Amicus Curiae Brief — Bolivarian Republic Venezuela v. Helmerich & Payne Int'l Drilling Co., 136 S. Ct. 1242 (2016) (No. 15-423)

by i Cae OE.)

MAY 24 2016

In the Supreme Court of the Aueh States

BOLIVARIAN REPUBLIC OF VENEZUELA, ET AL.,

PETITIONERS

V.

HELMERICH & PAYNE INTERNATIONAL DRILLING Co.,

ET AL.

ON PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE DISTRICT OF COLUMBIA CIRCUIT

BRIEF FOR THE UNITED STATES AS AMICUS CURIAE

DONALD B. VERRILLI, JR.

General

Principal

Attorney

EDWIN S. KNEEDLER

Deputy Solicitor General

GINGER D. ANDERS

Assistant to the Solicitor

BRIAN J. EGAN Department of Justice

Department State 8 sap pe

0 1 rie

Washington, D.C. 20520 (202) 514-2217 *

QUESTIONS PRESENTED

The Foreign Sovereign Immunities Act of 1976, 28

U.S.C. 1330, 1441(d), 1602 et seq., provides that a

foreign state and its instrumentalities are immune

from suit in United States courts, subject to limited

statutory exceptions. The expropriation exception

provides that a foreign state is not immune from any

suit “in which rights in property taken in violation of

international law are in issue” and a specified com-

mercial-activity nexus to the United States is present.

28 U.S.C. 1605(a)(3). The questions presented are:

1. Whether the complaint non-frivolously alleged

that property was “taken in violation of international

law,” where petitioners seized the property of a corpo-

ration that is a national of the foreign state in order to

discriminate against the corporation’s United States

parent;

2. Whether the complaint non-frivolously alleged

that the United States parent corporation placed

“rights in property” in issue within the meaning of

Section 1605(a)(3); and

3. Whether a court lacks jurisdiction under Section

1605(a)(3) only when the plaintiff’s claim that it has

placed in issue “rights in property taken in violation of

international law” is frivolous or completely devoid of

merit.

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TABLE OF CONTENTS

Page

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AA 1

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I. This Court should grant review to determine

the proper standard for establishing jurisdiction

under the F'SIA’s expropriation exception 7

A. The court of appeals’ decision is wrong 7

B. The proper standard for establishing

jurisdiction under the expropriation exception

II. The court of appeals’ conclusion that respondents’

expropriation claims are not frivolous does not

warrant review PR AES 17

A. The first question presented, co: i

whether H&P-V’s allegations satisfy Section

1605(a)(3), does not warrant review. 18

B. The second question presented, concerning

whether H&P-IDC’s allegations satisfy

Section 1605(a)(3), does not warrant review. 21

„ ——= 7d ˙ tiie 23

TABLE OF AUTHORITIES

Cases:

Abelesz v. Magyar Nemzeti Bank, 692 F.3d 661

/ EC Nd ae eee RET eR 14, 19

Agudas Chasidei Chabad of U.S. v. Russian Fed’n,

528 F.3d 934 (D.C. Cir. 2008) 4,11

Arbaugh v. Tc Corp., 546 U.S. 500 (2006). . 13

Argentine Republic v. Amerada Hess Shipping

JJ rr 7

Banco Nacional de Cuba v. Farr, 383 F.2d 166

c . ͤ 18

Cases—Continued: Page

Banco Nacional de Cuba v. Sabbatino, 307 F.2d

845 (2d Cir. 1962), rev’d on other grounds by 376

r 4, 18, 19

Bell v. Hood, 327 U.S. 678 (1946) . 4, 10, 11

Case Concerning the Barcelona Traction, Light &

Power Co. (Belg. v. Spain), 1970 1.C.J. 3

ES a a 19, 22, 23

Cutter v. Wilkinson, 544 U.S. 709 (2005) 20

de Sanchez v. Banco Cent. de Nicar., 770 F.2d 1385

r . —¼⅞èé . 14, 18

Dole Food Co. v. Patrickson, 538 U.S. 468 (2003) 21

First Nat'l City Bank v. Banco Para El Comercio

Exterior de Cuba, 462 U.S. 611 (1983) 15

Franchise Tax Bd. v Construction Laborers

Vacation Trust, 463 U.S. 1 (1983) 12

Mezerhane v. Repiblica Bolivariana de Venez.,

785 F.3d 645 (11th Cir. 2015), cert. denied, 136

r 14, 19

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

r 16

Owens v. Revublic of Sudan, No. 01-2244, 2016

WL 1170859 (D.D.C. Mar. 23, 2016). . 17

Permanent Mission of India to the U.N. v. City of

1442 8, 9, 22

Phoeniz Consulting Inc. v. Republic of Angl.,

216 F. 3d 36 (D.C. Cir. 2000 .. . 8

Robinson v. Government of Malay., 269 F.3d 133

ee 14, 17

Saudi Arabia v. Nelson, 507 U.S. 349 (1993) 7

Shapiro v. McManus, 136 S. Ct. 450 (2015) .................. 21

Cases—Continued: Page

Siderman de Blake . Republic of Arg., 965 F.2d

699 (9th Cir. 1992), cert. denied, 507 U.S. 1017

ee 15, 19

Simon v. Republic of Hung., 812 F.3d 127

. 12, 16, 19

United States v Belmont, 301 U.S. 324 (1937).............. 19

Verlinden B. N v. Central Bank of Nigeria,

. —.. 7, 9, 10, 13, 16

Zappia Middle E. Constr. Co v. Emirate of Abu

Dhabi, 215 F.3d 247 (2d Cir. 2000) 14

Statutes:

