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EIG Energy Fund XIV, L.P. v. Petroleo Brasileiro S.A

United States District Court, District of Columbia

March 30, 2017

EIG ENERGY FUND XIV, L.P., et al., Plaintiffs,
v.
PETRÓLEO BRASILEIRO S.A., et al., Defendants.

          MEMORANDUM OPINION

          AMIT P. MEHTA, UNITED STATES DISTRICT JUDGE

         I. INTRODUCTION

         This case arises out of the largest modern political scandal in the history of Brazil. In 2014, Brazilian investigators discovered that Defendant Petroleo Brasileiro S.A. (“Petrobras”), a Brazilian state-owned oil company, was at the center of a complex web of political and corporate corruption. The investigation, now popularly known as “Operation Car Wash, ” revealed that Petrobras had a long-standing practice of soliciting bribes in exchange for awarding construction and service contracts. In addition to enriching its executives, Petrobras also funneled portions of those payments to officials in Brazil's majority political party-the Workers Party-presumably to curry favor with those officials. These revelations sent shockwaves through Brazil and led to the prosecution and incarceration of several high-ranking Petrobras executives and government officials. The investigation into the full scope of the scandal continues to date.

         Plaintiffs are eight related U.S.-based and Cayman Islands-based investment funds, plus their investment adviser, that equity financed one of the entities entangled in the corruption scheme: Sete Brasil Participações (“Sete”). Petrobras established Sete to serve as a financing vehicle to fund the construction of a large fleet of drillships that Petrobras planned to use in developing large, newly discovered oil reserves located off the coast of Brazil. To that end, Petrobras installed three of its former officials-João Carlos de Medeiros Ferraz, Pedro José Barusco Filho, and Eduardo Costa Vaz Musa-as Sete executive officers. Through those officials, Sete then solicited bribes from various shipyards-including Defendants Odebrecht S.A., Odebrecht Participações e Engenharia S.A., Keppel Corporation Ltd., Keppel Offshore & Marine Ltd., Sembcorp Industries Ltd., Sembcorp Marine Ltd., and Jurong (collectively, the “Shipyard Defendants”)-in exchange for drillship construction contracts. Those bribe payments were split amongst Ferraz, Barusco, and Musa; current Petrobras executives; and Workers Party officials.

         Sete collapsed soon after investigators uncovered the bribe scheme. Sete depended on capital raised primarily through debt financing from government-backed lending institutions to pay the costs of building the drillships. After the scandal broke, however, those lenders withdrew their financing, causing Sete to default on the drillship contracts. As a result, Sete was forced into bankruptcy, where it remains today.

         Plaintiffs, who lost the hundreds of millions of dollars they invested in Sete, filed this lawsuit against Petrobras and the Shipyard Defendants. In their Amended Complaint, Plaintiffs advance three claims: (1) common law fraud, against Petrobras, premised on Petrobras fraudulently inducing Plaintiffs to invest in Sete; (2) aiding and abetting, against Petrobras, for providing substantial assistance to Sete in fraudulently inducing Plaintiffs to invest in Sete; and (3) civil conspiracy, against all Defendants, premised on the theory that Defendants conspired to conceal the existence of the Sete bribe scheme in an effort to fraudulently induce Plaintiffs, and other investors, to invest in Sete. Plaintiffs point to several allegedly fraudulent representations and material omissions that Petrobras and Sete made in pursuit of Plaintiffs' investment to support their claims. As a result of those misrepresentations, Plaintiffs allege that both Petrobras, individually, and all Defendants, as co-conspirators, are liable for Plaintiffs' investment losses.

         This matter is before the court on Motions to Dismiss. Petrobras and the Shipyard Defendants each filed separate Motions. Read together, Defendants seek dismissal under (1) Rule 12(b)(1) of the Federal Rules of Civil Procedure, for lack of subject matter jurisdiction, because (a) Plaintiffs do not have Article III standing and (b) Petrobras is immune from suit under the Foreign Sovereign Immunities Act; (2) Rule 12(b)(6), for failing to adequately state their claims; and (3) Rule 12(b)(2), for lack of personal jurisdiction over the Shipyard Defendants. Alternatively, certain Defendants, most prominently Petrobras, urge the court to dismiss this matter under the doctrine of forum non conveniens.

