Euroboor BV et al v. Grafova

Filing 343

MEMORANDUM OPINION. Signed by Judge Karon O Bowdre on 8/1/2022. (JLC)

FILED
2022 Aug-01 PM 03:31
U.S. DISTRICT COURT
N.D. OF ALABAMA

UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ALABAMA
SOUTHERN DIVISION
EUROBOOR B.V., et al.,
Counterclaim Defendant,
v.
ELENA GRAFOVA,
Counterclaim Plaintiff.

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CIVIL ACTION NO.
2:17-cv-2157-KOB

MEMORANDUM OPINION
The saga continues. See (Docs. 88, 231). The court conducted a three-day
Final Hearing in this case beginning on May 16, 2022. The sole claim remaining
for the hearing involved Ms. Grafova’s counterclaim for breach of contract
concerning two loans to Euroboor FZC; the court previously ruled that Euroboor
FZC had breached both contracts. (Doc. 231 at 24). The hearing addressed two
issues: (1) the amount of penalties that Euroboor FZC owed Ms. Grafova under the
loans based on Dutch law; and (2) whether UAE law entitles Ms. Grafova to pierce
Euroboor FZC’s corporate veil to hold Mr. Koster personally liable for any
judgment against Euroboor FZC. (Doc. 290 at 3). Before the hearing, the parties
stipulated to the applicable provisions of Dutch and UAE law. See (doc. 290 at 8).
And the parties stipulated that, as of May 16, 2022, Euroboor FZC owed Ms.
Grafova $1,023,134.48 as total principal and interest on both loans. (Doc. 328).

1

At the close of the hearing, the court instructed the parties to file briefs
reflecting their closing arguments and summaries of the evidence presented. The
court told the parties to point out any relevant exhibits previously submitted but
left unaddressed in the hearing. The court instructed that the parties could not later
rely on exhibits—specifically for purposes of an appeal—that they failed to
address at the hearing or failed to identify in their final briefs. Ms. Grafova
submitted a final brief identifying roughly fifteen additional exhibits. (Doc. 337).
Mr. Koster filed a brief relying on four Dutch cases but no additional exhibits.
(Doc. 338). The court has considered that additional case law and exhibits along
with the testimony and exhibits presented at the hearing.
For the reasons explained below, the court awards Ms. Grafova penalties in
the amount of $168,213.82, and it will also impose an additional daily penalty in
the event of Mr. Koster and Euroboor’s continued refusal to pay or agree to a
reasonable payment plan within 30 days of this order, i.e., August 31, 2022. The
court also finds that Ms. Grafova may pierce Euroboor FZC’s veil to hold Mr.
Koster personally liable under UAE law.
I.

The Loan Agreements

The parties ask the court to mitigate the amount of penalties owed under the
loan agreements between Ms. Grafova and Euroboor FZC. Those agreements,
which contained identical terms, provide:
2

Article 2. Interest
2.1 Debtor shall be liable to pay to creditor an interest rate of 6 (six)
% per annum over the principal sum and/or the remaining debt
amount.
2.2. The interest is payable quarterly, commencing on January 1,
2016.
2.3 If and to the extent that the interest has not been paid, the interest
shall be added to the principal sum and shall be interest-bearing.
Article 3. Repayment
Repayment of the principal sum shall take place on December 31,
2019.
Article 4. Immediate payability and penalty
4.1 Debtor shall commit to immediate repayment to creditor of the
principal sum and/or the remaining debt amount inclusive of interest
due, as well as penalties and costs possibly due without notice if the
creditor so requires, in the following cases:
...
e. if debtor fails to fulfill or violates any article within this
agreement, without prejudice to that stipulated in sub 2 of this
article;
...
4.2 The party that breaches any provision of this agreement, forfeits
an immediately due and payable penalty to the amount of USD 5.000
(in words: five thousand US Dollars) per occurrence, without
injunction or proof of default is required. . . .
4.3 Aforementioned penalty shall be increased by an amount of USD
500 (in words: five hundred US Dollars), per day of continuance of
the breach or the failure.
(Pl.’s Ex. 2; Pl.’s Ex. 3).

3

At the summary judgment stage, the court found a plain interpretation of
these terms ($5,000 per breach plus $500 per day) to produce an unreasonably high
penalty amount under Dutch law. (Doc. 231 at 26). So, the court now addresses the
extent to which it will mitigate the penalties Euroboor FZC owes Ms. Grafova.
II.

Penalties Under Dutch Law

Before the final hearing, the parties stipulated that the Dutch principles of
“reasonableness and fairness” should guide the court’s mitigation of penalties.
(Doc. 290 at 8). A reasonableness determination under Dutch law considers the
following factors:
(1) the amount of the actual loss/damage suffered relative to the
amount of the penalty;
(2) the nature of the agreement;
(3) the contents and purport of the penalty clause; and
(4) the circumstances under which the penalty clause was invoked.
(Doc. 290 at 8) (citing Turan B.V. v. Easystaff Payroll Serv., Case No. 17/00024, ¶
3.4.1 (Dutch Sup. Ct. 2018) (doc. 207-105 at 5)).
After considering the evidence, the court finds $168,213.82 to be a
reasonable and fair penalty that Euroboor FZC must pay Ms. Grafova under the
loans. The court calculates that amount based on a $5,000 penalty per nine
breaches of each of the two loan agreements from January 2018 until December
31, 2019 (for a subtotal of $90,000); it adds to that amount a 9% annual penalty
4

