Opinion
19 Civ. 5329 (VB) (AEK)
12-15-2023
ORANEFO OKOLO, as assignee of ST. LUKE'S HOSPITAL CONSORTIUM, Plaintiff, v. CROSS RIVER STATE GOVERNMENT, Defendant.
TO: THE HONORABLE VINCENT L. BRICCETTI, U.S.D.J.
REPORT AND RECOMMENDATION
ANDREW E. KRAUSE United States Magistrate Judge
Plaintiff Oranefo Okolo, as assignee of St. Luke's Hospital Consortium (“St. Luke's”), has brought this action against Cross River State Government (“Defendant” or “CRSG”), the government of one of the constituent states that make up the Federal Republic of Nigeria, alleging various claims arising out of a 2014 contract whereby St. Luke's agreed to finance, renovate, manage, and operate a hospital located in Cross River State. Amended Complaint, ECF No. 29 (“Am. Compl.”). Before the Court is Plaintiff's fourth motion for a default judgment pursuant to Rule 55(b)(2) of the Federal Rules of Civil Procedure. ECF Nos. 57-60; see also ECF Nos. 12, 22, 40. For the reasons that follow, I respectfully recommend that Plaintiff's motion for a default judgment be DENIED.
BACKGROUND
I. Factual Background
The following facts are drawn from the Amended Complaint and the materials submitted in connection with Plaintiff's motion for a default judgment.
In default judgment proceedings, “the Court may ‘accept as true the plaintiff['s] uncontroverted evidence,'” and a plaintiff “may establish proof by affidavit.” In re Terrorist Attacks on Sept. 11, 2001, Nos. 03-mdl-1570, 03-cv-9848 (GBD), 2011 WL 13244047, at *2 (S.D.N.Y. Dec. 22, 2011) (quoting Elahi v. Islamic Republic of Iran, 124 F.Supp.2d 97, 100 (D.D.C. 2000); and Campuzano v. Islamic Republic of Iran, 281 F.Supp.2d 258, 268 (D.D.C. 2003)); see also Bricklayers & Allied Craftworkers Loc. 2 v. Moulton Masonry & Constr., LLC, 779 F.3d 182, 189 (2d Cir. 2015) (observing that a motion for default judgment may be granted based on “the factual allegations in the complaint, combined with uncontroverted documentary evidence submitted by plaintiffs” with their motion); Aeronet Worldwide, Inc. v. AB&M Interstate Servs., Inc., No. 22-cv-1081 (BKS) (TWD), 2023 WL 6599077, at *4 n.3 (N.D.N.Y. Oct. 10, 2023) (collecting cases).
Plaintiff is a citizen of the United States and a resident of Yonkers, New York. ECF No. 57 (“Okolo Decl.”) ¶¶ 1, 3. Plaintiff is the founder of the African and American Healthcare Foundation (“AAHF”), a not-for-profit corporation authorized to do business in New York State. Id. ¶ 5. Defendant is the government of Cross River State. Id. ¶ 4.
In May 2014, AAHF joined with a Nigerian healthcare facility and “other Nigerians” to form St. Luke's, for the purpose of submitting an expression of interest to the CRSG to finance, renovate, manage, and operate a general hospital located in Obudu, Cross River State, Nigeria (the “Obudu Hospital”). Id. ¶ 6. St. Luke's was incorporated under the laws of Nigeria and its registered office was located in the city of Yaba, in Lagos State, Nigeria. Am. Compl., Ex. E (“Concession Agreement”) at 8.
