Date Submitted: January 10, 2014
Steven L. Caponi, Esquire and Elizabeth A. Sloan, Esquire of Blank Rome LLP, Wilmington, Delaware, Attorneys for Plaintiff.
Vincent J. Poppiti, Esquire, Carl D. Neff, Esquire, and Austen C. Endersby, Esquire of Fox Rothschild LLP, Wilmington, Delaware, and Ely Goldin, Esquire of Fox Rothschild LLP, Blue Bell, Pennsylvania, Attorneys for Defendants.
MEMORANDUM OPINION AND ORDER
John W. Noble Vice Chancellor
Plaintiff VTB Bank ("VTB") filed this action against Defendants Navitron Projects Corp. ("Navitron") and Development Max, LLC ("Development Max, " and together with Navitron, the "Defendants") alleging, among other claims, that the equitable appointment of a receiver for Development Max is warranted due to its "fraud, gross mismanagement and/or positive misconduct." In the Complaint, VTB denominates five causes of action: (i) appointment of a receiver; (ii) intentional fraudulent transfers; (iii) constructive fraudulent transfers; (iv) unjust enrichment; and (v) constructive trust. The Defendants moved to dismiss the Complaint under Court of Chancery Rule 12(b) for lack of personal jurisdiction and insufficiency of service of process as to Navitron, for failure to state a claim, for failure to plead fraud with particularity, and on forum non conveniens grounds.
The Court concludes that it lacks personal jurisdiction over Navitron. The Court also concludes that Development Max cannot be said to face overwhelming hardship if required to defend against VTB's cognizable claims in this forum. Finally, the Court defers ruling on the other aspects of the motion to dismiss.
A. The Parties
VTB is a Ukrainian bank and company located in Ukraine. Navitron is a Panamanian corporation and was, during the period at issue in this action, the managing member of Development Max, a Delaware limited liability company.Although Development Max was formed in 1999, Navitron did not become its managing member until 2008. Before then, the managing members of Development Max were Dmitriy Sviatash ("Sviatash") and Vasiliy Poliakov.
B. VTB's Loans to the AIS Group
As of February 2006, the Defendants were co-owners of AutoInvestStroy LLC, which VTB describes as the "umbrella entity" for a corporate family it calls the "AIS Group." The Defendants also "owned and controlled the majority of companies which were part of the AIS Group." The AIS Group sold and serviced cars through a network of regional centers, many of which were owned by Development Max, throughout Ukraine.
In 2008, VTB entered into separate, 364-day credit line agreements (the "Loans") with two entities of the AIS Group (the "AIS Borrowers"). The Loans would allow the AIS Group to purchase cars and sell them to Ukrainian consumers at its regional sale centers. As a condition of the Loans, VTB required the AIS Group to execute suretyship agreements and pledge both real and personal property as collateral (the "Collateral"). By January 2009, the AIS Borrowers had borrowed approximately $63 million under the Loans.
C. The Loans are Not Repaid, and the Collateral is Transferred to the Defendants
VTB alleges that the AIS Group transferred the cars it purchased with the proceeds of the Loans "through its network of shell companies using a series of fraudulent transfers." After the cars were sold to consumers in Ukraine, most of the sale proceeds "remained with Development Max and/or were funneled through shell companies back to Development Max and Navitron."
In February and March 2009, Sviatash met with representatives of VTB to discuss "restructuring of the debt" and "prepar[ing] a repayment plan for the loans." The meetings do not appear to have resulted in any firm plans.
Apparently, "VTB did not hear from Sviatash or the AIS Group" again.
Soon thereafter, the AIS Borrowers failed to make payments when the Loans were due in 2009. VTB then initiated litigation in Ukraine to foreclose on the Collateral, but it claims that the AIS Group "intentionally delayed the court proceedings" by "failing to appear on many occasions." In the meantime, the Defendants purportedly "relied upon forged and fictitious documents to facilitate the transfer of the Collateral" to separate entities that VTB believes to be under the Defendants' ownership or control. VTB insists the transfers of the Collateral subject to its suretyship liens must have used forged documents because, under Ukrainian law, "property subject to a lien may only be transferred if a notary certifies there are no liens on the assets or the lien holder consents to the transfer, " and VTB did not give its consent.
VTB contends that the fraudulently transferred Collateral "resided" with the Defendants, who were also unjustly enriched by retaining the proceeds of the Loans. As a result of the transfers, VTB is allegedly unable to foreclose on the Collateral and has consequently suffered damages of approximately $60 million.VTB also asserts, upon information and belief, that the Defendants have renamed certain AIS Group entities in order "to repeat their fraudulent conduct of transferring funds and assets to the detriment of creditors."
Of note, it is not alleged that the formation of Development Max in 1999 was in contemplation or in furtherance of the fraudulent scheme, which is not alleged to have begun until at least 2008. In other words, although VTB insists that Development Max engaged in fraudulent transfers, the Complaint does not allege that the formation of Development Max as a Delaware limited liability company was for fraudulent purposes.
A. Personal Jurisdiction over Navitron
Navitron moved to dismiss VTB's claims for, among other reasons, lack of personal jurisdiction under Court of Chancery Rule 12(b)(2). The Court should determine whether it has personal jurisdiction over Navitron before addressing the other grounds for dismissal.
As the plaintiff, VTB bears the burden of showing by affirmative proof— that is, by more than conclusory assertions—that the Court may exercise personal jurisdiction over Navitron, a nonresident defendant. If this jurisdictional question is raised without the benefit of an evidentiary hearing, as it was here, then VTB must "point to sufficient evidence in the record to support a prima facie case that jurisdictional facts exist." Specifically, VTB must establish two elements for the Court to exercise jurisdiction over Navitron: "(1) a statutory basis for service of process; and (2) the requisite 'minimum contacts' with the forum to satisfy ...