Motion for Joinder to Benworth FL’s Motion to Dismiss FRBSF Complaints (D.E. 170) — OTO Analytics v. Benworth

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U.S. District Court for the District of Puerto Rico · No. 3:23-cv-01034-GMM · Doc. 170 · 2024-10-01 · Docket on CourtListener

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A motion for joinder filed October 1, 2024 as Document 170 in OTO Analytics, LLC v. Benworth Capital Partners PR, LLC, No. 3:23-cv-01034-GMM, consolidated with Civil No. 24-01313, in the U.S. District Court for the District of Puerto Rico. Defendants Benworth Capital Partners PR, LLC, Bernardo Navarro and Claudia Navarro join co-defendant Benworth Capital Partners, LLC's motion to dismiss [D.E. 169] the Federal Reserve Bank of San Francisco's Complaint and Complaint in Intervention. They incorporate its arguments under Fed.R.Civ.P. 10(c) and L.Civ.R. 7(f), contending that the fraudulent transfer, alter ego, veil-piercing and conversion claims depend on a sufficiently pleaded breach of contract. The motion also adopts the argument that the complaints are shotgun pleadings and asks for dismissal under Rule 12(b)(6).

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IN THE UNITED STATES DISTRICT COURT 
FOR THE DISTRICT OF PUERTO RICO 
 
OTO ANALYTICS, LLC,  
Plaintiff, 
v. 
BENWORTH CAPITAL PARTNERS PR, 
LLC; BENWORTH CAPITAL 
PARTNERS, LLC; BERNARDO 
NAVARRO and CLAUDIA NAVARRO, 
Defendants. 
 
 
 
 
 
Civil No. 23-01034 (GMM) cons.  
Civil No. 24-01313 (GMM) 
 
 
FEDERAL RESERVE BANK OF SAN 
FRANCISCO,  
Plaintiff-Intervenor 
v. 
OTO ANALYTICS, LLC; BENWORTH 
CAPITAL PARTNERS PR, LLC; et al., 
Defendants in Intervention. 
 
 
 
 
 
 
FEDERAL RESERVE BANK OF SAN 
FRANCISCO,  
Consolidated Plaintiff, 
v. 
BENWORTH CAPITAL PARTNERS PR, 
LLC, et al., 
Consolidated Defendants. 
 
 
MOTION FOR JOINDER TO “BENWORTH CAPITAL PARTNERS, LLC’S MOTION 
TO DISMISS THE FEDERAL RESERVE’S COMPLAINT AND COMPLAINT IN 
INTERVENTION” [D.E. 169] 
 
COME NOW defendants Benworth Capital Partners PR, LLC (“Benworth PR”), 
Bernardo Navarro (“Mr. Navarro”) and Claudia Navarro (“Mrs. Navarro, and together with Mr. 
Navarro, the “Navarros”) (collectively, the “Appearing Defendants”), through the undersigned 
Case 3:23-cv-01034-GMM     Document 170     Filed 10/01/24     Page 1 of 8

 
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counsel, and respectfully request the dismissal of the Federal Reserve Bank of San Francisco’s 
(“Federal Reserve”) Complaint [Case No. 24-cv-01313, D.E. 1] (“Complaint” or “Compl.”) and 
Complaint in Intervention [Case No. 23-cv-01034, D.E. 146] (“Complaint in Intervention” or 
“Compl. Int.”) (collectively, the “Complaints”)1 substantially for the reasons advanced by co-
defendant Benworth Capital Partners, LLC (“Benworth FL”) in its “Motion to Dismiss the Federal 
Reserve’s Complaint and Complaint in Intervention” [D.E. 169] (“Motion to Dismiss”), and as 
grounds therefore STATE and PRAY as follows: 
The Complaints filed by the Federal Reserve allege, principally, that Benworth FL 
breached its Agreements2 with the Federal Reserve surrounding its extension of credit to Benworth 
FL as a loan originator under the Paycheck Protection Program’s (“PPP”) Liquid Facility, that 
was implemented by the United States Small Business Administration (“SBA”). See Compl. ¶¶ 
18–19; Compl. Int. ¶¶ 9–10. The Federal Reserve contends that it “holds a properly perfected, 
valid first-priority security interest in certain PPP loans pledged as collateral to secure [credit] 
advances” provided to Benworth FL, “as well as all ‘proceeds and products’ thereof and other 
collateral,” and that due to Benworth FL’s breaches or default under the Agreements, the Federal 
Reserve “has a senior priority right to collect against its collateral whether in the possession of 
Benworth FL or any of the other Defendants.” Compl. ¶ 2; Compl. Int. ¶¶ 2-3, 54.   
The Federal Reserve alleges that Benworth FL “fraudulently transferred various assets, 
including [its] collateral” to the Appearing Defendants, “who are exercising dominion and 
control over those assets,” such that Benworth FL was left without capital to fulfill its obligations 
 
