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Paulina Guirola De David v. Alaron Trading Corporation D/B/A Alaron Latin America

May 10, 2011

PAULINA GUIROLA DE DAVID, CORPORACION DE FIANZAS, CONFIANZA S.A., CARLO MAURO-RHODIO GUZMAN, JESUS ALBERTO QUIROA MONTEPEQUE ASESORES REGIONALES, S.A., DE C.V., CORPORACION DE INVERSIONS EN OPCIONES Y FUTUROS, S.A., ESBA S.A., JOSE MIGUEL GAITAN ALVAREZ, RICARDO RAMON MAZARIEGOS CATELLANOS AND MARIA VIRGINIA GAITAN DE MAZARIEGOS, JULIO ROBERTO PINEDA AVILA, FRANCISCO JAVIER PAZ PINEDA, JUAN FERNANDO PEREZ MARROQUIN, DIDIER PATRICK WURSTER, ALFREDO PRADANOS VALDIZAN, ALBA MARIA MARLENNE MEANY VALERIO DE HAGE AND NORMA LISSETTE HERNANDEZ SANCHEZ, SAMUEL ANTONIO CHARUCO SAGASTUME, CORPORACION INTEGRAL DE INVERSIONS, S.A., PLAINTIFFS,
v.
ALARON TRADING CORPORATION D/B/A ALARON LATIN AMERICA, ALBERTO ALVAREZ, JOSE "PEPE" ORTEGA, ALBERTO TARAFA, YET UNDETERMINED PRINCIPALS AND YET UNDETERMINED PERSONS, DEFENDANTS.



The opinion of the court was delivered by: Judge Robert W. Gettleman

MEMORANDUM OPINION AND ORDER

Plaintiffs, twenty foreign corporations and individuals, have filed a twelve-count second amended complaint against defendants Alaron Trading Corporation ("Alaron") and its d/b/a Alaron Latin America ("Alaron LA"), along with three of Alaron LA's managers and employees, Alberto Alvarez, Jose "Pepe" Ortega, and Alberto Tarafa, alleging four counts under the Commodity Exchange Act ("CEA")*fn1 and eight state law claims.*fn2 Defendant Alaron, joined by pro se defendant Tarafa (who has also filed a supplemental letter in support of the motion), has moved to dismiss the complaint pursuant to Fed. R. Civ. P. 12(b)(6). Defendant Jose "Pepe" Ortega has moved to dismiss all claims against him in the second amended complaint pursuant to Fed. R. Civ. P. 12(b)(6), 8(d)(1), 20(a)(1), and 21. Defendant Alberto Alvarez has moved to dismiss with prejudice all claims against him in the second amended complaint pursuant to Fed. R. Civ. P. 8(d), 9(b), and 12(b)(6). For the following reasons, all motions to dismiss are denied, except for Ortega's motion to dismiss as to Counts III and X, from which he is dismissed with prejudice. BACKGROUND*fn3

Plaintiffs are foreign individuals and corporations who maintained accounts with defendant Alaron, a Chicago-based futures commissions merchant ("FCM"). Defendant Alaron LA, is Alaron's d/b/a and Miami branch office. The individual defendants, all Florida citizens and residents, were employees and managers of Alaron LA: Alberto Alvarez was its branch manager; Jose "Pepe" Ortega was responsible for accounting and finance; and Alberto Tarafa was the Latin American sales representative.

Plaintiffs allege that from January 2005 through August 2008, defendants operated and fraudulently concealed from plaintiffs a futures and options Ponzi scheme, along with non-parties Mercados de Futuros ("MDF")-Alaron's Guatemala-based foreign introducing broker ("FIB")-and MDF's CEO and head trader, Raul Alfonso Giron Galves ("Giron"). Plaintiffs allege that this scheme was intended to, and in fact did, defraud them of at least $11 million. The details of the alleged Ponzi scheme are set forth in some detail in the court's November 2, 2010, Memorandum Opinion and Order granting in part and denying in part defendants' motions to dismiss the first amended complaint, and therefore will not be reiterated here. DeDavid v. Alaron Trading Corp., No. 10 CV 3502, 2010 U.S. Dist. LEXIS 117029 (N.D. Ill. Nov. 2, 2010).

DISCUSSION

I. Legal Standards

In considering a motion to dismiss, the court accepts as true all well-pleaded factual allegations and draws all reasonable inferences in favor of the plaintiff. Andonissamy v. Hewlett-Packard Co., 547 F.3d 841, 847 (7th Cir. 2008). The purpose of such a motion is to test the sufficiency of the complaint, not to rule on its merits. Gibson v. City of Chicago, 910 F.2d 1510, 1520 (7th Cir. 1990). The complaint must describe the claim in sufficient detail to give a defendant fair notice of what the claim is and the grounds on which it rests. The allegations must plausibly suggest that the plaintiff has a right to relief, raising the possibility above the "speculative level." Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555-56 (2007). The plaintiff must give enough details about the subject matter of the case to present a story that holds together. The court then asks "itself could these things have happened, not did they happen." Swanson v. Citibank N.A., 614 F.3d 400, 404 (7th Cir. 2010).

