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Rogers v. Brasileiro

September 27, 2010


The opinion of the court was delivered by: Paul G. Gardephe, U.S.D.J.


On September 25, 2009, Plaintiffs Dennis Rogers and Kevin Burlew initiated the above actions against Petróleo Brasileiro, S.A. ("Petrobrás"), alleging that Petrobrás committed breach of contract by failing to convert certain Petrobrás bearer bonds owned by Plaintiffs into preferred stock. (Docket No. 1)*fn1 On January 6, 2010, Petrobrás moved, pursuant to Federal Rule of Civil Procedure 12(b)(1) and (6), to dismiss the actions for lack of jurisdiction under the Foreign Sovereign Immunities Act, 28 U.S.C. §§ 1602 et seq., and under the doctrine of forum non conveniens; and for failure to state a claim upon which relief can be granted. (09-cv-8227, Docket No. 5; 09-cv- 8228, Docket No. 7) For the reasons stated below, Defendant's motions to dismiss will be DENIED.


For purposes of deciding Defendant's motions to dismiss, the Court assumes that the following factual allegations in the complaints*fn2 are true:

Defendant Petrobrás is a Brazilian, government-owned oil company created pursuant to Brazilian Law No. 2,004 on October 3, 1953. (Petrobrás Ex. 5 at 1-2; see Cmplt. ¶ 2)*fn3 Petrobrás maintains an office at 570 Lexington Avenue, New York, New York. (Cmplt. ¶ 2) Plaintiff Dennis Rogers is a citizen of Florida (Rogers Cmplt. ¶ 1), and Plaintiff Kevin Burlew is a citizen of Connecticut (Burlew Cmplt. ¶ 1). Rogers and Burlew own Series 1, 3, and 4 Petrobrás bearer bonds. (Cmplt. ¶ 5) The complaints do not describe how Plaintiffs acquired these bonds, but declarations submitted by Plaintiffs in opposition to Defendant's motions state that the bonds at issue were purchased in the United States with U.S. currency. (Pltfs. Decs. ¶ 4)

Petrobrás' Series 1 bearer bonds, issued on May 31, 1956, read as follows (in translation):

Petróleo Brasileiro, S.A. -- Petrobrás -- owes to the holder of this Certificate the amount of one thousand (1,000) cruzeiros corresponding to the contribution it received in 1954, pursuant to the provisions of Section 15 of Law No. 2,004 of October 2, 1953... and it will pay to it, up to their redemption, per accrued semester, interests at 7% (seven percent) per year, in accordance with the resolution of the general shareholders' meeting in an extraordinary session held on December 20, 1955....

The bearer obligations of this series are issued at this Company's discretion, pursuant to the provisions of Section 15 of Law No. 2,004, of October 3, 1953, and they are delivered to the holders of certificates of paid contributions by the owners of motor cars, in 1954....

The following are conditions of this issuance: 1st) Redemption as from January 1, 1958, so that it is fully paid up on December 31, 1977; 2nd) The total or partial redemption may be advanced, either by purchase in the Stock Exchange, or by sort at par; 3rd) The obligations shall have interests at 7% per year, accrued per semester, as from January 1, 1955; 4th) The interests shall be paid semi-annually, in March and September each year; 5th) The Federal Government is jointly liable, in any case, for the nominal value of this bond, pursuant to the provisions of Section 15, of Law No. 2,004, of October 3, 1953; 6th) Petróleo Brasileiro S.A. -- Petrobrás entitles to the holder of this obligation the option for receiving preferred nominative shares without voting rights, after the bond party meets the requirements of the Corporation Law and Section 18 of Law No. 2,004 of October 3, 1953. (Petrobrás Ex. 1 (Series 1 bond)) The other Series bonds are identical, except that the Series 3 bonds were issued on November 30, 1957, and had a redemption period from January 1, 1960 to December 31, 1979 (Petrobrás Ex. 2 (Series 3 bond), and the Series 4 bonds were issued on February 17, 1959, and had a redemption period from January 1, 1961 to December 31, 1980.*fn4 (Petrobrás Ex. 3 (Series 4 bond))

On June 22, 2009, Plaintiffs each sent a letter to Petrobrás' New York office requesting the conversion of their Petrobrás bearer bonds into preferred stock pursuant to the bonds' terms. (Cmplt. ¶ 6; see also Pltfs. Ex. A). On June 25, 2009, Theodore M. Helms, an Executive Manager of Investor Relations for Petrobrás, responded to Plaintiffs' letters by email, informing them that the office "regularly receive[s] inquiries about these bonds" and that the bonds "are no longer convertible." (Pltfs. Ex. C) Helms attached a letter from Petrobrás' Investor Relations Department detailing the history and legal standing of the bonds in Brazil. (Id.) In relevant part, the letter states that the bonds "are over twenty years old, and holders who did not assert their rights in good time may not now claim the redemption value or request conversion. The rights represented by these papers have lapsed, in accordance with Brazilian Civil Law and as stipulated on the back of these Bonds." (Id.)

On September 25, 2009, Plaintiffs filed separate actions in this Court claiming breach of contract based on Petrobrás' refusal to convert the bonds into preferred shares. (Docket No. 1) Defendant filed its motions to dismiss on January 6, 2010.


