World Holdings, LLC v. Fed. Republic of Germany

• Decision Date: 15 November 2012
• Docket Number: Nos. 11–14378,11–14457 and 11–14461.,s. 11–14378
• Parties: WORLD HOLDINGS, LLC, a Florida Limited Liability Company, Plaintiff–Appellant, v. FEDERAL REPUBLIC OF GERMANY, a foreign state, Defendant–Appellee. Sovereign Bonds Exchange LLC, Helmut Gaensel, Michael Yohe, James Briant, Conrad Curren, individually by and on behalf of all persons similarly situated, Plaintiffs–Appellants, v. Federal Republic of Germany, Defendant–Appellee. Sovereign Bonds Exchange LLC, Plaintiff–Appellant, v. Federal Republic of Germany, HSH Nordbank AG, Kiel, successor to Landesbank der Provinz Schleswig–Holstein, d.b.a. HSH Nordbank AG New York, WestLB AG, Duesseldorf, successor to Landesbank der Rheinprovinz, Landesbank der Provinz Westfalen and Landesbank fur Westfalen (Girozentrale), d.b.a. WestLB AG New York, Helaba Landesbank Hessen–Thueringen, Frankfurt am Main, d.b.a. Helaba Landesbank Hessen–Thueringen New York, LBBW Landesbank Baden–Wurttemberg, Stuttgart, successors to Landeskreditbank Baden–Wurttemberg, d.b.a. LBBW Niederlassung New York, LBBW New York, Dekabank Deutsche Girozentrale, Norddeutsche Landesbank Girozentrale Hannover, successor to Hannoversche Landeskreditanstalt, d.b.a. Norddeutsche Landesbank Girozentrale New York, Defendants–Appellees, Deutsche Landesbankenzentrale AG, Successor/agent for Landesbank Der Provinz Ostpreussen Hannoversche Landeskreditanstalt, Provinzialbank Pommern, Landesbank der Provinz Schleswig–Holstein, ProvinzialHilfskasse Fur Die Provinz Niederschlesien, Brandenburgische Provinzialbank, Defendant.
• Court: U.S. Court of Appeals — Eleventh Circuit

701 F.3d 641

WORLD HOLDINGS, LLC, a Florida Limited Liability Company, Plaintiff–Appellant,

v.FEDERAL REPUBLIC OF GERMANY, a foreign state, Defendant–Appellee.

Sovereign Bonds Exchange LLC, Helmut Gaensel, Michael Yohe, James Briant, Conrad Curren, individually by and on behalf of all persons similarly situated, Plaintiffs–Appellants,

v.Federal Republic of Germany, Defendant–Appellee.

Sovereign Bonds Exchange LLC, Plaintiff–Appellant,

v.Federal Republic of Germany, HSH Nordbank AG, Kiel, successor to Landesbank der Provinz Schleswig–Holstein, d.b.a. HSH Nordbank AG New York, WestLB AG, Duesseldorf, successor to Landesbank der Rheinprovinz, Landesbank der Provinz Westfalen and Landesbank fur Westfalen (Girozentrale), d.b.a. WestLB AG New York, Helaba Landesbank Hessen–Thueringen, Frankfurt am Main, d.b.a. Helaba Landesbank Hessen–Thueringen New York, LBBW Landesbank Baden–Wurttemberg, Stuttgart, successors to Landeskreditbank Baden–Wurttemberg, d.b.a. LBBW Niederlassung New York, LBBW New York, Dekabank Deutsche Girozentrale, Norddeutsche Landesbank Girozentrale Hannover, successor to Hannoversche Landeskreditanstalt, d.b.a. Norddeutsche Landesbank Girozentrale New York, Defendants–Appellees,Deutsche Landesbankenzentrale AG, Successor/agent for Landesbank Der Provinz Ostpreussen Hannoversche Landeskreditanstalt, Provinzialbank Pommern, Landesbank der Provinz Schleswig–Holstein, ProvinzialHilfskasse Fur Die Provinz Niederschlesien, Brandenburgische Provinzialbank, Defendant.

