Mayaguez Economic Development Inc. v. Federkiewicz et al

2020 | Cited 0 times | D. Puerto Rico | November 16, 2020

I. 1

1 ¶ ¶ 2


2 At this juncture, the court must examine the facts in the light most favorable to the non-movant, indulging that party with all possible inferences to be derived from the facts. See Rochester Ford Sales, Inc. v. Ford Motor Co., 287 F.3d 32, 38 (1st Cir.2002). The court conjecture or vitriolic invectiv Cherkaoui v. City of Quincy, 877 F.3d 14, 23 (1st Cir.2017)

(quoting Pina v. Children's Place, 740 F.3d 785, 795 (1st Cir.2014). The court reviews the

Reeves v. Sanderson Plumbing Products, Inc., 530 U.S. 133, 135 (2000).

If the non-movant generates uncertainty as to the true state of a material fact, the are unavailing. , 229 F.3d 49, 53 (1st Cir.2000). But the mere existence of an alleged factual dispute [ ] will not affect an otherwise properly Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48 (1986). See Cherkaoui, 877 F.3d at 23-24 (quoting Sanchez v. Alvarado, 101 F.3d dispute is genuine if the evidence [ ] is

such that a reasonable jury could resolve the point in favor of the non-moving party ).

III. Having the parties complied with Rule 56 by presenting their facts along responses and exhibits, the court will now outline its own undisputed set of facts. In doing so and since the facts on record are mostly uncontested Counterclaimants .

On May 1, 2018, MEDI and KLPL signed an LOI consisting in a loan proposal intended for the purchase of power generation units. Federkiewicz signed as President/CEO and authorized agent of KLPL, and Executive Director for MEDI. 3

PSF ¶ 1. See LOI, ECF 47-1. Per the LOI, MEDI would deposit $1,375,000.00 in a Segregated Project Account Solely for the MEDI Project with a commitment that the deposit would be returned in full if the loan did not close within 120 days. MEDI wired the deposit amount to Federkiewicz on May 18, 2018. PSF ¶ 3. MEDI eventually requested the deposit back because no loan closed within the 120 days from the date of the signing of the LOI or the wiring of the funds, to which Counterclaimants refused and informed that the deposit was spent at least partly. PSF ¶¶ 2-4. ¶ 22. See ECF No. 47-1.

On May 4, 2018, leading to the wiring of the deposit, Jose Hernández Mayoral 4

, as the contact person for MEDI and Counterclaimants, emailed [Riera] is PSF ¶ 5. See May 4, 2018 email, ECF No. 47-3. On May 5, 2018, Hernández informed Federkiewicz that he was ehalf. See First May 5, 2018 email, ECF No. 47-4. In other words, Hernández was authorized by Riera to serve as the contact person for both parties. See Hernández , ECF No. 47-11, page


4 Hernández See First May 5, 2018 email, ECF No. 47-4. 2. That day, Federkiewicz resplied providing the detailed framework you are working under. It seems like Alejandro [Director for MEDI] and you have a real good idea See Second May 5, 2018 email, ECF No. 47-4.

On May 11, 2018, Federkiewicz emailed Hernández stating: moment this Friday to see how progress has gone this week with Alejandro [Director for

MEDI] and the work he was completing on the MEDI project. Do you have any update on his stat PSF ¶ 7. See May 11, 2018 email, ECF No. 47-5. On May 11, 2018, Hernández responded: have been given assurances that the transfer will occur no later than next Friday the 18th. I will update you Monday until they do it. I am pushing so that it PSF ¶ 8. See Second May 11, 2018 email, ECF No. 47-6. On May 13, 2018, Federkiewicz followed up: closer, as we have allocated $15M to MEDI we are hopeful that we can get the deposit step completed so we can start the work for us to initiate the project and get the capital moving See May 13, 2018 email, ECF No. 47-7.

On May 15, 2018, Hernández emailed Federkiewicz two times regarding the same matter. First, he said that he had talked to Riera and that the wiring of the deposit was on [w]hat kind of information would you need -11. See First and Second Email from May 15, 2018, ECF No. 47-8 and 47-9, respectively. In pertinent, Federkiewicz replied: ¶

On May 18, 2018, MEDI wired the $1,375,000.00 dollar deposit to a U.S. bank account belonging to Federkiewicz. PSF ¶ 3. All parties agreed to do it this way because a Canadian bank, thus needing a corresponding stateside bank to proceed with the transfer. See HernándezAffidavit, page 2; Transaction Receipts, ECF No. 47-12 and 47-13.


¶ 13. See July 29, 2018 email, ECF No. ¶ 14. See First July 31,

2018 email, ECF No. 5


5 ¶ 15. See Second July 31, 2018 email, ECF No.

¶ 16. See August 2, 2018 email, ECF No.

On September 5, 2018, Hernández emailed Federkiewicz and, inter alia, mentioned that MEDI was aware it could request the deposit if the loan did not close in 120 days from Hernández signed but also the date MEDI wired the funds, and that since the wiring occurred on May

18 th

, the 120-day term would run until September 16, 2018. PSF ¶ 17. See September 5 email, ECF No. 47-19. On September 11, 2018, Hernández emailed Mr. Federkiewicz again, this time asking Counterclaimants whether the loan was to be closed by Monday, September 17, 2018. PSF ¶ 18. On September 13, 2018, Hernández again emailed Federkiewicz stating: action and request that its $1,375,000 , ECF No. 54, page 2. See September 13 email, ECF No. 54-2. On September 17, 2018, 121 days after it had wired the funds to

See First July 31, 2018 email, ECF No. defendants, MEDI sent a formal termination letter, via email from Hernández to return of the deposit. 6

PSF ¶ 19. See September 17, 2018 email, ECF No. 47-22.

