Practical Concepts, Inc. v. Republic of Bolivia, No. 85-6001

CourtUnited States Courts of Appeals. United States Court of Appeals (District of Columbia)
Writing for the CourtBefore WALD, Chief Judge, RUTH BADER GINSBURG and BORK; RUTH BADER GINSBURG
Citation811 F.2d 1543
PartiesPRACTICAL CONCEPTS, INC., Appellant, v. REPUBLIC OF BOLIVIA, et al.
Decision Date06 March 1987
Docket NumberNo. 85-6001

Page 1543

811 F.2d 1543
258 U.S.App.D.C. 354
PRACTICAL CONCEPTS, INC., Appellant,
v.
REPUBLIC OF BOLIVIA, et al.
No. 85-6001.
United States Court of Appeals,
District of Columbia Circuit.
Argued Oct. 6, 1986.
Decided Feb. 17, 1987.
As Amended March 6, 1987.

Page 1544

Appeal from the United States District Court for the District of Columbia (Civil Action No. 82-03706).

Neil I. Levy, Washington, D.C., for appellant.

Alexander W. Whitaker, with whom William R. Joyce, Jr., Washington, D.C., was on the brief, for appellee. Thomas T.F. Huang, Washington, D.C., entered an appearance, for appellee.

Richard K. Willard, Assistant Attorney General, Department of Justice, Joseph E. diGenova, United States Attorney, David Epstein and Michael J. Singer, Attorneys, Department of Justice, and Bruce C. Rashkow, Attorney, Department of State were on the brief for the United States as amicus curiae.

Before WALD, Chief Judge, RUTH BADER GINSBURG and BORK, Circuit Judges.

Opinion for the Court filed by Circuit Judge RUTH BADER GINSBURG.

RUTH BADER GINSBURG, Circuit Judge:

This case requires judicial interpretation of the Foreign Sovereign Immunities Act (FSIA), 28 U.S.C. Secs. 1330, 1602-1611, a measure Congress enacted in 1976 to govern the sensitive matter of the amenability of a foreign nation to suit in the United States. Under the FSIA, a district court may entertain a civil action against a foreign state only if the foreign state lacks immunity under the Act's prescriptions, i.e., 28 U.S.C. Secs. 1605-1607, or under an international agreement. 28 U.S.C. Sec. 1330. 1 Sovereign immunity under the FSIA is thus a gateway issue, not simply a

Page 1545

plea in defense to a claim: if the foreign state is entitled to immunity with respect to the claim asserted, then the district court lacks both subject matter and personal jurisdiction, and must dismiss the case. Verlinden B.V. v. Central Bank of Nigeria, 461 U.S. 480, 493 n. 20, 103 S.Ct. 1962, 1971 n. 20, 76 L.Ed.2d 81 (1983); De Sanchez v. Banco Central de Nicaragua, 770 F.2d 1385, 1389-90 (5th Cir.1985); MOL, Inc. v. Peoples Republic of Bangladesh, 736 F.2d 1326, 1328 (9th Cir.), cert. denied, 469 U.S. 1037, 105 S.Ct. 513, 83 L.Ed.2d 403 (1984).

The parties to the instant lawsuit are plaintiff-appellant Practical Concepts, Inc. (PCI), a private enterprise organized and operating in the United States, and defendant-appellee Republic of Bolivia (Bolivia). PCI alleged Bolivia's breach of a technical assistance and consulting services contract. Signed in August 1979, the contract-in-suit called for PCI's services in designing and implementing a comprehensive program for development of Bolivia's rural areas. The contract was to continue for a period of three years; while PCI and Bolivia were the sole contracting parties, funding for the venture came from the United States Agency for International Development (AID). In May 1981, Bolivia received notice that AID would no longer fund the contract. That same month, Bolivia terminated the agreement.

On December 30, 1982, PCI filed a complaint in the district court charging Bolivia with unlawful termination of the contract. Bolivia, by telegram addressed to PCI's counsel, acknowledged receipt of process, but did not otherwise respond to PCI's complaint. On July 28, 1983, the district court entered a default judgment against Bolivia.

Over a year later, PCI commenced execution proceedings. Bolivia then moved, under Rule 60(b) of the Federal Rules of Civil Procedure, for relief from the judgment. Among several asserted grounds for relief, Bolivia claimed immunity, as a foreign sovereign, from suit in any court in the United States. The district court granted the motion, vacated the default judgment, and dismissed the action on the ground that the governing FSIA provisions, 28 U.S.C. Secs. 1604-1605, shielded Bolivia from PCI's lawsuit. Practical Concepts, Inc. v. Republic of Bolivia, 613 F.Supp. 863, recon. denied, 615 F.Supp. 92 (D.D.C.1985). Having ruled dispositively on the threshold jurisdictional issue, the district court did not reach Bolivia's alternate pleas, including, inter alia, the argument that the court should abstain from entertaining PCI's complaint in deference to the arbitration clause in the contract. 613 F.Supp. at 865 n. 1.

