Autotech Technologie v. Integral Research ( 2007 )

In the
United States Court of Appeals
For the Seventh Circuit
____________
No. 06-1718
AUTOTECH TECHNOLOGIES LP,
Plaintiff-Appellee,
v.
INTEGRAL RESEARCH & DEVELOPMENT CORP.,
Defendant-Appellant.
____________
Appeal from the United States District Court
for the Northern District of Illinois, Eastern Division.
No. 96 C 3193—David H. Coar, Judge.
____________
ARGUED FEBRUARY 6, 2007—DECIDED AUGUST 29, 2007
____________
Before KANNE, WOOD, and WILLIAMS, Circuit Judges.
WOOD, Circuit Judge. Integral Research & Develop-
ment Corp. (“Integral”) is a company wholly owned by
the Belarusian government; Integral manufactures semi-
conductors. Autotech Technologies LP (“Autotech”) filed
an action against Integral in the U.S. district court for
the Northern District of Illinois in 1996 for violating an
exclusivity agreement that Autotech obtained through a
third party, Digital Devices, Inc. (“DDI”); it also filed a
similar suit in state court against DDI. Autotech, Integral,
and DDI later reached a global settlement, which was
reflected in orders entered by both courts on April 3, 1997
2 No. 06-1718
(“Agreed Order”). The federal judgment stipulated that the
court was retaining jurisdiction to enforce the Agreed
Order. Disputes were not long in coming. A few months
after the Order was entered, Autotech returned to the
district court with a motion seeking contempt sanctions
to enforce its exclusivity rights. The court found this
appropriate and imposed a sanction of $5,000 per day. As
far as anyone can tell, however, no one ever collected a
penny of that money. Almost ten years later, Autotech
sought and was granted an order reducing the accrued
fines to a judgment for $18.8 million. The order did not
stop the continuing accrual of the fines, but it included a
writ of execution granting Autotech the right to seize
Integral’s assets, including those held by third parties.
On appeal, Integral raises a host of reasons why we
should overturn the contempt judgment. Prominent
among them is a challenge to the subject matter juris-
diction of the district court to entertain this contempt
proceeding, because Integral is an instrumentality of a
foreign state. See the Foreign Sovereign Immunities Act
(“FSIA”), 28 U.S.C. §§ 1330, 1601-11. We conclude, how-
ever, that subject matter jurisdiction is secure.
Some of Integral’s other challenges hit their mark. First,
Integral is entitled to pursue its attack now against the
contempt finding underlying this huge judgment. Second,
Autotech’s failure properly to serve Integral with the
motion for contempt deprived Integral of notice of the
proceeding and, consequently, its right to a full and fair
hearing. Third, the writ of execution issued in 2006 was
defective, because it failed to identify specific properties in
the United States against which the judgment could be
executed. Finally, even if the service problem did not
compel reversal of the contempt finding on its own, we
would nonetheless reverse because Autotech failed to
demonstrate that Integral was in contempt of the Agreed
No. 06-1718 3
Order, and it offered no competent proof supporting the
sanction.
I
This case has its roots in an “Exclusive Sales Agreement”
that DDI and Integral concluded in 1992. Their agreement
made DDI the exclusive sales and marketing agent in the
United States for Integral’s products. In 1994, Autotech
purchased from DDI the exclusive right to promote and
sell Integral’s products for resale or incorporation into
products manufactured or sold in the United States; its
authority was embodied in an “Exclusive Marketing
Agreement.” Integral authorized the transfer of rights
from DDI to Autotech through an “Acknowledgment and
Modification of Agreement.” Relations between Autotech
and Integral (as well as Autotech and DDI) soon soured. In
1996, Autotech filed a three-count suit in federal court
against Integral, alleging breach of contract, fraud, and a
pattern of racketeering activity in violation of the Racke-
teer Influenced and Corrupt Organizations (RICO) Act, 18
U.S.C. § 1962(c). The complaint included demands for
$200,000 for the contract claim and more than $10 million
for the fraud and RICO claims. Integral filed two counter-
claims for fraud and RICO violations, demanding $50,000
for the former and more than $19 million for the latter.
Autotech filed parallel claims against DDI in state court.
See Autotech Technologies LP v. Digital Devices, Inc., et
al., 95 CH 3427 (Ill. Cir. Ct., Cook County).
On April 3, 1997, Autotech and Integral agreed to
dismiss the federal suit with prejudice, while allowing the
court to retain jurisdiction to enforce the provisions of
the Agreed Order. The state court suit was resolved
similarly on the same day. The Agreed Order provided that
Integral “shall not sell goods directly or indirectly in the
United States[,] Canada, or to Mexican subcontractors
4 No. 06-1718
except any and all sales may be made by Integral through
[Autotech].” Integral also promised not to use the Data
Book compiled to market Integral’s products. The Order
further required that both Integral and the government
of Belarus had to acknowledge the grant of exclusive
rights. Finally, Autotech waived a $200,000 debt that
Integral owed to it and agreed to transfer $217,000 to
Integral after it received the required acknowledgments.
As Autotech saw it, this agreement worked no better
than its predecessors. On December 2, 1997, Autotech filed
a motion to find Integral in contempt of the Order. The
only specific violation of the Order its motion alleged,
however, was that Integral was selling goods to a company
operated by Art Scornavacca. Autotech requested that
Integral be fined $20,000 a day, submitting that “the
imposition of this fine should have the effect of requiring
Integral to comply with the Court’s Order . . . .” No factual
affidavit accompanied the motion for contempt. Autotech
attached only a copy of the Agreed Order itself, acknowl-
edgments of the Order signed by Integral’s Vice-President
of Sales and Marketing (Dmitry Vecher) and an official
from the Ministry of Industry of the Republic of Belarus,
a copy of a minute entry from November 8, 1996, and a
letter from Vecher to one of Autotech’s principals.
