MANHATTAN (CN) – A federal judge went too far in sanctioning the Belarusian oil firm accused of helping the KGB kidnap and torture two U.S. citizens in 2008, the Second Circuit ruled Thursday.
The sanction, which completely stripped the oil firm of foreign sovereign immunity during a contentious discovery phase between the company and the two former hostages, was “troubling” and exceeded the district court’s discretion, according to the 46-page opinion.
New York City attorney Emanuel Zeltser and freelance reporter Vladlena Funk brought the underlying complaint five years ago in New York, detailing their 2008 abduction by the KGB from a restaurant in London.
At the time, Zeltser was representing a group of investors who had bought shares in Concern Belneftekhim, a Belarus oil firm whose name is abbreviated in Friday’s ruling as BNTK.
After the United States issued sanctions against Belarus, BNTK and several other companies in 2006 and 2007, the firm backed out of a deal with the investors to secure a controlling interest.
Zeltser and Funk say they had agreed to a meeting with BNTK representatives in March 2008 when they were drugged and spirited off to Belarus, where they were held hostage in a Stalin-era KGB detention center and tortured in an effort to get the United States to lift economic sanctions against the country.
While in Belarus, the government accused Zeltser and Funk of spying. Funk says she was pressured at some point into signing a confession implicating Zeltser in economic espionage.
Detained for more than a year, Zeltser and Funk say they were beaten, starved, sleep deprived, and denied medical treatment.
Following outrage and increased sanctions from U.S. lawmakers, Funk and Zeltser were pardoned by Belarusian dictator Alexander Lukashenko and then released from captivity after 12 months and 16 months, respectively.
The pair’s 2012 complaint accused Lukashenko and BNTK of conspiring in the abduction. While discovery was underway in August 2015, however, the District Court imposed sanctions of $2,000 a day on BNTK, and warned of greater sanctions if the company remained uncooperative.
Finding that the monetary penalties had not led to compliance, the court imposed additional sanctions two months later, striking BNTK;s sovereign immunity defense and ordering the company to pay up the $136,000 in accumulated sanctions.
The Second Circuit concluded Thursday that the court could have attempted instructional or additional monetary sanctions before taking so drastic a measure as striking immunity.
“The harshness of [that] sanction is comparable in that it effectively denied defendants a jurisdictional defense that could have allowed them to avoid litigating plaintiffs’ case in its entirety,” U.S. Circuit Judge Reena Raggi wrote for a three-personal panel.
Upholding the monetary penalties, Raggi noted that BNTK c”ould have halted the sanction on any day by complying with the court’s order.”
BNTK is represented by Ken Caruso with the firm White & Case. He was not immediately available to comment.
Zeltser, a partner at Sternik & Zeltser, is representing himself and Funk in the lawsuit.
“We are largely happy,” Zeltser in an email.
“Although I would prefer to win in all respects, the decision, even as is, is largely a victory for plaintiffs,” Zeltser added.
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