Opinion
CIVIL ACTION NO. H 01-0634
February 15, 2002
MEMORANDUM AND ORDER
This is before the Court on Petitioner Karaha Bodas Company, L.L.C.'s ("KBC'S") Motion for Leave to Register Judgment ("Motion to Register") [Doc. # 49] and Motion for In Camera Review of Second Affidavit of Christopher F. Dugan ("Motion for In Camera Review") [Doc. # 50]. Having reviewed the parties' submissions, all matters of record, and applicable legal authorities, the Court concludes that KBC's Motion to Register and Motion for In Camera Review should be granted.
Respondent Perushahaan Pertambangan Minyak Dan Gas Bumi Negara ("Pertamina") has filed its Opposition to KBC's Motion to Register [Doc. # 55] and Motion for In Camera Review [Doc. # 56]. KBC has filed a Combined Reply to Respondent's Opposition [Doc. # 61]. Pertamina's Motion for Leave to File a Sur-Reply in Opposition to Motion for In Camera Review of Second Affidavit of Christopher F. Dugan [Doc. # 62] is granted, and the Court has also considered Pertamina's Sur-Reply [Doc. # 63].
On December 4, 2001, a final judgment was entered against Pertamina in favor of KBC for $261,166,654.92 plus interest ("Judgment"). In an Order entered January 25, 2002, this Court found that a reasonable period of time had passed since entry of the judgment and authorized KBC to commence proceedings to execute on the Judgment. KBC now seeks leave to register the Judgment in other districts pursuant to 28 U.S.C. § 1963.
Section 1963 provides in relevant part: A judgment in an action for the recovery of money or property entered in any court of appeals, district court, bankruptcy court, or in the Court of International Trade maybe registered by filing a certified copy of the judgment in any other district or, with respect to the Court of International Trade, in any judicial district, when the judgment has become final by appeal or expiration of the time for appeal or when ordered by the court that entered the judgment for good cause shown.
This Court has jurisdiction to address KBC's Motion to Register while Pertamina's appeal is pending. Chicago Downs Ass'n v. Chase, 944 F.2d 366, 371-72 (7th Cir. 1991). Pertamina has not filed a supersedeas bond or otherwise sought a stay of execution pending appeal.
(emphasis added).
Good Cause Standard. — Numerous courts have found that § 1963's requirement of "good cause" is met by a showing that the defendant lacks sufficient property in the judgment forum to satisfy' the judgment, and has substantial property in another district. Columbia Pictures Television, Inc. v. Krypton Broadcasting of Birmingham, Inc., 259 F.3d 1186, 1197-98 (9th Cir. 2001); Chicago Downs Ass'n, 944 F.2d at 371; Dyll v. Adams, 1998 U.S. Dist. LEXIS 1616, *3-*4 (N.D. Tex. Feb. 6, 1998); Jack Frost Lab., Inc. v. Physicians Nurses Mfg. Corp., 951 F. Supp. 51, 52 (S.D.N.Y 1997); Bingham v. Zolt, 823 F. Supp. 1126, 1136 (S.D.N.Y. 1993), aff'd, 66 F.3d 553 (2d Cir. 1995); Schreiber v. Kellogg, 839 F. Supp. 1157, 1162 (E.D. Pa. 1993). The decision to allow registration of the Judgment lies in the Court's discretion. See Chicago Downs Ass'n, 944 F.2d at 372 (the district court's finding of good cause was not an abuse of discretion); See Columbia Pictures Television, Inc., 259 F.3d at 1197 ("We review the district court's decision to certify the judgment for registration based on a finding of good cause for an abuse of discretion.").
KBC's Evidence of Good Cause. — In support of "good cause," KBC has submitted the First Affidavit of Christopher F. Dugan, Exhibit 4 to Motion to Register ("First Duggan Affidavit"), which identifies certain assets of Pertamina located in the Southern District of Texas and states that such assets are insufficient to satisfy the Judgment. Pertamina has not contradicted the First Dugan Affidavit in any way.
The January 31, 2002 letter to this Court from Pertamina's counsel regarding a discovery dispute with KBC supports a finding that Pertamina has insufficient assets in this district to satisfy the Judgment. In that letter, counsel describes Pertamina's Houston office as "small" and states that it "merely responds to requests for information about the Indonesian oil and gas sector and sometimes facilitates purchases by Pertamina in the U.S.; it is not engaged in the sale of products or any other significant business matters in the U.S. and is not connected to the subjects of KBC's notice."
KBC has also submitted the Second Affidavit of Christopher F. Dugan ("Second Dugan Affidavit") in support of its position that Pertamina has substantial assets in other jurisdictions. KBC has asked the Court to consider the Second Dugan Affidavit in camera so as to avoid informing Pertamina of its execution strategy. Pertamina objects that consideration of the Second Dugan Affidavit in camera violates its due process right to confront the evidence against it and undermines the protections afforded to it by the Foreign Sovereign Immunities Act ("FSIA"). Pertamina's argument is unpersuasive.
In support of its ex parte submission, KBC relies in part upon Endicott-Johnson Corp. v. Encyclopedia Press, 266 U.S. 285, 288 (1928), in which the Supreme Court stated:
[T]he established rules of our system of jurisprudence do not require that a defendant who has been granted an opportunity to be heard and has had his day in court, should, after a judgment has been rendered against him, have a further notice and hearing before supplemental proceedings are taken to reach his property in satisfaction of the judgment. Thus, in the absence of a statutory requirement, it is not essential that he be given notice before the issuance of an execution against his tangible property; after the rendition of the judgment he must take notice of what will follow, no further notice being necessary to advance justice.