On September 10, 2014, the CRSG and St. Luke's executed the Concession Agreement. Okolo Decl. ¶ 8. Under the Concession Agreement, St. Luke's agreed to finance, renovate, manage, and operate the Obudu Hospital. Id.; see Concession Agreement at 8. In order to enable St. Luke's to recoup its investment and make a profit from the project, the Concession Agreement provided that St. Luke's was to manage and operate the renovated Obudu Hospital for a period of 20 years. Okolo Decl. ¶ 9; see Concession Agreement § 4.1. On May 14, 2016, the Obudu Hospital formally opened. Okolo Decl. ¶ 12. Over time, the AAHF and Plaintiff raised $450,000 and invested this in the Obudu Hospital project, and St. Luke's spent approximately $500,000 to renovate and equip the Obudu Hospital. Id. ¶¶ 10, 13. The AAHF and Plaintiff “used the secondary financial market to get the money into Nigeria,” because doing so enabled them to receive “a better exchange rate for the local currency than would have been the case through the regular banks.” Id. ¶ 11.
After the Obudu Hospital opened, the CRSG began to “undermine” the project by “inciting the local community against [St. Luke's], casting [St. Luke's] as ‘outsiders' who had come to take over the community's property and unduly exploit them.” Id. ¶ 13; see also ECF No. 71 (“Okolo Supp. Decl.”) ¶¶ 33-37. Plaintiff also maintains that the CRSG “fail[ed] to make payments it was obligated to make under the Concession Agreement”; “refused to agree with [St. Luke's] in working out the scale of fees and charges as contemplated in . . . the Concession Agreement; refused to engage with [St. Luke's] to ensure the implementation of the [Concession] Agreement . . .; and willfully impeded [St. Luke's] in the performance of [its] obligations under the [Concession] [A]greement ....” Okolo Decl. ¶¶ 15-16.
Pursuant to the Concession Agreement, any dispute between the parties that could not be resolved through negotiation was to be “referred to Arbitration pursuant to the Arbitration and Conciliation Act, Cap A18, Laws of the Federal Republic of Nigeria.” Concession Agreement § 27.0. By notice dated February 6, 2018, St. Luke's served the CRSG with a notice of arbitration. Okolo Supp. Decl. ¶ 27; ECF No. 71-1. The CRSG's legal counsel responded to the notice by letter dated April 24, 2018. Okolo Supp. Decl. ¶¶ 28-30; ECF No. 71-2. In that letter, the CRSG's counsel stated that the CRSG's obligations under the Concession Agreement “are nonmonetary but were to be achieved by policy direction” and that therefore, the CRSG “denies any liability” to St. Luke's. ECF No. 71-2. Ultimately, St. Luke's and the CRSG did not arbitrate their dispute. See Okolo Supp. Decl. ¶ 30.
On October 3, 2018, Plaintiff and St. Luke's executed an agreement whereby St. Luke's assigned its rights under the Concession Agreement to Plaintiff. Okolo Decl. ¶ 32; Am. Compl., Ex. F.
Plaintiff asserts he has suffered “severe financial loss,” and that since initiating this litigation against the CRSG, he has suffered professional setbacks. Okolo Supp. Decl. ¶¶ 13-21. During one job interview for a senior executive position in Baltimore, for example, Plaintiff was asked whether this litigation would interfere with his job performance if hired. Id. ¶ 16. Plaintiff believes that he did not get that job, and has not been hired for other senior executive positions, due to this litigation. See id. ¶¶ 18-20.
In a Report and Recommendation issued on November 16, 2022 (the “2022 R&R”), the undersigned recited the procedural history of this case from its inception in 2019 through Your Honor's issuance of an order of reference on October 13, 2021. See ECF No. 44 (order of reference); ECF No. 45 (2022 R&R). This Report and Recommendation assumes familiarity with the 2022 R&R, including the procedural history discussed therein.
Before he filed the instant motion, Plaintiff previously attempted to secure a default judgment against the CRSG in this action on three separate occasions. See ECF Nos. 12, 22, 40. Most recently, Plaintiff moved for a default judgment in August 2021. ECF Nos. 40-41. In the 2022 R&R, the undersigned recommended that the motion be denied because Plaintiff had failed to serve the CRSG in accordance with Section 1608(a)(3) of the Foreign Sovereign Immunities Act (“FSIA”), which requires that service be affected “by any form of mail requiring a signed receipt.” See ECF No. 45. The 2022 R&R also recommended that Plaintiff be provided with one final opportunity to serve the Amended Complaint on the CRSG. Id. On December 5, 2022, Your Honor largely adopted the 2022 R&R. ECF No. 47. On February 7, 2023, Plaintiff filed a certificate of service, ECF No. 50, and on March 13, 2023, submitted a proposed certificate of default, ECF Nos. 52-53. The Clerk of Court subsequently entered a certificate of default against the CRSG. ECF No. 54.
