Ivanenko v. Yanukovich, 20-7033

• Decision Date: 23 April 2021
• Docket Number: No. 20-7033,20-7033
• Citation: 995 F.3d 232
• Parties: Mykola IVANENKO, et al., Appellants v. Viktor YANUKOVICH, et al., Appellees
• Court: U.S. Court of Appeals — District of Columbia Circuit

995 F.3d 232

Mykola IVANENKO, et al., Appellants

v.Viktor YANUKOVICH, et al., Appellees

No. 20-7033

United States Court of Appeals, District of Columbia Circuit.

Argued March 22, 2021

Decided April 23, 2021

Rehearing En Banc Denied June 2, 2021

Kenneth Foard McCallion argued the cause and filed the briefs for appellants.

Robert M. Shaw argued the cause for appellee Government of Ukraine. With him on the brief was Cynthia A. Gierhart, Washington, DC.

Before: Henderson and Rogers, Circuit Judges, and Randolph, Senior Circuit Judge.

Rogers, Circuit Judge:

Appellants Luxexpress–II Ltd., Luxexpress 2016 Corporation, Alamo Group Inc., and Mykola and Larysa Ivanenko challenge the district court's dismissal of their claims against Ukraine for lack of subject–matter jurisdiction pursuant to the Foreign Sovereign Immunities Act ("FSIA"), 28 U.S.C. § 1602 et seq. They contend that three exceptions to the FSIA confer jurisdiction: expropriation of property in violation of international law, commercial activity, and waiver. See id. § 1605(a)(1)–(3).

Because none abrogates Ukraine's sovereign immunity, we affirm.

I.

Taking as true the factual allegations in the second amended complaint and the declarations, see Schubarth v. Fed. Republic of Germany , 891 F.3d 392, 395 (D.C. Cir. 2018), Mykola and Larysa Ivanenko, husband and wife, are Ukrainian nationals, 2d Am. Compl. ¶¶ 20–21. In 1993, they formed Luxexpress–II Ltd., an automobile import business based in Kyiv, Ukraine, which focused primarily on American–made vehicles. Id. ¶¶ 22, 73. Pursuant to various ordinances, written approvals, and lease agreements, Luxexpress–II leased "one of the most prestigious and valuable plots of land in Kyiv" on the banks of the Dnieper River. Id. ¶ 23; see id. ¶¶ 73–75, 77–79. Relying on these agreements, Alamo Group Inc., an American export company based in Atlanta, Georgia, began doing business with Luxexpress–II in 2002. Id. ¶¶ 19, 81, 90. It loaned $300,000 to Luxexpress–II and entered into a $5 million contract to supply vehicles and auto parts. Id. ¶ 84. In addition, Alamo Group and Luxexpress–II executed a no–cost lease, whereby they agreed to share office space with one another in Atlanta and Kyiv. Id. ¶ 86. The venture was "hugely successful," helping Luxexpress–II to become one of Ukraine's leading companies. Id. ¶ 82.

In December 2003, the Cabinet Ministers of Ukraine approved the construction of a road and railway bridge across the portion of the Dnieper River that bisects Kyiv. Id. ¶ 95. A few months later, the Ministry of Transport and the "State Administration of Railway Transport of Ukraine South–Western Railway" notified Luxexpress–II that its property lay in the project's path and its leases could be terminated. Id. ¶ 98. Luxexpress–II repeatedly provided the Ministry of Transport with estimates of the property's value so that it could be acquired at a fair market rate, but negotiations with the Ministry of Transport reached an impasse. See id. ¶¶ 100–05. Luxexpress–II filed suit in the Kyiv District Court, which ruled in its favor in 2006. Id. ¶ 107. But Ukraine appealed to the Supreme Court of Ukraine, which vacated the judgment. See id. ¶¶ 108–16.

Although the issue of compensation remained unresolved, the Cabinet Ministers informed Luxexpress–II in October 2009 that it intended to move forward with the project. Id. ¶ 120. Despite this warning, Luxexpress–II endeavored to expand its operations on the condemned property, including arranging meetings to explore opening a Harley–Davidson motorcycle dealership and a Marriott hotel. Id. ¶¶ 130–33. Those plans crumbled on July 25, 2012, when the Ivanenkos learned that their buildings and equipment had been "totally demolished." Id. ¶ 134. Alamo Group never recovered the automobiles and parts that it kept at the property. Mark Reznick, Decl. ¶ 24. According to appellants, the property never became a railway bridge; instead, it was converted into a sports facility owned by relatives of the former Director General of the Ukraine South–Western Railway. 2d Am. Compl. ¶ 11. With their business in ruins and facing death threats for having accused Ukrainian officials of graft, the Ivanenkos left Ukraine and sought political asylum in the United States. Id. ¶¶ 147–49.

