Box v. Dallas Mexican Consulate General
Filing
90
MEMORANDUM OPINION AND ORDER: The Court finds that it had an arguable basis for the exercise of subject matter jurisdiction under the commercial activity exception of the Foreign Sovereign Immunities Act. Accordingly, it is ORDERED that the 22 Motion to Set Aside Default Judgment is DENIED and the Default Judgment entered in this case stands. (Ordered by Judge Reed C O'Connor on 10/30/2013) (tln)
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF TEXAS
DALLAS DIVISION
BLAKE BOX d/b/a BLAKE BOX
COMPANY,
Plaintiff,
v.
DALLAS MEXICAN CONSULATE
GENERAL,
Defendant.
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Civil Action No. 3:08-cv-1010-O
MEMORANDUM OPINION AND ORDER
I.
INTRODUCTION
This case is on remand from the United States Court of Appeals for the Fifth Circuit to
permit the parties to conduct discovery and file additional briefing concerning the Court’s
jurisdiction over this lawsuit under the Foreign Sovereign Immunities Act (“FSIA”). See generally
Box v. Dallas Mex. Consulate Gen., 487 F. App’x 880 (5th Cir. 2012). At this stage of the litigation,
Defendant Dallas Mexican Consulate General’s (“Consulate”) Motion to Set Aside Default
Judgment (ECF No. 22) is pending before the Court. Following discovery, Plaintiff Blake Box d/b/a
Blake Box Company (“Box”) and the Consulate filed their respective response, reply, sur-reply, and
any supplemental information they wished to be considered.1 Therefore, the Motion to Set Aside
1
Before the Court are: the Consulate’s Motion to Set Aside Default Judgment and Brief in Support
(ECF No. 22), filed March 23, 2010; Plaintiff’s Response to the Consulate’s Motion to Set Aside Default
Judgment (ECF No. 69), filed May 8, 2013; Appendix to Plaintiff’s Response to the Consulate’s Motion to
Set Aside Default Judgment (ECF No. 70), filed May 8, 2013; the Consulate’s Sealed Reply in Support of
Motion to Set Aside Default Judgment (ECF No. 77), filed May 29, 2013; Sealed Appendix to the
Consulate’s Sealed Reply in Support of Motion to Set Aside Default Judgment (ECF No. 78), filed May 29,
2013; the Consulate’s Supplemental Brief in Support of Motion to Set Aside Default Judgment (ECF No.
Default Judgment has been fully briefed and is ripe for determination.
II.
FACTUAL BACKGROUND
Plaintiff Box is a licensed real estate broker who worked with the Consulate in its search for
a new Consulate location. See Pl.’s Original Compl. 2-3, ECF No. 1. Hugo Juarez-Carillo and former
Ambassador Enriqué Hubbard Urrea (“Consulate Officials”) hired Box in 2006 to provide various
real estate services related to identifying and securing a new Consulate building in Dallas.2 See id.
Initially, Box was to help the Consulate Officials secure a lease for the new facility, but the parties
decided to look for a property to purchase instead. See id. at 3. Ultimately, Box found a building (the
“Property”) for the Consulate to purchase, which was located at 1210 River Bend Drive and was part
of a complex consisting of three buildings. See id. When the owner of the three-building complex
refused to subdivide the complex to permit the Consulate to acquire the Property it desired, the
Consulate Officials agreed to enter a joint venture arrangement with Box whereby Box would buy
the complex, subdivide it, and sell back to the Consulate the Property it needed. Id. at 4. Sometime
in December 2007, Box learned that the Consulate purchased the Property from a third party, Setco,
84), filed July 24, 2013; Supplemental Appendix in Support of the Consulate’s Supplemental Brief in
Support of Motion to Set Aside Default Judgment (ECF No. 85), filed July 24, 2013; Plaintiff’s Response
to the Consulate’s Supplemental Brief in Support of Motion to Set Aside Default Judgment (ECF No. 86),
filed August 14, 2013; Appendix to Plaintiff’s Response to the Consulate’s Supplemental Brief in Support
of Motion to Set Aside Default Judgment (ECF No. 87), filed August 14, 2013; and Plaintiff’s Sealed SurReply to the Consulate’s Sealed Reply in Support of Motion to Set Aside Default Judgment (ECF No. 89),
filed September 17, 2013.
2
The Court accepts Box’s well-pleaded allegations of fact for the merits of Box’s claims but not for
the existence of subject matter jurisdiction. See Jackson v. FIE Corp., 302 F.3d 515, 525 (5th Cir. 2002). The
only fact that is dispositive of the Rule 60(b)(4) motion, and therefore in dispute, is whether the Consulate
Officials had actual authority to transact with Box, not whether the Consulate Officials merely contracted
with Box. Accordingly, the Court will disregard the Consulate’s attempts to argue the merits of the judgment,
including the existence of the joint venture. See Box v. Dallas Mex. Consulate Gen., 487 F. App’x 880, 887
(5th Cir. 2012).
2
in a transaction almost identical to the one Box had arranged. Id. at 4-5. Ultimately, the Consulate
Officials refused to pay Box and refused to abide by the terms of the joint venture. Id. Therefore,
Box filed this suit against the Consulate on June 16, 2008. See generally id.