Foreign Sovereign Immunities Act of 1976,

28 U.S.C. 1330, 1441(d), 1602 et se . 1

e x 7

EE T.. 1

RE 1,7

, een ee 3

9 ——— passim

e 8, 22

F CC EE 17

Zr 17

. 17

r - r 10

D . —%ö, e — 11

eee ee eee eee 15

Miscellaneous:

H.R. Rep. No. 1487, 94th Cong., 2d Sess. (1976) ...... 9, 15

Restatement (Third) of Foreign Relations of the

EA m, 19

In the Supreme Court of the United States

No. 15-423

BOLIVARIAN REPUBLIC OF VENEZUELA, ET AL.,

PETITIONERS

U.

HELMERICH & PAYNE INTERNATIONAL DRILLING CO.,

ET AL.

ON PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE DISTRICT OF COLUMBIA CIRCUIT

BRIEF FOR THE UNITED STATES AS AMICUS CURIAE

INTEREST OF THE UNITED STATES

This brief is submitted in response to the Court’s

order inviting the Solicitor General to express the

views of the United States. In the view of the United

States, the petition for a writ of certiorari should be

granted, limited to the third question presented.

STATEMENT

1. The Foreign Sovereign Immunities Act of 1976

(FSIA), 28 U.S.C. 1330, 1441(d), 1602 et seq., defines

the scope of immunity from suit enjoyed by a foreign

state. The FSIA provides that a foreign state and its

agencies and instrumenialities are “immune from the

jurisdiction” of federal and state courts except as

provided by certain international agreements and by

the exceptions to immunity in Sections 1605-1607. 28

U.S.C. 1604; see 28 U.S.C. 1605-1607. The “expropria-

(1)

2

tion exception,” which is at issue in this case, provides

that “[a] foreign state shall not be immune from the

jurisdiction of courts of the United States or of the

States in any case * * * in which rights in property

taken in violation of international law are in issue,”

and there is a specified commercial-activity nexus to

the United States. 28 U.S.C. 1605(a)(3).

2. a. For many decades, respondent Helmerich &

Payne International Drilling Company (H&P-IDC), a

United States company, provided oil-drilling services

to petitioners (the Bolivarian Republic of Venezuela

and two state-owned corporations) through a wholly

owned subsidiary, most recently respondent Hel-

merich & Payne de Venezuela, C.A. (H&P-V). H&P-V

is incorporated under Venezuelan law. Pet. App. 3a-4a,

39a. By 2009, petitioners had failed to pay approxi-

mately $100 million owed to H&P-V for its drilling

services. In response, H&P-V disassembled its drill-

ing rigs after fulfilling its existing contractual obliga-

tions. Id. at 4a-5a.

In June 2010, petitioners blockaded H&P-V’s prop-

erties. Pet. App. 5a. Shortly thereafter, the Venezue-

lan National Assembly enacted a bill recommending

that then-President Hugo Chavez expropriate H&P-

V’s property. Id. at 6a. President Chavez issued an

expropriation decree the same day. /d. at 6a, 44a.

Petitioners “now use{] H&P-V’s rigs and other assets

in their] state-owned drilling business.” Id. at 8a.

b. Respondents filed this suit in the District Court

for the District of Columbia. Pet. App. 45a-46a. Re-

spondents alleged that petitioners had taken their

property in violation of international law, and that the

3

district court had jurisdiction over that claim pursuant

to Section 1605(a)(3).' Id. at 8a.

As relevant here, petitioners moved to dismiss on

the ground that respondents’ expropriation claims did

not fall within Section 1605(a)(3). Pet. App. 8a. The

parties agreed to brief certain threshold issues, in-

cluding whether “H&P-V is a national of Venezuela

under international law,” and “whether H&P-IDC has

standing to assert a taking in violation of international

law” based on Venezuela’s expropriation of H&P-V’s

property. Id. at 9a.

The district court granted the motion to dismiss

in part and denied it in part. The court dismissed

H&P-V’s expropriation claim because it determined

that H&P-V is a national of Venezuela. Pet. App. 49a-

59a, 91a; see id. at 12a (“(Gjenerally, a foreign sov-

ereign’s expropriation of its own national’s property

does not violate international law.”). But the court

declined to dismiss H&P-IDC’s expropriation claim,

reasoning that although H&P-IDC did not own the

property petitioners allegedly seized from H&P-V,

H&P-IDC asserted that petitioners effectively took its

interest in H&P-V as a going concern. Id. at 8la-90a.

3. The court of appeals affirmed in part and re-

versed in part. Pet. App. Ia-29a.

a. The court of appeals first addressed the stand-

ard for determining whether respondents’ claims fell

within the expropriation exception. Pet. App. IIa-12a.

' Respondents also alleged that petitioners had breached the

drilling contracts, and that the court had jurisdiction over that

claim under the FSIA’s commercial-activity exception. Pet. App.

8a; see 28 U.S.C. 1605(a)(2). Respondents’ contract claims are at

issue in No. 15-698. At the Court’s invitation, the United States is

separately filing an amicus brief in that case.

