2005 Decisions

Opinions of the United

States Court of Appeals

for the Third Circuit

2-1-2005

LNC Inv LLC v. Republic Nicaragua

Precedential or Non-Precedential: Precedential

Docket No. 03-1224

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 PRECEDENTIAL 

 

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

____

 03-1224

______

LNC INVESTMENTS LLC, f/k/a

Investments, Inc.*,

 Appellant

 v.

THE REPUBLIC NICARAGUA

 (* See Clerk's Order of 5/23/03)

 

On Appeal from the United States District Court

for the District of Delaware

(D.C. No. 01-mc-00134)

District Judge: Honorable Joseph J. Farnan, Jr.

 

Submitted on Review of Jurisdiction

February 1, 2005

Before: SLOVITER, AMBRO, and ALDISERT, Circuit Judges.

(Filed February 1, 2005 )

_____

Elliot H. Scherker

Greenberg Traurig

Miami, FL 33131
2

Laurie A. Krepto

Scott Salerni

Greenberg Traurig

Wilmington, DE 19801

Raymond A. Levites

Pavelic & Levites

New York, NY 10012

Attorneys for Appellant

Preeta D. Bansal

Scott D. Musoff

Skadden, Arps, Slate, Meagher & Flom

New York, NY 10036

Scott M. Flicker

G. Hamilton Loeb

Paul, Hastings, Janofsky & Walker

Washington, DC 20004

Philip D. Anker

Wilmer Cutler Pickering Hale & Dorr

Washington, DC 20037

Attorneys for Appellee

 

OPINION OF THE COURT

 

SLOVITER, Circuit Judge.

This garnishment action arises from the District Court of

Delaware. Although the named parties in the suit are the

Republic of Nicaragua and LNC Investments, Inc. (“LNC”), the

issue before us arises from LNC’s attempt to garnish funds from

Megatel, a company which owes $50 million to Nicaragua. The

District Court quashed the writ of attachment LNC filed on
1

 The District Court reasoned that even if Megatel were to

pay LNC pursuant to the writ of attachment, Nicaraguan law would

not regard that payment as a discharge of Megatel’s obligation to

Nicaragua. 

 

2

 28 U.S.C. § 1963 provides in pertinent 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 may be 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.

3

Megatel because it concluded that Megatel would be exposed to

double liability if the writ were enforced.1 The District Court

had jurisdiction pursuant to 28 U.S.C. § 1963.2 We hold that this

court lacks jurisdiction because the District Court’s Order

quashing the writ of attachment against Megatel was not a final

disposition of the case under 28 U.S.C. § 1291.

I.

A. Megatel’s $ 50 million Obligation to Nicaragua

By agreement dated August 31, 2001 (“Enitel

Agreement”), the Republic of Nicaragua sold forty percent of the

authorized and outstanding shares of Empresa Nicaraguense de

Telecomunicaciones S.A. (“Enitel”), a state-owned and

controlled telecommunications company in Nicaragua, to a

consortium formed by Telia Swedtel AB, a Swedish

telecommunications company, and EMCE, a Honduran holding

company. 

The Enitel Agreement provided that the consortium could
4

organize a company for the purpose of purchasing the shares,

and that “all rights, privileges and obligations granted to the

[consortium] through this Agreement shall be transferred ipso

jure” to that company. App. at 271. Pursuant to this clause, the

consortium formed Megatel to purchase the shares under the

Enitel Agreement. On December 18, 2001, Megatel paid

$33,100,999 in cash to Nicaragua towards the price for the

shares of Enitel as per the Enitel Agreement. In addition,

Megatel agreed to pay the remaining $50 million of the agreed

price in five annual installments of $10 million a year.

B. The Republic of Nicaragua’s $86 million Debt to LNC

On December 11, 1980, Nicaragua entered into a loan

agreement (“Loan Agreement”) with a syndicate of banks to

restructure its then existing debt. The Loan Agreement provided

that Nicaragua would waive its sovereign immunity with respect

to any of its obligations arising under the agreement. It further

stated that any final judgment secured by lenders in New York

federal court “shall be conclusive and may be enforced in other

jurisdictions by suit on the judgment or in any other manner

provided by law, and [Nicaragua] hereby irrevocably submits to

the jurisdiction of the courts of each jurisdiction in which any

Person shall seek to enforce such judgment.” App. at 112-113.

