USA v. LightRay Captl ( 2021 )

Case: 20-20471 Document: 00516011970 Page: 1 Date Filed: 09/13/2021
United States Court of Appeals
for the Fifth Circuit United States Court of Appeals
Fifth Circuit
FILED
September 13, 2021
No. 20-20471 Lyle W. Cayce
Clerk
United States of America,
Plaintiff—Appellee,
Federal Republic of Nigeria
Claimant—Appellee,
versus
The M/Y Galactica Star, et al
Defendants,
and
LightRay Capital, L.L.C.,
Claimant—Appellant,
versus
Enron Nigeria Power Holding, Limited,
Movant—Appellant.
Appeal from the United States District Court
for the Southern District of Texas
USDC No. 4:17-CV-2166
Case: 20-20471 Document: 00516011970 Page: 2 Date Filed: 09/13/2021
No. 20-20471
Before Davis, Duncan, and Oldham, Circuit Judges.
W. Eugene Davis, Circuit Judge:
In this civil forfeiture case, the district court granted forfeiture of a
yacht, the M/Y Galactica Star, to the United States Government
(“Government”). Two unsuccessful claimants appeal orders by the district
court denying their claims. LightRay Capital, L.L.C. (“LightRay”), the sole
shareholder of the corporate owner of the yacht, appeals the district court’s
2018 order striking its claims and dismissing it for lack of standing; Enron
Nigeria Power Holding, Limited (“Enron Nigeria”), a judgment creditor of
the Federal Republic of Nigeria (“Nigeria”), appeals the district court’s
2020 order granting a consent motion that resulted in the forfeiture of the
yacht. Because (1) the district court did not err in dismissing LightRay, the
sole shareholder of the yacht’s corporate owner, from the proceedings for
lack of standing, and (2) Nigeria’s Verified Claim was at all times immune
from attachment and execution under the Foreign Sovereign Immunities Act
(“FSIA”), we AFFIRM the district court’s ruling with respect to
LightRay’s appeal and DISMISS Enron Nigeria’s appeal for lack of
jurisdiction.
I. BACKGROUND
This case arises from an alleged international conspiracy to secure
lucrative oil and gas contracts in Nigeria in exchange for bribes involving real
estate, furniture, artwork, and other gifts. Kolawale Aluko, a Nigerian
national, allegedly funneled millions of dollars of goods and services to
Diezani Alison-Madueke, the Minister for Petroleum Resources for Nigeria
from 2010 to 2015. The Government alleges that in her role as overseer of
Nigeria’s state-owned oil company, Alison-Madueke, in return for these
bribes, awarded lucrative contracts to companies designated by Aluko and
other co-conspirators, which were unqualified to perform them or failed to
2
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perform the contracts. These bribes funded a lavish and privileged lifestyle
for Alison-Madueke and her family. Aluko and his co-conspirators then
allegedly laundered the profits of the contracts (totaling more than $1.5
billion) into and through the United States using various shell companies and
complex financial transactions. Aluko and his co-conspirators allegedly used
proceeds from the conspiracy to purchase a 65-meter yacht, the M/Y
Galactica Star (“Galactica Star” or “yacht”), and numerous other assets.1
Alleging that the yacht and other assets (collectively, “the Assets”)
were the ill-gotten gains of an international conspiracy, the Government filed
an in rem civil forfeiture complaint under 18 U.S.C. § 981(a)(1)(A) and
(a)(1)(C) to claim the Assets, worth approximately $144 million.2 On August
11, 2017, Nigeria filed a verified claim to the Assets (“the Verified Claim”),
asserting that the conspirators had misappropriated funds from Nigeria’s
treasury and that Nigeria was the innocent owner of the Assets.3 Days before
the Government initiated forfeiture proceedings, Appellant LightRay
purchased 100 percent of the common stock in Earnshaw Associates Ltd.
