Marlowe v. Argentine Naval Commission

Citations: 604 F. Supp. 703; 1985 U.S. Dist. LEXIS 21752Docket: Civ. A. 84-1870

Court: District Court, District of Columbia; March 14, 1985; Federal District Court

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The United States District Court for the District of Columbia, presided over by Judge Charles R. Richey, addressed the defendant Argentine Naval Commission's Motion to Dismiss in the case Marlowe v. Argentine Naval Commission (Civ. A. No. 84-1870). The Court denied the motion, with both parties agreeing on the relevant facts. The lawsuit stems from an alleged breach of contract regarding the purchase of two aircraft by the Argentine Navy from Servistan S.A., a Panamanian corporation represented by the plaintiff, Randall J. Marlowe. The contract negotiations occurred in Buenos Aires and Washington, D.C., with the Argentine Naval Commission signing on behalf of the Armada. Notably, at the time of the contract's execution, Servistan S.A. did not possess the aircraft, which were to be obtained from an Ecuadorian entity.

The contract stipulated that payment would be secured by an irrevocable letter of credit, with details regarding inspection, warranties, and conditions for delays included. Article 10 specified that the contract would be governed by the laws of the District of Columbia and outlined communication procedures for both parties. The plaintiff filed the complaint on June 19, 1984, alleging breach of contract and fraud, with service made to the Argentine Naval Commission in Washington, D.C. The defendant received the summons but did not respond in time, leading to a default judgment granted on September 28, 1984. Subsequently, the defendant sought relief from this default judgment after the plaintiff attached some of its local assets.

On January 30, 1985, the Court vacated a default judgment against ANC, noting the liberal application of Rule 60(b) in default judgment cases. ANC subsequently filed a Motion to Dismiss, asserting three grounds: (1) lack of capacity to be sued, (2) insufficient service of process under the Foreign Sovereign Immunities Act (FSIA), and (3) lack of jurisdiction under the FSIA. The Court found these arguments unpersuasive.

ANC contended that its capacity to be sued should be determined by Argentine law, claiming it is a subordinate entity of the Argentine Armada and thus, can only be sued through the Republic of Argentina. This premise was rejected; the Court emphasized that jurisdictional capacity is governed by international and federal common law rather than the law of the chartering state. Citing *First National City Bank v. Banco para el Comercio Exterior de Cuba*, the Court noted that allowing a state to dictate its own liability could undermine rights under international law.

The Court concluded that under federal law, specifically the FSIA, ANC qualifies as a "foreign state" or an "agency or instrumentality" of a foreign state, granting the Court jurisdiction over ANC in this civil action, assuming proper service is executed.

The excerpt outlines the legal classification of the ANC (Argentine Navy Command) concerning its status as a "foreign state" or an "agency or instrumentality of a foreign state" under the Foreign Sovereign Immunities Act (FSIA). The FSIA defines a "foreign state" to include political subdivisions and agencies, while an "agency or instrumentality" must be a separate legal entity that is neither a U.S. citizen nor created under third-country laws. The court must determine ANC's status based on these definitions, noting that although both terms are equated in many respects, they differ in terms of service of process.

In the case of Unidyne Corp. v. Aerolineas Argentinas, the court dismissed a suit against ANC due to improper service, emphasizing that ANC is a department of the Argentine Navy, directly linked to the government and treated as a diplomatic agent. ANC's operations are entirely directed by the Argentine Navy, with no independent legal existence. The court concluded that ANC's characteristics do not support its status as a separate legal entity; rather, it operates as an integral part of the Argentine Navy, qualifying as a "foreign state" under the FSIA.

The plaintiff in Unidyne failed to serve ANC properly under the provisions applicable to foreign states. ANC’s assertion that it is not a suable entity was countered by the court's finding that its relationship with the Argentine government indicates it qualifies as a "foreign state," rather than an independent agency or instrumentality. The court clarified that ANC's role does not negate its juridical capacity, reinforcing the notion that ANC is a "foreign state" under federal law.

Unidyne establishes that ANC qualifies as a "foreign state" under federal law and is a proper defendant under the Foreign Sovereign Immunities Act (FSIA) if not immune from suit and properly served. Under 28 U.S.C. § 1608(a), service on a foreign state must follow any special arrangements specified in contracts between the parties. In this case, Article 10 of the contract mandated that communications, including legal notices, be sent by mail or telex to a designated address. The plaintiff served ANC by mailing the summons and complaint to the Chief of the Argentine Naval Commission at the specified address, which the court deemed substantial compliance with the contractual provisions, sufficient to confirm receipt of notice.

ANC's argument that Article 10-B did not constitute a "special arrangement for service" under the FSIA was rejected as overly technical. The court affirmed that the service was appropriate as it fell under the category of "notices, requests, demands or other communications" as outlined in the contract.

The FSIA permits jurisdiction over foreign states that waive their immunity from suit. ANC explicitly waived its immunity by agreeing that its contract would be governed by the laws of the District of Columbia, which constitutes an implied waiver under 28 U.S.C. § 1605(a)(1). The House Report elaborates that courts recognize implicit waivers when a foreign state agrees to a specific governing law for a contract, supporting the court's jurisdiction in this case.

The House Report is recognized as an authoritative source in legislative history, frequently cited by federal courts. Notable cases include Ohntrup v. Firearms Center, Inc., which suggests that an agreement to arbitrate or use another country’s laws implies a waiver of sovereign immunity. Resource Dynamics International v. General People's Committee reinforced this idea, with a contract clause stipulating Virginia law interpreted as an implicit waiver under 28 U.S.C. 1605 (a)(1). Similarly, in Ipitrade International v. Federal Republic of Nigeria, the court confirmed an arbitration award, asserting that an agreement to adjudicate under Swiss law constituted a waiver of sovereign immunity. These precedents indicate that a contractual agreement on governing law generally implies a waiver of sovereign immunity. In the present case, ANC's acceptance of District of Columbia law implies such a waiver. ANC challenges the House Report's authority, but cited cases provide substantial support for its conclusions. ANC argues that international law necessitates explicit consent to jurisdiction, but this does not align with the current interpretation of the Foreign Sovereign Immunities Act (FSIA), which allows for implied waiver. Additionally, while ANC claims insufficient contacts for personal jurisdiction, such a defense can be waived, and its implied waiver of immunity under 28 U.S.C. 1605 (a)(1) also waives lack of personal jurisdiction.

The Court finds that the Argentine Naval Commission (ANC) qualifies as a "foreign state" under the Foreign Sovereign Immunities Act, allowing it to be subject to jurisdiction in the U.S. The immunity provisions require a connection between the lawsuit and the U.S. or a waiver of immunity by the foreign state. ANC has established sufficient minimum contacts with the U.S., as it has its principal place of business in Washington, D.C., where the contract was negotiated and where notifications were directed. The Court asserts that asserting jurisdiction over ANC does not violate principles of fair play and substantial justice. 

The Court denies ANC's motion to dismiss, affirming proper service and a waiver of sovereign immunity. Additionally, the Court clarifies that jurisdictional capacity is determined by federal law, not state law. Although the plaintiff initially overlooked a relevant provision regarding service, it was ultimately deemed proper. The Court acknowledges that while there were contacts between ANC and a representative during negotiations, the extent related to the commercial activities exception under 28 U.S.C. 1605(a)(2) remains unclear. However, the finding of sufficient minimum contacts negates the need for further ruling on the immunity issue. The Court does not address the merits of the underlying case at this stage.