Connecticut Bank of Commerce v. Republic of Congo

• Decision Date: 20 July 2006
• Docket Number: No. Civ. 05-762-SLR.,Civ. 05-762-SLR.
• Citation: 440 F.Supp.2d 346
• Parties: CONNECTICUT BANK OF COMMERCE, Plaintiff, v. THE REPUBLIC OF CONGO, Defendant.
• Court: U.S. District Court — District of Delaware

440 F.Supp.2d 346

CONNECTICUT BANK OF COMMERCE, Plaintiff, v. THE REPUBLIC OF CONGO, Defendant.

No. Civ. 05-762-SLR.

United States District Court, D. Delaware.

July 20, 2006.

COPYRIGHT MATERIAL OMITTED

Paul D. Brown, and Joseph B. Cicero, of Greenberg Traurig, LLP, Wilmington, DE, for Plaintiffs Assignee, Af-Cap, Inc.

M. Duncan Grant, and James C. Carignan, of Hamilton Pepper, LLP, Wilmington, DE, for Garnishee, CMS Nomeco Congo LLC.

MEMORANDUM OPINION

SUE L. ROBINSON, Chief Judge.

I. INTRODUCTION

Connecticut Bank of Commerce ("CBC") obtained a money judgment in March 2000 against defendant, the Republic of Congo ("the ROC"), in the Supreme Court of the State of New York.¹ (D.I. 1 at ¶ 3) CBC's assignee, Af-Cap, Inc. ("AS-Cap"), filed a judgment action in the State of Delaware on August 30, 2005, and garnishee, CMS Nomeco Congo LLC ("CMS"), removed. (D.I.1) Presently before the court is Af-Cap's motion to remand. (D.I.3)

II. BACKGROUND

As a result of a default by the ROC, a money judgment exceeding 13 million dollars was entered against the ROC in New York. (D.I.5, Ex. A) Although CBC is still named as plaintiff, Af-Cap has acted as plaintiff since being assigned the interest in the New York judgment, and CBC no longer plays an active role in the litigation. (D.I. 1 at ¶ 4) Af-Cap buys, at substantial discounts, distressed debt of foreign nations and pursues the collection of those debts. (D.I. 1 at ¶ 5) In the present action, Af-Cap seeks to seize the ROC's inkind royalty interests in oil located in Congolese waters. (Id.)

Af-Cap seeks to garnish CMS to satisfy the judgment against the ROC.² (D.I. 1 at ¶ 7) The in-kind royalty oil is produced in Congolese territorial waters, transported through an underwater pipeline system, and stored in a storage terminal operated by CMS. (D.I. 5 at 1) The ROC's stateowned oil company then takes possession of such oil. (Id.)

According to orders issued by the Congolese court in December 2004 and July 2005, the ROC is entitled to take its inkind royalty, notwithstanding the efforts of judgment creditors to garnish the royalty through the United States Courts. (Id.) The Congolese court has further ordered CMS to deliver the oil to the ROC's stateowned oil company and has held that any order interfering with the ROC's receipt of its royalty oil is contrary to the ROC's public order. (D.I. 5 at 2) The Congolese court directs the use of public force to enforce these orders `in the event of noncompliance. (Id.)

Af-Cap served a Notice/Praecipe for Issuance of a Writ of Garnishment upon CMS on September 1, 2005. (D.I. 3 at 4) Af-Cap obtained a Writ of Garnishment from the Delaware Superior Court and served it upon CMS on October 12, 2005.³ (D.I. 5 at 2) CMS then filed its Notice of Removal on November 1, 2005. (D.I.1) M-Cap filed its motion to remand pursuant to 28 U.S.C. § 1447 on November 10, 2005. (D.I.3)

III. STANDARD OF REVIEW

The exercise of removal jurisdiction is governed by 28 U.S.C. § 1441. The statute is strictly construed, requiring remand to state court if any doubt exists over whether removal was proper. Shamrock Oil & Gas Corp. v. Sheets, 313 U.S. 100, 104, 61 S.Ct. 868, 85 L.Ed. 1214 (1941). A court will remand a removed case "if at any time before final judgment it appears that the district court lacks subject matter jurisdiction." 28 U.S.C. § 1447(c) (2004). The party seeking removal bears the burden to establish federal jurisdiction. Steel Valley Auth. v. Union Switch & Signal Div. Am. Standard, Inc., 809 F.2d 1006 (3d Cir.1987); Zoren v. Genesis Energy, L.P., 195 F.Supp.2d 598, 602 (D.De1.2002). In determining whether remand based on improper removal is appropriate, the court "must focus on the plaintiff's complaint at the time the petition for removal was filed," and assume all factual allegations therein as true. Id

IV. DISCUSSION

A. Subject Matter Jurisdiction and Removal Under the FSIA

The Foreign Sovereign Immunities Act ("FSIA"), 28 U.S.C. §§ 1602-11, is a "comprehensive statute containing a `set of legal standards governing claims of immunity in every civil action against a foreign state or its political subdivisions, agencies, or instrumentalities.'" Republic of Austria v. Altmann, 541 U.S. 677, 691, 124 S.Ct. 2240, 159 L.Ed.2d 1 (2004) (quoting Verlinden B.V. v. Central Bank of Nigeria, 461 U.S. 480, 488, 103 S.Ct. 1962, 76 L.Ed.2d 81 (1983)). The FSIA "`codifies as a matter of federal law, the restrictive theory of sovereign immunity,' and transfers primary responsibility for immunity determinations from the Executive to the Judicial branch." Id. Relevant to the present case, the FSIA "governs the extent to which a [foreign] state's property may be subject to attachment or execution." Republic of Austria, 541 U.S. at 691, 124 S.Ct. 2240. See 28 U.S.C. §§ 1609-1611.

