Connecticut Bank Of Commerce v. Republic Of CongoConnecticut Bank Of Commerce v. Republic Of Congo
George Weisz (argued), Cleary, Gottlieb, Steen & Hamilton, New York, NY, Donald Scott Thomas, Jr., Clark, Thomas & Winters, Austin, TX, for Defendant-Appellee.
Guy Stanford Lipe (argued), Vinson & Elkins, Houston, TX, Marc E. Vockell, Vinson & Elkins, Austin, TX, for Garnishees-Appellees-Cross-Appellants.
Peter Buscemi, Mark N. Bravin, Morgan, Lewis & Bockius, Washington, DC, for Amicus Curiae Emerging Markets Creditors Ass‘n Inc. Sovereign Immunity Working Group.
Appeals from the United States District Court for the Western District of Texas.
Before EMILIO M. GARZA, PARKER and DENNIS, Circuit Judges.
EMILIO M. GARZA, Circuit Judge:
The Connecticut Bank of Commerce appeals the district court‘s judgment that the Foreign Sovereign Immunities Act renders royalty and tax obligations owed by certain Texas oil companies to the Republic of Congo immune from garnishment.
A predecessor in interest to the Connecticut Bank of Commerce (hereinafter “the Bank“) lent the Congo $6.5 million. In the loan agreement, the Congo waived any right to claim foreign sovereign immunity either from suit or from attachment or execution of its property. The Congo defaulted on the loan. The Bank acquired the rights to a valid London judgment against the Congo for the outstanding principal and interest. In order to turn the foreign judgment into a U.S. judgment, the Bank filed suit in a state court in New York, as permitted by the terms of the loan agreement. The Congo did not appear in the New York action, and the state court entered a default money judgment in favor of the Bank.
The Foreign Sovereign Immunities Act (FSIA),
Only a court may execute against a foreign sovereign‘s property under the FSIA.
After obtaining the default judgment from the New York state court, the Bank asked that court to enter what it called a “1610(c) order.” The only order mentioned by
The Bank registered its New York judgment in Texas state court and obtained, from the clerk of the Texas state court and without any court order, a writ of garnishment directed to a group of Texas oil companies: CMS NOMECO Congo, Inc., The Nuevo Congo Ltd., and some of their affiliatе companies (hereinafter “the garnishees“). The writs of garnishment prohibited the garnishees from paying any debts to the Congo. The Congo and the garnishees removed the garnishment action to the United States District Court for the Western District of Texas and filed a motion to dismiss. The district court dissolved the writs of garnishment and dismissed the action. It held that, notwithstanding the obligations of the Full Faith and Credit statute and the New York court‘s “1610(c) order,” it was not prohibited by res judicata from considering on a blank slate the amenability of the garnishees’ debts to garnishment under the FSIA. It determined that the royalty and tax payments owed by the oil companies to the Congo did not arise from a “commercial activity in the United States,” and therefore were not subject to garnishment. The Bank appeals.
The Full Faith and Credit Statute,
The Full Faith and Credit Statute,
New York courts do not give preclusive effect to gratuitous determinations in a prior action. Res judicata operates to bar relitigation only of issues necessary to the judgment. Rader v. Mfrs. Cas. Ins. Co. of Philadelphia, 139 N.Y.S.2d 388 (N.Y.Sup.Ct.1955), aff‘d, 1 A.D.2d 799, 149 N.Y.S.2d 220 (N.Y.App.Div.1956); Pike v. Irving, 259 A.D. 303, 19 N.Y.S.2d 219 (N.Y.App.Div.1940); Finkelstein v. Equitable Life Assur. Soc. of the United States, 256 A.D. 593, 11 N.Y.S.2d 135 (N.Y.App.Div.1939), aff‘d, 281 N.Y. 690, 23 N.E.2d 19 (1939). Especially in the case of a default judgment, res judicata applies only to issues essential to support the judgment as requested by the pleadings; subsequent developments in the case cannot enlarge the scope of the judgment or the scope of res judicata beyond the complaint. Novak & Co. v. N.Y. City Hous. Auth., 105 A.D.2d 665, 482 N.Y.S.2d 7 (N.Y.App.Div.1984) (“Since the prior judgment was on default, the issues necessarily determined there are limited to those essential to the judgment.“);
For example, in Finkelstein, the defendant issued a number of insurance policies to the plaintiff. Some of thе policies paid benefits when the insured became “presumably permanently disabled” (type 1 policies) and others paid benefits only when the insured became actually “permanently disabled” (type 2 policies). Under New York law, this difference in phrasing had an important legal effect. Under a type 1 policy, if the insured was disabled for a certain period of a time set out in the policy, he was entitled to an irrebuttable presumption of permanent disability. Under type 2 policies, being disabled for the amount of time set out in the policy gave rise to a presumption of permanent disability, but the presumption could be rebutted. In a prior action, Finkelstein obtained a judgment on a type 1 policy. He later brought an action on other policies, both type 1 and type 2, asserting that res judicata barred relitigation of the issue of his disability. The Appellate Division held that the prior action was not res judicata as to the type 2 policies, even if the previous court had determined that Finkelstein was not only “presumably” disabled, but that he was actually disabled. It reasoned that “in the prior action all that the insured was required to establish was total and presumably permanent disability ... anything more than that which the insured may have proved was not within the issues in that action, and, hence, the judgment as to such extraneous matters is not res judicata.” Finkelstein, 11 N.Y.S.2d at 138 (emphasis added). This principle applies a fortiori to default judgments, where it would be impossible for the defendant to predict in advance of his default any extraneous determinations a court might make. See Pike, 259 A.D. at 303-304 (limiting the res judicata effect of a prior default judgment to the “claim as alleged in [the] complaint” and reasoning that the defendant‘s “default, for whatever reason, did not authorize the entry of a judgment against him beyond the scope of the prayer for relief“).
