Grynberg v. BP P.L.C.

• Decision Date: 27 March 2012
• Docket Number: Civil Action No. H–11–1731.
• Citation: 855 F.Supp.2d 625
• Parties: Jack J. GRYNBERG, et al., Plaintiffs, v. BP P.L.C. d/b/a BP Corp. North America et al., Defendants.
• Court: U.S. District Court — Southern District of Texas

855 F.Supp.2d 625

Jack J. GRYNBERG, et al., Plaintiffs,

v.BP P.L.C. d/b/a BP Corp. North America et al., Defendants.

Civil Action No. H–11–1731.

United States District Court,

S.D. Texas,

Houston Division.

March 27, 2012.

Andy Taylor, Attorney at Law, Brenham, TX, Daniel L. Abrams, Law Office of Daniel L. Abrams, PLLC, New York, NY, Roger Allan Jatko, RSM Production Corporation,Samuel Z. Yahn, Pricaspian Development Corp., Denver, CO, Stephen A. Fogdall, Schnader Harrison Segal & Lewis LLP, Philadelphia, PA, Kip Kevin Lamb, Attorney at Law, Beaumont, TX, for Plaintiffs.

Paul L. Mitchell, Dena Hanovice Palermo, Andrews Kurth LLP, Phillip B. Dye, Jr., Vinson & Elkins, Houston, TX, John L. Hardiman, Sullivan & Cromwell LLP, Kenneth M. Bialo, Mordecai Geisler, Emmet, Marvin & Martin, LLP, New York, NY, for Defendants.

ORDER

DAVID HITTNER, District Judge.

Pending before the Court are the Motion to Dismiss the Fourth Amended Complaint for Lack of Personal Jurisdiction and for Insufficiency of Service of Process, or in the Alternative, to Quash Service filed by Peter Sutherland and Lord John Browne, The BP Defendants' Motion to Dismiss the Fourth Amended Complaint, and the Motion to Dismiss of Statoil, ASA. Having considered the motions, submissions, and applicable law, the Court determines that all of the motions should be granted.

I. BACKGROUND

This case arises under the Racketeer Influenced and Corrupt Organizations Act (“RICO”), 18 U.S.C. § 1962 et seq. On May 6, 2011, Plaintiffs Jack J. Grynberg, Grynberg Production Corporation (a Texas corporation), Grynberg Production Corporation (a Colorado corporation), and Pricaspian Development Corporation (collectively, “Grynberg”) filed the pending lawsuit against Defendants BP P.L.C. d/b/a BP Corp North America, BP American Inc., and BP Exploration Operating Company (collectively, “BP”); Dens Norske Stats Oljeselskap ASA a/k/a Statoil ASA (“Statoil”); as well as two individual defendants, Peter Sutherland and Lord John Browne (collectively, the “Individual Defendants”). Since the inception of this lawsuit, Grynberg has filed five amended complaints. In the most recent complaint, the Fifth Amended Complaint (the “Complaint”), Grynberg asserts several civil RICO violations. ¹ Specifically, Grynberg alleges BP and the Individual Defendants violated 18 U.S.C. § 1962(b), (c), and (d): Count One contends that the Defendants had interests in or control of an illegal enterprise, a violation of subsection (b); Count Two contends that the Defendants were guilty of an association-in-fact enterprise, a violation of subsection (c); and Count Three contends that the Defendants were part of a conspiracy to commit RICO offenses, a violation of subsection (d). These claims arise from long-running disputes between Grynberg, BP, and Statoil, which are explained below.

A. The Ongoing Disputes1. A Consortium for Exploration and Production in Kazakhstan

Grynberg claims that in late 1989 and 1990, Mr. Grynberg “spent substantial time, money and effort developing original proprietary, geophysical, technical, economic, political highly confidential and exclusive information” regarding natural resources in Kazakhstan.² Specifically, the Complaint states that Mr. Grynberg met with and hosted Nursultan Abishevich Nazarbaev, then-First Secretary of the Communist Party (later President) of Kazakhstan. According to Grynberg, this meeting developed into a professional relationship that led to a request by the Kazakh government that Mr. Grynberg organize “an international oil and natural gas consortium to explore, develop and produce oil, natural gas and elemental sulfur in Kazakhstan.” ³ Therefore, “at the behest of the Kazakh government, [Mr.] Grynberg met in 1990 and 1991, with various Western oil companies, and their designated subsidiary corporations, as candidates to participate in a consortium to develop and produce oil, natural gas and elemental sulfur reserves in Kazakhstan.” ⁴ One of these oil companies was BP.⁵ After further conversations and meetings, Grynberg contends that Mr. Grynberg signed a protocol (the “Protocol”) with a Kazakh official, which was, in effect, a letter of intent to form a consortium for exploration and production of natural resources in the Pricaspian Basin portion of Kazakhstan. The Complaint states that four days later, BP officially agreed to join the consortium and accepted Grynberg's proposal to establish a joint venture (the “Joint Venture”).

