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MARVIN L. MORRIS, JR., Plaintiff, -against- THE PEOPLE'S REPUBLIC OF CHINA, et al., Defendants. GLORIA BOLANOS PONS, et al., Plaintiffs, -against- THE PEOPLE'S REPUBLIC OF CHINA, et al., Defendants.
05 Civ. 04470 (RJH), 06 Civ. 13221 (RJH)
UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF
NEW YORK
478 F. Supp. 2d 561; 2007 U.S. Dist. LEXIS 20784
March 21, 2007, Decided
March 22, 2007, Filed
COUNSEL: [**1] For Marvin L. Morris, Jr., Plain-tiff (1:05-cv-04470-RJH): Ronald Scott Moss, LEAD A
TTORNEY, Moss and Associates, P.C., Irvington, NY. For Gloria Bolanos Pons, Aitor Rodriguez Soria, Con-solidated Plaintiffs (1:05-cv-04470-RJH): Ronald Scott Moss, LEAD ATTORNEY, Moss and Associates, P.C., Hastings-on-Hudson, NY.
For The People's Republic of China, Defendant (1:05-cv-04470-RJH): Bradford A. Berenson, Carter G. Phillips, Eric A. Shumsky, LEAD ATTORNEYS, Sidley Austin LLP, Washington, DC; Alfred Robert Pietrzak, Sidley Austin LLP, New York, NY.
For Gloria Bolanos Pons, Aitor Rodriguez Soria, Plain-tiffs (1:06-cv-13221-RJH): Ronald Scott Moss, LEAD ATTORNEY, Moss and Associates, P.C., Hast-ings-on-Hudson, NY.
For The People's Republic of China, Defendant (1:06-cv-13221-RJH): Alfred Robert Pietrzak, Sidley Austin LLP, New York, NY.
JUDGES: Richard J. Holwell, United States District Judge.
OPINION BY: Richard J. Holwell
OPINION
[*563]
MEMORANDUM OPINION AND ORDER
Consolidated plaintiffs Marvin L. Morris and Gloria Bolanos Pons and Aitor Rodriguez Soria bring actions against defendant People's Republic of China ("PRC") eking to recover on defaulted bonds issued by the PRC's predecessor [**2] government in 1913. The PRC moves to dismiss Morris's complaint on the grounds that: (1) it is entitled to sovereign immunity and none of the exceptions enumerated in the Foreign Sovereign Immunities Act ("FSIA") are applicable; (2) the action is barred by the comprehensive ttlement of existing claims of United States nationals against the PRC under the International Claims Settlement Act 1 and a 1979 treaty between the two nations 2; and (3) the statute of limitations has long since expired. For the reasons that follow, the Court concludes that it lacks subject matter jurisdiction over Morris's complaint as the PRC is enti-tled to sovereign immunity, and further, that if jurisdic-tion existed, plaintiffs' claims would be time-barred. The Court does not address whether plaintiffs' claims are also barred by the International Claims Settlement Act or the 1979 treaty. If and when the PRC has been properly rved in the Pons action, the Court will entertain further briefing on whether there are facts justifying a different conclusion than that reached herein.电脑自动关机设置
1 See 2
2 U.S.C. §§ 1622, 164
3 (2006).
[**3]
2 Agreement Between the Government of the
United States of America and the Government of
the People's Republic of China Concerning the
Settlement of Claims, May 11, 1979, 30 U.S.T.
西湖六月中
1957.
BACKGROUND
The actions reprent part of a concerted effort by certain American citizens to collect almost $ 90 billion from the People's Republic of China for the failure of the PRC to pay the principal and interest on bonds issued in
1913 by the predecessor government of Yuan Shih-Kai. The bondholders have formed the American Bondhold-ers Foundation and are pursuing political, financial, and legal channels in their efforts to persuade the PRC to negotiate a [*564] ttlement. Asrting their rights as American citizens, plaintiffs insist that the PRC should be held to account for its economic commitments if it wishes to partake in international financial markets.
