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Rsm Production Corporation v. Freshfields Bruckhaus Deringer Us Llp

August 3, 2011


The opinion of the court was delivered by: Judge Beryl A. Howell


The plaintiff in this case apparently seeks to test the adage that "the third time's the charm," but the law does not work that way. The plaintiff, RSM Production Corporation (hereinafter "RSM"), alleges that it had an exclusive contract for natural gas exploration off the shore of Grenada but that corrupt dealings between Grenada and a Grenadian company, Global Petroleum Group, Ltd ("Global Petroleum"), led Grenada illegally to terminate its contract with RSM. After an unsuccessful lawsuit in New York and an arbitration in London, RSM filed this lawsuit against an international law firm, Freshfields Bruckhaus Deringer US LLP, and two of that law firm's attorneys, Jan Paulsson and Brian King, (hereinafter "Freshfields"), alleging that these three defendants were part of the conspiracy to bribe Grenada officials and deny RSM its licensing rights. Specifically, the plaintiff contends that Freshfields conspired to violate the Racketeer Influenced and Corrupt Organizations Act (hereinafter "RICO") by representing Grenada before the International Centre for the Settlement of Investment Disputes (hereinafter "ICSID") arbitration panel tasked with resolving the terminated contract dispute between the country and the plaintiff. Plaintiff now seeks at least $500 million in damages from Freshfields.

The defendants have moved to dismiss the Complaint, inter alia, on grounds that the plaintiff's case should be dismissed under the doctrine of res judicata because the plaintiff has already presented its claims before the Southern District of New York, which dismissed the plaintiff's Complaint for failure to state a claim. Despite the plaintiff's hopeful assertion that "this case will remain viable regardless of the outcome of the New York case," Compl. ¶ 43, the Court agrees with the defendants that this lawsuit is barred by the doctrine of res judicata. Accordingly, for the reasons set forth below, the defendants' motion to dismiss for failure to state a claim is granted.*fn1


Plaintiff's twenty-six page Complaint includes a comprehensive narrative of the underlying agreement and dispute between the plaintiff and the Grenadian government, the plaintiff's interactions with various government officials and allegedly corrupt businessmen, as well as a history of Grenada's alleged "well-known reputation for criminal bribery and corruption." Compl. ¶ 31. Many of the allegations, however, are largely extraneous and irrelevant to the issues in this case. The Court therefore recites only the allegations necessary for resolution of the pending motion.

Plaintiff RSM is a Texas corporation with its principal place of business in Denver, Colorado. Id. ¶ 1. On July 4, 1996, RSM and the nation of Grenada entered into an exclusive "Petroleum Agreement," which "was to have resulted in an oil and natural gas hydrocarbon exploration, development and production license being issued as a matter of routine performance by Grenada to RSM." Id. ¶ 10; Compl., Ex. A (Agreement Between the Government of Grenada and RSM Production Corporation). The agreement provided that "[a]s soon as possible but in any event no later than ninety (90) days after the Effective Date," RSM was to apply for, and the Grenadian Minister was to grant, an Exploration License. Compl., Ex. A at 4.

The agreement between RSM and Grenada included a force majeure provision, which stated that RSM's failure to fulfill any of the terms of the agreement would not be treated as a breach of the agreement if that failure was the result of "any event beyond the reasonable control of the party claiming to be affected by such event," including "any adverse claim or dispute relating to [Grenada's] ownership of or control over the petroleum in any portion of the Agreement Area." Id. at 26. Pursuant to this provision, on July 18, 1996, RSM provided notice to the Government of Grenada that it was invoking the agreement's force majeure clause due to "boundary disputes," and Grenada agreed to stay implementation of the agreement. Compl. ¶ 18.

In September 1996, the plaintiff alleges that Gregory Bowen, Grenada's former Deputy Prime Minister and former Minister of Agriculture, Lands, Forestry, Fisheries, Public Utilities, and Energy, informed Jack Grynberg, RSM's Chief Executive, that he expected significant bribe payments in order for RSM and Grynberg to conduct business in Grenada. Id. ¶¶ 5; 10-12. The plaintiff alleges that Mr. Grynberg refused to pay the bribes, and Mr. Bowen then began to "obstruct[], harass[] and intimidate[] RSM and Grynberg in their efforts to explore, develop and produce Grenada's vast oil and natural gas resources." Id. ¶ 12.

