Opinion ID: 625173
Heading Depth: 3
Heading Rank: 2

Heading: Threshold Issue with the Complaints

Text: Before venturing into our analysis of the commercial activity exceptions, we pause to address our concern with the way in which the plaintiffs have attempted to define their action (i.e., in terms of breach of contract). Based on an examination of the plain language of the Bonds, we are not convinced that there was a breach of contract at all. To wit, the terms and conditions on the face of the Bonds define Bearer Obligation in terms of what Petrobrás owes to the Bondholders, namely the nominal value of 1,000 cruzeiros and bi-annual interest payments of seven percent up to [the Bonds'] redemption. In the alternative, the sixth condition of . . . issuance in each of the series of Bonds at issue provides that the holder of this obligation [is entitled to] the option for receiving preferred nominative shares without voting rights, after the [B]ond party meets [certain] requirements. From the very terms of the Bonds, however, an obligation existed only through 1977 (or as late as 1980, in the case of the Series 4 bonds), the exact date corresponding to a Bond's specified redemption period. After the expiration of the redemption period, we believe that the Bonds no longer had a residual benefit. Therefore, in all cases, there is no current obligation as contemplated by the terms of the Bonds, the latest redemption period (for the Series 4 Bonds) having expired on December 31, 1980. There being no obligation, Petrobrás has no duty to honor an attempt by a Bondholder to convert, and a decision not to convert cannot be a breach, as the Bondholder is not deprived of any contractual right. Notwithstanding our grave concerns regarding the merits of the complaint, we proceed, as we must, first to determine issues of subject matter jurisdiction. Robinson v. Gov't of Malaysia, 269 F.3d 133, 141 (2d Cir.2001) (A . . . court does not. . . decide a case on the merits in order to decide if it has jurisdiction. Jurisdiction is not defeated by the possibility that averments might fail to state a cause of action. (internal quotation marks and alteration omitted)). For the following reasons, even if the Bonds continue to have a residual benefit, no exception to the FSIA affords the District Court subject matter jurisdiction.