Court Opinion

ID: 3166214
Source: CourtListenerOpinion
Date Created: 2015-12-29 23:02:38.985337+00
Date Added: 2024-06-11T12:03:09.030568
License: Public Domain

COURT OF CHANCERY
                                  OF THE
                            STATE OF DELAWARE

 JOHN W. NOBLE                                             417 SOUTH STATE STREET
VICE CHANCELLOR                                            DOVER, DELAWARE 19901
                                                          TELEPHONE: (302) 739-4397
                                                          FACSIMILE: (302) 739-6179

                               December 29, 2015

Steven L. Caponi, Esquire                   Vincent J. Poppiti, Esquire
Elizabeth A. Sloan, Esquire                 Carl D. Neff, Esquire
Blank Rome LLP                              Fox Rothschild LLP
1201 North Market Street, Suite 800         919 North Market Street, Suite 300
Wilmington, DE 19801                        Wilmington, DE 19801

      Re:   VTB Bank v. Navitron Projects Corp.
            C.A. No. 8514-VCN
            Date Submitted: August 11, 2015

Dear Counsel:

      Plaintiff VTB Bank (“VTB”), a Ukrainian bank and company,1 brings this

action against Development Max, LLC (“Development Max”), a Delaware limited

liability company, and Navitron Projects Corp. (“Navitron”), a Panamanian

corporation and managing member of Development Max, for fraudulent transfer,

constructive fraudulent transfer, and unjust enrichment and requests that the Court

1
 While VTB is based in Ukraine, its majority shareholder is a Russian Open Joint-
Stock Company. Verified Compl. (“Compl.” or “Complaint”) ¶ 6.
VTB Bank v. Navitron Projects Corp.
C.A. No. 8514-VCN
December 29, 2015
Page 2

appoint receiver for Development Max, impose a constructive trust, avoid the

allegedly fraudulent transfers, and award VTB its court costs.

                               I.   BACKGROUND

A. The Parties

       Development Max was formed in 1999 and is co-owned by Dmitriy Sviatash

and Vasiliy Poliakov.2 Sviatash and Poliakov were also managing members of

Development Max until 2008, when Navitron, also controlled by Sviatash and

Poliakov, became the managing member.3          In 2006, Development Max and

Navitron co-owned AutoInvestStroy LLC, the “umbrella entity for the AIS

Group.”4 The AIS Group, by 2007, was “one of the largest car retail and car

servicing businesses in Ukraine, holding a 10% share of the automobile market.”5

It purchased cars from manufacturers and sold them through a network of “Retail[]

Sales Centers” including thirty seven centers and fifty five show rooms, the “vast

2
  Id. ¶ 11.
3
  Id. ¶¶ 2, 11.
4
  Id. ¶ 12.
5
  Id. ¶ 13.
VTB Bank v. Navitron Projects Corp.
C.A. No. 8514-VCN
December 29, 2015
Page 3

majority” of which were formed and owned by Development Max.6 The AIS

Group also owned automobile service centers, parts stores, and assembly plants to

supplement its retail sales business.7

B. VTB Lends to Two AIS Group Subsidiaries

       In 2007, Poliakov, on behalf of the AIS Group, approached VTB seeking

financing for Private Enterprise RS-Centre (“PERS”) and Inter-Auto LLC (“IA,”

and together with PERS, the “Borrowers”), each an AIS Group subsidiary.8 On

May 26, 2008, VTB and PERS entered into a $30 million Credit Line Agreement

to be fully repaid on or before May 25, 2009 (the “PERS Loan”).9 On June 10,

2008, VTB and IA entered into a similar Credit Line Agreement for $40 million to

be fully repaid on or before June 9, 2009 (the “IA Loan,” and together with the

PERS Loan, the “Car Loans”).10 As security for the Car Loans, the AIS Group

“enter[ed] in a suretyship agreement and pledge[d] both personal and real property

