Case Information
UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA _________________________________________
)
EXXON MOBIL CORPORATION, )
)
Plaintiff, )
)
v. ) Case No. 19-cv-01277 (APM)
)
CORPORACIÓN CIMEX S.A. et al., )
)
Defendants. )
_________________________________________ )
MEMORANDUM OPINION AND ORDER I. INTRODUCTION
In 1996, Congress enacted the Cuban Liberty and Democratic Solidarity Act, 22 U.S.C. §§ 6021 et seq. , also known as the LIBERTAD, or Helms-Burton, Act. Title III of the LIBERTAD Act creates for U.S. nationals a private right of action against any “person” who traffics in property expropriated by the government of Cuba after January 1, 1959, and defines “person” to include any agency or instrumentality of a foreign state. The Act, however, contains a unique provision that authorizes the President to suspend the private right of action. Every presidential administration since the statute’s passage had done just that. But then the Trump Administration announced that it would lift the suspension in May 2019. That action opened the door for this novel lawsuit.
Over sixty years ago, Plaintiff Exxon Mobil Corporation (“Exxon”) held an interest in various oil and gas assets located in Cuba that were owned and operated by its wholly owned subsidiaries. The government of Cuba expropriated those assets in 1960. Exxon now seeks compensation under Title III of the LIBERTAD Act from the Cuban state-owned entities that allegedly traffic in its confiscated properties: Defendants Corporación CIMEX S.A. (Cuba) (“CIMEX”), Corporación CIMEX S.A. (Panama) (“CIMEX (Panama)”), and Unión Cuba- Petróleo (“CUPET”). Exxon seeks entry of an actual damages award of over $71 million plus treble damages.
Defendants now move to dismiss Exxon’s complaint, arguing that this court lacks subject matter jurisdiction over the dispute. For the reasons that follow, the court denies Defendants’ motion to dismiss as to CIMEX, defers ruling as to CUPET and CIMEX (Panama), and allows limited jurisdictional discovery as to CUPET and CIMEX (Panama).
II. BACKGROUND
A. Factual Background
1. Exxon’s Operations in Cuba Until 1960, Exxon, then known as Standard Oil, owned several subsidiaries operating in Cuba. See Second Am. Compl., ECF No. 33 [hereinafter SAC], ¶¶ 23–24. One such subsidiary was Esso Standard Oil, S.A. (“Essosa”), a wholly owned Panamanian corporation that operated in the Caribbean Basin and had its headquarters in Havana, Cuba. Id. ¶ 24. Exxon also operated Esso Standard (Cuba) Inc. and Esso (Cuba) Inc. (the “Exploration Companies”), which explored for and produced crude oil in Cuba. Id .
In October 1959, following the rise of Fidel Castro, the Cuban government arrived at the Exploration Companies’ Cuban office and “confiscated and copied all files, maps, and other records of geological exploration.” See id. ¶ 27. The Exploration Companies subsequently stopped all exploration efforts in Cuba and closed their office on the island. See id.
Some months later, in the summer of 1960, the Cuban government issued a series of resolutions that expropriated Essosa’s rights to its Cuban property. Id. ¶ 28. The resolutions prohibited Essosa “from operating its expanded Belot Refinery,” forced the company to “abandon its Cuban-based marketing operation,” and resulted in the closure of Essosa’s gasoline service stations in the country. Id. ¶ 29. All told, the Cuban government confiscated Essosa’s Belot Refinery, multiple bulk products terminals, and more than one hundred service stations. See id. ¶ 31. According to Exxon, “Cuba has never paid, and Plaintiff has never received, compensation for the expropriation of” that property. Id. ¶ 33.
2. The Foreign Claims Settlement Commission In response to Cuban expropriations, Congress in 1964 established a program pursuant to the International Claims Settlement Act of 1949, 22 U.S.C. §§ 1621 et seq ., to provide a way for “nationals of the United States” to submit expropriation claims against Cuba to the U.S. Foreign Claims Settlement Commission (“FCSC”). See Pub. L. No. 88-666, 78 Stat. 1110 (1964); Helmerich & Payne Int’l Drilling Co. v. Bolivarian Republic of Venezuela ( Helmerich III ), 743 F. App’x 442, 451 (D.C. Cir. 2018). The FCSC was tasked with determining “the amount and validity of claims against the Government of Cuba . . . which have arisen since January 1, 1959, . . . out of nationalization, expropriation, intervention, or other takings of, or special measures directed against, property of nationals of the United States . . . in order to obtain information concerning the total amount of such claims against the Government of Cuba . . . on behalf of nationals of the United States.” 22 U.S.C. § 1643.
In 1969, Standard Oil, Exxon’s predecessor, submitted a claim to the FCSC. SAC ¶ 34. The FCSC certified that Standard Oil “suffered a loss in the total amount of $71,611,002.90 . . . as a result of the intervention on July 1, 1960, of the Cuban branch of Essosa, a Panamanian corporation wholly owned by claimant.” SAC, Ex. 1, ECF No. 33-1 [hereinafter FCSC Claim], at 9. The award also entitled Standard Oil to interest at a rate of 6% per annum from July 1, 1960, to the date of settlement. Id. at 10. Exxon “has never settled the outstanding certified claims or received any payment from any entity with respect to the principal or interest due on its certified claim.” SAC ¶ 43.
3. The LIBERTAD, or Helms-Burton, Act In 1996, President Clinton signed into law the LIBERTAD Act, also known as the Helms-Burton Act, Pub. L. No. 104–114, 110 Stat. 785 (1996) (codified at 22 U.S.C. §§ 6021 et seq. ). Title III of the Act creates for U.S. nationals who owned property in Cuba a private right of action against any “person” that “traffics in property which was confiscated by the Cuban Government on or after January 1, 1959.” 22 U.S.C. § 6082(a)(1)(A). The Act defines “person” to include “any agency or instrumentality of a foreign state.” Id . § 6023(11).
A person engaged in trafficking confiscated property shall be liable to the U.S. national “for money damages.” Id. § 6082(a)(1)(A). The statute provides multiple ways for computing money damages, one of which is “the amount . . . certified to the claimant by the [FCSC], plus interest.” Id. § 6082(a)(1)(A)(i)(I). A certified claim from the FCSC creates a rebuttable presumption as to the amount of an award. Id. § 6082(a)(2). It also entitles the claimant to receive treble damages from the person trafficking the confiscated property. Id. §§ 6082(a)(3)(A), (C)(ii).
Title III, however, contains an important condition on the availability of its private cause of action. No doubt due to the potential foreign policy implications of such claims, Congress authorized the President to suspend Title III’s private right of action for sequential periods of up to six months upon notification to Congress that “the suspension is necessary to the national interests of the United States and will expedite a transition to democracy in Cuba.” Id . § 6085(b)(2). Since the Act’s passage every administration has issued a sequential six-month suspension of the right of action. SAC ¶ 45.
That changed under President Trump. On April 17, 2019, Secretary of State Michael Pompeo announced that the Trump Administration “would no longer suspend the right to bring an action under Title III effective May 2, 2019.” U.S. Dep’t of State, Cuba: Title III FAQs (LIBERTAD), https://www.state.gov/cuba-title-iii-faqs-libertad/ (last visited Mar. 22, 2021). That announcement opened the door for Exxon to file this action, which it did on May 2, 2019. See Compl., ECF No. 1.
4. Defendants’ Alleged Trafficking Activities Exxon contends that Defendants have “trafficked” in Essosa’s confiscated property for commercial gain.
CIMEX . According to Exxon, CIMEX “engages in a variety of foreign commerce across a variety of industries,” and, as relevant to Exxon’s suit, “operates over 600 service stations that sell gas and consumer goods across Cuba.” SAC ¶¶ 105–106. CIMEX, along with CUPET, operates over 300 such service stations under the name “Servi-Cupet.” Id. ¶ 106. Exxon explains that Servi-Cupets “are the functional equivalent of a 7-Eleven convenience store.” Id. ¶ 109. The stations sell “a variety of American products, including poultry, cereal, rice, cleaning supplies, frozen vegetables, and alcoholic beverages.” Id . Some of those service stations are built and maintained on property that formerly belonged to Essosa. Id. ¶ 107.
