Court Opinion

ID: 8409920
Source: CourtListenerOpinion
Date Created: 2022-11-02 17:14:37.36452+00
Date Added: 2024-06-11T16:46:49.980863
License: Public Domain

STRAUB, Circuit Judge,
dissenting.
Garb et al.’s (“Garb”) complaint describes a campaign of ethnic cleansing waged in the aftermath of World War II against Poland’s Jewish Holocaust survivors. Specifically, Garb alleges that Poland’s newly-formed nationalist government expropriated Jewish property— including homes, businesses and community centers — through violence, intimidation, and murder as part of its efforts to create an ethnically homogeneous state by inducing hundreds of thousands of Jews to flee the country. The Foreign Sovereign Immunity Act (“FSIA”) affords a cause of action for such violations of international law under certain conditions. The property at issue must be present in the United States or be owned or operated by a state “agency or instrumentality” that “is engaged in commercial activity in the United States.” 28 U.S.C. § 1605(a)(3).
The majority dismisses Garb’s complaint based on a narrow reading of the term “agency or instrumentality” that excludes the Polish Ministry of the Treasury (“Treasury”) without any jurisdictional discovery. This reading is contrary to the language and the legislative history of the FSIA, and thus arbitrarily eliminates the right of victims such as Garb to seek compensation for what was done to them and to their ancestors. Because I find that we may (depending on facts that the District Court failed to develop) have jurisdiction under the FSIA to hear Garb’s claims, I respectfully dissent.1
*599DISCUSSION
I. Subsection 1605(a)(3)
The provision at issue here abrogates immunity in all cases
in which rights in property taken in violation of international law are in issue and that property or any property exchanged for such property is present in the United States in connection with a commercial activity carried on in the United States by the foreign state; or that property or any property exchanged for such property is owned or operated by an agency or instrumentality of the foreign state and that agency or instrumentality is engaged in a commercial activity in the United States.
28 U.S.C. § 1605(a)(3). As the majority explains, whether this subsection applies to the Treasury depends on whether, under the FSIA, the Treasury is an agency or instrumentality of Poland or is a political subdivision or the Polish state itself.
The FSIA defines “agency or instrumentality” broadly, as “any entity — (1) which is a separate legal person, corporate or otherwise, and (2) which is an organ of a foreign state or political subdivision thereof, or a majority of whose shares or other ownership interest is owned by a foreign state or political subdivision thereof.” Id. § 1603(b) (emphasis added).2 The House Report on the FSIA (“House Report”) explains that any state entity is a “separate legal person,” and therefore an “agency or instrumentality,” provided that “under the law of the foreign state where it was created, [it] can sue or be sued in its own name, contract in its own name or hold property in its own name.” H.R.Rep. No. 94-1487, at 15 (1976), reprinted in 1976 U.S.C.C.A.N. 6604, 6614 (emphasis added). The House Report further explains that:
As a general matter, entities which meet the definition of an ‘agency or instrumentality of a foreign state’ could assume a variety of forms, including a state trading corporation, a mining enterprise, a transport organization such as a shipping line or airline, a steel company, a central bank, an export association, a governmental procurement agency or a department or ministry which acts and is suable in its own name.
Id. at 15-16 (emphasis added). Thus, reading the statute alongside the House Report, departments or ministries would appear to be “agenc[ies] or instrumental-ities]” if, under that country’s own laws, they are treated separately from the state for purposes of litigation, contract or property law. As for the term “political subdivision,” the House Report explains that this term “includes all governmental units beneath the central government, including local governments.” Id. at 15. If an entity is a political subdivision, it cannot be sued unless it is engaged here in commercial business that involves the property at issue. 28 U.S.C. § 1605(a)(3).
Because both “agencies or instrumental-ities” and “political subdivisions” are defined broadly in the FSIA and House Report, the line between the two categories is not absolutely clear. As a result, courts have formulated two conflicting tests for distinguishing between them: the “legal characteristics” test, which focuses on whether the entity is legally separate from the state in a number of ways, and the “categorical” or “core functions” test, which focuses on whether the core functions of the entity are primarily govern*600mental or commercial. Compare Hyatt Corp. v. Stanton, 945 F.Supp. 675, 683-84 (S.D.N.Y.1996) (holding that a governmental unit is an agency or instrumentality as long as it can act and be sued in its own name), and Bowers v. Transportes Navieros Ecuadorianos (Transnave), 719 F.Supp. 166, 170 (S.D.N.Y.1989) (applying legal characteristics test), with Transaero, Inc. v. La Fuerza Aerea Boliviana, 30 F.3d 148, 155 (D.C.Cir.1994) (finding the core functions test more compatible with the legal background to the FSIA), cert. denied, 513 U.S. 1150, 115 S.Ct. 1101, 130 L.Ed.2d 1068 (1995).
