Devincci Salah HOURANI, et al., Plaintiffs, v. Alexander V. MIRTCHEV, et al., Defendants.
Civ. No. 10-1618 (TFH).
United States District Court, District of Columbia.
May 8, 2013.
Lashon K. Kell, Richard W. Beckler, Bracewell & Giuliani LLP, Stephen Sale, Sale & Quinn, P.C., Washington, DC, for Defendants.
MEMORANDUM OPINION
THOMAS F. HOGAN, District Judge.
This case involves alleged violations of the Racketeer Influenced and Corrupt Organizations Act (“RICO“),
I. Background
Plaintiffs Devincci and Issam Hourani1 (collectively, “the Houranis“) are brothers and businessmen. Defendant Alexander Mirtchev heads Defendant Krull Corporation, a “global strategic solutions provider” with its principal place of business in the District of Columbia. Am. Compl. ¶ 3 [Docket No. 68]. According to the Amended Complaint,2 which is the operative complaint for the purposes of assessing Defendants’ Motion to Dismiss, the Houranis were, until 2007, very successful businessmen who operated “oil, broadcasting, and publishing companies” in the Republic of Kazakhstan. Id. ¶ 11. The specific companies at issue in Defendants’ pending motions are KTK Television and Alma Media, two media companies in which the Houranis held shares. See id. ¶ 17. Plaintiffs allege that Dariga Nazarbayev,3 the daughter of the Kazakh President, Nursultan Nazarbayev, “sought to amass ownership of the nation‘s major media outlets” as she contemplated a political career. Id. ¶ 12. Her goal was to “have the media portray her in the most favorable light” and to secure “the vast wealth and ownership [of] such large businesses.” Id. ¶ 12. She therefore sought Defendants’ assistance in actualizing her plan. Id. ¶ 13. Defendant Mirtchev allegedly agreed, from the District, to:
- “assist [Dariga] with monetizing her control of the company,”
- “deposit some of the proceeds of the seized businesses in western bank accounts where it would not be taxed or otherwise scrutinized,”
- “help Dariga use the money to acquire U.S. and European currencies [which] would raise Kazakhstan‘s standing in the eyes of the western political establishment,” and
- “use his influence to falsely brand the Houranis as international criminals and terrorists [to] neutralize the Houranis’ ability to attack her or her father in response to the extortion of their businesses.”
Id. ¶ 16. This conspiracy, according to Plaintiffs, is consistent with Defendant Mirtchev‘s “Superkhan” memorandum4 to
Plaintiffs allege that their businesses were subsequently harassed by various government entities. Id. ¶ 17. Armed police raided their offices on June 27, 2007. See id. ¶ 18-19. Plaintiff Devincci Hourani was also under surveillance by the KNB (the Kazakh equivalent of the KGB), who were allegedly “acting at the behest of Dariga and Mirtchev.” Id. ¶ 20. Under this pressure, in July 2007, Devincci met with Dariga to try to address the situation. Id. ¶ 21. She offered to use her ties to the government to “protect” the Houranis if he would sign over his family‘s shares in two mass media companies, KTK Television and Alma Media. Id. The following day, Devincci, under duress, signed over to the First Presidential Fund the family‘s shares in these two companies. Id. Dariga subsequently “siphoned the companies’ assets.” Id. ¶ 25. In the face of continued harassment, the Houranis left Kazakhstan in 2008. Id. ¶ 28. Since then, Dariga has allegedly compensated Defendant Mirtchev for his role in the extortion of Plaintiffs’ assets by wiring money (partially from revenues from Plaintiffs’ businesses) to the bank accounts of Defendant Krull Corporation, as well as to other bank accounts. Id. ¶¶ 29-31. Defendant Mirtchev has allegedly concealed the money from the extortion to avoid incurring tax liability. Id. ¶ 40.
