Nuevos Destinos, LLC et al v. Peck et al

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NORTH DAKOTA
EASTERN DIVISION
)
Nuevos Destinos, LLC, et al., )
) MEMORANDUM AND ORDER
Plaintiffs, )
)
vs. ) Case No. 3:19-cv-00045
)
Samuel Peck, et al., )
)
Defendants. )
I. INTRODUCTION
This case caught a second wind in North Dakota after its transfer from the U.S. District
Court for the District of Columbia. The complaint alleges that 21 Defendants, nine of which have
entered appearances, engaged in a racketeering scheme to defraud the Plaintiffs and others of
millions of dollars—in Peru. The Plaintiffs contend that the Defendants operated a de facto Ponzi
scheme with Peruvian businesses dealing in agricultural goods, ripping off investors and then, with
the promise of repaying past losses, enlisting those same investors to recruit new victims.
The complaint includes five counts: (1) violation of 18 U.S.C. § 1962(c), otherwise known
as the Racketeer Influenced and Corrupt Organizations Act (“RICO”); (2) conspiracy to violate
RICO under 18 U.S.C. § 1962(d); (3) conspiracy to commit fraud; (4) fraud; and (5) breach of
contracts. In eight separate motions, each of the nine appearing Defendants has moved to dismiss
predicated on either lack of jurisdiction or failure to state a claim or both. Doc. Nos. 133-38, 141-
42. In turn, the Plaintiffs have moved for permission to conduct jurisdictional discovery. Doc.
No. 129. The parties have exhaustively briefed the issues (essentially twice now), and the Court
has weighed all the arguments presented in this forum and the District of Columbia. For the
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reasons below, the Defendants’ eight motions to dismiss are granted. The Plaintiffs’ motion to
conduct jurisdictional discovery is concomitantly denied.
II. BACKGROUND
As it must at the motion to dismiss stage, the Court accepts the complaint’s factual
allegations as true. See Doc. No. 1. Considering the number of defendants, a brief introduction
of the parties is necessary at the outset. A summary of the allegations in the complaint and a
synopsis of the procedural history follows.
A. Introduction of Parties
The Plaintiffs are two business entities and one individual. Nuevos Destinos, LLC
(“NDL”) is a limited liability company registered in Florida that purchases agricultural goods in
Peru and exports them to the United States and elsewhere. Id. ¶ 9. Its principal place of business
during the time period relevant to this lawsuit was the District of Columbia. Id. Nuevos Destinos
Peru, S.A.C. (“NDP”) is a business entity organized in Peru that “purchased agricultural products
from Peru on behalf of NDL” as its agent. Id. ¶ 10. Like its American counterpart, NDP’s principal
place of business was the District of Columbia. Id. William P. Cook (“Cook”), a citizen of
Virginia, is the individual plaintiff. Id. ¶ 11. Cook “personally financed” the transactions at issue
and is a principal of NDL along with his wife, Ileana M. Boza, a U.S. permanent resident from
Peru. Id. ¶¶ 9, 11.
Because most of the named Defendants have yet to appear, the Court will primarily discuss
the nine Defendants that have responded to the claims through the pending motions. With that
said, three Defendants that have not appeared warrant introduction for context because of their
centrality to the claims. The first is Ignacio Harten Rodriguez Larrain (“Harten”), the alleged
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“central mastermind” of the purported racketeering enterprise. Id. ¶ 13. He is a citizen of Peru
that may currently be living in the United States. Id. Second is Agricola Peruana Del Sol, S.R.L.
(“APS”), a now defunct Peruvian business entity controlled by Harten as its General Manager that
exported agricultural goods from Peru to the United States and abroad. Id. ¶¶ 13, 15. As alleged,
APS served as the vehicle through which Harten and the other Defendants defrauded the Plaintiffs.
Id. And third is Peruvian Organic International Trading, S.A.C. (“POIT”), the “successor in
interest” to APS and an asserted wellspring of continued fraudulent activity that Harten covertly
runs. Id. ¶ 23.
The appearing Defendants consist of one United States citizen, one United States
corporation, five Peruvian citizens, and two Peruvian business entities. Chief among them is
Samuel Peck (“Peck”), who along with Harten is alleged to have been the racketeering scheme’s
primary architect. Id. ¶ 12. Peck co-founded APS with Harten and was the company’s majority
shareholder. Id. A citizen of Colorado, he is also the Vice President of SKE Midwestern, Inc.
(“SKE”), another named Defendant. Id. SKE, an agricultural export corporation that is
incorporated and has its principal place of business in North Dakota, lost millions to Harten in a
previous business deal gone bad. Id. ¶ 17. Peck and Harten allegedly used APS to recoup SKE’s
losses through further fraud. Id.
Moving to the Peruvian Defendants,1 Emilio Farah (“Farah”), another former victim of
Harten’s fraudulent machinations and a citizen of Peru, sought to sell agricultural products with
NDL and first introduced Cook to Harten. Id. ¶ 16. Farah is also the purported principal of
1 “Peruvian Defendants” refers to the seven appearing Defendants other than Peck and SKE.
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Defendants Convalor, S.A.C. (“Convalor”) and Confactor, S.A.C. (“Confactor”), two Peruvian
business entities. Id.
The remaining Defendants, collectively referred to as “the Costa Defendants,” are all
individual Peruvian citizens and members of Harten’s family. Jorge Harten Costa, Sr. (“Jorge,
Sr.”) is Harten’s father and served as a designated agent for APS, meaning his signature was
required—at least initially—for Harten to access the company’s funds. Id. ¶ 20. Harten’s brother,
Jorge Emilio Harten Rodriguez Larrain, Jr. (“Jorge, Jr.”), was also a designated agent for APS and
is now a shareholder in POIT. Id. ¶¶ 21, 23. Ofelia Maria Rodriguez Larrain Salinas de Harten
(“Ofelia”) is Harten’s mother and Jorge, Sr.’s wife. Id. ¶ 22. Ofelia is allegedly POIT’s “nominal
public head.” Id. Last is Javier Rodriguez Larrain Salinas (“Javier”), Ofelia’s brother and Harten’s
uncle. Id. ¶ 24. Javier attended the initial meeting between Cook and Harten and propped up
APS’s legitimacy to NDL after having fallen victim to the scheme himself. Id.
B. Alleged Racketeering Activity
The claimed racketeering enterprise took form in 2007 after Peck started doing business
with Harten on behalf of SKE. Id. ¶ 67. Allegedly a “compulsive gambler and former drug addict”
who “owed money to a number of Lima’s casinos,” Harten quickly proved a less than trustworthy
business associate. Id. ¶ 72. Peck and Harten then formed APS so that SKE could “exercise
control over Harten” in future business dealings. Id. ¶ 67.
Harten initially held only a small ownership interest in APS, while Peck and two other U.S.
citizens owned the remainder. Id. ¶ 68. Jorge, Sr., a lawyer, chartered APS with “safeguards”
designed to constrain Harten’s control over the company’s funds. Id. ¶ 69. Specifically, Jorge,
Sr., Jorge, Jr., and Peck oversaw APS’s operations as “Apoderados” (designated agents) and had
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to authorize any checks issued or cash withdrawn from company accounts. Id. With the safeguards
in place, SKE then moved forward with a $1 million purchase of agricultural goods from APS. Id.
Not long after, APS “ceased delivering product entirely.” Id. ¶ 70. By May 2011, SKE had paid
APS $3.6 million with little to nothing to show for it. Id. ¶ 74. SKE’s President then told Peck
“that his job was on the line and to do whatever it took to get [SKE’s] money back from APS and
Harten.” Id. ¶ 73.
In response, APS reorganized. Jorge, Sr. removed entirely the prior restrictions on Harten’s
access to the company’s funds, “making Harten the sole signatory on all of the APS accounts” in
July 2011. Id. ¶ 77. Harten’s ownership share increased in tandem to almost 50%, a move Peck
characterized as “necessary to ‘incentivize Harten’ to work to recover SKE’s lost $3.6 million.”
Id. ¶¶ 74-75. Peck remained the majority shareholder, with the other two U.S. citizens’ shares
becoming effectively nonexistent. Id. ¶ 75.
Untethered from corporate restraints, Harten and Peck devised the scheme that would
ultimately ensnare the Plaintiffs. The plan called for Peck to “issue facially valid purchase orders
on behalf of SKE and then Harten would shop them around to financing sources in Lima and
abroad.” Id. ¶ 76. Harten and Peck allegedly sold the purchase orders to investors with no intent
of delivering product, pocketing the proceeds to repay SKE and strong-arming victims into joining
the scheme with similar promises of eventual recompense. The scheme’s first victims were
Harten’s own family members, including his uncle, Javier, who lost $500,000. Id. ¶ 79. Peruvian
businessmen such as Farah, who lost $1.5 million, made for later targets. Id. ¶¶ 80-81.
NDL entered the picture in 2012. Id. ¶ 32. Up to that point, NDL had financed other export
companies in Peru. Id. ¶ 31. Beginning that year, however, NDL ventured into the export business
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directly. Id. To facilitate a potential business relationship, Farah introduced NDL to Harten in
Peru in April 2012. Id. ¶ 32. Farah told NDL that “he had a good experience with Harten and
APS” from a recent contract and that Harten was “honest” and “well connected.” Id. Shortly
thereafter in May, NDL met Peck and Harten at a lunch in Lima. Id. ¶ 88. Peck identified himself
as an SKE employee and told NDL “that he had worked for a long time with Harten and APS, and
Peck was very pleased with the relationship.” Id. At no time during this meeting did Peck identify
himself as a co-founder or majority shareholder of APS. Id. ¶ 91. Harten’s family members,
including Jorge, Sr. and Javier, also extolled Harten’s reputation as an honest businessman. Id. ¶¶
102-06, 112.
NDL inked its first contract with APS that same month to purchase 1566.6 metric tons of
product for $1,584,600. Id. ¶¶ 36-37. APS delivered less than 64 metric tons. Id. ¶ 37. Despite
the rocky start, NDL entered into several more contracts with APS spanning from May through
October 2012. Id. ¶¶ 45, 47, 58, 64-65. NDL’s commitment rested in part on the belief that “APS
had specific purchase orders, including [from] SKE (which NDL later found out to be largely
false).” Id. ¶ 37. Repeated attempts to obtain the promised product or an accounting for the money
NDL paid to Harten and APS proved futile. Id. ¶¶ 128-30.
