Transamerica Leasing v.La Republic a de Venezuela
| Decision Date | 21 January 2000 |
| Docket Number | 98-7202 |
| Parties | Transamerica Leasing, Inc., et al.,Appellees v. La Republic a de Venezuela and Fondo de Inversiones de Venezuela, AppellantsUnited States Court of Appeals FOR THE DISTRICT OF COLUMBIA CIRCUIT |
| Court | United States Courts of Appeals. United States Court of Appeals (District of Columbia) |
Appeal from the United States District Court for the District of Columbia(No. 97cv01354)
Alexander E. Bennett argued the cause for appellants. With him on the briefs were Mark H. Stumpf, Steven G. Reade, Jean E. Kalicki, and Beth R. Kallet.
John E. Bradley argued the cause for appellees. With him on the brief were Benjamin P. Deutsch, and Lisa M. Cobb. Cherie B. Artz entered an appearance.
Before: Ginsburg, Henderson, and Tatel, Circuit Judges.
Opinion for the Court filed by Circuit Judge Ginsburg.
Twelve companies that leased equipment to the now defunct CompaNia Anonima Venezolana de Navegaci On (CAVN), a shipping company owned by the Republic de Venezuela, brought suit against Venezuela and the Fondo de Inversiones de Venezuela (FIV), an instrumentality of the Venezuelan government created to assist in restructuring and privatizing state enterprises. The first three counts of the complaint allege that Venezuela and the FIV are derivatively liable for CAVN's breaches of contract. The final count alleges that Venezuela and the FIV are directly liable for having caused CAVN to breach its contracts with the plaintiffs.
In this interlocutory appeal, Venezuela and the FIV argue that they are immune from suit upon all counts under the Foreign Sovereign Immunities Act of 1976 (FSIA), 28 U.S.C. s 1602 et seq., and that they are immune from suit upon the fourth count under the doctrine as well. We hold that because they did not exercise the requisite control over CAVN, Venezuela and the FIV are indeed immune from suit upon the first three counts. We remand the case for the district court to consider in the first instance whether the defendants are immune from suit upon the fourth count.
Although the parties vigorously dispute many details of the relationship between CAVN and the defendants, the basic facts underlying this case are uncontested. CAVN was an international shipping company created in 1917 by Venezuela and operated as a state-owned instrumentality until it filed for bankruptcy in 1994. At all relevant times, the FIV, known under Venezuelan law as an "autonomous institute," owned 99.86% of CAVN's stock and Venezuela, through various ministries, owned the remainder. The plaintiffs are twelve corporations that leased to CAVN shipping equipment, such as containers and chassis, between 1982 and 1993.
In the early 1990s CAVN began experiencing severe financial trouble, in part because of the inefficient way in which it handled leased equipment. In September 1991 the FIV, concerned about CAVN's mounting losses, commissioned the consulting firm Booz, Allen & Hamilton, Inc. to assess CAVN's financial health and operating procedures. Booz Allen recommended that CAVN restructure its operations, upgrade its fleet, overhaul its handling of leased equipment, and in general strengthen its management.
In 1992 CAVN requested financial assistance from the FIV, which referred the request to the Sectoral Cabinet for Economic and Social Policy Issues, an organization that by law must approve all such requests before the FIV may act. The Cabinet approved CAVN's request conditioned upon CAVN's agreement to restructure. When CAVN agreed to that condition, the FIV commissioned Booz Allen to prepare a restructuring plan. The FIV made funds available to CAVN through a trust agreement under which the FIV is both settlor and trustee and CAVN is the beneficiary. Under the agreement, CAVN had to place some of its assets in trust with the FIV as collateral.
Notwithstanding these efforts, CAVN began to fall behind in its lease payments and in 1993 the plaintiffs issued notices of default and termination. In November 1993 CAVN and the lessors agreed to restructure CAVN's payments; until January 1994 the FIV provided additional capital infusions to allow CAVN to meet the restructured payment schedules. In April 1994 the lessors again agreed to restructure CAVN's payments. By July, however, CAVN was unable to continue operations: it filed for bankruptcy in October 1994.
