Leonard A. Sacks & Associates v. International Monetary Fund ( 2022 )

United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued December 9, 2021 Decided February 25, 2022
No. 21-7034
LEONARD A. SACKS & ASSOCIATES, P.C.,
APPELLANT
v.
INTERNATIONAL MONETARY FUND,
APPELLEE
Appeal from the United States District Court
for the District of Columbia
(No. 1:20-cv-02266)
Donald H. Spence, Jr. argued the cause for appellant.
With him on the briefs was Leonard A. Sacks.
James R. Newland, Jr. argued the cause for appellee. With
him on the brief were Kiran Aftab Seldon and Renee B. Appel.
Before: HENDERSON and PILLARD, Circuit Judges, and
SILBERMAN, Senior Circuit Judge.
Opinion for the Court filed by Circuit Judge PILLARD.
PILLARD, Circuit Judge: Plaintiff Leonard A. Sacks &
Associates, P.C. (Sacks) sued the International Monetary Fund
2
(Fund or IMF) to modify or vacate an arbitration award it
obtained against the Fund. The Fund asserted its immunity,
and the district court dismissed the case. Sacks does not
dispute the Fund’s general entitlement to immunity under its
Articles of Agreement, which have legally binding effect in the
United States pursuant to the Bretton Woods Agreements Act
(Bretton Woods Act). But Sacks claims that, by including in
the parties’ contract an agreement to arbitrate under the rules
of the American Arbitration Association (AAA) and the laws
of the District of Columbia, the Fund effected a limited waiver
of that immunity to allow judicial enforcement, modification,
or vacatur of any resulting arbitration award. Sacks’ argument
makes good sense: Both the AAA Rules and D.C. law
contemplate judicial involvement in the enforcement of arbitral
awards, so arguably the contract does as well. But a waiver of
the immunity of an international organization must be explicit.
Because the Fund’s contract with Sacks expressly retains the
Fund’s immunity, reiterating it even within the arbitration
clause itself, we affirm.
BACKGROUND
The International Monetary Fund “is an international
organization whose purposes include promoting international
monetary cooperation, facilitating the expansion and balanced
growth of international trade, promoting exchange stability
among its 190 member countries, and providing temporary
financial assistance to its member countries experiencing
balance of payments difficulties.” Appellee Br. at 11. Sacks is
an experienced construction law practice with a twenty-year
history of working with the Fund even before the
representation that gave rise to this case.
In 2011, the Fund hired Sacks to negotiate disputed claims
of various contractors that worked on the renovation of the
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Fund’s Washington, D.C. headquarters. The parties’ contract
asserts the Fund’s immunity from suit and provides that any
disputes not settled by mutual agreement shall be resolved by
arbitration. As to immunity, in a clause entitled “Immunities
of the International Monetary Fund: Taxes and Disputes,” the
contract recites that Article IX of the Fund’s Articles of
Agreement, as incorporated into U.S. law by the Bretton
Woods Act, “provides that the International Monetary Fund, its
property and its assets, wherever located and by whomsoever
held, are immune from every form of judicial process.” App.
63. It goes on to say: “Accordingly, and notwithstanding
anything to the contrary in this Agreement or any documents
to which it refers, it is expressly agreed and understood that”
any disputes are to be resolved not by litigation, but by
arbitration. App. 64.
The arbitration clause, nested within that immunity-from-
taxes-and-disputes provision, states:
Any controversy [or] claim arising out of or relating
to the Contract or any breach, termination [or]
invalidity thereof, shall be settled by the mutual
agreement of the parties hereto, provided that failing
such agreement the dispute shall be finally settled by
binding arbitration administered by the American
Arbitration Association (AAA) in accordance with
its Commercial Arbitration Rules then in
effect . . . . The arbitral case shall be decided
according to the terms of the Contract and the law of
the District of Columbia. If a claim or dispute would
have been barred by a time limitation had it been
asserted in a court of the District of Columbia, then
the Tribunal shall declare the claim or dispute to be
extinguished on the merits. Each party agrees to
implement any requirements of the arbitrator or
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arbitrators directed to it in accordance with those
rules.
App. 63-64. The arbitration clause concludes with a sentence
reiterating the Fund’s immunity: “It is understood and agreed
that the submission of a claim or dispute to arbitration shall not
excuse either party from performing its obligations under the
contract, and shall not be considered to be a waiver of the
immunities of the IMF.” App. 64.
