1 UNITED STATES COURT OF APPEALS

2

3 FOR THE SECOND CIRCUIT

4

5 August Term, 2002

6

7

8 (Argued: August 5, 2002 Decided: March 7, 2003)

9

10 Docket Nos. 02-7566, 02-9302

11

12 - - - - - - - - - - - - - - - - - - - -x

13

14 MOTOROLA CREDIT CORPORATION

15 and NOKIA CORPORATION,

16

17 Plaintiffs-Appellees,

18

19 v.

20

21 KEMAL UZAN, CEM CENGIZ UZAN, MURAT HAKAN UZAN,

22 MELAHAT UZAN, AYSEGUL AKAY, ANTONIO LUNA BETANCOURT,

23 UNIKOM ILETISM HIZMETLERI, STANDART PAZARLAMA A.S.

24 and STANDART TELEKOMUNIKASYON BILGISAYAR

25 HIZMETLERI A.S.,

26

27 Defendants-Appellants.

28

29

30 - - - - - - - - - - - - - - - - - - - -x

31

32 MOTOROLA CREDIT CORPORATION and NOKIA CORPORATION,

33

34 Plaintiffs-Counter-Defendants-Appellees,

35

36 v.

37

38 MURAT HAKAN UZAN and CEM CENGIZ UZAN,

39

40 Defendants-Counter-Claimants-Appellants,

41

42

43 KEMAL UZAN, MELAHAT UZAN, AYSEGUL AKAY, ANTONIO LUNA

44 BETANCOURT, UNIKOM ILETISM HIAMETLERI PAZARLAMA A.S.,

45 STANDART PAZARLAMA A.S., STANDART TELEKOMUNIKASYON

46 BILGISAYAR HIZMETLERI A.S.,
2

1 Defendants - Appellants,

2

3 MOTOROLA, INC., KROLL ASSOCIATES, INC., CHRISTOPHER B.

4 GALVIN, KEITH J. BANE, WALTER KEATING, ED HUGHES,

5 and ERNST KRAMER,

6

7 Counter-Defendants.

8 - - - - - - - - - - - - - - - - - - - -x

9

10 Before: JACOBS, CABRANES, and F.I. PARKER,

11 Circuit Judges.

12

13

14 In Docket No. 02-7566, an appeal from the May 9, 2002

15 order entered in the United States District Court for the

16 Southern District of New York (Rakoff, J.), granting

17 Plaintiffs’ application for a preliminary injunction.

18 Remanded.

19 In Docket No. 02-9302, an appeal from the September 30,

20 2002 order denying Defendants’ motion to compel arbitration

21 and to stay all proceedings pending arbitration, and

22 granting Plaintiffs’ motion to stay three arbitrations

23 pending in Switzerland. Remanded.

