Cornwall Management Ltd. et al v. Thor United Corp. et al

Filing 55

OPINION & ORDER re: 30 MOTION to Dismiss the Amended Complaint dated 4/26/13 filed by Atlant Capital Holdings, LLC, Peter Kambolin, 22 MOTION to Authorize Alternative Service on Defendant, Oleg Batratchenko filed by Oleg Soloviev, Cornwall Management Ltd., 9 MOTION to Dismiss the Amended Complaint filed by Abraham Bennun, North 3rd Development, LLC, 44 MOTION for Leave to File A Supplemental Pleading to the Amended Complaint and Demand for Jury Trial filed by Oleg Soloviev, Cornwall Management Ltd., 48 MOTION for Discovery (jurisdictional as to Defendant Oleg Batratchenko) filed by Oleg Soloviev, Cornwall Management Ltd.: Defendants Atlant Captial Holdings and Kambolin's motion (Dkt. No. 30) is granted, a nd the amended complaint is dismissed for lack of subject matter jurisdiction. The pending related motions (Dkt. Nos. 9, 22, 30, 44, and 48) are also dismissed. The clerk is directed to enter judgment accordingly. (Signed by Judge Louis L. Stanton on 10/8/2013) (tn)

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-...;,;..=-===========iI LSnC DOCr,p"\T UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK E l E("1 R0 \ !C \ L;' FI L[ D - - - X DOC #: _ _ _~Iv-rl',:-;:-- DAT[ FllED:..-.:...ID=-+1 111,.....'1=-\3_ /~~ CORNWALL MANAGEMENT LTD and OLEG SOLOVIEV a/k/a OLEG VALENTINOVICH SOLOVIEV, Pla SD~Y I iffs, 12 Civ. 8551 (LLS) against ­ OPINION & ORDER THOR UNITED CORP. a/k/a THOR UNITED CORPORATION, JOHN DOE THOR ENTITIES, ATLANT CAPITAL HOLDINGS, LLC, OLEG BATRACHENKO a/k/a OLEG BATRATCHENKO, a/k/a O.V. BATRACHENKOV, PETER KAMBOLIN, NORTH 3RD DEVELOPMENT, LLC and ABRAHAM BENNUN, Defendants. x Plaintiffs Cornwall Management Ltd. ev ("Soloviev u ) ("Cornwall U) and Oleg bring this diversi action against defendants Thor United Corp., John Doe Thor Entities (collectively, "Thor U), Atlant Capit Holdings, LLC ("AtlantU), Oleg Batrachenko ("Batrachenko U), Peter Kambolin ("Kambolin"), North 3rd Development, LLC ("North 3rd Development Abraham Bennun ("Bennun ll ), alleg ll and ), common law fraud related to the sale of a real estate investment property in Williamsburg, Brooklyn ("the Williamsburg propertyll) . Atlant and Kambolin move to dismiss the amended complaint pursuant to Fed. R. Civ. P. 12 (b) (1) lack of jurisdiction, and pursuant to Fed. R. C . -1 P. ect matter 12 (b) (6) for failure to state a cl upon which relief can be granted. Bennun and North 3rd Development also move to dismiss the amended compl for I insufficiency under Rule 12 (b) (6) Cornwall and Soloviev move for leave to amend the complaint, for alternative service on Batrachenko, and for jurisdictional discovery concerning Batrachenko. For the reasons that follow, the requisite diversity of citizenship among the parties is lacking, the court has no subject matter jurisdiction over this action, and therefore the complaint is smissed. BACKGROUND 1 In S 2007, Cornwall (represented by Soloviev) 1 entered into two contracts wi Thor (represented by Batrachenko), pursuant to whi Cornwall lent Thor a total of $2.2 million for the development of the Williamsburg, Brooklyn property. See Am. Compl. ~~ 37-41. Thor and its affiliate company Atlant (represented by defendants Batrachenko and Kambolin respectively) arrangement subsequently promised in a July 2010 ("the 2010 Arrangement") to repay the 2007 contract loans from the sale proceeds of the Williamsburg property if 1 This section refers to the Amended Complaint ("Am. Compl."), dated 26, 2013, as well as to the parties' affidavits in support of their arguments defendant Batratchenko's domicile. A court udicating a 12(b) (I) motion "may resolve disputed factual issues by reference to evidence outside the pleadings, including affidavits." _ A_ _ _ ~ _ _ _ ~L-_ _ _ _ "~-d .. ~~~ ...~C.o~~a.: _ _v~.~~R~o.w .. .. . .