As fascinating as China's political history during the twentieth century may be, t forth in varying detail in the pleadings and moving papers, the Court will en-deavor only to recount tho facts necessary for the resolution of the [**4] motion before it. In 1913, facing desperate financial conditions and mounting debt fol-lowing the fall of the Qing Dynasty, the new Chine government sought to rai capital through the issuance of bonds. Under the Chine Government Reorganisation Loan Agreement ("Loan Agreement"), an international consortium of banks loaned the Republic of China £ 25,000,000 and in turn issued bonds for the value of the loan. 3 (Loan Agreement, Pietrzak Decl. Ex. 6; Bond, id. Ex. 1; Bond conditions (on rever side of bond), id. Ex.
2.) The loan was cured by revenues from the Salt Ad-ministration of China and central government taxes on four specified Chine provinces. 4 (Loan Agreement, Arts. IV, VI.) The consortium of banks included banks from Britain, Germany, France, Russia, and Japan, but not Ame
rica. Indeed, American banks withdrew from the consortium after President Woodrow Wilson refud to support their participation on the grounds that the terms of the loan impod on China's sovereignty. (Statement of American Government in regard to Support requested by the American Group, March 18, 1913, Pietrzak Decl. Ex. 9.) Becau America was excluded from the loan agreement, no American [**5] banks took part in the issuance of the bonds, loan payments by China were not paid to and loan proceeds not held by American banks, principal and interest payments were only redeemable at issuing banks and cities outside of America, and issuing banks could not transfer their interest in the loans to American companies. (Bond Condition P 5; Loan Agreement, Arts. VIII, X, XIII, XIX.) However, issuing banks were not prohibited from issuing bonds to United States citizens. The Chine government rviced and paid the debt for approximately twenty-six years. In 1939, the Chine government cead making interest pay-ments on the bonds. (Compl. P 31.) In 1949, after a revolution, the Communist Party of China founded the PRC. The PRC made no interest payments, nor did it pay the principal when the bonds matured in 1960. 5
3 The agreement provided for the interest to
"be paid by the Chine government . . . through
the Banks or their designated agents," but the
bonds also stated on their face that China "di-
rectly undertakes and engages to pay to the
Bearer of this Bond" the amount owed. (See Loan
Agreement, Arts. VIII, X, Pietrzak Decl. Ex. 6;
Bond P 1, id. Ex. 1.) The face of the bond further
stated that the loan agreement was a "binding
agreement upon the Government of the Republic
of China, and its successors." (Bond preamble.)
[**6]
4 The PRC contends that the Loan Agreement,
negotiated by foreign banks wishing to expand
their home countries' political and economic in-
fluence in China, impod onerous conditions on
China. The included limiting China's ability to
u the proceeds to defend itlf against foreign
interests, and requiring China to give foreigners
official posts equal to their Chine counterparts.
It offers a commentator's view that "[t]he loan has
been condemned by Chine historians, national-
ist and communist alike, as one of the ugliest
crimes committed by the imperialist powers in
China." K.C. Chan, British Policy in the Reor-
ganization Loan to China 1912-13, 5 Mod. Asian
Stud. 355, 355 (1971).
5 Defendant suggests that in 1955, a PRC
government office issued a statement officially
repudiating payment of any public bonds issued
by "the Beiyang government and the Nationalist
government." (Pietrzak Decl. Ex. 11.) However,
it appears that defendant's English version of the
document containing this quotation has been in-
correctly translated, and that it actually states that
the PRC was "unable to repay" the obligations,
not that it was unwilling to.
同学十年[*565]
樗里疾怎么读[**7] Beginning in 1968 and spanning a year and a half, the Foreign Claims Settlement Commission t up under the International Claims Settlement Act of 1949 heard claims by U.S. nationals for loss resulting from the "nationalization, expropriation, intervention, or other takings" by the PRC from October 1, 1949 until No-vember 6, 1966. See 22 U.S.C. § 1643 (2006). During a cond claims period, the Commission heard claims arising from November 6, 1966 until May 11, 1979. See 22 U.S.C. § 1623(a)(1)(B). American citizens holding bonds, including the 1913 bonds at issue here, submitted claims to the Commission, although they were ultimately rejected. The valuations of the claims established by the Commission were not finally resolved or paid until the United States and the PRC normalized diplomatic rela-tions and reestablished bilateral economic and trade rela-tions in 1979. Under the treaty, the two nations reached a comprehensive ttlement of all property claims of U.S. nationals against the PRC "arising from any nationaliza-tion, expropriation, intervention, and other taking . . . on
or after October 1, 1949, and prior to the date [**8] of this Agreement [May 11, 1979]." (Agreement B
etween the Government of the United States of America and the Government of the People's Republic of China Concern-ing the Settlement of Claims, May 11, 1979, 30 U.S.T. 1957, Pietrzak Decl. Ex. 4.)