         The court rules as follows. First, all Plaintiffs other than EIG Management Company, LLC-the Funds' investment manager-have standing to assert claims against Petrobras. Second, the court will not dismiss this matter on forum non conveniens grounds because Petrobras and other movants have not met their burden to show that this court is an inconvenient forum in which to address Plaintiffs' claims. Third, the court has jurisdiction over Petrobras under the “commercial activity exception” to the Foreign Sovereign Immunities Act. Fourth, Plaintiffs have alleged plausible claims against Petrobras, under District of Columbia law, for fraud and aiding and abetting fraud. Fifth, this court lacks personal jurisdiction over the Shipyard Defendants, both under the District of Columbia long-arm statute and the Due Process Clause of the United States Constitution. And, sixth, Plaintiffs failed to plead a plausible claim of conspiracy against any Defendant.

         Accordingly, for the reasons discussed in greater detail below, the court grants in part and denies in part Defendant Petrobras' Motion. The court grants the Shipyard Defendants' Motions and will dismiss them from this case.

         II. BACKGROUND

         A. Factual Background

         1.The Creation of Sete Brasil

         Defendant Petróleo Brasileiro S.A. (“Petrobras”) is a Brazilian state-owned energy company. Am. Compl., ECF No. 11 [hereinafter Am. Compl.], ¶¶ 1, 19. In or around 2006, Petrobras publicly announced the discovery of significant new oil reserves off the coast of Brazil, containing an estimated 50 billion barrels of oil (the “Pre-Salt Reserves”). Id. ¶ 31. In 2010, Petrobras endeavored to construct a fleet of 28 deep-water drillships to extract the oil in the Pre-Salt Reserves. Id. ¶¶ 3, 32-33. In light of the high cost of constructing that fleet-approximately $20 billion, in total-Petrobras formed an independent entity, Sete Brasil Participações (“Sete”), to finance the project. Id. ¶¶ 32-35. This financing plan was devised by two senior Petrobras employees-João Carlos de Medeiros Ferraz (“Ferraz”) and Pedro José Barusco Filho (“Barusco”)-and allowed Petrobras to shift the large capital expenditure required to build the drillships off its balance sheet and onto Sete's balance sheet. Id. ¶¶ 31-32. Petrobras subsequently “installed” Ferraz as Sete's Chief Executive Officer; Barusco as its Chief Operating Officer; and a third Petrobras executive, Eduardo Costa Vaz Musa, as its Engineering Director. Id. ¶ 35.

         Petrobras and Sete raised the capital required to fund Sete's operations through both debt and equity financing sources. Id. ¶¶ 3-4. Sete's primary source of capital came from bank credit lines, including from the Brazilian state-owned development bank, Banco Nacional de Desenvolvimento Econômico e Social. Id. ¶ 34. In addition, the companies sought out equity investors in the United States and elsewhere. Id. ¶ 36. Once it secured that capital, Sete entered into contracts with several Brazil-based shipyards, including the Shipyard Defendants and their subsidiaries, to build the drillship fleet. Sete planned to lease those ships to Petrobras for use in developing the Pre-Salt Reserves. Id. ¶¶ 2-3. Sete anticipated that the lease proceeds would cover its operating costs, repay its loans, and provide a return to its investors. Id. ¶¶ 3, 33, 60.

         2. Plaintiffs' Investment in Sete

         Plaintiffs are eight related energy investment funds (the “Funds”) and their investment manager, EIG Management Company, LLC (“EIG Management”), through which the Funds invested in Sete (collectively, “Plaintiffs”). Id. ¶¶ 1, 10-18. Six of the Funds are limited partnerships organized under the laws of the State of Delaware and two are limited partnerships organized under the laws of the Cayman Islands. Id. ¶¶ 10-17. EIG Management is incorporated in Delaware, with its principal place of business in Washington, D.C. Id. ¶ 18.

