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De Letelier v. Republic of Chile

November 20, 1984

ISABEL MOREL DE LETELIER, ET AL., JUDGMENT CREDITORS-APPELLEES,
v.
THE REPUBLIC OF CHILE, ALSO DOING BUSINESS AS LINEA AEREA NACIONAL-CHILE, JUDGMENT DEBTOR, AND LINEA AEREA NACIONAL-CHILE, GARNISHEE-APPELLANT



Appeal from United States District Court for the Southern District of New York (Morris E. Lasker, J.) which in orders dated July 28 and December 20, 1983 held that the Chilean National Airline's (LAN's) activities in the murder of the former Chilean Ambassador to the United States and his aide in Washington, D.C. in 1976 constituted commercial activity under the Foreign Sovereign Immunities Act, 28 U.S.C. § 1602-11. Disregarding LAN's separate juridical existence upon equitable principles, the district court granted execution against LAN's assets in New York to satisfy the civil judgment obtained in the United States District Court for the District of Columbia against the Republic of Chile as a result of these wrongful deaths. Reversed.

Author: Cardamone

Before:

CARDAMONE and PRATT, Circuit Judges and BONSAL, District Judge*fn*

CARDAMONE, Circuit Judge:

The critical question posed on this appeal is whether the assets of a foreign state's wholly owned airline are subject to execution to satisfy a default judgment obtained against the foreign state. The district court, believing that Congress under the Foreign Sovereign Immunities Act of 1976, 28 U.S.C. §§ 1602-11 (1982) (FSIA or the Act), would not have established a right to jurisdiction over the foreign state without also providing a remedy, ordered execution. We reverse although we recognize that our decision may preclude the plaintiffs from collecting on their judgment. How one wishes to decide a case comes lightly to mind, on a wing; but often how one must decide it comes arduously, weighed down by somber thought. To rule otherwise here would only illustrate once again that hard cases make bad law.

FACTS

Orlando Letelier, the former Chilean Ambassador to the United States, his aide, Michael Moffitt, and Moffitt's wife, Ronni, were riding to work in Washington, D.C. in September, 1976 when an explosive device planted under the driver's seat in their car was detonated killing both Letelier and Ronni Moffitt and seriously injuring Michael Moffitt. That assassination gives rise to the present appeal.

Investigation by agencies of the United States government into these murders revealed the identity of nine assassins and their alleged connection to the government of Chile. Of the nine only Michael Vernon Townley, an American citizen working for Chilean intelligence, was convicted of a criminal offense. Three of those indicted were members of the Cuban Nationalist Movement who, although found guilty in the trial court, had their convictions reversed on appeal. See United States v. Sampol, 204 U.S. App. D.C. 349, 636 F.2d 621, 684 (D.C. Cir. 1980). Of the other five individuals indicted, none were brought to trial: three were Chilean nationals that Chile refused to extradite, and two remain at large.

In August 1978 the personal representatives of Letelier and Moffit instituted a civil tort action in the United States District Court for the District of Columbia against the indicted individuals and the Republic of Chile. The complaint asserted five causes of action: (1) a conspiracy to deprive Letelier and Moffitt of their civil rights under 42 U.S.C. § 1985; (2) assault and battery; (3) violation of the "law of nations" (international law); and, (5) murder of an internationally protected person under 18 U.S.C. § 1116. The complaint alleged that the non-commercial tort exception of § 7605(a)(5) of the FSIA applied and that Chile was not entitled to sovereign immunity in the tort action.

All defendants defaulted, although Chile sent two Diplomatic Notes to the United States Department of State asserting its sovereign immunity and that the allegations against it were false. The State Department forwarded these Notes to the clerk of the district court. In August 1978 the trial court granted default judgments against the individual defendants. During 1979 and 1980 the district court heard plaintiffs' motion for a default judgment against Chile, see Letelier v. Republic of Chile, 488 F. Supp. 665 (D.D.C. 1980), and finally resolved that motion. See Letelier v. Republic of Chile, 502 F. Supp. 259 (D.D.C. 1980). In the former case, the court ruled that it had subject matter jurisdiction pursuant to the exception to immunity found in § 1605(a)(5) of the Act. In the latter case the trial court relying on Townley's testimony at the criminal trial, where he had pled guilty and testified for the prosecution, granted a default judgment against the Republic of Chile and awarded plaintiffs over five million dollars including interest, compensatory and punitive damages, counsel fees and out of pocket expenses. The Republic of Chile did not take an appeal from either of these judgments.

