OPINION AND ORDER
PHILIP SIMON, District Judge
Before the Court is the U.S. Small Business Administration's Motion for Summary Judgment. [DE 81.] The SBA seeks a judgment in its favor against Defendants Ambrosia Banquet and Catering, Inc. and James G. Banaszak based on the outstanding amounts due on a loan made to Ambrosia and guaranteed by Banaszak. The SBA contends that there are no genuine issues of material fact and it is entitled to judgment as a matter of law. No party has filed an opposition to this Motion. For the reasons detailed below, the Motion is granted. Furthermore, because granting the Motion extinguishes the sole basis for federal subject-matter jurisdiction in this case, the case will be remanded to St. Joseph Superior Court, the Indiana state court where it originated.
FACTUAL BACKGROUND
On or about January 25, 2001, Ambrosia entered into a $463,000 loan with another Defendant in this case, Business Development Corporation. [DE 81-1 at 2.] As security for that loan, Banaszak also entered into an unconditional guaranty agreement with Business Development Corporation. [ Id. at 2-3.] Business Development Corporation then assigned the Ambrosia loan and the Banaszak guaranty to the SBA. [ Id. at 3.] Ambrosia defaulted on the loan, and the entire indebtedness of Ambrosia and Banaszak became due and owing to the SBA. [ Id.] As of June 16, 2010, the balance owed jointly and severally by Ambrosia and Banaszak was $494,553.61. [ Id.] Since that day interest has continued to accrue on the principal balance at a rate of 6.423% per annum or $72.86 per diem. [ Id.]
DISCUSSION
Summary judgment is proper "if the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c)(2). In this case, given that no party has filed any response to the SBA's Motion or disputed any of the facts set forth therein, the SBA's allegations in its Statement of Material Facts are deemed admitted unless they are unsupported by the evidence or contradict each other. See Smith v. Lamz, 321 F.3d 680, 683 (7th Cir. 2003) ("We have consistently held that a failure to respond by the nonmovant as required by local rules results in an admission."). Moreover, under Rule 56(e), if a party "fails to properly address another party's assertion of fact," the court may "grant summary judgment if the motion and supporting materials — including the facts considered undisputed — show that the movant is entitled to it." Fed.R.Civ.P. 56(e).
It is easy to see that the SBA is entitled to judgment here. Construction of a written contract is generally a question of law for which summary judgment is appropriate. Kordick v. Merchants National Bank Trust Co., 496 N.E.2d 119, 125 (Ind. Ct. App. 1986). In this case, the loan and guaranty are unambiguous, and it is uncontested that Ambrosia defaulted on its loan and Banaszak defaulted on his guaranty. Once a default has been established, summary judgment is appropriate. Morgan v. Southern Indiana Bank and Trust Company, 473 N.E. 2d 158, 160 (Ind. Ct. App. 1985). Thus, summary judgment in favor of the SBA is appropriate here.
Granting the SBA summary judgment rids this case of its sole federal claim. In instances like this, where all federal law claims have been eliminated and only supplemental state law claims remain, a district court has discretion to remand a properly removed case to state court. Carnegie-Mellon Univ. v. Cohill, 484 U.S. 343, 350 (1988); United Mine Workers of Am. v. Gibbs, 383 U.S. 715, 726 (1966). Indeed, the Seventh Circuit has repeatedly expressed its preference that district courts take this course of action. See, e.g., Leister v. Dovetail, Inc., 546 F.3d 875, 882 (7th Cir. 2008) ("When the federal claim in a case drops out before trial, the presumption is that the district judge will relinquish jurisdiction over any supplemental claim to the state courts."); Contreras v. Suncast Corp., 237 F.3d 756, 766 (7th Cir. 2001); Groce v. Eli Lilly Co., 193 F.3d 496, 501 (7th Cir. 1999).
In order to decide whether to retain jurisdiction over supplemental state law claims, a district court should consider and weigh the factors of judicial economy, convenience, fairness, and comity. Carnegie-Mellon Univ., 484 U.S. at 350. These factors weigh in favor of remand. Notions of comity support remand since this Court should defer to the St. Joseph Superior Court's interest in enforcing the laws of the State of Indiana. St. Joseph Superior Court is also clearly a convenient forum since all the remaining parties are based either in Mishawaka or New Carlisle, Indiana, both of which are located in St. Joseph County. And there is no serious risk of unfairness to any of the parties or a loss of judicial economy because the two motions still pending in this Court — Business Development Corporation's Motion for Summary Judgment [DE 65] and Mutual Bank's Motion for Auction Sale [DE 87] — can easily be resolved by the state court. Thus, this case is remanded to St. Joseph Superior Court.
CONCLUSION
Accordingly, U.S. Small Business Administration's Motion for Summary Judgment [DE 81] is GRANTED against Ambrosia Banquet and Catering, Inc. and James G. Banaszak, jointly and severally, in the amount of $494,553.61, plus a per diem interest amount of $72.86 from June 16, 2010 to the date of this judgment. Pursuant to 28 U.S.C. § 1447(c), this case is hereby REMANDED to the St. Joseph Superior Court, in St. Joseph County, Indiana, for redocketing under Indiana state court case number 71D05-0910-MF-854. Business Development Corporation's Motion for Summary Judgment [DE 65] and Mutual Bank's Motion for Auction Sale [DE 87] are hereby DENIED AS MOOT. The clerk shall treat this civil action as TERMINATED. All further settings in this action are hereby VACATED.
SO ORDERED.
ENTERED: December 3, 2010
rove that an exception to immunity applies.