from September 23, 2021—when this court ruled that Euroboor FZC breached the
contracts—until the date of this opinion, August 1, 2022.
As explained below, the court’s conclusion rests on three categories of
evidence that the parties presented: (1) evidence of the parties’ course of dealings
concerning loan agreements; (2) evidence of Ms. Grafova’s repeated requests in
November and December 2017 that Euroboor FZC begin repaying the loans’
interest and, later, to pay the loans’ full balance; and (3) evidence of Mr. Koster
and Euroboor FZC’s flagrant refusal to repay the loans, while depleting Euroboor
FZC’s resources by transferring them to Euroboor MEEBS, and despite repaying
or forgiving Euroboor FZC’s other creditors, including payments to Mr. Koster,
even after this court declared that Euroboor FZC breached the loans and the basic
amount due as of that date. The court will discuss each category of evidence
below.
A. The Parties’ Course of Dealings Concerning Loans
The court has previously noted that a plain reading of the loans indicates that
Euroboor FZC should have paid Ms. Grafova interest each quarter as it accrued.
See (Doc. 88 at 24). But Euroboor FZC presented credible evidence that Euroboor
typically did not pay quarterly interest as that quarter’s interest accrued under
similar language in loans between Euroboor entities, absent a request for quarterly
interest payments.
5

For example, Euroboor’s counsel questioned Ms. Grafova about how the
Euroboor entities typically handled the principal, interest, and penalties of intercompany loans. She testified that the Euroboor entities often used loan agreements
with terms similar to hers. She stated that Euroboor’s accounting systems reflected
the accruing interest beginning at the end of the first quarter after the loan was
created, and compounding each quarter thereafter. But she admitted that
Euroboor’s debtors never paid the interest on those loans before they came due and
that Euroboor did not typically seek penalties for such non-payment.
Euroboor also presented a financial statement of Euroboor FZC from
January 2017 that identified the principal of the loans from Ms. Grafova, the
interest accrued to that date (roughly $53,000), but excluding any mention of
penalties. (Def. Ex. 65, Bates Euroboor-0032975); see also (Def. Ex. 32, report for
May 2017, stating the same). On cross-examination Ms. Grafova testified that she
reviewed this report in her managerial role at Euroboor in 2017 and did not request
adding any amount of penalties for non-payment of the interest at that time. Of
course, those financial statements predate Ms. Grafova’s demand of quarterly
interest payments and for payment in full.
Based on this evidence, the court finds that the Euroboor parties—at Ms.
Grafova’s approval—typically (1) did not pay quarterly interest, despite language

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in the loan documents providing for such payments, and (2) did not impose
penalties for failure to pay a loan’s quarterly interest as it accrued.
B. Ms. Grafova’s Requests for Repayment of Interest
Despite the court’s conclusion above, the terms of the loans still stated in
unambiguous terms that “the interest is payable quarterly, commencing on January
1, 2016.” (Pl’s Ex. 2, ¶ 2.2). And the loans stated that Ms. Grafova could seek
immediate repayment of the principal and interest, “as well as penalties,” in the
event that the “debtor fails to fulfill or violates any article within this agreement.”
(Pl.’s Ex. 2, ¶ 4.1.e). The loans matured on December 31, 2019. (Id.).
Emails show that Ms. Grafova requested repayment of the loans’ principal
and interest numerous times in November and December 2017. On November 17,
2017, Ms. Grafova sent Mr. Koster an email requesting that he pay her “the
interest amount for my loan.” (Pl.’s Ex. 5) (emphasis added). Mr. Koster
responded on the same day that “it will take a little longer now to add up all other
amounts you owe me and in due time I will present you the calculation.” (Id.).
Then on November 28, 2017, Ms. Grafova sent another email to Mr. Koster
requesting that he make “immediate payment of the principal sum and the debt
amount of the interest due.” (Def. Ex. 55) (emphasis added). Mr. Koster responded
on December 2 that he did “not agree with any allegations contained [in Ms.

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Grafova’s November 28 email] as the same do not have sufficient legal basis and
standing.” (Id.).
Based on these emails, the court finds that Ms. Grafova properly requested
payment of the loans’ quarterly interest in November 2017. The loan language
unambiguously permitted her to request the interest payments before the loans’
maturity date because it stated that interest was “payable quarterly, commencing
on January 1, 2016.” (Pl.’s Ex. 2, ¶ 2.2). Nothing in Mr. Koster’s emailed
responses in 2017 or evidence at the final hearing in this case indicated his “legal
basis” to dispute Ms. Grafova’s request for interest payments.1 So the court finds
that, under the loans’ plain language, the interest that Euroboor FZC owed Ms.
Grafova became due at the end of the quarter that she emailed her requests—
January 1, 2018.
Of course, Euroboor FZC did not pay the interest when it became due
January 1, 2018, or at any time until the present. Euroboor FZC’s failure to repay
the quarterly interest on January 1, 2018 constituted a breach of the loan

1

The court has rejected Mr. Koster’s late-in-the-day and legally unfounded argument that he
refused to pay out of fear of committing “culpable money laundering” under Dutch law. See
(doc. 329). The court does not appreciate Mr. Koster’s continued efforts to advance that late-inthe-day and meritless argument. See (doc. 338 at 5).
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agreements, and Euroboor continued to breach the loan agreements for every
quarter that it refused to pay Ms. Grafova the interest after that time.2
For each of these breaches, the court finds that Euroboor FZC owes $5,000
penalties per loan for each quarter beginning in January 2018, until the loans’
maturity date on December 31, 2019. That amount equals eight quarters, times
$5,000 per quarter for each of the two loans, for a total penalty of $80,000. As
explained below, the court finds this penalty—which the loan documents set
forth—reasonable and fair based on the amount of the loans; based on Euroboor
FZC’s ability to make such interest payments when first requested and when due
subsequently; and based on Euroboor FZC’s refusal to make those payments, while
transferring assets, making larger payments to Mr. Koster, and writing off debts
that other creditors owed to it.
Further, the court finds that Euroboor FZC breached the loan agreements by
failing to pay the principal and interest owed when the loans matured on December
31, 2019. For this breach, under the language of the loans, the court will impose an
additional $5,000 in penalties for each loan ($10,000 total) for Euroboor FZC’s
failure to pay the full principal and compounded interest when due on the loans’
maturity date of December 31, 2019.

