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State of Qatar v. First Abu Dhabi Bank PJSC

United States District Court, S.D. New York

January 14, 2020

State of Qatar, Plaintiff,
v.
First Abu Dhabi Bank PJSC, et al, Defendants.

          OPINION & ORDER

          ALISON J. NATHAN, UNITED STATES DISTRICT JUDGE.

         The State of Qatar filed this action in New York Supreme Court against First Abu Dhabi Bank PJSC, Samba Financial Group SJSC, and twenty unnamed defendants (collectively, the Banks). Qatar alleged several fraud-related claims sounding in New York law. The Banks removed this action to federal court. Qatar now moves to remand. The Banks assert that federal jurisdiction is proper for two reasons. First, they allege that they are "foreign states" within the meaning of the Foreign Sovereign Immunities Act and therefore entitled to removal. Second, they allege that federal-question jurisdiction exists because Qatar's claims raise important federal issues. For the reasons that follow, the Court rejects both arguments. This case is therefore REMANDED to New York Supreme Court, New York County.

         I. BACKGROUND

         In resolving this motion, the Court treats all facts alleged in Qatar's Complaint as true. See Federal Ins. Co. v. Tyco Int'l Ltd., 422 F.Supp.2d 357, 391 (S.D.N.Y. 2006) ("When considering a motion to remand, the district court accepts as true all relevant allegations contained in the complaint and construes all factual ambiguities in favor of the plaintiff."). The Court also considers documents attached to the parties' memoranda of law regarding this motion. See Arseneault v. Congoleum, 2002 WL 472256, at *6 (S.D.N.Y. 2002) ("The Second Circuit. .. has said that, on jurisdictional issues, federal courts may look outside [the] pleadings to other evidence in the record, and therefore the court will consider material outside of the pleadings submitted on a motion to remand."). The following facts are deemed true for purposes of this motion.

         The Kingdom of Saudi Arabia, the United Arab Emirates (UAE), and the Kingdom of Bahrain have cut diplomatic ties with Qatar. Compl ¶ 22. They are now engaged in a multi-faceted campaign to "destabilize" Qatar and its economy. Compl. ¶ 36. The three nations have blockaded Qatar for more than three years by "clos[ing] all land, sea, and air transportations links with Qatar." Compl. ¶ 22. The blockade continues to this day. Compl. ¶ 22. They have also banned travel between the two countries, ejected Qatari citizens from their nations, and ordered their citizens in Qatar to return home. Compl. ¶ 22. And they have "fir[ed] up [their] PR machine[s]" to attack Qatar in the news media. Compl. ¶ 52.

         As part of this campaign, financial institutions "in league with the blockading countries" have engaged in fraudulent financial practices to harm Qatar. Compl. ¶ 3. Qatar alleges that Saudi Arabia and the UAE worked with Samba Financial Group and First Abu Dhabi Bank to devalue the Qatari currency, the Riyal. By decree of the Qatari government, the Riyal is pegged to the U.S. dollar at a fixed rate. Compl. ¶ 5, 12. Qatar stands ready to exchange 3.64 Riyal for 1 U.S. dollar for anyone at any time. This peg "provides consistency to foreign investors and is the bedrock of Qatar's monetary policy." Compl. ¶ 12. The Qatari government "has stood behind the Peg" for more than a decade; it has always "been willing and able to exchange Riyals at the pegged rate." Compl. ¶ 12, 40.

         The Banks engaged in various fraudulent transactions that aimed to reduce the value of the Rival. They hoped that investors would rush to exchange their Rival into dollars, thereby effectively creating a bank run and forcing Qatar into such dire financial straits that it would no longer be able to honor the exchange rate. In other words, this was a scheme to "break the peg." Compl. ¶ 22. "If the conspirators managed to break the Peg and devalue Qatar's currency, Qatar would suffer severe economic consequences. Qatari assets would be depreciated, and foreign investors would question their investments in Qatar." Compl. ¶ 42.

         The nations hoped their efforts would cripple Qatar. But that was not the only reason for this campaign. They also hoped that Qatar would be financially unable to hold "the world's most prestigious soccer tournament - the FIFA World Cup" in 2022. Compl. ¶ 54. By blockading Qatar and devaluing its currency, they believed Qatar would be unable to build the infrastructure required for the World Cup. Compl. ¶ 54. That in turn would create an "opening for the blockading countries to make a bid to host the games as a regional event, instead of solely in Qatar . .. bring[ing] [those three nations] attention, tourism, and money." Compl. ¶ 55.

         The Banks submitted "fraudulent quotes through their accounts with Bloomberg and Reuters to foreign exchange platforms and data centers located in New York County." Compl. ¶ 19. These phony quotes tanked the actual market value of the Riyal. Despite the Banks' efforts, however, Qatar continued to honor the peg price. Compl. ¶ 44. But doing so came at a cost: Qatar "was forced to liquidate billions of dollars in investments held in accounts ... and use those proceeds to support the Peg and stabilize Qatar's currency." Compl. ¶ 19.

