Free Opening Brief in Support - District Court of Delaware - Delaware

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IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF DELAWARE -----------------------------------------------------------x DAVIS INTERNATIONAL, LLC, HOLDEX, : LLC, FOSTON MANAGEMENT, LTD, and : OMNI TRUSTHOUSE, LTD, : : Plaintiffs, : v. : : NEW START GROUP CORP., VENITOM : CORP., PAN-AMERICAN CORP., MDM : BANK, URAL-GORNO METALURAGICAL : COMPANY, EVRAZ HOLDING, MIKHAIL : CHERNOI, OLEG DERIPASKA, ARNOLD : KISLIN, MIKHAIL NEKRICH, and : ISKANDER MAKMUDOV, : : Defendants. : -----------------------------------------------------------x

Case No. 04-1482-GMS

OPENING BRIEF IN SUPPORT OF DEFENDANTS' MOTION TO DISMISS THE COMPLAINT PURSUANT TO RULES 12(b)(1) AND 12(b)(6) OF THE FEDERAL RULES OF CIVIL PROCEDURE Attorneys for Defendant Arnold Kislin: Charles M. Oberly, III (DSBA No. 743) Karen V. Sullivan (DSBA No. 3872) Oberly, Jennings & Rhodunda, P.A. 800 Delaware Avenue, Suite 901 PO Box 2054 Wilmington, DE 19899 Lisa C. Cohen Schindler Cohen & Hochman LLP 100 Wall Street 15th Floor New York, NY 10005 (212) 277-6300 Lawrence S. Goldman Elizabeth Johnson The Law Offices of Lawrence S. Goldman 500 Fifth Ave., 29th Floor New York, NY 10110-2900 (212) 997-7499

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Attorneys for Defendants New Start Group Corp. and Venitom Group: Charles M. Oberly, III (DSBA No. 743) Karen V. Sullivan (DSBA No. 3872) Oberly, Jennings & Rhodunda, P.A. 800 Delaware Avenue, Suite 901 PO Box 2054 Wilmington, DE 19899 (302) 576-2000 Richard J. Schaeffer Peter J. Venaglia Laura D. Sullivan Dornbush, Schaeffer, Strongin & Weinstein, LLP 747 Third Avenue, 11th Floor New York, NY 10017 (212) 759-3300

Attorneys for Defendant Oleg Deripaska: Collins J. Seitz, Jr. (DSBA No. 2237) Kevin F. Brady (DSBA No. 2248) Connolly Bove Lodge & Hutz LLP 1007 North Orange Street P.O. Box 2207 Wilmington, DE 19899 (302) 658-9141 Attorneys for Defendant Evraz Holding: William M. Lafferty (DSBA No. 2755) Morris, Nichols, Arsht & Tunnell Chase Manhattan Centre, 18th Floor 1201 North Market Street P.O. Box 1347 Wilmington, DE 19899-1347 (302) 575-7341 Attorneys for Defendant MDM Bank: Richard I.G. Jones, Jr. (DSBA No. 3301) Ashby & Geddes 222 Delaware Avenue, 17th Floor P.O. Box 1150 Wilmington, DE 19899 (302) 654-1888 Joel B. Kleinman Steven J. Roman David H. Greenberg Dickstein Shapiro Morin & Oshinsky LLP 2101 L Street NW Washington, DC 20037-1526 (202) 785-9700 David H. Herrington Vitali Rosenfeld Cleary Gottlieb Steen & Hamilton LLP One Liberty Plaza New York, NY 10006 (212) 225-2266 Rodney F. Page Michael G. Biggers Bryan Cave LLP 700 13th Street, N.W. Washington, D.C. 20005-3960 (202) 508-6002

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Attorneys for Defendant Ural-Gorno Metallurgical Company: Charles M. Oberly, III (DSBA No. 743) Karen V. Sullivan (DSBA No. 3872) Oberly, Jennings & Rhodunda, P.A. 800 Delaware Avenue, Suite 901 PO Box 2054 Wilmington, DE 19899 (302) 576-2000 Attorneys for Defendant Iskander Makmudov: Charles M. Oberly, III (DSBA No. 743) Karen V. Sullivan (DSBA No. 3872) Oberly, Jennings & Rhodunda, P.A. 800 Delaware Avenue, Suite 901 PO Box 2054 Wilmington, DE 19899 (302) 576-2000 Attorneys for Defendant Mikhail Chernoi: Charles M. Oberly, III (DSBA No. 743) Karen V. Sullivan (DSBA No. 3872) Oberly, Jennings & Rhodunda, P.A. 800 Delaware Avenue, Suite 901 PO Box 2054 Wilmington, DE 19899 (302) 576-2000 Attorneys for Defendant Mikhail Nekrich: Charles M. Oberly, III (DSBA No. 743) Karen V. Sullivan (DSBA No. 3872) Oberly, Jennings & Rhodunda, P.A. 800 Delaware Avenue, Suite 901 PO Box 2054 Wilmington, DE 19899 (302) 576-2000 Dated: March 31, 2005 Paul R. Grand Edward M. Spiro Morvillo, Abramowitz, Grand, Iason & Silberberg, P.C. 565 Fifth Avenue New York, NY 10017 (212) 880-9510 Brian Maas Cameron A. Myler Frankfurt Kurnit Klein & Selz PC 488 Madison Avenue, 9th Floor New York, NY 10022 (212) 980-0120 William H. Devaney Heard & O'Toole LLP 405 Lexington Ave, Floor 62 New York, NY 10174 (212) 307-5500

William H. Devaney Heard & O'Toole LLP 405 Lexington Ave, Floor 62 New York, NY 10174 (212) 307-5500

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TABLE OF CONTENTS TABLE OF AUTHORITIES.................................................................................................. iv PRELIMINARY STATEMENT..............................................................................................1 NATURE AND STAGE OF THE PROCEEDINGS .................................................................1 SUMMARY OF ARGUMENT ...............................................................................................2 STATEMENT OF FACTS......................................................................................................4 ARGUMENT.........................................................................................................................7 I. PLAINTIFFS HAVE NOT AND CANNOT ESTABLISH THE COURT'S JURISDICTION OVER THE SUBJECT MATTER OF THEIR RUSSIAN-BASED ALLEGATIONS....................................................................7 A. There Is No Subject Matter Jurisdiction For The RICO Claims Under The Conduct Test......................................................8 B. There Is No Subject Matter Jurisdiction For The RICO Claims Under The Effects Test...................................................... 11 II. PLAINTIFFS' RICO CLAIMS ARE FATALLY DEFECTIVE...................................................................................................... 12 A. The Statute Of Limitations Bars Plaintiffs' Alleged Injury Based On The Alleged Illegal Scheme ................................................. 14 B. Considered Individually, Each Plaintiff's RICO Claims Are Barred By The Statute Of Limitations And By Lack Of Direct Causation ................................................................. 15 1. Davis And Foston's Claims Are Time-Barred........................................... 16 2. Omni And Holdex's Claims Are Time-Barred........................................... 16 3. Omni And Holdex's Losses Were Not Proximately Caused By RICO Acts ......................................................... 17 III. PLAINTIFFS' FAILURE TO ALLEGE THE ELEMENTS OF A CLAIM UNDER §§1962(a), (b), (c) OR (d) REQUIRES DISMISSAL................................................................... 20 A. Plaintiffs Fail To Establish A Claim Under § 1962(a) ........................................................................................... 20

