16‐3303‐cv(L) Petersen Energía Inversora, S.A.U., et al. v. Argentine Republic, et al.
UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT
August Term 2016
(Argued: June 15, 2017 Decided: July 10, 2018)
Docket Nos. 16‐3303‐cv(L), 16‐3304‐cv(Con)
PETERSEN ENERGÍA INVERSORA S.A.U. AND PETERSEN ENERGÍA, S.A.U.,
Plaintiffs‐Appellees,
v.
ARGENTINE REPUBLIC AND YPF S.A.,
Defendants‐Appellants.*
ON APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK
Before: WINTER, CALABRESI, AND CHIN, Circuit Judges.
* The Clerk of Court is directed to amend the official caption to conform to the above.
Appeal from an order of the United States District Court for the
Southern District of New York (Preska, J.), denying defendants‐appellantsʹ
motion to dismiss under (1) Federal Rule of Civil Procedure 12(b)(1) for lack of
subject matter jurisdiction on grounds of foreign sovereign immunity and
(2) Federal Rule of Civil Procedure 12(b)(6) pursuant to the act of state doctrine.
AFFIRMED IN PART AND DISMISSED IN PART.
Judge WINTER concurs in part and dissents in part in a separate opinion.
MICHAEL K. KELLOGG (Mark C. Hansen, Derek T. Ho, Benjamin S. Softness, on the brief), Kellogg, Hansen, Todd, Figel & Frederick, P.L.L.C., Washington, D.C., and Reginald R. Smith, King & Spalding LLP, New York, New York, for Plaintiffs‐Appellees.
MAURA BARRY GRINALDS, Skadden, Arps, Slate, Meagher & Flom LLP, New York, New York, and Martin Domb, Benjamin Joelson, Ackerman LLP, New York, New York, for Defendant‐Appellant Argentine Republic.
MICHAEL A. PASKIN, Cravath, Swaine & Moore LLP, New York, New York, and Thomas J. Hall, Marcelo M. Blackburn, Chadbourne & Parke LLP, New York, New York, for Defendant‐Appellant YPF S.A.
CHIN, Circuit Judge:
Defendants‐appellants the Argentine Republic (ʺArgentinaʺ) and
YPF S.A. (ʺYPFʺ) (together, ʺdefendantsʺ) appeal an order of the United States
District Court for the Southern District of New York (Preska, J.), denying
defendantsʹ motions to dismiss under (1) Federal Rule of Civil Procedure 12(b)(1)
for lack of subject matter jurisdiction on grounds of foreign sovereign immunity
and (2) Federal Rule of Civil Procedure 12(b)(6) pursuant to the act of state
doctrine. We affirm the district courtʹs order insofar as it denied the motion to
dismiss under the Foreign Sovereign Immunity Act and we dismiss defendantsʹ
appeal as to the act of state doctrine.
BACKGROUND
Unless otherwise noted, the facts herein are undisputed. They are
drawn from the complaint and the documents submitted by the parties in
reference to defendantsʹ motions to dismiss.
I. YPF Becomes a Publicly Traded Company
YPF is a petroleum company that was wholly owned and operated
by the Argentine government until 1993. That year, in accordance with broader
efforts to reform its economy, Argentina decided to privatize the petrol firm
through an initial public offering (ʺIPOʺ) of nearly 100% of YPFʹs voting stock 3
(the ʺsharesʺ).1 Argentina and YPF took a number of steps to entice investors to
participate in the IPO and thereby ensure its success, two of which are
particularly relevant to this case. First, they arranged for YPF to offer shares in
the United States as American Depository Receipts (ʺADRsʺ) listed on the New
York Stock Exchange (ʺNYSEʺ). Second, they amended YPFʹs bylaws ‐‐ that is,
the contract governing the relationship among YPF, Argentina (in its capacity as
a shareholder), and other YPF shareholders. In particular, the bylaws were
amended to incorporate protections for investors from (1) hostile takeovers and
(2) attempts by Argentina to renationalize the company. These takeover
protections form the basis of this breach of contract dispute, and so we describe
them in some detail.
Section 7(d) of the amended bylaws prohibits (with certain
exceptions inapplicable here) the direct or indirect acquisition of YPF shares if
1 Indeed, an article written by the then‐Governor of the Central Bank of Argentina notes that ʺ[t]he reforms of the 1990s . . . included financial system reforms, liberalization of trade and the capital account, and far‐reaching public sector reforms,ʺ including ʺ[p]ublic sector reform, which substantially reduced the scope of [Argentinaʹs] public sector [and] entailed privatizing almost all of the major public enterprisesʺ in the country. Pedro Pou, Argentinaʹs Structural Reforms of the 1990s, 37 Fin. & Dev. 13, 13 (2000). Privatizing Argentinaʹs major public enterprises had three main benefits: ʺPublic subsidies to [the formerly public] enterprises were reduced or eliminated; the enterprisesʹ efficiency and provision of services improved dramatically; and funds became available to cover a substantial part of the government deficit while other reforms . . . were under way.ʺ Id. 4
the acquisition results in the acquirer controlling 15% or more of the shares,
unless the acquirer makes a tender offer for all of the outstanding shares in
accordance with certain procedures and at a price determined by a formula in
the bylaws. Among the prescribed procedures, section 7(f) requires that any
such tender offer comply with the rules and regulations imposed by the
governments and stock exchanges where YPFʹs shares are listed. Because YPFʹs
securities were to be listed on the NYSE, those conducting tender offers in
accordance with these shareholder protection measures would be compelled by
section 7(f) to comply with NYSE and Securities and Exchange Commission
(ʺSECʺ) rules and regulations. Section 7(f)(iv) further obligates the acquirer to
publish notice of its tender offer ʺin the business section of the major newspapers
. . . in the City of New York, U.S.A. and any other city where the shares [of YPF]
shall be listed.ʺ App. 340. Perhaps most importantly for purposes of this appeal,
section 28(A) of the bylaws extends the tender offer requirement of sections 7(e)
and 7(f) to:
all acquisitions made by the [Government of Argentina], whether directly or indirectly, by any means or instrument, of shares or securities of [YPF], 1) if, as a consequence of such acquisition, the [Government] becomes the owner, or exercises the control of, the shares of [YPF], which, in addition to the prior holdings
thereof of any class of shares, represent, in the aggregate, at least 49% of the capital stock [of YPF]; or 2) if the [Government] acquires at least 8% of class D outstanding shares of stock, while withholding class A shares of stock amounting at least to 5% of the capital stock.
App. 432.
The penalties for breaching these provisions are drastic. Section 7(h)
provides that ʺ[s]hares of stock and securities acquired in breach of [the tender
offer requirements] shall not grant any right to vote or collect dividends.ʺ App.
