Plaintiffs Vladlena Funk and Emanuel Zeltser sued a Belarusian oil and holding company, Belneftekhim, its U.S. subsidiary, Belneftekhim U.S.A., and 50 unnamed individuals for damages relating to Plaintiffs' abduction and torture, which occurred in March of 2008.
After Plaintiffs filed their complaint in New York state court in 2012, Defendants removed the case to federal court in January of 2014 and moved to dismiss for lack of subject matter jurisdiction. Defendants argued they were entitled to foreign sovereign immunity because Belneftekhim was a state-owned Belarussian entity. Reserving judgment on that question, the district court ordered limited discovery and supplemental submissions to address whether Belneftekhim was an agency or instrumentality of a foreign state.
A day before the due date in the district court's order requiring Defendants to produce relevant documents, Defendants filed a notice of appeal of the district court's discovery order—the first of three such appeals of various discovery or sanctions orders for discovery noncompliance. One of those sanctions struck Defendants' sovereign immunity defense outright. The Second Circuit reversed that decision, remanding the case to the district court to address Defendants' pending motion to dismiss on the record before it.
After remand, Plaintiffs filed a motion for sanctions requesting an order (1) establishing an evidentiary presumption that the documents and witnesses that Defendants refused to provide would have refuted Defendants' claims of sovereign immunity, and (2) preventing Defendants from submitting any additional evidence on the sovereign-immunity issue.
The district court agreed with Plaintiffs and, before addressing the merits of Defendants' motion to dismiss, ruled that Plaintiffs were entitled to a presumption that Defendants' sovereign immunity defense would be refuted by the documents it has withheld. After making its sanctions order, the court denied Defendants' pending motion to dismiss for lack of subject matter jurisdiction. The presumption in favor of Plaintiffs effectively operated to defeat Defendants' argument that it could benefit from immunity.
Next, the district court addressed Defendants' claims that the complaint should be dismissed for lack of diversity jurisdiction. The court found this argument frivolous, as Defendants themselves had argued that diversity jurisdiction existed in the removal papers they filed upon originally removing the case to federal court from state court. Defendants also argued that Plaintiffs had failed to establish the court could exercise personal jurisdiction over them. That argument was rejected because there was specific jurisdiction over Plaintiffs' conversion, tortious interference, and various tort-based claims in that they either arose from business transactions in the state or arose from the commission of tortious acts within New York, as required by New York's long-arm statute. Furthermore, the court ruled, asserting personal jurisdiction over Defendants for these claims did not offend Defendants' due process rights under the constitution or under a minimum contacts analysis under controlling Supreme Court and Second Circuit authority. The motion to dismiss was denied. Michael Lehrman of the Chicago office contributed to this summary.