See, e.g., Saudi Arabia v. Nelson, 507 U.S. 349, 355,
113 S.Ct. 1471,
123 L.Ed.2d 47 (1993) ("Under the Act, a foreign state is presumptively immune from the jurisdiction of United States courts; unless a specified exception applies. . . .");
Export Group v. Reef Indus., Inc., 54 F.3d 1466, 1470 (9th Cir. 1995). So does the history of foreign sovereign immunity in U.S. courts.
At common law, foreign states were absolutely immune from suit and execution. In Schooner Exchange v. McFaddon, 11 U.S. (7 Cranch) 116, 3 L.Ed. 287 (1812), Chief Justice Marshall concluded that a federal court lacked jurisdiction over "a national armed vessel . . . of the emperor of France." Id. at 146. The opinion was read as extending absolute immunity to foreign sovereigns as "a matter of grace and comity." Verlinden, 461 U.S. at 486, 103 S.Ct. 1962. "Following Schooner Exchange, a two-step procedure developed for resolving a foreign state's claim of sovereign immunity. . . ." Samantar, 130 S.Ct. at 2284 (citing Republic of Mexico v. Hoffman, 324 U.S. 30, 34-36, 65 S.Ct. 530, 89 L.Ed. 729 (1945); Ex parte Peru, 318 U.S. 578, 587-89, 63 S.Ct. 793, 87 L.Ed. 1014 (1943); Compania Espanola De Navegacion Maritima, S.A. v. The Navema,r, 303 U.S. 68, 74-75, 58 S.Ct. 432, 82 L.Ed. 667 (1938)). First, the State Department could file a formal suggestion of immunity with the court on behalf of the foreign state. See Samantar, 130 S.Ct. at 2284; Ex parte Peru, 318 U.S. at 581, 63 S.Ct. 793. If the request was granted, the district court dismissed the case for lack of jurisdiction. See Samantar, 130 S.Ct. at 2284; Hoffman, 324 U.S. at 34, 65 S.Ct. 530; Ex parte Peru, 318 U.S. at 588, 63 S.Ct. 793. Second, if the State Department said nothing, a district court "`had authority to decide for itself whether all the requisites for such immunity existed.'" Samantar, 130 S.Ct. at 2284 (quoting Ex parte Peru, 318 U.S. at 587, 63 S.Ct. 793); see also Hoffman, 324 U.S. at 34-35, 65 S.Ct. 530; Puente v. Spanish Nat'l State, 116 F.2d 43 (2d Cir. 1940). In making that determination, the district court considered "whether the ground of immunity is one which it is the established policy of the [State Department] to recognize." Hoffman, 324 U.S. at 36, 65 S.Ct. 530. In this early era, courts used this two-step analysis most often in cases where a plaintiff sought to seize a ship belonging to a foreign state, Samantar, 130 S.Ct. at 2284, cases which primarily implicated immunity from execution.
In 1952, the State Department adopted the "restrictive" theory of foreign sovereign immunity, according to which immunity does not apply to "cases arising out of a foreign state's strictly commercial acts." Verlinden, 461 U.S. at 487, 103 S.Ct. 1962. Courts continued to defer to suggestions of immunity from the State Department and, in the absence of any such suggestion, to make immunity determinations themselves. See, e.g., Isbrandtsen Tankers, Inc. v. President of India, 446 F.2d 1198, 1199 (2d Cir. 1971) (deferring to State Department); Heaney v. Gov't of Spain, 445 F.2d 501, 503 n. 2 (2d Cir. 1971) (deciding immunity sua sponte); Victory Transp., Inc. v. Comisaria General de Abastecimientos y Transportes, 336 F.2d 354, 358-359 (2d Cir. 1964) ("Where, as here, the court has received no communication from the State Department concerning the immunity of the Comisaria General, the court must decide for itself whether it is the established policy of the State Department to recognize claims of immunity of this type.").
The continuing practice of district courts deciding issues of immunity sua sponte was not limited to immunity from suit. Courts also independently resolved questions of immunity from execution. See, e.g., Loomis v. Rogers, 254 F.2d 941 (D.C. Cir. 1958). In Loomis, the D.C. Circuit refused to permit the attachment of a fund which contained proceeds from the sale of oil owned by Italy. Id. at 942. The court relied on the "well-established rule of international law that the public property of a foreign sovereign is immune from legal process without the consent of that sovereign," which is "based upon principles of international comity, each sovereign yielding a portion of that absolute territorial jurisdiction which is the attribute of every nation." Id. at 943. There was no formal suggestion of immunity from the State Department or the Government of Italy, but the court explained that the "requirement that there be a formal suggestion of immunity applies only in those cases where there is a question of fact as to whether the property proceeded against is the public property of a foreign sovereign." Id. at 944. Because there was no question that the fund belonged to Italy, it could not be attached. See id.
Congress enacted the Foreign Sovereign Immunities Act in 1976 because, in part, "political considerations sometimes led the Department to file suggestions of immunity in cases where immunity would not have been available under the restrictive theory." Altmann, 541 U.S. at 690, 124 S.Ct. 2240 (quotation omitted). The FSIA made it the responsibility of the courts, not the State Department, to decide issues of immunity in the first instance. Congress essentially did away with the first step — a suggestion from the State Department — in what used to be a two-step immunity analysis. It did not, however, disturb the default presumption of foreign sovereign immunity or the practice of courts deciding issues of immunity sua sponte in cases where immunity is not raised by the State Department or a foreign state even though it is clear that the defendant was a foreign state or the property at issue belongs to a foreign state. This practice has clearly continued with respect to immunity from suit, Verlinden, 461 U.S. at 493 n. 20, 103 S.Ct. 1962, and, somewhat less clearly, with respect to immunity from execution. See, e.g., Letelier v. Republic of Chile, 748 F.2d 790, 792-93 (2d Cir. 1984) (deciding whether New York assets of Chilean national airline were immune from attachment even though Chile had steadfastly refused to participate in the liability and enforcement proceedings).