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1. Plaintiffs' Failure To Allege The Receipt Of Money From A Pattern Of Racketeering Activity Requires Dismissal .................................................................... 21 2. Plaintiffs' Failure To Allege An "Investment" Injury Requires Dismissal ....................................................................... 21 B. Plaintiffs' Failure To Allege The Elements Of A § 1962(b) Claim Requires Dismissal.............................................................. 23 C. Plaintiffs' Failure To Plead A Cognizable Claim Under § 1962(c) Requires Dismissal........................................................................ 24 1. Plaintiffs Have Failed To Allege A Proper Enterprise................................ 25 2. Plaintiffs Have Failed To Establish That Defendants Participated In The Conduct Of Affairs Of Any Of The Enterprises...................................................... 26 3. Plaintiffs Fail To Plead The Requisite Pattern Of Racketeering As To Each Defendant................................................... 28 (a) The Allegations As To New Start, Venitom, Pan-American And Delaware Real Estate Entities Do Not Constitute A Pattern Of Racketeering .................................................................................... 29 (b) Plaintiffs Fail To Allege A Pattern Of Racketeering As To MDM, Ural-Gorno And Evraz........................................................................................ 30 (c) The Allegations As To The GOK Enterprise Are Insufficient ................................................................................ 31 4. Plaintiffs Fail To Allege The Prerequisites Of The § 1962(C) Claim Against Various Individual Defendants............................................................................. 32 D. Plaintiffs' Failure To Plead Their Fraud Claims With The Requisite Particularity Mandates Dismissal ..................................... 32 1. Rule 9(b) Of The Federal Rules Of Civil Procedure Requires That Fraud Be Pleaded With Particularity ................................................................................... 32 2. Plaintiffs' Claims Of Mail And Wire Fraud Are Insufficiently Pleaded....................................................................... 33 3. Plaintiffs' Money Laundering Claims Are Inadequately Pleaded.............................................................................. 35

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E. Plaintiffs' Failure To Plead The Elements Of A §1962(d) Claim Requires Dismissal....................................................... 35 IV. PLAINTIFFS' FAILURE TO PLEAD THE ELEMENTS OF THEIR STATE LAW CLAIMS REQUIRES DISMISSAL ................................................................................... 37 CONCLUSION.................................................................................................................... 39

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TABLE OF AUTHORITIES Cases Adams v. Jankouskas, 452 A.2d 148 (Del. 1982) ...........................................................................38 Agency Holding Corp. v. Malley-Duff & Associates, Inc., 483 U.S. 143 (1987) ........................... 2, 12 Alleghany General Hospital v. Phillip Morris, Inc., 228 F.3d 429 (3d Cir. 2000) ............................19 Anderson v. Ayling, 396 F.3d 265 (3d Cir. 2005)............................................................ 2, 13, 19, 36 Apollo Fuel Oil v. United States, 195 F.3d 74 (3d Cir. 1999) .........................................................17 Arthur v. Guerdon Industries, Inc., 827 F. Supp. 273 (D. Del 1993) ................................ 2, 13, 19, 26 A-Valey Engineers, Inc. v. Board of Chosen Freeholders of the County of Camden, 106 F. Supp. 2d 711 (D.N.J. 2000)..................................................................................... 4, 36 Baram v. Farugia, 606 F.2d 42 (3d Cir. 1979) .......................................................................... 4, 38 Base Metal Trading SA v. Russian Aluminum, 253 F. Supp. 2d 681 (S.D.N.Y. 2003), aff'd, 98 Fed. Appx. 47 (2d Cir. April 30, 2004) .............................................................. passim Beck v. Prupis, 529 U.S. 494 (2000) ...................................................................................3, 35, 36 Bhatla v. Resort Dev Corp., 720 F. Supp. 501 (W.D. Pa. 1989)......................................................21 Butte Mining PLC v. Smith, 76 F.3d 287 (9th Cir. 1996) ................................................................10 Calabrese v. CSC Holdings, Inc., 283 F. Supp. 2d 797 (E.D.N.Y. 2003).........................................23 Callahan v. A.E.V., Inc., 182 F.3d 237 (3d Cir. 1999) .............................................................. 13, 19 Callahan v. Commonwealth Land Title Ins. Co., 1990 WL 168273 (E.D. Pa. Oct. 29, 1990) ............24 Casper v. Paine Webber Group, Inc., 787 F. Supp. 1480 (D.N.J. 1992) ..........................................18 Concern Sojuzvneshtrans v. Buyanovski, 80 F. Supp. 2d 273 (D.N.J. 1999) .................................. 7, 9 Curtin v. Tilley Fire Equip. Co., 1999 WL 1211502 (E.D. Pa. 1999) ..............................................30 Diamond v. Reynolds, 1986 WL 15374 (D. Del. Jan. 13, 1986) ......................................................18 Doe v. Unocal Corp., 110 F. Supp. 2d 1294 (C.D. Cal. 2000), aff'd in relevant part, 395 F.3d 932 (9th Cir. 2002) ..........................................................2, 7, 10 Dongelewicz v. First Eastern Bank , 80 F. Supp. 2d 339 (M.D. Pa. 1999), aff'd, Dongelewicz v. PNC Bank Nat'l Ass'n., 104 Fed. Appx. 811, 2004 WL 1661863, RICO Bus. Disp. Guide 10, 720 (3d Cir. July 23, 2004) ..........................................................37 Dow Chemical Co. v. Exxon Corp., 30 F. Supp. 2d 673 (D. Del. 1998) .............................. 3, 7, 20, 36

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EEOC v. Arabian Am. Oil Co ., 499 U.S. 244 (1991) .......................................................................7 EEOC v. Great Atlantic & Pacific Tea Co ., 735 F.2d 69 (3d Cir. 1984) ..........................................38 Esposito Hauling & Contracting Co. v. Bldg. & Constr. Trades Council of Del., 1993 WL 566442 (D. Del. Sept. 2, 1993) ...........................................................................26 Eureka Paper Box Company v. WBMA, Inc. Voluntary Employee Benefit Trust, 767 F. Supp. 642 (M.D. Pa. 1991)..........................................................................................31 Garbade v. Great Divide Mining & Milling Corp., 831 F.2d 212 (10th Cir. 1987) ...........................21 Glessner v. Kenny, 952 F.2d 702 (3d Cir. 1991) ............................................................................22 H.J., Inc. v. Northwestern Bell Telephone Co ., 492 U.S. 229 (1989) ......................................3, 28, 31 Helman v. Murry's Steaks, Inc., 742 F. Supp. 860 (D. Del. 1990)..........................................3, 23, 36 Hindes v. Castle, 937 F.2d 868 (3d Cir. 1991) .......................................................................... 3, 28 Holmes v. Securities Investor Protection Corp., 503 U.S. 258 (1992) ....................................2, 13, 18 Hughes v. Consol-Pennsylvania Coal Co ., 945 F.2d 594 (3d Cir. 1991), cert. denied, 504 U.S. 955 (1992) ..........................................................................................28 In re Bank of Credit & Commerce Int'l Depositors Litig., 1992 WL 696398 (C.D. Cal. April 30, 1992) ................................................................................................. 8, 18 In re South African Apartheid Litig., 346 F. Supp. 2d 538 (S.D.N.Y. 2004) ................................ 9, 12 Isaacson, Stolper & Co. v. Artisan's Sav. Bank , 330 A.2d 130 (Del. 1974).................................. 4, 38 Jaguar Cars, Inc. v. Royal Oaks Motor Car Co.,46 F.3d 258 (3d Cir. 1995) ...................................26 Jiffy Lube Int'l Inc. v. Jiffy Lube of Pennsylvania, 848 F. Supp. 569 (E.D. Pa. 1994) ................... 3, 21 Kaczmarek v. International Business Machines Corp., 30 F. Supp. 2d 626 (S.D.N.Y. 1998) ............23 Kehr Packages, Inc. v. Fidelcor, Inc., 926 F.2d 1406 (3d Cir. 1991) ...................................23, 29, 31 Kimmel v. Peterson, 565 F. Supp. 476 (E.D. Pa. 1983) ..................................................................35 Klehr v. A.O. Smith Corp., 521 U.S. 179 (1997) ............................................................................13 Kruman v. Christies Int'l PLC, 129 F. Supp. 2d 620 (S.D.N.Y. 2001), vacated on other grounds, 284 F.3d 384 (2d Cir. 2002) ...........................................................12 Lightning Lube, Inc. v. Witco Corp., 4 F.3d 1153 (3d Cir. 1993) ...........................................4, 22, 36 Lum v. Bank of America, 361 F.3d 217 (3d Cir. 2004) ...................................................................33 Marshall-Silver Construction Co., Inc. v. Mendel, 894 F.2d 593 (3d Cir. 1990) ..............................31

