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S.K. Innovation, Inc., et al v. Finpol

April 16, 2012

S.K. INNOVATION, INC., ET AL., PLAINTIFFS,
v.
FINPOL, ET AL., DEFENDANTS.



The opinion of the court was delivered by: James E. Boasberg United States District Judge

MEMORANDUM OPINION

Plaintiffs are two Kazakhstani citizens and three United States corporations who seek to bring suit under the Alien Tort Statute, 28 U.S.C. § 1350, against two government agencies of the Republic of Kazakhstan. Because this Court lacks subject-matter jurisdiction under the Foreign Sovereign Immunities Act, 28 U.S.C. §§ 1330, 1602 et seq., their suit cannot proceed. Plaintiffs have also submitted a Proposed Amended Complaint that adds as defendants various Kazakhstani government officials. As it contains no allegations of fact to support this Court's personal jurisdiction over the additional proposed defendants, the Court must find that its filing would be futile.

I.Background

According to the Proposed Amended Complaint, which must for now be presumed true, Plaintiffs Serik Bektayev and Adyl Bektayev are brothers who hold Ph.D degrees and describe themselves as "prominent businessm[e]n in Kazakhstan, with substantial international business activities, including in the U.S." Prop. Am. Compl., ¶¶ 4-5. Both are currently imprisoned in detention centers in Kazakhstan. Id. Plaintiffs S.K. Innovation, Inc. and S.K. Biolfuel, Inc. are Virginia corporations of which the Bektayevs are principals and shareholders. Id., ¶¶ 1-2. Plaintiff Human Redemption Foundation is a Delaware non-profit corporation of which the Bektayevs are members and beneficiaries, and which aims to end torture and the inhuman, degrading treatment the Bektayevs allege they have suffered in Kazakhstan. Id., ¶ 3.

Defendants are two Kazakhstani government agencies: the Agency on Economic Crimes and Corruption, known as "Finpol," and the Committee on Penal Enforcement Facilities, as well as 100 unnamed Doe defendants. Id., ¶¶ 6-7. In their Proposed Amended Complaint, Plaintiffs seek to add five Kazakhstani government officials as additional defendants. See id., ¶¶ 8-12.

Plaintiffs' Complaint is full of intrigue and misfortune for the Bektayevs, who have been active in real estate and development projects in Kazakhstan for more than a decade. See id., ¶¶ 20, 25. The story of the circumstances that led to their prosecution and imprisonment begins in 2005, when an officer of Kazakhstan's Interior Affairs Department (named as an individual defendant in Plaintiffs' Proposed Amended Complaint) allegedly accepted "an illegal financial contribution" from one of Serik Bektayev's business competitors to open a criminal investigation into his activities. See id., ¶ 32. Over the next few years, Plaintiffs plead that Serik was threatened by these competitors, who, in 2008, "made clear their demands [to Serik] to yield [his] business interests" and claimed that "they were capable [of] destroy[ing] Serik's businesses by using [Kazakhstani] law enforcement." Id., ¶ 35. In the spring of 2008, Serik became aware that Finpol was investigating him and had initiated "one or more criminal cases" against him.

Id., ¶ 36.

Plaintiffs then describe a complicated scheme by which Serik's competitors sought to gain control of (or "raid") his business assets. See id. For example, the Proposed Amended Complaint alleges that one of Serik's business competitors forged a power of attorney purportedly empowering him to manage and restructure "SN," one of the real-estate-development businesses with which Serik was involved. See id., ¶¶ 28, 37-39. This power of attorney was then "used to convert the holdings of SN and transfer the assets to another parent entity." Id. Plaintiffs plead that the fraudulent POA was then "readily used by authorities at the Ministry of Justice to take away from Serik the control over SN's assets." Id.

Around this same time, according to the Proposed Amended Complaint, Serik was hospitalized for a heart condition and potential brain tumor. See id., ¶¶ 42-44. While "Serik was in the hospital," Plaintiffs plead on information and belief, "Finpol speedily prepared a criminal case against him, targeting SN's business and alleging financial improprieties, attributed to Serik and several of his employees." Id., ¶ 44. Plaintiffs then describe a series of physical and due-process abuses that they attribute to Defendants. On July 26, 2008, Serik was summoned from the hospital to the prosecutor's office in Almaty, Kazakhstan, where he was interrogated regarding SN's business and accounting practices. Id., ¶ 45. While there, he "felt heart irregularities" and was eventually returned to the hospital, where he had a heart attack two days later while being held in the hospital's psychiatric ward. Id., ¶¶ 45-46. On July 29, the deputy prosecutor for Almaty came to Serik's hospital room and, while Serik was unconscious following the administration of medication, read to him "an accusatory act" and sought, over his doctors' objections, to remove him to a detention center. Id., ¶ 47. Plaintiffs allege Serik attempted to resist arrest, but was beaten, drugged, and removed to the detention center. Id., ¶ 48. "On information and belief, Finpol was directing these extraordinary measures applied to Serik." Id., ¶ 49.

