Harris v. VAO Intourist, Moscow

• Decision Date: 09 November 1979
• Docket Number: No. 78 Civ. 2352 (JBW).,78 Civ. 2352 (JBW).
• Citation: 481 F. Supp. 1056
• Parties: Alan D. HARRIS, as Executor of the Estate of Raymond DeJongh, Deceased, Plaintiff, v. VAO INTOURIST, MOSCOW: Intourist, New York: National Hotel: and the Union of Soviet Socialist Republics, Defendants.
• Court: U.S. District Court — Eastern District of New York

481 F. Supp. 1056

Alan D. HARRIS, as Executor of the Estate of Raymond DeJongh, Deceased, Plaintiff, v. VAO INTOURIST, MOSCOW: Intourist, New York: National Hotel: and the Union of Soviet Socialist Republics, Defendants.

No. 78 Civ. 2352 (JBW).

United States District Court, E. D. New York.

November 9, 1979.

Alan K. Hirschhorn, Roslyn Heights, N. Y., for plaintiff.

Wolf, Popper, Ross, Wolf & Jones, New York City, for defendants; Michael P. Fuchs, New York City, of counsel.

MEMORANDUM AND ORDER

WEINSTEIN, District Judge.

Raymond DeJongh, an American tourist, died as a result of a fire in the Moscow National Hotel where he was a guest. Alleging that "one or more of the defendants owned, leased, operated, managed, maintained and controlled" the National Hotel negligently, plaintiff's testator seeks damages.

Defendants move to dismiss on the ground that this court lacks jurisdiction. Each defendant seeks protection as a unit of a "foreign state" under the Foreign Sovereign Immunities Act, 28 U.S.C. §§ 1602 et seq.

The motion must be granted. Under the terms of the Immunities Act, each of the defendants qualifies for immunity as "an agency or instrumentality of a foreign state." Because of the Act, an American traveler abroad injured by the negligence of a state-owned "commercial" instrumentality has less protection from American courts than he would have were he similarly injured by a privately owned enterprise. Whether appropriate remedies are available in the foreign jurisdiction — as they will be in many situations — is not an issue relevant under the Act and we do not address it.

I. FACTS

All Union Company for Foreign Travel (Intourist, Moscow), is a legal entity established by decree of the Union of Soviet Socialist Republics Council of Labor and Defense and by statute. The Intourist Statute, Article 10, provides that the shares of Intourist may be owned only by Soviet organs or instrumentalities; 51% of the stock is owned by the State Administration for Foreign Tourism, 20% by the All-Union Organization, "Mezhdunarondnaya," and 29% by the Union of Soviet Socialist Republics Chamber of Commerce.

Intourist, Moscow is vested with authority to establish hotels. The defendant National Hotel was created pursuant to this authority as a separate legal entity authorized to operate and maintain a state-owned hotel in Moscow. All of its assets are in Moscow, where the hotel is registered as a legal person; the hotel conducts no activities in the United States.

VAO Intourist in the United States of America, New York (Intourist, New York), was created in Moscow pursuant to Article 4 of the Intourist Statute. Like Intourist, Moscow, it is state-owned. Its purpose is to promote tours from the United States to the Union of Soviet Socialist Republics. For this purpose it maintains offices and conducts a substantial business in New York City, encouraging use of Intourist, Moscow's facilities, including hotels in Moscow. Whether it is a separate entity for purposes of the Immunities Act, as plaintiff alleges, or a part of Intourist, Moscow, incapable of being sued as an independent organization, as defendants assert, is, as will appear below, of no significance under the facts of this case.

When visitors from the United States seek accommodations in Russia, they do so through private United States travel agencies which place orders with Intourist, Moscow. Intourist, Moscow confirms the arrangements with the American private agencies; they, in turn, advise the travelers. In the case at bar, a private travel service located in New York City arranged with Intourist, Moscow for decedent's accommodations at the National Hotel.

II. LAW

A. Foreign States and Waiver of Immunity

Absent a showing that one of the exceptions to the Immunities Act applies, each of the defendants qualifies for immunity as a "foreign state or as an agency or instrumentality of a foreign state" under the Act. Section 1603 of title 28 provides that:

(a) A "foreign state" . . . includes a political subdivision of a foreign state or an agency or instrumentality of a foreign state as defined in subsection (b).

(b) An "agency or instrumentality of a foreign state" means any entity —

(1) which is a separate legal person, corporate or otherwise, and

(2) which is an organ of a foreign state or political subdivision thereof, or a majority of whose shares or other ownership interest is owned by a foreign state or political subdivision thereof, and

(3) which is neither a citizen of a state of the United States . . . nor created under the laws of any third country.

