Rosenkrantz v. Inter-American Dev. Bank
| Decision Date | 05 April 2021 |
| Docket Number | Civil Action No. 20-3670 (BAH) |
| Parties | NOAH J. ROSENKRANTZ et al., Plaintiffs, v. INTER-AMERICAN DEVELOPMENT BANK, Defendant. |
| Court | U.S. District Court — District of Columbia |
MEMORANDUM OPINION
Plaintiffs Noah J. Rosenkrantz, Christopher Thibedeau, and TTEK Inc. ("plaintiffs") bring this action against the Inter-American Development Bank ("IDB"), an international financial institution created by member states, including the United States, for the purpose of facilitating the economic and social development of developing countries in the Americas. The individual plaintiffs were affiliated with companies that entered into agreements with IDB and the Government of Barbados to provide services on IDB-financed projects. They stand accused of engaging in Prohibited Practices in relation to the performance of those contracts and, as a result, the individual plaintiffs and TTEK, an entity created by Thibedeau in 2016 and controlled by him, are now subject to internal IDB proceedings to determine whether they should face bank-imposed sanctions, including debarment prohibiting them from entering into future contracts with IDB.
Plaintiffs claim that IDB has breached the underlying contracts in the course of its internal proceedings against them by failing to comply with the Sanctions Procedures that govern its consideration of Prohibited Practices allegations, and seek an order preliminarily enjoining the "sanctions proceedings against [them] that are currently pending before the [IDB]." Pls.' Mot. Prelim. Inj. ( ) at 1, ECF No. 8. IDB, for its part, moves for dismissal of the case, pursuant to Federal Rule of Civil Procedure 12(b)(1), contending that it is immune from suit under the International Organizations Immunities Act of 1945 ("IOIA"), 22 U.S.C. §§ 288-288l, and, as a result, the Court lacks subject-matter jurisdiction. See Def.'s Mot. Dismiss ("Def.'s Mot.") at 1, ECF No. 18; Def.'s Combined Opp'n Pls.' Mot. Prelim. Inj. & Mem. Supp. Def.'s Mot. Dismiss ("Def.'s Opp'n") at 14-21, ECF No. 18-1; Def.'s Reply Supp. Mot. Dismiss ("Def.'s Reply") at 2-10, ECF No. 23. For the reasons set forth below, IDB's Motion to Dismiss under Rule 12(b)(1) is granted and plaintiffs' Motion for Preliminary Injunction therefore must be denied.1
As resolution of IDB's motion to dismiss pursuant to Rule 12(b)(1) turns on the legal question of its immunity from suit, the relevant facts are described only briefly.
The IDB is an international financial institution, created in 1959 by member countries including the United States, with "[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." Pls.' Mot., Ex. 16, Agreement Establishing the Inter-Am. Dev. Bank ("IDB Charter") art. I, § 1, Apr. 8, 1959, 10 U.S.T. 3068, ECF No. 8-18; see also Decl. ofBrigida Benitez ("Benitez Decl.") ¶ 18, ECF No. 19-1. In furtherance of its objective of promoting economic and social development, IDB "provid[es] loans and grants to governments and government-controlled entities in its borrowing member countries," primarily in the Latin American and Caribbean regions, "which use the resources to fund development activities." Def.'s Opp'n at 3. The bank also "provides technical assistance to its borrowers" and "uses its funds to purchase goods and services directly to support its activities and those of its borrowing countries." Id. at 4.
In order to prevent interference by any member country's courts in IDB affairs, Article XI of the IDB Charter enumerates a list of "status, immunities, and privileges" that must "be accorded to the Bank in the territories of each member" and sets forth limited conditions under which IDB may be sued. IDB Charter art. XI, § 1. Of particular relevance here, Article XI, section 3 of the Charter specifies that Id. art XI, § 3. The United States has "accept[ed] membership" in the IDB pursuant to the IDB Charter, 22 U.S.C. § 283, and the immunities and privileges set forth in Article XI of the IDB Charter thus "have full force and effect in the United States," id. § 283g. In addition, IDB has twice been recognized by the United States to be an "international organization" as defined in the IOIA. See Exec. Order No. 10,873, 25 Fed. Reg. 3,097 (Apr. 8, 1960); Exec. Order No. 11,019, 27 Fed. Reg. 4,145 (Apr. 27, 1962).
