FSIA: Attempted Garnishment of Foreign Sovereign Oil Revenues

Af-Cap, Inc. v. Chevron Overseas (Congo) Ltd.
2007 WL 177823 (CA9 Jan. 25, 2007)

In this case, Af-Cap, a creditor of the Republic of Congo, garnished property held by Chevron Overseas. The Congo had defaulted on a $6.5 million loan for construction of a highway made by Equator Bank, Af-Cap's predecessor. In 1985, the Congo defaulted on the loan. In 1986, the Connecticut Bank of Commerce ("CBC") secured a judgment in the United Kingdom that was later converted to a U.S. judgment in New York. CBC later registered the judgment in both Texas and California.

In this case, Af-Cap attempted to secure the judgment based on oil royalties that Chevron owed to the Congo. CA9 held that section 1610 of the Foreign Sovereign Immunities Act applies: "The property in the United States of a foreign state ... used for a commercial activity in the United States, shall not be immune from attachment in aid of execution, or from execution, upon a judgment entered by a court of the United States or of a State ... if: (1) the foreign state has waived its immunity from attachment in aid of execution, or from execution ..." 28 U.S.C. § 1610(a).

Here, the Court determined that the obligations to the Congo owed by Chevron are not for commercial activity in the United States. Accordingly, the district court affirmed the dissolving and vacating of the garnishments and liens Af-Cap had established.

CA2 on Anti-Suit Injunctions: Keep Them Narrow

Ibeto Petrochemical Industries Ltd. v. M/T BEFFEN
2007 WL 106165 (CA2 Jan. 17, 2007)

The Second Circuit recently decided a case regarding an anti-suit injunction. The case involved a maritime dispute subject to arbitration in London. The district court granted an anti-suit injunction to block litigation brought by one party attempting to frustrate the arbitration by pursuing litigation in Nigeria. The Second Circuit affirmed the district court's grant of an anti-suit injunction, but modified it to narrow its scope.

Applying all the factors, the District Court found that the general federal policy favoring arbitration might be frustrated by the Nigerian litigation; widely disparate results might obtain because the Nigerian Courts would not apply the provisions of COGSA; a race to judgment could be provoked by the disparity; equitable considerations such as deterring forum shopping favor the injunction; and “it is likely that adjudication of the same issues in two separate actions would result in inconvenience, inconsistency, and a possible race to judgment.” Ibeto, 412 F.Supp.2d at 293. The District Court foresaw “considerable inconvenience” in the movement of witnesses between the two venues. Id. The District Court determined, however, that the threat to jurisdiction factor did not apply since “both courts have in personam jurisdiction over the parties.” Id. We agree with the foregoing analysis of the District Court in applying the China Trade factors and add our observation that the policy favoring arbitration is a strong one in the federal courts. See Paramedics, 369 F.3d at 654. Accordingly, the injunction is fully justified in this case. We note, however, that the District Court's application of the principle that “ ‘an anti-suit injunction may be proper where a party initiates foreign proceedings in an attempt to sidestep arbitration,” ’ Ibeto, 412 F.Supp.2d at 289 (quoting LAIF X SPRL v. Axtel, S.A. de C.V., 390 F.3d 194, 199 (2d Cir.2004)), is not warranted here, where the proceeding in Nigeria was first in time.

The foregoing having been said, we reiterate our understanding that due regard for principles of international comity and reciprocity require a delicate touch in the issuance of anti-foreign suit injunctions, that such injunctions should be used sparingly, and that the pendency of a suit involving the same parties and same issues does not alone form the basis for such an injunction. See China Trade, 837 F.2d at 36. Having these caveats in mind, we think that the injunction in this case cuts much too broadly.

The learned District Court wrote only that “defendants' motion to enjoin the Nigerian action is granted.” Ibeto, 412 F.Supp.2d at 293. The injunction should be directed specifically to the parties, for it is only the parties before a federal court who may be enjoined from prosecuting a suit in a foreign country. See 13 CHARLES ALAN WRIGHT, ARTHUR R. MILLER & EDWARD H. COOPER, FEDERAL PRACTICE & PROCEDURE: JURISDICTION § 3523 (2d ed.1984). Moreover, there is no need for the permanent injunction that the District Court seems to have issued. The parties need to be enjoined from proceeding in the courts of Nigeria only until the conclusion of the London arbitration and the consequent resolution of the still-pending case in the District Court. The District Court should modify its injunction with a specificity consonant with this determination.

Class Action Litigation Against the Holy See for Child Sexual Abuse

O'Bryan v. Holy See
2007 WL 114162 (W.D. Ky. Jan. 10, 2007)

A federal court recently ruled on the Holy See's motion to dismiss a putative class action with many claims against it with respect to child sexual abuse. The Court found that the Foreign Sovereign Immunities Act applied, however found that some of the allegations contained in the complaint fell within the tort exception to sovereign immunity. The Court further concluded that while some of the tortious allegations fell within the discretionary function exception to the tort exception, others did not. As the Court summarized:

In summary, this Court will dismiss the Plaintiffs' negligence claim that Defendant Holy See failed to provide safe care of children entrusted to the clergy. The Court also will dismiss Plaintiffs' deceit and misrepresentation claims. However, the Court will deny Defendant's motion to dismiss as to the failure to report and failure to warn negligence claims and as to all other claims asserted against the Holy See at this time. Therefore, the following claims remain against the Holy See: negligent failure to report, negligent failure to warn, breach of fiduciary duty (insofar as that breach involved the failure to report and the failure to warn), outrage and emotional distress, violations of the customary law of human rights, and claims under the doctrine of respondeat superior.

