Appeal from a judgment entered in the United States District Court for the Southern District of New York, Edward Weinfeld, Judge, dismissing plaintiff's complaint for lack of personal jurisdiction under the Foreign Sovereign Immunities Act, 28 U.S.C. § 1330(b). Affirmed, on the ground that the court lacks jurisdiction over the subject matter.
Before Kaufman and Timbers, Circuit Judges, and Ward, District Judge.*fn*
Throughout the long summer of 1787, the Framers of the Constitution, assembled at Philadelphia, hammered the parochial prejudices of thirteen colonies into the rough framework of a union. There, a fundamental tenet of American jurisprudence was forged: federal courts are courts of limited jurisdiction. Alexander Hamilton, Luther Martin, James Madison, and others honed such rough verbiage as "cases respecting the national peace and harmony" to the precision of "cases arising under the Laws of the United States,"*fn1 and Article III, thus tempered, emerged.
Nearly two centuries later, in 1976, Congress passed the Foreign Sovereign Immunities Act ("FSIA" or "Act").*fn2 The Act purports to create, pursuant to that same Article III, original jurisdiction in the district courts over "any nonjury civil action against a foreign state as to any claim for relief in personam with respect to which the foreign state is not entitled to immunity " 28 U.S.C. § 1330(a). This case, one of seven decided today involving the FSIA,*fn3 presents a sharp issue under the Act: may a foreign plaintiff sue a foreign state in a federal court for breach of an agreement not governed by federal law? The language of the statute seems to allow it. After exhaustive examination of the context, language, and history of Article III, we defer to the Framers' prescient restraint, and find jurisdiction lacking in the constitutional sense.
The facts relevant to the issues on appeal can be stated quite briefly. Verlinden B. V. is a Dutch corporation. It has its principal offices in Amsterdam, the Netherlands. On April 21, 1975, Verlinden signed a contract with the Federal Republic of Nigeria agreeing to ship to Nigeria 240,000 metric tons of cement over the course of several months. Nigeria, in turn, promised to establish "an Irrevocable, Transferable abroad, Divisible and Confirmed Letter of Credit in favour of the seller for the total purchase price through Slavenburg's Bank, Amsterdam, Netherlands." On June 23, 1975, Nigeria established the letter of credit at the Central Bank of Nigeria,*fn4 and made it payable through the Morgan Guaranty Trust Company in New York. Under the letter of credit, Verlinden could collect, upon presentation of certain documents, $60 per ton for shipments made to Nigeria. The letter of credit provided it was to be governed by "Uniform Customs and Practice Documentary Credits (1962 Revision) Chamber of Commerce Brochure No. 222."*fn5
On August 21, 1975, Verlinden subcontracted with a third party, Interbuco (a Leichtenstein corporation), for the purchase of 240,000 tons of cement at $51 per ton. Verlinden agreed to pay Interbuco $5 per ton if Verlinden reneged on the purchase.
In September, Nigeria found its ports clogged with ships.*fn6 Central Bank instructed Morgan, and Morgan notified Verlinden, that Morgan was not to pay Verlinden under the letter of credit for a shipment of cement unless Verlinden had obtained, two months before sailing, Nigeria's permission to enter the port. Verlinden, alleging Central Bank's action constituted an anticipatory breach of the letter of credit,*fn7 sued Central Bank in the Southern District of New York. Verlinden's complaint claimed $4.66 million, consisting mostly of lost profits and of money Verlinden was forced to pay Interbuco under the terms of the subcontract. Central Bank moved to dismiss the complaint for lack of jurisdiction under the FSIA. The district court, 488 F. Supp. 1284, granted the motion, assuming, as we have in setting forth the facts above, all the allegations of Verlinden's complaint to be true. Verlinden appeals.
Turning to the law, our first inquiry must be whether Verlinden's complaint meets a threshold requirement under the FSIA. Do both Verlinden and Central Bank fall into the category of parties contemplated by the Act? Section 2(a) of the FSIA, codified at 28 U.S.C. § 1330(a), provides:
The district courts shall have original jurisdiction without regard to amount in controversy of any nonjury civil action against a foreign state as defined in section 1603(a) of this title as to any claim for relief in personam with respect to which the foreign state is not entitled to immunity either under sections 1605-1607 of this title or under any applicable international agreement.
The parties agree that Central Bank is an "instrumentality of a foreign state" under 28 U.S.C. § 1603(b), and therefore is a "foreign state" under § 1603(a). Accordingly, Verlinden's suit is one "against a foreign state" for purposes of § 1330(a).
Verlinden's qualification under the Act is less clear, since it is a foreign corporation. The Report of the House Judiciary Committee on the bill that later became the Act (H.R. 11315) proclaims the Act's purpose to be to ensure that "our citizens will have access to the courts" in suits against foreign states. House Judiciary Committee, Jurisdiction of United States Courts in Suits Against Foreign States, H.R.Rep.No. 1487, 94th Cong., 2d Sess. 6, reprinted in (1976) U.S.Code Cong. & Admin.News 6604, 6605 ("House Report") (emphasis added).*fn8 The draftsmen of § 1330(a) assumed "U.S. businessmen" and "American property owner(s)" would bring suits under the Act. Id. The experts who testified at subcommittee hearings spoke of protecting "American citizens,"*fn9 "American businesses,"*fn10 "American parties,"*fn11 and "American nationals."*fn12 Looking back to the hearings surrounding the introduction of a 1973 predecessor to H.R. 11315, references to "our citizens" again abound.*fn13 In general, Congress emphasized that it did not intend "to open up our courts to all comers to litigate any dispute which any private party may have with a foreign state anywhere in the world." Hearings on H.R. 11315 Before the Subcommittee on Administrative Law and Governmental Relations of the House Committee on the Judiciary, 94th Cong., 2d Sess. 31 (1976) ("1976 Hearings") (testimony of Bruno A. Ristau, Chief, Foreign Litigation Section, Civil Division, Dep't of Justice).
On the other hand, extensive language in the legislative history supports the belief that Congress did not limit the Act to suits brought by Americans. The House Report states the Act provides "when and how parties" can sue a foreign state in American courts, House Report at 6604 (emphasis added), and that it applies to "any claim" against a foreign state, id. at 6611. Testimony before the subcommittee at the 1976 hearings referred broadly to relief for "private parties with claims," 1976 Hearings at 31 (testimony of Bruno A. Ristau), and "private litigants," id. at 58 (testimony of Peter D. Trooboff, Chairman, Committee on Transnational Judicial Procedure, International Law Section, American Bar Association). Professor Moore finds a "plain intention to confer on the district court jurisdiction of an action by an alien against a foreign state if the action otherwise meets the requirements" of the Act. 1 J. Moore, Federal Practice and Procedure P 0.66(4) at 700.178-79 (2d ed. 1979). This conclusion is ...