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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.
FEDERAL RESERVE BANK OF SAN
FRANCISCO,
Plaintiff-Intervenor,
v.
OTO ANALYTICS, LLC; BENWORTH
CAPITAL PARTNERS PR, LLC;
BENWORTH CAPITAL PARTNERS, LLC;
BERNARDO NAVARRO and CLAUDIA
NAVARRO,
Defendants in Intervention.
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Civil No. 23-01034 (GMM) cons. Civil
No. 24-01313 (GMM)
PLAINTIFF OTO ANALYTICS, LLC’S MOTION TO COMPEL (1) RESPONSES
TO INTERROGATORY NOS. 1, 2, AND 4 TO THE NAVARROS; (2) DOCUMENTS
RESPONSIVE TO DOCUMENT REQUESTS NOS. 6, 7, 11, AND 12 TO THE
NAVARROS; AND (3) DOCUMENTS RESPONSIVE TO DOCUMENT REQUEST
NO. 18 TO BENWORTH FL AND BENWORTH PR
Case 3:23-cv-01034-GMM Document 182 Filed 12/06/24 Page 1 of 22
Alexander L. Cheney (admitted pro hac vice)
333 Bush St
San Francisco, CA 94104
(415) 858-7400
acheney@willkie.com
Stuart R. Lombardi (admitted pro hac vice)
Willkie Farr & Gallagher LLP
787 7th Avenue
New York, NY 10019
(212) 728-8000
slombardi@willkie.com
Joshua S. Levy (admitted pro hac vice)
1875 K Street, N.W.
Washington, D.C. 20006
(202) 303-1000
jlevy@willkie.com
Dated: December 6, 2024
Alejandro J. Cepeda Diaz
USDC-PR 222110
McConnell Valdés LLC
270 Muñoz Rivera Ave.
Hato Rey PR 00918
Tel: (787) 250-5637
Email: ajc@mcvpr.com
Attorneys for Plaintiff and Defendant in
Intervention Oto Analytics, LLC
Case 3:23-cv-01034-GMM Document 182 Filed 12/06/24 Page 2 of 22
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TABLE OF CONTENTS
PRELIMINARY STATEMENT .................................................................................................1
BACKGROUND ........................................................................................................................2
LEGAL STANDARD.................................................................................................................7
ARGUMENT..............................................................................................................................8
CONCLUSION.........................................................................................................................14
CERTIFICATE OF SERVICE..................................................................................................16
Case 3:23-cv-01034-GMM Document 182 Filed 12/06/24 Page 3 of 22
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TABLE OF AUTHORITIES
Cases
Page(s)
Autoridad de Carreteras y Transportacion v. Transcore Atl., Inc.,
319 F.R.D. 422 (D.P.R. 2016) ...........................................................................................7, 8
In re Best Prod. Co.,
157 B.R. 222 (Bankr. S.D.N.Y. 1993) .................................................................................11
Boyer v. Crown Stock Dist., Inc.,
587 F.3d 787 (7th Cir. 2009) ...............................................................................................11
Foisie v. Worcester Polytechnic Inst.,
967 F.3d 27 (1st Cir. 2020)..............................................................................................9, 12
In re Ginn-La St. Lucie, Ltd., LLP,
2010 WL 8756756 (Bankr. S.D. Fla. Dec. 10, 2010)......................................................10, 11
HBE Leasing Corp. v. Frank,
48 F.3d 623 (2d Cir. 1995) ..................................................................................................11
Industrias Avícolas de P.R., Inc. v. Granjas Cupey, Inc.,
2002 WL 1040182 (P.R. Cir. Apr. 8, 2002) .........................................................................13
In re Joy Recovery Tech. Corp.,
286 B.R. 54 (Bankr. N.D. Ill. 2002).....................................................................................11
Mane FL Corp. v. Beckman,
355 So.3d 418 (Fla. 3d DCA 2008) .......................................................................................9
Marshall v. Comm’r of Internal Revenue,
782 F. App’x 565 (9th Cir. 2019) ........................................................................................11
In re Mervyn’s Holdings, LLC,
426 B.R. 488 (Bankr. D. Del. 2010) ....................................................................................11
Nagel v. Westen,
59 Cal. App. 5th 740 (2021) ..................................................................................................9
Nieto-Vincenty v. Valledor,
22 F. Supp. 3d 153 (D.P.R. 2014)..........................................................................................9
Orr v. Kinderhill Corp.,
991 F.2d 31 (2d Cir. 1993) ..................................................................................................11
Parker Waichman LLP v. Salas LC,
328 F.R.D. 24 (D.P.R. 2018) .................................................................................................7
Case 3:23-cv-01034-GMM Document 182 Filed 12/06/24 Page 4 of 22
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Slone v. Comm’r,
896 F.3d 1083 (9th Cir. 2018) .............................................................................................11
Torres-Román v. Martínez-Ocascio,
2023 WL 8372045 (D.P.R. Dec. 1, 2023)..............................................................................7
United States v. JG-24, Inc.,
331 F. Supp. 2d 14 (D.P.R. 2004)........................................................................................13
United States v. Planes,
656 F. Supp. 3d 1302 (M.D. Fla. 2023) ...............................................................................13
United States v. Tabor Ct. Realty Corp.,
803 F.2d 1288 (3d Cir. 1986)...............................................................................................11
VeroBlue Farms USA, Inc. v. Wulf,
