Motion to Set Aside or Vacate Judgment, Default or Dismissal in Liliya Osyka v. Finance And Credit Bank, Kostyantyn Zhevago| Trellis.Law

On September 25, 2015 a Motion-Secondary was filed involving a dispute between Liliya Osyka, and Finance And Credit Bank, Kostyantyn Zhevago, for Contract (Non-Commercial) in the District Court of Kings County.

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FILED: KINGS COUNTY CLERK 04/13/2016 03:16 PM INDEX NO. 511711/2015
NYSCEF DOC. NO. 35 RECEIVED NYSCEF: 04/13/2016

SUPREME COURT OF THE STATE OF NEW YORK
COUNTY OF KINGS
X
LILIYA OSYKA,
Index No.: 511711/2015
Plaintiff,
Hon. Lawrence Knipel
-against-

“FINANCE AND CREDIT” BANK and
KOSTYANTYN ZHEVAGO,

Defendants.

REPLY MEMORANDUM OF LAW IN SUPPORT OF
DEFENDANT KOSTYANTYN ZHEVAGO’S MOTION TO
VACATE THE DEFAULT JUDGMENT AND DISMISS THE COMPLAINT

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TABLE OF CONTENTS

PRELIMINARY STATEMENT ..................................................................................................... }

ARGUMENT ................................................................................................................................... I

I. The Default Judgment Should be Vacated and the Case Dismissed Because There was No
Proper Service of Process on Zhevago ................................................................................. I

II. The Court Lacks Jurisdiction Over Zhevago ........................................................................ 5

CONCLUSION ............................................................................................................................. 10

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TABLE OF AUTHORITIES

Amerasia Bank v. Saiko Enterprises, Inc.,
263 A.D.2d 519 (2d Dep't 1999) ........................................................................................ 1, 2, 4

AMTO, LLC v. BedfOrd Asset Mgt., LLC.
14-CV-9913, 2015 WL 3457452, (SDNY June I, 2015) ........................................................... 3

Armouth Int 'I, Inc. v. Haband Co., Inc.,
277 A.D.2d 189 (2d Dep't 2000) ............................................................................................ 8, 9

Damianos Realty Grp.. LLC v. Fracchia,
35 A.D.3d 344, 825 N.Y.S.2d 274 (2d Dep't 2006) ................................................................... 6

Ferrante Equip. Co. v. Lasker-Goldman Corp.,
26 N.Y.2d 280 (1970) ......................................................................................................... 6, 7, 8

Gottlieb Rackman & Reisman, P. C. v.Luminary Logic Ltd.,
2014 WL 6629119 (N.Y. Sup. Ct. 2014) ................................................................................... 6

In re Foreign Exch. Benchmark Rates Antitrust Litig.,
2016 WL 1268267 (SDNY Mar. 31, 20 16) ............................................................................ 7, 8

Indosuez Int'l Fin. B. V. v.Nat'! Reserve Bank,
98 N. Y.2d 23 8 (2002) ................................................................................................................. 8

International Shoe Co. v. Washington,
326 u.s. 31 0 ( 194 5)"' ........ """ "''" ...... "" ... "' ....... "' ...... '"' "" .......... """' ... ' ... " ...... " .... "" ........ ' .. 5

Klien v. Klien,
141 Mise 2d I 74 (Sup. Ct. 1988) ................................................................................................ 3

Morgenthau v. Avian Resources Ltd.
49 AD 3d 50 (I st Dep't 2007) ................................................................................................... 2, 3

Morgenthau v. Avian Resources Ltd.,
II NY3d 3 83 (2008) ................................................................................................................... 3

Oggeri v. Kay Chem. Co.,
4 76 N.Y. S.2d 619 (2d Dep 't 1984) ............................................................................................. 7

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Pichardo v. Zayas,
122 A.D.3d 699 (2d Dep't 2014) ............................................................................................ 8, 9

S. Seas Holding Corp. v.Starvest Grp., Inc.,
13 N.Y.S.3d 853 (Sup. Ct. N.Y. 2015) ....................................................................................... 7

Volkswagenwerk Aktiengesel/schaft v. Schlunk,
486 U.S. 694 (1988) ................................................................................................................ 1, 2

