EIE Guam Corp. v. Long Term Credit Bank of Japan, Ltd.

322 F.3d 635, 2003 WL 549345
Court of Appeals for the Ninth Circuit·Decided February 27, 2003·No. Nos. 02-16214, 02-16259·Published·Cited by 23 cases

Opinion

OPINION

GRABER, Circuit Judge.

We are called on to decide whether a voluntarily joined foreign sovereign may remove a case from a territorial court to a federal district court when the foreign sovereign obtained the original defendant’s interest by assignment after the commencement of the litigation. We answer that question “yes” and, accordingly, affirm the district court’s exercise of jurisdiction over this case.

FACTUAL AND PROCEDURAL HISTORY

EIE Guam Corporation (“EIEG”) is a Guam corporation that is a wholly owned subsidiary of a Japanese corporation, EIE International, Inc. In July of 1992, EIEG obtained a loan of $110.3 million from the Long Term Credit Bank of Japan (“Bank”) for the construction of the Hyatt Regency Guam Hotel (“Hotel”). In exchange, [638] EIEG executed a construction loan agreement, note, and mortgage on the Hotel. The mortgage allowed the Bank to foreclose on the Hotel if EIEG defaulted on the loan.

EIEG defaulted on the loan in 1993. The loan was extended for one year, but then fell back into default. A Forbearance Agreement was executed by the parties, but collapsed. EIEG has made no payment to the Bank since 1995.

Facing possible foreclosure, EIEG filed suit against the Bank and the other lenders in Guam Superior Court in August 1995. The Bank counterclaimed. The other lenders were dismissed by stipulation. In June 1999, the Guam Superior Court enjoined the Bank from foreclosing on the Hotel.

In August of 1999, the Bank assigned to the Resolution and Collection Corporation (“RCC”), a Japanese corporation, its notes, security instruments, and claims in the litigation with EIEG. In January 2000, the Bank moved to join the RCC as a defendant and counterclaimant under Guam Rule of Civil Procedure 25(c).1 Two months later, EIEG stipulated to the RCC’s voluntary joinder. The court filed a joinder order. The RCC then immediately removed the entire action to federal district court under the provisions of the Foreign Sovereign Immunities Act of 1976 (“FSIA”), 28 U.S.C. §§ 1601-1611.

Thereafter, the parties engaged in mediation on the island of Maui, Hawaii. At the end of the mediation session, and just six days before the trial in federal district court was scheduled to begin, the parties executed a document they called the “Maui Term Sheet,” settling the present litigation and agreeing to dismiss a related action.

In an attempt to iron out their remaining differences, the parties engaged in further negotiations. Those negotiations proved fruitless, however, and the parties reached an impasse. The parties then filed motions in federal district court, asking the court to interpret and enforce the Maui Term Sheet. The court filed an order in July 2001, interpreting and enforcing the Maui Term Sheet. That order held that the Maui Term Sheet constituted an enforceable settlement agreement. Additionally, it interpreted several of the provisions of the agreement whose meaning the parties disputed, and required that the parties conform to those interpretations.

The parties nonetheless failed to agree on the forms of the releases to be executed between them and, therefore, failed to close the deal by the August 9, 2001, deadline provided in the Maui Term Sheet. The Bank and the RCC asked the district court to schedule the case for trial, claiming that this was the remedy called for in the Maui Term Sheet. EIEG countered with a motion to enforce the settlement, maintaining -that the court should order specific performance of the agreement. In two orders issued in May of 2002, the district court held that it had the power to enforce the settlement agreement summarily. It interpreted the disputed provisions and ordered the parties “to do everything in them power to implement the settlement.” The district court set a new closing date of November 25, 2002. Instead of working to close the deal by that date, the parties brought these timely appeals of the district court’s two May 2002 orders.2

[639] STANDARDS OF REVIEW

The existence of subject matter jurisdiction under the FSIA is a question of law that we review de novo. Park v. Shin, 313 F.3d 1138, 1141 (9th Cir.2002). We review a district court’s findings of fact for clear error. Freeman v. Allstate Life Ins. Co., 253 F.3d 533, 536 (9th Cir.2001).

DISCUSSION

EIEG presents four arguments to support its assertion that removal of the case to federal court was improper. EIEG argues that: (A) the RCC is not a “foreign state” within the meaning of the FSIA; (B) the action is not “against” the Bank and the RCC, so the FSIA’s removal provision does not apply; (C) the RCC could not remove because it is an assignee that took the assignment after the litigation was underway, and then voluntarily joined the litigation; and (D) the RCC submitted itself to the jurisdiction of the Guam Superior Court. We will address each of those arguments in turn.

A. The RCC Is a Foreign State Under the FSIA.

The Foreign Sovereign Immunities Act provides the exclusive source of subject matter jurisdiction over suits involving foreign states and their instrumentalities. Gates v. Victor Fine Foods, 54 F.3d 1457, 1459 (9th Cir.1995); Joseph v. Office of Consulate Gen. of Nig., 830 F.2d 1018, 1021 (9th Cir.1987). The FSIA grants federal courts subject matter jurisdiction over actions brought against “an agency or instrumentality of a foreign state.” 28 U.S.C. § 1603(a). “An ‘agency or instrumentality of a foreign state’ means any entity”

(1) which is a separate legal person, corporate or otherwise, and
(2) which is an organ of a foreign state or political subdivision thereof, or a majority of whose shares or other ownership interest is owned by a foreign state or political subdivision thereof, and
(3) which is neither a citizen of a State of the United States as defined in section 1332(c) and (d) of this title, nor created under the laws of any third country.

28 U.S.C. § 1603(b).

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EIE Guam Corp. v. Long Term Credit Bank of Japan, Ltd., 322 F.3d 635, 2003 WL 549345 (9th Cir. 2003).

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