Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_99-cv-04941/USCOURTS-cand-3_99-cv-04941-18/pdf.json

Nature of Suit Code: 360
Nature of Suit: Other Personal Injury
Cause of Action: 28:1332 Diversity-Personal Injury

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United States District Court

For the Northern District of California

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

EMIL ALPERIN, et al.,

Plaintiffs,

 v.

VATICAN BANK, et al.,

Defendants. /

No. C-99-04941 MMC

ORDER GRANTING DEFENDANT IOR’S

MOTION TO DISMISS FOURTH

AMENDED COMPLAINT

(Docket No. 272)

Before the Court is the motion to dismiss plaintiffs’ Fourth Amended Complaint filed

March 20, 2006 by defendant Istituto per le Opere di Religione (“IOR”), seeking dismissal of

the claims asserted against IOR for lack of subject matter jurisdiction under the Foreign

Sovereign Immunities Act and for lack of standing. Plaintiffs have filed an opposition to the

motion; IOR has filed a reply. Having considered the papers filed in support of and in

opposition to the motion, the Court rules as follows.

BACKGROUND

Plaintiffs consist of both individual and organizational plaintiffs, as well as a

purported class of all Serbs, Jews, Roma, and former Soviet Union citizens and their heirs

and beneficiaries who suffered monetary and/or property losses assertedly caused by the

Independent State of Croatia (“NDH”) during the period from April 1941 through May 1945. 

(See Fourth Amended Complaint (“4AC”) ¶¶ 1, 45-73.) The defendants are IOR and the

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Order of Friars Minor (“OFM”). (See 4AC ¶¶ 74-85.) 

According to plaintiffs, defendants “accepted, concealed, hypothecated, laundered,

retained, converted and profited from assets looted by the Ustasha Regime during April

1941 through May 1945 and deposited in, or converted, concealed, hypothecated,

trafficked, credited, pledged, exchanged, laundered or liquidated through, the IOR, and

OFM after the demise of the NDH in May 1945.” (See id. ¶ 8.) Specifically, plaintiffs

allege that their property was taken by the Ustasha Regime and added to the Ustasha

Treasury. (See id. ¶¶ 41-44.) Plaintiffs allege that “[m]ore than 200 million Swiss francs”

from the Ustasha Treasury were “transferred to Vatican City and the College of San

Girolamo Degli Illirici and then to the IOR for conversion.” (See id. ¶ 154.) Plaintiffs further

allege that “[i]n 1948, 2,400 kilos of Ustasha Treasury gold was moved from the IOR to

Swiss bank accounts.” (See id. ¶ 155.) Additionally, plaintiffs allege that jewels, gold

coins, and gold jewelry from the Ustasha Treasury were converted after the end of World

War II by IOR and OFM before being transferred to Swiss bank accounts. (See id. ¶ 159.)

Plaintiffs further allege that a portion of the Ustasha Treasury was “transferred,

credited, and exchanged into the IOR’s gold trading program” in the United States. (See id.

¶ 39.) Plaintiffs allege that IOR deposited gold from the Ustasha Treasury in the Federal

Reserve Bank in New York and the Republic Bank of New York through the 1960's. (See

id. ¶¶ 37, 166.) Plaintiffs also allege that “[f]unds from the Ustasha Treasury laundered by

IOR were used to set up the publishing and commercial activities of the Croatian Publishing

House Croatia and the Croatian Historical Institute . . . and to expand the existing

operations of the Danica newspaper, the Croatian Franciscan Custody of the Holy Name,

the Franciscan Printery, the Croatian Almanac, and the Croatian Catholic Messenger

newspaper, all in Chicago under the direction of OFM.” (See id. ¶ 35.) Plaintiffs claim that

IOR “profited from Ustasha Treasury transactions involving banks in various European and

South American countries” and enhanced its position “as a post war gold trader on both

public and private markets. (See id. ¶¶ 162, 165.) 

By the instant complaint, plaintiffs assert causes of action against defendants for an

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 The moving party may make either a facial or a factual attack on the pleadings. 

See Wolfe v. Strankman, 392 F.3d 358, 362 (9th Cir. 2004). In a facial attack, the moving

party “‘asserts that the allegations contained in a complaint are insufficient on their face to

invoke federal jurisdiction.’” Id. (quoting Safe Air for Everyone v. Meyer, 373 F.3d 1035,

1039 (9th Cir. 2004)). In a factual attack, the moving party challenges the truth of the

allegations with extrinsic evidence such as affidavits. Id. In a factual attack, the opposing

party must respond with affidavits or other evidence to satisfy its burden of establishing

subject matter jurisdiction. Id. Here, IOR has submitted declarations in support of its

argument that it is a foreign sovereign, but it has not submitted extrinsic evidence with

respect to whether it falls within any of the FSIA’s exceptions to sovereign immunity. 