Additionally, on December 18, 2008, Defendants Mirtchev and Krull Corporation allegedly “published” or “caused” the Kazakh Embassy to publish defamatory statements about Plaintiffs on the embassy website, mostly related to Plaintiffs’ alleged terrorist ties.5 Id. ¶ 58. Defendants’ involvement in the publication of these statements was “concealed” by the Kazakh government and was only discovered by Plaintiffs in April 2010. Id. ¶ 62.
Plaintiffs’ initial complaint in this action was filed on September 23, 2010. On April 12, 2012, this Court granted Plaintiffs’ motion for leave to file an amended complaint. See Hourani v. Mirtchev, 282 F.R.D. 278 (D.D.C. 2012) [Docket No. 67]. Plaintiffs’ Amended Complaint alleges that Defen-
II. Defendants’ Motion to Dismiss
A. Motion to Dismiss Standard
A complaint must contain “enough facts to state a claim that is plausible on its face,” not merely one that is “conceivable.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007); see also Am. Fed‘n of Gov‘t Emps., Local 2741 v. District of Columbia, 689 F. Supp. 2d 30, 32-33 (D.D.C. 2009). That is, the plaintiffs must “plead[] factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). The Court must “accept as true all of the factual allegations contained in the complaint,” Atherton v. District of Columbia, 567 F.3d 672, 681 (D.C. Cir. 2009), and allow the plaintiff “the benefit of all inferences that can be derived from the facts alleged,” Kowal v. MCI Commc‘ns Corp., 16 F.3d 1271, 1276 (D.C. Cir. 1994). However, the Court may not “accept inferences drawn by plaintiffs if such inferences are unsupported by the facts set out in the complaint.” Id. A plaintiff must show “more than a sheer possibility that a defendant has acted unlawfully,” Iqbal, 556 U.S. at 678, and therefore must provide “more than labels and conclusions,” Twombly, 550 U.S. at 555. “Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, will not suffice. Iqbal, 556 U.S. at 678.
B. Analysis of RICO Claims
The Amended Complaint alleges two violations of RICO under
c) It shall be unlawful for any person employed by or associated with any enterprise engaged in, or the activities of which affect, interstate or foreign commerce, to conduct or participate, directly or indirectly, in the conduct of such enterprise‘s affairs through a pattern of racketeering activity or collection of unlawful debt.
(d) It shall be unlawful for any person to conspire to violate any of the provisions of subsection (a), (b), or (c) of this section.
Count I alleges that Defendant Mirtchev6 violated § 1962(c) by conducting the “enterprise,” i.e., Krull Corporation, through a “pattern of racketeering activity.” Am. Compl. ¶ 44. This “pattern” refers to Defendant Mirtchev‘s conspiracy to extort Plaintiffs’ businesses and his laundering of some of the proceeds of the extortion through various bank accounts. Id. ¶¶ 33-
Plaintiffs frame their allegations as a unified conspiracy in which Defendant Mirtchev, while in the United States, “approved” of Dariga‘s extortion of Plaintiffs’ media businesses, KTK Television and Alma Media, both of which were located in Kazakhstan. Id. at ECF 13. Dariga then “foster[ed] a campaign” in which Plaintiffs and their businesses suffered harassment and intimidation” at the hands of the Kazakh police. Am. Compl. ¶ 3. While in Kazakhstan, Dariga forced Plaintiffs to sign over their business shares. Id. ¶¶ 21-23. Dariga then paid Defendant Mirtchev for his assistance by wiring into Krull Corporation bank accounts payments that were, in part, derived from revenues of Plaintiffs’ seized businesses. Id. ¶¶ 30-31. Accepting these allegations as true, the Court acknowledges Defendant Mirtchev‘s alleged involvement in a conspiracy that was, undoubtedly, multinational. This Court must therefore consider whether this conspiracy has sufficient contacts with the United States to fall under RICO‘s domestic ambit. The Court finds that it does not.
