Autotech Technologie v. Integral Research

In the

United States Court of Appeals

For the Seventh Circuit

____________

No. 06-1718

AUTOTECH TECHNOLOGIES LP,

Plaintiff-Appellee,

v.

INTEGRAL RESEARCH & DEVELOPMENT CORP.,

Defendant-Appellant.

____________

Appeal from the United States District Court

for the Northern District of Illinois, Eastern Division.

No. 96 C 3193—David H. Coar, Judge.

____________

ARGUED FEBRUARY 6, 2007—DECIDED AUGUST 29, 2007

____________

Before KANNE, WOOD, and WILLIAMS, Circuit Judges.

WOOD, Circuit Judge. Integral Research & Develop-

ment Corp. (“Integral”) is a company wholly owned by

the Belarusian government; Integral manufactures semi-

conductors. Autotech Technologies LP (“Autotech”) filed

an action against Integral in the U.S. district court for

the Northern District of Illinois in 1996 for violating an

exclusivity agreement that Autotech obtained through a

third party, Digital Devices, Inc. (“DDI”); it also filed a

similar suit in state court against DDI. Autotech, Integral,

and DDI later reached a global settlement, which was

reflected in orders entered by both courts on April 3, 1997

2 No. 06-1718

(“Agreed Order”). The federal judgment stipulated that the

court was retaining jurisdiction to enforce the Agreed

Order. Disputes were not long in coming. A few months

after the Order was entered, Autotech returned to the

district court with a motion seeking contempt sanctions

to enforce its exclusivity rights. The court found this

appropriate and imposed a sanction of $5,000 per day. As

far as anyone can tell, however, no one ever collected a

penny of that money. Almost ten years later, Autotech

sought and was granted an order reducing the accrued

fines to a judgment for $18.8 million. The order did not

stop the continuing accrual of the fines, but it included a

writ of execution granting Autotech the right to seize

Integral’s assets, including those held by third parties.

On appeal, Integral raises a host of reasons why we

should overturn the contempt judgment. Prominent

among them is a challenge to the subject matter juris-

diction of the district court to entertain this contempt

proceeding, because Integral is an instrumentality of a

foreign state. See the Foreign Sovereign Immunities Act

(“FSIA”), 28 U.S.C. §§ 1330, 1601-11. We conclude, how-

ever, that subject matter jurisdiction is secure.

Some of Integral’s other challenges hit their mark. First,

Integral is entitled to pursue its attack now against the

contempt finding underlying this huge judgment. Second,

Autotech’s failure properly to serve Integral with the

motion for contempt deprived Integral of notice of the

proceeding and, consequently, its right to a full and fair

hearing. Third, the writ of execution issued in 2006 was

defective, because it failed to identify specific properties in

the United States against which the judgment could be

executed. Finally, even if the service problem did not

compel reversal of the contempt finding on its own, we

would nonetheless reverse because Autotech failed to

demonstrate that Integral was in contempt of the Agreed

No. 06-1718 3

Order, and it offered no competent proof supporting the

sanction.

I

This case has its roots in an “Exclusive Sales Agreement”

that DDI and Integral concluded in 1992. Their agreement

made DDI the exclusive sales and marketing agent in the

United States for Integral’s products. In 1994, Autotech

purchased from DDI the exclusive right to promote and

sell Integral’s products for resale or incorporation into

products manufactured or sold in the United States; its

authority was embodied in an “Exclusive Marketing

Agreement.” Integral authorized the transfer of rights

from DDI to Autotech through an “Acknowledgment and

Modification of Agreement.” Relations between Autotech

and Integral (as well as Autotech and DDI) soon soured. In

1996, Autotech filed a three-count suit in federal court

against Integral, alleging breach of contract, fraud, and a

pattern of racketeering activity in violation of the Racke-

teer Influenced and Corrupt Organizations (RICO) Act, 18

U.S.C. § 1962(c). The complaint included demands for

$200,000 for the contract claim and more than $10 million

for the fraud and RICO claims. Integral filed two counter-

claims for fraud and RICO violations, demanding $50,000

for the former and more than $19 million for the latter.

Autotech filed parallel claims against DDI in state court.

See Autotech Technologies LP v. Digital Devices, Inc., et

al., 95 CH 3427 (Ill. Cir. Ct., Cook County).

On April 3, 1997, Autotech and Integral agreed to

dismiss the federal suit with prejudice, while allowing the

court to retain jurisdiction to enforce the provisions of

the Agreed Order. The state court suit was resolved

similarly on the same day. The Agreed Order provided that

Integral “shall not sell goods directly or indirectly in the

United States[,] Canada, or to Mexican subcontractors

4 No. 06-1718

except any and all sales may be made by Integral through

[Autotech].” Integral also promised not to use the Data

Book compiled to market Integral’s products. The Order

further required that both Integral and the government

of Belarus had to acknowledge the grant of exclusive

rights. Finally, Autotech waived a $200,000 debt that

Integral owed to it and agreed to transfer $217,000 to

Integral after it received the required acknowledgments.