Your Honor adopted the 2022 R&R except as to the recommendation that Plaintiff be allotted 14 days to properly serve the Amended Complaint on the CRSG. See ECF No. 47 at 1. Following Plaintiff's objection that 14 days may not be sufficient for the Clerk of Court to serve the CRSG in accordance with the FSIA, Your Honor allowed Plaintiff 60 days to affect service. Id. at 3; see ECF No. 46 (Plaintiff's objection to the 2022 R&R).
On May 2, 2023, Plaintiff filed his fourth motion for a default judgment against the CRSG. ECF Nos. 57-60. Your Honor then issued an order to show cause directing the CRSG to appear at a hearing and show cause as to why a default judgment should not be entered against it, ECF No. 61; thereafter, Your Honor amended the order of reference to include Plaintiff's fourth motion for a default judgment, see ECF No. 63. The undersigned held a hearing on the order to show cause on June 30, 2023, during which a number of issues regarding Plaintiff's claims against the CRSG-including the basis for the jurisdiction of the Court-were discussed. Following the hearing, Plaintiff submitted supplemental briefing addressing the issues raised during the June 30, 2023 hearing. See ECF No. 72 (“Pl.'s Supp. Mem.”).
STANDARD OF REVIEW
“‘Federal Rule of Civil Procedure 55 is the basic procedure to be followed when there is a default in the course of litigation.'” City of New York v. Mickalis Pawn Shop, LLC, 645 F.3d 114, 128 (2d Cir. 2011) (quoting Vt. Teddy Bear Co., Inc. v. 1-800 Beargram Co., 373 F.3d 241, 246 (2d Cir. 2004)). “Rule 55 provides a ‘two-step process' for the entry of judgment against a party who fails to defend: first, the entry of a default, and second, the entry of a default judgment.” Id. (quoting New York v. Green, 420 F.3d 99, 104 (2d Cir. 2005)). More particularly, the Federal Rules of Civil Procedure provide that “[w]hen a party against whom a judgment for affirmative relief is sought has failed to plead or otherwise defend, and that failure is shown by affidavit or otherwise, the clerk must enter the party's default.” Fed.R.Civ.P. 55(a). After default has been entered and the defendant fails to appear or move to set aside the default under Rule 55(c), the Court may, on plaintiff's motion, enter a default judgment against that defendant. Fed.R.Civ.P. 55(b)(2); see Paravas v. Tran, No. 21-cv-807 (AJN) (KHP), 2022 WL 718842, at *3 (S.D.N.Y. Feb. 22, 2022), adopted by 2022 WL 718587 (S.D.N.Y. Mar. 10, 2022); Gogo Apparel, Inc. v. Daruk Imps., Inc., No. 19-cv-5701 (LGS) (SDA), 2020 WL 4274793, at *3 (S.D.N.Y. June 11, 2020), adopted by 2020 WL 4271694 (S.D.N.Y. July 23, 2020).
“[B]efore entering a default judgment, the district court must pursue its ‘independent obligation to inquire into the existence of subject-matter jurisdiction,' and ‘assure itself that it has personal jurisdiction over the defendant.'” Republic of Guatemala v. IC Power Asia Dev. Ltd., 619 F.Supp.3d 421, 428 (S.D.N.Y. 2022) (quoting Mickalis Pawn Shop, 645 F.3d at 12526, 133). “Neither jurisdictional question can be presumed to favor [the plaintiff]; in fact, the court must resolve ‘doubt . . . in favor of the defaulting party.'” Id. (quoting Enron Oil Corp. v. Diakuhara, 10 F.3d 90, 96 (2d Cir. 1993)).
