Phaneuf v. Republic of Indonesia

• Decision Date: 07 February 1997
• Docket Number: No. 95-17131,95-17131
• Citation: 106 F.3d 302
• Parties: 97 Cal. Daily Op. Serv. 895, 97 Daily Journal D.A.R. 1329 Curtis A. PHANEUF, Plaintiff-Appellee, v. REPUBLIC OF INDONESIA, a Foreign State; National Defense Security Council of the Republic of Indonesia--Jakarta, an Agency or Instrumentality of a Foreign State; H.A. Chalid Mawardi, Defendants-Appellants.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 302

106 F.3d 302

97 Cal. Daily Op. Serv. 895, 97 Daily Journal

D.A.R. 1329

Curtis A. PHANEUF, Plaintiff-Appellee, v. REPUBLIC OF INDONESIA, a Foreign State; National Defense

Security Council of the Republic of Indonesia--Jakarta, an

Agency or Instrumentality of a Foreign State; H.A. Chalid

Mawardi, Defendants-Appellants.

No. 95-17131.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted Nov. 4, 1996.

Decided Feb. 7, 1997.

Carolyn B. Lamm, Christopher M. Curran, Francis A. Vasquez, Jr., White & Case, Washington, DC, Janice A. Wezelman, Miller, Pitt & McAnally, P.C., Tucson, AZ, for defendants-appellants Republic of Indonesia, National Defense Security Council of the Republic of Indonesia and H.A. Chalid Mawardi.

William B. Blaser, Tucson, AZ, for plaintiff-appellee.

Appeal from the United States District Court for the District of Arizona, William D. Browning, District Judge, Presiding. D.C. No. CV-94-00746-WDB.

Before: RONEY, ^* Senior Circuit Judge, BEEZER and TROTT, Circuit Judges.

BEEZER, Circuit Judge:

The Republic of Indonesia, the National Defense Security Council of the Republic of Indonesia and H.A. Chalid Mawardi (collectively "defendants") appeal the district court's order denying the defendants' motion to dismiss on the basis of sovereign immunity and for lack of venue. We have jurisdiction over the district court's denial of the motion to dismiss pursuant to the collateral order doctrine. Schoenberg v. Exportadora de Sal, S.A. de C.V., 930 F.2d 777, 779 (9th Cir.1991), cert. denied, 513 U.S. 1018, 115 S.Ct. 581, 130 L.Ed.2d 496 (1994). Jurisdiction does not exist to review the district court's refusal to dismiss for lack of venue. American Concrete Agric. Pipe Ass'n v. No-Joint Concrete Pipe Co., 331 F.2d 706, 709 (9th Cir.1964). We reverse and remand.

I

Plaintiff Curtis A. Phaneuf holds several promissory notes allegedly issued by the National Defense Security Council of the Republic of Indonesia ("NDSC"). These notes are part of approximately 505 promissory notes created by several then-members of the NDSC and valued at over three billion U.S. dollars ("NDSC notes"). The notes bear the signatures of two NDSC members and the NDSC crest. The principal maker of the notes, Ibnu Hartomo, traded the "NDSC notes" for promissory notes issued by Hassan Zubaidi, a Syrian based financier. In August 1985, defendant Mawardi, then Indonesia's ambassador to Syria, participated in a signing ceremony in Damascus. At the ceremony Mawardi purportedly confirmed that Hartomo represented the Indonesian government and that the "NDSC notes" were "Official/Governmental." Zubaidi's notes were later discovered to be worthless.

The Republic of Indonesia claims that it did not know about the "NDSC notes" until late in 1985, at which time it promptly determined that these notes were unauthorized and invalid under Indonesian law. In January 1986, the NDSC's Secretary General informed Bank Indonesia that neither the NDSC nor any of its officials had authority to issue promissory notes and that the "NDSC notes" were invalid. Bank Indonesia then sent communications to financial institutions advising that Indonesia had detected unauthorized promissory notes allegedly issued by the NDSC. In April 1987, the NDSC issued a press release which disavowed NDSC responsibility for the notes, stating that responsibility lay with the persons who signed the notes. Bank Indonesia has continuously refused to honor the notes.

Phaneuf brought this action to enforce payment on the notes in his possession. The defendants moved to dismiss based on lack of subject matter jurisdiction under the Foreign Sovereign Immunities Act ("FSIA"). The district court denied the defendants' motion to dismiss, stating that defendants had not established a prima facie case of immunity under the FSIA.

Defendants contend that the district court erred in denying their motion to dismiss because: (1) they established a prima facie case of immunity under the FSIA; (2) the commercial activity exception to the FSIA does not apply to Phaneuf's claim; and (3) venue is improper in the District of Arizona.

II

The FSIA is the sole basis of subject matter jurisdiction over suits involving foreign states and their agencies and instrumentalities. Randolph v. Budget Rent-A-Car, 97 F.3d 319, 323 (9th Cir.1996). Under the FSIA, foreign states are immune from suit unless one of the enumerated exceptions to the Act applies. 28 U.S.C. §§ 1330, 1604-05. The existence of subject matter jurisdiction under the FSIA is a question of law reviewed de novo. Randolph, 97 F.3d at 323.