Finally, in reaction to a United States district court decision rendering a default judgment against the PRC for certain defaulted bonds not including the 1913 bonds, e Jackson v. PRC, 550 F. Supp. 869 (N.D. Ala. 1982), the PRC in 1983 nt a diplomatic Aide Memoire to the United States stating that "[t]he Chine government recognizes no external debts incurred by the defunct Chine governments and has no obligation to repay them." 6 (Pietrzak Decl. Ex. 13 P 2.) Plaintiffs now bring suit to enforce the obligations of the 1913 bonds against the PRC.
6 The PRC asrted as "a long-established
principle of international law that odious debts
are not to be succeeded to" (Pietrzak Decl. Ex. 13
P 2), a view they continue to advance, but do not
explicitly rely on, in making this motion to dis-
毛坯怎么读miss. (Mot. to Dismiss 1 n. 1.)
[**9] STANDARD OF REVIEW
Defendant moves to dismiss the complaint under Rule 12(b)(1) on the grounds that the Court lacks subject matter jurisdiction to hear the ca becau the PRC is immune from this lawsuit as a sovereign nation. In the context of a Rule 12(b)(1) challenge to jurisdiction under the FSIA, the Court must look to the substance of the allegations to determine whether one of the exceptions to the FSIA's general grant of immunity applies. See Rob-inson v. Gov't of Malaysia, 269 F.3d 133, 140 (2d Cir. 2001). "[T]he plaintiff has the burden of going forward with showing that, under exceptions to the FSIA, immu-nity should not be granted, although the ultimate burden of persuasion remains with the alleged foreign sover-eign." See Cargill Int'l S.A. v. M/T Pavel Dybenko, 991 F.2d 1012, 1016 (2d Cir. 1993) (citations omitted). The Court should look outside the pleadings to submissions by the parties when there are disputed factual issues. See Filetech S.A. v. Fr. Telecom S.A., 157 F.3d 922, 932 (2d Cir. 1998); Antares Aircraft, L.P. v. Federal Republic of Nigeria, 948 F.2d 90, 96 (2d Cir. 1991) (on a motion [**10] "challenging the district [*566] court's sub-ject matter jurisdiction, the court may resolve disputed jurisdictional fact issues by reference to evidence outside the pleadings, such as affidavits").
