Lord Day & Lord v. Socialist Repub., Viet.

• Decision Date: 27 March 2001
• Docket Number: No. 96 Civ. 5755(DAB).,96 Civ. 5755(DAB).
• Citation: 134 F.Supp.2d 549
• Parties: LORD DAY & LORD, Barrett Smith, Plaintiffs, v. THE SOCIALIST REPUBLIC OF VIETNAM, Swiss Reinsurance Company, Assurance Generales de France, and Groupe des Mutuelles Alsaciennes Defendants.
• Court: U.S. District Court — Southern District of New York

134 F.Supp.2d 549

LORD DAY & LORD, Barrett Smith, Plaintiffs, v. THE SOCIALIST REPUBLIC OF VIETNAM, Swiss Reinsurance Company, Assurance Generales de France, and Groupe des Mutuelles Alsaciennes Defendants.

No. 96 Civ. 5755(DAB).

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

March 27, 2001.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

Morgan, Lewis & Bockius LLP, New York City, Eugene F. Bannigan, Jennifer Mangino, for Plaintiff.

White & Case, Washington, DC, Christopher M. Curran, Francis A. Vasquez, Jr., Peter J. Carney for Defendant the Socialist Republic of Vietnam.

Swiss Re America Holding Corporation, New York City, Patrick J. O'Brien, for Defendants the Swiss Reinsurance Company, Assurance Generales de France Iart, and Groupe des Mutuelles Alsaciennes.

OPINION

BATTS, District Judge.

Plaintiff Lord Day & Lord ("Lord Day"), a law firm in liquidation, brought this interpleader action to determine the entitlement of funds currently held in the possession of this Court. The Socialist Republic of Vietnam ("Vietnam"), Swiss Reinsurance Company, Assurance Generales de France, and Groupe des Mutuelles Alsaciennes (collectively "Reinsurers") have all claimed such entitlement. Defendant Vietnam moves to dismiss the Reinsurers' Cross-Complaint for lack of jurisdiction, pursuant to Fed.R.Civ.P. 12(b)(1); (b)(2); and (c). For the reasons set forth below, Defendant Vietnam's motion is GRANTED in its entirety.

I. BACKGROUND

A. Factual Background

On December 6, 1970, a cargo of rice owned by the, then, Republic of Vietnam ("former Republic") was lost during overseas transport when the ship carrying the cargo sustained a collision in the Panama Canal. (Reinsurers' Compl. ¶¶ 18, 19.) The cargo was insured under a policy issued by Societe Vietnamenne D'Assurances et de Reassurances ("SOVAR"), a Vietnamese insurance corporation. (Id. ¶ 6.) Pursuant to the terms of its insurance agreement, SOVAR reimbursed the former Republic and Tong Cuoc Tiep Te, the then "General Supply Agency" of the former Republic, its insured, for the full value of the loss. (Id. ¶¶ 18-19.) SOVAR obtained an assignment dated December 14, 1971 from its insured for all rights against third parties responsible for the loss. (Id. ¶ 19; App. Mem. Opp., Ex. B (subrogation agreement)).¹ In turn, SOVAR was indemnified by the Reinsurers for a portion of the total cargo loss. (Reinsurers' Compl. ¶ 21.)

Under Plaintiff Lord Day's legal representation, SOVAR and the former Republic commenced a subrogation action in 1973 seeking recovery for the lost rice cargo against parties allegedly responsible for the loss. (Reinsurers' Compl. ¶ 20; Interpleader Compl. ¶ 4.²) The action proceeded in the name of the Republic of Vietnam and Tong Cuoc Tiep Te (the country's general supply agency). See In re: Chinese Maritime Trust, Ltd., 71 Civ. 161(RLC) (S.D.N.Y. Mar. 24, 1975) (Final Interlocutory Consent Judgment).³ This action resulted in a settlement in 1975 where the former Republic and Tong Cuoc Tiep Te were to obtain $548,364.56 from the Panama Canal Company, after payment of sums due other parties. (Reinsurers' Compl. ¶ 20).

On April 30, 1975, shortly after the settlement check was issued from the Panama Canal Company to Plaintiff Lord Day, Saigon fell to the armies of the Socialist Republic of Vietnam, and the United States subsequently banned all transfer of funds to the Vietnamese government and Vietnamese nationals. (Interpleader Compl. ¶ 6.⁴) See also Trading With the Enemy Act, 40 Fed.Reg. §§ 19202, 19203 (1973) ("TWEA"); 31 C.F.R. § 500.201(a)(1), (d). The settlement check was issued "Pay to the Order of: Lord, Day & Lord, attorneys for Republic of Vietnam & Tong Cuoc Tiep Te / General Supply Agency." (Court Ex. 1.)

Prevented from transferring the settlement check to its Vietnamese clients, Plaintiff sought and was issued a License by the Federal Foreign Assets Control agency permitting placement of the funds into a blocked account, pursuant to the Trading With the Enemy Act. See Court Ex. 2 (Application for License). See also In re: Chinese Maritime Trust, Ltd., 71 Civ. 161(RLC) (S.D.N.Y. Mar. 1976) (Order) (directing Lord, Day & Lord to place balance of the settlement funds "into a blocked account in a domestic bank in the name of the Republic of Viet-Nam and Tong Cuoc Tiep Te. The bank must acknowledge establishment of the account to the Office of Foreign Assets Control giving details.").