Plaintiffs have not submitted any evidence in opposition, and have treated IOR’s motion as

a facial attack, arguing that the allegations are sufficient on their face to establish

jurisdiction under the FSIA’s exceptions. IOR likewise characterizes its motion as a facial

attack, and makes no argument that plaintiffs are required to respond with evidence to

satisfy their burden of establishing jurisdiction. (See Motion at 1:7-10.) Because IOR’s

extrinsic evidence is limited to the issue of its status as a foreign sovereign, and because

the parties have not argued the issue, the Court will assume plaintiffs are not required to

respond with extrinsic evidence to survive the motion, and, accordingly, will analyze the

sufficiency of the complaint on its face. 

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accounting, conversion, unjust enrichment, restitution, and violations of international law. 

(See id. ¶¶ 182-201.)

LEGAL STANDARD

A motion to dismiss for lack of subject matter jurisdiction is brought pursuant to Rule

12(b)(1) of the Federal Rules of Civil Procedure. See Fed. R. Civ. P. 12(b)(1). When ruling

on a facial attack under Rule 12(b)(1), the Court “must accept as true all material

allegations of the complaint, and must construe the complaint in favor of the complaining

party.” See Warth v. Seldin, 422 U.S. 490, 501 (1975).1 

DISCUSSION

IOR moves to dismiss the claims against it on the grounds it is immune from suit

under the Foreign Sovereign Immunities Act (“FSIA”) and that plaintiffs lack standing.

A. Foreign Sovereign Immunities Act

The FSIA “provides the ‘sole basis’ for obtaining jurisdiction over a foreign sovereign

in the United States.” See Republic of Argentina v. Weltover, Inc., 504 U.S. 607, 611

(1992). The district courts have “original jurisdiction . . . of any nonjury civil action against a

foreign state . . . as to any claim for relief in personam with respect to which the foreign

state is not entitled to immunity” under the FSIA or any applicable international agreement. 

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See 28 U.S.C. § 1330(a); see also 28 U.S.C. § 2604 (providing “a foreign state shall be

immune from the jurisdiction of the courts of the United States and of the States except as

provided in sections 1605 to 1607 of this chapter”). The FSIA applies retroactively to all

conduct, including conduct occurring before its enactment. See Republic of Austria v.

Altmann, 541 U.S. 677, 697 (2004).

The defendant “bears the burden of establishing its immunity, including the burden

of proof that no exception applies.” See Phaneuf v. Republic of Indonesia, 106 F.3d 302,

306 (9th Cir. 1997). The defendant must first establish a prima facie case of sovereign

immunity, which gives rise to a presumption of immunity, by demonstrating that it is a

foreign state within the meaning of the FSIA. See id. If the defendant establishes a prima

facie case of immunity, the burden shifts to the plaintiff to establish that an exception

applies. See id. at 307. If the plaintiff meets its burden, the defendant then bears the

burden of showing that the exception does not apply. See id.

1. Agency or Instrumentality

IOR argues that it is an agency or instrumentality of the Holy See, which plaintiffs

concede is a foreign sovereign. (See Opp. at 1:23-24.) A foreign state “includes a political

subdivision of a foreign state or an agency or instrumentality of a foreign state.” See 28

U.S.C. § 1603(a). An agency or instrumentality of a foreign state is any entity that is (1) “a

separate legal person, corporate or otherwise”; (2) “an organ of a foreign state or political

subdivision thereof, or a majority of whose shares or other ownership interest is owned by a

foreign state or political subdivision thereof”; and (3) “neither a citizen of a State of the

United States . . . nor created under the laws of any third country.” See 28 U.S.C. §

1603(b). As plaintiffs concede (see Opp. at 2:24-25), IOR is a separate legal person and is

not a citizen of the United States or created under the laws of any third country, (see Caridi

Decl. ¶¶ 35, 47). Consequently, the issue that remains is whether IOR is an organ of the

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The relevant inquiry is whether IOR is an agency or instrumentality “at the time the

lawsuit is filed,” as opposed to “the time of the alleged wrongdoing.” See Patrickson v.

Dole Food Co., 251 F.3d 795, 805 (9th Cir. 2001). 