After catching on to the scheme, NDL successfully warned another Peruvian businessman
to steer clear of APS, Harten, and Peck in early 2013 when they attempted to use similar tactics to
entice the businessman to provide financing. Id. ¶ 82. Peck and Harten folded APS in reaction,
and Harten’s family then created POIT. Id. ¶ 83. While Jorge, Jr. and Ofelia are POIT’s only
shareholders, Harten allegedly runs the business to perpetuate the fraudulent activity and repay
APS’s debts. Id. Peck is also working with POIT. Id. He has purportedly “forced Harten to repay
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SKE with NDL’s money” and remains employed as SKE’s Vice President. Id. ¶ 93. All told,
NDL claims it poured $2.25 million into the deals with APS, with only $238,907 in product ever
delivered. Id. ¶ 193. The Plaintiffs seek damages to the tune of $2,011,093,2 as well as damages
for unspecified lost business opportunities. Id. ¶¶ 192-93.
C. Procedural History
As noted above, this case presents with an unusual procedural posture. The Plaintiffs
initially filed their complaint in the U.S. District Court for the District of Columbia on October 30,
2015. See Doc. No. 1. In retort, the nine Defendants that entered appearances uniformly moved
to dismiss the complaint for lack of jurisdiction, among other grounds. Doc. Nos. 35-38, 45, 50,
52, 54. On January 2, 2019, District Judge Emmet G. Sullivan issued an order and accompanying
memorandum opinion dismissing all nine Defendants for lack of jurisdiction in the District of
Columbia. Doc. Nos. 113, 114. However, Judge Sullivan later stayed that order, finding that
transfer, instead of dismissal, was more appropriate based predominantly on SKE and Peck’s
contacts with North Dakota. See Minute Order, Feb. 22, 2019. Following the transfer, the
Plaintiffs moved to conduct jurisdictional discovery. Doc. No. 129. Meanwhile, the nine
appearing Defendants renewed their motions to dismiss. Doc. Nos. 133-38, 141-42.
III. JURISDICTION OVER PERUVIAN DEFENDANTS
The Court first finds that it is without jurisdiction to consider the claims against the seven
Peruvian Defendants.3 Jurisdiction is the “first and fundamental question” for resolution. Franklin
2 RICO permits injured plaintiffs to recover treble damages. 18 U.S.C. § 1964(c).
3 SKE states in its pending motion to dismiss that it no longer contests jurisdiction as it did in the
District of Columbia. Doc. No. 138. Although Peck does not specifically disclaim a lack of
jurisdiction defense, his decision not to raise the issue in his renewed motion to dismiss operates
as a waiver. See Fed. R. Civ. P. 12(h)(1)(A).
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v. Peterson, 878 F.3d 631, 635 (8th Cir. 2017) (quoting Steel Co. v. Citizens for a Better Env’t,
523 U.S. 83, 94 (1998)). As an initial barrier, the Plaintiffs improperly served the Peruvian
Defendants under the Federal Rules of Civil Procedure. In addition, the Court wholly lacks
personal jurisdiction over citizens of Peru for events that occurred in Peru. Jurisdictional discovery
will not cure this fundamental shortcoming and is consequently inappropriate. Because
jurisdiction is a threshold inquiry, the Court will not address the merits of the Plaintiffs’ claims
against these seven Defendants. See Va. House of Delegates v. Bethune-Hill, 587 U.S. ___, 139
S. Ct. 1945, 1950 (2019) (“To reach the merits of a case, an Article III court must have
jurisdiction.”).
A. Improper Service of Process
The Peruvian Defendants initially contend that the Plaintiffs improperly served them with
process under the Federal Rules of Civil Procedure. “If a defendant is improperly served, a federal
court lacks jurisdiction over the defendant.” Bell v. Pulmosan Safety Equipment Corp., 906 F.3d
711, 714-15 (8th Cir. 2018) (quoting Printed Media Servs., Inc. v. Solna Web, Inc., 11 F.3d 838,
843 (8th Cir. 1993)). Service must be carried out in compliance with the Federal Rules and “[t]his
principle remains true despite any actual notice a defendant may have of the lawsuit.” Sieg v.
Karnes, 693 F.2d 803, 807 (8th Cir. 1982) (citations omitted).
The proof of service forms the Plaintiffs filed indicate that all seven Peruvian Defendants
received notice of the summons and complaint via delivery of notarized letters, written in English,
to third parties in Peru. Doc. Nos. 18-21, 23-24, 26. Process was served on receptionists at places
of business for six Defendants (Jorge, Sr., Ofelia, Javier, Farah, Convalor, and Confactor) and on
a family member at a residence for one Defendant (Jorge, Jr.). See id. Nothing in the record
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indicates that the Defendants had designated the served individuals as agents for receipt of service
of process.
Federal Rule 4(f) delineates the standard for service of process on an individual in a foreign
country:
(f) Unless federal law provides otherwise, an individual . . . may be served at a
place not within any judicial district of the United States:
(1) by any internationally agreed means of service that is reasonably
calculated to give notice, such as those authorized by the Hague Convention
on the Service Abroad of Judicial and Extrajudicial Documents;
(2) if there is no internationally agreed means, or if an international
agreement allows but does not specify other means, by a method that is
reasonably calculated to give notice:
(A) as prescribed by the foreign country’s law for service in that
country in an action in its courts of general jurisdiction;
(B) as the foreign authority directs in response to a letter rogatory or
letter of request; or
(C) unless prohibited by the foreign country’s law, by:
(i) delivering a copy of the summons and of the complaint to
the individual personally; or
(ii) using any form of mail that the clerk addresses and sends
to the individual and that requires a signed receipt; or
(3) by other means not prohibited by international agreement, as the court
orders.
Fed. R. Civ. P. 4(f). The requirements for serving a corporation in a foreign country are the same,
with one caveat – delivering a copy of the summons and complaint “personally” to a corporation
under Rule 4(f)(2)(C)(i) is ineffective. See Fed. R. Civ. P. 4(h)(2). Walking through Rule 4(f)
yields the conclusion that the Plaintiffs’ chosen method of service was inadequate.
Starting with Rule 4(f)(1), Peru is not a signatory to the Hague Convention on the Service
Abroad of Judicial and Extrajudicial Documents. See SA Luxury Expeditions, LLC v. Latin Am.
for Less, LLC, No. C 14-04085, 2015 WL 4941792, at *1 (N.D. Cal. Aug. 19, 2015). The United
States and Peru are, however, joint signatories to the Inter-American Convention on Letters
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Rogatory, as well as the Additional Protocol to that Convention. Id. The Plaintiffs did not effect
service using letters rogatory here. Because service was not attempted pursuant to the Inter-
American Convention, which is the only international agreement between the United States and
Peru regarding service, Rule 4(f)(1) is not satisfied.
Even so, “the Inter-American Convention does not purport to provide the exclusive method
of effecting service between the signatories.” C & F Systems, LLC v. Limpimax, S.A., No. 1:09-
cv-858, 2010 WL 65200, at *1 (W.D. Mich. Jan. 6, 2010) (citing Kreimerman v. Casa Veerkamp,
S.A. de C.V., 22 F.3d 634, 643-44 (5th Cir. 1994)). This cracks the door open to Rule 4(f)(2)
because the Inter-American Convention “allows but does not specify other means” for service.
Fed. R. Civ. P. 4(f)(2). Rule 4(f)(2) lists, for practical purposes, four additional avenues available
to effectuate service on foreign defendants.
First is subsection (A), permitting any method “prescribed by the foreign country’s law for
service in that country in an action in its courts of general jurisdiction.” Fed. R. Civ. P. 4(f)(2)(A).
The parties dispute Peru’s service of process requirements via dueling declarations. On one hand,
the Plaintiffs assert that “the only applicable law of Peru to this matter is Article 2094 of the
Peruvian Civil Code.” Doc. 64-9, p. 3. That Peruvian Civil Code section provides simply that a
foreign procedural instrument is governed “by the law of the place of its origin,” in essence
reflecting back to American law. Id. The Defendants, on the other hand, collectively posit three
requirements for service in Peruvian courts. Namely, notice of the claim, here consisting of the
summons and complaint, must be: (1) processed by a Peruvian court; (2) delivered to a defendant’s
domicile; and (3) accompanied by an official translation if not originally written in Spanish. Doc.
No. 35-2, pp. 4-5; Doc. No. 52-2, p. 5.
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When resolving an issue of foreign law, a “court may consider any relevant material or
source.” Fed. R. Civ. P. 44.1; see also United States v. Larson, 110 F.3d 620, 627 n.7 (8th Cir.
1997). After carefully examining the submitted declarations from both parties, the Court finds the
Defendants’ interpretation of Peruvian law most accurate.
As relevant here, Rule 4(f)(2)(A) looks to “[Peru’s] law for service . . . in an action in
[Peru’s] courts of general jurisdiction.” Fed. R. Civ. P. 4(f)(2)(A). Article 2094 of the Peruvian
Civil Code has nothing to do with this analysis. In a word, how Peru’s courts treat other countries’
procedural documents is irrelevant to how Peru’s courts require service in their own lawsuits. Even
if American law is in fact what a Peruvian court would turn to, what would that American law be?
Well, Federal Rule of Civil Procedure 4(f), which again would call for application of Peru’s own
law for service in its own courts. The result is a hamster wheel. Because Article 2094 misses the
mark, the Court rejects the Plaintiffs’ interpretation.
Instead, the Court finds that to properly serve a defendant in an action before a court of
general jurisdiction in Peru, notice of the claim must be: (1) processed by a Peruvian court; (2)
delivered to a defendant’s domicile; and (3) accompanied by an official translation if not originally
written in Spanish. See Doc. No. 35-2, pp. 4-5; Doc. No. 52-2, p. 5. A Peruvian court had not
processed the notarized letters the Plaintiffs’ employed here, nor were the letters accompanied by
Spanish translations of the summons and complaint. And four of the Defendants (Jorge, Sr.,
Ofelia, Javier, and Farah) were not served at their domicile, but rather at a place of business. See
Doc. Nos. 20, 21, 24, 26. Service was therefore ineffective under Peruvian law and Rule
4(f)(2)(A).
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Subsections (B) and (C) of Rule 4(f)(2) are equally inapplicable. As stated above, the
Plaintiffs did not attempt to use letters rogatory under subsection (B). Also lacking for all seven
Peruvian Defendants is personal delivery pursuant to Rule 4(f)(2)(C)(i). Personal delivery is
unavailable as a method of service for Convalor and Confactor as foreign corporations. See Fed.
R. Civ. P. 4(h)(2). Moreover, the five individual Peruvians were not served personally – the
process server delivered four notarized letters to receptionists at places of business and one to a
Defendant’s family member. See Doc. Nos. 20-21, 23-24, 26. Finally, under Rule 4(f)(2)(C)(ii),
the Plaintiffs did not attempt to serve the Defendants using mail addressed and sent by a Clerk of
Court’s office.
