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Case 1:13-cv-22131-JLK Document 18 Entered on FLSD Docket 09/20/2013 Page 1 of 33

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF FLORIDA MIAMI DIVISION CASE NO. 1:13-cv-22131-JLK SEGUROS UNIVERSALES, S.A., a Guatemalan anonymous society, FIANZAS UNIVERSALES, S.A. n/k/a ASEGURADORA FIDELIS, S.A., a Guatemalan anonymous society, and ORDENADORES, S.A., a Guatemalan anonymous society, v. Plaintiffs,

MICROSOFT CORPORATION, a Washington corporation, Defendant. _______________________________________/ MICROSOFT CORPORATIONS MOTION TO DISMISS FIRST AMENDED COMPLAINT FOR DAMAGES AND INJUNCTIVE RELIEF Pursuant to Federal Rule of Civil Procedure 12(b)(6), Defendant Microsoft Corporation (Microsoft) hereby moves for an Order dismissing the First Amended Complaint for Damages and Injunctive Relief 1 (the Amended Complaint) filed by Plaintiffs, Seguros Universales, S.A. (Seguros), Fianzas Universales, S.A. n/k/a Aseguradora Fidelis, S.A. (Fianzas), and Ordenadores, S.A. (Ordenadores) (collectively, the Plaintiffs), [D.E. 13]. In support of its Motion, Microsoft submits the following Memorandum of Law. MEMORANDUM OF LAW I. INTRODUCTION On August 26, 2013, Plaintiffs filed an Amended Complaint in lieu of responding to Microsofts motion to dismiss Plaintiffs initial complaint (the First Motion to Dismiss). As with the initial complaint, the Amended Complaint should be dismissed. While Plaintiffs have wisely abandoned their meritless claims of constructive fraud and abuse of process, they persist While purporting to seek preliminary and permanent injunctions, Plaintiffs wholly fail to plead any of the traditional factors for injunctive relief, or, much less, any facts necessary to support it. Among other things, Plaintiffs do not because they cannot plead the existence of any clear right currently in need of protection, or any pending dispute between the parties that could or should be enjoined. See Harry v. Wagner, 2013 WL 4648318, at *4 (M.D. Fla. 2013).
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Case 1:13-cv-22131-JLK Document 18 Entered on FLSD Docket 09/20/2013 Page 2 of 33 CASE NO. 1:13-cv-22131-JLK in attempting to unwind Microsofts enforcement of its intellectual property rights through the legal process of Guatemala and recast those proceedings as an illegal enterprise under the Racketeer Influenced and Corrupt Organizations (RICO) Act, 18 U.S.C. 1964, et seq. (Count I). Plaintiffs also have added a new and baseless cause of action for fraud (Count II). Despite their modest reworking, Plaintiffs core allegations are the same. Plaintiffs allege that Microsoft submitted false or fraudulent sworn declarations to the Guatemalan Fiscalia de Seccin de Delitos Contra La Propiedad Intelectual, (hereinafter referred to as the Guatemalan Special Prosecutor), and thereby commenced an action in Guatemala that resulted in a seizure order from a Guatemalan court (the Guatemalan Seizure Action). Plaintiffs further assert that Microsoft relied on the Guatemalan Seizure Action to extort payments and other concessions from Plaintiffs in Guatemala. Plaintiffs still cannot plead around the fact that, as pointed out in Microsofts First Motion to Dismiss, this case has little, if anything, to do with the United States or, much less, with the State of Florida. It has everything to do with Guatemala. Just like in their initial complaint, Plaintiffs fail to acknowledge that they previously entered into a written settlement agreement with Microsoft (the Settlement Agreement), pursuant to which they released Microsoft from all claims asserted in this lawsuit. 2 In the final analysis, the Amended Complaint still rests on implausible allegations that are flatly contradicted by the documents attached to or incorporated by reference in the Amended Complaint. The Court should dismiss the Amended Complaint with prejudice for the following reasons. First, as previously noted, by virtue of the clear and unambiguous terms of the Settlement Agreement, Plaintiffs released Microsoft from any and all claims arising out of or relating to the Guatemalan Seizure Action, including the claims asserted in this lawsuit. Second, by indiscriminately asserting, as the core bases underlying all of their claims, that Microsoft filed false declarations with the Guatemalan Special Prosecutor to secure a seizure order from a Guatemalan court and conduct a fraudulent raid of Plaintiffs business offices with the aid of Guatemalan law enforcement officers, Plaintiffs effectively ask this Court to adjudicate and question the integrity and viability of Guatemalan judicial and governmental proceedings. The Court should not accept the invitation to substitute its own judgment for that of another sovereign nation with a paramount interest in regulating conduct within its territory, and
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A true and correct copy of the Settlement Agreement, along with a certified English translation, is attached hereto as Exhibit A. 2

Case 1:13-cv-22131-JLK Document 18 Entered on FLSD Docket 09/20/2013 Page 3 of 33 CASE NO. 1:13-cv-22131-JLK resolving matters arising under its laws and litigated in its courts. The Court therefore should dismiss the Amended Complaint under the doctrine of forum non conveniens, principles of international comity, and/or the act of state doctrine. Third, RICO does not apply extraterritorially to claims that involve a foreign RICO enterprise and foreign predicate acts of racketeering activity. The Amended Complaint alleges that: (i) Microsoft appears to operate in Guatemala through a foreign corporate vehicle, i.e. Microsoft de Guatemala S.A. (Microsoft Guatemala); 3 (ii) the alleged RICO enterprise is foreign; and (iii) the alleged predicate acts of racketeering, i.e. the filing of false declarations in the Guatemalan Seizure Action to extort a payment of US$70,000 (the Settlement Payment) from Plaintiffs, occurred on foreign soil. The fact that Plaintiffs amended their pleading to try and enhance the role purportedly played by the U.S. entity, Microsoft Corporation (as compared to that of Microsoft Guatemala) in the alleged fraudulent scheme, does not alter the undeniably foreign character of the RICO claim. The alleged fraudulent scheme remains overwhelmingly extraterritorial. The fact that the companys global anti-piracy software policies may have originated in the United States, does not transform an extraterritorial claim into a domestic claim, or, much less, into an actionable claim under the RICO statute. Fourth, the Amended Complaint, on its face, contradicts the factual foundation upon which Plaintiffs claims purport to be based, namely, that Microsoft had no legitimate or lawful basis to file a copyright infringement complaint against Plaintiffs with the Guatemalan Special Prosecutor, or request that the Guatemalan Special Prosecutor seek the issuance of a seizure order by the Guatemala court. Specifically, Plaintiffs concede that, more than sixteen (16) months after the issuance of the seizure order, they still cannot document valid licenses for all of the Microsoft software operated on their computers. Therefore, Plaintiffs claims that Microsofts enforcement of the seizure order constitutes a RICO enterprise (Count I); was fraudulent (Count II); or unjustly enriched Microsoft (Count III), are implausible. The Amended Complaint should be dismissed with prejudice on that basis, as well. To the extent the Court is not inclined to dismiss the Amended Complaint with prejudice on the foregoing bases, there are still other grounds for dismissal:
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The RICO and fraud claims (Counts I and II) fail, because Plaintiffs allegations concerning Microsofts predicate acts of racketeering activity and other unsubstantiated

See Am. Complaint, 29, 43 (alleging that Microsoft appears to operate in Guatemala through Microsoft Guatemala). 3

Case 1:13-cv-22131-JLK Document 18 Entered on FLSD Docket 09/20/2013 Page 4 of 33 CASE NO. 1:13-cv-22131-JLK acts of fraud, lack the requisite particularity under the controlling case law and Rule 9(b) of the Federal Rules of Civil Procedure. Finally, the Unjust Enrichment claim (Count III) should be dismissed, because, as described in greater detail below, Plaintiffs fail to adequately plead duress under Florida law or Guatemalan law. Accordingly, there is no basis to invalidate the Settlement Agreement or find that it unjustly enriched Microsoft at Plaintiffs expense. II. BACKGROUND This case is about software infringement and the protection of intellectual property rights in Guatemala. 4 Plaintiffs assert that, [t]o aid in the conduct of their businesses, they installed and operated Microsoft software, such as Windows, Word, Excel, Publisher, and Outlook, in their business offices in Guatemala. 5 Between 2008 and 2012, Seguros and Fianzas admit to receiving documentation about Microsoft software infringement violations. 6 One such document, titled Impact of Software Piracy in Guatemala and Benefits of Correctly Handling Software Assets at the Company (the Software Piracy Letter) and dated June 9, 2008, is attached to the Amended Complaint. 7 The Software Piracy Letter states that [c]opying computer programs without . . . authorization infringes upon software ownership rights, which are expressly recognized by Guatemalan law and international treaties of which Guatemala is a party. 8 On or about March 7, 2012, Microsoft filed a criminal complaint with the Guatemalan Special Prosecutor, 9 in which it alleged that certain Microsoft software, without a license for See Am. Complaint, 13, 16, 24-25, 28; Exhibits to Complaint. See Am. Complaint, 11. 6 Am. Complaint, 18-19. 7 See Am. Complaint [D.E. 13-3, p. 3]. 8 Am. Complaint, [D.E. 13-3, p. 3]. 9 Am. Complaint, [D.E. 13-1, pp. 2-30]. In the Amended Complaint, Plaintiffs purport to provide written notice to Microsoft of certain issues of Guatemalan law pursuant to Rule 44.1, Fed. R. Civ. P. See Am. Complaint, [D.E. 13-1, pp. 8, 15]. Accordingly, Microsoft is compelled to address those issues and, together with its Motion, submits the sworn declaration of its Guatemalan legal expert, Alfredo Skinner-Kle (the Skinner-Kle Declaration or SkinnerKle Decl.). (The Skinner-Kle Declaration is attached hereto as Exhibit B.) As described in the Skinner-Kle Declaration, Guatemalan law provides for both criminal and civil copyright infringement actions. The Guatemalan Special Prosecutor is responsible for prosecuting criminal copyright infringement actions. However, the owner of a copyright, such as Microsoft, may file a complaint requesting that the Guatemalan Special Prosecutor initiate a criminal proceeding against an infringing party (which is precisely what Microsoft did, in this case, when it filed the aforementioned criminal complaint, on or about March 7, 2012). If the Guatemalan Special Prosecutor determines the complaint filed by a copyright owner has merit, he must request the issuance of a court order authorizing him to take any ex parte, precautionary remedial measure 4
5 4