(“Earnshaw”), a company that owned the yacht and owned or partly owned
1
The other assets include real estate located at 1049 Fifth Avenue, Units 11B and
12B, New York, NY 10032, 807 Cima del Mundo Road, Montecito, CA 90077, and 815
Cima del Mundo Road, Montecito, CA 90077; proceeds from a foreclosure sale of real
estate located at 157 West 57th Street, Unit 79, New York, NY 10019; and “all rights and
interests” in a promissory note executed by a Louisiana marine services company named
Cross Holdings.
2
Section 971 provides that “[a]ny property, real or personal, involved in a
transaction or attempted transaction in violation of section 1956, 1957 or 1960 of this title,
or any property traceable to such property” and “[a]ny property, real or personal, which
constitutes or is derived from proceeds traceable to [such a] violation . . . or a conspiracy to
commit such offense” is subject to forfeiture to the United States. 18 U.S.C.
§ 981(a)(1)(A),(C).
3
Nigeria filed a renewed verified claim on December 4, 2017.
3
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all of the other Assets. On December 29, 2017, LightRay filed a verified claim
to the Assets, based on its ownership of Earnshaw.
Appellant Enron Nigeria held an $11 million judgment against Nigeria
and filed a sealed motion to recover its judgment against any recovery Nigeria
might have through its claim in the forfeiture proceedings. To effect this
recovery of its debt, Enron Nigeria sought an order under Texas law for the
turnover of Nigeria’s claim to Enron Nigeria for continued litigation of its
claims.
In late 2017, the Galactica Star was being held in Cancun, Mexico,
under an order of attachment issued by a Mexican court. The Government
filed a motion in the district court for a protective order “directing the parties
to take an action to seize, secure, maintain, or preserve” the ship. The
magistrate judge granted this motion on March 2, 2018, ordering LightRay to
pay for the maintenance of the ship. The court expressly declined to rule on
which party owned the Galactica Star and noted that LightRay would be
entitled to partial reimbursement of its costs if the yacht were to be
determined to belong to the Government.
On May 10, 2018, the Government, LightRay, and Earnshaw entered
into a stipulation to resolve their claims to the Galactica Star. Through the
stipulation, LightRay withdrew its claim to the yacht, 4 agreed to transfer
custody and control of it to the Government, and agreed not to oppose an
interlocutory sale of it. LightRay then filed a notice of withdrawal of its claim
to the Galactica Star on May 24, 2018. 5 Shortly thereafter, the Government
moved to strike LightRay’s claim to the (non-yacht) assets that remained at
4
This stipulation did not apply to any of the other assets at issue in this case.
5
The Government then assumed custody of the yacht and spent approximately
$170,000 per month to maintain it.
4
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issue (“the Remaining Assets”) on the ground that LightRay lacked standing
to assert a claim to those assets. The district court granted the motion in an
oral hearing held on October 24, 2018.6
The Government and Nigeria thereafter filed a joint motion for an
order authorizing interlocutory sale of the yacht. Enron Nigeria filed an
emergency ex parte application for turnover and appointment of receiver
under seal, but the district court denied the motion. The district court
subsequently granted a motion to confirm the interlocutory private sale of the
Galactica Star on July 23, 2019, in which the yacht was sold for $37.4 million
and the proceeds of the sale were held as substitute res pending the
conclusion of the forfeiture action. By early 2020, the only remaining
claimant to the yacht was Nigeria. The Government and Nigeria filed a joint
motion for consent forfeiture judgment on February 24, 2020. In their
motion, Nigeria also withdrew its claim to the substitute res.
Still in pursuit of satisfaction of its judgment, Enron Nigeria filed a
second amended application for relief, this time unsealed, on March 9, 2020.
It opposed the motion for consent judgment and again requested turnover
and appointment of a receiver. On May 19, 2020, the district court heard
argument from Enron Nigeria, the Government, and Nigeria regarding the
motion for the consent judgment. Although LightRay filed no motions or
briefs with respect to any objections it had to the motion for consent
judgment, counsel appeared at the hearing to assert LightRay’s claim to the
yacht proceeds and contest the validity of the stipulation through which it
had withdrawn its claim to the yacht. LightRay took the position that it had
6
LightRay attempted to appeal the district court’s standing ruling, but this Circuit
dismissed the appeal for lack of jurisdiction because the district court had not certified the
ruling as an appealable final judgment. See United States v. M/Y Galactica Star, 784 F.
