Opposition Brief — Slade v. United States of Mexico

-

a

Supreme Court, U.S.

FILED

NOV 26 1986

JOSEPH F. SPANIOL, JR.

CLERK

No. 86-710

IN THE

Supreme Court of the United States

Octrosper Term, 1986

EDWIN SLADE,

¥.

Petitioner,

THE UNITED STATES OF MEXICO,

Respondent.

Own Perrrion For A WRIT OF CERTIORARI

TO THE Unrrep STATES CourT OF APPEALS

For tHe District oF COLUMBIA

RESPONDENT'S BRIEF IN OPPOSITION

ADLAI S. HARDIN, Jr.

| Chase Manhattan Plaza

New York, New York

(212) 530-5000

Counsel for Respondent

10005

i

QUESTION PRESENTED

Does the Foreign Sovereign Immunities Act of 1976 apply

retroactively to confer subject maiter jurisdiction over the

United States of Mexico with respect to actions transacted

between 1922 and 1951?

TABLE OF CONTENTS

GOURDS PI a iecisciesitenncictahincenictintcameccbientnien

TAGES CP FI oo icccoctieticd tet le eee

| EEE TA Ra

et ht a Cen Sa Ee

REASONS FOR DENIAL OF THE WRIT..........00.0.00.00cccccccceeeeees

THE QUESTION PETITIONER SteKS TO RAtse IS

PLAINLY WitHOUT Merit Becaust Mexico

WAS ABSOLUTELY IMMUNE FROM SUIT IN THE

UNITED STATES Prior TO THE PASSAGE OF THE

FOREIGN SOVEREIGN IMMUNITIES ACT OF 1976

THe Decision Betow, Wuicn Correctty

DECLINED RETROACTIVE APPLICATION OF THE

FOREIGN SOVEREIGN IMMUNITIES ACT OF

1976, NeirHer CONFLICTS witH THE Dect-

SIONS OF OTHER FEDERAL CouRTS Nor

PRESENTS AN UNSETTLED Issut OF LAW THAT

THIS COURT SHOULD RESOLVE ....00..0 0.

nF RE AIT I rs I En

TABLE OF AUTHORITIES

CASES ~

Alfred Dunhill of London, Inc. v. Republic of Cuba,

I ata acninsiomisninnsiedddecenanetwssaseas

Berizzi Bros. Co. v. S.S. Pesaro, 27\ U.S. 562 (1926).

Chisholm v. Georgia, 2 Dall. 419 (U.S. 1793) .............

Corporacion Venezolana de Fomento v. Vintero Sales

Corp., 477 F. Supp. 615 (S.D.N.Y. 1979, aff'd in

part and rev‘d in part, 629 F.2d 786 (2d Cir. 1980),

cert. denied, 449 U.S. 1080 (1981) ........ ee.

Edelman v. Jordan, 415 U.S. 651 (1974)...

Et Ve Balik Kurumu v. B.N.S. Int’l Sales Corp., 25

Misc. 2d 299, 204 N.Y.S.2d 971 (Sup. Ct. 1960),

aff'd, 17 A.D. 2d 927, 233 N.Y.S.2d 1013 (Ist

i acinied cians icucralbahesskessaesdnibeenthentaese

In re Investigation of World Arrangements, Etc., 13

ee I BIE D viasvcdcsscinccvecsssnconteccessosseses

Jackson v. The People’s Republic of China, 596

F.Supp. 386 (N.D. Ala. 1984), aff'd 794 F.2d

cick acanecnshoancnnvensnacns

Lamont v. Travelers Insurance Co., 281 N.Y. 362, 24

ta a ia c sn sneubdveoonadannseceets

National City Bank vy. Republic of China, 348 U.S.

aris acshcehahaLodquniecsasatcaeushesionossane

Pennhurst State School & Hosp. v. Halderman, 465

arch ci sbseaceivnieaxngneriaasastisasnsicvateeatacesensss

The Schooner Exchange v. McFaddon, \\ U.S. (7

I ih sa ciiennmahienecieas

Victory Transport Inc. v. Comisaria General de

Abastecimientos y Transportes, 336 F.2d 354 (2d

Cir. 1964), cert. denied, 381 U.S. 934 (1965) .:........

STATUTES

Ss Aes so sapavapnddudznonenane

PAGE

passim.

TREATISES, LAW REVIEWS

Delaume, Public Debt and Sovereign Immunity: The

Foreign Sovereign Immunities Act of 1976, 71 Am.

Bs Se a I ETB soars decir stiasccawivpcccennene

Note, Sovereign Immunity, 18 Harv. Int'l L.J. 42

von Mehren, The Foreign Sovereign Immunities Act

of 1976, 17 Colum. J. Trans. L. 33 (1978)...

