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767 THIRD AVE. v. CONSULATE GEN. OF SFRY

August 17, 1999

767 THIRD AVENUE ASSOCIATES, CARLYLE LIMITED PARTNERSHIP-XI, MELVYN KAUFMAN, & ROBERT KAUFMAN, PLAINTIFFS,
v.
CONSULATE GENERAL OF THE SOCIALIST FEDERAL REPUBLIC OF YUGOSLAVIA, YUGOSLAV PRESS & CULTURAL CENTER, YUGOSLAV CHAMBER OF ECONOMY, FEDERAL REPUBLIC OF YUGOSLAVIA, REPUBLIC OF BOSNIA-HERCEGOVINA, REPUBLIC OF CROATIA, REPUBLIC OF MACEDONIA, & REPUBLIC OF SLOVENIA, DEFENDANTS. FEDERAL REPUBLIC OF YUGOSLAVIA, CROSS-CLAIM PLAINTIFF, V. REPUBLIC OF BOSNIA-HERCEGOVINA, REPUBLIC OF CROATIA, REPUBLIC OF MACEDONIA, & REPUBLIC OF SLOVENIA, CROSS-CLAIM DEFENDANTS.



The opinion of the court was delivered by: Motley, District Judge.

  OPINION

The Socialist Federal Republic of Yugoslavia ("SFRY") leased property from plaintiffs for diplomatic offices in the City of New York. As the SFRY government fell, the United States forced it out of those offices, and the SFRY stopped paying plaintiffs rent. Plaintiffs filed this action against the SFRY and five new states that have emerged from the territory of the SFRY. The five new states moved for summary judgment and to dismiss.

For the reasons given below, the court holds that this action currently presents non-justiciable political questions. Accordingly, the court stays all matters in the case and places the case on the suspense calendar.

I. Background

A. History of Yugoslav Leasing of Plaintiffs' Properties

Plaintiffs are the owners of the property at 767 Third Avenue in the City of New York. Compl. ¶ 5.*fn1 During February-March 1981, the SPRY entered into three leases with plaintiff 767 Third Avenue Associates ("767") through 767's agent Sage Realty Corporation ("Sage"). The leases were for long-term tenancies for three SFRY governmental agencies (collectively, "SFRY tenants"): the Consulate General of the SPRY ("Consulate"), the Yugoslav Press and Cultural Center ("Center"), and the Yugoslav Chamber of Economy ("Chamber"). Ridulfo Aff. ¶¶ 2, 19, 38. The three leases all expired in late August 1991. Id. In 1991, as the 1981 leases ended, Sage and the SFRY tenants extended them for several more years. On August 5, 1991, the Chamber lease was extended to August 31, 1996; on October 21, 1991, the Center lease was extended to September 30, 1994; on October 28, 1991, the Consulate lease was extended to August 31, 1996. Id. ¶¶ 4, 22, 40. The SPRY breached these lease extensions, plaintiffs allege, by failing to pay the SFRY tenants' rent since May 1992 (for the Chamber) and June 1992 (for the Consulate and the Center). Compl. ¶¶ 24-25, 35-36, 46-47. Plaintiffs claim that the total SFRY debt is $2,262,224.41 plus interest. Compl. ¶¶ 27, 39, 50.

B. Disintegration of the Socialist Yugoslav Regime

Political upheaval in the SFRY was the spark for the SFRY tenants' rent delinquencies. Beginning in 1991, the SFRY government began to dissolve and the SFRY degenerated into civil war. Expressing its opposition to the conduct of the dominant Yugoslav regime in Belgrade, the United States government forced the SFRY tenants' offices in New York to close. On May 25, 1992, the United States Department of State ordered that the SFRY tenants (and other SFRY consulate staff in the United States) close their offices immediately, terminate operations by May 31, 1992, and have all staff leave the United States by June 7, 1992. Fed. Republic of Yugoslavia R. 56.1 Stmt. ¶ 32 & Pls.' Resp. ¶ 32; Ward Aff. ¶ 14. Additionally, Yugoslav assets in the United States were blocked by presidential executive orders dated May 30, 1992 and June 5, 1992 and related Treasury Department regulations. Fed. Republic of Yugoslavia R. 56.1 Stmt. ¶¶ 33-35 & Pls.' Resp. ¶¶ 33-35; Ward Aff. ¶¶ 15-17.

