Themis Capital, LLC v. Democratic Republic of Congo

• Decision Date: 26 July 2012
• Docket Number: No. 09 Civ. 1652 (PAE).,09 Civ. 1652 (PAE).
• Citation: 881 F.Supp.2d 508
• Parties: THEMIS CAPITAL, LLC and Des Moines Investments Ltd., Plaintiffs, v. DEMOCRATIC REPUBLIC OF CONGO and Central Bank of the Democratic Republic of the Congo, Defendants.
• Court: U.S. District Court — Southern District of New York

881 F.Supp.2d 508

THEMIS CAPITAL, LLC and Des Moines Investments Ltd., Plaintiffs,

v.DEMOCRATIC REPUBLIC OF CONGO and Central Bank of the Democratic Republic of the Congo, Defendants.

No. 09 Civ. 1652 (PAE).

United States District Court,

S.D. New York.

July 26, 2012.

Dennis H. Hranitzky, Debra Dubritz O'Gorman, Dechert, LLP, Amanda Frances Parsels, Charles Richard Jacob, III, Joel M. Miller, Miller & Wrubel, P.C., New York, NY, for Plaintiffs.

Nady Mayifuila, Emery Mukendi Wafwana & Associates, P.C., New York, NY, for Defendants.

OPINION & ORDER

PAUL A. ENGELMAYER, District Judge:

Plaintiffs Themis Capital, LLC and Des Moines Investments, Ltd. (collectively, “plaintiffs”) bring this claim for breach of contract under New York law against the Democratic Republic of the Congo and the Central Bank of the Democratic Republic of the Congo (collectively, “defendants”). Plaintiffs have moved for pre-discovery summary judgment. For the reasons that follow, that motion is denied, without prejudice to plaintiffs' right to re-file after a period of limited discovery in accordance with this Opinion & Order.

I. Factual Background¹

On March 31, 1980, the Republic of Zaire, a sovereign state in Central Africa, and the Bank of Zaire, Zaire's national bank, entered into a Refinancing Credit Agreement with various creditors and agents, including Citibank N.A. (“Credit Agreement” or “Agreement”). See Hranitzky Decl. Ex. A. Under the Credit Agreement, the Bank of Tokyo Trust Company was identified as the servicing bank. The Credit Agreement restructured various debts that Zaire owed to its creditors. The creditors were listed in a “Credit Information Schedule” attached to the Credit Agreement. See id. at R–1 to R–2.

Themis Capital (“Themis”) and Des Moines Investments, LLC (“Des Moines”) are the assignees of all rights, title, interest, benefits, and obligations in the debt owed to the creditors under the Credit Agreement.² Under the Credit Agreement, defendants owed $9,562,500 in principal to Citibank, and $459,999.67 in principal to Bayerische Vereinsbank International S.A. See Pls. Mot. 3. Following the execution of a deed of assignment, effective August 5, 2008, Themis is the successor-in-interest to these two debts, for a total of $10,022,499.67 in principal. Hranitzky Decl. Ex. B at 1; id. Ex. C at 2. Additionally, under the Credit Agreement, defendants owed: $487,900.00 in principal to Citibank N.A. under Schedule A–1; $308,463.08 in principal to Banque Bruxelles–Lambert S.A. (“Bruxelles–Lambert”) under Schedule A–2; $483,125.00 in principal to Electro Banque under Schedule A–14; $1,449,375.00 in principal to Citibank N.A. under Schedule A–14; $254,472.50 in principal to Bruxelles–Lambert under Schedule A–19; $308,451.77 in principal to Bruxelles–Lambert under Schedule A–21; and $4,689,271.00 in principal to Citibank N.A. under Schedule A–26. See Pls. Mot. 3; Hranitzky Decl. Exs. D–H (deeds of assignment). Following the execution of a deed of assignment, effective February 2, 2009, Des Moines is the successor-in-interest to these seven debts, for a total of $7,981,058.35 in principal. Hranitzky Decl. Ex. D at 1.

Under the Credit Agreement, Zaire was obliged to pay each contracting bank: “(a) The First Principal Payment of each Credit of such Bank, (b) The Reference Date Interest on each Credit of such Bank, and (c) all costs and expenses payable pursuant to Section 12.05 which shall have been notified to the [Republic of Zaire] by the Servicing Bank.” Agreement § 2.01. Zaire was required to make such payments periodically on specified payment dates, the last of which was April 2, 1990. Id. § 4.01(f); Pls. Mot. 4. The Credit Agreement further provided that the Bank of Zaire was “irrevocably and unconditionally instruct[ed]” to make all such payments on behalf of the Zaire to the banks, subject to the availability to the Bank of Zaire of sufficient foreign currency. Agreement §§ 8.03, 9.01(c); Defs. Opp'n 3.

In the years following the execution of the 1980 Credit Agreement, Zaire was plagued with political and social instability. See Defs. Opp'n 14 n. 7. ³ In May 1997, following 32 years of rule by authoritarian leader Joseph–Desire Mobutu, Mobutu was overthrown in a coup led by Laurent–Desire Kabila, who subsequently named himself president and changed the name of the country from Zaire to the Democratic Republic of the Congo (“DRC”). The Court assumes for the purpose of this motion, and defendants do not dispute, that defendants DRC and Central Bank of the DRC (“Central Bank”) are successors in interest to the Republic of Zaire and the Bank of Zaire.