In his complaint, Box asserted the following causes of action against the Consulate:
(1) breach of contract, (2) fraud/fraudulent inducement, (3) breach of fiduciary duty, (4) unjust
enrichment, (5) quantum meruit, (6) promissory estoppel, (7) constructive trust, (8) attorneys’ fees,
and (9) exemplary damages. See generally id. These claims arise out of Box’s provision of real estate
services and the subsequent formation of the joint venture. See generally id. The Consulate was
served with summons and Box’s Original Complaint on July 11, 2008. Pl.’s Mot. Default J. & Mem.
Supp. ¶ 4, ECF No. 13. After failing to file any responsive pleading or otherwise defend the lawsuit,
the Clerk of Court entered default against the Consulate. Clerk’s Entry Default, ECF No. 10. On
January 7, 2009, Box moved for default judgment. See generally Pl.’s Mot. Default J. & Mem.
Supp., ECF No. 13. After a hearing, the Court granted Box’s motion on September 20, 2009, and
entered final judgment the same day. Order, Sept. 30, 2009, ECF No. 16; Final J., ECF No. 17.
On March 23, 2010, the Consulate filed its Motion to Set Aside Default Judgment (ECF No.
22). The Consulate asserted that it was immune from suit under the FSIA because the commercial
activity exception to the FSIA did not apply to the Consulate’s agreements with Box. Mot. Set Aside
Default J. & Br. Supp. 9-12, ECF No. 22. Specifically, the Consulate argued that the Consulate
Officials lacked actual authority to enter into the alleged agreements with Box, which is a
prerequisite to applying the FSIA’s commercial activity exception. Id. Box requested discovery to
prove subject matter jurisdiction existed but, after conducting a hearing, the Court denied Box’s
request to conduct discovery and granted the Consulate’s motion. See Pl. Suppl. Br. Opp’n Mot. Set
3
Aside Default J. 7-8, ECF No. 34; Order, Dec. 23, 2010, ECF No. 36. The Court agreed that the
Consulate was immune from suit under the FSIA because there was no evidence the Consulate
Officials were authorized to engage in the commercial activity at issue in this case. Order 10-15,
Dec. 23, 2010, ECF No. 36; Final J., ECF No. 37.
Thereafter, Box appealed the Court’s ruling to the Fifth Circuit. Pl.’s Notice Appeal, ECF
No. 38. On August 21, 2012, the Fifth Circuit held that this Court abused its discretion in denying
Box discovery on the issue of whether the Consulate Officials had actual authority to pursue the
transaction at issue. See Box, 487 F. App’x at 884-85. The Fifth Circuit remanded for limited
discovery noting the fact that “the Consulate subsequently purchased the exact property suggests that
some form of actual authority might have existed for the transaction.” Id. at 885 n.6, 886. In
compliance with the Fifth Circuit’s directive, this Court issued its order finding that the Consulate’s
original Motion to Set Aside Default Judgment stands and ordering discovery as to whether the
Consulate Officials had actual authority to engage in commercial activity. Order, Dec. 7, 2012, ECF
No. 49.
Having reviewed the foregoing pleadings and evidence, the Court concludes that the Motion
to Set Aside Default Judgment is DENIED for the following reasons.
III.
LEGAL STANDARD
A.
Relief under Federal Rule of Civil Procedure 60(b)(4)
Under Rule 60(b)(4), a party may obtain relief from a final judgment, order, or proceeding
if the underlying judgment is void. Fed. R. Civ. P. 60(b)(4). A judgment is void and may be set aside
under Rule 60(b)(4) if the court lacked subject matter or personal jurisdiction or if the court acted
in a manner inconsistent with due process of law. United Student Aid Funds, Inc. v. Espinosa, 559
4
U.S. 260, 271 (2010); Carter v. Fenner, 136 F.3d 1000, 1006 (5th Cir. 1998). Rule 60(b)(4)
“embodies the principle that in federal court, a ‘defendant is always free to ignore the judicial
proceedings, risk a default judgment, and then challenge that judgment on jurisdictional grounds.’”
Jackson v. FIE Corp., 302 F.3d 515, 522 (5th Cir. 2002) (quoting Ins. Corp. of Ir., Ltd. v.
Compagnie des Bauxites de Guinee, 456 U.S. 694, 706 (1982)).
However, “[a] Rule 60(b)(4) challenge to jurisdiction should be sustained only where there
is a ‘clear usurpation of power’ or ‘total want of jurisdiction.’” Callon Petroleum Co. v. Frontier Ins.
Co., 351 F.3d 204, 208 (5th Cir. 2003) (quoting Nemaizer v. Baker, 793 F.2d 58, 64-65 (2d Cir.
1986)). When a court has both subject matter and personal jurisdiction, the “only inquiry is whether
the district court acted in a manner so inconsistent with due process as to render the judgment void.”
Id. at 210 (quoting N.Y. Life Ins. Co. v. Brown, 84 F.3d 137, 143 (5th Cir. 1996)). Furthermore,
“[w]hen . . . the motion is based on a void judgment under [R]ule 60(b)(4), the district court has no
discretion—the judgment is either void or it is not.” Recreational Props., Inc. v. Sw. Mortg. Serv.
Corp., 804 F.2d 311, 314 (5th Cir. 1986) (citations omitted); see also Magness v. Russ. Fed’n, 247
F.3d 609, 619 n.19 (5th Cir. 2001). Thus, if the judgment is void, “the district court must set it
aside.” Bludworth Bond Shipyard, Inc. v. M/V Caribbean Wind, 841 F.2d 646, 649 (5th Cir. 1988)
(citations omitted).
