Alghanim v. Alghanim

• Decision Date: 29 November 2011
• Docket Number: No. 09 Civ. 8098 (NRB).,09 Civ. 8098 (NRB).
• Parties: Bassam Y. ALGHANIM, Plaintiff, v. Kutayba Y. ALGHANIM, et al., Defendants.
• Court: U.S. District Court — Southern District of New York

828 F.Supp.2d 636

Bassam Y. ALGHANIM, Plaintiff,

v.Kutayba Y. ALGHANIM, et al., Defendants.

No. 09 Civ. 8098 (NRB).

United States District Court, S.D. New York.

Nov. 29, 2011.

John L. Gardiner, Esq., Jeffrey Glekel, Esq., Timothy G. Nelson, Esq., Skadden, Arps, Slate, Meagher & Flom L.L.P., New York, NY, Michael Zweiback, Esq., Nixon Peabody L.L.P., Los Angeles, CA, for Plaintiff Bassam Y. Alghanim.

Richard F. Schwed, Esq., Henry S. Weisberg, Esq., Christopher R. Fenton, Esq., Shearman & Sterling L.L.P., New York, NY, for Defendants Kutayba Y. Alghanim and Omar K. Alghanim.

Tai H. Park, Esq., Barry Junker, Esq., Park & Jensen L.L.P., New York, NY, for Defendant Waleed Moubarak.

MEMORANDUM AND ORDER

NAOMI REICE BUCHWALD, District Judge.

I. Introduction

Defendants Kutayba Y. Alghanim, Omar K. Alghanim, and Waleed Moubarak move to dismiss plaintiff Bassam Y. Alghanim's First Amended Complaint or, in the alternative, to stay this action pending arbitration pursuant to 9 U.S.C. §§ 3, 4, and 206. For the reasons discussed below, defendants' motion to stay is granted.

II. Background

A. The Division of the Alghanim Business Empire

According to the First Amended Complaint (the “complaint”), in the 1970s, Kutayba Y. Alghanim (“Kutayba”) and Bassam Y. Alghanim (“Bassam”) jointly assumed control of the business empire that their father had founded. Compl. ¶ 33. In 2007, following the increased involvement in this business empire of Omar K. Alghanim (“Omar”), Kutayba's eldest son, Kutayba and Bassam began to argue over the future of the family enterprise. Id. at ¶ 36. By 2008, their dispute had reached an impasse, and the brothers agreed to divide their commonly-owned property, which had grown over the years to encompass business interests in Kuwait and elsewhere that were worth billions of dollars. Id. at ¶¶ 33, 36. In March 2008, following disagreement over how to divide this commonly-owned property, Kutayba and Bassam, the latter allegedly under pressure from Kutayba and “high-ranking Kuwaiti officials,” ¹ entered into three agreements. Id. at ¶¶ 37–38.

First, on March 12, 2008, the brothers entered into a “General Points of Settlement,” which addresses, among other things, the division of their ownership stake in a commercial bank. See First Al–Essa Decl. Ex. A. This agreement, which does not contain a dispute-resolution clause, does not figure prominently in the parties' submissions.

Second, on March 12, 2008, the brothers entered into a broader “Agreement” that addresses the overall division of their commonly-owned property (the “March 12 Agreement”). This agreement contains a dispute-resolution clause:

Should any dispute arise in the future between the two Parties, the final advice, opinion and decision relating thereto will be issued by his highness Sheikh Nasser AL [sic] Mohamed Al Ahmed Al Jaber Al Saba.

First Al–Essa Decl. Ex. B ¶ 7.

Third, on March 27, 2008, the brothers entered into a “Memorandum of Understanding” that expressly integrates and explains the General Points of Settlement and March 12 Agreement (the “MOU”) (and together with the General Points of Settlement and March 12 Agreement, the “March Agreements”). The MOU sets out relatively more detailed terms that address the actual division of the brothers' commonly-owned property.² The MOU also contains a dispute-resolution clause:

[Kutayba] and [Bassam] hereby confirm their agreement that any dispute arising in the future between us related to the subject matter of this agreement shall be finally decided by H.H. Sheikh Nasser Mohammed al–Ahmed al–Jaber Al–Sabah.First Al–Essa Decl. Ex. C ¶ 15.

In March 2008, Sheikh Nasser Mohammed al–Ahmed al–Jaber Al–Sabah served as Prime Minister of Kuwait, as he does to the present day. In addition to the role that the dispute-resolution clauses anticipated for him, the Kuwaiti Prime Minister also served as witness for each of the March Agreements, none of which contains a choice-of-law clause.

Since entering the March Agreements, Kutayba and Bassam have allegedly remained locked in a bitter dispute over the division of the commonly-owned property. Compl. ¶ 42.

B. The Kuwaiti Cases

In connection with this ongoing dispute, Bassam has brought nine cases in Kuwaiti courts. In March 2009, Bassam filed six suits seeking to place commonly-owned property into judicial receivership. See First Al–Essa Decl. ¶¶ 5–7. All six suits were dismissed for reasons that do not appear relevant here.

