Santiago Mendez v. Autoridad DE Energia Electrica DE Puerto Rico et al

MOTION to Dismiss for Failure to State a Claim

D.P.R.August 12, 2016

4456972v1/014718 IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF PUERTO RICO PEDRO J. SANTIAGO MÉNDEZ Plaintiff Vs. AUTORIDAD DE ENERGÍA ELÉCTRICA DE PUERTO RICO; its Board of Governance composed of HARRY RODRÍGUEZ GARCÍA, LUIS BENÍTEZ HERNÁNDEZ, CARLOS BONILLA AGOSTO, ENID MONGE PASTRANA, LUIS SANTINI GAUDIER, CARLOS GALLISÁ BISBAL, MIGUEL A. TORRES DÍAZ (ex-officio member), ALBERTO BACÓ BAGUÉ (ex-officio member), DEFENDANTS A-Z, all unknown members of the Board of Governance of AUTORIDAD DE ENERGÍA ELÉCTRICA; THE COMMONWEALTH OF PUERTO RICO, REPRESENTED BY THE SECRETARY OF JUSTICE, HON. CÉSAR MIRANDA IN HIS OFFICIAL CAPACITY; INSURERS A, B, C; Richard Doe and Jane Doe; PETROBRAS AMERICA, INC.; SHELL TRADING (US) COMPANY; PETROWEST, INC.; VITOL, S.A.; VITOL, INC.; and UNKNOWN DEFENDANTS 1-100 Defendants Civil No. 3:16-cv-02454 VITOL S.A. & VITOL INC.’S MOTION TO DISMISS Case 3:16-cv-02454 Document 9 Filed 08/12/16 Page 1 of 20 4456972v1/014718 i TABLE OF CONTENTS Page I. INTRODUCTION ...............................................................................................................1 II. ALLEGATIONS IN THE COMPLAINT ...........................................................................3 A. There are Only Two Allegations Against Vitol S.A. and Vitol Inc. Specifically ..............................................................................................................3 B. The Four Allegations Against “Suppliers” or “Co-Defendants” Are Conclusory ...............................................................................................................4 III. LEGAL STANDARD ..........................................................................................................5 IV. ARGUMENT .......................................................................................................................6 A. The Complaint Fails Sufficiently to Allege an Antitrust Conspiracy ......................6 1. Plaintiff Must Plead Sufficient Facts to Establish a Conspiracy .................6 2. The Complaint Offers No Facts to Support the Alleged Conspiracy ...................................................................................................7 B. The Complaint Fails Sufficiently to Allege That Vitol S.A. & Vitol Inc. Delivered Non-Compliant Fuel to PREPA .......................................................9 1. The Conclusory Assertions Against “Co-Defendants” or “Suppliers” Are Insufficient to State a Claim Against Vitol S.A. or Vitol Inc. ..........................................................................................9 2. Even If Specifically Asserted Against Vitol S.A. or Vitol Inc., the Complaint’s Vague, Non-Specific Allegations Fail Adequately to Plead a Claim for Relief .....................................................11 3. The Complaint Does Not Come Close to Meeting Rule 9(b) ....................13 C. The Same Pleading Deficiencies Require Dismissal of the Article 1802 Claim ......................................................................................................................13 D. As the Supreme Court Recognized in Twombly, Defendants Should Not Be Subjected to Costly Discovery Based on Conclusory Allegations .............................................................................................................14 V. CONCLUSION ..................................................................................................................15 Case 3:16-cv-02454 Document 9 Filed 08/12/16 Page 2 of 20 4456972v1/014718 ii TABLE OF AUTHORITIES Cases AD/SAT, Div. of Skylight, Inc. v. Associated Press, 181 F.3d 216 (2d Cir. 1999)............................................................................................. 10 Alt. Sys. Concepts, Inc. v. Synopsys, Inc., 374 F.3d 23 (1st Cir. 2004) .................................................................................. 2, 4, 6, 13 Ashcroft v. Iqbal, 556 U.S. 662 (2009) .................................................................................................. passim Associated Gen. Contractors of Cal., Inc. v. Carpenters, 459 U.S. 519 (1983) ................................................................................................... 14, 15 Bates v. City of Chicago, 726 F.3d 951 (7th Cir. 2013) ........................................................................................... 10 Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) .................................................................................................. passim Caribe BMW, Inc. v. Bayerische Motoren Werke Aktiengesellschaft, 19 F.3d 745 (1st Cir. 1994) ................................................................................................ 6 Diaz Aviation Corp. v. Airport Aviation Servs., Inc., 716 F.3d 256 (1st Cir. 2013) ...................................................................................... 