1.
Rule 60(b)(4) Standard of Review
A judgment is not void simply because it may have been erroneous. See United Student Aid
Funds, Inc. v. Espinosa, 559 U.S. 260, 271 (2010); see also Kansas City S. Ry. Co. v. Great Lakes
Carbon Corp., 624 F.2d 822, 825 (8th Cir. 1980) (citing Stoll v. Gottlieb, 305 U.S. 165, 171 (1938))
(“[E]rror in interpreting a statutory grant of jurisdiction is not equivalent to acting with total want
5
of jurisdiction.”). Likewise, a Rule 60(b)(4) motion is not a substitute for appeal. Kansas City S. Ry.
Co., 624 F.2d at 825 n.4. “[I]f a party fails to appeal an adverse judgment and then files a Rule
60(b)(4) motion after the time permitted for an ordinary appeal has expired, the motion will not
succeed merely because the same argument would have succeeded on appeal.” Kocher v. Dow Chem.
Co., 132 F.3d 1225, 1230 (8th Cir. 1997) (citing Kansas City S. Ry. Co., 624 F.2d at 825 n.4); see
also Elgin Nat’l Watch Co. v. Barrett, 213 F.2d 776, 779-80 (5th Cir. 1954); Holston Inv. Inc. B.V.I.
v. LanLogistics, Corp., 766 F. Supp. 2d 1327, 1329-30 (S.D. Fla. 2011) (noting higher standard of
review applies to Rule 60(b)(4) motion unless defendant files timely appeal).
Accordingly, when analyzing a Rule 60(b)(4) motion that asserts a court lacked subject
matter jurisdiction, a court must determine whether it at least had an “arguable basis” for exercising
its jurisdiction. See United Student Aid Funds, Inc., 559 U.S. at 271 (acknowledging that federal
courts apply the arguable basis standard to Rule 60(b)(4) motions); Pierce v. Kyle, No. 12-15675,
2013 WL 4477856, *2 (11th Cir. Aug. 22, 2013) (applying arguable basis standard); Wendt v.
Leonard, 431 F.3d 410, 413 (4th Cir. 2005) (same); Fafel v. Dipaola, 399 F.3d 403, 411 (1st Cir.
2005) (same); Cent. Vt. Pub. Serv. Corp. v. Herbert, 341 F.3d 186, 187 (2d Cir. 2003) (same); In re
G.A.D., Inc., 340 F.3d 331, 336 (6th Cir. 2003) (same); United States v. Tittjung, 235 F.3d 330, 335
(7th Cir. 2000) (“[Rule 60(b)(4)] is narrowly tailored, such that a lack of subject matter jurisdiction
will not always render a final judgment ‘void.’ Only when the jurisdictional error is ‘egregious’ will
courts treat the judgment as void.”); Gschwind v. Cessna Aircraft Co., 232 F.3d 1342, 1346 (10th
Cir. 2000) (applying arguable basis standard); Kocher v. Dow Chem. Co., 132 F.3d 1225, 1230 (8th
Cir. 1997) (same); see also 12 Moore’s Federal Practice § 60.44 (Matthew Bender 3d ed.). Contra
Aurum Asset Managers, LLC v. Bradesco Companhia de Seguros, 441 F. App’x 822, 824-25 (3d Cir.
6
2011) (“‘[C]lear usurpation standard’ for vacating an order affirming an arbitration award only
applies in circumstances in which the parties have had their day in court on the issue of jurisdiction
such that re-litigation of the issue is barred by principles of res judicata.”). Thus, courts should grant
a Rule 60(b)(4) motion “only if the absence of jurisdiction was so glaring as to constitute a ‘total
want of jurisdiction’ or a ‘plain usurpation of power’ so as to render the judgment void from its
inception.” Kocher, 132 F.3d at 1230 (citing Kansas City S. Ry. Co., 624 F.2d at 825).
Here, as noted by the Fifth Circuit, the Consulate was aware of the lawsuit in time to file an
appeal but chose not to do so. See Box v. Dallas Mex. Consulate Gen., 487 F. App’x 880, 887 n.10
(5th Cir. 2012). Instead, the Consulate chose to proceed by way of a Rule 60(b)(4) motion.
Accordingly, the Consulate’s Motion to Set Aside Default Judgment should be granted only if the
Court concludes it had no arguable basis to believe the FSIA conferred subject matter jurisdiction
over this lawsuit.3 See Kocher, 132 F.3d at1230.
2.
Burden of Proof
It is not entirely clear who bears the burden of proof on subject matter jurisdiction in the
specific context of a Rule 60(b)(4) motion. See Jackson v. FIE Corp., 302 F.3d 515, 520-21 & n.6
(5th Cir. 2002) (noting the district court placed the burden on the defendant in a Rule 60(b)(4)
challenge to personal jurisdiction but declining to reach the issue as it was not challenged on appeal);
Semtek Intern., Inc. v. Info. Satellite Sys., No. 09-10183-RWZ, 2012 WL 831475, at *3-4 (D. Mass.
Mar. 9, 2012) (placing “high burden” on defendant to establish that prior default judgment was void
3
The Parties briefed the arguable basis standard of review before the Fifth Circuit, but the Fifth
Circuit did not address this issue given its decision to remand to permit discovery. Br. Appellant at 17, Box,
487 F. App’x 880 (No. 11-10126), 2011 WL 2603742 at *18; Br. Appellee at 17, Box, 487 F. App’x 880 (No.
11-10126), 2011 WL 9522997 at *17-18. Alternatively, if the appropriate standard is de novo, the Court finds
that it would reach the same result.