Allowing courts to independently raise and decide the question of immunity from execution is not only consistent with historical practice, but also with the purposes underlying the FSIA. A burden-shifting approach, unlike one that places the burden on the foreign state to plead and prove that its property is immune, is appropriately respectful of the "perfect equality and absolute independence of sovereigns, and th[e] common interest impelling them to mutual intercourse." The Schooner Exchange, 11 U.S. at 137, 7 Cranch 116; see also Nat'l City Bank of N.Y. v. Republic of China, 348 U.S. 356, 362, 75 S.Ct. 423, 99 L.Ed. 389 (1955) (explaining the doctrine of foreign sovereign immunity is based on "reciprocal selfinterest[] and respect for the `power and dignity' of the foreign sovereign"). The FSIA was meant to spare foreign states not only from liability on the merits but also from the cost and inconvenience of trial. See Foremost-McKesson, Inc. v. Islamic Republic of Iran, 905 F.2d 438, 443 (D.C. Cir. 1990) ("[Sovereign immunity is an immunity from trial and the attendant burdens of litigation, and not just a defense to liability on the merits." (quotation omitted)). Requiring the plaintiff to prove that immunity does not exist, rather than placing the burden on the defendant foreign state, best accomplishes that goal.
These policy considerations apply more strongly in the context of immunity from execution. "[T]he judicial seizure of the property of a friendly state may be regarded as an affront to its dignity and may . . . affect our relations with it." See Philippines v. Pimentel, 553 U.S. 851, 128 S.Ct. 2180, 2190, 171 L.Ed.2d 131 (2008) (quotation and alteration omitted). Congress was aware that, although the restrictive theory of sovereign immunity from suit had become an accepted principle of international law by the time of the FSIA's enactment, "the enforcement of judgments against foreign state property remainfed] a somewhat controversial subject." H.R. Rep. No. 94-1487, 1976 U.S.C.C.A.N. at 6626; Conn. Bank of Commerce v. Re-public of Congo, 309 F.3d 240, 255 (5th Cir. 2002). Accordingly, the exceptions to immunity from execution are more narrow than the exceptions from immunity from suit. Congress fully intended to create rights without remedies, aware that plaintiffs would often have to rely on foreign states to voluntarily comply with U.S. court judgments. See Autotech Techs. LP v. Integral Research Dev. Corp., 499 F.3d 737, 749 (7th Cir. 2007); Letelier, 748 F.2d at 799. In light of the special sensitivities implicated by executing against foreign state property, courts should proceed carefully in enforcement actions against foreign states and consider the issue of immunity from execution sua sponte.
Our decision in Wilmington Trust v. U.S. District Court, 934 F.2d 1026 (9th Cir. 1991), is not to the contrary. In that case, a U.S. bank tried to foreclose on a ship owned by a private Finnish corporation. Id. at 1027. The foreign corporation argued that FSIA applied because the lawsuit implicated a letter of credit issued by Finland's national bank. Id, at 1032. We disagreed, holding that "Congress intended requests for protection under the FSIA to originate from the foreign state party." Id. at 1033. Based on that language, plaintiffs argue that the district court erred by not requiring Iran to raise the issue of immunity.
However, in Wilmington Trust, Finland was not a party to the suit and it was not clear that the ship belonged to Finland. Id, at 1032 n. 9. When a court is not certain that the property in question is covered by the FSIA, a foreign state must make a prima facie case of ownership in order for the presumption of immunity to apply. Third parties cannot invoke immunity on behalf of a foreign state. See Republic of Philippines v. Marcos, 806 F.2d 344, 360 (2d Cir. 1986) (holding that defendant-appellant New York corporations who held property on behalf of defendants Ferdinand and Imelda Marcos could not assert foreign sovereign immunity). When it is clear that the plaintiff seeks to execute against property owned by a foreign state, as in this case, the presumption of immunity is automatically triggered. See, e.g., Letelier, 748 F.2d at 792-93. This is also the rule for immunity from suit; we require the defendant to make a prima, facie case that it is a foreign state only when that fact is not obvious or un-contested. See supra pages 1124-26. Therefore, Wilmington Trust supports our holding that the burden-shifting approach to foreign sovereign immunity from suit also applies to immunity from execution, and that it is the plaintiffs burden to prove that an exception to immunity applies if it is readily apparent that the property at issue belongs to a foreign state. Because plaintiffs themselves contend that the rights to payment from CMA CGM belong to Iran, the district court did not err by raising the issue of immunity sua sponte.
This practice was also followed prior to the enactment of the FSIA. See Loomis, 254 F.2d at 944("The requirement that there be a formal suggestion of immunity applies only in those cases where there is a question of fact as to whether the property proceeded against is the public property of a foreign sovereign."); Puente, 116 F.2d at 45 (explaining that a foreign state must file a formal suggestion of immunity when it is not apparent that it owns the property that plaintiff seeks to attach); Kungtig J arnvagsstyrehen v. Dexter Carpenter, Inc., 300 F. 891, 893-894 (S.D.N.Y. 1924) ("Bu? when the party before the court as claimant or as defendant is neither the sovereign nor his ambassador, it is now the established rule that the claim will not be recognized, unless by diplomatic intervention.").
