Firebird Global Master Fund II Ltd. v. Republic of Nauru ( 2013 )

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
______________________________
)
FIREBIRD GLOBAL MASTER )
FUND II LTD., )
)
Plaintiff, )
)
v. ) Civil Action No. 12-230 (RWR)
)
REPUBLIC OF NAURU, )
)
Defendant. )
______________________________)
MEMORANDUM OPINION
Plaintiff Firebird Global Master Fund II Ltd. (“Firebird”)
brings this action under the Foreign Sovereign Immunities Act
(“FSIA”), 28 U.S.C. § 1602 et seq., seeking to enforce a foreign
judgment against the defendant Republic of Nauru (“Nauru”).
After default was entered against Nauru, Firebird moved for entry
of default judgment arguing that Nauru waived sovereign immunity
and Firebird is entitled to enforce the foreign judgment against
Nauru in the United States. Because Firebird has not shown that
Nauru waived sovereign immunity as to United States courts, the
court lacks subject matter jurisdiction, the motion for entry of
default judgment will be denied, and the complaint will be
dismissed.
BACKGROUND
The Republic of Nauru Finance Corporation (“Ronfin”) issued
two series of Japanese yen bond certificates, Series B and Series
C certificates. Compl. ¶¶ 7-8. Nauru guaranteed paying
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principal and interest on the bond certificates in bond purchase
agreements. Id. ¶ 10. Nauru explicitly waived sovereign
immunity as to the courts of Japan and Nauru in the Conditions of
Guarantee annexed to the bond purchase agreements. Id., Ex. B,
Series B Bond Purchase Agreement Annex 2, ¶ 9 and Series C Bond
Purchase Agreement Annex 2, ¶ 9. On the relevant redemption
dates, Ronfin did not redeem the bond certificates. Id. ¶ 9.
Firebird currently holds the bond certificates. Id. ¶ 13.
Firebird brought an action in the Tokyo District Court against
Nauru seeking payment of the principal and interest on the bonds.
Id. ¶ 14. In 2011, the Tokyo District Court ruled in favor of
Firebird and awarded the equivalent of $37,427,658.29 in Japanese
yen to Firebird. Id. ¶¶ 15-16; see also id., Ex. A at 1, 20.
Firebird seeks to enforce that award here. The Clerk entered
default and Firebird moves for entry of default judgment.
DISCUSSION
The FSIA is “the sole basis for obtaining jurisdiction over
a foreign state in [United States] courts” and “‘must be applied
by the district courts in every action against a foreign
sovereign[.]’” Argentine Republic v. Amerada Hess Shipping
Corp., 488 U.S. 428, 434-35 (1989) (quoting Verlinden B.V. v.
Central Bank of Nigeria, 461 U.S. 480, 493 (1983)). “Under the
[FSIA], a foreign state is presumptively immune from the
jurisdiction of United States courts; unless a specified
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exception applies, a federal court lacks subject-matter
jurisdiction over a claim against a foreign state.” Saudi Arabia
v. Nelson, 507 U.S. 349, 355 (1993) (citing Verlinden B.V., 461
U.S. at 488-89); see also Kilburn v. Socialist People’s Libyan
Arab Jamahiriya, 376 F.3d 1123, 1126 (D.C. Cir. 2004) (citing 28
U.S.C. § 1604).
Default judgment may not be entered against a foreign state
under the FSIA “unless the claimant establishes his claim or
right to relief by evidence satisfactory to the court.” 28
U.S.C. § 1608(e). This provision “‘imposes a duty on FSIA courts
to not simply accept a complaint's unsupported allegations as
true, and obligates courts to inquire further before entering
judgment against parties in default.’” Wultz v. Islamic Republic
of Iran, 864 F. Supp. 2d 24, 28-29 (D.D.C. 2012) (quoting Rimkus
v. Islamic Republic of Iran, 750 F. Supp. 2d 163, 171 (D.D.C.
2010)). In evaluating whether a plaintiff has sufficiently
established its claim, courts may accept the plaintiff’s
“uncontroverted factual allegations, which are supported by . . .
documentary and affidavit evidence.” Oveissi v. Islamic Republic
of Iran, Civil Action No. 11-0849 (RCL), 2012 WL 3024758, at *2
(D.D.C. July 25, 2012) (internal quotation marks omitted).
Firebird argues that the waiver exception to sovereign
immunity in 28 U.S.C. § 1605(a)(1) is applicable in this case.
That exception denies immunity to a foreign state when
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the foreign state has waived its immunity either explicitly
or by implication, notwithstanding any withdrawal of the
waiver which the foreign state may purport to effect except
in accordance with the terms of the waiver[.]
28 U.S.C. § 1605(a)(1). Generally, with regard to express
waivers under this provision, “[a] foreign sovereign will not be
found to have waived its immunity unless it has clearly and
unambiguously done so.” World Wide Minerals, Ltd. v. Republic of
Kazakhstan, 296 F.3d 1154, 1162 (D.C. Cir. 2002). “[E]xplicit
waivers of sovereign immunity are narrowly construed in favor of
the sovereign and are not enlarged beyond what the language
requires.” Id. (internal quotation marks omitted).
Firebird argues that Nauru’s explicit waiver in the
Conditions of Guarantee annexed to the Bond Purchase Agreement
waived any and all defenses, including sovereign immunity. Pl.’s
Mot. for Entry of Final J. by Default (“Pl.’s Mot.”) at 4-5.
