Honduras Aircraft Registry v. Gov't of Honduras

• Decision Date: 08 March 1995
• Docket Number: No. 94-10060-CIV.,94-10060-CIV.
• Parties: HONDURAS AIRCRAFT REGISTRY, LTD., a Honduran corporation, Honduras Aircraft Registry Bureau, Limited, a Bahamian corporation, Plaintiffs, v. The GOVERNMENT OF HONDURAS, and Guillermo Chirinos, Director General of Civil Aeronautics of the Republic of Honduras, individually, Defendants.
• Court: U.S. District Court — Southern District of Florida

883 F. Supp. 685

HONDURAS AIRCRAFT REGISTRY, LTD., a Honduran corporation, Honduras Aircraft Registry Bureau, Limited, a Bahamian corporation, Plaintiffs, v. The GOVERNMENT OF HONDURAS, and Guillermo Chirinos, Director General of Civil Aeronautics of the Republic of Honduras, individually, Defendants.

No. 94-10060-CIV.

United States District Court, S.D. Florida.

March 8, 1995.

Alvin Lodish, Miami, FL, for plaintiff.

Donald Blackwell, Miami, FL, for defendant.

ORDER DENYING DEFENDANTS' MOTION TO DISMISS

JAMES LAWRENCE KING, District Judge.

THIS CAUSE comes to this Court upon Defendants' Motion to Dismiss, filed on December 1, 1995. After requesting and receiving two extensions of time, Plaintiffs filed a response on February 3, 1995.

I. Factual Background

On or about June 4, 1992, Defendant Government of Honduras entered into a contract with Plaintiffs Honduras Aircraft Registry and Honduras Air Registry Bureau to set up a system of commercial aircraft registration that would be in compliance with international civil aviation law. The contract was modified and reaffirmed on or about December 16, 1993. Under the terms of said contract, Plaintiffs were to establish an airworthiness system; draft civil aeronautical regulations; develop an aircraft registry database; provide manuals for registered aircraft; keep and maintain records in Florida of all such registered aircraft; effectuate aircraft inspection outside Honduras; promote aircraft registration in Honduras internationally; and provide technical assistance to Honduras' civil aviation authority. Plaintiffs' consideration was the right to inspect commercial aircraft for certification in Honduras and to charge a fee for such service to the aircraft owners. Defendant Government of Honduras ratified the contract by presidential decree on or about April 23, 1992.

On or about August 11, 1994, Defendants Government of Honduras and Guillermo Chirinos invalidated the April 1992 decree. One result of the decree invalidation was the grounding of aircraft, causing damages to Plaintiffs and its clients. Plaintiffs Honduras Aircraft Registry and Honduras Air Registry Bureau thus bring suit for breach of contract, unjust enrichment and tortious interference with a business relationship.

II. Legal Standard

A motion to dismiss will be granted where it is clear that no relief could be granted under any set of facts that could be proven consistent with the allegations. "Dismissal is justified only when the allegations of the complaint itself clearly demonstrate that plaintiff does not have a claim." 5A Wright & Miller, Federal Practice and Procedure § 1357; see also Bradberry v. Pinellas County, 789 F.2d 1513, 1515 (11th Cir.1986). For the purpose of the motion to dismiss, the complaint is construed in the light most favorable to the plaintiff, and all facts alleged by the plaintiff are accepted as true. Hishon v. King & Spalding, 467 U.S. 69, 73, 104 S.Ct. 2229, 2232-33, 81 L.Ed.2d 59 (1984). The issue is not whether the plaintiff will ultimately prevail, but "whether the claimant is entitled to offer evidence to support the claims," Scheuer v. Rhodes, 416 U.S. 232, 236, 94 S.Ct. 1683, 1686, 40 L.Ed.2d 90 (1974).

III. Analysis

Defendants move to dismiss the complaint under the act of state doctrine, lack of subject matter jurisdiction under the Foreign Sovereign Immunities Act ("FSIA"), lack of personal jurisdiction over Defendants and forum non conveniens. The Court has reviewed the issues raised and finds that for the reasons set forth below, Defendants' Motion to Dismiss should be denied.

A. Act of State Doctrine

Defendants contend that the act of state doctrine is applicable in the instant case and precludes this Court from judging the validity of a foreign sovereign's public acts. The Court finds this argument to be without merit.

Under the act of state doctrine, United States courts generally will refrain from ruling on the validity of a foreign sovereign's acts. See Restatement (Third) of Foreign Relations § 443(1). The United States Supreme Court has held that the act of state doctrine reflects "the strong sense of the Judicial Branch that its engagement in the task of passing on the validity of foreign acts of state may hinder" the conduct of foreign affairs. Banco Nacional de Cuba v. Sabbatino, 376 U.S. 398, 423, 84 S.Ct. 923, 938, 11 L.Ed.2d 804 (1964); see also In re Grand Jury Proceedings Bank of Nova Scotia, 740 F.2d 817, 831 (11th Cir.1984) ("The act of state doctrine is primarily designed to avoid impingement by the judiciary upon the conduct of foreign policy by the Executive Branch.")

