Iraq Middle Market Development Foundation v. Harmoosh et al

Filing 20

MEMORANDUM OPINION. Signed by Judge George Levi Russell, III on 3/30/2016. (jnls, Deputy Clerk)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MARYLAND
IRAQ MIDDLE MARKET DEVELOPMENT :
FOUNDATION,
:
Plaintiff,
:
v.
Civil Case No. GLR-15-1124
:
MOHAMMAD ALI MOHAMMAD
HARMOOSH, et al.,
:
Defendants.

:
MEMORANDUM OPINION

THIS MATTER is before the Court on Defendants’, Mohammad
Ali Mohammad Harmoosh and Jawad Alharmoosh, Motion to Compel
Arbitration and Dismiss or Stay Action.
case

involves

Foundation
judgment
record

Plaintiff’s,

(“IMMDF”),

obtained
its

fraudulently
corporation

in

Iraqi

attempt
Iraq

two

his

Middle

to

against

judgment

conveyed
and

Iraq

(Count

of

Market

enforce

a

Harmoosh.

ownership

parcels

(ECF No. 10).

I)

and

real

Development
foreign-money

IMMDF

seeks

alleges

interests

This

in

property

a
to

to

Harmoosh
dissolved
his

son,

AlHarmoosh, in an effort to avoid collection of this debt (Count
II).

(ECF No. 1).

Defendants seek to dismiss IMMDF’s action.

The Motion is ripe for disposition.
Motion

and

supporting

documents,

the

Having reviewed the

Court

finds

no

necessary pursuant to Local Rule 105.6 (D.Md. 2014).
reasons stated below, the Court will grant the Motion.

1

hearing
For the

BACKGROUND 1

I.

On November 10, 2006, IMMDF and Harmoosh’s company, AlHarmoosh
located
(“Loan

for
in

General

Iraq,

Trade,

entered

Agreement”).

Travel,

into

Pursuant

a

and

Medium
to

Tourism

(“AGTTT”),

Term
terms

the

Loan
of

Agreement
the

Loan

Agreement, IMMDF provided AGTTT with $2,000,000 to expand its
business.

Harmoosh, an Iraqi and American citizen, signed the

Loan Agreement in his capacity as Managing Partner of AGTTT and
a personal guaranty in his individual capacity in the form of a
promissory note.

AGTTT then allegedly failed to make payments

on the loan in accordance with the terms of the Loan Agreement.
In 2008, AGTTT went out of business.
On

July

30,

2010,

in

an

effort

to

collect

the

unpaid

balance on the loan, IMMDF brought suit in this Court to enforce
the

promissory

note.

Iraq

Middle

Mkt.

Harmoosh, 769 F.Supp.2d 838 (D.Md. 2011).
dismiss

the

case

for

lack

of

Dev.

Found.

v.

Al

Harmoosh moved to

subject-matter

jurisdiction,

arguing that the arbitration provision in the Loan Agreement
barred IMMDF from pursuing litigation.

Id. at 840.

On January

20, 2011, the Court found that the promissory note was part of
the

Loan

Agreement,

which

contains

an

arbitration

provision

encompassing all disputes and claims between the parties that
1

Unless otherwise noted, the following facts are taken from
the parties’ briefings on the instant Motion, and are viewed in
the light most favorable to the nonmoving party.
2

may “arise out of or in connection with the [Loan] Agreement or
a breach . . . thereof.”

Id. at 842.

concluded

subject-matter

that

it

lacked

As a result, the Court
jurisdiction

to

IMMDF’s claims and dismissed the case with prejudice.

hear

Id. at

842-43.
Seeking another venue to enforce the promissory note, in or
around February 2014, IMMDF brought suit against Harmoosh in the
Court

of

First

Instance

for

Commercial

Disputes

Iraq.

During the Iraqi proceedings, Harmoosh was represented by

an Iraqi attorney, Wael Jasim Kadhim Al-Waeli.

in

Baghdad,

On April 9,

2014, the Iraqi trial court entered judgment against Harmoosh in
the

amount

of

unsuccessfully
Federal

Court

$2,000,000
appealed
of

plus

the

attorney’s

judgment

Appeals,

which

to

the

affirmed

judgment on or about August 3, 2014.

fees.

Harmoosh

Baghdad/Al-Rasafa
the

trial

court

Harmoosh then appealed the

judgment to the Iraqi Federal Court of Cassation, which also
affirmed

the

trial

court’s

decision

on

September

22,

2014.

Harmoosh exhausted his appeals in the Iraqi judicial system.
IMMDF now seeks to collect on the judgment it received against
Harmoosh in Iraq.
On April 20, 2015, IMMDF brought suit against Defendants,
seeking to record its Iraqi judgment and alleging fraudulent
conveyance.

(ECF No. 1).

On May 14, 2015, Defendants filed a

Motion to Compel Arbitration and Dismiss or Stay Action.
3

(ECF

No. 10).
Motion.

On June 22, 2015, IMMDF filed an Opposition to the
(ECF No. 13).

On August 3, 2015, Defendants filed a

Reply to IMMDF’s Opposition.
IMMDF filed a Surreply. 2

(ECF No. 16).

On August 6, 2015,

(ECF No. 17-2).
II.

