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Odhiambo v. Republic of Kenya

United States District Court, District of Columbia

March 13, 2013

PETER GEORGE ODHIAMBO, Plaintiff,
v.
REPUBLIC OF KENYA, et al., Defendants

Page 18

For PETER GEORGE ODHIAMBO, Plaintiff: Ian P Alberg, LEAD ATTORNEY, EDGEWATERS PARTNERS, Arlington, VA; Thomas Kipkorir Kirui, PRO HAC VICE, LAW OFFICE OF THOMAS KIRUI, Arlington, VA.

For REPUBLIC OF KENYA, A Foreign State, KENYA MINISTRY OF FINANCE, KENYA REVENUE AUTHORITY, JOHN NJIRAINI, MICHAEL G. WAWERU, Defendants: Daniel David Barnowski, David I. Ackerman, LEAD ATTORNEYS, SNR DENTON U.S. LLP, Washington, DC.

OPINION

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AMY BERMAN JACKSON, United States District Judge.

MEMORANDUM OPINION

Plaintiff Peter Odhiambo, a refugee from Kenya, brings this suit against defendants -- the Republic of Kenya, the Kenya

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Ministry of Finance, the Kenya Revenue Authority (" KRA" ), and the current and former KRA Commissioner Generals, John Njiraini and Michael Waweru, in their official capacities. He alleges two breach of contract claims arising from the KRA's offer to pay a reward in exchange for information about unpaid taxes due to the Republic of Kenya. Count I asserts that defendants failed to pay him the reward after he provided information about undisclosed taxes, and Count II contends that defendants improperly disclosed his identity as an informant. According to Odhiambo, the disclosure of his identity as a whistleblower forced him into hiding and ultimately caused him to seek and obtain asylum in the United States.

Defendants have moved to dismiss the action for lack of subject matter jurisdiction under Federal Rule of Civil Procedure 12(b)(1) on the ground that they are immune under the Foreign Sovereign Immunity Act (" FSIA" ). They have also moved to dismiss for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6). Because Odhiambo's complaint does not contain allegations that fall within any of the exceptions to the FSIA, defendants are entitled to sovereign immunity, and the Court will dismiss the case for lack of subject matter jurisdiction. Therefore, it need not reach the Rule 12(b)(6) issue.

BACKGROUND

The following facts are taken from the complaint, and defendants do not dispute them for the purposes of this motion. Defs.' Mem. in Supp. of Defs.' Mot. to Dismiss [Dkt. # 14-1] (" Defs.' Mem." ) at 5 n.4. In 2003, Charterhouse Bank, a private Kenyan commercial bank, hired Odhiambo as an internal auditor. Am. Compl. [Dkt. # 13] ¶ 9. In the course of his employment, Odhiambo discovered that several accounts were being operated in violation of certain Kenyan laws, including Kenyan tax laws. Id. He notified Charterhouse's management of the illegal activities, but the bank's Managing Director told him not to write any reports on the suspicious accounts or transactions. Id.

In March of 2004, Odhiambo learned about the following " Information Reward Scheme" that was being advertised in Kenya's print and online newspapers:

Kenya Revenue Authority [1] wishes to draw the public's attention to a scheme that rewards persons who provide information as below:

o Information leading to the identification of hitherto undisclosed taxes -- a reward amounting to 1% of the tax identified up to a maximum of Ksh. 100,000.

o Information leading to the recovery of hitherto undisclosed taxes -- a reward amounting to 3% of the taxes collected.

Volunteers are assured of strict confidentiality to safeguard identities while information supplied is meticulously vetted to discourage vendetta.

Be patriotic -- share knowledge on tax evasion and earn rewards!

Id. ¶ 10; Ex. A to Am. Compl. In April and May of 2004, Odhiambo provided account activity reports for over 800 of Charterhouse's customers that he believed had evaded taxes to the KRA, the Kenya Anti-Corruption Commission, and the Central Bank of Kenya. Am. Comp. ¶ ¶ 11-12. In May of 2004, the KRA paid Odhiambo 200,000 Kenyan shillings, approximately $2,568, which the KRA described as a token

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of appreciation for the information he provided. Id. ¶ 13.

In August of 2004, Kenya's then-Minister of Finance created a task force to investigate Charterhouse's activities based on the information that Odhiambo had provided. Id. ¶ 14. Odhiambo was hired as a consultant to assist the task force and was paid by the Kenya Anti-Corruption Commission for his services. Id. In November of 2004, a colleague from Charterhouse told Odhiambo that the bank knew that he had provided information to the KRA. Id. ¶ 15. The colleague also stated that some of the bank's customers were paying kickbacks to the Minister of Finance and KRA officials to avoid prosecution for tax evasion. Id. Shortly after that, Odhiambo began receiving " disquieting calls telling him to leave Kenya." Id. However, the calls stopped in February of 2005, when the Central Bank of Kenya hired Odhiambo as an advisor. Id. Odhiambo suspects that it was someone at the KRA or the Kenya Anti-Corruption Commission who revealed his identity as an informant to Charterhouse or its customers. Id.

