United States District Court, S.D. New York
CBF INDÚ STRIA DE GUSA S/A/, DA TERRA SIDERÚ RGICA LTDA, FERGUMAR - FERRO GUSA DO MARANHÃ O LTD, FERGUMINAS SIDERÚ RGICA LTDA, GUSA NORDESTE S/A, SIDEPAR - SIDERÚ RGICA DO PARÁ SA, and SIDERÚ RGICA UNIÃ O S/A, Plaintiffs,
AMCI HOLDINGS, INC., AMERICAN METALS & COAL INTERNATIONAL, INC., K-M INVESTMENT CORPORATION, PRIME CARBON GMBH, PRIMETRADE, INC., HANS MENDE, and FRITZ KUNDRUN, Defendants
[Copyrighted Material Omitted]
For the Plaintiffs: David L. Barrack, Esq., James Nespole, Esq., Jami Mills Vibbert, Esq., David B. Schwartz, Esq., NORTON ROSE FULBRIGHT, New York, NY.
For the Defendants: Stuart P. Slotnick, Esq., BUCHANAN INGERSOLL & ROONEY, P.C., New York, NY; Kevin P. Lucas, Esq., Bruce A. Americus, Esq., Alexandra P. West, Esq., BUCHANAN INGERSOLL & ROONEY, P.C., Pittsburg, PA.
ROBERT W. SWEET, D.J.
Defendants AMCI Holdings, Inc. (" AMCI Holdings" ), American Metals & Coal International, Inc. (" American Metals" ), K-M Investment Corporation (" K-M" ), Prime Carbon GMBH (" Prime Carbon" ), Primetrade, Inc. (" Primetrade" ) (collectively, the " Corporate Defendants" ) and Hans Mende (" Mende" ) and Fritz Kundrun (" Kundrun" ) (collectively, the " Individual Defendants", and with the Corporate Defendants, the " Defendants" ) have moved pursuant to Rules 12(b)(1), 12(b)(2), 12(b)(3) and 12(b)(6) of the Federal Rules of Civil Procedure as well as under the doctrines of forum non conveniens and international comity abstention to dismiss the Complaint of Plaintiffs CBF Indú stria de Gusa S/A (" CBF" ), Da Terra Siderú rgica Ltda, Fergumar - Ferro Gusa Do Maranhã o Ltda, Ferguminas Siderú rgica Ltda, Gusa Nordeste S/A, Sidepar Siderú rgica Do Pará S/A (" Gusa" ) and Siderú rgica Uniã o S/A (collectively, " Plaintiffs" )
For the reasons set forth below, Defendants' motion is dismissed in part and granted in part.
I. Prior Proceedings
This action was commenced on April 18, 2013 with Plaintiffs' filing of the Complaint. The Complaint seeks enforcement of an arbitral award pursuant to 9 U.S.C. § 207 and alleges fraud and conspiracy to defraud against all Defendants, constructive fraudulent transfer pursuant to N.Y. Debt. Cred. Law § § 273-275 and 276 against Prime Carbon and AMCI Holdings and aiding and abetting fraudulent transfer against Mende and Primetrade. (Compl. ¶ ¶ 100-03.)
The Defendants filed the instant motion to dismiss the Complaint on July 30, 2013. Oral arguments were held, and the motion was marked fully submitted, on October 30, 2013.
II. Allegations of the Complaint
The following facts, assumed to be true, are taken from the Complaint.
The Complaint seeks to enforce a foreign arbitration under the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the " New York Convention" ) against the alleged alter egos and successor-in-interest to the award debtor, Steel Base Trade, AG (" SBT" ). The foreign arbitration was conducted by the International Chamber of Commerce Paris (" ICC Paris" ) (the " ICC Arbitration" ) which issued an arbitration award (" Award" ) in excess of $48 million in favor of Plaintiffs against SBT. (Compl ¶ 1.) The Complaint alleges that the Individual Defendants dominated and controlled the Corporate Defendants and fraudulently transferred the business, assets and most, but not all, of the liabilities of SBT to Prime Carbon, thereby rendering SBT insolvent and unable to satisfy the Award. ( Id.) Plaintiffs allege this is not the first time the Individual Defendants had undergone a scheme to defraud creditors.