Early in 2016, in an effort to hasten the resolution of the
contractors’ claims and get the project back on track, Sacks and
the Fund amended their contract to provide for a “reverse
contingent fee” on settlements of any of twelve remaining
contractors’ claims if Sacks succeeded in wrapping them up
before the end of March 2016. App. 32. By mid-April 2016,
Sacks had settled all but two of the claims. Sacks alleged that
its legal work on the settlements saved the Fund about $45
million. Sacks contends that the Fund itself at that point
calculated Sacks’ fee under the Agreement to be $4,152,945
but paid only $2,369,000. The Fund rebuffed Sacks’ protests
of underpayment with representations “that the parties would
‘square up’ after one of the remaining final subcontractor
claims - the Halac claim - was settled.” App. 13. Once the
Halac claim settled in May 2017 and Sacks again requested an
accounting for its services, the Fund responded that it had
already paid all the fees it owed.
Per the parties’ contract, Sacks filed a demand for
arbitration with the AAA. The arbitration panel awarded Sacks
$39,918.82 plus interest in additional compensation for Sacks’
legal work on the Halac claim after the prior fee payment, but
denied Sacks’ claim of underpayment in connection with the
earlier work.
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Sacks sued the Fund in D.C. Superior Court for
modification or vacatur of the arbitration award. Sacks claimed
that the award should be vacated pursuant to D.C. Code § 16-
4423 on grounds that it “was procured by undue means,” and
“was the result of misconduct by the arbitrators.” Motion to
Modify and/or Motion to Vacate Arbitration Award of Leonard
A. Sacks & Associates, P.C. at 1, Leonard A. Sacks & Assocs.,
P.C. v. Int’l Monetary Fund, No. 2020 CA 000711 C (D.C.
Super. Ct. Jan. 30, 2020), App. 11. Sacks also claimed that the
award was “defective as [to] the calculation of the amount
awarded to Sacks and should be modified” per D.C. Code § 16-
4424. Id.The Fund specially appeared for the limited purpose of
removing the case to federal court and asserting its immunity
from suit. The Fund sought removal under the Bretton Woods
Act, which establishes that actions by or against the IMF arise
under federal law and may be litigated in federal court. See 22
U.S.C. § 286g. That same day, it also moved to dismiss the suit
on immunity grounds pursuant to its Articles of Agreement, the
relevant provisions of which are given effect in the United
States by the Bretton Woods Act, 22 U.S.C. § 286h.
Sacks did not dispute that the Fund is generally entitled to
immunity from suit, but asserted the contract waived immunity
relating to enforcement of the arbitration clause. The contract
expressly provided for arbitration pursuant to the AAA Rules,
which contemplate courts’ entry of judgment on arbitral
awards, and D.C law, which permits judicial modification or
vacatur for certain narrowly circumscribed reasons. Rule R-
52(c) of the AAA Commercial Arbitration Rules provides that:
“Parties to an arbitration under these rules shall be deemed to
have consented that judgment upon the arbitration award may
be entered in any federal or state court having jurisdiction
6
thereof.” 1 And the D.C. Code empowers courts to modify
arbitral awards on grounds such as “an evident mathematical
miscalculation,” § 16-4424(a)(1), or to vacate them if, among
other things, the “award was procured by corruption, fraud, or
other undue means,” or there was “[e]vident partiality by an
arbitrator,” § 16-4423(a). Sacks argued that, by agreeing to an
arbitration clause referencing AAA rules and D.C. law, the
Fund explicitly waived its immunity against his suit seeking the
modification or vacatur of the arbitrators’ award on grounds
those provisions contemplate.
The district court granted the Fund’s motion to dismiss,
rejecting each of Sacks’ waiver theories. See generally
Leonard A. Sacks & Assocs., P.C. v. Int’l Monetary Fund, No.
CV 20-2266, 2021 WL 1166738 (D.D.C. Mar. 26, 2021),
reprinted in App. 137-42. The court first disposed of Sacks’
argument that the Fund waived its absolute immunity by
agreeing to arbitrate under the AAA Rules. Because the
contract specifically preserves the Fund’s immunity
“notwithstanding anything to the contrary in th[e] Agreement
or any documents to which it refers,” App. 64, the court held
that it could not treat reference to or incorporation of the AAA
Rules in the parties’ contract as an express waiver. The court
likewise rejected Sacks’ argument that the Fund waived its
1
Commercial Arbitration Rules and Mediation Procedures,
AMERICAN ARBITRATION ASSOCIATION 29 (Oct. 1, 2013),
https://www.adr.org/sites/default/files/CommercialRules_Web.pdf.
