Court Declines to Take Jurisdiction Over FCA Case Against Foreign-Based NGO; United States District Court for the Southern District of New York No. 17-cv-4135 (PKC), U.S. ex rel. TZAC Inc. v. Christian Aid

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The district court granted the defendant’s motion to dismiss a qui tam complaint on jurisdictional grounds. The plaintiff alleged that an NGO charitable organization had submitted fraudulent certifications to USAID, in which it attested that it was not affiliated with and had not provided any material support to terrorist organizations. The plaintiff alleged that one of the grantee’s subcontractors had in turn hired an organization listed as a “specially designated global terrorist” and connected to a separate foreign terrorist organization. According to the plaintiff, the defendant knew or should have known that its funds were being spent with this entity and therefore its certifications to USAID were false. However, the court concluded that it lacked jurisdiction to hear the complaint, because the defendant was based in and organized under the laws of the United Kingdom. The court found the nonprofit’s connections to the U.S. too slim to support jurisdiction. While the certifications reserved the government’s right to enforce their assertions, the court concluded that the relevant clause was not a forum selection clause and could not be reasonably construed as one. The court reasoned that if USAID wanted to ensure jurisdiction over any suits arising out of these certifications, it could have included such a clause.

Christian Aid moved to dismiss a qui tam complaint alleging that it had submitted false Anti-Terrorism Certifications to the U.S. Agency for International Development, arguing the court lacked personal jurisdiction and that the complaint failed to state a claim upon which relief could be granted.

Christian Aid is a non-governmental charitable organization based in the United Kingdom, which had received grants from USAID. To be eligible for these grants, Christian Aid had to certify that it was not affiliated with and had not provided material support to any terrorist organizations.

Plaintiff The Zionist Advocacy Center alleged these certifications were fraudulent. According to TZAC, in late 2015, Christian Aid sponsored a vocational training course in Lebanon to train mentally-disabled individuals to repair cellular telephones. The program was run through the Lebanese Physical Handicap Union, which in turn hired an organization called Jihad al Binaa to perform the training course. Jihad al Binaa has been designated by the United States as a “Specially Designated Global Terrorist” since February 2007, and is an arm of Hezbollah, a designated “Foreign Terrorist Organization” since October 1997.

TZAC alleged that LPHU was fully aware of Jihad al Binaa’s involvement with the training courses, and that, as sponsor of the program, Christian Aid is directly chargeable with the knowledge and activities of its partners. At a minimum, TZAC argued that Christian Aid acted with reckless disregard when it failed to ascertain the involvement of Jihad al Binaa.

At the outset, the court noted that the burden of proof on jurisdictional issues rested with the plaintiff. Christian Aid argued that because it is based in the United Kingdom, and this suit arose over certifications signed in London and Nairobi, TZAC had not plausibly alleged facts that would support the exercise of personal jurisdiction over it.

In response, TZAC argued that there is a basis for personal jurisdiction because the False Claims Act authorizes nationwide service of process, so the jurisdictional inquiry is upon Christian Aid’s contacts with the United States more generally, and it has alleged sufficient contacts between Christian Aid and the nation as a whole.

The court agreed that the service of process was procedurally proper and that there was a statutory basis for the exercise of personal jurisdiction. This left the court to consider the due process inquiry.

That inquiry requires the court determine whether a defendant has sufficient minimum contacts with the forum to justify the court’s exercise of personal jurisdiction and whether the assertion of personal jurisdiction over the defendant comports with traditional notions of fair play and substantial justice.

The court explained that when a plaintiff asserts a federal cause of action against a foreign defendant, the due process clause of the Fifth Amendment is the limitation on the federal forum’s exercise of personal jurisdiction. Accordingly, the court first considered Christian Aid’s contacts with the nation as a whole.

In its complaint, TZAC asserted that Christian Aid is a member of the Act Alliance, a group of charitable organizations with an office in New York. Further, Christian Aid also caused to be created a nonprofit organization registered in New York called Inspiraction. TZAC also noted that executives from Christian Aid traveled to New York for conferences and meetings, and that the language in the USAID certifications state that “the United States will have the right to seek judicial enforcement of these assurances.”

Nonetheless, the court found these contacts insufficient to support its exercise of personal jurisdiction over Christian Aid on either a general jurisdiction or specific jurisdiction basis. Because Christian Aid is based in and organized under the laws of the United Kingdom, the court found the organization not fairly regarded as at-home in the United States. Further, the court found the alleged facts—occasional business trips and membership in various associations—fell far short of the “constant and pervasive” contacts justifying the exercise of personal jurisdiction.

While the defendant did support the creation of a nonprofit, the court noted that some 135 entities from 120 countries had participated, and that the nonprofit was separate and distinct from Christian Aid. TZAC provided no further information regarding the specific steps Christian Aid took in creating it, or the extent to which they are involved with its operations. The court found these connections too attenuated to support the exercise of jurisdiction.

The court also found the “suit-related” contact between Christian Aid and the United States minimal. First, the court found that membership in the Act Alliance, founding the nonprofit, attending business meetings, and lobbying, have nothing to do with the present suit. Further, the complaint was short on facts regarding the negotiation, discussion, or government signing of the certifications. The allegedly fraudulent ATCs were signed by Christian Aid executives in cities outside of the United States. The allegedly terrorist-affiliated program was put on in Lebanon. The court held that even under the “effects test” the amended complaint was insufficient.

The court also noted that TZAC had not asserted that Christian Aid actually knew about the association with Jihad al Binna, never mind how much money it directly or indirectly gave to the organization or whether the support was earmarked for use in specific schemes. In the face of such deficiencies, the court concluded it could not exercise personal jurisdiction over a foreign-based charity with limited ties to the United States.

The court also found the certification clause asserting the United States’ rights to seek judicial enforcement of the assurances was plainly not a forum selection clause, and that Christian Aid count not plausibly foresee it being construed as such. The clause says nothing about the aid recipient’s submission to the jurisdiction of a forum in the United States. The court reasoned that had USAID wished to ensure jurisdiction over any suits arising out of these certifications, it could have included a forum selection clause. While the clause reserved the United States’ right, the court explained that if USAID sought to enforce the clauses in a United States court, it would have to comport with due process limitations.

Because the court held it lacked jurisdiction to hear the case, it concluded that it need not examine the merits. The court granted the motion to dismiss, and denied TZAC’s request for discovery and motion to amend.

FCA - TZAC Inc. v Christian Aid