Ministry of Defence of the State of Kuwait v. Naffa, No. 23-1377 (4th Cir. 18 June 2024) — the Defence Attaché Office's claim against an unlicensed "legal counsel" may proceed in federal court

COURT. Fourth Circuit, Niemeyer, Gregory and Agee JJ.; opinion by Judge Gregory; argued 19 March 2024, decided 18 June 2024. Appeal from the Eastern District of Virginia (Nachmanoff J., No. 1:22-cv-01270). Reversed, vacated and remanded.

THE FACTS AS PLEADED (accepted as true at this stage). In 2011 the Ministry authorised its Defence Attaché Office, associated with the Kuwaiti Embassy in Washington, to hire an American law firm. "Naffa & Associates, LLP" won the contract at $45,000 a year; Mr Naffa signed as "Yoseph M. Naffa, Esq." and then "Joseph M. Naffa, Esq.". A second agreement (2014) raised the retainer to $65,000; a third (1 April 2018), on "International Compliance Group" letterhead and signed "Joseph M. Naffa, Esq. LLM, Ph.D. Legal Counsel", raised it to $85,000. He also acted in the Office's purchase of four houses in Virginia ($50,000 in fees). Payments totalled $635,000. When asked in late 2019 for proof of licensure, he produced an American Bar Association membership card and graduate degrees. The Office then learnt that he had never passed a bar examination, was not licensed anywhere in the United States, and had never formed the LLP. An audit found that he had directed the closing agent on one purchase to pay him a credit due to the Office, which he later repaid in full. The D.C. Committee on the Unauthorized Practice of Law concluded that he had acted as in-house counsel and that the Attaché who hired him knew he was not authorised, and took no position on anything else.

THE RULING. The district court dismissed for want of jurisdiction, reasoning that the Ministry could recover only what it paid above the value of the services it received, and had not pleaded that this exceeded $75,000. The Fourth Circuit held that this was an impermissible assessment of the merits: under St. Paul Mercury (1938) the sum claimed in good faith governs unless recovery of more than $75,000 is legally impossible. Diversity jurisdiction exists where a foreign state sues a citizen of a US state (28 U.S.C. § 1332(a)(4)). The court vacated the district court's other rulings (time-bar of the first two agreements, parol evidence on the third) without deciding them.

USE IN A REPORT: a published appellate decision on jurisdiction only. It is a source for the Ministry's allegations and for how a Kuwaiti state body sues as a foreign state in US courts; it is not a finding that the defendant acted unlawfully.

Two points for a reader. The facts in the opinion are the Ministry's allegations, which the court was bound to accept as true at the pleading stage, and the only body to have reached a view on the licensing question, the D.C. Committee on the Unauthorized Practice of Law, found that no unauthorised practice occurred because Mr Naffa served as in-house counsel and the Attaché who hired him knew his status. The outcome on remand is not recorded here. For due diligence on advisers to Kuwaiti government offices abroad, the case is a documented example of a long retainer let without verification of professional licensing.