TIG INSURANCE COMPANY, AS SUCCESSOR BY MERGER TO INTERNATIONAL INSURANCE COMPANY AND INTERNATIONAL SURPLUS LINE INSURANCE COMPANY, APPELLANT v. REPUBLIC OF ARGENTINA, AS SUCCESSOR TO CAJA NACIONAL DE AHORRO Y SEGURO AND CAJA NACIONAL DE AHORRO Y SEGURO, APPELLEES
No. 19-7087
United States Court of Appeals FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued May 13, 2020 Decided July 28, 2020
Appeal from the United States District Court for the District of Columbia (No. 1:18-mc-00129)
David A. Edelstein argued the cause for appellees. With him on the brief were Christopher Taggi and Charles M. Asmar.
Opinion for the Court filed by Circuit Judge PILLARD.
PILLARD, Circuit Judge: TIG Insurance Company sought to satisfy a long-pending judgment by attaching a building that the Republic of Argentina listed for sale in the District of Columbia. The Foreign Sovereign Immunities Act (FSIA) prevents parties from executing against the property of foreign states in the United States unless the property falls into one of the statute‘s enumerated exceptions. See
BACKGROUND
Beginning in 1979, Argentina (through its predecessor-in-interest, a state-owned commercial insurance company called Caja Nacional) incurred debts under reinsurance contracts ultimately payable to TIG Insurance Corporation. First in 2000 (through its own predecessor-in-interest), and again in 2017, TIG sought and ultimately obtained commercial arbitral awards against Argentina for failure to pay under the reinsurance contracts. TIG confirmed those arbitral awards in the Northern District of Illinois in 2001 and 2018. Together, those awards are now worth more than $33 million. Despite the parties’ various efforts to reach a settlement over the last fifteen years, Argentina has yet to pay TIG any of the money owed.
In 2018, TIG learned that Argentina was planning to sell real estate in the District of Columbia. Several decades ago, Argentina used the property, located at 2136 R Street Northwest, to house both diplomats and commercial tenants. See NML Capital, Ltd. v. Republic of Argentina, No. 04-cv-0197 (CKK), 2005 WL 8161968, at *1, *4, *14 (D.D.C. Aug. 3, 2005). A creditor sought to attach the property in the early 2000s. Id. at *1. In the ensuing litigation, the district court noted that, “since 1997, the building has been uninhabited and in a state of disrepair with heavy restoration cost estimates.” Id. at *4. The property remains uninhabited today; Argentina says that it still stores some diplomatic files there.
On September 25, 2018, after Argentina had received multiple offers to buy the property, TIG registered its judgments from the Northern District of Illinois in the District of the District of Columbia, see
ANALYSIS
A. Legal Framework
In enacting the FSIA, “Congress established . . . a comprehensive framework for resolving any claim of sovereign immunity.” Republic of Argentina v. NML Capital, Ltd., 573 U.S. 134, 141 (2014) (internal quotation marks omitted). That framework “confers on foreign states two kinds of immunity.” Id. at 142; see generally Walters v. Indus. & Comm. Bank of China, Ltd., 651 F.3d 280, 286-89 (2d Cir. 2011). The first and more familiar is “jurisdictional immunity,” according to which “a foreign state shall be immune from the jurisdiction of the courts of the United States . . . except as provided in sections 1605 to 1607.”
In suits involving the attachment of a foreign sovereign‘s property, section 1610(a) governs how that “default presumption” may be overcome. Creditors must satisfy the two general requirements outlined in the opening language of that section and fit their claim into one of the seven enumerated exceptions to the otherwise applicable immunity codified in section 1609. The two general requirements and the specific exception invoked in this case are as follows:
(a) The [1] property in the United States of a foreign state, as defined in section 1603(a) of this chapter, [2] 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—
[. . .]
(6) the judgment is based on an order confirming an arbitral award rendered against the foreign state, provided that attachment in aid of execution, or execution, would not be inconsistent with any provision in the arbitral agreement[.]