The majority chooses the narrower core functions test, holding that any government entity whose core functions are governmental rather than commercial is by definition a political subdivision rather than an agency or instrumentality. Ante at 594. The principal flaw in this reading of the FSIA is that it finds no support in the statute’s definition of “agency and instrumentality,” which turns on whether an entity is a “separate legal person” rather than on its functions. 28 U.S.C. § 1603(b)(1). The legal characteristics test is plainly designed to identify whether an entity is a “separate legal person,” and it derives directly from specific language in the House Report. See House Report, at 15 (stating that an entity is a separate legal.entity if it “can sue and be sued in its own name, contract in its own name or hold property in its own name”); Hyatt, 945 F.Supp. at 681 (describing legal characteristics test as focusing on precisely those three factors).
The majority’s core functions test, on the other hand, is cut from judicial whole cloth. There is nothing in the statute or legislative history that makes commercial activity “the ultimate touchstone for FSIA analysis” in all respects. Transaero, 30 F.3d at 156 (Mikva, J., dissenting); see also id. at 155 (explaining that majority’s distinction between governmental and commercial functions “is nowhere to be found in the statute or legislative history”). Given that the FSIA is permeated elsewhere by explicit distinctions between commercial and non-commercial activities, see, e.g., § 1605(a)(2) (abrogating immunity for certain commercial activities), it is telling that the FSIA makes no such distinction based on a defendant’s core functions. See Hyatt Corp., 945 F.Supp. at 684 (noting that the FSIA’s explicit distinction between commercial and non-commercial activities suggests that, had Congress intended also to distinguish between state commercial entities and state governmental entities, it would have done so in similarly explicit terms).
Indeed, the majority’s view conflicts with the House Report’s statement that an agency or instrumentality could assume the form of “a department or ministry which acts and is suable in its own name,” House Report at 16, since all ministries would seem, by definition, to be governmental rather than commercial in their “core functions.” The majority attempts to explain away this inconsistency by arguing that, simply because a ministry “could” be an agency or instrumentality, it does not follow that it must be such. Of course, “could” does not mean “must”; but “could” cannot mean “could not,” as the majority would have it. The only possible reading of the House Report is that whatever test the courts devise, this test must allow for the possibility that at least some state ministries will fall within the FSIA’s definition of “agency or instrumentality.”
The legal characteristics test, by contrast, fully comports with the House Report because it enables courts to distinguish between ministries, classifying those with an independent legal character as agencies or instrumentalities. See Hyatt Corp., 945 F.Supp. at 683-84 (rejecting a proposed “core function” test as contrary *601to the text and legislative history of the FSIA, and citing cases where, under the legal characteristics test, a governmental entity was found not to be a separate legal entity); see also Transaero, 80 F.3d at 155 (Mikva, J., dissenting) (“[Ejvery foreign entity starts out on the same footing, and a court must decide whether the particular entity is a separate legal person — that is, whether it acts and is suable in its own name.” (quotation marks omitted)).
The majority’s reading also undercuts the very existence of § 1605(a)(3). See Duncan v. Walker, 533 U.S. 167, 174, 121 S.Ct. 2120, 150 L.Ed.2d 251 (2001) (“[A] statute ought, upon the whole, to be so construed that, if it can be prevented, no clause, sentence, or word shall be superfluous, void, or insignificant.” (internal quotation marks omitted)). Having already abrogated immunity for state commercial activities under § 1605(a)(2), Congress added subsection (a)(3) to address illegal expropriations, even though expropriations are a “decidedly sovereign — rather than commercial — activity,” ante at 586. In so doing, Congress apparently rejected a neat categorical distinction between when a sovereign acts in a private capacity and when it acts in a public capacity. This choice should not be overridden simply based on a general, conclusory assertion about the “ ‘rich background of federal and international law' ” against which the FSIA was enacted. Ante at 591 (quoting Transaero, 30 F.3d at 151).3 Certainly, Congress’s policy decision undermines the majority’s conclusory view that Congress intended to codify any rigid distinction between “public” acts and “commercial” acts.
