15-2065(L) Arch Trading Corp. v. Republic of Ecuador
United States Court of Appeals FOR THE SECOND CIRCUIT ______________
August Term, 2015
(Argued: January 5, 2016 Decided: October 14, 2016)
Docket No. 15‐2065(L), 15‐2106(con) ______________
ARCH TRADING CORP., ARVIN PROPERTIES INC., HEZER HOLDINGS INC., MADEC LIMITED, OSIS INTERNATIONAL CORP.,
Plaintiffs‐Appellants,
–v.–
THE REPUBLIC OF ECUADOR, a sovereign nation, FIDEICOMISO AGD‐CFN NO MÁS IMPUNIDAD, an agency or instrumentality of the Republic of Ecuador, CORPORACIÓN FINANCIERA NACIONAL, an agency or instrumentality of the Republic of Ecuador,
Defendants‐Appellees. ______________ B e f o r e : POOLER, HALL, and CARNEY, Circuit Judges. ______________
Five companies sue the Republic of Ecuador and two of its instrumentalities for claims arising out of the Ecuadorean government’s alleged seizure of a number of the companies’ assets in Ecuador beginning in July 2008. Invoking the Foreign Sovereign Immunities Act (FSIA), the District Court (Crotty, J.) dismissed the action for want of subject matter jurisdiction. We conclude that the plaintiff companies cannot invoke the FSIA’s takings exception to sovereign immunity because the instrumentalities are not “engaged in a commercial activity in the United States,” see 28 U.S.C. § 1605(a)(3), and that the activities of various subsidiaries and separate entities are not imputable to them in light of the presumption of legal separateness established in First National City Bank v. Banco Para el Comercio Exterior de Cuba, 462 U.S. 611 (1983) (“Bancec”). Accordingly, we AFFIRM the judgment of the District Court. ______________
PEDRO J. MARTINEZ‐FRAGA (Suzanne M. Berger, James M. Altman, C. Ryan Reetz, on the brief), Bryan Cave LLP, New York, NY, and Miami, FL, for Plaintiffs‐ Appellants.
ANDREW Z. SCHWARTZ, Foley Hoag LLP, Boston, MA, for Defendants‐Appellees. ______________
SUSAN L. CARNEY, Circuit Judge:
We are faced here with a question of subject matter jurisdiction over a dispute
with a vanishingly thin, if any, connection to the United States. Plaintiffs‐appellants are
five entities incorporated in the British Virgin Islands. They claim that in 2008, an
agency of the Republic of Ecuador unlawfully seized their “property in Ecuador”―
primarily, their ownership of over 100 companies located there. Joint Appendix (“J.A.”)
at 12. In 2013, they filed suit in the Southern District of New York seeking over
$1 billion in damages from defendants‐appellees the Republic of Ecuador (“Ecuador”)
and two of Ecuador’s instrumentalities―the Corporación Financiera Nacional (“CFN”),
and Fideicomiso AGD‐CFN No Más Impunidad (the “Trust”). The District Court
(Crotty, J.) dismissed the Complaint with prejudice for want of subject matter
jurisdiction.
The Foreign Sovereign Immunities Act (FSIA) establishes a general rule of
immunity for foreign states “from the jurisdiction of the courts of the United States and
of the States.” 28 U.S.C. § 1604; see also 28 U.S.C. § 1330. Only if the action in which the
foreign state or its agency or instrumentality is named as the defendant falls within one
2 of the Act’s several exceptions, see 28 U.S.C. § 1605, will jurisdiction lie. Plaintiffs here
contend that their action fits within the FSIA’s “takings” or “expropriation” exception,
set forth in Section 1605(a)(3). Section 1605(a)(3) provides that a foreign state (including
its agencies and instrumentalities) is not immune from jurisdiction in any case
in which rights in property taken in violation of international law are in issue and [1] that property or any property exchanged for such property is present in the United States in connection with a commercial activity carried on in the United States by the foreign state; or [2] that property or any property exchanged for such property is owned or operated by an agency or instrumentality of the foreign state and that agency or instrumentality is engaged in a commercial activity in the United States[.]
28 U.S.C. § 1605(a)(3) (bracketed numbers added). Both of the two independently
sufficient prongs of this subsection (here labeled [1] and [2]) are subject to the
precondition that the dispute concern property “taken in violation of international
law[.]” Id. Once this condition is met, the second prong then authorizes United States
courts to entertain an action against a foreign state’s agency or instrumentality where
(a) either the taken property or “any property exchanged for such property” is
(b) “owned or operated by an agency or instrumentality of the foreign state” and (c) the
agency or instrumentality “is engaged in a commercial activity in the United States[.]”
Id. In this appeal, we focus on the last element of this second prong: the agency or
instrumentality’s engagement in commercial activity in the United States.
Plaintiffs do not contend that either CFN or the Trust is itself engaged in
commercial activity in the United States. Rather, they argue primarily that we should
impute to each the United States activities of several other entities and on that basis
determine that CFN and the Trust are subject to jurisdiction under prong [2]. But CFN
and the Trust are entities distinct from the subsidiaries and other Ecuadorean entities to
which plaintiffs point. The presumption of legal separateness established by the
3 Supreme Court in First National City Bank v. Banco Para el Comercio Exterior de Cuba, 462
U.S. 611 (1983) (“Bancec”), and respect for international comity compel us to treat these
legally separate entities as just that, unless plaintiffs can demonstrate that CFN and the
Trust exercise “significant and repeated control over the [entities’] day‐to‐day
operations.” EM Ltd. v. Banco Cent. de la República Argentina, 800 F.3d 78, 91 (2d Cir.