2

Also, Euroboor FZC’s failure to repay the quarterly interest due January 1, 2018 likely justifies
Ms. Grafova’s premature acceleration of the loans’ principal because Euroboor FZC’s refusal to
pay “violat[ed] an[] article within this agreement.” (Pl.’s Ex. 2, ¶ 4.1.e).
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So the court will impose a penalty of $90,000 total for Euroboor FZC’s
failure to pay the interest from January 2018 to December 2019 and for its failure
to pay the total amount owed on December 31, 2019 on both loans. For the reasons
explained above, the court finds that this penalty fits both the “nature of the
agreement” and the “contents and purport of the [penalty] clause” under Dutch
law, as the parties have stipulated. (Doc. 290 at 8) (citing doc. 292-2, Easystaff
case).
The court rejects Euroboor’s argument—presented for the first time in its
post-hearing brief3—that the court should treat the two loans as “in essence a
single loan,” producing a penalty amount of $5,000 per quarter, rather than
$10,000 per quarter. See (doc. 338 at 6). Euroboor presented no evidence at the
hearing that the parties viewed the two loans as a “single loan,” and Euroboor’s
brief cites no exhibits or testimony to support that view. Rather, the loans had
different principal amounts, and the parties executed the loans agreements on
different dates with different documents (although with substantially identical
language). In fact, Ms. Grafova testified on cross examination that Mr. Koster
directed his accountants at Limes International to draft the loan agreements and
that she did not negotiate regarding the penalty provisions. And the court notes that
3

The court finds the timing of the parties’ post-hearing briefs analogous to reply briefs, in which
parties may not present new arguments. See In re Egidi, 571 F.3d 1156, 1163 (11th Cir. 2009)
(“Arguments not properly presented in a party’s initial brief or raised for the first time in a reply
brief are deemed waived.”).
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when Ms. Grafova and Mr. Koster discussed the loans at a restaurant on November
11, 2017, Ms. Grafova offered to reduce the interest owed from 6% to 3% if
Euroboor paid her the principal and interest sooner. (Def.’s Ex. 71). Mr. Koster
never acted on that very reasonable offer. So the court finds no reason to absolve
Euroboor FZC of half the penalties it owes under the two loan agreements that it
drafted.
C. Mr. Koster and Euroboor FZC’s Refusal to Repay the Loan
Agreements while Paying Other Debts and Paying Mr. Koster
Mr. Koster himself testified that he treated the loan dispute as a “war” with
Ms. Grafova, and the court finds that he executed an effective battle plan that has
prevented Ms. Grafova’s recovery of money due her since December 31, 2019. As
explained below, the evidence presented at the hearing greatly troubled the court
for at least four reasons:
1. Euroboor FZC had the financial means to repay Ms. Grafova’s loans when
due, but instead embarked on a scheme to deplete its own resources;
2. Mr. Koster directed the transfer of personal and other assets of Euroboor
FZC to create Euroboor MEEBS, which substantially replaced Euroboor FZC
and drained Euroboor FZC of assets with which it could repay Ms. Grafova;
3. Mr. Koster directed Euroboor FZC to pay its debts to other Euroboor-related
entities while writing off debts owed it; and
4. Mr. Koster personally received payments from Euroboor FZC that exceeded
the amount Euroboor owed to Ms. Grafova, and which Mr. Koster could
have directed to pay off the debt owed Ms. Grafova.

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i.

Euroboor FZC’s Financial Means

Evidence from the hearing showed that Euroboor FZC could have repaid
Ms. Grafova—but chose not to—no later than by the time the loans matured on
December 31, 2019.
For example, Mr. Rehman Shahzad, Euroboor FZC’s CFO, admitted on
cross-examination that Euroboor FZC could have paid, at a minimum, the interest
owed to Ms. Grafova around September 2018, when Mr. Koster began to wind
down Euroboor FZC. And Mr. Koster testified that his accountants advised him
that Euroboor FZC could have paid off the loans’ principal and interest within six
to eight months after Ms. Grafova’s initial requests for payment at the end of 2017.
But Mr. Koster chose to wage war instead of repaying the loans.
This testimony accords with Ms. Grafova’s evidence of Euroboor FZC’s
finances. Euroboor FZC’s year-end audit for 2019 (dated May 31, 2019) indicated
that the company had a total equity of 5.2 million AED and cash reserves of
737,000 AED. (Pl.’s Ex. 34 at 7). And the company’s 2020 year-end audit, while
showing a decrease in assets, showed its total equity of 1.6 million AED and cash
reserves at 40,215 AED. (Pl.’s Ex. 7 at 8). In other words, Euroboor FZC’s yearend audits show that the company had positive equity and cash reserves as of May
2018, 2019, and 2020, but deliberately chose not to repay Ms. Grafova.

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ii.