Case 1:13-cv-22131-JLK Document 18 Entered on FLSD Docket 09/20/2013 Page 5 of 33 CASE NO. 1:13-cv-22131-JLK use[,] [was] being utilized at the business address of one of the Plaintiffs. 10 The criminal complaint requested the issuance of an order by a Guatemalan court of competent jurisdiction to search the business premises of the plaintiff and seize and confiscate any computer equipment and/or media being used to reproduce or illegally store Microsoft software without authorization. 11 In addition, the criminal complaint requested that the Guatemalan Special Prosecutor be appointed as bailee to store all computer equipment confiscated. 12 On or about March 20, 2012, Microsofts legal counsel in Guatemala filed a declaration amending the criminal complaint to reflect that two Plaintiffs, Seguros Universales, Sociedad Annima, and Fianzas Universales, Sociedad Annima, operated at the address referenced in the criminal complaint. 13 The declaration also attached the Software Piracy Letter 14 and noted: I am also attaching a copy of a letter [i.e., the Software Piracy Letter] received from ELDER GUERRA, TECHNOLOGY MANAGER at those entities [i.e., Seguros and Fianzas], in which they were asked to reduce computer and legal risks of using software without a license. [The letter] gave notice that [such use] is a crime under our laws, with consequences of up to four years of jail and significant fines and indemnities for each illegal software [program] found. That assistance was offered for free. He was also requested to begin the process of correcting all existing irregularities. However, despite having provided sufficient time to make the corrections, no positive response was received from them [i.e., Seguros and Fianzas], and they continue to use software belonging to Microsoft Corporation without the respective use license. 15 On or about March 26, 2012, Microsoft made another filing with the Guatemalan Special Prosecutor, which included additional evidence of infringement by Plaintiffs. 16 On or about April 26, 2012, Microsoft added the third plaintiff, Ordenadores, to the criminal complaint. 17 On or about April 27, 2012, the Second District Court for Criminal, Narcotics and necessary to safeguard the rights of the copyright owner. The Guatemalan Special Prosecutor may enlist the aid of the local police to implement those measures. See Skinner-Kle Decl., 14. As described below, on or about April 27, 2012, the Guatemalan Special Prosecutor secured an order from a Guatemalan court authorizing an audit of Plaintiffs business premises, and the seizure of any evidence of copyright infringement by Plaintiffs. 10 Am. Complaint, [D.E. 13-1, p. 4]. 11 Am. Complaint, [D.E. 13-1, p. 10]. 12 Am. Complaint, [D.E. 13-1, p. 10]. 13 Am. Complaint, [D.E. 13-2, p. 3]. 14 Am. Complaint, [D.E. 13-2, p. 7]. 15 Am. Complaint, [D.E. 13-2, p. 3]. 16 Am. Complaint, [D.E. 13-4, p. 5]. 17 Am. Complaint, 34. 5

Case 1:13-cv-22131-JLK Document 18 Entered on FLSD Docket 09/20/2013 Page 6 of 33 CASE NO. 1:13-cv-22131-JLK Environmental Crimes in and for the Municipal District of Guatemala City (the Guatemalan Criminal Court) entered an order authorizing the Guatemalan Special Prosecutor and its authorized agents to conduct a physical inspection and audit of the computer hardware located at Plaintiffs business offices (the Guatemalan Seizure Action). 18 The audit was conducted that same day. 19 Plaintiffs allege that Microsofts representatives appeared with armed Guatemalan law enforcement officers, halted Plaintiffs business operations, extorted a settlement payment of US$70,000, and coerced Plaintiffs to accept the terms of the Settlement Agreement, which they allege was executed by their authorized representative under duress. 20 Contrary to Plaintiffs allegations of coercion and duress, the Settlement Agreement actually states: [B]y means of mutual concessions, we have decided by common agreement to avoid any kind of litigation that to date may have arisen...acknowledging...that MICROSOFT CORPORATION is the holder of copyright to the computer software...which the entity known as SEGUROS...and related companies 21 recognize and accept as valid. 22 The Settlement Agreement continues: The entity known as SEGUROSand related companies will pay THE HOLDERS [i.e., Microsoft] the total sum of...($70000.00) as COMPENSATORY DAMAGES, EXPENSES AND COURT COSTS that might to date have resulted from the unlicensed use of the following software. 23 Seguros also agree[d] to pay any taxes generated as a result of this settlement. 24 Moreover, Plaintiffs agreed to come into compliance with the copyright laws, operate Microsoft software legally, and submit copies of the licenses and invoices for the legalization of the software in use by July 27, 2012. 25 The Settlement Agreement sets forth specific terms and conditions for legalizing and validating the software in question. 26 By virtue of Plaintiffs obligations under the Settlement Agreement, Microsoft agree[d]
18 19

See Settlement Agreement, p. 2, ONE.RECITALS; p. 6, FIVE. See Settlement Agreement, p. 2, ONE.RECITALS. 20 Am. Complaint, 37-40, 43-45, 65, 73, 79-80, 83. 21 Plaintiffs concede that Fianzas is Seguros affiliate and that Ordenadores are both Seguros and Fianzas affiliate. Am. Complaint, 9-10. For instance, Plaintiffs admit that Ordenadores provides internal information and telecommunication services to Plaintiffs and is the title holder of Plaintiffs computer servers. Am. Complaint, 10. 22 Settlement Agreement, p. 3, TWO.SETTLEMENT (emphasis in original). 23 Settlement Agreement, p. 3, TWO.SETTLEMENT (emphasis added). The $70,000.00 sum was to be paid in four (4) installments of $17,500.00 each. Id. 24 Settlement Agreement, p. 3, TWO.SETTLEMENT. 25 Settlement Agreement, pp. 4-5, TWO.SETTLEMENT. 26 Settlement Agreement, p. 5, THREE. 6

Case 1:13-cv-22131-JLK Document 18 Entered on FLSD Docket 09/20/2013 Page 7 of 33 CASE NO. 1:13-cv-22131-JLK to discontinue the legal actions brought and to not bring others of a civil, criminal or any other nature resulting from the Proceedings filed against THE RESPONDENTS on the twenty-seventh of April of the current year, as the result of any other type of activity it may have carried out prior hereto. 27 In view of these and other provisions, including general releases of liability, the Settlement Agreement was signed by the parties, following a complete reading of the text [therein], being duly acquainted with the content, purpose, validity and other legal effects thereof. 28 Notwithstanding the terms of the Settlement Agreement, on June 14, 2013, Plaintiffs filed their initial complaint in this action. III. FEDERAL RULE OF CIVIL PROCEDURE 12(b)(6) STANDARD In order to withstand a motion to dismiss under Rule 12(b)(6), a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face. A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged. 29 A complaints allegations must be enough to raise a right to relief above the speculative level. 30 IV. ARGUMENT A. Plaintiffs Claims Are Barred by the Settlement Agreement. 1. The Court May Consider the Settlement Agreement in Deciding the Motion. In deciding a motion to dismiss, the Courts review is limited to the four corners of the operative complaint and any documents referred to therein that are central to the claims at issue. 31 Stated differently, where a plaintiff refers to certain documents in the complaint, and those documents are central to the plaintiffs claim, . . . the Court may consider the documents part of the pleadings for purposes of Rule 12(b)(6) dismissal. 32 [T]he defendants attaching such documents to the motion to dismiss will not require conversion of the motion into a motion for summary judgment. 33 Where there is a conflict between allegations in a pleading and the

27 28

Settlement Agreement, pp. 5-6, FIVE. Settlement Agreement, p. 8, ELEVEN. 29 Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949 (2009). 30 Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007). 31 In re Fontainebleau LV Contract Litig., 716 F.Supp.2d 1237, 1246 (S.D. Fla. 2010). 32 Brooks v. Blue Cross and Blue Shield of Florida, Inc., 116 F.3d 1364, 1368 (11th Cir. 1997). 33 Brooks, 116 F. 3d at 1368; see also Venture Assoc. Corp. v. Zenith Data Sys. Corp., 987 F.2d 429, 431 (7th Cir. 1993). 7

Case 1:13-cv-22131-JLK Document 18 Entered on FLSD Docket 09/20/2013 Page 8 of 33 CASE NO. 1:13-cv-22131-JLK central documents, it is well settled that the contents of the documents control. 34 Although Plaintiffs refer to an on the spot agreement to pay Microsoft $70,000 35 thereby incorporating it by reference in the Amended Complaint they opportunistically fail to attach a copy of the Settlement Agreement to their pleading. The reason is obvious. The Settlement Agreement flatly contradicts the allegations in the Amended Complaint, and releases Microsoft from any and all claims asserted in this lawsuit. 36 2. The Settlement Agreement is Enforceable. Plaintiffs allege that, on April 27, 2012, Microsoft: (i) proceeded to extort Plaintiffs by demanding an on the spot agreement to pay US$70,000 or Microsoft would remove all of Plaintiffs servers containing ALL of the Plaintiffs data and operational software, and (ii) forced Plaintiffs[] to capitulate to Microsofts extortion to avoid the . . . shutting down of their businesses. 37 Further, they assert that, because of the capitulation under duress to Microsofts demands, the Settlement Agreement is not a cognizable or enforceable agreement or contract under the applicable Guatemalan law. 38 Whether analyzed under Florida or Guatemalan law, Plaintiffs cannot allege facts, which, if taken as true, are sufficient to raise duress as a plausible defense to the formation or enforceability of the Settlement Agreement, and, more specifically, to the payment terms of that agreement (pursuant to which Plaintiffs agreed to make a settlement payment of US$70,000 to Microsoft and pay any taxes associated with the settlement). 39 First, a plaintiffs obligation to provide the grounds of his entitle[ment] to relief requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do. 40 Here, the allegations of duress merely parallel the buzzwords typically found in the case law. Second, Plaintiffs do not because they cannot allege facts, which, if taken as true, are sufficient to raise even a plausible inference that there was anything involuntary about Plaintiffs consent to the terms of the Settlement Agreement. For instance, the Settlement Agreement expressly states that (a) the parties exercised their free will and agreed to mutual
34 35

In re Fontainebleau LV Contract Litig., 716 F.Supp.2d at 1246. See Am. Complaint, 37. 36 See Settlement Agreement, pp. 2-6, 8 ONE.RECITALS; TWO.SETTLEMENT; THREE; FIVE; ELEVEN. 37 Am. Complaint, 37-38 38 Am. Complaint, 40. 39 See Skinner-Kle Decl., 30. 40 Twombly, 550 U.S.at 555 ([T]he pleading must contain something more . . . than . . . a statement of facts that merely creates a suspicion [of] a legally cognizable right of action.). 8

Case 1:13-cv-22131-JLK Document 18 Entered on FLSD Docket 09/20/2013 Page 9 of 33 CASE NO. 1:13-cv-22131-JLK concessions in entering into the Agreement; 41 and (b) the US$70,000 Settlement Payment was made by Plaintiffs for their unlicensed use of software. 42 Indeed, Plaintiffs allegations of duress are so contrary to logic and good sense as to be rendered frivolous, given the fact that, as Plaintiffs concede, 43 the US$70,000 Settlement Payment was made by Plaintiffs in four (4) separate installments of $17,500.00, three of which were spread out over a three (3) month period after the alleged fraudulent raid on April 27, 2012. 44 Plaintiffs do not because they cannot allege that, at any time before or after making any of the installment payments, they ever protested, disputed, or took steps to avoid the payment terms or the releases or waivers of liability contained in the Settlement Agreement. 45 To be sure, Plaintiffs indisputably received a clear benefit from executing the Settlement Agreement, namely, that, in exchange for the Settlement Payment and their compliance with other obligations, Microsoft: agree[d] to discontinue the legal actions brought and to not bring others of a civil, criminal or any other nature resulting from the Proceedings . . . on the twentyseventh of April of the current year, as the result of any other type of activity it may have carried out prior hereto. 46 Finally, Plaintiffs fail to allege why the only reasonable response to the so-called duress was to sign the Settlement Agreement or even make the Settlement Payment, particularly each installment payment over the three (3) month period after the alleged fraudulent raid. 47 In short, Plaintiffs duress defense is nothing more than a barebones conclusion or legal

