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Bigio v. Coca Cola
United States District Court for

the Southern District of New
York

III.

NEITHER THE ACT OF STATE DOCTRINE NOR THE LOCAL ACTION DOCTRINE BARS DIVERSITY-OF-CITIZENSHIP JURISDICTION OVER THE BIGIOS’ CLAIM AGAINST COCA-COLA

The trial court dismissed the Bigios’ diversity-of-citizenship claims on the ground that their adjudication would require holding "invalid the domestic acts of the Egyptian government," which the trial court found "cannot be done in light of the act of state doctrine, which mandates that the official acts of a foreign sovereign taken within its own territory shall be deemed valid by courts in the United States" (JA 188). Coca-Cola acknowledges in its Summary of Argument the obvious fact that the act of state doctrine was the basis for the trial court’s dismissal of the Bigios’ diversity-of-citizenship claim (Coca-Cola Br. 14-15). But in the body of its Argument, Coca-Cola changes course and contends that the true basis for dismissal of the diversity claim was the "local action doctrine" (Coca-Cola Br. 37-39). The trial court never invoked the "local action doctrine" nor discussed any of the principles associated with it (JA 188-89).

A. The Act of State Doctrine Is Inapplicable to This Case.

Coca-Cola’s only response to our contention that the act of state doctrine does not bar consideration of the validity of an annulled expropriation (see Dominicus Americana Bohio v. Gulf & Western, 473 F. Supp. 680 (S.D.N.Y. 1979)) is that the "asserted repudiation, [is] anything but clear" (Coca-Cola Br. 40). This argument plainly does not justify summary judgment. Since all disputed facts and inferences must be resolved in the light most favorable to the Bigios, questions about the validity of the expropriation decree must be resolved in favor of its validity. Ramirez de Arellano, 745 F.2d at 1534. Moreover, apart from the summary judgment aspect of this case, Coca-Cola has the burden of proving the applicability of the affirmative defense of act of state. Lack of clarity concerning the invalidation of the expropriation fails to satisfy that burden.

Coca-Cola nonetheless contends that the act of state doctrine bars adjudication of this case because the "court would have to examine the validity . . . [of] the refusal of MISR to recognize [that] the alleged repudiation was wrongful" (Coca-Cola Br. 40). Even if the trial court were required to examine MISR’s 1979 refusal to honor the annulment orders, doing so would not implicate the act of state doctrine because this case does not turn upon the legality of that refusal. The Supreme Court has made this point clear: "Act of state issues only arise when a court must decide — that is, when the outcome of the case turns upon — the effect of official action by a foreign sovereign. When that question is not in the case, neither is the act of state doctrine." W.S. Kirkpatrick v. Environmental Tectonics, 493 U.S. 400, 406 (1990) (emphasis in original).

In W.S. Kirkpatrick, the Supreme Court held that the act of state doctrine did not bar an inquiry into whether an American corporation had engaged in illegal conduct with the Nigerian government, even if it meant finding that the Nigerian government had been bribed by the American corporation in entering into a construction contract. "Regardless of what the court’s factual findings may suggest as to the legality of the Nigerian contract, its legality is simply not a question to be decided in the present suit." Id. Here, this case simply does not "turn upon" whether MISR acted illegally in 1979 in refusing to honor the annulment orders. It "turns upon" whether Coca-Cola acted illegally in acquiring the Bigios’ property from the Egyptian government. Thus, "[r]egardless of what the court’s factual findings may suggest as to the legality of" MISR’s conduct, "its legality is simply not a question to be decided in the present suit." Id.

W.S. Kirkpatrick also rejects Coca-Cola’s invocation of the act of state doctrine as a device "designed to prevent . . . entanglement in the internal affairs of another sovereign" (Coca-Cola Br. 41). W.S. Kirkpatrick explained that the act of state doctrine is not viewed as an expression of international comity. See 493 U.S. at 404. Rather, the doctrine is "a consequence of domestic separation of powers" — in other words, it guards against the Judicial branch interfering with the foreign policy prerogatives of the Executive branch. Id. Moreover, it is simply false that the Bigios seek to "invalidate the sale of ENBC" or inject themselves in the internal affairs of the Egyptian government. From the inception of this lawsuit, the Bigios have made it clear that they seek relief only from Coca-Cola for its expropriation of property that it knew has always belonged to the Bigios.

In addition, W.S. Kirkpatrick reiterated that a "balancing approach" weighs against application of the act of state doctrine where, as here, "the government that committed the ‘challenged act of state’ is no longer in existence." Id. at 409 (citing Sabbatino, 376 U.S. at 428). Coca-Cola seems to suggest that the real question is whether the form of the foreign government has changed over time (Coca-Cola Br. 41). But that fact is irrelevant for act of state purposes. What is relevant is that the Nasser regime is no longer in power. Hence any judicial interference does not breach foreign policy concerns that otherwise would be present if General Nasser were still ruling Egypt. See Republic of Philippines v. Marcos, 806 F.2d 344, 359 (2d Cir. 1986).

