Czarninski Baier de Adler v. Upper New York Investment Company LLC, et al.
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EFiled: Oct 31 2013 03:22PM EDT
Transaction ID 54476599
Case No. 6896VCN
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
VIVIAN CZARNINSKI BAIER DE ADLER
Plaintiff,
v.
UPPER NEW YORK INVESTMENT
COMPANY LLC, NORTH PARK AVENUE
INVESTMENT COMPANY LLC, UPPER
HUDSON INVESTMENT COMPANY LLC,
VISTAMAR INVESTMENTS LLC, JOHNY
JACOBO CZARNINSKI BAIER, DANNY
DAVID CZARNINSKI BAIER, and TALY
CZARNINSKI SHEFI DE SCHWARTZ,
Defendants.
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C.A. No. 6896-VCN
MEMORANDUM OPINION
Date Submitted: July 17, 2013
Date Submitted: October 31, 2013
Richard L. Renck, Esquire of Ashby & Geddes, P.A., Wilmington, Delaware, and
Michael A. Charish, Esquire of Schulman & Charish LLP, New York, New York,
Attorneys for Plaintiff.
Thomas W. Briggs, Jr., Esquire and Matthew R. Clark, Esquire of Morris, Nichols,
Arsht & Tunnell LLP, Wilmington, Delaware, Attorneys for Defendants Upper
New York Investment Company LLC, North Park Avenue Investment Company
LLC, Upper Hudson Investment Company LLC, Johny Jacobo Czarninski Baier,
and Taly Czarninski Shefi de Schwartz.
John L. Reed, Esquire and Stuart M. Brown, Esquire of DLA Piper LLP (US),
Wilmington, Delaware, Attorneys for Defendants Vistamar Investments LLC and
Danny David Czarninski Baier.
NOBLE, Vice Chancellor
I. INTRODUCTION
This Delaware action is a dispute among family members of Ecuadorian
citizenship over their ownership interests in a group of family-owned companies
based in Ecuador. That four Delaware limited liability companies hold some of the
disputed stock may explain why this lawsuit was filed here.
Vivian Czarninski Baier de Adler (“Vivian”) filed this action against two
groups of parties: first, the entities Upper New York Investment Company LLC
(“Upper New York LLC”), North Park Avenue Investment Company LLC (“North
Park Avenue LLC”), Upper Hudson Investment Company LLC (“Upper Hudson
LLC”), and Vistamar Investments LLC (“Vistamar LLC,” and collectively, the
“Delaware LLCs”); and second, the individuals Johny Jacobo Czarninski Baier
(“Johny”), Danny David Czarninski Baier (“Danny”), and Taly Czarninski Shefi
de Schwartz (“Taly,” and collectively, the “Individual Defendants,” and together
with the Delaware LLCs, the “Defendants”).
Vivian contends that the Individual Defendants engaged in a scheme to
defraud her of her minority ownership in the Czarninski family empire by, among
other actions, consolidating the group of companies into a select few without
notice or consent, then unilaterally diluting her ownership interest in the remaining
companies, before transferring stock in these companies for inadequate
consideration to the Delaware LLCs by way of entities in the British Virgin
1
Islands.1 Vivian alleges claims under Ecuadorian law for fraud and abuse and for
unjust enrichment.2
The Defendants filed three separate motions to dismiss. Upper New York
LLC, North Park Avenue LLC, and Upper Hudson LLC moved to dismiss for lack
of subject matter jurisdiction, improper venue, and failure to state a claim. Johny
and Taly moved to dismiss for lack of personal jurisdiction, improper venue,
insufficiency of process, and insufficiency of service of process.3
Finally,
Vistamar LLC and Danny moved to dismiss upon all six of these grounds. Aside
from filing separate motions, the Defendants presented a joint defense.
By an agreement among the parties, the only grounds for dismissal under the
Court’s consideration at this time are under Court of Chancery Rule 12(b)(1) for
subject matter jurisdiction and under Rule 12(b)(6) for failure to state a claim upon
which relief can be granted for the claims against Danny and the Delaware LLCs
(together, the “Moving Defendants”).4
1
Plaintiff’s Verified Complaint (the “Complaint” or “Compl.”) ¶¶ 1, 41, 103. The Complaint is
the source of the facts in this memorandum opinion. See Malpiede v. Townson, 780 A.2d 1075,
1082 (Del. 2001).
2
Compl. ¶¶ 102-12.
3
Johny and Taly also purported to preserve the opportunity to move to dismiss for lack of
subject matter jurisdiction.
4
See Third Am. Stip. and Briefing Scheduling Order (Oct. 17, 2012).
2
II. THE PARTIES
Vivian, who resides in Israel, is the sister of Johny and Danny and the aunt
of Taly, who is Johny’s daughter. Johny, Danny, and Taly all reside in Ecuador.5
The Delaware LLCs are Delaware limited liability companies.
Johny
controls Upper New York LLC, North Park Avenue LLC, and Upper Hudson LLC,
all of which were formed on April 2, 2008.6 Danny controls Vistamar LLC, which
was formed on December 29, 2009.7 The Delaware LLCs have no offices, no
employees, and no business, according to Vivian, outside the “sole purpose of
storing the assets [held by] Johny, Danny and Taly” at issue here.8
III. BACKGROUND
Vivian, Johny, and Danny are the children of Alfredo Czarninski, who
founded a group of family-owned companies that came to be known as Grupo
Economico El Rosado (“El Rosado Group” or the “Group”), “a real-estate and
business empire” in Ecuador that Vivian alleges is currently worth over $1 billion.9
El Rosado Group is not an entity itself but rather a group of companies with
significant cross-ownership.10 In effect, the Group “owns and operates prominent
supermarket chains, shopping centers, hardware stores, toy stores, movie theaters,
5
Id. ¶¶ 2, 7-9.
Id. ¶¶ 3-5, 70-72, 75.
7
Id. ¶¶ 6, 73.
8
Id. ¶ 74.
9
Id. ¶¶ 17-19, 27.
10
Id. ¶ 29.
6
3
and other businesses.”11 Historically, the main operating company of El Rosado
Group was Importadora El Rosado Cia. Ltda. (“El Rosado Ltd.”), an Ecuadorian
limited liability company that “generated almost all of the Group’s revenue, and
financed and managed the other companies in the Group.”12
A. The Czarninski Family’s Ownership of El Rosado Group
Alfredo Czarninski informed his three children on several occasions that he
and his wife each owned 25% of the Group and that the children each owned an
equal 16.67%. Not everyone in the family would own his or her designated
percentage in every Group company, but rather each allegedly owned that
percentage of the Group as a whole.13 By 2002, Vivian was a stockholder of
record for several El Rosado Group companies, and, moreover, her ownership
interest reflected her father’s general plan. For example, she claims she owned
approximately 16.22% of El Rosado Ltd.14 The purported plan of ownership of the
Group by the three siblings after the deaths of their parents was to be an equal
33.33%.15
11
Id. ¶ 18.
Id. ¶¶ 20, 25.
13
Id. ¶¶ 28-29.
14
Id. ¶ 31.
15
Id. ¶¶ 29-30.
12
4
Vivian was less involved than her brothers in the management and
operations of the Group. Johny succeeded his father as President of El Rosado
Group in 1997, and Danny became Executive Vice President.16 Living in Israel
while the rest of the Czarninski family lived in Ecuador, Vivian was a “passive
shareholder of El Rosado Group, who trusted her family members to run the
business.”17
On August 19, 2003, Alfredo Czarninski died intestate.18
A dispute
eventually arose over his estate’s assets and plan of distribution, with Vivian
claiming ownership of one-third of the estate’s stock, if any, in El Rosado Group
companies. Since at least their father’s death, according to Vivian, “Johny and
Danny have exerted complete control over El Rosado Group, ignoring corporate
formalities, and acting as if they were the exclusive owners.”19
B. The Scheme to Defraud Vivian
Vivian claims that Johny and Danny deprived her of her stock in El Rosado
Group, which she owned as a stockholder of record and by inheritance from their
father, with a five-part fraudulent scheme involving:
16
Id. ¶ 35. The Court notes the internal inconsistency of the allegations here that these two
individuals became executives of the Group and the prior allegations that the Group was not an
actual entity but merely shorthand for the group of family-owned companies.
17
Id. ¶¶ 32-33.
18
Id. ¶ 36.
19
Id. ¶ 37.
5
(a) converting El Rosado Ltd. to a corporation; (b) consolidating El
Rosado Group through a series of mergers; (c) increasing capital to
dilute the other shareholders; (d) transferring a substantial majority of
El Rosado corporate shares to shell companies in the British Virgin
Islands, for no consideration; and (e) transferring those shares from
the BVI companies to the Delaware LLCS, again for no
consideration.20
This scheme, from Vivian’s perspective, demonstrates how Johny and Danny
“abused Vivian’s trust, violated their fiduciary duties, and conspired to
fraudulently manipulate El Rosado Group to transfer wealth from Vivian and their
parents to the Delaware companies under their control.”21
1. The El Rosado Ltd. Conversion and the El Rosado Group Consolidation
The scheme began when Johny, “with the tacit consent of Danny,” converted
El Rosado Ltd. into Corporacion El Rosado S.A. (“El Rosado Corp.”), an
Ecuadorian corporation, on March 15, 2005. Although such a conversion under
Ecuadorian law purportedly requires the “unanimous written consent of all of [the
limited liability company’s] members”—which would have included Vivian as a
16.22% member—Johny allegedly did not notify her or obtain her consent.22
The next alleged step in the scheme was the consolidation of several
companies in El Rosado Group. The restructuring resulted in three “real-estate
holding companies worth hundreds of millions of dollars each”: El Rosado Corp.,
20
Id. ¶¶ 41, 103.
