De Sanchez v. Banco Central de Nicaragua, Civ. A. No. 79-4281.

• Decision Date: 20 April 1981
• Docket Number: Civ. A. No. 79-4281.
• Citation: 515 F. Supp. 900
• Parties: Josefina Najarro DE SANCHEZ v. BANCO CENTRAL DE NICARAGUA and Citizens and Southern International Bank.
• Court: U.S. District Court — Eastern District of Louisiana

515 F. Supp. 900

Josefina Najarro DE SANCHEZ v. BANCO CENTRAL DE NICARAGUA and Citizens and Southern International Bank.

Civ. A. No. 79-4281.

United States District Court, E. D. Louisiana.

April 20, 1981.

John G. DeRussy, New Orleans, La., for plaintiff.

William R. Pitts, Joe B. Norman, Liskow & Lewis, New Orleans, La., for defendant Banco Central de Nicaragua.

Warren M. Schultz, Jr., Jones, Walker, Waechter, Poitevent, Carrere & Denegre, New Orleans, La., for defendant Citizens and Southern International Bank.

MEMORANDUM AND ORDER

SEAR, District Judge.

This case involves application of the Foreign Sovereign Immunities Act of 1976 ("FSIA" or "Immunities Act"), 28 U.S.C. §§ 1330, 1391, 1441, 1602-1611, against the backdrop of the Nicaraguan revolution which ousted the regime of Anastasio Somoza Debayle in 1979. Josefina Najarro de Sanchez, a Nicaraguan citizen who left her country during the civil war and now resides in Miami, Florida, brings this suit against Banco Central de Nicaragua ("Banco Central"), the central bank of Nicaragua, and Citizens and Southern International Bank ("C & S"), an American commercial bank located in New Orleans, Louisiana, to recover $150,000 on a check drawn in her favor by Banco Central on its account with C & S. Banco Central moves to dismiss, contending that the suit is barred under the FSIA and that I lack personal jurisdiction over it. For the reasons discussed below, I find that there is jurisdiction over this suit and deny Banco Central's motion to dismiss.

In 1971 Sanchez held Certificate of Deposit No. 68-78 (ME) with Banco Nacional de Nicaragua ("Banco Nacional"), a Nicaraguan commercial bank, in the amount of $150,000.¹ Although it was not scheduled to mature until 1982, Sanchez went to Banco Nacional on July 12, 1979 seeking to redeem the certificate immediately. Because Banco Nacional lacked sufficient American dollars on hand to honor the certificate, it asked Banco Central, with which it held an account, for the dollars. Banco Central complied with the request by debiting Banco Nacional's account for an equivalent amount in Cordobas, the Nicaraguan national currency, and issuing Check No. 20110 on its C & S account to Sanchez for $150,000. Soon thereafter, Sanchez left Nicaragua for the United States.

Upon her arrival at Miami, Sanchez attempted to cash the check at a C & S branch in that city, but was told she should come to the New Orleans office. On July 17, 1979 Sanchez visited C & S in New Orleans and presented her check. Officials of the bank initially refused payment on the ground that Banco Central's account had been closed; they later advised Sanchez that although the account was still open, there were insufficient funds to cover the check. When Sanchez presented the check again a few days later, it was returned to her marked "Refer to maker." C & S told Sanchez that because of the turmoil in Nicaragua, it had suspended all payments from the Banco Central account as provided by the Uniform Commercial Code, and that it had been instructed by Dr. Arturo Cruz, the president of Banco Central who assumed office with the installation of the revolutionary junta in mid-July, to stop payments from the account. See Letter from Kenneth E. Moore, President of Citizens and Southern International Bank, to Josefina Najarro de Sanchez, July 20, 1979. Banco Central continues to refuse payment on the check.

Sanchez asserts four causes of action against Banco Central: breach of the duty to honor the check; breach of contract; misrepresentation; and conversion. Banco Central responds that it is immune to suit on any of these claims and that the action must be dismissed as to it.²

