Magness v. Russian Federation

IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

_____________________

No. 00-20136

_____________________

NINA SCHRODER MAGNESS;

AGNES SCHRODER ATKINS;

LEE ALEXANDER MAGNESS,

Plaintiffs-Appellees,

versus

RUSSIAN FEDERATION; ET AL.,

Defendants,

RUSSIAN FEDERATION; RUSSIAN

MINISTRY OF CULTURE;

RUSSIAN STATE DIAMOND FUND,

Defendants-Appellants.

_________________________________________________________________

Appeal from the United States District Court for the

Southern District of Texas, Houston

_________________________________________________________________

April 24, 2001

Before JOLLY and DAVIS, Circuit Judges, and RESTANI, Judge.*

E. GRADY JOLLY, Circuit Judge:

During the Bolshevik Revolution of 1918, the Soviet government

expropriated a piano factory and mansion owned by the Magness

family in St. Petersburg, Russia. In 1994, the appellees,

descendants of the Magness family, believed that changes in the

*

Judge of the U.S. Court of International Trade, sitting by

designation.

laws of the Russian Federation may now authorize the recovery of

their property. The Magness descendants met with Russian officials

in St. Petersburg in an unsuccessful attempt to regain the real

estate. This suit followed and a default judgment was entered

against the Russian defendants in the amount of $234 million plus

interest.

In this appeal we are called upon to interpret the service of

process provisions of the Foreign Sovereign Immunities Act

(“FSIA”), 28 U.S.C. § 1608(a-b), which outlines the methods for

serving process upon foreign entities. Specifically, we must

determine whether those provisions demand strict compliance

therewith, or whether either of these provisions can be satisfied

by some form of substantial compliance. In keeping with the plain

language of the FSIA, we conclude that Congress intended to require

strict compliance with section 1608(a) as to service upon foreign

states and their political subdivisions. However, we also hold

that substantial compliance--that is, actual notice of the suit and

the consequences thereof--can be sufficient to satisfy the

requirements of section 1608(b) as to service upon an agency or

instrumentality of a foreign state. In conclusion, we vacate the

default judgment and remand to allow proper service on the

defendants.

I

2

We turn first to the procedural history of this case. In July

1997, the Magness descendants filed this suit in the Southern

District of Texas, seeking a TRO that would prevent a traveling

exhibit of Russian Romanov family jewels, then on display in

Houston, from leaving the jurisdiction. The named defendants

included the Russian Federation, the Russian Ministry of Culture,

the Russian State Diamond Fund,1 and the Cultural Foundation

sponsoring the exhibition.2 The suit alleged that the defendants

had nationalized the Magness family property in 1918 and further

had expropriated several antique pianos owned by the plaintiffs in

the 1990s. The Russian Federation obtained United States counsel,

who represented its interest at the TRO hearing. The court denied

the TRO request.

After a year-long dormancy, in August 1998 the district court

ordered the Magness descendants to serve the summons and complaint

on the defendants, and to do so before September 1, 1998. They

attempted to serve the defendants in several ways. They first

served the attorneys who represented the Russian Federation at the

TRO hearing. In addition, they served the Texas Secretary of

1

The State Diamond Fund is an agency of the Russian Federation

created to house and oversee Russia’s collection of precious

stones.

2

The default judgment eventually awarded against the American-

Russian Cultural Cooperation Foundation was later dropped by the

court, and the Foundation is not a party to this appeal.

3

State, with instructions that the Secretary forward the summons and

complaint to “the Russian Federation c/o Boris Yeltsin and the

Russian Ministry of Culture/Russian State Diamond Fund c/o Deputy

Minister of Culture Mikhail Schvidkoy.” The Magness descendants

also forwarded the summons and complaint to the Director of Special

Consular Affairs at the State Department, with instructions to

serve all defendants through diplomatic channels.3 Finally, the

Magness descendants purported to serve process by sending the

summons and complaint directly to the Russian Deputy Minister of

Culture in Moscow.4

On November 13, 1998, the State Department informed the

Magness descendants that it could not serve the defendants because

of several procedural errors.5 On November 19, 1998, the Magness

descendants filed a motion for a default judgment. The court held

a hearing on the motion the following day, during which the Magness

descendants submitted evidence that they had served the defendants

3

While the Magness descendants recognize that service was

never completed through the State Department, they allege that the

defendants received service through the Texas Secretary of State

and otherwise had actual notice of the suit.