Waggaman v. Arauzo,
117 A.D.3d 724 (2d Dep't 2014) ................................................................................................ 5

World-Wide Volkswagen Corp. v. Woodson,
444 u.s. 286 (1980) .................................................................................................................... 9

Ziperman v. Frontier Hotel o(Las Vegas,
50 A.D.2d 581 (2d Dep't 1975) ................................................................................................. .4

Zwerling v. Zwerling,
167 Misc.2d 782,636 N.Y.S.2d 595 (N.Y. Sup. Ct. 1995) .................................................... 2, 3

Statutes
Section 200-B of New York Banking Law ..................................................................................... 7

Rules
C.P.L.R. § 301 ........................................................................................................................ .4, 9, 8

C.P .L.R. § 302 ............................................................................................................................. 4, 9

C.P.L.R. § 313 ......................................................................................................................... 2, 3, 4

C.P.L.R. § 5015(a)(4) ................................................................................................................. .4, 9

Treaty

Hague Convention on the Service Abroad of Judicial and Extrajudicial Documents
in Civil or Commercial Matters, Nov. 15, 1965, U.S.T. 361 .................................................passim

iii

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PRELIMINARY STATEMENT

Plaintiff Liliya Osyka ("Plaintiff') has utterly failed to meet her burden of

establishing that her purported service of process over Kostyantyn Zhevago ("Zhevago") in the

Ukraine was proper and that this Court has personal jurisdiction over Zhevago. The arguments

in Plaintiffs opposition papers are premised upon vague and wholly unsupported assertions of

Plaintiff's counsel. Moreover, the legal authority cited by Plaintiff, which there is not much, is

either wholly inapposite or directly contradicts Plaintiff's arguments. Accordingly, the default

judgment should be vacated and the case against Zhevago dismissed entirely.

ARGUMENT

I. The Default Judgment Should be Vacated and the Case Dismissed Because There was
No Proper Service of Process on Zhevago

Plaintiff concedes that Ukraine is a member of the Hague Convention on the

Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters (the

"Hague Convention") and that she failed to comply with the Hague Convention's procedures for

service of process through Ukraine's Central Authority. (Opp. at~~ 8-10; Tiffany Aff., Exh. 5;

see Tiffany Aff., Exh. 3, ~~ 7, 12). 1

As discussed in Zhevago's opening brief, New York courts have held that where

service of process is made in a foreign country that is a signatory of the Hague Convention, such

as Ukraine, compliance with the procedures of the Hague Convention is mandatory in State court

1
See Hague Convention, Nov. 15, 1965,20 U.S.T. 361, T.I.A.S. No. 6638 available at http:// hcch.e-
vision.nllindex_en.php?act =conventions.text&cid=17; Affidavit ofO!eg Malinevskiy, dated February 29,
2016, ~ 3, 4, attached to Tiffany Aff., Exh. 7 (Malinevskiy is a Ukrainian attorney who provides an
explanation of service pursuant to the Hague Convention on the Service Abroad of Judicial and
Extrajudicial Documents in Civil or Commercial Matters in Ukraine); see also, Tiffany Aff. Exh. 8,
Ukraine- Central Authority & Practical Information web page (as of February 29, 20 16) of the Hague
Conference on Private International Law available at https://www.hcch.net/en/states/hcch-
members/detai Is 1/?sid= 134).

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proceedings and supersede the CPLR . Amerasia Bank v. Saiko Enterprises, Inc., 263 A.D.2d

519,520 (2d Dep't 1999) citing20 UST 361, TIAS 6638 (1965); Volkswagenwerk

Aktiengesellschafl v. Schlunk, 486 U.S. 694 (1988) (same); Zwerling v. Zwerling, 167 Misc.2d

782, 785,636 N.Y.S.2d 595, 598 (N.Y. Sup. Ct. 1995) (noting that Hague Convention

supersedes CPLR under the Supremacy Clause of the U.S. Constitution). Pursuant to the Hague

Convention, service of process in Ukraine must be made by delivering the summons and

complaint to Ukraine's designated Central Authority, the Ministry of Justice of the Ukraine,

which will then effect service. 2 Because Plaintiff admits that she failed to follow these

procedures, her purported service of process fails as a matter oflaw.

