Zveiter v. Brazilian Nat. Superintendency, 92 Civ. 3548 (SS).

• Decision Date: 14 October 1993
• Docket Number: No. 92 Civ. 3548 (SS).,92 Civ. 3548 (SS).
• Citation: 833 F. Supp. 1089
• Parties: Clara ZVEITER, Plaintiff, v. BRAZILIAN NATIONAL SUPERINTENDENCY OF MERCHANT MARINE and Lloyd Brasileiro, Defendants.
• Court: U.S. District Court — Southern District of New York

833 F. Supp. 1089

Clara ZVEITER, Plaintiff, v. BRAZILIAN NATIONAL SUPERINTENDENCY OF MERCHANT MARINE and Lloyd Brasileiro, Defendants.

No. 92 Civ. 3548 (SS).

United States District Court, S.D. New York.

October 14, 1993.

Shustak Jalil Sanders & Heller by Gayle S. Sanders, New York City, for plaintiff.

Milbank, Tweed, Hadley & McCloy by Eugene F. Farabaugh, New York City (John W. Dean, Charles E. Dropkin, Louis L. Nock, of counsel), for defendants.

AMENDED OPINION AND ORDER

SOTOMAYOR, District Judge.

Defendants Brazilian National Superintendency of Merchant Marine ("BNSMM"), now known as the Brazilian National Department of Waterway Transportation, and Lloyd Brasileiro ("Lloyd") move for summary judgment to dismiss this sexual harassment action. For the reasons stated below, the motion is DENIED.

I. Background

Defendant Lloyd is a navigational shipping corporation established under the laws of Brazil. As Brazilian law requires, Brazil owns a majority of Lloyd's shares. Defendant BNSMM is a regulatory agency of Brazil, established pursuant to executive decrees of the Brazilian government, and charged with jurisdiction over navigational waterways.

Lloyd and BNSMM share a combined New York office, which is headed by a Delegate and an Assistant Delegate. During the times relevant to this action, the Delegate was Jose Vinhae, and then Juca Colagrossi. The Assistant Delegate was Edward Crouch.

Plaintiff Clara Zveiter was a secretary to the Delegate and Assistant Delegate. One week after Mr. Colagrossi took over as Delegate, Ms. Zveiter asked for a twenty day vacation, and while she was on vacation, Irene Romanelli substituted for her as a secretary. One week after plaintiff returned from vacation, she was permanently replaced by Ms. Romanelli and was reassigned to serve as a receptionist, without diminution in salary or benefits. Subsequently, plaintiff and three other male employees were terminated.

Plaintiff brought this suit claiming sexual harassment, in violation of the New York Human Rights Law. She also alleged discrimination on the basis of her religion, but she has withdrawn that claim. She has also withdrawn her claim for intentional infliction of emotional distress. The status of an additional claim, for overtime compensation, is unclear, but appears to have been abandoned.

Defendants move for summary judgment dismissing the action on the grounds that they are immune from suit by virtue of the Foreign Sovereign Immunities Act ("FSIA"), 28 U.S.C. §§ 1330, 1602-1611; that plaintiff has failed to state a claim for sexual harassment; and that plaintiff released the defendants from suit by signing a waiver shortly after she was terminated.

II. Discussion

A. Subject Matter Jurisdiction and The Foreign Sovereign Immunities Act

Defendants argue first that this Court lacks subject matter jurisdiction over plaintiff's claims because the defendants are immune from suit by virtue of the Foreign Sovereign Immunities Act ("FSIA"), 28 U.S.C. §§ 1330, 1602-1611.

The FSIA "provides the sole basis for obtaining jurisdiction over a foreign state in the courts of this country." Argentine Republic v. Amerada Hess Shipping Corp., 488 U.S. 428, 443, 109 S.Ct. 683, 693, 102 L.Ed.2d 818 (1989); 28 U.S.C. § 1330. The jurisdiction created by the FSIA, however, extends only to those claims "with respect to which the foreign state is not entitled to immunity either under 28 U.S.C. §§ 1605-1607 or under any applicable international agreement." 28 U.S.C. § 1330(a). Thus, defendants' motion presents an inquiry that must be addressed in two steps: first, I must determine whether the defendants are a "foreign state" within the meaning of the FSIA. If so, section 1330(a) is the exclusive means by which this Court may exercise subject matter jurisdiction over the action, and defendants are presumptively immunized from suit by virtue of 28 U.S.C. § 1604. Saudi Arabia v. Nelson, ___ U.S. ___, 113 S.Ct. 1471, 123 L.Ed.2d 47 (1993). That leads to the second question: whether this action comes within one of the exceptions to immunity provided by 28 U.S.C. § 1605.

Are the Defendants a Foreign State?

