September 19, 2017

Denial of Saudi real estate company’s bid to revive suit ends long-standing litigation.

On September 15, the New York Court of Appeals denied MBI International Holdings Inc.’s request to appeal a lower appellate court’s dismissal of the Saudi real estate firm’s $10 billion claim against Willkie client Barclays Bank PLC in a summary order. The denial of MBI’s bid to appeal by New York’s highest court ends this long-standing litigation.

Plaintiffs alleged that they built two large residential compounds in Saudi Arabia to house United States defense contractors, and entered into long-term leases with the Saudi government for the compounds. To refinance the loan used to build the compounds, the plaintiffs created Compound Lending Corporation (CLC). Barclays and a syndicate of banks loaned $900 million to Plaintiffs, secured by $1.4 billion in lease payments due from the Saudi government between 2001 and 2011. After an almost immediate default, the banking syndicate took as collateral the right to the lease payments securing the loans and pursued payment from the Saudi government directly, eventually settling the claims in 2006. Plaintiffs alleged that Barclays low-balled the settlement with the Saudi government, thereby purportedly compromising Plaintiffs’ right to an alleged “surplus” amount of lease payments existing after full repayment of the loan. Plaintiffs further alleged that Barclays owed them a fiduciary duty under Saudi law to recover from the Saudi government the full amount of the lease payments assigned to CLC so that Plaintiffs could recover their “surplus.”

The trial court (NY Commercial Division) dismissed the complaint on various grounds, including statute of limitations. Earlier this year (in a high-profile decision), the Appellate Division, First Department affirmed the trial court’s dismissal. The First Department focused on a number of facts alleged in Plaintiffs’ own complaint, including Plaintiffs’ allegation that they sued the Saudi government in a Saudi court in 2007 and learned both that Barclays settled CLC’s claims and they would not receive any surplus. The First Department concluded that these alleged facts should have put Plaintiffs on notice to initiate litigation at that time.

The case, MBI International Holdings Inc., et al. v. Barclays Bank PLC, reinforces the crucial legal principle that parties have a duty to investigate suspicions of fraud at the time these suspicions arise—not down the road, years later.

The Willkie team (which obtained victories at the Commercial Division, First Department and now Court of Appeals) included partner Todd Cosenza, associates Frank Scaduto, Joanne Pedone, William O’Brien and Tricia Haynes and law clerk Brooke Sgambati.

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