COURT OF APPEALS, STATE OF COLORADO
101 West Colfax Avenue, Suite 800
Denver, Colorado 80202
Appeal from the District Court, City & County of Denver,
Colorado, the Honorable William W. Hood III, District
Judge; Case No. 2001 CV 6514
Party Initiating the Appeal: Plaintiff/Appellant
Plaintiff-Appellant:
Archangel Diamond Corporation Liquidating Trust,
v.
Defendant-Appellee:
OAO Lukoil
Attorneys for Appellant:
Bruce S. Marks, pro hac vice
MARKS & SOKOLOV, LLC
1835 Market Street, 28th Floor
Philadelphia, PA 19103
Telephone: (215) 569-8901
Facsimile: (215) 569-8912
E-mail: marks@mslegal.com
▲COURT USE ONLY▲
Case Number: 11 CA 2452
Harold R. Bruno, III, #14945
Chad M. McShane, #30462
ROBINSON, WATERS & O’DORISIO, P.C.
1099 18th Street, Suite 2600
Denver, CO 80202-1926
Telephone: (303) 297-2600
Facsimile: (303) 297-2750
E-mail: hbruno@rwolaw.com; cmcshane@rwolaw.com
REPLY BRIEF
TABLE OF CONTENTS
CERTIFICATE OF COMPLIANCE ........................................................................ ii
TABLE OF AUTHORITIES ..................................................................................... v
REPLY TO THE STATEMENT OF THE CASE ..................................................... 1
Factual Background .............................................................................................. 1
Archangel Decision ............................................................................................... 1
ADC’s Limited Discovery .................................................................................... 2
The Bankruptcy ..................................................................................................... 3
Post-Bankruptcy Litigation ................................................................................... 3
REPLY TO THE STATEMENT OF “RELEVANT”
JURISDICTIONAL FACTS ...................................................................................... 4
A.
SPECIFIC JURISDICTION .................................................................. 5
B.
GENERAL JURISDICTION ................................................................ 5
REPLY ARGUMENT ............................................................................................... 6
I.
LUKOIL IS SUBJECT TO SPECIFIC JURISDICTION ............................... 6
A.
Archangel Does Not Preclude Specific Jurisdiction ............................. 7
1.
Collateral Estoppel Does Not Apply .......................................... 7
2.
The Mandate/Law of the Case Doctrine Does Not Apply.......... 9
B.
The Court Applied the Wrong Test For Tort ...................................... 10
C.
Caselaw Compels Specific Jurisdiction .............................................. 12
iii
D.
II.
III.
IV.
The RICO and COCCA Claims Further Support Jurisdiction ............ 12
LUKOIL IS SUBJECT TO GENERAL JURISDICTION............................ 13
A.
ADC Established Lukoil Israel, Oldberry, and Gilwood Acted
As Lukoil’s Agents/Alter Egos Regarding DSE ................................. 16
B.
The Court Improperly Considered Zubkov’s Affidavit ...................... 19
LUKOIL DID NOT MAKE A “COMPELLING CASE” JURISDICTION
WOULD BE UNCONSTITUTIONALLY UNREASONABLE .................. 22
A.
The Court Incorrectly Imposed the Burden on ADC .......................... 22
B.
Lukoil Did Not Present A “Compelling Case” ................................... 23
1.
General Jurisdiction .................................................................. 23
2.
Specific Jurisdiction .................................................................. 23
THE COURT ABUSED ITS DISCRETION IN DENYING
JURISDICTIONAL DISCOVERY ............................................................... 25
CONCLUSION ........................................................................................................ 28
CERTIFICATE OF SERVICE ................................................................................ 29
iv
TABLE OF AUTHORITIES
FEDERAL AND STATE CASES
Archangel Diamond Corp. v. OAO Lukoil, 123 P.3d 1187 (Colo.
2005) ..................................................................................................passim
Bebo Construction Co. v. Mattox & O'Brien, P.C., 990 P.2d 78 (Colo.
1999) ........................................................................................................... 8
Burger King Corp. v. Rudzewicz, 471 U.S. 462 (1985) ..........................22, 23
Chicago, M. & S.P.R. Co. v. Minneapolis Civic & Commerce Ass’n,
247 U.S. 490 (1918)....................................................................................... 17
Classic Automobile Sales, Inc. v. Schocket, 832 P.2d 233 (Colo.1992) ....... 12
Combs v. Baker, 886 F.2d 673 (4th Cir. 1989).............................................. 17
D&D Fuller CATV Construction, Inc. v. Pace, 780 P.2d 520 (Colo.
1989) ......................................................................................................... 12
Direct Sales Tire Co. v. District Court of County of Jefferson, 686
P.2d 1316 (Colo. 1984) ............................................................................ 25
Dudnikov v. Chalk & Vermillion Fine Arts, Inc., 514 F.3d 1063 (10th
Cir. 2008) .................................................................................................... 7
Ed. Testing Serv. v. Katzman, 631 F. Supp. 550 (D.N.J. 1986) .............. 15-16
Endless Pools, Inc. v. Wave Tec Pools, Inc., 362 F. Supp. 2d 578
(E.D. Pa. 2005) ......................................................................................... 16
First Horizon Mechanical Services v. Wellspring Capital
Management, 166 P.3d 166 (Colo. App. 2007) .................................12, 13
Foundation for Knowledge v. Interactive Design Consultants, LLC,
234 P.3d 673 (Colo. 2010) ................................................................passim
v
Garbade v. Great Divide Mining & Milling Corp., 831 F.2d 212
(10th Cir. 1987) ...................................................................................... 8-9
Gonzales v. People, 128 Colo. 522 (1953) ...................................................... 6
Great Neck Plaza, L.P. v. Le Peep Restaurants, LLC, 37 P.3d 485
(Colo. App. 2001) ..................................................................................... 14
H.J. Inc. v. Northwest Bell Telegraph Co., 492 U.S. 229 (1989).................. 13
Marine Midland Bank, N.A. v. Miller, 664 F.2d 899 (2d Cir. 1981) ......15, 17
Marquest Medical Products, Inc. v. Daniel, McKee & Co., 791 P.2d
14 (Colo. App. 1990) ................................................................................ 12
Musgrave v. Industrial Claim Appeals Office, 762 P.2d 686 (Colo.
