Motorola Credit Corp. v. Uzan
| Decision Date | 07 March 2003 |
| Docket Number | Docket No. 02-9302.,Docket No. 02-7566. |
| Citation | 322 F.3d 130 |
| Parties | MOTOROLA CREDIT CORPORATION and Nokia Corporation, Plaintiffs-Appellees, v. Kemal UZAN, Cem Cengiz Uzan, Murat Hakan Uzan, Melahat Uzan, Aysegul Akay, Antonio Luna Betancourt, Unikom Iletism Hizmetleri, Standart Pazarlama A.S. and Standart Telekomunikasyon Bilgisayar Hizmetleri A.S., Defendants-Appellants. Motorola Credit Corporation and Nokia Corporation, Plaintiffs-Counter-Defendants-Appellees, v. Murat Hakan Uzan and Cem Cengiz Uzan, Defendants-Counter-Claimants-Appellants, Kemal Uzan, Melahat Uzan, Aysegul Akay, Antonio Luna Betancourt, Unikom Iletism Hiametleri Pazarlama A.S., Standart Pazarlama A.S., Standart Telekomunikasyon Bilgisayar Hizmetleri A.S., Defendants—Appellants, Motorola, Inc., Kroll Associates, Inc., Christopher B. Galvin, Keith J. Bane, Walter Keating, Ed Hughes, and Ernst Kramer, Counter-Defendants. |
| Court | U.S. Court of Appeals — Second Circuit |
Robert F. Serio, Gibson, Dunn & Crutcher LLP, New York, New York, for Defendants-Appellants Kemal Uzan et al.
Kenneth M. Bialo (R. Stan Mortensen, James A. Baker, IV, James R. Heavner, Jr., of counsel), Baker Botts L.L.P., Washington, DC, for Defendants-Appellants Kemal Uzan, Cem Cengiz Uzan, Murat Hakan Uzan, Melahat Uzan, and Aysegul Akay.
Howard H. Stahl (Steven K. Davidson, Charles G. Cole, Bruce C. Bishop, Gordon M. Clay, on the brief), Steptoe & Johnson LLP, Washington, DC, for Plaintiff-Appellee Motorola Credit Corporation.
Jason Brown (Michael Donofrio, on the brief), Holland & Knight LLP, New York, New York, for Plaintiff-Appellant Nokia Corporation.
Before: JACOBS, CABRANES, and F.I. PARKER, Circuit Judges.
In Docket No. 02-7566, Defendants appeal from the May 9, 2002 preliminary injunction entered in the United States District Court for the Southern District of New York (Rakoff, J.), in aid of Plaintiffs' claims under the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. §§ 1961-1968, and certain Illinois state and common law claims. The plaintiff corporations financed cell-phone and communications networks set up in Turkey by Telsim Mobil Telekomunikasyon Hizmetleri A.S. ("Telsim"), and — following a series of non-payments and serious concern that the loans would not be repaid — are suing persons who are alleged to control Telsim and its onetime chief stockholder, Rumeli Telefon Sistemleri A.S. ("Rumeli Telefon"), and to have impaired collateral by diluting Telsim stock and other maneuvers. Arbitrations concerning the underlying financing transactions were initiated in Switzerland, and have been stayed by the Southern District of New York.
We conclude that the RICO claims based on a third-party's failure to pay on a debt are unripe. This ruling does not strip the district court of all jurisdiction, but it is likely to require reconsideration by the district court of a number of issues, rulings, and orders — no doubt aided by further proceedings being conducted on the merits. We therefore remand for the district court to dismiss the RICO claims, without prejudice to reassertion at some appropriate later time, and to exercise discretion as to whether to retain supplemental jurisdiction over the state law claims. However, we do not vacate the preliminary injunction.
In Docket No. 02-9302, Defendants appeal orders of the district court denying their motions to compel arbitration, staying three arbitrations pending in Switzerland, and denying Defendants' motion to stay all proceedings and the challenged orders pending arbitration. In light of our decision in 02-7566, we remand the issues in 02-9302 to the district court for reconsideration.
Nostra sponte, we hereby consolidate these appeals.
Plaintiff Motorola Credit Corporation ("MCC") is the financing affiliate of Motorola, Inc., which manufactures and services cellular telecommunications systems. Plaintiff Nokia Corporation sells switching technology.
