Summary
stating that in a RICO case where RICO authorizes nationwide service of process, defendants nevertheless were "properly served . . . pursuant to the Hague Convention."
Summary of this case from In re Lernout Hauspie Securities LitigationOpinion
02 Civ. 666 (JSR)
October 15, 2002
Steven Davidson, Esq., Gordon M. Clay, Esq., John O'Connor, Esq., Howard Stahl, Esq., Steptoe Johnson LLP, Washington, D.C., Attorney for Motorola.
Mishell B. Kneeland, Esq., Paul Fishman, Esq., Friedman Kaplan Seiler Adelman LLP, New York, NY, Allison G. Kort, Esq., Jason Brown, Esq., Holland Knight LLP, New York, N.Y., Attorneys for Nokia.
Robert F. Serio, Esq., Mark Holton, Esq., Gibson, Dunn Crutcher, New York, N.Y., David Rosenbert, Esq., Marcus, Rosenberg Diamond LLP, New York, N.Y., Stanley R. Mortenson, Esq., James R. Heavner, Jr., Esq., Baker Botts LLP, Washington, D.C., Attorneys For Individual Uzan Defendants.
Andrew N. Vollmer, Esq., Andrew Weissman, Esq., Wilmer, Cutler Pickering, Kenneth M. Bailo, Esq., New York, Washington, D.C., Attorney for Third Party.
MEMORANDUM ORDER
This Memorandum Order will set forth the reasons for the determinations recited in the Court's Order dated September 30, 2002 ("September 30 Order") and serve to confirm and implement that Order.
First, the September 30 Order denied defendants' motion to dismiss the complaint for insufficient service of process, lack of personal jurisdiction, failure to join indispensable parties, and forum non conveniens. While the Court has considered, and rejected, each of the arguments raised by defendants in support of that motion, a few of the more salient considerations are as follows:
With regard to service of process, the fact that the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1961et seq. (pursuant to which the primary claims here are brought) provides for nationwide service of process in certain circumstances, see id. at § 1965, in no way suggests a Congressional intent to preclude in RICO cases extraterritorial service of process to the extent ordinarily available under Rules 4(f) and 4(h), Fed.R.Civ.P. Here, all the defendants were properly served, in a manner comporting with those rules, pursuant to the Hague Convention. See O'Connor Decl., Ex. 28; transcript of July 23, 2002 hearing at 53; see also, Salomon Bros., Inc. v. Huitong Int'l Trust Inv. Corp., No. 94 Civ. 8559, 1997 WL 324051, at *2 (S.D.N.Y. June 13, 1997).
With reciard to personal jurisdiction, § 302(a) of the N.Y.C.P.L.R. provides, inter alia, for long-arm jurisdiction over any non-domiciliary who commits a tortious act within the state either in person or "through an agent." Here, the Court has already found, in connection with granting preliminary injunctive relief, that plaintiffs have made a substantial showing that all the defendants were engaged in a common conspiracy to carry out numerous tortious acts, see Opinion dated May 21, 2002 ("May 21 Opinion"), and thus were agents of each other for these purposes. As exemplified by the allegedly fraudulent e-mail sent from defendant Hakan Uzan in New York to Ed Hughes of Motorola Credit Corporation ("Motorola") on December 27, 1999 (which figured prominently in the preliminary injunction hearing), various of the defendants utilized their residences in New York as a base from which to commit one or more tortious acts. Given the joint conspiracy, this is more than sufficient to subject all the defendants to personal jurisdiction in New York pursuant to § 302(a). See, e.g., Best Cellars, Inc. v. Grape Finds at Dupont, Inc., 90 F. Supp.2d 431, 446 (S.D, N.Y. 2000); Chrysler Capital Corp. v. Century Power Corp., 778 F. Supp. 1260, 1266 (S.D.N.Y. 1991). Nor is there any due process concern, given that most, if not all, the individual defendants maintain residences in New York, hold New York driver's licenses, and, in the case of the two most important figures, Hakan Uzan and Cem Uzan, have either utilized New York courts to sue as a resident (Hakan) or have already conceded jurisdiction in this case (Cem). See generally, Asahi Metal Ind. Co. v. Superior Court of Cal., 480 U.S. 102, 113-115 (1987) (defining standards for assessing the twin due process requirements of minimum contacts and reasonableness).
