ariel Quiros, People's United Financial, Inc., and People's United Bank and grants Defendants' Motions to Dismiss (D.E. Ill. and 114). The Court finds that Plaintiffs lack standing to sue Defendant Quiros, because Plaintiffs' claims are derivative under Florida law, as they have not sufficiently alleged an injury separate and distinct from other investors. Additionally, the Court lacks personal jurisdiction over the Peoples' Defendants because Plaintiffs failed to meet their burden in rebutting the Defendants' affidavits, but even if they had, exercising personal jurisdiction over them would not comport with the Due Process Clause. Accordingly, the Motions to Dismiss are granted.

         I. Background

         A. The Amended Complaint

         On August 9, 2016, Plaintiffs filed an Amended Complaint against Defendants Raymond James & Associates, Inc., [1] People's United Financial, Inc., People's United Bank, Ariel Quiros, William Stenger, [2] and Joel Burstein.[3] The Defendants that remain are Ariel Quiros, People's United Bank, N.A., and People's United Financial, Inc. The Amended Complaint includes causes of action for: common law fraud against Quiros (Count I); aiding and abetting common law fraud against People's Bank (Count III); aiding and abetting breach of fiduciary duty against Quiros (Count IV); aiding and abetting breach of fiduciary duty against People's Bank (Count VI); civil conspiracy against Quiros and People's Bank (Count VII); negligence against People's Bank (Count IX); breach of fiduciary duty against People's Bank (Count X); breach of contract against People's Bank (Count XI); Florida's Racketeer Influenced and Corrupt Organizations Act against Quiros (Count XII); conspiracy to violate Florida's Civil Racketeer Influenced and Corrupt Organizations Act against Quiros (Count XIII). The Peoples' Defendants and Quiros move to dismiss the Amended Complaint. For the following reasons, the Court dismisses the Amended Complaint.

         B. Facts

         1. Parties

         Plaintiffs are all natural persons, over the age of twenty-one, who allegedly sustained damage as a result of their investments in this Ponzi scheme. Defendant Raymond James & Associates, Inc. is a corporation organized in Florida, with its principal place of business in St. Petersburg, Florida. Defendant People's United Financial, Inc., is a financial services company. People's United Financial, Inc. acquired the Chittenden Corporation, the bank holding company for the Chittenden Trust Company, which at the time of the acquisition, acted as the escrow agent for the investor funds for the EB-5 projects.

         Defendant People's United Bank is a federally chartered savings bank headquartered in Bridgeport, Connecticut, and is a subsidiary of People's United Financial, Inc. Plaintiffs submit that in July 2008, the Board of Directors of People's United Financial, Inc. and the Board of Directors of People's United Bank approved a plan to consolidate the acquired Chittenden entities into People's United Bank. Defendant Quiros is a natural person residing in Florida. Defendant Stenger is the Director, President, and CEO of Jay Peak, Inc, and resides in Vermont. Finally, Defendant Burstein resides in Florida and is the Miami Branch Manager and Vice President of Investments for the Raymond James South Florida Complex.

         2. Non-Parties

         Jay Peak, Inc. is a Vermont corporation that operates the Jay Peak Resort in Jay, Vermont, the location of the first six alleged EB-5 projects for which Quiros and Stenger raised money. Q Resorts is a Delaware corporation that is a 100% owner of Jay Peak, Inc., and Plaintiffs submit that Quiros is the sole owner, officer, and director of Q Resorts. Q Resorts acquired the stock of Jay Peak, Inc. from a Canadian company, Mont Saint-Sauveur International, Inc.

         Jay Peak Hotel Suites L.P. ("Phase I") is a Vermont limited partnership. Between December 2006 and May 2008, Phase I raised $17.5 million from 35 investors through the EB-5 program to build a hotel. Phase I then offered and sold securities in the form of limited partnership interests beginning in December 2006, when Jay Peak, Inc. was still owned by Mont Saint-Sauveur. Jay Peak Hotel Suites Phase II L.P. ("Phase II") is a Vermont limited partnership. Between March 2008 and January 2011, Phase II raised $75 million from 150 investors through an EB-5 offering of limited partnership interests to build a hotel, indoor water park, ice rink, and golf club house.

         Jay Peak Penthouse Suites L.P. ("Phase III") is a Vermont limited partnership. Between July 2010 and October 2012, Phase III raised $32.5 million from 65 investors through an EB-5 offering of limited partnership interests to build a 5 5-unit hotel and an activities center. Jay Peak Golf and Mountain Suites L.P. ("Phase IV") is a Vermont limited partnership. Between December 2010 and November 2011, Phase IV raised $45 million from 90 investors through an EB-5 offering of limited partnership interests to build golf cottage duplexes, a wedding chapel, and other facilities.

