LNC Inv LLC v. Republic Nicaragua

Opinions of the United
2005 Decisions States Court of Appeals
for the Third Circuit
2-1-2005
LNC Inv LLC v. Republic Nicaragua
Precedential or Non-Precedential: Precedential
Docket No. 03-1224
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PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
____
03-1224
______
LNC INVESTMENTS LLC, f/k/a
Investments, Inc.*,
Appellant
v.
THE REPUBLIC NICARAGUA
(* See Clerk's Order of 5/23/03)
On Appeal from the United States District Court
for the District of Delaware
(D.C. No. 01-mc-00134)
District Judge: Honorable Joseph J. Farnan, Jr.
Submitted on Review of Jurisdiction
February 1, 2005
Before: SLOVITER, AMBRO, and ALDISERT, Circuit Judges.
(Filed February 1, 2005 )
_____
Elliot H. Scherker
Greenberg Traurig
Miami, FL 33131
Laurie A. Krepto
Scott Salerni
Greenberg Traurig
Wilmington, DE 19801
Raymond A. Levites
Pavelic & Levites
New York, NY 10012
Attorneys for Appellant
Preeta D. Bansal
Scott D. Musoff
Skadden, Arps, Slate, Meagher & Flom
New York, NY 10036
Scott M. Flicker
G. Hamilton Loeb
Paul, Hastings, Janofsky & Walker
Washington, DC 20004
Philip D. Anker
Wilmer Cutler Pickering Hale & Dorr
Washington, DC 20037
Attorneys for Appellee
OPINION OF THE COURT
SLOVITER, Circuit Judge.
This garnishment action arises from the District Court of
Delaware. Although the named parties in the suit are the
Republic of Nicaragua and LNC Investments, Inc. (“LNC”), the
issue before us arises from LNC’s attempt to garnish funds from
Megatel, a company which owes $50 million to Nicaragua. The
District Court quashed the writ of attachment LNC filed on
2
Megatel because it concluded that Megatel would be exposed to
double liability if the writ were enforced.1 The District Court
had jurisdiction pursuant to 28 U.S.C. § 1963.2 We hold that this
court lacks jurisdiction because the District Court’s Order
quashing the writ of attachment against Megatel was not a final
disposition of the case under 28 U.S.C. § 1291.
I.
A. Megatel’s $ 50 million Obligation to Nicaragua
By agreement dated August 31, 2001 (“Enitel
Agreement”), the Republic of Nicaragua sold forty percent of the
authorized and outstanding shares of Empresa Nicaraguense de
Telecomunicaciones S.A. (“Enitel”), a state-owned and
controlled telecommunications company in Nicaragua, to a
consortium formed by Telia Swedtel AB, a Swedish
telecommunications company, and EMCE, a Honduran holding
company.
The Enitel Agreement provided that the consortium could
1
The District Court reasoned that even if Megatel were to
pay LNC pursuant to the writ of attachment, Nicaraguan law would
not regard that payment as a discharge of Megatel’s obligation to
Nicaragua.
2
28 U.S.C. § 1963 provides in pertinent part:
A judgment in an action for the recovery of money
or property entered in any court of appeals, district
court, bankruptcy court, or in the Court of
International Trade may be registered by filing a
certified copy of the judgment in any other district
or, with respect to the Court of International Trade,
in any judicial district, when the judgment has
become final by appeal or expiration of the time for
appeal or when ordered by the court that entered the
judgment for good cause shown.
3
organize a company for the purpose of purchasing the shares,
and that “all rights, privileges and obligations granted to the
[consortium] through this Agreement shall be transferred ipso
jure” to that company. App. at 271. Pursuant to this clause, the
consortium formed Megatel to purchase the shares under the
Enitel Agreement. On December 18, 2001, Megatel paid
$33,100,999 in cash to Nicaragua towards the price for the
shares of Enitel as per the Enitel Agreement. In addition,
Megatel agreed to pay the remaining $50 million of the agreed
price in five annual installments of $10 million a year.