6 Whiteman, Digest of International Law, § 20

SM iiss sieskich ten xcatatas ised chs tinsdapichebussssVdcueanvdacanesiervnes

OTHER AUTHORITIES

26 Department of State Bulletin, 678 (1952) 0.0.0.0...

PAGE

No. 86-710

IN THE

SUPREME COURT OF THE UNITED STATES

October Term, 1986

EDWIN SLADE,

Petitioner,

V.

THE UNITED STATES OF MEXICO,

Respondent.

ON PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE DISTRICT OF COLUMBIA

RESPONDENT'S BRIEF IN OPPOSITION

Respondent the United States of Mexico, defendant be-

low, respectfully requests that this Court deny the petition for

writ of certiorari seeking review of the decision in this case by

the Court of Appeals for the District of Columbia.

OPINIONS BELOW

The opinion of the District Court granting defendant’s

motion for summary judgment is reported at 617 F. Supp. 351

(D.D.C. 1985). The Court of Appeals affirmed on the opinion

below, 790 F. 2d 163 (D.C. Cir. 1986). Because the District

Court opinion is not accurately reproduced at pages 11-47 of

the Petition, citations in this brief will be to the published

opinion of the District Court at 617 F. Supp. 351.

STATEMENT OF THE CASE

The material facts are set forth in the opinion of the

District Court, 617 F. Supp. at 351-55, based on affidavits and

documents submitted in support of the motion for summary

judgment, and have not been contested by petitioner (see 617

F. Supp. at 354, footnote 9). The facts may be briefly

summarized.

Petitioner brought this action to recover the face amount of

certain “Receipts for Interest in Arrears” which he claims

(erroneously) were issued by respondent pursuant to agree-

ments made in 1922. The history of these “receipts” is

traceable to the period from 1886 to 1910, when the Mexican

government, certain municipalities and privately owned rail-

roads issued bonds which were sold worldwide. In 1914

payments on all of these bonds were suspended as a result of

civil unrest in Mexico. Subsequently, a voluntary committee of

international bankers (the ““Committee”’) was organized for the

purpose of negotiating resumption of payment of the bonds

(617 F. Supp. at 351-52).

The Committee and Mexico ultimately reached an agree-

ment in 1922 which included a waiver of interest and arrears of

interest due the bondholders as of January 2, 1923. The 1922

agreement also included a plan under which the government of

Mexico would pay to the Committee sums sufficient to retire

such unpaid interest by 1968, and a provision under which

holders of coupons for unpaid interest on the bonds could

deposit the coupons with the Committee and, pursuant to a

parate agreement with consenting bondholders, the Com-

mittee would issue “Receipts for Interest in Arrears”. In the

event that Mexico was unable to make sufficient payments to

the Committee under the 1922 agreement (as amended in

1925), the depositors could recover their interest coupons from

the Committee and resume their contractual rights against the

original public and private issuers of the bonds (617 F. Supp. at

352-53).

The Committee received more than $45 million from

Mexico pursuant to the 1922 plan and 1925 modification.

However, in 1928 Mexico again suspended payments to the

Committee because of social and economic conditions tn that

country. In 1942 and 1946 the Committee negotiated agree-

ments with Mexico under which holders of “Receipts for

Interest in Arrears” could receive payments, at less than face

value, directly fom Mexico (617 F. Supp. at 353).

The District Court noted that, in actions commenced in

1932 and 1952, the New York state courts made the following

findings of fact and conclusions of law: (1) the Committee was

not an agent of Mexico, (11) the government of Mexico was not

a party to the separate agreement made in 1922 between the

Committee and bondholders pursuant to which the “Receipts

for Interest in Arrears” were issued, (111) the coupons deposited

with the Committee in exchange for the receipts had no

substantial monetary value, (iv) the Committee was authorized

to destroy the coupons after publication of appropriate notice,

and (v) the Committee was thereupon discharged of any

further obligation to the receiptholders or bondholders (617 F.

Supp. at 354). The District Court concluded that:

Based on the foregoing facts, [footnote omitted | it is

clear that, as a matter of substantive contract law, plaintiff

cannot recover money due on receipts for interest arrears

issued under the 1922 Deposit Agreement. However,

Mexico has not moved to dismiss or for summary judg-

ment on this ground. Rather, it argues that this Court lacks

jurisdiction over it under the doctrine of sovereign immu-

nity (617 F. Supp. at 354-55).

