Nemariam v. Fed. Demo. Rep. of Ethiopia

• Decision Date: 22 June 2007
• Docket Number: No. 05-7178.,05-7178.
• Citation: 491 F.3d 470
• Parties: Hiwot NEMARIAM et al., Appellants v. The FEDERAL DEMOCRATIC REPUBLIC OF ETHIOPIA and the Commercial Bank of Ethiopia, Appellees.
• Court: U.S. Court of Appeals — District of Columbia Circuit

491 F.3d 470

Hiwot NEMARIAM et al., Appellants v. The FEDERAL DEMOCRATIC REPUBLIC OF ETHIOPIA and the Commercial Bank of Ethiopia, Appellees.

No. 05-7178.

United States Court of Appeals, District of Columbia Circuit.

Argued November 14, 2006.

Decided June 22, 2007.

Appeal from the United States District Court for the District of Columbia (No. 00cv01392).

Donald F. Donovan argued the cause for the appellants. Caroline H. Moustakis, and Colby A. Smith were on brief. Katherine B. Wilmore entered an appearance.

Knox Bemis argued the cause for the appellees. W. DeVier Pierson and Thomas R. Snider were on brief.

Before: HENDERSON and TATEL, Circuit Judges, and SILBERMAN, Senior Circuit Judge.

Opinion for the court filed by Circuit Judge HENDERSON.

KAREN LeCRAFT HENDERSON, Circuit Judge.

The appellants—six individuals of Eritrean origin, descent or nationality and the class they seek to represent—challenge the district court's dismissal of their unlawful takings claims against the Federal Democratic Republic of Ethiopia (Ethiopia) and the Central Bank of Ethiopia (CBE) for lack of subject matter jurisdiction under the Foreign Sovereign Immunities Act (FSIA or Act), 28 U.S.C. §§ 1330, 1602-1611. The court held that the appellants' claims failed to satisfy both the "rights in property" and the "owned or operated" requirements of 28 U.S.C. § 1605(a)(3). As detailed below, we affirm the district court's dismissal on alternative grounds.

I.

In May 1998, a long-standing border dispute between Eritrea and Ethiopia erupted into armed conflict. Approximately one month later, Ethiopia announced that a vast number of Eritreans living in the country "were engaged in spying and mobilizing financial and other resources to support the Eritrean aggression." First Amended Class Action Compl. ¶ 46 (Compl.), reprinted in Joint Appendix (JA) at 599 (internal quotation omitted). As a result, the appellants claim that they, along with thousands of other Eritreans, were expelled from the country "without notice or due process." Id. at 600.

In conjunction with their expulsions, the appellants claim that Ethiopia seized their bank accounts and other property. Specifically, they assert that Ethiopia issued an order freezing their CBE accounts "which prevented any access to or withdrawal of funds." Id. at 602-03. The CBE allegedly "retained the funds from these accounts or . . . exchanged them for other assets." Id. at 603. Although Ethiopia and the CBE contend that the funds in the accounts remain accessible, the appellants maintain that, having been expelled, they can never access the funds in their accounts because under Ethiopian banking law, holders of bank accounts must appear in person to withdraw funds—in Ethiopia there are no automated tellers, wire transfers are not permitted and checking accounts are illegal.

The appellants also claim that their businesses, houses, automobiles and other property¹ were seized and in many cases sold substantially below their market value at auction "by CBE for the benefit of CBE and Ethiopia." Many of the sales allegedly occurred under the pretext that the property was burdened by a tax debt or that a mortgage was in default. Some sales proceeds may have been deposited into CBE bank accounts in the appellants' names. Corrected Mem. of P. & A. in Opp'n to Defs.' Refiled Mot. to Dismiss 16 (Corrected Mem.).

On December 12, 2000, Ethiopia and Eritrea signed a Peace Agreement (Agreement) providing for the permanent termination of military hostilities. One provision of the Agreement created a Claims Commission (Commission) to adjudicate claims for loss, damage or injury related to the conflict and resulting from a violation of international law. Although the Agreement established the Commission as the exclusive forum for adjudicating claims arising from the conflict, it specifically provided for the continuance of claims filed in other fora before December 12, 2000.

The appellants brought suit in the district court on June 12, 2000. On August 12, 2001, the district court granted Ethiopia's and the CBE's motion to dismiss for lack of subject matter jurisdiction and lack of personal jurisdiction on the basis of forum non conveniens in favor of the Commission. We overturned the dismissal, however, concluding that "the Commission's inability to make an award directly to [the appellants], and Eritrea's ability to set off [the appellants'] claim[s], against claims made by . . . Ethiopia, render the Commission an inadequate forum."² Nemariam v. Fed. Democratic Republic of Ethiopia, 315 F.3d 390, 395 (D.C.Cir.2003).

