The opinion of the court was delivered by: LASKER
The personal representatives and survivors of Orlando Letelier and Ronni Moffitt ("judgment creditors") move pursuant to Fed. R. Civ. Pr. 69 and N.Y.C.P.L.R. § 5228 for the appointment of Michael Moffitt as receiver of the property interests of the Republic of Chile in the Chilean national airline, Lineas Aerea Nacional-Chile ("LAN"). The judgment against Chile was entered in the United States District Court for the District of Columbia, and has been filed in this court pursuant to the requirements of 28 U.S.C. § 1963.
The action arose from the tragic deaths of Orlando Letelier, the former Chilean ambassador to the United States, and his secretary, Ronni Moffitt. The two were killed on September 21, 1976, in Washington, D.C., when the car in which they were driving exploded as the result of the detonation of a bomb which had been placed under the driver's seat.Investigations into the murders were conducted by, among others, The Federal Bureau of Investigation ("FBI"), the Federal Aviation Administration ("FAA"), and the United States House of Representative Subcommittee on Government Activities and Transportation.
The FBI investigation culminated in indictments against nine individuals. One, Michael Vernon Townley, a United States citizen employed by Direccion de Intelligencia Nacional ("DINA"), the Chilean intelligence agency, pled guilty to conspiracy to murder a foreign official. Three of the defendants were tried and convicted, but the convictions were reversed on appeal,
after which, upon retrial, the jury acquitted. The remaining five defendants could not be tried because either Chile refused to extradite them or the FBI was unable to apprehend them.
The present action, a civil suit against the Republic of Chile, Townley, and the other defendants in the criminal action, was commenced in November, 1978. The complaint alleged that the individual defendants, acting at the direction and with the assistance of the Republic of Chile, caused the deaths of Letelier and Moffitt. None of the defendants answered the complaint, and defaults were entered against them. Subsequently, the Republic of Chile sent a "diplomatic note" and a memorandum of law to the Clerk of the Court via the Department of State, urging that the court lacked jurisdiction over Chile under the Foreign Sovereign Immunities Act of 1976, 28 U.S.C. § 1602 et seq. ("FSIA"). Despite what the court described as Chile's "unorthodox" means of communication with the court, the default was reopened to consider the jurisdictional arguments. After thorough analysis of the language and history of the FSIA, Chile was found amenable to jurisdiction under § 1605(a)(5) which allows the exercise of jurisdiction against foreign states "in any case . . . in which money damages are sought against a foreign state for personal injury or death . . . occurring in the United States and caused by the tortious act or omission of that foreign state." 488 F. Supp. 665, 669 (D.D.C. 1980) (Green, J.).
Under § 1608(e) of the FSIA, a judgment by default may not be entered against a foreign state unless "the claimant establishes his claim or right to relief by evidence satisfactory to the court." Accordingly, after the finding of jurisdiction was made, a hearing was held to allow for the submission of evidence to establish the plaintiffs' right to relief. No appearance was made by Chile. After reviewing the evidence, particularly Townley's testimony at the criminal trial, Judge Green concluded that it satisfactorily established that
"employees of the Republic of Chile, acting within the scope of their employment and at the direction of Chilean officials who were acting within the scope of their office, committed tortious acts of assault and battery and negligent transportation and detonation of explosives that were the proximate cause of the deaths of Orlando Letelier and Ronni Moffitt."
502 F. Supp. 259, 266 (D.D.C. 1980). A default judgment was accordingly entered against Chile.
LAN, the garnishee-respondent on the present application, is a commercial airline wholly owned by the Republic of Chile. It has not been named as a defendant. No findings were made by Judge Green as to its role, if any, in the assassinations, with the exception of the observation that "[u]contradicted testimony demonstrated that facilities and personnel of LAN . . . were used by Townley in connection with the preparation and carrying out of the assassination." 502 F. Supp. at 262.
However, inquiry was made into LAN's role by the House of Representatives Subcommittee on Government Activities and Transportation, whose findings are contained in a report entitled "Alleged Violations of U.S. Aviation Laws and Regulations by LAN Chile Airlines," H.R. Rep. No. 1157, 96th Cong., 2d Sess. (1980) ("The Report"). The Report was based on a hearing at which the subcommittee heard testimony from the FBI, the United States Attorney's Office, the Department of State, the FAA, the Civil Aeronautics Board ("CAB"), and a representative of LAN, Fernando Cruchaga, the assistant station manager of LAN's Kennedy International Airport office at the time of the assassination. In addition, the subcommittee examined the transcripts of the criminal proceedings and the FAA and CAB's records concerning the events in question.
In the section of the Report entitled "The Relationship Between LAN Chile Airlines and the Letelier Assassination," the following points were made:
1. "[O]n numerous occasions LAN Chile Airlines was used by the assassins in ways which were illegal, and which created a serious threat to the safety and security of LAN Chile passengers and cargo." (Report at 4).
2."In order to carry out the assassination, Townley (who was in Chile) had made arrangments to work with members of the Cuban Nationalist Movement ("CNM") in the United States. . . . Townley forwarded . . . plastic explosives and . . . TNT to the CNM via LAN." (Id.)