C. Plaintiffs' Prior Efforts at Legal Redress

On June 12, 1992, plaintiff 767 and Sage filed a Court of Federal Claims action against the United States, alleging that the government had taken their private property for public use and claiming a Fifth Amendment right to just compensation. Ward Aff. ¶ 2. On December 21, 1993, the Court of Claims dismissed the complaint; the Court of Appeals for the Federal Circuit affirmed the dismissal. 767 Third Avenue Assocs. v. United States, 30 Fed. Cl. 216 (Fed.Cl. 1993), aff'd, 48 F.3d 1575 (Fed.Cir. 1995).

On July 2, 1992, plaintiff 767 filed an action against the three SFRY tenants for unpaid May-July 1992 rent, 767 Third Avenue Assocs. v. Consulate Gen'l of the SFRY, Yugoslav Press & Cultural Ctr., & Yugoslav Chamber of Economy, No. 92 Civ. 4946(MBM). Ward Aff. ¶ 3, Ex. A. As against the Chamber, a default judgment was entered on December 17, 1992; the Chamber has not paid the $8,802 judgment. Id. ¶¶ 6-8. As against the Consulate and the Center, the case settled and the action closed on December 22, 1992; while the Center made the required $63,765.01 payment, the Consulate has not made its payments under the settlement. Id. 669-11.

D. The Present Action

On February 23, 1996, plaintiffs filed the present action for the entire amount of the SFRY tenants' rent delinquencies under all the 1991 lease extensions. The defendants are the SFRY tenants as well as the five new states that emerged from the territory of the SFRY (collectively, "state defendants"): the Federal Republic of Yugoslavia ("FRY"), the Republic of Bosnia-Hercegovina ("Bosnia"), the Republic of Croatia ("Croatia"), the Former Yugoslav Republic of Macedonia ("Macedonia"), and the Republic of Slovenia ("Slovenia"). Plaintiffs allege that the five state defendants are successors to the SFRY's liabilities as sovereign states that formerly were part of, and that together constitute the whole of, the SFRY. Compl. ¶¶ 8, 27, 39, 50. Defendant FRY has filed a crossclaim against the other state defendants.

The five state defendants all have filed essentially similar, but somewhat divergent, dispositive motions. The FRY has moved for summary judgment pursuant to Fed.R.Civ.P. 56. Macedonia has moved to dismiss pursuant to Ped.R.Civ.P. 12(b)(1) for lack of subject matter jurisdiction. Bosnia, Croatia, and Slovenia have moved to dismiss pursuant to both Ped.R.Civ.P. 12(b)(1) for lack of subject matter jurisdiction and Ped.R.Civ.P. 12(b)(6) for failure to state a claim. Macedonia, Bosnia, and Slovenia also have moved to dismiss the FRY cross-claim.

In a written submission and at oral argument, the United States has stated its policy regarding the status of the SFRY and the status of each of the five state defendants. See United States Stmt. of Interest ("U.S.Mem."); Tr. at 66-72. Succession issues aside, the United States has not recognized the FRY as a sovereign state, but has recognized the other four non-SFRY nations. Tr. at 69-70. The United States position on succession is as follows:

  It is the fundamental position of the United States at
  this point that the Socialist Federal Republic of
  Yugoslavia, the SFRY, has ceased to exist and that no
  state represents its continuation. . . . [E]ach of the
  states that is before your Honor today that has
  emerged on its territory, on the territory of the
  former SFRY, is a successor. Each has interests in the
  assets and liabilities of the former SFRY, but those
  interests have not yet been determined by the
  executive.

