Rsm Production Corporation v. Freshfields Bruckhaus Deringer US LLP ( 2011 )

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
RSM PRODUCTION CORPORATION,
Plaintiff,
v. Civil Action No. 10-00457
Judge Beryl A. Howell
FRESHFIELDS BRUCKHAUS DERINGER
US LLP, et al.
Defendants.
MEMORANDUM OPINION
The plaintiff in this case apparently seeks to test the adage that “the third time’s the
charm,” but the law does not work that way. The plaintiff, RSM Production Corporation
(hereinafter “RSM”), alleges that it had an exclusive contract for natural gas exploration off the
shore of Grenada but that corrupt dealings between Grenada and a Grenadian company, Global
Petroleum Group, Ltd (“Global Petroleum”), led Grenada illegally to terminate its contract with
RSM. After an unsuccessful lawsuit in New York and an arbitration in London, RSM filed this
lawsuit against an international law firm, Freshfields Bruckhaus Deringer US LLP, and two of
that law firm’s attorneys, Jan Paulsson and Brian King, (hereinafter “Freshfields”), alleging that
these three defendants were part of the conspiracy to bribe Grenada officials and deny RSM its
licensing rights. Specifically, the plaintiff contends that Freshfields conspired to violate the
Racketeer Influenced and Corrupt Organizations Act (hereinafter “RICO”) by representing
Grenada before the International Centre for the Settlement of Investment Disputes (hereinafter
“ICSID”) arbitration panel tasked with resolving the terminated contract dispute between the
country and the plaintiff. Plaintiff now seeks at least $500 million in damages from Freshfields.
1
The defendants have moved to dismiss the Complaint, inter alia, on grounds that the plaintiff’s
case should be dismissed under the doctrine of res judicata because the plaintiff has already
presented its claims before the Southern District of New York, which dismissed the plaintiff’s
Complaint for failure to state a claim. Despite the plaintiff’s hopeful assertion that “this case
will remain viable regardless of the outcome of the New York case,” Compl. ¶ 43, the Court
agrees with the defendants that this lawsuit is barred by the doctrine of res judicata.
Accordingly, for the reasons set forth below, the defendants’ motion to dismiss for failure to
state a claim is granted. 1
I. BACKGROUND
Plaintiff’s twenty-six page Complaint includes a comprehensive narrative of the
underlying agreement and dispute between the plaintiff and the Grenadian government, the
plaintiff’s interactions with various government officials and allegedly corrupt businessmen, as
well as a history of Grenada’s alleged “well-known reputation for criminal bribery and
corruption.” Compl. ¶ 31. Many of the allegations, however, are largely extraneous and
irrelevant to the issues in this case. The Court therefore recites only the allegations necessary for
resolution of the pending motion.
Plaintiff RSM is a Texas corporation with its principal place of business in Denver,
Colorado. Id. ¶ 1. On July 4, 1996, RSM and the nation of Grenada entered into an exclusive
“Petroleum Agreement,” which “was to have resulted in an oil and natural gas hydrocarbon
exploration, development and production license being issued as a matter of routine performance
by Grenada to RSM.” Id. ¶ 10; Compl., Ex. A (Agreement Between the Government of Grenada
1
The Court has jurisdiction to hear this case pursuant to 28 U.S.C. § 1331 because the plaintiff asserts a cause of
action under the Racketeer Influenced and Corrupt Organizations Act. Venue is proper in this District pursuant to
28 U.S.C. § 1391(a) and 19 U.S.C. § 1965(a) because Freshfields maintains an office and transacts business in the
District of Columbia.
2
and RSM Production Corporation). The agreement provided that “[a]s soon as possible but in
any event no later than ninety (90) days after the Effective Date,” RSM was to apply for, and the
Grenadian Minister was to grant, an Exploration License. Compl., Ex. A at 4.
The agreement between RSM and Grenada included a force majeure provision, which
stated that RSM’s failure to fulfill any of the terms of the agreement would not be treated as a
breach of the agreement if that failure was the result of “any event beyond the reasonable control
of the party claiming to be affected by such event,” including “any adverse claim or dispute
relating to [Grenada’s] ownership of or control over the petroleum in any portion of the
Agreement Area.” Id. at 26. Pursuant to this provision, on July 18, 1996, RSM provided notice
to the Government of Grenada that it was invoking the agreement’s force majeure clause due to
“boundary disputes,” and Grenada agreed to stay implementation of the agreement. Compl. ¶ 18.