The FSIA was enacted to bring uniformity to the disposition of legal claims against foreign governments and to make the judiciary, rather than the Department of State, the predominant arbiter of such claims. Before Congress approved the Immunities Act in 1976, courts presiding over suits in which a foreign state invoked sovereign immunity would look to the State Department for guidance. Ostensibly, the Department would follow the "restrictive" approach to foreign sovereign as set out in the "Tate Letter" of 1952, 26 Dept.State Bull. 984. Under that approach, foreign states could not be sued for conduct that was "public," "sovereign," or "governmental," (jure imperii), but could be held liable for damages arising from their "private" or "commercial" activities (jure gestionis). Once the State Department indicated to which category particular conduct belonged, the courts would typically accept the executive determination of immunity as conclusive and dispose of the suits accordingly. See, e. g., Republic of Mexico v. Hoffman, 324 U.S. 30, 65 S.Ct. 530, 89 L.Ed. 729 (1945); Ex parte Peru, 318 U.S. 578, 63 S.Ct. 793, 87 L.Ed. 1014 (1943); Spacil v. Crowl, 489 F.2d 614 (5th Cir. 1974); Southeastern Leasing Corp. v. Stern Dragger Belogorsk etc., 493 F.2d 1223 (1st Cir. 1974); Isbrandtsen Tankers, Inc. v. President of India, 446 F.2d 1198 (2d Cir.), cert. denied, 404 U.S. 985, 92 S.Ct. 452, 30 L.Ed.2d 369 (1971). See also Victory Transport, Inc. v. Comisaria General de Abastecimientos y Transportes, 336 F.2d 354, 360 (2d Cir. 1964), cert. denied, 381 U.S. 934, 85 S.Ct. 1763, 14 L.Ed.2d 698 (1965). Because the State Department is subject to political and diplomatic pressures, however, it often drifted from a strict application of the principle of "restrictive" immunity and gave courts inconsistent advice. Through the FSIA, Congress intended to eliminate the Department's influence on the scope of foreign sovereign immunity, and to regularize the standards used by the judiciary in determining that scope. See generally Report of House Judiciary Committee No. 94-1487, reprinted in 1976 U.S.Code Cong. & Admin.News 6604 (hereinafter referred to as "House Report" with citations to reprint pages).

The statute sets out as a general principle the immunity of foreign states and their agencies or instrumentalities³ to suit in American courts, and then provides specific exceptions to that general immunity. 28 U.S.C. § 1604. In the non-admiralty context, there are five exceptions, three of which are applicable to the facts of this case.⁴ Section 1605(a), 28 U.S.C., states in part:

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

. . . . .

(2) in which the action is based upon a commercial activity carried on in the United States by the foreign state; or upon an act performed in the United States in connection with a commercial activity of the foreign state elsewhere; or upon an act outside the territory of the United States in connection with a commercial activity of the foreign state elsewhere and that act causes a direct effect in the United States;

(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;

. . . . .

(5) not otherwise encompassed in paragraph (2) above, in which money damages are sought against a foreign state for personal injury or death, or damage to or loss of property, occurring in the United States and caused by the tortious act or omission of that foreign state or of any official or employee of that foreign state while acting within the scope of his office or employment; except this paragraph shall not apply to —

(A) any claim based upon the exercise or performance or the failure to exercise or perform a discretionary function regardless of whether the discretion be abused, or

(B) any claim arising out of malicious prosecution, abuse of process, libel, slander, misrepresentation, deceit, or interference with contract rights.

Whether Sanchez's claims fall within the exception created by § 1605(a)(2) of the FSIA depends preliminarily on whether Banco Central's conduct giving rise to those claims can be characterized as "commercial activity." The Immunities Act defines "commercial activity" as

either a regular course of commercial conduct or a particular commercial transaction or act. The commercial character of an activity shall be determined by reference to the nature of the course of conduct or particular transaction or act, rather than by reference to its purpose.

28 U.S.C. § 1603(d). The legislative history to the FSIA sheds further light on the meaning of the phrase:

Paragraph (c) of section 1603 defines the term "commercial activity" as including a broad spectrum of endeavor, from an individual commercial transaction or act to a regular course of commercial conduct. A "regular course of commercial conduct" includes the carrying on of a commercial enterprise such as a mineral extraction company, an airline or a state trading corporation. Certainly, if an activity is customarily carried on for profit, its commercial nature could readily be assumed. At the other end of the spectrum, a single contract, if of the same character as a contract which might be made by a private person, could constitute a "particular transaction or act."

As the definition indicates, the fact that goods or services to be procured through a contract are to be used for a public purpose is irrelevant; it is the essentially commercial nature of an activity or transaction that is critical. Thus, a contract by a foreign government to buy provisions or equipment for its armed forces or to construct a government building constitutes a commercial activity. The same would be true of a contract to make repairs on an embassy building. Such contracts should be considered to be commercial contracts, even if

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