2019 WL 12043593 (N.D. Tex. Sept. 10, 2019)...............................................................9, 10
VeroBlue Farms USA, Inc. v. Wulf,
465 F. Supp. 3d 633 (N.D. Tex. 2020).................................................................................10
Statutes and Rule
31 P.R. Laws Ann. § 9631...........................................................................................................9
Cal Civ. Code § 3439..................................................................................................................9
Cal. Civ. Code § 3439.04(a)(2)..................................................................................................11
Cal. Civ. Code § 3439.04(b)(2) .................................................................................................12
Cal. Civ. Code § 3439.04(b)(3) .................................................................................................12
Cal. Civ. Code § 3439.04(b)(11) ...............................................................................................12
Cal Civ. Code § 3439.10(b).........................................................................................................9
Fed. R. Civ. P. 65(d)(1).............................................................................................................14
Fla. Stat. § 726............................................................................................................................9
Fla. Stat. § 726.105(1)(b) ..........................................................................................................11
Fla. Stat. § 726.105(2)(b) ..........................................................................................................12
Fla. Stat. § 726.105(2(c)............................................................................................................12
Fla. Stat. § 726.105(2)(k) ..........................................................................................................12
Case 3:23-cv-01034-GMM Document 182 Filed 12/06/24 Page 5 of 22
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Other Authority
8 Charles A. Wright, Arthur R. Miller, et al., Federal Practice & Procedure § 2008
(3d ed. 2024)...................................................................................................................7, 12
Case 3:23-cv-01034-GMM Document 182 Filed 12/06/24 Page 6 of 22
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Pursuant to Federal Rules of Civil Procedure 26(b)(1), 33(a)(2), 34(a), and 37(a), Plaintiff
Oto Analytics, LLC (f/k/a Oto Analytics, Inc. d/b/a Womply) (“Womply”), by and through its
undersigned
counsel,
respectfully
requests
that
this
Court
compel
(1)
Defendants
Bernardo Navarro (“Mr. Navarro”) and Claudia Navarro (“Mrs. Navarro”; together, the
“Navarros”) to respond to Interrogatory Nos. 1, 2, and 4 in Womply’s First Sets of Interrogatories
to the Navarros dated July 19, 2024; (2) the Navarros to produce documents responsive to Requests
Nos. 6, 7, 11, and 12 in Womply’s First Sets of Requests for Production to the Navarros dated
July 19, 2024; and (3) Defendants Benworth Capital Partners, LLC (“Benworth FL”) and
Benworth Capital Partners PR LLC (“Benworth PR; together with Benworth FL and the
Navarros, “Defendants”) to respond to Request No. 18 in Womply’s First Sets of Requests for
Production to Benworth FL and Benworth PR dated July 19, 2024.
PRELIMINARY STATEMENT
Womply won an approximately $118 million arbitration award against Benworth FL,
which is owned and controlled by Mr. Navarro. Womply is unable to collect that award from
Benworth FL because it transferred more than $100 million to Benworth PR, which is owned and
controlled by the Navarros, leaving Benworth FL judgment proof. In discovery, Womply learned
that the Navarros have done it again and transferred funds out of Benworth FL and Benworth PR
into other entities they own and control (the “Navarro Entities”) to further frustrate Womply’s
debt collection efforts. To trace where Defendants have transferred the funds owed to Womply,
Womply sought discovery regarding the payments to the Navarro Entities, but Defendants refuse
to provide even the names of the Navarro Entities. This basic information is plainly relevant to
Womply’s fraudulent transfer claims (and, as discussed below, to Womply’s alter ego claim, veil
piercing claim, and requested relief), including because transferring the same funds owed to
Case 3:23-cv-01034-GMM Document 182 Filed 12/06/24 Page 7 of 22
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Womply to another entity the Navarros control is part of the same fraudulent transfer Womply is
seeking to unwind through this action.
Defendants assert that the Navarro Entities are not relevant to this action because Womply
did not identify specific transfers to those entities or the names of those entities in the Amended
Complaint. This is exactly backwards. Womply has no way of knowing about Defendants’ secret
transfers of funds or which entities the Navarros own and control without discovery. Womply is
not required to amend its complaint each time it learns about a new fraudulent transfer in order to
justify further discovery; such a requirement would cause only delay and enable Defendants to
endlessly transfer funds to escape collection in perpetuity. There is no valid basis for Defendants
to withhold information concerning Benworth FL’s and Benworth PR’s payments to other Navarro
Entities, which is the type of the information that is routinely produced in fraudulent transfer
actions. Accordingly, and for the reasons below, this Court should order Defendants to produce
this information immediately.