Plaintiff applied for a License in its role as "attorneys for Vietnam Assurance and Reassurance Co.," i.e. SOVAR. Court Ex. 2 at 1. In its application, Plaintiff listed SOVAR, rather than the former Republic, as a "present claimant" to the funds. Id. at 5. In its Complaint, Plaintiff explains that, although the case was brought in the name of Vietnam and Tong Cuoc Tiep Te and the Consent Judgment directed payment to Vietnam and Tong Cuoc Tiep Te, "Lord Day had planned to transfer the settlement funds to SOVAR because upon information and belief, SOVAR was subrogated to all rights of the Republic of Vietnam."⁵ (Interpleader Compl. ¶ 5.)

In the License application, Plaintiff stated that it sought the license in order collect the unpaid judgment and for the purpose of making disbursements to attorneys related to the settlement and "to such other persons having an interest in the balance as may lawfully be paid." (Court Ex. 2 at 4.) Although Plaintiffs acknowledged in the license application that "It is our understanding ... that there are other co-insurers and re-insurers who may be entitled to a share of the proceeds," no party claims to have sought payment from the account while the assets were frozen. Id. at 5.

Upon issuance of the License, Plaintiff deposited the funds in the name of the Republic of Vietnam and Tong Cuoc Tiep Te in an interest-bearing account with First National City Bank in New York. (Interpleader Compl. ¶ 8; Court Ex. 3 (Ltr. dated May 6, 1976 from First National City Bank acknowledging opening of blocked account).) Since the initial bank deposit by Plaintiff, the settlement funds have accrued interest and are now valued at approximately $2.8 million.

Effective March 6, 1995, the United States lifted the ban, thus allowing the settlement funds deposited by Plaintiff to be finally transferred. (Interpleader Compl. ¶ 10.) However, following the fall of Saigon, SOVAR had been effectively dissolved and nationalized in April 1975 by Vietnam, who discontinued its operations. (Reinsurers' Compl. ¶ 24.) Uncertain how to proceed, Plaintiff filed the instant Interpleader action.

B. Procedural Background

Plaintiff is a New York law firm currently in liquidation. (Interpleader Compl. ¶ 11.) Plaintiff brought this interpleader action pursuant to Rule 22 of the Federal Rules of Civil Procedure naming the Socialist Republic of Vietnam (the current government of Vietnam, hereinafter, "Vietnam"), and three foreign corporations believed to be former shareholders of SOVAR: Swiss Reinsurance Company ("Swiss Re"), Assurances Generales de France, and Groupe des Mutuelles Alsaciennes ("the Reinsurers"). (Id. ¶¶ 12-19.)

Plaintiff Lord Day sought (1) that each of the Defendants interplead and settle among themselves their respective rights to the funds at issue; (2) enjoinment and restraint from Defendants making any claim against Plaintiff to turn over the funds and prosecuting any action for the recovery of the funds; (3) discharge from all liability in transfer and maintenance of the funds; and (4) fees and attorneys' costs.

Following a hearing to show cause in interpleader conducted on November 13, 1996, this Court granted Plaintiff relief on each of its requests. The Court also ordered Plaintiff to deposit the funds with the Clerk of this Court.

The Reinsurers answered the Complaint and appeared as parties of interest with respect to the funds on November 6, 1996. Upon resolution of outstanding service issues, Vietnam filed its Answer on May 28, 1997. Vietnam's Answer to Plaintiff's Interpleader Complaint asserts its right to the funds pursuant to an Executive Agreement and also asserts several affirmative defenses, including its right to immunity as a foreign sovereign under the Foreign Sovereign Immunities Act. (Vietnam's Answer ¶ 2.)

The Reinsurers also filed a Cross-Complaint asserting entitlement to the funds. According to the Reinsurers, prior to SOVAR's dissolution and nationalization, the Reinsurers had an agreement with SOVAR to provide indemnity reinsurance covering a portion of the rice cargo loss, and also held approximately 30 percent of common stock in the corporation. (Id. ¶¶ 17, 25.) The Reinsurers claim ownership of the funds by their status as reinsurers and shareholders before and during SOVAR's dissolution and nationalization. In addition, Swiss Re brings a separate claim for expropriation.

Vietnam filed the instant motion to dismiss the Reinsurers' Cross-Complaint pursuant to Federal Rules of Civil Procedure 12(b) and (c) on various grounds, including Vietnam's asserted right to the funds as a matter of law pursuant to an Executive Agreement, lack of jurisdiction under the Federal Sovereign Immunities Act and the statute of limitations.

II. DISCUSSION

Interpleader actions generally proceed in two stages. First, the Court determines whether the plaintiff is entitled to the relief sought, including discharge. Pennsylvania Ins. Co. v. Long Island Marine Supply Corp., 229 F.Supp. 186, 188 (S.D.N.Y.1964). Second, the Court adjudicates the adverse claims of the interpleaded defendants. Id.

"A case is properly dismissed for lack of subject matter jurisdiction under Rule 12(b)(1) when the district court lacks the statutory or constitutional power to adjudicate it." Makarova v. U.S., 201 F.3d 110, 113 (2d Cir.2000). "In resolving a motion to dismiss for lack of subject matter jurisdiction under Rule 12(b)(1), a district court ... may refer to evidence outside the pleadings." Id. (citing Kamen v. American Tel. & Tel. Co., ...