In September 1996, the plaintiff alleges that Gregory Bowen, Grenada’s former Deputy
Prime Minister and former Minister of Agriculture, Lands, Forestry, Fisheries, Public Utilities,
and Energy, informed Jack Grynberg, RSM’s Chief Executive, that he expected significant bribe
payments in order for RSM and Grynberg to conduct business in Grenada. Id. ¶¶ 5; 10-12. The
plaintiff alleges that Mr. Grynberg refused to pay the bribes, and Mr. Bowen then began to
“obstruct[], harass[] and intimidate[] RSM and Grynberg in their efforts to explore, develop and
produce Grenada’s vast oil and natural gas resources.” Id. ¶ 12.
In December 2003, the plaintiff alleges that Lev Model, a “convicted criminal” and
“well-known, accomplished thief in Russian petroleum circles,” formed a Grenadian company
called Global Petroleum. Id. ¶¶ 7, 14-17. Global Petroleum’s “primary purpose,” according to
the plaintiff, is to “facilitate the payment of monies to Grenadian Government officials as well as
to the Government of Grenada, and to act as a front for other individuals and oil companies
3
interested in exploring, developing and ultimately extracting petroleum from offshore Grenada’s
vast hydrocarbon accumulations.” Id. ¶ 7. As part of these dealings, RSM alleges that shortly
after Global Petroleum’s formation Grenada began to take “active steps to get out if its exclusive
contract with RSM.” Id. ¶ 18.
On January 12, 2004, a month after Global Petroleum’s formation, RSM wrote to the
Prime Minister of Grenada to inform him that it was in the process of revoking the force majeure
clause. Id. ¶ 20. On April 14, 2004, RSM delivered its official application for an oil and natural
gas exploration license to Grenada’s Permanent Secretary of the Ministry of Finance. Id. ¶ 21.
On April 27, 2004, Mr. Bowen informed RSM that its application for an exploration license had
been filed more than ninety days after the revocation of the force majeure clause and was
therefore denied as untimely. Id. ¶¶ 23-24. In response, RSM filed a Request for Arbitration
with the ICSID in an effort to resolve the dispute. Id. ¶ 29.
In late 2005 and early 2006, while the ICSID arbitration proceeding was still pending, the
plaintiff alleges that Mr. Grynberg was contacted by Lev Korchagin, the director and legal
advisor for Global Petroleum, and Michael Melnicke, a New York businessman who served as
“Ambassador-at-Large” for Grenada. Id. ¶¶ 8, 9, 36-40. Messrs. Korchagin and Melnicke
offered to assist in the resolution of the dispute between RSM and Grenada. Id. Mr. Korchagin
told Mr. Grynberg that if Global Petroleum, which allegedly “‘own[ed]’ the Government of
Grenada,” could participate as a partner in RSM’s offshore Grenada license, Global Petroleum
“would work everything out.” Id. ¶ 37. Additionally, Mr. Melnicke asked that, in compensation
for his efforts to resolve RSM’s underlying dispute, he receive a “substantial overriding royalty”
based on the amount of oil and gas that was ultimately produced as a result of the RSM/Grenada
contract. Id. ¶ 40. Mr. Grynberg and RSM refused subsequent meetings with Mr. Korchagin,
4
but continued to informally meet with Mr. Melnicke. Id. ¶¶ 37-38. During these meetings, Mr.
Melnicke informed Mr. Grynberg that Mr. Bowen had been bribed by two individuals – Len
Blavatnik and Mikhail Fridman – so that their group could develop the petroleum reserves
believed to exist off the shore of Grenada. Id. ¶ 42. Mr. Melnicke “further revealed” that
Messrs. Blavatnik and Fridman had promised additional bribes to the Grenadian government and
had promised to pay Grenada’s legal fees associated with Grenada’s ICSID arbitration
proceeding with RSM. Id.On October 31, 2006, RSM filed suit against nine defendants, including Messrs.
Blatnavik, Bowen, Fridman, Korchagin, and Model, and Global Petroleum in the U.S. District
Court for the Southern District of New York, alleging tortious interference with contract, tortious
interference with prospective business advantage, and civil conspiracy to commit tortious
interference. Id. ¶ 43; See RSM Prod. Corp. v. Fridman, 643 F. Supp. 2d 382 (S.D.N.Y. 2009). 2
In Fridman, the district court dismissed RSM’s Complaint with prejudice for failure to state a
claim and observed that it “reflect[ed] a profound and fundamental misunderstanding of the legal
and procedural requirements for filing a complaint in a United States court.” Fridman, 643 F.
Supp. 2d at 415. The dismissal was affirmed by the Second Circuit. See RSM Prod. Corp. v.
Fridman, 387 Fed. App’x 72 (2d Cir. 2010).