24

25 ROBERT F. SERIO, Gibson, Dunn &

26 Crutcher LLP, New York, New

27 York, for Defendants-Appellants

28 Kemal Uzan et al.

29

30 Kenneth M. Bialo (R. Stan

31 Mortensen, James A. Baker, IV,

32 James R. Heavner, Jr., of

33 counsel), Baker Botts L.L.P.,

34 Washington, DC), for Defendants-
3

1 Appellants Kemal Uzan, Cem

2 Cengiz Uzan, Murat Hakan Uzan,

3 Melahat Uzan, and Aysegul Akay.

4

5 HOWARD H. STAHL (Steven K.

6 Davidson, Charles G. Cole, Bruce

7 C. Bishop, Gordon M. Clay, on

8 the brief), Steptoe & Johnson

9 LLP, Washington, DC, for

10 Plaintiff-Appellee Motorola

11 Credit Corporation.

12

13 JASON BROWN (Michael Donofrio,

14 on the brief), Holland & Knight

15 LLP, New York, New York, for

16 Plaintiff-Appellant Nokia

17 Corporation.

18

19 PER CURIAM:

20

21 In Docket No. 02-7566, Defendants appeal from the May

22 9, 2002 preliminary injunction entered in the United States

23 District Court for the Southern District of New York

24 (Rakoff, J.), in aid of Plaintiffs’ claims under the

25 Racketeer Influenced and Corrupt Organizations Act (“RICO”),

26 18 U.S.C. §§ 1961-1968, and certain Illinois state and

27 common law claims. The plaintiff corporations financed

28 cell-phone and communications networks set up in Turkey by

29 Telsim Mobil Telekomunikasyon Hizmetleri A.S. (“Telsim”),

30 and--following a series of non-payments and serious concern

31 that the loans would not be repaid--are suing persons who

32 are alleged to control Telsim and its onetime chief
4

1 stockholder, Rumeli Telefon Sistemleri A.S. (“Rumeli

2 Telefon”), and to have impaired collateral by diluting

3 Telsim stock and other maneuvers. Arbitrations concerning

4 the underlying financing transactions were initiated in

5 Switzerland, and have been stayed by the Southern District

6 of New York.

7 We conclude that the RICO claims based on a third8 party’s failure to pay on a debt are unripe. This ruling

9 does not strip the district court of all jurisdiction, but

10 it is likely to require reconsideration by the district

11 court of a number of issues, rulings, and orders--no doubt

12 aided by further proceedings being conducted on the merits. 

13 We therefore remand for the district court to dismiss the

14 RICO claims, without prejudice to reassertion at some

15 appropriate later time, and to exercise discretion as to

16 whether to retain supplemental jurisdiction over the state

17 law claims. However, we do not vacate the preliminary

18 injunction.

19 In Docket No. 02-9302, Defendants appeal orders of the

20 district court denying their motions to compel arbitration,

21 staying three arbitrations pending in Switzerland, and

22 denying Defendants’ motion to stay all proceedings and the
5

1 challenged orders pending arbitration. In light of our

2 decision in 02-7566, we remand the issues in 02-9302 to the

3 district court for reconsideration.

4 Nostra sponte, we hereby consolidate these appeals. 

5

6 BACKGROUND

7 Plaintiff Motorola Credit Corporation (“MCC”) is the

8 financing affiliate of Motorola, Inc., which manufactures

9 and services cellular telecommunications systems. Plaintiff

10 Nokia Corporation sells switching technology.

11 The individual Defendants are several members and one

12 close associate of the prominent Uzan family of Turkey,

13 which controls Telsim, and Rumeli Telefon. Neither Telsim

14 nor Rumeli Telefon is a party to this action. The Uzans

15 also control Defendants Unikom Iletism Hizmetleri Pazarlama

16 A.S., Standart Pazarlama A.S., and Standart Telekomunikasyon

17 Bilgisayar Hizmetleri A.S. (“Standart Telekom”). 

18 In 1998, MCC entered into several overlapping

19 agreements with Telsim and Rumeli Telefon. MCC loaned

20 Telsim $360 million to purchase cellular infrastructure and

21 equipment from Motorola Ltd. (a MCC affiliate), and $200

22 million to enable Telsim to acquire a 25-year nationwide
6

1 cellular license. As collateral, Rumeli Telefon--which then

2 owned approximately 73.5% of Telsim--pledged 51% of Telsim’s

3 outstanding shares. In subsequent years, MCC provided

4 additional financing--eventually totaling approximately $2

5 billion--and the pledged interest was increased to 66% of

6 Telsim’s outstanding shares.

7 Each of these agreements provides that it “shall be

8 governed and interpreted in accordance with the internal

9 laws (without regard to the laws of conflicts) of

10 Switzerland,” and that any unresolved dispute “aris[ing]”

11 under the agreement shall be decided, to the exclusion of

12 the ordinary courts, by a three-person arbitration panel in

13 Switzerland in accordance with the International Arbitration

14 Rules of the Zurich Chamber of Commerce. 

15 Also in 1998, Nokia entered into a smaller but similar

16 arrangement with Telsim and Rumeli Telefon. The initial

17 loan was extended by Nokia’s bank, ABN-Amro, backed by the

18 credit of Nokia. As security, Rumeli Telefon pledged 5% of

19 Telsim’s outstanding shares. In subsequent years, Nokia

20 extended additional financing to Telsim, approximately $800

21 million in all, and Rumeli Telefon increased the pledged

22 interest to 7.5% of Telsim’s outstanding shares.
 

1See infra note 5.