“The dispositions of motions for entries of defaults and default judgments . . . are left to the sound discretion of a district court because it is in the best position to assess the individual circumstances of a given case and to evaluate the credibility and good faith of the parties.” Enron Oil, 10 F.3d at 95. The Second Circuit has described a default judgment as “‘the most severe sanction which the court may apply.'” Mickalis Pawn Shop, 645 F.3d at 129 (quoting Green, 420 F.3d at 104). Because of the severity of a default judgment and “a strong preference for resolving disputes on the merits,” a district court's “discretion in proceeding under Rule 55 [is] circumscribed.” Id. (quotation marks omitted); see also Enron Oil, 10 F.3d at 96 (describing default judgments as “generally disfavored” and “reserved for rare occasions”). “The preference for denying a motion for default judgment is particularly strong when the defendant is a foreign sovereign.” Nationsbank of Fla. v. Banco Exterior de Espana, 867 F.Supp. 167, 174 (S.D.N.Y. 1994) (citing First Fidelity Bank, N.A. v. Gov't of Antigua & Barbuda-Permanent Mission, 877 F.2d 189, 196 (2d Cir. 1989)); see also Wiederspan v. Republic of Cuba, 246 F.Supp.3d 873, 877 (S.D.N.Y. 2017) (“Traditional notions of comity and concern that a judgment will negatively impact the nation's foreign affairs require the courts to scrutinize closely efforts to invoke jurisdiction over a foreign sovereign.”).
DISCUSSION
Plaintiff maintains that he is entitled to a default judgment because the CRSG has failed to answer the Amended Complaint or otherwise participate in this litigation. See ECF No. 59 (“Pl.'s Mem.”) at 2. But before a default judgment can be entered, a court must assure itself that it has both personal jurisdiction and subject matter jurisdiction over the parties and the claims. IC Power Asia Dev., 619 F.Supp.3d at 428. Each jurisdictional issue is addressed in turn below.
I. Personal Jurisdiction-Adequacy of Service of Process
Rule 4(j)(1) of the Federal Rules of Civil Procedure requires parties to serve foreign states, political subdivisions of foreign states, or agencies or instrumentalities of foreign states in accordance with 28 U.S.C. § 1608, which is part of the FSIA. See Okolo v. Cross River State Gov't, No. 18-cv-9479 (CS), 2019 WL 10248104, at *2 (S.D.N.Y. May 31, 2019). Section 1608(a) governs service on foreign states or political subdivisions thereof; as set forth in the Amended Complaint, the CRSG is “a government of a constituent part and political subdivision of the Federal Republic of Nigeria,” Am. Compl. ¶ 10, and therefore 28 U.S.C. § 1608(a) provides the requirements for service of process here. “Personal jurisdiction over a foreign sovereign exists only where service satisfies § 1608(a) of the FSIA.” CCM Pension-A, L.L.C. v. Republic of Argentina, No. 16-cv-1650 (TPG), 2016 WL 4154892, at *3 (S.D.N.Y. Aug. 2, 2016). Pursuant to 28 U.S.C. § 1608(a), a political subdivision of a foreign state must be served in accordance with one of four available methods, which appear in the statute in “hierarchical order.” Republic of Sudan v. Harrison, 587 U.S. ---, 139 S.Ct. 1048, 1054 (2019). Applicable here is the third method, which allows for service “by sending a copy of the summons and complaint and a notice of suit, together with a translation of each into the official language of the foreign state, by any form of mail requiring a signed receipt, to be addressed and dispatched by the clerk of the court to the head of the ministry of foreign affairs of the foreign state concerned.” 28 U.S.C. § 1608(a)(3).
Plaintiff has not asserted that he has “any special arrangement for service” with the CRSG, and Nigeria is not a signatory to the Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters. See Pl.'s Mem. at 2-3; see also Okolo, 2019 WL 10248104, at *2. Accordingly, subsections (1) and (2) of 28 U.S.C. § 1608(a) are inapplicable as methods for service of process in this matter.