Between the filing of the plaintiff’s Complaint in the Southern District of New York and
that case’s dismissal, RSM and Grenada proceeded with arbitration before the ICSID. On June
21, 2007, Mr. Bowen testified at the ICSID arbitration that Global Petroleum was financing the
legal fees Grenada incurred during the arbitration process. Compl. ¶ 44. Grenada’s legal
services during the arbitration were performed by defendants Freshfields Bruckhaus Deringer US
2
Four of the nine defendants (Messrs. Bowen, Model, and Korchagin, and Global Petroleum) in the New York suit
are labeled “Conspirators Who Are Not Named As Defendants” in the instant lawsuit, Compl. ¶¶5-9, while the other
five defendants are alleged to have used Global Petroleum “as a front.” Id. ¶ 7.
5
LLP, the United States affiliate of an international law firm based out of the United Kingdom,
and two of the firm’s attorneys, Brian King, a partner based out of Freshfields’ New York and
Amsterdam offices, and Jan Paulsson, a principal consultant in Freshfields’ Paris office. Id. ¶¶
2-4, 50, 62. The plaintiff alleges that, through September 2009, Global Petroleum had invested
over $10 million in Grenada’s defense in the arbitration, including $2.5 million personally
advanced by Mr. Model. Id. ¶¶ 46, 48.
Ultimately, the defendants obtained a favorable ruling for the Grenadian government
from the ICSID arbitration panel, which ruled that RSM had indeed filed its application for an
exploration license one day after the expiration of the ninety day period provided for in the
agreement. 3 Id. ¶ 29. Following resolution of RSM’s claims, in June 2008 Grenada issued an
Offshore License to Global Petroleum. Id. ¶ 49.
On March 17, 2010, RSM filed a Complaint in this Court, alleging that defendants
Freshfields, and Messrs. Paulsson and King conspired to commit an act in violation of the
Racketeer Influenced and Corrupt Organizations Act. Id. ¶ 57; 18 U.S.C. § 1962(d). The
plaintiff asserts that Global Petroleum, and Messrs. Model, Korchigan, Bowen and others
engaged in an association-in-fact RICO enterprise “designed for the common purpose of
enriching Bowen and other high-level Grenadian officials . . . and obtaining rights to receive an
exclusive exploration license for the development of vast hydrocarbon accumulations in
Grenada’s offshore waters.” Id. The plaintiff further asserts that, by representing Grenada in the
ICSID arbitration, the defendants “knowingly participat[ed] in and benefit[ted] from the legal
fees arising out of the conspiracy [and thus] have all participated in and benefitted from a
racketeering enterprise.” Id. ¶ 61. As a result of this alleged conspiracy, the plaintiff seeks to
3
RSM sought to have the panel’s ruling annulled, and on April 28, 2011, the Annulment Committee issued an order
discontinuing the proceeding and awarding Grenada the costs it incurred in that proceeding. Def.’s Notice of Suppl.
Authority dated May 4, 2011, Ex. A (ICSID Order of the Committee).
6
recover “no less (and possibly considerably more) than $500 million, which may be trebled
[under 18 U.S.C. § 1964(c)], along with attorney’s fees.” Id. ¶ 63.
On June 1, 2010, the defendants moved to dismiss the Complaint for lack of subject
matter jurisdiction, pursuant to Federal Rule of Civil Procedure 12(b)(1), and for failure to state a
claim, pursuant to Federal Rule of Civil Procedure 12(b)(6). Defs.’ Mot. Dismiss, ECF No. 8, at
1. This motion is now pending before the Court. For the reasons discussed below, the Court
grants the defendants’ motion to dismiss for failure to state a claim because the doctrine of res
judicata precludes this Court’s resolution of plaintiff’s claims. 4
II. STANDARD OF REVIEW
To survive a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6), a plaintiff
need only plead “enough facts to state a claim to relief that is plausible on its face” and to
“nudge[ ] [his or her] claims across the line from conceivable to plausible.” Bell Atl. Corp. v.
Twombly, 550 U.S. 544, 570 (2007); FED. R. CIV. P. 12(b)(6). “[A] complaint [does not] suffice
if it tenders naked assertions devoid of further factual enhancement.” Ashcroft v. Iqbal, 129 S.Ct.
1937, 1949 (2009) (internal quotation marks omitted) (citing Twombly, 550 U.S. at 557). Instead,
the complaint must plead facts that are more than “merely consistent with” a defendant’s
liability; “the plaintiff [must plead] factual content that allows the court to draw the reasonable
inference that the defendant is liable for the misconduct alleged.” Id. at 1949. The Court must
“assume all the allegations in the complaint are true (even if doubtful in fact) . . . [and] must give
the plaintiff the benefit of all reasonable inferences derived from the facts alleged.”
4
The defendants have also argued that the Complaint must be dismissed on grounds that the defendants are entitled
to immunity under Articles 21 and 22 of the ICSID Convention, the Complaint is barred by the applicable statute of
limitations, and that the plaintiff has failed to state a claim because the Complaint is “utterly devoid of any factual
basis.” Defs.’ Mem. Supp. Mot. Dismiss, ECF No. 8, at 2. Given resolution of the pending motion on grounds of
res judicata, the Court need not consider the defendants’ other arguments.