To the extent that the New York court made determinations about the amenability of the Congo‘s property to garnishment, those determinations were not in any way necessary to the money judgment sought by the pleadings. Here, the only pleading was the bank‘s complaint1, which sought to convert a money judgment in London into a money judgment in New York. The New York court awarded the money judgment when the Congo failed to appear. The Congo does not challenge the validity of that judgment. Under New York law, the pleadings define the scope of a default judgment and therefore the scope of res judicata.
Here, the “1610(c) order” and the determinations contained in the order were not necessary to awarding the money judgment. Section 1610(c) has nоthing to do with the merits of an action against a foreign state, and does not somehow turn the amenability of a foreign state‘s property to garnishment into a necessary part of the merits court‘s consideration. Section 1610(c) is directed entirely to a court attaching or executing against a foreign state‘s property, and not at all to the merits court. The statute provides:
No attachment or execution referred to in subsections (a) and (b) of this section shall be permitted until the court has ordered such attachment and execution after having determined that a reasonable period of time has elapsed following the entry of judgment and the giving of any notice required under section 1608(e) of this chapter.2
The statute has three elements. First, as discussed above, its chief purpose is to provide that only a court may enter an order of attachment or execution against a foreign state‘s property.
The “1610(c) order” had no effect in the New York litigation at all: the determinations in the “1610(c) order” could conceivably have legal effect only if some other court actually executing on the Congo‘s property were to treat the order as res judicata. The order was therefore not necessary to any coercive relief prayed for in the complaint or granted by the state court, and under New York law the order is not entitled to any preclusive effect.
Although the Bank does not say so in as many words, it essentially asks us to treat the New York court‘s “1610(c) order” as a declaratory judgment, as a separate and distinct form of relief from the money judgment issued by the New York court. It points out that its motion requesting the “1610(c) order” was served separately on the Congo. But the Bank‘s complaint did not seek a declaratory judgment against the Congo, it sought a money judgment. If the Bank had filed what was clearly a declaratory judgment action, then we would have a different situation. Nor could the post-judgment motion requesting the 1610(c) order enlarge the scope of the issues determined by the default judgment. As explained above, New York law limits the scope of a default judgment to the issues necessary to resolve the questions raised by the pleadings.
New York does not require civil litigants to show up in court only to fall on their swords. If a defendant does not contest his liability to the plaintiff as set out in the complaint, he need not appear in the action. Defaulting does not carry the risk that the court will enter a judgment or make determinations not essential to awarding the relief called for in the complaint. The action in New York was an action to turn a money judgment in London into a money judgment in New York. The Congo had no way of knowing from the complaint that the New York court would make determinations and issue declarations that had nothing to do with a money judgment. The immunity of the royalty and tax payments to garnishment was not a defense to a claim for money damages, and whatever the New York court may have said about the immunity of the Congo‘s assets to execution had nothing to do with the merits of the action it was considering. Such statements were mere superfluities. Now that the immunity of these assets to garnishment really is in issue, the Congo is not precluded from asserting its sovereign immunity defense.
II
Under the FSIA, courts may attach only a foreign state‘s “property in the United States” when that property is ”used for a commercial activity in the United States.”
Until 1952, the United States generally afforded foreign sovereigns absolute immunity from the jurisdiction of the courts, including complete immunity from execution. Verlinden B.V. v. Central Bank of Nigeria, 461 U.S. 480, 486, 103 S.Ct. 1962, 76 L.Ed.2d 81 (1983). Unlike state or federal sovereign immunity, foreign sovereign immunity does not derive from the constitution. Id. Foreign sovereign immunity instead derives from concerns of grace and comity between nations. As a result, the Supreme Court regularly deferred to the Executive Branch in determining whether to take jurisdiction over a case concerning a foreign sovereign. Id. The Executive was in a better position to anticipate the foreign relations consequences of subjecting a foreign state to suit in a U.S. court. Under the theory of absolute sovereign immunity, the Executive would regularly recommend that courts decline to take jurisdiction over any case against a foreign sovereign.