As Autotech saw it, this agreement worked no better

than its predecessors. On December 2, 1997, Autotech filed

a motion to find Integral in contempt of the Order. The

only specific violation of the Order its motion alleged,

however, was that Integral was selling goods to a company

operated by Art Scornavacca. Autotech requested that

Integral be fined $20,000 a day, submitting that “the

imposition of this fine should have the effect of requiring

Integral to comply with the Court’s Order . . . .” No factual

affidavit accompanied the motion for contempt. Autotech

attached only a copy of the Agreed Order itself, acknowl-

edgments of the Order signed by Integral’s Vice-President

of Sales and Marketing (Dmitry Vecher) and an official

from the Ministry of Industry of the Republic of Belarus,

a copy of a minute entry from November 8, 1996, and a

letter from Vecher to one of Autotech’s principals.

The last of these items, Vecher’s letter, was evidently the

foundation for Autotech’s allegation that Integral was

selling to Scornavacca. The letter suggests that Autotech

and Integral had been discussing a set of five questions.

The second of those questions related to Scornavacca. On

that topic, Vecher wrote (somewhat elliptically), “We can

provide with official confirmation of the binding necessity

of the Agreement for sole agents. While have business

with ordinary buyers (by the way, Mr. Scornavacca is

one of them) making a buying/selling contract with them

is sufficient, moreover that in this case the volumes of

purchases ordered are scanty and do not influence the

No. 06-1718 5

situation at the market.” This quote provides the only

support for Autotech’s assertion in its contempt motion

that “Mr. Vecher ADMITS THAT INTEGRAL IS SELLING

GOODS TO MR. SCORNAVACCA’S COMPANY.” No

record of service was attached to the motion. In its appear-

ance in court on the motion on December 9, 1997, Autotech

alleged only that it “served this on the embassy in Wash-

ington, D.C.”

On the day of the hearing, the district court issued an

Order for a Rule to Show Cause, returnable on December

23, 1997. Autotech had the responsibility of serving

Integral. Back in court on December 23, Autotech’s lawyer

said only that “They were served by certified mail on

December 12th. I have a copy of service or the original.” He

gave no details about who might have been served, and no

document verifying the service was ever entered in the

record. The court granted the motion for contempt, but

it lowered the daily fine from the requested $20,000 to

$5,000 a day out of concern that “[a] hundred days and

we’re up to $20 million.” The fine began accruing on

December 31, 1997. Autotech was ordered to “serve a copy

of this Court’s Order on Integral . . . and on the owner of

Integral . . . , being the Republic of Belarus by its Embassy

in Washington, D.C.” Again, no record of service was ever

made. (In its motion for a writ of execution filed on

February 2, 2006, Autotech alleged that it had spoken with

Integral’s then-attorney John LaPine following the Decem-

ber 23, 1997 contempt order. No competent evidence of

this conversation, in the form of an affidavit or otherwise,

was ever made part of the record.)

Autotech’s February 2, 2006, motion for a writ of execu-

tion submitted that the company had taken steps to

discover and levy upon the assets of Integral in the United

States, but that “[n]o such assets were discovered or

levied upon.” The motion explained that Autotech sought

the writ of execution because it “believes there are assets

6 No. 06-1718

of Integral located in other countries that can be levied

upon to satisfy at least a portion of the judgment debt

owed to Plaintiff. . . . In order to levy upon these assets,

Plaintiff must possess not only a certified copy of the

judgment order . . . but also a Writ of Execution.” (Empha-

sis added.) Yet again, the record contains no copy of

service of this motion on Autotech.

The court granted Autotech’s motion on February 10,

2006, without requiring from it any more information

about the assets it hoped to attach. The court’s writ read

as follows:

a. That Plaintiff, through its agents, is entitled to

enforce and collect from third parties the judgment

debt entered against Defendants on December 23,

1997, which amount is, as of January 31, 2006:

$14,790,000, plus interest of 4.5% compounded annu-

ally, totaling $18,867,730, and which amount contin-

ues increasing at the rate of $5,000.00 per day plus

interest;

b. That those third parties that have, hold, or are in

possession of goods or monies belonging to Integral

[are] commanded to produce to Plaintiff or its agents

all books, papers or records in their possession or

control which may contain information concerning

the property or income of, or indebtedness due Inte-

gral;

c. That those third parties be prohibited from making

or allowing any transfer or other disposition of, or

interfering with, any property not exempt from execu-

tion or garnishment belonging to Integral or to which

he [sic] may be entitled or which may be acquired by

or become due to Integral and from paying over or

otherwise disposing of any money not so exempt, which

is due or becomes due to Integral, until further order

of court or termination of the proceedings. . . . ;

No. 06-1718 7

d. That Plaintiff is allowed to levy upon and seize any

and all assets of Integral held by, in the possession or

control of, said third parties and, if said assets are not

cash money, to sell said assets and convert them

into cash money, and that Plaintiff is entitled to collect

said assets and cash money as and for satisfaction of

that portion of the judgment debt owed to it by Inte-

gral pursuant to the terms of the December 23, 1997

order.

In addition to the writ of execution, the court also reduced

the accrued contempt monies to a judgment order “in the

amount of $18,867,730.” The order also noted that the

issuance of the judgment order did not affect the further

accrual of fines. Integral filed a notice of appeal from the

judgment and the writ of execution on March 30, 2006.

