Arcapita Bank B.S.C.(c) v. Bahr. Islamic Bank (In re Arcapita Bank B.S.C.(c))
| Citation | 529 B.R. 57 |
| Decision Date | 17 April 2015 |
| Docket Number | Case No. 12–11076 SHL Jointly Administered,Adv. No. 13–01434 SHL, Adv. No. 13–01435 SHL |
| Parties | In re Arcapita Bank B.S.C.(c), et al., Reorganized Debtors. Official Committee of Unsecured Creditors of Arcapita Bank B.S.C.(c), et al., Plaintiff, v. Bahrain Islamic Bank, Defendant. Official Committee of Unsecured Creditors of Arcapita Bank B.S.C.(c), et al., Plaintiff, v. Tadhamon Capital B.S.C., Defendant. |
| Court | United States Bankruptcy Courts. Second Circuit. U.S. Bankruptcy Court — Southern District of New York |
Milbank, Tweed, Hadley & McCloy LLP, Counsel for Official Committee of Unsecured Creditors of Arcapita Bank B.S.C.(c), et al. By: Dennis F. Dunne, Esq., Evan R. Fleck, Esq., 1 Chase Manhattan Plaza, New York, New York 10005, By: Andrew M. Leblanc, Esq., 1850 K Street, NW, Suite 1100, Washington, D.C. 20006
K & L Gates LLP, Counsel for Bahrain Islamic Bank and Tadhamon Capital B.S.C. By: John A. Bicks, Esq., Lani A. Adler, Esq., 599 Lexington Avenue, New York, New York 10022
Before the Court are motions to dismiss filed by Bahrain Islamic Bank (“BisB”) and Tadhamon Capital B.S.C. (“Tadhamon,” and together with BisB, the “Defendants”), respectively, in the above-captioned adversary proceedings. The adversary proceedings were brought by the official committee of unsecured creditors for the above-captioned chapter 11 cases (the “Committee”). The cases seek the turnover of funds invested by the Debtor Arcapita Bank—a Bahraini investment bank—with the Defendants—two Bahraini entities—just before the bankruptcy filing. Because the motions in the two cases raise the same issues, the Court will address them together. The Defendants make several arguments for dismissal, including that the Court lacks personal jurisdiction over the Defendants. For the reasons set forth below, the motions are granted for lack of personal jurisdiction.
Arcapita Bank B.S.C.(c) (“Arcapita”), one of the above-captioned reorganized debtors, is licensed as an Islamic wholesale bank by the Central Bank of Bahrain. BisB Compl. ¶ 12; Tadhamon Compl. ¶ 12. Headquartered in Bahrain, Arcapita is operated as an investment bank and is a global manager of Shari‘ah compliant alternative investments. BisB Compl. ¶ 12; Tadhamon Compl. ¶ 12. Prior to its bankruptcy filing, Arcapita and its affiliates employed 268 people and, together with the debtors and their non-debtor subsidiaries, maintained offices in Bahrain, Atlanta, London, Hong Kong and Singapore. BisB Compl. ¶ 12; Tadhamon Compl. ¶ 12.
Defendant BisB is an Islamic commercial bank headquartered in Bahrain. BisB Compl. ¶ 13. BisB maintains correspondent bank accounts in the United States with Deutsche Bank, Standard Chartered Bank and JP Morgan Chase Bank. BisB Compl. ¶ 14. As required by the Patriot Act, BisB has designated an agent for service of process in the United States in connection with these accounts. BisB Compl. ¶ 14. BisB also participates in the Clearing House Interbank Payments System, located in New York. BisB Compl. ¶ 14.
Defendant Tadhamon is a Bahraini corporation and a subsidiary of Tadhamon International Islamic Bank (“TIIB”), a Yemeni bank that offers Islamic banking and investment services to customers in Yemen and abroad. Tadhamon Compl. ¶ 13. Tadhamon serves as the investment arm of TIIB. Tadhamon Compl. ¶ 13. While Tadhamon does not maintain any correspondent accounts in the United States, see Hr'g Tr. 62:19–21 (March 19, 2014), TIIB has correspondent bank accounts in the United States with Mashreq Bank and the Bank of New York Mellon. Tadhamon Compl. ¶ 14. As required by the Patriot Act, TIIB has designated an agent for service of process in the United States in connection with each of these accounts and also participates in the Clearing House Interbank Payments System in New York. Tadhamon Compl. ¶ 14.
According to the Defendants, they do not and have never maintained offices, staff or telephone numbers in the United States. Decl. of Waleed Rashdan ¶ 2 [Tadhamon ECF No. 8]; Decl. of Mohammed Ebraim Mohammed ¶ 2 [BisB ECF No. 8]. The Defendants maintain that they do not do business in the United States, do not solicit business or clients in the United States and do not advertise in the United States. Rashdan Decl. ¶ 2; Mohammed Decl. ¶ 2. Neither Defendant has filed a proof of claim in the debtors' cases.
A few days prior to its bankruptcy filing, Arcapita made several discrete short-term debt investments through the Defendants (the “Placements”). BisB Compl. ¶¶ 27, 30; Tadhamon Compl. ¶¶ 27, 31. The Placements were made under two separate investment agreements between Arcapita and each of the Defendants (the “Placement Agreements”). Id .1 Both of the Placement Agreements were negotiated and signed in Bahrain and provided that the laws of the Kingdom of Bahrain govern, except to the extent that such laws conflicted with the principles of Islamic Shari'ah, in which case Shari'ah law would prevail. Rashdan Decl. ¶ 13 & Ex. A, § 7.1; Mohammed Decl. ¶ 5 & Ex. A § 12.