Nos. 11–14378, 11–14457 and 11–14461.

United States Court of Appeals, Eleventh Circuit.

Nov. 15, 2012.

Samuel J. Dubbin, Dubbin & Kravetz, LLP, Coral Gables, FL, Michael Elsner, Brian T. Frutig, Vincent I. Parrett, Motley Rice, LLC, Mount Pleasant, SC, Alyssa D. Englund, Roger Frankel, Jonathan P. Guy, Lorraine S. McGowen, Orrick Herrington & Sutcliffe, William Pepper, New York City, Ingrid L. Moll, Motley Rice, LLC, Hartford, CT, Robert J. Pearl, Pearl Law Firm, Naples, FL, James Franklin Lowy, Lowy Royer Law Firm LLC, Tampa, FL, for Plaintiffs–Appellants.

Jeffrey Harris, Walter Elmer Diercks, Max Riederer von Paar, Rubin, Winston, Diercks, Harris & Cooke, LLP, Washington, DC, Gerald J. Houlihan, Houlihan & Partners, PA, Miami, FL, for Defendants–Appellees.

Appeals from the United States District Court for the Southern District of Florida.

Before DUBINA, Chief Judge, and PRYOR and HILL, Circuit Judges.

PRYOR, Circuit Judge:

In these three consolidated appeals, we must decide issues about the enforceability of German bonds issued during the period between World War I and World War II. The first appeal involves a complaint against the Federal Republic of Germany filed by World Holdings, LLC, for breach of contract regarding its Dawes and Young bonds. The second appeal involves a complaint against Germany filed by Sovereign Bonds Exchange, LLC, for breach of contract regarding its Dawes, Young, and municipal bonds. The third appeal involves a complaint against Germany and six German banks filed by Sovereign Bonds for breach of contract regarding its Agra bonds. These appeals present questions of subject matter jurisdiction under the Foreign Sovereign Immunities Act, 28 U.S.C. §§ 1330, 1602–1611, and the interpretation of three post-World War II treaties: the Agreement on German External Debts, Feb. 27, 1953, 4 U.S.T. 443, 333 U.N.T.S. 3, also known as the London Debt Agreement; the Agreement Between the Government of the United States of America and the Government of the Federal Republic of Germany Regarding the Validation of Dollar Bonds of German Issue, U.S.-Fed. Republic of Ger., Feb. 27, 1953, 4 U.S.T. 797, also known as the 1953 Validation Procedures Treaty; and the Agreement Between the United States of America and the Federal Republic of Germany Regarding Certain Matters Arising from the Validation of German Bonds, U.S.-Fed. Republic of Ger., Apr. 1, 1953, 4 U.S.T. 885, also known as the 1953 Validation Treaty. The district court granted a summary judgment in favor of Germany and against the complaint filed by World Holdings; dismissed the complaint filed by Sovereign Bonds regarding its Dawes, Young, and municipal bonds for failure to state a claim; and dismissed the complaint filed by Sovereign Bonds regarding its Agra bonds for lack of subject matter jurisdiction and, alternatively, for failure to state a claim.

We are asked to decide (1) whether the Foreign Sovereign Immunities Act granted the district court jurisdiction over the complaint filed against Germany by Sovereign Bonds to enforce Agra bonds issued by banks in the territory that became East Germany; (2) whether holders of Dawes, Young, municipal, and Agra bonds who did not assent to the settlement offer in the London Debt Agreement must, under the 1953 Validation Treaty, validate their bonds before they may enforce them in an American court; (3) whether the complaint filed by World Holdings to enforce its validated bonds was barred by the statute of limitations; and (4) whether the district court abused its discretion when it denied discovery to Sovereign Bonds to determine whether any of its bonds had been validated. We conclude that the district court had jurisdiction under the Foreign Sovereign Immunities Act over the complaint against Germany filed by Sovereign Bonds regarding its Agra bonds issued in the territory that later became East Germany; all the bonds are subject to the 1953 Validation Treaty and must be validated before they may be enforced in American courts; the complaint filed by World Holdings to enforce its validated bonds is untimely; and the district court did not abuse its discretion when it denied discovery to Sovereign Bonds on the issue of validation. We vacate in part and affirm in part.