In the 1980s, Nicaragua was unable to make payments

required under the Loan Agreement and defaulted on the loans. 

In 1986 and 1987, LNC purchased a portion of the debts owed

by Nicaragua under the Loan Agreement on the secondary

market. LNC then brought suit in the United States District

Court for the Southern District of New York for judgment on the

loans. In LNC Invs., Inc. v. Republic of Nicaragua, No. 96 Civ.

6360 (JFK) slip op. at 2 (S.D.N.Y. Apr. 2, 1999), LNC was

awarded a final judgment of $86,885,856.63 plus $230,000 in

attorney’s fees.

LNC asserts that it has been unable to retain counsel in

Nicaragua to enforce its judgment in the courts of that country. 

Thus, it has attempted to satisfy its judgment by garnishing the

assets of third parties who owe money to Nicaragua. On several
5

occasions, other federal courts have denied such attempts for

reasons other than the merits of LNC’s judgment. See LNC

Invs., Inc. v. Republic of Nicaragua, No. 99-2090, slip op. (S.D.

Fla. Oct. 2, 2002) (rejecting LNC’s attempt to enforce judgment

by serving a writ of garnishment on Swedtel AB, because LNC

failed to establish personal jurisdiction over Swedtel AB as a

non-resident foreign corporation); LNC Invs., Inc. v. Republic of

Nicaragua, No. 96 Civ. 6360 (JFK), 2000 WL 745550 (S.D.N.Y.

June 8, 2000) (rejecting LNC’s attempt to satisfy judgment by

attaching income tax and value-added tax payments owed by

American Airlines and Continental Airlines to Nicaragua on

ground that the assets were immune from attachment under the

Foreign Sovereign Immunities Act (“FSIA”)); LNC Invs., Inc. v.

Republic of Nicaragua, 115 F. Supp. 2d 358 (S.D.N.Y. 2000)

(rejecting LNC’s attempt to satisfy judgment by executing on

assets of Banco Central de Nicaragua held in the Federal

Reserve Bank of New York on ground that assets were immune

from attachment under the FSIA), aff’d, 228 F.3d 423 (2d Cir.

2000). 

C. The Present Action

On December 12, 2001, LNC registered its foreign

judgment with the District Court of Delaware. Thereafter, LNC

filed writs of attachment against Megatel, and against its former

parent companies, Megatel, LLC and Invertel, LLC.

The writ of attachment against Megatel, LLC (one of the

former parents) was filed on May 16, 2002. After receiving no

response, LNC served a writ of attachment for contempt on July

12, 2002. On July 15, 2002, Megatel responded to the writ of

attachment for contempt stating that it holds no goods or assets

belonging to the Republic of Nicaragua. Thereafter, LNC served

a subpoena duces tecum on Megatel, LLC to which Megatel,

LLC filed a motion for a protective order to quash or modify

subpoena.

The writ of attachment against Invertel, LLC (the other

former parent) was filed on August 6, 2002. After receiving no

response, LNC served a writ of attachment for contempt on
6

September 11, 2002. On September 13, 2002, Invertel, LLC

responded to the initial writ of attachment and the writ of

attachment for contempt, stating that it holds no goods or assets

belonging to the Republic of Nicaragua. No further action was

taken on the writ of attachment against Invertel, LLC.

On July 19, 2002, LNC served a writ of attachment

against Megatel itself. On November 19, 2002 Megatel moved

to quash the writ of attachment against it, arguing that

enforcement would subject it to double liability, that the

payments in question were immune from attachment under the

FSIA, and that the District Court lacked jurisdiction to order

attachment of the payments. On December 18, 2002, the District

Court issued a memorandum order granting Megatel’s motion to

quash the writ of attachment, finding that Megatel would be

exposed to double liability if the writ were enforced.