App. 1988) .................................................................................................. 9
Nelson v. Elway, 971 P.2d 245 (Colo. App. 1998).......................................... 9
OMI Holdings, Inc. v. Royal Insurance Co. of Canada, 149 F.3d 1086
(10th Cir. 1998) ........................................................................................ 24
Pandaw America, Inc. v. Pandaw Cruises India Pvt. Ltd., 2012 U.S.
Dist. LEXIS 13692 (D. Colo. Feb. 6, 2012)............................................. 12
In Re: Phillips, 139 P.3d 639 (Colo. 2006) ................................................... 14
Rodgers v. Colo. Department of Human Services, 39 P.3d 1232 (Colo.
App. 2001) ................................................................................................ 10
Sizova v. National Institute of Standards & Tech., 282 F.3d 1320
(10th Cir. 2002) ........................................................................................ 25
Stuart v. Spademan, 772 F.2d 1185 (5th Cir. 1985) .......................... 14-15, 17
SuperValu Stores, Inc. v. District Court, 906 P.2d 72 (Colo. 1995) ............... 9
Terminate Control Corp. v. Horowitz, 28 F.3d 1335 (2d Cir. 1994) ............ 13
vi
Theunissen v. Matthews, 935 F.2d 1454 (6th Cir. 1991)............................... 20
USA Leasing LLC, Inc. v. Montelongo, 25 P.3d 1277 (Colo. App.
2001) ...................................................................................................19, 20
In re Water Rights of Tonko v. Mallow, 154 P.3d 397 (Colo. 2007) .............. 7
Wells Fargo & Co. v. Wells Fargo Express Co., 556 F.2d 406 (9th
Cir. 1977) .................................................................................................. 14
MISCELLANEOUS
Colorado Savings Statute, C.R.S. §13-80-111 ................................................ 3
Colo. R. Civ. P. 12(b) .................................................................................... 25
Colo. R. Civ. P. 56 ......................................................................................... 19
Fed. R. Civ. P. 4(k)(2) ..................................................................................... 3
Fed. R. Civ. P. 26 ........................................................................................... 24
vii
REPLY TO THE STATEMENT OF THE CASE
Factual Background
This dispute arises out of agreements entered in 1993 and 1994 (the
“Agreement”) between the Archangel Diamond Corporation (“ADC”) and
Arckhangelskgeoldobycha (“AGD”). Although the Agreement provided for
arbitration in Stockholm, AGD, under the control of OAO Lukoil (“Lukoil”),
fought it tooth and nail, contesting the arbitration clause in the 1998 proceeding
(which dismissal the Swedish court reversed in 2005) and the renewed 2006
arbitration, costing ADC millions in legal fees. ADC abandoned the arbitration
because Lukoil’s litigiousness left it bankrupt in 2009, without funding to continue.
Archangel Decision
ADC has consistently alleged Lukoil did business here, including
“operat[ing] a gas station in [Glendale], Colorado” and “enter[ing] into a variety of
agreements with Colorado companies to provide Lukoil with engineering
services.” Archangel Diamond Corp. v. OAO Lukoil, 123 P.3d 1187, 1200 (Colo.
2005) (“Archangel”). Even without discovery, ADC obtained evidence Lukoil
operated the Glendale station, including admissions on its website, sufficient to
prima facie establish jurisdiction.
1
ADC’s Limited Discovery
Lukoil attempts to create the false impression ADC “litigated” the case for
eight years before amending its complaint. This is not true. The complaint was
filed in 2001. In 2002, Lukoil removed solely to avoid Colorado’s forum non
conveniens standard. The federal court remanded prior to discovery and Judge
Robbins dismissed in 2002, denying any discovery. The matter was not remanded
by this Court until 2007 because of Lukoil’s appellate wrangling.
In June, 2007, Judge Rappaport permitted discovery which Lukoil
stonewalled. The matter was stayed until early 2009 pending settlement efforts.
In May, 2009, Judge Mansfield granted ADC’s motion to compel discovery which
finally confirmed Lukoil ceased to operate the Glendale station before ADC filed
suit. But for Lukoil’s intransigence in opposing discovery in 2002 and
stonewalling in 2007, this issue could have been resolved years ago.
Meanwhile, ADC served a subpoena on DS Engineering, Inc. (“DSE”) and
took Dean Sillerud’s deposition in November, 2009. ADC immediately amended
its complaint to plead DSE served as Lukoil’s de facto Colorado office and RICO
and COCCA claims, after Sillerud confirmed Lukoil’s illegal “Cash Smuggling
Scheme,” allegations relevant to establishing Lukoil engaged in a “pattern of
racketeering” under RICO, regardless of whether ADC was harmed by these acts.
2
Thus, real litigation lasted only from early 2009 through November, 2009, when
ADC removed to the bankruptcy court, which stayed discovery.
The Bankruptcy
ADC’s lawyers and two other insiders did not “orchestrate” its bankruptcy.
The bankruptcy was filed to protect ADC’s creditors and minority shareholders out
of concern ADC’s controlling shareholder, De Beers, would dissolve ADC as a
means of collusively “settling” the litigation to take the diamond project for itself.
Lukoil participated in the bankruptcy, never contesting its bona fide nature. ADC
removed this case because federal courts hearing RICO claims apply a different
standard for personal jurisdiction under Fed.R.Civ.P. 4(k)(2), which allows
consideration of Lukoil’s nationwide contacts, not just those with Colorado. Thus,
ADC sought to decide jurisdiction in one proceeding. Nonetheless, the bankruptcy
court remanded.
