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LARY v. REPUBLIC OF CUBA

July 30, 1986

JOHN H. LARY, JR., Plaintiff, against THE REPUBLIC OF CUBA, a foreign government, Defendant


The opinion of the court was delivered by: SWEET

SWEET, D.J.

Plaintiff Dr. John H. Lary, Jr. ("Lary") has brought this action pro se seeking to recover on principal and interest due on Cuban bearer bonds issued by the defendant Republic of Cuba ("Cuba") in 1937 and 1953. Cuba how moves to dismiss this action pursuant to Rule 12(b), Fed.R.Civ.P. because the action is (1) barred by the doctrine of sovereign immunity, (2) barred by the act of state doctrine, (3) barred by the statute of limitations, (4) prohibited by the Cuban Assets Control Regulations of the Treasury Department, and (5) barred by the failure to obtain a Treasury Department license for the purchase of or suit on the bonds. For the reasons set forth below, Cuba's motion to dismiss is granted.

 Prior Proceedings

 The original complaint in this action was filed on November 9, 1983 in the Northern District of Alabama but was dismissed sua sponte and without prejudice, and was re-filed on August 22, 1985. Cuba moved to dismiss or transfer the action because venue was improperly laid in the Northern District of Alabama within the meaning of 28 U.S.C. § 1391(f) governing venue for actions against foreign states. On December 27, 1985, the action was transferred to the United States District Court for the District of Columbia pursuant to 28 U.S.C. § 1391(f)(4).

 The District of Columbia District Court entered an order on January 10, 1986, sua sponte transferring the action to the Southern District of New York pursuant to 28 U.S.C. § 1404(a), concluding that only New York had contacts with Lary's claims and that venue in New York would best serve the convenience of the parties and the witnesses.

 On January 23, 1986, Cuba filed a motion for extension of its time to answer or move, which was granted by memo endorsement of February 24, 1986. On March 5, 1986. Cuba filed the instant motion to dismiss. In a letter application to the court on April 4, 1986, Lary requested and was granted an extension of time to respond to the issues raised by the defendant's motion, the opposition papers due on June 4, 1986. Lary has submitted no opposition to Cuba's motion to dismiss, and has not provided the court with his own affidavit in opposition to the motion.

 Facts

 Sometime after 1979, Lary purchased the Cuban bonds upon which he sues from a brokerage firm in Huntsville, Alabama at a "substantial discount" from the approximate face amount of the bonds, which Lary estimates to be somewhere between $10,000 and $100,000. The debt obligations involve two series of bearer bonds, the "Four and One-Half Percent (4 1/2%) Bonds of the External Debt of the Republic of Cuba, 1937-1977" (the "1937" issue) and "The Republic of Cuba Veterans, Courts and Public Works Bond Issue Four Percent (4%) 1953-1983" (the "1953" issue).

 Both series of bonds were issued by the Republic of Cuba, and executed by its Minister of Finance. Principal on the 1937 issue was due on June 30, 1977 and principal on the 1953 issue was due on November 1, 1983. The coupon interest and principal amount of the 1937 issue was payable either at the office of Manufacturers Hanover Trust Company ("MHT", the Trustee and Fiscal Agent, or at the MHT branch office or agency in Havana. The coupon interest and principal amount of the 1953 series was payable only in Havana, at the offices of the Banco Nacional de Cuba.

 The Cuban Government failed to pay the interest coupons on the 1937 bonds due December 31, 1960, and failed to pay the interest coupons attached to the 1953 series beginning November, 1960.

 Although it is unnecessary to recite the history of the deteriorating relationship between the United States and Cuba during the decades of the 1950's and 1960's, see Banco Nacional de Cuba v. Sabbatino, 376 U.S. 398, 11 L. Ed. 2d 804, 84 S. Ct. 923 (1964); Sardino v. Federal Reserve Bank of New York, 361 F.2d 106 (2d Cir. 1966); Banco Nacional de Cuba v. Chase Manhattan Bank, 505 F. Supp. 412, aff'd and modified, 658 F.2d 875 (2d Cir. 1981), a brief review of the statutory scheme devised in response to these developments is warranted.

 On July 8, 1963, the United States promulgated the "Cuban Assets Control Regulations ("CACR") of the Treasury Department, 31 CFR Part 515, originally authorized by Trading With the Enemy Act ("TWEA"), 50 U.S.C. App. § 1 et seq. and subsequently authorized by the International Emergency Economic Powers Act of 1976, 50 U.S.C. § 1702(a)(1)(B). These regulations, among other things, prohibit the transfer of "any property or evidences of indebtedness" in which Cuba or any national thereof has "had an interest of any nature whatsoever, direct or indirect." 31 CFR Part 515.201(b). The program was aimed at prohibiting all financial and commercial transactions between the United States nationals and Cuba and Cuban nationals and to place all of the Cuban property in the United States under the control of the Treasury Department. The Regulations prohibit engaging in the transactions listed without obtaining authorization from the Secretary of the Treasury, usually granted in the form of a license. 31 CFR § 515.201(a).

 Discussion

 According to Cuba, Lary's admitted failure to obtain a license from the Office of Foreign Assets Control ("OFAC") before purchasing the bonds or bringing an action on such bonds deprives the court of jurisdiction to consider these claims as ...


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