416 F.3d 146 (2nd Cir. 2005), 04-1357, Norex Petroleum Ltd. v. Access Industries, Inc.

Docket Nº:Docket No. 04-1357-CV.
Citation:416 F.3d 146
Party Name:NOREX PETROLEUM LIMITED, Plaintiff-Appellant, v. ACCESS INDUSTRIES, INC., Renova, Inc., Leonard Blavatnik, Victor Vekselberg, Alfa Group Consortium, Crown Finance Foundation, CTF Holdings, Ltd., Alfa Finance Holdings, S.A., Crown Luxembourg Holdings, S.A., Elliot Spitz, Tyumen Oil Company, Simon Kukes, Joseph Bakaleynik, LT Enterprises Limited, San
Case Date:July 21, 2005
Court:United States Courts of Appeals, Court of Appeals for the Second Circuit

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416 F.3d 146 (2nd Cir. 2005)

NOREX PETROLEUM LIMITED, Plaintiff-Appellant,

v.

ACCESS INDUSTRIES, INC., Renova, Inc., Leonard Blavatnik, Victor Vekselberg, Alfa Group Consortium, Crown Finance Foundation, CTF Holdings, Ltd., Alfa Finance Holdings, S.A., Crown Luxembourg Holdings, S.A., Elliot Spitz, Tyumen Oil Company, Simon Kukes, Joseph Bakaleynik, LT Enterprises Limited, Sandwell Enterprises Limited, Eastmount Properties Limited and Aston Trustees Limited, Defendants-Appellees.

Docket No. 04-1357-CV.

United States Court of Appeals, Second Circuit

July 21, 2005

Argued: Oct. 26, 2004.

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Bruce S. Marks, Marks & Sokolov, LLC, Philadelphia, Pennsylvania (Peter J.W. Sherwin, Proskauer Rose LLP, New York, New York; George C. Pratt, Farrell Fritz, P.C., Uniondale, New York, on the brief), for Plaintiff-Appellant.

Kim Koopersmith (Christopher T. Schulten, on the brief), Akin Gump Strauss Hauer & Feld, New York, New York, for Alfa Group Consortium, Crown Finance Foundation, CTF Holdings, Ltd., and Alfa Finance Holdings, S.A., submitting on behalf of all Defendants-Appellees.

Of Counsel: White & Case LLP (Owen C. Pell, Robert M. Kelly, Timothy S. Pfeifer), New York, New York, for Tyumen Oil Company, Simon Kukes, and Joseph Bakaleynik.

Reed Smith LLP (Herbert F. Kozlov, Kenneth Dana Greenwald), New York, New York, for Renova, Inc. and Victor Vekselberg.

Morrison & Foerster LLP (Mark P. Ladner), New York, New York, for Sandwell Enterprises Limited, Eastmount Properties Limited, and Aston Trustees Limited.

Curtis, Mallet-Prevost, Colt & Mosle LLP (Turner P. Smith, Myles K. Bartley), New York, New York, for Access Industries, Inc. and Leonard Blavatnik.

Alston & Bird LLP (John F. Cambria), New York, New York, for Elliot Spitz and Crown Lux Holdings, S.A.R.L.

Eric J. Grannis, New York, New York, for LT Enterprises Limited.

Before: WINTER, KATZMANN, and RAGGI, Circuit Judges.

RAGGI, Circuit Judge.

For most of the 1990s, plaintiff-appellant Norex Petroleum Limited ("Norex") was the majority shareholder of ZAO Corporation Yugraneft ("Yugraneft"), a Russian oil company. In 2002, Norex sued defendants-appellees Access Industries, Inc.; Renova, Inc.; Leonard Blavatnik; Victor Vekselberg; Alfa Group Consortium; Crown Finance Foundation; CTF Holdings, Ltd.; Alfa Finance Holdings, S.A.; Crown Luxembourg Holdings, S.A.; Elliot Spitz; Tyumen Oil Company ("TNK"); Simon

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Kukes; Joseph Bakaleynik; LT Enterprises Limited; Sandwell Enterprises Limited; Eastmount Properties Limited; and Aston Trustees Limited (collectively "the defendants") for substantive and conspiratorial violations of the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. §§ 1961-1968, in connection with their alleged takeover of Yugraneft. Norex now appeals from a judgment of the United States District Court for the Southern District of New York (Laura Taylor Swain, Judge ), entered on March 3, 2004, granting defendants' motion to dismiss Norex's complaint on the ground of forum non conveniens. See Norex Petroleum Ltd. v. Access Indus., Inc., 304 F.Supp.2d 570, 584 (S.D.N.Y.2004). It contends, inter alia, that the district court erred at the first step of forum non conveniens analysis by giving undue weight to a presumption that Canadian-based Norex's choice of a New York forum was not based on genuine convenience without engaging in the sliding-scale analysis set forth in Iragorri v. United Technologies Corp., 274 F.3d 65, 71-73 (2d Cir.2001) ( en banc ). Norex further contends that the defendants failed at the second step of forum non conveniens analysis to carry their burden to demonstrate that Russia presently affords Norex an adequate alternative forum for litigation of the issues underlying its RICO claims. We agree with both arguments and, accordingly, vacate the forum non conveniens dismissal and remand the case to the district court for further proceedings consistent with this opinion.

