931 F. Supp. 2d 478
S.D.N.Y.2013Background
- Russian citizens Starshinova, Vasilyanskaya, and Tzentziper sue on behalf of themselves and 480,551 others regarding alleged Thor program fraud.
- Plaintiffs allege eleven federal and state-law claims arising from investments in Thor Optima, Thor Opti-Max, and Thor Guarant programs.
- Defendants, led by Oleg Batratchenko and various Thor entities, move to dismiss under Rule 12(b)(1), (2), and (6).
- Court limits review to the Amended Complaint, declining to consider Investment Memoranda or translations outside the pleading.
- Investors allegedly relied on misrepresentations of safety, high returns, and liquidity; 2008 crisis and SEC actions intensified concerns; 2009-2010 redemption issues.
- Court ultimately dismisses federal claims, and, with federal claims barred, declines to exercise supplemental jurisdiction over state-law claims.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Are the SEA claims extraterritorial under Morrison? | Plaintiffs contend SEA claims apply where irrevocable liability occurred in the US. | Defendants argue Morrison confines SEA extraterritorial reach to domestic transactions. | SEA claims dismissed for lack of domestic transactions/irrevocable liability in US. |
| Does the CEA § 4o apply extraterritorially under Morrison? | CEAs should reach extraterritorial fraud affecting US investors. | Morrison shows no extraterritorial intent; § 4o not to be applied abroad. | Presumption against extraterritoriality applies; § 4o not extraterritorial. |
| If CEA applies, do plaintiffs have standing under § 22? | Plaintiffs allege receivership-like status via funds’ activities benefiting investors. | Standing requires specific trading/contract relationships; plaintiffs lack them. | Plaintiffs lack standing under § 22; CEA claim fails. |
| Should the court exercise supplemental jurisdiction over state-law claims? | State claims arise from same nucleus of facts as federal claims. | No federal claims remain; supplemental jurisdiction not available. | No supplemental jurisdiction; state claims dismissed. |
Key Cases Cited
- Morrison v. Nat’l Australia Bank, Ltd., 561 U.S. 247 (2010) (presumption against extraterritoriality governs federal statutes)
- Absolute Activist Value Master Fund Ltd. v. Ficeto, 677 F.3d 60 (2d Cir.2012) (requires concrete facts on where irrevocable liability occurred)
- In re Optimal U.S. Litig., 813 F.Supp.2d 351 (S.D.N.Y.2011) (illustrates conduct/effect considerations for extraterritorial claims)
- In re Optimal U.S. Litig., 865 F.Supp.2d 451 (S.D.N.Y.2012) (reaffirmed territorial analysis for extraterritorial claims)
- Ashcroft v. Iqbal, 556 U.S. 662 (2009) (plausibility standard for pleading factual content)
- Friedl v. City of New York, 210 F.3d 79 (2d Cir.2000) (outside materials not properly considered on 12(b)(6) absent proper basis)
- Faulkner v. Beer, 463 F.3d 130 (2d Cir.2006) (addressing admissibility/consideration of materials in judicial review)