Mario Lopez Garza v. Citigroup Inc

NOT PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
___________
No. 16-4332
___________
MARIO ALBERTO LOPEZ GARZA,
The Executor of the estate of Hans Jorg Schneider Sauter,
Appellant
v.
CITIGROUP INC.
____________________________________
On Appeal from the United States District Court
for the District of Delaware
(D. Del. Civ. No. 1-15-cv-00537)
District Judge: Honorable Sue L. Robinson
____________________________________
Submitted under Third Circuit L.A.R. 34.1(a)
on September 27, 2017
Before: AMBRO, KRAUSE, Circuit Judges,
and CONTI,* Chief District Judge
(Opinion filed: February 2, 2018)
___________
OPINION **
___________
*
Honorable Joy Flowers Conti, Chief Judge of the United States District Court
for the Western District Court Pennsylvania, sitting by designation.
**
This disposition is not an opinion of the full Court and pursuant to I.O.P. 5.7
does not constitute binding precedent.
KRAUSE, Circuit Judge.
This appeal concerns a transnational dispute over hundreds of millions of dollars
allegedly due the estate of Mexican national Hans Jorg Schneider Sauter (“the Estate”),
for which Appellant Mario Alberto Lopez Garza serves as executor. The Estate filed in
the District Court a one-count complaint (“the Complaint”) demanding an accounting by
Appellee Citigroup Inc. on the premise that Citigroup controls the bank hosting the
accounts with the disputed funds. Whatever complexities there may be in the peripheries
of this litigation, the questions before us in the Estate’s appeal are straightforward: (1) did
the District Court err when it granted Citigroup’s motion for judgment on the pleadings;
and (2) did the District Court abuse its discretion when it refused to grant leave to amend,
both before dismissing the Complaint and later in denying the Estate’s motion for
reconsideration? Answering both questions in the negative, we will affirm. 1
I.
According to the Complaint, Schneider Sauter was a Mexican citizen and
businessman involved in currency trading and real estate. Apparently Mexican
authorities believed that Schneider Sauter was engaged in illicit activity, and he served
time in a Mexican prison. After Schneider Sauter died in 2008, Garza was appointed by a
probate court in Mexico to serve as executor of the Estate.
1
We separately address Citigroup’s cross-appeal, which concerns only the District
Court’s order granting in part Citigroup’s motion for relief under Fed. R. Civ. P. 41(d).
2
Through his investigation of assets available to the Estate, Garza allegedly
uncovered three documents indicating that substantial funds—no less than
$300,000,000—were on deposit in accounts held in Schneider Sauter’s name at Banco
Nacional de Mexico S.A. integrante del Grupo Financiero Banamex (“Banamex”),
Citigroup’s “full-service bank subsidiary” in Mexico. JA 44. After Garza obtained
several orders from the Mexican probate court directing Banamex to turn over to the
Estate all funds in the Schneider Sauter accounts, Banamex instituted collateral amparo
proceedings to challenge the legal authority of the probate court. 2
Stymied in the Mexican court system, the Estate brought the Banamex litigation to
the United States courts, first by filing suit in the Southern District of New York, and
then by filing the Complaint in the District of Delaware. The only defendant named in
the Complaint was Citigroup. Citing the North American Free Trade Agreement
(“NAFTA”), Dec. 17, 1992, reprinted in 32 I.L.M. 296-456, 605-800 (1993), the
Expedited Funds Availability Act (“the EFAA”), 12 U.S.C. §§ 4001-4010, and Mexican
law, the Estate alleged that Citigroup possesses information regarding the Banamex
accounts because it “is required . . . to oversee, control and supervise the activity of its
subsidiary banks.” JA 46. A single count in the Complaint demanded an “accounting”
2
As the Ninth Circuit Court of Appeals has explained it, “the amparo is a highly
complex legal institution . . . somewhat similar to habeas corpus and, inter alia, is the
means to review and annul unconstitutional judicial decisions.” United States v. Fowlie,
24 F.3d 1059, 1064 (9th Cir. 1994) (emphasis in original). Citigroup represents that the
amparo proceedings are still pending.
3
that would permit Garza to “ascertain all transfers of funds into and out of the bank
accounts formerly belonging to the decedent.” JA 47.