Contracting Out of Hague Convention Service?

Camphor Technologies, Inc. v. Biofer, SPA
2007 WL 123406 (Conn. Super. Jan. 4, 2007)

In this case, Camphor Technologies, a Connecticut company is suing Biofer, SPA. In accordance with a general contractual agreement between the parties, Camphor served notice via mail, not through the Hague Convention procedure. The agreement provides:

All notices, consents, approvals, requests, demands or other communications ('Notices') which either of the parties to this Agreement may desire or be required to give to the other party hereunder shall be in writing and shall be deemed properly given if (i) hand-delivered, [ (ii.) ] sent by private or public mail carrier which provides evidence of delivery . . .

Plaintiff claims that this notice provision is sufficient to contract out of the Hague requirements. The court rejects this argument in two different ways. First, the Court suggests that the Hague Convention procedures are only optional if the receiving nation has waived the right. In this manner, the rights secured under Hague suggest an underlying respect for judicial sovereignty rather than personal rights assigned to foreign defendants. Second, the court held that because the lawsuit was outside the scope of the contract, and accordingly the notices discussed in the contractual language did not include notices to sue.

Another Example of Conditional Dismissal for Forum Non Conveniens

Lake v. Bayer Corp.
2006 WL 3919948 (Conn. Super. Dec. 22, 2006)

This Connecticut state case is another example of a dismissal for forum non conveniens containing what I believe are typical conditions on the moving defendant. As I have discussed here, I believe a Court must have personal jurisdiction over a party to create these conditions and that they are not a mere "understanding about the world" as the government argued in Sinochem. See my summary of that case here.

Here, Bayer AG and Bayer Corp. sought to have a tort suit dismissed. The alternative proposed forum is the UK. First, the trial court denied the motion, but upon rehearing and a new balancing of public and private factors, the trial court agreed to a FNC dismissal. These are the conditions:

The court orders that provided the defendants submit a signed stipulation in writing as to the following within thirty days hereof, the plaintiffs' complaint is dismissed. The defendants must stipulate to the following:
1. Consent to jurisdiction in the U.K.
2. Accept service of process in connection with an action in the U.K.
3. Waive applicable statutes of limitations in the U.K. up to one year from the date of dismissal of this action.
4. Make their cervastatin and other relevant litigation discovery records, and their personnel, available for litigation in the U.K.
5. Satisfy any judgment that may be entered against them in the U .K.
6. Consent to the reopening of the action in Connecticut in the event any of the above conditions are not met as to any proper defendant in this action.

As the court is requiring defendants to stipulate that they will actually take on the following actions, there is certainly a coercive element to this order of dismissal. For the government's position of these conditions as "understandings about the world" to be true, it would follow that the defendants would take all of these actions independent of the Connecticut lawsuit. But that seems far from the case here, the Connecticut dismissal order is what is directly compelling defendants to make the above listed stipulations. First establishing personal jurisdiction is an essential prerequisite to using the coercive power of a court order to alter a party's behavior--and that sort of altered behavior is present with conditional FNC dismissals.

What do others think? Will the Supreme Court weigh in on this question? Anyone disagree that such a dismissal is permissible without first determining personal jurisdiction?

Powerex Granted

Following its conference today, SCOTUS announced it would hear the case of Powerex Corp. v. Reliant Energy Services. I had discussed the case previously here.

ATCA: Political Question Doctrine, Collateral Order Doctrine & International Discovery in Indonesia

Doe v. Exxon Mobil Corp.
2007 WL 79007 (C.A.D.C. Jan. 12, 2007)

Major issues in this litigation include: (1) whether a district court’s denial of a motion to dismiss a case with international diplomatic ramifications under the political question doctrine is reviewable under the collateral order doctrine, or whether review must await a final judgment on the merits; (2) the extent to which limitations on discovery stemming from diplomatic concerns may render a claim non-justiciable under the political question doctrine.

The case arose from a lawsuit against Exxon-Mobil by eleven villagers in the Indonesian province of Aceh. The plaintiffs alleged that Exxon-Mobil hired security forces from the Indonesian military, and that these forces committed murder, torture, sexual assault, battery, false imprisonment, and other torts. The complaint alleged that Exxon-Mobile retained and equipped these forces despite being aware that the Indonesian military had committed human rights abuses in the past. Defendants moved to dismiss, and the district court granted the motion in part. It dismissed all claims under the Alien Tort Statute and the Torture Victim Protection Act for failure to state a claim and for lack of subject matter jurisdiction. It also dismissed claims against defendant PT Arun LNG Company, an entity of which the Indonesian government owned 55%. It reasoned that allowing litigation to proceed against that defendant would “create a significant risk of interfering in Indonesian affairs.” The court denied the motion to dismiss the plaintiffs’ common law tort claims, but directed the parties to tailor discovery in such a manner as to limit interference with the sovereign prerogatives of the Indonesian government. Exxon-Mobil filed an interlocutory appeal, claiming that the issues in the case were non-justiciable political questions, and the resolution of that appeal was the subject of this opinion.