6
  Id.
7
  Id.
8
  Id. ¶ 14.
9
  Id. ¶ 15.
10
   Id. ¶ 16.
VTB Bank v. Navitron Projects Corp.
C.A. No. 8514-VCN
December 29, 2015
Page 4

as collateral” (the “Collateral”).11 By January 2009, PERS had drawn down $23.1

million and IA had drawn down $39.9 million.12 “On April 9, 2009, the PERS

Loan and IA Loan were amended, limiting the credit line to US$23.1 million and

US$39.9 million respectively.”13

C. The Alleged Fraudulent Conduct

      The Borrowers used the Car Loans to purchase cars from manufacturers.14

VTB alleges that Navitron and Development Max, through their control of the AIS

Group, fraudulently transferred the purchased vehicles through the AIS Group’s

“network of shell companies” to the Retail Sales Centers, and funneled the sale

proceeds back to themselves.15 In February and March 2009, in an attempt to

appease VTB’s concerns regarding repayment of the Car Loans, Sviatash met with

VTB, requested a restructuring of the debt and meetings with VTB officers, and

“promis[ed] to prepare a repayment plan for the loans.”16 The requested officer

11
   Id. ¶¶ 15-16.
12
   Id. ¶ 19.
13
   Id. ¶ 17.
14
   Id. ¶ 20.
15
   Id.
16
   Id. ¶ 21.
VTB Bank v. Navitron Projects Corp.
C.A. No. 8514-VCN
December 29, 2015
Page 5

meetings, however, never took place, a plan was never produced, and the

Borrowers, shortly thereafter, failed to make payments on the Car Loans.17 During

the summer of 2009, VTB initiated court proceedings in Ukraine to foreclose on

the Collateral, though the AIS Group delayed, and many times failed to appear for,

such proceedings.18

      VTB alleges that during the pendency of the Ukrainian proceedings,

Development Max and Navitron, through their control of the AIS Group,

fraudulently transferred the Collateral through a “web of affiliate companies . . .

formed solely to facilitate the fraud” (the “Transfers”).19 VTB argues that the

Transfers could not have occurred absent reliance on “forged and fictitious

documents,” reasoning that Ukrainian law requires, prior to transferring property

subject to a lien, either notary certification that the assets are free from any liens or

consent of the lien holder (which VTB did not provide).20 The Transfers were

effectuated, VTB continues, to “hide the Collateral from VTB,” and “each

17
   Id. ¶¶ 21-22.
18
   Id. ¶ 23.
19
   Id. ¶¶ 2, 24.
20
   Id. ¶¶ 24-25.
VTB Bank v. Navitron Projects Corp.
C.A. No. 8514-VCN
December 29, 2015
Page 6

recipient of the Transfers was owned/controlled by Development Max and/or

Navitron.”21 The Transfers resulted in the AIS Group’s “assets, money, property

and Collateral . . . – including VTB’s loan proceeds – resid[ing] with Development

Max and Navitron” which, given the Borrowers’ insolvency, precluded VTB from

foreclosing on the Collateral.22 VTB alleges that Development Max and Navitron

plan to continue this fraudulent scheme in the future, as evidenced by their

renaming of the “mortgagors, ‘Corporation AIS’, to United KOMP Corporation.”23

                       II.   PROCEDURAL POSTURE

      VTB filed the Complaint on April 30, 2013. In response, Development Max

and Navitron filed a Motion to Dismiss on July 31, 2013 seeking dismissal on

grounds of forum non conveniens, among other theories.24        The Court, in a

memorandum opinion issued on April 28, 2014 (“VTB I”), granted the Motion with

respect to VTB’s claim against Navitron, but denied the Motion with respect to

21
   Id. ¶ 26.
22
   Id. ¶ 27.
23
   Id. ¶ 28.
24
   Opening Br. of Defs. Navitron Projects Corp. and Development Max, LLC in
Supp. of Their Mot. to Dismiss 16.
VTB Bank v. Navitron Projects Corp.
C.A. No. 8514-VCN
December 29, 2015
Page 7

VTB’s claim against Development Max.25 In denying Development Max’s Motion

to Dismiss, the Court noted that “VTB’s request for a receiver implicates this

Court’s fundamental role in overseeing the conduct of Delaware entities,” and

recognized that “even where, as in this action, the defendant may otherwise suffer

overwhelming hardship if required to litigate in Delaware,” Delaware’s strong

policy favoring this Court’s ability to “oversee and rectify the conduct of Delaware

entities may be so compelling in a particular case that it may militate against

dismissal on forum non conveniens grounds.”26

      Recognizing that the Motion to Dismiss briefing improperly implied that

VTB’s claims arose under Delaware law (as opposed to Ukrainian law), the Court

deferred ruling on the remaining grounds to allow the parties an opportunity to

present expert testimony regarding the application of Ukrainian law to the facts of

the case.27 Following the Court’s guidance, the parties each submitted opening and

25
    VTB Bank v. Navitron Projects Corp., 2014 WL 1691250, at *12 (Del. Ch.
Apr. 28, 2014).
26
   Id. at *5, *11.
27
   Id. at *12.
VTB Bank v. Navitron Projects Corp.
C.A. No. 8514-VCN
December 29, 2015
Page 8

rebuttal expert affidavits28 and supplemental briefing on Development Max’s

Motion to Dismiss. 29 Having received the parties’ expert reports and supplemental

briefing, the Court now reconsiders Development Max’s arguments seeking

dismissal on grounds of forum non conveniens.