2015) (“EM”), cert. dismissed, 136 S. Ct. 1731 (2016). Plaintiffs have failed to clear this
substantial bar and therefore have not satisfied the requirements of Section 1605(a)(3).
Accordingly, Ecuador, CFN, and the Trust are protected by sovereign immunity under
28 U.S.C. § 1604, and we need not consider the alternative bases for dismissal relied on
by the District Court or presented by defendants. We therefore AFFIRM the judgment
of the District Court dismissing plaintiffs’ action for want of jurisdiction.
BACKGROUND
We set out the facts as alleged in the Complaint, amplified by the limited
jurisdictional materials submitted by the parties. See Kensington Int’l Ltd. v. Itoua, 505
F.3d 147, 153 (2d Cir. 2007).
Arch Trading Corp., Arvin Properties Inc., Hezer Holdings Inc., Madec Limited,
and Osis International Corp. (together, “plaintiffs”) are entities “formed under the laws
of the British Virgin Islands, i.e., outside of Ecuador,” and are “separate and distinct
juridical entit[ies].” J.A. at 15, Compl. ¶¶ 14, 15. Plaintiffs assert that since he assumed
power in 2007, Ecuadorean President Rafael Correa Delgado has “aggressively
advanced an agenda of debilitating competing interests and of concentrating power in
himself and his allies,” and that they have been victims of that agenda. J.A. at 20,
Compl. ¶ 41. Beginning in July 2008, Ecuador’s Agencia de Garantía de Depósitos
(“AGD”)―at the time “Ecuador’s equivalent to the Federal Deposit Insurance
Corporation,” J.A. at 17, Compl. ¶ 28―unlawfully seized 133 companies owned by
plaintiffs (the “Seized Companies”) and failed to provide any compensation to them for
4 the taking.1 No legal recourse was available in Ecuador, plaintiffs assert: Soon after the
seizure, Ecuador’s Constituent Assembly issued its “Mandate 13,” which barred
Ecuador’s judiciary―on penalty of criminal prosecution―from considering any such
legal challenges.
The Seized Companies are now owned and controlled by defendants. Most of
the Seized Companies are currently held by the Trust, an instrumentality of Ecuador
that CFN and AGD established in March 2009. CFN, another instrumentality of
Ecuador, is the Trust’s sole trustee.
In June 2013, plaintiffs filed the Complaint in the United States District Court for
the Southern District of New York against Ecuador, CFN, and the Trust, seeking
compensation for the Seized Companies. Defendants moved to dismiss on a number of
grounds, including that the FSIA precluded the District Court’s exercise of jurisdiction.
With respect to whether the FSIA’s “takings” exception permitted the court’s exercise of
jurisdiction over them, they argued that it did not. First, asserting that the ultimate
owners of the five plaintiff companies are Ecuadorean individuals, they urged that the
expropriations did not violate international law because they fall within the act of state
doctrine. See, e.g., Republic of Austria v. Altmann, 541 U.S. 677, 713 (2004) (Breyer, J.,
concurring) (noting “consensus view that § 1605(a)(3)’s reference to ‘violation of
international law’ does not cover expropriations of property belonging to a country’s
own nationals”). Second, they contended that even if the takings violated international
law, plaintiffs still failed to satisfy Section 1605(a)(3) because the Seized Companies are
all “located in” Ecuador (precluding jurisdiction over Ecuador under the first prong of
1 Although the Complaint alleges that “several hundred companies . . . are the subject matter of this lawsuit,” J.A. at 15, Compl. ¶ 16, the list of seized assets that they attached to their Complaint in the District Court and refer us to on appeal contains only 133, J.A. at 37‐41.
5 Section 1605(a)(3)),2 and that plaintiffs do not allege―indeed, cannot plausibly
allege―that CFN and the Trust engage in any commercial activity in the United States
(precluding jurisdiction over CFN and the Trust under the second prong of
Section 1605(a)(3)).
To substantiate their position, defendants submitted declarations from high‐
ranking Ecuadorean officials discussing the activities in the United States of CFN and
the Trust, all pointing toward the conclusion that neither CFN nor the Trust is engaged
in commercial activity in the United States. In rebuttal, plaintiffs submitted a
declaration made by Francisco Rendón Pantaleón (the “Rendón Declaration”). Rendón
declares that he has held important managerial positions at CFN and has served in
other high‐ranking positions in the Ecuadorean government, including as its Minister of
Economy and Finance. He further outlines the commercial activities in the United
States that plaintiffs see as relevant to the application of Section 1605(a)(3).
The District Court granted defendants’ motion to dismiss. It reasoned that,
although plaintiffs are incorporated in the British Virgin Islands, they should be treated
as Ecuadorean because their ultimate individual owners―Roberto and William Isaías
Dassum (the “Isaías brothers”), it found, see infra note 3―are of Ecuadorean nationality.
Under the act of state doctrine, therefore, the alleged takings of the Seized Companies
did not violate international law and Section 1605(a)(3) does not apply. The District
Court also ruled that plaintiffs failed to demonstrate that either CFN or the Trust is itself
engaged in a commercial activity in the United States. This failure independently
2 Plaintiffs stated at oral argument in the District Court on defendants’ motion to dismiss that the Seized Companies are “located in Ecuador.” J.A. at 575. Whether they meant that the Seized Companies are all creatures of Ecuadorean law, that the Seized Companies have no assets located in the United States, or something else, is not apparent, but their “location” in Ecuador is undisputed.
6 precluded plaintiffs’ reliance on Section 1605(a)(3). See Arch Trading Corp. v. Republic of
Ecuador, No. 13‐CV‐4445, 2015 WL 3443906 (S.D.N.Y. May 28, 2015).
