Olympia Exp., Inc. v. Linee Aeree Italiane, S.P.A.

• Decision Date: 30 November 2007
• Docket Number: No. 07-1821.,No. 07-1708.,07-1708.,07-1821.
• Citation: 509 F.3d 347
• Parties: OLYMPIA EXPRESS, INC. and Neotours, Ltd., Plaintiffs-Appellees, Cross-Appellants, v. LINEE AEREE ITALIANE, S.P.A., doing business as Alitalia Airlines, Defendant-Appellant, Cross-Appellee.
• Court: U.S. Court of Appeals — Seventh Circuit

509 F.3d 347

OLYMPIA EXPRESS, INC. and Neotours, Ltd., Plaintiffs-Appellees, Cross-Appellants, v. LINEE AEREE ITALIANE, S.P.A., doing business as Alitalia Airlines, Defendant-Appellant, Cross-Appellee.

No. 07-1708.

No. 07-1821.

United States Court of Appeals, Seventh Circuit.

Argued November 5, 2007.

Decided November 30, 2007.

Terry M. Grimm (argued), Winston & Strawn, Chicago, IL, for Plaintiffs-Appellees, Cross-Appellants.

Thomas Carulli (argued), Kaplan, Von Ohlen, & Massamillo, New York, NY, for Defendant-Appellant, Cross-Appellee.

Before POSNER, EVANS, and SYKES, Circuit Judges.

POSNER, Circuit Judge.

Alitalia appeals from an $8.5 million judgment in a suit for breach of contract under Illinois law. The suit, brought by two firms that sell tickets for seats on Alitalia flights, had been filed in an Illinois state court. But Alitalia removed it to the federal district court in Chicago under the Foreign Sovereign Immunities Act (codified in 28 U.S.C. §§ 1330(a), 1441(d), 1602-1611), at a time when the Italian government was Alitalia's majority shareholder. That made Alitalia a foreign-government instrumentality (a "foreign state," in the language of the Act) fully subject to the Act, 28 U.S.C. §§ 1603(a), (b)(2), and therefore entitled to remove the case to federal district court. The removal provision, 28 U.S.C. § 1441(d); see In re Air Crash Disaster Near Roselawn, Indiana, 96 F.3d 932, 936 (7th Cir.1996); Rex v. Compania Pervana De Vapores, S.A., 660 F.2d 61, 63-64 (3d Cir.1981), states that "upon removal the action shall be tried by the court without jury." But after the case was removed, the Italian government sold its majority shareholding in Alitalia, and the plaintiffs—four years into the case—demanded a jury. The district court agreed to the demand. Alitalia sought mandamus to prevent the jury trial, but while its petition for mandamus was pending, the jury trial (which had not been stayed) was held, resulting in the judgment from which Alitalia now appeals. We denied the petition without considering the merits of Alitalia's claim to be entitled to a nonjury trial. In re Linee Aeree Italiane (Alitalia), 469 F.3d 638 (7th Cir. 2006). So if the Foreign Sovereign Immunities Act entitled it to a nonjury trial, we must vacate the judgment. Matthews v. CTI Container Transport Int'l, Inc., 871 F.2d 270, 282 (2d Cir.1989); Houston v. Murmansk Shipping Co., 667 F.2d 1151, 1154-55 (4th Cir.1982); cf. Fisher v. Danos, 671 F.2d 904, 906 (5th Cir.1982).

The only basis of federal jurisdiction in this case, at least when it was filed and thus before Alitalia's conversion to a private firm, was the removal provision that we cited. Because the suit arose under state rather than federal law, it could not have been brought in or removed to a federal district court under the federal-question jurisdiction. Nor under the diversity jurisdiction; a suit against a foreign state is not within that jurisdiction. 28 U.S.C. § 1332(a)(4); Ruggiero v. Compania Peruana de Vapores Inca Capac Yupanqui, 639 F.2d 872, 875-76 (2d Cir. 1981) (Friendly, J.). (A suit by a foreign state against citizens of one or more U.S. states is. 28 U.S.C. § 1332(a)(4).) The district court thought that Alitalia's conversion changed the jurisdictional basis of the suit from foreign sovereign immunity to diversity of citizenship. But in Dole Food Co. v. Patrickson, 538 U.S. 468, 478-80, 123 S.Ct. 1655, 155 L.Ed.2d 643 (2003), the Supreme Court had held that whether the defendant is a foreign state within the meaning of the Foreign Sovereign Immunities Act is to be determined on the basis of the facts in existence when the suit was filed, and if this principle governs our case the jurisdictional basis has not changed.

The specific question in Dole was whether the Act applied to a company that had ceased to be a "foreign state" before it was sued rather than, as in our case, after. But the Court based its decision on the familiar rule—emphatically reaffirmed after Dole, in Grupo Dataflux v. Atlas Global Group, L.P., 541 U.S. 567, 124 S.Ct. 1920, 158 L.Ed.2d 866 (2004)—that jurisdiction is determined by the facts that exist when the suit is filed. 538 U.S. at 478, 123 S.Ct. 1655. It would be a big surprise to discover that the Court has changed its mind and now thinks that jurisdiction under the Foreign Sovereign Immunities Act is determined when a party demands a jury trial—in this case, demands it years after the suit was first removed to federal district court under section 1441(d).

