Court Opinion

ID: 4269524
Source: CourtListenerOpinion
Date Created: 2018-04-24 17:00:44.00148+00
Date Added: 2024-06-11T14:31:24.033404
License: Public Domain

UNITED STATES DISTRICT COURT
                            FOR THE DISTRICT OF COLUMBIA
____________________________________
                                    )
REPUBLIC OF KAZAKHSTAN,             )
                                    )
                  Plaintiff,        )
                                    )
      v.                            )                 Civil Action No. 17-2067 (ABJ)
                                    )
ANATOLIE STATI, et al.,             )
                                    )
                  Defendants.       )
____________________________________)

                                  MEMORANDUM OPINION

       Plaintiff, the Republic of Kazakhstan (“Kazakhstan”), has brought this action against

defendants, Anatolie Stati and Gabriel Stati and the two companies they own, Ascom Group, S.A.

(“Ascom”) and Terra Raf Trans Traiding Ltd. (“Terra Raf”) for alleged violations of the Racketeer

Influenced and Corrupt Organizations Act (“RICO”), 18 U.S.C. § 1961 et seq., and the common

law torts of fraud and civil conspiracy. Compl. ¶ 1 [Dkt. # 1]. Kazakhstan claims that defendants

obtained an arbitral award from the Stockholm Chamber of Commerce (“SCC”) in Sweden

through fraud, and it seeks damages, attorneys’ fees, and an injunction preventing defendants from

enforcing the arbitral award in the United States. Id. at 92–93 (“Prayer for Relief”). 1

       On February 26, 2018, the Clerk of Court entered defaults against two of the four

defendants – Ascom and Terra Raf – due to their failure to answer the complaint. Clerk’s Entry

of Default Re: Terra Raf [Dkt. # 8]; Clerk’s Entry of Default Re: Ascom [Dkt. # 9]. A few days

1       In a related case to enforce the same arbitral award, Kazakhstan raised, and the Court
rejected, similar arguments based on alleged fraud. See Anatolie Stati v. Republic of Kazakhstan,
No. 14-1638, 2018 WL 1461898, at *3–9, 16 (D.D.C. Mar. 23, 2018) (granting petition to confirm
SCC arbitral award because “none of the grounds for refusal or deferral of the award set forth in
the New York Convention apply”).
later, on March 2, 2018, defendants moved to vacate the entries of default, see Defs.’ Mot. to

Vacate Entry of Default Against Ascom and Terra Raf [Dkt. # 13] (“Defs.’ Mot.”); Mem. in Supp.

of Defs.’ Mot. [Dkt. # 14] (“Defs.’ Mem.”), and plaintiff opposed the motion. Kazakhstan’s Opp.

to Defs.’ Mot. [Dkt. # 15] (“Pl.’s Opp.”). For the reasons that follow, the Court will grant

defendants’ motion.

                                            ANALYSIS

       Under Federal Rule of Civil Procedure 55(c), “[t]he court may set aside an entry of default

for good cause.” Fed. R. Civ. P. 55(c). The Court must exercise its discretion in making such a

determination, but in this Circuit, “strong policies favor resolution of disputes on their merits.”

Jackson v. Beech, 636 F.2d 831, 835 (D.C. Cir. 1980); see also Mohamad v. Rajoub, 634 F.3d 604,

606 (D.C. Cir. 2011) (pointing to Jackson v. Beech for the same proposition). “In exercising its

discretion, the district court is supposed to consider ‘whether (1) the default was willful, (2) a set-

aside would prejudice plaintiff, and (3) the alleged defense was meritorious.’” Mohamad, 634
F.3d at 606, quoting Keegel v. Key West & Caribbean Trading Co., 627 F.2d 372, 373 (D.C. Cir.

1980). “Because of the strong preference for resolving disputes on the merits, any doubts must be

resolved in favor of the party seeking relief from the default.” Gray v. Staley, 310 F.R.D. 32, 35

(D.D.C. 2015), citing Jackson, 636 F.2d at 837.

       Before the Court can analyze whether good cause exists to vacate the entry of default, it

must first address the threshold requirement set forth in Local Civil Rule 7(g) which provides that

“[a] motion to vacate an entry of default, or a judgment by default, or both, shall be accompanied

by a verified answer presenting a defense sufficient to bar the claim in whole or in part.” LCvR

7(g). Defendants have not filed an answer with their motion. Instead, they request that the Court

exercise its discretion and permit them to file a motion to dismiss by May 4, 2018, which is sixty

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days from the date the last defendant in this case was served. 2 Defs.’ Mem. at 5 n.3; Defs.’ Reply

at 6 n.2.

        The Court will grant this request as a matter of judicial efficiency. It sees no reason why

the four defendants, all represented by the same counsel, should be required to file separate

answers or other responsive pleadings to the same complaint. 3 Furthermore, this ruling is

consistent with the Circuit’s strong preference to proceed on the merits. See Jackson, 636 F.2d at

837; see also Azamar v. Stern, 275 F.R.D. 1, 4 n.3 (D.D.C. 2011) (noting that “courts have

proceeded with considering the merits of a motion to vacate default despite the failure to comply

with [Local Civil Rule 7(g)], partially due to the preference for allowing a case to proceed on the

merits rather than allowing the entry of default to stand on a purely procedural ground”).

