Lizama drops BOS’ suit vs investment firm

The Superior Court has dismissed the Bank of Saipan’s lawsuit against U.S.-based investment firm D.A. Davidson & Co., saying that the bank’s allegations against Davidson “do not set forth the elements of fraudulent misrepresentation.”

D.A. Davidson & Co. is one of the many defendants the bank had sued for alleged involvement or for receiving benefits in the conspiracy to defraud the bank.

Associate Judge Juan T. Lizama said the allegations also do not allow the court to draw an inference that evidence on material points would be introduced at trial.

“Since the acts underlying the alleged conspiracy are inadequately pleaded, there can be no claim for conspiracy,” said the judge in dismissing with finality the claims against Davidson.

Lizama, however, emphasized that the ruling does not affect the status of the other co-defendants in the case.

The bank had sued former chief executive officer Tomas B. Aldan and his co-defendants Bert Douglas Montgomery, Michael T. Wilson, the estate of Dusean Berkich, along with Davidson and several other businessmen and lawyers from the U.S. mainland, in February 2003 for their alleged participation in a scheme that crippled the bank.

The original complaint alleged that Davidson and other defendants engaged in fraudulent misrepresentation. The complaint also alleged that Davidson participated in a conspiracy to commit fraud. Davidson allegedly provided assistance to Montgomery and others in Montgomery’s fraudulent attempt to purchase majority of the bank’s common stock.

In granting Davidson’s motion to dismiss, Lizama pointed out that under the Commonwealth Rules of Civil Procedures, a complaint may be dismissed if it fails to state a claim upon which relief can be granted.

“The complaint must contain either direct allegations on every material point necessary to sustain a recovery on any legal theory, even though it may not be the theory suggested or intended by the pleader, or contain allegations from which an inference fairly may be drawn that evidence on these material points will be introduced at trial,” Lizama said.

While the amended complaint adds that Davidson had a “knowing” state of mind, and that Davidson provided “knowing and substantial assistance” to the alleged scheme, it still does not indicate what Davidson did or said to cause a fraudulent misrepresentation, the judge noted.

Lizama said the bank admitted that the alleged fraudulent scheme in its amended complaint was carried on by defendants “other than Davidson.”

“Davidson’s alleged conduct does not constitute a fraudulent misrepresentation. Thus, the amended complaint provides insufficient detail to support a claim for fraudulent misrepresentation against Davidson. Davidson’s alleged actions do not constitute substantial assistance,” Lizama said.

Further, he said, BOS does not suggest that Davidson had a fiduciary duty to provide information to the Bank.

Underscoring the need to drop the complaint with finality, Lizama said he is not convinced that BOS can cure the deficiencies of the amended complaint with respect to Davidson.

While the bank added allegations regarding the other co-defendants, it failed to add any allegations regarding Davidson, Lizama pointed out.

“More than a year has passed since the motion was argued, and still, no information about Davidson’s participation in the alleged scheme has been brought to light,” the judge said.