Id. ¶ 40.
22
Id. ¶¶ 42-43.
21
6
Inmobiliaria Lavie, S.A. (“Lavie”), and Inmobiliaria Motke, S.A. (“Motke”).23
One other remaining company, Comercial Inmobiliaria S.A. (“CISA”), owned a
majority of the stock of El Rosado Corp.24
2. The Dilution of Vivian’s Minority Stock Ownership
Vivian alleges particular facts about an unlawful dilution of her ownership in
one Group company: Lavie. At a general Lavie stockholders meeting on April 19,
2005, Johny unilaterally issued additional stock in Lavie “to companies that he
himself wholly owned.”25 Specifically, Vivian alleges that Johny, who “was the
only person present” at this meeting, caused Lavie to issue 9,734,582 new shares at
a par value of $389,383, “instead of [at] their market value . . . [in the] hundreds of
millions of dollars.”
The newly issued stock purportedly increased Johny’s
ownership of Lavie from 0.84% to 68.84%.26 Vivian was not notified of the
meeting or in any way offered to subscribe into this new offering of Lavie stock.27
3. The Series of Transfers of Group Stock to the Delaware LLCs
The final steps of the scheme, Vivian contends, culminated with the transfer
of stock in the remaining El Rosado Group companies to the Delaware LLCs. By
March 29, 2007, Johny and Danny had formed four companies in the British
23
Id. ¶ 44.
Id. ¶ 45.
25
Id. ¶¶ 46-47.
26
Id. ¶¶ 47-49.
27
Id. ¶ 49.
24
7
Virgin Islands (the “BVI Companies”).28 At this point, Vivian’s niece, Taly, began
to assist Vivian’s brothers.29 The Individual Defendants purportedly transferred
two of Lavie’s primary assets, its majority controlling interest in CISA “worth
hundreds of millions of dollars” and its over 99% interest in Motke similarly
“worth hundreds of millions of dollars,” to the BVI Companies “for absolutely no
consideration.”30 In addition, the Individual Defendants allegedly transferred to
the BVI Companies CISA’s majority interest in El Rosado Corp., which also “was
worth hundreds of millions of dollars[,] . . . again for no consideration.”31 These
transfers allegedly occurred throughout 2006 and 2007; the final transaction date
28
Danny formed one of the BVI Companies, Mazal Worldwide, S.A., in 2006. Id. ¶ 51. On
March 29, 2007, Johny formed the other three BVI Companies: Upper New York Investment
Company Ltd., North Park Avenue Investment Company Ltd., and Upper Hudson Investment
Company Ltd. Id. ¶ 52.
29
Id. ¶ 50.
30
Id. ¶¶ 54-56.
31
Id. ¶¶ 57-58.
In support of her assertion that these transfers were made for inadequate consideration, Vivian
points to Lavie’s and CISA’s internal accounting records and a report by external auditor
PricewaterhouseCoopers (“PwC”). Id. ¶ 60. For instance, although Lavie’s internal accounting
records showed credits of $26,392,555.07 for its CISA shares and $26,659,652.93 for its Motke
shares, the corresponding debit entries were “non-deductible expenses,” which, Vivian alleges,
reflect that Lavie received no consideration for these transfers. Similar accounting entries in
CISA’s internal records from October 2007 showed credit entries of $44,637,630.75 for its El
Rosado Corp. shares; $3,266,573.47 for its Lavie shares; and $14,074.61 for its Motke shares, all
with corresponding debit entries for “non-deductible expenses.” Vivian complains that these
book values undervalued the total market value of the stock transferred by Lavie and CISA. Id.
¶¶ 61-62.
Vivian also points to a June 2008 PwC report prepared for CISA that allegedly stated that the
transfers “carried out for zero value in favor of related companies domiciled abroad caused the
accrual of net losses in the years 2007 and 2006”—losses that purportedly “exceeded the limit
permitted by Ecuadorian law”—such that “CISA would have to be dissolved if its shareholders
did not ‘solve the situation.’” After this report, CISA allegedly merged into Lavie at Johny’s
direction and with Danny’s consent. Id. ¶ 63.
8
referenced is October 2007, based on the dates of the accounting entries for CISA
and Lavie.32
Ecuadorian law is said to require the seller and the buyer of stock to notify
the corporation of the transfer so that the corporation can then register the stock in
the buyer’s name and notify Ecuador’s Superintendent of Companies (the
“Superintendent”) about the new registration.33 The Individual Defendants were
able to accomplish the stock transfers to the BVI Companies, Vivian contends,
through their control of El Rosado Group, by which “they simply sent the notices
of transfer to each other, registered themselves in the corporate books, and notified
the Superintendent . . . themselves.”34
Lastly, Vivian alleges that the Individual Defendants completed their
scheme by transferring the stock in El Rosado Group companies held by the BVI
Companies to the newly formed Delaware LLCs.
On April 2, 2008, Johny
purportedly domesticated the three BVI Companies he had formed, creating Upper
New York LLC, North Park Avenue LLC, and Upper Hudson LLC.35 Danny
32
Id. ¶¶ 59, 61-62.
Id. ¶ 64.
34
Id. ¶ 65. In a telling example, Vivian alleges that Johny signed one notification letter as
President of Lavie (the seller) and as attorney in fact for the BVI Companies (the buyers) for the
transfer of CISA stock and sent the letter to Taly, CISA’s President. Johny, as Manager of
CISA, then allegedly registered the BVI Companies as the new owners in CISA’s records before
signing the notice of transfer and sending it to the Superintendent himself. Id. ¶ 66.
35
Id. ¶¶ 70-72.
33
9
allegedly then caused the transfer of the Group stock held by his BVI Company to
the newly formed Vistamar LLC on December 30, 2009.36
The result of the scheme was to put control of approximately 86% of El
Rosado Corp., 99% of Lavie, and 100% of Motke in the Delaware LLCs, and thus
in the hands of Johny and Danny.37 By the end of 2010, Vivian claims her direct
and indirect stock ownership in these companies had been reduced to almost
nothing: from 16% to 5% in El Rosado Corp.; from 14% to 0.02% in Lavie; and
from 15% to 0% in Motke.38
C. The Israeli Probate Proceeding for Alfredo Czarninski’s Estate
Vivian initiated an Israeli probate proceeding for Alfredo Czarninski’s estate
in November 2006. During the proceeding, she, Johny, and Danny agreed that “the
three children are the sole heirs of the deceased [Alfredo Czarninski], and should
receive equal inheritances of one-third each.”
The Israeli court purportedly
declared that this plan of intestate succession was appropriate under Ecuadorian
law.39 Vivian does not allege that the Israeli court, or any other court, conducted or
approved an inventory of the estate.
36
Id. ¶ 73. Danny’s BVI Company, Mazal Worldwide, S.A., allegedly transferred its El Rosado
Group holdings to a Panamanian company, Panora Investments S.A., that Danny formed in 2007.
Id. ¶ 68. Panora Investments S.A. then allegedly transferred its El Rosado Group holdings to
Vistamar LLC. Id. ¶ 73.
37
Id. ¶ 77.
38
Id. ¶ 79.
39
Id. ¶¶ 82, 84.
10
D. Vivian Eventually Learns of the Alleged Scheme
Throughout this time, Vivian claims to have been “blamelessly ignorant” of
what the Individual Defendants were doing with the Group companies “[g]iven her
physical distance from Ecuador, her lack of access to El Rosado [Group]
information, and her deference to her brothers.”40 In addition, Vivian alleges that
the Individual Defendants fraudulently concealed their misconduct by “deliberately
neglecting to send her corporate notices, in violation of Ecuadorian law”; by
misrepresentations about a discrepancy in family assets during the Israeli probate
proceeding; and by a 2007 statement Johny made when the three siblings were in
the Netherlands in which he “falsely assured [her] that he and Danny had run El
Rosado [Group] by the book, had done nothing wrong, and that [she] would
receive everything to which she was entitled.”41 Finally, Vivian asserts that her
reliance on these misrepresentations prevented her from uncovering the scheme. 42
At some point, the dynamic between Vivian and the Individual Defendants
seems to have changed.
After retaining Ecuadorian counsel in 2009, Vivian
alleges she initiated an action, similar to a books and records inspection, for Lavie.
Vivian claims she received Lavie documents between May 2010 and January
40
Id. ¶ 88.
Id. ¶¶ 90-92.
42
Id. ¶¶ 89, 92.
41
11
2011.43 But it was not until August 2010 that Vivian first became aware of the
Defendants’ conduct, “[g]iven the complexity of El Rosado Group, the defendants’
fraud, and the hundreds of corporate acts involved.”44
Despite her allegations that the scheme culminated with the transfer of the
stock at issue to the Delaware LLCs, Vivian also asserts that the fraud was
ongoing. In particular, Johny is alleged to have held a stockholder meeting for El
Rosado Corp. on August 16, 2011, to approve a stock increase, purportedly made
“to further dilute Vivian’s share . . . and fraudulently transfer wealth from Vivian
to the defendants.” Vivian claims she was not formally notified of the meeting as
required under Ecuador law.45 She claims she only learned of the planned increase
on September 5, 2011, at which time her local counsel sent a letter to Johny as
Executive President of El Rosado Corp. Vivian alleges that she did not receive a
response before she filed the Complaint on September 28, 2011.46
IV. CONTENTIONS
Vivian alleges that the Defendants’ five-part scheme is fraudulent and
abusive conduct committed in the name of companies in violation of Article 17 of
the Corporate Act of Ecuador (“Article 17,” and the “Article 17 Claim”).47 Vivian
43
Id. ¶ 93.
Id. ¶ 94.
45
Id. ¶¶ 96-97.
46
Id. ¶ 98.
