Tag Archives: Capacity

Recent Development: Smith Rocke Ltd. v. República Bolivariana de Venezuela

February 3, 2014 By in International Takings Exception Tags: , , , , , , , Leave a comment

On January 27, 2014, District Judge Schofield granted Venezuela’s motion to dismiss a lawsuit arising out of the expropriation of a Venezuelan company and its assets.  See Smith Rocke Ltd. v. Republica Boliviariana de Venezuela, 12 CV. 7316 LGS, 2014 WL 288705 (S.D.N.Y. Jan. 27, 2014).  The district court’s opinion addressed several important issues under the FSIA:

Sovereign Activity: The court concluded that the commercial activity exception did not apply because the case was based upon a sovereign act – the expropriation a Venezuelan company – rather than commercial activity.  Smith Rocke Ltd., 2014 WL 288705, at *4.  In my view, foreign states do not sufficiently rely upon the “sovereign activity” defense in FSIA cases.  There is a tendency for attorneys to assume that the commercial activity exception applies if the case involves commercial conduct or a breach of contract.  However, even in the context of a commercial dispute, defense counsel in FSIA cases must carefully examine the allegations and determine whether the requirements of section 1605(a)(2) are met.  That includes an analysis of whether the sovereign activity defense applies.  See, e.g., Braka v. Bancomer, S.N.C., 762 F.2d 222, 225 (2d Cir. 1985) (no jurisdiction under commercial activity exception where contractual breach caused by the exercise of sovereign power); MOL, Inc. v. Peoples Republic of Bangladesh, 736 F.2d 1326, 1328 (9th Cir. 1984) (no jurisdiction under commercial activity exception where licensing agreement and its alleged breach concerned Bangladesh’s sovereign right to regulate its natural resources).

Gravamen Rule: In determining that the commercial activity exception did not apply, the district court held that only the expropriation exception could confer jurisdiction because the “gravamen here is that Defendants engaged in the unlawful taking of [the property] . . . without compensation, in violation of international law.”  Smith Rocke Ltd., 2014 WL 288705, at *4.  Judge Schofield’s reliance on the gravamen rule was correct, and highlights yet another critical issue for a sovereign challenging jurisdiction under the FSIA.  Cf. Saudi Arabia v. Nelson, 507 U.S. 349, 363 (1993); O’Bryan v. Holy See, 556 F.3d 361, 380 (6th Cir. 2009); Garb v. Republic of Poland, 440 F.3d 579, 588 (2d Cir. 2006); Randolph v. Budget Rent-A-Car, 97 F.3d 319, 324 (9th Cir. 1996); de Sanchez v. Banco Cent. de Nicaragua, 770 F.2d 1385, 1398 (5th Cir. 1985).

Violation of International Law: In holding that the expropriation exception did not confer jurisdiction, Judge Schofield applied the “widely accepted” rule “that the taking of property by a state from its own nationals does not violate international law.”  Smith Rocke Ltd., 2014 WL 288705, at *7; see also, e.g., Republic of Austria v. Altmann, 541 U.S. 677, 713 (2004) (Breyer, J., joined by Souter, J., concurring).  The court also made it clear that what counts is the nationality of the property owner at the time of the seizure itself.  Id. at *7; cf. Siderman de Blake v. Republic of Argentina, 965 F.2d 699, 704, 711 (9th Cir. 1992) (plaintiff who became United States citizen prior to the taking could invoke the expropriation exception).

Capacity: The capacity issue under the FSIA – which I have addressed before – is likely to become increasingly important in the post-Samantar era.  In Smith Rocke Ltd., the district court dismissed the individual defendants because they were sued in their official capacity; as the court noted, “where an official is sued in his official capacity, and where the action is clearly against the foreign state itself as the real party in interest, the case may be treated as an action ‘against the foreign state itself, as the state is the real party in interest.’”  Smith Rocke Ltd., 2014 WL 288705, at *11, quoting Samantar v. Yousef, 560 U.S. 305, 325 (2010).