B. The Republic of Nicaragua’s $86 million Debt to LNC
On December 11, 1980, Nicaragua entered into a loan
agreement (“Loan Agreement”) with a syndicate of banks to
restructure its then existing debt. The Loan Agreement provided
that Nicaragua would waive its sovereign immunity with respect
to any of its obligations arising under the agreement. It further
stated that any final judgment secured by lenders in New York
federal court “shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner
provided by law, and [Nicaragua] hereby irrevocably submits to
the jurisdiction of the courts of each jurisdiction in which any
Person shall seek to enforce such judgment.” App. at 112-113.
In the 1980s, Nicaragua was unable to make payments
required under the Loan Agreement and defaulted on the loans.
In 1986 and 1987, LNC purchased a portion of the debts owed
by Nicaragua under the Loan Agreement on the secondary
market. LNC then brought suit in the United States District
Court for the Southern District of New York for judgment on the
loans. In LNC Invs., Inc. v. Republic of Nicaragua, No. 96 Civ.
6360 (JFK) slip op. at 2 (S.D.N.Y. Apr. 2, 1999), LNC was
awarded a final judgment of $86,885,856.63 plus $230,000 in
attorney’s fees.
LNC asserts that it has been unable to retain counsel in
Nicaragua to enforce its judgment in the courts of that country.
Thus, it has attempted to satisfy its judgment by garnishing the
assets of third parties who owe money to Nicaragua. On several
4
occasions, other federal courts have denied such attempts for
reasons other than the merits of LNC’s judgment. See LNC
Invs., Inc. v. Republic of Nicaragua, No. 99-2090, slip op. (S.D.
Fla. Oct. 2, 2002) (rejecting LNC’s attempt to enforce judgment
by serving a writ of garnishment on Swedtel AB, because LNC
failed to establish personal jurisdiction over Swedtel AB as a
non-resident foreign corporation); LNC Invs., Inc. v. Republic of
Nicaragua, No. 96 Civ. 6360 (JFK), 2000 WL 745550 (S.D.N.Y.
June 8, 2000) (rejecting LNC’s attempt to satisfy judgment by
attaching income tax and value-added tax payments owed by
American Airlines and Continental Airlines to Nicaragua on
ground that the assets were immune from attachment under the
Foreign Sovereign Immunities Act (“FSIA”)); LNC Invs., Inc. v.
Republic of Nicaragua, 115 F. Supp. 2d 358 (S.D.N.Y. 2000)
(rejecting LNC’s attempt to satisfy judgment by executing on
assets of Banco Central de Nicaragua held in the Federal
Reserve Bank of New York on ground that assets were immune
from attachment under the FSIA), aff’d, 228 F.3d 423 (2d Cir.
2000).
C. The Present Action
On December 12, 2001, LNC registered its foreign
judgment with the District Court of Delaware. Thereafter, LNC
filed writs of attachment against Megatel, and against its former
parent companies, Megatel, LLC and Invertel, LLC.
The writ of attachment against Megatel, LLC (one of the
former parents) was filed on May 16, 2002. After receiving no
response, LNC served a writ of attachment for contempt on July
12, 2002. On July 15, 2002, Megatel responded to the writ of
attachment for contempt stating that it holds no goods or assets
belonging to the Republic of Nicaragua. Thereafter, LNC served
a subpoena duces tecum on M egatel, LLC to which M egatel,
LLC filed a motion for a protective order to quash or modify
subpoena.
The writ of attachment against Invertel, LLC (the other
former parent) was filed on August 6, 2002. After receiving no
response, LNC served a writ of attachment for contempt on
5
September 11, 2002. On September 13, 2002, Invertel, LLC
responded to the initial writ of attachment and the writ of
attachment for contempt, stating that it holds no goods or assets
belonging to the Republic of Nicaragua. No further action was
taken on the writ of attachment against Invertel, LLC.
On July 19, 2002, LNC served a writ of attachment
against Megatel itself. On November 19, 2002 Megatel moved
to quash the writ of attachment against it, arguing that
enforcement would subject it to double liability, that the
payments in question were immune from attachment under the
FSIA, and that the District Court lacked jurisdiction to order
attachment of the payments. On December 18, 2002, the District
Court issued a memorandum order granting Megatel’s motion to
quash the writ of attachment, finding that Megatel would be
exposed to double liability if the writ were enforced.