We further note that, to the extent the district court's forum non conveniens analysis was informed by an assumption that the preclusive effect of a 2002 Russian default judgment against Norex would be the same in the United States as in Russia, these issues are, in fact, distinct. Where a foreign jurisdiction would deem a claim precluded, it does not afford the present available alternative forum for litigation necessary to support forum non conveniens dismissal. United States recognition of a final foreign judgment may support dismissal of a related action in our courts, but on a ground of international comity more akin to res judicata than forum non conveniens. In this case, however, the district court could not recognize, much less give preclusive effect to, the Russian default judgment against Norex without affording Norex an opportunity to be heard on its challenge to the Russian court's exercise of personal jurisdiction. Accordingly, dismissal on preclusion grounds is premature. The parties may, however, pursue the matter further on remand.

I. Background

For purposes of this appeal, we accept the facts pleaded in plaintiff's complaint as true. See Wiwa v. Royal Dutch Petroleum Co., 226 F.3d 88, 93 n. 1 (2d Cir.2000).

A. The Parties

Norex is a Cypriot corporation owned by Appalachia Investments, Ltd., a California corporation beneficially owned by Alex Rotzang, a Canadian citizen. Norex's principal place of business is Calgary, Canada. The defendant corporations and associations are variously organized under the laws of New York (Access Industries and Renova); several European sovereignties, including Lichtenstein (Crown Finance Foundation), Gibraltar (CTF Holdings), Luxembourg (Alfa Finance Holdings and Crown Luxembourg Holdings), 1 the

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Russian Federation (TNK), 2 and the Isle of Man (Sandwell Enterprises, Eastmount Properties, and Aston Trustees Limited); as well as the Bahamas (LT Enterprises). Of the five individually named defendants, four are United States citizens: (1) Leonard Blavatnik, who maintains a residence in New York City and owns and controls defendant New York corporations Access Industries and Renova; (2) Elliot Spitz, who allegedly managed and supervised various companies owned by Crown Luxembourg Holdings; (3) Simon Kukes, the president and chief executive officer of TNK; and (4) Joseph Bakaleynik, the first vice president of TNK. The fifth individual defendant, Victor Vekselberg, another owner of defendant Renova, is a permanent resident of the United States.

B. The Charged Racketeering Scheme

During the 1990s, Norex acquired a 60% interest in Yugraneft, with the remaining 40% owned by another Russian oil company, OAO Chernogorneft. Norex alleges that, by the end of the decade, defendants had hatched a scheme to take over Yugraneft by means of various RICO predicate acts of mail and wire fraud, extortion, interstate and foreign travel in aid of racketeering enterprises, and money laundering. See 18 U.S.C. §§ 1961(1)(B), 1962. While many of these predicate acts allegedly occurred entirely in Russia, others involved wiring money through United States banks to bribe officials in Russia, to buy corporate assets in Russia, or to hide the profits of allegedly illegal activities in Russia. In its brief before this court, Norex asserts that defendants "resident in the S.D.N.Y. masterminded and controlled the scheme out of that district." Appellant's Br. at 11-12 (emphasis omitted). Although Norex's factual allegations are complex, we briefly outline those relevant to resolution of this appeal.

1. The Unpaid Oil Dispute

In 1999, an audit of Yugraneft's books and records raised questions regarding the adequacy of the initial capital contribution made by Chernogorneft. As a result, Norex's equity interest in Yugraneft was increased and Chernogorneft's reduced. Meanwhile, Chernogorneft, now controlled by TNK, found itself unable to repay Yugraneft for 70,000 metric tons of oil, part of a larger oil loan made in 1993. At the same time, another company in which TNK also owned a substantial interest owed Yugraneft payment for 102,000 metric tons of oil.

In November 1999, TNK official German Khan met with Norex Chairman Alex Rotzang in San Francisco and demanded that Yugraneft forgive the aforementioned oil debts, threatening that otherwise TNK "would run over Yugraneft like a steamroller," because TNK "eliminate[s] those who go against us." Compl. ¶ 199. The following year, in August 2000, Khan urged Yugraneft General Director Lyudmilla Kondrashina to settle the oil debt for 30% of its value, threatening that a refusal would leave Yugraneft with nothing because TNK had its "own people at all levels of government." Id. ¶ 202. Khan repeated the 30% offer in January 2001, warning Kondrashina that, unless she agreed, TNK would take over Yugraneft. He stated that any litigation to challenge such a takeover would prove futile because TNK " 'controlled' Russia's Supreme Arbitration Court." Id. ¶ 206.

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2. The Defendants' Takeover of Yugraneft

In fact, extensive litigation did ensue in Russian courts regarding control of Yugraneft, with results generally adverse to Norex. 3 Of particular relevance to this appeal is a lawsuit filed by TNK in Siberia on June 25, 2001, seeking to invalidate a large portion of Norex's equity interest in Yugraneft on the ground that Norex's capital contribution in the form of "know how" had been improperly valued. Norex insists that it was never properly served in this action, which the parties refer to as the "Know-How Case." It further contends that TNK corrupted the court proceedings, obtaining an ex parte injunction on June 26, 2001, that barred Norex from voting the disputed Yugraneft shares at shareholders' meetings. Thereafter, the defendants purportedly fabricated the minutes of a June 28, 2001 Yugraneft shareholders'...

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