Without reaching the merits of the political question argument, the court concluded that it lacked jurisdiction to hear the appeal. It found that the case in question did not fit within the collateral order doctrine, which describes a few narrow exceptions to the general rule that a decision is not appealable until it becomes final. Under the collateral order doctrine, a non-final decision may be reviewable if the court “finally determine[s] claims of right separable from, and collateral to, rights asserted in the action.” Exxon argued that motions to dismiss under the political question doctrine ought to be reviewable under the collateral order doctrine as a means of protecting the executive branch from judicial intrusion into sensitive foreign policy matters. The court disagreed, reasoning that discovery could be tailored to avoid such problems, and that Exxon had failed to otherwise identify any other collateral rights that could only be protected through an interlocutory appeal.

In the alternative, Exxon requested the court to treat the petition as a writ of mandamus, which, if granted, would allow the appeals court to reach the merits of the political question doctrine and compel the district court to dismiss the case for want of jurisdiction. The court reiterated the familiar principle that the mandamus is an extraordinary remedy that would only be appropriate if the lower court indisputably exceeded its jurisdiction. Citing precedents from other circuits involving similar facts, the court declined to issue the mandamus remedy in this case. It reasoned that, despite the potential diplomatic ramifications of the suit, the State Department had never requested that the case be dismissed as a political question, and discovery could be managed so as to minimize any diplomatic problems that might result.

Is Antarctica a Foreign Country? CA7 Says Not for Federal Taxes

Arnett v. C.I.R.
2007 WL 93234 (C.A.7 Jan. 16, 2007)

In this unusual case, Petitioner Dave Arnett was employed by Raytheon Corporation and stationed in Antarctica during 2001. When he filed his taxes, he claimed an exclusion for income earned in a foreign country under 26 U.S.C. 911. The IRS assessed a tax deficiency, holding that section 911 does not apply to Antarctica. CA7 affirmed.

Arnett first argues that the term "foreign country" is unambiguous and therefore any IRS regulation is unnecessary. In Smith v. United States, the Supreme Court held that Antarctica falls within the foreign country exception to the FTCA. However, CA7 does not believe that this is a general rule, but rather specific to the context of the FTCA, making "foreign country" an ambiguous term.

Given the ambiguity, CA7 examined the IRS Reg under a deferential standard per the Chevron doctrine. The Regs define a foreign country as:

The term "foreign country" when used in a geographical sense includes any territory under the sovereignty of a government other than that of the United States. It includes the territorial waters of the foreign country (determined in accordance with the laws of the United States), the air space over the foreign country, and the seabed and subsoil of those submarine areas which are adjacent to the territorial waters of the foreign country and over which the foreign country has exclusive rights, in accordance with international law, with respect to the exploration and exploitation of natural resources.

26 C.F.R. 1.911-2(h).

Finally, the court examines whether the Commissioner's interpretation of the regulation to preclude Antarctica is correct. Because excluding Antarctica is compatible with general U.S. policy underlying section 911 and also consistent with the U.S. refusal to acknowledge sovereign claims over Antarctica, the court believes the IRA position prevails.

Personal Jurisdiction over Iranian Officials for Alleged Torture

Nikbin v. Islamic Republic of Iran
2007 WL 64185 (D.D.C. Jan. 11, 2007)

In this case, Plaintiff Ghollam Nikbin filed suit against the Islamic Republic of Iran, the Iranian Ministry of Intelligence and Security ("MOIS"), the Islamic Revolutionary Guards ("Revolutionary Guards"), and the individuals Ali Akbar Hashemi Rafsanjani ("Rafsanjani"), Ali Akbar Fallahian Khuzestani ("Khuzestani"), and Does 1-10 seeking money damages for injuries arising from acts of torture allegedly committed against Nikbin while he was in the custody of the Iranian government. None of the defendants responded to the suit and the clerk entered a default.

In this opinion, Judge Bates undertakes to determine whether the court has jurisdiction over the parties and claims. With respect to the Iranian sovereign defendants, the court finds that the "torture exception" to sovereign immunity applies here. For any acts that the plaintiff may demonstrate constitute torture, he may be able to adequately state a claim.

Next, the individual officials who are sued in their official capacity is also entitled to protections of the Foreign Sovereign Immunities Act. With respect to service of process, the court concludes in a novel opinion that Section 1608, which controls service of process to foreign sovereigns, also applies to foreign officials sued in the official capacity;

This Court now holds that an officer of an entity that is considered the foreign state itself under the core-functions test should also be treated as the state itself for purposes of service of process under § 1608. This result follows from the derivative nature of an individual defendant's sovereign immunity under the FSIA.

Because the plaintiff failed to effect service in a matter in accord with section 1608, the court finds service was lacking for the official capacity claims.

Finally, the court turns to individual capacity claims against the same officers. For these claims, the 1608 service of process is not a requirement. The court concludes that service is not proper under any state long arm statute or under Rule 4(k)(2). Torture of an American abroad does not have a sufficient effect on the United States to give rise to jurisdiction through a protective or effects principle. Moreover, the plaintiff has not shown that the defendants have continuous and systematic ties to the U.S. to support a claim of general jurisdiction. Accordingly, the claims against the individual defendants are dismissed.