The Proposed Amended Complaint further catalogues abuses that Serik suffered while awaiting trial and sentencing in the detention center in Almaty. It recounts numerous beatings, see, e.g., id., ¶¶ 48, 58, 60; a host of untreated medical ailments, see id., ¶¶ 50-51, 53, 68; an official plot to kill him, see id., ¶¶ 54-57; his three suicide attempts, see id., ¶¶ 87, 90, 95; a defective pre-trial investigation, see id., ¶¶ 69-71; trial sessions fraught with "endless violations of the minimum procedural standards," see id., ¶ 73; and a very irregular conviction and sentencing. See id., ¶¶ 92-97.

With respect to Serik's business interests, Plaintiffs allege that some unnamed third party used the fraudulent POA to vest control over SN in a Russian entity, ZAO Mars Systems of Radiolocation (Mars). Id., ¶ 75. They further allege that the real beneficiaries of the transfer were Serik's business competitors in Kazakhstan. Id., ¶ 76. Additionally, "[a]s a part of the prosecution," Plaintiffs allege Finpol froze the assets of SN, Serik, and his family. Id., ¶ 80. "On information and belief, all that was [] done and endorsed by Finpol, to allow special interests to take control of those assets, to suppress Serik's and Adyl's resistance, and to resell those assets to third parties." Id., ¶ 81.

Plaintiffs allege a similar series of events involving Serik's brother Adyl, who served as the principal of a Kazakhstani company called ABK-5 TOO. Id., ¶ 99. Like Serik, Adyl heard rumors that his competitors wanted to obtain his realty assets and raid his businesses. Id., ¶ 100. Plaintiffs allege that after an investigation into Adyl was opened, the ABK-5 office "was raided, on information and belief, by certain authorities, believed to be Finpol's officers," who took "cash and documents held at the office" and "confiscated certain original[] sets of documents" from ABK-5's accountant. Id., ¶¶ 108-09. Instead of having "the documents audited by a certified government body, on information and belief, Finpol's officers passed the documents to a private accounting company, not licensed for audit, which was to prepare an accusatory document, doing so in collusion with those who ordered such an audit." Id., ¶ 109.

Adyl was subsequently charged with an economic crime alleging that he failed to "fulfill his obligations [to] the shareholders in the development project Naurys." Id., ¶¶ 110. On October 6, 2008, Adyl was arrested and has since been detained in the detention center in Astana, Kazakhstan. Id. Plaintiffs assert that while there, like Serik, Adyl has been beaten, id., ¶ 111; has suffered severe medical ailments for which he received inadequate treatment, id., ¶¶ 112-14; has been threatened by Finpol investigators, id., ¶ 115; and continues to be detained despite a court ruling that at least a portion of his detention has been unlawful. Id., ¶ 117.

On January 25, 2010, Plaintiffs brought this suit against Finpol and the Committee on Penal Enforcement Facilities asserting one claim under the Alien Tort Statute (ATS), also known as the Alien Tort Claims Act, 28 U.S.C. § 1350. See Prop. Am. Compl., ¶ 149. Defendants initially moved to dismiss the Complaint on April 5, 2010, under Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6). Plaintiffs opposed the motion on July 23, 2010. Following the D.C. Circuit's issuance of its opinion in Doe v. Exxon Mobile Corp., 654 F.3d 11 (D.C. Cir. 2011), last July, the Court permitted Defendants to rebrief their Motion to Dismiss and denied the original Motion as moot. In accordance with the new briefing schedule approved by the Court, Defendants filed a new Motion to Dismiss on September 2, 2011. Plaintiffs filed their Opposition on October 16, and Defendants filed a Reply on October 31. The Motion is now ripe. Also ripe for decision are two motions subsequently filed by Plaintiffs that seek leave of the Court to amend the Complaint to add additional defendants. The Court will consider each of these motions in turn.