On November 30, 2004, the task force investigating Charterhouse issued a report that confirmed Odhiambo's information regarding the failure to pay taxes by some of the bank's customers. Id. ¶ 16. About six months later, on June 13, 2005, the KRA paid Odhiambo 250,279.20 Kenyan shillings, approximately $3,282. Id. ¶ 18. The KRA described this payment as " Odhiambo's dues" from the tax recovered from one of the accounts that he disclosed. Id. But the KRA did not specify the account in question or the total amount of taxes recovered from that account. Id. In March of 2006, the Central Bank of Kenya advised the Minister of Finance that its investigation had uncovered " significant tax evasion" at Charterhouse. Id. ¶ 19. A Ministry of Finance official then reported these findings to the Parliament of Kenya, and Charterhouse was placed under statutory management on June 26, 2006. Id. ¶ ¶ 20-22.

Subsequently, the statutory manager of Charterhouse commissioned PricewaterhouseCoopers (" PwC" ) to conduct an independent investigation of the bank's operations. Id. ¶ 23. According to the complaint, [2] this investigation showed that " money was flowing from the Cook Islands through Charterhouse in Kenya to New York and other destinations." Id. ¶ 24. One account showed " suspicious transfers of $950,000 in March 2005, $760,000 in January 2006 and $400,000 in February 2006 to the Wall Street Banking Corporation in New York." Id.

In July of 2006, five police officers confronted Odhiambo while he was at work in the Central Bank of Kenya with what he calls a " bogus warrant." Id. ¶ 25. The then-acting Central Bank Governor rejected the warrant, and allowed Odhiambo to escape. Id. " Fearing further police harassment, Odhiambo called the [Kenya Anti-Corruption Commission], the Daily Nation (one of Kenya's major daily newspapers) and the Kenya National Commission on Human Rights." Id. After the Daily Nation published a story about his role as a whistleblower, the threats he had received, and the police harassment, " Odhiambo began receiving threatening phone calls warning him to leave Kenya and suspicious people were seen lurking around his house." Id. ¶ 26. As a result of these telephone calls and " hostile surveillances," Odhiambo " sought protection for his family in the United States, changed his cell phone number, and changed his residence twice." Id.

On July 19, 2006, the head of the Kenya National Commission on Human Rights

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contacted the U.S. Embassy to seek protection for Odhiambo, and that same month, Odhiambo met with U.S. embassy officials in Nairobi to discuss his asylum application. Id. ¶ ¶ 28-29. While discussions regarding his relocation were ongoing, Odhiambo received a letter from the KRA thanking him for the tax information that he provided and stating that he would receive his reward as soon as the KRA finalized its investigations. Id. ¶ 31. On August 15, 2006, Odhiambo traveled to Tanzania to await the processing of his application for refugee status in the United States. Id. ¶ 32. He stayed there for one and a half months at the full expense of the U.S. government. Id. Odhiambo arrived in the United States as a refugee on September 26, 2006, and the U.S. government paid his living expenses for ninety days after he arrived in the country. Id. ¶ 34.

In 2008 and 2009, Odhiambo had a number of meetings with Kenyan government officials in the United States about his " unpaid Information Reward Claim." Id. ¶ ¶ 35-36, 38-39. On June 18, 2008, he met with the Prime Minister's Chief of Staff for several hours in Maryland to discuss the reward payment. Id. ¶ 36. Later that month, the Chief of Staff called him from Kenya and told him to provide the KRA with a sworn statement describing the information he provided to the Kenyan government about tax evasion. Id. ¶ 37. Odhiambo complied with this request. Id. The following year, on September 24, 2009, Odhiambo met with the Kenyan Prime Minister in New York to discuss his claim for a reward payment. Id. ¶ 39. A year later, the KRA Commissioner General announced that Charterhouse had complied with the Kenya Income Tax Act's requirements and that he had no problem with reopening the bank. Id. ¶ 41. On November 30, 2011, Odhiambo sent " a final demand letter and notice of his intent to sue the Defendants." Id. ¶ 42. The Republic of Kenya and the KRA acknowledged receipt of his letter, and in their letters of acknowledgement, they both pledged to get back to Odhiambo at a later date. Exs. Q and R to Am. Compl.

On March 21, 2012, Odhiambo filed this suit against defendants; he amended his complaint in July of 2012. He alleges that by advertising the reward scheme, defendants offered to pay him for information leading to the identification and/or recovery of undisclosed taxes and promised to keep his identity as a whistleblower confidential, and that he accepted that offer by providing the requested information. See Am. Compl. ¶ ¶ 46-55. Count I alleges that defendants breached the contract by failing to pay the full reward amount of $24,533,683. Id. ¶ ¶ 46-51. Count II alleges that defendants also breached the contract by disclosing Odhiambo's role as a whistleblower, and it seeks a payment of $5 million in compensatory damages. Id. ¶ ¶ 52-55. Defendants have moved to dismiss this action under Federal Rules of Civil Procedure 12(b)(1) for lack of subject matter jurisdiction on the basis of sovereign immunity under the FSIA, and 12(b)(6) for failure to state a claim. Defs.' Mot. to Dismiss [Dkt. # 14] (" Defs.' Mot." ).

