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 misappropriated from Almaty and BTA were laundered through several United States real-estate investments, including the Tri-County Mall, World Health Networks, Trump SoHo Hotel, Syracuse Center, and Creacard S.A. The plaintiffs asserted claims for conversion, unjust enrichment, and money had and received.

A jury previously found for the plaintiffs. The court later granted the defendants’ motion for a new trial on the conversion and unjust-enrichment claims because the jury had been incorrectly instructed about when those claims accrued for purposes of the statute of limitations. The court stated that, under the correct instruction, the three-year limitations period would have expired in 2016, before this case was filed in 2019. The jury had not decided whether equitable estoppel prevented the defendants from relying on the limitations defense.

Summary-judgment motion

The defendants moved for summary judgment under Federal Rule of Civil Procedure 56. Summary judgment is appropriate only when there is no genuine dispute about a fact that could affect the result and the moving party is entitled to judgment as a matter of law. The defendants argued that the conversion and unjust-enrichment claims were time-barred and that equitable estoppel could not apply as a matter of law.

The parties agreed that the claims accrued in 2013, that the limitations period was three years, and that the plaintiffs bore the burden of proving equitable estoppel. Under New York law, equitable estoppel may prevent a defendant from asserting a statute-of-limitations defense when the defendant’s fraud, misrepresentation, or concealment caused the plaintiff to delay filing suit. The plaintiff must identify a deceptive act separate from the conduct forming the claim and must show diligence in investigating and pursuing the claim.

The court found that the defendants had not shown entitlement to judgment as a matter of law. First, the public filings in a 2013 lawsuit involving the Tri-County Mall did not necessarily show that the plaintiffs knew, or should have known, that the dispute involved funds stolen from them or a broader laundering scheme. The settlement in that lawsuit was confidential, and the public docket did not disclose that a settlement had occurred or reveal its terms.

Second, the parties disputed what Sater told an investigator, Garske, during a 2015 meeting and whether any information learned by the investigator should be attributed to the plaintiffs. The court also noted a dispute about whether an agreement barred the investigator from disclosing Sater’s identity to the plaintiffs. Third, the plaintiffs’ 2015 crossclaims in a related case concerned a different investment and did not mention Sater, the Tri-County Mall, or the other projects at issue here. Those crossclaims therefore could not establish as a matter of law that the plaintiffs knew the facts underlying the present claims.

The court also noted that the defendants had not made specific arguments concerning MeM and had challenged equitable estoppel only as to the Tri-County Mall proceeds, not the four other investments. The defendants’ motion for summary judgment was denied.

Motion to disqualify counsel

The defendants conditionally moved to disqualify Boies Schiller as trial counsel based on the possible testimony of Matthew Schwartz, an attorney representing the plaintiffs who had also represented them in the related case. The defendants relied on the advocate-witness rule, which can prevent a lawyer from acting as trial advocate when the lawyer is likely to give necessary and substantially prejudicial testimony.

The court ruled that the defendants had failed to timely identify Schwartz as a potential witness under Federal Rule of Civil Procedure 26. The court found no substantial justification for the delay and found that allowing the defendants to call Schwartz on the eve of trial would prejudice the plaintiffs. As a sanction under Rule 37(c)(1), the court precluded the defendants from calling Schwartz as a witness at trial.

That sanction eliminated the need to disqualify Schwartz or Boies Schiller. The court also held independently that the defendants had not shown that Schwartz’s testimony was necessary, because they identified four other witnesses who could testify about the same issues. The defendants likewise had not shown that Schwartz’s testimony would be prejudicial; their account of what he would say was disputed and speculative. The motion to disqualify Schwartz and Boies Schiller was denied.

Disposition

The court denied the defendants’ motion for summary judgment and denied their motion to disqualify Boies Schiller as trial counsel. The court directed the clerk to close the docket entry for the summary-judgment motion.