In the latter regard, the District Court observed that “[p]laintiffs merely outline
examples of commercial activities that CFN and [the Trust’s] subsidiaries [or other
distinct legal entities] allegedly engage in,” as opposed to activities of CFN and the
Trust themselves. Id. at *4 (emphasis added). Because “agencies and instrumentalities
of foreign states are presumed to be separate” from other distinct legal entities, the
District Court declined to impute the activities of those entities to CFN and the Trust
absent a showing that CFN and the Trust “exercise day‐to‐day control” over them. Id.
After finding that venue in the Southern District of New York was improper under the
FSIA and also denying plaintiffs’ request for jurisdictional discovery, the District Court
dismissed the case with prejudice. 3
3 As we have noted, for purposes of reviewing the instant motion to dismiss for want of jurisdiction, we accept the version of the facts laid out in the Complaint as amplified and modified by the declarations submitted by both plaintiffs and defendants. To provide further context for the parties’ arguments, however, we observe that defendants―citing court filings in a closely related Florida state court case filed by an agency of Ecuador in 2009 (the “Florida action”)―paint a vastly different picture of the key events. See Appellees’ Br. at 6‐7; J.A. at 47‐ 57 (Compl., Agencia de Garantía de Depósitos v. Dassum, No. 09‐34950CA09 (Fla. 11th Jud. Cir. Ct.) (filed Apr. 29, 2009)). In brief, although defendants agree with plaintiffs that in 2008 an agency of Ecuador, AGD, seized assets belonging to private entities, in their telling these assets belonged to the Isaías brothers. The Isaías brothers (they charge) once controlled Filanbanco, formerly the largest Ecuadorean Bank. When Filanbanco became insolvent in or about 1998, Ecuadorean financial agencies allegedly pumped hundreds of millions of dollars into Filanbanco in a vain attempt to save it. The Isaías brothers assertedly used this cash infusion to enrich themselves personally. Filanbanco ultimately collapsed and entered liquidation proceedings. AGD then (in 2008) seized Ecuadorean assets owned by the Isaías brothers (the Seized Companies) to cover some of AGD’s related losses. Soon after, in 2009, AGD sued the Isaías brothers in Florida state court seeking compensation for losses arising from Filanbanco’s failure. Sixteen companies, including all five plaintiffs here, sought to intervene in that action and moved for leave to file a cross‐complaint seeking damages for Ecuador’s takings. In their motion, the putative intervenors asserted at several points that they were wholly owned by members of the Isaías family. J.A. at 244, 245,
7 This appeal followed.
DISCUSSION
On appeal of a dismissal for lack of subject matter jurisdiction under the FSIA,
“[w]e review the district court’s legal conclusions concerning sovereign immunity de
novo and its factual findings for clear error.” Kensington, 505 F.3d at 153. To invoke the
protections of the FSIA, the defendant must first present a prima facie case that it is a
foreign sovereign or related instrumentality. See Cargill Int’l S.A. v. M/T Pavel Dybenko,
991 F.2d 1012, 1016 (2d Cir. 1993). Once a defendant has presented such a prima facie
case, then a court must determine whether an FSIA‐recognized exception to immunity
applies. In making this determination, “the district court can and should consider
matters outside the pleadings relevant to the issue of jurisdiction.” Kensington, 505 F.3d
at 153. If, as occurred here, a sovereign defendant “challenges the factual basis of the
plaintiff’s claim [that the sovereign defendants are not immune], the plaintiff has the
burden of going forward with evidence showing that, under exceptions set forth in the
FSIA, immunity should not be granted.” Robinson v. Govʹt of Malaysia, 269 F.3d 133, 141
(2d Cir. 2001) (footnote and internal quotation marks omitted). When the plaintiff
carries that burden of production, a district court must resolve disputed issues of fact, if
there are any, when deciding the motion to dismiss. Id. Although the foreign sovereign
shoulders the burden of persuasion on the ultimate question of subject matter
250. The Florida trial court permitted the companies to intervene, and Ecuador―which by then had been substituted as a plaintiff for AGD―moved successfully to dismiss the intervenors’ complaint. Appellees advise that as of September 2015, the Florida action was still pending against Roberto and William Isaías individually. The Florida action thus provided the basis for additional arguments made in the District Court and on this appeal. We express no view on their merits or on the merits of the District Court’s alternative holding that a court may disregard a corporation’s nation of incorporation and instead look to the nationality of its individual owners when determining whether a violation of international law has taken place. We also express no view of the District Court’s factual finding that members of the Isaías family own or control plaintiffs.
8 jurisdiction, id., those suing the sovereign shoulder the burden of rebutting the Bancec
presumption of legal separateness when that presumption is at issue, Zappia Middle East
Constr. Co. v. Emirate of Abu Dhabi, 215 F.3d 247, 252 (2d Cir. 2000).
I. Applicable law
A. Foreign Sovereign Immunities Act
The Supreme Court has described the Foreign Sovereign Immunities Act as “the
sole basis for obtaining jurisdiction over a foreign state in our courts.” Argentine Republic
v. Amerada Hess Shipping Corp., 488 U.S. 428, 434 (1989). Under the FSIA, “a foreign
sovereign and its instrumentalities are immune from suit in the United States courts
unless a specific statutorily defined exception applies.” Zappia, 215 F.3d at 251. Absent
such an exception, the immunity conferred by the FSIA strips courts of both subject
matter and personal jurisdiction over the foreign state. Cargill, 991 F.2d at 1016; see
Foreign Sovereign Immunities Act of 1976, Pub. L. No. 94‐583, 90 Stat. 2891 (codified at
28 U.S.C. §§ 1330; 1332(a)(2)‐1332(a)(4); 1391(f); 1441(d); and 1602‐1611).
Plaintiffs do not dispute that Ecuador is a foreign state presumptively entitled to
sovereign immunity or that, because CFN and the Trust are Ecuador’s instrumentalities
under the FSIA, they too are presumptively shielded from suit. The parties further
appear to agree that the only exception to immunity under the FSIA under which
jurisdiction could lie in this case is the “takings” or “expropriation” exception
established in 28 U.S.C. § 1605(a)(3).
