Fundacion Segarra-Boerman e Hijos, Inc. et al v. Martinez-Alvarez et alREPLY to Response to MotionD.P.R.December 6, 2018IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF PUERTO RICO FUNDACIÓN SEGARRA-BOERMAN e HIJOS, INC. and MILDRED A. SEGARRA-BOERMAN, Plaintiffs, v. ALFREDO MARTÍNEZ-ÁLVAREZ; FELIPE SEGARRA INVESTMENT CORP.; TITÍN FOUNDATION, INC.; JOSÉ RAMON QUIÑONES-COLL; MARTÍNEZ- ÁLVAREZ, MENENDEZ-CORTADA & LEFRANC ROMERO, PSC; ALFREDO MARTÍNEZ-ALVAREZ, JR.; SOFÍA MARTÍNEZ-ÁLVAREZ; MARTINAL REAL ESTATE CORP.; and MARTINAL MANAGEMENT CORP., Defendants. CIVIL NO. 3:16-cv-02914-DRD ORAL ARGUMENT REQUESTED TITÍN DEFENDANTS’ REPLY IN FURTHER SUPPORT OF THEIR MOTION TO DISMISS THE AMENDED COMPLAINT AND INCORPORATED MEMORANDUM OF LAW IN SUPPORT Case 3:16-cv-02914-DRD Document 107 Filed 12/06/18 Page 1 of 46 TABLE OF CONTENTS Page PRELIMINARY STATEMENT .....................................................................................................1 ARGUMENT ...................................................................................................................................1 I. THE COURT LACKS SUBJECT MATTER JURISDICTION OVER THE CIVIL RICO CLAIMS. .......................................................................................................1 II. PLAINTIFFS FAIL TO STATE A CLAIM UNDER CIVIL RICO. ..................................2 A. Plaintiffs Lack Standing To Assert RICO Claims. ..................................................2 1. Plaintiffs Cannot Establish RICO Injuries Based On The Predicate Acts They Allege. ........................................................................................2 (a) Plaintiffs’ Allegations Of Mail And Wire Fraud And Corresponding Injuries Based On Deprivation Of Honest Services Must Fail............................................................................3 (b) Plaintiffs Cannot Establish Mail Or Wire Fraud Or A Resulting RICO Injury Based on Injury To Intangible Interests. ...........................................................................................6 2. Plaintiffs’ Cited Injuries Are Not Cognizable Under RICO. .......................8 3. The “Specific Injury” Cited In Exhibit 3 Is Not Cognizable Under RICO, And In Many Instances Does Not Appear In The RICO Case Statement. ..........................................................................................11 4. Plaintiffs Cannot Establish Proximate Causation of Their Injuries. ..........13 B. Plaintiffs Cannot Establish A Pattern of Racketeering. .........................................15 1. No Continuity.............................................................................................15 2. No Relatedness...........................................................................................17 C. Plaintiffs’ Claims Under Sections 1962(a), (b), and (d) Must Fail. .......................18 1. Plaintiffs Have Not Alleged An Acquisition Injury Under Section 1962(b). ......................................................................................................18 2. Plaintiffs Have Not Alleged An Investment Injury Under Section 1962(a). ......................................................................................................18 3. Plaintiffs’ Claims Under Section 1962(d) Alleging Conspiracies To Violate Sections 1962(a) and (b) Must Be Dismissed..........................19 D. Plaintiffs Cannot Establish A Viable RICO Enterprise. ........................................19 1. Plaintiffs Have Not Pled Enterprises Distinct From Defendants. ..............19 2. Plaintiffs Fail to Plead Adequate Participation in the Enterprise by Defendants. ................................................................................................21 i Case 3:16-cv-02914-DRD Document 107 Filed 12/06/18 Page 2 of 46 3. Plaintiffs Implicitly Concede That They May Not Plead The Existence Of Multiple Factually Contradictory Enterprises. .....................21 E. Plaintiffs’ RICO Claims Are Time-Barred. ...........................................................22 III. PLAINTIFFS’ UNFAIR COMPETITION CLAIMS MUST BE DISMISSED................23 A. The Opposition Fails to Buttress Plaintiffs’ Unfair Competition Claims As To Plaintiff Doña Mildred And Five Defendants. .................................................23 1. Plaintiff Doña Mildred Lacks Standing. ....................................................24 2. Plaintiffs’ Claims Against Five Of The Titín Defendants Must Be Dismissed. ..................................................................................................25 B. The Unfair Competition Claims Are Barred By Puerto Rico’s One-Year Statute of Limitations and Laches..........................................................................25 C. Plaintiffs Permitted The Authorized Defendants To Use The FSB Mark. ............27 D. Plaintiffs Authorized Joint Use Of The FSB And Martinal Marks. ......................28 E. Plaintiffs Allege No Continuing Harm Meriting An Injunction. ...........................29 IV. THE BREACH CLAIM SHOULD BE DISMISSED. ......................................................29 A. The Breach Claim Does Not Give Rise To Federal Subject Matter Jurisdiction. ............................................................................................................29 B. Plaintiffs Concede That Supplemental Jurisdiction Does Not Apply. ...................31 C. Puerto Rico Substantive Law Applies And Requires Dismissal. ..........................32 1. Contracts Formed By Agents Need An “Authentic Document” To Be Valid. ....................................................................................................32 2. Plaintiffs Fail To Explain The Ongoing Settlement Discussions. .............33 3. Plaintiffs Cannot Claim The Full Contract Amount. .................................34 V. THE PR CLAIMS SHOULD BE DISMISSED FOR LACK OF SUPPLEMENTAL JURISDICTION. ...............................................................................35 VI. ANY DISMISSAL SHOULD BE ENTERED WITH PREJUDICE. ................................35 CONCLUSION ..............................................................................................................................35 ii Case 3:16-cv-02914-DRD Document 107 Filed 12/06/18 Page 3 of 46 TABLE OF AUTHORITIES Page Cases Ahmed v. Hosting.com, 28 F. Supp. 3d 82 (D. Mass. 2014) .......................................................................................... 24 Airlines Reporting Corp. v. Aero Voyagers, Inc., 721 F. Supp. 579 (S.D.N.Y. 1989) .......................................................................................... 17 Arrieta Gimenez v. Arietta Negron, 672 F. Supp. 46 (D.P.R. 1987) ................................................................................................. 26 Baker v. Simmons Co., 307 F.2d 458 (1st Cir. 1962) ................................................................................................... 26 Beck v. Prupis, 529 U.S. 494 (2000) ................................................................................................................ 19 Bridge v. Phoenix Bond & Indem. Co., 553 U.S. 639 (2008) ................................................................................................................ 13 C&M Cafe v. Kinetic Farm, Inc., No. 16-CV-04342-WHO, 2016 WL 6822071 (N.D. Cal. Nov. 18, 2016) ................................ 8 Camel Hair & Cashmere Inst. of Am., Inc. v. Assoc’d Dry Goods Corp., 799 F.2d 6 (1st Cir. 1986) ....................................................................................................... 25 Chaset v. Fleer/Skybox Int’l, LP, 300 F.3d 1083 (9th Cir. 2002) ................................................................................................... 7 Cleveland v. United States, 531 U.S. 12 (2000) .................................................................................................................. 10 Cruz v. FX DirectDealer, LLC, 720 F.3d 115 (2d Cir. 2013) ................................................................................................... 21 Delta Airlines Inc. v. Wunder, No 1:13-CV-3388-MHC, 2015 WL 11242003 (N.D. Ga. Dec. 15, 2015) ................................. 8 Dice v. Akron, C. & Y. R. Co. is, unavailing. 342 U.S. 359 (1962) ............................................................................................. 30 Efron v. Embassy Suites (Puerto Rico), Inc., 223 F.3d 12 (1st Cir. 2000) ............................................................................................... 15, 16 Eldridge v. Gordon Bros. Grp., LLC, 316 F.R.D. 12 (D. Mass. 2016), 863 F.3d 66 (1st Cir. 2017) .................................................. 35 Evercrete Corp. v. H-Cap Ltd., 429 F. Supp. 2d 612 (S.D.N.Y. 2006) ....................................................................................... 8 Feinstein v. Resolution Tr. Corp., 942 F.2d 34 (1st Cir. 1991) ..................................................................................................... 18 iii Case 3:16-cv-02914-DRD Document 107 Filed 12/06/18 Page 4 of 46 Flagstaff Med. Ctr., Inc. v. N.L.R.B., 715 F.3d 928 (D.C. Cir. 2013) ................................................................................................. 22 Fleet Credit Corp. v. Sion, 893 F.2d 441 (1st Cir. 1990) .................................................................................................... 17 Estate of Foster v. Gomer, No. 11-cv-1242 (C. D. Cal. Feb. 15, 2012) ............................................................................. 17 Fulgence v. J. Ray McDermott & Co., 662 F.2d 1207 (5th Cir. 1981) ................................................................................................. 32 Gaia Techs., Inc. v. Reconversion Techs, Inc., 93 F.3d 774 (Fed. Cir. 1996), amended on reh’g in part, 104 F.3d 1296 (Fed. Cir. 1996) ......................................................................................................................................... 28 Gen. Office Prods. Corp. v. A.M. Capen’s Sons, Inc., 115 D.P.R. 553, 15 P.R. Offic. Trans. 727 (1984) ................................................................... 11 Gross v. Waywell, 628 F. Supp. 2d 475 (S.D.N.Y. 2009) ............................................................................... 15, 17 H.J. Inc. v. Northwestern Bell Telephone Co., 492 U.S. 229 (1989) ........................................................................................................... 16, 17 Hamm v. Rhone–Poulenc Rorer Pharms., Inc., 187 F.3d 941 (8th Cir. 1999) ..................................................................................................... 6 Hazel v. U.S. Postmaster Gen., 7 F.3d 1 (1st Cir. 1993) ............................................................................................................ 22 Hemi Grp. LLC v. City of New York, NY, 559 U.S. 1 (2010) ..................................................................................................................... 14 J.D. Marshall Int’l, Inc. v. Redstart, Inc., 935 F.2d 815 (7th Cir. 1991) ................................................................................................... 16 Johnson Elec. N. Am., Inc. v. Mabuchi Motor Am. Corp., 98 F. Supp. 2d 480 (S.D.N.Y. 2000) ......................................................................................... 8 Jordan K. Rand, Ltd. v. Lazoff Bros. Inc., 537 F. Supp. 587 (D.P.R. 1982) ............................................................................................... 26 Kagan v. El San Juan Hotel & Casino, 7 F.3d 218 (1st Cir. 1993) ........................................................................................................ 32 King v. Shou-Kung Wang, 663 Fed. Appx. 12 (2d Cir. 2016) ............................................................................................ 17 Lares Grp., II v. Tobin, 221 F.3d 41 (1st Cir. 2000) ...................................................................................................... 23 Lexmark Int’l, Inc. v. Static Control Components, Inc., 134 S. Ct. 1377 (2014) ............................................................................................................. 24 London v. Carson Pirie Scott & Co., No. 85 C 9712, 1987 WL 11382 (N.D. Ill. May 22, 1987) ..................................................... 24 iv Case 3:16-cv-02914-DRD Document 107 Filed 12/06/18 Page 5 of 46 Madonna v. United States, 878 F. 2d 62 (2d Cir. 1989) ..................................................................................................... 15 McNally v. United States, 483 U.S. 350 (1987) ............................................................................................................... 4, 5 Mendez Internet Mgmt. Servs., Inc. v. Banco Santander de P.R., 621 F.3d 10 (1st Cir. 2010) ........................................................................................................ 6 Miranda v. Ponce Fed. Bank, 948 F.2d 41 (1st Cir. 1991) ........................................................................................................ 3 Monterey Plaza Hotel Ltd. P’ship v. Local 483 of the Hotel Emp. and Rest. Emp. Union, AFL-CIO, 215 F.3d 923 (9th Cir. 2000) ..................................................................................... 6 Patrizzi v. Bourne in Time, Inc., No. 11 CIV. 2386 PAE, 2012 WL 4833344 (S.D.N.Y. Oct. 11, 2012) ..................................... 8 Planetary Mot., Inc. v. Techsplosion, Inc., 261 F.3d 1188 (11th Cir. 2001) ............................................................................................... 24 ProFitness Physical Therapy Ctr. v. Pro-Fit Orthopedic & Sports Physical Therapy P.C., 314 F.3d 62 (2d Cir. 2002) .............................................................................................. 28 Puerto Rican-Am. Ins. Co. v. Benjamin Shipping Co., 829 F.2d 281 (1st Cir. 1987) .................................................................................................... 27 Quint v. A.E. Staley Mfg. Co., 246 F.3d 11 (1st Cir. 2001) ...................................................................................................... 