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A “juridic person” is a “fictitious” rather than a “natural” person. (See id. ¶ 25.) A

“public juridic person” is an entity that “is created by the specific grant of the competent

authority.” (See id. ¶ 27.)

4

 “A chirograph is a traditionally handwritten instrument through which the Pontiff

expresses his will. In the Holy See’s legal system, the papal chirograph is law.” (See

Caridi Decl. ¶ 32 n.1.) 

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foreign state. See 28 U.S.C. § 1603(b)(2).2

 

To determine whether an entity is an organ, “courts consider whether the entity

engages in a public activity on behalf of the foreign government.” See EIE Guam Corp. v.

Long Term Credit Bank of Japan, 322 F.3d 635, 640 (9th Cir. 2003). In making this

determination, courts examine the following factors: (1) “the circumstances surrounding the

entity’s creation”; (2) “the purpose of its activities”; (3) “its independence from the

government”; (4) “the level of government financial support”; (5) “its employment policies”;

and (6) “its obligations and privileges under state law.” See EIE Guam Corp., 322 F.3d at

640. 

a. Circumstances surrounding IOR’s creation

The first factor looks to whether the entity was created by public law. See, e.g., id.

(finding organ status where entity created pursuant to laws enacted by Japanese Diet);

Corporacion Mexicana de Servicios Maritimos, S.A. de C.V. v. M/T Respect, 89 F.3d 650,

655 (9th Cir. 1996) (finding organ status where entity created by Mexican Constitution,

Federal Organic Law, and Presidential Proclamation). IOR is a “public juridic person”

under canon law. (See Declaration of Professor Settimio Carmignani Caridi (“Caridi Decl.”)

¶¶ 25-26.)3 IOR’s status as a public juridic person was established on March 1, 1990,

pursuant to the Chirographum quo nova ordinatio datur Organismo Istituto per le Opere

(“1990 Chirograph”)4 and Adnexum Statuto, Istituto per le Opere di Religione (“1990

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Caridi states that the 1990 Statuto is the “internal governing regulations” of IOR. 

(See Caridi Decl. ¶ 32.) 

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Plaintiffs argue the Caridi Declaration should not be given any weight because IOR

has failed to provide translated copies of the documents relied upon by Caridi. IOR did,

however, provide copies and translations of the primary sources Caridi relied upon in his

declaration, in particular, the 1990 Chirograph and the 1990 Statuto. (See Lena Decl., filed

June 30, 2006, Ex. A.) Plaintiffs further argue that Caridi’s declaration “should be accorded

little if any weight” because “IOR is asking the Court to enforce religious law - canon and

ecclesiastical - in a secular property dispute with non-members of the Roman Catholic

religion.” (See Opp. at 3:9-11, 3:26-28.) IOR is not, however, asking the Court to enforce

religious law; rather, it is presenting its governing laws to establish it is an agency or

instrumentality of a foreign state as defined by the FSIA.

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Statuto”)5 issued by Pope John Paul II, the governing authority of the Holy See.6 (See

Caridi Decl. ¶ 32.) Accordingly, the circumstances surrounding IOR’s creation, and, in

particular, its creation as a juridic person by the Pope, support a finding of organ status.

b. Purpose of IOR’s activities

The second factor focuses on whether the entity serves a public purpose or whether

it acts as an independent commercial enterprise to maximize its own profits. See, e.g., EIE

Guam Corp., 322 F.3d at 640 (finding organ status where entity’s purpose was to carry out

national policy to revitalize Japanese financial system); Kelly v. Syria Shell Petroleum Dev

B.V., 213 F.3d 841, 848 (9th Cir. 2000) (finding organ status where entity’s purpose was to

develop and explore Syria’s mineral resources); but see, e.g., Patrickson v. Dole Food Co.,

251 F.3d 795, 808 (9th Cir. 2001) (finding no organ status where entity, created to exploit

resources owned by Israeli government, was “independent commercial enterprise[ ]” acting

to “maximize profits rather than pursue public objectives”). 

According to the 1990 Statuto, IOR’s purpose is to “provide custody and

administration of movables and immovables transferred or entrusted to the same institute

for the purpose of works of religion and charity.” (See Caridi Decl. ¶ 37; see also

Declaration of Jeffrey S. Lena (“Lena Decl.”) ¶ 4 & Ex. A (Piccolo Decl., 1990 Bylaws

Translation (“Bylaws Translation”)).) The 1990 Statuto authorizes IOR to act “as a fiduciary

of the deposited funds for designated pious purposes, and as an autonomous pious

foundation that directly carries out the charitable purposes of the Holy See and the State of

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Vatican City.” (See Caridi Decl. ¶ 38; see also Lena Decl. Ex. A (Bylaws Translation).) 

