Castillo et al v. Klayman & Toskes, P.A. et al

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF PUERTO RICO
LYNETTE CASTILLO, et al.,
Plaintiffs,
v.
KLAYMAN & TOSKES, P.A., et al.,
Defendants.
CIVIL NO. 24-1427 (CVR)
OPINION AND ORDER
INTRODUCTION
The present case arises from financial losses incurred by different investors for
bonds managed by UBS Financial Services during the bond market collapse that occurred
in Puerto Rico in 2013. Plaintiffs are some of those investors who, because of those losses,
sought legal help in attempting to recoup them. 	Plaintiffs Lynette Castillo, Félix M.
Avilés-Franco, 	their 	conjugal 	partnership, 	Personnel 	Recruiting 	Service, 	Corp.
(collectively, the “Castillo Plaintiffs”); Salvador Jiménez, Raquel Jiménez, their conjugal
partnership, and the Salvador Jiménez Individual Retirement Account (collectively, the
“Jiménez 	Plaintiffs”), 	individually 	and 	on 	behalf 	of 	all 	others 	similarly 	situated
(collectively “Plaintiffs”), filed this case against Defendants Klayman & Toskes, P.A.
(“K&T”), 	Lawrence 	L. 	Klayman, 	and 	Steven 	J. 	Toskes 	(“Toskes”, 	collectively,
“Defendants”). Plaintiffs allege in the Amended Complaint that Defendants, a law firm
and its attorneys, defrauded Plaintiffs by having them pay legal fees to represent them in
their claims before the Financial Industry Regulatory Authority (“FINRA”), even though
they were not authorized to practice law in Puerto Rico. Plaintiffs bring this diversity case
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with causes of action under Puerto Rico law for fraud (Count I), breach of contract (Count
II), damages (Count III), unjust enrichment (Count IV), and breach of the implied duty
to act in good faith (Count V). (Docket No. 48)
Defendants moved to dismiss the claims against them via an “Omnibus Motion to
Strike Class Allegations and Dismiss Amended Complaint.” (Docket No. 51). Defendants
aver the request for class certification is facially infirm and the class cannot be certified.
Plaintiffs argue on the merits that the Jiménez Plaintiffs duly authorized K&T to represent
them before FINRA through Defendant Toskes, who had been previously granted pro hac
vice admission by the Puerto Rico Supreme Court, and suffered no damages as they never
paid Defendants any fees. 	Defendants also claim that all Plaintiffs failed to plausibly
plead damages exceeding $75,000 and therefore did not meet the amount in controversy.
As to the remaining claims, they claim they are all time-barred, fraud is not pled with
particularity, and equitable tolling is unavailable to save the time-barred claims.
Plaintiffs filed the corresponding Opposition and Defendants replied. 	(Docket
Nos. 59 and 72). The undersigned referred Defendants’ Motion to Dismiss to Magistrate
Judge 	Héctor 	Ramos-Vega 	(“Magistrate 	Judge 	Ramos-Vega”) 	for 	a 	Report 	and
Recommendation (“R&R”). (Docket No. 76).
Magistrate Judge Ramos-Vega then filed an R&R recommending the case be
dismissed in its entirety. (Docket No. 92). Magistrate Judge Ramos-Vega found that both
sets of Plaintiffs failed to meet the threshold jurisdictional amount, which effectively ends
the case. Notwithstanding, Magistrate Judge Ramos-Vega offered additional grounds for
dismissal of the case on the merits. As to the Jiménez Plaintiffs, he held their claims were
based on the premise that the individual Defendants were not admitted to practice law in
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Puerto Rico. The evidence showed the opposite, that Defendant Toskes had been granted
pro hac vice admission in 2013 by the Puerto Rico Supreme Court to represent individuals
in FINRA proceedings, including them, and they were aware of this. 	As to the Castillo
Plaintiffs, he found all their claims were time-barred and the allegations insufficient to
meet the equitable doctrine of fraudulent concealment, which in any event, was
inapplicable. (Id.).
