The US Court of Appeals for the Sixth Circuit recently reversed a district court’s decision to dismiss a complaint based on claim preclusion. In its complaint, Venture Global Engineering (VGE) alleged that Satyam Computer Services, Ltd. (Satyam) fraudulently induced VGE to enter into a joint venture by misrepresenting its finances. Satyam moved to dismiss on the grounds that VGE was precluded from bringing its claims because it failed to do so previously at an arbitration between the parties. The Sixth Circuit disagreed, finding that VGE based its claims on information Satyam had concealed and that, if a party wrongfully conceals facts that made it impossible for an opposing party to assert its claims in a prior proceeding, claim preclusion would not bar the opposing party from asserting those claims in a subsequent proceeding. Based on the evidence before it, the Sixth Circuit concluded that Satyam had concealed its true financial state by manipulating and falsifying its financial statements and, by doing so, made it impossible for VGE to bring its Racketeer Influenced and Corrupt Organizations Act, fraud in the inducement, common law fraud and fraudulent concealment claims. The court was not persuaded by Satyam’s argument that actions that constitute the fraud itself could not be a basis for concealment of the fraud and determined that, in any event, VGE had pled actions by Satyam distinct from the fraud, in furtherance of the concealment of the fraud.
Venture Global Eng’g, LLC v. Satyam Computer Servs., Ltd., No. 12-2200 (6th Cir. Sept. 13, 2013).