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HATZLACHH SUPPLY v. SAVANNAH BANK OF NIGERIA

December 9, 1986

HATZLACHH SUPPLY INC., Plaintiff,
v.
SAVANNAH BANK OF NIGERIA, Defendant



The opinion of the court was delivered by: TENNEY

TENNEY, J.

This matter is before the Court on defendant's motion to dismiss the complaint. Plaintiff, Hatzlachh Supply Inc., is a New York corporation involved in the import-export business. Defendant, Savannah Bank, is a Nigerian bank existing under the laws of Nigeria. Plaintiff alleges that it forwarded bills of lading to defendant with specific instructions not to transfer the documents until a Nigerian purchaser remitted the purchase price and that plaintiff transported the goods but was never paid. Plaintiff alleges that the defendant released the documents without being paid or was paid and converted the money or negligently mishandled the documents. Plaintiff then instituted litigation to recover the value of the goods.

 Defendant moves for an order dismissing the case because of a lack of both subject matter and personal jurisdiction and alternatively under the doctrine of forum non conveniens.

 For the reasons set out below, defendant's motion is denied on all three grounds.

 BACKGROUND

 In 1981 the plaintiff agreed to sell to a Nigerian importer, Difson Ltd., nearly $1.3 million worth of photographic supplies. The importer, in order to avoid violating Nigeria's strict foreign currency regulations, selected defendant, a government owned bank, to submit a specialized currency form (Form M). This form is widely used in Nigeria as it permits Nigerian buyers to transfer money to foreign suppliers of goods. The form is designed to work as follows: A Nigerian buyer obtains the services of a local Nigerian bank. Together they fill out Form M and the bank submits it to the Central Bank of Nigeria. When the goods are received in Nigeria they are subject to government inspection. If the government approves of the shipment, the Central Bank will allow the local bank to transfer the foreign currency to the seller.

 Plaintiff exported the goods but did not receive any money. Defendant wrote to plaintiff's bank claiming Difson refused to pay unless the drafts were changed. Defendant subsequently communicated its desire to be paid for the collection services allegedly rendered. The final communication from defendant states that the documents forwarded to defendant "were intercepted by unknown elements who cannot be located." *fn1" The communications sent by the defendant were on stationery with the heading "SAVANNAH BANK OF NIGERIA LTD." Immediately beneath that heading is the following legend: "AFFILIATED WITH BANK OF AMERICA NT & S.A." It appears that the Bank of America National Trust and Savings Association owns 30 percent of the shares of defendant's stock. *fn2" On the bottom of the stationery there is a listing of the bank's board of directors. Three out of the ten named directors are labeled as "(U.S. Citizen[s])." Defendant has repeatedly held Board of Directors meetings in the United States and also sends its agents traveling to the United States to meet with its correspondent banks.

 DISCUSSION

 A. JURISDICTION

 Subject matter jurisdiction over the case at bar is governed by the Foreign Sovereign Immunities Act ("F.S.I.A."). This statute provides that subject to international agreements to which the United States is a party, a foreign state is immune to suit in both federal and state courts. 28 U.S.C. § 1604 (Supp. 1986). However, 28 U.S.C. § 1605 provides for various exceptions to the general grant of immunity. If the action in this: case falls within one of the statute's exceptions, the Court has subject matter jurisdiction. If service of process is sufficient, the Court also may exercise personal jurisdiction. 28 U.S.C. § 1330. If the defendant does not protest service of process, it is presumed to be adequate. Texas Trading & Milling Corp. v. Federal Republic of Nigeria, 647 F.2d 300, 313 (2d Cir. 1981), cert. denied, 454 U.S. 1148, 71 L. Ed. 2d 301, 102 S. Ct. 1012 (1982); Crimson Semiconductor, Inc. v. Electronum, 629 F. Supp. 903, 907 (S.D.N.Y. 1986); Chisholm & Co. v. Bank of Jamaica, 643 F. Supp. 1393, 1402 (S.D. Fla. 1986). As a final aspect to the personal jurisdiction inquiry, the court must determine whether the defendant has sufficient contact with the forum so as not to offend due process of law. International Shoe Co. v. Washington, 326 U.S. 310, 316, 90 L. Ed. 95, 66 S. Ct. 154 (1945); Texas Trading, 647 F.2d at 313-15.

 1. SUBJECT MATTER JURISDICTION

 Defendant claims it is immune from suit as a result of the F.S.I.A. Defendant argues that it is an instrumentality of the Nigerian government since the government owns a majority of the shares of the defendant's stock. In addition, defendant asserts that the activity in question was not commercial and took place entirely outside the United States. However, even if the bank is majority owned by the government and the alleged activity transpired entirely outside the United States, the F.S.I.A. cannot be used to evade jurisdiction in the case at bar. The F.S.I.A. declares that a foreign state is not immune from jurisdiction in any case in which the foreign state conducts "an act outside the territory of the United States in connection with a commercial activity of the foreign state elsewhere and that act causes a direct effect in the United States." 28 U.S.C. § 1605(a)(2). This subsection vests the court with subject matter jurisdiction if the action (1) concerns a commercial activity, and (2) causes a direct effect in the United States. Defendant professes that its only activity was to adhere to the Nigerian government's currency regulations and that this activity was therefore not commercial. However, 28 U.S.C. § 1603(d) states that it is the nature of the action rather than its purpose which is the determinative factor. "[I]t is a normal commercial function to act for another in collecting and holding funds Transamerican Steamship Corp. v. Somali Democratic Republic, 247 U.S. App. D.C. 208, 767 F.2d 998, 1003 (D.C. Cir. 1985). See also Callejo v. Bancomer, S.A., 764 F.2d 1101, 1109-10 (5th Cir. 1985) (Mexican national bank's sale of certificates of deposit held commercial in nature although goal was to comply with government regulations.). "A contract, implied or otherwise, is inherently commercial, even when the ultimate purpose behind it is government regulation." Chisholm, 643 F. Supp. at 1400. Furthermore, the legislative history of the F.S.I.A. indicates that the drafters intended that the activity in the present case would be considered commercial. The drafters mention as examples of commercial activity "import-export transactions involving sales to or purchases from concerns in the United States." H. Rep. No. 94-1487, 94th Cong., 2d Sess. 16, reprinted in 1976 U.S. Code Cong. & Ad. News 1615, 1616. Moreover, defendant acknowledges that it requested plaintiff's bank to remit a payment for its alleged services. See Exhibit 4b attached to Declaration of Morris Broker, President of the plaintiff corporation, dated November 11, 1985 (hereinafter referred to as "Broker Dec."). This activity is clearly commercial in nature.

 To determine if there is a direct effect in the United States, the relevant inquiry "is whether the corporation has suffered a 'direct' financial loss." Texas Trading, 647 F.2d at 312. This circuit has made several pronouncements to clarify the exact nature of this inquiry. In Carey v. National Oil Corp., 592 F.2d 673 (2d Cir. 1979), the court indicated that a breach of contract as well as a tort can cause a direct effect. In Schmidt v. Polish People's Republic, 579 F. Supp. 23, 27 (S.D.N.Y.), aff'd, 742 F.2d 67 (2d Cir. 1984), the court decided that when a United States corporation was the beneficiary of a contract made payable and negotiated in the United States, breach ...


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