B. The FSIA Notice Requirements
CMA CGM and the United States argue that plaintiffs did not properly serve the default judgment on Iran. The FSIA provides that a court may not order enforcement of a default judgment until a copy of that judgment is "sent to the foreign state or political subdivision in the manner prescribed for service in this section." 28 U.S.C. § 1610(c), § 1608(e). The FSIA provides for four different methods of ser-vice, the third of which is applicable here. Id. § 1608(a)(1)-(4). This third method requires "sending a copy of the [default judgment], together with a translation [of the default judgment] into the official language of the foreign state, by any form of mail requiring a signed receipt, to be ad-dressed and dispatched by the clerk of the court to the head of the ministry of foreign affairs of the foreign state concerned." Id. § 1608(a)(3). Service is complete when the foreign state sends back a "signed and returned postal receipt." Id. § 1608(c)(2).
The four forms of service are listed in descending order of preference. The first two are inapplicable because there is no "special arrangement for service" between the U.S. and Iran, § 1608(a)(1), and Iran is not a party to any "international convention on service of judicial documents," § 1608(a)(2). See Ben-Rafael v. Islamic Republic of Iran, 540 F.Supp.2d 39, 52 (D.D.C. 2008).
Counsel for plaintiffs submitted an affidavit to the District Court for the District of Columbia informing the court that he had mailed Manouchehr Mottaki, the Iranian Foreign Minister, copies of the default judgment, accompanying memorandum opinion, and Farsi translations on November 19, 2008, by DHL Express. He further attested that he had received an acknowledgment of receipt signed by Manouchehr Mottaki on January 10, 2008. See Affidavit of Service of Process of Judgment Pursuant to 28 U.S.C. § 1608(e), Peterson v. Islamic Republic of Iran, No. 1:01-cv-2094 (D.D.C. July 19, 2006). On the basis of this affidavit, Judge Lambert entered an order holding that plaintiffs had satisfied the service requirements of § 1608(e). See Order Permitting Execution of Judgment Pursuant to 28 U.S.C. § 1610(c), Peterson v. Islamic Republic of Iran, 1:01-CV-2094 (D.D.C. June 26, 2008).
It is true that plaintiffs' counsel erred by mailing a copy of the default judgment to the Iranian Foreign Affairs Minister himself, rather than asking the clerk of the court to mail the papers. 28 U.S.C. § 1608(a)(3). This mistake is not fatal. The Ninth Circuit has adopted a substantial compliance test for the FSIA's notice requirements; a plaintiffs failure to properly serve a foreign state defendant will not result in dismissal if the plaintiff substantially complied with the FSIA's notice requirements and the defendant had actual notice. See Straub v. A P Green, Inc., 38 F.3d 448, 453 (9th Cir. 1994). In Straub, the Ninth Circuit excused the plaintiffs "failure to dispatch the complaint by the clerk of the court" because the foreign state had "received actual notice of the lawsuit." Id. at 453-54. By the same token, the FSIA's service requirements have been substantially complied with in this case.
CGM CMA and the United States go further and argue that Iran should have been served with the registration of judgment with the Northern District of California and the subsequent motion for assignment of Iran's rights to payment from CMA CGM. Plaintiffs' counsel did mail their various assignment motions by regular U.S. mail, apparently without delivery confirmation, to a variety of high-level Iranian officials, including the Minister of Foreign Affairs. These papers do not appear to have been translated into Farsi.
The FSIA is quite clear what a plaintiff must serve on a foreign state before a court may enforce a default judgment against that state: the default judgment. Service of post-judgment motions is not required. "Section 1608 sets forth the exclusive procedures with respect to service on . . . a foreign state." H.R. Rep. 94-1487, 1976 U.S.C.C.A.N. at 6622 (emphasis added). We may not add to those requirements. But see Autotech Technologies LP v. Integral Research Development Corp., 499 F.3d 737, 747-49 (7th Cir. 2007) (holding that the FSIA's service provisions do not cover post-judgment motions and applying the federal rules for service instead); Rubin v. Islamic Republic of Iran, 2008 WL 192321 (N.D.U1.2008) (same). If Congress had intended for foreign states to receive notice of every post-judgment motion, it would have said so. The district court erred in concluding that it could not enforce the plaintiffs' assignment motion because they had not complied with FSIA's service requirements.
Even if the federal service rules applied, the plaintiffs would not have been required to serve Iran with the CMA CGM assignment motion. Federal Rule of Civil Procedure 5(a) typically requires service of an assignment motion to enforce a judgment. But Federal Rule 5(a)(2) waives that requirement for motions against a party, like Iran, who is in default for failing to appear. Even parties who fail to appear must be served with pleadings with new claims, Fed.R.Civ.P. 5(a)(2), but an assignment motion is not a pleading (i.e. a complaint or an answer) nor does it contain a new claim (but rather is an attempt to enforce an old claim). Even if the assignment motion is construed as raising a new claim, Rule 5(a)(2) would require service of that motion pursuant to Rule 4, and Rule 4 requires service on foreign states pursuant to the FSIA. Fed.R.Civ.P. 4(j)(1). As explained above, the FSIA does not require service of post-judgment motions.
C. Immunity of Iran's Rights to Payment from
CMA CGM Having held that the district court did not err by considering Iran's immunity from execution sua sponte, and that the assignment motions were properly served on Iran, we must now decide whether Iran's rights to payment from CMA CGM constitute "property in the United States." 28 U.S.C. § 1610(a). We hold that they do not and are, therefore, immune from execution. We affirm the district court's denial of plaintiffs' assignment motion.
Enforcement proceedings in federal district court are governed by the law of the state in which the court sits, "but a federal statute governs to the extent that it is applicable." Fed.R.Civ.P. 69(a)(1). The FSIA does not provide methods for the enforcement of judgments against foreign states, only that those judgments may not be enforced by resort to immune property. See 28 U.S.C. §§ 1609- 1610. Therefore, California law on the enforcement of judgments applies to this suit insofar as it does not conflict with the FSIA. See, e.g., Walker Int'l Holdings, Ltd. v. Republic of Congo, 415 F.3d 413, 415-16 (5th Cir. 2005) (applying Texas enforcement law in a FSIA case); Hegna v. Islamic Republic of Iran, 380 F.3d 1000, 1006-07 (7th Cir. 2004) (applying Illinois law); Karaha Bodas Co., LLC v. Perusahaan Pertambangan Minyak Dan Gas Bumi Negara, 313 F.3d 70, 83 (2d Cir. 2002) (applying New York law).