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Mathews v. Kidder, Peabody & Co., 260 F.3d 239 (3d Cir. 2001) ................................... 2, 12, 13, 19 Nasser v. Andersen Worldwide Societe Cooperative, 2003 WL 22179008 (S.D.N.Y. Sept. 23, 2003) .....................................................................................................11 National Railroad Passenger Corp. v. Notter, 677 F. Supp. 1 (D.D.C. 1987) ..................................17 North South Finance Corporation v. Al-Turki, 100 F.3d 1046 (2d Cir. 1996) ............................ 2, 7, 8 NRB Indus. v. R.A. Taylor & Assocs., 1998 WL 3638 (S.D.N.Y. Jan. 7, 1998) ................................23 Nuevo Mundo Holdings v. PriceWaterhouse Coopers LLP, 2004 WL 2848524 (S.D.N.Y. Dec. 9, 2004) ........................................................................................................11 OSRecovery, Inc. v. One Group Int'l, Inc., 354 F. Supp. 2d 357 (S.D.N.Y. 2005)........................ 8, 24 Peters v. Welsh Development Agency, 1991 WL 172950 (N.D. Ill. Aug. 29, 1991) ............................8 Philan Ins. Ltd. v. Frank B. Hall & Co., 748 F. Supp. 190 (S.D.N.Y. 1990) ....................................10 Poulos v. Caesars World, Inc., 379 F.3d 654 (2d Cir. 2004) ............................................................7 Prudential Insurance Co. v. United Gypsum Co., 359 F.3d 226 (3d Cir. 2004) ............... 12, 13, 19, 20 Brittingham v. Mobil Corp., 943 F.2d 297 (3d Cir. 1991) ........................................................ 22, 26 Reves v. Ernst & Young, 507 U.S. 170 (1993) ........................................................................... 3, 26 Rolo v. City Investing Co. Liquidating Trust, 155 F.3d 644 (3d Cir. 1998), abrogation on other grounds recognized by, Forbes v. Eagleson, 228 F.3d 471 (3d Cir. 2000) ..37 Roquette America, Inc. v. Alymum N.V.,2004 WL 1488384 (S.D.N.Y. July 1, 2004) .......................11 Rose v. Bartle, 871 F.2d 331 (3d Cir. 1989) .........................................................................4, 22, 32 Rotella v. Wood, 528 U.S. 549 (2000) ..........................................................................................13 Saporito v. Combustion Engineering Inc., 843 F.2d 666 (3d Cir. 1988) ..........................................34 Schlick v. Penn-Dixie Cement Corp., 507 F.2d 374 (2d Cir. 1974), cert. denied, 421 U.S. 976 (1975) ..........................................................................................34 Sedima, S.P.R.L. v. Imrex Co., Inc., 473 U.S. 479 (1985) ...............................................................25 Seville Indus. Machinery v. Southmost Machinery, 742 F.2d 786 (3d Cir. 1984), cert. denied, 469 U.S. 1211 (1985) .........................................................................................33 Sinaltrainal v. The Coca-Cola Co., 256 F. Supp. 2d 1345 (S.D. Fla. 2003) ................................... 7, 8 Spitzer v. Abdelhak , 1999 WL 1204352 (E.D. Pa. Dec. 15, 1999) ...................................................35 Standard Chlorine of Del. v. Sinibaldi, 821 F. Supp. 232 (D. Del. 1992) ........................................22

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Steamfitters Local Union No. 420 Welfare Fund v. Phillip Morris, Inc., 171 F.3d 912 (3d Cir. 1999) ..................................................................................................19 Stursberg v. Todi, 2004 WL 2244539 (E.D. Pa. October 1, 2004) ............................................ 28, 30 Tabas v. Tabas, 47 F.3d 1280 (3d Cir.), cert. denied, 515 U.S. 1118 (1995) ....................................31 Travelers Indemnity Company v. Lake, 594 A.2d 38 (Del. 1991)....................................................37 United States v. Antar, 53 F.3d 568 (3d Cir. 1995) ........................................................................27 United States v. Giffen, 326 F. Supp. 2d 497 (S.D.N.Y. 2004)........................................................18 United States v. Irizarry, 341 F.3d 273 (3d Cir. 2003) ............................................................... 3, 26 United States v. Parise, 159 F.3d 790 (3d Cir. 1998) .....................................................................27 United States v. Riccobene, 709 F.2d 214 (3d Cir. 1983) ........................................................... 3, 26 University of Maryland at Baltimore v. Peat, Marwick, Main & Co ., 996 F.2d 1534 (3d Cir. 1993)........................................................................................... 27, 37 Zaro Licensing, Inc. v. Cinmar, Inc., 779 F. Supp. 276 (S.D.N.Y. 1991).........................................23 Statutes 10 Del. C. § 8106..........................................................................................................................4 11 Del. C. § 1201........................................................................................................................18 18 U.S.C. § 1961 ................................................................................................................. passim 18 U.S.C. § 1962 ................................................................................................................. passim 18 U.S.C. § 201..........................................................................................................................18 Rules Fed. R. Civ. P. 9(b).............................................................................................................. passim Fed. R. Civ. P. 12(b)(1)............................................................................................................. 1, 2 Fed. R. Civ. P. 12(b)(6).................................................................................................................1 Treatises 2A MOORE'S FEDERAL P RACTICE (2d ed. 1982) ...........................................................................34 Restatement (Second) of Conflict of Laws (1971) .........................................................................37

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PRELIMINARY STATEMENT As demonstrated in the other opening briefs supporting defendants' motion to dismiss, the complaint should be dismissed because, as the Honorable John G. Koeltl of the Southern District of New York found and as the Second Circuit affirmed, this case belongs in Russia. Even if this Court were to deny defendants' motion based on the other grounds , the complaint should still be dismissed because, as a matter of law, it fails to state any viable cause of action. In their vague complaint, plaintiffs plead a Byzantine tangle of conclusory allegations that merely parrot statutory language without setting forth the facts required for claims under the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. § 1961, et seq. ("RICO"). Plaintiffs fail to allege a specific RICO enterprise (instead listing eight separate enterprises), fail to set forth the specific acts and statutes corresponding to the claimed RICO predicate acts, and fail to plead with particularity those predicate acts governed by Fed. R. Civ. P. 9(b). With few exceptions, they fail to show which defendants committed which acts, generally merely alleging that the acts were committed by the "Conspirators" (see, e.g., Compl. ¶¶ 46, 51, 52, 59, 62-64, 67-68). Giving plaintiffs the benefit of every doubt, it is nonetheless clear that they cannot state a claim. The complaint should be dismissed. NATURE AND STAGE OF THE PROCEEDINGS Plaintiffs originally filed their complaint in the Delaware Court of Chancery on November 4, 2004. Defendants removed on November 30th and the Court held a telephone conference with the parties on December 21st . On March 8, 2005, plaintiffs served discovery demands and Rule 26 disclosures. There have been no other proceedings to date. Defendants now submit this opening brief in support of their motion to dismiss the complaint pursuant to Rules 12(b)(1) and 12(b)(6) of the Federal Rules of Civil Procedure on the grounds that plaintiffs have failed to state a claim and that subject matter jurisdiction is lacking. In addition, by separate briefs, defendants are moving to