Following our remand, jurisdictional discovery commenced in September 2003. Discovery disputes stalled its completion but the district court nevertheless directed Ethiopia and the CBE to file a renewed motion to dismiss. On the retirement of the district judge who originally dismissed the action, the judge to whom it was assigned ordered the CBE and Ethiopia to refile memoranda in support of their renewed motion to dismiss and ordered the appellants to refile a response. In an Order dated November 8, 2005, the district court again dismissed the complaint for lack of subject matter jurisdiction. Nemariam v. Fed. Democratic Republic of Ethiopia, 400 F.Supp.2d 76, 86 (D.D.C. 2005). This appeal followed.

II.

FSIA is "the sole basis for obtaining jurisdiction over a foreign state in our courts." Argentine Republic v. Amerada Hess Shipping Corp., 488 U.S. 428, 434, 109 S.Ct. 683, 102 L.Ed.2d 818 (1989). It gives the district court "jurisdiction over a civil action against a foreign sovereign for any claim `with respect to which the foreign state is not entitled to immunity.'" Peterson v. Royal Kingdom of Saudi Arabia, 416 F.3d 83, 86 (D.C.Cir.2005) (quoting 28 U.S.C. § 1330(a)<sup>3</sup>). A foreign state enjoys sovereign immunity under the Act "unless an international agreement or one of several exceptions in the statute provides otherwise." Id. (internal citations omitted). Thus, "[i]n the absence of an applicable exception, the foreign sovereign's immunity is `complete'—`[t]he district court lacks subject matter jurisdiction over the plaintiff's case.'" Id. (quoting Phoenix Consulting, Inc. v. Republic of Angola, 216 F.3d 36, 39 (D.C.Cir.2000) (2d alteration in original)).

The appellants seek to establish jurisdiction pursuant to 28 U.S.C. § 1605(a)(3)— FSIA's so-called "expropriation exception"—alleging that Ethiopia and the CBE illegally expropriated their bank accounts (bank account claims) and other property (non-bank account claims). Section 1605(a)(3) provides:

(a) A foreign state shall not be immune from the jurisdiction of courts of the United States or of the States in any case—

(3) 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 present in the United States in connection with a commercial activity carried on in the United States by the foreign state; or 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." Peterson v. Royal Kingdom of Saudi Arabia, 332 F.Supp.2d 189, 196, 197 (D.D.C.2004), aff'd, 416 F.3d 83 (D.C.Cir.2005). A jurisdictional nexus is established if: (a) the property "`is present in the United States in connection with a commercial activity carried on in the United States by the foreign state'" or (b) the 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.'" Id. at 197-98 (quoting 28 U.S.C. § 1605(a)(3)). The appellants contend that both their bank account and non-bank account claims satisfy the latter jurisdictional nexus requirement.

In their motion to dismiss, the CBE and Ethiopia did not dispute the appellants' factual allegations. See Defs.' Reply Mem. of Law in Supp. of Refiled Mot. to Dismiss for Lack of Jurisdiction 3 ("[G]rounds for dismissal are based upon issues of law, and underlying facts sufficient to support dismissal are not in dispute." (emphasis added)). Accordingly, we must "take the [appellants'] factual allegations as true and determine whether they bring the case within any of the exceptions to immunity invoked by the [appellants]." Phoenix Consulting, 216 F.3d at 40. We review "de novo whether [the] facts are sufficient to divest the foreign sovereign of its immunity." Price v. Socialist People's Libyan Arab Jamahiriya, 389 F.3d 192, 197 (D.C.Cir.2004).

A. Bank Account Claims

The district court dismissed the appellants' bank account claims because they failed to satisfy both the "rights in property" and the "owned or operated" requirements of section 1605(a)(3). See Nemariam, 400 F.Supp.2d at 83-84, 85. Specifically, the district court held that a bank account constitutes an intangible contract right to receive funds from the bank, id. at 83-84, the expropriation exception does not apply to intangible property, id. at 82, and the appellants failed to demonstrate that the CBE benefited from its alleged control over the bank accounts, id. at 84-86.⁴ Although we disagree with the district court's interpretation of the "rights in property" and the "owned or operated" requirements of section 1605(a)(3), we nevertheless agree with the district court that the CBE neither owns nor operates the appellants' bank accounts within the meaning of section 1605(a)(3).

1. "Rights In Property" Requirement

As an initial matter, the appellants' bank accounts constitute intangible property...