Settlement Agreement, p. 1, ONE.RECITALS; TWO SETTLEMENT. Settlement Agreement, p. 3, TWO SETTLEMENT. 43 Am. Complaint, 41. 44 Settlement Agreement, p. 3, TWO.SETTLEMENT. 45 See Davis v. Hefty Press, 11 So. 2d 884, 885-86 (Fla. 1943) (holding that, even if a contract is allegedly procured by duress, it is ratified, thereby waiving duress, where those who now complain that the arrangement was infected in that manner recognized it and actually benefited under it); see also Am. Airlines, Inc. v. CardozaRodriguez, 133 F.3d 111, 119 (1st Cir. 1998) (a party seeking to avoid a contract based on duress must tender-back any consideration received in exchange); Howlett v. Holiday Inns, Inc., 120 F.3d 598, 601 (6th Cir. 1997). The law of Guatemala on duress (coaccin) and ratification is in line with the law of Florida. See Skinner-Kle Decl., 29-32. 46 Settlement Agreement, pp. 5-6, FIVE. 47 See Scratch Golf, LLC v. Lexington Ins. Co., 2009 WL 4377556, at *2 (11th Cir. 2009) (For duress to exist . . . not only must a threat be improper, but it must leave the aggrieved party without any reasonable alternative other than to assent.); Friedman v. Bache & Co., 321 F. Supp. 347, 350 (S.D. Fla. 1970) (One of the elements of actionable duress is that the circumstances involved allow a person no alternative.); see also Skinner-Kle Decl., 32. 9
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Case 1:13-cv-22131-JLK Document 18 Entered on FLSD Docket 09/20/2013 Page 10 of 33 CASE NO. 1:13-cv-22131-JLK label, and cannot withstand the pleading mandates of Twombly and Iqbal. Plaintiffs assertions of extortion or capitulation are insufficient to nudge their allegations of duress across the line from conceivable to plausible, 48 and amount to nothing more than the-defendant-unlawfullyharmed-me accusations that are proscribed by the Supreme Court under Rule 8. 49 3. The Settlement Agreement Releases Microsoft from All Claims Asserted by Plaintiffs in the Amended Complaint.

The law is well-settled that Florida courts enforce general releases to further the policy of encouraging settlements. 50 Numerous Florida cases have upheld general releases, even when the releasing party was unaware of [a] defect at the time the agreement was executed, 51 including circumstances where a party discovered negligence after the executing a settlement agreement. 52 Even more important, other courts have recognized this principle even in the face of a fraudulent inducement claim. For example, in Kobatake v. E.I. DuPont De Nemours & Co., 53 the court held that the execution of such all-encompassing releases prohibits [plaintiffs] from suing defendants [for fraudulent inducement]. 54 The law of Guatemala is in accord with the law of Florida. 55 As set forth below, Plaintiffs released the claims asserted in this lawsuit. The Settlement Agreement provides that, by order of the [Guatemalan Criminal Court], an audit was conducted on the computer hardware located at the facilities of the commercial entity known as SEGUROS and related companies. 56 Furthermore, paragraph seven (7) of the Settlement Agreement unambiguously provides that Plaintiffs hereby and henceforth waive all actions of any nature that may arise, whether past, present or future, on the basis of this claim and the Legal Proceeding that was conducted at its facilities on the twenty-seventh of April of the current year [i.e., 2012] [i.e., the Guatemalan Seizure Action] or of any other event related to this proceeding. 57 See Perez, 2011 WL 2680503, at *4 Iqbal, 129 S.Ct. at 1949 (citing Twombly, 550 U.S. at 555). 50 Mazzoni Farms, Inc. v. E.I. DuPont De Nemours and Co., 761 So. 2d 306, 314 (Fla. 2000). 51 Mazzoni Farms, Inc., 761 So. 2d at 306; see also Braemer Isle Condominium Assn, Inc. v. Boca Hi, Inc., 632 So. 2d 707, 707-08 (Fla. 4th DCA 1994) (enforcing general release although party did not discover alleged defects until after executing the release). 52 Hardage Enters. v. Fidesys Corp., 570 So. 2d 436, 437-39 (Fla. 5th DCA 1990). 53 162 F.3d 619, 625 (11th Cir. 1998). 54 Mazzoni Farms, Inc., 761 So. 2d at 306. 55 See Skinner-Kle Decl., 28. 56 Settlement Agreement, p. 2, ONE.RECITALS. 57 Settlement Agreement, p. 6, SEVEN. 10
49 48

Case 1:13-cv-22131-JLK Document 18 Entered on FLSD Docket 09/20/2013 Page 11 of 33 CASE NO. 1:13-cv-22131-JLK There is no question that the claims asserted by Plaintiffs in this action relate to or arise from the Guatemalan Seizure Action. 58 As in Kobatake, 59 where the Eleventh Circuit affirmed that actions for fraud, civil conspiracy, spoliation of evidence, public nuisance, and racketeering were properly barred by a settlement release provision, 60 Plaintiffs claims here likewise are barred, because paragraph seven (7) of the Settlement Agreement releases Microsoft from those claims. 61 Accordingly, the Amended Complaint must be dismissed with prejudice. B. Forum Non Conveniens Mandates Dismissal of Plaintiffs Claims with Prejudice. Under the doctrine of forum non conveniens, the Court should dismiss a complaint when the following factors are satisfied: (1) the trial court finds that an adequate alternate forum exists which possesses jurisdiction over the whole case, including all of the parties; (2) the trial court finds that all relevant factors of private interest favor the alternate forum, weighing in the balance a strong presumption against disturbing plaintiffs initial forum choice; (3) if the balance of private interests is at or near equipoise, the court further finds that factors of public interest tip the balance in favor of trial in the alternate forum; and (4) the trial judge ensures that plaintiffs can reinstate their suit in the alternate forum without undue inconvenience or prejudice. 62 1. Adequate Alternate Forum The first factor enunciated in Aldana is easily met here. The available forum prong of the analysis generally will be satisfied when the defendant is amenable to process in the other

58

Am. Complaint, 57-58, 61-65, 67-71 (Count I); 72-73, 75 (Count II); 78-80, 83 (Count III). 55-60, 62, 68, 72-75. 59 Kobatake v. E.I. DuPont De Nemours & Co., 162 F.3d 619, 625 (11th Cir. 1998). 60 At issue in Kobatake was a settlement agreement based on damages alleged incurred by plaintiffs in the use of defendants product, Benlate 50DF. 162 F.3d at 623, 625. The settlement agreement released defendant from, among other things, any and all claims arising from or in any way related to [plaintiffs] use of Benlate. 162 F.3d at 624-25. 61 See Cerniglia v. Cerniglia, 679 So.2d 1160, 1164-65 (Fla. 1996) (summary judgment on claims for assault and battery, intentional infliction of emotional distress, common-law fraud, and breach of contract because of general release); Caballero v. Phoenix Am. Holdings, Inc., 79 So.3d 106, 107 (Fla. 3d DCA 2012) (summary judgment on retaliatory discharge, violations of Florida Whistleblowers Act, breach of contract, fraudulent inducement, unjust enrichment, and promissory estoppel, because of general release); see also Skinner-Kle Decl., 28. 62 Aldana v. Del Monte Fresh Produce N.A., Inc., 578 F.3d 1283, 1290 (11th Cir. 2009). 11

Case 1:13-cv-22131-JLK Document 18 Entered on FLSD Docket 09/20/2013 Page 12 of 33 CASE NO. 1:13-cv-22131-JLK jurisdiction. 63 As reflected in the Skinner-Klee Declaration, in an action for damages, Guatemalan law confers jurisdiction on the court presiding over the territory in which the damages occurred: Because the Complaint seeks damages against Microsoft that allegedly were sustained by the plaintiffs in Guatemala and more specifically, at plaintiffs business offices in Guatemala City the Guatemalan court presiding over that location would have jurisdiction to hear plaintiffs claims. 64 In any event, Microsoft also will agree to file a stipulation that, if the Court dismisses the Amended Complaint on forum non conveniens grounds, it will voluntarily submit to the jurisdiction of the Guatemalan courts for purposes of defending itself against any claim for relief Plaintiffs may assert in that forum. 65 As such, there is no question that Microsoft would be amenable to process in Guatemala. Besides being an available forum, Guatemala is an adequate, alternative forum. The law is clear that [a]n adequate forum need not be a perfect forum. 66 The [a]dequacy of the alternative forum does not require equivalence of result, but merely the existence of some meaningful remedy. 67 As described above, pursuant to the express terms of the Settlement Agreement, Plaintiffs released Microsoft from, and waived the right to assert, any claim against Microsoft arising out of or relating to the Guatemalan Seizure Action. 68 In an apparent attempt to circumvent the Settlement Agreement, Plaintiffs allege it is unenforceable, because it was procured by duress. 69 For the reasons described above and in the Skinner-Klee Declaration, the Amended Complaint fails to adequately plead the defense of duress under either Florida or Guatemalan law. 70 Notwithstanding that conclusion, if the Court were to dismiss the Amended Lisa, S.A. v. Gutierrez Mayorga, 441 F. Supp. 2d 1233, 1236-37 (S.D. Fla. 2006), affirmed by 240 Fed. Appx. 822, 823-24 (11th Cir. 2007) (quoting Satz v. McDonnell Douglas Corp., 244 F.3d 1279, 1282 (11th Cir. 2001)). 64 Skinner-Kle Decl., 22; see also Skinner-Kle Decl., 23 and 25 (indicating that Microsoft has filed a notice in the public record with the name and identity of its registered agent for the purpose of service of process in Guatemala; 24 (explaining that Microsoft tacitly submitted to the jurisdiction of Guatemalan courts for purposes of any dispute arising under or relating to the Settlement Agreement). 65 See Lisa, S.A., 441 F.Supp.2d at 1237 (Guatemala is an available forum, because defendants consented to jurisdiction there). 66 Lisa, S.A., 441 F. Supp. 2d at 1237 (quoting Satz, 244 F. 3d at 1283). 67 Lisa, S.A., 441 F. Supp. 2d at 1238 (quoting Polanco v. H.B. Fuller Co., 941 F.Supp. 1512, 1526 (D. Minn. 1996)). 68 Settlement Agreement, p. 6, SEVEN. 69 See Am. Complaint, 40. 70 See supra, pp. 8-10; Skinner-Kle Decl., 30-32. 12
63