         Beginning in 2010, Petrobras and Sete provided various promotional materials to EIG Management, including in Washington, D.C., in an effort to solicit the Funds' investment. Id. ¶¶ 36-44, 47. In January 2010, Petrobras sent EIG Management-the Amended Complaint does not specific precisely to which EIG Management office[1]-a “Confidential Informational Memorandum” (the “Petrobras Memorandum”) describing the strategic details and investment outlook of the Sete project. Id. ¶ 36. The Petrobras Memorandum included specific disclosures regarding several project-related risk factors-e.g., cost overruns, engineering defects, and environmental concerns-as well as favorable financial projections associated with investing in Sete. Id. ¶ 37. It also contained representations that Sete would enter into shipbuilding contracts that complied with Brazilian law. Id. ¶ 38.

         In September 2010, EIG Management received, in Washington, D.C., a multi-page presentation prepared by Petrobras (the “Petrobras Drilling Presentation”), which provided further detail concerning how Petrobras planned to finance and construct the drillship fleet. Id. ¶¶ 40-43. The Petrobras Drilling Presentation contained similar risk disclosures as the Petrobras Memorandum and also specifically cautioned U.S. investors, among other things, that the technical terminology used therein, such as oil and gas reserves, did not meet the definitional requirements governing similar filings made with the Securities and Exchange Commission. Id. ¶ 40. Then, in October 2010, EIG Management received, in Washington, D.C., another document prepared and circulated by Petrobras entitled the “Pre-Salt Oil Rigs Project, ” which largely mirrored the disclosures and representations contained in the Petrobras Memorandum and Petrobras Drilling Presentation. Id. ¶ 44.[2]

         In addition to circulating these solicitation materials, Plaintiffs allege that Ferraz regularly communicated with EIG Management employees, both in person and via e-mail, to solicit the Funds' investment. Id. ¶¶ 45-46, 48-53. These communications took place both while Ferraz worked for Petrobras and after he assumed his position at Sete. For instance, in both October 2010 and March 2011, EIG Management representatives met with Ferraz, then an employee of Petrobras, at EIG Management's office in Rio de Janeiro to discuss the Funds' potential investment in Sete. Id. ¶¶ 45-46. EIG Management representatives again met with Ferraz in September 2013, this time in Washington, D.C., after he had officially joined Sete. Id. As part of that trip, Ferraz attended EIG Management's investor conference, where he informed the Funds' investors that Sete expected to earn nearly $90 billion in revenue over 20 years from its charter contracts with Petrobras and that it projected an annual EBITDA of $4.6 billion.[3] Id. ¶ 53. Throughout this period, Ferraz also was in regular e-mail contact with EIG Management employees, touting the rapid progress on fleet construction, the substantial international investment interest in Sete, and its favorable financial projections. Id. ¶¶ 48-50.

         No one at Petrobras or Sete, however, ever disclosed to EIG Management that Petrobras had formed Sete, at least in part, to further a long-standing bribe scheme. Years before Sete's formation, Petrobras executives, including Barusco, began extracting bribes and kickbacks from various contractors, including the Shipyard Defendants or their subsidiaries, in exchange for Petrobras contracts. Id. ¶¶ 8, 58-59. Those contractors would pay kickbacks directly to Petrobras executives, who kept some portion for themselves and disbursed the rest to various Workers Party officials. Id. ¶¶ 5, 58-59. This practice would continue at Sete. Id. ¶¶ 8, 57-58. Over time, the bribe scheme enriched Petrobras executives to the tune of nearly $100 million dollars. Id. ¶¶ 8, 56.

         The Funds ultimately invested $221, 133, 393 in Sete, but did so indirectly. Id. ¶ 54. Plaintiffs established two Luxembourg-based companies-EIG Sete Parent SÀRL and its subsidiary, EIG Sete Holdings SÀRL (“EIG Luxembourg”)-specifically for the purpose of making their investment. The Funds first transferred capital to EIG Luxembourg, which, in turn, invested those funds into a Brazilian holding company, FIP Sondas. See Def. Petrobras' Mot. to Dismiss, ECF No. 58, Mem. in Supp., ECF No. 58-1 [hereinafter Petrobras Mot.], Ex. 4, ECF No. 58-7 [hereinafter Investment Agreement], §§ 3.4, 4.3. FIP Sondas, which owned 95 percent of Sete's shares-Petrobras directly owned the remaining five percent-then invested the Funds' money into Sete pursuant to an Investment Agreement signed by EIG Luxembourg, FIP Sondas, and others. Id. The Investment Agreement contains both a choice-of-law clause, designating Brazilian law as the law governing interpretation of the Agreement, and a forum selection clause, specifying that disputes arising from the Investment Agreement be settled through arbitration in Brazil or, if arbitration is unavailable under Brazilian law, in a Brazilian court. Id. §§ 13.9, 13.12, 13.12.4, 13.12.5, 13.12.12.