CIMEX also uses its service stations to process remittances, or money transfers. Id. ¶ 111. When a remittance is sent to Cuba from the United States, “U.S. dollars are transferred by persons in the United States using agent locations in the United States.” Id. ¶ 121. Recipients can then collect their remittances at CIMEX’s service stations, among other locations in Cuba, and some of the service stations that process remittances are maintained on Essosa’s former property. See id. ¶¶ 115–116.
Exxon alleges that “Cuba received an estimated $3.6 billion U.S. dollars in 2018 from remittances, and it is estimated that 90% of these remittances come from the United States.” Id. ¶ 112. Remittances are “the only conduit for persons residing in the United States to transfer U.S. dollars to support family and friends in Cuba.” Id. ¶ 122. Exxon maintains that the remittance business is crucial to the Cuban economy because it provides U.S. dollars for the Cuban government and financial system, which are strained for hard currency. See id. ¶ 121. Cuba channels remittances through FINCIMEX, which has “a license to manage all remittance wire transfers from the United States,” and “CIMEX facilitates remittance transactions through its partnership with a U.S.-based remittance provider.” Id. ¶ 113.
CIMEX (Panama) . Exxon makes no direct trafficking allegations against CIMEX (Panama). Instead, it claims that CIMEX and CIMEX (Panama) “are alter egos of one another.” Id. ¶ 3. The two entities, according to Exxon, share “the ultimate same ownership, with the same officers and directors, [and] work[] out of the same office at the same address without any regard for corporate formalities or respecting the separateness of either entity.” Id. ; see also id. ¶ 19.
CUPET . CUPET is Cuba’s state-owned oil company. Id. ¶ 91. It operates Essosa’s former Belot Refinery, which, following a merger with another refinery, is now known as the Ñicó Lopez Refinery, one of four refineries owned by CUPET. Id. ¶¶ 92–93. One of CUPET’s “main objectives is to supply the domestic needs for petroleum products, including gasoline, diesel, and fuel oil.” Id. ¶ 93.
CUPET also allegedly uses Essosa’s confiscated property—including its former refinery and “plants, terminals, and infrastructure”—to import and refine crude oil, as well as to explore for and extract oil. Id. ¶¶ 97–98. In support of these activities, CUPET engages in business with foreign companies, “allow[ing] CUPET to import crude oil to supply the domestic needs for petroleum products and engage in joint oil exploration projects in Cuba and the Gulf of Mexico.” Id. ¶ 99. CUPET provides “offshore exploration opportunities for a range of international companies” and “host[s] annual conferences seeking foreign partners in oil and gas exploration and production.” Id. ¶ 101(c).
Apart from CUPET’s commercial activities, Exxon also contends that CUPET has negligently operated the Ñicó Lopez Refinery and “cause[d] considerable environmental damage to the Florida Straits.” Id. ¶ 103. The Ñicó Lopez Refinery allegedly “dumps hydrocarbons and industrial waste into Havana Bay,” and polluted water has run “northeasterly 40-50 miles” from the refinery, which Exxon contends “bring[s] the pollution at or near the United States-Cuba maritime boundary.” Id.
B. Procedural Background
On May 2, 2019, Exxon filed its initial Complaint in this matter. See Compl., ECF No. 1. Thereafter, it filed the Second Amended Complaint, adding CIMEX (Panama) as a defendant. See SAC. The Second Amended Complaint is the operative pleading.
Defendants have moved to dismiss the Second Amended Complaint for lack of subject matter and personal jurisdiction. See Defs.’ Mot. to Dismiss Action with Prejudice, & for Other Relief, ECF No. 42 [hereinafter Defs.’ Mot.]. As to subject matter jurisdiction, Defendants assert that: (1) they are agencies or instrumentalities of a foreign sovereign, Cuba, and thus are immune from suit pursuant to the Foreign Sovereign Immunities Act (“FSIA”), and (2) Exxon lacks Article III standing. See Defs.’ Mot., Defs.’ Mem. of P. & A. in Supp. of Mot. to Dismiss with Prejudice & for Other Relief, ECF No. 42-3 [hereinafter Defs.’ Br.]. As to personal jurisdiction, Defendants contend that, as agents or instrumentalities of a foreign sovereign, they enjoy protection under the Due Process Clause and lack the requisite minimum contacts with the United States to be subject to suit here. Id. at 47–60.
The court heard oral argument on March 10, 2021. See Minute Entry, Mar. 10, 2021. Following the hearing, the parties agreed to defer their dispute over personal jurisdiction until after the question of subject matter jurisdiction is resolved, including possible interlocutory appellate review. See Stip. & Order, ECF No. 59. Therefore, the court in this decision focuses only on its subject matter jurisdiction and does not consider the parties’ positions on personal jurisdiction.
II. LEGAL STANDARD
Defendants have asserted immunity from suit under the FSIA, and so “the court’s focus
shifts to the exceptions to immunity laid out in 28 U.S.C. §§ 1604, 1605, and 1607.”
Phx.
Consulting, Inc. v. Republic of Angola
,
In moving to dismiss, a foreign-state defendant may challenge either the legal or factual
sufficiency underpinning an exception.
See Phx. Consulting
,
IV. DISCUSSION
The parties agree that Cuba wholly owns Defendants CIMEX, CIMEX (Panama), and CUPET, and therefore Defendants are presumptively immune from suit in U.S. courts as agencies or instrumentalities of a foreign state. See 28 U.S.C. § 1604 (stating “a foreign state” is immune from suit in the courts of the United States, unless a statutory exception applies); id. § 1603(a) (defining “foreign state” to include “an agency or instrumentality of a foreign state”); SAC ¶ 9 (alleging Defendants to be “agencies or instrumentalities of a foreign state”).
Exxon nevertheless argues that this court has jurisdiction over Defendants because Congress abrogated their sovereign immunity in three statutory provisions: (1) Title III of the LIBERTAD Act, (2) the FSIA’s commercial activity exception, and (3) the FSIA’s expropriation exception. See Pl.’s Mem. of Law in Opp’n to Mot. to Dismiss the Action & for a Partial Stay, ECF No. 47 [hereinafter Pl.’s Br.], at 2–3. Short of a finding that Defendants are not immune to suit, Exxon has also requested limited jurisdictional discovery. Id. at 33–34. Defendants counter that none of the cited grounds to abrogate immunity apply and that jurisdictional discovery is unwarranted; they also argue that Exxon lacks standing. See Defs.’ Br. at 2–4, 45–46.
The court first turns to Exxon’s reliance on Title III as a source for abrogating immunity, then addresses the immunity exceptions under the FSIA, and concludes with a discussion of standing.
A. Title III of the LIBERTAD Act
Exxon’s opening salvo is unusual. It has been a common refrain since the Supreme Court’s
decision in
Argentine Republic v. Amerada Hess Shipping Corp.
that “the FSIA [is]
the sole basis
for obtaining jurisdiction over a foreign state in our courts.”