II

A. Subject Matter Jurisdiction

We begin, as we must, with the question of the district

court’s subject matter jurisdiction. For that purpose, we

must look to the suit as a whole, and we must assess

whether jurisdiction was proper as of the time the suit

commenced. See Grupo Dataflux v. Atlas Global Group,

LP, 541 U.S. 567, 570-71 (2004) (reaffirming time-of-filing

rule, but noting also that certain actions after filing may

cure an initial jurisdictional defect). Autotech filed this

action against Integral in 1996. Because Integral, the

defendant, was wholly owned by the government of

Belarus, subject matter jurisdiction depended upon the

application of the FSIA. This is because, as a corporate

entity wholly owned by a foreign government, Integral falls

within the FSIA’s definition of the term “foreign state.” See

28 U.S.C. § 1603(a), (b)(2); Dole Food Co. v. Patrickson,

538 U.S. 468 (2003). Autotech had alleged, erroneously,

8 No. 06-1718

that jurisdiction existed under 28 U.S.C. § 1332, the

diversity and alienage statute. Section 1332 might support

jurisdiction insofar as the case is against the two officers

of Integral who were named in the complaint, but

Autotech has furnished no information about the citizen-

ship of its partners, and so we cannot be sure. In any

event, because it has said nothing about their significance

to the case on appeal, we consider that any arguments

specific to them have been waived. Integral did not deny

that jurisdiction was properly premised on diversity.

Although normally parties cannot consent to federal

jurisdiction, the FSIA presents a special case, as we

discuss below. The statute makes immunity from suit the

general rule for foreign states, see 28 U.S.C. § 1604, but,

perhaps more importantly, § 1605 provides for exceptions

from that general rule.

At least two of those exceptions readily apply to this

litigation. The first, set out in § 1605(a)(1), is waiver; the

other, found in § 1605(a)(2), is for commercial activities

carried on in the United States, or carried on elsewhere

with a direct effect in the United States. Several conse-

quences flow from any decision that an exception to

immunity applies: first, the district court has subject

matter jurisdiction over the claim, 28 U.S.C. § 1330(a);

second, it has personal jurisdiction over the state, 28

U.S.C. § 1330(b); and third, the foreign sovereign (or, as

here, its instrumentality) must defend the case on the

merits. See Verlinden B.V. v. Central Bank of Nigeria, 461

U.S. 480, 488-89 (1983). In a sense, then, in cases gov-

erned by § 1605(a)(1), this means that the voluntary act

of waiver actually does confer jurisdiction on the dis-

trict court, contrary to the usual rule. But the broader

point of the statute, as Verlinden noted, is that it embodies

a congressional determination that suits against foreign

sovereigns inevitably implicate the foreign relations of the

United States and thus “arise under” federal law. See id.

No. 06-1718 9

at 493. Thus, the waiver merely paves the way for the

exercise of jurisdiction that Congress has determined is

appropriate.

Integral never filed a piece of paper proclaiming that it

was waiving its sovereign immunity, but it did so implic-

itly in a number of ways. It never raised an immunity

defense prior to these contempt proceedings—not in a

responsive pleading, not in any other motion, and not in

the Agreed Order. Failing to raise sovereign immunity

and then participating fully in a court proceeding amount

to an implied waiver of immunity. See Allendale Mut. Ins.

Co. v. Bull Data Systems, Inc., 10 F.3d 425, 432 (7th Cir.

1993) (holding that French-owned defendant “waived its

objection to the jurisdiction of the Northern District of

Illinois when it filed its counterclaim against [plaintiff]

in that court without asserting that the court lacked

jurisdiction” (citing RESTATEMENT (THIRD) OF THE FOREIGN

RELATIONS LAW OF THE UNITED STATES § 421(3) (1987))).

Integral also signaled a waiver of its immunity by agree-

ing in its original contract with Digital Devices to arbitrate

in the United States and by agreeing to a contract gov-

erned by Illinois law. See Frolova v. Union of Soviet

Socialist Republics, 761 F.2d 370, 377 (7th Cir. 1985) (“The

legislative history of the FSIA gives . . . examples of cases

in which courts have found implied waivers: . . . (2) a

foreign state has agreed that a contract is governed by the

law of a particular country; and (3) a foreign state has filed

a responsive pleading in a case without raising the defense

of sovereign immunity.” (citing H. R. REP. No. 1487, 94th

Cong., 2d Sess. 18, reprinted in 1976 U.S. CODE CONG. &

AD. NEWS 6604, 6617; S. REP. No. 1310, 94th Cong., 2d

Sess. 18)). We conclude, therefore, that the district court

had subject matter jurisdiction under § 1605(a)(1) because

of Integral’s waiver of its sovereign immunity.

Although it is unnecessary to reach Autotech’s alter-

native argument that jurisdiction existed under the

10 No. 06-1718

commercial-acts exception of § 1605(a)(2), we note that

this too applies here. The underlying contract was all

about marketing Integral’s products in the United States.

It therefore deals with commercial activity undertaken in

the United States of an instrumentality of a foreign

sovereign. That is all that § 1605(a)(2) requires. This case

does not require us to delve into the more complex ques-

tion of when commercial activity outside the United

States has a sufficiently direct domestic effect to come

within the terms of the statute. See Republic of Argentina

v. Weltover, Inc., 504 U.S. 607, 617-20 (1992).

Perhaps realizing that it cannot show a lack of original

jurisdiction in this case, Integral has offered a different

argument for why jurisdiction is lacking here. It suggests

that the FSIA does not authorize federal district courts to

enter monetary contempt sanctions against foreign

sovereigns. This rule, it asserts, implicates not just the

kind of remedy the court may order, but the court’s basic

competence, even if the court has jurisdiction over the

underlying suit. Integral argues that “absent a clear and

specific waiver of sovereign immunity from contempt itself,

a district court lacks the jurisdiction to enforce its

orders through monetary contempt proceedings against

a foreign sovereign.”