Choice of Law in Admiralty Case

Roberts v. Tesoro Refining and Marketing Co.,
2007 WL 43903 (S.D. Tex. Jan 5, 2007)

In this case, the Plaintiff, Aled Roberts -- a U.S. resident but a citizen of the UK -- was injured while disembarking from the M/T CAPE AVILA. The ship was moored 2.5 miles from a Dominican Republic Port. The Defendants are Tesoro Refining and Marketing Company ("Tesoro"), Tesoro Far East Maritime Company ("Tesoro East"), One Marine, Inc. ("One Marine"), Columbia Ship Management Deutschland ("Columbia"), Overseas Shipholding Group, Inc. ("Overseas"), M/T CAPE AVILA, and Avila Tanker Corporation ("Avila") who are various owners, contractors, and charterers.

Defendants moved to apply the law of the Dominican Republic to the suit. The court examined the factors as established by Lauritzen v. Larsen, 345 U.S. 571 (1953) and further elaborated in Hellenic Lines Ltd. v. Rhoditis, 398 U.S. 306(1970). The eight factors are:

(1) the allegiance or domicile of the plaintiff; (2) the place of the contract; (3) the allegiance of the defendant shipowner; (4) the law of the flag; (5) the accessibility of the foreign forum; (6) the place of the wrongful act; (7) the law of the forum; and (8) the defendant shipowner's base of operations. These factors, while potentially suggestive of a mechanical approach to determining choice of law, are not all of equal or even comparable significance.

Examining these factors, the court concluded that none weighed in favor of applying the law of the Dominican Republic. Since some weighed in favor of U.S. law, American law is chosen.

It is interesting to note that defendants may have done better with their motion had they sought to apply the law of Cyprus. As the ship was Cypriot flagged, the court suggested that this may have been a more close call. However, it is unclear from the opinion what substantive provision of Dominican Republic law defendants sought to gain.

Sinochem Argument

Sinochem v. Malaysia Int'l Shipping Co was argued today. The transcript can be found here. Scotusblog has an argument preview here. In short, the case presents the question of whether a federal district court may dismiss a complaint on forum non conveniens grounds prior to adjudicating personal jurisdiction.

I had previously discussed Sinochem in this post regarding forum non conveniens. As I suggested, one question I have is if this rule is adopted, whether a court may dismiss on forum non conveniens with conditions (i.e., defendant waives jurisdictional challenge in foreign court). Justice Ginsburg asked this exact question to Mr. Hallward-Driemeier, who was arguing for the U.S. in support of the petitioner:

[T]here is a question about a court without personal jurisdiction dismissing on forum non conveniens ground, and that is, it's common, as you know, to condition forum non conveniens dismissals on the defendant's undertaking that the defendant will not raise the statute of limitations and other conditions. If the Court has no personal jurisdiction over the defendant, it would be unable to impose such conditions; isn't that so?

Mr. Hallward-Driemeier responded:

Our understanding of a conditional dismissal in this circumstance is that the dismissing court is explaining its understanding of the world, and that -- and facts as they bear upon its analysis, such as is the defendant subject to jurisdiction in a foreign forum. Oftentimes, the plaintiff -- if I could answer – often time the plaintiff objects to dismissal because they can't sue the defendant in the foreign forum. The defendant agrees to waive any objection to jurisdiction. That understanding of fact is a condition of the dismissal. If it later proves to be untrue because the defendant objects to jurisdiction of the foreign court, it would be open to the plaintiff to seek to reopen the first suit on that ground.

Besides this point, this case appears headed towards a clear reversal of CA3 and a rule allowing courts to dismiss on forum non conveniens grounds before deciding jurisdiction. Nonetheless, I am not sure that the government's argument is compelling here. A condition that leads to dismissal under forum non is often more than a mere "understanding of the world." It is often not a fact that happened to exist, but rather an express agreement made by defendants to secure dismissal of the U.S. suit. The defendant affirmatively acts in a manner consistent with the conditional dismissal with the understanding that such activity will allow the U.S. suit to be dismissed. To me, a court should only exercise this authority over a defendant -- and police a defendant's compliance with the condition -- after it has established that it actually has any jurisdiction over the party in the first place. While condition-less dismissals for forum non conveniens may simply be an alternative threshold ground for dismissal that a court may choose prior to deciding jurisdiction, I still don't think that is the same when a court wishes to impose conditions.

Comity, Forum Non Conveniens and the National Bank of Greece

Klonis v. National Bank of Greece, S.A.
2006 WL 3851146 (S.D.N.Y. Dec. 27, 2006).

Comity and forum non conveniens were the primary issues in this case. Plaintiffs Nicholas and Mary Klonis sued the National Bank of Greece for failure to pay the principal and interest due on three accounts that the couple opened with the National Mortgage Bank of Greece in the 1980s. Two of the accounts were opened in New York; the other was opened in Athens. Defendants moved to dismiss the count relating to the Athens account for lack of personal jurisdiction. Defendants also sought dismissal of the entire action on international comity grounds, and for forum non conveniens. The court declined to rule on the former motion, but addressed the latter two.

The court denied the defendant’s motion to dismiss under the doctrine of comity. It reasoned that parallel litigation may proceed in the United States and another country without creating a conflict, at least until the entry of judgment in one forum results in collateral estoppel in the other. In the meantime, the court held that the mere presence of concurrent litigation does not supersede the district court’s nearly absolute obligation to exercise the jurisdiction that it retains. The court indicated that, in order to win dismissal on international comity grounds, there must be some exceptional circumstance justifying that outcome, and none was present here. The court also denied the defendants’ alternative request for a stay pending the outcome of the litigation in Greek courts.

