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CONCERN SOJUZVNESHTRANS v. BUYANOVSKI

August 31, 1999

CONCERN SOJUZVNESHTRANS, PLAINTIFF,
v.
LEV MIKHAILOVICH BUYANOVSKI, VLADIMIR ALEKSANDROVICH EMEREL AND INTERFORM USA, INC., DEFENDANTS.



The opinion of the court was delivered by: Wolin, District Judge.

  OPINION

Before the Court are the motions of defendants Lev Buyanovsky ("Buyanovsky") and Vladimir Emerel ("Emerel") (together, "defendants") to dismiss plaintiff's Complaint for failure to state a claim upon which relief can be granted.*fn1 The Court has decided the matters on the papers pursuant to Rule 78. For the following reasons, the Court will grant in part and deny in part defendants' motions for dismissal.

BACKGROUND

Plaintiff Concern Sojuzvneshtrans ("SVT") is a corporation established and existing under the laws of the Russian Federation. Buyanovsky is a Russian citizen with permanent residence status in the United States. Buyanovsky lives in Holmdel, New Jersey, and is president and one of two principal stockholders of defendant Interform USA, Inc. ("Interform"). Emerel is a Russian citizen with permanent resident status in the United States. Emerel also lives in Holmdel, New Jersey, and is an officer and the second principal stockholder of Interform. Interform is a New York corporation with a principal place of business identified as Buyanovsky's residence in Holmdel, New Jersey. (Complaint ¶ 1-7).*fn2

In August 1994, SVT entered into a series of agreements with PTKC Znamya Revolyutsii ("PTKC"), a Russian corporation owned and directed by Buyanovsky and Emerel. (Id. at ¶ 8-9.) Under the agreements, SVT provided freight forwarding service to PTKC. SVT agreed to arrange for the transportation of cargoes of phosphorous from Kazakhstan to various foreign countries and the return of the empty freight cars to Kazakhstan. (Id. at ¶ 8.) When PTKC needed to make a shipment it would provide an order with necessary shipping information to SVT (e.g., number and type of freight cars and tonnage), which would in turn supply to PTKC information for completion of the bills of lading necessary to have the rail cars transported by the various national railroads. (Id. at ¶ 10.) This information included codes that caused the shipments to be charged to SVT by the railroads and paid from SVT's deposits with the railroads. (Id.) PTKC supplied this information to a company called "Nodfos", its supplier in Kazakhstan, and Nodfos would place the information on bills of lading and ship the phosphorous. (Id.) SVT also sent or faxed a telegram to the appropriate departure station notifying it of the shipment and the code applied to the shipment. (Id.)

The parties made several shipments under these arrangements during 1994 and 1995. Although PTKC did not reliably make payments, eventually all payments were made for shipments during those period. (Id. at ¶ 11.)

In 1996, shipments increased significantly and PTKC began to fall further behind in its payments.*fn3 In 1996, Buyanovsky and Emerel began to have Interform issue the bill of lading instructions to Nodfos rather than have PTKC forward the SVT instructions. (Id. at ¶ 12.) On numerous occasions defendants caused Interform to issue instructions (through the telecommunications system of the United States) that had not been obtained from SVT and/or to re-use prior instructions without authorization from SVT. (Id. at ¶ 13; Counts 1-23.) The invented or altered instructions issued by Interform contained codes and other instructions that caused unauthorized shipments to be charged by the railroads to SVT. (Id. at ¶ 14.) Due to the inefficiency of the billing systems of the railroads in the former USSR states, SVT did not learn of any of the unauthorized shipments until March, 1997. (Id. at ¶ 15.) From August 1996 to February 1997, PTKC requested and received authorization for shipments from SVT, reportedly in addition to the unauthorized shipments. (Id. at ¶ 16.) SVT stopped authorizing shipments for PTKC in February 1997 because of the considerable arrears PTKC owed. (Id. at ¶ 16.)

Defendants Buyanovski and Emerel met with representatives of SVT in Moscow on February 14, 1997. During that meeting, Emerel confirmed in writing that SVT was owed $713,619.55 (USD) for PTKC shipments. (Id. at ¶¶ 17-18.) Emerel explained that PTKC was having difficulty but would pay the debt over the course of the following year. Neither Emerel nor Buyanovsky disclosed the unauthorized shipments. (Id. at ¶ 18.) PTKC also agreed to prepay further shipments at a premium rate. (Id.)

SVT agreed to arrange for shipment of twenty-four tanks of yellow phosphorous as the first shipment under the new agreement. (Id. at ¶ 19.) Only one shipment was made under this arrangement before SVT discovered the unauthorized shipments and refused to transport further cargoes for PTKC. (Id. at 20.) SVT claims that at least 246 rail cars were moved in unauthorized shipments. (Id.)

In its Complaint, SVT charges defendants with issuing letters of instructions to Nodfos during the period August 1996 through March 1997. (Id. at ¶ 106.) Specifically, SVT alleges that each of the fraudulent instructions were sent through the telecommunications system of the United States in violation of 18 U.S.C. § 1343 (wire fraud) and thus violated 18 U.S.C. § 1962(c) (Racketeer Influenced and Corrupt Organizations Act, hereinafter "RICO"). (Id. at ¶¶ 109, 110.) SVT alleges that Buyanovsky and Emerel conducted the business (and conspired to conduct the business) of defendant Interform and PTKC through a pattern of racketeering activity in violation of RICO at 18 U.S.C. § 1962(c) & (d). (Id. at ¶¶ 110, 112.) SVT further alleges that defendants' issuance of false instructions and false statements to SVT defrauded plaintiff of substantial sums of money. (Id. at ¶ 114.)

Defendants move for dismissal for failure to state a claim upon which relief can be granted. Defendants raise four objections, concerning (1) the statute of limitations, (2) compliance with Rule 9(b), (3) the continuity requirement of RICO, and (4) extraterritorial application of RICO.

Motion to Dismiss Standard

Rule 12(b)(6) of the Federal Rules of Civil Procedure permits a complaint to be dismissed for failure to state a claim upon which relief can be granted. When reviewing a motion to dismiss under Rule 12(b)(6), the Court must accept as true all allegations in the complaint, and must provide the plaintiff with the benefit of all inferences that may be fairly drawn from the complaint. See, e.g., Wilson v. Rackmill, 878 F.2d 772, 775 (3d Cir. 1989). A complaint cannot be dismissed unless the court is certain that no set of facts can be proved that would entitle plaintiff to relief. See id.; Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957). "The issue is not whether [the] plaintiff will ultimately prevail but whether the claimant is entitled to offer evidence to support the claims. Indeed it may appear on the face of the pleadings that a recovery is very remote and unlikely but that is not the test." Scheuer v. Rhodes, 416 U.S. 232, 236, 94 S.Ct. 1683, 40 L.Ed.2d 90 (1974), overruled on other grounds, Davis v. Scherer, 468 U.S. 183, 104 S.Ct. 3012, 82 ...


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