The District Court granted Mexico’s summary judgment

motion on the ground that the Foreign Sovereign Immunities

Act (“FSIA”) could not be applied retroactively to confer

subject matter jurisdiction over Mexico.* After noting that the

* Respondent also argued below that dismissal was required because

(i) Mexico’s acts in negotiating the 1922, 1925, 1942 and 1946

agreements with the Committee did not constitute “commercial

activity” under the FSIA, and (ii) the requisite “minimum con- .

tracts” are not present to support jurisdiction in the United States.

The District Court did not reach these issues.

4

FSIA “provides the sole basis for subject matter jurisdiction

over suits against foreign states [citations omitted]” (617 F.

Supp. at 355), the Court observed that retroactive application

of statutes is disfavored (617 F. Supp. at 356), and that prior to

1952 “the United States recognized and adhered to the theory

of absolute sovereign immunity” (617 F. Supp. at 357).

Because the District Court found no support for retroactive

application in the statutory language and legislative history of

the FSIA, and because applying the FSIA to the underlying

transactions would prejudice the antecedent rights of Mexico,

the District Court held that

Retroactive application of the Act would repudiate the

immunity of foreign sovereigns for transactions predating

1952 and thus be inconsistent with Congress’ intent not to

affect the substantive law of liability.

(617 F. Supp. at 357) and that it would be “inequitable to

divest Mexico of the absolute immunity it enjoyed in 1922 by

applying the FSIA to this case” (617 F. Supp. at 358).

REASONS FOR DENIAL OF THE WRIT

{

THE QUESTION PETITIONER SEEKS TO

RAISE IS PLAINLY WITHOUT MERIT BE-

CAUSE MEXICO WAS ABSOLUTELY IMMUNE

FROM SUIT IN THE UNITED STATES PRIOR

TO THE PASSAGE OF THE FOREIGN SOVER-

EIGN IMMUNITIES AC} OF 1976

The doctrine of foreign sovereign immunity provides that

no state may claim jurisdiction over another. Under the

traditional theory, a foreign sovereign’s immunity from suit was

absolute unless the sovereign consented to suit. 6 Whiteman,

Digest of International Law, § 20 at 553 (1968); Note, Sover-

eign Immunity, 18 Harv. Int'l L.J. 429 (1977); Lamont v.

Travelers Insurance Co., 281 N.Y. 362, 369, 24 N.E.2d 81, 82

(1939). The United States first adopted this traditional rule in

5

the 19th century in The Schooner Exchange v. McFaddon, \\

U.S. (7 Cranch) 116 (1812). Although The Schooner Ex-

change concerned the seizure of a military vessel, the principle

of absolute immunity was later extended to all acts, including

commercial acts, of a foreign state. Berizzi Bros. Co. v. S.S.

Pesaro, 271 U.S. 562 (1926). ‘

It was not until 1952 that the “restrictive” theory of

sovereign immunity—which postulates that a foreign sovereign

may engage in various forms of conduct that are not within its

governmental functions and, consequently, are not deserving of

immunity—was formally adopted by the Executive Branch with

thé issuance of the “Tate Letter”. 26 Department of State

Bulletin, 678 (1952), reprinted in Alfred Dunhill of London,

Inc. v. Republic of Cuba, 425 U.S. 682, 711-15 (1976).

The Tate Letter provided little guidance for the application

of its ““governmental/private act” dichotomy, however. Con-

sequently, courts applied a variety of tests to determine the

immunity question. See, e.g., Et Ve Balik Kurumu v. B.N.S.

Int’s Sales Corp., 25 Misc. 2d 299, 303, 204 N.Y.S.2d 971, 977

(Sup. Ct. 1960), aff'd, 17 A.D.2d 927, 233 N.Y.S.2d 1013 (Ist

Dep’t 1962); In re Investigation of World Arrangements, Etc.,

13 F.R.D. 280, 290-91 .~D.D.C. 1952). But even after the

advent of the “restrictive” theory in 1952, the courts continued

to regard the issuance of public debt as a governmental

function and therefore subject to the rule of immunity. See,

e.g., National City Bank v. Republic of China, 348 U.S. 356

(1955); victory Transport Inc. v. Comisaria General de

Abastecimientos y Transportes, 336 F.2d 354 (2d Cir. 1964),

cert. denied, 381 U.S. 934 (1965).

It was only through the enactment of the FSIA in 1976 that

Congress altered the law and for the first time characterized the

issuance of public debt as a commercial activity. Congress

rejected the traditional approach, and decided that the issuance

of public debt for foreign sovereigns should be treated as a

commercial transaction, not subject to the doctrine of sovereign

6

immunity. See Delaume, Public Debt and Sovereign Immunity:

The Foreign Sovereign Immunities Act of 1976, 7\ Am J Antl L.