The last of these items, Vecher’s letter, was evidently the
foundation for Autotech’s allegation that Integral was
selling to Scornavacca. The letter suggests that Autotech
and Integral had been discussing a set of five questions.
The second of those questions related to Scornavacca. On
that topic, Vecher wrote (somewhat elliptically), “We can
provide with official confirmation of the binding necessity
of the Agreement for sole agents. While have business
with ordinary buyers (by the way, Mr. Scornavacca is
one of them) making a buying/selling contract with them
is sufficient, moreover that in this case the volumes of
purchases ordered are scanty and do not influence the
No. 06-1718 5
situation at the market.” This quote provides the only
support for Autotech’s assertion in its contempt motion
that “Mr. Vecher ADMITS THAT INTEGRAL IS SELLING
GOODS TO MR. SCORNAVACCA’S COMPANY.” No
record of service was attached to the motion. In its appear-
ance in court on the motion on December 9, 1997, Autotech
alleged only that it “served this on the embassy in Wash-
ington, D.C.”
On the day of the hearing, the district court issued an
Order for a Rule to Show Cause, returnable on December
23, 1997. Autotech had the responsibility of serving
Integral. Back in court on December 23, Autotech’s lawyer
said only that “They were served by certified mail on
December 12th. I have a copy of service or the original.” He
gave no details about who might have been served, and no
document verifying the service was ever entered in the
record. The court granted the motion for contempt, but
it lowered the daily fine from the requested $20,000 to
$5,000 a day out of concern that “[a] hundred days and
we’re up to $20 million.” The fine began accruing on
December 31, 1997. Autotech was ordered to “serve a copy
of this Court’s Order on Integral . . . and on the owner of
Integral . . . , being the Republic of Belarus by its Embassy
in Washington, D.C.” Again, no record of service was ever
made. (In its motion for a writ of execution filed on
February 2, 2006, Autotech alleged that it had spoken with
Integral’s then-attorney John LaPine following the Decem-
ber 23, 1997 contempt order. No competent evidence of
this conversation, in the form of an affidavit or otherwise,
was ever made part of the record.)
Autotech’s February 2, 2006, motion for a writ of execu-
tion submitted that the company had taken steps to
discover and levy upon the assets of Integral in the United
States, but that “[n]o such assets were discovered or
levied upon.” The motion explained that Autotech sought
the writ of execution because it “believes there are assets
6 No. 06-1718
of Integral located in other countries that can be levied
upon to satisfy at least a portion of the judgment debt
owed to Plaintiff. . . . In order to levy upon these assets,
Plaintiff must possess not only a certified copy of the
judgment order . . . but also a Writ of Execution.” (Empha-
sis added.) Yet again, the record contains no copy of
service of this motion on Autotech.
The court granted Autotech’s motion on February 10,
2006, without requiring from it any more information
about the assets it hoped to attach. The court’s writ read
as follows:
a. That Plaintiff, through its agents, is entitled to
enforce and collect from third parties the judgment
debt entered against Defendants on December 23,
1997, which amount is, as of January 31, 2006:
$14,790,000, plus interest of 4.5% compounded annu-
ally, totaling $18,867,730, and which amount contin-
ues increasing at the rate of $5,000.00 per day plus
interest;
b. That those third parties that have, hold, or are in
possession of goods or monies belonging to Integral
[are] commanded to produce to Plaintiff or its agents
all books, papers or records in their possession or
control which may contain information concerning
the property or income of, or indebtedness due Inte-
gral;
c. That those third parties be prohibited from making
or allowing any transfer or other disposition of, or
interfering with, any property not exempt from execu-
tion or garnishment belonging to Integral or to which
he [sic] may be entitled or which may be acquired by
or become due to Integral and from paying over or
otherwise disposing of any money not so exempt, which
is due or becomes due to Integral, until further order
of court or termination of the proceedings. . . . ;
No. 06-1718 7
d. That Plaintiff is allowed to levy upon and seize any
and all assets of Integral held by, in the possession or
control of, said third parties and, if said assets are not
cash money, to sell said assets and convert them
into cash money, and that Plaintiff is entitled to collect
said assets and cash money as and for satisfaction of
that portion of the judgment debt owed to it by Inte-
gral pursuant to the terms of the December 23, 1997
order.
In addition to the writ of execution, the court also reduced
the accrued contempt monies to a judgment order “in the
amount of $18,867,730.” The order also noted that the
issuance of the judgment order did not affect the further
accrual of fines. Integral filed a notice of appeal from the
judgment and the writ of execution on March 30, 2006.