31 Rhode Island Fishermen’s All., Inc. v. Rhode Island Dep’t Of Envtl. Mgmt., 585 F.3d 42 (1st Cir. 2009) ...................................................................................................... 30 Roeder v. Alpha Indus., Inc., 814 F.2d 22 (1st Cir. 1987) ........................................................................................................ 9 Saylor v. Bastedo, 100 F.R.D. 44 (S.D.N.Y. 1983) ............................................................................................... 22 Schofield v. First Commodity Corp. of Boston, 793 F.2d 28 (1st Cir. 1986) ...................................................................................................... 20 Skilling v. United States, 561 U.S. 358 (2010) ............................................................................................................... 5, 6 Smith v. Jackson, 84 F.3d 1213 (9th Cir. 1996) ..................................................................................................... 8 Sparling v. Hoffman Const. Co., 864 F.2d 635 (9th Cir. 1988) ..................................................................................................... 9 Suna v. Bailey Corp., 107 F.3d 64 (1st Cir. 1997) ........................................................................................................ 4 Tafflin v. Levitt, 493 U.S. 455 (1990) ................................................................................................................. 30 v Case 3:16-cv-02914-DRD Document 107 Filed 12/06/18 Page 6 of 46 Texas Indus., Inc. v. Radcliff Materials, Inc., 451 U.S. 630 (1981) ................................................................................................................. 32 United States v. Baldinger, 838 F.2d 176 (6th Cir. 1988) ..................................................................................................... 6 United States v. Greenleaf, 692 F.2d 182 (1st Cir. 1982) ...................................................................................................... 4 United States v. Jefferson, 674 F.3d 332 (4th Cir. 2012) ..................................................................................................... 5 United States v. Kwiat, 817 F.2d 440 (7th Cir. 1987) ..................................................................................................... 4 United States v. Ochs, 842 F.2d 515 (1st Cir. 1988) .................................................................................................. 5, 6 United States v. Ratcliff, 488 F.3d 639 (5th Cir. 2007) ..................................................................................................... 5 United States v. Regan, 713 F. Supp. 629 (S.D.N.Y. 1989) ............................................................................................ 5 United States v. Turner, 465 F.3d 667 (6th Cir. 2006) ..................................................................................................... 5 United States v. Weimert, 819 F.3d 351 (7th Cir. 2016) ..................................................................................................... 4 United States Fire Ins. Co. v. United Limousine Serv., Inc., 303 F. Supp. 2d 432 (S.D.N.Y. 2004) ..................................................................................... 18 Vemco, Inc. v. Camardella, 23 F.3d 129 (6th Cir. 1994) ..................................................................................................... 16 Vicom, Inc. v. Harbridge Merch. Servs., Inc., 20 F.3d 771 (7th Cir. 1994) ..................................................................................................... 19 WEC Holdings, LLC v. Juarez, No. 2:07-CV-00137-BES-PAL, 2008 WL 345792 (D. Nev. Feb. 5, 2008) ............................. 28 Weizmann Inst. of Sci. v. Neschis, 421 F. Supp. 2d 654 (S.D.N.Y. 2005) ..................................................................................... 17 Westchester Cty. Indep. Party v. Astorino, 137 F. Supp. 3d 586 (S.D.N.Y. 2015) ..................................................................................... 10 Williams v. Metzler, 132 F.3d 937 (3d Cir. 1997) .................................................................................................... 32 Rules / Statutes 10 L.P.R.A. § 1303 ....................................................................................................................... 33 18 U.S.C. § 1346 ......................................................................................................................... 3, 5 vi Case 3:16-cv-02914-DRD Document 107 Filed 12/06/18 Page 7 of 46 18 U.S.C. § 1962(a) .................................................................................................... 18, 19, 20, 21 18 U.S.C. § 1962(b) .................................................................................................... 18. 19, 20, 21 18 U.S.C. § 1964(c) ............................................................................................................ 6, 13, 16 18 U.S.C. § 1962(d) ................................................................................................................ 18, 19 31 L.P.R.A. § 3052 ....................................................................................................................... 34 31 L.P.R.A. § 3452 ....................................................................................................................... 33 31 L.P.R.A. § 3453(6) ............................................................................................................. 32, 33 31 L.P.R.A. § 3512 ....................................................................................................................... 26 31 L.P.R.A. § 5298 ................................................................................................................. 26, 27 Energy Reorganization Act .......................................................................................................... 32 Fed. R. Civ. P. 8(a) ................................................................................................................. 12, 25 Fed. R. Civ. P. 9(b) ................................................................................................................. 12, 25 Fed. R. Civ. P. 15(c) ..................................................................................................................... 27 Fed. R. Evid. 408 .......................................................................................................................... 34 Other Authorities Black’s Law Dictionary (8th ed. 2004) ........................................................................................ 28 Carlos E. Díaz Olivo, Las Organizaciones Sin Fines De Lucro: Perfil Del Tercer Sector En Puerto Rico, 69 Rev. Jur. U.P.R. 719 (2000) 9, 24 vii Case 3:16-cv-02914-DRD Document 107 Filed 12/06/18 Page 8 of 46 The Titín Defendants respectfully submit this Reply in Further Support of their Motion to Dismiss the Amended Complaint and Incorporated Memorandum of Law in Support (the “Reply”).1 PRELIMINARY STATEMENT Continuing a pattern in the Plaintiffs’ pleadings, the Opposition attempts to shift the goalposts. Where the Motion pointed out deficiencies in Plaintiffs’ claims, the Opposition sidesteps by attempting to recharacterize the claims already asserted or invent new ones. For example, while Plaintiffs’ Exhibit 3 articulates 21 “Specific Injur[ies]” which they now claim are RICO injuries, see Opp. 8, id. Ex. 3, no fewer than 15 of these purported injuries are nowhere plead in the sections of the RICO Case Statement detailing injuries to each Plaintiff, and others were reassembled from poorly-pled allegations and not pled in their current form. See Reply, Ex. 4. The inverse is also true; to avoid the appearance that Plaintiffs’ dispute is a “mere inheritance quarrel,” Opp. 1—which it is—Plaintiffs omit any mention of that purported injury from Exhibit 3, despite elsewhere defending its viability, see Opp. 11-12, 17. In drafting this Reply, the Titín Defendants have thus had to wrestle with vague and shifting allegations without the fair notice required or the benefits that the RICO Case Statement is designed to confer. Regardless, Plaintiffs’ efforts to defend or reformulate their allegations fail. The Opposition fails to save any of the Federal Claims, to detail why the Court should exercise supplemental jurisdiction over the PR Claims, or to rebut that dismissal should be entered with prejudice. This unfortunate and misguided attempt to turn a family dispute into a criminal conspiracy should be ended once and for all. ARGUMENT I. THE COURT LACKS SUBJECT MATTER JURISDICTION OVER THE CIVIL RICO CLAIMS. Plaintiffs’ Civil RICO Claims fall outside the subject matter jurisdiction of the Court due to the “probate exception” to federal jurisdiction. Plaintiffs’ counter-arguments are unavailing, Opp. 3-7, and 1 This Reply incorporates all terms defined in the Motion to Dismiss (the “Motion”) (Dkt. 56). The “Opposition” refers to Plaintiffs’ Opposition to the Motion to Dismiss (Dkt. 62). Case 3:16-cv-02914-DRD Document 107 Filed 12/06/18 Page 9 of 46 the Court should dismiss the Civil RICO Claims for the reasons detailed in the Motion. See Mot. 9-11 (explaining that the essence of the Amended Complaint is Plaintiffs’ failure to inherit under Titín’s Third Will, and that the probate exception prohibits such circumvention of res judicata and Puerto Rico courts). II. PLAINTIFFS FAIL TO STATE A CLAIM UNDER CIVIL RICO. A. Plaintiffs Lack Standing To Assert RICO Claims. In the Motion, the Titín Defendants noted the difficulty in pinning down and responding to Plaintiffs’ RICO “injuries,” because “Plaintiffs’ description of their purported RICO injuries in the RICO Case Statement rambles over six pages and fails entirely to state the particularized allegations required in a RICO Case Statement.” Mot. 13 n.6. At most, Plaintiffs appeared to claim various amorphous injuries such as their failure to inherit under Titín’s Third Will and alleged interference with FSB’s mission. See, e.g., AC ¶¶ 172, 299, 302; RCS 33-39. In their Opposition—filed seven months after Plaintiffs’ obligation to file a RICO Case Statement accrued and four months after they purportedly complied with that obligation—Plaintiffs attempt to counter this fatal flaw by submitting a list describing the “Specific Injury” they claim to have suffered. Opp. Ex. 3; see also Opp. 8. Plaintiffs’ belated attempt to both camouflage their prior non-compliance and reformulate their allegations falls flat. Exhibit 3 to the Opposition lists 21 purported injuries, many of which are nowhere mentioned in their RICO Case Statement (and thus were not properly pled), while others are omitted from Exhibit 3 despite their inclusion in the RICO Case Statement. In any event, no injury listed in the RICO Case Statement or in Exhibit 3 is cognizable under Civil RICO, and Plaintiffs fail to rebut the Titín Defendants’ specific arguments for why Plaintiffs’ claims must be dismissed. 1. Plaintiffs Cannot Establish RICO Injuries Based On The Predicate Acts They Allege. In setting forth the most recent permutation of Plaintiffs’ theory of their case, the Opposition attempts to evade the Motion by asserting that Plaintiffs’ purported RICO injuries (and the corresponding predicate acts) are based on deprivations of honest services, misdirected credit for charitable donations, 2 Case 3:16-cv-02914-DRD Document 107 Filed 12/06/18 Page 10 of 46 and trademark infringement. For example, while Plaintiffs never pled “honest services fraud” or cited the relevant statute, 18 U.S.C. § 1346, and their accusations of “faithlessness” appeared to be a gloss or at most the basis for Puerto Rico breach of fiduciary duty claims, see AC ¶¶ 500-29, Plaintiffs now list payments made to the Titín Defendants “as faithless fiduciaries and servants” first in their list of RICO injuries, Opp. Ex. 3, ¶ 1, and it is unmistakable from the Opposition that Plaintiffs are complaining not just about the funds paid but about the dishonest nature of the services itself, see e.g., Opp. Ex. 3, ¶ 1; see also Opp. 9. Whether newly asserted or not, however, none of the purported injuries described above can serve as the basis for mail/wire fraud and thus cannot cause a corresponding RICO injury. See Miranda v. Ponce Fed. Bank, 948 F.2d 41, 48 (1st Cir. 1991) (“An actionable claim under [Civil RICO] requires that the complainant’s injury stem from a predicate act”) (citation omitted). (a) Plaintiffs’ Allegations Of Mail And Wire Fraud And Corresponding Injuries Based On Deprivation Of Honest Services Must Fail. Plaintiffs cannot assert mail/wire fraud, or a resulting RICO injury, based on payment of fees and salaries to allegedly conflicted parties. At least 34 of the “predicate acts” of mail or wire fraud Plaintiffs cite consist of routine communications or payments for services within the scope of Plaintiffs’ professional relationship with the Titín Defendants. The only purportedly “fraudulent” aspect of these mailings and wirings (as clarified by the Opposition) is that they were made while the Titín Defendants allegedly had conflict of interest. See, e.g., AC Ex. A ¶¶ 1-3, 10-15, 27-33, 41-43, 51-52, 58-60, 66, 73-74, 77-78, 87, 93, 100, 102, 104; see also Opp. 1-2, 8-9, 11, 13-14, 19-20. Plaintiffs mistakenly argue that these allegations are sufficient to allege mail/wire fraud, and a corresponding RICO injury. See Opp. 19-20 (“[T]he alleged predicate acts do, indeed, concern intentional omissions and misrepresentation because they were committed by attorneys, officers and directors charged with independent fiduciary duties.”) (emphasis added). They are not. Mail and wire fraud cannot be based on a breach of fiduciary duty alone, 3 Case 3:16-cv-02914-DRD Document 107 Filed 12/06/18 Page 11 of 46 and must instead involve deprivation of money or property other than routine payments to a conflicted party.2 A breach of fiduciary duty, without more, cannot constitute mail or wire fraud. To qualify as mail or wire fraud, the action must involve a