Court Opinion

ID: 619897
Source: CourtListenerOpinion
Date Created: 2011-12-28 01:01:17+00
Date Added: 2024-06-11T17:50:50.006974
License: Public Domain

FILED
                           NOT FOR PUBLICATION                              DEC 27 2011

                                                                        MOLLY C. DWYER, CLERK
                    UNITED STATES COURT OF APPEALS                       U .S. C O U R T OF APPE ALS

                            FOR THE NINTH CIRCUIT

KAZENERCOM TOO; et al.,                          No. 09-56329

             Plaintiffs - Appellants,            D.C. No. 8:09-cv-00059-JVS-
                                                 MLG
  v.

IBAR DEVELOPMENT, LLC; et al.,                   MEMORANDUM *

             Defendants - Appellees,

  and

YERKIN AKKUZOV; et al.,

             Third-party-defendant -
Appellees,

________________________________

WELLS FARGO BANK NA,

             Third-party-defendant.

KAZENERCOM TOO; et al.,                          No. 10-55458

              Plaintiffs - Appellees,            D.C. No. 8:09-cv-00059-JVS-
                                                 MLG

        *
             This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
YERKIN BEKTAYEV,

            Plaintiff-counter-defendant -
Appellee,

 v.

ANATOLY VANETIK, (“TONY”),

            Defendant - Appellant,

________________________________

IBAR DEVELOPMENT, LLC; et al.,

            Defendants,

TURAN PETROLEUM, INC.,

            Defendant-counter-defendant,

 and

KANET MEIRMANOV,

            Plaintiff-third-party-plaintiff,

 and

YERKIN AKKUZOV; et al.,

            Third-party-defendant.

BERIK BEKTAY,                                  No. 10-55922

                                          2
              Plaintiff - Appellant,            D.C. No. 8:09-cv-00059-JVS-
                                                MLG
YERKIN BEKTAYEV; et al.,

             Plaintiff-counter-defendant-
third party plaintiff - Appellants,

 and

KAZENERCOM TOO; et al.,

              Plaintiffs,

   v.

TURAN PETROLEUM, INC.,

              Defendant-counter-defendant
- Appellee,

 and

TREK RESOURCES, INC.; et al.,

              Defendants,
and

YERKIN AKKUZOV; et al.,

              Third-party-defendants.

                    Appeal from the United States District Court
                       for the Central District of California
                     James V. Selna, District Judge, Presiding

                                            3
                    Argued and Submitted December 8, 2011 **
                              Pasadena, California

Before: PREGERSON and PAEZ, Circuit Judges, and JONES, District Judge.***

      We address three related appeals arising from an asset purchase transaction

between Kazenercom TOO (“Kazenercom”) and its affiliates on one hand, and

Turan Petroleum, Inc. (“Turan”) and its affiliates on the other.

                                          I

      Kazenercom and its affiliates appeal the district court’s dismissal with

prejudice of their Verified Second Amended Complaint (“SAC”) and Verified

Amended Third-Party Complaint (“ATPC”) pursuant to Federal Rules of Civil

Procedure 12(b)(6) and 12(e). We review the Rule 12(e) dismissals for abuse of

       **
              Case Nos. 09-56329 and 10-55458 were argued and submitted
December 8, 2011. This panel unanimously concludes Case No. 10-55922 is
suitable for decision without oral argument, and that case is therefore submitted
without oral argument. See Fed. R. App. P. 34(a)(2).
        ***
            The Honorable James P. Jones, United States District Judge for the
Western District of Virginia, sitting by designation.