7
Aktieselskabet AF 21. November 2001 v. Fame Jeans Inc., 525 F.3d 8, 17 (D.C. Cir. 2008)
(internal quotations and citations omitted).
III. DISCUSSION
The plaintiff asserts one cause of action in this case: that the defendants entered into a
conspiracy with Global Petroleum, Messrs. Bowen, Model, and others to commit a RICO
violation. Compl. ¶¶ 55-62; see 18 U.S.C. § 1962(d). 5 The defendants argue, inter alia, that the
plaintiff’s cause of action is barred by the doctrine of res judicata, or claim preclusion, because
the plaintiff’s allegations against the defendants “rest[ ] on the same allegations of bribery and
corruption that were the subject of [the plaintiff’s] action in the Southern District of New York,”
which that court dismissed and the Second Circuit affirmed. Def.’s Mem. Supp. Mot. Dismiss
(“Def.’s Mem.”), at 13; see also RSM Prod. Corp. v. Fridman, 643 F. Supp. 2d 382 (S.D.N.Y.
2009), aff’d 387 Fed. App’x 72 (2d Cir. 2010). The Court agrees with the defendants that the
Second Circuit’s affirmance of the dismissal of the plaintiff’s claims was a final judgment on the
merits of the allegations underlying the instant case. Consequently, the plaintiff’s current lawsuit
must be dismissed.
A. Requirements for Res Judicata
The doctrine of res judicata bars the court from hearing “repetitious suits involving the
same cause of action once a court of competent jurisdiction has entered a final judgment on the
5
Section 1962(d), conspiracy to violate RICO, provides that “[i]t shall be unlawful for any person to conspire to
violate any of the provisions of subsection (a), (b), or (c) of [Section 1962].” 18 U.S.C. § 1962(d). Subsections (a),
(b), and (c) provide that: “(a) It shall be unlawful for any person who has received any income derived, directly or
indirectly, from a pattern of racketeering activity or through collection of an unlawful debt in which such person has
participated as a principal within the meaning of section 2, title 18, United States Code, to use or invest, directly or
indirectly, any part of such income, or the proceeds of such income, in acquisition of any interest in, or the
establishment or operation of, any enterprise which is engaged in, or the activities of which affect, interstate or
foreign commerce…; (b) It shall be unlawful for any person through a pattern of racketeering activity or through
collection of an unlawful debt to acquire or maintain, directly or indirectly, any interest in or control of any
enterprise which is engaged in, or the activities of which affect, interstate or foreign commerce; and (c) It shall be
unlawful for any person employed by or associated with any enterprise engaged in, or the activities of which affect,
interstate or foreign commerce, to conduct or participate, directly or indirectly, in the conduct of such enterprise's
affairs through a pattern of racketeering activity or collection of unlawful debt.” 18 U.S.C. § 1962(a)-(c).
8
merits.” United States v. Tohono O’Odham Nation, 131 S.Ct. 1723, 1730 (2011) (internal
quotations omitted). The doctrine plays an integral role in advancing the “the conclusive
resolution of disputes” and “preclude[s] parties from contesting matters that they have had a full
and fair opportunity to litigate protects [sic] their adversaries from the expense and vexation
attending multiple lawsuits, conserves judicial resources, and fosters reliance on judicial action
by minimizing the possibility of inconsistent decisions.” Montana v. United States, 440 U.S. 147,
153-54 (1979); Drake v. FAA, 291 F.3d 59, 66 (D.C. Cir. 2002) (“[A] ‘final judgment on the
merits of an action precludes the parties or their privies from relitigating issues that were or
could have been raised in that action,’” quoting Allen v. McCurry, 449 U.S. 90, 94 (1980)). Res
judicata is an affirmative defense that is usually pled in a defendant’s answer, but courts have
also allowed parties to assert the defense in a Rule 12(b)(6) motion to dismiss. Nader v.
Democratic Nat’l Comm., 590 F. Supp. 2d 164, 169 (D.D.C. 2008) (citing Stanton v. D.C. Ct. of
Appeals, 127 F.3d 72, 76-77 (D.C. Cir. 1997). A subsequent lawsuit is barred by the doctrine of
res judicata “if there has been prior litigation (1) involving the same claims or cause of action,
(2) between the same parties or their privies, and (3) there has been a final, valid judgment on the
merits, (4) by a court of competent jurisdiction.” Porter v. Shah, 606 F.3d 809, 813-14 (D.C.
Cir. 2010); Capitol Hill Grp. v. Pillsbury, Winthrop, Shaw, Pittman, LLC, 569 F.3d 485, 490
(D.C. Cir. 2009) (en banc); Smalls v. United States, 471 F.3d 186, 192 (D.C. Cir. 2006) (citing
Blonder-Tongue Labs., Inc. v. Univ. of Ill. Found., 402 U.S. 313, 323-24 (1971)).