We cannot accept this degree of fine-tuning. Once a court

is entitled to exercise subject matter jurisdiction over the

suit, it has the full panoply of powers necessary to bring

that suit to resolution and to enforce whatever judgments

it has entered. From our common-law ancestors forward,

one of the most important of those powers is the power to

punish contempt of court. See, e.g., Spallone v. United

States, 493 U.S. 265, 276 (1990) (reaffirming “axiom that

‘courts have inherent power to enforce compliance with

their lawful orders through civil contempt’ ” (quoting

Shillitani v. United States, 384 U.S. 364, 370 (1966));

No. 06-1718 11

Young v. United States ex rel. Vuitton et Fils, S.A., 481

U.S. 787, 794 (1987) (“[I]t is long settled that courts

possess inherent authority to initiate contempt proceed-

ings for disobedience to their orders . . . .”). Nothing in the

text of the FSIA comes close to suggesting that the FSIA

was designed to abrogate or limit this essential power, or

even that a separate jurisdictional showing is necessary

for a contempt proceeding that arises within a case prop-

erly brought under the FSIA.

The structure of the FSIA itself refutes this idea.

Jurisdiction (as well as immunity) is addressed in § 1604,

which is captioned “Immunity of a foreign state from

jurisdiction,” and § 1605, captioned “General exceptions

to the jurisdictional immunity of a foreign state.” In

contrast, later sections of the statute address various

stages of a proceeding that has passed the jurisdictional

hurdles. Sections 1609 and 1610 respectively outline the

rules for “[i]mmunity from attachment and execution of

the property of a foreign state” and “[e]xceptions” thereto.

These sections delimit the scope of the district court’s

power to enter orders executing a judgment. They are, in

the final analysis, nothing more than restrictions on the

court’s remedial and enforcement powers. Section 1609

says that, subject to certain exceptions, “the property in

the United States of a foreign state shall be immune from

attachment, arrest, and execution . . .”; section 1610(a)

lists those exceptions, in effect indicating when the

property of a foreign state may be attached in aid of

execution on a judgment.

The cases that Integral has cited for the proposition that

the court has no power to enter judgment against a foreign

sovereign offer no support for its argument that a

separate jurisdictional basis must exist for a contempt

proceeding. It is true that the Fifth Circuit overturned the

district court’s issuance of a contempt order in Af-Cap Inc.

v. Republic of Congo, 462 F.3d 417 (5th Cir. 2006), on the

12 No. 06-1718

ground that §§ 1610 and 1611 of FSIA did not provide for

monetary sanctions as an “available method[ ] of attach-

ment and execution against property of foreign states.” Id.

at 428. Whether or not we agree with the outcome of that

case (which we have no occasion to consider here), it is

plain that nothing in the opinion suggests that the Fifth

Circuit thought that the flaw was a jurisdictional one.

(One commentator from the State Department has opined

otherwise, see Marian N. Leich, Judicial Determinations

of Immunity and Department of State’s Role, 81 AM. J.

INT’L L. 643, 644 n.4 (1987) (commenting that the State

Department’s understanding of the FSIA “supported the

position that jurisdiction for purposes of execution and

attachment is not coextensive with jurisdiction to enter-

tain an action”), but we can find no judicial authority

for that proposition.) We would need much more clear

guidance from Congress than we have before we could con-

clude that a court had no jurisdiction to entertain con-

tempt proceedings in an action brought under the FSIA

for which subject matter jurisdiction has been established.

B. Appellate Jurisdiction

This appeal is from a proceeding that arose under the

jurisdiction that the court retained in the Agreed Order to

enforce its provisions. In these circumstances, we “treat

the postjudgment proceeding as if it were a free-standing

lawsuit and . . . identify the final decision in the

postjudgment proceeding and confine any further appeal

under section 1291 to that decision.” Bogard v. Wright, 159

F.3d 1060, 1062 (7th Cir. 1998) (citations omitted). “A

postfinal order will be treated as ‘final’ for purposes of

section 1291 if it ‘dispose[s] of all issues raised in the

postjudgment motion.’ ” JMS Development Co. v. Bulk

Petroleum Corp., 337 F.3d 822, 825 (7th Cir. 2003) (quoting

Transportation Cybernetics, Inc. v. Forest Transit Com’n,

No. 06-1718 13

950 F.2d 350, 352 (7th Cir. 1991)); see also Motorola, Inc.

v. Computer Displays Int’l, Inc., 739 F.2d 1149, 1154 (7th

Cir. 1984) (“While it is true that most post-judgment

orders are final decisions within the ambit of § 1291, not

all are. To be final, the post-judgment order must still

dispose completely of the issues raised.”).

An order issued in post-judgment contempt proceed-

ings may be appealable: “Contempt proceedings brought

to enforce a final judgment are similar in most ways to

other post-judgment proceedings. . . . Complete disposition

of the contempt proceeding supports final judgment

appeal, since there is no apparent opportunity for later

review; appeal ordinarily is not available before complete

disposition . . . .” 15B Charles Alan Wright, Arthur R.