IOR is not authorized to retain profits. (See Caridi Decl. ¶ 53.) Accordingly, IOR serves a

public purpose of the Holy See and is not an “independent commercial enterprise”;

consequently, this factor supports a finding of organ status.

c. Independence from the Holy See

The third factor focuses on the entity’s structure. The Courts of Appeals have held

that an entity is an organ of the foreign state where the entity’s board is comprised of highranking government officials. See, e.g., Kelly, 213 F.3d at 848 (finding organ status where

board members “have invariably been high-level Syrian government officials”); Patrickson,

251 F.3d at 808 (finding no organ status where entity was “not run by government

appointees”). Here, the Cardinals’ Commission, the highest administrative level of IOR, is

comprised of five high-ranking government officials, all appointed by the Holy See. (See

Caridi Decl. ¶¶ 41-42; see also Lena Decl. Ex. A (Bylaws Translation).) Plaintiffs argue,

however, that the Holy See lacks control over IOR because the Cardinals’ Commission

does not conduct the day-to-day activities of IOR. Although the Cardinals’ Commission

does not itself oversee IOR’s day-to-day activities, the Commission appoints and removes

members of the Oversight Council, including the IOR’s president (see Caridi Decl. ¶ 43;

see also Lena Decl. Ex. A (Bylaws Translation)), who, as plaintiffs concede, is responsible

for IOR’s day-to-day operations (see Opp. at 7:25-27). Furthermore, an entity “may be an

organ of a foreign state even if it has some autonomy from the foreign government.” See

EIE Guam Corp., 322 F.3d at 640. Simply “because ‘the [state] is not directly involved in

the day-to-day activities of [the entity] does not mean that it is not exercising control over

the entity.’” See id. (alteration in original) (quoting Gates v. Victor Fine Foods, 54 F.3d

1457, 1461 (9th Cir. 1995)). Moreover, IOR “cannot change its rules of internal

governance without permission of and final approval by the sovereign,” further indicating a

lack of independence from the Holy See. (See Caridi Decl. ¶ 36; see also Lena Decl. ¶ 4 &

Ex. A (Piccolo Decl., 1990 Chirograph Translation).) Accordingly, IOR’s lack of

independence from the Holy See supports a finding of organ status.

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d. Financial support from the Holy See

The fourth factor focuses on whether the entity is funded by the government. See,

e.g., EIE Guam Corp., 322 F.3d at 640 (finding organ status where entity funded by

government and compensated by government for all losses); California v. NRG Energy,

Inc., 391 F.3d 1011, 1026 (9th Cir. 2004) (finding no organ status where entity received no

financial support from government). Although IOR’s current source of funding is not

apparent from the record, IOR was originally funded by the Holy See. (See Caridi Decl. ¶

33.) Moreover, although IOR has not presented evidence that the Holy See compensates

it for its losses, IOR, as previously noted, is not authorized to retain profits. (See id. ¶ 53.) 

Accordingly, the evidence with respect to IOR’s receipt of financial support from the Holy

See supports a finding of organ status.

e. IOR’s employment policies

The fifth factor looks to whether the entity employs civil servants. See, e.g.,

Corporacion Mexicana, 89 F.3d at 656 (finding organ status where entity employed only

public servants); Patrickson, 251 F.3d at 808 (finding no organ status where entity’s

employees “were not treated as” civil servants). IOR has not presented evidence to show

that its employees are civil servants. An entity, however, “may be an organ of a foreign

state for purposes of the FSIA even if its employees are not civil servants”). See EIE, 322

F.3d at 641.

f. IOR’s obligations and privileges under state law

The final factor considers the entity’s obligations and privileges under state law,

including whether it performs any exclusive activities for the government, see, e.g.,

Corporacion Mexicana, 89 F.3d at 655 (finding organ status where entity charged with

exclusive responsibility of refining and distributing government property); Kelly, 213 F.3d at

848 (finding organ status where entity had exclusive right to explore and develop Syria’s

petroleum reserves), and whether the entity enjoys immunity from suit, see, e.g., NRG, 391

F.3d at 1026 (finding no organ status where entity not immune from suit).