Exxon’s argument proceeds as follows. Title III permits actions against “any person” trafficking in confiscated property, 22 U.S.C. § 6082(a)(1)(A), and the term “person” is defined to include “any agency or instrumentality of a foreign state,” id . § 6023(11). Title III further provides that, “[e]xcept as provided in this subchapter, the provisions of Title 28 . . . apply to actions under this section to the same extent as such provisions and rules apply to any other action brought under section 1331 of Title 28.” Id . § 6082(c)(1). The FSIA, Exxon points out, is contained in Title 28. Key to Exxon’s reading is the clause “except as provided in this subchapter,” id. According to Exxon, by including the clause “except as provided in this subchapter” in Title III, Congress intended to take Title III cases outside the strictures of the FSIA. See Pl.’s Br. at 13. More pointedly, Exxon maintains that “the FSIA applies only so long as it does not conflict with Title III, in which case Title III must control as Congress directed.” Id. Such a conflict exists between the FSIA’s immunity provisions and Title III, according to Exxon. Requiring a Title III plaintiff to satisfy an immunity exception under the FSIA would frustrate Congress’s purpose in creating a private right of action that includes actions against an agency or instrumentality of a foreign state. Title III, Exxon urges, therefore obviates the need to satisfy an FSIA immunity exception. Exxon’s logic, though not without superficial appeal, ultimately fails.
To begin, the court looks to the FSIA. Congress used its power to determine “the exact
degrees and character” of “the subject-matter jurisdiction of the lower federal courts” to create in
the FSIA a presumption of immunity for foreign sovereigns.
Amerada Hess
, 488 U.S. at 433
(internal quotation marks omitted). The FSIA thus provides that “[s]ubject to existing international
agreements to which the United States is a party at the time of enactment of this Act a foreign state
shall be immune from the jurisdiction of the courts of the United States and of the States except as
provided in sections 1605 to 1607 of this chapter.” 28 U.S.C. § 1604. Section 1604 of the FSIA
thus (1) establishes the presumption of foreign state immunity in U.S. courts (“a foreign state shall
be immune”) and (2) identifies where the exceptions to that immunity can be found (“existing
international agreements” and “except as provided in sections 1605 to 1607 of this chapter”).
See
Sachs
,
Title III of the LIBERTAD Act, codified at 22 U.S.C. § 6082, is not among the listed
exceptions in the FSIA. Moreover, Title III does not mention sovereign immunity. That is because
Title III does no more than create a private right of action and is not an exception to sovereign
immunity. Exxon’s argument boils down to a contention that Title III’s private right of action
conflicts with the FSIA and therefore the private right of action waives sovereign immunity, but
the D.C. Circuit has been clear that private rights of action and exceptions to sovereign immunity
are two entirely different species. In
Cicippio-Puleo v. Islamic Republic of Iran
, the court
considered Congress’s efforts to legislate liability against foreign state sponsors of terrorism.
See
The same “clearly settled distinction” defeats Exxon’s argument here. While Title III provides Exxon with a cause of action against Cuba, it is silent as to sovereign immunity. Just as the existence of a waiver of sovereign immunity did not establish a private right of action in Cicippio-Puleo , the converse must also be true: the existence of a private right of action cannot establish a waiver of foreign sovereign immunity. Title III’s private right of action therefore cannot be construed to create a conflict with the FSIA’s sovereign immunity provisions, and Exxon’s jurisdictional theory fails.
Furthermore, as written, Title III does not reflect an intention to waive sovereign immunity. The court must presume that Congress was aware of the Supreme Court’s sovereign immunity
jurisprudence when it passed the LIBERTAD Act in 1996,
see Nat’l Ass’n of Mfrs. v. Dep’t of
Lab.
,
Congress’s silence as to immunity is amplified by other provisions of Title III that make
explicit reference to the FSIA. Subsection (c)(2), which immediately follows the provision on
which Exxon relies, explicitly mentions the FSIA, providing that “service of process . . . shall be
made in accordance with section 1608 of Title 28.” 22 U.S.C. § 6082(c)(2). Given that Congress
knew how to refer to a provision of the FSIA when it wanted to, the court doubts that Congress
would have cavalierly jettisoned for Title III actions the comprehensive scheme that the FSIA
creates simply by stating in subsection (c)(1) that Title 28 applies “[e]xcept as provided in this
subchapter,”
id.
§ 6082(c)(1).
See Whitman v. Am. Trucking Ass’ns, Inc.
,
In addition, Congress was careful to anticipate and explicitly provide instructions for instances in which Title III was in tension with existing doctrines, suggesting that Congress would have explicitly stated the FSIA did not apply to Title III if that were its intention. For example, Congress provided that a court may not invoke the “act of state doctrine”—which “precludes the courts of this country from inquiring into the validity of the public acts a recognized foreign sovereign power committed within its own territory,” Banco Nacional de Cuba v. Sabbatino , 376 U.S. 398, 401 (1964), superseded by statute , 22 U.S.C. § 2370(e)(2)—to “decline . . . to make a determination on the merits in an action” brought pursuant to Title III, 22 U.S.C. § 6082(a)(6). Similarly, Congress also anticipated that Title III might someday create tension with a democratically elected government in Cuba. Title III therefore explicitly provides that “any judgment against an agency or instrumentality of the Cuban Government shall not be enforceable against an agency or instrumentality of either a transition government in Cuba or a democratically elected government in Cuba.” 22 U.S.C. § 6082(d). Despite these instances in which Congress took pains to explicitly define how Title III would interact with existing doctrines, Congress said nothing with respect to foreign sovereign immunity. It would therefore be inconsistent with the comprehensive scheme Congress drafted in Title III for the court to interpret Congress’s statement that Title 28 applies “[e]xcept as provided in this subchapter” to quietly abrogate foreign sovereign immunity.
Beyond the text of Title III, the court’s conclusion is bolstered by the fact that when
Congress has devised new exceptions to the presumption of sovereign immunity in the past, it has
amended the FSIA in plain and certain terms. For example, in 1996, Congress passed the
Antiterrorism and Effective Death Penalty Act, which introduced a new exception to sovereign
immunity for state acts of terrorism. Pub. L. No. 104-132, 110 Stat. 1214 (1996);
see also Owens
v. Republic of Sudan
,
Finally, as a matter of textual interpretation, the “[e]xcept as provided in this subchapter” clause bears a straightforward reading that does not require the court to upend the FSIA’s sovereign immunity scheme. The clause is most naturally understood to mean that where an express provision of Title III directly contradicts an express provision of Title 28, including the FSIA, the text of Title III governs. And certain provisions of Title III do conflict with Title 28. For example, Title III creates a $50,000 amount-in-controversy requirement, 22 U.S.C. § 6082(b), whereas under the FSIA, federal district courts have original jurisdiction over foreign states “without regard to amount in controversy,” 28 U.S.C. § 1330(a). For suits brought pursuant to Title III, then, the $50,000 amount-in-controversy trumps the FSIA. No similar provision expressly abrogates sovereign immunity. Had Congress intended to create a special immunity waiver for Title III actions that avoids the FSIA’s strictures, the court would have expected Congress to do so clearly, as it did in other instances when Congress set rules specific to Title III actions.
B. The FSIA
Having determined that Title III does not supply the waiver of sovereign immunity needed to advance Exxon’s case, the court turns to the FSIA’s immunity exceptions. Two are relevant here: the commercial activity exception and the expropriation exception.
1. Which Exceptions Can Apply At the outset, the parties clash over the interplay between the commercial activity and expropriation exceptions. According to Defendants, the expropriation exception in this case fully eclipses the commercial activity exception because Exxon’s claim turns on Cuba’s “quintessentially sovereign act” of expropriating property. Defs.’ Br. at 5–8 (internal quotation marks omitted). Relying on Rong v. Liaoning Province Government , 452 F.3d 883 (D.C. Cir. 2006), Defendants contend that because “commercial use almost always follows expropriation, allowing suit on that commercial use under the commercial activity exception would eviscerate the distinct limitations of the expropriation exception.” Defs.’ Br. at 6.