Post-Bankruptcy Litigation
After remand in 2010, ADC served discovery related to DSE. Judge Hood
dismissed in 2011, denying any discovery. Thereafter, in 2012, ADC re-filed its
claims within the 90 day period required by Colorado’s savings statute, C.R.S.
§13-80-111, so the federal court may decide jurisdiction, inter alia, under RICO
and Fed.R.Civ.P. 4(k)(2).
3
REPLY TO THE STATEMENT OF
“RELEVANT” JURISDICTIONAL FACTS
Despite receiving no discovery from Lukoil related to DSE, ADC, through
remarkable investigators, obtained substantial evidence to support its jurisdictional
allegations – an effort obstructed by Sillerud lying at his 2009 deposition when he
denied knowing of Lukoil Israel’s officers and directors, Sillerud Dep., CD,
p.2467-68, when he has been a director of Lukoil Israel since January 1, 2000. Cyprus
Report, CD, p.3458. Lukoil offers no explanation why it did not disclose this
falsity to ADC or the Court, which hindered ADC from learning Lukoil CFO
Kukura served as Lukoil Israel’s chairman. Fortuitously, ADC’s investigators
uncovered Sillerud’s perjury when obtaining reports from Cyprus in 2011. Cyprus
Report, CD, p.3457-58.
ADC’s opening brief extensively cites to the record to support its
allegations. Lukoil’s criticism notwithstanding, any reasonable reading of
Sillerud’s deposition would conclude DSE served as Lukoil’s de facto office in
Colorado. After all, five Lukoil operating companies, including Lukoil AIK,
reimbursed every penny spent by DSE for providing engineers from 1999 onward
through three “Slush Fund Companies” -- Lukoil Israel, Oldberry, Ltd., and
Gilwood, Ltd. Amended Complaint (“AC”), ¶¶25-26, CD, p.2002; Sillerud
Dep.,CD, pp.2453, 2458; DSE Invoices, CD, pp.2485-3165. Likewise, Sillerud
4
testified the cash taken from the bank was deliberately broken into bundles below
$10,000, AC,¶30, CD, p.2003; Sillerud Dep., CD, p.2454, 2467-68, 71, resulting in
the engineers who smuggled the cash not reporting the transactions as required.
AC,¶¶31-32, CD, p.2004; Sillerud Dep., CD, pp.2471, and then
returning the cash to Sillerud in Russia. Sillerud Dep., CD, p.2467-68. The invoices
show how the cash was disaggregated. DSE Invoices, CD, pp.2485-3165.
A.
SPECIFIC JURISDICTION
Lukoil does not dispute ADC moved its financial center to Colorado in
February, 2007 and principal place of business to Colorado in November, 2007, or
suffered its harm here. Nor does it dispute it did not acquire control over AGD
until 2008, knowing ADC was in Colorado, and thereafter directed over 75
communications which ADC received and relied upon in suffering harm in
Colorado.
B.
GENERAL JURISDICTION
Again, ab initio, ADC alleged Lukoil did business in Colorado, including
“enter[ing] into a variety of agreements with Colorado companies to provide
Lukoil with engineering services.” Archangel at 1200. As Archangel found,
Lukoil maintained the Glendale station; the hitch is Lukoil ceased its operation in
1999, even though Lukoil’s logo was displayed for years thereafter. Thus, ADC
5
changed focus to DSE.
The only “evidence” Lukoil offered to counter ADC’s allegations and
evidence concerning Lukoil’s control over DSE and the Slush Fund Companies
through Lukoil CFO Kukura and Lukoil AIK director Goldwasser was Zubkov’s
Affidavit, which should have been ignored as hearsay. In its Answer Brief, Lukoil
now relies on Sillerud’s deposition. However, given Sillerud’s perjury, apparently
designed to protect Lukoil/Kukura, any testimony countering ADC’s allegations
should be ignored. Gonzales v. People, 128 Colo. 522, 526 (1953) (if “any
witness … testified falsely to any material fact, then [the triers-if-fact] had a right
to disregard the whole or any part of the testimony of such witness”). Regardless,
he does not address Lukoil’s control over the Slush Fund Companies.
REPLY ARGUMENT
I.
LUKOIL IS SUBJECT TO SPECIFIC JURISDICTION
Lukoil distorts the standard for specific jurisdiction, arguing the minimum
contacts inquiry concerns whether the defendant “purposefully avails himself of
the privilege of conducting business in the forum state,” Answer Brief at 17,
selectively quoting Archangel. However, this is not the standard for tort based
jurisdiction. Rather, as Archangel recognized, in the tort context, ADC need only
show Lukoil “purposefully directed” conduct at the forum. Archangel 123 P.3d at
6
1194. As Dudnikov v. Chalk & Vermillion Fine Arts, Inc., clarified, “In the tort
context, we often ask whether the nonresident defendant ‘purposefully directed’ its
activities at the forum state; in contract cases, meanwhile, we sometimes ask
whether the defendant ‘purposefully availed’ itself of the privilege of conducting
activities … in the forum state.” 514 F.3d 1063, 1072 (10th Cir. 2008) (emphasis
added).
A.
Archangel Does Not Preclude Specific Jurisdiction
Archangel only addressed “specific jurisdiction over Lukoil on the principle
AGD was acting as its agent,” concluding because ADC “unilaterally” moved to
Colorado after its relationship with AGD began, it “failed to establish a prima facie
showing of specific jurisdiction over AGD, [and, thus] Archangel has also failed to
demonstrate a prima facie showing of specific jurisdiction over Lukoil.” Archangel
at 1197. The Amended Complaint implicates different facts, claims, and theories.
1.
Collateral Estoppel Does Not Apply
Collateral estoppel requires, inter alia, “the issue sought to be precluded is
identical to an issue actually and necessarily determined in a prior proceeding.” In
re Water Rights of Tonko v. Mallow, 154 P.3d 397, 405 (Colo. 2007). The factual
and legal issues decided in Archangel are different than those before this Court.
