Opinion ID: 771984
Heading Depth: 2
Heading Rank: 2

Heading: Abstention Issues

Text: 51 Even when a district court has jurisdiction over a case, it may choose not to exercise that jurisdiction if principles of abstention are applicable. In this case, the district court's diversity jurisdiction may be subject to the application of the act of state doctrine and principles of comity. We conclude that contrary to the view of the district court, the act of state doctrine does not apply, and remand for the district court's application of the principles of international comity.
52 Notwithstanding the diverse citizenship of the parties, the district court held that it lacked subject matter jurisdiction in this litigation because of the dictates of the act of state doctrine. See Bigio, 1998 WL 293990, at , 1998 U.S. Dist. LEXIS 8295, at . The United States Supreme Court's classic statement of this principle is more than 100 years old. 53 Every sovereign State is bound to respect the independence of every other sovereign State, and the courts of one country will not sit in judgment on the acts of the government of another done within its own territory. Redress of grievances by reason of such acts must be obtained through the means open to be availed of by sovereign powers as between themselves. 54 Underhill v. Hernandez, 168 U.S. 250, 252 (1897); see also Banco Nacional de Cuba v. Sabbatino, 376 U.S. 398, 401 (1964) (The act of state doctrine in its traditional formulation precludes the courts of this country from inquiring into the validity of the public acts a recognized foreign sovereign power committed within its own territory.). 55 In reviewing the district court's treatment of this issue, we note first that contrary to the conclusion of the court, the act of state doctrine is not jurisdictional. Allied Bank Int'l v. Banco Credito Agricola de Cartago, 757 F.2d 516, 520 (2d Cir. 1985). 6 Jurisdictional or not, however, the district court held that in this case its application was required and that as a result the district court could not exercise its diversity jurisdiction. 56 Although the standard of review of a district court's decision to abstain is often described as an abuse-of-discretion standard, we have noted that in the abstention area that standard of review is somewhat more rigorous. Because we are considering an exception to a court's normal duty to adjudicate a controversy properly before it, the district court's discretion must be exercised within the narrow and specific limits prescribed by the particular abstention doctrine involved.... Thus,... there is little or no discretion to abstain in a case which does not meet traditional abstention requirements. 57 Hachamovitch v. DeBuono, 159 F.3d 687, 693 (2d Cir. 1998) (internal quotation marks and citations omitted; ellipses in original). Applying this standard of review, we reverse the district court on this point. 7 58 The act of state doctrine, much the concern of scholars, see, e.g., Sabbatino, 376 at 424 n.22, has not been explored extensively by the modern Supreme Court. There is, however, a substantial gloss on the doctrine that has been developed by our Court in light of the Supreme Court's teaching that: (i)its proper application requires a balancing of interests, see W.S. Kirkpatrick & Co. v. Environmental Tectonics Corp., 493 U.S. 400, 406 (1990); Sabbatino, 376 U.S. at 428; see also Braka v. Bancomer, S.N.C., 762 F.2d 222, 224 (2d Cir. 1985), and (ii)the act of state doctrine should not be invoked if the policies underlying the doctrine do not justify its application, see Kirkpatrick, 493 U.S. at 706; Sabbatino, 376 U.S. at 428; Braka, 762 F.2d at 224. 59 We begin with the proposition that the function of the court in applying the act of state doctrine is to weigh in balance the foreign policy interests that favor or disfavor [its] application. Republic of the Philippines v. Marcos, 806 F.2d 344, 359 (2d Cir. 1986). We have noted that 60 the policy concerns underlying the doctrine require that the political branches be preeminent in the realm of foreign relations. Accordingly, the Supreme Court has directed that each case be analyzed individually to determine the need for a separation of powers: the less important the implications of an issue are for our foreign relations, the weaker the justification for exclusivity in the political branches. 