Afremov v. Jarayan et al

Filing 147

ORDER : 1. Third-Party Defendant's Motion for Summary Judgment [Doc. No. 121] is GRANTED; 2. The Amended Third-Party Complaint is dismissed in its entirety on the merits and with prejudice; and 3. Third-Party Defendant's Motion for Defau lt Judgment and for Attorney's Fees as to Third-Party Plaintiffs [Doc. No. 137] is DENIED AS MOOT in part as to default judgment, and DENIED in part as to the request for attorney's fees (Written Opinion). Signed by Judge Susan Richard Nelson on 10/24/12. (LPH)

UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA

Michael Afremov,

Civil No. 11-00313 (SRN/SER)

Plaintiff,
v.
Artur Jarayan, and Object of Vertu, LLC
ORDER
Defendant and Third-Party
Plaintiffs,
v.
John Atzbach,
Third-Party Defendant.
_________________________________________________________________________

Andrew H. Bardwell, Skolnick & Shiff, PA, 527 Marquette Avenue South, Suite
2100, Minneapolis, Minnesota 55402, for Plaintiff
Sandra K. Kensy, 5430 Carlson Road, St. Paul, Minnesota 55126, for Third-Party
Defendant John Atzbach
No Appearance on Behalf of Defendants and Third-Party Plaintiffs, Artur Jarayan
and Object of Vertu, LLC
__________________________________________________________
This matter came on for hearing on October 24, 2012 before the Honorable
Susan Richard Nelson upon Third-Party Defendant’s Motion for Summary
Judgment [Doc. No. 121] and Motion for Default Judgment and for Attorney’s
Fees [Doc. No. 137].

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Based upon all the files, records, and proceedings herein, the Court hereby
makes the following:
FINDINGS OF FACT
1.

Plaintiff Michael Afremov (“Afremov”) is an engineer engaged in the
business of research and development of medical devices. Afremov Depo.,
p. 6, l. 13-14; p. 21, l. 12 – p. 24, l. 4) At all times material herein, Afremov
was interested in acquiring Imperial Russian silver pieces. (Afremov Depo.,
p. 26).

2.

Defendants Artur Jarayan (“Jarayan”) and Object of Vertu (“Vertu”)
(collectively “Defendants”) were engaged in the business of buying and
selling Imperial Russian Silver pieces.

3.

Third-Party Defendant John Atzbach (“Atzbach”) is a dealer in
Imperial Russian art and antiques. Atzbach Depo., p. 102, l. 23-24; Jarayan
Depo., p. 46, l. 22 – p. 47, l. 2) Since 1998, Atzbach has operated his
business through the legal entity Atzbach & Thomas, Inc. (Atzbach Depo.,
p. 11, l. 12 – p. 12, l. 5) All transactions at issue in this litigation were done
by Atzbach as the representative of Atzbach & Thomas, Inc. (Atzbach
Depo., p. 11, l.12- p. 12, l. 5)

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THE SILVER TRANSACTIONS
4.

Afremov engaged Jarayan to act as his agent in the procuring of
Imperial Russian Silver pieces. (Afremov Depo., p. 57, l. 10-15)

Jarayan

was to purchase such pieces for Afremov at the lowest and best price
possible. In return, Afremov agreed to pay to Jarayan a commission of 5%
the purchase price. (Id.)
5.

Beginning in 2008, Jarayan, through his company Eastern European
Art Gallery, Inc., (“Eastern European”) began purchasing items from
Atzbach & Thomas, Inc. for resale to Afremov. Jarayan was a client of
Atzbach & Thomas, Inc. to whom it was supplying merchandise. Atzbach
Depo., p. 17, l. 16 – p. 18, l. 25) Jarayan asked Atzbach to ship and bill
Afremov directly on Jarayan’s behalf and, in connection therewith, to
withhold a portion of the purchase price as a commission to Jarayan.
(Atzbach Depo., p. 16, l. 18-23; p. 19, l. 20-24) Atzbach agreed to do so for
certain transactions. Each transaction that Atzbach handled for Afremov and
Jarayan had a separate agreement with respect to the amount, if any, of
commission or discount applied. (Jarayan Depo., p. 232, l. 12-14).

The

amount of the commission was variable, on a case-by-case basis, at the
discretion of Atzbach. (Atzbach Depo., p. 16, l. 23- p. 17, l. 9; p. 150, l. 18-

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24; Jarayan Depo., p. 233). There were some transactions in which no
commission or discount was given. (Atzbach Depo., p. 16, l. 25 – p. 17, l. 1)
6.