28
   Development Max submitted the Second Affidavit of Gleb Bialyi (Trans.
ID 56026500) (“Bialyi Opening Aff.”) and the Third Affidavit of Gleb Bialyi
(Trans. ID 56219275) (“Bialyi Rebuttal Aff.”). VTB submitted the Expert Report
of Roman Maidanyk (Trans. ID 56024154) (“Maidanyk Opening Aff.”) and the
Second Expert Report of Dr. Roman Maydanyk (Trans. ID 56217259) (“Maidanyk
Rebuttal Aff.”).
29
   On November 12, 2014 Development Max filed its Supplemental Opening Brief
in Support of its Motion to Dismiss. VTB responded on December 15, 2014 with
an opposition brief. Development Max’s January 5, 2015 reply concluded the
briefing on the Motion to Dismiss. Development Max argued for dismissal on
forum non conveniens grounds in its supplemental briefing. Development Max,
LLC’s Supplemental Opening Br. in Supp. of its Mot. to Dismiss 18-21. VTB,
however, in apparent (and reasonable) reliance on the Court’s representation that it
may revisit its VTB I forum non conveniens analysis “upon resolution of
Development Max’s motion to dismiss under Rule 12(b)(6),” VTB Bank, 2014
WL 1691250, at *12 n.108, considered Development Max’s argument, at least at
that time, “dead,” and avoided analysis of the argument’s merits. Pl.’s Opposition
to Def.’s Supplemental Opening Br. in Supp. of its Mot. to Dismiss 2. The Court,
on May 22, 2015, seeking further guidance on the topic, wrote to the parties
requesting additional briefing on the forum non conveniens analysis, to which VTB
and Development Max responded by filing additional supplemental briefs on
June 4 and July 24, 2015, respectively.
VTB Bank v. Navitron Projects Corp.
C.A. No. 8514-VCN
December 29, 2015
Page 9

                             III.   CONTENTIONS

      VTB argues that Development Max has not met its burden to overcome

Delaware’s “presumption” favoring a plaintiff’s choice of forum, especially given

Delaware’s strong interest in preventing fraudulent use of its entities,30 that

application in Delaware courts of foreign law does not of itself warrant dismissal,31

and that continuing the case in Ukrainian courts will create discovery and personal

jurisdiction burdens not present in Delaware.32 Development Max disputes each of

VTB’s contentions, and further argues that requiring it to litigate in Delaware

would subject it to “overwhelming hardship,” justifying dismissal on forum non

conveniens grounds.33

30
    Pl.’s Supplemental Briefing on the Issue of Forum Non Conveniens (“Pl.’s
Supplemental Br.”) 5-7.
31
   Id. at 8-9.
32
   Id. at 10-13.
33
   Def. Development Max, LLC’s Supplemental Briefing on the Issue of Forum
Non Conveniens 5-17.
VTB Bank v. Navitron Projects Corp.
C.A. No. 8514-VCN
December 29, 2015
Page 10

                                 IV.    ANALYSIS

A. Forum Non Conveniens Standard

      Delaware courts generally respect a plaintiff’s choice of forum “unless

equity weighs strongly in favor of the defendant.”34 Dismissal on grounds of

forum non conveniens is a “drastic remedy,” and should be analyzed with caution

as not to deprive a plaintiff of the procedural or substantive advantages the chosen

forum may afford.35 To overcome this burden, a defendant must show that “the

traditional forum non conveniens factors weigh so heavily that the defendant will

