Preble-Rish Haiti, S.A. v. BB Energy USA ( 2021 )

Case: 21-20534 Document: 00516081996 Page: 1 Date Filed: 11/04/2021
United States Court of Appeals
for the Fifth Circuit United States Court of Appeals
Fifth Circuit
FILED
November 4, 2021
No. 21-20534
Lyle W. Cayce
Clerk
Preble-Rish Haiti, S.A.,
Plaintiff—Appellant/Cross-Appellee,
versus
BB Energy USA, LLC,
Garnishee—Appellee/Cross-Appellant.
Appeal from the United States District Court
for the Southern District of Texas
USDC No. 4:21-cv-01953
Before Elrod, Oldham,* and Wilson, Circuit Judges.
Per Curiam:**
This dispute arises out of a garnishment action. The district court
allowed discovery to proceed against the garnishee, BB Energy, without
ruling on BB Energy’s motion to dismiss, which argued that the garnishment
*
Judge Oldham would grant the motion to stay.
**
Pursuant to 5th Circuit Rule 47.5, the court has determined that this
opinion should not be published and is not precedent except under the limited
circumstances set forth in 5th Circuit Rule 47.5.4.
Case: 21-20534 Document: 00516081996 Page: 2 Date Filed: 11/04/2021
No. 21-20534
action is barred by sovereign immunity. BB Energy has moved to stay
discovery. Because the district court may permit limited discovery to
determine its jurisdiction (i.e., whether the action is barred by sovereign
immunity), we deny the stay and instruct the district court to limit discovery
to only the sovereign immunity issue.
I.
Preble-Rish Haiti, S.A. (“PRH”) entered into three contracts with
Haiti’s Bureau de Monétisation de Programmes d’Aide au Développement
(“BMPAD”) to transport and deliver fuel to Haiti. The contracts provided
that any disputes under the contracts would be submitted to binding
arbitration in New York. A dispute arose after BMPAD allegedly seized a
PRH vessel and forcibly offloaded its fuel without paying for it. PRH initiated
arbitration in New York, which BMPAD opposed. A New York state court
issued an order compelling arbitration, and the arbitration panel issued a
Partial Final Award to PRH awarding roughly $23 million. BMPAD refused
to post security and indicated that it would not honor the arbitration award.
PRH filed this garnishment action in the U.S. District Court for the
Southern District of Texas, seeking to use the maritime Rule B attachment
process to garnish funds owned by BMPAD in the possession of BB Energy.
BB Energy is also in the business of supplying fuel to Haiti. PRH alleged that
BB Energy regularly receives prepayments from BMPAD for fuel, and PRH
sought to attach BMPAD funds which had been prepaid to BB Energy. BB
Energy has vigorously opposed such attachment in proceedings before the
district court.
The district court granted a writ of maritime attachment, which PRH
served on BB Energy on July 1, 2021. BB Energy moved to dismiss the action
and vacate the attachment, arguing, inter alia, that maritime Rule B
attachment was improper because the contracts between PRH and BMPAD
2
Case: 21-20534 Document: 00516081996 Page: 3 Date Filed: 11/04/2021
No. 21-20534
were not maritime contracts. The district court granted the motion to vacate
the attachment in part, accepting BB Energy’s argument that the breach of
contract claim did not provide a basis for maritime jurisdiction. But the
district court also deferred the motion to vacate in part, finding that
attachment might be proper on other grounds—namely, to enforce the
arbitral award after it was finalized by New York courts.
PRH then amended its complaint to invoke admiralty jurisdiction by
alleging maritime torts in addition to breach of contract. BB Energy moved
to dismiss PRH’s amended complaint, arguing, as relevant here, that the
Foreign Sovereign Immunities Act (“FSIA”) barred PRH from asserting its
maritime tort claims against BMPAD. After a hearing on October 25, 2021,
the district court deferred ruling on BB Energy’s motion to dismiss and
ordered BB Energy to submit to written discovery and a corporate
representative deposition. BB Energy immediately appealed to us and moved
for a stay of discovery. PRH filed a cross-motion to dismiss the appeal for
lack of jurisdiction.
II.