In 1952, the State Department issued the “Tate Letter,” which announced the Department‘s adoption оf the “restrictive” theory of foreign sovereign immunity. Id. at 486-87. Under the restrictive theory, which many other nations had already adopted, the State Department would continue to recommend immunity in suits concerning a foreign state‘s sovereign, public acts. The Department, however, would recommend denying immunity in suits based on a foreign sovereign‘s strictly commercial activities. The Tate Letter did nothing to modify the complete immunity enjoyed by foreign sovereigns from execution against their property. If a plaintiff successfully obtained a final judgment against a foreign sovereign, he still had to rely on the foreign state to pay the judgment voluntarily. H.R. REP. No. 94-1487, at 8, 27 (“[T]he traditional view in the United States concerning execution has been that the property of foreign states is absolutely immune from execution.... Even after the ‘Tate Letter’ of 1952, this continued to be the position of the Department of State and of the courts.“); RESTATEMENT (THIRD) OF THE FOREIGN RELATIONS LAW OF THE UNITED STATES § 460 cmt. a (1987) (hereinafter “RESTATEMENT“).
The FSIA shifted the responsibility to make determinations about foreign sovereign immunity from the State Department to the courts. Verlinden, 461 U.S. at 488. For the most part, the FSIA codifies the restrictive theory of sovereign immunity as described in the Tate Letter. Id. But the FSIA also modified the rule barring execution against a foreign state‘s property by ”partially lowering the barrier of immunity from execution, so as to make this immunity conform more closely with the provisions on jurisdictional immunity in the bill.” H.R. REP. No. 94-1487, at 27 (emphasis added). For bоth immunity from jurisdiction and immunity from attachment, “commercial activity” generally constitutes the touchstone of the immunity determination. But immunity from execution is nevertheless narrower than jurisdictional immunity. De Letelier v. Republic of Chile, 748 F.2d 790, 798-99 (2d Cir.1984). In De Letelier, the Second Circuit surveyed both the history of immunity from execution and the international law context at the time Congress passed the FSIA. The court concluded that Congress intended to lift immunity from execution only “in part,” that it did not intend to reverse completely the historical and international antipathy to executing against a foreign state‘s property even in cases where a judgment could be had on the merits. Id. It attributed the differences in phrasing between the jurisdictional (
Two subsections of the FSIA spell out the exceptions to immunity from execution.
Because subsection (a) is intended to be narrower than subsection (b), we pay close attention to the differences in phrasing between the sections. Subsection (a) allows courts to execute only when the property is “used for a commercial activity,” whereas subsection (b) permits execution of “any property,” regardless of its use. The focus in subsection (a) is plainly on the “use” to which the property is put. As the Restatement explains, “For purposes of post-judgment attachment and execution, the Foreign Sovereign Immunities Act draws a sharp distinction between the property of states and the property of state instrumentalities ... The property of states may be attached only if it is or was used in commercial activity; the property of state instrumentalities may be attached without any such limitation, so long as the instrumentality itself is engaged in commercial activity in the United States.” RESTATEMENT § 460 cmt. b.
Restricting execution against property belonging to foreign states depending on the “use” of that property, rather than its source, helps accomplish the purpose of limiting execution against property directly belonging to a foreign state more severely than execution against property belonging to an instrumentality. The premise is that agencies or instrumentalities engaged in commercial activity are akin to any other player in the market, and that their functions are primarily commercial.
An example helps clarify the point. Consider an airplane owned by a foreign government and used solely to shuttle a foreign head-of-state back and forth for official visits. If the plane lands in the United States, it would not be subject to attachment or execution. The plane is not “used for” any commercial activity, in the U.S. or elsewhere. It plainly would not matter how the foreign government bought the plane, raised the purchase price, or otherwise came into ownership. Even if the government received the plane as payment from a U.S. company in an obviously commercial transaction, that would not somehow transform the “use” of the plane into a commercial use. Regardless of how the government came to own the plane, a U.S. court could never under the terms of the FSIA confiscate a plane used solely to transport a foreign head-of-state on official business. Attaching the plane and selling it in execution of a judgment would go too far in interrupting the public acts of a foreign state.4
The phrase “used for” in
III
In its petition for rehearing, the Bank advances an interpretation of “used for” that conflicts with the plain meaning of that phrase. The Bank contends that property is “used for” a commercial activity in the United States whenever it is “integral to” or “related to” a commercial activity located here. The Bank relies on a sentence from Judge Dennis‘s separate opinion: “Because the... royalties to the Congo were necessary and integral to, and therefore used for, the joint venture ... those royalty obligations fell within the exceptions to immunity from execution provided for by FSIA
The dictionary defines “to use” differently from any of these phrases. It defines “use,” as relevant here, to mean: “to carry out a purpose or action by means of: make instrumental to an end or process... UTILIZE.” WEBSTER‘S THIRD NEW INTERNATIONAL DICTIONARY 2524 (Philip B. Gove ed., Merriam Webster Inc. 1993) (1961). To use property for a commercial activity, within the ordinary meaning of “use,” would be to put the property in the service of the commercial activity, to carry out the activity by means of the property. Here, the royalty obligations in question represent the revenue, the income, from an allegedly commercial activity. In ordinary usage, we would not say that the revenue from a transaction is “used for” that transaction. For example, in return for an employee‘s service to his employer, he generally receives revenue in the form of a salary. It would be strange to say that “Thе employee uses his salary for his job.” He earns his salary from his job, but he uses it to pay the rent, buy groceries, and so forth. The revenue from a commercial transaction does not have the instrumental relationship to the commercial activity denoted by the phrase “used for;” it is not put in service of that activity, instead it is the end result or income from the activity.
