Iraq Middle Market Development Foundation v. Harmoosh, 2017 U.S. App. LEXIS 1860

Background

In 2006 Iraq Middle Market Development Foundation loaned $2 million to AGTTT; promissory note guaranteed by Mohammad Harmoosh, an Iraq/US dual citizen residing in Maryland. Loan agreement contained an arbitration clause designating Amman, Jordan.
Foundation sued Harmoosh in Maryland federal court in 2010; that court dismissed for arbitration, but Harmoosh did not move to compel arbitration under the FAA.
In 2014 the Foundation sued in Iraqi commercial courts; Harmoosh appeared through counsel, raised defenses (jurisdiction and shareholder liability), litigated through trial, appeal, and the Iraqi Court of Cassation, and lost a $2 million judgment.
In 2015 the Foundation sought recognition of the Iraqi money judgment in Maryland under the Maryland Uniform Foreign Money-Judgments Recognition Act; Harmoosh invoked the Act's exception for proceedings "contrary to" an agreement to settle out of court (arbitration clause).
The Maryland district court granted summary judgment for Harmoosh, declined to recognize the Iraqi judgment as contrary to the arbitration clause, and compelled arbitration of a related fraudulent-conveyance claim; Foundation appealed.
The Fourth Circuit vacated and remanded, holding that (1) Maryland law does not treat foreign judicial proceedings as automatically "contrary to" an arbitration agreement when the parties voluntarily litigate abroad (waiver is possible), and (2) genuine factual disputes exist about whether Harmoosh waived his arbitration right by participating in Iraqi litigation.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether §10-704(b)(4) permits refusal to recognize a foreign judgment merely because the foreign proceedings occurred despite an arbitration clause	Foundation: Maryland should recognize foreign judgments unless proceedings are "contrary to" arbitration and Harmoosh waived arbitration by litigating in Iraq	Harmoosh: §10-704(b)(4) allows Maryland courts to decline recognition whenever a dispute was litigated abroad contrary to an arbitration agreement	Court: §10-704(b)(4) does not apply if the parties voluntarily waived arbitration by litigating in foreign court; waiver can bar the exception
Whether Harmoosh waived or defaulted his FAA arbitration right by litigating in Iraqi courts to final judgment	Foundation: Evidence shows Harmoosh knowingly litigated in Iraq, failed to raise arbitration at trial, appealed to final Iraqi court — constituting waiver/default	Harmoosh: He preserved arbitration; his counsel raised arbitration before Iraqi courts (disputed)	Court: Genuine disputes of material fact exist about whether Harmoosh waived/defaulted; summary judgment for Harmoosh was improper
Whether Maryland courts should apply waiver principles to foreign proceedings consistently with domestic waiver law and comity concerns	Foundation: Waiver should apply to foreign proceedings to preserve comity and predictability	Harmoosh: Allowing recognition to be defeated despite foreign litigation would honor arbitration clause terms	Court: Applying waiver promotes contractual predictability and international comity; statute not intended to undermine waiver doctrine
Whether district court properly compelled arbitration of the fraudulent-conveyance claim after refusing to recognize the Iraqi judgment	Foundation: Premature because recognition of Iraqi judgment remains disputed; fraudulent-conveyance arbitrability depends on recognition outcome	Harmoosh: Fraudulent-conveyance claim arises from loan and is arbitrable	Court: Vacated district court's order compelling arbitration pending resolution of waiver facts

Key Cases Cited

Henry v. Purnell, 652 F.3d 524 (4th Cir.) (en banc) (standard of review for summary judgment)
Charles J. Frank, Inc. v. Associated Jewish Charities of Baltimore, 450 A.2d 1304 (Md. 1982) (party litigating an arbitrable dispute to final judgment waives arbitration)
Forrester v. Penn Lyon Homes, Inc., 553 F.3d 340 (4th Cir. 2009) (statutory default under FAA is narrower than common-law waiver)
Maxum Foundations, Inc. v. Salus Corp., 779 F.2d 974 (4th Cir. 1985) (default results when party so substantially uses litigation machinery that permitting arbitration would prejudice the other party)
Rota-McLarty v. Santander Consumer USA, Inc., 700 F.3d 690 (4th Cir. 2012) (prejudice and waiver analysis under FAA)
Wolff v. Wolff, 389 A.2d 413 (Md. Ct. Spec. App.) (Maryland Recognition Act aims to promote international comity)
Guinness PLC v. Ward, 955 F.2d 875 (4th Cir.) (discussing comity and recognition of foreign judgments)