Knox v. Orascom Telecom Holding S.A.E.

• Decision Date: 12 March 2007
• Docket Number: No. 06 Civ. 6824 VM.,06 Civ. 6824 VM.
• Citation: 477 F.Supp.2d 642
• Parties: Leslye KNOX, individually and as the administrator of the Estate of Aharon Ellis and as natural guardian of plaintiffs Jordan Terrell Ellis, Reuven Carter, Shanon Carter, Shayrah Carter, Yoshavyah Carter and Amitai Carter, Jordan Terrell Ellis, minor, Reuven Carter, minor, Shanon Carter, minor, Shayrah Carter, minor, Yoshavyah Carter, minor, Amitai Carter, minor, by their next of friend and guardian Leslye Knox, Prince Shaleak, Mellonee Ellis Francine Ellis Lynne Ellis Yihonadav Ellis Tsaphrirah Ellis Aron Carter, Plaintiffs, v. ORASCOM TELECOM HOLDING S.A.E, Defendant.
• Court: U.S. District Court — Southern District of New York

477 F.Supp.2d 642

Leslye KNOX, individually and as the administrator of the Estate of Aharon Ellis and as natural guardian of plaintiffs Jordan Terrell Ellis, Reuven Carter, Shanon Carter, Shayrah Carter, Yoshavyah Carter and Amitai Carter, Jordan Terrell Ellis, minor, Reuven Carter, minor, Shanon Carter, minor, Shayrah Carter, minor, Yoshavyah Carter, minor, Amitai Carter, minor, by their next of friend and guardian Leslye Knox, Prince Shaleak, Mellonee Ellis Francine Ellis Lynne Ellis Yihonadav Ellis Tsaphrirah Ellis Aron Carter, Plaintiffs, v. ORASCOM TELECOM HOLDING S.A.E, Defendant.

No. 06 Civ. 6824 VM.

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

March 12, 2007.

Robert Joseph Tolchin, Law Office of Robert J. Tolchin, New York City, for Plaintiffs.

Christopher. Mark Curran, Nicole Erb, White & Case LLP (DC), Washington, DC, for Defendant.

DECISION AND ORDER

MARRERO, District Judge.

Plaintiffs ("Plaintiffs") initiated this supplemental turnover proceeding against Orascom Telecom Holding S.A.E. ("Orascom") seeking a judgment and order directing Orascom to turnover and pay to Plaintiffs any funds in its possession that are due and owing Plaintiffs judgment-debtors, the Palestinian Authority ("PA") and the Palestine Liberation Organization ("PLO").

Orascom moved to dismiss the complaint on several grounds, including lack of personal jurisdiction and lack of subject matter jurisdiction. With respect to personal jurisdiction, by order dated November 7, 2006 this Court stayed any personal jurisdictional discovery in this action pending the outcome of the allegedly similar and related personal jurisdictional discovery dispute at issue in Estate of Ungar v. Palestinian Authority, No. 18 MS 302 (S.D.N.Y.) (the "Ungar Miscellaneous Action"), currently pending in this Court before Judge Colleen McMahon.

However, in order to move this action forward, the Court, agreed to consider Orascom's motion to dismiss for lack of subject matter jurisdiction. Having reviewed the parties' submissions and the relevant case law on this issue, for the reasons set forth below, Orascom's motion to dismiss the complaint for lack of subject matter jurisdiction is GRANTED.

I. BACKGROUND

Plaintiffs are the representatives and heirs of Aharon Ellis, an American citizen who was murdered in a terrorist shooting attack in Hadera, Israel, on January 17, 2002. Plaintiffs brought suit under the Antiterrorism Act of 1991, 18 U.S.C. § 2331-2339D (the "ATA"), against the PLO and the PA, whom Plaintiffs allege planned and carried out the attack. See Knox v. Palestine Liberation Organization, 442 F. supp.2d 62, 65 (S.D.N.Y.2006). This Court, adopting the Report and Recommendation of Magistrate Judge Katz, found Plaintiffs were entitled to recover damages in the amounts there specified and directed entry of final judgment against the PLO and PA in the total amount of $192,740,660.13. Id.

Plaintiffs assert that the PA and PLO have failed to satisfy this judgment. Consequently, they brought the instant turnover proceeding against Orascom, an Egyptian telecommunications company, seeking monies in Orascom's possession that Orascom allegedly owes or is holding for the PA. (See Complaint in Supplemental Proceeding, dated September 5, 2006 ("Compl."), ¶ 28.) More specifically, Plaintiffs allege that as the result of direct investments by the PA in Orascom, "the PA acquired direct and/or indirect stakes and/or shares and/or interests in" two Orascom subsidiaries, Orascom Telecom Algeria ("OTA") and Orascom Telecom Tunisia ("OTT"). (Id. ¶ 25.) Subsequently, "Orascom agreed to purchase the PA's OTA and OTT Stakes for an unknown sum totaling hundreds of millions of dollars." (Id.) Plaintiffs allege that Orascom did in fact acquire the PA stake in OTA and OTT and is currently indebted to the PA for sums due as a result of this acquisition.

Of particular significance to the motion now before the Court, the Plaintiffs allege that "the PA carried out all of the above-described transactions and investments in its own name and/or under the names of at least two shell entities:" The Palestinian Commercial Services Corporation ("PCSC") and The Palestine Investment Fund ("PIF"). (Id. ¶ 29.) Plaintiffs assert that the PCSC and PIF are "shell entities wholly-owned and controlled by the PA with no purpose or business other than to act as investment vehicles for the PA." (Id. ¶ 30.) Thus, "[a]ny and all assets and property of any type designated or titled to, or held in, the name of the PCSC and PIF,¹ are legally, beneficially and equitably owned by the PA." (Id. ¶ 30.)

