651 F.3d 280 (2nd Cir. 2011), 10-806-cv, Walters v. Industrial and Commercial Bank of China, Ltd.
|Citation:||651 F.3d 280|
|Opinion Judge:||REENA RAGGI, Circuit Judge:|
|Party Name:||Debbie WALTERS, Max Walters, Plaintiffs-Petitioners-Appellants, v. INDUSTRIAL AND COMMERCIAL BANK OF CHINA, LTD., Bank of China Ltd., China Construction Bank Corporation, Respondents-Appellees, The People's Republic of China, Defendant.|
|Attorney:||Charles H. Camp, Law Offices of Charles H. Camp, Washington, D.C., for Plaintiffs-Petitioners-Appellants. Lanier Saperstein (Pamela Rogers Chepiga, Mitchell A. Silk, on the brief), Allen & Overy LLP, New York, NY, for Respondents-Appellees.|
|Judge Panel:||Before: SACK, RAGGI, LYNCH, Circuit Judges.|
|Case Date:||July 07, 2011|
|Court:||United States Courts of Appeals, Court of Appeals for the Second Circuit|
Argued: Dec. 1, 2010.
[Copyrighted Material Omitted]
Debbie and Max Walters appeal from a judgment of the United States District Court for the Southern District of New York (Denny Chin, Judge ), entered on April 29, 2010, which dismissed their petition for issuance of a turnover order pursuant to Fed.R.Civ.P. 69(a) and N.Y. C.P.L.R. § 5225(b) (" petition" ). The Walters sought a turnover order to enforce a $10 million default judgment against the People's Republic of China by collecting China's assets in the possession of the respondent banks, Industrial and Commercial Bank of China, Ltd., Bank of China Ltd., and China Construction Bank Corporation (together, " Banks" ). Citing the Foreign Sovereign Immunities Act of 1976 (" FSIA" ), Pub.L. No. 94-583, 90 Stat. 2891 (codified as amended at 28 U.S.C. §§ 1330, 1332(a), 1391(f), 1441(d), 1602-1611), the district court dismissed the petition. To the extent the petition sought assets beyond the scope of the exception to immunity from execution set forth in 28 U.S.C. § 1610(a)(2), the district court ordered dismissal with prejudice. To the extent the petition sought assets conceivably falling within the scope of § 1610(a)(2), the district court ordered dismissal " without prejudice to the Walters filing a new Petition narrowly tailored to the requirements of § 1610(a)(2)" and " pursuant to § 1610(c)." Order ¶ ¶ 4-5, Walters v. People's Republic of China, No. 18 Misc. 302 (S.D.N.Y. Feb. 2, 2010).
Without filing a new petition, the Walters appeal, arguing that (1) the Banks lack standing to assert foreign sovereign immunity on behalf of China, which has not itself appeared in this action; (2) China waived sovereign immunity, both (a) by its commercial and tortious conduct underlying the default judgment, and (b) by its failure to appear; (3) the petition satisfies all FSIA requirements, including those of § 1610(a)(2) and § 1610(c); and (4) under the FSIA, petitioners are entitled to collect on the default judgment against China from the assets of China's agencies and instrumentalities, in addition to the assets of China itself.
We reject these arguments as without merit and affirm the judgment of dismissal.
A. The Default Judgment Entered in the Western District of Missouri
This case has its origins in a tragedy. On November 11, 1990, petitioners' thirteen-year-old son, Kale Ryan Walters, was killed on a hunting trip with his father when a Chinese-manufactured rifle the boy was carrying allegedly malfunctioned and discharged. In November 1993, the Walters sued China and entities allegedly controlled by that sovereign in the United States District Court for the Western District of Missouri on theories of products liability, negligence, and breach of warranty in connection with the manufacture and export of the gun in question. See Compl., Walters v. Century Int'l Arms, Inc., No. 93-5118-CV-SW-1 (W.D.Mo. Nov. 4, 1993).
