Proctor & Gamble Cellulose Co. v. Viskoza-Loznica
| Citation | 33 F.Supp.2d 644 |
| Decision Date | 27 October 1998 |
| Docket Number | No. 95-2291-TUBRE.,95-2291-TUBRE. |
| Court | U.S. District Court — Western District of Tennessee |
| Parties | THE PROCTOR & GAMBLE CELLULOSE COMPANY, Plaintiff, v. VISKOZA-LOZNICA, Progres, Progresviskoza, Investbanka Beograd, and Beogradska Banka Dd, New York Agency, Defendants. |
Maurice Wexler, Baker, Donelson, Bearman & Caldwell, Memphis, TN, John Vanderstar, Maneesha Mithal, Covington & Burling, Washington, DC, for Proctor & Gamble Cellulose Company, plaintiff.
Joseph M. Rogers, Hale Fogleman & Rogers, West Memphis, AR, Deyan, Ranko, Brashich, Law Office of Deyan Ranko Brashich, New York City, for Viskoza-Loznica, Progres, Progres-Viskoza, Investbanka Beograd, defendants.
ORDER ON DEFENDANTS' MOTIONS TO DISMISS AND MOTION FOR SUMMARY JUDGMENT, AND PLAINTIFF'S MOTION TO STRIKE
Plaintiff Procter & Gamble Cellulose Company brought this action against defendants Viskoza-Loznica, Progres, and Progres-Viskoza (collectively "the Progres defendants") alleging breach of contract in the failure to pay for delivered goods. Procter & Gamble's complaint also named Investbanka Beograd and Beogradska Banka DD, New York Agency as defendants alleging a separate breach of contract in their refusal to honor several letters of credit. On April 24, 1997, Beogradska Banka DD, New York Agency, was dismissed by order of this court.
The Progres defendants and Investbanka have each filed a motion to dismiss alleging lack of subject matter and personal jurisdiction, insufficient process and insufficient service of process. Investbanka has also filed a motion for summary judgment. Plaintiff has filed a motion to strike motions filed by the defendants. These motions are presently before the court.
Procter & Gamble Cellulose Company is a Delaware corporation with its principal place of business in Memphis, Tennessee. At all times relevant to this suit, Procter & Gamble was a manufacturer of wood pulp.
Procter & Gamble had a thirty year business relationship with the Progres defendants, all of which are located in what is now the Federal Republic of Yugoslavia, which consists of Serbia and Montenegro (hereinafter Yugoslavia or the Yugoslav state). During that time, Procter & Gamble negotiated many sales of wood pulp to the Progres defendants, which Procter & Gamble exported to Yugoslavia. Procter & Gamble alleges that Progres and Progres-Viskoza were government-owned purchasing agents which were responsible for placing wood pulp orders with Procter & Gamble and remitting payment. Procter & Gamble further alleges that Progres and Progres-Viskoza paid for the wood pulp by obtaining letters of credit in favor of Procter & Gamble, payable in Memphis, Tennessee. According to Procter & Gamble, Viskoza-Loznica was the ultimate user of the wood pulp.
Between April 20, 1991, and May 18, 1992, Procter & Gamble exported sixteen shipments of wood pulp to Progres-Viskoza at a price of $3,859,465. Of this amount, $1,156,966.70 was allegedly to be paid by five separate letters of credit issued by Investbanka and confirmed by Beogradska Banka. To date, Procter & Gamble has not been paid any portion of the $3,859,465.
The primary reason for the interruption in the parties' business relationship was the United States government's reaction to various aggressions occurring within Yugoslavia. On May 30, 1992, President Clinton issued Executive Order 12808 which froze assets held in the name of the Yugoslav state. Pursuant to this Executive Order, and the subsequent Executive Order 12810, in July of 1992 the Office of Foreign Assets Control ("OFAC") established a list of entities organized or located in Yugoslavia that it presumed were agencies or instrumentalities of Yugoslavia. Investbanka, Progres, and Viskoza-Loznica (but not Progres-Viskoza) were on the OFAC list. As a result, United States citizens were prohibited from transacting business with those defendants, unless the transactions were licensed by OFAC. In addition, any assets of those defendants within the jurisdiction of the United States were frozen. The parties dispute what effect this policy had on the defendants' ability to make payments to Procter & Gamble.