App’x 268, 272, 276 (5th Cir. 2019) (per curiam).
5
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entered into the May 10, 2018 stipulation under duress and, therefore, the
stipulation was invalid.
After hearing arguments, the district court denied Enron Nigeria’s
motion for turnover relief and granted the motion for consent judgment of
forfeiture to the United States. It determined that the Government had sole
claim to the yacht, and that Nigeria had no lawful claim to it and therefore
Enron Nigeria had nothing against which to recover its debt. With respect to
LightRay, the court rejected any argument that its stipulation and withdrawal
of its claim to the yacht was invalid. The court also held that LightRay lacked
standing to assert a claim to the yacht or the Remaining Assets. On July 15,
2020, the district court certified as final judgments under Rule 54(b): (1) the
2018 order striking LightRay from the litigation, and (2) the 2020 order
granting forfeiture of the Galactica Star proceeds to the Government.
Both LightRay and Enron Nigeria timely appealed. LightRay
challenges the district court’s 2018 order striking its claims and dismissing it
from the proceedings, and the 2020 order granting forfeiture of the Galactica
Star proceeds to the Government. Enron Nigeria challenges the 2020 order
denying its motion for turnover relief and granting the Government and
Nigeria’s joint motion for consent judgment.
II. LEGAL STANDARDS
“This court reviews questions of standing de novo.” 7 This Court
“review[s] for clear error all facts expressly or impliedly found by the district
7
United States v. $500,000.00 in U.S. Currency (“Five Hundred Thousand”), 591
F.3d 402, 404 (5th Cir. 2009) (quoting Nat’l Athletic Trainers’ Ass’n, Inc. v. U.S. Dep’t of
Health & Human Servs., 455 F.3d 500, 502 (5th Cir. 2006)) (quotation marks omitted).
6
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court” that bear upon standing.8 “The claimant opposing forfeiture bears the
burden of establishing [its] standing.”9
This Court reviews a district court’s ruling on a turnover order for
abuse of discretion.10 “A court abuses its discretion when it acts ‘in an
unreasonable or arbitrary manner . . . without reference to any guiding rules
and principles.’”11
As a threshold matter, however, this Court must have jurisdiction to
hear a case or controversy. The FSIA “provides the sole basis for obtaining
jurisdiction over a foreign state in the courts of this country.” 12 “The
existence of subject matter jurisdiction under the FSIA is a question of law
which this Court reviews de novo.”13
III. LIGHTRAY’S APPEAL
The district court rejected LightRay’s claim to the proceeds of the sale
of the Galactica Star and other assets based on its ownership of the stock of
Earnshaw, the owner of the yacht and most of the Remaining Assets. As to
LightRay’s claim to the proceeds of the sale of the Galactica Star, the district
court rejected LightRay’s attempt to set aside the stipulation in which
LightRay withdrew its claim to the proceeds based on its argument that the
8
Rivera v. WyethAyerst Labs., 283 F.3d 315, 319 (5th Cir. 2002) (citing Pederson v.
La. State Univ., 213 F.3d 858, 869 (5th Cir. 2000)).
9
Five Hundred Thousand, 591 F.3d at 404 n.2 (citation omitted).
10
Bollore S.A. v. Imp. Warehouse, Inc., 448 F.3d 317, 321 (5th Cir. 2006) (citing
Beaumont Bank v. Buller, 806 S.W.2d 223, 226 (Tex. 1991)).
11
Id. (quoting Beaumont Bank, 806 S.W.2d at 226).
12
Argentine Republic v. Amerada Hess Shipping Corp., 488 U.S. 428, 443 (1989).
13
Stena Rederi AB v. Comision de Contratos del Comite Ejecutivo Gen. del Sindicato
Revolucionario de Trabajadores Petroleros de la Republica Mexicana, S.C., 923 F.2d 380, 386
(5th Cir. 1991) (citation omitted).