7

1 Each of these agreements provides that it “shall be

2 governed by, and shall be construed in accordance with Swiss

3 law,” and that all disputes “relating to” the agreement

4 shall be resolved by a three-member arbitration panel in

5 Switzerland in accordance with the International Arbitration

6 Rules of the Zurich Chamber of Commerce.

7 Of these colossal loans from MCC and Nokia, Telsim has 

8 repaid approximately $200 million since 1998, and only $5

9 million since mid-2000.

10 A special shareholders meeting of Telsim was convened

11 on April 24, 2001. MCC and Nokia contend that it was

12 convened for the purpose of devaluing the pledges of Telsim

13 shares. Defendants contend that the purpose was to protect

14 against a feared loss of control over Telsim. In any event,

15 the shareholders at the meeting tripled the number of

16 outstanding Telsim shares. Although current shareholders

17 were afforded preemption rights to purchase the newly issued

18 shares, Rumeli Telefon (the largest shareholder) waived

19 these rights, and they were transferred to Defendant

20 Standart Telekom (another Uzan-controlled company), which

exercised them. Partly as a result of this transfer,1 21
8

1 Standart Telekom raised its stake in Telsim from 0.32% to

2 66.48%, while Rumeli Telefon’s holding (all of which was

3 pledged to MCC and Nokia) was reduced to 24.54%--severely

4 diluting the value of Plaintiffs’ collateral.

5 Plaintiffs presented additional evidence of the

6 Defendants’ maneuvers. For example, the Defendants

7 attempted to alter the voting rights of Telsim’s outstanding

8 shares in a way that would have reduced the voting power of

9 the pledged shares and thereby further impaired the

10 collateral. Defendants also allegedly caused false criminal

11 charges to be initiated in Turkey against MCC and Nokia

12 executives, on the claimed grounds that the executives had

13 made “explicit and armed threats” against the Uzans to kill,

14 blackmail, and abduct them, and offered to drop the charges

15 if Plaintiffs deferred payment on the outstanding loans. 

16 Defendants also diverted revenue and assets away from

17 Telsim.

18 Plaintiffs contend that the Defendants’ activities

19 throughout this period were intended to thwart Plaintiffs’

20 ability to foreclose on the loans and exercise their rights

21 with respect to the pledged interest.

22 Before this lawsuit was filed, ABN-Amro began an
 

2The three Swiss arbitrations that the district court

stayed are between and among entities that are party to

contractual arbitration agreements, but that are not all

present in this lawsuit.

9

1 arbitration against Telsim in Switzerland. In this

2 arbitration, Telsim attempted to reschedule its repayments

3 based on a theory of “economic force majeure.” Shortly

4 after this lawsuit was filed, Telsim began an arbitration

5 proceeding in Switzerland against MCC in which Telsim also

6 invoked “economic force majeure” in an effort to reschedule

7 its repayments. On June 7, 2002, Rumeli Telefon commenced

8 two arbitrations against the Plaintiffs in Switzerland,

9 seeking damages and Plaintiffs’ compelled consent to the

10 deposit of the pledged Telsim shares with the arbitral

11 forum. On October 15, 2002, the district court issued an

12 opinion granting Plaintiffs’ motion to stay the Swiss

13 arbitrations initiated by Telsim and Rumeli Telefon. That

14 stay is among the rulings challenged on the appeal in Docket

No. 02-9302, and subject to remand.

2 15

16 In the complaint in the Southern District of New York,

17 both Plaintiffs alleged violations of RICO (Counts I-IV),

18 and sought the imposition of a constructive trust or

19 equitable lien (Count XII). In addition, MCC alleged
10

1 Illinois state and common law claims (Counts V-VII, XI), and

2 violations of the Computer Fraud and Abuse Act, 18 U.S.C. §

3 1030(a)(4) (Count VIII), and the Electronic Communications

4 Privacy Act, 18 U.S.C. §§ 2511(1)(a), 2701(a)(2) (Counts IX5 X). 

6 On May 9, 2002, following a six-day evidentiary

7 hearing, the district court granted the Plaintiffs’ motion

8 for a preliminary injunction, which (inter alia) directs the

9 Defendants “to deposit into the [district court’s] registry

10 . . . the shares of stock of Telsim . . . held by defendant

11 Standart [Telekom] . . . and issued to Standart [Telekom]

12 during a meeting of Telsim shareholders on April 24, 2001,

13 comprising at least 73.5% of the shares of Telsim stock

14 currently outstanding.” On May 21, 2002, the district court

15 stated its reasons for that order. Motorola Credit Corp. v.