Litigation Comment: Richardson v. Attorney General of the British Virgin Islands

November 22, 2013 By in Officials Tags: , , , , , , , , , , , Leave a comment

Another blog devoted to issues relating to foreign sovereigns in United States courts recently mentioned the case Richardson v. Attorney General of the British Virgin Islands, Civil No. 2008-144, 2013 WL 4494975 (D.V.I. Aug. 20, 2013).  See www.foreignsovereignblog.com.  Although Richardson is unusual because the foreign sovereign is appearing pro se, the case is indeed interesting for a number of reasons:

Capacity: Richardson addresses the circumstances under which a lawsuit against a foreign sovereign official should be deemed a lawsuit against the foreign sovereign itself.  Richardson, 2013 WL 4494975, at *2.  The official capacity issue frequently arises with respect to domestic government officials.   Cf. Kentucky v. Graham, 473 U.S. 159, 166 (1985) (“[A]n official-capacity suit is, in all respects other than name, to be treated as a suit against the entity.  It is not a suit against the official personally, for the real party in interest is the entity”).  In Samantar, the Supreme Court recognized that it was an issue under the FSIA as well: “it may be the case that some actions against an official in his official capacity should be treated as actions against the foreign state itself, as the state is the real party in interest.”  Samantar v. Yousuf, 560 U.S. 305, 325 (2010), citing Graham, 473 U.S. at 166.  It is an issue that should be kept in mind whenever an attorney confronts a case against a foreign sovereign official.

Waiver: The Richardson court correctly held that a foreign state does not waive immunity simply by failing to appear in the matter.  Richardson, 2013 WL 4494975, at *4.  However, the court also accurately stated that a foreign state does waive immunity if it fails to assert immunity in a responsive pleading – which, according to a docket check, is what the pro se foreign sovereign defendant may just have done in a recent filing.  Id.  Richardson highlights that a foreign sovereign can actually increase the risk of waiver by appearing in the action, particularly if defense counsel is not familiar with the FSIA’s waiver rules.

Commercial Activity: In analyzing whether the plaintiff’s claims involved commercial activity, the Richardson court examined whether the conduct was “of a nature that a private person would undertake for profit.”  Richardson, 2013 WL 4494975, at *4.  The “for profit” test is controversial, particularly given the nature/purpose language in 28 U.S.C. section 1603(d).  However, there is a strong argument that whether or not an activity is the type customarily undertaken for profit is an appropriate factor to consider, and I address that issue here.

Scope of Employment/Respondeat Superior: The Richardson court quotes the Fifth Circuit’s decision in Moran for the following proposition relating to the tort exception’s “scope of employment” requirement: “‘[T]he scope of employment provision of the tortious activity exception requires a finding that the doctrine of respondeat superior applies to the tortious act or omission committed by the officer or employee of the foreign state.’”  Richardson, 2013 WL 4494975, at *5, quoting Moran v. Kingdom of Saudi Arabia, 27 F.3d 169, 173 (5th Cir. 1994).  This again is an issue for a future post, but courts and attorneys in FSIA cases should be careful not to equate the tort exception’s “scope of employment” requirement with a respondeat superior analysis.  Under most circumstances the two are identical, but in certain situations there is a big difference.  Cf. Primeaux v. United States, 181 F.3d 876 (8th Cir. 1999) (en banc).

Political Subdivision: Richardson determined that BVI was a political subdivision of the United Kingdom for purposes of the FSIA.  Richardson, 2013 WL 4494975, at *10.  On its face that determination appears correct, but it is worth noting that there are not many cases under the FSIA addressing what is meant by the term “political subdivision.”  Under the right circumstances, the political subdivision issue is one that could involve very interesting litigation.

Strict Compliance: The Richardson court correctly held that a plaintiff must strictly comply with section 1608(a)’s service of process requirements.  See Richardson, 2013 WL 4494975, at *8; see also https://fsialaw.com/2013/11/07/the-ninth-circuits-substantial-service-error/.  However, Richardson is unusual in that the court appeared to hold that the strict compliance standard applied to the requirements of the Hague Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters, Nov. 15, 1965, 658 U.N.T.S. 163 (“Hague Service Convention”).  See Richardson, 2013 WL 4494975, at *13; see also 28 U.S.C. § 1608(a)(2).  There are not many cases under section 1608(a)(2), but applying a strict compliance standard to the Hague Service Convention requirements appears to be a logical extension of FSIA service precedent.

Official Immunity: Official immunity is relatively straightforward when the Executive Branch files a suggestion of immunity.  See, e.g., Rosenberg v. Lashkar-e-Taiba, — F. Supp. 2d — , 2013 WL 5502851 (E.D.N.Y. Sept. 30, 2013).  Richardson provides an example of a court finding a foreign sovereign official immune even in the absence of a suggestion of immunity from the Executive Branch.  Richardson, 2013 WL 4494975, at *16; see also Samantar, 560 U.S. at 311 (discussing that, under the common law, a district court “had authority to decide for itself whether all the requisites for such immunity existed” in the “absence of recognition of the immunity by the Department of State”) (citations and internal quotations omitted).  A court determination of official immunity can be a useful tool for FSIA defense counsel in cases against officials or in situations where discovery is sought from foreign sovereign officials.