Citigroup answered the Complaint and then filed a motion for judgment on the
pleadings under Fed. R. Civ. P. 12(c) or, in the alternative, for a stay of all federal
litigation pending resolution of the proceedings in Mexico. In its Rule 12(c) motion and
oral argument before the District Court, Citigroup argued under Delaware law that an
accounting is strictly a remedy and, thus, cannot be pleaded as a stand-alone claim. In
any event, Citigroup contended, the Estate failed to sufficiently plead the fiduciary
relationship between Schneider Sauter and Citigroup necessary to support an accounting
action. In response, the Estate urged the District Court that the Complaint stated a viable
demand for an accounting and, alternatively, that leave to amend should be granted.
The District Court granted Citigroup’s motion and dismissed the Complaint with
prejudice. The District Court agreed with Citigroup that the Estate’s “failure to plead any
underlying substantive cause of action or fiduciary relationship renders its claim for an
accounting legally invalid on its face under Delaware law.” JA 19. It concluded that the
Complaint revealed no basis to impute to Citigroup any duty that Banamex—as host of
the accounts with the disputed funds—might owe the Estate. Deeming the Estate’s
pleading defects to be incurable, the District Court denied leave to amend on futility
grounds.
The District Court also denied reconsideration, rejecting the Estate’s arguments
that it should have been granted leave to amend with unspecified “additional facts,” JA
4
284, and that NAFTA provided a basis for a fiduciary relationship between the Estate and
Citigroup. This appeal followed.
II. 3
On appeal, the Estate argues, first, that the District Court erred in granting a
motion for judgment on the pleadings because the Complaint adequately stated a claim
for an accounting, and, second, that even if the Complaint were in any way defective, the
District Court “should have granted the Estate an opportunity to amend [it].” Appellant’s
Br. at 39. 4 Neither argument is persuasive.
A. The District Court’s Ruling on the Motion for Judgment on the Pleadings.
A party may move for judgment on the pleadings after the pleadings are closed so
long as the timing of the motion does not delay trial. Fed. R. Civ. P. 12(c). “A motion
3
The District Court had subject matter jurisdiction under 28 U.S.C. § 1332(a)(2).
We have appellate jurisdiction under 28 U.S.C. § 1291. We review the District Court’s
order granting Citigroup’s motion under Rule 12(c) de novo, see In re Fosamax
(Alendronate Sodium) Prod. Liab. Litig. (No. II), 751 F.3d 150, 165 n.11 (3d Cir. 2014),
and “may affirm on any grounds supported by the record.” Maher Terminals, LLC v.
Port Auth. of N.Y. & N.J., 805 F.3d 98, 105 n.4 (3d Cir. 2015). The District Court’s order
denying the Estate’s motion for reconsideration is reviewed for abuse of discretion, see
Chesapeake Appalachia, LLC v. Scout Petroleum, LLC, 809 F.3d 746, 753 (3d Cir.
2016), as is its refusal to grant leave to amend. See U.S. ex rel. Petratos v. Genentech
Inc., 855 F.3d 481, 486 (3d Cir. 2016).
4
As a threshold matter, the Estate asserts that the District Court misapplied the
Rule 12(c) standard when it failed to accept the veracity of certain allegations in the
Complaint. Cf. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). However, there is no
indication that the District Court failed to accept as true all well-pleaded allegations in the
Complaint. In any event, accepting those allegations as true, we reach the same
conclusion as the District Court on de novo review.
5
for judgment on the pleadings based on the defense that the plaintiff has failed to state a
claim is analyzed under the same standards that apply to a Rule 12(b)(6) motion.” Revell
v. Port Auth. of N.Y. & N.J., 598 F.3d 128, 134 (3d Cir. 2010). Accordingly, judgment
on the pleadings is proper where the plaintiff’s factual allegations, taken as true and
viewed in the light most favorable to the plaintiff, are not sufficient to state “a claim for
relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007).