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dismiss the complaint on the grounds of direct estoppel, forum non conveniens, and international comity. 1 SUMMARY OF ARGUMENT I. Plaintiffs have not and cannot establish this Court's jurisdiction over the subject

matter of their Russian-based RICO allegations . None of the purported conduct that directly caused plaintiffs' alleged loss occurred in or had substantial direct effects in the United States. Instead, Russia is the locus of all of the alleged conduct and all of the purported substantial effects. Accordingly, subject matter jurisdiction over plaintiffs' RICO claims is lacking. See North South Finance Corporation v. Al-Turki, 100 F.3d 1046 (2d Cir. 1996); Doe v. Unocal Corp., 110 F. Supp. 2d 1294, 1311 (C.D. Cal. 2000), aff'd in relevant part, 395 F.3d 932, 961-62 (9th Cir. 2002). II. Plaintiffs' RICO claims are defective because plaintiffs failed to bring their

claims within RICO's four year statute of limitations and failed to allege that the ir purported injury was proximately caused by any purported RICO predicate act. The statute of limitations for a civil RICO action is four years, counted from when a plaintiff discovers or should have discovered the injury. Agency Holding Corp. v. Malley-Duff & Associates, Inc., 483 U.S. 143, 156

(1987); Mathews v. Kidder, Peabody & Co., 260 F.3d 239, 245 (3d Cir. 2001). Additionally, a plaintiff must allege facts sufficient to demonstrate that the alleged RICO violations proximately caused the loss for which relief is sought. Holmes v. Securities Investor Protection Corp., 503 U.S. 258, 268 (1992); Anderson v. Ayling, 396 F.3d 265, 269 (3d Cir. 2005); Arthur v. Guerdon Industries, Inc., 827 F. Supp. 273, 280 (D. Del 1993). Here, plaintiffs allege that they were injured by a takeover scheme and pattern of racketeering activity that "began no later than the early 1990's and continues

1

All defendants join in this motion, which tracks a motion they filed to dismiss the virtually identical allegations made by plaintiffs (and others) in the Southern District of New York. In dismissing that action on forum non conveniens grounds, Judge Koeltl did not reach defendants' Rule 12 motion. Base Metal Trading SA v. Russian Aluminum, 253 F. Supp. 2d 681 (S.D.N.Y. 2003), aff'd, 98 Fed. Appx. 47 (2d Cir. April 30, 2004) ("Base Metal Trading"). As in the prior litigation, defendants respectfully suggest that this Court first consider defendants' direct estoppel motion and then, if and as necessary, proceed to their forum non conveniens motion, their comity motion, and finally this Rule 12 motion.

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through the present date." (Compl. ¶¶ 1 & 136.) All of the alleged conduct causing the purported injury occurred more than four years ago. Moreover, if plaintiffs are complaining about the purported transfer of their shares, those losses are not proximately linked to the alleged RICO acts. Indeed, plaintiffs specifically allege that the shares of Omni, Holdex, and Foston were transferred as a result of court decisions. Accordingly, plaintiffs' RICO claims must be dismissed. III. Plaintiffs failure to allege the elements of a claim under §§ 1962(a), (b), (c) or (d)

of RICO requires dismissal. Plaintiffs fail to show a violation of § 1962(a) because they do not sufficiently allege that money was received from a pattern of racketeering activity and that their purported injury resulted directly from the investment of that income rather than from the alleged predicate acts themselves. Nor do they establish a claim for each separate defendant. See Dow Chemical Co. v. Exxon Corp., 30 F. Supp. 2d 673, 697 (D. Del. 1998); Jiffy Lube Int'l Inc. v. Jiffy Lube of Pennsylvania, 848 F. Supp. 569, 582 (E.D. Pa. 1994). Plaintiffs' § 1962(b) claim likewise must be dismissed for failing to show that defendants acquired or maintained an enterprise "through a pattern of racketeering activity." Helman v. Murry's Steaks, Inc., 742 F. Supp. 860, 879, 882 (D. Del. 1990). Plaintiffs fail on many fronts to allege the elements of their § 1962(c) claim. First, plaintiffs do not properly allege a RICO enterprise. United States v. Irizarry, 341 F.3d 273, 286 (3d Cir. 2003); United States v. Riccobene, 709 F.2d 214, 221-224 (3d Cir. 1983). Second, plaintiffs have not properly alleged how each defendant individually managed and operated a RICO enterprise. Reves v. Ernst & Young, 507 U.S. 170 (1993). Third, plaintiffs have not pleaded a pattern of racketeering as to each defendant. H.J., Inc. v. Northwestern Bell Telephone Co., 492 U.S. 229 (1989); Hindes v. Castle, 937 F.2d 868, 872 (3d Cir. 1991). Nor have plaintiffs adequately pleaded a violation of § 1962(d) because: (1) they fail to allege that the acts that caused their purported injury violated RICO, Beck v. Prupis, 529 U.S. 494 (2000); (2) they fail to establish a violation of either §§ 1962(a), (b) or (c), Lightning Lube, Inc. v. Witco

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Corp., 4 F.3d 1153, 1191 (3d Cir. 1993); and (3) they fail to allege the prerequisites of a § 1962(d) claim in more than a conclusory manner. A-Valey Engineers, Inc. v. Board of Chosen Freeholders of the County of Camden, 106 F. Supp. 2d 711, 717 (D.N.J. 2000). Finally, plaintiffs' vague claims of fraudulent activities fall far short of the specificity required by Fed. R. Civ. P. 9(b) and thus cannot be considered as predicate acts for purposes of plaintiffs' RICO claim. Rose v. Bartle, 871 F.2d 331, 356 n.33 (3d Cir. 1989). IV. Plaintiffs' failure to plead the elements of their state law claims requires

dismissal. Under Delaware conflicts of law analysis, Russian law applies to plaintiffs' state law claims. Thus, as demonstrated in defendants' motions to dismiss on forum non conveniens and

comity grounds, this Court should leave those issues to be decided by Russian courts. Even if Delaware law applies, plaintiffs' state law claims are both time-barred because they were brought after the three year time period (10 Del. C. § 8106; Isaacson, Stolper & Co. v. Artisan's Sav. Bank , 330 A.2d 130 (1974)), and substantively deficient because they fail to properly plead that the acts at issue were done without lawful justification. Baram v. Farugia, 606 F.2d 42, 43-44 (3d Cir. 1979). STATEMENT OF FACTS The relevant facts are set forth in Judge Koeltl's decision in the Base Metal Trading action. As discussed in defendants' motion to dismiss on the basis of direct estoppel and in the accompanying declaration of Lisa C. Cohen, dated March 18, 2005, plaintiffs' complaint is nearly identical to the relevant portion of plaintiffs' ple adings in the Base Metal Trading action. In short, the complaint alleges a conspiracy to take over Kachkanarsky GOK ("GOK"), Russia's largest vanadium ore mining factory, by either appropriating or diluting plaintiffs' GOK shares. (Compl. ¶¶ 1-14.) Plaintiffs' allegations with respect to GOK begin in 1999, when Messrs. Chernoi, Deripaska, Makhmudov, Nekrich and Kislin ­ defined as the "Conspirators" ­ purportedly met with plaintiffs' representative, Jalol Khaidarov, in Paris and in Moscow, in order to threaten GOK shareholders to cede control. (Compl. ¶¶ 5, 50, 54-57.) According to the complaint, in response to the purported threat, the controlling GOK shareholders ­ presumably the plaintiffs, although the complaint is not