DISCUSSION

A. Standard of Review
The Court notes that although Defendants title their Motion
as a “Motion to Compel Arbitration,” Defendants do not seek to
compel Count I.

Rather, they present several arguments against

recognition

IMMDF’s

therefore,

of

construe

the

Iraqi

judgment.

Motion

as

both

The
a

Court

motion

to

will,
compel

arbitration and to dismiss for failure to state a claim.
A court may treat a motion to compel arbitration as either
a motion to dismiss or a summary judgment motion.

PC Constr.

Co. v. City of Salisbury, 871 F.Supp.2d 475, 477 (D.Md. 2012)
(quoting Shaffer v. ACS Gov’t Servs., Inc., 321 F.Supp.2d 682,
683–84 (D.Md. 2004)).

“Whether the motion should be treated as

2

IMMDF’s Motion for Leave to File Surreply (ECF No. 17) is
also pending before the Court.
The Court may grant a surreply
“when the movant otherwise would be unable to contest matters
presented for the first time in the opposing party’s reply.”
Hossfeld v. Gov’t Emps. Ins. Co., 88 F.Supp.3d 504, 508 (D.Md.
2015) (citing Khoury v. Meserve, 268 F.Supp.2d 600, 605 (D.Md.
2003)), aff’d, 85 F.App’x 960 (4th Cir. 2004)).
Because
Defendants present new evidence and arguments in their Reply to
IMMDF’s Opposition (ECF No. 16), the Court will grant the Motion
for Leave to File Surreply and consider the Surreply (ECF No.
17-2) when resolving the Motion to Compel and Dismiss (ECF No.
10).
4

a motion to dismiss or a motion for summary judgment turns on
whether

the

pleadings.”
To

court

must

consider

documents

outside

the

Id.

survive

a

Federal

Rule

of

Civil

Procedure

12(b)(6)

motion to dismiss, a complaint must set forth “a claim to relief
that is plausible on its face.”

Ashcroft v. Iqbal, 556 U.S.

662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S.
544,

570

(2007)).

presented

to

and

“When
not

‘matters

excluded

by

outside
the

the

court,

pleading

the

are

[12(b)(6)]

motion shall be treated as one for summary judgment and disposed
of as provided in Rule 56.’”
Auth.,

149

F.3d

253,

Laughlin v. Metro. Wash. Airports

260-61

(4th

Cir.

1998)

(quoting

Fed.R.Civ.P. 12(d)).
Under Rule 56(a), the Court must grant summary judgment if
the moving party demonstrates that there is no genuine issue as
to

any

material

fact

and

judgment as a matter of law.

the

moving

party

is

entitled

to

In reviewing a motion for summary

judgment, the Court views the facts in a light most favorable to
the nonmoving party.

Anderson v. Liberty Lobby, Inc., 477 U.S.

242, 255 (1986) (citing Adickes v. S. H. Kress & Co., 398 U.S.
144, 158-59 (1970)).
Once a motion for summary judgment is properly made and
supported, the opposing party has the burden of showing that a
genuine dispute exists.

Matsushita Elec. Indus. Co. v. Zenith
5

Radio Corp., 475 U.S. 574, 586–87 (1986).

“[T]he mere existence

of some alleged factual dispute between the parties will not
defeat

an

otherwise

properly

supported

motion

for

summary

judgment; the requirement is that there be no genuine issue of
material fact.”

Anderson, 477 U.S. at 247–48.

A material fact is one that might affect the outcome of a
party’s case.
Ventures,

Id. at 248; JKC Holding Co. v. Wash. Sports

Inc.,

264

F.3d

459,

465

(4th

Cir.

2001).

The

materiality is determined by the substantive law, and “[o]nly
disputes over facts that might affect the outcome of the suit
under

the

governing

summary judgment.”

law

will

properly

preclude

the

entry

of

Anderson, 477 U.S. at 248; Hooven-Lewis v.

Caldera, 249 F.3d 259, 265 (4th Cir. 2001).
A genuine issue concerning a material fact arises when the
evidence is sufficient to allow a reasonable jury to return a
verdict in the nonmoving party’s favor.
248.

Anderson, 477 U.S. at

Rule 56(e) requires the nonmoving party to go beyond the

pleadings

and

by

its

own

affidavits,

or

by

the

depositions,

answers to interrogatories, and admissions on file, designate
specific facts showing that there is a genuine issue for trial.
Celotex Corp. v. Catrett, 477 U.S. 317, 324 (1986).
Here, because the Court must consider matters outside of
the pleadings, the Motion will be construed as one for summary
judgment.
6

B. Analysis
1.

Recognition of a Foreign Judgment

Maryland’s Uniform Foreign Money Judgments Recognition Act
(“Recognition Act”) governs whether the Court should recognize a
foreign judgment.

Md.Code Ann., Cts. & Jud.Proc. §§ 10-701 et

seq. (West 2015); Guinness PLC v. Ward, 955 F.2d 875, 883 (4th
Cir.