13, 14 Flovac, Inc. v. Airvac, Inc., 817 F.3d 849 (1st Cir. 2016) .............................................................................................. 6 Hayduk v. Lanna, 775 F.2d 441 (1st Cir. 1985) .............................................................................................. 5 In re Aluminum Warehousing Antitrust Litigation, No. 13-md-2481 (KBF), 2015 WL 1344429 (S.D.N.Y. Mar. 23, 2015) ......................... 10 In re Elevator Antitrust Litig., 502 F.3d 47 (2d Cir. 2007)................................................................................................. 8 In re Elevator Antitrust Litig., No. 04 CV 1178(TPG), 2006 WL 1470994 (S.D.N.Y. May 30, 2006) ............................. 8 In re Travel Agent Comm’n Antitrust Litig., 583 F.3d 896 (6th Cir. 2009) ........................................................................................... 10 Isla Nena Air Servs, Inc. v. Cessna Aircraft Co., 449 F.3d 85 (1st Cir. 2006) .............................................................................................. 14 Case 3:16-cv-02454 Document 9 Filed 08/12/16 Page 3 of 20 4456972v1/014718 iii Lorenzana v. South American Restaurants Corp., 799 F.3d 31 (1st Cir. 2015) .............................................................................................. 15 Mendez Internet Mgmt. Servs., Inc. v. Banco Santander de Puerto Rico, Civil No. 08-2140 (JAF), 2009 WL 1392189 (D.P.R. May 15, 2009) .............................. 9 N. Am. Catholic Educ. Programming Found., Inc. v. Cardinale, 567 F.3d 8 (1st Cir. 2009) ............................................................................................ 2, 13 Penalbert-Rosa v. Fortuno-Burset, 631 F.3d 592 (1st Cir. 2011) ............................................................................................ 12 Podiatrist Ass’n, Inc. v. La Cruz Azul de Puerto Rico, Inc., 332 F.3d 6 (1st Cir. 2003) .................................................................................................. 6 Pressure Vessels v. Empire Gas, 137 P.R. Dec. 497 (1994)................................................................................................... 6 Pruell v. Caritas Christi, 678 F.3d 10 (1st Cir. 2012) .............................................................................................. 12 Redondo Waste Sys., Inc. v. Lopez-Freytes, 659 F.3d 136 (1st Cir. 2011) ............................................................................................ 12 SD3, LLC v. Black & Decker (U.S.) Inc., 801 F.3d 412 (4th Cir. 2015) ........................................................................................... 10 White v. R.M. Packer Co., Inc., 635 F.3d 571 (1st Cir. 2011) .............................................................................................. 6 Case 3:16-cv-02454 Document 9 Filed 08/12/16 Page 4 of 20 4456972v1/014718 1 TO THE HONORABLE COURT: NOW COME Defendants Vitol Inc. and Vitol S.A., through their undersigned counsel, and respectfully move this Court for an Order dismissing the amended complaint (“Complaint”) (Dkt. 1-12) pursuant to Fed. R. Civ. P. 12(b)(6). The Complaint falls woefully short of the well- established pleading standards set forth in Twombly and Iqbal. Such flimsy allegations cannot stand as a legal matter and should not serve as the basis for an extraordinarily expensive discovery process. Accordingly, this Court must dismiss the Complaint. I. INTRODUCTION Plaintiff Santiago Méndez’s Complaint does not come close to satisfying federal pleading standards. It fails to state a claim for relief against Vitol S.A. and Vitol Inc. and should be dismissed. The Complaint fails to state a claim in several key respects. First, it contains no allegations specifically directed to Vitol S.A. or Vitol Inc.; rather, the Complaint offers only a conclusory allegation of conspiracy. The Complaint asserts an antitrust claim against Vitol S.A. and Vitol Inc. based on the broad allegation “that [PREPA], during the past ten years has acquired fossil fuels for operating its energy power plants containing contaminants and of lower quality than that which appeared on its bills [invoices], by means of an agreement, in combination or in conspiracy with its suppliers.” Compl. at 2 (second bracket in original). But that core allegation of conspiracy is entirely conclusory, and it is not supported by any factual allegations against Vitol S.A. and Vitol Inc. There are simply no facts alleged in the Complaint—none—to support the conspiracy allegation. As the Supreme Court has explained, “Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). Case 3:16-cv-02454 Document 9 Filed 08/12/16 Page 5 of 20 4456972v1/014718 2 Second, the Complaint’s remaining and equally conclusory “factual” allegations are asserted only against “co-defendants” or “suppliers” as an amorphous group. Group allegations that lump all defendants together do not state a plausible claim for relief against individual defendants. The Complaint fails to assert specific factual allegations against Vitol S.A. and Vitol