         Jay Peak Lodge and Townhouses L.P. ("Phase V") is a Vermont limited partnership. Between May 2011 and November 2012, Phase V raised $45 million from 90 investors through an EB-5 offering of limited partnership interests to build 30 vacation rental townhouses, 90 vacation rental cottages, a cafe, and a parking garage. Jay Peak Hotel Suites Stateside L.P. ("Phase VI") is a Vermont limited partnership. Between October 2011 and December 2012, Phase VI raised $67 million from 134 investors through an EB-5 offering of limited partnership interests to build an 84-unit hotel, 84 vacation rental cottages, a guest recreation center, and a medical center. Jay Peak Biomedical Research Park L.P. ("Phase VII") is a Vermont limited partnership. Between November 2012 and April 2016, Phase VII raised approximately $83 million from 166 investors through an EB-5 offering of limited partnership interests to construct a biomedical research facility.

         Q Burke Mountain Resort, LLC owns Burke 2000, LLC, which in turn owns Burke Mountain Operating Company. Plaintiffs' submit that Quiros owns 100% of Q Burke Mountain Resort, LLC. Q Burke Mountain Resort Hotel and Conference Center, L.P. ("Phase VIII") is a Vermont limited partnership. Between June 2013 and April 2016, Phase VIII raised approximately $53 million from 106 investors through an EB-5 offering of limited partnership interests to build a 112-room hotel, a conference center, and outdoor pool.

         Stenger is the director and only principal of various other entities that act as the general partners of the limited partnerships in Phases I-VI. Quiros and Stenger are managing members of AnC Bio Vermont GP Services, LLC, a Vermont limited liability company that acts as the general partner for Phase VII.

         3.The Alleged Ponzi Scheme

         Plaintiffs' claims stem from their investments in a series of related projects at the Jay Peak and Q Burke ski resorts in Vermont. Plaintiffs allege that Jay Peak was owned and operated by Mont Saint-Sauveur International, Inc. from 1978 until mid-2008. Quiros and Stenger allegedly negotiated with Mont Saint-Sauveur to acquire and further develop Jay Peak in 2007. Quiros and Stenger then raised funds to develop Jay Peak through the EB-5 Immigrant Investor Program-a program created by federal law that provides prospective immigrants the opportunity to become permanent U.S. residents by investing in U.S. enterprises. Plaintiffs allege that in 2008, Quiros, Burstein, and Amigo (Burstein's supervisor), met to discuss a financial structure for the limited partnerships they planned to implement to raise capital for the EB-5 projects. As a result, Plaintiffs submit that Raymond James agreed that investor funds would be transferred from escrow accounts at People's Bank to accounts at Raymond James, over which Quiros would have exclusive authority.

         Plaintiffs allege that the Ponzi scheme occurred as follows: Burstein, Quiros, and Amigo made plans to finance the purchase of Jay Peak using a margin loan. Investor funds would be used to purchase Treasury bills and Raymond James would then lend money to Quiros using the investor money as collateral, without notifying the investors that their money was serving as collateral. The Treasury bills purchased with investor funds became collateral for a margin loan, and the loan permitted Quiros to borrow up to 90% of the value of the Treasury bills in the limited partnership accounts at Raymond James.

         In preparation for the closing of Jay Peak Inc., Quiros asked Saint-Sauveur to open brokerage accounts at Raymond James in the names of Phases I and II. Saint-Sauveur agreed, and Stenger opened Saint-Sauveur's accounts at Raymond James for Phases I and II. People's Bank then made two transfers of $11 million and $7 million in escrowed investor funds to Saint-Sauveur's Phase I and II accounts at Raymond James. Thereafter, Quiros opened two accounts at Raymond James under his control for Phases I and II. Before Quiros tendered the purchase price to Saint-Sauveur, Saint-Sauveur transferred $11 million in its Phase I and $7 million in its Phase II accounts at Raymond James to Quiros's Phase I and II accounts. By Plaintiffs' account, Quiros was in control of investor money for Phases I and II that was otherwise supposed to be in Stenger's control.

         Prior to transferring the funds for Phases I and II, Saint-Sauveur wrote a letter to Burstein, copying Quiros, confirming that the funds in the Raymond James Phase I account were investor funds and cautioning about the permissible use of the funds. The letter stated, inter alia, that "[y]ou confirmed that these funds will not be used in any manner, including as collateral or a guarantee, to finance [Q Resorts' purchase of] the Jay Peak Resort."