The phrases “integral to” and “related to” plainly mean something different. These are broad phrases that would allow execution on the basis of just about any connection with a commercial activity. The statute specifies a particular kind of relationship, a “used for” relationship. If Congress had intended any relationship to suffice, we would not expect for it to have used the narrower “used for” language.
Furthermore, the structure of the FSIA indicates that the phrase “used for” was intended to have a more specific meaning than what the Bank suggests: if we were to interpret
(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 state elsewhere; 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 direct effect in the United States;
This section uses the phrase “in connection with” a commercial activity. It allows a plaintiff to pierce a foreign state‘s immunity for suits based on acts that have any connection with a commercial activity in the United States (or with a commercial activity elsewhere that causes a direct effect in the United States). This phrase, “in connection with,” means something like “related to” or “integral to.” That is, the phrasing in the immunity section means much the same thing that the Bank wants to assign to the phrasing in the execution section.
Section 1610(a), concerning immunity from execution, does not use the phrase “in connection with.” If Congress had intended to allow execution on property that had a “relationship with” or was “integral to” a commercial transaction in the United States, we would expect it to say as much, probably by using the same phrase (“in connection with“) as it used in crafting the exception to jurisdictional immunity. Instead,
(a) The property in the United States of a foreign state, as defined in section 1603(a) of this chapter, used for a commercial activity in the United States, shall not be immune from attachment in aid of execution, or from execution, upon a judgment entered by a court of the United States or of a State after the effective date of this Act, if [one of several additional factors applies].
Congress used the more specific phrase “used for a commercial activity” in this section rather than the less specific phrase “in connection with a commercial activity” used in
As we previously observed, 299 F.3d 378, 387-89 (5th Cir.2002), the difference in phrasing between the two “commercial activity” sections stands out especially starkly when viewed against the background of the historical and international law context of the FSIA. Historically, even under the “restrictive” theory of sovereign immunity, foreign sovereigns have enjoyed complete immunity from execution of their property in United States courts. Verlinden B.V. v. Central Bank of Nigeria, 461 U.S. 480, 486 (1983). Moreover, at the time the FSIA was passed, the international community viewed execution against a foreign state‘s property as a greater affront to its sovеreignty than merely permitting jurisdiction over the merits of an action. The Second Circuit‘s decision in De Letelier v. Republic of Chile, 748 F.2d 790, 798-99 (2d Cir.1984), relied on the international law context of the FSIA in concluding that the FSIA‘s exceptions to executional immunity were indeed narrower than its exceptions to jurisdictional immunity. The court relied on two principle sources of international law: the European Convention on State Immunity and the British State Immunity Act. The FSIA and the two European laws were all passed at roughly the same time: the European Convention in 1972, the FSIA in 1976, and the British State Immunity Act in 1978. Id. The European Convention did not provide any mechanism by which a litigant could execute against a foreign state‘s property: a judgment creditor had to obtain satisfaction through the foreign state‘s executive or administrative channels. Id.
The British State Immunity Act‘s provision on immunity from execution more closely parallels the FSIA‘s: it focuses plainly on the “use” of the property. The Act provides:
(2)(b) the property of a State shall not be subject to any process for the enforcement of a judgment or arbitration award or, in an action in rem, for its arrest, detention or sale.
. . .
(4) Subsection (2)(b) above does not prevent the issue of any process in respect of property which is for the time being in use or intended for use for commercial purposes ...
State Immunity Act 1978, c. 33, § 13 (Eng.). The British Act‘s phrasing makes explicit that the mere relationship to a commercial activity does not suffice to permit execution, the property must presently, “for the time being,” be “in use or intended for use for a commercial purpose.” The British Act‘s focus in the jurisdictional immunity section, by contrast, is on the “relationship” to commercial activity:
A State is not immune as respects proceedings relating to —
(a) a commercial transaction entered into by the State
State Immunity Act 1978, c. 33, § 3 (Eng.). Thus, the British Act parallels the FSIA: it allows jurisdiction based on mere relationship to a commercial activity, but very clearly permits execution only depending on the “use” of the property.
On the face of the FSIA, the exception to executional immunity is crafted using the more specific “used for” language instead of the broader “in connection with” language. When we place this difference in phrasing against the background of the history of the two forms of immunity in the United States and the international law context of the FSIA, the difference in phrasing stands out even more plainly. We reject the Bank‘s definition, not only because it does not accord with the plain meaning of the phrase “used for,”5 but because it would obscure a clearly intentional difference in the way the two different “commercial activity” exceptions from immunity — executional and jurisdictional — have been phrased by Congress.6
IV
Contrary to the Bank‘s suggestion, assigning the phrase “used for” its ordinary meaning does not make it impossible to execute against the intangible property of the foreign state. The Bank argues that we have improperly assigned a temporal focus to the phrase “used for,” that we have focused on the intended use of the property in the future instead of its use in the present or the past. The Bank suggests that, because it is difficult to prove what a foreign state intends to do in the future with intangible property, like bank accounts,7 judgment creditors will rarely be able to execute against any intangible property.