Inc., and hence cannot survive. Third, even had they been alleged against Vitol S.A. or Vitol Inc. specifically, the Complaint’s meager allegations against “co-defendants” and “suppliers” are far too vague, conclusory, and non-specific to satisfy federal pleading standards. They do not even apprise Vitol S.A. and Vitol Inc. of the specific claims against them, let alone “contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’” Iqbal, 556 U.S. at 678 (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). Fourth, because the “core allegations” of the Complaint “effectively charge fraud” in the form of allegedly altered laboratory tests of fuel oil delivered to PREPA, Rule 9(b)’s heightened pleading standards apply. See N. Am. Catholic Educ. Programming Found., Inc. v. Cardinale, 567 F.3d 8, 15 (1st Cir. 2009). But the Complaint does not even remotely satisfy the basic pleading requirements under Rule 8 as interpreted in Twombly and Iqbal; it certainly does not meet Rule 9(b)’s particularity requirement that the Complaint “specify the who, what, where, and when of the allegedly false or fraudulent representation.” Alt. Sys. Concepts, Inc. v. Synopsys, Inc., 374 F.3d 23, 29 (1st Cir. 2004). Finally, the Complaint is likewise deficient with respect to the plaintiff’s claim against Vitol S.A. and Vitol Inc. for violation of Puerto Rico Article 1802. The Complaint’s naked assertion that Vitol S.A. and Vitol Inc. violated Article 1802 by conspiring with some or all of Case 3:16-cv-02454 Document 9 Filed 08/12/16 Page 6 of 20 4456972v1/014718 3 the other defendants at some point during a 10-year period is insufficient under Twombly and Iqbal. Accordingly, the Court should dismiss the Complaint. II. ALLEGATIONS IN THE COMPLAINT The Complaint does not contain any specific factual allegations of actionable conduct against Vitol S.A. and Vitol Inc. Indeed, there are only two sets of allegations that even mention Vitol S.A. and Vitol. Inc. by name. A. There are Only Two Allegations Against Vitol S.A. and Vitol Inc. Specifically The first allegations directed specifically at Vitol S.A. and Vitol Inc. are merely the paragraphs that identify them as parties, allege that they are “in the business of, among other things, marketing distribution, exporting, importing and sale of fossil fuels,” and allege that they have “supplied fossil fuels to [PREPA] for the last 10 years.” See Compl. at 4. The only other allegation that mentions Vitol S.A. and Vitol Inc. is the ultimate (and conclusory) allegation of conspiracy in the section listing the legal elements of the antitrust claim: The actions by [PREPA] and its Board of Governance by mutual agreement, collusion and/or conspiracy with Co-Defendants, Petrowest, Petrobras, Shell, Vitol 1 and V., to supply [PREPA] with fuel non-conforming with the specifications required while representing in the shipping documentation that it did, constitutes a violation of Article 2 of the Puerto Rico Antitrust Act (Law 77 – 1964) by unreasonably restricting businesses and/or commerce in Puerto Rico. . . . The actions by Co-Defendants as described afore are the proximate cause of the damages suffered by class members. Compl. at 18. 1 1 The Complaint repeats those conclusory allegations verbatim in the Article 1802 claim; the only change is emphasized below: “The actions by [PREPA] and its Board of Governance by mutual agreement, collusion and/or conspiracy with Co-Defendants, Petrowest, Petrobras, Shell, Vitol 1 and V., to supply [PREPA] with fuel non-conforming with the specifications required while representing in the shipping documentation that it did, constitutes a violation of Puerto Rico Civil Code Article 1802.” Compl. at 18– 19. Case 3:16-cv-02454 Document 9 Filed 08/12/16 Page 7 of 20 4456972v1/014718 4 B. The Four Allegations Against “Suppliers” or “Co-Defendants” Are Conclusory The Complaint also contains four (and only four) generic allegations against “suppliers” or “co-defendants” as a group. First, the Complaint alleges—with no factual support—that PREPA has knowingly acquired non-compliant fuel oil for a decade: “During the last 10 years, [PREPA] and its Board of Governance, with full knowledge of the facts [knowingly], has been acquiring fossil fuels from co-defendants which do not comply with the requisites and criteria for fuel quality as mentioned afore, however, paying as if they did thus comply.” Compl. at 6. Second, the Complaint alleges that PREPA did so on the basis of knowingly falsified lab reports: “Said purchases were justified at [PREPA] on the basis of altered, falsified or manipulated laboratory reports supplied by laboratories contracted by co-defendant suppliers, with the full knowledge of [PREPA]’s purchasing officers.” Compl. at 7. No factual support is offered for that allegation, either. Third, the Complaint alleges that unidentified “suppliers” on unspecified “occasions” obtained altered test results to justify the sale of non-conforming fuel: “On occasions the laboratories varied or altered equipment calibration or testing methodologies. When a test