4

The record shows that some persons signed for these mailed

documents. However, there is no indication of who specifically

signed for the documents. Nor is there any evidence of who in the

Russian government may have seen the documents.

5

The State Department gave the Magness descendants’ counsel

advice on correcting these errors and offered a contact should they

have any further questions.

4

by the methods previously described. The court determined that the

defendants had been properly served and entered a default judgment.

The court approved the Magness descendants’ proposed findings of

facts and conclusions of law on June 8, 1999, and entered a final

judgment against the defendants. See Magness v. Russian

Federation, 54 F.Supp.2d 700 (S.D. Tex. 1999).

In October 1999, the defendants retained United States counsel

in an attempt to vacate the default judgment under Rule 60. On

January 12, 2000, the district court denied the motion, ruling that

the Magness descendants had “substantially complied” with the

service of process requirements of the FSIA and provided sufficient

notice of the suit to the defendants. This appeal followed.

II

A district court’s denial of a motion to vacate under Rule 60

is reviewed for abuse of discretion. See CJC Holdings v. Wright &

Lato, Inc., 979 F.2d 60, 63 (5th Cir. 1992). Because of the

seriousness of a default judgment, “even a slight abuse [of

discretion] may justify reversal.” Seven Elves, Inc. v. Eskenazi,

635 F.2d 396, 402 (5th Cir. 1981)).

The FSIA outlines specific provisions for service of process

upon foreign governments and agencies in 28 U.S.C. § 1608.6 The

6

In full, § 1608(a-b) reads (emphasis added):

(a) Service in the courts of the United States and of the

5

States shall be made upon a foreign state or political

subdivision of a foreign state:

(1) by delivery of a copy of the summons and

complaint in accordance with any special

arrangement for service between the plaintiff

and the foreign state or political

subdivision; or

(2) if no special arrangement exists, by

delivery of a copy of the summons and

complaint in accordance with an applicable

international convention on service of

judicial documents; or

(3) if service cannot be made under paragraphs

(1) or (2), by sending a copy of the summons

and complaint and a notice of suit, together

with a translation of each into the official

language of the foreign state, by any form of

mail requiring a signed receipt, to be

addressed and dispatched by the clerk of the

court to the head of the ministry of foreign

affairs of the foreign state concerned, or

(4) if service cannot be made within 30 days

under paragraph (3), by sending two copies of

the summons and complaint and a notice of

suit, together with a translation of each into

the official language of the foreign state, by

any form of mail requiring a signed receipt,

to be addressed and dispatched by the clerk of

the court to the Secretary of State in

Washington, District of Columbia, to the

attention of the Director of Special Consular

Services–-and the Secretary shall transmit one

copy of the papers through diplomatic channels

to the foreign state and shall send to the

clerk of the court a certified copy of the

diplomatic note indicating when the papers

were transmitted.

(b) Service in the courts of the United States and of the

States shall be made upon an agency or instrumentality of

6

Magness descendants acknowledge that they failed strictly to comply

with the service provisions of the FSIA.7 The provisions for

a foreign state:

(1) by delivery of a copy of the summons and

complaint in accordance with any special

arrangement for service between the plaintiff

and the agency or instrumentality; or

(2) if no special arrangement exists, by

delivery of a copy of the summons and

complaint either to an officer, a managing or

general agent, or to any other agent

authorized by appointment or by law to receive

service of process in the United States; or in

accordance with an applicable international

convention on service of judicial documents;

or

(3) if service cannot be made under paragraphs

(1) or (2), and if reasonably calculated to

give actual notice, by delivery of a copy of

the summons and complaint, together with a

translation of each into the official language

of the foreign state–-

(A) as directed by an authority of the foreign state

or political subdivision in response to a letter rogatory

or request or

(B) by any form of mail requiring a signed receipt,

to be addressed and dispatched by the clerk of the court

to the agency or instrumentality to be served, or

(C) as directed by order of the court consistent

with the law of the place where service is to be made.