The resulting judgment against the Republic of Chile was entered in the United States District Court for the District of Columbia. Plaintiffs subsequently filed the judgment in the United States District Court for the Southern District of New York, see 28 U.S.C. § 1963 (1982), for the purpose of executing on the property interests that The Republic of Chile has in the Chilean national airline, Linea Aerea Nacional-Chile or LAN, which is located in New York, and for the appointment of Michael Moffitt as a receiver of those interests to satisfy the judgment against Chile pursuant to New York's CPLR 5228 and Fed. R. Civ. P. 69. The application for execution against LAN's assets came before District Court Judge Morris E. Lasker. LAN moved to dismiss claiming that it should not be held to answer for Chilean debts and that its assets were immune from execution. Relying upon a recent decision of the United States Supreme Court, First National City Bank v. Banco Para El Comercio Exterior de Cuba (Bancec), 462 U.S. 611, 103 S. Ct. 2591, 77 L. Ed. 2d 46 (1983), which based a decision to disregard separate corporation identities on "international equitable principles," Judge Lasker first held in an opinion and order dated July 28, 1983 that, were the facts as asserted, LAN's role in the assassination was commercial activity under the Act. He further held that to adhere to LAN's separate corporate identity would, as in Bancec, violate equitable principles. Letelier v. Republic of Chile, 567 F. Supp. 1490, 1496 (S.D.N.Y. 1983).

Having concluded that LAN's assets were subject to execution to satisfy a judgment against Chile, the district court concluded that the language of § 1610(a)(2) did not limit execution only to commercial assets used for commercial purposes, as LAN claimed, but also permitted execution to satisfy tort judgments "so long as the assets on which the judgment creditor seeks to execute were also used commercially in the activity giving rise to the claim." Id. at 1499. The rationale for this reading of the statute was that a statute should not be interpreted to create a right without a remedy. The court reasoned that if jurisdictional immunity is lifted, the presumption is that there will be a right to execute. Id. at 1500 & n.7.

Plaintiffs later sought discovery against The Republic of Chile by serving it with interrogatories and requests to produce documents and admit facts. Chile refused to comply and again filed Diplomatic Notes asserting its refusal to recognize either the validity of the default judgment or the district court's jurisdiction in the supplementary proceedings for enforcement. Judge Lasker in an order dated December 20, 1983 granted plaintiff's motions for Rule 37 sanctions against LAN consisting of adverse findings of fact that provided a basis to disregard LAN's juridical separateness, and appointed Moffitt as a receiver of LAN's assets in the United States. From the rulings of July 28 and December 20, 1983 LAN has appealed and raised a number of issues.

Discussion

The principal issue is whether LAN's assets may be executed upon to satisfy the judgment obtained in the District of Columbia against Chile. This ;discussion necessarily focuses on the Foreign Sovereign Immunities Act of 1976, which is the exclusive source of subject matter jurisdiction over all suits involving foreign states or their instrumentalities. Rex v. CIA Pervana de Vapores, S.A., 660 F.2d 61, 62 (3d Cir. 1981), cert. denied, 456 U.S. 926, 72 L. Ed. 2d 440, 102 S. Ct. 1971 (1982). According to § 1604, foreign states are immune from suit in our courts unless the conduct complained of comes within the exceptions set forth in §§ 1605 to 1607 of the Act. Similarly, under § 1609 foreign states are immune from execution upon judgments obtained against them, unless an exception set forth in §§ 1610 or 1611 of the FSIA applies.

The judgment creditors claim that § 1610(a)(2) allows them to execute upon LAN's assets in this case, ...


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