United States District Court, S.D. New York
August 3, 2005.
AEKYUNG CO., LTD, Plaintiff
INTRA & COMPANY, INC., INTRA OFFSHORE PARTNERS, INC., NASSER DAWANI and JOHN DOES 1 through 10, Defendants.
The opinion of the court was delivered by: LAWRENCE McKENNA, District Judge
MEMORANDUM AND ORDER
Plaintiff, AeKyung Co., Ltd. ("plaintiff"), brings this suit
against Intra & Company, Inc. ("Intra"), Intra Offshore Partners,
Inc. ("Intra Offshore"), Nasser Dawani ("Dawani"), and ten John
Doe defendants, asserting Racketeer Influenced and Corrupt
Organizations Act, 18 U.S.C. §§ 1961-1968 ("RICO"), and common
law fraud claims, and to recover an unpaid arbitration award
against Intra. Plaintiff moves pursuant to Federal Rule of Civil
Procedure 37 to compel the deposition of Dawani, or in the
alternative, for default judgment. Plaintiff also moves for an
award of reasonable expenses and attorney's fees incurred in
bringing the Rule 37 motion, and to amend the complaint under
Rule 15. Intra and Dawani (collectively, "defendants") filed a
cross-motion pursuant to Rule 12(b)(1) to dismiss for lack of
subject matter jurisdiction, and pursuant to Rule 60, to vacate
this Court's September 3, 2003 judgment confirming an arbitration award against Intra.*fn1 For the reasons set forth below,
plaintiff's (1) motion to compel is granted, (2) motion for
default judgment is denied, (3) motion for costs and fees is
denied, and (4) motion to amend is granted. Defendants' motions
Plaintiff asserts RICO and common law fraud claims arising out
of what was allegedly "a massive international fraud perpetrated
by defendants who purported to have the ability to raise
financing for a $300,000,000 real estate development project in
the Republic of Korea contemplated by plaintiff and who, instead
extracted $2,800,000 from plaintiff under the guise of fees and
expenses for the work they falsely claimed they had done."
(Compl. ¶ 1).
On October 13, 2000, this Court ordered plaintiff and Intra to
arbitration and stayed the litigation of the non-arbitrable
claims. Aekyung Co., Ltd. v. Intra & Co., Inc., No. 99 Civ. 11773, 2000 WL 1521202 (S.D.N.Y. Oct. 13, 2002). An arbitration
proceeding was subsequently conducted and an award rendered in
favor of plaintiff in April 2003. (Affidavit of Jeffrey R. Mann,
June 1, 2004, "June Mann Aff.," at ¶ 12) This Court entered a
judgment confirming that award on September 3, 2003 (the
"September 2003 Judgment"). No. 99 Civ. 11773, 2000 WL 10216
(S.D.N.Y. Jan. 6, 2000). Plaintiff now pursues the non-arbitrable
RICO and fraud claims against Dawani and Intra Offshore, and also
seeks to enforce the unpaid September 2003 Judgment against Intra
Inc. (Affidavit of Jeffrey R. Mann, March 24, 2004, "March Mann.
Aff.," at ¶¶ 5, 15)
On January 8, 2004, plaintiff served a Notice of Deposition
upon Intra and Dawani for a deposition to be held on February 9,
2004. (Id. at ¶ 4 & Ex. A) Plaintiff sought Dawani's deposition
in his individual capacity and as the sole shareholder, director,
and officer of Intra. (Id. at ¶ 5) On February 2, 2004,
plaintiff's attorney, Jeffrey R. Mann ("Mann") telephoned Michael
Mantell ("Mantell"), counsel for defendants, to confirm the
deposition. (Id. at ¶ 6) At that time, Mantell advised Mann
that the deposition would not proceed on February 2, 2004 because
Dawani would not be in the United States, and was ill and
receiving medical treatment. (Id.) Although Mantell also stated
that he would write to a letter to this Court regarding his
client's inability to appear for the deposition, he did not do so. (Id. at ¶¶ 7-8) On February 5, 2004, Mann wrote a letter to
Mantell again seeking to schedule the Dawani deposition. (Id.
at 9 & Ex. B) During a March 15, 2004 call, defendants consented
to plaintiff's filing of a motion to compel the Dawani
deposition, or alternatively, for default judgment. (Id. at ¶
This Court will first address defendants' Rule 12(b)(1) motion
to dismiss for lack of subject matter jurisdiction. Federal
courts are courts of limited jurisdiction and may hear cases only
where a federal question exists or there is diversity of the
parties. 28 U.S.C. §§ 1331, 1332. In addressing a motion to
dismiss for lack of subject matter jurisdiction, the court must
accept the allegations pled in the complaint. See, e.g.,
Scheuer v. Rhodes, 416 U.S. 232, 236 (1974); Atl. Mut. Ins.
