Caro-Bonet v. Lotus Mgmt., LLC

ARMANDO CARO-BONET AND IRIS SANTOS-DIAZ, Plaintiffs, v. LOTUS MANAGEMENT, LLC, et al., Defendants.

CIVIL NO.: 15-2106 (MEL)

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF PUERTO RICO

July 27, 2018

OPINION AND ORDER

Dr. Armando Caro Bonet ("Caro") and Iris Santos Díaz (Santos) (collectively "Plaintiffs") filed a complaint on August 16, 2015, against Jorge E. Pérez ("Pérez), Damaris Seguinot ("Seguinot"), Lotus Management LLC ("Lotus"), Livepad International Inc. ("Livepad"), Carlos J. Ramírez ("Ramírez"), and RLI LLP ("RLI") (collectively "Defendants"). ECF No. 1. Plaintiffs alleged that Defendants violated the Racketeer Influenced and Corrupt Organizations Act ("RICO") section 1962(c), 18 U.S.C. § 1962(c); RICO section 1962(d), 18 U.S.C. § 1926(d); the covenants of good faith and fair dealing under Article 1210 of the Puerto Rico Civil Code, P.R. Laws Ann. tit. 31 § 3375, and Puerto Rico law claims of fraud. All claims against co-defendants Lotus, Livepad, Ramírez, and RLI have been dismissed without prejudice. ECF Nos. 36; 67. Thus, the only two remaining defendants are Pérez and Seguinot (hereinafter "Defendants"). Moreover, Plaintiffs' RICO section 1962(c) claim was previously dismissed by the court. ECF No. 28.

Pending before the court is Defendants' motion for summary judgment. ECF Nos. 46. Defendants argue that Plaintiffs' RICO section 1962(d) claim should be dismissed as RICO section 1962(d) does not provide a cause of action on its own, Plaintiffs' have not established an enterprise as required by section 1962(d), and because Plaintiffs' signed a release and waiver of liability agreement. Defendants argue that the court should then decline supplemental jurisdiction over Plaintiffs' Puerto Rico law claim. Alternatively, Defendants argue that Plaintiffs' Puerto Rico law claim should be dismissed as Plaintiffs' signed a release and waiver of liability agreement. Plaintiffs filed a response in opposition to Defendants' motion for summary judgment. ECF No. 55.¹

I. MOTION FOR SUMMARY JUDGMENT

A. Standard of Review

The purpose of summary judgment "is to pierce the boilerplate of the pleadings and assay the parties' proof in order to determine whether trial is actually required." Wynne v. Tufts Univ. Sch. of Med., 976 F.2d 791, 794 (1st Cir. 1992) (citations omitted). Summary judgment is granted when the record shows that "there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). "A dispute is genuine if the evidence about the fact is such that a reasonable jury could resolve the point in the favor of the non-moving party. A fact is material if it has the potential of determining the outcome of the litigation." Farmers Ins. Exch. v. RNK, Inc., 632 F.3d 777, 782 (1st Cir. 2011) (quoting Rodríguez-Rivera v. Federico Trilla Reg'l Hosp., 532 F.3d 28, 30 (1st Cir. 2008)).

The party moving for summary judgment bears the burden of showing the absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). Once the movant presents a properly focused motion "averring 'an absence of evidence to support the nonmoving party's case[,]' [t]he burden then shifts to the nonmovant to establish the existence of at least one fact issue which is both 'genuine' and 'material.'" Griggs-Ryan v. Smith, 904 F.2d 112, 115 (1st Cir. 1990) (quoting Garside v. Osco Drug, Inc., 895 F.2d 46, 48 (1st Cir. 1990)). For issues where the nonmoving party bears the ultimate burden of proof, that party cannot merely "rely on an absence of competent evidence, but must affirmatively point to specific facts [in the record] that demonstrate the existence of an authentic dispute." McCarthy v. Nw. Airlines, Inc., 56 F.3d 313, 315 (1st Cir. 1995) (citation omitted). The plaintiff need not, however, "rely only on uncontradicted evidence . . . . So long as the plaintiff's evidence is both cognizable and sufficiently strong to support a verdict in her favor, the factfinder must be allowed to determine which version of the facts is most compelling." Calero-Cerezo v. U.S. Dep't of Justice, 355 F.3d 6, 19 (1st Cir. 2004) (emphasis in original) (citation omitted).

In assessing a motion for summary judgment, the court "must view the entire record in the light most hospitable to the party opposing summary judgment, indulging all reasonable inferences in that party's favor." Griggs-Ryan, 904 F.2d at 115 (citations omitted). There is "no room for credibility determinations, no room for the measured weighing of conflicting evidence such as the trial process entails, [and] no room for the judge to superimpose his own ideas of probability and likelihood . . . ." Greenburg v. P. R. Mar. Shipping Auth., 835 F.2d 932, 936 (1st Cir. 1987). The court may, however, safely ignore "conclusory allegations, improbable inferences, and unsupported speculation." Medina-Muñoz v. R.J. Reynolds Tobacco Co., 896 F.2d 5, 8 (1st Cir. 1990) (citations omitted).