7
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Government coerced it to do so. On appeal, LightRay argues that it was
unable to demonstrate the basis for its coercion claim because the case had
been stayed and shortly thereafter LightRay was struck from the proceedings
in district court. LightRay thus contends that the district court’s judgment of
forfeiture of the Galactica Star proceeds to the Government violated
LightRay’s due process rights. As to the Remaining Assets, LightRay
contends that it has standing to contest forfeiture because it has “an interest
in the seized property” and it can assert an “innocent owner” defense under
§ 983(d).
A. Waiver of Duress Argument Regarding the Stipulation
We consider first whether the district court abused its discretion in
ruling that LightRay waived any argument that it was coerced into
withdrawing its claim to the proceeds of the sale of the yacht.14 The district
court based this ruling on the fact that LightRay stipulated to withdraw its
claim—and two weeks later, formally withdrew its claim.15
We see no basis for a claim of coercion. We agree with the district
court that this is particularly so in light of the fact that LightRay did not
challenge the stipulation based on this alleged duress for over two years16 and
14
See, e.g., In re Signal Int’l, LLC, 579 F.3d 478, 487 (5th Cir. 2009) (“We review
for abuse of discretion the district court’s ruling that Signal’s challenge was untimely and
that the defense was thus waived.”).
15
Also, LightRay filed no motion for relief from the district court’s order
dismissing it from the case and it filed no brief in advance of the May 19, 2020 telephone
conference fleshing out its argument or requesting an evidentiary hearing to produce
evidence that would support its argument.
16
The Government, LightRay, and Earnshaw entered into the stipulation in which
LightRay withdrew its claim to the yacht on May 10, 2018. LightRay only challenged the
validity of the stipulation at the telephone conference regarding the motion for consent
judgment on May 19, 2020, but it did not file any opposition to the motion prior to the
conference either.
8
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it did not appeal to the district court the magistrate judge’s order requiring it
to pay the maintenance costs. Moreover, LightRay engaged in negotiations
and went through numerous drafts with the Government over the language
of the stipulation, and it voluntarily withdrew its claim to the yacht two weeks
after the stipulation was signed. LightRay also presumably received benefit
from the waiver—namely, not having to pay hundreds of thousands of dollars
monthly in yacht maintenance costs. Also, as the district court pointed out,
LightRay knew how to file a motion for relief of a stay order, which it did not
do. All the circumstances surrounding the stipulation thus support a rejection
of the unsupported duress argument. For these reasons, we are satisfied that
the district court did not abuse its discretion in rejecting LightRay’s duress
argument and its attempt to nullify its affirmative action of withdrawing its
claim to the yacht.
B. Dismissal of LightRay’s Claim to Remaining Assets
The district court dismissed LightRay’s claim to the Remaining
Assets based on its conclusion that LightRay lacked standing under the civil
forfeiture statute to assert a claim. Under 18 U.S.C. § 981(a)(1), the United
States is permitted to seize property traceable to certain enumerated crimes.
Civil forfeiture proceedings are governed by § 983, which provides that, “[i]n
any case in which the Government files . . . a complaint for forfeiture of
property, any person claiming an interest in the seized property may file a
claim asserting such person’s interest in the property.” 17
We have held that to show standing in the civil forfeiture context, a
claimant must show both constitutional and “prudential” standing.18 As
17
18 U.S.C. § 983(a)(4)(A).
18
United States v. One 18th Century Colombian Monstrance, 797 F.2d 1370, 1375 (5th
Cir. 1986) (“A claimant . . . must be able to show at least a facially colorable interest in the
proceedings sufficient to satisfy the case-or-controversy requirement and ‘prudential
9
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LightRay points out, the Eighth Circuit has held that a sole shareholder of a
corporation has constitutional standing under Article III in a civil forfeiture
of corporate assets because “only a colorable interest in the property to be
forfeited” is required.19 We agree that LightRay is able to meet the standard
for constitutional standing in this matter. As to what we previously identified
as “prudential” standing, however, we conclude that the district court
properly dismissed LightRay. As explained by the Supreme Court in Lexmark
Int’l, Inc. v. Static Control Components, Inc., the label “prudential standing”
is “misleading.”20 Rather, the issue is whether, using traditional principles
of statutory interpretation, the party “has a cause of action under the
statute.”21 As applied in this case, the issue then is whether a shareholder of
a corporation has a cause of action under § 983(a)(4)(A), i.e., “an interest in
the seized property,” to challenge a civil forfeiture of the corporation’s
assets.