California enforcement law authorizes a court to "order the judgment debtor to assign to the judgment creditor . . . all or part of a right to payment due or to become due, whether or not the right is conditioned on future developments." Cal. Civ.Proc. Code § 708.510(a). The FSIA abrogates the immunity of all Iranian commercial property in the United States. 28 U.S.C. § 1610(a)(7). Therefore, a right to payment belonging to Iran is assignable only if that right is located in the United States.
A right to payment is intangible. It is difficult to assign a location to property that by definition "lacks a physical existence." See Black's Law Dictionary 1233 (7th ed. 1999); Af-Cap Inc. v. Republic of Congo, 383 F.3d 361, 371(5th Cir. 2004). "The situs of intangibles is in truth a legal fiction, but there are times when justice or convenience requires that a legal situs be ascribed to them." Severnoe Sec. Corp. v. London Lancashire Ins. Co., 255 N.Y. 120, 174 N.E. 299, 300 (1931) (Cardozo, J.). This is one of those times. To determine the location of an intangible right to payment, we must look to California state law. See GP Credit Co., LLC v. Orlando Residence, Ltd., 349 F.3d 976, 979-81 (7th Cir. 2003) (applying Wisconsin law to determine the location of a `chose in action,' an intangible form of property); Levin v. Tiber Holding Corp., 277 F.3d 243, 249 (2d Cir. 2002) (reasoning that contractual obligations are "intangible property" and applying New York law to determine situs).
But see Berkey v. Third Ave. Ry. Co., 244 N.Y. 84, 155 N.E. 58, 61 (1926) (Cardozo, J.) ("Metaphors in law are to be narrowly watched, for starting as devices to liberate thought, they end often by enslaving it.").
In Philippine Export and Foreign Loan Guarantee Corp. v. Chuidian, 218 Cal.App.3d 1058, 267 Cal.Rptr. 457 (1990), the Court of Appeal of California squarely held that the location of a right to payment, at least for the purpose of applying section 708.510(a) in a suit against a foreign state defendant, is the location of the debtor. Accordingly, a foreign state defendant's rights to payment from third-party debtors are assignable only if those "debtors [] reside in the United States." Id. at 481. The Court of Appeal instructed the trial court to enter an "order compelling Philguarantee," an agency of the Philippines, "to assign to Chuidian all debts owing or to become owing to Philguarantee from individuals or entities located in the United States." Id.
The California Court of Appeal's interpretation of California Code of Civil Procedure section 708.510(a) is binding on the panel. See Ryman v. Sears, Roebuck Co., 505 F.3d 993, 994 (9th Cir. 2007) ("[W]hen (1) a federal court is required to apply state law, and (2) there is no relevant precedent from the state's highest court, but (3) there is relevant precedent from the state's intermediate appellate court, the federal court must follow the state intermediate appellate court decision. . . .").
Other states agree that the situs of a debt obligation is the location of the debtor. See Rush v. Savchuk, 444 U.S. 320, 328, 100 S.Ct. 571, 62 L.Ed.2d 516 (1980) (acknowledging the "legal fiction that assigns a situs to a debt, for garnishment purposes, wherever the debtor is found"); Af-Cap Inc., 383 F.3d at 373 ("[C]ourts consistently hold that the situs of a debt obligation is the situs of the debtor."); Alliance Bond Fund v. Grupo Mexicano De Desarrollo, S.A., 190 F.3d 16, 25 n. 9 (2d Cir. 1999) (interpreting New York law); Great Falls Transfer Storage Co. v. Pan Am. Petroleum Corp., 353 F.2d 348, 349 (10th Cir. 1965) (interpreting Montana and Wyoming law); State v. W. Union Fin. Servs., Inc., 220 Ariz. 567, 208 P.3d 218, 229 n. 10 (2009); Levi Strauss Co. v. Crockett Motor Sales, Inc., 293 Ark. 502, 739 S.W.2d 157, 158 (1987); Hotel 71 Men Lender LLC v. Falor, 14 N.Y.3d 303, 900 N.Y.S.2d 698, 926 N.E.2d 1202, 1210 (2010). 571, 62 L.Ed.2d 516 (1980) (acknowledging the "legal fiction that assigns a situs to a debt, for garnishment purposes, wherever the debtor is found"); Af-Cap Inc., 383 F.3d at 373 ("[C]ourts consistently hold that the situs of a debt obligation is the situs of the debtor."); Alliance Bond Fund v. Grupo Mexicano De Desarrollo, S.A., 190 F.3d 16, 25 n. 9 (2d Cir. 1999) (interpreting New York law); Great Falls Transfer Storage Co. v. Pan Am. Petroleum Corp., 353 F.2d 348, 349 (10th Cir. 1965) (interpreting Montana and Wyoming law); State v. W. Union Fin. Servs., Inc., 220 Ariz. 567, 208 P.3d 218, 229 n. 10 (2009); Levi Strauss Co. v. Crockett Motor Sales, Inc., 293 Ark. 502, 739 S.W.2d 157, 158 (1987); Hotel 71 Men Lender LLC v. Falor, 14 N.Y.3d 303, 900 N.Y.S.2d 698, 926 N.E.2d 1202, 1210 (2010). 