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LEHMAN BROTHERS COMMERCIAL CORPORATION v. MINMETALS INT'L

April 25, 2001

LEHMAN BROTHERS COMMERCIAL CORPORATION AND LEHMAN BROTHERS SPECIAL FINANCE INC., PLAINTIFFS,
v.
MINMETALS INTERNATIONAL NON-FERROUS METALS TRADING COMPANY AND CHINA NATIONAL METALS AND MINERALS IMPORT AND EXPORT COMPANY, DEFENDANTS. MINMETALS INTERNATIONAL NON-FERROUS, METALS TRADING COMPANY, COUNTERCLAIM PLAINTIFF, V. LEHMAN BROTHERS INC., LEHMAN BROTHERS ASIA LIMITED, LEHMAN BROTHERS SECURITIES ASIA LIMITED AND LEHMAN BROTHERS CAPITAL CO., (H.K.) LIMITED, ADDITIONAL COUNTERCLAIM DEFENDANTS.



The opinion of the court was delivered by: John F. Keenan, United States District Judge:

  OPINION and ORDER

Before the Court is a motion by the Plaintiffs Lehmah Brothers Commercial Corporation and Lehman Brothers Special Financing, Inc.*fn1 to strike the jury demand in this case pursuant to 28 U.S.C. § 1330 (a) ("section 1330(a)"). The Defendants Minmetals International Non-Ferrous Metals Trading Company ("Non-Ferrous") and China National Metals & Minerals Import & Export Corporation ("Minmetals") oppose the motion. For the reasons that follow in this Opinion and Order, the Court grants Lehman's motion. Any trial in this case will be before this Court without a jury.

BACKGROUND

The Court will discuss only those circumstances that are relevant to the current motion, as the background to this case is fully set forth in a previous decision of this Court. See Lehman Bros. Commercial Corp. v. Minmetals Int'l Non-Ferrous Metals Trading Co., No. 94 Civ. 8301, 2000 WL 1702039 (S.D.N Y Nov. 13, 2000). Lehman, a global investment bank, is a citizen of the United States. Id. at *1. Minmetals is the parent corporation of the Minmetals Group, an international trading conglomerate that is owned entirely by the People's Republic of China ("China") and reports directly to China's Ministry of Foreign Trade and Economic Cooperation. Id. Non-Ferrous is a wholly-owned subsidiary of Minmetals. Id.

Lehman originally asserted that this Court's jurisdiction in this case was based upon diversity of citizenship, pursuant to 28 U.S.C. § 1332 (a)(2), and alternatively, upon section 1330(a), known as the Foreign Sovereign Immunities Act, codified at 28 U.S.C. § 1330, 1441(d), 1602 et seq. ("FSIA"). Along with its answer to Lehman's complaint, Non-Ferrous asserted fourteen counterclaims against Lehman, two of which were subsequently dismissed by an Opinion and Order of this Court. See Lehman Bros. Commercial Corp., 2000 WL 1702039 at *10.

Both Lehman and the Defendants entered jury demands in this case. In a letter to this Court dated November 30, 2000, however, Lehman stated that this Court's exclusive source of jurisdiction in this case was section 1330(a), which, according to Lehman, mandates a nonjury trial. The parties subsequently briefed and filed the motion that is now before the Court.

DISCUSSION

The FSIA provides that "[t]he district courts shall have original jurisdiction . . . of any nonjury civil action against a foreign state as defined in section 1603(a) of this title as to any claim for relief. . . ." 28 U.S.C. § 1330 (a). Section 1603(a) of that title states that the term "foreign state" "includes a political subdivision of a foreign state or an agency or instrumentality of a foreign state. . . ." See 28 U.S.C. § 1603 (a) ("section 1603(a)").

Lehman argues that because this case is a civil action against two foreign — state defendants, section 1330(a) requires that any trial in this case be nonjury. The Defendants, on the other hand, argue that this case may be tried before a jury, at least in part, for three reasons: (1) Non-Ferrous is not a foreign-state defendant as defined in section 1603(a); (2) foreign-state defendants can waive the protection of the nonjury provision in section 1330(a); and (3) section 1330(a) does not govern Non-Ferrous' counterclaims against Lehman.*fn2 The Court will address the Defendants' contentions in that order.

A. FSIA's Applicability to Non-Ferrous

Minmetals concedes that it is governed by the FSIA because it is the instrumentality of a foreign state, China. (See Defs.' Opp. Mem. at 10, 15). Non-Ferrous, on the other hand, asserts that it does not fall under the FSIA because it is neither a political subdivision of a foreign state (China) nor an agency or instrumentality of China. Lehman does not argue that Non-Ferrous is a political subdivision of China, and so this Court need only determine whether Non-Ferrous is an agency or instrumentality of China.

The term "agency or instrumentality of a foreign state" is defined in 28 U.S.C. § 1603 (b) ("section 1603(b)") as "a separate legal person, corporate or otherwise, and . . . [inter alia,] a majority of whose shares or other ownership interest is owned by a foreign state or political subdivision thereof . . ." 28 U.S.C. § 1603 (b)(1)-(2)

Non-Ferrous argues that it is not an "agency or instrumentality of a foreign state" as defined in section 1603(b) because it is not majority-owned by a foreign state or a political subdivision of a foreign state. Non-Ferrous acknowledges that its sole owner, Minmetals, is an instrumentality of a foreign state. It argues, however, that because Minmetals is neither a foreign state nor a political subdivision of a foreign state, Non-Ferrous cannot be an "agency or instrumentality of a foreign state" as defined in section 1603(b). As a result, it would not be a "foreign state" as defined in section 1603(a), and would not fall under the FSIA.

Non-Ferrous' argument depends upon the breadth of the term "foreign state" as it is used in section 1603(b). If that term is used in section 1603(b) to refer only to foreign states themselves, Non-Ferrous is not an agency or instrumentality under that subsection.*fn3 On the other hand, if the term "foreign state" in section 1603(b) itself includes an agency or instrumentality of a foreign state as defined in section ...


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