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Armada (Singapore) PTE Ltd. v. Amcol International Corp.

United States District Court, N.D. Illinois, Eastern Division

March 21, 2017



          Elaine E. Bucklo United States District Judge.

         Armada (Singapore) Pte. Ltd. (“Armada”) has sued Amcol International Corporation (“Amcol”) and two of its wholly-owned subsidiaries, American Colloid Company (“ACC”) and Volclay International Corporation (“Volclay”) (Amcol, ACC, and Volclay collectively, “the defendants”), for causes of action under federal law, Illinois law, and maritime law. The claims arise in connection with the insolvency of Ashapura Minechem Limited (“Ashapura”), an Indian company with respect to which the defendants are alleged to be affiliates and/or insiders.[1] The defendants have moved for a judgment on the pleadings pursuant to Rule 12(c) of the Federal Rules of Civil Procedure. For the reasons below, the motion is granted in part and denied in part.


         Armada's complaint alleges[2] that in April 2008, it entered into two contracts of affreightment (COAs) with Ashapura.[3] Under the COAs, Armada agreed to ship loads of Ashapura's bauxite from India to various foreign ports. Armada's complaint alleges that in September 2008, after encountering difficulties with its bauxite suppliers, Ashapura breached the COAs.

         Shortly thereafter, Armada began efforts to collect on the debt it was owed by Ashapura as a result of the breach. In September 2008, Armada initiated two separate maritime attachment proceedings against Ashapura in the Southern District of New York pursuant to Rule B of the Supplemental Rules for Certain Admiralty and Maritime Claims of the Federal Rules of Civil Procedure. And in August 2010, Armada commenced Rule B attachment proceedings in this court, naming the defendants -- who until 2014 owned roughly twenty percent of Ashapura's stock -- as garnishees.

         Armada also instituted two arbitration proceedings against Ashapura in London, England. In February 2010, the arbitrator issued default judgments in Armada's favor totaling roughly $70 million. In May 2011, Ashapura sought protection from India's Board of Industrial and Financial Reconstruction (BIFR), and in October 2011, Ashapura commenced Chapter 15 bankruptcy proceedings in the Southern District of New York. Armada was an objecting creditor in the Chapter 15 proceedings.

         Armada alleges that the defendants exercised control rights over Ashapura, and that once they learned of Ashapura's impending insolvency, they engaged in various machinations to deplete Ashapura's assets, thereby hindering Armada's and other creditors' collection efforts. In particular, Armada alleges that the defendants engaged in the following schemes:

The Euro-Payment Scheme: in the Southern District of New York attachment proceedings, Armada obtained an order providing for the seizure of, inter alia, wire transfers received by Ashapura. In order to avoid detection, the defendants arranged with Ashapura for wire payments to Ashapura to be made in euros -- even when the relevant contracts required payment in dollars.
The Contra-Charging Plan: once the defendants became aware of Ashapura's insolvency, they adopted a practice of charging Ashapura for purchases made by other Amcol affiliates. Specifically, from roughly Spring 2008 to Spring 2009, if an Amcol affiliate owed a debt to the defendants, it was treated as being owed by Ashapura. In turn, any payments the defendants owed Ashapura were set-off against the amounts Ashapura was deemed to owe the defendants.
The Dividend Fraudulent Transfer: in October 2008, despite its looming insolvency, Ashapura paid a $2.75 million dividend to its shareholders. The defendants' portion of the dividend was approximately $550, 000.
The Buy-Back Fraudulent Transfer: in December 2009, Ashapura purchased some of its own stock from the defendants, shortly before the stock's price dropped precipitously.
Bankruptcy Proceedings: the defendants coordinated the filing of Ashapura's Chapter 15 bankruptcy petition in order to stay creditors' actions. In addition, the defendants deliberately misled the bankruptcy court by failing to disclose that certain of Ashapura's assets (i.e., Ashapura's bentonite line of business, which the defendants had valued at up to $60 million) had been diverted to one of Ashapura's affiliates shortly before Ashapura's BIFR filing.
The AANV-Related Debt: at some point around 2007, Ashapura entered into a joint venture called “Ashapura Amcol NV” (“AANV”) with one of the defendants' European affiliates. In December 2007, the defendants lent Ashapura €7.1 million to cover Ashapura's portion of AANV's start-up funding (“the AANV-related debt”). Although by January 2011, the defendants considered the debt to be worthless, they arranged for Ashapura to repay it by way of two “restructuring transactions.” The first of these took place on June 30, 2011. In exchange for forgiving half of Ashapura's AANV-related debt, Ashapura gave the defendants an increased stake in another joint venture, Ashapura Volclay Limited-Unit II (“AVL-Unit II”). In addition, Ashapura made a €1.5 million ($2.3 million) payment to buy out the defendants' interest in AANV. The remainder of the AANV-related debt was forgiven by a series of transactions in 2013-2014. These essentially involved Ashapura's buy-back of the defendants' remaining Ashapura stock and the defendants' acquisition of Ashapura's twenty percent ownership of another joint venture.