Defendant also moves to dismiss the complaint as time-barred under the applicable statute of limitations. "Where the dates in a complaint show that an action is barred by a statute of limitations, a defendant may rai the affirmative defen in a pre-answer motion to dis-miss[, which] is properly treated as a Rule 12(b)(6) mo-tion to dismiss." Ghartey v. St. John's Queens Hosp., 869 F.2d 160, 162 (2d Cir. 1989). "[S]uch a motion should not be granted unless it appears beyond doubt that the plaintiff can prove no t of facts in support of his claim which would entitle him to relief." Ortiz v. Cornetta, 867 F.2d 146, 148 (2d Cir. 1989) (citations and internal quo-tation marks omitted). The Court "must accept as true the factual allegations in the complaint, and draw all rea-sonable inferences in favor of the plaintiff." Bolt Elec., Inc. v. City of New York, 53 F.3d 465, 469 (2d Cir. 1995) (citations omitted). The Court may not look outside the [**11] complaint and "any documents that are either incorporated into the complaint by reference or attached to the complaint as exhibits." Blue Tree Hotels Inv. (Can.), Ltd. v. Starwood Hotels & Resorts Worldwide, Inc., 369 F.3d 212, 217 (2d Cir. 2004) (citing Taylor v. Vt. Dep't of Educ., 313 F.3d 768, 776 (2d Cir. 2002)). DISCUSSION
A. Foreign Sovereign Immunity
Until 1952, the United States held the official view that foreign sovereigns were absolutely immune from suits in the courts of the United States. At that time, the executive branch adopted a restrictive t
heory of immu-nity, under which a state would be granted immunity only for its sovereign or public acts. See Letter from Jack B. Tate, Acting Legal Advir, to Philip B. Perlman, Acting Attorney General (May 19, 1952). This view was codified by the Foreign Sovereign Immunities Act ("FSIA") in 1976, now the sole means of obtaining juris-diction over a foreign sovereign in the United States. 28 U.S.C. §§ 1330, 1602-11 (2006); e also Argentine Re-public v. Amerada Hess Shipping Corp., 488 U.S. 428, 443, 109 S. Ct. 683, 102 L. Ed. 2d 818 (1989); Republic of Austria v. Altmann, 541 U.S. 677, 124 S. Ct. 2240, 159 L. Ed. 2d 1 (2004) [**12] (FSIA applies to law-suits bad on claims arising before its passage as well). Under the FSIA, "a foreign state is presumptively im-mune from the jurisdiction of United States courts" unless one of the enumerated exceptions apply. Saudi Arabia v. Nelson, 507 U.S. 349, 355, 113 S. Ct. 1471, 123 L. Ed. 2d 47 (1993). 7
7 To challenge subject matter jurisdiction un-
der the FSIA, the defendant must first prent a
"prima facie ca that it is a foreign sovereign."
Cargill Int'l S.A. v. M/T Pavel Dybenko, 991 F.2d
1012, 1016 (2d Cir. 1993). It is undisputed here
that the PRC is a foreign sovereign.
Plaintiff invokes the "commercial activity" excep-tion to a foreign state's immunity, which provides:
A foreign state shall not be immune
from the jurisdiction of courts of the
United States or of the States in any
ca . . . in which the action is bad [1]
upon a commercial activity carried on in
the United States by the foreign state; or
[2] upon an act performed in the United
States in connection with a commercial
[**13] activity of the foreign state
elwhere; or [3] upon an act outside the
territory of the United States in connec-
tion with a commercial activity of the for-
eign state elwhere and that act [*567]
caus a direct effect in the United States.
28 U.S.C. § 1605(a)(2). In particular, plaintiff contends that the PRC is subject to suit under the third clau. For a foreign state to be subject to jurisdiction under the third clau, the lawsuit must be (1) "bad . . . upon an act outside the territory of the United States"; (2) "that was taken in connection with a commercial activity of [the foreign state] outside this country"; and (3) "that caud a direct effect in the United States." Republic of Argen-tina v. Weltover, Inc., 504 U.S. 607, 611, 112 S. Ct. 2160, 119 L. Ed. 2d 394 (1992).
The parties do not dispute that the first two factors are established. First, a lawsuit is "bad upon" conduct that, "if proven, would entitle a plaintiff to relief under his theory of the ca." Saudi Arabia v. Nelson, 507 U.S. 349, 357, 113 S. Ct. 1471, 123 L. Ed. 2d 47 (U.S. 1993). In this ca, the legally si
gnificant act was the PRC or its predecessor's default on plaintiff's bonds. The prior gov-ernment of [**14] China cead paying interest on the bonds in 1939. Under the terms of the bonds, all pay-ments of principal and interest were to be made in Brit-ain, Germany, France, Russia, or Japan. (Bond Condi-tions P 5.) Thus, the breach took place either in China where the decision to default was made or in one of the countries where payments were to be made, thereby sat-isfying the requirement that the acts occur outside the United States. See Weltover Inc. v. Republic of Argentina, 941 F.2d 145, 153 (2d Cir. 1991), aff'd 504 U.S. 607, 112 S. Ct. 2160, 119 L. Ed. 2d 394 (1992) ("[t]he legally significant act was defendants' failure to abide by the contractual terms; i.e., to make payments in" the speci-fied location). The Court need not inquire further into where exactly the breach or failure to pay occurred, so long as it occurred outside the United States. See Texas Trading & Milling Corp. v. Federal Republic of Nigeria, 647 F.2d 300, 311 n.30 (2d Cir. 1981) ("We need not belabor the point that the specific act or acts upon which the suits are bad, the anticipatory repudiation of the cement contracts and letters of credit, took place at least in part 'outside the territory [**15] of the United States.'"). Second, the breach of the terms of the bonds was in connection with the issuance of the bonds, which has been held to be a "commercial activity" within the meaning of the FSIA. See Weltover, 941 F.2d at 151 ("the issuance of debt instruments . . . is clearly commer-cial"); Shapiro v. Republic of Bolivia, 930 F.2d 1013, 1018 (2d Cir. 1991) ("it is l
f-evident that issuing public debt is a commercial activity within the meaning of Sec-tion 1605(a)(2)").