gave a result of non-compliance with parameters, the supplier obtained another one altered by another laboratory with the purpose of justifying the sale of non-conforming fuel pursuant to established purchasing parameters.” Id. Finally, the Complaint alleges that the “co-defendant suppliers” benefitted from the alleged scheme: “The afore referred illicit purchases also benefited the co-defendant suppliers in that these obtained higher proceeds to thus agreed to in their contracts with [PREPA], by selling a lesser quality fuel at the price of a higher quality fuel.” Compl. at 7. That is it. That constitutes the entirety of plaintiff’s allegations against Vitol S.A. and Vitol Inc. purporting to state a claim for a ten-year long antitrust conspiracy with three Case 3:16-cv-02454 Document 9 Filed 08/12/16 Page 8 of 20 4456972v1/014718 5 competing energy trading companies, an unidentified number of fuel testing laboratories, and Puerto Rico’s public utility. These empty and unsupported allegations are wholly insufficient to state a claim for relief against Vitol S.A. and Vitol Inc. 2 III. LEGAL STANDARD “To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’” Iqbal, 556 U.S. at 678 (quoting Twombly, 550 U.S. at 570). “A pleading that offers ‘labels and conclusions’ or ‘a formulaic recitation of the elements of a cause of action will not do.’” Id. (quoting Twombly, 550 U.S. at 555). “Nor does a complaint suffice if it tenders ‘naked assertion[s]’ devoid of ‘further factual enhancement.’” Id. (quoting Twombly, 550 U.S. at 557). Further, “the tenet that a court must accept as true all of the allegations contained in a complaint is inapplicable to legal conclusions.” Id. “[O]nly a complaint that states a plausible claim for relief survives a motion to dismiss.” Id. at 679. “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id. at 678. “Where a complaint pleads facts that are ‘merely consistent with’ a defendant’s liability, it ‘stops short of the line between possibility and plausibility of entitlement to relief.’” Id. (quoting Twombly, 550 U.S. at 557). Further, Rule 9(b)’s heightened pleading standards apply to cases, such as the Complaint here, “in which fraud lies at the core of the action.” Hayduk v. Lanna, 775 F.2d 441, 443 (1st Cir. 1985). The Complaint must therefore “specify the who, what, where, and when of the 2 Plaintiff also separately alleges that PREPA improperly passed on the costs of unpaid bills by governmental, industrial, and commercial electricity consumers to residential consumers through a fuel adjustment clause meant to account only for variations in the cost of fuel oil. But this claim is not asserted against Vitol S.A. and Vitol Inc. Case 3:16-cv-02454 Document 9 Filed 08/12/16 Page 9 of 20 4456972v1/014718 6 allegedly false or fraudulent representation.” Alt. Sys. Concepts, Inc. v. Synopsys, Inc., 374 F.3d 23, 29 (1st Cir. 2004). Here, the Complaint does not come close to satisfying Rule 8 or Rule 9(b)’s pleading standards. IV. ARGUMENT A. The Complaint Fails Sufficiently to Allege an Antitrust Conspiracy The Complaint should be dismissed because it utterly fails to allege facts supporting its allegation of conspiracy, which is an essential element of plaintiff’s antitrust claim. 1. Plaintiff Must Plead Sufficient Facts to Establish a Conspiracy Plaintiff Santiago Méndez asserts claims under Section 2 of Puerto Rico’s antitrust law, which is coextensive with Section 1 of the Sherman Act. 3 Section 1 of the Sherman Act “by its plain terms reaches only ‘agreements’—whether tacit or express.” White v. R.M. Packer Co., Inc., 635 F.3d 571, 575 (1st Cir. 2011). “Because § 1 of the Sherman Act ‘does not prohibit all unreasonable restraints of trade . . . but only restraints effected by a contract, combination, or conspiracy, the crucial question is whether the challenged anticompetitive conduct stems from independent decision or from an agreement, tacit or express.” Twombly, 500 U.S. at 553 (internal quotation marks and brackets omitted). Therefore, under Twombly and White, a complaint alleging a Section 1 violation must be dismissed if it fails adequately to allege the existence of an agreement (a conspiracy). 3 See Podiatrist Ass’n, Inc. v. La Cruz Azul de Puerto Rico, Inc., 332 F.3d 6, 16 (1st Cir. 2003) (citing Caribe BMW, Inc. v. Bayerische Motoren Werke Aktiengesellschaft, 19 F.3d 745, 754 (1st Cir. 1994)); Pressure Vessels v. Empire Gas, 137 P.R. Dec. 497, 508–20 (1994)) (“Because this language mirrors the language of Section 1 of the Sherman Act, we have treated the two provisions as coextensive.”); see also Flovac, Inc. v. Airvac, Inc., 817 F.3d 849, 853 n.1 (1st Cir. 2016) (“With respect to matters relevant to this appeal, Puerto Rico’s antitrust statute is coterminous with the Sherman Act.”). Case 3:16-cv-02454 Document 9 Filed 08/12/16 Page 10 of 20 4456972v1/014718 7 2. The Complaint Offers No Facts to Support the Alleged Conspiracy The Complaint’s allegation that a conspiracy existed is nothing more than a “‘naked assertion devoid of ‘further factual enhancement.’” Iqbal, 