7

All parties agree that service upon the Russian Federation

(as a foreign state) and the Russian Ministry of Culture (as a

political subdivision) is dictated by § 1608(a), while service upon

the Russian State Diamond Fund (as an instrumentality of Russia) is

governed by § 1608(b). Under 28 U.S.C. § 1603(a), the term

“political subdivision” includes all governmental units beneath the

7

service under section 1608 are hierarchical, such that a plaintiff

must attempt the methods of service in the order they are laid out

in the statute.8 Regarding the Russian Federation and the Russian

Ministry of Culture under section 1608(a), they must first be

served in accordance with any special arrangement between the

parties or in accordance with an applicable international

convention. See 28 U.S.C. § 1608(a)(1-2). Given that there was no

special arrangement or international convention governing service

here, the Magness descendants are required to have attempted

service on the head of the Russian Ministry of Foreign Affairs.

See 28 U.S.C. § 1608(a)(3). Finally, if service could not be made

through the Ministry of Foreign Affairs within thirty days, they

could resort to service through the State Department. See 28

U.S.C. § 1608(a)(4).

central government. An “agency or instrumentality” of a foreign

state, on the other hand, is defined as any organ or political

subdivision of a foreign state which is a separate legal person or

entity. 28 U.S.C. § 1603(b). Whether an entity is a “separate

legal person” depends upon the nature of its “core functions”--

governmental vs. commercial--and whether the entity is treated as

a separate legal entity under the laws of the foreign state. See

Transaero v. La Fuerza Aerea Boliviana, 30 F.3d 148, 151 (D.C. Cir.

1994); Hyatt Corp. v. Stanton, 945 F.Supp. 675, 683 (S.D.N.Y.

1996). Under this formulation, the Russian Ministry of Culture is

governed by § 1608(a), while the Russian State Diamond Fund is a

separate legal entity governed by § 1608(b).

8

The legislative history of the FSIA confirms this structure

of the service provisions, in that Congress expressly provided that

“[t]here is a hierarchy in the methods of service.” H.R. Rep. No.

1487, 94th Cong., 2d Sess. (1976), at 11.

8

Instead of asking the clerk of the district court to send the

summons and notice of suit by return receipt mail to the head of

the Russian foreign ministry under section 1608(a)(3), the Magness

descendants sent their complaint to the Texas Secretary of State

for forwarding to Boris Yeltsin, and sent the complaint directly to

the Russian Deputy Minister of Culture. Thus, the FSIA was not

strictly complied with as to the Russian Federation and Ministry of

Culture.9

9

As to the defendant Russian Federation, the Magness

descendants argue that any service of process defense was waived

when the Russian Federation sent counsel to appear at the TRO

emergency hearing in July 1997. At the time of the TRO hearing,

the Magness descendants had not yet attempted service; thus,

Russia could not have been expected to raise a faulty service

defense. The law establishes that waiver under the FSIA occurs

“only when the sovereign/state fails to assert immunity in a

responsive pleading.” MCI Telecomm. Corp. v. Alhadhood, 82 F.3d

658, 661-62 (5th Cir. 1996).

The cases cited by the Magness descendants fail to support

sufficiently their argument that Russia’s appearance at an

emergency TRO hearing before any attempted service waived any

faulty service defense. The Magness descendants primarily rely on

Broadcast Music, Inc. v. M.T.S. Enterprises, Inc., 811 F.2d 278,

281 (5th Cir. 1987), for this proposition. However, the defendants

in Broadcast Music actively participated in events surrounding the

trial for months by accepting deposition notices, engaging in

settlement discussions, and attending pretrial meetings. Here,

Russia made only one appearance--at an emergency TRO hearing held

one day after the claim was filed--and Russia’s TRO counsel

informed the Magness descendants that they were unable to accept

service on behalf of Russia.

Even the district court apparently did not think the Russian

Federation had waived its right to proper service. After a year of

inaction following the TRO denial, the court threatened to dismiss

the Magness descendants’ suit if they did not properly serve the

defendants by September 1, 1998. The court, it appears to us,

would not have ordered such service upon Russia if it believed the

9

As to the Russian State Diamond Fund, section 1608(b)

(applicable to instrumentalities of a foreign state) was similarly

not strictly followed. A plaintiff must first attempt service in

accordance with any special arrangement between the parties. See

28 U.S.C. § 1608(b)(1). Next, a plaintiff may serve through an

authorized agent in the United States or according to an applicable

international convention. See 28 U.S.C. § 1608(b)(2). If no such

agent or convention exists, as was the case here, a plaintiff may

serve papers via a letter rogatory,10 through the clerk of the

court, or as directed by the court, if these methods are

“reasonably calculated to give actual notice.” See 28 U.S.C.

