Rosenkrantz v. Inter-Am. Dev. Bank
| Decision Date | 03 June 2022 |
| Docket Number | 21-7047 |
| Parties | Noah J. ROSENKRANTZ, et al., Appellants v. INTER-AMERICAN DEVELOPMENT BANK, Appellee |
| Court | U.S. Court of Appeals — District of Columbia Circuit |
Gregory J. Wrenn argued the cause and filed the briefs for appellants.
Griffith L. Green argued the cause for appellee. With him on the brief was Laura C. Mulherin.
Charlotte H. Taylor and Ariel N. Volpe were on the brief for amici curiae International Bank for Reconstruction and Development, et al. in support of appellee.
Before: Srinivasan, Chief Judge, Henderson and Jackson* , Circuit Judges.
Plaintiffs Noah J. Rosenkrantz, Christopher Thibedeau and TTEK Inc. (collectively, the Plaintiffs) sued the Inter-American Development Bank (the IDB or the Bank), alleging that the IDB violated its internal investigatory procedures when investigating allegations that the Plaintiffs had engaged in "Prohibited Practices"—e.g., corruption, fraud, coercion, collusion, obstruction and misappropriation—in the performance of IDB-financed contracts, an investigation that ultimately led to the imposition of severe sanctions against the Plaintiffs. The IDB moved to dismiss the suit for lack of subject matter jurisdiction, asserting immunity under the International Organizations Immunities Act (IOIA), 22 U.S.C. §§ 288 – 288l . The Plaintiffs countered that their case fell within two exceptions to IOIA immunity: the commercial activity exception and the waiver exception. Rejecting the Plaintiffs’ arguments, the district court granted the IDB's motion to dismiss. As detailed infra , we affirm.
On review of a dismissal order, "[w]e assume the truth of all material factual allegations in the complaint and ‘construe the complaint liberally, granting plaintiff the benefit of all inferences that can be derived from the facts alleged.’ " Am. Nat'l Ins. Co. v. FDIC , 642 F.3d 1137, 1139 (D.C. Cir. 2011) (quoting Thomas v. Principi , 394 F.3d 970, 972 (D.C. Cir. 2005) ). We recite the relevant facts accordingly.
The IDB is an international financial institution created by its member countries for "[t]he purpose of ... contribut[ing] to the acceleration of the process of economic and social development of the regional developing member countries, individually and collectively." See Agreement Establishing the Inter-American Development Bank (IDB Charter) art. I, § 1, opened for signature Apr. 8, 1959, 10 U.S.T. 3068, reprinted in Joint Appendix (J.A.) 0216–54. The IDB fulfills its chartered objective by providing loans and grants to the governments and government-controlled entities located in its borrowing member countries—principally in the Latin American and Caribbean regions—which, in turn, use those resources to fund development activities. See Rosenkrantz v. Inter-Am. Dev. Bank , No. CV 20-3670, 2021 WL 1254367, at *1 (D.D.C. Apr. 5, 2021). Forty-eight countries, including the United States, are currently members of the IDB.
The IDB charter requires the bank to "take all necessary measures to ensure that the proceeds of any loan made, guaranteed, or participated in by the Bank are used only for the purposes for which the loan was granted, with due attention to considerations of economy and efficiency." IDB Charter art. III, § 9(b). Pursuant to this mandate, the IDB has adopted internal policies prohibiting all parties involved in an IDB-financed project from engaging in "Prohibited Practices," which encompass corruption, fraud, coercion, collusion, obstruction and misappropriation. See IDB, Sanctions Procedures (Sanctions Procedures) § 2.2 (2020), reprinted in J.A. 148–66. This prohibition extends well beyond "parties who contract with the Bank" to cover "any party involved" in an IDB-financed project, including, inter alia , borrowers, grant recipients, bidders, suppliers, contractors and subcontractors, service providers and financial intermediaries, as well as the officers, employees and agents of these entities. Id. § 1.2; see also id. § 2.2.
The IDB enforces its prohibition on Prohibited Practices through a multi-step internal review process set forth in the IDB's Sanctions Procedures that is designed to identify and, if necessary, penalize violations. See generally Sanctions Procedures §§ 3–14; see also Rosenkrantz , 2021 WL 1254367, at *2–3 (describing IDB's sanctions process). First, allegations of Prohibited Practices are referred to the IDB's Office of Institutional Integrity (OII) for investigation. See Sanctions Procedures § 3.1. If the OII concludes that "a preponderance of the evidence supports a finding of Prohibited Practice," id. § 3.3, it issues a Statement of Charges and Evidence and refers the matter, including all relevant evidence, to an IDB President-appointed Sanctions Officer, id. §§ 3.2–3.4; see also id. § 10.2, who, like the OII, determines whether "a preponderance of the evidence supports a finding that the Respondent engaged in a Prohibited Practice," id. § 4.1. If the Sanctions Officer determines the standard has been met, he provides the respondent and the OII with a "Notice," which consists of, among other things, the Statement of Charges and Evidence, the Sanctions Officer's findings, and a description of possible sanctions; the respondent has sixty days after delivery of the Notice to respond. Id. §§ 4.5–4.7. A respondent's failure to respond is deemed an admission of the allegations set forth in the Notice and a waiver of the opportunity to appeal. Id. § 4.8.
