The Rep. of Ecuador v. Dassum and Dassum , 146 So. 3d 58 ( 2014 )

Third District Court of Appeal
State of Florida
Opinion filed July 2, 2014.
Not final until disposition of timely filed motion for rehearing.
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No. 3D13-1753
Lower Tribunal No. 09-34950
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The Republic of Ecuador,
Appellant,
vs.
Roberto Isaias Dassum and William Isaias Dassum,
Appellees.
An Appeal from the Circuit Court for Miami-Dade County, John W.
Thornton, Judge.
Squire Sanders and Alvin B. Davis and Digna B. French and Rafael Langer-
Osuna, for appellant.
Lewis Tein; Kula & Samson, and Elliot Kula, for appellees.
Before WELLS, ROTHENBERG and SALTER, JJ.
SALTER, J.
The Republic of Ecuador (Republic) appeals a final summary judgment in
favor of two former bankers from Ecuador now living in Miami, brothers Roberto
Isaias and William Isaias. The legal issue is whether the extraterritoriality
exception to the act of state doctrine bars the Republic’s claims in Florida to
recover some $200 million in alleged damages following the failure of Ecuador’s
(formerly) largest bank, Filanbanco.
We reverse and remand, concluding that: (1) the record demonstrates
genuine issues of fact regarding the allegedly-remaining indebtedness of the
Isaiases to the Republic; and (2) the Republic’s complaint seeking remedies in
Florida is not based, as argued by the Isaiases, on a “confiscatory decree of a
foreign sovereign . . . acting beyond its territorial dominion.”1
The Proceedings in Ecuador
The Isaiases owned and controlled two Panamanian entities which were the
shareholders of Filanbanco. In 1998, Filanbanco experienced a liquidity crisis as
part of a widespread national financial crisis. Ecuador’s legislature established the
Agencia de Garantia de Depositos (“AGD”), an agency similar to the Federal
Deposit Insurance Corporation in the United States. By mid-2001, the AGD had
injected over $1.16 billion2 into Filanbanco in an effort to help the bank recover
stability and to protect its depositors.
Filanbanco engaged the international accounting firm of Deloitte & Touche
(Deloitte) to determine the extent and causes of the bank’s massive losses. In May
1 Order Granting Defs.’ Mot. Summ. J. at 8.
2 All amounts in this opinion are expressed in United States dollars.
2
2001, Deloitte issued a written report to the Republic’s national superintendent of
financial institutions concluding that depositors’ losses (as of December 1998)
were at least $661.5 million. Filanbanco was forced to close, and Article 29 of the
AGD law imposed liability on the Isaiases (jointly and severally) for the losses.
The Republic concluded that the Isaiases had drained the bank’s funds through
fraudulent misconduct. In 2003, Ecuador issued arrest warrants for the Isaiases,
who were by then in Miami.3
In February 2008, the Republic’s banking authority issued Resolution
Number JB-2008-1084 (Resolution 1084), authorizing the approval and delivery of
the Deloitte report to the AGD. The AGD then pursued the assets of the Isaiases in
Ecuador to recover and sell them, thereby reducing the allegedly outstanding
liability of the Isaiases to the Republic. As of April 2009, the AGD alleged that it
had recovered and sold approximately $400 million of such assets in Ecuador to be
applied in reduction of the claimed $661.5 million indebtedness of the Isaiases.
The Florida Lawsuit
In April 2009, the AGD4 sued the Isaiases in circuit court in Miami, alleging
that the Isaiases reside in Miami and have at least $20 million in property here.
The complaint seeks to collect the Isaiases’ allegedly-remaining liabilities of
3 Ecuador requested extradition of the Isaiases to Ecuador, but the request has not
been granted so far as the record reflects.
4 In 2010, the Republic of Ecuador itself was substituted for AGD as the party
plaintiff.
3
approximately $200 million. The prayer for relief in the complaint “demands
judgment . . . for damages, interest, and such further relief that the Court may deem
just and proper.” The Republic’s complaint does not demand that the circuit court
summarily seize any of the Isaiases’ property in Florida or transfer title to any such
property to the Republic.