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clear ­ agreed to sell 20% of their shares to the alleged Conspirators, who made a $5 million down payment. But, several months later, the GOK controlling shareholders cancelled the sale and returned the money, allegedly believing that it would be impossible to satisfy the demands of defendants Chernoi and Makmudov. (Compl. ¶¶ 52-53.) Plaintiffs next plead that the alleged Conspirators bribed the local Governor, Eduard Roussel, to aid in their scheme. (Compl. ¶¶ 58-62.) Plaintiffs claim that defendant Pan-American Corp. in 1999 (even though they also plead that Pan-American was defunct as of 1998 (Compl. ¶ 25)) wired payments through unnamed b anks in the United States to Russian-based Moscovsky Delovoy Mir Bank ("MDM Bank") for Governor Roussel, including a sum for use in his election campaign. (Compl. ¶¶ 58-62.) The purported Conspirators allegedly took over GOK's Russian plant by armed force on January 28, 2000. Allegedly by bribing and threatening four members of GOK's Board of Directors, the purported Conspirators replaced Khaidarov with Andrey Kozitsin, an agent of the alleged Conspirators, as GOK's general manager. All of this purported conduct took place in Russia, including the bribes of "expensive automobiles and apartments in Moscow." (Compl. ¶¶ 63-67.) Plaintiffs next contend that the alleged Conspirators arranged for GOK to incur massive false debts with Russian companies and placed it in a sham bankruptcy. (Compl. ¶¶ 75-87.) On about March 30, 2000, the Sverdlovsk Arbitrazh Court accepted the bankruptcy petition and appointed Oleg Kozyrev, another purported agent of the Conspirators, as GOK's provisional manager. (Compl. ¶ 83.) Kozyrev was nominated as GOK's external manager at the first creditors meeting, an

appointment that the Russian court approved after a hearing on August 22, 2000. The purported Conspirators next allegedly arranged for plaintiffs to be removed from the registry of GOK shareholders and for their shares to be transferred secretly to "Delaware shell companies New Start and Venitom and other companies controlled by the Conspirators." (Compl. ¶ 88.) Each plaintiff's losses allegedly occurred as follows:

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Davis :

All of Davis's GOK shares were allegedly transferred to New Start on October 18, 2000. Further, plaintiffs claim that, to "cloak" the transfer with the appearance of legitimacy, the purported Conspirators arranged for a prior agent of Davis, Mr. Ashenbrenner, to submit a power of attorney authorizing the transfer and to make false wire transfers. (Compl. ¶¶ 89-94.) Omni, which had acquired more than 34 million shares of GOK as a result of a judicial sale in 1998, lost 10,583,063 of those shares as a result of a court order by the Chelyabinsk Arbitrazh Court dated August 1, 2000 to set aside the judicial sale. Plaintiffs claim that these shares were ordered to be re-registered in the name of NPRO Urals, a Russian company allegedly controlled by the purported Conspirators. (Compl. ¶¶ 95-103.) Foston lost 37,715,081 of its GOK shares also as a result of a court order. That court order, from a Moscow court and dated September 29, 2000, was issued in a lawsuit that was, according to plaintiffs, commenced in 2000 by three companies that had earlier sold their GOK shares to Foston. The transfer of shares back to those companies was effectuated on October 18, 2000. (Compl. ¶¶ 104-08.) Holdex lost 2,307,984 of its GOK shares also as a result of a court order, this time from the Kalmykia Arbitrazh Court. In 2000, GOK had sued Polyprom, the company that sold its GOK shares to Holdex. On November 22, 2000, the Kalmykia Arbitrazh Court ruled in GOK's favor, ordering that the shares be registered to "another Russian company." Plaintiffs claim that neither Polyprom nor Holdex were notified of the proceedings..2 Plaintiffs allege upon information and belief that these shares were "ultimately" transferred to Venitom and other companies controlled by the purported Conspirators. (Compl. ¶¶ 109-14.)

Omni:

Foston:

Holdex:

In the only substantive paragraph discussing Ural-Gorno or Evraz, the plaintiffs claim that "[u]ltimately, the GOK shares illegally taken from Plaintiffs were `sold' to [Ural-Gorno] which then `sold' the shares to [Evraz] in 2004." (Compl. ¶ 131.) Finally, plaintiffs plead that the alleged Conspirators used "legal means" in order to "eliminate minority shareholders" (Compl. ¶ 134) by arranging for GOK to issue new shares that were purchased by the Conspirators allegedly with profits obtained from their control of GOK.3 According to plaintiffs, the purpose of the issuance was to dilute the remaining shares held by Foston, Omni, and Holdex. (Compl. ¶¶ 127-30.) Plaintiffs also allege that Omni and Holdex (seemingly in
2

Plaintiffs fail to tell this Court that Holdex has argued this lack of notice issue to numerous Russian courts, none of which have held that Holdex lacked adequate notice. Defendants ask this Court to take judicial notice of these precedents, which are referenced in the opening brief supporting their motion to dismiss on the basis of comity.
3

The complaint alleges "upon information and belief" that such funds were wired from unnamed American banks, either "directly or indirectly" to either GOK or MDM.

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2004, although the complaint is unclear) sold a block of about 52 million GOK shares for $27.7 million ­ which, through legal means, "end[ed] up in the hands of the Conspirators." ARGUMENT I. PLAINTIFFS HAVE NOT AND CANNOT ESTABLISH THE COURT'S JURISDICTION OVER THE SUBJECT MATTER OF THEIR RUSSIAN-BASED ALLEGATIONS Plaintiffs bear the affirmative burden of demonstrating the existence of subject matter jurisdiction. "Once jurisdiction is challenged, the party asserting subject matter jurisdiction has the burden of proving its existence." Dow Chemical Co. v. Exxon Corp., 30 F. Supp. 2d 673, 689 (D. Del. 1998). Here, plaintiffs cannot establish subject matter jurisdiction based upon RICO because all of the material conduct complained of, and all of the direct effects of the alleged conduct, occurred in Russia. Indeed, the Southern District of New York decided on the very same facts alleged here that all of the activities complained about "arise from the conduct of business in Russia." Base Metal Trading, 253 F. Supp. 2d at 696. The Supreme Court has made clear that, absent specific congressional authorization, statutory remedies should not be applied outside the United States. EEOC v. Arabian Am. Oil Co ., 499 U.S. 244, 248 (1991) ("Aramco") ("[L]egislation of Congress, unless a contrary intent appears, is meant to apply only within the territorial jurisdiction of the United States") (internal citation omitted). Indeed, while RICO is an expansive statute, "[c]ourts have concluded that this broad construction does not include international schemes largely unrelated to the United States." Sinaltrainal v. The Coca-Cola Co., 256 F. Supp. 2d 1345, 1359 (S.D. Fla. 2003) (dismissing for lack of subject matter jurisdiction). Not surprisingly, the prevailing law in this Circuit and others is that civil RICO can be applied extraterritorially only under the limited circumstances that satisfy either the "conduct" or the "effects" test of subject matter jurisdiction. Concern Sojuzvneshtrans v. Buyanovski, 80 F. Supp. 2d 273 (D.N.J. 1999) (following Second Circuit and Ninth Circuit case law on this issue). See North South Finance Corporation v. Al-Turki, 100 F.3d 1046 (2d Cir. 1996); Poulos v. Caesars World, Inc., 379 F.3d 654, 663 (2d Cir. 2004); Doe v. Unocal Corp., 395 F.3d. 932, 961 (9th Cir. 2002) ("for