So the district court was wrong to think that when Alitalia was privatized the jurisdictional basis of this suit switched to diversity, which allows a suit by a U.S. citizen against a foreign citizen, 28 U.S.C. § 1332(a)(2), as distinct from a foreign state instrumentality. "There is no doubt that 28 U.S.C. § 1330(a) and its counterpart dealing with removal, § 1441(d), are the sole source of a district court's jurisdiction over a civil action against a foreign state as defined by the FSIA." Houston v. Murmansk Shipping Co., supra, 667 F.2d at 1153.

We have found only two previous cases in which the defendant ceased to be a "foreign state" after the suit was filed. Leith v. Lufthansa German Airlines, 897 F.Supp. 1115 (N.D.Ill.1995), held that the change of status did not take the case outside the Foreign Sovereign Immunities Act. Matton v. British Airways Board, Inc., No. 85 CIV. 1268, 1988 WL 117456, at *3 (S.D.N.Y., Oct.27, 1988), held that it did. We agree with Leith; the jurisdictional basis of the suit continued to be, and remains, that Act, and nothing else. But this does not mean that a change in the defendant's status that occurs after a suit is filed cannot alter the plaintiffs' right to a jury trial. A demand for a jury trial is made "after [rather than at] the commencement of the action and not later than 10 days after the service of the last pleading directed to [an issue triable of right by a jury]." Fed.R.Civ.P. 38(b). And while in this case the demand was filed much later, it could be argued that the deadline should be tolled whenever an unforeseen change eliminates a bar to the demand— especially in this case, because Alitalia stipulated that it would not object to the plaintiffs' demand for a jury trial on the ground that it was untimely.

The tolling of the 10-day deadline would certainly be impermissible were the bar to a jury trial in section 1441(d) itself jurisdictional. That section is, we have just seen, the only basis upon which this case is within federal jurisdiction. Jurisdiction is power, as Holmes famously said, Cordova v. Grant, 248 U.S. 413, 419, 39 S.Ct. 138, 63 L.Ed. 334 (1919); Michigan Trust Co. v. Ferry, 228 U.S. 346, 356, 33 S.Ct. 550, 57 L.Ed. 867 (1913); see also Steel Co. v. Citizens for a Better Environment, 523 U.S. 83, 94, 118 S.Ct. 1003, 140 L.Ed.2d 210 (1998); Ex parte McCardle, 74 U.S. (7 Wall.) 506, 514, 19 L.Ed. 264 (1869), and the power conferred by section 1441(d) does not include the power to conduct a jury trial. The plaintiffs argue that the ban on trial by jury in section 1441(d) cannot be important enough to affect jurisdiction because the section is not even a part of the Foreign Sovereign Immunities Act. But that is incorrect. Both that section and 28 U.S.C. §§ 6202-6211 are provisions of the Act (along with 28 U.S.C. § 1330(a), of which more in a moment). See Public Law 94-583, 90 Stat. 2891 (Oct. 21, 1976). They simply were codified in different parts of Title 28. Section 1441(d) confers removal jurisdiction and was therefore grouped with other, similar provisions.

What is true is that jurisdiction usually refers to a court's authority to entertain a case, rather than to procedural incidents such as whether to convene a bench trial or a jury trial. Against this, however, can be cited the text of 28 U.S.C. § 1330(a). Although the plaintiffs filed this suit in state court, they could have filed it in federal district court under—and only under—that section, which provides that "the district courts shall have original jurisdiction without regard to amount in controversy of any nonjury civil action against a foreign state." (Emphasis added.) That reads like a conferral of jurisdiction only over nonjury suits, rather than the conferral of a broader jurisdiction and then, incidentally as it were, an instruction to the judge not to convene a jury. The latter is a more natural reading of section 1441(d). But it can't be right that if one brings a suit directly in federal court against a foreign state a jury trial is absolutely barred, while if instead one brings the identical suit in state court and the foreign state removes it to the same federal district court a subsequent change in the defendant's status may enable the plaintiff to obtain a jury trial. Cf. Ruggiero v. Compania Peruana de Vapores Inca Capac Yupanqui, supra, 639 F.2d at 876 n. 7.

Yet the court in the Houston case, which we cited earlier, held that the bar to jury trial in sections 1330(a) and 1441(d) is not jurisdictional; and though decided many years ago, Houston remains the only decision to have addressed the question. The foreign-state defendant had prevailed with the jury and was opposing the plaintiff's argument that the case must be retried without one, though it was the plaintiff that had demanded the jury and the defendant that had opposed the demand. Since the bar in the Foreign Sovereign Immunities Act to trial by jury is intended for the benefit of the foreign-state defendant, it would have been a considerable paradox to invoke the concept of subject-matter jurisdiction to force that defendant, after it had prevailed in a jury trial, to undergo a bench trial. There was every reason to terminate the litigation on the basis of the jury verdict in favor of the foreign-state defendant even though the plaintiff's demand for a jury should have been refused.

The facts of Houston make us reluctant to conclude that the bar to a jury...