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Osseiran v. International Finance Corp.

July 27, 2007


The opinion of the court was delivered by: Richard W. Roberts United States District Judge


Plaintiff Salah Osseiran brought this action against the International Finance Corporation ("IFC") for breach of contract, promissory estoppel, and breach of a confidentiality agreement. IFC moved to dismiss for lack of subject matter jurisdiction due to IFC's immunity from suit, for failure to state a claim, and due to forum non conveniens, among other things. IFC is not immune in this case, Osseiran has failed to state a claim for breach of contract, but he has adequately alleged promissory estoppel and breach of confidentiality, and this forum is appropriate. Thus, IFC's motion to dismiss will be granted in part and denied in part. Additionally, Osseiran moved to stay this action to allow jurisdictional discovery. Because he has established subject matter jurisdiction, his request will be denied as moot.


In the summer of 2005, Osseiran held approximately 1.5% of the shares in the Middle East Capital Group ("MECG").*fn1 Seeking to gain a controlling share in MECG, Osseiran contacted IFC, an international organization and private arm of the World Bank, which owned approximately 10.8% of MECG's shares, and Barclays Capital, which owned approximately 18% of MECG's shares, to purchase their shares. (Am. Compl. ¶¶ 17-18.) Osseiran alleges that in November 2005, IFC, acting on behalf of itself and Barclays Capital, agreed in a series of e-mail exchanges on the terms by which it would sell its and Barclay's shares through a standard stock purchase agreement and to keep all negotiations regarding the stock sales confidential. Osseiran claims that in reliance on that agreement, he set aside funds for the purchase price and proceeded to purchase additional shares of MECG stock from other shareholders to achieve majority status. (Id. ¶¶ 23, 34.) During December 2005, Osseiran, IFC and Barclays agreed upon language for the formal stock purchase. However, IFC repeatedly postponed executing the purchase agreement while making the "repeated promise that it would soon execute the formal stock purchase agreement" and maintaining that "it fully intended to complete the transaction as envisioned in the November agreement and the draft stock purchase agreement." (Id. ¶¶ 6-7.) Due to IFC's failure to sell its shares in a timely manner, Barclays and Osseiran eventually negotiated and carried out the purchase of Barclays' shares by Osseiran upon the terms of the November 2005 draft agreement. Growing increasingly frustrated by IFC's foot-dragging, Osseiran voiced his concern in a series of e-mails about quickly consummating the sale, eventually stating that he was prepared to initiate legal proceedings. Osseiran also informed IFC that its employees had breached the confidentiality agreement by informing third parties of IFC and Barclays' stock sales to Osseiran. (Id. ¶ 30.) At a February 16, 2006 MECG shareholder meeting, IFC solicited higher offers than those suggested by Osseiran for its stock and proposed a joint sale of stock, excluding Osseiran, to First National Bank ("FNB"). (Id. ¶ 35.) Shortly therefter, Osseiran discovered that IFC had entered into an agreement to sell its stock to FNB by March 31, 2006.

Osseiran filed this action alleging that "IFC . . . reneged on its promise to sell its MECG stock to Osseiran and abused his trust and confidence by stringing him along and inducing him to purchase other MECG shares, all the while conspiring with other MECG shareholders to solicit a higher price for their shares from a third party." (Id. ¶ 8.) His purchases cost him over one million dollars and left him still as a minority shareholder with no control. (Id. ¶ 44.) IFC moved to dismiss under Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6) and under the doctrine of forum non conveniens, contending that IFC has not waived immunity under the International Organizations Immunities Act or in its Articles of Agreement to allow Osseiran's action, that Osseiran's claims for breach of contract, promissory estoppel and breach of confidentiality (Am. Compl. Counts I, II and III, respectively) fail as a matter of law, and that this matter should be litigated in Guernsey. Osseiran also moved to stay his suit to allow jurisdictional discovery.



"Before a court may address the merits of a complaint, it must assure that it has jurisdiction to entertain the claims." Rodriguez v. Nat'l Ctr. for Missing & Exploited Children, Civ. Action No. 03-120 (RWR), 2005 WL 736526, at *6 (D.D.C. Mar. 31, 2005). A court must dismiss a claim if it does not possess subject matter jurisdiction to hear and decide the dispute due to a defendant's immunity from suit. Weinstock v. Asian Dev. Bank, Civ. Action No. 05-174 (RMC), 2005 WL 1902858, at *2 (D.D.C. Jul. 13, 2005) (citing Rochon v. Ashcroft, 319 F. Supp. 2d 23, 27 (D.D.C. 2004)). Subject matter jurisdiction cannot be waived, and "[w]henever it appears by suggestion of the parties or otherwise that the court lacks jurisdiction of the subject matter, the court shall dismiss the action." Arbaugh v. Y & H Corp., 546 U.S. 500, 506 (2006). Although a court may consider matters outside of the pleadings in deciding whether to grant a motion to dismiss for lack of jurisdiction, the court must nonetheless "accept all of the factual allegations in the complaint as true." Jerome Stevens Pharms. v. Food & Drug Admin., 402 F.3d 1249, 1253 (D.C. Cir. 2005) (internal quotation omitted). Once a foreign defendant asserts the jurisdictional defense of immunity, a court must then determine if the defendant has waived immunity for the purposes of plaintiff's lawsuit. Cf. Phoenix Consulting, Inc. v. Rep. of Angl., 216 F.3d 36, 40 (D.C. Cir. 2000) (assessing jurisdictional immunity under the Foreign Sovereign Immunities Act).