1992);

see

(Md.Ct.Spec.App.
judgment

that

enforced.

also
1978),

is

See

not
Wolff,

Wolff

v.

aff’d,

401

entitled
389

Wolff,
A.2d

to

A.2d

389
479

A.2d
(Md.

recognition
at

415 n.3

413,
1979).

will

not

415
A
be

(“Enforcement,

however, necessarily comprehends recognition.”).
Maryland’s Recognition Act “applies to a foreign judgment
that is final, conclusive, and enforceable where rendered even
though an appeal is pending or it is subject to appeal,” Cts. &
Jud. Proc. § 10-702, and provides grounds for nonrecognition of
a foreign judgment, id. § 10-704.
Recognition

Act

provides

Section 10-704 of Maryland’s

four

mandatory

grounds

nonrecognition of a foreign judgment:
(1) The judgment was rendered under a system
which does not provide impartial tribunals
or
procedures
compatible
with
the
requirements of due process of law;
(2) The foreign court did not have personal
jurisdiction over the defendant;
(3)
The
foreign
court
did
not
have
jurisdiction over the subject matter; or
(4) The judgment was obtained by fraud.
Id. § 10-704(a)(1)-(4).
7

for

The section also provides five discretionary grounds for
nonrecognition of a foreign judgment:
(1) The defendant in the proceedings in the
foreign court did not receive notice of the
proceedings in sufficient time to enable him
to defend;
(2) The cause of action on which the
judgment is based is repugnant to the public
policy of the State;
(3) The judgment conflicts with another
final and conclusive judgment;
(4) The proceeding in the foreign court was
contrary to an agreement between the parties
under which the dispute was to be settled
out of court; or
(5) In the case of jurisdiction based only
on personal service, the foreign court was a
seriously inconvenient forum for the trial
of the action.
Id. § 10-704(b)(1)–(5).
If a foreign judgment meets the requirements of section 10702

and

does

not

fall

under

any

of

the

mandatory

or

discretionary grounds for nonrecognition, then it “is conclusive
between

the

parties

to

the

extent

that

it

grants

or

denies

recovery of a sum of money . . . [and] enforceable in the same
manner as the judgment of a sister state which is entitled to
full faith and credit.”
Defendants
nonrecognition

advance
of

Id. § 10-703.
several

IMMDF’s

Iraqi

consider their arguments in turn.

8

arguments
judgment.

under § 10-704
The

Court

for
will

a. Mandatory Grounds for Nonrecognition
Defendants
entitled

to

argue

that

recognition

Recognition

Act’s

Specifically,

IMMDF’s

under

mandatory

Defendants

Iraqi

all

four

grounds

contend:

judgment

(1)

of

the

for

the

is

not

Maryland

nonrecognition.

Iraqi

legal

system

does not provide impartial tribunals or due process; (2) the
Iraqi court lacked personal jurisdiction; (3) the Iraqi court
lacked subject-matter jurisdiction; and (4) IMMDF obtained its
judgment

by

perpetuating

fraud

on

the

court.

The

Court

disagrees.
i. Impartial Tribunals and Due Process
Defendants contend that Iraqi courts are not impartial and
do not provide due process.
Act

“does

foreign
courts.

not

require

tribunal
The

‘compatible

be

statute

with

the

Due process under the Recognition

that

the

identical
simply

to

procedures
those

requires

requirements

of

employed

employed

in

that

the

due

process

by

the

American

procedures
of

be

law.’”

Guinness, 955 F.2d at 900 (quoting Ingersoll Milling Mach. Co.
v. Granger, 833 F.2d 680, 687 (7th Cir. 1987)).
While Maryland courts have not interpreted § 10-704(a)(1),
other

courts

Foreign–Money

interpreting
Judgments

the

same

Recognition

3

provision
Act

of

the

Uniform

(“UFMJRA”) 3

have

The Maryland Recognition Act adopted the due process
provision of the UFMJRA without any changes to the UFMJRA
9

emphasized

that

“the

foreign

judicial

system

must

only

be

‘fundamentally fair’ and ‘not offend against basic fairness.’”
DeJoria v. Maghreb Petrol. Expl., S.A., 804 F.3d 373, 380 (5th
Cir. 2015) (quoting Soc’y of Lloyd’s v. Turner, 303 F.3d 325,
330 (5th Cir. 2002)) (applying Texas’s Recognition Act); see
also Soc’y of Lloyd’s v. Ashenden, 233 F.3d 473, 477 (7th Cir.
2000) (applying Illinois’s Recognition Act); Bank Melli Iran v.
Pahlavi,

58

California’s

F.3d

1406,

Recognition

1412

(9th

Act);

Cir.

Ingersoll,

1995)
833

(applying

F.2d

at

688

(applying Illinois’s Recognition Act).
This inquiry examines the fairness of the entire judicial
system, not the details of a particular proceeding.

DeJoria,

804 F.3d at 381; Turner, 303 F.3d at 330 (emphasizing that “the
Texas

Recognition

‘rendered

[only]

Act

requires

under

a

that

system’

the

foreign

that

judgment

provides

be

impartial

tribunals and procedures compatible with ‘due process of law’”
(quoting Tex.Civ.Prac.

&

Rem.Code

§

36.005(a)(1)));

Ashenden,

233 F.3d at 477 (relying on the use of “system” in Illinois’s
Recognition

Act

parties

challenge

to

judgments”).

and

rejecting
the

due

an

approach

process

that

underlying

would

allow

“particular

Proving that a country’s judicial system is not

fundamentally fair is a high bar to clear.

