Khokhar v. Yousuf et al

Filing 52

ORDER TO SHOW CAUSE WHY ACTION SHOULD NOT BE DISMISSED. Show Cause Response due by 9/6/2017. Signed by Judge Saundra B Armstrong on 8/16/17. (dtmS, COURT STAFF) (Filed on 8/16/2017)

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UNITED STATES DISTRICT COURT
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FOR THE NORTHERN DISTRICT OF CALIFORNIA
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OAKLAND DIVISION
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MOHAMMAD MINHAJ KHOKHAR,

Case No: C 15-06043-SBA

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Plaintiff,
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Related to
Case No: C 17-01769 SBA

v.
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AMJAD YOUSUF, et al.,
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Defendants.

ORDER TO SHOW CAUSE WHY
ACTION SHOULD NOT BE
DISMISSED

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Plaintiff Mohammad Minhaj Khokhar (“Plaintiff”), acting pro se, brings the instant

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action for breach of contract against Amjad Yousuf (“Amjad”); Zarina Amjad (“Zarina”);

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Muhammad Ahmad Amjad aka Kamran (“Kamran”); Muammad Abdullah Amjad aka

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Khawar (“Khawar”); Kashif Mahmood; other members and relatives of Amjad Family;

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Marhaba Travels and Money Changers; Zamzam Builders & Developers; other businesses

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or entities under Marhaba, Zamzam, Amjad, and Khawar titles; and partners of Amjad

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Yousuf and Khawar (collectively “Defendants”). Dkt. 1. Defendants failed to appear or

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respond to the Complaint, and the Clerk entered default on May 16, 2016. Dkt. 18.

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Plaintiff’s motion for default judgment is pending before the Court. Dkt. 32.

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I.

BACKGROUND

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A.

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Plaintiff is a citizen of the United States, with residences in both California and

FACTUAL OVERVIEW

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Pakistan. Compl. ¶¶ 1(b), 6. Defendants, who are “family members, an employee, and

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some partners,” are “all citizens of Pakistan.” Id. ¶ 6. Defendants reside in Karachi,

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Pakistan, although “[s]ome of the Partners also live in Dubai, Abu Dhabi and Saudi

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Arabia.” Id. ¶ 8. Defendants operate several businesses in Pakistan, including construction

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and property development businesses. Id. ¶ 7.

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In “early 2008,” Amjad approached Plaintiff seeking business investments. Id. ¶ 10.

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In or about July 2008, Plaintiff gave Amjad $120,482. Id. In September 2009, Plaintiff

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gave Amjad an additional $1 million. Id. ¶ 12. These transactions were later documented

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in a two-page “Agreement” between Plaintiff, on the one side, and Amjad and “Marhabah

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Travels & Tourism (pvt Ltd.),” on the other. Id. ¶ 17, Dkt. 1-1 pp. 1-3 (“First Agreement”)

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at 1. The First Agreement identifies Plaintiff as a resident of both the United States and

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Pakistan, and identifies Amjad as a resident of Pakistan, with both residential and business

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addresses listed in that country. Id. The First Agreement provides that it is to be

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“adjudicated under the laws of the Government of Pakistan.” Id. at 2. “In the event if [sic]

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no justice is provided and received, laws of Dubai or Malaysia or USA may apply.” Id.
The First Agreement provides that Plaintiff had an outstanding investment of

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$1,102,410 with “Mr. Amjad and his company,” and sets forth terms for the intermittent

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payment of “profit” and repayment of the principal. Id. at 1. The investments were for

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“various projects related to construction and real estate,” with the profits “mainly

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distributed to charity organizations for education of orphans and salaries of their teachers”

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in Pakistan. Id. The First Agreement states that “profitability has been about 20%,” but

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that Mr. Amjad and the Company “agree to do better this year and provide an estimated

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profit of about 30%,” or possibly as much as 40% profit on “the existing construction

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project.” Id. The First Agreement provides that Mr. Amjad and the Company were to

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return the original investment in full by October 23, 2010, but further provides for the

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return of the original investment funds within 30 days upon Plaintiff’s demand. Id. at 1-2.

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Thereafter, Defendants violated the First Agreement by, among other things, failing

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to pay “profits” as agreed. Compl. ¶ 18. Over the next few years, the parties entered into a

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series of subsequent agreements to modify the terms of repayment and extend the

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repayment deadline. As many as six such agreements were executed, variously signed by

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Amjad, his wife Zarina, and his sons Kamran and Khawar. The final agreement, dated

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December 5, 2014, is titled “Acknowledgment, Confirmation and a Promissory Note

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Agreement.” Id. ¶ 50, Dkt. 1-1 pp. 21-22 (“Final Agreement”). The Final Agreement was
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signed at Amjad’s residence in Karachi, Pakistan, and printed on paper with a masthead of

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a Pakistan 50 Rupee note. Id. In the Final Agreement, Amjad agreed to repay the loan

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principal with accrued profits and penalties by no later than January 12, 2015. Id. The

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Final Agreement purports to bind Amjad “and his entire family.” It is signed by Amjad and

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three other unidentified “family members,” but not Zarina. Id. The Final Agreement

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provides that Plaintiff “can take legal actions against me as per previous agreements in any

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courts in Pakistan, Malaysia, or USA.” Id. ¶ 8. According to Plaintiff, Defendants violated

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the Final Agreement and have failed to repay the funds. Compl. ¶¶ 54-55.