The only issue before us is whether the second general requirement of section 1610(a)—that the property be “used for a commercial activity in the United States“—is met. The first requirement is satisfied because there is no dispute that the building at 2136 R Street NW is Argentinian
As a preliminary matter, Argentina contends that we need not resolve even that narrow question because TIG has taken contrary positions in the district court and before this court, thereby forfeiting both the argument it made below and the one it now advances. See generally Argentina Br. 31-36. According to Argentina, TIG asked the district court to evaluate whether the property was “used for a commercial activity” at the time of filing, but now argues that the court should have examined the totality of the circumstances surrounding the property to make that determination.
We see no forfeiture here. TIG‘s arguments speak to different questions, both of which must be answered to resolve this case. First, at what moment in time should a district court assess whether a property is one “used for a commercial activity“? And, second, what circumstances should a district court examine to make that determination? As explained below, we agree with TIG on both counts: Courts should determine whether a property is “used for a commercial activity” based on the totality of circumstances at the time of filing.
B. District Courts Should Determine Whether a Property Is “Used for a Commercial Activity” at the Time of Filing
We begin with the question of timing. Argentina argues, and the district court agreed, that the phrase “used for a commercial activity” means that the property must “be in use for a commercial purpose at the time a writ of attachment and execution issues.” Argentina Br. 9; see also TIG Ins. Co., 2019 WL 3017618, at *2 (requiring ongoing use for a commercial purpose at the “moment that a court makes [its] immunity determination“). By contrast, TIG argues that district courts are to “examin[e] the state of the record at the time of filing” to make this determination. TIG Br. 42.
TIG‘s time-of-filing approach best accords with the text and purpose of the FSIA. Under the “comprehensive framework” that the FSIA created, “any sort of immunity defense made by a foreign sovereign in an American court must stand on the Act‘s text. Or it must fall.” NML, 573 U.S. at 141-42. Stripped to the pertinent essentials, the text at issue here states that “[t]he property in the United States of a foreign state . . . used for a commercial activity in the United States, shall not be immune.”
The text does not support Argentina‘s time-of-writ rule for several reasons:
First, as Argentina‘s resort to an “implicit” tense makes clear, the text is anything but clear as to what tense it envisions. Nothing in the language of this provision offers any clue as to whether “is used” or “was used” is the better reading. Moreover, as explained in greater detail below, we do not think any tense at all is to be associated with this phrase, which
Second, even were we to accept Argentina‘s contention that the text implicitly references current use, Argentina does not support its further contention that what counts as the present time for purposes of that assessment is the moment the court would issue its writ. A statute‘s use of the present tense ordinarily refers to the time the suit is filed, not the time the court rules. For example, in considering whether plaintiffs have shown that a foreign corporation operates as an instrumentality of a foreign sovereign, the Supreme Court has held that the “plain text . . . requires that instrumentality status be determined at the time suit is filed” because the text “is expressed in the present tense.” Dole Foods Co. v. Patrickson, 538 U.S. 468, 478 (2003); see also Bennett, 618 F.3d at 26 (Garland, J., concurring) (“Given the statute‘s use of the present tense, I would hold that [its protection] against attachment applies to property . . . at the time the writ of attachment is filed.“). Because litigation proceeds based on facts as alleged in a complaint, it makes sense that the time the complaint is filed is the presumptive temporal touchstone.