3. "[T]he CNM sent Townley . . . paging devices which he modified to serve as remote control detonation for explosives which he later shipped back to CNM. The paging devices were shipped to and from Chile via LAN . . ." (Id.).
4. Townley flew to the United States via LAN on September 8, 1976, on a ticket issued under an alias, carrying "a substance which the FBI believes was lead trinitroresorcinate, a highly volatile, unstable, primary explosive, and several flash caps (used to ignite explosives." (Report at 5).
5. Townley met with other DINA agents and a LAN employee on September 9, 1976, in the LAN VIP lounge, and "arranged . . . to rent a car for them in New York under a false name." (Id.).
6. After placing the explosives in Letelier's car, Townley was unable to return to Chile under the alias by which he entered the country, so he "approached a LAN Chile pilot, Ronald Berger, who used his internal account to arrange for the issuance of a new ticket under . . . another of Townley's fictitious identities." (Id.)
7. "LAN Chile personnel participated in a number of currency transactions that were undertaken in order to pay off various participants in the assassination scheme." (Id.)
Additional information concerning Townley's use of LAN in connection with the assassination is contained in the testimony of Townley at the criminal trial (Exhibit A to Affidavit of John Privitera in support of the motion), the testimony of Fernando Cruchaga, LAN's former assistant manager at the Kennedy International Airport facility, before the grand jury which indicted Townley and others (Exhibit B to Privitera Affidavit), and an interim FBI report on LAN's role in the assassination, dated January 25, 1980 (Exhibit C to Privitera Affidavit).
Before delving into the parties' arguments, it is appropriate to review the present posture of the case. First, the current application is an attempt to execute on a judgment. Chile litigated the question of the trial court's jurisdiction; its arguments were rejected. It was given an opportunity to litigate the merits, but chose to default. No appeal has been taken from Judge Green's decisions.
Second, and of equal importance, the defendant in this action is the Republic of Chile, no LAN. LAN was never served with process in this action, and had no opportunity to offer evidence or cross-examine witnesses before Judge Green. Although LAN's activities and personnel have been the subjects of Congressional and FBI investigations, no findings against LAN have been made by a court of law in connection with the events out of which this action arose.
LAN argues that it is a separate juridical entity from the Republic of Chile and not liable for the Republic's debts. It asserts that the judgment creditors have made no showing which would warrant piercing the corporate veil between LAN and the Republic; and that the evidence proffered linking LAN to the assassinations is hearsay, lacking in trustworthiness, and even if credited, of little probative value. Moreover, LAN argues that even if it could be deemed liable on Chile's debt, the FSI bars execution on LAN's assets. Finally, LAN contends that execution on LAN's assets to satisfy a judgment against Chile would violate LAN's right to due process of law, because LAN was not a party to the action in which liability was found.
The judgment creditors respond that LAN, as a wholly-owned subsidiary of Chile, is simply an asset of the Republic, and that, as judgment creditors of the Republic, they can levy on any of the Republic's assets. In the alternative, the judgment creditors assert that they are entitled to pierce the corporate veil and reach LAN's assets because the evidence produced reveals that, in carrying out the assassinations, Chile disregarded LAN's separate status and teated it as an alter ego. With respect to the FSIA, the judgment creditors contend that Chile's interest in LAN is leviable under § 1610(a)(2) which permits execution upon "property . . . used for the commercial activity upon whichh the claim is based." Finally, the judgment creditors argue that LAN's due process rights are not violated by execution upon Chile's interest in LAN: Chile may, should it choose to do so, use LAN's assets to satisfy a Chilean debt, so LAN cannot complain if Chile is forced to use those assets for the same purpose.
The question whether a foreign judicial entity may be held accountable for the acts and liabilities of its sovereign parent has been the subject of a recent ruling by the United States Supreme Court in First National City Bank v. Banco Para El Comercio Exterior de Cuba ("Bancec"), 51 U.S.L.W. 482 (U.S. June 17, 1983). The Bancec decision is of profound importannce to the difficult questions presented here, and bears close analysis.
The Bancec action arose from the issuance of an irrevocable letter of credit by First National City Bank ("Citibank") in favor of Bancec, a bank wholly owned by the Republic of Cuba, in August, 1980. Less than a month after the issuance of the letter of credit, Cuba nationalized Citibank's property through forced expropriation. Undaunted, Bancec brougnt suit on the letter of credit in February, 1961, in federal court in the United States. A few weeks after the filing of the complaint, Cuba dissolved Bancec and transferred its assets to the Cuban Ministry of Foreign Trade and Cuba's central bank, Banco Nacional de Cuba. Within the week, the assets were again transferred to another government entity, referred to as Empresa, and from it to the current holder, yet another judicial entity, referred to as Cubazucar. Cubazucar is a Cuban "trading company" which is apparently still in existence. Id. at 4822. A motion to substitute Cubazucar as plaintiff was denied by the district court because of concerns that it would further complicate the litigation.
Citibank admitted liability on the letter of credit. However, it sought to set off, against its liability, Cuba's liability to it for the assets seized in the nationalization. Bancec argued that both it and Cubazucar were separate judicial entities, and could not be ...