The federal pleading standard guides our assessment of whether the Estate’s
Complaint sets forth a viable claim under applicable state law. “As a federal court sitting
in diversity, we ‘are required to apply the substantive law of the state whose laws govern
the action.’” Norfolk S. Ry. Co. v. Basell USA Inc., 512 F.3d 86, 91 (3d Cir. 2008)
(quoting Robertson v. Allied Signal, 914 F.2d 360, 378 (3d Cir. 1990)). Here, the District
Court chose to apply the law of Delaware, and the parties do not contest that choice on
appeal.
Delaware law provides a right to an accounting in specified situations, only one of
which is potentially relevant here, i.e., “where a fiduciary relationship exists between the
parties and a duty rests upon defendant to render an account.” Pan Am. Trade & Inv.
Corp. v. Commercial Metals Co., 94 A.2d 700, 701 (Del. Ch. 1953). Citigroup contends
that, even assuming an accounting demand can be maintained under Delaware law as a
stand-alone claim, 5 the Estate failed to sufficiently plead the requisite fiduciary
5
The Delaware Supreme Court characterizes an accounting as an “equitable
remedy.” See, e.g., Rebstock v. Lutz, 158 A.2d 487, 489 (Del. 1960). And the Delaware
6
relationship. We agree that no such relationship is apparent from the facts in the
Complaint, and the District Court therefore properly granted Citigroup’s motion for
judgment on the pleadings.
The thrust of the Estate’s main argument for recognizing Citigroup as a fiduciary
flows from a critical assumption built into the Complaint: that there is a duty owed by
Banamex to Schneider Sauter as its depositor. From that relationship, the Estate would
extrapolate a duty to Citigroup on the ground that Banamex is allegedly a “subsidiary
bank[].” JA 46. The problem with this theory is that, under Delaware law, “the relation
between a bank and a mere general depositor of funds is that of debtor and creditor, and
is in no sense of a fiduciary nature.” Tharp v. St. Georges Tr. Co., 34 A.2d 253, 255
(Del. Ch. 1943); cf. Paradise Hotel Corp. v. Bank of Nova Scotia, 842 F.2d 47, 53 (3d
Cir. 1988) (“Creditor-debtor relationships such as that between the Bank and Paradise
rarely are found to give rise to a fiduciary duty.”). And if Schneider Sauter is not owed a
fiduciary duty by Banamex, then a fortiori there is no such duty that can be imputed to
Citigroup as Banamex’s alleged corporate parent. See Greco v. Univ. of Delaware, 619
A.2d 900, 903 (Del. 1993) (imputing liability requires underlying liability).
Code does the same. See Del. Code Ann. tit. 12, § 3581(b)(4) (2017). The Delaware
Supreme Court has not yet addressed whether a demand for an accounting may be
pleaded as a stand-alone form of action, but we need not predict how this state law issue
ultimately will be resolved because, even assuming an accounting demand can be pleaded
without a companion claim, the Estate’s Complaint was properly dismissed on Rule 12(c)
grounds.
7
The Estate’s arguments to the contrary are unavailing. Even if the Estate were
correct that it is owed a fiduciary duty from Banamex, that duty could not pass to
Citigroup without piercing the legal veil that generally shields a parent corporation from
the acts of its subsidiaries. See United States v. Bestfoods, 524 U.S. 51, 61 (1998).
“Persuading a Delaware court to disregard the corporate entity,” however, “is a difficult
task,” Wallace ex rel. Cencom Cable Income Partners II, Inc., L.P. v. Wood, 752 A.2d
1175, 1183 (Del. Ch. 1999) (citation and internal quotations omitted), and, as Citigroup
correctly points out, the factual allegations in the Complaint, taken as true, reveal not
“Citigroup’s control of Banamex’s day-to-day operations or a complete disregard of the
corporate form between the two entities,” but instead “the expected level of supervision
by a parent company of its foreign subsidiary.” Appellee’s Br. at 28. Thus, the District
Court properly determined that the Complaint lacked factual allegations necessary to
support veil-piercing under Delaware law. See Outokumpu Eng’g Enter., Inc. v.
Kvaerner EnviroPower, Inc., 685 A.2d 724, 729-30 (Del. Super. Ct. 1996) (discussing
alter-ego and agency theories of liability for corporate parent).
The Estate is no more successful with its argument that the sources of law cited in
the Complaint—from jurisdictions other than Delaware—show Citigroup owed a
fiduciary duty to Schneider Sauter directly, rather than through the conduit of Banamex.