LightRay argues that it has “an interest in the seized property,” as
required by § 983(a)(4)(A), because it is the owner of 100 percent of
Earnshaw’s shares, and Earnshaw directly or indirectly owns the Remaining
Assets, namely: (1) a 49.9 percent stake in 1049 Fifth Avenue, Units 11B and
12B, New York, NY 10032, (2) a 49.9 percent stake in Wamdara, Inc., a
California company whose assets include real property located at 807 Cima
del Mundo Road, Montecito, CA 90077 and 815 Cima del Mundo Road,
considerations defining and limiting the role of the courts.’” (quoting Worth v. Seldin, 422
U.S. 490 at 517–18 (1975)).
19
United States v. Eleven Million Seventy-One Thousand One Hundred & Eighty-Eight
Dollars & Sixty-Four Cents ($11,071,188.64) in United States Currency, 825 F.3d 365, 371
(8th Cir. 2016).
20
Lexmark Int’l, Inc. v. Static Control Components, Inc., 572 U.S. 118, 125 (2014).
21
Id. at 128.
10
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Montecito, CA 90077; and (3) an 87.5 percent stake in the rights and interests
held by Rivermount International Ltd., or its affiliates or assignees.22
LightRay contends that “Congress has . . . conferr[ed] broad standing to civil
forfeiture claimants,” as § 983(d)(3) provides that “any person claiming an
interest in the seized property may file a claim asserting such person’s
interest in the property.” LightRay emphasizes that Congress did not tie the
term “interest” to direct legal ownership. We disagree.
As the Supreme Court has noted, “[a] basic tenet of American
corporate law is that the corporation and its shareholders are distinct
entities . . . . An individual shareholder, by virtue of his ownership of shares,
does not own the corporation’s assets . . . .”23 This Court too has noted that
“a corporation is a separate entity from its shareholders,” and therefore “the
shareholders’ interest in the corporation does not equate to ownership by the
shareholder of specific corporation assets.” 24 Furthermore, “[a] corporate
parent which owns the shares of a subsidiary does not, for that reason, own
or have legal title to the assets of the subsidiary . . . .”25 These basic principles
of corporate law are applicable in California, New York, and the British
22
It does not appear that Earnshaw has retained any ownership to or proceeds of
the auction for 157 West 57th Street, Unit 79, New York, NY 10019, as it assigned its rights
and causes of action to Margaret Song of Song Realty on February 27, 2018.
23
Dole Food Co. v. Patrickson, 538 U.S. 468, 474–75 (2003) (citations omitted). See
also 18A Am. Jur. 2d Corporations § 623 (“Stated another way, the shareholders of a
corporation do not own the property of a corporation; the corporation does. Thus, a
purchase of stock in a corporation is not a purchase of the corporate assets . . . Likewise, a
parent corporation’s ownership of all of the shares of its subsidiary does not make the
subsidiary’s assets the parent’s assets.”).
24
United States v. Wyly, 193 F.3d 289, 304 (5th Cir. 1999). Although Wyly involved
criminal forfeiture, our discussion of a shareholder’s interest was in the context of general
corporate principles.
25
Dole Food Co., 538 U.S. at 475 (citation omitted).
11
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Virgin Islands, which are all the jurisdictions of incorporation for the
subsidiary companies that own the Remaining Assets in this case.26
Simply put, LightRay’s interest in Earnshaw’s stock does not
establish LightRay’s interest in Earnshaw’s corporate assets. Accordingly,
we conclude that LightRay has no cause of action under the civil forfeiture
statute and that the district court did not err in dismissing LightRay from this
matter.