scheme to deprive the victim of “money or property.” McNally v. United States, 483 U.S. 350, 360 (1987); cf. United States v. Greenleaf, 692 F.2d 182, 188 (1st Cir. 1982) (“[B]reach of a fiduciary duty, standing alone, does not constitute mail fraud.”), cert. denied, 460 U.S. 1069 (1983). In McNally, the Supreme Court held that an officer’s scheme to direct insurance commissions to an agency he owned—a blatant conflict of interest—fell outside of the mail fraud statute in part because no evidence indicated that the alleged victim would have paid a lower premium or secured better insurance elsewhere. Id. The Court explained that, because there was no financial harm, the conviction was not based on a deprivation of “money or property,” but instead was improperly premised on the right to have one’s affairs “conducted honestly.” Id. at 352-56. Courts have consistently confirmed McNally’s key holding: “a breach of fiduciary duty combined with a mailing or wire communication is insufficient alone to establish mail or wire fraud.” United States v. Weimert, 819 F.3d 351, 367 (7th Cir. 2016) (citing United States v. Kwiat, 817 F.2d 440, 444 (7th Cir. 1987)). Given the holding of McNally, Plaintiffs’ allegation that their agents were conflicted—i.e., a violation of their right to honest services— is insufficient to allege mail or wire fraud. Plaintiffs must also allege a loss of “money or property” resulting from each conflicted act. They have not and cannot do so. Plaintiffs’ assertion that payment of fees and retainers alone suffices to show mail/wire fraud (and a resulting RICO injury) is incorrect and conflicts with this Circuit’s binding precedent. This so-called “salary theory” of mail and wire fraud—i.e., that payments to a conflicted fiduciary constitute “money or property” sufficient to plead mail or wire fraud—was first articulated in footnote 10 of the McNally 2 Many of the predicate acts alleged in Exhibit A also fail to “specify the statements that the plaintiff contends were fraudulent” or “explain why the statements were fraudulent” and therefore fail. Suna v. Bailey Corp., 107 F.3d 64, 73 (1st Cir. 1997). 4 Case 3:16-cv-02914-DRD Document 107 Filed 12/06/18 Page 12 of 46 dissent, but was rejected by the First Circuit in United States v. Ochs, 842 F.2d 515 (1st Cir. 1988). There, the First Circuit found that even though the “fiduciary did receive money in violation of a duty owed to his principal,” id. at 526, this was insufficient for conviction because the “salary theory” is not good law: “[w]e do not think courts are free simply to recharacterize every breach of fiduciary duty as a financial harm, and thereby to let in through the back door the very prosecution theory that the Supreme Court [in McNally] tossed out the front.” Id. at 527. The law of this circuit is dispositive of Plaintiffs’ contention, and most other courts have followed Ochs in rejecting the “salary theory.” See, e.g., United States v. Regan, 713 F. Supp. 629, 635-36 (S.D.N.Y. 1989) (“[T]he harm or injury contemplated or intended must be a monetary or property interest of the victim” and this “would be rendered meaningless if it were interpreted to allow an employee’s deceitful breach of duty to be prosecuted as mail or wire fraud merely by alleging that the defendant’s employer was thereby deprived of the full value of any wages paid to the defendant during the period of the deceit.”) (emphasis added); see also United States v. Ratcliff, 488 F.3d 639 (5th Cir. 2007) (affirming dismissal of mail fraud charges premised on alleged scheme to obtain salary and benefits of elected office through election fraud); United States v. Turner, 465 F.3d 667, 681 (6th Cir. 2006) (“[T]he salary theory does not fall within the scope of a scheme to obtain money or property”). Although Congress enacted 18 U.S.C. § 1346 in response to McNally, providing that the mail and wire fraud statutes may include “a scheme or artifice to deprive another of the intangible right of honest services,” this provision does not save Plaintiffs’ allegations. In Skilling v. United States, the Supreme Court held that honest-services fraud under Section 1346 requires bribes or kickbacks, neither of which Plaintiffs allege. 561 U.S. 358, 408–10 (2010). “The Supreme Court determined in Skilling that [Section 1346] . . . criminalizes only those wire fraud schemes involving bribery and kickbacks, and not a defendant’s failure to disclose self-dealing conflicts of interest.” United States v. Jefferson, 674 F.3d 332, 339 n.8 (4th Cir. 2012) (emphasis added) (citation omitted), as amended (Mar. 29, 2012). Here, Plaintiffs allege a list of retainer fees, management fees, commission fees, and similar payments for the services of Alfredo Sr., his law firm, Martinal, and others. See, e.g., AC Ex. A, ¶¶ 1-3. 5 Case 3:16-cv-02914-DRD Document 107 Filed 12/06/18 Page 13 of 46 Plaintiffs state that these payments were “for [Defendants’] services,” AC ¶ 21, allege no bribery or kickback scheme, and claim that “the alleged predicate acts [constitute mail and wire fraud] because they were committed by attorneys, officers and directors charged with independent fiduciary duties.” Opp. 19- 20 (emphasis added). Plaintiffs’ allegations of mail/wire fraud and RICO injuries based on those claims must be rejected as based on a theory the First Circuit has specifically considered and roundly rejected.3 (b) Plaintiffs Cannot Establish Mail Or Wire Fraud Or A Resulting RICO Injury Based on Injury To Intangible Interests. Plaintiffs cannot assert either mail/wire fraud, or a resulting RICO injury, based on harm to goodwill or reputation, or through misdirected charitable credit. This type of harm—including to FSB’s mission and reputation in the charitable marketplace—does not involve “concrete financial loss,” and is not cognizable under RICO. Mot. 15-16. Reputational harms cannot support claims of mail or wire fraud, and RICO injury based on such predicates must fail. See Mendez Internet Mgmt. Servs., Inc. v. Banco Santander de P.R., 621 F.3d 10 (1st Cir. 2010) (affirming dismissal of RICO claim where mail and wire fraud was predicated on allegations of defamation); Monterey Plaza Hotel Ltd. P’ship v. Local 483 of the Hotel Emp. and Rest. Emp. Union, AFL-CIO, 215 F.3d 923 (9th Cir. 2000) (affirming dismissal of civil RICO claim where mail and wire fraud predicates were based on damage to goodwill); see also United States v. Baldinger, 838 F.2d 176, 180 & n.3 (6th Cir. 1988). A reputational loss is not cognizable under RICO even if it could lead to a business injury. See, e.g., Hamm v. Rhone–Poulenc Rorer Pharms., Inc., 187 F.3d 941, 954 (8th Cir. 1999) (“Damage to reputation is generally considered personal injury and thus is not an injury to ‘business or property’ within the meaning of 18 U.S.C. § 1964(c).”). This kind of harm is not a “concrete financial 3 The authorities Plaintiffs cite are not to the contrary. All three cases they cite for the proposition that “retainers, fees, invoices, salaries and bonuses to disloyal and faithless fiduciaries . . . constitute a RICO injury” are from outside the First Circuit (where Ochs controls) and predate Skilling. Opp. 9 (citing Cook Cnty. v. Lynch (N.D. Ill. 1985); Doe I v. The Gap, Inc. (D. N. Mar. I. Nov. 26 2001); and City of New York v. JAM Consultants (S.D.N.Y. 1995)). Moreover, Plaintiffs’ citation to a string of cases on excessive payments, see Opp. 8-9, is irrelevant given that Plaintiffs nowhere detail how the fees paid to the Titín Defendants were excessive, only that the payees were conflicted. 6 Case 3:16-cv-02914-DRD Document 107 Filed 12/06/18 Page 14 of 46 loss,” but at most an “injury to a valuable intangible property interest,” see Chaset v. Fleer/Skybox Int’l, LP, 300 F.3d 1083, 1087 (9th Cir. 2002), for which Civil RICO does not provide redress. (i) Plaintiffs Cannot Establish Mail/Wire Fraud Or A Resulting RICO Injury Based On Misdirected Credit For Charitable Contributions. Plaintiffs cannot assert either mail/wire fraud, or a resulting RICO injury, based on the at least 44 purported predicate acts related to the allegation that the Titín Defendants’ “t[ook] credit” for FSB’s charitable donations or “obtain[ing] good will [sic] and reputational benefit” thereby. AC Ex. A ¶¶ 6, 22; see also, e.g., id. ¶¶ 4-9, 16-17, 19-26, 36, 39-40, 46, 48-49, 53-54, 57, 64, 67-72, 75-76, 82-84, 90, 94, 101, 107, 109-11. Nor can Plaintiffs claim RICO injury to FSB’s “intangible assets (including its goodwill and reputation, opportunities for additional family funding, and designation of origin, especially in relation to the name and memory of the founding family)” based on these predicates. RCS 36; Opp. Ex. 3 ¶ 11. Any such misdirected benefit provides no basis for mail/wire fraud or a resulting RICO injury. Plaintiffs cite no contrary authority. The three cases they do refer to have nothing to do with charitable donations or reputational harms such as those they allege. Opp. 10 (citing Gas Tech Inst. v. Rehmat; Blue Cross; and Planned Parenthood Federation of America, Inc.). Plaintiffs do not allege that Defendants misappropriated the donated funds for themselves or otherwise obtained a financial benefit; rather, they admit that the charitable donations were sent as intended, but claim that the Titín Defendants got credit for them. Per Plaintiffs’ own formulation, this is a matter of goodwill and reputation, not money. There is no basis for either mail/wire fraud or a resulting RICO injury on this claim. (ii) Plaintiffs Cannot Establish Mail Or Wire Fraud Or A Resulting RICO Injury Based On Trademark Infringement Plaintiffs cannot assert either mail/wire fraud, or a resulting RICO injury, based on the multiple purported predicate acts they cite which relate to purported infringement of FSB’s trademark and/or unfair competition. See AC Ex. A ¶¶ 34, 61, 79; Opp. Ex. 3 ¶ 11; Opp. 10 n.8, 12 n.9; AC ¶ 367. Plaintiffs’ purported injuries arise from possible confusion of the Martinal and FSB Marks, and relate exclusively to the Titín Defendants allegedly “misappropriating [FSB’s] goodwill and reputation.” RCS 21. These are 7 Case 3:16-cv-02914-DRD Document 107 Filed 12/06/18 Page 15 of 46 at most “claim[s] of willful trademark infringement—not racketeering.” Evercrete Corp. v. H-Cap Ltd., 429 F. Supp. 2d 612, 630 (S.D.N.Y. 2006); Patrizzi v. Bourne in Time, Inc., No. 11 CIV. 2386 PAE, 2012 WL 4833344, at *5 (S.D.N.Y. Oct. 11, 2012) (dismissing RICO claims despite plaintiff’s allegation that “his business suffered” due to infringing website domain names). “Many courts have held that the federal RICO statute is not a proper mechanism to address trademark infringement claims.” Delta Airlines Inc. v. Wunder, No 1:13-CV-3388-MHC, 2015 WL 11242003, at *7 (N.D. Ga. Dec. 15, 2015) (collecting cases, and further finding that plaintiff’s “mail and wire fraud allegations are simply restatements of its trademark claim”); see also Smith v. Jackson, 84 F.3d 1213, 1217-18 (9th Cir. 1996) (rejecting RICO claims that were essentially “reformulated copyright infringement claims”); Johnson Elec. N. Am., Inc. v. Mabuchi Motor Am. Corp., 98 F. Supp. 2d 480 (S.D.N.Y. 2000) (rejecting RICO claims that were “nothing more than claims of knowing and deliberate patent infringement”). The sole case cited by Plaintiffs—an unreported case from the Northern District of California—is not to the contrary, as that court found that plaintiffs had properly pled lost profits stemming from the purported activity (and there was thus no conflict with Smith’s controlling precedent). See Opp. 10 n.8 (citing C&M Cafe v. Kinetic Farm, Inc., No. 16-CV-04342-WHO, 2016 WL 6822071, at *8 (N.D. Cal. Nov. 18, 2016) (acknowledging that “harm to reputation is generally not considered an injury to ‘business or property’ under RICO” and concluding that the purported behavior caused lost profits) (citation omitted)). Plaintiffs have made no such allegation here. And to the extent Plaintiffs’ injuries arise from other forms of unfair competition—such as the very existence of the Titín Foundation, see Opp. 12—these too are based on goodwill and reputation and cannot constitute a predicate act or RICO injury. 2. Plaintiffs’ Cited Injuries Are Not Cognizable Under RICO. The Motion explained that Plaintiffs’ purported injuries related to Titín’s wills, FSB’s mission, and intangible property are not cognizable under RICO. Mot. 13-16. The Opposition responded that the Amended Complaint had alleged at least 21 specific RICO injuries, and elaborated that these included (1) improper payments of retainers and fees, id. 8-9, (2) a contractual injury due to FSB and Doña 8 Case 3:16-cv-02914-DRD Document 107 Filed 12/06/18 Page 16 of 46 Mildred’s relationship with Titín, id. 11-13, (3) loss of real estate, id. 9-10, and (4) tortious interference with Plaintiffs’ business, id. 10. While the specifics of the Opposition’s Exhibit 3 are dealt with both above and below, see supra Sections II.A, II.A.1, infra Section II.A.3, these four injuries are not cognizable under civil RICO. As a preliminary issue related to all of Plaintiffs’ claimed injuries, neither FSB nor Doña Mildred has standing to sue for harm to the other. Although Plaintiffs contend that Doña Mildred has “special status” enabling her to assert derivative injuries on behalf of FSB, Opp. 11,4 this argument fails for at least two reasons. Opp. 11. First, “there is no shareholder standing to assert RICO claims where the harm is derivative of harm to the corporation,” Sparling v. Hoffman Const. Co., 864 F.2d 635, 640 (9th Cir. 1988) (citing Roeder v. Alpha Indus., Inc., 814 F.2d 22, 29-30 (1st Cir. 1987)), and the cases Plaintiffs cite in support are not RICO cases, Opp. 11-12 (citing Fraigcomar Soccer Club, Inc.; Amador; Toro Vizcarrondo). Second, an individual’s purported capacity to sue derivatively on behalf of a charity is irrelevant here as FSB itself has sued, mooting the very purpose of derivative litigation, which is to vindicate the entity’s rights. See Opp. 11, 31 (citing Carlos E. Díaz Olivo, Las Organizaciones Sin Fines De Lucro: Perfil Del Tercer Sector En Puerto Rico, 69 Rev. Jur. U.P.R. 719, 760 (2000) (in turn noting that (1) derivative suits aim “to enforce the entity’s rights and objectives” and (2) parties looking to sue on behalf of a charity must first demand that the entity take action instead) (emphasis added)). Despite Plaintiffs’ efforts to group themselves together to avoid dismissal, their injuries are easily divisible into two groups—those purportedly affecting FSB, and those allegedly affecting Doña Mildred. Thus, even if Plaintiffs had successfully pled injury in context of the Cataño Land Deal, see Mot. 3-4, Opp. 9-10, 14, this injury could only accrue to FSB, and not to Doña Mildred, as she had no claim on those assets. Similarly, even if Plaintiffs had successfully pled injury in the context of the FSIC Purchase, see Mot. 4- 5, Opp. 13, this injury could only accrue to Doña Mildred, as FSB had no claim on those assets. 