Here, IOR performs activities exclusively for the foreign state, including routing

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payments between Holy See agencies. (See Caridi Decl. ¶¶ 49, 51.) Moreover, although

there is no evidence that IOR is immune from suit within the Holy See, IOR is immune from

suit in Italy. (See id. ¶ 35.) Accordingly, IOR’s obligations and privileges under state law

support a finding that IOR is an organ of the Holy See.

g. Summary of IOR’s status as a foreign sovereign

In sum, the circumstances surrounding IOR’s creation, the purpose of its activities,

its level of independence from the Holy See, its level of financial support from the Holy See,

and its obligations and privileges under state law all demonstrate that IOR is an organ of

the Holy See. Although there is no evidence that IOR’s employees are civil servants, the

other factors are sufficient to support a finding that IOR is an organ of the Holy See. 

Accordingly, IOR has established a prima facie case of sovereign immunity, and will be

immune from suit unless an exception applies. See Phaneuf, 106 F.3d at 306-07.

2. Exceptions

Because IOR has established a prima facie case of sovereign immunity, the burden

shifts to plaintiffs to show that an exception applies. See id. Plaintiffs contend IOR is not

entitled to immunity under the commercial activity exception set forth in § 1605(a)(2), the

international takings exception set forth in § 1605(a)(3), or the tort exception set forth in

§ 1605(a)(5). 

a. Commercial activity exception

The commercial activity exception provides three situations in which a foreign state

will not be immune from suit, specifically, where the action is based upon (1) “a commercial

activity carried on in the United States by the foreign state”; (2) “an act performed in the

United States in connection with a commercial activity of the foreign state elsewhere”; or (3)

“an act outside the territory of the United States in connection with a commercial activity of

the foreign state elsewhere and that act causes a direct effect in the United States.” See

28 U.S.C. § 1605(a)(2). Plaintiffs contend the first and third clauses are applicable herein. 

(See 4AC ¶ 34; see also Opp. at 9-14.) 

In order to establish jurisdiction under the first clause, the commercial activity on

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which the plaintiff relies “‘must be the activity upon which the lawsuit is based.’” See Sun v.

Taiwan, 201 F.3d 1105, 1109 (9th Cir. 2000) (quoting America West Airlines, Inc. v. GPA

Group, Ltd., 877 F.2d 793, 796 (9th Cir. 1989). The entire case need not rest on the

commercial activity of the defendant, but the plaintiff must show that “‘an element of the . . .

claim consists in conduct that occurred in commercial activity carried on in the United

States.’” Id. (quoting Sugimoto v. Exportadora De Sal, S.A. De C.V., 19 F.3d 1309, 1311

(9th Cir. 1994)). Here, plaintiffs do not identify the commercial activity within the United

States that would satisfy the requirements of the first clause. Rather, they argue only that

IOR’s conversion and money laundering activities, which occurred outside the United

States, had a direct effect inside the United States because IOR used funds from the

Ustasha Treasury to set up a publishing house and gold accounts in the United States. 

(See 4AC ¶ 34-37, 152-160; see also Opp. at 9:18-20.) Assuming such activities qualify as

“commercial activity” within the United States, the instant action is not based thereon, but

rather is based on IOR’s alleged conversion and money laundering, which took place

outside the United States. See Sun, 201 F.3d at 1110 (holding defendants’ promotional

and administrative activities within United States not relevant with respect to jurisdiction

under FSIA where underlying claim of negligence was failing to supervise student in

Taiwan). Accordingly, the first clause, requiring that an action be "based upon a

commercial activity carried on in the United States by the foreign state" is not applicable. 

See 28 U.S.C. § 1605(a)(2).

With respect to the third clause, plaintiffs allege that “[p]ursuant to 28 U.S.C. [§]

1605(a)(2), there is an exception to sovereign immunity as the conversion, money

laundering, and retention of the plunder of plaintiffs’ property by the IOR has had a direct

commercial effect in the United States and California.” (See 4AC ¶ 34.) Plaintiffs allege

that the “[f]unds from the Ustasha Treasury laundered by IOR were used to set up the

publishing and commercial activities of the Croatian Publishing House Croatia and the

Croatian Historical Institute” in Chicago and to expand various existing newspaper

operations also in Chicago. (See id. ¶ 35.) Plaintiffs further allege that “IOR possessed

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and/or possesses gold accounts in the United States and the private and public gold

markets in the United States were directly effected [sic] by gold credits and transfers made

possible by the additional gold supplied the IOR from the Ustasha Treasury.” (See id. ¶

37.) 

