United States District Court, Southern District of New York
February 13, 2002
BRAD M. REISS, PLAINTIFF,
SOCIETE CENTRALE DU GROUPE DES ASSURANCES NATIONALES, A/K/A DECISION AND SOCIETE CENTRALE DU GAN, A/K/A ORDER SOCIETE DE GESTION DE GARANTIES ET DE PARTICIPATIONS, UNION POUR LE FINANCEMENT D'IMMEUBLES DE SOCIETES, UNION INDUSTRIELLE DE CREDIT AND GAN S.A., DEFENDANTS.
The opinion of the court was delivered by: VICTOR Marrero, United States District Judge:
DECISION AND ORDER
Plaintiff Brad M. Reiss ("Reiss") filed this action in 1998, to recover
a "finder's fee" allegedly owed to him by defendants Societe Centrale du
Groupe des Assurances Nationales ("Societe") Union pour le Financement
D'Immeubles de Societe ("UIS"), Union Industrielle de Credit ("UIC"), and
GAN S.A. (hereinafter collectively referred to as "Defendants"), all of
which are French governmental entities. Reiss claims that Defendants'
obligation arose from an agency relationship for his work, performed in
the United States, in soliciting an American corporation, GECC, to
purchase UIC and UIS from Defendants. According to Reiss, his agency
agreement was consummated on behalf of Defendants by Alaine Juliard
("Juliard") UIS's chairman, at several meetings with him, in the United
States, that occurred from 1992 through 1995.
Defendants filed a motion to dismiss the complaint pursuant to Fed. R.
Civ. P. 12(b)(2) for lack of personal jurisdiction under the New York
state long-arm statute, N Y C.P.L.R. § 302, and Fed. R. Civ. P.
12(b)(6) for failure to state a claim on the ground that Reiss did not
establish that Defendants had authorized Reiss to act as their agent. The
district court granted Defendants' motion. See Reiss v. GAN S.A.,
78 F. Supp.2d 147 (S.D.N.Y. 1999). Although given leave to replead, Reiss
instead appealed the district court's ruling.
On appeal, the Second Circuit reversed the dismissal and instructed the
parties to engage in discovery on the issue of subject matter jurisdiction
under the Foreign Sovereign Immunities Act ("FSIA"). See Reiss v. Societe
Centrale du Groupe Des Assurances Nationales, 235 F.3d 738, 747-48 (2d
Cir. 2000).*fn1 In particular, the Second Circuit instructed that:
The question here is whether Reiss can demonstrate a
significant nexus between his engagement by Societe
and/or GAN S.A. as a marketing agent in the United States
and his action to recover a finder's fee for the deal
that culminated in the sale of UIC and UIS by Societe to
GECC. That question cannot be resolved without a
determination as to whether Reiss was in fact retained by
Societe and/or GAN S.A. . . . Although Juliard was the
chairperson of UIS, it may very well be that he acted on
behalf of Societe and/or GAN S.A. in his dealings with
Reiss, whose claim basically is that he was hired by
Juliard on behalf of Societe and/or GAN S.A. and
services that led to the sale of UIS and UIC to
GECC. . . . Reiss should be permitted to go forward with
the discovery to which he is entitled.
On remand, the case was assigned to this Court. The Court assumes
familiarity with the detailed description of the identities of the
parties and other underlying facts set forth in the Second Circuit's
Following up on the Circuit Court's holding, Reiss arranged for
discovery proceedings before the Tribunal de Grande Instance in Paris
— Service des Commissiones Rogatoires Internationales that are
scheduled to commence on February 25, 2002. At those proceedings, Reiss
contemplates examining three executives of Defendants, Philippe Rosio,
Guy de Chavanne, and Juliard (collectively hereinafter the "French
Officials"), as the Second Circuit encouraged him to do. See id., at 747
("We think it would be helpful to have the depositions of Juliard and de
Chavanne . . . to assist the court in undertaking an FSIA jurisdiction
In anticipation of those proceedings, Reiss filed a letter brief
seeking clarification on the scope of permissible discovery. (Letter from
Richard E. Haftel to the Court, dated Jan. 2, 2002). Reiss indicated that
he would seek discovery of matters occurring in 1992 through 1995.
(Letter from Richard F. Haftel to the Court, dated January 25, 2002
("Haftel Letter").) At a status conference held before the Court on
January 4, 2002, Defendants stated that they would oppose Reiss's efforts
to obtain discovery regarding any matter beyond the events that occurred
following Reiss's initial meeting with Juliard in July of 1992.
Defendants assert that Reiss may seek discovery only on the alleged date
of his engagement by Juliard, which Reiss identifies in the complaint as
July 1992, and may not pursue any inquiry that may touch upon the merits
of the action in any way.
