Russian Steelmaker Wins a Third Circuit Appeal

March 3, 2010

Cleary Gottlieb successfully represented Evraz Holding, a Russian steelmaking 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. The Third Circuit’s decision in favor of Evraz and the other defendants rejected the plaintiffs’ attempt to bring a lawsuit in the United States concerning matters that took place in Russia and have been litigated in the Russian courts.

Evraz was named as one of several defendants in a civil RICO action filed in the Delaware Court of Chancery by parties who alleged that they were former shareholders of GOK and that they had lost their ownership as a consequence of fraud, extortion, bribery and false bankruptcy proceedings in Russia – all of which allegedly took place prior to Evraz’s acquisition of GOK. After Evraz and the other defendants removed the case to federal court, the plaintiffs re-filed their state law claims in the Court of Chancery. The District Court for the District of Delaware dismissed the action based on direct estoppel, agreeing with Evraz and the other defendants that the plaintiffs’ claims were essentially the same as those asserted in an earlier action in the Southern District of New York that had been dismissed based on forum non conveniens. The Delaware court, however, initially denied the defendants’ motion to enjoin the plaintiffs from pursuing the same claims in other courts, citing uncertainly over its jurisdiction to entertain such an injunction.

On appeal, the Third Circuit affirmed the district court’s dismissal of the action based on direct estoppel. It also granted the defendants’ cross-appeal, holding that the district court did have a sufficient jurisdictional basis to entertain the defendants’ injunction motion, and remanded the case to the district court for consideration of the injunction motion on its merits.

On remand, the district court found in favor of Evraz and the other defendants, ruling that the plaintiffs’ re-filing in the Court of Chancery following removal had constituted an improper attempt to subvert the removal statute. As a result, the District Court issued an injunction permanently barring the plaintiffs from pursuing the same claims in any other court in the United States, including the Court of Chancery.

The plaintiffs again appealed to the Third Circuit. On March 3, the Court of Appeals issued its judgment, holding that the District Court had both the legal authority to enjoin the plaintiffs under the applicable exception codified in the Anti-Injunction Act and the factual basis to do so, in light of the plaintiffs’ “abusive tactic that courts have condemned as an attempt to subvert the removal statute.” The Third Circuit thus affirmed the anti-suit injunction, which effectively puts an end to this protracted litigation. This is a complete victory for Evraz and the other defendants.