Practical Concepts, Inc. v. Republic of Bolivia

Decision Date11 July 1985
Docket NumberCiv. A. No. 82-3706.
Citation613 F. Supp. 863
PartiesPRACTICAL CONCEPTS, INC., Plaintiff, v. The REPUBLIC OF BOLIVIA, Defendant.
CourtU.S. District Court — District of Columbia

Neil I. Levy, Melrod, Redman & Gartlan, Washington, D.C., for plaintiff.

William R. Joyce, Jr., Thomas T.F. Huang, Vance, Joyce, Carbaugh & Huang, Washington, D.C., for defendant.

L. Marc Zell, Topf, Zell, Kolodny & Goldstein, Bethesda, Md., for garnishee.



On July 28, 1983, this Court entered a default judgment in favor of the plaintiff, Practical Concepts, Inc. ("PCI"), against the Republic of Bolivia ("Bolivia") in the amount of $1,695,601.00. After a statutorily prescribed waiting period, PCI began proceedings to execute the judgment and obtained attachments directed to two local banks against accounts titled in the name of the Bolivian Embassy. Shortly thereafter, Bolivia made its first appearance and filed a motion to vacate the default judgment, arguing it is void because the Court lacked jurisdiction to render it. In addition to Bolivia's motion, there are presently before the Court PCI's motions for judgment of condemnation against the garnishee National Bank of Washington, and for discovery sanctions against Corporacion Minera de Bolivia, an intervenor claiming ownership of one of the garnished accounts.

For the reasons set forth below, the Court vacates the default judgment and dismisses the suit for lack of personal and subject matter jurisdiction. Consequently, the writs of attachment are quashed, and the motion for discovery sanctions denied.


This litigation arises from Bolivia's alleged breach of a contract for the provision of consulting services by PCI. The contract was executed in August 1979 by the Bolivian Ministry of Planning and Coordination ("MPC"), but was mainly funded by a $2.5 million grant from the United States Agency for International Development ("AID"). The purpose of both the AID grant and the PCI contract was to develop a comprehensive plan for Bolivian rural development.

PCI's services under the contract were to be rendered by two distinct teams of advisors. PCI's U.S.-based staff retained overall control and were responsible for broadscale research, planning and supervision of the project. Other aspects of the project, such as direct technical assistance and data gathering, were to be performed by personnel on location in Bolivia for periods of assignment ranging from one to three years (referred to in the contract and hereinafter as the "field team" or "expatriate staff").

In addition to their consulting fee and fixed costs, the contract entitled PCI to reimbursement of costs directly incurred in the course of performance. Reimbursement was to be made through the submission of monthly vouchers to MPC. Once verified and approved, the vouchers were transmitted to AID, which authorized payment from the U.S. Treasury directly to PCI in Washington, D.C. The contract provided that "financing of these services and other costs will be subject to the availability of funds to USAID for this purpose" and "that USAID may, from time to time, exercise certain approval rights" including "the right to approve the terms of this Contract, the Contractor, and any or all ... specifications ... related to this Contract and the Project of which it is part." Articles III, IV C., Exhibit B to Bolivia's Memorandum in Support of Motion for Relief From Judgment by Default and for Dismissal.

Performance of the contract proceeded smoothly until May 1981, when AID informed MPC that it would discontinue funding of the contract, apparently because PCI had come under investigation by AID's Inspector General and by the Justice Department. On May 21, 1981, MPC advised PCI of the termination of the contract.

PCI's complaint, filed December 30, 1982, alleged that Bolivia had breached the contract by failing to comply with its termination provisions. Specifically, PCI claimed that Bolivia gave inadequate notice of termination, failed to honor a properly submitted "termination claim" voucher, and wrongfully revoked its earlier approval of two PCI vouchers which had not yet been paid by the U.S. Treasury.

Although Bolivia acknowledged service of the complaint, it took no action in defense of the suit. On July 28, 1983, in strict compliance with the provisions of the Foreign Sovereign Immunities Act ("FSIA" or "the Act") governing the award of default judgments against foreign states, 28 U.S.C. § 1608(c) (1982), the Court entered its judgment. Bolivia did not appeal. On October 12, 1984, after determining that a reasonable period of time had elapsed following the entry of judgment, 28 U.S.C. § 1610(c) (1982), the Court issued attachments to the National Bank of Washington and Riggs National Bank against Bolivian embassy accounts. The embassy filed letters of protest four days later, and finally, on November 14, 1984, counsel appeared on behalf of Bolivia.


