Opinion ID: 151499
Heading Depth: 2
Heading Rank: 2

Heading: Mortimer's Claim to Recover on the West German Bonds

Text: Having found subject matter jurisdiction present with regard to the West German Bonds, we now consider Mortimer's claim as to those Bonds on the merits. We review the district court's order granting the FRG's motion to dismiss under Rule 12(b)(6) de novo, consider[ing] the legal sufficiency of [Mortimer's] complaint, taking its factual allegations to be true[,] and drawing all reasonable inferences in [Mortimer]'s favor. Harris v. Mills, 572 F.3d 66, 71 (2d Cir.2009). To survive a motion to dismiss, a complaint must meet a plausibility standard. Id. at 72. Although we `must accept as true all of [a complaint's] allegations . . .,' that `tenet' `is inapplicable to legal conclusions,' and `[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.' Id. (quoting Ashcroft v. Iqbal, ___ U.S. ___, 129 S.Ct. 1937, 1949, 173 L.Ed.2d 868 (2009)) (second alteration in Harris ). This analysis is `a context-specific task that requires [us] to draw on [our] judicial experience and common sense.' Id. (quoting Iqbal, 129 S.Ct. at 1950). As for the district court's denial of Mortimer's subsequent motions to alter the judgment and for leave to amend its complaint, although we generally review such determinations for abuse of discretion, where the determination is based upon a legal interpretation, de novo review is appropriate. See Gorman v. Consol. Edison Corp., 488 F.3d 586, 592 (2d Cir.2007); Fed. R. Civ. P. 44.1. It is well-established that [o]ne good reason to deny leave to amend is when such leave would be futile, specifically when the additional information d[oes] not cure the complaint. Acito v. IMCERA Group, Inc., 47 F.3d 47, 55 (2d Cir.1995). As previously noted, Mortimer's original complaint alleged that the FRG assumed liability for the Bonds, 35.5% of which were issued in what later became West Germany. Mortimer's proposed amended complaint further alleged that [t]he German Validation laws are no longer in force and do not currently apply to the obligations of West German origin. (Proposed Am. Compl. ¶ 22.) Because Mortimer has failed to plausibly allege that it either met the statutory validation requirements aimed to represent valid, legal obligation or was not required to do so, we conclude that it has failed to state a claim. Starting from the premise that the FRG assumed liability for valid foreign currency bonds issued in the territory that became West Germanywhich we accept for reasons already stated, the parties dispute whether Mortimer must comply with the validation procedures before seeking to recover on the West German Bonds in its possession. The FRG argues that no cause of action in this case lies because Mortimer failed to comply with the validation procedures. Mortimer does not assert that it complied with the validation procedures; instead, it contends that it need not do so. Specifically, Mortimer avers that the Validation Law is no longer in effect, and that even if it is, Mortimer's claims are enforceable notwithstanding its refusal to register and submit the West German Bonds to a Validation Board. We address each argument in turn.
We first examine whether the bond validation procedures required by the Validation Law are still in force. Mortimer argues that the Unification Treaty's inclusion of the Validation Law in Annex I amounts to an implied agreement that the Validation Law is no longer in effect. This argument is without merit. Article 11 of the Unification Treaty provides that international agreements to which [West Germany] is a party shall retain their validity, and with the exception of the treaties named in Annex I, shall also relate to [former East German] territory. 30 I.L.M. at 471. Article 11's plain language only excludes treaties listed in Annex I from being extended to former East German territory; it in no way affects the validity of those treaties with respect to former West German territory. Cf. Reese Bros., Inc. v. United States, 447 F.3d 229, 235 (3d Cir.2006) (The usual meaning of the word `and' . . . is conjunctive, . . . unless the context dictates otherwise, the `and' is presumed to be used in its ordinary sense. (internal quotation marks omitted)). Moreover, the Validation Law is listed in the FRG's current statutory code, with only minor amendments irrelevant to this case since its enactment. [16] The Validation Law's continued applicability is supported by the inclusion of both the 1953 and 1960 Treaties, which incorporate the Validation Law, in the United States Department of State's list of treaties in force as of January 1, 2009, see United States Department of State, Treaties in Force: A List of Treaties and Other International Agreements of the United States in Force on January 1, 2009, at 100-01 (2009), available at http:// www.state.gov/documents/organization/ 123747.pdf (last visited January 29, 2010). Both the 1953 and 1960 Treaties confirm that the Validation Law may not be amended or modified except as may be agreed between [West Germany] and the United States. 1960 Treaty, 12 U.S.T. at 944; 1953 Treaty, 4 U.S.T. at 888-89, Art. I. Therefore, inclusion on the treaties in force list suggests the conclusion that there has been no agreement between the United States and the FRG to nullify the Validation Law. For the foregoing reasons, we conclude that the Validation Law's bond validation procedures continue to apply to the West German Bonds.