See What Happens After the Arbitrator Issues an Award, AMERICAN
ARBITRATION ASSOCIATION 2, https://www.adr.org/sites/default
/files/document_repository/AAA229_After_Award_Issued.pdf
(“Under federal and state laws, there are only a few ways to challenge
an arbitrator’s award. The Federal Arbitration Act (‘FAA’) and
some state laws provide the reasons why an award can be vacated
(thrown out), modified (changed), or corrected. Those reasons are
very limited in general.”).
7
immunity by agreeing to arbitrate under D.C. law. The contract
states that “[t]he arbitral case shall be decided” according to the
contract’s terms and D.C. law, App. 64, which the court read
to specify the substantive law the arbitrators should apply in
interpreting the contract, not to invite review of their awards.
Finally, the district court distinguished C & L Enterprises,
Inc. v. Citizen Band Potawatomi Indian Tribe of Oklahoma,
532 U.S. 411 (2001), on which Sacks substantially relied. The
court noted that the contract in C & L Enterprises, unlike the
contract at issue in this case, included a provision explicitly
recognizing that an arbitral award thereunder could be
“reduced to judgment” by a court. Sacks, 2021 WL 1166738,
at *3, App. 141 (quoting C & L Enters., 532 U.S. at 418-19).
The court also pointed out that the IMF contract’s identification
of D.C. law as applying in the “arbitral case” materially
differed from the C & L Enterprises contract’s choice-of-law
provision, Sacks, 2021 WL 1166738, at *3, App. 141-42,
which identified the law under which the “contract shall be
governed,” 532 U.S. at 415. Finally, the court concluded that
C & L Enterprises does not support Sacks’ waiver claim
because, “unlike the contract in that case, the one at issue here
specifically reaffirms the Fund’s immunity.” Sacks, 2021 WL
1166738, at *3, App. 142.
Sacks timely appealed.
ANALYSIS
We review an international organization’s claim of
immunity de novo. See Nyambal v. Int’l Monetary Fund, 772
F.3d 277, 280 (D.C. Cir. 2014).
We start from the shared premise that the Fund is generally
immune from suit. The Fund’s immunity is more protective
than the immunity afforded international organizations under
8
the International Organizations Immunities Act (IOIA), 22
U.S.C. § 288a(b). See Nyambal, 772 F.3d at 281; see also Jam
v. Int’l Fin. Corp., 139 S. Ct. 759, 771-72 (2019) (including the
Fund in a list of international organizations with charters that
“specify a different level of immunity” from what the IOIA
provides). Article IX § 3 of the Fund’s Articles of Agreement,
which has full force and effect in the United States under the
Bretton Woods Act, 22 U.S.C. § 286h, grants the Fund absolute
immunity from suit absent its express waiver. Thus, the
Fund “enjoy[s] immunity from every form of judicial process
except to the extent that it expressly waives its immunity for
the purpose of any proceedings or by the terms of any
contract.” Nyambal, 772 F.3d at 281 (alterations in original)
(quoting Articles of Agreement, Art. IX § 3).
Sacks argues that the arbitration clause in the Fund’s
contract for Sacks’ legal services waived the Fund’s immunity
from suit for the limited purpose of allowing Sacks to
enforce—or, conversely, to modify or vacate—any resultant
arbitration award. We thus look to the contract for an
expression of any such waiver. See C & L Enters., 532 U.S. at
418; Nyambal, 772 F.3d at 282.
The Supreme Court in C & L Enterprises provided a
framework for determining whether an entity waived its
immunity by agreeing to arbitrate. The text of the contract at
issue there, like the one in this case, contained no affirmative
immunity waiver. Rather the claim there, as here, rested on the
incorporation of processes or laws that contemplate a role for
courts. The Court in C & L Enterprises addressed “the impact
of an arbitration agreement” within “a standard form
construction contract signed by the parties” on “a tribe’s plea
of suit immunity.” 532 U.S. at 414. “The question presented
[wa]s whether the Tribe waived its immunity from suit in state
court when it expressly agreed to arbitrate disputes with C & L
9
relating to the contract, to the governance of Oklahoma law,
and to the enforcement of arbitral awards ‘in any court having
jurisdiction thereof.’” Id.The Court held that “by the clear import of the arbitration
clause, the Tribe is amenable to a state-court suit to enforce an
arbitral award in favor of contractor C & L.” 532 U.S. at 414.