4

The court first rejected petitioners’ contention that

respondents’ claims did not fall within Section

1605(a)(3) because they did not describe a takling] in

violation of international law“ 28 U.S.C. 1605(a)(3);

Pet. App. lla. Relying on Bell v. Hood, 327 U.S. 678

(1946), and D.C. Circuit precedent, the court of ap-

peals stated that subject-matter jurisdiction “is not

defeated” by the possibility that a complaint “might

fail to state a cause of action on which petitioners

could actually recover.” Pet. App. lla; see Agudas

Chasidei Chabad of U.S. v. Russian Fed’n, 528 F.3d

934, 940-941 (D.C. Cir. 2008). The court stated that

“we will grant a motion to dismiss” for lack of jurisdic-

tion under the FSIA “on the grounds that the plaintiff

has failed to plead a ‘taking in violation of internation-

al law’ or has no ‘rights in property ... in issue’

only if the claims are ‘wholly insubstantial or frivo-

lous.“ Pet. App. IIa (citing Chabad, 528 F.3d at 943).

The court of appeals next held that H&P-V’s ex-

propriation claim was not frivolous. Pet. App. 12a-17a.

The court acknowledged that, under the so-called

domestic-takings rule, a foreign state’s expropriation

of its own national’s property does not violate interna-

tional law. Id. at 12a. But the court understood a pre-

FSIA Second Circuit decision to hold that interna-

tional law prohibits a state from expropriating the

property of a domestic corporation based on discrimi-

nation against the corporation’s foreign shareholders.

Id. at 13a-14a (discussing Banco Nacional de Cuba v.

Sabbatino, 307 F.2d 845, 861 (2d Cir. 1962), rev’d on

other grounds by 376 U.S. 398 (1964)). In light of

Sabbatino, and in the absence of “any decision from

any circuit that so completely forecloses H&P-V’s

discriminatory takings theory as to inescapably ren-

5

der the claim] frivolous and completely devoid of

merit,” the court of appeals held that H&P-V’s claim

“has satisfied this Circuit’s forgiving standard.” /d. at

16a (citation and internal quotation marks omitted).

The court of appeals likewise held that H&P-IDC’s

claim that its own “rights in property” had been taken

in violation of international law was not frivolous. Pet.

App. 17a-22a. The court noted that “shareholders

may have rights in corporate property” that are not

derivative of the corporation’s rights, id. at 20a, and

that H&P-IDC alleged that it had suffered “a total

loss of control over its subsidiary,” id. at 22a.

b. Judge Sentelle dissented in part. Pet. App. 30a-

36a. He disagreed with the court of appeals’ expro-

priation holdings, and he would have held that both

H&P-V and H&P-IDC had “failed to plead a taking in

violation of international law.” Id. at 34a.

DISCUSSION

In the first two questions presented, petitioners

challenge the court of appeals’ determination that

H&P-V’s and H&P-IDC’s expropriation claims may

proceed under Section 1605(a)(3). In the third ques-

tion presented, petitioners challenge the court’s use of

the frivolousness standard to determine whether

respondents had established jurisdiction under Sec-

tion 1605(a)(3). The Court should grant the petition

for a writ of certivrari, limited to the third question

presented.

We first address the third question presented be-

cause it concerns the appropriate standard for adjudi-

cating the issues addressed in the other two questions

presented—namely, whether respondents’ allegations

satisfy Section 1605(a)(3)’s jurisdictional requirements.

The court of appeals erred in holding that Section

6

1605(a)(3), which permits claims “in which rights in

property taken in violation of international law are in

issue,” is satisfied whenever a plaintiff makes merely

a non-frivolous allegation that the case places in issue

“rights in property taken in violation of international

law.” 28 U.S.C. 1605(a)(3). The court should have

examined whether respondents’ allegations actually

describe a “tak{ing] in violation of international law”

—that is, conduct that is prohibited by international

law—and whether respondents’ allegations actually

identify their own “rights in property” that were im-

paired as a result of petitioners’ conduct. The courts

of appeals are divided on the appropriate pleading

standard, and the question implicates important for-

eign-relations and uniformity concerns. This Court’s

review is warranted.

The Court should not grant plenary review with re-

spect to the other two questions presented. The court

of appeals held only that respondents’ allegations that

petitioners expropriated their property rights in viola-

tion of international law were not frivolous. Those

limited conclusions, which followed from the court’s

use of the erroneous frivolousness standard, do not

independently warrant review at this stage. That is so

regardless of the Court’s disposition of the pleading-

standard question. If this Court reviews the pleading

standard and concludes that the court of appeals

should have considered whether respondents’ allega-

tions actually describe “rights in property taken in

violation of international law,” then the Court should

permit the lower courts to undertake that inquiry in

the first instance. Conversely, if the Court affirms, or

declines to review, the court of appeals’ use of the

frivolousness standard, then there is no need for this

7

Court to review the court of appeals’ case-specific

application of that standard to respondents’ allega-

tions.

I. THIS COURT SHOULD GRANT REVIEW TO DETER-

MINE THE PROPER STANDARD FOR ESTABLISHING

JURISDICTION UNDER THE FSIA’S EXPROPRIATION

EXCEPTION

A. The Court Of Appeals’ Decision is Wrong

1. The FSIA provides that the district courts shall

have jurisdiction over actions against a foreign state

for “any claim for relief in personam with respect to

which the foreign state is not entitled to immunity

either under sections 1605-1607 of this title or under

any applicable international agreement.” 28 U.S.C.

1330(a). Sections 1605-1607, in turn, set forth the

specific standards governing whether a foreign nation

is entitled to sovereign immunity. See Verlinden B.V. v.

Central Bank of Nigeria, 461 U.S. 480, 488, 497 (1983).