On January 16, 2003, LNC filed a notice of appeal from
the December 18, 2002 Order quashing the writ of attachment
against Megatel. By letter dated February 11, 2003, we directed
the parties to respond as to whether LNC’s appeal was
jurisdictionally defective because “it appears that a writ of
attachment remains pending against Invertel.” That letter did not
refer to the pending writ of attachment against Megatel, LLC,
although it is apparent that this writ is pending as well. In
response to our letter, LNC moved the District Court to dismiss
its pending writs of attachment against both Megatel, LLC and
Intervel, LLC, as garnishees for Nicaragua, without prejudice.
The District Court granted this request on February 26, 2003.
On August 4, 2004, Megatel was bought by Sercotel, SA
de CV (“Sercotel”), a wholly owned subsidiary of America
Movil, SA de CV, a publicly traded Mexican company. Thus, at
the present time, Megatel, LLC and Invertel, LLC are no longer
the parent companies of Megatel.
II.
To recapitulate, LNC seeks to appeal the order quashing
its writ of attachment on Megatel. The issue before us is
6
whether LNC’s dismissal without prejudice of its writs of
attachment against Megatel, LLC and Invertel, LLC is sufficient
to render the case procedurally final for purposes of 28 U.S.C. §
1291.3 We hold it is not.
The finality requirement of 28 U.S.C. § 1291 is grounded
“not in merely technical conceptions of ‘finality,’” but rather on
a policy “against piecemeal litigation.” Catlin v. United States,
324 U.S. 229, 233 (1945). Thus, we have “adhered consistently
to the general rule that we lack appellate jurisdiction over partial
adjudications when certain of the claims before the district court
have been dismissed without prejudice.” Fed. Home Loan
Mortgage Corp. v. Scottsdale Ins. Co., 316 F.3d 431, 438 (3d
Cir. 2003); see also Erie County Retirees Ass’n v. County of
Erie, Pa., 220 F.3d 193, 201 (3d. Cir. 2000) (“[O]rdinarily we do
not have jurisdiction under 28 U.S.C. § 1291 of an appeal from
an order partially adjudicating a case when an appellant has
asserted a claim in the district court which it has withdrawn or
dismissed without prejudice.”), cert. denied, 532 U.S. 913
(2001).
We have recognized an exception to this general rule
where the claims dismissed without prejudice are “effectively
barred.” In those cases, we have held that the district court’s
order or judgment is final for purposes of § 1291. For example,
in Fassett v. Delta Kappa Epsilon, 807 F.2d 1150 (3d Cir. 1986),
the district court granted summary judgment on behalf of four of
the five defendants. Rather than proceed to trial against the fifth
3
28 U.S.C. § 1291 states in pertinent part,
The courts of appeals (other than the United States
Court of Appeals for the Federal Circuit) shall have
jurisdiction of appeals from all final decisions of the
district courts of the United States, the United States
District Court for the District of the Canal Zone, the
District Court of Guam, and the District Court of the
Virgin Islands, except where a direct review may be
had in the Supreme Court.
7
defendant alone, plaintiffs filed a stipulation of dismissal
without prejudice against that defendant. Plaintiffs then filed a
timely notice of appeal. We sua sponte explored the issue of
finality and held that despite the general rule barring partial
appeals, plaintiffs’ claims against the fifth defendant were
“effectively barred” because the statute of limitations on that
claim had lapsed at the time the plaintiff entered into the
stipulation of dismissal. Id. at 1155. Thus, adopting a practical
approach, we held that the finality requirement of § 1291 was
satisfied.
Similarly, in GFL Advantage Fund, Ltd. v. Colkitt, 272
F.3d 189, 198-99 n.3 (3d Cir. 2001), the district court twice
dismissed without prejudice defendant’s counterclaims for lack
of specificity. Notwithstanding that the dismissal was without
prejudice, we held that we had jurisdiction under § 1291 to hear
defendant’s appeal from the district court’s order granting
summary judgment to plaintiff because the district court had
determined that defendant’s affirmative defenses, which were
identical to his counterclaims, failed as a matter of law. Thus,
the district court’s dismissal of defendant’s counterclaims
without prejudice effectively barred these claims, and rendered
the district court’s judgment final.