B. Analysis
In this case, the parties agree that the third and fourth requirements for application of res
judicata are met. See Defs.’ Mem., at 14; Pl.’s Mem. Opp’n Mot. Dismiss, ECF No. 12
(hereinafter “Pl.’s Opp’n Mem.”), at 29-33; Pl.’s Notice of Suppl. Authority, ECF No. 13, at 1-2.
9
With regard to the requirement that there be a final, valid judgment on the merits, the Southern
District of New York dismissed RSM’s complaint “against all Defendants for failure to state a
claim pursuant to Fed. R. Civ. P. 12(b)(6), because it [did] not contain allegations concerning
each of the material elements necessary to sustain recovery under any of the claims asserted.”
Fridman, 643 F. Supp. 2d at 404 (internal quotations omitted). In its opposition papers, the
plaintiff argued that the Southern District of New York did not render a final judgment on the
merits as to Mr. Bowen because he was dismissed, “before any merits-based determination,” on
jurisdictional grounds under the Foreign Sovereign Immunities Act. Pl.’s Opp’n Mem., at 30-31.
On appeal, however, the Second Circuit stated in a decision issued after the plaintiff had
submitted its opposition papers that Mr. Bowen was not entitled to immunity, but nonetheless
affirmed Mr. Bowen’s dismissal because the Second Circuit concluded that the plaintiff had
failed to state a claim against any of the defendants. 6 Fridman, 387 Fed. App’x at 75 (“We need
not, however, remand to the district court for further proceedings regarding whether Bowen may
be entitled to immunity on other grounds, because the district court concluded, and we agree, that
plaintiffs have failed in any event to state a civil conspiracy claim.”) (internal citations omitted).
The plaintiff concedes that “Mr. Bowen has now received a dismissal on the merits in the New
York case.” Pl.’s Notice of Suppl. Authority, ECF. No. 13, at 1. 7
6
Dismissal under Rule 12(b)(6) for failure to state a claim is generally considered a decision on the merits. See
Federated Dep’t Stores, Inc. v. Moitie, 452 U.S. 394, 399 n.3 (1981) (noting, in a case involving res judicata, that
“the dismissal for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6) is a ‘judgment on the
merits.’”); Haase v. Sessions, 835 F.2d 902, 906 (D.C. Cir. 1987) (“12(b)(6) presents a ruling on the merits with res
judicata effect.”).
7
The plaintiff maintains that “the other alleged co-conspirators [Lev Model and Global Petroleum] did not receive
merits-based dismissals and in any event were not in privity with Freshfields.” Pl.’s Notice of Suppl. Authority,
ECF. No. 13, at 2. This argument also fails because the Fridman court dismissed the plaintiff’s Complaint as to all
defendants for failure to state a claim, including Model and Global Petroleum, even though they failed to appear
before the court. See Fridman, 643 F. Supp. 2d at 414-415 (“[T]he Third Amended Complaint is dismissed as to all
appearing Defendants, principally on the ground that its factual allegations do not support any legally cognizable
claim. Plaintiffs’ allegations that Model and Global Petroleum Group serve as ‘fronts for Fridman’s, Blavatnik’s,
[and other defendants not mentioned in the plaintiff’s Complaint in this case] efforts to bribe Grenadian officials’ . .
10
Regarding the fourth requirement for application of res judicata, the parties do not
dispute that the Southern District of New York was a court of competent jurisdiction. See Pl.’s
Opp’n Mem., at 29-33; see also Fridman, 643 F. Supp. 2d at 400. The Court therefore narrows
its discussion to whether the Fridman action involved (1) the same claims or cause of action, and
(2) the same parties or their privies.
1. The Fridman Case Involved The Same Claims Or Cause Of Action As This
Case.
The first requirement for application of res judicata requires there to be prior litigation
involving “the same claims or cause of action.” Tohono O’Odham, 131 S.Ct. at 1730. This
“identity element” is satisfied when “there is an identity of the causes of action [and] the cases
are based on the same nucleus of facts.” Capitol Hill Grp., 569 F.3d at 490 (internal citations and
quotations omitted). To determine whether two cases arise out of the same nucleus of facts, “the
court will consider ‘whether the facts are related in time, space, origin, or motivation, whether
they form a convenient trial unit, and whether their treatment as a unit conforms to the parties’
expectations or business understanding and usage.” Apotex, Inc. v. FDA, 393 F.3d 210, 217
(D.C. Cir. 2004) (quoting I.A.M. Nat’l Pension Fund v. Indus. Gear Mfg. Co., 723 F.2d 944, 949
n.5 (D.C. Cir. 1983)). The case presently before the Court certainly arises from the same nucleus
of facts that was presented to the Southern District of New York in Fridman. The Court
therefore concludes that the identity element of res judicata is satisfied.