342. And section 28(C) extends such treatment to shares acquired by Argentina,
unless its breach is accidental. In that case, ʺ[t]he penalties provided for in
subsection (h) of Section 7 shall be limited . . . to the loss of the right to vote.ʺ
App. 355. At bottom, these shareholder protection measures appear to promise
investors a compensated exit from their ownership position in the firm if
Argentina were to decide to renationalize YPF.
Argentina and YPF touted these protections in the prospectus filed
with the SEC in connection with the IPO. That document stated that ʺ[u]nder
[YPFʹs] By‐laws, in order to acquire a majority of [YPFʹs] capital stock . . . , the
Argentine Government first would be required to make a cash tender offer to all
holders of [the shares] on terms and conditions specified in the By‐laws.ʺ App.
23. The prospectus further stated that ʺany Control Acquisition carried out by
the Argentine Government other than in accordance with th[at] procedure . . .
will result in the suspension of the voting, dividend and other distribution rights
of the shares so acquired.ʺ Id. (alteration in original).
By all accounts, Argentinaʹs marketing efforts worked. YPF
launched a successful IPO on June 29, 1993. Through the sale of YPF securities,
Argentina raised billions of dollars in investment capital with the largest share
(more than $1.1 billion in total) coming from the sale of ADRs in the United
States on the NYSE. A firm called Repsol S.A. (ʺRepsolʺ) emerged from the IPO
as YPFʹs majority shareholder. Even after the IPO, however, Argentina
continued to participate in YPFʹs corporate governance as a commercial actor. It
remained a holder of YPFʹs Class A shares, entitling it to elect at least one
member of the firmʹs board of directors. Argentina also retained a veto right over
certain third‐party acquisitions of YPFʹs capital stock. After the IPO, YPFʹs
shares, via the ADRs, were traded publicly on the NYSE and other exchanges.
Plaintiffs‐appellees Petersen Energía Inversora, S.A.U. and Petersen
Energía, S.A.U. (together, ʺPetersenʺ) entered the picture in 2008. Between 2008
and 2011, Petersen conducted a series of acquisitions and came to own
approximately 25% of YPFʹs shares, held in the form of ADRs issued by the Bank
of New York Mellon in New York City. All of Petersenʹs acquisitions were made
in accordance with YPFʹs bylaws, including the tender offer provisions in section
7. The bulk of Petersenʹs shares were purchased from Repsol and their purchase
was financed by Repsol and various financial institutions, which maintained a
security interest in the stock as collateral. As part of a shareholder agreement
with Petersen, Repsol agreed to cause YPF to make biannual distributions of 90%
of its profits to shareholders via dividends in accordance with section 25 of the
bylaws. Petersen often used these dividends to make payments on the loans it
used to finance the purchase of YPF stock.
All of that changed in 2012. Early that year, members of the
Argentine government began publicly criticizing Repsolʹs and Petersenʹs
management of YPF and started discussing the prospect of renationalizing the
company. The value of YPFʹs ADRs plummeted in response to this news. To put
what happened next in the appropriate context, it helps to understand a little
about the mechanics of Argentine expropriation law.
II. Argentine Expropriation Law
Expropriation is the ʺgovernmental taking or modification of an
individualʹs property rights.ʺ Expropriation, BLACKʹS LAW DICTIONARY (10th ed.
2014). A ʺclassic exampleʺ is the governmentʹs condemnation of a parcel of land
to make way for some public good, like a road. Murr v. Wisconsin, 137 S. Ct.
1933, 1939 (2017). The enactment of land use regulations may also, in some cases,
constitute an expropriation. See id. But these land‐based examples understate
the breadth of a sovereignʹs power of expropriation, which can be vast. That is so
because all types of property can be expropriated, whether tangible or intangible.
Personal property, airspace rights, contract rights, even the shares of a
corporation ‐‐ at least in theory, a sovereign can expropriate them all. See Penn
Cent. Transp. Co. v. City of New York, 438 U.S. 104, 128 (1978) (discussing a ʺtakingʺ
of airspace rights); accord August Reinisch, Expropriation, in The Oxford Handbook
of International Investment Law 407, 410 (Peter Muchlinski et al. eds., 2008) (ʺIt is
generally asserted that expropriation may affect not only tangible property but
also a broad range of intangible assets of economic value to an investor. Property
that may be expropriated by states thus comprises immaterial rights and
interests, including in particular contractual rights.ʺ). In reality, however,
whether a government may expropriate property, what property is subject to
expropriation, and how much the government must compensate the individual it
expropriated the property from (if at all) are largely questions of law of the
expropriating nation. Leo T. Kissam & Edmond K. Leach, Sovereign Expropriation
of Property and Abrogation of Concession Contracts, 28 Fordham. L. Rev. 177, 184
(1959) (ʺStates are at liberty to carry out . . . expropriations in the manner and
form they consider best; . . . they are free to operate their municipal system of
property according to their own national genius . . . .ʺ); compare Org. for Econ.
Co‐operation & Dev., ʺIndirect Expropriationʺ and the ʺRight to Regulateʺ in
International Investment Law, in International Investment Law: A Changing Landscape
43, 43‐72 (2005) (discussing limits imposed on expropriations by customary
international law). In this case, we look to Argentine law. See Garb v. Republic of
Poland, 440 F.3d 579, 594‐98 (2d Cir. 2006).
Article 17 of Argentinaʹs National Constitution sets the conditions
under which property may be expropriated by the Argentine government. To
effectuate an expropriation consistent with Article 17, two conditions must be
met: (1) the Argentine Congress must declare a public use for the property to be
expropriated and (2) the owner of the property must be compensated. The
Argentine government has passed laws to clarify what property is subject to
expropriation and to specify the procedures that must be followed to meet the
conditions for expropriation.
One such law is Law 21,499, known as the ʺGeneral Expropriation
Law.ʺ App. 57. It empowers, among other entities, the Argentine Federal
Government to act as an expropriator. As for the declaration of public use
required by Article 17 of the National Constitution, section 5 of the General
Expropriation Law clarifies that the Argentine Congress ʺshall particularly refer
to specific propertyʺ to be expropriated in its declaration and section 1 provides
that ʺ[p]ublic use, which is required as legal grounds for expropriation,
comprises all cases where public welfare may be involved.ʺ App. 185‐86. The
law further declares that ʺ[a]ll such property as may be convenient or necessary
to satisfy [that] ʹpublic useʹ purpose, whatever the legal nature thereof, whether
publicly or privately owned, or be they things or not, may be subject to
expropriation . . . .ʺ App. 186. As for compensation for that property, section 10
of the General Expropriation Law provides that the owner shall receive ʺthe
objective value of the property plus any direct and immediate damages resulting
from expropriation,ʺ such amounts to be fixed by agreement of the owner and
expropriator or pursuant to a court proceeding. App. 187. And, presumably to
prevent the ownerʹs malfeasance while compensation is being fixed, section 16 of
the law proclaims that ʺ[n]o contract executed by the owner after the effective
date of the law declaring the expropriation of the property and which may imply
the creation of any right or interest in the property shall be good as against the
expropriator.ʺ App. 187.