In May 2015, Luxexpress–II and the Ivanenkos filed suit against thirty Ukrainian officials in the Southern District of New York and shortly thereafter amended their complaint to add Ukraine as a defendant. See Luxexpress 2016 Corp. v. Gov't of Ukraine , No. 15-CV-4880 (VSB), 2018 WL 1626143, at *2 (S.D.N.Y. Mar. 30, 2018). Following a pre–motions conference, the district court granted appellants leave to further amend their complaint. Id. The second amended complaint, filed by Luxexpress–II, Luxexpress 2016 Corporation (the successor in interest to Luxexpress–II), Alamo Group, and the Ivanenkos, alleged violations of the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. § 1962, as well as claims for wrongful expropriation, fraud, abuse of process, and conversion. See id. at *1. Ukraine moved to dismiss, and the district court, finding that venue was improper, transferred the case to the District of Columbia. Id.

There, Ukraine renewed its motion to dismiss, arguing that it was entitled to sovereign immunity pursuant to the FSIA. The district court agreed, concluding that none of the three FSIA exceptions invoked by appellants conferred jurisdiction. Luxexpress 2016 Corp. v. Gov't of Ukraine , No. 18-cv-812 (TSC), 2020 WL 1308357, at *10 (D.D.C. Mar. 19, 2020). It rejected appellants’ reliance on the FSIA's expropriation exception, reasoning that Ukraine's taking of its own citizens’ property did not violate international law and that Alamo Group failed to plausibly allege that its property was operated by an instrumentality of Ukraine engaged in commercial activity in the United States. Id. at *3–6. The FSIA's commercial activity exception did not vitiate Ukraine's immunity, the district court explained, because the alleged taking was an exercise of sovereign authority, not commercial conduct. Id. at *6. And the district court found that Ukraine had not waived its immunity and thus the FSIA's waiver exception was inapplicable. Id. at *8–9. After the district court dismissed Ukraine from the suit with prejudice, see Order (Mar. 19, 2020), appellants voluntarily dismissed the individual defendants and noted this appeal.

II.

Pursuant to the FSIA, "a foreign state shall be immune from the jurisdiction of the courts of the United States" unless one of the statute's enumerated exceptions applies. 28 U.S.C. § 1604. The FSIA thus "provides the sole basis for obtaining jurisdiction over a foreign state in the courts of this country." Argentine Republic v. Amerada Hess Shipping Corp. , 488 U.S. 428, 443, 109 S.Ct. 683, 102 L.Ed.2d 818 (1989). This broad grant of immunity reflects "the absolute independence of every sovereign authority and helps to induce each nation state, as a matter of international comity, to respect the independence and dignity of every other, including our own." Bolivarian Republic of Venezuela v. Helmerich & Payne Int'l Drilling Co. , ––– U.S. ––––, 137 S. Ct. 1312, 1319, 197 L.Ed.2d 663 (2017) (internal quotation marks, alteration, and citation omitted).

The court reviews de novo the district court's jurisdictional determinations. Schubarth , 891 F.3d at 398. Where, as here, the dispute centers on the sufficiency of the plaintiffs’ jurisdictional allegations, "dismissal is warranted if no plausible inferences can be drawn from the facts alleged that, if proven, would provide grounds for relief." Id. (quoting Price v. Socialist People's Libyan Arab Jamahiriya , 294 F.3d 82, 93 (D.C. Cir. 2002) ). It is the defendant's burden to establish sovereign immunity, "including that ‘the plaintiff's allegations do not bring its case within a statutory exemption to immunity.’ " Id. (quoting Phoenix Consulting Inc. v. Republic of Angola , 216 F.3d 36, 40 (D.C. Cir. 2000) ).

Appellants challenge the district court's dismissal of Ukraine, contending that the second amended complaint sets forth sufficient facts to establish three FSIA exceptions: the expropriation exception, the commercial activity exception, and the waiver exception. 28 U.S.C. § 1605(a)(1)–(3). We disagree.

A.

Appellants first maintain that the FSIA's expropriation exception permits their lawsuit against Ukraine. In their view, Ukraine's "total destruction" of their property was a taking in violation of international law, particularly because Ukraine acted with the "discriminatory intent" to punish the Ivanenkos for promoting Western business interests. Pls.’ Br. 22. Relevant here, the FSIA's expropriation exception divests a foreign state of its immunity in any action "in which rights in property taken in violation of international law are in issue and that property or any property exchanged for such property ... is owned or operated by an agency or instrumentality of the foreign state and that agency or instrumentality is engaged in a commercial activity in the United States." 28 U.S.C. § 1605(a)(3). "For the exception to apply, therefore, the court must find that: (1) rights in property are at issue; (2) those rights were taken in violation of international law; and (3) a jurisdictional nexus exists between the expropriation and the United States." Schubarth , 891 F.3d at 398–99 (quoting Nemariam v. Fed. Democratic Republic of Ethiopia , 491 F.3d 470, 475 (D.C. Cir. 2007) ).

The district court correctly determined that appellants’ lawsuit does not fall within the FSIA's expropriation exception. With respect to Luxexpress–II and the Ivanenkos, their claims are barred by the "domestic takings rule," which provides that a foreign state's seizure of its citizens’ property within its territory does not violate international law. See Fed. Republic of Germany v. Philipp , ––– U.S. ––––, 141 S. Ct. 703, 709, ––– L.Ed.2d –––– (2021) ; United States v....