In Fridman, as in this case, the plaintiff alleged corrupt dealings among Messers. Bowen,
Korchigan, and Model, Global Petroleum, and the government of Grenada that resulted in
. suffers from the same defects as their allegations against the appearing Defendants: they are not based on any
cognizable facts properly before the court. Indeed, they are based on the same wishful thinking, both as to the
claims asserted and as to the legal standards for filing a complaint, as Plaintiffs’ allegations with respect to the
appearing Defendants. Accordingly, the entry of a default judgment against [Model and Global Petroleum] would
be inappropriate.”).
11
Grenada’s termination of its contract with RSM. As the defendants note, “RSM’s claims against
Freshfields rests on the same allegations of bribery and corruption that were the subject of its
action in the Southern District of New York, a suit that was dismissed with prejudice,” and the
plaintiff’s Complaint in this case “merely add[s] Freshfields as another supposed member of the
conspiracy alleged in Fridman.” Defs.’ Mem., at 13, 16. Indeed, four of the named defendants in
Fridman – Messers. Bowen, Korchigan, and Model, and Global Petroleum – are listed as
“Conspirators Who Are Not Named as Defendants” in the Complaint, and they are alleged to
have perpetuated the same underlying bribery scheme to deny RSM its exploration license so
that the license could instead be awarded to Global Petroleum. See Compl., ¶¶ 5-9; see also
Fridman, 643 F. Supp. 2d at 382. In fact, the Complaint in this case and the Third Amended
Complaint in Fridman both include sections entitled “The Scheme Is Implemented,” which
includes much of the same verbatim language. See Compl. ¶¶ 18-30; Defs.’ Mot. Dismiss, Ex. B,
Fridman Third Amended Complaint, ¶¶ 29-40. Both of these sections detail Grenada’s rejection
of RSM’s application for the GSM exploration license, and the “scheme” to which plaintiff
refers in both complaints – in other words, the illegal activity that forms the basis of RSM’s
cause of action – is clearly the same in this case as it was in Fridman.
The plaintiff does not dispute that the operative facts of Fridman are identical to the facts
presented in this case. Rather, the plaintiff argues that (1) the identity element of res judicata is
not satisfied because “this case sounds in RICO conspiracy, not the state law claims which were
asserted in New York;” 8 and (2) “many of the facts leading to the institution of this lawsuit were
8
In the Southern District of New York, the plaintiff asserted causes of action for intentional tortious interference
with prospective business advantage against all defendants except Bowen, tortious interference with contract against
all defendants except Bowen, and civil conspiracy against all defendants. See Defs.’ Mot. Dismiss, Ex. B, Fridman
Third Am. Compl., ¶¶ 59-72. To prove a RICO conspiracy claim, which is alleged in this case, the plaintiff must
prove that: “(1) two or more people agreed to commit a substantive RICO offense, and (2) the defendant knew of
and agreed to the overall objective of the violation.” United States v. Philip Morris, 327 F. Supp. 2d 13, 19 (D.D.C.
2004) (citing Salinas v. United States, 522 U.S. 52, 65 (1997).
12
discovered long after the 2006 commencement of the New York lawsuit.” See Pl.’s Opp’n Mem.,
at 33. First, plaintiff’s argument that res judicata does not apply because it presents different
legal claims is erroneous and demonstrates a fundamental misunderstanding of the principle
underlying the doctrine of res judicata, which is that “it is the facts surrounding the transaction
or occurrence which operate to constitute the cause of action, not the legal theory on which a
litigant relies.” Capitol Hill Grp., 569 F.3d at 490 (internal quotations omitted). Since “claim
preclusion precludes the litigation of claims, not just arguments,” Nat. Res. Defense Council, 513
F.3d at 261 (emphasis in original), the plaintiff cannot re-litigate an issue simply by asserting a
different legal claim. See Apotex, 393 F.3d at 217-218 (“There are no new facts. [The plaintiff]
is simply raising a new legal theory. This is precisely what is barred by res judicata.”); see also
Herrion v. Children’s Hosp. Nat’l Med. Ctr., No. 10-cv-00254, 2011 WL 2014031, at *9
(D.D.C. May 24, 2011) (“It is well-established that res judicata applies regardless of the claims
or legal theories actually relied upon in the earlier litigation.”); Youngin’s Auto Body v. District
of Columbia, No. 09-cv-1376, 2011 WL 996662, at *5 (D.D.C. March 17, 2011) (“[F]or the
purposes of claim preclusion, the legal theory upon which the plaintiff relies is irrelevant; rather,
the relevant inquiry is whether the plaintiff’s claims arise out of the same ‘common nucleus of
facts’ as the [earlier litigation].”) (internal citation omitted). The fact that the plaintiff asserts a
different legal claim in this case does not preclude application of the res judicata.