         On April 8, 2019, the State of Qatar filed this action against First Abu Dhabi Bank, Samba Financial Group, and twenty unnamed defendants in New York Supreme Court, New York County. Dkt. No. 2, Ex. A-l (Complaint). Qatar alleged purely state-law claims: fraud, conspiracy to commit fraud, and aiding and abetting fraud. Compl. ¶¶ 131-154. The Banks removed this action to federal court. Dkt. Nos. 1 (Samba's notice of removal), 5 (First Abu Dhabi Bank's consent to removal). Qatar now moves to remand. Dkt. No. 25.

         A defendant is entitled to remove "any civil action brought in a State court of which the district courts of the United States have original jurisdiction." 28 U.S.C. § 1441. When federal jurisdiction is asserted by a defendant in a removal petition, the defendant has the burden of establishing that removal is proper. United Food & Commercial Workers Union, Local 919, AFL-CIO v. CenterMark Properties Meriden Square, Inc., 30 F.3d 298, 301 (2d Cir. 1994). Any doubts that a case is properly removed to federal court are "resolved against removability out of respect for the limited jurisdiction of the federal courts and the rights of states." In re Methyl Tertiary Butyl Ether ("MTBE") Prods. Liability Litig., 488 F.3d 112, 124 (2d Cir. 2007).

         II. THE FOREIGN SOVEREIGN IMMUNITIES ACT DOES NOT ENTITLE THE BANKS TO REMOVAL

         The Banks first argue that they are entitled to removal under the Foreign Sovereign Immunities Act (FSIA). Because they are not "foreign state[s]" within the meaning of the Act, however, the Court rejects this argument.

         A. The Second Circuit's Five-Prong Test for FSIA Removal

         FSIA grants "foreign state[s]" immunity from "the jurisdiction of the courts of the United States and of the states," unless a limited set of exceptions applies. 28 U.S.C. § 1604; Verlinden B. V. v. Cent. Bank of Nigeria, 461 U.S. 480, 488-89 (1983). It also guarantees foreign states the right to remove any civil action from state court to federal court. "Any civil action brought in a State court against a foreign state as defined in section 1603(a) of this title may be removed by the foreign state to the district court of the United States for the district and division embracing the place where such action is pending." 28 U.S.C. § 1441(d); Verlinden, 461 U.S. at 489.

         The term "foreign state" in FSIA "on its face indicates a body politic that governs a particular territory." Samantar v. Youssuf, 560 U.S. 305, 314 (2010). But FSIA defines "foreign state" more expansively than just other nation states. "A 'foreign state' .. . includes a political subdivision of a foreign state or an agency or instrumentality of a foreign state as defined in subsection (b)." 28 U.S.C. § 1603(a). Subsection (b) states:

         An "agency or instrumentality of a foreign state" means any entity-

(1) which is a separate legal person, corporate or otherwise, and
(2) which is an organ of a foreign state or political subdivision thereof, or a majority of whose shares or other ownership interest is owned by a foreign state or political subdivision thereof, and
(3) which is neither a citizen of a State of the United States as defined in section 13 32 (c) and (e) of this title, nor created under the laws of any third country.

Id. § 1603(b).

         The Banks argue that they are "agenc[ies] or instrumentalities]" of Saudi Arabia and the UAE. If the Banks satisfy this definition, FSIA entitles them to remove this case to federal court. There is no dispute that the Banks are "separate legal person[s], corporate or otherwise." As discussed below, both banks are incorporated under the laws of their respective jurisdictions. The Banks therefore satisfy § 1603(b)(1). There is also no dispute that the banks are not American citizens and are created under the laws of Saudi Arabia and the UAE, not any other country. The Banks therefore also satisfy § 1603(b)(3). The Banks' ability to remove thus comes down to § 1603(b)(2). And the Banks do not allege that a "majority of [their] shares or other ownership interest is owned by a foreign state or political subdivision thereof." They must instead prove that they are "organ[s]" of Saudi Arabia and the UAE.

         The Second Circuit has "no definitive test to determine whether an entity is a government 'organ.'" Peninsula Asset Mgmt. (Cayman) Ltd. v. Hankook Tire Co., 476 F.3d 140, 143 (2d Cir. 2007). Instead, a multi-factor balancing test, first laid out in Filler v. Hanvit Bank, governs this analysis. 378 F.3d 213 (2d Cir. 2004). In Filler, the Second Circuit laid out five factors to consider in determining whether an entity is a foreign state's "organ":

(1) whether the foreign state created the entity for a national purpose; (2) whether the foreign state actively supervises the entity; (3) whether the foreign state requires the hiring of public employees and pays their salaries; (4) whether the entity holds exclusive rights to some right in the ...

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