Barantsevich v. VTB Bank

• Decision Date: 29 May 2013
• Docket Number: Case No. CV 12–08993 MMM (AJWx).
• Citation: 954 F.Supp.2d 972
• Parties: Anzhey BARANTSEVICH, an individual, Plaintiff, v. VTB BANK, a Russian corporation, VTB Capital AM formerly known as VTB Bank Asset Management, a Russian corporation, VTB Capital, a New York corporation, and Beau Cameron, an individual, Defendants.
• Court: U.S. District Court — Central District of California

954 F.Supp.2d 972

Anzhey BARANTSEVICH, an individual, Plaintiff,

v.VTB BANK, a Russian corporation, VTB Capital AM formerly known as VTB Bank Asset Management, a Russian corporation, VTB Capital, a New York corporation, and Beau Cameron, an individual, Defendants.

Case No. CV 12–08993 MMM (AJWx).

United States District Court, C.D. California.

May 29, 2013.

Belinda M. Meyer, Law Offices of Lin Meyer Inc., Tarzana, CA, for Anzhey Barantsevich.

Catherine Valerio Barrad, Mark Clifton Brown, Maria D. Melendez, Sidley Austin LLP, New York, NY, for VTB Bank, VTB Capital AM and VTB Capital.

R. Thomas Wire, R. Thomas Wire Law Offices, Westlake Village, CA, for Beau Cameron.

ORDER GRANTING VTB BANK'S MOTION TO DISMISS PLAINTIFF'S FIRST AMENDED COMPLAINTS

MARGARET M. MORROW, District Judge.

On March 18, 2012, Anzhey Barantsevich filed this action against VTB Bank.¹On January 4, 2013, VTB Bank moved to dismiss the complaint pursuant to Rules 12(b)(2) and 12(b)(6) of the Federal Rules of Civil Procedure.² Plaintiff filed a first amended complaint that added VTB Capital AM, VTB Capital, and Beau Cameron as defendants on January 25, 2013.³ At a scheduling conference on February 25, 2013, the court advised the parties that it would deem VTB Bank's Rule 12(b)(2) motion as directed to the first amended complaint; the court denies the Rule 12(b)(6) motion as moot in light of the filing of the amended complaint. Plaintiff filed his opposition to VTB Bank's motion on March 6, 2013.⁴ VTB Bank filed its reply on March 18.⁵

I. FACTUAL BACKGROUND

This case concerns a failed software venture in Los Angeles, California. VTB Bank is a Russian “open joint stock company.” ⁶ Its “core business” is the provision of banking and lending services to corporate customers.⁷ VTB Bank has approximately twenty subsidiaries throughout the world that are banks and financial companies; collectively, these companies are known as the VTB Group.⁸ Among the bank's subsidiaries are VTB Capital AM, a Russian company that has its headquarters in Moscow.⁹ VTB Capital AM manages investment portfolios and venture capital funds for its clients. ¹⁰ It served as the investment manager for the venture fund at issue in this case. VTB Bank is also the parent of VTB Capital, Inc., a Delaware corporation with its principal place of business in New York.¹¹

Plaintiff is a California citizen who resides in Los Angeles.¹² In 2004 or 2005, he met defendant Beau Cameron, who was a freelance special effects artist.¹³ A few years later, plaintiff and Cameron decided to form a business to create visual effects software for use in movies.¹⁴ Plaintiff and Cameron turned to VTB Group to locate funding for the venture, ¹⁵ and in that regard, met with Andrei Zuzin and Alexandra Johnson. ¹⁶ Zuzin was an employee of VTB Capital AM,¹⁷ while Johnson was an independent consultant working for VTB Capital AM.¹⁸ The discussions occurred both in Russia and California.¹⁹

Plaintiff contends VTB Group lawyers told him that, to facilitate the investment, he would have to form a shell company in Moscow; in response, he organized Zao Beau Laboratories (“Zao Labs”).²⁰ Thereafter, VTB Capital AM provided equity financing to Zao Labs.²¹ The investment was made using funds held by a closed-end mutual investment venture fund in which VTB Bank and an entity known as the Russian Venture Company were unitholders. ²² VTB Capital AM became a minority shareholder of Zao Labs; ²³ the majority of shares were owned by Beau Cameron, Inc., a company jointly owned by plaintiff and Cameron.²⁴ Plaintiff, Zuzin, and Johnson were among the directors placed on the board of Zao Labs.²⁵ Plaintiff and Cameron also established a company in the United States, Beau Laboratories (“Beau Labs”).²⁶ Beau Labs was formed as a wholly-owned subsidiary of Zao Labs.²⁷ The investment funds from VTB Capital AM were to be funneled through Zao Labs in Russia to Beau Labs in California, where they were to be used to develop software.²⁸

VTB Capital AM's total investment was $7 million. It purportedly told plaintiff that, in order to protect its investors, the money would be paid in two phases; specifically, it advised that initially, $4 million would be wired to Beau Labs (through Zao Labs), and that the remainder of the funds would be paid once plaintiff and Cameron had made sufficient progress developing the software.²⁹ Plaintiff asserts he was advised that $2 million of the $7 million investment was to be repaid not to VTB Capital AM, but to two “entities that VTB Bank would designate.” ³⁰ When the first $4 million payment was made, Zuzin informed plaintiff that he would receive wiring instructions from Pete Gub regarding the entities that were to be repaid.³¹ Plaintiff was subsequently told the funds were to be repaid to the offshore bank accounts of companies named Vestax and Bigland.³² Zuzin said that Bigland was owned by Karman Ulukhanov, who was a member of the Zao Labs board of directors, and that funds were to be paid to him as a “finder's fee” for arranging the deal.³³ He reported that VTB Bank wanted funds wired to Vestax “in order to satisfy the Russian Government requirement that a portion of the investment funds contributed to Beau [Labs] be utilizedby Russian companies.” ³⁴

