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Iraq Middle Market Development Foundation v. Harmoosh

United States District Court, D. Maryland

September 27, 2018

IRAQ MIDDLE MARKET DEVELOPMENT FOUNDATION, Plaintiff,
v.
MOHAMMAD ALI MOHAMMAD HARMOOSH, et al., Defendants.

          MEMORANDUM OPINION

          George L. Russell, III United States District Judge

         THIS MATTER is before the Court on Defendants Mohammad Ali Mohammad Harmoosh and Jawad Alharmoosh's Motion for Summary Judgment and to Compel Arbitration (ECF No. 49). The Motion is ripe for disposition, and no hearing is necessary. See Local Rule 105.6 (D.Md. 2016). For the reasons outlined below, the Court will grant the Motion.

         I. BACKGROUND[1]

         Plaintiff Iraq Middle Market Development Foundation (“IMMDF”), a non-profit corporation, makes and services loans to local businesses in Iraq. Iraq Middle Mkt. Dev. Found. v. Harmoosh, 848 F.3d 235, 237 (4th Cir. 2017). On November 10, 2006, IMMDF agreed to lend $2 million to an entity Harmoosh controlled. Id.; (Compl. ¶ 8, ECF. No. 1). The loan agreement includes an arbitration clause specifying that “[a]ll disputes, controversies and claims between the parties which may arise out of or in connection with the Agreement . . . shall be finally and exclusively settled by arbitration.” Harmoosh, 848 F.3d at 237. The clause identifies Amman, Jordan as the venue for arbitration. Id. As part of the loan agreement, Harmoosh executed a promissory note guaranteeing repayment of the loan. Id.

         In 2010, after Harmoosh had refused to repay the loan, IMMDF tried to collect by suing him for breach of contract in this Court. Id. Harmoosh moved to dismiss, arguing that his alleged breach was an arbitrable dispute “aris[ing] out of or in connection with” the loan agreement. Id. The Court agreed and dismissed IMMDF's complaint. Id. (citing Iraq Middle Mkt. Dev. Found. v. Al Harmoosh, 769 F.Supp.2d 838, 842 (D.Md. 2011)). Harmoosh, however, did not move to compel arbitration, as he was entitled to do under the Federal Arbitration Act (“FAA”). Harmoosh, 848 F.3d at 237 (citing 9 U.S.C. § 3 (2012)).

         In February 2014, IMMDF filed another civil action against Harmoosh to collect on the promissory note, this time in the Court of First Instance for Commercial Suites (“CFICS”) in Baghdad, Iraq. Id.; (Compl. ¶ 13). Harmoosh appeared in that court through counsel and asserted at least two affirmative defenses. Harmoosh, 848 F.3d at 237. First, he contended that the court lacked personal jurisdiction. Id. Second, Harmoosh argued that he was not personally liable because he guaranteed the loan only in his capacity as a shareholder. Id. The parties disagree as to whether Harmoosh raised the arbitration clause as a third defense. Id. It is undisputed that, under Iraqi law, although a valid arbitration clause deprives a court of jurisdiction over arbitrable disputes, a party waives his right to arbitrate if he fails to assert it before the trial court. Id. (citing Art. 253, Amended Civ. Proc. Code No. 83 of 1969 (Iraq)).

         In any event, IMMDF and Harmoosh litigated their dispute to final judgment in Iraq. Id. In April 2014, the CFICS found in favor of IMMDF and awarded it $2 million in damages and $424.91 in costs and legal fees (the “Iraqi Judgment”). Id. Harmoosh appealed the Iraqi Judgment to the Baghdad/Al-Rasafa Federal Court of Appeals (the “Intermediate Appellate Court”), which affirmed. Id. Harmoosh then appealed to the Federal Court of Cassation of Iraq, the court of last resort for commercial disputes, which also affirmed. Id.

         On April 20, 2015, IMMDF returned to this Court and filed a two-count Complaint against both Harmoosh and Alharmoosh. (ECF. No. 1). Count I seeks recognition of the Iraqi Judgment under the Maryland Uniform Foreign Money-Judgments Recognition Act (the “Maryland Recognition Act”), Md. Code Ann., Cts. & Jud. Proc. [“CJP”] §§ 10-701 et seq. (West 2016). (Compl. ¶¶ 20-22). Count II alleges that Harmoosh fraudulently conveyed some of his assets both before and after the CFICS rendered the Iraqi Judgment. (Id. ¶¶ 23-35).

         The following month, Defendants filed a Motion to Compel Arbitration and Dismiss or Stay Action (ECF No. 10), contending that the Iraqi Judgment was not entitled to recognition because the parties agreed to arbitrate their disputes. Harmoosh, 848 F.3d at 238. The Court concluded that “IMMDF's Iraqi judgment on the promissory note is contrary to the parties' agreement to arbitrate” under section 10-704(b)(4) of the Maryland Recognition Act. (Mar. 30, 2016 Mem. Op., at 22, ECF No. 20). The Court also concluded that IMMDF's fraudulent conveyance claim is related to Harmoosh's debt under the loan agreement and promissory note and is therefore subject to arbitration. (Id. at 26). Accordingly, the Court granted Defendants' motion as to both Counts of the Complaint, directed that Count II between submitted to arbitration, and dismissed the matter. (Id. at 22-23, 26-27).

         IMMDF appealed to the United States Court of Appeals for the Fourth Circuit. (Notice Appeal, ECF No. 23). The Fourth Circuit held that the “arbitration clause exception” set forth in section 10-704(b)(4) of the Maryland Recognition Act is inapplicable where parties choose to forego their rights to arbitrate by participating in foreign judicial proceedings. Harmoosh, 848 F.3d at 240. The Fourth Circuit also determined that “genuine issues of material fact remain as to whether Harmoosh defaulted his right to arbitrate, ” citing the FAA as governing law. Id. at 241-42. The Fourth Circuit acknowledged that the parties had not conducted discovery, thus adding that “it is too soon to say whether Harmoosh defaulted his arbitration rights.” Id. at 238, 242 n.2. Consequently, the Fourth Circuit remanded the matter to this Court. Id. at 242.

         On February 5, 2018, Defendants filed their Motion for Summary Judgment and to Compel Arbitration. (ECF No. 49). IMMDF filed an Opposition on February 27, 2018. (ECF No. 52). On March 13, 2018, Defendants filed a Reply. (ECF No. 53).

         II. DISCUSSION

         A.

         Standard ...


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