The opinion of the court was delivered by: JOHN E. SPRIZZO
Defendant Central Bank of Nigeria ("CBN") moves to dismiss cross-claims asserted against it by Weldor Trust Reg. ("Weldor"), Guy Bermes ("Bermes") and Impexco of Texas, Inc. ("Impexco") (collectively the "Weldor defendants")
under the Foreign Sovereign Immunities Act, 28 U.S.C. § 1602-1611 (1988) ("FSIA"). For the reasons that follow, that motion is granted.
This complaint arises out of an alleged fraudulent contract ("the contract") for the sale of Nigerian light crude oil by the Federal Government of Nigeria to defendants Weldor and Impexco. That purported contract was entered into between Bermes on behalf of the Weldor defendants and defendants Chief Everest N. Ofoegbu, Captain Davies, and Mr. Alhadji M. A. Daura (the "Nigerian defendants") on behalf of the Nigerian government on August 27, 1990. See Defendant CBN's Appendix, Exhibit 9 ("Def. App., Ex."). Pursuant to its terms, the Federal Republic of Nigeria agreed to sell to the Weldor defendants 2.7 million barrels of the above-referenced Nigerian light crude. See id.
The contract further required that Weldor Trust and Impexco deposit $ 500,000 in an account under the name Weldor Trust Account at CBN to be transferred to an account of the Nigerian government five days after the departure from Nigerian territorial waters of Weldor's ship carrying the crude oil cargo. See id. In order to effectuate that deposit, the Nigerian defendants loaned the Weldor defendants the $ 500,000. See id., Ex. 10. Later, on or about September 18, 1990, plaintiff Solfred Maizus, a 50% shareholder in Impexco, see id., Ex. 1, wired to an account controlled by the Nigerian defendants an amount covering the $ 500,000 advance and a $ 30,000 fee as consideration for that advance. See id., Ex. 10; Amended Complaint, PP 25, 26. Thereafter, each of the Weldor defendants guaranteed a promissory note payable to Solfred Maizus for his financing of the oil transaction secured, in part, by the $ 500,000 deposited into the Weldor Trust Account at CBN.
On September 11, 1990, Bermes and Chief Ofoegbu met with Mr. J.O. Daramola, an employee of CBN in their Banking Supervision Department, see Affidavit of Victor Atebioritsemiro Moore sworn to October 22, 1992 ("Moore Aff."), P 21,
at his office for the purpose of opening an account at CBN. At that meeting, Bermes completed and signed a form to open the account and handed Daramola a briefcase containing $ 500,000 in cash with a letter purportedly from the Nigerian government authorizing Daramola to open an account in Weldor's name.
See Def. App., Ex. 13, 14. Daramola gave Bermes a handwritten temporary receipt on a Central Bank of Nigeria notepad. See id., Ex. 16; Moore Aff., Ex. B. An allegedly official receipt headed "Central Bank of Nigeria," bearing a CBN seal, and allegedly signed by a CBN official, was faxed to Bermes two days later. See Def. App., Ex. 17-18; Moore Aff., Ex. C.
The delivery of crude, for reasons not especially clear,
was never completed, the money was never returned, and Maizus brought his action. The Weldor defendants filed cross-claims against the Nigerian defendants, Daramola and CBN under RICO, common law fraud and, in the alternative, negligent misrepresentation. CBN filed this motion to dismiss the cross-claims claiming immunity from suit as a foreign sovereign.
The Weldor defendants argue that the alleged acts of CBN qualify under the commercial activity exception to immunity under the FSIA for acts performed outside the United States which cause a direct effect in the United States, the only exception which plaintiffs allege to be applicable. See 28 U.S.C. § 1605(a)(2).