In December 2003, the plaintiff alleges that Lev Model, a "convicted criminal" and "well-known, accomplished thief in Russian petroleum circles," formed a Grenadian company called Global Petroleum. Id. ¶¶ 7, 14-17. Global Petroleum's "primary purpose," according to the plaintiff, is to "facilitate the payment of monies to Grenadian Government officials as well as to the Government of Grenada, and to act as a front for other individuals and oil companies interested in exploring, developing and ultimately extracting petroleum from offshore Grenada's vast hydrocarbon accumulations." Id. ¶ 7. As part of these dealings, RSM alleges that shortly after Global Petroleum's formation Grenada began to take "active steps to get out if its exclusive contract with RSM." Id. ¶ 18.

On January 12, 2004, a month after Global Petroleum's formation, RSM wrote to the Prime Minister of Grenada to inform him that it was in the process of revoking the force majeure clause. Id. ¶ 20. On April 14, 2004, RSM delivered its official application for an oil and natural gas exploration license to Grenada's Permanent Secretary of the Ministry of Finance. Id. ¶ 21. On April 27, 2004, Mr. Bowen informed RSM that its application for an exploration license had been filed more than ninety days after the revocation of the force majeure clause and was therefore denied as untimely. Id. ¶¶ 23-24. In response, RSM filed a Request for Arbitration with the ICSID in an effort to resolve the dispute. Id. ¶ 29.

In late 2005 and early 2006, while the ICSID arbitration proceeding was still pending, the plaintiff alleges that Mr. Grynberg was contacted by Lev Korchagin, the director and legal advisor for Global Petroleum, and Michael Melnicke, a New York businessman who served as "Ambassador-at-Large" for Grenada. Id. ¶¶ 8, 9, 36-40. Messrs. Korchagin and Melnicke offered to assist in the resolution of the dispute between RSM and Grenada. Id. Mr. Korchagin told Mr. Grynberg that if Global Petroleum, which allegedly "'own[ed]' the Government of Grenada," could participate as a partner in RSM's offshore Grenada license, Global Petroleum "would work everything out." Id. ¶ 37. Additionally, Mr. Melnicke asked that, in compensation for his efforts to resolve RSM's underlying dispute, he receive a "substantial overriding royalty" based on the amount of oil and gas that was ultimately produced as a result of the RSM/Grenada contract. Id. ¶ 40. Mr. Grynberg and RSM refused subsequent meetings with Mr. Korchagin, but continued to informally meet with Mr. Melnicke. Id. ¶¶ 37-38. During these meetings, Mr. Melnicke informed Mr. Grynberg that Mr. Bowen had been bribed by two individuals -- Len Blavatnik and Mikhail Fridman -- so that their group could develop the petroleum reserves believed to exist off the shore of Grenada. Id. ¶ 42. Mr. Melnicke "further revealed" that Messrs. Blavatnik and Fridman had promised additional bribes to the Grenadian government and had promised to pay Grenada's legal fees associated with Grenada's ICSID arbitration proceeding with RSM. Id.

On October 31, 2006, RSM filed suit against nine defendants, including Messrs. Blatnavik, Bowen, Fridman, Korchagin, and Model, and Global Petroleum in the U.S. District Court for the Southern District of New York, alleging tortious interference with contract, tortious interference with prospective business advantage, and civil conspiracy to commit tortious interference. Id. ¶ 43; See RSM Prod. Corp. v. Fridman,643 F. Supp. 2d 382 (S.D.N.Y. 2009).*fn2

In Fridman, the district court dismissed RSM's Complaint with prejudice for failure to state a claim and observed that it "reflect[ed] a profound and fundamental misunderstanding of the legal and procedural requirements for filing a complaint in a United States court." Fridman,643 F. Supp. 2d at 415. The dismissal was affirmed by the Second Circuit. See RSM Prod. Corp. v. Fridman, 387 Fed. App'x 72 (2d Cir. 2010).

Between the filing of the plaintiff's Complaint in the Southern District of New York and that case's dismissal, RSM and Grenada proceeded with arbitration before the ICSID. On June 21, 2007, Mr. Bowen testified at the ICSID arbitration that Global Petroleum was financing the legal fees Grenada incurred during the arbitration process. Compl. ¶ 44. Grenada's legal services during the arbitration were performed by defendants Freshfields Bruckhaus Deringer US LLP, the United States affiliate of an international law firm based out of the United Kingdom, and two of the firm's attorneys, Brian King, a partner based out of Freshfields' New York and Amsterdam offices, and Jan Paulsson, a principal consultant in Freshfields' Paris office. Id. ¶¶ 2-4, 50, 62. The plaintiff ...

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