         3. Criminal Investigation of Petrobras and Sete

         In or about 2014, Brazilian investigators revealed Operation Car Wash to the public. Am. Compl. ¶¶ 55-60. In the wake of that revelation, Brazilian authorities convicted or charged several Petrobras executives-including Renato Duque and Roberto Gonçalves-and Sete officials- including Ferraz, Barusco, and Musa-for their involvement in the bribe scheme. Id. ¶ 64. Barusco, Ferraz, and Musa entered into plea agreements that required them to cooperate in the ongoing investigation. Id. ¶ 56. As part of his plea agreement, Barusco agreed to testify at a public hearing, where he explained that he and Ferraz had established Sete in an effort to expand the preexisting bribe scheme at Petrobras. Id. ¶¶ 57-58 (quoting Barusco's testimony that “[t]he issue of [Sete], about the establishment of bribe amounts, was a continuity of what happened in Petrobras”). According to Barusco, the discovery of the Pre-Salt Reserves provided Petrobras the opportunity not only to create Sete, but also to have a number of shipyards pay bribes in exchange for shipbuilding contracts. Id. ¶¶ 57-59. Barusco admitted that shipyards, including those owned or controlled by the Shipyard Defendants, agreed to pay kickbacks of approximately one percent of the value of the contracts to Petrobras executives and government officials in exchange for securing the contracts. Id. ¶¶ 8, 57-58, 62.

         To date, nearly 200 corporate executives, Workers Party officials, and others have been charged or convicted in connection with the Brazilian investigation, including several alleged agents of the Shipyard Defendants. Id. ¶¶ 6, 64-67. Additionally, according to Plaintiffs, Brazilian officials continue to investigate the Shipyard Defendants' participation in the bribe scheme. Id. ¶ 67.

         4. Sete's Bankruptcy

         The public revelation of the corruption scheme led to Sete's ruin. The company's lenders quickly pulled their credit lines, blocking Sete's access to capital and leaving it unable to secure replacement debt or equity financing. Lacking access to capital, Sete defaulted on its shipbuilding contracts and, as a result, Petrobras canceled its charter agreements with Sete. Id. ¶ 68. Subsumed by debt, Sete filed for bankruptcy in April 2016. Id. ¶¶ 68-69. According to Plaintiffs, Sete's bankruptcy rendered the Funds' investment worthless. Id. ¶ 70.

         B. Procedural Background

         Plaintiffs filed a three-count Amended Complaint. Count One alleges that Petrobras defrauded Plaintiffs by making materially false and misleading statements and material omissions with the purpose of inducing the Funds to invest in Sete. Plaintiffs specifically assert that both the materials provided by Petrobras and statements made by its agents failed to disclose the ongoing bribe scheme and its associated risks. Plaintiffs further allege that by failing to disclose those risks, Petrobras fraudulently induced the Funds to invest in Sete and, thus, caused the Funds' investment losses. Id. ¶¶ 72-83.

         Count Two alleges that Petrobras aided and abetted Sete in fraudulently inducing Plaintiffs to invest in Sete. Plaintiffs contend that Petrobras created and staffed Sete for the purpose of perpetrating and expanding the existing bribe scheme. As a result, Plaintiffs allege, Petrobras provided substantial assistance to Sete in making materially false and misleading written and oral statements designed to induce the Funds' investment. Plaintiffs further assert that, for the same reasons as in Count One, Petrobras' actions were the proximate cause of the Funds' investment losses. Id. ¶¶ 84-97.

         Lastly, Count Three alleges that all Defendants engaged in a civil conspiracy to defraud Plaintiffs into investing in Sete. Specifically, Plaintiffs allege that the Shipyard Defendants' payment and concealment of bribes to Sete were integral elements of the aforementioned scheme to defraud the Funds. Plaintiffs assert that Defendants, as co-conspirators, are jointly and severally liable for Plaintiffs' injuries. Id. ¶¶ 98-111.