Additional Facts ¶ 20. ECF

No. 47-23. ¶ 21. ECF No. 47-11. 7

¶ 23. ECF No. 47-24 and up to 47-26. ¶ 24. ECF No. 47-24 47-26. ¶ 25. ECF No.

47-24 47-26. Counterclaimants allege to have no ownership, employment or management relationship with 12 Peers, and no control or access to its documents. Statement of Additional Facts by Counterclaimants ¶ 14, ECF No. 54, page 12.

6 ¶ 2 by alleging th terminated the LOI and requested its deposit back. (See MEDI SJ Ex. X). In addition, MEDI effectively breached and prematurely, wrongfully and constructively terminated the LOI long before that by failing to -3.

7 ¶¶ ¶¶

IV. A. Before proceeding to analyze principal claims, the court notes that in their response Counterclaimants invoked the Economic Loss Rule (the to argue that tortious claim grounded on embezzlement is barred. Counterclaimants specifically relied on Isla Nena Air Servs. v. Cessna Aircraft Co., 449 F.3d 85, 90 (1st Cir. 2006) to compel this court to expand the applicability of the Rule. They are incorrect.

In Isla Nena, the First Circuit Court recognized that the Rule Isla Nena, 449

F.3d at 90. Furthermore, that Id.

at 87 (citing among others East River, 476 U.S. at 867-68; Lockheed Martin Corp. v. RFI Supply, Inc., 440 F.3d 549, 552-53 (1st Cir.2006). In addition, in order to apply the Rule to , the Court in Isla Nena relied on another decision, Betancourt v. W.D. Schock Corp., 907 F.2d 1251 (1st Cir.1990). Such decision held that a plaintiff could not assert a tort claim because Puerto Rico s negligence statute, [31 P.R. Laws Ann § 5141], does not apply in the context Id. at 1255. product itself occurs through an abrupt, accident- essentially the failure of the purchaser to receiv Id.

From the findings of facts it follows that this case is in no way like Isla Nena or Betancourt. As such, the court concludes that the Rule, invoked by Counterclaimants, is inapplicable in whole. In this case, a tortious claim for the apparent embezzlement of a loan deposit is brought forth against a lending company who contracted with a municipal corporation. Hence, tortious claim has nothing to do with product liability or a commercial transaction in the way provided by Isla Nena or Betancourt. In fact, even if the Rule has been modified by other courts, Counterclaimants not only fail to cite decisions that closely resemble our case but also fail to identify a single binding instance in which the Rule was applied to bar tortious claims that stem from embezzlement or any related conduct. 8

This conclusion, however, in no way limits the forthcoming result of this Opinion and Order, which ultimately and for other reasons DENIES claim but GRANTS the breach of contract and specific performance claim invoked.

B. Embezzlement as a Tort The first of two principal claims brought forth by MEDI relates to embezzlement as a source of extracontractual 31 P.R. LAWS ANN. § 5141 . In short, MEDI suggests that, because Counterclaimants

against them and conclude that the deposit was embezzled, thus causing tortious harm. ECF No. 47, pages 10-11. This is erroneous because, as reflected (1) MEDI has not placed the court

8 in a position to conclude that a tortious obligation exists between the parties, let alone that embezzlement occurred and caused harm to the Plaintiff; and 9

This is true even when the court applies . P.R. LAWS. ANN. Tit. 32 Ap. VI, R. 303(5).

31 P.R. LAWS ANN. § 5141.

9 This goes without saying that the court is in no position to entertain whether embezzlement, as defined by either Federal Criminal norms or Puerto Rico Criminal norms, occurred. This case is one of civil nature in full and despite Tit. 7, § 1080 codifying embezzlement as a crime for private money Moreover, the court notes that embezzlement generally requires for proof of illegal appropriation of entrusted money, intentionally used or disposed for a finality not authorized. See, for example, . Tit. 33 § 4895; Pueblo de P.R. v. Tapia, 101 D.P.R. 423 (1973); 18 U.S.C. § 666(a)(1)(A).


10 KLPL illicitly caused harm to MEDI without the existence

of a prior civil/contractual obligation between the parties.

, our net result would hold true because under Puerto Rico Law, a plaintiff is barred from recovering simultaneously from both a tortious action and a contractual action, when these two arise from the same conduct. Ramos Lozada v. Orientalist Rattan, 130 D.P.R. 712, 728 (1992). In fact, Puerto consequence of the breach of an obligation specifically agreed upon, which damage would

not occur without the existence of a party may not choose whether to proceed in a contract or tort. Isla Nena, 449 F.3d at 90 (citing id.). This means that even if we were wrong in determining that there is no meritorious tort claim, MEDI would only be able to recover damages under one of the two causes of actions (the contractual or the tortious), t what led to the breach of contract and the tortious harm.

C. 11

11 12



For example, on May 13, 2018, Federkiewicz replied: have allocated $15M to MEDI we are hopeful that we can get the deposit step completed so we can start the work for us to initiate the project and get the capital moving as soon as possib See ECF No. 47-7.

13 see First May 5

Email at ECF No. 47-4 14 15

14 anks for providing the detailed framework you are working under. It seems like Alejandro [Executive Director for MEDI] and you have a real good idea on how to See Second May 5, 2018 email at ECF No. 47-4.

15 ¶¶ Hernández Hernández Hernández

D. Dismissal of KLPL Counter Claim 16




V. CONCLUSION For the reasons above, this court hereby GRANTS IN PART and DENIES IN PART for embezzlement is DENIED with prejudice, while its specific performance and breach of


Judgment shall be entered accordingly.

In San Juan, Puerto Rico, November 16, 2020

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