Thus, “subject matter jurisdiction” in any action

against a foreign state “depends on the existence of

one of the specified exceptions to foreign sovereign

immunity.” Id. at 493; see Saudi Arabia v. Nelson,

507 U.S. 349, 355 (1993) (same); Argentine Republic v.

Amerada Hess Shipping Corp., 488 U.S. 428, 434

(1989) (same).

For that reason, “[ajt the threshold of every action

in a District Court against a foreign state, * * * the

court must satisfy itself that one of the exceptions

applies—and in doing so it must apply the detailed

federal law standards set forth in the Act.” Verlinden,

461 U.S. at 493-494. When the foreign state moves to

dismiss on the ground that the claim, as pleaded, does

not satisfy the requirements of the relevant exception

8

to immunity, the court must determine whether the

allegations are legally sufficient to satisfy those re-

quirements.” In Permanent Mission of India to the

United Nations v. City of New York, 551 U.S. 193

(2007) (Permanent Mission), for instance, this Court

determined whether, as a matter of law, the plaintiff’s

claim to enforce a tax lien under New York law fell

within Section 1605(a)(4), which creates an exception

to immunity for suits “in which * * * rights in im-

movable property situated in the United States are in

issue.” 28 U.S.C. 1605(a)(4). The Court first deter-

mined the scope of Section 1605(a)(4)’s reference to

“rights in * * * property,” concluding that it extend-

ed to non-ownership and non-possessory interests.

Permanent Mission, 551 U.S. at 198-199. The Court

then analyzed the content of the lien right asserted

under New York law, concluding that the tax lien en-

cumbered the right to convey the property at issue.

Ibid. The Court accordingly held that the lien-

enforcement suit “implicates ‘rights in immovable

property’” within the meaning of the FSIA exception.

Id. at 199. The Court thus determined that the claim

pleaded in the complaint was legally sufficient to fulfill

Section 1605(a)(4)’s requirements.

2. Using language parallel to that of Section

1605(a)(4), at issue in Permanent Mission, the expro-

priation exception to foreign sovereign immunity

permits a suit against a foreign state in any case “in

* When the foreign state challenges the factual basis for jurisdic-

tion, by contrast, the court must go beyond the pleadings and

resolve disputed issues of fact necessary to determine jurisdiction.

Phoeniz Consulting Inc. v. Republic of Anl., 216 F.3d 36, 40 (D.C.

Cir. 2000). This case involves a legal, not factual, challenge to

jurisdiction under the expropriation exception.

9

which rights in property taken in violation of interna-

tional law are in issue,” and there is a specified com-

mercial-activity nexus to the United States. 28 U.S.C.

1605(a)(3). Apart from the nexus requirement, which

is not at issue in this case, Section 1605(a)(3) contains

two primary substantive requirements. First, the

case must be one in which “rights in property” are “in

issue”—in other words, the complaint must identify

the plaintiff’s property rights that serve as the basis

for its claims. See Permanent Mission, 551 U.S. at

198-199. Second, there must have been a takling! in

violation of international law.” For a court to “satisfy

itself” that a claim comes within Section 1605(a)(3),

Verlinden, 461 U.S. at 494, it must determine that the

plaintiff’s allegations fulfill those requirements, Per-

manent Mission, 551 U.S. at 198-199.

Accordingly, a court evaluating its jurisdiction un-

der Section 1605(a)(3) must make a legal determina-

tion that the complaint places “in issue” property

rights that were “taken in violation of international

law.” The court must verify that the complaint con-

tains allegations that describe a taking prohibited by

international law.’ If the allegations are legally insuf-

ficient to describe such a violation—if, for instance,

the alleged taking constitutes only a violation of mu-

nicipal law—then the complaint has not placed “in

The legislative history provides guidance on the scope of the

inquiry, stating that It he term ‘taken in violation of international

law’ would include” certain well-established claims under interna-

tional expropriation law, such as “the nationalization or expropria-

tion of property without payment of the prompt adequate and

effective compensation required by international law,” and “tak-

ings which are arbitrary or discriminatory in nature.” H.R. Rep.

No. 1487, 94th Cong., 2d Sess. 19-20 (1976).

10

issue” rights in property “taken in violation of inter-

national law.” Similarly, if the allegations are legally

insufficient to establish that the plaintiff seeks to

vindicate its own rights in property, the complaint has

not placed “in issue” “rights in property.” In either

scenario, the allegations in the complaint do not satis-

fy Section 1605(a)(3)’s jurisdictional requirements.

3. The court of appeals did not undertake the re-

quired analysis. Instead of determining whether

H&P-V’s allegations actually state a violation of inter-

national law or H&P-IDC’s allegations actually place

its own “rights in property” in issue, the court exam-

ined only whether respondents’ allegations on those

points were “wholly insubstantial or frivolous.” Pet.

App. IIa (citation omitted); id. at 16a, 20a. The court

thus failed to conduct the legal analysis necessary to

determine whether the action falls within Section

1605(a)(3)’s exception to immunity.‘ Verlinden, 461 U.S.

at 493-494.

In framing the question as whether respondents’

expropriation claims were frivolous, the court of ap-

peals relied on Bell v. Hood, 327 U.S. 678 (1946).