§ 1608(b)(3). Instead of following the statute, the Magness

descendants forwarded a copy of their papers to the State

Department and the Texas Secretary of State for service upon the

Fund. Thus, the requirements of section 1608(b) were not strictly

followed as to the Russian State Diamond Fund.11

III

Federation’s appearance at the TRO had waived service.

10

A letter rogatory is a formal request from a court in one

country to the appropriate judicial authorities in another country

that can effectuate service of process.

11

All parties acknowledge that no “special arrangement” existed

between the parties in this case, and no applicable “international

convention” authorizes service in any way. Therefore, § 1608(a)(1-

2) and § 1608(b)(1-2) are inapplicable and not at issue in this

appeal.

10

The question before this court, therefore, is whether strict

compliance is required for service of process under section

1608(a), for a foreign state, and under section 1608(b), for an

instrumentality of a foreign state. The Magness descendants

contend that, even if their attempts at service of process upon the

defendants did not strictly comply with section 1608, they

substantially complied with the FSIA, and that the defendants had

actual notice of the suit. They further argue that, in any event,

the Russian Federation waived its right to contest service by

appearing at the TRO hearing. The defendants, however, argue that

the FSIA makes no provision for anything other than strict

compliance with its service of process requirements, and that

actual notice cannot substitute for proper service under either

section 1608(a) or (b). In addition, the appellants and the United

States, as amici, contend that, in any event, the Magness

descendants failed to even substantially comply with section

1608(a) or (b). Because service was never effectuated, the

district court had no personal jurisdiction over the defendants,

they claim, and thus the default judgment should be vacated

pursuant to Rule 60(b)(4).12

12

The appellants alternatively argue that the default judgment

should have been vacated under Rule 60(b)(3), because the judgment

was secured through fraud, misrepresentation, and misconduct. They

claim that the Magness descendants never informed the court that

they had been instructed by the State Department that service was

11

A

Section 1608(a)

We conclude that the provisions for service of process upon a

foreign state or political subdivision of a foreign state outlined

in section 1608(a) can only be satisfied by strict compliance. The

express language of the statute requires that service “shall” be

made upon a foreign state in the manner prescribed. Moreover, the

committee report on the FSIA states that “section 1608(a) sets

forth the exclusive procedures for service on a foreign state.”

H.R. Rep. No. 94-1487, at 24 (1976) (emphasis added).13 This

language simply does not support a finding that anything less than

strict compliance will suffice under the law.

This interpretation is in accord with decisions of the Second,

Seventh, and D.C. Circuits.14 In Gray v. Permanent Mission of

People’s Republic of Congo to United Nations, 443 F.Supp. 816, 821

(S.D.N.Y.), aff’d, 580 F.2d 1044 (2d Cir. 1978), the Second Circuit

ineffectual, and thus they obtained the default judgment under

fraudulent means.

13

Incidentally, this “exclusive procedures” language is missing

in the discussion of § 1608(b) in the legislative history.

14

Although the Ninth Circuit appears to have adopted a blanket

“substantial compliance” test for § 1608 in Straub v. Green, Inc.,

38 F.3d 448, 453 (9th Cir. 1994), that decision dealt only with

service under § 1608(b), and the court’s decision in Gerritsen v.

Consulado General De Mexico, 989 F.2d 340, 345 (9th Cir. 1993),

suggests that plaintiffs must strictly comply with the service

provisions on a foreign state under § 1608(a).

12

affirmed a district court holding that, under section 1608(a),

“informal notification through channels clearly outside the obvious

requirements of the applicable statute cannot be substituted for

those which meet the requirements.” The court determined that

actual notice given the defendant, a foreign state to be served

under section 1608(a), was insufficient to meet the requirements of

the FSIA. See also Shen v. Japan Airlines, 918 F.Supp. 686, 692

(S.D.N.Y. 1994).