The individual Defendants are several members and one close associate of the prominent Uzan family of Turkey, which controls Telsim, and Rumeli Telefon. Neither Telsim nor Rumeli Telefon is a party to this action. The Uzans also control Defendants Unikom Iletism Hizmetleri Pazarlama A.S., Standart Pazarlama A.S and Standart Telekomunikasyon Bilgisayar Hizmetleri A.S. ("Standart Telekom").
In 1998, MCC entered into several overlapping agreements with Telsim and Rumeli Telefon. MCC loaned Telsim $360 million to purchase cellular infrastructure and equipment from Motorola Ltd. (a MCC affiliate), and $200 million to enable Telsim to acquire a 25-year nationwide cellular license. As collateral, Rumeli Telefon — which then owned approximately 73.5% of Telsim — pledged 51% of Telsim's outstanding shares. In subsequent years, MCC provided additional financing — eventually totaling approximately $2 billion — and the pledged interest was increased to 66% of Telsim's outstanding shares.
Each of these agreements provides that it "shall be governed and interpreted in accordance with the internal laws (without regard to the laws of conflicts) of Switzerland," and that any unresolved dispute "aris[ing]" under the agreement shall be decided, to the exclusion of the ordinary courts, by a three-person arbitration panel in Switzerland in accordance with the International Arbitration Rules of the Zurich Chamber of Commerce.
Also in 1998, Nokia entered into a smaller but similar arrangement with Telsim and Rumeli Telefon. The initial loan was extended by Nokia's bank, ABN-Amro, backed by the credit of Nokia. As security, Rumeli Telefon pledged 5% of Telsim's outstanding shares. In subsequent years, Nokia extended additional financing to Telsim, approximately $800 million in all, and Rumeli Telefon increased the pledged interest to 7.5% of Telsim's outstanding shares.
Each of these agreements provides that it "shall be governed by, and shall be construed in accordance with Swiss law," and that all disputes "relating to" the agreement shall be resolved by a three-member arbitration panel in Switzerland in accordance with the International Arbitration Rules of the Zurich Chamber of Commerce.
Of these colossal loans from MCC and Nokia, Telsim has repaid approximately $200 million since 1998, and only $5 million since mid-2000.
A special shareholders meeting of Telsim was convened on April 24, 2001. MCC and Nokia contend that it was convened for the purpose of devaluing the pledges of Telsim shares. Defendants contend that the purpose was to protect against a feared loss of control over Telsim. In any event, the shareholders at the meeting tripled the number of outstanding Telsim shares. Although current shareholders were afforded preemption rights to purchase the newly issued shares, Rumeli Telefon (the largest shareholder) waived these rights, and they were transferred to Defendant Standart Telekom (another Uzan-controlled company), which exercised them. Partly as a result of this transfer,1 Standart Telekom raised its stake in Telsim from 0.32% to 66.48%, while Rumeli Telefon's holding (all of which was pledged to MCC and Nokia) was reduced to 24.54%—severely diluting the value of Plaintiffs' collateral.
Plaintiffs presented additional evidence of the Defendants' maneuvers. For example, the Defendants attempted to alter the voting rights of Telsim's outstanding shares in a way that would have reduced the voting power of the pledged shares and thereby further impaired the collateral. Defendants also allegedly caused false criminal charges to be initiated in Turkey against MCC and Nokia executives, on the claimed grounds that the executives had made "explicit and armed threats" against the Uzans to kill, blackmail, and abduct them, and offered to drop the charges if Plaintiffs deferred payment on the outstanding loans. Defendants also diverted revenue and assets away from Telsim.
Plaintiffs contend that the Defendants' activities throughout this period were intended to thwart Plaintiffs' ability to foreclose on the loans and exercise their rights with respect to the pledged interest.