But this argument runs aground on controlling precedent. The D.C. Circuit has “never held
that in order to proceed against a foreign government, a claim must fall into just one FSIA
exception.”
de Csepel v. Hungary
,
2. The Commercial Activity Exception As relevant here, the commercial activity exception provides that a “foreign state shall not be immune from the jurisdiction of the courts of the United States in any case . . . in which the action is based . . . 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.” 28 U.S.C. § 1605(a)(2). The parties’ differences center on two elements of this exception: (1) whether Exxon’s claim is “based upon” a “commercial activity” and (2) whether Defendants’ alleged commercial activity “causes a direct effect in the United States.” The court addresses each element in turn.
a. Commercial activity
The Supreme Court has instructed that the inquiry of whether a suit is “based upon” a
“commercial activity” “first requires a court to identify the particular conduct on which the
plaintiff’s action is ‘based.’”
Sachs
,
Here, the “core” of Exxon’s action arises from “trafficking” in expropriated property.
Under Title III of the LIBERTAD Act, “any person that . . . traffics in property which was
confiscated by the Cuban Government” shall be liable to any U.S. national who owns the claim to
such property. 22 U.S.C. § 6082(a)(1)(A). The statutory text of Title III thus makes clear that
trafficking, and not expropriation, is the gravamen of the claim. Defendants are wrong to contend
otherwise.
See
Defs.’ Br. at 5–8. The Act does not grant a cause of action for the mere
expropriation of the property. Rather, liability under the Act attaches only when a U.S. person’s
property has been confiscated
and
trafficked. To be sure, expropriation, or a showing that the
plaintiff’s property has been “confiscated,” is a necessary element of a trafficking claim, but that
element alone would not “entitle a plaintiff to relief,”
Sachs
,
Having determined that “trafficking” is the “gravamen” of a Title III claim, the court has
little trouble concluding that the acts of trafficking alleged here constitute “act[s] . . . in connection
with a commercial activity” for purposes of the FSIA. 28 U.S.C. § 1605(a)(2). “[A] state engages
in commercial activity . . . where it exercises only those powers that can also be exercised by
private citizens, as distinct from those powers peculiar to sovereigns.”
Nelson
,
In Title III, Congress selected a decidedly broad definition for the term “traffics” that plainly encompasses the types of actions taken by private citizens acting in trade or commerce. A person “traffics” in confiscated property if that person knowingly and intentionally:
(i) sells, transfers, distributes, dispenses, brokers, manages, or otherwise disposes of confiscated property, or purchases, leases, receives, possesses, obtains control of, manages, uses, or otherwise acquires or holds an interest in confiscated property, (ii) engages in a commercial activity using or otherwise benefiting from confiscated property, or
(iii) causes, directs, participates in, or profits from, trafficking (as described in clause (i) or (ii)) by another person, or otherwise engages in trafficking (as described in clause (i) or (ii)) through another person,
without the authorization of any United States national who holds a claim to the property.
22 U.S.C. § 6023(13)(A). The breadth of this definition makes clear that, generally speaking, an act of “trafficking” under the LIBERTAD Act will likely qualify as commercial activity for purposes of the FSIA.
And it does here. Exxon alleges that Defendants have acted as private parties, not
sovereign entities, with respect to the confiscated property. Exxon alleges that Defendants traffic
in the expropriated property via (1) “commercial activities in the global oil market,” including
owning and operating refineries, importing and refining crude oil, and conducting exploration and
extraction of oil, SAC ¶¶ 91–104; (2) operating service stations “that sell gas and consumer goods”
on confiscated property,
id.
¶¶ 105–110; and (3) processing remittances on confiscated property,
id.
¶¶ 111–122. Each of these actions is “commercial in nature,”
Foremost-McKesson
, 905 F.2d
at 450, and could be accomplished by “[a] private party in the market,”
Rong
,
Defendants cite the D.C. Circuit’s decisions in
Foremost-McKesson
and
Rong
, but their
reliance is misplaced. In those cases, the plaintiffs brought claims that were based on the
expropriation of their assets.
See Foremost-McKesson, Inc. v. Islamic Republic of Iran
,
No. 82-cv-0220,
b. Direct effects
The commercial activity exception also requires that the “act . . . in connection with a
commercial activity” “cause[] a direct effect in the United States.” 28 U.S.C. § 1605(a)(2). The
Supreme Court has explained that “an effect is ‘direct’ if it follows as an immediate consequence
of the defendant’s activity.”
Weltover
,
Exxon alleges that Defendants’ trafficking has had the following direct effects in the United States: (1) CIMEX channels money from U.S. citizens to Cuba through remittances processed at service stations located on former Essosa properties, Pl.’s Br. at 17–21; (2) CIMEX sells food and consumer goods imported from the United States at service stations on confiscated properties, id. at 21–22; (3) Defendants deprive Exxon of the use of the confiscated property, id. at 23–25; (4) CUPET uses the confiscated property to compete with Exxon in the global oil market, id. at 25–27; and (5) CUPET’s operation of the confiscated refinery and processing facilities has polluted U.S. waters, id. at 27–28.
i. Remittances Starting with remittances, Exxon argues that CIMEX’s trafficking has a direct effect in the United States because CIMEX operates on confiscated property service stations that process remittances sent by individuals in the United States to recipients in Cuba. [1] According to Exxon, “[t]he ‘immediate consequence’ of opening these channels is that they create a market for remittances to flow from the U.S. to Cuba and enable these transactions to occur.” Pl.’s Br. at 18. The court agrees.
It is clear from Defendants’ own description of CIMEX’s remittance business that CIMEX uses confiscated property to engage in continuous commerce with the United States. According to Defendants’ declarant, Mali Suris Valmaña, the legal director of CIMEX, certain of CIMEX’s service stations process remittances sent from the United States via Western Union. Defs.’ Mot., Decl. of Mali Suris Valmaña, ECF No. 42-4 [hereinafter Valmaña Decl.], ¶ 6. A remittance is initiated when a U.S. resident designates a recipient in Cuba for a transfer of money and makes payment to Western Union. Id. ¶¶ 13(a)–(b). The U.S. resident receives a “Unique Code” identifying the particular remittance, which she then shares with the intended recipient in Cuba. Id. ¶¶ 13(b)–(c). The recipient can select any of 502 Western Union locations in Cuba, present the Unique Code and appropriate identification, and collect an amount in Cuban convertible pesos, or “CUCs,” equal to the original remittance amount. Id. ¶¶ 13(d)–(e), (i). Defendants concede that between four and ten of CIMEX’s properties that have Western Union locations operate on property connected to Essosa. Id. ¶ 12.
In arguing whether CIMEX’s processing of remittances constitutes a direct effect in the
United States, neither side has presented a case squarely on point. The Supreme Court and the
D.C. Circuit have held, however, that the direct effect requirement is met in cases involving
commercial transactions that contemplate contract performance or designate a place of payment
in the United States.
See, e.g.
,
Weltover
, 504 U.S. at 618–19 (finding direct effect where
“Respondents had designated their accounts in New York as the place of payment, and Argentina
made some interest payments into those accounts before announcing that it was rescheduling the
payments”);
de Csepel v. Republic of Hungary
,
Defendants raise a number of objections to this conclusion. First, they argue that, under
Zedan v. Kingdom of Saudi Arabia
,
Defendants take up the mantle of triviality as well, arguing that the processing of remittances on expropriated property generates a “trivial” effect in the United States because CIMEX operates remittance locations on only four to ten of the confiscated properties. Defs.’ Br. at 15. The court rejects this argument at this juncture because the number of former Essosa locations processing remittances in Cuba says nothing of the effect in the United States . Defendants have not, for instance, supplied any facts establishing the actual volume of remittances processed at those locations or their dollar value. Absent such evidence, Defendants cannot carry their burden of establishing that the effect in the United States is “trivial.”
Defendants next insist that CIMEX’s processing of remittances cannot cause a direct effect in the United States because the “locus of the tort” is in Cuba. See Defs.’ Br. at 13. This argument gains no traction because the D.C. Circuit has held that “a foreign locus does not always mean that a tort causes no ‘direct effect’ in the United States.” EIG Energy Fund XIV , 894 F.3d at 347. Accordingly, even if Cuba were the locus of the tort, that does not foreclose the possibility that CIMEX’s remittance activity could have a direct effect in the United States.