The court also denied the defendants’ motion to dismiss on forum non conveniens grounds. The Second Circuit uses a three part test to determine whether such a dismissal is appropriate. The court described the test as follows:

First, the court must determine the degree of deference that plaintiffs' choice of forum deserves. Next, it must determine whether the proposed alternative forum constitutes an adequate forum for the resolution of the claims. Finally, assuming that the alternative forum is adequate, the court must weigh the relevant private and public interest factors and determine whether the plaintiffs' chosen forum or the proposed alternative is, in fact, the more convenient and appropriate forum.

Regarding the first part of the test, the court restated the familiar axiom that the plaintiff’s choice of forum is generally entitled to strong deference. To determine the appropriate degree of deference in this particular case, the court looked for evidence of forum shopping and found little. It also concluded that litigating the matter in New York would be as convenient or nearly as convenient to the parties as doing so in Greece. Regarding the second prong, the court found that Greece was an appropriate alternative forum. However, turning to the third part of the test, the court determined that practical considerations weighed in favor of litigating in New York. Specifically, the court determined that the hardship to the plaintiffs from conducting the litigation in Greece would be substantial, while the defendants would not endure similar hardship as a result of litigating in the United States.

Overall, the outcome is not particularly surprising. U.S. courts tend both to exercise jurisdiction despite the existence of parallel foreign litigation and to deny motions to dismiss on forum non conveniens grounds absent compelling reasons to grant them.

Argentinean Funds in Fed Reserve May Not Be Attached to Fulfill Judgment

Em Ltd. v. Republic of Argentina,
2007 WL 29978 (CA2 Jan 5, 2007)

This case arises from the attempt of NML Capital, Ltd. ("NML") and EM Ltd ("EM") to attach funds of the Banco Central de la Republica Argentina ("BCRA") held in the Federal Reserve Bank of New York. NML and EM had previously filed suit to recover $170 and $700 million, respectively, worth of bonds that Argentina had defaulted on during its 2001 financial crisis. A judgment had been entered in favor of EM; NML has yet to secure a judgment. Nonetheless, both parties sought to attach BCRA funds. They believed such attachment was appropriate after the President of Argentina issued decrees giving the Republic control over the BCRA funds in order to repay IMF loans.

The district court denied the attachment on three seperate grounds. First, the district court found that BCRA funds are seperate from those of the Republic of Argentina. Therefore, BCRA funds could not be attached for a judgment that runs against the Republic. Second, even if the funds were owned by Argentina, it is not clear that they are held by the federal reserve as as to be "used for a commercial activity in the United States." 28 U.S.C. 1610(a)(1). Accordingly, the Foreign Sovereign Immunities Act was not satisfied. Third, the FSIA also specifically precludes attachment "of a foreign central bank . . . held for its own account" unless the central bank or government expressly waives the provision. 28 U.S.C. 1611(b)(1). The court found no such waiver here.

The Second Circuit affirmed the district court. However, Judge Cabranes discussed the difference between assets of a foreign state and assets held by an instrumentality of a foreign state:

The FSIA's protections against attachment and execution extend to the instrumentalities of a foreign state such as BCRA, although the protections applicable to assets of instrumentalities vary from those applicable to the assets of the foreign states themselves. See Karaha Bodas, 313 F.3d at 82 ("Section 1610 provides different regimes for sovereign states on the one hand, and their agencies and instrumentalities on the other."); see also S & S Machinery Co. v. Masinexportimport, 706 F.2d 411, 414 (2d Cir.1983) ("State-owned central banks indisputably are included in the [FSIA's] definition of 'agency or instrumentality.' "). Under subsections 1610(a) and (d), assets of a foreign state can be attached only if the assets sought to be attached are "used for a commercial activity in the United States." But under subsection 1610(b), which concerns agencies and instrumentalities of foreign states, creditors may attach "any property in the United States of an agency or instrumentality of a foreign state engaged in commercial activity in the United States," 28 U.S.C. § 1610(b) (emphasis added). As we explained in Karaha Bodas, "[s]ubsection (a) is generally thought to be narrower than subsection (b). While subsection (b) applies to all property of the agencies and instrumentalities of foreign states, subsection (a) applies only to the property of foreign states that is 'used in commercial activity.' " Karaha Bodas, 313 F.3d at 82 (quoting Conn. Bank of Commerce v. Republic of Congo, 309 F.3d 240, 253 (5th Cir.2002)).

Judge Cabranes continued to explain that the funds in question continued to be BCRA funds, not Republic of Argentina funds, even following the decree authorizing the use of funds to repay the IMF. Moreover, even if the court had found that the funds had converted to control of the Republic, the decrees alone would not provide sufficient support to demonstrate that the funds were to be used for commerial activity within the United States.

This is a rather fascinating, complicated case. Please take a look at the decision for full details.

Applying California Arbitration Law over the FAA: Denying Arbitration in the Case of Third Parties

Rambus Inc. v. Hynix Semiconductor, Inc.
2007 WL 18829 (Cal. App. Jan. 3, 2007)

A California appellate court recently released an opinion regarding international arbitration. Rather than applying the FAA which would have required the court to compel arbitration, the court looked to California law and determined that arbitration was not required.