1  
This Court granted the Federal Reserve’s request to consolidate Case Numbers 24-cv-01313 and 23-cv-01034. 
[Case No. 23-cv-01034, D.E. 155]. 
2  
As alleged, these are the PPP Liquid Facility Letters of Agreement executed on May 4, 2020, January 14, 2021, 
and January 30, 2023 (“LOA”), each of which contained substantially the same language and incorporated the 
Reserve Bank’s Operating Circular No. 10 (“Operating Circular”) (the LOA and Operating Circular, together, the 
“Agreements”). See Compl. ¶¶ 19–20 & Ex. A–B; Compl. Int. ¶¶ 10–11 & Ex. A–B. 
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to the Federal Reserve. Compl. ¶ 3; Compl. Int. ¶¶ 2-3, 54.   
In the Complaint, the Federal Reserve brings fraudulent transfer, alter ego, veil piercing, 
and conversion claims (Counts II through VII) that hinge on its ability to accelerate Benworth 
FL’s debt because it has allegedly breached the Agreements. See Compl. ¶¶ 68–110. The Federal 
Reserve is requesting “a judgment against all Defendants” of over $66 million, “and an order of 
recission” of what it terms “Fraudulent Transfers” made from Benworth FL to Benworth PR and 
the Navarros. See id. ¶¶ 4, 60. Finally, the Federal Reserve claims that Benworth FL converted 
the “PPP Collateral” when it transferred funds to Benworth PR and the Navarros. See id. ¶¶ 106–
110.  Notably, the Federal Reserve does not identify which claim is against which defendant in 
any of its causes of action. See id. ¶¶ 64–110.   
Meanwhile, the Complaint in Intervention asserts a single claim for declaratory relief, 
seeking declarations that (1) “the Reserve Bank has a properly perfected first-priority lien and 
security interest in the Defendants’ assets to the extent such assets constitute, in whole or in part, 
PPP Collateral”; (2) “Womply may only collect from the Defendants’ assets to the extent such 
assets are not PPP Collateral”; and “(3) as to any non-PPP Collateral assets, the Reserve Bank 
may recover at least pro rata with Womply.”  See Compl. Int. ¶¶ 55–62 & Prayer for Relief.  
Because the Federal Reserve is hoping to “recover at least pro rata with Womply,” the 
declarations it requests in the Complaint in Intervention also depend, in part, on the Federal 
Reserve’s ability to accelerate Benworth FL’s debt as a result of its alleged defaults under the 
Agreements. See id. 
In the Motion to Dismiss, Benworth FL argues that the Court should dismiss the Federal 
Reserve’s breach of contract claim, see Compl. ¶¶ 64–67, and by extension the declaratory 
judgment request asserted in the Complaint in Intervention, see Compl. Int. ¶¶ 55–62, because 
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each of the breaches alleged in the Complaints is conclusory and lacks the necessary specificity 
to meet the applicable pleading standard, given California’s requirements for a breach of contract 
claim. Although it generally references four purported breaches in its “Relevant Facts,” see 
Compl. ¶¶ 32–34, the Federal Reserve fails to sufficiently identify specific conduct by Benworth 
FL that constitutes a breach and uses vague and indefinite language, such as “including but not 
limited to,” that is inherently ambiguous and leaves the door open to unpled breaches. Benworth 
FL further argues that the ripeness and ability of the Federal Reserve to state fraudulent transfer 
and declaratory judgment claims in the Complaints hinges on it sufficiently alleging that 
Benworth FL has an accelerated debt that is due because it breached the Agreements. See Compl.  
¶¶ 71, 91-92, 103-104; Compl. Int. ¶¶ 52-62. Since all such claims inextricably depend on a well-
pled breach of contract claim allowing the acceleration of Benworth FL’s debt – which the Federal 
Reserve has failed to do – Benworth FL requests the Court to dismiss these claims under Federal 
Rules of Civil Procedure 12(b)(1) and 12(b)(6).   
Pursuant to Fed.R.Civ.P. 10(c) and L.Civ.R. 7(f), for the sake of judicial economy and to 
avoid needlessly duplicating the arguments made by Benworth FL, the Appearing Defendants 
hereby join and incorporate by reference, as if argued herein, all the arguments, citations, and 
prayers for relief made by Benworth FL in its Motion to Dismiss [D.E. 169].  The arguments in 
Benworth FL’s Motion to Dismiss are readily transferrable to the Appearing Defendants’ instant 
motion for the following reasons. 
 