Additionally, Defendants object that the remittances do not satisfy the direct-effect
requirement because they do not cause an injury in the United States. Defs.’ Br. at 13. Defendants
interpret
Helmerich & Payne International Drilling Co. v. Bolivarian Republic of Venezuela
(
Helmerich I
),
Moreover, there is no support in the text of the FSIA for Defendants’ position that a “direct effect” must be an injury. The statute merely requires that the act outside the United States “cause[] a direct effect in the United States.” 28 U.S.C. § 1605(a)(2). It notably does not require a direct injury . Indeed, the D.C. Circuit has previously held that “[n]othing in the FSIA requires that the ‘direct effect in the United States’ harm the plaintiff.” Cruise Connections , 600 F.3d at 666 (quoting 28 U.S.C. § 1605(a)(2)). Thus, the court concludes that the direct effect of CIMEX’s trafficking need not cause an injury in the United States to satisfy the commercial activity exception.
Defendants also argue that, even if CIMEX’s remittance business can be said to have an
effect in the United States, that effect is not direct.
See
Defs.’ Br. at 14. According to Defendants,
the effect of CIMEX’s remittance business depends on the decisions of independent third parties:
“[p]ersons in the United States must decide to send remittances; they must decide to use [Western
Union], not other companies; and the recipients must decide to collect the remittance at one of a
handful of locations situated on former Essosa land from among over 500 available [Western
Union] locations.”
Id.
The court is unconvinced. The effect of CIMEX’s remittance business in
the United States is not rendered indirect simply because third parties make choices about the
origination and collection points for remittances. Defendants concede that “only remittances
generated in the U.S. are currently being paid out in Cuba” and that CIMEX is prohibited “from
collecting money in Cuba to be paid out in the United States or in any other country.” Valmaña
Decl. ¶¶ 14–15. Thus, CIMEX’s entire remittance business is aimed at bringing money from the
United States into Cuba. Those money transfers are direct, without any intermediary. CIMEX
cannot hide behind the decisions of third parties to sever the directness of the effect when the very
business line it operates is exclusively designed for U.S. residents to send money to Cuba.
Cf. EIG
Energy Fund XIV
,
Defendants lodge two final objections. They contend that, under the commercial activity exception, “the act upon which Plaintiff’s action is ‘based’ . . . must cause[] [the] direct effect in the United States,” and because Exxon’s action is not “based upon” CIMEX’s remittance business, the remittances cannot be the cause of the requisite direct effect. Defs.’ Br. at 14 (quoting 28 U.S.C. § 1605(a)(2)). It is not entirely clear what Defendants contend Exxon’s action is based upon, but the court has little doubt that CIMEX’s use of confiscated property to participate in the remittance business is an “act . . . in connection with a commercial activity,” as required by section 1605(a)(2). Relatedly, Defendants assert that even if CIMEX’s processing of remittances qualifies as a direct effect, the processing of remittances provides the court with jurisdiction over only that portion of Exxon’s claim that concerns the specific CIMEX service stations that process remittances. See Defs.’ Br. at 14–15. In so arguing, Defendants seem to suggest that the court’s jurisdiction as to Exxon’s single Title III claim against CIMEX is divisible based on the properties that do and do not cause the direct effect. Defendants cite no authority for this novel proposition, and the court declines to adopt such a jurisdiction-parsing approach.
ii. Sale of Imported U.S. Food and Consumer Goods Exxon next argues that CIMEX’s sale of imported U.S. goods at the former Essosa service stations has a direct effect in the United States. [2] Pl.’s Br. at 22–23. Defendants counter that this activity does not cause a direct effect in the United States because CIMEX itself does not import goods from the United States. Defs.’ Reply Mem. of P. & A. in Supp. of Mot. to Dismiss & for Other Relief, ECF No. 49 [hereinafter Defs.’ Reply Br.], at 6–7. Instead, it purchases U.S. goods through another Cuban company, Alimport, thereby causing its sales of U.S. goods to have, at most, an indirect effect in the United States. Id.
Defendants’ argument overlooks two critical facts not in dispute. The first is that CIMEX exercises some degree of discretion in carrying U.S. goods for sale in its convenience stores; CIMEX does not contend that it is compelled to offer U.S. goods. Although CIMEX purports not to instruct Alimport on “the country from where the products should be sourced,” CIMEX and Alimport have a supply contract pursuant to which CIMEX specifies “the products and their amounts that CIMEX-Cuba will purchase from Alimport for the next calendar year.” Second Decl. of Mali Suris Valmaña, ECF No. 53 [hereinafter Second Valmaña Decl.], ¶ 6. Thus, American products reach CIMEX’s shelves only when CIMEX has placed an order for goods. Alimport in turn buys some of the goods CIMEX has ordered from the United States, and CIMEX makes a business decision to carry them. As such, CIMEX has a decisional role in marketing U.S. goods from its convenience stores.
The second is that CIMEX’s sale of U.S. goods generates demand for U.S. goods.
Although Valmaña says that “CIMEX-Cuba does not give any direction to Alimport about the
country from where the products should be sourced, the companies from which the products should
be purchased, or the brands of a product,” and that “Alimport decides all this on its own,”
id.
, such
explanation defies basic economics. If CIMEX opted not to carry U.S. goods, Alimport would not
purchase them, or at the very least would not purchase them in the same quantities. Put differently,
CIMEX’s purchase of U.S. goods through Alimport creates demand for goods from the United
States, and such demand constitutes a direct effect in the United States. Though the exact dollar
amount of U.S. goods sold by CIMEX is unclear, the court safely can say it is valued in the millions
annually; even Defendants do not seriously suggest it is a “trivial” amount.
[3]
Exxon therefore has
established a prima facie case that CIMEX’s sale of U.S. goods has a direct effect on U.S. markets.
See EIG Energy Fund XIV
,
Defendants disclaim that Alimport is acting as CIMEX’s agent when it purchases goods in
the United States,
see
Second Valmaña Decl. ¶ 6, but even if no agency relationship actually exists,
the fact that CIMEX affects U.S. markets through a third party does not render its buying and
selling of U.S. goods an indirect effect.
Cf. EIG Energy Fund XIV
,
iii. Continued Use of the Confiscated Property Exxon next asserts that Defendants’ unauthorized use of confiscated property causes a direct effect in the United States because it harms Exxon, a U.S. citizen. Pl.’s Br. at 23–25. Exxon adds that “Defendants’ trafficking . . . cuts off a flow of capital, personnel, data, equipment, and materials to the U.S., including compensation that should be made to Plaintiff in the U.S.” Id. at 24.
Exxon’s argument is squarely foreclosed by
Bell Helicopter Textron, Inc. v. Islamic
Republic of Iran
,
Exxon’s contention that Defendants’ conduct has “cut[] off a flow of capital, personnel, data, equipment, and materials in the U.S.,” Pl.’s Br. at 24, fares no better. In so claiming, Exxon compares Defendants’ alleged trafficking to the joint venture at issue in Foremost-McKesson , 905 F.2d 438. See Pl.’s Br. at 23–25. That analogy is a weak one, however, for Exxon’s claim of domestic harm is entirely unsubstantiated even at the pleadings stage. In Foremost-McKesson , Iranian agencies and instrumentalities had entered into a joint venture with the plaintiff. See 905 F.2d at 440–41. Through the joint venture, Foremost assisted in establishing a dairy in Iran by “provid[ing] the top management for the dairy and controll[ing] its Board of Directors.” Id. at 440–41. “[T]here was a constant flow of capital, management personnel, engineering data, machinery, equipment, materials and packaging between the United States and Iran to support the operation of [the] Dairy.” Id. at 451.
