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MBI Group, Inc. v. Credit Foncier du Cameroun

June 10, 2008

MBI GROUP, INC., ET AL., PLAINTIFFS,
v.
CREDIT FONCIER DU CAMEROUN, ET AL., DEFENDANTS.



The opinion of the court was delivered by: John D. Bates United States District Judge

MEMORANDUM OPINION

Plaintiffs MBI Group, Inc. ("MBI") and Altantic Group, SCI ("Atlantic") bring this lawsuit against Credit Foncier du Cameroun ("CFC") and the Republic of Cameroon seeking damages for breach of contract, fraud, misrepresentation, intentional interference with contract, and misappropriation of trade secrets and proprietary information. This controversy arises out of an agreement by which plaintiffs would take the lead in constructing a series of affordable housing projects in Cameroon with CFC providing the land and funding for that initiative. As plaintiffs would have it, the deal was scuttled by CFC and Cameroon when MBI and Atlantic refused to deliver bribes that were demanded by certain officials within the government of Cameroon. Defendants, by contrast, deny the accusations of bribery and insist that there was no binding agreement to begin with. Claiming immunity subject to the Foreign Sovereign Immunities Act, 28 U.S.C. §§ 1602-1611, defendants have moved to dismiss the complaint for an absence of subject matter jurisdiction. They also claim that the action should be dismissed for lack of personal jurisdiction and on forum non conveniens grounds. Plaintiffs, for their part, oppose defendants' motion to dismiss and have moved for jurisdictional discovery in their own right. Those motions are fully briefed and ripe for resolution. Upon careful consideration, and for the reasons set forth below, the Court will deny plaintiffs' motion for discovery and grant defendants' motion to dismiss on forum non conveniens grounds.

BACKGROUND

MBI is a Delaware corporation that has "designed and developed a business plan, program and model for the construction, marketing, sale and operation . . . [of] affordable housing in regions of the world with limited or undeveloped housing infrastructure." Compl. ¶¶ 4, 9. Cameroon, of course, is a sovereign nation located in Africa. CFC is a corporation organized under the laws of Cameroon. See Defs.' Mot. Mekongo Decl. ¶ 3. The majority of CFC's shares are owned by the government of Cameroon. Id. CFC's stated purpose is to make affordable housing available to Cameroon's citizens. Id. ¶ 5. To that end, CFC is funded in part by a 1% tax levied on the salaries of workers in Cameroon who earn over 50,000 CFA Francs per month, as well as a .25% payroll tax on employers in the country. Id. CFC's Board of Directors consists of twelve members, eight of whom are appointed directly by the government of Cameroon. Id. ¶ 4. Notwithstanding the government's involvement in funding CFC and appointing its directors, CFC allegedly "acts independently" and the government assertedly lacks "the right to direct the actions of CFC's Board." See Defs.' Reply Mekongo Decl. ¶ 2.

According to plaintiffs, CFC first approached MBI in November 2003 "and solicited MBI's participation in the development and the implementation of an affordable housing program in Cameroon." See Compl. ¶ 14. That contact was made through Joseph Edou, who was the General Manager of CFC during the relevant time period. Id. Edou represented to MBI that Cameroon lacked a supply of affordable housing and that CFC "desired to enter into an agreement with an entity that would serve as a developer . . . [and] implement an affordable housing program which would be rolled out in various cities in Cameroon." Id. ¶ 15. The Overseas Private Investment Corporation ("OPIC") is a U.S. government agency that aims "to develop robust housing markets through construction of affordable homes in developing nations with the goal of bolstering retail banking and fueling local capital markets as engines of entrepreneurship." Id. ¶ 12 (internal quotation marks omitted). Plaintiffs assert that "CFC desired to attract financing and support for an affordable housing program from agencies such as OPIC," and CFC recognized that "financial support from OPIC required substantial financial participation from an American entity," such as MBI. Id. ¶ 15.