face ‘overwhelming hardship’ if the lawsuit proceeds in Delaware.”36 Though the

34
   Martinez v. E.I. DuPont de Nemours & Co., 86 A.3d 1102, 1106 (Del. 2014);
Ison v. E.I. DuPont de Nemours & Co., 729 A.2d 832, 841 (Del. 1999).
35
   Ison, 729 A.2d at 841 (quoting Picketts v. Int’l Playtex, Inc., 576 A.2d 518, 524
(Conn. 1990)).
36
   Martinez, 86 A.3d at 1104; accord Ison, 729 A.2d at 838; Kolber v. Holyoke
Shares, Inc., 213 A.2d 444, 447 (Del. 1965) (“The dismissal of an action on the
basis of the doctrine, and the ultimate defeat of the plaintiff’s choice of forum, may
occur only in the rare case in which the combination and weight of the factors to be
considered balance overwhelmingly in favor of the defendant.”); Pipal Tech
Ventures Private Ltd. v. MoEngage, Inc., 2015 WL 9257869, at *10 (Del. Ch.
Dec. 17, 2015) (“My job in evaluating this motion is not to choose the ‘best,’ or
even a ‘proper’ forum; instead, it is to respect the Plaintiff’s choice of forum unless
the Defendant can show resulting hardship or inconvenience so profound that it
overwhelms that choice.”).
VTB Bank v. Navitron Projects Corp.
C.A. No. 8514-VCN
December 29, 2015
Page 11

“overwhelming hardship” standard is an “appropriately high burden,” it is “not

intended to be preclusive.”37 While Delaware courts generally defer to a plaintiff’s

choice of forum, “foreign plaintiffs . . . are routinely accorded far less deference in

their choice of forum than are citizens or residents.”38 Indeed, in dismissing a case

on forum non conveniens grounds, the United States Supreme Court reasoned that

“[b]ecause the central purpose of any forum non conveniens inquiry is to ensure

that the trial is convenient, a foreign plaintiff’s choice deserves less deference.”39

B. Application

      Delaware courts assess the forum non conveniens inquiry pursuant to the six

Cryo–Maid40 factors:

37
   Martinez, 86 A.3d at 1105 (“The evolution of the adjective ‘overwhelming’ in
this context is consistent with the distinction between preclusive and stringent.”);
accord Pipal, 2015 WL 9257869, at *5 (“The moving defendant need not show
that it is factually or financially impossible to mount a defense in this jurisdiction.
Rather, to overcome a plaintiff’s jurisdictional choice, a moving defendant must
demonstrate that such a choice is overwhelmingly inappropriate and inconsistent
with the administration of justice.”).
38
   Lisa, S.A. v. Mayorga, 2009 WL 1846308, at *9 n.41 (Del. Ch. June 22, 2009)
(alteration in original) (quoting In re Nash v. McDonald’s Corp., 1997
WL 528036, at *3 (Del. Super. Feb. 27, 1997)), aff’d, 993 A.2d 1042 (Del. 2010).
39
   Piper Aircraft Co. v. Reyno, 454 U.S. 235, 256 (1981).
40
   See Gen. Foods Corp. v. Cryo–Maid, Inc., 198 A.2d 681 (Del. 1964).
VTB Bank v. Navitron Projects Corp.
C.A. No. 8514-VCN
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Page 12

                 (1) the relative ease of access to proof; (2) the availability of
         compulsory process for witnesses; (3) the possibility of the view of
         the premises; (4) whether the controversy is dependent upon the
         application of Delaware law which the courts of this State more
         properly should decide than those of another jurisdiction; (5) the
         pendency or nonpendency of a similar action or actions in another
         jurisdiction; and (6) all other practical problems that would make the
         trial of the case easy, expeditious and inexpensive.41

         This Court, in VTB I, denied Development Max’s motion to dismiss on

forum non conveniens grounds. In its analysis, the Court first determined that each

of the first five Cryo–Maid factors either favored Development Max or was

neutral. To briefly summarize: (1) “the vast majority of the evidence necessary for

Development Max to defend the fraudulent transfer and unjust enrichment claims

would be not in Delaware but rather in Ukraine, and most likely written in

Ukrainian”; (2) “all relevant witnesses reside outside Delaware and, in all

likelihood, in Ukraine, where the alleged conduct occurred”; (3) while the ability

to view the premises slightly favors litigation in Ukraine, the availability of video

recording largely neutralizes this factor; (4) Ukraine has the most significant

relationship to the fraudulent transfer and unjust enrichment claims, necessitating

41
Taylor v. LSI Logic Corp., 689 A.2d 1196, 1198-99 (Del. 1997).
VTB Bank v. Navitron Projects Corp.
C.A. No. 8514-VCN
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application of Ukrainian law; and (5) because no similar action is pending in

another jurisdiction, this factor is neutral.42   In denying Development Max’s

motion, however, the Court afforded due consideration to the Delaware Supreme

Court’s statement that the “Other Practical Considerations” factor is “neither

hollow in meaning nor rigid in application.”43 The VTB I Court reasoned that

Development Max’s request for appointment of a receiver implicated “this Court’s

fundamental and immutable responsibility to supervise the entities chartered and

formed under Delaware law,” and that

      Delaware’s public interest in having this Court oversee and rectify the
      conduct of Delaware entities may be so compelling in a particular
      case that it may militate against dismissal on forum non conveniens
      grounds even where, as in this action, the defendant may otherwise
      suffer overwhelming hardship if required to litigate in Delaware.44

