3 claims in lawyer’s suit vs E-Land, others dismissed

The Superior Court has dismissed three of the four claims in attorney Vincent Deleon Guerrero Torres’ lawsuit against E-Land World Co. Ltd. and others.

In an order on Monday, Associate Judge Joseph N. Camacho dismissed Torres’ claims for fraudulent concealment and usurpation of corporate opportunity, breach of fiduciary duty, and assisting a breach of fiduciary duty.

Camacho ruled that shareholders lack standing to maintain claims for corporate harms as direct actions, and such claims must be brought derivatively, regardless of the size of the corporation.

A derivative action refers to a lawsuit brought by a shareholder of a corporation on behalf of the corporation to enforce or defend a legal right or claim.

Saipan Tribune tried but failed to obtain comments from Torres yesterday.

Torres sued the defendants for allegedly failing to provide a proper accounting, embarking upon a scheme to misappropriate business opportunities and funds, and negotiating loans of over $5 million without proper authorization.

Named as defendants in Torres’ lawsuit are E-Land World Ltd., Suwaso Corp., Micronesian Resort Inc., and Dennis Seo.

E-Land is the majority shareholder of the Coral Ocean Point Golf Resort. Suwaso Corp. owns COP.

In 2012, Marianas Resort Inc. and Yusuke Fumoto agreed to sell his 85% ownership interest in Suwaso to Marianas Resort Inc. Torres remains a minority shareholder of Suwaso stock, holding a 15% ownership interest.

Torres’ third claim or cause of action (usurped corporate opportunity) is predicated on an alleged injury to Suwaso and seeks redress belonging to Suwaso.

Torres, through counsel William Fitzgerald, alleged that E-land embarked upon a scheme to wrongfully misappropriate business opportunities and the funds they generated from Suwaso.

Torres alleged that the defendants continue to secretly, deceitfully, and wrongfully appropriate the funds of Suwaso for the benefit of E-Land through E-Land’s VIP membership program.

In his ruling, Camacho said any harm to Torres is necessarily derivative of the alleged harm to Suwaso.

Likewise, Torres’ allegation that E-land has “fraudulently concealed this unauthorized usurpation of Suwaso’s business opportunity” states a viable claim only if there was some usurped business opportunity to conceal, and thus alleges a harm that is wholly derivative of the alleged injury to Suwaso, Camacho said.

Thus, he said, Torres’ third cause of action cannot be maintained as a direct action, and must be dismissed.

Camacho said the breach of fiduciary duty claims that are predicated on corporate management, like Torres’ fourth cause of action, are also derivative. This is because any mismanagement of corporate assets harms the corporation first and any injury to the shareholder is necessarily derivative of that alleged harm, he added.

Further underscoring the derivative nature of Torres’ fourth cause of action, Camacho said, is the fact that the only injury alleged is loss of stock value—a harm that courts have consistently characterized as a corporate harm.

In short, Camacho said, Torres’ fourth cause of action seeks redress for harms to Suwaso, cannot be maintained as a direct action, and must be dismissed.

The judge said Torres’ fifth cause of action against E-Land and its agents (for “assisting” alleged breaches of fiduciary duty by MRI and Suwaso’s directors) must be dismissed for the same reasons.

Camacho said all of the conduct Torres identifies as giving rise to a breach of fiduciary duty (corporate waste, usurpation of corporate opportunity) could only constitute a breach of fiduciary duties owed to Suwaso.

In short, the judge said, Torres’ authorities are either distinguishable or fundamentally not on point, and his attempt to recast classic corporate injuries as injuries unique to him fails as a matter of law and fact.

Camacho said Torres’ fifth claim for “assisting a breach of fiduciary duty” seeks to redress an alleged corporate harm, cannot be maintained as a direct action, and must be dismissed.

Torres originally filed the suit in the Superior Court. The defendants then moved to transfer the lawsuit to the District Court.

The defendants, though counsel Richard W. Pierce, also moved the District Court to compel all Torres’ claims to arbitration before the American Arbitration Association.

In April 2017, U.S. District Court for the NMI Chief Judge Ramona V. Manglona granted Torres’ motion to remand his four remaining claims to the Superior Court.

Manglona granted the defendants’ motion to compel arbitration as to Torres’ first cause of action—fraudulent misrepresentation.

Having granted defendants’ motion to compel arbitration as to the lawyer’s first cause of action, Manglona said she will dismiss the claim and retain jurisdiction to enforce any arbitration.

Robert T. Torres, Lee H. Rubin, and Justin I. Park are counsel for defendants.