556 U.S. at 678 (quoting Twombly, 550 U.S. at 557). As noted above, the sole allegation of conspiracy is in the Complaint’s recitation of the legal elements of its antitrust cause of action: The actions by [PREPA] and its Board of Governance by mutual agreement, collusion and/or conspiracy with Co-Defendants, Petrowest, Petrobras, Shell, Vitol 1 and V., to supply [PREPA] with fuel non-conforming with the specifications required while representing in the shipping documentation that it did, constitutes a violation of Article 2 of the Puerto Rico Antitrust Act (Law 77 – 1964) by unreasonably restricting businesses and/or commerce in Puerto Rico. Compl. at 18. This allegation is an archetype of the “[t]hreadbare recital[] of the elements of a cause of action, supported by mere conclusory statements,” that Twombly and Iqbal hold fails to state a claim for relief. Iqbal, 556 U.S. at 678. Indeed, Twombly itself cited a similar allegation as insufficient to plead an antitrust claim under § 1. Discussing the plaintiff’s allegation “that the [defendants] have entered into a contract, combination or conspiracy to prevent competitive entry into their . . . markets and have agreed not to compete with one another,” the Court stated that it “doubt[ed] that the complaint’s references to an agreement among the [defendants] would have given the notice required by Rule 8.” Twombly, 550 U.S. at 565 n.10 (alteration in original); see also Iqbal, 556 U.S. at 680 (“Had the Court simply credited the allegation of a conspiracy, the plaintiffs would have stated a claim for relief and been entitled to proceed perforce.”). The Court in Twombly went on to explain—in a passage that applies with equal force here—that the complaint had no factual support for the conclusory allegation of conspiracy: “Apart from identifying a 7-year span in which the § 1 violations were supposed to have occurred, the pleadings mentioned no specific time, place, or person involved in the alleged Case 3:16-cv-02454 Document 9 Filed 08/12/16 Page 11 of 20 4456972v1/014718 8 conspiracies.” Twombly, 550 U.S. at 565 n.10 (citation omitted). The Court found that “the complaint here furnishes no clue as to which of the four [defendants] (much less which of their employees) supposedly agreed, or when and where the illicit agreement took place.” Id. Similarly, the Second Circuit dismissed as conclusory an antitrust complaint that alleged conspiracy by merely “enumerat[ing] ‘basically every type of conspiratorial activity that one could imagine.’” In re Elevator Antitrust Litig., 502 F.3d 47, 50 (2d Cir. 2007) (quoting In re Elevator Antitrust Litig., No. 04 CV 1178(TPG), 2006 WL 1470994, at *2–3 (S.D.N.Y. May 30, 2006)). The complaint in that case alleged that defendants “(a) [p]articipated in meetings in the United States and Europe to discuss pricing and market divisions; (b) [a]greed to fix prices for elevators and services; (c) [r]igged bids for sales and maintenance; (d) [e]xchanged price quotes; (e) [a]llocated markets for sales and maintenance; (f) ‘[c]ollusively’ required customers to enter long-term maintenance contracts; and (g) [c]ollectively took actions to drive independent repair companies out of business.” Id. at 51 n.5. The Second Circuit observed that “[t]he list is in entirely general terms without any specification of any particular activities by any particular defendant,” and thus “is nothing more than a list of theoretical possibilities, which one could postulate without knowing any facts whatever.” Id. at 50–51 (quoting Elevator, 2006 WL 1470994, at *2–3). The Second Circuit dismissed the complaint, holding that “[s]uch ‘conclusory allegation[s] of agreement at some unidentified point do[] not supply facts adequate to show illegality.’” Id. at 51 (quoting Twombly, 550 U.S. at 557). These exact same deficiencies are fatal to the Complaint here. Although the Complaint identifies an expansive 10-year time period in which the alleged conspiracy took place, the Complaint “mention[s] no specific time, place, or person involved in the alleged conspiracies.” Twombly, 550 U.S. at 565 n.10; see also Elevator Antitrust, 502 F.3d at 50–51 (“The list is in Case 3:16-cv-02454 Document 9 Filed 08/12/16 Page 12 of 20 4456972v1/014718 9 entirely general terms without any specification of any particular activities by any particular defendant [and thus] is nothing more than a list of theoretical possibilities, which one could postulate without knowing any facts whatever.” (internal quotation marks omitted)). Plus, the Complaint “furnishes no clue as to which” fuel suppliers, “(much less which of their employees) supposedly agreed, or when and where the illicit agreement took place.” Twombly, 550 U.S. at 565 n.10; see also Mendez Internet Mgmt. Servs., Inc. v. Banco Santander de Puerto Rico, Civil No. 08-2140 (JAF), 2009 WL 1392189, at *5 (D.P.R. May 15, 2009) (“Plaintiffs’ complaint contains only bare allegations of an agreement among Defendants, with no information as to how, when, and where the Defendants came to the alleged agreement.”). Instead, just as in Twombly, the plaintiff’s Complaint offers nothing more than “labels and conclusions or ‘a formulaic recitation of the elements of a cause of action.” Twombly, 550 U.S. at 555. That is not sufficient to allege an antitrust conspiracy. B. The Complaint Fails Sufficiently to Allege That Vitol S.A. & Vitol Inc. Delivered Non-Compliant Fuel to PREPA In addition to the plaintiff’s failure to adequately allege an agreement, plaintiff’s Complaint also fails to plausibly allege that Vitol S.A. or Vitol Inc. delivered non-compliant fuel to PREPA, which is the sole factual premise for both the antitrust and Article 1802 claims. Both claims should be dismissed on this independent basis. 