Chuidian v. Philippine Nat. Bank
| Decision Date | 29 August 1990 |
| Docket Number | Nos. 88-6146,88-6481,s. 88-6146 |
| Parties | Vincente B. CHUIDIAN, Plaintiff-Appellant, v. PHILIPPINE NATIONAL BANK, Defendant, and Raul Daza, Defendant-Appellee. Vincente B. CHUIDIAN, Plaintiff-Appellee, and Philippine Export and Foreign Loan Guarantee Corporation, Intervenor, v. PHILIPPINE NATIONAL BANK, Defendant, and Raul Daza, Defendant-Appellant. |
| Court | U.S. Court of Appeals — Ninth Circuit |
Steven C. Finley, San Francisco, Cal., for plaintiff-appellant-cross-appellee.
Benjamin George Williams, Santa Monica, Cal., for defendant-appellee-cross-appellant.
Appeal from the United States District Court for the Central District of California.
Before WALLACE, THOMPSON and O'SCANNLAIN, Circuit Judges.
Chuidian, a Philippine citizen, sued Daza, a Philippine citizen and an official of the Philippine government, after Daza instructed the Philippine National Bank (Bank) to dishonor a letter of credit issued by the Republic of the Philippines to Chuidian. The district court dismissed for lack of subject matter jurisdiction, and Chuidian timely appeals. We have jurisdiction pursuant to 28 U.S.C. Sec. 1291, and we affirm.
Chuidian owns interests in various businesses in California. In 1985, the Philippine Export and Foreign Loan Guarantee Corporation (Guarantee Corporation), an instrumentality of the Republic of the Philippines government under then-President Ferdinand Marcos, sued several of Chuidian's companies in Santa Clara County Superior Court. Chuidian counterclaimed. The parties settled the Santa Clara County litigation in late 1985. As part of the settlement, the Bank, a state-owned bank, issued an irrevocable letter of credit to Chuidian on behalf of the Guarantee Corporation, payable at the Bank's Los Angeles branch.
Shortly thereafter, on February 26, 1986, the government of President Marcos was overthrown, and replaced by the current government of President Corazon Aquino. The new regime formed the Presidential Commission on Good Government (Commission), an executive agency charged with recovering "ill-gotten wealth" accumulated by Marcos and his associates. Philippine Executive Order No. 1, Sec. 2(a) (Feb. 28, 1986). The Commission was given the authority "[t]o enjoin or restrain any actual or threatened commission of acts by any person or entity that may render moot and academic, or frustrate, or otherwise make ineffectual the efforts of the Commission...." Id., Sec. 3(d).
Daza was a duly appointed member of the Commission. In March 1986, acting pursuant to section 3(d) of the executive order, Daza instructed the Bank not to make payment on the letter of credit issued to Chuidian. According to Daza, the Commission suspected that Marcos and Chuidian had entered into a fraudulent settlement of the Santa Clara County litigation to pay off Chuidian for not revealing certain facts about Marcos's involvement in Chuidian's business enterprises. As a result, the Commission wished to examine the propriety of the settlement, and, in order to secure payment in the event of a decision against Chuidian, needed to prevent payment under the letter of credit.
When the Bank, pursuant to Daza's order, refused to make payment under the letter of credit, Chuidian sued the Bank in Los Angeles County Superior Court. The Bank removed the action to federal district court pursuant to 28 U.S.C. Sec. 1441(d). Chuidian later added as defendants Daza and several other individuals, asserting intentional interference in his contractual relations with the Bank.
In an unrelated action, the Guarantee Corporation sought to reopen the Santa Clara County litigation and set aside the settlement giving rise to the letter of credit. Like Daza, the Guarantee Corporation asserted that the settlement was the product of a collusive arrangement between Chuidian and Marcos. The Guarantee Corporation also intervened in Chuidian's suit against Daza, arguing that Chuidian should not recover because the settlement giving rise to the letter of credit was invalid.
After protracted procedural maneuvering, Daza moved to dismiss on grounds of defective service of process and sovereign immunity. Daza also moved for sanctions pursuant to rule 11, Fed.R.Civ.P. The district court granted the motion to dismiss, holding that Daza had sovereign immunity for acts committed in his official capacity as a member of the Commission, and that Chuidian's allegations that Daza had acted beyond his authority lacked merit. The court denied Daza's request for rule 11 sanctions. Chuidian appeals from the dismissal, and Daza cross-appeals from the denial of sanctions.
The parties agree that absent a finding of sovereign immunity, the district court had subject matter jurisdiction to consider Chuidian's claims. Nevertheless, because the question is one of first impression in this circuit and is sufficiently in doubt, we determined that it should be considered by us sua sponte.
