Georgian American Alloys, Inc. and Others v White & Case LLP (registered in England and Wales) and Another
| Jurisdiction | England & Wales |
| Judge | Mr Justice Field |
| Judgment Date | 31 January 2014 |
| Neutral Citation | [2014] EWHC 94 (Comm) |
| Docket Number | Claim No. 2013 Folio 1485 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 31 January 2014 |
[2014] EWHC 94 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
The Rolls Building
Fetter Lane
London EC4 1NL
Mr Justice Field
Claim No. 2013 Folio 1485
Daniel Jowell QC and Richard Eschwege (instructed by Enyo Law LLP) for the Claimants
Bankim Thanki QC and Tamara Oppenheimer (instructed by Olswang LLP) for the Defendants
Hearing date: 19 December 2013
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
Introduction
This is an application for a permanent injunction to restrain the Defendants ("White & Case") from acting for or advising Mr Victor Mikaylovich Pinchuk in proceedings brought in the Commercial Court against Mr Igor Kolomoisky and Mr Gennadiy Bogolyubov. Originally the application was for an order restraining White & Case from advising or acting not only in the Commercial Court action but also in LCIA arbitration proceedings brought by Mr Pinchuk against Mr Kolomoisky, Mr Bogolyubov and Mikhail Iosifovich Spektor. However, on 17 December 2013 White & Case announced through their solicitors, that they would cease acting for Mr Pinchuk in the LCIA arbitration and so notified the arbitral tribunal on 18 December 2013.
The hearing of the application was in private to protect the confidentiality of the information that it is at the heart of the case. Upon their undertakings to keep confidential certain evidence adduced by the each side, White & Case's counsel and the members of a "Neutral Team" established within White & Case had full access to all of the evidence.
Mr Pinchuk was refused permission to be joined as a party but he was allowed to adduce evidence as to the impact on him if the injunction sought were granted and was permitted to make representations thereon through his counsel, Ms Dinah Rose QC, at which point the court went into open session. Save as aforesaid, Mr Pinchuk and his legal team were not permitted to attend the hearing.
The background to the application
Mr Pinchuk, Mr Kolomoisky and Mr Bogolyubov are all businessmen of Ukrainian origin. Mr Kolomoisky and Mr Bogolyubov are the ultimate owners of the Claimant companies and own interests in OAO PrivatBank ("PrivatBank"), a commercial bank in Ukraine, and in closed joint stock company ZAO Privat Intertrading ("Privat Intertrading").
The 1 st Claimant ("GAA") manufactures and supplies ferroalloys that are used in the production of iron and steel. It is a Delaware company incorporated in February 2012; its principal office is in Miami, Florida. It conducts its business through the 2 nd to 7 th Claimants of which it is the ultimate parent company. Prior to the incorporation of GAA and the restructuring of the ferroalloy businesses of which it is now the parent, the ferroalloy businesses were held by Optima Group LLC, a Delaware company, and Haftseek Investments Ltd and GM Georgian Manganese Holdings Ltd, which were two Cypriot companies. Optima Group LLC was the immediate parent company of the 2 nd Claimant ("CC Metals and Alloys"). Haftseek Investments Ltd was the immediate parent company of the 3 rd and 4 th Claimants (respectively "Felman Production" and "Felman Trading"), and GM Georgian Manganese Holdings Ltd was the immediate parent company of the 5 th and 6 th Claimants (respectively "Georgian Manganese" and "Vartsikhe").
The 2 nd Claimant and the 3 rd, 4 th and 7 th Claimants are companies incorporated and based in the United States. The 5 th and 6 th Claimants are Georgian entities.
White & Case is a large international law firm comprising a number of different entities registered in the jurisdictions in which they operate. The 1 st Defendant is a Limited Liability Partnership registered in England and Wales; the 2 nd Defendant is a Limited Liability Partnership registered in the state of New York. White and Case has offices in New York, London, Washington, Miami, Moscow and elsewhere.
The first Eastone/Pinchuk engagement
In September 2010, Mr David Goldberg, a White & Case partner working out of the London and Moscow offices, began providing advice to Mr Pinchuk and his management company, Eastone Group ("Eastone"), in relation to a dispute between Mr Pinchuk on the one hand and Mr Kolomoisky and Mr Bogolyubov on the other, in respect of a ferroalloy joint venture. The matter was recorded in White and Case's conflicts system at the time as follows:
We are advising the client regarding a dispute with Mr Kolomoyski [sic] and his related entities in connection with a joint venture between our client and Mr Kolomoyski [sic] and in particular concerning the suspected syfoning [sic] of profits from the joint venture businesses.