ANALYSIS
The Court may refer dispositive motions to a Magistrate Judge for an R&R. See 28
U.S.C. § 636(b)(1)(B); Fed. R. Civ. P. 72(b). Within fourteen days of receiving a copy of
the R&R, “a party may serve and file specific written objections to the proposed findings
and recommendations.” Id. Upon filing of a timely objection, a party is entitled to a de
novo determination of “those portions of the report or specified proposed findings or
recommendations to which specific objection is made.” 	Total Petroleum Puerto Rico
Corp. v. Fonseca-Marrero, Civil No. 16-2436 (PAD), 2018 WL 6131777, at *1 (D.P.R. 2018)
(quotation omitted); Ponsa-Rabell v. Santander Securities, LLC, 2020 WL 4219685, at *1
(D.P.R. 2022); United States v. J.C.D., 861 F.3d 1, 6 (1st Cir. 2017). When performing this
review, the Court may “accept, reject, or modify, in whole or in part, the findings or
recommendations made by the magistrate judge.” 28 U.S.C. § 636(a)(b)(1). Objections
must “specifically identify the portions of the proposed findings and recommendations to
which objection is made and the basis for the objection.” Local Rule 72(d); see also Fed.
R. Civ. P. 72(b)(2). 	However, the Court need not “consider frivolous, conclusive, or
general objections.” See Rodríguez-González v. Astrue, 854 F.Supp.2d 176, 178 (D.P.R.
2012). And if objections merely repeat arguments already made to the magistrate judge,
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a de novo review is unwarranted, and the district judge will review those portions of the
R&R for clear error. Id. Further, a party objecting to an R&R is not “entitled as of right
to a de novo review by the [district] judge of an argument never raised” before the
magistrate judge. See United States v. Rosado-Cancel, 917 F.3d 66, 69 (1st Cir. 2019).
1. 	Plaintiffs’ Objections to the R&R.
Plaintiffs timely filed their Objections to the R&R. 	(Docket No. 95). 	As to the
jurisdictional amount, they admit that each member of the class must meet the statutory
minimum of $75,000 but argue instead that “the combination of their attorneys’ fees,
their expenses, as well as the tort damages related to the breach of contract meet and
exceed the $75,000 threshold.” (Docket No. 95, p. 2). They indicate that the amount of
damages claimed in the Amended Complaint is $1,000,000 per Plaintiff, and because
ascertaining 	damages 	is 	a 	jury 	function, 	Plaintiffs 	posit 	Defendants 	have 	not
demonstrated to a legal certainty that a jury would not award them more than the
$75,000 threshold amount.
As to the merits of their claims, Plaintiffs admit their “dolo” cause of action is time-
barred but aver instead that they filed a separate breach of contract claim 1, and dispute
the Magistrate Judge’s conclusion that this cause of action and unjust enrichment claim
are time-barred. 	They argue instead that Plaintiffs’ claims carry the 15-year statute of
limitations for contact claims under the 1930 Civil Code 2 and are therefore timely. They
also proffer that, under the First Circuit’s precedent, a contract statute of limitations
1 As will be discussed later in more detail, the Magistrate Judge found Plaintiffs’ breach of contact claim was really a
pre-contractual dolo claim.
2 The new Puerto Rico Civil Code was enacted in November 2020. Since the causes of action alleged in this case arose
before then, the terms contained in the 1930 Civil Code govern the Court’s analysis. See P.R. Laws Ann tit. 31, §§11719,
11720 (2020).
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applies to otherwise time-barred emotional damages when those emotional damages
arise from a contractual breach. In other words, even if their tort claims are time-barred,
they can recover damages therefrom if they arise from a timely breach of contract claim.
Finally, they proffer the Magistrate Judge erred in finding their unjust enrichment claims
to be time-barred, as the statute of limitations for those claims is 15 years instead of 1
year.
2. Application.
As to the amount in controversy requirement, Magistrate Judge Ramos-Vega
found that Plaintiffs’ Opposition admitted that “damages suffered [by Plaintiffs] are the
[attorney] fees paid.” (Docket No. 59 at p. 16). The Jiménez Plaintiffs never paid any fees
to Defendants, and the Castillo Plaintiffs only paid $68,502.00. Since each Plaintiff must
individually satisfy the amount in controversy for the Court to exercise jurisdiction,
Magistrate Judge Ramos-Vega found Plaintiffs failed to meet this threshold issue.
Plaintiffs’ objection posits that they suffered mental anguish in addition to the fees
paid, and that the Amended Complaint sought $1,000,000 in damages for each Plaintiff.
(Docket No. 96, p. 2). The problem with this argument is that the Amended Complaint
merely states, in a very general fashion, that “Plaintiffs are entitled to $1,000,000 in
damages stemming from the defendants’ tortious acts.” Nothing more is stated as to the
alleged damages, much less that each Plaintiff individually claimed this amount.