        With respect to the motion to vacate the defaults, the Court has considered each of the Rule

55(c) factors, and it finds that there is good cause to vacate the defaults entered against Ascom and

Terra Raf. The first factor – whether the default was “willful” – requires more than negligent

conduct. See, e.g., Gray, 310 F.R.D. at 35 (“To show willfulness, a moving party need not

establish bad faith, though it must demonstrate more than mere negligence.”); see also Wilson v.

Superclub Ibiza, LLC, 279 F.R.D. 176, 179 (D.D.C. 2012) (same). Here, defendants contend that

their failure to respond to the complaint was “borne of negligence,” Defs.’ Reply at 2, that is “a

combination of miscommunication, colorable questions concerning the sufficiency of service with

respect to . . . [d]efendant Terra [Raf], lack of service on Gabriel Stati, and [p]laintiff’s failure to

2       According to defendants, service of the other two defendants, Anatolie Stati and Gabriel
Stati, was completed, although no certificate of service has been filed with the Court. See Reply
Mem. in Supp. of Defs.’ Mot. [Dkt. # 16] (“Defs.’ Reply”) at 6 n.2.

3      The Court notes that all four defendants have now filed a motion to dismiss the complaint.
See Defendants’ Motion to Dismiss [Dkt. # 19].
                                                   3
file certificates of service [on the public docket] when it considered service to have been

completed.” Defs.’ Mem. at 3. And they assert that despite this initial delay in responding,

defendants are now ready and eager to defend against the suit. Defs.’ Reply at 2.

        Although the Court does not condone defendants’ negligent behavior, there is no indication

that they deliberately tried to delay this case or acted with wanton or willful disregard for their

legal responsibilities. See Gray, 310 F.R.D. at 35 (holding that the defendants’ two-month delayed

response was not willful under Rule 55(c) because they had not failed to defend against the case

or otherwise engaged in “dilatory tactics”); see also Kusi v. British Airways Corp., No. 96-2868,

1997 WL 420334, at *1 (D.D.C. July 17, 1997) (holding that the defendant’s failure to respond to

complaint due to miscommunication between its foreign corporate headquarters and its U.S.

counsel was excusable neglect since there was no indication that the defendant “acted with willful

disregard for its legal responsibilities”).

        In fact, a day after the Clerk of Court entered the defaults against Ascom and Terra Raf,

counsel for defendants entered their appearance and emailed plaintiff’s counsel seeking to

negotiate a briefing schedule. Ex. A to Defs.’ Reply [Dkt. # 16-3]; Notice of Appearance James

E. Berger [Dkt. # 10]; Notice of Appearance Charlene C. Sun [Dkt. # 11]; Notice of Appearance

Taylor T. Lankford [Dkt. # 12]. And shortly thereafter, defendants filed this motion to vacate the

defaults. Defs.’ Mot. So this is not a case where defendants were “totally unresponsive,” see

Jackson, 636 F.2d at 836 (noting that default judgment should be reserved for situations involving

a “totally unresponsive party”), and since “enforcing judgments as a penalty for delays in filing is

often contrary to the fair administration of justice,” the Court finds that this delay is excusable

under Rule 55(c). Int’l Painters & Allied Trades Union & Indus. Pension Fund v. H.W. Ellis

Painting Co., 288 F. Supp. 2d 22, 25 (D.D.C. 2003).

                                                 4
       Moreover, plaintiff will not be prejudiced by vacating the defaults. There is no indication

that the delay in this case has caused witnesses to disappear or physical evidence to deteriorate.

See Capital Yacht Club v. Vessel AVIVA, 228 F.R.D. 389, 394 (D.D.C. 2005), citing KPS &

Assocs., Inc. v. Designs By FMC, Inc., 318 F.3d 1, 15 (1st Cir. 2003) (noting that prejudice results

from the dangers that accompany delay such as “loss of evidence, increased difficulties of

discovery, or an enhanced opportunity for fraud or collusion”). Plaintiff asserts that “delay

enhances [defendants’] opportunity to perpetuate their fraudulent scheme.” Pl.’s Opp. at 9. But

this claim is not well-founded since the danger plaintiff seeks to forestall is an effort by the

defendants to enforce the arbitral award through legal systems in “multiple jurisdictions.” Id. And

the arbitral award has already been upheld by the Swedish Supreme Court and recently by this

Court notwithstanding the fraud allegations. See Stati, 2018 WL 1461898 at *5, 16.

       Finally, defendants have met the third criteria for vacating the defaults because they have

proffered a potentially meritorious defense based on their contention that the complaint fails to

allege a prima facie RICO claim because the vast majority of the conduct is lawful and occurred

outside the United States. Defs.’ Mem. at 5; see Mohamad, 634 F.3d at 606 (“[A]llegations are

meritorious if they contain even a hint of a suggestion which, proven at trial, would constitute a

complete defense.”), quoting Keegel, 627 F.2d at 374.

                                                 5
       Accordingly, for the reasons stated, the Court will grant defendants’ motion, [Dkt. # 13],

to vacate the defaults entered against Ascom and Terra Raf.

       A separate order will issue.

                                            AMY BERMAN JACKSON
                                            United States District Judge

DATE: April 24, 2018

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