Rambus, Inc., filed suit against Hynix Semiconductor, Inc. and Hynix Semiconductor America, Inc. (collectively, "Hynix"); Samsung Electronics Co., Ltd. ("SEC"), Samsung Semiconductor, Inc., and Samsung Electronics America, Inc. (collectively, "Samsung") and other parties alleging a conspiracy to fix prices of dynamic random access memory ("DRAM") in violation of the Cartwright Act. Rambus had previously entered into licensing arrangements with Hynix and SEC. Both contracts had California choice of law and mandatory arbitration provisions. Accordingly, upon filing of the suit, Hynix and SEC moved to compel arbitration in accordance with the contracts. The trial court found that valid, enforceable arbitration provisions existed. Nonetheless, the court refused to apply the FAA and instead held that California law allowed trial courts discretion to refuse arbitration if certain conditions exist. Here, because not all defendants would be subject to arbitration, the court found that arbitration would create piecemeal adjudication of the dispute and would therefore be contrary to public policy. The California appellate court affirmed the refusal to compel arbitration.

California Arbitration Law v. the Federal Arbitration Act
The California arbitration law allows courts discretion in refusing to compel arbitration in certain cases. Section 1281.2 states:

On petition of a party to an arbitration agreement alleging the existence of a written agreement to arbitrate a controversy and that a party thereto refuses to arbitrate such controversy, the court shall order the petitioner and the respondent to arbitrate the controversy if it determines that an agreement to arbitrate the controversy exists, unless it determines that: [¶] ... [¶] (c) A party to the arbitration agreement is also a party to a pending court action or special proceeding with a third party, arising out of the same transaction or series of related transactions and there is a possibility of conflicting rulings on a common issue of law or fact.... [¶] ... [¶]

If the court determines that a party to the arbitration is also a party to litigation in a pending court action or special proceeding with a third party as set forth under subdivision (c) herein, the court (1) may refuse to enforce the arbitration agreement and may order intervention or joinder of all parties in a single action or special proceeding; (2) may order intervention or joinder as to all or only certain issues; (3) may order arbitration among the parties who have agreed to arbitration and stay the pending court action or special proceeding pending the outcome of the arbitration proceeding; or (4) may stay arbitration pending the outcome of the court action or special proceeding.

In contrast, the FAA requires arbitration when there exists a valid arbitration agreement, even if third parties would not be subject to the arbitration. As stated by the court:

Title 9 United States Code section 2 provides: "A written provision in any maritime transaction or a contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract or transaction, or the refusal to perform the whole or any part thereof, or an agreement in writing to submit to arbitration an existing controversy arising out of such a contract, transaction, or refusal, shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract." Thus, the FAA requires an arbitration agreement to be enforced even if multiple parties are involved who are not bound to arbitrate. (See, e.g., Moses H. Cone Hospital v. Mercury Constr. Corp. (1983) 460 U.S. 1, 19-20, superseded by statue on other grounds.)

Here, the court found that because the FAA does not preempt California arbitration law, it need not apply the FAA. Because the parties expressed an intent to apply substantive California law, the court finds comfort in applying the California arbitration law. "[O]ur Supreme Court holds that when the parties choose California law to govern their agreement, the procedural sections of the FAA are not 'applicable.' (Cronus, supra, 35 Cal.4th at p. 380.)." Clearly, if this case were in a federal court, the FAA procedural rules would apply and arbitration would be required.

Given the strong congressional support of arbitration particularly in the context of interstate and international commerce, should the FAA procedural rules trump state arbitration law? To me, this case is a compelling study of why such preemption may be justified.

Dismissing Foreign Chemical Weapons Manufacturers for Lack of Personal Jurisdiction

Stutts v. The De Dietrich Group,
2006 WL 3388648 (E.D.N.Y. Nov. 21, 2006)

This opinion is the latest chapter in the suit against companies who allegedly provided chemical weapons to Iraq prior to the 1991 Gulf War. Plaintiffs are Gulf War veterans who claim that they were injured by exposure to chemical weapons. Two defendants, Buchi Labortechnik AG ("Buchi AG") and De Dietrich Process Systems, S.A. ("DDPS-SA"), moved to dismiss for lack of personal jurisdiction. The Court grants both motions.

Buchi AG is a Swiss pharmaceutical and food manufacturing company. First, Plaintiffs argue that Buchi AG does business in New York, however the Court finds that Plainitffs fail to allege sufficient contacts demonstrating such presence. Next, Plaintiffs attempt to secure jurisdiction based on Buchi AG's U.S. subsidiary/agent responsible for sale, Buchi Analytical. The Court rejects the Plaintiff's evidence here:

Plaintiffs rely on materials beyond the pleadings to support their jurisdictional allegations. They refer to the websites of Buchi AG and Buchi Analytical, which show identical product lists. See Pl. Opp. at 4; see also McCallion Decl. Exs. E, D. Additionally, plaintiffs excerpt a page purported to be from the "Buchi website" that lists Buchi Analytical as a "USA Partner." These pages do not inform the Court about the relationship between the two entities and are insufficient to raise an inference of agency.

Finally, Plaintiffs argue that jurisdiction pursuant to Rule 4(k)(2) is present. The Court rejects this theory as well, holding that the Plaintiffs failed to properly plead 4(k)(2).