In a desperate effort to get around the Hague Convention, Plaintiff asserts two

wholly deficient arguments:

First, Plaintiff attempts to argue that she could disregard the Hague Convention's

requirements and serve process pursuant to CPLR § 313 because "courts of this State concluded

that process service under CPLR 313 is permitted in foreign countries, regardless of the methods

the foreign state may use." (Opp. at~ I 0). This is argument is completely meritless. As

discussed above, New York courts uniformly hold that Hague Convention procedures are

mandatory where service is attempted in member countries. Amerasia Bank., 263 A.D.2d at 520.

Moreover, the Appellate Division case cited by Plaintiff to support her position, Morgenthau v

Avian Resources Ltd. 49 AD3d 50, 60 (1st Dep't 2007) ajf'd as mod, II NY3d 383 (2008),

actually vitiates her argument. In that case, the First Department, inter alia, affirmed the

Aff. ,, 3, 4; Tiffany Aff. Exh. 8; Tiffany Aff., Exh.
Central Authority &
7,
See Hague Convention, Nov. 15, 1965,20 U.S.T. 361, T.l.A.S. No. 6638, Arts. 2, 5, 6; Malinevskiy
3, 4; see also, Tiffany Aff. Exh. 8, Ukraine-
Practicallnformation webpage (as of February 29, 2016) of the Hague Conference
on Private International Law available at https://www.hcch.net/en/states/hcch-
members/details 1/?sid= 134).

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dismissal of a complaint on the grounds that plaintiff failed to properly serve defendants that

were incorporated in the British Virgin Islands, a signatory to the Hague Convention, in

accordance with that treaty. Morgenthau v Avian Resources Ltd., 49 AD 3d 50, 60 (1st Dep't

2007) aff'd as mod, II NY3d 383 (2008). What is more, Plaintiff here failed to advise this Court

that this case was appealed to the Court of Appeals which then, in no uncertain terms, also held

that compliance with Hague Service requirements are the supreme law of the land and

mandatory:

Where there exists a treaty requiring a specific form of service of
process such as the Convention on the Service Abroad of Judicial
and Extrajudicial Documents in Civil or Commercial Matters
(Hague Service Convention), that treaty, of course, is the supreme
law of the land and its service requirements are mandatory.

Morgenthau v Avian Resources Ltd., II NY3d 383, 390 (2008).

The only other case cited by Plaintiff is Klien v Klien, 141 Misc. 2d 174, 178

(Sup. Ct. 1988), an inapposite child custody dispute case that in no way adjudicates, or even

references, the Hague Convention requirements that form the basis of the motion here. For this

reason, a subsequent court decision that has analyzed the Hague Convention specifically found

Klien to be "neither authoritative nor persuasive." Zwerling, 167 Misc. 2d 782, 788 (holding

Plaintiffs attempted to service under CPLR § 313 insufficient where Hague Convention was

applicable).

Second, Plaintiffs reference to (and apparent reliance on) Article 10 of the Hague

Convention is perplexing and does not save her argument. Article I 0 provides alternative

methods to serving a country's Central Authority, including by mail and by judicial officers, but

only if the member country has not objected to Article I 0 procedures. AMTO, LLC v Bedford

Asset Mgt., LLC, 14-CV-9913, 2015 WL 3457452, at *7 (SDNY June I, 2015) (holding Article

I 0 service is "unavailable to serve defendants who reside in foreign countries that have acceded

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to the Hague Service Convention with an objection to Article I 0"); Zwerling, 167 Misc. 2d 782,

788 (Sup. Ct. 1995) (same). Here, Plaintiff cites to Article 10, implying to the Court that it is

applicable (interestingly, Plaintiffs opposition submission, which is an affirmation, never

directly states that Article I 0 is applicable to Ukraine). Ukraine, however, has specifically

objected to service under Article l 0 methods. 3 Indeed, Ukraine specifically states in its

Declarations and Reservations relating to Article I 0 that: "Ukraine will not use on its territory

methods of transmission ofjudicial documents provided for in Article 10 of the Convention." 4

Thus, while Plaintiff never directly states that Article I 0 methods are proper in

Ukraine, Plaintiffs conclusory intimations that such methods are proper are a complete

mischaracterization of the applicable law. See e.g., Zwerling, 167 Misc. 2d 782, 788 (dismissing

complaint and holding Article I 0 service was improper where member country at issue objected

to Article I 0).