Thus, the only question is whether there was a "di-rect effect in the United States." In conducting this in-quiry, the Court should balance "Congress' goal of open-ing the courthou doors 'to tho aggrieved by the commercial acts of a foreign sovereign,'" Weltover, 941 F.2d at 151 (citing Texas Trading & Milling Corp., 647 F.2d at 312), with the requirement of "some form of sub-stantial contact with the United States," Verlinden B.V. v. Central Bank of Nigeria, 461 U.S. 480, 490, 103 S. Ct. 1962, 76 L. Ed. 2d 81 (1983). The Court finds that there was no direct effect in the United States, and thus the PRC is entitled to sovereign immunity.
1. Abnce of a [**16] "Direct Effect"
As an initial matter, the Court questions whether the 1939 default on interest or the 1960 default on principal had any effect on plaintiff who likely purchad the long-defaulted bonds for a few hundred dollars in a "col-lectibles" market in 2000. Plaintiff describes the effect as follows: "Mr. Morris has not been paid what he is owed [*568] by Defendant." (Opp'n 5.) Financial loss arising from a breach of contract can constitute an effect. See Texas Trading & Milling Corp., 647 F.2d at 312 ("a di-rect effect can ari not only from a tort, . . . but from [a breach] of a contract . . . as well"). 8 However, plaintiff
has prented no evidence showing any loss in this ca. While plaintiff alleges that he purchad the bonds in 2000 (Compl. P 38), he does not provide any more de-tails about the nature of the transaction. If he purchad the bonds (priced) as collectibles, and not as legitimate financial instruments, 9 then it can hardly be considered a financial loss when he receives exactly what he paid for.
影视公司名字10 A party who purchad the bonds as financial instru-ments has a more tenable claim to have suffered an "ef-fect" in a commercial n as [**17] envisioned by the FSIA.
8 The court in Texas Trading was referring to
a corporation when it found that financial loss
constituted a direct effect. See Texas Trading &
Milling Corp., 647 F.2d at 312 (determining fi-
nancial loss to corporation constitutes direct ef-
fect becau "[u]nlike a natural person, a corpo-
rate entity is intangible; it cannot be burned or
crushed. It can only suffer financial loss.").
Where the affected party is a natural person, it is
slightly less obvious that financial loss, rather
than actual injury, should constitute an effect for
purpos of the FSIA. To the extent there is any
doubt, however, the Court finds this to be the
ca.
9 In this regard, defendant points the Court to
veral cas in which the SEC has obtained civil
injunctions preventing the sale of ancient bonds
as anything other than collectibles. See SEC Liti-
gation Relea No. 15989 (Dec. 1, 1998); SEC
Litigation Relea No. 18393 (Oct. 6, 2003).
10 Indeed, the bonds that are the subject of
this ca can currently be purchad over eBay.
At the time of publication, the £ 20 bond was
lling for $ 100 and £ 100 bond was lling for $
500.
