Summary
In Walters, the Second Circuit held that even if a foreign state does not enter an appearance to assert an immunity defense, a court still must determine that execution immunity is unavailable under the FSIA.
Summary of this case from Arbitration Between Int'l Legal Consulting Ltd. v. Malabu Oil & Gas Ltd.Opinion
No. 18 Misc. 302.
December 2, 2009.
OPINION ORDER
The Industrial and Commercial Bank of China, Ltd., Bank of China, Ltd., and China Construction Bank Corp. (collectively, "the Banks"), which are not parties to this litigation, seek an order vacating restraining notices and quashing subpoenas issued to them by plaintiffs Debbie and Max Walters.
I. Background
Mr. and Mrs. Walters originally filed suit in 1993 in the U.S. District Court for the Western District of Missouri under various theories of product liability, negligence, and breach of warranty stemming from the allegedly improper manufacture of an SKS semi-automatic rifle made in China that jammed and killed their thirteen year old son. The Walters named the People's Republic of China ("PRC"), among other defendants, in their amended complaint. The PRC asserted its sovereign immunity in that action, but that court nonetheless issued a default judgment against the PRC for $10 million in October 1996, finding that it had jurisdiction over the PRC pursuant to the "commercial activity" exception to immunity found in the Foreign Sovereign Immunities Act ("FSIA"). ( See Walters v. Century International Arms, Inc., No. 93 Civ. 5188 ¶ 5 (W.D. Mo. Oct. 22, 1996), Ex. E to Dec. of Lanier Saperstein dated Nov. 13 2009 ("Saperstein Dec.").) For the past thirteen years, the Walters have sought — so far without success — to collect against the PRC.
In October 2006, the default judgment against the PRC was extended for an additional ten years. (See Ex. M to Saperstein Dec.)
In October of this year, the Walters served restraining notices and subpoenas on the New York branches of the Industrial and Commercial Bank of China, Ltd., Bank of China, Ltd., and China Construction Bank Corp. (See Exs. N-P to Saperstein Dec.) The notices and subpoenas seek "[a]ll documents showing all property, including money, in your possession in which the government of The People's Republic of China has any interest" and "forbid[] [the Banks] to make or suffer any sale, assignment, transfer or interference with any property (including money) in which the [PRC] has any interest. . . ." (Id.)
The Banks subsequently moved to vacate the restraining notices and quash the subpoenas. Specifically, the Banks contend that the Walters seek to restrain funds and subpoena documents related to property that may not be restrained under the FSIA. The Walters respond in their memoranda — and their counsel specifically represented to the Court at oral argument on November 24, 2009 — that they seek to restrain only property belonging to the PRC that is held by the Banks outside of the United States. They contend that such property falls outside of the scope of the FSIA and, therefore, can be restrained. Plaintiffs also argue belatedly in a surreply memorandum that the Banks lack standing to assert the affirmative defense of sovereign immunity on the PRC's behalf.
On November 20, 2009, the Court received a copy of a letter from the embassy of the PRC to the U.S. Department of State in which the PRC expresses its ongoing belief that, as a sovereign state, it is immune from any attempt to restrain its funds and states its "grave concern" over the Walters' attempt to do so. (Letter from the Embassy of the People's Republic of China to the U.S. Department of State dated Nov. 11, 2009 at 1.)
II. Legal Standard
III. Analysis
28 U.S.C. § 1602 28 U.S.C. §§ 16101611 Elliott Associates, L.P. v. Banco De La Nation,2000 WL 1449862see also Kensington Intern. Ltd. v. Republic of Congo, 461 F.3d 238 243 Fidelity Partners, Inc. v. Philippine Export Foreign Loan Guarantee Corp., 921 F. Supp. 11131119 see also Aurelius Capital Partners, LP v. Republic of Argentina,584 F.3d 12013028 U.S.C. § 1610 States 28 U.S.C. § 1610see also FG Hemisphere Associates, LLC v. Republique du Congo, 455 F.3d 575588 See EM Ltd. v. Republic of Argentina,473 F.3d 463486
The Walters' argument that the Banks lack standing to raise the defense of sovereign immunity pursuant to the FSIA in this action is unavailing, as the PRC itself has asserted the defense of sovereign immunity, both in the original action in the Western District of Missouri and in the action before this Court. ( See Saperstein Dec. ¶ 5; Ex. C. to Saperstein Dec. ¶ 4; Letter from the Embassy of the People's Republic of China to the U.S. Department of State dated Nov. 11, 2009.)
VI. Conclusion
In order to execute on a default judgment against the PRC, the Walters seek to restrain assets and to subpoena documents concerning assets owned by the PRC and held by the Banks outside of the United States. The FSIA provides no exception to the PRC's sovereign immunity that would justify that procedure. Accordingly, the Banks' motion to vacate the restraining notices and to quash the subpoenas is granted.
SO ORDERED: