Court Opinion

ID: 6929208
Source: CourtListenerOpinion
Date Created: 2022-07-23 23:48:21.231391+00
Date Added: 2024-06-11T16:07:04.346906
License: Public Domain

JON 0. NEWMAN, Chief Judge,
dissenting:
The Court has ordered the dismissal, at the pleading stage, of a lawsuit that presents novel and subtle issues concerning complicated financial maneuverings in the Emirate of Dubai, United Arab Emirates (“Dubai”)., Dismissal is ordered because the Court has concluded that the complaint does not allege conduct by the defendants falling within the “commercial activity” exception of the Foreign Sovereign Immunities Act, 28 U.S.C. § 1605(a)(2). (1988). Instead, the Court holds, the conduct alleged to have been engaged in by Dubai and by a governmentally established committee is sufficiently within a judicial role to be excluded from the “commercial activity” exception. .Because I am persuaded that a definitive decision as to the nature of the challenged conduct cannot fairly be made from the face of the complaint, I would uphold the District Court’s order denying the motion to dismiss the. complaint and let the matter proceed, at least to the summary judgment stage, if not to trial. I therefore respectfully dissent.
The lawsuit concerns the efforts of creditors, The Drexel Burnham Lambert Group Inc. (“Drexel”) and Refeo, Inc., to enforce rights originally arising from loan- transactions with Abdul Galadari, a citizen of Dubai, and A.W. Galadari Commodities (“Commodities”), a division of.A.W. Galadari Holdings (Private) Ltd. As.a result of extreme financial difficulties experienced by Galadari and companies owned or controlled by him, the government of Dubai issued a series of decrees that appear to blend two types of activities that would be regarded as distinct, had they been undertaken in the course of insolvency proceedings in. this country. On the one hand, the decrees created an adjudicative body, The Committee of Receivers for A.W. Galadari, et al. (“the Committee”), to act in a capacity similar to that of a United States .bankruptcy court or a state court administering insolvency or receivership proceedings. On the other hand, the decrees also invested the Committee with authority to take over and operate Galadari’s ventures, and the government of Dubai provided the, Committee with substantial .funds .to be used for. the creditors of the failed ventures. In this latter capacity, the Committee appears to have been functioning less like an adjudicator and more like either a successful purchaser of assets at a liquidation proceeding or a new corporation emerging from a Chapter 11 reorganization.
Though the capacity in which the Committee acted is in sharp dispute, the effect of at least some of its actions is quite clear, notably the Committee’s decision to devote much of the fresh funds from the government of •Dubai to satisfy the claims of residents of .Dubai and to decline .to pay the notes of Drexel and Refco. Plaintiffs allege that the chairman of the Committee refused payment of Drexel’s note on the ground that the note represented “gambling losses.” See Drexel, Burnham Lambert Group Inc. v. Committee of Receivers for A.W. Galadari, 810 F.Supp. 1375, 1386-87 n. 19 (S.D.N.Y.1993) (“Drexel ”).
The District Court, in its careful and comprehensive opinion upholding the sufficiency of the complaint, demonstrated a sensitive awareness of the dual nature of the Committee’s activity. Judge Motley wrote:
While the Committee has served in a quasi-judicial capacity, the Committee has also acted in commercial and 'non-judicial capacities. This court’s jurisdiction in this matter is based upon the latter.
Drexel, 810 F.Supp.- at 1391. In rejecting the District Court’s ruling, this Court too recognizes that there are involved in this *332case some activities that are essentially judicial and some that “might be regarded as commercial.” 11 F.3d at 329.
My disagreement with the Court arises because I lack the Court’s- ability to determine, from the face of the complaint alone, how to categorize the activities of a body created by the sovereign decree of a foreign state with whose laws and practices I have no familiarity. At an earlier stage of this litigation, we observed that “[bjecause the Dubai decree appears to be Dubai’s first attempt to frame an insolvency law, our courts have had no experience with Dubai bankruptcy practices and procedures.” Drexel Burnham Lambert Group Inc. v. Galadari, 777 F.2d 877, 881 (2d Cir.1985). That deficiency has not been remedied.
The Court is able to place all of the activities underlying the plaintiffs’ claim on the judicial side of the line.between judicial and commercial activities only by making what I regard as a somewhat imprecise generalization. The Court- says:
The gravamen of these claims concerns the essentially judicial role of the Committee in marshalling the assets of Galadari and Commodities and adjudicating the claims of their creditors, including Drexel and Refco, and not any of the tangentially related commercial conduct in which the Committee or the Emirate might have engaged.
11 F.3d at 329 (emphasis added).
Upon a development of the facts, assessed against an informed understanding of the law of Dubai in the field of creditors’ rights and insolvency proceedings, it would be possible to know not simply what is the “gravamen” of the plaintiffs’ claims, or what those claims “concern,” or whether the Committee’s role was “essentially” judicial. Instead, we would be in a position to know precisely what occurred, what the claims really are, and whether the particular actions of the Committee' that caused injury to the plaintiffs really were judicial. Perhaps the Committee “adjudicated” the claims of Drexel and Refco and denied them, acting like a United States ■bankruptcy judge. But it is also possible that the Committee, acting like a successor corporation, used fresh cash from its “parent” entity to prefer some of its creditors and simply reneged on an enforceable obligation to discharge liabilities to the plaintiffs. I do not know which occurred, but I would give the plaintiffs an opportunity to develop evidence to show that their interpretation of the events is correct.
It is premature and unfair to dismiss this complaint at this time.