Under the terms of the Placement Agreements, Arcapita appointed the Defendants to serve as its agent in the purchase of the Placement investments on Arcapita's behalf. BisB Compl. ¶¶ 23–24; Tadhamon Compl. ¶¶ 22, 24. The Defendants were subsequently obligated to repurchase the Placements from Arcapita on a deferred payment basis for an amount equal to the original investment, plus an agreed-upon return (the “Placement Proceeds”). BisB Compl. ¶¶ 2, 24; Tadhamon Compl. ¶ 2, 24. The Defendants were to transfer the Placement Proceeds to Arcapita on the designated maturity date of the Placement. BisB Compl. ¶¶ 2, 24; Tadhamon Compl. ¶ 2, 24.
Consistent with these Placement Agreements, Arcapita entered into a Placement with BisB in the amount of $10 million on March 14, 2012 (the “BisB Placement”). BisB Compl. ¶ 27. To execute the BisB Placement, Arcapita transferred funds from its account at JP Morgan Chase Bank in New York to the correspondent bank account maintained by BisB at JP Morgan Chase Bank in New York. BisB Compl. ¶ 15. The Committee alleges that this transfer took place at the direction of BisB. BisB Compl. ¶¶ 15, 28. On the same day as the transfer, BisB purchased the commodities for Arcapita through a London broker. Mohammed Decl. ¶ 10.
Arcapita entered into two Placements with Tadhamon on March 15, 2012, each for $10 million (the “Tadhamon Placements”). Tadhamon Compl. ¶ 27. To execute the Tadhamon Placements, Arcapita transferred funds from its account at JP Morgan Chase Bank in New York to an account at HSBC Bank in New York. Tadhamon Compl. ¶ 28. The HSBC account was a correspondent bank account maintained by Khaleeji Commercial Bank B.S.C., Tadhamon's bank in Bahrain. Rashdan Decl. ¶ 7. The funds were then immediately transferred from the HSBC account to an account held by Tadhamon at Khaleeji Commercial Bank in Bahrain. Tadhamon Compl. ¶ 28; Rashdan Decl. ¶ 7. The Committee asserts that the HSBC account was designated by Tadhamon as the account to which the funds were to be transferred. Tadhamon Compl. ¶ 28.
Less than a month after these Placements, Arcapita filed for protection under Chapter 11 of the Bankruptcy Code. On April 5, 2012, the U.S. Trustee appointed an official committee of unsecured creditors pursuant to Section 1102(a) of the Bankruptcy Code (the “Committee” or the “Plaintiff”). All of the Placements matured within a month after Arcapita's bankruptcy filing.2 Both Defendants, however, failed to deliver the Placement Proceeds to Arcapita. BisB Compl. ¶¶ 32, 34; Tadhamon Compl. ¶¶ 35, 38. Instead, the Defendants informed Arcapita that, under Bahraini law, they were setting off the Placement Proceeds against amounts owed to them by Arcapita. BisB Compl. ¶ 34; Tadhamon Compl. ¶ 38.3 In December 2012, Tadhamon returned to Arcapita the portion of the Placement Proceeds that exceeded its purported setoff. Tadhamon Compl. ¶ 40. The Committee alleges that the current outstanding balance of Placement Proceeds due and owing to Arcapita is $10,002,292.00 from BisB and $18,480,269.00 from Tadhamon. BisB Compl. ¶ 36; Tadhamon Compl. ¶ 40.
In June 2013, the Court confirmed the proposed plan of reorganization in Arcapita's bankruptcy. See Findings of Fact, Conclusions of Law, and Order Confirming the Second Amended Joint Plan of Reorganization of Arcapita Bank B.S.C.(c) and Related Debtors With Respect to Each Debtor Other Than Falcon Gas Storage Company, Inc. Under Chapter 11 of the Bankruptcy Code [ECF No. 1262]. Later that summer, the Court entered the Order Granting Committee's Motion for Leave, Standing and Authority to Prosecute Avoidance Claims [ECF No. 1411], which granted the Committee the authority to pursue the claims asserted here against the Defendants. The Committee subsequently brought these cases against the Defendants for breach of contract, turnover, the avoidance of a preferential transfer, violation of the automatic stay, and claims disallowance. BisB Compl. ¶ 1; Tadhamon Compl. ¶ 1. The Committee seeks, among other things, to compel the Defendants to comply with their obligations under the Placement Agreements by turning over the Placement Proceeds. Alternatively, the Committee seeks to have the Placements avoided and recover the funds as an improper payment of antecedent debts under Sections 547(b) and 550 of the Bankruptcy Code. BisB Compl. ¶ 6; Tadhamon Compl. ¶ 6.
Fed. R. Civ. P. 12(b)(2), incorporated herein by Bankruptcy Rule 7012(b), provides for dismissal of a case for lack of personal jurisdiction. See Fed. R. Bankr.P. 7012(b). To survive a Rule 12(b)(2) motion, a party must make a prima facie showing that jurisdiction exists. See O'Neill v. Asat Trust Reg. (In re Terrorist Attacks on September 11, 2001), 714 F.3d 659, 673 (2d Cir.2013) (citing Penguin Grp. (USA) Inc. v. Am. Buddha, 609 F.3d 30, 34 (2d Cir.2010) ). This “must include an averment of facts that,...
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