II
A. Subject Matter Jurisdiction
We begin, as we must, with the question of the district
court’s subject matter jurisdiction. For that purpose, we
must look to the suit as a whole, and we must assess
whether jurisdiction was proper as of the time the suit
commenced. See Grupo Dataflux v. Atlas Global Group,
LP, 541 U.S. 567, 570-71 (2004) (reaffirming time-of-filing
rule, but noting also that certain actions after filing may
cure an initial jurisdictional defect). Autotech filed this
action against Integral in 1996. Because Integral, the
defendant, was wholly owned by the government of
Belarus, subject matter jurisdiction depended upon the
application of the FSIA. This is because, as a corporate
entity wholly owned by a foreign government, Integral falls
within the FSIA’s definition of the term “foreign state.” See
28 U.S.C. § 1603(a), (b)(2); Dole Food Co. v. Patrickson,
538 U.S. 468 (2003). Autotech had alleged, erroneously,
8 No. 06-1718
that jurisdiction existed under 28 U.S.C. § 1332, the
diversity and alienage statute. Section 1332 might support
jurisdiction insofar as the case is against the two officers
of Integral who were named in the complaint, but
Autotech has furnished no information about the citizen-
ship of its partners, and so we cannot be sure. In any
event, because it has said nothing about their significance
to the case on appeal, we consider that any arguments
specific to them have been waived. Integral did not deny
that jurisdiction was properly premised on diversity.
Although normally parties cannot consent to federal
jurisdiction, the FSIA presents a special case, as we
discuss below. The statute makes immunity from suit the
general rule for foreign states, see 28 U.S.C. § 1604, but,
perhaps more importantly, § 1605 provides for exceptions
from that general rule.
At least two of those exceptions readily apply to this
litigation. The first, set out in § 1605(a)(1), is waiver; the
other, found in § 1605(a)(2), is for commercial activities
carried on in the United States, or carried on elsewhere
with a direct effect in the United States. Several conse-
quences flow from any decision that an exception to
immunity applies: first, the district court has subject
matter jurisdiction over the claim, 28 U.S.C. § 1330(a);
second, it has personal jurisdiction over the state, 28
U.S.C. § 1330(b); and third, the foreign sovereign (or, as
here, its instrumentality) must defend the case on the
merits. See Verlinden B.V. v. Central Bank of Nigeria, 461
U.S. 480, 488-89 (1983). In a sense, then, in cases gov-
erned by § 1605(a)(1), this means that the voluntary act
of waiver actually does confer jurisdiction on the dis-
trict court, contrary to the usual rule. But the broader
point of the statute, as Verlinden noted, is that it embodies
a congressional determination that suits against foreign
sovereigns inevitably implicate the foreign relations of the
United States and thus “arise under” federal law. See id.
No. 06-1718 9
at 493. Thus, the waiver merely paves the way for the
exercise of jurisdiction that Congress has determined is
appropriate.
Integral never filed a piece of paper proclaiming that it
was waiving its sovereign immunity, but it did so implic-
itly in a number of ways. It never raised an immunity
defense prior to these contempt proceedings—not in a
responsive pleading, not in any other motion, and not in
the Agreed Order. Failing to raise sovereign immunity
and then participating fully in a court proceeding amount
to an implied waiver of immunity. See Allendale Mut. Ins.
Co. v. Bull Data Systems, Inc., 10 F.3d 425, 432 (7th Cir.
1993) (holding that French-owned defendant “waived its
objection to the jurisdiction of the Northern District of
Illinois when it filed its counterclaim against [plaintiff]
in that court without asserting that the court lacked
jurisdiction” (citing RESTATEMENT (THIRD) OF THE FOREIGN
RELATIONS LAW OF THE UNITED STATES § 421(3) (1987))).
Integral also signaled a waiver of its immunity by agree-
ing in its original contract with Digital Devices to arbitrate
in the United States and by agreeing to a contract gov-
erned by Illinois law. See Frolova v. Union of Soviet
Socialist Republics, 761 F.2d 370, 377 (7th Cir. 1985) (“The
legislative history of the FSIA gives . . . examples of cases
in which courts have found implied waivers: . . . (2) a
foreign state has agreed that a contract is governed by the
law of a particular country; and (3) a foreign state has filed
a responsive pleading in a case without raising the defense
of sovereign immunity.” (citing H. R. REP. No. 1487, 94th
Cong., 2d Sess. 18, reprinted in 1976 U.S. CODE CONG. &
AD. NEWS 6604, 6617; S. REP. No. 1310, 94th Cong., 2d
Sess. 18)). We conclude, therefore, that the district court
had subject matter jurisdiction under § 1605(a)(1) because
of Integral’s waiver of its sovereign immunity.
Although it is unnecessary to reach Autotech’s alter-
native argument that jurisdiction existed under the
10 No. 06-1718
commercial-acts exception of § 1605(a)(2), we note that
this too applies here. The underlying contract was all
about marketing Integral’s products in the United States.
It therefore deals with commercial activity undertaken in
the United States of an instrumentality of a foreign
sovereign. That is all that § 1605(a)(2) requires. This case
does not require us to delve into the more complex ques-
tion of when commercial activity outside the United
States has a sufficiently direct domestic effect to come
within the terms of the statute. See Republic of Argentina
v. Weltover, Inc., 504 U.S. 607, 617-20 (1992).
Perhaps realizing that it cannot show a lack of original
jurisdiction in this case, Integral has offered a different
argument for why jurisdiction is lacking here. It suggests
that the FSIA does not authorize federal district courts to
enter monetary contempt sanctions against foreign
sovereigns. This rule, it asserts, implicates not just the
kind of remedy the court may order, but the court’s basic
competence, even if the court has jurisdiction over the
underlying suit. Integral argues that “absent a clear and
specific waiver of sovereign immunity from contempt itself,
a district court lacks the jurisdiction to enforce its
orders through monetary contempt proceedings against
a foreign sovereign.”
