Reed Int'l v. Afg. Int'l Bank

Decision Date21 February 2023
Docket Number21-cv-10626 (ER)
PartiesREED INTERNATIONAL, INC., Plaintiff, v. AFGHANISTAN INTERNATIONAL BANK, Defendant.
CourtUnited States District Courts. 2nd Circuit. United States District Courts. 2nd Circuit. Southern District of New York
OPINION & ORDER

EDGARDO RAMOS, U.S.D.J.

Reed International, Inc., is a company headquartered in Virginia that provided security, training, and logistics services in support of the United States Military in Afghanistan. Doc. 1 ¶¶ 1, 8. It brings this breach of contract action against Afghanistan International Bank (AIB). In order to obtain a private security company license from the Ministry of Interior Affairs of Afghanistan (“the Ministry”), the Ministry required Reed to obtain a bank guarantee from a licensed bank in Afghanistan. Reed secured a guarantee from AIB, which is based in and operates in Afghanistan. Reed also maintained a bank account with AIB. Upon the expiration of the guarantee, Reed requested the return of its funds in the guarantee as well as in its bank account. AIB refused to do so. Reed alleges that AIB's refusal to release the funds is a breach of the guarantee and account agreements. Both the guarantee and account agreement contain forum selection clauses designating Afghanistan as the proper forum for any disputes arising out of those contracts, however, Reed filed the instant complaint in this District.

Pending before the Court are two motions: (1) AIB's motion to dismiss the complaint for forum non conveniens improper venue, and lack of personal jurisdiction; and (2) Reed's motion for limited jurisdictional discovery. For the reasons discussed below, AIB's motion to dismiss is GRANTED, and Reed's motion for limited jurisdictional discovery is DENIED.

I. BACKGROUND
A. Factual background

The Ministry required Reed to obtain a bank guarantee from a bank registered and licensed by Afghanistan's central bank, Da Afghanistan Bank (DAB) in order to obtain a private security company license. Doc. 1 ¶ 1, 18. On August 22, 2018, Reed obtained the guarantee from AIB in exchange for cash collateral in the amount of $300,000. Id. ¶ 1. AIB is the largest private bank in Afghanistan and is charted under, and operates subject to, the commercial banking laws of Afghanistan. Id. ¶ 9. By its terms the guarantee was initially set to expire on August 23, 2019. Id. ¶ 19. The guarantee was extended twice and remained valid and in effect through August 21, 2021. Id.

AIB submits that in addition to signing the guarantee, Reed also issued a counter-guarantee for and on behalf of itself to AIB on September 24, 2018 from its office in Kabul, the capital of Afghanistan. See Doc. 22 ¶ 11; Doc. 22-5. Reed does not mention the counter-guarantee in its briefing. Lastly, Reed maintained an ordinary bank account with AIB under an account agreement. Doc. 1 ¶ 3; Doc. 22-1. Reed alleges that the account had a balance of $16,062.84 as of August 31, 2021. Doc. 1 ¶ 3.

The Court notes that, in mid-April 2021, United States President Joseph Biden declared that American troops would leave Afghanistan by September 11 of that year.[1]On August 15, 2021, over two weeks before the official planned U.S. withdrawal date, Taliban fighters entered Kabul.[2] United States troops had withdrawn completely by August 31, 2021.[3]

In 2021 Reed decided not to renew its license with the Ministry beyond August 21, 2021, and shut down its operations in Afghanistan that month. Doc. 1 ¶ 23. Accordingly, on September 1, 2021, Reed demanded that AIB return its funds held on deposit via letter.[4] Id. ¶ 6. The funds were not released to Reed. Id. By letter dated September 23, 2021, Reed again requested the return of the funds securing the guarantee. Doc. 1-4. In response, AIB replied via letter outlining the appropriate procedure Reed needed to follow for the release the funds. Doc 1-5. Specifically, Reed was instructed to submit a “No Claim Letter” from the Ministry and the “Original Guarantee” with all its subsequent amendments. Id. Reed did not follow these procedures. According to Reed, “AIB knows that it is unlikely that Reed . . . will travel to Afghanistan and get the originals of the [g]uarantees and a [no claim] letter back from the [Ministry].” Doc. 1 ¶ 31.

Reed also requested that AIB transfer the $16,062.84 from its bank account. In response, AIB informed Reed that all international transactions were currently on hold based on instruction of DAB circular no. 7618/6733. Doc. 1-5 ¶ 1. Reed claims its demand was unlawfully denied. Doc. 1 ¶ 6.

Forum selection provisions

The guarantee states that it is subject to the Uniform Rules for Demand Guarantees, ICC Publication No. 758 (“URDG 758”),[5] which contain a mandatory forum selection clause that requires any dispute concerning the guarantee to be heard in Afghanistan. See Doc. 1-2 at 1. “Unless otherwise provided in the guarantee, any dispute between the guarantor and the beneficiary relating to the guarantee shall be settled exclusively by the competent court of the country of the location of the guarantor's branch or office that issued the guarantee.” URDG 758 Art. 35(a). In the guarantee, AIB is the guarantor and the Ministry is the beneficiary.