Defendant moves to dismiss pursuant to Fed. R. Civ. P. 12(b)(1) for lack of subject matter jurisdiction, and under Fed. R. Civ. P. 12(b)(6) for failure to state a claim upon which relief can be granted. A claim is "properly dismissed for lack of subject matter jurisdiction under Rule 12(b)(1) when the district court lacks the statutory or constitutional power to adjudicate it." Makarova v. United States, 201 F.3d 110, 113 (2d Cir. 2000). "When jurisdiction is challenged, the plaintiff 'bears the burden of showing by a preponderance of the evidence that subject matter jurisdiction exists.'" Arar v. Ashcroft, 532 F.3d 157, 168 (2d Cir. 2008) (quoting APWU v. Potter, 343 F.3d 619, 623 (2d Cir. 2003)). In deciding a motion to dismiss for lack of subject matter jurisdiction under Rule 12(b)(1), courts may consider evidence outside the pleadings. See Makarova, 201 F.3d at 113; City of New York v. FDIC, 40 F. Supp. 2d 153, 160 (S.D.N.Y. 1999) (citing Kamen v. AT & T Co., 791 F.2d 1006, 1011 (2d Cir. 1986)).

A Rule 12(b)(6) motion, in contrast, challenges the legal sufficiency of the pleaded claims. "To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to 'state a claim for relief that is plausible on its face.'" Ashcroft v. Iqbal, 556 U.S. --, 129 S.Ct. 1937, 1949 (2009) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007)). To meet this standard, a complaint's factual allegations must permit the Court, "draw[ing] on its judicial experience and common sense," "to infer more than the mere possibility of misconduct." Id. at 1950. "In considering a motion to dismiss... the court is to accept as true all facts alleged in the complaint," Kassner v. 2nd Ave. Delicatessen Inc., 496 F.3d 229, 237 (2d Cir. 2007) (citing Dougherty v. Town of N. Hempstead Bd. of Zoning Appeals, 282 F.3d 83, 87 (2d Cir. 2002)), and must "draw all reasonable inferences in favor of the plaintiff." Id. (citing Fernandez v. Chertoff, 471 F.3d 45, 51 (2d Cir. 2006)). For purposes of a motion to dismiss, the "complaint is deemed to include any written instrument attached to it as an exhibit or any statements or documents incorporated in it by reference," and the court may consider any document "which is integral to the complaint." Int'l Audiotext Network, Inc. v. Am. Tel. and Telegpaph Co., 62 F.3d 69, 72 (2d Cir. 1995).

In resolving Defendant's motions to dismiss for forum non conveniens, this Court may consider affidavits, affirmations and exhibits submitted in connection with the motions. See Goldberg v. UBS AG, 660 F. Supp. 2d 410, 419 (S.D.N.Y. 2009) (citing cases); Kingsway Fin. Servs. v. Pricewaterhouse-Coopers, LLP, 420 F. Supp. 2d 228, 233 (S.D.N.Y. 2005) (citing cases stating that courts may consider affidavits and other evidence in considering a motion to dismiss on abstention grounds).


The Foreign Sovereign Immunities Act ("FSIA"), 28 U.S.C. §§ 1602, et seq., is "the sole basis for obtaining jurisdiction over a foreign state" in United States courts. Argentine Republic v. Amerada Hess Shipping Corp., 488 U.S. 428, 439 (1989). The FSIA provides that a "foreign state shall be immune from the jurisdiction of the courts of the United States and of the States except as provided in sections 1605 to 1607 of this chapter." 28 U.S.C. § 1604.

Under the FSIA, "foreign state" includes "an agency or instrumentality of a foreign state," defined as: any entity-

(1) which is a separate legal person, corporate or otherwise, and

(2) which is an organ of a foreign state or political subdivision thereof, or a majority of whose shares or other ownership interest is owned by a foreign state or political subdivision thereof, and

(3) which is neither a citizen of a State of the United States as defined in section 1332 (c) and (e) of this title, nor created under the laws of any third country.

28 U.S.C. § 1603(a)-(b).

Petrobrás argues that because Brazil owns a majority of its common or voting shares, it is an organ of the Brazilian government and immune from suit under the FSIA. (Def. Br. 6-11). Plaintiffs argue that Petrobrás is not entitled to FSIA immunity, however, because Brazil does not own a majority of its shares when all classes of stock are considered. At the very least, Plaintiffs argue, they should be permitted discovery as to whether Petrobrás is an organ of Brazil. (Pltf. Br. 8-9)

Defendant's foreign state status merits little discussion. Case law makes clear that Petrobrás is considered immune under the FSIA. See U.S. Fidelity & Guar. Co. v. Braspetro Oil Servs., Co., 199 F.3d 94, 98 (2d Cir. 1999) (per curiam) (noting that "acts of Petrobras" were "[a]cts of the state" but upholding the exercise of subject matter jurisdiction over Petrobrás under the FSIA's commercial activity exception); Strata Heights Int'l Corp. v. Petroleo Brasileiro, S.A., Nos. 02-20645, 67 Fed. App'x 247, 02-20767, 2003 WL 21145663, at *4 (5th Cir. 2003) ("The district court properly applied the third clause of the commercial activity of the FSIA... to determine that Petrobras was not entitled to foreign sovereign immunity."); Atwood Turnkey Drilling, Inc. v. Petroleo Brasileiro, 875 F.2d 1174, 1176 (5th Cir. 1989) ("Petrobras is entitled to sovereign immunity under the FSIA").

Because PetrobrĂ¡s falls under the definition of a "foreign state," this Court must consider whether any of the FSIA's exceptions to immunity apply. PetrobrĂ¡s argues that Plaintiffs fail to, and cannot, demonstrate that any of the three ...

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