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Oster v. Republic of South Africa

December 31, 2007

DAVID W. OSTER, ET AL. PLAINTIFFS,
v.
THE REPUBLIC OF SOUTH AFRICA, DEFENDANT.



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

MEMORANDUM OPINION

Count I plaintiffs*fn1 brought this action against the defendant, the Republic of South Africa, seeking to enforce a judgment from a prior action. Count II plaintiffs*fn2 brought this action alleging that South Africa is liable for securities fraud, breach of fiduciary duty, breach of contract, and conversion based on the actions of its agents Adriaan Stander and Roelof Van Rooyen, principal managing officers of Intercol Party, Ltd. ("Intercol") and Oceantec Syndicate ("Oceantec"). South Africa moves to dismiss the plaintiffs' complaint, arguing that the court lacks subject matter jurisdiction. Because there is no subject matter jurisdiction over plaintiffs' claims, South Africa's motion to dismiss will be granted.*fn3

BACKGROUND

In an effort to investigate money due them based upon a series of collateral trading transactions, Count I plaintiffs met with Douglas Logan, a director of Intercol, a South African company that claimed to be "in the business of intelligence gathering, security services, political analysis, and high-risk investigative services, including high-tech electronic information services." (Compl. at ¶ 36.) Logan introduced plaintiffs to Stander and Van Rooyen, the principal managing officers of Intercol and Oceantec. (Id. at ¶ 37.) Stander and Van Rooyen told plaintiffs that they could help investigate the financial transactions.

Thereafter, plaintiffs were in continuous contact with Stander and Van Rooyen and paid them large sums of money to conduct the investigation. Stander and Van Rooyen represented to plaintiffs that they had retrieved plaintiffs' funds from the trading transactions and would be disbursing those funds to plaintiffs. Plaintiffs claim that despite repeated assurances by Stander and Van Rooyen, they were never paid any of the funds allegedly owed to them. (Id. at ¶ 44.)

Count I plaintiffs brought suit against Stander, Van Rooyen, Oceantec and Intercol in New York claiming securities fraud, breach of fiduciary duty, and breach of contract. (Id., Ex. 2 at 1-2.) Plaintiffs were awarded actual and punitive damages in a default judgment issued in 1995. (Id. at ¶ 9, Ex. 2 at 13-14.) Plaintiffs now seek to have the 1995 default judgment against the individual and corporate defendants enforced against South Africa. They argue that Stander and Van Rooyen and their corporations acted as agents and front companies for South Africa during the relevant periods and therefore represented the sovereign in the lawsuit.

Count II plaintiffs claim that Stander held himself out to be a former officer of the South African Security Police at the time of their dealings. (Id. at ¶ 40.) Plaintiffs allege that new information has been discovered proving that both Stander and Van Rooyen were "contract employees" of the National Intelligence Agency of the Republic of South Africa ("NIA"). (Id.) Plaintiffs also assert that an investigation by South African Police uncovered evidence in Stander's possession showing that large amounts of money were transferred from accounts in the United States to accounts in South Africa and that funds were deposited in an account in Van Rooyen's name at Citibank in New York. (Id.) Plaintiffs claim that this evidence corroborates the agency relationship alleged in the complaint. Plaintiffs assert that at all times Stander and Van Rooyen were working for South Africa as members of the NIA and that Oceantec and Intercol were front companies designed to facilitate the numerous covert operations of Stander and Van Rooyen. (Id. at ¶¶ 48-49.) Plaintiffs claim that the money transfers were carried out at the behest of South Africa in order to bypass apartheid-era sanctions and argue that South Africa should be held liable for the injuries caused by its agents, Van Rooyen and Stander and their corporate affiliates. (Id. at ¶¶ 53-54.)

Plaintiffs offer several items as proof of their allegations of South Africa's involvement. Specifically, plaintiffs cite the report of U.S. Magistrate Judge James Francis in the 1995 New York lawsuit, Curtis v. Stander, Civ. No. 96-31 (S.D.N.Y. 1995) ("the Report"), Stander's answer to the complaint in the 1995 lawsuit ("Stander's Answer"), the deposition and affidavit of Peter Goslar ("Goslar deposition"), and Stander's "Request for Release" filed in the Republic of South Africa under the "Law of Safeguarding" in 1994.

Count II plaintiffs allege that Stander, Van Rooyen, Intercol and Oceantec committed securities fraud, breached their fiduciary duty and breached a contract acting as agents of the defendant. Count II plaintiffs also claim that Stander, Van Rooyen and their corporate affiliates converted funds owed to plaintiffs as commissions from the alleged transaction.

South Africa moves to dismiss the claims of the Count I and Count II plaintiffs under Federal Rule of Civil Procedure 12(b)(1), arguing that the court lacks subject matter jurisdiction.*fn4

DISCUSSION

"Before a court may address the merits of a complaint, it must assure that it has jurisdiction to entertain the claims." Osseiran v. International Finance Corp., 498 F. Supp. 2d 139, 143 (D.D.C. 2007) (quotations and citation omitted). "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." Id. Under Federal Rule of Civil Procedure 12(b)(1), the plaintiff bears the burden of establishing that the court has subject matter jurisdiction. See Forrester v. United States Parole Comm'n, 310 F. Supp. 2d 162, 167 (D.D.C. 2004) citation omitted). "In determining whether to grant a motion to dismiss for lack of subject matter jurisdiction, the Court may either consider the complaint alone, or the complaint supplemented by undisputed facts evidenced in the record, or the complaint supplemented by undisputed facts plus the court's resolution of disputed facts." Best v. United States, Civil Action No. 07-007 (PLF), 2007 WL 4226398, at *1 (D.D.C. Dec. 3, 2007) (quotations and citation omitted). "The Court must accept all of the factual allegations in the complaint as true, but may, in appropriate cases, consider certain materials outside the pleadings." Id. (citing Jerome Stevens Pharms., Inc. v. FDA, 402 F.3d 1249, 1253-54 (D.C. Cir. 2005)). Although the complaint is to be liberally construed, the court need not accept factual inferences drawn by the plaintiffs if those inferences are not supported by facts alleged in the complaint. Nor must the court accept plaintiffs' legal conclusions. See id. (citing Primax Recoveries, Inc. v. Lee, 260 F. Supp. 2d 43, 47 (D.D.C. 2003)).

The Foreign Sovereign Immunity Act ("FSIA") is "the sole basis for obtaining jurisdiction over a foreign state[.]" Argentine Republic v. Amerada Hess Shipping Corp., 488 U.S. 428, 443 (1989). "[A] foreign state is presumptively immune from the jurisdiction of United States courts" unless one of the statutory exceptions applies. Saudi Arabia v. Nelson, 507 U.S. 349, 355, (1993) (citing Verlinden B.V. v. Central Bank of Nigeria, 461 U.S. 480, 488-89 (1983)). South Africa asserts its presumptive right to immunity under the FSIA. In response, the plaintiffs claim that the acts of ...


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