Marlowe v. Argentine Naval Com'n

• Decision Date: 14 March 1985
• Docket Number: Civ. A. No. 84-1870.
• Citation: 604 F. Supp. 703
• Parties: Randall J. MARLOWE, Plaintiff, v. ARGENTINE NAVAL COMMISSION, Defendant.
• Court: U.S. District Court — District of Columbia

604 F. Supp. 703

Randall J. MARLOWE, Plaintiff, v. ARGENTINE NAVAL COMMISSION, Defendant.

Civ. A. No. 84-1870.

United States District Court, District of Columbia.

March 14, 1985.

Robert R. Smiley, III, Smiley, Olson, Gilman & Pangia, Washington, D.C., for plaintiff.

Bruno A. Ristau, Joel E. Leising, Kaplan, Russin & Vecchi, Washington, D.C., for defendant.

CHARLES R. RICHEY, District Judge.

BACKGROUND

Before the Court is defendant's Motion to Dismiss, opposition thereto, and supporting memoranda. For the reasons herein stated, the Court denies the Motion to Dismiss.

The parties agree as to all facts material to the instant Motion. This suit is based on an alleged breach of a contract for the purchase of two aircraft by the Argentine Armada (Navy) from plaintiff's assignee, a Panamanian corporation known as Servistan S.A. The contract was negotiated by plaintiff, acting as the seller's representative, and representatives of the Armada and defendant Argentine Naval Commission ("ANC"). The negotiations took place in Buenos Aires, Argentina, and at the ANC headquarters in Washington, D.C. The contract was signed on behalf of the Armada by the then Acting Chief of the Argentine Naval Commission in Washington, D.C., and it identified the purchaser as "ARMADA ARGENTINA—Argentine Naval Commission having its principal place of business at 630 Indiana Ave., N.W., Washington, D.C. 20004." The contract was signed on behalf of the seller by the plaintiff, Randall J. Marlowe, and the seller was identified as "SERVISTAN S.A. —P.O. Box 4871—Panama 5—Republica de Panama, represented in this stand by R.J. MARLOWE & ASSOCIATES, having its place of business at Av. Rivadavia 5154— Capital Federal—ARGENTINA."

At the time the contract was executed, the seller did not have title to, or possession of, the aircraft. The seller was to obtain the aircraft from an Ecuadorian interest for delivery and sale to the buyer. The contract required that payment of the purchase price, expressed in United States currency, be assured by the buyer by an irrevocable letter of credit. Payment under the letter of credit was to be made in several installments, based upon a contractual schedule. The contract further contained detailed provisions for the inspection and technical approval of the aircraft, taxes, warranties, and conditions for excusable delays. Finally, Article 10 of the contract provided, under the heading "MISCELLANEOUS", as follows:

A. This agreement shall be governed by and construed in accordance with the laws of the District of Columbia, U.S.A.

B. All notices, requests, demands, or other communications to or upon the respective parties hereto shall be deemed to have given or made when deposited in the mail, postage prepaid, or in the case of telegraphic notice when delivered to the telegraph company or when actually sent by Telex, addressed to Seller, or Buyer, as the case may be, at their respective addresses set forth below:

In the case of the Buyer:

ARMADA ARGENTINA ARGENTINA (sic) NAVAL COMMISSION 630 INDIANA AVE.—N.W WASHINGTON, D.C.—20004 TEL.: XXX-XXX-XXXX

In the case of the Seller:

SERVISTAN S.A P.O. BOX 4871 PANAMA 5 — PANAMA TELEX: 2769 (DIMAR PG).

Plaintiff filed the complaint in this case on June 19, 1984, alleging breach of contract and fraud. Service of the summons and complaint was made on ANC in Washington, D.C. Service was addressed to:

CHIEF, ARGENTINE NAVAL COMMISSION 630 INDIANA AVE., N.W WASHINGTON, D.C. 20001

Although defendant received the service, it did not promptly respond to the complaint, and on September 28, 1984, the Court granted plaintiff's motion for default judgment. After plaintiff attached some of defendant's local assets, ANC, on December 3, 1984, moved for relief from the default judgment. By Order of January 30, 1985, the Court, noting the "liberal spirit" of Rule 60(b) as applied to cases involving default judgments, Spann v. Commissioners of the District of Columbia, 443 F.2d 715, 716 n. 1 (D.C.Cir.1970), vacated the default judgment against ANC. ANC has now filed the instant Motion to Dismiss. In this Motion, ANC raises three grounds for dismissal: (1) that ANC lacks the capacity to be sued; (2) that service of process was insufficient under the Foreign Sovereign Immunities Act; and (3) that this Court lacks jurisdiction under that Act.¹ As demonstrated below, all of these arguments fail.