47
Id. ¶¶ 102-07.
44
12
also alleges that the Defendants’ continued, wrongful possession of her El Rosado
Group stock constitutes unjust enrichment under Ecuadorian law (the “Unjust
Enrichment Claim”).48 Vivian’s claims are based on two different theories of stock
ownership: first, the stock for which she was a stockholder of record;49 and second,
the stock to which she was entitled upon the intestate death of her father.50
A. Subject Matter Jurisdiction
Vivian contends that the Court has subject matter jurisdiction over her
claims because “the rights [she] invokes are equitable.”51
She frames the
Article 17 Claim as a breach of fiduciary duty owed by the Individual Defendants
in light of their positions in the Group.
Vivian contends that the Unjust
Enrichment Claim also asserts equitable rights.52 Among the remedies sought are
an award of damages for the El Rosado Group stock Vivian alleges she owns, or,
alternatively, the shares themselves, and a constructive trust on the assets of the
Delaware LLCs.
48
Id. ¶¶ 108-12.
See, e.g., id. ¶¶ 31, 33, 39, 89.
50
See, e.g., id. ¶¶ 28-29, 78, 82, 84.
51
Pl.’s Answering Br. in Opp’n to Points III and V of Defs.’ Joint Mot. to Dismiss (“Pl.’s
Answering Br.”) 11. Vivian also has sought to preserve the right to argue that the Court has
equitable jurisdiction on the independent grounds of requesting an equitable remedy where there
is no adequate remedy at law, an argument she was not in a position to make before discovery.
Id. 11 n.29.
52
Id. 11.
49
13
In opposition, the Moving Defendants do not challenge that Vivian’s claims
are premised on fiduciary duties owed to her. Rather, they argue that the Court
lacks equitable jurisdiction over the Article 17 Claim because Ecuadorian law
would require Vivian first to obtain a criminal judgment for the fraud alleged in the
Complaint before pursuing civil remedies—a condition precedent that she has not
met.53 In addition, the Moving Defendants argue that the Court lacks jurisdiction
over Vivian’s claim under the inheritance theory of ownership because they
necessarily involve “unresolved predicate questions” about the assets of Alfredo
Czarninski’s estate, which the Court also lacks jurisdiction to determine.54
B. Failure to State a Claim
1. Laches
Vivian concedes that the presumptive limitations period governing her
equitable claims is three years.55 She argues, however, that she has alleged unusual
circumstances that warrant application of a limitations period longer than three
years.56 Alternatively, Vivian contends that she has alleged facts that demonstrate
53
Joint Reply Br. in Supp. of Points III and V of Defs.’ Mot. to Dismiss (“Defs.’ Reply Br.”) 8-
9.
54
Joint Br. in Supp. of Defs.’ Mot. to Dismiss (“Defs.’ Br.”) 22. The Defendants further argued
that the intestate inheritance issue was then being litigated not only in Ecuador, but also in Israel.
Id. 23.
55
Pl.’s Post-Hearing Opening Br. in Opp’n to Points III and V of Defs.’ Joint Mot. to Dismiss
(“Pl’s Post-Hr’g Br.”) 38.
56
Pl.’s Answering Br. 31.
14
a reasonably conceivable basis for tolling of the laches period, particularly under
the doctrines of fraudulent concealment and equitable tolling.57
The Moving Defendants argue that Vivian’s claims accrued when the Group
stock was transferred to the BVI Companies, which occurred more than four years
before the Complaint was filed. This timeline, they assert, means that the claims
are presumptively untimely under laches. The Moving Defendants also insist that
Vivian was on inquiry notice more than three years before she filed the Complaint,
which would make tolling inappropriate, because reasonable diligence would have
revealed facts giving rise to her claims.58
2. The Article 17 Claim
Vivian contends that the allegations of the five-part scheme involving the
Moving Defendants support the Article 17 Claim.59 She further argues that a
criminal judgment is not a required element to sustain that claim for civil
remedies.60 The Moving Defendants take a contrary position, maintaining that a
criminal judgment, which Vivian did not obtain, is a necessary element of relief for
the Article 17 Claim.61
In addition to this criminal judgment prerequisite
argument, the Moving Defendants argue that Article 17 is a remedial statute and
57
Pl.’s Post-Hr’g Br. 19-20; Pl.’s Answering Br. 31-34.
Opening Post-Hr’g Br. (“Defs.’ Post-Hr’g Br.”) 12-14; Defs.’ Reply Br. 19-24; Defs.’ Br. 3738.
59
Pl.’s Answering Br. 22.
60
Pl.’s Post-Hr’g Br. 2-3.
61
Defs.’ Reply Br. 4-6; Defs.’ Answering Post-Hr’g Br. 6.
58
15
not a cause of action. They assert, moreover, that Vivian has not alleged that the
Individual Defendants acted in the name of companies, making her reliance on
Article 17 inappropriate.62
3. The Unjust Enrichment Claim
Vivian contends that her allegations support the Unjust Enrichment Claim
arising under general principles of Ecuadorian law.63 The Moving Defendants do
not challenge the substance of the allegations, as they instead point to a procedural
limitation for this claim. All parties recognize that unjust enrichment is a so-called
subsidiary action: it is a claim of last resort available only if Vivian could not have
asserted any other cause of action.64 The Moving Defendants argue that unjust
enrichment is unavailable here because Vivian could have sought relief under
Article 17 had she first obtained the necessary criminal judgment.65
4. Res Judicata or Collateral Estoppel
The Moving Defendants contend that Vivian’s claims are barred by either
res judicata or collateral estoppel in light of Vivian’s prior petitions for
intervention to the Superintendent in Ecuador. Because Vivian’s petitions for
intervention in El Rosado Group were denied or not appealed, they argue Vivian
62
Defs.’ Post-Hr’g Br. 3; Defs.’ Br. 33.
Pl.’s Answering Br. 24-25.
64
Compare Pl.’s Post-Hr’g Br. 13, with Defs.’ Post-Hr’g Br. 18.
65
Defs.’ Post-Hr’g Answering Br. 6; Defs.’ Post-Hr’g Br. 17-18.
63
16
cannot relitigate those legal claims or factual issues here.66 Vivian challenges the
Moving Defendants’ statement of Ecuadorian law. She argues that neither res
judicata or collateral estoppel applies here because Ecuador does not apply either
doctrine to administrative decisions such as the Superintendent’s review of her
petitions for invention.67
V. ANALYSIS
A. Subject Matter Jurisdiction
1. The Standard of Review
If a party moves to dismiss under Court of Chancery Rule 12(b)(1), the nonmoving party bears the burden of establishing the Court’s jurisdiction.68 In this
analysis, the Court should accept the material factual allegations in the complaint
as true,69 and “all inferences therefrom [should be] construed in [the non-moving
66
Defs.’ Br. 40-41.
Pl.’s Answering Br. 25, 27.
68
See, e.g., Gladney v. City of Wilmington, 2011 WL 6016048, at *2-4 (Del. Ch. Nov. 30, 2011)
(finding no equitable jurisdiction for requests of “a declaratory judgment, permanent injunctive
relief, and compensatory damages” where, after “[h]aving carefully considered the allegations
made and relief requested in the [c]omplaint,” the Court determined that the plaintiff “failed to
state a colorable claim for equitable relief” and, alternatively, that the “true substance of the
relief” sought was available as an adequate remedy at law within the exclusive jurisdiction of a
different court); Shore Invs., Inc. v. BHole, Inc., 2009 WL 2217744, at *2 (Del. Ch. July 14,
2009) (considering the plaintiff’s arguments from the allegations and relief requested in the
complaint and finding that it “failed to meet its burden of establishing the Court's subject matter
jurisdiction”).
69
See Diebold Computer Leasing, Inc. v. Commercial Credit Corp., 267 A.2d 586, 588 (Del.
1970).
67
17
party’s] favor.”70 The Court should determine if equitable jurisdiction is present
based not on any “magic words,”71 but rather upon its review of whether the
complaint asserts equitable rights or seeks equitable remedies.72 Although the
Court may look beyond the complaint, the inquiry should be “as of the time of
filing”; subsequent events “are generally irrelevant.”73
Just as the parties can raise subject matter jurisdiction under Rule 12(b)(1),
so too can the Court examine this issue on its own under Rule 12(h)(3). 74 The
Court’s subject matter jurisdiction cannot be determined by contract,75 by consent
70
Harman v. Masoneilan Int’l, Inc., 442 A.2d 487, 489 (Del. 1982); see also Prestancia Mgmt.
Gp., Inc. v. Va. Heritage Found., II LLC, 2005 WL 1364616, at *3 (Del. Ch. May 27, 2005).
71
McMahon v. New Castle Assocs., 532 A.2d 601, 603 (Del. Ch. 1987); see also Int’l Bus.
Machs. Corp. v. Comdisco, Inc., 602 A.2d 74, 78 (Del. Ch. 1991) (“[A] judge in equity will take
a practical view of the complaint, and will not permit a suit to be brought in Chancery where a
complete legal remedy otherwise exists but where the plaintiff has prayed for some type of
traditional equitable relief as a kind of formulaic ‘open sesame’ to the Court of Chancery.”).