      The Court therefore determined that, pursuant to the sixth Cryo–Maid

factor—practical problems affecting the trial’s ease, speed, and expense—“[i]t

cannot be said to cause overwhelming hardship under these circumstances to

require Development Max, an entity formed under the laws of the State of

42
   VTB Bank, 2014 WL 1691250, at *8-10.
43
   Martinez, 86 A.3d at 1112.
44
   VTB Bank, 2014 WL 1691250, at *11.
VTB Bank v. Navitron Projects Corp.
C.A. No. 8514-VCN
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Page 14

Delaware and alleged to have engaged in pervasive fraudulent conduct, to defend

its actions before this Court.”45 The “circumstances” referred to, however, include

the Court’s determination that Development Max may have properly stated a claim

under Ukrainian law for fraudulent transfer, necessitating the appointment of a

receiver, thereby implicating Delaware’s interest and “fundamental role in

overseeing the conduct of Delaware entities.”46

      Stated another way, the VTB I Court’s determination, on which the above

reasoning relies, that Delaware’s interest in overseeing its entities warrants denial

of Development Max’s motion to dismiss on forum non conveniens grounds,

recognizes that the Complaint may adequately state a claim for fraudulent transfer

under Ukrainian law that can be said to amount to “gross mismanagement” under

Delaware law.47 The Court, however, never affirmatively so held, and, in fact,

45
   Id. at *12.
46
   Id. at *5, *12.
47
    While VTB’s fraudulent transfer and unjust enrichment claims are, under
Delaware’s choice of law regime, appropriately analyzed under Ukrainian law, id.
at *9-10, the question of whether to appoint a receiver is, pursuant to the internal
affairs doctrine, governed by Delaware law. Id. at *5.
VTB Bank v. Navitron Projects Corp.
C.A. No. 8514-VCN
December 29, 2015
Page 15

expressly acknowledged its assumption:48 “The parties did not present expert

affidavits or testimony on these areas of Ukrainian law, and the Court cannot

resolve whether the allegations of the Complaint state a claim or whether they are

subject to (or satisfy) the particularity pleading standard without guidance from

qualified, Ukrainian law experts.”49 Thus, the question here is whether VTB’s

allegations state a claim under Ukrainian law adequate to justify the appointment

of a receiver under Delaware law.

      As stated above, the Court, since issuing VTB I, has received from each

party opening and rebuttal expert affidavits analyzing the application of Ukrainian

law to the facts of this case.50 Upon review of such affidavits, however, the Court

finds itself, as indicated in its May 22, 2015 letter to the parties, experiencing

difficulty “[a]pplying the law of Ukraine to the facts in the Complaint.”51 The

positions taken by the experts are in many instances diverging and in others

48
    Id. at *12 (“The allegations of Development Max’s systemic and systematic
fraudulent conduct . . . may state reasonably conceivable claims for fraudulent
transfers under Ukrainian law . . . .” (emphasis added)).
49
   Id.
50
   See supra note 28.
51
   Letter to Steven L. Caponi, Esquire and Austen C. Endersby, Esquire Regarding
the Forum Non Conveniens Issue 3 (May 22, 2015).
VTB Bank v. Navitron Projects Corp.
C.A. No. 8514-VCN
December 29, 2015
Page 16

irreconcilable. For example, Development Max’s expert, Gleb Bialyi, refutes the

existence of an unjust enrichment cause of action under Ukrainian law, stating that

“Ukraine does not recognize judicially-created causes of action [or] . . . claims

sounding in equity.”52     To the extent that Ukraine’s recently-enacted 2011

Corruptive Practices Act would create criminal liability for “unlawful enrichment,”

Bialyi continues, any civil challenge “could not be brought separately” from the

criminal case, and no other Ukrainian laws support a claim for unjust enrichment. 53

VTB’s expert, Roman Maidanyk, however, states that “[a]ccording to Art. 1212 of

the Civil Code of Ukraine [(“Art. 1212”)], unjustly acquired property is property