III

The district court held that it currently had subject matter jurisdiction, but stated that it might revisit the issue later in the trial based on further discovery. Subject matter jurisdiction under the FSIA, however, must be decided before the suit can proceed. Security Pac. Nat'l Bank v. Derderian, 872 F.2d 281, 283-84 (9th Cir.1989). Immunity under the FSIA is not only immunity from liability, but immunity from suit. Compania Mexicana de Aviacion v. United States Dist. Court, 859 F.2d 1354, 1358 (9th Cir.1988). The district court improvidently postponed its final determination of subject matter jurisdiction under the FSIA.

IV

The district court denied the defendants' motion to dismiss holding that the defendants had not established a prima facie case of immunity. The district court relied on a footnote in Siderman de Blake v. Republic of Argentina in determining the prima facie requirements for sovereign immunity. See 965 F.2d 699, 708 n. 9 (9th Cir.1992) (citing Meadows v. Dominican Republic, 817 F.2d 517, 522 (9th Cir.), cert. denied, 484 U.S. 976, 108 S.Ct. 486, 487, 98 L.Ed.2d 485 (1987)), cert. denied, 507 U.S. 1017, 113 S.Ct. 1812, 123 L.Ed.2d 444 (1993). Footnote nine of Siderman de Blake states:

Where .... the plaintiff alleges in his complaint that his claim is based on a foreign state's strictly commercial acts, the defendant must establish a prima facie case that it is a sovereign state and that the plaintiff's claim arises out of a public act. This proof establishes a presumption that the foreign state is protected by immunity.

Id.

In its order, the district court stated that defendants failed to show that the "acts complained of arise out of a public act." Defendants had argued to the district court that the commercial activity exception to the FSIA, 28 U.S.C. § 1605(a)(2), did not apply because they had not participated in the issuance of the promissory notes. The district court concluded that the defendants could not "consistently argue that they are entitled to immunity (as a foreign sovereign for their sovereign acts) [under] the FSIA and, at the same time, argue that the acts alleged were not sovereign so as to defeat its exceptions."

We, however, have never required a defendant to establish that a plaintiff's claim arose from a public act. We did not engage in a public act inquiry in either Siderman de Blake or Meadows v. Dominican Republic, upon which Siderman de Blake relies, because neither case concerned whether the defendants had demonstrated a prima facie case of immunity. Siderman de Blake, 965 F.2d at 707-08 (discussing whether plaintiffs met their burden of production that exceptions to the FSIA applied); Meadows, 817 F.2d at 523 (holding that the defendants had not met their final burden of persuasion that the commercial activity exception did not apply). The suggestion in Siderman de Blake and Meadows that the FSIA prima facie case includes a public act requirement is dicta, and as such holds no precedential value.

In other existing precedent, defendants have established their prima facie entitlements to sovereign immunity by proving only that they qualified as "foreign state[s]" under 28 U.S.C. § 1603(a)-(b). We did not require these defendants to demonstrate that the plaintiffs' claims arose from a public act. Export Group v. Reef Indus., 54 F.3d 1466, 1470 (9th Cir.1995) (citing Meadows, 817 F.2d at 522-23); Gates v. Victor Fine Foods, 54 F.3d 1457, 1459-60 (9th Cir.), cert. denied, --- U.S. ----, 116 S.Ct. 187, 133 L.Ed.2d 124 (1995); cf. Randolph, 97 F.3d at 324 (discussing the shifting of the burden of production under the FSIA without addressing a prima facie public act requirement and citing Siderman de Blake, 965 F.2d at 707-08).

Further, the FSIA dictates that "a foreign state shall be immune from the jurisdiction of the courts of the United States and of the States except as provided in sections 1605 to 1607." 28 U.S.C. § 1604; see Compania Mexicana de Aviacion, 859 F.2d at 1359 ("We lack both statutory subject matter and personal jurisdiction over any claim against a foreign sovereign unless one of the Act's exceptions applies...."). Sections 1605 through 1607 of Title 28 outline the only exceptions to the Act. Requiring a foreign state to prove a public act conflicts with the plain language of the statute: a foreign state is immune from suit unless one of the enumerated exceptions applies. There is no exception for non-public acts.

The legislative history of the FSIA also does not compel the conclusion that a defendant must prove a public act to establish a prima facie case of immunity. The suggestion in Meadows of a public act requirement was based, in part, on a House Report which states:

[T]he burden will remain on the foreign state to produce evidence in support of its claim of immunity. Thus, evidence must be produced to establish that a foreign state or one of its subdivisions, agencies or instrumentalities is the defendant in the suit and that the plaintiff's claim relates to a public act of the foreign state-that is, an act not within the exceptions in sections 1605-1607.

H.R.Rep. No. 1487, 94th Cong., 2d sess. This legislative history, however, clarifies only that the defendant bears the burden of establishing its immunity, including the burden of proof that no exception applies. It does not necessitate a prima...