DeJoria, 804 F.3d at

language.
Compare Uniform Foreign Money–Judgments Recognition
Act § 4(a)(1), with Cts. & Jud.Proc. § 10-704(a)(1).
10

384.

“A case of serious injustice must be involved.”

Guinness,

955 F.2d at 900 (quoting Ingersoll, 833 F.2d at 687).
For

instance,

in

Pahlavi,

the

United

States

Court

of

Appeals for the Ninth Circuit declined to recognize an Iranian
judgment

because

the

country’s

courts

“ingredients of basic due process.”

did

not

provide

58 F.3d at 1413.

the
The

court’s finding was based on official State Department reports
instituting a travel ban for U.S. citizens during the relevant
time

period

and

discussing

the

lack

of

due

process

fundamental fairness in the Iranian judicial system.
1411-12.

and

Id. at

The court noted that public trials are rare and highly

politicized and “the regime does not believe in the independence
of the judiciary.”

Id. (citation omitted).

The court further

noted that Iran’s revolutionary courts could take jurisdiction
over civil court cases and overturn decisions in those cases,
and

U.S.

justice.”

citizens

had

“little

reasonable

expectation

of

Id.

In support of their argument that the Iraqi legal system
does not provide due process and its courts are not impartial,
Defendants rely on Ashenden, a 2007 Washington Post article 4 (ECF
No. 10-7), and Harmoosh’s affidavit attesting that his Iraqi

4

Walter Pincus, Shhh . . . There’s Corruption in Iraq, Wash.
Post
(June
25,
2007),
http://www.washingtonpost.com/wpdyn/content/article/2007/06/24/
AR2007062401301.html.
11

attorney told him that the Iraqi trial court would accept a
bribe in exchange for entering judgment in his favor and the
Court of Appeals requested a bribe in exchange for overturning
the trial court judgment (ECF No. 10-8).

Defendants’ reliance,

however, is misplaced.
First, the Ashenden court did not address whether the Iraqi
legal

system

provided

impartial

tribunals

or

due

process.

Rather, it merely noted that if the judgment at issue had been
rendered in a country such as Iraq, “whose adherence to the rule
of law and commitment to the norm of due process are open to
serious question,” the court would have considered the issue of
impartiality.

233

F.3d

at

477.

In

addition,

even

if

the

Ashenden court had considered the fairness of the Iraqi legal
system, the opinion was rendered in 2000—years before the fall
of Saddam Hussein and restructuring of the Iraqi government.
(Pl’s Opp’n to Defs.’ Mot. [“Opp’n”] 9, ECF No. 13).

Ashenden,

therefore, does not necessarily reflect the realities of Iraq’s
court system, which was instituted after Hussein was removed
from power in 2003.
support

Harmoosh’s

The 2007 Washington Post article fails to
argument

for

the

same

reason—it

does

not

provide an account of the operation of the Iraqi legal system in
2014—when IMMDF initiated its lawsuit.
Under

its

new

government,

the

articles

of

Iraq’s

2005

Constitution set forth several principles designed to establish
12

due process.

(See ECF Nos. 13-16, 13-17).

For example, Article

15 of the Iraqi Constitution prohibits the deprivation of an
individual’s “life, security and liberty” without “a decision
issued by a competent judicial authority.”
5, ECF No. 13-16).
and

guarantees

(Opp’n Ex. C-4, at

Article 19 creates an independent judiciary

a

right

litigation, to defend.

to

litigate

and,

(ECF No. 13-18).

at

all

stages

of

In addition, Iraq’s

Court of First Instance, which was specifically established to
hear commercial suits like the one between IMMDF and Harmoosh,
presided over the case.

(ECF No. 13-19).

Moreover, evidence

submitted by both parties shows that Harmoosh had an attorney
who represented him during all court proceedings.

The evidence

also establishes that Harmoosh received notice of the Iraqi suit
and had the opportunity to litigate and defend his case in Iraqi
court.

(ECF Nos.

13-7 through 13-11).

Thus, it appears that

the Iraqi judicial system utilizes procedures compatible with
due process of law.
Defendants
Harmoosh’s

Iraqi

also

submitted

attorney

told

an

affidavit

him

that

the

attesting
Iraqi

that

appellate

court requested a bribe in exchange for overturning the trial
court judgment.

(ECF No. 10-8).

While Harmoosh’s affidavit

bolsters Defendants’ argument, the inquiry into the fundamental
fairness of a country’s judicial system involves examining the
system as a whole, not the details of a particular proceeding.
13

DeJoria, 804 F.3d at 380.

Defendants have not produced evidence

of systemic problems with bribery in the Iraqi judicial system.
The

Court,

therefore,

demonstrate

that

the

finds

Iraqi

Defendants

legal

system

have
does

failed
not

to

provide

impartial tribunals or due process.
ii. Personal and Subject-Matter Jurisdiction
First, Defendants contend the Iraqi courts did not have
personal jurisdiction over Harmoosh.

Defendants argue Harmoosh

has no contacts or connections to Iraq because he is a U.S.
citizen and his Iraqi company, AGTTT, went out of business in
2008.
had

IMMDF submitted evidence to establish the Iraqi courts

personal

jurisdiction

over

Harmoosh.