We clarify that we express no holding as to the temporal aspect of the phrase “used for.” In its petition for rehearing, the Bank does not allege any scenario under which the Congo has put its royalty or tax obligations at any point in time in the service of a commercial activity in the United States. That is, it does not claim that the Congo used the property for a commercial activity, within the ordinary meaning of “used for,” at any time. Instead, it wants us to interpret the phrase “used for” in a way that goes beyond the ordinary meaning assigned to that phrase. Because the temporal aspect of the phrase “used for” does not seem particularly important to resolving this case on any of the Bank‘s current theories, we express no opinion on when the property must be used for a commercial activity in the United States.
Moreover, we cannot see how focusing on the use of propеrty forecloses execution against intangible property. Our decision in Atwood Turnkey Drilling, Inc. v. Petroleo Brasileiro, S.A., 875 F.2d 1174 (5th Cir.1989), helps illustrate how certain intangible property can uncontroversially be viewed as used in service of a commercial activity in the United States. The Bank cites Atwood for the proposition that the panel opinion departs from precedent. To the contrary, Atwood demonstrates that the panel opinion is consistent with the way we have interpreted the “used for” requirement in the past.
In Atwood, Petrobras, a Brazilian state instrumentality, contracted with Atwood, an American company, to drill oil wells off the coast of Brazil. As security for the sums due Atwood under the contract, Petrobras provided a letter of credit issued by an American bank. When Petrobras refused to pay Atwood, Atwood sued for breach of contract in federal court. Because the letter of credit was due to expire by its own terms, the district court issued a preliminary injunction requiring Petrobras to extend the letter of credit for one year from the date of the order or until all issues pertinent to the letter of credit were resolved. Petrobras appealed, arguing that none of the FSIA‘s exceptions to immunity from prejudgment attachment,
(d) The property of a foreign state ... used for a commercial activity in the United States, shall not be immune from attachment prior to the entry of judgment in any action ... if —
(1) the foreign stаte has explicitly waived its immunity from attachment prior to judgment ... and
(2) the purpose of the attachment is to secure satisfaction of a judgment that has been or may ultimately be entered against the foreign state, and not to obtain jurisdiction.
This section, like
Although Atwood did not explicitly consider the “used for” requirement, Petrobras plainly used the letter of credit for a commercial purpose within the ordinary meaning of the phrase “used for.” Petrobras used the letter of credit to secure the services of an American corporation to do drilling work. As we explained in the panel opinion, “what matters is not how [the foreign state] made its money, but how it spends it.” In Atwood, the letter of credit did not represent the income or the revenue from the commercial transaction, as the royalty and tax obligations do here. Rather, Petrobras put the letter of credit in service of the commercial activity, it “spent” the letter of credit on that activity. On the record before us, by contrast, the Congo has not put its intangible property in the service of any commercial activity in the United States. The panel‘s definition of “used for” is therefore fully consistent with our having permitted the prejudgment attachment in Atwood.8,9
The Atwood case shows how courts can determine, without speculation, that the intangible property of a foreign state is used for a commercial activity in the United States. In this case, for example, the royalty and tax obligations would be used for a commercial activity in the United States if the Congo used them as collateral for loans obtained from United States banks. There is nothing so inherently speculative about the use of intangible property that courts cannot meaningfully ascertain how such interests are used by the foreign states that own them.
V
Finally, our focus on the use of a foreign state‘s property does not in any way conflict with the Supreme Court‘s decision in Republic of Argentina v. Weltover, Inc., 504 U.S. 607, 112 S.Ct. 2160, 119 L.Ed.2d 394 (1992), which explored the meaning of the phrase “commercial activity” in the FSIA. Nothing in the panel opinion concerns the definition of “commercial activity“: we assume for the sake of argument that the joint venture with the American oil companies was indeed a “commercial activity.” Instead, we focus on the phrase “used for,” a phrase nowhere found in the jurisdictional commercial activity exception discussed in Weltover. The Weltover court summarized its holding as follows:
[W]e conclude that when a foreign government acts, not as regulator of a market, but in the manner of a private player within it, the foreign sovereign‘s actions are “commercial” within the meaning of the FSIA. Moreover, beсause the Act provides that the commercial character of an act is to be determined by reference to its “nature” rather than its “purpose,”
28 U.S.C. § 1603(d) , the question is not whether the foreign government is acting with a profit motive or instead with the aim of fulfilling uniquely sovereign objectives. Rather, the issue is whether the particular actions that the foreign state performs (whatever the motive behind them) are the type of actions by which a private party engages in “trade and traffic or commerce.”