II.Legal Standard

A. Motion to Dismiss

In evaluating Defendants' Motion to Dismiss, the Court must "treat the complaint's factual allegations as true . . . and must grant plaintiff 'the benefit of all inferences that can be derived from the facts alleged.'" Sparrow v. United Air Lines, Inc., 216 F.3d 1111, 1113 (D.C. Cir. 2000) (quoting Schuler v. United States, 617 F.2d 605, 608 (D.C. Cir. 1979)) (internal citation omitted); see also Jerome Stevens Pharms., Inc. v. FDA, 402 F.3d 1249, 1253 (D.C. Cir. 2005). This standard governs the Court's considerations of Defendants' Motions under both Rules 12(b)(1) and 12(b)(6). See Scheuer v. Rhodes, 416 U.S. 232, 236 (1974) ("in passing on a motion to dismiss, whether on the ground of lack of jurisdiction over the subject matter or for failure to state a cause of action, the allegations of the complaint should be construed favorably to the pleader"); Walker v. Jones, 733 F.2d 923, 925-26 (D.C. Cir. 1984) (same). The Court need not accept as true, however, "a legal conclusion couched as a factual allegation," nor an inference unsupported by the facts set forth in the Complaint. Trudeau v. Fed. Trade Comm'n, 456 F.3d 178, 193 (D.C. Cir. 2006) (quoting Papasan v. Allain, 478 U.S. 265, 286 (1986) (internal quotation marks omitted)).

To survive a motion to dismiss under Rule 12(b)(1), Plaintiffs bears the burden of proving that the Court has subject-matter jurisdiction to hear their claims. See Lujan v. Defenders of Wildlife, 504 U.S. 555, 561 (1992); U.S. Ecology, Inc. v. U.S. Dep't of Interior, 231 F.3d 20, 24 (D.C. Cir. 2000). A court has an "affirmative obligation to ensure that it is acting within the scope of its jurisdictional authority." Grand Lodge of Fraternal Order of Police v. Ashcroft, 185 F. Supp. 2d 9, 13 (D.D.C. 2001). For this reason, "'the [p]laintiff's factual allegations in the complaint . . . will bear closer scrutiny in resolving a 12(b)(1) motion' than in resolving a 12(b)(6) motion for failure to state a claim." Id. at 13-14 (quoting 5A Charles A. Wright & Arthur R. Miller, Federal Practice and Procedure § 1350 (2d ed. 1987) (alteration in original)). Additionally, unlike with a motion to dismiss under Rule 12(b)(6), the Court "may consider materials outside the pleadings in deciding whether to grant a motion to dismiss for lack of jurisdiction." Jerome Stevens, 402 F.3d at 1253.

Rule 12(b)(6) provides for the dismissal of an action where a complaint fails "to state a claim upon which relief can be granted." When the sufficiency of a complaint is challenged under Rule 12(b)(6), the factual allegations presented in it must be presumed true and should be liberally construed in plaintiff's favor. Leatherman v. Tarrant Cty. Narcotics & Coordination Unit, 507 U.S. 163, 164 (1993). The notice-pleading rules are "not meant to impose a great burden on a plaintiff," Dura Pharm., Inc. v. Broudo, 544 U.S. 336, 347 (2005), and he or she must thus be given every favorable inference that may be drawn from the allegations of fact. Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 584 (2007). Although "detailed factual allegations" are not necessary to withstand a Rule 12(b)(6) motion, Twombly, 550 U.S. at 555, "a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face." Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949 (2009) (internal quotation omitted). Plaintiffs must put forth "factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id. Though a plaintiff may survive a 12(b)(6) motion even if "recovery is very remote and unlikely," Twombly, 550 U.S. at 555 (citing Scheuer v. Rhodes, 416 U.S. 232, 236 (1974)), the facts alleged in the complaint "must be enough to raise a right to relief above the speculative level." Id. at 555.

B. Motion to Amend

A plaintiff may amend his complaint once as a matter of course within "21 days after serving it" or within "21 days after service of a responsive pleading or 21 days after service of a motion under Rule 12(b), (e), or (f), whichever is earlier." Fed. R. Civ. P. 15(a)(1). Otherwise, the plaintiff must seek consent from the defendant or leave from the Court. The latter "should [be] freely give[n] . . . when justice so requires." Fed. R. Civ. P. 15(a)(2). In deciding whether to grant leave to file an amended complaint, courts may consider "undue delay, bad faith or dilatory motive on the part of the movant, repeated failure to cure deficiencies by amendments previously allowed, undue prejudice to the opposing party by virtue of allowance of the amendment, futility of amendment, etc." Foman v. Davis, 371 U.S. 178, 182 (1962). In this Circuit, "it is an abuse of discretion to deny leave to amend unless there is sufficient reason." Firestone v. Firestone, 76 F.3d 1205, 1208 (D.C. Cir. 1996). Furthermore, under Rule 15, "the non-movant generally carries the burden in persuading the court to deny leave to amend." Nwachukwu v. Karl, 222 F.R.D. 208, 211 (D.D.C. 2004).