First, as ADC clarified after remand, it moved to Colorado in 1997 before
7
Lukoil took over AGD in 1998. Haddon Aff., ¶¶4-5, CD, p.3194.1 Thus, unlike
AGD’s relationship with ADC, which began before ADC “unilaterally” moved,
Lukoil chose to take over AGD knowing ADC was in Colorado. Whether
jurisdiction may be sustained over Lukoil for taking control over AGD knowing it
would need to communicate with ADC in Colorado to obtain financing was not
decided in Archangel. In short, collateral estoppel “is inapplicable to matters that
… were not [] litigated in a prior proceeding.” Bebo Constr. Co. v. Mattox &
O’Brien, P.C., 990 P.2d 78, 85 (Colo. 1999).
Second, ADC pleads jurisdiction, not based on agency, but premised on
Lukoil’s own wrongful conduct in directing the fraudulent communications. AC,
¶¶214-215, CD, pp.2029-30. ADC further alleges Lukoil was a “person” which
operated AGD as an “enterprise” through a pattern of racketeering in violation of
RICO and COCCA. AC, ¶¶130-171, 231, CD, pp.2017-23, 2033. Under these
statutes, only Lukoil, the RICO/COCCA person, not AGD, the RICO/COCCA
enterprise, is liable.2 Thus, jurisdiction over AGD is now irrelevant to
1
In 2002, Judge Robbins erred in sua sponte dismissing ADC’s tort claims based
on the “economic loss” doctrine, not considering specific jurisdiction based on tort.
Thus, ADC did not have an opportunity to clarify the issue until remand from the
appellate courts.
2
Garbade v. Great Divide Mining & Milling Corp., 831 F.2d 212, 213 (10th Cir.
1987) (“Section 1962(c) makes it unlawful for a ‘person’ to enter the activities of
8
jurisdiction over Lukoil.
2.
The Mandate/Law of the Case Doctrine Does Not Apply
Archangel originally “remand[ed] to the trial court for further proceedings
not inconsistent with [its] opinion.” 123 P.3d at 1201. “[W]hen a case is remanded
for further proceedings consistent with the appellate court’s opinion, it is a general
remand.” Musgrave v. Industrial Claim Appeals Office, 762 P.2d 686, 688 (Colo.
App. 1988). Although Archangel slightly changed its mandate and remanded to
the court of appeals to “consider any remaining unaddressed issues raised on
appeal relating to Lukoil”, Modified Opinion, CD, pp.1725-26, i.e. forum non
conveniens, a general remand was clearly intended.
“A general remand authorizes the trial court to make new findings and
conclusions so long as there is no conflict with the ruling of the appellate court.”
Musgrave, 762 P.2d at 688. The mandate rule does not preclude “amend[ing] the
pleadings following remand from an appellate court unless such amendment would
contravene a mandate that expressly or by necessary implication precludes such
amendment.” SuperValu Stores, Inc. v. District Court, 906 P.2d 72, 78 (Colo.
1995) (permitting amendment); Nelson v. Elway, 971 P.2d 245 (Colo. App. 1998)
(permitting amendment under SuperValu). Equally, the law of case doctrine,
an ‘enterprise’ using racketeering activities. … The section does not [impose
liability on the] … enterprise”).
9
another name for the mandate doctrine, is inapplicable to issues “not addressed by
the appellate court” or which do “not conflict with the mandate.” Rodgers v. Colo.
Dep’t of Human Servs., 39 P.3d 1232, 1235 (Colo. App. 2001) .
Here, ADC clarified it moved to Colorado before Lukoil became involved
with AGD, and amended its complaint to plead claims against Lukoil for its own
wrongful conduct, not just based on an agency relationship with AGD, under
RICO, COCAA, and common law. These issues were not decided or precluded by
Archangel.
B.
The Court Applied the Wrong Test For Tort
Rather than addressing the merits of specific jurisdiction, Lukoil attempts to
confuse the issues by mischaracterizing the decision, Foundation for Knowledge,
and Archangel.
First, Judge Hood clearly applied the contract test, stating the new evidence
regarding “Archangel’s Colorado move does not create a reasonable inference that
Lukoil was purposefully availing itself of the privilege to do business in
Colorado,” Opinion, CD, p.4322, not the “purposefully directed” tort test. He also
improperly held this case involves “foreign claims in foreign forums.” Opinion,
CD, p.4322. The case concerns federal and Colorado law claims in a Colorado
forum for harm caused by fraudulent communications directed at Colorado.
10
Second, ADC does not merely allege it sustained an injury in Colorado
where it maintained its principal place of business; it alleges the injury was caused
by Lukoil’s targeting over 75 fraudulent communications which it received and
relied upon in Colorado. This is hardly conduct “so remote” as not to sustain
jurisdiction under Foundation for Knowledge.
Third, Archangel never held acts of AGD and/or Lukoil directed at Colorado
were “remote” to ADC’s harm; rather, Archangel’s concern was AGD’s acts were
directed at Colorado solely because ADC “unilaterally” moved there, making its
connection to Colorado “fortuitous,” 123 P.3d at 1197 – a concern applicable to
AGD, but not Lukoil, which became involved knowing ADC was in Colorado.
Fourth, Archangel concluded “AGD has not purposefully availed itself of
the privilege of conducting business in Colorado.” Id. at 1200. In footnote 6, it
then observed, “even if the first prong were satisfied, the second one is not in that
we have determined that Archangel’s claims do not meet the ‘arising out of’ prong
of the minimum contacts inquiry,” obviously referring to the contract based test.
Contrary to Lukoil, Archangel did not conclude the harm suffered by ADC from
the 75+ the fraudulent communications did not arise from these same
communications in regard to tort claims.
11
C.
Caselaw Compels Specific Jurisdiction
Lukoil “expressly aimed” over 75 fraudulent communications which ADC
received and relied upon in suffering harm in Colorado, satisfying Calder,
Dudnikov, and Foundation for Knowledge. Lukoil does not even discuss the many
other Colorado cases sustaining jurisdiction when fraudulent communications are
directed here.3
D.