Under the FSIA, foreign states are immune from suit in United States courts subject to certain statutory exceptions. See 28 U.S.C. §§ 1605, 1607; Verlinden B.V. v. Central Bank of Nig., 461 U.S. 480, 486-89, 76 L. Ed. 2d 81, 103 S. Ct. 1962 (1983); Carey v. Nat'l Oil Corp., 592 F.2d 673, 676 (2d Cir. 1979) (per curiam). One of these, the commercial activity exception, removes that immunity where sovereigns engage in conduct which is commercial and private in nature, regardless of its purpose. See 28 U.S.C. § 1603(d); Republic of Arg. v. Weltover, Inc., 112 S. Ct. 2160, 2166-67, 119 L. Ed. 2d 394 (1992); Texas Trading & Milling Corp. v. Fed. Republic of Nig., 647 F.2d 300, 308-10 (2d Cir. 1981), cert. denied, 454 U.S. 1148, 71 L. Ed. 2d 301, 102 S. Ct. 1012 (1982). In the instant case, the parties do not dispute that CBN is a sovereign within the meaning of the FSIA, nor can any colorable claim be made that CBN's receipt of a bank deposit was not commercial activity within the meaning of section 1603(d) of the FSIA. However, for the reasons that follow, CBN's motion to dismiss must be granted because that activity had no direct effect in the United States.
The only conceivable predicate for any claim that there has been any effect in the United States in this case consists solely of the fact that one of the Weldor defendants, Impexco, is an American corporation and, by virtue of that domicile, suffered an injury here. However this Court is aware of no case in which that circumstance has been found to be a sufficient basis for jurisdiction under the FSIA.
Indeed, courts have consistently held that the FSIA's enumerated exceptions to sovereign immunity "require some form of substantial contact with the United States[,]" see Verlinden, supra, 461 U.S. at 490-91; Texas Trading, supra, 647 F.2d at 311-12, in that some legally significant act giving rise to the claim occur in the United States. See, e.g., Weltover, Inc. v. Republic of Arg., 941 F.2d 145, 152-53 (2d Cir. 1991), aff'd, 112 S. Ct. 2160, 119 L. Ed. 2d 394 (1992) (citing Zedan v. Kingdom of Saudi Arabia, 270 U.S. App. D.C. 382, 849 F.2d 1511, 1515 (D.C. Cir. 1988)). For example, the requisite nexus with the United States has been found where foreign sovereigns have defaulted on performance obligations due in the United States.
See, e.g., Republic of Arg. v. Weltover, Inc., supra, 112 S. Ct. at 2168-69; see also Antares Aircraft v. Fed. Republic of Nig., 948 F.2d 90, 95 (2d Cir. 1991), vacated, 112 S. Ct. 3020, 120 L. Ed. 2d 892 (1992).
Moreover, even assuming, arguendo, that Impexco's U.S. domicile was a sufficient predicate for finding an effect in the United States with respect to its claims, the injury it alleges is under no rational construction of the term a direct injury. An effect is direct when "it follows as an immediate consequence of the defendant's . . . activity." See Republic of Arg. v. Weltover, Inc., supra, 112 S. Ct. at 2168 (citation omitted). Here, the $ 500,000 deposited in the Weldor Trust Account at CBN, which had been originally designated in the oil contract to be paid to the Nigerian defendants as compensation for the completed oil transaction and which, upon repayment by Maizus of the $ 500,000 advanced by the Nigerian defendants, became security for Maizus's note, was instead, since that transaction was never completed, payable to Maizus, on his demand in accordance with the terms of the promissory note. Therefore, the loss of the money from the Weldor Trust Account at CBN directly effected Maizus, if anyone, but clearly had no immediate consequence on any of the Weldor defendants, who are at best liable to compensate Maizus for the loss which he, not they, suffered.
In any event, the exercise of jurisdiction over CBN in this case would not be consistent with due process and thus cannot be exercised under the FSIA. See Int'l Shoe Co. v. Washington, 326 U.S. 310, 66 S. Ct. 154, 90 L. Ed. 2d 95 (1945). The Court of Appeals in Texas Trading, supra, articulated the standard for evaluating the sufficiency of a foreign state's contacts with the United States for constitutional purposes. That standard requires the Court to analyze the extent to which a defendant has availed itself of the privileges of American law, the extent to which litigation in the United States would be foreseeable to it, the ...