On appeal, PCI initially contends that the default judgment should have remained closed. We find this contention insubstantial and hold that the district court, in view of Rule 60(b)(4) and (6), properly allowed full consideration of Bolivia's jurisdictional objection. More prominently, PCI maintains that this case fits within the "commercial activity" exception to the rule according foreign sovereigns immunity from suit, 28 U.S.C. Sec. 1605(a)(2) (set out infra pp. 1548-1549). We conclude that the district court improperly rejected application of that exception. Nonetheless, we do not instruct immediate reinstatement of the default judgment. Instead, we remand the case so that the district judge may consider Bolivia's alternate pleas, particularly Bolivia's defense based on the arbitration clause of the contract between PCI and Bolivia. 2

I.

PCI urges two reasons why the district court should not have entertained Bolivia's

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motion for relief from the judgment entered July 28, 1983 upon Bolivia's default. First, in a telegram addressed to PCI's counsel, Bolivia acknowledged receipt of the complaint and notice of suit; PCI regards the telegram as "the functional equivalent of an appearance." Brief of Appellant at 9. Second, PCI asserts that Bolivia should not be allowed to mount a collateral attack on the judgment because Bolivia deliberately bypassed "numerous opportunities to challenge the ... facts upon which the court's jurisdiction depended." Id. Neither reason supplies cause for ruling the 60(b) motion out of order.

The telegram PCI features was dispatched from Bolivia on February 24, 1983 by a Bolivian engineer, subsecretary at Bolivia's Ministry of Planning and Coordination. The addressee, who received the telegram the next day, is the attorney whose signature appears on PCI's complaint. 3 The message, running less than five lines, acknowledges receipt of pleadings and refers to the governance of the laws of Bolivia, as stated in "General Provisions" appended to the contract between Bolivia and PCI. 4

The telegram, we note, does not appear to have been composed or translated by individuals conversant with the dissimilar legal systems of Bolivia and the United States. Overlooking the perils of converting the legal terms and concepts of one system into those of another, 5 PCI insists that the telegram not only shows "Bolivia's consent to the court's jurisdiction to decide the jurisdictional issues," Brief of Appellant at 22, it even "request[s] a trial." Id. at 9, 17, 21; Reply Brief of Appellant at 2, 3.

Nothing in or between the lines of the telegram sustains PCI's imaginative rendition. The district judge properly comprehended the telegram as simply an "acknowledgement of receipt of service," not, as PCI pretended, "a general appearance." Practical Concepts, Inc., 613 F.Supp. at 867 n. 6. 6

Page 1547

Turning to PCI's second position, that Bolivia cannot now challenge the district court's jurisdiction because it passed up "numerous opportunities" to do so, we again uphold the ruling of the district judge. A defendant who knows of an action but believes the court lacks jurisdiction over his person or over the subject matter generally has an election. He may appear, raise the jurisdictional objection, and ultimately pursue it on direct appeal. If he so elects, he may not renew the jurisdictional objection in a collateral attack. See, e.g., Durfee v. Duke, 375 U.S. 106, 84 S.Ct. 242, 11 L.Ed.2d 186 (1963); Baldwin v. Iowa State Traveling Men's Ass'n, 283 U.S. 522, 51 S.Ct. 517, 75 L.Ed. 1244 (1931). Should he proceed this way, he may defend on the merits in the district court without losing his right to press on direct review the jurisdictional objection, along with objections on the merits. See, e.g., Baldwin, 283 U.S. at 525, 51 S.Ct. at 518; Hassler, Inc. v. Shaw, 271 U.S. 195, 200, 46 S.Ct. 479, 480, 70 L.Ed. 900 (1926); Vilter Mfg. Co. v. Rolaff, 110 F.2d 491, 495 (8th Cir.1940).

Alternatively, the defendant may refrain from appearing, thereby exposing himself to the risk of a default judgment. When enforcement of the default judgment is attempted, however, he may assert his jurisdictional objection. If he prevails on the objection, the default judgment will be vacated. If he loses on the jurisdictional issue, on the other hand, his day in court is normally over; as a consequence of deferring the jurisdictional challenge, he ordinarily forfeits his right to defend on the merits. As set out in RESTATEMENT (SECOND) OF JUDGMENTS Sec. 65 comment b (1982): "When [a] person [named as a defendant] kn[o]w[s] about the action but perceive[s] that the court lack[s] territorial or subject matter jurisdiction, he is given a right to ignore the proceeding at his own risk but to suffer no detriment if his assessment proves correct." See also Insurance Corp. of Ireland v. Compagnie des Bauxites de Guinee, 456 U.S. 694, 706, 102 S.Ct. 2099, 2106, 72 L.Ed.2d 492 (1982) ("A defendant is always free to ignore the judicial proceedings, risk a default judgment, and then challenge that judgment on jurisdictional grounds in a collateral proceeding.").