7
under Rule 60(b)(4) asserting lack of subject matter jurisdiction under the FSIA). Ordinarily, under
the FSIA, once a defendant alleges that it is a “foreign state,” the plaintiff must produce facts
showing that the commercial activity exception applies, “but the defendant retains the ultimate
burden of proof on immunity.” See Arriba Ltd. v. Petroleos Mexicanos, 962 F.2d 528, 533 (5th Cir.
1992) (citing Stena Rederi AB v. Comision de Contratos, 923 F.2d 380, 390 n.14 (5th Cir. 1991)).
Even if a foreign state does not appear, however, the district court must still determine whether
immunity is available under the FSIA. Verlinden B.V. v. Cent. Bank of Nigeria, 461 U.S. 480, 492
n.20 (1962).
In light of the “arguable basis” standard, the Court finds that, in this context, the burden is
properly placed on the defendant.4 See In re Diet Drugs Prods. Liab. Litig., 434 F. Supp. 2d 323, 333
(E.D. Pa. 2006) (“The burden on [the Rule 60(b)(4)] movants here is a heavy one because of the
strong interest in the finality of judgments.”). However, the Court’s decision would be the same
even if the burden is properly placed on Plaintiff.
B.
Foreign Sovereign Immunities Act
The FSIA is the sole source of subject matter jurisdiction in lawsuits against foreign states.
Dale v. Colagiovanni, 443 F.3d 425, 427-28 (5th Cir. 2006) (citing Argentine Rep. v. Amerada Hess
Shipping Corp., 488 U.S. 428, 434-39 (1989)). Generally, foreign states are immune from
jurisdiction in United States’ courts unless a FSIA exception applies. Arriba Ltd. v. Petroleos
Mexicanos, 962 F.2d 528, 532-33 (5th Cir. 1992) (citing 28 U.S.C. § 1605). The “commercial
4
The Parties also briefed the appropriate burden of proof for consideration by the Fifth Circuit, but
the Fifth Circuit did not address this issue given its disposition of the case. Br. Appellant at 17, Box, 487 F.
App’x 880 (No. 11-10126), 2011 WL 2603742 at *17; Br. Appellee at 19, Box, 487 F. App’x 880 (No.
11-10126), 2011 WL 9522997 at *19.
8
activity” exception is at issue in this case and provides that foreign states are not immune if the
action is based upon “commercial activity that has a jurisdictional nexus with the United States.” Id.
at 533 (citing 28 U.S.C. § 1605(a)(1)-(2)). Commercial activity means:
either a regular course of commercial conduct or a particular
commercial transaction or act. The commercial character of an
activity shall be determined by reference to the nature of the course
of conduct or particular transaction or act, rather than by reference to
its purpose.
Id. (citing 28 U.S.C. § 1603(d)). A sufficient “jurisdictional nexus” can be demonstrated in one of
the three following ways: “(1) a commercial activity carried on in the United States; (2) an act
performed in the United States in connection with a commercial activity carried on outside the
United States; or (3) a commercial activity carried on outside the United States that has a direct
effect in the United States.” Id. (citing Stena Rederi AB v. Comision de Contratos, 923 F.2d 380, 386
(5th Cir. 1991)). Importantly, courts must determine whether the commercial activity is attributable
to the foreign state. See Dale, 443 F.3d at 429. Under the FSIA, “foreign state” includes an agent of
the foreign state. See Bd. of Regents of Univ. of Tex. Sys. v. Nippon Tel. & Tel. Corp., 478 F.3d 274,
278 (5th Cir. 2007) (citing 28 U.S.C.§ 1603(b)).
The FSIA requires “actual authority . . . to trigger the commercial activity exception.”5 Dale,
443 F.3d at 428. When a government agent’s actions are limited by statute, any action beyond those
limitations is not attributable to the foreign state. Doe v. Qi, 349 F. Supp. 2d 1258, 1282 (N.D. Cal.
2004). Thus, the Court must determine whether the Consulate Officials were acting within their
“official mandate” when they transacted with Box. Id. (citing In re Estate of Ferdinand Marcos,
5
The Consulate does not dispute that the Consulate Officials are agents of the Mexican government;
rather, the Consulate contends that the Consulate Officials did not have actual authority to transact with Box.
Mot. Set Aside Default J. & Br. Supp. 9-12, ECF No. 22.
9
Human Rights Litig., 25 F.3d 1467, 1472 n.8 (9th Cir.1994)).
IV.
MOTION TO SET ASIDE DEFAULT JUDGMENT
The Consulate contends that the default judgment entered in this case is void because the
Court lacked subject matter jurisdiction to consider the case. Mot. Set Aside Default J. & Br. Supp.
9-12, ECF No. 22. The Consulate argues jurisdiction does not exist because it is a foreign state
generally immune from suit under the FSIA and that the commercial activity exception to immunity
does not apply because the Consulate Officials did not have actual authority to transact with Box.