Plaintiffs indeed fail to plead the requisite elements for Rule 4(k)(2) jurisdiction, in particular that jurisdiction is not available in any state, but that defendant has sufficient contacts with the United States through its subsidiary. Moreover, where a party's contacts with the United States hinge on an alleged identity between it and an affiliated corporation, courts require sufficient allegations of interdependence to find a prima facie case of jurisdiction under Rule 4(k)(2)

DDPS-SA is a French supplier of equipment, systems, solutions and services to the chemical and pharmaceutical industries. Again, Plaintiffs argue that jurisdiction is proper over DDPS-SA through its U.S. subsidiary, DDPS-Inc. However, the Court determines that the subsidiary does not conduct all the business in the U.S. that DDPS-SA otherwise would, and jurisdiction through the subsidiary is accordingly not appropriate.

Plaintiffs also assert, again without elaboration, that DDPS-INC is a "mere department" of DDPS-SA. See Pl. Opp. at 6. Yet plaintiffs' allegations fail to demonstrate the requisite control by the parent of the subsidiary for jurisdiction to exist under this theory. While both parties agree that DDPS-INC is a wholly-owned subsidiary of DDPS-SA, thus demonstrating common ownership, plaintiffs fail to refute the sworn affidavit of Bello which indicates that other aspects of control are absent. For example, DDPS-INC is not DDPS-SA's agent for service of process in New York or the United States. Bello Decl. ¶ 25. Moreover, DDPS-INC is financially independent of DDPS-SA.

Again, the court finds that Plaintiffs failed to plead sufficiently to claim jurisdiction under Rule 4(k)(2).

Finally, the Court examined the Plaintiffs' motion for jurisdictional discovery. Because the Court believes that Plaintiffs failed to adequately plead jurisdictional facts, it denied the motion for discovery.

Where, as here, there are insufficient allegations that a subsidiary is so identified with its parent corporation that the latter is properly subject to jurisdiction based on the subsidiary's contacts in New York, a plaintiff has failed to establish a prima facie case of jurisdiction over the parent corporation.

___
Personally, I find it surprising that with respect to the jurisdiction-through-subsidiary argument, the Court relied upon affidavits submitted by the defendant corporations rather than allowing jurisdictional discovery. The Plaintiffs apparently provided publicly available evidence from websites, etc., in an attempt to demonstrate jurisdiction, but the Court relied on affidavits to refute such evidence. To me, it would seem this would be a proper case for jurisdictional discovery limited to the relationship between the named Defendants and their U.S. subsidiaries/agents. What is expected in such a case? Generally, would one expect jurisdictional discovery here?

Courts Lack Authority to Review Iran-US Claims Tribunal

Kiaie v. Islamic Republic of Iran,
2006 WL 3833946 (D.D.C. Dec. 29, 2006)

In this action, members of two families represented themselves pro se in an action against Iran. They claimed that during Iran's 1979 Islamic Revolution, corporations in which plaintiffs owned stock were seized by the government. The Kiaie and the Tavakoli family filed claims with the Iran-U.S. Claims Tribunal ("the Tribunal") in the early 1980s seeking compensation for the confiscation of the corporations. In 1996, the Tribunal denied all Kiaie plaintiffs relief. In 1997, the Tribunal awarded damages to one member of the Tavakoli family.

Plaintiffs apparently sought to challenge the Tribunal's rulings in federal court and obtain further relief against Iran. However, in adopting the magistrates findings, Judge Kessler ruled that the Court lacked authority to review decisions of the Tribunal. The Algiers Accords, which created the Tribunal, were designed specifically to eliminate Iranian liability in U.S. courts. Further, the Foreign Sovereign Immunities Act precludes litigation of any such claims against Iran.

Serving Process against the Palestinian Authority and the PLO

Klieman v. Palestinian Authority
2006 WL 3826677 (D.D.C. Dec. 29, 2006)

This is another case against the Palestinian Authority ("PA"), the Palestinian Liberation Organization ("PLO"), and individual defendants for alleged acts of terrorism. However because this case is brought by the estate of an American citizen, the claim is brought under the Antiterrorism Act of 1991.

Previously, Judge Friedman denied defendants' motion to dismiss and held that:

(1) collateral estoppel precluded the relitigation of the issues surrounding defendants' assertion of sovereign immunity and that sovereign immunity does not divest this Court of jurisdiction to hear this case, see Klieman I at 159; (2) judicial resolution of this case was not precluded by the political question doctrine, see id. at 162; (3) the attack alleged in the Complaint did not occur "in the course of" an armed conflict and therefore was not an "act of war" outside of the jurisdiction of the ATA, see id. at 167; and (4) whether the attack at issue met the definition of "international terrorism" in the ATA was a disputed question of material fact which should not be decided by the Court in the context of a motion to dismiss.

Here, defendants move to dismissal for insufficient service of process and lack of personal jurisdiction.

With respect to the six individual named defendants, the court holds that they were not properly served with process. Plaintiffs attempted to serve the defendants via the PLO's office in Washington DC. However, the court rejected this service holding that there is no evidence to support the contention that the PLO was authorized to accept service for the individuals. Moreover, Rule 4(h) applies to corporations, not individuals. Because the individuals were not served either in the United States under Rule 4(e) or in a foreign country under Rule 4(f) and there was no Rule 4(e) waiver, the individuals were not properly served. The court grants plaintiffs an additional 30 days to perfect service.