The Court ordered further briefing to assist it in identifying the
scope of discovery to which Reiss is entitled at this stage of
Because federal courts are courts of limited jurisdiction, they must
police subject matter delineations on their own initiative. See Fed. R.
Civ. P. 12(h); Ruhrgas AG v. Marathon Oil Co., 526 U.S. 574, 583 (1999)
(citing Fed. R. Civ. P. 12(h)); Lyndonville Savings Bank & Trust Co. v.
Lussier, 211 F.3d 697, 700 (2d Cir. 2000) ("[F]ailure of subject matter
jurisdiction is not waivable and may be raised at any time by a party or
by the court sua sponte.") Creaciones Con Idea, S.A. de C.V. v.
Confecciones, S.A. de C.V., 75 F. Supp.2d 279, 280-81 (S.D.N.Y. 1999)
(sua sponte dismissal for lack of subject matter jurisdiction under
28 U.S.C. § 1332). The Court is now asked to decide whether, in
furtherance of the Court's jurisdictional analysis, Reiss's examination
of the French Officials should be limited to the events that occurred in
1992 and only in the United States, or, encompass matters during the time
period of 1992 through 1995 both in the United States and, to the extent
bearing on the jurisdictional issue, in France as well.
According to Defendants, "the only relevant question pertaining to this
Court's jurisdiction over Societe Centrale is whether Mr. Juliard, as a
representative of Societe Centrale, hired Mr. Reiss in July of 1992 in
the United States." (Letter of Lawrence W. Newman to the Court, dated
January 18, 2002 (emphasis in original).) The Court finds that
Defendants' position on this point is untenable. Defendants would have
FSIA jurisdiction inquiry limited to acts taken by individuals
pre-authorized to represent foreign states and taken only when physically
present in the United States. Neither the FSIA, the Second Circuit case
law or holding in this action, nor the rules of agency compel such a
convergence of time, place and authorization.*fn2 As the Court explains
below, a party's ratification, that is, subsequent approval of an agent's
performance, may support a finding of jurisdiction under the FSIA, even if
such approval is granted and transmitted from abroad.
Under the FSIA, "a foreign state is presumptively immune from the
jurisdiction of the United States courts; unless a specified exception
applies, a federal court lacks subject matter jurisdiction over a claim
against a foreign state." Saudi Arabia v. Nelson, 507 U.S. 349, 355
(1993); see also 28 U.S.C. § 1604, 1605; Reiss, 235 F.3d at 746. As
the Second Circuit held and the parties here agree, "the only arguable
exception upon which Reiss may rely is the `commercial activity'
exception" which confers subject matter jurisdiction upon federal courts
in any case:
[I]n which the action is based upon a commercial
activity carried on in the United States by a foreign
state; or upon an act performed in the United States
in connection with a commercial activity of the
foreign state elsewhere; or upon an act outside the
territory of the United States in connection with a
commercial activity of the foreign state elsewhere and
that act causes direct effect in the United States.
28 U.S.C. § 1605(a)(2). The FSIA clearly contemplates that acts
supporting jurisdiction may occur in, and outside, the United States.
The Second Circuit considered Reiss's complaint under the first clause
of the commercial activity exception, namely, commercial activity carried
on in the United States by [a] foreign state".*fn3 To determine whether
the exception applies, parties are entitled to some discovery. See First
City, 150 F.3d at 176 ("[G]enerally a plaintiff may be allowed limited
discovery with respect to the jurisdictional issue.") (internal
quotations and citation omitted). This Court has the authority, and
duty, to order discovery into the FSIA jurisdictional issue. See Reiss,
235 F.3d at 748; Phoenix Consulting, Inc. v. Republic of Angola,
216 F.3d 36, 40 (D.C. Cir. 2000). of course, given the comity and
sensitivity owed foreign sovereigns, such discovery should be given
appropriate limits. See Phoenix Consulting, 216 F.3d at 40; see also Kelly
v. Syria Shell Petroleum Development B.V., 213 F.3d 841, 849 (5th Cir.
2000) ("when FSIA immunity has been claimed, unlimited jurisdictional
is not permitted as a matter of course. Instead it should be ordered
circumspectly and only to verify allegations of specific facts
crucial to an immunity determination.") (internal quotations and
citations omitted) (emphasis in original); First City, 150 F.3d at 176.