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RICO to apply extraterritorially, the claim must meet either the `conduct' or the `effect' test that courts have developed to determine jurisdiction in securities fraud cases"). Under these tests, RICO can be applied extraterritorially where there is either conduct in the United States that "directly caused" the loss at issue or conduct outside the United States intended to have and in fact having an effect in the United States. North South Finance Corp., 100 F.3d at 1051-52. See also OSRecovery, Inc. v. One Group Int'l, Inc., 354 F. Supp. 2d 357, 367 (S.D.N.Y. Jan. 21, 2005) (dismissing RICO claims against foreign parties where conduct both occurred abroad and caused injury outside the United States); Sinaltrainal, 256 F. Supp. 2d at 1359-60 (same). Plaintiffs have failed to allege a sufficient United States nexus to the purported predicate acts. As various courts have recognized, RICO cannot be extended cavalierly to acts on foreign soil that might, if they had occurred here, be considered criminal, for that "would give RICO a nearly boundless extraterritorial scope and turn RICO into a vehicle for adventurous civil and criminal litigators with an itch to see the world." Peters v. Welsh Development Agency, 1991 WL 172950, at * 7 (N.D. Ill. Aug. 29, 1991) (holding that acts occurring abroad "are not racketeering activities within the meaning of the RICO statute and are unavailable as a basis upon which to state a RICO claim"); see also In re Bank of Credit & Commerce Int'l Depositors Litig., 1992 WL 696398, at *12 (C.D. Cal. April 30, 1992) (alleged bribery of Peruvian bankers could not be predicate act of racketeering because it was not indictable or punishable under United States law). As discussed below, plaintiffs meet neither the conduct nor the effect test. A. There Is No Subject Matter Jurisdiction For The RICO Claims Under The Conduct Test Under the "conduct" test, there can be no subject matter jurisdiction if a plaintiff does not fairly allege an injury directly caused by defendant's U.S.-based RICO violations. As one court within this Circuit held, Under the conduct test, the court possesses subject-matter jurisdiction `where conduct material to the completion of the fraud occurred in the United States." Psimenos v. E.F. Hutton & Co., Inc., 722 F.2d 1041, 1046 (2d Cir. 1983). "Mere preparatory activities

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and conduct far removed from the consummation of the fraud, will not suffice to establish jurisdiction. Only where conduct `within the United States directly caused' the loss will a district court have jurisdiction." Id. at 1046 (quotation omitted, emphasis added). Concern, 80 F. Supp. 2d at 278. See also In re South African Apartheid Litig., 346 F. Supp. 2d 538, 556 (S.D.N.Y. 2004) ("[c]onduct test is satisfied where conduct material to the activities occurred in the United States and directly caused the loss suffered by plaintiffs"). Plaintiffs have failed to allege any conduct by defendants in the United States that directly caused plaintiffs' purported loss. Plaintiffs pretend that Delaware was "the forum of choice" for defendants' predicate acts (Compl. ¶ 135), but not one of the alleged acts concerning defendants' takeover of GOK occurred within the United States. Rather, plaintiffs allege that: · · · · · · · · in mid-1999, threats were made in France and in Russia warning plaintiffs, through their agent, Jalol Khaidarov, to cede control of GOK (Compl. ¶¶ 5, 50, 54-57); in 2000, defendants, acting in Russia , bribed Eduard Roussel, the Governor of the Sverdlovsk Oblast, where GOK was located (Compl. ¶¶ 6, 58-62); on about January 28, 2000, defendants physically took over the GOK facility in Russia by sending in armed persons (Compl. ¶¶ 6, 63); following the takeover, defendants both threatened and bribed GOK's directors in Russia by, for example, purchasing "apartments in Moscow" (Compl. ¶¶ 6, 64-68); once defendants allegedly controlled GOK, they entered into sham contracts with Russian companies and created sham debts in Russia (Compl. ¶¶ 7, 75-87); when GOK was placed into bankruptcy in Russia in March 24, 2000, defendants purportedly asserted further control over GOK (Compl. ¶¶ 8, 79-87, 115-17); in late 2000, defendants allegedly arranged for plaintiffs' shares in GOK to be transferred through court proceedings in Russia (Compl. ¶¶ 9, 88-114); and in 2003, defendants purportedly arranged for GOK to issue new shares in Russia (Compl. ¶ 13).

The complaint's allegations concerning conduct in the United States are so tangential to the purported RICO scheme that they cannot conceivably serve as the basis for subject matter jurisdiction. Plaintiffs vaguely allege that, in the early 1990s, some defendants laundered funds from acts unrelated to those in issue, and those funds were used as "seed money" for other unspecified

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"illegal ventures." (Compl. ¶ 5.) Even if these allegations are true (and they are not), there is nothing to connect these acts to the alleged RICO violations involving the purported scheme to take over GOK, which plaintiffs allege began almost a decade later "[i]n mid-1999." (Compl. ¶ 5.) Likewise, plaintiffs assert that defendants "created" numerous Delaware entities for the purpose of furthering unspecified "criminal conduct" (Compl. ¶ 35), but nothing connects this activity to the alleged RICO scheme. Plaintiffs also allege that their shares were improperly transferred to Delaware entities (e.g., Compl. ¶ 9), yet the actual transfer occurred in Russia, and the shares purportedly ended up with shell corporations in the United States only after the compla ined-of conduct. Of the several wire transfers that plaintiffs contend came from unnamed United States banks on unspecified dates for the purpose of furthering the alleged scheme, all went to Russian banks for the benefit of entities in Russia in consideration for transactions or acts that occurred in Russia. Allegations regarding the use of wires or the creation of a corporation in the United States to further a scheme abroad cannot establish subject matter jurisdiction, as case after case has held. See, e.g., Butte Mining PLC v. Smith, 76 F.3d 287, 291 (9th Cir. 1996) ("[t]here is no reason to extend the jurisdictional scope of RICO to make criminal the use of the mail and wire in the United States as part of an alleged fraud outside the United States"). In Butte Mining, the court rejected United States contacts far more extensive than those alleged here. There, unlike here, defendants specifically purchased Montana mining property from Americans, formed U.S. corporations to hold those assets, and then issued securities abroad allegedly using those mining properties as the assets underlying the stock sales. That court held that this conduct did not confer subject matter jurisdiction, finding that the securitie s offers occurred solely abroad and that the U.S.-based conduct was merely preparatory to that scheme. See also Doe v. Unocal Corp., 110 F. Supp. 2d 1294, 1311 (C.D. Cal. 2000), aff'd in relevant part, 395 F.3d 932, 961-62 (9th Cir. 2002) ("transfer of significant monies" from the United States to further the international scheme, as well as communications from and meetings in the United States, were mere "preparatory activities insufficient to establish subject matter jurisdiction"); Philan Ins. Ltd. v. Frank B. Hall & Co., 748 F. Supp. 190, 194 (S.D.N.Y. 1990) ("creation of a corporation .

