Gater Assets Ltd. v. AO Moldovagaz

Decision Date22 June 2021
Docket Number19-3562,19-4021,19-4147,August Term 2020,Nos. 19-3550,19-3747,19-4017,s. 19-3550
Citation2 F.4th 42
Parties GATER ASSETS LIMITED, Petitioner-Appellee-Cross-Appellant, Lloyd's Underwriters at London, Petitioner, v. AO MOLDOVAGAZ, Republic of Moldova, Respondents-Appellants-Cross-Appellees, AO Gazsnabtranzit, Respondent.
CourtU.S. Court of Appeals — Second Circuit

Michael McGinley, Dechert LLP, Philadelphia, PA (Selby P. Brown, Dechert LLP, Philadelphia, PA; May Chiang, Dechert LLP, New York, NY; and Dennis H. Hranitzky, Quinn Emanuel Urquhart & Sullivan, New York, NY, on the brief), for Petitioner-Appellee-Cross-Appellant Gater Assets Limited.

Robert Kry (Lauren M. Weinstein and Leonid Grinberg, on the brief), MoloLamken LLP, New York, NY, for Respondent-Appellant-Cross-Appellee AO Moldovagaz.

Edward Baldwin, Steptoe & Johnson LLP, Washington, DC, for Respondent-Appellant-Cross-Appellee Republic of Moldova.

Before: Raggi, Sullivan, and Menashi, Circuit Judges.

Menashi, Circuit Judge:

This suit involves a longstanding dispute over Moldovan gas debts. In 2000, the U.S. District Court for the Southern District of New York (Preska, J.) entered a default judgment against Respondents-Appellants—the Republic of Moldova ("Republic") and the Moldovan corporation AO Moldovagaz ("Moldovagaz")—in favor of Lloyd's Underwriters ("Lloyd's"), a British underwriters association. The default judgment confirmed a Russian arbitration award granted to Lloyd's after Moldovagaz's predecessor-in-interest, AO Gazsnabtranzit, defaulted on debt it owed to a Russian gas supply company named Gazprom. Lloyd's had reinsured the debt. In 2012, Lloyd's assigned its right to collect on the default judgment to Petitioner-Appellee Gater Assets Limited ("Gater"), a British Virgin Islands company. With the limitations period for enforcing the default judgment nearing its end, Gater brought a renewal action in the same district court pursuant to New York Civil Practice Law and Rules § 5014, which allows for the renewal of a judgment and the restarting of its limitations period. On November 1, 2019, the district court entered a renewal judgment in Gater's favor against both Moldovagaz and the Republic. The district court explained its underlying reasoning in opinions filed on September 30, 2018,1 and September 27, 2019.2

Moldovagaz and the Republic contest the district court's jurisdiction to enter the renewal judgment. Because this case involves only foreign parties and a cause of action that arises under New York state law, this suit would seem to fall outside the subject-matter jurisdiction of the federal courts under Article III of the Constitution. A lawsuit between foreign parties does not implicate diversity jurisdiction, see Mossman v. Higginson , 4 U.S. (4 Dall.) 12, 14, 1 L.Ed. 720 (1800), and a claim under New York state law does not generally "aris[e] under ... the Laws of the United States," U.S. Const. art. III, § 2; see Wilson v. Sandford , 51 U.S. (10 How.) 99, 101-02, 13 L.Ed. 344 (1850).

Because of the particular respondents, however, jurisdiction may exist pursuant to the Foreign Sovereign Immunities Act ("FSIA"), 28 U.S.C. §§ 1330, 1391(f), 1441(d), 1602 - 11. The FSIA provides federal district courts with "original jurisdiction" over "any nonjury civil action against a foreign state as defined in [the FSIA] ... with respect to which the foreign state is not entitled to immunity either under [the FSIA] or under any applicable international agreement." Id. § 1330(a). In Verlinden B.V. v. Cent. Bank of Nigeria , the Supreme Court held that this jurisdictional grant, when viewed in light of the FSIA as a whole, suffices to provide federal courts with arising-under jurisdiction. 461 U.S. 480, 496-97, 103 S.Ct. 1962, 76 L.Ed.2d 81 (1983). Therefore, if the respondents are foreign states for the purposes of the FSIA, then the district court had subject-matter jurisdiction over Gater's renewal action so long as an exception to the general rule of foreign sovereign immunity applies.

Yet subject-matter jurisdiction is not enough by itself. A court must also have personal jurisdiction over a party in order to enter a binding judgment against it. The FSIA provides that a court with subject-matter jurisdiction pursuant to the FSIA also has "[p]ersonal jurisdiction over a foreign state" so long as "service [was] made" in accordance with the FSIA's service rules. 28 U.S.C. § 1330(b). Neither Moldovagaz nor the Republic argues that it did not receive proper service. Still, the Due Process Clause of the Fifth Amendment independently prohibits federal courts from exercising personal jurisdiction over parties that lack "minimum contacts" with the court's forum. See Waldman v. Palestine Liberation Org. , 835 F.3d 317, 330-31 (2d Cir. 2016).

