Delaware District Court Determines that an Accounting Cannot be a Freestanding Claim Under Delaware Law

Mario Alberto Lopez Garza, The Executor of the Estate of Hans Jorg Schneider Sauter v. Citigroup, Inc. C.A. No. 15-537-SLR (June 29, 2016)

Mario Alberto Lopez Garza, the executor of a Mexican estate, the Estate of Hans Jorg Schneider Souter (the “Estate), initiated probate proceedings in Mexico claiming that  Banco Nacional de Mexico, S.A. integrante del Grupo Financiero Banamex (“Banamex”) in Mexico, a wholly-owned, indirect subsidiary of Citigroup, Inc. (“Citigroup”), was holding the Estate’s funds. This Mexican probate action was stayed upon Banamex’s initiation of proceedings to determine the authority of the probate judge.  After that, the executor sued Banamex and Citigroup, in the United States District Court for the Southern District of New York on behalf of the Estate. After the court denied the Estate’s motion for leave to file a second amended complaint on the basis of futility, the Estate voluntarily dismissed the New York action. Subsequently, in an effort to access information as to the funds purportedly belonging to the Estate, the executor brought suit against Citigroup in the United States District Court for the District of Delaware, seeking an accounting. Citigroup filed a motion for judgment on the pleadings.

Citigroup argued, and the Court found, that the executor had not substantively alleged that the Estate was entitled to an accounting and, thus, failed to state a claim. Delaware courts have routinely ruled that an accounting is not so much a cause of action as it is a form of equitable relief. While Mr. Garza contended that Delaware case law allows an accounting to be a stand-alone claim, the court found that his case law was not on point. The court concluded that Delaware allows claims for accounting only when they arise out of contractual or fiduciary relationships between the parties. Mr. Garza then suggested that either New York or Mexico law would apply; however the Court found that New York law also holds that “a fiduciary relationship must be alleged to sustain a freestanding claim of an accounting.” The Court declined to address the application of Mexican law, as Mr. Garza did not cite one that would allow the Estate to seek an accounting from Citigroup in the United States.