Plaintiff alleges that these representations were false, and that in fact the funds were being wired to Bigland and Vestax as “illegal kickback[s].” ³⁵ Zuzin purportedly instructed plaintiff to report the wire transfers as “Research and Development Costs,” and present the expenses to the Zao Labs board for approval.³⁶ Plaintiff followed Zuzin's instructions, wiring the funds as requested and presenting the expenses to the Zao Labs board. ³⁷ The board did not question the Vestax and Bigland transfers. ³⁸

In early 2009, plaintiff's relationship with Cameron began to sour.³⁹ He began to question whether Cameron was actually developing software, while Cameron expressed dissatisfaction with his level of compensation.⁴⁰ Soon thereafter, both plaintiff and Cameron reported to the Zao Labs board that the other had stolen money from Beau Labs.⁴¹ Cameron purportedly told the board that plaintiff had wrongfully converting the funds wired to Vestax and Bigland.⁴² As a result, plaintiff lost his place on the Zao Labs board and was replaced by a VTB Group employee, chosen by Beau Cameron, Inc., the majority shareholder in Zao Labs.⁴³ Plaintiff asserts that “VTB Bank agreed to look the other way on monies proved to them to be stolen” by Cameron,⁴⁴ and instead made plaintiff the “fall guy.” ⁴⁵

Subsequently, plaintiff filed this action. He alleges, inter alia, that defendants, including VTB Bank, engaged in fraud, unfair business practices, and violated the Racketeer Influenced and Corrupt Organizations Act (“RICO”), 18 U.S.C. §§ 1961–1968. He asserts that the court can exercise personal jurisdiction over VTB Bank for a variety of reasons. The court addresses each argument below.

II. DISCUSSION

A. Legal Standard Governing Rule 12(b)(2) Motions to Dismiss

When a defendant moves to dismiss for lack of personal jurisdiction, the plaintiff bears the burden of demonstrating that the court may properly exercise jurisdiction over the defendant. Pebble Beach Co. v. Caddy, 453 F.3d 1151, 1154 (9th Cir.2006); Bohara v. Backus Hosp. Med. Benefit Plan, 390 F.Supp.2d 957, 961 (C.D.Cal.2005) (citing Ziegler v. Indian River Cnty., 64 F.3d 470, 473 (9th Cir.1995)). Absent formal discovery or an evidentiary hearing, a plaintiff need make only a prima facie showing that jurisdiction is proper to survive dismissal. Pebble Beach, 453 F.3d at 1154;Rio Prop., Inc. v. Rio Int'l Interlink, 284 F.3d 1007, 1019 (9th Cir.2002); Ziegler, 64 F.3d at 473.

To satisfy his burden, a plaintiff can rely on the allegations in his complaint to the extent they are not controverted by the moving party. See, e.g., Doe v. Unocal Corp., 248 F.3d 915, 922 (9th Cir.2001) (“Where not directly controverted,plaintiff's version of the facts is taken as true for the purposes of a 12(b)(2) motion to dismiss”). If defendants adduce evidence controverting the allegations, however, the plaintiff must “ ‘come forward with facts, by affidavit or otherwise, supporting personal jurisdiction.’ ” Scott v. Breeland, 792 F.2d 925, 927 (9th Cir.1986) (quoting Amba Mktg. Sys., Inc. v. Jobar Int'l, Inc., 551 F.2d 784, 787 (9th Cir.1977)). “Conflicts between [the] parties over statements contained in affidavits must be resolved in the plaintiff's favor.” Schwarzenegger v. Fred Martin Motor Co., 374 F.3d 797, 800 (9th Cir.2004); see also AT & T v. Compagnie Bruxelles Lambert, 94 F.3d 586, 588 (9th Cir.1996) (“In determining whether [the plaintiff] has met this burden, uncontroverted allegations in [the] complaint must be taken as true, and ‘conflicts between the facts contained in the parties' affidavits must be resolved in [plaintiff's] favor for purposes of deciding whether a prima facie case for personal jurisdiction exists,’ ” quoting WNS Inc. v. Farrow, 884 F.2d 200, 203 (5th Cir.1989)).

“The general rule is that personal jurisdiction over a defendant is proper if it is permitted by a long-arm statute and if the exercise of that jurisdiction does not violate federal due process.” Pebble Beach, 453 F.3d at 1154–55 (citing Fireman's Fund Ins. Co. v. Nat'l Bank of Cooperatives, 103 F.3d 888, 893 (9th Cir.1996)); see also Metro–Goldwyn–Mayer Studios Inc. v. Grokster, Ltd., 243 F.Supp.2d 1073, 1082 (C.D.Cal.2003) (citing Aanestad v. Beech Aircraft Corp., 521 F.2d 1298, 1300 (9th Cir.1974)). Because California authorizes jurisdiction to the full extent permitted by the Constitution, see Cal.Code Civ. Proc. § 410. 10, the only question the court must ask is whether the exercise of jurisdiction over defendants would be consistent with due process. Harris Rutsky & Co. Ins. Servs., Inc. v. Bell & Clements Ltd., 328 F.3d 1122, 1129 (9th Cir.2003); Peterson v. Highland Music, Inc., 140 F.3d 1313, 1317 n. 2 (9th Cir.1998).

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