245 F. Supp. 3d 486
S.D.N.Y.2017Background
- In 1875 Peru contracted with the Consignee Company for the Guano (CCG) to issue 8,600 bearer Bonds (7% interest, semiannual coupons) payable and serviced in New York; Bonds named Hobson, Hurtado & Co. as Peru’s New York financial agent.
- Although the Bonds were signed and recorded, CCG retained them (did not publicly issue them), credited Peru’s account for their face value, and between 1876–1880 debited Peru for scheduled interest/principal, effectively keeping the certificates in CCG’s possession.
- A 1901 international arbitration (mandated by the 1883 Peru–Chile treaty) examined the Bonds and found they had been issued to CCG but not circulated; the Tribunal awarded CCG a portion of the Bank of England deposit.
- Plaintiff MMA Consultants, an Illinois corporation, holds 14 of the 1875 Bonds (unspecified chain of title) and demanded payment from Peru in 2015 after receiving no response to demand letters; Peru moved to dismiss for lack of jurisdiction (FSIA) and failure to state a claim.
- The district court treated extrinsic historical materials (the Arbitration Award and certain historical exhibits) as properly considered for jurisdictional purposes, but excluded a consultant’s declaration recounting negative archival searches as inadmissible lay opinion.
- The court found that, even accepting the Bonds were executed in New York, the undisputed historical record showed they were never publicly issued and were held and amortized by CCG; the court dismissed MMA’s complaint with prejudice for lack of subject-matter jurisdiction under the FSIA (commercial-activity exception not met) and, alternatively, as time-barred and failing to state a claim.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| FSIA commercial-activity exception (§1605(a)(2)) — first clause (activity carried on in U.S.) | Bonds were executed and payable in New York; gravamen of suit is nonpayment tied to U.S. contacts | Bonds were never publicly issued or circulated in U.S.; core conduct occurred in Peru; U.S. contacts are incidental | First clause not satisfied — U.S. contacts (execution/place of payment) insufficient to make U.S. commercial activity the gravamen |
| FSIA commercial-activity exception — third clause (act outside U.S. causing direct effect in U.S.) | Designation of Hobson Hurtado in NY as place of payment means breach had direct effect in U.S. | No legally significant act causing an immediate/direct effect in U.S.; Hobson Hurtado long defunct; prior handling by CCG produced no U.S. effect relevant to MMA’s claim | Third clause not satisfied — no legally significant act causally producing a direct U.S. effect supporting jurisdiction |
| Statute of limitations / merits (breach accrual) | Limitations did not run until 2015 when MMA demanded payment; alternatively CPLR §211 or equitable tolling applies | Claims accrued when bonds matured/when holder could demand payment (redemption period ended by 1880); too stale; §211 inapplicable; no tolling | Claim time-barred under New York law; no equitable tolling; bonds’ redemption period expired long ago, so no actionable residual obligation |
| Admissibility / evidentiary reliance on historical materials (Award and Lide Decl.) | Court should not rely on the Award beyond its limited scope; Lide declaration inadmissible | Award is integral and judicially noticeable; Lide exhibits partly judicially noticeable; declarant’s conclusions inadmissible | Court judicially noticed and relied on the Arbitration Award and some historical exhibits; excluded Lide declarant’s expert-style conclusions as inadmissible lay opinion |
Key Cases Cited
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (pleading must state a plausible claim)
- Ashcroft v. Iqbal, 556 U.S. 662 (courts disregard legal conclusions on a motion to dismiss)
- Argentine Republic v. Amerada Hess Shipping Corp., 488 U.S. 428 (FSIA provides exclusive jurisdictional framework for foreign states)
- Weltover, Inc. v. Republic of Argentina, 504 U.S. 607 (commercial-activity exception: acts outside U.S. that have direct effect in U.S. can overcome immunity)
- OBB Personenverkehr AG v. Sachs, 136 S. Ct. 390 ("based upon" requires identifying the particular conduct constituting the gravamen)
- Rogers v. Petroleo Brasileiro, S.A., 673 F.3d 131 (Second Circuit on FSIA direct-effect analysis for bonds)
- Virtual Countries, Inc. v. Republic of South Africa, 300 F.3d 230 (legally significant acts test and limits on ripple-effect jurisdiction)
- Kensington Int’l Ltd. v. Itoua, 505 F.3d 147 (commercial-activity exception requires the gravamen to be tied to U.S. activity)
- Hanil Bank v. PT. Bank Negara Indonesia, 148 F.3d 127 (in breach cases, the legally significant act is the breach and its location matters)