United States District Court, District of Columbia
BERMAN JACKSON UNITED STATES DISTRICT JUDGE.
the Republic of Kazakhstan (“Kazakhstan”),
brought this civil suit against the defendants - Anatolie
Stati, Gabriel Stati, and the two companies they own, Ascom
Group, S.A. and Terra Raf Trans Traiding Ltd. (the
“Stati Parties”) - for alleged violations of the
Racketeer Influenced and Corrupt Organizations Act
(“RICO”), 18 U.S.C. § 1961 et seq.,
and the common law torts of fraud and civil conspiracy.
Compl. ¶ 1 [Dkt. # 1]. Kazakhstan claims that defendants
obtained an arbitral award from the Stockholm Chamber of
Commerce (“SCC”) in Sweden through fraud, and
that defendants' subsequent efforts to use legal process
to enforce and collect on that arbitral award have been
unlawful. Id. ¶¶ 6, 8. Kazakhstan filed
this lawsuit while an action to enforce the arbitral award
was already pending in this Court, and it seeks damages,
attorneys' fees, and an injunction preventing defendants
from enforcing the foreign arbitral award in the United
States. Id., “Prayer for Relief, ” at
Stati Parties moved to dismiss the complaint for failure to
state a claim under Federal Rule of Civil Procedure 12(b)(6).
Plaintiff opposed the motion, and the matter is ripe for
decision. For the reasons that follow, the Court will grant
defendants' motion and dismiss the ill- advised lawsuit.
A RICO civil suit is not a vehicle to challenge non-frivolous
litigation, or in this case, a valid and final foreign
related case to enforce the same foreign arbitral award, this
Court granted the Stati Parties' petition to confirm the
award pursuant to the New York Convention. Anatolie Stati
v. Republic of Kazakhstan, 302 F.Supp.3d 187, 209
(D.D.C. 2018). The Court held that Kazakhstan did not
establish any of the narrow grounds for denying confirmation
of the foreign award. Id. at 202-09. The facts
surrounding this case are discussed in detail in that
briefly recap, the Stati Parties initiated arbitration
proceedings seeking reparations against Kazakhstan with the
Stockholm Chamber of Commerce on July 26, 2010 for the
expropriation of their assets, including an unfinished
liquified petroleum gas plant (“LPG plant”).
Compl. ¶¶ 6, 138. On December 19, 2013, the SCC
tribunal found that Kazakhstan violated its obligations under
the Energy Charter Treaty, and it issued an award in favor of
the Stati Parties in the amount of $497, 685, 101.00, which
included $199 million for the LPG plant. Id.
attempted to nullify the SCC award by instituting proceedings
before the Svea Court of Appeal in Stockholm. Compl. ¶
183. It argued, among other things, that the SCC award was
procured by fraud. Id. ¶ 185. The alleged fraud
concerned the value of the LPG plant. Id. ¶ 5.
According to plaintiff, prior to the initiation of the
arbitral proceedings, the Stati Parties “created a
number of illegitimate contractual documents with related
parties for the purpose of artificially inflating the
construction costs of the LPG [p]lant.” Id.
¶ 65. These falsified construction costs, Kazakhstan
alleges, were included in financial statements, which were in
turn used to fraudulently induce companies, including the
state-owned oil and gas company, KazMunaiGas
(“KMG”), into bidding $199 million for the LPG
plant in 2008. Id. ¶¶ 5, 116, 130-31.
Thus, Kazakhstan charges that the Stati Parties
misrepresented the value of the LPG plant during the SCC
arbitration when they proffered “the fraudulently
procured bids, ” the “falsified financial
statements, ” “false testimony regarding the
amount of the investment in the LPG [p]lant, ” and
“expert reports” that restated those figures as
evidence. Id. ¶ 152. According to Kazakhstan,
based upon this “false evidence” the arbitral
panel awarded the Stati Parties $199 million in compensation
for the LPG plant. Id.
what Kazakhstan characterizes as its “detailed and
specific allegations regarding [d]efendants' fraudulent
scheme, ” the Svea Court of Appeal affirmed the
arbitral award on December 9, 2016. Compl. ¶ 188.
Kazakhstan then filed a motion to the Swedish Supreme Court
seeking to quash the Svea Court of Appeal's judgment due
to “grave procedural errors.” Id. ¶
190. That legal challenge also failed. On October 24, 2017,
the Swedish Supreme Court denied Kazakhstan's motion.
Stati, 302 F.Supp.3d at 196.
the Swedish Supreme Court decision extinguished
Kazakhstan's hope of vacating the final arbitral award,
the legal battle to resist the award's enforcement rages
on in several jurisdictions across Europe and the United
States where the Stati Parties initiated enforcement
proceedings to collect on the award. Compl. ¶¶ 194-247.