First, to the extent the Federal Reserve is seeking in its First Cause of Action to collect 
from the assets of the Appearing Defendants for debts allegedly owed by Benworth FL due to 
alleged breaches of the Agreements, the collection claim as to the Appearing Defendants fails if 
said breaches are insufficiently plead, as argued by Benworth FL in the Motion to Dismiss. Put 
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differently, without a well-pled breach of contract claim allowing for the acceleration of 
Benworth FL’s alleged debt to the Federal Reserve –as Benworth FL argued— there is no debt to 
collect from the assets of the Appearing Defendants. In addition, of course, there can be no 
collection claim against Benworth PR or the Navarros for debts owed by Benworth FL, unless 
the Court first finds in favor of the Federal Reserve on the alter ego or corporate veil piercing 
claims, which are also subject to dismissal for insufficiency of the pleadings, as further discussed 
in the Motion to Dismiss.  
Second, in the Second, Third, and Fourth Causes of Action in the Complaint, the Federal 
Reserve seeks to rescind the alleged actual and constructive Fraudulent Transfers made by 
Benworth FL to Benworth PR and the Navarros. As Benworth FL correctly explains in its 
Motion to Dismiss, under Puerto Rico law, a transaction executed “in fraud of creditors”—i.e., a 
fraudulent transfer—may be rescinded, when a creditor cannot otherwise recover a debt that is 
due. See P.R. Laws Ann. tit. 31, §§ 6231 & 6233. One of the elements of such a claim is that the 
transferring defendant be a true debtor of the plaintiff. See Sucesión Almazán v. López, 20 P.R. 
Dec. 537, *2 (1914). Therefore, to the extent the Federal Reserve has failed to properly allege 
that Benworth FL breached the Agreements and thus that Benworth FL owes it an accelerated 
debt of over $66 million, as argued by Benworth FL in its Motion to Dismiss, it has also 
insufficiently pled a necessary element of the referenced causes of action against the Appearing 
Defendants.  
Likewise, the Fifth and Sixth Causes of Action, under which the Federal Reserve asserts 
corporate alter ego or successor liability and veil-piercing claims, respectively, are entirely 
contingent on the sufficiency (or lack thereof) of the pleadings regarding the breach of contract 
claim between the Federal Reserve and Benworth FL.  See Compl. ¶¶ 93, 97 (alleging Benworth 
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PR should be held liable for Benworth FL’s debt to the Federal Reserve); id. ¶¶ 104, 105 
(alleging the Navarros should be personally liable for Benworth FL’s and Benworth PR’s debt to 
the Federal Reserve).  Therefore, these claims also fail against the Appearing Defendants, based 
on the same arguments made by Benworth FL in the Motion to Dismiss.  
Third, as to the Seventh Cause of Action for conversion, the arguments raised by 
Benworth FL apply equally to the Appearing Defendants. In short, the claim should be dismissed 
because the Federal Reserve failed to allege sufficient facts to establish that Benworth FL or the 
Appearing Defendants maliciously and wrongfully acquired its property or transferred any of the 
PPP Collateral, and its allegations properly sound in contract rather than tort. See generally 
Compl. ¶¶ 106–110; see also Montalvo v. LT’s Benjamin Records, 56 F. Supp. 3d 121, 127-128, 
139 (D.P.R. 2014); Fed. Ins. Co. v. Banco de Ponce, 582 F. Supp. 1388, 1393 (D.P.R. 1984).   
Fourth, Benworth FL’s argument as to the improper use of shotgun pleading by the 
Federal Reserve is plainly applicable to the Appearing Defendants. The Federal Reserve incurred 
in impermissible shotgun pleading by incorporating by reference in each claim the allegations in 
every claim that came before it, and improperly using “group pleading” to allege claims against 
all the defendants without identifying which claims concern each of them separately. See 
Sanchez-Sifonte v. Fonseca, CV 22-1444 (RAM), 2023 WL 5753677, at *2 (D.P.R. Sept. 6, 
2023). As a result, all claims brought in the Complaint and Complaint in Intervention should be 
dismissed. 
Consequently, given that all of Benworth FL’s arguments presented in its Motion to 
Dismiss [D.E. 169] are also applicable to the Appearing Defendants’ case, they are joining 
Benworth FL in moving this Court for a dismissal under Rule 12(b)(6) of the Federal Rules of 
Civil Procedure. 
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WHEREFORE, the Appearing Defendants respectfully request that this Honorable 
Court take notice of their joinder to Benworth FL’s “Motion to Dismiss the Federal Reserve’s 
Complaint and Complaint in Intervention” [D.E. 169], as if fully argued herein, and grant the 
request for dismissal of the Complaint [Case No. 24-cv-01313, D.E. 1] and Complaint in 
Intervention [Case No. 23-cv-01034, D.E. 146].  
CERTIFICATE OF SERVICE: We hereby certify that on this same date the foregoing 
motion was filed with the Clerk of the Court using the CM/ECF system, which will send 
notification of such filing to all attorneys and participants of record. 
RESPECTFULLY SUBMITTED. 
In San Juan, Puerto Rico, on this 1st day of October 2024. 
 
