Motorola Credit Corp. v. Uzan

• Decision Date: 08 February 2006
• Docket Number: No. 02 Civ. 0666(JSR).,02 Civ. 0666(JSR).
• Citation: 413 F.Supp.2d 346
• Parties: MOTOROLA CREDIT CORPORATION and Nokia Corporation, Plaintiffs, v. Kemal UZAN, Cem Cengiz Uzan, Murat Hakan Uzan, Melahat Uzan, Aysegul Akay, Antonio Luna Betancourt, Unikom Iletism Hizmetleri Pazarlama A.S., Standart Pazarlama A.S., and Standart Telekomunikasyon Bilgisayar Hizmetleri A.S., Defendants.
• Court: U.S. District Court — Southern District of New York

413 F.Supp.2d 346

MOTOROLA CREDIT CORPORATION and Nokia Corporation, Plaintiffs, v. Kemal UZAN, Cem Cengiz Uzan, Murat Hakan Uzan, Melahat Uzan, Aysegul Akay, Antonio Luna Betancourt, Unikom Iletism Hizmetleri Pazarlama A.S., Standart Pazarlama A.S., and Standart Telekomunikasyon Bilgisayar Hizmetleri A.S., Defendants.

No. 02 Civ. 0666(JSR).

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

February 8, 2006.

Appeal from the United States District Court for the Southern District of New York, Rakoff, J.

COPYRIGHT MATERIAL OMITTED

Gordon M. Clay, Howard H. Stahl, John F. O'Connor, Steven K. Davidson, Steptoe & Johnson, L.L.P., Washington, DC, Mishell B. Kneeland, Paul J. Fishman, Friedman, Kaplan, Seiler & Adelman, L.L.P., Jason Brown, Michael N. Donofrio, Neal N. Beaton, Holland & Knight LLP, New York City, for Plaintiffs.

Kenneth M. Bialo, Emmet, Marvin and Martin, L.L.P., Mark Benjamin Holton, Robert F. Serio, Thomas C. Sheehan, Gibson, Dunn & Crutcher LLP, Dan J. Schulman, Salans, New York City, Ryan E. Bull, Baker Botts LLP, Washington, DC, for Defendants.

OPINION AND ORDER

RAKOFF, District Judge.

Familiarity with the Court's factual findings in this case, as set forth in the Court's prior reported decision, Motorola Credit Corp. v. Uzan, 274 F.Supp.2d 481 (S.D.N.Y.2003) ("Uzan I"), and affirmed by the Court of Appeals, Motorola Credit Corp. v. Uzan, 388 F.3d 39 (2d Cir.2004) ("Uzan II"), is here presumed. Those factual findings detail at great length a multi-billion-dollar fraud perpetrated by the individual defendants (five members of the Uzan family and one of their closest associates), in connivance with various corporate defendants that were then controlled by the individual defendants.¹

In Uzan I, the Court awarded plaintiff Motorola Credit Corporation ("Motorola") $2,132,896,905.66 in compensatory damages, and an equal sum in punitive damages. See Uzan I at 580. The Court of Appeals affirmed the compensatory damages, see Uzan II, at 59, but, while noting that "on this record, some punitive damages award is appropriate," id. at 63, remanded for reconsideration of the size of the punitive award.² Following briefing and oral argument by the parties, see transcript, 8/18/05, the Court now determines what amount of punitive damages must be awarded Motorola from the individual defendants pursuant to the applicable laws of Illinois and the United States.

As the Court's prior findings evidence, at length, the individual defendants, jointly and severally, engaged in a coordinated campaign of lies and misrepresentations in order to swindle Motorola of more than $2 billion, which they then converted to their own joint and several benefits. When threatened with exposure, they resorted not only to further lies and corporate manipulations but even to obstruction of justice and, ultimately, misrepresentations to this Court. They also engaged in knowing contempt of this Court's orders and criminal contempt of the parallel orders of a British court.

It is obvious, therefore, that defendants' conduct was fraudulent, willful, and malicious, evincing a wanton and deliberate disregard for Motorola's rights, and well warranting punitive damages under Illinois law. See, e.g., Kelsay v. Motorola, Inc., 74 Ill.2d 172, 186, 23 Ill.Dec. 559, 384 N.E.2d 353 (1978) ("It has long been established in this State that punitive or exemplary damages may be awarded when torts are committed with fraud, actual malice, deliberate violence or oppression, or when the defendant acts willfully, or with such gross negligence as to indicate a wanton disregard of the rights of others."); Laughlin v. Hopkinson, 292 Ill. 80, 89, 126 N.E. 591 (1920) ("Where damages result from willful, wanton and grossly fraudulent representations, we think it proper that the jury should be permitted to inflict damages for example's sake and by way of punishment to the defendant.").

In determining the size of the punitive award under Illinois law, the Court should consider "the nature and enormity of the wrong, the financial status of the defendant, and the potential liability of the defendant." Deal v. Byford, 127 Ill.2d 192, 204, 130 Ill.Dec. 200, 537 N.E.2d 267 (1989). As to the first prong, it is beyond question that the defendants' fraud was enormous, both in amount and in the defendants' brazen resort to all kinds of reprehensible misconduct to achieve their ends. Since, with respect to punitive damages, "the punishment should fit the crime," Hazelwood v. Illinois C.G. Railroad, 114 Ill.App.3d 703, 713, 71 Ill.Dec. 320, 450 N.E.2d 1199 (1983), defendants' misconduct warrants a very sizeable financial penalty to punish and deter them. See Kelsay, 74 Ill.2d at 186, 23 Ill.Dec. 559, 384 N.E.2d 353.

