Zhan v. World Bank

• Court: District Court, District of Columbia
• Decided: November 20, 2019
• Docket: Civil Action No. 2019-1973
• Status: Published

Opinion

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

1 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

2 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

3 (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.”

4 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.

5 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