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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DOCr,p"\T

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK

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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