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United States District Court for the District of Maryland dismisses foreign corporation’s claims against a United States citizen residing in India for lack of subject matter jurisdiction.

Bhari Info. Tech. Sys. Private Ltd. v. Sriram
No. 13-1480 (D. Md. Oct. 28, 2013)

by Wayne C. Heavener, Associate
Semmes, Bowen & Semmes (www.semmes.com)

In Bhari Information Technology System Private Ltd. v. Sriram, the United States District Court for the District of Court dismissed a foreign corporation’s claims against a United States citizen residing in India under the Racketeer Influenced and Corrupt Organizations Act (“RICO”), 18 U.S.C. §§ 1961–68, and state law claims for failure to state a claim, and lack of subject matter jurisdiction, respectively. Writing for the Court, Judge Paul W. Grimm found that plaintiff Dubai corporation failed to allege sufficient facts that the defendant had committed predicate acts to invoke recovery under RICO. As a result, the Dubai corporation’s RICO claim was dismissed, destroying federal subject matter jurisdiction for the plaintiff’s remaining state law claims.

Komal Sriram (“Defendant”) was the sole owner of Ram Consultants, Inc. (“RPC”), a company which administered and managed pension plans. Defendant is a citizen of the United States, but resides in India. In 2005, Defendant sold RPC to a Dubai corporation, Bhari Information Technology Systems Private Ltd. (“Plaintiff”). Though Plaintiff remitted payment, Defendant did not transfer his shares, and remained with RPC as a consultant until 2013. During that time, Plaintiff alleges that Defendant diverted customers away from RPC to other corporations, including the Indian company Info-Drive, Ltd. On May 21, 2013, Plaintiff filed a Complaint against Defendant, alleging claims of fraudulent concealment and tortious interference. Defendant moved for dismissal based on a lack of subject matter and personal jurisdiction. As a result, Plaintiff amended its Complaint to include a claim under RICO, and thereby invoking federal question jurisdiction. The United States District Court for the District of Maryland denied Defendant’s original motion as moot, and Defendant shortly thereafter filed a Motion to Dismiss the Amended Complaint.

The United States District Court for the District of Maryland dismissed all of Plaintiff’s claims with prejudice. The Court First examined Plaintiff’s RICO claim, and found that Plaintiff failed to plead facts upon which relief could be granted. The Court observed that in order to recover under RICO, a Plaintiff must allege the conduct: (1) of an enterprise that affects interstate commerce (2) through a pattern (3) of racketeering activity. The Court observed that Plaintiff’s alleged instances of fraud and of diverting business occurred wholly within India, and outside of the territorial limits of the United States. The Court found an extraterritorial application of RICO inappropriate because Defendant derived no revenue from Maryland between 2000 and 2005, and had done no business in Maryland since that time. Furthermore, the Court held that Plaintiff’s Complaint failed to meet the elevated pleading standards for alleging mail and wire fraud as predicate acts for a RICO claim under FED. R. CIV. P. 9(b). Because Plaintiff failed to allege the words or methods of communication used, dates, or to whom the communications were made, the Court dismissed Plaintiff’s RICO Count for failure to state a claim upon which relief can be granted under FED. R. C. P. 12(b)(6).

The Court also dismissed Plaintiff’s fraudulent concealment and tortious interference claims for lack of subject matter jurisdiction. Plaintiff’s fraudulent concealment and tortious interference claims were state claims, supplemental to Plaintiff’s federal question claim under RICO. Because the Court dismissed Plaintiff’s RICO claim, Plaintiff no longer could invoke federal question jurisdiction. The Court also observed that, while Defendant is a United States citizen, Plaintiff resides in India. Given that Plaintiff failed to allege that Defendant is a resident, domiciliary, or citizen of the State of Maryland, the Court treated Plaintiff as a foreign citizen. As a foreign corporation and foreign litigant, respectively, Plaintiff and Defendant were not in complete diversity. Absent federal question jurisdiction, and given that complete diversity did not exist between the two (2) foreign litigants, the Court dismissed Plaintiff’s claims of fraudulent concealment and tortious interference for lack of subject matter jurisdiction.


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