4 Plaintiffs do not bother to argue the inverse. FSB cannot sue for injuries to Doña Mildred. 9 Case 3:16-cv-02914-DRD Document 107 Filed 12/06/18 Page 17 of 46 With respect to the specific injuries alleged in the Opposition, first, as explained above, Plaintiffs’ allegations of injury by improper payments and retainers, fees, and salaries, Opp. 8-9, assert honest services fraud, which cannot support a RICO injury here. See supra Section II.A.1(a). Second, Plaintiffs fail to rebut that they lack standing to allege injury from failure to inherit under Titín’s Third Will. Plaintiffs take issue with the Titín Defendants’ characterization of this matter as a “mere inheritance quarrel,” Opp. 1, and assert that “the majority of Plaintiffs’ damages and injury allegations are substantially unrelated to Titín’s estate,” id. 7.5 See Mot. 13-15. Yet they also assert that (i) because Titín and Doña Mildred incorporated and served as members of FSB, Titín “had a contractual relationship” with them, Opp. 11, and (ii) both Plaintiffs had a “protectable business expectancy that Titín would provide them (and not a competing sham ‘charity’ . . .) with a funding source,” id. 12. Plaintiffs cite no authority for the existence of such a legally cognizable expectancy; in short, Plaintiffs aver that because Titín had a sister and they started a charity together, he was obligated to leave his money to them and they could sue others for his failure to do so. This argument is ludicrous and deserves no longer response.6 To the extent one is required, the Motion established that a “hypothetical property interest” does not confer standing. Id. at 13-15. Furthermore, mail and wire fraud require the object of the fraud to be money or property in the hands of the victim. See Cleveland v. United States, 531 U.S. 12, 15 (2000) (“It does not suffice . . . that the object of the fraud may become property in the recipient’s hands; for purposes of the mail fraud statute, the thing obtained must be property in the hands of the victim.”); see also Westchester Cty. Indep. Party v. Astorino, 137 F. Supp. 3d 586, 602-03 (S.D.N.Y. 2015). This 5 In fact, they are so eager to distance their claims from Titín’s estate and Third Will that they do not list their failure to inherit as a “Specific Injury to Plaintiffs’ Business or Property.” Opp. Ex. 3. If Plaintiffs concede they have suffered no RICO injury from loss of expectancy of inheritance from Titín, the Titín Defendants agree for the reasons outlined in the Motion. 6 This revealing allegation is, however, at the heart of this entire case. Plaintiffs expected to inherit Titín’s money and believed they had a right to it, and are now suing those they believe deprived them of that “patrimony.” RCS 39. But as explained in the Motion, Plaintiffs never had a right to Titín’s money and their disappointment does not render liable those who did nothing but effectuate Titín’s wishes. 10 Case 3:16-cv-02914-DRD Document 107 Filed 12/06/18 Page 18 of 46 requirement rules out the money from Titín’s estate as an object of the alleged mail and wire fraud, and thus also precludes any RICO injury accruing to the Plaintiffs from failure to inherit those funds. Third, Plaintiffs have no RICO injury for “loss of fee simple possession of real estate.” Opp. 9. Since FSB is the only Plaintiff alleged to have possessed real estate (i.e., the Cataño Lands), only FSB could possibly claim such an injury. See supra Section II.A.2. But FSB’s purported injury is riddled with problems, including that it is not based on any predicate acts and occurred in 1997, long before the 2012 cutoff under RICO’s statute of limitations. See infra at §§ II.A.4, II.E; Mot. 33-34. And fourth, Plaintiffs cannot base any RICO injury on their claim of “tortious interference with Plaintiffs’ ‘business.’” Opp. 10. Plaintiffs’ claim of tortious interference appears to have three grounds: (1) alleged interference with FSB’s charitable purpose, (2) purported trademark infringement, and (3) supposed interference with Doña Mildred’s inheritance expectancy. Opp. 10-12 nn.7, 8, 9. As explained above, none of these support a RICO injury, as the first two (which concern only FSB) are based on goodwill and cannot support a RICO injury, see supra Section II.A.1(b), and the third is based on the incorrect assumption that Plaintiffs possessed a non-hypothetical property interest in Titín’s estate, see Mot. 13-15, supra Section II.A.2.7 Moreover, the “tortious interference” that Plaintiffs allege is not legally recognized in Puerto Rico. For tortious interference to exist “there must be a contract with which a third person interferes. If what is affected is an expectation or a profitable financial relationship where there is no contract, the action does not lie . . . .” Gen. Office Prods. Corp. v. A.M. Capen’s Sons, Inc., 115 D.P.R. 553, 15 P.R. Offic. Trans. 727, 734 (1984) (emphasis added). No contract is at issue here. 3. The “Specific Injury” Cited In Exhibit 3 Is Not Cognizable Under RICO, And In Many Instances Does Not Appear In The RICO Case Statement. 7 Plaintiffs’ assertion that “Defendants also tortiously interfered with Doña Mildred’s inheritance expectancy . . . [because] Titín’s three wills were procured by fraud and undue influence” also fails. Opp. 12 n.9. Plaintiffs did not plead tortious interference in the Amended Complaint and Plaintiffs offer nothing more than conclusory allegations regarding this purportedly 20-year-long fraud. Moreover, as described in the Motion, Plaintiffs fail to show any proximate causation between the Titín Defendants’ allegedly fraudulent communications to them and third parties and undue influence on Titín. Mot. 19; see also Gen. Office Prods. Corp., 115 D.P.R. 553. 11 Case 3:16-cv-02914-DRD Document 107 Filed 12/06/18 Page 19 of 46 Plaintiffs’ Exhibit 3 lists 21 purported injuries; none are cognizable under RICO.8 As explained above, at least 50 of the alleged injuries in Exhibit 3 concern honest services fraud, which cannot support a RICO injury without bribery or kickbacks. See supra Section II.A.1(a). The first injury in Exhibit 3 merely reflects the Titín Defendants’ receipt of compensation while they were “faithless fiduciaries and servants,” but Plaintiffs do not allege that the Titín Defendants failed to provide the services for which Plaintiffs paid, or articulate why the amounts paid exceeded the cost of similar services elsewhere. Opp. Ex. 3 ¶ 1. Other purported injuries in Exhibit 3 are similarly grounded on honest services fraud, and again plead no bribes or kickbacks. Id. ¶¶ 12 (“numerous instances of self-dealing”), No. 15 (“payments to conflicted attorneys”). Consequently, “Specific Injur[ies]” 1, 12, and 15 are not cognizable under Civil RICO. As also described above, Plaintiffs’ claim of injury from alleged harm to intangibles is not cognizable under Civil RICO. See supra Section II.A.1(b). In particular, Plaintiffs cannot claim as cognizable under RICO those injuries (i) resulting from donations that were allegedly made primarily to benefit and aggrandize the Titín Defendants, see supra Section II.A.1(b)(i), or (ii) based on trademark infringement/unfair competition, see supra Section II.A.1(b)(ii). Thus, “Specific Injur[ies]” 2 and 11 are not cognizable under Civil RICO. In addition, many items in Exhibit 3 fail to specify harm or the basis for fraud in contravention of Rules 8(a) or 9(b), or specify an impermissible basis. See, e.g., Reply Ex. 4, ¶¶ 21 (claiming that the costs of suit are themselves a RICO injury), 5 (referring to “mismanagement of FSB” that resulted in income taxes and penalties without explaining any specifics of the purported fraud); 13 (discussing interest payments without specifying any impropriety or breach); 14 (discussing dividend withholding without detailing why withholding was not permitted); 3 (failing to explain how the purchase of “computer and technology equipment” was outside the bounds of the Martinal-FSB service relationship); 19 (referring to 8 As noted above, Plaintiffs’ list of “Specific Injury” omits any mention of failure to inherit from Titín. See supra 10 n.5. 12 Case 3:16-cv-02914-DRD Document 107 Filed 12/06/18 Page 20 of 46 “dissipation of assets” without any identification of such assets or why Plaintiffs have any injury from the same); 20 (mentioning “misappropriation” of “proprietary information relating to its commercial real estate dealings” without any identification of such “proprietary information”); 4 (nowhere alleging why an organization should not pay rent for its Executive Director as part of her compensation); 16 (failing to describe fraudulent basis or anything beyond seller’s remorse regarding Doña Mildred’s agreement to exchange land for liquid assets); 17 (failing to allege that the two sets of assets at issue had different values at the time of the transaction). Simply alleging “mismanagement of FSB” while providing no detail regarding the same is the opposite of a “Specific Injury,” and does not meet the applicable pleading requirements. These injuries, many of which do not appear in the portion of the RICO Case Statement detailing each Plaintiff’s injuries, do not suffice to show a RICO injury. Fourth, Plaintiffs fail to specify which specific injuries apply to FSB and which apply to Doña Mildred. On their face, 13 of the 21 purported injuries apply only to FSB, Reply Ex. 4 ¶¶ 1-13; 5 of the 21 purported injuries apply only to Doña Mildred, id. ¶¶ 14-18; and only 3 of the 21 purported injuries apply to both (or neither) of the Plaintiffs, id. ¶¶ 19-21. Thus, Doña Mildred cannot assert a RICO injury to her business or property for “Specific Injur[ies]” 1-13, FSB cannot assert a RICO injury to its business or property for 14-18, and Plaintiffs’ vague and unfounded assertions under 19-21 fail to show RICO injuries to business or property for either FSB or Doña Mildred. Therefore, and for the additional reasons articulated in the Motion and the Reply, including Exhibit 4, these items fail to qualify as RICO injuries, and cannot establish either the continuity or relatedness required. See infra Section II.B. 4. Plaintiffs Cannot Establish Proximate Causation of Their Injuries. Plaintiffs have not and cannot establish that their injuries were proximately caused by any viable predicate acts. Plaintiffs first err by conflating but-for causation with proximate causation. Opp. 14 (“But for Defendants’ fraud . . . . But for Defendants’ secretive undue influence and fraudulent rigging of wills . . .”). The RICO statute requires not only “but-for” causation, but also proximate causation—that the plaintiff was injured directly, and “by reason of” a predicate act. 18 U.S.C. § 1964(c); Bridge v. Phoenix 13 Case 3:16-cv-02914-DRD Document 107 Filed 12/06/18 Page 21 of 46 Bond & Indem. Co., 553 U.S. 639, 653-54 (2008). In evaluating causation under RICO, the “general tendency . . . is not to go beyond the first step.” Hemi Grp. LLC v. City of New York, NY, 559 U.S. 1, 10 (2010) (quotations omitted). Having mistaken the showing required, Plaintiffs fail to meet it. For instance, Plaintiffs have not and cannot show how “any purported misrepresentations to FSB, Doña Mildred, or third parties could possibly have ‘proximately caused’ reduced inheritance from Titín.” Mot. 18 (emphasis in original); see also id. 18-19. The Opposition fails to address this, and instead doubles-down on accusations of failure to provide “truthful and disinterested advice” with no causal nexus to the litany of harms alleged. Opp. 13-14. This fails because the provision of advice is at least one step removed from the harm alleged, cutting off proximate causation. See Hemi, 559 U.S. at 10.9 Accusations of “undue influence,” “rigging of wills” and a “sham entity” are also meaningless due to Plaintiffs’ failure to tie these to any predicate acts that would be the proximate cause of their failure to inherit Titín’s wealth.10 Opp. 14-15. Similarly, Plaintiffs have not and cannot show how any predicate acts proximately caused the loss of the Cataño Land, which Plaintiffs do not refute was preceded by only three unrelated predicate acts. Compare Mot. 19-20 with Opp. 14. Rather than address these points head-on, Plaintiffs assert that the Titín Defendants have not proved an “intervening cause.” See Opp. 13-15. While such intervening cause is unnecessary given Plaintiffs’ failure to meet their own burden, it is in fact present on the face of Plaintiffs’ own pleadings. Titín’s Third Will, by which he exercised his unfettered authority to dispose of 9 These averments also fail because, as described above, they are plainly flawed honest-services allegations and there can be no RICO injury flowing from them. See supra II.A.1(a). 10 Plaintiffs’ claim regarding the distribution under Doña Amelia’s will falls victim to the same infirmity. Plaintiffs allege that instead of distributing 50% of Doña Amelia’s property to Doña Mildred, Alfredo Sr., as executor of Doña Amelia’s will, “steered the valuable family real estate assets of Doña Amelia’s estate into his control.” AC ¶ 57. Regardless of the general nature of these accusations, Plaintiffs allege no proximate causation between that purported wrong and any predicate act. See generally AC Ex. A (no communications regarding Doña Amelia’s will, distribution of her estate, or the apartment described in AC ¶ 57); see also id. (listing no communications with Doña Mildred at all prior to February 2005, long after Doña Amelia’s will was probated and years after the 2001 distribution of her estate, AC ¶ 55). 