Opinion
CASE NO. 21-81781-CIV-SINGHAL
2023-01-31
BOCK HOLDINGS, LLC, et al., Plaintiffs, v. REPUBLIC OF HONDURAS and National Agrarian Institute of Honduras, Defendants.
Josefina Maria Aguila-Benna, Miami, FL, Kendall Brindley Coffey, Dorothy Camille Kafka, Coffey Burlington, P.L., Miami, FL, for Plaintiffs Bock Holdings, LLC, Cindy Miller, Gary Miller, Vicki Glaesner, Pat Halty, Julio Halty, Alexis Morrill, Paulette Craft, George McMeekan, Michelle Miller, Gary Morris, Karla Dailing. Kendall Brindley Coffey, Dorothy Camille Kafka, Coffey Burlington, P.L., Miami, FL, for Plaintiffs Richard Reikenis, Carolyn Reikenis, Kevin Rohan. Gabriel Matthew Hartsell, Dorsey & Whitney LLP, Phoenix, AZ, Juan C. Basombrio, Pro Hac Vice, Dorsey & Whitney, Costa Mesa, CA, for Defendants.
Josefina Maria Aguila-Benna, Miami, FL, Kendall Brindley Coffey, Dorothy Camille Kafka, Coffey Burlington, P.L., Miami, FL, for Plaintiffs Bock Holdings, LLC, Cindy Miller, Gary Miller, Vicki Glaesner, Pat Halty, Julio Halty, Alexis Morrill, Paulette Craft, George McMeekan, Michelle Miller, Gary Morris, Karla Dailing. Kendall Brindley Coffey, Dorothy Camille Kafka, Coffey Burlington, P.L., Miami, FL, for Plaintiffs Richard Reikenis, Carolyn Reikenis, Kevin Rohan. Gabriel Matthew Hartsell, Dorsey & Whitney LLP, Phoenix, AZ, Juan C. Basombrio, Pro Hac Vice, Dorsey & Whitney, Costa Mesa, CA, for Defendants. ORDER RAAG SINGHAL, UNITED STATES DISTRICT JUDGE
THIS CAUSE is before the Court upon Defendants' Motion to Dismiss the Complaint (DE [24]). The motion is fully briefed and, for the reasons discussed below, the Court concludes that Defendants are immune from suit. The Motion to Dismiss is, therefore, granted.
I. INTRODUCTION
Plaintiffs Bock Holdings LLC and its individual members (collectively, "Bock") allege they purchased 40 acres of oceanfront property in the Republic of Honduras with the intention of building a resort village and marina. Bock alleges that Defendants illegally expropriated the property in 2010 without compensation in violation of international and Honduran law. The property was taken as part of a national agricultural reform program with the intention of providing property to local farmers to cultivate crops for export to the United States and other countries. On July 17, 2017, the Supreme Court of Honduras affirmed that the land was wrongfully expropriated and ordered title to the properties to be returned to the rightful owners. The local Honduran authorities, however, refuse to annul the expropriated titles and restore the property to Bock.
Bock sued Defendants, the Republic of Honduras ("Honduras") and the National Agrarian Institute of Honduras ("INA" or, collectively "Honduras"), in this Court to recover damages for alleged violations of international law arising from the expropriation. See Complaint (DE [1]). Bock alleges jurisdiction under 28 U.S.C. § 1330, the Foreign Sovereign Immunities Act of 1976 ("FSIA"), 28 U.S.C. § 1605(a)(3), and the Second Hickenlooper Amendment, 22 U.S.C. § 2370(e)(2). See, Complaint (DE [1] ¶ 20).
Defendants, who are a foreign government and a governmental subdivision or instrumentality, move to dismiss the Complaint. They assert sovereign immunity under FSIA, 28 U.S.C. § 1604.
Defendants also argue the case should be dismissed for failure to state a claim and for forum non conveniens. Because this Court lacks subject matter jurisdiction over the case, neither of these grounds for dismissal will be addressed.
