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Dinosaur Merchant Bank Ltd. v. Bancservices International LLC

United States District Court, E.D. Missouri, Southeastern Division

December 6, 2019




         This matter is before the Court on Plaintiff Dinosaur Merchant Bank Limited's Motion for Judgment on the Pleadings. (Doc. 18.) For the following reasons, the Court will grant Plaintiff's Motion.

         I. Background

         Plaintiff Dinosaur Merchant Bank Limited (“Dinosaur”) brought this action alleging breach of contract, breach of good faith and fair dealing, and conversion against Defendant Bancservices International, LLC (“BSI”). Dinosaur's claims arise out of a contract (the International Payment Services Agreement or “IPSA”) between Dinosaur and BSI dated October 13, 2017. Under the IPSA, Dinosaur engaged BSI to provide payment services for Dinosaur. Dinosaur claims that BSI improperly withheld $3, 469, 718.26 in funds Dinosaur entrusted to BSI for the transmission of money to purchase crude oil on behalf of Dinosaur's client. The Complaint requests an award of $3, 469, 718.26 in compensatory damages, as well as punitive damages, pre-judgment interest and post-judgment interest; and attorneys' fees pursuant to the terms of the IPSA.

         BSI filed a Counterclaim, setting forth claims for fraud, breach of contract, and indemnity. BSI alleges that Dinosaur failed to disclose to BSI information material to the transaction at issue that would have raised significant compliance issues and may have caused the transaction to be rejected by other involved parties.

         In its Motion, Dinosaur argues that it is entitled to a judgment on its Complaint directing the return of its funds wrongly withheld by BSI, and an award of expenses and attorneys' fees. Dinosaur further argues that the Counterclaim should be dismissed for failure to state an actionable claim. BSI opposes the Motion. (Doc. 31.) Dinosaur has filed a Reply, in which it requests oral argument on its Motion. (Doc. 32.) The Court finds that the pleadings are sufficient to resolve Dinosaur's Motion and will therefore deny Dinosaur's request for oral argument.

         II. Legal Standard

         “After the pleadings are closed-but early enough not to delay trial-a party may move for judgment on the pleadings.” Fed.R.Civ.P. 12(c). A motion for judgment on the pleadings should be granted when, accepting all facts pled by the nonmoving party as true and drawing all reasonable inferences from the facts in favor of the nonmoving party, the movant has clearly established that no material issue of fact remains and that the movant is entitled to judgment as a matter of law. Schnuck Markets, Inc. v. First Data Merchant Services Corp., 852 F.3d 732, 737 (8th Cir. 2017). As will be discussed below, a motion for judgment on the pleadings is analyzed differently depending on whether the motion seeks a merits disposition or seeks to press a Rule 12 defense. Dinosaur does both in its Motion.

         III. Facts

         Dinosaur sets out its version of the relevant facts in the Complaint. (Doc. 1.) BSI denies most of those facts on the basis it has insufficient information to form a belief as to the allegations. (Doc. 9.) The Court sets forth the following summary merely to provide context to the allegations and does not consider them in ruling on the Motion. Any material disputes are set forth and discussed in the Court's analysis.

         Dinosaur is a private company organized under the laws of the United Kingdom and is majority-owned by a citizen of the State of New York. Under the laws of the United Kingdom, Dinosaur is authorized to accept deposits, provide credit, give investment advice, and arrange deals in investments, as well as provide payment services. BSI is a limited liability company organized under the laws of the State of Missouri and is a registered money services business.

         On October 30, 2018, Dinosaur enlisted the services of BSI to assist it with a transaction involving the purchase of Boscan crude oil by a Thai asphalt company (Tipco Asphalt Public Company Limited, hereinafter “Tipco”) from a Venezuelan petroleum company (Petroleos de Venezuela, S.A., hereinafter “PdVSA”). In this instance, PdVSA intended to sell Tipco a quantity of oil[1] that was being stored aboard a vessel, the Stena Surprise, against which a prejudgment attachment had been entered by a Curacao Court. The attachment was entered against PdVSA for the benefit of an Italian energy company, Energy Coal, to satisfy a debt PdVSA owed to Energy Coal that accrued between 2012 and 2014. The attachment allowed PdVSA to find a buyer for the oil rather than selling it at a public auction, so long as the sales contract was for at least $17, 348, 645.