There, this Court construed 28 U.S.C. 41(1) (1940),

which conferred on federal courts jurisdiction over

any action that “arises under” the Constitution, trea-

ties, or laws of the United States. 28 U.S.C. 41(1)

* Respondents’ claims on the merits are that their property was

taken in violation of international law. Resps. C.A. Br. 16; see 11-

cv-1735 Docket entry No. 1 (D.D.C. Sept. 23, 2011) (Compl. 19 172-

181). It is unclear, however, what right of action respondents

invoke. To the extent respondents’ complaint may be understood

to assume that Section 1605(a)(3) itself provides an implied right of

action, the court of appeals did not address that issue, and it is not

presented here.

11

(1940); see 28 U.S.C. 1331. As the Court explained, a

claim “arises under” federal law if the claim will be

“sustained if the Constitution and laws of the United

States are given one construction and will be defeated

if they are given another.” Bell, 327 U.S. at 685; see

Merrill Lynch v. Manning, No. 14-1132 (May 16,

2016), slip op. 8-10 (describing “arising under” juris-

diction). Thus, the federal-question statute has been

understood to separate the jurisdictional inquiry from

any examination of the legal sufficiency of the claim: a

claim may “arise[{] under” federal law even if the

court’s ultimate construction of federal law will defeat

the plaintiff’s claim. The Court applied that principle

in Bell, holding that “the failure to state a proper

cause of action calls for a judgment on the merits and

not for a dismissal for want of jurisdiction.” 327 U.S.

at 682. The Court also explained, however, that a suit

asserting an “alleged claim under the Constitution or

federal statutes” that “is wholly insubstantial and

frivolous” may be “dismissed for want of jurisdiction.”

Id. at 682-683.

The D.C. Circuit has understood Bell to establish a

general rule, equally applicable to the FSIA as to

Section 1331, that “jurisdiction ... is not defeat-

ed ... by the possibility that” a complaint “might

fail to state a cause of action.” Pet. App. 11a (quoting

Bell, 327 U.S. at 682); see Agudas Chasidei Chabad of

U.S. v. Russian Fed’n, 528 F.3d 934, 940 (D.C. Cir.

2008) (Chabad). The D.C. Circuit has accordingly held

that whenever, as in this case, “the plaintiff’s claim on

the merits directly mirror{s] the jurisdictional stand-

ard” set forth in the FSIA, the court should find the

jurisdictional standard satisfied so long as the plain-

12

tiff’s claim is not frivolous. Simon v. Republic of

Hung., 812 F.3d 127, 140 (2016).

That approach is founded on a misunderstanding of

the scope of Bell. Rather than announcing a general

rule that would apply to other jurisdictional grants

without regard to their text, Bell rested on an inter-

pretation of the specific language of the federal-

question statute. Under that statute, jurisdiction does

not turn on the legal sufficiency of the claim; rather,

the legal sufficiency of the claim is purely a merits

question. See p. 11, supra. Bell’s rule that a purport-

ed federal claim may be dismissed for lack of jurisdic-

tion only if it is frivolous preserves the independence

of the jurisdictional and legal-merits inquiries by

ensuring that they do not collapse into one another.

Bell’s frivolousness standard has no application to

the FSIA. Assessing whether a claim falls within a

particular statutory grant of jurisdiction is a question

of statutory construction. See Franchise Tax Bd. v.

Construction Laborers Vacation Trust, 463 U.S. 1, 21-

22 (1983). Unlike the federal-question statute, the

FSIA establishes substantive federal immunity stand-

ards that the court must apply in order to determine

Simon reaf: rmed the D.C. Circuit's reliance on Bell in cases

like this one, in which both jurisdiction under the expropriation

exception in the FSIA and the legal sufficiency of the plaintiff’s

claim on the merits turn on whether international law prohibited

the alleged taking. 812 F.3d at 140. Simon clarified, however, that

the court will not apply the Bell standard in cases in which the

plaintiff’s claim on the merits does not rely on international law

and therefore “the jurisdictional and merits inquiries do not over-

lap.” Id. at 141. In Simon, the court declined to apply Bell be-

cause the plaintiffs asserted common-law conversion claims on the

merits, and they alleged a taking that violated international law

only to establish jurisdiction. /bid.

13

whether it has jurisdiction. Verlinden, 461 U.S. at

497; see pp. 7-10, supra; cf. Arbaugh v. Y&H Corp.,

546 U.S. 500, 514-515 (2006) (explaining that Congress

may condition subject-matter jurisdiction on satisfy-

ing a substantive requirement). In the case of the

expropriation exception, one of those substantive

standards is whether the case involves “rights in

property taken in violation of international law.” 28

U.S.C. 1605(a)(3). The expropriation exception there-

fore requires a legal inquiry that the federal-question

statute eschews: jurisdiction under Section 1605(a)(3)

turns on the legal sufficiency of the plaintiff’s claim

that the alleged taking violated international law.

That conclusion adheres to the political Branches’

judgment that foreign states should not be subjected

to the burden of litigation unless a court appll ies] the

detailed federal law standards set forth in the Act”

and Satisflies] itself that one of the exceptions [to

immunity] applies.” Verlinden, 461 U.S. at 494. But

the court of appeals’ application of the Bell standard

effectively nullifies the expropriation exception’s re-

quirements. Congress would not have a.iticipated that

foreign states would be subject to the burdens of suit

for expropriation claims in every case in which the

plaintiff makes merely a non-frivolous assertion that

the state’s conduct violated international law.

B. The Proper Standard For Establishing Jurisdiction

Under The Expropriation Exception Warrants This

Court’s Review

1. The courts of appeals disagree on how to evalu-

ate a district court’s jurisdiction over an expropriation

claim against a foreign state.