As explained in the 2022 R&R, Plaintiff's sole error in his previous attempt to serve the Amended Complaint was that the mailing to the Nigerian Minister of Foreign Affairs did not require a signature upon receipt. See ECF No. 45 at 8-9; see also Friedman v. Mission of Gabonese Republic, No. 17-cv-8142 (AJN), 2019 WL 95479, at *2 (S.D.N.Y. Jan. 2, 2019). But Plaintiff cured this defect in his most recent attempt at service by serving the Amended Complaint using a mode of delivery that required signature upon receipt, and providing the Court with a copy of the signed proof of delivery. See ECF No. 50 & Exs. A, B. Plaintiff also provided the Clerk of Court with a copy of the summons, Amended Complaint, and notice of suit that was addressed and dispatched to the Nigerian Minister of Foreign Affairs. See ECF No. 48. Accordingly, Plaintiff has satisfied each requirement of 28 U.S.C. § 1608(a)(3), and has adequately served the Amended Complaint pursuant to the FSIA. Compare Friedman, 2019 WL 95479, at *2 (denying motion to enforce judgment where plaintiffs filed proof of service that stated, “NO SIGNATURE REQUIRED”), with Dkt. No. 17-cv-8142 (AJN), ECF No. 46 at 2 (order granting motion to enforce judgment, noting documents were delivered “and a signature was provided upon receipt” and that plaintiffs “therefore satisfy the notice requirement”).
II. Subject Matter Jurisdiction-the Commercial Activity Exception to the FSIA
Even when proper service has been affected, however, “[f]oreign sovereigns may not be hauled into courts of the United States unless an exception to sovereign immunity applies.” Wiederspan, 246 F.Supp.3d at 874. Plaintiff argues that the Court has subject matter jurisdiction over his claim because the “commercial activity exception” of the FSIA applies. See Pl.'s Mem. at 3-4; Pl.'s Supp. Mem. at 2-6. For the reasons that follow, the undersigned disagrees.
A. Legal Standard
The FSIA “provides the ‘sole basis' for obtaining jurisdiction over a foreign sovereign in the United States.” Atlantica Holdings, Inc. v. Sovereign Wealth Fund Samruk-Kazyna JSC, 813 F.3d 98, 106 (2d Cir. 2016) (quoting Republic of Argentina v. Weltover, Inc., 504 U.S. 607, 611 (1992)). “Under the [FSIA], a foreign state is presumptively immune from the jurisdiction of United States courts; unless a specified exception applies, a federal court lacks subject-matter jurisdiction over a claim against a foreign state.” Saudi Arabia v. Nelson, 507 U.S. 349, 355 (1993); see also 28 U.S.C. § 1604 (“[A] foreign state shall be immune from the jurisdiction of the courts of the United States and of the States except as provided in sections 1605 and 1607 of this chapter.”).
Plaintiff invokes the commercial activity exception, which courts have called “[t]he single most important exception to foreign state immunity under the FSIA.” Atlantica Holdings, 813 F.3d at 106 (quotation marks omitted). This exception provides that:
[a] foreign state shall not be immune from the jurisdiction of courts of the United States or of the States in any case . . . in which the action is based [1] upon a commercial activity carried on in the United States by the foreign state; or [2] upon an act performed in the United States in connection with a commercial activity of the foreign state elsewhere; or [3] upon an act outside the territory of the United States in connection with a commercial activity of the foreign state elsewhere and that act causes a direct effect in the United States[.]28 U.S.C. § 1605(a)(2). Plaintiff asserts that the CRSG is not immune from the Court's jurisdiction because the third clause of the commercial activity exception applies in this case. Pl.'s Mem. at 3; Pl.'s Supp. Mem. at 5; see Am. Compl. ¶ 33.
