First Chicago Intern. v. United Exchange Co., Ltd.

Decision Date19 January 1988
Docket NumberNo. 87-7059,87-7059
Citation836 F.2d 1375,267 U.S. App. D.C. 27
Parties, 10 Fed.R.Serv.3d 584 FIRST CHICAGO INTERNATIONAL, Appellant, v. UNITED EXCHANGE CO., LTD., et al.
CourtU.S. Court of Appeals — District of Columbia Circuit

Appeal from the United States District Court for the District of Columbia (Civil Action No. 86-00437).

James vanR. Springer, with whom David I. Shapiro and Mary-Patrice Brown, Washington, D.C., were on the brief, for appellant. John T. Kotelly and Peter J. Kadzik, Washington, D.C., also entered appearances for appellant.

Eugene M. Propper, with whom Dwight D. Meier, W. Gregg Kerr and Robert C. Zimmer, Washington, D.C., were on the brief for appellees, Petra Bank and Petra Intern. Banking Corp. Richard G. Reed and D. Richard Funk also entered appearances for appellees.

Stephen P. Kling, with whom John K. Crummey, Annapolis, Md., was on the brief for appellees, United Exchange Co., Ltd., et al.

Before WALD, Chief Judge, SENTELLE, Circuit Judge, and GIBSON, * Senior Circuit Judge.

Opinion for the Court filed by Chief Judge WALD.

WALD, Chief Judge:

The transactions that led to this lawsuit involved four principal parties. Appellant First Chicago International Bank (FCI) has its principal place of business in New York. Appellees are United Exchange Company, a currency trading company with its sole place of business in Jordan; Petra Bank (Petra), a Jordanian banking concern; and Petra International Banking Corporation (PIBC), a subsidiary of Petra with its sole place of business in the District of Columbia. FCI brought this action in the district court for the District of Columbia against United Exchange Company and some of its officers (collectively UNEXCO) and against Petra and PIBC. The complaint alleged that the defendants were liable for defrauding FCI of more than $23 million through an illegal check-kiting scheme. We affirm the trial judge's decision to dismiss the UNEXCO defendants for lack of personal jurisdiction. We reverse the trial court's decision, 655 F.Supp. 787, to grant summary judgment for Petra and PIBC on the ground that it was premature to do so without first permitting discovery on the merits.

I. BACKGROUND

FCI alleges that between September and December 1985, UNEXCO, Petra and PIBC engaged in a check-kiting scheme involving the transfer of large sums of money between certain accounts at FCI in New York and PIBC in the District of Columbia. FCI claims that there were two distinct patterns of check-kiting activity. Under the first, UNEXCO allegedly drew checks on its account at FCI payable to Petra and to an individual named Hani Kattan. Petra and Kattan deposited these sums into accounts at PIBC in the District. Petra then wired funds back into UNEXCO's account at FCI. Similarly, Kattan wrote checks on his Petra account payable to Jamal Abu Samra Est. (JASE), a business owned by one of UNEXCO's officers, and JASE endorsed the checks over to UNEXCO for deposit in its account at FCI. Under the second pattern of kiting, UNEXCO allegedly wrote checks to various third parties, who then endorsed them over to JASE for deposit in its account at PIBC. JASE then reversed the process, resulting in deposits in UNEXCO's account at FCI. See Record Excerpts (R.E.) at 15-16.

In December 1985 UNEXCO deposited 29 checks into its account at FCI. All of the checks, which totalled approximately $28 million, were drawn on the JASE account at PIBC. Shortly after UNEXCO presented the checks to PIBC for payment, it was notified that the checks had been dishonored because of insufficient funds in the JASE account. In the interim, however, FCI had credited the checks to UNEXCO's account and permitted UNEXCO to withdraw a substantial portion of the uncollected funds. The result was an overdraft of over $23 million in UNEXCO's account at FCI. See id. at 17.

FCI filed a complaint alleging, inter alia, conspiracy under the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. Secs. 1962(c) & (d), 1341, 1343. After FCI pursued limited discovery (specifically, some preliminary discovery unrelated to the merits and the deposition of former FCI employee Rafael M. Kamar) defendants UNEXCO and Othman moved to dismiss the complaint for lack of personal jurisdiction and forum non conveniens. Petra and PIBC joined in seeking dismissal on grounds of forum non conveniens, but otherwise conceded that this court had jurisdiction over them. Twelve days after oral argument on the jurisdictional motions, Petra and PIBC filed motions to dismiss on the merits; although the motions were brought under Federal Rules of Civil Procedure 12(b)(6) and 12(h)(2), they were considered by the court as motions for summary judgment, because of their reliance on matters outside the pleadings. See Memorandum Opinion (Mem.Op.) at 3 n. 1, 18 (Feb. 20, 1987). During the briefing of the various motions, defendants repeatedly objected to FCI's discovery requests on the ground that merits discovery was premature while the defendants' jurisdictional and forum motions were pending. 1 Apart from the deposition taken of Kamar, no discovery on the merits took place. See Appellant's Brief at 7-10.