Before this lawsuit was filed, ABN-Amro began an arbitration against Telsim in Switzerland. In this arbitration, Telsim attempted to reschedule its repayments based on a theory of "economic force majeure." Shortly after this lawsuit was filed, Telsim began an arbitration proceeding in Switzerland against MCC in which Telsim also invoked "economic force majeure" in an effort to reschedule its repayments. On June 7, 2002, Rumeli Telefon commenced two arbitrations against the Plaintiffs in Switzerland, seeking damages and Plaintiffs' compelled consent to the deposit of the pledged Telsim shares with the arbitral forum. On October 15, 2002, the district court issued an opinion granting Plaintiffs' motion to stay the Swiss arbitrations initiated by Telsim and Rumeli Telefon. That stay is among the rulings challenged on the appeal in Docket No. 02-9302, and subject to remand.2
In the complaint in the Southern District of New York, both Plaintiffs alleged violations of RICO (Counts I-IV), and sought the imposition of a constructive trust or equitable lien (Count XII). In addition, MCC alleged Illinois state and common law claims (Counts V-VII, XI), and violations of the Computer Fraud and Abuse Act, 18 U.S.C. § 1030(a)(4) (Count VIII), and the Electronic Communications Privacy Act, 18 U.S.C. §§ 2511(1)(a), 2701(a)(2) (Counts IX-X).
On May 9, 2002, following a six-day evidentiary hearing, the district court granted the Plaintiffs' motion for a preliminary injunction, which (inter alia) directs the Defendants "to deposit into the [district court's] registry ... the shares of stock of Telsim ... held by defendant Standart [Telekom] ... and issued to Standart [Telekom] during a meeting of Telsim shareholders on April 24, 2001, comprising at least 73.5% of the shares of Telsim stock currently outstanding." On May 21,...
To continue reading
Request your trial
-
Yucaipa Am. Alliance Fund I, L.P. v. Ehrlich
...124) Plaintiffs' losses arising from a failure to close the JCT Deal, if any, are not "clear and definite." See Motorola Credit Corp. v. Uzan , 322 F.3d 130, 135 (2d Cir.2003) ("a cause of action does not accrue under RICO until the amount of damages becomes clear and definite"). Moreover, ......
-
City of New York v. Cyco.Net, Inc.
...section 1962; (2) injury to business or property; and (3) causation of the injury by the defendant's violation. Motorola Credit Corp. v. Uzan, 322 F.3d 130, 135 (2d Cir.2003) (quoting Hecht v. Commerce Clearing House, Inc., 897 F.2d 21, 23 (2d Cir.1990)); see also Baisch v. Gallina, 346 F.3......
-
New Hope Family Servs., Inc. v. Poole
...moving party.’ " Allied Office Supplies, Inc. v. Lewandowski , 261 F. Supp. 2d 107, 108 (D. Conn. 2003) (quoting Motorola Credit Corp. v. Uzan , 322 F.3d 130, 135 (2d Cir. 2003) ). Moreover, in certain circumstances, an even higher standard applies. "The moving party must make a ‘clear’ or ......
-
Sky Med. Supply Inc. v. SCS Support Claims Servs., Inc.
...(quoting First Nationwide Bank, 27 F.3d at 767–69 (quoting Sedima, 473 U.S. at 496, 105 S.Ct. 3275 )); see also Motorola Credit Corp. v. Uzan, 322 F.3d 130, 135 (2d Cir.2003) (where amount of damages was not “clear and definite,” holding that “Plaintiffs lack statutory standing under RICO b......
-
Racketeer Influenced and Corrupt Organizations
...confer standing), overruled on other grounds by Hill v. Tangherlini, 724 F.3d 965, 967 n.1 (7th Cir. 2013); Motorola Credit Corp. v. Uzan, 322 F.3d 130, 136 (2d Cir. 2003) (holding lenders’ claims arising out of third parties’ failure to pay loans not ripe because loss was not clear and def......
-
RACKETEER INFLUENCED AND CORRUPT ORGANIZATIONS
...confer standing), overruled on other grounds by Hill v. Tangherlini, 724 F.3d 965, 967 n.1 (7th Cir. 2013); Motorola Credit Corp. v. Uzan, 322 F.3d 130, 136 (2d Cir. 2003) (holding lenders’ claims arising out of third parties’ failure to pay loans not ripe because loss was not clear and def......
-
Fraud and Misrepresentation
...the federal courts’ independent ability to grant injunctive relief derives from the Judiciary Act of 1789), rev’d on other grounds, 322 F.3d 130. 247. Agency Holding Corp. v. Malley-Duff & Assocs., 483 U.S. 143, 146-56 (1987); see also Prudential Ins. Co. of Am. v. United States Gypsum Co.,......