Id.; see also Arriba Ltd. v. Petroleos Mexicanos, 962 F.2d 528, 532-33 (5th Cir. 1992) (citing 28
U.S.C. § 1605). Box, on the other hand, contends that the Consulate Officials had actual authority
or, at minimum, that there is an arguable basis for the Court to find actual authority. See generally
Pl.’s Resp. Mot. Set Aside Default J., ECF No. 69; United Student Aid Funds, Inc. v. Espinosa, 559
U.S. 260, 271 (2010) (acknowledging that federal courts apply the arguable basis standard to Rule
60(b)(4) motions). Specifically, Box points to the subsequent purchase of the same property under
similar conditions as an indication that the Consulate Officials were authorized to pursue the
transaction with him. Pl.’s Resp. Mot. Set Aside Default J. 17, ECF No. 69
A.
Scope of Review
In entering default judgment, the Court found that it had subject matter jurisdiction under
the commercial activity exception. Mem. Op. & Order 2-6, Sep. 30, 2009, ECF No. 16. It is
undisputed that this action is based upon the facilitation of real estate services and the formation of
a joint venture between Box and the Consulate—commercial activity that occurred in the United
States. See id.; Final J., Sept. 30, 2009, ECF No. 17 (awarding $87,500 for services rendered by Box
to the Consulate; $6,725 in costs expended by Box on behalf of the Consulate; and $3,000,000 in
10
lost profits on the joint venture agreement). The only issue for the Court to determine at this stage
is whether the Consulate Officials had actual authority to transact with Box. See generally Box v.
Dallas Mex. Consulate Gen., 487 F. App’x 880 (5th Cir. 2012). If they had authority to do so, there
was an arguable basis for the exercise of subject matter jurisdiction. Importantly, the Court may not
re-examine the merits of any of Box’s claims. See id. at 887. Instead the scope of review is limited
to determining whether the Court had an arguable basis to conclude that the commercial activity
exception to the FSIA conferred subject matter jurisdiction.
B.
The Consulate Officials Had Actual Authority to Engage in a Commercial
Activity on the Consulate’s Behalf
The Court concludes that the Mexican government authorized the Consulate Officials to
engage in a commercial activity that forms the basis of Box’s claims. The Consulate contends that
the Procedures Manual for the Acquisition and/or Leasing of Real Property Assets Abroad (the
“Procedures”) is the sole source of actual authority for the purchase of real property.6 See Mot. Set
Aside Default J. 6, ECF No. 22. The Consulate further argues that Box and the Consulate Officials
failed to comply with the Procedures in relation to the purchase of the Property and, therefore, this
failure deprived the Consulate Officials of actual authority to transact with Box.7 See id. at 4-7.
6
The Consulate also originally referenced the Internal Standards for the Administration of Mexican
Representation’s Real Property Assets Abroad (“Standards”), but the Court finds that the Standards were not
in effect at the time of the transaction between Box and the Consulate Officials. App. Consulate’s Reply
Supp. Mot. Set Aside Default J. Ex. 2 (Guzman depo.), App. 102-03, ECF No. 78-1.
7
The Consulate relies heavily on the Procedures for its contention that the Consulate Officials lacked
actual authority, yet the Consulate’s corporate representative, Ivonne Lopez Guzman, testified that the steps
set forth in the Procedures “are not followed chronologically.” See id. (Guzman depo.), App. 112, ECF No.
78-1. On one hand, the Consulate asserts that the Procedures are the ultimate source of authority. See Reply
Supp. Mot. Set Aside Default J. 4, ECF No. 77. On the other hand, the Consulate contends that the steps in
the Procedures are not followed in the order set forth in the Manual and that there are additional requirements
to purchase real property, which are not in the Procedures. See id. at 6-7 (stating the following additional
11
The Court, however, finds the Consulate’s description of the authorization required to
transact with Box to be too narrow. The sole issue before the Court is whether the Consulate
Officials had actual authority to engage in a commercial activity—not just whether the Consulate
Officials had actual authority to purchase the Property from Box. This lawsuit is based upon the
facilitation of real estate services and the formation of a joint venture. See Pl.’s Original Compl. 2-3,
ECF No. 1. Thus, the Court will look to the Procedures to determine whether the Consulate Officials
had actual authority to contract with Box for the provision of real estate services or for the joint
venture. Importantly, this finding corresponds with the FSIA in that the crucial inquiry is whether
this Court had an arguable basis for finding that the Consulate Officials had actual authority to
engage in a commercial activity on the Consulate’s behalf. See Arriba Ltd. v. Petroleos Mexicanos,
962 F.2d 528, 533 (5th Cir. 1992) (citing 28 U.S.C. § 1603(d)). Accordingly, the Court may look to
the entire “course of commercial conduct.” See 28 U.S.C. § 1603(d).
1.
The Procedures
The general objective of the Procedures is to “[e]stablish a standards guide that allows the
Mexican Representation holder abroad . . . to follow a [sic] ordered and systematic procedure for the
acquisition and/or leasing of property abroad.”8 App. Consulate’s Reply Supp. Mot. Set Aside
requirements not in the Procedures: (1) any agreement must also be in writing; (2) Mexican officials cannot
obtain approval to purchase property from someone other than the present owner; (3) the Mexican
government cannot enter joint ventures; and (4) although the Procedures contemplate authorization of a
“maximum” purchase price, the Consulate could not purchase Property for less than that amount authorized).
From the Consulate’s point of view, the Procedures are flexible when it benefits the Consulate but rigid when
it pertains to Box. This inconsistency diminishes the Consulate’s credibility when it argues the Procedures
must be followed precisely before authority exists.