         Armada's original complaint alleged several claims under the Illinois Uniform Fraudulent Transfer Act (“IUFTA”), 740 ILCS §§ 160/1 et seq., and the Racketeer Influenced and Corrupt Organizations Act (“RICO”), 18 U.S.C. § 1964. It also asserted common-law claims for wrongful payment of dividends and wrongful assumption of a debt. The defendants filed a motion to dismiss, which I granted as to two of the RICO counts but otherwise denied. Armada (Singapore) PTE Ltd. v. AMCOL Int'l Corp., No. 13 C 3455, 2013 WL 5781845, at *8 (N.D. Ill. Oct. 25, 2013) (“Armada I”).

         Armada subsequently filed an amended complaint that realleged the IUFTA counts, the surviving RICO counts, and the wrongful-dividend claim. Additionally, the amended complaint abandoned the claim alleging wrongful assumption of a debt and added a claim for breach of fiduciary duty. Armada also added a cause of action styled “maritime fraudulent transfer.” The defendants now move pursuant to Rule 12(c) for a judgment on the pleadings with respect to each of Armada's claims.


         “Under Rule 12(c), a party can move for judgment on the pleadings after the filing of both the complaint and answer.” Brunt v. Serv. Employees Int'l Union, 284 F.3d 715, 718 (7th Cir. 2002). “Rule 12(b)(6) and Rule 12(c) employ the same standard: the complaint must state a claim that is plausible on its face.” St. John v. Cach, LLC, 822 F.3d 388, 389 (7th Cir. 2016) (quotation marks omitted). “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id. (quotation marks omitted).

         A. RICO

         Congress enacted RICO in an attempt to eradicate criminal racketeering activity. See, e.g., Midwest Grinding Co. v. Spitz, 976 F.2d 1016, 1019 (7th Cir. 1992). In addition to the criminal provisions set forth in § 1962 of the statute, § 1964 provides a civil cause of action for “[a]ny person injured in his business or property by reason of a violation” of the statute's criminal provisions. 18 U.S.C. § 1964(c). In Count VIII of the amended complaint, Armada alleges that the defendants violated RICO § 1962(c), which makes it “unlawful for any person employed by or associated with any enterprise engaged in ... interstate or foreign commerce, to conduct or participate ... in the conduct of such enterprise's affairs through a pattern of racketeering activity.” 18 U.S.C. § 1962(c). According to Armada, the defendants engaged in a pattern of racketeering activity by committing numerous acts of mail fraud and wire fraud in stripping Ashapura of its assets. In Count IX, Armada alleges a violation of RICO § 1962(d), which makes it a crime to conspire to violate RICO's other criminal provisions.

         The defendants argue that Armada's RICO claims must be dismissed in light of the Supreme Court's recent decision in RJR Nabisco, Inc. v. European Community, 136 S.Ct. 2090 (2016), which held that the civil RICO statute does not apply extraterritorially. The suit in RJR Nabisco was brought by the European Community and several of its member states, alleging that RJR Nabisco had participated in a global money-laundering scheme in association with various organized crime groups. Id. at 2098. RJR Nabisco moved to dismiss the RICO claims on the ground that they required an improper extraterritorial application of the statute. Id. at 2099.

         The Court began by observing that it is “a basic premise of our legal system that, in general, United States law governs domestically but does not rule the world.” Id. at 2100 (quotation marks omitted). This principle, the Court explained, gives rise to a presumption that federal statutes do not apply extraterritorially. Thus, “[a]bsent clearly expressed congressional intent to the contrary, federal laws will be construed ...

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