In contrast, Exxon has not alleged any flow of capital, personnel, or materials between the United States and Cuba. If anything, Exxon’s allegations suggest that Standard Oil set up largely self-sufficient subsidiary operations in the Cuban market. For example, Exxon alleges that Standard Oil established a Panamanian subsidiary that had “responsibility for operations in the Caribbean Basin and headquarter[s] in Havana” and two exploration companies that were “qualified to do business in Cuba for exploring for and producing crude oil,” maintained “an office in Cuba for geological studies[,] and owned assets incident to the functioning of the office.” SAC ¶¶ 24, 26. Exxon makes no allegation that there was a steady flow of capital, management, or materials between Standard Oil and its subsidiaries in Cuba. Accordingly, Exxon has not established a direct effect in the United States from Defendants’ mere commercial use of confiscated assets.
iv. Competition in the global oil market
The court now turns its focus to CUPET. Exxon argues that CUPET’s trafficking in confiscated property has had a direct effect in the United States because CUPET uses such property to compete with Exxon in the global oil market. See Pl.’s Br. at 25–27. Specifically, Exxon points to a number of joint ventures that CUPET has entered with Exxon’s competitors that involve the use of Essosa’s confiscated property, in particular the Ñicó Lopez Refinery. Id. at 26.
This argument is simply another version of Exxon’s contention that it has been harmed by Defendants’ continued use of confiscated property. It, too, fails to make out a direct effect. The court assumes for present purposes, without deciding, that trafficking in confiscated property could have a direct effect in the United States on the rightful owner’s competitive position. But Exxon has alleged no such direct effect here. At most, it makes generalized allegations of competitive harm, which are not enough. Nowhere, for example, does Exxon allege that it actually has competed, domestically or internationally, against any joint venture involving CUPET. Nor has Exxon alleged that any other U.S. company has done so. Moreover, at least two of the joint ventures that Exxon cites—with Melbana Energy and Castrol, B.V.—involve exploration of Cuba’s oil fields or production for the Cuban domestic market. See id . Exxon has not shown how it or any U.S. company could have competed in either marketplace given the U.S. sanctions regime against Cuba.
Exxon points to Congress’s finding when passing the LIBERTAD Act that traffickers “profit[] from economically exploiting Castro’s wrongful seizures” and have refused to pay the appropriate compensation. See id. at 27 (quoting 22 U.S.C. § 6081(11)). A congressional finding is of course owed due consideration. But untethered from any real-world facts particular to the plaintiff before the court, such a finding cannot by itself establish a prima facie case for jurisdiction.
The cases on which Exxon relies to establish that anticompetitive effects constitute a direct
effect are inapposite. In
WMW Machinery
, the court did not find that the foreign defendant’s
actions had a direct effect in the United States merely by harming the plaintiff’s competitive
advantage, as Exxon claims,
id.
; instead, the court found a direct effect where a joint venture
agreement and agency contract created an obligation to export certain machine tools to the plaintiff
in the United States.
WMW Machinery, Inc. v. Werkzeugmaschinehandel GmbH IM Aufbau
, 960
F. Supp. 734, 741 (S.D.N.Y. 1997) (holding “[t]he financial loss sustained by WMW was an
‘immediate consequence’ of the nonperformance of . . . contractual obligations” that required the
export of “machine tools to WMW in the United States”). And in
American Bonded Warehouse
Corp. v. Compagnie Nationale Air France
, the court found jurisdiction based on the defendant’s
alleged anticompetitive activities
in the United States
and thus did not need to consider whether
activity outside the United States had a direct effect there.
See
v. CUPET’s pollution of U.S. waters
Exxon next claims that CUPET’s operation of the confiscated refinery and processing facilities has polluted the Gulf of Mexico, constituting a direct effect in the United States. Pl.’s Br. at 27. Exxon also alleges that CUPET has participated in “lobbying and industry meetings” as a consequence of this polluting activity and that such participation independently causes a direct effect in the United States. Id. at 27–28. Defendants respond that any pollution from the confiscated refinery has not passed through the boundary of U.S. territorial waters and therefore is beyond the United States for purposes of the FSIA. Defs.’ Br. at 16. They further dispute that CUPET representatives participated in lobbying and industry meetings and argue that such meetings in any event are too trivial to constitute a direct effect. Defs.’ Reply at 3–4.
CUPET’s asserted pollution of the Gulf of Mexico does not constitute a direct effect in the United States on the present record because Exxon has failed to show that any such pollution has reached the territorial waters of the United States. For purposes of the FSIA, the “United States” is defined to “include[] all territory and waters, continental or insular, subject to the jurisdiction of the United States.” 28 U.S.C. § 1603(c). The Supreme Court has interpreted that definition to refer exclusively to “the territorial jurisdiction of the United States,” Amerada Hess , 488 U.S. at 441, which extends “12 nautical miles from the baselines of the United States determined in accordance with international law,” Presidential Proclamation No. 5928, Territorial Sea of the United States of America, 54 Fed. Reg. 777, 777 (Dec. 27, 1988). Exxon alleges that CUPET’s pollution extends “40-50 miles” from Cuba’s shore, bringing it “at or near the United States-Cuba maritime boundary.” SAC ¶ 103. The U.S.-Cuba maritime boundary, however, is farther ashore than the U.S. territorial boundary. See Office of Coast Survey, Nat’l Oceanic & Atmospheric Admin., U.S. Dep’t of Commerce, U.S. Maritime Limits & Boundaries, https://nauticalcharts.noaa.gov/data/us-maritime-limits-and-boundaries.html (last visited Apr. 7, 2021) (delineating both the U.S. maritime boundary and the U.S. territorial boundary). Exxon therefore has not shown that CUPET’s alleged pollution penetrates the U.S. territorial boundary, and thus has not established that pollution from the refinery has a direct effect in the United States.
Nor does the fact that CUPET representatives attended a handful of one-off meetings in
the United States constitute a direct effect, at least on the present record. CUPET has disclosed
five meetings concerning ecology that a single representative attended in the United States between
November 2016 and March 2019, and Exxon points to those meetings as evidence of a direct
effect.
See
Pl.’s Br. at 27 (citing Defs.’ Mot., Second Decl. of Roberto Suárez Sotolongo, ECF
No. 42-7 [hereinafter Second Sotolongo Decl.], ¶ 16). But these brief meetings did not “amount[]
to more than transitory and insubstantial contact for purposes of the Act,” and therefore cannot
constitute a direct effect in the United States.
Maritime Int’l Nominees Establishment v. Republic
of Guinea
,
vi.
CIMEX (Panama)
Exxon does not allege that CIMEX (Panama) has itself engaged in commercial activity that
has a direct effect in the United States; rather, it seeks to secure jurisdiction based solely on the
contention that CIMEX (Panama) is the alter ego of Cuban CIMEX.
See
Pl.’s Br. at 29, 60; SAC
¶ 3. In support, Exxon claims that CIMEX and CIMEX (Panama) “shar[e] the ultimate same
ownership, with the same officers and directors, working out of the same office at the same address
without any regard for corporate formalities or respecting the separateness of either entity.” SAC
¶ 3. These allegations are sparse to say the least, and they are not sufficient to overcome CIMEX
(Panama)’s presumed immunity, even at the pleadings stage.
See McWilliams Ballard, Inc. v.
Broadway Mgmt. Co.
,
* * * In sum, with respect to the requirement of direct effects in the United States, the court concludes: (1) CIMEX’s processing of remittances and its purchase and sale of goods imported from the United States have a direct effect in the United States; (2) Defendants’ use of Exxon’s confiscated property and CUPET’s competition in the global oil market, alleged pollution, and participation in a handful of meetings in the United States have not caused a direct effect in the United States; and (3) no acts of CIMEX (Panama), directly or as an alter ego of CIMEX, have been shown to have a direct effect in the United States.
