Gibbons and Beiseigel v Udarus Na Gaeltachta

CourtUnited States District Courts. 2nd Circuit. United States District Courts. 2nd Circuit. Southern District of New York
Date12 October 1982
United States District Court, Southern District of New York

(Ward, District Judge)

Gibbons and Beiseigel
and
Udaras na Gaeltachta and the Industrial Development Authority Of Ireland1

State immunity Jurisdictional immunity Foreign government agencies Exceptions to immunity Commercial activity exception Definition of criteria of commercial activity United States Foreign Sovereign Immunities Act 1976 State agencies for development in the Republic of Ireland Failure of business enterprise established under agreement with State instrumentalities Jurisdiction of United States courts

Relationship of international law and municipal law Treaties Effect in municipal law Whether treaty provision a waiver of immunity

Treaties Effect in municipal law State immunity Treaty provision as waiver of immunity Republic of Ireland-United States Treaty of Friendship, Commerce and Navigation, 1950, Article XV(3) The law of the United States

Summary: The facts:The plaintiffs had established a business in Ireland in return for which, it was claimed, the Udaras na Gaeltachta (the UG)

and the Industrial Development Authority of Ireland (the IDA), two instrumentalities of the Republic of Ireland, had agreed to provide them with financial assistance under a joint venture agreement concluded between all the parties. The undertaking failed, and the corporation went into liquidation

The plaintiffs sought damages under the United States Foreign Sovereign Immunities Act 1976 (the FSIA),2 asserting that they had been induced to establish the corporation and divulge proprietary information as a result of false representations made to them by the UG and the IDA. It was maintained that the UG and the IDA had interfered in the financial relations between the plaintiffs and the Irish company and had interfered with the plaintiffs' expectancy of financial gain. Finally it was alleged that property, in the form of know-how and technology, had been taken by the UG and the IDA contrary to international law.

The plaintiffs maintained that sovereign immunity did not apply because the action related to a commercial activity3 and rights in property taken in violation of international law.4 Finally, it was claimed that the waiver exception applied as a result of Article XV(3) of the Republic of Ireland-United States Treaty of Friendship, Commerce and Navigation, 1950.5

The UG and the IDA sought to have the action dismissed on the ground that the Court lacked subject-matter jurisdiction under the FSIA and Article III of the Constitution of the United States. In addition it was claimed that the Court lacked personal jurisdiction over the two instrumentalities and that the Court should decline to hear the action under the doctrine of forum non conveniens. Finally the UG and the IDA maintained that the plaintiffs' pleadings for the fraud claim had failed to satisfy procedural requirements.

Held:The Court had subject-matter jurisdiction over the action. The plaintiffs' claim for fraud was dismissed.

(1) The UG and the IDA had the status of a foreign State under the FSIA. It was for the plaintiffs to establish that an exception to immunity under that Act or under an international agreement existed in the present action (pp. 8890).

(2) Failure by the UG and the IDA to fulfil contractual obligations under the joint venture agreement was sufficient to establish that the commercial activity exception applied in the present action because it was based upon acts performed in connection with that agreement. The purpose of the agreement, although intended to further government policies, was of a commercial nature, being an activity which an individual might customarily carry on for profit. In addition the acts giving rise to the cause of action, i.e. contractual negotiations and the conclusion of the joint venture agreement (which fell substantially to be performed in the United States), occurred in the United States, thereby establishing a sufficient nexus with the United States to establish subject-matter jurisdiction. There was a

constitutional basis, as required under Article III of the Constitution, for the grant of subject-matter jurisdiction to the federal court (pp. 908)

(3) Where the FSIA granted subject-matter jurisdiction to a court, that court was also vested with personal jurisdiction over the parties to the action. Furthermore the assertion of personal jurisdiction over the UG and the IDA would not contradict due process requirements (pp. 99101).

(4) The facts of the case did not point to the action being more appropriately heard in Ireland and the present action could not be dismissed on the ground of forum non conveniens (pp. 1016).

(5) The plaintiffs' pleadings regarding the fraud claim were not sufficiently particular and were dismissed (pp. 83 and 1068).

