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Jam v. International Finance Corp.

United States District Court, District of Columbia

March 24, 2016

BUDHA ISMAIL JAM, et al., Plaintiffs,
v.
INTERNATIONAL FINANCE CORPORATION, Defendant.

MEMORANDUM OPINION

JOHN D. BATES United States District Judge

Located in a coastal region of Gujarat, India, the coal-fired TataMundra Power Plant was constructed in order to supply much-needed power for India's continued economic growth. But according to plaintiffs, who live, fish, and farm in the shadow of the Plant, its main legacy has been environmental and social harm-to the marine ecosystem, to the quality of the air, to plaintiffs' health, and to their way of life. Plaintiffs believe that the International Finance Corporation (IFC), which provided $450 million for construction of the Plant, is primarily responsible for their injuries. They have sued IFC in this Court seeking several forms of equitable relief or, in the alternative, compensatory and punitive damages. IFC now moves to dismiss on several grounds, most notably that it is immune from this suit under the International Organizations Immunities Act. Because the Court agrees that IFC is immune from this suit, it will dismiss plaintiffs' complaint in its entirety, without reaching IFC's other arguments.

BACKGROUND

IFC is an international organization with 184 member countries, including the United States and India. Def.'s Mot. to Dismiss [ECF No. 10-1] at 3. As described in its Articles of Agreement, IFC's purpose is "to further economic development by encouraging the growth of productive private enterprise in member countries." Ex. 1 to Zeidan Decl. [ECF No. 10-8] (Articles of Agreement) Art. I. To fulfill that purpose, IFC may invest in privately run projects for which "sufficient capital is not available on reasonable terms." Id. The project at the center of this case, development of the Tata Mundra Power Plant, was carried out by Coastal Gujarat Power Limited (CGPL), a subsidiary of Tata Power, an Indian power company. IFC loaned CGPL $450 million for the development of the Plant. Total project cost was estimated to be $4.14 billion. Compl. [ECF No. 1] ¶¶ 56, 47.

Internal IFC policies demand careful attention to the environmental and social impacts of IFC-financed projects. IFC's "Performance Standards on Environmental and Social Sustainability" create a framework for the assessment, avoidance, minimization, and mitigation of environmental and social risks. See Ex. 5 to Herz Decl. [ECF No. 22-5] (2012 Performance Standards) at ¶¶ 1-8. "IFC will only finance investment activities that are expected to meet the requirements of the Performance Standards within a reasonable period of time." Ex. 2 to Herz Decl. [ECF No. 22-5] (2012 Policy on Environmental and Social Sustainability) ¶ 22. When IFC does invest in a project, the resulting loan agreement requires the client to comply with the Performance Standards and other related policies. See 2012 Policy on Environmental and Social Sustainability ¶24. Thus, "managing environmental and social risks and impacts in a manner consistent with the Performance Standards [becomes] the responsibility of the client." Id. ¶7. But IFC retains responsibility for monitoring and supervising its clients' efforts. Id. "If the client fails to comply with its environmental and social commitments, " then "IFC will work with the client to bring it back into compliance." Id](24. "Persistent delays in meeting [those commitments] can lead to loss of financial support from IFC." Id. ¶22.

From the earliest stages of its involvement, IFC recognized that the development of the Plant entailed significant-and possibly irreversible-environmental and social risks. See Ex. 7 to Zeidan Decl. [ECFNo. 10-14] (Compliance Advisory Ombudsman Assessment Report) at 4-5. Hence, before closing the deal on IFC's $450 million investment, IFC and CGPL developed an Environmental and Social Action Plan in an attempt to manage the risks they had identified. Compl.¶¶ 49-51. Ultimately, the Action Plan was incorporated into the loan agreement, along with IFC's Performance Standards and other environmental guidelines. See Ex. 1 to Karim Decl. [ECF No. 10-5 & -6] (Schedule I to Loan Agreement) at 91-92 (requiring CGPL to comply with the "Environmental and Social Requirements"); see also id at 13-14 (defining "Environmental and Social Requirements").

Plaintiffs include fishermen and farmers who live and work near the Plant, suing on behalf of themselves and others similarly situated; a local trade union (MASS) dedicated to protection of fisherworkers' rights; and the local government of a nearby village. See Compl. ¶¶13-15. In plaintiffs' view, CGPL and IFC have failed to honor their commitments. They point to a host of negative environmental and social impacts allegedly caused by the operation of the Plant: hot water from the cooling system has substantially altered the marine environment, depressing the fish catch near the shore; the water intake channel has leaked saltwater into the groundwater, thereby making it unsuitable for drinking or irrigation; emissions have significantly degraded local air quality; local fisherman and farmers have been displaced. See Pis.' Opp'n [ECF No. 22] at 3-5; see also Compl. ¶¶ 74-115. Plaintiffs feel that, when these individual impacts are considered in the aggregate, their "way of life [has been] fundamentally threatened or destroyed by the Tata Mundra Plant." Compl. ¶ 6.