1. The Conclusory Assertions Against “Co-Defendants” or “Suppliers” Are Insufficient to State a Claim Against Vitol S.A. or Vitol Inc. The Complaint contains no factual allegations as to allegedly non-conforming deliveries by Vitol S.A. or Vitol Inc. specifically. All of Santiago Mendez’s factual allegations, as conclusory and unsupported as they are, are alleged only against “suppliers” or “co-defendants.” This kind of generalized group-pleading does not state a claim. Case 3:16-cv-02454 Document 9 Filed 08/12/16 Page 13 of 20 4456972v1/014718 10 As the Fourth Circuit recently explained in dismissing an antitrust case: “A plaintiff in a § 1 case cannot assemble some collection of defendants and then make vague, non-specific allegations against all of them as a group.” SD3, LLC v. Black & Decker (U.S.) Inc., 801 F.3d 412, 422 (4th Cir. 2015). “At trial, a § 1 plaintiff will be required to make a ‘factual showing that each defendant conspired in violation of the antitrust laws.’” Id. (quoting AD/SAT, Div. of Skylight, Inc. v. Associated Press, 181 F.3d 216, 234 (2d Cir. 1999)). “[T]he complaint must forecast that factual showing, and if it fails to allege particular facts against a particular defendant, then the defendant must be dismissed.” Id. “In other words, the complaint ‘must specify how these defendants [were] involved in the alleged conspiracy,’ without relying on ‘indeterminate assertions’ against all ‘defendants.’” Id. (quoting In re Travel Agent Comm’n Antitrust Litig., 583 F.3d 896, 905 (6th Cir. 2009)). Thus, the Fourth Circuit dismissed claims against certain defendants’ corporate parents and affiliates where “the ‘complaint was vague, never explained its case, and lumped [them] together without sufficient detail.’” Id. (quoting Bates v. City of Chicago, 726 F.3d 951, 958 (7th Cir. 2013)). The Southern District of New York recently dismissed an antitrust complaint for the same deficiencies. In In re Aluminum Warehousing Antitrust Litigation, No. 13-md-2481 (KBF), 2015 WL 1344429, at *2–3 (S.D.N.Y. Mar. 23, 2015), the court dismissed claims against certain corporate parents and affiliates and observed that plaintiffs’ pleadings attempted “to lump these defendants together within a grouping with several affiliated companies, and . . . assert a naming convention that purports to capture all of the affiliated companies together.” Id. at *2 (“For instance, after introducing myriad separate companies affiliated with Pacorini Metals USA LLC, plaintiffs then state that thereafter they will refer to all of them together as ‘Pacorini.’”). The Court held that the plaintiffs’ allegations were insufficient, as “[n]either of the two complaints Case 3:16-cv-02454 Document 9 Filed 08/12/16 Page 14 of 20 4456972v1/014718 11 sets forth any specific facts that suggest any participation by any one of these specific entities in the allegedly unlawful conduct.” Id. at *3. The Complaint employs the same improper group-pleading approach here, lumping Vitol S.A. and Vitol Inc. together will all other defendants in (already vague and conclusory) allegations against “co-defendants” or “suppliers.” Indeed, the Complaint’s group-pleading here is even less plausible than the attempts rejected in SD3 and Aluminum Warehousing. In those cases, the Courts rejected attempts to group-plead claims against related corporate entities— parents, subsidiaries, and affiliates. Here, the Complaint attempts to group-plead allegations not only against corporations that are one hundred percent unrelated, but that are also competitors. Because the Complaint fails to allege any facts against Vitol S.A. and Vitol Inc. specifically, it fails to state a claim for relief against them. 2. Even If Specifically Asserted Against Vitol S.A. or Vitol Inc., the Complaint’s Vague, Non-Specific Allegations Fail Adequately to Plead a Claim for Relief The Complaint’s conclusory and generic group-pleading requires dismissal. But that is only the start of the Complaint’s problems. Even if plaintiff had made the very same allegations against Vitol S.A. and Vitol Inc. specifically that he asserts generally against “co-defendants” or “suppliers,” those allegations are woefully insufficient. They are far too vague and conclusory to state a plausible claim for relief. In essence, the Complaint alleges that on one or more (unspecified) occasions sometime in the last ten years, Vitol