Zhan v. World Bank ( 2019 )

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
RENJIE ZHAN,
Plaintiff,
v. No. 19-cv-1973 (DLF)
WORLD BANK,
Defendant.
MEMORANDUM OPINION
In the early 1990s, the World Bank helped the Chinese government fund construction of
the Shuikou Hydroelectric Power Station (the “Shuikou Dam”). The project forced nearby
villagers to resettle, and the Chinese government allegedly broke its promise to compensate those
villagers. With this putative class action, Renjie Zhan sues the World Bank for its role in the
project. Compl., Dkt. 1. Before the Court is the World Bank’s Motion to Dismiss for lack of
subject-matter jurisdiction and for failure to state a claim. Mot. to Dismiss, Dkt. 10. Because the
Bank is immune from this type of suit under the International Organizations Immunities Act, the
Court lacks subject-matter jurisdiction and will grant the Bank’s motion.
I. BACKGROUND1
The World Bank, which comprises two separate institutions, the International
Development Association (IDA) and the International Bank for Reconstruction and Development
(IBRD), “is an international financial institution” charged with “assisting the development of its
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In considering a motion to dismiss for lack of subject-matter jurisdiction, the Court accepts as
true all of the Complaint’s material allegations. See, e.g., Muir v. Navy Fed. Credit Union, 529
F.3d 1100, 1105 (D.C. Cir. 2008).
member nation’s territories, promoting and supplementing private foreign investment, and
promoting long range balanced growth in international trade.” Mendaro v. World Bank, 717
F.2d 610, 611 (D.C. Cir. 1983). The United States joined the 140-member Bank in 1945. See id.
The Bank’s toolkit includes the ability to lend directly to member nations. See id. at 12.
In the “early 1990s,” the Bank helped the Chinese government finance the Shuikou Dam
with a direct loan. Compl. ¶ 5. As part of this construction project, the government identified
areas that would become submerged once the dam was complete. Id. The village with the “most
serious losses from the submersion” was a village called Xiadun. Id. at ¶ 8. “All farmland” and
“[p]art of the forest” in Xiadun were submerged. Id. To help the villagers living in those and
other areas resettle, the government offered them “an extremely low compensation
arrangement.” Id. at ¶ 5. But a “self-fattening policy” of bribery, corruption, and embezzlement
kept the government from compensating these villagers until 2002, when the government started
making “very small” compensation payments. See id. at ¶¶ 10–12.
As for the World Bank’s role, Zhan alleges that the Bank was supposed to keep a “close
watch” on the resettlement process but instead “turned a blind eye to the behavior of
government officials and to the difficulty of the migrants on the ground in the Submersion
District.” Id. at ¶ 14. And because of the Bank’s “protection,” government corruption continues
to stymie the resettled villagers from receiving compensation for their lost property. Id. at ¶ 15.
Zhan, proceeding pro se, purports to represent 252 Xiadun villagers who “did not receive
any compensation for their lost land or houses.” Id. at ¶ 9. Zhan filed the Complaint on July 2,
2019, seeking $12,332,500 to compensate for the villagers’ lost homes, another $2,520,00 “to
cover damages and other costs incurred by the plaintiffs as a result of this incident,” and “all
costs related to this lawsuit.” Id. at ¶¶ 16–18. The World Bank moved to dismiss under Federal
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Rule of Civil Procedure 12(b)(1) for lack of subject-matter jurisdiction and under Federal Rule of
Civil Procedure 12(b)(6) for failure to state a claim. For the reasons that follow, the Court will
dismiss this case under Rule 12(b)(1). Because the Court lacks subject-matter jurisdiction, it will
not consider the World Bank’s Rule 12(b)(6) arguments.
II. LEGAL STANDARD
A court facing with a Rule 12(b)(1) motion to dismiss must accept “all material factual
allegations in the complaint and construe the complaint liberally, granting plaintiff the benefit of
all inferences that can be derived from the facts alleged.” Am. Nat’l Ins. Co. v. FDIC, 642 F.3d
1137, 1139 (D.C. Cir. 2011) (quotation omitted). But “the court need not accept factual
inferences drawn by plaintiffs if those inferences are not supported by facts alleged in the
complaint,” and the court need not “accept plaintiff’s legal conclusions.” Disner v. United
States, 888 F. Supp. 2d 83, 87 (D.D.C. 2012) (quotation omitted). Nor is the court “limited to
the allegations of the complaint.” Hohri v. United States, 782 F.2d 227, 241 (D.C. Cir. 1986),
vacated on other grounds, 482 U.S. 64 (1987). It “may consider such materials outside the
pleadings as it deems appropriate to resolve the question whether it has jurisdiction to hear the
case.” Scolaro v. D.C. Bd. of Elections & Ethics, 104 F. Supp. 2d 18, 22 (D.D.C. 2000). And
“[i]f the court determines at any time that it lacks subject-matter jurisdiction, the court must
dismiss the action.” Fed. R. Civ. P. 12(h)(3).
III. ANALYSIS
Thanks to two Executive Orders, the World Bank’s two constituent intuitions are “public
international organizations entitled to the privileges, exemptions, and immunities conferred by
the” International Organizations Immunities Act (IOIA). Exec Order No. 9,751, 11 Fed. Reg.