Plaintiffs blame IFC for the injuries they have suffered. In their view, if IFC had "follow[ed] its own policies and enforce[d] the conditions of the loan agreement, " the negative environmental and social impacts caused by the Plant could have been avoided, minimized, or mitigated. Compl. ¶ 191; see Id. ¶¶176-92. Based on that conviction, plaintiffs filed a complaint with IFC's Compliance Advisor Ombudsman (CAO). See Ex. 6 to Zeidan Decl. [ECF No. 10-13]. The CAO is IFC's "independent recourse and accountability mechanism ... for environmental and social concerns." Ex. 3 to Zeidan Decl. [ECF No. 10-10] (CAO Operational Guidelines) at 4. But the CAO's compliance function is focused on IFC's environmental and social performance, not on the performance of IFC's clients. Id. at 22. CAO compliance investigations focus on whether IFC has "fail[ed] to address environmental and/or social issues as part of [its] review process, " and whether that failure has "resulted in outcomes that are contrary to the desired effect of the [IFC's] policy provisions." Id at 24. The final investigation report, which is made available on the CAO's website, will detail any identified policy violations. Id. at 25. However, the CAO is not a court, has "no authority with respect to judicial processes, " and creates no "legal enforcement mechanism." LI at 4. Thus, the CAO cannot compel IFC to right its wrongs, or to provide remedies to individuals who have been harmed by IFC-financed projects.

Plaintiffs understand that well. The CAO investigation into their complaint concluded that IFC had failed adequately to consider the environmental and social risks to which plaintiffs would be exposed as a result of the Plant's development. See Ex. 11 to Zeidan Decl. [ECF No. 10-18] (CAO Audit Report) at 4. In the CAO's estimation, IFC then compounded that error by failing to perform an environmental and social impact assessment "commensurate with project risk, " and by failing to "address [subsequent] compliance issues during [project] supervision." Id; see also Id. at 50-53 (summarizing the key compliance findings). IFC responded with a letter challenging some of the CAO's conclusions, see Ex. 12 to Zeidan Decl. [ECF No. 10-19], and with a statement laying out a ten-item action plan to address any compliance shortcomings, see Ex. 13 to Zeidan Decl. [ECF No. 10-20]. But the CAO was unimpressed. In a subsequent monitoring report, it explained that "a number of its findings suggest the need for a rapid, participatory and expressly remedial approach to assessing and addressing project impacts raised by [plaintiffs]." Ex. 14 to Zeidan Decl. [ECF No. 10-21] at 5. In the eyes of the CAO, the action plan proposed by IFC and CGPL fell short of that mark. LI The matter remains open for continued monitoring. Def.'sMot. to Dismiss at 7.

Seeking the relief they cannot obtain from the CAO, plaintiffs have filed a complaint in this Court. Their case is focused on "the irresponsible and negligent conduct of the International Finance Corporation in appraising, financing, advising, supervising and monitoring its significant loan to enable the development of the Tata Mundra Project in Gujarat, India." Compl. ]f2. That conduct, plaintiffs contend, gives rise to valid claims for negligence, negligent supervision, public nuisance, private nuisance, trespass, and breach of contract. See Id. ¶¶| 294-332. As remedies, plaintiffs seek various forms of injunctive relief running against IFC or, in the alternative, compensatory and punitive damages. See id ¶¶ 333-45. IFC has responded with a motion to dismiss. At the threshold, IFC believes plaintiffs' suit is barred by the International Organizations Immunities Act (IOIA), 22 U.S.C. § 288 et seq. Alternatively, IFC asks the Court to dismiss on grounds of forum non conveniens or for failure to join indispensable third parties. Finally, IFC argues that some of the counts in plaintiffs' complaint fail to state a claim upon which relief can be granted. See Def.'s Mot. to Dismiss at 1-2. As the Court agrees that IFC is immune from plaintiffs' suit, it will address only IFC's threshold immunity argument.

LEGAL STANDARD

IFC's immunity claim seeks dismissal for lack of subject-matter jurisdiction under Federal Rule of Civil Procedure 12(b)(1). As"[f]ederal courts are courts of limited jurisdiction[, ] .. . [i]t is to be presumed that a cause lies outside this limited jurisdiction, and the burden of establishing the contrary rests upon the party asserting" it. Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 377 (1994) (citations omitted). Thus, plaintiffs must establish jurisdiction by a preponderance of the evidence. See Gordon v. Office of the Architect of the Capitol, 750 F.Supp.2d 82, 87 (D.D.C. 2010). In making this determination, "the Court must accept as true all of the factual allegations contained in the complaint, " but those allegations "will bear closer scrutiny in resolving a 12(b)(1) motion than in resolving a 12(b)(6) motion for failure to state a claim." Id. at 86-87 (internal quotation marks and citations omitted).

DISCUSSION

"It is well established that statutes like the IOIA that grant immunity to foreign nations and international organizations limit the District Court's jurisdiction over parties that are entitled to such protection." Weinstock v. Asian Dev. Bank, 2005 WL 1902858, at*3 (D.D.C. July 13, 2005). "The International Organizations Immunities Act applies to those international organizations which the President designates as entitled to [its] benefits . .. ." Osseiran v. IntT Finance Corp., 552 F.3d 836, 838 (D.C. Cir. 2009). IFC is among those organizations that have been so designated. Id. (citing Exec. Order No. 10, 680, 21 Fed. Reg. 7, 647 (Oct. 2, 1956)). Under the IOIA, IFC generally "enjoy[s] the same immunity from suit and every form of judicial process as is enjoyed by foreign governments." 22 U.S.C. § 288a(b). "When Congress enacted the IOIA in 1945, foreign sovereigns enjoyed-contingent only upon the State Department's making an immunity request to the court-'virtually absolute immunity.'" Atkinson v. Inter-Am. Dev. Bank, 156 F.3d 1335, 1340 (D.C. Cir. 1998) (quoting Verlinden B.V. v. ...


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