Firebird also claims that the waiver is “not limited to actions
brought in Japan or Nauru, but goes to any legal action relating
to the Guarantee[.]” Id. at 5. However, the context of the
language in the Conditions of Guarantee indicates otherwise. The
relevant provision in the Conditions of Guarantee for both series
of bonds states:
Any legal action relating to the Guarantee (including the
Conditions of Guarantee) may be brought against the Republic
in the Tokyo District Court . . ., to the jurisdiction of
which the Republic hereby expressly and irrevocably submits
for purposes of any such action. Any such action may also
be brought against the Republic in any competent court of
the Republic. To the extent permitted by applicable law the
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Republic hereby irrevocably waives any immunity to which it
might otherwise be entitled from jurisdiction, suit,
attachment, judgment or execution in any such action.
Compl. Ex. B, Series B Bond Purchase Agreement Annex 2, ¶ 9 and
Series C Bond Purchase Agreement Annex 2, ¶ 9.
Firebird relies on Capital Ventures Int’l v. Republic of
Arg., 552 F.3d 289 (2d Cir. 2009). In that case, Capital
Ventures, the owner of the bonds, brought suit against Argentina,
the issuer of the bonds, after Argentina defaulted on principal
and interest payments. Id. at 291-92. The bonds in that case
were issued with an offering circular which provided: 1) a forum
selection clause which waived immunity in the District Court in
Frankfurt and any federal court in Buenos Aires, and 2) an
immunity clause which waived “any immunity (sovereign or
otherwise) from jurisdiction of any court or from any legal
process[.]” Id. at 291-92. The Second Circuit found that
despite the limited forum selection clause, Argentina had
explicitly waived its sovereign immunity to suit in the United
States because of the broad statement waiving immunity from
jurisdiction of “any court.” Id. at 293-94. The court concluded
that “a waiver of sovereign immunity [from suit in the United
States] can be explicit even when other provisions of the
document are applicable only to specific, non-United States
jurisdictions.” Id. at 296.
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However, that principle does not apply here. Nauru has not
waived sovereign immunity as to “any court” as Argentina did.
Read in context, “any such action” in the Conditions of Guarantee
refers directly to the previous sentences discussing legal
actions brought in Japan or Nauru. The plaintiff asserts no
reason to disregard the plain text of the contract and find that
the waiver of sovereign immunity, based on the Conditions of
Guarantee, goes beyond the courts of Japan and Nauru. Further,
the Bond Purchase Agreement and the Conditions of Bond restrict
the forum selection clause and Ronfin’s waiver of sovereign
immunity to the courts of Japan and Nauru. See Compl., Ex. B,
Series B Bond Purchase Agreement ¶ 8.2 and Annex 1, ¶ 28,
Series C Bond Purchase Agreement ¶ 8.2 and Annex 1, ¶ 26. In
these circumstances, the waiver of sovereign immunity cannot
sustain an action in the United States. See Atl. Tele-Network
Inc. v. Inter-Am. Dev. Bank, 251 F. Supp. 2d 126, 133 (D.D.C.
2003) (finding that Guyana’s waiver of sovereign immunity “gives
no intimation that it was ever thereby contemplating suit in the
United States, and the subsection's juxtaposition immediately
below a [limited] choice-of-law selection clause . . . and above
a [limited] forum-selection clause . . . in the only section of
the entire contract devoted to the resolution of disputes
suggests strongly to the contrary”). The limited nature of the
waivers of sovereign immunity in this case and the obligation to
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narrowly construe explicit waivers in favor of the sovereign doom
the plaintiff’s argument under 28 U.S.C. § 1605(a)(1).
Firebird asserts in a footnote that it can also proceed
under 28 U.S.C. § 1605(a)(2), the commercial activity exception
to the FSIA. Pl.’s Mot. at 4 n.1. Under this exception, the
FSIA does not recognize a foreign state’s immunity where
the action 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[.]
28 U.S.C. § 1605(a)(2). Firebird argues merely that this
exception is applicable because Firebird “maintains its principal
place of business in New York [and] was directly harmed by
Nauru’s failure to honor its Guarantees.” Pl.’s Mot. at 4 n.1.
Firebird cites Republic of Argentina v. Weltover, Inc., 504 U.S.
607 (1992).
In Weltover, Argentina issued and later defaulted on bonds.
The Supreme Court found that Argentina’s conduct constituted a
commercial activity for the purposes of the FSIA because “when a
foreign government acts, not as regulator of a market, but in the
manner of a private player within it, the foreign sovereign's
actions are ‘commercial’ within the meaning of the FSIA.” Id. at
614. Weltover emphasized that the FSIA’s analysis is focused on
the “nature” of the activity, and Argentina creating debt
instruments was directly analogous to “a private commercial
transaction.” Id. at 615-16. Similarly, in this case, Nauru
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issuing bonds qualifies as a commercial activity. However, this
exception also requires that the act have “cause[d] a direct
effect in the United States.” 28 U.S.C. § 1605(a)(2). Firebird
attempts to satisfy this prong merely by stating that Firebird’s
principal place of business is New York and the company was
harmed by Nauru’s breach. Pl.’s Mot. at 4 n.1. Firebird
provides no evidence –- documentary, affidavit, or otherwise --
to support these assertions as is required by the FSIA. Because
Firebird has not shown that Nauru waived sovereign immunity as to
United States courts under either exception of the FSIA, Firebird
is not entitled to entry of default judgment or entitled to
proceed in this action.
CONCLUSION
Firebird has not overcome Nauru’s presumptive immunity from
suit in a United States court, and there is no subject matter
jurisdiction over this claim. The motion for a default judgment
will be denied, and the complaint will be dismissed for lack of
subject matter jurisdiction. An appropriate Order accompanies
this memorandum opinion.
SIGNED this 15th day of January, 2013.
/s/
RICHARD W. ROBERTS
United States District Judge