981 F.3d 1239
11th Cir.2020Background
- In 1957 Banco do Brasil issued 30 "Letras Hipotecárias" (colonization bonds) promising payment of principal and 5% interest, with stated 20-year maturity and reference to several Brazilian laws.
- R&R International (a Florida LLC) sought to redeem some bonds; R&R (or an individual associated with it) attempted redemption at the Bank’s Miami branch in 2015; Bank later confirmed authenticity but recommended presenting bonds in Brazil; R&R formally demanded payment in 2018 after a multi-year delay.
- Banco do Brasil is majority-owned by the government of Brazil (52.2%), so it is a "foreign state" under the Foreign Sovereign Immunities Act (FSIA); the Bank removed the suit to federal court and moved to dismiss.
- The district court dismissed on three alternative grounds: lack of subject-matter jurisdiction under the FSIA (concluding the commercial-activity exception did not apply), the act-of-state doctrine, and failure to state a claim because Brazilian law barred the bonds by the statute of limitations.
- The Eleventh Circuit held that the commercial-activity exception does provide subject-matter jurisdiction (vacating that part), but that R&R’s claim is barred by Brazil’s statute of limitations (affirming dismissal with prejudice on that ground).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether FSIA commercial-activity exception permits jurisdiction | Bank issued bonds as commercial activity and refusal to pay occurred (or had effect) in Miami | Bank is a foreign state; refusal to honor was a decision made abroad and thus outside the exception | Court: Jurisdiction exists under FSIA’s commercial-activity exception (issuance commercial; refusal caused a direct U.S. effect) |
| Whether the Bank’s failure to honor is an "act" for FSIA purposes and where it occurred | The refusal (or wrongful omission) produced a U.S. effect when Miami payment was demanded | The decision not to perform is an act that occurs in Brazil, not the U.S. | Court: Treats the decision not to perform as an act in Brazil but holds the extraterritorial act caused a direct effect in the U.S., satisfying the third clause |
| Whether the Bank’s refusal caused a "direct effect" in the U.S. | Money was demanded at Miami branch; nonpayment meant money due in U.S. was not delivered | Bank argued the bonds were unenforceable under Brazilian law, so no direct U.S. effect | Held: Direct-effect test met (analogous to Republic of Argentina v. Weltover); failure to deliver money to Miami produced a direct U.S. effect |
| Whether Brazilian law bars the claim by statute of limitations | Bonds never matured (arguing an 1890 decree means no fixed maturity) or Brazilian precedent not controlling | Bonds matured in 1977; general 20-year limitation under Brazil’s 1916 Civil Code ran in 1997; Camilotti supports nonenforceability | Held: Claim is time-barred under Brazilian law; dismissal with prejudice affirmed on statute-of-limitations ground |
Key Cases Cited
- Republic of Argentina v. Weltover, 504 U.S. 607 (direct-effect test: nonpayment to U.S. bank creates direct U.S. effect)
- Guirlando v. T.C. Ziraat Bankasi A.S., 602 F.3d 69 (2d Cir.) (omission vs. decision: failure to act treated as a sovereign decision occurring abroad)
- Rogers v. Petroleo Brasileiro, 673 F.3d 131 (2d Cir.) (discussing commercial-activity exception and extraterritorial acts)
- Mezerhane v. República Bolivariana de Venezuela, 785 F.3d 545 (11th Cir.) (standard of review for FSIA immunity)
- John R. Sand & Gravel Co. v. United States, 552 U.S. 130 (statute of limitations is an affirmative defense that can be forfeited)
- United States v. Cotton, 535 U.S. 625 (subject-matter jurisdiction cannot be forfeited or waived)
- Access Now, Inc. v. Southwest Airlines Co., 385 F.3d 1324 (11th Cir.) (issues not raised below are forfeited)