Farouki v. Petra Int'l Banking Corp.

• Citation: 811 F.Supp.2d 388
• Decision Date: 20 September 2011
• Docket Number: Civil Action No. 08–2137 (RCL).
• Parties: A. Huda FAROUKI, Plaintiff, v. PETRA INTERNATIONAL BANKING CORPORATION, et al., Defendants.
• Court: U.S. District Court — District of Columbia

811 F.Supp.2d 388

A. Huda FAROUKI, Plaintiff,

v.PETRA INTERNATIONAL BANKING CORPORATION, et al., Defendants.

Civil Action No. 08–2137 (RCL).

United States District Court, District of Columbia.

Sept. 20, 2011.

Robert J. Mathias, David Clarke, Jr., Grayson D. Stratton, DLA Piper LLP, Washington, DC, for Plaintiff.

John Robert Fornaciari, Jeremy M. Keim, Robert Matthew Disch, Baker & Hostetler LLP, Washington, DC, for Defendants.

MEMORANDUM OPINION

ROYCE C. LAMBERTH, Chief Judge.

Plaintiff, A. Huda Farouki, brings this action against defendants Petra International Banking Corporation, Petra Bank, and Randolph B. Old. Defendant Petra International Banking Corporation has counterclaimed against plaintiff. Before the Court are defendants' Motion [66] to Dismiss Amended Complaint and plaintiff's Motion [69] to Dismiss Amended Counterclaim. Upon consideration of defendants' Motion, the opposition [68] thereto, the reply [70], applicable law, and the entire record in this case, the Court will grant in part and deny in part defendants' motion for the reasons set forth below. Upon consideration of plaintiff's Motion, the opposition [71] thereto, the reply [72], applicable law, and the entire record in this case, the Court will grant plaintiff's motion for the reasons set forth below. The Court will also enter, sua sponte, summary judgment for plaintiff on Count I of the Amended Complaint.

I. BACKGROUNDA. FACTUAL BACKGROUND

Plaintiff, A. Huda Farouki (“Mr. Farouki”), is a United States citizen of Jordanian descent who has resided in Virginia since 1971. Am. Compl. ¶ 7. In 1973, Mr. Farouki formed a company called American Export Group International Services, Inc. (“AEGIS”) to engage in the business of exporting construction materials, housing materials and systems, and medical equipment and supplies to government and private sector clients throughout the world. Id. ¶ 18. AEGIS was a Delaware company controlled by Mr. Farouki, its president, from 1973 to 1993. Id. ¶ 11.

On November 12, 1986, AEGIS entered a secured credit facility agreement with defendant Petra International Banking Corporation (“PIBC”) for $3.7 million in financing in connection with ongoing construction projects in Saudi Arabia. Id. ¶ 19. PIBC was chartered in the District of Columbia in 1983 pursuant to the Edge Act, 12 U.S.C. § 611, to engage in international and foreign banking operations. Id. ¶ 8. Defendant Petra Bank, a Jordanian bank located in Amman, Jordan that began operations in 1977, is the parent company of PIBC and owned approximately 70% of PIBC's stock. Id. ¶¶ 8–9. In connection with this secured credit facility agreement, on November 12, 1986 AEGIS executed a promissory note (“AEGIS Loan”) and Mr. Farouki signed a personal guaranty (“AEGIS Guaranty” or “Guaranty”) for the repayment of the AEGIS Loan. Id. ¶ 19. The Guaranty was also signed by a second guarantor, Ali T. Farouki. Id. ¶ 19. On November 23, 1986, Mr. Farouki entered into a deed of trust that provided his personal residence as collateral for the AEGIS Loan and Guaranty. Id. ¶ 23. Additional collateral supporting the AEGIS Loan included claims that AEGIS had against various governmental and business clients for unpaid work performed under contract. Id. ¶ 24.

The AEGIS Loan was issued in the District of Columbia and payments were made on it in the District of Columbia. Id. ¶ 21. To satisfy U.S. regulatory requirements, Petra Bank collateralized every dollar that PIBC loaned to AEGIS with a cash deposit in a PIBC account in the District of Columbia—for every $1 million guaranteed by Mr. Farouki, Petra Bank provided security to PIBC in the form of a $1 million deposit with PIBC. Id. ¶ 20. The AEGIS Guaranty stated that its “performance and construction” was to be “governed by the internal laws of the District of Columbia.” Id. ¶ 21; Defs.' Mot. to Dismiss Ex. 5, at 5. The AEGIS Loan agreement stated that the representations made by any party would “be deemed to include the successors and assigns of such party.” Am. Compl. ¶ 21.

On April 30, 1987, AEGIS filed a voluntary petition for bankruptcy protection under Chapter 11 of the U.S. Bankruptcy Code in the United States Bankruptcy Court for the District of Columbia. Id. ¶ 25. Under the terms of the Guaranty, the AEGIS bankruptcy filing constituted an event of default giving PIBC the right to sue Mr. Farouki for the funds outstanding under the AEGIS Loan. Id. ¶ 25. According to the terms of the Guaranty:

At the option of the Lender and with or without demand or notice, all or any part of the indebtedness and all or any part of Guarantors' obligations hereunder shall become due and payable immediately, irrespective of any agreed maturity, upon the happening of one or more of the following events: ... (5) the insolvency or appointment of a receiver of the business or property of Borrower ... or filing of any petition in bankruptcy for relief under the Bankruptcy Code....