16 Uzan, 202 F. Supp. 2d 239 (S.D.N.Y. 2002). The district

17 court concluded (insofar as the opinion bears on this

18 appeal) that (1) injunctive relief is available to a private

19 plaintiff bringing a civil action under RICO; (2) Plaintiffs

20 demonstrated a sufficient likelihood of success on the

21 merits of their RICO claims; (3) Plaintiffs had standing to

22 bring their RICO claims against Defendants regardless of
11

1 whether they pursued remedies against Telsim; (4) MCC was

2 independently entitled to injunctive relief under the

3 Illinois state and common law claims; and (5) the

4 arbitration provisions in the various agreements did not

5 divest the court of jurisdiction. Defendants now appeal.

6

7 DISCUSSION

8 This case raises a host of unusual questions, and the

9 answers have enormous consequences to the parties and non10 parties alike. Today, however, we focus on a single issue

11 that was incorrectly decided by the district court, and that

12 may have impact on many issues confided to the discretion of

13 the district court.

14 “We review a district court’s decision to grant . . . a

15 preliminary injunction for abuse of discretion.” Int’l Bhd.

16 of Teamsters v. Local Union No. 810, 19 F.3d 786, 789 (2d

17 Cir. 1994). “Abuse of discretion usually consists of

18 clearly erroneous findings of fact or the application of an

19 incorrect legal standard.” Id. To obtain a preliminary

20 injunction, a plaintiff must show “a threat of irreparable

21 injury and either (1) a probability of success on the merits

22 or (2) sufficiently serious questions going to the merits of
 

3It is said that a plaintiff who seeks a “mandatory”

injunction, rather than a “prohibitory” injunction, must

demonstrate a “clear” or “substantial” likelihood of

success. Beal v. Stern, 184 F.3d 117, 122-23 (2d Cir.

1999). The district court expressed doubts that MCC and

Nokia were seeking mandatory injunctive relief (not often an

easy distinction to draw), but concluded that the heightened

standard would be satisfied if triggered.

12

1 the claims to make them a fair ground of litigation, and a

2 balance of hardships tipping decidedly in favor of the

3 moving party.” Time Warner Cable v. Bloomberg L.P., 118

F.3d 917, 923 (2d Cir. 1997).3 4

5 The district court determined that Plaintiffs “are

6 substantially likely to succeed on their RICO claim under

7 Count III.” Motorola, 202 F. Supp. 2d at 248. Necessary to

8 this determination was the court’s conclusion that

9 Plaintiffs had standing to bring their RICO claims and to

10 seek injunctive relief based on those claims. We conclude

11 that, under First Nationwide Bank v. Gelt Funding Corp., 27

12 F.3d 763, 768 (2d Cir. 1994), the Plaintiffs lack statutory

13 standing under RICO because their claims are unripe. 

14 Although the district court determined that MCC is also

15 entitled to the preliminary injunction based on its Illinois

16 state and common law claims, the dismissal of the RICO

17 claims has potential bearing on the district court’s

18 exercise of supplemental jurisdiction over the non-federal
13

1 claims. We therefore remand for the district court to

2 decide, under 28 U.S.C. § 1367(c), whether it will retain

3 jurisdiction over the state law claims.

4 Under RICO, “[a]ny person injured in his business or

5 property by reason of a violation of section 1962 of this

6 chapter may sue therefor in any appropriate United States

7 district court.” 18 U.S.C. § 1964(c). To satisfy RICO’s

8 standing requirements, a plaintiff must demonstrate, “(1) a

9 violation of section 1962; (2) injury to business or

10 property; and (3) causation of the injury by the violation.” 

11 Hecht v. Commerce Clearing House, Inc., 897 F.2d 21, 23 (2d

12 Cir. 1990). In First Nationwide, this Court considered a

13 bank’s RICO claim arising out of fraudulently induced loans. 