2. The Joint Venture

According to the Complaint, the agreed-upon Joint Venture, which was memorialized in a letter executed by both Grynberg and BP on June 7, 1990 (the “June 7 Letter Agreement”), defined an Area of Mutual Interest (“AMI”) and “contemplated that Grynberg would assist BP's entry, along with Grynberg, into a consortium of companies that would secure a concession from the government of Kazakhstan to explore, develop and produce hydrocarbons in the AMI.” ⁶ In addition, the Complaint contends that based solely on the Joint Venture, Grynberg (1) supplied BP with proprietary and confidential information—both economic and geophysical—regarding the Kazakhstan oil fields, (2) coordinated several introductions between BP and top Kazakhstan government officials, and (3) provided BP with the Protocol concerning natural resources in the Pricaspian Basin.

Grynberg contends that soon thereafter, BP breached the Joint Venture by violating the terms of the June 7 Letter Agreement, as well as misappropriating Grynberg's proprietary and confidential information by sharing it with Statoil and an American oil field supply salesman, James Giffen (“Giffen”). Grynberg claims that BP's breach of the Joint Venture led to the eventual creation of a third-party consortium created by Giffen (the “Giffen Consortium”) at the exclusion of Grynberg.⁷ The Giffen Consortium ultimately obtained Kazakh government approval to explore and develop the Greater Kashagan Oil Field in Kazakhstan (“GKOF”).

3. Litigation Regarding the Joint Venture

In 1993, litigation between Grynberg, BP, and Statoil ensued, concerning the Grynberg–BP Joint Venture and BP's and Grynberg's rights under the June 7 Letter Agreement. Grynberg sought a share of the net profits BP received from the Giffen Consortium due to any development and production of oil, natural gas, or elemental sulfur in areas located in the AMI, which included the GKOF. In 1999, after six years, the litigation was resolved in settlement, whereby BP, Statoil, and Grynberg agreed that Grynberg would receive a percentage of all proceeds obtained by BP and Statoil from the GKOF.⁸ Grynberg entered into two formal settlement agreements: one with BP and one with Statoil (collectively, the “1999 Settlement Agreements”).⁹ The two agreements are, in all material respects, identical. By executing the 1999 Settlement Agreements, BP and Statoil agreed to pay Grynberg a specific percentage of net profits obtained from the GKOF. In return, Grynberg agreed to release any claims that it may have regarding the GKOF.¹⁰ Moreover, both of the 1999 Settlement Agreements contained a mandatory arbitration clause, which required that any claims arising out of the rights and obligations of the parties under the 1999 Settlement Agreements would be submitted to arbitration.

4. The Sale of BP's and Statoil's Interests in the GKOF

In 2001, BP and Statoil simultaneously announced that they would sell their respective interests in the GKOF to a fellow member of the Giffen Consortium, Total S.A. (“Total”). The sales were finalized in 2002. Grynberg argues that the sale prices of BP's and Statoil's interests were unconscionably low, and that the interests were sold at a discount to avoid payment of proceeds to Grynberg under the 1999 Settlement Agreement and to avoid certain tax implications. Grynberg claims that several side deals were made to conceal the true sales price of the GKOF. In 2002, based on these beliefs, Grynberg initiated an arbitration under the terms of the 1999 Settlement Agreement, in which it sought to recover a more substantial share of the sale prices of BP's and Statoil's interests in the GKOF (the “Arbitration”). The Arbitration lasted for almost eight years, during which time Grynberg contends that several other significant issues came to light.

5. Giffen's Indictment and Criminal Prosecution

During the pendency of the Arbitration, Giffen was arrested and indicted for several federal crimes, including violations of the Foreign Corrupt Practices Act (the “FCPA”). The indictment charged Giffen with violating the FCPA by paying bribes to Kazakh government officials. Grynberg avers that these bribes were allegedly documented as “signature bonuses” paid to the Kazakh officials. Grynberg contends that in return for the bribes, Giffen obtained the Kazakhstan government's concessions to develop and produce several oil and natural gas reserves in Kazakhstan, including the GKOF. According to Grynberg, Giffen never denied arranging bribes of Kazakh officials so that western oil companies could obtain these concessions. Rather, throughout his prosecution, Giffen asserted the public authority defense, arguing that he acted at the behest of the U.S. Government.¹¹ Grynberg states that based on this defense, prosecutors were persuaded to drop all charges under the FCPA, and instead, Giffen plead guilty to a misdemeanor offense under the Internal Revenue Code for failure to disclose control over a foreign bank account on his tax returns.¹²

6. BP's and Statoil's Internal Audit Reports

Meanwhile in 2007, as part of the ongoing Arbitration, BP produced several internal audit reports to Grynberg that identified several “signature bonuses” paid to the Kazakh government. Included in these signature bonuses were payments constituting “production sharing fees.” Grynberg argues that these fees could not have been true production sharing fees because, to date, no production has occurred in the GKOF. Instead, Grynberg...