Raccoon Recovery v. Navoi Mining and Metallurgical

• Decision Date: 18 September 2002
• Docket Number: No. 02-M-139.,02-M-139.
• Parties: RACCOON RECOVERY, LLC, as assignee and successor in interest, Plaintiff, v. NAVOI MINING AND METALLURGICAL KOMBINAT, Defendant.
• Court: U.S. District Court — District of Colorado

244 F.Supp.2d 1130

RACCOON RECOVERY, LLC, as assignee and successor in interest, Plaintiff, v. NAVOI MINING AND METALLURGICAL KOMBINAT, Defendant.

No. 02-M-139.

United States District Court, D. Colorado.

September 18, 2002.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

Ernest E. Staggs, Jr., Denver, CO, for plaintiff.

Steven E. Abelman, Cage, Williams, Abelman & Layden, P.C., Denver, CO, Francis A. Vasquez, White & Case, LLP, Washington, DC, for defendant.

ORDER OF DISMISSAL FOR LACK OF JURISDICTION

MATSCH, District Judge.

This is an Application for Charging Order which was referred to Magistrate Judge Craig B. Shaffer who filed a recommendation on August 14, 2002. The plaintiff Raccoon Recovery, LLC, filed objections to that recommendation on August 26, 2002. The magistrate judge made findings and conclusions based on an extensive record and a full opportunity for the plaintiff to submit support for its contentions. The recommendation is for dismissal for lack of subject matter jurisdiction. The plaintiff in its objections has submitted additional material which was not before the magistrate judge. This court will not consider that material and restricts its review to the record submitted to the magistrate judge. Based on that record, the court adopts the findings of fact and conclusions of law of Magistrate Judge Shaffer and upon that basis, it is

ORDERED that the motion for discovery is denied and the Application for Charging Order is denied and this civil proceeding is dismissed for lack of jurisdiction.

RECOMMENDATION ON PLAINTIFF'S APPLICATION FOR CHARGING ORDER and REQUEST FOR DISCOVERY

SHAFFER, United States Magistrate Judge.

THIS MATTER comes before the court on Plaintiff Raccoon Recovery LLC's ("Raccoon") Citation of Authority, Application for Charging Order, and Request for Discovery, filed on February 12, 2002, and Defendant Navoi Mining and Metallurgical Kombinat's ("Navoi") Opposition to Application for Charging Order, filed May 24, 2002. On February 14, 2002, pursuant to an Order of Reference to Magistrate Judge, this action was referred to Magistrate Judge Boland for a hearing of the evidence and a recommendation for order regarding Raccoon's application for charging order and request for discovery. Following Magistrate Judge Boland's Order of Recusal, dated March 13, 2002, the case was reassigned to Magistrate Judge Shaffer. The court held a hearing on Raccoon's Application and Navoi's Opposition on June 11, 2002. For the following reasons, the court recommends that Raccoon's Application for Charging Order and Request for Discovery be denied.

FACTUAL BACKGROUND

The following facts are taken from the allegations in Raccoon's Application and attached exhibits which, for the purposes of this motion, will be taken as true. At some time prior to 1994, Nuexco Exchange, AG and Global Nuclear Services and Supply, Ltd. purchased and took delivery of uranium concentrates from Navoi for the benefit of CSI Enterprises, Inc ("CSI"), an entity apparently affiliated with Oren Benton. On or about August 23,1994, Navoi advised CSI that if it failed to pay the outstanding balance of $1,784,977.80, Navoi would initiate legal proceedings to collect that debt. Although CSI made a partial payment, in October 1994, CSI, Oren Benton and other entities (collectively the "Benton defendants") executed a settlement agreement and confession of judgment in favor of Navoi. As a result of CSI's failure to comply with the payment schedule mandated by the settlement agreement, Navoi filed the confession of judgment in the District Court for the City and County of Denver, in Case Number 94CV6122 (hereinafter "the Denver action"). On December 12, 1994, judgment was entered against the Benton defendants named by Navoi. On December 20, 1994, Navoi received a final payment on behalf of CSI. See Exhibit B attached to Raccoon's Application for Charging Order.

On February 23, 1995, Benton, CSI and other related entities filed cases under Chapter 11 of the United States Bankruptcy Code. Id. In conjunction with that bankruptcy, an action for avoidance and recovery of preferential and fraudulent transfers was initiated against Navoi on February 21, 1997, in Official Joint Creditors' Committee of CSI Enterprises, Inc., et al. v. Navoi Mining and Metallurgical Kombinat, Adversary Proceeding No. 97-1131-SBB (hereinafter "the Adversary Proceeding"). On June 3, 1997, a judgment, in the amount of $1,794,877.89 was entered against Navoi in the Adversary Proceeding, based upon a finding that Navoi was in default. See Exhibit A attached to Raccoon's Application for Charging Order. Raccoon Recovery, LLC is a Colorado limited liability company and an assignee and successor in interest to the judgment against Navoi in the Adversary Proceeding. In June 2001, Raccoon filed in the District Court for the City and County of Denver a Motion for Order Charging Individual Interest of Navoi in an alleged joint venture involving Navoi and Newmont Mining Corporation (hereinafter the "Zarafshan-Newmont joint venture"). Raccoon contends that Navoi and Newmont each hold a 50% interest in Zarafshan-Newmont, which is a heap-leach gold recovery operation in the Republic of Uzbekistan.