This Court‘s precedent has made clear—and the parties agree—that RICO does not apply extraterritorially. United States v. Philip Morris USA, Inc., 783 F. Supp. 2d 23, 28 (D.D.C. 2011) (“[T]here is no evidence that Congress intended to criminalize foreign racketeering activities under RICO.“). Other courts have uniformly concluded the same, applying the Supreme Court‘s guidance in Morrison v. National Australia Bank Ltd., that “[w]hen a statute gives no clear indication of an extraterritorial application, it has
This Court‘s precedent does not fall cleanly into either camp. Our decision in Philip Morris used language consistent with both, quoting from Cedeño that “the focus of RICO is on the enterprise,” 783 F. Supp. 2d at 28-29 (internal quotation marks omitted), while also referring to the lack of congressional intent to “criminalize foreign racketeering activities under RICO,” id. at 29. Nevertheless, in accordance with the majority of other post-Morrison cases deciding this issue, this Court finds that “RICO‘s statutory language and legislative history support the notion that RICO‘s focus is on the pattern of racketeering activity.” Chao Fan Xu, 706 F.3d at 977.
This Court therefore declines Plaintiffs’ invitation to assess the extraterritoriality of Plaintiffs’ RICO claim by examining the “location of the enterprise.”9
Similarly, the Second Circuit dismissed a RICO claim with “slim” domestic contacts in Norex, 631 F.3d at 33, in which Plaintiffs alleged a “racketeering and money laundering scheme with the goal of seizing control over most of the Russian oil industry through the use of Russian oil companies.” Id. at 30. The Norex Plaintiffs alleged (1) “that Defendants used money transferred through United States wires to bribe Russian officials and commit various violations of U.S. laws and statutes,” (2) “that Defendants traveled between the U.S. and Russia in aid of various aspects of the alleged Illegal Scheme,” and (3) “that an extortion attempt was made by [a] Defendant ... while ... in San Francisco.” Norex Petroleum Ltd. v. Access Indus., Inc., 540 F. Supp. 2d 438, 443 (S.D.N.Y. 2007), aff‘d, 631 F.3d 29 (2d Cir. 2010). Such conduct was found insufficient for RICO liability. Norex, 631 F.3d at 33.
In Cedeño, the Second Circuit affirmed the dismissal of the plaintiff‘s RICO claim, finding that the alleged enterprise was “almost exclusively Venezuelan”10 and that the plaintiff “fail[ed] to allege that the domestic predicate acts proximately caused his injuries.” Cedeño v. Castillo, 457 F. App‘x 35, 38 (2d Cir. 2012). There, the plaintiff alleged that the defendants, many of whom were associated with the Venezuelan government, schemed to imprison him, damaged his businesses, and laundered money from the extortion through U.S. bank accounts (only the last of these acts had a domestic connection). Cedeño, 733 F. Supp. 2d at 471, 472. Finally, in Chao Fan Xu, the Ninth Circuit affirmed the defendants’ convictions under § 1962(d) when the “pattern of racketeering activity ... was executed and perpetuated in the United States” even though it was “conceived of and planned overseas.” 706 F.3d at 979.
Furthermore, as in Cedeño, Plaintiffs fail to allege that the domestic predicate act of post-extortion money laundering proximately caused their injuries. See Cedeño, 457 F. App‘x at 38; see also Hemi Group, LLC v. City of New York, 559 U.S. 1, 130 S.Ct. 983, 991 (2010) (“[T]he compensable injury flowing from a [RICO] violation ... necessarily is the harm caused by [the] predicate acts.“) (emphasis removed) (internal quotation marks omitted). Indeed, Plaintiffs’ injuries—e.g., the loss of their assets in Kazakhstan, harassment by Kazakh government officials, government police raids, and expulsion from Kazakhstan—were the “direct and proximate” result of the extortion, not the post-extortion money laundering. Oki Semiconductor Co. v. Wells Fargo Bank, 298 F.3d 768 (9th Cir. 2002) (affirming dismissal of RICO claims after finding, in part, that theft, not money laundering of theft proceeds, was proximate cause of plaintiff‘s injury). Thus, Plaintiffs’ money laundering claim cannot constitute a predicate act under RICO.