 
PO Box 195168 
San Juan, PR 00919-5168 
Tel.: 787.766.7000 
Fax: 787.766.7001 
 
s/ Roberto A. Cámara-Fuertes 
Roberto A. Cámara-Fuertes 
USDC-PR 219002 
rcamara@ferraiuoli.com 
 
s/ Jaime A. Torrens-Dávila 
Jaime A. Torrens-Dávila 
USDC-PR 223810 
jtorrens@ferraiuoli.com 
 
s/ Mónica Ramos Benítez 
Mónica Ramos-Benítez 
USDC-PR 308405 
mramos@ferraiuoli.com 
 
Counsel for Benworth Capital Partners, LLC and Bernardo Navarro 
 
 
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CASELLAS ALCOVER & BURGOS PSC 
PO Box 364924 
San Juan, PR 00936-4924 
Tel. (787) 756-1400 
Fax. (787) 756-1401 
/s/ Ricardo F. Casellas 
USDC-PR Bar No. 203114 
rcasellas@cabprlaw.com 
 
/s/ Carla S. Loubriel Carrión 
USDC-PR Bar No. 227509 
cloubriel@cabprlaw.com 
 
Counsel for Benworth Capital Partners PR, LLC and Claudia Navarro  
 
Case 3:23-cv-01034-GMM     Document 170     Filed 10/01/24     Page 8 of 8

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