R&R INTERNATIONAL CONSULTING LLC, Plaintiff-Appellant, v. BANCO DO BRASIL, S.A., a foreign corporation, Defendant-Appellee.
No. 19-12466
United States Court of Appeals for the Eleventh Circuit
December 4, 2020
D.C. Docket No. 1:19-cv-20071-FAM. Appeal from the United States District Court for the Southern District of Florida. [PUBLISH]. Before WILLIAM PRYOR, Chief Judge, HULL and MARCUS, Circuit Judges.
WILLIAM PRYOR, Chief Judge
This appeal presents issues about the Foreign Sovereign Immunities Act and Brazilian law. In 1957, Banco do Brasil, S.A., issued a series of bonds that were
I. BACKGROUND
In 2018, R&R International Consulting LLC sued Banco do Brasil, S.A., in Florida state court for breaching 30 interest-bearing promissory notes. According to R&R, these “Letras Hipotecárias,” which it translated as “mortgage notes,” were issued by the Bank on March 8, 1957. Each note said that the Bank promised to pay the holder 5,000 cruzeiros—the currency of Brazil at the time the bonds were issued—plus interest at a rate of five percent a year. The holder could redeem a note at any branch of the Bank after the lapse of 20 years or if the note was selected in a drawing held at least once a year in Brazil‘s capital. The notes cited three provisions of Brazilian law:
The Bank presents a slightly different version of events. It asserts that R&R did not even exist in 2015; according to public records, it was created in 2017 by Rodolfo Luiz Coelho, who named himself manager. It was Coelho, not R&R, who first tried to redeem the notes in July 2015. The Bank also says that it informed Coelho that the notes were worthless after his first attempt to redeem them in 2015.
The Bank removed the action to the district court and moved to dismiss the complaint. Its motion included an affidavit from a Brazilian lawyer about the legal and historical context of the Bank and the notes. The lawyer explained that the Bank was established in 1808 by the Prince Regent of Brazil, while the country was still a Portuguese colony. For over a century, it was Brazil‘s de facto central bank, issuing the national currency and implementing the policy of the federal
The lawyer then explained that R&R‘s “mortgage notes” were actually “[c]olonization [b]onds.”
Finally, the lawyer discussed why the colonization bonds were no longer redeemable and were instead sold online as collector‘s items. The general rule in Brazil is that all obligations are subject to a statute of limitations unless the applicable law says otherwise. Because neither the colonization bonds themselves nor the laws authorizing them mentioned they were exempt, the statute of limitations applied. And because the colonization bonds were issued in 1957, they were subject to the Brazilian Civil Code of 1916, including the 20-year statute of limitations found in article 177. So, if the colonization bonds were issued in 1957 and matured in 1977, then the statute of limitations ran 20 years later in 1997. In
The district court granted the Bank‘s motion and dismissed R&R‘s complaint on three alternative grounds. First, it concluded that it lacked subject-matter jurisdiction. Because the government of Brazil owned 52.2 percent of the Bank‘s shares, the Bank was a “foreign state” under the Foreign Sovereign Immunities Act,
II. STANDARD OF REVIEW
We review de novo whether a defendant is entitled to immunity under the Foreign Sovereign Immunities Act. Mezerhane v. República Bolivariana de Venez., 785 F.3d 545, 548 (11th Cir. 2015). We also review de novo an interpretation of foreign law. Seguros del Estado, S.A. v. Sci. Games, Inc., 262 F.3d 1164, 1171 (11th Cir. 2001). And we review de novo the dismissal of a complaint for failure to state a claim upon which relief can be granted. Hill v. White, 321 F.3d 1334, 1335 (11th Cir. 2003).
III. DISCUSSION
We begin with the issue of jurisdiction and then turn to foreign law. Because we agree that R&R‘s complaint is barred by the statute of limitations, we need not address the prudential act-of-state doctrine. We also need not address whether the district court erred by relying on the Bank‘s translation of the colonization bonds, as R&R failed to make that argument before the district court. See Access Now, Inc. v. Sw. Airlines Co., 385 F.3d 1324, 1331 (11th Cir. 2004).
The Foreign Sovereign Immunities Act provides that “a foreign state shall be immune from the jurisdiction of the courts of the United States and of the States except as provided in” certain enumerated exceptions.
R&R has the initial burden of establishing jurisdiction under an exception. Devengoechea v. Bolivarian Republic of Venez., 889 F.3d 1213, 1221 n.9 (11th Cir. 2018). It invokes the commercial-activity exception, which provides jurisdiction in three circumstances: if “the action is based upon a commercial activity carried on in the United States by the foreign state“; if it is based “upon an act performed in the United States in connection with a commercial activity of the foreign state elsewhere“; or if it 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.”