BACKGROUND
In August 2021, Womply commenced arbitration (the “Arbitration”) against Benworth
FL seeking nearly $153 million in unpaid fees plus millions more in contractual interest.
(Amended Complaint dated July 1, 2024 (“Am. Compl.”; ECF No. 125) ¶¶ 157–58; Benworth
FL’s Answer (ECF No. 150) ¶¶ 157–58.) Benworth FL is wholly owned and controlled by its
Chief Executive Officer and founder Mr. Navarro. (Am. Compl. ¶ 2; Benworth FL’s Answer ¶ 2.)
On June 26, 2024, the arbitrator entered a corrected final award in the Arbitration ordering
Benworth FL to pay Womply approximately $118 million. (ECF No. 162-2 at 73.) Benworth FL
has not paid any portion of this award but has instead transferred funds out of the company to
prevent Womply from recovering the funds it is owed.
Case 3:23-cv-01034-GMM Document 182 Filed 12/06/24 Page 8 of 22
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In October 2022, during the deposition of Mr. Navarro in the Arbitration, Womply learned
that Benworth FL had transferred more than $100 million to Benworth PR, which is 99% owned
by Mrs. Navarro (Mr. Navarro’s wife) and 1% owned by Mr. Navarro, leaving Benworth FL
unable to satisfy an award for Womply in the Arbitration. (Am. Compl. ¶¶ 10–11, 166; Benworth
PR’s Answer (ECF No.149) ¶¶ 2, 10, 12.) On January 24, 2023, Womply filed this action against
Defendants Benworth PR, Benworth FL, and the Navarros to recover the funds Defendants
transferred out of Benworth FL. Womply brings claims for actual and constructive fraudulent
transfer, declaratory judgment that Benworth PR is the alter ego of and/or successor to Benworth
FL, and declaratory judgment seeking to pierce the corporate veil and hold the Navarros (and the
entities they control) liable for Benworth PR’s obligations. (Am. Compl. ¶¶ 215–55).
In discovery in this case, Womply received information confirming that
. (Ex. 1 (Defendants_00226904)
at -6912 (“
”); Ex. 2 (Defendants_00227701) at -7713 (“
”).)1 In addition, Womply has discovered that the Navarros made additional transfers
of funds to frustrate Womply’s debt collection efforts. Indeed, since 2021,
, (Ex. 3 (Defendants_00227698)), and
and to one or more
unidentified “Related Part[ies].” (Ex. 4 (Defendants_00240127).)
1 All references to “Ex.” refer to exhibits to the accompanying declaration of Joshua S. Levy.
Case 3:23-cv-01034-GMM Document 182 Filed 12/06/24 Page 9 of 22
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In order to further trace where the Navarros have transferred Womply’s funds, Womply
sought discovery into payments to Defendants’ related entities. On July 19, 2024, Womply served
discovery requests regarding “Navarro Entities,” which are defined as “(i) any entity in which
[Mr. or Mrs.] Navarro has or had voting or operational control during the Relevant Time Period;
(ii) any entity in which [Mr. or Mrs.] Navarro holds or held a majority ownership or equity interest,
either directly or indirectly, during the Relevant Time Period; or (iii) any trust or similar entity for
which [Mr. or Mrs.] Navarro is or was a beneficiary or beneficial owner during the Relevant Time
Period.” (Ex. 5 at 2; Ex. 6 at 2; Ex. 7 at 2; Ex. 8 at 2.) Womply’s First Set of Interrogatories to
each of Mr. and Mrs. Navarro requested that, among other things, the Navarros:
1.
Identify all payments or transfers received by You or a [] Navarro Entity
from Benworth FL, and for each payment or transfer, list the amount of the payment
or transfer; the date of the payments or transfer; and the reason for the payment or
transfer.
2.
Identify all payments or transfers received by You or a [] Navarro Entity
from Benworth PR, including, for each payment or transfer, the amount of the
payment or transfer; the date of the payments or transfer; and the reason for the
payment or transfer.
4.
Identify the entities (including trusts) in which You are, directly or
indirectly, a owner, shareholder, equityholder, partner, member, beneficiary, or
beneficial owner for each year from 2021 to present, including for each entity in
each year, Your ownership percentage
(Ex. 5 at 5–6; Ex. 6 at 5–6.) Womply’s First Set of Requests for Production to each of Mr. and
Mrs. Navarro requested, among other things:
6.
All Documents and Communications Concerning any payments or transfers
made to a [] Navarro Entity by Benworth FL.
7.
All Documents and Communications Concerning any payments or transfers
made to a [] Navarro Entity by Benworth PR.
11.
All contracts and agreements between a [] Navarro Entity and Benworth
FL.
Case 3:23-cv-01034-GMM Document 182 Filed 12/06/24 Page 10 of 22
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12.
All contracts and agreements between a [] Navarro Entity and Benworth
PR.
(Ex. 7 at 7-8; Ex. 8 at 7.)