In sum, the predicate acts that proximately caused Plaintiffs’ injury—namely, the extortion in Kazakhstan by a Kazakh actor of Plaintiffs’ Kazakhstan-based assets—were squarely extraterritorial and therefore outside of RICO‘s reach. Defendant Mirtchev‘s mere agreement from the United States cannot paint over this foreign scheme with a domestic brush. This Court therefore dismisses the Plaintiffs’ RICO claims.
C. Analysis of Conspiracy to Defame Claim
Plaintiffs also assert that Defendant Mirtchev acted “through Krull” and that Defendants “published or caused” the Kazakh Embassy to publish defamatory articles on the embassy‘s website. See Am. Compl. ¶¶ 58-59. These articles included news stories, editorials, internal government memoranda, and other internet publications. Id. ¶ 59. Because Plaintiffs fail to plead sufficient facts to support their conspiracy to defame claim, this claim must be dismissed.
Under District of Columbia law, a plaintiff claiming defamation must show: “(1) that the defendant made a false and defamatory statement concerning the plaintiff; (2) that the defendant published the statement without privilege to a third party; (3) that the defendant‘s fault in publishing the statement amounted to at least negligence; and (4) either that the statement was actionable as a matter of law irrespective of special harm or that its publication caused the plaintiff special harm.” Jankovic v. Int‘l Crisis Group, 494 F.3d 1080, 1088 (D.C. Cir. 2007).
Defendants argue that Plaintiffs’ claim must be dismissed because the claim does not identify the “the time, place, content, speaker, and listener of the allegedly defamatory matter.” Defs.’ Reply at ECF 19 [Docket No. 75]. However, contrary to Defendants’ argument, District of Columbia law does not apply a heightened pleading standard requiring such detail. See Oparaugo v. Watts, 884 A.2d 63, 76 (D.C. 2005) (refusing to adopt a heightened standard that would require the plaintiff to “plead the time, place, content, speaker and listener of the allegedly defamatory matter“); see also Intelsat USA Sales Corp. v. Juch-Tech, Inc., 935 F. Supp. 2d 101, 2013 WL 1224893, 2013 U.S. Dist. LEXIS 43258 (D.D.C. Mar. 27, 2013) (concluding that because the defendants’ counterclaim “alleged the speaker, recipient, subject matter, and defamatory nature of
District of Columbia law does require, however, that Plaintiffs’ factual allegations of defamation be specific enough to allow Defendants to “form responsive pleadings.” Solers, Inc. v. Doe, 977 A.2d 941, 948 (D.C. 2009). Plaintiffs fail to meet this standard. The Amended Complaint alleges only that Defendant Mirtchev “use[d] his influence to falsely brand the Houranis as international criminals and terrorists,” Am. Compl. ¶ 16, and that he acted “through Krull, and with the active support of the Kazakh ambassador” to “cause” the Kazakh Embassy to post defamatory statements, id. ¶ 58. Plaintiffs allege no facts describing the “influence” Defendant Mirtchev had with the embassy, Forbes.com, the “Eurasian Transition Group,” or the publishers of “various other Internet publications“—or even simply what relationship Defendants’ “influence” had to the publishing of these statements. Id. ¶ 59. Plaintiffs also do not describe how Defendant Mirtchev purportedly “caused” the embassy to publish these statements or in what manner he himself or Krull Corporation did so.13 Without
III. Defendants’ Motion for Sanctions
Defendants move this Court to dismiss Plaintiffs’ claims with prejudice and to impose sanctions against Plaintiffs and their counsel under
- it is not being presented for any improper purpose, such as to harass, cause unnecessary delay, or needlessly increase the cost of litigation;
- the claims, defenses, and other legal contentions are warranted by existing law or by a nonfrivolous argument for extending, modifying, or reversing existing law or for establishing new law;
- the factual contentions have evidentiary support or, if specifically so identified, will likely have evidentiary support after a reasonable opportunity for further investigation or discovery; and
- the denials of factual contentions are warranted on the evidence or, if specifically so identified, are reasonably based on belief or a lack of information.