Due to MBI's familiarity with OPIC and its interest in the Cameroon project, MBI officials traveled to Cameroon to investigate the feasibility of the undertaking. Id. ¶ 16. MBI then submitted a "formal expression of interest" in the project at CFC's request. Id. ¶ 17. After CFC responded that the proposal "conformed with CFC's requirements," MBI began taking preliminary steps to "commence master planning" of the project. Id. ¶ 18. One such step was the creation of Atlantic on March 24, 2004. Id. ¶ 20. Atlantic was incorporated under the laws of Cameroon "specifically for the development and implementation of the Cameroon Housing Project." Id. Atlantic, however, is not a wholly owned subsidiary of MBI. In fact, MBI directly owns only 35% of Atlantic. See Defs.' Mot. Ngwafor Decl. ¶ 13. Roger Tchoufa, a co-founder of MBI, owns another 20% of Atlantic in his personal capacity. Id. The remaining 45% of Atlantic stock is owned by a company known as The Falls. Id. The Falls is a public limited company organized under the laws of Cameroon. Id. ¶ 10. The sole shareholder of The Falls is Ateba Minkoulou Gabriel, who is evidently Joseph Edou's brother-in-law. Id. ¶ 10; Defs.' Mot. Mekongo Decl. ¶ 19. As defendants would have it, this arrangement is merely a front and the true owner and driving force behind The Falls is in fact Joseph Edou.

In any event, in May 2004 the parties were engaged in an effort to formalize the tentative agreement between MBI and CFC. In order to facilitate that, Edou traveled to the United States for two weeks and MBI arranged for him to meet with several officials of OPIC and the U.S. Department of Housing and Urban Development, among other agencies. See Compl. ¶ 25. Also present during this period was Andre Booto A Ngon ("Booto"), then the Chairman of the Board of CFC. See Pl.'s Opp'n Tchoufa Decl. ¶¶ 10-11. On May 18, 2004, MBI and CFC signed a Memorandum of Agreement in Bethesda, Maryland memorializing the deal between the parties. See Compl. ¶ 26. Edou signed the agreement on behalf of CFC, evidently at Booto's direction. Among other things, the Memorandum Agreement called for CFC to provide to plaintiffs:

(a) project development and construction financing of approximately forty nine million dollars (US$49,000,000.00) and all necessary financial guarantees for the Yaounde Phase I Project; (b) land on which approximately 1,100 affordable housing units would be constructed by Plaintiffs for the Yaounde Phase I Project; (c) mortgage financing for the buyers of the 1100 units for the Yaounde Phase I Project; and (d) the identity of over 50,000 potential home buyers. CFC also confirmed the availability of mortgage funds for at least 5,000 to 6,000 houses over the next four years.

Id. ¶ 27 (internal quotation marks omitted). In return, MBI and Atlantic agreed to "be responsible for the selection and supervision of the contractors and consultants for the housing project," to "carry out a feasibility study for the housing project . . . [and to serve] the role of Developer." Id. ¶¶ 28-29.

Soon thereafter, plaintiffs retained the services of Group Five International ("Group Five"), a South African construction company, to "carry out pre-construction studies of the Project and to prepare detailed cost estimates." Id. ¶ 31. During November 2004, plaintiffs submitted a feasibility study to CFC. Id. ¶ 33. CFC requested certain changes to the project in lieu of the study's findings; plaintiffs promptly made those changes and resubmitted another proposal to CFC on December 8, 2004, which plaintiffs allege was then accepted by CFC. Id. ¶¶ 34-37. Plaintiffs then contracted with Group Five to undertake the construction project dubbed "Yaounde Phase I." Id. ¶¶ 39-40. In furtherance of that agreement, CFC delivered $4,750,000 in funding to Group Five to begin the project. Id. ¶ 40.

On July 23, 2005, plaintiffs allege that CFC "handed over to Plaintiffs and to Group Five 102 hectares of land for the construction and the completion of the Yaounde Phase I Project" at a public ceremony. Id. ¶ 45. On July 15, 2005 and August 11, 2005, respectively, plaintiffs and CFC signed two additional Memoranda of Agreement in Cameroon. Id. ¶¶ 47-52. Joseph Edou signed for CFC on both occasions. Those agreements purported to expand upon the initial 2004 Memorandum of Agreement to provide for additional phases of the Cameroon housing project. Plaintiffs timely took steps to begin performance under both agreements. Id. ¶¶ 54-57. Indeed, in reliance upon the July 15th Agreement, plaintiffs submitted an application with OPIC in Washington, D.C. for construction financing for the Yaounde Phase II Project. Id. ¶ 50. And pursuant to the August 11th Agreement, plaintiffs also submitted a Preliminary Application for Guarantee with the Multilateral Investment Guarantee Agency of the World Bank. Id. ¶ 54.