We cannot accept this degree of fine-tuning. Once a court
is entitled to exercise subject matter jurisdiction over the
suit, it has the full panoply of powers necessary to bring
that suit to resolution and to enforce whatever judgments
it has entered. From our common-law ancestors forward,
one of the most important of those powers is the power to
punish contempt of court. See, e.g., Spallone v. United
States, 493 U.S. 265, 276 (1990) (reaffirming “axiom that
‘courts have inherent power to enforce compliance with
their lawful orders through civil contempt’ ” (quoting
Shillitani v. United States, 384 U.S. 364, 370 (1966));
No. 06-1718 11
Young v. United States ex rel. Vuitton et Fils, S.A., 481
U.S. 787, 794 (1987) (“[I]t is long settled that courts
possess inherent authority to initiate contempt proceed-
ings for disobedience to their orders . . . .”). Nothing in the
text of the FSIA comes close to suggesting that the FSIA
was designed to abrogate or limit this essential power, or
even that a separate jurisdictional showing is necessary
for a contempt proceeding that arises within a case prop-
erly brought under the FSIA.
The structure of the FSIA itself refutes this idea.
Jurisdiction (as well as immunity) is addressed in § 1604,
which is captioned “Immunity of a foreign state from
jurisdiction,” and § 1605, captioned “General exceptions
to the jurisdictional immunity of a foreign state.” In
contrast, later sections of the statute address various
stages of a proceeding that has passed the jurisdictional
hurdles. Sections 1609 and 1610 respectively outline the
rules for “[i]mmunity from attachment and execution of
the property of a foreign state” and “[e]xceptions” thereto.
These sections delimit the scope of the district court’s
power to enter orders executing a judgment. They are, in
the final analysis, nothing more than restrictions on the
court’s remedial and enforcement powers. Section 1609
says that, subject to certain exceptions, “the property in
the United States of a foreign state shall be immune from
attachment, arrest, and execution . . .”; section 1610(a)
lists those exceptions, in effect indicating when the
property of a foreign state may be attached in aid of
execution on a judgment.
The cases that Integral has cited for the proposition that
the court has no power to enter judgment against a foreign
sovereign offer no support for its argument that a
separate jurisdictional basis must exist for a contempt
proceeding. It is true that the Fifth Circuit overturned the
district court’s issuance of a contempt order in Af-Cap Inc.
v. Republic of Congo, 462 F.3d 417 (5th Cir. 2006), on the
12 No. 06-1718
ground that §§ 1610 and 1611 of FSIA did not provide for
monetary sanctions as an “available method[ ] of attach-
ment and execution against property of foreign states.” Id.
at 428. Whether or not we agree with the outcome of that
case (which we have no occasion to consider here), it is
plain that nothing in the opinion suggests that the Fifth
Circuit thought that the flaw was a jurisdictional one.
(One commentator from the State Department has opined
otherwise, see Marian N. Leich, Judicial Determinations
of Immunity and Department of State’s Role, 81 AM. J.
INT’L L. 643, 644 n.4 (1987) (commenting that the State
Department’s understanding of the FSIA “supported the
position that jurisdiction for purposes of execution and
attachment is not coextensive with jurisdiction to enter-
tain an action”), but we can find no judicial authority
for that proposition.) We would need much more clear
guidance from Congress than we have before we could con-
clude that a court had no jurisdiction to entertain con-
tempt proceedings in an action brought under the FSIA
for which subject matter jurisdiction has been established.
B. Appellate Jurisdiction
This appeal is from a proceeding that arose under the
jurisdiction that the court retained in the Agreed Order to
enforce its provisions. In these circumstances, we “treat
the postjudgment proceeding as if it were a free-standing
lawsuit and . . . identify the final decision in the
postjudgment proceeding and confine any further appeal
under section 1291 to that decision.” Bogard v. Wright, 159
F.3d 1060, 1062 (7th Cir. 1998) (citations omitted). “A
postfinal order will be treated as ‘final’ for purposes of
section 1291 if it ‘dispose[s] of all issues raised in the
postjudgment motion.’ ” JMS Development Co. v. Bulk
Petroleum Corp., 337 F.3d 822, 825 (7th Cir. 2003) (quoting
Transportation Cybernetics, Inc. v. Forest Transit Com’n,
No. 06-1718 13
950 F.2d 350, 352 (7th Cir. 1991)); see also Motorola, Inc.
v. Computer Displays Int’l, Inc., 739 F.2d 1149, 1154 (7th
Cir. 1984) (“While it is true that most post-judgment
orders are final decisions within the ambit of § 1291, not
all are. To be final, the post-judgment order must still
dispose completely of the issues raised.”).
An order issued in post-judgment contempt proceed-
ings may be appealable: “Contempt proceedings brought
to enforce a final judgment are similar in most ways to
other post-judgment proceedings. . . . Complete disposition
of the contempt proceeding supports final judgment
appeal, since there is no apparent opportunity for later
review; appeal ordinarily is not available before complete
disposition . . . .” 15B Charles Alan Wright, Arthur R.
Miller, and Edward H. Cooper, Fed. Prac. & Proc. § 3917
(3d ed. 2000); see also Szabo v. United States Marine
Corp., 819 F.2d 714, 716 (7th Cir. 1987) (“[A]n order of
civil contempt is appealable if and only if it is . . . final for
purposes of section 1291 . . . .”). We accordingly have
jurisdiction over the district court’s entry of its judgment
against Integral assessing a fine of $18,867,730. As we
noted in Motorola, “[a]n order finding a party in civil
contempt disposes of all of the issues raised only if it
includes both a finding of contempt and the imposition of
a sanction.” 739 F.2d at 1154. Although this judgment may
not resolve the underlying issue (Integral’s refusal to
abide by the judgment order), there would be no other time
at which this order would be appealable, for Autotech has
no obligation to wait for the resolution of any other issue
to execute the order and attempt to collect on the judg-
ment. We conclude, therefore, that Integral was entitled
to take its appeal at this time.