On January 23, 2002, Navoi removed the action to the United States District Court pursuant to 28 U.S.C. § 1441. In its notice of removal, Navoi stated that Raccoon failed to effect service upon Navoi in accordance with the Foreign Sovereign Immunities Act ("FSIA"), 28 U.S.C. § 1602 et seq. Navoi further asserted that it is "wholly-owned by the Government of Uzbekistan and an instrumentality of the Government of Uzbekistan . . . and therefore, is entitled to foreign sovereign immunity under the Foreign Sovereign Immunities Act."

ANALYSIS

On May 28, 2002, Navoi filed its Opposition to Raccoon's Application for Charging Order. Although Navoi filed a brief in "opposition," it seeks to dismiss the action "forthwith under Federal Rule of Civil Procedure 12(h)(3)." In its Opposition, Navoi raises the following arguments: (1) that Navoi is a foreign state entitled to sovereign immunity under the FSIA; (2) that Raccoon failed to comply with the service requirements imposed under 28 U.S.C. § 1608, both in connection with the default judgment entered in the Adversary Proceeding and the Application filed in this action; and (3) that the assets that Raccoon seeks to encumber are immune from attachment under the FSIA.

On July 1, 2002, this court entered an Order in this action. That Order identified the issues raised by Navoi in its Opposition and acknowledged the burden shifting procedure applicable to resolving the immunity issue under the FSIA. See Moran v. Kingdom of Saudi Arabia, 27 F.3d 169, 172 (5th Cir.1994). This court concluded that Raccoon should be afforded an opportunity to file a supplemental brief responding to the legal arguments raised in Navoi's Opposition and addressing Raccoon's prima' facie burden under the FSIA. This court also permitted Raccoon to address Navoi's arguments regarding defective service under § 1608 and the subject assets' immunity from attachment.

On July 15, 2002, Raccoon filed a Supplemental Brief in Support of Motion and Application for Charging Order. Having reviewed Raccoon's Application and Navoi's Surreply, and the exhibits attached to the parties' papers, and considered the arguments made by the parties during the hearing on June 11, 2002, the court concludes that further oral argument would not assist its analysis.

A. Standard of Review

Rule 12(h)(3) provides that the district court shall dismiss a pending action "whenever it appears by suggestion of the parties or otherwise that the court lacks jurisdiction of the subject matter." Fed.R.Civ.P. 12(h)(3). See, e.g., St. Clair v. City of Chico, 880 F.2d 199, 201 (9th Cir.) (treating motion raising ripeness issue as motion to dismiss for lack of subject matter jurisdiction), cert, denied, 493 U.S. 993, 110 S.Ct. 541, 107 L.Ed.2d 539 (1989). See also Cook v. City of Pomona, 884 F.Supp. 1457, 1461 (C.D.Cal.), aff'd, 70 F.3d 1277, 1995 WL 703711 (9th Cir.1995); Bradford National Life Insurance Co. v. Union State Bank, 794 F.Supp. 296, 297 (E.D.Wis.1992). Normally, a district court should first resolve doubts regarding its subject matter jurisdiction before proceeding to the merits of the litigation. See Ruhrgas AG v. Marathon Oil Company, 526 U.S. 574, 577, 119 S.Ct. 1563, 143 L.Ed.2d 760 (1999). A court lacking jurisdiction must dismiss the litigation at any point in the proceedings in which it becomes apparent that jurisdiction is lacking. See Laughlin v. Kmart Corp., 50 F.3d 871, 873 (10th Cir.), cert, denied, 516 U.S. 863, 116 S.Ct. 174, 133 L.Ed.2d 114 (1995). See also Neiberger v. Hawkins, 150 F.Supp.2d 1118, 1120 (D.Colo.2001) ("a motion to dismiss based on sovereign immunity is treated as a motion to dismiss for lack of subject matter jurisdiction pursuant to Rule 12(b)(1)").

Under Rule 12(b)(1) of the Federal Rules of Civil Procedure, a motion to dismiss may be granted if the court does not have subject matter jurisdiction over the matter. The determination of subject matter jurisdiction is a threshold question of law. Madsen v. United States ex. rel. United States Army Corps of Engineers, 841 F.2d 1011, 1012 (10th Cir.1987). As courts of limited jurisdiction, federal courts may only adjudicate cases that the Constitution and Congress have granted them authority to hear. See U.S. Const. Art. Ill, § 2; Morris v. City of Hobart, 39 F.3d 1105, 1110 (10th Cir.1994), cert, denied, 514 U.S. 1109, 115 S.Ct. 1960, 131 L.Ed.2d 852 (1995). The court applies a rigorous standard of review when presented with a motion to dismiss pursuant to Fed.R.Civ.P. 12(b)(1) for lack of subject matter jurisdiction. Consumers Gas & Oil, Inc. v. Farmland Indus. Inc., 815 F.Supp. 1403, 1408 (D.Colo.1992). "[T]he party invoking federal jurisdiction bears the burden of proof." Marcus v. Kansas...