14 Case 3:16-cv-02914-DRD Document 107 Filed 12/06/18 Page 22 of 46 his assets as he wished, is one such intervening cause that cuts off proximate causation. Mot. 18-19. Other intervening causes, such as the government’s declaration of a protected wetland in the Cataño Lands, are also on the face of Plaintiffs’ pleadings and likewise foreclose proximate causation. Mot. 20; AC ¶ 168. Finally, Plaintiffs’ professed hope that “discovery will reveal evidence of proximate causation” is irrelevant, as evidence is not at issue here. Opp. 15 (quoting In re Avandia ) (emphasis added). On this motion to dismiss, Plaintiffs have failed to meet their burden of plausibly alleging proximate causation between the predicate acts they list and their purported injury. Discovery is not a means of skirting the requirements imposed by the Federal Rules and this Court’s Standing Order for RICO cases. C.f. Madonna v. United States, 878 F. 2d 62, 66 (2d Cir. 1989) (“Speculation that “discovery will unearth information tending to prove [plaintiff’s] contention of fraud, is precisely what Rule 9(b) attempts to discourage.”). B. Plaintiffs Cannot Establish A Pattern of Racketeering. The Motion established that Plaintiffs have not adequately pled a pattern of racketeering. Any hope Plaintiffs may harbor of meeting this requirement vanishes once improperly pled predicates of honest services fraud, charitable donations, and trademark infringement are stripped away. See supra passim. 1. No Continuity. As explained in the Motion, Plaintiffs have failed to establish a pattern because they cannot show closed- or open-ended continuity. “RICO claims premised on mail or wire fraud must be particularly scrutinized because of the relative ease with which a plaintiff may mold a RICO pattern from allegations that, upon closer scrutiny, do not support it.” Efron v. Embassy Suites (Puerto Rico), Inc., 223 F.3d 12, 20 (1st Cir. 2000). And, where plaintiffs “assert only mail and wire fraud” as predicate acts, even a “multiplicity of mailings ‘may be no indication of the requisite continuity of the underlying fraudulent activity’ and thus ‘does not necessarily translate into a ‘pattern’ of racketeering activity.’” Gross v. Waywell, 628 F. Supp. 2d 475, 493 (S.D.N.Y. 2009) (citation omitted). Here, Plaintiffs’ “115 predicate acts over 40 years,” Opp. 18, are largely composed of routine payments or communications made while 15 Case 3:16-cv-02914-DRD Document 107 Filed 12/06/18 Page 23 of 46 under a purported conflict of interest, credit for charitable donations, and the use of FSB’s trademark— none of which are viable predicate acts. Without the 95 or more flawed predicate acts regarding honest services, charitable donations, and trademark infringement, Plaintiffs are left with a sporadic collection of mail and wire fraud allegations, spread across two victims, as part of what Plaintiffs themselves describe as a single overarching scheme. This is insufficient to show continuity of any kind. Specifically, when these flawed allegations are subtracted, Plaintiffs are left with approximately 20 alleged predicate acts largely related to the Cataño Land Deal or the FSIC Purchase. Even if these predicate acts were viable, they cannot support closed- or open-ended continuity. First, these purported schemes concern different entities; FSB was purportedly victimized by the Cataño Land Deal and Doña Mildred by the FSIC Purchase. Second, these purported schemes are both limited in time and stale. The FSIC-related allegations fall in a period of just over a year (February 2005 to March 2006)—far less than the “substantial period of time” required for closed- ended continuity. See AC Ex. A ¶¶ 35, 37, 38, 55, 56; H.J. Inc. v. Northwestern Bell Telephone Co., 492 U.S. 229, 242 (1989); Efron, 223 F.3d at 21 (21 months insufficient); Vemco, Inc. v. Camardella, 23 F.3d 129, 134 (6th Cir. 1994) (17 months insufficient); J.D. Marshall Int’l, Inc. v. Redstart, Inc., 935 F.2d 815, 821 (7th Cir. 1991) (13 months insufficient). Similarly, the Cataño-related allegations are too sporadic and far removed from the 1997 transaction at issue, as they span from 2005 to 2012. See AC Ex. A, ¶¶ 44-45, 47, 50, 62-63, 85, 88-89, 92; H.J., 492 U.S. at 239. Third, as explained in the Motion, and per the Plaintiffs’ own words, these allegations at most involve a single financial endeavor to “defraud the Segarra-Boerman Family,” Opp. 17, and targeted only two victims,11 which is too narrow to satisfy closed- ended continuity. See Mot. 22-23; Efron, 223 F.3d at 19. And as both the Cataño and FSIC transactions 11 Plaintiffs again assert injuries to parties other than themselves, such as the Titín Foundation (which Plaintiffs also claim was enriched with funds diverted from Titín’s estate), the Méndez-Bagur Family (which Plaintiffs also claim was receiving funds from the Titín Defendants’ “misappropriation”), as well as a “larger social interest” in protecting supposed victims like themselves. Opp. 17-18, 21 n.14. The RICO statute is clear that only a “person injured . . . may sue.” 18 U.S.C. 1964(c). Plaintiffs lack standing to assert claims on behalf of dead family, the Titín Defendants themselves, and other foundations. 16 Case 3:16-cv-02914-DRD Document 107 Filed 12/06/18 Page 24 of 46 closed long ago (as did any conflict with the Méndez-Bagur family), there is no threat of repetition supporting open-ended continuity. See H.J., 492 U.S. at 241; see also Airlines Reporting Corp. v. Aero Voyagers, Inc., 721 F. Supp. 579, 584-85 (S.D.N.Y. 1989) (no threat of repetition despite 50 alleged acts of mail fraud over 13 months).12 Plaintiffs’ contentions of continuity find no support in the cases they cite. For example, Fleet Credit Corp. v. Sion, 893 F.2d 441, 447 (1st Cir. 1990), King v. Shou-Kung Wang, 663 Fed. Appx. 12, 14 (2d Cir. 2016) (summary order disclaiming precedential effect), and Weizmann Inst. of Sci. v. Neschis, 421 F. Supp. 2d 654, 687-88 (S.D.N.Y. 2005) involved apparently viable, or at least unscrutinized predicate acts.13 The court in Weizmann specifically noted that “Defendants do not appear to dispute that the Complaints adequately plead fraud,” “Defendants also do not appear to dispute the sufficiency of the predicate acts pleaded in the Wire/Mail Fraud Allegations and the Foreign Transport Allegations,” and “Defendants do not appear to dispute that the predicate acts alleged are ‘part of the execution’ of Defendants’ alleged underlying fraudulent scheme.” Weizmann, 421 F. Supp. 2d at 689-90. Here, the vast majority of Plaintiffs’ predicate-act allegations are facially defective. Those remaining are far from “extensive,” Opp. 16, and cannot meet the continuity requirement. 2. No Relatedness. 12 Although Plaintiffs attempt to demonstrate “secondary indicia” by alleging multiple other “schemes to defraud,” see Opp. 17, these are facially insufficient. See supra Sections II.A.4. n.10 (“the distribution of Doña Amelia Boerman’s estate” lacks proximate causation), Section II.A.1(b)(i) (“self dealing with charitable contributions” is not a RICO injury), II.A.1(a) (“self-dealing” allegations fail to state a RICO injury), II.A.2, II.A.4 (“theft of the Titín estate” lacks both injury and proximate causation); AC ¶ 239 (nowhere showing why an unconsummated proposal to divide FSB’s investment portfolio between Doña Mildred and Titín constitutes a RICO scheme by the Titín Defendants or an injury relating thereto). 13 Plaintiffs also cite and attach Estate of Foster v. Gomer, No. 11-cv-1242, at 12 (C. D. Cal. Feb. 15, 2012), which involved much more serious predicate acts—e.g., extortion involving a threat to burn down Foster’s home—reaching far beyond honest-services fraud and leading directly to injury to the plaintiff itself (Foster’s estate). Most importantly, however, the court in that case engaged in no analysis whatsoever of the continuity requirement. Here, since Plaintiffs’ alleged predicate acts are “grounded entirely” on mail and wire fraud, their predicate acts and pattern arguments merit more intense scrutiny. See Waywell, 628 F. Supp. 2d at 493. 17 Case 3:16-cv-02914-DRD Document 107 Filed 12/06/18 Page 25 of 46 Plaintiffs’ alleged pattern fails to establish the relatedness element required for Civil RICO Claims. Despite Plaintiffs’ citation to their purported 115 predicate acts, Opp. 16, as described above, at least 95 of the purported 115 predicate acts are impermissibly based on honest services fraud and other improper predicates, charitable donations, and trademark infringement. See supra Section II.A.1. Without these, Plaintiffs are left with two unrelated, limited episodes, both occurring in the mid-2000s, which themselves are dismissible: the Cataño Land Deal and the FSIC Purchase. These episodes share no common connections, as the Cataño Land Deal allegedly victimized FSB while the FSIC Purchase allegedly victimized Doña Mildred. These stale and unrelated allegations are insufficient to show relatedness. See Feinstein v. Resolution Tr. Corp., 942 F.2d 34, 44 (1st Cir. 1991) (affirming dismissal of RICO claim on relatedness grounds even though two episodes had “some common reference points” including the victims’ identities and similarities in the purposes of the underlying transactions). C. Plaintiffs’ Claims Under Sections 1962(a), (b), and (d) Must Fail. 1. Plaintiffs Have Not Alleged An Acquisition Injury Under Section 1962(b). As explained in the Motion, Plaintiffs “have not and cannot specify additional injury distinct from the injury purportedly caused by the alleged predicate acts,” and accordingly there can be no “acquisition injury” to sustain Plaintiffs’ 1962(b) claim. Mot. 24; see also United States Fire Ins. Co. v. United Limousine Serv., Inc., 303 F. Supp. 2d 432, 450 (S.D.N.Y. 2004) (denying 1962(b) claim where the alleged injury was not “directly resulting” from the acquisition and not “separate and apart” from the injury suffered from predicate acts). While Plaintiffs claim to have alleged a distinct acquisition injury, the paragraphs they cite from their pleadings merely repeat alleged injuries purportedly related to their predicate acts; they discuss no separate injury “resulting from” any acquisition of an enterprise. Opp. 22 (citing AC ¶¶ 38-134, 170-80, 218-20, 419-60). Plaintiffs’ § 1962(b) claim therefore fails. 2. Plaintiffs Have Not Alleged An Investment Injury Under Section 1962(a). As explained in the Motion, Plaintiffs “have not and cannot specify additional injury distinct from the injury purportedly caused by the predicate acts.” Mot. 27. “[M]ere reinvestment of the racketeering 18 Case 3:16-cv-02914-DRD Document 107 Filed 12/06/18 Page 26 of 46 proceeds into a business activity is not sufficient for § 1962(a) standing.” Vicom, Inc. v. Harbridge Merch. Servs., Inc., 20 F.3d 771, 778 n.6 (7th Cir. 1994). While Plaintiffs cite one paragraph from their Amended Complaint and three pages from the RICO Case Statement to the effect that “they suffered injury as a result of the conspiracy to use and invest funds in the operation of the enterprise,” Opp. 23 (citing AC ¶ 417, RCS 73-75), none of the cited material describes any injury arising from such use or reinvestment. See also AC ¶ 416 (alleging conspiracy to invest or use racketeering income to establish and operate enterprises but no separate “reinvestment” harm); RCS 73-75 (same). Moreover, the investment injuries Plaintiffs allege are the same as those alleged in connection with their predicate acts. Compare AC ¶ 417 (alleging investment injuries relating to “FSB’s purpose,” “the benefits of income producing and other real estate,” and the “Segarra-Boerman Family wealth”) with RCS 36; AC ¶¶ 389-90 (same, but as injury caused by predicate acts). Plaintiffs’ § 1962(a) claim therefore fails. 3. Plaintiffs’ Claims Under Section 1962(d) Alleging Conspiracies To Violate Sections 1962(a) and (b) Must Be Dismissed. As explained in the Motion, Plaintiffs’ claims under § 1962(d) for conspiracies to violate §§ 1962(a) and (b) fail because “[w]hen a complaint fails to state a claim with respect to the substantive RICO violation, . . . a conspiracy claim based on that allegation also must be dismissed.” Mot. 26. Plaintiffs do not rebut this argument directly, but merely note that their acquisition injuries are “adequately pled” and that the First Circuit has not opined on the Supreme Court’s statement in Beck that “arguably a plaintiff . . . is required to allege injury from the ‘use or invest[ment]’ of illicit proceeds.” Opp. 23 n.17, 24 n.18 (citing Beck v. Prupis, 529 U.S. 494, 506 n.9 (2000)). This is irrelevant because Plaintiffs have not alleged proper acquisition or investment injuries, much less a conspiracy to inflict acquisition or investment injuries that would suffice under RICO. Plaintiffs’ § 1962(d) claims therefore fail. D. Plaintiffs Cannot Establish A Viable RICO Enterprise. 1. Plaintiffs Have Not Pled Enterprises Distinct From Defendants. 