Opinion ID: 151499
Heading Depth: 4
Heading Rank: 2

Heading: Affirmative Assumption of Liability

Text: Mortimer also alleges that the FRG acceded to obligations under the East German Bonds through various legislative documents and treaties referenced in the original and proposed amended complaints as acts of recognition. If these documents were sufficient to establish that the FRG became obligated under the East German Bonds, then FSIA jurisdiction would be present; however, they are insufficient, and jurisdiction is absent here as well. The complaint alleged that [a]fter World War II, Germany entered into an agreement with the Allied High Commission in which it assumed liability for the pre-war external debt of the German Reich. (Compl. ¶ 11.) However, the complaint provided no further specifics respecting this agreement. Thus, we understand the complaint's reference to an agreement with the Allied High Commission to refer to the London Debt Accord, which is the only possible, reasonable interpretation of Mortimer's complaint. [13] In addition, Mortimer's proposed amended complaint specified acts of recognition by which the FRG allegedly repeatedly recognized its obligation for the pre-war external debt of the German Reich and the [s]tate of Prussia: (1) the Unification Treaty, 3 I.L.M. at 379, Art. 23(6); (2) a letter dated March 6, 1951 from Konrad Adenauer, Chancellor, Federal Republic of Germany, to André François-Poncet, Chairman, Allied High Commission (Mar. 6, 1951), reprinted in 2 U.S.T. 1250, 1250, translated in 2 U.S.T. 1252, 1252 (hereinafter Adenauer Letter); and (3) a post-reunification Letter on Behalf of the Federal Republic of Germany to Office of the Chief Counsel, Securities and Exchange Commission (Feb. 18, 1994) (hereinafter SEC Filing). [14] We examine each of these documents in turn to determine whether any of them constitutes an act conferring liability for the East German Bonds upon the FRG.
The FRG's Federal Court of Justice concluded in 2005 that the London Debt Accord does not govern foreign currency bonds issued in territory that became East Germany, and that applying the Accord to such bonds would exceed the appropriate boundaries of judicial decision-making. See Bundesgerichtshof, 25 BGHZ 353/04, at 19 ¶ 41. We agree. Only two provisions of the London Debt Accord, adopted in 1960 by West Germany, address West Germany's liability for the debts of either the German Reich or East Germany. Neither obligates West Germany to assume liability for the East German Bonds. The first, Article 20, governs Reich [d]ebts and provides that West Germany will, at the request of the interested creditors, enter into direct negotiations with regard to these debts. London Debt Accord, 4 U.S.T. at 457. This provision plainly applies only to debts of the German Reich owing under [m]ultilateral [a]greements, meaning debts for which either the German Reich or West Germany had already assumed liability. Id. Even assuming arguendo that the East German Bonds constitute Reich [d]ebts for purposes of the London Debt Accord, [15] as Mortimer has maintained throughout this action, the Validation Law and 1953 Treaty, cover only foreign currency bonds issued in what later became West German territory. ( See Tr. 30:16-19 (Mortimer's counsel stated that the validation law. . . . made every effort not to cover East Germany liabilities [sic] at the time. That's confirmed.); Tr. 36:18-21(arguing that the 1953 Treaty references and is governed by the Validation Law). Thus, Article 20 does not indicate that the Accord confers East German Bond liability upon West Germany. The second provision, Article 25, specifically refers to bonds issued in territory that became East Germany, providing that the Parties . . . will review the [Accord] on the reunification of Germany to mak[e] the [Accord's] provisions . . . applicable to the debts of persons residing in East Germany. 4 U.S.T. at 459. Although anticipating West and East Germany's reunification and the need to mak[e] equitable adjustments, respecting debts incurred in the territory of East Germany, id., Article 25 and the remainder of the Accord refrained from delineating those possible adjustments, let alone imposing liability upon West Germany for any of East Germany's debts. Thus, we conclude that the London Debt Accord did not obligate the FRG to compensate holders of bonds issued in what became East Germany.