(citations omitted). The Fifth Circuit analyzed Endicott in Brown v. Liberty Loan Corp. of Duval, 539 F.2d 1355, 1363-65 (5th Cir. 1976), and found "[m]ore recent decisions of the Supreme Court establish the need to balance various interests in order to determine whether due process requires notice and an opportunity for a hearing whenever an individual is to be deprived of property permanently or temporarily." See also Morrell v. Mock, 270 F.3d 1090, 1097 (7th Cir. 2001) ("In detemining . . . what post-judgment process (if any) is due, we must balance the nature of the private interests at stake, the risk of harm from erroneous deprivations, and the government's interests affected.").
The Brown court cited North Georgia Finishing. Inc. v. Di-Chem., Inc., 419 U.S. 601 (1975); Mitchell v. W. T Grant Co., 416 U.S. 600 (1974); Fuentes v. Shevin, 407 U.S. 67 (1972); and Sniadach v. Family Finance Corp., 395 U.S. 337 (1969).
This matter is before the Court on KBC's request to register the Judgment in other districts, not a request for execution. Thus, at this stage Pertamina is not being deprived of property, even temporarily. The balancing test articulated by Brown arguably is not applicable in this situation. Nonetheless, the Court has undertaken the balancing test proposed by Pertamina and finds in favor of KBC.
KBC was first awarded Judgment against Pertamina by an International Arbitral Tribunal in December, 2000. This Court affirmed the award approximately one year later and issued its Judgment. Pertamina has now appealed that Judgment to the Fifth Circuit. KBC already has had to wait a substantial period before commencing efforts to collect the award and Judgment from Pertamina. There is a very real danger that Pertamina's assets in the United States will be depleted as time wears on. This danger is enhanced by the impending reorganization of Pertamina and, possibly, the precarious state of the Indonesian economy.
Pertamina has the power, even now, to stop KBC's collection efforts by filing a supersedeas bond.
Pertamina has expressed serious concerns that KBC's actions will interfere with Indonesia's sovereign immunity because some of the property KBC has identified as belonging to Pertamina may in fact belong to the Indonesian government. Pertamina's concerns can be addressed adequately in any forum in which KBC seeks a writ of execution or other process against specific property. Whether or not specific property is immune or exempt from execution is not before this Court. In addition, the risk of harm to Pertamina is mitigated by procedures under state law commonly available for relief from wrongful execution, including the right to seek damages and attorney's fees. The Court finds that the balance of interests in this case weighs in favor of KBC.
The ESIA expressly allows execution on property in the United States of a foreign state as long as the provisions of § 1610 are met. Section 1610(c) of the FSIA prohibits attachment or execution until the court has ordered such attachment and execution after determining that a reasonable period of time has elapsed following entry of judgment. KBC's current motion complies with § 1610(c) because KBC has obtained an order declaring that a "reasonable period of time" has elapsed since entry of judgment. In any event, the Court notes that only registration is currently at issue, not execution against property. Thus, Pertamina's argument that there is no provision in the FSIA allowing ex parte proceedings against the property of a foreign state is not determinative of the issue at hand.
By the same token, Pertamina has identified no statutory bar to the in camera review of the Second Dugan Affidavit.
Pertamina relies on Ferrostaal Metals Corp. v. S.S. Lash Pacfico, 652 F. Supp. 420, 423, (S.D.N.Y. 1987). This case is inapposite. In Ferrostaal, the judgment creditor served various banks with non-judicial ex parte restraining notices enjoining payments to the judgment debtor. Id. at 421. The notices were not issued pursuant to a court order and thus they were "just the type of restraining notices against which § 1610(c) of the Act protects foreign states." Id. at 423. In contrast, KBC has appropriately sought an order from the Court before engaging in enforcement efforts against Pertamina.
The Court concludes that its consideration of the Second Dugan Affidavit ex parte does not violate Pertamina' s right to due process or it rights under the ESIA. The affidavit supports KBC's requests as to jurisdictions in which registration of the Judgment may take place. A separate order authorizing execution in those jurisdiction will also be necessary.
Scope of Leave to Register. — KBC's Motion to Register seeks leave to register the Judgment in other districts generally. However, the Second Dugan Affidavit presents evidence that Pertamina has substantial assets potentially subject to execution in Delaware, New York, and California. The body of case law interpreting the "good cause" provision of 28 U.S.C. § 1963 does not establish whether registration should be granted generally, or should be limited to any district in which the plaintiff has presented evidence that the defendant has substantial assets. The Court finds that the reasonable and equitable application of the "good cause" standard mandates, during the pendency of an appeal, registration only in those districts for which KBC has supplied evidence of the existence of assets. See Jack Frost Lab., Inc., 951 F. Supp. at 52 (granting motion to register judgment in Florida, but not in district courts in any other states because plaintiff presented no evidence of assets outside of Florida).
The Court concludes, after balancing the interests of the parties, that due process requires the provision of notice to Pertamina of the jurisdictions in which the Judgment against it may be registered.
For the reasons discussed above, the Court finds that good cause exists to allow KBC to register the December 4, 2001 Judgment in the district courts in Delaware, New York, and California. It is therefore
ORDERED that KBC's Motion to Register [Doc. # 49] is GRANTED. It is further
ORDERED that KBC's Motion for In Camera Review [Doc. # 50] is GRANTED.
It is further
ORDERED that KBC may register the Judgment entered December 4, 2001 in the district courts in Delaware, New York, and California.