14 We held that “to the extent [the bank’s] complaint is

15 predicated on loans that have not been foreclosed, its

16 claims are not ripe for adjudication because it is uncertain

17 whether [the bank] will sustain any injury cognizable under

18 RICO.” First Nationwide, 27 F.3d at 767.

19 Our holding in First Nationwide rested on the general

20 principle that “a cause of action does not accrue under RICO

21 until the amount of damages becomes clear and definite.” 

22 Id. at 768. The “clear and definite” amount of damages

23 suffered by a secured creditor who is fraudulently induced
14

1 to make a loan and seeks to recover the value of the loan

2 itself, “cannot be established until it is finally

3 determined whether the collateral is insufficient 

4 to make the plaintiff whole, and if so, by how much.” Id.

5 That is because the RICO damages are netted against recovery

6 obtained from collateral and other sources:

7 Because the fraud defendant is not liable for all

8 losses that may occur, but only for those actually

9 suffered, only after the lender has exhausted the

10 bargained-for remedies available to it can the

11 lender assert that it was damaged by the fraud,

12 and then only to the extent of the deficiency.

13

14 Id. In short, “a plaintiff who claims that a debt is

15 uncollectible because of the defendant’s conduct can only

16 pursue the RICO treble damages remedy after his contractual

17 rights to payment have been frustrated.” Id. We therefore

18 concluded that until the secured creditor foreclosed on the

19 loans, the creditor’s claims were not ripe for suit. Id. at

20 769.

21 It is undisputed that Plaintiffs have not foreclosed on

22 the loans at issue here, and that arbitrations are pending

23 in Switzerland that concern the same underlying

24 transactions. The district court undertook to distinguish

25 First Nationwide in the following terms: 

26 In First Nationwide, . . . the plaintiff

27 sought to bring a RICO claim against the very
15

1 borrower on whose collateral the plaintiff had

2 not yet fully foreclosed and as to whom

3 ordinary collection proceedings were far from

4 completed. Here, by contrast, the borrower

5 (Telsim) is not a party at all, and the named

6 defendants, who are accused, inter alia, of

7 fraudulently inducing the plaintiffs to extend

8 the $2.7 billion in loans and of diverting it

9 to their benefit, are independently liable for

10 this known and certain sum, regardless of

11 whether plaintiffs pursue their alternative

12 remedies against Telsim or not.

13

14 Motorola, 202 F. Supp. 2d at 249. 

15 We think that this distinction is invalid. True, the

16 borrower (Telsim) is not a party here, and this is not a

17 contract action. It is likewise true that the present

18 claims are alleged under a wholly distinct theory (fraud)

19 that would render Defendants liable independently of Telsim. 

20 But the RICO damages sought are in respect of a loss that

21 would be abated to the extent that: Plaintiffs realize value

22 on the collateral; Plaintiffs recover in the Swiss

23 arbitrations; or the size of the debt on the underlying

24 contracts, or the obligation to pay it, is affected by any

25 ruling on Telsim’s defenses in the Swiss arbitration that is

26 binding and enforceable. These contingencies, and other

27 conceivable contingencies, remain. “[T]he fraud defendant

28 is not liable for all losses that may occur, but only for

29 those actually suffered.” First Nationwide, 27 F.3d at 768
16

1 (emphases added). Therefore, “the loss” suffered on past2 due loans as to which Plaintiffs have “not finally

3 foreclosed cannot yet be determined. Only when

4 [Plaintiffs’] actual loss becomes clear and definite will

5 the claims be ripe for suit. Until that time, [Plaintiffs]

6 lack[] standing under RICO to assert claims as to those

7 loans.” Id. at 769. 

8 The district court’s reliance on GICC Capital Corp. v.

9 Technology Finance Group, Inc., 30 F.3d 289 (2d Cir. 1994),

10 and In re Merrill Lynch Partnerships Litigation, 154 F.3d 56

11 (2d Cir. 1998), is misplaced. The plaintiff in each case

12 was unsecured, so there was no collateral on which to

13 foreclose, or any other contractual remedy. As we stated in

14 In re Merrill Lynch:

15 First Nationwide [is] inapplicable in this

16 case. [It] hold[s] that when a creditor

17 alleges he has been defrauded RICO injury is

18 speculative when contractual or other legal

19 remedies remain which hold out a real

20 possibility that the debt, and therefore the

21 injury, may be eliminated or significantly

22 reduced. The RICO claim is, thus, not ripe

23 until those remedies are exhausted and the

24 damages are clear. . . . As investors have no

25 contractual or other legal remedies which

26 could assuage the injury [in this case], the

27 amount of damages was “clear and definite,” and the injury w

28 investment. 