Atzbach & Thomas, Inc. paid to Eastern European Art Gallery the
sum of $1,030,268.50 in 2008 and the sum of $40,000 in 2009 in
commissions for the pieces that Jarayan purchased on behalf of Afremov.
(Jarayan Depo., p. 221; Kensy Aff., Ex. E (Depo. Ex. 51))

7.

Because Jarayan was Atzbach & Thomas’ client, Atzbach was acting
under the direction of Jarayan as to the amount to invoice Afremov. .
(Atzbach Depo., p. 23, l. 5-8)

All negotiations as to the sales price of the

items to Afremov were between Afremov and Jarayan, without any
involvement of Atzbach. (Atzbach Depo., p. 21, l. 25 – p. 22, l. 11). At no
time did Atzbach ever represent to Afremov that the amounts set forth in
Atzbach & Thomas, Inc. invoices were the lowest possible price at which he
would sell the piece, that the price at which he was selling the piece was the
price at which he or Third-Party Plaintiffs had procured it, or whether
Atzbach or Third-Party Plaintiffs were receiving any commissions in
connection with the sale of the piece. (Afremov Aff., ¶ 5; Atzbach Aff., ¶ 5)
8.

Atzbach owed no duty to acquire artifacts for Afremov “at the lowest
possible price”.

Afremov understood that Atzbach was a “dealer” of

Russian artifacts and that he would profit from the sales to Afremov.
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(Afremov Depo., p. 58, l 17-21).

Afremov had an agency relationship only

with Jarayan with respect to the artifact transactions. (Id., p. 166, l 10- p.
167, l. 1). It was Jarayan only who received secret commissions at the
expense of Afremov.
9.

In addition to the silver transactions, Third-Party Plaintiffs and
Afremov were involved in a company known as AM Plaza, LLC. (“AM
Plaza”) (ECF No. 73-1, Ex. A) AM Plaza was formed for the purpose of
building and operating a casino in Armenia.

Afremov and Vertu were

members of AM Plaza and Jarayan was the Manager. (Id.) Afremov had
entrusted Jarayan with $2,190,000 which he was supposed to use for the
benefit of AM Plaza, LLC.

(Id., Section 4.1(a)(i).)

Afremov accused

Jarayan of defrauding him in connection with this business transaction and,
in July of 2009, terminated his relationship with Jarayan. (Kensy Aff.,
Exhibit D (Deposition Ex. 40))
10.

Following his discovery of Jarayan’s fraud concerning the casino
operation, Afremov told Atzbach that he severed his relationship with
Jarayan and that he suspected Jarayan had defrauded him in connection with
the silver transactions as well. (Atzbach Depo., p. 64, l. 6 – p. 66, l. 6)
During that conversation, Afremov told Atzbach that he had an agreement
with Jarayan whereby, for a 5% commission, Jarayan was to work as his
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agent and obtain for him the very best prices possible in his negotiations for
the artifacts. Afremov asked Atzbach whether he had ever paid Jarayan any
commissions and he told him that he had.

Prior to this conversation,

Atzbach had no knowledge of the terms of the agreement (Atzbach Depo., p.
64, l. 6 – p. 66, l. 6)
11.

Afremov confirmed that it was only after he had terminated his
relationship with Jarayan that Atzbach told him that Jarayan had been
double-dipping in that he had received commissions from Atzbach in
connection with the silver pieces that Atzbach had, at Jarayan’s direction,
shipped and invoiced directly to Afremov. (Afremov Depo., p. 62, l. 23 – p.
63, l. 9; p. 65, l. 16-20; Afremov Aff., ¶ 11)

THE CHEN COLLECTION
12.

In addition to the various agreements respecting the silver transactions
with Afremov, there were times when Atzbach & Thomas, Inc. and Jarayan
purchased certain Imperial Russian pieces together. (Atzbach Depo., p. 44,
l. 14-17) There were also times when Atzbach sold “shares” of pieces to
Jarayan. (Atzbach Aff., ¶ 6) At issue in this litigation are three (3) pieces
that were part of a very large collection that was known as the “Chen
Collection”.

The three pieces are a Large Kurlykov Enamel Tazza

(“Tazza”), a Ruckert Card Case (“Card Case”), and a Kurlykov/Ruckert Tea
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Set (“tea set”) that were purchased by Atzbach at Lyon & Turnbull. (Id.)
Atzbach sold to Jarayan a one-third interest in those pieces for the total sales
price of $204,557.03. (Id.) Atzbach had also sold a one-third interest in the
pieces to a client of Atzbach & Thomas, Inc. named Alex. (Atzbach Depo.,
p. 125, l. 22-p.127, l. 6; Atzbach Aff., Ex. A)
13.