Finally, Plaintiffs vague and wholly unsupported statements that "in accordance

with Plaintiffs knowledge and belief, there is no objection of Ukraine against service under the

Rule CPLR § 313" is nonsensical in light of the fact Ukraine signed and is governed by the

Hague Convention, which mandates service through Ukraine's designated Central Authority-

the Minister of Justice. The same is true for Plaintiffs conclusory statement (devoid of any

citation to law whatsoever) that "Ukraine Civil Procedure Code has no regulations regarding

process service in connection with foreign court proceedings."

3
Ukraine's Declarations and Reservations, Declarations and Reservations, Articles: 8, I 0, 15, 16, available
at the Hague Conference on Private International Law web page (as of April 13, 20 16) (available at:
https://www.hcch.net/en/instruments/conventions/status-table/notifications/?csid;426&disp;resdn) and
attached as Exh. A to the Second Affirmation of Michael J. Tiffany, dated Aprill3, 2016. See also, A
Lawyer's Handbook for Enforcing Foreign Judgments in the United States and Abroad, Robert E. Lutz
(Cambridge University Press 2007) at 233 (citing U.S. State Department Service Guide and stating
Ukraine objects to Article 10 service methods).

4!d.

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In light of the clearly deficient service, the default judgment should be vacated

and the action dismissed against Zhevago. Amerasia Bank, 263 A.D.2d 519, 520 (dismissing

complaint and vacating judgment against foreign defendant where plaintiff did not effectuate

service pursuant to the provisions set forth in the Hague Convention); McCray v Petrini, 212

AD2d 676,676 (2d Dep't 1995) (dismissing case where plaintiff has failed to meet his burden of

establishing proper service of process).

II. The Court Lacks Jurisdiction Over Zhevago

Plaintiff bears the burden of proving that this Court has personal jurisdiction over

Zhevago under either CPLR §§ 301 or 302. Ziperman v Frontier Hotel ofLas Vegas, 50 A.D.2d

581, 582 (2d Dep't 1975). Plaintiff has not, and cannot, meet this burden. Zhevago simply does

not have the requisite contacts with New York to establishjurisdiction. 5

Zhevago Does Not Have Requisite Contacts with New York

First, Plaintiff does not even attempt to argue that Zhevago has any personal or

individual contacts with New York that would justifY the imposition of personal jurisdiction.

And Zhevago has offered an unrefuted affidavit that no such contacts exist. (Affidavit of

Kostyantyn Zhevago, dated February 29,2016, ~ 5). Accordingly, there are simply no grounds

to impose jurisdiction over him under either the CPLR or constitutional due process standards.

Waggaman v. Arauzo, 117 A.DJd 724, 725-26 (2d Dep't 2014) citing International Shoe Co. v.

Washington, 326 U.S. 310,316 (1945).

5
Plaintiff's statement that "the issue of jurisdiction was discussed several times ... and there was no
objection of the Defendants" (Opp. at 6) is a total mischaracterization this proceeding. It is undisputable
that Zhevago objected to jurisdiction in his very first filing before this Court- the motion sub judice.

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Jurisdiction over Zhevago Cannot be Exercised Tltrouglt The Bank

Having failed to show any direct contacts between Zhevago and New York,

Plaintiffs wrongly claim that the court has jurisdiction over defendant Bank Finance and Credit

(the "Bank") and that such jurisdiction should be imputed to Zhevago apparently under a

piercing cooperate veil theory (although, confusingly, plaintiff never even mentions the

doctrine). This attempt to establish jurisdiction also fails as a matter of law for numerous

independent reasons.