The RICO/COCCA Claims Further Support Jurisdiction
It is trite law a state has a compelling interest in enforcing its laws to protect
its citizens. E.g., Foundation for Knowledge v. Interactive Design Consultants,
LLC, 234 P.3d 673, 682 (Colo. 2010) (“Colorado has a strong interest in resolving
any controversy involving a nonprofit corporation headquartered … within the
state”). Thus, ADC’s RICO/COCCA claims further support jurisdiction based on
Lukoil directing fraudulent communications at Colorado based ADC. Pandaw Am.,
Inc. v. Pandaw Cruises India Pvt. Ltd., 2012 U.S. Dist. LEXIS 13692, *19 (D.
Colo. Feb. 6, 2012) (sustaining jurisdiction because “United States obviously has
an interest in enforcing its statutes”).
3
E.g. Classic Auto Sales, Inc. v. Schocket, 832 P.2d 233, 237(Colo.1992)
(sustaining personal jurisdiction when fraudulent communications directed at
Colorado); D&D Fuller CATV Constr., Inc. v. Pace, 780 P.2d. 520, 525 (Colo.
1989) (same); First Horizon Mech. Servs. v. Wellspring Capital Mgmt., 166 P.3d
166, 174 (Colo. App. 2007) (same); Marquest Medical Products, Inc. v. Daniel,
McKee & Co., 791 P.2d 14, 16 (Colo. App. 1990) (same).
12
Lukoil’s argument ADC was not harmed by the “Cash Smuggling Scheme”
misses the point. ADC was harmed by the over 75 fraudulent communications
directed by Lukoil into Colorado, satisfying RICO/COCCA. The “Cash
Smuggling” allegations are relevant pursuant to H.J. Inc. v. Northwest Bell Tel.
Co., 492 U.S. 229, 242 (1989), which held a “pattern of racketeering” may be
established by showing racketeering is “a regular way of conducting defendant’s
ongoing legitimate business.” Terminate Control Corp. v. Horowitz, 28 F.3d 1335,
1347 (2d Cir. 1994) teaches “[a] pattern of racketeering activity may be based
upon predicate acts directed against non-plaintiffs as long as one act injures the
plaintiff so as to create standing for that plaintiff.”
II.
LUKOIL IS SUBJECT TO GENERAL JURISDICTION
For jurisdictional purposes, Lukoil does not dispute under agency, a plaintiff
need only show the actions of an agent “are of such a character as to amount to the
doing business of the parent,” based on the “concept that the principal is
responsible for the actions of an agent.” First Horizon Merch. Servs. v.
Wellspring Capital Mgmt., LLC, 166 P.3d 166, 177 (Colo. App. 2007)
(recognizing agency and alter ego jurisdiction). Jurisdiction may be sustained
when the agent’s activities are “sufficiently important to the foreign corporation
that if it did not have a representative to perform them, the corporation's own
13
officials would undertake to perform substantially similar services.” Wells Fargo
& Co. v. Wells Fargo Express Co., 556 F.2d 406, 423 (9th Cir. 1977).
Nor does Lukoil dispute under alter ego jurisdiction, a plaintiff need only
show the corporation is a “mere instrumentality for the transaction of the
[principal’s] own affairs, and there is such unity of interest … [that] separate
personalities … no longer exist.” In Re: Phillips, 139 P.3d 639, 644 (Colo. 2006).
“[F]acts concerning … control … are relevant for both theories.” Id.
Practical
control can evidence agency because the agent “is conducting the ‘real’ business”
of the principal” and alter ego because of “no real separate corporate existence.”
Id.
To confuse the standard for jurisdiction, Lukoil creates the impression ADC
must submit admissible evidence to satisfy the rigorous tests imposed in Great
Neck Plaza, L.P. v. Le Peep Restaurants, LLC, 37 P.3d 485, 490 (Colo. App. 2001)
and Phillips. However, while these cases set forth factors to consider, they
addressed agency/alter ego involving liability based on corporate veil and reverse
corporate veil piercing – a much more stringent standard than the prima facie test
for jurisdiction, let alone at the motion to dismiss stage.
As Stuart v. Spademan, 772 F.2d 1185 (5th Cir. 1985) observed:
the alter ego test for attribution of contacts, i.e., personal jurisdiction, is
less stringent than that for liability. See, e.g., Marine Midland Bank, N.A.
14
v. Miller, 664 F.2d 899, 904 (2d Cir.1981). Accordingly, for jurisdiction
to exist, there need not be both the existence of a mere shell corporation
and fraud. Rather, either factor, a shell corporation or fraud is sufficient
by itself to justify jurisdiction.
Id. at 1198, fn.12 (quotations omitted, emphasis added).
As Marine Midland stated:
In deciding whether the corporation is a real or a shell entity, the
appropriate standard should not be the very stringent test, normally
applied in other contexts, for piercing the corporate veil. That test
requires a showing not only that the corporation is a shell, but that it was
used to commit a fraud … In determining [jurisdiction] … it is sufficient
to inquire whether the corporation is a real or shell entity. If the
corporation is merely a shell, it is equitable, even if the shell may not
have been used to perpetrate a fraud, to subject its owner personally to
the court's jurisdiction ...
664 F.2d at 903 (emphasis added).
Lukoil is also wrong post-complaint contacts may not be considered.
“[F]iling of suit is not “some watershed mark after which the defendant’s activities
should not be considered for jurisdictional purposes … To permit the filing of a
complaint to limit jurisdiction by immunizing a defendant’s future actions in the
forum state when those actions are a mere continuation of those underlying the
complaint would make no sense.” Ed. Testing Serv. v. Katzman, 631 F.Supp. 550,
15
556 (D.N.J. 1986).4
Here, ADC has established a “reasonable inference” of jurisdiction -- all the
prima facie standard requires – from Lukoil using DSE from 1999 onward as its
agent/alter ego to service Lukoil-AIK and four other Lukoil subsidiaries.
A.
