Community Finance Group, Inc. v. Republic of Kenya
2011 U.S. App. LEXIS 24846
8th Cir.2011Background
- CFG and Andrew Vilenchik sued the Republic of Kenya and Kenyan agencies alleging breach of duty, improper taking, conversion, conspiracy, aiding and abetting and unjust enrichment.
- CFG arranged a gold purchase through Zilicon Freighters for 300 kg of gold at $6 million, with an escrow of $350,000 wired to Great Lakes Auto Tech Int'l Ltd to cover Kenyan taxes, customs fees, and storage.
- The $350,000 was wired via Bay Forex Bureau and later reportedly redirected to Great Lakes; Kenyan Central Bank later verified the transaction.
- Kenyan authorities informed CFG that UN authorization was required for release of the gold; CFG became suspicious and BFID investigations followed; Illunga Ngoei was arrested.
- CFG never received the gold and did not recover the $350,000; CFG’s Kenyan attorney later represented the Kenya Central Bank as well.
- The district court dismissed the case for lack of subject-matter jurisdiction under the FSIA; CFG appealed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether FSIA commercial activity exception applies | CFG asserts commercial activity of Kenya in US-linked transaction. | Kenya's actions were governmental regulation, not private commerce. | Commercial activity exception does not apply. |
| Whether FSIA expropriation exception applies | CFG seeks recovery for taking of funds/gold allegedly held by defendants. | Plaintiffs did not own or receive the gold; no present US property or US-based commercial activity by defendants. | Expropriation exception does not apply. |
| Whether FSIA tort exception applies | Alleged torts occurred (taking/conversion) with effects in the United States. | Torts allegedly occurred in Kenya; acts in US were by CFG, not by defendants; no agent relationship shown. | Tort exception does not apply. |
Key Cases Cited
- Argentine Republic v. Amerada Hess Shipping Corp., 488 U.S. 428 (1989) (FSIA basis; foreign state presumptively immune unless an exception applies)
- Saudi Arabia v. Nelson, 507 U.S. 349 (1993) (FSIA immunities; foreign state presumptively immune)
- Gen. Elec. Capital Corp. v. Grossman, 991 F.2d 1376 (8th Cir. 1993) (burden shifts to plaintiff after prima facie immunity)
- Republic of Argentina v. Weltover, Inc., 504 U.S. 607 (1992) (commercial activity and private-like conduct abroad)
- World Wide Minerals, Ltd. v. Republic of Kazakhstan, 296 F.3d 1154 (D.C. Cir. 2002) (state power to regulate is sovereign, not private commerce)
- Tucker v. Whitaker Travel, Ltd., 620 F. Supp. 578 (E.D. Pa. 1985) (governmental regulation vs. private market activity)
- Amerada Hess Shipping Corp. v. Argentina, 488 U.S. 428 (1989) (territorial nexus; expropriation-like issues)
- First Merchants Collection Corp. v. Republic of Argentina, 190 F. Supp. 2d 1336 (S.D. Fla. 2002) (foreign-state takings; discretionary function limitations)