City of Almaty, Kazahkstan v. Mukhtar Ablyazov

Background

The City of Almaty and BTA Bank JSC sought to recover funds allegedly embezzled in Kazakhstan and laundered in the United States. The litigation began as a state-court interpleader action and was removed to federal court. The federal court previously held that it had original and removal jurisdiction over the action under 28 U.S.C. §§ 1330 and 1441(d).

The Kazakh Entities later amended their crossclaims to add a state-law claim seeking recognition of a United Kingdom judgment against Ilyas Khrapunov and in favor of BTA. In June 2020, the court dismissed that claim for lack of supplemental jurisdiction, holding that it did not form part of the same constitutional case as the claims supporting original jurisdiction. The court also ordered the Kazakh Entities to show cause why a related judgment-recognition claim against Mukhtar Ablyazov should not be dismissed for the same reason.

BTA moved for reconsideration. It argued for the first time that a separate standard for ancillary jurisdiction applied and that the court should not have used the common-nucleus-of-operative-fact test from United Mine Workers v. Gibbs. BTA also moved for partial summary judgment and requested oral argument.

Legal standard for reconsideration

The court explained that reconsideration is governed by Federal Rule of Civil Procedure 59(e) and Local Rule 6.3. It is available only when the moving party identifies an intervening change in controlling law, new evidence, a clear error, or a need to prevent manifest injustice. It is not a way to present arguments that could have been raised earlier or to obtain a second opportunity to litigate an issue.

Reasoning on the Khrapunov claim

The court found that BTA had already addressed the jurisdictional issue in its earlier briefing. BTA had argued that the Gibbs test was the applicable test and had relied on the same authorities that it later challenged. Because BTA did not previously argue that Gibbs was inapplicable or that ancillary jurisdiction was governed by a different standard, the court held that BTA had waived those arguments for purposes of reconsideration.

The court nevertheless considered BTA’s new arguments and rejected them on the merits. Article III of the Constitution limits federal jurisdiction over additional claims to claims forming part of the same constitutional case or controversy as a claim within the court’s original jurisdiction. Section 1367(a) codifies that limitation. Under Gibbs, state-law claims must arise from a common nucleus of operative fact with the claims supporting federal jurisdiction.

The court explained that the Second Circuit had not held that claims described as ancillary are exempt from Gibbs. Although ancillary jurisdiction can cover claims incidental to matters already before a court, and pendent jurisdiction generally concerns additional claims without an independent jurisdictional basis, both types of jurisdiction still must satisfy the applicable factual-relationship requirement. The court also rejected BTA’s argument that its claim should receive a looser standard because BTA had voluntarily intervened and pursued affirmative claims.

Applying Gibbs and the Second Circuit’s decision in Lyndonville, the court held that a claim to recognize or enforce a judgment turns on the existence and validity of that judgment, not on the facts underlying separate tort or other claims. The court rejected BTA’s attempt to distinguish Lyndonville based on possible evidence concerning the United Kingdom court’s personal jurisdiction over Khrapunov. It concluded that the judgment-recognition claim did not share a common nucleus of operative fact with the claims supporting original jurisdiction and that the court had not clearly erred in dismissing it.

Reasoning on the Ablyazov claim

The court applied the same analysis to the judgment-recognition claim against Ablyazov. It found even less possibility of factual overlap because personal jurisdiction over Ablyazov was not disputed, and the facts relevant to the claim were limited to the existence and validity of the United Kingdom judgments. The court also held that allegations that the judgments may have motivated fraudulent transfers to Triadou did not create supplemental jurisdiction, particularly because the related fraudulent-conveyance claims had been dismissed and were state-law claims.

The court therefore concluded that it lacked subject-matter jurisdiction over the judgment-recognition claim against Ablyazov. Because of that jurisdictional ruling, it denied BTA’s motion for partial summary judgment on that claim.

Remand

BTA alternatively asked the court to remand the state-law claims. The court declined to do so. It explained that 28 U.S.C. § 1447(c) refers to remanding a case when the district court lacks subject-matter jurisdiction, and that neither the Supreme Court nor the Second Circuit had decided whether that provision authorizes remand of individual claims while the rest of a case remains in federal court. The court read the statute as contemplating remand of an entire case, not individual claims whose jurisdictional defect arose after removal. It also noted that the judgment-recognition claims did not originate in state court.

The court concluded that dismissal without prejudice for refiling in state court was appropriate and that BTA was not entitled to remand.

Requests for immediate appellate review

BTA asked the court to enter a partial final judgment under Federal Rule of Civil Procedure 54(b) or certify an interlocutory appeal under 28 U.S.C. § 1292(b). The court declined both requests. It found that BTA’s late-raised arguments did not justify interlocutory review, that applying Lyndonville did not present a substantial disagreement about a controlling legal question, and that the jurisdictional issues should not be reviewed piecemeal.

Disposition

The court denied BTA’s motion for reconsideration. It denied BTA’s motion for partial summary judgment and denied BTA’s motion for oral argument as moot. It dismissed without prejudice BTA’s judgment-recognition claim against Ablyazov and concluded that BTA’s judgment-recognition claims were subject to dismissal without prejudice for lack of subject-matter jurisdiction.