That leaves only Rule 4(f)(3), allowing for service pursuant to court order. The Plaintiffs
have not moved for such an order in this forum. But in their omnibus response to the pending
motions to dismiss, the Plaintiffs contend that “even if there was some [service] defect, it was
minor and non-prejudicial” and they should be allowed a second chance to properly serve the
Defendants. Doc. No. 154, p. 13.
The Court declines to entertain this eleventh hour request for a do-over more than four
years into the litigation. District courts possess “discretion to determine ‘when the particularities
and necessities of a given case require alternate service of process under Rule 4(f)(3).’” TracFone
Wireless, Inc. v. Washington, 290 F.R.D. 686, 687-88 (M.D. Fla. 2013) (quoting Rio Props., Inc.
v. Rio Int’l Interlink, 284 F.3d 1007, 1015 (9th Cir. 2002)). Despite the manifold avenues for
proper service available under Rule 4, the Plaintiffs made a single attempt to serve the Peruvian
Defendants that patently did not comply with any of them. More importantly, permitting a second
round of service would do nothing to change the inevitable outcome—that there is no basis to
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exercise jurisdiction over the Peruvian Defendants—and result only in further unwarranted delay.
The Court therefore, in the exercise of its discretion, will not permit alternative service.
In sum, the Plaintiffs failed to properly serve the Peruvian Defendants with process under
Rule 4 of the Federal Rules of Civil Procedure. The Court accordingly lacks jurisdiction over
them. In any event, and even if service had been proper, the Court cannot constitutionally exercise
personal jurisdiction over the Peruvian Defendants.
B. Lack of Personal Jurisdiction
Over and above improper service of process,4 the seven Peruvian Defendants argue that
the Court lacks personal jurisdiction over them, thereby mandating their dismissal pursuant to Rule
12(b)(2) of the Federal Rules of Civil Procedure. Albeit in a roundabout way, the Plaintiffs put
forth three independent grounds for personal jurisdiction. To start, the Plaintiffs claim generally
that the Defendants have sufficient contacts with North Dakota. They also rely on Federal Rule
of Civil Procedure 4(k)(2), the federal long-arm statute that permits jurisdiction when there is a
supporting federal claim and a defendant lacks contacts with a specific forum. The last asserted
basis is 18 U.S.C. § 1965(b), RICO’s nationwide personal jurisdiction provision.
“To survive a motion to dismiss for lack of personal jurisdiction, a plaintiff must make a
prima facie showing that personal jurisdiction exists.” K-V Pharm. Co. v. J. Uriach & CIA, S.A.,
648 F.3d 588, 591 (8th Cir. 2011) (citing Dever v. Hentzen Coatings, Inc., 380 F.3d 1070, 1072
(8th Cir. 2004)). This prima facie showing is established “not by the pleadings alone, but by the
affidavits and exhibits presented with the motions and opposition thereto.” Miller v. Nippon
Carbon Co., Ltd., 528 F.3d 1087, 1090 (8th Cir. 2008) (quoting Dever, 380 F.3d at 1072). When
4 To squarely address personal jurisdiction, the Court will assume, for Part III.B. only, that the
Plaintiffs properly served the Peruvian Defendants.
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a defendant challenges personal jurisdiction, the plaintiff “carries the burden of proof, and the
burden does not shift to the party challenging jurisdiction.” Epps v. Stewart Info. Servs. Corp.,
327 F.3d 642, 647 (8th Cir. 2003). Absent a hearing or trial, the evidence must be viewed in the
light most favorable to the Plaintiffs. Creative Calling Solutions, Inc. v. LF Beauty Ltd., 799 F.3d
975, 979 (8th Cir. 2015) (citing Radaszewski ex rel. Radaszewski v. Telecom Corp., 981 F.2d 305,
309-10 (8th Cir. 1992); Fed. R. Civ. P. 56(a)).
1. North Dakota Long-Arm Statute
The complaint’s lone allegation supporting jurisdiction in this forum specifically is that the
racketeering enterprise operated in North Dakota, as well as in the District of Columbia and Peru.
Doc. No. 1, ¶ 150. Indeed, the Plaintiffs have not even so much as hinted that jurisdiction is proper
under North Dakota’s long-arm statute since this case’s transfer. And for good reason; each
Peruvian Defendant lacks the requisite minimum contacts with North Dakota.
The exercise of personal jurisdiction is appropriate if a two-part test is met. First, a
defendant must fall within the ambit of the relevant forum’s long-arm statute. Dever, 380 F.3d at
1073 (citing Morris v. Barkbuster, Inc., 923 F.2d 1277, 1280 (8th Cir. 1991)). Second, a defendant
must have sufficient minimum contacts with the forum under the Due Process Clause of the
Fourteenth Amendment. Id.
Unless statutory authority provides otherwise, a federal court exercises personal
jurisdiction to the same extent as “a court of general jurisdiction in the state where the district court
is located.” Fed. R. Civ. P. 4(k)(1)(A); see also Coen v. Coen, 509 F.3d 900, 905 (8th Cir. 2007)
(citing Dakota Indus., Inc. v. Ever Best Ltd., 28 F.3d 910, 915 (8th Cir. 1994)). The North Dakota
long-arm statute “authorizes North Dakota courts to exercise personal jurisdiction over nonresident
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defendants to the fullest extent permitted by due process.” Hansen v. Scott, 2002 ND 101, ¶ 16,
645 N.W.2d 223. When a state’s “long-arm statute is coextensive with constitutional limits,
[courts] need only determine whether the assertion of jurisdiction . . . offends due process.”
Johnson v. Woodcock, 444 F.3d 953, 955 (8th Cir. 2006) (citing Minnesota Mining & Mfg. v.
Nippon Carbide Indus., 63 F.3d 694, 696-97 (8th Cir. 1995)).
To comport with due process, “the defendant’s contacts with the forum State must be such
that maintenance of the suit ‘does not offend traditional notions of fair play and substantial
justice.’” World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 292 (1980) (quoting Int’l
Shoe Co. v. Washington, 326 U.S. 310, 316 (1945)). “Each defendant’s contacts . . . must be
assessed individually.” Calder v. Jones, 465 U.S. 783, 790 (1984) (citing Rush v. Savchuk, 444
U.S. 320, 332 (1980)). There are two categories of personal jurisdiction: general jurisdiction and
specific jurisdiction. Daimler AG v. Bauman, 571 U.S. 117, 127 (2014). To establish general
jurisdiction, a defendant’s contacts with the forum must be “so ‘continuous and systematic’ as to
render them essentially at home in the forum.” Goodyear Dunlop Tires Operations, S.A. v. Brown,
564 U.S. 915, 919 (2011) (quoting Int’l Shoe, 326 U.S. at 317). Alternatively, specific jurisdiction
exists when the suit “arises out of or relates to the defendant’s contacts with the forum.” Daimler,
571 U.S. at 127 (quoting Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 414
n.8 (1984)) (alterations omitted).
At a more granular level, the Eighth Circuit Court of Appeals has established a five-factor
test for measuring minimum contacts for purposes of asserting personal jurisdiction over a
defendant:
(1) the nature and quality of a defendant’s contacts with the forum state; (2) the
quantity of such contacts; (3) the relation of the cause of action to the contacts; (4)
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the interest of the forum state in providing a forum for its residents; and (5) the
convenience of the parties.
Dever, 380 F.3d at 1073-74 (alterations omitted). In applying this test, courts must consider “all
of the factors in the aggregate and examine the totality of the circumstances.” Johnson v. Arden,
614 F.3d 785, 794 (8th Cir. 2010) (citing Northrup King Co. v. Compania Productora Semillas
Algodoneras Selectas, S.A., 51 F.3d 1383, 1388 (8th Cir. 1995)). With that in mind, the Eighth
Circuit lends “significant weight” to the first three factors. Romak USA, Inc. v. Rich, 384 F.3d
979, 984 (8th Cir. 2004).
All five factors weigh against the exercise of personal jurisdiction over the Peruvian
Defendants. The Plaintiffs contend that the RICO enterprise operated in North Dakota,
presumably through its connection with SKE and Peck. The record contains some correspondence
between SKE and Harten, acting on APS’s behalf, that appears to have been sent to auditors in
Fargo. Doc. No. 64-7. Other than that, there are no specific allegations that Convalor, Confactor,
the Costa Defendants, or Farah have any contacts with North Dakota. Naturally enough, the
Plaintiffs did not claim jurisdiction was proper in North Dakota when this case began in the District
of Columbia. But even since transfer, their filings regarding jurisdictional discovery and the
pending motions to dismiss have avoided mentioning the Peruvian Defendants’ contacts with
North Dakota altogether.
Turning to the Eighth Circuit factors, when examining the nature and quality of contacts
with the forum, the primary consideration is whether a nonresident defendant has “fair warning
that a particular activity may subject a person to the jurisdiction of a foreign sovereign.” Gould v.
P.T. Krakatau Steel, 957 F.2d 573, 576 (8th Cir. 1992) (quoting Shaffer v. Heitner, 433 U.S. 186,
218 (1977) (Stevens, J., concurring)). None of the Peruvian Defendants has ever set foot in North
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Dakota. See Doc. Nos. 133-1, 134-2, 135-2, 136-2, 141-2. The most that can be said is that some
of them transacted business with Peck, an officer of a North Dakota corporation, while he was in
Peru. This is precisely the kind of “random, fortuitous, or attenuated” contact that cannot form the
basis for personal jurisdiction. Burger King Corp. v. Rudzewicz, 471 U.S. 462, 475 (1985)
(citations and internal quotation marks omitted). Even if any correspondence that APS sent to
SKE in North Dakota could be attributable to at least Jorge, Sr. or Jorge, Jr. as APS’s designated
agents, these infrequent contacts would still come up short. See Viasystems, Inc. v. EBM-Papst
St. Georgen GmbH & Co., KG, 646 F.3d 589, 594 (8th Cir. 2011).
Quantity of contacts becomes relevant where general jurisdiction is alleged. See Lakin v.
Prudential Sec., Inc., 348 F.3d 704, 712 (8th Cir. 2003). Specific jurisdiction, on the other hand,
can arise from a single contact with the forum. See Fulton v. Chicago, Rock Island & P. R. Co.,
481 F.2d 326, 334-35 (8th Cir. 1973). There is no cognizable basis for exercising general
jurisdiction here. None of the individual Peruvian Defendants is domiciled in North Dakota and
neither Convalor nor Confactor is incorporated or has its principal place of business in the state.