The NAFTA provision cited in the Complaint imposes obligations on parties to the treaty
with respect to their treatment of foreign financial institutions and investors in those
institutions; it does not impose new obligations on banks to their customers. See 32
8
I.L.M. at 657-63; cf. LeClerc v. Webb, 419 F.3d 405, 412 n.12 (5th Cir. 2005) (individual
citizen of Canada was not a “beneficiary of NAFTA”). 6 For its part, the EFAA merely
requires that “depository institution[s]” make available for prompt withdrawal their
customers’ deposited funds. See Bank One Chicago, N.A. v. Midwest Bank & Tr. Co.,
516 U.S. 264, 267 (1996). It thus has no bearing here, insofar as the Complaint alleged
that the disputed funds had been deposited into accounts with Banamex, not Citigroup.
Finally, the Estate posits that Mexican law “require[s] banks to turn over funds
immediately to an Estate in the event of the death of an account holder,” JA 45, but
conclusory legal assertions need not be credited without supporting factual allegations in
reviewing a motion under Rule 12(c), see Iqbal, 556 U.S. at 679, and, even if credited,
the Mexican law described by the Estate would appear to impose an obligation only on
the bank holding the decedent’s funds—again, Banamex, not Citigroup.
In sum, even accepting as true the factual allegations in the Complaint and
considering the various sources of law to which it cites, the Estate failed to plead a viable
accounting action against Citigroup under Delaware law. The District Court thus did not
err when it granted Citigroup’s motion for judgment on the pleadings.
6
Moreover, contrary to the Estate’s argument in the District Court that NAFTA
permits it “to bring suit in the United States against the party that has sought and obtained
Mexican permission to operate in Mexico, namely Citi,” JA 284, federal law expressly
disclaims the availability of a private right of action under NAFTA. See 19 U.S.C. §
9B. The District Court’s Denial of Leave to Amend.
In arguing that leave to amend should have been granted, the Estate attacks both
the District Court’s pre-judgment denial of leave to amend and its refusal to reconsider.
We perceive no error in either of those rulings.
The Estate requested leave to amend, as an alternative to dismissal, in its
opposition to Citigroup’s Rule 12(c) motion and at oral argument on the motion. It later
argued in support of reconsideration that the District Court erred when it dismissed the
Complaint with prejudice “rather than granting Plaintiff an opportunity to amend.” JA
283. At none of those junctures, however, did the Estate proffer a proposed amended
complaint or even describe with any detail the substance of the putative pleading. 7 Our
precedent is clear that district courts act within the bounds of their discretion when they
reject undeveloped requests for leave to amend that, like the Estate’s, are unaccompanied
by a proposed amended pleading. See, e.g., Fletcher-Harlee Corp. v. Pote Concrete
3312(c).
7
Indeed, the Estate did not submit a proposed amended complaint until the filing
of its reply brief in support of reconsideration, a submission the District Court was well
within its discretion to refuse to consider. See D. Del. LR 7.1.5(a) (2010). Although the
District Court signed off on a stipulation between the parties permitting the Estate to file
a reply in this case, its willingness to consider the Estate’s rebuttal to arguments raised in
Citigroup’s responsive briefing was not an open invitation to submit an amended
complaint at that late stage and does not excuse the Estate’s untimely submission.
Moreover, the District Court’s Local Rules require that a party seeking leave to amend
attach to his request two documents: “[t]he proposed pleading as amended” and “[a]
form of the amended pleading which shall indicate in what respect it differs from the
pleading which it amends, by bracketing or striking through materials to be deleted and
underlining materials to be added.” D. Del. LR 15.1 (2010). The Estate failed to attach
10
Contractors, Inc., 482 F.3d 247, 252 (3d Cir. 2007); Lake v. Arnold, 232 F.3d 360, 374
(3d Cir. 2000). For that reason alone, the District Court did not abuse its discretion when
it refused to grant leave to amend before judgment or upon the Estate’s motion for
reconsideration.
