Base Metal Trading Sa v. Russian Aluminum

• Decision Date: 27 March 2003
• Docket Number: No. 00 CIV.9627 JGK.,00 CIV.9627 JGK.
• Citation: 253 F.Supp.2d 681
• Parties: BASE METAL TRADING SA, Base Metal Trading Ltd., Alucoal Holdings Ltd., Mikom, Davis International, LLC, Holdex, LLC, Foston Management, Ltd., Omni Trusthouse, Ltd., Nexis Products, LLC, and Polyprom, Ltd., Plaintiffs, v. RUSSIAN ALUMINUM, Rual Trade Ltd., Sibirsky Aluminum Products USA Corp. a/k/a Sibirsky Aluminum (US), Sibirsky Aluminum (Russia), Bauxal Management, SA, Metcare Management, SA, Unimetal Limited, SA, Oleg Deripaska, Mikhail Chernoi, Blonde Management, Inc., Blonde Investments, Corp., Pan-American Corp., Arnold Kislin, Iskander Makhmudov, Moskovskiy Delovoi Mir Bank, Novokuznetsk Aluminum Zavod, New Start Group Corp., Venitom Corp., Unidale LLC, and Investland, LLC. Defendants.
• Court: U.S. District Court — Southern District of New York

253 F.Supp.2d 681

BASE METAL TRADING SA, Base Metal Trading Ltd., Alucoal Holdings Ltd., Mikom, Davis International, LLC, Holdex, LLC, Foston Management, Ltd., Omni Trusthouse, Ltd., Nexis Products, LLC, and Polyprom, Ltd., Plaintiffs, v. RUSSIAN ALUMINUM, Rual Trade Ltd., Sibirsky Aluminum Products USA Corp. a/k/a Sibirsky Aluminum (US), Sibirsky Aluminum (Russia), Bauxal Management, SA, Metcare Management, SA, Unimetal Limited, SA, Oleg Deripaska, Mikhail Chernoi, Blonde Management, Inc., Blonde Investments, Corp., Pan-American Corp., Arnold Kislin, Iskander Makhmudov, Moskovskiy Delovoi Mir Bank, Novokuznetsk Aluminum Zavod, New Start Group Corp., Venitom Corp., Unidale LLC, and Investland, LLC. Defendants.

No. 00 CIV.9627 JGK.

United States District Court, S.D. New York.

March 27, 2003.

Robert Abrams, Stroock & Stroock & Lavan, L.L.P., New York City, Bruce S.

Marks, Marks & Sokolov, L.L.P., Philadelphia, PA, Raymond N. Hannigan, Herrick, Feinstein, LLP, New York City, for plaintiffs.

Michael D. Burrows, Robert M. Buschmann, Winston & Strawn, New York City, for Sibirsky Aluminum Group, Sibirsky Aluminum Products USA Corp., Bauxal Management, S.A., Metcare Management, S.A., Unimetal Limited, S.A., and Mr. Oleg Deripaska.

Ira M. Feinberg, John A. Redmon, Hogan & Hartson L.L.P., New York City, for Novokuznetsk Aluminum Zavod.

Paul R. Grand, Morvillo, Abramowitz, Grand, Iason & Silberberg, P.C., New York City, for Russian Aluminum, RUAL Trade Ltd.

Richard Schaeffer, Peter Venaglia, Dornbush, Mensch, Mandelstam & Schaeffer, LLP, New York City, for New Start Group Corp., Venitom Corp., Unidale LLC, Investland, LLC.

Victor Roger Rubin, International Law Counsel, PC, New York City, for Mikhail Chernoi, Chernoi Companies.

Raymond L. Vandenberg, Vandenberg & Feliu, LLP, New York City, for Moskovskiy Delovoi Mir Bank.

Brian S. Cousin, Greenberg Traurig, LLP, New York City, for Panamerican Trade Corp.

Elizabeth M. Johnson, Law Offices of Lawrence S. Goldman, Lisa C. Cohen, Schindler Cohen & Hochman LLP, New York City, for Arnold Kislin and Blonde Managemnet, Inc.

