WJ Holding Ltd. v. Shireen Mar. Ltd.
| Decision Date | 25 November 2020 |
| Docket Number | 20 CV 1068 (LDH) (CLP) |
| Parties | WJ HOLDING LIMITED and STUBRICK LIMITED, Plaintiffs, v. SHIREEN MARITIME LTD, MAZLIN TRADING CORP., AMM CONSULTING AND MANAGEMENT GROUP LLC, and ALEXANDER SPIEGEL, Defendants. |
| Court | U.S. District Court — Eastern District of New York |
REPORT AND RECOMMENDATION
On April 7, 2017, plaintiffs WJ Holding Limited ("WJH") and Stubrick Limited ("Stubrick") (together, the "Drukker Companies") commenced an action in Supreme Court, Kings County, against defendants Shireen Maritime Ltd., Mazlin Trading Corp., AMM Consulting and Management Group LLC, and Alexander Spiegel, seeking a declaration that certain loan agreements between the parties were unenforceable sham loan agreements and an injunction barring defendants from enforcing these agreements. Defendants removed the action to this Court and plaintiffs now move to remand the case back to state court.1
For the reasons set forth below, it is respectfully recommended that plaintiffs' motion for remand be granted.
According to the plaintiffs' First Amended Complaint, filed on July 9, 2019 in state court, plaintiffs WJH and Stubrick are both Cyprus based companies owned by Yuri Drukker, an agricultural engineer who has owned edible oil production facilities in Moldova and Russia for many years. (Am. Compl.2 ¶¶ 21, 22, 29). WJH owns the Open-Joint Stock Company Bender Oil Extraction Plant ("Bender Oil"), a vegetable oil extraction facility located in the Transdniestra, a separatist enclave in Moldova. (Id. ¶¶ 3, 31).
According to the Complaint, defendant Spiegel is a citizen of Florida, and owner of defendants Shireen, AMM, and Mazlin. (Id. ¶ 26). It is alleged that Shireen is a Liberian shell company; Mazlin is a British Virgin Islands shell company; and AMM is a dissolved Florida corporation controlled by defendant Spiegel and his children, with legal ownership held by the Alexander Spiegel Revocable Family Trust, of which Spiegel is the trustee. (Id. ¶¶ 23-25).
Plaintiffs allege that Drukker and Spiegel were "lifelong friends" who engaged in numerous business dealings. (Id. ¶ 30). In or about 2011, Spiegel expressed an interest in becoming a 30% equity owner in Bender Oil in exchange for $7,000,000. (Id. ¶ 5). Plaintiffs allege that defendant Spiegel never had any intention of paying the full price for his shares and instead, he and the other defendants "schemed and conspired to dupe the Drukker Companies into signing agreements that would, on their face, seem to allow the Defendants to acquire 30% of Bender Oil at a fraction of the actual price and leave the Drukker Companies holding the bag for the balance of the cost of the shares." (Id. ¶ 6). According to the Amended Complaint, Spiegel persuaded Drukker to enter into an agreement whereby Spiegel, through AMM, wouldpurchase the right to acquire 30% of the shares at a reduced price, with the remainder of the price to be financed by two lending companies, Shireen and Mazlin. (Id. ¶¶ 8-9). It is alleged that Spiegel never informed plaintiffs that he owned and controlled Shireen and Mazlin, and never had any intention of repaying the loans. (Id. ¶¶ 11, 12). It is further alleged that Spiegel was seeking to defraud the United States and foreign tax authorities and he implemented this scheme in order to retain liquid assets for the benefit of his children, while avoiding estate taxes. (Id. ¶¶ 14, 15).
Based on a promise from Spiegel that he would assume the debt, the Drukker Companies entered into Loan Agreements with Shireen and Mazlin. (Id. ¶ 17). When the Transdniestrian government reneged on certain obligations to Bender Oil, reducing the company's profitability, it is alleged that Spiegel reneged on his agreement to assume the debt under the Loan Agreements. (Id. ¶ 18). Plaintiffs allege that as a result of Spiegel's breach of the oral agreement to assume the debt, the Drukker Companies became responsible to pay Spiegel's own companies, and as a consequence, neither WJH or Stubrick have been able to obtain additional financing nor have they been able to operate. (Id. ¶ 19).
Plaintiffs bring claims of breach of contract against Spiegel and AMM, claims of breach of implied covenant of good faith and fair dealing against Spiegel and the Spiegel Companies, and claims of promissory estoppel, fraudulent inducement, and breach of fiduciary duty against Spiegel. (Id. ¶ 20). The Amended Complaint also alleges a claim of civil conspiracy against all defendants and seeks a declaratory judgment against Spiegel and the Spiegel Companies. (Id.)
