Transaero, Inc. v. La Fuerza Aerea Boliviana

• Decision Date: 29 July 1994
• Docket Number: No. 92-7222,92-7222
• Citation: 308 U.S. App. D.C. 86,30 F.3d 148
• Parties: TRANSAERO, INC., Appellee, v. LA FUERZA AEREA BOLIVIANA, Appellant.
• Court: U.S. Court of Appeals — District of Columbia Circuit

Page 148

30 F.3d 148

308 U.S.App.D.C. 86

TRANSAERO, INC., Appellee, v. LA FUERZA AEREA BOLIVIANA, Appellant.

No. 92-7222.

United States Court of Appeals, District of Columbia Circuit.

Argued Feb. 24, 1994.

Decided July 29, 1994.

Appeal from the United States District Court for the District of Columbia (91ms00139).

James W. Shannon, Jr., Washington, DC, argued the cause for appellant. With him on the briefs was Gregory B. Craig, Washington, DC.

Ronald N. Cobert, Washington, DC, argued the cause for appellee. With him on the brief was Andrew M. Danas, Washington, DC. Joseph M. Roberts, Washington, DC, entered an appearance.

On the brief for amicus were Frank W. Hunger, Asst. Atty. Gen., Eric H. Holder, Jr., U.S. Atty., Douglas Letter, U.S. Dept. of Justice, and Linda Jacobson, U.S. Dept. of State, Washington, DC.

Before MIKVA, Chief Judge, and WILLIAMS and SENTELLE, Circuit Judges.

Opinion for the Court filed by Circuit Judge SENTELLE.

Dissenting opinion filed by Chief Judge MIKVA.

SENTELLE, Circuit Judge:

Transaero, Inc., a New York corporation, obtained a default judgment against La Fuerza Aerea Boliviana ("the Bolivian Air Force") in the Eastern District of New York and registered the judgment in the district court for the District of Columbia. The Bolivian Air Force moved for summary judgment, claiming that the district court in New York lacked personal jurisdiction because the default judgment had been obtained without the service of process required by the Foreign Sovereign Immunities Act, 28 U.S.C. Secs. 1330, 1602-1611 (1988) ("the Act"). The Bolivian Air Force contended that because it is a "foreign state or political subdivision of a foreign state" within the meaning of section 1608 of the Act, Transaero had served it improperly. The district court held instead that the Bolivian Air Force is an "agency or instrumentality" of Bolivia under the service provisions of section 1608, so that Transaero's method of service gave the New York court jurisdiction. The Bolivian Air Force has taken an interlocutory appeal from the order. See Foremost-McKesson, Inc. v. Islamic Republic of Iran, 905 F.2d 438, 443 (D.C.Cir.1990) (denial of a claim of sovereign immunity is an immediately appealable collateral order).

We hold that the Bolivian Air Force is a "foreign state or political subdivision" within the meaning of section 1608 and that Transaero's method of service was defective. We therefore reverse and remand with directions to dismiss.

I.

Transaero sold aviation parts to the Bolivian Air Force throughout the early 1980s. In 1988, Transaero filed a complaint in the Eastern District of New York that alleged breach of contract and sought $983,696.60 in damages. On September 15, 1988, the Clerk of Court dispatched translations of the summons and complaint to the Bolivian Air Force in La Paz, Bolivia by registered mail with a return receipt requested. The Bolivian Air Force received the summons and complaint and sent a return receipt to the Clerk on September 23, 1988. The Bolivian Air Force made no appearance, and Judge Mishler scheduled a hearing on Transaero's motion for default judgment for March 30, 1989. Transaero sent notice of the hearing to the Bolivian Air Force, to the Bolivian First Minister in La Paz, Bolivia, and to the Bolivian Ambassador and Consul General in Washington. When the Bolivian Air Force failed to appear at the hearing, Judge Mishler granted the motion for default judgment. The court found that service had been properly effected under section 1608(b), but made no findings on the adequacy of service under 1608(a). The court also held that it had subject matter jurisdiction over the contract claim under section 1605(a)(2) of the Act, which creates an exception to the general rule of sovereign immunity for claims arising from "commercial activities" conducted by foreign states.

In 1991, Transaero registered the default judgment in the district court for the District of Columbia under 28 U.S.C. Sec. 1963 (Supp. IV 1992) and served a set of interrogatories under Federal Rule of Civil Procedure 69. The Bolivian Air Force entered an appearance and moved to quash the interrogatories and dismiss the proceedings, arguing that the District Court for the Eastern District of New York lacked jurisdiction because the Bolivian Air Force had not been served in compliance with section 1608(a) of the Act. In an order dated September 25, 1992, the District Court for the District of Columbia denied the motion. The court found that Transaero had originally served the Bolivian Air Force under section 1608(b); that the Bolivian Air Force received actual notice of Transaero's lawsuit; and that the Bolivian Air Force was notified by mail of the hearing on Transaero's motion for default judgment. The court then ruled that, as a matter of law, the Bolivian Air Force is an "agency or instrumentality" of Bolivia and that service under section 1608(b) was proper.