Plaintiffs allege that defendants failed to pay any outstanding principal or corresponding interest due under the 1980 Credit Agreement to plaintiffs' predecessors-in-interest, or to plaintiffs themselves. Am. Compl. ¶¶ 20, 23; Pls. Statement ¶ 7. Defendants do not dispute that no such payment has been made. Defs. Statement ¶ 7. It is also undisputed that this is the first lawsuit to raise such claims, i.e., that the original creditors, prior to transferring their rights to Themis and Des Moines, did not bring a claim against defendants alleging a breach of the Credit Agreement.

Important here, in 2003, a single-page document that referenced the 1980 Credit Agreement was circulated between Citibank and individuals in the DRC. See Hranitzky Decl. Ex. N (“2003 Letter”). The 2003 Letter, dated February 25, 2003, provided:

The Democratic Republic of Congo and the Central Bank of Congo hereby refer to the Refinancing Credit Agreement dated as of March 21, 1980 among the Democratic Republic of Congo (formerly known as the Republic of Zaire), the Central Bank of Congo (formerly known as the Bank of Zaire), the Banks and Agents party thereto and the Bank of Tokyo–Mitsubishi Trust Company (formerly known as Bank of Tokyo Trust Company), as Servicing Bank.

The Democratic Republic of Congo and the Central Bank of Congo hereby acknowledge and confirm as of the date hereof their respective obligations with respect to the principal and interest unpaid under such Refinancing Credit Agreement consisting, in the case of interest, both of interest accrued on principal installments prior to the maturity and interest accrued on overdue principal and interest, and all other obligations arising under such Refinancing Credit Agreement in accordance with the terms thereof.

2003 Letter at 1. The Letter specifically provided that it was intended to overcome any concerns that the DRC's and Central Bank's debts were no longer collectible, including based on the New York statute of limitations applicable to breach of contract claims:

It is the intention of the Democratic Republic of Congo and the Central Bank of Congo in executing and delivering this acknowledgment formally to recognize and confirm all such obligations in order to eliminate any concerns any person holding claims under such Refinancing Agreement may have due to any possible application or any principles of prescription, including without limitation, those established by the New York statute of limitations, which might lead any person in refraining from acting to enforce such claims might have an adverse effect on the ultimate enforceability of such claims.

Id. A header at the top of the Letter read: “Fax reçu de: 212 559 0979,” which, in English, translates to “fax received from 212 559 0979,” and the date stamp “20/03/03 17:47.” Id. The Letter also contained stamps at the top of the page that stated: “Received”; “Citibank, N.A.”; “Democratic Rep. of Congo”; and “2003 Feb 27.” Id.

The 2003 Letter was signed by Leonard Luongwe Kabule (“Luongwe”), who at the time was the DRC's interim Minister of Finance and Budget, and Jean–Claude Masangu Mulungo (“Masangu”), the Central Bank's Governor. The Letter was not signed by representatives of any of the creditors under the 1980 Credit Agreement.

II. Procedural Background

On February 23, 2009, plaintiffs brought this lawsuit. They allege that defendants breached the Credit Agreement by failing to pay the outstanding principal and interest owed to plaintiffs as assignees. On May 22, 2009, plaintiffs filed an amended complaint. On May 20, 2009, and again on November 19, 2009, service of the amended complaint was executed. Defendants did not appear following such service.

On February 1, 2010, plaintiffs moved for summary judgment or, in the alternative, default judgment. On April 28, 2010, the Hon. George B. Daniels, to whom this case was then assigned, entered an Order Granting Default Judgment (Dkt. 13). On June 17, 2010, Judge Daniels referred this case to Magistrate Judge Kevin N. Fox for a calculation of the amounts of interest owed to plaintiffs. On November 1, 2010, Judge Fox issued a Report and Recommendation (“Report”) that the Court adopt plaintiffs' interest calculations (Dkt. 16). The Report recommended that plaintiffs be awarded $18,003,558.32 in principal, $61,316,391.16 in interest, and $228,405.24 in “out-of-pocket” expenses. See Report at 6.

On November 29, 2010, defendants made their first appearance in this case, in the form of a letter to the Court requesting additional time to object to the Report. Plaintiffs consented to the request. On January 21, 2011, defendants filed their objections to the Report; on March 4, 2011, plaintiffs responded to such objections.

On April 28, 2011, defendants moved to set aside the default judgment, upon consent of the plaintiffs. On June 3, 2011, the Court granted the unopposed motion and entered an order setting aside the default (Dkt. 38).

On June 28, 2011, Judge Daniels referred the case to Magistrate Judge Fox for the purpose of settlement. Settlement negotiations were unsuccessful. On October 18, 2011, following reassignment of the case, the Court directed the parties to submit a case management schedule. The parties each submitted letters proposing summary judgment motion briefing schedules (Dkt. 54). On October 26, 2011, the...