Article

14

of

the

Iraqi Civil Code states in relevant part: “An Iraqi national
shall be tried before the courts of Iraq in respect of the
rights

owing

abroad.”

from

him

even

those

which

have

(Opp’n Ex. C1, at 261, ECF No. 13-13).

been

created

Though AGTTT

went out of business in 2008—two years after it entered into the
Loan Agreement with IMMDF in 2006—it is undisputed that Harmoosh
is an Iraqi citizen, as evidenced by his Iraqi passport.
No. 13-4).

(ECF

Thus, construing the evidence in the light most

favorable to IMMDF, Defendants have failed to demonstrate the
Iraqi courts lacked personal jurisdiction over Harmoosh.
Next,

Defendants

argue

the

Iraqi

courts

lacked

subject-

matter jurisdiction over the action because the matter should
14

have been submitted to arbitration in accordance with the Loan
Agreement.
arbitrate

IMMDF
in

the

contends

Iraqi

Harmoosh

waived

his

right

court.

Article

253

of

trial

to

Iraq’s

Amended Civil Procedure Code No. 83 of 1969 (“Article 253”),
states
“[i]f the parties agree to resolve the
dispute through arbitration, then a suit
cannot be heard by the courts before all
arbitration avenues have been exhausted. . .
. However, if one of the parties resorts to
the court in violation of the arbitration
agreement and the other party does not
object to that, then the suit may be heard
and the arbitration clause shall be deemed
as null and [void].”
(Opp’n Ex. B-6, at 3, ECF No. 13-12).
Section
arising

out

24.2
of

of
the

the
Loan

Loan

Agreement

Agreement

exclusively settled by arbitration.”
No. 10-1).
Iraqi

appellate

“shall

be

all

disputes

finally

and

(Mot. to Compel Ex. 1, ECF

Defendants submitted an affidavit from Harmoosh’s

attorney,

Agreement’s

states

Al-Waeli,

arbitration
courts. 5

attesting

provision

(ECF

No.

5

that

before
16-1).

he

raised

the

the

Iraqi

trial

IMMDF

Loan

submitted

and
a

Accompanying his Defendant’s Reply Brief, Defendants
submitted translations of Al-Waeli’s affidavit and what appears
to be an Iraqi appellate court brief.
(ECF Nos. 16-1, 16-2).
IMMDF contends that the translations and affidavit do not
contain the necessary indicia of reliability and the Court
should not consider them. “Under Fed.R.Civ.P. 56, as amended in
2010, facts in support of or opposition to a motion for summary
judgment need not be in admissible form; the requirement is that
the party identify facts that could be put in admissible form.”
15

translation

of

an

affidavit

from

its

Iraqi

attorney,

Salam

Zuhair Dhia, attesting Harmoosh’s attorneys failed to raise the
Loan

Agreement’s

arbitration

provision

as

a

defense

accordance with Article 253 or this Court’s 2011 Opinion. 6

in
(ECF

No. 13-6).
IMMDF
Iraqi

also

trial

attorneys

submitted

court

never

translations

hearings

raised

the

to

of

summaries

demonstrate

arbitration

that

from

the

Harmoosh’s

provision,

thereby

rendering the provision null and void pursuant to Article 253.
(ECF

Nos.

13-7

through

13-11).

The

Court

notes

these

translations are merely short summaries of the hearings (Opp’n
Ex. B, at ¶ 6, ECF No. 13-6) and, therefore, may not address
every issue raised by the parties.

As such, the Court finds

that they are insufficient to demonstrate that Harmoosh waived
his right to arbitrate in the Iraqi trial court.

Wonasue v. Univ. of Md. Alumni Ass’n, No. PWG-11-3657, 2013 WL
5719004, at *8 (D.Md. Oct. 17, 2013). Although the translations
may not comply with certain procedural requirements establishing
their
reliability,
these
deficiencies
are
not
incurable.
Because the affidavit and appellate brief could be put in
admissible form, the Court will, therefore, consider them when
ruling on the Motion.
6
Although this Court concluded that it did not have
subject-matter jurisdiction over IMMDF’s action to enforce
Harmoosh’s promissory note due to the arbitration provision in
the Loan Agreement, it dismissed IMMDF’s case, but did not enter
an order compelling arbitration because Harmoosh submitted a
motion to dismiss, not a petition to compel arbitration.
Al Harmoosh, 769 F.Supp.2d at 842-43.
16

Despite

the

parties’

competing

affidavits,

there

is

no

evidence demonstrating that the Iraqi courts found that Harmoosh
waived the arbitration provision and deemed the provision null
and void pursuant to Article 253. 7

If Harmoosh’s attorney did

raise the arbitration provision as a defense, the Iraqi courts
may not have had subject-matter jurisdiction over the case under
Article 253.

Conversely, if Harmoosh’s attorney did not raise

the arbitration provision as a defense and continued to litigate
the case, then the Iraqi courts would have had subject-matter
jurisdiction over the case.
Thus, Defendants have not submitted sufficient evidence to
establish

that

jurisdiction.

the

Iraqi

courts

lacked

subject-matter

Accordingly, Defendants have not established that

they are entitled to summary judgment on this mandatory ground
for nonrecognition.
iii.

Fraud on the Court

Defendants also argue that this Court should not recognize
the Iraqi judgment because IMMDF committed fraud on the Iraqi
court.