399, 405 (July 1977); von Mehren, The Foreign Sovereign

Immunities Act of 1976, 17 Colum. J. Trans. L. 33, 49 (1978)

n.69,

Petitioner relies on Chisholm v. Georgia, 2 Dall. 419 (U.S.

1793) for the proposition that a foreign sovereign may be sued

by a citizen ( Petition at 6). Chisholm, however, decided the

issue of state sovereign immunity rather than the issue of

foreign sovereign immunity. Moreover, in Edelman v. Jordan,

415 U.S. 651, 662 (1974), this Court recalled that the Chisholm

decision “literally shocked the Nation. Sentiment for passage

of a constitutional amendment to override the decision rapidly

gained momentum, and five years after Chisholm the Eleventh

Amendment was officially announced by President John

Adams.” The Eleventh Amendment overruled Chisholm, “but

this Court has recognized that its greater significance lies in its

affirmation that the fundamental principle of soverign immu-

nity limits the grant of judicial authority in Article III”.

Pennhurst State School & Hosp. v. Halderman, 465 U.S. 89, 98

(1984).

The principle of sovereign immunity is reiterated in the

other case cited by petitioner, Lamont v. Travelers Insurance

Co., 281 N.Y. 362, 363, 24 N.E.2d 81, 82 (1939) ( Petition at

4), which stated that “[t]he Government of Mexico is, of

course, immune from suit here.” Recovery for repudiation of a

contract or for injury inflicted without any justification by a

foreign sovereign could not be granted by the courts without the

consent of that sovereign (/d. at 84). This doctrine was not

changed until the passage of the FSIA in 1976.

Thus, there can be no question that under the common law

doctrine of sovereign immunity as it existed prior to 1976,

respondent is absolutely immune from suit in any court in the

United States based on the claim asserted by petitioner in this

action. Even under the “restrictive” theory of sovereign

immunity announced by the State Department in 1952, and

even if petitioner's “receipts” constituted public debt obliga-

-

tions of the Mexican Government (which they do not), this

action would be barred because prior to the FSIA the courts

held that public loans constituted a governmental activity to

which immunity would continue to attach.

THE DECISION BELOW, WHICH CORRECTLY

DECLINED RETROACTIVE APPLICATION OF

THE FOREIGN SOVEREIGN IMMUNITIES ACT

OF 1976, NEITHER CONFLICTS WITH THE

DECISIONS OF OTHER FEDERAL COURTS

NOR PRESENTS AN UNSETTLED ISSUE OF

LAW THAT THIS COURT SHOULD RESOLVE

The decisions of the District Court and the Court of

Appeals rejecting retroactive application of the FSIA provisions

governing subject matter jurisdiction are in accord with the

other federal courts that have considered the issue. Corporacion

‘enezolana de Fomento vy. Vintero Sales Corp., 477 F. Supp.

615 (S.D.N.Y. 1979), aff'd in part and rev'd in part, 629 F.2d

786, 791 (2d Cir. 1980), cert. denied, 449 U.S. 1080 (1981):

Jackson v. The People’s Republic of China, 596 F. Supp. 386

(N.D. Ala. 1984), aff'd, 794 F.2d 1490 ( Lith Cir. 1986). The

FISA has never been used by any court to confer subject matter

jurisdiction over pre-1952 transactions. Thus, there is no split

in authority for this Court to resolve, and no need for this Court

to address the issue.

For more than a century, the United States granted foreign

nations absolute immunity from suit in the nation’s courts

(Jackson, supra, at 1492). This doctrine was not questioned

until the Executive Branch adopted a more “restrictive” theory

of sovereign immunity in 1952. The United States should not,

by a change in its domestic law, retroactively abrogate the

internationally accepted principle of sovereign immunity

In short, there ts no reason for this Court to grant the

petition for certioran in this case. Petitioner's claim against

respondent ts patently defective and subject to summary dis-

missal on at least four separate grounds. The decisions of the

courts below in this action are consistent with all of the cases

which have considered the issue, and there ts no authority in

support of petitioner's contention. And finally, the opinion of

the District Court n rejecting retroactive application of the

FSIA reflects the policy of the Unned States Government as set

forth in the “Statement of Interest” signed by attorneys of the

Department of State and the Department of Justice and filed in

Jackson v. The People’s Republic of China, supra

CONCLUSION

The petition for certiorari shouid he denied

Respectfully submitted,

Apiat S. Harpy, Jr

| Chase Manhattan Plaza

New York. New York [0005

(212) $30-.S000

Counsel for Respondent

November 26, 1986

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