The Second Circuit has held, contrary to the deci-

sion below, that the court must determine whether the

14

complaint’s allegations set forth a taking that, if prov-

en, would violate international law. Zappia Middle E.

Constr. Co. v. Emirate of Abu Dhabi, 215 F.3d 247,

251-252 (2000) (holding that “breach of a commercial

contract alone does not constitute a taking pursuant to

international law”). In a subsequent decision, the

Second Circuit expressly affirmed that courts must

undertake that legal inquiry in determining jurisdic-

tion. See Robinson v. Government of Malay., 269 F.3d

133, 143 (2001); accord id. at 147 (Sotomayor, J., con-

curring in the judgment). In discussing Zappia, the

court explained that “the applicability of the ‘expro-

priation’ exception to the FSIA requirels] a

determination whether the defendant’s conduct violat-

ed ‘international law’” as a legal matter, even though

“the same question—the liability under international

law of the foreign government for the behavior of the

corporation—would have been presented on the mer-

its.” 269 F.3d at 143.

The Fifth, Seventh, and Eleventh Circuits similarly

assess the legal sufficiency of the plaintiff’s jurisdic-

tional allegations. See, e. g., de Sanchez v Banco Cent.

de Nicar., 770 F.2d 1385, 1396, 1395-1397 (5th Cir.

1985) (relevant question is “whether any generally

accepted norm of international law prohibits” the

foreign state’s alleged expropriation; if not,

the foreign state is immune”) (emphasis omitted);

Abelesz v. Magyar Nemzeti Bank, 692 F.3d 661, 679-

685 (7th Cir. 2012) (plaintiffs’ complaint did not con-

tain the elements that the court concluded were nec-

essary to allege a taking in violation of international

law); Mezerhane v Repiiblica Bolivariana de Venez.,

785 F.3d 545, 548-551 (11th Cir. 2015) (foreign state

was immune because the alleged expropriation of the

15

property of its national does “not constitute a ‘viola-

tion of international law’”), cert. denied, 136 S. Ct. 800

(2016).°

By contrast, the Ninth Circuit, like the D.C. Circuit,

has held that, [alt the jurisdictional stage,” the court

“need not decide,” as a legal matter, “whether the

taking actually violated international law” to deter-

mine whether a claim comes within the expropriation

exception. Siderman de Blake v. Republic of Arg., 965

F.2d 699, 711 (1992), cert. denied, 507 U.S. 1017 (1993).

Rather, “as long as a ‘claim is substantial and non-

frivolous, it provides a sufficient basis for the exer-

cise’” of jurisdiction. /bid. (citation omitted).

2. This Court should grant review to resolve the

conflict among the courts of appeals. That conflict

undermines the FSIA’s purpose of fostering the

“‘develop{ment of] a uniform body of law’ concerning

the amenability of a foreign sovereign to suit in Unit-

ed States courts.” First Nat! City Bank v. Banco

Para El Comercio Exterior de Cuba, 462 U.S. 611, 622

n.11 (1983) (quoting H.R. Rep. No. 1487, 94th Cong.,

2d Sess. 32 (1976)). The disagreement may also en-

courage forum-shopping. Federal venue provisions

permit any plaintiff to bring suit against a foreign

state in the District of Columbia. 28 U.S.C. 1391(f)(4).

The court of appeals’ decision therefore may encour-

age plaintiffs to file expropriation claims in that court

* Respondents observe (Br. in Opp. 23) that these decisions did

not expressly consider whether the Bell “frivolousness” standard

applies. But each squarely held that courts must determine, as u

legal matter, whether the alleged conduct is prohibited by interna-

tional law, thereby foreclosing any reliance on the frivolousness

standard.

16

so that they may benefit from the D.C. Circuit’s per-

missive approach to jurisdiction.

The appropriate standard for establishing jurisdic-

tion under Section 1605(a)(3) is important. Recogniz-

ing that Jaletions against foreign sovereigns in our

courts raise sensitive issues concerning the foreign

relations of the United States,” Verlinden, 461 U.S. at

493, Congress carefully crafted the FSIA’s exceptions

to immunity to reflect prevailing customary interna-

tional-law standards of foreign state immunity, id. at

487-488. Section 1605(a)(3) provides a narrow excep-

tion to immunity for claims involving “rights in prop-

erty taken in violation of international law,” where

there is a specified commercial-activity nexus to the

United States. The D.C. Circuit’s use of the frivo-

lousness standard, however, effectively nullifies key

elements of the immunity analysis whenever the plain-

tiff’s claim purports to rely on international law and

the plaintiff can muster a non-frivolous argument that

international law recognizes the claim.’ That permis-

sive approach may result in adverse foreign-relations

consequences and reciprocal adverse treatment of the

United States in foreign courts. See National City

Bank v. Republic of China, 348 U.S. 356, 362 (1955).

In addition, the court of appeals’ approach may ex-

tend to other FSIA exceptions that contain require-

As discussed above, see note 5, supra, the D.C. Circuit does not

use the frivolousness standard when the plaintiff's merits claim

does not mirror the jurisdictional standard. Simon, 812 F.3d at

140-141. Nothing in the FSIA suggests, however, that Congress

intended the required jurisdictional showing to vary based on the

nature of the plaintiff's claim. In addition, plaintiffs may attempt

to recast their claims to take advantage of the frivolousness stand-

ard.