19 Case 3:16-cv-02914-DRD Document 107 Filed 12/06/18 Page 27 of 46 Plaintiffs have not alleged a viable RICO enterprise because they have neglected the person- enterprise distinction. Plaintiffs contend that the Titín Defendants’ enterprise arguments “ignore express allegations,” Opp. 25, but the Motion merely holds Plaintiffs to the inconsistent facts they pled. As Plaintiffs fail to rebut the arguments raised in the Motion, this section focuses on the few points that are not already addressed there. First, as to Counts 3 and 4, Plaintiffs do not dispute the applicability of the “distinctiveness requirement”—that the Titín Foundation cannot be a RICO enterprise where its subsidiary FSIC is a defendant. Mot. 29 (citation omitted); Opp. 25-26. Instead, Plaintiffs attempt to cabin this concession to 2014 onward and note that some courts have not followed this precedent (though Plaintiffs do not argue for any alternative principle). Opp. 26. But Plaintiffs did not plead any such temporal limits to Counts 3 and 4, and cannot recharacterize these accusations now, in opposition to a motion to dismiss. Second, Plaintiffs acknowledge a circuit split untouched by the First Circuit on whether the person- enterprise distinction applies to claims under § 1962(b). Opp. 26. Plaintiffs argue that the absence of a requirement in § 1962(b) that the defendant be “employed by or associated with” an enterprise means the person-enterprise distinction does not apply to § 1962(b) claims. Opp. 26-27. But the sole case Plaintiffs cite addressed claims under § 1962(a), not (b), and there is no basis for Plaintiffs’ assertion that § 1962(a) and (b) are “logically akin.” Opp. 26. Though § 1962(a) may not “require a relationship between the person and the enterprise,” § 1962(b) does, because just as it would “stretch[] the language too far to suggest that a corporation can be employed by or associated with itself” under § 1962(c), it would be illogical to suggest that an enterprise can acquire itself under § 1962(b). Schofield v. First Commodity Corp. of Boston, 793 F.2d 28, 31 (1st Cir. 1986). In other words, § 1962(b)’s requirement that a defendant acquire an enterprise implies more distinctiveness between the defendant and the enterprise than § 1962(a)’s requirement that a defendant invest in an enterprise. Plaintiffs’ counterargument cannot save their claim. 20 Case 3:16-cv-02914-DRD Document 107 Filed 12/06/18 Page 28 of 46 Third, Plaintiffs cite Cruz v. FX DirectDealer, LLC, 720 F.3d 115, 121 (2d Cir. 2013), to argue that their § 1962(b) claims “do not fail in toto” for lack of person-enterprise distinctiveness. Opp. 27. In that case, however, the court affirmed the dismissal of a RICO claim in toto, partly because the alleged enterprise consisted of an association of individuals that included the defendant itself. 720 F.3d 115, 119- 21. Here too, Plaintiffs’ claims should be dismissed in toto because their alleged enterprises improperly overlap with the Titín Defendants. 2. Plaintiffs Fail to Plead Adequate Participation in the Enterprise by Defendants. Plaintiffs argue that to establish “sufficient participation” in an enterprise, they merely need to state that the Titín Defendants worked for or provided services to the enterprise. See Opp. 27. On this premise, Plaintiffs argue that the Titín Defendants participated in the enterprises because they were the enterprise’s president, lawyers, fiduciaries, or persons who otherwise conducted its affairs. Id. The law does not permit such a scattershot approach to liability. Mot. 30-31. If Plaintiffs were correct, any president, lawyer, fiduciary, or other actor conducting the affairs of what later was described as a RICO enterprise would be a subject to liability merely by virtue of that association. For the reasons set forth in the Motion—including that “Plaintiffs cannot simply describe the Titín Defendants’ day-to-day job responsibilities and then assert, in conclusory fashion, that these commonplace obligations were part of a racketeering scheme”—Plaintiffs’ allegations are insufficient to state a claim under RICO as to Alfredo Jr., QC, MRE, and MMC. Id. The Amended Complaint also fails to allege participation in any enterprise by Sofía, the Titín Foundation, and FSIC. Id. And without valid claims against other defendants, Plaintiffs cannot maintain a RICO action against Alfredo Sr. as an individual. See id. 3. Plaintiffs Implicitly Concede That They May Not Plead The Existence Of Multiple Factually Contradictory Enterprises. Plaintiffs implicitly concede that pleading inconsistent facts is impermissible. See Opp. 28. But Plaintiffs allege inconsistent motives for the Titín Defendants’ participation in enterprises. For example, they include the Titín Foundation in the group with a conspiratorial purpose and yet also exclude the Titín 21 Case 3:16-cv-02914-DRD Document 107 Filed 12/06/18 Page 29 of 46 Foundation from the group with a conspiratorial purpose. Compare AC ¶ 362 with AC ¶ 391. As Plaintiffs have contradicted themselves on a question of fact, their assertions of RICO enterprises must fail. See Mot. 31-33; see also Flagstaff Med. Ctr., Inc. v. N.L.R.B., 715 F.3d 928, 933 (D.C. Cir. 2013) (“Motive is a question of fact”); Hazel v. U.S. Postmaster Gen., 7 F.3d 1, 4 (1st Cir. 1993) (similar). E. Plaintiffs’ RICO Claims Are Time-Barred. Plaintiffs’ claims cannot survive RICO’s limitations period because Plaintiffs knew about their injuries—which is all that matters under RICO—more than four years before filing their complaint. See Mot. 33-34. Leaving aside Plaintiffs’ impermissible allegations of mail and wire fraud related to honest services, charitable donations, and goodwill, Plaintiffs are left only with allegations related to the Cataño Land Deal and the FSIC Purchase, each with a singular Plaintiff who must independently satisfy RICO’s limitations period and other requirements. See supra Section II.A.1. The underlying transactions for the Cataño Land Deal and the FSIC Purchase closed in 1997 and 2006, respectively, with Plaintiffs’ full awareness and involvement. As Plaintiffs did not file a complaint until 2016, their RICO claims are time- barred. The “two equitable estoppel doctrines” Plaintiffs cite do not apply. Opp. 30. First, Plaintiffs’ claim that the “adverse domination doctrine” means that “the statute of limitations only commenced when Defendants lost control of the entity, FSB, in September of 2014,” is factually and legally inaccurate. Id. The adverse domination doctrine can only apply to corporations, and it thus cannot save Doña Mildred’s claims. Moreover, it requires “full, complete and exclusive control” by the alleged wrongdoers, which Plaintiffs have not alleged. Saylor v. Bastedo, 100 F.R.D. 44, 51 (S.D.N.Y. 1983). By Plaintiffs’ own allegations, at the end of 2004, the four Segarra-Boerman family members on the FSB board outnumbered the two non-family members (or at most a three-to-three split if non-Defendant Titín were not counted among the family). AC ¶ 81. Throughout this time, MASH and the other family members retained the “ability to question [Alfredo Sr.’s] conduct or discover the truth.” AC ¶ 78. By December 2009, “five of the seven Directors of FSB were members of the Segarra-Boerman nuclear family.” AC ¶¶ 188, 218. 22 Case 3:16-cv-02914-DRD Document 107 Filed 12/06/18 Page 30 of 46 And in May 2012, when the FSB Board increased from 7 to 11 members, the “Segarra-Stubbe Directors” still enjoyed a 7-to-4 majority, including the non-family members they nominated, over the other directors. AC ¶ 220. The Titín Defendants did not “lose control” of FSB in September 2014, Opp. 30; they never had control of it, much less the “full, complete and exclusive control” required for adverse domination. Second, “fraudulent concealment” does not apply. Plaintiffs argue that Defendants “actively misled Plaintiffs” and “remained silent despite their affirmative fiduciary duty to disclose.” Id. But these arguments again revolve around Plaintiffs’ honest-services theory, which fails. See above at § II.A.1(a). When Plaintiffs purportedly discovered their advisors’ conflicts is irrelevant; what matters is the discovery of a RICO injury, “not discovery of the other elements of a claim.” Lares Grp., II v. Tobin, 221 F.3d 41, 44 (1st Cir. 2000) (emphasis added). Plaintiffs have no RICO injury from their flawed allegations of honest services fraud and similar acts; their essential allegations of injury stem from the Cataño Land Deal and the FSIC Purchase. See supra Section II.A.1(a). And Plaintiffs fail to allege that Defendants did anything to conceal injuries stemming from these transactions (as opposed to purported conflicts), or to explain why they were not on inquiry notice of their injuries despite their full involvement in these transactions. Moreover, Alfredo Sr. was under no duty to disclose. Mot. 18. Fraudulent concealment cannot apply. III. PLAINTIFFS’ UNFAIR COMPETITION CLAIMS MUST BE DISMISSED. Like the Amended Complaint, the Opposition attempts to dress common law tort claims in the clothing of unfair competition. This misapplication seeks an unwarranted stretch in the law, and these claims should be dismissed. Most importantly, neither the Amended Complaint nor the Opposition establish why Martinal’s use of its own logo, which it has indisputably owned for many years and which Plaintiff FSB borrowed with full knowledge of Martinal’s ownership, could possibly give rise to any claim by FSB for unfair competition. A. The Opposition Fails to Buttress Plaintiffs’ Unfair Competition Claims As To Plaintiff Doña Mildred And Five Defendants. 23 Case 3:16-cv-02914-DRD Document 107 Filed 12/06/18 Page 31 of 46 1. Plaintiff Doña Mildred Lacks Standing. Plaintiff Doña Mildred lacks standing to lodge Unfair Competition Claims. Plaintiffs argue that Doña Mildred possesses a reasonable interest in protecting the FSB Mark merely because it “was built off of her name” and “[h]arm to FSB necessarily harms Doña Mildred.” Opp. 31; see also id. at 11. But standing under the Lanham and Puerto Rico Trademark Acts is limited to parties who can show an injury to a commercial interest in reputation or sales; Doña Mildred cannot. Mot. 35. Plaintiffs’ continued failure to plead any commercial injury to Doña Mildred is fatal. The “Lanham Act authorizes suit only for commercial injuries” and standing exists only “when deception of consumers causes them to withhold trade from the plaintiff.” Lexmark Int’l, Inc. v. Static Control Components, Inc., 134 S. Ct. 1377, 1391 (2014) (emphasis added); see also Ahmed v. Hosting.com, 28 F. Supp. 3d 82, 89 (D. Mass. 2014) (noting that, prior to Lexmark (and to the extent Lexmark does not apply), Lanham Act standing was “generally understood . . . to require some degree of commercial injury to the plaintiff . . . .”) (emphasis added). Doña Mildred’s lack of any commercial interest in the FSB Mark dooms her claim. The authorities Plaintiffs cite are not to the contrary. As noted above at Section II.A.2, Díaz Olivo’s notion that an individual may sue derivatively on behalf of a charity is irrelevant here because FSB itself has sued. See Opp. 31 (citing Díaz Olivo, Las Organizaciones, 69 Rev. Jur. U.P.R. at 760). Plaintiffs’ remaining authorities are similarly irrelevant, or actually support the Titín Defendants’ arguments. See Opp. 31-32 (citing London v. Carson Pirie Scott & Co., No. 85 C 9712, 1987 WL 11382, at *2 (N.D. Ill. May 22, 1987) (sole stockholder of a corporation had standing to sue because defendant’s actions could injure corporation, and thus “adversely affect plaintiff’s economic interests”) (emphasis added); Planetary Mot., Inc. v. Techsplosion, Inc., 261 F.3d 1188, 1199-1200 (11th Cir. 2001) (individual who created and distributed software under a mark engaged in commercial competition, and retained standing despite lacking profit motive); Camel Hair & Cashmere Inst. of Am., Inc. v. Assoc’d Dry Goods Corp., 799 F.2d 6, 11-12 (1st Cir. 1986) (trade association had standing because its member commercial actors did)). 24 Case 3:16-cv-02914-DRD Document 107 Filed 12/06/18 Page 32 of 46 2. Plaintiffs’ Claims Against Five Of The Titín Defendants Must Be Dismissed. Plaintiffs fail to cite to any infringing conduct by FSIC, QC, the Law Firm, Alfredo Jr., or the Titín Foundation with the specificity required under Rule 8(a). The Opposition cites to no conduct by QC at all, infringing or otherwise. Opp. 32; AC ¶¶ 198-211, 478-90. Similarly, it points to no actual infringing conduct by either Alfredo Jr. or Martinal, and states merely that other Titín Defendants acted “in association with the trademarked logo of Martinal, [which is Alfredo Jr.’s] company.” Opp. 32. Plaintiffs describe neither why that “association” results in liability nor why the Court should pierce the corporate veil to hold an officer personally liable for a company’s actions. If it applies (which it should not), Rule 9(b) also bars these claims. Plaintiffs suggest that their Unfair Competition Claims are similar to those for “fraud, misrepresentation, concealment, and deceit,” Opp. 33 n.25, which would in turn mean that Rule 9(b) would apply, see Fed. R. Civ. P. 9(b). But Plaintiffs fail to plead facts against the above-described Titín Defendants with the particularity required. See, e.g., AC ¶¶ 206 (describing no dates, times, or context, regarding when unnamed “employees of [the Law Firm] and Martinal” purportedly sent checks or made statements which could obscure the source of funds), 199- 211, 485, 493 (describing no specific letters sent by or on behalf of FSIC); id. Ex. A (describing no communications from or assisted by FSIC, QC, the Law Firm, Alfredo Jr., or the Titín Foundation which “intentionally obscured the true source of funds,” id. ¶ 206). B. The Unfair Competition Claims Are Barred By Puerto Rico’s One-Year Statute of Limitations and Laches. Plaintiffs’ Unfair Competition Claims are time-barred and must be dismissed. The Motion showed that Plaintiffs’ claims under the Puerto Rico Trademark Act are barred by the statute of limitations and their parallel Section 43(a) claims are barred by either the statute of limitation or laches. Mot. 36. Plaintiffs raise three main arguments in opposition. First, they allege that a longer four-year statute of limitations should apply. Opp. 32-33. Second, they claim that, as a general matter, laches cannot be invoked “where Defendants’ actions were calculated to trade upon Plaintiffs’ goodwill and reputation.” 25 Case 3:16-cv-02914-DRD Document 107 Filed 12/06/18 Page 33 of 46 Id. 33-34. Finally, they claim that the Titín Defendants “cannot establish the requisite elements to show laches.” Id. 34 n. 34. Each of these arguments are misguided, and none saves Plaintiffs’ claims. Plaintiffs’ assertion that a four-year limitation period applies is baseless. Plaintiffs cite 31 L.P.R.A. § 3512 for this period, and describe it as applying to “serious dolus . . . which courts have applied for fraud, misrepresentation, concealment, and deceit.” Opp. 33 n.25. Regardless of Plaintiffs’ failure to cite to any such “courts,” Plaintiffs omit that on its face, this period applies only to actions to nullify contracts: the provision is placed in a chapter of the Civil Code entitled “Nullity of Contracts”; the provision itself is entitled “Prescription of action for nullity”; and it prescribes that an “action for nullity shall last four (4) years.” 