The Seventh Circuit similarly required strict compliance under

section 1608(a) in Alberti v. Empresa Nicaraguense De La Carne, 705

F.2d 250, 253 (7th Cir. 1983). In that case, noting that section

1608(a) “delineates the ‘exclusive procedures’ for effecting

service of process upon a foreign state,” the court refused to

excuse the plaintiff’s service on the Nicaraguan Ambassador in lieu

of the head of the foreign affairs ministry. See also Magnus

Elec., Inc., v. Royal Bank of Canada, 620 F.Supp. 387, 389

(N.D.Ill. 1985), aff’d in part, rev’d in part on other grounds, 830

F.2d 1396 (7th Cir. 1987) (holding that “noncompliance with the

[FSIA]’s literal requirements (though it certainly did provide

notice) deprives this Court of personal jurisdiction.”).

The District of Columbia Circuit, holding that “strict

adherence to the terms of 1608(a) is required,” also rejected the

substantial compliance test under section 1608(a) in Transaero,

13

Inc. v. La Fuerza Aerea Boliviana, 30 F.3d 148, 154 (D.C. Cir.

1994), cert. denied, 513 U.S. 1150, 115 S.Ct. 1101 (1995). The

court rejected the claim that service upon the Bolivian Ambassador

and Consul General in Washington was sufficient under section

1608(a), noting that foreign states, unlike foreign agencies or

instrumentalities, may lack the “sophisticated knowledge of the

United States legal system” that might otherwise authorize

substantial compliance with service provisions. Id.

Based on these decisions, the express language of section

1608(a), and the United States’ interest in ensuring that the

proper officials of a foreign state are notified when a suit is

instituted, we hold that plaintiffs must strictly comply with the

statutory service of process provisions when suing a foreign state

or political subdivision under section 1608(a).15

B

Section 1608(b)

The statutory language and case law concerning section 1608(b)

present a different question. As such, we are convinced that

substantial compliance with the provisions of service upon an

15

We leave open the possibility that, under extraordinary

circumstances not present in this case, when service of process

according to the express provisions of § 1608(a) is a manifest

impossibility, other methods of service that fully satisfy the

goals of section 1608(a) might be sufficient. However, we decline

to define any such exception until those extraordinary

circumstances come before this court.

14

agency or instrumentality of a foreign state--that is, service that

gives actual notice of the suit and the consequences thereof to the

proper individuals within the agency or instrumentality--is

sufficient to effectuate service under section 1608(b).

Perhaps most significant to this determination is the express

statement in section 1608(b)(3) that delivery under that subsection

is authorized “if reasonably calculated to give actual notice.”

This language reflects the fact that “Congress was there concerned

with substance rather than form.” Transaero, 30 F.3d at 154. This

reference to actual notice is absent from section 1608(a).

Our holding as to section 1608(b) is in accord with the Third,

Sixth, Ninth, Eleventh, and D.C. Circuits, all of which have

determined that substantial compliance with section 1608(b) is

sufficient so long as the defendants have actual notice of the

suit.16 The Third Circuit found that service under section 1608(b)

was sufficient absent strict compliance in Velidor v. L/P/G

Benghazi, 653 F.2d 812, 821 (3d Cir. 1981). The court noted that

16

We recognize that not all federal courts have found

substantial compliance sufficient under § 1608(b). See, e.g.,

LeDonne v. Gulf Air, Inc., 700 F.Supp. 1400 (E.D.Va. 1988)

(requiring strict compliance under 1608(b)); Lippus v. Dahlgren

Mfg. Co., 644 F.Supp. 1473, 1479 (E.D.N.Y. 1986) (requiring that

certain “exigencies” be present before excusing non-strict

compliance with § 1608(b)); Unidyne Corp. v. Aerolineas Argentinas,

590 F.Supp. 391, 395 (E.D.Va. 1984) (noting that “this Court is

directed to strictly interpret the requirements set forth in §

1608(b).”).

15

“[r]ather than making service on foreign instrumentalities a rigid,

technical, or cumbersome procedure, Congress sought to facilitate

the ability of private plaintiffs to serve foreign entities.” Id.

Again, the court concluded that actual notice was the determining

consideration. See also Obenchain Corp. v. Corporation Nacionale

de Inversiones, 665 F.Supp. 435, 437 (W.D.Pa. 1987), aff’d in part,

rev’d in part on other grounds, 898 F.2d 142 (3d Cir. 1990).