The Isaiases counterclaimed for a declaratory judgment that the AGD orders
were illegal and improper under the law of Ecuador. The trial court determined
that those orders represented governmental actions taken within Ecuador and
granted the Republic’s motion for summary judgment based on the act of state
doctrine. Similarly, sixteen entities which had an interest in some of the assets
seized and sold in Ecuador by the AGD for application to the alleged indebtedness
of the Isaiases sought to intervene in the Florida lawsuit for a declaratory judgment
that the seizure orders were illegal. The trial court dismissed the intervenors’
complaint on grounds that the Florida claims of the intervenors related exclusively
to sovereign actions of the Republic within its own borders, and were thus barred
by the Foreign Sovereign Immunities Act5 and the act of state doctrine.
In March 2013, the Isaiases moved for final summary judgment against the
Republic on the claims asserted by the Republic in its Florida complaint. The
primary basis for the Isaiases’ motion was the extraterritoriality exception to the
5 28 U.S.C. §§ 1602-1611.
4
act of state doctrine. The trial court granted that motion, and this appeal followed.
Analysis
The act of state doctrine is a judicially-created principle of international
comity; the courts of Florida and the United States will presumptively defer to
governmental acts (whether we might characterize them as executive, legislative,
or judicial) taken within the territory of another sovereign nation. Banco Nacional
de Cuba v. Sabbatino, 376 U.S. 398, 401 (1964); Nat’l Inst. of Agrarian Reform v.
Kane, 153 So. 2d 40, 42 (Fla. 3d DCA 1963). The doctrine gives effect to the
primacy of the executive branch of our own federal government in the conduct of
international relations with other countries.
The governmental acts to which we ordinarily defer include actions of the
executive branch of a foreign government—such as the AGD in the present case—
which determine an indebtedness and direct the seizure of assets within that
country in partial or full satisfaction of that indebtedness. But the courts of this
country have also been receptive to claims asserted by foreign governments to
recover for acts in a foreign country by alleged wrongdoers (officials from a prior
administration or regime) who subsequently took up residence here with ill-gotten
gain. Republic of Philippines v. Marcos, 806 F.2d 344, 360 (2d Cir. 1986) (“The
complaint seeks recovery of property illegally taken by a former head of state, not
confiscation of property legally owned by him.”).6
5
The act of state doctrine and our deference do not extend to sovereign acts
of a foreign government purporting to seize, summarily, property within the United
States. This “extraterritoriality exception” to the doctrine requires us to exercise
our own jurisdiction and to determine whether the foreign sovereign’s claim
against the assets here amounts to a “taking” contrary to United States policy and
the fifth and fourteenth amendments to our Constitution. Bandes v. Harlow &
Jones, Inc., 852 F.2d 661, 667 (2d Cir. 1988); Republic of Iraq v. First Nat’l City
Bank, 353 F.2d 47, 51 (2d Cir. 1965).
In the present case, the Republic’s complaint does not identify any act of the
government of Ecuador summarily seizing or confiscating any property of the
Isaiases in Miami-Dade County, the State of Florida, or the United States. Rather,
the complaint alleges that Filanbanco is in liquidation and that Resolution 1084 has
authorized the AGD to “initiate all legal actions” against any persons obligated by
law to reimburse the AGD for the amounts advanced to depositors and other
creditors of Filanbanco. The Republic’s Florida complaint alleges that: the
Isaiases were found by Deloitte (in a report then approved by Ecuador’s banking
authorities), to be liable to the AGD for $661.5 million; the AGD seized in
6 In cases such as Marcos, a successor foreign government alleges that a
predecessor official’s property or funds in the United States represent proceeds of
an embezzlement or other wrongful acts in the foreign country. No specific
“tracing” or “fruits of the crime” allegations are made in the complaint against the
Isaiases, but the complaint alleges that the Isaiases are liable to the Republic for the
Isaiases’ acts and omissions regarding Filanbanco.