Defs.' Mot. to Dismiss Ex. 5, at 3. On July 28, 1989, AEGIS filed a plan of reorganization with the bankruptcy court that was dependent upon continued financing from PIBC, AEGIS's principal lender. Am. Compl. ¶ 26. Although Mr. Farouki did not re-execute the AEGIS Guaranty to cover additional post-petition financing beyond the previously agreed upon credit limits, PIBC provided post-petition financing to AEGIS on a non-guaranteed basis on numerous occasions. Id. ¶ 27.

In August 1989, the Central Bank of Jordan (“Central Bank”), pursuant to martial law, assumed control of Petra Bank in Jordan and PIBC in Washington, D.C. Id. ¶ 28. The Central Bank replaced many of Petra Bank and PIBC's officers and directors and established new management committees. Id. ¶ 28. PIBC implemented a practice of having the General Manager of Petra Bank serve as a permanent member of its Board of Directors and at least one official from the Central Bank as another, usually as PIBC's Chairman. Id. ¶ 28. Bassam Anabtawi, a Jordanian, became the interim General Manager of the newly reconstituted PIBC. Id. ¶ 28.

Banking operations continued at both Petra Bank and PIBC after the Central Bank takeover, with PIBC continuing to loan new funds to AEGIS under the existing credit facility. Id. ¶ 29. During the life of the AEGIS Loan, PIBC issued additional letters of credit to AEGIS, which were guaranteed by Petra Bank through a signed guaranty delivered to PIBC in the District of Columbia. Id. ¶ 30. This included an additional $550,000 loaned by PIBC to AEGIS under the existing credit facility with funds PIBC received from Petra Bank. Id. ¶ 36. Petra Bank also purchased “risk participations” in these letters of credit by exchanging telexes with PIBC in the District of Columbia. Id. ¶ 31.

Between September 1989 and January 1990, Mr. Anabtawi made a series of trips from Jordan to Washington, D.C. on behalf of Petra Bank. Id. ¶ 32. During this period, Mr. Farouki met with Mr. Anabtawi several times at PIBC's offices in the District of Columbia to discuss AEGIS's ongoing business and obligations under the AEGIS Loan, as well as Petra Bank's expectation that it would be repaid for the loans it had made and was continuing to make to AEGIS by funding the PIBC credit facility. Id. ¶ 32.

In January 1990, defendant Randolph B. Old (“Mr. Old”) was appointed to succeed Mr. Anabtawi as General Manager of PIBC and began to manage PIBC from the bank's offices in the District of Columbia. Id. ¶ 10. Between 1990 and 1993, Mr. Farouki met with Mr. Old, Dr. Mohammed Saeed El–Nabulsi (the Governor of the Central Bank and official liquidator of Petra Bank), and Dr. Michel Marto (the Deputy Governor of the Central Bank and a member of the Petra Bank liquidation committee) to discuss repayment of the loans made by PIBC and Petra Bank under the AEGIS credit facility. Id. ¶¶ 37–40. Dr. El–Nabulsi and Dr. Marto both represented Petra Bank's interest in the repayment of the AEGIS Loan and sought assurances that AEGIS would repay the AEGIS Loan to PIBC so that the money could in turn be repaid to Petra Bank. Id. ¶¶ 38–40.

During this time period, Mr. Farouki also participated in a series of negotiations with PIBC personnel, including Mr. Old, at PIBC's offices in the District of Columbia concerning the release of the AEGIS Guaranty. Id. ¶ 41. Mr. Farouki and PIBC ultimately came to an agreement that Mr. Farouki would be released from the AEGIS Guaranty after he satisfied certain conditions, including: (1) Mr. Farouki's continued employment with AEGIS; (2) Mr. Farouki's continued efforts to rehabilitate AEGIS, including filing a plan of reorganization with the bankruptcy court that met PIBC's approval; and (3) Mr. Farouki's assistance in the collection of AEGIS receivables for the benefit of PIBC. Id. ¶ 44. In exchange for Mr. Farouki's efforts to collect AEGIS receivables, PIBC agreed to pay Mr. Farouki between 40–50% of all collections. Id. ¶ 44.

Mr. Farouki alleges that between 1990 and 1993 he satisfied PIBC's terms for the release of the AEGIS Guaranty, and that the original $3.7 million extended under the AEGIS Loan and guaranteed by Mr. Farouki was repaid in full. Id. ¶¶ 44–45. Mr. Farouki also alleges that PIBC and Mr. Old, as General Manager of PIBC, released Mr. Farouki from the AEGIS Guaranty based on Mr. Farouki's ongoing assistance in the collection of AEGIS's receivables and Mr. Farouki's agreeing to release all of his and AEGIS's claims against PIBC relating to its failure to provide additional funding during the AEGIS reorganization. Id. ¶ 48. According to Mr. Farouki, the release of the Guaranty was contained in a written document executed by Mr. Old, but Mr. Farouki is unable to locate this document. Id. ¶ 48.

On May 10, 1993, PIBC assigned its alleged rights under the AEGIS Guaranty to Petra Bank in consideration for the financial support provided to PIBC in 1989 and thereafter. Id. ¶ 51; Pl.'s Opp'n Ex. 4. Later that year, on July 23, 1993, AEGIS's bankruptcy was converted from a ...