Tarek Fouad v. State

• Court: Court of Appeals for the Ninth Circuit
• Decided: February 16, 2021
• Docket: 20-55531
• Status: Unpublished

Opinion

NOT FOR PUBLICATION FILED UNITED STATES COURT OF APPEALS FEB 16 2021 MOLLY C. DWYER, CLERK U.S. COURT OF APPEALS FOR THE NINTH CIRCUIT

TAREK A. FOUAD, derivatively on behalf No. 20-55531 of nominal defendant Digital Soula Systems, D.C. No. Plaintiff-Appellant, 8:19-cv-01837-RGK-ADS

v. MEMORANDUM* THE STATE OF QATAR; QATAR ARMED FORCES; DIGITAL SOULA SYSTEMS, Nominal Defendant, Real Party in Interest,

Defendants-Appellees.

Appeal from the United States District Court for the Central District of California R. Gary Klausner, District Judge, Presiding

Submitted February 11, 2021** Pasadena, California

Before: BOGGS,*** M. SMITH, and MURGUIA, Circuit Judges.

* This disposition is not appropriate for publication and is not precedent except as provided by Ninth Circuit Rule 36-3. ** The panel unanimously concludes this case is suitable for decision without oral argument. See Fed. R. App. P. 34(a)(2). *** The Honorable Danny J. Boggs, United States Circuit Judge for the U.S. Court of Appeals for the Sixth Circuit, sitting by designation. This dispute arises out of business dealings between the State of Qatar and a

Qatari defense and security consultancy company, Digital Soula Systems (DSS).

Plaintiff Tarek A. Fouad (Fouad) filed a derivative action in his role as shareholder

on behalf of DSS against the State of Qatar and the Qatar Armed Forces

(collectively, Qatar Defendants). Fouad appeals the district court’s dismissal of his

First Amended Complaint (FAC) for forum non conveniens pursuant to a forum

selection clause that provided Qatari courts with exclusive jurisdiction over the

dispute. Because the parties are familiar with the facts, we do not recount them here,

except as necessary to provide context to our ruling.

We have jurisdiction under 28 U.S.C. § 1291. We review an order dismissing

a case for forum non conveniens based on a forum selection clause for abuse of

discretion. Yei A. Sun v. Advanced China Healthcare, Inc., 901 F.3d 1081, 1086 (9th

Cir. 2018). We review an order denying a motion to compel arbitration de novo.

O’Connor v. Uber Techs., Inc., 904 F.3d 1087, 1093 (9th Cir. 2018) (citing Kilgore

v. KeyBank, Nat’l Ass’n, 718 F.3d 1052, 1057 (9th Cir. 2013) (en banc)). We affirm.

DSS contracted with the State of Qatar to provide consulting services under a

Consultancy Services Agreement. Article 56.1 of the Consultancy Services

Agreement specified that any disputes arising from the agreement would be

arbitrated under the rules of the International Chamber of Commerce International

2 Court of Arbitration (ICC) in London, England. Article 56.2 specified that the

agreement would be governed by the laws of the State of Qatar.

Around March 2015, DSS began performance under the Consultancy Services

Agreement. After certain milestones were met, significant delays occurred. DSS

continued to work and billed QAR 16,087,456 (US $4,419,626) but was never paid.

Between August 30, 2018 and November 1, 2018, the other two DSS

shareholders, Lt. Col. Al-Mannai and Mr. Abu-Issa, entered into a settlement on

behalf of DSS with the Qatar Defendants. The Settlement Agreement released the

Qatar Defendants from any claims involving the Consultancy Services Agreement

in exchange for QAR 9,021,550 (US $2,471,658). The Settlement Agreement

specified that Qatari law would govern the agreement and that the courts of Qatar

would have exclusive jurisdiction over any disputes arising from the agreement.

After two separate requests for arbitration before the ICC were dismissed,

Fouad filed suit, later amending with the operative FAC. Qatar Defendants and DSS

moved to dismiss, arguing, in part, that the case should be dismissed for forum non

conveniens pursuant to the forum selection clause in the Settlement Agreement or,

alternatively, pursuant to the Consultancy Services Agreement’s arbitration clause.

Fouad opposed the motions and sought an order staying the case and compelling

arbitration in California.

3 The district court issued an order: (1) denying Fouad’s motion to stay the case

and compel arbitration, (2) granting Qatar Defendants’ motion to dismiss, and (3)

denying as moot DSS’s motion to dismiss. Fouad appealed.

1. Fouad argues the district court erred by dismissing the FAC because the forum

selection clause in the Settlement Agreement was unenforceable. Federal law applies

to interpreting a forum selection clause. Manetti-Farrow, Inc. v. Gucci America,

Inc., 858 F.2d 509, 513 (9th Cir. 1988). Forum selection clauses are considered

prima facie valid. See Carnival Cruise Lines v. Shute, 499 U.S. 585, 589 (1991);

Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 9–11 (1972). A forum selection clause

may be unenforceable for three reasons: (1) “if the inclusion of the clause in the

agreement was the product of fraud or overreaching”; (2) the selected forum is so

“gravely difficult and inconvenient” that the complaining party will “for all practical

purposes be deprived of its day in court”; or (3) “if enforcement would contravene a

strong public policy of the forum in which suit is brought.” Richards v. Lloyd’s of

London, 135 F.3d 1289, 1294 (9th Cir. 1998); Argueta v. Banco Mexicano, S.A., 87

F.3d 320, 325 (9th Cir. 1996). The party claiming the clause is invalid or

unenforceable due to unfairness bears a heavy burden of proof. See Carnival Cruise

Lines, 499 U.S. at 592, 595. Fouad fails to meet this heavy burden.