Accordingly, with this legal backdrop in mind, we return to how
Argentina regained control over YPFʹs affairs in the spring of 2012.
III. Argentina Regains Control of YPF
On April 16, 2012, pursuant to the General Expropriation Law,
Argentina proposed legislation that would expropriate directly from Repsol 51%
of the voting stock of YPF. On the same day, the Argentine National Executive
Office decreed that it was empowering an ʺIntervenorʺ to seize immediate control
of YPFʹs operations and to operate the company as a going concern while the
Argentine Congress considered the expropriation legislation. Action was swift.
Indeed, before some of these measures were even announced publicly, the
Intervenor seized control of YPFʹs facilities, replaced top management with
government officials, and escorted YPFʹs then‐CEO off the premises. The
Intervenor also cancelled regularly‐scheduled meetings of YPFʹs board of
directors and refused to make expected dividend payments.
Argentine officials were also quick to declare that, despite having
acquired control of the company, Argentina and YPF had no intention of
complying with the tender offer provisions of YPFʹs bylaws. For example, on
April 17, 2012, in a speech before the Argentine Senate, the countryʹs Deputy
Economy Minister described as ʺfools . . . those who think that the State has to be
stupid and buy everyone according to YPFʹs own law, respecting its by‐law.ʺ
App. 29 n.1. He also dismissed the tender offer requirements as ʺunfairʺ and a
ʺbear trap.ʺ Id.
On May 3, 2012, the proposed expropriation legislation was enacted
as Law 26,741 with an effective date of May 7, 2012 (the ʺYPF Expropriation
Lawʺ). In accordance with Article 17 of the National Constitution, the YPF
Expropriation Law pronounced Argentinaʹs national public interest in achieving
ʺself‐sufficiency in hydrocarbon[] supply,ʺ App. 165, by, inter alia, integrating
ʺpublic and private . . . capital into strategic alliances aimed at the exploration
and exploitation of conventional and unconventional hydrocarbons,ʺ App. 166.
The law further provided that:
to ensure the fulfillment of the objectives of this law, the fifty‐one percent (51%) equity interest in YPF Sociedad Anónima represented by the same percentage of Class D shares of the said Company, held by Repsol YPF S.A., its controlled or controlling entities, directly or indirectly, is hereby declared to be of public use and subject to expropriation.
App. 167. The YPF Expropriation Law also extended the Intervenorʹs control
over the firmʹs operations and granted the Argentine executive branch the right
to ʺexercise all the political rights over all the shares subject to expropriationʺ
until the expropriation, including compensation of Repsol, was finalized. App.
167.
Argentina did indeed exercise the rights of Repsolʹs shares, using
them to cancel YPFʹs previously‐scheduled dividend payment and board
meeting in April 2012, and voted the shares at a shareholder meeting in June
2012, in contravention of section 7(h) of the bylaws. Unable to meet its loan
obligations without the dividend payment, Petersen entered insolvency
proceedings in July 2012 and its lenders foreclosed on the YPF ADRs that
Petersen had pledged as collateral. Repsol was eventually compensated for its
expropriated shares to the tune of $4.8 billion.
IV. Procedural History
Petersen commenced this action in the district court on April 8, 2015,
alleging, inter alia, breach of contract on grounds that (1) Argentina repudiated its
obligation to make the tender offer in accordance with sections 7(e) and (f) and
28 of the bylaws, (2) YPF breached its obligation to ensure Argentina made such
a tender offer in light of its acquisition of Repsolʹs shares, and (3) YPF permitted
Argentina to exercise the voting rights of Repsolʹs shares and other corporate
governance powers in contravention of section 7(h) of the bylaws. Defendants
moved to dismiss the complaint, arguing, inter alia, that the district court lacked
subject matter jurisdiction under the Foreign Sovereign Immunities Act, 28 U.S.C.
§ 1601 et seq. (the ʺFSIAʺ), and that Petersenʹs claims were barred by the ʺact of
state doctrine.ʺ As is relevant here, the district court denied defendantsʹ motions
to dismiss with respect to the FSIA and act of state issues. They timely appealed
the FSIA ruling and the district court subsequently certified the act of state issue
for our interlocutory review.
DISCUSSION
Two issues are presented. First, we consider whether the federal
courts have subject matter jurisdiction over this case under the FSIA. Second, we
address defendantsʹ arguments based on the act of state doctrine.
I. Subject matter jurisdiction under the FSIA
A. Applicable law
Our jurisdiction over the district courtʹs FSIA ruling is premised on
the collateral order doctrine, which ʺallows an immediate appeal from an order
denying immunity under the FSIA.ʺ Kensington Intʹl Ltd. v. Itoua, 505 F.3d 147,
153 (2d Cir. 2007) (citation omitted). We review de novo ʺa district courtʹs legal
determinations regarding its subject matter jurisdiction, such as whether
sovereign immunity exists,ʺ and its factual determinations for clear error. Filler
v. Hanvit Bank, 378 F.3d 213, 216 (2d Cir. 2004). ʺIn determining whether an
exception to the FSIA applies, the district court can and should consider matters
outside the pleadings relevant to the issue of jurisdiction,ʺ and we do the same
on appeal. Kensington, 505 F.3d at 153.
The FSIA ʺprovides the sole basis for obtaining jurisdiction over a
foreign state in the courts of this country.ʺ Argentine Republic v. Amerada Hess
Shipping Corp., 488 U.S. 428, 443 (1989). ʺThe Act states that a ʹforeign state shall
be immune from the jurisdiction of the courts of the United States and of the
States except as provided in sections 1605 to 1607.ʹʺ Rogers v. Petroleo Brasileiro,
S.A., 673 F.3d 131, 136 (2d Cir. 2012) (quoting 28 U.S.C. § 1604). Here, the parties
do not dispute that Argentina is a foreign state and YPF is an instrumentality of
Argentina and therefore Petersen has ʺthe burden of going forward with
evidence showing that, under exceptions to the FSIA, immunity should not be
granted.ʺ Kensington, 505 F.3d at 153 (citation omitted). ʺWhere the plaintiff
satisfies [its] burden that an FSIA exception applies, the foreign sovereign then
bears the ultimate burden of persuasion that the FSIA exception does not apply.ʺ
Swarna v. Al‐Awadi, 622 F.3d 123, 143 (2d Cir. 2010).