8
The Procedures, as cited and quoted by the Court, are the translations from Spanish to English
supplied by the Consulate. See App. Consulate’s Reply Supp. Mot. Set Aside Default J. Ex. 3 (Procedures),
App. 212, ECF No. 78-1 (affidavit of accuracy).
12
Default J. Ex. 3 (Procedures), App. 217, ECF No. 78-1. The Policies section of the Procedures states:
“The holder of the Mexican Representation Abroad will exercise the ownership rights and
obligations of the property’s acquisition . . . on behalf of the Ministry.” Id. at 221. The Policies
further provide: “In Order to formally begin any transaction for the property’s acquisition . . . the
budget resources authorized . . . must be taken into account.” Id. Lastly, the Policies state that “[t]he
Mexican Representations Abroad Holder must not sign any letter of intent, pure and financial sales
and leasing contracts, without the opinion of Legal Counsel and the authorization of the Chief Clerk
on behalf of the General Office of Real Property Assets and Material Resources.” Id.
Thereafter, the Procedures contain twenty-eight steps for the “acquisition and/or leasing of
real property assets abroad.” Id. at 222-28. The steps include submitting a formal request, ensuring
technical specifications are met, securing a budget and, if the negotiations are successful, allocating
funds and obtaining legal review prior to the execution of a contract.9 See generally id.
In this case, the facts demonstrate that the Consulate submitted a formal request to acquire
a new building, which outlined three potential properties under step one of the Procedures. App.
Consulate’s Reply Supp. Mot. Set Aside Default J. Ex. 5 (Steps), App. 271, ECF No. 78-2. GDRIM10
issued a technical report and concluded that the Property was the most suitable location pursuant to
step two. Id. at 275-82. GDIRM provided that the Property “will be submitted to the consideration
of the superiors starting the negotiations for its acquisition immediately, beginning with making an
appraisal.” Id. at 282. GDIRM also noted that it would be necessary to investigate the Property to
determine whether it was subject to debts, lawsuits, or mortgages. Id. In steps five through seven,
9
A more comprehensive outline of the steps can be found in the appendix to this order.
10
The Court assumes that, in translation, the GDIRM is the equivalent of the DGBIRM.
13
the appropriate Mexican officials authorized the Consulate “to start the activities prior to the
acquisition” of the Property. Id. at 285-89. These authorized activities included “expenses and the
retention or hiring of what needs to be hired; the things that need to be, or that are needed during the
process of purchase.” App. Consulate’s Reply Supp. Mot. Set Aside Default J. Ex. 2 (Guzman
depo.), App. 72-74, ECF No. 78-1. Notably, this authorization placed no limitation on whom the
Consulate Officials may engage to complete these tasks nor did it exclude engaging Box. App.
Consulate’s Reply Supp. Mot. Set Aside Default J. Ex. 5 (Steps), App. 274, ECF No. 78-2. The
Consulate also conducted a cost-benefit study and report regarding the Property pursuant to step
nine. Id. at 291-378.
In step ten, the General Director notified the Consulate that “to start the acquisition process,
it is necessary to do an appraisal . . .” Id. at 380-81. Pursuant to steps eleven and twelve, Mexican
officials made inquiries into the availability of resources to acquire the Property and confirmed the
resources existed. Id. at 383-89. In step sixteen, the Consulate submitted the appraisal for the
Property, and the Deputy General Director commented:
[T]he amount indicated in the appraisal . . . will be applied for the
acquisition of the property located at 1210 River Bend Drive, Dallas,
Texas [(the Property)]. Such being the case, I would appreciate the
confirmation of the agreement of the owner with this figure.
Id. at 391-92. Finally, in step seventeen the Consulate submitted the proposed real estate agreement
for legal review, which indicated that the Consulate intended to purchase the Property from Setco
rather than Box. Id. at 394.
2.
Actual Authority for a Commercial Activity
A review of the undisputed facts demonstrates that Box provided real estate services to the
14
Consulate Officials. See Pl.’s Original Compl. 2-3, ECF No. 1. Specifically, Box searched for
properties that the Consulate could lease and, at the Consulate’s direction, later searched for a
property for the Consulate to purchase. Id. at 3. After Box located the Property, the appropriate
Mexican officials determined it was the best location for the Consulate’s needs. App. Consulate’s
Reply Supp. Mot. Set Aside Default J. Ex. 5 (Steps), App. 275-82, ECF No. 78-2. Box identified
prospective sites, enlisted contractors, met with city officials, and was involved in negotiations. See
Pl.’s Original Compl. 3, ECF No. 1. When the owner of the complex refused to subdivide to allow
for the individual purchase of the Property, Box and the Consulate Officials agreed to enter a joint
venture whereby Box would facilitate the Consulate’s acquisition of the Property. See id. at 4.
