Archangel Diamond Corp. Liquidating Trust v. OAO Lukoil

• Decision Date: 18 December 2014
• Docket Number: Civil Case No. 12–cv–00041–RM–MJW
• Citation: 75 F.Supp.3d 1343
• Parties: Archangel Diamond Corporation Liquidating Trust, Plaintiff, v. OAO Lukoil, Defendant.
• Court: U.S. District Court — District of Colorado

75 F.Supp.3d 1343

Archangel Diamond Corporation Liquidating Trust, Plaintiff

v.OAO Lukoil, Defendant.

Civil Case No. 12–cv–00041–RM–MJW

United States District Court, D. Colorado.

Signed December 18, 2014

Bruce Samuel Marks, Marks & Sokolov, LLC, Philadelphia, PA, Chad Michael McShane, Robinson, Waters & O'Dorisio, P.C., Denver, CO, for Plaintiff.

Douglas B. Tumminello, Frederick J. Baumann, Lewis Roca Rothgerber LLP, Denver, CO, Michael K. Swan, Akin, Gump, Strauss, Hauer & Feld, LLP, Houston, TX, for Defendant.

ORDER

RAYMOND P. MOORE, United States District Judge

THIS MATTER comes before the Court on Defendant OAO Lukoil's (“Lukoil”) Motion to Dismiss (“Motion”) Plaintiff Archangel Diamond Corporation Liquidating Trust's (“Trust”), as successor-in-interest to Archangel Diamond Corporation (“Archangel”), Complaint pursuant to Fed.R.Civ.P. 12(b)(2), 12(b)(6), and under abstention theories. (ECF No. 29.) The Trust's action against Lukoil, a Russian corporation, arises from allegations that it joined and furthered an “illegal scheme” (“Illegal Scheme”) by Arkhangelskgeoldobycha (“AGD”), a Russian corporation, to deprive Archangel, a Canadian corporation, of the benefits of a “rich” diamond discovery in Russia. The primary issues before the Court are whether this action should be dismissed for lack of personal jurisdiction and/or forum non conveniens .

The participants (AGD and Lukoil) in the alleged Illegal Scheme are Russian entities and the party injured (Archangel) was a Canadian corporation. Lukoil's conduct complained of, however, had connections not only to Russia but also to Colorado as that was where Archangel had its principal place of business and felt the effects of Lukoil's alleged conduct—the lulling of Archangel into investing more funds to potentially develop the diamond discovery and the bankruptcy of Archangel in Colorado. But, the Colorado state courts have already determined that they may not exercise specific or general personal jurisdiction over Lukoil, albeit under Colorado's long arm statute and the Fourteenth Amendment, on the claims now before this Court. And, after a careful consideration of the record and the applicable laws, the Court reaches the same conclusion as that of the Colorado state courts—that Lukoil is not subject to personal jurisdiction in Colorado – and, further, that this action should be dismissed based on forum non conveniens .

I. BACKGROUND: CLAIMS AGAINST LUKOIL

In Order to understand the claims against Lukoil, events which allegedly occurred prior to Lukoil's involvement merit discussion.

A. THE RUSSIAN DIAMOND LICENSE

1. The Russian Connections

In 1993, Russia announced a competitive tender for the development of diamonds in the Archangelsk Region in Northern Russia. (ECF No. 1, Complaint, ¶¶ 27, 28.) Archangel's predecessor¹ negotiated a joint venture agreement with State Enterprise Arkhangelgeology (“AGE”), a Russian state corporation, to submit a tender to develop the “Verkhotina Area” in the Archangelsk Region. (Complaint, ¶¶ 16, 29.) Thereafter, in November 1993, Archangel entered into an agreement (the “1993 Agreement”) with AGE to form a joint venture in which AGE would bid for the license and Archangel would provide up to $5.3 Million funding for the diamond exploration/development license. (Complaint, ¶ 30.) In December 2013, AGE won the tender and received the Diamond License issued by the Russian government. (Complaint, ¶ 30.)

In January 1994, Archangel and AGE agreed that additional funds would be needed and the Diamond License would be transferred to the joint venture, as subsequently memorialized in February 25, 1994 (the “1994 Memorandum”) (1993 Agreement and 1994 Memorandum, collectively, “Agreement”). (Complaint, ¶ 31.) The parties incorporated Almazny Bereg (“AB”) as the joint venture company. (Complaint, ¶ 32.)

In approximately May 1995, a new law permitted the transfer of the Diamond License from AGE to the joint venture. (Complaint, ¶ 35.) AGE was subsequently privatized in December 1995, and became known as AGD. (Complaint, ¶ 35.)

In approximately February 1996, a rich pipe of diamonds was discovered in the Verkhotina Area. (Complaint, ¶ 37.) This is when AGD is said to have begun its Illegal Scheme to deprive Archangel of its interest in the diamond discovery. In April 1996, AGE transferred the Diamond License to AGD, which Archangel thereafter requested be transferred to AB. (Complaint, ¶¶ 36, 37.) AGD, however, threatened to transfer the Diamond License to a new company, and not AB. (Complaint, ¶¶ 38, 39.)