         PdVSA and Tipco had previously entered into a Sales Contract for the delivery of Boscan crude oil, subject to PdVSA's availability. The Sales Contract set forth the “Particular Conditions of Sale” for the time period of January 1, 2014 through December 31, 2017; it was numbered SA144531 and signed by a representative of Tipco on January 13, 2014.

         Between October 20 and 22, 2018, an Escrow Agreement (Doc. 17 at pp. 21-25) concerning the oil purchase was signed by representatives of PdVSA, Tipco, and a Panamanian law firm named De Jesus & De Jesus (identified as “Escrow Agent”). The Escrow Agreement noted that PdVSA and Tipco agreed upon a purchase price of $23, 468, 931.86 for the Boscan crude oil.[2] A portion of the agreed sale price, a total of $17, 348, 645, was to be paid to the Curacao Court to pay Energy Coal's attachment lien. The remainder of the $23, 468, 931.86 totaling $6, 120, 286.86 was to remain with the Escrow Agent.

         To consummate the sales contract for the 380, 225 barrels of oil between Tipco and PdVSA, De Jesus & De Jesus used Barnett Capital Bank (an international financial institution located and registered in the Commonwealth of Dominica) to deposit $23, 468, 931.86 with Dinosaur on October 22, 2018. According to Dinosaur, the wire instructions advised that the purpose of the funds was for the further benefit of De Jesus & De Jesus and that the purpose of the funds were “cost of goods, Boscan crude oil sales agreement dated 1/1/14 cargo load per vessel Mt. Stena Surprise with BL. 14707-703-1-1.” (Doc. 1 at ¶ 8.)

         On October 26, 2018, Barnett Capital Bank instructed Dinosaur to originate a wire transfer from its account with Dinosaur in the sum of $17, 348, 645, the funds to be sent to the Curacao bank Banco di Caribe N.V. for the benefit of an account maintained there by “Gemeenschappeljik Hof Van Justice, Curacao, ” which is Dutch for Common Court of Justice, Curacao (“Curacao Court”). Id. at ¶ 9. According to the wire instructions the wire was for “Cost of gods [sic] sales agreement cargo load per vessel Mt. Stena surprice [sic] with BL 14707/7031/1 Energy Coal Case.” Id.

         Dinosaur reportedly engaged in a due diligence investigation between October 26, 2018, and October 30, 2018. See Doc. 1 at p. 3-4. Dinosaur states that it concluded from its investigation that the requested $17, 348, 645 transfer was for the purpose of lifting the Curacao Court-imposed attachment and enabling Tipco to take possession of the crude oil then stored as cargo in the MT Stena Surprise. Dinosaur further states that it discovered that PdVSA was subject to OFAC[3] sanctions in connection with any debt incurred by PdVSA after August 24, 2017. Dinosaur asserts that the Curacao Court attachment had occurred pre-August 24, 2017, and therefore did not fall under the sanctions.

         On October 30, 2018, Dinosaur engaged BSI to transmit $17, 348, 645 using its BANCwire product to the Curacao Court's account at Banco di Caribe Bank pursuant to the preexisting IPSA (“Transaction”). Dinosaur states that, along with the wire payment instructions, it provided BSI with the “fruits of its due diligence, including the contract of crude oil sale between PdVSA and Tipco, the escrow agreement between Tipco and De Jesus & De Jesus, a letter from De Jesus & De Jesus describing the crude oil transaction, and two orders of the Curacao Court relating to the attachment of the crude oil cargo in the MT Stena Surprise.” Id. at ¶ 13.

         BSI accepted the Transaction. At some point downstream in the chain of transfers involved in the Transaction, either Banco di Caribe or another bank in the chain rejected the payment and returned the $17, 348, 645 to BSI. On November 21, 2018, Dinosaur requested that BSI send the $17, 348, 645 to a different account maintained by the Curacao Court, for the same purposes as the October 30, 2018 request. (Doc. 17-2 at pp. 3-4.) On November 29, 2018, Dinosaur directed BSI to cancel the wire payment transfer and to return the $17, 348, 645 to Dinosaur.