The district court also raised sua sponte, and heard oral argument on, the question of whether the action could be transferred to the Southern District of New York. FCI's position was that the action could have been brought in the Southern District of New York and could be transferred there under 28 U.S.C. Secs. 1404(a) or 1406, either in whole or by severing some defendants. In a memorandum opinion dated February 20, 1987, the district court granted the motions to dismiss the UNEXCO defendants for lack of jurisdiction as well as the motion to dismiss Petra and PIBC on the merits. It did not reach the questions of forum non conveniens or transfer to New York. See Mem.Op. at 21.

II. PERSONAL JURISDICTIONAL OVER THE UNEXCO DEFENDANTS

Section 13-423(a)(1) of the District of Columbia long arm statute provides that a local court may have personal jurisdiction over a person as to a claim arising from that "person's transacting any business in the District of Columbia." This provision of the long-arm statute has been interpreted to be coextensive with the Constitution's due process limit. See Crane v. Carr, 814 F.2d 758, 762 (D.C.Cir.1987). In the instant case, FCI argues that the District may exercise jurisdiction over the UNEXCO defendants pursuant to Sec. 13-423(a)(1). 2 We disagree. For the reasons that follow, we uphold the district court's conclusion that due process precludes the exercise of personal jurisdiction over the UNEXCO defendants.

FCI concedes that neither UNEXCO nor its officers maintained a bank account in the District relevant to this lawsuit; the only bank accounts that are implicated in the alleged check-kiting scheme were maintained at PIBC by Petra, JASE and Kattan. See Appellant's Brief at 40 n. 39. Nor does appellant contend that UNEXCO has its place of business in the District. Rather, FCI's position is that "the flow of checks and wire transfers into and out of the PIBC account in the District constituted the transaction of business in which [the UNEXCO defendants] actively participated." Appellant's Reply Brief at 10. According to FCI, "[t]he continuous transfer of massive sums of money" through PIBC accounts in the District "was a calculated and intentional projection of UNEXCO's check-kiting business into the District of Columbia." Appellant's Brief at 40. Conclusory statements such as these, however, "[do] not constitute the prima facie showing necessary to carry the burden of establishing personal jurisdiction," Naartex, 722 F.2d at 787, and FCI has failed to adduce any concrete evidence establishing that UNEXCO participated in an illegal check-kiting scheme or that it "purposefully avail[ed] itself of the privileges of conducting activities within [the District]." Hanson v. Denckla, 357 U.S. 235, 253, 78 S.Ct. 1228, 1240, 2 L.Ed.2d 1283 (1958). The evidence in the record shows only that UNEXCO received checks drawn on accounts in the District and that UNEXCO wrote checks on its FCI account in New York that were eventually deposited in the District by third parties. As the district court noted, "UNEXCO is not alleged to have sent any checks directly to [PIBC]." Mem.Op. at 14 (emphasis added). Nor is there any indication whatsoever in the record that UNEXCO specifically arranged for the checks to be deposited in, or drawn on, the PIBC accounts in the District. As the Supreme Court has stated, the mere fact that a plaintiff accepts checks drawn on a bank in a particular forum "is of neglible significance" for determining whether the plaintiff has sufficient contacts with that forum. Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 416, 104 S.Ct. 1868, 1873, 80 L.Ed.2d 404 (1984). Because FCI has not presented evidence to substantiate its claim that UNEXCO "transacted business" with Petra or that UNEXCO had any unusual ties with the PIBC accounts in the District, we agree with the trial court that there is "no basis on which to hold that [the UNEXCO defendants] 'purposefully directed' their activities in any way towards the District." 3 Mem.Op. at 23.

FCI claims in the alternative that Petra and PIBC are co-conspirators of UNEXCO and that the District has jurisdiction over UNEXCO through the agency of Petra and PIBC. As noted, however, the general rule is that a plaintiff must make a prima facie showing of the pertinent jurisdictional facts. See, e.g., Chase v. Pan-Pacific Broadcasting, Inc., 617 F.Supp. 1414, 1415 n. 1 (D.D.C.1985); Professional Investors Life Ins. Co. v. Roussel, 445 F.Supp. 687, 691-92 (D.Kan.1978); Wright & Miller, Federal Practice and Procedure: Civil 2d Sec. 1068, at 345 (1987). Here, FCI has fallen far short of making out a prima facie case of the jurisdictional fact of a check-kiting conspiracy. There is no...

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