Miller, and Edward H. Cooper, Fed. Prac. & Proc. § 3917

(3d ed. 2000); see also Szabo v. United States Marine

Corp., 819 F.2d 714, 716 (7th Cir. 1987) (“[A]n order of

civil contempt is appealable if and only if it is . . . final for

purposes of section 1291 . . . .”). We accordingly have

jurisdiction over the district court’s entry of its judgment

against Integral assessing a fine of $18,867,730. As we

noted in Motorola, “[a]n order finding a party in civil

contempt disposes of all of the issues raised only if it

includes both a finding of contempt and the imposition of

a sanction.” 739 F.2d at 1154. Although this judgment may

not resolve the underlying issue (Integral’s refusal to

abide by the judgment order), there would be no other time

at which this order would be appealable, for Autotech has

no obligation to wait for the resolution of any other issue

to execute the order and attempt to collect on the judg-

ment. We conclude, therefore, that Integral was entitled

to take its appeal at this time.

III

Satisfied that there is federal subject matter jurisdiction

over this suit and that we have appellate jurisdiction, we

14 No. 06-1718

may now turn to the remaining arguments in this case:

whether Autotech properly served Integral in the contempt

proceeding, whether the writ of execution was adequate,

and whether Autotech made an adequate showing on the

merits of its contempt motion.

A. Service

This question is closely aligned to the issue of our

appellate jurisdiction. Autotech argues that Integral

should have appealed from the contempt order within 30

days of its entry on December 23, 1997. In principle,

Integral could have done so. “A judgment establishing a

system of coercive fines that will be exacted for future

violations of a decree is final when entered; appeal can,

and perhaps must, be taken at the time of entry without

awaiting future contempt and actual imposition of the

fines.” 15B Wright, Miller, and Cooper, Fed. Prac. & Proc.

§ 3917. This means, in Autotech’s view, that Integral is

now barred from making any complaint about either the

underlying finding of contempt or the accrual of the fines.

Integral admits that this appeal is an attempt to collater-

ally attack the underlying 1997 contempt order. It argues

that it may do so, however, because it was never properly

notified about the contempt proceeding.

Before Integral can be barred either by law-of-the-case

principles or something analogous to issue preclusion, it

must have had a fair opportunity to be heard in the

contempt proceeding. “Before finding a party in contempt,

the district court must allow that party an ‘opportunity to

contest the issue.’ ” United States v. Berg, 20 F.3d 304, 310

(7th Cir. 1994) (quoting Ferrell v. Pierce, 785 F.2d 1372,

1383 (7th Cir. 1986)). As the Supreme Court has ex-

plained:

[D]ue process of law as explained in . . . Cooke [v.

United States, 267 U.S. 517 (1925)] requires that one

No. 06-1718 15

charged with contempt of court be advised of the

charges against him, have a reasonable opportunity to

meet them by way of defense or explanation, have the

right to be represented by counsel, and have a chance

to testify and call other witnesses in his behalf, either

by way of defense or explanation.

In re Oliver, 333 U.S. 257, 275 (1948). While Oliver was

a criminal case, the notice requirement applies similarly

in a civil case: “In a civil contempt case, due process

requires that notice be given of the time and place of

hearing.” American Fletcher Mortg. Co., Inc. v. Bass, 688

F.2d 513, 519 (7th Cir. 1982); see also E.E.O.C. v. Local

638, 81 F.3d 1162, 1176 (2d Cir. 1996); Remington Rand

Corporation-Delaware v. Business Systems, Inc., 830 F.2d

1256, 1258 (3d Cir. 1987).

The question here is whether the notice given to

Integral—service on the Belarusian ambassador—was

sufficient both under the FSIA and for due process pur-

poses. The FSIA contains specific rules for service of

process, but it says nothing about service of later motions.

Under FED. R. CIV. P. 4(j)(1), “Service [of process] upon a

foreign state or a political subdivision, agency, or instru-

mentality thereof shall be effected pursuant to 28 U.S.C.

§ 1608.” Section 1608, which is part of the FSIA, autho-

rizes three methods for serving an agency or instrumen-

tality of a foreign state:

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

in accordance with any special arrangement for ser-

vice between the plaintiff and the agency or instru-

mentality; 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 accor-

16 No. 06-1718

dance 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.

28 U.S.C. § 1608(b).

Nothing in the FSIA explicitly requires that notice of a

motion (even a motion for contempt) be given in accordance

with the procedures for serving process. Although neither

the Local Rules of the Northern District of Illinois nor

the Federal Rules of Civil Procedure provide the notice

standard for due process purposes, both supply relevant

benchmarks for our inquiry. The Local Rules of the

Northern District of Illinois generally require formal

service of process for a contempt motion, providing that

“[w]here the alleged contemnor has appeared in the

action by an attorney, the notice of motion or order to

show cause and the papers upon which it is based may

be served upon that attorney; otherwise service shall be

made personally, in the manner provided for by Federal

Rule of Civil Procedure 4 for the service of a summons.”

N.D. ILL. LOCAL RULE § 18(A) (1997). This is more strin-

No. 06-1718 17

gent than the normal requirements for contempt proceed-

ings in federal court, which are satisfied by service that

conforms to FED. R. CIV. P. 5(b). See Watkins v. Rives, 125

F.2d 33, 40 (D.C. Cir. 1941); see also 4B Charles A. Wright

and Arthur R. Miller, Fed. Prac. & Proc. § 1145 (3d ed.