Notwithstanding the progress that the parties appeared to be making on the project, plaintiffs allege that the endeavor began to unravel during "August or September 2005" when "officials of Cameroon solicited and demanded a bribe in connection with the Cameroon Project." Id. ¶ 60. That demand was communicated to plaintiffs through Joseph Edou. Plaintiffs steadfastly refused to pay any bribe, a stance that Edou evidently shared. Id. ¶¶ 60-61. Due to Edou's opposition to the bribery demands, plaintiffs contend that he was removed from his position at CFC and replaced by Camille Ekindi on September 13, 2005. Upon subsequent meetings between plaintiffs and Mr. Ekindi, plaintiffs learned that Mr. Ekindi had been "instructed" not to take any further action with respect to the housing project without specific approval from the government of Cameroon. Id. ¶ 65. Shortly thereafter, CFC made several unilateral and material changes to the Yaounde Phase I Project that was already underway; plaintiffs noted that the changes constituted a material breach of the prior agreements, but nevertheless proceeded to accommodate CFC's demands. Id. ¶¶ 70-74. Finally, on December 12, 2005, CFC "instructed Plaintiffs to cease all work on the Yaounde Phase I Project." Id. ¶ 81. Plaintiffs were allegedly informed by Mr. Ekindi that he had "been instructed to identify a pretext for the termination of the Cameroon Housing Project and in particular the Yaounde Phase I Project." Id. ¶ 82.

Plaintiffs "took all reasonable and prudent steps to continue or resume the Cameroon Housing Project and, in particular, the Yaounde Phase I Project." Id. ¶ 85. Their efforts, however, were ultimately unsuccessful. As a result, "Group Five terminated its existing agreements and commenced the repatriation of its employees." Id. ¶ 84. Tchoufa met a final time with Mr. Ekindi at CFC's offices on February 15, 2006. Id. ¶ 86. At that meeting, Tchoufa contends that Mr. Ekindi "admitted that Defendants had no basis for objection to the revised plans, and that those plans had been approved by the relevant Cameroon land development agency." Id. ¶ 87. Nevertheless, Mr. Ekindi reportedly indicated that "there was no hope that the Cameroon Housing Project, and in particular the Yaounde Phase I Project would go forward." Id. After re-affirming that he "would not authorize any payments of any bribes," Tchoufa left Cameroon and returned to the United States. Id. ¶¶ 87-88.

On March 23, 2006, plaintiffs wrote to defendants demanding compensation for the damages caused by defendants' breach of the existing agreements. Id. ¶ 89. Plaintiffs explicitly noted that defendants' "conduct . . . is conventionally associated with allegations of graft and corruption." Id. Tchoufa asserts that, in apparent retaliation for those accusations, Cameroon officials improperly arrested his wife's secretary and imprisoned her for one week without any formal charges. Id. ¶ 90. Additionally, the government seized portions of property belonging to Tchoufa and his wife and supposedly directed threats towards other members of Tchoufa's family. Id. Moreover, during September 2006, one of Tchoufa's relatives was arrested and Cameroon officials allegedly demanded a $200,000 bribe to secure the relative's release. Id. ¶ 91. In fact, Tchoufa himself was incarcerated for nearly a month in the Ivory Coast on the basis of an Interpol notice allegedly issued by Cameroon; he was eventually released following the intervention of the United States Embassy. See Pl.'s Reply Tchoufa Decl. ¶ 24. These incidents have convinced Tchoufa and plaintiffs that they "cannot receive a fair hearing in any court in the Cameroon." See Compl. ¶ 96.

Defendants tell a different story, however. As they would have it, CFC was the victim of unauthorized self-dealing by rogue agents, specifically Edou and Booto. According to defendants, Edou had no authority to enter into the initial 2004 Memorandum Agreement because -- pursuant to CFC's by-laws -- the general manager lacks the capacity to bind CFC to any contract in excess of $20,000. See Defs.' Mot. At 7. Thus, because the various agreements that Edou signed with plaintiffs called for CFC to deliver approximately $49 million in funding, any such arrangements would require explicit Board of Directors approval. Id. And defendants maintain that "[n]one of the purported 'Memorandums of Agreement' . . . nor any other purported contract relating to any of the projects in which MBI or Atlantic was involved was submitted to CFC's Board of Directors for approval." Id. at 8. Moreover, defendants assert that "no businessman with even a basic acquaintance with funding by government-owned corporations such as CFC could have reasonably believed that one individual, a General Manager, could by himself authorize a commitment of the magnitude of US$49 million." Id.

Under defendants' view, due both to Edou's purported lack of authority and also to his supposedly undisclosed ownership interest in Atlantic via The Falls, the agreements between Edou and plaintiffs should be viewed as unauthorized self-dealing. Those acts, according to defendants, led to a criminal indictment against Edou that charged him "with misappropriation and embezzlement of public funds, and conspiring with others to misappropriate funds for fictitious services purportedly rendered." Id. at 9. Moreover, ...


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