Security Pacific Nat. Bank v. Derderian

• Decision Date: 21 March 1989
• Docket Number: No. 87-6025,87-6025
• Citation: 872 F.2d 281
• Parties: SECURITY PACIFIC NATIONAL BANK, a National Banking Association, and American International Group, a Delaware Corporation, Plaintiffs-Appellees, v. Robert DERDERIAN, aka Bob Derian, aka Bedros A. Derderian, et al., Defendants-Appellants, and Miraslav Jocovic, et al., Defendants.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 281

872 F.2d 281

SECURITY PACIFIC NATIONAL BANK, a National Banking Association, and American International Group, a Delaware Corporation, Plaintiffs-Appellees, v. Robert DERDERIAN, aka Bob Derian, aka Bedros A. Derderian et al., Defendants-Appellants and Miraslav Jocovic, et al., Defendants.

No. 87-6025.

United States Court of Appeals Ninth Circuit.

Argued and Submitted Jan. 11, 1989.

Decided March 21, 1989.

Irvine P. Dungan, Gregg A. Stanford, Irvine P. Dungan, Inc., Sacramento, Cal., for defendants-appellants.

Robert Louis Fisher, Barton, Klugman & Oetting, Los Angeles, Cal., for plaintiffs-appellees.

Appeal from the United States District Court for the Central District of California.

Before ALARCON, BRUNETTI and THOMPSON, Circuit Judges.

ALARCON, Circuit Judge:

Security Pacific National Bank and American International Group (Security Pacific) filed this action against Robert Derderian and others in Los Angeles Superior Court to recover for the illegal conversion and forgery of an $852,000 check. Security Pacific alleged that one of the defendants, Banco BCH Sociedad Nacional (Banco BCH), accepted for deposit in its Tijuana branch gold coins which derived from proceeds of the stolen check.

Banco BCH, a bank owned by the government of Mexico, removed the action to federal district court pursuant to 28 U.S.C. Sec. 1441(d) and moved to dismiss on the ground of foreign sovereign immunity. 28 U.S.C. Secs. 1330, 1602 et seq. Prior to a decision on the motion to dismiss, Security Pacific and Banco BCH entered into a stipulation, approved by the district court, which dismissed Banco BCH from the action.

Without determining its jurisdiction over the pending claims, the district court permitted the matter to proceed to trial against the remaining defendants. The district court ordered judgment for Security Pacific, awarding $750,000 in punitive damages and treble damages of $2,550,000. Derderian appeals, contending the judgment is erroneous because the treble damage award does not reflect the amounts previously recovered by Security Pacific and the punitive damage award is excessive.

We do not reach the issue of damages. The judgment must be reversed and the matter remanded to the Los Angeles Superior Court because the district court lacked jurisdiction.

Under the Foreign Sovereign Immunities Act (FSIA) the presence of an immune foreign sovereign defendant deprives a district court of subject matter and personal jurisdiction. 28 U.S.C. Secs. 1330, 1602 et seq.; Argentine Republic v. Amerada Hess Shipping Co., --- U.S. ----, ----, 109 S.Ct. 683, 687, 102 L.Ed.2d 818 (1989); Verlinden B.V. v. Central Bank of Nigeria, 461 U.S. 480, 493, 103 S.Ct. 1962, 1971, 76 L.Ed.2d 81 (1983). The actions of Banco BCH do not fall within any of the statutory exceptions to sovereign immunity. 28 U.S.C. Sec. 1605. In particular, Banco's commercial activities in this matter had no direct effect in the United States. Because Banco BCH was immune from suit under the FSIA, the district court lacked original jurisdiction over this matter. Therefore, this action must be remanded to the Los Angeles Superior Court. 28 U.S.C. Sec. 1330(a); see Sullivan v. First Affiliated Securities, Inc., 813 F.2d 1368, 1376-77 (9th Cir.) (claims remanded to state court where claims were not within the district court's original jurisdiction), cert. denied, --- U.S. ----, 108 S.Ct. 150, 98 L.Ed.2d 106 (1987); cf. 28 U.S.C. Sec. 1447(c).

I PERTINENT FACTS

In 1985, Derderian obtained a blank cashier's check from American International Company (AIC) which he executed in the amount of $852,000. ¹ Derderian forged the signatures of two AIC officers. He gave the check to Miraslav Jocovic (Jocovic), who deposited it in his account at Security Pacific National Bank. Jocovic withdrew the funds. He purchased gold coins with the proceeds. He turned some of the money and coins over to Derderian.

Approximately $150,000 of the coins were taken by Jocovic and Sylvia Bastides (Bastides) to Mexico. There, they were deposited in the bank account and safety deposit box of Refugio Bastides, Sylvia's grandmother, in the Tijuana branch of Banco BCH.

On September 16, 1985, Security Pacific filed this action in Los Angeles Superior Court for compensatory damages and equitable relief against Derderian, his parents, Jocovic, ² Sylvia Bastides, and Banco BCH. Banco BCH removed the case to the district court pursuant to 28 U.S.C. Sec. 1441(d). Thereafter, Banco BCH filed a motion to dismiss on the grounds of foreign sovereign immunity, 28 U.S.C. Secs. 1330, 1602 et seq., improper service of process, and insufficient minimum contacts with the forum. The motion was noticed. Before it was heard, however, the district court dismissed the action against Banco BCH in accordance with the stipulation filed pursuant to Fed.R.Civ.P. 41. The trial proceeded against the remaining defendants ³ and on May 12, 1987, the district court entered judgment for Security Pacific. Derderian timely appealed.