(including money) acquired or preserved by [a] person at the expense of another

person (injured person) without sufficient legal basis . . . [and] must be returned to

the injured [person],” and that Art. 1212 “is sufficiently similar to the American

concept of unjust enrichment.”54      Further, with respect to VTB’s fraudulent

52
   Bialyi Opening Aff. 8.
53
   Id. at 8-18 (emphasis removed).
54
    Maidanyk Opening Aff. 5, 7. Bialyi disputes Maidanyk’s interpretation of
Art. 1212, stating that it “addresses acquired property, not unjustly acquired
property,” and that Art. 1212 does not apply to the facts of this case because
VTB’s allegations are insufficient to find that that Development Max “(i) acquired
VTB Bank v. Navitron Projects Corp.
C.A. No. 8514-VCN
December 29, 2015
Page 17

conveyance claim, while the experts agree (though through divergent reasoning)

that Article 234 of the Civil Code of Ukraine governing “Sham Transactions”

would not provide VTB a successful cause of action, they disagree as to the

viability of a potential claim under Article 235 of the Civil Code of Ukraine

(“Art. 235”). Art. 235 invalidates transactions in which the parties “formally enter

into one contract, but in fact intend to create [a] legal relationship of a different

nature.”55 Maidanyk, VTB’s expert, suggests that VTB may successfully claim

under Art. 235 that the AIS Group’s transfer of the Car Loan proceeds through

affiliates and eventually to Development Max and Navitron constituted an invalid

“simulated” transaction, the true nature of the transfer being a gift rendered

unlawful by the conditions imposed by VTB on the Car Loan proceeds.56 In

contrast, Bialyi, Development Max’s expert, states that money lent by a bank is no

longer the bank’s property (though it may have a right to repayment) and that

property of VTB without sufficient legal ground, (ii) kept or stored VTB’s
property; and (iii) is in possession of VTB’s property.” Bialyi Rebuttal Aff. 1-3.
Further, Bialyi, in his Opening Affidavit, suggests that Art. 1212 is more closely
akin to the common law concepts of replevin or conversion as opposed to unjust
enrichment. Bialyi Opening Aff. 16.
55
   Maidanyk Opening Aff. 9-10.
56
   Id. at 12.
VTB Bank v. Navitron Projects Corp.
C.A. No. 8514-VCN
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Page 18

therefore the money did not belong to VTB at the time of the Transfers, that this

transaction is not actionable under Ukrainian law as it may be under Delaware’s

fraudulent transfer law, and that Art. 235 would not allow the Court to invalidate

both the “superimposed ‘deceptive’ transaction and the underlying transaction left

in its wake”—the parties would remain bound to the underlying transaction (here,

the “gift”).57 The inconsistencies, unfortunately, continue.58

      Given the civil law structure of the Ukrainian legal system (reducing the

precedential value of Ukrainian court decisions),59 the absence of a direct

counterpart under Ukrainian law to Delaware’s fraudulent transfer and unjust

enrichment causes of action, and the experts’ starkly divergent opinions regarding

the applicability of the Civil Code of Ukraine to the facts of this case—indicating

57
   Bialyi Rebuttal Aff. 5-7.
58
   For example, Bialyi stated that the Complaint must “set forth a factually detailed
statement of circumstances giving rise to the claim,” and that VTB’s failure to
attach certain documents to the Complaint may result in its refusal and return,
Bialyi Opening Aff. 32-33, while Maidanyk states that the appropriate pleading
standard is more relaxed, requiring only a “description of the circumstances on
which the claims are based,” and that the Ukrainian courts “rarely refuse to accept
[documents required to be attached to the complaint], supplied during the hearing,
unless they are irrelevant or unreliable.” Maidanyk Rebuttal Aff. 11 (emphasis
removed).
59
   Bialyi Opening Aff. 6; Maidanyk Opening Aff. 5.
VTB Bank v. Navitron Projects Corp.
C.A. No. 8514-VCN
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Page 19

unsettled foreign law and its uncertain application to the facts—the Court holds

that Ukraine, as opposed to Delaware, is the proper forum in which to litigate this

dispute. The above considerations mandate this conclusion on two grounds.

