Opinion ID: 407800
Heading Depth: 2
Heading Rank: 1

Heading: The Act of State Issue

Text: 10 CGNL claims on appeal that the act of state doctrine does not apply to the present case, and furthermore, that the Hickenlooper amendment, 22 U.S.C. § 2370(e)(2) (1976), precludes Entex from invoking the doctrine. 11 The district court relied on Hunt v. Mobil Oil Corp., 550 F.2d 68 (2d Cir.), cert. denied, 434 U.S. 984, 98 S.Ct. 608, 54 L.Ed.2d 477 (1977), in disposing of this issue. Under the holding of Hunt, the district court concluded that the plaintiff would have to prove that 'but for' the acts of the Defendant, the Mexican government would not have put a Mexican corporation whose assets are located in Mexico into receivership. This court would thus be forced to scrutinize the motives of the Mexican officials. Such an inquiry is clearly barred by the act-of-state doctrine. 12 The most recent pronouncement of the act of state doctrine in this circuit is found in Industrial Investment Development Corp. v. Mitsui Co., Ltd., 594 F.2d 48 (5th Cir. 1979), cert. denied, 445 U.S. 903, 100 S.Ct. 1078, 63 L.Ed.2d 318 (1980). In Mitsui, we noted that the analysis in Hunt was unduly broad, and held that, in establishing a causal relation between the private violations alleged and the injuries suffered, a plaintiff was not required to establish that the defendant's acts were the sole cause of the injury. (I)nquiry beyond the fact of some damage flowing from the unlawful conspiracy relates only to the amount and not the fact of damage. Id. at 55. We also held that an inquiry into the motivation of a foreign government was not as protected by the act of state doctrine as an inquiry into the validity of the foreign government's law or regulation. Id. 13 Even such a narrow interpretation of the act of state doctrine, however, would require the court to refrain from examining the claim of conspiracy here. As we noted in Mitsui, application of the doctrine is determined by balancing several factors, namely, the degree of involvement of the foreign state, whether the validity of its law or regulation was an issue, whether the foreign state was a named defendant, and whether there was a showing of harm to American commerce. 594 F.2d at 52-53. 14 Although the Government of Mexico is not a named defendant here, consideration of the remaining factors shows that the district court did not err in dismissing the conspiracy claim. Resolution of the charges made by CGNL would require a determination of the legality of the Mexican government's action in appointing an interventor to take over CGNL's operations in Nuevo Laredo, and the validity of such action under Mexican law. Furthermore, unlike the plaintiff in Mitsui, CGNL has not demonstrated that the conspiracy in any way affected United States commerce. A balancing of the competing interests involved shows that any analysis by this court would have an adverse effect on the relations between this country and Mexico. 15 The Restatement (Second) of Foreign Relations Law of the United States section 41 further supports this conclusion: 16 (A) court in the United States ... will refrain from examining the validity of an act of a foreign state by which that state has exercised its jurisdiction to give effect to its public interest (emphasis added). 17 Illustration 6 under comment d is particularly instructive: State A obtains by eminent domain proceedings title to an electric utility system in its territory. The vesting of title is an act of state within the meaning of the rule stated in this Section. 18 The district court concluded, and we agree, that the act of expropriation by the Mexican government was governmental, and not commercial. Therefore, the purely commercial exception to the act of state doctrine set forth in Alfred Dunhill of London, Inc. v. Republic of Cuba, 425 U.S. 682, 96 S.Ct. 1854, 48 L.Ed.2d 301 (1976), does not apply. 