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Grynberg v. BP P.L.C.

November 12, 2008

JACK J. GRYNBERG, GRYNBERG PRODUCTION CORPORATION (TX), GRYNBERG PRODUCTION CORPORATION (CO), AND PRICASPIAN DEVELOPMENT CORPORATION (TX), PLAINTIFFS,
v.
BP P.L.C., STATOILHYDRO ASA, BG GROUP P.L.C., BG NORTH AMERICA, JOHN BROWNE, ANTHONY HAYWARD, PETER SUTHERLAND, HELGE LUND, EIVIND REITEN, ROBERT WILSON, AND FRANK CHAPMAN, INDIVIDUALS, DEFENDANTS.



The opinion of the court was delivered by: John D. Bates United States District Judge

MEMORANDUM OPINION

Plaintiffs Jack J. Grynberg, Grynberg Production Corporation (TX), Grynberg Production Corporation (CO), and Pricaspian Development Corporation (TX) (collectively, "plaintiffs" or "Grynberg") sued several oil companies and their executives alleging violations of the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1962, and various state laws. See Complaint ("Compl.") at ¶¶ 57-86. Before the Court are three motions filed by the various defendants to dismiss the complaint. BP P.L.C. ("BP") filed a motion to compel arbitration and dismiss the complaint for failure to state a claim. BP executives John Browne, Anthony Hayward, and Peter Sutherland (collectively, "Individual BP Defendants") filed a motion to dismiss for lack of personal jurisdiction. Statoilhydro ASA ("Statoil") filed a motion to compel arbitration and dismiss the complaint for failure to state a claim and for lack of personal jurisdiction. The Court concludes that the initial question of the arbitrability of Grynberg's claims is one for the arbitrator, and therefore the complaint will be dismissed against BP, Individual BP Defendants, and Statoil without prejudice. The Court does not reach the defendants' Rule 12(b)(2) and 12(b)(6) motions.

BACKGROUND

The dispute in this case stems from business dealings in Kazakhstan between plaintiffs and the defendant oil companies. See Compl. at ¶ 22. In the late 1980s and early 1990s, Grynberg obtained information about large oil and gas reserves in Kazakhstan. Grynberg arranged meetings between the Kazakh government and several oil companies, including a wholly-owned subsidiary of BP -- BP Exploration Operating Company Ltd. ("BPX") -- and British Gas Group ("BG"), to develop those reserves. See id. at ¶¶ 32-36. In 1993, BPX and Statoil formed a separate joint venture. Id. at ¶ 38. Soon thereafter, BPX allegedly "cut [its] own deal with the Kazakhstan Government to squeeze the Grynberg Plaintiffs out of Kazakhstan. . . ." Id. at ¶ 23. Litigation then ensued.

The parties agreed to settle their initial dispute. In January 1999, Grynberg executed virtually identical Settlement Agreements and Mutual Release Agreements (collectively, "the Agreements") with BPX and Statoil. The Agreements require BPX and Statoil to account for the profits they earn in Kazakhstan and to pay plaintiffs a portion of net profits. Id. at ¶ 23. The Agreements also release all parties from all claims related to Statoil's and BPX's activities in Kazakhstan. See Statoil's Memorandum of Law in Support of its Motion to Dismiss ("Statoil Mot.") at 6-7; BP's Memorandum of Law in Support of its Motion to Dismiss ("BP Mot.") at 5-9.

Most germane to the current dispute, the Agreements provide that any disputes "arising out of, in relation to or in any way connected with" the Agreements shall be "referred to and settled by" arbitration. See Statoil Mot. at 6-8; BP Mot. at 9-10. The Agreements incorporate the Commercial Arbitration Rules ("AAA Rules") of the American Arbitration Association ("AAA"), see Settlement Agreement at § 10.04, and provide that New York law governs, see id. at § 10.02.