Case 1:13-cv-22131-JLK Document 18 Entered on FLSD Docket 09/20/2013 Page 13 of 33 CASE NO. 1:13-cv-22131-JLK Complaint on forum non conveniens grounds, Plaintiffs would not be precluded from filing an action for annulment in Guatemala to have the Settlement Agreement invalidated on the basis of duress (or any other defense to the formation or enforceability of the Settlement Agreement which may be recognized under Guatemalan law). 71 The Guatemalan Code of Civil Procedure permits the recovery of monetary damages in a civil annulment action. 72 Moreover, to the extent their efforts to invalidate the Settlement Agreement prove successful, Plaintiffs would be free to pursue other potential remedies against Microsoft for monetary damages in Guatemala. For example, with respect to Plaintiffs allegations that Microsoft filed a false or fraudulent criminal complaint and sworn declarations in the Guatemalan Seizure Action, Plaintiffs could potentially assert a claim for abuse of process in Guatemala. 73 Based on the foregoing, Plaintiffs clearly would not be deprived of all meaningful remedies if this case were dismissed in favor of the Guatemalan forum. The mere fact the Plaintiffs may not be able to assert the exact claims asserted in this action (including their RICO claim) does not render Guatemala an inadequate forum. 74 [B]eing deprived of some relief is not sufficient to find that the Guatemalan forum is inadequate. 75 Indeed, several federal courts, including this Court, have previously determined that Guatemala is an adequate, alternative forum. 76 The same result should issue here. 2. Private Interests. The second factor enunciated in Aldana likewise is easily met in this case. Private interests include ease of access to sources of proof; availability of compulsory process for attendance of unwilling, and the cost of obtaining attendance of willing[] witnesses . . . and all Skinner-Kle Decl., 29, 33 (explaining that Guatemalan law recognizes both a civil or criminal action for annulment of a contract). 72 Skinner-Kle Decl., 33. 73 Skinner-Kle Decl., 35 (stating that the Guatemalan Civil Code recognizes a cause of action for abuso del derecho (abuse of process) which permits a plaintiff to recovery monetary damages). 74 See Lisa, S.A., 441 F.Supp.2d at 1237-38 (Guatemala was an adequate alternative forum, notwithstanding the inability to assert a RICO claim) (citing cases); Republic of Panama v. BCCI Holdings S.A., 119 F.3d 935, 952 (11th Cir. 1997) (same). 75 Lisa, S.A., 441 F. Supp. 2d at 1237. 76 See Lisa, S.A., 441 F. Supp. At 1238; Aldana, 578 F.3d at 1290-92; Palacios v. The Coca Cola Co., 757 F.Supp.2d 347, 355-360 (S.D.N.Y. 2010); Polanco, 941 F. Supp. at 1526; Kieswetter v. Chiquita Brands Companies North America, Inc., 1992 WL 55183, at *2 (E.D. La. 1992); Bolanos v. Gulf Oil Corp., 502 F.Supp. 689, 691 (W.D. Pa. 1980). 13
71

Case 1:13-cv-22131-JLK Document 18 Entered on FLSD Docket 09/20/2013 Page 14 of 33 CASE NO. 1:13-cv-22131-JLK other practical problems that make trial of a case easy, expeditious and inexpensive. 77 The presumption that a plaintiff has chosen a sufficiently convenient forum is weaken[ed] when, as in this case, the plaintiff is a foreigner litigating far from home. 78 Perhaps the most important private interest of the litigants is access to evidence. 79 Here, the crux of the Amended Complaint is that, by fil[ing] false declarations with the Guatemalan court, and, in turn, secur[ing] a seizure order from the Guatemalan court, Microsoft: (a) appeared with armed Guatemalan law enforcement officers at Plaintiffs business offices in Guatemala; (b) fraudulently raid[ed] Plaintiffs business offices in Guatemala; (c) extort[ed] Plaintiffs by demanding an on the spot agreement to pay US$70,000; (d) failed to disclose . . . the [US$70,000] payment . . . to the Guatemalan authorities, as to evade Guatemalan tax laws and improperly shift the financial burden of paying those taxes to Plaintiffs; and (e) committed tax evasion by forc[ing] Seguros, on behalf of Plaintiffs . . . to pay the amount of Microsofts $21,000 (i.e., 31% of $70,000) tax liability to the Guatemalan government, resulting in additional damages to Seguros. 80 Plaintiffs also allege that Microsofts alleged duress and tax evasion must be analyzed under Guatemalan law. 81 The only factually-supported allegations connecting this case to the United States are that Microsoft is a Washington corporation and that Plaintiffs made three (3) of the installment payments towards the Settlement Payment into a U.S. bank account. 82 Because this case is rooted in the alleged fraudulent conduct and duress perpetrated by Microsoft in Guatemala, it is not surprising that a vast majority of the potential witnesses and relevant documents concerning the alleged fraud and duress also are located in Guatemala. 83 Plaintiffs are Guatemalan business entities. 84 The various translated Guatemalan court See Lisa, S.A., 441 F. Supp.2d at 1238; Gulf Oil Corp. v. Gilbert, 330 U.S. 501, 508 (1947). Lisa, S.A., 441 F. Supp.2d at 1239 (emphasis added) (quoting Leon v. Million Air Cargo, Inc., 251 F.3d 1305, 1315 (11th Cir. 2001)). 79 Lisa, S.A., 441 F. Supp.2d at 1239. 80 See Am. Complaint, 16, 25, 26, 35, 31, 37, 43, 73-75, 79-83. 81 Am. Complaint, 40, 43. 82 See Am. Complaint, 7, 41; Settlement Agreement, p. 4, TWO.SETTLEMENT. 83 It bears reminding the Court that, even if there is evidence in the United States, such evidence can be obtained under 28 U.S.C. 1782 (permitting a district court to compel production of a document or other thing for use in a proceeding in a foreign or international tribunal). 84 Am. Complaint, 4-6. 14
78 77

Case 1:13-cv-22131-JLK Document 18 Entered on FLSD Docket 09/20/2013 Page 15 of 33 CASE NO. 1:13-cv-22131-JLK documents that Plaintiffs attach to the Amended Complaint and contend are fraudulent, were filed by Rodolfo Estuardo Varela Martinez, a Guatemalan, an attorney and notary [and] a resident of the department of Guatemala. 85 In addition, by the plain language of Plaintiffs allegations, the duress in procuring the Settlement Payment allegedly occurred while the fraudulent raid was taking place or the Settlement Agreement was being executed at Plaintiffs business offices in Guatemala. 86 Accordingly, many of the potential eyewitnesses are located in Guatemala, as well. In sum, the majority of the documentary evidence figures to be written in Spanish, and most of the material witness figure to be Spanish speakers. Thus, the cost associated with translating documents and interpreting witness testimony would be exorbitant if the matter were to proceed to trial in the United States. Here, as in Lisa, S.A., the costs associated with any potential litigation would be far greater if this action were to proceed in this forum. 87 As such, the private interests weigh heavily in favor of dismissal. 3. Public Interests. While this Court need not consider the public interest factors given that the private interest factors strongly favor dismissal, 88 the public interest factors nevertheless favor dismissal of this case, as well. Relevant public interest factors include the sovereigns interests in deciding the dispute, the administrative burdens posed by trial, and the need to apply foreign law. 89 Here, given the nature of this case Guatemalan plaintiffs suing for fraud, duress, and tax evasion arising from a Guatemalan court proceedings and conduct allegedly causing injury solely in Guatemala there is no question that this dispute bears little relation to the United States, or, much less, Florida. 90 Importantly, the Guatemalan context of the underlying events gives rise to a Guatemalan interest in local adjudication, and as such, cut[s] squarely in favor of dismissal of this case. 91 Plaintiffs certainly appear to have no qualms about
85 86

See Am. Complaint, [D.E. 13-1, pp. 3, 15; 13-2, pp. 3, 6; 13-4, pp. 3, 7]. See Am. Complaint, 36-40. 87 Lisa, S.A., 441 F. Supp.2d at 1239-40. 88 See Aldana, 578 F.3d at 1298. 89 Lisa, S.A., 441 F. Supp.2d at 1240 (quoting Satz v. McDonnell Douglas Corp., 244 F.3d 1279, 1284 (11th Cir. 2001)). 90 See Morse v. Sun Intl Hotels Ltd., No. 98-7451-Civ, 2001 WL 34874967, at *6 (S.D. Fla. Feb. 26, 2001) (public interest factors weighed in favor of dismissal where Florida plaintiff sued Bahamian hotels for negligence based on an accident that occurred in the Bahamas). 91 Palacios, 757 F.Supp.2d at 362-63 (The interest in protecting jurors from sitting on cases with no relevance to their own community weighs heavily in favor of dismissal.); see also 15

Case 1:13-cv-22131-JLK Document 18 Entered on FLSD Docket 09/20/2013 Page 16 of 33 CASE NO. 1:13-cv-22131-JLK emphasizing Guatemalas interests in this litigation when it suits them or magnifies their importance: (a) Seguros is a major Guatemalan insurance . . . [with] 243 employees, enjoys annual revenue of US$38 Million and is ranked the fourth (4th) largest insurance company in Guatemala by revenues; and (b) Fianzas is ranked the second (2nd) largest surety company in Guatemala by annual revenues of US$ 5.25 Million. 92 In fact, this lawsuit stems from software infringement and intellectual property enforcement in Guatemala, the legal implications of which are highlighted by Plaintiffs in the Amended Complaint: Plaintiffs were 100% compliant but lacked documentation for 2% of their software licenses. This, in a country [i.e., Guatemala] with an average compliance rate of a mere [sic] 20%, i.e., 80% non-compliance. 93 Finally, Plaintiffs allege that Guatemalan law governs the determination of various claims or defenses in this action. 94 This element also weighs heavily in favor of forum non conveniens dismissal. 95 In sum, Plaintiffs ask this Court to pass judgment on, question, and second guess the propriety, integrity, and viability of court proceedings in a foreign jurisdiction, i.e., Guatemala. The Court should not engage in such endeavors. 96 As such, the administrative burden of this case should be on the jurisdiction with the most significant contacts with the alleged occurrences, i.e., Guatemala. 97 In Lisa, S.A., the court held that, because the alleged fraud occurred in Guatemala, the conduct causing the injury occurred in Guatemala, and Guatemalan law would likely apply, Guatemala [was] a far more appropriate forum to litigate the lawsuit. 98 The same is true here. 99 The Court should dismiss this case in favor of the Guatemalan forum. 4. Reinstatement of Lawsuit in Guatemala. The final factor also is easily satisfied in this case. As emphasized above, Plaintiffs may Piper Aircraft, 454 U.S. at 260 ([T]here is a local interest in having localized controversies decided at home. (citation and internal quotation marks omitted)); Do Rosario Veiga v. World Meteorological Organization, 486 F.Supp.2d 297, 307 (S.D.N.Y. 2007) (same). 92 Am. Complaint, 8-9. 93 Am. Complaint, 50. 94 Am. Complaint, 44-45. 95 See Piper Aircraft Co. v. Reyno, 454 U.S. 235, 268 n.29 (1981) (Many forum non conveniens decisions have held that the need to apply foreign law favors dismissal.); Lisa, S.A., 441 F.Supp.2d at 1240 (same); Morse, 2001 WL 34874967, at *7 (same). 96 See Chesley v. Union Carbide Corp., 927 F.2d 60, 66 (2d Cir. 1991) (U.S. courts are not responsible for supervising the integrity of judicial systems of other sovereign nations). 97 Lisa, S.A., 441 F.Supp.2d at 1241 (citation and internal quotation marks omitted). 98 Lisa, S.A., 441 F. Supp. 2d at 1240-41. 99 See also Palacios, 757 F.Supp.2d at 362-63. 16