The third clause of the commercial activity exception is known as the “direct-effect clause.” Atlantica Holdings, 813 F.3d at 106. Under the direct-effect clause, a foreign state is not immune from jurisdiction if the plaintiff's “lawsuit is (1) based . . . upon an act outside the territory of the United States; (2) that was taken in connection with a commercial activity of [a foreign government] outside this country; and (3) that caused a direct effect in the United States.” Weltover, 504 U.S. at 611 (cleaned up).
To satisfy the “direct effect” requirement, the direct effect in the United States must “follow[] as an immediate consequence of the defendant's activity,” meaning that “between the foreign state's commercial activity and the effect, there was no intervening element.” Guirlando v. T.C. Ziraat Bankasi A.S., 602 F.3d 69, 74 (2d Cir. 2010) (cleaned up). “The effect need not be substantial or foreseeable, but it must be something more than trivial or incidental.” Kensington Int'l Ltd. v. Itoua, 505 F.3d 147, 157 (2d Cir. 2007) (citation omitted); see also Virtual Countries, Inc. v. Republic of South Africa, 300 F.3d 230, 236 (2d Cir. 2002) (“Congress did not intend to provide jurisdiction whenever the ripples caused by an overseas transaction manage eventually to reach the shores of the United States.” (quotation marks omitted)). It also is well-settled that “[m]ere financial loss suffered by an individual in the United States is not sufficient to constitute a direct effect under § 1605(a)(2).” Lavi v. Bank Negara Indonesia, No. 22-cv-6000 (VSB), 2023 WL 5016917, at *4 (S.D.N.Y. Aug. 7, 2023) (quotation marks omitted); see Daou v. BLC Bank, S.A.L., 42 F.4th 120, 135 (2d Cir. 2022) (“the mere fact that a foreign state's commercial activity outside of the United States caused physical or financial injury to a United States citizen is not itself sufficient to constitute a direct effect in the United States” (quotation marks omitted)). If a plaintiff's location at the time of a financial loss were sufficient to establish a “direct effect” in that location within the meaning of the FSIA, jurisdiction over foreign sovereigns would be permitted “in practically every case in which a U.S. domiciliary claimed harm from the acts of a foreign sovereign, an outcome that would undermine the FSIA's background presumption of affording immunity to foreign states.” Aldossari ex rel. Aldossari v. Ripp, 49 F.4th 236, 255 (3d Cir. 2022); see Soudavar v. Islamic Republic of Iran, 67 Fed.Appx. 618, 619 (D.C. Cir. 2003) (per curiam) (“Although appellant was a legal resident of the United States at the time of this transaction, a mere financial loss by a resident of the United States does not constitute a ‘direct effect' in the United States.”).
“In contract cases, a breach of a contractual duty causes a direct effect in the United States sufficient to confer FSIA jurisdiction so long as the United States is the place of performance for the breached duty.” Daou, 42 F.4th at 136 (cleaned up); see Weltover, 504 U.S. at 618-19 (finding a direct effect in the United States because New York was expressly designated as a place of payment for certain bonds). This can include circumstances where the contract in question specifically designated that a payment be made to a bank account in the United States. See Com. Bank of Kuwait v. Rafidain Bank, 15 F.3d 238, 240-41 (2d Cir. 1994) (holding that Iraqi banks' failure to remit funds in New York had a direct effect in the United States because contract that banks allegedly breached required them “to make payments in U.S. dollars into accounts in New York City”).
B. Application
Here, the CRSG's alleged breaches of the Concession Agreement did not have a “direct effect in the United States” as required under the third clause of the commercial activity exception, and the CRSG therefore remains immune from suit under the FSIA.
Plaintiff asserts that the CRSG breached the Concession Agreement by “failing to make payments it was obligated to make under the Concession Agreement,” “refus[ing] to agree with [St. Luke's] in working out the scale of fees and charges as contemplated in . . . the Concession Agreement; refus[ing] to engage with [St. Luke's] to ensure the implementation of the Agreement . . .; and willfully imped[ing] [St. Luke's] in the performance of its obligations under the [A]greement ....” Okolo Decl. ¶¶ 15-16. As a result of that conduct, Plaintiff maintains that “[m]onies which AAHF and [he] took out of the United States and invested in this hospital project in Nigeria are yet to be reimbursed/repaid and there are no immediate prospects of repayment/reimbursement from CRSG.” Id. ¶ 18.