The IDB Charter requires the bank to "take the 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." IDB Charter art. III, § 9(b). To fulfill this duty, IDB has adopted internal policies prohibiting all parties involved in IDB-financed activities from engaging in corruption, fraud, coercion, collusion, obstruction, and misappropriation, known collectively as "Prohibited Practices." Pls.' Mot., Ex. 5, IDB, Sanctions Procedures ("Sanctions Procedures") § 2.2 (2020), ECF No. 8-7; see also Benitez Decl. ¶ 10. The ban on Prohibited Practices applies not only to "parties who contract with the Bank," but also to "any party involved" in an IDB-financed project, "whether by virtue of a contract" with IDB or a member of IDB, or because of a relationship with any of a number of "other parties," including IDB borrowers, grant recipients, bidders, suppliers, contractors and subcontractors, service providers, among others, and any "officers, employees and agents" of such entities. Sanctions Procedures § 1.2; see also id. § 2.2. These prohibitions are enforced through a sanctions process that follows the guidelines set forth in IDB's Sanctions Procedures, which outline a multi-step internal administrative and quasi-judicial review process by which the bank identifies and penalizes Prohibited Practices. See generally id. §§ 3-15.
At the first step in the process, IDB's Office of Institutional Integrity ("OII") investigates "allegations of Prohibited Practices." Id. § 3.1. If OII "believes that a preponderance of the evidence supports a finding of a Prohibited Practice," id. § 3.3, the office presents to a Sanctions Officer appointed by the IDB President, see id. § 3.2, "a Statement of Charges and Evidence," identifying each respondent alleged to have engaged in a Prohibited Practice, the nature of the Prohibited Practice, and the facts underlying the charges, id. §§ 3.3-3.4. OII must "attach all evidence relevant to the determination of a sanction then available to OII," id. § 3.4.4, and "allexculpatory or mitigating evidence in the possession of OII," with limited exceptions, to the Statement of Charges, id. § 3.4.5; see also id. § 10.2.
Next, the Sanctions Officer reviews the Statement of Charges and again "determine[s] whether a preponderance of the evidence supports a finding that the Respondent engaged in a Prohibited Practice." Sanctions Procedures § 4.1. Upon finding that this standard is met, the Sanctions Officer "prepare[s] a Notice" to be sent to the respondent, id. § 4.5, consisting of the Statement of Charges, all evidence submitted to the Sanctions Officer by OII, the Sanctions Officer's findings, an explanation of the respondent's right to respond to the charges, and a description of the potential sanctions, id. § 4.6. A respondent has sixty days after receipt of a Notice to "submit written materials to the Sanctions Officer including arguments and evidence." Id. § 4.7.
At the close of this period, the Sanctions Officer "assess[es] the submissions of OII and (if any) of the Respondent and . . . issue[s] a Determination." Sanctions Procedures § 4.9. If the Sanctions Officer concludes by "a preponderance of the evidence" that the respondent "engaged in a Prohibited Practice," she may impose an appropriate sanction, id. § 4.9.2, ranging in severity from a formal reprimand to debarment, "a determination that a Respondent is ineligible, either permanently or for a stated period of time, to be awarded and/or participate in additional contracts for [IDB] Projects," id. § 8.2. Though a debarment does not necessarily prevent a sanctioned entity or individual from participating in certain IDB-financed projects as a non-contracting party, IDB "may decide not to authorize such participation on the basis of integrity risk or other considerations." Id. § 8.2.2. Parties subject to sanctions may include not only the respondent but also any entity that a respondent owns or controls, in whole or in common with others. Id. § 8.3. Under the Sanctions Procedures, "[t]he imposition of any Sanction shall bepublic," id. § 8.2, and IDB is permitted to disclose "information concerning the identity of each sanctioned party, the Prohibited Practice, and the Sanction imposed," as it "deem[s] appropriate," id. § 14.1.
A respondent who made a submission to the Sanctions Officer "may appeal the Sanctions Officer's Determination . . . in writing" to the Sanctions Committee within forty-five days of the Determination. Sanctions Procedures § 6.1. OII "may submit additional written materials" to the Committee, id. § 6.2, but any additional "evidence presented . . . to the Committee by OII" must be provided to the respondent, id. § 10.2. The Sanctions Officer may not be a member of the Sanctions Committee that reviews the Determination. Id. § 3.2. The Committee considers the entire record that was presented to the Sanctions Officer to determine for a third time "whether a...
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