The opinion of the court was delivered by: Ricardo M. Urbina, United States District Judge.
GRANTING THE PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT AND
DENYING THE DEFENDANT'S MOTION FOR SUMMARY JUDGMENT
This Foreign Sovereign Immunities Act case comes before the court on
the parties' cross-motions for summary judgment pursuant to Federal Rule
of Civil Procedure 56(c). Salah Turkmani ("the plaintiff") seeks damages
for an alleged breach of contract by the Republic of Bolivia ("the
defendant"). The defendant filed its cross-motion for summary judgment on
the ground that it is immune from suit pursuant to the Foreign Sovereign
Immunities Act ("FSIA"), as amended 28 U.S.C. § 1602 et seq., and, in
the alternative, asserts a champerty defense pursuant to Section 489 of
the New York Judiciary Law. After consideration of the parties'
submissions and the relevant law, the court grants the plaintiff's motion
for summary judgment and denies the defendant's motion for summary
The plaintiff served as the president and director of the Mega
Company, and was also the Mega Company's sole shareholder. See Pl.'s
Mot. For Summ. J. ("Pl.'s Mot.") at 6. In the late 1980s, the Mega
Company engaged in the business of purchasing foreign debt from various
creditors, including bondholders. See id. at 7. The defendant is a
foreign state located in South America. See Compl. at 3.
In October 1968, the defendant issued more than $67 million in "sinking
fund" bonds,*fn1 with the principal amount of the bonds set to mature on
October 1, 1995 ("the bonds"). See id. at 2-3. In February 1969, the
defendant entered into a Fiscal Agency Agreement with the Bank of New
York, whereby the defendant established a sinking fund at the Bank of New
York to purchase and redeem the bonds. See id. at 3-4.
The Mega Company, through the plaintiff, bought the majority of the
issue in this case in August 1995 for 12 percent of their par value.*fn2
See Pl.'s Mot. at 6. The Mega Company made the initial purchases from two
different individuals. See id. at 6-10. The plaintiff's wife, Chang Oh
Turkmani, who served as the general counsel at the Mega Company, brokered
each of the deals. See Def.'s Mot. for Summ. J. ("Def.'s Mot.") at 6.
The defendant first defaulted on interest payments due on the bonds
in 1988. See Pl.'s Stat. of Mat. Facts at 14-15. On October 1, 1995, the
defendant defaulted on the principal payments. See id. Several holders of
the Bolivian bonds then instituted a class action against the defendant
on October 18, 1995, in Hirshon v. Bolivia, Civil Action No. 95-1957
(SSH) (D.D.C.). See id. at 15. That class-action suit came before Judge
Stanley S. Harris of this court. See Hirshon v. Bolivia, 979 F. Supp. 908
On December 15, 1995, the defendant entered into an agreement with the
Paris Club ("the Paris Club Agreement"), a group of creditor governments
that formed in 1956 to address restructuring debts with debtor
countries.*fn3 See Def.'s Mot. at 3-4. The Paris Club Agreement provides
for restructuring of the defendant's external debt based on a payment of
33 percent of the principal amount due, with payments of accrued interest
forgiven. See id. The United States and the defendant entered into an
agreement ("the International Agreement") adopting the Paris Club
Agreement on January 23, 1996. See id.
After the defendant had already defaulted on paying the interest and
principal due on the bonds, the Mega Company purchased additional bonds in
October 1996 from a third individual. See Def.'s Mot. at 6. Again, the
plaintiff's wife brokered the purchase of these bonds. See id.
In December 1996, the Mega Company, by a unanimous vote of its board of
directors, transferred the bonds to the plaintiff as a year-end bonus for
his work performed for the company in 1996. See Def.'s Mot. at 7. The
board of directors consisted of the plaintiff, the plaintiff's wife, and
the plaintiff's brother. See id. They set the value of the bonds at
$30,000.00. See id.
The defendant alleges that the plaintiff and his wife spoke to
personnel at the Bolivian Embassy, who informed them that the defendant
was already in default of the principal and interest due on the bonds,
and made no promise of any payment forthcoming. See Def.'s Mot. at 7-8.
The plaintiff claims, to the contrary, that the Bolivian Embassy
represented that the defendant would honor its debt. See Pl.'s Mot. at
9-11. The plaintiff also claims that the bonds were not transferred to
him and his wife for the purposes of initiating litigation as prohibited
by New York's champerty statute.*fn4 See Pl.'s Mot. at 10-11.
On December 11, 1996, Judge Harris preliminarily approved a proposed
settlement in the Hirshon class action, conditionally certified a
settlement class, and approved a notice to be sent to all known
bondholders, including the plaintiff. See Hirshon, 979 F. Supp. at 910;
Pl.'s Mot. at 11. On February 10, 1997, the plaintiff opted out of the
class certified for settlement purposes. See Pl.'s Mot. at 11. On April
4, 1997, the Hirshon class action entered a settlement, awarding payment
of 33 percent of the principal face amount due on the bonds to the
remaining class members. See id.; Hirshon, 979 F. Supp. at 911. Because
the plaintiff did not participate in the 1997 class-action settlement, he
now brings this breach-of-contract claim against the defendant seeking
his own recovery of damages.