In April of 2009, Atzbach sold to Afremov Atzbach & Thomas and
Alex’s two-third’s interest, in the tea set for the sum of $400,000. (Atzbach
Depo., p. 131, l. 7-11). The sale of Jarayan’s one-third interest in the tea set
was addressed separately between Afremov and Jarayan. (Jarayan Depo., p.
308, l., 2-6; Atzbach Depo., p. 131, l. 7-1; Atzbach Aff., Ex. A, JAR002030)
Afremov paid to Jarayan $100,000 for his one-third share in the tea set and
Jarayan accepted and cashed the check. (Jarayan Depo., p. 308, l. 12-18)
Afremov sent a second $100,000 check to Jarayan which supposedly was
never cashed. (Jarayan Depo., p. 308, l. 19-22) At the time all interests in
the tea set were sold to Afremov for a total of $600,000, the retail price of
the tea set was listed at $750,000. (Atzbach Aff., ¶ 7)

14.

In July of 2010, Afremov indicated some interest in the Tazza and the
Card Case, the remaining two co-owned Chen collection pieces. (Atzbach
Depo., p. 130, l. 7-11; Atzbach Aff., ¶ 8) Atzbach and Alex agreed to sell
their respective one-third ownership interests to Afremov. Consistent with
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the sale of the tea set a year earlier, if Afremov wanted to purchase Jarayan’s
one-third interest, he would have to negotiate that purchase directly with
Jarayan. (Atzbach Depo., p. 130, l. 7 – 131, l. 6) Sometime after the sale,
Atzbach delivered the two pieces to Afremov. (Atzbach Depo., p. 133, l. 1825)
15.

Although Jarayan claims that Atzbach and Alex could not sell their
interests in the two remaining Chen collection pieces, there was no
agreement between Atzbach and Jarayan that Atzbach would not ever sell
his one-third interest. (Atzbach Depo., p. 151, l. 25-152, l. 3; Jarayan Depo.,
p. 311, l. 1-11) There was no requirement that either party inform the other
if they were going to sell their interest in the pieces. (Atzbach Depo., p. 152,
l. 4-7).

There was no prohibition that Atzbach could not transfer the

possession of the pieces to another party. (Atzbach Depo., p. 153, l. 4-7). In
fact, Jarayan never met or spoke to the third owner of the pieces, Alex, and
had absolutely no agreement with him. (Jarayan Depo., p. 312, l. 25-313, l. )
16.

The Amended Third-Party Complaint was filed on June 1, 2011.
(ECF 27). Third-Party Defendant filed his motion for summary judgment on
September 12, 2012 (ECF 121). Third-Party Plaintiffs failed to file any
responsive pleadings. Third-Party Defendant incurred fees in connection

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with this summary judgment motion in the amount of $11,422.50 and costs
in the amount of $201.56.(Kensy Aff., ECF 139)
17.

On October 9, 2012, this Court entered an Order of Default against
Defendants and judgment of default was thereafter entered. (ECF 135, 136)

Based on the foregoing, the Court makes the following:
CONCLUSIONS OF LAW
1.

Third-Party Defendant has established that all transactions at issue

were consummated Atzbach & Thomas, Inc. In the absence of any responsive
briefing from Third-Party Plaintiff or appearance at oral argument, Atzbach has
demonstrated that no genuine issues of material fact exist as to claims against him
individually and that he is entitled to judgment as a matter of law. Fed. R. Civ. P.
56(e)(2). Third-Party Plaintiffs have not presented any evidence which would
establish that Atzbach acted in his individual capacity with respect to any
transactions at issue in the Amended Third-Party Complaint. Accordingly, the
Amended Third-Party Complaint is dismissed in its entirety.
2.

Third-Party Plaintiffs sought contribution and indemnity from

Atzbach, individually, for the silver fraud claims and unjust enrichment claims of
Plaintiff, claiming that he had a common liability to Afremov as a result of his
involvement in the silver transactions. This Court has held that “Defendants may
not implead Atzbach unless he could be jointly liable to Afremov for the particular
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claims he alleges with respect to the artifact transactions – essentially that Jarayan
failed to act in Afremov’s best interests by not acquiring the artifacts at the lowest
possible prices.” (Memorandum Opinion and Order, ECF No. 66, p. 27.) Atzbach
has demonstrated that no genuine issues of material fact exist and that he is entitled
to judgment as a matter of law on Third-Party Plaintiffs’ claims of contribution and
indemnity (Count One). Third-Party Plaintiffs have not demonstrated the existence
of specific facts in the record that create a genuine issue for trial.
3.