It is clear, however, that amendment should not be permitted if it would be futile. In other words, if the proposed amendment would still render the complaint deficient, courts need not grant leave. See In re Interbank Funding Corp. Securities Litigation, 629 F.3d 213, 218 (D.C. Cir. 2010) ("[A] district court may properly deny a motion to amend if the amended pleading would not survive a motion to dismiss.") (citing Forman, 371 U.S. at 182, for proposition that "'futility of amendment' is permissible justification for denying Rule 15(a) motion"); James Madison Ltd. v. Ludwig, 82 F.3d 1085, 1099 (D.C. Cir. 1996) ("Courts may deny a motion to amend a complaint as futile . . . if the proposed claim would not survive a motion to dismiss.").

III.Analysis

Defendants first contend that Plaintiffs' claims against them must be dismissed because, under the Foreign Sovereign Immunities Act of 1976 (FSIA), 28 U.S.C. §§ 1330, 1602 et seq., this Court lacks subject-matter jurisdiction over the case. In addition, Defendants maintain that Plaintiffs' attempt to amend the Complaint to add individual defendants should be rejected as futile. The Court will address these two points in turn.

A. Motion to Dismiss

1. Applicability of the FSIA

Plaintiffs' Proposed Amended Complaint seeks relief solely under the Alien Tort Statute. See Prop. Am. Compl., ¶ 149. The ATS provides in full: "The district courts shall have original jurisdiction of any civil action by an alien for a tort only, committed in violation of the law of nations or a treaty of the United States." 28 U.S.C. § 1350. The Supreme Court has recognized that the ATS provides aliens with a private cause of action over the offenses of "violation of safe conducts, infringement of the rights of ambassadors, and piracy," as well as torts that "rest on a norm of international character accepted by the civilized world and defined with a specificity comparable to the features of the[se] 18th-century paradigms." Sosa v. Alvarez-Machain, 542 U.S. 692, 724-25 (2004).

Although the ATS is itself a jurisdictional statute, claims brought thereunder against a foreign state are nevertheless subject to the jurisdictional constraints codified in the FSIA. See Argentine Republic v. Amerada Hess Shipping Corp., 488 U.S. 428, 443 (1989) (holding, in an ATS case, that "the FSIA provides the sole basis for obtaining jurisdiction over a foreign state in the courts of this country"). The FSIA both limits and grants jurisdiction to U.S. courts to hear cases brought against foreign sovereign nations. The Act provides that "a foreign state shall be immune from the jurisdiction of the courts of the United States and of the States except as provided in sections 1605 to 1607 of this chapter" and "[s]ubject to existing international agreements to which the United States [was] a party at the time of enactment." 28 U.S.C. § 1604. Accordingly, "[u]nder the FSIA, a foreign state is immune from the jurisdiction of American courts unless the case falls within a statutory exemption." Mwani v. bin Laden, 417 F.3d 1, 15 (D.C. Cir. 2005) (citing 28 U.S.C. §§ 1604, 1605-1607). Conversely, if an FSIA exception does properly apply, this Court has subject-matter jurisdiction over such a case. See 28 U.S.C. § 1330(a).

Defendants bear the burden to prove that they are entitled to immunity under the FSIA.

See Princz v. Federal Republic of Germany, 26 F.3d 1166, 1171 (D.C. Cir. 1994). Once each Defendant "make[s] a prima facie showing that it is a foreign state," however, Plaintiffs are faced with a burden of production to "assert[] at least some facts showing that one of the FSIA exceptions applies." de Csepel v. Republic of Hungary, 808 F. Supp. 2d 113, 127 (D.D.C. 2011) (citing Agudas Chasidei Chabad v. Russian Fed'n, 528 F.3d 934, 940 (D.C. Cir. 2008)). While the ultimate burden of persuasion remains with Defendants, where, as here, they can show that Plaintiffs' jurisdictional allegations are legally insufficient -- that is, taken as true, Plaintiffs' factual allegations fail to bring the case within any of the exceptions to immunity that they invoke -- a court properly finds that it lacks subject-matter jurisdiction and must dismiss the case. See Mwani, 417 F.3d at 15-16; see also Kilburn v. Socialist People's Libyan Arab Jamahiriya, 376 F.3d 1123, 1127, 1131 (D.C. Cir. 2004).

The first step in the Court's analysis is thus to determine whether Defendants Finpol and the Committee come within the definition of "foreign state" to which the FSIA applies. For the purposes of § 1605, the term "foreign state" includes any "political subdivision" of the state as well as its "agenc[ies]" and "instrumentalit[ies]." Id., § 1603. Defendants -- Kazakhstan's Agency on Economic Crimes and Corruption (Finpol) and its Committee on Penal Enforcement Facilities -- fit soundly within this definition. Although Plaintiffs suggest that they "disagree" with the proposition that Defendants are "proper ...


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