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Ambriz Trading Corp. v. URALSIB Financial Corp.

November 21, 2011


The opinion of the court was delivered by: Shira A. Scheindlin, U.S.D.J.



Ambriz Trading Corporation ("Ambriz") and Ilya Lobanov (collectively the "plaintiffs") bring this action against OJSC Financial Corporation URALSIB ("UFC"), URALSIB Capital, LLC ("UC"), URALSIB Securities Limited ("USL"), and Malbourne Invest & Finance, S.A. ("Malbourne") (collectively the "defendants") alleging (1) that defendants participated in a criminal enterprise under the Racketeer Influenced and Corrup Organizations ("RICO") laws,*fn1 (2) that defendants engaged in securities fraud in violation of the Securities Exchange Act of 1934 ("SEA"),*fn2 and (3) unjust enrichment.*fn3 Defendants now move to dismiss the Complaint on the grounds that (1) plaintiffs have not made a reasonable effort to effectuate service of process;*fn4 (2) lack of personal jurisdiction;*fn5 (3) all claims against Malbourne must be arbitrated; (4) venue is improper under the doctrine of forum non conveniens; and (5) plaintiffs have failed to state a claim.*fn6 Because plaintiffs have failed to effectuate service of process, defendants' motion is granted.


A. The Parties

Ambriz is a corporation under the laws of Seychelles with its principal place of business in Moscow, Russia.*fn7 Ambriz was a client of Malbourne from 2005 to 2009, during which time Malbourne arranged for the execution of equity trades on Ambriz's account.*fn8 Lobanov is a citizen of Russia who resides in Moscow.*fn9 Lobanov was employed as the Relationship Manager by UC in Moscow from May 2001 through September 2009.*fn10 While there, his responsibilities included managing client securities accounts, developing client relationships and generating new trading business.*fn11 The terms of Lobanov's employment at UC were governed by a contract written in Russian and governed by Russian law.*fn12

Lobanov ceased working for UC in September 2009.*fn13

UFC is an open joint stock company under Russian law.*fn14

UFC operates exclusively as a holding company and has only one office, in Moscow, Russia, where all twenty of its employees work.*fn15 UFC is the parent company of a number of subsidiaries, and neither it nor its subsidiaries maintain or have ever maintained any offices, bank accounts, real estate or phone listings in New York.*fn16

UC is a limited liability company under Russian law.*fn17

UC is a subsidiary of UFC and operates as a licensed broker-dealer and investment banking company.*fn18 Its operations are regulated by the Russian Federal Service on Financial Markets - the Russian equivalent of the U.S. Securities and Exchange Commission ("SEC").*fn19 UC executes trades on the Russian Trading System Stock Exchange ("RTS") and the Moscow Interbank Currency Exchange Stock Exchange ("MICEX").*fn20 UC has no offices outside of Russia and all of its two hundred employees work in Moscow.*fn21 UC does not have any bank accounts, offices, real estate or phone listings in New York, and it is not authorized to execute trades on the New York Stock Exchange ("NYSE").*fn22 UC's revenue is derived exclusively from customers outside of the United States.*fn23 While Ambriz was a client of Malbourne, Ambriz's accounts were managed by UC employees and all the relevant documentation regarding trades executed on behalf of Amrbiz is housed at UC's Moscow office.*fn24

USL is a private limited company under English law.*fn25

USL is a subsidiary of UFC and operates as a broker-dealer regulated by the United Kingdom's Financial Services Authority and as a member of the London Stock Exchange ("LSE").*fn26 All fourteen of USL's employees work in its only office in London.*fn27 USL serves institutional investors in Europe who wish to invest in Russian companies listed on the LSE.*fn28 USL does not have any offices, real estate or phone listings in New York and is not authorized to trade on the NYSE.*fn29 USL maintains a special purpose bank account with JP Morgan Chase in New York.*fn30

This account exists to help clients who choose to settle trades on the MICEX in U.S. dollars through a clearing mechanism offered by the Russian Depositary Clearing Company ("RDCC").*fn31 The balance of this account is swept out to USL's foreign bank accounts or to clients' accounts at the end of each day after the trades are settled as required by the RDCC.*fn32

Malbourne is a company under the laws of Anguilla with a registered address in Anguilla in the British Virgin Islands.*fn33 Malbourne is a subsidiary of UFC with no employees and with all of its operations handled by UC employees in Moscow and USL employees in London.*fn34 Malbourne executes trades on behalf of clients through Anguilla in order to take advantage of the country's favorable tax policies.*fn35 Because Malbourne has no employees, though, all the actual trading takes place in Moscow and London.*fn36 For example, while Ambriz was a client, all of Ambriz's accounts were managed from UC's Moscow office and all the trading records are maintained there.*fn37 Malbourne has no offices, real estate or phone listings in New York.*fn38 Like USL, Malbourne maintains a bank account at JP Morgan Chase in New York for the purpose of settling trades for clients who choose to use U.S. dollars to settle their trades.*fn39

Defendants are affiliated with two other entities, Jefferies International Limited ("Jefferies") and Auerbach Grayson & Company ("Auerbach"). Jefferies is a London based broker-dealer with affiliates in New York.*fn40 Because none of defendants are authorized to execute trades on the NYSE, when a client wishes to execute a trade on the NYSE, defendants refer the order to Jefferies.*fn41 Jefferies is then able to execute the trade in the United States through its New York affiliate which is authorized to ...

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