The exception relevant here, the commercial activity exception,
provides as follows:
A foreign state shall not be immune from the jurisdiction of courts of the United States . . . in any case . . . in which the action is based [1] upon a commercial activity carried on in the United States by the foreign state; or [2] upon an act performed in the United States in connection with a commercial activity of the foreign state elsewhere; or [3] upon an act outside the territory of the United States in connection with a commercial activity of the foreign state elsewhere and that act causes a direct effect in the United States.
28 U.S.C. § 1605(a)(2). As for these conditions ʺ[a] plaintiff need only show that
one of [them] is met for the commercial activities exception to apply.ʺ
Kensington, 505 F.3d at 154.
Below, the district court held that Petersenʹs claims satisfy the third
condition, known as the ʺdirect‐effect clause.ʺ To establish jurisdiction on that
basis, the action must be ʺ(1) based . . . upon an act outside the territory of the
United States; (2) that was taken in connection with a commercial activity of
Argentina outside this country; and (3) that cause[d] a direct effect in the United
States.ʺ Republic of Argentina v. Weltover, Inc., 504 U.S. 607, 611 (1992) (alteration
in original) (internal quotation marks omitted).
As to the first element, ʺwe must identify the act of the foreign
sovereign State that serves as the basis for plaintiffsʹ claims.ʺ Garb, 440 F.3d at
586. What matters for this inquiry is that the challenged ʺaction is ʹbased uponʹ
the ʹparticular conductʹ that constitutes the ʹgravamenʹ of the suit.ʺ OBB
Personenverkehr AG v. Sachs, 136 S. Ct. 390, 396 (2015). The Supreme Court has
instructed us to ʺzero[] in on the core of [the plaintiffsʹ] suit: the . . . acts that
actually injured them.ʺ Id.
As to the second element, ʺthe Act defines ʹcommercial activityʹ as
ʹeither a regular course of commercial conduct or a particular commercial
transaction or act,ʹ and provides that ʹ[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.ʹʺ Saudi
Arabia v. Nelson, 507 U.S. 349, 358‐59 (1993) (quoting 28 U.S.C. § 1603(d)). A state
engages in ʺcommercial activity . . . only where it acts ʹin the manner of a private
player withinʹ the marketʺ or, put differently, ʺwhere it exercises ʹonly those
powers that can also be exercised by private citizens,ʹ as distinct from those
ʹpowers peculiar to sovereigns.ʹʺ Id. at 360. For example, ʺa foreign stateʹs
repudiation of a contract is precisely the type of activity in which a private player
within the market engages.ʺ De Csepel v. Republic of Hungary, 714 F.3d 591, 599
(D.C. Cir. 2013) (citation and internal quotation marks omitted). By contrast,
ʺexpropriations . . . do not fall within the ʹcommercial activityʹ exception of the
FSIA [because] [e]xpropriation is a decidedly sovereign ‐‐ rather than commercial
‐‐ activity.ʺ Garb, 440 F.3d at 586.
As to the third element, ʺa direct effect in the United States,ʺ ʺto be
direct, an effect need not be substantial or foreseeable, but rather must simply
follow[] as an immediate consequence of the defendantʹs . . . activity.ʺ Atlantica
Holdings, Inc. v. Sovereign Wealth Fund Samruk‐Kazyna JSC, 813 F.3d 98, 108 (2d
Cir. 2016) (alteration in original) (internal quotation marks omitted).
B. Application
With these principles in mind, we turn to defendantsʹ arguments
that this case does not fall within the FSIAʹs commercial activity exception. We
first consider Argentinaʹs contention that Petersenʹs claims are in fact based on
sovereign acts, rather than commercial ones, and then we address YPFʹs
arguments that it too is entitled to immunity under the FSIA.
1. Argentina
Argentina does not challenge the district courtʹs conclusion that its
breach of the bylawsʹ tender offer requirements caused a direct effect in the
United States. And we agree with that conclusion because those provisions
required Argentina to tender for ADRs listed on the NYSE and ʺcourts have
consistently held that, in contract cases, a breach of a contractual duty causes a
direct effect in the United States sufficient to confer FSIA jurisdiction [if] the
United States is the place of performance for the breached duty.ʺ Id. at 108‐09.
Instead, Argentina argues that Petersenʹs claims are ʺbased onʺ the
sovereign act of expropriation, rather than any commercial activity, thereby
rendering the FSIAʹs commercial activity exception inapplicable. It premises this
argument on three claims about the nature of Petersenʹs lawsuit. First, Argentina
asserts that the complaint misinterprets the bylaws, obscuring that the breach
Petersen complains of is actually Argentinaʹs sovereign expropriation of Repsolʹs
51% ownership stake in YPF, rather than the failure to conduct a tender offer.
Second, Argentina contends that it could not have complied with both the YPF
Expropriation Law and the bylawsʹ tender offer requirement because the former
required Argentina to acquire 51% ownership of YPF and no greater amount.
Third, Argentina characterizes Petersenʹs claims as an impermissible effort to
ʺenforce the bylaws.ʺ Argentina Reply Br. 2. We discuss each argument, in turn.
Argentina first contends that the district court erred in accepting
Petersenʹs interpretation that YPFʹs bylaws permitted Argentina to conduct a
tender offer after it acquired a controlling interest in YPF. According to
Argentina, the bylaws instead required Argentina to acquire its majority
ownership position through the tender offer process contemplated in the bylaws.
Argentina, in this view, breached the bylaws (if at all) by acquiring Repsolʹs stock
through the expropriation instead of a tender offer. So understood, Petersenʹs
lawsuit is not ʺbased onʺ Argentinaʹs commercial activity; rather, it is based on a
decidedly sovereign act, i.e., the expropriation of Repsolʹs shares. Consequently,
Argentina argues that Petersenʹs lawsuit falls outside of the FSIAʹs commercial
activity exception.
We are not persuaded. Looking, as we must, to ʺthe core of [the
plaintiffsʹ] suit,ʺ i.e., ʺthe . . . acts that actually injured them,ʺ OBB Personenverkehr,
136 S. Ct. at 396, we conclude that Petersen seeks relief for injuries caused by
commercial, rather than sovereign, activity.
