SOKOL HOLDINGS INC. v. BMB MUNAI INC.

• Decision Date: 29 June 2010
• Docket Number: No. 05 Civ. 3749(KMW)(DF).,05 Civ. 3749(KMW)(DF).
• Citation: 726 F.Supp.2d 291
• Parties: SOKOL HOLDINGS, INC., Brian Savage, and Thomas Sinclair, Plaintiffs, v. BMB MUNAI, INC., Alexandre Agaian, Bakhytbek Baiseitov, Georges Benarroch, Boris Cherdabayev, Mirgali Kunayev, Credifinance, Capital, Inc., and Credifinance Securities, Ltd., Defendants.
• Court: U.S. District Court — Southern District of New York

726 F.Supp.2d 291

SOKOL HOLDINGS, INC., Brian Savage, and Thomas Sinclair, Plaintiffs,

v.BMB MUNAI, INC., Alexandre Agaian, Bakhytbek Baiseitov, Georges Benarroch, Boris Cherdabayev, Mirgali Kunayev, Credifinance, Capital, Inc., and Credifinance Securities, Ltd., Defendants.

No. 05 Civ. 3749(KMW)(DF).

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

June 29, 2010.

COPYRIGHT MATERIAL OMITTED.

COPYRIGHT MATERIAL OMITTED.

David S. Senoff, Philadelphia, PA, Jacob Goldberg, Jamie Rebecca Mogil, Faruqi & Faruqi, LLP, Jenkintown, PA, Jerome M. Marcus, Jonathan Auerbach, Marcus & Auerbach LLC, Jenkintown, PA, Thomas E.L. Dewey, Dewey, Pegno & Kramarsky, LLP, New York, NY, for Plaintiffs.

Andrew Charles Levitt, Richard Anthony Menchini, Robert A. O'Hare, Jr., O'Hare Parnagian LLP, New York, NY, Brent V. Manning, Chad R. Derum, James Eusun Ji, L. R. Curtis, Jr., Manning Curtis Bradshaw & Bednar LLC, Salt Lake City, UT, for Defendants.

OPINION AND ORDER ON DEFENDANTS' MOTION FOR SUMMARY JUDGMENT

KIMBA M. WOOD, District Judge.

I. Introduction

Plaintiffs Sokol Holding, Inc. (“Sokol”), Brian Savage, and Thomas Sinclair (“Plaintiffs”) bring this action against Defendants Alexandre Agaian, Bakhytbek Baiseitov, Boris Cherdabayev, Mirgali Kunayev, and BMB Munai, Inc. (“BMB”) (collectively, the “BMB Defendants”), as well as Georges Benarroch, Credifinance Capital, Inc., and Credifinance Securities, Ltd. (collectively, “Credifinance Defendants”). Plaintiffs allege that Defendants wrongfully used the contents of Plaintiffs' business plan (hereinafter, the “Sokol Business Plan”) to acquire the Aksaz-Dolinnaya-Emir oil and gas fields (hereinafter, the “ADE Oil Fields”) located in western Kazakhstan. Plaintiffs also allege that Defendants tortiously interfered with a contract that Plaintiffs had negotiated with a related party, Emir Oil, LLP (hereinafter, “Emir Oil”), to purchase a controlling interest in the ADE Oil Fields, and to pursue a project to explore and extract the field's oil reserves (hereinafter, the “ADE Project”).

Defendants have moved for summary judgment as to each of Plaintiffs' claims. For the reasons stated below, the Court GRANTS Defendants' motion in part and DENIES it in part. The Court GRANTS Defendants' motion with respect to Plaintiffs' claims of (1) Breach of Contract and (2) Breach of Fiduciary Duty. The Court DENIES Defendants' motion with respect to Plaintiffs' claims of (1) Unfair Competition, (2) Unjust Enrichment, and (3) Tortious Interference with Contract.

II. Procedural Background

Plaintiffs filed their initial Complaint on April 12, 2005, and have since amended the pleadings three times. On November 30, 2005, Defendants moved to dismiss or, in the alternative, to stay the then-operative Second Amended Complaint. This Court denied Defendants' motion without prejudice, and stated that the motion could be renewed after completion of related discovery. (Docket Entry (“DE”) 24.) On June 12, 2006, Defendants renewed their motion to dismiss the Second Amended Complaint or to stay the action pending arbitration. The Court dismissed three of Plaintiffs' claims for breach of fiduciary duty (Counts VII, VIII, and IX), and denied the motion for a stay pending arbitration. (DE 47.) Defendants appealed the Court's denial of their motion for a stay pending arbitration. Defendants concurrently moved in this Court for a stay pending decision by the Court of Appeals for the Second Circuit on their appeal. This Court denied the motion.

On September 18, 2008, the Second Circuit affirmed the denial of Defendants' motion to stay the action pending arbitration with respect to all claims except Plaintiffs' claim for specific performance. Sokol Holdings, Inc. v. BMB Munai, Inc., 542 F.3d 354 (2d Cir.2008). The Second Circuit held that the claim for specific performance “should be stayed or dismissed pending arbitration,” and that Plaintiffs should be permitted to seek leave from this Court to amend the pleadings in order to omit their claim for specific performance. Id. at 362.