In the instant case, LNC initiated writs of attachment
against Megatel and against Megatel’s former parent companies,
Megatel, LLC and Invertel, LLC, in its attempt to garnish the
$50 million that Megatel owes Nicaragua pursuant to the Enitel
Agreement. In order to be able to appeal the District Court’s
December 18, 2002 Order quashing the writ of attachment
against Megatel, LNC has dismissed the pending writs of
attachment against Megatel, LLC and Invertel, LLC, but it has
done so without prejudice. It argues that the dismissal of
Megatel’s former parents, albeit without prejudice, effectively
bars any future garnishment action against them, rendering the
December 18, 2002 Order final.
LNC first contends that as of August 4, 2004, Megatel,
LLC and Invertel, LLC are no longer the parent companies of
Megatel, and thus, any future garnishment action brought against
8
the former parent companies, predicated on the Enitel
transaction, will fail as a practical matter. This argument may be
factually correct---it is often the case that the dissolution of a
parent subsidiary relationship will completely sever any debt
obligations which the parent owes on behalf of the subsidiary.
However, such fact – contingent determinations must be made
by the district court in the first instance. See, e.g., Sewak v.
I.N.S., 900 F.2d 667, 673 (3d Cir. 1990) (“As an appellate court
we do not take testimony, hear evidence or determine disputed
facts in the first instance. Instead, we rely upon a record
developed in those fora that do take evidence and find facts.”).
There is nothing in the record to eliminate the possibility that
Megatel, LLC or Invertel, LLC assumed some of the debt
obligations of Megatel from the Enitel Agreement, and that these
obligations remain with the parent companies even after the sale
of Megatel to Sercotel. Thus, even after the August 4, 2004 sale,
LNC may have a colorable garnishment action against the
former parent companies. 4
LNC also argues that because both Megatel, LLC and
Invertel, LLC’s responded to the original writs of attachment by
stating that they held no property of the Republic of Nicaragua,
their dismissal without prejudice effectively barred any future
garnishment action. We are not persuaded. We cannot accept
the unilateral assertions of parties opposing a garnishment action
as factually determinative.5
4
For instance, the Enitel Agreement provides that the
transfer of rights from the Telia / EMCE consortium to Megatel
“will not relieve the . . . [consortium] of its representations and
obligations under [certain clauses] of this Agreement, for which the
[consortium] will be severally liable.” App. at 271.
5
Indeed, even after Megatel, LLC responded that it held no
assets belonging to the Republic of Nicaragua, LNC filed a
discovery motion against Megatel, LLC. This discovery motion
remained pending in the District Court until LNC dismissed it
without prejudice on February 26, 2003.
9
Unlike the cases applying the exception referred to above,
we are not faced with a straightforward application of law to
undisputed fact, as was the case in Fassett, nor is this a case
where the District Court made the initial factual and legal
determinations which effectively ended the case before it, as in
GFL Advantage Fund, Ltd. Accordingly, we hold that LNC’s
voluntary dismissal without prejudice of the pending
garnishment actions against Megatel, LLC and Invertel, LLC, as
a practical matter, does not effectively bar a future garnishment
action against the parent companies arising from the Enitel
Agreement.
Accordingly, the District Court’s December 18, 2002
Order is not final for purposes of 28 U.S.C. § 1291.6 See Fed.
Home Loan M ortgage, 316 F.3d at 438 (3d Cir. 2003); Erie
County Retirees Ass’n, 220 F.3d at 201 (3d. Cir. 2000). We will
therefore dismiss this appeal for lack of jurisdiction.
_______________________
6
Such a finding will not deprive LNC of the opportunity
for appellate review. See Ohntrup v. Firearms Ctr., Inc., 802 F.2d
676, 678 (3d Cir. 1986). LNC need only pursue its garnishment
action against Megatel, LLC and Invertel, LLC to their conclusion
in the District Court, or withdraw those proceedings with prejudice.
10