Womply similarly requested that Benworth FL and Benworth PR each produce “[a]ll
Documents and Communications Concerning payments or distributions from You to Mr. Navarro,
any B. Navarro Entity, or any C. Navarro Entity.” (Ex. 9 at 9; Ex. 10 at 8.) This Court ordered
Defendants to respond to Womply’s discovery requests by October 7, 2024. (ECF No. 161.)
On October 7, the Navarros served partial Answers and Objections to Womply’s First Set
of Interrogatories and, on October 11 (four days after the Court-ordered deadline), the Navarros
served “supplementary” answers and objections.
(Exs. 11–14.)
The Navarros objected to
Interrogatory Nos. 1, 2, and 4 on relevance grounds, refused to identify any Navarro Entities, and
refused to provide any information about payments or transfers to any Navarro Entities. (Ex. 11
at 5–8; Ex. 12 at 4–7; Ex. 13 at 3–4; Ex. 14 at 2–3.) The Navarros also served Answers and
Objections to Womply’s First Set of Requests for Production of Document that likewise objected
to Request Nos. 6, 7, 10, and 11 on relevance grounds and refused to produce any documents or
information regarding any Navarro Entities. (Ex. 15 at 10–13; Ex. 16 at 10–13.) Benworth FL
and Benworth PR likewise objected to Womply’s requests on relevance grounds and refused to
produce any documents or information concerning any Navarro Entity. (Ex. 17 at 17–18; Ex. 18
at 18–19.)
On October 10, 2024, the parties met and conferred by videoconference about Defendants’
discovery responses. (Ex. 19 at 17–21.) During the meet-and-confer call, Womply and the Federal
Reserve Bank of San Francisco (“Reserve Bank”; together with Womply, “Plaintiffs”) “stated
that any payments from Benworth FL or Benworth PR to any B. Navarro and C. Navarro entities
are highly relevant because they show Benworth FL and Benworth PR paying the Navarros
Case 3:23-cv-01034-GMM Document 182 Filed 12/06/24 Page 11 of 22
6
through entities they control.” (Id. at 5.) They also explained that they “have no way of knowing
which entities are being used to channel funds and that Defendants must provide that information.”
(Id.) As a compromise, “Defendants represented that, in response to Womply’s interrogatories,
Defendants will produce a full list of all B. Navarro and C. Navarro entities as defined by the RFPs
by Friday, October 11.” (Id.) Defendants did not do so.
On October 17, 2024, the parties met and conferred again. (Id. at 10–13.) During the meet-
and-confer call, “Defendants withdrew their representation from the October 10 meet-and-confer
call that they would produce a list of names of all entities controlled by Mr. and/or Mrs. Navarro.
Defendants now state that they are standing on their relevance objection and will not produce such
information.”
(Id. at 3.)
“Womply and the Reserve Bank responded that Benworth FL and
Benworth PR transferring money to the Navarros through entities they control is directly relevant
to their fraudulent transfer claims and that Plaintiffs would not know the names of these entities,
which are in Defendants’ possession, custody, and control. Womply further responded that such
information is relevant to its alter ego/successor liability claims and veil piercing claim by showing
how the Navarros moved and controlled funds and undercapitalized Benworth FL.”
(Id.)
Defendants did not respond to any of these arguments and, instead, claimed “they are willing to
reconsider their position if Plaintiffs provide case law on this issue.” (Id.)
On October 21, 2024, two business days later, Womply emailed Defendants case law in
which a court ordered “defendants in [a] fraudulent transfer action to respond to interrogatories
seeking to identify ‘all of Defendants’ Affiliated Entities, including the identity of all shareholders,
owners, managers, and/or directors.’” (Id. at 10 (quoting VeroBlue Farms USA, Inc. v. Wulf, 2019
WL 12043593, at *2–4 (N.D. Tex. Sept. 10, 2019)).) Defendants then ignored Womply for weeks.
On October 29, 2024, Defendants abruptly cancelled a scheduled meet-and-confer call minutes
Case 3:23-cv-01034-GMM Document 182 Filed 12/06/24 Page 12 of 22
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beforehand and did not reschedule. (Id. at 6.) On November 8, 2024, 18 days after Womply sent
the requested case law, Defendants belatedly responded without any authority that “[w]e still don’t
understand how the Navarro-controlled entities information is relevant.”
(Id. at 2.)
Because
Defendants are withholding highly relevant information about the entities to which they have
fraudulently transferred funds owed to Womply, Womply declared impasse and files this Motion.
LEGAL STANDARD
“Federal Rule of Civil Procedure 26(b)(1) permits a party to obtain discovery that is
‘relevant to any party’s claim or defense.’”
Torres-Román v. Martínez-Ocascio, 2023 WL
8372045, at *4 (D.P.R. Dec. 1, 2023) (Méndez-Miró, J.) (quoting Fed. R. Civ. P. 26(b)(1)).