B. Uncontested Material Facts²

José Martínez (Martínez), a friend and co-worker of Caro, told Caro that he knew somebody who was looking for investors for his business involving buying and trading gold. ECF No. 46-1, ¶ 2, 53. Martínez introduced Caro to Pérez. ECF No. 46-1, ¶ 3. The first time they met was in early 2012 at a meeting introducing a business venture. ECF No. 46-1, ¶ 3. Santos attended this meeting as well. ECF No. 46-1, ¶ 17. At this meeting, Pérez did a presentation and explained that he had a franchise to some mines in Peru. ECF No. 64, at yyy.³ Pérez showed pictures and documents from the Peruvian Government pertaining to mining. ECF No. 46-1, ¶ 5. Pérez stated that he needed to raise money to buy some machinery in order to refine gold that he would buy from local minors. ECF No.64, ¶ zzz. Once the gold was processed, it would be sold for a profit and the profits would be shared. ECF No. 64, ¶ Aaaa. Plaintiffs were offered a contract to "buy gold at market price" and then at the end of a certain period receive a percentage of the profit from that gold. ECF No. 64, ¶ Bbbb. No contracts were signed during this first meeting. ECF No. 46-1, ¶ 6. Nonetheless, after Caro and Santos discussed the information, they decided to consider the investment. ECF No. 46-1, ¶ 18.

At a second meeting that took place around February 2012, they were shown a physical kilogram of gold and a certificate of authenticity. ECF No. 46-1, ¶¶ 7, 19. A contract was also shown and explained to them, which they agreed to. ECF No. 46-1, ¶ 7.⁴ They bought a kilogram of gold for $55,000 pursuant to a contract with Lotus. ECF No. 46-1, ¶¶ 7-8, 19-20. They would be paid 8.3% a month for 3 months and they would get the physical kilogram of gold at the end of the contract. ECF No. 46-1, ¶ 8. Pérez was authorized to conduct business for Lotus but he did not own the company. ECF No. 64, at ¶¶ nn, bbb.

Caro received the first and second payment installments for approximately $5,000 each. ECF No. 46-1, ¶ 9. After this, Caro decided to invest in gold a second time and bought four kilograms for $217,000. ECF Nos. 46-1, ¶ 10; 64, ¶ 3⁵; 46-2, at 24:14-25.⁶ This contract, which was subscribed with Livepad, would pay ten percent a month for twelve months and then they would get the four kilograms at the end of the twelve months. ECF Nos. 46-1, ¶ 10; 64, ¶ 3; 46-2, at 26:9-21, 27:14-17. Santos also signed a second contract for the purchase of four kilograms of gold with Livepad. ECF No. 46-1, ¶ 21. Livepad was created by Pérez and Seguinot, and they had control over Livepad. ECF Nos. 64, at ¶¶ uu, ww, xx; 46-4, at 151.⁷ The second contract had clauses stating that a third party could be used to help with the business. ECF No. 46-1, ¶ 11. The third party turned out to be Ramírez. ECF No. 46-1, ¶ 11.

After the second contract was executed, the Plaintiffs stopped receiving payments and agreed to sign a third contract. ECF Nos. 46-1, ¶ 23; 46-1, ¶ 12; 64, ¶ 3; 46-2, at 31:2-25. Each Plaintiff signed a third contract with Ramírez on August 10, 2012, in a form of a Memorandum of Understanding. ECF No. 46-1, ¶¶ 13, 24.⁸ Under the new contracts, Ramírez was directly responsible for delivering the money. ECF Nos. 46-1, ¶ 23; 46-1, ¶ 12; 64, ¶ 3; 46-2, at 31:17-25. As part of this new contract, Caro and Santos would be paid a premium to compensate for the delay in the previous payments. ECF Nos. 46-1, ¶ 23; 46-1, ¶ 12; 64, ¶ 3; 46-2, at 31:17-25. On that same date, Ramírez subscribed promissory notes in favor of Caro and Santos in the amount of $259,611.25. ECF No. 46-1, ¶ 14; 46-1, ¶ 25; 64, ¶ 5; 46-11. As part of the new contracts, Caro and Santos each signed a "release and waiver of liability agreement." ECF Nos. 46-1, ¶ 15; 64, ¶ 4; 46-9; 46-1, ¶ 26; 64, ¶ 6; 46-12.⁹ Pérez told Caro via telephone that if Ramírez did not pay, he would pay. ECF Nos. 46-1, ¶ 12; 64, ¶ 3; 46-2, at 34:23-35:4. Caro and Santos communicated with Ramírez by email on several occasions regarding the contract and payments. ECF No. 46-1, ¶ 27.

C. RICO Section 1962(d) Claim

Plaintiffs originally brought a Rico section 1962(c) claim and a RICO section 1962(d) claim. Section 1962(c) states that "[i]t shall be unlawful for any person employed by or associated with any enterprise engaged in, or the activities of which affect, interstate or foreign commerce, to conduct or participate, directly or indirectly, in the conduct of such enterprise's affairs through a pattern of racketeering activity or collection of unlawful debt." 18 U.S.C. § 1962(c). Plaintiffs' 1962(c) claim was previously dismissed by the court, thus Plaintiffs' 1962(d) conspiracy claim is the only remaining federal claim. ECF No. 28. "Section 1962(d) serves to make unlawful conspiracies to violate section 1962(c)." Feinstein v. Resolution Tr. Corp., 942 F.2d 34, 41 (1st Cir. 1991).¹⁰ In order "[t]o prove a RICO conspiracy, a plaintiff must show (1) the existence of an enterprise; (2) that each defendant knowingly joined the...