7

“[W]aiver of the right to arbitrate is ‘not to be lightly
inferred’ and ‘the party opposing arbitration bears a heavy
burden of proving waiver.’” Liberty Mut. Grp., Inc. v. Wright,
No. DKC 12-0282, 2012 WL 1446487, at *3 (D.Md. Apr. 25, 2012)
(quoting MicroStrategy, Inc. v. Lauricia, 268 F.3d 244, 249-51
(4th Cir. 2001)) (emphasis added). The Court finds that IMMDF’s
submissions do not meet this heavy burden.
17

Maryland courts recognize a distinction between two types
of fraud: intrinsic and extrinsic.

Mueller v. Payn, 352 A.2d

895, 902 (Md.Ct.Spec.App. 1976); see also Schwartz v. Merchs.
Mortg. Co., 322 A.2d 544, 547 (Md. 1974) (collecting cases).
Intrinsic

fraud

typically

involves

allegations

of

a

party

obtaining a judgment based on perjured testimony or falsified
documents.

Schwartz, 322 A.2d at 546.

Extrinsic fraud, on the

other hand, “goes to the question of jurisdiction” or involves
circumstances
fairly

preventing

presenting

his

(citations omitted).
prevents

an

“the

defeated

case.”

party

Mueller,

from

352

fully

A.2d

at

and
902

“[F]raud is extrinsic when it actually

adversarial

trial,

but

is

intrinsic

when

it

is

employed during the course of the hearing which provides the
forum for the truth to appear, albeit that truth was distorted
by the complained of fraud.”

Id. at 903 (quoting Schwartz, 322

A.2d at 547).
Examples of extrinsic fraud include the plaintiff keeping
the defendant away from court, the plaintiff taking action to
prevent the defendant from being informed of the suit, or an
attorney
party,

“fraudulently

resulting

in

or

her

States

without

defeat.
v.

authority”
Schwartz,

Throckmorton,

98

representing

322
U.S.

A.2d

547

(quoting

United

(1878)).

“Fraud, to be available as a defense against an action

on a foreign judgment, must be extrinsic fraud.”
18

61,

at

a

65–66,

Mueller, 352

A.2d at 902 (quoting Second Nat’l Bank of Phila. v. Thompson, 56
A.2d 492, 496 (N.J.Ch. 1947)).
Defendants contend that IMMDF committed fraud on the Iraqi
court because it did not abide by the arbitration provision in
the Loan Agreement and initiated litigation in Iraq, did not
disclose this Court’s 2011 Opinion dismissing IMMDF’s case for
lack of subject-matter jurisdiction, and obtained a judgment in
excess of what is owed on the loan.

This conduct may amount to

intrinsic fraud, but it does not constitute the extrinsic fraud
necessary for nonrecognition of the Iraqi judgment.
Moreover,
failure

to

Defendants

inform

the

do

Iraqi

not
trial

demonstrate
court

of

that

the

IMMDF’s

arbitration

provision and this Court’s 2011 Opinion prevented an adversarial
trial.

In fact, Harmoosh was represented by two attorneys in

the Iraqi trial court who presented arguments on his behalf.
(ECF

Nos.

13-9

through

13-11).

Thus,

Defendants

have

not

presented sufficient evidence that IMMDF prevented Harmoosh from
fully and fairly presenting his case.

Accordingly, Defendants

have failed to present sufficient facts to establish fraud as a
ground for nonrecognition of the Iraqi judgment. 8

8

Defendants also briefly argue in their Reply Brief to
Plaintiff’s
Opposition
that,
under
§
10-705(4)(b)(2)
of
Maryland’s Recognition Act, IMMDF’s action to enforce the entire
$2 million value of the promissory note is repugnant to public
policy in Maryland because Harmoosh has partially satisfied his
debt, and, entering an order enforcing the entire value of the
19

b. Discretionary Ground for Nonrecognition
Defendants further argue that IMMDF’s Iraqi judgment is not
entitled to recognition because it is contrary to the parties’
prior agreement to arbitrate. 9
Maryland courts have not interpreted § 10-701(b)(4) of its
Recognition

Act.

Other

jurisdictions

considering

whether

to

recognize a foreign judgment under the same provision of the
UFMJRA

have

party

to

declined
a

contract

arbitration provision.
Foods

to

Corp.-USA,

No.

recognize
pursued

foreign

litigation

judgments

where

contrary

to

a
an

See Montebueno Mktg., Inc. v. Del Monte
CV

11-4977

MEJ,

2012

WL

986607,

at

*2

(N.D.Cal. Mar. 22, 2012), aff’d sub nom., 570 F.App’x 675 (9th
Cir. 2014); Tyco Valves & Controls Distrib. GmbH v. Tippins,
Inc., No. 04-1626, 2006 WL 2924814, at *7 (W.D.Pa. Oct. 10,

judgment would be contrary to this Court’s 2011 Opinion.
(See
Defs.’ Reply to Pl.’s Opp’n to Defs.’ Mot. 5, ECF No. 16).
Defendants do not cite, nor does the Court find, any authority
to support this proposition.
The Court, therefore, will not
consider Defendants’ public policy argument.
9
Defendants also argue that IMMDF’s Iraqi judgment is not
entitled to recognition pursuant to sub-section 10-704(b)(3) of
Maryland’s Recognition Act because it conflicts with this
Court’s 2011 Opinion dismissing IMMDF’s previous action for lack
of subject-matter jurisdiction.
The Court, however, did not
reach the merits of the case and the underlying issues were not
litigated.
See Byblos Bank Europe, S.A. v. Sekerbank Turk
Anonym Syrketi, 885 N.E.2d 191, 191 (N.Y. 2008) (declining to
recognize Belgian judgment that conflicted with earlier Turkish
judgment dismissing case on the merits).
As such, Defendants
have failed to demonstrate the Iraqi judgment conflicts with a
prior existing judgment.
20