         Plaintiffs allege that despite knowing the investor money could not be used to purchase Jay Peak, Inc., Quiros-with the assistance of Stenger, Burstein, and Raymond James-through Q Resorts, used $21.9 million of investor funds ($12.4 million from Phase I and $9.5 million from Phase II) to fund the vast majority of the purchase of Jay Peak, Inc. Quiros then transferred $7.6 million of Phase I investor funds and $6 million of Phase II investor funds from the Raymond James Accounts to a third account that he opened at Raymond James in the name of Q Resorts. The same day, Quiros wired $13, 544 million from the Q Resorts account to the law firm representing Saint-Sauveur as partial payment for the stock purchase. Over the next several months, Quiros made additional payments to the same law firm totaling $8.4 million. Plaintiffs allege that all of these payments were made improperly using investor funds, and maintain that Stenger facilitated many of these payments by transferring additional money from People's Bank to Quiros's Q Resorts account at Raymond James. When the transfers were complete, Quiros wired the money to the law firm representing Saint-Sauveur.

         Plaintiffs submit that nothing in the limited partnership agreements permitted Quiros to use the investor funds to buy Jay Peak, Inc. In fact, a section in the Phase I and II agreements prevented the general partner from borrowing or commingling investor funds and from permitting Quiros and Q Resorts to purchase Jay Peak, Inc., without investor consent. Plaintiffs further allege that Quiros's misuse of investor funds permeated through each of the EB-5 projects at issue.

         When Quiros opened the Phase I and II accounts, he signed a credit agreement with Raymond James that allowed both accounts to hold margin balances-the accounts could borrow money and hold negative cash balances that would be paid back to Raymond James with interest. Quiros pledged the funds in the Phase I and II accounts as collateral for any margin loans the accounts incurred, and opened new accounts in the name of each limited partnership that he had sole control over. Stenger transferred investor funds from accounts at People's Bank-where investors had deposited their money-to the accounts controlled by Quiros. Plaintiffs submit that Stenger violated terms of the applicable limited partnership agreements and breached his fiduciary duty as general partner to the investors in the limited partnerships each time he transferred the funds. Plaintiffs suggest this occurred with every limited partnership. Plaintiffs also maintain that Quiros's establishment of the margin loans violated the terms of the limited partnership agreements because the agreements prohibited general partners from encumbering or pledging investor funds as collateral without investor approval. Lastly, Plaintiffs allege that Quiros and Stenger commingled Phase I investor monies with funds from other limited partnerships.

         Among the offering materials purportedly given to investors was an escrow agreement with People's Bank. To purchase a limited partnership interest in any phase, each investor was required to (1) enter into the escrow agreement; and (2) transfer funds to People's Bank, with $500, 000 as the limited partnership investment and an additional sum, usually $50, 000 for administrative fees. Id. Further, the escrow agreements stated that People's Bank would release the funds to the specific limited partnership account at Raymond James that the investor purchased an interest in. However, the Phase I-III offering materials provided that the investors' funds could only be held in bank accounts, and the Phases I and II documents required that the transferee bank accounts be "insured by an agency of the federal government." Plaintiffs allege that as a brokerage firm, Raymond James is neither a bank, nor is ensured by the Federal Deposit Insurance Corporation, and thus, the transfer of investor funds for Phases I-III was prohibited by the offering materials given to investors. For the following reasons, the Court grants the Motions to Dismiss.

         II. Legal Standard

         "A pleading that states a claim for relief must contain ... a short and plain statement of the claim showing that the pleader is entitled to relief." Fed.R.Civ.P. 8(a)(2). When ruling on a motion to dismiss, a court must view the complaint in the light most favorable to the plaintiff and accept the plaintiffs well-pleaded facts as true. See St. Joseph's Hosp., Inc. v. Hosp. Corp. of Am., 795 F.2d 948, 954 (11th Cir. 1986). To survive a motion to dismiss, a "complaint must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544s 570 (2007)). Detailed factual allegations are not required, but a pleading must offer more than "labels and conclusions" or "a formulaic recitation of the elements of the cause of action." Twombly, 550 U.S. at 555; Jackson v. BellSouth Telecomm., 372 F.3d 1250, 1263 (11th Cir. 2004) ("To survive a motion to dismiss, plaintiffs must do more than merely state legal conclusions; they are required to allege some specific factual bases for those conclusions or face dismissal of their claims."). In short, the complaint must not merely allege misconduct, but must demonstrate that the pleader is "entitled to relief." Iqbal, 556 U.S. at 677-78.