Importantly though, nothing in the Concession Agreement indicates that the parties contemplated any aspect of the parties' performance would take place in, or involve, the United States. Indeed, the Concession Agreement is a wholly Nigeria-centric contract. The parties to the Concession Agreement-the CRSG and St. Luke's-are both Nigerian entities. See Concession Agreement at 8. The purpose of the contract was “the operation of General Hospital Obudu in [the] Obudu Local Government Area of Cross River State.” Id. at 8 § E; see also Am. Compl. ¶¶ 12-15. Additionally, St. Luke's was required to make payments to the CRSG in Nigerian currency. Concession Agreement §§ 12.1, 12.3. To the extent that a location was specified in the contract, the parties' performance obligations were to take place in Nigeria. See id. §§ 10.1(b) (“provide all reasonable assistance to [St. Luke's] in procuring applicable permits required from any CRSG agency”), 10.1(g) (“Support [St. Luke's] . . .in enabling training cooperation with local health institutions ....”), 11.1(a) (“undertake the redesign, rehabilitation, [e]quipment procurement, operation and maintenance of the Hospital Facility”), 11.1(h) (“[a]llow access to facility for purposes of inspection at the end of each half year or as may be communicated from time to time by the CRSG”), and 11.1(m) (“Observe acceptable level of sanitation including waste management in the Hospital Facility.”). Finally, the contract was governed by Nigerian law, and any disputes were to be submitted to arbitration pursuant to the Nigerian Arbitration and Conciliation Act. Id. §§ 27.0, 28.0.
The fact that United States entities funded the Obudu Hospital project and expected to see a return on their investment is insufficient to defeat the CRSG's immunity from suit. See Pl.'s Supp. Mem. at 2-3; Okolo Decl. ¶ 7 (“all the parties involved were fully aware that the bulk of the financing for the hospital would come from the United States through AAHF and [Plaintiff]”). None of the alleged breaches of the Concession Agreement-such as the refusal to work out the scale of fees and charges, the refusal to engage with St. Luke's to ensure implementation of the Agreement, and the impeding of St. Luke's' performance of its obligations-involved duties that were to be performed in the United States. See Daou, 42 F.4th at 136. Further, the Concession Agreement does not require any payments to be made to a bank account in the United States. Cf. Rafidain Bank, 15 F.3d 238, 240-41. And unlike in cases where courts found the commercial activity exception applicable because the parties specifically contracted for the involvement of United States-based financial institutions, there is no reference to any United States-based financial institution here. Compare Adler v. Fed. Republic of Nigeria, 107 F.3d 720, 727 (9th Cir. 1997) (finding transaction had “direct effect in the United States” where the plaintiff “requested [Nigerian] defendants to make payment in New York”), and Sec. Inv. Prot. Corp. v. Bernard L. Madoff Inv. Sec. LLC, 480 B.R. 501, 513-14 (Bankr. S.D.N.Y. 2012) (finding that where contract required that assets be held in New York accounts and invested in U.S. securities and treasuries, the “movement of money to and from [an investment firm] in the United States, as contemplated by the [a]greements, was not fortuitous or incidental; instead, it was ‘the ultimate objective' and the ‘raison d'etre' of the Agreement”), with Valambhia v. United Republic of Tanzania, 964 F.3d 1135, 1141 (D.C. Cir. 2020) (“As we have stated in the context of breach-of-contract actions proceeding under clause three, there is no direct effect where the foreign sovereign might well have paid its contract partner through a bank account in the United States but might just as well have done so outside the United States.” (quotation marks omitted)), and Lavi, 2023 WL 5016917, at *5 (rejecting allegation that commercial activity had direct effects in the United States where “[t]he Complaint contains no allegations or indication that the contract had designated accounts in New York as the place of payment, or, for that matter, that any place in the United States was the place of performance for the contractual obligations”). Plaintiff also avers that he “used the secondary financial market to get the money into Nigeria because we got a better exchange rate for the local currency,” further indicating that it was purely incidental to the Concession Agreement that most of the funding for the project originated in the United States. See Okolo Decl. ¶ 11. Ultimately, the only alleged “direct effect in the United States” is Plaintiff's allegation that he has suffered financial hardship here, and this is insufficient to satisfy the third clause of the commercial activity exception to the FSIA. Daou, 42 F.4th at 136; Lavi, 2023 WL 5016917, at *4; see Pl.'s Supp. Mem. at 2-3 (describing the purported direct effect in the United States as “directly depriving U.S. citizens domiciled in the United States of their hard-earned money”).
