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IN RE AIR CRASH NEAR NANTUCKET ISLAND

October 7, 2005.

IN RE AIR CRASH NEAR NANTUCKET ISLAND, MASSACHUSETTS, ON OCTOBER 31, 1999. THE BOEING COMPANY, Plaintiff,
v.
EGYPTAIR, and MISR INSURANCE, Defendants.



The opinion of the court was delivered by: FREDERIC BLOCK, District Judge

MEMORANDUM & ORDER

This is a declaratory judgment action brought by Boeing against EgyptAir and MISR Insurance Company ("MISR"), EgyptAir's insurer; the action is an outgrowth of the EgyptAir Flight 990 crash on October 31, 1999, into the Atlantic Ocean near Nantucket Island, Massachusetts, resulting in the death of all 217 individuals on board. Prior to this action, MISR initiated a subrogation action against Boeing in an Egyptian court. Notwithstanding the pending action in Egypt, Boeing seeks a declaratory judgment in this Court that EgyptAir, MISR and MISR's reinsurers are barred by various contracts from recovering damages from Boeing arising from the loss of Flight 990 or, alternatively, that EgyptAir is liable to Boeing for subrogation damages sought by MISR and its reinsurers.

  Pursuant to Fed.R.Civ.P. 12(b)(1), MISR has moved to dismiss Boeing's complaint for lack of subject matter jurisdiction based on the Foreign Sovereign Immunities Act ("FSIA"), 28 U.S.C. §§ 1330 & 1602 et seq., and for lack of "minimum contacts" required by the Due Process Clause to exercise personal jurisdiction over MISR; alternatively, MISR has moved for a stay pending arbitration. In a supplemental filing, MISR has also moved to dismiss the complaint under the broad discretion accorded to the Court under the Declaratory Judgment Act ("DJA"), 28 U.S.C. § 2201.*fn1 For the reasons set forth below, MISR's motions are denied, and the Court will retain jurisdiction. BACKGROUND

  A. Contracts between Boeing and EgyptAir

  In 1988, EgyptAir entered into a Purchase Agreement for, inter alia, the sale of the aircraft that later operated as EgyptAir Flight 990; the aircraft was built by Boeing, a United States corporate domiciliary, in the United States, and was regularly flown by EgyptAir in the United States. The Purchase Agreement also required Boeing to provide EgyptAir with various support services in connection with the sale. In 1997, Boeing entered into a second contract with EgyptAir, entitled Customer Services General Terms Agreement ("CSGTA"), for the sale and lease of, inter alia, "spare parts, standards, tools, [m]aterials . . ., services and retrofit kit changes. . . ." CSGTA at i (attached as Ex. C to Compl.). Both contracts specified that they would be governed by the laws of the State of Washington.

  In each contract, Boeing provided certain warranties against defects and, in exchange, in a provision entitled "Disclaimer and Release," EgyptAir agreed to waive all other warranties, obligations and liabilities of Boeing, expressly including, inter alia, "any obligation, right, claim or remedy in tort, whether or not arising from the negligence of Boeing." Purchase Agreement, Ex. B, Part D-1 (attached as Ex. B to Compl.); see also CSGTA ¶ 12.1.

  These contracts also required EgyptAir (1) to indemnify Boeing and hold it harmless under certain circumstances for any injury to or death of any person, or loss of or damage to any property, including the aircraft; (2) to have Boeing named as an additional insured on EgyptAir's aviation liability insurance policy, and (3) to have its hull insurance carrier waive all rights of subrogation against Boeing. Additionally, EgyptAir was required to provide Boeing with certificates of insurance evidencing that EgyptAir had complied with the indemnification provisions, and to keep the certificates "current and valid." Purchase Agreement, Ex. C, Part E.

  B. EgyptAir's Insurance Policy

  At all relevant times, MISR, which is wholly owned by the Arab Republic of Egypt, provided EgyptAir aviation liability and hull insurance pursuant to a single Hull and Liability Policy that was renewed annually. In this policy MISR agreed to insure against "loss, damage, liability or expense occurring" during the time of coverage and to waive all rights of subrogation against "each of the parties comprising the Assured." Hull and Liability Policy at 1 (attached as Ex. A to Decl. of Hussein Attalla Hussein). Although the cover page of the policy only identified EgyptAir as the Assured, the policy extended coverage to "incorporate [the] requirements [in contracts between Boeing and EgyptAir]," id. at 12, requiring, as previously noted, that the aviation liability policy that EgyptAir was obliged to obtain would name Boeing as an additional insured, and that the requisite hull insurance policy would provide for the waiver of subrogation.

  The Hull and Liability Policy also included an arbitration clause requiring all disputes "arising between the Assured and [MISR] with reference to the interpretation of this Policy or the rights with respect to any transaction involved" to be referred to arbitration "in accordance with the Statutory Rules for Arbitration in [Egypt]." Id. at 13.

  On July 18, 1989, EgyptAir obtained a certificate of insurance from MISR certifying that MISR had agreed "to add Boeing as an additional assured under hull and liabilities policy no. 1710/89 [the policy number that was in place as of that date] and waive[] . . . subrogation in respect of" the subject aircraft. Decl. of Harold G. Booker ¶ 2 & Ex. A. The certificate also incorporated by reference "all other terms and conditions [of] Hull and Liabilities Policy No. 1710/89." Id. at Ex. A.*fn2 Thereafter, Boeing delivered the aircraft to EgyptAir.

