Russia's VTB bank found in default in U.S. lawsuit over downed airliner

(Reuters) - A U.S. magistrate judge declared Russia's state-controlled VTB Bank to be in default in a Manhattan court battle this week, placing it at risk of being held liable for providing funds to Russian separatists who allegedly downed an airliner over eastern Ukraine in 2014.

VTB has spent months attempting to retain new U.S. lawyers in the case after global law firm Latham & Watkins said it would no longer defend the bank following Russia's invasion of Ukraine. Attorneys with New York's Brafman & Associates said they were willing to represent VTB but repeatedly struggled to find a bank willing to accept a payment from Russia.

U.S. Magistrate Judge Gabriel Gorenstein on Monday granted Latham’s request to withdraw from the case. He said without lawyers to defend it, VTB is now in default and the plaintiffs can request a default judgment against the Russian bank.

A lawyer with Latham and Brafman lawyer Marc Agnifilo did not immediately return requests for comment. A representative for VTB could not be immediately reached.

Agnifilo told the court on Aug. 19 that, after contacting six banks and failing to find any willing to process the Russian payment, “we do not see a path forward for our firm.” Agnifilo also said attorneys had contacted two large law firms about taking on VTB as a client and were rejected both times.

Agnifilo said in earlier court filings that sanctions against Russia were making it difficult to find a bank willing to accept the payment from the lender, even though U.S. authorities allow attorneys to be paid for representing sanctioned entities in court. Both VTB and another Russian bank named in the case, Sberbank, have been sanctioned over the Ukraine invasion.

Family members of Quinn Schansman, an American killed when the Malaysia Airlines flight was downed, sued VTB, Sberbank and other financial institutions in 2019, claiming they facilitated payments to Russian separatists who allegedly shot down the plane. VTB and Sberbank have denied the claims.

Lawyers at Jenner & Block representing the family asked the court’s clerk on Tuesday to enter a formal certificate of default against VTB. The lawyers on Wednesday declined to comment.

Sberbank was able to hire new lawyers from another small New York firm, Wilk Auslander, after its attorneys with White & Case and Debevoise & Plimpton said in March that they would exit the case. Agnifilo said in court papers that his firm was rejected by the bank that handled the Sberbank payment.

Read more:

Banks shun U.S. law firm trying to represent Russian lender VTB

Russian bank faces U.S. court default if it can't find new law firm

Sanctioned Russian bank gets new U.S. lawyers in downed airliner case

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