The Court turns its attention to Bolivia's motion under Federal Rule of Civil Procedure 60(b) to vacate the default judgment. As grounds for that relief, Bolivia asserts that the judgment is void because, by virtue of Bolivia's sovereign immunity, the Court lacked both subject matter and in personam jurisdiction.1 PCI makes three colorable arguments in response. First, it maintains that the motion is untimely. Second, PCI argues that lack of jurisdiction is not sufficient grounds to set aside the judgment under Rule 60. Finally, PCI argues that the Court did in fact have jurisdiction to render the judgment. The Court proceeds with an analysis of these three arguments.


Rule 60(b) provides in relevant part:

On motion and upon such terms as are just, the court may relieve a party of his legal representative from a final judgment, order, or proceeding for the following reasons: (1) mistake, inadvertence, surprise, or excusable neglect; (2) newly discovered evidence which by due diligence could not have been discovered in time to move for a new trial under Rule 59(b); (3) fraud (whether heretofore denominated intrinsic or extrinsic), misrepresentation, or other misconduct of an adverse party; (4) the judgment is void; (5) the judgment has been satisfied, released or discharged, or a prior judgment upon which it is based has been reversed or otherwise vacated, or it is no longer equitable that the judgment should have prospective application; or (6) any other reason justifying relief from the operation of the judgment. The motion shall be made within a reasonable time, and for reasons (1), (2) and (3) not more than one year after the judgment, order, or proceeding was entered or taken.

A threshold issue raised by the briefs is whether Bolivia's motion is time-barred by the last quoted sentence of the rule. The motion was filed on December 4, 1984, more than one year after entry of the default judgment, and so any reliance on clauses (1), (2), and (3) of the rule would plainly be foreclosed. Bolivia's jurisdictional attack, however, falls within clause (4) of the rule. The issue is thus reduced to whether the "reasonable time" limitation in the first clause of the sentence operates to bar the motion.

PCI urges the Court to view the issue in light of the special requirements of the FSIA which assure that a foreign government is apprised of a default against it and given a reasonable opportunity to seek relief prior to any attachment being issued.2 Bolivia's lengthy delay in making any sort of post-judgment submission to the Court, says PCI, cannot, especially in light of the failure to take advantage of these protections, be regarded as reasonable.

It is well established, however, that, despite what a literal reading of the rule would suggest, the "reasonable time" limitation does not apply to a motion under clause (4) attacking a judgment as void. Pacurar v. Hernly, 611 F.2d 179, 181 (7th Cir.1979); C. Wright & A. Miller, Federal Practice and Procedure § 2862 (1973) (hereinafter "Wright & Miller").3 Our Circuit Court of Appeals has held that "a void judgment, ... cannot acquire validity because of laches on the part of him who applies for relief from it," Austin v. Smith, 312 F.2d 337, 343 (D.C.Cir.1962). It would be anomolous if the FSIA, with its special solicitude for foreign states, were cited as justification for applying a more stringent rule here.

Parenthetically, the Court notes that it finds nothing at all unreasonable in Bolivia's strategy of waiting until after execution of the judgment was under way to raise its jurisdictional point. As explained in the next section, a defendant who questions a court's jurisdiction over him is free to ignore the suit and attack the default judgment in a subsequent proceeding, provided, of course, that he is willing to undertake the risks associated with that tactic.4 Bolivia made such a choice here, and even were it not for the rule just cited, the Court would be unable to find that choice unreasonable.


A judgment is not void merely because it is erroneous. Wright & Miller, § 2862. PCI devotes a considerable portion of its brief to arguing that, even assuming the Court lacked jurisdiction to enter judgment against Bolivia, that does not amount to the sort of defect that would render the judgment void. Rather, the judgment is, at most, merely erroneous.

The traditional rule is that a judgment rendered in excess of the court's jurisdiction is void and a legal nullity. Restatement of Judgments §§ 5-7 (1942). PCI cites younger authorities that seem to question that rule. One of their cases holds that

In the interest of finality, the concept of void judgments is narrowly construed. While absence of subject matter jurisdiction may make a judgment void, such total want of jurisdiction must be distinguished from an error in the exercise of jurisdiction. A court has the power to determine its own jurisdiction, and an error in that

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