3. The Expropriation Exception Exxon also argues that the court has subject matter jurisdiction over this dispute under the FSIA’s expropriation exception. See Pl.’s Br. at 34. As relevant to Exxon’s claims, the expropriation exception strips a foreign state’s immunity in any case:
in which rights in property taken in violation of international law are in issue and . . . that property or any property exchanged for such property is owned by an agency or instrumentality of the foreign state and that agency or instrumentality is engaged in a commercial activity in the United States.
28 U.S.C. § 1605(a)(3). “For the exception to apply, . . . the court must find that: (1) rights in
property are at issue; (2) those rights were taken in violation of international law; and (3) a
jurisdictional nexus exists between the expropriation and the United States.”
Nemariam v. Federal
Democratic Republic of Ethiopia
,
Exxon alleges that its rights in property were taken when Cuba nationalized the assets of its subsidiary Essosa. See SAC ¶¶ 28–31, 92–101, 107–110, 116. Defendants argue that Exxon does not have a property right in the assets of its subsidiary under international law because, while a parent company has an interest in the rights of its subsidiary’s property, only the subsidiary has rights in its property. See Defs.’ Br. at 21–25. As Defendants see the matter, a parent’s property rights in its subsidiary are not in issue unless the state takes over the subsidiary’s entire enterprise, and Cuba has not taken over Essosa’s entire enterprise. See id. at 23–25. Relying on decisions of the Iran-United States Claims Tribunal and a number of arbitration rulings, Exxon responds that it does not need to show that Essosa’s entire enterprise was taken over in order to establish a property right recognized by international law. Pl.’s Br. at 42–45.
To determine whether Exxon has a property right that was taken in violation of
international law, the court looks to customary international law.
[5]
See Philipp
,
The D.C. Circuit in
Helmerich III
explained the state of customary international law with
respect to the property rights at issue here: that of a shareholder in the expropriated assets of a
wholly owned subsidiary.
See id.
at 454 (“Our question, therefore, is whether H&P-IDC [the
parent] has adequately alleged that Venezuela and [its state-owned entities] expropriated H&P-V
[the subsidiary] itself in violation of international law.”). The court there observed that
“[i]nternational law undisputedly protects the ‘direct rights’ shareholders enjoy in connection with
corporate ownership, including ‘the right to any declared dividend, the right to attend and vote at
general meetings, [and] the right to share in the residual assets of the company on liquidation.’”
Id.
(quoting
Barcelona Traction, Light & Power Co.
(Belg. v. Spain), Judgment, 1970 I.C.J. 3, 36
¶ 47 (Feb. 5)). Furthermore, “[i]t is also well established that a state violates international law if
it takes ‘measures that have an effect equivalent to a formal expropriation of [a foreign]
shareholder’s own property rights,’ even if the state does not formally divest the shareholder of its
shares.”
Id.
(quoting Suppl. Br. for the U.S. as Amicus Curiae at 10,
Helmerich III
, 743 F. App’x
442 (No. 13-7169),
[W]hen a state permanently takes over management and control of [a foreign shareholder’s] business, completely destroying the beneficial and productive value of the shareholder’s ownership of their company, and leaving the shareholder with shares that have been rendered useless, it has indirectly expropriated the ownership of that business and has responsibility under customary international law to provide just compensation to the shareholder.
Id. (quoting U.S. Suppl. Br. at 12). On the other hand, “a state’s expropriation of a corporation’s property that does not result in the expropriation of the entire enterprise is not an indirect expropriation of foreign shareholders’ direct rights under customary international law, even if it reduces the value of the shares to zero.” U.S. Suppl. Br. at 10.
Exxon urges that international law states just the opposite. Relying on decisions of the
Iran-United States Claims Tribunal and investor-state arbitration rulings as evidence of customary
international law, Exxon argues that customary international law permits a parent company to
bring a claim based on its indirect interest in its subsidiary’s property.
See
Pl.’s Br. at 43–44. But
Exxon’s reliance on the decisions of the Iran-United States Claims Tribunal is misplaced. That
Tribunal’s decisions reflect the application of a specific agreement between Iran and the United
States.
See
Office of the Assistant Legal Adviser for Int’l Claims & Inv. Disputes, U.S. Dep’t of
State, Iran-U.S. Claims Tribunal, https://www.state.gov/iran-u-s-claims-tribunal/ (last visited Mar.
23, 2021). “[S]pecific, bargained-for agreements between nations . . . offer little evidence that the
signatories would perceive ‘a sense of legal obligation’ to follow the same rules under international
custom absent a negotiated treaty.”
Helmerich III
, 743 F. App’x at 452 (quoting
Restatement
(Third) of the Foreign Relations Law of the United States
§ 102(2)). Nor can the handful of
investor-state arbitration decisions on which Exxon relies overcome the contrary view of the
International Court of Justice, which is “accorded great weight” in determining customary
international law,
see Restatement (Third) of the Foreign Relations Law of the United States
§ 103
cmt. b. Put simply, Exxon has not marshalled enough evidence from reputable sources of
customary international law to support its position that, as a general and consistent practice of
states, a parent holds property rights in the assets of its subsidiary whose value has not been entirely
destroyed by an expropriation.
See Helmerich III
,
The question before the court therefore is whether Cuba’s expropriation of Essosa’s Cuban property “completely destroy[ed] the beneficial and productive value of [Exxon’s] ownership of” Essosa, effectively rendering Exxon’s shares “useless.” Id . at 455. The undisputed evidence is that Cuba’s expropriation did not have such effect. Defendants have presented substantial evidence of Essosa’s continued operation even after the confiscation of its Cuban assets. See Defs.’ Mot., Decl. of Lindsey Frank, ECF No. 42-10, ¶¶ 2–19. They have (1) identified deeds filed with the Public Registry in Panama showing that Essosa has consistently held annual shareholders meetings and that Essosa held Board of Directors meetings as recently as 2019, id. ¶¶ 2–5; (2) produced a 2011 court decision noting that Essosa operated at least 40 fuel stations at the time, id. ¶ 11; and (3) submitted public records showing that Essosa began operating as Puma Energy Standard Oil, S.A. in 2012 and is currently listed as a company in good standing in the Public Registry of Panama, id. ¶¶ 6, 18–19. While Exxon does not explicitly concede that Essosa remains in operation, it has not challenged the voluminous evidence Defendants have produced; its only argument on this score is that it does not need to show that Essosa is defunct. Cf. Pl.’s Br. at 42–43 (arguing that it “need not demonstrate that Essosa dissolved”). Because Exxon’s claim concerns Essosa’s property and Essosa continues to operate as a going concern, Exxon has not established that Cuba’s expropriation deprived it of property in violation of international law.
Exxon resists this conclusion by arguing that this court “must presumptively accept
Plaintiff’s certified claim [from the FCSC] as conclusive proof of Plaintiff’s ownership interest in
the property at issue.” Pl.’s Br. at 40–41. But that argument suffers from two problems. First, the
FCSC’s certification of a claim at most creates a property right under domestic law, not
international law. And second, the FCSC certifies claims for ownership interests that are broader
than the property rights recognized under customary international law. The FCSC has jurisdiction
to adjudicate “any rights
or interests
. . . owned wholly or partially, directly
or indirectly
. . . by
nationals of the United States.” 22 U.S.C § 1643b(a) (emphasis added). By contrast, the
expropriation exception requires the plaintiff to identify “rights in property” that have been “taken
in violation of international law,” 28 U.S.C. § 1605(a)(3);
see also Helmerich II
,
C. Jurisdictional Discovery
To recap, the court has found that the commercial activity exception reaches Exxon’s Title III claim against CIMEX, but not against CUPET or CIMEX (Panama). The court also has concluded that the expropriation exception cannot sustain a claim against any Defendant.
