Herzberger v Compania de Acero del Pacifico SA

• Date: 17 August 1978
• Court: U.S. District Court — Southern District of New York

United States, District Court, Southern District, New York.

(Lasker, District Judge)

Emery Herzberger

and

Compania De Acero Del Pacifico, S.A.

Sovereign immunity Foreign States and State-owned corporations Corporation owned by Chilean Government agency Foreign Sovereign Immunities Act 1976 Removal of actions to Federal District Courts by foreign States The law of the United States

Summary: The facts:The plaintiff commenced an action in a State court for payment for goods allegedly sold to the predecessor in interest of Compania de Acero del Pacifico, S.A. (CAP). CAP was founded by the Chilean Corporation de Fomento de la Producion (CORFO) to undertake the mining of iron ore and production of steel products in Chile. Its shares were 95.15% owned by CORFO. CORFO was a government agency designed to foster the economic development of the country by means of government assistance and direct government control of various Chilean industries. The Chief Officer of CORFO and the members of its board of directors were Ministers in the Chilean Government. CAP removed the suit to the District Court claiming that the Court had jurisdiction under 28 U.S.C. Section 1330, added to the Code by the Foreign Sovereign Immunities Act 1976.1 By Section 1330 the District was given original jurisdiction, without regard to the amount in controversy, in respect of any civil non-jury action against a foreign State. The term foreign State was defined in Section 1603(a) of the Act to include an agency or instrumentality of a foreign State as further defined in Section 1603(b). CAP claimed to fall within the definition of foreign State. The plaintiff moved to remand, arguing:

(1) CAP was not a foreign State within the meaning of Section 1603. The Immunities Act was, inter alia, intended by Congress to apply only to the national corporations of socialist countries.

(2) The Federal Court lacked diversity jurisdiction under 28 U.S.C. Section 1332.

(3) CAP had waived its right to assert either of these two jurisdictional grounds by receiving a permit to do business in New York State.

Held:The plaintiff's motion to remand was denied.

(1) Since CAP was a separate corporate person the majority of whose shares were owned by a foreign State or political subdivision thereof, it fell within the definition of an agency, or instrumentality of a foreign State contained in Section 1603(b) of the Act. CAP was thus a foreign State for jurisdictional purposes, and Section 1603 encompassed a corporation engaging in traditional capitalist commercial activities.

(2) Even if CAP were not a foreign State it would be entitled to diversity jurisdiction under 28 U.S.C. Section 1332 (a)(2).

(3) There was no authority to show that a corporation merely doing business in New York was required to forgo its right to remove an action to the Federal Court. In fact, the Immunities Act included an amendment to 28 U.S.C. Section 1441, the removal statute, which permitted the removal to the Federal District Court of any civil actions brought in the courts of the States against a foreign State, at the foreign State's discretion. Nor was there such a limitation on removal in the diversity provision.

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

Emery Herzberger (Herzberger) commenced this action for payment of goods allegedly sold to the predecessor in interest of Compania de Acero del Pacifico, S.A. (CAP) in State court. Before answering the complaint, CAP removed the suit to this...