Thus, they are not “essentially at home” in North Dakota. See Goodyear, 564 U.S. at 919. The
third factor, the relation of the contacts with the cause of action, is similarly unhelpful to the
Plaintiffs because the events that gave rise to this action and any resulting injuries occurred outside
North Dakota.
The secondary factors—the interest of the forum state and the convenience of the parties—
are also unfavorable for the Plaintiffs. North Dakota has no conceivable interest in claims against
citizens of Peru that arose from business activities in Peru that caused out-of-state injuries to
nonresident plaintiffs. The inconvenience of hauling seven defendants away from this case’s
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epicenter in Peru to a courtroom in North Dakota goes without saying. Weighing all the Eighth
Circuit factors, the Court cannot constitutionally exercise personal jurisdiction over the Peruvian
Defendants under North Dakota’s long-arm statute.
2. Federal Rule of Civil Procedure 4(k)(2)
Notwithstanding the lack of contacts with North Dakota in particular, the Plaintiffs argue
more vigorously that the exercise of personal jurisdiction is consistent with Federal Rule of Civil
Procedure 4(k)(2), the federal equivalent of a long-arm statute. In addition to requiring proper
service, that Rule applies when: (1) the underlying claim arises under federal law; (2) the defendant
is not subject to jurisdiction in any other state’s court of general jurisdiction; and (3) the exercise
of jurisdiction comports with the Due Process Clause of the Fifth Amendment. Clockwork IP,
LLC v. Clearview Plumbing & Heating Ltd., 127 F. Supp. 3d 1020, 1029 (E.D. Mo. 2015) (citing
Fed. R. Civ. P. 4(k)(2); Mwani v. bin Laden, 417 F.3d 1, 10 (D.C. Cir. 2005)). While the first two
requirements are met, the third is not.
a. Claim Under Federal Law
Unsurprisingly, to support application of Rule 4(k)(2), the claim must arise under federal
law. Two Peruvian Defendants, Farah and Convalor, contend there is no claim arising under
federal law because the Plaintiffs have failed to state a RICO claim. A recent case in this district
found a lack of personal jurisdiction over a civil RICO claim under Rule 4(k)(2) because the
plaintiffs there had failed to state a plausible claim for relief against a single defendant. See Energy
Transfer Equity, LP v. Greenpeace Int’l, Case No. 1:17-cv-00173-BRW, 2018 WL 4677787, at *5
(D.N.D. July 24, 2018). The Court here, though, will first address the jurisdictional issues without
wading into the merits of the RICO claim against the Peruvian Defendants. See Archangel
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Diamond Corp. Liquidating Tr. v. OAO Lukoil, 75 F. Supp. 3d 1343, 1361 (D. Colo. 2014). Four
of the Peruvian Defendants have not addressed the RICO claim’s merits, relying solely on lack of
jurisdiction. See Doc. Nos. 134-37. In the interest of judicial economy, the Court therefore finds
that the claim arises under federal law regardless of whether the RICO claim is meritorious.
b. Not Subject to Jurisdiction in Any State’s Court of General Jurisdiction
Rule 4(k)(2)’s second requirement is that a defendant cannot be amenable to personal
jurisdiction in any state specifically. The Eighth Circuit Court of Appeals has yet to decide which
party bears the burden of proving this jurisdictional void, but most circuits place the burden on the
defendant. See Touchcom, Inc. v. Bereskin & Parr, 574 F.3d 1403, 1414 (Fed. Cir. 2009)
(explaining that the Fifth, Seventh, Ninth, Eleventh, and D.C. Circuits have adopted this approach,
with only the First and Fourth Circuits differing); see also Fraserside IP L.L.C. v. Netvertising
Ltd., 902 F. Supp. 2d 1165, 1179 (N.D. Iowa 2012) (presuming the Eighth Circuit would follow
the majority position). The majority approach as laid out in the leading Seventh Circuit opinion is
straightforward:
A defendant who wants to preclude use of Rule 4(k)(2) has only to name some other
state in which the suit could proceed. Naming a more appropriate state would
amount to a consent to personal jurisdiction there . . . . If, however, the defendant
contends that he cannot be sued in the forum state and refuses to identify any other
where suit is possible, then the federal court is entitled to use Rule 4(k)(2). This
procedure makes it unnecessary to traipse through the 50 states, asking whether
each could entertain the suit.
ISI Int’l, Inc. v. Borden Ladner Gervais LLP, 256 F.3d 548, 552 (7th Cir. 2001) (citations omitted).
None of the Peruvian Defendants has named another state that could exercise personal jurisdiction
over them. Exactly the opposite, in fact, because all seven assert they are not subject to personal
jurisdiction anywhere in the United States. As a result, part two of the Rule 4(k)(2) test is satisfied.
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c. Fifth Amendment Due Process
Like under a state long-arm statute, Rule 4(k)(2)’s final requirement is that the exercise of
personal jurisdiction comport with due process. “The due process analysis under Rule 4(k)(2) is
nearly identical to the traditional personal jurisdiction analysis, the only difference lies in that the
forum under analysis shifts . . . to the United States as a whole.” Fraserside IP, L.L.C. v. Youngtek
Solutions, Ltd., No. C11-3005-MWB, 2013 WL 139510, at *14 (N.D. Iowa Jan. 10, 2013) (citing
Synthes (U.S.A.) v. G.M. Dos Reis Jr. Ind. Com. De Equip. Medico, 563 F.3d 1285, 1295 (9th
Cir. 2009); Oldfield v. Pueblo De Bahia Lora, S.A., 558 F.3d 1210, 1220 (11th Cir. 2009); Holland
Am. Line Inc. v. Wärtsilä N.A., Inc., 485 F.3d 450, 463 (9th Cir. 2007)).
Though strained, the Plaintiffs appear to assert two separate grounds for sufficient
minimum contacts with the United States as a whole. They first put forward a laundry list of the
Peruvian Defendants’ contacts with the United States unrelated to the present action, suggesting
general jurisdiction based on “continuous and systematic” contacts with the United States. See
Doc. No. 64, pp. 15-38. The Plaintiffs also contend that the Peruvian Defendants, through their
awareness of APS and POIT’s fraudulent schemes, purposefully directed activities at the United
States by knowingly soliciting American investors and shipping goods to the U.S. resulting in
injury to the Plaintiffs’ U.S. bank accounts and customer relationships, a nod to specific
jurisdiction. See Doc. No. 154, pp. 11-12.
Addressing the general jurisdiction argument first, none of the Peruvian Defendants has
the requisite “continuous and systematic” contacts to render them “essentially at home” in the
United States. See Goodyear, 564 U.S. at 919. Indeed, to find all seven Defendants subject to
general jurisdiction under Rule 4(k)(2)—meaning in practical application that they could be
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subject to suit in any judicial district in the United States for any claim potentially implicating
federal law arising anywhere in the world—would have frightening implications. As the Supreme
Court has made clear, “only a limited set of affiliations with a forum will render a defendant
amenable to all-purpose jurisdiction.” Daimler, 571 U.S. at 137. These affiliations consist
exclusively of an individual’s domicile or a corporation’s place of incorporation and principal
place of business in all but an “exceptional case.” Id. at 139 n.19. The complaint unequivocally
states that all seven Defendants are citizens of Peru, with the Costa Defendants and Farah
domiciled there and Convalor and Confactor organized there with their principal places of business
there. See Doc. No. 1, ¶¶ 16, 20, 21, 22, 24. This all but forecloses the exercise of general
jurisdiction, even more so because the Supreme Court has explicitly warned against haling foreign
citizens into American courts on a general jurisdiction theory. See Daimler, 571 U.S. at 140-42.
At the same time, the Peruvian Defendants’ remaining contacts with the United States fall
well short of an “exceptional case.” The Plaintiffs have not offered any new contacts between the
Peruvian Defendants and the United States since transfer, relying instead on their filings in the
District of Columbia. The most comprehensive account of the Peruvian Defendants’ contacts with
the United States is found in the Plaintiffs’ omnibus response to the first wave of motions to
dismiss along with its accompanying exhibits. See Doc. No. 64, pp. 15-38. Ignoring the Plaintiffs’
frequent digressions that do nothing more than rehash the substantive allegations in the complaint,
the Defendants’ relevant contacts with the United States as a whole, viewed in the light most
favorable to the Plaintiffs, are as follows.
Jorge, Sr.’s Peruvian law firm “does extensive work” for American clients “and advertises
in the United States.” Id. at 15-16. He is a director of a Peruvian commercial airline that conducts
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flights to the United States, and he has travelled to the U.S. for business and leisure often, holding
a B1/B2 visitor visa. Id. Jorge, Sr. was also a designated agent for APS, which shipped goods to
the United States; in that capacity he attended business meetings with the Plaintiffs and other
American citizens in Peru. Id. at 17, 24-25.
Ofelia, too, is a frequent visitor to the United States. Id. at 27. She is the majority
shareholder in POIT, which conducts business in this country. Id. Jorge, Jr. was, like his father,
a designated agent for APS, and he is the General Manager for POIT. Id. at 29. He has travelled
“regularly” to the United States. Id.
Javier is a partner in the same Peruvian law firm as Jorge, Sr., with similar American
clients, and he also serves as a director for other Peruvian corporations that conduct business in
the United States. Id. at 30-31. He has travelled to the United States for business, pleasure, and
medical care. Id. at 32. Like Jorge, Sr., Javier attended business meetings with American citizens
in Peru. Id.
Without more, these contacts cannot render the four Costa Defendants “essentially at
home” in the United States. The Plaintiffs’ allegations that these Defendants frequently travel to
the United States reveal only that they are visitors—the opposite of at home—when in this country.
That they are additionally employees and directors of businesses that deal with American citizens
is equally insufficient to subject them to the breathtakingly broad reach of general jurisdiction
under the federal long-arm rule. Due process does not permit the exercise of general jurisdiction
over the Costa Defendants.
As to Farah, he owns a textile business, Lancaster, that “advertises its products in English”
and may conduct business in the United States. Id. at 33-34. He has a daughter enrolled in college
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in the United States, and he has obtained medical care here. Id. at 37. Perhaps more significantly,
the Plaintiffs assert that Farah maintains a bank account and owns a condominium in the United
States. Id.