ADC Established Lukoil Israel, Oldberry, and Gilwood Acted As
Lukoil’s Agents/Alter Egos Regarding DSE
Lukoil does not dispute ADC established “a reasonable inference that DSE
was the alter ego or agent of Lukoil Israel Ltd … Oldberry Limited … or Gilwood
Limited,” Opinion, CD, p.4312, even though these companies had no formal
ownership of DSE. In defending the conclusion ADC “failed to present a prima
facie showing that Lukoil Israel, Oldberry or Gillwood are the alter egos or agents
of Lukoil,” Opinion, CD, p.4312, Lukoil asks this Court to apply a simplistic
analysis, ignoring reality and the reasonable inferences to which ADC is entitled.
First, it is irrelevant Lukoil was not a direct shareholder of Lukoil Israel,
Gilwood, or Oldberry. The key issue is whether Lukoil used or controlled these
shell companies as its agents/alter egos to use or control DSE as their agent/alter
ego, regardless of how many paper buffer entities Lukoil may have interposed
between itself and these companies. “[C]ourts will not … be blinded or deceived
4
See also Endless Pools, Inc. v. Wave Tec Pools, Inc., 362 F. Supp. 2d 578, 584
(E.D. Pa. 2005) (“time frame for assessing defendant’s minimum contacts with the
forum state includes pre-and post-Complaint contacts”).
16
by mere forms or law but, regardless of fictions, will deal with the substance … as
if the corporate agency did not exist and as the justice … may require.’” Chicago,
M. & S.P.R. Co. v. Minneapolis Civic & Commerce Ass’n, 247 U.S. 490,
501(1918).
Second, all Archangel required ADC to show was a “reasonable inference”
Lukoil controlled these shell companies to do its business of providing US
engineers to staff five subsidiaries to sustain agency/alter ego jurisdiction, a
standard requiring courts to “draw the most favorable inferences for the existence
of jurisdiction,” Combs v. Baker, 886 F.2d 673, 676 (4th Cir. 1989), and designed
only to “screen out cases in which personal jurisdiction is obviously lacking.”
Archangel, 123 P.3d at 1192 (quotations omitted).
Prima facie this occurred if the three “Slush Fund Companies” between DSE
and Lukoil were shells, as ADC established and Lukoil did not deny. Spademan,
supra.; Marine Midland, supra. In drawing its inferences from the evidence, this
Court should ask:
 If Lukoil did not control these companies, who did?
 Why didn’t Lukoil submit affidavits of people with personal knowledge
such as Kukura, Lukoil Israel’s chairman/director and Goldwasser, their
manager, instead of attorney Zubkov, if it did not control these
companies?
17
 Why would Lukoil transfer valuable interests in Lukoil AIK and Tursunt
-- paying hundreds of millions of dollar in dividends -- to Lukoil Israel
for nothing, if it did not control Lukoil Israel through Kukura?
Given ADC’s undisputed evidence these shell companies engaged in
extensive activity between Lukoil and DSE, as well as Lukoil’s failure to submit
affidavits from Kukura and Goldwasser, the only reasonable inference is these
companies were controlled by Lukoil through Kukura and Goldwasser.
Third, Lukoil does not dispute illegality provides a compelling justification
for jurisdiction when combined with control and the absence of corporate
formalities, as here, including:
 DSE operating as a mere “pass through,” with no records of using the
cash from the Cash Smuggling Scheme or to substantiate the False
Expenses; AC,¶¶26, 32, CD, pp.2003-04; Sillerud Dep., CD, pp.2462-63,
2468-70;
 DSE, Lukoil Israel, Oldberry, and Gilwood engaging in the illegal Cash
Smuggling Scheme, reimbursed by Lukoil’s subsidiaries; AC,¶¶36-37,
CD, p.2005; Sillerud Dep., CD, pp.2460, 2464-65, Offshore Chart, CD,
p.3892; Money Laundering Chart, CD, p.3570;
 Lukoil Israel director Sillerud’s perjury; AC,¶28, CD, p.2003; Sillerud
Dep., CD, pp.2467-68, Report, CD, p.3458;
 Gilwood doing business with DSE and Lukoil AIK for years after being
dissolved; Gilwood Report, CD, p.3468, Sillerud Dep., CD, pp.2466-70;
and
 Lukoil Israel, Oldberry, and Gilwood being nothing more than shells,
with no capitalization, real offices or employees. AC,¶32, CD, p.2004,
18
Sillerud Dep., CD, pp.2462-63.5
Lukoil submitted no evidence to contest this illegality or to establish these
companies had real existences.
B.
The Court Improperly Considered Zubkov’s Affidavit
Lukoil does not dispute affidavits must be made on personal knowledge
without hearsay. Colo. R. Civ. P. 56. Nor does it dispute an affidavit fails this
standard when “the affiant is plaintiff's attorney rather than a witness on plaintiff's
behalf, and the affidavit does not affirmatively show that the attorney has any
personal knowledge of the relevant facts.” USA Leasing LLC, Inc. v. Montelongo,
25 P.3d 1277, 1278 (Colo. App. 2001).
Lukoil offers no explanation why the court ignored USA Leasing and makes
no attempt to justify the sua sponte appointment of Zubkov as an expert witness.
Lukoil also does not dispute the court was required to accept ADC’s otherwise
uncontested allegations under Archangel, absent Zubkov’s affidavit. Importantly,
if affidavits like this are accepted without discovery, foreign defendants can easily
defeat jurisdiction and force Coloradans to litigate in far-off forums (like Russia).
5
The only exception being Lukoil Israel was literally given valuable interests in
two Lukoil subsidiaries; however, this was done as part of the “Dividends Scheme”
controlled by Kukura, not because it had real existence. Cyprus Report, CD,
p.3457-58, Offshore Chart, CD, p.3892; Money Laundering Chart, CD, p.3570.