First, as Plaintiff's own filings in this case concede, in September 2015, the

Ukrainian governmental banking authorities announced that it had removed the Bank's

management and took control over the administration of the Bank. (Zhevago Aff. ~ 9; See

NYSCEF Doc. No. 9, Exh. 13 (plaintiffs filing showing that the Bank has been under the

administration of Ukrainian governmental authorities since September 2015)). The Bank is

currently in liquidation and under the administration and management of Ukrainian

governmental banking authorities and has been since the start of this case. (!d.; Zhevago Aff. ~

9). Thus, Plaintiff, in admitting that Ukrainian banking authorities control the Bank, has belied

her own conclusory assertion that Zhevago improperly controls the Bank. For this reason alone,

Plaintiffs attempt to establish jurisdiction through the Bank fails.

Secant!, Plaintiffs purported basis for piercing the corporate veil- the conclusory
6
statement that Zhevago controlled, owned, made decisions on behalf of the Bank - even if true

(which it certainly is not)- are insufficient as a matter oflaw to pierce the corporate veil and

impute the Bank's conduct to Zhevago, as the Court of Appeals has made clear. See e.g.,

Ferrante Equip. Co. v Lasker-Goldman Corp., 26 N.Y.2d 280,283 (1970) (holding the mere fact

6
Plaintiffs Opposition at 8.

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that respondent is a controlling shareholder a corporation doing business in New York will not

subject shareholder, as an individual, to in personam jurisdiction); Damianos Realty Grp., LLC v.

Fracchia, 35 A.D.3d 344, 344, 825 N.Y.S.2d 274, 276 (2d Dep't 2006) ("The mere claim that

the corporation was completely dominated by the defendants, or conclusory assertions that the

corporation acted as their 'alter ego,' without more, will not suffice to support the equitable relief

of piercing the corporate veil."); Gottlieb Rackman & Reisman, P. C. v. Luminary Logic Ltd.,

2014 WL 6629119, at *3 (N.Y. Sup. Ct. 2014) ("Plaintiff's conclusory allegations of

[individual's] domination and control over [company] are insufficient to justiry piercing the

corporate veil to find personal jurisdiction.").

Third, Plaintiffs insufficient statement that Zhevago controls the Bank also fails

for the independent reason that Plaintiffs statements are based entirely on conclusory

unsupported assertions of counsel. Oggeri v. Kay Chem. Co., 476 N.Y.S.2d 619,620 (2d Dep't

1984) (finding that "the issue of jurisdiction cannot be determined on the conclusory claims

made by counsel"); S. Seas Holding Corp. v.Starves! Grp., Inc., 13 N.Y.S.3d 853 (Sup. Ct. N.Y.

Co. 2015) (finding that plaintiff failed to establish a prima facie showing of jurisdiction based on

plaintiffs conclusory and factually unsupported contention that defendant regularly does or

solicits business in New York). Indeed, Plaintiffs only reference to purported evidence relating

to the Bank is to Plaintiffs Exhibit I, which is an unidentified document of uncertain origin that

purports to show Zhevago indirectly owns a majority interest in the Bank. Given the lack of

foundation for this document, it should not even be considered on this motion, but even if it is, as

discussed above, it merely purports to show Zhevago's indirect ownership interest in the Bank,

which wholly insufficient to pierce the cooperate veil. Ferrante Equip. Co. v Lasker-Goldman

Co1p., 26 N.Y.2d 280,283 '(1970) (holding the mere fact that respondent is a controlling

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shareholder a corporation doing business in New York will not subject shareholder, as an

individual, to in personam jurisdiction).

Fourth, Plaintiffs purported jurisdiction over the Bank cannot be imputed to

Zhevago or anyone else because Plaintiffs purported basis for jurisdiction over the Bank itself

fails as a matter of Jaw. Indeed, Plaintiff starts off her opposition argument by stating that the

"Court's jurisdiction over Defendants [the Bank and Zhevago] is based on Section 200-B of New

York Banking Law." (Opp. at~ 21). Section 200-B of New York Banking Law, however,

confers subject matter jurisdiction, not personal jurisdiction. Indeed, "the New York Court of

Appeals has interpreted § 200-b to confer subject matter jurisdiction and not personal

jurisdiction." In re Foreign Exch. Benchmark Rates Antitrust Litig., 2016 WL 1268267, at *2, 13

CIV. 7789 (LGS) (SDNY Mar. 31, 2016) (emphasis added) citing Indosuez Int'l Fin. B. V. v.

Nat'! Reserve Bank, 744 N.E.2d 696, 98 N.Y.2d 238, 248 (2002). Thus, Plaintiffs infirm

jurisdictional argument fails to this reason as well. In re Foreign Exch. Benchmark Rates

Antitrust Litig., 2016 WL 1268267, at *2 (rejecting Section 200-B as a basis for personal

jurisdiction and granting foreign bank's motion to dismiss for lack of personal jurisdiction).