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. . in New York for the purpose of advancing the conspiracy" does not establish subject matter jurisdiction). Likewise, in Nuevo Mundo Holdings v. PriceWaterhouse Coopers LLP, 2004 WL 2848524, at * 5 (S.D.N.Y. Dec. 9, 2004), allegations that defendants conspired with foreign officials to seize control of a foreign corporation by placing it in receivership/administration to facilitate its liquidation were insufficient to establish jurisdiction under the conduct test because all material conduct occurred abroad. See also Roquette America, Inc. v. Alymum N.V., 2004 WL 1488384, at * 8 (S.D.N.Y. July 1, 2004) (dismissing RICO claim where relevant conduct occurred abroad); Nasser v. Andersen Worldwide Societe Cooperative, 2003 WL 22179008, at * 5 (S.D.N.Y. Sept. 23, 2003) (dismissing RICO claim where there were no particularized allegations of conduct in United States material to scheme). Plaintiffs fail to establish subject matter jurisdiction under the "conduct" test. B. There Is No Subject Matter Jurisdiction For The RICO Claims Under The Effects Test Plaintiffs' failure to satisfy the "conduct test" of RICO subject matter jurisdiction is matched by their inability to plead facts which, even if assumed to be true, demonstrate any substantial "effect" in the United Sates of defendants' allege activity in Russia. The alleged foreign activities have no substantial direct effects here and were not purported to be intended to have an effect here. Two of the plaintiffs (Foston and Omni) are foreign companies, with no possible claim that they suffered effects here. (Compl. ¶¶ 18 & 19.) And, as the Base Metal Trading case has already established, the two purported U.S.-based plaintiffs (Davis and Holdex) are "mere shell companies." Base Metal Trading, 253 F. Supp. 2d at 695-96. 4 At best, the alleged effects of defendants' purported

4

In Base Metal Trading, Judge Koeltl found that plaintiffs failed to "effectively counter" defendants' proof that Davis and Holdex were shell companies. 253 F. Supp. 2d at 696. Rather, plaintiffs' response to the Court's questions about their ties to the United States was "telling for how little information it provides about the American plaintiffs." Id., 253 F. Supp. 2d at 695. On appeal, plaintiffs conceded that these companies were shells whose principals all resided abroad, and they merely challenged the significance of that fact to the forum non conveniens dismissal. The Second Circuit rejected plaintiffs' argument.

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acts were only remotely or indirectly felt in the United States. "Remote and indirect effects, as well as generalized effects in the United States, are insufficient to meet this standard." In re South African Apartheid Litig., 346 F. Supp. 2d at 556 (finding that tortures, murders and crimes committed abroad had no direct or substantial effect in the United States). Indeed, the mere fact that two plaintiffs are nominally organized under American law is insufficient to allege an effect here. Courts have specifically rejected the extraterritorial application of United States law to acts occurring overseas where the only domestic connection is that some plaintiffs are American citizens. See, e.g., Kruman v. Christies Int'l PLC, 129 F. Supp. 2d 620, 62526 (S.D.N.Y. 2001), vacated on other grounds, 284 F.3d 384 (2d Cir. 2002) (dismissing antitrust claim under "effects" test even though some plaintiffs were American where the actual events that caused injury occurred abroad). Because subject matter jurisdiction for plaintiffs' Russian-based RICO claims cannot be established under either the "conduct" or the "effects" test, those claims must be dismissed. II. PLAINTIFFS' RICO CLAIMS ARE FATALLY DEFECTIVE To recover under RICO, each plaintiff must allege both that that the claim was asserted within four years from the time that the injury was or should have been discovered and that the alleged RICO violations proximately caused the loss for which relief is sought. Each plaintiff's RICO claims fail to meet one or both of these standards. The statute of limitations for a civil RICO action is four years. See Agency Holding Corp. v. Malley-Duff & Associates, Inc., 483 U.S. 143, 156 (1987). As the Third Circuit has held, the statute of limitations begins to run when a plaintiff discovers or should have discovered the injury. Math ews v. Kidder, Peabody & Co., 260 F.3d 239, 245 (3d Cir. 2001); see also Prudential Insurance Co. v. United Gypsum Co., 359 F.3d 226, 233 (3d Cir. 2004) (courts must determine when a plaintiff knows of his injury and the source of the injury), citing Forbes v. Eagleson, 228 F.3d 471, 484-85 (3d Cir. 2000). It does not matter if the injury is continuous in nature such that the plaintiff continues to suffer harm well into the statutory period if the injury itself occurred outside the limitations period. See

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Klehr v. A.O. Smith Corp., 521 U.S. 179, 191 (1997) (plaintiffs who purchased a faulty grain silo could not collect damages for harm occurring within the statutory period because those damages flowed from a discoverable injury outside the statutory period). Nor does it matter if plaintiffs have knowingly suffered an injury but monetary damages from that injury have not yet accrued. See Prudential, 359 F.3d at 236-37 (rejecting argument that RICO injury did not accrue when they became aware of the danger of asbestos in their buildings, but only when they removed it, suffering monetary loss and an "actual" injury); Mathews, 260 F.3d at 254 (plaintiffs with RICO securities fraud claim who should have been aware of their injury as the returns on their investment fell could not wait to see how the investment developed before bringing suit). Accordingly, RICO plaintiffs, who are charged with being "prosecutors, `private attorneys general', dedicated to eliminating racketeering activity," Rotella v. Wood, 528 U.S. 549, 557 (2000), must act at the first sign of injury. See Klehr, 521 U.S. at 194-95 (plaintiff must act with reasonable diligence to discover his injury when faced with circumstances that suggest a problem); Mathews, 260 F.3d at 251-52 (plaintiffs must act with due diligence to investigate when faced with the possibility of fraud or "storm warnings"). Furthermore, under the Third Circuit's loss causation analysis, "[a] causal connection simpliciter between the defendants' actions and the plaintiffs' injuries is insufficient to give rise to a RICO claim; the plaintiff must show that the connection is proximate, i.e. not too remote." Callahan v. A.E.V., Inc., 182 F.3d 237, 260 (3d Cir. 1999). Rather, a plaintiff must allege facts sufficient to demonstrate that the alleged RICO violations proximately caused the loss for which relief is sought. Holmes v. Securities Investor Protection Corp., 503 U.S. 258 (1992). See Anderson v. Ayling, 396 F.3d 265, 269 (3d Cir. 2005) (RICO "requires a pla intiff to show (1) that he was injured (2) by reason of a violation of § 1962") (affirming dismissal for failure to state a claim); Arthur v. Guerdon Industries, Inc., 827 F. Supp. 273, 280 (D. Del 1993) ("[t]o recover under 18 U.S.C. § 1962(c), the plaintiffs are required to present proof of an injury. Further, that injury must have been proximately

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caused by the RICO violation of the defendants. In other words, the injury and the violation must have some direct relationship"). A. The Statute of Limitations Bars Plaintiffs' Alleged Injury Based On The Alleged Illegal Scheme

Plaintiffs filed the complaint on November 4, 2004, seeking relief for defendants' purported conduct with respect to the alleged takeover of GOK. Accordingly, plaintiffs' claims are timely only if they did not know and should not have known of their injury until after November 4, 2000. In the complaint, plaintiffs allege that they were harmed by a large, unitary scheme to seize control of GOK through a common overarching pattern of racketeering activity. According to

plaintiffs, that takeover scheme and pattern of racketeering activity "began no later than the early 1990's and continues through the present date." (Compl. ¶¶ 1 & 136.) The complaint alleges: · in Count III that plaintiffs have been injured "[a]s a direct and proximate cause of Defendants' use and investment of racketeering income in the Illegal Takeover of GOK and loss of their shares;" in Count IV that plaintiffs have been injured "[a]s a direct and proximate result of the takeover of GOK; in Count V that "[t]he pattern of racketeering activity included the commission of two or more predicate acts of racketeering from 1993 through the current date , in violation of 18 U.S.C. § 1962(c);" and in Count VI that defendants conspired " acquire an interest in GOK and to to operate GOK through the Illegal Takeover and conversion of Plaintiffs' shares in GOK, . . . ;" "to violate 18 U.S.C. § 1962(b) by taking over GOK through a pattern of racketeering activity;" and "to violate 18 U.S.C. § 1962(c) by operating and managing GOK through a pattern of racketeering activity."

· ·

·

(Compl. ¶¶ 151, 156, 162, 165, 166, & 168 (emphasis added).)5 All of the acts related to the purported takeover of GOK occurred before November 4, 2000. The alleged extortion occurred in April and November of 1999 and February and March of 2000. (Compl. ¶¶ 50, 54-57 & 74.) The alleged bribery of Governor Roussel occurred in 1999. (Compl. ¶¶

5

That this case represents a single unified scheme or at least one part of a single unified scheme was recognized in the Base Metal Trading action, which found that, in joining the scheme to seize control of GOK with the scheme to seize an aluminum business, plaintiffs alleged "one coherent scheme." Base Metal Trading, 253 F. Supp. 2d at 684.

