Opinion ID: 1433952
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Heading Rank: 4

Heading: Determining Whether an Agency Relationship Exists Between the Holy See and Its Domestic Corporations for Purposes of Establishing Jurisdiction over the Holy See

Text: a. The Bancec standard In arguing that the actions of the corporations are not attributable to Holy See for purposes of determining jurisdiction, the Holy See relies on First Nat. City Bank v. Banco Para el Comercio Exterior de Cuba ( Bancec ), 462 U.S. 611, 103 S.Ct. 2591, 77 L.Ed.2d 46 (1983). In Bancec, the Supreme Court considered whether an instrumentality created by a foreign state could be held liable for the actions of the foreign state itself, a question the reverse of ours. Bancec was the Cuban Government's exclusive agent in foreign trade, and the government supplied all of [Bancec]'s capital and owned all of its stock. Id. at 614, 103 S.Ct. 2591. Soon after Bancec sought to collect on a letter of credit that had been issued in its favor by Citibank, the Cuban government seized and nationalized all of Citibank's assets in Cuba. Id. So, when Bancec filed an action in U.S. federal court to recover on the letter of credit, Citibank counterclaimed, seeking a setoff for the value of its expropriated Cuban branches. Id. at 614-15, 103 S.Ct. 2591. In the meantime, Bancec was dissolved, and Bancec filed a stipulation stating that ... its claim had been transferred to the Ministry of Foreign Trade of Cuba. Id. at 615-16, 103 S.Ct. 2591. Jurisdiction in Bancec existed under FSIA's counterclaim provision, 28 U.S.C. § 1607(c). [7] Id. at 620-21, 103 S.Ct. 2591. Because jurisdiction was not at issue, the question for the Supreme Court was one of liability: whether Bancec could be held liable for the act of expropriation committed by the Cuban government. Id. at 617, 103 S.Ct. 2591. The Supreme Court began by noting that, although Bancec was an agency or instrumentality of Cuba within the meaning of FSIA § 1603(b), this status was relevant only to jurisdiction; it did not control the question of Bancec's liability for Cuba's actions. The FSIA was not intended to affect the substantive law determining the liability of a foreign state or instrumentality. Id. at 620, 103 S.Ct. 2591. Instead, liability was to be assessed according to corporate law principles common to both international law and federal common law. Id. at 623, 103 S.Ct. 2591. Surveying international and federal law on the status of corporations, the Supreme Court recognized a presumption of separate juridical [status] for the instrumentalities of foreign states. Id. at 624, 624-28, 103 S.Ct. 2591. That presumption can be overcome, the Court explained, in two instances: when a corporate entity is so extensively controlled by its owner that a relationship of principal and agent is created, or when recognizing the separate status of a corporation would work fraud or injustice. Id. at 629, 103 S.Ct. 2591. The Court then held the latter standard dispositive of Bancec's case: The Cuban government could not have sued in its own name in a U.S. court without waiving its sovereign immunity and answering for [its] seizure of Citibank's assets. Id. at 633, 103 S.Ct. 2591. Instead, Cuba had transferred its assets to separate entities, and Bancec then sought to avoid liability for the seizure. [T]he Cuban government ... [and] not any third parties that may have relied on Bancec's separate juridical identity would be the real beneficiary if Bancec was not held liable for the Cuban government's actions. Id. at 631-32, 103 S.Ct. 2591. Given this circumstance, the Court concluded that to adhere blindly to the corporate form would work such an injustice that the presumption of separate juridical status had been overcome. Id. at 632, 103 S.Ct. 2591. Holding Bancec liable for the Cuban government's actions, the Court held that Citibank was entitled to offset the value of its seized assets from the amount it owed to Bancec. Id. at 634, 103 S.Ct. 2591. The Supreme Court in Bancec did not have the opportunity to consider whether the actions of a corporation may be attributed to the sovereign  the reverse of the Bancec scenario  for purposes of determining whether jurisdiction over that sovereign exists. This Circuit has not previously addressed that question either. [8] At least two other circuits, however, faced with such a scenario, have applied Bancec 's