19
This Court should draw a line against hearsay in favor of Colorado residents.6
First, although Zubkov “attested” he received information from Lukoil
personnel and reviewed documents, 2010 Z. Affidavit, ¶2, CD, p.3175, he did not
identify the persons with whom he allegedly conferred or produce the documents
which he allegedly reviewed. Further, he did not allege he was personally
involved with DSE or the Slush Fund Companies. This is no different than USA
Leasing, which provides no exception for in-house attorneys.
Second, while the court erroneously concluded Zubkov had “sufficient
personal knowledge for his affidavit to be competent evidence regarding personal
jurisdiction,” it recognized, and Lukoil concedes, “[a]ny arguments to the contrary
go to weight and credibility.” Opinion, CD, p.4314. Given issues of weight and
credibility, Archangel required a hearing so ADC could examine him. After all,
the court could have given him no weight if ADC had been permitted to confront
him.
6
Absent a hearing, federal courts “disposing of a 12(b)(2) motion do … not weigh
the controverting assertions of the party seeking dismissal. We adopted this rule …
in order to prevent non-resident defendants from regularly avoiding personal
jurisdiction simply by filing an affidavit denying all jurisdictional facts, as the
Appellee has done in the case before us.” Theunissen v. Matthews, 935 F.2d 1454,
1459 (6th Cir. 1991) (citation omitted).
20
Third, Lukoil does not defend the sua sponte appointment of Zubkov as an
expert, only citing a case that review is for abuse of discretion. However, that case
did not concern sua sponte appointment of the adverse party’s attorney made
without notice and an opportunity to be heard for the sole purpose of permitting
hearsay – an abuse of both the standard for appointing experts and due process.
Fourth, Lukoil falsely argues ADC “proffered no competent evidence to
contradict” Zubkov. Answer Brief at 36. For example, Zubkov denied Lukoil
Israel has any relationship to Lukoil and claimed Lukoil “has no responsibility for
contracts” by Lukoil Israel. Z. Affidavit , ¶28, CD, p.3177. However, ADC
submitted evidence CFO Kukura was Lukoil Israel’s chairman and director and
Lukoil AIK director Goldwasser was its manager. Reports, CD, pp.3457-59;
Lukoil AIK Quarterly Report, CD, p.3208. ADC also submitted evidence Lukoil
Israel was a sham company, including:
 It was entirely financed by Lukoil subsidiaries, AC,¶¶32,36-37, CD,
pp.2004-05, Offshore Chart, CD, p.3892;
 Its sole purpose was to serve Lukoil subsidiaries, AC,¶¶27-28, 34, CD,
pp.2003-04; Sillerud Dep., CD, pp.1966, 1972-78;
 It had nominal capital, Reports, CD, pp.4135, 4160, 4184.
 It had no real office or employees, Reports, CD, pp.4135, 4160, 4184.
 It reimbursed the illegal Cash Smuggling Scheme, Offshore Chart, CD,
21
p.3892; Money Laundering Chart, CD, p.3570;
 Sillerud lied about knowing its directors, concealing Kukura’s
involvement, Sillerud Dep., CD, pp.2467-68, Report, CD, p.3458.; and
 There was no reasonable explanation for Lukoil transferring valuable
interests in its subsidiaries and paying hundreds of millions of dollars to
Lukoil Israel, unless it controlled it. AC,¶36, CD, p.2005; Sillerud Dep.,
CD, pp.2460, 2464-65.
At a minimum, the court should have found a prima facie case and held a
hearing, given ADC’s evidence, so ADC could confront Zubkov, its sole witness,
as well as Kukura and Goldwasser.
III.
LUKOIL DID NOT MAKE A “COMPELLING CASE”
JURISDICTION WOULD BE UNCONSTITUTIONALLY
UNREASONABLE
A.
The Court Incorrectly Imposed the Burden on ADC
Lukoil does not dispute the defendant must present a “compelling case” that
jurisdiction does not comport with “fair play and substantial justice” once
minimum contacts are established. Burger King Corp. v. Rudzewicz, 471 U.S.
462, 477 (1985). Rather, Lukoil contends the court did not impose the burden on
ADC. This is false. The court held: the “plaintiff must … show that the exercise
of jurisdiction … would comport with fair play and substantial justice.” Opinion,
CD, p.4312. Regardless of the court’s allocation of burden, Lukoil does not
dispute review is de novo.
22
B.
Lukoil Did Not Present A “Compelling Case”
1.
General Jurisdiction
Archangel held “for the purposes of the reasonableness inquiry, we conclude
that this reasonable inference that Lukoil has a continuous and systematic business
presence in Colorado [through the Glendale station] makes it reasonable for that
company to defend Archangel’s claims here.” 123 P.3d at 1201. Here, if DSE
served as Lukoil’s agent/alter ego for years, its contacts go well beyond those
involved in operating the Glendale station, including hiring dozens of engineers,
maintaining an office with a secretary/office manager, maintaining bank accounts,
and paying taxes in Colorado for years.
2.
Specific Jurisdiction
Every factor concerning specific jurisdiction favors ADC, Lukoil’s
distortion of the record to the contrary.
First, Colorado’s interest in adjudicating this dispute is high. ADC was a
Colorado resident when it sustained injury in Colorado where Lukoil directed the
fraudulent communications. A “[s]tate generally has a ‘manifest interest’ in
providing its residents with a convenient forum for redressing injuries inflicted by
out-of-state actors.” Burger King, 471 U.S. at 473.
23
Second, ADC has a compelling interest in obtaining effective relief in its
home forum, which, as the court implicitly recognized, Opinion, CD, p.4321,
would not occur if the case is dismissed to Russia. OMI Holdings, Inc. v. Royal
Ins. Co. of Canada, 149 F.3d 1086, 1097 (10th Cir. 1998) (plaintiff’s interest in
relief “may weigh heavily in cases where a Plaintiff's chances of recovery will be
greatly diminished by forcing him to litigate in another forum”).