~l~a~nc.d=, 494 F.3d 71, 77 n.4 (2d Cir. -2 Cornwall and Soloviev agreed to extend the loans and re from taking legal action. ~~ 52, 58. Cornwall and Soloviev sed Kambolin and Batrachenko to make that "Bennun all Id. this proposal" and draft the 2010 Arrangement. ~ Id. 53. The gravamen of the Amended Complaint is that the defendants engaged in fraud by entering into the 2010 Arrangement, a contract which they had no intent to perform. ld. ~ 61. Cornwall and Soloviev allege that Kambolin and Batrachenko concurrently negotiated a "short" sale (i.e., for less than its value) of the Williamsburg property to Bennun and the defendants now refuse to repay the loans although they have sufficient funds to do so. defendants See id. ~~ 62-71. "If the sclosed their plans to short sell the Williamsburg property, plaintiffs would have commenced earlier legal actions to recover their monies." ld. ~ 128. Cornwall and Soloviev are both foreign is a Nevis corporation with its princ ies. Cornwall place of business in Charlestown, Nevis, while Soloviev is a Russian citizen who currently resides Moscow, Russia. Id. ~~ 9-10. In the Amended Complaint, Cornwall and Soloviev allege that Batrachenko is a United States citizen who resides in New Jersey and is the co-founder and principal of Thor USA, a New York corporation, and other affiliated companies. Id. ~~ 11, 14. Atlant is a Delaware limited liability company with its -3 principal place business in New York, New York, and North 3rd liability company with its Development LLC ig a New York limit ss in New York, New York. principal place of bus 16. Kambolin and Bennun are Uni Id~~_ ~~ in New York, New York. rd. ~~ 13, States citizens who reside 15, 17. DISCUSSION 1 jurisdiction pursuant to 7 U.S.C. Plaintiffs assert § 25(c), 28 U.S.C. §§ 1331, 1332(a), and 1367(a). 25(c) grants district courts juri concerns and regulates dealings in commodities. real estate is a commodity.2 mention or argument § ction for private rights of action under the Commodities Exchange Act ("CEA loans nor 7 U.S.C. ff ) I which Neither the The parties make no question or supplemental jurisdiction in their papersi no support for any such concept is giveni and those recitals in the amended complaint are considered abandoned. The sole issue is whether there is diversity jurisdiction. Atlant and Kambolin contend that dismissal is appropriate because Batrachenko is a U.S. citizen domiciled abroad in Russia, and there 28 U.S.C. § 1332. the court does not ct under In response, Cornwall and Soloviev argue that Commodities are defined in 7 U.S.C. products. 2 juri § -4 la(9): they are primarily agricultural is Batrachenko is domiciled in New York, so ity jurisdiction. 1. "A case is properly dismissed for lack of subject matter J ct under Rule 12(b) (1) when strict court lacks power to adjudicate it." the statutory or constituti Makarova v. U.S., 201 F.3d 110, 113 (2d Cir. 2000). 28 U.S.C. § 1332 grants the strict courts jurisdiction over cases between "citizens of a State" and"c subjects of a foreign State." United States citizens domiciled abroad are not "citizens of a State. subjects of a foreign State. U izens or are not "citizens or U Thus, a suit naming such persons as parties cannot be based on diversity. See Creswell v. Sullivan & Cromwell, 922 F.2d 60, 68-69 (2d r. 1990): United States citizens who are domiciled abroad are neither citizens of any state of the United States nor citizens or subjects of a foreign state, and § 1332 (a) does not provide that the courts have jurisdiction over a t to which such persons are parties. Though we are unclear as to Congress's rationale for not granting United States citizens domiciled abroad rights parallel to those it accords to foreign nationals, the language of § 1332(a) is specific and requires the conclusion that a suit by or against Unit States citizens domiciled abroad may not be premised on diversity. See §mith v. _g_~rterl 545 F.2d 909 (5th Cir.), s:..ert: ____denied/ 431 U.S. 955, 97 S.Ct. 2677 (1977) i see also 1 Moore's -5­ 13B C. ~O.74[4]1990i Federal - Practice --- Cooper, Wright, A. Miller & E. Practice and Procedure, § 3621, at 577 78 (1984) . -~ .. .. .. -----.--~-------. complaint, though most of According to foreign are citizens the plaintiffs United pI iffs are countries, three who permanent reside States citizens above principles, abroad. Under the therefore, since not all of the pI if fs are entitled to sue in I court based on the diversity statute, plaintiffs may not maintain this suit on the basis of jurisdiction. When a fendant challenges a aintiff's grounds for diversity, the plaintiff must prove "by a preponderance of the evidence that it exists." Makarova, 201 F.3d at 113. "In an action in which jurisdiction is premised on diversi ity must exist at the t citizenship, commenced." Universal Licens S . . A., 293 F.3d 579, 581 (2d the action is v. Paola del r. 2002). For purposes of diversity jurisdiction, it is domicile that det c izenship. Domicile is the ace where one has "his true fixed home and principal establishment, and to which whenever he is absent, he has the intention of returning." v. Fortuna, 157 F.3d 945, 948 (2d Cir. 1998) ing 13B Charles A. Wright, Arthur R. Miller & Edward H. Cooper, Federal Practice and Procedure, "Domicile res § 3612 at 526 (2d ed. 1984). (1) the party's presence in the state; -6 (2) the intent to remain in that state indef . Co. v. Weavi -~=~------~---------------.