475 F.3d 1080 (9th Cir. 2007), 04-16387, Af-Cap, Inc. v. Chevron Overseas (Congo) Ltd.
|Docket Nº:||04-16387, 04-16388, 04-16788, 04-16810.|
|Citation:||475 F.3d 1080|
|Party Name:||AF-CAP INC., Plaintiff-counter-defendant-Appellant, v. CHEVRON OVERSEAS (CONGO) LIMITED; Chevron International (Congo) Limited; Cabinda Gulf Oil Company Limited; The Republic of Congo, Defendants-Appellees, Chevron Texaco Corporation; Chevron Texaco Global Energy Inc.; Chevron Texaco Overseas Petroleum Inc., Defendants-counter-claimants-Appellees.|
|Case Date:||January 25, 2007|
|Court:||United States Courts of Appeals, Court of Appeals for the Ninth Circuit|
Argued and Submitted April 3, 2006.
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Adam C. Belsky (briefed), Terry Gross (argued), Gross & Belsky, San Francisco, California, for plaintiff-appellant-counter-defendant Af-Cap.
Neil A.F. Popovic (briefed and argued), Heller Ehrman LLP, San Francisco, California; Jonathan Blackman and Boaz S. Morag, Cleary, Gottlieb, Steen & Hamilton, LLP, New York, New York, for defendant-appellee The Republic of Congo.
Douglas G. Boven, Reed Smith LLP, San Francisco, California, for third-party defendants-appellees ChevronTexaco Corporation, et al.
Appeal from the United States District Court for the Northern District of California D.C. Nos. CV-03-01963-PJH, CV-01-01548-PJH, CV-03-01963-PJH, Phyllis J. Hamilton, District Judge, Presiding.
Before: Marsha S. Berzon, Johnnie B. Rawlinson, and Consuelo M. Callahan, Circuit Judges.
RAWLINSON, Circuit Judge.
In this consolidated action, Af-Cap Inc. (Af-Cap), the judgment creditor, appeals the district court's judgment dissolving and vacating garnishments and liens filed against any property of the Republic of Congo (the Congo), the judgment debtor, held by third party ChevronTexaco Corporation (CT Corp) and domestic ChevronTexaco subsidiaries (collectively ChevronTexaco), and dismissing Af-Cap's writ of execution action filed against ChevronTexaco, three ChevronTexaco foreign subsidiaries, and the Congo, a sovereign country.
The Congo asserts a sovereign immunity defense against Af-Cap's attempted execution of its judgment against the Congo's property allegedly held by ChevronTexaco. The property sought to be garnished includes intangible obligations of ChevronTexaco owed to the Congo for various bonuses, taxes, and royalties related to the extraction of hydrocarbons, oil, and other of the Congo's natural resources. Because these obligations were not "used for a commercial activity in the United States," they are protected from execution or collection under the Foreign Sovereign Immunity Act (FSIA) codified at 28 U.S.C. § 1610(a). We therefore affirm the dismissal of this garnishment action.
This case involves a garnishment action against the Congo's property in execution of a judgment for a defaulted $6.5 million loan made to the Congo by Af-Cap's predecessor, Equator Bank.
On December 18, 1984, pursuant to a loan agreement (the 1984 Loan Agreement), Equator Bank loaned $6.5 million to the Congo for the construction of a highway. The Congo consented to "execution against any property whatsoever (irrespective of its use or intended use), " based on any action arising out of the 1984 Loan Agreement. The Congo also agreed to waive its "[sovereign] immunity from suit, execution, attachment ... or other legal process." However, in 1985, the Congo defaulted on the loan. In 1986, the Connecticut Bank of Commerce (CBC), Equator Bank's assignee, obtained an English judgment against the Congo, which it converted into a United States judgment in New York. CBC subsequently registered the judgment in Texas and California. The California action was removed to federal district court in the Northern District of California, Case No. 01-1548, where the litigation was stayed pending a final decision in the Texas case.
Meanwhile, parallel litigation based on the Texas judgment proceeded. In Connecticut Bank of Commerce v. Republic of Congo, 309 F.3d 240 (5th Cir. 2002) (CBC), the Fifth Circuit addressed the parallel garnishment action filed by CBC against property held by CMS, a third party oil company that owed tax and royalty obligations to the Congo. CBC recognized the
validity of the judgment, but remanded for a determination of whether the Congo "used" the CMS obligations "in a commercial activity in the United States." Id. at 249, 260-61. Af-Cap v. Republic of Congo, 383 F.3d 361 (5th Cir. 2004), addressed the appeal from the district court decision after remand, and held that tax and royalty obligations owed to the Congo that were used to pay a commercial loan from a United States bank were used for commercial purposes in the United States, thereby rendering them amenable to execution. Id. at 368, 371.