         III. LEGAL STANDARD

         Defendants move to dismiss on three grounds.[4] First, under Rule 12(b)(1) of the Federal Rules of Civil Procedure, they contend that the court is without subject matter jurisdiction to hear Plaintiffs' claims because (1) Plaintiffs lack Article III standing and (2) Petrobras is immune from suit under the Foreign Sovereign Immunities Act, 28 U.S.C. § 1602 et seq. See Petobras Mot. at 19-28; Def. Odebrecht's Mot. to Dismiss, ECF No. 56, Mem. in Supp., ECF No. 56-1 [hereinafter Odebrecht Mot.], at 14. Additionally, certain Defendants have moved to dismiss under the doctrine of forum non conveniens, asserting that Brazil is the better forum in which to resolve the parties' disputes. Petrobras Mot. at 9-19; Odebrect Mot. at 22-27; Defs. Sembcorp Marine & Jurong's Mot. to Dismiss, ECF No. 51, Mem. in Supp., ECF No. 51-1 [hereinafter Jurong Mot.], at 8-13.

         Second, under Rule 12(b)(6), Defendants argue that Plaintiffs have failed to state plausible claims of fraud, aiding and abetting, and conspiracy to defraud, upon which relief can be granted. See Petrobras Mot. at 28-45; Odebrect Mot. at 27-30; Jurong Mot. at 13-16; Def. Keppel's Mot. to Dismiss, ECF No. 54 [hereinafter Keppel Mot.], at 18-31; Def. Sembcorp Industries' Mot. to Dismiss, ECF No. 55 [hereinafter Sembcorp Mot.], at 9-14.

         Finally, under Rule 12(b)(2), the Shipyard Defendants argue that the court lacks personal jurisdiction over them under both the District of Columbia long-arm statute, D.C. Code § 13-423(a), and the Due Process Clause. See Odebrect Mot. at 14-22; Keppel Mot. at 8-18; Sembcorp Mot. at 2-8; Jurong Mot. at 5-8.

         A. Dismissal for Lack of Subject Matter Jurisdiction Under Rule 12(b)(1)

         When deciding a motion to dismiss under Rule 12(b)(1), although a court has discretion to consider materials outside the pleadings, it still must accept all well-pleaded factual allegations in the complaint as true. Jerome Stevens Pharm., Inc. v. Food & Drug Admin, 402 F.3d 1249, 1253- 54 (D.C. Cir. 2005). The plaintiff bears the burden of invoking the court's subject matter jurisdiction. Arpaio v. Obama, 797 F.3d 11, 19 (D.C. Cir. 2015).

         When ruling on a Rule 12(b)(1) motion, in which the defendant challenges the plaintiff's standing to assert a claim, a federal court must presume that it “lack[s] jurisdiction unless the contrary appears affirmatively from the record.” DaimlerChrysler Corp. v. Cuno, 547 U.S. 332, 342 n.3 (2006) (quoting Renne v. Geary, 501 U.S. 312, 316 (1991)). The burden of establishing the elements of standing “rests upon the party asserting jurisdiction.” Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 377 (1994); see Lujan v. Defenders of Wildlife, 504 U.S. 555, 561 (1992). A plaintiff must establish standing “for each claim” and “for each form of relief sought, ” DaimlerChrysler, 547 U.S. at 352 (internal quotation marks omitted), “with the manner and degree of evidence required at the successive stages of litigation, ” Lujan, 504 U.S. at 561.

         B. Dismissal for Failure to State a Claim Under Rule 12(b)(6)

         Motions to dismiss under Rule 12(b)(6) test the legal sufficiency of a complaint. See Smith-Thompson v. District of Columbia, 657 F.Supp.2d 123, 129 (D.D.C. 2009).

To survive a motion to dismiss, 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.

Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citation omitted) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 556 (2007)).

