CCM Pension-A, L.L.C. et al v. The Republic of Argentina

Filing 31

OPINION #106599 re: #20 MOTION to Dismiss the Complaint pursuant to Rules 12(b)(1), (2) & (5), dated May 13, 2016, filed by The Republic of Argentina. For the foregoing reasons, the claims based on the Italian Bonds are dismissed for lack of personal jurisdiction, lack of subject-matter jurisdiction, and insufficient service of process, and the claims based on the German Bonds are dismissed for insufficient service of process and lack of personal jurisdiction. (As further set forth in this Opinion) (Signed by Judge Thomas P. Griesa on 8/2/2016) (kl) Modified on 8/4/2016 (ca).

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
-----------------------------------------------------

X

CCM PENSION-A, L.L.C., et al.,
Plaintiffs,
v.

16-cv- 650 (TPG)

THE REPUBLIC OF ARGENTINA,
Defendant.
X

OPINION

In this bondholder action against the Republic of ;Argentina, the court
must assess whether certain claims may proceed. The Rrpublic has moved to
dismiss claims on some bonds for lack of personal jurisdi~tion, lack of subjectmatter jurisdiction, and insufficient service of process. For the

follo~ing

reasons,

the court grants the Republic's motion to dismiss.
Background
Plaintiffs are institutional investors that allegedly hold beneficial interests
m twelve series of Republic-issued bonds governed by Italian, German, or
English law.
The "Italian Bonds" are governed by Italian law, while! the "German Bonds"
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are governed by German law. Neither the Italian Bonds nor the German Bonds
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designate an authorized agent for service of process in thej United States or for
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suits brought in the United States. For the Italian Bonds, the "Courts of Milan"
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have jurisdiction over "[a]ny dispute" between the partie*.

See, e.g., Dkt. 22,

Block Decl. Ex. J (art. 13).
After the Republic allegedly defaulted on the bonds, plaintiffs filed suit in
this court.

Plaintiffs attempted to serve the complaint, on the Republic by
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delivering it to the New York branch of Banco de la Naqi6n Argentina (BNA),
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which is the authorized agent for service of process for 4aims on U.S. bonds.
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Plaintiffs did not serve the Republic with process under any international service
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convention.
The Republic now moves to dismiss claims on the. Italian and German
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Bonds under Federal Rules of Civil Procedure 12(b)(l), (2), $-nd (5). The Republic
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argues that this court lacks personal and subject-matter j~risdiction over claims
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on the Italian Bonds, and that plaintiffs' inadequate servide of process deprives
this court of personal jurisdiction over claims on the Italian and German Bonds.
Plaintiffs' principal retort is that the Republic has waived these jurisdictional and
service defenses by failing to assert them in other, now-settled litigations brought
by different plaintiffs. The court will address each defense in turn.
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Discussion
1. Waiver of Immunity
As to the Italian Bonds, the Republic argues that

thi~

court lacks personal

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and subject-matter jurisdiction because there has been nb waiver of immunity
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to suit in the United States on these particular bonds.
Personal jurisdiction over a foreign sovereign exists ~nly as to claims over
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which there is subject-matter jurisdiction.
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See 28 U.S.q. § 1330(b); see also

Capital Ventures Int'l v. Republic of Argentina, 552 F.3d f89, 293 n.3 (2d Cir.
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2009). The Foreign Sovereign Immunities Act (FSIA) provides the sole source of
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subject-matter jurisdiction over a foreign sovereign. See *8. U.S.C. §§ 1330(a),
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1604; see also Garb v. Republic of Poland, 440 F.3d 579i, 581 (2d Cir. 2006).
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Under the FSIA, a foreign sovereign "is presumptively immune from the
jurisdiction of United States courts," and federal courts t~erefore lack subjectmatter jurisdiction over claims against a foreign sovereigf "unless a specified
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exception applies." Saudi Arabia v. Nelson, 507 U.S. 349,! 355 (1993); see also
28 U.S.C. §1605(a).
An FSIA exception applies when a foreign

sover~ign

"has waived its

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immunity either explicitly or by implication." 28 U.S.C.

~

1605(a)(1). Explicit

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waivers must be clear and unambiguous, and courts must ~'narrowly construe[]"
them "in favor of the sovereign."

