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LIPPUS v. DAHLGREN MFG. CO.

September 26, 1986

MICHAEL LIPPUS and MARCIA LIPPUS, Plaintiffs,
v.
DAHLGREN MANUFACTURING COMPANY, ROYAL ZENITH CORPORATION, VEB POLYGRAPH DRUCKMASCHINENWERK PLANETA, Defendants; ROYAL ZENITH CORP. and DAHLGREN MANUFACTURING COMPANY, Third Party Plaintiffs, v. UNITECAHNA AUSSENHANDELSGESELLSCHAFT MBH, VOLKSSIGENER AUSSENHANDELSBETRIEB POLYGRAPH EXPORT-IMPORT COMPANY, and FOUR SEASONS PRINTING COMPANY, INC., Third Party Defendants



The opinion of the court was delivered by: WEXLER

MEMORANDUM AND ORDER

WEXLER, District Judge

 Plaintiff spouses Michael and Marcia Lippus commenced this products liability action against the Dahlgren Manufacturing Company ("Dahlgren"), Royal Zenith Corporation ("Zenith"), and VEB Polygraph Druckmaschienenwerk Planeta ("Planeta"), in New York State Supreme Court for an injury sustained by Michael Lippus in the course of his employment. Planeta, an instrumentality of the German Democratic Republic ("GDR"), removed the action to this Court under the Foreign Sovereign Immunities Act, 28 U.S.C. §§ 1602-11. Zenith and Dahlgren have asserted cross-claims against each other and Planeta. Zenith commenced a third party action against Four Seasons Printing Company, Inc. ("Four Seasons"), Unitechna Aussenhandelsgesellschaft m.b.H. ("Unitechna"), and Volkseingener Aussenhandelsbetrieb Polygraph Export-Import Company ("Polygraph"). On consent and by Order of Magistrate Jordan, Dahlgren joined in this third party action. Four Seasons cross-claimed against its two co-third party defendants and asserted counterclaims against Zenith and Dahlgren. Planeta, Polygraph and Unitechna (collectively the "GDR Defendants") have not asserted any cross-claims, couterclaims, or third party claims. Discovery in the case is virtually complete and the matter has been scheduled for a non-jury trial. Before the Court at this time are Planeta's motions to dismiss plaintiffs' Complaint for insufficiency of process, Rule 12(b)(4), Fed. R. Civ. P., and the GDR Defendants' joint motion to dismiss or stay Zenith's cross-claims pending arbitration or litigation in the GDR. The Court will turn first to Planeta's motion to dismiss plaintiffs' Complaint for insufficiency of process.

 I.

 The following facts are relevant to the service of process issue. On May 13, 1983, plaintiffs delivered a copy of the Summons and Complaint to a Mr. Horst Streichan in the commercial section of the GDR embassy in New York City. In an affidavit, counsel for Planeta states that Streichan has no connection with Planeta, but is an employee of Unitechna. Altman Affidavit, [P] 5. Three weeks later, plaintiffs served another copy of the Summons and Complaint at the GDR's New York embassy on a person named Ms. Dachmar. Planeta's attorney also states that upon information and belief no one by the name of Ms. Dachmar is employed at the GDR embassy. Altman Affidavit, [P] 5. It appears, however, that the person served may have been Dagmar Kuehnelt, Mr. Streichan's secretary. Neither Streichan nor Kuehnelt are apparently authorized to accept service on behalf of Planeta. Defendant's counsel also affirms that Planeta has no office in the United States, is not authorized to do business in New York, and has no officer, managing or general agent authorized to receive service of process in the United States. Rand Affidavit, [P] 2. On August 3, 1983, plaintiff served a copy of the Summons and Complaint on the New York Secretary of State pursuant to N.Y. Bus. Corp. L. § 307, and re-served the Secretary of State on November 7, 1983, who confirmed service in a letter dated December 9, 1983.

 In March 1984, plaintiffs' counsel received a short letter from a Dieter Peh, who is a First Secretary in the Commercial Section of the GDR's New York embassy. In pertinent part, the correspondence stated that:

 Today we got your Third Party Summons dated August 22, 1983. Please notice that the POLYGRAPH-Export-Import foreign trade enterprise is located in the German Democratic Republik, 1080 Berlin, Friederichstrasse 61.

 If you want to send something to this enterprise, please send it to the above mentioned address.