II. LEGAL STANDARDS
"The Foreign Sovereign Immunities Act ("FSIA") 'provides the sole basis for obtaining jurisdiction over a foreign state in the courts of this country.' " Sequeira v. Republic of Nicaragua, 815 Fed. Appx. 345, 347 (11th Cir. 2020) (quoting OBB Personenverkehr AG v. Sachs, 577 U.S. 27, 30, 136 S.Ct. 390, 193 L.Ed.2d 269 (2015)). "Under the FSIA, a foreign state is presumptively immune from suit unless a specific exception applies." Id. (quoting Permanent Mission of India to the U.N. v. City of New York, 551 U.S. 193, 197, 127 S.Ct. 2352, 168 L.Ed.2d 85 (2007)). "If none of the exceptions applies, then the district court lacks subject matter jurisdiction over the plaintiff's claims." Butler v. Sukhoi Co., 579 F.3d 1307, 1312 (11th Cir. 2009). "Thus, in order to establish subject matter jurisdiction under the FSIA, the plaintiff must overcome the presumption that the foreign state is immune from suit by producing evidence that 'the conduct which forms the basis of [the] complaint falls within one of the statutorily defined exceptions.' " Id. at 1312-13 (quoting S& Davis Int'l, Inc. v. The Republic of Yemen, 218 F.3d 1292, 1300 (11th Cir. 2000)). "Once a party offers evidence that an FSIA exception to immunity applies, the party claiming immunity bears the burden of proving by a preponderance of the evidence that the exception does not apply." Id. (citing Aquamar S.A. v. Del Monte Fresh Produce N.A., Inc., 179 F.3d 1279, 1290 (11th Cir. 1999) (citations omitted)). "The FSIA is a jurisdictional statute; it 'does not create or modify any causes of action.' " Comparelli v. Republica Bolivariana De Venezuela, 891 F.3d 1311, 1319 (11th Cir. 2018) (quoting Republic of Austria v. Altmann, 541 U.S. 677, 695 n.15, 124 S.Ct. 2240, 159 L.Ed.2d 1 (2004)).
Bock claims Defendants are subject to jurisdiction under FSIA pursuant to the expropriation exception, 28 U.S.C. § 1605(a)(3). (DE [1] ¶ 20). Bock also alleges "[t]his action is based upon action in connection with commercial activity of Honduras causing direct effect in the United States. See 28 U.S.C. § 1605(a)(2)." (DE [1] ¶ 23).
III. DISCUSSION
Bock alleges jurisdiction under the expropriation exception to the FSIA. 28 U.S.C. § 1605(a)(3). (DE [1] ¶ 20). "To fall within its coverage, [Plaintiffs] must show (1) that rights in property are at issue; (2) that property was taken; (3) that the taking was in violation of international law; and (4) that at least one of the two statutory nexus requirements are satisfied." Comparelli, 891 F.3d at 1319. The two statutory nexus requirements are based upon commercial activity in the United States by the foreign state, agency, or instrumentality. See 28 U.S.C. § 1605(a)(3). Bock alleges that "Honduras sent representatives to the U.S. and Florida and expended hundreds of thousands of dollars to induce U.S. investors to undertake commercial activities in Honduras." (DE [1] ¶ 66). Further, Bock alleges that the expropriation was done to develop agricultural products that would be exported to the United States and elsewhere. Id. ¶ 53.
Defendants argue that the expropriation exception does not apply because there has been no taking in violation of international law. The court must, therefore, determine whether there actually was a taking in violation of international law; a colorable argument that the taking violated international law is insufficient to establish jurisdiction under FSIA. Bolivarian Republic of Venezuela, et al. v. Helmerich & Payne Int'l Drilling Co., 581 U.S. 170, 187, 137 S.Ct. 1312, 197 L.Ed.2d 663 (2017). This determination must be made at the "[a]t the threshold of the action." Id. (quoting Verlinden B.V. v. Central Bank of Nigeria, 461 U.S. 480, 493, 103 S.Ct. 1962, 76 L.Ed.2d 81 (1983)).
"Although they are separate jurisdictional rules, the FSIA expropriation exception and the Second Hickenlooper Amendment each require a showing" that the alleged taking violated international law. Comparelli, 891 F.3d at 1320.
In the context of the FSIA, challenges to jurisdiction "may be resolved by looking to 'material extrinsic from the pleadings, such as affidavits or testimony.' " Comparelli, 891 F.3d at 1320. To establish jurisdiction under the expropriation exception, the court must resolve relevant factual disputes and determine 'that the property in which the party claims to hold rights was indeed property taken in violation of international law.' " Id. at 1319 (quoting Helmerich, 581 U.S. at 174, 137 S.Ct. 1312).
Defendants argue -- and Bock does not dispute -- that prior to being expropriated, the 40 oceanfront acres of land were owned by a Honduran corporation, Desarrollos Turisticos Bock de Honduras, S.A. ("Bock de Honduras"). See (DE [25] ¶ 11). Indeed, the Honduran Constitution prohibits foreigners from acquiring oceanfront properties. See (DE [26], Ex. 3). This, Defendants argue, removes Bock's claim from international law. "[U]nder the international law of property a foreign sovereign's taking of its own nationals' property remains a domestic affair." Fed. Republic of Germany v. Philipp, — U.S. —, 141 S. Ct. 703, 709, — L.Ed.2d — (2021). "This 'domestic takings rule' assumes that what a country does to property belonging to its own citizens within its own borders is not the subject of international law." Id. (expropriation exception did not apply to Nazi-era takings from German citizens); see also, Fogade v. ENB Revocable Trust, 263 F.3d 1274, 1294 (11th Cir. 2001) ("As a rule, when a foreign nation confiscates the property of its own nationals, it does not implicate principles of international law."); Comparelli, 891 F.3d at 1320 (same); Beg v. Islamic Republic of Pakistan, 353 F.3d 1323, 1328 n.3 (11th Cir. 2003) ("International law prohibits expropriation of alien property without compensation, but does not prohibit governments from expropriating property from their own nationals without compensation.").