72
See Candlewood Timber Gp. LLC v. Pan Am. Energy, LLC, 859 A.2d 989, 997 (Del. 2004);
see also Town Council of Ocean View v. Brown, 2010 WL 2183924, at *3 (Del. Ch. May 27,
2010) (describing “the prayer for relief in [the plaintiff’s] petition” for a mandatory injunction
compelling an individual to comply with municipal requirements as “a quintessential equitable
remedy for which there is no adequate substitute at law” and therefore within the Court’s
jurisdiction); Gelof v. Prickett, Jones & Elliot, P.A., 2010 WL 759663, at *3 (Del. Ch. Feb. 19,
2010) (reviewing the allegations of the complaint and finding no jurisdiction for a claim of
malpractice against a law firm, despite being couched in terms of a breach of fiduciary duty,
where the claim was unsupported by allegations that the attorney-client relationship actually rose
to the level of a fiduciary relationship); Winner Acceptance Corp. v. Return on Capital Corp.,
2008 WL 5352063, at *6 (Del. Ch. Dec. 23, 2008) (finding subject matter jurisdiction based on
its review of the complaint because the allegations “provide a sufficient basis to support a claim
for piercing the corporate veil, which falls within this Court's equitable jurisdiction”); Prestancia
Mgmt. Gp., 2005 WL 1364616, at *3 (“In determining whether equitable jurisdiction exists, this
Court will look beyond the language of a complaint and examine the substance and nature of the
relief being sought.”).
73
Azurix Corp. v. Synagro Techs., Inc., 2000 WL 193117, at *2, (Del. Ch. Feb. 3, 2000).
74
See Clark v. Teeven Hldg. Co., Inc., 625 A.2d 869, 883 (Del. Ch. 1992).
75
See Wife, A.M.M. v. Husband, J.L W., 285 A.2d 824, 825 (Del. Ch. 1971).
18
in the pleadings,76 or even by procedural waiver.77 That the Defendants may have
conceded that the Court has equitable jurisdiction78 does not, in Vivian’s words,
“end the inquiry”79—equitable jurisdiction must be found by the Court.80 For this
reason, the Court will consider whether it has equitable jurisdiction over Vivian’s
claims against all Defendants, even though Johny and Danny did not expressly
assert that ground in their motion to dismiss.
2. The Scope of the Court’s Equitable Jurisdiction
Three situations fall within the Court’s limited jurisdiction: “(1) one or more
of the plaintiff’s claims for relief is equitable in character, (2) the plaintiff requests
relief that is equitable in nature, or (3) subject matter jurisdiction is conferred by
statute.”81 The equitable rights asserted or remedies sought need not arise under
Delaware law, since this Court is capable of adjudicating such rights and remedies
under the laws of foreign jurisdictions.82 But, as a matter of judicial comity, this
Court should not exercise jurisdiction where the claims are within the exclusive
76
See Timmons v. Cropper, 172 A.2d 757, 760 (Del. Ch. 1961).
See Ct. Ch. R. 12(h)(3).
78
Defs.’ Reply Br. 8.
79
Pl.’s Post-Hr’g Br. 15.
80
See generally El Paso Natural Gas Co. v. TransAmerican Natural Gas Corp., 669 A.2d 36, 39
(Del. 1995).
81
Candlewood Timber, 859 A.2d at 997; see also 10 Del. C. § 341 (granting to the Court
jurisdiction over “all matters and causes in equity”); 10 Del. C. § 342 (removing from the
Court’s jurisdiction “any matter wherein sufficient remedy may be had by common law, or
statute, before any other court or jurisdiction of [Delaware]”).
82
See generally Taylor v. LSI Logic Corp., 689 A.2d 1196, 1200 (Del. 1997) (“It is not unusual
for courts to wrestle with open questions of the law of sister states or foreign countries.”); see
also Ct. Ch. R. 44.1.
77
19
jurisdiction of a foreign tribunal83—such as a violation of criminal laws84 or a
proceeding involving a foreign estate with no Delaware assets.85
Common equitable rights within the Court’s jurisdiction are “fiduciary rights
and duties.”86 Equitable remedies are those in which “the available remedy at law
is not fully sufficient to protect or redress the resulting injury under the
circumstances.”87 Where the claim asserted is equitable, a request for monetary
damages does not render this Court unable to hear the equitable claim.88 In other
words, if the right asserted is not equitable, only if the available remedy at law is
“sufficient”—meaning “complete, practical and efficient”—would “this Court [be]
without jurisdiction.”89
83
See Candlewood Timber, 859 A.2d at 1004 (“In limited circumstances[,] . . . Delaware courts
will not exercise subject matter jurisdiction over a dispute that is predicated on foreign law
where the foreign state has vested jurisdiction exclusively in its own courts.”).
84
See Wilson v. Girard, 354 U.S. 524, 529 (1957) (recognizing that, absent consent otherwise,
“[a] sovereign nation has exclusive jurisdiction to punish offenses against its laws committed
within its borders”).
85
See Wilkins v. Ellett, 108 U.S. 256, 258 (1883) (identifying the “proper place[s]” for
administration of a decedent’s estate as the domicile at the time of death and any jurisdiction “in
which he leaves personal property.”); see also Yancey v. Nat’l Trust Co., 1993 WL 155492, at
*10 (Del. Ch. May 7, 1993) (“[U]nder Delaware law, [a non-domiciliary] [e]state's nonDelaware assets are not to be administered in Delaware.”).
86
Christiana Town Ctr., LLC v. New Castle County, 2003 WL 21314499, at *9 (Del. Ch. June 6,
2003), aff’d, 841 A.2d 307, 307 (Del. 2004).
87
Id.
88
See Bird v. Lida, Inc., 681 A.2d 399, 402 (Del. Ch. 1996) (noting that the Court is not deprived
of jurisdiction over equitable rights even if a monetary recovery “is the only relief sought”)
(citing Harman, 442 A.2d at 496-500).
89
Int’l Bus. Machs. Corp., 602 A.2d at 78.
20
Some theories of liability, such as unjust enrichment, resist being defined as
either equitable rights or equitable remedies.90
An unjust enrichment claim
typically includes a request for a constructive trust, which is an equitable remedy
that generally brings the claim within this Court’s jurisdiction.91 But, this Court
has found that a complaint seeking a constructive trust “will only invoke . . .
equitable jurisdiction if there is ‘either an identifiable fund to which plaintiff
claims equitable ownership . . . or the legal remedy will be inadequate for another
reason—such as the distinctively equitable nature of the right asserted.’”92
Not every claim that a party alleges needs to be equitable. Under the socalled clean-up doctrine, if this Court may hear at least one claim, then it has
discretion to resolve the non-equitable, legal claims involving the same
controversy.93 This doctrine is limited to ancillary legal questions—not matters
totally outside the Court’s jurisdiction, such as punitive damages.94
90
See DONALD J. WOLFE, JR. & MICHAEL A. PITTENGER, CORPORATE AND COMMERCIAL
PRACTICE IN THE DELAWARE COURT OF CHANCERY § 2.03[b] at 2-25 to 2-28 (2013).
91
See McKee v. McKee, 2007 WL 1378349, at *3 (Del. Ch. May 3, 2007).
92
Testa v. Nixon Uniform Serv., Inc., 2008 WL 4958861, at *3 (Del. Ch. Nov. 21, 2008)
(quoting McMahon, 532 A.2d at 608).
93
See Park Oil, Inc., v. Getty Ref. & Mktg. Co., 407 A.2d 533, 535 (Del. 1979); Medek v. Medek,
2008 WL 4261017, at *3 (Del. Ch. Sept. 10, 2008) (explaining that clean-up doctrine jurisdiction
can be appropriate, among other reasons, “to resolve a factual issue which must be determined in
the proceedings; to avoid multiplicity of suits; to promote judicial efficiency; to do full justice; to
avoid great expense; to afford complete relief in one action; and to overcome insufficient modes
of procedure at law”) (quoting Getty Ref. & Mktg. Co. v. Park Oil, Inc., 385 A.2d 147, 150 (Del.
Ch. 1978), aff’d, 407 A.2d at 533).
94
See, e.g., Beals v. Wash. Int’l, Inc., 386 A.2d 1156, 1159 (Del. Ch. May 10, 1978) (resolving
that the Court “should not on its own volition assume new jurisdiction to impose penalties it
could not formerly impose”).
21
Vivian alleges the Court has equitable jurisdiction under 10 Del. C. § 341,95
arguing that she has asserted equitable rights.96 The Court finds it appropriate to
analyze Vivian’s claims separately by theory of Group stock ownership: first, as a
stockholder of record; and second, as a purported heir by intestate succession.
3. Equitable Jurisdiction under the Stockholder of Record Theory
(a) The Article 17 Claim
Evaluating the Complaint in its entirety, the Court finds that Vivian has met
her burden to establish that the Article 17 Claim is based on a fiduciary duty.
Vivian alleges that the Individual Defendants owed fiduciary duties to her as a
stockholder of record because of their positions in El Rosado Group and their
management and control over her property, namely, her alleged stockholdings.97
By extension, those fiduciary duties also support the Court’s jurisdiction over the
Article 17 Claim against the Delaware LLCs, or, at least, clean-up jurisdiction.98
Vivian’s request for monetary relief does not alter the equitable nature of these
rights.99
95
Compl. ¶ 10.
Pl.’s Answering Br. 11.
97
See, e.g., Compl. ¶¶ 39-40, 88-89; see also Christiana, 2003 WL 21314499, at *9.
98
See Park Oil, 407 A.2d at 535.
99
See Bird, 681 A.2d at 402.
96
22
Notwithstanding this analysis, the Court could still lack jurisdiction if the
Article 17 Claim involves Ecuadorian criminal law issues.100 The Defendants
maintain that Vivian cannot assert this claim without a preceding judgment against
the Individual Defendants, which would presumably only be available in an
Ecuadorian tribunal.101 The Court held a Rule 44.1 hearing during which the
parties presented expert testimony on Article 17, and the experts disagreed over
whether a criminal judgment is required for civil liability under that statute.102 As
a result, the Court must interpret Ecuadorian law for jurisdictional purposes.
The relevant statute, Article 17, provides:
For frauds, misuses, or de facto proceedings that are committed in the name
of companies and other natural persons or legal entities, they will be
personally and jointly liable those:
1.