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B.

PROCEDURAL HISTORY

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On December 23, 2015, Plaintiff initiated the instant action for breach of contract.

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Dkt. 1. In addition to the loan principal of just over $1 million, he seeks various damages

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totaling more than $30 million. The action was initially assigned to Magistrate Judge Paul

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Grewal, and later reassigned to Magistrate Judge Laurel Beeler. On May 16, 2016, the

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Clerk entered default as to all defendants. Dkt. 18. On March 31, 2017, Plaintiff filed the

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pending Motion for Default Judgment. Dkt. 32. On May 25, 2017, Plaintiff filed a Brief

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on Jurisdictional Issues (“JX Brief”) in support of default judgment. Dkt. 44.

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In the meantime, on March 30, 2017, Plaintiff initiated a new action against

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Defendants, but named several additional other defendants, including the “Government of

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Pakistan through its Ministries,” several named ministries, and at least one individual

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government official (collectively the “Pakistan Defendants”). Khokhar v. Government of

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Pakistan through Its Ministries, Case No. 17-CV-01769-SBA. The two actions were then

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related. Dkt. 39. On June 12, 2017, counsel entered a notice of appearance on behalf of the

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Pakistan Defendants in the latter filed action, and declined to consent to the jurisdiction of a

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magistrate judge. Consequently, both actions were reassigned to this Court on June 19,

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2017. Dkt. 47.

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Plaintiff has since filed two nearly identical motions urging this Court to enter
default judgment. Dkt. 49, 51.

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II.

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LEGAL STANDARDS
The clerk may enter default against a party who fails to plead or otherwise defend an

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action. Fed. R. Civ. P. 55(a). After entry of default, a district court may enter a default

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judgment. Id. 55(b). The decision whether to grant or deny a default judgment lies within

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the sound discretion of the court. Aldabe v. Aldabe, 616 F.2d 1089, 1092 (9th Cir. 1980).

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Factors a district court may consider in exercising its judgment include: (1) the possibility

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of prejudice to the plaintiff; (2) the merits of the plaintiff’s substantive claim; (3) the

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sufficiency of the complaint; (4) the sum of money at stake in the action; (5) the possibility

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of a dispute concerning the material facts; (6) whether the default was due to excusable

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neglect; and (7) the policy favoring decisions on the merits. Eitel v. McCool, 782 F.2d

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1470, 1472-73 (9th Cir. 1986).

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III.

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DISCUSSION
Now pending before the Court is Plaintiff’s motion for default judgment. “When

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entry of judgment is sought against a party who has failed to plead or otherwise defend, a

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district court has an affirmative duty to look into its jurisdiction over both the subject

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matter and the parties.” In re Tuli, 172 F.3d 707, 712 (9th Cir. 1999). Additionally, a

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district court “may dispose of an action by a forum non conveniens dismissal, bypassing

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questions of subject-matter and personal jurisdiction, when considerations of convenience,

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fairness, and judicial economy so warrant.” Sinochem Int’l Co. v. Malaysia Int’l Shipping

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Corp., 549 U.S. 422, 432 (2007).

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A.

JURISDICTION
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Subject Matter Jurisdiction

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District courts have original jurisdiction over all civil actions where the matter in

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controversy exceeds the sum or value of $75,000, exclusive of interest and costs, and is

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between citizens of a State and citizens or subjects of a foreign state. 28 U.S.C.

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§ 1332(a)(2). According to the allegations of the Complaint, Plaintiff is a citizen of the

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United States and Defendants are citizens of Pakistan. Compl. ¶ 6. The matter in

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controversy exceeds the sum of $75,000. Id. ¶¶ 1(a), 79-80. Thus, the Court tentatively

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finds that it may exercise diversity jurisdiction over this matter.

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2.

Personal Jurisdiction

“A judgment entered without personal jurisdiction over the parties is void.” Tuli,

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172 F.3d at 712. To avoid entry of a void judgment, a district court may dismiss an action

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sua sponte for lack of personal jurisdiction. Id.; see also Facebook, Inc. v. Pedersen, 868 F.

