Fugitive Tycoon Guo Wengui, Seeking Asylum in United States, Denied Protection from Creditors’ New York Lawyers
April 26, 2018
In 2015, Guo Wengui, a/k/a Kwok Ho Wan, a Chinese citizen, billionaire investor and political provocateur, fled China for the United States amid reported investigations by the Chinese government involving several of his businesses and business partners. Mr. Guo reportedly left behind approximately $17 billion in Chinese assets, which have been frozen. Despite living an opulent lifestyle on the 18th floor of the Sherry Netherland hotel on Fifth Avenue, he is now facing some financial pressure.
Among Mr. Guo’s international creditors is Pacific Alliance Asia Opportunity Fund (“Pacific Alliance”), a Hong Kong investment fund formed under Cayman Islands law. In 2008, Pacific Alliance loaned $30 million to Mr. Guo’s Hong Kong company in connection with the development of Pangu Plaza, site of a “7 Star Hotel” in Beijing near the Olympic arenas. In connection with the loan, Mr. Guo signed a personal guarantee. All of the documents and transactions were executed in Hong Kong or China.
According to Pacific Alliance, Mr. Guo now owes approximately $88 million in principal and accrued interest on the loan. However, Pacific Alliance’s efforts over the years to collect against Mr. Guo have been unsuccessful. Accordingly, in April 2017, Pacific Alliance brought suit against Mr. Guo in the Commercial Division of New York County, where Mr. Guo now resides and is seeking asylum from the United States government. (Mr. Guo’s membership at President Trump’s Mar-a-Lago resort does not appear to have expedited his application. It’s complicated.)
Mr. Guo moved before Judge Barry Ostrager to dismiss the complaint on grounds of forum non conveniens (inconvenient forum) pursuant to CPLR 327. New York courts (e.g., Islamic Rep. of Iran v. Pahlavi, 62 NY2d 474, 479 ; Shin-Etsu Chem. Co. v. ICICI Bank Ltd., 9 AD3d 171, 178 [1st Dept 2004]) generally consider the following factors: (i) the availability of an alternative forum; (ii) the burden on the New York courts; (iii) whether the transaction out of which the cause of action arose occurred primarily in a foreign jurisdiction; (iv) the applicability of foreign law; (v) the potential hardship to the defendant; and (vi) whether a foreign forum has a substantial interest in adjudicating the action.
Mr. Guo argued that New York was an inconvenient forum because the dispute involved contracts between a Hong Kong investment fund and a Chinese citizen that were governed by Hong Kong law and related to Chinese real estate. Moreover, all of the relevant evidence was located in China and Hong Kong. Pacific Alliance responded that Mr. Guo was a fugitive from China and would never appear there for a legal proceeding; therefore, New York was the only forum available for Pacific Alliance to pursue its claims.
Judge Ostrager granted Mr. Guo’s motion to dismiss. The court reasoned that the State of New York had no interest in resolving a breach of contract dispute between Hong Kong and Chinese parties involving a Hong Kong agreement relating to Chinese real estate. Notwithstanding Mr. Guo’s residence in New York, the foreign site of the disputed transaction was most important to determining the proper forum. As for Pacific Alliance’s argument that Mr. Guo would not appear at a proceeding in Hong Kong or China, the court found “that circumstance would likely benefit plaintiff rather than be a detriment to plaintiff,” presumably because it would be easier for Pacific Alliance to obtain a default judgment.
The Appellate Division, First Department reversed, noting Mr. Guo’s “heavy burden” of establishing that New York is an inconvenient forum. Contrary to Judge Ostrager, the First Department found that Hong Kong was “not a suitable or adequate alternative, because defendant cannot return there due to his pending asylum claim and fugitive status.” This concern for Mr. Guo is somewhat strange because Mr. Guo had explicitly endorsed Pacific Alliance pursuing a judgment in China or Hong Kong against Mr. Guo without Mr. Guo’s appearance. Perhaps Mr. Guo agrees with commenters in China who believe that Chinese judgments are more difficult to enforce in the United States due to fears that such judgments are politically motivated.
Ultimately, the First Department found that there was insufficient evidence that it would be a hardship for Mr. Guo to litigate in New York, especially because he previously had brought suit against others in New York. However, the First Department’s decision did not appear to state a clear reason why certain factors were being weighed more heavily than others. Future litigants confronting inconvenient forum issues should take note of the unpredictability of the multi-factor balancing test.