Procter & Gamble avers that this court has subject matter jurisdiction over all the defendants under both 28 U.S.C. § 1330 (Foreign Sovereign Immunities Act "FSIA") and 28 U.S.C. § 1332 (diversity).1 The requirements for personal jurisdiction, process, and service of process are somewhat more stringent if jurisdiction is based on diversity.2
All the defendants concede that this court has subject matter jurisdiction based on diversity. Both Investbanka and the Progres defendants have brought motions under Rule 12(b)(1) of the Federal Rules of Civil Procedure, however, challenging Procter & Gamble's assertion that this court has subject matter jurisdiction under the FSIA. 28 U.S.C. § 1330 provides:
(a) The district courts shall have original jurisdiction without regard to amount in controversy of any nonjury civil action against a foreign state as defined in section 1603(a) of this title as to any claim for relief in personam with respect to which the foreign state is not entitled to immunity either under sections 1605-1607 of this title or under any applicable international agreement.
A "determination of whether a party is subject to the court's jurisdiction under 28 U.S.C. § 1330 should be based upon a party's status at the time the act complained of occurred." Gould, Inc. v. Pechiney Ugine Kuhlmann, 853 F.2d 445, 450 (6th Cir.1988). All of the defendants contend they were not foreign states as defined in 28 U.S.C. § 1603(a) at the time of the acts complained of, thereby precluding jurisdiction based on 28 U.S.C. § 1330.
28 U.S.C. § 1603(a), which defines "foreign state" for purposes of 28 U.S.C. § 1330, provides:
(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 of 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.
The parties dispute whether the defendants were agencies or instrumentalities of a foreign state, as described in 28 U.S.C. § 1603(b), during the relevant period.
When a defendant raises lack of subject matter jurisdiction as a defense pursuant to Rule 12(b)(1), the plaintiff bears the burden of establishing the existence of the court's jurisdiction. Rogers v. Stratton Indus., Inc., 798 F.2d 913, 915 (6th Cir. 1986). Furthermore, where defendants factually attack whether a court has subject matter jurisdiction as averred in a complaint, "no presumptive truthfulness applies to the [plaintiff's] factual allegations." Ohio Nat'l Life Ins. Co. v. United States, 922 F.2d 320, 325 (6th Cir.1990).3 Instead, factual disputes should be decided by the court based on the evidence before it. Id.
Should facts critical to jurisdiction be in dispute, as ofttimes they are, the court must make appropriate inquiry, and must satisfy itself on authority to entertain the case. The court has considerable leeway in devising procedures in that direction, and may resort to written or live evidence submitted in connection with the motion. The nonmoving party must, however, be afforded an ample opportunity to secure and present evidence relevant to the existence of jurisdiction.
Rogers, 798 F.2d at 918 (citation omitted). In the case at bar, there are several mixed questions of law and fact that this court must resolve. The parties have provided several briefs with supporting affidavits on these issues, leading the court to find the parties have been "afforded an ample opportunity to secure and present evidence relevant to the existence of jurisdiction." Accordingly, the court finds it unnecessary to hold an evidentiary hearing. See Ohio Nat'l Life, 922 F.2d at 327 ().
Procter & Gamble places heavy reliance on Progres, Viskoza-Loznica, and Investbanka's being placed on the list of "blocked entities" issued in July of 1992 by OFAC for purposes of alerting U.S. citizens to Yugoslav entities that they may not transact business with. Procter & Gamble asserts that the defendants' presence on this list conclusively establishes that they are agencies or instrumentalities of the government of Yugoslavia. This court disagrees.
The OFAC list is a partial list of entities owned or presumed to be controlled by the Yugoslav state. One can infer from the list that OFAC does not make a determination whether each entity on its list is actually owned or controlled by the state. Instead, OFAC openly states on the list that it presumes that all entities located or organized within Yugoslavia are controlled by the state.4
OFAC presumes companies located or organized in Yugoslavia are agencies or instrumentalities of the state because of its understanding of the economic structure of Yugoslavia. OFAC has concluded that the current economic system in Yugoslavia, in particular the concept of social-ownership, provides the state with a residual claim on the majority of all Yugoslav entities' capital. Milena Ship Management Co. v. Newcomb, 804 F.Supp. 859, 863...
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