II.DISCUSSION

A. STANDARD OF REVIEW

On a motion to dismiss for lack of subject matter jurisdiction pursuant to Federal Rule of Civil Procedure 12(b)(1), the plaintiff bears the burden of establishing that the Court has subject matter jurisdiction to adjudicate the allegations in the complaint. See Malik v. Meissner, 82 F.3d 560, 562 (2d Cir.1996). In considering the motion, the Court must "accept as true all material factual allegations in the complaint." Shipping Fin. Serv. Corp. v. Drakos, 140 F.3d 129, 131 (2d Cir.1998). The Court can take into consideration evidence presented outside of the pleadings, including affidavits and depositions. See Makarova v. United States, 201 F.3d 110, 114 (2d Cir.2000). However, the Court is not obligated to draw inferences from the pleadings and other submissions favorable to the party asserting jurisdiction. See Shipping Fin. Serv., 140 F.3d at 131.

B. ANCILLARY ENFORCEMENT JURISDICTION

In this turnover action,² Plaintiffs assert jurisdiction over Orascom based on this Court's inherent power to enforce its own judgments.³ Indeed, the district court's "ancillary enforcement jurisdiction is well established." S.E.C. v. Antar, 120 F.Supp.2d 431, 439 (D.N.J. 2000). Absent jurisdiction to enforce its own judgments, "the judicial power would be incomplete and entirely inadequate to the purposes for which it was conferred by the Constitution." Peacock v. Thomas, 516 U.S. 349, 356, 116 S.Ct. 862, 133 L.Ed.2d 817 (1996) (quoting Riggs v. Johnson County, 6 Wall. 166, 73 U.S. 166, 18 L.Ed. 768 (1868)). Thus, the Supreme Court has "approved the exercise of ancillary jurisdiction over a broad range of supplementary proceedings involving third parties to assist in the protection and enforcement of federal judgments...." Id. at 356, 116 S.Ct. 862.

However, exercise of the Court's ancillary enforcement jurisdiction is bounded by certain limits. In Peacock, the Supreme Court noted that it has "never authorized the exercise of ancillary jurisdiction in a subsequent lawsuit to impose an obligation to pay an existing federal judgment on a person not already liable for that judgment." Id. at 357, 116 S.Ct. 862. Orascom contends that this impermissible practice is precisely what the Plaintiffs are attempting to pursue in this action.

In Peacock, the plaintiff had obtained a judgment against defendant Tru-Tech Corporation. See Id. at 352, 116 S.Ct. 862. When Tru-Tech could not satisfy the judgment, the plaintiff brought a supplemental proceeding seeking to pierce Tru-Tech's corporate veil and recover the judgment from Peacock, an officer of the corporation. Id. The Supreme Court held that the supplemental proceeding was in fact a new action against Peacock based on a new theory of liability for which independent grounds of subject matter jurisdiction must exist, and that consequently the Court's ancillary jurisdiction could not be exercised in such circumstances. Id. at 358, 116 S.Ct. 862 (Plaintiff's "attempt to make Peacock answerable for the ERISA judgment [against Tru-Tech] is not ancillary to that judgment.").

The Second Circuit, interpreting Peacock, has emphasized that a "distinction for jurisdictional purposes exists between an action to collect a judgment ... and an action to establish liability on the part of a third party...." Epperson v. Entertainment Express, Inc., 242 F.3d 100, 104 (2d Cir.2001), The latter requires an independent basis for subject matter jurisdiction because the court is presented with "a substantive theory seeking to establish liability on the part of a new party not otherwise liable." Id. at 107.

In Epperson, the plaintiff had previously obtained a default judgment and then brought a subsequent action against a third party to whom funds had allegedly been fraudulently conveyed by the judgment-debtor. See Id. at 103. The district court dismissed the action, finding no ancillary enforcement jurisdiction because under Peacock, the fraudulent conveyance claim constituted a new theory of liability requiring an independent basis for subject matter jurisdiction. The Second Circuit reversed, holding that Peacock was distinguishable because a proceeding to void a fraudulent conveyance does not seek to hold the third party liable for the underlying judgment, but merely seeks "to ensure the collectibility of the default judgment." Id. at 107.

Orascom asserts that Plaintiffs are attempting to achieve precisely what Peacock prohibits. It argues that in asserting that the PIF is a "shell entit[y]" owned and controlled by the PA, Plaintiffs clearly seek relief based on a new theory of liability. Orascom further maintains that the relief Plaintiffs seek "effectively renders the Palestinian funds liable for the underlying judgment against the PA on alter-ego or veil-piercing theories: assets that ordinarily would have been transferred from Orascom to the Palestinian funds would be transferred instead, if Plaintiffs prevail, to the Plaintiffs to satisfy their judgment against the PA. Because Orascom purportedly owes the Palestinian funds an asset, it is legally and logically inescapable that Plaintiffs may pursue Orascom for that asset only if the Palestinian funds are legally determined to be alter egos of the PA." (Reply Memorandum of Law in Support of Orascom Telecom Holding S.A.E.'s Motion to Dismiss for Lack of Subject Matter Jurisdiction, dated ...