Opinion
Misc. Action No. 22-70 (JDB)
2023-07-31
BAINBRIDGE FUND LTD., Plaintiff, v. The REPUBLIC OF ARGENTINA, Defendant.
Drew T. Dorner, Duane Morris LLP, Washington, DC, Anthony J. Costantini, Pro Hac Vice, David T. McTaggart, Pro Hac Vice, Kevin Savarese, Pro Hac Vice, Duane Morris LLP, New York, NY, for Plaintiff. Carmine D. Boccuzzi Jr., Cleary Gottlieb Steen & Hamilton LLP, New York, NY, Rathna Ramamurthi, Cleary Gottlieb Steen & Hamilton, LLP, Washington, DC, for Defendant.
Drew T. Dorner, Duane Morris LLP, Washington, DC, Anthony J. Costantini, Pro Hac Vice, David T. McTaggart, Pro Hac Vice, Kevin Savarese, Pro Hac Vice, Duane Morris LLP, New York, NY, for Plaintiff. Carmine D. Boccuzzi Jr., Cleary Gottlieb Steen & Hamilton LLP, New York, NY, Rathna Ramamurthi, Cleary Gottlieb Steen & Hamilton, LLP, Washington, DC, for Defendant. MEMORANDUM OPINION & ORDER JOHN D. BATES, United States District Judge
Before the Court is an application from Bainbridge Fund Ltd. ("Bainbridge") seeking a writ of fieri facias and attachment of property owned by the Republic of Argentina in the District of Columbia. Bainbridge makes this application in an attempt to partially satisfy a judgment entered against Argentina in 2020. For the reasons below, the Court will deny Bainbridge's application.
Background
On December 1, 2020, the United States District Court for the Southern District of New York entered a judgment of $95,424,899.38 in Bainbridge's favor against Argentina. Decl. of Anthony Costantini in Supp. of Pl.'s Appl. for Attach. of Property & Writ of Fieri Facias [ECF No. 2-1] ("Costantini Decl.") ¶ 2; Ex. A to Costantini Decl. [ECF. No. 2-2] ("Judgment"). The judgment relates to Argentina's default on a bond owned by Bainbridge and orders Argentina to pay the unpaid value of the principal on the bond plus certain interest. See Judgment. The judgment remains unpaid despite Bainbridge's formal demands to Argentina. Costantini Decl. ¶ 4.
The bond at the heart of the judgment contained an express waiver of sovereign immunity. As relevant here, Argentina waived "any immunity . . . from attachment in aid of execution of judgment . . . to the fullest extent permitted by the laws of [the] jurisdiction" and "consent[ed] generally for the purposes of the Foreign Sovereign Immunities Act to the giving of any relief . . . in connection with any . . . Related Judgment." Ex. I to Costantini Decl. [ECF No. 2-10] ("Specimen") at 12.
Argentina owns the Chancery Annex, a building located at 2136 R Street NW in Washington, D.C. Mem. of P. & A. in Supp. of Pl.'s Appl. for Attach. of Property & Writ of Fieri Facias [ECF No. 2] ("Appl.") at 3; Mem. of P. & A. of Argentina in Opp'n to Appl. [ECF No. 13] ("Opp'n") at 1, 3; see TIG Ins. Co. v. Republic of Argentina, 967 F.3d 778, 781-82 (D.C. Cir. 2020) ("[T]here is no dispute that the building at 2136 R Street NW is Argentinian property in the United States."). "Several decades ago, Argentina used the [Chancery Annex] to house both diplomats and commercial tenants," TIG Ins. Co., 967 F.3d at 780, but "since 1997, the building has been uninhabited and in a state of disrepair," id. (quoting NML Cap., Ltd. v. Republic of Argentina, No. 04-cv-0197 (CKK), 2005 WL 8161968, at *4 (D.D.C. Aug. 3, 2005)); see Opp'n at 4. Argentina has listed the Chancery Annex for sale on two occasions, most recently in 2018. See Opp'n at 4; Appl. at 3-4; see also TIG Ins. Co., 967 F.3d at 780. Each time Argentina has attempted to sell the property, creditors have unsuccessfully sought attachment. Opp'n at 4; see NML Cap., Ltd., 2005 WL 8161968, at *1, *4; TIG Ins. Co., 967 F.3d at 780. The building is not currently for sale, nor is the Argentine diplomatic mission currently authorized to sell it. Ex. A to Decl. of Jorge Argüello ("2022 Argüello Decl.") [ECF No. 13-11] ("2020 Argüello Decl.") ¶ 7. The Chancery Annex is subject to residential property taxes and is valued at $3,203,500. See Ex. H. to Costantini Decl. [ECF No. 2-9] at 2-3.