After being served with petitioners' complaint pursuant to 28 U.S.C. § 1608(a)(2)-(4), China returned the documents, claiming sovereign immunity, and thereafter entered no appearance in the Missouri action. The district court nevertheless proceeded to conduct a bench trial and, on October 22, 1996, entered a default
judgment against China for $10 million (" Missouri default judgment" ). See Final Judgment, Walters v. Century Int'l Arms, Inc., No. 93-5118-CV-SW-1 (W.D.Mo. Oct. 22, 1996). In doing so, the Missouri district court determined that it had jurisdiction over China under FSIA exceptions to sovereign immunity for carrying on commercial activity within the United States, see 28 U.S.C. § 1605(a)(2), and committing a " tortious act or omission" causing damages in this country, id. § 1605(a)(5).1 The district court dismissed without prejudice petitioners' claims against the single Chinese-controlled corporation then remaining in the case.2
Over the next ten years, the Walters unsuccessfully attempted to collect on the Missouri default judgment. Their 1998 motion in the Western District of Missouri for an order of attachment and execution in the amount of $10 million was denied for failure to identify any property belonging to China falling within one of the FSIA exceptions to execution immunity listed in 28 U.S.C. § 1610(a) or (b). See Order, Walters v. People's Republic of China, No. 93-5118-CV-SW-1 (W.D.Mo. Dec. 18, 1998).3 The Walters' 2001 effort to execute the judgment upon two Chinese giant pandas on loan to the National Zoo in Washington, D.C., prompted an appearance in opposition by the United States and, in the end, a dismissal on consent with prejudice. See Order, Walters v. People's Republic of China, No. 93-5118-CV-SW-1 (W.D.Mo. Aug. 5, 2002).
In October 2006, with the ten-year-old judgment still unsatisfied, the district court for the Western District of Missouri granted petitioners' request to extend the judgment for another ten years. See Order, Walters v. People's Republic of China, No. 93-5118-CV-SWDW (W.D.Mo. Oct. 18, 2006); see also 28 U.S.C. § 1962 (providing for federal judgment to operate as lien in same manner and time as state judgment); Mo. S.Ct. R. 74.08-.09 (providing for judgments to expire after ten years, subject to motion for revival).
B. Proceedings in the Southern District of New York
1. Restraining Notices and Subpoenas
In 2009, the Walters shifted their enforcement efforts from Missouri to New York. On September 1, 2009, they registered the Missouri default judgment in the United States District Court for the Southern District of New York, and the following month they served restraining notices and subpoenas on the New York branches of the respondent Banks, forbidding the transfer of any of China's assets held by the Banks and demanding documents relating to such assets. See Walters v. People's Republic of China, 672 F.Supp.2d 573, 574 (S.D.N.Y.2009). In subsequent filings and at oral argument, petitioners clarified that they sought to restrain only China's assets held outside the United States. See id.
The Banks moved in the district court to vacate the restraining notices and to quash the subpoenas on the ground of China's sovereign immunity. In opposition, petitioners argued that (1) China's property outside the United States was not protected
by sovereign immunity under the FSIA, and (2) the Banks lacked standing to assert immunity on behalf of China. See id.
On December 2, 2009, District Judge Sidney H. Stein granted the motion to vacate and quash, holding that the FSIA's exceptions to sovereign immunity did not apply to China's assets outside the United States. See id. at 575. Judge Stein found it unnecessary to decide whether the Banks had standing to assert sovereign immunity on China's behalf, relying instead on China's own assertion of immunity in a November 11, 2009 letter to the U.S. Department of State. See id. at 575 n. 2. Therein, China maintained that it " enjoys sovereign immunity" with respect to petitioners' claims, that it had made in this case " repeated representations to the U.S. side through diplomatic channel[s] and stressed that China enjoys sovereign immunity and is not subject to jurisdiction of U.S. courts," and that it " does not accept the jurisdiction of U.S. courts and the so-called default judgment." Letter from Embassy of People's Republic of China to U.S. Dep't of State (Nov. 11, 2009).
Petitioners did not appeal the district court's December 2, 2009 order.
2. Turnover Petition
On November 24, 2009, petitioners filed in the district court and served upon the Banks the present petition for issuance of a turnover order pursuant to N.Y. C.P.L.R. § 5225(b).4 The petition, which was served on China via its Ministry of Justice, sought " all funds of [China] being held within or without the United States by any or all of [the Banks] as is necessary to fully satisfy the [Missouri default] Judgment." Notice of Pet. for Issuance of Turnover Order at 2, Walters v. People's Republic of China, No. 18 Misc. 302 (S.D.N.Y. Nov. 24, 2009). In a December 24, 2009 letter to petitioners' counsel, the Chinese Ministry of Justice rejected service of the petition, stating that " [t]he execution of the request would infringe the sovereignty or security of the People's Republic of China." Letter from Ministry of Justice, People's Republic of China to Charles H. Camp (Dec. 24, 2009).
The Banks moved to dismiss the petition, and then-District Judge Denny Chin granted the motion on February 2, 2010. Insofar as the petition sought turnover of assets (1) held outside the United States or (2) held inside the United States but not falling within the scope of 28 U.S.C. § 1610(a)(2), the district court ordered dismissal with prejudice. To the extent the petition sought turnover of assets inside the United States falling within the scope of § 1610(a)(2), the district court ordered dismissal " without prejudice to the Walters filing a new Petition narrowly tailored to the requirements of § 1610(a)(2)"...
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