As previously discussed, Section 1605(a)(3) contains two independent prongs,
each of which is subject to the precondition that the dispute concern property “taken in
violation of international law[.]” Id. Once the precondition is met, the first prong then
provides that a foreign state is not immune from jurisdiction in any case in which “[a]
property or any property exchanged for such property is [b] present in the United States
[c] in connection with a commercial activity carried on in the United States by the foreign
9 state[.]” Id. (emphasis added). Plaintiffs did not allege in the District Court proceedings
either that any of their expropriated property is present in the United States, see supra
note 2, or that this prong of Section 1605(a)(3) applies against Ecuador itself. They do
not argue otherwise here. Accordingly, we consider only whether plaintiffs’ allegations
support application of the second prong of Section 1605(a)(3) against CFN and the
Trust.
Section 1605(a)(3)’s second prong withdraws immunity when “rights in property
taken in violation of international law are in issue” and where (a) either the taken
property or “any property exchanged for such property” is (b) “owned or operated by
an agency or instrumentality of the foreign state” and (c) “that agency or
instrumentality is engaged in a commercial activity in the United States[.]” Id. The
second prong thus requires that the foreign sovereign’s agency or instrumentality be
“engaged in a commercial activity in the United States.” Section 1603 of Title 28 defines
both “commercial activity” and “commercial activity carried on in the United States by
a foreign state,” but not the phrase “engaged in a commercial activity in the United
States.” Section 1603(d) provides that a “commercial activity” means “either a regular
course of commercial conduct or a particular commercial transaction or act.” 28 U.S.C.
§ 1603(d). It directs that “[t]he 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. In contrast, subsection (e) provides that
“[a] commercial activity carried on in the United States by a foreign state” means
“commercial activity carried on by such state and having substantial contact with the
United States.” Id. § 1603(e) (emphasis supplied). For present purposes, we assume
without deciding that satisfying the less demanding definition of “commercial activity”
stated in subsection (d) suffices to establish that an instrumentality is “engaged in a
commercial activity in the United States” within the meaning of Section 1605(a)(3). See
10 Agudas Chasidei Chabad of U.S. v. Russian Fed’n, 528 F.3d 934, 946‐48 (D.C. Cir. 2008)
(applying Section 1603(d) to second prong of the takings exception).
B. The Bancec presumption
In First National City Bank v. Banco Para El Comercio Exterior de Cuba, 462 U.S. 611
(1983) (“Bancec”), the Supreme Court established the principle that “government
instrumentalities established as juridical entities distinct and independent from their
sovereign should normally be treated as such.” Id. at 626‐27. Sound justifications
support this principle, known as the “Bancec presumption”: As the Court observed,
“Freely ignoring the separate status of government instrumentalities would result in
substantial uncertainty” for sovereigns and creditors alike. Id. at 626. Further,
recognizing the legal distinctions between entities drawn by another nation’s laws
accords “[d]ue respect for the actions taken by foreign sovereigns and for principles of
comity between nations.” Id.
Accordingly, we have described the Bancec presumption as “strong.” Zappia, 215
F.3d at 252. And, as we have recently observed, “both Bancec and the FSIA legislative
history caution against too easily overcoming the presumption of separateness.” EM,
800 F.3d at 90 (internal quotation marks omitted). In line with this approach, we will
find the Bancec presumption to have been overcome only if “(1) the [entity] is so
extensively controlled by its owner that a relationship of principal and agent is created,
or (2) the recognition of an [entity’s] separate legal status would work a fraud or
injustice.” Kirschenbaum v. 650 Fifth Ave. & Related Props., 830 F.3d 107, 128 (2d Cir. 2016)
(internal quotation marks omitted).
II. Commercial activity in the United States of CFN and the Trust
Defendants concede that, together, CFN and the Trust own or operate at least 80
of the 133 companies allegedly expropriated from plaintiffs. Rather, they argue that
CFN and the Trust are not themselves engaged in commercial activity in the United
11 States, and that the Bancec presumption means that we may not impute the commercial
activities described in the Rendón Declaration to them.
For their part, plaintiffs question whether the Bancec presumption has any
bearing here at all, observing that in Bancec the Supreme Court examined the
relationship between a foreign state and an instrumentality of that state, both of which
are presumptively entitled to sovereign immunity, whereas this case concerns the
relationships between a foreign state’s instrumentalities and other distinct legal entities
that may not themselves be entitled to sovereign immunity. We fail to see why the
distinction is relevant, however: Freely ignoring the separate legal status of foreign
government instrumentalities vis‐à‐vis distinct non‐governmental legal entities would
create uncertainties closely resembling, if not identical to, those that the Court cited as
necessitating the Bancec presumption in the first place. See Dole Food Co. v. Patrickson,
538 U.S. 468, 475‐76 (2003) (rejecting argument that “as a categorical matter, all
subsidiaries are deemed to be the same as the parent corporation” because “[t]he text of
the FSIA gives no indication that Congress intended us to depart from the general rules
regarding corporate formalities”); Bancec, 462 U.S. at 628 (justifying Bancec presumption
with legislative history warning that foreign jurisdictions might “disregard the juridical
divisions between different U.S. corporations” “[i]f U.S. law did not respect the separate
juridical identities” drawn by foreign law); Zappia, 215 F.3d at 251‐52 (applying Bancec
presumption to evaluate relationship between a bank and the Emirate of Abu Dhabi).