The Court notes that Defendants’ motion has some merit, as Plaintiffs have alleged facts in their First Amended Complaint that contradict facts outlined in their original complaint and Plaintiffs’ own sworn statements.15 Specifically, the First Amended Complaint alleges that Dariga, acting as a private party, “siphoned [Plaintiffs’ media] companies’ assets” en route to a political career. Am Compl. ¶¶ 12, 25. In contrast, in their Original Complaint and in other sworn testimony, Plaintiffs consistently claim that the Government of Kazakhstan expropriated their assets because of Plaintiffs’ ties to General Rakhat Aliyev. See, e.g., Compl. ¶ 10 [Docket No. 1] (“The theft of the Houranis’ assets stems directly from a meeting between Rakhat Aliyev and President Nazarbayev ....“); id. ¶ 126 (“with the stroke of a
In addition, while Dariga seems to be a government agent with a supporting role in the Original Complaint—advising Devincci Hourani to sign over his family‘s assets to the First Presidential Fund, warning him “that the government would take more drastic actions against his family” if he failed to do so, Compl. ¶ 126, and “allow[ing] government entities to expropriate all of the companies’ assets,” id. ¶ 127—she takes center stage in the Amended Complaint as a non-governmental party, see Pls.’ Opp. to Mot. to Dismiss. at ECF 34 (“[T]he [First Amended Complaint] focuses on instances in which ... Dariga ... acted for her own personal reasons with no official government imprimatur, to steal certain businesses of the Hourani family.“). Furthermore, while both complaints allege that Dariga instructed the Houranis to sign the assets over to the “First Presidential Fund,” the Original Complaint describes this fund as being “set up by President Nazabayev to develop his image domestically and abroad.” Compl. ¶ 126; see also Am. Compl. ¶ 21 (“[Dariga] demand[ed] that Devincci Hourani sign over to the First Presidential Fund [his and Issam‘s] shares in Alma Media [and KTK Television]“).16
Plaintiffs allege that they do not plead new factual allegations, only new legal theories. See Pls.’ Opp‘n to Defs.’ Rule 11 Mot. at 2-3 [Docket No. 89]. They also argue that the allegations in the Amended Complaint simply refocus and narrow the original claims, “adding another fact in the chain of events.” Hr‘g Tr. 65:10 (Apr. 16, 2013). A plaintiff, however, may not plead facts in their amended complaint that contradict those in their original complaint. While reconcilable “small variations” between the complaints are acceptable, Price v. Socialist People‘s Libyan Arab Jamahiriya, 389 F.3d 192 (D.C. Cir. 2004), “[w]here a plaintiff blatantly changes his statement of the facts in order to respond to the defendants[‘s] motion to dismiss ... [and] directly contradicts the facts set forth in his original complaint a court is authorized to accept the facts described in the original complaint as true.” Colliton v. Cravath, Swaine & Moore LLP, No. 08-0400, 2008 WL 4386764, at *6, 2008 U.S. Dist. LEXIS 74388, at *19 (S.D.N.Y. Sept. 24, 2008) (internal quotation marks and citations omitted). Given the number and nature
IV. Conclusion
This Court has considered Plaintiffs’ remaining arguments and has found them without merit. Thus, for the foregoing reasons, Defendants’ motion to dismiss the complaint is GRANTED WITH PREJUDICE and Defendants’ motion for Rule 11 sanctions is DENIED. An appropriate order accompanies this memorandum opinion.
THOMAS F. HOGAN
United States District Judge
Timothy SKRYNNIKOV, Plaintiff, v. FEDERAL NATIONAL MORTGAGE ASSOCIATION, Defendant.
Civil Action No. 11-0609 (GK).
United States District Court, District of Columbia.
May 8, 2013.