A copy of Judge Pauley's opinion is available here.
Yukos Oil Company (OTC: YUKOY) was one of Russia's leading vertically-integrated oil companies, and one of the world's largest non-state owned oil companies, both in terms of reserves and market capitalization, until the October 2003 arrest of the company's CEO and December 2004 forced sale of Yukos' main production unit, to recover alleged tax debts.
Judge Pauley's prior opinion (In re Yukos Oil Co. Sec. Litig., No. 04 Civ. 5243 (WHP), 2006 WL 800736 (S.D.N.Y. Mar. 30, 2006)) is available here.
In the prior opinion, Judge Pauley, granted defendant Group Menatep Limited’s motion to dismiss and also granted in part and denied in part a motion to dismiss by defendants Yukos and Bruce K. Misamore (Yukos' former CFO).
In essence, the defendants raised three principal arguments in their motions to dismiss and for reconsideration.
First, that the District Court must abstain from deciding the merits of the case under the "act of state" doctrine. The doctrine prevents United States courts from "question[ing] the validity of public acts (acts jure imperii) performed by other sovereigns within their own borders." Republic of Austria v. Altmann, 541 U.S. 677, 700 (2004).
Judge Pauley rejected this argument, holding:
this Court is not being called on to either invalidate or enforce the Russian Federation's measures, nor will the validity of those sovereign acts have any bearing on Defendants' motions to dismiss or on questions likely to affect the merits of this litigation . . . As such, the act of state doctrine does not warrant abstention.Second, the defendants asserted a lack of federal subject matter jurisdiction for claims of two of the three lead plaintiffs. Judge Pauley found that the conduct at issue was insufficient under either the "conduct test" or the "effects test," and dismissed the claims of the foreign plaintiff (Roxwell Holdings) that purchased Yukos common stock on the Russian Trading System Stock Exchange and those of the American plaintiff (Parsimony) that purchased the equity-linked bonds on the Luxembourg Stock Exchange that were restricted from being "offered, sold or delivered within the United States or to U.S. persons."
Finally, the defendants argue that the complaint fails to state a claim for either primary violations of the securities laws or control person liability. Judge Pauley found that plaintiffs had failed to adequately plead any material misrepresentation and further failed to adequately plead scienter. Having found that the complaint failed to state a claim for primary liability, Judge Pauley further found that the defendants were not subject to control person liability on those claims.
Roxwell Holdings Limited and Mykola Buinyckyi are the lead plaintiffs for the putative sub-class of purchasers of Yukos common stock and ADRs and Lerach Coughlin Stoia Geller Rudman & Robbins LLP is lead counsel for the sub-class.
Parsimony Ltd. is the lead plaintiff for the putative sub-class of purchasers of Yukos' equity linked convertible bonds and Murray Frank & Sailer LLP is lead counsel for the sub-class.
A copy of the consolidated amended complaint is available here.
Technically, three defendants remain in the case - Mikhail B. Khodorkovsky (Yukos' former president, CEO and largest shareholder), Platon Lebedev (Menatep's CEO), and PricewaterhouseCoopers Russia. As noted in Judge Pauley's opinion however, all three were not served with the consolidated amended complaint, thus for all intents and purposes, absent an appeal by the plaintiffs, the litigation is over.
Daily Trivia: Taking a page from embattled American executives, both Khodorkovsky and Lebedev have created websites to take their case to the people. Khodorkovsky's site can be found here and Lebedev's can be found here. You can find additional information on the prison camps they are being held in using this interactive map.