Under the third clause, IOR will not be immune from suit if the instant action is based

upon an act that (1) was committed outside the United States; (2) was taken in connection

with a commercial activity of IOR outside the United States; and (3) caused a direct effect

in the United States. See Republic of Argentina v. Weltover, Inc., 504 U.S. 607, 611

(1992). Although plaintiffs have alleged the instant action is based on conduct —

conversion and money laundering — committed outside the United States, (see 4AC ¶¶

152-160), plaintiffs have not shown IOR’s alleged conduct was done in connection with a

“commercial activity” outside the United States. 

A “commercial activity” is “either a regular course of commercial conduct or a

particular commercial transaction or act.” See 28 U.S.C. § 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. When

a foreign sovereign acts “not as regulator of a market, but in the manner of a private player

within it, the foreign sovereign’s actions are ‘commercial’ within the meaning of the FSIA.” 

See Weltover, 504 U.S. at 614. Plaintiffs contend, without citation to authority, that “[t]he

[c]rimes of IOR were [c]ommercial [a]ctivity.” (See Opp. at 12:3-16.) Plaintiffs do not

explain how IOR’s alleged criminal acts are synonymous with that of a “private player” in

the market. 

Even if plaintiffs were to establish that IOR’s alleged conversion was done in

connection with a commercial activity, however, plaintiffs have failed to show a direct effect

in the United States. An effect is direct “if it follows as an immediate consequence of the

defendant’s activity,” see Weltover, 504 U.S. at 618 (internal quotation and citation

omitted), and is not a “secondary or incidental[ ] result[ ]” of the defendant’s actions, see

Corzo v. Banco Cent. De Reserva Del Peru, 243 F.3d 519, 525 (9th Cir. 2001) (holding

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In light of the foregoing, the Court does not reach IOR’s argument that the Court is

precluded from analyzing plaintiffs’ claim under the commercial activity exception because

the claim is “in essence” one for an unjust taking of property, properly analyzed under the

international takings exception. (See Motion at 10:9-12:10.) 

12

effect on U.S. companies not direct where defendant’s conduct caused “cutoff of cash-flow”

that caused plaintiff to breach contracts with said companies). Courts “often look to the

place where legally significant acts giving rise to the claim occurred” to determine the place

where a direct effect is likely to be located. See Adler v. Fed. Republic of Nigeria, 107 F.3d

720, 727 (9th Cir. 1997) (internal quotation and citation omitted).

Here, plaintiffs contend the “direct effect” in the United States was IOR’s “publishing

activities in Chicago” and IOR’s “enhance[d] . . . position as a gold trader.” (See Opp. at

12:18-19, 13:8-9.) Any such effect, however, has no legal significance with respect to

plaintiffs’ claim that IOR converted their property in Vatican City in 1946. A mere receipt of

a collateral financial benefit in the United States is not a direct effect. Cf. Adler, 107 F.3d at

726-27 (“[M]ere financial loss . . . in the U.S. is not, in itself, sufficient to constitute a ‘direct

effect.’”) Moreover, the asserted effects occurred years after IOR’s alleged conversion,

and thus were not an “immediate consequence,” see Weltover, 504 U.S. at 618, of the

claimed wrongful conduct. According to plaintiffs, at least six years passed after IOR’s

alleged conversion in 1946 until the establishment of the publishing company in Chicago. 

(See 4AC ¶¶ 39, 146-147.) Further, plaintiffs concede there is a lapse of approximately

fifteen years between IOR’s alleged conversion in 1946 and IOR’s alleged gold dealings in

the United States. (See Opp. at 13:16-18.) The only authority plaintiffs cite in support of

their argument is Altmann v. Austria, 317 F.3d 954 (9th Cir. 2002). That case, however,

addressed only the “international takings” exception and thus did not involve an analysis of

the “direct effect” requirement under the commercial activity exception. Accordingly,

plaintiffs have failed to show the instant action is based on an “act outside the territory of

the United States in connection with a commercial activity of the foreign state elsewhere”

that “causes a direct effect in the United States.” See 28 U.S.C. § 1605(a)(2).7

b. International takings exception

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Plaintiffs next argue that IOR is not entitled to immunity under § 1605(a)(3), the

international takings exception. Section 1605(a)(3) provides:

A foreign state shall not be immune from the jurisdiction of courts of the

United States or of the States in any case . . . in which rights in property taken

in violation of international law are in issue and that property or any property

exchanged for such property is present in the United States in connection

with a commercial activity carried on in the United States by the foreign state;

or that property or any property exchanged for such property is owned or

operated by an agency or instrumentality of the foreign state and that agency

or instrumentality is engaged in a commercial activity in the United States.

