Israel Discount Bank Ltd. v. Schapp, CV 06-00106 DDP (CWx).

• Decision Date: 02 August 2007
• Docket Number: No. CV 06-00106 DDP (CWx).,CV 06-00106 DDP (CWx).
• Citation: 505 F.Supp.2d 651
• Parties: ISRAEL DISCOUNT BANK LIMITED, Plaintiff, v. Moshe SCHAPP, Defendant.
• Court: U.S. District Court — Central District of California

505 F.Supp.2d 651

ISRAEL DISCOUNT BANK LIMITED, Plaintiff, v. Moshe SCHAPP, Defendant.

No. CV 06-00106 DDP (CWx).

United States District Court, C.D. California.

August 2, 2007.

Brian I. Hamblet, Ronald F. Frank, Bannan Green Frank and Terzian, Los Angeles, CA, Kevin C. McCann, Sean Unger, Paul Hastings Janofsky & Walker, San Francisco, CA, for Plaintiff.

Amy Semmel, Mona D. Miller, Paul M. Kelley, Donfeld Kelley & Rollman, Los Angeles, CA, for Defendant.

AMENDED ORDER GRANTING PLAINTIFF'S MOTION TO DISMISS ON GROUND OF FORUM NON CONVENIENCE; DECLINING TO RULE ON OTHER MOTIONS

PREGERSON, District Judge.

[Plaintiffs forum non conveniens and rule 12 motions filed on 02/09/07; Plaintiffs international comity and 12(b)(1) motion, and Defendant's motion to remand filed on 02/22/07]

This matter comes before the Court¹ on the plaintiff and counterclaim defendant Israel Discount Bank, Ltd.'s motion to dismiss on the ground of forum non conveniens, motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(1) on the ground of foreign sovereign immunity, motion to dismiss pursuant to Federal Rule 12(b)(3) on the ground of a forum selection clause, motion to dismiss on the ground of international comity, and defendant and counter-claimant Moshe Schnapp's motion to remand this case to state court. After reviewing the materials submitted by the parties and considering the arguments therein, the Court grants the plaintiff's motion to dismiss defendant's counterclaim on the ground of forum non conveniens. This order of dismissal will qualify as the entry of judgment as to defendant's counterclaim. The Court further denies defendant's motion to remand as moot, and remands the plaintiff's collection-proceeding to state court for further proceedings.

I. BACKGROUND

The plaintiff and counterclaim defendant, Israel Discount Bank Limited ("IDB"), is a corporation organized under the laws of Israel with its principal place of business in Tel Aviv, Israel.² The defendant and counter-claimant, Moshe Schnapp ("Schnapp") is an Israeli citizen currently residing in California. On September 1, 2005, IDB filed a Complaint for Recognition of Foreign Judgment in state court against the defendant, Moshe Schnapp ("Schnapp") to enforce two Israeli judgments IDB won against Schnapp in Israel. The judgments in the two underlying Israeli actions were entered in the Haifa District court (Civil Case No. 600/99 (hereinafter the "Haifa Action")), the Honorable Justice Oded Gershon presiding, on January 31, 2001, and in the Tel Aviv District Court (Civil Case No.2051/99 (the "Tel Aviv Action")), the Honorable Drora Pilpel presiding, on January 9, 2001. On December 8, 2005, the defendant and counter-claimant filed a counterclaim in state court asserting various claims for breach of contract, fraud, and negligent misrepresentation.

A. Statement of the Facts

Unless otherwise noted, the facts of the case are not in dispute. IDB was established in 1935 in Tel Aviv. IDB is involved in retail banking, investment banking, and capital market activities. Schnapp opened an account at the Ramat Shaul branch of IDB (Account No. 605255). In opening this account, Schnapp agreed to the terms and conditions as set forth in the Private/Current Account Condition ("Account Agreement"). See Defs Ex. 4. Opening an account is a prerequisite to doing business with IDB, and the terms of the Account Agreement control all other banking relationships between the parties. The Account Agreement designates Israeli law as controlling and designates Israel as the exclusive forum for suits arising from the relationship.

In or around May 1998, Schnapp and a colleague, Eli Aran, were involved in efforts to purchase a company in Israel known as Granit Harchamel Investments, Ltd. ("Granit"). At that time Schnapp contacted IDB and indicated that he was competing to purchase Granit. According to IDB, Schnapp stated he had submitted a $168,750,000 offer to purchase Granit, and asked whether IDB would issue him credit up to $170 million dollars to finance the transaction. According to IDB, negotiations ensued but no agreement was ever reached.