That rule, too, has an exception. We have held that foreign states do not enjoy due process protections from the exercise of the judicial power because foreign states, like U.S. states, are not "persons" for the purposes of the Due Process Clause. See Frontera Res. Azerbaijan Corp. v. State Oil Co. of Azerbaijan Republic , 582 F.3d 393, 399 (2d Cir. 2009) ; see also U.S. Const. amend. V ("[N]or shall any person ... be deprived of life, liberty, or property, without due process of law."). When applying the Fifth Amendment, moreover, we do not define a foreign state in the same way the FSIA does. The FSIA's definition of a foreign state includes both the sovereign itself and its agencies and instrumentalities, which are separate legal persons from the sovereign. See 28 U.S.C. § 1603(a) - (b). Yet when it comes to the Fifth Amendment, we have indicated—and today hold directly—that only the sovereign itself and its "alter egos" are not "persons." Agencies and instrumentalities of foreign sovereigns retain their status as "separate legal person[s]," id. § 1603(b)(1), and receive protection from the exercise of personal jurisdiction under the Due Process Clause.

All told, the requirements for exercising jurisdiction over the claims against each Respondent-Appellant may be simply stated. First, to pursue its claim for a renewal judgment against Moldovagaz, Gater must establish (1) that Moldovagaz is a foreign state for the purposes of the FSIA and that an FSIA immunity exception applies (thus allowing the exercise of subject-matter jurisdiction), and (2) that Moldovagaz either has minimum contacts with the district court's forum or is an alter ego of the Republic (thus allowing the exercise of personal jurisdiction). Second, because the Republic is unquestionably a foreign sovereign, Gater's claim for a renewal judgment against it must fit within an exception to sovereign immunity under the FSIA (thereby allowing the exercise of both subject-matter jurisdiction and personal jurisdiction).

As we explain below, the record here fails to establish that Gater's renewal action meets the jurisdictional requirements for its claims against each Respondent-Appellant. With respect to Moldovagaz, Gater concedes that Moldovagaz has no contacts with the United States. And, contrary to the district court's conclusion, Moldovagaz is not an alter ego of the Republic. The Republic neither exercises "extensive[ ] control" over Moldovagaz nor abused the corporate form such that respecting Moldovagaz's separate juridical personhood "would work fraud or injustice." First Nat'l City Bank v. Banco Para El Comercio Exterior de Cuba (Bancec ), 462 U.S. 611, 629, 103 S.Ct. 2591, 77 L.Ed.2d 46 (1983). Therefore, the district court lacked personal jurisdiction over Moldovagaz.

With respect to the Republic, Gater's claim against it does not fit within an FSIA immunity exception. The district court invoked the exception for actions to confirm arbitration awards issued pursuant to a qualifying agreement "made by the foreign state." 28 U.S.C. § 1605(a)(6). But the Republic was not a party to the underlying arbitration agreement. Recognizing this fact, the district court relied on direct benefits estoppel to hold that the immunity exception nevertheless applied. It is not clear to us, however, that a theory of direct benefits estoppel can establish that a foreign state "made" an agreement to which it was not a party. But even assuming that it can, the direct benefits theory cannot support subject-matter jurisdiction here because Gater fails to demonstrate either that the agreement "expressly provide[d] [the Republic] with a benefit" or that the Republic "actually invoke[d] the contract to obtain its benefit." Trina Solar US, Inc. v. Jasmin Solar Pty Ltd , 954 F.3d 567, 572 (2d Cir. 2020). The district court, therefore, lacked subject-matter jurisdiction over Gater's renewal claim against the Republic.

Accordingly, we vacate the district court's judgment in Gater's renewal action and remand with instructions to dismiss the renewal action for lack of jurisdiction. We nevertheless affirm the district court's refusal to vacate its original default judgment because the appellants have failed to demonstrate that the district court had no arguable basis to exercise jurisdiction to enter that judgment.

BACKGROUND
I

Moldovans rely on natural gas supplied by Gazprom, a gas supply company that is majority-owned by the Russian government. Many Moldovan customers—especially those in the autonomous region of Transnistria—use the gas without providing full payment. See J. App'x 1181-82. As a result of this and other factors, the Republic and some Moldovan gas entities accumulated large debts to Gazprom in the early 1990s. To help address the mounting debt, in 1995 the Republic formed a corporation called Gazsnabtranzit by privatizing several Moldovan state-owned gas transmission companies and giving Gazprom a majority equity stake in the resulting corporation.

When that effort did not succeed, the Republic, Transnistria, and Gazprom incorporated Moldovagaz in 1998. To form Moldovagaz, each of the parties contributed its stake in Gazsnabtranzit. Combined,...

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