Following the Second Circuit's decision, Plaintiffs amended the pleadings and filed a Third Amended Complaint. ¹ Plaintiffs' Third Amended Complaint asserts the following five causes of action:

(1) Breach of Contract against all Defendants based on the allegation that Defendants violated a confidentiality agreement when they implemented much of the Sokol Business Plan while excluding Plaintiffs from the ADE Project;

(2) Unfair Competition against all Defendants based on the allegation that Defendants misappropriated Plaintiffs' work product with respect to the Sokol Business Plan;

(3) Unjust Enrichment against all Defendants based on the allegation that Defendants were unjustly enriched by their use of the information and efforts provided by Plaintiffs;

(4) Tortious Interference with Contract against all Defendants based on the allegation that Defendants intentionally caused a breach of the contract between Sokol and a third party, Emir Oil; and

(5) Breach of Fiduciary Duty against Credifinance Defendants based on the allegation that Credifinance Defendants breached a fiduciary duty to Sokol when they agreed to provide investment banking services to BMB Defendants.

Defendants now move for summary judgment as to each of these claims.

III. Facts

Unless otherwise noted, the following facts are undisputed, and are derived from the parties' Local Rule 56.1 Statements, affidavits, and other submissions.

A. The Parties

1. Plaintiffs

Savage and Sinclair are the sole shareholders of Sokol. In 2003, the two men drafted a plan for a business venture (presented as the Sokol Business Plan), pursuant to which Plaintiffs would (1) create an oil and gas exploration and production company in the Republic of Kazakhstan, (2) acquire a controlling interest of the ADE Oil Fields, and (3) pursue the ADE Project.

2. Defendants

BMB is a Nevada Corporation that has its principal place of business in Kazakhstan. BMB was founded by BMB Defendants Alexandre Agaian, Bakhytbek Baiseitov, Boris Cherdabayev, and Mirgali Kunayev. Credifinance Capital, Inc. and Credifinance Securities, Ltd. are Canadian corporations. ² Georges Benarroch is an officer and director of the two Credifinance corporations.

B. The ADE Oil Fields and Early Acquisition Efforts

In April 1999, the Republic of Kazakhstan licensed Emir Oil to explore the ADE Oil Fields in western Kazakhstan. ³ The award of the exploration license to Emir Oil was publicly announced and was widely known in the region. Because Emir Oil lacked the necessary capital to explore and develop the ADE Oil Fields on its own, it obtained the assistance of Petroleum Geo-Services (“PGS”), an international geophysical company, to assess the ADE Oil Fields' reserves, to prepare presentation materials on the ADE Project, and to secure investors.

Emir Oil met with numerous potential investors about the ADE Project. In early 2001, Emir Oil began to discuss the ADE Project with Falcon Energy Group (“Falcon”), a Canada-based oil company at which Plaintiff Sinclair was the Financial Director. In light of Falcon's discussions with Emir Oil, Falcon sought to acquire a majority interest in the ADE Oil Fields and to pursue the ADE Project. Falcon drafted a written plan to achieve these commercial objectives (hereinafter, the “Falcon Business Plan”). ⁴ Falcon also retained Credifinance Defendants to help it to obtain the financing for the acquisition and the ADE Project. Credifinance Defendants reviewed the Falcon Business Plan. Credifinance Defendants proposed, as a capitalization strategy, that Falcon complete a reverse merger of Falcon through InterUnion Financial Corporation (“IUFN”), a company owned and controlled by Credifinance Defendants. ⁵

In October 2002, Falcon's efforts to acquire the ADE Oil Fields failed due to lack of funding. PGS and Emir Oil then contacted several other potential investors in Kazakhstan about the ADE Project. ⁶

C. Plaintiffs' Formation of Sokol and the Sokol Business Plan

1. Presentation of Sokol Business Plan to BMB Defendants

Sinclair left Falcon in early 2002, and sought to acquire the ADE Oil Fields and pursue the ADE Project independent of Falcon. He and three partners (Savage, Nikolai Klinchev, and Richard Moore) promoted the ADE Project to other potential investors in Kazakhstan. Sinclair and Savage appear to have led this effort to find investors and partners for the ADE Project. They used the presentation materials that had been prepared by PGS and the contents of the Falcon Business Plan, which Sinclair had apparently kept with him after leaving Falcon.

Sinclair and Savage's pursuit of investors and partners for the ADE Project led them to discussions with BMB Defendants, which did not culminate in a formal agreement. The discussions proceeded as follows. In early 2003, Sinclair contacted BMB Defendants Kunayev, Cherdabayev, and Baiseitov, each of whom was a Kazakh national and a prominent figure in the Kazakh oil and gas exploration industry. Sinclair proposed a joint business venture to BMB Defendants, pursuant to which: (1) Sinclair and Savage would form Sokol; (2) Sokol would acquire a controlling interest in Emir Oil; and (3) Sokol would pursue the ADE Project. Pursuant to the proposed joint business venture, BMB Defendants would provide capital for the venture in exchange for receiving an equity interest in Sokol, and serving on Sokol's Board of Directors. ⁷ Although BMB Defendants expressed interest in the proposal, no formal agreement was reached.

During discussions with BMB Defendants, Plaintiffs gave BMB Defendants a draft of the Sokol Business Plan, which described the proposed venture. The Sokol Business Plan provided that: (1) Sokol would acquire 70% of Tolmakov's 90% interest in Emir Oil; (2) Sokol would oversee the exploration and exploitation of the ADE Oil Fields; (3) Cherdabayev, Kunayev, Baiseitov, Sinclair, Klinchev, and Moore would each own an...