Mr. Koster’s Draining Euroboor FZC to Create
Euroboor MEEBS

Mr. Koster’s replacement of Euroboor FZC with Euroboor MEEBS also
supports imposing penalties.
Rehman Shahzad testified that Euroboor FZC began winding down in
September or October of 2018 at Mr. Koster’s direction, based on the purported
legal guidance of APT Consultants. Around that same time, Mr. Koster directed
the creation of Euroboor MEEBS, a company that supplied the same materials
Euroboor FZC supplied to the same customers, operated primarily with the same
employees, assumed Euroboor FZC’s lease, and received most of Euroboor FZC’s
assets. The key difference between these largely identical companies was that
Euroboor MEEBS had no debts to Ms. Grafova, and she did not serve as a
shareholder of MEEBS. This evidence supports the inference that Mr. Koster
created Euroboor MEEBS to avoid repaying Ms. Grafova.
The first red flag for Euroboor FZC’s wind-down is who helmed the ship at
that time. Before 2018, Euroboor FZC’s only two directors were Mr. Koster and
Ms. Grafova. But Mr. Koster unilaterally ousted Ms. Grafova as a director on July
4, 2018. (Pl.’s Ex. 54). In other words, Mr. Koster’s efforts left him as the sole
director when he made key decisions about winding down Euroboor FZC and
transferring its business to MEEBS. Even so, Mr. Koster continued to deplete
Euroboor FZC’s assets by receiving “remuneration” payments for serving as the
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company’s director. (Pl.’s Ex. 33). Mr. Koster admitted that Ms. Grafova never
received any such payments as director. Mr. Koster’s sole control over both
companies, coupled with his declared war on Ms. Grafova, casts serious doubts on
the financial decisions made at that time.
The court also has grave concerns about the role of APT Consultants in
Euroboor FZC’s wind-down. Mr. Koster and Mr. Shahzad testified that they relied
on APT Consultants to provide legal advice about how to wind down Euroboor
FZC’s business. But none of the evidence concerning Euroboor’s purported
advisors indicates that APT was aware of Ms. Grafova’s loans to Euroboor FZC
that are at issue in this lawsuit. In fact, the court directly questioned Mr. Shahzad
as to whether any Euroboor employees ever told Euroboor’s legal or accounting
consultants about Ms. Grafova’s loans or this lawsuit; he responded that he did not
know. And Mr. Shahzad’s testimony also left the court with doubts as to whether
he had ever received notice of this court’s summary judgment ruling that Euroboor
FZC must pay Ms. Grafova the loans’ principal and interest; when the court
questioned him about this point, he first testified that he never heard of the court’s
summary judgment ruling, and then he recalled that he “thought” he had received
some notice of the ruling.
Put simply, Euroboor’s consultants could not have properly advised the
company as to the legality of steps taken to wind down Euroboor FZC without
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knowing about Ms. Grafova’s loans and her case to enforce them pending before
this court, and specifically about the judgment entered in her favor. The evidence
offered at the hearing failed to show that Euroboor or Mr. Koster ever gave
information about these matters to APT, on which Mr. Koster relied to insulate the
transfers of practically all of Euroboor FZC’s assets to avoid paying the lawful
debt to Ms. Grafova. Seeking APT’s advice—while failing to provide key
information about loans, legal claims, and court rulings against the company—
undercuts the “reasonableness” of relying on APT’s advice and actually
demonstrates bad faith, if not outright fraud.
Unsurprisingly, APT Consultants did not provide sound advice. In a
December 2018 email exchange between an APT advisor and Mr. Shahzad, APT
advises a four-step “sequence” in which Euroboor FZC could pay off its debts and
wind down its business. (Pl.’s Ex. 53). Notably, that sequence does not include
paying back Ms. Grafova’s loans that came due in full a year later; it does not
mention Ms. Grafova’s loans at all, even though they appeared on FZC’s financial
statements. E.g., (Def.’s Ex. 32, 2017 Financial Statement; Pl.’s Ex. 7, 2020
Financial Statement). Nor does it refer to any legal principles supporting the
suggested “sequence” that ignored payment of a legal debt. The email does advise
determining the “correct amounts [owed] to Director [Koster],” but that instruction
did not include determining the amounts owed to Ms. Grafova because Mr. Koster
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ousted her as a director five months earlier. (Pl.’s Ex. 53). So the court finds that
Euroboor and Mr. Koster’s reliance on APT did not sanitize their conduct.
Around the same time, Euroboor MEEBS began its operations in late
December 2018. (Pl.’s Ex. 64). The Euroboor entities include companies in five
countries (USA, China, Russia, Netherlands, and UAE). Notably, Mr. Koster
admitted that the UAE is the only country with two Euroboor entities: Euroboor
FZC and MEEBS. In fact, beginning in February 2019, MEEBS began operating
out of the same space that Euroboor FZC previously occupied; Euroboor FZC
merely rented the space to MEEBS. (Pl.’s Ex. 53). But the exchange reflects only
part of the complete overlap between Euroboor FZC and MEEBS.
Mr. Shahzad also testified that Euroboor FZC sold nearly all of its inventory
to Euroboor MEEBS in May 2019, shortly after MEEBS began its operations. See
(Def.’s Ex. 165). He admitted that MEEBS paid Euroboor FZC roughly 2 million
AED for inventory valued at around 3 million AED. That transaction resulted in a
confusing trail of payments and credit notes between Euroboor FZC and MEEBS,
in both AED and United States Dollar transactions. See (Def.’s Ex. 165, 149, 150).
Mr. Shahzad claimed that APT Consultants advised these transactions. But from all
appearances, MEEBS merely replaced Euroboor FZC while buying its inventory at
below-market costs.

