The opinion of the court was delivered by: EDELSTEIN
EDELSTEIN, District Judge:
Plaintiffs brought this action to recover money allegedly owed on two certificates of deposit ("CDs") made with defendant and to rescind the CD contracts and recover damages allegedly incurred from securities law violations by defendant in connection with the CDs. Jurisdiction is based upon 28 U.S.C. § 1603(a) and 15 U.S.C. § 77(v). Defendant has moved pursuant to Fed. R. Civ. P. 12(b) to dismiss.
Plaintiffs are residents of New York State. Defendant is a banking corporation organized under the laws of Mexico. On or about September 29, 1981 plaintiffs Albert and Pauline Braka purchased a $300,000 CD with a twelve month maturity date from defendant. At the same time plaintiffs Robert and David Braka also purchased a $300,000 CD with a twelve month maturity date. The purchases were arranged by defendant's New York licensed agent, situated at One State Street Plaza, New York, NY. The principal and interest, at a rate of 22.94% per annum, on the CDs were payable in dollars in Mexico, where the deposits were held. Interest payments were in fact transmitted from Mexico to the plaintiffs' bank in New York. Defendant is not authorized to do banking business in New York State.
In August 1982 the Mexican government, to preserve its dwindling foreign currency reserve, promulgated rules and regulations prohibiting the withdrawal of any money in foreign currency bank accounts within Mexico and directing that money was to be withdrawn only in Mexican pesos at a rate of exchange fixed by the Mexican government.On September 1, 1982 the Mexican government nationalized the defendant bank. On September 29, 2981 -- the maturity date of the plaintiffs' CDs -- the fixed rate of exchange was 70 pesos to the dollar, which was a little more than half of the market exchange rate, which was approximately 135 pesos to the dollar.
Plaintiffs, in court one, demand $144,000 on each CD based on defendant's alleged breach on contract. In count two plaintiffs allege that the CDs were "securities" and demand rescision pursuant to 15 U.S.C. §§ 77(e) and 77(1). Plaintiffs further allege in count two that defendant made a fraudulent misrepresentation and failed to disclose certain information, as a result of which plaintiffs demand damages pursuant to 15 U.S.C. § 77(q).
The defendant has moved: (1) to dismiss both claims on the grounds that they are barred by the act-of-state doctrine, the Foreign Sovereign Immunities Act, and the Articles of Agreement of the International Monetary Fund; and (2) to dismiss the securities law claims on the grounds that they are barred by the statute of limitations and that they fail to state a cause of action.
The Foreign Sovereign Immunities Act ("FSIA") provides that subject to certain exceptions "a foreign state shall be immune from the jurisdiction of the courts of the United States and the States." 28 U.S.C. § 1604.Plaintiffs concede that defendant would normally fall within the purview of this provision, but contend that defendant falls within the commercial activity exception, 28 U.S.C § 1605(a)(2), which permits a suit against a foreign state or its agency if the cause of action arises from strictly "commerical acitivty."
The "commercial activity" exception must be viewed in connection with the act-of-state doctrine. In Arango v. Guzman Travel Advisors Corp., 621 F.2d 1371 (5th Cir. 1980) plaintiffs' travel package with defendants was aborted when Dominican immigration officials denied plaintiffs entry into that country upon their arrival at the Santo Domingo airport because of their inclusion on an official list of "undesirable aliens." Plaintiffs sued the Dominican national airline, among others, for false imprisonment and battery as well as for a refund of the costs of the vacation package. The court stated that the claims of false imprisonment and battery were barred by the FSIA despite the "commercial activity" exception applicable generally to the airline:
The focus of the [commercial activity] exception to immunity recognized in § 1605(a)(2) is not on whether the defendant generally engages in a commercial enterprise or activity, as an airline such as Dominicana unquestionably does; rather, it is on whether the particular conduct giving rise to the claim in question actually constitutes or is in connection with commercial activity [or derives from an act-on-state]. . . . Yessenin-Volpin v. Novosti Press Agency, 443 F. Supp. 849, 855-56 (S.D.N.Y. 1978) (holding generally commercial Soviet news agencies immune for alegedly libelous story produced for official Soviet state publications). . . . Dominicana [the airline] was impressed into service . . . by Dominican immigration officials [as an act-of-state] pursuant to that country's laws.
In the case at bar, the banking activities of defendant were unquestionably commercial activities falling generally within the exception to the FSIA. The plaintiff's cause of action for breach of contract, however, arose from the defendant's conduct that was mandated by the Mexican government's act-of-state in the sovereign regulation ofMexican currency. That cause of action is ...