Turning to the PA and the PLO, the Court cites prior opinions finding that they have sufficient minimum contacts with the U.S. to permit personal jurisdiction consistent with the Due Process Clause. Further, they have been held to be unincorporated associations for purposes of Rule 4(h)(1) which allows for service "by delivering a copy of the summons and of the complaint to an officer, a managing or general agent, or to any other agent authorized by appointment or law to receive service of process." The plaintiffs claim to have properly served the PA and the PLO by serving a researcher at the PLO offices in DC, Hakam Takash. While the Court acknowledges that he is an employee of the PLO, the Court holds that the Plaintiffs failed to establish that he is authorized to receive process. Again, the Court grants 30 days for the plaintiffs to perfect service on the PA and PLO. The same applies to four other organizations, Fatah, Al Aqsa, Tanzim, and Force 17 which plaintiffs allege operate as a single unincorporated association.

Terrorism Not Actionable Under ATCA: Judge Edward's Concurrence in Tel Oren Lives On

Saperstein v. Palestinian Authority
2006 WL 3804718 (S.D. Fla. Dec. 22, 2006)

In this case, Plaintiffs allege terrorism claims through the Alien Tort Claims Act against the Palestinian Authority ("PA") and the Palestinian Liberation Organization ("PLO"). Ramsey Clark and Lawrence Schilling represent the defendant organizations. Judge Seitz dismisses the complaint for lack of subject matter jurisdiction, holding that terrorism is not actionable under ATCA.

Judge Seitz discusses whether ATCA creates a cause of action against private parties accused of committing terrorism. She turns to the 1984 case from the D.C. Circuit, Tel Oren v. Libyan Arab Republic, 726 F.2d 774, in which Judge Edwards stated in concurrence that "the nations of the world are so divisively split on the legitimacy of such aggression as to make it impossible to pinpoint an area of harmony or consensus" and therefore terrorism was not yet a clear violation of international law.

Based on Tel Oren alone, Judge Seitz dismissed the terrorism ATCA claim:

To resolve Defendants' motion, it is necessary to determine if the Plaintiffs' TAC allegations fit the categories of conduct that prior courts have found constitute a violation of the law of nations, even when carried out by a private actor. The conduct in Tel Oren is substantially similar to the conduct in the present case. Judge Edwards, in Tel Oren, made it abundantly clear that politically motivated terrorism has not reached the status of a violation of the law of nations. In their own words, Plaintiffs describe Defendants' conduct as terrorism. Beginning with their introduction, Plaintiffs state that they bring this action for damages caused by Defendants' "acts of terrorism as defined in federal law, and by reason of related tortious terrorist behavior." (TAC at 2.) Further, Plaintiffs specifically allege that the PA and PLO failed to "denounce and condemn acts of terror, apprehend, prosecute and imprison persons involved directly, and/or indirectly in acts of terrorism and outlaw and dismantle the infrastructure of terrorist organizations. (Id. 67.) Thus, if the conduct of the Defendants is construed as terrorism, then Plaintiffs have not alleged a violation of the law of nations.

_____
Without commenting on whether the PA and/or the PLO should be construed as terrorist organizations, I find Judge Seitz's direct adoption of Tel Oren quite troubling and I think we will see more of this case. I believe there are numerous problems with this decision.

First, the world has changed significantly since 1984 when Tel Oren was decided. While there may have been doubt as to whether terrorism violation international law in 1984, numerous UN declarations, treaties against terrorism, statements of most nations of the world, NATO’s action in Afghanistan against terrorism, etc., all suggest that terrorism is now considered a violation of international law. While the second order question – how terrorism is defined – may be a live debate (and highly relevant to the outcome of this case), there are certainly “easy” cases where one may identify that terrorism occurred and that it violated international law. For example, the 9/11 attacks are widely recognized as acts of terrorism proscribed by international law. By bluntly adopting Tel Oren, Judge Seitz's opinion would seemingly deny recover under international law for even such horrific, clear examples of international terrorism.

Second, the internal U.S. law regarding terrorism has significantly changed since 1984. In 1992, Congress adopted a civil remedy for U.S. victims of terrorism and provided an operational definition for U.S. courts. 18 U.S.C. § 2331. Like the adoption of the Torture Victim Protection Act, the creation of a specific cause of action for terrorism with universal jurisdiction for U.S. citizens seems to confirm that Congress believes terrorism violates the law of nations and therefore the creations of universal civil jurisdiction is appropriate.

Finally, this opinion fails to analyze Tel Oren with respect to Sosa v. Alvarez-Machain. Clearly, Sosa sets the standard for courts seeking to determine whether specific norms of international law should be construed as actionable through the Alien Tort Claims Act. Sosa blessed CA2's holdings in Filartiga and Kadic allowing for private causes of action in the context of torture and genocide. However, Sosa never concurred with Judge Edward’s concurrence in Tel Oren. Therefore, before adopting Judge Edward's position regarding terrorism – which I argued above is likely no longer supported given the changed political and legal landscape in the last 22 years – the court must, at the very least, determine that Judge Edward’s analysis in Tel Oren comports with the Supreme Court's 2004 Sosa opinion. Such a review of Tel Oren in light of Sosa is noticeably absent.

Whether the Alien Tort Claims Act creates a private right of action for terrorism is perhaps one of the most pressing questions with respect to ATCA jurisprudence. While courts may weigh the international law evidence regarding terrorism and disagree, a court addressing this question seems obligated to review and evaluate the enormous changes that have occurred to international law in the field of terrorism since 1984.