S.A. and/or Vitol Inc. sold PREPA fuel oil that did not comply (in unspecified ways) with certain (unidentified) product specifications and “obtained” (unspecified) laboratory tests of that fuel oil that were “altered.” But the Complaint fails to allege “sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’” Iqbal, 556 U.S. at 678 (quoting Twombly, 550 U.S. at 560). Case 3:16-cv-02454 Document 9 Filed 08/12/16 Page 15 of 20 4456972v1/014718 12 In addition to the complete absence of factual allegations to support plaintiff’s allegation of conspiracy (as explained above), the Complaint also fails to allege any facts to support its conclusory allegations that non-conforming fuel was delivered or that laboratory reports were altered to support such shipments: 1. The Complaint does not allege any facts about when in the last ten years Vitol S.A. and Vitol Inc. are alleged to have delivered non-compliant fuel oil. See Twombly, 550 U.S. at 565 n.10 (“Apart from identifying a 7-year span in which the § 1 violations were supposed to have occurred, the pleadings mentioned no specific time, place, or person involved in the alleged conspiracies.”). 2. The Complaint fails to identify any specific deliveries that were allegedly non- compliant, and it fails to identify any specific laboratory tests that were allegedly altered (or even incorrect). See id. Indeed, the Complaint does not mention even a single specific transaction or laboratory report. 3. The Complaint fails to allege any facts as to how any fuel oil delivered by Vitol S.A. or Vitol Inc. allegedly did not comply with the contractual specifications or any other “requisites and criteria for fuel quality.” See Pruell v. Caritas Christi, 678 F.3d 10, 14 (1st Cir. 2012) (“Yet even the amended complaint does not provide examples (let alone estimates as to the amounts) of such unpaid time for either plaintiff or describe the nature of the work performed during those times.”). 4. And the Complaint fails to allege any facts about how or when Vitol S.A. and Vitol Inc. allegedly “obtained another [test result] altered by another laboratory.” See Penalbert-Rosa v. Fortuno-Burset, 631 F.3d 592, 595 (1st Cir. 2011) (“[S]ome allegations, while not stating ultimate legal conclusions, are nevertheless so threadbare or speculative that they fail to cross ‘the line between the conclusory and the factual.’”). The Complaint’s “bare assertions” of delivery of non-compliant fuel oil are “conclusory and not entitled to be assumed true.” Iqbal, 556 U.S. at 680 (“[T]hese bare assertions, much like the pleadings of conspiracy in Twombly, amount to nothing more than a ‘formulaic recitation of the elements’ of a constitutional discrimination claim.’”). They fail even to “apprise” Vitol S.A. and Vitol Inc. “of the claims against them,” Redondo Waste Sys., Inc. v. Lopez-Freytes, 659 F.3d 136, 141 (1st Cir. 2011), let alone “possess enough heft to ‘sho[w] that the pleader is entitled to relief.’” Twombly, 550 U.S. at 557 (alteration in original). Case 3:16-cv-02454 Document 9 Filed 08/12/16 Page 16 of 20 4456972v1/014718 13 3. The Complaint Does Not Come Close to Meeting Rule 9(b) The pleading deficiencies are even more pronounced because the Complaint is subject to Rule 9(b)’s heightened pleading requirement. See Fed. R. Civ. P. 9(b). A core aspect of the Complaint is its vague allegation that PREPA acquired allegedly non-conforming fuel “on the basis of altered, falsified or manipulated laboratory reports supplied by laboratories contracted by co-defendant suppliers,” Compl. at 7 (¶ 15). That triggers Rule 9(b)’s particularity requirement. See N. Am. Catholic Educ. Programming Found., Inc. v. Cardinale, 567 F.3d 8, 15 (1st Cir. 2009) (“[T]he case law here and in other circuits reads Rule 9(b) expansively to cover associated claims where the core allegations effectively charge fraud.”). Here, as demonstrated above, the Complaint completely fails to meet the basic pleading standards under Rule 8 under Twombly and Iqbal. It also (and necessarily) fails to meet the heightened pleading requirements of Rule 9(b). The Complaint does not even attempt to “specify the who, what, where, and when,” Alt. Sys., 374 F.3d at 29, with respect to the allegedly falsified or manipulated laboratory tests. C. The Same Pleading Deficiencies Require Dismissal of the Article 1802 Claim The Complaint’s failure to allege sufficient facts to support its naked allegations of conspiracy and a scheme to deliver non-conforming fuel also requires dismissal of the Article 1802 claims. “The elements of an Article 1802 claim are a physical or emotional injury, a negligent or intentional act or omission (i.e., a wrongful act), and a causal connection between the injury and the defendant’s wrongful conduct.” Diaz Aviation Corp. v. Airport Aviation Servs., Inc., 716 F.3d 256, 265–66 (1st Cir. 2013). The Complaint fails adequately to plead these elements. First, to establish the wrongful act, the Complaint relies on the very same conclusory allegation of conspiracy that is fatal to the antitrust claim. See supra Part