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Supp. 2d 953 (N.D. Cal. 2012) (denying motion for default judgment on the ground that the

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plaintiff had failed to establish personal jurisdiction). Where questions arise regarding the

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existence of personal jurisdiction, a court must provide the plaintiff notice and an

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opportunity to establish that jurisdiction is proper. Tuli, 172 F. 3d at 713.
Here, the only basis for personal jurisdiction alleged by Plaintiff is consent. See

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Compl. ¶ 1(c) (“The Defendants have agreed to have the lawsuit heard in Courts of all fifty

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States of America of which California is part.”) Specifically, Plaintiff asserts that

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Defendants “agreed to jurisdiction of the USA courts in the [First Agreement].” JX Brief

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¶ 2. Plaintiff refers to the portion of the agreement that provides: “The Agreement is

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adjudicated under the laws of the Government of Pakistan. In the event if [sic] no justice is

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provided and received, laws of Dubai or Malaysia or USA may apply.” Id. (citing First

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Agreement at 2). Plaintiff asserts that Defendants also consented to the jurisdiction of the

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courts of the United States in the Final Agreement. Id. ¶ 5. Plaintiff refers to the portion of

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the agreement that provides: “I also acknowledge that [Plaintiff] can take legal action

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against me as per previous agreements in any courts in Pakistan, Malaysia or USA.” Id.

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(citing Final Agreement ¶ 8). Plaintiff argues that the “I” in that statement means

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“Defendants,” but acknowledges that the agreement is signed by only two of the named

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defendants, i.e., Amjad and Khawar. Id.; see also Compl. ¶ 50.

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As a threshold matter, the Court notes that Plaintiff confuses “choice of law” and

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“choice of forum” or “forum selection” clauses. See generally, 77 Am. Jur. 2d Venue § 10.

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A forum selection clause designates the state or court where litigation may be brought,

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while a choice-of-law clause identifies the substantive law that will be applied. Id.; see also
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17A Am. Jur. 2d Contracts § 253 (defining a forum selection clause) & § 255 (defining a

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choice of law clause). Even assuming that the choice of law clause set forth in the First

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Agreement—which provides for application of the law of Pakistan, or, if justice is not

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attained, the law of Dubai or Malaysia or the United States—is contractually enforceable

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so as to invoke application of the law of the United States (a proposition this Court finds

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questionable), that clause merely identifies the law that governs the contract, not the forum

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in which suit may be brought.

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Unlike the clause identified in the First Agreement, the clause identified in the Final

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Agreement constitutes a forum selection clause. Generally, acceptance of a forum selection

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clause evidences consent to personal jurisdiction in the specified forum(s). S.E.C. v. Ross,

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504 F.3d 1130, 1149 (9th Cir. 2007). The Court tentatively finds, however, that the forum

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selection clause in the Final Agreement does not apply to a majority of the named

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defendants in this action. “Under general contract principles, a forum selection clause may

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give rise to waiver of objections to personal jurisdiction . . . provided that the defendant

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agrees to be so bound . . . .” Holland Am. Line Inc. v. Wartsila N. Am., Inc., 485 F.3d 450,

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458 (9th Cir. 2007) (internal citations omitted) (holding that personal jurisdiction was

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lacking over certain entities that did not agree to be bound by the forum selection clause).

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“The fundamental element lacking here is any evidence that [certain of the named

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defendants] agreed to the clause.” Id.

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The Final Agreement has signatory lines for “Mr. Amjad Yusuf” and “Mrs. Amjad

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Yusuf (Zarina),” but is signed only by Amjad. Plaintiff explicitly alleges that Zarina

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declined to sign the Final Agreement. Compl. ¶ 52. The Final Agreement also has a

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section designated “Other Family members,” under which Khawar signed. None of the

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other named defendants are parties to the Final Agreement, and Plaintiff fails to allege any

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other basis for binding them to the forum selection clause contained therein. Accordingly,

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personal jurisdiction appears to be lacking as to all Defendants except Amjad and Khawar.

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B.

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Additionally, “[f]ederal district courts have discretion to dismiss an action under the

FORUM NON CONVENIENS

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doctrine of forum non conveniens.” Ayco Farms, Inc. v. Ochoa, 862 F.3d 945, 948 (9th

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Cir. 2017) (citing Am. Dredging Co. v. Miller, 510 U.S. 443, 447-48 (1994) (internal

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citations omitted)). A district court “may dispose of an action by a forum non conveniens

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dismissal, bypassing questions of subject-matter and personal jurisdiction, when

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considerations of convenience, fairness, and judicial economy so warrant.” Sinochem, 549

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U.S. at 432. A court may issue a forum non conveniens dismissal sua sponte, so long as the

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parties are given notice and an opportunity to present their views. Costlow v. Weeks, 790

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F.d 1486, 1488 (9th Cir. 1986).
As a threshold matter, the Court notes that the aforementioned forum selection

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clause is not an impediment to a forum non conveniens dismissal. Forum selection clauses

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take two forms—mandatory and permissive. See generally, 77 Am. Jur. 2d Venue § 10.