The Bancec presumption may be overcome in these circumstances, too, then, only
if an entity is “so extensively controlled” that a relationship of principal and agent is
created, or where respecting separateness “would work fraud or injustice.”
Kirschenbaum, 830 F.3d at 128. The latter concern is not raised in this case. Plaintiffs
make no allegation, for example, that defendants manipulated the corporate form of the
relevant governmental instrumentalities and their affiliates with the intention of
12 making it more difficult for plaintiffs to obtain compensation alleged to be due for their
loss of property. See EM, 800 F.3d at 95‐96. As to the former, we have recently clarified
that the “touchstone inquiry” for the “extensive control” required by Bancec is “whether
the sovereign state exercises significant and repeated control over the instrumentality’s
day‐to‐day operations.” Id. at 91. Pertinent factors include whether the sovereign
entity:
(1) uses the instrumentality’s property as its own; (2) ignores the instrumentality’s separate status or ordinary corporate formalities; (3) deprives the instrumentality of the independence from close political control that is generally enjoyed by government agencies; (4) requires the instrumentality to obtain approvals for ordinary business decisions from a political actor; and (5) issues policies or directives that cause the instrumentality to act directly on behalf of the sovereign state.
Id. Mindful of these factors, we next consider whether we may attribute to CFN and the
Trust any of the commercial activities in the United States that plaintiffs have identified.
We address each sovereign defendant in turn.
A. CFN
In support of their position, defendants submitted a sworn declaration by Danilo
Morales, an employee of CFN for over sixteen years and CFN’s “Attorney of the General
Manager” as of 2014, when the declaration was made. Morales avers that “CFN has no
contracts with U.S. companies or that require performance in the United States; it is not
licensed to do business in the United States and it does not conduct business there;
[and] it has no investments or other property” there. J.A. at 404, ¶ 5.
The Rendón Declaration is designed to rebut these assertions. Rendón avers
generally that “CFN, since its very inception, actively and affirmatively has engaged in
business activities in the United States. A number of the entities [th]at CFN has
confiscated have a commercial presence in the United States and most [of] these
13 companies have never ceased to conduct business in the United States.” J.A. at 417,
¶ 19. He offers five “emblematic” examples. J.A. at 418, ¶ 20. These concern Pacific
National Bank; Seguros Sucre, S.A.; Rocafuerte Seguros, S.A.; TC TV and Gama TV; and
Banco del Migrante. In presenting four of these, however, Rendón follows a similar
pattern: He describes the activities in the United States of entities other than CFN, and
then offers only conclusory averments that CFN exercises some kind of control over
those entities.4
For example, Rendón states that CFN is the sole shareholder of Banco del
Pacífico S.A. Ecuador (“Banco Pacífico”), which in turn is the sole shareholder of Pacific
National Bank, located in Florida. Banco Pacífico has invested over $100 million in
Pacific National Bank, a United States entity, he asserts. But because CFN, Banco
Pacífico, and Pacific National Bank are distinct legal entities, it does not follow that
“CFN . . . is responsible for USD $100 million of commercial activity in the United
States,” as Rendón declares. J.A. at 419, ¶ 26. Rendón also avers that CFN employees
are members of Banco Pacífico’s board of directors, and that CFN is “quite active” in
naming Banco Pacífico’s senior management. J.A. at 419, ¶ 27. But Banco Pacífico is an
entity distinct from Pacific National Bank, and, even as to CFN’s relationship with
Banco Pacífico, “courts have consistently rejected the argument that the appointment or
removal of an instrumentality’s officers or directors, standing alone, overcomes the
Bancec presumption,” EM, 800 F.3d at 92 (footnote omitted), because the exercise of such
powers is “not synonymous with control over the instrumentality’s day‐to‐day
operations,” id. at 93. Especially in light of his asserted access to Banco Pacífico’s
4 Rendón elsewhere appears to acknowledge the attenuated nature of the relationships. See J.A. at 425, ¶ 47 (averring that CFN “engages in . . . commercial activity” “through” the entities discussed in his declaration (emphasis added)).
14 operations,5 his failure to cite any specific examples of CFN’s influence over either
Banco Pacífico or Pacific National Bank undermines his claims. Rendón’s averments of
CFN’s involvement thus fall well short of establishing the existence of any “significant
and repeated control” by CFN over Banco Pacífico’s (or Pacific National Bank’s)
operations.
Rendón also identifies two Ecuadorean insurance companies, Seguros Sucre,
S.A., and Rocafuerte Seguros, S.A., that allegedly conduct business in the United States.
Rendón’s averments of CFN’s involvement in the operations of those companies are far
too threadbare, however, to rebut the Bancec presumption with respect to these
companies. Both are legal entities distinct from CFN: The record reflects that CFN
owns all of Seguros Sucre’s shares, and the Trust holds all the shares of Rocafuerte
Seguros. Rendón avers generally that CFN “actively oversees Seguros Sucre’s
operations (management) and commercial dealings,” but provides no details in support
of that claim. J.A. at 420, ¶ 32. And Rendón makes no assertions of any CFN
involvement in Rocafuerte Seguros’s operations whatsoever. The District Court
reasonably refused to accept these conclusory allegations as a sufficient basis for
inferring the necessary level of control. See Zappia, 215 F.3d at 253 (rejecting challenge to
the Bancec presumption because “[t]he conclusory allegations in Mr. Zappia’s affidavit
are not sufficient to create a material issue of fact”).