2006) (declining to recognize German default judgment because it
was

contrary

to

the

parties’

agreement

to

arbitrate);

The

Courage Co. v. The Chemshare Corp., 93 S.W.3d 323, 338 (Tex.App.
2002) (affirming trial court decision not to recognize Japanese
judgment due to parties’ agreement to arbitrate).
v.

Balaam,

953

S.W.2d

478,

482

(Tex.App.

But see Dart

1997)

(affirming

recognition of Australian judgment because both parties failed
to enforce agreement’s forum-selection clause).
The

U.S.

California
issue.

District

decision

in

Court

for

Montebueno

the

Northern

provides

District

insight

on

of
this

Montebueno previously brought a breach of contract suit

against Del Monte in the Philippines.

2012 WL 986607, at *1.

During the Philippine litigation, Del Monte filed a petition to
compel

arbitration

arguing

that

the

in

the

Philippine

Northern

District

litigation

parties’ agreement to arbitrate.

Id.

was

of

California,

contrary

to

the

The court found that the

contract contained a valid and enforceable arbitration provision
and granted Del Monte’s Petition to Compel Arbitration.

Id.

Despite the court’s order, Montebueno continued its suit against
Del Monte in the Philippines and obtained a judgment against Del
Monte.

Id.

Montebueno then sought to enforce the judgment in

the Northern District of California.

Id.

Del Monte filed a

motion to dismiss arguing that the court should not enforce the
judgment

under

section

1716(c)(5)
21

of

California’s

Uniform

Foreign–Country

Money

Judgments

Recognition

Act 10

(“UFCMJRA”)

because it was contrary to an agreement between the parties to
arbitrate.

Id.

The court found that the proceedings in the

Philippines

were

contrary

to

a

valid

agreement

between

the

parties to arbitrate “and, under Section 1716(c)(5), the [c]ourt
may exercise its discretion and refuse to recognize the foreign
judgment.”

Id. at *1-*2.

Here, this Court concluded in its 2011 Opinion that the
promissory

note

is

part

of

the

Loan

Agreement

and

disputes

arising out of its alleged breach are subject to its arbitration
provision.

Al

Harmoosh,

769

F.Supp.2d

at

842.

The

Court,

therefore, finds IMMDF’s Iraqi judgment on the promissory note
is contrary to the parties’ agreement to arbitrate. 11
Accordingly, the Court finds Defendants have demonstrated
that they are entitled to judgment as a matter of law regarding

10

Section 1716(c)(5) of California’s UFCMJRA provides that
“[a] court of this state is not required to recognize a foreigncountry judgment if . . . [t]he proceeding in the foreign court
was contrary to an agreement between the parties under which the
dispute in question was to be determined otherwise than by
proceedings in that foreign court.”
Cal.Civ.Proc.Code §
1716(c)(5) (West 2016).
Section 10-704(b) of Maryland’s
Recognition Act provides: “A foreign judgment need not be
recognized if . . . [t]he proceeding in the foreign court was
contrary to an agreement between the parties under which the
dispute was to be settled out of court.”
11
To the extent IMMDF argues Harmoosh waived his right to
arbitrate in the Iraqi Court, the Court finds that it has failed
to meet it heavy burden of demonstrating waiver. See supra note
7.
22

this

discretionary

ground

for

nonrecognition

and

will

grant

Defendants’ Motion as to Count I.
2.

Compelling Arbitration

Defendants also seek to compel arbitration.

Section 24.2

of the Loan Agreement requires the parties to arbitrate “[a]ll
disputes, controversies and claims . . . which may arise out of
or in connection with the Agreement or a breach, termination or
invalidity thereof.”

(Mot. to Compel Ex. 1, at 4, ECF No. 10-

1).
The

Federal

Arbitration

Act

(“FAA”)

requires

district

courts to direct parties to arbitrate “any issue referable to
arbitration

under

arbitration.” 12
S.Ct.