Chuidian and Daza are both citizens of the Philippines. Therefore, no diversity jurisdiction exists. See 28 U.S.C. Sec. 1332. Likewise, Chuidian's underlying claims do not present a federal question. See 28 U.S.C. Sec. 1331.
Federal courts have jurisdiction over suits against foreign sovereigns under the Foreign Sovereign Immunity Act, 28 U.S.C. Secs. 1602-1611 (Act), even where the parties are not diverse and the underlying claims do not present a federal question. Verlinden B.V. v. Central Bank of Nigeria, 461 U.S. 480, 489-94, 103 S.Ct. 1962, 1969-74, 76 L.Ed.2d 81 (1983) (Verlinden ); 28 U.S.C. Sec. 1330(a). Nevertheless, we do not base our jurisdiction on the Act. To do so would be insufficient for this case because some of the claims presented do not raise an issue of sovereign immunity. For those which do involve sovereign acts, the district court did not rely upon the Act, and the parties dispute whether it applies. We need not resolve this question since a more secure basis for jurisdiction exists which places the entire controversy properly before us without regard to the applicability of 28 U.S.C. Sec. 1330(a).
The claim against Daza's co-defendant, the Bank, is properly in federal court pursuant to 28 U.S.C. Sec. 1441(d). At all relevant times, the Philippine government owned a majority interest in the Bank. Thus, the Bank qualifies as an "agency or instrumentality of a foreign state" under 28 U.S.C. Sec. 1603(b). See 28 U.S.C. Sec. 1608(b)(2). Section 1441(d) provides that in any state court action against a foreign state (including an agency or instrumentality of a foreign state), the foreign state may remove the proceeding to federal court. We have not previously considered whether removal pursuant to section 1441(d) transfers the entire action or only the claim against the removing entity. We now decide that jurisdictional issue.
The Fifth Circuit faced an identical question in Arango v. Guzman Travel Advisors Corp., 621 F.2d 1371, 1375 (5th Cir.1980) (Arango ). Arango stated a claim against Dominicana, an instrumentality of the government of the Dominican Republic, and several private parties. Dominicana removed pursuant to section 1441(d). The Fifth Circuit held that where a sovereign defendant in a multi-party suit removes under section 1441(d), "the entire action against all defendants accompanies it to federal court." Id. at 1375. The court relied upon two passages from the legislative history of section 1441(b). First, Congress spoke of removal of "the action" rather than of "the claim," suggesting that removal would not effect a separation of the claims. Second, Congress acknowledged that co-defendants might be involuntarily removed under section 1441(d). "New subsection (d) of section 1441 permits the removal of any such action at the discretion of the foreign state, even if there are multiple defendants and some of these defendants desire not to remove the action." H.R.Rep. No. 94-1487, 94th Cong., 2d Sess., reprinted in 1976 U.S.Code Cong & Admin.News 6604, 6631 (emphasis added) (House Report). The Fifth Circuit reasoned that such involuntary removal could occur only if section 1441(d) envisioned removal of the entire action. Arango, 621 F.2d at 1375.
We agree with the reasoning of the Fifth Circuit and hold that section 1441(d) requires, in the case of a removal by a foreign sovereign, that the federal court initially exercise jurisdiction over claims against co-defendants even if such claims could not otherwise be heard in federal court. Thus, the proper removal by Daza's co-defendant Bank also transferred the claims against Daza to federal court, without regard to whether the Act provides an independent basis for hearing those claims. Therefore, given that the claims were properly in federal court, we next consider whether the Act or some other form of sovereign immunity barred adjudication on the merits.
The central issue in this appeal is whether Daza is entitled to sovereign immunity for acts committed in his official capacity as a member of the Commission. Daza argues that he qualifies as an "agency or instrumentality of a foreign state," 28 U.S.C. Sec. 1603(b), and hence is entitled to immunity pursuant to the Act, 28 U.S.C. Sec. 1604. Chuidian contends either that Daza is not covered by the Act, or, in the alternative, that this case falls within the exceptions to immunity expressly provided by the Act. See 28 U.S.C. Secs. 1605-07. The government, in a "Statement of Interest of the United States," takes a third position. Under the government's view, Daza is not covered by the Act because he is an individual rather than a corporation or an association, but he is nevertheless entitled to immunity under the general principles of sovereign immunity expressed in the Restatement (Second) of Foreign Relations Law Sec. 66(b).
We initially consider whether the Act applies to an individual such as Daza acting in his official capacity as an employee of a...
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