Robert E. Hauberg, Jr., Baker, Donelson, Bearman & Cauldwell, Washington, DC, for Iskander Makhmudov.

OPINION AND ORDER

KOELTL, District Judge.

This is a case about two Russian companies, Novokuznetsk Aluminum Zavod ("NKAZ") and Kochkanarsky GOK ("GOK"), Russia's largest producers of aluminum and vanadium, respectively. The plaintiffs' claims arise from the defendants' alleged illegal takeovers of these companies by means including bribery of local Russian political officials, judicial corruption in Russia, and armed force. The plaintiffs argue that the defendants drove NKAZ and GOK into bankruptcy and then gained control of the companies through sham bankruptcy proceedings overseen by allegedly corrupt local Russian judges. The plaintiffs seek over $3 billion for alleged damages. The defendants have now moved to dismiss the current Complaint on many bases, including forum non conveniens.

The plaintiffs, Base Metal Trading, SA ("BMT SA"), Base Metal Trading, Ltd. ("BMT Ltd."), Alucoal Holdings, Ltd. ("Alucoal") (collectively the "BMT Plaintiffs"), MIKOM (collectively, with the BMT Plaintiffs the "NKAZ Plaintiffs" or the "Aluminum Plaintiffs"); Davis International, LLC ("Davis"), Holdex, LLC ("Holdex"), Foston Management, Ltd. ("Foston"), Omni Trusthouse, Ltd. ("Omni") (collectively the "Davis Plaintiffs"); Nexis Products, LLC ("Nexis") and Polyprom (collectively the "GOK Plaintiffs") bring this action for violations of the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1961 et seq., intentional interference with contract, and conversion. The defendants are Sibirsky Aluminum Group ("Sibirsky Russia"), Sibirsky Aluminum Products USA Corp. ("Sibirsky USA"), Bauxal Management, S.A. ("Bauxal"), Metcare Management, S.A. ("Metcare"), Unimetal Limited, S.A. ("Unimetal"), Mr. Oleg Deripaska ("Deripaska") ("collectively the "Sibirsky Defendants"), Russian Aluminum, RUAL Trade, Ltd. ("RUAL"), Mikhail Chernoi ("Chernoi"), Blonde Management, Inc. ("Blonde Management"), Blonde Investments, Corporation ("Blonde Investments"), Pan-American Corporation ("Pan-American"), Arnold Kislin ("Kislin"), Iskander Makhmudov ("Makhmudov"), Moskovskiy Delovoi Mir Bank ("MDM Bank"), NKAZ, New Start Group Corporation ("New Start"), Venitom Corporation ("Venitom"), Unidale LLC ("Unidale") and Investland, LLC ("Investland") (New Start, Venitom, Unidale and Investland hereinafter the "GOK Defendants").

The Sibirsky Defendants now move to dismiss on the basis of forum non conveniens and all defendants join this motion. MDM Bank has also filed a motion to dismiss for forum non conveniens. The Sibirsky Defendants move pursuant to Rules 12(b)(1) and 12(b)(6) of the Federal Rules of Civil Procedure to dismiss for lack of subject matter jurisdiction and failure to state a claim, as well as failure to plead fraud with particularity as required by Federal Rule of Civil Procedure 9(b). All defendants join in this motion. Two motions to dismiss on the ground of comity have also been filed, one by NKAZ and the other by the GOK Defendants. All defendants join in these motions.

I.

On December 19, 2000, the BMT Plaintiffs—BMT SA, BMT Ltd. and Alucoal— filed suit in this Court alleging that defendant Deripaska, the head of Sibirsky Aluminum, and his partner, defendant Chernoi, conspired with others to monopolize the Russian aluminum industry beginning in the 1990's. (Original Compl. If 1.) The Complaint alleged that Sibirsky, comprising Sibirsky Aluminum and its affiliates, including Russian Aluminum, took over NKAZ through rigged bankruptcy proceedings in the Kemerovo Region of Russia. (Original Compl. ¶ 5.) The Kemerovo Region is located in Western Siberia north of the border between Kazakhstan and Mongolia. Once in control of NKAZ, Sibirsky terminated contracts between NKAZ and the BMT Plaintiffs and forced the BMT Plaintiffs to enter into less favorable contracts with Sibirsky affiliates. (Original Compl. ¶ 6.) None of the BMT Plaintiffs are United States citizens or residents. (Am.Compl.¶¶ 23, 25, 27.)

