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Turan Petroleum Inc. v. Ministry of Oil and Gas of Kazakhstan

United States District Court, District of Columbia

April 26, 2019

TURAN PETROLEUM, INC., a Delaware corporation, et al., Plaintiffs,
v.
MINISTRY OF OIL AND GAS OF KAZAKHSTAN, et al., Defendants. and TURAN PETROLEUM, INC., a Nevada Corporation, Intervenor-Plaintiff,

          MEMORANDUM OPINION

          REGGIE B. WALTON UNITED STATES DISTRICT JUDGE

         The plaintiffs, Turan Petroleum, Inc. (a Delaware corporation), Energyfund, Inc., and Trustees for Trek Resources, Inc. (collectively, the “plaintiffs”), bring this civil action seeking compensatory and punitive damages against the Ministry of Oil and Gas of Kazakhstan (the “Ministry”) and Does from 1 to 100, [1] pursuant to the Foreign Sovereign Immunities Act (“FSIA”), 28 U.S.C. § 1605 (2018), alleging breach of contract, violation of the plaintiffs' rights under the Treaty Between the United States of America and the Republic of Kazakhstan Concerning the Reciprocal Encouragement and Protection of Investment (the “Bilateral Investment Treaty”), breach of fiduciary duties, unjust enrichment, misrepresentation, negligence, and also seeking declaratory relief. See Complaint (“Compl.”) ¶¶ 6, 87-123. On August 15, 2011, the Court provisionally granted a motion to intervene nunc pro tunc, filed by Turan Petroleum, Inc. (a Nevada corporation) (“Turan Nevada”), for the sole purpose of allowing it to file a motion to dismiss. See Order at 1 (Aug. 15, 2011), ECF No. 36. The subjects of this Memorandum Opinion are (1) Intervenor Plaintiff Turan Petroleum, Inc.'s Motion To Dismiss Pursuant to Fed.[ ]R.[ ]Civ.[ ]P. 12(b)(1), 12(b)(3), and 12(b)(6) (“Int. Pl.'s Mot.”), ECF No. 35; (2) the Plaintiffs' Motion to File Supplemental Complaint Under Rule 15(d) (“Pls.' 1st Mot. to Supp. Compl.”), ECF No. 55; (3) the Plaintiffs' Motion to Consolidate Considerations of Briefing on Motion to Dismiss, Brought by Turan Petroleum, Inc. (Nevada), and on Plaintiffs' Motion to File Supplemental Complaint (“Pls.' Mot. to Consolidate”), ECF No. 60; (4) the Plaintiffs' Motion to Amend and Supplement Complaint (“Pls.' 2d Mot. to Am. and Supp. Compl.”), ECF No. 108[2]; (5) the Plaintiffs' Request for Judicial Notice or in the Alternative for Admitting Into Evidence in Support of Supplemental Memorandum (“Pls.' Req. for Judicial Notice”), ECF No. 115; and (6) the Intervenor Plaintiff's Request for Status Conference (“Int. Pl.'s Req. for Hr'g”), ECF No. 141.[3] Upon consideration of the parties' submissions, [4] the Court concludes that it must (1) grant Turan Nevada's motion to dismiss the complaint for lack of subject-matter jurisdiction, (2) deny as futile the plaintiffs' first motion to file a supplemental complaint and the plaintiffs' second motion to amend and supplement the Complaint, and (3) deny as moot the plaintiffs' motion to consolidate the Court's consideration of Turan Nevada's motion to dismiss and the plaintiffs' first motion to file a supplemental complaint, the plaintiffs' request for judicial notice, and Turan Nevada's request for a hearing.[5]

         I. BACKGROUND

         The following factual allegations are taken from the plaintiffs' Complaint and are accepted as true for the purposes of resolving Turan Nevada's motion to dismiss as required by Federal Rule of Civil Procedure 12(b)(1).