Similar to the Costa Defendants, Farah’s sporadic business and personal contacts with the
United States fail to clear the high bar for general jurisdiction. And even viewing the evidence in
the light most favorable to the Plaintiffs, the allegations regarding Farah’s bank account and
condominium ownership are speculative. In response, Farah submitted a sworn declaration stating
that he does not own and has never owned property in the United States, only that he told Cook he
was thinking about purchasing a condominium for his daughter while she attended college but
decided against doing so. Doc. No. 82-1. Another declaration states that the bank account the
Plaintiffs reference belongs to Farah’s wife. Doc. No. 141-2. On a motion to dismiss for lack of
jurisdiction, courts are permitted to consider submissions from both parties and need not blindly
treat the Plaintiffs’ allegations as true. See Miller, 528 F.3d at 1090. Where, as here, the
allegations are speculative and are directly contradicted by other competent evidence in the record,
the Court finds these suspect contacts insufficient to support general jurisdiction over Farah.
The Plaintiffs fail to allege any contacts with the United States as to Confactor and
Convalor other than their connection to Farah and his family. See Doc. No. 64, pp. 33-38.
Contacts must be assessed for each defendant individually, and Farah’s personal contacts cannot
be imputed to Confactor or Convalor without more. See Rush, 444 U.S. at 332 (characterizing the
assertion of personal jurisdiction based solely on the contacts of another defendant as “plainly
unconstitutional”). General jurisdiction under the federal long-arm rule is therefore manifestly
inappropriate as to these two defendants.
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For specific jurisdiction under Rule 4(k)(2), “the defendant’s suit-related conduct must
create a substantial connection” with the United States as a whole. Walden v. Fiore, 571 U.S. 277,
284 (2014). The analysis looks at “contacts that the ‘defendant himself’ creates with the forum”
and not merely at the defendant’s “contacts with persons who reside there.” Id. at 285 (emphasis
in original) (quoting Burger King, 471 U.S. at 475). As a result, “a defendant’s relationship with
a plaintiff or third party, standing alone, is an insufficient basis for jurisdiction.” Id. at 286 (citing
Rush, 444 U.S. at 332).
Relying on a case from the District of Columbia, the Plaintiffs argue that shipping products
to the United States, soliciting American investors, and seeking entry into American markets is
enough to subject the Peruvian Defendants to specific jurisdiction pursuant to Rule 4(k)(2). See
Citadel Inv. Grp., L.L.C. v. Citadel Capital Co., 699 F. Supp. 2d 303, 315 (D.D.C. 2010). Citadel’s
facts are plainly distinguishable. There, the defendant itself solicited business relationships in the
United States. Id. Juxtapose that with the Plaintiffs’ argument, which is that the Peruvian
Defendants knew Harten and APS shipped goods to the United States, knew Harten and APS
targeted American investors, and knew of Harten and APS’s intent to defraud those investors. See
Doc. No. 64, pp. 12-15. Missing, however, is any allegation whatsoever that the Peruvian
Defendants acted separate and apart from Harten and APS to reach into the United States.
Dragging the Peruvian Defendants halfway across the globe to defend these claims based only on
their relationship with Harten and APS would patently contravene due process. Instead, these
Defendants must have individual, suit-related contacts that demonstrate an intent to purposefully
avail themselves of the protection of the laws of the United States. See Hanson v. Denckla, 357
U.S. 235, 253 (1958).
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To that end, the Plaintiffs point to Jorge, Sr., Farah, and Javier purportedly vouching for
Harten’s honesty and business acumen while meeting with the Plaintiffs in Peru. See Doc. No.
64, pp. 24, 32, 35. But this evinces nothing more than incidental contacts with American citizens,
not an intentional targeting of the United States. Even less can be said for Ofelia, Jorge, Jr.,
Confactor, and Convalor in this regard, as there are no specific instances of their participation in
any conversations that led to the Plaintiffs’ injuries.
Jorge, Sr., Ofelia, and Jorge, Jr.’s status as officers of APS and POIT forms the last basis
for the Plaintiffs’ argument for specific jurisdiction. See id. at 17, 27, 28. They insinuate that the
Peruvian Defendants’ employment with and management of the entities that caused their injuries
creates jurisdiction. Not so. Even if personal jurisdiction existed over APS or POIT, Jorge, Sr.,
Ofelia, and Jorge, Jr. cannot be subject to jurisdiction based on their status as corporate officers
alone. See Ark. Rice Growers Coop. Ass’n v. Alchemy Indus., Inc., 797 F.2d 565, 574 (8th Cir.
1986) (citations omitted) (“The law is clear that a corporate officer or agent who has contact with
the forum state only with regard to the performance of corporate duties does not thereby become
subject to jurisdiction in his or her individual capacity.”). Thus, exercising specific jurisdiction
over the Peruvian Defendants under Rule 4(k)(2) would be inconsistent with due process.
3. RICO Jurisdiction
The Plaintiffs’ last argument for jurisdiction derives from RICO itself. While normally
constrained to the same extent as state courts, federal courts can additionally exercise personal
jurisdiction when authorized by federal statute. Fed. R. Civ. P. 4(k)(1)(C). Under 18 U.S.C. §
1965(b), RICO provides for nationwide service of process when the “ends of justice require” so
long as at least one defendant is otherwise subject to traditional minimum contacts jurisdiction in
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the forum. See Armstrong v. Am. Pallet Leasing Inc., 678 F. Supp. 2d 827, 849-50 (N.D. Iowa
2009). The Eighth Circuit Court of Appeals has yet to address whether § 1965(b) nationwide
service translates into nationwide personal jurisdiction in the RICO context, but the district courts
in the Eighth Circuit that have considered the issue have found that it does. See id.; Golub &
Assoc., Inc. v. Long, No. 4:09CV92 JCH, 2009 WL 690118, at *2 (E.D. Mo. Mar. 11, 2009) (citing
Gatz v. Ponsoldt, 271 F. Supp. 2d 1143, 1152 (D. Neb. 2003)). Following that position, and
because SKE and Peck have both consented to personal jurisdiction in North Dakota, nationwide
jurisdiction under § 1965(b) is available to the Plaintiffs.
Nonetheless, nationwide jurisdiction does not equate to worldwide jurisdiction. See
AmTrust Fin. Servs., Inc. v. Lacchini, 260 F. Supp. 3d 316, 330 n.7 (S.D.N.Y. 2017) (citations
omitted) (“RICO does not have a jurisdictional provision authorizing personal jurisdiction . . . over
foreign defendants.”); CGC Holding Co., LLC v. Hutchens, 824 F. Supp. 2d 1193, 1199 (D. Colo.
2011) (citations omitted) (“RICO does not authorize extraterritorial service of process.”). It is
undisputed that the Plaintiffs served the Peruvian Defendants outside the United States. As a
result, § 1965(b) does not authorize personal jurisdiction.
Just as the U.S. District Court for the District of Columbia found, none of the three theories
the Plaintiffs have advanced allows the Court to exercise personal jurisdiction. The Defendants
lack the contacts necessary to satisfy due process both with North Dakota specifically and the
United States as a whole. Even RICO’s wide-sweeping jurisdictional provision is unavailing
because the statute’s reach does not extend to foreign defendants. To sum it up, a citizen of Peru
involved in events in Peru could not fairly expect to wind up in a federal courtroom in North
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Dakota. The Court cannot constitutionally exercise personal jurisdiction over Jorge, Sr., Ofelia,
Jorge, Jr., Javier, Farah, Confactor, and Convalor.
C. Jurisdictional Discovery
As a final effort, the Plaintiffs contend they are entitled to jurisdictional discovery to bolster
any shortcomings in their allegations. Doc. No. 129. District courts retain discretion to determine
when jurisdictional discovery is warranted. Johnson v. United States, 534 F.3d 958, 964 (8th Cir.
2008); Lakin, 348 F.3d at 713. Rule 56 of the Federal Rules of Civil Procedure provides “guidance
in determining whether to allow discovery on jurisdictional facts.” Johnson, 534 F.3d at 965. To
obtain discovery under Rule 56, a party must submit an affidavit demonstrating: “(1) what facts
are sought and how they are to be obtained; (2) how these facts are reasonably expected to raise a
genuine issue of material fact; (3) what efforts the affiant has made to obtain them; and (4) why
the affiant’s efforts were unsuccessful.” Id. “When a plaintiff offers only speculation or
conclusory assertions about contacts with a forum state, a court is within its discretion in denying
jurisdictional discovery.” Viasystems, 646 F.3d at 598 (internal alteration omitted) (quoting
Dever, 380 F.3d at 1074 n.1).
Playing the Plaintiffs’ request out demonstrates that jurisdictional discovery is inapposite.
Given unbounded discovery, the jurisdictional facts the Plaintiffs seek would amount to more of
the same contacts that cannot form the basis for personal jurisdiction. See Doc. No. 131, p. 6
(requesting discovery related to (1) Defendants’ assertions regarding personal jurisdiction
generally, (2) Defendants’ “visits to, and activities directed toward, the United States,” and (3)
documents to further support the Defendants’ involvement in the alleged racketeering enterprise
“directed against the Plaintiffs in the U.S.”). Their motion does not point to any concrete
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jurisdictional facts available through discovery. Nor does it explain how those facts, if obtained,
would establish personal jurisdiction, either general or specific. The declaration of Troy Swenson,
brother to an executive at SKE, is the only affidavit submitted in this forum for the purpose of
supporting jurisdictional discovery. Doc. No. 131-1. Following what appears to be a theme for
the Plaintiffs, however, the declaration merely repeats the allegation that SKE is recouping its
previous losses through illegal means. Not one of the appearing Peruvian Defendants is so much
as mentioned in the declaration.
The bottom line is that the Peruvian Defendants are not “essentially at home” in the United
States, and their individual deliberate contacts with the United States did not give rise to this
litigation. No amount of discovery will cure these defects. The Plaintiffs’ conclusory assertions
to the contrary do not entitle them to jurisdictional discovery. In the exercise of its discretion, the
Court declines to allow the Plaintiffs to conduct jurisdictional discovery.
To recap, the Court lacks jurisdiction both because the Plaintiffs failed to properly serve
the Peruvian Defendants and because the exercise of personal jurisdiction would violate due
process under the Fifth and Fourteenth Amendments. The Plaintiffs will not be permitted to
conduct jurisdictional discovery. Remaining for disposition are Peck and SKE’s motions to
dismiss for failure to state a claim.
IV. FAILURE TO STATE A CLAIM AGAINST PECK AND SKE
Shifting now to the two domestic Defendants, the Plaintiffs have failed to state a RICO
claim against Peck and SKE. The complaint inadequately pleads the predicate acts necessary to
demonstrate that Peck and SKE violated 18 U.S.C. § 1962(c). Furthermore, the Plaintiffs have not
established a continuous pattern of racketeering activity. Even overlooking these pitfalls, the
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Plaintiffs’ RICO claim is anchored in Peru, so Peck and SKE’s alleged conduct is beyond the
statute’s reach. Without the RICO claim, the remaining conspiracy and state-law claims against
Peck and SKE warrant dismissal as well.