To overcome these statutory obstacles, the majority relies on the House Report’s definition of “political subdivision” as “in-cludflng] all governmental units beneath the central government, including local governments.” Ante at 596 (citing House Report at 15). The majority construes the House Report language as sweeping in all administrative ministries, departments, and the like. However, the House Report language relating to political subdivisions is far vaguer than the language clarifying the FSIA’s definition of “agency or instrumentality,” offers less evidence of specific congressional intent, and therefore cannot be given the same weight.4 See Morales v. Trans. World Airlines, Inc., 504 U.S. 374, *602384-85, 112 S.Ct. 2031, 119 L.Ed.2d 157 (1992) (“[I]t is a commonplace of statutory construction that the specific governs the general.”); Mattel, Inc. v. Barbie-Club.com, 310 F.3d 293, 300 (2d Cir.2002) (applying the canon of generalia specialibus non derogant, according to which general provisions do not qualify specific ones).
For these reasons, statutory considerations, on balance, weigh heavily.in favor of applying the legal characteristics test, rather than the majority’s “core functions” test, to determine whether the Polish Treasury is a political subdivision of Poland or an agency or instrumentality.
II. Caselaw
Notwithstanding the statutory obstacles discussed above, the majority herein is “persuaded by” the majority’s analysis in Transaero to reject Garb’s literal reading of the FSIA. See ante at 594. I am not. To begin with, the circumstances in Tran-saero were different from those here in at least one crucial respect: the D.C. Circuit was merely deciding whether service had been properly effected (a question which depended on the defendant’s status under the FSIA), not whether an entire class of defendants was immune under § 1605(a)(3). Indeed, one of the reasons given by the Transaero majority for its categorical “core functions” test was that “[sjervice of process should be the prologue to the suit rather than the central drama,” and that an unnecessarily complex test would “derail cases rather than ensuring their prompt and orderly commencement.” Transaero, 30 F.3d at 152. Plainly, these same efficiency concerns cannot apply where, as here, classification of the defendant will decide not merely the preliminaries of litigation but the merits themselves.
As for the persuasiveness of Transae-ro ’s remaining analysis, the Transaero majority relied on three additional grounds of doubtful validity or significance. First, the Transaero majority presumed that, because FSIA generally codified a “restrictive” theory of sovereign immunity, an “agency or instrumentality” must be a commercial, as opposed to a public enterprise. See Transaero, 30 F.3d at 151-52. As the Transaero dissent explained, however, this “distinction is nowhere to be found in the statute or legislative history.” Id. at 155 (Mikva, J., dissenting). Indeed, the dichotomy seems “inapt,” id., particularly for § 1605(a)(3), which applies to the sovereign act of expropriating property in violation of international law, and which undermines the Transaero majority’s blanket assertion that FSIA “repealed sovereign immunity for ‘commercial activities,’ but preserved it for inherently sovereign or public acts.” 30 F.3d at 151-52.
Second, the Transaero majority also relied on the fact FSIA allows venues in suits against agencies or instrumentalities wherever they are licensed to do business or are doing business. Transaero, Inc. v. La Fuerza Aerea Boliviana, 30 F.3d 148, 152 (D.C.Cir.1994) (citing 28 U.S.C. § 1391(f)(3)). However, as the Transaero dissent points out, see id. at 155, this provision is only one of various alternative methods for establishing venue, and therefore-does not suggest that all agencies or instrumentalities will have a place of busi*603ness. Third, the Transaero majority relied on the fact that the phrase “agency or instrumentality” is a “commonplace” in government corporate charters. But it is a textbook logical fallacy to infer, from the fact that all corporations are called “agencies or instrumentalities,” that all agencies or instrumentalities are corporate. More importantly, the Transaero majority improperly overrode the FSIA’s plain legislative history in favor of a conclusory assumption that Congress simply could not have intended to sweep in as many state defendants as would be swept in on a literal reading of “agency or instrumentality.”
The majority also relies on the fact that Transaero was cited in two subsequent cases: Magness v. Russian Federation, 247 F.3d 609 (5th Cir.), cert. denied, 534 U.S. 892, 122 S.Ct. 209, 151 L.Ed.2d 149 (2001) and Compagnie Noga D'Importation et D’Exportation, S.A. v. Russian Federation, 361 F.3d 676, 683 (2d Cir.2004). These cases provide little support for the majority’s conclusion, and certainly do not support a result contrary to or in tension with the statute. Magness did not decide the present issue at all, but simply noted that both parties accepted the Russian Ministry of Culture’s status as a political subdivision for purposes of determining service and then, in passing dicta, appeared (oddly enough) to endorse both Transaero’s “core functions” test and Hyatt’s “legal characteristics” test. Magness, 247 F.3d at 613 n. 7 (citing Transaero, 30 F.3d at 151 and Hyatt Corp. v. Stanton, 945 F.Supp. 675, 683 (S.D.N.Y.1996)).