Bock Holdings LLC owns 100% of the stock of, and completely controls, Bock de Honduras. Bock argues, therefore, that the taking of the oceanfront property owned by Bock de Honduras affected the rights and interests of Bock Holdings, LLC, and its members, all of whom are United States citizens. Bock cites the appellate court decision in Helmerich & Payne Int'l Drilling Co. v. Bolivarian Republic of Venezuela, 743 Fed. Appx. 442, 454 (D.C. Cir. 2018), which held that seizure of a U.S. parent company's wholly owned Venezuelan subsidiary violated international law because it affected the shareholder's value. But the seizure at issue in Helmerich was of the subsidiary itself. The complaint alleged that Venezuela had "entirely commandeered" the subsidiary's operations and "permanently take[n] over management and control" of the business. Id. at 454-55. Thus, the court explained that
Bock offers to amend the Complaint to include these factual allegations, but amendment is not necessary. The facts have been submitted via the Declaration of Richard Reikenis (DE [42] Ex. 1).
[W]hen a state permanently takes over management and control of [a foreign shareholder's] business, completely destroying the beneficial and productive value of the shareholder's ownership of their company, and leaving the shareholder with shares that have been rendered useless, it has indirectly expropriated the ownership of that business and has responsibility under customary international law to provide just compensation to the shareholder.Id. No similar allegations have been made in this case. In fact, Bock's Complaint makes no mention of Bock de Honduras; the property's ownership was raised in Defendants' Motion to Dismiss.
Bock alleges that Defendants wrongfully expropriated a 40-acre oceanfront parcel and failed to effectuate its return as ordered by the Supreme Court of Honduras. But because the property was owned by a Honduran corporation - and could not be owned by a foreign entity - the expropriation was not a violation of international law as required for jurisdiction under FSIA and the Second Hickenlooper Amendment.
Bock next argues that Defendants waived immunity under FSIA by accepting foreign aid from the United States. FSIA states that a foreign government can waive immunity, either expressly or impliedly. 28 U.S.C. § 1605(a)(1); Republic of Argentina v. NML Capital, Ltd., 573 U.S. 134, 142, 134 S.Ct. 2250, 189 L.Ed.2d 234 (2014). According to Bock, the United States sent Honduras $55 million in aid in 2012. The Foreign Relations Authorization act prohibits foreign assistance to governments that have "nationalized or expropriated the property of any United States person." 22 U.S.C. § 2370a(a)(2). Thus, Bock reasons, Honduras' acceptance of foreign assistance from the United States constitutes a waiver of Honduras' right to assert sovereign immunity.
Nothing in § 2370a indicates that a country would waive sovereign immunity by accepting foreign aid from the United States. Rather, if aid is prohibited due to expropriation of property owned by a United States person, the President is authorized to instruct banks and financial institutions to vote against any loan or utilization of funds for the benefit of the offending country. 22 U.S.C. § 2370a(b). Finding that a waiver of sovereign immunity occurs by the acceptance of foreign aid would undermine the requirements for jurisdiction under FSIA and the Second Hickenlooper Amendment and render these statutes superfluous. Even assuming a waiver of sovereign immunity could evolve from the acceptance of foreign aid, the Court can find no waiver here. Section 2370a prohibits aid to foreign countries that have expropriated property owned by United States citizens. As discussed supra, there was no expropriation of property owned by a United States person; the property in question was owned by a Honduras company. Thus, § 2370a(a)(2) does not apply.
Finally, Bock argues that the Complaint asserts subject matter jurisdiction exists under the commercial activity exception in 28 U.S.C. § 1605(a)(2) and that Defendants waived any challenge by failing to address that section in their Motion to Dismiss. Subject matter jurisdiction, however, can never be waived. A district court must "inquire into whether it has subject matter jurisdiction at the earliest possible stage in the proceedings" and must do so "sua sponte whenever it may be lacking." Univ. of S. Ala. v. Am. Tobacco Co., 168 F.3d 405, 410 (11th Cir. 1999) (citations omitted). As discussed supra, the existence of an FSIA exception is jurisdictional. Sachs, 577 U.S. at 30, 136 S.Ct. 390 (FSIA "provides the sole basis for obtaining jurisdiction over a foreign state in the courts of this country") (quotation omitted).