Rendón’s allegations about the relationship between CFN and TC TV and Gama
TV, two television stations whose shares appear to be held by the Trust,6 and which
5 Beginning January 2011, for example, Rendón served as “Manager of Deposit Accounts,” a position he held until he became the “National Manager of Institutional Relationship” the following January. He further avers that he is a former member of Banco Pacífico’s board of directors. 6 The Rendón Declaration is imprecise on this point: It states that the Trust is the “single
shareholder” of Rocafuerte Seguros, J.A. at 421, ¶ 33, and that TC TV and Gama TV “belong to”
15 purchase programs from United States entities such as Disney, Warner Brothers, and
others, are no different. Rendón alleges generally that CFN “oversees” the commercial
transactions of TC and Gama, and “affirmatively participates in negotiations with U.S.
entities.” J.A. at 423, ¶ 39. But this nonspecific “oversight” of and “participation” in
contractual negotiations, standing alone, is not enough to permit us to conclude that TC
and Gama are mere shells for corporate activity more appropriately attributable to CFN.
See DRC, Inc. v. Republic of Honduras, 71 F. Supp. 3d 201, 216‐17 (D.D.C. 2014) (contract
between company and sovereign’s instrumentality requiring sovereign to “monitor[] [its
instrumentality’s] overall compliance” with contract did not demonstrate “the sort of
managerial control needed to overcome [the instrumentality’s] presumptive
separateness” (internal quotation marks and alterations omitted)); GSS Grp. Ltd. v.
Republic of Liberia, 31 F. Supp. 3d 50, 66 (D.D.C. 2014) (“GSS fails to offer any persuasive
argument as to how the government’s co‐signing the contract and its being kept
apprised of ‘notices in respect of [its instrumentality]’ demonstrate the sort of extensive
control necessary to disregard the [instrumentality’s] distinct corporate identity.”), aff’d
sub nom. GSS Grp. Ltd. v. Nat’l Port Auth. of Liberia, 822 F.3d 598 (D.C. Cir. 2016). Rendón
does not declare nor do plaintiffs allege that, for example, TC and Gama lacked the
capacity to decline CFN’s involvement. See U.S. Fid. & Guar. Co. v. Braspetro Oil Servs.
Co., No. 97‐CV‐6124, 1999 WL 307666, at *10 (S.D.N.Y. May 17, 1999) (finding Bancec
presumption rebutted where sovereign instrumentality “deposited funds in [its indirect
subsidiary’s] bank account . . . and made millions of dollars of . . . payments from that
account . . . without seeking approval from [the indirect subsidiary],” and fully
negotiated a $163 million contract “and simply ‘nominated [the indirect subsidiary]’ to
serve as the signatory to various transactions related to [the contract]”), conclusions aff’d,
the Trust, J.A. at 423, ¶ 39. Lacking any indication otherwise, we interpret these statements to mean that the shares of each of these companies are held in trust by the Trust for its beneficiary.
16 199 F.3d 94, 98 (2d Cir. 1999). Nor do they allege that the benefits of these agreements
inured solely to CFN. See Seijas v. Republic of Argentina, 502 F. App’x 19, 23 (2d Cir.
2012) (citing as illustrative example of extensive control the fact that instrumentality
“never exercised its right to collect a percentage on transactions relating to [the
sovereign’s] oil, but passed on all proceeds to the state”). And plaintiffs do not allege or
demonstrate that CFN is involved in TC and Gama’s affairs outside of contractual
negotiations—e.g., they make no allegations that CFN used TC and Gama’s resources as
its own or disregarded corporate formalities between them. See EM, 800 F.3d at 91.
Taking a different but equally unsuccessful tack, plaintiffs cite to CFN’s
Ecuadorean foundational statute to lend support to their argument. For example, they
note that CFN is authorized to have overseas offices, but they never claim that CFN
actually maintains an outpost in the United States. The enabling statute also requires
CFN to “administer” the Trust’s assets, plaintiffs observe, e.g., Sp. App’x at 75, but this
authorization does not demonstrate that CFN in practice exercises the significant, day‐
to‐day control over any United States‐based or ‐involved entities that is required to
rebut the Bancec presumption.
Finally, Rendón asserts that a United States commercial activity can be found in
the fact that CFN, acting on its own behalf, helped establish “Banco del Migrante,” a
program allegedly launched to “make available CFN’s financial products to
Ecuadoreans living in the United States” and which other Ecuadorean entities have
ostensibly advertised in the United States. J.A. at 424, ¶¶ 42, 44. If true, perhaps CFN
might be said itself to engage in commercial activity in the United States instead of
through some other entity, and the requirements of U.S.‐based commercial activity in
the takings exception could be satisfied.
But Danilo Morales avers that, although some initial paperwork for such a
program was completed, the program never came to fruition. He agrees that CFN
17 provides loans to expatriate Ecuadoreans, but he clarifies that CFN does so only upon
the citizens’ return to Ecuador. And the record evidence supports his characterization,
at the expense of Rendón’s. Indeed, plaintiffs themselves submitted a number of
newspaper articles and other printouts of online material that seem to undermine their
position. For instance, promotional materials for the program that are included in the
record describe a “[d]oor for [r]eturning [m]igrants,” J.A. at 466, and a “[w]elcome
[h]ome [p]rogram,” J.A. at 468, designed for “covering the needs of persons who return
to the country,” J.A. at 480. A news article describes a “Migrant Bank Trust Fund . . .
directed towards helping migrant persons who have returned to Ecuador,” and advises
that “[a]ll of the [beneficiaries] returned to the country after several years abroad.” J.A.
at 478. Thus, the District Court did not clearly err by rejecting plaintiffs’ assertions
about the relationship between CFN, Banco del Migrante, and the United States.