31 L.P.R.A. § 3512; see also Arrieta Gimenez v. Arietta Negron, 672 F. Supp. 46, 49 (D.P.R. 1987) (“31 L.P.R.A. secs. 3408 and 3512, govern actions for nullification of a contract.”). As the Amended Complaint nowhere seeks to nullify a contract, including with respect to the Unfair Competition Claims—see AC ¶¶ 530-551—a four-year limitations period does not apply. Rather, Puerto Rico’s one- year limitation for torts, which runs “from the time the aggrieved person had knowledge,” applies. 31 L.P.R.A. § 5298.14 Plaintiffs’ suggestion that a defendant cannot claim laches where its “actions were calculated to trade upon [p]laintiffs’ goodwill and reputation” is untrue and distorts the authorities cited. In Jordan K. Rand, Ltd. v. Lazoff Bros. Inc., the district court granted a preliminary injunction and found the “defendant’s testimony . . . unworthy of belief” after an evidentiary hearing at which “proof [was] adduced.” 537 F. Supp. 587, 590 (D.P.R. 1982). Similarly, in Baker v. Simmons Co., the First Circuit decided an appeal challenging the district court’s issuance of an injunction based “on all the evidence.” 307 F.2d 458, 461 (1st Cir. 1962). Here, no preliminary injunction is sought, and no “proof” or “evidence” precludes the Titín Defendants from asserting a common defense. Plaintiffs’ odd interpretation of these 14 As shown below, Plaintiffs’ bare assertion of a continuing tort does not save their Unfair Competition Claims. See infra Section I.E. 26 Case 3:16-cv-02914-DRD Document 107 Filed 12/06/18 Page 34 of 46 cases would categorically exclude all defendants accused of unfair competition from ever claiming laches on a motion to dismiss, no matter how facially untimely the claims. This is not the law. Finally, Plaintiffs’ assertion that the Titín Defendants “cannot establish the requisite elements to show laches,” id. 34 n.26, both mistakes the burden and is unsupported by fact. The applicable Puerto Rico statute of limitations period is one year. See supra Section III.B; Mot. 36-37. Plaintiffs admit that they learned of the latest purportedly tortious act over a year ago. See AC ¶ 210. Therefore, “a presumption of laches [has been] created” and Plaintiffs bear the burden of refuting it. See Puerto Rican- Am. Ins. Co. v. Benjamin Shipping Co., 829 F.2d 281, 283 (1st Cir. 1987) (affirming dismissal of admiralty action for laches under one-year statute of limitations imposed by 31 L.P.R.A. § 5298).15 Plaintiffs’ feeble attempts to meet their burden by claiming that “delay in bringing suit was []reasonable and . . . defendant was [not] prejudiced by the delay” fall short. Id. First, while Plaintiffs allege “intentional concealment,” and “adverse domination,” Opp. 34 n.26, they also admit that FSB severed all ties with the Titín Defendants—thus ending any “adverse domination” or “concealment” and opening any records to discovery—no later than September 2014, AC ¶¶ 287, 292-93; see also supra Section II.E (Plaintiffs have not pled adverse domination at all). They cite to only one instance of purported unfair competition after that time, which “FSB learned” of in 2015. Id. ¶ 210. These excuses do not justify years of delay before seeking relief. Second, the Titín Defendants did indeed suffer prejudice from Plaintiffs’ delay, including through loss of the chance to (i) properly evaluate Plaintiffs’ claims in the late-2016 settlement negotiations, see infra Section IV.C.2, and/or (ii) cut short any putatively continuing tortious behavior so as to limit damages. C. Plaintiffs Permitted The Authorized Defendants To Use The FSB Mark. 15 Although Plaintiffs never raise this issue, the changes in the Amended Complaint do not “relate back” to the date of the Original Complaint for limitations purposes. See Fed.R. Civ. P. 15(c). The Amended Complaint adds new Titín Defendants and the Unfair Competition Claims lack a common transaction and occurrence (or a common nucleus of operative fact) with the acts underlying the other claims. See AC ¶ 198-211. Thus, if Plaintiffs’ Section 43(a) claim is the only surviving federal claim, the Court may decline to exercise supplemental jurisdiction over the PR Claims. See infra Section V. 27 Case 3:16-cv-02914-DRD Document 107 Filed 12/06/18 Page 35 of 46 The Opposition confirms that FSB consented to the Authorized Defendants’ use of the FSB Mark. Plaintiffs concede that the “Martinal Administration Contract gave Defendants the right to control the ‘administration and management of all of FSB’s property.’” Opp. 34 (emphasis added). Use of FSB’s name was part and parcel of “Defendants[’] . . . right to control.” See id.16 By executing and maintaining that contract, FSB consented to the Titín Defendants’ handling of any work involved with administering and managing FSB’s property and executing its charitable purpose, including sending letters and executing documents in FSB’s name, creating brochures with FSB’s name, writing FSB checks, and otherwise using the FSB Mark. See, e.g., AC ¶¶ 26, 28, 70, 208. FSB was aware of the Titín Defendants’ efforts on its behalf for many years; it cannot now claim that it did not authorize use of the FSB Mark.17 D. Plaintiffs Authorized Joint Use Of The FSB And Martinal Marks. Plaintiffs have failed to show that any use of the FSB Mark in conjunction with the Martinal Mark was unauthorized. As unauthorized use is a necessary element of unfair competition, this dooms Plaintiffs’ claims. See Mot. 37-38. The Amended Complaint makes clear that Plaintiffs were well aware of the Titín Defendants’ joint use of the Martinal and FSB Marks at least as early as October 2009. See AC ¶ 208; Ex. A ¶ 79 (email described in AC ¶ 208 dated Oct. 27, 2009); see also AC ¶¶ 26, 68, 70-71, 206-07; Mot. 39-40. Plaintiffs cannot argue years later, and in spite of their inaction, that they never 16 Plaintiffs’ assertion that the contract is “silen[t] as to the use of FSB’s intellectual property” is irrelevant. Opp. 34. “Personal property” includes “intellectual property” by any standard definition. See Gaia Techs., Inc. v. Reconversion Techs, Inc., 93 F.3d 774, 777 (Fed. Cir. 1996) (“Patents and trademarks, like other personal property, may be conveyed . . . .”), amended on reh’g in part, 104 F.3d 1296 (Fed. Cir. 1996); Black’s Law Dictionary 1254 (8th ed. 2004) (“personal property” is “[a]ny movable or intangible thing that is subject to ownership and not classified as real property.”) (emphasis added). 17 The cases Plaintiffs cite are inapposite. Opp. 34. In WEC Holdings, LLC v. Juarez, the defendant claimed that the plaintiff had “expressly acknowledged that the [defendant] [wa]s an owner of the mark.” No. 2:07-CV-00137-BES-PAL, 2008 WL 345792, at *2 (D. Nev. Feb. 5, 2008) (emphasis in original) (quotation marks omitted). No Titín Defendant has ever asserted ownership of FSB’s Mark. Similarly, the uncontroversial statement in ProFitness Physical Therapy Ctr. v. Pro-Fit Orthopedic & Sports Physical Therapy P.C. that “a plaintiff communicates active consent by conduct that amounts to an explicit or implicit assurance” precisely describes Plaintiffs’ adherence to the Martinal Administration Contract in full knowledge of the Titín Defendants’ use of the FSB Mark. 314 F.3d 62, 68 (2d Cir. 2002). 28 Case 3:16-cv-02914-DRD Document 107 Filed 12/06/18 Page 36 of 46 consented. Plaintiffs also cannot claim that authorization was withdrawn, Opp. 34-35, as they admit that only “two FSB directors,” and not the organization itself, objected to using the Martinal Mark alongside FSB’s. AC ¶ 208. Moreover, the Titín Defendants would be gravely prejudiced if they were forced to give up their own Martinal Mark, which they have trademarked, and only lent to FSB. See AC ¶ 26. E. Plaintiffs Allege No Continuing Harm Meriting An Injunction. Plaintiffs are not entitled to injunctive relief because they do not to allege continuing irreparable harm. Plaintiffs’ first claim—that they will be harmed by the Titín Foundation’s use of the Martinal Mark, Opp. 35—is curious given that FSB has already changed its logo, and thus remedied any prospective confusion. AC ¶ 202. Plaintiffs also fail to square their admission that Martinal owns the rights to its Mark, id. ¶¶ 26-27, 203, 483, with their parallel claim that FSB has a right to prohibit Martinal from using that Mark as it sees fit, Opp. 35. Plaintiffs’ second claim—that they are not required to show present or future confusion to obtain an injunction, Opp. 35—is simply ridiculous, as without showing a present or future risk of confusion, Plaintiffs cannot show the “irreparable harm” necessary for that relief.18 IV. THE BREACH CLAIM SHOULD BE DISMISSED. Plaintiffs have failed to counter the Motion’s showing that (i) the Breach Claim does not give rise to federal jurisdiction, (ii) supplemental jurisdiction over the Breach Claim (or supplemental jurisdiction over other claims based on the Breach Claim) is inappropriate due to a lack of common facts, (iii) Puerto Rico substantive law governs the Breach Claim and requires dismissal, (iv) Plaintiffs’ continued settlement negotiations after they purportedly reached a final agreement doom their claim, and (v) claiming damages for the full amount of the contract is impermissible under settled contract principles. A. The Breach Claim Does Not Give Rise To Federal Subject Matter Jurisdiction. 18 As the Titín Defendants have stated, Mot. 40, and Plaintiffs have apparently accepted, Opp. 35, the Titín Defendants do not and will not use the FSB Mark, which similarly moots any purported “irreparable harm” from denial of an injunction on this ground. 29 Case 3:16-cv-02914-DRD Document 107 Filed 12/06/18 Page 37 of 46 Plaintiffs fail to meet their burden to establish subject matter jurisdiction over the Breach Claim because they have not shown that it presents any federal question. Plaintiffs do not dispute that, absent diversity of parties not present here, see AC ¶ 31, federal courts presumptively lack subject matter jurisdiction over a breach of contract claim. Compare Mot. 41-43, with Opp. 36. Nor do Plaintiffs dispute that a federal court may exercise jurisdiction over such a claim in only two rare circumstances: (i) when a federal issue in the contract claim is “decisive” and “substantial,” or (ii) when a court previously and independently exercised jurisdiction over a plaintiff’s claim before settlement was reached. Compare Mot. 41-43, with Opp. 36. The Breach Claim meets neither exception. Plaintiffs fail to explain why the Breach Claim presents any federal issue. The Opposition’s conclusory assertion that the Breach claim poses a federal question “as a standalone federal claim or a . . . claim under Puerto Rico law with embedded federal questions,” Opp. 36, describes no “decisive” question of federal law that must be decided to adjudicate a straightforward breach of contract claim. Id. Plaintiffs only highlight this deficiency by citing Rhode Island Fishermen’s All., Inc. v. Rhode Island Dep’t Of Envtl. Mgmt., 585 F.3d 42 (1st Cir. 2009), where such an issue was present, and “it [was] not logically possible for the plaintiffs to prevail on this cause of action without affirmatively answering the embedded question of . . . federal law.” Id. at 49 (cited in Opp. 36). Similarly, the Opposition nowhere establishes that Civil RICO is one of the limited set of federal statutes implicating particularly federal concerns that can give rise to federal jurisdiction when a pre-suit settlement is breached. See Mot. 42-43 (Titín Defendants “have been unable to find a single instance where a court has exercised federal jurisdiction over a pre-suit settlement of Civil RICO claims”); Opp. 36 (citing no such cases).19 19 Plaintiffs’ citation to Dice v. Akron, C. & Y. R. Co. is unavailing. 342 U.S. 359 (1962). The Motion cited this case as an example of a statute—specifically, the Federal Employers’ Liability Act— where particularly federal concerns were present. Mot. 43. Plaintiffs fail to show that Civil RICO implicates similar federal concerns. To the contrary, in Tafflin v. Levitt, the Court “perceive[d] no ‘clear incompatibility’ between state court jurisdiction over civil RICO actions and federal interests” and “no significant danger of inconsistent application of federal criminal law” from adjudication by state courts. 493 U.S. 455, 464-65 (1990) (emphasis added). If state courts can preside over Civil RICO claims, it is unclear why they cannot also adjudicate settlements of such claims. 30 Case 3:16-cv-02914-DRD Document 107 Filed 12/06/18 Page 38 of 46 Plaintiffs also fail to show why breach of a pre-suit settlement of a Civil RICO claim should give rise to federal jurisdiction. In support of this proposition, which would dramatically expand the scope of federal jurisdiction, the Opposition cites only to a case cited in the Motion, see Mot. 45-46, which found that a post-suit settlement agreement resolving federal claims may be governed by federal substantive law, and nowhere addressed the appellate or district court’s subject matter jurisdiction over the claim. See Quint v. A.E. Staley Mfg. Co., 246 F.3d 11, 14 (1st Cir. 2001). This case stands for the undisputed notion that a federal court may retain jurisdiction over a settlement after it has exercised jurisdiction over the original action, not that it has jurisdiction over every agreement releasing federal claims. See Mot. 43-44. B. Plaintiffs Concede That Supplemental Jurisdiction Does Not Apply. The Opposition fails to show why the Breach Claim should be resolved in the same action as the other claims. In the Motion, the Titín Defendants cited multiple authorities and the Amended Complaint for the propositions that (i) the facts underlying the Breach Claim are entirely distinct from those underlying the other claims in this action, (ii) absent such a “common nucleus of operative fact,” a court should not exercise supplemental jurisdiction, and (iii) where federal claims are dismissed before trial, so too should state law claims. Mot. 44-45, 49-50. Plaintiffs respond by claiming, without citations, that “the facts alleged in the underlying claims and the claim for breach of the [settlement] have much in common,” Opp. 37 n.30, and by citing authority that supplemental jurisdiction is “flexible,” Opp. 36-37. Plaintiffs fail to explain why the Breach Claim merits the exercise of any such discretion. Plaintiffs do not describe any overlap between the operative facts underlying the Breach Claim (occurring in 2016) and the other claims (occurring up to 2015).20 Declining supplemental jurisdiction would narrow the 20 Plaintiffs’ feeble assertion that “repudiation of the settlement agreement is . . . consistent with the racketeering pattern supporting Plaintiffs’ RICO claims,” Opp. 37 n.30, reinforces the absence of a common nucleus of fact. Per Plaintiffs’ own language, the purported breach is “consistent with,” not “a part of,” any RICO pattern. Plaintiffs fail to show how proving either the Breach Claim or the other claims would be affected by division into separate actions, other than by hampering their efforts to cast the Titín Defendants as villains. 