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Aluminium Bahr. B.S.C. v. Dahdaleh

United States District Court, W.D. Pennsylvania

April 28, 2014

ALUMINIUM BAHRAIN B.S.C., Plaintiff,
v.
VICTOR DAHDALEH, Defendant

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For ALUMINUM BAHRAIN B.S.C., Plaintiff: Charles B. Gibbons, LEAD ATTORNEY, Christopher A. Amar, Mackenzie A. Baird, Buchanan Ingersoll & Rooney PC, Pittsburgh, PA; Mark J. MacDougall, LEAD ATTORNEY, James E. Sherry, Kristine L. Sendek-Smith, Lauren B. Kerwin, W. Randolph Teslik, PRO HAC VICE, Akin Gump Strauss Hauer & Feld LLP, Washington, DC; Ashley N. Bailey, PRO HAC VICE, Crowell & Moring LLP, Washington, DC.

For VICTOR DAHDALEH, Defendant: David E. Kendall, Joseph G. Petrosinelli, LEAD ATTORNEYS, PRO HAC VICE, Sarah L. Lochner, Williams & Connolly LLP, Washington, DC; David J. Berardinelli, DeForest Koscelnik Yokitis Skinner & Berardinelli, Pittsburgh, PA; Walter P. DeForest, DeForest, Koscelnik, Yokitis & Kaplan, Pittsburgh, PA.

For UNITED STATES, Intervenor: Adam G. Safwat, LEAD ATTORNEY, U.S. Department of Justice, Fraud Section, Criminal Division, Washington, DC.

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OPINION and ORDER OF COURT

Donetta W. Ambrose, Sr., U.S. Dist. Judge.

Pending before me is Defendant Victor Dahdaleh's Motion to Dismiss the Amended Complaint without prejudice in favor of arbitration or, alternatively, to stay the action and compel mandatory arbitration. ECF No. [157]. Currently, discovery in this case is stayed because Mr. Dahdaleh was being prosecuted in the United Kingdom for offenses involving facts and allegations similar to those before me. At Mr. Dahdaleh's request, I stayed discovery until the resolution of his U.K. trial to avoid prejudicing his criminal case. ECF No. [155]. Mr. Dahdaleh's U.K. case resolved in December 2013 and now, he seeks the dismissal of Plaintiff Aluminum Bahrain B.S.C.'s (" Alba" ) First Amended Complaint without prejudice or, in the alternative, asks me to stay this case, and compel mandatory arbitration. Def.'s Br., ECF No. [158], 2. Both sides filed briefs in support of their positions. ECF No. [158] (Mr. Dahdaleh's Brief in Support); ECF No. [160] (Alba's Opposition); ECF No. [161] (Mr. Dahdaleh's Reply). After careful consideration, Defendant's motion is granted.

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I. Background

The case before me arises out of Mr. Dahdaleh's involvement in Alba's procurement of alumina, a raw material necessary for its production of aluminum, starting in 1990. See First Amend. Compl. (" AC" ), ECF No. [64], ¶ 21. The extensive background of this case is well known to the parties. Distilled to its essence, Alba alleges that Mr. Dahdaleh participated in a criminal scheme to defraud it by establishing shell companies and paying quid pro quo bribes to induce Alba to overpay for alumina. AC ¶ ¶ 23-25.

Alba, a Bahraini entity, is one of the world's largest aluminum producers and is majority owned by the Government of Bahrain. AC ¶ 17. Alcoa Inc. is a Pennsylvania corporation and the majority owner of Alcoa World Alumina LLC and Alcoa of Australia Ltd. AC ¶ ¶ 5-6, 12 (collectively " Alcoa" ).[1] Mr. Dahdaleh owned several entities involved in providing alumina to Alba. AC ¶ ¶ 14-15. Those entities included Alumet Limited, Kwinalum Trading Pte Limited, Alumet Asia Pte Limited, and three companies named AA Alumina & Chemicals (" AAAC-1," " AAAC-2," and " AAAC-3" ). Id. Alumina, the " principal raw input" for the production of aluminum, constitutes 80% of Alba's raw material costs. AC ¶ 18.

Alba alleges that that Mr. Dahdaleh helped Alcoa operate a criminal scheme wherein Alcoa and its senior U.S. executives illegally profited by overcharging Alba for the alumina that Alba purchased from Alcoa and its subsidiaries. AC ¶ ¶ 21-30. Under the scheme, Alcoa's illegal profits were also used to pay quid pro quo bribes to senior executives of Alba and the Government of Bahrain to induce Alba to enter into economically disadvantageous contracts with Alcoa. AC ¶ ¶ 23-26. Alba alleges that, in furtherance of the criminal scheme, Mr. Dahdaleh established a series of offshore shell companies and convinced Alba to deal with the shell companies as subsidiaries and affiliates of Alcoa. AC ¶ 24. Alba claims that: (1) the shell companies added no legitimate economic value to the transactions in which they were involved; (2) their true purpose and role was to purchase alumina from Alcoa at market rates and then to resell the very same alumina to Alba at inflated prices; and (3) these offshore shell companies were also a vehicle for funneling the quid pro quo bribes to Alba's senior executives and the Bahraini government and for distributing the illegal proceeds among the participants involved in the scheme. AC ¶ ¶ 26, 39-42; see also Alba's RICO Case Statement (" RCS" ), ECF No. [66], 13-15.