Once the sixty days are up, the Sanctions Officer evaluates the submissions from the OII and, if any, the respondent. Id. § 4.9. If the Sanctions Officer concludes again that a preponderance of the evidence supports the finding of a Prohibited Practices violation, he may impose an appropriate sanction, id. § 4.9.2, which may range from a formal reprimand to debarment—a determination that the respondent is "ineligible, either permanently or for a stated period of time, to be awarded and/or participate in additional contracts for Projects," id. § 8.1–8.2. The Plaintiffs characterize debarment as "career-ending" for them, akin to a "Scarlet A." Appellants’ Br. 17. Parties subject to sanctions include not only the respondent but also any entity that a respondent owns or controls. Sanctions Procedures § 8.3.
If the respondent makes a submission to the Sanctions Officer during the sixty-day period upon delivery of the Notice, he has forty-five days to appeal the Sanctions Officer's determination to the Sanctions Committee. Id. § 6.1. The Committee reviews the entire record that was presented to the Sanctions Officer in order to determine—for, by now, a fourth time—whether a preponderance of the evidence supports a finding that the respondent engaged in a Prohibited Practice. Id. § 7.1. If the Committee determines the standard is met, it issues a final decision, which summarizes its findings and sanctions and takes effects immediately. Id. § 7.3. The IDB is permitted to disclose the identity of any sanctioned party, along with the imposed sanctions, to borrowers, other international and multinational organizations, governmental authorities and the general public. Id. § 14.1.
Importantly, the Sanctions Procedures were "adopted to guide the exercise of discretion" by the IDB and "do not themselves confer any rights or privileges to any parties." Id. § 15.1. Moreover, on the issue of immunity, the Sanctions Procedures state that "[n]othing in these Procedures shall be considered to alter, abrogate, or waive the immunities and privileges as set forth in" the IDB Charter or in other agreements among member countries. Id. § 15.2.
Over the course of 2010, the IDB entered into two contracts with GreenLine Systems, Inc. (GreenLine)—referred to as the ACRMS Contract and the KCP Contract—to provide customs products to the Government of Barbados. Rosenkrantz , 2021 WL 1254367, at *3. At the time, Rosenkrantz was the co-founder, CEO and chairman of GreenLine and Thibedeau was a GreenLine vice president. Id . Both contracts, to which neither Rosenkrantz nor Thibedeau was named a contracting party, id. ; see Compl. ¶¶ 26, 32, specified that "no promises, terms, conditions, or obligations other than those contained herein" existed between the IDB and GreenLine and made no reference to the Sanctions Procedures. Rosenkrantz , 2021 WL 1254367, at *3 ; see J.A. 0036 (ACRMS Contract); J.A. 0064 (KCP Contract).
In 2013, GreenLine was acquired by A-T Solutions, Inc. (ATS); after the acquisition, Rosenkrantz left the company and Thibedeau stayed on as a vice president of ATS. Rosenkrantz , 2021 WL 1254367, at *4. The acquisition was governed by the "GreenLine Purchase Agreement," which, according to the Plaintiffs, obligated ATS and the "GreenLine Securityholders," a group that included Rosenkrantz and Thibedeau, to "cooperate fully with each other in connection with the defense, negotiation or settlement of any Indemnifiable Claim." Id. . In their view, this agreement contractually obligated ATS, and any successors in interest, to facilitate for the GreenLine Securityholders "the retention and provision of records and information reasonably relevant to such Indemnifiable Claim[s]," as well as access to "employees ... to provide additional information and explanation of any material provided." Id. .
In 2015, the Government of Barbados awarded ATS an IDB-financed contract—referred to as the ESW Contract—for another customs product. Id . Again, neither Rosenkrantz, who had already left ATS, nor Thibedeau was a party to the contract. Id. Although the IDB was also not a party, the contract required all participants to comply with the IDB's "Applicable Policies in regard to fraud and corruption and prohibited practices." Id. ; see J.A. 0087 (ESW Contract). During the ESW Contract negotiations, ATS was acquired by Pacific Architects and Engineers (PAE). Rosenkrantz , 2021 WL...
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