United States District Court, D. North Dakota, Eastern Division
MEMORANDUM AND ORDER
D. Welte, Chief Judge United States District Court.
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.
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 reasons below, the Defendants' eight
motions to dismiss are granted. The Plaintiffs' motion to
conduct jurisdictional discovery is concomitantly denied.
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.
Introduction of Parties
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.
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 “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.
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.
to the Peruvian Defendants,  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 Defendants Convalor, S.A.C.
(“Convalor”) and Confactor, S.A.C.
(“Confactor”), two Peruvian business entities.
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
Alleged Racketeering Activity
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.
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 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.
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.
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.
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 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.
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. ¶¶
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 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,
well as damages for unspecified lost business opportunities.
Id. ¶¶ 192-93.
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.
JURISDICTION OVER PERUVIAN DEFENDANTS
Court first finds that it is without jurisdiction to consider
the claims against the seven Peruvian
Defendants. Jurisdiction is the “first and
fundamental question” for resolution. Franklin
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.”).
Improper Service of Process
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).
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 indicates that the Defendants had
designated the served individuals as agents for receipt of
service of process.
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
(A) as prescribed by the foreign country's law for
service in that country in an action in its courts of general
(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;
(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.
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 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.
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
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.
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.
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.
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).
(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.
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