III
Satisfied that there is federal subject matter jurisdiction
over this suit and that we have appellate jurisdiction, we
14 No. 06-1718
may now turn to the remaining arguments in this case:
whether Autotech properly served Integral in the contempt
proceeding, whether the writ of execution was adequate,
and whether Autotech made an adequate showing on the
merits of its contempt motion.
A. Service
This question is closely aligned to the issue of our
appellate jurisdiction. Autotech argues that Integral
should have appealed from the contempt order within 30
days of its entry on December 23, 1997. In principle,
Integral could have done so. “A judgment establishing a
system of coercive fines that will be exacted for future
violations of a decree is final when entered; appeal can,
and perhaps must, be taken at the time of entry without
awaiting future contempt and actual imposition of the
fines.” 15B Wright, Miller, and Cooper, Fed. Prac. & Proc.
§ 3917. This means, in Autotech’s view, that Integral is
now barred from making any complaint about either the
underlying finding of contempt or the accrual of the fines.
Integral admits that this appeal is an attempt to collater-
ally attack the underlying 1997 contempt order. It argues
that it may do so, however, because it was never properly
notified about the contempt proceeding.
Before Integral can be barred either by law-of-the-case
principles or something analogous to issue preclusion, it
must have had a fair opportunity to be heard in the
contempt proceeding. “Before finding a party in contempt,
the district court must allow that party an ‘opportunity to
contest the issue.’ ” United States v. Berg, 20 F.3d 304, 310
(7th Cir. 1994) (quoting Ferrell v. Pierce, 785 F.2d 1372,
1383 (7th Cir. 1986)). As the Supreme Court has ex-
plained:
[D]ue process of law as explained in . . . Cooke [v.
United States, 267 U.S. 517 (1925)] requires that one
No. 06-1718 15
charged with contempt of court be advised of the
charges against him, have a reasonable opportunity to
meet them by way of defense or explanation, have the
right to be represented by counsel, and have a chance
to testify and call other witnesses in his behalf, either
by way of defense or explanation.
In re Oliver, 333 U.S. 257, 275 (1948). While Oliver was
a criminal case, the notice requirement applies similarly
in a civil case: “In a civil contempt case, due process
requires that notice be given of the time and place of
hearing.” American Fletcher Mortg. Co., Inc. v. Bass, 688
F.2d 513, 519 (7th Cir. 1982); see also E.E.O.C. v. Local
638, 81 F.3d 1162, 1176 (2d Cir. 1996); Remington Rand
Corporation-Delaware v. Business Systems, Inc., 830 F.2d
1256, 1258 (3d Cir. 1987).
The question here is whether the notice given to
Integral—service on the Belarusian ambassador—was
sufficient both under the FSIA and for due process pur-
poses. The FSIA contains specific rules for service of
process, but it says nothing about service of later motions.
Under FED. R. CIV. P. 4(j)(1), “Service [of process] upon a
foreign state or a political subdivision, agency, or instru-
mentality thereof shall be effected pursuant to 28 U.S.C.
§ 1608.” Section 1608, which is part of the FSIA, autho-
rizes three methods for serving an agency or instrumen-
tality of a foreign state:
(1) by delivery of a copy of the summons and complaint
in accordance with any special arrangement for ser-
vice between the plaintiff and the agency or instru-
mentality; or
(2) if no special arrangement exists, by delivery of a
copy of the summons and complaint either to an
officer, a managing or general agent, or to any other
agent authorized by appointment or by law to receive
service of process in the United States; or in accor-
16 No. 06-1718
dance with an applicable international convention on
service of judicial documents; or
(3) if service cannot be made under paragraphs (1) or
(2), and if reasonably calculated to give actual notice,
by delivery of a copy of the summons and complaint,
together with a translation of each into the official
language of the foreign state—
(A) as directed by an authority of the foreign state
or political subdivision in response to a letter
rogatory or request or
(B) by any form of mail requiring a signed receipt,
to be addressed and dispatched by the clerk of
the court to the agency or instrumentality to be
served, or
(C) as directed by order of the court consistent
with the law of the place where service is to be
made.
28 U.S.C. § 1608(b).
Nothing in the FSIA explicitly requires that notice of a
motion (even a motion for contempt) be given in accordance
with the procedures for serving process. Although neither
the Local Rules of the Northern District of Illinois nor
the Federal Rules of Civil Procedure provide the notice
standard for due process purposes, both supply relevant
benchmarks for our inquiry. The Local Rules of the
Northern District of Illinois generally require formal
service of process for a contempt motion, providing that
“[w]here the alleged contemnor has appeared in the
action by an attorney, the notice of motion or order to
show cause and the papers upon which it is based may
be served upon that attorney; otherwise service shall be
made personally, in the manner provided for by Federal
Rule of Civil Procedure 4 for the service of a summons.”
N.D. ILL. LOCAL RULE § 18(A) (1997). This is more strin-
No. 06-1718 17
gent than the normal requirements for contempt proceed-
ings in federal court, which are satisfied by service that
conforms to FED. R. CIV. P. 5(b). See Watkins v. Rives, 125
F.2d 33, 40 (D.C. Cir. 1941); see also 4B Charles A. Wright
and Arthur R. Miller, Fed. Prac. & Proc. § 1145 (3d ed.