61 Braka, 762 F.2d at 224 (quoting Sabbatino, 376 U.S. at 428; other citations omitted). Additionally we have said that [t]he doctrine demands a case-by-case analysis of the extent to which in the context of a particular dispute separation of powers concerns are implicated[,]... always... tempered by common sense. Allied Bank Int'l, 757 F.2d at 521. 62 [T]he applicability of the doctrine depends on the likely impact on international relations that would result from judicial consideration of the foreign sovereign's act. If adjudication would embarrass or hinder the executive in the realm of foreign relations, the court should refrain from inquiring into the validity of the foreign state's act. 63 Id. at 520-21 (citing, inter alia, Sabbatino, 376 U.S. at 427-28; footnote omitted). 64 We conclude that the resolution of this case by United States courts will not likely impact on international relations or embarrass or hinder the executive in the realm of foreign relations. 65 In Sabbatino, the Court remarked that [t]he balance of relevant considerations may... be shifted if the government which perpetrated the challenged act of state is no longer in existence. 376 U.S. at 428; accord Kirkpatrick, 493 U.S. at 409 (dictum). Plaintiffs assert that [t]he Nasser government, which effected the expropriation, is no longer in existence. Appellants' Br. at 47. Defendants respond that [t]he heads of state may have changed, but the government has remained the same. Appellees' Br. at 41. 66 We cannot resolve the question thus posed, at least not on the record before us. But there is little doubt that the Egyptian government that is now in power is far removed in time and circumstance from that which seized the Bigios' property. The expropriation took place thirty-four or more years ago; President Nasser has been dead for thirty years. 67 The rationale for considering a change in government is that the danger of interference with the Executive's conduct of foreign policy is surely much less than the typical case where the act of state is that of the current foreign government. Marcos, 806 F.2d at 359. Applying that rationale to this case, whether the present government is characterized as the same as or different from the one responsible for the expropriation, the danger of interference with the executive's branch's conduct of foreign policy by a court's adjudication here is dim indeed. 68 Moreover, the current government, as we have noted, has apparently repudiated the acts in question and has sought to have the property or its proceeds returned to the Bigios. Any finding of impropriety with respect to Egyptian expropriation of Jewish-owned property in the early 1960's would more likely be consonant, than at odds, with the present position of the Egyptian government. See Dominicus Americana Bohio v. Gulf & Western Indus., 473 F. Supp. 680, 690 (S.D.N.Y. 1979) ([A]n act that would otherwise be immune from judicial inquiry may lose its privileged status if the government repudiates it.). There are no seeds for embarrass[ment] or hind[rance of] the executive in the realm of foreign relations that we can perceive. Allied Bank Int'l, 757 F.2d at 521. 69 The district court did not consider the fact that the Nasser regime is long gone, and it discounted the letter of the Egyptian Ministry of Finance directing Misr to return the Heliopolis property to the Bigios because it found that plaintiffs have not provided any evidence regarding the legal effect of the letter. There is little ambiguity on the face of the Ministry of Finance letter; it appears to reflect a determination that the property in question rightfully belongs to the Bigios and not Misr. As pointed out in the affidavit of Ahmed G. Abou Ali, an Egyptian lawyer, which the defendants submitted to the district court, the Ministry of Finance letter states in clear terms, Mr. Josias Raphael Nessim Bigio is the owner of the shares pertaining to the real estate properties [in Heliopolis listed below] . . . which have previously been sold to [Misr]. We also note that the burden of proof rests on defendants to justify application of the act of state doctrine, see Alfred Dunhill of London, Inc. v. Republic of Cuba, 425 U.S. 682, 694 (1976); Marcos, 806 F.2d at 359, in which case it would likely have been for the defendant to present evidence resolving the asserted ambiguity in its favor. 70 We are unable to see how any decision that the district court might make would offend the government of Egypt or interfere with the relationship between Egypt and the United States. The decision of the district court to invoke the act of state doctrine was therefore and to that extent in error.