17

ments that parallel the legal merits of the plaintiff's

claim. For instance, the terrorism exception provides

both an exception to immunity and a right of action for

claims for personal injury or death “that was caused

by an act of torture, extrajudicial killing, aircraft

sabotage, hostage taking.“ 28 U.S.C. 1605A(a)(1) and

(e). One district court, relying on Chabad and Simon,

has applied the Bell standard to claims brought under

that provision. See Owens v. Republic of Sudan, No.

01-2244, 2016 WL 1170919, at *22-*25 (D.D.C. Mar.

23, 2016) (plaintiffs need only make non-frivolous

allegations of legal causation). In addition, the tort

exception’s requirements may overlap with the merits

in some cases, as that exception applies to a claim for

personal injury or death “caused by the tortious act or

omission of that foreign state or of any official or

employee of that foreign state while acting within the

scope of his office or employment.” 28 U.S.C.

1605(a)(5); see Robinson, 269 F.3d at 143-144 (discuss-

ing overlap between jurisdictional and merits inquir-

ies in cases brought under Section 1605(a)(5)).

II. THE COURT OF APPEALS’ CONCLUSION THAT

RESPONDENTS’ EXPROPRIATION CLAIMS ARE

NOT FRIVOLOUS DOES NOT WARRANT REVIEW

Petitioners also challenge (Pet. 11-26) the court of

appeals’ holdings that both H&P-V’s and H&P-IDC’s

claims fell within the expropriation exception. Con-

trary to petitioners’ characterization (Pet. 12, 18), the

court’s conclusions were not based on a determination

that respondents’ allegations described conduct that

actually constituted a taking that was prohibited by

international law. Instead, the court held only that

respondents’ claims were not frivolous. Pet. App. 17a,

18

22a. Those conclusions do not warrant this Court’s

review.

A. The First Question Presented, Concerning Whether

H&P-V’s Allegations Satisfy Section 1605(a)(3), Does

Not Warrant Review

1. H&P-V argues that its expropriation claim satis-

fied Section 1605(a)(3)’s requirement of a takling] in

violation of international law” because international

law prohibits taking the property of a domestic corpo-

ration to discriminate against the corporation’s for-

eign shareholders. Pet. App. 13a-17a. Petitioners

contend (Pet. 12) that the court of appeals held that

respondents’ claim “does state a [violation of] interna-

tional law.” To the contrary, the court held only that

H&P-V’s argument was “non-frivolous.” Pet. App. 17a.

The court based that conclusion primarily on a single

fifty-year-old appellate decision. /d. at 13a (citing

Banco Nacional de Cuba v. Sabbatino, 307 F.2d 845,

861 (2d Cir. 1962), rev’d on other grounds by 376 U.S.

398 (1964)), reaff’d on remand by Banco Nacional de

Cuba v. Farr, 383 F.2d 166, 185 (2d Cir. 1967). In Sab-

batino, the Second Circuit held that “[w]Jhen a foreign

state treats a corporation in a particular way because

of the nationality of its shareholders,” a court may

disregard “the ‘nationality’ of the corporate fiction.”

307 F.2d at 861.

Rather than asking only whether H&P-V’s claim

was frivolous, the court of appeals should have deter-

mined whether a “generally accepted norm” of inter-

national expropriation law does prohibit taking a do-

mestie corporation’s property to discriminate against

foreign shareholders. de Sanchez, 770 F.2d at 1396

(emphasis added). In the view of the United States,

the answer to that question is no. The international

19

law of expropriation generally imposes no limits on a

state’s taking of its own national’s property. See Re-

statement (Third) of Foreign Relations of the United

States § 712(1) (1987) (requiring without exception

that a “taking by the state” must be “of the property

of a national of another state” before the taking state

is “responsible under international law”); see also

United States v. Belmont, 301 U.S. 324, 332 (1937)

(recognizing domestic-takings rule); Mezerhane, 785

F.3d at 546, 549-551; Siderman de Blake, 965 Fd at

711. Sabbatino is the sole authority that suggests

otherwise—but that decision rested on the incorrect

premise that international law disregards the nation-

ality of the corporation when it is different from that

of most of the shareholders. See 307 F.2d at 861; but

cf. Case Concerning the Barcelona Traction, Light &

Power Co. (Belgium v. Spain), 1970 I. C. J. 3 (Feb. 5),

41 9, 41 (Barcelona Traction) (holding, in case involv-

ing alleged expropriation of the property of a Canadi-

an corporation whose shareholders were mostly Bel-

gian nationals, that the corporation was to be treated

as a national of its state of incorporation, not the state

of its shareholders).“

* Two courts of appeals have permitted plaintiffs to invoke Sec-

tion 1606(a)(3) in asserting claims that their property was taken in

violation of international-law norms against genocide. See Simon,

812 F.3d at 142-146; Abelesz, 692 F.3d at 674-677. Setting aside

whether the expropriation exception encompasses such claims,

international-law rules against genocide, unlike the distinct inter-

national-law rules governing expropriation, regulate a state’s

conduct toward its own nationals. Those decisions therefore do noc

suggest that where genocide is not involved, international law

permits a national of a state to assert expropriation claims like

those at issue here.

20

2. The court of appeals’ holding that H&P-V’s

claim is not frivolous does not warrant review.

Petitioners assert (Pet. 12) that the decision below

created a circuit split as to whether “pleading a for-

eign state’s discriminatory expropriation of the prop-

erty of its own nationals does state a [violation of]

international law.” But the decision did not create any

such split, because the court of appeals did not actual-

ly render such a holding.

The court of appeals did err in permitting H&P-V’s

claim to proceed under the expropriation exception.