Second, plaintiff argues that facts leading to the filing of this case were discovered after
commencement of the Fridman case in 2006. These facts include “Lev Model’s criminal
conviction, Lev Model’s payment of the college tuition of Gregory Bowen’s daughter, and
Bowen’s June 2007 sworn testimony confirming Global Petroleum’s payment of Grenada’s legal
fees.” See Pl.’s Opp’n Mem., at 33. While the plaintiff may not have been aware of these facts in
13
2006, the plaintiff was certainly aware of them before the termination of the Fridman
proceedings because all three of the factual allegations that were purportedly undiscovered
appear in the plaintiff’s Third Amended Complaint in Fridman. See Defs.’ Mot. Dismiss, Ex. B,
Fridman Third Am. Compl., ¶¶ 26-27, 53, 55. The Southern District was presented with
allegations that Freshfields was serving as Grenada’s counsel before the ICSID arbitration panel,
that some of the defendants “had promised to pay all of Grenada’s legal fees in connection with
the arbitration between RSM and Grenada,” and that “Global Petroleum Group has invested over
$4 million (and quite possibly much more) into the legal defense of the Government of Grenada
in the arbitration against RSM.” Id. ¶¶ 40, 50, 53. The complaints in this case and Fridman arise
from the exact same nuclei of facts – all of which were known to the plaintiff when it filed its
Third Amended Complaint before the Southern District of New York.
The plaintiff relies on a non-binding, factually inapposite case from the Seventh Circuit,
Doe v. Allied-Signal, Inc., 985 F.2d 908 (7th Cir. 1993), to argue that it was not required to
amend its Fridman complaint to add Freshfields as a defendant in order to avoid res judicata in a
later proceeding. See Pl.’s Opp’n Mem., at 33. The plaintiff’s interpretation of Allied-Signal is
incorrect. In Allied-Signal, the Seventh Circuit held that a plaintiff was not required to amend
her complaint in the first action when the damages she was seeking in the second action arose
from an adverse judgment in the first action. Allied-Signal, 985 F.2d at 915. In other words, the
claims asserted by the plaintiff in the second case were not even ripe until the conclusion of the
first case. Id. Since it would “twist res judicata grotesquely out of shape [to] hold[ ] that a
plaintiff must include not only all claims arising from the same transaction, but must anticipate
future harms from adverse judgments yet to be rendered,” the Seventh Circuit found that the
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plaintiff was not required to amend her complaint to incorporate claims that were not ripe at the
time. Id.The situation in Allied-Signal bears no resemblance to the factual circumstances at issue
here. The record from the Fridman proceeding demonstrates that the plaintiff knew of the
relevant, operative facts that it asserts in this case at the time it filed its Third Amended
Complaint in Fridman, including that Freshfields was serving as Grenada’s attorney in the
ICSID arbitration. See Compl. ¶ 40; Defs.’ Mot. Dismiss, Ex. B, Fridman Third Am. Compl.
Res judicata “prevents parties from relitigating issues they . . . could have raised in a prior action
on the same claim,” and this is exactly what the plaintiff is attempting to do in this case.
NextWave Personal Commc’ns, Inc. v. FCC, 254 F.3d 130, 143 (D.C. Cir. 2001). Accordingly,
since the plaintiff’s Complaint arises out of the same nucleus of facts as presented to the
Southern District in Fridman, the Court concludes that the identity element of res judicata is
satisfied.
2. The Defendants Are In Privity With The Fridman Defendants
The second element of res judicata requires that the prior litigation be between the same
parties or their privies. See Natural Res. Def. Council, 513 F.3d at 260. The plaintiff asserts that
“Freshfields does not claim it was in privity with any of the Defendants who actually received
dismissals on the merits in the New York case. In fact, the New York Defendants which obtained
merits-based dismissals successfully argued that the New York Complaint did not adequately
link them with Grenada, Bowen, Model or Global Petroleum.” See Pl.’s Opp’n Mem., at 32. The
plaintiff’s interpretation of the district court’s decision in Fridman, however, is incorrect,
particularly in light of the Second Circuit’s Fridman decision.
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As a preliminary matter, each of the defendants in the New York case received a merits-
based dismissal. The district court and the Second Circuit held that RSM had failed to state a
claim as to any of the defendants in Fridman, including Messrs. Bowen and Model, and Global
Petroleum, whom plaintiff claims were dismissed merely on procedural grounds and are named
as Freshfields’ co-conspirators in this case. Indeed, plaintiff concedes that the Second Circuit
dismissed Mr. Bowen on the merits in its decision. Pl.’s Notice of Suppl. Authority, ECF. No.