         When assessing a motion to dismiss under Rule 12(b)(6), the court must accept the plaintiff's well-pleaded factual allegations as true and draw all reasonable inferences from those allegations in the plaintiff's favor. Id.; Arpaio, 797 F.3d at 19. The court is not required, however, to assume the truth of legal conclusions or accept inferences that are not supported by the facts set out in the complaint. Iqbal, 556 U.S. at 678; Islamic Am. Relief Agency v. Gonzales, 477 F.3d 728, 732 (D.C. Cir. 2007). “Threadbare recitals of the elements of the cause of action, supported by mere conclusory statements, do not suffice.” Iqbal, 556 U.S. at 678. If a complaint lacks sufficient facts “to state a claim that is plausible on its face, ” then the court must dismiss it. Id. (quoting Twombly, 550 U.S. at 570); see also Arpaio, 797 F.3d at 19.

         C. Dismissal for Lack of Personal Jurisdiction Under Rule 12(b)(2)

         A motion to dismiss under Rule 12(b)(2) challenges whether a federal court can exercise its jurisdiction over a particular defendant. The plaintiff bears the burden of establishing a prima facie case of personal jurisdiction by coming forward with specific and pertinent facts that connect the defendant with the forum. Reuber v. United States, 750 F.2d 1039, 1052 (D.C. Cir. 1984). Unlike a Rule 12(b)(6) or Rule 12(b)(1) motion to dismiss, however, the court need not treat all the plaintiff's allegations as true when making a personal jurisdiction determination. The court may, instead, “receive and weigh affidavits and any other relevant matter to assist it in determining the jurisdictional facts.” 5A Charles A. Wright & Arthur R. Miller, Federal Practice and Procedure § 1351 (1990); accord Youming Jin v. Ministry of State Sec., 335 F.Supp.2d 72, 77 (D.D.C. 2004). However, the court must resolve any factual discrepancies with regard to establishing personal jurisdiction in favor of the plaintiff. See Crane v. New York Zoological Soc'y, 894 F.2d 454, 456 (D.C. Cir. 1990).

         IV.DISCUSSION

         A. Article III Standing

         The court begins its analysis, as it must, with whether Plaintiffs have standing to bring suit. See, e.g., Davis v. Fed. Election Comm'n, 554 U.S. 724, 734 (2008) (“[A] plaintiff must demonstrate standing for each claim [it] seeks to press and for each form of relief that is sought.” (internal quotation marks omitted)). That inquiry, as will be seen, also informs the court's analysis of several other asserted grounds for dismissal.

         As a general matter, a plaintiff has standing when she has “(1) suffered an injury in fact, (2) that is fairly traceable to the challenged conduct of the defendant, and (3) that is likely to be redressed by a favorable judicial decision.” Spokeo, Inc. v. Robins, 578 U.S.,, 136 S.Ct. 1540, 1547 (2016) (citing Lujan, 504 U.S. at 560-61). An injury in fact is “an invasion of a legally protected interest which is (a) concrete and particularized, and (b) actual or imminent, not conjectural or hypothetical.” Lujan, 504 U.S. at 560 (footnote, citations, and internal quotation marks omitted). The plaintiff must demonstrate that she meets each of these requirements. Id. at 561.

         Plaintiffs advance one theory to establish the Funds' standing and another to establish EIG Management's standing. As to the Funds' standing, Plaintiffs allege that the Funds suffered an injury-in-fact when they were induced to invest in Sete and that such injury is directly traceable to Petrobras and Sete's fraudulent misrepresentations to EIG Management. Pls.' Opp'n to Defs.' Motions to Dismiss, ECF No. 62 [hereinafter Pls.' Opp'n], at 11-12; see also Oral Hearing Tr. (rough draft) [hereinafter Tr.], at 54. In contrast, Plaintiffs conceded at oral argument that EIG Management-as distinct from the Funds-did not suffer any legal injury as a result of Defendants' actions. See Tr. at 54. Plaintiffs, therefore, try a less direct route to establish EIG Management's standing. After Plaintiffs filed suit in this case, EIG Luxembourg-the Funds' second-tier subsidiary that was established to make the Sete investment through FIP Sondas- assigned its rights to any and all claims arising out of the Sete Investment to EIG Management. See Pls.' Opp'n, Ex. B, ECF No. 62-6 [hereinafter “Assignment Agreement”]. Plaintiffs contend that the assignment places EIG Management in the shoes of EIG Luxembourg, which itself has a cognizable injury-in-fact-the losses EIG Luxembourg suffered. See Pls.' Opp'n at 12.