On January 16, 2003, LNC filed a notice of appeal from

the December 18, 2002 Order quashing the writ of attachment

against Megatel. By letter dated February 11, 2003, we directed

the parties to respond as to whether LNC’s appeal was

jurisdictionally defective because “it appears that a writ of

attachment remains pending against Invertel.” That letter did not

refer to the pending writ of attachment against Megatel, LLC,

although it is apparent that this writ is pending as well. In

response to our letter, LNC moved the District Court to dismiss

its pending writs of attachment against both Megatel, LLC and

Intervel, LLC, as garnishees for Nicaragua, without prejudice. 

The District Court granted this request on February 26, 2003.

On August 4, 2004, Megatel was bought by Sercotel, SA

de CV (“Sercotel”), a wholly owned subsidiary of America

Movil, SA de CV, a publicly traded Mexican company. Thus, at

the present time, Megatel, LLC and Invertel, LLC are no longer

the parent companies of Megatel.

II.

To recapitulate, LNC seeks to appeal the order quashing

its writ of attachment on Megatel. The issue before us is
3

 28 U.S.C. § 1291 states in pertinent part, 

The courts of appeals (other than the United States

Court of Appeals for the Federal Circuit) shall have

jurisdiction of appeals from all final decisions of the

district courts of the United States, the United States

District Court for the District of the Canal Zone, the

District Court of Guam, and the District Court of the

Virgin Islands, except where a direct review may be

had in the Supreme Court.

7

whether LNC’s dismissal without prejudice of its writs of

attachment against Megatel, LLC and Invertel, LLC is sufficient

to render the case procedurally final for purposes of 28 U.S.C. §

1291.3 We hold it is not.

The finality requirement of 28 U.S.C. § 1291 is grounded

“not in merely technical conceptions of ‘finality,’” but rather on

a policy “against piecemeal litigation.” Catlin v. United States,

324 U.S. 229, 233 (1945). Thus, we have “adhered consistently

to the general rule that we lack appellate jurisdiction over partial

adjudications when certain of the claims before the district court

have been dismissed without prejudice.” Fed. Home Loan

Mortgage Corp. v. Scottsdale Ins. Co., 316 F.3d 431, 438 (3d

Cir. 2003); see also Erie County Retirees Ass’n v. County of

Erie, Pa., 220 F.3d 193, 201 (3d. Cir. 2000) (“[O]rdinarily we do

not have jurisdiction under 28 U.S.C. § 1291 of an appeal from

an order partially adjudicating a case when an appellant has

asserted a claim in the district court which it has withdrawn or

dismissed without prejudice.”), cert. denied, 532 U.S. 913

(2001). 

We have recognized an exception to this general rule

where the claims dismissed without prejudice are “effectively

barred.” In those cases, we have held that the district court’s

order or judgment is final for purposes of § 1291. For example,

in Fassett v. Delta Kappa Epsilon, 807 F.2d 1150 (3d Cir. 1986),

the district court granted summary judgment on behalf of four of

the five defendants. Rather than proceed to trial against the fifth
8

defendant alone, plaintiffs filed a stipulation of dismissal

without prejudice against that defendant. Plaintiffs then filed a

timely notice of appeal. We sua sponte explored the issue of

finality and held that despite the general rule barring partial

appeals, plaintiffs’ claims against the fifth defendant were

“effectively barred” because the statute of limitations on that

claim had lapsed at the time the plaintiff entered into the

stipulation of dismissal. Id. at 1155. Thus, adopting a practical

approach, we held that the finality requirement of § 1291 was

satisfied. 

Similarly, in GFL Advantage Fund, Ltd. v. Colkitt, 272

F.3d 189, 198-99 n.3 (3d Cir. 2001), the district court twice

dismissed without prejudice defendant’s counterclaims for lack

of specificity. Notwithstanding that the dismissal was without

prejudice, we held that we had jurisdiction under § 1291 to hear

defendant’s appeal from the district court’s order granting

summary judgment to plaintiff because the district court had

determined that defendant’s affirmative defenses, which were

identical to his counterclaims, failed as a matter of law. Thus,

the district court’s dismissal of defendant’s counterclaims

without prejudice effectively barred these claims, and rendered

the district court’s judgment final.