While Defendants are correct that discovery regarding jurisdiction
under the FSIA must be carefully circumscribed, Defendants seek to unduly
constrain discovery in applying the foregoing general principles to the
facts of this case. In 1998, Reiss detailed facts in the complaint that
might support the Court's exercise of jurisdiction herein. If Reiss can
establish that Juliard, who allegedly had numerous contacts with Reiss in
the United States and France during the period from 1992 through 1995,
was acting as agent for any of the Defendants, then Reiss has established
the substantial nexus necessary for jurisdiction. See Reiss, 235 F.3d at
747. A necessarily central inquiry in this regard is the scope of
Juliard's authority to enter into agreements of the type at issue here
and to bind Defendants thereby. That question is discrete and entirely
distinct from whether or not Defendants actually engaged in the
commercial activities in the United States that Reiss alleges. Moreover,
the predicate for any authority Juliard may have possessed may
fundamentally rest upon events that extended in time beyond Juliard's
only interaction with Reiss in July 1992 or in place beyond the United
States. Thus, if the source of that authority is to be traced and
verified, its trial cannot be artificially truncated at a given moment,
as though nothing preceded or succeeded the sole act in July 1992 that
Defendants seek to isolate as the only relevant point. Such a static view
of things does not accord with the reality that human events occur in
multiple chains of related reactions and interactions whose origins and
effects cannot be captured and time-frozen in a single snapshot, as
Defendants' theory would propound.
In addition to the question of whether Reiss was engaged by Defendants
during July 1992, there is a second pertinent line of inquiry essential
for Reiss to pursue: whether Reiss's or Juliard's conduct, if
unauthorized when taken, was later authorized by Defendants through
ratification. "Ratification is a form of retroactive authority" that
occurs where a principal, having knowledge of the material facts, accepts
the benefits of the agent's actions already made on his behalf. Banque
Arabe et Internationale D'Investissement v. Maryland Nat'l Bank,
850 F. Supp. 1199, 1213 (S.D.N.Y. 1994); see also Chemical Bank v.
Affiliated FM Ins. Co., 196 F.3d 373, 375-76 (2d Cir. 1999), cert.
denied, 531 U.S. 1074 (2001). Indeed, in the complaint, Reiss identified
the issue of subsequent authorization by alleging that Juliard might need
further authorization from GAN S.A. "before he took any actions with
respect to any important matters." (Compl., ¶ 33.)
Additional analogous authority for permitting discovery on the second
question may be found in cases, cited by Reiss, based upon personal
jurisdiction analysis. Although that inquiry addresses a different
ultimate issue, under some circumstances the basis for both personal and
subject matter jurisdiction could be predicated on the existence of an
agency and the conduct of the alleged agent in furtherance of the legal
relationship. To ascertain whether an agency relationship exists, a court
may consider whether the agent's acts were ratified by subsequent conduct
of the principal. See Pennie & Edmonds v. Fabry Glove & Mitten Co., No.
89 Civ. 0883, 1990 WL 9323, *2-*3 (S.D.N.Y. Jan. 29, 1990) ("A
ratification arises "when a party to a voidable contract accepts benefits
flowing from the contract, or remains silent, or acquiesces in contract
[sic] for any considerable length of time after he has opportunity to
annul or void the contract.'") (citing The Prudential Ins. Co. of Amer.
v. BMC Indus. Inc., 630 F. Supp. 1298, 1300 (S.D.N.Y. 1986)). Here, if
proven, ratification by Societe or GAN S.A. necessarily would have
occurred subsequent to Juliard's initial visit to New York in July of
1992. See also Bank of Montreal v. Mitsui Manufacturers Bank, No. 85
Civ. 1519, 1987 WL 5829, * 2 (S.D.N.Y. Jan. 21, 1987) (personal
jurisdiction over an out-of-state defendant was found based on the
performance of "purposeful acts with persons or entities in New York
regarding the contract, albeit preliminary or subsequent to its
execution."); Applied Hydro-Pneumatics, Inc., v. Bauer Manufacturing,
416 N.Y.S.2d 817, 820 (App. Div. 2d Dept. 1979).
In sum, to answer the question identified by the Second Circuit
— that is, whether Reiss can demonstrate subject matter
jurisdiction under the FSIA, through a determination of "whether Reiss
was in fact retained by Societe and/or GAN S.A." — Reiss is
entitled to obtain discovery regarding any authorization that may have
occurred prior to, contemporaneously with or subsequent to the July 1992
meeting between Juliard and Reiss in New York, even if such authorization
occurred outside the United States. This inquiry conceivably may overlap
with facts and issues relevant to the merits of Reiss's claims. To some
extent that prospect is unavoidable because not uncommonly jurisdictional
and substantive issues are integrally connected. This side effect of the
jurisdictional analysis that the parties and Court must undertake could
be minimized by carefully-focused questions that in good faith honor the
spirit of the limitations on discovery to specific facts bearing on the
jurisdiction and immunity determinations.
For the foregoing reasons, it is hereby
ORDERED that, as part of the initial FSIA jurisdiction-related
discovery, Reiss may inquire into matters related to the agency
relationship and authority pertaining thereto of Juliard and Reiss and
occurring between January 1, 1992 and December 31, 1995.