571, 62 L.Ed.2d 516 (1980) (acknowledging the "legal fiction that assigns a situs to a debt, for garnishment purposes, wherever the debtor is found"); Af-Cap Inc., 383 F.3d at 373 ("[C]ourts consistently hold that the situs of a debt obligation is the situs of the debtor."); Alliance Bond Fund v. Grupo Mexicano De Desarrollo, S.A., 190 F.3d 16, 25 n. 9 (2d Cir. 1999) (interpreting New York law); Great Falls Transfer Storage Co. v. Pan Am. Petroleum Corp., 353 F.2d 348, 349 (10th Cir. 1965) (interpreting Montana and Wyoming law); State v. W. Union Fin. Servs., Inc., 220 Ariz. 567, 208 P.3d 218, 229 n. 10 (2009); Levi Strauss Co. v. Crockett Motor Sales, Inc., 293 Ark. 502, 739 S.W.2d 157, 158 (1987); Hotel 71 Men Lender LLC v. Falor, 14 N.Y.3d 303, 900 N.Y.S.2d 698, 926 N.E.2d 1202, 1210 (2010). 571, 62 L.Ed.2d 516 (1980) (acknowledging the "legal fiction that assigns a situs to a debt, for garnishment purposes, wherever the debtor is found"); Af-Cap Inc., 383 F.3d at 373 ("[C]ourts consistently hold that the situs of a debt obligation is the situs of the debtor."); Alliance Bond Fund v. Grupo Mexicano De Desarrollo, S.A., 190 F.3d 16, 25 n. 9 (2d Cir. 1999) (interpreting New York law); Great Falls Transfer Storage Co. v. Pan Am. Petroleum Corp., 353 F.2d 348, 349 (10th Cir. 1965) (interpreting Montana and Wyoming law); State v. W. Union Fin. Servs., Inc., 220 Ariz. 567, 208 P.3d 218, 229 n. 10 (2009); Levi Strauss Co. v. Crockett Motor Sales, Inc., 293 Ark. 502, 739 S.W.2d 157, 158 (1987); Hotel 71 Men Lender LLC v. Falor, 14 N.Y.3d 303, 900 N.Y.S.2d 698, 926 N.E.2d 1202, 1210 (2010).
CMA CGM is a French corporation, therefore the debt obligation it owes to Iran is located in France. Iran's rights to payment from CMA CGM are not "property in the United States" and are immune from execution. 28 U.S.C. § 1610(a)(7). We affirm the district court's denial of plaintiffs' motion to assign Iran's rights to payment from CMA CGM.
IV. Conclusion
This case turns on the question of whether immunity from execution is an affirmative defense that must be raised by a foreign state. The statutory text, structure, legislative history, and case law suggest that sua sponte consideration is appropriate and serves the dual goals of the FSIA: affording American plaintiffs with a means for bringing suit against foreign states and ensuring that their disputes will not be resolved based on political considerations, and also demonstrating a proper respect for foreign states and sparing them the inconvenience of litigation. We affirm the district court order on the basis that Iran's rights to payment from CMA CGM are not "property in the United States" that are amenable to attachment.
N.R. SMITH, Circuit Judge, dissenting:
Immunity from execution is an affirmative defense. Neither the history of sovereign immunity nor the purpose of the FSIA permit or require the court to address immunity from execution sua sponte. I must therefore dissent from today's holding.
As a general rule, a claim of immunity is an affirmative defense. As such, it must be affirmatively pleaded by the defendant. Even though immunity "is an entitlement not to stand trial or face the other burdens of litigation," Saucier v. Katz, 533 U.S. 194, 200, 121 S.Ct. 2151, 150 L.Ed.2d 272 (2001) overruled on other grounds by Pearson v. Callahan, 555 U.S. 223, 129 S.Ct. 808, 172 L.Ed.2d 565 (2009), the burden of asserting it "rests with the [party] seeking it." al-Kidd v. Ashcroft, 580 F.3d 949, 958 (9th Cir. 2009) cert. granted ___ U.S. ___, 131 S.Ct. 415, 178 L.Ed.2d 321 (2010). This is true of many forms of immunity. See 5 Wright Miller, Federal Practice and Procedure, § 1271, n. 57 (discussing which issues must be raised as affirmative defenses under Fed.R.Civ.P. 8(c)); Murphy v. Waterfront Comm'n of New York, 378 U.S. 52, 84 S.Ct. 1594, 12 L.Ed.2d 678, (1964) (noting that when a witness receives a promise of immunity from prosecution, the witness must "plead and prove, as an affirmative defense, that he has received immunity. . . ."); Gomez v. Toledo, 446 U.S. 635, 640, 100 S.Ct. 1920, 64 L.Ed.2d 572 (1980) ("Since qualified immunity is a defense, the burden of pleading it rests with the defendant."); Aholelei v. Dep't of Pub. Safety, 488 F.3d 1144, (9th Cir. 2007) ("Eleventh Amendment immunity is an affirmative defense that must be raised early in the proceedings to provide fair warning to the plaintiff." (internal quotation marks and citation omitted)).
The plain language of the FSIA makes it clear that sovereign immunity from execution must be raised as an affirmative defense. The majority acknowledges that nothing in the language of the FSIA provides that sovereign immunity from suit or execution may be raised sua sponte. Maj. Op. 1124. In its entirety, § 1604 reads: "Subject to existing international agreements to which the United States is a party at the time of enactment of this Act a foreign state shall be immune from the jurisdiction of the courts of the United States and of the States except as provided in sections 1605 to 1607 of this chapter." 28 U.S.C. § 1604. Similarly, § 1609 makes no mention that it may be raised sua sponte. It simply states: "Subject to existing international agreements to which the United States is a party at the time of enactment of this Act the 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.G. § 1609. Thus, the plain language of the statute does not provide a means for the court to address the issue sua sponte.