Mortimer's proposed amended complaint also alleged that upon unification, the FRG assumed liability for East Germany's debts, including the East German Bonds. Article 23 of the Unification Treaty provides that the FRG shall take over the sureties, guarantees and warranties assumed by [East Germany] and debited to its state budget prior to unification. Unification Treaty, 30 I.L.M. at 479, Art. 23(6). Article 23 is based on the recognition that [the FRG] is liable for [East Germany's] state debts. Frowein, 86 Am. J. Int'l L. at 157. But, Mortimer's argument suffers from a critical flaw: the failure to allege how East Germany assumed liability for bonds issued by private banks located in the state of Prussia. As we concluded in our discussion of automatic successor liability, supra, Mortimer has failed to allege an affirmative act by which East Germany assumed liability for debt issued within the German Reich, let alone the state of Prussia. Thus, Mortimer's allegation that the Unification Treaty alone provides no basis for liability beyond speculation that East Germany assumed liability for the bonds. A claim based on such speculation is implausible. See Iqbal, 129 S.Ct. at 1949.
The remaining documents referenced in Mortimer's amended complaint are West German Chancellor Konrad Adenauer's letter to the Allied Commission in 1951 opining that West Germany is liable for the pre-war external debt of the German Reich, 2 U.S.T. at 1252, and, the FRG's SEC filing in 1994 stating that the FRG is not only the successor to, but is identical with, the German Reich under principles of international public law, and that holders of the interest coupons or talons. . . can look only to the Federal Republic for payment, SEC Filing at 3. Neither document provides an independent legal basis for holding the FRG liable for the East German Bonds. Mortimer has identified, and we have located, no precedent holding a foreign sovereign state liable based solely on a representation by its head of state or an administrative filing made in the United States on the sovereign's behalf. Moreover, neither document expressly mentions the East German Bonds at issue; instead, each discusses West Germany's affirmative assumption of liability for the German Reich's pre-war external debts issued in what became West Germany. It is at best ambiguous whether such statements were intended to cover the East German Bonds, thereby expanding the FRG's legal obligations, as opposed to discussing then-existing debts and obligations undertaken by West Germany in pre-existing multilateral agreements such as the 1960 Treaty. Chancellor Adenauer's 1951 letter speaks only to West Germany's assumption of the German Reich's debt; it gives no indication that West Germany assumed more than the debt incurred in what became its territory or otherwise obligated itself to honor debt incurred in what became East Germany. Instead, the letter discusses West Germany's debts by reference to its obligation to resume payments on the German external debt. 2 U.S.T. at 1253. Moreover, Mortimer has never explained how West Germany might have assumed liability for the East German Bonds or would have had any motivation to do so prior to the 1951 letter, such as by way of a preexisting multilateral agreement. The SEC filing cited by Mortimer provides that the FRG is liable for  certain bonds issued between 1924 and 1930 by the German Reich and the [s]tate of Prussia, and subsequently references interest payments that the present-day FRG  obligated itself to pay . . . following the reunification of Germany under the London Debt Accord. SEC Filing at 1 (emphases added). As already explained, because the London Debt Accord does not cover foreign currency bonds issued in the territory of East Germany, the SEC filing logically refers only to bonds issued in what became West German territory, bonds for which West Germany and thus the FRG repeatedly and affirmatively assumed liability, beginning with the Validation Law and 1953 Treaty. Accordingly, we conclude that neither letter expands the FRG's liability to encompass obligations for the East German Bonds. After considering and rejecting all the documents identified by Mortimer's proposed amended complaint as potential bases for holding the present-day FRG liable for the East German Bonds as incapable of advancing Mortimer's claim for compensation, we are left with mere conclusory statements, Iqbal, 129 S.Ct. at 1949, in Mortimer's original complaint. These contentions fail to show anything more than a sheer possibility, id., that the FRG assumed liability under the East German Bonds. We thus agree with the district court that leave to amend would be futile because Mortimer's proposed amended complaint did not cure the original complaint's deficiencies. See Acito, 47 F.3d at 55. For the foregoing reasons, we affirm the judgment of the district court dismissing Mortimer's claim to enforce the East German Bonds, but we do so on the alternative ground that Mortimer has failed to make the threshold showing necessary to invoke the commercial activity exception to the FSIA, and therefore subject matter jurisdiction is lacking. Insofar as Mortimer has moved for leave to amend the judgment and to amend the complaint with respect to the East German Bonds, we affirm the district court's denial of that motion.