                                          4
discretion, and review de novo the Rule 12(b)(6) dismissals. We vacate the

dismissals and remand with leave to amend.1

       In dismissing the complaints pursuant to Rule 12(e), the district court stated

that “even if dismissal is not warranted under Rule 41(b), it is nonetheless

warranted, at a minimum, under Rule 12(e).” In so concluding, the district court

committed legal error by failing to consider whether dismissal was warranted

under Federal Rule of Civil Procedure 41(b). See McHenry v. Renne, 84 F.3d
1172, 1179 (9th Cir. 1996); see also Ferdik v. Bonzelet, 963 F.2d 1258, 1260-61

(9th Cir. 1992) (“In determining whether to dismiss a case for failure to comply

with a court order the district court must weigh five factors . . . .”). In this case, the

Rule 41(b) factors weigh decisively against dismissal. Dismissal here is

particularly harsh given the viability of Kazenercom’s RICO claims. In addition,

the district court failed to consider less severe alternatives after it found that

Kazenercom failed to comply with its Rule 12(e) order. Nothing in the record

suggests, moreover, that the complaints impeded the court’s ability to manage its

       1
         Kazenercom filed motions for judicial notice in this appeal on May 26,
2010 and April 26, 2011. We take judicial notice of the documents referenced in
the May 26, 2010 motion because they arise from the two related appeals, Nos. 10-
55458 and 10-55922. See U.S. ex rel. Robinson Rancheria Citizens Council v.
Borneo, Inc., 971 F.2d 244, 248 (9th Cir. 1992). We decline to take judicial notice
of the documents in the April 26, 2011 motion because they are irrelevant to the
issues on appeal. See Trigueros v. Adams, 658 F.3d 983, 987 (9th Cir. 2011).

                                            5
docket or prejudiced the defendants. Because the district court overlooked these

factors, we must vacate the Rule 12(e) dismissals.

      Next, the district court erroneously dismissed the federal RICO claims in the

SAC under Rule 12(b)(6). Although we are not unsympathetic to the district

court’s tedious task of weeding through the operative complaint, we conclude that

the SAC adequately pleads a civil RICO offense and RICO conspiracy. 18 U.S.C.

§§ 1962(c), (d). Taking as true the factual allegations and reasonable inferences,

the SAC alleges the conduct of an enterprise through a pattern of racketeering

activity, and a conspiracy to do the same. See Odom v. Microsoft Corp., 486 F.3d
541, 545 (9th Cir. 2007) (en banc). We therefore vacate the dismissal of the

federal RICO claims.

      The district court correctly found, however, that the SAC and the ATPC fail

to state a claim under the federal securities laws. First, with respect to the alleged

misrepresentation concerning Kazenercom’s majority stake in Turan, both

complaints fail to plead the circumstances of fraud with particularity. See 15

U.S.C. § 78u-4(b); Fed. R. Civ. P. 9(b); Zucco Partners, LLC v. Digimarc Corp.,

552 F.3d 981, 990-91 (9th Cir. 2009). Second, with respect to the alleged

misrepresentation concerning Turan’s stock price, the complaints fail to allege loss

causation. See In re Gilead Sciences Securities Litig., 536 F.3d 1049, 1055 (9th

                                           6
Cir. 2008). Third, the complaints fail to state an insider trading claim because they

do not allege with particularity that any plaintiff bought or sold Turan stock

contemporaneously with the alleged insiders. See Neubronner v. Milken, 6 F.3d
666, 670 (9th Cir. 1993). Accordingly, the district court properly dismissed these

claims.2

      The district court abused its discretion, however, in denying leave to amend

the SAC and ATPC. Because the Verified First Amended Complaint and the

Verified Third-Party Complaint were the only complaints that any court previously

had dismissed, the SAC and ATPC each constitute only the first failure to cure the

deficiencies identified by the district court. Under these circumstances, denial of

leave to amend was improper. Cf. Zucco Partners, 552 F.3d at 1007 (affirming

dismissal with prejudice after repeated failures to cure deficiencies).

      We therefore vacate the dismissals of both complaints, and remand to the

district court. Kazenercom and its affiliates shall have the opportunity to replead

their federal securities law claims against all defendants. Taking into consideration

any amended pleadings, and the well-pleaded RICO claims in the SAC, the district

court must also reconsider whether to exercise supplemental jurisdiction over any

      2
         To the extent the SAC and ATPC alleged other federal securities claims
not addressed here, Kazenercom waived on appeal any dispute with the district
court’s dismissal of such claims.

                                           7
state law claims. See Exxon Mobil Corp. v. Allapattah Services, Inc., 545 U.S.
546, 559, 564-65 (2005); Shames v. California Travel and Tourism Comm’n, 626
F.3d 1079, 1085 (9th Cir. 2010).