LightRay also argues that it is entitled to assert the “innocent owner”
defense under § 983(d). Under this provision, “[a]n innocent owner’s
interest in property shall not be forfeited under any civil forfeiture statute,”
but the burden is placed on the claimant to prove his innocent ownership.27
LightRay emphasizes the language of the statute dealing with what an
innocent owner must establish when it acquires a property interest “after the
conduct giving rise to the forfeiture has taken place.” As a preface to listing
these requirements, the statute provides that it applies “at the time that
[owner] acquired the interest in the property.”28 LightRay argues that this
language of the statute supports its argument that acquisition of an “interest
in the property” and “not direct ownership” is “all that is required for
26
See, e.g., United States v. Bennett, 621 F.3d 1131, 1136 (9th Cir. 2010) (California
law); Brock v. Poor, 216 N.Y. 387, 402 (N.Y. 1915) (New York law); Ostad v. Nehmadi, 31
Misc. 3d 1211(A), 2011 WL 1420879, at *8 (N.Y. Sup. Ct. 2011) (New York law); In re
Kingate Mgmt. Ltd. Litig., No. 09-cv-5386, 2016 WL 5339538, at *36 (S.D.N.Y. Sept. 21,
2016) (British Virgin Islands law).
27
18 U.S.C. § 983(d)(1).
28
Id. § 983(d)(3)(A) (emphasis added). Specifically, the statutory text states:
“With respect to a property interest acquired after the conduct giving rise to the forfeiture
has taken place, the term ‘innocent owner’ means a person who, at the time that person
acquired the interest in the property—(i) was a bona fide purchaser or seller for value . . . ;
and (ii) did not know and was reasonably without cause to believe that the property was
subject to forfeiture.”
12
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standing to assert the [innocent owner] defense.” However, the statute also
requires that an “innocent owner” be “a person with an ownership interest
in the specific property sought to be forfeited,” and expressly excludes “a
person with only a general unsecured interest in . . . the property or estate of
another.”29
As a preliminary matter, LightRay neither raised this innocent owner
defense in its briefing opposing the Government’s motion to strike it from
the case in district court, nor did it raise it during the motion hearing held on
October 24, 2018. Therefore, the argument is waived.30
Nevertheless, even on the merits, LightRay’s innocent owner
argument is unavailing. As discussed above, the basic principle of American
corporate law is that the corporation and its shareholders are distinct entities,
and that an individual shareholder, by virtue of his ownership of shares, does
not own the corporation’s assets. In Eleven Million, the Eighth Circuit
concluded that a sole shareholder “did not have an ownership interest in the
funds to be forfeited entitling her to assert an innocent owner’s defense”
because the corporation (and not the shareholder) “possessed legal title and
exercised complete control over the defendant property.”31 The Eighth
Circuit explained that, because the shareholder “did not take formal action
as the company’s sole director and shareholder to dissolve the corporation
and gain personal access to the property or transfer the assets to her own
personal accounts,” she “[fell] within the category of persons ‘with only a
29
18 U.S.C. § 983(d)(6)(A),(B)(i).
30
SCA Promotions, Inc. v. Yahoo!, Inc., 868 F.3d 378, 384 (5th Cir. 2017) (explaining
that “arguments not raised before the district court are waived and cannot be raised for the
first time on appeal” (quoting LeMaire v. La. Dep’t of Transp. & Dev., 480 F.3d 383, 387
(5th Cir. 2007))).
31
825 F.3d 365, 372 (8th Cir. 2016).
13
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general unsecured interest in’ the seized corporate property and therefore
without an ownership interest under the statute.”32 Similarly, LightRay, as a
shareholder of Earnshaw, only has a general unsecured interest in the assets
being forfeited and therefore does not have an ownership interest such that it
may assert the innocent owner defense.