The Court is sympathetic to Defendants' argument that Bock did not assert the commercial activity exception as a basis of subject matter jurisdiction. Paragraph 20 of the Complaint specifically addresses subject matter jurisdiction and lists FSIA, 28 U.S.C. § 1605(a)(3) and the Second Hickenlooper Amendment, 22 U.S.C. § 2730(e)(2). (DE [1] ¶ 20). Paragraph 23 alleges that "[t]his action is based upon action in connection with a commercial activity of Honduras causing direct effect in the United States. See 28 U.S.C. § 1605(a)(2)," but makes no other reference to subject matter jurisdiction. Nevertheless, because the Complaint does reference the commercial activity exception to sovereign immunity, the Court must address whether the exception applies.
The commercial activity exception to FSIA provides jurisdiction over foreign states when "the action is based upon an act outside the territory of the United States in connection with a commercial activity of the foreign state elsewhere and that causes a direct effect in the United States." 28 U.S.C. § 1605(a)(2). Bock argues the property was expropriated by a decree of INA through which farmers were given title to certain lands without compensation or consent of existing landlords. (DE [1] ¶ 52; [42], Ex. 2). The actual purpose of the expropriation decree, they contend, was to allow Defendants to profit from Honduras' agricultural industry, by jointly selling and exporting corn and other vegetables in the United States and elsewhere. Id., Ex. 3. Thus, Bock argues, this action is based upon the commercial activity of Defendants. The "direct effect" in the United States is the millions of dollars of agricultural products imported by the United States from Honduras each year. (DE [42], p. 6).
To determine whether Bock's action is "based upon" Honduras' commercial activities, "we must identify the conduct upon which the suit is based by looking at the particular conduct that constitutes the "gravamen" of the suit, i.e., the "core" of the suit." Global Marine Exploration, Inc. v. Republic of France, 33 F.4th 1312, 1324 (11th Cir. 2022) (cleaned up) (quoting Devengoechea v. Bolivarian Republic of Venezuela, 889 F.3d 1213, 1222 (11th Cir. 2018) and Sachs, 577 U.S. at 35, 136 S.Ct. 390). In this case, the core of this action is the expropriation of property.
"A foreign state engages in commercial activity when it participates in a transaction as a private party would." Sequeira, 815 Fed. Appx. at 350 (citing Beg, 353 F.3d at 1325). The Eleventh Circuit has held repeatedly that taking of land is a sovereign act and not a commercial activity. Beg, 353 F.3d at 1326 ("[c]onfiscation of real property is a public act because private actors are not allowed to engage in 'takings in the manner that governments are"); Sequeira, 815 Fed. Appx. at 350 (foreign government's taking of farmland and subsequent selling of livestock not commercial activity). The motivation behind the action is irrelevant. Id. "[T]he issue is whether the particular actions that the foreign state performs (whatever the motive behind them) are the type of actions by which a private party engages in 'trade and traffic or commerce.' " Republic of Argentina v. Weltover, Inc., 504 U.S. 607, 614, 112 S.Ct. 2160, 119 L.Ed.2d 394 (1992). The gravamen of Bock's suit is expropriation. The expropriation of property can only be accomplished by a sovereign entity, not a private party, and is not commercial activity. This conclusion is bolstered by the fact that FSIA contains a separate exception granting jurisdiction for expropriations made in violation of international law. Beg, 353 F.3d at 1328. Bock's claim does not, therefore, fall within the commercial activity exception to FSIA.
As discussed supra, Bock's claims do not fall within the expropriation exception because the property was not owned by a foreign national and, therefore, the expropriation did not violate international law.
Bock requests jurisdictional discovery, but the Court concludes that discovery is not warranted. The principles of comity underlying FSIA require a balancing of the need for discovery against the "need to protect a sovereign's or sovereign's agency legitimate claim to immunity from discovery." Butler, 579 F.3d at 1314. Here, Bock would seek discovery to establish that an expropriation occurred. But for purposes of deciding this motion, the expropriation was presumed. Thus, discovery on this issue would not yield useful information. The additional areas of inquiry listed by Bock likewise would not alter the conclusion that no exception to FSIA applies in this case.
IV. CONCLUSION
The Defendants, a foreign nation and a foreign agency, are presumptively immune from suit under FSIA unless a statutory exception applies. As discussed supra, neither the expropriation nor commercial activity exception applies to Bock's claims. Accordingly, it is hereby
ORDERED AND ADJUDGED that Defendant's Motion to Dismiss the Complaint (DE [24]) is GRANTED. This case is DISMISSED WITH PREJUDICE. The Clerk of Court is directed to CLOSE this case and DENY AS MOOT any pending motions.
DONE AND ORDERED in Chambers, Fort Lauderdale, Florida, this 31st day of January 2023.