That practicality points to a third, related obstacle to Argentina‘s time-of-writ rule, which is that it would require departing from the usual rules governing civil litigation, according to which district courts generally assess facts at the time of filing. In the context of determining diversity jurisdiction, for example, jurisdiction “is determined by the condition of the parties at the commencement of the suit.” Anderson v. Watts, 138 U.S. 694, 702-03 (1891); see also Grupo Dataflux v. Atlas Global Grp., 541 U.S. 567, 570-71 (2004). Similarly, in determining whether the amount-in-controversy requirement is satisfied, courts do not consider changes that occur after removal to federal court. See, e.g., St. Paul Mercury Indem. Co. v. Red Cab Co., 303 U.S. 283, 295 (1938). And, as noted, district courts determine how to rule on a motion to dismiss by “looking to the facts existing when” the complaint is filed. Keene Corp. v. United States, 508 U.S. 200, 207 (1993). Argentina replies that these examples generally involve jurisdictional requirements, and execution immunity is not jurisdictional in this circuit. Argentina Br. 26-27. But nothing about that distinction supports adopting an unfamiliar time-of-writ rule for assessing commercial use. Indeed, at oral argument, counsel for Argentina was unable to point to a single example where we have adopted such a rule in any area of law. See Oral Arg. Rec. 14:18-15:50.
Fourth, given the FSIA‘s general definition of “commercial activity,” Argentina‘s reading of the phrase “used for a commercial activity” creates a separate textual problem. The statute defines “commercial activity” to mean “either a regular course of commercial conduct or a particular commercial transaction or act.”
The district court conceded that that this consequence was one casualty of its time-of-writ rule, but suggested it was “reasonable to conclude that Congress did not intend to invoke both definitions each time it referenced the term ‘commercial activity’ in the FSIA.” TIG Ins. Co., 2019 WL 3017618, at *4. That reasoning, while perhaps tenable in isolation, cannot prevail against an alternate reading that gives full effect to both definitions.
Argentina responds that a time-of-filing rule runs into two textual problems of its own. First, Argentina points to the Ninth Circuit‘s definition of “use” in this provision to mean “active employment.” See Argentina Br. 16 (quoting Af-Cap, Inc., v. Chevron Overseas (Congo) Ltd., 475 F.3d 1080, 1088 (9th Cir. 2007) (Af-Cap II)). But that interpretation does not speak to the question of timing here: A property could equally be in “active employment” at the time of filing or at the time of writ. And, in any event, the Ninth Circuit in Af-Cap II adopted that definition only to answer questions unrelated to the issue before us, including whether the statute‘s passive construction covers use by an entity other than the foreign sovereign (no) or property that was merely generated by, or has some general nexus with, a commercial activity (also no). See Af-Cap II, 475 F.3d at 1087, 1091, 1093. Argentina actively employed its property for a commercial activity (namely, putting it up for sale), so there is no question that these facts satisfy the Ninth Circuit‘s interpretation, such as it is. But the fundamental point is that the issue here is not addressed by the portion of Af-Cap II that examines the definition of the word “use.” And, as discussed below, when the Ninth Circuit did answer the question posed here, it adopted a totality-of-the-circumstances inquiry. See Af-Cap II, 475 F.3d at 1091; see also Af-Cap Inc. v. Republic of Congo, 383 F.3d 361, 369 & nn.7-8 (5th Cir. 2004) (Af-Cap I).
Second, Argentina contrasts the introductory language in section 1610(a) with the language used in one of the enumerated exceptions, which permits attachment where “property is or was used for the commercial activity upon which the claim is based.”
In any case, the “is or was” specification in section 1610(a)(2) is best read as making “double sure,” Mercy Hosp., Inc. v. Azar, 891 F.3d 1062, 1068 (D.C. Cir. 2018) (quoting Fla. Health Scis. Ctr., Inc. v. HHS, 830 F.3d 515, 520 (D.C. Cir. 2016)), that property that itself forms the basis of a claim would be attachable. As the House Report accompanying the FSIA emphasized, the “language ‘is or was used’ in paragraph (2) contemplates a situation where property may be transferred from the commercial activity which is the subject of the suit in an effort to avoid the process of the court.” H.R. Rep. No. 94-1487, at 28 (1976). Congress’ choice to emphasize the reach of the second exception does not mean that Congress intended the general scope of attachable property under section 1610 to be narrower. Indeed, the most recent Restatement of Foreign Relations Law of the United States uses
The lack of textual basis for Argentina‘s proffered time-of-writ rule suffices to reject it. But the broader purpose of the FSIA further confirms that the time-of-filing rule is the better reading. Congress enacted the FSIA to “protect the rights of both foreign states and litigants in United States courts.”