Argentina claims that the Chancery Annex remains "part of the Argentine diplomatic mission in Washington, D.C." Opp'n at 3 (citing 2020 Argüello Decl. ¶ 3). Today, the Chancery Annex is used "to store diplomatic files of the Argentine Mission and of the Republic's Defense and Military Attache's Office," and access to the building is limited to "members of the Republic's Ministry of Defense and the Republic's Ministry of Foreign Affairs, International Trade & Worship." 2020 Argüello Decl. ¶¶ 4, 8. However, "[o]ther than for the storage of these files," the building is "essentially unusable" due to its "state of disrepair." Id. ¶ 5.
On July 28, 2022, Bainbridge filed the present application asking this Court to attach the Chancery Annex and issue a writ of fieri facias. See Appl. Argentina responded in opposition on September 1, 2022, see Opp'n, and on September 20, 2022, Bainbridge replied in support of its application, see Reply Mem. of P. & A. in Supp. of Appl. [ECF No. 14] ("Reply"). The application is now ripe for decision.
Legal Standard
An attachment and a writ of fieri facias are both mechanisms of seizing and selling a debtor's property in satisfaction of a judgment. Under District of Columbia law—which governs this application, see Fed. R. Civ. P. 69(a)(1) —"[a] money judgment is enforced by a writ of execution," such as "the writ of fieri facias." D.C. R. Civ. Pro. 69(a)(1) & cmt. D.C. law separately permits the attachment of real property, see D.C. Code § 16-508, which permits a court to "make all orders necessary for the preservation of the property . . . [and] order that the property be sold and its proceeds paid into court and held subject to its order on the final decision of the case." Id. § 16-550. These remedies are not exclusive: "[a]n attachment may be issued upon a judgment either before or after or at the same time with a fieri facias." Id. § 16-542.
Under Rule 69(a)(1), "[t]he procedure on execution—and in proceedings supplementary to and in aid of judgment or execution—must accord with the procedure of the state where the court is located."
Once a judgment is registered in a jurisdiction, it has the same effect as if it were originally entered in that jurisdiction. See 28 U.S.C. § 1963; D.C. Code § 15-352. Under D.C. law, a final judgment for the payment of money—such as the judgment at issue in this case—recognized by this Court constitutes a lien on the debtor's freehold and leasehold estates. D.C. Code § 15-102. "[E]very final judgment . . . for the payment of money rendered in the . . . United States District Court for the District of Columbia . . . when filed and recorded in the office of the Recorder of Deeds . . . is enforceable, by execution issued thereon." Id. § 15-101(a).
The Foreign Sovereign Immunities Act ("FSIA") states that "property in the United States of a foreign state shall be immune from attachment" unless the property falls into one of the statute's enumerated exceptions. 28 U.S.C. § 1609. A "prerequisite common to those exceptions is that the property be 'used for a commercial activity.' " TIG Ins. Co., 967 F.3d at 780 (quoting 28 U.S.C. § 1610(a)). The specific exception at issue in this case, § 1610(a)(1), specifies that property "used for a commercial activity . . . shall not be immune from attachment . . . if the foreign state has waived its immunity from attachment in aid of execution."
Analysis
I. The Effect of Argentina's Waiver of Immunity
The Court must first address Bainbridge's argument that, given the breadth of Argentina's waiver of immunity in the bond documents, Bainbridge need not also demonstrate that the Chancery Annex is used for a commercial activity.