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58-62.) The purported armed takeover of GOK occurred "on or about January 28, 2000," followed, in quick succession, by the alleged threats and bribery of the resisting directors of GOK. (Compl. ¶¶ 63-68.) The "sham transactions" were purportedly entered into by Kozitsin, GOK's new general director, between the end of January and mid-February of 2000. (Compl. ¶¶ 75-87.) And GOK was placed into the supposedly fraudulent bankruptcy on March 24, 2000. (Compl. ¶¶ 79-87, 115-17.) Nor is there any doubt that plaintiffs knew before November 4, 2000 of their alleged injury resulting from the purported takeover of GOK in early 2000. Plaintiffs admit that they knew of defendants' purported extortion to gain control of GOK in 1999: plaintiffs, as controlling

shareholders, contend that they had preliminarily agreed to sell 20% of their shares to the defendants but then changed their mind, deciding "it was impossible to cooperate or satisfy Chernoi and Makmudov, short of simply giving up their interests for far less than their worth." (Compl. ¶ 53.) Plaintiffs also knew in 1999 that Makmudov had allegedly demanded that they transfer 51% of GOK's shares to Chernoi without payment. (Compl. ¶¶ 54-57.) Plaintiffs also knew of the alleged bribery of Governor Roussel: as they claim, the "illegal payment" was "widely reported in the Russian press." (Compl. ¶ 61.) And, as plaintiffs admit, the purported armed takeover of GOK in January of 2000 "was widely covered by leading Russian TV and media." (Compl. ¶ 63.) Because plaintiffs' purported injuries from the purported "Illegal Takeover of GOK" were known to plaintiffs more than four years ago, their claims are time-barred. B. Considered Individually, Each Plaintiff's RICO Claims Are Barred By The Statute Of Limitations And By Lack Of Direct Causation

Even if this Court does not, for statute of limitations purposes, consider the plaintiffs as one and the same under their own allegations of a unitary scheme and instead considers the first actual monetary loss for each plaintiff separately ­ that is, the transfer of shares from each ­ the plaintiffs' claims are still fatally flawed, both because they are individually time-barred and because plaintiffs have failed to show that their losses were proximately caused by any defendant's RICO violations.

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1.

Davis And Foston's Claims are Time -Barred

Plaintiffs admit that Davis lost all of its GOK shares "[o]n or about October 18, 2000," when VRK Company, the registration company for GOK shares, registered a transfer of Davis's shares. (Compl. ¶ 90.) Plaintiffs likewise concede that Foston learned of the transfer of 37,715,081 of its GOK shares "in October 2000." (Compl. ¶¶ 106-07.) Davis's and Foston's claims are thus clearly time-barred. 2. Omni And Holdex's Claims Are Time -Barred

Plaintiffs allege that they were unaware of the August 1, 2000 order from a Moscow court divesting Omni of 10,583,063 of its GOK shares until December 2000 (Compl. ¶¶ 96, 98, 99) and of the November 22, 2000 order from the Kalmykia Arbitrazh Court divesting Holdex of 2,307,984 of its GOK shares until sometime in January 2001 (Compl. ¶¶ 98, 110, 112). 6 Certainly, Omni should have been aware of its losses. As a major stockholder, together with the other shareholders, owning 72% of the GOK stock, Omni certainly was aware of the alleged attempt to extort Khaidarov to persuade the shareholders to sell their shares since indeed they agreed in 1999 to sell 20% of their stock to the Conspirators. It certainly was aware of the subsequent demand of Chernoi and Makmudov since this caused the shareholders to rescind their transfer. It certainly was aware of the alleged armed takeover of GOK on January 28, 2000 since, according to the complaint, the seizure was widely reported in the media. It certainly was aware of the removal of Khaidarov since, according to the complaint, on March 4, 2000 the GOK shareholders met to overturn that removal. In addition, Omni (and Holdex's) agent, Joseph Traum, was certainly aware or should have been aware of the purported injury before the November 4, 2000 cutoff date for statute of limitation purposes. According to the complaint, Traum, who plaintiffs state was Davis's managing director
6

As established in defendants' motion to dismiss based on comity, both Omni and Holdex have repeatedly litigated their claim of lack of notice in a number of Russian courts in challenging the transfer. Although some of the courts have permitted hearings on this issue, every court has rejected Omni's claim that it had not received notice.

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and was "authorized to represent" Holdex and Omni, was extorted in January 2000. (Compl. ¶¶ 121126.) As the managing director of Davis, Traum was obviously personally aware that Davis lost all of its shares in October 2000. Accordingly, since their authorized representative knew, as a matter of law Omni and Holdex also knew of defendants' alleged designs on plaintiffs' stock to solidify their control over GOK. See, e.g., Apollo Fuel Oil v. United States, 195 F.3d 74, 76 (3d Cir. 1999); National Railroad Passenger Corp. v. Notter, 677 F. Supp. 1, 6-7 (D.D.C. 1987) (notice to agent is notice to principal for limitations purposes). 3. Omni's And Holdex's Losses Were Not Proximately Caused By RICO Acts Even if the claims of Omni and Holdex were not time-barred, they are barred (as are those of Davis and Foston) because plaintiffs' losses are not proximately linked to the alleged RICO acts. Indeed, plaintiffs specifically allege that the shares of Omni, Holdex, and Foston were transferred as a result of court decisions. (See, e.g., Compl. ¶¶ 96-97.) According to plaintiffs, in August of 2000 the Chelyabinsk Arbitrazh Court declared invalid the judicial sale where Omni had acquired its GOK shares. The appellate division "likewise ordered" the re-registrations of the shares on October 16, 2000, and the Federal Court for the Ural District affirmed that order on January 4, 2001. "As a result," the plaintiffs continue, "Omni was divested of 10,583,063 shares . . . ." (Compl. ¶¶ 95-97.) For Foston, a "Moscow" court "ordered the transfer of 37,715,081 of Foston's GOK shares." (Compl. ¶¶ 105-06.) And Holdex's shares were transferred as a result of an order from the Kalmykia Arbitrazh Court dated November 22, 2000, against Polyprom, the company that sold its GOK shares to Holdex. "As the result, Holdex was divested of 2,307,984 shares . . . ." (Compl. ¶ 110.) None of the RICO predicate acts alleged by plaintiffs proximately caused those purported harms. There is no specific allegation that all, or any, of these five court decisions were caused by RICO acts. Even the most charitable reading of the complaint fails to identify a RICO predicate act associated with these purportedly improper proceedings.

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Moreover, even assuming arguendo that there was bribery of a Russian governmental or judicial official that may have been improper under Russian law (and plaintiffs make no such allegation), the fact that something is improper or wrongful does not make it a RICO predicate act satisfying proximate causation requirements. Casper v. Paine Webber Group, Inc., 787 F. Supp. 1480, 1498 (D.N.J. 1992) (dismissing RICO claim where wrongful act causing injury was not a RICO predicate); see also Diamond v. Reynolds, 1986 WL 15374, at * 3 (D. Del. Jan. 13, 1986). The crime of bribery under 18 U.S.C. § 201 only prohibits payments to a "public official" that is defined in § 201(a)(1) as including a wide variety of employees of the United States government, not employees of foreign governments. See In re Bank of Credit & Commerce Int'l Depositors Litig ., 1992 WL 696398 at n. 32 ("bribery under 18 U.S.C. § 201 only applies to public officials and cannot extend to payments to Peruvian bankers to obtain deposits or London based BCCI employees"). And 11 Del. C. § 1201 requires that the bribe recipient be an