Tr. at 66-67; see also U.S. Mem. at 3-4. The executive branch has not reached a final determination on these succession issues because, it explains, "the question of how assets and liabilities located in the United States should then he allocated to the various successors . . . must be determined by international negotiation, and that international negotiation has not yet concluded." Tr. at 70. "The present policy of the United States is to encourage the successors to the SFRY to reach an internationally negotiated settlement of these issues. Until those negotiations succeed, or until allocation of assets and liabilities is settled politically in some other way, claims raising these issues are unsuitable for judicial resolution." U.S. Mem. at 9-10. As against the state defendants, the United States concludes that this case is non-justiciable because "the manner in which assets and liabilities of a former state are to be allocated amongst one or more successors is not a question for the courts to decide, but is a political question that is reserved to the Executive Branch." Tr. at 67; See also U.S. Mem. at 9. As against the SFRY tenants, the United States does not object to continuation of this case, U.S. Mem. at 10-12, but reiterates that no judgment now could be enforced against the state defendants. Tr. at 70-71.

II. Discussion

A. Non-Justiciable Political Questions

During the SFRY's transition to a number of sovereign states, this judicial district has seen several cases of disputed claims to SFRY assets and liabilities (collectively, "SFRY asset/liability cases"). See Sage Realty Corp. v. Jugobanka, D.D., No. 95 Civ. 0323(RJW), 1998 WL 702272 (S.D.N.Y. Oct. 8, 1998) (landlord's claim for unpaid rent against tenant Yugoslav bank expelled from United States); Beogradska Banka A.D. Belgrade v. Interenergo, Inc. ("Beogradska Banka"), No. 97 Civ. 2065(JGK), 1998 WL 661481 (S.D.N Y Sept. 24, 1998) (FRY bank's claim of succession to SFRY bank and loans it held); Jugobank A.D. Belgrade v. Sidex Int'l Furniture Corp. ("Jugobank "), 2 F. Supp.2d 407 (S.D.N Y 1998) (FRY bank's claim of succession to SFRY bank and debt obligations it held); Yucyco, Ltd. v. Republic of Slovenia, 984 F. Supp. 209 (S.D.N.Y. 1997) (creditor's claim against Slovenia on SFRY contracts); Yucyco, Ltd. v. Republic of Croatia, No. 96 Civ. 5559(DC), 1997 WL 728173 (S.D.N Y Nov. 19, 1997) (companion case to id., holding same as against Croatia); Fed. Republic of Yugoslavia v. Park-71st Corp. ("Park-71st "), 913 F. Supp. 191 (S.D.N Y 1995) (FRY's claim to SFRY-owned New York apartment).

Despite the political upheaval underlying the SFRY asset/liability cases, not all have featured non-justiciable political questions. "[P]olitical question doctrine must be cautiously invoked, and the law is clear that the fact that a case touches on foreign affairs does not, without more, imply that the case involves a political question." Can v. United States, 14 F.3d 160, 163 (2d Cir. 1994); see also Kadic v. Karadzic, 70 F.3d 232, 249 (2d Cir. 1995) ("Although . . . cases present issues that arise in a politically charged context, that does not transform them into cases involving nonjusticiable political questions."). Cases pose non-justiciable political questions only to the extent that they pose "questions . . . beyond the competence and proper institutional role of the federal courts." Jugobank, 2 F. Supp.2d at 415. Factors that are "[p]rominent on the surface of any case held to involve a political question" include the following six:

  [1] a textually demonstrable constitutional commitment
  of the issue to a coordinate political department; or
  [2] a lack of judicially discoverable and manageable
  standards for resolving it; or [3] the impossibility
  of deciding without an initial policy determination of
  a kind clearly for nonjudicial discretion; or [4] the
  impossibility of a court's undertaking independent
  resolution without expressing lack of the respect due
  coordinate branches of government; [5] or an unusual
  need for unquestioning adherence to a political
  decision already made; [6] or the potentiality of
  embarrassment from multifarious pronouncements by
  various departments on one question.

Baker v. Carr, 369 U.S. 186, 217, 82 S.Ct. 691, 710, 7 L.Ed.2d 663 (1962), quoted in Kadic, 70 F.3d at 249, and Can, 14 F.3d at 163. All of the above six factors would be present in a judicial allocation of ...


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