2002) (“Direct service as required by Rule 4 for process

is not required by Rule 5(b) since a civil contempt proceed-

ing is an extension of the main action and personal

jurisdiction need not be reasserted under Rule 4.”).

Although we have not addressed the question, the Third

Circuit has concluded that in evaluating whether notice

was sufficient for due process in a civil contempt proceed-

ing, the court should look to the notice requirements in

FED. R. CRIM. P. 42. See Remington Rand Corporation-

Delaware, 830 F.2d at 1258. Rule 42(a) requires that

notice be given “in open court, in an order to show cause,

or in an arrest order.” If the contempt occurs in open court,

then notice is easy. For indirect cases like this one, the

open-court option may not be available. In any case, the

focus must be on notifying the alleged contemnor, rather

than on the formalities of notification procedures. As a

result, we have recognized that “ ‘[t]he purpose of the

notice is to inform the contemnor of the nature of the

charges and enable the contemnor to prepare a defense.’ ”

American Fletcher Mortg., 688 F.2d at 519 (quoting United

States v. Powers, 629 F.2d 619, 625 (9th Cir. 1980) (cita-

tions omitted)).

Here, the record contains no indication that Integral ever

received notice of the contempt proceeding. All we have

are summary allegations from its adversary in the tran-

script and in a motion, neither of which can substitute for

proof of notice. The only hint of service in the record is

a copy indicating that there was service on the am-

bassador from Belarus, which we discuss below. Although

Autotech halfheartedly claims that it served Integral, the

18 No. 06-1718

latter denies receiving such service and no copy of the

service was made part of the record.

Both FED. R. CIV. P. 4 and 5 require that service be filed

with the court. See FED. R. CIV. P. 4(l) (“If service is not

waived, the person effecting service shall make proof

thereof to the court. If service is made by a person other

than a United States marshal or deputy United States

marshal, the person shall make affidavit thereof.”); FED.

R. CIV. P. 5 (“All papers . . . required to be served upon

a party, together with a certificate of service, must be

filed with the court within a reasonable time after ser-

vice . . . .”). We discussed the requirement of Rule 5 in

Russell v. City of Milwaukee, 338 F.3d 662 (7th Cir. 2003):

Although the word “require” connotes that the filing of

the certificate is mandatory, the rest of the Advisory

Committee Note indicates that the purpose of the

requirement is to aid the district court by creating a

standard method of proof that service was made; there

is no indication that the amendment was meant to

remove completely a district court’s discretion to find

that service has been made when a party fails to file a

certificate. The Advisory Committee Note states:

“Having such information on file may be useful for

many purposes, including proof of service if an issue

arises concerning the effectiveness of the service. The

certificate will generally specify the date as well as

the manner of service . . . .”

Id. at 666. While the court there held that a certificate of

service might not be necessary where service was not

otherwise contested or where there was proof that it had

been accomplished, it also noted that “[c]ertainly, if a

paper filed with the court does not contain the required

certificate of service, a court may disregard it.” Id. Here,

Autotech’s assertion that Integral had notice is not

supported by any record evidence—evidence that Autotech

had the burden of supplying.

No. 06-1718 19

Autotech’s attempt to serve Integral through the

Belarusian embassy does not fill this gap. In fact, service

through an embassy is expressly banned both by an

international treaty to which the United States is a party

and by U.S. statutory law. The Vienna Convention on

Diplomatic Relations, Apr. 18, 1961, 23 U.S.T. 3227,

prohibits service on a diplomatic officer. See Tachiona v.

United States, 386 F.3d 205, 222 (2d Cir. 2004) (“[W]e

decline to construe the FSIA as a license to serve process

on diplomatic and consular representatives, even as agents

for private, non-immune entities.”). This conclusion is

reinforced by the fact that service of process on an ambas-

sador is not authorized by the FSIA. See Alberti v.

Empresa Nicaraguense de la Carne, 705 F.2d 250, 253 (7th

Cir. 1993). In Alberti, we were referring to § 1608(a)(3),

which allows for service “to be addressed and dispatched

by the clerk of the court to the head of the ministry of the

foreign state concerned.” We noted that the House Report

had stated, “A second means [of service], of questionable

validity, involves the mailing of a copy of the summons

and complaint to the diplomatic mission of the foreign

state. Section 1608 precludes this method . . . . Service on

an embassy by mail would be precluded under this bill.” Id.

at 253 (quoting H.R. REP. 1487, 94th Cong., 2d Sess.,

reprinted in 1976 U.S.C.C.A.N. 6604, 6625 (emphasis

added)). This is no less true where an instrumentality of

a foreign state is involved.

In conclusion, there is no competent record evidence of

proper service of the contempt motion on Integral. The

only record of service was by a method that is not autho-

rized under FSIA and is inconsistent with the Vienna

Convention on Diplomatic Relations. This alone resolves

both the question whether Integral may now attack the

judgment (yes) and the question whether the judgment

may stand (no).

20 No. 06-1718

B. Writ of Execution

Although lack of proper notice is enough to dispose of the

present appeal, we deem it useful to address Integral’s

alternative arguments, as these points could conceivably

arise on remand. The first one we discuss is whether the

writ of execution is valid. We review the questions of

immunity from execution under the FSIA de novo. See Af-

Cap, Inc. v. Chevron Overseas (Congo) Ltd., 475 F.3d 1080,

1085-86 (9th Cir. 2007).