Also, we cannot overlook that LightRay chose to maintain Earnshaw
as a separate corporate entity, thereby securing all the attendant advantages
of doing so, including an attempt by its principals to support the argument
that LightRay is an innocent owner. We agree with the Eighth Circuit that
“[a] court of equity will not disregard a corporation’s exclusive ownership of
assets and claims ‘where those in control have deliberately adopted the
corporate form in order to secure its advantages.’”33 This Court therefore
declines to allow LightRay to disregard the corporate entity when it is
advantageous to LightRay and, on the other hand, benefit from the corporate
entity when it wishes. Accordingly, shareholders such as LightRay do not
have an “ownership interest in the specific property sought to be forfeited”
and therefore LightRay cannot assert the innocent owner defense.34
32
Id. (quoting 18 U.S.C. § 983(d)(6)(B)(i)).
33
Id. at 373 (quoting Schenley Distillers Corp. v. United States, 326 U.S. 432, 437
(1946)); see also First Beneficial, 2009 WL 1035233, at *4 (“The law cannot allow a sole
corporate shareholder to disregard the corporate entity when it suits him and allow him the
benefit of the corporate entity when he desires.”).
34
See, e.g., United States v. All Assets Held in Acct. No. XXXXXXXX, 299 F. Supp.
3d 121, 129 (D.D.C. 2018) (“[C]ourts generally have held that a corporate shareholder lacks
standing to contest the forfeiture of a corporation’s assets . . . . This is so because a
shareholder has no ownership interest in any specific assets of a corporation.”); United
States v. Young, 77 F. Supp. 3d 1191, 1192 (D. Utah 2014) (“Established case law has made
clear that shareholders of a corporation and members of an LLC do not have standing to
challenge the forfeiture of the entity’s assets.”); United Sates v. New Silver Palace
Restaurant, Inc., 810 F. Supp. 440, 442 (E.D.N.Y. 1992) (“Since the shareholder claimants
are neither the owners nor lienholders with respect to corporate assets, they have no
14
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IV. ENRON NIGERIA’S APPEAL
Enron Nigeria holds a $11 million judgment against Nigeria and filed
a claim in the forfeiture proceeding against any recovery Nigeria might make
in that proceeding. Enron Nigeria challenges the district court’s 2020 order
denying its motion for turnover relief, permitting Nigeria to voluntarily
dismiss its claim, and granting the Government and Nigeria’s joint motion
for consent judgment for forfeiture of the Galactica Star proceeds to the
Government. Enron Nigeria argues that Nigeria’s Verified Claim is not
immune from attachment and execution under the FSIA because Nigeria
waived its sovereign immunity in this case. However, Nigeria asserts that it
did not waive its sovereign immunity and therefore this Court lacks
jurisdiction over the dispute between Enron Nigeria and Nigeria. The FSIA
“provides the sole basis for obtaining jurisdiction over a foreign state in the
courts of this country.”35 “It also provides the sole, comprehensive scheme
for enforcing judgments against foreign sovereigns in civil litigation.” 36
Section 1609 of the FSIA provides, in relevant part, that “the property in the
United States of a foreign state shall be immune from attachment, arrest, and
execution except as provided in sections 1610 and 1611 of this chapter.” 37
standing in this forfeiture proceeding.”); United States v. 479 Tamarind Dr., No. 1:98-cv-
2279, 2011 WL 1045095, at *2 (S.D.N.Y. Mar. 11, 2011) (“[A] shareholder has no standing
to contest the forfeiture of an asset of a corporation because shareholders do not have an
ownership interest in any specific property owned by that corporation.”); United States v.
Real Prop. Associated with First Beneficial Mortg. Corp., No. 3:08-CV-285, 2009 WL 1035233,
at *3 (W.D.N.C. Apr. 16, 2009) (“A shareholder in a corporation has no legal title to the
assets of the corporation, but has a form of an equitable interest therein . . . . That interest,
however, is not in any specific asset or assets of the corporation, but rather in the general
holdings of the corporation.”).
35
Argentine Republic v. Amerada Hess Shipping Corp., 488 U.S. 428, 443 (1989).