IV.A. & n.1. Second, the sole factual allegations in the Case 3:16-cv-02454 Document 9 Filed 08/12/16 Page 17 of 20 4456972v1/014718 14 Complaint to support the notion either that Vitol S.A. or Vitol Inc. even delivered non- conforming fuel, which at most would be an alleged breach of contract with PREPA, not a tort, are the same vague and conclusory group-pleaded allegations against “co-defendants” and “suppliers” that fail to establish the Complaint’s antitrust claims. See supra Part IV.B. Third, because the Article 1802 claim is also premised on the Complaint’s allegations of fraud, the allegations must meet the requirements of Rule 9(b). Since the allegations do not come close to meeting Rule 8’s standards, they cannot meet the heightened standards of Rule 9(b). See supra IV.B.3. And finally, the Complaint does not allege “physical or emotional injury,” Diaz Aviation Corp., 716 F.3d at 265–66, but rather alleges only purely economic loss that “arose exclusively as a consequence of [an alleged] breach of contract,” and “would not have occurred without the existence of a contract,” and is therefore barred by the economic loss rule. Isla Nena Air Servs, Inc. v. Cessna Aircraft Co., 449 F.3d 85, 90-91 (1st Cir. 2006) (applying Puerto Rico law). D. As the Supreme Court Recognized in Twombly, Defendants Should Not Be Subjected to Costly Discovery Based on Conclusory Allegations The Complaint’s paltry allegations implicate the very concerns expressed by the Supreme Court in Twombly. In Twombly, the Supreme Court recognized that noting the massive expense of proceeding to discovery in an antitrust case, and emphasized that “a district court must retain the power to insist upon some specificity in pleading before allowing a potentially massive factual controversy to proceed.” Twombly, 550 U.S. at 558 (quoting Associated Gen. Contractors of Cal., Inc. v. Carpenters, 459 U.S. 519, 528 n.17 (1983)). Those precise concerns underscore the inadequacy of plaintiff’s Complaint here. The expense of discovery if this case were to proceed would be massive: The named plaintiff seeks to represent a putative class of over 1,000,000 customers of a public utility in an antitrust claim Case 3:16-cv-02454 Document 9 Filed 08/12/16 Page 18 of 20 4456972v1/014718 15 involving thousands of deliveries of fuel oil over a ten-year period against Vitol S.A., Vitol Inc., three other energy trading companies, an unidentified number of testing laboratories, Puerto Rico’s public utility, and an unidentified number of Puerto Rico government officials. Cf. id. (“That potential expense is obvious enough in the present case: plaintiffs represent a putative class of at least 90 percent of all subscribers to local telephone or high-speed Internet service in the continental United States, in an action against America’s largest telecommunications firms (with many thousands of employees generating reams and gigabytes of business records) for unspecified (if any) instances of antitrust violations that allegedly occurred over a period of seven years.”). But the Complaint offers nothing but conclusory assertions in support of that claim. “[C]ourts ‘do not unlock the doors of discovery for a plaintiff armed with nothing more than conclusions.’” Lorenzana v. S. Am. Restaurants Corp., 799 F.3d 31, 35 (1st Cir. 2015) (quoting Iqbal, 556 U.S. at 678–79). The Complaint’s vague and conclusory factual allegations fail “to raise a right to relief above the speculative level,” Twombly, 550 U.S. at 555, and thus cannot “survive[] a motion to dismiss.” Iqbal, 556 U.S. at 679. V. CONCLUSION The Court should dismiss Santiago Mendez’s claims against Vitol S.A. and Vitol Inc. for failure to state a claim for relief under Rule 12(b)(6). WHEREFORE, Defendants Vitol Inc. and Vitol S.A. respectfully request that the Court enter an Order dismissing the Complaint pursuant to Fed. R. Civ. P. 12(b)(6). RESPECTFULLY SUBMITTED. In San Juan, Puerto Rico, this 12th day of August, 2016. Case 3:16-cv-02454 Document 9 Filed 08/12/16 Page 19 of 20 4456972v1/014718 16 I hereby certify that on this date I presented this Motion to Dismiss to the Clerk of the Court for filing and uploading to the Court’s CM/ECF system, which will send electronic notification of such filing to all counsel of record. THE LAW OFFICES OF ANDRÉS W. LÓPEZ, P.S.C. 902 Fernández Juncos Ave. Miramar San Juan, Puerto Rico 00907 P.O. Box 13909 San Juan, Puerto Rico 00908 Telephone: (787) 294-9508 Fax: (787) 294-9519 s/Andrés W. López ANDRÉS W. LÓPEZ USDC No. 215311 Andres@awllaw.com Counsel for Vitol S.A. and Vitol Inc. SUSMAN GODFREY, LLP 1000 Louisiana Street, Suite 5100 Houston, Texas 77002 Telephone: (713) 651-9366 Fax: (713) 654-6666 s/ Neal S. Manne PHV Pending nmanne@susmangodfrey.com s/ Ophelia Camina PHV Pending ocamina@susmangodfrey.com s/ Alex Kaplan ______ PHV Pending akaplan@susmangodfrey.com s/ Weston O’Black PHV Pending woblack@susmangodfrey.com s/ Michael Kelso PHV Pending mkelso@susmangodfrey.com Counsel for Vitol S.A. and Vitol Inc. Case 3:16-cv-02454 Document 9 Filed 08/12/16 Page 20 of 20