[**18] Assuming plaintiff has suffered some in-jury, he has not made a showing of a "direct effect" as required by the statute. "[A]n effect is direct if it follows as an immediate conquence of the defendant's legally significant act." Weltover, 504 U.S. at 618 (citations and internal quotations omitted). 11 Plaintiff purchad his bonds over sixty years after the PRC's predecessor gov-ernment
defaulted in 1939 and forty years after the bonds matured. Such an effect lacks the immediacy required for this exception to sovereign immunity to apply. Before plaintiff suffered an effect, he first had to purcha the bonds, an intervening act. A line of cas interpreting "direct effect" in the context of tort liability has found that an intervening act, or an extended causal chain, can keep an effect from being characterized as direct. See Virtual Countries, Inc. v. Republic of South Africa, 300 F.3d 230, 237 (2d Cir. 2002) (concluding that there was no jurisdiction where the "effect" was dependent on an intervening factor); United World Trade, Inc. v. Man-gyshlakneft Oil Prod. Ass'n, 33 F.3d 1232, 1238 (10th Cir. 1994) (same); Upton v. Empire of Iran, 459 F. Supp. 264, 266 (D.D.C. 1978) [**19] ("The common n interpretation of a 'direct effect' is one which has no in-tervening element, but, rather, flows in a straight line without deviation or interruption."). While this ca sounds in contract and not in tort, the Court nonetheless finds that plaintiff's act of purchasing the bonds many decades after default likewi is an intervening act breaking the causal relationship. The "direct effect" from the legally significant acts, the breaching of the terms of the bonds, was felt in 1939 [*569] and 1960, not in 2000 when plaintiff purchad and the defaulted bonds in
a "collectibles" market.
11 The Supreme Court, resolving a split
among the circuits, has explicitly held that for an
effect to be considered "direct," it need not be
台风中心"foreeable" or "substantial." Weltover, 504 U.S.
at 618.
Nothing in the commercial activity exception ex-pressly limits cognizable effects to tho felt solely by plaintiff. 12 Thus, plaintiff could arguably rely on the ef-fect felt by the former holders of his bonds. [**20] The default on plaintiff's bonds, in either 1939 or 1960, would cau a direct effect to tho people who held plaintiff's bonds at the time of default. See Weltover, 941 F.2d at 152 ("Becau defendants' breach of the [bond] agreement deprived plaintiffs of their contractual rights to receive payment, defendants' acts caud a direct ef-fect to plaintiffs."). If plaintiff alleged that U.S. citizens held his bonds at the time of any default, the Court would then have to consider whether citizenship was sufficient to place the direct effect "in the United States," discusd infra. However, plaintiff has not put forward any evidence regarding the provenance of the eight bonds he now holds, nor does he allege that antecedent owners were U.S. citizens who suffered direct effects in the United States. At most, he makes the conclusory al-legation that bonds were sold at an unspe
cified time to and in the United States. (Compl. PP 18, 19.)
12 For example, in Commercial Bank of Ku-
wait v. Rafidain Bank, the defendant was to make
payments not directly to plaintiff, but to U.S. ac-
counts held by third-party banks. 15 F.3d 238,
241 (2d Cir. 1994). The Court rejected defen-
dant's argument that the commercial activity ex-
ception did not apply becau the withheld pay-
ments were not to be made to plaintiff, and held
that the failure to "remit funds in New York . . .
had a direct effect in the United States." Id.
[**21] 2. Abnce of a Direct Effect "in the United States"
Even if plaintiff established that U.S. citizens held his bonds at the time of any default, or that his purcha of the bonds in 2000 somehow gave ri in some other manner to a "direct effect," he must still show that the direct effect was felt "in the United States." Plaintiff ar-gues that the Court should focus entirely on the citizen-ship of the bondholder in considering where the effect was felt. Certainly, one factor in evaluating where finan-cial loss is felt is where a corporation is incorporated, or analogously, where a natural person resides. See Texas Trading & Milling Corp., 647 F.2d at 312 (finding fi-nancial loss occurred "in the United States" for two rea-sons, one of which was that "each of the plaintiffs is an American corporation"); Crimson Semiconductor, Inc. v. Electronum, 629 F. Supp. 903, 907 (S.D.N.Y. 1986) (finding "direct effect in the United States" where "the beneficiary of the contract" was "a New York corpora-tion"); cf. Int'l Housing Ltd. v. Rafidain Bank Iraq, 893