Furthermore, Plaintiffs’ Opposition to Defendants’ Motion to Dismiss contains no
discussion at all in support of their damages allegations, only mentioning in passing that
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their damages “are the fees paid” 3, so the Magistrate Judge found Plaintiffs’ silence to be
an “acquiescence.” Considering Plaintiffs’ admission that the fees paid were their
damages, the Court agrees with Magistrate Judge Ramos-Vega that the amount in
controversy is not met and the Court lacks jurisdiction to entertain this case. 	This
conclusion puts an end to this case.
However, considering that Magistrate Judge Ramos-Vega discussed in the R&R
the dismissal of this case on the merits, the Court finds it proper to briefly discuss this
case beyond the jurisdictional threshold. In doing so, the Court agrees with Magistrate
Judge Vega-Ramos that, even if the Court were to find the jurisdictional threshold was
met, it would still dismiss the case on the additional grounds he discussed, which
ultimately recommended that outcome.
As to the merits of the claims, Plaintiffs did not object to the Magistrate Judge’s
recommendation to dismiss the claims of the Jiménez Plaintiffs, which were based on
Defendants’ alleged unlawful legal practice, because Defendant Toskes had sought and
was granted pro hac vice admission to the Puerto Rico bar. 	Plaintiffs’ Objection also
admitted their dolo claim was untimely and presented no objection to the Magistrate
Judge’s conclusion that the pleadings failed to comply with the specificity requirements
for fraud in Fed. R. Civ. P. 9(b) for the application of the equitable tolling doctrine of
fraudulent concealment which in any event, he also found was inapplicable in this case.
Plaintiffs also failed to present objections to the Magistrate Judge’s conclusion that the
3 Even then, this is mentioned only in the section addressing “loss causation” as to the class action elements. (Docket
No. 59, p. 16). Plaintiffs’ opposition contains absolutely no discussion whatsoever about the amount in controversy
argument raised by Defendants. It is therefore deemed waived. See United States v. Zannino, 895 F.2d 1, 17 (1st Cir.
1990) (finding that “issues adverted to in a perfunctory manner, unaccompanied by some effort at developed
argumentation, are deemed waived”).
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fraud (count I), tort (count III), and duty to act in good faith (count V) claims, which are
subject to a one-year statute of limitations, were also time-barred. Absent any objections
thereto, the Court sees no clear error in Magistrate Judge Ramos-Vega’s conclusion that
these causes of action are time-barred and hereby ADOPTS the recommendation to
dismiss them.
This only leaves the breach of contract and the unjust enrichment claims, for
which the Court conducts a de novo review considering Plaintiffs’ objections. Plaintiffs’
position is that, separately from dolo, they alleged a breach of contract claim which carries
a 15-year statute of limitations under the 1930 Civil Code. Plaintiffs hired Defendants in
2015, and the case was filed in 2024, thus making this claim timely. However, Magistrate
Judge Ramos-Vega found the breach of contact claim to be a contractual dolo claim,
insofar as its allegations did not arise from any specific obligation, but rather that
Plaintiffs were tricked into signing the retainer agreements with Defendants under false
pretenses, to wit, that they were not authorized to practice law in Puerto Rico. 	In so
finding, Magistrate Judge Ramos-Vega noted that Plaintiffs failed to identify in their
Amended Complaint, as well as in their Opposition, any specific provisions of the retainer
agreements that Defendants allegedly breached, and that the Amended Complaint was
rife with allegations regarding the fraudulent actions that took place when Plaintiffs were
supposedly deceived into signing the retainer agreements. Magistrate Judge Ramos-Vega
also found that “Plaintiffs concede as much [that their claim was under dolo and not a
breach of contract claim], as they do not challenge Defendants’ argument other than citing
caselaw discussing the difference between contractual and noncontractual claims.”
(Docket No. 92, p. 14).
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The Court agrees with Magistrate Judge Ramos-Vega that this claim is really a pre-
contractual dolo claim and not a breach of contract claim. Both the Amended Complaint,
as well as the Opposition to the Motion to Dismiss, discuss at great length different legal
elements such as pre- and post-contractual dolo and fraud, and how Defendants
fraudulently hoodwinked Plaintiffs into signing the retainer agreements. 	At the same
time, Plaintiffs fail to point out which provisions of the retainer agreement were allegedly
breached. 	Given that a dolo claim carries a four-year statute of limitations term, this
claim is also time-barred.
