Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_99-cv-03073/USCOURTS-cand-3_99-cv-03073-40/pdf.json

Nature of Suit Code: 290
Nature of Suit: Other Real Property Actions
Cause of Action: 28:1332 Diversity-Fraud

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United States District Court

For the Northern District of California

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United States District Court

For the Northern District of California

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

UNIVERSAL TRADING & INVESTMENT

CO,

Plaintiff,

 v.

 KIRITCHENKO ET AL,

Defendant. /

No. C-99-03073 MMC (EDL)

ORDER VACATING JANUARY 30, 2007

HEARING AND GRANTING MOTION

FOR PROTECTIVE ORDER AND

MOTION TO QUASH SUBPOENAS

On or about November 20, 2006, Plaintiff served a subpoena on non-party Robert Valdez,

former tenant and now owner of one of Defendant Kiritchenko’s San Francisco properties (the

“Jackson Street property”), seeking information related to Valdez’s lease and acquisition of the

Jackson Street property. Defendants, joined by Valdez, objected to the subpoena on the grounds of

relevance and burdensomeness, moved to quash the subpoena, and sought a protective order

precluding such discovery. See Motion (Doc. No. 1156). The motion was fully briefed by the

parties. Because the matter is appropriate for decision without oral argument, the Court vacates the

January 30, 2007 hearing. 

I. Factual Background

The Jackson Street property was one of several properties subject to a writ of attachment

ordered by this Court on January 24, 2000 (Doc. Nos. 296-301) and May 24, 2004 (Doc. No. 712) 

(granting application for issuance of additional writs of attachment, including attachment of the

Jackson Street property). On or around August 9, 2006, Valdez and Kiritchenko entered into a

contract for the purchase and sale of the Jackson Street property. On November 3, 2006,

Kiritchenko moved the Court to release the attachment on the Jackson Street property in order to

consummate the sale. Plaintiff opposed the motion on the grounds that Plaintiff suspected the

Case 3:99-cv-03073-MMC Document 1212 Filed 01/25/07 Page 1 of 3
United States District Court

For the Northern District of California

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transaction was fraudulent and the property was undervalued. After full consideration of the papers

and the arguments set forth at the hearing, the Court granted Kiritchenko’s motion and released the

attachments on November 14, 2006, subject to certain conditions. See Order Regarding Property

Sale and Sale Proceeds (Doc. No. 1097) (M.J. Laporte). Specifically, Kiritchenko was ordered to

place the proceeds of the sale in a separate, blocked, frozen account bearing interest, and the

attachment lien on the sale property automatically transferred to this account. Plaintiff objected to

the decision and sought a review by the District Judge in an emergency motion, arguing again that

the circumstances of the transaction evinced a fraudulent transfer. The Court denied the motion to

stay and overruled the objections. See Order Denying Motion to Stay, and Objections to, Magistrate

Judge Laporte’s Order Regarding Property Sale and Sale Proceeds (Doc. No. 1101) (J. Chesney). 

The sale was then completed. Plaintiff now seeks discovery relating to the lease and sale of the

Jackson Street property transaction, including appraisals of the property, agreements with

Kiritchenko, correspondence with Kiritchenko, payment records, closing documents, mortgage

documents, and insurance documents.

II. Discussion

Plaintiff is entitled to seek discovery related to the claims or defenses in this matter, and may

seek information reasonably calculated to lead to the discovery of admissible evidence. Fed. R. Civ.

P. 26(b)(1). Plaintiff’s Second Amended Complaint (“SAC”) alleges that Defendants carried out

several illegal schemes, through which it misappropriated hundreds of millions of dollars from

Ukraine. SAC ¶ 37. The alleged schemes included misappropriating funds from the exportation of

ferrous metals and mineral ore by a state-run agency, obtaining money under the false pretense of

promising to deliver wheat to the government, illegally acquiring state-owned grain and selling it

back to the government at an undisclosed profit, unlawfully diverting proceeds from the sale of

natural gas through a government-created monopoly secretly benefitting Defendants, and falsifying

the actual cost of prefabricated houses sold to the government. SAC ¶ 37. Defendants allegedly

concealed or laundered the misappropriated funds by, inter alia, purchasing property in California

with the misappropriated monies and assets. See SAC ¶ 39. Further, Defendants allegedly

transferred property and assets fraudulently to other Defendants, for no real consideration, in order

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Plaintiff’s Opposition explains its reasons for serving a subpoena on a second person, Eugene

Shenkar. However, that person and the subpoena served on him were not addressed in Defendants’

Motion. 

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to hinder, delay, or defraud Ukraine. SAC ¶¶ 234-238. Plaintiff alleges that Ukraine suffered

substantial damages as a direct and proximate cause of the wrongful acts alleged in the SAC. See,

e.g., SAC ¶ 239.

Plaintiff’s subpoena seeks discovery of the Jackson Street property transaction because

Plaintiff believes the transaction to be a fraudulent conveyance. Motion at 2. Plaintiff believes the

property was sold to the property’s tenant at a below-market price. Id. Moreover, Plaintiff “believes

it was against Kiritchenko’s interest to sell the attached property, because [he] would lose

substantial rent revenue;” however, “Kiritchenko would be able to profit from the transaction [with]

a ‘side deal’ with the buyer to pay him the remaining value of the property outside of escrow.” Id.. 

Plaintiff does not address the effect of the Court’s Order requiring the proceeds of the sale to

be placed in a separate, blocked, and frozen but interest bearing account. Further, Plaintiff’s SAC

does not contain any allegations related to the Jackson Street property or its tenant, nor does the

SAC allege this type of “loss of rent” or “side deal” injury. Plaintiff’s SAC alleges only that

Defendants engaged in fraudulent transactions with other Defendants, with respect to properties

other than the Jackson Street property. Thus, even if Plaintiff’s speculation were true, the Jackson

Street property transaction, and any damage to Ukraine occurring as a result, is separate from and

not related to the claims or defenses in this matter. Moreover, the funds from the sale are in a

blocked account. Accordingly, discovery related to the Jackson Street property transaction is

irrelevant and outside the scope of permissible discovery. See Fed. R. Civ. P. 26(b)(1). Therefore,

the Court GRANTS Defendants’ Motion to Quash, and GRANTS Defendants’ Motion for a

Protective Order precluding discovery related to the Jackson Street property transaction.1

IT IS SO ORDERED.

Dated: January 25, 2007 ELIZABETH D. LAPORTE

United States Magistrate Judge

Case 3:99-cv-03073-MMC Document 1212 Filed 01/25/07 Page 3 of 3