         On a motion to dismiss for lack of personal jurisdiction, the court accepts as true all allegations in the complaint and decides whether the plaintiff has met its burden of establishing a prima facie case of personal jurisdiction. Stubbs v. Wyndham Nassau Resort & Crystal Palace Casino, 447 F.3d 1357, 1360 (11th Cir. 2006). "[W]here the defendant challenges the court's exercise of jurisdiction over its person, the plaintiff bears the ultimate burden of establishing personal jurisdiction is present." Oldfield v. Pueblo De Bahia Lora, S.A., 558 F.3d 1210, 1217 (11th Cir. 2009).

         When determining whether personal jurisdiction exists over a defendant, courts generally partake in a two-step analysis. Verizon Trademark Servs., LLC v. Producers, Inc., 810 F.Supp.2d 1321, 1324-25 (M.D. Fla. 2011). A court may exercise personal jurisdiction over a nonresident if: (1) the forum state's long-arm statute confers jurisdiction and (2) jurisdiction would not "offend traditional notions of fair play and substantial justice." PVC Windoors, Inc. v. Babbitbay Beach Constr., N.V., 598 F.3d 802, 807 (11th Cir. 2010) (citation and internal quotations omitted). Courts proceed to the second step only if the long-arm statute provides for jurisdiction. Id. A court must strictly construe the long-arm statute in assessing whether a plaintiff has satisfied its burden of producing affidavits, documents, or testimony that overcome a defendant's evidence challenging personal jurisdiction. Sculptchair, Inc. v. Century Arts, Ltd., 94 F.3d 623, 627 (11th Cir. 1996) (citations omitted).

         III. Analysis

         Defendants Quiros, People's United Financial, Inc., and People's United Bank, N.A. move to dismiss the Amended Complaint. Quiros makes ten arguments in his Motion to Dismiss Counts I, IV, VII, XII, and XIII of the Amended Complaint: (1) Plaintiffs do not allege a Ponzi scheme; (2) Plaintiffs lack standing to bring derivative claims; (3) Plaintiffs have not alleged investment injury for Phases I-V of the alleged Ponzi scheme; (4) Plaintiffs cannot bring claims on behalf of limited partnerships in which they did not invest; (5) Plaintiffs' claims against Quiros fail because they are breach of contract claims disguised as tort claims; (6) Plaintiffs have not pled falsity of offering documents with requisite particularity as required by Federal Rule of Civil Procedure 9(b); (7) Aiding and Abetting Breach of Fiduciary Duty (Count IV) fails because Plaintiffs do not allege that Quiros owed a fiduciary duty to investors or that he had knowledge of the purported fiduciary duties at issue; (8) Civil Conspiracy (Count VII) fails because Plaintiffs have not alleged an actual agreement by the alleged co-conspirators; (9) Racketeer Influenced and Corrupt Organizations Act claims (Counts XII and XIII) fail because Plaintiffs have not adequately pleaded criminal wrongdoing and Plaintiffs have not sufficiently alleged Quiros's participation in a pattern of racketeering activity; and (10) the statutes of limitation bar claims for aiding and abetting breach of fiduciary duty and civil conspiracy (Counts IV and VII).

         Quiros's motion relies on procedural and substantive arguments. The Court will address his procedural arguments first, because standing and statutes of limitation are dispositive threshold matters. See Varga v. Palm Beach Capital Mgmt., LLC, No. 09-82398-CIV, 2010 WL 8510622, at *1 (S.D. Fla. Sept. 3, 2010) ("[V]enue and standing issues are threshold legal issues that are case-dispositive."); Bethke v. Stetson, 521 F.Supp. 488, 489 (N.D.Ga. 1979), aff'd, 619 F.2d 81 (5th Cir. 1980) ("A determination as to whether the claim is barred by the statute of limitations is dispositive of the issues in the case."). Quiros's procedural arguments include: (1) Plaintiffs lack standing to bring derivative claims; (2) Plaintiffs lack standing because they have not alleged investment injury for phases I-V; (3) Plaintiffs lack standing to bring claims on behalf of limited partnerships in which they did not invest; and (4) the statutes of limitation bar claims for aiding and abetting breach of fiduciary duty (Count IV) and civil conspiracy (VII).

         The Peoples' Defendants also seek dismissal of the Amended Complaint with three principal arguments: (1) the Court lacks personal jurisdiction over them; (2) Plaintiffs' claims fail because they are based upon the Peoples' Defendants transfers of funds consistent with the terms of the escrow agreements; and (3) Plaintiffs' fail to plausibly plead claims against the Peoples' Defendants. Like ...


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