Co. v. Balfour Maclaine Int'l Ltd., 968 F.2d 196, 198 (2d Cir.
1992). Plaintiff must demonstrate that jurisdiction exists by a
preponderance of the evidence.
Because there are aliens on either side of the caption,
defendants are correct in stating that the only possible basis
for subject matter jurisdiction lies in the RICO claim. (Defs'
Mem. at 6)*fn2 Defendants argue that this Court does not
have jurisdiction over the instant case, and did not at the time the
September 2003 Judgment was entered, because plaintiff has failed
to state a RICO claim upon which relief can be granted. (Id. at
7) In fact, both sides' briefing on the jurisdiction issue
focuses myopically on the sufficiency of plaintiff's RICO claim.
That focus is misplaced. "Whether a federal court posseses
federal-question subject matter jurisdiction and whether a
plaintiff can state a claim for relief under a federal statute
are two [separate] questions. . . ." Carlson v. Principal Fin.
Group, 320 F.3d 301, 305 (2d Cir. 2003) (citing Montana-Dakota
Util. Co. v. Northwestern Pub. Serv. Co., 341 U.S. 246, 249
Jurisdiction, therefore, is not defeated as
[defendants] seem to contend, by the possibility that
the averments might fail to state a cause of action
on which [plaintiff] could actually recover. For it
is well settled that the failure to state a proper
cause of action calls for a judgment on the merits
and not for a dismissal for want of jurisdiction.
Bell v. Hood, 327 U.S. 678
, 682 (1946). Under the correct
analysis, "[f]ederal question jurisdiction exists where a
well-pleaded complaint `establishes either that federal law
creates the cause of action or that the plaintiff's right to
relief necessarily depends on resolution of a substantial question of
federal law." Greenberg v. Bear, Stearns & Co., 220 F.3d 22
(2d Cir. 2000) (quoting Franchise Tax Bd. v. Constr. Laborers
Vacation Trust, 463 U.S. 1
, 27-28 (1983)). In contrast,
jurisdiction does not exist where the federal issues are
"immaterial," "patently without merit," "insubstantial or
frivolous." Bell, 327 U.S. at 683.
In the instant case, plaintiff's complaint clearly states that
federal jurisdiction is based on a federal statute, i.e., RICO.
(Compl. ¶ 3) Plaintiff has asked for relief based upon that
statute in four of the six causes of action. (Id., Counts I
IV) Moreover, without passing on the sufficiency of the RICO
claim, this Court notes that plaintiff does contend that the
complaint adequately pleads a pattern of racketeering activity
based on an open-ended continuity theory. (See, e.g., Id..
¶¶ 10, 33-48, 66-76, 81-84)*fn3 Thus, because plaintiff's
right to relief necessarily depends on the resolution of a
substantial question of federal law, i.e., the merits of the
RICO claim, subject matter jurisdiction does exist here.
4 Defendants move to vacate the September 2003 Judgment, arguing
that this Court did not have subject matter jurisdiction over the
case. (Defs' Mem. at 14) Based on the finding that subject matter
jurisdiction exists, the motion is denied.
This Court now turns to plaintiff's motions, the first of which
is a motion to compel the deposition of defendant Dawani,
pursuant to Fed.R.Civ.P. 37(d). In response, defendants argue
only that this Court does not have jurisdiction to hear the
motion. (Defs' Reply at 8) Because defendants have presented no
argument as to why Dawani, a party to this case, should not be
deposed, plaintiff's motion to compel is granted. Fed.R.Civ.P.
37(d) (granting authority to the court to make orders in regard
to discovery failures as are just).
Plaintiff moves, in the alternative, for a motion for default
judgment. Given that the motion to compel is granted, the motion
for default judgment is denied on the condition that defendants
comply with the terms of this Memorandum and Order (see Section
8, below). See, e.g., Shamis v. Ambassador Factors Corp.,
34 F. Supp. 2d 879, 887 (S.D.N.Y. 1999) (finding that dismissal is
inappropriate where alternative sanctions are available, and that
"[i]t is well settled in this Circuit that the sanction of
dismissal . . . `is a drastic penalty which should be imposed
only in extreme circumstances.'") (quoting Salahuddin v. Harris, 782 F.2d 1127, 1132 (2d Cir. 1986) (other
Plaintiff also moves for an award of reasonable expenses and
attorney's fees associated with the filing of the motion to
compel. (Pl. Mem. at 9) In support of that request, plaintiff
cites Beattie v. Bolla Taxi, Inc., No. 01 Civ. 1270, 2003 WL
22070538 (S.D.N.Y. Sept. 5, 2003), for the proposition that such
an award is appropriate where a party fails to appear for a
properly noticed deposition. However, Beattie dealt with
parties who "failed to appear for their deposition on at least
three separate occasions." Id. at *2. The instant case
represents a far less extreme scenario.
