Appeal from a judgment of the United States District Court for the Southern District of New York, Sofaer, J., granting Bancomer's motion to dismiss plaintiffs' complaint on the ground that the action is barred by the state doctrine. Affirmed.
Van Graafeiland, Meskill and Winter, Circuit Judges.
This appeal represents our second opportunity in recent months to consider the effect of foreign financial decrees on the investments of United States entities. Because we agree with the district court that plaintiffs' recovery is barred by the act of state doctrine, we affirm the judgment of the United States District Court for the Southern District of New York, Sofaer, J., dismissing plaintiffs' complaint
In our previous excursion into the intricacies of the act of state doctrine, Allied Bank International v. Banco Credito Agricola de Cartago, 757 F.2d 516 (2d Cir. 1985) (on rehearing), we held that because the situs of the debt was in the United States, the act of state doctrine did not operate to prevent the creditors from recovering for their losses. In the case before us, however, the doctrine does bar relief because the situs of defendant's obligations was in Mexico.
Plaintiffs are a number of United States citizens who purchased peso- and dollar-denominated certificates of deposit (CDs) from defendant Bancomer, S.A. (Bancomer). When plaintiffs' purchases were made in 198l, Bancomer was a privately run Mexican bank. Plaintiffs arranged for their purchases by telephone with Bancomer's Mexico City office. The purchases were effected either through application of plaintiffs' funds that were on deposit in Mexico or through plaintiffs' delivery of checks drawn on their New York banks payable to Bancomer's New York agency. If the latter method was used, the agency, which was not authorized to accept deposits, transmitted the funds by interbank transfer to the Mexican office. The CDs indicated that Mexico was the place of deposit and the place of payment of principal and interest, although as a convenience such payments were sometimes transmitted to plaintiffs' New York banks. the total value of the CDs was $2,l00,000. All of the CDs were scheduled to mature in February 1983, except one, which was to reach maturity in September 1982. The annual interest rates ranged from l4.3 percent to 23.25 percent.
In August 1982, shortly before the first certificate was to reach maturity, the Mexican Ministry of Treasury and Public Credit issued a decree requiring that all domestic obligations be performed by delivery of an equivalent amount in pesos at the prevailing exchange rate. This decree banned the use of foreign currency as legal tender.
In September two more decrees were issued. the first nationalized Mexico's banks, including Bancomer. The second mandated a system of exchange controls that was carried out by the subsequent issuance of rules called "General Rules for Exchange Controls." As a result of these and later decrees, plaintiffs received Mexican pesos at the officially prescribed exchange rates, approximately 70-80 pesos per dollar, when they tendered their certificates on the maturity dates. Plaintiffs allege that because they did not receive the then actual market exchange rate of l35-l50 pesos per dollar, they lost over $900,000.
Plaintiffs filed suit in federal district court in New York claiming damages for breach of contract and for violation of the federal securities laws. Bancomer moved to dismiss the complaint, arguing that the court lacked jurisdiction under the Foreign Sovereign Immunities Act, 28 U.S.C. § l602 et seq. (1982) (FSIA), that, even if jurisdiction did exist, the act of state doctrine precluded examination of Mexico's acts, and the CDs are not "securities" and so are not subject to the securities laws.
The district court considered only the first two defenses. Ruling that it could view the motion either as a Rule l2(b) (6) motion to dismiss or as a Rule 56 motion for summary judgment, the court held that the FSIA did not render Bancomer immune from suit but that the act of state doctrine did bar judicial review of plaintiffs' claims.
First, the court held that Bancomer's issuance of CDs was a commercial rather than a sovereign act, and that it therefore fell within the commercial activity exception to FSIA, 28 U.S.C. § l605(a) (2). The court ruled, moreover, that the fact that Bancomer was prohibited from complying with its contractual obligations by a governmental decree did not render Bancomer immune from suit.
However, the court went on to hold that the absence of immunity did not render plaintiffs' claims justiciable. Because the situs of plaintiffs' CDs was in Mexico, the court determined that act of state principles prevented judicial examination of the complaint. In addition, the court rejected plaintiffs' claims that they were harmed by a commercial activity of the Mexican government. Noting that Mexico had acted within its governmental function of setting monetary policy, the court held that Mexico's issuance of exchange controls was not a commercial activity. Therefore, the court rejected plaintiffs' claims as barred by the act of state doctrine.*fn1 The court dismissed plaintiffs' action pursuant to Fed. R. ...