Argentina does not deny that such manipulation is possible, instead arguing that any concern about such a result “flows from the incorrect starting premise that enforcement of judgments against foreign states should be identical to enforcement of judgments against private individuals.” Argentina Br. 24. But holding that a foreign sovereign enjoys execution immunity only to the extent that the FSIA provides does not reduce it to nothing. The FSIA affords immunity to property that is not “used for a commercial activity.” Argentina‘s preferred rule would place extraordinary burdens on the parties and the district court to speculate about factual circumstances at the precise moment when the court‘s writ would issue. We fail to discern any intent on Congress’ part to guarantee such a result.
C. District Courts Should Examine the Totality of the Circumstances to Determine Whether a Property Is “Used for a Commercial Activity”
Concluding that courts should assess the facts at the time of filing does not answer what facts bear on whether a property is one “used for a commercial activity.”
Once again, that result follows from the text and purpose of the FSIA. The line between sovereign acts and commercial acts is a distinction central to the FSIA. The statute seeks to ensure that
Indeed, just as it would be odd to look only to the property‘s use at the moment when the court issues its writ, so, too, would it be odd to confine a district court‘s examination to the property‘s use at the exact moment when the suit was filed. That approach would again encourage gamesmanship—but on the part of plaintiffs rather than foreign sovereigns. In either case, an artificially narrow lens allows one-time or aberrational uses to dictate the fate of the property. The Fifth Circuit illustrates this point through the hypothetical of an “airplane owned by a foreign government and used solely to shuttle a foreign head-of-state back and forth for official visits,” but that “had been used on rare occasions for commercial activities—for example, . . . to fill in for a displaced plane in the foreign country‘s commercial fleet.” Id. at 369 (quoting Conn. Bank, 309 F.3d at 253). The Fifth Circuit concluded that it would “strain reason” to hold that the airplane could be attached and sold in execution of a judgment due to those aberrational commercial uses. Id. Extending the hypothetical, the fact that a suit is filed during one of the “rare occasions” when the property has a commercial use similarly should not be dispositive. Rather, the better conclusion is to hold that a “foreign property retains its immunity protection where its commercial uses, considered holistically and in context, are bona fide exceptions to its otherwise noncommercial use.” Id. at 370.
In requiring the district court to consider the broader context of the property at issue, we join our colleagues in three other circuits. Under the Fifth Circuit‘s “more holistic approach,” courts “should include an examination of the uses of the property in the past as well as all facts related to its present use, with an eye toward determining whether the commercial use of the property, if any, is so exceptional that it is an out of character use for that property.” Id. at 369 (footnote and internal quotation marks omitted). This holistic approach gives due weight to past uses of the property in order to accurately characterize what kind of property is at issue: “[C]onsideration of evidence of past use is an indispensable part of a court‘s FSIA inquiry” because a “court forbidden to consider how property has been used in the past would be hard-pressed to accurately determine whether the predominant use of that property is commercial or sovereign.” Id. at 369 n.7. Reasoning along similar lines, the Third Circuit recently concluded that this “totality-of-the-circumstances inquiry seems more appropriate” to ensure that gamesmanship does not distort the result. Crystallex, 932 F.3d at 150 (citing Af-Cap I, 383 F.3d at 369).