STANDARD OF REVIEW

In evaluating a motion to dismiss under Rule 12(b)(1), the Court must " treat the complaint's factual allegations as true, . . . and must grant plaintiff 'the benefit of all inferences that can be derived from the facts alleged.'" Sparrow v. United Air Lines, Inc., 216 F.3d 1111, 1113, 342 U.S. App. D.C. 268 (D.C. Cir. 2000) (citation omitted), quoting Schuler v. United States, 617 F.2d 605, 608, 199 U.S. App. D.C. 23 (D.C. Cir. 1979). Nevertheless, the Court need not accept inferences drawn by the plaintiff if those inferences are unsupported by facts alleged in the complaint, nor must the

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Court accept plaintiff's legal conclusions. Browning v. Clinton, 292 F.3d 235, 242, 352 U.S. App. D.C. 4 (D.C. Cir. 2002).

Under Rule 12(b)(1), the plaintiff bears the burden of establishing jurisdiction by a preponderance of the evidence. See Lujan v. Defenders of Wildlife, 504 U.S. 555, 561, 112 S.Ct. 2130, 119 L.Ed.2d 351 (1992); Shekoyan v. Sibley Int'l Corp., 217 F.Supp.2d 59, 63 (D.D.C. 2002). Federal courts are courts of limited jurisdiction and the law presumes that " a cause lies outside this limited jurisdiction." Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 377, 114 S.Ct. 1673, 128 L.Ed.2d 391 (1994); see also Gen. Motors Corp. v. EPA, 363 F.3d 442, 448, 361 U.S. App. D.C. 6 (D.C. Cir. 2004) (" As a court of limited jurisdiction, we begin, and end, with an examination of our jurisdiction." ). Because " subject-matter jurisdiction is an 'Art[icle] III as well as a statutory requirement . . . no action of the parties can confer subject-matter jurisdiction upon a federal court.'" Akinseye v. District of Columbia, 339 F.3d 970, 971, 358 U.S. App. D.C. 56 (D.C. Cir. 2003), quoting Ins. Corp. of Ir., Ltd. v. Compagnie des Bauxites de Guinee, 456 U.S. 694, 702, 102 S.Ct. 2099, 72 L.Ed.2d 492 (1982).

When considering a motion to dismiss for lack of jurisdiction, the court " is not limited to the allegations of the complaint." Hohri v. United States, 782 F.2d 227, 241, 251 U.S. App. D.C. 145 (D.C. Cir. 1986), vacated on other grounds, 482 U.S. 64, 107 S.Ct. 2246, 96 L.Ed.2d 51 (1987). Rather, a court " may consider such materials outside the pleadings as it deems appropriate to resolve the question [of] whether it has jurisdiction to hear the case." Scolaro v. D.C. Bd. of Elections & Ethics, 104 F.Supp.2d 18, 22 (D.D.C. 2000), citing Herbert v. Nat'l Acad. of Sciences, 974 F.2d 192, 197, 297 U.S. App. D.C. 406 (D.C. Cir. 1992); see also Jerome Stevens Pharms., Inc. v. FDA, 402 F.3d 1249, 1253, 365 U.S. App. D.C. 270 (D.C. Cir. 2005).

ANALYSIS

" In the United States, there is only one way for a court to obtain jurisdiction over a foreign state and it is not a particularly generous one -- the FSIA." Peterson v. Royal Kingdom of Saudi Arabia, 416 F.3d 83, 86, 367 U.S. App. D.C. 421 (D.C. Cir. 2005). Under the FSIA, " a foreign state is presumptively immune from the jurisdiction of United States courts," and " unless a specified exception applies, a federal court lacks subject-matter jurisdiction over a claim against a foreign state." Saudi Arabia v. Nelson, 507 U.S. 349, 355, 113 S.Ct. 1471, 123 L.Ed.2d 47 (1993); see also 28 U.S.C. § § 1604-05 (2006). The exceptions listed in 28 U.S.C. § 1605 provide " the sole basis for obtaining jurisdiction over a foreign state in the courts of this country." Nelson, 507 U.S. at 355, quoting Argentine Republic v. Amerada Hess Shipping Corp., 488 U.S. 428, 443, 109 S.Ct. 683, 102 L.Ed.2d 818 (1989) (internal quotation marks omitted). In other words, American courts cannot hear a case brought against a foreign sovereign unless one of the exceptions applies.

Odhiambo does not dispute that the Republic of Kenya, the Kenya Ministry of Finance, and the Kenya Revenue Authority are " foreign states" within the meaning of the FSIA. But he asserts that the Court has jurisdiction over them based on the first two exceptions of the FSIA: the waiver exception, 28 U.S.C. § 1605(a)(1); and the commercial activity exception, id. ยง 1605(a)(2). Pl.'s Resp. to Defs.' Mot. to Dismiss [Dkt. # 17] (" Pl.'s Opp." ) at 4. He also contends that FSIA immunity is not available to the individual defendants because they are not " ...


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