Case 1:13-cv-22131-JLK Document 18 Entered on FLSD Docket 09/20/2013 Page 17 of 33 CASE NO. 1:13-cv-22131-JLK reinstate their lawsuit against Microsoft in Guatemala without jurisdictional hurdles. 100 C. International Comity Mandates Dismissal of Plaintiffs Claims with Prejudice. Principles of international comity limit a domestic courts jurisdiction to hear claims like those asserted in this lawsuit. 101 Comity refers to the spirit of cooperation in which a domestic tribunal approaches the resolution of cases touching the laws and interests of other sovereign states. 102 The rationale for dismissal is deference to the foreign countrys legal, judicial, legislative, and administrative system of handling disputes over which it has jurisdiction, in a spirit of international cooperation. 103 Comity should be withheld only when its acceptance would be contrary or prejudicial to the interest of the nation called upon to give it effect. 104 The limits on a domestic courts jurisdiction to prescribe the law of a foreign dispute involve more than just a question of discretion. With respect to any dispute, a state should defer to the other state if that states interest is clearly greater. 105 A nation having some basis for jurisdiction, even over its own nationals, should refrain from exercising that jurisdiction with respect to a person or activity having connections with another state when the exercise of such jurisdiction would be unreasonable. 106 A court should weigh the relative significance of effects on the United States as compared with those elsewhere, and the relative importance to the violations charged of conduct within the United States as compared with conduct abroad. 107 Application of the foregoing principles all favor dismissal of Plaintiffs claims. As stated previously, the crux of this lawsuit is that Microsoft, after allegedly fil[ing] false declarations and, in turn, secur[ing] a seizure order from the Guatemalan court, allegedly conducted a fraudulent raid of Plaintiffs business offices with armed Guatemalan law enforcement officers; proceeded to extort Plaintiffs by demanding an on the spot agreement to pay See Skinner-Kle Decl., 22-25. See Philadelphia Gear Corp. v. Philadelphia Gear de Mexico, 44 F.3d 187, 191-92 (3d Cir. 1994) (abuse of discretion in failing to properly consider issue of international comity); Sequihua v. Texaco, Inc., 847 F. Supp. 61 (S.D. Tex. 1994) (dismissing complaint on grounds of comity). 102 Socit Nationale Industrielle Aerospatiale v. U.S. Dist. Ct. for S.D. Iowa, 482 U.S. 522, 542 n. 27 (1987). 103 Fleeger v. Clarkson Co., 86 F.R.D. 388, 392 (N.D. Tex. 1980); Sequihua, 847 F. Supp. at 63. 104 Philadelphia Gear Corp., 447 F.3d at 191 (quoting Somportez Ltd. v. Philadelphia Chewing Gum Corp., 453 F.3d 435, 440 (3d Cir. 1971), cert. denied, 405 U.S. 1017 (1972)). 105 Restatement (Third) of Foreign Relations Law of the United States 403(3) (1987). 106 Id. at 403(1). 107 Timberlane Lumber Co. v. Bank of America Natl Trust and Say. Assn, 549 F.2d 597, 614 (9th Cir. 1976). 17
101 100

Case 1:13-cv-22131-JLK Document 18 Entered on FLSD Docket 09/20/2013 Page 18 of 33 CASE NO. 1:13-cv-22131-JLK US70,000; and committed tax evasion by forcing Seguros, on behalf of Plaintiffs, to pay Microsofts tax liability, i.e., US$ 21,000, to the Guatemalan government, which conferred an inequitable benefit on Microsoft. 108 On balance, the interests of Guatemala in monitoring the conduct of litigants (like Microsoft) in proceedings, within the exclusive jurisdiction of the courts of Guatemala (like the Guatemalan Seizure Action), far outweigh any interest the United States may have in regulating the conduct of litigants in those same proceedings. Put another way, Plaintiffs claims concern matters regulated by the Guatemalan courts and the Guatemalan Special Prosecutor, and involve activity taken by Microsoft exclusively in Guatemalan courts pursuant to Guatemalan law. Guatemala has a paramount interest in resolving matters arising within its borders, litigated in its courts, and/or requiring the application of its laws. Resolution of Plaintiffs claims by this Court directly challenges Guatemalas sovereign interest in matters relating to the Guatemalan Seizure Action without interference from a United States court. In short, resolution of the issues alleged by Plaintiffs in this lawsuit should occur in the nation that is best able to consider the policy, legislative, and judicial interests of Guatemala and that has the greatest connection to this matter. That nation is Guatemala. Plaintiffs attempt to assert a RICO claim does not alter this conclusion, because, as discussed in more detail below, the RICO claim entails the application of United States law to conduct that allegedly occurred in Guatemala, and not the United States. 109 Stated differently, the RICO claim involves the direct extraterritorial application of United States law, and as such, implicates significant considerations of international comity. 110 Accordingly, this Court should refrain from exercising jurisdiction and dismiss Plaintiffs claims with prejudice. D. The Act of State Doctrine Mandates Dismissal of Plaintiffs Claims with Prejudice. The act of state doctrine prohibits a United States court from passing judgment on the validity of an act of a foreign sovereign taken within its own territory. 111 The doctrine is not some vague doctrine of abstention but a principle of decision binding on federal and state courts See Am Complaint, 16, 25, 26, 35, 31, 37, 43, 73-75, 79-83. See Am. Complaint, 65. 110 Cf. C.A. Westel de Venezuela v. Am. Tel. & Tel. Co., 1992 WL 209641, at *19 (S.D.N.Y. 1992) (international comity not implicated where RICO claim entailed application of U.S. law to alleged racketeering activity that occurred in the United States, and not in Venezuela). 111 Glen v. Club Mediterranee, S.A., 365 F.Supp.2d 1263, 1267 (S.D. Fla. 2005) (citing W.S. Kirkpatrick & Co. v. Environmental Tectonics Corp., 493 U.S. 400, 405 (1990)); see also Vanity Fair Mills v. T. Eaton Co., 234 F.2d 633, 646 (2nd Cir. 1956). 18
109 108

Case 1:13-cv-22131-JLK Document 18 Entered on FLSD Docket 09/20/2013 Page 19 of 33 CASE NO. 1:13-cv-22131-JLK alike, whereby the act within its own boundaries of one sovereign State . . . becomes . . . a rule of decision for the courts of this country. 112 In this context, even if the defendant is a private party, not an instrumentality of a foreign state, and even if the suit is not based specifically on a sovereign act, the Court should nevertheless decline to decide the merits of the case if in doing so [it] would need to judge the validity of the public acts of a sovereign state performed within its own territory. 113 [T]he relevant acts are not merely those of the named defendants, but any governmental acts whose validity would be called into question by adjudication of the suit. 114 Here, the allegations that serve as the bases for all of Plaintiffs claims are that Microsoft filed the criminal complaint and supporting false declarations with the Guatemalan Special Prosecutor to secure[] a seizure order from the Guatemalan court and conduct a fraudulent raid of Plaintiffs business with the aid of Guatemalan law enforcement officers. 115 Importantly, the complaint and sworn declarations, which Plaintiffs allege are false or fraudulent, were deemed sufficient by: (1) the Guatemalan Special Prosecutor, which, based on Microsofts criminal complaint and sworn declarations, initiated criminal proceedings against the Plaintiffs and requested an order from the Guatemalan Criminal Court authorizing certain precautionary remedial measures to be executed with the aid of Guatemalan law enforcement (i.e., the alleged fraudulent raid and the seizure of evidence of infringement); 116 and (2) the Guatemalan Criminal Court, which, upon receiving the request from the Guatemalan Special Prosecutor, issued the order authorizing the aforementioned precautionary remedial measures. 117 The relevant acts of the Guatemalan Special Prosecutor, Guatemalan Criminal Court, and Guatemalan law enforcement clearly constitute governmental or public acts of a sovereign Glen, 365 F.Supp.2d at 1267 (quoting W.S. Kirkpatrick & Co., 493 U.S. at 406); see also Callejo v. Bancomer, S.A., 764 F.2d 1101, 1112-1113 (5th Cir. 1985); First Nat. City Bank v. Banco Nacional de Cuba, 406 U.S. 759, 769 (1972)). 113 Callejo, 764 F.2d at 1113 (citing Banco Nacional de Cuba v. Sabbatino, 376 U.S. 398, 428 (1964)); Compaa de Gas de Nuevo Laredo v. Entex, Inc., 686 F.2d 322, 325-26 (5th Cir. 1982) (applying act of state doctrine in suit between private parties). 114 Callejo, 764 F.2d at 1115. 115 Am. Complaint, 13, 35-37; see also Am. Complaint, 13-16, 25-26, 28, 31-31, 34-40, 45, 49-50, 57-58, 61-65, 68-70, 72-75, 78-79. 116 See Skinner-Kle Decl., 13-16; Am. Complaint, Exhibit A, Criminal Complaint, [D.E. 13-1, pp. 6-8, 10-11, 13); Settlement Agreement, p.2, ONE.RECITALS; p. 6, FIVE. 117 See Settlement Agreement, p.2, ONE.RECITALS; p. 6, FIVE; Skinner-Kle Decl., 1415 19
112

Case 1:13-cv-22131-JLK Document 18 Entered on FLSD Docket 09/20/2013 Page 20 of 33 CASE NO. 1:13-cv-22131-JLK state. 118 The act of state doctrine operates as an issue preclusive device, foreclosing judicial inquiry into the validity or propriety of such acts in litigation between any set of parties.119 Deciding the merits of this lawsuit would require this Court to judge the validity or second guess the acts of Guatemalan state actors. Because the act of state doctrine precludes this Court from addressing those claims, 120 the Amended Complaint must be dismissed with prejudice. 121 E The RICO Claim Should Be Dismissed with Prejudice as RICO Does Not Apply Extraterritorially Where the Alleged Enterprise and Predicate Activity Are Foreign. This districts decision in Sorota v. Sosa 122 is dispositive of Plaintiffs RICO claim (Count I). There, the plaintiff, Sorota, was approached about owning a Peruvian telephone company (Sparq), which Sosa agreed to manage and split profits if Sorota provided the capital. 123 While in Florida, Sorota alleged, Sosa induced him to wire money on 18 separate occasions from a Florida bank account . . . for the ostensible purpose of operating the company. 124 However, Sosa misappropriated much of the money for his own personal use in both Florida and Peru. 125 Sosa also established two (2) additional Peruvian companies to take over Sparqs money and property and redirect Sparqs business contracts and profits. 126 Sorota filed a RICO claim, alleging that, by repeatedly inducing Sorota to wire money with fraudulent intent, Sosa engaged in a pattern of racketeering activity, and that Sparq, together with the other Peruvian companies, formed an enterprise which provided cover to defraud Sorota and served as the vehicle for receiving moneys from [him] induced by fraud. 127 In response, Sosa moved to dismiss the RICO claim, contending that RICO does not apply extraterritorially and that Sorota alleged a foreign (rather than a domestic) RICO enterprise. 128 In dismissing Sorotas RICO claim with prejudice, the court stated as follows: [S]everal courts have examined the RICO statute and determined that the focus of RICO is on the enterprise as the recipient of, or cover for, a pattern of criminal
118 119