“Because ‘discovery itself is designed to help define and clarify the issues, the limits set forth in
Rule 26 must be construed broadly to encompass any matter that bears on, or that reasonably could
lead to other matters that could bear on, any issue that is or may be in the case.’” Id. (quoting
Oppenheimer Fund, Inc. v. Sanders, 437 U.S. 340, 351 (1978)) (cleaned up); see also Parker
Waichman LLP v. Salas LC, 328 F.R.D. 24, 26 (D.P.R. 2018) (“In the context of pretrial discovery,
‘relevance’ is broadly and liberally interpreted.”) (cleaned up); 8 Charles A. Wright, Arthur R.
Miller, et al., Federal Practice & Procedure § 2008 (3d ed. 2024) (“Discovery is not limited to the
issues raised by the pleadings, for discovery itself is designed to help define and clarify the
issues.”) (citing Klonoski v. Mahlab, 156 F.3d 255 (1st Cir. 1998)).
“When a party resists the production of evidence, it bears the burden of establishing lack
of relevancy,” and “[t]he objecting party must show specifically how each interrogatory or request
for production is not relevant.” Autoridad de Carreteras y Transportacion v. Transcore Atl., Inc.,
319 F.R.D. 422, 427 (D.P.R. 2016) (cleaned up). “If a party fails to answer an interrogatory
submitted under Rule 33 or fails to produce documents as requested under Rule 34, the opposing
Case 3:23-cv-01034-GMM Document 182 Filed 12/06/24 Page 13 of 22
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party may move for an order compelling discovery.” Id. (cleaned up) (quoting Fed. R. Civ. P.
37(a)(3)(B)).
ARGUMENT
The Navarros object to providing the names of the Navarro Entities solely on relevance
grounds.
The Navarros do not—and cannot—argue that producing a list of names is unduly
burdensome or disproportionate to the needs of this more than $100 million action. The Navarros
also do not argue that producing documents, communications, contracts, or agreements between
Navarro Entities and the Benworth FL and Benworth PR is unduly burdensome or disproportionate
to the needs of this case. Thus, to obtain the requested discovery, Womply need only point to a
single theory of relevance. The names of the Navarro Entities are independently relevant to each
of Womply’s claims and requested relief, any one of which is sufficient to satisfy the low bar of
relevance at the discovery stage.
First, the Navarro Entities are relevant to trace funds for Womply’s fraudulent transfer
claims. Womply alleges that “Benworth FL transferred $171 million, and possibly much more,”
to entities the Navarros own and control, including Benworth PR, “with the actual intent to hinder
or delay Womply’s efforts to collect its fees from Benworth FL, or to defraud Womply.” (Am.
Compl. ¶¶ 218–21.) Defendants’ limited document production in this action shows that Benworth
FL and Benworth PR both also transferred funds to other entities the Navarros own and/or control,
which would likewise hinder or delay Womply’s efforts to collect the fees it is owed. (See supra
at 2–3.)
Because the funds Womply seeks to recover have now been transferred to Navarro
Entities, Womply will not be able to recover on its fraudulent transfer claims without learning the
names of these Navarro Entities. Discovery regarding such additional or subsequent fraudulent
transfers—which a plaintiff would have no way of knowing about without discovery—is so self-
Case 3:23-cv-01034-GMM Document 182 Filed 12/06/24 Page 14 of 22
9
evidently relevant that it is routinely produced without any litigation. See, e.g., Nagel v. Westen,
59 Cal. App. 5th 740, 744–46 (2021) (reversing dismissal of fraudulent transfer action because
plaintiffs did not need to “identify[] a third party transferree who received their assets”); Mane FL
Corp. v. Beckman, 355 So.3d 418, 422–23 (Fla. 3d DCA 2008) (granting summary judgment for
plaintiff in fraudulent transfer action where discovery showed that (1) limited liability company
owned by husband and wife used fraudulently obtained funds to purchase real property,
(2) company transferred that property to the company owners who sold the property, (3) the
owners used the sale proceeds to buy a condominium unit, and (4) the owners transferred the
condominium unit to a new company they controlled).2
In the rare fraudulent transfer cases in which defendants tried to withhold information about
entities they own or control to which they transferred funds, the court ordered defendants to
produce this information. See, e.g., VeroBlue, 2019 WL 12043593, at *2–4. In VeroBlue, for
example, a bankrupt company brought fraudulent transfer claims against its founders alleging that
2 Womply does not address choice-of-law issues at this stage because all the relevant jurisdictions
recognize “fraudulent conveyance actions [that] are both remedial in nature and auxiliary to
underlying actions to recover debts (which can sound in tort, contract, or some admixture of the
two).” Foisie v. Worcester Polytechnic Inst., 967 F.3d 27, 41 (1st Cir. 2020); see, e.g., Cal Civ.
Code § 3439; Fla. Stat. § 726; 31 P.R. Laws Ann. § 9631. Womply cites California law because
this case arises from contractual debts Benworth FL owes to Womply, which are governed by
California law. (Am. Compl. Ex. 2 § 9; id. Ex. 3 § 4.) Womply also cites Florida law because
Florida has the “most significant relationship” to this action, Nieto-Vincenty v. Valledor, 22 F.