BPX and Statoil sold their interests in the Kazakh oil and gas reserves in June 2001. Compl. at ¶ 40. The sale closed in 2002 and plaintiffs quickly initiated the currently-pending arbitration. Plaintiffs alleged that BPX and Statoil had concealed their planned sale of their Kazakh interests at the time the parties entered into the Agreements. Statoil Mot. at 9. Plaintiffs also alleged that BPX and Statoil sold their interests at too low a price and that BPX and Statoil had not paid plaintiffs the full amount due under the Agreements. Id. The arbitration has not gone smoothly. Over the past six years, plaintiffs have asked a court to intervene in the arbitration three times, all unsuccessfully.

Plaintiffs now seek judicial intervention for a fourth time. The central allegation in the current complaint is that "[d]efendants have engaged in criminal bribery schemes, and in attempting to cover up those bribes, have lied to the Plaintiffs, withheld evidence, with trickery have attempted to force Plaintiffs, without their knowledge, consent or approval, to pay a portion of those illegal bribes out of the profits that the corporate Plaintiffs should have shared in, thereby harming Plaintiffs' hard-earned and well-justified reputation as a crusader against bribery and other corruption within the petroleum industry." Compl. at ¶ 24. This allegation forms the basis of plaintiffs' RICO and common law claims. See id. at ¶¶ 57-86.

STANDARD

When considering a motion to compel arbitration, "the appropriate standard of review for the district court is the same standard used in resolving summary judgment motions" pursuant to Federal Rule of Civil Procedure 56(c). Brown v. Dorsey & Whitney, LLP, 267 F.Supp.2d 61, 67 (D.D.C. 2003) (internal quotation marks omitted); see also Par-Knit Mills, Inc. v. Stockbridge Fabrics Co., 636 F.2d 51, 54 & n.9 (3d Cir. 1980). Thus, the motion should be granted when the pleadings and evidence demonstrate that "there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed. R. Civ. P. 56(c). The movant bears the burden of demonstrating the absence of a genuine dispute of material fact. See Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). The movant may support its motion by "identifying those portions of 'the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any,' which it believes demonstrate the absence of a genuine issue of material fact." Id. (quoting Fed. R. Civ. P. 56(c)).

To determine whether a genuine issue of material fact exists, the Court must regard the non-movant's statements as true and accept all evidence and make all inferences in the non-movant's favor. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986); Par-Knit Mills, Inc., 636 F.2d at 54. But the non-movant must establish more than a mere "scintilla of evidence" in support of its position. Anderson, 477 U.S. at 252. Indeed, the movant may point to the absence of evidence proffered by the non-movant to succeed on a motion to compel arbitration. Cf. Celotex, 477 U.S. at 322. "If the [non-movant's] evidence is merely colorable, or is not significantly probative," a motion to compel arbitration may be granted. See Anderson, 477 U.S. at 249-50 (citations omitted).

ANALYSIS

The Court's analysis begins and ends with the threshold question whether the arbitrator or the Court determines arbitrability. Plaintiffs do not seriously contest the existence or validity of the arbitration agreement.*fn1 Rather, plaintiffs argue that their current claim is beyond the scope of the arbitration agreement, that they never intended the arbitrator to determine arbitrability, and that the arbitrator has already decided that these claims are not arbitrable. The Court is not persuaded by any of plaintiffs' arguments.

Plaintiffs first argue that the current allegations fall outside the scope of the arbitration clause. See Plaintiffs' Opposition ("Pl. Opp.") at 17-18. Plaintiffs allege that criminal acts --bribery in violation of the Foreign Corrupt Practices Act ("FCPA"), 15 U.S.C. § 78dd-1 et seq. --form the predicate acts necessary for their RICO claim, 18 U.S.C. § 1961. Plaintiffs rely on Washburn v. Societe Commerciale de Reassurance, 831 F.2d 149 (7th Cir. 1987), for the proposition that claims "focus[ing] on the agreements' role in a larger criminal scheme are beyond the scope of arbitration." Pl. Opp. at 18. In Washburn, the court recognized that RICO claims can be arbitrable. Id. at 149 (citing Shearson/American Exp., Inc. v. McMahon, 482 U.S. 220 (1987)). But the court ...


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