Instead of dismissing aspects of its claim that fall short under the FSIA immunity exceptions, Exxon asks the court to order jurisdictional discovery. Pl.’s Br. at 33–34. Specifically, as relevant to CUPET and CIMEX (Panama), Exxon asks for “discovery to test Defendants’ declarations” concerning (1) “[t]he overlapping relationships and operations of CUPET, CIMEX- Cuba, and CIMEX-Panama, and the Cuban State’s influence and control over each of their operations,” (2) “[t]he lack of independence of Defendants’ divisions and empresas , including their failure to observe corporate formalities, the extent of Defendants’ control over them, and their contacts with the U.S. while acting as agents of Defendants,” and (3) “[t]he nature, purpose, and extent of Defendants’ admitted contacts with various U.S. government officials and private companies, including during travel to the U.S.” Id . at 34.
In the context of the FSIA, the D.C. Circuit has said that trial courts “
must
give the plaintiff
‘
ample opportunity
to secure and present evidence,’” but that “[i]n order to avoid burdening a
sovereign that proves to be immune from suit . . . jurisdictional discovery should be carefully
controlled and limited.”
Phx. Consulting
,
Though the court thinks it is a close call, it will permit limited jurisdictional discovery into
the topics identified by Exxon concerning CUPET’s and CIMEX (Panama)’s trafficking activities
that may have caused direct effects in the United States. Such discovery is limited to the three
topics the court has identified.
See supra
pp. 42 (identifying these topics). With respect to CUPET,
Defendants have downplayed the significance of CUPET’s contacts with the United States,
see
Second Sotolongo Decl. ¶¶ 16–17, and the court has relied on those representations to hold, on the
present record, that the commercial activity exception does not apply to CUPET,
see supra
pp. 35.
Exxon is entitled to discovery as to those representations. As for CIMEX (Panama), its status as
a defendant rests on its relationship with CIMEX, which Exxon contends is one of alter ego. “Our
courts have ordered discovery to illuminate alter ego disputes before deciding dispositive motions
which asserted lack of jurisdiction over the alleged alter ego.”
Material Supply Int’l, Inc. v.
Sunmatch Indus. Co.
,
D. Standing In addition to their sovereign immunity defense, Defendants argue that Exxon lacks standing to bring this action. Defs.’ Br. at 45–46. Specifically, Defendants argue that Exxon’s only injury is the loss of Essosa’s property due to Cuba’s expropriation of that property and Defendants’ alleged trafficking has not injured Exxon. See id. at 46. Exxon responds that it suffered and continues to suffer an invasion of its interests because “Defendants have not compensated Plaintiff or obtained Plaintiff’s authorization for use of the Confiscated Property, as Congress required.” See Pl.’s Br. at 9–11.
A plaintiff has standing if she has “suffered an injury in fact” that is both causally connected
to “the conduct complained of” and can “be redressed by a favorable decision” from the court.
See
Lujan v. Defs. of Wildlife
, 504 U.S. 555, 560 (1992) (internal quotation marks omitted). “To
establish injury in fact, a plaintiff must show that he or she suffered an invasion of a legally
protected interest that is concrete and particularized and actual or imminent, not conjectural or
hypothetical.”
Spokeo, Inc. v. Robins
,
The Supreme Court recognized in
Spokeo
that “Congress may ‘elevate to the status of
legally cognizable injuries concrete,
de facto
injuries that were previously inadequate in law,’”
id.
at 1549 (quoting
Lujan
,
Here, there can be no question that Congress legislated an injury in fact in Title III. Pursuant to section 6082, “any person that . . . traffics in property which was confiscated by the Cuban Government on or after January 1, 1959, shall be liable to any United States national who owns the claim to such property.” 22 U.S.C. § 6082(a)(1)(A). In so legislating, Congress recognized that U.S. nationals with claims to trafficked confiscated property have suffered an injury. Exxon has asserted just such an injury. See SAC ¶ 131 (“CIMEX Cuba, CIMEX Panama, and/or CUPET have and continue to traffic in the Confiscated Property to which Plaintiff owns the claim . . . .”).
And Exxon’s injury is concrete.
See Spokeo
,
Defendants next argue that there is no causal connection between their unlawful conduct
and Exxon’s injury. Defs.’ Br. at 46. Defendants again miss the mark by characterizing Exxon’s
injury as the expropriation of Essosa’s property.
See id.
Congress has defined Exxon’s injury in
terms of the effects of trafficking in the confiscated property, and that injury is plainly “fairly
traceable” to Defendants’ alleged trafficking—“not the result of the independent action of some
third party not before the court.”
See Lujan
,
Finally, although Defendants do not challenge the redressability of Exxon’s injury, it is
clear that, if Defendants are found liable in this action, Title III provides for Exxon to receive “the
amount, if any, certified to [it] by the Foreign Claims Settlement Commission under the
International Claims Settlement Act of 1949, plus interest.” 22 U.S.C. § 6082(a)(1)(A)(i)(I). A
favorable decision would therefore redress Exxon’s injury.
See Lujan
,
The court concludes that Exxon has Article III standing to bring a claim under Title III of the LIBERTAD Act.
V. CONCLUSION AND ORDER
For the foregoing reasons, the court grants in part and defers in part Defendants’ Motion to Dismiss. The court denies Defendants’ Motion to Dismiss as to CIMEX and orders limited jurisdictional discovery as to CUPET and CIMEX (Panama). The parties shall meet and confer and propose to the court by May 4, 2021, a schedule for discovery that is consistent with the limited scope of discovery described in this Memorandum Opinion and Order.
Dated: April 20, 2021 Amit P. Mehta United States District Court Judge
Notes
[1] Defendants have submitted a declaration stating that “[n]either CUPET, nor any of the empresas or mercantile societies that are integrated with it has any involvement in the money transfer (remittance) business.” Defs.’ Mot., Second Decl. of Roberto Suárez Sotolongo, ECF No. 42-7, ¶ 10. Exxon offers no evidence to dispute CUPET’s claimed non-involvement in the remittance business, despite allegations suggesting otherwise in the Second Amended Complaint, see SAC ¶¶ 115–116. Having failed to contradict the evidence CUPET presents, the court at this juncture finds that CUPET is not involved in the remittance business, and thus considers whether remittances have a direct effect in the United States only as to CIMEX.
[2] Exxon alleges in the Second Amended Complaint that both “CIMEX and CUPET use Confiscated Property to sell American goods to Cuban consumers.” SAC ¶ 109. In its briefing, however, Exxon argues only that CIMEX sells American goods at service stations. See Pl.’s Br. at 21–22; see also Pl.’s Br., Decl. of Jared R. Butcher, ECF No. 47-2, ¶¶ 22–28 (providing evidence related to CIMEX’s involvement in imports but not CUPET’s involvement). Accordingly, the court considers whether importing American goods constitutes a direct effect as to CIMEX only.
[3] Exxon contends that “CIMEX imports hundreds of millions of dollars’ worth of food and consumer goods from the U.S.,” Pl.’s Br. at 21, but the State Department fact sheet Exxon cites refers to the export value of all U.S. goods to Cuba, not just those sold by CIMEX, Bureau of W. Hemisphere Affs., U.S. Dep’t of State, U.S. Relations with Cuba, Bilateral Relations Fact Sheet (Nov. 22, 2019), https://www.state.gov/u-s-relations-with-cuba/. As a result, the exact dollar value of CIMEX’s sale of U.S. goods is not established on this record.
[4] None of the foregoing is meant to suggest that discovery might not shed further light on the relationship between CIMEX and Alimport, and thus impact the court’s ultimate view on whether CIMEX’s purchase of U.S. goods from an intermediary for sale in its stores gives rise to a direct effect in the United States.
[5] Exxon initially argued that “U.S. cases interpreting the expropriation exception’s elements control over international
law.” Pl.’s Br. at 42. Following the Supreme Court’s decision in
Federal Republic of Germany v. Philipp
,
[6] Exxon’s contention that
Garcia-Bengochea v. Carnival Corp.
,