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Iraq Middle Market Development Foundation v. Harmoosh

United States Court of Appeals, Fourth Circuit

February 2, 2017

IRAQ MIDDLE MARKET DEVELOPMENT FOUNDATION, Plaintiff - Appellant,
v.
MOHAMMAD ALI MOHAMMAD HARMOOSH, a/k/a Mohammed Alharmoosh; JAWAD ALHARMOOSH, Defendants-Appellees.

          Argued: December 7, 2016

         Appeal from the United States District Court for the District of Maryland, at Baltimore. George L. Russell III, District Judge. (1:15-cv-01124-GLR)

         ARGUED:

          D. Michelle Douglas, KALBIAN & HAGERTY, LLP, Washington, D.C., for Appellant.

          Mukti N. Patel, FISHERBROYLES LLP, Princeton, New Jersey, for Appellees.

         ON BRIEF:

          Haig V. Kalbian, KALBIAN & HAGERTY, LLP, Washington, D.C., for Appellant.

          Before WILKINSON, MOTZ, and FLOYD, Circuit Judges.

         Vacated and remanded by published opinion. Judge Motz wrote the opinion, in which Judge Wilkinson and Judge Floyd joined.

          DIANA GRIBBON MOTZ, Circuit Judge

         After securing a judgment in Iraq for non-payment of a promissory note, a creditor sought to have the judgment recognized in the federal district court for the District of Maryland. The debtor contended that the judgment was not entitled to recognition given that the parties had agreed to arbitrate their disputes. The district court agreed and granted summary judgment to the debtor. Because genuine issues of material fact remain as to whether the debtor lost his right to arbitrate by utilizing the Iraqi judicial process, we must vacate and remand for further proceedings.

         I.

         The Iraq Middle Market Development Foundation, a non-profit corporation, makes and services loans to local businesses in Iraq. On November 10, 2006, the Foundation agreed to lend $2 million to Al-Harmoosh for General Trade, Travel, and Tourism ("AGTTT"), a company headquartered in Najaf, Iraq. 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." The clause identifies Amman, Jordan as the venue for arbitration. As part of the deal, Mohammad Harmoosh, a managing partner of AGTTT and a dual citizen of Iraq and the United States, who resides in Maryland, executed a promissory note guaranteeing repayment of the loan.

         In 2010, after Harmoosh had refused to repay the loan, the Foundation tried to collect by suing him for breach of contract in federal court in Maryland. Harmoosh moved to dismiss, arguing that his alleged breach was an arbitrable dispute "aris[ing] out of or in connection with" the loan agreement. The district court agreed and dismissed the Foundation's complaint. 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. 9 U.S.C. § 3 (2012).

         In February 2014, the Foundation filed another civil action against Harmoosh to collect on the promissory note, this time in the Court of First Instance for Commercial Disputes in Baghdad. Harmoosh appeared in that court through counsel and asserted at least two affirmative defenses. He contended that the court lacked personal jurisdiction and that he was not personally liable because he guaranteed the loan only in his capacity as a shareholder. The parties disagree as to whether Harmoosh raised the arbitration clause as a third defense. It is undisputed that, under Iraqi law, although a valid arbitration clause deprives a court of ...


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