The alleged joint venture involved a pooling of the ferroalloy assets owned by Mr Pinchuk and Mr Kolomoisky and Mr Bogolyubov to be vested in a holding company ("the Ferroalloy Holding") on terms that Mr Kolomoisky and Mr Bogolyubov would have a 50% share therein, Mr Pinchuk a 30% share, and a third party a 20% share on the basis that the profits of the Ferroalloy Holding would be distributed between the shareholders in the same proportions as their shareholdings. The dispute arose out of Mr Pinchuk's claim that he had not been paid his share of the profits of the Ferroalloy Holding and that Mr Kolomoisky and Mr Bogolyubov had depressed the profits of the Ferroalloy Holding by siphoning off assets through related party transactions.
The Optima Engagement
On 20 April 2011, the General Counsel of Optima Acquisitions LLC and Optima Industrial Management LLC (together "Optima"), Mr Robert Powell, emailed Mr Colin Diamond, a partner of White & Case based in New York, enquiring whether White & Case would act in implementing a corporate restructuring under which CC Metals and Alloys, Felman Production, Felman Trading, Georgian Manganese and Vartsikhe would be brought into the ownership of a new holding company to be known as Georgian American Alloys, Inc ("GAA") which would be the subject of an IPO. In this email, Mr Powell named Mr Kolomoisky and Mr Bogolyubov as two of the ultimate owners of the businesses involved, and requested that Mr Diamond run a conflicts check to see if White and Case would be free to accept the proposed engagement ("the Optima Engagement").
Mr Diamond proceeded to carry out a conflict search and learned from the resulting report that Mr Goldberg was listed as having opened a matter potentially adverse to Mr Kolomoisky and Mr Bogolyubov who were parties related to his (Mr Diamond's) potential client, Optima. Mr Diamond therefore emailed Mr Goldberg on 21 April 2011 to check whether he could take on the matter for Optima. He told Mr Goldberg in this email that the firm had been approached to represent a group of companies whose ultimate shareholders included Mr Bogolyubov and Mr Kolomoisky and informed him of the result of his conflict check; he also asked to be informed of the nature of the matter opened by Mr Goldberg and whether it was still active "in order to see if we need to do anything." Attached to this email was the conflict report that had been provided to Mr Diamond. Pages 1 and 5 of that report have been provided by White & Case but not pages 2, 3 and 4. On page 1 all of the Claimants and Mr Bogolyubov and Mr Kolomoisky are listed as parties searched, together with 3 other individuals, and on page 5 is set out the entry recorded in White & Case's conflict system recorded in paragraph 8 above.
Mr Goldberg received Mr Diamond's email on his Blackberry on a bank holiday weekend and does not recall having accessed or read the attached report.
On 24 April 2011, Mr Goldberg informed Mr Diamond that the potential dispute between Mr Pinchuk/Eastone and Messrs Kolomoisky and Bogolyubov had been settled and that there would therefore be no issue in Mr Diamond undertaking the work for Optima. At the time, Mr Goldberg had not heard from Eastone or Mr Pinchuk for a number of months and believed that the dispute with Messrs Kolomoisky and Bogolyubov had gone away following a payment made in December 2010 in the sum of $150 million to Mr Pinchuk by Mr Kolomoisky. Mr Goldberg did not, however, enquire of Eastone or Mr Pinchuk or anyone else for confirmation that the dispute had indeed been settled.
On 24 May 2011, there was a meeting attended by Mr Powell and Mr Mordechai Korf on behalf of Optima and Mr Diamond and Messrs Brahmst and Polonsky on behalf of White and Case at which Mr Diamond confirmed that there was no conflict of interest preventing White & Case acting on the proposed restructuring and IPO. In the course of this meeting there was discussion over the possible impact of Mr Bogolyubov and Mr Kolomoisky having significant further interests in the mining sector and the need to determine whether there was substantive or potential conflict where business opportunities could be diverted.
Following this meeting, White & Case were engaged to work on the proposed restructuring and IPO and Mr Powell on behalf of Optima signed an engagement letter tendered by White & Case dated 22 June 2011 setting out:
…the terms of the engagement of White & Case LLP ("White & Case" or the "the Firm") to act on behalf of a new entity ("HoldCo") to be formed to hold CC Metals & Alloy, LLC, Felman Trading, Inc., Felman Production, Inc. and "Georgia Manganese" (consisting of two...
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