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The overlap of employees at both companies also indicates MEEBS’s
replacement of Euroboor FZC. In February 2019, Euroboor FZC terminated seven
employees, including Rehman Shahzad and Tulsidas Gawande, a financial
manager for the company. (Pl.’s Ex. 66). On cross-examination about these
employees, Mr. Koster recalled that four of the seven immediately began working
for MEEBS after their termination, and he could not recall whether the other three
did as well. All seven of the employees received “gratuity salary” from Euroboor
FZC upon their termination; Shahzad received 2,700 AED and Gawande received
6,200 AED. (Pl.’s Ex. 66). But almost immediately, both those individuals
continued providing the same services to MEEBS that they had provided to
Euroboor FZC.
Further, it appears that Euroboor FZC and MEEBS serve significantly
overlapping clientele: both companies contract with “Adex International,” “Al
Hejaz Building Materials,” “Al Reyami International Steel Tech,” “AL Rizq Al
Halaal Trading Company,” “Al Shirawi Equipment,” “Al Zeituna Metal
Construction,” “Al Bawardi Tools & Hardware,” “AMRT Enterprises,” “Armour
Machinery Repairing,” “Automech Steel,” and “Ayoki Contracting.” Cf. (Pl.’s Ex
173, Bates P173-003) with (id., Bates P173-018). And that list reflects only the
business partners whose names start with “A.” The overlapping clientele indicates
the replacement of Euroboor FZC with MEEBS.
17

Mr. Koster also engaged in shady transactions between himself, Euroboor
FZC, and MEEBS to serve his financial goals, while avoiding repaying Ms.
Grafova. For example, Mr. Shahzad testified that Mr. Koster loaned capital funds
to start MEEBS, but on cross-examination he admitted that he did not know
whether documents evidencing those loans existed. And in a disturbing December
2018 email, Mr. Shahzad discussed the Euroboor company’s practice of “issuing
intercompany sales invoices”—i.e., of transferring money among Mr. Koster and
his entities at his direction. (Pl.’s Ex. 84). Mr. Shahzad wrote to Mr. Koster: “I
want to transfer some money from [Euroboor FZC]’s account to your personal
account, which you will pay to MEEBS, after that I will be able to pay to
[MEEBS’s] suppliers.” (Id.). Mr. Shahzad testified on re-direct that he conducted
this transaction in accordance with Mr. Koster’s “wishes.” 4 Had Mr. Koster not
wanted to hide the transfer of funds from Euroboor FZC to MEEBS, Mr. Shahzad
would have no reason to first transfer funds from Euroboor FZC to Mr. Koster. So
it would appear that MEEBS’s funds came directly from Mr. Koster. In other
words, Mr. Koster treated his personal account and the corporate accounts of
Euroboor FZC and MEEBS as interchangeable vessels in a financial shell game
among the entities.
4

Importantly, the email also notes that “same has been discussed with Mr. Noor [of APT
Consultants], and he is agreed as well.” (Pl.’s Ex. 84). APT’s rubber-stamping this shady
financial practice casts further doubts on the accuracy of any advice from APT that Euroboor
purportedly relied on.
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Viewed together, the evidence and testimony indicated that Mr. Koster
directed the simultaneous wind-down of Euroboor FZC and the creation of the
nearly-identical Euroboor MEEBS. That transition included murky transfers of
inventory, firing and re-hiring of over half of Euroboor FZC’s staff, and MEEBS’s
operating out of Euroboor FZC’s own office space. And Mr. Koster’s alleged
reliance on APT Consultants hurts, rather than helps, his case because he
knowingly failed to provide APT with key information about Ms. Grafova’s loans,
her claims in this case, and this court’s summary judgment in her favor—matters
that affect the legality of transfers of assets.
iii.

Euroboor FZC’s Debt Payments and Write Offs

At the hearing, the parties also introduced evidence of Euroboor FZC’s
decision to pay its other debts and write off debts owed it, despite not paying Ms.
Grafova.
One such debt was $1.23 million that Euroboor USA owed to Euroboor
FZC. Mr. Koster and Ms. Abraham (Euroboor USA’s general manager) testified
that Euroboor USA owed debts to Euroboor FZC as its supplier. But Euroboor
USA suffered yearly financial losses from its start until 2020, preventing it from
paying off those debts. On April 2, 2019—less than nine months before Ms.
Grafova’s loans became due—Euroboor FZC’s “board of directors” (i.e., Mr.

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Koster) decided to write off the $1.23 million debt that Euroboor USA owed to
FZC. (Pl.’s Ex. 98).
The court finds Euroboor FZC’s forgiving Euroboor USA’s debts
problematic for two reasons. First, the court has already explained that Mr. Koster
ousted Ms. Grafova on July 4, 2018, leaving him as the sole director on Euroboor
FZC’s “board” in April 2019 when the board decided to write off $1.23 million in
debts. If Euroboor USA had somehow paid that debt to Euroboor FZC, then
Euroboor FZC could have later paid Ms. Grafova, but Mr. Koster prevented that
series of events by forgiving the debt.
And second, Mr. Koster and Mr. Shahzad testified that Euroboor FZC
forgave the $1.23 million debt at the guidance of APT Consultants. But the only
documentary evidence of any such advice is an email from APT to Mr. Shahzad,
dated May 23, 2019—over a month after Euroboor FZC’s “board” decided to erase
the debt. (Pl.’s Ex. 57). And the court has already discussed its concerns with Mr.
Koster and Euroboor’s reliance on APT’s advice, while withholding key
information from APT. So the court finds little credibility to the testimony that
Euroboor forgave debts in April 2019 based on uninformed guidance that APT did
not provide until May 2019. Rather, the court finds that Euroboor FZC’s payment
of debts and debt write offs indicates its efforts to thwart Ms. Grafova’s ability to
collect the debt owed to her.
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iv.