To start, we agree with the district court that, under the bylaws,
Argentinaʹs expropriation triggered an obligation to make a tender offer for the
remainder of YPFʹs outstanding shares. Argentinaʹs contrary interpretation, i.e.,
that the bylaws required Argentina to conduct a tender offer in order to acquire
Repsolʹs 51% stake in YPF (meaning that the expropriation itself was Argentinaʹs
breach, rather than its subsequent failure to make a tender offer) rests on a
misreading of the bylaws. To recap, section 28(A) of the bylaws provides in its
totality that:
The provisions of subsections e) and f) of Section 7 (with the sole exception of the provisions of paragraph
B of the said Section) shall apply to all acquisitions made by the National Government, whether directly or indirectly, by any means or instrument, of shares or securities of the Corporation, 1) if, as a consequence of such acquisition, the National Government becomes the owner [of], or exercises the control of, the shares of the Corporation, which, in addition to the prior holdings thereof of any class of shares, represent, in the aggregate, at least 49% of the capital stock; or 2) if the National Government acquires at least 8% of class D outstanding shares of stock, while withholding class A shares of stock amounting at least to 5% of the capital stock provided for in subsection (a) of section 6 of these By‐laws upon registration thereof with the Public Registry of Commerce. Should class A shares represent a lower percentage than the one previously mentioned, the provisions set forth in point 2) of this Section shall not be applicable. Instead, the general criteria set forth in subsection d) of Section 7 shall apply.
App. 432. Admittedly, the wording of this bylaw is not a paragon of clarity, a
defect that is no doubt exacerbated by the provisionʹs translation into English
from the Spanish language original. But we can divine its meaning if, for the
sake of simplicity, we unpack some of the cross references and omit certain
clauses that do not apply to this case. Recall, for example, that the tender offer
requirements are found in ʺ[t]he provisions of subsections e) and f) of Section 7,ʺ
App. 432, and that we are concerned only with Argentinaʹs expropriation of
Repsolʹs 51% ownership stake. With these facts in mind, section 28(A) can be
fairly rephrased as follows: 23
The [obligation to make a tender offer] shall apply to [Argentinaʹs acquisition of YPFʹs shares] . . . by any means or instrument . . . if, as a consequence of such acquisition, [Argentina] becomes the owner [of], or exercises the control of, . . . at least 49% of the capital stock [of YPF] . . . .
App. 432. Simply put, section 28(A) compels Argentina to make a tender offer in
accordance with the procedures set forth in the bylaws if ʺby any means or
instrumentʺ it ʺbecomes the owner [of], or exercises the control of,ʺ at least 49%
of YPFʹs capital stock. App. 432 (emphasis added).
This interpretation is bolstered by the language of section 7(d),
which determines whether acquirers other than Argentina must make a tender
offer. That bylaw provides that ʺ[i]f the terms of subsections e) and f) of this
section are not complied with, it shall be forbidden to acquire shares or securities of
the Corporation . . . if, as a result of such acquisition, the purchaser becomes the
holder of,ʺ inter alia, ʺ[15%] or more of the capital stock.ʺ App. 338 (emphasis
added). As the italicized language demonstrates, when the drafters of the
bylaws, namely, YPF and Argentina, wanted to ensure that certain acquisitions
would proceed only through a tender offer process, they used language that flatly
forbade non‐conforming acquisitions. By contrast, the absence of any similar
prohibitory language in section 28(A) suggests that Argentinaʹs acquisition of a
control position is different in that it merely triggers a separate obligation to
make a tender offer. In other words, in contrast to a hostile takeover by a private
actor, Argentinaʹs acquisition of a control position, as such, did not have to be
accomplished through the tender offer.
Under this reading of the contract, we conclude that Petersenʹs
lawsuit is ʺbased onʺ Argentinaʹs breach of a commercial obligation. The
gravamen of Petersenʹs claim is that Argentina denied Petersen the benefit of the
bargain promised by YPFʹs bylaws when Argentina repudiated its obligation to
tender for Petersenʹs shares. As the district court noted, when Argentina
expropriated Repsolʹs 51% stake in YPF, it incurred the obligation under section
28(A) of YPFʹs bylaws to make a tender offer for the remainder of YPFʹs
outstanding shares. That obligation and Argentinaʹs subsequent repudiation of it
were indisputably commercial in nature in that they are ʺthe type of actions by
which a private party engages in trade and traffic or commerce.ʺ Weltover, 504
U.S. at 614 (citation and internal quotation marks omitted); accord De Csepel, 714
F.3d at 599 (ʺ[A] foreign stateʹs repudiation of a contract is precisely the type of
activity in which a private player within the market engages.ʺ (citation and
internal quotation marks omitted)). Indeed, as noted above, the bylaws impose
similar obligations on others who seek to acquire large ownership stakes in YPF,
and the record shows that those commercial actors, including Petersen,
conducted tender offers when so required. Although Argentinaʹs obligation to
conduct a tender offer in this case was triggered by its sovereign act of
expropriation, see Garb, 440 F.3d at 586 (ʺExpropriation is a decidedly sovereign ‐‐
rather than commercial ‐‐ activity.ʺ), there is nothing unusual about conditioning
a commercial obligation on the occurrence of a sovereign act, even when the
sovereign itself is one of the parties to the contract, see, e.g., Guevara v. Republic of
Peru, 468 F.3d 1289, 1300 (11th Cir. 2006) (discussing a hypothetical contract
wherein a sovereign conditioned its payment on a contract ʺto buy bullets from a
private manufacturer . . . on it declaring war on a neighbor before the scheduled
date of deliveryʺ and concluding that ʺ[t]he condition precedent of a declaration
of war . . . does not change the commercial nature of the acts of purchasing and
payingʺ for the bullets); Restatement (Second) of Contracts § 264, ill. 3.
Moreover, as the district court correctly observed, ʺ[t]he commercial contractual
obligations at issue here could just as easily have been triggered by Argentinaʹs
acquisition of a controlling stake in YPF in open‐market transactions.ʺ S. App.
17. Accordingly, for these reasons, we conclude that Argentinaʹs breach of those
obligations was a commercial act, not a sovereign one.
We turn next to Argentinaʹs contentions that (1) it could not have
complied with both the bylaws and the YPF Expropriation Law at the time of its
breach and (2) Petersenʹs lawsuit is an ex post facto attempt to ʺenforce the
bylaws.ʺ Argentina Reply Br. 2. Both arguments fail.
As to the first argument, we see no reason why Argentina could not
have complied with both the bylawsʹ tender offer requirements and the YPF
Expropriation Law. In support of its argument to the contrary, Argentina relies
on the declaration of an expert witness who opines that ʺthe YPF Bylaws cannot
validly restrict, limit, or in any way affect the exercise of sovereign powers of the
National Government in general and regarding expropriations in particular.ʺ
App. 214. Because its expropriation powers trump the bylaws and ʺrequiring
any post‐expropriation tender for the remaining YPF shares would be
inconsistent with the [YPF] Expropriation Lawʹs requirement that Argentina
acquire exactly 51% ownership in YPF,ʺ Argentina Br. 39, Argentina contends that
it could not have complied with both obligations and thus the YPF Expropriation
Law prevails. Finally, Argentina avers that, pursuant to our opinion in In re
Vitamin C Antitrust Litigation, 837 F.3d 175 (2d Cir. 2016), we must defer to its
expertʹs interpretation of Argentine law. Again, we are not persuaded.
