LeDonne v. Gulf Air, Inc.

• Decision Date: 21 November 1988
• Docket Number: Civ. A. No. 88-0580-A.
• Citation: 700 F. Supp. 1400
• Parties: Jacqueline Smith LeDONNE, Plaintiff, v. GULF AIR, INC., Defendant.
• Court: U.S. District Court — Eastern District of Virginia

700 F. Supp. 1400

Jacqueline Smith LeDONNE, Plaintiff, v. GULF AIR, INC., Defendant.

Civ. A. No. 88-0580-A.

United States District Court, E.D. Virginia, Alexandria Division.

November 21, 1988.

COPYRIGHT MATERIAL OMITTED

Richard C. Shadyac, Jr., Shadyac & Shadyac, Arlington, Va., for plaintiff.

Moffett B. Roller, Condon & Forsyth, Falls Church, Va., for defendant.

MEMORANDUM OPINION

ELLIS, District Judge.

This diversity suit to enforce an Illinois default judgment presents threshold dispositive issues concerning the Foreign Sovereign Immunities Act ("FSIA" or "the Act"), 28 U.S.C. §§ 1603 et seq. Plaintiff, seeking to enforce the Illinois judgment, argues that the FSIA is inapplicable and, alternatively, that, even if applicable, the FSIA confers no immunity on Gulf Air because the conduct underlying the default judgment falls within the Act's "commercial activity" exception. See 28 U.S.C. §§ 1603(d), 1605(a)(2). Gulf Air responds, arguing for the applicability of the Act, the irrelevance of the exception and hence the protection of immunity. Gulf Air also argues that even if the exception applies to deprive Gulf Air of the FSIA's immunity, plaintiff's claim still fails because she failed to comply with the Act's service requirements.

Because the essential facts are undisputed, this matter is appropriate for summary disposition pursuant to Rule 56, Fed.R. Civ.P. For the reasons set forth here, the Court concludes that FSIA applies, that the commercial activity exception operates to deny immunity to Gulf Air, but that plaintiff's failure to comply with the Act's service provisions is fatal to her claim.

Facts

Plaintiff, Jacqueline Smith LeDonne, is an Illinois citizen. Defendant, Gulf Air, Inc., (Gulf Air) is a joint stock company with limited liability created by a treaty among four Persian Gulf states: The Emirate of Abu Dhabi, the State of Bahrain, the State of Qatar and the Sultanate of Oman. These sovereign nations own 100% of Gulf Air's stock. Gulf Air is a foreign passenger and freight airline headquartered in Bahrain. From there it flies west as far as London and east as far as Hong Kong. Although Gulf Air does not yet fly passengers into the United States,¹ for all times relevant here it has maintained sales offices in the United States for the purpose of marketing its services to those wishing to travel routes serviced by Gulf Air.

On August 27, 1985, plaintiff filed a civil action in the Circuit Court of Cook County, Illinois. Named as defendants were Gulf Air, Gulf Aviation Services (Aviation Services) and three individuals. Aviation Services, a corporation licensed to do business in Illinois, had once acted as Gulf Air's general sales agent, but that relationship ceased as of January 18, 1982. At the time the Illinois action was filed, there was, so far as this record shows, no contractual or ownership connection between Gulf Air and Aviation Services. One of the three individuals sued in the Illinois action, Michael Behou, was alleged to be Aviation Services' Executive Vice President. The remaining individual defendants in the Illinois action, Joseph Khoury and Hrach Azadian, were alleged to be executives of Gulf Air. The Illinois complaint, prolix and lacking in clarity, alleged against all five defendants malicious prosecution, slander, libel and, arguably, civil conspiracy to commit these torts. Damages of $1,002,500 were claimed, with $1,000,000 attributed to general damages and $2,500 attributed to the attorney's fees and other expenses incurred by plaintiff in defending herself against the allegedly unfounded and malicious accusations.

Plaintiff's allegations in the Illinois action may be summarized as follows:

(1) that Gulf Air and Aviation Services jointly owned, furnished and conducted an air freight sales business office in Chicago.

(2) that plaintiff, who worked in this office, was led to believe that she was jointly employed by Gulf Air and Aviation Services and that these entities, in turn, were jointly owned and operated.

(3) that in February, 1982, plaintiff received permission from defendant Hrach Azadian to sign his name in requesting complimentary tickets from TWA for travel to Cairo, Egypt or alternatively, Los Angeles, California for use in connection with plaintiff's planned honeymoon.

(4) that in August, 1982 Azadian told a TWA investigator (i) that plaintiff did not have authority to sign his name to a complimentary ticket request, (ii) that he had no knowledge of her requesting permission to do so, and (iii) that plaintiff was not a Gulf Air employee.