2002) (“Direct service as required by Rule 4 for process
is not required by Rule 5(b) since a civil contempt proceed-
ing is an extension of the main action and personal
jurisdiction need not be reasserted under Rule 4.”).
Although we have not addressed the question, the Third
Circuit has concluded that in evaluating whether notice
was sufficient for due process in a civil contempt proceed-
ing, the court should look to the notice requirements in
FED. R. CRIM. P. 42. See Remington Rand Corporation-
Delaware, 830 F.2d at 1258. Rule 42(a) requires that
notice be given “in open court, in an order to show cause,
or in an arrest order.” If the contempt occurs in open court,
then notice is easy. For indirect cases like this one, the
open-court option may not be available. In any case, the
focus must be on notifying the alleged contemnor, rather
than on the formalities of notification procedures. As a
result, we have recognized that “ ‘[t]he purpose of the
notice is to inform the contemnor of the nature of the
charges and enable the contemnor to prepare a defense.’ ”
American Fletcher Mortg., 688 F.2d at 519 (quoting United
States v. Powers, 629 F.2d 619, 625 (9th Cir. 1980) (cita-
tions omitted)).
Here, the record contains no indication that Integral ever
received notice of the contempt proceeding. All we have
are summary allegations from its adversary in the tran-
script and in a motion, neither of which can substitute for
proof of notice. The only hint of service in the record is
a copy indicating that there was service on the am-
bassador from Belarus, which we discuss below. Although
Autotech halfheartedly claims that it served Integral, the
18 No. 06-1718
latter denies receiving such service and no copy of the
service was made part of the record.
Both FED. R. CIV. P. 4 and 5 require that service be filed
with the court. See FED. R. CIV. P. 4(l) (“If service is not
waived, the person effecting service shall make proof
thereof to the court. If service is made by a person other
than a United States marshal or deputy United States
marshal, the person shall make affidavit thereof.”); FED.
R. CIV. P. 5 (“All papers . . . required to be served upon
a party, together with a certificate of service, must be
filed with the court within a reasonable time after ser-
vice . . . .”). We discussed the requirement of Rule 5 in
Russell v. City of Milwaukee, 338 F.3d 662 (7th Cir. 2003):
Although the word “require” connotes that the filing of
the certificate is mandatory, the rest of the Advisory
Committee Note indicates that the purpose of the
requirement is to aid the district court by creating a
standard method of proof that service was made; there
is no indication that the amendment was meant to
remove completely a district court’s discretion to find
that service has been made when a party fails to file a
certificate. The Advisory Committee Note states:
“Having such information on file may be useful for
many purposes, including proof of service if an issue
arises concerning the effectiveness of the service. The
certificate will generally specify the date as well as
the manner of service . . . .”
Id. at 666. While the court there held that a certificate of
service might not be necessary where service was not
otherwise contested or where there was proof that it had
been accomplished, it also noted that “[c]ertainly, if a
paper filed with the court does not contain the required
certificate of service, a court may disregard it.” Id. Here,
Autotech’s assertion that Integral had notice is not
supported by any record evidence—evidence that Autotech
had the burden of supplying.
No. 06-1718 19
Autotech’s attempt to serve Integral through the
Belarusian embassy does not fill this gap. In fact, service
through an embassy is expressly banned both by an
international treaty to which the United States is a party
and by U.S. statutory law. The Vienna Convention on
Diplomatic Relations, Apr. 18, 1961, 23 U.S.T. 3227,
prohibits service on a diplomatic officer. See Tachiona v.
United States, 386 F.3d 205, 222 (2d Cir. 2004) (“[W]e
decline to construe the FSIA as a license to serve process
on diplomatic and consular representatives, even as agents
for private, non-immune entities.”). This conclusion is
reinforced by the fact that service of process on an ambas-
sador is not authorized by the FSIA. See Alberti v.
Empresa Nicaraguense de la Carne, 705 F.2d 250, 253 (7th
Cir. 1993). In Alberti, we were referring to § 1608(a)(3),
which allows for service “to be addressed and dispatched
by the clerk of the court to the head of the ministry of the
foreign state concerned.” We noted that the House Report
had stated, “A second means [of service], of questionable
validity, involves the mailing of a copy of the summons
and complaint to the diplomatic mission of the foreign
state. Section 1608 precludes this method . . . . Service on
an embassy by mail would be precluded under this bill.” Id.
at 253 (quoting H.R. REP. 1487, 94th Cong., 2d Sess.,
reprinted in 1976 U.S.C.C.A.N. 6604, 6625 (emphasis
added)). This is no less true where an instrumentality of
a foreign state is involved.
In conclusion, there is no competent record evidence of
proper service of the contempt motion on Integral. The
only record of service was by a method that is not autho-
rized under FSIA and is inconsistent with the Vienna
Convention on Diplomatic Relations. This alone resolves
both the question whether Integral may now attack the
judgment (yes) and the question whether the judgment
may stand (no).
20 No. 06-1718
B. Writ of Execution
Although lack of proper notice is enough to dispose of the
present appeal, we deem it useful to address Integral’s
alternative arguments, as these points could conceivably
arise on remand. The first one we discuss is whether the
writ of execution is valid. We review the questions of
immunity from execution under the FSIA de novo. See Af-
Cap, Inc. v. Chevron Overseas (Congo) Ltd., 475 F.3d 1080,
1085-86 (9th Cir. 2007).