World Wide Minerals, Ltd. v. Republic of

Kazakhstan, 296 F.3d 1154, 1162 (D.C. Cir. 2002) (quotation omitted). Implicit
waivers, too, must be "unmistakable" or "unambiguous," with courts applying
the same narrow construction as with explicit waivers.

Shapiro v. Republic of

Bolivia, 930 F.2d 1013, 1017 (2d Cir. 1991).
The Republic has not explicitly waived immunity to

s~it

in this court as to

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the Italian Bonds. Although the Italian Bonds clearly

waiv~ immunity to suit in
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Italy, they contain no such waiver for New York. And submission to suit in Italy
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effects no waiver in the United States under the FSIA. See

~aglet
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Central de Nicaragua, 839 F. Supp. 232, 234 (S.D.N.Y. 19913).

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Corp. v. Banco

Plaintiffs cry foul because the Republic failed to rai$e sovereign immunity
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as an affirmative defense when filing answers in similar crses brought by other
.

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bondholders. See, e.g., PortenaHoldings v. Republic ofArgentina, No. 16-cv-1063
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(S.D.N.Y.). But the Republic's submission to suit against d~fferent plaintiffs does
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not waive its immunity as to plaintiffs' claims here. To 1nd implicit waiver in
these circumstances would not "construe[] narrowly'' the R¢public's actions. See
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Shapiro, 930 F.2d at 1017. It would also contradict the !practice of analyzing
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immunity defenses in the context of the specific claims and lease before the court.
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See, e.g., id. at 1018 n.4; cf BiomedicalPatentMgmt. Corp.

p.

Cal., Dep'tofHealth

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Servs., 505 F.3d 1328, 1339 (Fed. Cir. 2007) (finding that, jin the context of U.S.
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states' immunity, "waiver of immunity as to the subject m1tter of a lawsuit does
not, by itself, constitute a waiver of immunity in any future ~awsuit involving that
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subject matter").
Without a waiver, there is no basis for personal and subject-matter
jurisdiction in this court over claims on the Italian Bonds. Finding no waiver,
the court dismisses those claims.
2. Forum-Selection Clauses

The Republic argues that the court must dismiss flaims on the Italian
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Bonds for the additional reason that the court must enfo1ce the Italian Bonds'
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forum-selection clauses, which provide for the exclusive j~risdiction of another
forum.

As a general matter, courts should enforce forum-selFction clauses unless
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there are strong policy reasons not to. M/ S Bremen v. Zap4ta Off-Shore Co., 407
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',

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I
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U.S. 1, 15 (1972); see also Atl. Marine Constr. Co. v. U.S. bist. Court for W. Dist.
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ofTex., 134 S. Ct. 568, 583 (2013) (courts should enforce forum-selection clauses

"[i]n all but the most unusual cases"). "Of course if mandrtory venue language
is employed, the clause will be enforced." John Boutari & Son, Wines & Spirits,

S.A. v. Attiki Imps. & Distribs. Inc., 22 F. 3d 51, 52 (2d Cir. 1994).
The need to enforce forum-selection clauses is pe haps greatest in the
international arena. See generally M/ S Bremen, 407 U.S. $.-t 9 ("We cannot have
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trade and commerce in world markets and international Waters exclusively on
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our terms, governed by our laws, and resolved in our

court~.").

Forum-selection

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clauses are "an almost indispensable precondition to •achievement of the
orderliness

and

predictability

essential

to

any

int~rnational

business

transaction." Scherk v. Alberto-Culver Co., 417 U.S. 506, 516 (1974). Moroever,
"concerns of international comity, respect for the capacities of foreign and
transnational tribunals, and sensitivity to the need of the international
commercial system for predictability in the resolution of disputes" all counsel
courts to enforce clauses designating foreign forums, even if a contrary result on
the merits would be forthcoming in a domestic context. Mitsubishi Motors Corp.
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v. Soler Chrysler-Plymouth, 473 U.S. 614, 629 (1985).
Here, the Italian Bonds designate "the Courts of M4an" as the exclusive
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forum for disputes between the parties. One series provid¢s that "[a]ny dispute
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... will be subject to the exclusive jurisdiction of the Courtf of Milan," while the
other series indicates that "[a]ny dispute ... will be subjecl to the jurisdiction of
the Courts of Milan without the possibility of derogation thereof" Dkt. 22, Block
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Decl. Ex. I (art. 10) & Ex. J (art. 13) (emphases added). The~e facts alone support
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dismissal in this forum.
Plaintiffs cite no authority for their argument that a !sovereign nullifies an
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explicit forum-selection clause by not deploying it in differbnt litigation brought
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by different plaintiffs. Indeed, the authority seems to goth¢ other way. See, e.g.,
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Harmon v. Boland, 90 F. Supp. 559, 560 (S.D.N.Y. 1950) f"Waiver of the venue
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privilege in prior cases does not constitute a waiver of the ptivilege in this case.");