Plaintiffs' Contracts With SBT
Plaintiffs are companies organized under the laws of, and with their offices located in, Brazil, and they produce and supply pig iron, an intermediate metal made by smelting iron ore with a high-carbon fuel. (Compl. ¶ 25.) Pig iron can be further refined through melting and blending processes into steel or wrought iron. ( Id.)
Plaintiffs began selling pig iron to Primetrade AG, a Swiss company and predecessor to SBT, over fifteen years ago. ( Id. ¶ 26.) Primetrade AG supplied a portion of this pig iron to its U.S. subsidiary, Primetrade. ( Id. ¶ 28.)
Primetrade AG became SBT in 2004 following an explosion on a bulk carrier carrying cargo for the benefit of Primetrade AG. On or about February 28, 2004, off the coast of Colombia, a bulk carrier, the YTHAN, exploded, causing the death of the master and five crew members of the vessel. (Compl. ¶ 29.) The YTHAN cargo was being supplied for the benefit of Primetrade AG. ( Id.) Following the loss of life and cargo on the YTHAN, Primetrade AG transferred its business to SBT on or about April 6, 2005 and began operating with the same officers and directors as and at the same offices as Primetrade AG. ( Id. ¶ 30.) At that time, Primetrade AG's representative in Brazil, Silvio Moreira (" Moreira" ) informed a representative of CBF and Gusa that Primetrade AG had to change its name due to its inability to obtain financing and otherwise continue its business following litigation arising out of the vessel explosion. ( Id.) Moreira assured Plaintiffs that the business would be the same, just under a different name, and for some time Plaintiffs and SBT continued to contract for the sale of pig iron in the same manner as before. ( Id.)
On or about October 5, 2007, AMCI International GmbH (" AMCI International" ), a company owned and controlled by Mende and Kundrun, purchased SBT and its U.S. subsidiary, Primetrade USA. (Compl. ¶ 31.) Moreira, then an SBT employee, told a representative of CBF and Gusa of the purchase. ( Id.) Between January 1, 2008 and September 17, 2008, Plaintiffs and SBT (now owned by the " AMCI Family" ) entered into ten separate contracts for the sale and purchase of 103,500 metric tons of pig iron to SBT for total consideration to Plaintiffs of over $76 million (the " Contracts" ). ( Id. ¶ 32.) Only Plaintiffs and SBT are the signatories of the Contracts, none of the Defendants are signatories. ( Id. ¶ 34.) Plaintiffs allege that four of the ten Contracts provide for delivery of the pig iron in the United States. ( Id. ¶ 35.) The scheduled time of shipment of the pig iron was from April 2008 through December 1, 2008. ( Id. ¶ 36.)
Each of the contracts contained the following arbitration provision:
All disputes arising in connection with the present contract shall be finally settled under the rules of Conciliation and Arbitration of the International Chamber of Commerce, Paris, by one or more arbiter, appointed in accordance with said rules.
( Id. ¶ 37.)
SBT initially purchased 33,056 metric tons of pig iron under the Contracts. However, after purchasing this amount the market for pig iron fell, and SBT stopped its purchases. ( Id. ¶ 39.) By October 2008, SBT was in default of the Contracts. ( Id.)
When contacted by Plaintiffs regarding the default, Defendants stated in an e-mail dated November 20, 2008:
You know our group and it is not our style to walk away from obligations. . . . We will need a long time to work this out together. My message to your group is: we are not walking away!!!
(Comp. ¶ 40.) But after delivery of this e-mail, SBT continued to be in default and did not purchase any further pig iron. ( Id. ¶ 41.) Instead, SBT was purchasing pig iron from other suppliers at this time. ( Id.)
Plaintiffs Initiate The ICC Arbitration
On September 11, 2009, Plaintiffs sent notice to SBT regarding the outstanding amounts due and proposed a negotiation prior to submitting the dispute to the ICC Paris. ( Id. ¶ 42.) SBT requested an extension of time to respond to Plaintiffs' notice, purportedly to assess and evaluate
the Contracts and related issues. ( Id. ¶ 43.) Plaintiff agreed to extend SBT's time to respond to the notice until October 5, 2009. ( Id. ¶ 44.) Unbeknownst to Plaintiffs, SBT was at the time unloading its assets, including its main asset Primetrade. Business operations continued to proceed under Prime Carbon, another Mende- and Kundrun- controlled company. The unloading of SBT ...