(5) that based on this information, TWA notified the FBI which then began a criminal investigation.

(6) that Azadian repeated to an FBI agent the statements he had made to the TWA investigator and that, as a result, plaintiff was indicted by a federal grand jury on mail and wire fraud charges pursuant to 18 U.S.C. § 1343.

(7) that the indictment was dismissed after plaintiff retained counsel and underwent a polygraph examination, the results of which supported her version of the facts.

(8) that the false and malicious acts and statements of Azadian and Behou to TWA, the FBI and other authorities were duly authorized by Gulf Air and Aviation Services and caused substantial damage to plaintiff.

We turn next to the important facts concerning attempts to serve the Illinois complaint and the resulting default judgment. As noted, the Illinois action was filed on August 25, 1985. Two days later, the clerk of the Cook County Circuit Court issued a summons for service of the complaint on the C.T. Corporation, who plaintiff thought was Aviation Services' agent for service of process. On September 5, 1985, a deputy sheriff filed an affidavit averring that service of the complaint was effected on the C.T. Corporation as agent for Aviation Services. It also appears that the server was informed at the time by C.T. Corporation that it was no longer Aviation Services' authorized agent for service of process. Plaintiff made no effort to serve the complaint on Gulf Air, apparently because she was convinced that Gulf Air and Aviation Services were jointly owned, that she was jointly employed and that they were essentially the same company.² Plaintiff alleges, however, that Gulf Air received actual notice of the complaint. This occurred, plaintiff alleges, in a telephone conversation between plaintiff's Illinois counsel and Mr. Joseph Khoury of Gulf Air sometime after September 5, 1985. Specifically, plaintiff's counsel alleges that Mr. Khoury acknowledged the complaint and promised to "follow it up personally or through his attorney." (Affidavit of Haddad, ¶ 4).

The next pertinent event occurred on March 4, 1986. On this date the Cook County Circuit Court entered an Order of Default against Gulf Air and Aviation Services. Thereafter, the Clerk of the Court issued a summons for Gulf Air and Aviation Services for service on the Illinois Secretary of State in accordance with the Illinois long-arm statute. Ill.Rev.Stat. ch. 32 §§ 5.25(c), 5.30. With respect to Gulf Air, substitute service on the Secretary of State was apparently deemed appropriate because Gulf Air was allegedly was doing business in Illinois without having registered to do so. In any event, it is important to focus sharply on what the record discloses as to what happened to these summonses after issuance by the Illinois court.

There is abundant evidence that the Aviation Services summons reached the Secretary. The affidavit of compliance of service on the Secretary of State for Aviation Services is stamped "Secretary of State Corporation Dept. — Chicago May 2, 1986." The lower portion of the affidavit is stamped "Received May 8, 1986 Secretary of State." Further, the upper right hand corner of the affidavit has a space labeled "For use by the Secretary of State." This space is filled in with a file number, date and clerk's initials.

By contrast, the record does not reflect that the Gulf Air summons ever reached the Secretary. The affidavit of compliance for Gulf Air is not stamped "received" by the Illinois Secretary of State. Nor is the space in the upper right hand corner filled in. Although the deputy sheriff's affidavit of service dated May 5, 1986, alleges the service was completed for Gulf Air, an affidavit from the Office of Secretary of State states that no such service of process for Gulf Air was ever received.

Plaintiff's counsel also avers, by affidavit, that a copy of the summons and complaint were sent by registered mail to C.T. Corporation and to Michael Behou on behalf of Aviation Services, as required by Illinois law. See Ill.Rev.Stat. ch. 32 ¶ 5.25(c)(2) (Smith-Hurd Cum.Supp.1988). The return receipt indicates they were delivered on June 9, 1986. Plaintiff's counsel similarly avers that he caused a copy of the summons and the complaint to be sent by certified mail to Joseph Khoury, Gulf Air, Inc., 489 Fifth Avenue, New York, New York. Yet, unlike the parallel mailing to Aviation Services, plaintiff has not produced any return receipt to prove that the complaint and summons were ever delivered or received. Gulf Air denies ever receiving any written notice of the Illinois suit until this action was filed. In any event, the facts make clear that no attempt to serve the complaint on Gulf Air was made until after the entry of default.

Following all this, on June 29, 1987, a default judgment for $530,000 in damages was entered in the Cook County Circuit Court against Gulf Air and Aviation Services. So far as the record shows, plaintiff never succeeded in properly serving either the complaint or the default judgment on Gulf Air.

We come now to the genesis of the instant suit. On April 25, 1988, plaintiff filed suit in the Arlington County Circuit Court to enforce the Illinois default judgment. That suit was properly removed to this Court. Gulf Air challenges both subject matter and personal jurisdiction. More specifically, Gulf Air contends it is...