Critically, however, the counter-guarantee Reed issued to AIB is also subject to the URDG, and therefore subject to the URDG's forum selection clause. “Where, at the request of the counter-guarantor, a demand guarantee is issued subject to the URDG, the counter-guarantee shall also be subject to the URDG, unless the counter-guarantee excludes the URDG.” See URDG 758, Art. 1(b). URDG 758 provides that any dispute between Reed (as counter-guarantor) and AIB (as the guarantor) “shall be settled exclusively by the competent court of the country of the location of the counter-guarantor's branch or office that issued the counter-guarantee.” URDG 758, Art. 35(b). Because Reed issued the counter-guarantee from its Kabul office, Afghanistan is the designated venue. Doc. 22-5. The Parties do not dispute that they agreed to the terms of the guarantee and the account agreements.

Likewise, the account agreement provided that Reed agreed to be bound by Afghan law and required the parties to submit to jurisdiction in Afghanistan should any disputes arise (“Any complaint or claim against [] [AIB] must be lodged in Afghanistan and with the Office of CEO of the Bank or as prescribed by the [DAB].”). Doc. 22-1 ¶ 30(b).

B. Procedural background

Reed filed the instant complaint on December 13, 2021, alleging breach of contract, and in the alternative, unjust enrichment. It sought to recover a total of $316,062.84. Doc. 1 ¶ 49. On April 26, 2022, AIB filed a motion to dismiss, arguing that the forum selection clauses in the guarantee and the account agreements require this Court to dismiss the complaint on the basis of forum non conveniens. Alternatively, AIB argues venue is improper in this district, and that AIB is not subject to personal jurisdiction in this Court. Doc. 23 at 6-7. Concurrently, on May 9, 2022, Reed filed a motion for jurisdictional discovery. Doc. 24.

II. LEGAL STANDARDS
A. Personal jurisdiction

In diversity or federal question cases, personal jurisdiction is determined in accordance with the law of the forum in which the federal court sits. Whitaker v. Am. Telecasting, Inc., 261 F.3d 196, 208 (2d Cir. 2001) (citing Bensusan Rest. Corp. v. King, 126 F.3d 25, 27 (2d Cir. 1997)). This determination involves a two-step analysis. Metro. Life Ins. Co. v. Robertson-Ceco Corp., 84 F.3d 560, 567 (2d Cir. 1996). In New York, courts must first determine whether personal jurisdiction is appropriate pursuant to the State's general jurisdiction statute, Civil Practice Law and Rules (“C.P.L.R.”) § 301, or its specific jurisdiction statute, C.P.L.R. § 302. General jurisdiction over foreign corporations is proper when the corporation's affiliations are so continuous and systematic that they are essentially “at home” in the forum state. Daimler AG v. Bauman, 134 S.Ct. 746, 754 (2014). “Specific jurisdiction is a significantly more limited doctrine” than general jurisdiction. Dennis v. JPMorgan Chase & Co., 343 F.Supp.3d 122, 202 (S.D.N.Y. 2018). For a state court to exercise specific jurisdiction, the suit must arise out of the defendants' contacts which create a substantial connection with the forum state. Id. at 202-03. The due process inquiry requires courts to evaluate the “quality and nature of the defendant's contacts with the forum state under a totality of the circumstances test.” Licci ex rel. Licci v. Lebanese Canadian Bank, SAL, 732 F.3d 161, 170 (2d Cir. 2013) (quoting Best Van Lines, Inc. v. Walker, 490 F.3d 239, 246 (2d Cir. 2007)).

Additionally, courts in New York State may exercise specific personal jurisdiction over defendants under the New York long-arm statute if (1) the defendant transacts any business within the state, and (2) the cause of action arises from that business transaction. Alibaba Grp. Holding v. Alibabacoin Found., No. 18 Civ. 2897(JPO), 2018 WL 2022626, at *4-8 (S.D.N.Y. Apr. 30, 2018) (citations omitted); see also C.P.L.R. § 302(a)(1) (NY long-arm statute). “A suit will be deemed to have arisen out of a party's activities in New York if there is an articulable nexus, or a substantial relationship, between the claim asserted and the actions that occurred in New York.”

Royalty Network Inc. v. Dishant.com, LLC, 638 F.Supp.2d 410, 422 (S.D.N.Y. 2009) (quoting Best Van Lines, 490 F.3d at 246).

B. Venue

“The legal standard for a motion to dismiss for improper venue is the same as a motion to dismiss for lack of personal jurisdiction.” Casville Invs., Ltd. v. Kates 12 Civ. 6968 (RA), 2013 WL 3465816, at *3 (S.D.N.Y. July 8, 2013) (citing Gulf Ins. Co. v. Glasbrenner, 417 F.3d 353, 355 (2d Cir. 2005)). “When a defendant challenges either the...

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