In sum, PCI has recited inapposite precedent, 7 but not a single decision that casts genuine doubt on the district court's determination: Bolivia could "wait [ ] until

Page 1548

after execution of the judgment was under way to raise its jurisdictional point," so long as it bore "the risks associated with that tactic." Practical Concepts, Inc., 613 F.Supp. at 866. Bolivia undertook the risks--"the inconvenience of having [its] assets subjected to judicial process" following the entry of the default judgment, and the...

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91 practice notes
  • Ministry of Defense and Support v. Cubic Defense, No. 99-56498.
    • United States
    • United States Courts of Appeals. United States Court of Appeals (9th Circuit)
    • 7 Octubre 2004
    ...Bauxites de Guinee, 456 U.S. 694, 706, 102 S.Ct. 2099, 72 L.Ed.2d 492 (1982); see also Practical Concepts, Inc. v. Republic of Bolivia, 811 F.2d 1543, 1547 (D.C.Cir.1987). It is therefore clear that MOD could have mounted a collateral attack on the Elahi default judgment in the proceedings ......
  • Price v. Socialist People's Libyan Arab Jamahiriya, No. 00-7244.
    • United States
    • United States Courts of Appeals. United States Court of Appeals (District of Columbia)
    • 28 Junio 2002
    ...personal jurisdiction will be established under the FSIA. See 28 U.S.C. § 1330(b); Practical Concepts, Inc. v. Republic of Bolivia, 811 F.2d 1543, 1548 n. 11 (D.C.Cir.1987) (noting that under the FSIA, "subject matter jurisdiction plus service of process equals personal jurisdiction"). Howe......
  • Rush-Presbyterian-St. Luke's Medical Center v. Hellenic Republic, RUSH-PRESBYTERIAN-ST
    • United States
    • United States Courts of Appeals. United States Court of Appeals (7th Circuit)
    • 14 Junio 1989
    ...courts 'a great deal of latitude in determining what is a "commercial activity" ' "); Practical Concepts, Inc. v. Republic of Bolivia, 811 F.2d 1543, 1549 (D.C.Cir.1987); Transamerica S.S. Corp. v. Somali Democratic Republic, 767 F.2d 998, 1002 (D.C.Cir.1985); Velidor v. L/P/G Benghazi, 653......
  • Owens v. Republic Sudan, No. 14-5105
    • United States
    • United States Courts of Appeals. United States Court of Appeals (District of Columbia)
    • 28 Julio 2017
    ...would be forfeited by reason of its having defaulted in the district court. See Practical Concepts, Inc. v. Republic of Bolivia , 811 F.2d 1543, 1547 (D.C. Cir. 1987). In this case, however, due to the size of the judgments against Sudan, their possible effects upon international relations,......
  • Request a trial to view additional results
91 cases
  • Ministry of Defense and Support v. Cubic Defense, No. 99-56498.
    • United States
    • United States Courts of Appeals. United States Court of Appeals (9th Circuit)
    • 7 Octubre 2004
    ...Bauxites de Guinee, 456 U.S. 694, 706, 102 S.Ct. 2099, 72 L.Ed.2d 492 (1982); see also Practical Concepts, Inc. v. Republic of Bolivia, 811 F.2d 1543, 1547 (D.C.Cir.1987). It is therefore clear that MOD could have mounted a collateral attack on the Elahi default judgment in the proceedings ......
  • Price v. Socialist People's Libyan Arab Jamahiriya, No. 00-7244.
    • United States
    • United States Courts of Appeals. United States Court of Appeals (District of Columbia)
    • 28 Junio 2002
    ...personal jurisdiction will be established under the FSIA. See 28 U.S.C. § 1330(b); Practical Concepts, Inc. v. Republic of Bolivia, 811 F.2d 1543, 1548 n. 11 (D.C.Cir.1987) (noting that under the FSIA, "subject matter jurisdiction plus service of process equals personal jurisdiction"). Howe......
  • Rush-Presbyterian-St. Luke's Medical Center v. Hellenic Republic, RUSH-PRESBYTERIAN-ST
    • United States
    • United States Courts of Appeals. United States Court of Appeals (7th Circuit)
    • 14 Junio 1989
    ...courts 'a great deal of latitude in determining what is a "commercial activity" ' "); Practical Concepts, Inc. v. Republic of Bolivia, 811 F.2d 1543, 1549 (D.C.Cir.1987); Transamerica S.S. Corp. v. Somali Democratic Republic, 767 F.2d 998, 1002 (D.C.Cir.1985); Velidor v. L/P/G Benghazi, 653......
  • Owens v. Republic Sudan, No. 14-5105
    • United States
    • United States Courts of Appeals. United States Court of Appeals (District of Columbia)
    • 28 Julio 2017
    ...would be forfeited by reason of its having defaulted in the district court. See Practical Concepts, Inc. v. Republic of Bolivia , 811 F.2d 1543, 1547 (D.C. Cir. 1987). In this case, however, due to the size of the judgments against Sudan, their possible effects upon international relations,......
  • Request a trial to view additional results

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