This suit, for alleged RICO violations, is the latest
chapter. In its 93-page complaint, plaintiff accuses
defendants of engaging in a “sophisticated and
wide-ranging illegal pattern of racketeering, ” based
upon its efforts to fraudulently inflate the value of the LPG
plant, both prior to and during the SCC arbitration, and its
ongoing litigation activities to enforce and collect on the
SCC award. Compl. ¶¶ 2, 5-18.
filed this suit on October 5, 2017. See Compl.
Defendants moved to dismiss the complaint on April 20, 2018,
arguing that plaintiff failed to state a claim, Defs.'
Mot. to Dismiss [Dkt. # 19] (“Defs.' Mot.”);
Mem. of P. & A. in Supp. of Defs.' Mot. to Dismiss
[Dkt. # 19-1] (“Defs.' Mem.”). Plaintiff
filed its opposition to the motion on May 25, 2018,
see Rep. of Kazakhstan's Mem. of P. & A. in
Opp. to Defs.' Mot. [Dkt. # 26] (“Pl.'s
Opp.”), and defendants filed their reply on June 11,
2018. See Reply of Defs.' Mot. to Dismiss [Dkt.
# 28] (“Defs.' Reply”).
Court finds that plaintiff failed to state a RICO claim based
upon a “scheme” that amounts to a protracted
legal dispute over an LPG plant. Accordingly, the Court will
dismiss the RICO claims with prejudice, and it declines to
exercise supplemental jurisdiction over the common law claims
of fraud and civil conspiracy.
survive a [Rule 12(b)(6)] motion to dismiss, 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, 556 U.S. 662, 678 (2009), quoting
Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570
(2007). In Iqbal, the Supreme Court reiterated the
two principles underlying its decision in Twombly:
“First, the tenet that a court must accept as true all
of the allegations contained in a complaint is inapplicable
to legal conclusions.” Iqbal, 556 U.S. at 678.
And “[s]econd, only a complaint that states a plausible
claim for relief survives a motion to dismiss.”
Id. at 679, citing Twombly, 550 U.S. at
is facially plausible when the pleaded factual content
“allows the court to draw the reasonable inference that
the defendant is liable for the misconduct alleged.”
Iqbal, 556 U.S. at 678. “The plausibility
standard is not akin to a ‘probability
requirement,' but it asks for more than a sheer
possibility that a defendant has acted unlawfully.”
Id. A pleading must offer more than “labels
and conclusions” or a “formulaic recitation of
the elements of a cause of action, ” id.,
quoting Twombly, 550 U.S. at 555, and
“[t]hreadbare recitals of the elements of a cause of
action, supported by mere conclusory statements, do not
evaluating a motion to dismiss under Rule 12(b)(6), a 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) (internal
citation omitted), quoting Schuler v. United States,
617 F.2d 605, 608 (D.C. Cir. 1979); see also Am.
Nat'l Ins. Co. v. FDIC, 642 F.3d 1137, 1139 (D.C.
Cir. 2011), quoting Thomas v. Principi, 394 F.3d
970, 972 (D.C. Cir. 2005). Therefore, when considering a
motion to dismiss, a court must construe a complaint
liberally in the plaintiff's favor. Kowal v. MCI
Commc'ns Corp., 16 F.3d 1271, 1276 (D.C. Cir. 1994).
Nevertheless, the court need not accept inferences drawn by
the plaintiff if those inferences are unsupported by facts
alleged in the complaint, nor must the court accept
plaintiff's legal conclusions. Id.; see also
Browning v. Clinton, 292 F.3d 235, 242 (D.C. Cir. 2002).
In ruling upon a motion to dismiss for failure to state a
claim, a court may ordinarily consider only “the facts
alleged in the complaint, documents attached as exhibits or
incorporated by reference in the complaint, and matters about
which the Court may take judicial notice.”
Gustave-Schmidt v. Chao, 226 F.Supp.2d 191, 196
(D.D.C. 2002), citing EEOC v. St. Francis Xavier
Parochial Sch., 117 F.3d 621, 624-25 (D.C. Cir. 1997).
The RICO Claims
Count I and II of its complaint, Kazakhstan alleges that the
Stati Parties violated the RICO statute, 18 U.S.C. §
1962(c), by engaging in a pattern of racketeering activity
involving mail fraud, wire fraud, and money laundering, as
well as a conspiracy to commit those offenses, 18 U.S.C.
§ 1962(d). Compl. ¶¶ 253-87. Plaintiff alleges
that defendants engaged in fraud to inflate the value of the
LPG plant to enrich themselves, concealing the ...