II DISCUSSION

Jurisdiction of the district court over this action depends upon an interplay of removal jurisdiction and the Foreign Sovereign Immunities Act, 28 U.S.C. Secs. 1330, 1602 et seq., which immunizes foreign states and their instrumentalities from the jurisdiction of United States courts unless the matter falls within one of the statutory exceptions to immunity.

A. Removal Jurisdiction

When, after removal, ⁴

a case is tried on the merits without objection and the federal court enters judgment, the issue in subsequent proceedings on appeal is not whether the case was properly removed, but whether the federal district court would have had original jurisdiction over the case had it been filed in that court.

Sorosky v. Burroughs Corp., 826 F.2d 794, 798 (9th Cir.1987) (quoting Grubbs v. General Electric Credit Corp., 405 U.S. 699, 702, 92 S.Ct. 1344, 1347, 31 L.Ed.2d 612 (1972)).

We review the existence of subject matter jurisdiction independently, without deference to the district court's determination of this issue. Gerritsen v. de la Madrid Hurtado, 819 F.2d 1511, 1515 (9th Cir.1987). We conclude that the district court lacked jurisdiction to enter a judgment in this matter.

28 U.S.C. Sec. 1330(a) provides that district courts have original jurisdiction without regard to the amount in controversy of any nonjury civil action against a foreign state "as to any claim for relief in personam with respect to which the foreign state is not entitled to immunity." 28 U.S.C. Sec. 1330(a) (emphasis added). "If one of the specified exceptions to sovereign immunity applies, a federal district court may exercise subject-matter jurisdiction under Sec. 1330(a); but if the claim does not fall within one of the exceptions, federal courts lack subject-matter jurisdiction" and personal jurisdiction. Verlinden, 461 U.S. at 489, n. 14, 103 S.Ct. at 1969, n. 14.

Thus, federal jurisdiction over both foreign and non-foreign parties does not attach until it is determined that the foreign sovereign lacks immunity from jurisdiction under the provisions of the FSIA. Frolova v. Union of Soviet Socialist Republics, 761 F.2d 370, 372-73 (7th Cir.1985). Where sovereign immunity exists, the court is without jurisdiction over the action just as it would be in a case filed in federal district court under 28 U.S.C. Sec. 1332 that did not have diverse parties, or one filed under 28 U.S.C. Sec. 1331 absent a claim arising under federal law. It is essential, therefore, as a preliminary matter in cases in which sovereign immunity is claimed, that the district court decide the question of immunity. Verlinden, 461

U.S. at 493-94, 103 S.Ct. at 1971-72. ⁵ The FSIA

must be applied by the district courts in every action against a foreign sovereign, since subject-matter jurisdiction in any such action depends on the existence of one of the specified exceptions to foreign sovereign immunity, 28 U.S.C. Sec. 1330(a). At the threshold of every action in a district court against a foreign state, therefore, the court must satisfy itself that one of the exceptions applies--and in doing so it must apply the detailed federal law standards set forth in the Act.

Verlinden, 461 U.S. at 493-94, 103 S.Ct. at 1971 (footnote omitted); see also Amerada Hess, --- U.S. at ----, 109 S.Ct. at 687. ⁶

B. Foreign Sovereign Immunity

1. The Foreign Sovereign Immunities Act

The FSIA provides the sole basis for subject matter jurisdiction in cases involving foreign sovereigns. Amerada Hess, --- U.S. at ----, 109 S.Ct. at 687; McKeel v. Islamic Republic of Iran, 722 F.2d 582, 586-87 (9th Cir.1983) cert. denied, 469 U.S. 880, 105 S.Ct. 243, 83 L.Ed.2d 182 (1984). The purpose of the FSIA "is to provide when and how parties can maintain a lawsuit against a foreign state or its entities in the courts of the United States and to provide when a foreign state is entitled to sovereign immunity." H.R.Rep. No. 94-1487, 94th Cong., 2d Sess. 6, reprinted in 1976 U.S.Code Cong. & Admin.News 6604 (1976). It was also intended to provide uniformity of decision and to conform to international law. McKeel, 722 F.2d at 586-87.

The Foreign Sovereign Immunities Act (FSIA) provides that the district courts have original subject matter jurisdiction "as to any claim for relief in personam with respect to which the foreign state is not entitled to immunity" under the Act or under any applicable international agreement. 28 U.S.C. Sec. 1330(a). Personal jurisdiction over a foreign state exists "as to every claim for relief over which the district courts have [subject-matter] jurisdiction where service has been made under [the Act]." ⁷ 28 U.S.C. Sec. 1330(b). Thus, sovereign immunity is not merely a defense under the FSIA. Its absence is a jurisdictional requirement. 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); Olsen by Sheldon v. Government of Mexico, 729 F.2d...