29 

30 In re Merrill Lynch, 154 F.3d at 59. Moreover, the issue in
17

1 GICC Capital was whether the plaintiff had established

2 proximate cause so as to satisfy RICO standing, 30 F.3d at

3 292, and the discussion of RICO injury in In re Merrill

4 Lynch pertained to a statute-of-limitations issue, 154 F.3d

5 at 58-59. In any event, neither case impairs the rule

6 enunciated in First Nationwide.

7 It may be that the arbitration is a forlorn hope for

8 MCC and Nokia, and that, in any event, the collateral will

9 yield little of value. But the arbitration does not cease

10 to be a possible influence (negotiated by contract) on the

11 amount of loss simply because the district court has stayed

12 it. Certainly, the district court cannot in that way force

13 the RICO claim to ripen. 

14 Because Plaintiffs lack RICO standing to assert claims

15 based on a Telsim’s failure to pay on a debt, those claims

16 must be dismissed, without prejudice to reassertion at some

17 appropriate later time. This dismissal also implicates the

18 district court’s subject matter jurisdiction. In Lerner v.

19 Fleet Bank, N.A., 318 F.3d 113 (2d Cir. 2003), we recently

20 explained that a plaintiff’s “lack of statutory standing

21 [under RICO] does not divest the district court of original

22 jurisdiction.” Id. at 103. Thus, although the plaintiffs’

23 RICO claims in that case were properly dismissed, “[t]he
18

1 district court had original jurisdiction to support the

2 exercise of supplemental jurisdiction over the . . .

3 plaintiffs’ state-law claims.” Id. We then vacated the

4 district court’s dismissal of the plaintiffs’ state law

5 claims for lack of jurisdiction, and remanded for a

6 determination of whether to exercise supplemental

7 jurisdiction.

8 We recognize that the district court has already

9 exercised supplemental jurisdiction over MCC’s state law

10 claims, and referenced those claims as additional support

11 for the injunction. However, the dismissal of the RICO

12 claims alters things in a way that justifies reconsideration

13 of the injunction, the sufficiency of grounds for issuance

14 as well as the terms of an injunction, if issued. Among

15 other considerations, the sole remaining federal claims are

16 minor compared to the now-dismissed RICO claims, both in

17 terms of scope and in terms of relief. 

18 In light of this changed landscape, we remand this case

19 to the district court for it to decide whether to retain

20 supplemental jurisdiction over the state law claims pursuant

21 to 28 U.S.C. § 1367(c). Given the district court’s

22 conclusion (which we do not now address) that, with respect

23 to MCC, the state law claims provide an independent basis
 

4Nokia did not join in alleging all of MCC’s state law

causes of action. However, Nokia’s allegation of a

Constructive Trust/Equitable Lien cause of action (it is

unclear whether that claim is based on Illinois or New York

law) might provide an alternative basis for upholding the

preliminary injunction in aid of Nokia. See, e.g., Hurst v.

Papierz, 306 N.E.2d 532, 537-38 (Ill. App. Ct. 1973);

Rolnick v. Rolnick, 230 N.Y.S.2d 789, 791 (N.Y. Sup. Ct.

1962). We intimate no view as to the viability of the

constructive trust or any other claim. It is for the

district court to determine, in the first instance, whether

Nokia’s remaining claims provide a sufficient basis to

support the preliminary injunction. Therefore, we also

remand, but do not vacate, the portion of the preliminary

injunction sought by Nokia.

19

1 for the preliminary injunction, we do not vacate the

2 preliminary injunction; but our ruling is without prejudice

3 to any ruling we may make on any relief (or denial of

relief) that results from ongoing additional proceedings.4 4

5 While the mandate of this Court leaves the injunction

6 intact, the issuance of the mandate naturally ends the

7 November 27, 2002 Order of this Court staying the imposition

8 and accrual of fines against the Defendants for non9 compliance. However, the schedule of fines established by

10 the district court has long passed, and the district court

11 may (if it determines that the injunction should continue)

12 establish a new, prospective schedule for enforcing

13 compliance.