substantive corporate law principles in determining whether jurisdiction exists under the FSIA. In Transamerica Leasing v. La Republica de Venezuela, 200 F.3d 843 (D.C.Cir. 2000), a plaintiff sued Venezuela, alleging that Venezuela was liable for the commercial acts of a government instrumentality, CAVN. Id. at 846. To determine whether Venezuela was amenable to suit under the commercial activity exception, the court turned to the Bancec test and asked whether (1) Venezuela and CAVN had a principal-agent relationship, or (2) recognizing CAVN as a separate entity would work an injustice. Id. at 848. Although it acknowledged that  Bancec recognized these as exceptions to the rule that a foreign sovereign is not liable for the acts of an instrumentality of the state, the D.C. Circuit held that they serve also as exceptions to the rule that a foreign sovereign is not amenable to suit based on the acts of such an instrumentality. Id. (emphasis added). See also Foremost-McKesson, Inc. v. Islamic Republic of Iran, 905 F.2d 438, 446 (D.C.Cir.1990) (The presumption of juridical separateness of entities also applies to jurisdictional issues.). The Fifth Circuit adopted the same principle in Arriba Ltd. v. Petroleos Mexicanos, 962 F.2d 528, 533-36 (5th Cir.1992), refusing to attribute the actions of a private labor union to the Mexican state-owned oil company for purposes of determining FSIA jurisdiction. We join the D.C. Circuit and the Fifth Circuit in extending Bancec 's analysis to the question whether the actions of a corporation may render a foreign sovereign amenable to suit. A foreign state can only act[ ] through its agents, be they corporations or individual people. Phaneuf v. Republic of Indonesia, 106 F.3d 302, 307-08 (9th Cir.1997) (Because a foreign state acts through its agents, an agent's deed... constitutes activity `of the foreign state.'); see also Gilson v. Republic of Ireland, 682 F.2d 1022, 1026 n. 16 (D.C.Cir.1982) (noting that the activities of an agent may be attributed to the principal for jurisdictional purposes). Therefore, in applying the jurisdictional provisions of the FSIA, courts will routinely have to decide whether a particular individual or corporation is an agent of a foreign state. Bancec provides a workable standard for deciding this question. Applying Bancec 's presumption in favor of separate juridical status for foreign state instrumentalities at the jurisdiction phase, not just at the liability phase, is consistent with the FSIA's broad policy goals. In Bancec, the Court discussed at length the comity considerations at play when entertaining suits against foreign government instrumentalities in U.S. courts. 462 U.S. at 626, 103 S.Ct. 2591; see also Republic of Austria v. Altmann, 541 U.S. 677, 688, 124 S.Ct. 2240, 159 L.Ed.2d 1 (2004). As at the merits phase, failing to recognize the presumption of separate juridical status at the jurisdictional phase could result in substantial uncertainty over whether an instrumentality's assets would be diverted to satisfy a claim against the sovereign, and might frustrate the efforts of sovereign nations to structure their governmental activities in a manner deemed necessary to promote economic development and efficient administration. Bancec, 462 U.S. at 626, 103 S.Ct. 2591. Applying Bancec 's presumption  as well as the standard for overcoming that presumption  at the outset of a suit as well as at the merits phase makes good sense. With these considerations in mind, we conclude that it is appropriate to use the Bancec standard to determine whether Doe's allegations are sufficient to permit jurisdiction over the Holy See based on acts committed by its affiliated domestic corporations. b. Applying the Bancec standard to Doe's complaint Applying the rule of Bancec to the allegations in Doe's complaint, we conclude that Doe has not alleged sufficient facts to overcome the presumption of separate juridical status, for reasons similar to those dispositive in the converse situation in Flatow v. Islamic Republic of Iran, 308 F.3d 1065 (9th Cir.2002). In Flatow, we applied Bancec to the relationship between the Iranian government and the Bank Saderat Iran (BSI). BSI was created by the Iranian government and fully owned by it. Id. at 1072-73. Its actions were regulated by Iran's General Assembly of Banks and High Council of Banks, which reviewed BSI's annual statements and perform[ed] broad policymaking