Rual Trade Ltd. v. Viva Trade LLC, 07-C-1015 (E.D. Wisc. Apr. 28, 2008) [click for opinion]    

Plaintiff Rual Trade Ltd. (”Rual”) brought an action in state court asserting breach of contract and related claims against defendants Viva Trade LLC (”Viva”), a Wisconsin limited liability company, and Lithuanian citizens Vladimir Romanov (”Vladimir”), Roman Romanov (”Roman”) and Ukio Bankas Investicine Group (”UBIG”) (Vladimir, Roman and UBIG collectively referred to as the “Lithuanian defendants”). Defendants removed the case pursuant to 9 U.S.C. § 205, which authorizes the removal of cases relating to arbitration proceedings under the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (”New York Convention“). Once in federal court, Rual moved for a default judgment against Viva for failure to file a timely answer, and Viva and the Lithuanian defendants brought separate motions to dismiss Rual’s complaint based on forum non conveniens, lack of personal jurisdiction and failure to state a claim. 

First, the Wisconsin court denied Rual’s motion for default judgment against Viva because Viva had presented a meritorious defense by asserting that Rual was required to arbitrate all its claims pursuant to the arbitration clause contained in the loan agreement on which Rual sued Viva. The court also relied on Viva’s swift appearance soon after Rual filed its default judgment motion, lack of prejudice to Rual and the fact that there was a significant amount in dispute ($10 million).

The court proceeded to evaluate the various motions to dismiss advanced by Defendants. In assessing Defendants’ forum non conveniens arguments, the court applied the well-established test from Piper Aircraft Co. v. Reyno, 454 U.S. 235 (1981). The court did not get past the threshold factor of determining whether there was an adequate alternative forum. Viva represented through its counsel that it “would consent to the jurisdiction of the Lithuanian court for purposes of resolving the issues raised in the complaint, including whether the claims against Viva should be submitted to arbitration under the Swiss Rules of International Arbitration.” The court did not accept the representation because it was merely stated in Viva’s brief and not supported by an affidavit or other evidentiary instrument. The court stated that Defendants could refile their motions to dismiss based on forum non conveniens if they produced adequate evidence that Viva could be amenable to suit in Lithuania.

On the Lithuanian defendants’ personal jurisdiction defense, the court granted limited discovery to Rual to establish that the Lithuanian defendants used Viva as an alter ego. The court stated that if Rual discovered evidence that the Lithuanian defendants controlled Viva in 2003 and 2004 and that they treated Viva as an alter ego, then such defendants would fall within Wisconsin’s long-arm statute regardless of whether the Lithuanian defendants ever set foot in Wisconsin.

The court evaluated the motion to dismiss for failure to state a claim under Lithuanian law for the fraud, unjust enrichment, and intentional misrepresentation claims and under Wisconsin law for the alter ego claim. The court reasoned that Rual’s complaint and the attachments thereto showed that the contracts at issue were most significantly related to Lithuania. The parties primarily negotiated and executed the contracts in Lithuania, and most of the parties reside in Lithuania. On the other hand, the alter ego claim was subject to Wisconsin law because Viva was a Wisconsin company and, under the general rule, a plaintiff’s alter ego theory is governed by the law of the state in which the business at issue is organized.

The court also assessed whether it should dismiss Rual’s claims in favor of arbitration. In the face of the arbitration clause contained in the loan agreement with Viva, Rual argued that arbitration would “drag out the dispute contrary to the Convention’s goal and that arbitrating in Switzerland will be futile because in that forum it cannot present claims against the Romanovs or UBIG.” The court found this argument unavailing and ordered Rual to arbitrate its claims against Viva pursuant to the loan agreement’s arbitration clause. However, because the Lithuanian defendants were not signatories to the loan agreement, Rual’s claims against them were not dismissed.