Prior to the enactment of the FSIA, the United States

gave absolute immunity to foreign sovereigns from the

execution of judgments. This rule required plaintiffs who

successfully obtained a judgment against a foreign sover-

eign to rely on voluntary repayment by that State. Con-

necticut Bank of Commerce v. Republic of Congo, 309 F.3d

240, 252 (5th Cir. 2002). The FSIA codified this practice

by establishing a general principle of immunity for

foreign sovereigns from execution of judgments: “[T]he

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.” 28

U.S.C. § 1609. This immunity extends to the instrumental-

ities of a foreign state. Em Ltd. v. Republic of Argentina,

473 F.3d 463, 472 (2d Cir. 2007). On the other hand,

in keeping with its general pattern, the FSIA also recog-

nizes exceptions to this immunity, “modif[ying] the rule

barring execution against a foreign state’s property by

‘partially lowering the barrier of immunity from execution

so as to make this immunity conform more closely with the

provisions on jurisdictional immunity in the bill.’ ” Con-

necticut Bank of Commerce, 309 F.3d at 252 (quoting H.R.

REP. 94-1487 at 27 (1976) (emphasis added)). Although

there is some overlap between the exceptions to jurisdic-

tional immunity and those for immunity from execution

and attachment, there is no escaping the fact that the

No. 06-1718 21

latter are more narrowly drawn. See De Letelier v. Repub-

lic of Chile, 748 F.2d 790, 798-99 (2d Cir. 1984).

Subsections 1610(a) and (d) provide general exceptions

to the immunity of a foreign state from execution of a

judgment, while subsection 1610(b) adds additional

exceptions for instrumentalities of a foreign state. See

Connecticut Bank of Commerce, 309 F.3d at 253. In

keeping with the FSIA’s overall design, “[t]he protections

applicable to assets of instrumentalities vary from those

applicable to the assets of the foreign states themselves.”

Em Ltd., 473 F.3d at 472. As the Second Circuit explained

the difference:

Under subsections 1610(a) and (d), assets of a foreign

state can be attached only if the assets sought to be

attached are “used for a commercial activity in the

United States.” But under subsection 1610(b), which

concerns agencies and instrumentalities of foreign

states, creditors may attach “any property in the

United States of an agency or instrumentality of a

foreign state engaged in commercial activity in the

United States,” 28 U.S.C. § 1608(b) (emphasis added).

Em Ltd., 473 F.3d at 472-73; see also Connecticut Bank of

Commerce, 309 F.3d at 252.

Even if the theoretical power to attach assets of Integral

that are found within the United States exists (which is all

that § 1610 promises), that is not enough to win the day

for Autotech. Its effort to secure payment fell short on

much more basic points. First is the question whether

it identified any specific property on which it wished to

execute its judgment. The FSIA says that immunity from

execution is waived only for specific “property.” As a result,

in order to determine whether immunity from execution or

attachment has been waived, the plaintiff must identify

specific property upon which it is trying to act. E.g., Af-

Cap, Inc., 383 F.3d at 367. A court cannot give a party a

22 No. 06-1718

blank check when a foreign sovereign is involved: property

belonging to the sovereign itself, or a different instrumen-

tality, may still enjoy immunity while property of the

instrumentality that is in the case may not. The only way

the court can decide whether it is proper to issue the

writ is if it knows which property is targeted.

It is also of no small moment that the FSIA authorizes

execution only against properties “in the United States.”

See Richmark Corp. v. Timber Falling Consultants, 959

F.2d 1468, 1477 (9th Cir. 1992) (“It is true that section

1610 does not empower United States courts to levy on

assets located outside the United States.”); Fidelity

Partners, Inc. v. Philippine Export and Foreign Loan

Guarantee Corp., 921 F.Supp. 1113, 1119 (S.D.N.Y. 1996)

(“Under the FSIA, assets of foreign states located outside

the United States retain their traditional immunity from

execution to satisfy judgments entered in United States

courts.”); see also Af-Cap, Inc., 383 F.3d at 367 (“[U]nder

§ 1610(a) of the FSIA, a court is prohibited from executing

against the property of a foreign state unless that prop-

erty is: (1) in the United States; and (2) used for com-

mercial activity in the United States.”). The FSIA did not

purport to authorize execution against a foreign sover-

eign’s property, or that of its instrumentality, wherever

that property is located around the world. We would need

some hint from Congress before we felt justified in adopt-

ing such a breathtaking assertion of extraterritorial

jurisdiction. See, e.g., Small v. United States, 544 U.S. 385,

388-89 (2005) (noting “the legal presumption that Con-

gress ordinarily intends its statutes to have domestic, not

extraterritorial, application”). As cases like Pasquantino v.

United States, 544 U.S. 349 (2005), illustrate, the pre-

sumption against extraterritorial effect is not absolute

or rigid. Nor, as Small acknowledged, is there some kind

of “clear statement” rule under which extraterritorial

No. 06-1718 23

application follows only if Congress says so in no uncertain

terms. If, however, as here, there is an absence of “statu-

tory language, context, history, or purpose” indicating that

Congress was legislating with the world in mind, the

presumption is sound. Small, 544 U.S. at 391.