Prior to the enactment of the FSIA, the United States
gave absolute immunity to foreign sovereigns from the
execution of judgments. This rule required plaintiffs who
successfully obtained a judgment against a foreign sover-
eign to rely on voluntary repayment by that State. Con-
necticut Bank of Commerce v. Republic of Congo, 309 F.3d
240, 252 (5th Cir. 2002). The FSIA codified this practice
by establishing a general principle of immunity for
foreign sovereigns from execution of judgments: “[T]he
property in the United States of a foreign state shall be
immune from attachment[,] arrest[,] and execution except
as provided in sections 1610 and 1611 of this chapter.” 28
U.S.C. § 1609. This immunity extends to the instrumental-
ities of a foreign state. Em Ltd. v. Republic of Argentina,
473 F.3d 463, 472 (2d Cir. 2007). On the other hand,
in keeping with its general pattern, the FSIA also recog-
nizes exceptions to this immunity, “modif[ying] the rule
barring execution against a foreign state’s property by
‘partially lowering the barrier of immunity from execution
so as to make this immunity conform more closely with the
provisions on jurisdictional immunity in the bill.’ ” Con-
necticut Bank of Commerce, 309 F.3d at 252 (quoting H.R.
REP. 94-1487 at 27 (1976) (emphasis added)). Although
there is some overlap between the exceptions to jurisdic-
tional immunity and those for immunity from execution
and attachment, there is no escaping the fact that the
No. 06-1718 21
latter are more narrowly drawn. See De Letelier v. Repub-
lic of Chile, 748 F.2d 790, 798-99 (2d Cir. 1984).
Subsections 1610(a) and (d) provide general exceptions
to the immunity of a foreign state from execution of a
judgment, while subsection 1610(b) adds additional
exceptions for instrumentalities of a foreign state. See
Connecticut Bank of Commerce, 309 F.3d at 253. In
keeping with the FSIA’s overall design, “[t]he protections
applicable to assets of instrumentalities vary from those
applicable to the assets of the foreign states themselves.”
Em Ltd., 473 F.3d at 472. As the Second Circuit explained
the difference:
Under subsections 1610(a) and (d), assets of a foreign
state can be attached only if the assets sought to be
attached are “used for a commercial activity in the
United States.” But under subsection 1610(b), which
concerns agencies and instrumentalities of foreign
states, creditors may attach “any property in the
United States of an agency or instrumentality of a
foreign state engaged in commercial activity in the
United States,” 28 U.S.C. § 1608(b) (emphasis added).
Em Ltd., 473 F.3d at 472-73; see also Connecticut Bank of
Commerce, 309 F.3d at 252.
Even if the theoretical power to attach assets of Integral
that are found within the United States exists (which is all
that § 1610 promises), that is not enough to win the day
for Autotech. Its effort to secure payment fell short on
much more basic points. First is the question whether
it identified any specific property on which it wished to
execute its judgment. The FSIA says that immunity from
execution is waived only for specific “property.” As a result,
in order to determine whether immunity from execution or
attachment has been waived, the plaintiff must identify
specific property upon which it is trying to act. E.g., Af-
Cap, Inc., 383 F.3d at 367. A court cannot give a party a
22 No. 06-1718
blank check when a foreign sovereign is involved: property
belonging to the sovereign itself, or a different instrumen-
tality, may still enjoy immunity while property of the
instrumentality that is in the case may not. The only way
the court can decide whether it is proper to issue the
writ is if it knows which property is targeted.
It is also of no small moment that the FSIA authorizes
execution only against properties “in the United States.”
See Richmark Corp. v. Timber Falling Consultants, 959
F.2d 1468, 1477 (9th Cir. 1992) (“It is true that section
1610 does not empower United States courts to levy on
assets located outside the United States.”); Fidelity
Partners, Inc. v. Philippine Export and Foreign Loan
Guarantee Corp., 921 F. Supp. 1113, 1119 (S.D.N.Y. 1996)
(“Under the FSIA, assets of foreign states located outside
the United States retain their traditional immunity from
execution to satisfy judgments entered in United States
courts.”); see also Af-Cap, Inc., 383 F.3d at 367 (“[U]nder
§ 1610(a) of the FSIA, a court is prohibited from executing
against the property of a foreign state unless that prop-
erty is: (1) in the United States; and (2) used for com-
mercial activity in the United States.”). The FSIA did not
purport to authorize execution against a foreign sover-
eign’s property, or that of its instrumentality, wherever
that property is located around the world. We would need
some hint from Congress before we felt justified in adopt-
ing such a breathtaking assertion of extraterritorial
jurisdiction. See, e.g., Small v. United States, 544 U.S. 385,
388-89 (2005) (noting “the legal presumption that Con-
gress ordinarily intends its statutes to have domestic, not
extraterritorial, application”). As cases like Pasquantino v.
United States, 544 U.S. 349 (2005), illustrate, the pre-
sumption against extraterritorial effect is not absolute
or rigid. Nor, as Small acknowledged, is there some kind
of “clear statement” rule under which extraterritorial
No. 06-1718 23
application follows only if Congress says so in no uncertain
terms. If, however, as here, there is an absence of “statu-
tory language, context, history, or purpose” indicating that
Congress was legislating with the world in mind, the
presumption is sound. Small, 544 U.S. at 391.
