Hogan Lovells obtains dismissal of federal RICO action brought by investor plaintiffs seeking more than US$1 billion

New York, 8 September 2020 – A team from global law firm Hogan Lovells won a major motion to dismiss in the United States District Court for the Southern District of New York (SDNY) in an action filed by a New York hedge fund and European investors against clients CPI Property Group (CPIPG) and its majority shareholder, Radovan Vitek.

The plaintiffs alleged violations of the Racketeer Influenced and Corrupt Organizations Act (RICO) and sought damages in excess of US$ 1 billion. The case raised novel and important issues concerning the application of U.S. law and the jurisdiction of U.S. courts over conduct occurring entirely outside the U.S. – in this case in Europe.

The RICO lawsuit (filed in 2019) followed an earlier action brought by a similar group of plaintiffs in Luxembourg in 2015, from which CPIPG was dismissed last year.

The Honorable Denise Cote of the SDNY granted the defendants’ motions to dismiss, ruling that Luxembourg is an adequate forum for resolution of the plaintiffs claim. The court noted the substantial similarities to the lawsuit filed in Luxembourg.

The New York lawsuit “bears indicia of forum shopping,” the court stated, adding that “the salient difference between the two suits is the potential for treble damages under the RICO statute” which “is not a legitimate reason for choosing this particular venue.”

The case has wide ranging implications for overseas-based companies interacting with U.S. private investors. The ruling reinforces the premise that U.S. federal courts remain skeptical of efforts to engage in forum shopping solely to derive a perceived tactical advantage in the U.S., where all of the alleged conduct occurred outside the U.S.

“We are grateful for the professionalism and advice of the Hogan Lovells team,” said Martin Matula, General Counsel of CPIPG. “The Group will continue to defend our hard-earned reputation against baseless threats and claims.”

The Hogan Lovells team included New York partners Seth Cohen and Michael Hefter, and associates Andrew Harris and Julia Grabowska.

The case is Kingstown Capital Management v. Vitek. CPIPG’s press release about the decision is here.

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