Starting with the latter argument, In re Vitamin C Antitrust Litigation
has now been reversed by the Supreme Court, in Animal Science Products, Inc. v.
Hebei Welcome Pharmaceutical Co., 138 S. Ct. 1865 (2018). The Supreme Court in
Animal Science rejected our ruling in Vitamin C that federal courts are ʺbound to
deferʺ to a foreign governmentʹs construction of its own law, 837 F.3d at 189, and
instead held that ʺ[a] federal court should accord respectful consideration to a
foreign governmentʹs submission, but is not bound to accord conclusive effect to
the foreign governmentʹs statements.ʺ Animal Sciences, 138 S. Ct. at 1869.
Here, even according respectful consideration to Argentinaʹs views,
we do not find that the expertʹs interpretation supports Argentinaʹs argument
that ʺany post‐expropriation tender for the remaining YPF shares would be
inconsistent with the [YPF] Expropriation Lawʹs requirement that Argentina
acquire exactly 51% ownership in YPF.ʺ Argentina Br. 39. In particular, there is
no provision in the YPF Expropriation Law itself and no statement in the expertʹs
opinion that the law compelled Argentina to ʺacquire exactly 51% ownership in
YPFʺ and no greater ownership position. Argentina Br. 39 (emphasis in original).
To the contrary, as noted above, the YPF Expropriation Law declares
only that to ensure ʺself‐sufficiency in hydrocarbon[] supply,ʺ App. 165, and to
integrate ʺpublic and private . . . capital into strategic alliances aimed at the
exploration and exploitation of conventional and unconventional hydrocarbons,ʺ
App. 166, ʺthe fifty‐one percent (51%) equity interest in YPF Sociedad Anónima
represented by the same percentage of Class D shares of the said Company, held
by Repsol YPF S.A., its controlled or controlling entities, directly or indirectly, is
hereby declared to be of public use and subject to expropriation,ʺ App. 167. The
law further provides that YPF shall remain a publicly‐traded company after the
expropriation and ʺshall not be subject to any legislation or regulation applicable
to the administration, management and control of companies or entities partly
owned by the national or provincial governmentsʺ of Argentina, confirming that
YPF would continue its normal commercial activities after the expropriation.
App. 169. At bottom, the YPF Expropriation Law does not prohibit a post‐
expropriation tender offer under YPFʹs bylaws; indeed, it says absolutely nothing
about Argentinaʹs acquisition of additional YPF shares in a subsequent market
transaction.
Similarly, Argentinaʹs expert opines only that (1) Argentinaʹs
sovereign power of expropriation cannot be limited by private agreement, (2)
ʺthe expropriation of YPF shares for reasons of public use . . . prevails over
clauses in . . . a private corporate agreementʺ such as the bylaws, and (3) ʺin [his]
opinion, [he did] not perceive, in the process of intervention of YPF or in the
temporary occupation and subsequent expropriation of shares, that there was
any violation of constitutional or legal norms under Argentine law.ʺ App. 218.
Again, none of these opinions support the proposition that Argentina was
required by law to acquire exactly 51% of YPF, no more and no less.
Accordingly, even if we were to accord deference to Argentinaʹs legal expert
pursuant to In re Vitamin C Antitrust Litigation, we conclude that his opinion does
not establish what Argentina says it does. Although we are mindful of the
deference we owe to foreign sovereigns as to the construction of their laws, we
simply see no basis in the record for concluding that Argentina could not have
complied with both the YPF Expropriation Law and the bylawsʹ tender offer
requirements by launching a post‐expropriation tender offer.
As to Argentinaʹs last argument on the FSIA issue, it is unclear what
Argentina means when it characterizes Petersenʹs lawsuit as an attempt to
ʺenforce the bylaws.ʺ Argentina Reply Br. 2. To the extent that Argentina is
suggesting that Petersen wants a court to order Argentina to conduct a tender
offer now, such argument is baseless. Petersenʹs complaint does not seek a
specific performance remedy. Nor could it for Petersen is no longer a YPF
shareholder and therefore could not perform its obligation to tender shares in the
event of a court‐ordered tender offer. Restatement (Second) Contracts § 363,
cmts. a & b (plaintiffʹs ability to perform its obligations under the contract is a
prerequisite to a specific performance remedy). Rather, Petersen merely seeks
compensatory damages for Argentinaʹs breach of its tender offer obligation in
2012. The award of such damages would no more ʺenforce the bylawsʺ than an
award of damages in any breach of contract case would enforce the contract
forming the basis of the plaintiffʹs suit.
In sum, we conclude that when Argentina asserted control over
Repsolʹs 51% stake in YPF via expropriation, it incurred a separate commercial
obligation under the bylaws to make a tender offer for the remainder of YPFʹs
outstanding shares. Because Petersen claims it was injured by Argentinaʹs
repudiation of that commercial obligation and we conclude that the repudiation
was an act separate and apart from Argentinaʹs expropriation of Repsolʹs shares,
we hold that Petersenʹs action against Argentina falls within the ʺdirect‐effects
clauseʺ of the FSIA.
2. YPF
As a threshold matter, we note that although YPF became an
instrumentality of Argentina by virtue of the expropriation of Repsolʹs shares, see
28 U.S.C. § 1603(b)(2) (an ʺinstrumentality of a foreign stateʺ is, inter alia, ʺany
entity . . . a majority of whose shares or other ownership interest is owned by a
foreign stateʺ), that fact does not render all of its subsequent conduct ʺsovereign,ʺ
rather than ʺcommercial,ʺ in nature. See Gemini Shipping, Inc. v. Foreign Trade Org.
for Chems. & Foodstuffs, 647 F.2d 317, 318‐20 (2d Cir. 1981) (noting that a foreign
instrumentality can engage in commercial activity sufficient to bring such
conduct within FSIAʹs commercial activity exception). Instead, the inquiry
remains whether YPF ʺact[ed] in the manner of a private player within the
market,ʺ or whether ʺit exercise[d] . . . powers peculiar to sovereigns.ʺ Nelson, 507
U.S. at 360 (citations and internal quotation marks omitted).
YPF raises two objections to maintaining subject matter jurisdiction
over this case under the FSIA. First, it argues that the gravamen of Petersenʹs
claims against it is its alleged failure to stop Argentina from voting Repsolʹs
expropriated shares and that such act was in compliance with Argentinaʹs
sovereign expropriation and thus not a commercial activity. Second, YPF
contends that its failure to stop Argentina from exercising corporate governance
powers conferred by Repsolʹs shares had no direct effect in the United States.