Several features of the contract between the Tribe and the
contractor supported that conclusion. First, the contract
“require[d] resolution of all contract-related disputes between
C & L and the Tribe by binding arbitration,” and specified that
the AAA Rules for the construction industry would govern. Id.
at 419. Those Rules, in turn, provided: “Parties to these rules
shall be deemed to have consented that judgment upon the
arbitration award may be entered in any federal or state court
having jurisdiction thereof.” Id. at 415 (quoting American
Arbitration Association, Construction Industry Dispute
Resolution Procedures, R-48(c) (Sept. 1, 2000)). Second, the
contract stated it was “governed by the law of the place where
the Project [wa]s located.” Id. The Project was in Oklahoma,
and Oklahoma law empowered courts to enforce arbitration
awards. Id. at 415, 419-20. Third, “the contract specifically
authorize[d] judicial enforcement of the resolution arrived at
through arbitration.” Id. at 422. C & L’s arbitration clause
stated that “[t]he award rendered by the arbitrator or arbitrators
shall be final, and judgment may be entered upon it in
accordance with applicable law in any court having jurisdiction
thereof.” Id. at 415. The Court was therefore satisfied “that
under the agreement the Tribe proposed and signed, the Tribe
clearly consented to arbitration and to the enforcement of
arbitral awards in Oklahoma state court,” and “thereby waived
its sovereign immunity from C & L’s suit.” Id. at 423.
Sacks relies on two key similarities between the contract
at issue here and the C & L contract. Like the C & L contract,
10
the IMF contract provides that disputes “shall be finally settled
by binding arbitration administered by the American
Arbitration Association (AAA) in accordance with its
Commercial Arbitration Rules then in effect.” App. 64; see C
& L Enters., 532 U.S. at 419. And, like the AAA construction
industry rules at issue in C & L Enterprises, Rule 52 of the
AAA Commercial Arbitration Rules provides that: “Parties to
an arbitration under these rules shall be deemed to have
consented that judgment upon the arbitration award may be
entered in any federal or state court having jurisdiction
thereof.” 2 Sacks argues that by incorporating the AAA Rules
the Fund, like the Tribe in C & L Enterprises, consented to the
courts’ jurisdiction to enter judgment on an arbitration award.
And Sacks contends that waiver to allow a court to enter
judgment on an award encompasses a court’s authority to
modify or vacate the award where circumstances so warrant.
Sacks also points to the provision in the IMF contract
stating that “[t]he arbitral case shall be decided according to the
terms of the Contract and the law of the District of Columbia,”
App. 64, and notes that D.C. law contains limited provision for
the modification, D.C. Code § 16-4424, and vacatur, D.C.
Code § 16-4423, of arbitration awards. Similarly, the C & L
contract set Oklahoma law as the governing law, and
Oklahoma law provided for the enforcement of arbitral awards
in court. 532 U.S. at 415. Sacks thus argues that, by selecting
D.C. law to govern the contract, the Fund waived its immunity
from judicial modification or vacatur of an award on grounds
recognized by D.C. law.
But Sacks does not account for two key features of the IMF
and C & L contracts that differ: The IMF contract contains
express preservations of immunity that were absent from the C
2
See supra note 1.
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& L contract. And the C & L contract explicitly provided for
entry of judgment on arbitral awards, whereas the IMF contract
does not. The contract at issue in C & L Enterprises was a
standard form contract. It did not mention Tribal immunity at
all, and it went beyond deeming final any award entered
pursuant to its arbitration clause to provide that “judgment may
be entered upon it in accordance with applicable law in any
court having jurisdiction thereof.” 532 U.S. at 415. The
Fund’s arbitration clause, by contrast, appears in a section titled
“Immunities of the International Monetary Fund,”
underscoring that the Fund views resolution of disputes by
arbitration as part and parcel of preserving its immunity from
judicial process. App. 63. The IMF contract broadly affirms
that the Fund’s Articles of Agreement render it “immune from
every form of judicial process.” App. 63. And the concluding
sentence of the arbitration clause itself declares that “[i]t is
understood and agreed that the submission of a claim or dispute
to arbitration . . . shall not be considered to be a waiver of the
immunities of the IMF.” App. 64.