Third, the burden on Lukoil defending a case in Colorado is minimal, given
its extensive contacts with Colorado, including DSE and having maintained a gas
station in Glendale. Its Fed.R.Civ.P. 26 disclosures made while Lukoil removed
the case in 2002 reveal only five fact witnesses, all under its control. Lukoil
Initial Discl., CD, p.3187. Bringing these witnesses to Colorado would involve
minimal expense to Russia’s largest oil company which has gas stations from
Maine to Florida. AC, ¶¶38-45, CD, pp.2005-07. All ADC key witnesses, such as
Coloradans Haddon and former CFO Davis, speak English, not Russian, reside in
the West, and are unwilling to go to Russia, with one exception. 2011 Transcript,
CD, p.4446. The third party witnesses to the Cash Smuggling Scheme – Sillerud
and the engineers who smuggled the cash -- reside in Colorado. Lukoil’s
“argument” the majority of witnesses are in Russia is simply false.
24
Fourth, Lukoil’s unsubstantiated argument the “majority of relevant
documents” are in Russian and in Russia is false.
Almost all documents related to
the core of this dispute are in the U.S. (i.e. correspondence, financial documents)
and, further, most documents are in English, as evidenced by ADC’s filings.
Documents related to the Cash Smuggling Scheme are in English and in Colorado.
If this case were litigated in Russia, ADC would be required to translate its
documents into Russian, a burden no different than what Lukoil alleges.
IV.
THE COURT ABUSED ITS DISCRETION IN DENYING
JURISDICTIONAL DISCOVERY
Lukoil does not dispute Colorado courts would follow Sizova v. Nat’l Inst. of
Stds. & Tech., 282 F.3d 1320 (10th Cir. 2002) in permitting discovery related to
personal jurisdiction under Colo.R.Civ.P. 12(b), which, as Archangel observed, is
virtually identical to the Federal Rule. 123 P.3d 1192. As Sizova states, “When a
defendant moves to dismiss for lack of jurisdiction, either party should be allowed
discovery on the factual issues raised by that motion… A refusal to grant discovery
constitutes an abuse of discretion if the denial results in prejudice to a litigant.”
E.g., Direct Sales Tire Co. v. District Court of County of Jefferson, 686 P.2d 1316,
1321 (Colo. 1984) (upholding discovery noting “[i]n close cases, the balance must
be struck in favor of allowing discovery”).
25
The court abused its discretion, particularly given, as it held, ADC had
already established a prima facie case that DSE was the agent/alter ego of Lukoil
Israel, Oldberry, and Gilwood and only needed discovery to show these companies
were Lukoil’s agents/alter egos.
First, the court improperly construed the prior orders, apparently believing
discovery was limited to Lukoil’s Glendale station, Discovery Orders, CD, p.4333,
4336, 4343, ignoring Judge Mansfield’s order allowing discovery of all Lukoil
contacts with Colorado, including DSE. 2009 Order, CD, pp.1918-19. Lukoil
makes no attempt to defend this error.
Second, the court’s contradictory finding of ample opportunity for discovery
-- even though it believed discovery had been limited to the Glendale station -makes no sense. While Lukoil attempts to muddy the record, Lukoil produced no
information related to its use of DSE in response to ADC’s 2007 discovery, since
ADC did not target DSE. After ADC amended its complaint to add allegations
regarding DSE, ADC served highly relevant discovery regarding DSE after remand
from the bankruptcy court in late 2010. Lukoil and DSE objected and produced
nothing.
Third, ADC’s narrowly targeted document requests and interrogatories
26
imposed no undue burden.7
Discovery on Lukoil imposed no undue burden; Lukoil failed to submit an
affidavit the discovery imposed any burden. All ADC sought were documents
related to (a) interrelationships between Lukoil, Lukoil AIK, Oldberry, Gilwood,
and Lukoil Israel, such as minutes of board and shareholder meetings of these
entities; (b) lists of directors, shareholders, and beneficial owners, annual and
quarterly financial reports and shareholder agreements; (c) documents related to
Sillerud being a deputy general director of Lukoil Israel and Lukoil-AIK; and (d)
payments to/from DSE. ADC’s Second and Third Sets, CD, pp.2280-86, 4029-41.
All documents are those kept in the normal course of business.
Discovery on DSE posed no burden on Lukoil and minimal burden on DSE.
All ADC sought were (a) records of wire transfers to/from DSE; (b) contracts and
correspondence between DSE and Lukoil entities; and (c) bills or invoices, and
documents related to cash carried by DSE to Russia. DSE Subpoena, CD, pp.205660.
Discovery on Wells Fargo regarding wires to/from DSE posed no burden on
Lukoil or DSE.
7
ADC also sought depositions, such as of Kukura and Zubkov. However, these
were put on hold pending resolving paper discovery disputes. Temkin Aff., ¶¶3031, 36-40, 42, CD, pp.2418, 2420-21.
27
CERTIFICATE OF SERVICE
The undersigned hereby certifies that on the12th day of June, 2012, a true
and correct copy of the foregoing Reply Brief was served via LexisNexis on:
Frederick J. Baumann, Esq.
Douglas B. Tuminello, Esq.
Jaclyn K. Casey, Esq.
Rothgerber Johnson & Lyons LLP
1200 17th Street, Suite 3000
Denver, CO 80202
Attorneys for Appellee OAO Lukoil
Michael K. Swan, Esq.
Akin,Gump,Strauss, Hauer & Feld, LLP
111 Louisiana Street, 44th Floor
Houston, TX 77002-5200
Mswan@akingump.com
Attorneys for Appellee OAO Lukoil
Bruce S. Marks, Esq.
Marks & Sokolov, LLC
1835 Market Street, 28th Floor
Philadelphia, PA 19103
marks@mslegal.com
Attorneys for Appellant
Chris G. Baumgartner
Dufford & Brown, P.C.
1700 Broadway, Suite 2100
Denver, Colorado 80290-2101
cbaumgartner@duffordbrown.com
Attorneys for Interested Party DS
Engineering, Inc.
/s/ Martha M. Parker, original signature on file
29