A proper motion for reconsideration under Fed. R. Civ. P. 59(e) must be based on
one of three grounds: “(1) an intervening change in controlling law; (2) the availability
of new evidence; or (3) the need to correct clear error of law or prevent manifest
injustice.” Lazaridis v. Wehmer, 591 F.3d 666, 669 (3d Cir. 2010) (per curiam). None
pertain here. The Estate’s motion for reconsideration provided nothing in the way of new
or overlooked law or facts to impugn the District Court’s ruling that amendment would
be futile. And, in fact, the District Court, going beyond what was required in this case,
carefully considered the Estate’s argument that a fiduciary relationship existed between
the Estate and Citigroup, as well as the extra-pleading evidence offered in support of that
argument, before it granted Citigroup’s Rule 12(c) motion and denied the Estate’s motion
for reconsideration. The District Court’s thorough analysis confirms that there was no
error—much less “clear error” or “manifest injustice”—in its conclusion on
reconsideration that leave to amend would be futile because the Estate could not
adequately plead a plausible claim for relief. See Twombly, 550 U.S. at 570.
The cases cited by the Estate are not to the contrary. In United States ex rel.
Customs Fraud Investigations v. Victaulic Co., 839 F.3d 242 (3d Cir. 2016), the district
the latter document to its reply. 11
court granted the defendant’s Rule 12(b) motion “with prejudice, without any discussion
of why [the relator-plaintiff] should not be afforded the opportunity to amend its
complaint to solve any perceived deficiencies.” Id. at 247. By contrast, the District
Court here explained in its opinion why it was granting Citigroup’s motion with prejudice
and denying leave to amend. Additionally, in Victaulic, after the relator-plaintiff’s
complaint was dismissed, it promptly filed a motion for leave to amend that included “a
proposed First Amended Complaint.” Id. Here, however, the Estate, in moving for
reconsideration after dismissal, merely alluded to unspecified “additional record
evidence” that it obtained “[b]ased on ongoing investigation,” JA 284, and it failed to
submit a timely proposed amended pleading.
Newark Branch, NAACP v. Town of Harrison, New Jersey, 907 F.2d 1408 (3d Cir.
1990), is even farther afield. In that case, the district court mistakenly believed “that it no
longer had the power to entertain amendments once the original complaint had been
dismissed” for lack of standing. Id. at 1416. We vacated the district court’s order
denying leave to amend because: (1) an adverse judgment, even one based on a
determination that the case is non-justiciable, is not a complete impediment to
amendment; and (2) the NAACP’s post-judgment motion for leave to amend was
accompanied by a “proposed amendment” that was “not facially meritless.” Id. at 1417.
In contrast, the District Court here did not misunderstand the scope of its power to grant
leave to amend and, again, the Estate failed to accompany its requests for such relief with
a properly formulated proposed amended pleading.
12
In the last case cited by the Estate on this point, Grayson v. Mayview State
Hospital, 293 F.3d 103, 114 (3d Cir. 2002), we held that, notwithstanding the enactment
of the Prison Litigation Reform Act, 42 U.S.C. § 1997e, et seq., pro se plaintiffs
proceeding in forma pauperis “who file complaints subject to dismissal under Rule
12(b)(6) should receive leave to amend unless amendment would be inequitable or
futile.” Id. at 114. The applicability of the sua sponte amendment rule, however, is
cabined to cases like Grayson; “[i]n non-civil rights cases, the settled rule is that properly
requesting leave to amend a complaint requires submitting a draft amended complaint.”
Fletcher-Harlee, 482 F.3d at 252-53. 8
In sum, under applicable precedent and the standard for motions under Rule 59(e),
the District Court did not abuse its discretion in refusing to grant leave to amend and
denying reconsideration.
III.
For the foregoing reasons, the District Court’s orders dismissing the case and
denying reconsideration will be affirmed.
8
In addition to Victaulic, Newark Branch, NAACP, and Grayson, the Estate’s
opening brief cited non-precedential opinions of this Court. As we have pointed out on
multiple occasions, however, such opinions “‘are not regarded as precedents that bind the
court because they do not circulate to the full court before filing.’” In re Grand Jury
Investigation, 445 F.3d 266, 276 (3d Cir. 2006) (quoting 3d Cir. I.O.P. 5.7 (2002));
accord Watson v. Rozum, 834 F.3d 417, 427 (3d Cir. 2016).
13