  C. Requirements for Foreign Air Carriers

  As required by United States Department of Transportation ("DOT") regulations, EgyptAir obtained a Foreign Air Carrier Permit from the DOT to engage in commercial air transportation in the United States; the permit provided "that operations under this permit constitute a waiver of sovereign immunity[.]"*fn3 In further compliance with DOT regulations, EgyptAir thereafter had its insurer, MISR, file with the DOT a Foreign Air Carriers Certificate of Insurance certifying that it issued a policy of aircraft liability insurance to EgyptAir for the subject aircraft. See Foreign Air Carriers Certificate of Insurance (attached as Ex. A to Compl.).*fn4

  D. EgyptAir Flight 990 Litigation

  Flight 990 was flying from the United States to Cairo when it crashed. After the crash, numerous lawsuits were commenced against EgyptAir and/or Boeing; in every suit against Boeing, a third-party complaint or cross-claim was brought by Boeing against EgyptAir seeking indemnification and contribution. These lawsuits were later consolidated as multi-district litigation and transferred to this Court for the resolution of pre-trial matters. EgyptAir agreed not to contest liability where jurisdiction and venue were proper and settled many of these lawsuits, although it reserved the right to seek contribution or indemnification. As required by the Hull and Liability Policy, MISR also compensated EgyptAir for the value of the aircraft.

  Thereafter, EgyptAir and MISR filed separate actions against Boeing in Egyptian courts. EgyptAir sued Boeing in the North Cairo Court of the First Instance, seeking to compel Boeing to, inter alia, produce documents related to the investigation into the cause of the crash. Boeing's counsel has advised the Court that on March 28, 2005, "the Egyptian court held that jurisdiction did not exist under Article 30, paragraph 2, of the Egyptian Procedural Code because the Case is not related to an asset existing in Egypt or an obligation that arose, was performed or should have been performed in Egypt." Letter from Scott F. Seablom on behalf of Boeing (Apr. 5, 2005), at 1 (internal citations and quotations omitted). Accordingly, the case was dismissed.

  MISR, as EgyptAir's subrogee, initiated a subrogation action against Boeing in the North Giza Court of the First Instance, seeking, inter alia, damages for the amount that it paid to EgyptAir on the hull insurance ($53 million) and the amount that it has paid thus far to the victims' families ($63 million). This is the action that forms the basis for MISR's supplemental motion requesting that the Court dismiss the declaratory judgment action.*fn5

  The basis for the subrogation action is MISR's contention that the Flight 990 crash was caused by a defect in the elevator control system; MISR asserted two bases for Boeing's liability: (1) that it designed and manufactured a defective product, and (2) that it failed to warn of the known defect.*fn6 MISR also alleged that pursuant to Article 67 of the Egyptian Commercial Code, tort liability may not be waived even if a contract expressly provides otherwise. The Court has been advised by both Boeing's and MISR's counsel that Boeing had challenged the Egyptian court's jurisdiction, but that the court ruled that it had jurisdiction because the aircraft was registered in Egypt. See Letter from Frederick Alimonti on behalf of MISR (Feb. 11, 2005); Letter from Scott F. Seablom on behalf of Boeing (Mar. 1, 2005), at 8. According to Boeing's counsel, MISR thereafter requested that the Egyptian court direct a panel of experts to investigate the cause of the accident, which would require "a lengthy investigation." Letter from Scott F. Seablom (Mar. 1, 2005), at 14. As the Court was recently advised in a subsequent letter from Boeing's counsel, the Egyptian court has permitted Boeing to add EgyptAir as a party to this litigation but has "ruled that it would not address any legal issues raised by the joinder of EgyptAir until after the panel of appointed experts complete[d] its investigation. . . ." Letter from Scott F. Seablom (Sept. 27, 2005), at 2.

  In the present declaratory judgment action, Boeing seeks resolution of its liability as the manufacturer of the aircraft. Specifically, Boeing seeks a declaratory judgment that (1) the disclaimer and release, and the indemnity provisions in the Purchase Agreement and CSGTA bar EgyptAir, MISR and its reinsurers from seeking to recover any damages from Boeing arising from the loss of Flight 990; (2) either "[MISR] and its reinsurers are barred from subrogating against Boeing[,]" or, alternatively, "EgyptAir is liable to Boeing for all subrogation damages sought by [MISR] and its reinsurers"; and (3) EgyptAir, MISR and its reinsurers are barred from seeking damages against Boeing because they failed to raise these claims as compulsory counterclaims as required by Fed.R.Civ.P. 13(a). Compl. at 19-20. DISCUSSION

  A. Foreign Sovereign Immunities Act

  "The FSIA . . . provides the sole basis for obtaining [subject matter] jurisdiction over a foreign sovereign in the United States." Virtual Countries, Inc. v. Republic of South Africa, 300 F.3d 230, 236 (2d Cir. 2002) (alterations in original) (quoting Republic of Argentina v. Weltover, Inc., 504 U.S. 607, 611 (1992)). Section 1330(a) of Title 28 provides that federal district courts

 
shall have original jurisdiction without regard to amount in controversy of any nonjury civil action against a foreign state as defined in section 1603(a) of this title as to any claim for relief in personam with respect to which the foreign state is not entitled to immunity either under sections 1605-1607 of this title or under any applicable international ...

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