Kingstown Capital Management, L.P. v. Vitek

Background

Several related investment firms operating from Manhattan invested in ORCO Property Group, S.A., a Luxembourg-based real estate development company whose shares traded on European exchanges. The plaintiffs alleged that Radovan Vitek secretly acquired control of ORCO, used associates and companies to conceal his purchases, caused valuable assets to be transferred at below-market prices, and diluted minority shareholders’ interests.

The complaint included five Kingstown entities and two foreign entities, Investhold Ltd. and Verali Limited. It asserted nine causes of action, including claims under the Racketeer Influenced and Corrupt Organizations Act (RICO), New York claims for tortious interference with contract, conversion, fraud, unjust enrichment, and negligent misrepresentation.

Three Kingstown plaintiffs had filed an earlier related case in Luxembourg in 2015 against Vitek, ORCO, CPI Property Group, S.A., Jean-François Ott, and others. That case concerned substantially the same alleged plan to take control of ORCO, issue dilutive shares, and dispose of ORCO-related assets. The Luxembourg case had not yet reached the merits, and a motion to dismiss it remained pending.

International Comity

The court treated the request to abstain under international comity as a motion to dismiss for lack of subject-matter jurisdiction. It found that the New York and Luxembourg proceedings were parallel because they involved substantially the same parties, conduct, alleged wrongdoing, and injury, even though the cases included different defendants and legal theories.

The court found exceptional circumstances supporting abstention. Kingstown had waited more than four years after starting the Luxembourg case to file the New York action. The alleged conduct primarily occurred in Europe and concerned a Luxembourg company, European assets, and European corporate-governance laws. The New York connections consisted mainly of Kingstown’s Manhattan offices, several visits by Ott, and communications received in New York. The court also found that simultaneous litigation would create significant burdens involving foreign witnesses, documents, translation, international discovery, and European privacy laws.

The court granted the motions to dismiss Kingstown’s claims on international-comity grounds. Investhold was not a plaintiff in the Luxembourg case, so the court considered international comity only as to Kingstown’s claims.

Forum Non Conveniens

The court also applied the doctrine of forum non conveniens, which allows dismissal when another available forum is substantially more appropriate for resolving the dispute. The court considered the deference owed to the plaintiffs’ choice of forum, whether Luxembourg was adequate, and the private and public interests supporting each forum.

The court gave the plaintiffs’ choice of New York diminished deference. Although the Kingstown entities operated from Manhattan, the court found that the case had few meaningful ties to New York and that filing in New York after the Luxembourg case created indications of forum shopping. The court also noted the potential for treble damages under RICO, but concluded that this was not a legitimate reason to select New York as the forum.

The court found Luxembourg adequate. It described Luxembourg as having a sophisticated legal system capable of addressing complex financial fraud, conversion, fiduciary-duty, and other business claims. The absence of a Luxembourg equivalent to RICO did not make Luxembourg inadequate. The court also found that the defendants were subject to service and jurisdiction in Luxembourg through their connections to CPI Property Group, S.A., which had declared itself subject to Luxembourg jurisdiction.

The private-interest factors favored Luxembourg because the defendants, witnesses, and documentary evidence were overwhelmingly located in Europe, outside this court’s subpoena power. The public-interest factors also favored Luxembourg because the dispute concerned a Luxembourg company, European conduct, and questions of Luxembourg and other foreign law. The court therefore concluded that Luxembourg was the more appropriate forum.

Disposition

The defendants’ motions to dismiss filed on February 14, 2020, and April 17, 2020, were granted. The action was dismissed against all defendants under the forum non conveniens doctrine, including defendants who had not been served or had not appeared. The court did not decide whether it had personal jurisdiction over the defendants. The clerk was directed to close the case.