But that error stemmed from its use of the frivolous-

ness standard, not definitive legal conclusions about

the conduct prohibited by international law. This

Court should therefore review the proper standard for

establishing jurisdiction under Section 1605(a)(3). See

Pt. I, supra. Regardless of how the Court disposes

of the frivolousness question, the question whether

H&P-V’s claim satisfies Section 1605(a)(3)’s require-

ments does not warrant review at this time.

If the Court grants review of the frivolousness

question and concludes that Section 1605(a)(3) re-

quires a court to determine whether the plaintiff’s

allegations actually set forth a violation of interna-

tional law, that will mean that the court of appeals did

not evaluate H&P-V’s claim under the correct stand-

ard. Rather than granting certiorari now to conduct

that inquiry in the first instance, the better course

would be to permit the court of appeals to determine

whether H&P-V’s allegations do state a takling! in

violation of international law.” See Cutter v. Wil-

kinson, 544 U.S. 709, 718 n.7 (2005) ([Wie are a court

of review, not of first view.”). Because respondents’

briefing before the court of appeals focused solely on

21

demonstrating that H&P-V’s claim was not frivolous,

Resps. C.A. Br. 34-44, the parties should have the

opportunity to litigate the jurisdictional question

under the correct standard.

Conversely, if this Court concludes that the frivo-

lousness standard is correct (or denies certiorari on

that question, thereby leaving the frivolousness

standard in place), then there is no need for this Court

to review the court of appeals’ application of that

standard to respondents’ complaint. The question

whether H&P-V’s allegations are frivolous lacks sig-

nificance beyond this case. The general standard of

frivolousness is one that lower courts have ample

experience applying in a range of contexts. See, e. g.,

Shapiro v. McManus, 136 S. Ct. 450, 455 (2015). In

addition, reviewing H&P-V’s allegations would not

provide this Court with an opportunity to decide

whether international law actually prohibits discrimi-

natory takings of a national’s property in some cir-

cumstances.

B. The Second Question Presented, Concerning Whether

H&P-IDC’s Allegations Satisfy Section 1605(a)(3),

Does Not Warrant Review

1. In addressing the second question presented,

the court of appeals held only that H&P-IDC’s claim

that its own “rights in property” were “in issue,” 28

U.S.C. 1605(a)(3), was not frivolous. Pet. App. 22a;

but ef. Pet. 18. The court acknowledged that because

“the corporation and its shareholders are distinct

entities,” a shareholder generally does not have an

ownership interest in the corporation’s property. Dole

Food Co. v. Patrickson, 538 U.S. 468, 474-475 (2003).

But the court nonetheless held that H&P-IDC “may

have rights in” H&P-V’s property. Pet. App. 20a. The

22

court did not examine the source or scope of those

potential rights. /d. at 20a-22a. The court then con-

cluded, without analysis, that whatever rights H&P-

IDC possessed might be “rights in property” for pur-

poses of Section 1605(a)(3), because that provision

does not contain any express “limitation” on what

constitutes a “right[] in property.” Id. at 19a.

Because the court of appeals employed the incor-

rect frivolousness standard, it failed to determine

whether respondents’ allegations were legally suffi-

cient to place H&P-IDC’s “rights in property” in issue.

The court should have first examined whether the law

of the state of H&P-V’s incorporation—Venezuela—

gave H&P-IDC, as its shareholder, any direct rights.

Municipal law generally accords shareholders “direct

rights” related to the corporation that are independ-

ent of the rights of the corporation, such as the right

to receive dividends or to share in assets upon liquida-

tion. Barcelona Traction, 1970 I. C. J. 3, 1 47. The

court then should have considered whether any such

rights constitute “rights in property” for purposes of

Section 1605(a)(3). See Permanent Mission, 551 U.S.

at 198-199 (analyzing rights under New York law and

then considering whether they were “rights in immov-

able property” for purposes of Section 1605(a)(4)).

Finally, the court should have determined whether the

complaint sufficiently alleges that petitioner’s actions

constituted a “tak[ing] in violation of international

law.” 28 U.S.C. 1605(a)(3). While a shareholder’s

direct rights generally are not implicated by state

action that depreciates the value of a corporation’s

shares, even severely, actions such as taking the

shareholder’s shares will implicate a shareholder’s

23

direct rights. See generally Barcelona Traction, 1970

I. C. J. 3, 49 44, 47-49.

2. The question whether H&P-IDC’s claim is frivo-

lous does not warrant review. Like the question con-

cerning H&P-V’s takings claim, the deficiencies in the

court of appeals’ analysis stem from its use of the

frivolousness standard, not from any actual determi-

nation of the scope of H&P-IDC’s rights in property

or any conclusion about what constitutes “rights in

property” for purposes of Section 1605(a)(3). And like

the question concerning H&P-V’s claim, regardless of

how the Court disposes of the pleading-standard ques-

tion, the court of appeals’ holding that H&P-IDC’s

claim could proceed under Section 1605(a)(3) does not

warrant review at this time. See pp. 20-21, supra.

CONCLUSION

The petition for a writ of certiorari should be grant-

ed, limited to the third question presented.

Respectfully submitted.

DONALD B. VERRILLI, JR.

Solicitor General

BENJAMIN C. MIZER

Princi Assistant

5 ea

EDWIN S. KNEEDLER

Deputy Solicitor General

GINGER D. ANDERS

Assistant to the Solicitor

General

BRIAN J. EGAN SHARON SWINGLE

Legal Adviser LEWIS S. YELIN

Department of State Attorneys

May 2016