Fakhri v. Marriot Int'l Hotels, Inc.

• Decision Date: 12 August 2016
• Docket Number: Civil No. PJM 14–840
• Citation: 201 F.Supp.3d 696
• Parties: Ziad Sakr FAKHRI, Plaintiff v. MARRIOT INTERNATIONAL HOTELS, INC., Defendant.
• Court: U.S. District Court — District of Maryland

201 F.Supp.3d 696

Ziad Sakr FAKHRI, Plaintiff

v.MARRIOT INTERNATIONAL HOTELS, INC., Defendant.

Civil No. PJM 14–840

United States District Court, D. Maryland.

Signed August 12, 2016

John Jay Range, Thomas Clinton Goodhue, Hunton and Williams LLP, Elizabeth Austin Bonner, Thomas B. Mason, Harris Wiltshire and Grannis LLP, Washington, DC, for Plaintiff.

Jeffrey L. Poston, George D. Ruttinger, Crowell and Moring LLP, Washington, DC, for Defendant.

MEMORANDUM OPINION

PETER J. MESSITTE, UNITED STATES DISTRICT JUDGE

Ziad Sakr Fakhri ("Fakhri") has brought suit against Marriott International Hotels, Inc. ("Marriott"), a Maryland corporation, for tortious interference with contractual relations in violation of Article 122 of the Lebanese Code of Obligations and Contracts. The suit arises out of an extended litigious relationship between parties relating to the operation of a hotel in Beirut, Lebanon. The hotel was owned by a company known as Jnah Development, S.A.L. ("Jnah"), and, until July 2007, was operated by Marriott under a Management Agreement with Jnah. By the time Marriott terminated the Management Agreement in 2007, Jnah had brought two separate arbitration proceedings against it at the International Chamber of Commerce ("ICC") in Paris, both related to Marriott's management of the hotel.

In 2009, Fakhri, a shareholder of Jnah, together with other shareholders, entered into a contract to sell their shares, which purportedly granted Fakhri the right to arbitrate certain claims against Marriott on Jnah's behalf. On that basis, Fakhri initiated a third arbitration proceeding against Marriott at the ICC related to Marriott's termination of the Management Agreement ("Jnah 3" arbitration). Fakhri alleges, however, that before the arbitration took place, Marriott entered into a secret, illicit settlement agreement with Jnah's new owners, Shayah–owned Jnah,¹ inducing them both to disaffirm Fakhri's right to arbitrate the claims and to testify against him in the Jnah 3 arbitration proceedings.

Prior to the initiation of the present suit for tortious interference, the ICC tribunal in Jnah 3 issued a final arbitral award, holding that Fakhri lacked authority to bring the arbitration claims on behalf of Jnah. Fakhri, ostensibly on Jnah's behalf, appealed this decision to the French courts, arguing, among other things, that the award had been obtained through fraud and collusion arising out of the secret agreement between Marriott and Shayah–owned Jnah. As things now stand, Fakhri's complaints of fraud have been entirely rejected by the French courts—although it is possible that he may yet attempt one final appeal.

Before this Court, Marriott has moved to dismiss Fakhri's claims for lack of subject matter jurisdiction pursuant to Federal Rule of Civil Procedure 12(b)(1) on the grounds that: (1) the ICC alone has jurisdiction to resolve claims related to the Jnah–Marriott Management Agreement, and (2) under the Convention on the Recognition and Enforcement of Foreign Arbitral Awards ("New York Convention"), this Court lacks jurisdiction to vacate, modify, or set aside the ICC's award, which Fakhri effectively seeks to do in this suit by collaterally attacking the award.

For its part, Marriott has brought counterclaims against Fakhri for fraud, negligent misrepresentation, and unjust enrichment, alleging that he falsely represented that he had the right accept payment for an earlier arbitral award on Jnah's behalf ("Jnah 2" award), whereas that payment should rightfully have been made to Jnah's new owners. Fakhri has moved to dismiss the counterclaims pursuant to Federal Rule of Civil Procedure 12(b)(6) on the grounds that Marriott's counterclaims are time-barred by the statute of limitations and that, in any event, Marriott has failed to state a claim.

For reasons that follow, the Court will GRANT Marriott's Motion to Dismiss for Lack of Subject Matter Jurisdiction, finding that this suit constitutes a collateral attack on the Jnah 3 award. Further, the Court will DISMISS Marriott's counterclaims, since Marriott concedes that jurisdiction over its counterclaims depends on the Court's jurisdiction over Fakhri's claims.

I.Factual and Procedural Background

Fakhri initiated this suit during the pendency of his appeal of ICC tribunal's ruling that he did not have the right to bring claims on behalf of his former company, Jnah, in what was the third arbitration between Jnah and Marriott over the hotel management contract ("Jnah 3").

A.

