United States District Court, S.D. New York
OPINION & ORDER
J. NATHAN, UNITED STATES DISTRICT JUDGE.
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
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.
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.
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.
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.
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.
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.
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.
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.
THE FOREIGN SOVEREIGN IMMUNITIES ACT DOES NOT ENTITLE THE
BANKS TO REMOVAL
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.
The Second Circuit's Five-Prong Test for 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.
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:
"agency or instrumentality of a foreign state"
means any entity-
(1) which is a separate legal person, corporate or otherwise,
(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).
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.
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