Opinion ID: 2502147
Heading Depth: 2
Heading Rank: 3

Heading: The Banks' Standing to Raise Execution Immunity

Text: Petitioners submit that the district court erred in relying on FSIA execution immunity to dismiss this case because the Banks lacked standing to invoke this protection and China never appeared in these proceedings to claim it. On one prior occasion, this court has held assets immune from execution in a proceeding in which the sovereign itself did not enter an appearance. See De Letelier v. Republic of Chile, 748 F.2d at 795-98 (holding that even if Chile and its national airline were considered alter egos, circumstances did not come within any FSIA exception to execution immunity so as to permit attachment of airline assets in United States). We have not, however, specifically addressed the circumstances under which execution immunity may be considered sua sponte or at the behest of a third party, the issue raised directly on this appeal. Those of our sister circuits that have considered the question have uniformly held that, at least where a judgment creditor seeks to enforce a judgment rendered against a foreign sovereign by attaching or executing upon its property, a district court may apply the FSIA's execution immunity provisions regardless of whether the foreign sovereign enters an appearance. See Rubin v. Islamic Republic of Iran, 637 F.3d at 801 [7th Cir.]; Peterson v. Islamic Republic of Iran, 627 F.3d at 1128-29 [9th Cir.]; Walker Int'l Holdings Ltd. v. Republic of Congo, 395 F.3d 229, 233 (5th Cir.2004); see also Rubin v. Islamic Republic of Iran, 456 F.Supp.2d 228, 231-33 (D.Mass.2006). We now join them in concluding that the district court properly applied FSIA execution immunity to dismiss this case against the Banks despite the fact that China itself did not appear in the action to invoke such immunity. In reaching this conclusion, we rely on the text and structure of the FSIA. See Hardt v. Reliance Standard Life Ins. Co., ___ U.S. ____, 130 S.Ct. 2149, 2156, 176 L.Ed.2d 998 (2010); Dobrova v. Holder, 607 F.3d 297, 301 (2d Cir.2010) (Statutory analysis necessarily begins with the plain meaning of a law's text and, absent ambiguity, will generally end there. (brackets and internal quotation marks omitted)). Title 28 U.S.C. § 1609 states that the property in the United States of a foreign state shall be immune from attachment arrest and execution except as provided in sections 1610 and 1611 of this chapter. [8] This language places no limit on the district court's authority to recognize execution immunity. To the contrary, the statute's use of the mandatory form  providing that such property shall be immune from execution absent a statutory exception  signals that, at least where there is no dispute that the targeted property is owned by a foreign sovereign, execution immunity inures in the property itself and applies without regard to how the issue is raised. See Rubin v. Islamic Republic of Iran, 637 F.3d at 799 (It follows from [§ 1609's] language that the immunity does not depend on the foreign state's appearance in the case.). That conclusion is only reinforced by considering § 1609 in context with § 1610(c). The latter provision states that [n]o attachment or execution pursuant to the immunity exceptions identified in § 1610(a) and (b), see Part II.B.2, supra (discussing exceptions), shall be permitted until the court has ordered such attachment and execution after having determined that a reasonable period of time has elapsed following the entry of judgment and the giving of any notice required under section 1608(e) of this chapter. In short, § 1610(c) not only ensures that no execution upon sovereign property can take place without notice to the sovereign, but it also requires a prior judicial determination that the execution is warranted under one of the § 1610(a) or (b) exceptions and with respect to specifically identified property. See Rubin v. Islamic Republic of Iran, 637 F.3d at 800 (construing § 1610(c) to make clear that even when the foreign state fails to appear in the execution proceeding, the court must determine that the property sought to be attached is excepted from immunity under § 1610(a) or (b) before it can order attachment or execution); id. at 797 ([A] judgment creditor seeking to invoke an exception to § 1609 immunity must first identify the property on which it seeks to execute.); Aurelius Capital Partners, LP v. Republic of Argentina, 584 F.3d at 130 (citing FG Hemisphere Assocs., LLC v. République du Congo, 455 F.3d 575, 594 (5th Cir.2006), for proposition that prior to issuing a garnishment order, a district court must make factual findings that support application of the § 1610(a) exception to executional immunity, and therefore, the court must determine the location of each form of property at time of issuance of the order to ensure that it governs property located in the United States (brackets and internal quotation marks omitted)). This statutory requirement is appropriately reflected in the practice of the district courts of this circuit. See, e.g., Olympic Chartering, S.A. v. Ministry of Indus. & Trade of Jordan, 134 F.Supp.2d 528, 536 (S.D.N.Y. 2001) (holding that since the plaintiff in the instant case has not identified any specific assets in its motion, the Court cannot adequately review the propriety of attaching the assets of the judgment-debtor for purposes of satisfying § 1610(c)); Trans Commodities, Inc. v. Kazakstan Trading House, S.A., No. 96 Civ. 9782, 1997 WL 811474, at  (S.D.N.Y. May 28, 1997) (vacating restraining notice because no court had specifically passed upon propriety of attaching funds for purposes of satisfying § 1610(c)); see also Rubin v. Islamic Republic of Iran, 456 F.Supp.2d at 231 [D. Mass.] (Rule 69 therefore requires that the Court consider a particular property's immunity status under FSIA (and similar statutes) prior to allowing a