As a starting point, Rule 8(a)(2) of the Federal Rules of Civil Procedure requires a
complaint to contain a “short and plain statement of the claim showing that the pleader is entitled
to relief.” Fed. R. Civ. P. 8(a)(2). In turn, Federal Rule 12(b)(6) mandates the dismissal of a claim
if the complaint fails to state a claim upon which relief can be granted. “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.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl.
Corp. v. Twombly, 550 U.S. 544, 570 (2007)); Braden v. Wal-Mart Stores, Inc., 588 F.3d 585, 594
(8th Cir. 2009). A complaint is facially plausible where its factual content “allows the court to
draw the reasonable inference that the defendant is liable for the misconduct alleged.” Iqbal, 556
U.S. at 678.
A plaintiff must plead facts that show more than mere speculation or possibility that a
defendant acted unlawfully. Wilson v. Ark. Dep’t of Human Servs., 850 F.3d 368, 371 (8th Cir.
2017) (citing Iqbal, 556 U.S. at 678); McDonough v. Anoka Cnty., 799 F.3d 931, 946 (8th Cir.
2015) (citing Twombly, 550 U.S. at 555). While courts must accept the complaint’s factual
allegations as true, they are not required to accept a plaintiff’s legal conclusions or a “formulaic
recitation of the elements of a cause of action.” In re Pre-Filled Propane Tank Antitrust Litig., 860
F.3d 1059, 1063 (8th Cir. 2017) (quoting Iqbal, 556 U.S. at 678). A complaint does not “suffice
if it tenders ‘naked assertion[s]’ devoid of ‘further factual enhancement.’” Id. (quoting Iqbal, 556
U.S. at 678). In addition, courts must “review the plausibility of the plaintiff’s claim as a whole,
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not the plausibility of each individual allegation.” Whitney v. Guys, Inc., 700 F.3d 1118, 1128
(8th Cir. 2012) (citing Zoltek Corp. v. Structural Polymer Grp., 592 F.3d 893, 896 n.4 (8th Cir.
2010)). Whether a complaint states a plausible claim for relief is a “context-specific task that
requires the reviewing court to draw on its judicial experience and common sense.” In re
SuperValu, Inc., 925 F.3d 955, 962 (8th Cir. 2019) (quoting Hamilton v. Palm, 621 F.3d 816, 818
(8th Cir. 2010)) (in turn quoting Iqbal, 556 U.S. at 679).
When pled, fraud claims must additionally comply with the heightened standard of Federal
Rule 9(b), which requires plaintiffs to plead “with particularity the circumstances constituting
fraud.” Fed. R. Civ. P. 9(b). “The particularity requirements of Rule 9(b) apply to allegations of
mail fraud and wire fraud when used as predicate acts for a RICO claim.” Murr Plumbing, Inc. v.
Scherer Bros. Fin. Servs. Co., 48 F.3d 1066, 1069 (8th Cir. 1995) (citations omitted). Rule 9(b)
requires a plaintiff to plead “such matters as the time, place and contents of false representations,
as well as the identity of the person making the misrepresentation and what was obtained or given
up thereby.” H & Q Props., Inc. v. Doll, 793 F.3d 852, 856 (8th Cir. 2015) (citing Murr, 48 F.3d
at 1069). To do so, a plaintiff must identify the “who, what, where, when, and how” of the alleged
fraud. United States ex rel. Costner v. URS Consultants, Inc., 317 F.3d 883, 888 (8th Cir. 2003).
This heightened standard enables a defendant to respond “specifically, at an early stage of the case,
to potentially damaging allegations of immoral and criminal conduct.” Abels v. Farmers
Commodities Corp., 259 F.3d 910, 920 (8th Cir. 2001). “Conclusory allegations that a defendant’s
conduct was fraudulent and deceptive are not sufficient to satisfy the rule.” BJC Health Sys. v.
Columbia Cas. Co., 478 F.3d 908, 917 (8th Cir. 2007) (quoting Commercial Prop. Invs. v. Quality
Inns Int’l Inc., 61 F.3d 639, 644 (8th Cir. 1995)).
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Enacted to curb the prevalence of organized crime, RICO provides a private right of action
to a plaintiff “injured in his business or property by reason of a violation of [18 U.S.C. § 1962].”
18 U.S.C. § 1964(c). The Plaintiffs support their RICO claim with an alleged substantive violation
of § 1962(c), which prohibits “any person employed by or associated with any enterprise engaged
in, or the activities of which affect, interstate or foreign commerce, to conduct or participate,
directly or indirectly, in the conduct of such enterprise’s affairs through a pattern of racketeering
activity or collection of unlawful debt.” 18 U.S.C. § 1962(c). To stave off a motion to dismiss, §
1962(c) requires a plaintiff to adequately plead “(1) conduct (2) of an enterprise (3) through a
pattern (4) of racketeering activity.” Crest Constr. II, Inc. v. Doe, 660 F.3d 346, 353 (8th Cir.
2011) (citations omitted). The Plaintiffs have failed to plausibly allege that Peck and SKE engaged
in conduct constituting racketeering activity. Similarly, the complaint does not establish a
continuous pattern of racketeering activity.5
A. Plausibility of RICO Claim
To state a RICO claim, the Plaintiffs must demonstrate that Peck and SKE “participated in
the enterprise . . . by committing at least two racketeering (predicate) acts.” Aguilar v. PNC Bank,
N.A., 853 F.3d 390, 402 (8th Cir. 2017) (quoting United States v. Darden, 70 F.3d 1507, 1518 (8th
Cir. 1995)). The Plaintiffs allege predicate acts pursuant to three statutes: mail fraud under 18
U.S.C. § 1341, wire fraud under 18 U.S.C. § 1343, and money laundering under 18 U.S.C. § 1956,
violations of which qualify as racketeering activity. See 18 U.S.C. § 1961(1). “When pled as
RICO predicate acts, mail and wire fraud require a showing of: (1) a plan or scheme to defraud,
(2) intent to defraud, (3) reasonable foreseeability that the mail or wires will be used, and (4) actual
5 Because the claim falters on these grounds, the Court assumes without deciding that an
enterprise exists and that all three Plaintiffs have standing to assert a RICO injury.
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use of the mail or wires to further the scheme.” H & Q Props., 793 F.3d at 856 (citation omitted).
“The requirements of § 1962(c) must be established as to each individual defendant.” Craig
Outdoor Advert., Inc. v. Viacom Outdoor, Inc., 528 F.3d 1001, 1027 (8th Cir. 2008) (citations
omitted).
Taking the predicate statutes in turn, the Plaintiffs’ lone mail fraud allegation is that an
APS employee sent a sample of product via DHL from Lima, Peru, to one of NDL’s customers in
Pollock Pines, California, at Harten’s direction. Doc. No. 1, ¶ 174. The Plaintiffs contend this act
furthered the scheme to defraud them because Harten never intended to complete the order. Id.
The wire fraud allegations consist of four emails sent to the Plaintiffs in the District of
Columbia. Harten sent the first three emails in July 2012. The initial message, on July 9,
confirmed receipt of a $120,000 payment from the Plaintiffs and represented that two containers
of product had already shipped when Harten purportedly knew that to be false. Id. ¶ 179. Three
days later, the second message relayed a photograph of quinoa (that Harten apparently had never
purchased) intended to fulfill one of APS’s contracts with the Plaintiffs. Id. ¶ 180. And on July
23, Harten solicited $130,000 over and above what the Plaintiffs had already paid, again with no
intent of providing either new product or what he originally promised. Id. ¶ 181. Finally, an APS
employee emailed a photograph of sample beans to Cook on October 11, 2012 “at the behest of
Harten and in furtherance of the scheme to defraud.” Id. ¶ 178.
As for money laundering, the Plaintiffs claim that Harten and APS engaged in “unlawful
transactions financed with fraudulently-generated funds” involving two Peruvian banks in Lima
between 2012 and the date of the complaint. Id. ¶ 186. The Plaintiffs also generally allege that
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all the named Defendants, including Peck and SKE, directly or indirectly participated in each
predicate act. Id. ¶ 191.
Without needing to pass on the allegations’ merits, the complaint is utterly devoid of
assertions that either Peck or SKE committed a single predicate racketeering act. The Plaintiffs
likewise do not assert that Peck or SKE aided or abetted in any predicate acts. Indeed, for all the
huffing and puffing in the complaint, Harten, APS, and two of its employees are the only
Defendants alleged to have engaged in any instances of mail fraud, wire fraud, or money
laundering. See id. ¶¶ 171-87. The Plaintiffs’ general allegations that Peck and SKE participated
in these predicate acts cannot surmount Rule 9(b)’s high bar. See Crest Constr. II, 660 F.3d at 356
(citing Gallagher v. Magner, 619 F.3d 823, 842 (8th Cir. 2010)) (“While the complaint is awash
in phrases such as ‘ongoing scheme,’ ‘pattern of racketeering,’ and ‘participation in a fraudulent
scheme,’ without more, such phrases are insufficient to form the basis of a RICO claim.”).
On a broader scale, the Plaintiffs have argued to exhaustion that Peck and SKE played a
central role in the scheme to defraud them. But contentions of generally fraudulent or deceptive
conduct—true or otherwise—cannot sustain a RICO claim because such conduct is not
racketeering activity. See Bridge v. Phoenix Bond & Indem. Co., 553 U.S. 639, 653 (2008)
(“Congress chose to make mail fraud, not common-law fraud, the predicate act for a RICO
violation.”). Viewed through this narrower prism, the RICO claim against Peck and SKE falls
apart because their alleged conduct does not constitute mail or wire fraud.
For example, SKE’s supposed racketeering conduct is opaque at best. The Plaintiffs offer
meagerly that SKE must have been in on the scheme to defraud them somehow because it never
fired Peck or sued Harten or APS over its $3.6 million loss. Doc. No. 1, ¶¶ 93, 98. SKE’s President
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also told Peck “that his job was on the line and to do whatever it took” to recover the company’s
lost investment. Id. ¶ 73. This conduct plainly does not rise to the level of mail or wire fraud.
The farthest the allegations extend for Peck is that he concealed his status as APS’s founder
and majority shareholder when he encouraged the Plaintiffs to do business with Harten. Id. ¶¶ 88-
91. The Plaintiffs additionally assert that Peck and Harten displayed “facially valid SKE purchase
orders” to entice unwitting financiers to enter sham contracts with APS. Id. ¶ 90, 95. Absent,
though, is any indication that these acts involved use of the mail or wires. The Plaintiffs further
rely on an email Peck sent to the Plaintiffs seeking to speak with Harten about a separate contract
with the apparent intent to lend faux credibility to Harten. Id. ¶ 35. While involving the wires,
nothing in the record other than pure speculation supports an inference that Peck intended to
advance a scheme to defraud the Plaintiffs with this email. Such unsubstantiated speculation is
insufficient to plead wire fraud “with particularity” as Rule 9(b) requires.