19 CGNL urges that an exception to the act of state doctrine exists when the governmental acts in question were procured through corruption, and cites Dominicus Americana Bohio v. Gulf & Western Industries, Inc., 473 F.Supp. 680, 690 (S.D.N.Y.1979), for support. We first note that, as the court below correctly observed, Dominicus cites the Hunt case in support of this proposition, yet, the Hunt court specifically refused to address the merits of this issue. Hunt, supra, 550 F.2d at 79. We similarly decline to address this issue. Based on the facts of this case, and viewing the record as a whole, we conclude that the Mexican government, by taking possession of CGNL assets, acted in an emergency to insure that the citizens of Nuevo Laredo receive uninterrupted service of natural gas. 20 CGNL also claims that a letter from the Mexican government allowing it to prosecute causes of action before any authority, whether it be National or Foreign, constitutes an implied waiver by the Mexican government of the act of state defense. CGNL cites no case to support its assertion that an implied waiver by a non-litigating foreign government of the act of state defense operates to deprive a private defendant from asserting the defense. Although a clear and unambiguous statement by a foreign government that it would not object to a judicial examination of a public act undertaken by it may well influence an American court, it is but one of the many factors considered by courts in determining the applicability of the act of state doctrine. 4 21 The facts of this case indicate, however, that the letter cited by CGNL does not constitute a waiver of the act of state defense by the Mexican government. Rather, it merely allows CGNL to pursue claims which might otherwise be foreclosed by the governmental order placing CGNL into receivership. 22 CGNL next claims that our decision in Tabacalera Severiano Jorge, S. A. v. Standard Cigar Co., 392 F.2d 706 (5th Cir.), cert. denied, 393 U.S. 924, 89 S.Ct. 255, 21 L.Ed.2d 260 (1968), precludes application of the act of state doctrine in this case. In Tabacalera, we held that the act of state doctrine did not preclude a federal court from entertaining a suit involving a debt by an American corporation in Florida owed a Cuban corporation, where the Cuban government had no physical control over the debt. We agree with the district court that Tabacalera does not apply here. First, the debt in Tabacalera was located in the United States, whereas here, the alleged confiscation of CGNL property occurred in Mexico. We do not accept CGNL's contention that the bond money it was required to deposit in the United States when it sought an injunction in the district court constitutes a sufficient res. We agree with the district court that the bond money is not related to the conspiracy claim, and therefore, CGNL cannot use it to circumvent the act of state doctrine. Second, the holding of Tabacalera fits well within the purely commercial exception to the act of state doctrine articulated in Dunhill, supra. We hold that the act of state doctrine precludes adjudication of the conspiracy claim by our court. 23 As a last resort, CGNL claims that the Hickenlooper amendment, 22 U.S.C. § 2370(e)(2) (1976), a legislative exception to the act of state doctrine, applies in this case. CGNL contends that the alleged conspiracy between Entex and the Government of Mexico, resulting in the seizure of CGNL assets in Mexico without compensation, violated United States and international law, giving rise to a claim in our courts. 24 The Hickenlooper amendment provides that unless the President of the United States suggests otherwise, or the act of state is not contrary to international law, ... no court in the United States shall decline on the ground of the federal act of state doctrine to make a determination on the merits giving effect to the principles of international law in a case in which a claim of title or other right to property is asserted.... In Banco Nacional de Cuba v. First National City Bank of New York, 431 F.2d 394 (2d Cir. 1970), rev'd on other grounds, 406 U.S. 759, 92 S.Ct. 1808, 32 L.Ed.2d 466 (1972), Chief Judge Lumbard analyzed the amendment's legislative history, and concluded that Congress intended it to be limited to cases involving claims of title with respect to American owned property nationalized by a foreign government in violation of international law, when the property or its assets were subsequently located in the United States. 431 F.2d at 399-402. See also Menendez v. Saks and Co., 485 F.2d 1355, 1372 (2d Cir. 1973), rev'd on other grounds sub nom. Alfred Dunhill of London, Inc. v. Republic of Cuba, 425 U.S. 682, 96 S.Ct. 1854, 48 L.Ed.2d 301 (1976). Applying this principle to the present case, we hold that the Hickenlooper amendment is inapplicable because neither the nationalized property nor its proceeds are located in the United States. 5