PJSC Armada v. Kuzovkin

PJSC ARMADA and ARSENAL ADVISOR, LTD., Plaintiffs-Appellants, v. ALEXY KUZOVKIN, ALLA ROITMAN, and YEFIM ROITMAN, Defendants-Respondents.

No. A-1893-19

Superior Court of New Jersey, Appellate Division

September 3, 2021

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Argued May 20, 2021

On appeal from the Superior Court of New Jersey, Law Division Bergen County, Docket No. L-0197-19.

Corinne McCann Trainor argued the cause for appellants (Fox Rothschild, LLP, attorneys; Ely Goldin and Corinne McCann Trainor, of counsel and on the briefs; Allison L. Hollows, on the briefs).

Jeffrey Fleischmann argued the cause for respondent Alexy Kuzovkin.

Peter Slocum argued the cause for respondents Alla Roitman and Yefim Roitman (Lowenstein Sandler, LLP, attorneys Christopher S. Porrino and Peter Slocum, on the brief).

Before Judges Hoffman, Suter, and Smith.

PER CURIAM.

Plaintiffs PJSC Armada (Armada) and Arsenal Advisor Ltd. (Arsenal) appeal from two Law Division orders, dated June 28, and December 2, 2019, that dismissed their complaint with prejudice against defendants, Alla Roitman, Yefim Roitman and Alexy Kuzovkin. In the June 28, 2019 order, the motion court dismissed plaintiffs' claims against the Roitmans for failure to state a claim upon which relief can be granted under Rule 4:6-2(e) and on forum non conveniens grounds; additionally, it dismissed Arsenal's claims for lack of standing. In the December 2, 2019 order, the court dismissed plaintiffs' claims against Kuzovkin for lack of personal jurisdiction.

We conclude the motion court erred in dismissing plaintiffs' complaint with prejudice, as its dismissal at this stage did not represent an adjudication on the merits. Thus, any dismissal of plaintiffs' claims should have been without prejudice to afford plaintiffs the opportunity to amend their complaint. We further conclude the motion court's dismissals on jurisdictional grounds were premature; instead, the court should have permitted discovery on the questions of personal jurisdiction and forum non conveniens. Finally, we conclude the motion court erred in dismissing plaintiffs' claims pursuant to Rule 4:6-2(e). Accordingly, we reverse and remand for discovery and to allow plaintiffs to amend their complaint.

I.

A.

Because this appeal comes to us on a Rule 4:6-2 motion to dismiss, we accept the facts alleged in the complaint as true, granting plaintiff "every reasonable inference of fact." Green v. Morgan Props., 215 N.J. 431, 452 (2013) (quoting Printing Mart-Morristown v. Sharp Elecs. Corp., 116 N.J. 739, 746 (1989)). Thus, we begin with a summary of the facts pled by plaintiffs.

Plaintiff Armada is a public joint-stock company formed and registered in the Russian Federation, with its principal place of business in Moscow. Armada's stock trades on the Moscow Interbank Currency Exchange. At all relevant times, Armada served as the parent company of a consortium of companies which, at its peak in 2012, ranked as one of the top five software developers in Russia, with combined annual sales of approximately RUB 5.579 million (or $184 million under the 2012 prevailing exchange rate).

Plaintiff Arsenal, a corporation formed under the laws of the British Virgin Islands, was the principal shareholder of Armada. Armada's other shareholders included major American, European, and Russian financial institutions.

Defendant Kuzovkin led Armada's management team and, from 2012 to 2014, engaged in a fraudulent scheme to siphon money and technology from Armada for his personal benefit. Kuzovkin's illegal scheme involved: 1) the transfer of Armada funds to shell companies under the guise of software development contracts; 2) the formation of a competitor company, Programmy Produkt LLC, which poached business and employees from Armada; and 3) usurious lending between Armada and three of its wholly owned subsidiaries. Russian banks facilitated Kuzovkin's scheme by allowing him to transfer the profits of his schemes into shell companies and offshore accounts.

In late 2013, Armada's shareholders commenced corporate and legal proceedings in Russia to oust Kuzovkin and the other Armada managers from their posts, eventually succeeding in 2014; however, Kuzovkin fled to Austria, leaving Armada's offices completely empty. Before fleeing to Austria, in the fall of 2013, Kuzovkin purchased $8, 500, 000 worth of real estate in Austria and Russia using the embezzled funds. This included an October 18, 2013 purchase of a luxury Moscow apartment owned by defendant Alla Roitman, a New Jersey citizen living in Mahwah. On that same day, Kuzozkin also used embezzled funds to purchase an automobile parking spot associated with the apartment from Alla Roitman's father, Yefim Roitman, also a New Jersey citizen.