The Sixth Circuit adopted a similar substantial compliance

test for section 1608(b) in Sherer v. Construcciones Aeronauticas,

987 F.2d 1246 (6th Cir. 1993). The court observed that “the common

theme running through [FSIA] cases, whether ‘substantial

compliance’ or ‘strict compliance,’ is the importance of actual

notice to the defendants.” Id. at 1249. The court adopted the

substantial compliance approach “under the circumstances in this

case,” where the defendant had answered the complaint despite the

defect in service and had raised twenty-one affirmative defenses.

Id. at 1250.

In Straub v. Green, Inc., 38 F.3d 448, 453 (9th Cir. 1994),

the Ninth Circuit “formally adopt[ed] a substantial compliance test

for the FSIA.” The court determined that, under section 1608(b),

“the pivotal factor is whether the defendant receives actual notice

16

and was not prejudiced by the lack of compliance.” Id.17 And in

Harris Corp. v. National Iranian Radio and Television, 691 F.2d

1344, 1352 (11th Cir. 1982), the Eleventh Circuit similarly adopted

the substantial compliance test under § 1608(b), finding that

actual notice should override technical deficiencies in service

under that section.18

Finally, the D.C. Circuit in Transaero, 30 F.3d at 154, noted

that “[t]he authorities generally hold that section 1608(b) may be

satisfied by technically faulty service that gives adequate notice

to the [defendant].” Id. at 153. In authorizing substantial

compliance under section 1608(b), the court observed that foreign

agencies and instrumentalities, which are “typically international

commercial enterprises, often possess a sophisticated knowledge of

the United States legal system that other organs of foreign

governments may lack.” Id. at 154.

C

17

The Fifth Circuit has expressly disagreed with Straub, albeit

on unrelated grounds. See Pere v. Nuovo Pignone, Inc., 150 F.3d

477, 480-81 (5th Cir. 1998).

18

The Harris court appeared to limit its holding by stating,

“[t]hough we find service adequate here, we admonish those seeking

to invoke the FSIA to follow the service provisions it

contains. . . . There is no excuse for departure from the dictates

of the statute.” Id. at 1352, n.16. Since the Harris decision, at

least one district court in the Eleventh Circuit has interpreted

this language to mean that strict compliance is required absent

extraordinary circumstances. See Shell Oil Co. v. M/V Itanage, 830

F.Supp. 1423, 1425 (M.D.Fla. 1993).

17

In sum, virtually no authority suggests that substantial

compliance would suffice under section 1608(a) as to foreign

governments--the Russian Federation and the Russian Minister of

Culture in this case. Nevertheless, the vast majority of the case

law does support a holding that substantial compliance under

section 1608(b), coupled with actual notice, can suffice to meet

the statutory service requirements for instrumentalities of a

foreign state. We formally adopt such a test for section 1608(b),

but decline to authorize substantial compliance as to section

1608(a).

Having already determined that the Magness descendants failed

strictly to comply with either section 1608(a) or (b), we now turn

to ascertain whether the plaintiffs substantially complied with the

provisions of section 1608(b) as to the Russian State Diamond Fund

in this case.

IV

The cases authorizing substantial compliance with the service

of process provisions under section 1608(b) note that it is actual

notice by the defendant that substantiates the compliance. The

Magness descendants assert that the defendants all had actual

notice of the suit, while the defendants deny having such notice.

As to the Russian State Diamond Fund, the defendants contend

that the mailing of process to Boris Yeltsin and the Russian State

18

Diamond Fund “c/o Deputy Minister of Culture Mikhail Schvidkoy” was

not substantial compliance with section 1608(b), which permitted

service via a letter rogatory, through the clerk of the court, or

as directed by the court. See 28 U.S.C. § 1608(b)(3). The Magness

descendants, in turn, assert that they substantially complied with

section 1608(b)(3)(B), which authorizes service upon an

instrumentality of a foreign state by any form of mail requiring a

signed receipt. They point out that they sent service papers to

the Texas Secretary of State with a request that those documents be

forwarded to the “Russian Ministry of Culture/Russian State Diamond

Fund.” Finally, the Magness descendants contend that all

defendants had actual notice of the suit, as evidenced by the

Russian Federation’s appearance at the TRO hearing and the

confirmation received by the Texas Secretary of State showing that

the return receipt for the service documents had been signed by

somebody at the “Russian Ministry of Culture/Russian State Diamond

Fund.”

