vinewood capital v. dar al-maal al-islami trust (5th cir. 2008)
TRANSCRIPT
Sharia [i.e. Islamic law] is not a book of statutes or judicial
precedent imposed by a government, and it’s not a set of
regulations adjudicated in court. Rather, it is a body of
[Qurʾān]-based guidance that points Muslims toward living
an Islamic life. It doesn’t come from the state, and it doesn’t
even come in one book or a single collection of rules. Sharia
is divine and philosophical.
“”-Asifa Quraishi-Landes, Senior Scholar at SHARIAsource, “Five Myths
about Sharia,” Washington Post, June 24, 2016.
We use real cases to show how U.S. Courts consider Islamic law. Like
any other legal framework, Islamic law defines and dignifies the private rites and
contracts that people of faith and ordinary citizens otherwise hold dear, including
matters of marriage and commerce. What do American judges do
when adjudicating a case in which at least one seeks to navigate these private
practices and their protections through Islamic law, in jurisdictions of U.S. law?
FACTS #1:
Plaintiff Characters:Vinewood Capital
Other Plaintiff Characters:
Wendel Pardue
Laird Fairchild
James Conrad
Defendant Characters:Dar al-Maal al-Islami Trust
Ziad Rwashdeh
Khalid Abdulla-Janahi
Others:
August Investment
Alpha Investment
The “Trio”
Contracts in Question:
“The Settlement Agreement and Release” (“The Settlement Agreement”)
“Special Purpose Mudaraba Agreement”
“Overland Defendants”
*“A mudaraba agreement is an Islamic financing instrument extending credit for an annual fee rather than compounding interest. Under Islamic law,
loaning money for ribā (interest) is prohibited.”
FACTS #2:
May 2, 2006: “Vinewood filed this suit against Defendants alleging claims for
breach of contract, promissory estoppel, fraud and misrepresentation. The
main text of Vinewood’s first amended complaint is devoid of any factual
allegations. It simply alleges the elements for each cause of action, and
makes conclusory allegations….”
FACTS #3:
April 2004: Pardue and Fairchild file an action in Texas state court (“the Texas litigation”) against their
former employer, Overland Realty Capital, including…Rawashdeh” for wrongful termination. “Overland
defendants file counterclaims.”
June 2004: Conrad, a former Overland employee…meets with defendants to negotiate and settle the Texas
litigation. “The ‘Trio’ create[s] a new real-estate investment company called Vinewood” as part of the
negotiations. Vinewood would “source real estate investments for the DMI Trust entities” and “be the
exclusive company...for real-estate ventures in the United States.”
October 7, 2004: The Settlement Agreement is signed by the Trio and DMI. Both parties agree to resolve all
disputes as part of the Texas litigation, and agree that “dispute resolution...shall be governed by the State of
New York...settled by arbitration to be held in the Commonwealth of the Bahamas.”
“Nowhere in the agreement does it mention the creation of Vinewood...”
FACTS #4:
October 14, 2004: “Vinewood and August Investment create the “Special Purpose Mudaraba
Agreement.” Under this document, August Investment agrees to loan Vinewood up to 2.5 million dollars.
Dispute Resolution: Just like the Settlement Agreement, any disputes under the mudaraba agreement will
be settled according to the laws of New York and resolved through arbitration in the Bahamas.
“Nowhere in the mudaraba agreement does it refer to the Settlement Agreement nor does it state that
Vinewood would be the exclusive company used by the DMI Trust entities....”
August Investment subsequently transferred its interest in the mudaraba agreement, with Vinewood’s
consent, to Alpha Investment.
*“A mudaraba agreement is an Islamic financing instrument extending credit for an annual fee rather than compounding interest. Under Islamic law,
loaning money for ribā (interest) is prohibited.”
FACTS #5:
May 2, 2006: “Vinewood filed this suit against Defendants…”
Vinewood’s Fairchild claimed in the suit that the defendants, Rawashdeh and Abdulla-Janahi had
agreed to place Vinewood in charge of providing and managing certain real-estate ventures managed
by DMI Trust. Vinewood “began expending time” and other resources to come up with an investment
summary and business plan, recruit employees, and prepare budgets.
Vinewood’s Conrad claimed in the suit that Abdullah-Janahi of DMI Trust introduced “individuals
from Bahrain and Kuwait who were doing business with DMI Trust,” implying that DMI Trust still
intended to do business with Vinewood. Vinewood “did a substantial amount of work” as a result,
“only to have Defendants never follow through with their promises to invest.”
Has the mudaraba agreement been violated? Is Vinewood’s suit
subject to the arbitration agreement?
FACTS #6:
Plaintiff Characters:
Vinewood Capital
Wendel Pardue
Laird Fairchild
James Conrad
Defendant Characters:Dar al-Maal al-Islami Trust
Ziad Rwashdeh
Khalid Abdulla-Janahi
August Investment
Alpha Investment
Overview:
Vinewood’s Arguments:
1) no valid arbitration agreement
2)
Settlement and Mudaraba
Agreements
Vinewood Defendants.”
3) oral agreement
separate apart those
agreements
DMI Trust, et al.’s Arguments:
1) Vinewood signed the mudaraba
agreement mandatory
arbitration clause
2) Vinewood’s principles signed
the Settlement Agreement
3) valid and
enforceable agreement
Vinewood
Vinewood’s do not fall agreements.
Moreover
Vinewood’s claims do not
indicate violation either agreement.
Vinewood
Alpha Investment mudaraba
Vinewood
unrelated to the mudaraba
mudaraba agreement same standard other
agreements Settlement Agreement
interpreted
New York law arbitrated Bahamas
Defendants’ claims mudaraba
agreement Court same standards Texas
law as other claims
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