The objection by Plaintiffs does not help because it raises something different
altogether, namely, that no contract for professional services can be valid if the person
misrepresented him or herself as a professional and he/she was not one. But Magistrate
Judge Ramos-Vega correctly found that Defendant Toskes had indeed validly sought and
obtained pro hac vice admission to the Puerto Rico bar in 2013, and further, had informed
the Puerto Rico Supreme Court he would be representing the Jiménez Plaintiffs before
FINRA.
Citing to Muñiz-Olivari v. Stiefel Labs, Inc., 496 F.3d 29 (1st Cir. 2007), Plaintiffs
attempt to salvage their time-barred tort claim, averring that when such a claim arises
from a contract, the applicable statute of limitations is the one for contractual claims, or
15 years. But the issue in Muñiz-Olivari was whether separate emotional damages were
recoverable in a breach of contract action by the contracting party and his spouse, who
was not a party to the contract. There was no statute of limitations issue raised in Muñiz-
Olivari and therefore, it cannot stand for the proposition that Plaintiffs ask the Court to
accept today. Plaintiffs’ citation to Ansin v. River Oaks FFurniture,195 F.3d 645 (1st Cir.
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1997) to stand for the same proposition is inapposite, insofar as that case was decided
under Massachusetts’ law and not under civil law.
Finally, Plaintiffs contend that Magistrate Judge Ramos-Vega erred in finding
their unjust enrichment claims to be time-barred, as the statute of limitations for those
claims is 15 years instead of 1 year. Thus, if the Court were to find the breach of contact
claim to be time-barred, they argue their unjust enrichment cause of action remains
viable. It does not.
Under Puerto Rico law, unjust enrichment is a specific doctrine utilized as a last
resort and when there is no statute or other remedy directly applicable to the situation.
Rivera-Muñiz v. Horizon Lines Inc., 737 F.Supp.2d 57, 65 (D.P.R. 2010) (unjust
enrichment is “subsidiary to other remedies provided by law and is unavailable if the
plaintiff may seek other forms of relief”). It is not applicable where a contract governs the
dispute at issue and courts have precluded its application when there is an existing
contract between the parties. P.R. Tel. Co. v. Sprintcom, Inc., 662 F.3d 74, 97 (1st Cir.
2011); Westernbank Puerto Rico v. Kachkar, No. 07-1606 (ADC), 2009 WL 6337949 at
*29 (D.P.R. Dec. 10, 2009); Medina & Medina v. Country Pride Food Ltd., 631 F.Supp.
293, 302 (D.P.R. 1986).
In the case at bar not only is there an existing contract between the parties, but
Plaintiffs have other avenues of relief available to them, ones which they have specifically
pled. Thus, “when plaintiffs allege conduct that is covered by an applicable statute, even
if plaintiffs have failed to sufficiently allege that claim or if the claim is time-barred, it is
inappropriate to allow a claim for unjust enrichment.” In re Fin. Oversight & Mgmt. Bd.
for Puerto Rico, 578 F.Supp.3d 267, 296 (D.P.R. 2021), aff’d, 54 F.4th 42 (1st Cir. 2022);
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Ocaso, S.A., Compañia de Seguros y Reaseguros v. P.R. Mar. Shipping Auth., 915 F. Supp.
1244. n.15 (D.P.R. 1996) (dismissing claim for unjust enrichment when facts would allow
for a claim sounding in tort, despite tort claim being time-barred). 	Thus, the Court
reaches the same result as Magistrate Judge Ramos-Vega, but via a different route.
Simply put, unjust enrichment is not available to Plaintiffs.
In sum, upon an independent review of the record and consideration of the
analysis contained in Magistrate Judge Ramos-Vega’s R&R and having conducted its own
research and analysis on the issues presented for the Court’s consideration, the Court
adopts in full the Magistrate Judge’s findings and legal conclusions that Defendants’
Omnibus motion should be granted and the case dismissed.
CONCLUSION
In view of the foregoing, the R&R (Docket No. 92) is ADOPTED. Consequently,
Defendants’ 	“Omnibus 	Motion 	to 	Strike 	Class 	Allegations 	and 	Dismiss 	Amended
Complaint” (Docket No. 51) is GRANTED and Plaintiffs’ claims are DISMISSED WITH
PREJUDICE.
Judgment shall be entered accordingly.
IT IS SO ORDERED.
In San Juan, Puerto Rico, on this 27 th day of February 2026.
S/CAMILLE L. VELEZ-RIVE
CAMILLE L. VELEZ RIVE
UNITED STATES DISTRICT JUDGE
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