As the United States notes, there is no evidence that the

Magness descendants included a “notice of suit” in the service

documents that allegedly were served. The notice of suit is an

integral part of the service requirements upon foreign states, and

is “designed to provide a foreign state with an introductory

explanation of the lawsuit, together with an explanation of the

19

legal significance of the summons, complaint, and service.” H.R.

Rep. No. 94-1487, at 12.

Most importantly, there is no evidence to establish that the

defendants had actual notice of the suit. The Magness descendants

bear the burden of proving that the defendants had actual notice.

See, e.g., Straub, 38 F.3d at 454; Hirsch v. Blue Cross, Blue

Shield, 800 F.2d 1474, 1477 (9th Cir. 1986). Under the FSIA,

proving “actual notice” requires more than a mere showing that

somebody in the foreign state knew of the claim. See Sherer, 987

F.2d at 1250 (finding actual notice only because defendant hired

counsel and moved to dismiss the complaint).

Because the plaintiffs have not established that they provided

the Russian State Diamond Fund actual notice of the suit,

substantial compliance with section 1608(b) was lacking.

V

Having determined that the Magness descendants failed to

perfect service under section 1608 as to any of the defendants in

this case, we now consider the district court’s denial of the

defendants’ Rule 60(b) motion.

In Seven Elves, 635 F.2d at 402, this court held that a

district court should consider eight factors when ruling on a Rule

60(b) motion to vacate a default judgment:

20

(1) that final judgments should not lightly be disturbed;

(2) that the Rule 60(b) motion is not to be used as a

substitute for appeal;

(3) that the rule should be liberally construed in order

to achieve substantial justice;

(4) whether the motion was made within a reasonable time;

(5) whether, if the judgment was a default or a dismissal

in which there was no consideration of the merits, the

interest in deciding cases on the merits outweighs, in

the particular case, the interest in the finality of

judgments, and there is merit in the movant’s claim or

defense;

(6) whether, if the judgment was rendered after a trial

on the merits, the movant had a fair opportunity to

present his claim or defense;

(7) whether there are intervening equities that would

make it inequitable to grant relief; and

(8) any other factors relevant to the justice of the

judgment under attack.

Analyzing these factors, we must conclude that the default

judgment in favor of the Magness descendants should be vacated as

to all three defendants.19 The motion to vacate was made within a

reasonable time; the motion is not being utilized as a substitute

for appeal; the interest in deciding the merits of the case

19

The defendants request that the judgment be vacated under

Rule 60(b)(3) or Rule 60(b)(4). Under Rule 60(b)(3), this court

has held that “a party may engage in Rule 60(b)(3) misconduct if he

fails to disclose evidence he knows about and the production of

such evidence was clearly called for.” Montgomery v. Hall, 592

F.2d 278, 279 (5th Cir. 1979). The Magness descendants evidently

convinced the district court that they had properly served the

defendants, even though the State Department repeatedly informed

them that service was incomplete. Rule 60(b)(4) authorizes a court

to vacate a judgment as “void” when personal jurisdiction is

lacking. Under such circumstances, this court has determined that

“the district court has no discretion, the judgment is either void

or it is not.” Recreational Properties, Inc. v. Southwest Mortgage

Serv. Corp., 804 F.2d 311, 313-14 (5th Cir. 1986).

21

outweigh the interest in finality; and, the diplomatic implications

of this case encourage a consideration of the claim on the merits.

The government has emphasized the weighty diplomatic

considerations underlying this case, noting that the United States

has fought jurisdiction in instances where foreign attorneys have

attempted to serve the United States via non-authorized government

employees. In its amici brief the United States suggests that it

would not consider itself to have been properly served under the

attempts utilized by the Magness descendants in this case.20 In

this light, and for the reasons we have explained, we conclude that

the default judgment should be vacated, that the case must be

remanded, and that the Magness descendants should be allowed a

reasonable time to perfect service upon the defendants.

Therefore, the judgment is VACATED and the case is REMANDED

for further proceedings not inconsistent with this opinion.

V A C A T E D and R E M A N D E D.

20

That is, the delivery of a package addressed to “George W.

Bush, the White House” to a random federal agency that lacks the

responsibility for foreign relations would not provide adequate

notice of suit to the United States.

22