As to the second prong, "punitive damages should be large enough to provide retribution and deterrence but should not be so large that the award destroys the defendant." See Hazelwood, 71 Ill. Dec. 320, 450 N.E.2d at 1207. Here, the individual defendants, despite repeated discovery orders, have refused to produce evidence of their financial situation—evidence largely or exclusively in their control. This does not mean that the Court is free to award any amount of punitive damages it feels like, see Uzan II, at 64, but it does mean that Motorola is not required, and, indeed, could not reasonably be expected, to submit "hard" evidence of defendants' financial position. See Deal, 127 Ill.2d at 205, 130 Ill.Dec. 200, 537 N.E.2d 267 ("The plaintiff was not required to present such evidence [regarding their financial status], and the defendants made no attempt to do so. The defendants cannot now complain of its absence."); Ford v. Herman, 316 Ill.App.3d 726, 734, 249 Ill. Dec. 942, 737 N.E.2d 332 (2000) ("If a defendant facing a punitive damages claim realizes that the plaintiffs are not presenting what would clearly be relevant financial status evidence, the defendant bears the burden of putting on that evidence."); Pickering v. Owens-Corning Fiberglas Corp., 265 Ill.App.3d 806, 823, 203 Ill.Dec. 1, 638 N.E.2d 1127 (1994) (finding no abuse of discretion when "[t]he trial court ordered [in response to defendant's failure to fully respond to discovery requests for financial information in connection with their punitive damages claim] that plaintiffs' amended allegations that defendant's net worth was $1.5 billion would be deemed admitted and that defendant would not be allowed to contest this value.").

In 2003, Forbes estimated the Uzan defendants' net worth at $1.3 billion. Forbes World's Richest People, Forbes, Mar. 2003. In 2004, it estimated that their net worth had increased to $1.5 billion. Forbes Billionaires List, Assoc. Press, Feb. 27, 2004. These, obviously, are rough estimates at best, but were made by a disinterested third party. However, they were almost certainly under-estimates because they did not take account of the evidence that subsequently came to light of the defendants' huge embezzlements.

Specifically, this Court determined in Uzan I that the individual defendants had converted to their own use a substantial part of the $2 billion stolen from Motorola. Uzan I at 558-61. Thereafter, the Turkish government charged certain of the Uzans with embezzling more than $5 billion in connection with an entirely separate $6 billion bank fraud. See, e.g., Uzan says he sought' deals; Motorola lawyer dismisses offers, Chi. Trib., Mar. 2, 2004 ("Uzan's father, Kemal, and his brother, Hasan, have been fugitives since the Turkish government last summer accused them of pilfering the $5.8 billion from Imar Bank."); Turkish, Regulator Rejects Uzan's Debt Repayment Plan, Dow Jones Int'l News, Mar. 12, 2004 ("An investigation found that some $6 billion in Turkish lira and foreign currency had been deposited at the bank without any record and was used by the controlling shareholders. The government started repaying depositors in January, labelling the Imar case as the biggest bank robbery in history.'"); Turkey Seizes 219 Companies Of Uzan Family, N.Y. Times, Feb. 16, 2004 ("Turkey has accused leading members of the family, including the patriarch Kemal Uzan, of involvement in a multibillion-dollar bank fraud."); Motorola, Turkey Chase Family for Missing Billions, Chi. Trib., Dec. 28, 2003 ("The Turkish government believes the Uzans siphoned $5.2 billion from a bank they owned, Imar Bankasi."); WEEK, Turkish Probe, Dec. 14, 2003 ("Foreign Minister Abdullah Gul says Turkey has asked the United States to extradite members of the controversial Uzan family, accused in Turkey of involvement in a multi-billion dollar fraud in the collapsed Imar Bank."). Although, in this connection, the Turkish Government has seized certain of the defendants' assets in Turkey—notably the telecommunications company Telsim—the secretive and labyrinthine manner in which the individual defendants operated their complex financial empire, see Uzan I at 526-537, makes it likely that they retain access to substantial assets even while some of them are occupying fugitive status. See, e.g., Press Scanner, Turkish Daily News, Jan. 17, 2006 (summarizing reports that the Uzans are currently `living like kings' in Jordan, where a Vatan reporter says he has uncovered evidence of six new companies formed by the Uzan family.).

All of this suggests that the individual defendants, jointly and severally, remain billionaires and should be able to satisfy a very substantial punitive damages award. Given the reprehensibility of the individual defendants' concerted conduct, the size of their fraud, and their seeming ability to pay, and taking account the goals of punishment and deterrence, the Court finds that an award of $1 billion in punitive damages is necessary and permissible under Illinois law. Because the concerted manner in which the individual defendants carried out the original fraud, as well as their ties of blood or (in the case of Mr. Betancourt) long-term close association, strongly suggests...