Despite the IMF contract’s inclusion of the kinds of cross
references to AAA Rules and state law that supported the
waiver holding in C & L Enterprises, this contract’s express
preservations of immunity and lack of any contemplation that
a court might enter judgment on the award distinguishes this
case. Indeed, although the Fund itself does not cite this
particular phrase, its contract contains a somewhat unusual
commitment that “[e]ach party agrees to implement any
requirements of the arbitrator or arbitrators directed to it in
accordance with those rules,” App. 64—perhaps
acknowledging that it is up to the parties to carry out any award
in the absence of judicial involvement. In the face of an
explicit, blanket assertion that submission to arbitration “shall
not be considered to be a waiver of the immunities of the IMF,”
App. 64, and the absence of any express contemplation of
12
judicial involvement as was present in the C & L contract, we
cannot say that the Fund explicitly waived immunity even for
the limited purpose of determining the validity (or not) of an
arbitral award and reducing it to judgment.
Sacks disagrees, contending that the contract does not
actually preserve the Fund’s immunity from judicial
modification or vacatur of an arbitration award, but preserves
it only for other purposes. Sacks reads the concluding sentence
of the arbitration clause to mean that “[a]fter Sacks filed its
claim with the AAA, it was understood that the Fund’s
immunity as to all . . . issues not ‘arising out of or relating to
the Contract’ remained intact,” even as “immunity was waived
as to dispute resolution through arbitration in accordance with
the AAA Rules.” Reply Br. at 9. That explanation is
unpersuasive. Nobody would think that by agreeing to arbitrate
“[a]ny controversy [or] claim arising out of or relating to the
Contract or any breach, termination [or] invalidity thereof,”
App. 64, the Fund ran a risk of waiving its immunity regarding
issues unrelated to the contract. It makes no sense that the Fund
would restate its immunity as it did to guard against that
unlikely prospect. Rather, given C & L Enterprises, the natural
reading is that the Fund was concerned that its agreement to
arbitrate might subject it to the kinds of limited judicial review
to which arbitration awards are ordinarily subject. The Fund’s
insistence in the arbitration clause itself that it was not waiving
its immunity suffices to contradict the implication that it was.
CONCLUSION
The Fund’s entitlement to absolute immunity from suit,
together with the fact that it explicitly reaffirmed its immunity
in its agreement to arbitrate with Sacks, compels us to affirm.
It is true, as Sacks argues, that the Court in C & L Enterprises
observed that an arbitration “regime has a real world objective;
13
it is not designed for regulation of a game lacking practical
consequences,” 532 U.S. at 422, and concluded the arbitration
clause before it would be “meaningless if it did not constitute a
waiver of whatever immunity” the Tribe otherwise had, id.(quoting Native Vill. of Eyak v. GC Contractors, 658 P.2d 756,
760 (Alaska 1983)). As IMF counsel acknowledged at oral
argument, absent waiver, the Fund’s immunity from suit
entitles it to ignore an arbitration award against it. Oral Arg.
Rec. 12:27-12:31. Thus, although the IMF contract says any
disputes arising from or relating to it shall be “finally settled by
binding arbitration,” App. 64, its arbitration clause does not
actually bind the Fund to the arbitral result in any meaningful
legal sense.
But the concerns the Court expressed in C & L Enterprises
are alleviated here by the Fund’s explicit preservation of its
immunity. The assertion of immunity within the arbitration
clause itself makes a difference: Parties in Sacks’ position have
a choice whether to avoid agreeing to such terms with immune
entities like the IMF without at least a limited waiver of their
immunity, or—as Sacks did here—to contract on the IMF’s
terms. Unlike the contractor in C & L Enterprises, Sacks had
reason to believe the normal safeguards ordinarily associated
with binding arbitration had been contracted away. Cf. C & L
Enters., 532 U.S. at 422 (“And to the real world end, the
contract specifically authorizes judicial enforcement of the
resolution arrived at through arbitration.”). Absent an explicit
waiver that is not present here, we will not disturb the terms the
Fund offered and Sacks, an experienced law firm, chose to
accept.
For the foregoing reasons, we affirm.
So ordered.