Id. at 614 (internal citations omitted). Weltover holds that we may not refer to the purpose of a sovereign state‘s activity in classifying its activity as commercial or noncommercial. Here, to the extent we have looked to purpose at all, we have looked to the purpose of the property, not the purpose of the activity. Weltover has nothing to say about the definition of “used for,” and nothing in that opinion commands or suggests that “used for” denotes anything other than its ordinary meaning.
VI
We interpret statutes according to their plain meanings. United States v. Ron Pair Enters., Inc., 489 U.S. 235, 242, 109 S.Ct. 1026, 103 L.Ed.2d 290 (1989). In ordinary usage, we would not say that someone uses the revenue or income of a transaction for that transaction. The Bank uses a number of phrases to describe the relationship of the royalty and tax obligations to the allegedly domestic commercial activity: the obligations are “contemplated by” the activity, they are “necessary to” or “integral to” the activity, they are “related to” the activity. All of these relationships рlainly differ from the relationship demanded by the statute: a “used for” relationship. Accordingly, we remand to the district court to determine how the Congo uses its royalty and tax obligations. How these obligations were generated is of no account under the plain language of the statute.
This appeal comes to us on a motion to dismiss. As such, there is little factual development in the record about how the royalties and tax obligations are used. We therefore vacate the dismissal of the garnishment action, which was based on the district court‘s conclusion that the oil joint venture between the Congo and the garnishees was not “commercial activity in the United States.” Even assuming that the district court was correct in this conclusion, that would tell us only how the royalties and tax obligations were generated, not how they are used. We remand to the district court for further consideration of the dispositive factual question, what the royalty and tax obligations are “used for.”10 If it turns out that the royalties and tax obligations are not used for any commercial activity in the United States, the district court should dissolve the writs of garnishment and dismiss the action.
VACATED and REMANDED for further proceedings not inconsistent with this opinion.
DENNIS, Circuit Judge, Concurring in vacating the district court‘s judgment and remanding the case for further proceedings but disagreeing in part with the majority opinion as to the controlling principles of law:
The pertinent provisions of the FSIA are:
§ 1610. Exceptions to the immunity from attachment or execution
(a) The property in the United States of a foreign state, as defined in section 1603(a) of this chapter, used for a commercial activity in the United States, shall not be immune from attachment in aid of execution, or from execution, upon a judgment entered by a court of the United States or of a State after the effective date of this Act, if —
(1) the foreign state has waived its immunity from attachment in aid of execution or from execution either explicitly or by implication, notwithstanding any withdrawal of the waiver the foreign state may purport to effect except in accordance with the terms of the waiver,
1.
In my opinion, the district court erred in failing to recognize that, in the loan agreement upon which the Bank‘s judgment against the Congo is based, the Congo explicitly waived its immunity from execution, as follows:
(C) The Borrower consents generally in respect of any suit, action or proceedings arising out of or in connection with this Agreement to the giving of any relief, or the issuance of any process in connection with any such suit, action or proceedings including, without limitation, the [taking], enforcement or execution against any property whatsoever (irrespective of its use or intended use) of any order or judgment that may be made or given in such action or proсeedings.
(D) To the extent that the Borrower may in any jurisdiction claim for itself or its assets immunity from suit, execution, attachment (whether in aid or execution, before judgment or otherwise) or other legal process and to the extent that in any such jurisdiction there may be attributed to itself or its assets such immunity (whether or not claimed) the Borrower agrees not to claim and waives such immunity to the fullest extent permitted by the laws of that jurisdiction intending, in particular, that in any proceedings taken in New York the foregoing waiver of immunity shall have effect under and be construed in accordance with the United States Foreign Sovereign Immunities Act of 1976.
There can be no reasonable doubt that the Congo thereby explicitly waived its immunity from execution of the judgment entered against it in New York in favor of the Bank in accordance with the
2.
Under the undisputed facts, the property executed upon — the garnishees’ intangible obligations to pay royalties — are in the United States, as required by
3.
The oil companies’ obligations to pay royalties are property of the Congo being used for commercial activity in the United States in accordance with
The FSIA defines “commercial activity” as:
[E]ither a regular course of commercial conduct or a particular commercial transaction or act. The commercial nature of an activity shall be determined by reference to the nature of the course of conduct, rather than by reference to its purpose.
28 U.S.C. § 1603(d) .
The Supreme Court held in Republic of Argentina v. Weltover, Inc., 504 U.S. 607, 614 (1992) that “when a foreign government acts, not as a regulator of a market, but in the manner of a private player within it, the foreign sovereign‘s actions are ‘commercial’ within the meaning of the FSIA.” Because
In Weltover, bond holders brought a breach of contract action against Argentina arising out of Argentina‘s unilateral rescheduling of the maturity dates for payment on certain government bonds. 504 U.S. at 609-10. A unanimous Court concluded that Argentina did not enjoy immunity from suit for its actions. The Court concluded that the issuance of the bonds was “commercial activity,” and that the unilateral extension of the bonds’ maturity dates by presidential decree was an act made “in connection with” that activity. Id. at 617, 612. Rejecting Argentina‘s argument that the issuance of the bonds was not commercial activity because the bonds were issued for a sovereign purpose, the Court explained: “it is irrelevant why Argentina participated in the bond market in the manner of a private actor; it matters only that it did so.” Id. at 617 (emphasis in original).