During the relevant time period, Alba entered into two contracts for the procurement of alumina: (1) the 1990 contract with Alcoa of Australia (an Alcoa subsidiary) and (2) the 2005 contract with AAAC-3. AC ¶ ¶ 38 & 142. Alba alleges that the alumina prices under the 1990 contract included the cost of " commissions" or money paid to Mr. Dahdaleh by Alcoa of Australia through a series of Agency Agreements. AC ¶ 19. Mr. Dahdaleh purportedly used portions of this money to bribe senior Alba and Bahraini government officials. AC ¶ 42. According to Alba, Alcoa of Australia fulfilled its alumina supply obligations under the 1990 contract by assigning it to Mr. Dahdaleh's shell companies. RCS 7-9.

The 1990 contract, following several extensions and an amendment, remained in effect through 2004. RCS 8. Alba alleges that it then was induced to enter into a new ten-year alumina supply agreement

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with a Dahdaleh-owned shell company, AAAC-3. RCS 9. Alba claims that Mr. Dahdaleh had a side agreement with Alcoa to purchase and re-sell alumina to Alba at an inflated price. Id. Alba alleges that this agreement also granted Mr. Dahdaleh use of Alcoa's logo and trademarks in order to deceive Alba into thinking that it was dealing with a legitimate Alcoa affiliate. Id.

Prior to negotiation of the 2005 contract, Alba alleges that Alcoa attempted to acquire a stake in Alba at a depressed price. RCS 10. Alba claims that Mr. Dahdaleh acted as, and was held out to be, an authorized agent and representative of Alcoa during the share sale negotiations that ultimately fell through. AC ¶ ¶ 113 & 115.

Both the 1990 and 2005 contracts contain clauses requiring arbitration of " [a]ny dispute, controversy or claim arising under or in connection with" the agreements. Def.'s Br. 4 (citing Article 13.1 of both the 1990 and 2005 contracts). Mr. Dahdaleh asks me to dismiss or stay the case in favor of arbitration pursuant to these contractual provisions. Def.'s Br. 5, 10-11.

II. Standard

The parties disagree on the standard that I should use to review Mr. Dahdaleh's motion. Mr. Dahdaleh requests that I apply Rule 12(b)(6) because his motion merely attacks " the legal significance of Alba's pleadings and the allegations in them." Def.'s Br. 1. Alba contends that Rule 56 is the appropriate legal standard. Pl.'s Br. 4. The standard for motions to compel arbitration depends on the circumstances. Guidotti v. Legal Helpers Debt Resolution, L.L.C., 716 F.3d 764, 774-76 (3d Cir. 2013). " [W]hen it is apparent, based on 'the face of a complaint, and documents relied upon in the complaint,' that certain of a party's claims 'are subject to an enforceable arbitration clause, a motion to compel arbitration should be considered under a Rule 12(b)(6) standard without discovery's delay.'" Id. at 776. However, limited discovery and review of a renewed motion under a summary judgment standard is appropriate where the validity of the arbitration agreement is at issue. Id. at 774. Here, Alba does not contest the validity of the arbitration agreements or deny that it intended to be bound by them. Rather, Alba contests that Dahdaleh is not a party who can enforce the arbitration agreements and that the agreements cannot be enforced for various policy reasons. Therefore, I apply a Rule 12(b)(6) standard.

A court may compel arbitration only where there is " no genuine issue of fact concerning the formation of the agreement" to arbitrate and, in making this decision, a court must give " the party opposing arbitration 'the benefit of all reasonable doubts and inferences that may arise.'" Kirleis v. Dickie, McCamey & Chilcote, P.C., 560 F.3d 156, 158 (3d Cir. 2009) (citing Par-Knit Mills, Inc. v. Stockbridge Fabrics Co., 636 F.2d 51, 54 (3d Cir. 1980)). Under a 12(b)(6) standard, a court must " accept all factual allegations in the complaints and all reasonable inferences to be drawn therefrom in the light most favorable to the plaintiffs." See Lorenz v. CSX Corp., 1 F.3d 1406, 1413 (3d Cir. 1993). In so doing, I will not consider any conclusory allegations in the complaint. See Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007): " A pleading that offers labels and conclusions or a formulaic recitation of the elements of a cause of action will not do. Nor does a complaint suffice if it tenders naked assertions devoid of further factual enhancement." ) (internal citations and alterations omitted).

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In a civil RICO case, the RICO case statement is part of the pleadings. See id. Additionally, a court may look " to matters of public record, including court files and records, and documents referenced in the complaint or are essential to a plaintiff's claim which are attached to a defendant's motion." Colbert v. Mercy Behavioral Health, 845 F.Supp.2d 633, 637 (W.D. Pa. 2012) ...


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