Under the FSIA exception relevant here, property "used for a commercial activity . . . shall not be immune from attachment . . . if the foreign state has waived its immunity." 28 U.S.C. § 1610(a)(1) (emphasis added). The parties agree that the governing bond documents contain a waiver of sovereign immunity for both jurisdictional and execution purposes. In relevant part, the waiver states:
The FSIA treats "jurisdictional immunity" (i.e., whether a foreign state is "immune from the jurisdiction of courts of the United States or of the States" for the purposes of being sued, 28 U.S.C. § 1605) as distinct from "immunity from attachment and execution" (i.e., whether "the property in the United States of a foreign state shall be immune from attachment arrest and execution," id. § 1609). See Republic of Argentina v. NML Cap., Ltd., 573 U.S. 134, 142, 134 S.Ct. 2250, 189 L.Ed.2d 234 (2014) (noting that "[t]he text of the [FSIA] confers on foreign states two kinds of immunity" and that "[t]he exceptions to . . . 'execution immunity'[ ] are narrower" than those to "jurisdictional immunity").
[t]o the extent that the Republic . . . shall be entitled . . . to any immunity from suit, from the jurisdiction of any [relevant] court . . . [or] from attachment in aid of execution of judgment, . . . the Republic . . . has irrevocably waived such immunity to the fullest extent permitted by the laws of such jurisdiction and consents generally for the purposes of the [FSIA] to the giving of any relief . . . in connection with any . . . Related Judgment.Specimen at 12. However, the parties disagree whether, in light of this waiver, Bainbridge nevertheless has a burden under § 1610(a)(1) to demonstrate that the Chancery Annex is "used for a commercial activity" in order to subject it to attachment. Bainbridge argues that the Court need not even reach the question of whether the property was "used for a commercial activity" due to the expansive language in Argentina's waiver. Argentina responds that Bainbridge's argument seeks to sidestep § 1610(a)(1), which requires both a waiver of immunity and that the property be used for commercial activity.
Bainbridge identifies two distinct clauses in the waiver that it claims are relevant here: the first waives immunity "to the fullest extent permitted" by a jurisdiction's law, and the second consents to "any relief" for FSIA purposes. Specimen at 12. Bainbridge concedes that "[n]ormally, a waiver of 'immunity to the fullest extent permitted by the laws of such jurisdiction' would nevertheless require a showing of 'commercial activity' under the FSIA," given that the FSIA is a law of this jurisdiction. Appl. at 10 (quoting Specimen at 12). However, Bainbridge argues that Argentina "clearly dispensed with the 'commercial activity' requirement" when it, per the second clause, "consent[ed] generally for the purposes of the [FSIA] to the giving of any relief . . . in connection with any . . . Related Judgment." See Reply at 2 (quoting Specimen at 12); Appl. at 10. Bainbridge claims that "[a]ny other interpretation [of the waiver] contradicts itself: one cannot consent generally to the giving of any relief on a judgment under the FSIA, and then argue that the FSIA bars the granting of the same relief." Appl. at 10.
Bainbridge seems to contradict its initial concession in its reply, suggesting without support that the Republic's waiver of " 'immunity to the fullest extent permitted by the laws of such jurisdiction,' . . . arguably obviates any showing of 'commercial activity' under the FSIA." Reply at 2 (quoting Specimen at 12). The Court agrees with Bainbridge's initial position: the "fullest extent" clause, standing alone, would be insufficient to obviate the need to demonstrate commercial use.
For its part, Argentina urges that the exception in § 1610(a)(1) must be interpreted conjunctively, requiring both (i) that the property is "used for a commercial activity" and (ii) that "the foreign state has waived immunity." See Opp'n at 15-17. It notes that the waiver at issue only extends "to the fullest extent permitted by the laws of [this] jurisdiction," which include the FSIA, and that it only consented to relief "for the purposes of the [FSIA]." Id. at 16 (emphases omitted) (quoting Specimen at 12). Accordingly, Argentina contends, the "waiver of immunity does not and cannot operate to eliminate [the] mandatory, statutorily imposed requirement" that the property be used for a commercial purpose. Id.