In the present case, the Congo engaged in commercial activity by entering into a joint venture with American oil companies and others for the purpose of discovering and extracting oil and gas. A “joint venture” is by definition a “business undertaking by two or more persons engaged in a single defined project.” Black‘s Law Dictionary 843 (7th ed. 1999); “shared profits and losses” is one of its necessary elements.
The district court concluded that the Congo did not engage in commercial activity because its contract with the oil companies was sovereign in nature and some of its activities were strictly sovereign. The district court relied on dictum in a Seventh Circuit case, Rush-Presbyterian-St.Luke‘s Med. Ctr. v. Hellenic Republic, 877 F.2d 574, 578 (7th Cir.1989) (“a contract whereby a foreign state grants a private party a license to exploit the state‘s natural resources is not a commercial activity, since natural resources, to the extent they are ‘affected with a public interest,’ are goods in which only the sovereign may deal.“)(citing and paraphrasing MOL, Inc. v. Peoples Republic of Bangladesh, 736 F.2d 1326, 1329 (9th Cir.1984)(“government‘s grant of license to capture and export rhesus monkeys for scientific experimentation not a commercial activity, since the agreement ‘concerned Bangladesh‘s right to regulate its natural resources,’ a uniquely sovereign function“)).1-1
Unlike the situation in MOL, however, the Congo‘s actions did not stop with its initial action as sovereign, in the regulation of its natural resources, to open them to exploitation and development. The Congo went on to step down from its sovereign status and engage in a typical commercial activity, a joint venture contract with oil companies for the exploration, production, and sale on the world market of oil and gas. This is not something that only a sovereign can do. Even if the Congo‘s initial action in exposing its minerals to development was sovereign and regulatory, “when a foreign government acts, not as a regulator of a market, but in the manner of a private player within it, the foreign sovereign‘s actions are ‘commercial’ within the meaning of the FSIA.” Weltover, 504 U.S. at 607. See also, Weltover Inc. v. Republic of Argentina, 941 F.2d 145, 151 (2d Cir.1991) (“[o]nce a sovereign enters the marketplace as a commercial actor, it should be subject to all the rules of the marketplace.“)2-1
Because the Texas oil companies’ obligation to pay royalties to the Congo were necessary and integral to, and therefore used for, the joint venture commercial activity conducted, in substantial part in the United States, by the Congo and the other parties to the joint venture, those royalty obligations fell within the exceptions to immunity from execution provided for by
4.
Finally, in my view, the district court erred or abused its discretion in not allowing the Bank to conduct discovery before dismissing its garnishment proceeding. The Bank made a reasonable showing that the garnishees’ obligations to pay royalties to the Congo is property of the Congo present in the United States, used for a commercial activity in the United States, and therefore not immune from execution upon an uncontested judgment entered by a court of a State. The district court‘s dismissal was tantamount to the conversion of a Rule 12(b)(6) motion to dismiss into a Rule 56 motion for summary judgment without giving all parties an opportunity to present all material made pertinent to such a motion by Rule 56. See
Conclusion
Although I agree with much of the majority opinion, I would reverse and remand the case for further proceedings not inconsistent with the reasons hеrein assigned.
ON PETITION FOR PANEL REHEARING
PER CURIAM:
IT IS ORDERED that the Republic of Congo‘s motion for leave to file its petition for rehearing out of time is GRANTED.
IT IS FURTHER ORDERED that the Republic of Congo‘s petition for panel rehearing is DENIED. In the petition, the Congo points out that the majority opinion in this case neglected to address explicitly one of the two prongs of analysis under
In our view, this omission does not require any change to the mandate of the majority opinion. The factual question of what the royalty and tax obligations are “used for” appears much less difficult on this record than the legal question of determining the situs of the intangible royalty obligations. Moreover, despite the Congo‘s arguments to the contrary, we continue to believe that the district court is the appropriate forum to resolve the factual question of how the Congo uses its property.
The petition for panel rehearing is therefore DENIED.
DENNIS, CIRCUIT JUDGE concurring in granting the Bank‘s petition for panel rehearing, and dissenting from denial of the Congo‘s petition for rehearing:
I.
I commend the majority opinion for recognizing that we interpret statutes according to their “plain meaning” and turning to the dictionary to determine what that meaning is for the words “used for” in
As the majority itself correctly notes, “used for” can mean “utilize.” What the majority omits to mention is that “used for” also means “to put into action or service: have recourse to or enjoyment of: EMPLOY.” Webster‘s Third New International Dictionary 2253 (Philip B. Gove ed., 3rd ed. 1993). See also Black‘s Law Dictionary 1540 (Bryan A. Gardner, ed., 7th ed. 1999) (“[t]he application or employment of something“); Merriam-Webster‘s Collegiate Dictionary 1301 (Frederick C. Mish ed., 10th ed. 1993) (“avail oneself of: EMPLOY ... to expend or consume by putting to use“). Thus property is “used for commercial activity” if it is employed in, applied in the service of, or utilized for commercial activity.