Petersen responds, correctly in our view, that YPFʹs arguments
ignore that Petersen alleges two separate breaches of YPFʹs bylaws. The
complaint alleges that YPF breached the bylaws by (1) failing to enforce the
bylawsʹ tender offer provisions vis‐à‐vis Argentina and (2) failing to enforce the
penalties that section 7(h) imposes on shareholders who have breached their
tender offer obligations. As for Petersenʹs first theory of the case, we conclude
that the claim against YPF falls within the ʺdirect‐effect clauseʺ of FSIAʹs
commercial activity exception for the same reasons that the analogous claim
against Argentina does. That is, YPFʹs obligation to enforce the tender offer
provision triggered by Argentinaʹs expropriation of Repsolʹs 51% ownership
stake is commercial in nature ‐‐ indeed, every corporation is obligated to abide
by its bylaws, see, e.g., Boilermakers Local 154 Ret. Fund v. Chevron Corp., 73 A.3d
934, 938‐40 (Del. Ch. 2013) ‐‐ and YPFʹs failure to do so caused a direct effect in
the United States, namely, the required tender for ADRs listed on the NYSE
never took place. See Atlantica Holdings, 813 F.3d at 108‐09 (ʺ[C]ourts have
consistently held that, in contract cases, a breach of a contractual duty causes a
direct effect in the United States sufficient to confer FSIA jurisdiction [if] the
United States is the place of performance for the breached duty.ʺ).
As for Petersenʹs second theory of liability, we conclude that YPFʹs
failure to enforce the penalties imposed by section 7(h) is of a piece with its
failure to enforce the tender offer provisions. Like those latter provisions, section
7(h) implicates the commercial affairs of YPF, i.e., what voting rights attach to
which shares and which shares are entitled to collect dividends, and thus its
enforcement or non‐enforcement constitutes commercial activity. To be sure, the
YPF Expropriation Law granted Argentina the right to exercise the voting rights
associated with Respsolʹs shares, but YPF has not explained how that fact
transforms its own failure to enforce the bylaws into an exercise of ʺpowers
peculiar to sovereigns.ʺ Nelson, 507 U.S. at 360. What is more, as noted, the YPF
Expropriation Law explicitly stated that the firm would remain a publicly‐traded
company, subject to laws applicable to private, rather than government‐owned
companies. This fact cuts against YPFʹs contention that it was somehow acting as
a sovereign. Furthermore, YPFʹs refusal to enforce section 7(h)ʹs penalties had a
direct effect in the United States because (1) it enabled Argentina to cancel
planned dividend payments, some of which would have been made to investors
based in the United States, and (2) it precipitated Petersenʹs default on its loan
obligations and the subsequent foreclosure of Petersenʹs ADRs, which were held
by the Bank of New York Mellon in New York City.
Accordingly, we conclude that Petersenʹs claims against YPF also fall
within the ʺdirect‐effect clauseʺ of the FSIAʹs commercial activity exception.
* * *
The thrust of defendantsʹ arguments on appeal is that Petersen has
engaged in a form of artful pleading that we have previously rejected. They
contend that Petersen has re‐characterized Argentinaʹs expropriation of Repsolʹs
shares as a commercial act, rather than a sovereign one, so as to trigger
application of the FSIAʹs commercial activity exception. See Garb, 440 F.3d at 588
(ʺFederal courts have repeatedly rejected litigantsʹ attempts to establish subject
matter jurisdiction pursuant to . . . FSIA exceptions when their claims are in
essence based on disputed takings of property.ʺ). Based on our review of the
complaint and the record before us, however, we are satisfied that Petersen is not
challenging the expropriation.
As noted above, Argentinaʹs expropriation powers are vast. Indeed,
it could have expropriated the entirety of YPF, some smaller portion of the firm
such as the 25% stake owned by Petersen, or even just the contractual rights of
shareholders to receive tender offers in accordance with the bylaws. Of course,
had Argentina done any of these things, it would have been obligated by its own
law to compensate Petersen for ʺthe objective value of the propertyʺ it
expropriated, ʺplus any direct and immediate damages resulting from
expropriation.ʺ App. 187. And we agree that a lawsuit based on such
expropriations would fall outside of the FSIAʹs commercial activity exception.
Argentina, however, did not expropriate anything from Petersen. To
be sure, it did expropriate Repsolʹs 51% stake in YPF. But, Petersen does not
challenge that, or any other sovereign act. Instead, Petersen wants a court to
award it the benefit of the bargain that Argentina and YPF struck with each
shareholder who purchased YPF shares on the open market. Petersen claims that
defendants repudiated that bargain when they refused to conduct a tender offer
in accordance with YPFʹs bylaws, despite having incurred the obligation to do so
by virtue of Argentinaʹs acquisition of a controlling stake in the firm. The
ʺgravamenʺ of Petersenʹs lawsuit is thus the defendantsʹ repudiation of a contract
that had a direct effect in the United States. OBB Personenverkehr, 136 S. Ct. at
396. Sovereigns are not immune from such lawsuits under the FSIA. See
Weltover, 504 U.S. at 614‐15.
The Act of State Doctrine
As noted, we have appellate jurisdiction over the issue of the
defendantsʹ immunity from suit under the FSIA under the collateral order
doctrine, pursuant to which the district courtʹs order denying such immunity
was immediately appealable. See Atlantica Holdings, 813 F.3d at 105. By contrast,
the district courtʹs denial of defendantsʹ motions to dismiss under the act of state
doctrine, which were brought pursuant to Federal Rule of Civil Procedure
12(b)(6), is not immediately appealable. See Will v. Hallock, 546 U.S. 345, 351
(2006); see also Balintulo v. Daimler AG, 727 F.3d 174, 186 (2d Cir. 2013) (ʺAs a
general matter, denials of a motion to dismiss are not appealable as ʹfinal
decisionsʹ of the district courts under 28 U.S.C. § 1291.ʺ).
Interlocutory orders that are otherwise non‐appealable, however,
may be reviewed under 28 U.S.C. § 1292(b) if the district court is ʺof the opinion
that [the relevant] order involves a controlling question of law as to which there
is substantial ground for difference of opinion and that an immediate appeal
from the order may materially advance the ultimate termination of the
litigation.ʺ 28 U.S.C. § 1292(b); see McDonnell Douglas Fin. Corp. v. Penn. Power &
Light Co., 849 F.2d 761, 764 (2d Cir. 1988). If, as here, the district court certifies an
appeal, the Court of Appeals may then, ʺin its discretion, permit an appeal to be
taken from such order.ʺ 28 U.S.C. § 1292(b).