See Callejo, 764 F.2d at 1113. Glen, 365 F.Supp.2d at 1271 (citation and internal quotation marks omitted). 120 Glen, 365 F.Supp.2d at 1271 (unjust enrichment not viable because of act of state doctrine). 121 See Glen, 365 F.Supp.2d at 1271. 122 842 F.Supp.2d 1345 (S.D. Fla. 2012). 123 Sorota, 842 F.Supp.2d at 1346. 124 Sorota, 842 F.Supp.2d at 1346-47. 125 Sorota, 842 F.Supp.2d at 1346-47. 126 Sorota, 842 F.Supp.2d at 1347. 127 Sorota, 842 F.Supp.2d at 1347. 128 Sorota, 842 F.Supp.2d at 1347. 20

Case 1:13-cv-22131-JLK Document 18 Entered on FLSD Docket 09/20/2013 Page 21 of 33 CASE NO. 1:13-cv-22131-JLK activity. While one court has asserted that [t]he focus of the statute is the racketeering activity, . . . other courts have persuasively explained that RICO does not punish the predicate acts of racketeeringindeed, each predicate act is, itself, a separate crimebut only racketeering activity in connection with an enterprise. Thus, regardless of where the predicate acts of racketeering occur, RICO does not apply where . . . the alleged enterprise and impact of the predicate activity upon it are entirely foreign. 129 The court concluded that Sorota alleged a foreign not a domestic RICO enterprise, because, among other things, the role of [the] alleged enterprise . . . was to act as the recipient of, and cover for, Sosas racketeering activity by receiving and holding the funds that he fraudulently induced Sorota to wire to Peru. 130 The court continued: [T]he enterprise operated entirely in Peru, with its only connection to the United States being that the funds it possessed originated from (and possibly returned to) a Florida bank account. Such a limited connection with the United States is insufficient. While aspects of Sosas racketeering activity (i.e., the wire fraud) allegedly took place in the United States, RICO does not apply where, as here, the alleged enterprise and the impact of the predicate activity upon it are entirely foreign. 131 The courts findings in Sinapsis Trading USA, LLC v. Secure Wrap of Miami, Inc. also are instructive. 132 There, the plaintiffs generally alleged that the defendants Secure Wrap of Miami, Inc. and certain of their employees were displeased with [p]laintiffs success in winning a contract to be the exclusive vendor at Miami International Airport for luggage services, and in retaliation, engaged in a world-wide criminal racketeering scheme.133 Specifically, the plaintiffs alleged, defendants published false information and obtained false affidavits that led to criminal proceedings and ultimately caused the plaintiffs to lose airport business in Argentina and damage to their reputation throughout the world. 134 Defendants moved to dismiss, contending, among other things, that the alleged conduct at issue did not implicate RICO. 135 In response, the plaintiffs argued that the racketeering conduct occurred from Florida base: Plaintiffs are seeking to apply RICO to conduct occurring, being orchestrated from

129 130

Sorota, 842 F.Supp.2d at 1350. Sorota, 842 F.Supp.2d at 1350. 131 Sorota, 842 F.Supp.2d at 1350-51. 132 2013 WL 1455824, at *6 (S.D. Fla. 2013) (Sinapsis). 133 Sinapsis, 2013 WL 1455824, at *1 134 Sinapsis, 2013 WL 1455824, at *2-3. 135 Sinapsis, 2013 WL 1455824, at *1. 21

Case 1:13-cv-22131-JLK Document 18 Entered on FLSD Docket 09/20/2013 Page 22 of 33 CASE NO. 1:13-cv-22131-JLK and/or emanating from Miami-Dade County, Florida[,] and elsewhere in the United States. 136 In its analysis, the court noted that a [a] RICO enterprise is shown where a group of persons associates, formally or informally, with the purpose of conducting illegal activity. 137 The court rejected plaintiffs arguments, finding that the complaint proffered no facts . . . to support the contention of a pattern of racketeering activity by an enterprise from Florida. 138 Applying the rationale of Sorota and Sinapsis to this case, Plaintiffs RICO claim cannot withstand dismissal with prejudice. Plaintiffs, which are all Guatemalan business entities, 139 do not because they cannot allege any new facts that would locate or identify a RICO enterprise in the United States, or that would substantiate any assertion that the impact of the alleged predicate acts of racketeering was domestic. 140 Put another way, the Amended Complaint does not alter the conclusion that the alleged Microsoft RICO Enterprise and predicate acts of racketeering activity were located or occurred in Guatemala. For instance, Plaintiffs allege: (a) Microsoft appears to operate through a foreign corporate vehicle, Microsoft de Guatemala, S.A (Microsoft Guatemala), in Guatemala, and conduct[ed] business in Guatemala through Microsoft Guatemala; 141 (b) Microsoft fraudulently obtained a seizure order from the Guatemalan Court after filing with the Guatemalan Special Prosecutor (i) a complaint requesting an ex parte seizure order under Guatemalan law that alleged a violation of Microsofts intellectual property rights, and (ii) fraudulent or false declarations that Plaintiffs were infringing Microsoft copyright [sic]; 142 (c) Microsoft appeared with armed Guatemalan law enforcement officers at Plaintiffs business offices in Guatemala, halted Plaintiffs business operations in Guatemala, extort[ed] Plaintiffs by demanding an on the spot agreement to pay US$70,000, and, as to the tax liability on the US$70,000, evade[d] Guatemalan tax laws and improperly shift[ed] the financial burden of paying those taxes to Plaintiffs;143 (d) The operations of Microsoft in its international intellectual property enforcement programs and consequent dealings with Plaintiffs constitute a racketeering operation; 144
136 137

Sinapsis, 2013 WL 1455824, at *6, n. 6. Sinapsis, 2013 WL 1455824, at *5 (citation and internal quotation marks omitted). 138 Sinapsis, 2013 WL 1455824, at *6, n. 6. 139 See Am. Complaint, 4-6. 140 See Sorota, 842 F.Supp.2d at 1350-51. 141 See Am. Complaint, 29, 43, 45 (emphasis added); Sorota, 842 F. Supp. 2d at 1350. 142 See Am. Complaint, 13, 15, 16, 25, 28, 31, 35 (emphasis added). 143 See Am. Complaint, 36-37, 43-44 (emphasis added). 144 Am. Complaint, 59. 22

Case 1:13-cv-22131-JLK Document 18 Entered on FLSD Docket 09/20/2013 Page 23 of 33 CASE NO. 1:13-cv-22131-JLK (e) Microsoft directed and coordinated . . . (1) [Microsoft Guatemala], (2) Business Software Alliance, (3) Sofier Trading World, and (4) as yet unidentified additional parties (the Microsoft RICO Enterprise); (f) The Microsoft RICO Enterprise made coordinated fraudulent representations to Plaintiffs . . . to the Guatemalan courts, and to Guatemalan law enforcement; 145 and (g) The predicate acts set forth in this Complaint, including defrauding and extorting the three (3) Plaintiffs including by filing false sworn declarations and false supporting letters to secure an improper payment of US$70,000 and to evade Microsofts tax obligations while shifting them to Plaintiffs . . . constitutes [sic] a pattern or patterns of racketeering activity. 146 The haphazard allegations that Microsoft directed and coordinated the Microsoft RICO Enterprise do not because they simply cannot change the geographic location of the alleged Microsoft RICO Enterprise or where the alleged predicate acts of racketeering occurred (i.e., Guatemala). To be sure, Microsofts mere location in the United States as a Washington corporation and nothing else would be insufficient to establish a domestic enterprise. 147 The only allegations in the Amended Complaint connecting the alleged enterprise to the United States are that (1) Microsoft purportedly diverted the US$70,000 allegedly extorted from Plaintiffs away from [Microsoft Guatemala] and to itself in the United States; and (b) Plaintiffs made three (3) of the installment payments towards the US$70,000 directly into a U.S. bank account. 148 As in Sorota, however, the unremarkable allegation that the US$70,000 payment may have been accepted by Microsoft in the United States does not establish a sufficient connection to the United States to permit the application of the RICO statute in this case.149
145 146

Am. Complaint, 63. Am. Complaint, 65. 147 See In re Mouttet, 2013 WL 2111283, at *8 (Bank. Ct. S.D. Fla. 2013) ([E]ven though mail and money went into or through Florida because a principal of the Plaintiffs was located in Florida, this is not enough to trigger application of Federal RICO. (emphasis added)); Norex Petroleum Ltd. v. Access Industs., Inc., 631 F.3d 29, 33 (2nd Cir. 2010) ([S]imply alleging that some domestic conduct occurred cannot supportdomestic application of RICO). 148 Am. Complaint, 41, 43. 149 See Sorota, 842 F. Supp. 2d at 1350; In re Mouttet, 2013 WL 2111283, at *8; Cedeo v. Intech Group, Inc., 733 F.Supp.2d 471, 473 (S.D.N.Y. 2010) (dismissing a RICO claim as seeking extraterritorial application where the contacts with the United States . . . were limited to the movement of funds into and out of U.S.-based bank accounts); c.f. Borich v. BP Products N. Am., Inc., 2013 WL 2357528, at *3-5 (Ill. N.D. 2013) (Congress passed RICO to eradicate organized, long-term activity; where defendant acted in Texas by sending agreement to plaintiff 23