The legislative history is consistent with the plain language of the FSIA. The Supreme Court recognized that "[t]he House Report on the Act states that `sovereign immunity is an affirmative defense which must be specially pleaded.'" Verilnden, 461 U.S. 480, 493 n. 20, 103 S.Ct. 19(32 (1983) (quoting H.R. Rep. No. 94-1487, at 17 (1976), as reprinted in 1976 U.S.C.C.A.N. 6604, 6616). The House Re-port continues: "the burden will remain on the foreign state to produce evidence in support of its claim of immunity. Thus, evidence must be produced to establish that a foreign state or one of its subdivisions, agencies or instrumentalities is the defendant in the suit and that the plaintiffs claim relates to a public act of the foreign state — that is, an act not within the exceptions in sections 1605-1607." H.R. Rep. No. 94-1487 at 17, U.S.C.C.A.N. at 6616 (emphasis added). Congress thus required the foreign state to assert the defense of sovereign immunity.
Congress has, however, outlined an exception to this general rule. As the Supreme Court noted in Verlindev, the exception is detailed in 28 U.S.C. § 1330. 461 U.S. at 493 n. 20, 103 S.Ct, 1962.
28 U.S.C. § 1330(a) states:
The district courts shall have original jurisdiction without regard to amount in controversy of any non-jury civil action against a foreign state as defined in section 1603(a) of this title as to any claim for relief in personam with respect to which the foreign state is not entitled to immunity either under sections 1605-1607 of this title or under any applicable international agreement.
Thus in § 1330, Congress explicitly linked the question of whether a foreign state has sovereign immunity (under 28 U.S.C. §§ 1603, 1605-07), to the question of whether the federal court would have subject matter jurisdiction. Applying § 1330, if a court found a foreign state was not entitled to sovereign immunity (under one of the enumerated sections) then it necessarily had subject matter jurisdiction over the action. And, because it is clearly established that courts may address matters of subject matter jurisdiction sua sponte, Snell v. Cleveland, Inc., 316 F.3d 822, 826 (9th Cir. 2002), courts would then also have the power to consider sua sponte sovereign immunity from suit.
28 U.S.C. § 1330(a) does not, however, mention determinations of immunity from execution under 28 U.S.C. § 1609. Therefore, such immunity remains an affirmative defense that must be pleaded and proved by the defendant. Of course, had Congress wished to include § 1609 in § 1330(a), it certainly knew how to do so. See Botomu v. Paid McNally Realty, 216 F.3d 827, 832 (9th Cir. 2000). "The incorporation of one statutory provision to the exclusion of another must be presumed intentional under the statutory canon of expretsio unius. . . . Congress obviously knew how to adopt provisions of[the FSIA] because it expressly adopted [sections 1603, 1605-07] and it is unlikely that Congress would absentmindedly forget to adopt a provision that appears a mere two [sections] below the [] section it adopted." Id. (internal quotation marks, alternations, and citations omitted). This omission is significant, because the failure to include § 1609 in 28 U.S.C. § 1330 requires that sovereign immunity from execution, just like other immunities, must be pleaded as an affirmative defense. Therefore, the plain language of the FSIA allows courts to address the issue of sovereign immunity from suit, but not immunity from execution, as a jurisdictional question that can be raised sua sponte by courts.
The majority argues that there are nonetheless good reasons for allowing courts to address this issue sua sponte. First, it cites cases wherein it alleges that courts addressed sovereign immunity sua sponte even before the enactment of the FSIA, arguing that to allow courts to do so now would be consistent with historical practice. Maj. Op. 1125-26. Second, it argues that allowing courts to resolve issues of sovereign immunity from execution sua sponte would be consistent with the underlying purposes of the FSIA. Maj. Op. 1127. However, there is no basis for these propositions; no historical reasons or underlying purposes can trump the plain language of the statute. Moreover, the majority's premises for those arguments are also questionable.
First, the cited cases are not controlling precedent (or even strong evidence) for this alleged historical practice. None of the cited cases were decided in our court. Further, the holdings in the three Second Circuit cases do not support the premise. In Victory, the court did not raise the issue of sovereign immunity sua sponte. 336 F.2d 354. Instead, the Spanish government specifically argued that its Ministry of Commerce was entitled to sovereign immunity. The court noted that "[a] claim of sovereign immunity may be presented to the court by either of two procedures." Id, at 358. The first involves a request from the State Department and the second involves a direct request from the foreign sovereign. Id. In that case, the State Department had not made such a request, and therefore the court had to "decide for itself whether it is the established policy of the State Department to recognize claims of immunity of this type." Id. at 359. But, because the foreign state had asserted sovereign immunity on its own behalf, the court was not required to resolve the issue sua sponte. Heaney similarly did not involve a court addressing sovereign immunity sua sponte. 445 F.2d 501. There again, the foreign sovereign did in fact assert immunity. Id. at 502 ("The [Government of Spain] moved for dismissal of the complaint on the grounds, insofar as here relevant, that the court lacked jurisdiction by virtue of the sovereign immunity of the Spanish Government and the consular immunity of Gomero."). In the third case, Isbrandtsen Tankers, the State Department made the request for sovereign immunity for the foreign state, which, as the opinion notes, was the practice before the enactment of the FSIA. 446 F.2d 1198. None of these cases therefore address whether the court may consider sovereign immunity sua sponte,
Victory, incidentally, took a very limited view of sovereign immunity. "Sovereign immunity is a derogation from the normal exercise of jurisdiction by the courts and should be accorded only in clear cases." 336 F.2d at 360. Therefore, "the courts should deny immunity where the State Department has indicated, either directly or indirectly, that immunity need not be accorded." Id. at 358. Similarly, since Congress delegated the decision making in this area to the courts by statute, the courts should deny immunity where Congress has indicated it should be denied — including actions falling under § 1605(a)(7) and § 1610(a)(7).