Who ordered or executed them, without prejudice to the
liability that said persons may affect;
2.
Who obtained a profit from it, up to its value; and
3.
Who are the holders of assets for the effecting of restitution.103
100
See, e.g., Wilson, 354 U.S. at 529.
Defs.’ Answering Post-Hr’g Br. 1-3; Defs.’ Post-Hr’g Br. 4-6; Defs.’ Reply Br. 4-6; Defs.’
Br. 33.
102
Vivian’s expert, Dr. Hernán Pérez Loose (“Pérez”), testified that no preceding criminal
judgment is necessary. Hearing Transcript (“Hr’g Tr.”) (Pérez) 139-46, 151-57, 163-66. The
Defendants’ expert, Dr. Ricardo Noboa Bejarano (“Noboa”), testified that the facts alleged in the
Complaint would be criminal conduct and that Ecuadorian law requires a criminal judgment
before a civil claim seeking indemnity for that criminal conduct. Id. (Noboa) 13, 15-16.
103
Joint Exhibit (“JX”) 23.
101
23
The Defendants concede that Article 17 provides for civil liability for certain
unlawful conduct.104
But, they assert, where the conduct alleged is criminal,
Article 41 of Ecuador’s Code of Criminal Procedure (“Article 41”) restricts civil
liability until after a criminal judgment is obtained.105 This statutory interpretation
puts the Defendants in the awkward position of arguing that the Complaint “alleges
conduct that constitutes criminal conduct under Ecuadorean law” 106—specifically
under Article 560 for misappropriation and abuse of trust107 and Article 563 for
deceit108 of Ecuador’s Penal Code. Under this theory, absent a criminal judgment,
not only would the Court lack equitable jurisdiction, but also “even a civil court in
Ecuador would lack jurisdiction.”109
104
Defs.’ Post-Hr’g Br. 3-4.
JX 16 (“[N]o suit may be taken for civil indemnification derived from a criminal violation
until there is a final criminal verdict that declares a person responsible for the violation.”).
106
Defs.’ Post-Hr’g Br. 4.
107
JX 20 (“One who has fraudulently embezzled or squandered to the detriment of another,
commercial paper, money, goods, bills, settlements, documents of any type, which contain
obligations or discharges, which were delivered to him under the condition of returning them, or
who made a specific use or employment thereof, shall be punished with prison of from one to
five years, and a fine of from eight to sixteen United States dollars.”).
108
JX 21 (“A person who, with the intention of appropriating something belonging to another,
provides funds, furnishings, liabilities, settlements, receipts, whether using false names or false
information, and employing fraudulent dealings to create a belief in the existence of fictitious
companies, powers of attorney or imaginary credits, to instill hope or fear of an incident,
accident or any other fictitious event, or to otherwise abuse trust or credulity, shall be punished
with imprisonment from six months to five years and a fine of fifty thousand sucres.”).
109
Defs.’ Reply Br. 8.
105
24
In response, Vivian argues that a criminal judgment is not a necessary
element of the Article 17 Claim such that the Court has jurisdiction, independent of
whether the conduct alleged in the Complaint is criminal.110 For support, she
presented the Orrantia litigation in which Ecuador’s National Court of Justice111
allowed a civil claim under Article 17 against an individual for fraud and abuse
committed in the name of a company without a preceding criminal judgment
against that person.112 The Defendants argue that Orrantia is distinguishable as a
case of contractual liability, in contrast to the fiduciary relationship alleged here, 113
but the Court does not find the distinction persuasive.114 The Defendants do not
challenge that, in the Orrantia litigation, a civil Ecuadorian court exercised
jurisdiction without a criminal judgment.115 As Vivian’s expert conceded, judicial
decisions in Ecuador may not be binding, but they are nevertheless “very
persuasive.”116 The Court is unwilling to contradict this persuasive example here;
110
Pl.’s Surreply Mem. in Opp’n to Points III and V of Defs.’ Joint Mot. to Dismiss (“Pl.’s
Surreply Mem.”) 3-4.
111
At the time, the court was called the Supreme Court of Justice of Ecuador.
112
JX 36; Pl.’s Post-Hr’g Br. 4-7, Ex. A.
113
Defs.’ Answering Post-Hr’g Br. 3-6.
114
Not only was the civil liability upheld before the criminal judgment was obtained, but also the
criminal judgment was unavailable because the statute of limitations had already run. Pl.’s PostHr’g Br. Ex. A.
115
In Orrantia, the National Court of Justice described the three theories for relief under
Article 17 as: (i) fraud, which constitutes “conduct consisting of machination or insidious
subterfuge aimed at obtaining an illegal benefit,”; (ii) abuse, which is “excess, misuse, or
arbitrary employment of something”; and (iii) manifest disregard of the law, “which is nothing
but a path contrary to law, different from that which is set forth in the law.” JX 1 ¶ 20 (Noboa
Expert Decl.); JX 36.
116
Hr’g Tr. (Pérez) 122.
25
rather, through expert reports and testimony, Vivian has met her burden to
establish the substance of Ecuadorian law.117
The interpretation of Article 41 espoused by the Defendants cannot survive
scrutiny under public policy grounds articulated by Vivian. Although civil relief
would be independently available for abuse under Article 17, once the conduct
alleged involves fraud (and thus becomes criminal), the Defendants’ argument
goes, civil relief is necessarily dependent on, and available only after, the party
asserting the claim obtains a criminal judgment. In other words, the Defendants
argue that their alleged conduct was so clearly fraudulent as to be criminal such
that Vivian cannot assert a claim now unless and until a judge determines that the
Individual Defendants’ conduct was criminal,118 which is not possible unless and
until a district attorney finds it appropriate to bring criminal charges.119 Such a
reading, in the Court’s opinion, would eviscerate Vivian’s equitable rights. On
policy grounds, especially in light of Orrantia, the Court cannot adopt this reading
of Article 41. Instead, the Court finds the more appropriate reading of Article 41
to be that advanced by Vivian’s expert: the statute prevents double compensation
for an injured party who participated in bringing a criminal action,120 not any
117
See Vichi v. Koninklijke Philips Elecs. N.V., 62 A.3d 26, 46 (Del. Ch. 2012) (quoting
Republic of Panama v. Am. Tobacco Co., 2006 WL 1933740, at *4 (Del. Super. June 23, 2006)).
118
Defs.’ Post-Hr’g Br. 4.
119
Hr’g Tr. (Noboa) 6.
120
Id. (Pérez) 156-59, 248 (“It is my understanding, based on my analysis of article of this text
and the case law that we have discussed, that it [the third paragraph of Article 41] prevents a
26
compensation for that party without a criminal judgment. 121 Thus, the Court has
equitable jurisdiction over the Article 17 Claim against the Defendants.
(b) The Unjust Enrichment Claim
Vivian has also met her burden to show the Court’s equitable jurisdiction
over the Unjust Enrichment Claim, which the Defendants largely do not contest.122
Vivian alleges that the Individual Defendants owed her fiduciary duties and that
the Delaware LLCs (and, by extension, the Individual Defendants) unlawfully
possess the El Rosado Group stock gained through breaches of fiduciary duty;123
these allegations satisfy her burden.124 The requested remedy of “restitution of the
fair market value of the [Group] shares of which she has been deprived”125 does
not defeat jurisdiction.126 By contrast, that Vivian seeks a constructive trust on an
identifiable fund—the Delaware LLCs—further supports jurisdiction.127
person who has filed a private accusation in a criminal proceeding along the decision of the
[district attorney] to press charges, prevent that person that is filing the private denunciation or
private action in order to recover damages later on. That person cannot bring a civil action for
the same fact to recover damages too.”).
121
Vivian’s expert’s acknowledgement that the conduct described in the Complaint “might
amount to a crime” does not undermine his presentation of Ecuadorian law. Id. (Pérez) 224.
122
Defs.’ Reply Br. 8.
123
Compl. ¶¶ 39, 74, 77, 88-89, 104.
124
See Christiana, 2003 WL 21314499, at *9.
125
Compl. ¶ 112.
126
See Bird, 681 A.2d at 402.
127
See Testa, 2008 WL 4958861, at *3.
27
4. Equitable Jurisdiction under the Stockholder by Inheritance Theory
Vivian contends that the Court has equitable jurisdiction, or at a minimum
clean-up doctrine jurisdiction, over the Article 17 Claim and the Unjust
Enrichment Claim for the El Rosado Group stock that she is entitled to inherit from
her father. Vivian requests that the Court “afford full faith and credit to the
decision of the Israeli court,” which allegedly found that each of Vivian, Johny,
and Danny should receive one-third of Alfredo Czarninski’s estate under
Ecuador’s laws of intestate succession.128 So armed, Vivian argues that the Court
should divide Alfredo Czarninski’s estate accordingly and thereby allow her to
assert claims as a Group stockholder by inheritance.129 This request for relief
begets an unanswered question: is Group stock among the assets in Alfredo
Czarninski’s estate?
As a matter of comity, the Court is without jurisdiction to answer that
question. None of these assets was alleged to have been in Delaware, let alone
owned by the Delaware LLCs, when Alfredo Czarninski died in 2003, as those
entities did not even exist until 2008. Vivian has cited one case in which this Court
exercised jurisdiction over claims related to a foreign estate—a case in which the
plaintiff, a beneficiary, co-executor, and co-trustee of an estate duly probated in
Quebec, Canada, filed claims against the co-executors and co-trustees for alleged
128
129
Compl. ¶¶ 82, 84-85.
Pl.’s Answering Br. 16-18.