judgment creditor to execute against it.). Indeed, a contrary construction would be difficult to reconcile with § 1610(a)(1), which, as discussed in Part II.D.2, infra, does not recognize a sovereign's failure to appear as a waiver of sovereign immunity. [9] In urging otherwise, petitioners rely on our decision in Republic of Philippines v. Marcos, 806 F.2d 344 (2d Cir.1986), mischaracterizing that case as holding that immunity from execution or attachment under §§ 1609 and 1610 is a defense that is exclusive to the foreign sovereign and a third party cannot raise the defense on the foreign sovereign's behalf. Appellants' Reply Br. at 13 (emphasis in original). This reliance is doubly misplaced. First, Marcos concerned the foreign state's immunity from jurisdiction, not sovereign assets' immunity from execution. See 806 F.2d at 360. Second, the record in Marcos raised doubts as to whether the individuals asserting jurisdictional immunity were entitled to FSIA protections in any respect and, even if they were, whether the specific acts at issue were undertaken in a sovereign capacity. See id. By contrast, in this turnover action only execution, not jurisdictional, immunity is at issue, and both the sovereignty of the judgment debtor and the sovereign nature of the assets at issue are undisputed. Moreover, because China was served with the petition and has repeatedly invoked sovereign immunity for its assets as well as itself in a number of diplomatic communications relating to the Walters' lawsuit, there is no concern in this case that the Banks' invocation of execution immunity to avoid a turnover order directed at sovereign assets in their possession somehow interferes with the foreign sovereign's ability to exercise its rights. Cf. Rubin v. Islamic Republic of Iran, 408 F.Supp.2d 549, 557 (N.D.Ill.2005) (identifying such concern in denying third-party standing), rev'd 637 F.3d 783 (7th Cir.2011). To the extent that a court has the power, or even duty, to consider a question sua sponte, it is hardly necessary to speak of third-party standing. If a court may consider an issue on its own motion, it does not matter what triggers the court's inquiry. The court may consider the issue once it is suggested by any party  or, for that matter, non-party  even if there is no reason to confer a special right of third-party standing on that party. In any event, the general rule against third-party standing is a judicially self-imposed and prudential limitation, rather than a constitutional one. Allen v. Wright, 468 U.S. 737, 751, 104 S.Ct. 3315, 82 L.Ed.2d 556 (1984); see also Cordes & Co. Fin. Servs., Inc. v. A.G. Edwards & Sons, Inc., 502 F.3d 91, 100-01 (2d Cir.2007). As such, it must yield to a contrary statute. See Leibovitz v. N.Y.C. Transit Auth., 252 F.3d 179, 186 (2d Cir. 2001). That is this case. As previously discussed, the FSIA, by its terms, authorizes consideration of sovereign immunity from both jurisdiction and execution even in the absence of an appearance by the sovereign. See Walker Int'l Holdings Ltd. v. Republic of Congo, 395 F.3d at 233 ([T]he very language of the FSIA makes clear that the [sovereign's] presence is irrelevant[.]). In arguing to the contrary, petitioners contend that sovereign immunity is an affirmative defense. The point is debatable. See Frolova v. U.S.S.R., 761 F.2d 370, 373 (7th Cir.1985) (observing that legislative history's characterization of sovereign immunity as affirmative defense is not entirely accurate); see also Verlinden B.V. v. Cent. Bank of Nigeria, 461 U.S. at 493 n. 20, 103 S.Ct. 1962; Rubin v. Islamic Republic of Iran, 637 F.3d at 799 n. 15. We need not, however, resolve the question because [b]oth the Supreme Court and the Second Circuit have long held that courts may dismiss actions on their own motion in a broad range of circumstances where they are not explicitly authorized to do so by statute or rule. Snider v. Melindez, 199 F.3d 108, 112 (2d Cir.1999). For instance, although the statute of limitations is ordinarily an affirmative defense that the defendant must raise at the pleadings stage and that is subject to rules of forfeiture and waiver, John R. Sand & Gravel Co. v. United States, 552 U.S. 130, 133, 128 S.Ct. 750, 169 L.Ed.2d 591 (2008), district courts may dismiss an action sua sponte on limitations grounds in certain circumstances where the facts supporting the statute of limitations defense are set forth in the papers plaintiff himself submitted, Leonhard v. United States, 633 F.2d 599, 609 n. 11 (2d Cir.1980) (cited in Snider v. Melindez, 199 F.3d at 112); but cf. Davis v. Bryan, 810 F.2d 42, 44 (2d Cir.1987) (discouraging sua sponte consideration of limitations defense). Similarly, res judicata is a waivable defense that a court is nonetheless free to raise sua sponte. See Doe v. Pfrommer, 148 F.3d 73, 80 (2d Cir.1998) ([W]hile [res judicata] or similar defenses are ordinarily not to be recognized when not in the answer, no absolute bar to the consideration of such claims exists. (internal quotation marks and ellipsis omitted)); see also Arizona v. California, 530 U.S. 392, 412, 120 S.Ct. 2304, 147 L.Ed.2d 374 (2000). So too with sovereign immunity. We identify no doctrinal bar to a district court's applying execution immunity on its own initiative consistent with the terms of the FSIA. See Walker Int'l Holdings Ltd. v. Republic of Congo, 395 F.3d at 233 (identifying no authority for proposition that it is the sovereign's exclusive right to raise the issue of sovereign immunity under the FSIA (emphasis in original)). [10] We therefore conclude that, where a judgment creditor seeks to enforce a judgment against an undisputed foreign sovereign by collecting against what are undisputed sovereign assets, a court may apply the immunity protections of the FSIA even if the sovereign does not appear in the action. [11] We therefore reject petitioners' standing challenge as without merit.