Federal and state courts possess concurrent jurisdiction under the FSIA pursuant to 28 U.S.C. § 1602, which states, "Claims of foreign states to immunity should henceforth be decided by courts of the United States and of the States in conformity with the principles set forth in this chapter." See also Republic of Argentina v. Weltover, Inc., 504 U.S. 607, 610, 112 S.Ct. 2160, 119 L.Ed.2d 394 (1992) (finding the FSIA "establishes a comprehensive framework for determining whether a court in this country, state or federal, may exercise jurisdiction over a foreign state"); Testa v. Katt, 330 U.S. 386, 67 S.Ct. 810, 91 L.Ed. 967 (1947) (requiring state courts of general jurisdiction to entertain claims predicated on federal law where Congress has conferred concurrent jurisdiction).

The FSIA also includes specific provisions conferring subject matter jurisdiction to the federal courts, 28 U.S.C. § 1330(a),⁴ and includes a removal provision, 28 U.S.C. § 1441(d), which states, "Any civil action brought in a State court against a foreign state as defined in section 1603(a) of this title may be removed by the foreign state...." 28 U.S.C. § 1441(d) (emphasis added). See Republic of Austria, 541 U.S. at 691, 124 S.Ct. 2240.

Af-Cap argues that, according to the plain language of § 1441(d), only the foreign state can remove to the district court and, consequently, garnishee CMS improperly removed the action. The court declines to so limit removal in the context at bar, a garnishment action where the defendant foreign state was never active in the litigation. Consequently, the court will examine whether this garnishment action, according to the facts, is a separate and distinct civil action appropriately removed.

B. Civil Action

Section 1441(d) allows removal of "any civil action brought in a State court against a foreign state...." 28 U.S.C. § 1441(d). "A suit which is merely ancillary or supplemental to another action cannot be removed from state to federal court." Richmond v. Allstate Ins. Co., 624 F.Supp. 235, 236 (E.D.Pa.1985). The courts are divided over whether a garnishment action is a separate and distinct action for purposes of removal.⁵

The Third Circuit has not addressed whether a garnishment action in state court is merely ancillary, or whether it is a distinct civil action. Scanlin v. Utica First Ins. Co., 426 F.Supp.2d 243, 247 (M.D.Pa. 2006). District courts in the Third Circuit, have approached the issue in various ways.⁶ Some courts in the Third Circuit have embraced a "flexible analysis" approach to determine whether garnishment proceedings have been properly removed by the garnishee and to determine whether the garnishment action is a separate and distinct civil action. Id. In addition, several flexible "ancillariness" tests have been articulated. Id.

In Scanlin, for example, the court posed three questions to determine whether a garnishment action is removable: (1) Was the garnishment proceeding substantially a continuation of the prior state court suit?; (2) Was the issue in the garnishment action completely separate from the central issue in the state court proceeding?; (3) Was the true defendant the same in the garnishment action? Id. at 249 (citing Haines by Midlantic Bank, N.A. v. Donn's, Inc., No. 95-1025, 1995 WL 262534, at *2 (E.D.Pa.1995)). The court in Scanlin found that the issue to be resolved in the garnishment action, whether defendant's parents' insurance policy would provide coverage for their son's judgment, was distinct from the issues of defendants' liability in the initial personal injury action. Id. at 250. In addition, the court found that defendant Brown was no longer a party in the garnishment litigation; only the garnishee UTICA was a named party, and defendant Brown had assigned his rights against UTICA to plaintiff. Id. Therefore, the court concluded that the garnishment action was a civil action appropriately removed. Id.

In Graef v. Graef 633 F.Supp. 450 (E.D.Pa.1986), the court applied an "independent federal analysis" in determining whether that particular garnishment action was a distinct civil action. Id. at 452. The district court considered the Pennsylvania state court's prior characterizations of garnishment actions as ancillary or independent, focusing on (1) whether an issue of fact might be joined, and (2) whether the proceeding is adversary, calling for a judgment independent of the underlying cause. Id. The district court concluded that Pennsylvania's garnishment statutes had been interpreted as involving separate and distinct civil actions. See Shearer v. Reed, 286 Pa.Super. 188, 428 A.2d 635 (1981) (the garnishment action subsequent to a tort judgment permitted a new claim for bad faith against the defendant's insurer).

In Richmond v. Allstate Ins. Co., 624 F.Supp. 235, 236 (E.D.Pa.1985), the court considered whether it would be called upon to re-examine, in the garnishment action, issues of fact contested in and "inseparably tied to" the initial state action. Id. at 238. In its discussion of policies favoring remand, the court denounced relitigating the same issues of fact in federal court, bifurcating the trial...