Payments from Euroboor FZC to Mr. Koster
Personally

Ms. Grafova also presented evidence that Euroboor FZC made a staggering
number of payments directly to Mr. Koster in the months shortly before the
maturity date of the loans on December 31, 2019.
For example, Euroboor FZC made ten transfers to Mr. Koster’s personal
bank account in the months from January to June 2019. (Pl.’s Ex. 23). These
transfers totaled roughly $1.32 million; seven of them were for exactly
$135,000.00. On cross-examination, Mr. Koster admitted that he essentially “paid
himself” with these transfers, and he offered no other explanation for their
conspicuously identical amounts.
Likewise, in May 2019, Euroboor FZC paid Mr. Koster three “royalty”
payments of $100,000.00 each. Euroboor’s records indicate these payments
covered Mr. Koster’s 2016 royalties (Pl.’s Ex. 92), 2017 royalties (Pl.’s Ex. 93),
and 2018 royalties (Pl.’s Ex. 94) from Euroboor FZC. Mr. Koster offered no
explanation for why Euroboor FZC had delayed in paying those royalties until the
end of the 2019 fiscal year—the same year that Ms. Grafova’s loans became due.
This pattern has not stopped: Euroboor FZC’s May 31, 2021 income
statement shows that Mr. Koster received a 2021 salary of 528,000 AED (nearly
$144,000 USD). (Pl.’s Ex. 31). Mr. Koster also received $12,000 per year as
“remuneration” for serving as Euroboor FZC’s director. (Pl.’s Ex. 33). These
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payments raise perplexing questions, especially in light of Euroboor FZC’s defense
that it does not have assets to pay anything to Ms. Grafova.
The court estimates that these payments to Mr. Koster total nearly $2
million—well over the amount of principal and interest Euroboor FZC owed Ms.
Grafova on December 31, 2019. Those payments, which occurred in the months
around the time Ms. Grafova’s loans became due through at least 2021, undercut
any argument that Euroboor FZC did not have the assets to repay Ms. Grafova.
Still, Mr. Koster cites several cases in his brief that he argues support
“drastically mitigat[ing] the penalty.” (Doc. 338 at 10). The court finds all of these
cases distinguishable for a single reason: none of them concerned a situation
where, as here, the party breaching the contract continued to breach after a court
ordered that the party was in breach and set forth steps by which the party could
cure the breach. This court issued such a ruling on September 23, 2021, when it
found that Euroboor FZC breached the two loan contracts and owed at least the
principal and compounded quarterly interest on the loans and set forth that amount.
(Doc. 231). Even so, Euroboor continued refusing to pay anything to Ms. Grafova.
Also, the non-breaching parties in Mr. Koster’s cited Dutch cases either
failed to prove an aspect of the breach claim (Easystaff case, doc. 292-2; Plaintiff,
doc. 292-5), failed to prove damages (Foekens case, doc. 292-4), or failed to prove
an “intentional breach of contract” (VOF case, doc. 292-3). The court has found
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that Ms. Grafova proved each of those issues here—most disturbing is the
continued intentional refusal to pay the legal debts owed to Ms. Grafova even after
the court found Euroboor FZC had breached the loan contracts. So the court finds
little relevant guidance from Mr. Koster’s Dutch authority.
In sum, the evidence above addresses the Dutch law factor of the
“circumstances under which the penalty clause was invoked”—that is, Ms.
Grafova’s repeated requests for payment beginning in November 2017 and
Euroboor and Mr. Koster’s willful refusal to pay her, despite Euroboor FZC’s
making significant payments to Mr. Koster and transferring many of its assets to its
successor, MEEBS.
The evidence also touches on the Dutch law factor of the “purpo[se] of the
penalty clause”—that is, to deter Euroboor FZC’s willful non-payment of Ms.
Grafova’s loans. But before setting a penalty amount, the court will explain the
evidence supporting Ms. Grafova’s veil-piercing allegation because much of that
evidence will also inform the court’s penalty determination.
III.

Piercing Euroboor FZC’s Corporate Veil

The parties stipulate that UAE law governs the veil-piercing allegation. That
law provides that a business owner may face personal liability if he uses an LLC to

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“drive a personal agenda.” 5 (Doc. 290 at 9) (quotation omitted). An owner drives a
personal agenda when his acts both result in harm to third parties, and the acts
“were deceitful and culminate in what could be characterized as a gross mistake.”
(Id.). Managers of LLCs may also face personal liability when they “fail to act
within the statutory duty of care,” act fraudulently, or “abuse the protection
afforded by” the LLC’s limited-liability status. (Id.). As explained below, the court
finds Mr. Koster’s conduct meets this standard for personal liability.
The parties did not provide any UAE case law that would help the court
flesh out these principles. So, although not controlling as to the court’s findings
under UAE law, the court consults Alabama case law.
In an analogous case, the Alabama Supreme Court affirmed the lower
court’s decision to pierce the corporate veil against a business owner who
“dissolved” his solely-owned corporation to avoid paying for a court judgment
issued against it based on breach of contract. Cohen v. Williams, 318 So. 2d 279
(Ala. 1975). Despite ceasing the corporation’s operations, the owner continued to
borrow money on the corporation’s insurance policy and pay other debts of the
corporation, while refusing to pay the judgment against the company. Id. at 280.
The analysis of Cohen applies to Mr. Koster’s conduct here:

5

Testimony at the hearing confirmed that Euroboor’s designation as an “FZC” company equates
to “LLC” status under American business law principles.
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Because of [the owner]’s “dissolution” of the corporation, there were
no assets from which the judgment could be collected. [The owner]
personally assumed liability for all corporate debts except the
judgment. By the “dissolution” he sought to evade the judgment.
These are precisely the type of acts which a court in the exercise of its
inherent equitable powers may view to differentiate the [LLC] form
from the substance.
Cohen, 318 So. 2d at 281.
Here, the court has already touched on Mr. Koster’s conduct in assuming
sole directorship of Euroboor FZC, dissipating its assets, and receiving personal
transfers from Euroboor FZC. In addition to informing the penalty analysis, that
conduct indicates that Mr. Koster “abused the protection afforded by” Euroboor
FZC’s corporate form for his own purposes in his war with Ms. Grafova and to
avoid paying the debt owed to her. See (doc. 290 at 9, citing UAE law). So that
conduct supports piercing Euroboor FZC’s corporate veil as well.
The court also finds that Ms. Grafova may pierce the corporate veil because
Mr. Koster consistently transferred funds among the entities and to himself and
created loans between himself and the other Euroboor entities. For example, Ms.
Grafova presented evidence of numerous loans between Mr. Koster and Euroboor
FZC. E.g., (Pl.’s Ex. 127, loans totaling $215,590.63 in May 2018). And the court
has already discussed the December 2018 email in which Rehman Shahzad
proposed transferring funds from Euroboor FZC to Mr. Koster’s “personal
account, which you will pay to MEEBS, after that I will be able to pay [MEEBS’s]