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“There is a vast difference between the two.” Hsu v. OZ Optics Ltd., 211 F.R.D. 615, 618

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(N.D.Ca. 2002) (citations omitted). A forum selection clause is mandatory if it clearly

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designates a forum as exclusive. N. California Dist. Council of Laborers v. Pittsburg-Des

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Moines Steel Co., 69 F.3d 1034, 1037 (9th Cir. 1995). “A mandatory forum selection

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clause is presumed valid and is to be strictly enforced.” Hsu, 211 F.R.D. at 618 (citing M/S

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Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 10 (1972)). On the other hand, a permissive

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forum selection clause merely provides the parties’ consent to jurisdiction in a particular

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forum, but is not exclusive. Hunt Wesson Foods, Inc. v. Supreme Oil Co., 817 F.2d 75, 77

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(9th Cir. 1987). Where a forum selection clause is permissive, a typical forum non

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conveniens analysis is applied. See Evolution Online Sys., Inc. v. Koninklijke PTT

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Nederland N.V., 145 F.3d 505, 510 (2d Cir. 1998); accord McNeil v. Stanley Works, 33 F.

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App’x 322, 324 (9th Cir. 2002) (concluding that the district court property applied a forum

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non conveniens analysis where the parties executed a permissive forum selection clause).

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Under a traditional forum non conveniens analysis, dismissal is appropriate only if:

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(1) an adequate alternative forum exists; and (2) the balance of private and public interest
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factors favor dismissal. Ayco, 862 F.3d at 948 (quotation omitted). An alternative forum is

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adequate if the defendants are subject to service of process or consent to be sued in that

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jurisdiction and the forum permits a satisfactory remedy. See Piper Aircraft Co. v. Reyno,

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454 U.S. 235, 254 n.22 (1981). If an adequate alternative forum exists, the Court weighs a

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number of private and public interests factors to determine whether dismissal is warranted.

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The private interest factors are: (1) the residence of the parties and the witnesses; (2) the

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forum’s convenience to the litigants; (3) access to physical evidence and other sources of

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proof; (4) whether unwilling witnesses can be compelled to testify; (5) the cost of bringing

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witnesses to trial; (6) the enforceability of the judgment; and (7) all other practical

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problems that make trial of a case easy, expeditious and inexpensive. Ayco, 862 F.3d at

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950. The public interest factors are: (1) the local interest of the lawsuit; (2) the court’s

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familiarity with governing law; (3) the burden on local courts and juries; (4) the amount of

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congestion in the court; and (5) the costs of resolving a dispute unrelated to the forum. Id.

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Because Plaintiff has not previously had notice of the Court’s intention to consider

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whether a forum non conveniens dismissal is appropriate, the Court will give Plaintiff the

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opportunity to address this matter. However, the Court makes the following, preliminary

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observations. Although Plaintiff is a citizen of the United States, he also maintains a

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residence in, and frequently travels to, Pakistan. Defendants, who have not appeared in this

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action, reside in Pakistan. Furthermore, as discussed above, this Court appears to lack

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personal jurisdiction over a majority of the named defendants. In contrast, it appears that a

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court in Pakistan would have jurisdiction over most, if not all, of the named defendants. At

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a minimum, both Amjad and Khawar, as Pakistani citizens, are subject to service of process

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in Pakistan. Resolution of the underlying contractual dispute would be governed by the

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laws of Pakistan. Additionally, a judgment by this Court would not be directly enforceable

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in Pakistan, where the Defendants reside.1 In view of the foregoing, as well as an initial

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1 Pursuant to Pakistan Civil Procedure Code, 1908 § 44-A, a plaintiff may execute a foreign
judgment in Pakistan only if the country from which the judgment was obtained is a reciprocating
territory. The United States is not a reciprocating territory. See Office of the Advocate General
Punjab, Rulings, 2006 CLC 1328.

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review of all applicable private and public interest factors, the Court tentatively finds that

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dismissal on the grounds of forum non conveniens may be appropriate in this action.

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Accordingly,

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IT IS HEREBY ORDERED THAT Plaintiff shall show cause in writing why this

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action should not be dismissed: (1) for lack of personal jurisdiction; and/or (2) on forum

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non conveniens grounds. Plaintiff’s response, which shall not exceed ten (10) pages, must

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be filed within twenty-one (21) days of the date this Order is filed. Failure to fully and

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timely comply with this order may constitute grounds for dismissal.

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IT IS SO ORDERED.
Dated: 8/16/17

______________________________
SAUNDRA BROWN ARMSTRONG
Senior United States District Judge

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