Title 28, U.S.C. §§ 1602 et seq., precludes actions against agencies or instrumentalities of foreign states, except as provided in the Act. Plaintiff claims that the defendants have waived this immunity or, alternatively, that the activities of the defendants cause them to be excluded, pursuant to section 1605(a)(2), from the Act's protection.

The legislative history suggests that implied waivers by commercial action are not consonant with the Act's purposes; implicit waivers are reflected in actions relating to adjudication and explicit waivers are found in treaties. The report on the Act states:

Section 1605(a)(1) of title 28 treats explicit and implied waivers by foreign states of sovereign immunity. With respect to explicit waivers, a foreign state may renounce its immunity by treaty, as has been done by the United States with respect to commercial and other activities in a series of treaties of friendship, commerce, and navigation, or a foreign state may waive its immunity in a contract with a private party. Since the sovereign immunity of a political subdivision, agency or instrumentality of a foreign state derives from the foreign state itself, the foreign state may waive the immunity of its political subdivisions, agencies or instrumentalities.

With respect to implicit waivers, the courts have found such waivers in cases where a foreign state has agreed to arbitration in another country or where a foreign state has agreed that the law of a particular country should govern a contract. An implicit waiver would also include a situation where a foreign state has filed a responsive pleading in an action without raising the defense of sovereign immunity.

H.R.Rep. No. 94-1487, 94th Congress, 2d Sess. 13, reprinted in 1976 U.S.Code Cong. & Admin.News, pp. 6604, 6617.

There is no evidence that there was either an explicit or implicit waiver of immunity. A letter of the Soviet Ambassador, claiming immunity for each defendant, "has a persuasive quality." Yessenin-Volpin v. Novosti Press Agency, Tass, 443 F.Supp. 849, 854 (S.D.N.Y.1978). The statutes and treaties cited by plaintiff, though indicating a capacity of the defendants to sue or be sued at their option, do not reflect an intention to waive governmental immunity.

B. Jurisdictional Basis — Continuing and Systematic Contacts

There would be enough activity of Union of Soviet Socialist Republics' integrated tourism activities within the United States to provide a basis for due process-in-personam jurisdiction under International Shoe Co. v. State of Washington, 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95 (1945). The various tourist services of the Union of Soviet Socialist Republics operating cooperatively transact sufficient continuous business within New York to meet the requirements of statutes such as that state's section 301 of the Civil Practice Law and Rules. It provides: "A court may exercise such jurisdiction over persons, property, or status as might have been exercised heretofore." Pursuant to this provision the courts approve in personam jurisdiction based upon continuing presence through continuing business contacts under factual circumstances similar to those present here. See, e. g., Gelfand v. Tanner Motor Tours Ltd., 339 F.2d 317 (2d Cir. 1964), on remand, 385 F.2d 116 (2nd Cir. 1967); Frummer v. Hilton Hotels International, Inc., 19 N.Y.2d 533, 281 N.Y.S.2d 41, 227 N.E.2d 851, cert. denied, 389 U.S. 923, 88 S.Ct. 241, 19 L.Ed.2d 266 (1967); Bryant v. Finnish National Airline, 15 N.Y.2d 426, 260 N.Y.S.2d 625, 208 N.E.2d 439 (1965). Cf., e. g., Cornelison v. Chaney, 16 Cal.3d 143, 127 Cal.Rptr. 352, 545 P.2d 264 (1976) (Nebraska resident present in California because twenty trips a year into California provide basis for "doing business" jurisdiction; California resident struck in Nevada).

It is important to note that under this "doing business" concept — which is a form of presence — the cause of action sued upon does not have to arise out of activities in, or other contacts with, the local jurisdiction. For purposes of in personam jurisdiction, the foreign entity is treated as a local domiciliary. Were the defendants private corporations organized abroad, in personam jurisdiction would lie under a statutory scheme such as New York's since they have sufficient continuing commercial operations and contacts with New York to be "doing business" here — i. e., present in the same sense as New York domestic corporation — for jurisdictional purposes.

The question is whether a different result from the traditional one must be reached because the defendants are foreign-state owned enterprises. The answer is yes. This result is required because Congress has adopted a special jurisdictional statute covering entities owned by foreign states; it has authorized the exercise of less than the complete personal jurisdiction that might constitutionally be afforded American courts under traditional concepts of fairness and due process. The variety of state bases for jurisdiction are not available because Congress created a uniform jurisdictional statute applicable throughout the United States. Moreover, due to the policy and language of the Immunities Act, the Act's bases of jurisdiction are less comprehensive than those found in the usual jurisdictional statutes of the states and the District of Columbia.

As demonstrated in II C, infr...