"If a party fails to appear at a deposition after having been
properly notified . . . `the court . . . may make such orders in
regard to the failure as are just. . . .'" Handwerker v. AT&T
Corp., 211 F.R.D. 203, 208 (S.D.N.Y. 2002) (quoting Fed.R. Civ.
P. 37(d)). "Reasonable expenses, including attorney's fees, also
may be awarded against the party and/or the attorney failing to
act, unless the court finds that . . . `other circumstances make
an award of expenses unjust.'" Id. The circumstances in the
instant case weigh against an award of expenses and fees at this
time. First, plaintiff was notified of the fact that Dawani would
not appear one week before the date of the scheduled deposition. (March Mann Aff. ¶ 6) Second, Dawani's
counsel did provide some justification for Dawani's
non-appearance, i.e., "that he would not be in the United
States on that date and was ill and was receiving medical
treatment." (Id.) Based on those circumstances, the motion for
fees and costs is denied. Plaintiff, is however, granted leave to
renew the motion if Dawani fails to cooperate in the scheduling
of his deposition in accordance with this Memorandum and Order.
Finally, plaintiff moves pursuant to Rule 15(a) for leave to
amend the complaint to add factual allegations relevant to the
RICO claim (the "new facts"). (Pl. Opp'n Mem. at 20) According to
plaintiff, the new facts will show that defendants engaged in
similar misconduct "against multiple [non-party] victims."
(Id.) Defendants argue that the motion should be denied because
the "RICO's four-year statute of limitations has run with respect
to the [new] conduct alleged." (Defs' Reply at 6) Defendants are
correct in stating that RICO is governed by a four-year
limitations period. Agency Holding Corp. v. Malley-Duff &
Assocs., Inc., 483 U.S. 143, 156-57 (1987). That period places a
temporal limitation on when a plaintiff may sue based on an
injury that she has suffered as a result of conduct defined in
the statute. See, e.g., Bingham v. Zolt, 66 F.3d 553, 560 (2d
Cir. 1995) (emphasis added). Here, plaintiff does not seek to add the new facts in order to allege additional injuries caused by
defendants' misconduct. Rather, the new facts relate to
misconduct against non-party victims, and would tend to show that
defendants engaged in a pattern of racketeering.
18 U.S.C. § 1961(5) (defining pattern of racketeering activity and providing
that RICO plaintiff may plead acts occurring "within 10 years
after the commission of a prior act of racketeering activity").
Thus, the limitations period governing RICO does not preclude
this Court from granting plaintiff leave to amend the complaint.
"Leave to file an amended complaint `shall be freely given when
justice so requires,' and should not be denied unless there is
evidence of undue delay, bad faith, undue prejudice to the
non-movant, or futility." Milanese v. Rust-Oleum Corp.,
244 F.3d 104, 110 (2d Cir. 2001) (quoting Fed.R.Civ.P. 15(a), and
citing Foman v. Davis, 371 U.S. 178, 182 (1962)). Defendants do
not, nor could they, argue that they would be prejudiced by the
amended pleading, as the new facts merely amplify existing
allegations that defendants "had undertaken a similar scam to
defraud . . . others then unknown to Aekyung." ([Proposed] Am.
Compl. ¶ 101) The original complaint provided notice of
plaintiff's intent to show that defendants engaged in a pattern
of racketeering activity. (Compl. ¶¶ 91, 107) For example,
defendants had notice that plaintiff planned to show that
defendants perpetrated similar schemes against non-party victims, such as Asia Broadcasting and Communications Network, Ltd., a
Thailand corporation. (Id. ¶¶ 28, 33-46, 66, 80-82) This Court
thus finds that permitting plaintiff to file a first amended
complaint is in the interest of justice and will not unduly
prejudice defendants. Plaintiff's motion for leave to amend is
For the reasons discussed above, defendants' motions to dismiss
and vacate are denied. Plaintiff's motion to compel and motion
for leave to file an amended complaint are granted, while the
motions for default judgment and for expenses and fees are
denied. Dawani's counsel shall immediately provide plaintiff's
counsel with five dates, before November 1, 2005, on which Dawani
is available for his deposition. If Dawani fails to appear for
his deposition before November 1, 2005, plaintiff may renew the
motions for default judgment and for expenses and fees.