Case 1:13-cv-22131-JLK Document 18 Entered on FLSD Docket 09/20/2013 Page 24 of 33 CASE NO. 1:13-cv-22131-JLK Sorotas findings are noteworthy in this regard: [I]t is worth reiterating the Supreme Courts observation [in Morrison v. Morrison, 130 S.Ct. 2869, 2884 (2010)] that it is a rare case of prohibited extraterritorial application that lacks all contact with the territory of the United States, and that the presumption against extraterritorial application would be a craven watchdog indeed if it retreated to its kennel whenever some domestic activity is involved in the case. 150 As in Sinapsis, Plaintiffs proffer no other facts in the Amended Complaint to support any contention that Microsoft operated or conducted a pattern of racketeering activity by an enterprise from this forum, i.e., Florida, much less anywhere else in the United States. Accordingly, because Plaintiffs do not because they cannot allege a domestic RICO enterprise, and the alleged predicate acts of racketeering activity upon which Plaintiffs rely are entirely foreign, the RICO Claim should be dismissed with prejudice. 151 Since Plaintiffs have already amended their complaint as a matter of course (i.e., the Amended Complaint), any further effort by Plaintiffs to amend their RICO claim would be futile and cause undue delay. 152

in Illinois, which was sent back to Texas, plaintiffs RICO claim still failed to allege a domestic pattern of racketeering activity from which she was injured). 150 Sorota, 842 F.Supp.2d at 1351. The crux of the Amended Complaint clearly is Microsofts alleged misuse of the legal process in Guatemala by allegedly filing false or fraudulent declarations, and in turn, obtaining a fraudulent seizure order from a Guatemalan court. The misuse of a foreign jurisdictions legal process, such as by committing an abuse of process or fraud on the court, while possibly tortious or illegal under the foreign law of Guatemala, [is] not within reach of the [RICO] statute. See Sinapsis, 2013 WL 1455824, at *6; see also Annulli v. Panikkar, 200 F.3d 189, 199200 (3d Cir. 1999) (RICO does not cover garden-variety state law crimes, torts, and contract breaches unless they constitute mail or wire fraud). 151 C.f. Tymoshenko v. Firtash, 2013 WL 1234821, at *11-13 (S.D.N.Y. 2013) (dismissing RICO claim because the focus of Plaintiffs allegations [was] on a foreign enterprise and a pattern of racketeering activity that occurred abroad, even though various defendants were based in the U.S., and plaintiffs alleged that U.S. defendants laundered illegally obtained funds through the [U.S.] and elsewhere in order to conceal profits, including kickbacks to Ukrainian officials); Norex Petroleum Ltd., 631 F.3d at 3233 (affirming dismissal where plaintiffs alleged numerous acts in the [U.S.] . . . including mail and wire fraud [and] Hobbs Act violations, because allegations insufficient to support extraterritorial application of RICO). 152 See Sorota, 842 F. Supp.2d at 1350-51, n.4 (leave to amend futile after finding RICO allegations impermissibly extraterritorial because the enterprise operated entirely [abroad], with its only connection to the United States being that the funds it possessed originated from . . . a Florida bank account); Burch v. Pioneer Credit Recovery Inc., 551 F.3d 122, 126 (2d Cir. 2008) (affirming denial of leave to amend as futile because motions to amend should generally be denied in instances of futility, undue delay, bad faith or dilatory motive) (citing Forman v. Davis, 371 U.S. 178, 182 (1962) ([P]leading is not an interactive game in which plaintiffs file a 24

Case 1:13-cv-22131-JLK Document 18 Entered on FLSD Docket 09/20/2013 Page 25 of 33 CASE NO. 1:13-cv-22131-JLK F. Plaintiffs Claims Are Undermined By Concessions in the Amended Complaint and Settlement Agreement. The Amended Complaint cannot withstand dismissal with prejudice based on Plaintiffs own concessions. Specifically, Plaintiffs concede, on the face of the Amended Complaint, that they are unable to document valid licenses for at least two (2) percent of the Microsoft software they were operating on their computers at the time of the Guatemalan Seizure Action. 153 Accepting this allegation as true for purposes of this Motion, Plaintiffs admission undermines the foundational fact supporting each of their claims, namely, that there was no legitimate or lawful basis to request the issuance of a seizure order by the Guatemalan court and/or to enforce that order against Plaintiffs. 154 Stated differently, by conceding that they cannot produce valid licenses for at least two (2) percent of the Microsoft software utilized on their computers, Plaintiffs are admitting to have infringed on Microsofts intellectual property rights, or at a minimum, that the prospect of software infringement existed. The Settlement Agreement itself confirms that Plaintiffs were engaged in the unlicensed use of Microsoft software, 155 and consequently, any contradictory allegations in the Amended Complaint must be rejected by this Court. 156 In light of Plaintiffs concessions, the Court is compelled to find that the alleged fraudulent enforcement of the seizure order against Plaintiffs in Guatemala cannot possibly support any claim for relief asserted by Plaintiffs. Furthermore, Plaintiffs conclusory allegations of fraud and duress simply fail to square with any plausible reading of Plaintiffs own factual allegations and the Settlement Agreement. 157 The Court should dismiss the Amended complaint, and then bat it back and forth with the Court over a rhetorical net until a viable complaint emerges. Rather, plaintiffs have the responsibility to plead their case adequately, without defendants or the Courts assistance.)). 153 Am. Complaint, 49-50. 154 See Am. Complaint, 57-58, 63, 65, 68, 70 (Count I); 72-73, 75 (Count II); 78-80, 83 (Count III). 155 Settlement Agreement, p. 3, TWO. SETTLEMENT. 156 See Weaver v. Opera Tower, 2008 WL 4145520, at *3-4 (S.D. Fla. 2008) (dismissing claims because agreements at issue contradict specific allegations of complaint); Hillcrest Pacific Corp v. Yamamura, 727 So. 2d 1053, 1056 (Fla. 4th DCA 1999) (affirming dismissal with prejudice because Agreement plainly contradicts the allegations of the complaint and is fatally inconsistent with Pacifics claim of fraud in the inducement); see also Lopez v. Ernie Haire Ford, Inc., 974 So. 2d 517, 519 (Fla. 2nd DCA 2008) (citing cases for proposition that a party has a duty to learn and know the contents of a proposed contract before he signs and delivers it and is presumed to know and understand its contents, terms and conditions). 157 See Iqbal, 129 S.Ct. at 1949; Twombly, 550 U.S. at 555. 25

Case 1:13-cv-22131-JLK Document 18 Entered on FLSD Docket 09/20/2013 Page 26 of 33 CASE NO. 1:13-cv-22131-JLK Complaint with prejudice on this basis alone. 158 G. Even Assuming Plaintiffs Could Survive a Motion to Dismiss Based on the Foregoing Arguments, There are Still Other Grounds for Dismissal. 1. The RICO and Fraud Claims Are Not Pled With the Requisite Particularity.

Counts I (RICO) and II (fraud) fail to satisfy the pleading requirements set forth by Twombly, Iqbal, and Federal Rule of Civil Procedure 9(b). While a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, a plaintiffs obligation to provide the grounds of his entitle[ment] to relief requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do. 159 Factual allegations must be enough to raise a right to relief above the speculative level. 160 In addition to the aforementioned requirements, because RICO claims are essentially a certain breed of fraud claims, they are subject to the heightened pleading standards of [Rule 9(b).] 161 In that regard, each predicate act must be pleaded with particularity, 162 and thus, the complaint must set forth: (1) precisely what statements were made in what documents or oral representations or what omissions were made, and (2) the time and place of each such statement and the person responsible for making (or, in the case of omissions, not making) same, and (3) the content of such statements and the manner in which they misled the [party who was defrauded], and (4) what the [party perpetrating the fraud] obtained as a consequence of the fraud. 163 Requiring a plaintiff to plead fraud with particularity serves an important purpose . . . by See Twelve Inches Around Corp. v. Cisco Systems, Inc., 2009 WL 928007, at *4 (S.D.N.Y. 2009) (dismissing fraud claim where plaintiffs concession in complaint undermined plaintiffs conclusory claims of reliance); Hirsch v. Arthur Andersen & Co., 72 F.3d 1085, 1095 (2d Cir. 1995) (dismissing complaint with prejudice: the Complaints attenuated allegations of control are contradicted both by more specific allegations in the Complaint ); Delman v. Entertainment Partners Group, Inc., 2008 WL 3914465, at *3 (C.D. Cal. 2008) (plaintiff contradicted his conspiracy allegations by stating that he was fired because he was unruly and disruptive on the set; plaintiff thus failed to state the basic elements of a civil conspiracy claim); see also Great American Fidelity Ins. Co. v. JWR Const. Svcs., Inc., 882 F.Supp.2d 1340, 1346 (S.D. Fla. 2012). 159 Twombly, 550 U.S. at 555 (citations and internal quotation marks omitted). 160 Id. ([T]he pleading must contain something more . . . than . . . a statement of facts that merely creates a suspicion [of] a legally cognizable right of action. (citation omitted)). 161 Sinapsis, 2013 WL 1455824, at *3; see also Ambrosia Coal & Constr. Co. v. Pages Morales, 482 F.3d 1309, 131617 (11th Cir. 2007)). 162 Sinapsis, 2013 WL 1455824, at *4 (citing cases). 163 Brooks v. Blue Cross and Blue Shield of Fla., Inc., 116 F.3d 1364, 1371 (11th Cir. 1997); see also Pirelli, 631 F.3d at 441-42 (In adding flesh to the bones of the word particularity . . . a plaintiff ordinarily must describe the who, what, when, where, and how of the fraud . . . .); D.H.G. Props., LLC v. Ginn Cos., LLC, 2010 WL 5584464, at *4 (M.D. Fla. 2010). 26
158

Case 1:13-cv-22131-JLK Document 18 Entered on FLSD Docket 09/20/2013 Page 27 of 33 CASE NO. 1:13-cv-22131-JLK alerting defendants to the precise misconduct with which they are charged and protecting defendants against spurious charges of immoral and fraudulent behavior. 164 Therefore, mere conclusory allegations of fraud clearly are insufficient. 165 Plaintiffs RICO and fraud claims fail when held to these benchmarks. In order to state a claim for relief under Federal RICO section 1962(c) . . . the plaintiff must allege (1) conduct, (2) of an enterprise, (3) through a pattern, (4) of racketeering activity. 166 Plaintiffs allegations concerning the alleged RICO enterprise and pattern of racketeering activity merely parrot the elements of a RICO action under the statute. For example, Plaintiffs indiscriminately allege that the operations of Microsoft in its international intellectual property enforcement programs and consequent dealings with Plaintiffs constitute a racketeering operation, and Microsoft directed and coordinated, and was a member of, the Microsoft RICO Enterprise, which included Microsoft Guatemala, Business Software Alliance, and Sofier Trading World.167 Plaintiffs further assert that the Microsoft RICO Enterprise engaged in a pattern of racketeering activity and the following predicate acts of racketeering: mail fraud, wire fraud, acts interfering with commerce in violation of 18 U.S.C 1951, and fraud. 168 Yet, other than the conclusory assertions that Microsoft defrauded or extorted $70,000 and evaded a $21,000 tax liability, the Amended Complaint is devoid of any facts to substantiate Plaintiffs allegations that Microsoft engaged in mail fraud, wire fraud, acts interfering with commerce in violation of 18 U.S.C. 1951, or any type of fraud. With respect to Plaintiffs threadbare allegations that Microsoft engaged in mail fraud, wire fraud, or fraud, 169 the case of Sinapsis Trading USA, LLC v. Secure Wrap of Miami, LLC 170 is instructive. In Sinapsis, the plaintiffs alleged that defendants and their agents constitute[d] an enterprise that has committed mail and wire fraud, extortion, perjury, and other unlawful acts by: (1) publishing false criminal claims . . .; (2) extorting Plaintiffs by making threats of personal injury and threatening to file false criminal charges; and (3) defrauding
164 165