The case was originally filed in Supreme Court, Kings County, on April 7, 2017. (Jacobs Decl.3 ¶ 2). According to plaintiffs, however, proceedings related to this underlying dispute began in November 2016, when defendants Shireen and Mazlin commenced an arbitration proceeding against plaintiffs in the London Court of International Arbitration. (Pls.' Mem.4 at 2). Plaintiffs did not participate in the fact-finding procedures of the arbitration because they took the position that they had been fraudulently induced into entering into the agreements which contained the arbitration provision. (Jacobs Remand Decl., Ex. B5 at 2). On January 23, 2018, the London Court of International Arbitration issued final awards in favor of Mazlin and against plaintiffs. (Jacobs Remand Decl., Ex. B at 3).
While the arbitration was ongoing, plaintiffs commenced the state court action seeking declaratory and injunctive relief. Defendants were served on April 13, 2017 with the state court summons and complaint. (Jacobs Decl. ¶ 3, Ex. B). Defendants then moved to dismiss the initial Complaint, which was denied on March 13, 2018. (Jacobs Remand Decl., Ex. B at 3). Thereafter, defendants filed an Answer including a counterclaim for breach of the loan documents; there was no counterclaim seeking to confirm the Arbitration Award. (Id.) On December 11, 2018, defendants were granted permission to amend their Answer to interpose a new counterclaim to confirm the Arbitration Award. (Id.)
On July 9, 2019, the parties entered into a stipulation allowing plaintiffs to amend their state court Complaint, which they did that same day. (Jacobs Decl. ¶¶ 4, 5, Exs. C, D). A stipulation extending defendants' time to answer was entered into on July 29, 2019, giving defendants until September 6, 2019 to respond to the Amended Complaint. (Id. ¶ 6, Ex. E).
Throughout the period from March 2018 to June 2019, the parties engaged in discovery in the state court action, with defendants serving deposition notices, the parties exchanging document demands and interrogatories, and the parties negotiating before the state court on issues relating to the timing and nature of discovery. (Jacobs Remand Decl., Ex. B at 4).
In April 2018, while the state court action was pending and after defendants had interposed their breach of contract counterclaim, defendant Mazlin commenced a new action against WJH, Stubrick, and Drukker in the Circuit Court of the Eleventh Judicial Circuit in and for Miami-Dade County, Florida (the "Florida action"). (Id. at 5). In that action, Mazlin sought to confirm the Arbitration Award and sought relief for the alleged fraudulent transfers. (Id.) Defendants in the Florida action filed a motion to dismiss Mazlin's claims in May 2018. (Id.) While the motion was pending, the Florida court so ordered an agreement between the parties abating the Florida case pending resolution of the New York state court case. (Id.)
On August 8, 2019, defendants removed the New York state action to the Southern District of New York. (Jacobs Decl. ¶ 7, Ex. F). The Notice of Removal sought to confirm the Arbitration Award. Included in the filing was a copy of a Verified Petition to Recognize and Enforce Foreign Arbitration Awards, 19 CV 7652 (S.D.N.Y.) (Jacobs Remand Decl., Ex. B at 5). Upon agreement of the parties, the Southern District action was remanded back to state court on February 11, 2020. (Jacobs Decl. ¶ 8, Ex. G).
On February 27, 2020, defendants filed a second Notice of Removal to this Court. (Id. ¶ 9, Ex. H). On March 30, 2020, plaintiffs filed the instant motion to remand the action to the New York State Supreme Court, Kings County, arguing that defendants are seeking the same relief in four separate courts, in three jurisdictions, at the same time. (Jacobs Remand Decl., Ex. B at 5). In the event that the Court declines to order remand, plaintiffs seek entry of a default against defendants. Finally, plaintiffs also seek an award of fees and costs. (Pls.' Procedural Mem.6 at 1). On June 8, 2020, plaintiffs also filed a second motion to remand on the ground that this Court lacks subject matter jurisdiction.
Title 28 of the United States Code, Section 1441(a) provides that a defendant may remove "any civil action brought in a State court of which the district courts . . . have original jurisdiction . . . ." Removal is proper when a case originally filed in state court presents a federal question or where there is diversity of citizenship among the parties and the amount in controversy exceeds $75,000. See 28 U.S.C. §§ 1331, 1332(a); see also Gurney's Inn Resort & Spa Ltd. v. Benjamin, 743 F. Supp. 2d 117, 119 (E.D.N.Y. 2010) () (citing Citibank, N.A. v. Swiatkoski, 395 F. Supp. 2d 5, 8 (E.D.N.Y. 2005))).
The statute requires a defendant who seeks to remove an action from state court to file a notice of removal signed pursuant to Rule 11 of the Federal Rules of Civil Procedure and "containing a short and plain statement of the grounds for removal, together with a copy of all process, pleadings, and orders served upon such defend...
To continue reading
Request your trial