      First, as explained above, the Court’s forum non conveniens analysis in

VTB I concluded that the only factor favoring VTB (and the factor the Court rested

its decision on) was the “other practical problems” factor, given VTB’s request for

appointment of a receiver and Delaware’s policy favoring oversight by its courts of

Delaware entities.60 A corollary of the difficult application of complex, unsettled

Ukrainian law to the facts of this case, however, is this Court’s inability to appoint

a receiver based on such law.61 Appointment of a receiver, especially to a solvent

corporation, is an “extraordinary remedy.”62          The Delaware standard for

60
   VTB Bank, 2014 WL 1691250, at *11-12.
61
   As stated, though the question of whether to appoint a receiver is governed by
Delaware law, the question of whether the Delaware standard for appointment of a
receiver has been met is based on whether Development Max violated Ukrainian
law. See supra note 47.
62
   TVI Corp. v. Gallagher, 2013 WL 5809271, at *5 (Del. Ch. Oct. 28, 2013); Pope
Invs. LLC v. Benda Pharm., Inc., 2010 WL 5233015, at *10 (Del. Ch. Dec. 15,
2010) (“Because a receiver constitutes extraordinary relief, it might make sense to
require [the plaintiff] to pursue a less drastic remedy that might allow it to collect
VTB Bank v. Navitron Projects Corp.
C.A. No. 8514-VCN
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Page 20

appointment of a receiver requires “a showing of fraud, gross mismanagement,

positive misconduct by corporate officers, breach of trust, or extreme

circumstances showing imminent danger of great loss which cannot otherwise be

prevented.”63   In light of the extraordinary nature of and strong showing of

misconduct necessary to justify this relief, there are significant difficulties with

appointing a receiver for Development Max under the circumstances of this case.

Consequently, while Delaware’s interest in overseeing its entities remains, “[o]ne

of the principal [remedies] this Court [utilizes to] uphold[] the integrity of

Delaware law”—appointment of a receiver64—is no longer controlling. Indeed, the

Court’s denial in VTB I of Development Max’s motion to dismiss on grounds of

forum non conveniens relied on the Court’s potential appointment of a receiver

should Development Max’s conduct, analyzed under Ukrainian law, so require.65

on its judgment while allowing [the defendant] to continue operations, before
seeking a receiver.”).
63
   Zutrau v. Jansing, 2013 WL 1092817, at *5 (Del. Ch. Mar. 18, 2013).
64
   VTB Bank, 2014 WL 1691250, at *11.
65
   Id. at *12 (“There may be situations in which Delaware’s interest in hearing a
request for the equitable appointment of a receiver for a Delaware entity does not
outweigh the hardship that litigating in Delaware would entail. Based on the
VTB Bank v. Navitron Projects Corp.
C.A. No. 8514-VCN
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Thus, with the uncertainty in applying Ukrainian law, the weight the VTB I Court

afforded the “other practical problems” Cryo–Maid factor is no longer appropriate.

Considering the five remaining Cryo–Maid factors in accordance with the Court’s

analysis in VTB I,66 Development Max has satisfied the “overwhelming hardship”

standard and is therefore entitled to dismissal on forum non conveniens grounds.67

allegations against Development Max, however, the Court cannot reach that
conclusion here at this time.”).
66
   See supra text accompanying note 42.
67
   Additionally, the fact that Development Max was likely created for a proper
purpose reduces, to some extent, Delaware’s interest in its oversight. Development
Max was formed in 1999, yet its allegedly fraudulent conduct—improper diversion
of the Car Loan proceeds and Collateral—did not begin until 2007. Compl. ¶¶ 11,
14. While VTB alleges that Development Max was formed and used to effectuate
the alleged fraud, Pl.’s Supplemental Br. 2, such statements are conclusory and,
without more, insufficient to support such an inference. In essence, while
Delaware is interested in preventing use of its entities to engage in fraud or other
misconduct, such interest is enhanced where the fraud or misconduct extends to the
formation or dissolution of the entity, which implicates a governmental agency—
the office of the Secretary of State—into the improper scheme. Pipal, 2015
WL 9257869, at *10 (denying a defendant’s motion to dismiss on forum non
conveniens grounds where the individual wrongdoers “created a Delaware entity to
hold, market, and monetize the purloined asset . . . in contravention of Indian
law . . . [and] the Delaware Uniform Trade Secrets Act” (emphasis added));
cf. Matthew v. Fläkt Woods Gp. SA, 56 A.3d 1023, 1027-28 (Del. 2012)
(maintaining jurisdiction over a non-Delaware entity under conspiracy theory of
personal jurisdiction because Delaware’s long-arm statute extends to anyone who
“[t]ransacts any business . . . in the State,” quoting 10 Del. C. § 3104(c)(1), and
VTB Bank v. Navitron Projects Corp.
C.A. No. 8514-VCN
December 29, 2015
Page 22