31 Case 3:16-cv-02914-DRD Document 107 Filed 12/06/18 Page 39 of 46 issues and conserve Court and party resources. And the Breach Claim requires interpreting Puerto Rico law, which Puerto Rico (not federal) courts should address. See infra Section V. C. Puerto Rico Substantive Law Applies And Requires Dismissal. Plaintiffs fail to refute that Puerto Rico substantive law applies to the Breach Claim, regardless of whether that claim gives rise to federal subject matter jurisdiction. The Opposition states ipse dixit that “Puerto Rico law does not control, federal common law does.” Opp. 37. But it nowhere rebuts the controlling authority holding that state law presumptively applies absent a significant conflict between it and federal policy. See Mot. 45-46 (citing, inter alia, Texas Indus., Inc. v. Radcliff Materials, Inc., 451 U.S. 630, 640-41 (1981); Kagan v. El San Juan Hotel & Casino, 7 F.3d 218, at *3 (1st Cir. 1993)). Both Plaintiffs’ one-sentence response and the inapposite authorities it cites fail to justify departure from the default application of Puerto Rico law. See Opp. 37 (citing Williams v. Metzler, 132 F.3d 937, 946 (3d Cir. 1997) (breach of settlement of claim under Energy Reorganization Act judged by federal common law); Fulgence v. J. Ray McDermott & Co., 662 F.2d 1207, 1208 (5th Cir. 1981) (breach of settlement of Title VII claim judged by federal common law)).21 1. Contracts Formed By Agents Need An “Authentic Document” To Be Valid. Plaintiffs fail to establish why the Breach Claim should be exempt from the “authentic document” requirement. See Mot. 46-47; Opp. 37-39. Under Puerto Rico law, forming a contract through an agent requires an “authentic document.” 31 L.P.R.A. § 3453(6). “[T]he authentic document rule is a formal and absolute rule . . . .” Mot. 46-47 (collecting cases). While Plaintiffs point to an exception for “commercial contracts,” and instances where the requirement “may cause prejudicial delay to the nature and rapidity of mercantile traffic,” Opp. 38 (citing 31 L.P.R.A. § 3453(6) (emphasis added)), they do not 21 As detailed above and in the Motion, certain statutes “implicate[] particularly federal concerns” such that a claim alleging breach of a settlement may confer federal subject matter jurisdiction. Supra Section IV.A; Mot. 42-43. As similar considerations apply, it is unsurprising that some of these cases may also apply federal common law. But as also detailed above, neither the Titín Defendants nor Plaintiffs have found any cases finding that similar concerns apply in the Civil RICO context. Supra Section IV.A. 32 Case 3:16-cv-02914-DRD Document 107 Filed 12/06/18 Page 40 of 46 even attempt to show why the purported settlement agreement—which bound parties not engaged in commerce with each other—either was a “commercial contract” or implicated “mercantile traffic” in any way. Opp. 38. Even if the purported settlement were a commercial contract—which it was not—it would still be invalid and “produce no obligation or cause of action” because it was not “reduced to writing” though its validity “require[d] certain necessary forms or formalities.” 10 L.P.R.A. §§ 1303. Plaintiffs obfuscate the law in an effort to evade the authentic document requirement. Plaintiffs’ assertion that a contract exists “when consent, object and cause are present,” Opp. 37, applies as a baseline to contracts generally, but does not negate the additional requirement that “[i]n all cases, contracts made through agents shall be made by means of authentic documents.” 31 L.P.R.A. § 3453(6). Plaintiffs have confused a necessary condition for a sufficient one. Similarly, Plaintiffs’ repeated argument that contracts exist “provided the essential conditions required for their validity exist,” Opp. 37, 39, begs the question by assuming that an “authentic document” is not one of these essential conditions, when in fact, it is. Finally, the Opposition cites 31 L.P.R.A. § 3452 for the proposition that “once the basic elements of a contract exist, the parties may compel each other to execute the contract in the form required by law,” Opp. 37-38 (emphasis in original), and claims that the ability to compel compliance with formalities does not undercut the validity of the contract, Opp. 39. But Plaintiffs ignore the first phrase of that provision, which specifies that a party may invoke this provision “[s]hould the law require the execution of an instrument or other special formality in order to make the obligations of a contract binding.” 31 L.P.R.A. § 3452; Opp. 38. This provision does not mean that a contract is valid regardless of formalities; rather, a contract is not binding absent those formalities, though a party may compel another to make it binding by completing them. 31 L.P.R.A. § 3452. That Plaintiffs never invoked this provision to compel the Titín Defendants to make the alleged settlement binding is more evidence that no agreement ever existed. 2. Plaintiffs Fail To Explain The Ongoing Settlement Discussions. 33 Case 3:16-cv-02914-DRD Document 107 Filed 12/06/18 Page 41 of 46 The Opposition unsuccessfully portrays their former counsel’s August 8, 2016 letter as merely formalizing an agreement already reached.22 Opp. 39-40. But Plaintiffs cannot ignore that on August 8, 2016—three days after Plaintiffs claim the agreement was reached—Plaintiffs’ counsel was making forward-looking statements about a settlement that might be reached at some point in the future. Mot. Ex. 1 at 2. Plaintiffs’ complete failure to address the September 8 letter is also telling. Opp. 39. In that letter, sent a month after settlement allegedly was reached, Plaintiffs acknowledged and rejected a $2 million “August 31, 2016 settlement offer” from the Titín Defendants. Mot. Ex. 2 at 1. Plaintiffs do not even attempt to reconcile an August 5 settlement with their own continuation of settlement discussions, including consideration of a counteroffer bearing very different terms, over a month later. See Mot. 48.23 3. Plaintiffs Cannot Claim The Full Contract Amount. This Court should dismiss the Breach Claim to the extent it demands payment of $26 million of consideration under the purported settlement. Plaintiffs do not dispute that, if a settlement existed, they had the option of “exacting the fulfilment of the obligation or its rescission.” 31 L.P.R.A. § 3052 (emphasis added); Mot. 49. Plaintiffs thus could choose between (i) “exacting the fulfilment of the obligation” by continuing to refrain from filing suit and seeking $26 million, or (ii) rescinding the contract, retaining their right to sue, and seeking any damages from their failure to receive $26 million at that time. Plaintiffs have waffled on this question; while the Amended Complaint asserts that the purported 22 Contrary to Plaintiffs’ insinuations, the Titín Defendants did not disregard Federal Rule of Evidence 408 when referencing the Plaintiffs settlement letters in the Motion to Dismiss. Opp. 39 n.31. This Rule governs the admissibility of evidence, and nothing has been offered into evidence in this case. More broadly, Plaintiffs’ apparent belief that the Rules permit them to selectively reference settlement discussions, but prohibit the Titín Defendants from providing context, is unfounded. 23 Plaintiffs repeatedly portray the consideration they provided as not filing a complaint on August 5, 2016. See, e.g., Opp. 39; AC ¶¶ 331-32. This is a transparent effort to redefine any consideration not as “never” filing suit, but as not filing suit on a particular day, such that filing suit after that day did not breach the agreement. This characterization does not reach the lowest level of plausibility. Plaintiffs do not describe the purported agreement as one to “toll” or “stay,” but to “settle” claims. AC ¶¶ 324-28, 331. And any assertion that the Titín Defendants were willing to pay $26 million to avoid a filing on a particular day while Plaintiffs retained the right to file suit on subsequent days is far-fetched. 34 Case 3:16-cv-02914-DRD Document 107 Filed 12/06/18 Page 42 of 46 settlement “is an enforceable pre-suit settlement,” AC ¶ 477 (emphasis added), the Opposition admits that the Plaintiffs actually “rescind[ed] the agreement.” Opp. 40. Plaintiffs’ admission that they rescinded the agreement limits their Breach Claim at most to damages flowing directly from that rescission. V. THE PR CLAIMS SHOULD BE DISMISSED FOR LACK OF SUPPLEMENTAL JURISDICTION. Plaintiffs failed to make, and have therefore waived, any argument that the Court should retain jurisdiction over the PR Claims if it dismisses the Federal Claims. See Eldridge v. Gordon Bros. Grp., LLC, 316 F.R.D. 12, 27 (D. Mass. 2016) (“The First Circuit requires a litigant to raise all arguments in its opposition to a dispositive motion or waive the right to raise them thereafter.”), aff’d in relevant part, vacated in irrelevant part, 863 F.3d 66 (1st Cir. 2017). The Motion demonstrated that if the “federal claims are dismissed, no basis remains for the Court to exercise supplemental jurisdiction over the PR Claims.” Mot. 50. Plaintiffs nowhere rebut this showing, except in responding to the Breach Claim, which brought up specific issues regarding lack of common facts. See Opp. 36-37; supra Section IV.B. Therefore, if the Court dismisses the Federal Claims, the PR Claims should also be dismissed. VI. ANY DISMISSAL SHOULD BE ENTERED WITH PREJUDICE. Plaintiffs also failed to make, and have waived, any argument that dismissal should be entered without prejudice. See Eldridge, 316 F.R.D. at 27; supra Section V. Section VI of the Motion showed why “Plaintiffs’ claims against all the Titín Defendants should be dismissed with prejudice.” Mot. at 50. Plaintiffs nowhere contest this argument, other than a passing reference with respect to Count 10. See Opp. 36 n.29. This Court should therefore dismiss all claims with prejudice. CONCLUSION For the foregoing reasons and the reasons set forth in the Titín Defendants’ Motion to Dismiss, Dkt. 56, Plaintiffs’ Amended Complaint should be dismissed in its entirety, with prejudice. 35 Case 3:16-cv-02914-DRD Document 107 Filed 12/06/18 Page 43 of 46 DATED: San Juan, Puerto Rico December 6, 2018 REICHARD & ESCALERA Rafael Escalera-Rodríguez (U.S.D.C.-P.R. No. 122609) Alana Vizcarrondo (U.S.D.C.- P.R. No. 301614) MCS Plaza, 10th Floor 255 Ponce De León Avenue San Juan, Puerto Rico 00917-1913 (787) 777-8888 escalera@reichardescalera.com vizcarrondo@reichardescalera.com Respectfully submitted, By: /s/Daniel Salinas-Serrano QUINN EMANUEL URQUHART & SULLIVAN, LLP Daniel Salinas-Serrano (U.S.D.C.-P.R. No. 224006) 777 Sixth Street NW, 11th Floor Washington, D.C. 20001 (202) 538-8000 danielsalinas@quinnemanuel.com Andrew P. Marks (pro hac vice) Yariv Pierce (pro hac vice) 51 Madison Avenue, 22nd Floor New York, New York 10010 (212) 849 7000 andrewmarks@quinnemanuel.com yarivpierce@quinnemanuel.com Attorneys for the Titín Defendants 36 Case 3:16-cv-02914-DRD Document 107 Filed 12/06/18 Page 44 of 46 CERTIFICATE OF COMPLIANCE I hereby certify that the foregoing complies with the form and length requirements of Local Rule 7(d) of the Local Rules of the United States District Court for the District of Puerto Rico because it has been prepared in a proportionally spaced 12 point Times New Roman font and complies with the Court’s grant of a page extension of up to 35 pages. DATED: San Juan, Puerto Rico December 6, 2018 REICHARD & ESCALERA, LLC Rafael Escalera-Rodríguez (U.S.D.C.-P.R. No. 122609) Alana Vizcarrondo (U.S.D.C.- P.R. No. 301614) MCS Plaza, 10th Floor 255 Ponce De León Avenue San Juan, Puerto Rico 00917-1913 (787) 777-8888 escalera@reichardescalera.com vizcarrondo@reichardescalera.com By: /s/Daniel Salinas-Serrano QUINN EMANUEL URQUHART & SULLIVAN, LLP Daniel Salinas-Serrano (U.S.D.C.-P.R. No. 224006) 777 Sixth Street NW, 11th Floor Washington, D.C. 20001 (202) 538-8000 danielsalinas@quinnemanuel.com Andrew P. Marks (pro hac vice) Yariv Pierce (pro hac vice) 51 Madison Avenue, 22nd Floor New York, New York 10010 (212) 849-7000 andrewmarks@quinnemanuel.com yarivpierce@quinnemanuel.com Attorneys for the Titín Defendants Case 3:16-cv-02914-DRD Document 107 Filed 12/06/18 Page 45 of 46 CERTIFICATE OF SERVICE I hereby certify that on today, I electronically filed the foregoing with the Clerk of this Court using the CM/ECF System, which will send notice of such filing to all counsel of record. DATED: San Juan, Puerto Rico December 6, 2018 REICHARD & ESCALERA, LLC Rafael Escalera-Rodríguez (U.S.D.C.-P.R. No. 122609) Alana Vizcarrondo (U.S.D.C.- P.R. No. 301614) MCS Plaza, 10th Floor 255 Ponce De León Avenue San Juan, Puerto Rico 00917-1913 (787) 777-8888 escalera@reichardescalera.com vizcarrondo@reichardescalera.com By: /s/Daniel Salinas-Serrano QUINN EMANUEL URQUHART & SULLIVAN, LLP Daniel Salinas-Serrano (U.S.D.C.-P.R. No. 224006) 777 Sixth Street NW, 11th Floor Washington, D.C. 20001 (202) 538-8000 danielsalinas@quinnemanuel.com Andrew P. Marks (pro hac vice) Yariv Pierce (pro hac vice) 51 Madison Avenue, 22nd Floor New York, New York 10010 (212) 849-7000 andrewmarks@quinnemanuel.com yarivpierce@quinnemanuel.com Attorneys for the Titín Defendants Case 3:16-cv-02914-DRD Document 107 Filed 12/06/18 Page 46 of 46