6
Ecuador over $400 million in assets of the Isaiases in reduction of that liability;
and the AGD has been authorized to pursue the balance of the liability through
litigation against the Isaiases in Miami-Dade County. The prayer for relief in the
complaint seeks a judgment for money damages for the unrecovered net amount
allegedly remaining due from the Isaiases, jointly and severally, “and such other
relief that the Court may deem just and proper.”
This complaint is in stark contrast to a hypothetical complaint demanding
the enforcement in Florida of a foreign sovereign’s confiscation of property
located in Florida, as a judicial fait accompli, all in purported reliance on the act of
state doctrine. Such a demand plainly would be subject to the extraterritoriality
exception to the doctrine, as in Republic of Iraq.
The order granting summary judgment in the present case was based on an
erroneous predicate advanced by counsel for the Isaiases, who characterized the
Florida complaint as an effort to “seize the [Isaiases’] property in the U.S” through
an “executive fiat” within Ecuador. In fact, however, the complaint seeks a
judgment for money damages which, if further proceedings warrant, could only
then be used to execute upon property in the United States. The Isaiases are not
precluded from opposing the entry of such a judgment in Miami-Dade County by
asserting their defenses and affirmative defenses at trial.
Nor does the Republic’s complaint in Florida allege that the computations of
7
liability in Ecuador must be given preclusive effect by the circuit court here. The
governmental resolutions establishing the Isaiases’ alleged liability (and reductions
in that alleged liability following recoveries in Ecuador) are neither “out-of-
country foreign money-judgments” eligible for recognition and enforcement under
sections 55.601-.607, Florida Statutes (2009),7 nor foreign decrees subject to the
more expansive principle of international comity described in Nahar v. Nahar, 656
So. 2d 225 (Fla. 3d DCA 1995).
The Isaiases did not make a conclusive showing in the circuit court that the
actions by the banking authorities and Deloitte in Ecuador were confiscatory acts
strictly based on politics, revolution, or regime change. The Isaiases have not
provided, on this record, summary judgment evidence under Florida Rule of Civil
Procedure 1.510(c) that the Republic’s claims of misapplication and
misrepresentation, and the Deloitte report, for example, are pretextual or even
factually incorrect. On the record presented, the Isaiases had the opportunity to
present information to the banking authorities (and on at least some occasions,
took advantage of that opportunity)8 in Ecuador both before and after the issuance
7 The terms “judgment” and “foreign court,” used repeatedly within Florida’s
Uniform Out-of-country Foreign Money-Judgment Recognition Act, make it clear
that the Republic’s banking authority’s resolutions at issue in the present case
would not be eligible for recognition under the Act.
8 Although the order granting the motion for summary judgment characterizes the
Republic’s complaint as “an attempt to enforce a non-judgment finding of
liability,” the Isaiases have not shown that the “non-judgment” findings by Deloitte
and the Republic’s banking authorities are fabrications or even erroneous.
8
of the Deloitte report and before and after they moved to Miami.
Simply stated, the Republic claims to be a creditor with a claim for money
damages against the Isaiases based on their allegedly wrongful acts and omissions
in Ecuador. The validity and extent of any such claim are subject to proof as in
any claim by a foreign sovereign against one of its citizens residing in the United
States. The Florida trial court is not obligated to give preclusive effect to the
findings of Deloitte and the AGD, and it will not interfere with the Republic’s
sovereignty or the foreign relations of the United States if the Florida court rules
for or against the Republic’s claims here in Florida after considering the proof put
forward by the Republic.
Conclusion
We reverse and remand the final summary judgment in favor of the Isaiases
for further proceedings. The existing complaint is not barred as a matter of law as
an attempt to obtain summary recognition of acts of state in Ecuador that “seize” or
“confiscate” property of the Isaiases in Miami-Dade County. There are genuine
issues of material fact that remain in dispute regarding (1) the Isaiases’ allegedly-
remaining indebtedness to the Republic, and (2) the entitlement of the Republic to
the entry of a judgment here against the Isaiases for money damages. The Isaiases
have not demonstrated on this record that the Republic has no facts or legal basis
upon which it may prove its claims.
9
Reversed and remanded for further proceedings.
10