From 1994 to May 2009, Fakhri was an officer and shareholder of Jnah Development S.A.L., a Lebanese company that owned a hotel in Beirut. Am. Compl. ¶ 5, ECF No. 76. Fakhri and other members of his family, including his father, Sakr Fakhri, owned slightly over 86% of the share capital in Jnah. See Def.'s Mot. Dismiss, Ex. 1, Jnah 3 Award ¶ 45, ECF No. 104–3. In 1994, Jnah and Marriott entered into a series of agreements (the "1994 Marriott–Jnah Agreements") under which Marriott was to manage and operate the hotel owned by Jnah (the Beirut Marriott). Am. Compl. ¶ 15. The Management Agreement, one of the key 1994 Marriott–Jnah Agreements in this case, contained an arbitration clause pursuant to which any dispute arising out of the Management Agreement was to be resolved through arbitration before the ICC.² The First Jnah arbitration, while not particularly relevant to the precise issue before the Court, is worth recounting as background to the relationship between Jnah and Marriott. That arbitration, Jnah 1, arose over Marriott's management of the hotel. Although Marriott initiated Jnah 1, the ICC tribunal, on October 30, 2003, awarded Jnah $850,000 and gave Fakhri access to the hotel's books of control and account. Id. ¶¶ 26–30.

On June 20, 2005, Jnah, through Fakhri, initiated a second arbitration ("Jnah 2"), claiming, on the basis of the hotel books, that Marriott had made improper deductions, had failed to maintain the hotel as a 5–star property, and had employed a clerk who stole some $500,000 from the hotel. Id. ¶¶ 37–38. Marriott counterclaimed, alleging that Jnah had failed to provide the hotel with sufficient working capital and had misappropriated Marriott trademarks. Id. ¶ 39.

Then, on July 18, 2007, while Jnah 2 was still pending, and in the wake of another dispute between parties, Marriott ceased management of the hotel. See id. ¶¶ 40–43. Fakhri alleges that, in the depressed hotel market following the 2006 Israeli–Hezbollah war, Marriott had demanded that Jnah provide $92,000 in capital within ten days. Id. When the parties could not come to an agreement as to the capital, Marriott ended its management of the hotel and terminated the Management Agreement. Id.

Fakhri's Amended Complaint before this Court states that Marriott's sudden withdrawal resulted in Jnah's inability to fulfill a condition of a loan agreement that Jnah had with Arab Bank—which held a security interest in the hotel—that Jnah maintain a hotel operator. This led Arab Bank to foreclose on the hotel, forcing a fire sale of the hotel to the detriment of Jnah's shareholders. See id. ¶¶ 47–49. Sabih El Masri—who, as it happens, is Fakhri's uncle and also the Vice Chairman of the Arab Bank, and who had made personal loans to Fakhri's father, Sakr Fakhri, the owner of the largest amount of Jnah stock—proposed to purchase Jnah from the shareholders, Plaintiff Ziad Sakr Fakhri included. Id.

To acquire Jnah's shares, Masri formed an entity under Lebanese law called Shayah Holding S.A.L. ("Shayah"). Id. ¶ 51. Pursuant to a signed February 5, 2009 settlement agreement with Masri entitled "Settlement Proposal," Ziad Sakr Fakhri—again, Plaintiff in the present suit—sold his shares to Masri in return for a cash payment of U.S. $7 million and an irrevocable power of attorney and an assignment of rights, ostensibly giving Fakhri the right to pursue certain claims Jnah held against Marriott.³ See id. ¶¶ 52–57; Am. Compl., Ex. 5, February 5, 2009 Settlement Proposal (English original), ECF No. 76–7. The Settlement Agreement provided that Sakr Fakhri would transfer of his shares "in consideration for the settlement of Sakr's personal debt." See Settlement Proposal at 1. The Settlement Agreement further provided that "[i]n respect of the ICC arbitration case against Marriott," if the award was favorable, Fakhri would be "entitled to the full amount of any arbitration award after deduction of all related fees and expenses incurred since the initiation of the arbitration case," but if, on the other hand, the award was unfavorable, Fakhri would be "held liable for the full amount owed by the Company[.]" Id. at 2. The Agreement also stated in the same paragraph that Jnah would "issue an irrevocable power of attorney to Ziad [Fakhri] authorizing him to (i) follow up on the arbitration proceedings...as well as to (ii) accept payment on behalf of the Company" if the arbitral award was favorable. Id.

On May 4, 2009, the Transfer of Shares Contract was executed, with four draft documents appended to it: (1) an Assignment of Rights ("AOR"), (2) an Irrevocable Power of Attorney ("POA"), (3) an Undertaking to draw up an Irrevocable Power of Attorney, and (4) a Declaration and Undertaking by Ziad Fakhri. See Amend Compl. ¶ 54; Ex. 6, Transfer of Shares Document, ECF No. 76–8; see also Def.'s Mot. Dismiss, Ex. 1, Jnah 3 Award ¶ 51, ECF No. 104–3. Shayah–owned Jnah's Board of Directors approved the AOR and POA on July 10, 2009, and Fakhri received executed copies on October 27, 2009. Id. ¶¶ 54, 58–59; Am. Compl., Ex. 7, Power of Attorney Document (Arabic original and English translation); Ex. 8, Assignment of Rights Document (Arabic original and English translation), ECF Nos. 76–9, 76–10.

The POA stated in relevant part that Jnah (the "Company"):⁴

ha[s] mandated to Mr. Ziad Sakr Fakhri to plead on behalf of and defend the "Company" in all that is related to the existing dispute with the company Marriott International Inc. and the "Company" arising out of the

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