We conclude that the only possible avenue to jurisdiction is through the third clause. In Guirlando v. T.C. Ziraat Bankasi A.S., the Second Circuit explored the “metaphysical conundrum” that arises when the “act” that triggers the commercial-activity exception is an omission, such as failure to perform under a contract. 602 F.3d 69, 76 (2d Cir. 2010); see also Rogers v. Petroleo Brasileiro, S.A., 673 F.3d 131, 138 (2d Cir. 2012). The court reasoned that “the failure to act is not itself an act,” but “[t]he decision by a foreign sovereign not to perform is . . . an act.” Guirlando, 602 F.3d at 76. It also concluded that, as a legal fiction, the decision not to perform “is an act in the foreign state,” “not an act in the United States.” Id. Under that persuasive reasoning, the act that would trigger the commercial-activity exception is the Bank‘s decision not to honor R&R‘s bonds. Because the Bank is a foreign state, it made that decision in Brazil, outside the territory of the United States. So only the third clause of the commercial-activity exception applies.
R&R is correct that the Bank‘s decision not to honor the colonization bonds caused a direct effect in the United States. The Supreme Court faced a similar issue in Republic of Argentina v. Weltover, Inc., 504 U.S. 607, 609 (1992), where Argentina and its central bank had issued a series of bonds to stabilize the country‘s currency. When the bonds began to mature, Argentina unilaterally extended the payment schedule. Id. at 610. Several bondholders, who had arranged for their bonds to be redeemed in their bank accounts in New York, sued Argentina and its central bank for breach of contract. Id. at 610, 619. The Supreme Court held that Argentina had caused a direct effect in the United States because “[m]oney that was supposed to have been delivered to a New York bank for deposit was not forthcoming.” Id. at 619. Likewise, the colonization bonds promised that they could be redeemed at any of the Bank‘s branches, and R&R demanded payment at the Miami branch. So, as in Weltover, “[m]oney that was supposed to have been delivered to a [Miami] bank for deposit was not forthcoming.” Id.
The district court erroneously conflated subject-matter jurisdiction with the statute of limitations. Whether subject-matter jurisdiction exists is a separate question from whether a complaint states a claim upon which relief can be granted. See Bulgartabac Holding AD v. Republic of Iraq, No. 1:08-cv-06502-RJH, 2009 WL 3113252, at *6-8 (S.D.N.Y. Sept. 30, 2009) (concluding that the plaintiff had carried its initial burden of showing that jurisdiction existed under the commercial-activity exception but then dismissing a breach-of-contract claim because of the statute of limitations); Dar El-Bina Eng‘g & Contracting Co. v. Republic of Iraq, 79 F. Supp. 2d 374, 376, 385, 388, 391 (S.D.N.Y. 2000) (concluding that a genuine question of material fact existed as to subject-matter jurisdiction but then dismissing a claim for breach of a promissory note because of the statute of limitations); see also Chalabi v. Hashemite Kingdom of Jordan, 503 F. Supp. 2d
The district court erred by concluding that it lacked subject-matter jurisdiction. Because the issuance of the colonization bonds was a commercial activity and the Bank‘s refusal to honor those bonds caused a direct effect in the United States, jurisdiction exists under the commercial-activity exception to the Foreign Sovereign Immunities Act.
B. R&R‘s Complaint Is Barred by the Statute of Limitations.
The colonization bonds were issued in 1957 and, by their terms, matured 20 years later in 1977. Neither the colonization bonds nor the laws authorizing them exempt the bonds from the general statute of limitations. Under article 177 of Brazil‘s Civil Code of 1916, which was in effect at the time the bonds were issued, the limitations period was 20 years.
R&R makes a few arguments why the district court misinterpreted Brazilian law, but none of them is persuasive. First, it argues that the bonds never matured, so the statute of limitations never started to run. It cites
Second, R&R contends that the district court erred by relying on the opinion of the Brazilian Superior Court of Justice in Camilotti. It argues that because Brazil
Finally, R&R cites “the Brazilian Constitution Article V, Section XXXVI” as supposedly preventing the Brazilian government from interfering with R&R‘s rights as the holder of the colonization bonds. But R&R makes this argument only in passing. It does not even list the Brazilian Constitution in its table of authorities, much less provide any caselaw or secondary sources to explain the constitutional provision. So R&R abandoned this issue. See Sapuppo v. Allstate Floridian Ins. Co., 739 F.3d 678, 681 (11th Cir. 2014).
IV. CONCLUSION
We VACATE IN PART the dismissal without prejudice for lack of subject-matter jurisdiction, and we AFFIRM IN PART the alternative dismissal with prejudice because the complaint is barred by the statute of limitations.
WILLIAM PRYOR
CHIEF JUDGE