Finally, we acknowledge that the en banc opinion of the District of Columbia Circuit in Ramirez de Arellano conflicts with this Court’s interpretation of the Hickenlooper Amendment, 22 U.S.C. 2370(e)(2), but we urge this Court to reconsider its position in light of Ramirez de Arellano and the plain language of the Amendment (Bigio Br. 48-49).

B. The Local Action Doctrine Does Not Bar Consideration of This Case.

Coca-Cola’s contention that the local action doctrine bars consideration of this case is based upon three Nineteenth Century decisions, and a fourth — Pasos v. Pan American Airways, Inc., 229 F.2d 271 (2d Cir. 1956) — that Judge Weinstein charitably described as a "less than crystal clear opinion," which "depends on the questionable theory that a federal court probably cannot exercise any jurisdiction over real property outside of the jurisdiction." Sani-Chem Prods., Inc. v. Town of Clarksdale, No. 77-C-2021, 1977 U.S. Dist. LEXIS 12135, at *3-4 (E.D.N.Y. Dec. 29, 1977).

The "local action doctrine" derives from an English common-law rule that had outlived its rationale by the time the rule was first applied in our courts by Justice John Marshall, riding Circuit, in Livingston v. Jefferson, 15 F. Cas. 660, No. 8411 (D.C.D. Va. 1811)6. Chief Justice Marshall reluctantly "submit[ed]" to the rule, in deference to precedent, despite his feeling that the rule made little sense and often produced grave injustice. The rule of Livingston v. Jefferson has been "almost universally criticized" by commentators and rejected by jurisdictions not "slavishly bound" by the limitations of stare decisis. 17 James Wm. Moore Et. Al., Moore’s Federal Practice 110 App., 104[2] at 46 n.20 (collecting commentary and cases) & 46-48.

This Court, however, need not decide whether to perpetuate a rule that was obsolete upon adoption two centuries ago, and was applied in Pasos almost half a century ago "with much doubt." 229 F.2d at 273. Even in its existing form, the local action doctrine does not bar adjudication of this case. First, the Restatement of Conflict of Laws makes clear that the local action doctrine has no application, where, as here, a plaintiff seeks only money damages for trespass, and does not seek to remove the defendant from the land. The Restatement explicitly provides:

87 Action for Trespass to Foreign Land

A State may entertain an action that seeks to recover compensation for a trespass upon or harm done to land in another state.7

The Bigios’ trespass and conversion claims seek relief against Coca-Cola for its knowing expropriation of the Bigios’ property. The Bigios do not seek ejectment of Coca-Cola, MISR, ENBC, or any other entity. Their trespass claims are for money damages only, and they do not "try title."

Second, even if the trespass action were local, it would not deprive the court of jurisdiction to hear this case. As the District Court said in Firestone v. Galbreath, 722 F. Supp. 1020, 1028 (S.D.N.Y. 1989), "[t]he claims for trespass alone do not render the entire action a local action" where the primary claims sought reconveyance of property on grounds of fraud and undue influence. The Bigios’ ATCA claim is their primary cause of action and "the fact that one count of the action is [local] is not sufficient to make the suit one local in character."

French v. Clinchfield Coal, 407 F. Supp. 13, 17 (D. Del. 1976).


FOOTNOTES:

6. The Restatement (Second) of Conflict of Laws (1971) explains that the rule, requiring that a trespass must be tried in the "neighborhood of the occurrence," was necessitated by the English tradition that "jurymen were supposed to have personal knowledge of the facts" in all cases, not just trespass cases. Comment a, 87. "What is surprising," the Comment explains, is that the local action rule remained in effect in trespass cases "long after jurors were no longer required, or even permitted, to have personal knowledge of the facts of the case." Id.

7. The Comment goes on to explain that the local action rule has no application where an action for trespass

seeks only the recovery of money damages from the defendant. Such an action does not seek to affect title to foreign land, as would a bill to quiet title, nor does it require official action in the state where the land lies, as would a suit in which the plaintiff asks that the defendant be removed from the land and he himself placed in possession (see Comment d). There is no reason why an action for trespass to land should be treated differently than any other action for the recovery of money damages. Actions for trespass to foreign land have been entertained in most of the more recent cases in this country. It is believed that such actions will be increasingly entertained in the future.

Comment d distinguishes "trespass for money damages," in which an action lies anywhere jurisdiction may be had over the defendant, with "trespass to try title," in which "an action will lie only in the state where the land is since one of its objectives is that the defendant be removed from the land and the plaintiff placed in possession" (citation omitted).

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