In June 1997 the plaintiffs brought this suit against the Republic of Venezuela and the FIV (henceforth referred to collectively as "Venezuela" or "the Government"). In the first three counts of the complaint they allege that Venezuela used CAVN as its "alter ego," or as its "agent," or that it cloaked CAVN with apparent authority to bind the Government, and that Venezuela is therefore liable upon the lease agreements and restructured payment schedules. In the final count the lessors allege that Venezuela, by refusing to continue providing funds to CAVN, caused CAVN to breach its contracts with the plaintiffs. Venezuela moved to dismiss the complaint in January 1998, claiming that under the FSIA it is immune from suit upon all counts and that suit upon the fourth count is precluded under the act of state doctrine as well.
The district court denied Venezuela's motion to dismiss. Based upon the pleadings and the extensive evidence submitted supporting and opposing the motion, the district court found that Venezuela, which had appointed the Board, exerted extensive control over CAVN's everyday operations, played a major role in CAVN's financial restructuring, and appeared to have authorized CAVN to act on its behalf. From these findings the district court concluded both that CAVN had in fact acted as the Government's agent, and that it had apparent authority to act for the Government, in its dealings with the plaintiffs, and therefore that Venezuela is amenable to a suit based upon the activities of CAVN. The court did not discuss the final count of the complaint, in which the plaintiffs seek to hold Venezuela liable for causing CAVN to breach its contracts, and with respect to which the Government raises the act of state objection.
Venezuela filed this interlocutory appeal in order to press its claim of immunity from suit. Under the FSIA a "foreign state [is] immune from the jurisdiction of the courts of the United States and of the States," subject to certain enumerated exceptions. 28 U.S.C. s 1604. For this purpose, "foreign state" includes any "agency or instrumentality" thereof. 28 U.S.C. s 1603(a). Both Venezuela and the FIV are immune from suit upon the plaintiffs' claims, therefore, unless those claims fall within one of the listed exceptions. The plaintiffs contend that their claims are within the "commercial activity" exception, which provides that:
(a) 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 stateelse where; 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 directeffect in the United States;28 U.S.C. s 1605(a)(2).
Venezuela implicitly concedes that the first three counts of the complaint are based upon "commercial activities" within the meaning of 28 U.S.C. s 1605(a)(2), but maintains that it is not amenable to a suit based upon the commercial activities of CAVN because CAVN was not its agent. As to the final count, Venezuela argues first that the activities alleged there are not "commercial activities," and second that they are acts of state for which the Government is immune from trial in any event.
The district court's denial of a foreign state's motion to dismiss upon the ground of sovereign immunity is subject to interlocutory appeal under the collateral order doctrine. See Foremost-McKesson, Inc. v. Islamic Republic of Iran, 905 F.2d 438, 443 (D.C. Cir. 1990) (citing Cohen v. Beneficial Industrial Loan Corp., 337 U.S. 541, 545-47 (1949)). We review the district court's findings of fact for clear error, see Jungquist v. Sheikh Sultan Bin Khalifa Al Nahyan, 115 F.3d 1020, 1028 (D.C. Cir. 1997), and in this case we find none. We review de novo the district court's determination that Venezuela is not entitled to immunity, see id., to which task the balance of this opinion is devoted.
A. Subject matter jurisdiction, Counts I-III
A government instrumentality "established as [a] juridical entit[y] distinct and independent from [its] sovereign should normally be treated as such"; thus, it is presumed to have legal status separate from that of the sovereign. First National City Bank v. Banco Para El Comercio Exterior de Cuba, 462 U.S. 611, 627 (1983) (Bancec). That presumption can be overcome in two situations: First, "where a corporate entity is so extensively controlled by its owner that a relationship of principal and agent is created," id. at 629 (citing NLRB v. Deena Artware, Inc., 361 U.S. 398, 402-404 (1960));and second, where recognition of the instrumentality as an entity apart from the state "would work fraud or injustice."Id. (citing Taylor v. Standard Gas & Electric Co., 306 U.S. 307, 322 (1939)). Although the Supreme Court in Bancec recognized these as exceptions to the rule that a foreign sovereign is not liable for the acts of an instrumentality of the state, we have since held that they serve also as exceptions to the rule that a foreign sovereign is not amenable to suit based upon the acts of such an instrumentality. See, e.g., Foremost-McKesson, 905 F.2d at 446-47. Accordingly, the present plaintiffs argue both reasons--agency and injustice-for holding that Venezuela is amenable to suit based upon the activities of CAVN.
1.The agency exception: Principles Our previous decisions applying the agency exception...
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