See 28 U.S.C. § 1605(a)(3). 

IOR argues that plaintiffs fail to meet the exception for a number of reasons,

including that plaintiffs have claimed only “intangible” property rights, that plaintiffs have not

alleged facts showing the taking of their property was in violation of international law, and

that plaintiffs have not satisfied the local remedies rule. The Court need not reach all of the

issues raised by IOR, however, because plaintiffs have failed to establish an essential

element under either clause of the exception. Under the first clause, plaintiffs have failed to

allege that their property or property exchanged for it is in the United States in connection

with a commercial activity in the United States. Under the second clause, although

plaintiffs allege that IOR owns or operates their property, plaintiffs fail to allege that IOR is

engaged in a commercial activity in the United States. 

Plaintiffs argue that the jurisdictional nexus is satisfied under the first clause

because parts of the Ustasha Treasury were exchanged for gold and then transferred to

the United States through IOR’s gold trading program, which included trading with the

Federal Reserve Bank and the Republic Bank of New York through the 1960's. (See 4AC

¶¶ 37, 39, 166; Opp. 14:23-25, 18:21, 19:5-17.) Plaintiffs have not alleged, however, that

their property was exchanged for gold and then transferred to the United States, only that

an unidentified “portion” of the Ustasha Treasury was transferred. Further, plaintiffs

concede that the gold involved in IOR’s alleged transfer may no longer be present in the

United States. (See Opp. 18:21.) Plaintiffs’ argument thus rests on three levels of

speculation: first, that their personal property might have been among the unidentified items

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8

Relying on Vencedora Oceanica Navigacion, S.A. v. Companie Nationale

Algerienne de Navigation, 730 F.2d 195, 204 (5th Cir. 1984), IOR argues plaintiffs must

allege not only possession or control but also that their property is being used by IOR for its

own benefit. The legislative history on which Vencedora based its holding, specifically, a

committee report, does not make reference to such a requirement, however. Although the

report states that “a taking in violation of international law” includes “nationalization” or

“expropriation” of property without compensation, see 1976 U.S. Code Cong. & Ad. News

6604, 6618, the use of such terms does not imply a requirement that the foreign state use

the property for its own benefit. See Black’s Law Dictionary 1052 (8th ed. 2004) (defining

“nationalize” as to “bring (an industry) under governmental control or ownership”); Id. at 621

(defining “expropriation” as “[a] governmental taking or modification of an individual’s

property rights, esp. by eminent domain”). 

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that IOR allegedly exchanged for gold; second, that the gold for which their property was

exchanged might have been among the gold transferred to the United States as part of

IOR’s gold trading program; and third, that the transferred gold might still be present in the

United States, forty years after IOR’s last alleged gold transaction in the United States. 

Plaintiffs are correct that the Court is required to accept as true the factual allegations in

the complaint. See Warren v. Fox Family Worldwide, Inc., 328 F.3d 1136, 1139 (9th Cir.

2003). Plaintiffs, however, have not alleged, as required under the FSIA, that their property

or property exchanged for it is within the United States, but only that the property might be

within the United States. Such allegations are too speculative to support the requisite

jurisdictional nexus. See Crist v. Republic of Turkey, 995 F. Supp. 5, 11 (D.D.C. 1998)

(“Plaintiffs’ mere allegation that the proceeds derived from their real property located in

Cyprus are now somehow connected to some unidentified commercial activity . . . in the

United States is simply not sufficient to satisfy the jurisdictional requirements under the

FSIA.”). 

With respect to the second clause, plaintiffs allege that IOR “retained” some of their

property after converting other property for the benefit of the exiled Ustasha. (See 4AC ¶¶

42, 44, 191.)8 Assuming, arguendo, such conclusory allegation suffices to plead current

ownership by IOR, plaintiffs nonetheless fail to allege IOR is currently engaged in a

commercial activity in the United States. See 28 U.S.C. § 1605(a)(3). Plaintiffs argue that

IOR’s gold trading program in the United States constitutes a commercial activity. (See

Opp. at 19:6-17.) Plaintiffs acknowledge, however, that IOR’s last gold transaction in the

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9

 Plaintiffs allege that an individual identified as Fr. Dominik Mandic, set up, under

OFM’s direction, various publishing entities in Chicago that conduct ongoing business

throughout the United States. (See 4AC ¶¶ 35, 36.) Plaintiffs do not allege, however, that

IOR is in any way involved with these entities, other than to allege that the publishing

businesses were originally established using funds from the Ustasha Treasury that had

been laundered by IOR. (See id.) 