Schnapp claims that on May 21, 1998, Simcha Pops, on behalf of Schnapp, negotiated an agreement with IDB to fund his purchase of Granit. IDB disputes that any agreement was ever reached. IDB alleges that one week and a half later, on June 1, 1998, a meeting was held at IDB's Tel Aviv office between Schnapp and Meir Belisha, a representative of IDB. At the meeting, Schnapp stated that his proposal to acquire the controlling interest in Granit had reached the next stage of tender, and that he was required to provide to Mashav Initiating and Development Ltd. (Granit's parent company) ("Mashav") a bank guarantee of $4 million dollars.

According to IDB, Belisha made clear to Schnapp that no agreement between IDB and Schnapp had been reached regarding the financing of the proposed Granit transaction, and that IDB's agreement to provide the guarantee letter for the $4 million to Schnapp did not reflect any agreement as to the $170 million dollar credit facility he had requested. IDB also allegedly stated at that time that it would be willing to issue the guarantee letter only if Schnapp provided collateral (shares in Genesis owned by Schnapp's company), such that if IDB were ever required to fund the guarantee, Schnapp's account would be indebted for the amount paid, and the collateral would serve as security.

On June 17, 1998, Schnapp and his partner, Eli Aran, were, announced as the winning bidders for the controlling interest in Granit with 14 days to close the transaction. Schnapp, however, proved unable to provide financing to complete the purchase of Granit's shares, and on July 26, 1998, Mashav demanded payment of the guarantee from IDB. IDB thereafter demanded from Schnapp the amount required for the payment of the guarantee. On August 25, 1998, when IDB did not receive payment from Schnapp, it paid Mashav the $4 million dollars and debited Schnapp's account (No, 605255) in the same amount.

After negotiations regarding the money owed IDB by Schnapp failed, IDB filed suit in Israel against Schnapp demanding that he repay the $4 million dollars. On September 1, 1998, IDB filed a summary proceeding against Schnapp in the Haifa District Court concerning repayment of the $4 million that IDB had apparently paid on the guarantee. Soon after the claim was filed, the parties reached a settlement agreement. The settlement agreement, signed September 2, 1998, required Schnapp to pay $1 million dollars in cash and $3 million dollars in the form of two loans from IDB to Schnapp to be repaid over 24 months (the sum total offsetting the debit in his account). The additional loan necessitated additional collateral, and IDB required Schnapp to repledge the stocks he had previously used as collateral for the guarantee letter.

As part of the settlement agreement, Schnapp also agreed to and signed a waiver, which (translated into English) provides:

I do not have and will not have in the future any contention and/or claim and/or cause of action and/or demand against you and/or against your management and/or against any of your employees, and I hereby expressly waive, in everything and only everything connected with and related to my debt as stated in the agreement under reference, and inter alia, the issuance of your aforesaid guarantee and its payment in a manner by which I perceive the whole matter as arranged to my satisfaction in the framework of the aforesaid agreement.

See Def's Ex. 1. According to Schnapp, the agreement waived claims concerning IDB's guarantee, but not claims arising from IDB's alleged reneging on a promise to provide financing for the purchase of the controlling interest in Granit. IDB alleges, however, that Schnapp ignored the terms of the waiver by filing suit in Israel in October 1998, claiming that IDB failed to finance the purchase of Granit as allegedly promised, Schnapp filed the action in the Tel Aviv District. Court on October 22, 1998. The action was subsequently dismissed in November of 2000.

During this period, both IDB and Schnapp engaged one another in litigation. Through his company, Ageret Sixteen 93, Ltd., Schnapp filed suit against IDB in New York state court (Civil Case Index No. 121345/98) in 1998. See Def's Request for Judicial Notice ("RJN"). The New York action was dismissed on the ground of forum non conveniens based on, among other reasons, the fact that Israel was an adequate alternative forum, the fact that a majority of the transactions out of which the action arose occurred in Israel, the location and citizenship of the parties and witnesses, the presence of a forum selection clause, and the applicability of Israeli law. Id.

On May 9, 1999, IDB filed a summary proceeding against Schnapp in Haifa District Court concerning the repayment of the sums due under the September 2 agreement. IDB asserts that Schnapp participated in the litigation, including making the arguments on claims he now asserts against IDB. The Court ultimately found for IDB. See Decl. of Gabriel Moyal-Maor, ¶ 3-5. IDB then sought to enforce its judgment in Israel. It then learned that Schnapp had already left Israel.

Schnapp claims that "[i]n August of 2000 an agreement was reached which allowed Mr. Schnapp to leave Israel." Opp. at 5. After judgment had been entered, Schnapp left Israel and relocated to Los Angeles, California. IDB tracked Schnapp to California, which led to IDB's filing of the underlying collection action. The time for appealing the judgment in Haifa Action has since passed. However, after the collection action in the present case was filed, Schnapp purported to appeal the Haifa Action in Israel.

B. Removal and the Ninth Circuit Order

On January 6, 2006, asserting that it qualifies as a foreign sovereign within the meaning of the Foreign Sovereign Immunities Act ("FSIA") (28 U.S.C. § 1603), IDB...