13, at 1. With regard to Mr. Model and Global Petroleum, the district court in Fridman declined
to enter default judgment against these defendants, despite the fact that they had not appeared to
contest RSM’s allegations, precisely because the plaintiff had also failed to state a claim as to
these defendants. Indeed the district court clearly stated that RSM’s allegations against Model
and Global Petroleum Group “suffers from the same defects as their allegations against the
appearing Defendants: they are not based on any cognizable facts properly before the court.
Indeed, they are based on the same wishful thinking, both as to the claims asserted and as to the
legal standards for filing a complaint, as Plaintiffs’ allegations with respect to the appearing
Defendants.” Fridman, 643 F. Supp. 2d at 414-15.
In this case, the plaintiff’s Complaint specifically lists Messrs. Bowen and Model, and
Global Petroleum as “Conspirators Who Are Not Named As Defendants.” See Compl. ¶¶ 5-7.
Members of a conspiracy are deemed under the law to be in privity with each other. See Airframe
Sys., Inc. v. Raytheon Co., 601 F.3d 9, 17-18 (1st Cir. 2010) (stating that co-conspirators are in
privity for purposes of res judicata when “the [later] claims were or could have been brought
against the original defendant in the original suit and the subsequent suit tried to hold related
defendants liable on related claims.”) (internal quotations omitted) (alteration in original);
Gambocz v. Yelencsics, 468 F.2d 837, 841-42 (3d Cir. 1972) (holding that unnamed co-
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conspirators sued in a subsequent suit could assert a claim preclusion defense when the plaintiff
had sued other conspirators on the same claims in the first suit). Although Freshfields was not
named as a defendant in the Fridman case, there clearly can be no dispute that Freshfields was in
privity with these Fridman defendants, whom plaintiff itself alleges are Freshfields’ co-
conspirators. See McLaughlin v. Bradlee, 599 F. Supp. 839, 848 (D.D.C. 1984) (holding that a
defendant who was not named in plaintiff’s prior suits could assert res judicata because the
conspiracy the plaintiff was attempting to allege had already been dismissed against the other
defendants in earlier litigation). As discussed above, the Southern District dismissed these
parties because the plaintiff had failed to allege facts sufficient to support its allegations of illegal
activity. The Second Circuit’s decision only further cemented that these Fridman defendants
received a merits-based judgment. Fridman, 387 Fed. App’x at 75 (stating that the “plaintiffs
have failed in any event to state a civil conspiracy claim” and citing Wright & Miller for the
proposition that “[i]f the action is dismissed, it should be dismissed as to the defaulting party as
well as the remaining defendants,” 10A Charles Alan Wright, Arthur R. Miller & Mary Kay
Kane, Federal Practice and Procedure § 2690, at 75 (3d ed. 1998)).
Here, the plaintiff attempts to assert claims against Freshfields for participation in the
exact same alleged corrupt conspiracy that was presented to the Southern District of New York
and the Second Circuit in Fridman. Pursuant to the doctrine of res judicata, the Court will not
allow the plaintiff to re-litigate its previously dismissed claims by simply asserting a new legal
theory and naming a party that could have been named in the earlier suit. See San Remo Hotel,
L.P. v. City and Cty. of San Francisco, Cal., 545 U.S. 323, 336 n.16 (2005) (“Under res judicata,
a final judgment on the merits of an action precludes the parties or their privies from relitigating
issues that were or could have been raised in that action.”) (internal quotation omitted); I.A.M.
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Nat’l Pension Fund, Benefit Plan A v. Indus. Gear Mfg. Co., 723 F.2d 944, 949 (D.C. Cir. 1983)
(noting that res judicata “forecloses all that which might have been litigated previously”);
Asemani v. Ahmadinejad, No. 09-cv-0611, 2009 WL 928383, at *1 (D.D.C. April 2, 2009)
(holding, in a case in which the court had already dismissed the plaintiff’s claims on the merits,
that a complaint with the same factual allegations filed against a new defendant was barred by
res judicata “[b]ecause the underlying facts of [the] civil action existed at the time of the prior
civil action.”); see also 18A Charles Alan Wright, Arthur R. Miller & Mary Kay Kane, Federal
Practice and Procedure § 4464.1 (2d ed.) (res judicata is most appropriate “in cases that seem to
reflect no more than a last desperate effort by a plaintiff who is pursuing a thin claim against
defendants who were omitted from the first action because they were less directly involved than
the original defendants.”).
IV. CONCLUSION
The Court concludes that the plaintiff’s claims in this case are barred under res judicata.
Accordingly, the defendants’ motion to dismiss is granted. An Order consistent with this
memorandum opinion will be entered.
DATED: AUGUST 3, 2011
/s/ Beryl A. Howell
BERYL A. HOWELL
United States District Judge
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