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August 3, 2005.

AEKYUNG CO., LTD, Plaintiff

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 are denied.


  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 ¶ 13)


  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 (1951)).

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, 25 (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 ...

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