28
unpaid tax obligations from stock held by the estate in a Delaware corporation.130
This case does not stand for the proposition that the disposition of entirely nonDelaware assets of a foreign estate may be within this Court’s limited jurisdiction;
it supports the opposite.131 That a portion of Alfredo Czarninski’s estate’s assets
may have been subsequently transferred to the Delaware LLCs after his death does
not expand the Court’s equitable jurisdiction to determine the estate’s assets.
For reasons similar to why the Court lacks jurisdiction to award punitive
damages,132 so too does it lack jurisdiction over Vivian’s claims here as a
beneficiary of her father’s estate’s stock in El Rosado Group.133 Not even the
130
See Yancey, 1993 WL 155492, at *1, *5.
Vivian does not allege that a court with competent jurisdiction had inventoried Alfredo
Czarninski’s estate before she filed the Complaint. Since the Court’s jurisdiction inquiry is
focused on the time of the filing, there is no decision for the Court to consider whether it would
have equitable jurisdiction to enforce. See Azurix Corp., 2000 WL 193117, at *2.
More than a year after Vivian filed the Complaint, an Ecuadorian court apparently issued a
decision that inventoried Alfredo Czarninski’s estate at approximately $1 million; this decision
was subsequently affirmed in November 2012. Pl.’s Surreply Mem. 4-5. In contrast to asking
the Court to afford the Israeli judgment full faith and credit, Vivian here asks that the Court
effectively ignore the Ecuadorian decision not only because it is “non-final” in that “if additional
assets are discovered . . . they will be added to the inventory,” but also because it was allegedly
the product of “judicial corruption” such that “the Court cannot grant comity to [it].” Pl.’s PostHr’g Br. 15-17. Despite the seriousness of these latter allegations, and irrespective of their
potential veracity, it is not the role of the Court to comment on integrity of the judicial system of
foreign jurisdictions.
The argument that an estate inventory decision should not be afforded full faith and credit
because it may have been the product of a corrupt judicial process does not, on its own, provide
equitable jurisdiction to inventory the estate of a non-domiciliary with no Delaware assets where
the Court does not already have jurisdiction. In any event, because Vivian expressly argues that
the Court should not afford full faith and credit to the Ecuadorian inventory decision, the Court
does not consider whether it would have jurisdiction for claims based on any El Rosado Group
stock to be distributed to her under that decision.
132
See Beals, 386 A.2d at 1159.
133
See Yancey, 1993 WL 155492, at *1, *5.
131
29
clean-up doctrine can overcome the overwhelming concerns of comity; even if it
did, the Court would likely be justified in declining to exercise that discretion.134
In any event, Vivian has not established that Ecuadorian law would allow for
administration of Alfredo Czarninski’s estate in Delaware, and she thus has not
met her burden to show that the Court has jurisdiction over her claims based on
this theory of stock ownership.
In sum, the Court has subject matter jurisdiction over Vivian’s Article 17
Claim and Unjust Enrichment Claim under the stockholder of record theory. The
Court lacks subject matter jurisdiction over Vivian’s claims under the stockholder
by inheritance theory.
B. Failure to State a Claim135
1. The Standard of Review
In its review under Court of Chancery Rule 12(b)(6), the Court accepts the
well-pleaded allegations of fact in the Complaint as true, including “even vague
allegations . . . if they provide the defendant[s] notice of the claim,” and it views
all reasonable inferences from these allegations in favor of Vivian as the party
asserting the claim.136 But, the Court need not “accept conclusory allegations
134
See Park Oil, 407 A.2d at 535.
Johny and Taly did not move to dismiss under Rule 12(b)(6). The following analysis thus
applies to Vivian’s claims against the Moving Defendants only.
136
Cent. Mortg. Co. v. Morgan Stanley Mortg. Capital Hldgs. LLC, 27 A.3d 531, 536 (Del.
2011).
135
30
unsupported by specific facts, nor . . . draw unreasonable inferences in [Vivian’s]
favor.”137 Under this inquiry, the Court should only grant the motion to dismiss if
Vivian “could not recover under any reasonably conceivable set of circumstances
susceptible of proof.”138
2. Laches
Because Vivian’s claims sound in equity, the limitations doctrine that
applies is laches, which focuses on whether an unreasonable delay in asserting the
claim has unfairly prejudiced the defendant.139 This Court frequently uses the
analogous statutory limitations period as the presumptive limitations period for
laches.140 Where a party files a claim after the presumptive period, the claim is
likely time-barred “except in the ‘rare’ and ‘unusual’ circumstance that a
recognized tolling doctrine excuses the late filing.”141
The Court does not need to engage in a traditional laches analysis for a
presumptively late complaint.142 Instead, the Court may look to the complaint to
137
Nemec v. Shrader, 991 A.2d 1120, 1125 (Del. 2010).
Cent. Mortg. Co., 27 A.3d at 536.
139
Reid v. Spazio, 970 A.2d 176, 182 (Del. 2009) (defining laches as “an unreasonable delay by
the plaintiff in bringing suit after the plaintiff learned of an infringement of his rights, thereby
resulting in material prejudice to the defendant”).
140
See U.S. Cellular Inv. Co. of Allentown v. Bell Atl. Mobile Sys., Inc., 677 A.2d 497, 502 (Del.
1996) (“Absent some unusual circumstances, a court of equity will deny a plaintiff relief when
suit is brought after the analogous statutory period.”).
141
In re Sirius XM S’holder Litig., 2013 WL 5411268, at *4 (Del. Ch. Sept. 27, 2013) (citations
omitted).
142
Albert v. Alex. Brown Mgmt. Servs., Inc., 2005 WL 1594085, at *12 (Del. Ch. June 29, 2005)
(citing U.S. Cellular, 677 A.2d at 502).
138
31
determine if there are sufficient allegations that the period should be tolled.143
There is no rule barring this doctrine as the basis for dismissal under Rule 12(b)(6)
where “it is clear from the face of the complaint that [laches] exists and that the
plaintiff can prove no set of facts to avoid it.”144 Indeed, this Court has dismissed
claims upon laches grounds at the motion to dismiss stage.145 But, since the
standard of review under Rule 12(b)(6) is only of reasonable conceivability based
on the complaint, “affirmative defenses, such as laches, are not ordinarily wellsuited for treatment on such a motion,” even though the Court may reach a
different answer with a more developed factual record.146
(a) What is the Presumptive Limitations Period?
Under Delaware’s borrowing statute,147 the applicable limitations period for
these claims is three years, the shorter of Delaware’s analogous statute of
143
See Ryan v. Gifford, 918 A.2d 341, 359 (Del. Ch. 2007); see also Smith v. Mattia, 2010 WL
412030, at *4 (Del. Ch. Feb. 1, 2010) (listing the recognized tolling grounds as an inherently
unknowable injury, fraudulent concealment, and equitable tolling).
144
Reid, 970 A.2d at 183; see also Khanna v. McMinn, 2006 WL 1388744, at *30 (Del. Ch.
May 9, 2006) (examining whether a set of reasonably conceivable facts prevent the application
of laches at the pleadings stage); CertainTeed Corp. v. Celotex Corp., 2005 WL 217032, at *6
(Del. Ch. Jan. 24, 2005) (determining timeliness based on the facts alleged in, and documents
incorporated within, the complaint).
145
See, e.g., In re Sirius XM, 2013 WL 5411268, at *4-7; In re Coca-Cola Enters., Inc. S’holders
Litig., 2007 WL 3122370, at *6-7 (Del. Ch. Oct. 17, 2007); In re Tyson Foods, Inc. Consol.
S’holder Litig., 919 A.2d 563, 586-87 (Del. Ch. 2007).
146
Reid, 970 A.2d at 183; see also Pfeiffer v. Toll, 989 A.2d 683, 690-91 (Del. Ch. 2010)
(finding, at the motion to dismiss stage, a sufficient pleading of tolling for claims of breach of
fiduciary duty accruing between December 2004 and September 2005 until December 2005 such
that a complaint filed in November 2008 was not barred by laches under the presumptive threeyear limitations period).
147
See 10 Del. C. § 8121.
32
limitations for fiduciary duty and unjust enrichment148 and the limitations period
under Ecuadorian law.149 The presumptive three year period began when Vivian’s
claims accrued, unless it should be tolled.150
148
See 10 Del. C. § 8106.
This comparison is of the limitations periods and their respective “accoutrements,” such as
claim accrual and tolling doctrines, and the shorter limitations period is accepted with its
accoutrements. See Frombach v. Gilbert Assocs., Inc., 236 A.2d 363, 366 (Del. 1967). A party
should not be able to bring a foreign law claim in Delaware if it would be time-barred from
bringing that claim in the foreign jurisdiction. See Calcaño Pallano v. AES Corp., 2011
WL 2803365, at *3 (Del. Super. July 15, 2011).
The parties agree that the Ecuadorian limitations period for the Article 17 Claim is longer
than three years; they disagree over how much longer. Vivian claims that the period is ten years.
Pl.’s Post-Hr’g Br. 18. The Moving Defendants assert not only that the period is four years, but
also that they would need to be served with the claim within that time. Defs.’ Post-H’rg Br. 1516. That is, the Moving Defendants argue that Vivian’s claims are untimely since they were not
served with the claims until October 26, 2011, which is more than four years after they contend
Vivian’s claims accrued in August 2007. Id. 16-17. Since this disputed legal issue could affect
the Court’s analysis, it again needs to determine Ecuadorian law. But, the Court need not
determine whether the Moving Defendants’ argument that timeliness is contingent upon service
is correct because it concludes that the relevant Ecuadorian limitations period is ten years.