This is undoubtedly why, when considering whether the

tax and royalty obligations owned by the Republic of

Congo were exempt from immunity from execution under

§ 1610(a), the Fifth Circuit tried to identify whether the

situs of those obligations was in the United States. Af-Cap

Inc., 383 F.3d at 371-73. In our case, Autotech frankly

admitted that it intended to use the writ to levy against

assets outside the United States. There is a procedure

for doing so, but Autotech did not use it. If assets exist in

another country, the person seeking to reach them must

try to obtain recognition and enforcement of the U.S.

judgment in the courts of that country. If that effort is

successful, then those courts can use their powers to

assure enforcement of the judgment. Here, not only did

Autotech fail to identify any assets in the United States

that Integral had, it freely admitted that it was not try-

ing to reach any such assets. Under the circumstances,

we must conclude that there was nothing that the writ of

execution could validly reach.

C. Validity of the Contempt Judgment

Integral also asserts that Autotech failed to carry its

burden of proof to show that it was in contempt of the

Agreed Order. We review a district court’s decision on a

contempt motion for abuse of discretion and will not

reverse “ ‘unless the result was clearly erroneous or unless

we find an abuse of discretion by the district court.’ ”

D. Patrick, Inc. v. Ford Motor Co., 8 F.3d 455, 460 (7th Cir.

1993) (quoting Laborers’ Pension Fund v. Dirty Work

Unltd., Inc., 919 F.2d 491, 494 (7th Cir. 1990)). On this

24 No. 06-1718

point, too, we find that Integral has the better of the

argument.

“In order to prevail on a contempt petition, the com-

plaining party must demonstrate by clear and convincing

evidence that the respondent has violated the express

and unequivocal command of a court order.” D. Patrick,

8 F.3d at 460 (emphasis in original). Autotech got off on

the wrong foot by failing to comply with the requirements

set in the Local Rules of the Northern District of Illinois

for this type of motion. Those rules require that “[t]he

affidavit upon which [the] notice of motion or order to

show cause is based shall set out with particularity the

misconduct complained of, the claim, if any, for damages

occasioned thereby, and such evidence as to the amount of

damages as may be available to the moving party.” N.D.

ILL. LOCAL RULE 18(A) (1997). In so doing, the local rules

not only notify the alleged contemnor of the charges

against her but also ensure that the party alleging con-

tempt has entered competent evidence into the record.

Autotech did not submit the required affidavit with its

motion for contempt. One consequence of this failure

was that it neglected to provide enough information to

carry its burden of proof. As we noted at the outset, the

only proof Autotech submitted was the rather incoherent

sentence in Vecher’s letter, which said “While have

business with ordinary buyers (by the way, Mr.

Scornavacca is one of them) making a buying/selling

contract with them is sufficient, moreover that in this

case the volumes of purchases ordered are scanty and do

not influence the situation at the market.” No reasonable

fact-finder could conclude that this statement clearly

and convincingly showed that Integral was admitting

that it was engaged in prohibited sales. It is impossible

to know what the phrases “have business with ordinary

buyers” or “making a buying/selling contract with them”

mean and whether they refer to current or past behavior.

No. 06-1718 25

While Vecher’s letter may be relevant to the question

whether Integral violated its obligations under the Agreed

Order, it is not sufficient on its own to sustain Autotech’s

burden.

Autotech also offered no evidence supporting any

particular level for the contempt sanction. “Civil contempt

sanctions are designed for the dual purpose of compelling

compliance with a court order and compensating the

complainant for losses caused by contemptuous actions.”

Tranzact Tech., Inc. v. 1Source Worldsite, 406 F.3d 851,

856 (7th Cir. 2005). The sanctions must relate to one of

these two purposes:

When the purpose of sanctions in a civil contempt

proceeding is compensatory, a fine, payable to the

complainant, must be based on evidence of actual loss.

When the purpose is to make the defendant comply,

the court must consider the “character and magnitude

of the harm threatened by continued contumacy, and

the probable effectiveness of any suggested sanction

in bringing about the result desired.”

South Suburban Housing Center v. Berry, 186 F.3d 851,

854 (7th Cir. 1999) (quoting United Mine Workers v. Gibbs,

330 U.S. 258, 304 (1947)). The amount of the sanction

must be supported in the record. See id. Here, the record

was silent on this central point. Autotech asked for a

sanction in the amount of $20,000 per day just because, as

its lawyer put it, “in this original RICO [action] we had a

complaint for $10 million which we dismissed . . . based

upon this [global settlement] order. We’re talking about

millions of dollars of goods.” The court reduced the fine to

$5,000 per day because it thought that it would balloon out

of control: “[a] hundred days and we’re up to $20 million.”

Nowhere was there evidence of either the actual losses

Autotech was suffering or what it might take to ensure

Integral’s compliance. Under the circumstances, it was

26 No. 06-1718

an abuse of discretion to find Integral in contempt and to

set a fine of $5,000 per day.

IV

In summary, we conclude that the district court had

subject matter jurisdiction over both the original case and

the contempt proceedings that grew out of it. For several

reasons, we also conclude that Integral is entitled to

appeal from the judgment in excess of $18 million against

it for that alleged contempt. Finally, we conclude that the

judgment cannot stand, because of flaws in service, the

lack of specificity of the property to be covered by the writ

of execution, and the lack of evidence supporting the

finding of contempt and the amount of the judgment. We

therefore VACATE the contempt judgment and the writ of

execution and REMAND for further proceedings con-

sistent with this opinion.

A true Copy:

Teste:

________________________________

Clerk of the United States Court of

Appeals for the Seventh Circuit

USCA-02-C-0072—8-29-07