I. BACKGROUND

We divide the background in five parts. First, we explain the shared historical background of the three appeals. Second, we recount the procedural history of the litigation by World Holdings to enforce its Dawes and Young bonds. Third, we recount the procedural history of the litigation by Sovereign Bonds to enforce its Dawes, Young, and municipal bonds. Fourth, we describe the procedural history of the action filed by Sovereign Bonds to enforce its Agra bonds. Fifth, we discuss the relevant aspects of this appeal.

A. The Historical Background.

In an effort to rehabilitate its economy after World War I, Germany sold bonds in foreign countries. In 1924, Germany made a public offering of 7 Percent External Gold Bonds, better known as “Dawes bonds,” on the New York Stock Exchange. These bonds were backed by the full faith and credit of Germany, held absolute priority over other German debts, and provided for collateral security from taxes on tobacco, beer, sugar, and the German spirits monopoly. In 1930, Germany made an offering of 5 1/2 Percent International Gold Bonds, known as “Young bonds,” on the New York Stock Exchange. These bonds were also backed by the full faith and credit of Germany, were entitled to priority over all German debts except the Dawes bonds, and provided for collateral security from a direct annual tax on the German Railway Company.

On June 1, 1928, fourteen provincial and communal banks issued the German Provincial and Communal Banks Consolidated Agricultural Loan Bonds, also known as “Agra bonds.” These loans were issued for the purpose of improving agricultural conditions in Germany. The banks involved in the issuance were owned in whole or in part by a German province and each province was legally responsible for all obligations of its banks. A majority of the obligor banks for the Agra bonds were located in territory that would eventually become East Germany.

When Adolph Hitler gained power before World War II, Germany defaulted on many of its foreign debts. Germany defaulted on the Dawes and Young bonds and began aggressively purchasing the bonds at deep discounts. Instead of cancelling the repurchased certificates, Germany held the certificates in Berlin banks. Germany also issued a moratorium on the payment of the Agra bonds.

After World War II, the United States and West Germany entered a multinational treaty known as the London Debt Agreement to “remove obstacles to normal economic relations between the Federal Republic of Germany and other countries.” London Debt Agreement, preamble, 4 U.S.T. at 445. The Agreement was signed in February 1953 and created a framework for the settlement of claims against the West German government, and it constituted an offer of settlement to all holders of bonds covered by the Agreement. See id. at 453. If a bondholder accepted the settlement offer, he would be guaranteed payment at a lower rate than the rate to which he would have otherwise been entitled. If a bondholder refused to accept the settlement offer, he maintained his preexisting rights of enforcement. But West Germany adopted a policy of waiting to pay bondholders who did not assent to the Agreement until all bondholders who did assent had been paid.

On the same day that West Germany signed the London Debt Agreement, it entered a bilateral agreement with the United States that established procedures for the validation of several German bonds. 1953 Validation Procedures Treaty, 4 U.S.T. at 797. This treaty was motivated by concerns that large numbers of bonds held in Berlin had been stolen by Soviet forces at the end of the war and could be reintroduced into commerce alongside legitimate claims of American creditors. To combat this fraud, bondholders would have to prove that their bonds were located outside of Germany when Berlin fell to Soviet forces. Id. at 800, 822.

The 1953 Validation Procedures Treaty provided several different ways to validate a bond. Id. at 822–23. A registrant could, for example, submit a bank document stating that the bondholder acquired the bond from that bank before January 1, 1945. Id. at 822. A registrant could also provide his own affidavit stating the date and manner of...