                                           II

      Vanetik appeals the district court’s denial of sanctions against Kazenercom

and its counsel under the PSLRA. Because some of Kazenercom’s claims survive

dismissal, the question of sanctions is not ripe for determination. 15 U.S.C. §

78u-4(c)(1). We therefore vacate the district court’s order denying sanctions.

                                           III

      Yerkin Bektayev, Berik Bektay, and Kanet Meirmanov (collectively,

“Bektayev”) challenge the district court’s grant of summary judgment in the

interpleader action in favor of Turan. In particular, they argue that the district

court erred in giving preclusive effect to the Nevada state court’s summary

judgment order finding that Bektayev and four colleagues (collectively, “Bektayev

Board”) never constituted the legitimate board of directors of Turan. We review de

novo the district court’s ruling on issue preclusion, and once we determine that it is

                                           8
available, we review the decision to apply it for abuse of discretion. We affirm in

both respects.3

       The Nevada judgment satisfies the criteria for issue preclusion under Nevada

law. Five Star Capital Corp. v. Ruby, 194 P.3d 709, 713 (Nev. 2008). First, the

state and federal actions center on the same issue of which of the competing boards

legally controls Turan. Bektayev waived any argument to the contrary by not

raising it in the district court.

       Second, the Nevada judgment was final and on the merits. Bektayev

contends that the relevant judgment is the state court’s prior interlocutory order

finding that the Bektayev Board is illegitimate (“Interlocutory Order”). This

argument has no merit. As Bektayev conceded in district court, the Nevada court’s

summary judgment order reiterated the Interlocutory Order’s findings. Bektayev

does not dispute that the Nevada court’s summary judgment was final and on the

merits.

       Third, Bektayev was a party to the Nevada action. The record confirms that

he presented arguments and evidence to show that the Bektayev Board was the

       3
         Kazenercom filed motions for judicial notice in this appeal on May 24,
2011 and November 8, 2011. We decline to take judicial notice of these
documents because they are irrelevant to the issues on appeal. See Trigueros, 658
F.3d at 987.

                                           9
duly elected board of Turan. Further, the notice of appeal in the Nevada action

was filed by Bektayev on behalf of Turan. See Paradise Palms Cmty. Ass’n v.

Paradise Homes, 505 P.2d 596, 598 (Nev. 1973) (“A party . . . is one who is

directly interested in the subject matter, and had a right to make defense, or to

control the proceeding, and to appeal from the judgment.” (internal quotation

marks omitted)).

      Fourth, the Nevada action was actually and necessarily litigated. Bektayev

does not dispute that litigation was necessary. Rather, he asserts that he did not

actually litigate his claim because (1) the Nevada court entered the Interlocutory

Order without holding an evidentiary hearing or permitting discovery, and (2)

subsequently entered summary judgment without giving Bektayev further notice or

a hearing. But the exclusion of Bektayev after the Interlocutory Order is

inconsequential because by that point he had already received a full and fair

opportunity to argue that the Bektayev Board was legitimate. Moreover, whether

Nevada law required the state court to permit discovery or an evidentiary hearing

may be an issue for the Nevada Supreme Court, but it is not a matter for this court

to decide. Absent any indication of the Nevada judgment’s subsequent reversal,

we accept it as valid. See LaForge v. State, Univ. and Cmty. College Sys. of

Nevada, 997 P.2d 130, 134 n.4 (Nev. 2000).

                                          10
      Because the requirements for issue preclusion are met, we hold that the

district court did not abuse its discretion in finding that the Nevada judgment

precludes the argument that the Bektayev Board constitutes the legitimate board of

Turan. We therefore affirm the district court’s grant of summary judgment in favor

of Turan.

      In sum, in appeal No. 09-56329, we vacate the dismissals and remand with

leave to replead. In No. 10-55458, we vacate the order denying sanctions as

premature. In No. 10-55922, we affirm the grant of summary judgment.

      AFFIRMED in part, VACATED in part, and REMANDED for further

proceedings consistent with this disposition. The parties shall bear their own

costs on appeal.

                                          11