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suppliers.” (Pl.’s Ex. 84). As explained above, this kind of transaction often occurs
when businesses try to hide their assets from creditors. See Cohen, 318 So. 2d at
281.
The court has also discussed Mr. Koster’s efforts to write off or pay
Euroboor FZC’s debts, except for those owed to Ms. Grafova. This practice
resembles the owner’s efforts to pay off the company’s debts in Cohen, while
draining the company’s funds to prevent repayment of the judgment against it. See
Cohen, 318 So. 2d at 281. And of course, this court issued a judgment in Ms.
Grafova’s favor in September 2019, just as in Cohen; but Mr. Koster continued to
siphon funds away from Euroboor FZC even after that time to avoid repaying Ms.
Grafova.
Also, invoices reflect that one Euroboor entity would often pay for Mr.
Koster’s expenses related to another Euroboor entity, resulting in a confusing trail
of invoices and payments between companies. (Def.’s Ex. 146). Ms. Grafova
presented evidence that as recently as 2021, Mr. Koster continued to pay for the
Euroboor entities’ rents, attorney’s fees, and other expenses through transfers
involving his personal accounts and unexplained “dividends.” (Pl.’s Ex. 190).
These transfers reflect Mr. Koster’s abuse of Euroboor FZC’s distinct corporate
identity. See (doc. 290 at 9, citing UAE law).

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The court also finds that Mr. Koster likely violated UAE corporate law—
another relevant factor for veil-piercing under UAE law. On cross-examination,
Ms. Grafova’s counsel walked Mr. Koster through several provisions of UAE
corporate law. See (Pl.’s Ex. 17 and accompanying testimony). For example,
Article 49 of UAE corporate law prohibits one shareholder from exercising any
duties beyond “ordinary management tasks” without approval from the company’s
other shareholders. See (Pl.’s Ex. 17 at Bates P017-011). But Mr. Koster
unilaterally decided to terminate most of Euroboor FZC’s employees in 2019. See
(Pl.’s Ex. 66). Taking that action without Ms. Grafova’s approval as a shareholder
likely violated Article 49.
Likewise, Mr. Koster’s unilateral decision to forgive $1.23 million in debt
that Euroboor USA owed to Euroboor FZC in April 2019 likely violated Article 49
because he did not seek approval from Ms. Grafova, the only other shareholder.
See (Pl.’s Ex. 98). And his unilateral decision to terminate Ms. Grafova as a
director without her approval as a shareholder indicates a similar violation.
Mr. Koster’s testimony also indicates that he likely violated—or at least
acted without knowledge of—the provisions governing corporate liquidation. See
(Pl.’s Ex. 17 at Bates P017-055). For example, UAE law requires a company
undergoing liquidation to appoint a liquidator by decision of the General Assembly
(i.e., board of directors). (Id., Article 308). But when asked about these provisions,
27

Mr. Koster admitted that he did not know they existed, and he provided no
evidence that he attempted to comply with them. The court finds this evidence to
support piercing the veil because it shows Mr. Koster’s failure “to act within the
statutory duty of care.” (Doc. 290 at 8, citing UAE law).
On the topic of Euroboor FZC’s liquidation, the court notes a troubling
email exchange that began when Ms. Grafova sent Mr. Koster a renewed request to
pay the loans’ principal and interest in December 2018. (Pl.’s Ex. 60). Euroboor
FZC’s CFO forwarded Ms. Grafova’s request to Euroboor’s legal advisor, and Mr.
Koster requested a meeting with the advisor to discuss possible solutions. In
response, the advisor sent Mr. Koster legal advice addressing potential avenues to
“liquidate the Company.” (Id. at Bates P060-002). This email chain directly links
Ms. Grafova’s efforts to recover for her loans (the first email in the chain) with Mr.
Koster’s efforts to prevent her recovery by liquidating Euroboor FZC.
Overall, this evidence aligns with Mr. Koster’s threat to Ms. Grafova in a
restaurant in November 2017 that he would “empty the company” to prevent her
from recovering on the loans. (Def.’s Ex. 71). And it aligns with Mr. Koster’s
testimony that he viewed the events following Ms. Grafova’s decision to accelerate
the loans as a “war.” He manipulated Euroboor FZC’s assets to win battles in that
personal war against Ms. Grafova. So the court will grant Ms. Grafova’s request to

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pierce Euroboor FZC’s corporate veil to hold Mr. Koster personally liable for any
judgment against it.
IV.