The Court agrees with Argentina that § 1610(a)(1) clearly presents two requirements for attachment of a foreign state's U.S.-based property and that Bainbridge, therefore, must satisfy both the commercial activity requirement and the immunity waiver requirement. As Argentina notes, courts considering similar circumstances appear to have uniformly adopted this approach. Opp'n at 15-16; see, e.g., Aurelius Cap. Partners, LP v. Republic of Argentina, 584 F.3d 120, 130 (2d Cir. 2009) ("Even when a foreign state completely waives its immunity from execution, courts in the U.S. may execute only against property that meets these two statutory criteria." (internal quotation marks omitted)); Conn. Bank of Comm. v. Republic of Congo, 309 F.3d 240, 247 (5th Cir. 2002) (same); see also NML Cap., Ltd., 573 U.S. at 142, 134 S.Ct. 2250 (noting that "[t]he exceptions to . . . 'execution immunity'[ ] are narrower" than those to "jurisdictional immunity" because " '[t]he property in the United States of a foreign state' is subject to attachment, arrest, or execution if (1) it is 'used for a commercial activity in the United States,' and (2) some other enumerated exception to immunity applies, such as the one allowing for waiver" (citation omitted)). Thus, despite Bainbridge's insistence, see Appl. at 10; Reply at 2, the Court concludes that Argentina could not override the FSIA's statutorily mandated commercial activity requirement simply by framing its waiver more broadly.
Even if the parties could have waived the commercial activity requirement through broad language, nothing on the face of the waiver suggests that they intended to do so. Per the first clause, Argentina waived immunity only "to the fullest extent permitted by the laws of such jurisdiction," Specimen at 12, which implicitly incorporates the FSIA's restrictions. Similarly, per the second clause, Argentina "consent[ed] generally for the purposes of the [FSIA] to the giving of any relief . . . in connection with any . . . Related Judgment," id. (emphasis added), and attachment of the Chancery Annex—the form of relief sought here—would only be permitted "for the purposes of the [FSIA]" if Bainbridge also demonstrates that the property is used for a commercial activity.
Given that the second clause, read independently, would not suffice to "dispense with the 'commercial activity in the United States' requirement," Appl. at 11, the Court need not address Bainbridge's argument that the first waiver of immunity to the "fullest extent permitted" by the laws of this jurisdiction "has no effect on"—i.e., does not modify—"the subsequent consent" to "any relief," see id. at 10-11.
Accordingly, the Court concludes that, notwithstanding Argentina's waiver of sovereign immunity, Bainbridge must also show that the Chancery Annex is used for a commercial activity in order to override the FSIA's general guarantee of immunity from attachment.
II. The Commercial Activity Requirement
Having established that the waiver alone is insufficient to override immunity from attachment, the next question is whether the Chancery Annex is "used for a commercial activity." 28 U.S.C. § 1610(a). "Commercial activity" can refer to "either a regular course of commercial conduct or a particular commercial transaction or act." Id. § 1603(d). "The commercial character of an activity shall be determined by reference to the nature of the course of conduct or particular transaction or act, rather than by reference to its purpose." Id. To determine if a property has been used for a commercial activity, this Court must "determine whether, at the time of filing, the totality of the circumstances supported characterizing the . . . property as one 'used for a commercial activity.' " TIG Ins. Co., 967 F.3d at 788.
In an earlier dispute over the attachment of the Chancery Annex, the D.C. Circuit declined to endorse a specific formula and instead instructed district courts to conduct a "case-by-case" inquiry into the "totality of the circumstances" to determine "how they find particular factual circumstances to bear on a property's asserted commercial use." TIG Ins. Co., 967 F.3d at 787. Although a court's inquiry focuses on the totality of the circumstances at the time of filing, it is important to "give[ ] due weight to past uses of the property in order to accurately characterize what kind of property is at issue" and "to ensure that gamesmanship does not distort the result." Id. at 786. However, courts should avoid finding "uses in the distant past[ ] sufficient to satisfy the 'used for a commercial activity' requirement." Id. at 788. In other words, past use is not dispositive but merely an additional data point within the broader inquiry of "whether the predominant use is . . . commercial or sovereign." Id. at 786 (quoting Af-Cap Inc. v. Republic of Congo ("Af-Cap I"), 383 F.3d 361, 369 n.7 (5th Cir. 2004)).
After the D.C. Circuit vacated the district court's original order and remanded the case in TIG Ins. Co., the district court on remand assessed the two underlying judgments in that case and determined that one did not include an implied waiver of immunity and the other was issued against a third party, not Argentina. See TIG Ins. Co. v. Republic of Argentina, No. 18-mc-00129 (DLF), 2022 WL 3594601, at *7 (D.D.C. Aug. 23, 2022). Accordingly, the district court did not address whether the Chancery Annex was used for a commercial activity.