Absent any claims of contribution and indemnity, Third-Party

Plaintiffs’ supplemental state law claims, Counts Two through Nine, are dismissed.
4.

Atzbach has demonstrated that he is entitled to judgment as a matter

of law on Count Two – the oral contract to pay commissions. The amount of
commission to be paid, if any, by Atzbach to Jarayan, based on sales of artifacts to
Afremov, rested solely with Atzbach. The agreement as to whether to pay a
commission, and the amount thereof, was made on a case by case basis entirely at
the discretion of Atzbach. Third-Party Plaintiffs have failed to produce evidence
from which this Court could fix the legal liabilities of the parties with respect to
their claims of an oral contract with respect to the payment of commissions.
5.

Atzbach has demonstrated that he is entitled to judgment as a matter

of law on Counts Four and Five -- Tortious Interference with Contract and Tortious
Interference with Prospective Economic Relationships. These Counts are based on
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Third-Party Plaintiffs’ allegation that Jarayan acted as Afremov’s “exclusive
agent” with respect to the acquisition of the Russian antiquities. (Amended Third
Party Complaint, ¶ 23). Jarayan admitted that he was not an exclusive agent for
Afremov and that Afremov was purchasing such items from all over the world.
(Jarayan Depo., p. 52, l. 1-14). Furthermore, Atzbach first learned of terms of the
agency agreement between Afremov and Jarayan after Afremov had terminated the
agency agreement and therefore Third-Party Plaintiffs cannot establish all elements
of their prima facie case. Third-Party Plaintiffs have failed to demonstrate the
existence of specific facts in the record that create a genuine issue for trial with
respect to their claims of Tortious Interference with Contract and Tortious
Interference with Prospective Economic Relationships.
6.

Atzbach has demonstrated that he is entitled to judgment as a matter

of law with respect to Third -Party Plaintiffs’ claims of Promissory Estoppel
(Count Six); Conversion (Count Seven); Civil Conspiracy (Count Eight); and
Breach of the Covenant of Good Faith and Fair Dealing (Count Nine). Third-Party
Plaintiffs have failed to demonstrate the existence of specific facts in the record
that create a genuine issue for trial. Atzbach is entitled to a judgment of dismissal.
7.

Because the Court grants Third-Party Defendant’s Motion for

Summary Judgment on the merits, his Motion for Default Judgment is denied as
moot. In his Motion for Default Judgment, Third-Party Defendant also seeks
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attorney’s fees pursuant to Local Rule 7.1(g)(4). This rule gives the Court
discretion to award various sanctions for a party’s failure to timely file and serve a
memorandum of law, including an award of reasonable attorney’s fees to the
opposing party. See D. Minn. LR § 7.1(g) (“If a party fails to timely file and serve
a memorandum of law, the court may cancel the hearing and consider the matter
submitted without oral argument; reschedule the hearing; hold a hearing, but refuse
to permit oral argument by the party who failed to file; award reasonable attorney's
fees to the opposing party; take some combination of these actions; or take any
other action that the court considers appropriate.”). The Court’s use of the
discretionary remedial actions set forth in Local Rule 7.1(g) are perhaps most
appropriate when a party’s actions have required the opposing party to undertake
unnecessary motion practice. Here, the instant motions filed by Third-Party
Defendant were not unnecessary. Rather, Third-Party Defendant’s motions were
necessary, with or without a response from Third-Party Plaintiffs. Accordingly,
the Court declines to exercise its discretion to award attorney’s fees and denies
Third-Party Defendant’s motion in this respect.
THEREFORE, IT IS HEREBY ORDERED:
1.

Third-Party Defendant’s Motion for Summary Judgment [Doc. No.

121] is GRANTED;

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2.

The Amended Third-Party Complaint is dismissed in its entirety on

the merits and with prejudice; and
3.

Third-Party Defendant’s Motion for Default Judgment and for

Attorney’s Fees as to Third-Party Plaintiffs [Doc. No. 137] is DENIED AS
MOOT in part as to default judgment, and DENIED in part as to the request for
attorney’s fees.
LET JUDGMENT BE ENTERED ACCORDINGLY.
DATED: October 24, 2012

BY THE COURT:
s/Susan Richard Nelson
Susan Richard Nelson
United States District Court Judge

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