7,713 (July 13, 1946) (designating the IBRD); see Exec. Order No. 11,966, 42 Fed. Reg. 4,331
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(Jan. 24, 1977) (designating the IDA). The IOIA provides that such organizations “shall enjoy
the same immunity from suit and every form of judicial process as is enjoyed by foreign
governments . . . .” 22 U.S.C. § 288a(b).
This immunity has two main exceptions. First, the IOIA limits this immunity “to the
extent that such organizations may expressly waive their immunity for the purpose of any
proceedings or by the terms of any contract.” Id. And second, the Supreme Court held recently
that the IOIA’s reference to “same immunity” means the same immunity that foreign
governments enjoy “at any given time,” not the immunity they enjoyed when Congress passed
the IOIA. Jam v. Int’l Fin. Corp., 139 S. Ct. 759, 772 (2019). “Today, that means that the
Foreign Sovereign Immunities Act” (FSIA)—which did not exist when Congress enacted the
IOIA—“governs the immunity of international organizations.” Id.
The World Bank is thus immune from suit unless an FSIA exception applies or the Bank
expressly waived its immunity under the IOIA. Neither is present here.
First, no FSIA exception applies. It is the plaintiff’s burden to establish subject-matter
jurisdiction, yet Zhan does not identify a relevant FSIA exception. See Hudes v. Aetna Life Ins.
Co., 806 F. Supp. 2d 180, 186 (D.D.C. 2011). And in any event, no FSIA exception could apply.
As explained below, the World Bank has not “waived its immunity” expressly, nor is there any
plausible argument that the Bank waived its immunity implicitly. 28 U.S.C. § 1605(a)(1). This
suit is not “based upon” an act connected to “a commercial activity of the foreign state . . . that
causes a direct effect in the United States.” 28 U.S.C. § 1605(a)(2). The “gravamen” of this suit
centers not on commercial activity but rather on the Chinese government’s tortious actions in
China and against Chinese citizens. OBB Personenverkher AG v. Sachs, 136 S. Ct. 390, 395–96
(2015). This case does not involve “rights in property taken in violation of international law.”
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28 U.S.C. § 1605(a)(3). It does not involve rights in any “property in the United States,” let
alone property “acquired by succession or gift” or “immovable property.” 28 U.S.C.
§ 1605(a)(4). It does not involve money damages sought “for personal injury or death, or
damage to or loss of property, occurring in the United States.” 28 U.S.C. § 1605(a)(5). And it
does not seek to enforce an arbitration agreement. See 28 U.S.C. § 1605(a)(6). The FSIA does
not pierce immunity here.
Second, the World Bank has not expressly waived its immunity. Once again, Zhan does
not argue as much. And that argument would fail regardless.
The World Bank has indeed waived certain immunity through its Articles of Agreements.
Article VII, § 3 of the IBRD Articles of Agreement provides: “Actions may be brought against
the Bank only in a court of competent jurisdiction in the territories of a member in which the
Bank has an office, has appointed an agent for the purpose of accepting service or notice of
process, or has issued guaranteed securities.” The IDA Articles of Agreement contain an
identical provision. See IDA Articles of Agreement, art. VIII, § 3.
But the D.C. Circuit has interpreted this provision to waive the Bank’s immunity only
“from suits by its debtors, creditors, bondholders, and those other potential plaintiffs to whom
the Bank would have to subject itself to suit in order to achieve its chartered objectives.”
Mendaro v. World Bank, 717 F.2d 610, 615 (D.C. Cir. 1983). The Mendaro court reasoned that
waiving immunity for debtors, creditors, and bondholders furthers the Bank’s objectives because
those parties are more likely to transact with the World Bank if judicial recourse is available
when deals go sideways. See id. at 618. Thus, the “default rule” under Mendaro is that “the
Bank’s immunity should be construed as not waived unless the particular type of suit would
further the Bank’s objectives.” Atkinson v. Inter-Am. Dev. Bank, 156 F.3d 1335, 1338 (D.C. Cir.
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1998), abrogated on other grounds by Jam v. Int’l Fin. Corp., 139 S. Ct. 759 (2019); see also
Vila v. Inter-Am. Inv. Corp., 570 F.3d 274, 278 (D.C. Cir. 2009) (describing the Mendaro rule as
“a test to determine whether such charter terms waive a specific type of lawsuit”).
A suit like this one would hinder the Bank, not help it. As the Bank correctly warns,
exposure to liability for “decades-old loans where plaintiffs have been allegedly injured by the
borrower—and not the actions of the World Bank—would severely interfere with and hamper
the Bank’s operations.” Mot. to Dismiss at 10. Such exposure would also make certain loans
riskier than they would otherwise be, reducing the Bank’s financial capacity and willingness to
lend. And even if the Bank could conceivably benefit from waiving immunity here, any limited
benefit “would be substantially outweighed by the burdens caused by judicial scrutiny of the
[Bank’s] discretion to select and administer programs.” Mendaro, 717 F.2d at 617. “This clear
lack of benefit—indeed, disadvantage—of a waiver of immunity . . . compels the conclusion that
Section 3 of the agreement should not be construed to waive the Bank’s immunity in this case.”
Atkinson, 156 F.3d at 1338–39.
CONCLUSION
For these reasons, the Court grants the World Bank’s motion to dismiss and dismisses
this case without prejudice. A separate order accompanies this Memorandum Opinion.
________________________
DABNEY L. FRIEDRICH
United States District Judge
November 20, 2019
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