Republic of Kaz. v. Stati

380 F. Supp. 3d 55
CourtCourt of Appeals for the D.C. Circuit
DecidedMarch 30, 2019
DocketCivil Action No. 17-2067 (ABJ)
StatusPublished
Cited by5 cases

This text of 380 F. Supp. 3d 55 (Republic of Kaz. v. Stati) is published on Counsel Stack Legal Research, covering Court of Appeals for the D.C. Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Republic of Kaz. v. Stati, 380 F. Supp. 3d 55 (D.C. Cir. 2019).

Opinion

AMY BERMAN JACKSON, United States District Judge

Plaintiff, the Republic of Kazakhstan ("Kazakhstan"), brought this civil suit *57against the defendants - Anatolie Stati, Gabriel Stati, and the two companies they own, Ascom Group, S.A. and Terra Raf Trans Traiding Ltd. (the "Stati Parties") - for alleged violations of the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1961 et seq. , and the common law torts of fraud and civil conspiracy. Compl. ¶ 1 [Dkt. # 1]. Kazakhstan claims that defendants obtained an arbitral award from the Stockholm Chamber of Commerce ("SCC") in Sweden through fraud, and that defendants' subsequent efforts to use legal process to enforce and collect on that arbitral award have been unlawful. Id. ¶¶ 6, 8. Kazakhstan filed this lawsuit while an action to enforce the arbitral award was already pending in this Court, and it seeks damages, attorneys' fees, and an injunction preventing defendants from enforcing the foreign arbitral award in the United States. Id. , "Prayer for Relief," at 92-93.

The Stati Parties moved to dismiss the complaint for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6). Plaintiff opposed the motion, and the matter is ripe for decision. For the reasons that follow, the Court will grant defendants' motion and dismiss the ill-advised lawsuit. A RICO civil suit is not a vehicle to challenge non-frivolous litigation, or in this case, a valid and final foreign arbitral award.

BACKGROUND

In a related case to enforce the same foreign arbitral award, this Court granted the Stati Parties' petition to confirm the award pursuant to the New York Convention. Anatolie Stati v. Republic of Kazakhstan , 302 F. Supp. 3d 187, 209 (D.D.C. 2018).1 The Court held that Kazakhstan did not establish any of the narrow grounds for denying confirmation of the foreign award. Id. at 202-09. The facts surrounding this case are discussed in detail in that opinion.

To briefly recap, the Stati Parties initiated arbitration proceedings seeking reparations against Kazakhstan with the Stockholm Chamber of Commerce on July 26, 2010 for the expropriation of their assets, including an unfinished liquified petroleum gas plant ("LPG plant"). Compl. ¶¶ 6, 138. On December 19, 2013, the SCC tribunal found that Kazakhstan violated its obligations under the Energy Charter Treaty, and it issued an award in favor of the Stati Parties in the amount of $ 497,685,101.00, which included $ 199 million for the LPG plant. Id. ¶¶ 158-59.

Kazakhstan attempted to nullify the SCC award by instituting proceedings before the Svea Court of Appeal in Stockholm. Compl. ¶ 183. It argued, among other things, that the SCC award was procured by fraud. Id. ¶ 185. The alleged fraud concerned the value of the LPG plant. Id. ¶ 5. According to plaintiff, prior to the initiation of the arbitral proceedings, the Stati Parties "created a number of illegitimate contractual documents with related parties for the purpose of artificially inflating the construction costs of the LPG [p]lant." Id. ¶ 65. These falsified construction costs, Kazakhstan alleges, were included in financial statements, which were in turn used to fraudulently induce companies, including the state-owned oil and gas company, *58KazMunaiGas ("KMG"), into bidding $ 199 million for the LPG plant in 2008. Id. ¶¶ 5, 116, 130-31. Thus, Kazakhstan charges that the Stati Parties misrepresented the value of the LPG plant during the SCC arbitration when they proffered "the fraudulently procured bids," the "falsified financial statements," "false testimony regarding the amount of the investment in the LPG [p]lant," and "expert reports" that restated those figures as evidence. Id. ¶ 152. According to Kazakhstan, based upon this "false evidence" the arbitral panel awarded the Stati Parties $ 199 million in compensation for the LPG plant. Id.

Despite what Kazakhstan characterizes as its "detailed and specific allegations regarding [d]efendants' fraudulent scheme," the Svea Court of Appeal affirmed the arbitral award on December 9, 2016. Compl. ¶ 188. Kazakhstan then filed a motion to the Swedish Supreme Court seeking to quash the Svea Court of Appeal's judgment due to "grave procedural errors." Id. ¶ 190. That legal challenge also failed. On October 24, 2017, the Swedish Supreme Court denied Kazakhstan's motion. Stati , 302 F.Supp.3d at 196.

Although the Swedish Supreme Court decision extinguished Kazakhstan's hope of vacating the final arbitral award, the legal battle to resist the award's enforcement rages on in several jurisdictions across Europe and the United States where the Stati Parties initiated enforcement proceedings to collect on the award.2 Compl. ¶¶ 194-247. This suit, for alleged RICO violations, is the latest chapter. In its 93-page complaint, plaintiff accuses defendants of engaging in a "sophisticated and wide-ranging illegal pattern of racketeering," based upon its efforts to fraudulently inflate the value of the LPG plant, both prior to and during the SCC arbitration, and its ongoing litigation activities to enforce and collect on the SCC award. Compl. ¶¶ 2, 5-18.

Plaintiff filed this suit on October 5, 2017. See Compl. Defendants moved to dismiss the complaint on April 20, 2018, arguing that plaintiff failed to state a claim, Defs.' Mot. to Dismiss [Dkt. # 19] ("Defs.' Mot."); Mem. of P. & A. in Supp. of Defs.' Mot. to Dismiss [Dkt. # 19-1] ("Defs.' Mem."). Plaintiff filed its opposition to the motion on May 25, 2018, see Rep. of Kazakhstan's Mem. of P. & A. in Opp. to Defs.' Mot. [Dkt. # 26] ("Pl.'s Opp."), and defendants filed their reply on June 11, 2018. See Reply of Defs.' Mot. to Dismiss [Dkt. # 28] ("Defs.' Reply").3

The Court finds that plaintiff failed to state a RICO claim based upon a "scheme" that amounts to a protracted legal dispute over an LPG plant. Accordingly, the Court will dismiss the RICO claims with prejudice, and it declines to exercise supplemental jurisdiction over the common law claims of fraud and civil conspiracy.

STANDARD OF REVIEW

Free access — add to your briefcase to read the full text and ask questions with AI

Related

Cite This Page — Counsel Stack

Bluebook (online)
380 F. Supp. 3d 55, Counsel Stack Legal Research, https://law.counselstack.com/opinion/republic-of-kaz-v-stati-cadc-2019.