Indeed, the Ninth Circuit embraces a broader inquiry than even the Fifth Circuit. Whereas the Fifth Circuit had expressed its “reservations about defining property use as commercial in nature solely by reference to past single and/or exceptional commercial uses,” Af-Cap I, 383 F.3d at 369, the Ninth Circuit “decline[d] . . . to incorporate the Fifth Circuit‘s articulated ‘reservations‘” because, in its view, “attempting to quantify the number of commercial uses associated with the property, or to embark upon characterizing property use as exceptional or unexceptional, would unnecessarily complicate the determination to be made under § 1610(a),” Af-Cap II, 475 F.3d at 1091 (quoting Af-Cap I, 383 F.3d at 369). We do not choose between these slightly different approaches, leaving it to district courts to elaborate, case-by-case, how they find particular factual circumstances to bear on a property‘s asserted commercial use.
Argentina raises three primary objections to a totality-of-the-circumstances inquiry. First, it seeks to rebut the circuit consensus by reference to cases, most notably from the Second Circuit, that appear to place potentially dispositive weight on the property‘s use at the time the writ would issue. See Argentina Br. 17-19. In particular, the Second Circuit has noted that property subject to attachment and execution “must be ‘property in the United States of a foreign state’ and must have been ‘used for a commercial activity’ at the time the writ of attachment or execution is issued.” Aurelius Capital Partners, LP v. Republic of Argentina, 584 F.3d 120, 130 (2d Cir. 2009) (quoting
But across its cases in this area, the Second Circuit appears to be concerned with ensuring that purely future uses are not projected to satisfy the requirements of § 1610(a). As TIG explains, the best reading of Aurelius is that, “by the time that a writ is issued, some commercial use must already have been active.” TIG Br. 30. That reading accords with other language from Aurelius explaining that “[s]ection 1610(a) does not say that the property in the United States of a foreign state that ‘will be used’ or ‘could potentially be used’ for a commercial activity in the United States is not immune from attachment or execution,” but instead makes clear that the property “must be ‘used for a commercial activity in the United States’ before it is susceptible to attachment and execution.” 584 F.3d at 130; see also id. at 131 (noting that Argentina “had not used the funds for any commercial activity at the time of attachment” (emphasis added)). Similarly, in EM Ltd. v. Republic of Argentina, the Second Circuit found inadequate an attempt to attach funds that “could have been used to repay the Republic‘s debts to the IMF” where there was no evidence of “either actual use or designation for use” in that manner. EM Ltd. v. Republic of Argentina, 473 F.3d 463, 484 (2d Cir. 2007); see also id. (“The plain language of the statute suggests that the standard is actual, not hypothetical, use.“). Such concerns are assuaged by a totality-of-the-circumstances inquiry, under which a property would not be found to be commercial if it had never yet been used for commercial activity.
Finally, Argentina worries that a totality-of-the-circumstances approach would “open the door to a commercial use entirely in the past (even pre-filing) abrogating the execution immunity of a foreign sovereign‘s property.” Argentina Br. 40. But, just as they need to steer clear of relying on the purely future commercial uses of concern to the Second Circuit, district courts examining the totality of the circumstances should avoid finding speculative or aberrational commercial uses, or uses in the distant past, sufficient to satisfy the “used for a commercial activity” requirement. Both the Fifth and Ninth Circuit analyses described above are sensitive to this concern. The fact remains that, in enacting the FSIA, Congress “shifted the responsibility for making determinations about foreign sovereign immunity from the Executive Branch to the Judiciary,” Grenada, 768 F.3d at 84, with the House Report specifically explaining that courts were to “have a great deal of latitude in determining what is a ‘commercial activity’ for purposes of [the FSIA],” H.R. Rep. No. 94-1487, at 16. In accordance with Congress’ aims, we have confidence that district courts will carefully apply the totality-of-the-circumstances approach in each case to determine whether a property may fairly be characterized as “commercial” for purposes of attachment.
CONCLUSION
Because the district court applied the incorrect legal standard, we vacate and remand for the district court to determine whether, at the time of filing, the totality of the circumstances supported characterizing the R Street property as one “used for a commercial activity” and, if so, whether any of Argentina‘s other defenses bar attachment of its property.
So ordered.