Jurisdiction over Zhevago Camwt be Exercised Through Ferrexpo

Plaintiffs arguments relating to Ferrexpo are specious, vague and totally

unavailing. Plaintiff purports that Zhevago is an executive and shareholder ofFerrexpo, which is

a publically traded company on the London Stock Exchange (it is a foreign company in the

business of mining, processing and selling premium iron ore pellets to the global steel industry).

Plaintiff alleges that Ferrexpo has an office in New York and therefore Zhevago, as a shareholder

and executive, is subject to personal jurisdiction through that office. Plaintiffs position is

absurd. As discussed above, Zhevago's position as a shareholder or executive is insufficient to

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establish jurisdiction. Ferrante Equip. Co. v Lasker-Goldman Corp., 26 N.Y.2d 280,283 (1970).

Moreover, the exhibits to Plaintiffs opposition referencing Ferrexpo merely confirm the

company's adherence to corporate formalities. Indeed, Plaintiffs Exhibits 4 and 5 purport to be

a SEC corporate filing record and SEC Form F-6 Registration Statement. 7

What is more, Plaintiff has also absolutely failed to show that Ferrexpo itself has

the requisite jurisdictional contacts with New York. Indeed, Plaintiff completely fails to identiJY

any specific (or even general) business activity in New York. Moreover, Zhevago's association

with Ferrexpo cannot form a basis for specific jurisdiction because that company has absolutely

nothing to do with plaintiffs allegations. Armouth Int '1, Inc. v. Haband Co., Inc., 277 A.D.2d

!89, 190 (2d Dep't 2000) (holding specific jurisdiction required a substantial relationship

between the New York activity and the cause of action) and it cannot form the basis for general

jurisdiction under CPLR § 30 l because the "doing business" prong of CPLR § 30 I is

inapplicable to natural persons. Pichardo v. Zayas, 122 A.D.3d 699, 702-03 (2d Dep't 2014) lv

to appeal denied, 26 NY 3d 905 (20 15).

Tlte Motion Sltou/d Be Vacated Under CPLR § 5015

Alternatively, the record also establishes that Zhevago did not become aware of

the action until Febmary 2, 2016, warranting the default judgment being set aside under CPLR §

5015. Contrary to Plaintiffs wrongful statement otherwise, Zhevago's has a meritorious defense

7
Even if plaintiff were able to meet the statutory requirements ofCPLR §§ 301 and 302 (which he
cannot), the alleged attenuated would violate constitutional due process, as there has been no showing that
the defendant has certain "minimum contacts" with the forum state such that it should "reasonably
anticipate being haled into court there." World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297
( 1980).

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to this breach of contract action because, inter alia, and as mentioned in his opening brief, he

never entered into a contract with plaintiff.

CONCLUSION

For the reasons set forth above, defendant Zhevago respectfully requests that an

order be made vacating the default judgment, dated December 18,2015 (NYSCEF Doc. No. 16),

and dismissing the complaint as against Zhevago.

Dated: New York, New York
Aprill3, 2016
LEADER & BERKON LLP

By: Is/ Michael J. Tiffany
MICHAEL J. TIFFANY
630 Third Avenue
NewYork,NY 10017
Telephone: (212) 486-2400
Facsimile: (212) 486-3099
Attorneys for Defendant
Kostyantyn Zhevago

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Case Info

Judge

Lawrence Knipel, Comm 4 Track Judge’s New Case

Case No.

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Document Filed Date

April 13, 2016

Case Filing Date

September 25, 2015

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Motion-Secondary: Liliya Osyka v. Finance And Credit Bank, Kostyantyn Zhevago

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