However, the doctrine is not without its limitations; it "does not establish an exception for cases and controversies that may embarrass foreign governments, but merely requires that, in the process of deciding, the acts of foreign sovereigns taken within their own jurisdictions shall be deemed valid." W.S. Kirkpatrick & Co., Inc. v. Environmental Tectonics Corp., Int'l, 493 U.S. 400, 409, 110 S.Ct. 701, 707, 107 L.Ed.2d 816 (1990). Exceptions to the doctrine include those acts of state that are purely commercial or for which no foreign policy goal of the Executive Branch is impeded. Id. at 403-05, 110 S.Ct. at 703-05; Alfred Dunhill of London, Inc. v. Republic of Cuba, 425 U.S. 682, 707, 96 S.Ct. 1854, 1867, 48 L.Ed.2d 301 (1976).

The Complaint alleges that the parties entered into a contract for the development and maintenance of a comprehensive commercial aircraft registration database and system. Accepting the Complaint's allegations as true and viewing them in the light most favorable to the non-moving party, a contract was executed between Plaintiffs and the Republic of Honduras for the provision of technical assistance. Compl. at ¶¶ 8-18. This is the type of contract private parties enter into in the course of commerce. There is "nothing about the government's action (except perhaps its purpose) that is not analogous to a private commercial transaction." Republic of Argentina v. Weltover, 504 U.S. 607, 616, 112 S.Ct. 2160, 2167, 119 L.Ed.2d 394 (1992). In light of the foregoing, the Court finds that Defendants' governmental action at the heart of Plaintiffs' allegations is commercial in nature. Thus the act of state doctrine does not apply.

B. Foreign Sovereign Immunities Act

The Foreign Sovereign Immunities Act of 1976, 28 U.S.C. § 1602 et seq. ("FSIA") creates a comprehensive framework for determining whether an American court, state or federal, may exercise jurisdiction over a foreign state. Under the Act, a "foreign state shall be immune from the jurisdiction of the courts of the United States and of the States" unless one of the statute's exceptions applies. 28 U.S.C. § 1604. See Republic of Argentine v. Amerada Hess Shipping Corp., 488 U.S. 428, 434-39, 109 S.Ct. 683, 688-91, 102 L.Ed.2d 818 (1989). If none of the exceptions set forth in the FSIA applies, the district court lacks both statutory subject-matter jurisdiction and personal jurisdiction. 28 U.S.C. § 1330(a,b); Verlinden B.V. v. Central Bank of Nigeria, 461 U.S. 480, 489 & fn. 14, 103 S.Ct. 1962, 1969 & fn. 14, 76 L.Ed.2d 81 (1983).

Under the commercial exception, a foreign state is not immune from suit in any case

in which the action is based upon a commercial activity carried on in the United States by a foreign state; or upon an act performed in the United States in connection with a commercial activity of the foreign state elsewhere; or upon an act outside the territory of the United States in connection with a commercial activity of the foreign state elsewhere and that act causes a direct effect in the United States

28 U.S.C. § 1605(a)(2). Section 1603(d) defines "commercial activity" to mean "either a regular course of commercial conduct or a particular commercial transaction or act." The court determines the commercial character of an activity "by reference to the nature of the course of conduct or particular transaction or act, rather than by reference to its purpose." 28 U.S.C. § 1603(d) (emphasis added).

Construing the FSIA, the Supreme Court has held that "when a foreign government acts, not as a regulator of a market, but in the manner of a private player within it, the foreign sovereign's actions are `commercial' within the meaning of the FSIA." Republic of Argentina v. Weltover, 504 U.S. 607, 614, 112 S.Ct. 2160, 2166, 119 L.Ed.2d 394 (1992). The relevant inquiry is thus "whether the particular actions that the foreign state performs (whatever the motive behind them) are the type of actions by which a private party engages in `trade and traffic or commerce.'" Id. (emphasis in original) (citation omitted). Honduras' motivations in establishing a civil aircraft registry thus are irrelevant to this Court's determination.

The contract at issue in the instant case involves the exchange of goods and services. The government of Honduras acted as any private actor could in securing goods and services from other private actors. The Court thus finds that Honduras' actions are of the type private parties engage in trade and traffic and are therefore commercial in nature.

Plaintiffs rely on § 1605(a)(2) to establish jurisdiction. The Court's analysis also focuses on whether this action is (1) "based ... upon an act outside the territory of the United States"; (2) that was taken "in connection with a commercial activity" of Honduras outside the U.S.; and (3) that "caused a direct effect in the United States."¹ Presumably, the parties do not contest that the act in question (nullifying the alleged contract) occurred outside the territory of the United States. The dispute thus centers on whether the nullification was taken "in connection with a commercial activity" of Honduras, and whether it had a "direct effect in the United States." The Supreme Court held that "an effect is `direct' if it follows as an immediate consequence of the defendant's activity." Id. at 618, 112...