2. The Colorado Connections

In February 1997, Archangel hired a Colorado resident (Gary Davis) as Chief Financial Officer and moved its financial center from Canada to Colorado. (Complaint, ¶¶ 4, 45.) Thereafter, AGD engaged in various actions in an attempt to avoid the parties' agreement to transfer the Diamond License. Initially, in April 1997, AGD informed Archangel that the Diamond License would be transferred to the joint venture. (Complaint, ¶ 40.) In August 1997, however, AGD informed Archangel that it was withdrawing from the Agreement and selling its shares of AB. (Complaint, ¶ 41.)² AGD also sent a letter of its decision to Archangel's financial advisors, purportedly to disrupt Archangel's ability to finance the project. (Complaint, ¶ 43.) However, AGD subsequently agreed to abide by the Agreement and sent Archangel a letter confirming the Agreement was in effect, and that Archangel should proceed to fund a work program.

(Complaint, ¶¶ 44, 91a.) Unbeknownst to Archangel, AGD was planning to transfer its shares in AB to a newly formed subsidiary which, under Russian law, would have prohibited AGD from transferring the Diamond License to AB. (Complaint, ¶ 44.)

By November 1997, Archangel hired another Colorado resident (Timothy Haddon) as the Chief Executive Officer and moved its principal place of business to Colorado. (Complaint, ¶¶ 4, 45.) On December 18, 1997, Archangel notified AGD that Archangel had moved its headquarters to Colorado. (Complaint, ¶ 46.) AGD confirmed the Diamond License would be transferred to AB following completion of and payment for the work program. In reliance on AGD's representations, Archangel signed the work program and agreed to invest an additional $5.2 Million in funds. (Complaint, ¶ 47.) At that time, Archangel had already contributed $4.9 Million to the project. (Complaint, ¶ 48.)

B. LUKOIL'S ACTIONS WHILE ARCHANGEL WAS IN COLORADO

1. Lukoil Allegedly Joins the Illegal Scheme

In about February 1998, Lukoil, a Russian public corporation and Russia's largest oil company, obtained control over AGD by acquiring a majority of its shares and appointing a former Lukoil executive to head AGD. Lukoil, however, assured Archangel that AGD would honor the Agreement. (Complaint, ¶¶ 4, 15, 50–53, 87.) In a March 17, 1998 memo, AGD stated to Archangel that the Agreement remained in effect. (Complaint, ¶ 91.b.) In a letter dated April 3, 1998, Lukoil implied to Archangel that it would abide by the Agreement. (Complaint, ¶ 52.) By May 1998, however, AGD (allegedly under the control of Lukoil) informed Archangel that it would not honor the Agreement and planned to transfer the Diamond License to another entity. (Complaint, ¶ 54.) Nonetheless, between May and June 1998, AGD had communications with Archangel concerning the ongoing status of the diamond project. (Complaint, ¶ 91d & e.)

By August 1998, however, pursuant to the Agreement, Archangel initiated arbitration proceedings in Stockholm (“Stockholm Arbitration”) against AGD, Lukoil and others. The arbitrators decided that it had jurisdiction to hear Archangel's claim against AGD, but not Lukoil. (Complaint, ¶ 56.) In the arbitration, AGD and Archangel agreed that Russian law applied to their dispute and relations in general. (ECF No. 29–20, page (p.) 4, ¶ 132; No. 47, p. 40 n.26.)³ Nonetheless, Archangel subsequently argued that Swedish law applied. (ECF No. 47, p. 40 n. 26; No. 47–69, pp. 138–159.)

While the arbitration was pending, AGD and Archangel resolved their dispute and entered into an agreement dated July 15, 1999 (the “1999 Agreement”). (Complaint, ¶ 57.) AGD communicated to Archangel in Colorado on many occasions between July 1999 and August 2000 concerning the diamond project. (Complaint, ¶ 91j–s.) In reliance on AGD's communications that the agreements concerning the diamond project would be performed—communications allegedly directed by Lukoil—Archangel funded its operations in the United States and Russia, and authorized (through the mail and wire) the transmission of funds to AGD to fund the diamond venture. (Complaint, ¶¶ 91, 92.)

AGD did not, however, honor the Agreement or the 1999 Agreement and did not transfer the Diamond License to the joint venture. Accordingly, Archangel reactivated the Stockholm Arbitration. (Complaint, ¶ 63.) AGD challenged jurisdiction again, but this time the arbitrators decided they lacked jurisdiction to hear the dispute. (Complaint, ¶ 65.) Thereafter, on November 27, 2001, Archangel filed suit against Lukoil and AGD in the District Court, City and County of Denver, Colorado, which the trial court dismissed for lack of personal jurisdiction. (Complaint, ¶ 66.) In 2000 or 2001, Lukoil acquired the remaining interest in AGD. (Complaint, ¶ 50.)

2. Archangel's Move Back to Canada Due to Financial Difficulties

By December 2002, after litigating⁴ against AGD and Lukoil for so many years, Archangel was out of money. Archangel was able to find investors associated with DeBeers, a large diamond producer, to provide funding to prosecute its claims, but this required Archangel to move its principal place of business backed to Canada. (Complaint, ¶¶ 13, 67, 68.)

Archangel successfully appealed the arbitrators' decision and filed a renewed arbitration (Complaint, ¶ 69). Archangel also successfully appealed the dismissal of the Colorado state court action but only as to Lukoil. (Complaint, ¶ 70.) Subsequent to these decisions, Archangel, DeBeers, AGD,...