--~. u te Nat'l Artists , 769 F. Supp. 1224, 1227 (S.D.N.Y. 1991) To determine domicile, consider the "totality of the evidence." resi Id. or is conclusive, although the "No single of a married person's spouse and children (if the ed) is couple has not considerable weight." National Artists, 769 F. Supp. at 1228. 2• The parties' views are at odds about Batrachenko's domicile, and ordi ly we do not reso motions, but reserve them for t a l . issues of fact on In this case, however, no genuine issues of fact are raised, because it is apparent that their submissions refer to different time periods. Cornwall and Soloviev assert that Batrachenko is domiciled in New York. res They allege that Batrachenko has four current s in the United States (two in New Jersey and two in New York), and claim resi current driver's license. in New Jersey, where he has a Thompson Decl. considerable documentary evidence ~~ 2 4. he had dealings in New York from 2005 through 2009/ did some business t and has some lit ion there. They submit In 2010/ Plaintiffs also contend that Batrachenko is domiciled in New York because that is where his second wife/ Tatiana Smirnoff Zayes Batrachenko, and his daughter, Jane Batrachenko/ reside. -7 Plaintiff Soloviev states: I have known the Defendant, aleg Batrachenko a/k/a aleg Batratchenko a/k/a a.v. Batrachenkov ("Batratchenko") s 2007. At 1 material times, Batratchenko represented to me that he was a permanent resident of New York, New York in the United States; that he lived in New York with his wife, Tatiana Smirnoff, and daughter Jane Batratchenko; and that his wife, Tatiana Smirnoff sat on the board of rectors of Thor Uni ted Corp. ("Thor USA") . Soloviev Decl. ~ 4. Like much of out-of-date. aintiff's factual submissions, that one is It disregards (probably through ignorance) the unequivocal evidence that the Batrachenkos were divorced in 1999, and he understandably no longer is domiciled with her. now lives in Moscow. Def Peter Kambolin declares: 2. I personal knew aleg Batrachenko' s ex­ wife Tatiana Smirnoff when Batrachenko lived in the United States and the two were married, and am aware that he divorced her in December 1999. 3. In addition, based on my conversations with aleg Batrachenko over the years, I know that he current resides in Russia, in an s late father owned at 24/1 Frunzenskaya Naberezhnaya, Apt. 60, Moscow, Russia, which is located in the Khamnoviki neighborhood in Moscow. 4. I also know that he lives with two of his children[,] Maxim, age 5, and Karina, age 7. 5. Karina at tends private school in Moscow, and Maxim attends the kindergarten "Solnyshko" in the Kuntsevskiy district of Moscow. 6. I also primary know that Batrachenko's current of business 1S 18 Malaya -8­ He Priogovskaya Street, in Moscow. building I, fice 206 declare under penalty of perjury that the foregoing statements are true and correct. I Kambolin Reply Decl. ~~ 2-6. On August 30, 2012 the Moscow Ci decision st the Khamnovniki its identification Court upheld the ct court of Moscow, including "the individual O.V. Batrachenko, who resides in the jurisdiction of Khamovniki district court of Moscow." See Ex. 6 to Am. Compl. at 4. Batrachenko is a U.S. citizen domicil in Moscow, Russia, and this court has no more jurisdiction over the subject matter of this case than it does over a multitude of business lit ions in New York between ted States citizens who do not reside in separate states. 3. There being no subject matter j action, plaintiffs' related motions complaint (Dkt. No. 44), to sdiction over this leave to further amend smiss it legal insufficiency (Dkt. Nos. 9 and 30), perform alternat service on Batrachenko (Dkt. No. 22), and for expanded jurisdictional discovery (Dkt. No. 48) are deni CONCLUSION De s Atlant Capital HoI (Dkt. No. 30) is grant and Kambolin's motion ,and the amended complaint is dismissed -9 for lack of subject matter jurisdiction. motions (Dkt. Nos. The pending related 9, 22, 30, 44, and 48) are also dismissed. clerk is di to enter judgment accordingly. So ordered. Dated: New York, New York October S, 2013 LOUIS L. STANTON U.S.D.J. 10­

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