Durham v. Bus. Mgmt. Assocs., 847 F.2d 1505, 1511 (11th Cir. 1988). Talib v. Skyway Comms. Holding Corp., 2005 WL 1610707, at *4 (M.D. Fla. 2005). 166 In re Mouttet, 2013 WL 2111283, at *10 (citing Sedima, S.P.R.L. v. Imrex Co., Inc., 473 U.S. 479, 496 (1985)). 167 Am. Complaint, 58-59 (emphasis added). 168 Am. Complaint, 61, 64 (emphasis added). 169 See Am. Complaint, 64. 170 2013 WL 1455824, at *4-7 (S.D. Fla. 2013). 27

Case 1:13-cv-22131-JLK Document 18 Entered on FLSD Docket 09/20/2013 Page 28 of 33 CASE NO. 1:13-cv-22131-JLK Plaintiffs by diverting sales and harming [plaintiffs] reputation. 171 The defendant moved to dismiss, contending that the complaint was not pled with particularity. 172 The court granted the motion, noting that no single allegation [in the complaint] suffices to provide the who, what, where, when, and why of any aspect of the fraud, and that, at no point, is the hallmark of a fraud claim a false representation that was relied on by the [p]laintiffs even articulated. 173 The court found the alleged mail fraud and wire fraud insufficient, because the complaint did not specify the dates of the communications; what precise statements were made to whom or by whom; where they were made; or whether that person spoke for any one of the [d]efendants. 174 Similarly, the court rejected as insufficient the allegations of false criminal affidavits and false statements, because plaintiffs did not allege what defamatory statements were made, how they were false, and who was misled. 175 Here, as in Sinapsis, Plaintiffs allegations of mail fraud, wire fraud, and fraud are equally deficient, because they are unsubstantiated and lack any detail about what, when, where, and how they might have occurred (i.e., when, why, where, and how Microsoft used the mail for the purpose of executing [a fraudulent] scheme or artifice; 176 when, why, where, and how Microsoft use[d] . . . interstate wires in furtherance of [a fraudulent] scheme; 177 when, why, where, and how Microsoft carried out a fraudulent scheme to extort monies from its licenses under ostensible copyright policing and enforcement; 178 when, why, where, and how Microsoft create[d] the false appearance that multiple independent parties had vetted Microsofts allegations of infringement, etc. 179). Nor does the Amended Complaint adequately describe what the scheme sought to accomplish (and whether that involves an intent to defraud).180 Moreover, Plaintiffs conclusory assertions that Microsofts sworn declarations contained

2013 WL 1455824, at *4. Sinapsis, 2013 WL 1455824, at *1. 173 Sinapsis, 2013 WL 1455824, at *5 (emphasis added); see also In re MasterCard Intl, 313 F.3d 257, 263 (5th Cir. 2002). 174 Sinapsis, 2013 WL 1455824, at *5; see also Leonard v. StuartJames Co., Inc., 742 F.Supp. 653, 659 (N.D. Ga. 1990) (dismissing securities fraud claims for similar reasons). 175 Sinapsis, 2013 WL 1455824, at *5. 176 See Sinapsis, 2013 WL 1455824, at *4 (citation and internal quotation marks omitted). 177 See Sinapsis, 2013 WL 1455824, at *4 (citation and internal quotation marks omitted). 178 See Am. Complaint, 18. 179 See Am. Complaint, 75. 180 See Sinapsis, 2013 WL 1455824, at *5. 28
172

171

Case 1:13-cv-22131-JLK Document 18 Entered on FLSD Docket 09/20/2013 Page 29 of 33 CASE NO. 1:13-cv-22131-JLK false statements do not salvage their RICO and fraud claims, because, in many instances, the Amended Complaint (a) does not identify the specific statements in the declarations that allegedly are false; or (b) much less, explain how or why any such statements are false or fraudulent, including by providing factual substantiation for the imprecise and deficient assertions that Plaintiffs held all licenses required or complied with Microsofts software licensing compliance reports. 181 But, most importantly, Plaintiffs do not because they cannot allege with particularity the hallmark of a fraud claim -- a false representation that was relied on by Plaintiffs. 182 Stated differently, Plaintiffs cannot allege any injury or harm that they incurred in reliance on a false representation made to them by Microsoft (i.e., how that reliance defrauded Plaintiffs in making the Settlement Payment or entering into the Settlement Agreement). 183 Plaintiffs allegations that Microsoft engaged in acts interfering with commerce in violation of 18 U.S.C. 1951 are equally deficient. Section 1951 provides that Whoever in any way or degree obstructs, delays, or affects commerce or the movement of any article or commodity in commerce, by robbery or extortion or attempts or conspires so to do, or commits or threatens physical violence to any person or property in furtherance of a plan or purpose to do anything in violation of this section shall be fined under this title or imprisoned not more than twenty years, or both. 184 As referenced in 1951, extortion is defined as obtaining property from another, with his consent, induced by wrongful use of actual or threatened force, violence, or fear, or under color of official right. 185 Plaintiffs allege that, on April 27, 2012, Microsoft appeared at Plaintiffs business offices with armed Guatemalan law enforcement officers, halted [their] business operations, and proceeded to extort Plaintiffs by demanding an on the spot agreement to pay US$70,000 or Microsoft would remove all of Plaintiffs servers[.] 186 Notably absent from the Amended Complaint, however, is any allegation that Microsoft used or threatened to use force,

181 182

See Am. Complaint, 20-23, 26. Sinapsis, 2013 WL 1455825, at *5; see also In re MasterCard Intl, 313 F.3d at 263. 183 See Rhodes v. O. Turner & Co., LLC, 117 So. 3d 872, 876 (Fla. 4th DCA 2013) (two essential elements of fraud are as follows: (3) an intention that the representation induces anothers reliance; and (4) consequent injury by the other party acting in reliance on the representation.). 184 Halpin v. David, 2009 WL 1753759, at *8 (N.D. Fla. 2009) (quoting 18 U.S.C. 1951). 185 Halpin, 2009 WL 1753759, at *8 n.4 (quoting 18 U.S.C. 1951(b)(2)). 186 Am. Complaint, 36-37. 29

Case 1:13-cv-22131-JLK Document 18 Entered on FLSD Docket 09/20/2013 Page 30 of 33 CASE NO. 1:13-cv-22131-JLK violence, or fear against Plaintiffs to extort the US$70,000 payment. 187 To the contrary, Plaintiffs executed the Settlement Agreement, which expressly states that (a) the parties freely exercised their rights and agreed to mutual concessions in entering into the Agreement; 188 and that (b) the US$70,000 payment was made by Plaintiffs for their unlicensed use of software. 189 In sum, the Amended Complaint fails to plead any predicate act of racketeering activity based on fraud or extortion (Count I), as well as a separate fraud claim (Count II), with the requisite particularity under Rule 9(b). The Court should dismiss the RICO and fraud claims. 190 2. Plaintiffs Unjust Enrichment Claim Fails as a Matter of Law. In Count III, Plaintiffs allege that Microsoft, using duress, coerced Plaintiffs into agreeing to. . . pay[] Microsofts tax liability to the Guatemalan government (in the amount of $21,000), pursuant to the terms of the Settlement Agreement. 191 Plaintiffs continue: This is an invalid agreement under Guatemalan law. Therefore, there was no legally cognizable agreement. 192 According to Plaintiffs, it would be inequitable for Microsoft to retain the benefits of the $21,000 (i.e., 31% of $70,000) taxes Plaintiffs paid the Guatemalan government which Microsoft should have paid, directly or indirectly. 193 As described above, whether analyzed under Florida or Guatemalan law, Plaintiffs cannot allege facts, which, if taken as true, sufficiently allege duress as a defense to the formation or enforceability of the Settlement Agreement. Accordingly, Plaintiffs fail to allege any cognizable basis to invalidate the Settlement Agreement or find that its terms somehow unjustly enriched Microsoft at Plaintiffs expense. See Halpin, 2009 WL 1753759, at *2, 9 (dismissing plaintiffs complaint because there were no allegations of force, violence, or fear to sustain a RICO claim based on 1951). 188 Settlement Agreement, p. 1, ONE.RECITALS; TWO SETTLEMENT. 189 Settlement Agreement, p. 3, TWO SETTLEMENT. 190 To extent Plaintiffs attempt to allege a RICO conspiracy claim, that claim must be dismissed as well, because the Amended Complaint fails to sufficiently allege a substantive RICO violation or any agreement among the alleged co-conspirators to violate RICO. See Rogers v. Nacchio, 241 Fed .Appx. 602, 609 (11th Cir. 2007); In re Mouttet, 2013 WL 2111283, at *8 (Bank. Ct. S.D. Fla. 2013) (same). Any conspiracy claim would also be subject to dismissal, as Plaintiffs do not allege any plausible factual basis for a finding of a conscious agreement [to commit predicate acts of racketeering] among the alleged co-conspirators, none of which are even defendants in this case. See Elsevier Inc. v. W.H.P.R., Inc., 692 F.Supp.2d 297, 312-13 (S.D.N.Y. 2010); U.S. v. Yannotti, 541 F.3d 112, 122 (2d Cir. 2008). 191 Am. Complaint, 79, 80. 192 Am. Complaint, 80. 193 Am. Complaint, 83. 30
187

Case 1:13-cv-22131-JLK Document 18 Entered on FLSD Docket 09/20/2013 Page 31 of 33 CASE NO. 1:13-cv-22131-JLK V. CONCLUSION For all the foregoing reasons, the Court should grant Microsofts motion to dismiss.

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Case 1:13-cv-22131-JLK Document 18 Entered on FLSD Docket 09/20/2013 Page 32 of 33 CASE NO. 1:13-cv-22131-JLK Dated: September 20, 2013 Respectfully submitted, GREENBERG TRAURIG, P.A. Attorneys for Defendant 333 Avenue of the Americas Miami, Florida 33131 Telephone: (305) 579-0500 Facsimile: (305) 579-0717 E-mail: gonzalezr@gtlaw.com E-mail: rodriguezjo@gtlaw.com By: /s/ Ricardo A. Gonzalez HILARIE BASS Florida Bar No. 334243 RICARDO A. GONZALEZ Florida Bar No. 0691577 JONATHAN J. RODRIGUEZ Florida Bar No. 70431

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Case 1:13-cv-22131-JLK Document 18 Entered on FLSD Docket 09/20/2013 Page 33 of 33 CASE NO. 1:13-cv-22131-JLK CERTIFICATE OF SERVICE I hereby certify that on September 20, 2013, I electronically filed the foregoing document with the Clerk of the Court using CM/ECF. I also certify that the foregoing document is being served this day on all counsel of record or pro se parties identified on the attached Service List in the manner specified, either via transmission of Notices of Electronic Filing generated by CM/ECF or via First Class U.S. Mail for those counsel or parties who are not authorized to receive electronically Notices of Electronic Filing. /s/ Ricardo A. Gonzalez

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