Regardless of verity, then, Peck and SKE’s conduct does not constitute mail fraud, wire
fraud, or any other RICO predicate act pursuant to § 1961(1). There are no specific, plausible
allegations that either Defendant used the mail or wires with the intent to perpetuate a scheme to
defraud the Plaintiffs. The complaint therefore fails to plead conduct constituting the two predicate
acts of racketeering activity necessary to sustain a RICO claim against Peck and SKE.
Also missing from the complaint is a sufficient basis to find that the alleged enterprise
plausibly engaged in a pattern of racketeering activity. “A pattern is shown through two or more
related acts of racketeering activity that ‘amount to or pose a threat of continued criminal activity.’”
Nitro Distrib., Inc. v. Alticor, Inc., 565 F.3d 417, 428 (8th Cir. 2009) (quoting Wisdom v. First
Midwest Bank, 167 F.3d 402, 406 (8th Cir. 1999)). Establishing either closed-ended or open-
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ended continuity satisfies this requirement. “Closed-ended continuity involves ‘a series of related
predicates extending over a substantial period of time;’ open-ended continuity involves acts which,
by their nature, threaten repetition into the future.” Crest Constr. II, 660 F.3d at 356 (quoting
Wisdom, 167 F.3d at 407) (in turn quoting H.J. Inc. v. Nw. Bell Tel. Co., 492 U.S. 229, 241-42
(1989)).
The Plaintiffs argue for both closed-ended and open-ended continuity. In support of
closed-ended continuity, they contend that the alleged RICO enterprise “was created prior to 2011”
and continued at least through the date of the complaint. Doc. No. 1, ¶ 167. Arguing for open-
ended continuity, the Plaintiffs claim the enterprise “continues to engage in illegal acts and will do
so indefinitely.” Id. They point to the formation of POIT to carry on APS’s fraudulent activities,
as well as attempts to defraud a Peruvian businessman in 2013 and a Dutch company in 2015. Id.
¶¶ 82-84. Neither theory is persuasive.
The closed-ended continuity argument is unavailing because it is the dates of the RICO
predicate offenses that determine whether the enterprise acted over a “substantial period of time,”
not the Plaintiffs’ chosen narrative of events. See Craig Outdoor, 528 F.3d at 1028 (“a plaintiff
must provide evidence of multiple predicate acts occurring over a substantial period of time”)
(emphasis added). However unsavory, conduct that is not racketeering activity in the first place
cannot illustrate a continuous pattern of racketeering activity. Therefore, as alleged in the
complaint, the predicate acts lasted only from July 9, 2012 through October 11, 2012. Doc. No.
1, ¶¶ 178-79. Closed-ended continuity requires predicate acts to span at least one year. Crest
Constr. II, 660 F.3d at 357. Accordingly, the three-month window provided in the complaint is
not enough to show that racketeering activity occurred over a “substantial period of time.” See,
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e.g., Wisdom, 167 F.3d at 407 (finding six-month span of predicate acts insufficient); Geraci v.
Women’s Alliance, Inc., 436 F. Supp. 2d 1022, 1043-44 (D.N.D. 2006) (same).
Open-ended continuity is also foreclosed because the Plaintiffs do not plausibly allege acts
that threaten future racketeering activity. A showing of open-ended continuity requires “that the
predicate acts themselves involve a distinct threat of long-term racketeering activity or that the
predicate acts constitute a regular way of conducting an ongoing legitimate business or a RICO
enterprise.” Craig Outdoor, 528 F.3d at 1028 (citing H.J. Inc., 492 U.S. at 242-43). By the
complaint’s own terms, the predicate acts ended in October 2012 and consequently do not pose a
threat of long-term racketeering activity. Nor could the purported enterprise—which the Plaintiffs
assert endured at minimum from 2011 until 2015—regularly conduct itself through the alleged
predicate acts because they lasted a mere three months. Even taking a wider view, the claim that
POIT is continuing the RICO enterprise through further fraud to repay APS’s debts is vague, and
there are no specific instances of POIT engaging in racketeering activity alleged in the complaint.
In the same vein, the Defendants’ alleged attempts to defraud other victims in 2013 and 2015 fail
to demonstrate continuing racketeering activity, instead describing wholly foreign business
dealings that fall well outside the scope of the mail and wire fraud statutes.
The Plaintiffs have failed to plausibly allege a continuous pattern of racketeering activity.
Added to that, they have not pled that Peck or SKE engaged in any conduct that constitutes a
predicate racketeering act. Accordingly, the Plaintiffs RICO claim under § 1962(c) against Peck
and SKE must be dismissed.
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B. Extraterritoriality
As a separate ground for dismissal, Peck and SKE put forward two differing theories that
RICO does not apply extraterritorially under the present circumstances. SKE asserts that RICO’s
substantive provision—§ 1962(c) for purposes of this action—cannot support extraterritorial
application, claiming the conduct that comprises the claim’s predicate acts occurred in Peru. Peck,
meanwhile, contends that RICO’s private right of action under § 1964(c) is unavailable altogether
because the Plaintiffs suffered a foreign injury. This distinction becomes important considering
the Supreme Court’s recent decision addressing RICO’s extraterritorial application. See RJR
Nabisco, Inc. v. European Cmty., 579 U.S. ___, 136 S. Ct. 2090, 2099-2100 (2016) [hereinafter
RJR Nabisco].
“It is a basic premise of our legal system that, in general, ‘United States law governs
domestically but does not rule the world.’” Id. at 2100 (quoting Microsoft Corp. v. AT & T Corp.,
550 U.S. 437, 454 (2007)). “Absent clearly expressed congressional intent to the contrary, federal
laws will be construed to have only domestic application.” Id. (citing Morrison v. Nat’l Austl.
Bank Ltd., 561 U.S. 247, 255 (2010)). Applying these principles in RJR Nabisco, the Supreme
Court determined that RICO’s substantive provision, § 1962, applies to foreign conduct, but only
to the extent that the predicate offenses comprising the RICO claim themselves apply
extraterritorially. Id. at 2103. Conversely, the Court held RICO’s private right of action under §
1964(c) cannot be applied extraterritorially, therefore requiring a plaintiff to plausibly allege “a
domestic injury to business or property.” Id. at 2111.
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1. Section 1964(c) Private Right of Action
Addressing first the threshold ability to utilize RICO’s private right of action under §
1964(c), the Court finds that the Plaintiffs have adequately pled a domestic injury. The Supreme
Court did not parse the distinction between a foreign and domestic injury in RJR Nabisco, stating
only that such a determination “will not always be self-evident.” Id. Similarly, there is no
guidance from the Eighth Circuit Court of Appeals as to what constitutes a domestic injury for
RICO purposes. Three other federal appellate courts, however, have addressed the issue.
Beginning in the immediate aftermath of RJR Nabisco, the Second Circuit advocated for a
fact-intensive, case-by-case analysis to determine the geographic location of a RICO injury. See
Bascuñán v. Elsaca, 874 F.3d 806, 817-18 (2d Cir. 2017). The Second Circuit’s more limited
central holding in Bascuñán, though, was that “an injury to tangible property is generally a
domestic injury only if the property was physically located in the United States” when harmed.
Id. at 819. For the locus of injuries to intangible property, on the other hand, the Third and Seventh
Circuits have advanced divergent standards. The Seventh Circuit went with a bright-line rule,
holding that “a party experiences or sustains injuries to its intangible property at its residence,
which for a corporation . . . is its principal place of business.” Armada (Sing.) PTE Ltd. v. Amcol
Int’l Corp., 885 F.3d 1090, 1094 (7th Cir. 2018). But the Third Circuit rejected this approach,
gravitating instead toward the fact-intensive analysis the Second Circuit postulated. See
Humphrey v. GlaxoSmithKline PLC, 905 F.3d 694, 707-09 (3d Cir. 2018). The Third Circuit
went on to enumerate several factors for courts to consider, including:
where the injury itself arose; the location of the plaintiff’s residence or principal
place of business; . . . where any relevant business agreements were entered into
and the laws binding such agreements; and the location of the activities giving rise
to the underlying dispute.
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Id. at 707. While no one factor is dispositive, the Humphrey court’s approach focuses “primarily
upon where the effects of the predicate acts were experienced.” Id. After reviewing both
perspectives, the Court finds the Third Circuit’s approach in Humphrey, and its reasoning for
declining to follow the Seventh Circuit’s more rigid test, persuasive. The Court will therefore
follow Humphrey’s case-by-case approach.
Most recently, the Third Circuit has further developed Humphrey into an instructive three-
part test for determining when a RICO plaintiff has suffered a domestic injury. That test requires
examination of “(1) the nature of the injury [a plaintiff] claims to have suffered due to Defendants’
actions; (2) whether the injured property is tangible or intangible; and (3) where the injury
occurred.” Cevdet Aksut Ve Ogullari Koll.Sti v. Cavusoglu, 756 F. App’x 119, 123 (3d Cir. 2018).
The test’s third part incorporates the Bascuñán analysis when the injured property is tangible and
the Humphrey factors when it is intangible. Id.
Applying this test, the nature of the Plaintiffs’ injuries as alleged consists of just north of
$2 million in losses from U.S. bank accounts as well as unspecified lost business opportunities
with U.S. customers. Doc. No. 1, ¶¶ 192-93. These are intangible injuries. See Mullin v. Travelers
Indem. Co. of Conn., 541 F.3d 1219, 1223-24 (10th Cir. 2008) (collecting cases describing bank-
account funds as intangible property); Humphrey, 905 F.3d at 708 (treating loss of U.S. customers
as intangible property interest). Thus, analysis under the Humphrey factors is necessary to
determine if the Plaintiffs have suffered a domestic injury.
To reiterate, the Plaintiffs’ allegations must be taken as true at the pleading stage. The
Defendants’ characterizations of the nature or location of any injuries are irrelevant. Mindful of
that, weighing in favor of a domestic injury is Humphrey’s “primary” consideration because the
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Plaintiffs felt the effects of the predicate acts on their U.S. bank accounts and in the loss of U.S.
customers. NDL and NDP’s principal places of business are likewise in the United States. The
remaining factors cut towards a foreign injury. Specifically, the injuries arose from contracts that
were entered into and executed entirely in Peru and governed by Peruvian law. Though a close
call, the Court finds that dismissal on this ground would be inappropriate. The two factors most
important to both the Third and Seventh Circuits (where a plaintiff felt the effects of the predicate
acts and where a plaintiff has its principal place of business) trend in the Plaintiffs’ favor. The
Court therefore finds that the Plaintiffs have plausibly alleged a domestic injury for RICO
purposes. Accordingly, extraterritoriality concerns do not preclude the Plaintiffs’ use of §
1964(c)’s private right of action.