         After gaining independence in 1992, the Republic of Kazakhstan (“Kazakhstan”) sought investments from foreign sources into its economy. See Compl. ¶ 13. As part of this endeavor, Kazakhstan offered “western investors concessions for exploration of oil and gas reserves, ” which entitled investors “to explore the subsurface reserves[] [and] to produce . . . and [ ]export the oil and gas products extracted within the concession territories.” Id. ¶ 16. “In the course of that promotional campaign to attract western investments, the Ministry made various public offers and announced biddings for those oil and gas concessions.” Id. ¶ 18. At issue in this case is the Ministry's repudiation of two agreements, which the parties refer to as the Aral and Arys concessions. See id. ¶ 23.

         In 2001, the Ministry solicited bids “for the exploration and development of the oil and gas resources” located in the Kyzlorda and Shymkent regions in Kazakhstan. Id. ¶ 44; see also id. ¶ 29. The Aral concession agreement was consummated with Ai Dan LLC (“Ai Dan”), a Kazakh entity, on June 29, 2002. See id. ¶ 31. Later that year, the agreement was amended to transfer the rights granted under the concession to Kok Aral Munai LLC (“KAM”), a subsidiary of Ai Dan. See id. ¶ 32-33. In 2003, the “Ministry concluded the initial agreement on the Arys [c]oncession with a Kazakh entity[, ] Aral Petroleum LLC.” Id. ¶ 48.

         On February 18, 2005, “the Ministry issued an Order, by which it suspended the Aral [c]oncession for one month, claiming a non-performance by KAM.” Id. ¶ 37. Thereafter, on July 5, 2005, “the Ministry issued [ ] Order No. 979, by which it terminated the June 2002 agreement on the Aral [c]oncession altogether.” Id. ¶ 38. In September 2010, “the Ministry made a unilateral decision to terminate the Arys [c]oncession.” Id. ¶ 75.

         On December 9, 2010, the plaintiffs instituted this civil action. See id. at 1. On March 30, 2011, Turan Nevada filed its motion to intervene, see generally Int. Pl.'s Mot., which, as noted earlier, the Court “provisionally [granted nunc pro tunc] for the sole purpose of allowing it to file a motion to dismiss.” Order at 1 (Aug. 15, 2011), ECF No. 36 (emphasis in original). On August 8, 2011, Turan Nevada filed its motion to dismiss. See generally Int. Pl.'s Mot. Thereafter, on November 4, 2011, the plaintiffs requested leave to file a supplemental complaint, see Pls.' 1st Mot. to Supp. Compl. at 1, and on June 12, 2015, the plaintiffs filed their second motion to amend and supplement their complaint, see Pls.' 2d Mot. to Am. and Supp. Compl. at 1. These motions are the subjects of this Memorandum Opinion.

         II. STANDARDS OF REVIEW

A. Motion to Dismiss for Lack of Subject-Matter Jurisdiction

         “Federal [district] courts are courts of limited jurisdiction, ” Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 377 (1994), and “[a] motion for dismissal under [Federal Rule of Civil Procedure] 12(b)(1) ‘presents a threshold challenge to the court's jurisdiction, '” Morrow v. United States, 723 F.Supp.2d 71, 75 (D.D.C. 2010) (Walton, J.) (quoting Haase v. Sessions, 835 F.2d 902, 906 (D.C. Cir. 1987)). Thus, “the Court is obligated to determine whether it has subject-matter jurisdiction in the first instance, ” Curran v. Holder, 626 F.Supp.2d 30, 32 (D.D.C. 2009), and must dismiss a claim if it “lack[s] [] subject-matter jurisdiction, ” Fed.R.Civ.P. 12(b)(1).

         In deciding a motion to dismiss based upon lack of subject-matter jurisdiction, “the [C]ourt need not limit itself to the allegations of the complaint.” Grand Lodge of the Fraternal Order of Police v. Ashcroft, 185 F.Supp.2d 9, 14 (D.D.C. 2001). Rather, the “[C]ourt may consider such materials outside the pleadings as it deems appropriate to resolve the question [of] whether it has jurisdiction to hear the case.” Scolaro v. D.C. Bd. of Elections and Ethics, 104 F.Supp.2d 18, 22 (D.D.C. 2000); see also Jerome Stevens Pharms., Inc. v. FDA, 402 F.3d 1249, 1253 (D.C. Cir. 2005). Additionally, the Court must “assume the truth of all material factual allegations in the complaint and ‘construe the complaint liberally, granting [a] plaintiff the benefit of all inferences that can be derived from the facts alleged.'” Am. Nat'l Ins. Co. v. Fed. Deposit Ins. Corp, 642 F.3d 1137, 1139 (D.C. Cir. 2011) (alteration in original) (quoting Thomas v. Principi, 394 F.3d 970, 972 (D.C. Cir. 2005)). However, a “[p]laintiff's factual allegations in the complaint . . . will bear closer scrutiny in resolving a 12(b)(1) motion than resolving a 12(b)(6) motion for failure to state a claim.” Grand Lodge, 185 F.Supp.2d at 13-14 (citation and internal quotation marks omitted); see also Macharia v. United States, 334 F.3d 61, 64, 69 (D.C. Cir. 2003).