         On November 30, 2018, BSI informed Dinosaur that it was retaining $3, 469, 718.26 and returning only $13, 848, 926.74 of the $17, 348, 645 Dinosaur had instructed be returned to Dinosaur. See Doc. 15-5 at pp. 2-3. BSI represented in this communication that it was entitled to a 5% “transaction fee” of $867, 429.63, and a 15% “escrow holdback” of $2, 602, 288.63 in connection with the funds. Id. BSI noted:

We are continuing to examine the reasons for the payment rejection and continue to be concerned that this payment has subjected us to substantial potential legal and financial risk given that it was rejected by the recipient bank and given that it involved Petroleos de Venezuela, S.A. (“PdVSA”), an entity considered part of the Government of Venezuela and subject to various prohibitions and sanctions imposed by the United States Office of Foreign Assets Control (“OFAC”) as well as various recent corruption allegations.

Id. at 2. While BSI expressed appreciation for Dinosaur's assistance in investigating the payment rejection, it stated that additional information was needed. In particular, “one item we need to receive is documentation from the Curacao court that authorizes this payment given that Payment Request BCB2117 was rejected.” Id. BSI then requested “documentation from the Curacao court that directs any payment from Tipco Asphalt Public Company Ltd (“Tipco”) to be paid to the Curacao court.” Id. As further explanation for deducting a processing fee and holding funds in escrow, BSI explained:

Also, in the October 10, 2018 “Payment Instruction” delivered by PdVSA to Tipco, PdVSA indicates that the purchase price under the contract between PdVSA and Tipco is USD $23, 468, 931.86. Accordingly, it appears that USD $17, 348, 645 of the purchase price was needed to pay PdVSA's creditors and release the seized cargo from the Curacao court. We are examining to understand what portion of the USD $6, 120, 286.86 balance has been or will be paid to PdVSA, but any information you can provide would be appreciated…

Id. BSI added:

Upon our satisfaction that there are no damages, claims, losses or other liability resulting from this transaction (after our confirmation that we have received all requested documentation to our satisfaction), we will remit to Dinosaur the remaining escrow amount, less any amounts needed to satisfy such damages, claims, losses or other liability. If within sixty (60) days of the date of this correspondence we have not reached such satisfaction for any reason (including any failure by Dinosaur to deliver any and all requested supporting documentation), the then remaining balance of the escrow shall be remitted to BSI (or any BSI-designated entity) and Dinosaur shall have no further claim to such amount.

Id. at 3.

         In response, counsel retained by Dinosaur emailed a letter (Doc. 15-6) to BSI on December 3, 2018, wherein BSI demanded return of the “$17, 348, 645, minus applicable fees, by no later than December 7, 2018.” Id. at 3. Dinosaur's counsel further disagreed with BSI's imposition of the $867, 429.63 transaction fee and holdback in escrow of $2, 602, 288.63. Counsel explained:

DMBL values its continued relationship with Bancservices International LLC. To that end, DMBL shared, and will continue to share, the results of its extensive transaction due diligence with you. We note that the underlying legitimate business purpose of the $17, 348, 645 originated by DMBL for the benefit of Gemeenschappellijik Hof Van Justitie of Curacao, i.e., the Curacao Court, was clear. The payment was made to satisfy an order of that court in a proceeding related to judgements obtained by PdVSA creditors. True, the recipient bank rejected the transaction, apparently for compliance reasons. We cannot state with certainty why the recipient bank rejected the transaction. We do not believe on the basis of the available information that the transaction violated U.S. or other sanctions. As you may know, the Curacao court has scheduled a hearing for Friday, December 7, 2018, apparently to obtain an update regarding the status of the transaction.
DMBL, like you, continues to inquire regarding the nature and purpose of the $6, 120, 286 held by De Jesus & De Jesus. Pursuant to the escrow agreement DMBL obtained from its client, and which DMBL provided to you, De Jesus & De Jesus is the escrow agent for PdVSA and Tipco Asphalt, PdVSA's counterparty with respect to the Curacao court-managed transaction related to certain Curacao court-attached PdVSA assets. The escrow agreement states that any amount in excess of $17, 348, 645 (i.e. the sale amount imposed by the Curacao court) and the actual sale amount paid by PdVSA's counterparty (which resulted in the residual $6, 120, 286.86) would be used to pay other PdVSA obligations upon PdVSA's written instructions. De Jesus & De Jesus assert, in a letter that DMBL supplied to you, that the residual funds would be used to pay attorney and courts fees. DMBL continues to investigate this issue.
Notably, the Curacao court-required transaction involving the $17, 348, 645 does not involve the residual funds currently held by De Jesus & De Jesus. Until DMBL has satisfied its anti-money laundering and sanctions-related inquiries with respect to the residual $6, 120, ...

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