The field office and oil derrick of Norex Petroleum in Siberia
The field office and oil derrick of Norex Petroleum in Siberia (Photo by:Norex Petroleum Ltd.)

ALBANY – A billion dollar international lawsuit involving dramatic allegations of strong arm tactics, corrupt foreign courts and a complicated scheme to steal a Siberian oil field is headed for trial in Manhattan after the state’s highest court reinstated the action in a key statute-of-limitations decision.

The Court of Appeals’ holding in Norex Petroleum v. Blavatnik, 121, gives a Canadian oil company a chance to civilly pursue two Russian nationals living in New York, and several foreign corporations allegedly under their control, in a long-running battle over a lucrative oil field in western Siberia.

In a unanimous decision, the court said through Judge Susan Phillips Read (See Profile) that since the state case was filed within six months after a similar federal action was dismissed, the matter is timely under both the law of New York and that of Alberta, Canada, where Norex is based. The ruling reversed Manhattan Supreme Court Justice Eileen Bransten of the Commercial Division, who dismissed the action on statute of limitations grounds, and the Appellate Division, First Department, which had affirmed Bransten.

The complaint alleges that Leonard Blavatnik, described as a “Russian émigré billionaire living on Park Avenue,” and his former university roommate, Victor Vekselberg, “a Russian expatriate billionaire living on East 67th Street,” and companies that they direct conspired to strip Norex of its lucrative controlling interest in a Russian oil company, ZAO Yugraneft.

According to court records, Norex dove into the Russian oil market in 1991, partnering with a Soviet entity to form Yugraneft to develop oil fields in western Siberia. The complaint alleges that after the collapse of the Soviet Union, Blatvatnik and Vekselberg conspired from New York to grasp control of the Russian oil assets.

“Defendants accomplished their illegal takeover … by corrupting Russian court proceedings and government officials in an attempt to decrease Norez’s ownership interest in and voting rights over Yugraneft, forging documents, and ultimately sending armed private militiamen carrying AK-47 machine guns to storm Yugraneft’s corporate offices and oil fields in June 2001,” according to the state court complaint, Norex v. Blavatnik, 650591/2011.

The defendants deny the allegations.

Norex initially filed its complaint in the Southern District, alleging various violations of the Racketeering Influenced and Corrupt Organizations (RICO) act. The federal claim was dismissed in 2004 on forum non conveniens grounds and reinstated the following year by the U.S. Court of Appeals for the Second Circuit.

But after the U.S. Supreme Court decided Morrison v. National Australia Bank, 130 S. Ct. 2869 in 2010 and held that federal securities fraud statutes generally lack extraterritorial reach, the Second Circuit affirmed the dismissal of the RICO action without reaching the merits. A few months later, Norex filed suit in Manhattan Supreme Court.

The defendants moved for dismissal, citing CPLR 202, New York’s so-called “borrowing statute.”

Under §202, when a matter arises outside of New York and the plaintiff is a nonresident, the state “borrows” the statute of limitations where the claim arose, in this case Alberta, Canada. A parallel provision, CPLR 205, the so-called “savings statute,” permits a plaintiff to refile a related claim within six months if the action was terminated for reasons other than the merits.

In 2012, Bransten granted the defendants’ motion to dismiss under CPLR 202, holding that Alberta’s statute of limitations would have expired in 2004, or two years after Norex filed in the Southern District. The First Department unanimously affirmed in 2013 (see 2013 NY Slip Op 02848).

Timely Action

Last week, the Court of Appeals unanimously reversed the First Department.

“This appeal calls upon us to decide whether a nonresident plaintiff who filed a timely action in New York federal court may refile claims arising from the same transaction in state court within six months of the federal action’s non-merits termination, even though the suit would be untimely in the out-of-state jurisdiction where the claims accrued,” Read wrote. “We hold that such a lawsuit is not time-barred.”

In a 22-page opinion, Read parsed §§202 and 205 and the court’s various precedents addressing those provisions, and clarified just what the oft-cited statutes do and how they interact.

Read explained that CPLR 202 applies only to the initial filing of a complaint and was intended in large part to discourage forum shopping and ensure that a nonresident plaintiff does not lodge an action in New York simply to exploit a longer statute of limitations period.

She said CPLR 205 is the remedial response to §202 and was designed to provide a litigant, who had timely filed a case at the outset, an opportunity to re-file if the matter is dismissed for a technical or procedural reason, rather than on the merits.

Here, Read said, once Norex filed its timely federal action, “the borrowing statute’s purpose to prevent forum shopping was fulfilled, and CPLR 202″ was no longer in play.”

“Stated another way, it is irrelevant that Alberta law does not have a savings statute similar to CPLR 205 (a) because at the point in time when Norex filed its ‘new’ action in Supreme Court, the borrowing statute’s requirements had already been met,” Read wrote. “In our view, this reading of the way in which CPLR 202 and CPLR 205 (a) interrelate best comports with statutory language, and honors both the borrowing statute’s purpose to prevent forum shopping and the savings statute’s goal to implement the vitally important policy preference for the determination of actions on the merits.”

Chief Judge Jonathan Lippman (See Profile) and judges Victoria Graffeo (See Profile), Robert Smith (See Profile), Eugene Pigott Jr. (See Profile), Jenny Rivera (See Profile) and Sheila Abdus-Salaam (See Profile) concurred.

Barry Ostrager, a partner at Simpson Thacher & Bartlett who represents Norex, said the ruling has considerable implications, largely because it clarifies an issue of law that often arises in commercial and other disputes.

“CPLR sections 202 and 205 are provisions that are frequently invoked in a variety of contexts,” Ostrager said. “The case is really one of first impression to determine the proper interplay between 202 and 205.”

Ostrager said the decision makes clear that CPLR 202 is simply a borrowing statute that applies only upon the initial finding to protect against forum shopping. Here, he said, where the Canadian plaintiff came to New York federal court within weeks of the alleged offense, there was obviously no attempt to forum shop.

“I think the court and Judge Read went to great pains to discuss prior precedents,” Ostrager said. “What the court is saying is: ‘We are once and for all determining what the interplay is between 202 and 205, and we are once and for all explaining what the purpose of 202 is and what the purpose of 205 is.’ It is a very precedentially significant case.”

Owen Pell, a partner at White & Case, argued for the defendants. A firm spokesman declined to comment.