23,

parties

arbitration

agreement

in

writing

for

such

9 U.S.C. § 3 (2012); see KPMG LLP v. Cocchi, 132

25-26

to

an

(2011)

proceed

to

agreement

(“[D]istrict
arbitration

has

been

on

courts
issues

signed.”

shall
as

(quoting

direct
to

which

Dean

the
an

Witter

Reynolds, Inc. v. Byrd, 470 U.S. 213, 218 (1985)).
In the Fourth Circuit, a court must enter an arbitration
order if the petitioner demonstrates:
(1) the existence of a dispute between the
parties,
(2)
a
written
agreement
that
includes
an
arbitration
provision
which
12

The Court will apply the FAA as opposed to the Maryland
Uniform Arbitration Act because “[f]ederal law . . . governs
[arbitrability] in either state or federal court.”
Moses H.
Cone Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 23
(1983).
23

purports to cover the dispute, (3) the
relationship of the transaction, which is
evidenced by the agreement, to interstate or
foreign commerce, and (4) the failure,
neglect or refusal of the [opposing party]
to arbitrate the dispute.
Adkins v. Labor Ready, Inc., 303 F.3d 496, 500-01 (4th Cir.
2002) (quoting Whiteside v. Teltech Corp., 940 F.2d 99, 102 (4th
Cir. 1991)).
“[A] disagreement about whether an arbitration clause . . .
applies to a particular type of controversy” raises a question
of arbitrability.

Howsam v. Dean Witter Reynolds, Inc., 537

U.S. 79, 84 (2002).

An order to arbitrate a particular dispute

may be denied where the agreement “is not susceptible of an
interpretation that covers the asserted dispute.”
Inc.

v.

Commc’ns.

Workers

of

Am.,

475

U.S.

AT & T Tech.,

643,

650

(1986)

(quoting United Steelworkers of Am. v. Warrior & Gulf Navigation
Co.,

363

U.S.

574,

582-83

(1960)).

While

doubts

should

be

resolved in favor of coverage, Moses H. Cone Mem’l Hosp., 460
U.S.

at

24-25,

district

courts

must

recognize

that

“a

party

cannot be required to submit to arbitration any dispute which he
has not agreed so to submit.”

Howsam, 537 U.S. at 83 (quoting

Warrior & Gulf Navigation Co., 363 U.S. at 582).
In

the

recognition

instant
of

the

Complaint,

Iraqi

judgment

24

IMMDF

brought

(Count

I)

and

claims

for

fraudulent

conveyance (Count II). 13

(ECF No. 1).

Because the Court will

grant summary judgment as to Count I and will not recognize the
Iraqi judgment, the Court must determine whether the remaining
claim for fraudulent conveyance is arbitrable.
“To decide whether an arbitration agreement encompasses a
dispute a court must determine whether the factual allegations
underlying the claim are within the scope of the arbitration
clause, regardless of the legal label assigned to the claim.”
Mawing v. PNGI Charles Town Gaming, L.L.C., 426 F.App’x 198, 199
(4th Cir. 2011) (quoting J.J. Ryan & Sons, Inc. v. Rhone Poulenc
Textile, S.A., 863 F.2d 315, 319 (4th Cir. 1988)).
In Maryland, a fraudulent conveyance is “[e]very conveyance
made

and

every

obligation

incurred

with

actual

intent,

as

distinguished from intent presumed in law, to hinder, delay, or
defraud present or future creditors.”
15-207 (West 2015).
whether

matured

or

Md.Code Ann., Comm.Law §

A creditor is “a person who has any claim,
unmatured,

absolute, fixed, or contingent.”

13

liquidated

or

unliquidated,

Id. § 15-201(d).

It appears Defendants may be seeking to compel
arbitration of the breach of contract claims IMMDF brought
against Harmoosh on July 30, 2010 in this Court; however, the
disputes presented in the instant Complaint do not include
IMMDF’s breach of contract claims.
Harmoosh has not filed a
separate action or a counterclaim to compel arbitration of the
breach of contract claims. The Court, therefore, may not submit
the breach of contract claims to arbitration at this time.
25

In the 2011 Opinion, the Court determined IMMDF’s claims
for breach of the promissory note depended upon the existence of
the

Loan

Agreement,

which

included

a

valid

provision.

Al Harmoosh, 769 F.Supp.2d at 842.

provision

relates

to

all

disputes,

arbitration

The arbitration

controversies,

and

claims arising out of or in connection with the Loan Agreement.
IMMDF asserts that it has been a “judgment creditor of Harmoosh
since

at

least

2010,

and

is

currently

owed

in

excess

of

$2,000,000 pursuant to its [Iraqi] Judgment against Harmoosh.”
(Compl. ¶ 33, ECF No. 1).
Because the Court will not recognize the Iraqi Judgment,
IMMDF

would

not

Agreement.

be

Harmoosh’s

creditor

absent

the

Loan

Harmoosh’s

IMMDF’s fraudulent conveyance claim is related to
debt

promissory note.
connection

with

arbitration.

to

IMMDF

under

the

Loan

Agreement

and

the

The claim, therefore, arises out of or in
the

Loan

Agreement

and

is

subject

to

Accordingly, the Court will grant the Motion to

Compel as to Count II and dismiss this matter.

See Choice

Hotels Int'l, Inc. v. BSR Tropicana Resort, Inc., 252 F.3d 707,
709-10 (4th Cir. 2001) (“[D]ismissal is a proper remedy when all
of the issues presented in a lawsuit are arbitrable”).
III. CONCLUSION
For

the

foregoing

reasons,

it

is

hereby

ordered

that

Defendants’ Motion to Compel Arbitration and Dismiss or Stay
26

Action (ECF No. 10) is GRANTED.
be submitted to arbitration.

Count II of the Complaint shall
The Clerk shall CLOSE this case.

A separate order follows.
Entered this 30th day of March, 2016

/s/
_____________________________
George L. Russell, III
United States District Judge

27