      Second, as the Delaware Supreme Court recently held in Martinez, an

“implicit and logical corollary of the fourth Cryo–Maid factor”—whether the case

implicates Delaware law more properly decided by Delaware courts—is that

“important and novel issues of other sovereigns are best determined by their courts

where practicable.”68 To that end, where “[t]his Court is being asked to decide

complex and unsettled issues of [foreign] law,”69 it will consider “the defendant’s

interest in obtaining an authoritative ruling from the relevant foreign courts on the

legal issue on which its liability hinges, as distinguished from a predictive, non

authoritative ruling by our courts.”70 As stated, application of Ukrainian law, as

interpreted by the parties’ experts, to the facts of this case is far from

straightforward. The Civil Code of Ukraine contains no direct counterpart to

Delaware’s unjust enrichment and fraudulent transfer laws, and the parties’ expert

affidavits submit diverging interpretations regarding its appropriate application to

finding that the Delaware co-conspirator’s filing of a certificate of cancellation as
part of the conspiracy constituted such a transaction of business).
68
   Martinez, 86 A.3d at 1109-10.
69
   Hupan v. All. One Int’l, Inc., 2015 WL 7776659, at *8 (Del. Super. Nov. 30,
2015).
70
   Martinez, 86 A.3d at 1111.
VTB Bank v. Navitron Projects Corp.
C.A. No. 8514-VCN
December 29, 2015
Page 23

the facts.71 Therefore, Development Max would benefit from an authoritative

ruling from Ukrainian courts. The Martinez court reinforced its reasoning with a

reminder that “plaintiffs who are not residents of Delaware, whose injuries did not

take place in Delaware, and whose claims are not governed by Delaware law have

a less substantial interest in having their claims adjudicated in Delaware.”72 Here,

VTB is a Ukrainian bank whose injuries occurred in Ukraine and whose claims are

governed by the laws of Ukraine. It therefore has a “less substantial” interest in

adjudicating its claims in Delaware.73

71
   The Pipal court, in denying a motion to dismiss on forum non conveniens
grounds, noted that while Indian law governed “at least . . . one of the claims,” its
application to the issues was “settled” and alternative causes of action required
application of Delaware law to the facts of the case. Pipal, 2015 WL 9257869,
at *8. The Pipal court concluded, therefore, that while the factor “slightly favors”
dismissal, “this factor would be more persuasive if unsettled issues of Indian law
were presented.” Id. at *9.
72
   Martinez, 86 A.3d at 1111.
73
   The Court notes further that though Development Max is a Delaware entity, its
operation of the AIS Group takes place solely in Ukraine. Id. at 1108 (though the
defendant—E.I. du Pont de Nemours and Company, Inc.—itself obviously had a
strong connection to the State of Delaware, the Court, in granting the defendant’s
motion to dismiss on forum non conveniens grounds, agreed with the trial court’s
reasoning that “the Defendant’s state of incorporation ha[d] no rational connection
to the cause of action” where the claims arose out of the plaintiffs’ exposure to
asbestos while working in the defendant’s Argentinean textile plants); Pipal, 2015
VTB Bank v. Navitron Projects Corp.
C.A. No. 8514-VCN
December 29, 2015
Page 24

                                V.    CONCLUSION

      For the reasons above, the Court grants, without prejudice, Development

Max’s Motion to Dismiss on forum non conveniens grounds.

      IT IS SO ORDERED.

                                        Very truly yours,

                                        /s/ John W. Noble

JWN/cap
cc   Register in Chancery-K

WL 9257869, at *9 (“While the Plaintiff asserts correctly that Delaware has a
‘powerful interest’ in preventing Delaware entities from being used as a vehicles
for wrongdoing, it is India that has an interest in preventing theft of assets in India,
and in redressing breaches of contract occurring there.” (footnote omitted)). The
Court’s ability to oversee and manage the conduct and effectiveness of a receiver
for Development Max alleged to operate through a “web” of companies in Ukraine
is less than certain, further reducing the appropriateness of this remedy in
Delaware. Pipal, 2015 WL 9257869, at *1 (denying the defendant’s motion to
dismiss on forum non conveniens grounds, reasoning in part that, though the
allegedly fraudulent activity took place in India (including the development and
ultimate theft of a computer application), the wrongdoers “placed the stolen
application . . . into a Delaware corporation, . . . [which] marketed the application
in the United States and abroad, and has solicited and received investments based
on the representation that it owns the [application]”).