The majority not only uses an improperly truncated and cramped meaning of “use“, it also mischaracterizes the assets at issue in this case which the Bank seeks to attach. In order to make its argument work, the majority incorrectly describes Congo‘s royalty interest as “revenue” or “income,” i.e., as the results or fruits of the Congo‘s right to receive royalties rather than the property right itself. On the contrary, however, a landowner royalty interest is an intangible property interest entitling its owner to a share of production, in kind or cash, if, as and when there is production, free of the costs of production. See 8 Howard R. Williams & Charles J. Meyer, Oil and Gas Law 952 (2001). See also Jensen v. Wilkinson, 133 S.W.2d 982, 984 (Tex.Civ.App. 1939)(“... the usual and customary way for a land-owner to realize on the value of his land for oil is to get it leased, retaining royalty rights, and through such royalty rights to share in the profits which it is hoped will issue from his land in the form of oil production, or to sell such royalty rights or portions thereof to others.“);
A simple analogy helps here. The relationship between a royalty interest and the proceeds from that interest is the same as between shares of stock and dividends owed as a consequence of ownership of shares. Just as a share of stock has existence and value separate from dividends, landowner royalty interest has existence and value as a property interest separate from the payments owed on that interest. See Jensen, 133 S.W.2d at 984 (explaining that value to royalty interest prior to oil production comes from “belief that the working interest, which is created by the same-self lease that creates the royalty rights, will be developed and operated“). And while the majority may reasonably think that it would be strange to describe revenue as “used for” the enterprise that created it, it is certainly normal usage to consider shares of stock or royalty interest as “used for” the commercial activity which ultimately generates production and revenue.
The majority thus ignores both the ordinary meaning of “use” and misconceives the nature of the property interest involved here, to arrive at the conclusion that Bank has failed make a showing that the royalty interest is “used for” commercial activity. For these reasons I believe that the majority‘s analysis is incorrect.
I would reverse the district court‘s grant of summary judgment, and remand for further proceedings in light of the precepts discussed in my separate opinions.
II.
In denying the Congo‘s request for an opinion on the situs of the royalty obligations the majority writes, “[t]he factual question of what the royalty and tax obligations are ‘used for’ appears much less difficult on this record than the legal question of determining the situs of the intangible royalty obligations.”
I cannot comprehend why the difficulty of the situs question allows this court to shirk its duty in guiding the district court on a complex legal determination it may have to make. Such a conсlusion is justifiable only by assuming that it is inevitable that the district court will find that the royalty interest is not “used for” commercial activity. If the majority sub silentio has already reached this decision, it should forthrightly declare the reasons for its conclusion. Although I likely would disagree with the reasons, they may reveal that the case should not be remanded or provide helpful guidance to the district court if it is remanded.
Upon further research I think that the situs question is one which deserves more attention, and one upon which the district court may need more guidance in answering. Accordingly, I would grant the Congo‘s petition for rehearing for the purpose of clarifying and setting forth th’
Notes
H.R. REP. No. 94-1487, at 30 (1976).Section 1610(c) prohibits attachment or execution under sections 1610(a) and (b) unless the court has issued an order for such attachment and execution. In some jurisdictions in the United States, attachment and execution to satisfy a judgment mаy be had simply by applying to a clerk or to a local sheriff. This would not afford sufficient protection to a foreign state.
Atwood, 875 F.2d at 1177 (emphasis added). The phrases “contemplated by” and “related to” in Atwood refer to language in the waiver agreement, not to language in the statute. The phrase occurs in the text of the Atwood opinion immediately after the relevant excerpt from the waiver agreement, in the following context:B. Waiver of sovereign immunity. The Borrower [Petrobras] acknowledges and agrees that the activities contemplated by the provisions of this agreement and the notes are commercial in nature ... and therefore acknowledges and agrees that it is not entitled to any right of immunity on the grounds of sovereignty ... in any legal action or proceedings arising out of or relating to this agreement or the notes.
The phrase “contemplated by” in Atwood refers to the scope of Petrobras‘s waiver of immunity, not to the “used for” requirement ofThe instant case relates to the letter of credit which is an activity contemplated by the financing agreement. Accordingly, the waiver provision applies ...
With respect to discovery, the district court may on remand limit any additional discovery to facts relating to the immunity determination. Arriba Ltd. v. Petroleos Mexicanos, 962 F.2d 528, 534 (5th Cir.1992); Kelly v. Syria Shell Petroleum Dev. B.V., 213 F.3d 841, 849 (5th Cir.2000); First City, Texas-Houston, N.A. v. Rafidain Bank, 150 F.3d 172, 176-77 (2d Cir.1998). Even with respect to the immunity issue, the district court should order discovery “circumspectly and only to verify allegations of specific facts crucial to [the] immunity determination.” Arriba Ltd., 962 F.2d at 534. The scope of discovery on exceptions to foreign sovereign immunity is a matter of the district court‘s discretion. Kelly, 213 F.3d at 849.