71 The defendants argued to the district court that it should decline jurisdiction over this action pursuant to the principles of international comity. Because the district court dismissed the plaintiffs' state-law claims for what it considered lack of subject matter jurisdiction pursuant to the act of state doctrine, it did not reach this issue. The defendants have renewed their international comity argument on appeal. 72 International comity has been defined as the recognition which one nation allows within its territory to the legislative, executive or judicial acts of another nation. Hilton v. Guyot, 159 U.S. 113, 164 (1895). It may (although it does not in this case) take the form of a discretionary act of deference by a national court to decline to exercise jurisdiction in a case properly adjudicated in a foreign state. In re Maxwell Communication Corp., 93 F.3d 1036, 1047 (2d Cir. 1996); see, e.g., Allstate Life Ins. Co. v. Linter Group, Ltd., 994 F.2d 996 (2d Cir.) (affirming dismissal in favor of pending proceeding in Australia), cert. denied, 510 U.S. 945 (1993). When a court dismisses a complaint in favor of a foreign forum pursuant to the doctrine of international comity, it declines to exercise jurisdiction it admittedly has. See Finanz AG Zurich v. Banco Economico S.A., 192 F.3d 240, 245-46 (2d Cir. 1999) (treating separately the questions of subject matter jurisdiction and deferral to a foreign forum pursuant to international comity); Filetech S.A. v. France Telecom S.A., 157 F.3d 922, 928-30, 932 (2d Cir. 1998) (same); Posner v. Essex Ins. Co., 178 F.3d 1209, 1222 (11th Cir. 1999) (noting that relevant question is whether court should abstain from hearing claims despite the existence of jurisdiction over those claims); cf. Hartford Fire Ins. Co. v. California, 509 U.S. 764, 796-98 & n.24 (1993) (separating question of subject matter jurisdiction under Sherman Act from question of international comity, which might recommend against exercise of jurisdiction); Computer Assocs. Int'l, Inc. v. Altai, Inc., 126 F.3d 365, 371-72 (2d Cir. 1997) (treating separately due regard for principles of international comity and the court's power to enjoin a foreign suit by persons subject to its jurisdiction). The decision whether to dismiss a case on international comity grounds ordinarily lies within the discretion of the district court. See Finanz AG Zurich, 192 F.3d at 246; Jota v. Texaco, Inc., 157 F.3d 153, 160 (2d Cir. 1998). 73 The questions that would be addressed by the district court in this case would appear to include (1) whether the plaintiffs' property in Egypt was wrongfully seized by the Egyptian government during the early 1960's, at which time the plaintiffs were living in Egypt, and (2) whether the plaintiffs' have rights to that property. The answer to the second question may depend on the answer to the first; it may also, however, depend on the legal effect of the 1977 edict and subsequent instructions issued by the Egyptian government with respect to the Bigios' property. In addition, one of the claims implicit in the plaintiffs' complaint, which they have indicated an intent to litigate, is for trespass to land located in Egypt. This lawsuit's connection to Egypt is therefore undeniably strong. By contrast, the only connection between this lawsuit and the United States of which we have been made aware is the identity of the defendants as United States corporations. Under these circumstances and on the basis of the information before us, we cannot say that retention of jurisdiction would be the only possible course of action for the district court. 74 But, on the other hand, we cannot say that dismissal on grounds of international comity is the sole result consistent with a proper exercise of the district court's discretion. The district court did not consider, among other things, whether an adequate forum exists in [Egypt] and whether the defendant[s] sought to be sued in the United States forum [are] subject to or [have] consented to the assertion of jurisdiction against [them] in the foreign forum. Jota, 157 F.3d at 160. And we do not think this case falls within the category of extreme cases . . . where a foreign sovereign's interests [are] so legitimately affronted by the conduct of litigation in a United States forum that dismissal is warranted without regard to the defendant[s'] amenability to suit in an adequate foreign forum. Id. Thus, even after factoring in the court's normal duty to adjudicate a controversy properly before it, Hachamovitch, 159 F.3d at 693 (citation and internal quotation marks omitted), we cannot on the present record say for certain that it would be an abuse of discretion to decide the international comity question one way or the other. Neither can we reach the merits of the parties' dispute without resolving the issue of whether the dispute should be heard by United States courts at all under principles of international comity. 75 We therefore do not decide whether the plaintiffs failed to state a claim or to present sufficient evidence to overcome the defendants' motion in the alternative for summary judgment. Instead, we remand the case to the district court for it to decide in the first instance whether its deciding the cause is consistent with principles of international comity.