Later in March 2009, Bassam filed two suits seeking (i) an accounting of the recent profits of Yusuf Ahmed Alghanim and Sons W.L.L. (“YAAS”) and Alghanim Industries Co. W.L.L. (“Alghanim Industries”), two entities within the brothers' business empire, and (ii) payment of his share of those recent profits. See First Al–Essa Decl. Exs. J, L. On November 2, 2009, in the action involving YAAS (the “YAAS Accounting Action”), the Kuwaiti Court of First Instance dismissed the suit against Kutayba and YAAS because it concluded that the MOU contained an arbitration clause and that it thus lacked jurisdiction. See First Al–Essa Decl. Ex. K. Its findings were affirmed on Bassam's appeal to the Kuwaiti Appellate Court, an intermediate court of appeal. See Third Al–Essa Decl. Ex. 1. As detailed below, Bassam's ensuing appeal to the Kuwaiti Court of Cassation, the highest court of appeal, bears on the resolution of the pending motion.³

Finally in October 2009, Bassam filed one suit seeking a declaration that he owns 50% of YAAS. First Al–Essa Decl. Ex. N. The Kuwaiti Court of First Instance similarly dismissed the suit against Kutayba and YAAS in favor of arbitration., a decision that the Kuwaiti Appellate Court affirmed and from which Bassam has apparently not further appealed. See Fourth Al–Essa Decl. ¶ 2.

C. The Email–Hacking Case

On September 22, 2009, Bassam brought suit in this Court. In the complaint, he alleges that Kutayba, Omar, Waleed Moubarak (“Waleed”), YAAS, and Alghanim Industries engaged in an email-hacking scheme beginning in July 2008 in which they successfully endeavored together with others to gain access to his personal email accounts for the purpose of gaining a strategic advantage in the ongoing dispute over the division of the brothers' commonly-owned property. See Compl. ¶ 14. Bassam named YAAS and Alghanim Industries themselves as defendants because they allegedly made payments to facilitate the email-hacking scheme at Kutayba and Omar's direction. Id. at ¶ 91. As the complaint notes, Kutayba is the Chairman, Omar is the Chief Executive Officer, and Waleed is the Chief Legal Officer of both YAAS and Alghanim Industries. Id. at ¶¶ 23–28. Bassam alleges ten causes of action against these defendants premised on violation of the Stored Communications Act, Computer Fraud and Abuse Act, Wiretap Act, and Racketeer Influenced and Corrupt Organizations Act (“RICO”), as well as common law and state statutory law.

D. The Pending Motion

On July 1, 2010, the parties agreed to the denial without prejudice of defendants' initial motion to dismiss the complaint, or, in the alternative, stay this action pending arbitration in order to permit the parties and this Court to learn the decision of the Kuwaiti Court of Cassation in the YAAS Accounting Action before proceeding further.⁴ See Oral Argument Tr. 7:3–8:14, July 1, 2010.

On February 15, 2011, the Kuwaiti Court of Cassation affirmed the decision of the lower courts in the YAAS Accounting Action and dismissed the suit in favor of arbitration. See Fifth Al–Essa Decl. ¶ 4. It held that the dispute-resolution clauses in the March Agreements are arbitration clauses that reflect “the parties wish to resolve by arbitration any future dispute concerning the subject matter of the MOU.” Fifth Al–Essa Decl. Ex. 2 9.

On March 9, 2011, defendants accordingly renewed their motion, which is now ripe for decision.⁵

III. Discussion

Chapter 2 of the Federal Arbitration Act (“FAA”), 9 U.S.C. §§ 201 et seq., implements the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, June 10, 1958, 21 U.S.T. 2517 (entered into force Dec. 29, 1970) (the “Convention”). Distilling the requirements of the Convention as ratified and as enabled in Chapter 2, the Second Circuit has held that a district court will have jurisdiction to enforce an arbitration agreement pursuant to the Convention where that arbitration agreement (1) is a “written agreement”; (2) “provide[s] for arbitration in the territory of a signatory of the [C]onvention”; (3) is “commercial” in its subject matter; and (4) is not “entirely domestic in scope.” Smith/Enron Cogeneration Ltd. P'ship, Inc. v. Smith Cogeneration Intern., Inc., 198 F.3d 88, 92 (2d Cir.1999).

The parties do not expressly address whether the dispute-resolution clauses in the March Agreements satisfy these four requirements, but both plaintiff and defendants clearly assume the applicability of the. Convention. See Defs. Br. 9–10; Pl. Opp'n 2. We are similarly satisfied that the Convention applies and that there exists jurisdiction under Chapter 2 of the FAA.

Defendants style their motion as one to dismiss the complaint or, in the alternative, to stay this action pending arbitration pursuant to 9 U.S.C. §§ 3, 4, and 206. Though § 3 is part of Chapter 1 of the FAA it is applicable to cases under Chapter 2 and the Convention. See Energy Transp., Ltd. v. M.V. San Sebastian, 348 F.Supp.2d 186, 201 (S.D.N.Y.2004) (noting Chapter 2 of the FAA does not make “specific reference to the court's power to stay the action while arbitration proceeds” before stating “[c]onsequently § 3 may be fully incorporated into ... Chapter 2”); 9 U.S.C. § 208 (“Chapter 1 applies to actions and proceedings brought under [Chapter 2] to the extent that [Chapter 1] is not in conflict with [Chapter 2] or the Convention”).

Section 3 provides in relevant part that a court, “upon being satisfied that the issue involved in [a] suit ... is referable to arbitration under [a written...