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Eastern Financing Corp. v. JSC Alchevsk Iron and Steel Works

March 23, 2009

EASTERN FINANCING CORPORATION, PLAINTIFF,
v.
JSC ALCHEVSK IRON AND STEEL WORKS AND INDUSTRIAL UNION OF DONBASS, DEFENDANTS.



The opinion of the court was delivered by: Robert P. Patterson, Jr., U.S.D.J.

OPINION AND ORDER

On June 7, 2007, Defendant JSC Alchevsk Iron and Steel Works ("Alchevsk") appeared specially and moved to set aside the default judgment entered against it by this Court on May 13, 2005 for $1,411,707.00 plus prejudgment interest in the amount of $921,138.81 based on fraud on the Court; and it moved to dismiss the complaint filed against it by Plaintiff Eastern Financing Corporation ("EFC") on October 15, 2004. In the motion to dismiss, Defendant claimed, inter alia, that this Court lacks personal jurisdiction over Alchevsk, a Ukrainian corporation. On June 24, 2008, this Court vacated the default judgment entered against Defendant Alchevsk, finding that the judgment was procured by fraud on the Court. See Eastern Financing Corp. v. JSC Alchevsk Iron & Steel Works, 2008 U.S. Dist. LEXIS 48640 (S.D.N.Y. 2008). The Court confined its opinion and order to the issue of fraud on the Court and to vacating the default judgment; the Court expressly did not reach Alchevsk's claim that this Court does not have personal jurisdiction over Defendant. Id. at *4, n.1.*fn1

Subsequently, Plaintiff Eastern Financing Corporation ("EFC") filed an amended complaint on July 17, 2008 (the "Amended Complaint"), seeking (1) the entry of a U.S. judgment against Defendants Alchevsk and its parent company, Defendant Industrial Union of Donbass ("ISD"), pursuant to CPLR Article 53 based on the January 22, 2004 Resolution of the Economic Court in the Lugansk Region of Ukraine (the "Bankruptcy Court"); or, alternatively, (2) the entry of a U.S. judgment against Defendants Alchevsk and ISD for breach of the Amicable Agreement associated with that Resolution, dated December 25, 2003. (Amd. Compl. ¶¶ 23-27.)

Before the Court is Defendant Alchevsk's motion to dismiss the Amended Complaint pursuant to Fed. R. Civ. P. 12(b)(2) and 12(b)(6) for lack of personal jurisdiction and because both of Plaintiff's claims are time-barred.*fn2 For the reasons that follow, Defendant's motion to dismiss for lack of personal jurisdiction is granted.*fn3

I. JURISDICTIONAL FACTS*fn4

The following facts were found by the Court in its prior opinion, Eastern Financing Corp. v. JSC Alchevsk Iron & Steel Works, 2008 U.S. Dist. LEXIS 48640 (S.D.N.Y. 2008) (the "Opinion"), after an evidentiary hearing, are undisputed, or are alleged in Plaintiff's amended complaint and affidavit. The Court accepts them as true for the purposes of resolving this jurisdictional dispute. See Hoffritz For Cutlery, Inc. v. Amajac, Ltd., 763 F.2d 55, 56-57 (2d Cir. 1985).

Disclosure of these facts would have alerted the Court that a question of personal jurisdiction over Defendant existed.

Plaintiff EFC is a corporation organized and existing under the laws of the State of Delaware, with its principal place of business located in the State of New York. (Am. Compl. ¶ 4.) Defendant Alchevsk is a Ukrainian joint stock company, with offices in the town of Alchevsk, Ukraine. (Am. Compl. ¶ 5.) Alchevsk does not have, and has never had, any offices, banking or other accounts, property, or any other assets in the United States, and does not engage in banking or other financial activity in the United States. (Declaration of Alla Abramtseva, dated May 25, 2007 ("Abramtseva Decl.") ¶ 9.) Defendant ISD, Alchevsk's parent company, is a Ukrainian joint stock company, with offices in the town of Donetsk, Ukraine. (Am. Compl. ¶ 6.) Alchevsk and ISD are, and at all relevant times have been, manufacturers of metal products, such as pig iron, heavy sections, plates, and steel billets. (Am. Compl. ¶ 8.)