BB Energy argues that the district court erred by permitting broad
discovery without first determining whether sovereign immunity bars this
garnishment action. As we have noted, “FSIA immunity is immunity not
only from liability, but also from the costs, in time and expense, and other
disruptions attendant to litigation.” Kelly v. Syria Shell Petrol. Dev. B.V., 213
F.3d 841, 849 (5th Cir. 2000). “Accordingly, when FSIA immunity has been
claimed, unlimited jurisdictional discovery is not permitted as a matter of
course. Instead, it should be ordered circumspectly and only to verify
allegations of specific facts crucial to an immunity determination.” Id.(citation and internal quotation marks omitted). BB Energy claims the
3
Case: 21-20534 Document: 00516081996 Page: 4 Date Filed: 11/04/2021
No. 21-20534
district court violated that rule here by deferring its ruling on the sovereign
immunity defense and ordering broad discovery in the interim.
PRH’s primary response is to argue that we lack jurisdiction over this
appeal. According to PRH, we lack jurisdiction because BB Energy appealed
from a discovery order. And “[a]s a general matter, discovery orders do not
constitute final decisions under [28 U.S.C.] § 1291, and therefore, are not
immediately appealable.” Piratello v. Philips Elecs. N. Am. Corp., 360 F.3d
506, 508 (5th Cir. 2004).
But some discovery orders are immediately appealable. In particular,
when a defendant asserts an immunity defense, we have held that a district
court’s order that declines or refuses to rule on a motion to dismiss based on
the immunity defense is an immediately appealable order. Zapata v. Melson,
750 F.3d 481, 484 (5th Cir. 2014). This is because such an order is
tantamount to denying the immunity defense, part of the purpose of which is
to protect the defendant from the burden of litigation itself—including
discovery. Id. And we have held that a sovereign immunity claim may be
raised by a garnishee holding a foreign sovereign’s property in addition to the
foreign sovereign itself. FG Hemisphere Assocs., LLC v. République du Congo,
455 F.3d 575, 584 (5th Cir. 2006).
Here, BB Energy raised BMPAD’s sovereign immunity as a defense
in its motion to dismiss. The district court permitted discovery, but it is
unclear whether this was to aid its ruling on the motion to dismiss or whether
the district court was proceeding to discovery without resolving BB Energy’s
sovereign immunity defense. To the extent the latter was the case, this was
error: A district court must rule on an immunity defense properly raised in a
motion to dismiss before allowing any discovery that is not “ordered
circumspectly and only to verify allegations of specific facts crucial to an
4
Case: 21-20534 Document: 00516081996 Page: 5 Date Filed: 11/04/2021
No. 21-20534
immunity determination.” Kelly, 213 F.3d at 849.*** That being said, the
district court could have just as well been exercising its discretion in ordering
limited discovery to resolve whether BB Energy was, in fact, shielded by
BMPAD’s sovereign immunity. Because this would have been permissible,
we presume that was the case. Thus, we deny BB Energy’s stay motion, and
we trust that the district court will allow limited discovery only as to evidence
that will elucidate whether BB Energy is entitled to dismissal on sovereign
immunity grounds.
* * *
BB Energy’s motion to stay discovery is DENIED. The district
court is instructed, consistent with our precedent, to limit discovery “only to
verify allegations of specific facts crucial to an immunity determination.”
Kelly, 213 F.3d at 849. PRH’s motion to dismiss this appeal for lack of
jurisdiction is DENIED.
***
PRH contends that broader discovery is necessary to determine whether the
district court has personal jurisdiction over BB Energy, and district courts confronted with
multiple jurisdictional issues have discretion as to which challenge to resolve first. PRH’s
authority for this proposition is Ruhrgas AG v. Marathon Oil Co., 526 U.S. 574 (1999), where
the Supreme Court held that there is no general “unyielding jurisdictional hierarchy” as
between personal jurisdiction and subject-matter jurisdiction determinations. Id. at 578.
But Ruhrgas did not involve an immunity defense, and as already noted, immunity defenses
uniquely require prioritization because they protect defendants from the burdens of
litigation, including discovery. See Kelly, 213 F.3d at 849. PRH cites no authority
supporting its position that a district court may forbear to rule on an immunity defense
while allowing broad discovery on a separate jurisdictional issue.
5