Further, while some past uses might be relevant, future or speculative uses cannot satisfy the "commercial activity" requirement. TIG Ins. Co., 967 F.3d at 787; see also EM Ltd. v. Republic of Argentina, 473 F.3d 463, 484 (2d Cir. 2007) (finding funds that "could have been used to repay . . . debts" insufficient to support "actual . . . [commercial] use"). Additionally, "the further removed the property is from [a] referenced commercial transaction, the less likely it is that the property was used for that transaction." TIG Ins. Co., 967 F.3d at 787 (quoting Af-Cap, Inc. v. Chevron Overseas (Congo) Ltd. ("Af-Cap II"), 475 F.3d 1080, 1091 (9th Cir. 2007)).
Bainbridge first points to the Chancery Annex's "long history of commercial use"—specifically, leases to commercial tenants in the 1980s and 1990s. Appl. at 12. Even though commercial leasing is "an unquestionably commercial activity," NML Cap., Ltd., 2005 WL 8161968, at *14, these leases occurred in the "distant past"—several decades ago—and are accordingly not "sufficient to satisfy the 'used for a commercial activity' requirement," TIG Ins. Co., 967 F.3d at 788.
Next, Bainbridge notes that Argentina twice listed the Chancery Annex for sale—in 2003 and 2018—which it argues is indicative of commercial use. Appl. at 13-14. As the D.C. Circuit has explained, "putting [property] up for sale" qualifies as "actively employ[ing] [that] property for a commercial activity." TIG Ins. Co., 967 F.3d at 784. However, in this case, those listings only lasted for a few months and happened approximately five and 20 years ago, respectively. These past uses—especially the more recent 2018 listing—may be somewhat relevant to determining whether the Chancery Annex was used for a commercial activity at the time of filing, but they are certainly not determinative. Bainbridge further complains that Argentina has engaged in gamesmanship in the past by pulling sales listings for the Chancery Annex from the market immediately prior to the filing of similar applications for attachment. See id. at 786 (noting that the "totality-of-the-circumstances inquiry" helps "ensure that gamesmanship does not distort the result"). But that is not what occurred here. The most recent listing was in 2018, and the Court is hesitant to "defin[e] property use as commercial in nature solely by reference to past single and/or exceptional commercial uses." Id. at 787 (quoting Af-Cap I, 383 F.3d at 369).
Bainbridge also accuses the Republic of having left the Chancery Annex in a "self-induced, sham state of disuse" and having "forego[ne] tangible offers" "in order to avoid the process of court." Appl. at 14. Bainbridge offers no evidence of an ulterior motive; rather, it asks the Court to infer one from the Republic's past actions. Specifically, Bainbridge points to when the Republic listed the building for sale five years ago and then took it off the market "three days after a judgment creditor filed suit against the Property." Id. at 14; see TIG Ins. Co., 967 F.3d at 780. The Republic's history of pulling listings in proximity to attachment efforts—although concerning—is not particularly relevant here, because the Chancery Annex was not listed for sale prior to this suit. There is no dispute that the building has been sitting in its current state of disuse for years, and the Court has no reason to believe the building's current condition is a "sham."
Not all Circuits agree about whether it is ever permissible to define a property as "used for commercial activity" based on isolated or exceptional past commercial uses. As the D.C. Circuit has noted, other Circuits have adopted divergent views on how broadly to conduct the totality-of-the-circumstances inquiry. For example,
[w]here as the Fifth Circuit had expressed its reservations about defining property use as commercial in nature solely by reference to past single and/or exceptional commercial uses, the Ninth Circuit declined to incorporate the Fifth Circuit's articulated reservations because, in its view, attempting to quantify the number of commercial uses associated with the property, or to embark upon characterizing property use as exceptional or unexceptional, would unnecessarily complicate the determination to be made under § 1610(a).TIG Ins. Co., 967 F.3d at 787 (cleaned up). However, the D.C. Circuit explicitly "d[id] not choose between these slightly different approaches, leaving it to district courts to elaborate, case-by-case, how they find particular factual circumstances to bear on a property's asserted commercial use." Id.
