Irish bank can't be sued in U.S. court over loans made in Chicago Spire negotiations

By Dan Churney | Mar 19, 2019

Artist's rendering of proposed Chicago Spire skyscraper against Chicago skyline   Contributed artist's rendering

A federal judge has ruled an Irish national bank cannot be sued by a development company for allegedly sabotaging the Chicago Spire skyscraper project by selling off the company's loans.

U.S. District Judge Andrea Wood said the developer failed to show the financial institution engaged in enough commercial activity in the United States to fall under jurisdiction of American courts. As a result, a $1.2 billion lawsuit brought by Irish developer Garrett Kelleher and his company, Shelbourne North Water Street Corp., against the Irish government's National Asset Management Agency was dismissed.

In 2006, Shelbourne began an effort to build the 2,000-foot-tall Spire residential building in downtown Chicago. The structure, which could have been the world's tallest residential building, was to stand on a site bordered by the Chicago River, Lake Michigan and the Ogden Slip. 

By the time the bottom fell out of the global real estate market in 2008, Shelbourne had spent $300 million, which was partly funded by $90 million in loans from Anglo Irish Bank. A hole had been dug for the building when work stopped.

In the wake of the Great Recession, Anglo's loans were transferred to Ireland's National Asset Management Agency (NAMA), which was formed to handle Irish real estate investments. However, Shelbourne alleged NAMA misled about the status of the loans and deceived others about the Spire project, which reduced the marketability of the proposed building site.

Shelbourne said it tried to work with a British capital firm to redeem the loans at full value per its agreement with NAMA, but NAMA sold them at one-third their value to Related Midwest, costing Irish taxpayers $57 million and leaving the Spire project up in the air.

In February 2018 in U.S. District Court for the Northern District of Illinois, Shelbourne sued, saying NAMA's actions cost the company $1.2 billion, including $685 million in anticipated profit. Shelbourne also alleged NAMA failed to protect its confidential data, in connection with a criminal case in Irish court involving a former NAMA employee's leak of information.

NAMA contended the suit should be dismissed, pointing to the U.S. Foreign Sovereign Immunities Act, which denies jurisdiction of American courts over foreign states, unless one of the exceptions apply as spelled out by the Act.

One of the exceptions, which Shelbourne claimed came into play, is if a foreign state engages in regular commercial activity in the U.S. To this end, Shelbourne put forth several instances of alleged acts by NAMA that took place in the U.S.

Wood found the acts cited were unconnected to Shelbourne's claims in the suit. As an example, Shelbourne said NAMA hired Chicago lawyers, sent a representative once to Chicago, and made other arrangements. However, Wood noted these acts were in connection with earlier dealings, not the allegedly tortious behavior that came later, specifically NAMA's marketing of the loans and Shelbourne's effort to redeem them.

Wood pointed out Shelbourne listed other acts that did not occur in the U.S.

Shelbourne also argued NAMA waived its immunity to U.S. jurisdiction through Ireland's signing of the 1950 Treaty of Friendship, Commerce and Navigation with the U.S.

Wood was again unmoved, finding the two countries "did not intend to waive immunity for their respective enterprises on the basis of a small number of commercial activities within the other country when the enterprise is not carrying on regular business in that country."

Wood observed that if Shelbourne redeemed the loans, the company had no assurance the Spire would be built.

"The alleged $1.21 billion injury Shelbourne suffered as a result of defendants’ conduct was based

on Shelbourne’s prediction that, had it been able to buy the loans, it would have completed

construction of the Chicago Spire," Wood said. "Of course, had Shelbourne paid off its loans, there was no guarantee that the Spire would have been completed — Shelbourne still would have had to find the funds to actually complete construction of the Spire."

Shelbourne is represented by attorneys J. Joseph Bainton and Katherine Felice of Barclay Damon LLP, of New York, and Michael Kelly and Adam Toosley, of Freeborn & Peters LLP, of Chicago.

NAMA is represented by Quarles & Brady, of Chicago.

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Organizations in this Story

Barclay Damon Freeborn & Peters Michael J. Kelly Quarles and Brady LLC U.S. District Court for the Northern District of Illinois

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