         B. Motion to Amend Pleadings

         Under Federal Rule of Civil Procedure 15(a), the Court “should freely give leave” to a party to amend its pleading “when justice so requires.” Fed.R.Civ.P. 15(a)(2). While the Court has sole discretion to grant or deny leave to amend, “[l]eave to amend a [pleading] should be freely given in the absence of undue delay, bad faith, undue prejudice to the opposing party, repeated failure to cure deficiencies, or futility.” Richardson v. United States, 193 F.3d 545, 548-49 (D.C. Cir. 1999) (citing Foman v. Davis, 371 U.S. 178, 182 (1962)). The rationale for this perspective is that “[i]f the underlying facts or circumstances relied upon by a plaintiff may be a proper subject of relief, [it] ought to be afforded an opportunity to test [its] claim on the merits.” Foman, 371 U.S. at 182. Nevertheless, the “[C]ourt may properly deny a motion to amend if the amended pleading would not survive a motion to dismiss, ” i.e., if it is futile to permit the proposed amendment. In re Interbank Funding Corp. Sec. Litig., 629 F.3d 213, 218 (D.C. Cir. 2010); see also 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

         Turan Nevada argues that this case must be dismissed for lack of subject-matter jurisdiction because “as an agency of a foreign sovereign, the “[M]inistry is immune from suit under the . . . []FSIA[], ” and that “allegations of [the p]laintiffs' Complaint are insufficient . . . to establish that any of the exceptions to immunity under the FSIA applies.” Int. Pl.'s Mot. at 2 (emphasis removed).[6] Turan Nevada also claims that the allegations in the plaintiffs' proposed amended pleadings “are insufficient to confer subject-matter jurisdiction upon [ ] this Court.” Int. Pl.'s Resp. to Pls.' Mot. to Am. at 7. The Court will address each in turn.

         A. The FSIA

         Under the FSIA, a foreign state, its political subdivisions, agencies, and instrumentalities are presumed to be immune from the jurisdiction of the United States courts. See TMR Energy Ltd. v. State Prop. Fund of Ukr., 411 F.3d 296, 299 (D.C. Cir. 2005) (citing Saudi Arabia v. Nelson, 507 U.S. 349, 355 (1993)); see also 28 U.S.C. § 1604; S.K. Innovation, Inc. v. Finpol, 854 F.Supp.2d 99, 107 (D.D.C. 2012). The “presumption is overcome only if the plaintiff shows that one of the exceptions to immunity provided in 28 U.S.C. §§ 1605-07 applies.” TMR Energy, 411 F.3d at 299.[7] As Turan Nevada correctly notes, the FSIA “provides the exclusive basis for a court to obtain subject-matter jurisdiction over a foreign state, ” Int. Pl.'s Resp. to Pls.' Mot. to Am. at 5; see also Nelson, 507 U.S. at 355, and “unless a specific FSIA exception applies, this Court lacks subject-matter jurisdiction to hear the claims asserted by the [p]laintiffs[] because the Ministry is an agency of Kazakhstan, a foreign state, ” Int. Pl.'s Mot. at 5.[8] The plaintiffs claim that “[t]he statutory [FSIA] exceptions . . . apply, ” Compl. ¶ 6, specifically the waiver exception, the commercial activity exception, and the expropriation exception, see id. The Court will address in turn each of the statutory exceptions to jurisdictional immunity of a foreign state asserted by the plaintiffs.

         1. The ...


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