In a civil case of international intrigue, Funk v. Belneftekhim a/k/a Concern Belneftekhim, 14 CV 0376 (E.D.N.Y. Oct. 20, 2015), the facts alone make for a worthy read. Plaintiffs, a New York attorney and his legal assistant, represented investors in defendants, a Belarusian oil company and its U.S. subsidiary that were connected with Belarussian government officials and several “John Does.” U.S. governmental sanctions in 2006 and 2007 against Belarus gave rise to a “commercial dispute” between plaintiffs’ clients and defendants over the status of the investments. Slip op. at 3. According to the complaint, instead of negotiating in good faith, after several meetings in New York, the defendants in 2008 “lured” plaintiffs to travel to London whereupon they drugged plaintiffs, flew them against their will to Belarus and imprisoned and tortured them for over a year. District Judge Brian M. Cogan’s opinion recounts diplomatic efforts at high levels of the U.S. government and human rights organizations to obtain plaintiffs’ release. Slip op. at 5.
In 2012, plaintiffs commenced suit in New York Supreme Court against defendants for assault and battery, false imprisonment, infliction of emotional distress and other intentional torts. Defendants did not answer and took no action with respect to the case until 2014, when they removed it to federal court on the twin bases of diversity jurisdiction and original jurisdiction for actions involving foreign states. Defendants then moved to dismiss based upon sovereign immunity defense and lack of personal jurisdiction. The Court determined that the parties would have to engage in discovery for it to resolve the issues, but defendants would not cooperate. The Court at first issued monetary sanctions against defendants and, when they failed to pay, plaintiffs moved for default judgment as a discovery sanction.
The legal issues resolved might at first blush appear to be of interest only to the litigants, but Judge Cogan grappled with several jurisdictional, pleading and discovery issues that should attract wider attention. First, Judge Cogan resolved that “a discovery sanction other than monetary fines, which defendants continue to refuse to pay, is appropriate.” Slip op. at 10. He added that “although it may eventually come that point,” id., default was too much of a sanction too soon and that, first, the Court should impose a lesser but still severe sanction of striking the sovereign immunity defense. In that way, the sanction fit the offending conduct of failure to engage in discovery on the defense. The Court vacated “per diem” monetary sanctions previously imposed on defendants on a going forward basis, but kept those in place that had already accumulated.
The striking of the sovereign immunity defense gave rise to another issue: whether the removal was untimely. 28 U.S.C. 1441(d) allows for enlargement of the usual 30-day period for removal (see section 1446) in cases of sovereign immunity “at any time for cause shown.” Plaintiff argued for remand based on the dismissal of the defense. The Court rejected remand on the grounds that, at the time of the removal, “it [was] not the case that the defense was so frivolous that [defendant] could not invoke [Section 1441(d)] and trigger the Court’s discretion to enlarge the removal period.” Slip op. at 11. The Court further noted that it continued to have diversity subject matter jurisdiction. Id.
Finally, the Court required plaintiffs to re-plead with more particularity under Fed. R. Civ. P. 9(b) their fraud claim that defendants had “lured” them from New York to London with the intent to imprison them in Belarus. It noted that “defendants’ personal jurisdiction arguments may well be dependent on the survivability of the plaintiffs’ fraud claims.” Slip op. at 13. The Court noted that “[m]erely attributing statements to [corporate] ‘defendants’ is not enough as it neither alleges the names of the speakers nor the specific positions they held for defendants.” Slip op. 15. Sympathizing that the plaintiffs could not without discovery identify several of the John Doe defendants, the Court added “if any of the John Doe defendants are responsible for the fraudulent statements, plaintiffs must at least identify what the Doe defendant said, when it was said and where it was said.” Id.