Additionally, because plaintiffs asserts various fraud-related claims, Counts I-VIII and XI are subject to the heightened pleading standards of Rule 9(b), which requires that "[i]n all averments of fraud or mistake, the circumstances constituting fraud or mistake shall be stated with particularity." As used in Rule 9(b), "circumstances" means the "who, what, where, when, and how" of the alleged fraud. Uni*quality, Inc. v. Infotronx, Inc., 974 F.2d 918, 923 (7th Cir. 1992) ("the plaintiff [must] state the identity of the person who made the representation, the time, place and content of the misrepresentation, and the method by which the misrepresentation was communicated to the plaintiff") (internal quotation omitted). In a multiple-defendant case, "the complaint should inform each defendant of the nature of his alleged participation in the fraud." Vicom, Inc. v. Harbridge Merchant Servs., 20 F.3d 771, 778 (7th Cir. 1994) (citation omitted); see also Zic v. Italian Gov't Travel Office, 149 F. Supp. 2d 473, 477 (N.D. Ill. 2001) ("The particularity requirement of Rule 9(b) means that a plaintiff may not 'lump' multiple defendants together in a fraud claim; he must identify the nature of defendant's participation in the alleged fraud."); Balabanos v. North Am. Inv. Group, Ltd., 708 F.Supp. 1488, 1493 (N.D. Ill. 1988) (in multiple-defendant cases, "the complaint should inform each defendant of the specific fraudulent acts that constitute the basis of the action against the particular defendant").

II. Defendant Alaron's Motion to Dismiss

The court previously found that the fraud-related claims (Counts I-VIII and XI) in the first amended complaint failed to meet Rule 9(b)'s requirement that allegations of fraud be pled with specificity. Plaintiff has remedied the deficiencies of the previous complaint by adding the following allegations: each plaintiff's Alaron account number(s), the approximate date the accounts were opened, with whom the plaintiffs spoke to open and maintain their accounts, and the locations and approximate dates of these conversations. The second amended complaint also includes new allegations that, "as early as August 2003," Alvarez and Ortega met with MDF officials, learned of the proposed principal and trading guarantees, and nonetheless arranged for MDF to be Alaron's foreign introducing broker ("FIB") and to espouse those false guarantees.

Alaron's motion to dismiss the second amended complaint, which pro se defendant Tarafa has joined, presents a number of arguments that plaintiffs have failed to satisfy Rule 9(b)'s heightened pleading requirement as to its allegations of fraud: (1) plaintiffs have pled insufficient facts to determine whether jurisdiction exists (thus mandating dismissal of the entire complaint); (2) plaintiffs have failed to allege that an agency relationship existed between MDF/Giron and Alaron (also mandating dismaissal of all counts); (3) plaintiffs have failed to allege a conspiracy to defraud (Count VIII); (4) most of the allegations pertaining to plaintiffs' fraud claims (Counts I, II, V, VI, and VII) do not constitute actionable misrepresentation or fraud; and (5) plaintiffs have failed to allege excessive trading and excessive commission rate claims. Alaron also argues that Counts IX, X, and XII should be dismissed because, for the following reasons, plaintiffs have failed to satisfy Rule 8(a): (1) plaintiffs have not alleged that Alaron owed them a fiduciary duty (Count IX); (2) Alaron owed no duty to plaintiffs that could support a claim for negligent supervision (Count X); and (3) plaintiffs have failed to state a claim for unjust enrichment (Count XII). For the following reasons, Alaron's motion to dismiss is denied.

Jurisdiction

First, Alaron unconvincingly argues that plaintiffs have not pled sufficient facts to support diversity jurisdiction under 28 U.S.C. §1332. Alaron claims that plaintiffs' allegation that "the amount in controversy as to each Plaintiff exceeds $75,000.00" is insufficient because it does not state that this amount is exclusive of interest and costs. Plaintiffs have also, however, alleged an aggregate loss of $11 million. "'[T]he sum claimed by [the proponent of federal jurisdiction] controls if the claim is apparently made in good faith. It must appear to a legal certainty that the claim is really for less than the jurisdictional amount to justify dismissal.'" Meridian Sec., Ins. Co. v. Sadowski, 441 F.3d 536, 541 (7th Cir. 2006), quoting St. Paul Mercury Indem. Co. v. Red Cab Co., 303 U.S. 283, 288-89 (1938). Plaintiffs' allegations of amount-in-controversy appear to have been made in good faith, and defendants do not claim otherwise. Relatedly, despite Alaron's claims to the contrary, plaintiffs have not failed to allege individualized damages, because they have alleged an amount exceeding $75,000 as to each plaintiff.

Second, Alaron incorrectly contends that plaintiffs have not pled sufficient facts to support federal question jurisdiction under 28 U.S.C. § 1331 because the allegations do not allow for a determination of whether plaintiffs' CEA claims are barred by the two-year statute of limitations, 7 U.S.C. § 18(a). Motions to dismiss on statute of limitations grounds are rarely granted. Reiser v.Residential Funding Corp., 380 F.3d 1027 (7th Cir. 2004) (citation omitted) ("All we have to go on is the complaint, and because the period of limitations is an affirmative defense it is rarely a good reason to dismiss under Rule 12(b)(6)."). For a statute of limitations defense to be decided on a motion to dismiss, the bar must be facially obvious-but Alaron cannot establish that, on its face, the second amended complaint shows the CEA claims are barred. The two-year statute of limitations for CEA claims began to run when plaintiffs, "in the exercise of due diligence, [have] actual or constructive knowledge of the conduct in question." Dyer v. Merrill Lynch, Pierce, Fenner & Smith Inc., 928 F.2d 238, 240 (7th Cir. 1991) (citations omitted). Reading the complaint in the light most favorable to plaintiffs, they have alleged that their first chance to discover defendants' wrongdoing was in August 2008, when the media reported that the Guatemalan government had shut down MDF and was ...


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