With reciard to indispensable parties, the Court previously rejected, in its May 21 Opinion at 25, the primary arguments here advanced by defendants that Telsim Mobil Telekomunikasyon Hizmetleri A.S. ("Telsim") and Rumeli Telefon Sistemleri A.S. ("Rumeli Telefon") are necessary and indispensable parties to these proceedings. Since then, defendants' arguments to this effect have, if anything, grown weaker. For example, given defendants' recent offer (accepted by the Court in its Order dated October 3, 2002) to partially purge their contempt by causing Telsim to amend its Articles of Incorporation, there is no remaining doubt that the instant defendants fully control Telsim and its corporate shareholder Rumeli Telefon sufficiently to protect those companies' interests here. Nor, in view of the effective stay of the Swiss arbitrations (see infra), is there any remaining material possibility that Telsim and Rumeli Telefon will be subjected to "inconsistent" obligations as a result of their presence in the Swiss arbitrations but absence here. Finally, even if (contrary to fact) Telsim and Rumeli Telefon were necessary parties here, defendants have utterly failed to show that these companies are "indispensable" parties under Rule 19, Fed.R.Civ.P., since, among other defects, defendants have failed to show why, given their control of these two companies, both companies could not be made parties to this litigation if defendants so desired. See Fed.R.Civ.P. 19(b) (absent party not indispensable unless it "cannot be made a party").
With regard to forum non conveniens, defendants have likewise failed to carry their burden of rebutting the normally strong presumption favoring a plaintiff's chosen forum. See Aguinda v. Texaco, Inc., 303 F.3d 470, 476 (2d Cir. 2002). Indeed, given the individual defendants' substantial ties to New York, and the uniquely American legal aspects of a RICO action, this prong of defendants' motion borders on the frivolous. See generally Piper Aircraft Co. v. Reyno, 454 U.S. 235, 254 (1981) (discussing factors)
Second, the September 30 Order denied defendants' motion to dismiss the complaint for lack of subject matter jurisdiction and for failure to state a claim, except as to plaintiffs' eighth claim, which the Court dismissed. So far as the motion is directed against the RICO claims, many of the arguments defendants here make — such as objections to plaintiffs' standing to bring such claims and objections to the adequacy of the pleading of the RICO pattern, enterprise, and predicate acts — were previously rejected, expressly or by necessary implication, in the Court's May 21 Opinion. With respect to arguments not previously ruled upon, only a few merit mention here:
With regard to the extraterritorial application of RICO, the complaint sets forth literally hundreds of predicate acts of mail fraud and wire fraud occurring in the United States, not to mention wire transfers from New York involving at least $450 million in fraudulently obtained funds. This is more than sufficient to warrant application of RICO to the international frauds here alleged. See, e.g., Johnson Elec. N. Am., Inc. v. Mabuchi Motor Am. Corp., 98 F. Supp.2d 480, 485 (S.D.N.Y. 2000); C.A. Westel de Venezuela v. ATT Co., No. 90 Civ. 6665, 1992 WL 209641, *17 (S.D.N.Y. Aug. 17, 1992).
With regard to the RICO claims under §§ 1962(a) and 1962(b), while these claims may present proof problems absent from the claims under §§ 1962(c) and 1962(d) (which were expressly or implicitly found to be adequate in the May 21 Opinion), the pleadings adequately allege the requisite investment and acquisition injuries sufficiently to survive a motion to dismiss. See Complaint, ¶¶ 14, 28-35, 126-37, 144-51, 157-64, 182-235, 241-42, 264-65.
With regard to plaintiffs' "computer hacking" claims, while oral argument suggests that several of these claims may not escape summary judgment, all of the claims, when read most favorably to plaintiffs, escape dismissal under Fed.R.Civ.P. 12(b)(6) except for plaintiffs' eighth cause of action against Cem Uzan and Hakan Uzan for fraudulent use of a computer under 18 U.S.C. § 1030(a)(4). Defendants properly note that plaintiffs' Complaint fails to allege the requisite $5,000 in damages required to maintain a civil action under § 1030(5)(B)(i) and, accordingly, this claim must be dismissed, without prejudice, however, to being repled in the form annexed to Motorola counsel's letter of August 7, 2002.