The Mexican government indisputably authorized the Consulate to pursue the acquisition of
a the Property. App. Consulate’s Reply Supp. Mot. Set Aside Default J. Ex. 5 (Steps), App. 285-89,
ECF No. 78-2 (authorizing the Consulate “to start the activities prior to the acquisition”); id. Ex. 2
(Guzman depo.), App. 72-74, ECF No. 78-1 (stating authorization for preliminary activities includes
“expenses and the retention or hiring of what needs to be hired; the things that need to be, or that are
needed during the process of purchase”). The evidence shows this authorization was not limited to
hiring a particular individual or entity. The Consulate points to the draft contract, submitted under
step seventeen of the Procedures, as an indication that the Consulate Officials only had authority to
deal with Setco. See Consulate’s Reply Supp. Mot. Set Aside Default J. 6-7, ECF No. 77. However,
the evidence shows that prior to the contract with Setco, the Consulate Officials were given full
authority for all preliminary activities and this authorization did not exclude hiring Box or specify
the hiring of some other entity or person. See App. Consulate’s Reply Supp. Mot. Set Aside Default
J. Ex. 2 (Guzman depo.), App. 72-74, ECF No. 78-1. Instead, the evidence clearly shows that the
15
Consulate Officials were authorized to hire whomever needed to be hired to complete the things that
needed to be completed to purchase the Property. See id. Pursuant to this authorization, the Consulate
Officials engaged Box to carry out these necessary preliminary activities to acquire the Property.
Based on the foregoing, the Court finds that the Consulate Officials had actual authority to engage
Box as the Consulate’s real estate broker in its pursuit of a new Consulate location, which was a
commercial activity carried on in the United States under the provisions of the FSIA.
3.
Extent of Subject Matter Jurisdiction
The Court recognizes that this scenario is complicated in that the transaction which forms
the basis of this action constitutes two distinct activities: (1) the provision of real estate services and
(2) the formation of a joint venture that was intended to acquire real estate. While the Court finds
that the Consulate Officials had actual authority to engage in all preliminary activities in pursuit of
a new Consulate location (i.e., the retention of Box as the Consulate’s real estate broker to acquire
the Property), the joint venture poses a more difficult question because its purpose was to acquire
real property. The Court need not reach, however, whether fulfilling the purpose of the joint venture
falls within the scope of the Consulate Officials’ actual authority, as the Court has determined the
general authorization given to the Consulate for all activities leading up to the acquisition of the
Property would include the retention of Box as a real estate broker.11 Therefore, the commercial
11
Even if the Court needed to decide whether forming the joint venture to obtain the Property was
authorized, the Court would conclude that the Consulate was authorized to do so. The facts show the
Consulate could not obtain the Property it desired outright, and it is undisputed that the only way the
Consulate could acquire the Property it desired was to agree to structure the transaction as Box, and later
Setco, did. Therefore, the Consulate agreed to form the joint venture with Box because it appeared to be the
only way to obtain the Property. This agreement between Box and the Consulate Officials easily fits within
Mexico’s express authorization that directed the Consulate to complete the things needed to be completed
to purchase the Property, in this instance to form a joint venture with Box. See App. Consulate’s Reply Supp.
Mot. Set Aside Default J. Ex. 2 (Guzman depo.), App. 72-74, ECF No. 78-1. As stated above, the things that
needed to be completed and the identities of those whom the Consulate would engage to complete them were
16
activity exception provides an arguable basis for the Court’s exercise of subject matter jurisdiction
over this lawsuit.
The Consulate asserts that these facts are similar to cases in which courts have found
government agents lacked actual authority, but the Court finds this situation to be distinguishable.
Specifically, the cases cited by the Consulate deal with scenarios in which the single activity at issue
was not authorized. See generally Allfreight Worldwide Cargo Inc. v. Ethiopian Airlines Enter., 307
F. App’x 721 (4th Cir. 2009) (execution of contract); Dale v. Colagiovanni, 443 F.3d 425 (5th Cir.
2006) (plan to purchase insurance companies); Velasco v. Gov’t of Indon., 370 F.3d 392 (4th Cir.
2004) (issuance of promissory notes).12 Here, the Court is tasked with determining whether actual
authority to engage in a commercial activity permits the exercise of subject matter jurisdiction over
the entire transaction at issue. With no clear direction on this point, the Court will look to other
situations for guidance.13
In Saudi Arabia v. Nelson, the United States Supreme Court explained that the “based upon”
not specified or limited. That Box’s substantive cause of action for breach of the joint venture to actually
acquire the Property may have encountered difficulties on the merits cannot be litigated here. See Box v.
Dallas Mex. Consulate Gen., 487 F. App’x 880, 887 (5th Cir. 2012); see also Kocher, 132 F.3d at1230.
Based on the facts of this case, the only activity not authorized was the actual purchase of the Property from
Box.
12
It is also notable that the cases cited by the Consulate were not decided in the context of a Rule
60(b)(4) motion.
13
In Stena Rederi AB v. Comision de Contratos, the Fifth Circuit noted:
[W]e need not resolve the troublesome question whether the FSIA
authorizes pendent claim jurisdiction; i.e., whether the FSIA permits the
district court to exercise jurisdiction over all of the plaintiff’s claims so
long as the plaintiff can establish a commercial activities jurisdictional
nexus to at least one of its claims.
923 F.2d 380, 389 n.12 (5th Cir. 1991). The Fifth Circuit’s discussion dealt with the jurisdictional nexus
between the claims and commercial activity rather than the issue of actual authority. Nonetheless, the Court
finds this footnote merits mention as it deals with pendent claim jurisdiction under the FSIA.