The Amount of Penalties

Having fully addressed the relevant evidence from the hearing, the court
turns to the appropriate amount of penalties to impose. As explained above, the
court will impose $90,000 in penalties under the loan agreements for Euroboor
FZC’s quarterly breaches in failing to pay the quarterly interest that Ms. Grafova
requested beginning in December 2017, and for failing to pay the loans’ balances
when they became due on December 31, 2019 (nine breaches times $5,000 per
loan: 9 x $5,000 x 2 = $90,000).
The court also finds an additional penalty appropriate for Mr. Koster and
Euroboor FZC’s deliberate and intentional refusal to pay Ms. Grafova after
September 23, 2021, when the court issued its summary judgment ruling
specifically finding that Euroboor FZC owed her the loans’ principal and interest.
(Doc. 231). The loan agreements provide for a $500 daily penalty until paid in full,
but the court has found that amount to be unreasonably high when measured from
the December 31, 2019 due date. (Doc. 231 at 24).
Unfortunately, the parties provided little helpful guidance as to a reasonable
penalty in their post-hearing briefs: Ms. Grafova again sought the $500 daily
penalty that this court already found to be unreasonable (albeit with a more limited
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time frame), and Mr. Koster asked the court to award no penalties for the period
since the court’s summary judgment ruling in September 2021. See (Doc. 337 at
11; doc. 338 at 3).
The court rejects those proposals and instead, adopts a penalty provision
familiar to Mr. Koster and the Euroboor entities. The court will impose a penalty
of 9% interest compounded annually, calculated from September 23, 2021 (the
date this court found Euroboor FZC obligated to pay the loans’ principal and
interest) until the date of this final judgment, August 1, 2022. Mr. Koster should
not object because the court derives this 9% penalty figure from Euroboor’s intercompany dealings—namely, the “settlement agreement” between Euroboor FZC
and Euroboor BV concerning their trademark dispute. That agreement provided for
“delay penalties at 9% annually as of the date of the judicial claim until payment in
full and fees and expenses.” (Def.’s Ex. 139).
In this case, the 9% interest from September 23, 2021, until the final
judgment date of August 1, 2022, results in a penalty of $78,213.82. When added
to the $90,000 quarterly breach penalties, Euroboor FZC owes $168,213.82 in
penalties. And when added to the loans’ stipulated principal and interest of
$1,023,134.48 (doc. 328), Euroboor owes a total of $1,191,348.30.
The court finds this amount reasonable because the sum total of all penalties
reflect roughly 14% of the total amount owed. That proportion reasonably reflects
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the recalcitrance showed by Mr. Koster in his “war” against Ms. Grafova, and the
similar penalties in Dutch cases. E.g., (doc. 292-2, Easystaff case) (mitigating
penalty to 17% of total breach amount without the prolonged recalcitrance seen
here).
To be sure, the court’s penalty award affords Mr. Koster a small victory in a
“battle” that Ms. Grafova’s brief raises: the court previously rejected her request to
impose a $500 daily penalty and will not change its mind. See (Doc. 337 at 11).
But Mr. Koster’s flagrant refusal to pay Ms. Grafova—despite her repeated
requests for repayment and despite this court’s order finding Euroboor FZC in
breach—ultimately lost him the war over Ms. Grafova’s loans and requires the
imposition of this additional penalty. So now he must pay.
The court finds it appropriate to impose an additional, contingent penalty to
speed Ms. Grafova’s recovery, which she has been seeking before this court for
nearly four years. Mr. Koster and Euroboor FZC have two options to avoid the
imposition of additional penalties:
1. On the one hand, Mr. Koster and Euroboor FZC may pay Ms. Grafova in full
for the loans’ principal, interest, and penalties now imposed within 30 days
of the issuance of this opinion without incurring any additional penalties or
additional contractual interest6: i.e., full payment of $1,191,348.30 no later
than August 31, 2022;

6

In essence, the court suspends the incurrence of contractual interest during the 30-day period to
encourage repayment of the debt. If not paid within this 30-day grace period, contractual interest
will again accrue.
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2. Alternatively, Mr. Koster and Euroboor FZC may work with Ms. Grafova to
develop a reasonable payment plan to fully repay the loans’ principal,
interest, and penalties over a limited, specified time period. If the parties
cannot agree on a reasonable payment plan, the parties shall submit their
positions about such a plan to the court no later than thirty days from the
issuance of this opinion; the court will then determine a reasonable and
binding payment plan.
The court notes that the contractual interest of six percent compounded
annually continues to accrue (after the 30-day grace period) until the loans are fully
paid, even if Euroboor enters a payment plan. But Euroboor’s failure to either
make full payment within 30 days or to agree to a reasonable payment plan (or to
submit its contested proposals to the court for a plan) within 30 days will trigger an
additional daily penalty of $250 per day, per loan. This figure represents a one-half
reduction of the loans’ $500 daily penalty. The court finds the imposition of this
mitigated contractual penalty reasonable under Dutch law in light of the recognized
purpose of contract’s penalties to encourage payment and to punish for failure to
do so. Precisely because the daily penalty punishes Euroboor FZC and Mr. Koster
for continued nonpayment, the court finds it appropriate as a contingent penalty if
the Defendants continue to deliberately, intentionally, and flagrantly refuse to pay.
So if Euroboor FZC and Mr. Koster fail (1) to make full payment of the
loans’ principal, interest, and penalties by August 31, 2022, OR (2) enter a
payment plan by August 31, 2022, a penalty will begin to accrue at the rate of $500
daily ($250 per loan, per day) on the entire sum of the loan’s principal, six percent

32

contractual quarterly interest, and penalties awarded by this court. That penalty—
along with contractual interest—will continue to accrue until Defendants pay the
loans’ principal, interest, and penalties in full.
Finally, the court notes that Ms. Grafova argues in her final brief that the
court should “depart from the liquidated point system and award Ms. Grafova all
of her attorney’s fees, expert fees, and costs post-September 23, 2021.” (Doc. 337
at 14). The court declines to address this argument now because it has ordered that
Ms. Grafova could renew her request for attorney’s fees and present any relevant
arguments by a separate filing after the court issues this opinion. See (doc. 290 at
11; doc. 334).
The court will enter a contemporaneous order reflecting these rulings.
DONE and ORDERED this 1st day of August, 2022.

____________________________________
KARON OWEN BOWDRE
UNITED STATES DISTRICT JUDGE

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