In the instant case, LNC initiated writs of attachment

against Megatel and against Megatel’s former parent companies,

Megatel, LLC and Invertel, LLC, in its attempt to garnish the

$50 million that Megatel owes Nicaragua pursuant to the Enitel

Agreement. In order to be able to appeal the District Court’s

December 18, 2002 Order quashing the writ of attachment

against Megatel, LNC has dismissed the pending writs of

attachment against Megatel, LLC and Invertel, LLC, but it has

done so without prejudice. It argues that the dismissal of

Megatel’s former parents, albeit without prejudice, effectively

bars any future garnishment action against them, rendering the

December 18, 2002 Order final.

LNC first contends that as of August 4, 2004, Megatel,

LLC and Invertel, LLC are no longer the parent companies of

Megatel, and thus, any future garnishment action brought against
4

 For instance, the Enitel Agreement provides that the

transfer of rights from the Telia / EMCE consortium to Megatel

“will not relieve the . . . [consortium] of its representations and

obligations under [certain clauses] of this Agreement, for which the

[consortium] will be severally liable.” App. at 271.

5

 Indeed, even after Megatel, LLC responded that it held no

assets belonging to the Republic of Nicaragua, LNC filed a

discovery motion against Megatel, LLC. This discovery motion

remained pending in the District Court until LNC dismissed it

without prejudice on February 26, 2003.

9

the former parent companies, predicated on the Enitel

transaction, will fail as a practical matter. This argument may be

factually correct---it is often the case that the dissolution of a

parent subsidiary relationship will completely sever any debt

obligations which the parent owes on behalf of the subsidiary. 

However, such fact – contingent determinations must be made

by the district court in the first instance. See, e.g., Sewak v.

I.N.S., 900 F.2d 667, 673 (3d Cir. 1990) (“As an appellate court

we do not take testimony, hear evidence or determine disputed

facts in the first instance. Instead, we rely upon a record

developed in those fora that do take evidence and find facts.”). 

There is nothing in the record to eliminate the possibility that

Megatel, LLC or Invertel, LLC assumed some of the debt

obligations of Megatel from the Enitel Agreement, and that these

obligations remain with the parent companies even after the sale

of Megatel to Sercotel. Thus, even after the August 4, 2004 sale,

LNC may have a colorable garnishment action against the

former parent companies.4

LNC also argues that because both Megatel, LLC and

Invertel, LLC’s responded to the original writs of attachment by

stating that they held no property of the Republic of Nicaragua,

their dismissal without prejudice effectively barred any future

garnishment action. We are not persuaded. We cannot accept

the unilateral assertions of parties opposing a garnishment action

as factually determinative.

5

 
6

 Such a finding will not deprive LNC of the opportunity

for appellate review. See Ohntrup v. Firearms Ctr., Inc., 802 F.2d

676, 678 (3d Cir. 1986). LNC need only pursue its garnishment

action against Megatel, LLC and Invertel, LLC to their conclusion

in the District Court, or withdraw those proceedings with prejudice.

10

Unlike the cases applying the exception referred to above,

we are not faced with a straightforward application of law to

undisputed fact, as was the case in Fassett, nor is this a case

where the District Court made the initial factual and legal

determinations which effectively ended the case before it, as in

GFL Advantage Fund, Ltd. Accordingly, we hold that LNC’s

voluntary dismissal without prejudice of the pending

garnishment actions against Megatel, LLC and Invertel, LLC, as

a practical matter, does not effectively bar a future garnishment

action against the parent companies arising from the Enitel

Agreement.

Accordingly, the District Court’s December 18, 2002

Order is not final for purposes of 28 U.S.C. § 1291.6 See Fed.

Home Loan Mortgage, 316 F.3d at 438 (3d Cir. 2003); Erie

County Retirees Ass’n, 220 F.3d at 201 (3d. Cir. 2000). We will

therefore dismiss this appeal for lack of jurisdiction.

_______________________