As an international organization entitled to protection under the International Organizations Immunities Act ("IOIA"), 22 U.S.C. § 288a(b), IFC maintains that it is immune from Osseiran's action. The IOIA allows designated entities to "enjoy the same immunity from suit and every form of judicial process as is enjoyed by foreign governments, except to the extent that such organizations may expressly waive their immunity for the purpose of any proceedings or by the terms of any contract." 22 U.S.C. § 288a(b). This immunity may be waived only in the most limited circumstances such as where the organization itself has waived its immunity. Dujardin v. Int'l Bank for Reconstr. and Dev., 9 Fed. Appx. 19, 20 (D.C. Cir. 2001).

Although IFC has not expressly waived its immunity for all actions, it has noted in Article VI of its Articles of Agreement circumstances under which a civil action may proceed. "Actions may be brought against the Corporation only in a court of competent jurisdiction in the territories of a member in which the Corporation has an office, has appointed an agent for the purpose of accepting service or notice of process, or has issued or guaranteed securities. No actions shall, however, be brought by members or persons . . . deriving claims from members." (Def.'s Mot. to Dismiss, Ex. C (IFC Arts. of Agreement, Art. VI, Sec. 3).) Mendaro v. World Bank, 717 F.2d 610 (D.C. Cir. 1983), interpreted identical language in the Articles of Agreement for the World Bank to mean that "the World Bank's members . . . intended to waive the Bank's immunity from suits by its debtors, creditors, bondholders, and those other potential plaintiffs to whom the Bank would have to subject itself to suit in order to achieve its chartered objectives." Id., 717 F.2d at 615. The objectives stated in the IFC's Articles of Agreement include assisting in the financing of productive private enterprises which "contribute to the development of its member countries by making investments," bringing "together investment opportunities, domestic and foreign private capital, and experienced management[,]" and seeking "to stimulate, and to help create conditions conductive to, the flow of private capital, domestic and foreign, into the productive investment of member countries." (Def.'s Mot. to Dismiss, Ex. C (IFC Arts. of Agreement, Art. I).)

Once, as here, a waiver has been identified, the scope of that waiver must then be assessed. See Atkinson v. Inter-Am. Dev. Bank, 156 F.3d 1335, 1338 (D.C. Cir. 1998); Mendaro, 717 F.2d at 617. "'Since the purpose of the immunities accorded international organizations is to enable the organizations to fulfill their functions, applying the same rationale in reverse, it is likely that most organizations would be unwilling to relinquish their immunity without receiving a corresponding benefit which would further the organization's goals.'" Atkinson, 156 F.3d at 1338 (quoting Mendaro, 717 F.2d at 617 (further stating that "limitations on immunity that subject the organization to suits which could significantly hamper the organization's functions are inherently less likely to have been intended, and a court's interpretation of the provision in dispute should have that in mind")). Thus, suits based on commercial transactions may proceed where the benefits of a waiver outweigh any associated costs. Atkinson, 156 F.3d at 1338.

IFC maintains that Osseiran is not a "creditor, debtor or bondholder" nor is he the type of plaintiff for whom IFC would have waived its immunities to achieve its organizational goals. Osseiran retorts that his suit, involving a sale by IFC of one of its equity investments to a private investor, amounts to the type of commercial transaction for which IFC's immunity would be waived. He reasons that the corresponding benefit of allowing a sale to attract additional investors outweighs the burdens of litigation over any dispute about the sale. Osseiran also argues that he is precisely the type of plaintiff by whom IFC should be subjected to suit in order to achieve its organizational goal of promoting investment opportunities. (See Pl.'s Opp'n to Def.'s Mot. to Dismiss ("Pl.'s Opp'n") at 6.)

Because IFC seeks to attract potential investors and provide money to developing member countries, negotiating to obtain capital from a sale of stock investments it holds would further bedrock IFC objectives. Considering that IFC's stated goal is "contribut[ing] to the development of its member countries by making investments" (Def.'s Mot. to Dismiss, Ex. C (IFC Arts. of Agreement, Art. 1)), funds received from Osseiran would be instrumental in creating additional investment opportunities. Waiver of immunity for litigation arising from transactions involving a sale of stock to a private investor provides a clear benefit in attracting additional investors willing to engage in financial transactions with IFC that would further development objectives. Cf. Atkinson, 156 F.3d at 1338 (noting that where waiver of immunity for certain types of proceedings provided no conceivable benefit and instead created a disadvantage for defendant, immunity was not waived). Without such waiver, these investors might be more hesitant to enter into negotiations with IFC to purchase investments because they could not sue to enforce agreements. See Mendaro, 717 F.2d at 618 (finding that in the World Bank context, exceptions to immunities were designed to ensure that parties could sue to enforce the Bank's contracts given that "[p]otential investors would be much less likely to acquire the Bank's own securities if they could not sue the Bank to enforce its liabilities").

IFC argues that there is no binding contract for a stock sale between Osseiran and itself that would trigger any cost-benefit analysis or assessment of the sale's relationship to IFC's objectives. IFC also maintains that while waiver may be justified where "an insistence on immunity would actually prevent or hinder [IFC] from conducting its activities" (Def.'s Mot. to Dismiss at 31 (quoting Mendaro, 717 F.2d at 617)), immunity applies here since allowing Osseiran's suit would require IFC to be bound to contracts that are still ...

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