17
language of the commercial activity exception requires that the commercial activity form the basis
of the lawsuit. See 507 U.S. 349, 356-57 (1993); see also 28 U.S.C. § 1605(a)(2) (stating the
commercial activity exception applies when “the action is based upon a commercial activity carried
on in the United States by the foreign state”). The Supreme Court cited with approval a Fifth Circuit
case that stated the proper focus is on the “gravamen of the complaint.” Saudi Arabia , 507 U.S. at
357 (citing Callejo v. Bancomer, S.A., 764 F.2d 1101, 1109 (5th Cir. 1985)). In other words, the
commercial activity exception applies so long as the commercial activity constitutes one element of
the plaintiff’s claim. Id. at 357 (citing Santos v. Compagnie Nationale Air Fr., 934 F.2d 890, 893
(7th Cir. 1991)); see also Kirkham v. Societe Air Fr., 429 F.3d 288, 295-96 (D.C. Cir. 2005). Thus,
in regard to the nexus required between the commercial activity and the claims asserted, courts
recognize that the scope of subject matter jurisdiction may be broader than the commercial activity
itself.
The Court also emphasizes the procedural posture of this action. While one district court
doubted whether the FSIA authorizes “pendent claim jurisdiction,” the Court cannot approach this
issue in the same manner because the Consulate did not timely appear in this suit. See Dar El-Bina
Eng’g & Contracting Co., Ltd. v. Rep. of Iraq, 79 F. Supp. 2d 374, 386 n.97 (S.D.N.Y. 2000).
Because of the procedural posture of this case, the Court’s sole task is deciding the Rule 60(b)(4)
motion. Under Rule 60(b)(4), a judgment is void for lack of subject matter jurisdiction only if the
Court acted in “‘total want of jurisdiction.’” Callon Petroleum Co. v. Frontier Ins. Co., 351 F.3d
204, 208 (5th Cir. 2003) (quoting Nemaizer v. Baker, 793 F.2d 58, 64-65 (2d Cir. 1986)) (emphasis
added). Thus, the Court’s inquiry ended the moment it determined it had an arguable basis for the
exercise of subject matter jurisdiction based on the retention of Box as a real estate broker. See supra
18
Part IV.B.2. The Court risks overstepping the Fifth Circuit’s mandate by conducting any inquiry
beyond whether an arguable basis existed for the exercise of subject matter jurisdiction . See Box v.
Dallas Mex. Consulate Gen., 487 F. App’x 880, 887 (5th Cir. 2012).
For these reasons, the Court concludes that its finding that the Consulate Officials had actual
authority to retain Box as the Consulate’s real estate broker is a sufficient arguable basis for the
exercise of subject matter jurisdiction over this lawsuit. This commercial activity, which occurred
in the United States, forms the basis of Box’s lawsuit and, as such, warrants application of the
FSIA’s commercial activity exception.14 That the Consulate may have had meritorious defenses to
Box’s claims is irrelevant given the Consulate’s decision to refrain from defending itself after being
notified of this lawsuit. See Kocher v. Dow Chem. Co., 132 F.3d 1225, 1230 (8th Cir. 1997).
Accordingly the Motion to Set Aside Default Judgment is DENIED.
VI.
CONCLUSION
For these reasons, the Court finds that it had an arguable basis for the exercise of subject
matter jurisdiction under the commercial activity exception of the Foreign Sovereign Immunities
Act. Accordingly, it is ORDERED that the Motion to Set Aside Default Judgment is DENIED and
the Default Judgment entered in this case stands.
SO ORDERED on this 30th day of October, 2013.
_____________________________________
Reed O’Connor
UNITED STATES DISTRICT JUDGE
14
As noted in footnote 11, the Consulate Officials and Box were also authorized to enter into the
joint venture. Therefore, this activity would independently support application of the commercial activity
exception. The only activity the Consulate had no authority to engage in with Box was the actual purchase
of the Property.
19
APPENDIX
The twenty-eight steps in the Procedures can be summarized as follows:
•
•
•
•
•
•
•
•
•
In step one, the General Office of Real Property Assets and Material
Resources (DGBIRM) receives the Mexican Representative Abroad’s
(RME) written application for the acquisition of real property. App.
Consulate’s Reply Supp. Mot. Set Aside Default J. Ex. 3
(Procedures), App. 223, ECF No. 78-1.
In step two, DGBIRM issues a technical report that determines
whether the property “complies with the basic requirements.” Id.
If the property covers the basic requirements, the Procedures skip to
step five in which the Associate General Office of Real Estate
(“Associate General”) “[p]resents the proposal’s analysis to the Chief
Clerk for his approval.” Id. at 223-24.
In step six, the Chief Clerk receives the Associate General’s request
for authorization, and the Chief Clerk conveys his decision in writing.
Id. at 224.
In step seven, the Associate General receives notice from the Chief
Clerk regarding the acquisition of the property. Id.
If the acquisition was approved by the Chief Clerk, the Procedures
skip to step nine, which entails a written request for budget resources.
The Procedures note that “[o]btaining the resources to perform the
acquisition is essential to initiate any formal transaction with the
property’s owner.” Id.
In step ten, the Associate General requests that the RME perform an
appraisal of the property and, in step eleven, the General Office of
Programming, Organization, and Budget receives the written
transaction authorization request of budgetary resources. Id. at 225.
Step twelve also involves a written request for authorization of
budget resources, and if the resources are authorized, the Procedures
skip to step sixteen. Id. at 225-26. At this point, the Associate General
“[i]nform[s] the RME of the authorization and maximum sales and/or
leasing price, in order to carry out the last negotiation with the
property owner regarding the price and sales price conditions and
indicate that once the agreement is closed to remit the sales contract
project . . . .” Id. at 226.
Generally, the remaining steps entail legal review and execution of
the final sales contract. Id. at 226-28.
20
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