Odette v. Shearson, Hammill & Co., 394 F. Supp. 946, 951 (S.D.N.Y. 1975)
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(refusing to find waiver of venue defense despite defendant's failure to raise it in
a prior litigation).
Plaintiffs also invoke the "interests of justice" in asking the court to ignore
the clauses' clear language. But the interests of justice do not favor plaintiffs
here. Plaintiffs and the Republic contracted for an exclusive forum, and "[i]n all
but the most unusual cases . . . 'the interest of justice' is served by holding
parties to their bargain." Atl. Marin Constr. Co., 134 S. Ct. at 583. Plaintiffs have
failed to show that litigating this case in Italy "will be so gravely difficult and
inconvenient that [they] will for all practical purposes be deprived of [their] day
in court." SeeM/ S Bremen, 407 U.S. at 18. Accordingly, the court will enforce
these forum-selection clauses and dismiss plaintiffs' claims on the Italian Bonds.

3. Service of Process
As to both the Italian and German Bonds, the Republic argues that

plaintiffs' service of process was inadequate, and thus the court lacks personal
jurisdiction over the Republic.
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Personal jurisdiction over a foreign sovereign exists only where service
satisfies§ 1608(a) of the FSIA. 28 U.S.C. § 1330(b). Under§ 1608(a), where no
"special arrangement exists," a plaintiff must accomplish service "by delivery of
a copy of the summons and complaint in accordance with an applicable
international convention on service of judicial documents."

28

u.s.c.

§ 1608(a)(2); see also Fed. R. Civ. P. 40)(1).
"Courts have been unequivocal that§ 1608(a) 'mandate[s] strict adherence
to its terms,' . . . [and] defective service is rarely, if ever, excused."

Lewis &

Kennedy, Inc. v. Permanent Mission of Republic of Botswana to United Nations,
No. 05-cv-2591, 2005 WL 1621342, at *3 (S.D.N.Y. July 12, 2005). It is irrelevant
that a foreign sovereign is aware of a suit despite not having been served with
process.

Gray v. Permanent Mission of People's Republic of Congo to United

Nations, 443 F. Supp. 816, 821 (S.D.N.Y. 1978).
The Italian and German Bonds do not designate an agent for service of
process for actions not brought in Italy or Germany. No other explicit "special
arrangement" exists between the parties, and plaintiffs did not serve the Republic
through any international convention.

See generally Scheck v. Republic of

Argentina, No. 10-cv-5167, 2011 WL 2118795, at *2 (S.D.N.Y. May 23, 2011)
(finding the Hague Service Convention applicable when similar German-law
bonds designated no authorized agent or other special arrangement for service).
Plaintiffs' delivery of the complaint to BNA's New York branch is deficient
because BNA is not the Republic's authorized agent for suits related to these
bonds. Plaintiffs argue that the Republic's past acquiescence to service through
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BNA in other litigation with different parties yielded an unspoken "special
arrangement" by creating an implied agency for service in this case.

But a

"special arrangement" under§ 1608(a)(l) must be "between the plaintiff and the
foreign state," not other plaintiffs and the foreign state. To endorse plaintiffs'
implied-agency theory for service would not constitute "strict adherence to the
FSIA," see Finamar Inv'rs Inc. v. Republic ofTadjikistan, 889 F. Supp. 114, 117
(S.D.N.Y. 1995), and the court declines to adopt that approach.
Plaintiffs' service of process was deficient and this court therefore lacks
personal jurisdiction over the Republic for claims on the Italian and German
Bonds.
Conclusion
For the foregoing reasons, the claims based on the Italian Bonds are
dismissed for lack of personal jurisdiction, lack of subject-matter jurisdiction,
and insufficient service of process, and the claims based on the German Bonds
are dismissed for insufficient service of process and lack of personal jurisdiction.

SO ORDERED
Dated: New York, New York
August 2, 2016
Thomas P. Griesa
United States District Judge

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