2. Section 1962(c) Predicate Acts
Even with an adequately pled domestic injury, however, the predicate acts sustaining the
Plaintiffs’ RICO claim—§ 1341 mail fraud, § 1343 wire fraud, and § 1956 money laundering—
cannot apply extraterritorially as alleged, and so the claim fails for this reason as well. Heeding
the Supreme Court’s mandate in RJR Nabisco, the task is to determine whether the three statutes
providing the predicate acts themselves support extraterritorial application under the
circumstances. See RJR Nabisco, 136 S. Ct. at 2103.
As an initial requirement, “a RICO enterprise must engage in, or affect in some significant
way, commerce directly involving the United States” to permit § 1962’s application at all. Id. at
2105. The alleged RICO enterprise here meets this basic requirement in that the Defendants
engage in commerce affecting the United States. Beyond that, the RJR Nabisco Court succinctly
set forth a two-step framework to determine if a predicate statute applies extraterritorially. Id. at
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2101; see also Kiobel v. Royal Dutch Petroleum Co., 569 U.S. 108, 124-25 (2013); Morrison, 561
U.S. at 266. The first step asks “whether the statute gives a clear, affirmative indication that it
applies extraterritorially.” RJR Nabisco, 136 S. Ct. at 2101. If it does not, the second step looks
to “whether the case involves a domestic application of the statute.” Id. Justice Alito’s opinion
explained the second step this way:
If the conduct relevant to the statute’s focus occurred in the United States, then the
case involves a permissible domestic application even if other conduct occurred
abroad; but if the conduct relevant to the focus occurred in a foreign country, then
the case involves an impermissible extraterritorial application regardless of any
other conduct that occurred in U.S. territory.
Id. Under this framework, the Plaintiffs’ RICO claim stumbles.
As pertinent here, the RJR Nabisco framework’s first step requires looking to the mail
fraud, wire fraud, and money laundering statutes to discern whether there is clear congressional
intent that they apply extraterritorially. Notably, the same three statutes were at issue in RJR
Nabisco. While not passing on their extraterritorial application directly, the Supreme Court left
undisturbed the Second Circuit Court of Appeals’ decision below. See id. at 2105. In that earlier
proceeding, the Second Circuit held that neither the mail fraud statute nor the wire fraud statute
clearly expresses an intent for extraterritorial application. European Cmty. v. RJR Nabisco, Inc.,
764 F.3d 129, 140-41 (2d Cir. 2014), rev’d on other grounds, 579 U.S. ___, 136 S. Ct. 2090 (2016)
[hereinafter European Community]. The Court agrees with the Second Circuit’s position that §§
1341 and 1343 do not rebut the presumption against extraterritoriality. The money laundering
statute, though, plainly manifests an intent to apply to extraterritorial conduct in limited
circumstances. See 18 U.S.C. § 1956(f)(1); see also European Cmty., 764 F.3d at 140. To support
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a RICO claim, then, the Plaintiffs must plausibly allege a domestic application of the mail or wire
fraud statutes or a permissible extraterritorial application of the money laundering statute.
With a dearth of case law in the Eighth Circuit, two decisions from the Second Circuit chart
a course for resolving whether the Plaintiffs have alleged a domestic application of the mail or
wire fraud statutes. The first is European Community itself. There, the Second Circuit decided
not to draw a finite line between domestic and extraterritorial application. Id. at 142. In the end,
the facts presented a straightforward domestic application because the defendants hatched and
executed the underlying fraudulent scheme entirely within the United States. Id. So, when
“domestic conduct satisfies every essential element” of a predicate offense, the mail and wire fraud
statutes apply domestically without hesitation. Id.
Now compare that scenario with a subsequent Second Circuit case where a wire fraud
scheme formed and carried out in Mexico obtained financing in the United States and conducted
its fraudulent transactions through U.S. banks. See Petroleos Mexicanos v. SK Eng’g & Constr.
Co. Ltd., 572 F. App’x 60, 61 (2d Cir. 2014). In that case, the court found the domestic conduct
insufficient because “[t]he activities involved in the alleged scheme—falsifying the invoices, the
bribes, the approval of the false invoices—took place outside of the United States.” Id. With these
two opinions as guideposts, district courts have found impermissible extraterritorial application of
the mail and wire fraud statutes on facts that align “closer to Petroleos than European Community.”
Worldwide Directories, S.A. De C.V. v. Yahoo! Inc., 14-cv-7349 (AJN), 2016 WL 1298987, at
*10 (S.D.N.Y. Mar. 31, 2016); see also United States v. Prevezon Holdings LTD., 122 F. Supp.
3d 57, 71-72 (S.D.N.Y. 2015).
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That represents the situation here. Without question, the Defendants hatched any alleged
scheme to defraud the Plaintiffs in Peru. The conduct underlying the predicate acts also occurred
abroad. For instance, the purportedly fraudulent samples and photographs as well as Harten’s
apparently false representations to the Plaintiffs originated from Peru. See Doc. No. 1, ¶¶ 174,
178-81. True enough, the United States was the end point for the predicate acts. But fewer than
all the essential elements of mail and wire fraud occurred in the United States, and the activities
underlying the scheme took place in Peru. As a result, wielding the mail and wire fraud statutes
in this case would result in their impermissible extraterritorial application.
In contrast, the money laundering statute does apply extraterritorially, but only if “the
conduct is by a United States citizen or, in the case of a non-United States citizen, the conduct
occurs in part in the United States.” 18 U.S.C. § 1956(f)(1); see also European Cmty., 764 F.3d
at 139-40. Because Congress has restricted extraterritorial application to those specified instances,
the Plaintiffs’ money laundering predicate must allege acts committed either within the United
States or by a United States Citizen. This they have not done. The complaint contends that Harten
and APS, both Peruvian citizens, consummated the allegedly illegitimate transactions through two
Peruvian banks in Lima.6 The money laundering statute does not apply extraterritorially under
these circumstances.
The Plaintiffs have not sufficiently pled that Peck and SKE engaged in racketeering activity
or demonstrated a continuous pattern of racketeering activity. More broadly, the complaint fails
to allege the violation of any RICO predicate statute that can support a domestic or permissible
extraterritorial application. That means the § 1962(c) RICO claim itself is impermissibly
6 Again, boilerplate assertions that other Defendants participated in the predicate acts, without
more, are insufficient. See Crest Constr. II, 660 F.3d at 356.
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extraterritorial. See RJR Nabisco, 136 S. Ct. at 2103. Therefore, the RICO claim against Peck
and SKE fails.
C. RICO Conspiracy
The second count of the complaint charges a violation of 18 U.S.C. § 1962(d), conspiracy
to violate RICO. To vindicate such a claim, the Plaintiffs must adequately plead that SKE and
Peck “manifested an agreement to participate directly or indirectly, in the affairs of an enterprise
through the commission of two or more predicate crimes.” United States v. Bennett, 44 F.3d 1364,
1374 (8th Cir. 1995). “A civil RICO conspiracy claim under 18 U.S.C. § 1962(d) cannot survive
if . . . the plaintiff has failed to allege the requisite substantive elements of RICO.” Rolfes v.
MBNA Am. Bank N.A., 416 F. Supp. 2d 745, 754 (D.S.D. 2005) (citing Hamm v. Rhone-Poulenc
Rorer Pharm., Inc., 187 F.3d 941, 954 (8th Cir. 1999)); see also Bowman v. W. Auto Supply Co.,
985 F.2d 383, 388 (8th Cir. 1993) (requiring commission of a predicate racketeering act to bring
§ 1962(d) RICO conspiracy claim). As explained above, the complaint fails to plausibly allege
any RICO predicate violations or a continuous pattern of racketeering activity. The RICO
conspiracy claim against Peck and SKE thus requires dismissal.
D. State-Law Claims
The complaint’s last three counts allege conspiracy to commit fraud, fraud, and breach of
contracts,7 presumably under District of Columbia law. The Plaintiffs base jurisdiction over these
state-law claims solely on supplemental jurisdiction. See Doc. No. 1, ¶ 2. A district court “may
decline to exercise supplemental jurisdiction” over a state-law claim when it “has dismissed all
claims over which it has original jurisdiction.” 28 U.S.C. § 1367(c)(3). When authorized by
7 The complaint asserts a breach of contracts claim against Peck, but not SKE. See Doc. No. 1,
¶¶ 222-28.
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statute, the ability to decline supplemental jurisdiction is committed to a district court’s discretion.
See McLaurin v. Prater, 30 F.3d 982, 985 (8th Cir. 1994); Packett v. Stenberg, 969 F.2d 721, 726-
27 (8th Cir. 1992). With the RICO and RICO conspiracy claims dismissed, no compelling reasons
remain to adjudicate the common-law claims in federal court. In its discretion, the Court declines
to exercise supplemental jurisdiction over the Plaintiffs’ state-law claims against Peck and SKE.
V. CONCLUSION
The Court has carefully reviewed the entire record, the parties’ filings, and the relevant
case law. For the reasons above, the Defendants’ motions to dismiss (Doc. Nos. 133-38, 141-42)
are GRANTED. The Court ORDERS that Jorge, Sr., Ofelia, Jorge, Jr., Javier, Farah, Convalor,
and Confactor are hereby DISMISSED from this action for lack of jurisdiction pursuant to Rule
12(b)(2) of the Federal Rules of Civil Procedure. The Plaintiffs’ motion to conduct jurisdictional
discovery (Doc. No. 129) is DENIED. The Court further ORDERS that the RICO claim under
18 U.S.C. § 1962(c) and the RICO conspiracy claim under 18 U.S.C. § 1962(d) against SKE and
Peck are hereby DISMISSED WITH PREJUDICE for failure to state a claim upon which relief
can be granted pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure. The Court
further ORDERS that the state-law claims against SKE and Peck are hereby DISMISSED because
the Court declines to exercise supplemental jurisdiction over them. Considering the extensive
briefing submitted, the Plaintiffs’ motion for hearing (Doc. No. 156) is DENIED.
IT IS SO ORDERED.
Dated this 2nd day of December, 2019.
/s/ Peter D. Welte
Peter D. Welte, Chief Judge
United States District Court
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