Under 28 U.S.C. § 1603(a), a "foreign state" is defined to include its agencies and instrumentalities. An "agency or instrumentality of a foreign state" is 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.

28 U.S.C. § 1603(b).

Defendant Lloyd is a navigational shipping corporation organized by the Federal Government of Brazil pursuant to executive decrees, and the Brazilian government owns at least 51% of its shares, as required by Brazilian law. As an individual corporate entity "a majority of whose shares or other ownership interest is owned by a foreign state," 28 U.S.C. § 1603(b)(2), and as plaintiff concedes in her Rule 3(g) statement, Lloyd is an agency or instrumentality of Brazil.

Defendant BNSMM, now known as the Brazilian National Department of Waterway Transportation,¹ is a regulatory agency of the federal government of Brazil with jurisdictional authority over navigational and merchant marine affairs on the high seas. As such, it is an agency or instrumentality of Brazil.

Thus, I conclude that there is no disputed question of material fact regarding the status of the defendants. As a matter of law, they are agencies or instrumentalities of Brazil and a "foreign state" within the meaning of the FSIA, and therefore 28 U.S.C. § 1330(a) provides the exclusive basis for this Court's exercise of subject matter jurisdiction over the action.

The sole allegation of subject matter jurisdiction in the complaint, however, refers to diversity jurisdiction pursuant to 28 U.S.C. § 1332. Although Fed.R.Civ.P. 8(a) requires that the Complaint contain "a short and plain statement of the grounds upon which the court's jurisdiction depends," and the Complaint is undeniably defective in that regard, the pleadings to date have established a prima facie showing of subject matter jurisdiction. Therefore, I will not dismiss this action for lack of subject matter jurisdiction, but instead grant leave to amend the complaint. I do so because absent sovereign immunity, such jurisdiction does lie with this Court, albeit pursuant to section 1330, and because the erroneous allegation of subject matter jurisdiction in this case may be regarded as a mere pleading error.

Sovereign Immunity

The FSIA creates the sole basis for jurisdiction over a suit against a foreign state, and at the same time bestows sovereign immunity upon the defendant foreign states unless the action falls within one of the enumerated exceptions to the presumption of immunity. 28 U.S.C. § 1604. The plaintiff contends that this case comes under the first clause² of the "commercial activity exception" to sovereign immunity, which permits a federal court to exercise jurisdiction in an action otherwise barred by the FSIA if "the action is based 1 upon a commercial activity carried on in the United States by the foreign state...." 28 U.S.C. § 1605(a)(2).

Zveiter claims that she was sexually harassed while employed as a secretary by defendants in the United States, and therefore the commercial activity relevant to this action is defendants' employment of plaintiff. I must thus determine whether the employment of a secretary is a "commercial activity" under the FSIA.

Like all questions of statutory interpretation, "the starting point is `the language of the statute itself.'" United States v. James, 478 U.S. 597, 604, 106 S.Ct. 3116, 3120, 92 L.Ed.2d 483 (1986) (citation omitted). Under the FSIA, "commercial activity" is "either a regular course of commercial conduct or a particular commercial transaction or act." 28 U.S.C. § 1603(d). This definition is "somewhat circular," since it defines "commercial activity" in terms of "commercial conduct" and "commercial transaction." Callejo v. Bancomer, S.A., 764 F.2d 1101, 1108 n. 6 (5th Cir.1985).

The Supreme Court recently considered the applicability of the "commercial activity" exception to foreign sovereign immunity. See Saudi Arabia v. Nelson, ___ U.S. ___, ___, 113 S.Ct. 1471, 1479, 123 L.Ed.2d 47 (1993). The Court began its analysis by explicating the "restrictive" theory of foreign sovereign immunity that Congress adopted when it enacted the FSIA:

Under the restrictive, as opposed to the "absolute," theory of foreign sovereign immunity, a state is immune from the jurisdiction of foreign courts as to its sovereign or public acts (jure imperii), but not as to those that are private or commercial in character (jure gestionis).

___ U.S. at ___, 113 S.Ct. at 1479 (citations omitted). Thus, "a state engages in commercial activity under the restrictive theory where it exercises `only those powers that can also be exercised by private citizens,' as distinct from those `powers peculiar to sovereigns.'" Id. (citations omitted).

In Nelson, plaintiff worked in Saudi Arabia at a hospital owned and operated by the Saudi government. After he reported a number of safety defects that he had observed on the job, he was arrested by Saudi government officials, jailed, tortured, and beaten. He subsequently sued in a federal court, alleging various intentional torts. The Supreme Court held that since "exercise of the powers of police and penal officers is not the sort of action by which private parties can engage in commerce," the intentional conduct that plaintiff had alleged could not qualify as commercial under the restrictive theory. ___ U.S. at ___, 113 S.Ct. at 1479.

By contrast, this action does not arise from activities that are "peculiarly sovereign in...