Third, the September 30 Order denied defendants' motion to compel plaintiffs to submit their instant claims to arbitration as part of two subsequently commenced but now ongoing arbitrations (discussed further below) between, respectively, Telsim and Motorola (with respect to plaintiff Motorola's claims) and Telsim and ABN-AMRO Bank, N.V. (with respect to plaintiff Nokia's claims). The Court previously rejected this same application in its May 21 Opinion at 22-23, and here adds only that it is now reasonably clear from the parties' submissions that Swiss law discourages, if not prohibits, the joinder of non-parties to an arbitration. Here, none of the defendants is party to the underlying arbitration agreements. While the defendants may now find it in their interests to "consent" to being added as parties to the arbitrations, such consent can not be effected unilaterally, especially where, as here, it is being employed simply as a way of avoiding an otherwise valid proceeding in this Court. Conversely, nothing in Motorola's or ABN-AMRO's agreements to arbitrate contractual disputes arising from their respective financing agreements with Telsim can reasonably be read to constitute an agreement to arbitrate with Telsim plaintiffs' tort allegations that the persons and entities that ultimately controlled Telsim (i.e., the defendants here) siphoned Telsim's loan proceeds to defendants' own benefit and otherwise defrauded plaintiffs.
Fourth, the September 30 Order granted in part and denied in part plaintiffs' motion to stay or otherwise enjoin defendants from further pursuing the aforementioned, and two other, arbitrations. Specifically, the arbitrations that plaintiffs seek to stay are: (1) an arbitration filed in Switzerland by Telsim against Motorola on February 5, 2002 (i.e., well after the filing of the instant action) seeking to excuse, on grounds of "economic force majeure," Telsim's contractual default of its obligations to repay Motorola's loans; (2) an arbitration filed in Switzerland by Rumeli Telefon against Motorola on June 7, 2002 seeking,inter alia, to facilitate the transfer to the control of the Swiss arbitrators of the same Telsim stock that this Court had previously ordered transferred to the registry of this Court; (3) an arbitration, parallel to #2 and likewise filed in Switzerland by Rumeli Telefon on June 7, 2002, seeking parallel relief with respect to the Telsim stock pledged to ABN AMRO Bank (Nokia's intermediary), which this Court had likewise already ordered transferred to this Court's registry; and (4) an arbitration filed on June 10, 2002 in Paris (before the International Chamber of Commerce) by Telsim against two Motorola affiliates — Motorola Limited and Motorola Turkey — alleging breach of certain warranties given with respect to Motorola equipment supplied to Telsim.
As to the first three arbitrations, it is painfully obvious that they were commenced in an effort to undercut the prior orders of, and proceedings before, this Court. The two arbitrations filed June 7 are particularly egregious, since they were filed, not only in defiance of this Court's order to transfer the Telsim stock to the registry of this Court, but also at the very time that defendants were telling this Court that, because of various Turkish court orders (later found by this Court to likely be the product of defendants' collusive behavior), they could not transfer any Telsim stock out of Turkey. As for the February 5 arbitration, it sought to place before the Swiss arbitrators the determination of what is, in fact, one of defendants' primary defenses on the merits to the instant lawsuit and thereby to disrupt the instant proceedings (firmly scheduled for trial on February 10, 2003) as well as to raise the specter of piecemeal and inconsistent litigation.
While plaintiffs argue that, under such circumstances, this Court has power under the All Writs Act, 28 U.S.C. § 1651, to stay these three arbitrations directly, the Court need not reach that issue, since it has already found — and defendants no longer genuinely dispute, if they ever did — that the instant defendants have complete power to control Telsim and Rumeli Telefon and that plaintiffs are substantially likely to prevail on their instant claims against all defendants. See May 21 Opinion. Moreover, it is clear from the foregoing that plaintiffs will suffer irreparable injury if the three Swiss arbitrations proceed. Accordingly, pursuant to Rule 65, Fed.R.Civ.P., the defendants here are hereby immediately ordered to restore and maintain the status quo ante by taking all steps necessary to place the Swiss arbitrations on hold and not to allow Telsim or Rumeli Telefon or their agents or attorneys to pursue those arbitrations in any respect, pending further order of this Court.
The Paris arbitration, however, stands on a different footing. Whether or not Motorola's equipment was defective (as defendants assert and plaintiffs deny), even defendants do not seriously maintain that such alleged defects materially excused Telsim from repayment of its debts to Motorola (let alone Nokia), nor, obviously, could it have excused any of the fraud alleged by plaintiffs. While not wholly irrelevant to the instant proceedings, therefore, the issue of the alleged equipment defects is a collateral issue of minor consequence to the instant litigation. Accordingly, the Court declines to take any action with respect to that arbitration, at least at this time.
For the foregoing reasons, the Court hereby reaffirms its September 30 Order, the injunctive provisions of which as here elaborated will hereby take effect forthwith.