In addition to the pending action in the Northern District of California seeking to enforce the registered judgment, Af-Cap filed a creditor's suit, Case No. 03-1963, against the Congo and six ChevronTexaco corporations: CT Corp, Chevron Texaco Global Energy Inc. (CTGEI), ChevronTexaco Overseas Petroleum Inc. (CTOPI), Chevron Overseas Congo Ltd. (COCL), Chevron International Congo Limited (CICL), and Cabinda Gulf Oil Co. (CABGOC).
Af-Cap identified the following intangible obligations that it alleged were the property of the Congo:
(1) Certain obligations used to offset prepayments made by ChevronTexaco to the Congo, including a $3.8 million participation bonus payable by CABGOC, a $3.5 million signature bonus previously transferred by COCL for the development of the K/AIMI oil field located on the border of the Congo and Angola, and a $5 million operator bonus previously transferred by COCL for the development of the K/AIMI oil field;
(2) CTGEI's $7 million payment to the Congo for the acquisition of Society Commune de Logistique (SCLOG), a Congolese joint venture for the distribution of oil within the Congo;
(3) COCL's and CICL's various fees and tax obligations payable to the Congo;
(4) COCL's contingent obligation for a portion of a $10 million signing bonus if a permit is issued for the Moho and Bilondo oil fields;
(5) In-kind royalties payable by COCL and CICL to the Congo and SNPC for extractions from the N'Kossa, Marine VII and Kitina fields; and
(6) $2 million payable by COPCL directly to third-party contractors for social programs within the Congo, including the construction of a university and a high school.
The district court entertained a motion based solely on the second prong of FSIA § 1610(a): whether the Congo's property, represented by the above-described obligations, was "used for a commercial activity in the United States." For purposes of the dispositive motion, the parties stipulated that: (1) the offshore ChevronTexaco subsidiaries were in the United States; (2) the district court had personal jurisdiction over all of the ChevronTexaco corporations involved in this action; (3) SNPC is the alter ego of the Congo; and (4)"all disputed facts [would] be presumed in favor of Af-Cap."
The district court ruled that none of the ChevronTexaco obligations identified by Af-Cap was property used by the Congo in a commercial activity in the United States. Thus, the obligations were not amenable to execution under the sovereign immunity exception described in § 1610(a). The district court therefore dissolved and vacated all garnishments and liens. This appeal followed.
II. GENERAL STANDARDS OF REVIEW
"The existence of sovereign immunity and subject matter jurisdiction under the [FSIA] are questions of law that
[this Court] review[s] de novo." Park v. Shin, 313 F.3d 1138, 1141 (9th Cir. 2002) (citation omitted). "The availability of issue preclusion is also reviewed de novo on appeal." Dias v. Elique, 436 F.3d 1125, 1128 (9th Cir. 2006) (citation omitted). "Discovery rulings are reviewed for an abuse of discretion," Surfvivor Media, Inc. v. Survivor Prods., 406 F.3d 625, 630 (9th Cir. 2005) (citation omitted), as is the district court's decision to conclude discovery. Villegas-Valenzuela v. INS, 103 F.3d 805, 813 (9th Cir. 1996).
A. We Are Not Collaterally Estopped By The Texas Judgment From Analyzing The Scope Of The Congo's Waiver Of Immunity.
As a general proposition, "[t]he doctrine of collateral estoppel (or issue preclusion) prevents relitigation of issues actually litigated and necessarily decided, after a full and fair opportunity for litigation, in a prior proceeding." Kourtis v. Cameron, 419 F.3d 989, 994 (9th Cir.2005) (citation and internal quotation marks omitted). We have applied the doctrine "where (1) the issue necessarily decided at the previous proceeding is identical to the one which is sought to be relitigated; (2) the first proceeding ended with a final judgment on the merits; and (3) the party against whom collateral estoppel is asserted was a party or in privity with a party at the first proceeding." Id. (citation omitted). Although "[i]ssue preclusion generally refers to the effect of a prior judgment in foreclosing successive litigation of an issue of fact or law ...," New Hampshire v....
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