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United States occurred, at the latest, in the 1960's. (See 4AC ¶ 166.)9

 Because plaintiffs

fail to allege IOR is currently engaged in any commercial activity in the United States,

plaintiffs have failed to establish the jurisdictional nexus under the second clause of §

1605(a)(3). 

c. Tort exception

Plaintiffs argue that the tort exception applies because “[s]ome of the Ustasha

Treasury was converted in the United States through the IOR gold trading program.” (See

Opp. at 19:20-21.) Under the tort exception, a foreign state is not immune from suit in any

case “not otherwise encompassed in [the commercial activity exception], in which money

damages are sought against a foreign state for personal injury or death, or damage to or

loss of property, occurring in the United States and caused by the tortious act or omission

of that foreign state or of any official or employee of that foreign state while acting within

the scope of his office or employment.” See 28 U.S.C. § 1605(a)(5). Section 1605(a)(5)

further provides: “[T]his paragraph shall not apply to”: (1) “any claim based upon the

exercise or performance or the failure to exercise or perform a discretionary function

regardless of whether the discretion be abused” or (2) “any claim arising out of malicious

prosecution, abuse of process, libel, slander, misrepresentation, deceit, or interference with

contract rights.” See id. 

The tort exception applies when both the injury complained of and the tortious act or

omission occur in the United States. See Olsen v. Gov’t of Mexico, 729 F.2d 641, 645 (9th

Cir. 1984). Although all of the tortious conduct need not occur in the United States, “at

least one entire tort” must occur in the United States. See id. at 646. 

Plaintiffs concede that the gold, after being looted, was “initially converted in 1946

through the machinations of IOR in Vatican City,” (see Opp. at 19:24-25), but contend that,

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10In light of the above ruling, the Court does not reach IOR’s argument that plaintiffs’

claim is “based upon the exercise or performance or the failure to exercise or perform a

discretionary function,” see 28 U.S.C. § 1605(a)(5)(A), or whether the Court is precluded

from analyzing plaintiffs’ claim under the tort exception because it is “in essence” a claim

for an unjust taking of property, properly analyzed under the international takings exception,

(see Motion at 10:9-12:10). 

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by transferring the gold to the United States, “IOR reconverted the plaintiffs’ property in the

United States,” (see id. at 19:25, 20:9-11). Plaintiffs argue that IOR’s acts constitute a tort

under California law, but provide no explanation as to why California law is applicable. 

Even under California law, however, plaintiffs have failed to show that “one entire tort” has

occurred in the United States. See Olsen, 729 F.2d at 645. California Civil Code § 1712,

which provides a cause of action for conversion, states in relevant part: “One who obtains a

thing without the consent of its owner . . . must restore it to the person from whom it was

thus obtained.” As plaintiffs concede, IOR obtained the gold in the Vatican City. (See Opp.

at 19:24-25.) Once IOR came into possession of the gold in the Vatican City, it did not

“obtain” it again by transferring it to the United States. Plaintiffs provide no authority for

their argument that IOR’s “reconversion” is a tort under California law or the law of any

other jurisdiction. Unlike the commercial activities exception, the tort exception does not

confer jurisdiction where a tort committed outside the United States has a subsequent

effect within the United States. See Argentine Republic v. Amerada Hess Shipping Corp.,

488 U.S. 428, 441 (1989). Accordingly, plaintiffs have failed to show IOR’s alleged tortious

conduct occurred in the United States, and consequently, have failed to show the tort

exception applies.10 

3. Summary

Because IOR has established a prima facie case that it is an organ of a foreign

sovereign, and because plaintiffs’ allegations, even if taken as true, do not establish an

exception to sovereign immunity applies, IOR’s motion to dismiss plaintiffs’ claims against

IOR will be GRANTED. Consequently, the Court does not reach IOR’s additional argument

that plaintiffs lack standing.

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CONCLUSION

For the reasons set forth above, IOR’s motion to dismiss the claims against IOR for

lack of subject matter jurisdiction under the FSIA is hereby GRANTED, and plaintiffs’ claims

against IOR are hereby DISMISSED. 

IT IS SO ORDERED.

Dated: December 27, 2007 

MAXINE M. CHESNEY

United States District Judge

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