Similarly, the rather narrow issue before us in Compagnie Noga was whether the Russian Federation could be held to an arbitration agreement entered into by the Russian Government. We found that, under the Constitution of the Russian Federation, the Russian Government constituted one half of a bicameral executive, and functioned analogously to our executive cabinet. 361 F.3d at 685-86. We also noted that the Russian Government had presented no evidence that it was an independent juridical entity from the Federation. Compagnie Noga, 361 F.3d at 686. In these circumstances, we determined that the Russian Government had not provided a basis for escaping the arbitration agreement. Because Compagnie Noga did not concern the FSIA or any other statutory references to agencies, instrumentalities or political subdivision and did not involve any substantiated claim by the defendant that it was legally independent from the Russian Federation, the case is scarcely relevant to, and certainly not controlling of, the case at hand.
Conclusion
As set forth above, the majority’s reading is in tension with the text of the FSIA, conflicts with the House Report’s clear, specific definition of “agency or instrumentality,” and places undue weight on the House Report’s vague definition of “political subdivision.” The majority’s strained reading of the FSIA, moreover, is unnecessary. The FSIA’s distinction between “political subdivisions” and “agencies or instrumentalities” makes sense if the dividing line is between government entities with a separate legal existence — i.e., possessing their own budget, suable in their own name, etc. — and those without such.
Because this case was dismissed before any jurisdictional discovery took place, and because the record therefore does not clearly indicate how Garb would fare on the legal characteristics test, this case should be remanded for further proceedings. It is important, as well, to bear in mind the seriousness of the events alleged in Garb’s complaint, which I think merits something more than dismissal based on a *604legally unsupported technicality. I therefore respectfully dissent.

. Because I would remand for jurisdictional discovery as to the applicability of *599§ 1605(a)(3), I do not reach Garb's alternative argument that Poland's actions fall within the "commercial activity” exception to the FSIA, see § 1605(a)(2).

. There is a third condition, which is irrelevant. The majority concedes that the first prong of this statutory definition is the only one at issue in this case. See ante at 591.

. Similarly, the majority's analogy to Eleventh Amendment immunity, see ante at 597 n. 23, is inapt. While "it is black letter Eleventh Amendment law that the political agencies and departments of states are entitled to the same sovereign immunity as the state,” Compagnie Noga D’Importation et D’Exportation, S.A. v. Russian Federation, 361 F.3d 676, 688 (2d Cir.2004), the House Report makes plain that the FSIA allows for jurisdiction over at least some ministries, as the majority appears to concede, see ante at 597 n. 22. See also College Sav. Bank v. Fla. Prepaid Postsecondary Educ. Expense Bd., 527 U.S. 666, 685, 119 S.Ct. 2219, 144 L.Ed.2d 605 ("[A] suit by an individual against an unconsenting State is the very evil at which the Eleventh Amendment is directed — and it exists whether or not the State is acting for profit, in a traditionally 'private' enterprise, and as a 'marker participant.’ "); id. n. 4 (rejecting proposed analogy between Eleventh Amendment and FSIA).

. Further complicating the meaning of “political subdivision” is the fact that this term is often used to refer not to various central state entities, but rather to different geographical levels of government, such as national, regional, provincial, state and local governments. See Restatement (Third) of the Foreign Relations Law of the United States ("Restatement”) § 452 comment b (emphasis added) ("Immunity of political subdivisions. Under international law, cities, towns, counties, and comparable subordinate units of government ordinarily are not entitled to sovereign immunity. The immunity of constituent units of federal states — e.g. provinces, cantons, States — is disputed .... The States of the United States enjoy immunity in United States courts under ... the Constitution *602.... ”); id. at Reporters’ Note 1 ("Immunity of foreign political subdivisions in United States courts. Cities and towns of foreign states have not generally been considered immune .... However, political subdivisions that have a status comparable to that of States of the United States have been held immune as sovereigns.” (internal citation omitted)); id. § 901, comment b ("A state may seek redress under international law for any violation of its legal interests, including those concerning its political subdivisions (States, provinces, cantons, or regions), public corporations, or private persons... ”).