Supp. 3d 153, 161 (D.P.R. 2014), because, inter alia, (1) Womply contracted with Benworth FL,
a Florida limited liability company located in Florida and owned by a Florida citizen, and therefore
expected to deal with a Florida entity; (2) the funds at issue were transferred from Florida and,
should Plaintiffs prevail, the funds will be returned to Florida; and (3) California law provides that
fraudulent transfer claims are “governed by the local law of the jurisdiction in which the debtor is
located when the transfer is made or the obligation is incurred,” which is Florida. Cal Civ. Code
§ 3439.10(b). Should this Court seek to conduct a choice-of-law analysis at this stage, Womply
respectfully requests leave to fully brief this issue. See Foisie, 967 F.3d at 42 (“emphasiz[ing] that
the optimal timing for a choice-of-law determination is case-specific,” and reversing because “the
district court’s choice-of-law determination was premature”).
Case 3:23-cv-01034-GMM Document 182 Filed 12/06/24 Page 15 of 22
10
they “transferred 1.25 million shares of stock to another company they owned and controlled” that
“benefitted them personally and not VeroBlue.” 465 F. Supp. 3d 633, 644 (N.D. Tex. 2020). The
plaintiff served interrogatories and document requests seeking to “[i]dentify all of Defendants’
Affiliated Entities, including the identity of all shareholders, owners, managers, and/or directors,”
“[i]dentify any and all entities (including trusts) in which any of the Defendants, any of the
Defendants’ Affiliated Entities, and/or any member of Defendants’ Family has owned a beneficial
or equitable interest or has or is serving as a trustee or beneficiary,” and obtain “financial
information” regarding these entities. 2019 WL 12043593, at *4–5. The defendants objected to
these interrogatories and document requests as irrelevant and overbroad and the court overruled
defendants’ objections, holding that “the information that [plaintiff] seeks through these []
interrogatories are relevant to the claims in, and proportional to the needs of this case.” Id. at *5.
So too here, the names and “financial information” regarding the Navarros’ “related entities” are
relevant to Womply’s fraudulent transfer claims. Id. at *3. The fact that VeroBlue “was brought
by a company against its insiders” who transferred funds “for the benefit of the insiders’ affiliates
entities” while Womply brings this action as a judgment creditor against the Navarros as insiders
of Benworth FL and Benworth PR who transferred funds to entities they control for to benefit
themselves does not affect the relevance analysis. (Ex. 19 at 2.)
Second, Defendants’ transfers to the Navarro Entities are relevant to the merits of
Womply’s actual and constructive fraudulent transfer claims. It is settled law in fraudulent transfer
actions that “the court must ‘look beyond the particular transfers in question to the entire
circumstance of the transactions’” to “arrive at the substance of the transactions.” In re Ginn-La
St. Lucie, Ltd., LLP, 2010 WL 8756756, at *4 (Bankr. S.D. Fla. Dec. 10, 2010) (quoting In re
Case 3:23-cv-01034-GMM Document 182 Filed 12/06/24 Page 16 of 22
11
Chase & Sanborn Corp., 848 F.2d 1196, 1199 (11th Cir. 1988)).3 When a defendant transfers
funds through multiple transactions, courts routinely “collapse[] transactions” where “a transfer is
only a step in a general plan.” Id. (quoting Orr, 991 F.2d at 35) (cleaned up).4 Here, Defendants
transferred the funds Benworth FL owes to Womply first to Benworth PR and then to the Navarro
Entities. Discovery regarding the Navarro Entities is therefore directly relevant to “the economic
realities of the transaction” and “‘the knowledge or intent of the parties involved in the
transaction.’” Id. (quoting Best Prod., 157 B.R. at 229).
Such discovery is also relevant to
Womply’s constructive fraudulent transfer claim because, should discovery show that the funds
merely passed through Benworth PR on the way to the Navarro Entities, this demonstrates that
Benworth FL transferred funds to Benworth PR “[w]ithout receiving a reasonably equivalent value
in exchange for the transfer.” Cal. Civ. Code § 3439.04(a)(2); Fla. Stat. § 726.105(1)(b).
Contrary to these principles, Benworth seeks to withhold all discovery regarding the
Navarro Entities because “[t]he fraudulent transfer claim” alleged in the Amended Complaint
“seeks to unwind only transfers between Benworth FL and Benworth PR.” (Ex. 19 at 2.) But
“[d]iscovery is not limited to the issues raised by the pleadings, for discovery itself is designed to
3 See also Boyer v. Crown Stock Dist., Inc., 587 F.3d 787, 793 (7th Cir. 2009) (“[F]raudulent
conveyance doctrine . . . is a flexible principle that looks to substance, rather than form.”); Orr v.