14 We note, however, that there appears to be a problem
 

5 It appears to us that, prior to the shareholders

meeting on April 24, 2001, Rumeli Telefon owned

approximately 73.5% of the outstanding Telsim stock. At

that meeting, the total available shares of Telsim stock

were tripled, and Rumeli Telefon was given preemptive rights

that would have allowed it to maintain its 73.5% ownership

of Telsim. Because Rumeli Telefon declined to exercise

those rights (it transferred them to Standart Telekom), its

stake in Telsim dropped from 73.5% of all outstanding shares

to 24.5% of all outstanding shares. Therefore, Rumeli

Telefon gave Standart Telekom preemptive rights that allowed

Standart Telekom to acquire 49% of the outstanding shares of

Telsim (the difference between the 73.5% to which Rumeli was

entitled and the 24.5% it ended up with). 

20

1 with a term of the present injunction. The injunction

2 directs the Defendants “to deposit into the [district

3 court’s] registry . . . the shares of stock of Telsim . . .

4 held by defendant Standart [Telekom] . . . and issued to

5 Standart [Telekom] during a meeting of Telsim shareholders

6 on April 24, 2001, comprising at least 73.5% of the shares

7 of Telsim stock currently outstanding.” It would be

8 impossible for Standart Telekom to comply with this order

9 because, as far as the record shows, Standart Telekom only

10 has 66.48% of the currently outstanding Telsim stock. 

11 Moreover, of the Telsim stock Standart Telekom does own,

12 only a portion of it (49% of the currently outstanding

shares5 13 ) is traceable to Rumeli Telefon’s preemptive rights

14 and, correspondingly, to the stock pledged to the

15 Plaintiffs. The rest of Standart Telekom’s Telsim stock was
21

1 either owned by Standart Telekom prior to the April 24, 2001

2 meeting, or acquired by exercising the preemptive rights of

3 Telsim stockholders other than Rumeli Telefon.

4 The preliminary injunction cannot directly reach the

5 Telsim stock still owned by Rumeli Telefon because Rumeli

6 Telefon is not a party to this litigation. Moreover, so far

7 as we can tell from the record, Rumeli Telefon still owns

8 24.5% of the currently outstanding Telsim stock. Those

9 shares remain subject to the pledge and potentially subject

10 to foreclosure by the Plaintiffs. Additionally, the

11 district court’s opinion does not explain the basis for

12 including within the ambit of the preliminary injunction the

13 Telsim shares owned by Standart Telekom that are not

14 traceable to the Rumeli Telefon preemptive rights. To the

15 extent Standart Telekom acquired these shares by exercising

16 the preemptive rights of Uzan-controlled companies other

17 than Rumeli Telefon, it might be appropriate--although we

18 express no view on the viability of this position--for the

19 preliminary injunction to include those shares if, for

20 example, it could be shown that Standart Telekom’s

21 acquisition of those shares was part of the fraud. As yet

22 no findings suggest that there has been any such showing. 

23 Therefore, although we leave the preliminary injunction in
22

1 place, we caution that this is an issue to be addressed if,

2 on remand, the court decides to keep the preliminary

3 injunction in place. 

4 We intimate no opinion on any other issues raised in

5 this appeal. The parties may make appropriate motions

6 following the district court’s decisions on remand.

7

8 CONCLUSION

9 For the foregoing reasons, we remand in 02-7566 for the

10 district court to dismiss, without prejudice, Plaintiffs’

11 RICO claims based on Telsim’s failure to pay on its debt,

12 and to decide whether to retain supplemental jurisdiction

13 over the state law claims. In light of this disposition, we

14 remand for reconsideration all issues raised on the appeal

15 in 02-9302. The court may conduct any proceedings not

16 inconsistent with this opinion. In light of these holdings,

17 we deny, as moot, the following motions pending in 02-9302:

18 1) Plaintiffs’ motion to dismiss the appeal; 2) Defendants’

19 motion for a stay of all proceedings in the district court

20 pending appeal; and 3) Defendants’ motion for an expedited

21 appeal. Each party will bear its own costs of this appeal.

22 The mandate shall issue forthwith.