The plaintiff filed his complaint on July 8, 1997. As stated before,
the case was initially assigned to Judge Harris. The plaintiff claims
that he bought bonds with an aggregate face value of $220,211.75 and
interest coupons worth $46,101.00. See Compl. at 6. As such, he seeks
damages of at least $266,312.75 plus attorneys' fees.*fn5
The parties filed cross-motions for summary judgment on September 4,
1998. The defendant asserts, among other things, the defenses of
sovereign immunity and champerty. See Answer at 1. On March 15, 2001, the
case was reassigned to the below-signed member of the court, Ricardo M.
On June 4, 2001, the plaintiff renewed his motion for summary
judgment. On June 11, 2001, the defendant renewed its motion for summary
judgment. Accordingly, the parties' cross-motions for summary judgment
are now fully briefed and ripe for resolution. For the reasons that
follow, the court grants summary judgment for the plaintiff and denies
summary judgment for the defendant.
A. Legal Standard for Summary Judgment
Summary judgment is appropriate when "the pleadings, depositions,
answers to interrogatories, and admissions on file, together with the
affidavits, if any, show that there is no genuine issue as to any
material fact and that the moving party is entitled to a judgment as a
matter of law." FED. R. CIV. P. 56(c); see also Celotex Corp. v.
Catrett, 477 U.S. 317, 322 (1986); Diamond v. Atwood, 43 F.3d 1538, 1540
(D.C. Cir. 1995). To determine which facts are "material," a court must
look to the substantive law on which each claim rests. See Anderson v.
Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A "genuine issue" is one
whose resolution could establish an element of a claim or defense and,
therefore, affect the outcome of the action. See Celotex, 477 U.S. at
322; Anderson, 477 U.S. at 248.
In addition, the nonmoving party may not rely solely on allegations or
conclusory statements. See Greene v. Dalton, 164 F.3d 671, 675 (D.C.
Cir. 1999); Harding v. Gray, 9 F.3d 150, 154 (D.C. Cir. 1993). Rather,
the nonmoving party must present specific facts that would enable a
reasonable jury to find in its favor. See Greene, 164 F.3d at 675. If the
evidence "is merely colorable, or is not significantly probative, summary
judgment may be granted." Anderson, 477 U.S. at 249-50 (internal
B. The FSIA Does Not Preclude the Plaintiff's Claim
When the court addresses a suit against a foreign state, the court must
initially determine whether it has subject-matter jurisdiction to hear
the case. See Argentine Republic v. Amerada Hess Shipping Corp.,
488 U.S. 428, 443 (1989). The FSIA provides the sole basis for
jurisdiction over suits against foreign nations. See id.
The FSIA presumes that foreign states are immune from the jurisdiction
of United States courts. See 28 U.S.C. § 1604. Exceptions to this
immunity exist for cases dealing with waiver of immunity, certain
commercial activities, expropriation of certain types of property, cases
concerning rights to immovable property situated in the United States,
and actions based in tort, or admiralty claims. See
28 U.S.C. § 1605(a)(1)-(5),(b).
In the present case, the defendant argues that because the facts giving
rise to the plaintiff's cause of action took place before the enactment
of the FSIA, the court lacks subject-matter jurisdiction over the instant
case because the FSIA may not apply to the defendant retroactively. See
Def.'s Mot. at 11. The plaintiff contends that the FSIA applies to this
case and, furthermore, that the defendant's actions, which are the
subject of this lawsuit, are commercial activities that are exempt from
the FSIA's sovereign-immunity status pursuant to
28 U.S.C. § 1605(a)(2). See Pl.'s Mot. at 24. The court addresses
these arguments in turn.
1. The FSIA Applies to Post-1952 Commercial Acts by a Foreign Sovereign
The court must first determine whether the FSIA applies to the
plaintiff's claim and thereby ascertain whether subject-matter
jurisdiction exists. Since the founding of the nation to the latter half
of the twentieth century, foreign sovereigns enjoyed absolute immunity
from suit in United States courts. See e.g., The Schooner Exchange v.
McFaddon, 11 U.S. 116, 137-38 (1812); see also Verlinden B.V. v. Central
Bank of Nigeria, 461 U.S. 480, 486 (1983) (explaining the history of
sovereign immunity in the United States). During that time, courts
deferred to the decisions of the Executive branch on whether to exert
jurisdiction over actions against foreign sovereigns and their
instrumentalities, and, as a matter of grace and comity on the part of
the United States, the State Department generally requested immunity in
all actions against friendly foreign sovereigns. See Verlinden, 461 U.S.
In 1952, the Tate Letter announced the Executive branch's adoption of
the "restrictive theory" of immunity with respect to claims against
foreign sovereigns. See Letter from Jack B. Tate, Acting Legal
Adviser, Department of State, to Acting Attorney General Philip B. Perlman
(May 19, 1952), reprinted in 26 Dept. of State Bull. 984-985 (1952), and in
Alfred Dunhill of London, Inc. v. Cuba, 425 U.S. 682, 712-13 (1976).
Under the restrictive theory of immunity, foreign states and their
instrumentalities retained immunity for their ...