In 1995, the then General Manager of Alchevsk, Mr. Evgeniy Mironov, came to New York City to meet with Mr. Sam Kislin, the principal of EYA Davidson Trading Establishment ("EYA Davidson"), a Liechtenstein trust. (Am. Compl. ¶ 9.) At that time, Mr. Mironov proposed a business venture, and he and Mr. Kislin thereafter negotiated and verbally agreed to the terms of such a venture. (Id.; Declaration of Sam Kislin, dated September 29, 2008 ("Kislin Decl.") ¶ 9.) On August 2, 1995, a contract (the "Contract") was entered into between Alchevsk and EYA Davidson, pursuant to which EYA Davidson was to supply raw materials to Alchevsk, such as coking coal and ferro ore for the production of various steel products. (Am. Compl. ¶ 10.) The contract was drafted by Vladimir Lembert, a representative of EYA Davidson located in Ukraine (Kislin 11/20/07 Tr. at 94-95), written in Russian, executed by both parties in Ukraine, and all deliveries of goods or materials under the contract were to take place in Ukraine.

(Abramtseva Decl. ¶¶ 11-12; Abramtseva Decl. Ex. B; Eastern Financing Corp., 2008 U.S. Dist. LEXIS 48640 at *3.) Section 6 of the contract states:

16.1. All disputes arising in connection with the performance of the present Contract, if not settled amicably, shall be submitted for consideration and final resolution by the International Commercial Arbitration Court with the Ukrainian Chamber of Commerce and Industry in Kiev as prescribed by its Rules of Procedure. The judgments made by such Court shall be final and binding for both parties. (Abramtseva Decl., Ex. B, ¶ 6; Eastern Financing Corp., 2008 U.S. Dist. LEXIS 48640 at *3-*4.)

In late 1996, Mr. Mironov returned to New York City to meet with Mr. Kislin regarding the difficulty Alchevsk was having in meeting its obligations. (Kislin Decl. ¶ 12.) By 1997, although Alchevsk had partially satisfied its obligations to EYA Davidson under the Contract, there was an outstanding indebtedness owned by Alchevsk to EYA Davison in the amount of $1,411,706.96, which the parties agreed could be satisfied through Alchevsk's delivery of steel plates. (Am. Compl. ¶ 12.) When no such delivery was made by Alchevsk, in April 1997, EYA Davidson invoked the arbitration clause contained in Section 6 of the Contract and, through counsel, commenced an arbitration proceeding against Alchevsk, based upon the outstanding debt, in the International Commercial Arbitration Court of the Ukraine (the "ICAC"). (Am. Compl. ¶¶ 13-14.) During the course of this arbitration proceeding, on April 15, 1997, EYA Davidson underwent statutory liquidation, and its rights under the Contract were assumed by its parent entity, Eastern Financial Holding, Ltd. ("EFHL"), a British Virgin Islands corporation controlled by EYA Davidson's principal, Mr. Kislin. (Am. Compl. ¶ 15.) On January 16, 1998, ICAC found that EFHL had not presented adequate proof of its role as EYA Davidson's successor, and ICAC dismissed the arbitration proceeding. (Am. Compl. ¶ 16.)

On September 10, 1997, a bankruptcy proceeding had been initiated by Alchevsk in the Bankruptcy Court. On December 15, 1997, EFHL filed a claim with the Bankruptcy Court for the amount of the debt, and on June 10, 1998, the Bankruptcy Court ruled that EFHL's claim as successor in interest to EYA Davidson was valid. (Am. Compl. ¶¶ 17-18.)

On or about December 25, 2003, an "Amicable Agreement" was entered into between Alchevsk and a committee of its creditors in the bankruptcy proceeding, and EFHL's claim for the debt was approved. Under the provisions of the Amicable Agreement, Alchevsk agreed to pay 15% of EFHL's claim for the amount of the debt by March 1, 2004, with the balance of the claim to be satisfied by securities issued by ISD. (Am. Compl. ¶ 19.) The Bankruptcy Court approved the Amicable Agreement on January 22, 2004. (Am. Compl. ¶ 20.) In the Amicable Agreement, EFHL was correctly listed as a creditor of 4th priority with an approved claim of $1,411,706.96, and with the postal address of one of its agents "c/o Moore ...


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