Argentina counters that, "[t]o the extent there is any use of the Chancery Annex, that use has been diplomatic." Opp'n at 9. Argentina first points to the building's distant past use as a diplomatic residence and the U.S. State Department's recognition of the Chancery Annex on diplomatic rolls through at least 2004. Id. at 10. It also highlights the Chancery Annex's continued display of the Argentine flag and seal, the allocation of the building to a particular Argentine ministry, restrictions on access to only certain government employees, and its "sole ongoing use over decades" to store diplomatic files. Id. The Court agrees with Bainbridge that certain acts—like displaying a flag or seal—are not inherently diplomatic activities. See Reply at 8 n.6. However, it does not necessarily follow—as Bainbridge insists—that the Chancery Annex "lost any diplomatic status decades ago when the Republic ceased using the Property to house diplomatic representatives." Id. at 8. Although Argentina's evidence of diplomatic use is not overwhelming, it provides broader context for how to treat the isolated instances of commercial use in the distant past.
Finally, the parties agree that the building is presently in a state of disuse. The FSIA requires that a property be "used for a commercial activity" to be subject to attachment. 28 U.S.C. § 1610(a) (emphasis added). Courts interpreting this language have concluded that, to be " 'used for a commercial activity in the United States,' . . . the property in question [must be] put into action, put into service, availed or employed for a commercial activity." Af-Cap II, 475 F.3d at 1091; see id. at 1088 ("The United States Supreme Court has similarly defined 'use' as being 'most sensibly read to mean active employment for commercial purposes, and not merely a passive, passing, or past connection to commerce . . . .' " (quoting Jones v. United States, 529 U.S. 848, 855, 120 S.Ct. 1904, 146 L.Ed.2d 902 (2000))); see also Opp'n at 8-9 (collecting cases). Thus, to the extent that the building has largely been left in an extended state of disuse (outside of storing diplomatic files), that weighs against characterizing it as a property "used for a commercial activity"—it has not been used for much of anything.
Bainbridge argues that a current lack of use cannot "eliminate[ ] the relevance of any past commercial activity." Reply at 5; see also id. at 6 (attempting to distinguish Argentina's authorities because "the subject properties were never used for commercial activity or any commercial use was not by the sovereign itself"). But this strawman argument holds no water and misses the point—the current lack of use does not impact the relevance of any past commercial uses, and Argentina does not suggest it does.
Considering the totality of these circumstances, the Court is not convinced that Bainbridge has met its burden of showing that the Chancery Annex is a property "used for a commercial activity." § 1610(a). On one hand, Bainbridge has presented evidence of some past commercial activities—namely, commercial leases in the 1980s and 1990s and sales listings in 2003 and 2018—but the majority of these are "uses in the distant past," which are not "sufficient to satisfy the 'used for a commercial activity' requirement." TIG Ins. Co., 967 F.3d at 788. Even the more recent sale listing was a "single" and "exceptional commercial use[ ]" nearly four years prior to filing. Id. at 787 (quoting Af-Cap I, 383 F.3d at 369). On the other hand, there is some evidence of diplomatic use. Although some of the most obvious diplomatic uses, including the Chancery Annex's stint as a diplomatic residence and its recognition on diplomatic rolls, also occurred in the distant past, there is also some indicia of the Chancery Annex's present diplomatic use, such as the allocation of the building to the Argentine Ministry of Foreign Affairs, International Trade & Worship, restrictions on access to only members of the Ministries of Foreign Affairs and Defense, and the storage of diplomatic files. Additionally, the Chancery Annex has fallen into a state of disrepair, meaning that—outside of storing documents—it is effectively not in use for any purpose. Accordingly, the Court concludes that, under the totality of the circumstances, the Chancery Annex is not a property "used for a commercial activity." § 1610(a); see TIG Ins. Co., 967 F.3d at 786 ("[A] 'foreign property retains its immunity protection where its commercial uses, considered holistically and in context, are bona fide exceptions to its otherwise noncommercial use.' " (quoting Af-Cap I, 383 F.3d at 370)). Hence, the exception in § 1610(a)(1) does not apply, and the Chancery Annex remains immune from attachment.
Argentina also argued that the Chancery Annex is immune from attachment under the Vienna Convention on Diplomatic Relations and Optional Protocols on Disputes. See Opp'n at 17-22. The Court will not address this argument in light of its conclusion that the exception in § 1610(a)(1) does not apply.
* * *
For the foregoing reasons, upon consideration of [2] plaintiff's application for attachment of property and a writ of fieri facias, and the entire record herein, it is hereby
ORDERED that [2] plaintiff's application is DENIED.
SO ORDERED.