In August 2017, plaintiffs obtained permission from the United States District Court for the District of New Jersey, pursuant to 28 U.S.C. § 1782, to subpoena Alla Roitman for information related to her sale of the Moscow property to Kuzovkin. In response to the subpoena, Alla Roitman produced one document, an agreement of sale dated October 18, 2013. Her counsel explained a cash transaction facilitated the sale, with Kuzovkin dropping off cash in a Moscow safe deposit box and Alla Roitman retrieving it after the agreement of sale was signed.

The agreement of sale, written in Russian, lists the sale price as P27, 560, 978 rubles, which equaled approximately $1, 000, 000 in United State s dollars (USD). The fair market value of the apartment, however, was approximately $3, 500, 000 USD, and plaintiffs allege Kuzovkin actually paid the equivalent of $3, 700, 000 USD for the apartment and parking spot via the safety deposit box, with the sales agreement misrepresenting the sale price to conceal the embezzled funds Kuzozkin used to pay.

Plaintiffs allege Alla and Yefim Roitman intentionally concealed the true sale price with Kuzovkin "to assist Kuzovkin in his embezzlement and siphoning of assets away from Armada and its shareholders." The Roitmans were aware of Kuzovkin's embezzlement and misconduct, and by assisting him with this fraudulent transfer, they became active participants in Kuzovkin's illegal scheme.

B.

On January 9, 2019, plaintiffs filed their Law Division complaint, asserting six causes of action: (1) breach of fiduciary duty against Kuzovkin only; (2) aiding and abetting breach of fiduciary duty against the Roitmans only; (3) common law fraud against all defendants; (4) fraudulent transfer against all defendants;^[1] (5) civil conspiracy against all defendants; and (6) racketeering, in violation of the New Jersey Racketeer Influenced and Corrupt Organizations Act^[2] (NJRICO). For relief, plaintiffs "demand[ed] judgment in their favor in an amount in excess of $3, 700, 000, along with an award of costs and any other relief that this Court deems necessary, just and appropriate."

In May 2019, the Roitmans filed a motion to dismiss, which the motion court granted on June 28, 2019. In a written opinion, the court stated that, per Rule 4:6-2(e), the complaint failed to state a claim upon which relief could be granted because the factual allegations were insufficient to establish plaintiffs' causes of action against the Roitmans. The court further found Arsenal lacked standing to assert its claims against the Roitmans because Arsenal's claimed injury arose solely from its status as shareholder of Armada. Additionally, the court determined the claims against the Roitmans should be dismissed on forum non conveniens grounds. The court found that New Jersey was a "demonstrably inappropriate" forum, that Russia would provide an adequate alternative, and that the relevant public and private interest factors favored dismissal. Though the court's opinion stated each individual claim against the Roitmans was dismissed without prejudice, the order granting the Roitmans' motion to dismiss stated the complaint was dismissed with prejudice.

On September 23, 2019, Kuzovkin filed a separate motion to dismiss, asserting plaintiffs' complaint failed to state a claim upon which relief could be granted per Rule 4:6-2(e), and the court lacked personal or subject matter jurisdiction over him per Rule 4:6-2-(b). Plaintiffs opposed the motion and also submitted a proposed amended complaint, requesting the opportunity to file the amendment. The court granted Kuzovkin's motion, dismissing plaintiffs' complaint with prejudice, concluding that Kuzovkin was not subject to personal jurisdiction in New Jersey.

Plaintiffs now appeal the orders that dismissed their complaint against all three defendants. Plaintiffs argue the motion court's with-prejudice dismissal of their complaint was in error, as the court prematurely ruled on dispositive issues without permitting plaintiffs to engage in jurisdictional discovery, establish an evidentiary record relative to Kuzovkin's contacts with New Jersey, or amend their complaint to provide supplemental facts. We agree.

II.

A.

At the outset, we find the motion court erred in dismissing plaintiffs' complaint with prejudice. We assume the court's basis for dismissing plaintiffs' claims against the Roitmans with prejudice was its application of forum non conveniens because the court stated in its written opinion that its dismissal of those claims for failure to state a claim was without prejudice. Similarly, in its subsequent order, the court dismissed the claims against Kuzovkin with prejudice after concluding it lacked personal jurisdiction over Kuzovkin.

"Generally a dismissal that is 'on the merits' of a claim is with prejudice, but a dismissal that is 'based on a court's procedural inability to consider a case' is without prejudice." Alan J. Cornblatt, P.A. v. Barow, 153...