B. The Trust and Ecuador
On behalf of defendants, Ronald Pérez, CFN’s Deputy National Manager of
Fiduciary Trust and Securitization, submitted a sworn declaration in which he avers
that, like CFN, the Trust has no contracts with United States companies or contracts that
require performance in the United States; is not licensed to do business in the United
States; and has no investments, bank accounts, or other property in the United States.
The Rendón Declaration does not include a separate discussion of the Trust.
Instead, piggybacking on their arguments as to CFN, plaintiffs appear to urge that the
Trust is engaged in commercial activity in the United States because the Trust holds
stock in and—through its trustee, CFN—“controls the management and operation” of
companies engaged in such activity. Appellants’ Br. at 54. Plaintiffs identify only three
such entities: TC TV, Gama TV, and Rocafuerte Seguros, S.A. Accepting arguendo
plaintiffs’ argument that the Trust’s legal status (as distinct from that of the entities
whose stock it holds) rises or falls with CFN’s parallel status as Trustee, they have not
18 rebutted the Bancec presumption for the same reasons that they have not rebutted it as
between CFN and those entities, as discussed above.
Finally, neither plaintiffs in their brief nor the Rendón Declaration addresses the
commercial activity of Ecuador itself in the United States or Ecuador’s relationship with
any of the legally separate entities mentioned above. One might argue that, were we to
conclude that the District Court may exercise jurisdiction over CFN or the Trust
consistent with Section 1605(a)(3), then it follows that the court may exercise
jurisdiction over Ecuador as well. Some of our sister Circuits appear to hold this
general view about the relationship between an instrumentality’s sovereign immunity
and that of its associated sovereign, while some district courts in our Circuit have
questioned the reasoning. Compare, e.g., Cassirer v. Kingdom of Spain, 616 F.3d 1019, 1022,
1028‐34 (9th Cir. 2010) (en banc) (concluding, without engaging in independent analysis
of jurisdiction over Spain, that district court could exercise jurisdiction over Spain and
its instrumentality because the instrumentality owned the expropriated property and
was engaged in a commercial activity in the United States); Agudas Chasidei Chabad, 528
F.3d at 948 (concluding, without separate discussion of jurisdiction over Russia, that
district court had jurisdiction over Russia because two of its instrumentalities held
expropriated property and were engaged in a commercial activity in the United States),
with, e.g., Hammerstein v. Fed. Republic of Germany, No. 09‐CV‐443, 2011 WL 9975796, at *5
(E.D.N.Y. Aug. 1, 2011) (concluding that “the takings exception does not provide
jurisdiction” over a foreign sovereign when “the property at issue is not in the United
States”); Freund v. Republic of France, 592 F. Supp. 2d 540, 561 (S.D.N.Y. 2008)
(articulating, but declining to resolve, the same argument), aff’d sub nom. Freund v.
Société Nationale des Chemins de Fer Français, 391 F. App’x 939 (2d Cir. 2010). The FSIA’s
definition of “foreign state” may also contribute to the confusion by “includ[ing] . . . an
agency or instrumentality of a foreign state” within its purview. 28 U.S.C. § 1603(a). We
19 do not reach the issue, however, for even assuming that this interpretation of
Section 1605(a)(3) is correct, the District Court lacked jurisdiction over CFN and the
Trust for the reasons discussed above.
III. Denials of jurisdictional discovery and of an evidentiary hearing
In a final effort to preserve their suit, plaintiffs contend that at the very least the
District Court acted too hastily in dismissing the Complaint without either conducting
an evidentiary hearing or affording them the opportunity to pursue jurisdictional
discovery. Discovery, they say, would allow them to reinforce their argument that
defendants conduct United States‐based activities sufficient to support the exercise of
jurisdiction over them by United States courts, and an evidentiary hearing would
permit resolution of disputed issues of relevant fact. We are not persuaded on either
count.
We review a district court’s denial of jurisdictional discovery for abuse of
discretion, see Swarna v. Al‐Awadi, 622 F.3d 123, 143‐44 (2d Cir. 2010), always mindful
that a district court has “wide latitude to determine the scope” of discovery, Frontera
Resources Azerbaijan Corp. v. State Oil Co. of Azerbaijan Republic, 582 F.3d 393, 401 (2d Cir.
2009). A district court’s decision not to hold an evidentiary hearing is similarly
reviewed for abuse of discretion. See Zappia, 215 F.3d at 253.
Because “sovereign immunity protects a sovereign from the expense,
intrusiveness, and hassle of litigation, a court must be ‘circumspect’ in allowing
discovery before the plaintiff has established that the court has jurisdiction over a
foreign sovereign defendant under the FSIA.” EM Ltd. v. Republic of Argentina, 695 F.3d
201, 210 (2d Cir. 2012) (quoting First City, Texas‐Houston, N.A. v. Rafidain Bank, 150 F.3d
172, 176‐77 (2d Cir. 1998)), affʹd sub nom. Republic of Argentina v. NML Capital, Ltd., 134 S.
Ct. 2250 (2014). Accordingly, a district court may deny jurisdictional discovery
demands made on a foreign sovereign if the party seeking discovery cannot articulate a
20 “reasonable basis” for the court first to assume jurisdiction. See Filus v. Lot Polish
Airlines, 907 F.2d 1328, 1332 (2d Cir. 1990); cf. Jazini v. Nissan Motor Co., 148 F.3d 181, 183,
185 (2d Cir. 1998) (affirming dismissal for lack of jurisdiction “before discovery”
because plaintiffs’ allegations “lack[ed] the factual specificity” to show that subsidiary
was a “mere department” of foreign corporate parent).