Article 17 does not include an express limitations period. At the Rule 44.1 hearing, Vivian’s
expert stated that for civil claims like the Article 17 Claim, the period is determined by reference
to the default statute, which provides for a ten-year period. Hr’g Tr. (Pérez) 174-76. By
contrast, the Moving Defendants’ expert argued that since Vivian’s expert had analogized
Article 17 as an application of liability principles and claim accrual rules from Title XXIII of
Ecuador’s Civil Code, the Court should adopt Title XXIII’s limitations period of four years.
Id. (Noboa) 35-36; id. (Pérez) 234-35. Because, by its very terms, the limitations provision of
Article XXIII governs only “[t]he causes of action that this Title grants for damages or fraud,”
the Court is not persuaded that this statute should be read to apply to the Article 17 Claim.
JX 18. The Court instead accepts Vivian’s expert’s testimony that the limitations period is ten
years; thus, the Complaint, regardless of claim accrual or tolling under Ecuadorian or Delaware
law, would be timely if it were filed in Ecuador.
150
See CertainTeed Corp., 2005 WL 217032, at *7; see also Vichi v. Koninklijke Philips Elecs.
N.V., 2009 WL 4345724, at *15 (Del. Ch. Dec. 1, 2009) (applying Delaware’s law of claim
accrual and tolling to claims arising under Italian and Dutch law where the Court applied the
borrowing statute and determined that the shorter of the limitations periods was Delaware’s).
149
33
(b) When Did Vivian’s Claims Accrue?
Vivian’s causes of action accrued when the allegedly harmful conduct took
place, “even if [she was then] unaware of the cause of action or the harm.” 151
Vivian argues that her claims accrued upon what she considers the last step of the
Moving Defendants’ fraudulent scheme—when the last Group stock was
transferred to the Delaware LLCs in December 2009, which would make the
September 28, 2011, Complaint timely.152 In opposition, the Moving Defendants
argue that the claims accrued “at the moment [they] removed their allegedly illgotten gains from the El Rosado Group Companies to the BVI Companies,” which
purportedly occurred in March 2006 and August 2007.153
The Moving
Defendants’ argument would render the Complaint presumptively untimely.
The Complaint includes one (repeated) allegation that the transfers of Group
stock to the Delaware LLCs were made for no consideration;154 the Court finds this
allegation, without more, insufficient to support Vivian’s position on claim accrual.
Vivian does not allege to have been a stockholder of either the BVI Companies or
the Delaware LLCs; in other words, she does not allege to have been on either side
of these transactions. The transfer of El Rosado Group stock from the former to
151
In re Tyson Foods, 919 A.2d at 584 (citing Isaacson, Stolper & Co. v. Artisans’ Sav. Bank,
330 A.2d 130, 132 (Del. 1974)).
152
Pl.’s Post-Hr’g Reply Br. in Opp’n to Points III and V of Defs.’ Joint Mot. to Dismiss (“Pl.’s
Post-Hr’g Answering Br.”) 8.
153
Defs.’ Post-Hr’g Br. 11 (citing Compl. ¶¶ 79-81).
154
Compl. ¶¶ 1, 41, 103.
34
the latter thus cannot be said to have caused additional damage to Vivian as a
purported Group stockholder. It would be unreasonable for the Court to infer from
the Complaint that Vivian’s claims did not accrue until the transfer to the Delaware
LLCs. Viewing the allegations in the Complaint most favorably to Vivian, the
Court finds that the alleged fraudulent scheme was complete, and the claims
accrued, no later than when the stock in El Rosado Group was transferred to the
BVI Companies in 2006 and 2007, with the last transaction in October 2007.
(c) Should the Limitations Period be Tolled?
Vivian initially argued that she alleged facts supporting tolling under all
three recognized grounds:155 an inherently unknowable injury, fraudulent
concealment, and equitable tolling.156 In subsequent filings, she did not argue that
the alleged injury was inherently unknowable, which would require her to show
that “[n]o objective or observable factors . . . exist[ed] that might have put [her] on
notice of an injury.”157 Absent a contrary argument, the Court finds Vivian’s
allegations that she was “blamelessly ignorant” of the alleged scheme and that the
injuries were inherently unknowable “[g]iven her physical distance from Ecuador,
155
Pl.’s Answering Br. 31-34.
See Smith, 2010 WL 412030, at *4.
157
In re Tyson Foods, 919 A.2d at 584-85.
156
35
her lack of access to El Rosado [Group] information, and her deference to her
brothers”158 to be insufficient to support tolling under this theory.
Tolling under fraudulent concealment requires Vivian to allege an “actual
artifice by the [Moving] [D]efendant[s] that either prevented [her] from gaining
knowledge of material facts or led [her] away from the truth.” 159 Vivian alleged
that the Moving Defendants, especially through the actions of Johny and Danny,
fraudulently concealed their conduct—namely, by their “deliberately neglecting to
send her corporate notices, in violation of Ecuadorian law”; by misrepresentations
made by their Israeli counsel; and by Johny’s 2007 statement to Vivian.160
Aside from the statement in 2007, Vivian does not allege when the
fraudulent concealment occurred. But, such an omission at the pleadings stage
may be unsurprising where the alleged fraudulent concealment includes the failure
to send required notices. This failure, as alleged, would prevent her from gaining
knowledge of these material facts. Viewed separately, these allegations may not
support a finding of fraudulent concealment. But, considered collectively, the
Court finds that these allegations support a reasonably conceivable basis for tolling
under fraudulent concealment.
158
Compl. ¶¶ 87-88.
In re Tyson Foods, 919 A.2d at 585 (quotations omitted).
160
Compl. ¶¶ 90-92.
159
36
Finally, under equitable tolling, the Court may find that the limitations
period should be delayed during the period where Vivian alleges she “has
reasonably relied upon the competence and good faith of a fiduciary.” 161 The
Moving Defendants do not contest that Vivian’s relationship with the Individual
Defendants was fiduciary in nature because of their positions in El Rosado Group
and their control over her property.162 Throughout the Complaint, Vivian alleges
good faith reliance on the Individual Defendants. Thus, the Court also finds a
reasonably conceivable basis for equitable tolling of Vivian’s claims against the
Moving Defendants.
(d) Was Vivian on Inquiry Notice?
Even the most persuasive allegations of tolling can only delay the limitations
period until the party asserting the claim was on inquiry notice.163 That point is
when the party discovers facts “constituting the basis of the cause of action or the
existence of facts sufficient to put a person of ordinary intelligence and prudence
on inquiry which, if pursued, would lead to the discovery” of the claim.164 Said
161
In re Tyson Foods, 919 A.2d at 563.
Compl. ¶¶ 39-40, 88-89.
163
See Albert, 2005 WL 1594085, at *12.
164
Wal-Mart Stores, Inc. v. AIG Life Ins. Co., 860 A.2d 312, 319 (Del. 2004) (quoting Coleman
v. PricewaterhouseCoopers, LLC, 854 A.2d 838, 842 (Del. 2004)).
162
37
differently, Vivian was on inquiry notice if exercising reasonable diligence should
have revealed facts giving rise to the harm.165
Vivian alleges she first was aware of the Moving Defendants’ conduct in
August 2010.166 In turn, the Moving Defendants argue that Vivian was put on
inquiry notice when documents evidencing the allegedly wrongful Group
consolidations, stock dilutions, and transfers to the BVI Companies were filed with
the Superintendent, and thus available to Vivian if she exercised what they
consider to be reasonable diligence. It is the Defendants contention that Vivian’s
failure to discover the alleged fraud for more than five years, where she alleges to
be a sizeable minority stockholder in companies purportedly worth hundreds of
millions of dollars, is evidence that she was not reasonably diligent.167
At the Rule 44.1 hearing, both parties’ experts testified that a so-called
public deed evidencing the transformation of a limited liability company to a
corporation, the merger of two companies, a capital increase, and the transfer of
stock must be filed with the Superintendent before the proposed transaction can
165
See, e.g., Weiss v. Swanson, 948 A.2d 433, 452 (Del. Ch. 2008); In re Tyson Foods, 919 A.2d
at 591 (explaining Delaware’s underlying policy as reflecting that parties “are under an
obligation to exercise reasonable diligence in their affairs, and no succor from the statute of
limitations should be offered a dilatory plaintiff in the absence of such care”).
166
Compl. ¶¶ 93-94.
167
Defs.’ Joint Br. 37-38. The Moving Defendants also offer extrinsic evidence to show that
Vivian was on notice, through a power of attorney they claim she provided to her mother, about
the transactions in El Rosado Group. This apparent power of attorney was not referenced in or
incorporated into the Complaint, so it is outside of the Court’s purview at this stage. See
Malpiede v. Townson, 780 A.2d 1075, 1082-83 (Del. 2001).
38
occur.168 But, Vivian’s expert contends that it is “[v]ery, very difficult” to find a
public deed—in his opinion, a public deed can only be found by someone with
some background knowledge of when and where the public deed was filed.169 The
Moving Defendants may not agree with this opinion, but they did not disagree with
the opined difficulty in finding a public deed. The Court credits Vivian’s expert
and thus cannot say now at the motion to dismiss stage that reasonable diligence
required Vivian to search for public deeds where she had no information from
which to begin a search.170
Moreover, the Moving Defendants’ argument here centers on what they
claim the public deeds would have revealed to Vivian had she found them.171
Despite how persuasive this evidence might be, the Court’s analysis under
Rule 12(b)(6), as Vivian correctly notes,172 is limited to the facts as alleged in the
Complaint. The Defendants have not argued that these filings were incorporated or
otherwise integral to Vivian’s Complaint, so the Court may not consider them now
168
Compare Hr’g Tr. (Pérez) 239-42, 244, with id. (Noboa) 47-50.
Id. (Pérez) 181 (“[W]e have been hired sometimes for foreign persons of foreign corporations
to find public deeds, and it's not easy unless that person exactly know[s] the date, the notary
where the deed was executed.”).