In May, 2001, all of the defendants filed motions to dismiss on a series of grounds, including forum non conveniens and lack of subject matter jurisdiction. In response, the BMT Plaintiffs amended the Complaint on August 3, 2001 to add seven new plaintiffs, including three United States corporations.¹ The Amended Complaint added twelve new defendants and a new scheme to take over GOK, in addition to NKAZ. The Amended Complaint alleges a:

massive racketeering scheme beginning in the 1990's among, inter alia, the members of an international Russian-American organized crime group, headed by Mikhail Chernoi, and including business moguls Oleg Deripaska, the head of Sibirsky Aluminum, and Iskander Makhmudov, the then de facto head of MDM Bank, and the Izmailovo Russian-American mafia group to take over and monopolize the Russian aluminum and other metals industries (the "Illegal scheme").

(Am.Compl. ¶ 1.) The plaintiffs claim Chernoi, Deripaska, and Makhmudov ("the Conspirators"), as well as their allies and the companies they control, directly or indirectly committed numerous criminal acts including physical violence, mail and wire fraud, and money laundering in the United States in furtherance of the illegal scheme. (Am.Compl.¶¶ 2-4.)

The Amended Complaint comprises two primary parts. First, the BMT Plaintiffs and one new party, MIKOM, reallege that the Conspirators took over NKAZ in 2000 by using rigged bankruptcy proceedings.² (Am.Compl.¶¶ 5-6.) Second, the remainder of the new plaintiffs bring new claims for the alleged illegal takeover of GOK through physical force, bribery, and extortion.³ (Am.Compl. ¶ 5.)

Changes to one section of the Original Complaint exemplify the way in which the plaintiffs try to meld the new claims into the old to form one coherent scheme. The Original Complaint included a section entitled "The Aluminum Wars" that traced the history of an alleged series of "wars" to control the Russian aluminum industry precipitated by its privatization in the 1990s. (Original Complaint ¶¶ 68-71.) The BMT Plaintiffs alleged that during this period and continuing to the present, Deripaska and Chernoi conspired together to take over the Russian aluminum industry, including NKAZ. (Original Compl. ^ 71.) These allegations have been newly styled in the Amended Complaint as the history of "The Metal Wars." The sole changes to the Original Complaint are added references to the vanadium industry and other metal industries that are tacked on to the text of the Original Complaint. (Am.Compl.¶¶ 122-24.) Additionally, Chernoi and Deripaska are now alleged to have been joined by defendant Makhmudov in conspiring to control the Russian metals industry, including NKAZ and GOK. (Am.Compl. ¶ 124.)

(A)

The Amended Complaint first tells the story of the defendants' alleged illegal takeover of the Russian aluminum industry, particularly with respect to NKAZ. The first steps in this scheme allegedly included takeovers of three other Russian aluminum companies: Krasnoyarsk Aluminum Zavod ("KRAZ"), Sayansk Aluminum Zavod ("SAZ"), and Bratsk Aluminum Zavod ("BRAZ"). (Am.Compl. ¶^ 123, 125-47.) The Conspirators allegedly effected the takeovers through various illegal means, including redirecting the shipment of finished aluminum from the factories, the murder of numerous rivals in association with the Izmailovo Mafia, the filing of false criminal charges against an official of KRAZ, rigged Russian court proceedings and economic extortion. (Am. Compl.¶¶ 130,136, 138,140,142, 145.)

Beginning in late 1994 or early 1995, plaintiff MIKOM, under its president Mikhail Zhivilo ("Zhivilo"), entered into a contract to manage NKAZ. (Am.Compl.¶¶ 12, 30, 148.) MIKOM then solicited Western trading partners such as BMT Ltd. to extend loans to NKAZ and to trade with the company. (...