The District Court acted within the permissible bounds of its discretion when it
concluded that plaintiffs did not present an adequate basis for expecting that they
would be able to rebut the Bancec presumption with respect to CFN, the Trust, or
Ecuador. With respect to CFN, plaintiffs’ averments of sovereign control are largely
conclusory and were rightly disregarded. The remaining relevant averments, including
those concerning CFN’s power to appoint board members or managerial employees of
some of its subsidiaries, establish only that CFN exercises powers incidental to
ownership of these separate entities—not that CFN ignores corporate formalities or
directs the entities’ day‐to‐day operations. The Bancec presumption is difficult to
overcome, and plaintiffs do not come close to the mark. See, e.g., McKesson Corp. v.
Islamic Republic of Iran, 52 F.3d 346, 351‐52 (D.C. Cir. 1995) (finding Bancec presumption
rebutted where “[r]outine business decisions, such as declaring and paying dividends
to shareholders and honoring [the instrumentality’s] contractual commitments, were
dictated by [the sovereign state]”); Kensington Int’l Ltd. v. Republic of Congo, No. 03‐CV‐
4578, 2007 WL 1032269, at *9‐12 (S.D.N.Y. Mar. 30, 2007) (finding Bancec presumption
rebutted where: (1) auditors were required to obtain “an official letter from the
[sovereign’s] Ministry of Finance” to receive access to the instrumentality’s financial
records; (2) audits revealed “the absence of any clear demarcation between [the
sovereign’s] finances and those of [the instrumentality]”; (3) the instrumentality’s
corporate structure was designed to allow the sovereign to engage in “unnecessarily
complex transactions and charades for the purpose of confounding its creditors”; and
21 (4) the instrumentality’s business records suggested no commercial activity distinct
from that performed on behalf of the sovereign). With respect to Ecuador and the Trust,
they make no attempt to show that either is engaged in a commercial activity in the
United States independent of CFN’s alleged commercial activities in the United States.
Plaintiffs thus effectively group together CFN, Ecuador, and the Trust, in conflict with
the policies underlying the Bancec presumption.
Further, plaintiffs did not specify―and on appeal still have not specified―what
discovery they might seek. When sovereign immunity is at issue, discovery is
warranted “only to verify allegations of specific facts crucial to an immunity
determination.” EM Ltd. v. Republic of Argentina, 473 F.3d 463, 486 (2d Cir. 2007)
(internal quotation marks omitted). The conclusory nature of the averments contained
in the Rendón Declaration suggests that plaintiffs do not yet know what they expect to
find from discovery notwithstanding that their declarant, Rendón, held a managerial
position at CFN when they prepared and filed the Complaint. The FSIA protects
defendants from a fishing expedition that seeks to examine the details of the
relationships between them and a number of distinct legal entities without any non‐
speculative basis for believing that those details would establish jurisdiction.
Plaintiffs maintain that discovery should nonetheless have been allowed because,
they claim, the Bancec presumption issue was “neither briefed nor argued below” and
“[t]he district court did not ask any questions at oral argument concerning Bancec.”
Appellants’ Reply at 27. But, by our reading, plaintiffs stray from the record in making
this claim: Defendants raised the Bancec issue in their motion to dismiss and again in
their reply. And the District Court discussed the relevant aspects of the Rendón
Declaration extensively at oral argument. Although the District Court may not have
mentioned the case name “Bancec,” it certainly highlighted the distinction between
activities of defendants and of the entities alleged to be conducting commercial activity
22 in the United States. The District Court itself initially prompted counsel for plaintiffs by
stating that it “underst[ood] the point about the subsidiaries maybe doing business” in
the United States, and asking, “[W]hat business are [CFN, the Trust, and Ecuador]
doing themselves?” J.A. at 577 (emphasis added).
Nor did the District Court abuse its discretion by not conducting an evidentiary
hearing. See APWU v. Potter, 343 F.3d 619, 627 (2d Cir. 2003) (“Where jurisdictional facts
are placed in dispute, . . . [a] district court retains considerable latitude in devising the
procedures it will follow to ferret out the facts pertinent to jurisdiction.” (internal
quotation marks and alterations omitted)). Plaintiffs did not request such a hearing,
and the District Court was not required to convene one sua sponte. See, e.g., Aoude v.
Mobil Oil Corp., 892 F.2d 1115, 1120 (1st Cir. 1989) (noting courts of appeals “regularly
turn a deaf ear to protests that an evidentiary hearing should have been convened but
was not, where, as here, the protester did not seasonably request such a hearing in the
lower court”). And even were we to overlook this gap, the Rendón Declaration’s few
non‐conclusory averments, were they to be credited, hardly establish an entitlement to a
hearing. Although the submitted declarations conflict with respect to the existence and
nature of a Banco del Migrante program, plaintiffs’ position is undermined by their
own submissions. In these circumstances, plaintiffs have no entitlement either to a
hearing or to the discovery they now demand.
CONCLUSION
In summary, we agree with the District Court that it lacks subject matter
jurisdiction because plaintiffs have failed to establish the applicability of the takings
exception to foreign sovereign immunity. Plaintiffs fail to provide an adequate basis for
inferring that CFN or the Trust is engaged in commercial activity in the United States
within the meaning of Section 1605(a)(3). Although plaintiffs point to the commercial
activities in the United States of certain entities alleged to be owned by CFN or held in
23 the Trust, they fail to clear the high bar imposed by the Bancec presumption and
ensuing case law for imputing those activities to the defendant instrumentalities. The
District Court committed no error in so holding, nor in denying plaintiffs an evidentiary
hearing and jurisdictional discovery.
Accordingly, we AFFIRM the judgment of the District Court dismissing the suit
with prejudice for want of jurisdiction.