We now turn to the plausibility of Mortimer's attempt to enforce its West German Bonds as a non-assenter [17]  that is, a bondholder who neither registered nor presented its foreign currency bonds for validation in accordance with the Validation Law. Mortimer contends that the Validation Law's sole restriction on such a claim for compensation is that it may not be asserted to the prejudice of holders of validated foreign currency bonds, Validation Law, BGBl.II at 317, Art. 52(1), and that because the FRG made final payments to settling creditors in 1994, there is no possibility that validated bondholders would be prejudiced by a non-assenter's claim. We find Mortimer's position unavailing. First, Mortimer points to no language in any enactment that abrogates the validation requirements once all validated bondholders have been compensated. In light of the express validation requirements in the Validation Law, 1953 Treaty, and London Debt Accord, see id. at 306, Art. 2 (Foreign currency bonds remain valid only if they are validated . . . pursuant to this Law.); id. at 315, Art. 41 (placing the burden of proving the bonds' validity on the bondholder) id. at 317, Art. 50 (governing the Invalidation of Bonds which have not been validated); 1953 Treaty, 4 U.S.T. at 889, Art. II (providing that [n]o bond . . . shall be enforceable unless and until it shall be validated in accordance with the Validation Law); id. at 888 (providing that corresponding benefits apply only to bonds which have been duly validated); London Debt Accord, 4 U.S.T. at 453, Art. 15(1) (extending benefit[s] to a limited class of creditors who assent to the . . . conditions in respect of such debts), we find Mortimer's non-assenter claim unpersuasive. Additionally, we find Mortimer's argument regarding the intent of the validation procedures to be unreasonably narrow. While the validation procedures were created, in part, to facilitate assenting bondholders' receipt of payment, there is no reason to believe that prejudice to validated bondholders is the only reason to require validation. There is another significant reason to screen out and protect against illegitimate bond claims. As the 1953 Treaty explains, the Validation Law facilitates the settlement of West Germany's financial obligations . . . with assurance that claims prejudicial to such settlement will not be asserted on the basis of bonds which were unlawfully acquired. 1953 Treaty, 4 U.S.T. at 888. See generally Abrey, 153 F.Supp. at 339-42 (detailing the historical background leading to promulgation of validation procedures). In any event, even assuming arguendo that enforcing Mortimer's claims would not prejudice holders of validated bonds, Mortimer failed to comply with the additional requirements that all non-assenting bondholders must meet. In addition to the requirement, cited by Mortimer, that a claim for compensation based on non-validated bonds not prejudice of holders of validated [bonds], Article 52(1) also requires that a claimant establish two preconditions prior to asserting such a claim: (1) that the bonds at issue were validated upon timely registration; and (2) that the failure to register [the bonds] was not due to . . . gross negligence. BGBl.II, at 317. Moreover, the next paragraph of the provision, Article 52(2), states that the right to compensation for non-validated bonds created by Article 52 can be asserted only after it has been finally adjudicated that the conditions set forth in Article 52(1) have been met. Id. (emphasis added). Article 52(2) further states that [e]xclusive jurisdiction to make such adjudication shall rest with the Chamber of Settlement of Securities of the district in which the issuer has its seat. Id. These additional requirements make plain that the absence of prejudice to the holders of validated bonds is necessary, but not sufficient, to permit Mortimer to bring claims relating to the West German Bonds under Article 52 without their prior validation pursuant to the Validation Law. As Mortimer has not alleged that the preconditions to bringing a compensation claim under this provision were adjudicated in its favor or even that, as a factual matter, the preconditions are satisfied with respect to the West German Bonds, we hold that Mortimer's argument fails on its own terms. In sum, a non-assenter can only enforce bonds covered by the Validation Law after complying with the validation procedures and explaining why any delay in doing so is excusable. Like the district court, we hold that Mortimer, by not satisfying either criterion, has failed to set forth a plausible basis in either the complaint or the proposed amended complaint for enforcing the West German Bonds at this stage. Indeed, allowing Mortimer to do so would undercut the purpose of the Validation Law by eliminating any guarantee that Mortimer's West German Bonds, allegedly valued at over $400,000,000, are in fact legitimate. Our decision is consistent with past cases, which have evaluated the enforceability of foreign currency bonds covered by the Validation Law only after the bondholder has registered and submitted its bonds for evaluation in accordance with the Law, and the Validation Board has adjudicated their validity. See Teplin v. Fed. Republic of Germany, No. 81-1874, 690 F.2d 1060, 1982 U.S.App. LEXIS 12629, at -3 (D.C.Cir. Aug. 18, 1982) (per curiam) (finding a bondholder's claims to be not properly before th[e] court because he failed to validate the bonds, thus making them enforceable in U.S. courts); cf. Cavac Compania Anonima Venezolana de Administracion y Comercio v. Bd. for the Validation of German Bonds in the United States, 189 F.Supp. 205, 208 (S.D.N.Y.1960) (permitting arbitration after a Validation Board refused to validate the bonds at issue); Abrey, 153 F.Supp. at 338 (permitting an independent trial respecting the bonds' validity after they were declared invalid by a Validation Board). We therefore affirm the dismissal of Mortimer's claims respecting the West German Bonds and the denial of leave to amend.