36
Af-Cap, Inc. v. Republic of Congo, 462 F.3d 417, 428 (5th Cir. 2006).
37
28 U.S.C. § 1609.
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Enron Nigeria bases its waiver argument on Section 1610(a) of the FSIA,
which 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 from attachment in aid of execution, or from execution, upon a
judgment entered by a court of the United States or of a state.” 38 Enron
Nigeria argues that Nigeria waived its sovereign immunity because it used
the Verified Claim “to ask for, and participate in the commercial sale of the
yacht in the United States, thus lending the [V]erified [C]laim . . . eligible for
seizure” by Enron Nigeria, as a judgment creditor of Nigeria. Nigeria does
not contest that the sale of the Galactica Star was “commercial activity,” but
it denies that Nigeria itself engaged in commercial activity.
We conclude that Nigeria did not waive its sovereign immunity by
encouraging the United States Government to sell the Galactica Star. As this
Court noted in Connecticut Bank of Commerce v. Republic of Congo, “what
matters under the [FSIA] is how the foreign state uses the property, not how
private parties may have used the property in the past.”39 Here, the United
States Government is the party that “used” the property in commercial
activity, not Nigeria, and only the foreign state itself can waive its sovereign
immunity.40 Although Enron Nigeria contends that Nigeria participated in
38
Id. § 1610(a).
39
309 F.3d 240, 256 n.5 (5th Cir. 2002).
40
See, e.g., Rubin v. Islamic Republic of Iran, 830 F.3d 470, 481 (7th Cir. 2016) (“[A]
third party’s commercial use of a foreign state’s property does not trigger the § 1610(a)
exception to execution immunity. Rather, § 1610(a) applies only when the foreign state itself
has used its property for a commercial activity in the United States[.]”); Aurelius Cap.
Partners, LP v. Republic of Argentina, 584 F.3d 120, 131 (2d Cir. 2009) (“[B]efore the
retirement and pension funds at issue could be subject to attachment, the funds in the hands
of the Republic must have been ‘used for a commercial activity.’”); Flatow v. Islamic Republic
of Iran, 76 F.Supp.2d 16, 23 (D.D.C. 1999) (“[T]he provision’s applicability turns on the
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the sale of the Galactica Star, including agreeing to a target sales price and
auctioneer, the motion for interlocutory sale repeatedly designates the
United States Government as the party orchestrating the sale (albeit “in
consultation with the Federal Republic of Nigeria”), and as the party
entering into the Purchase Agreement with the winning bidder and receiving
the funds from the buyer. Moreover, the property that Enron Nigeria seeks
to attach is not even the yacht itself—it is Nigeria’s Verified Claim to the
yacht. Enron Nigeria argues that Nigeria “used its Verified Claim to
participate in the sale of the [y]acht,” but cites no authority to support a
conclusion that simply consulting with the United States Government on an
interlocutory sale conducted by others, under the supervision and guidance
of the United States Government, constitutes “commercial activity” within
the meaning of the FSIA.
Because the “commercial activity” exception to the FSIA does not
apply, Nigeria has not waived its sovereign immunity and this Court lacks
jurisdiction to consider Enron Nigeria’s arguments on the merits.
Accordingly, Enron Nigeria’s appeal is dismissed.
V. CONCLUSION
For these reasons, we conclude that the district court did not abuse its
discretion in determining that LightRay deliberately withdrew its claim
against the yacht and waived its argument that it did so under duress. We also
conclude that it did not err in dismissing LightRay from the proceedings for
lack of standing with respect to the Remaining Assets. Additionally,
Nigeria’s Verified Claim was at all times immune from attachment and
execution under the FSIA and Enron Nigeria has not met its burden to show
foreign state’s actions with respect to commercial use . . . [not to] foreign state property
that is being used by a non-agent third party.”).
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that Nigeria waived its sovereign immunity such that this Court may exercise
jurisdiction to consider this claim. Accordingly, we AFFIRM the district
court’s order with respect to LightRay and DISMISS Enron Nigeria’s
appeal for lack of jurisdiction.
18