Kinderhill Corp., 991 F.2d 31, 35 (2d Cir. 1993) (“An allegedly fraudulent conveyance must be
evaluated in context[.]”) (cleaned up); HBE Leasing Corp. v. Frank, 48 F.3d 623, 635–36 (2d Cir.
1995); United States v. Tabor Ct. Realty Corp., 803 F.2d 1288, 1302–03 (3d Cir. 1986); In re
Mervyn’s Holdings, LLC, 426 B.R. 488, 497 (Bankr. D. Del. 2010); In re Joy Recovery Tech.
Corp., 286 B.R. 54, 74 (Bankr. N.D. Ill. 2002) (“Courts will eschew appeals to form which obscure
the substance of a transaction.”).
4 See also Marshall v. Comm’r of Internal Revenue, 782 F. App’x 565, 567 (9th Cir. 2019)
(affirming that “the multiple steps in the transaction through which the Marshalls sold their MAC
stock could be ‘collapsed’ and deemed a ‘transfer’”); Slone v. Comm’r, 896 F.3d 1083, 1085–88
(9th Cir. 2018) (holding that stock sale could be collapsed in fraudulent transfer action); In re Best
Prod. Co., 157 B.R. 222, 229 (Bankr. S.D.N.Y. 1993) (“In reality, collapsing transactions is little
more than an effort on the part of the court to focus not on the formal structure of a transaction,
but rather on the knowledge or intent of the parties involved in the transaction.”).
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help define and clarify the issues.” 8 Wright & Miller § 2008 (citing Klonoski, 156 F.3d 255).
Indeed, Womply would have no way of knowing about the transfers to the Navarro Entities without
the benefit of discovery. Defendants thus seek to place Womply in a Catch-22 in which Womply
cannot learn about Defendants’ efforts to transfer funds owed to Womply unless Womply already
knows about such transfers. This turns discovery law on its head. Womply is not required to
amend its complaint each time it learns about yet another transfer by Defendants, which will result
only in delay that will enable Defendants to endlessly transfer funds without paying Womply.
Third, Defendants’ transfers to the Navarro Entities are relevant to show intent for
Womply’s actual fraudulent transfer claims. “[T]he party pleading fraudulent intent is customarily
permitted to rely on certain badges of fraud,” which are “circumstances so commonly associated
with fraudulent transfers that their presence gives rise to an inference of intent.” Foisie, 967 F.3d
at 51 (cleaned up; collecting cases). For example, it is a badge of fraud if “[t]he debtor retained
possession or control of the property transferred after the transfer,” “[t]he debtor removed or
concealed assets,” or “[t]he debtor transferred the essential assets of the business to a lienor who
transferred the assets to an insider of the debtor.” Cal. Civ. Code §§ 3439.04(b)(2)–(3), (11); Fla.
Stat. §§ 726.105(2)(b)–(c), (k).
Evidence showing that Benworth FL and/or Benworth PR
transferred funds to entities controlled by the Navarros is directly relevant to each of these badges
of fraud.
Without knowing the names of such entities or having access to their underlying
documentation, Womply will be unable to determine which transfers were fraudulent.
Fourth, the Navarro Entities are relevant to Womply’s alter ego and veil piercing claims.
Womply alleges that “Benworth PR should be held liable for Benworth FL’s debt to Womply,
because Benworth PR is the alter ego of Benworth FL,” because, among other reasons,
“Mr. Navarro has control over the assets of both Benworth PR and Benworth FL.” (Am. Comp.
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¶¶ 241–48.) Womply also alleges that “Mr. and Ms. Navarro should be held personally liable for
satisfying Benworth PR’s obligations because, among other reasons, the Navarros have “extensive
or pervasive control over Benworth PR,” and “Mr. Navarro has control over the assets of both
Benworth PR and Benworth FL.” (Id. ¶¶ 249– 53.) Under both Puerto Rico and Florida law, “the
alter ego is the person in control” of the entity. United States v. JG-24, Inc., 331 F. Supp. 2d 14,
63 (D.P.R. 2004) (collecting cases); see also United States v. Planes, 656 F. Supp. 3d 1302, 1331
(M.D. Fla. 2023) (holding that “[a]lter ego liability applies” to “a corporate officer who is in
control of a corporation”) (citing Walton v. Tomax Corp., 632 So.2d 178, 181 n.2 (Fla. 5th DCA
1994)). This Court can also “disregard the corporate entity” to hold “the individual[s] behind the
corporate veil . . . personally liable” based on “undercapitalization.” JG-24, 331 F. Supp. 2d at 63
(collecting cases).
Discovery into Benworth FL and Benworth PR’s transfers to the Navarro
Entities is therefore relevant to show the Navarros’ control over and undercapitalization of
Benworth FL and Benworth PR, which is directly relevant to Womply’s alter ego and veil piercing
claims.
