Evraz Wins Third Circuit Appeal

May 23, 2007

Cleary Gottlieb successfully represented Evraz Holding, a Russian steel and mining corporation, in a Third Circuit appeal arising from a dispute over ownership and control of Kachkanarsky GOK, the largest vanadium ore processing plant in Russia.

Evraz was named as one of several defendants in a civil RICO action by former shareholders of GOK, who alleged that they had lost their ownership as a consequence of fraud, extortion, bribery and false bankruptcy proceedings in Russia (the alleged actions took place before Evraz’s acquisition of GOK.) The U.S. District Court for the District of Delaware dismissed the action based on direct estoppel, ruling that the plaintiffs’ claims were essentially the same as those asserted in an earlier action that the U.S. District Court for the Southern District of New York had dismissed based on forum non conveniens. The Delaware court, however, denied the motion of Evraz and other defendants to enjoin plaintiffs from pursuing the same claims in other courts, including in another action the plaintiffs had filed in the Delaware Court of Chancery; it believed it did not have jurisdiction to do so because defendants had contested the court’s subject matter jurisdiction and some defendants had contested the court’s personal jurisdiction over them. The plaintiffs appealed the dismissal of the action to the Third Circuit, and the defendants cross-appealed the denial of the injunction.

In a decision issued May 23, 2007, the Third Circuit affirmed the dismissal of the action based on direct estoppel. On defendants’ cross appeal, the court found that the district court did have a sufficient jurisdictional basis to entertain the injunction motion, because it had subject matter jurisdiction over the plaintiffs’ RICO claims, as well as personal jurisdiction over at least some of the defendants and – most important – over the plaintiffs, who would be the subject of the injunction.