         Petrobras counters that the Funds lack standing under what is known as the “shareholder standing rule.” Petrobras Mot. at 26-28. Under that rule, “[c]laims based on injury to the corporation . . . are derivative in nature and any damages suffered are owed to the corporation, ” not the shareholder. See Labovitz v. Washington Times Corp., 172 F.3d 897, 901 (D.C. Cir. 1999). Shareholders “can bring an individual claim [only] if they suffer injuries ‘directly or independently of the corporation.'” Id. at 900-01. Here, Petrobras asserts that the shareholder standing rule bars the Funds' suit because they are mere shareholders of the corporation that suffered the actual injury resulting from Sete's demise, EIG Luxembourg. Petrobras Mot. at 27. Petrobras points out that EIG Luxembourg, and not the Funds, recorded the losses arising from the failed investment. Id.; id., Ex. 5 at 19. Therefore, Petrobras contends, the Funds, at most, suffered only a derivative injury and thus lack standing to bring the asserted claims. See Petrobras Mot. at 26-27.

         As to EIG Management, Petrobras maintains that the September 2016 assignment agreement-signed six months after Plaintiffs filed their original Complaint-does not confer standing on EIG Management because the assignment comes too late. As standing must exist at the time the suit is filed, see Davis, 544 U.S. at 732; Grupo Dataflux v. Atlas Global Grp., L.P., 541 U.S. 567, 570 (2004); Compton v. Alpha Kappa Alpha Sorority, Inc., 64 F.Supp.3d 1, 13 (D.D.C. 2014), EIG Luxembourg's post-suit assignment to EIG Management is ineffective for purposes of this suit.

         The court addresses whether either the Funds or EIG Management have standing, in turn.

         1. The Funds' Standing

         Petrobras' argument that the Funds lack standing boils down to this: the multi-layer investment structure through which the Funds invested in Sete not only insulated the Funds from any losses incurred, but also protected them from suffering the requisite injury for purposes of Article III standing. See Petrobras Mot. at 26-27. Although that argument has surface appeal, the court disagrees and finds the Funds have standing.

         At its core, the Amended Complaint advances claims premised on the tort of fraudulent inducement. For that common law tort, the aggrieved party suffers injury at the time it is dispossessed of the money or property sought by the defendant. See, e.g., Parr v. Ebrahimian, 774 F.Supp.2d 234, 240 (D.D.C. 2011) (finding, in fraud action against seller of condominium who allegedly misrepresented facts about the property, that plaintiff was injured upon her purchase of the condominium); see also Lichtenstein v. Reassure Am. Life Ins. Co., No. 07-1653, 2009 WL 792080, at *9 (E.D.N.Y. Mar. 23, 2009) (measuring injury in the context of fraudulent inducement from time of purchase of insurance policies); Womack v. Nissan N. Am., Inc., 550 F.Supp.2d 630, 634 (E.D. Tex. 2007) (finding that plaintiff was injured upon purchasing a vehicle with a computer software device that registered a mileage different from the actual mileage). As the Restatement (Second) of Torts summarizes:

The word “injury” . . . denote[s] the fact that there has been an invasion of a legally protected interest which, if it were the legal consequence of a tortious act, would entitle the person suffering the invasion to maintain an action of tort. . . . The meaning of the word “injury, ” as here defined, differs from the sense in which the word “injury” is often used, to indicate that the invasion of the interest in question has been caused by conduct of such a character as to make it tortious.

         Restatement (Second) of Torts § 7 cmt. a (Am. Law. Inst. 1965) (emphasis added). Here, the Funds' “legally protected interest” was their property right in the millions of dollars they committed as an investment in Sete, as well as their intangible right to control how they spent that money. Cf. United States v. Akinyoyenu, 201 F.Supp.3d 82, 86 (D.D.C. 2016) (citing 18 U.S.C. § 1341, collecting cases, and explaining that, for purposes of the federal mail and wire fraud statutes, “money or property” includes the intangible right to control how to use one's property). Plaintiffs have alleged that Petrobras and Sete invaded those protected interests by directly making ...


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