The opinion of the court was delivered by: LAWRENCE McKENNA, District Judge
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 ...