DEFENDANT IS A FOREIGN STATE UNDER FEDERAL LAW, AND THUS IS CAPABLE OF BEING SUED

1. Federal Law Determines the Juridicial Status of ANC.

ANC asserts that to determine whether an entity has the capacity to sue or be sued, reference must be made to that body of law under which the entity exists. In this case, the entity, ANC, was created under Argentine law. Under Argentine law, ANC continues, it is a mere subordinate command of the Argentine Armada, and one of its missions is the procurement of materials, spare parts, and supplies from foreign countries for use by the Armada. ANC has submitted a legal opinion from the legal adviser of the Argentine Embassy, Cesar F. Matas, who concludes, based on the creation and role of the ANC, that under Argentine law ANC lacks the capacity to sue or be sued.² The only proper defendant, according to ANC, would be the Republic of Argentina.

This argument rests upon a faulty premise. The juridical capacity of ANC must be determined not by Argentine law, but by "principles ... common to both international law and federal common law." First National City Bank v. Banco para el Comercio Exterior de Cuba, 462 U.S. 611, 623, 103 S.Ct. 2591, 2598, 77 L.Ed.2d 46 (1983).³ In First National City Bank, the Supreme Court considered the juridical status of a state-owned Cuban bank. The respondent there offered an argument similar to that presented by ANC here—that the law of the chartering state determined the bank's juridical status. Rejecting that argument, the Supreme Court stated:

To give conclusive effect to the law of the chartering state in determining whether the separate juridicial status of its instrumentality should be respected would permit the state to violate with impunity the rights of third parties under international law while effectively insulating itself from liability in foreign courts. We decline to permit such a result.

103 S.Ct. at 2597 (footnotes omitted). Instead, the Court held that "the principles governing this case are common to both international law and federal common law, which in these circumstances is necessarily informed both by international law principles and by articulated congressional policies." Id. at 2598.⁴

Acceptance of ANC's argument in the present case might render a result which the Supreme Court has "declined to permit" —that ANC could "violate with impunity the rights of third parties ... while effectively insulating itself from liability in foreign courts."⁵ Id. at 2597. Therefore, Argentine law does not control this question, and the Court looks to federal law to determine whether ANC may be sued.

2. Under Federal Law, ANC is a Foreign State.

The Federal Sovereign Immunities Act ("FSIA") is a comprehensive congressional scheme which regulates the amenability of foreign nations to suit in the United States. Verlinden B.V. v. Central Bank of Nigeria, 461 U.S. 480, 493, 103 S.Ct. 1962, 1971, 76 L.Ed.2d 81 (1983). This federal law defines some entities as "foreign states", and others as "agencies or instrumentalities of foreign states". 28 U.S.C. 1603. Assuming proper service, unless a "foreign state", or an "agency or instrumentality" thereof, is immune under the Act, this Court has jurisdiction over it in a civil action such as this one. 28 U.S.C. § 1330(a). Therefore, this "articulated congressional policy" determines the juridical status of certain branches of foreign governments. See First National City Bank, 103 S.Ct. at 2598. Accordingly, the Court must determine whether ANC is a "foreign state" or an "agency or instrumentality of a foreign state" under the Act.

The FSIA defines a "foreign state" and an "agency or instrumentality" thereof in 28 U.S.C. § 1603:

For the purposes of this chapter—

(a) A "foreign state", except as used in section 1608 of this title, includes a political subdivision of a foreign state or an agency or instrumentality of a foreign state as defined in subsection (b).

(b) An "agency or instrumentality of a foreign state" means any entity —

(1) which is a separate legal person, corporate or otherwise, and

(2) which is an organ or a foreign state or political subdivision thereof, or a majority of whose shares or other ownership interest is owned by a foreign state or political subdivision thereof, and

(3) which is neither a citizen of a State of the United States as defined in section 1332(c) and (d) of this title, nor created under the laws of any third country.

It is apparent from the statutory language that the FSIA substantially equates a "foreign state" with an "agent or instrumentality of a foreign state". There are significant differences, however, concerning the service of process upon the two under the FSIA. See 28 U.S.C. § 1608. Proper service upon a foreign state, detailed in § 1608(a), is somewhat different from proper service upon an agency or instrumentality of a foreign state, described in § 1608(b). This difference was the issue which recently faced one federal court in a case involving ANC. Unidyne Corp. v. Aerolineas Argentinas, 590 F.Supp. 398 (E.D.Va.1984). In Unidyne, the court dismissed the suit against ANC, a co-defendant, for lack of proper service. In so doing, the court relied on many of the same factual assertions presented by ANC in the present case:

The ANC is a department of the Argentine Navy whose goal is to procure supplies from foreign countries. The ANC maintains an office in the District of Columbia which is staffed exclusively by active duty Argentine Naval officers on two-year assignments from Argentina. These naval officers are treated as

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