170
See Weiss, 948 A.2d at 452 (finding it “beyond ‘reasonable’ diligence” to require a
stockholder to “cull through the company’s Form 4s each time they were filed, compare the grant
dates of the options with the timing of the quarterly earnings releases, and then conduct a
statistical analysis to uncover the alleged malfeasance”); In re Tyson Foods, 919 A.2d at 591
(holding that reasonable diligence should not, as a matter of law, “include[] an obligation to sift
through a proxy statement, on the one hand, and a year's worth of press clippings and other
filings, on the other, in order to establish a pattern concealed by those whose duty is to guard the
interests of the investor”).
171
Defs.’ Post-Hr’g Br. 12-13.
172
Pl.’s Post-Hr’g Answering Br. 8.
169
39
to determine whether the Complaint states a claim.173 Consequently, Vivian cannot
be said to have been on inquiry notice before August 2010.
Therefore, Vivian’s claims cannot be dismissed under laches at this time.
3. The Article 17 Claim
The Moving Defendants assert that Article 17 does not provide relief here
because Vivian has not alleged that the fraud and abuse was committed in the
name of companies. Their other primary argument is based on the premise that a
civil claim alleging fraud under Article 17 requires a preceding criminal judgment,
which, as they note, Vivian does not allege that she obtained. For the reasons set
forth earlier, based on the persuasive Orrantia precedent and legal policy, the
Court accepts that the Article 17 Claim can proceed against the Moving
Defendants without a criminal judgment against the Individual Defendants.174
Vivian alleges that she was not notified about the fraudulent consolidation of
entities, the capital increases, or the transfers of El Rosado Group stock. Johny,
Danny, and Taly allegedly took these actions, and thereby committed fraud and
abuse through their control of El Rosado Group and the BVI Companies—in other
words, in the name of companies.175 The Court need not determine whether the
alleged fraud and abuse was committed in the name of El Rosado Group, the BVI
173
See Vanderbilt Income & Growth Assocs., L.L.C. v. Arvida/JMB Managers, Inc., 691 A.2d
609, 613 (Del. 1996).
174
See supra Part V.A.3.a.
175
See, e.g., Compl. ¶¶ 49, 56, 59, 65-66, 68-73, 75.
40
Companies and the Delaware LLCs, or all, because Johny, Danny, and Taly acted
in the name of companies on both sides of the transactions at issue.
These
allegations state a reasonably conceivable basis for the Article 17 Claim.
Accordingly, the Court may not dismiss this claim for failure to state a claim upon
which relief can be granted.176
4. The Unjust Enrichment Claim
Vivian’s Unjust Enrichment Claim does not arise under any specific
provision of Ecuador’s Civil Code. Instead, in the words of Vivian’s expert, the
cause of action reflects a “universal principle of law.”177 The Moving Defendants
have, in effect, conceded that this remedy is likely available under Ecuadorian law,
noting that “some jurists and the National Court of Justice have suggested that a
cause of action akin to unjust enrichment would be recognized in Ecuador.”178
176
Assuming arguendo that a criminal judgment would be necessary for a claim of fraud, the
Moving Defendants have nevertheless not demonstrated that Vivian failed to state a reasonably
conceivable basis for a claim of abuse under Article 17. The Court is not persuaded that the
predominant use of the word “fraud” in the Complaint and in Vivian’s briefs prevents her from
asserting a claim for abuse—particularly since Vivian alleges “abuse” throughout the Complaint.
See, e.g., id. ¶¶ 40, 103-04, 106. It would be unreasonable to allow the Moving Defendants to
argue that Vivian has alleged only a claim of fraud where she has expressly alleged both fraud
and abuse.
177
Hr’g Tr. (Pérez) 134 (“Q: Is it possible to bring, in Ecuador, an unjust enrichment claim
independent of specific statutory provisions? A. Yes, it’s possible. . . . Again, in the case in
Article 17 there is an independent cause of action established for unjust enrichment, and the code
I cite is also the basis for that to bring an independent action for unjust enrichment. It’s a
universal principle of law basically.”).
178
Defs.’ Reply Br. 6 (citing JX 1 ¶¶ 99-105 (Noboa Expert Decl.); JX 3 ¶¶ 100-103 (Pérez
Expert Decl.)).
41
But, the Moving Defendants insist that the Court can only find that Vivian
has alleged a reasonably conceivable basis for the Unjust Enrichment Claim, as a
subsidiary action, if Vivian did not have any other cause of action available to
her.179 Vivian, in large part, has agreed with this position,180 and so too does the
Court.
Article 17 would provide relief, in Vivian’s own opinion, against a party
“who (1) commits fraud or abuse on behalf of companies, (2) takes advantage of
corporate fraud or abuse, or (3) is holding property gained through corporate fraud
or abuse.”181 This statutory interpretation provides relief against Danny, as an
individual who committed fraud and abuse on behalf of El Rosado Group
companies, his BVI Company, or Vistamar LLC, and against the Delaware LLCs
as entities holding stock in El Rosado Group gained through the Individual
Defendants’ corporate fraud and abuse. Vivian has not met her burden to show
how the Unjust Enrichment Claim would provide for remedies greater than those
afforded by the Article 17 Claim.182 Thus, that the Article 17 Claim is an available
cause of action renders the Unjust Enrichment Claim unavailable.
179
Defs.’ Post-Hr’g Br. 18; Defs.’ Reply Br. 6-7.
Pl.’s Post-Hr’g Br. 13.
181
Pl.’s Answering Br. 22.
182
By contrast, Vivian’s expert testified that Vivian could recover restitution and damages
through the Article 17 Claim because that statute “has a component of unjust enrichment.” Hr’g
Tr. (Pérez) 247; JX 3 ¶¶ 93-96 (Pérez Expert Decl.).
180
42
Therefore, the Court must dismiss the Unjust Enrichment Claim against the
Moving Defendants for failure to state a claim upon which relief can be granted.
5. Res Judicata or Collateral Estoppel
The Moving Defendants argue that Vivian’s claims of wrongful conduct by
Johny, Danny, Taly, and El Rosado Group are barred by res judicata or collateral
estoppel based on administrative decisions rendered in Ecuador. Vivian contends
that Ecuadorian law does not grant preclusive effect to the Superintendent’s
decisions. The Court agrees with Vivian’s presentation of Ecuadorian law and
concludes that neither res judicata nor collateral estoppel bars the Article 17
Claim.
Res judicata and collateral estoppel are related doctrines that preclude
repetitive litigation. Res judicata prevents a party “from bringing a second suit
based on the same cause of action after a judgment has been entered in a prior suit
involving the same parties.”183
Collateral estoppel “prohibits a party from
relitigating a factual issue that was adjudicated previously.”184 When a party asks
the Court to apply res judicata or collateral estoppel to a foreign judgment, “the
preclusive effect of a foreign judgment is measured by standards of the rendering
183
184
Betts v. Townsends, Inc., 765 A.2d 531, 534 (Del. 2000).
M.G. Bancorporation, Inc. v. Le Beau, 737 A.2d 513, 520 (Del. 1999).
43
forum.”185 Accordingly, the Court must determine the preclusive effect under
Ecuadorian law of Vivian’s petitions for intervention to the Superintendent.
In a petition for intervention, a stockholder requests the Superintendent to
review potential wrongful conduct by the corporate entity. 186 Vivian filed petitions
for intervention for both El Rosado Corp. and Lavie.
The El Rosado Corp.
petitions were denied,187 but the Lavie petition was granted.188
At the Rule 44.1 hearing, Vivian’s expert explained that the Ecuadorian
courts are not bound by the legal or factual decisions of the Superintendent not
only because the Superintendent is only an administrative agency, but also because
of express language to that effect in the Superintendent’s decisions.189 The Moving
Defendants concede that res judicata does not apply to administrative decisions,190
but they maintain, based on their expert’s report, that because Vivian failed to
challenge the Superintendent’s decisions in court, “the effects of the
Superintendency’s decision[s] become final, and they equate to a kind of res
185
Columbia Cas. Co. v. Playtex FP, Inc., 584 A.2d 1214, 1217 (Del. 1991); see also Bata v.
Bata, 163 A.2d 493, 504-11 (Del. 1960) (applying Dutch principles of res judicata and collateral
estoppel to determine the preclusive effects of a Dutch judgment).
186
Hr’g Tr. (Pérez) 185 (“The reason why the shareholder requested the intervention was
because she alleged that the administrators were doing some wrongdoing in the administration of
the company.”).
187
Clark Aff. Ex. C, D.
188
Castro Decl. Ex. B.
189
Hr’g Tr. (Pérez) 183-88; JX 3 ¶ 129 (Pérez Expert Decl.).
190
Defs.’ Reply Br. 25.
44
judicata because they are immutable.”191 In contrast, Vivian’s expert testified that
the failure to appeal does not have preclusive effects outside of that petition.192
The Court is not persuaded by the Moving Defendants’ expert and instead
accepts Vivian’s expert’s testimony. Therefore, because the Court has determined
that an Ecuadorian court would not find the Superintendent’s decisions preclusive
for claims or factual questions, Vivian’s Article 17 Claim is not barred by either
res judicata or collateral estoppel.
VI. CONCLUSION
For the preceding reasons, Vivian’s claims against the Defendants under the
theory of Group stock ownership by inheritance are dismissed under Rule 12(b)(1)
for the Moving Defendants and under Rule 12(h)(3) for Johny and Taly. The
Moving Defendants’ 12(b)(6) motions are granted only as to the Unjust
Enrichment Claim. Otherwise, the motions to dismiss are denied.
Counsel are requested to confer and to submit an implementing form of
order.
191
192
JX 1 ¶ 79.
Hr’g Tr. (Pérez) 187.
45
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