 Although it is uncontested that Zenith attempted to join Polygraph to the action as a third-party defendant in a Summons dated August 22, 1983, there is no indication that the Lippuses have asserted a claim against Polygraph, who is sued here as a third party defendant. Nevertheless, on March 12, 1984, plaintiffs' counsel attempted to re-serve Planeta by sending a copy of the Summons and complaint against Planeta to the GDR at the Berlin address mentioned in Peh's letter. The papers were not addressed and dispatched by the clerk of the court but were merely sent certified mail and without a German translation. On April 5, 1984, plaintiffs' counsel again sent an untranslated copy of the Summons and Complaint, this time by registered mail return receipt requested, to Planeta at another address in the GDR and also to Polygraph in Berlin with instructions to forward the documents to their lawyers in the United States. Planeta's attorney states that in April 1984, he received from Planeta a copy of plaintiffs' April 5 Summons and Complaint. Rand Affidavit, [P] 3. Shortly thereafter, Planeta removed the action to this Court.

 Planeta argues that the Complaint should be dismissed because plaintiffs have failed to comply with the service provisions of the Foreign Sovereign Immunities Act, 28 U.S.C. § 1608(b) ("FSIA"). *fn1" It is conceded that under the FSIA proper service must be made upon Planeta in accordance with either the first clause of subsection (b)(2)(by delivery of the Summons and Complaint in English to an agent or officer in the United States), or by clause (B) of subsection (b)(3) (by having the clerk of the court mail a copy of the Summons and Complaint return receipt requested together with a German translation, to Planeta's offices in the GDR). It is beyond doubt that § 1608 is the exclusive means of service under the FSIA. 1976 U.S. Code Cong. & Ad. News 6604, 6622. Planeta contends that plaintiffs have not complied with the service provisions of the FSIA, either under subsection (b)(2) or (b)(3)(B).

 Though styled as a motion to dismiss for lack of personal jurisdiction, Rule 12(b)(2) or insufficiency of process, Rule 12(b)(4), Planeta's motion to dismiss for failure to comply with subsection (b)(2) can also be classified as a motion under Rule 12(b)(5) to dismiss for insufficiency of service of process. C. Wright & A. Miller, Federal Practice & Procedure: Civil § 1353. In any event, Planeta contends that the service of process at the commercial section of the GDR embassy in New York is inadequate under subsection (b)(2) because Planeta has no agents or officers in the United States authorized to accept process.

 Plaintiffs do not dispute these facts, but argue that service on the Secretary of State, pursuant to N.Y. Bus. Corp. L. § 307 (McKinney's 1986), qualifies as valid service upon "any other agent authorized by appointment or by law to receive service of process in the United States." 28 U.S.C. § 1608(b)(2). The issue is one of first impression. Although there is no indication from either the plain language of the statute or the legislative history that Congress intended for substituted service under state law to fall within the provisions of the FSIA, see 1976 U.S. Code Cong. & Ad. News 6624, the only other court to have been confronted with a similar question held that service on the Virginia Secretary of the Commonwealth pursuant to the Virginia long-arm statute could "conceivably" be proper under the FSIA. See Unidyne Corporation v. Aerolineas Argentinas, 590 F. Supp. 391 (E.D. Va. 1984).

 In Unidyne, an American corporation commenced an action for breach of contract against Aerolineas Argentinas, which is an instrumentality of the sovereign nation of Argentina. Service was effected by mailing a copy of the Summons and Complaint to the Virginia Secretary of the Commonwealth, who acknowledged service and forwarded the court documents to Aerolineas' office in New York. 590 F. Supp. at 395. In granting the motion to dismiss for lack of personal jurisdiction under 28 U.S.C. § 1330(b), the Unidyne court apparently assumed without discussion that the service of a foreign sovereign in accordance with the state was proper under subsection (b)(2) but found that Aerolineas was beyond the reach of the Virginia long-arm statute. Therefore, despite receipt of service, Aerolineas was not subject to personal jurisdiction under federal law.

 With all due respect, this Court disagrees with the analysis employed in Unidyne. Federal law fully pre-empts the states in the area of foreign relations even though the FSIA represents a more limited view of foreign sovereign immunity. When federal law pre-empts state law, reference to local law is simply not germane. The federal court is the only forum in which either the GDR or Planeta can be sued and § 1608 is the exclusive method of service of process. Absent a clear indication from Congress that the FSIA incorporates state law by reference, this Court is unwilling to allow an arm of a foreign government to be subject to personal jurisdiction under state law. Moreover, upon close examination, the legislative history appears to reject an implicit incorporation of state law by reference. The statute does not explicitly rule out service under state law, but the legislative history states specifically that § 1608 was meant to fill a void in state and federal law. H.R. ...


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