City of Almaty, Kazakhstan v. Sater

Background

The City of Almaty, Kazakhstan, and BTA Bank JSC sued Felix Sater, Bayrock Group Inc., Global Habitat Solutions Inc., MeM Energy Partners LLC, and other defendants. The plaintiffs alleged that funds taken from Almaty and BTA were laundered through several United States investment projects. At trial, the remaining claims were conversion against Sater, unjust enrichment against Sater, Bayrock, Global Habitat Solutions, and MeM, and money had and received against those same defendants.

The jury found for the plaintiffs on all three claims. It awarded damages on the conversion claim against Sater, damages on the unjust-enrichment claims against all four defendants, and damages on the money-had-and-received claims against all four defendants. The jury also found that the defendants had not proved their statute-of-limitations defense to the conversion and unjust-enrichment claims, and that Sater, Bayrock, and Global Habitat Solutions had not proved their release defense.

Post-trial motions and legal standards

The defendants moved for judgment as a matter of law under Federal Rule of Civil Procedure 50(b), or alternatively for a new trial under Rule 59. The court treated the asserted grounds as a Rule 59 request for a new trial because the defendants had not properly raised the specific Rule 50 grounds before the case was submitted to the jury. Arguments supporting a new trial that were listed in the motion notice but not developed in the briefing were treated as waived.

A Rule 50 motion asks whether the evidence could support the jury’s verdict when viewed in the light most favorable to the nonmoving party. A Rule 59 motion permits a new trial when the court independently concludes that the jury reached a seriously erroneous result or that the verdict was a miscarriage of justice. Because the defendants had not objected to the jury instruction about when the claims accrued, the court reviewed the alleged instructional error under the demanding plain-error standard.

Conversion and unjust enrichment

The jury was instructed that the claims accrued when the plaintiffs knew, or reasonably should have known, about the defendants’ conduct. The court held that this was an incorrect discovery rule under New York law. Conversion claims accrue when the conversion occurs, and unjust-enrichment claims accrue when the wrongful act giving rise to restitution occurs; neither claim generally accrues upon discovery of the conduct.

The jury found that the earliest dates on which the plaintiffs had claims against the defendants were in 2013. The court concluded that those findings meant the conversion and unjust-enrichment claims accrued in 2013 and that the applicable limitations periods expired in 2016. Because the plaintiffs filed the action in 2019, the claims were time-barred unless the plaintiffs could establish equitable estoppel. The erroneous instruction caused the jury to reject the statute-of-limitations defense without reaching that issue.

The court held that the instructional error was plain, affected substantial rights, and went to the central issue in the case. Entering judgment for the plaintiffs would disregard the jury’s 2013 accrual findings, while entering judgment for the defendants would disregard the fact that the erroneous instruction prevented the jury from deciding equitable estoppel. The court therefore granted the defendants’ Rule 59 motion for a new trial on the conversion and unjust-enrichment claims and denied their Rule 50(b) motion for judgment on those claims.

Release defense

The Sater Defendants argued that a release in a Confidential Assistance Agreement protected them. The court rejected that argument. They were not named parties to the agreement, and the jury reasonably could find that the release was fraudulently induced because the evidence showed that Sater’s ownership of Litco was concealed. The jury also reasonably could find that the Sater Defendants were not intended third-party beneficiaries of the release. The court held that a new trial on the release issue was unwarranted.

Other arguments

The court rejected the defendants’ argument that the plaintiffs’ forensic-accounting expert had undermined the case. The court also rejected the argument that the jury instructions and verdict form improperly failed to distinguish between Almaty and BTA. The court concluded that the evidence involved intermingled funds and that the claims arose from the same facts, making the joint presentation and collective reference to the plaintiffs proper.

The defendants’ request to vacate punitive damages against Sater was denied as moot because those damages were awarded only on the conversion claim, which would receive a new trial. The court also rejected the argument that the compensatory damages involved double or triple counting. It concluded that the jury had allocated damages among multiple theories to avoid awarding more than once for the same injury. Although the conversion and unjust-enrichment awards had to be vacated for a new trial, the damages award on the money-had-and-received claim remained valid.

Disposition

Judge Koeltl granted the defendants’ Rule 59 motion for a new trial on the conversion and unjust-enrichment claims. He denied the defendants’ Rule 50(b) motion for judgment on those claims. He denied the defendants’ Rule 59 motion for a new trial and Rule 50(b) motion for judgment on the money-had-and-received claim. The plaintiffs’ request to enter their proposed judgment was denied as moot, and the parties were directed to submit a joint status report.