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Chettri v. Nepal Rastra Bank

United States Court of Appeals, Second Circuit

June 20, 2016

Ashim Khattri Chettri, d/b/a Tarala Internationals, Wu Lixiang, individually and as agent and partner of Tarala Internationals, Plaintiff-Appellants,
v.
Nepal Rastra Bank, and Department of Revenue Investigation, Government of Nepal, Defendant-Appellees, Nepal Bangladesh Bank, Ltd., and Chase Manhattan Bank, Defendants,

          Submitted: August 25, 2015

         Ashim Khattri Chettri, doing business as Tarala Internationals ("Tarala"), and Wu Lixiang ("Wu") appeal from the decision of the United States District Court for the Southern District of New York (Gardephe, J.) vacating a default judgment and dismissing their complaint against Nepal Rastra Bank ("Rastra Bank") and the Department of Revenue Investigation of the Government of Nepal ("the Department"). The district court concluded that it lacked subject matter jurisdiction because both Rastra Bank and the Department, as political subdivisions or agencies of the Government of Nepal ("Nepal"), are immune from suit under the Foreign Sovereign Immunities Act of 1976 ("FSIA"), 28 U.S.C. § 1602 et seq. The district court also concluded that it lacked personal jurisdiction because Tarala and Wu failed to comply with the service of process requirements of the FSIA. We agree with the district court's determination that it lacked subject matter jurisdiction and therefore need not address the issue of service of process. Accordingly, we AFFIRM the district court's judgment vacating the default judgment and dismissing the complaint.

         Appeal from the United States District Court for the Southern District of New York. No. 10 Civ. 8470 - Paul G. Gardephe, Judge.

          Dilli Raj Bhatta, Bhatta Law & Associates, PLLC, New York, NY, for Plaintiff-Appellants.

          Khagendra Gharti-Chhetry, Chhetry & Associates, P.C., New York, NY, for Defendant- Appellees.

          Before: Newman, Walker, and Jacobs, Circuit Judges.

          John M. Walker, Jr., Circuit Judge

         Ashim Khattri Chettri, doing business as Tarala Internationals ("Tarala"), and Wu Lixiang ("Wu") appeal from the decision of the United States District Court for the Southern District of New York (Gardephe, J.) vacating a default judgment and dismissing their complaint against Nepal Rastra Bank ("Rastra Bank") and the Department of Revenue Investigation of the Government of Nepal ("the Department"). The district court concluded that it lacked subject matter jurisdiction because both Rastra Bank and the Department, as political subdivisions or agencies of the Government of Nepal ("Nepal"), are immune from suit under the Foreign Sovereign Immunities Act of 1976 ("FSIA"), 28 U.S.C. § 1602 et seq. The district court also concluded that it lacked personal jurisdiction because Tarala and Wu failed to comply with the service of process requirements of the FSIA. We agree with the district court's determination that it lacked subject matter jurisdiction and therefore need not address the issue of service of process. Accordingly, we AFFIRM the district court's judgment vacating the default judgment and dismissing the complaint.

         BACKGROUND

         Tarala, a Colorado corporation, is the principal supplier of clothing and military equipment to Nepal. Wu is the director of a company that helps Tarala coordinate the logistics of its international transactions. Wu has acted as Tarala's agent in connection with contracts with Nepal and has also independently conducted business with Nepal.

         Rastra Bank, located in Kathmandu, is Nepal's financial agent and is authorized to open and operate accounts, settle obligations, and issue letters of credit on behalf of Nepal. The Department is the prosecutorial arm of Nepal's Ministry of Finance and its duties include monitoring wire transfers for compliance with Nepalese laws such as the Nepal Asset (Money) Laundering Prevention Act of 2008.

         Between 2006 and 2008, Nepal placed several orders with Tarala for equipment for the Nepalese army and police force. Acting as Tarala's distribution partner in these transactions, Wu coordinated procurement and delivery of the goods. Nepal paid Tarala for the equipment through letters of credit issued by Rastra Bank to Chase Manhattan Bank, naming Tarala as a beneficiary.

         On July 23, 2008, Tarala wired $1 million from Chase Manhattan Bank, located in New York, to Wu's personal account at Nepal Bangladesh Bank, Ltd. ("Bangladesh Bank"), which is located in Kathmandu. Wu claims that he intended to use the $1 million to pay a third party to transport equipment and complete delivery of goods to Nepal.

         On August 4, 2008, Bangladesh Bank notified Rastra Bank of irregularities concerning the wire payment to Wu. Bangladesh Bank informed Rastra Bank that Wu had failed to provide adequate documentation of the source of the funds and that, as a result, Bangladesh Bank was freezing the funds pending an explanation of their source and pending further instructions from Rastra Bank. On August 27, 2008, the Department instructed Rastra Bank to direct Bangladesh Bank to freeze Wu's account pending further investigation.

         In an attempt to persuade Bangladesh Bank to release the funds, Tarala provided letters from financial institutions and government agencies attesting to the legitimacy of the wire transfer. Rastra Bank and the Department took the position that this documentation was insufficient to establish the source of the funds.

         On November 10, 2010, after the letters were unsuccessful in unfreezing the account, Tarala and Wu filed the underlying complaint in this action. Rastra Bank and the Department responded by claiming that Tarala and Wu failed to comply ...


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