4 In the district court, Fouad did not argue the forum selection clause was itself

procured by fraud, nor did he introduce any evidence to establish that it was. Instead,

Fouad argued that the Settlement Agreement as a whole was a product of fraud.

However, “[t]he Supreme Court has noted that simply alleging that one was duped

into signing the contract is not enough.” Richards, 135 F.3d at 1297 (citing Scherk

v. Alberto-Culver Co., 417 U.S. 506, 519 n.14 (1974)). “For a party to escape a forum

selection clause on the grounds of fraud, it must show that ‘the inclusion of that

clause in the contract was the product of fraud or coercion.’” Id. (quoting Scherk,

417 U.S. at 519 n.14). Therefore, by failing to differentiate the alleged fraud that

induced DSS to enter the Settlement Agreement from any separate proof of fraud

concerning inclusion of the forum selection clause, Fouad did not meet his burden.

Any additional arguments not raised in the district court are waived. See Armstrong

v. Brown, 768 F.3d 975, 981 (9th Cir. 2014).

Fouad also contends that the district court erred by concluding that Qatar is

an adequate forum because he would be denied his day in court there. However,

Fouad fails to challenge the district court’s findings on the issue. Instead, Fouad

attempts to raise new arguments and offer additional evidence not raised in the

district court. The district court’s findings were proper, Fouad’s new arguments are

waived, and even if considered, are without merit.

5 As the district court found, Fouad’s contention that he would experience harm

if he were required to litigate in Qatar was unsupported. Fouad offered no evidence

that his physical presence in Qatar was required to pursue the action, nor did he

provide “either amplifying details or any admissible evidence to substantiate” his

claim that he would be harmed if he returned to Qatar. Fouad’s contention that no

lawyer would represent him in Qatar was also unsupported because he provided no

evidence demonstrating that he attempted to, but could not, retain counsel there.

Fouad also failed to produce evidence sufficient to substantiate his claim that

he would be deprived of due process if forced to litigate in Qatar. The only evidence

Fouad submitted in the district court was a two-page U.N. Human Rights article. As

noted by the district court, the article largely describes positive developments in the

Qatari judicial system that undercut Fouad’s claim that Qatar is an inadequate forum.

The only concerns noted in the article relate to the treatment of certain “marginalized

groups,” of which the district court found Fouad was not a member. Based on these

findings, the district court properly held that the article did not “represent the kind

of ‘powerful showing’ that would permit this court to declare Qatar an inadequate

forum.” See Tuazon v. R.J. Reynolds Tobacco Co., 433 F.3d 1163, 1179 (9th Cir.

2006).

6 Accordingly, because Fouad failed to establish any basis to render the forum

selection clause unenforceable, the district court did not abuse its discretion by

dismissing the FAC.

2. Fouad does not contest the district court’s order denying his motion to compel

arbitration in California in his briefing. Accordingly, Fouad waived his ability to

contest that aspect of the district court’s order. See Tri-Valley CAREs v. U.S. Dep’t.

of Energy, 671 F.3d 1113, 1129–30 (9th Cir. 2012).

Instead, Fouad contends the district court erred by not compelling arbitration

in London. But Fouad did not seek to compel arbitration in London in the district

court. Instead, Fouad’s briefing in the district court focused on compelling

arbitration in California. Because he did not ask the district court to compel

arbitration in London, Fouad waived that issue on appeal. See, e.g., Singleton v.

Wulff, 428 U.S. 106, 120 (1976); Armstrong, 768 F.3d at 981; Komatsu, Ltd. v. States

S.S. Co., 674 F.2d 806, 812 (9th Cir. 1982).

3. Fouad also contends that the district court erred by ruling on the arbitrability

of this dispute and that the issue must instead be resolved by an arbitrator. This

argument is also waived because it was not raised below and is inconsistent with

Fouad’s course of conduct in the district court. Fouad did not challenge the district

court’s competence to decide the question of arbitrability in the proceedings

below—he did the opposite by submitting the question of arbitrability of his claims

7 to the district court. Fouad cannot now argue the district court erred by deciding that

issue.

4. Finally, the district court did not abuse its discretion by not granting leave to

amend sua sponte. Importantly, Fouad never requested leave to amend the FAC in

the district court. “Where a party does not ask the district court for leave to amend,

the request on appeal to remand with instructions to permit amendment comes too

late.” Alaska v. United States, 201 F.3d 1154, 1163–64 (9th Cir. 2000) (internal

quotation marks and alternations omitted).

AFFIRMED.