Defendants appear to concede that Mr. Navarro has “[c]ontrol over assets” of Benworth
FL and Benworth PR, and do not dispute that the Navarros “undercapitalized Benworth FL” and
Benworth PR. (Ex. 19 at 2.) Instead, Defendants assert that, under Womply’s alter ego and veil
piercing claims, “it would be the Navarros in their personal capacity, not any Navarro-controlled
entity, who would be held liable.” (Id.) Not so. Once the corporate veil has been pierced, whether
by the alter ego doctrine or otherwise, “the fiction of the separate corporate entity may be property
disregarded” and all assets over which the Navarros exercise “domination and control” are subject
to attachment. Industrias Avícolas de P.R., Inc. v. Granjas Cupey, Inc., 2002 WL 1040182, at *8
(P.R. Cir. Apr. 8, 2002) (quoting 1 Fletcher Cyclopedia of the Law of Corporations § 41.35).
Case 3:23-cv-01034-GMM Document 182 Filed 12/06/24 Page 19 of 22
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Finally, the Navarro Entities are relevant to the remedies Womply and the Reserve Bank
are seeking. Womply is seeking, among other things, “[r]escission of the Fraudulent Transfer”
from Benworth FL to Benworth PR. The Reserve Bank is seeking “(i) [a] declaration that the
Reserve Bank has a first-priority lien and security interest in the Defendants’ assets to the extent
such assets constitute, in whole or in part, PPP Collateral; (ii) [a] declaration that Womply may
only from the Defendants’ assets to the extent such assets are not PPP Collateral; [and] (iii) [a]
declaration that as to any non-PPP Collateral assets, the Reserve Bank may recover at least pro
rata with Womply.” (Reserve Bank Complaint in Intervention dated Aug. 2, 2024 (“Reserve
Bank Compl.”; ECF No. 146) at 17.)5 To determine which funds are “PPP Collateral” subject to
the Reserve Bank’s lien and which are not, Plaintiffs must trace the flow of funds from Benworth
FL to Benworth PR and the Navarro Entities. Discovery regarding the Navarro Entities is therefore
relevant to the remedies Womply and the Reserve Bank are seeking, and necessary to draft
sufficiently particularized declaratory and/or injunctive relief. See Fed. R. Civ. P. 65(d)(1) (“Every
order granting an injunction” must “describe in reasonable detail . . . the act or acts restrained or
required.”).
CONCLUSION
For the foregoing reasons, Womply respectfully requests that this Court (1) order the
Navarros to respond to Womply’s Interrogatory Nos. 1, 2, and 4 to the Navarros, including
identifying the names of all Navarro Entities, within one week; (2) order the Navarros to produce
5 The Reserve Bank defines “PPP Collateral” as “(i) all [Benworth FL’s] rights, title, and interest
in property (wherever located) that is identified on a collateral schedule, identified on the Reserve
Bank’s books and records as pledged to, or subject to a security interest, or that is in the possession
or control of the Reserve Bank, (ii) all documents, books and records, including programs, tapes,
and related electronic data processing software, evidencing or relating to the foregoing, and (iii) all
proceeds and products of the foregoing, including but not limited to interest, dividends, insurance,
rents and refunds.” (Reserve Bank Compl. ¶ 12 n.2.)
Case 3:23-cv-01034-GMM Document 182 Filed 12/06/24 Page 20 of 22
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all documents responsive to Womply’s Requests for Production Nos. 6, 7, 11, and 12 to the
Navarros within 14 days; and (3) order Benworth FL and Benworth PR to produce all documents
responsive to Womply’s Request for Production No. 18 to Benworth FL and Benworth PR within
14 days.
Dated: December 6, 2024
Of Counsel
Willkie Farr & Gallagher LLP
By: /s/ Alexander L. Cheney
Alexander L. Cheney (admitted pro hac vice)
333 Bush St
San Francisco, CA 94104
(415) 858-7400
acheney@willkie.com
Stuart R. Lombardi (admitted pro hac vice)
Willkie Farr & Gallagher LLP
787 7th Avenue
New York, NY 10019
(212) 728-8000
slombardi@willkie.com
Joshua S. Levy (admitted pro hac vice)
1875 K Street, N.W.
Washington, D.C. 20006
(202) 303-1000
jlevy@willkie.com
Respectfully submitted,
By: /s/ Alejandro J. Cepeda Diaz
Alejandro J. Cepeda Diaz
USDC-PR 222110
McConnell Valdés LLC
270 Muñoz Rivera Ave.
Hato Rey PR 00918
Tel: (787) 250-5637
Email: ajc@mcvpr.com
Attorneys for Plaintiff and Defendant in
Intervention Oto Analytics, LLC
Case 3:23-cv-01034-GMM Document 182 Filed 12/06/24 Page 21 of 22
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CERTIFICATE OF SERVICE
The undersigned certifies that on December 6, 2024 the foregoing document was filed with
the Clerk of the Court using CM/ECF, which sent notices to all parties receiving notifications
through the CM/ECF system.
Dated: December 6, 2024
By: /s/ Alejandro J. Cepeda Diaz
Attorney for Plaintiff Oto Analytics, LLC
Case 3:23-cv-01034-GMM Document 182 Filed 12/06/24 Page 22 of 22