After the Bolivian Air Force's motion for summary judgment was denied, Transaero requested an order compelling the Bolivian Air Force to answer its interrogatories. The judge in charge of the case passed away and that motion apparently has never been resolved. On May 12, 1993, the Bolivian Air Force requested the Eastern District of New York to set aside the default judgment on the ground that it had been procured through fraudulent representations of fact. The court denied the motion, the Bolivian Air Force appealed the denial to the Second Circuit, and the Second Circuit affirmed. See Transaero, Inc. v. La Fuerza Aerea Boliviana, 24 F.3d 457 (2d Cir.1994). ¹

II.

A.

Under the Act, "subject matter jurisdiction plus service of process equals personal jurisdiction." Texas Trading & Milling Corp. v. Federal Republic of Nigeria, 647 F.2d 300, 308 (2d Cir.1981), cert. denied, 454 U.S. 1148, 102 S.Ct. 1012, 71 L.Ed.2d 301 (1982). The Bolivian Air Force admits that the New York court had subject matter jurisdiction under the "commercial activities" provision of section 1605(a)(2). It claims only that Transaero's service failed to comply with sections 1603 and 1608 of the Act. Section 1603 provides:

(a) A "foreign state", except as used in section 1608 of this title, includes a political subdivision of a foreign state or an agency or instrumentality of a foreign state as defined in subsection (b).

(b) An "agency or instrumentality of a foreign state" means any entity--

(1) which is a separate legal person, corporate or otherwise, and

(2) which is an organ of a foreign state or political subdivision thereof, or a majority of whose shares or other ownership interest is owned by a foreign state or political subdivision thereof, and

(3) which is neither a citizen of a State of the United States ..., nor created under the laws of any third country.

28 U.S.C. Sec. 1603 (emphasis added). Section 1608 does not further define either term. Section 1608(a) establishes certain requirements for service on "a foreign state or political subdivision of a foreign state," while section 1608(b) establishes different requirements for service on "agencies or instrumentalities" of foreign states.

B.

The nub of the dispute is whether the Bolivian Air Force counts as a "foreign state" or rather as an "agency or instrumentality" under section 1608. That in turn depends upon whether the Bolivian Air Force is a "separate legal person, corporate or otherwise" under section 1603(b)(1). ² The words in themselves are opaque. Some district courts have sought to illuminate them by balancing three "characteristics" of separate legal status: whether, under the law of the foreign state where it was created, the entity can sue and be sued in its own name, contract in its own name, or hold property in its own name. Bowers v. Transportes Navieros Ecuadorianos, 719 F.Supp. 166, 170 (S.D.N.Y.1989); see also Unidyne Corp. v. Aerolineas Argentinas, 590 F.Supp. 398, 400 (E.D.Va.1984). But other courts have thought the distinction is instead a categorical one, and depends on whether the defendant is the type of entity "that is an integral part of a foreign state's political structure, [or rather] an entity whose structure and function is predominantly commercial." Segni v. Commercial Office of Spain, 650 F.Supp. 1040, 1041-42 (N.D.Ill.1988). The amicus curiae brief of the United States in this case proposes a similar test that looks to the "core function" of the foreign governmental body at issue. See Br. of United States at 12-13, 16.

We think that the categorical approach adopted in Segni and urged, in a somewhat different form, by the United States--whether the core functions of the foreign entity are predominantly governmental or commercial--best captures the statutory meaning. Congress spoke against a rich background of federal and international law that colors the statutory terms and fills them out. The Supreme Court has held that the Act largely codifies the "restrictive" theory of sovereign immunity, under which "immunity is confined to suits involving the foreign sovereign's public acts, and does not extend to cases arising out of a foreign state's strictly commercial acts." Verlinden B.V. v. Central Bank of Nigeria, 461 U.S. 480, 487, 103 S.Ct. 1962, 1968, 76 L.Ed.2d 81 (1983). See also Republic of Argentina v. Weltover, Inc., --- U.S. ----, ----, 112 S.Ct. 2160, 2165, 119 L.Ed.2d 394 (1992). Thus the Act repealed foreign immunity for "commercial activities," Sec. 1605(a)(2), but preserved it for inherently sovereign or public acts. See Saudi Arabia v. Nelson, --- U.S. ----, ----, 113 S.Ct. 1471, 1479, 123 L.Ed.2d 47 (1993); Weltover, --- U.S. at ----, 112 S.Ct. at 2166. The distinction between foreign states and their instrumentalities establishes two categories of actors that correspond to the restrictive theory's two categories of acts.

Besides section 1608, the distinction appears in the venue provisions of 28 U.S.C. Sec. 1391 (1988). Section 1391(f) makes the federal...