The following is the text of the judgment of the Court:

The complaint filed in this action sets forth claims for (1) breach of contract, (2) an accounting, (3) fraud, (4) tortious interference with contractual relations, and (5) a taking of property in violation of international law. Defendants are Udaras na Gaeltachta (UG), an instrumentality of the Republic of Ireland, and the Industrial Development Authority of Ireland (IDA), also an instrumentality of the Republic of Ireland. UG and IDA have moved to dismiss the complaint, arguing (1) that the Court lacks subject matter jurisdiction over this action, (2) that the Court lacks personal jurisdiction over both UG and IDA, (3) that the Court should invoke the doctrine of forum non conveniens, and (4) that plaintiffs have failed to plead fraud with the particularity required by Rule 9(b), Fed.R. Civ.P. For the reasons hereinafter stated, the Court finds that only the fourth of these arguments has merit. Accordingly, the Court denies the UGIDA motion insofar as it seeks dismissal of the complaint in its entirety, and grants the UGIDA motion insofar as it seeks dismissal of plaintiffs' fraud claim.

BACKGROUND

Analysis of the UGIDA motion requires a fairly detailed recapitulation of the factual background to this action. To the extent the papers before the Court disclose a factual dispute with respect to an issue relevant to the UGIDA motion, the Court has liberally construed plaintiffs' version of the facts and has deemed that version to be true for the purpose of deciding this motion. Texas Trading & Milling Corp. v. Federal Republic of NigeriaINTL,[6] 647 F.2d 300, 303 n.6 (2d Cir.1981), cert. denied, 454 U.S. 1148, 102 S.Ct. 1012, 71 L.Ed.2d 301 (1982). Needless to say, by so doing the Court has not relieved plaintiffs of their trial burden of proving the necessary jurisdictional facts by a preponderance of the evidence. Gilson v. Republic of IrelandECAS, 682 F.2d 1022, 1026 (D.C.Cir.1982); Bialek v. Racal-Milgo, Inc., 545 F.Supp. 25, 36 (S.D.N.Y.1982).

The series of events that led to the commencement of this action began in 1973. At that time, plaintiffs were both employed by the Standard T Chemical Company (Standard), a New York corporation that was engaged in manufacturing plastic containers used to package cosmetics for sale to the general public. Standards most popular cosmetics containers were those made from metallized plastic. During his employ by Standard, plaintiff Gibbons had acquired a substantial expertise in the production techniques associated with the manufacture of metallized plastic cosmetics containers. Plaintiff Beiseigel, while employed by Standard, had become an expert in marketing such containers to cosmetics manufacturers.

Although metallized plastic cosmetics containers had, by 1974, become quite popular within the United States cosmetics industry, they had not theretofore been extensively manufactured or marketed in Europe. Plaintiffs accordingly perceived a lucrative foreign market for such containers and set about finding a means of exploiting that market through the use of their expertise in the area. Sometime in late 1973, plaintiffs learned of IDA. IDA was then and is today an instrumentality of the Republic of Ireland. It is a not-for-profit entity that exists to encourage foreign industrial development, particularly the creation of new manufacturing facilities, within the Republic of Ireland. To this end, it maintains offices in various countries around the world, including one here in New York City. Projects that qualify for the IDA program are eligible for various forms of governmental assistance, including capital grants from IDA itself and tax incentives made available by Irish law.

In the spring of 1974, plaintiffs informed IDA that they were considering the possibility of starting a manufacturing operation in Ireland for the production of metallized plastic cosmetics containers, and inquired whether such a project might qualify for the IDA program. At that time, no such manufacturing facility existed in Ireland. The initial discussions between plaintiffs and IDA relative to plaintiffs' proposed project took place either over the telephone or via letter. After IDA expressed interest in the project, plaintiffs traveled to New York and met with two representatives of IDA at IDA's office in New York City. At this meeting, plaintiffs were informed of the governmental assistance to which they would be entitled if their project qualified for the IDA program. Among other things, IDA offered to lease plaintiffs a plant in Ireland and to provide a capital grant equal to forty-five percent of the cost of the machinery needed to equip the plant. Shortly after the New York City meeting, plaintiffs traveled to Ireland, at IDA's request, to inspect possible plant sites. However, since both the plant sites and IDA's proposed capital grant proved inadequate for plaintiffs' purposes, the negotiations between plaintiffs and IDA were discontinued in the summer of 1974.

In the late summer or early fall of 1974, plaintiffs once again contacted IDA with regard to their proposed project. IDA informed plaintiffs that they might be...

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