We exercise our discretion not to accept jurisdiction over this aspect
of the appeal. The act of state doctrine provides an affirmative defense and was
raised below on a motion to dismiss pursuant to Rule 12(b)(6). Dismissal was
warranted only if the doctrineʹs applicability was ʺshown on the face of the
complaint.ʺ Konowaloff v. Metro. Museum of Art, 702 F.3d 140, 146 (2d Cir. 2012);
accord Daventree Ltd. v. Republic of Azerbaijan, 349 F. Supp. 2d 736, 755 (S.D.N.Y.
2004) (ʺAs a substantive rather than a jurisdictional defense, the Act of State
doctrine is more appropriately raised in a motion for summary judgment than in
a motion to dismiss.ʺ). As discussed above, the face of Petersenʹs complaint
makes clear that it is not challenging Argentinaʹs official acts ‐‐ the expropriation
of property ‐‐ and the complaintʹs allegations that Argentina and YPF breached
their obligations by failing to engage in a tender offer did not require the district
court to rule on the validity of any of Argentinaʹs official acts. At this juncture of
the proceedings, the act of state doctrine does not present the kind of legal
question that normally constitutes a ʺcontrolling question of law.ʺ Whether the
act of state doctrine bars Petersenʹs claims is a merits determination that turns on
the facts. In these circumstances, we decline to reach the issue. Accordingly, we
dismiss the portion of this appeal challenging the district courtʹs ruling on the
defendantsʹ act of state defense.
CONCLUSION
For the foregoing reasons, we AFFIRM the district courtʹs order
holding that Argentina and YPF are not immune from suit under the FSIA and
DISMISS the portion of this appeal challenging the district courtʹs ruling on the
WINTER, Circuit Judge, concurring in part and dissenting in part:
I agree entirely with the excellent discussion and ruling as to
whether FSIA immunizes Argentina and YPF. I dissent from the disposition of
the act‐of‐state issue.
Having rejected the Section 1292(b) motion that we hear an
interlocutory appeal ‐‐ otherwise non‐appealable ‐‐ from the district courtʹs
rejection on the pleadings of the act‐of‐state defense, my colleaguesʹ opinion is
quite clear that we lack jurisdiction over the act‐of‐state issue. It is less clear in
stating that the reason for rejecting the motion is that the issue depends on
ʺfacts.ʺ The district court ruled that the facts alleged in the complaint stated a
claim that was not subject to the act‐of‐state defense. My colleaguesʹ conclusion
that fact‐finding is needed to rule on the issue is a merits decision going to the
nature and contours of the act‐of‐state defense. Such a conclusion seems,
therefore, inconsistent with the ruling that we lack jurisdiction over the issue.
Because the reasons we give for rejecting FSIA immunity are that the harm to
plaintiffs was not caused by a sovereign, rather than commercial, act of the
Argentinian state, that portion of the opinionʹs reasoning also calls for a rejection
of the act‐of‐state defense to the claim as alleged. A brief review of the relevant procedural history is in order. The
defendants moved to dismiss the complaint on the basis that the district court
lacked subject matter jurisdiction under the FSIA and that Petersenʹs claims were
barred by the act‐of‐state doctrine. The district court denied the defendantsʹ
motion on both fronts. The first issue ‐‐ FSIA immunity ‐‐ was immediately
appealable under the collateral order doctrine. Kensington Intʹl Ltd. v. Itoua, 505
F.3d 147, 153 (2d Cir. 2007). The rejection of the act‐of‐state defense was
interlocutory and not immediately appealable. The district court, believing the
conditions of Section 1292(b) had been met, certified the appeal so that we could
decide both issues in tandem. Argentina and YPF then moved this court to grant
leave for immediate appeal of the act‐of‐state issue. 2d Cir. Dkt. Nos. 16‐3510,
16‐3512. No opposition was filed to these motions. The motions were referred to
a motions panel, which then referred them to the merits panel –‐ this panel –‐ so
that ʺ[t]hat panel can decide, in the first instance, whether the act‐of‐state issue is
appropriate for immediate appeal pursuant to . . . § 1292(b).ʺ Motion Order, 2d
Cir. Dkt. No. 16‐3510 (Feb. 14, 2017).
Pursuant to 28 U.S.C. § 1292(b), we have discretion to allow an
appeal to be taken from an order not otherwise appealable when the district
judge states in writing ʺthat such order [1] involves a controlling question of law
[2] as to which there is substantial ground for difference of opinion and [3] that
an immediate appeal from the order may materially advance the ultimate
termination of the litigation.ʺ (brackets added). In my view, the established
standards under Section 1292(b) are satisfied.
First, a controlling question of law is present. Reversing the district
courtʹs holding that the act‐of‐state doctrine ʺdoes not preclude inquiry into
contractual obligations related to or arising out of [acts of expropriation],ʺ would
result in dismissal of the case. See Klinghoffer v. S.N.C. Achille Lauro, 921 F.2d 21,
24 (2d Cir. 1990) (ʺ[I]t is clear that a question of law is ʹcontrollingʹ if reversal of
the district courtʹs order would terminate the action.ʺ); In re Duplan Corp., 591
F.2d 139, 148 n.11 (2d Cir. 1978).
Second, there is substantial ground for difference of opinion; in
particular, whether Argentinaʹs obligation under the bylaws to make a tender
offer was independent of Argentinaʹs sovereign acts of intervention and
expropriation.
Finally, an immediate appeal would materially advance the ultimate
termination of the case. Judicial efficiency would be served by deciding both this
issue and the FSIA question simultaneously. My colleaguesʹ conclusion as to the
lack of immunity under FSIA is that the facts alleged in the complaint do not
state a claim that implicates a sovereign, rather than commercial, act of the
Argentinian state. This conclusion resolves both the FSIA issue and the act‐of‐
state defense. Only a paragraph, if that, would be necessary to explain an
affirmance of the certified appeal if we took jurisdiction. We need say only that
assertion of an act‐of‐state defense requires that a sovereign, rather than
commercial, act has caused the harm to the plaintiffs, and no such act occurred
here.
Instead, my colleagues deny the motion, hold that we lack appellate
jurisdiction, and explain these rulings on the grounds that unspecified ʺfactsʺ are
needed to adjudicate the act‐of‐state defense. While the reason given suggests a
remand for further proceedings, my colleaguesʹ jurisdictional ruling leaves the
dismissal of the act‐of‐state defense in place and governed by the law of the case
doctrine in the district court. See Am. Hotel Intʹl Grp., Inc. v. OneBeacon Ins. Co.,
611 F. Supp. 2d 373, 378‐79 (S.D.N.Y. 2009) affʹd, 374 F. Appʹx 71 (2d Cir. 2010).
I therefore concur in the affirmance on the FSIA issue. I dissent from
the denial of the Section 1292(b) motion and would affirm the dismissal of the
act‐of‐state defense to the claim alleged in the complaint.