Moreover, Plaintiff cannot save his claim by arguing that an additional or alternative direct effect of the CRSG's conduct was “the destruction of [Plaintiff's] prospects as a Health Care Executive in the United States.” See Pl.'s Supp. Mem. at 4; Okolo Supp. Decl. ¶¶ 13-21. It is well established that a “direct effect” within the meaning of the FSIA must “follow[] as an immediate consequence of the defendant's” activity, without any “intervening element.” Guirlando, 602 F.3d at 74-75. According to Plaintiff, he “learned that [he] did not get [a] job because [an interview] panel member felt that . . . the continuation of the litigation would detract from [Plaintiff's] total commitment and ability to perform on the job ....” Okolo Supp. Decl. ¶ 18. Put differently, based on Plaintiff's own averments, it was not the CRSG's conduct that directly caused this alleged harm, but rather the potential employer's concern about this litigation. Such incidental, attenuated harm cannot serve as the basis of a claim under the FSIA. See, e.g., Kensington Int'l, 505 F.3d at 157-58 (“Congress did not intend to provide jurisdiction whenever the ripples caused by an overseas transaction manage eventually to reach the shores of the United States.” (quotation marks omitted)).
Because Plaintiff has failed to establish that the CRSG's purported breach of the Concession Agreement had any direct effect in the United States, Plaintiff has failed to show that the commercial activity exception to the FSIA applies.
Because the CRSG is immune from suit under the FSIA and the Court therefore lacks subject matter jurisdiction over this matter, this Report and Recommendation does not address the additional arguments included in Plaintiff's supplemental briefing regarding the viability of
CONCLUSION
For the foregoing reasons, I respectfully recommend that Plaintiff's motion for a default judgment (ECF Nos. 57-60) be DENIED because the CRSG is immune from suit under the FSIA, and Plaintiff has not demonstrated that any exception to the FSIA is applicable.
NOTICE
Pursuant to 28 U.S.C. § 636(b)(1) and Rule 72(b) of the Federal Rules of Civil Procedure, the parties shall have fourteen (14) days from service of this Report and Recommendation to file written objections. See also Fed.R.Civ.P. 6(a). A party may respond to another party's objections within fourteen (14) days after being served with a copy. Fed.R.Civ.P. 72(b)(2). Such objections, and any responses to such objections, shall be filed with the Clerk of Court, with courtesy copies delivered to the chambers of the Honorable Vincent L. Briccetti, United States District Court, Southern District of New York, 300 Quarropas Street, White Plains, New York, 10601, and to the chambers of the Honorable Andrew E. Krause at the same address.
Any request for an extension of time for filing objections or responses to objections must be directed to Judge Briccetti, and not to the undersigned.
Plaintiff's tortious interference with economic relations claim and whether Plaintiff complied with the arbitration requirements of the Concession Agreement. See Pl.'s Supp. Mem. at 7.
Failure to file timely objections to this Report and Recommendation will result in a waiver of objections and will preclude appellate review. See Thomas v. Arn, 474 U.S. 140 (1985); Smith v. Campbell, 782 F.3d 93, 102 (2d Cir. 2015).