functions. Id. at 1073. Flatow held these facts insufficient to overcome the presumption of separate juridical status, because the government's involvement [did not] rise to a [sufficiently] high[ ] level, and in particular, did not involve day-to-day control. Id. (citing McKesson Corp. v. Islamic Republic of Iran, 52 F.3d 346, 351-52 (D.C.Cir.1995)) (holding the presumption of separateness overcome where Iran controlled routine business decisions, such as declaring and paying dividends and honoring contracts). Doe's complaint does not allege day-to-day, routine involvement of the Holy See in the affairs of the Archdiocese, the Order, and the Bishop. Instead, it alleges that the Holy See creates, divides[,] and re-aligns dioceses, archdioceses and ecclesiastical provinces and gives final approval to the creation, division or suppression of provinces of religious orders. Doe also alleges that the Holy See promulgates and enforces the laws and regulations regarding the education, training[,] and standards of conduct and discipline for its members and those who serve in the governmental, administrative, judicial, educational[,] and pastoral workings of the Catholic [C]hurch world-wide. These factual allegations  that the Holy See participated in creating the corporations and continues to promulgate laws and regulations that apply to them-are quite similar to the facts in Flatow, and are, as in Flatow, insufficient to overcome the presumption of separate juridical status. Doe does directly allege in his complaint that the corporations are agents of the Holy See. In this context, however, the term agent is not self-explanatory. Agent can have more than one legal meaning: the standard for determining that a natural person is the agent of another differs from the standard for attribution of the actions of a corporation to another entity. See, e.g., Rough & Ready Lumber Co. v. Blue Sky Forest Products, 105 Or. App. 227, 231, 804 P.2d 498 (1991) (an agency relationship between two natural persons results from the manifestation of consent by one person to another that the other shall act on his behalf and subject to his control, and consent by the other so to act.) (quoting Restatement (Second) of Agency § 1 (1958)). The Bancec standard is in fact most similar to the alter ego or piercing the corporate veil standards applied in many state courts to determine whether the actions of a corporation are attributable to its owners. See, e.g., Amfac Foods, Inc. v. Int'l Sys. & Controls Corp., 294 Or. 94, 107-08, 654 P.2d 1092 (1982) (holding that to demonstrate alter ego status, plaintiff must show control of the subsidiary and that the plaintiff's inability to collect from the corporation resulted from some form of improper conduct on part of parent corporation). Even reading the complaint generously to Doe, as we must, we cannot infer from the use of the word agent that Doe is alleging the type of day-to-day control that Bancec and Flatow require to overcome the presumption of separate juridical status. The district court apparently found jurisdiction proper by relying on the second, equitable prong of Bancec, noting that foreign states cannot avoid their obligations to third parties by engaging in abuses of the corporate form. Doe, 434 F.Supp.2d at 936. But Doe has not alleged that the Holy See has inappropriately used the separate status of the corporations to its own benefit, as in Bancec, or that the Holy See created the corporations for the purpose of evading liability for its own wrongs. Rather, in ruling for Doe on this point, the district court seemed to be influenced by the complaint's allegations of wrongful acts perpetrated directly by the Holy See. See Doe, 434 F.Supp.2d at 937. The existence of such direct wrongful acts cannot determine whether the distinct wrongful acts of the affiliated corporations should also be attributed to the Holy See. Doe's vicarious liability claim for the actions of the Archdiocese, Chicago Bishop, and Order is based entirely on an allegation that the actions of the domestic corporations are attributable to the Holy See. Doe has therefore not alleged sufficient facts to demonstrate that any exception to sovereign immunity applies to that cause of action. We therefore conclude that the district court lacked jurisdiction over the Holy See for the tortious acts allegedly committed by the Archdiocese, the Chicago Bishop, and the Order.