This is undoubtedly why, when considering whether the
tax and royalty obligations owned by the Republic of
Congo were exempt from immunity from execution under
§ 1610(a), the Fifth Circuit tried to identify whether the
situs of those obligations was in the United States. Af-Cap
Inc., 383 F.3d at 371-73. In our case, Autotech frankly
admitted that it intended to use the writ to levy against
assets outside the United States. There is a procedure
for doing so, but Autotech did not use it. If assets exist in
another country, the person seeking to reach them must
try to obtain recognition and enforcement of the U.S.
judgment in the courts of that country. If that effort is
successful, then those courts can use their powers to
assure enforcement of the judgment. Here, not only did
Autotech fail to identify any assets in the United States
that Integral had, it freely admitted that it was not try-
ing to reach any such assets. Under the circumstances,
we must conclude that there was nothing that the writ of
execution could validly reach.
C. Validity of the Contempt Judgment
Integral also asserts that Autotech failed to carry its
burden of proof to show that it was in contempt of the
Agreed Order. We review a district court’s decision on a
contempt motion for abuse of discretion and will not
reverse “ ‘unless the result was clearly erroneous or unless
we find an abuse of discretion by the district court.’ ”
D. Patrick, Inc. v. Ford Motor Co., 8 F.3d 455, 460 (7th Cir.
1993) (quoting Laborers’ Pension Fund v. Dirty Work
Unltd., Inc., 919 F.2d 491, 494 (7th Cir. 1990)). On this
24 No. 06-1718
point, too, we find that Integral has the better of the
argument.
“In order to prevail on a contempt petition, the com-
plaining party must demonstrate by clear and convincing
evidence that the respondent has violated the express
and unequivocal command of a court order.” D. Patrick,
8 F.3d at 460 (emphasis in original). Autotech got off on
the wrong foot by failing to comply with the requirements
set in the Local Rules of the Northern District of Illinois
for this type of motion. Those rules require that “[t]he
affidavit upon which [the] notice of motion or order to
show cause is based shall set out with particularity the
misconduct complained of, the claim, if any, for damages
occasioned thereby, and such evidence as to the amount of
damages as may be available to the moving party.” N.D.
ILL. LOCAL RULE 18(A) (1997). In so doing, the local rules
not only notify the alleged contemnor of the charges
against her but also ensure that the party alleging con-
tempt has entered competent evidence into the record.
Autotech did not submit the required affidavit with its
motion for contempt. One consequence of this failure
was that it neglected to provide enough information to
carry its burden of proof. As we noted at the outset, the
only proof Autotech submitted was the rather incoherent
sentence in Vecher’s letter, which said “While have
business with ordinary buyers (by the way, Mr.
Scornavacca is one of them) making a buying/selling
contract with them is sufficient, moreover that in this
case the volumes of purchases ordered are scanty and do
not influence the situation at the market.” No reasonable
fact-finder could conclude that this statement clearly
and convincingly showed that Integral was admitting
that it was engaged in prohibited sales. It is impossible
to know what the phrases “have business with ordinary
buyers” or “making a buying/selling contract with them”
mean and whether they refer to current or past behavior.
No. 06-1718 25
While Vecher’s letter may be relevant to the question
whether Integral violated its obligations under the Agreed
Order, it is not sufficient on its own to sustain Autotech’s
burden.
Autotech also offered no evidence supporting any
particular level for the contempt sanction. “Civil contempt
sanctions are designed for the dual purpose of compelling
compliance with a court order and compensating the
complainant for losses caused by contemptuous actions.”
Tranzact Tech., Inc. v. 1Source Worldsite, 406 F.3d 851,
856 (7th Cir. 2005). The sanctions must relate to one of
these two purposes:
When the purpose of sanctions in a civil contempt
proceeding is compensatory, a fine, payable to the
complainant, must be based on evidence of actual loss.
When the purpose is to make the defendant comply,
the court must consider the “character and magnitude
of the harm threatened by continued contumacy, and
the probable effectiveness of any suggested sanction
in bringing about the result desired.”
South Suburban Housing Center v. Berry, 186 F.3d 851,
854 (7th Cir. 1999) (quoting United Mine Workers v. Gibbs,
330 U.S. 258, 304 (1947)). The amount of the sanction
must be supported in the record. See id. Here, the record
was silent on this central point. Autotech asked for a
sanction in the amount of $20,000 per day just because, as
its lawyer put it, “in this original RICO [action] we had a
complaint for $10 million which we dismissed . . . based
upon this [global settlement] order. We’re talking about
millions of dollars of goods.” The court reduced the fine to
$5,000 per day because it thought that it would balloon out
of control: “[a] hundred days and we’re up to $20 million.”
Nowhere was there evidence of either the actual losses
Autotech was suffering or what it might take to ensure
Integral’s compliance. Under the circumstances, it was
26 No. 06-1718
an abuse of discretion to find Integral in contempt and to
set a fine of $5,000 per day.
IV
In summary, we conclude that the district court had
subject matter jurisdiction over both the original case and
the contempt proceedings that grew out of it. For several
reasons, we also conclude that Integral is entitled to
appeal from the judgment in excess of $18 million against
it for that alleged contempt. Finally, we conclude that the
judgment cannot stand, because of flaws in service, the
lack of specificity of the property to be covered by the writ
of execution, and the lack of evidence supporting the
finding of contempt and the amount of the judgment. We
therefore VACATE the contempt judgment and the writ of
execution and REMAND for further proceedings con-
sistent with this opinion.
A true Copy:
Teste:
________________________________
Clerk of the United States Court of
Appeals for the Seventh Circuit
USCA-02-C-0072—8-29-07