Only in Loomis did the D.C. Circuit address sua sponte the issue of immunity from execution. 254 F.2d 941. Even if one could construe this one case as establishing a historical practice, that practice was abrogated by the FSIA. Under the plain language of the FSIA, determinations of immunity from execution (unlike determinations of immunity from suit) are not linked to the question of subject matter jurisdiction and therefore cannot be addressed sua sponte.
Although Loomis did involve the seizure of assets, the context appears to be distinguishable from the present case. Loomis was not attaching assets in order to satisfy a judgment, but possibly to obtain jurisdiction over the foreign state. 254 F,2d at 942. One purpose of the FSIA was to "render unnecessary the practice of seizing and attaching the property of a foreign government for the purpose of obtaining jurisdiction," H.R. Rep. No. 94-1487 at 8, 1976 U.S.C.C.A.N, at 6606.
Second, allowing courts to sua sponte address immunity from execution would not be consistent with the underlying purposes of the FSIA. The legislative history of the FSIA does not in any way indicate that, courts should address sovereign immunity sua sponte. Instead, one purpose of the FSIA was to establish procedures that would allow successful plaintiffs to enforce their judgments. The FSIA "would remedy, in part, the present predicament of a plaintiff who has obtained a judgment against a foreign state. Under existing law, a foreign state in our courts enjoys absolute immunity from execution, even in ordinary commercial litigation where commercial assets are available for the satisfaction of a judgment. [The FSIA] seeks to restrict this broad immunity from execution." H.R. Rep. No. 94-1487 at 8, 1976 U.S.C.C.A.N. at 6606. This purpose was strengthened in 1996 when the terrorism exception was added to the FSIA. The terrorism exception created both an exception to immunity from suit for acts of terrorism and a coextensive exception to immunity from execution. Antiterrorism and Effective Death Penalty Act of 1996, Pub.L. No. 104-132, § 221, 110 Stat. 1214(codified at 28 U.S.C. § 1605(a)(7) and § 1610(a)(7)). Even if, as the majority argues, "exceptions to immunity from execution are more narrow than the exceptions from immunity from suit" and "Congress fully intended to create rights without remedies," Maj. Op. 1128, Congress clearly did not embrace those arguments for victims of terrorism. Of course, such policy considerations, even if true, would not outweigh the plain language of the statute.
The majority opinion cites Lelelier, 748 F.2d at 799 for this proposition. Although Letelier was unable to execute against the Chilean assets at the time of his suit, under the current version of the FSIA it appears that he would be able to do so, because the basis of his claim was a terrorist act (an extra-judicial killing).
In considering the FSIA, Congress noted several situations in which U.S. citizens may be injured by foreign states, for example, disputes about the purchase price or terms of a sale of goods or real estate or when a citizen is struck by an automobile owned by a foreign embassy. H.R. Rep. 94-1486 at 6-7, 1976 U.S.C.C.A.N, at 6605. An examination of the FSIA reveals that exceptions were tailored to address those exact situations. See §§ 1605(a)(2), 1610(a)(2), (b)(2) (relating to commercial disputes), §§ 1605(a)(4), 1610(a)(4) (relating to property disputes), and §§ 1605(a)(5), 1610(a)(5) (relating to tort claims). While Congress could not, without abrogating sovereign immunity entirely, provide that property would be available on which to execute a judgment, it does not seem that Congress actually "intended to create rights without remedies."
Furthermore, contrary to the majority's assertion, there is less reason to raise immunity sua sponte regarding execution than there is regarding a suit. The purpose of immunity is generally to spare the defendant "the cost and inconvenience of trial." Foremost-McKesson, 905 F.2d at 443, However, after a court has determined that the sovereign is not immune from suit and enters a judgment on the merits, only the enforcement action remains. Now, having been judged liable, the foreign state has a concrete interest in participating to protect its interests, unlike a trial on the merits, where any liability is still speculative.
This says nothing about whether the foreign country will choose to assert that defense, even though our statutes make it available. Indeed, it seems that addressing a defense that the foreign state has itself not chosen to assert would undermine, not protect, the independence of the foreign sovereign.
In a different context, the Confrontation Clause seeks to improve (among other things) the reliability of the trial process. Yet, if the defendant Is not interested in invoking its protections, we certainly do not impose it on that defendant.
There is no support for the majority's assertion that the burden of proving an exception to immunity from execution should be placed on the plaintiff. The statute creates no such burden. Contrary to the majority's interpretation of the statute, the FSIA does not establish one presumption, but actually establishes two mutually exclusive presumptions. The majority correctly states that there is a general presumption that the property of foreign states is not subject to execution. 28 U.S.C. § 1609. However, the FSIA also presumes that "property in the United States of a foreign state . . . used for a commercial activity in the United States, shall not be immune from attachment in aid of execution upon a judgment . . . if — the judgment relates to a claim for which the foreign state is not immune under section 1605(a)(7)." § 1610(a)(7). Commercial property, executed upon based on a judgment obtained under § 1605(a)(7), is therefore presumptively subject to execution, unless the defendant proves otherwise. As reflected in the legislative history of the FSIA, "evidence must be produced to establish that a foreign state . . . is the defendant in the suit and that the plaintiffs claim relates to . . . an act not within the exceptions in sections 1605-1607." H.R. Rep. 94-1487 at 17, 1976 U.S.C.C.A.N. at 6616.
The majority recognizes that, in the con-text of immunity from suit, the burden shifts between the parties. Maj. Op. 1124-25. However, it fails to acknowledge the clear precedent in this and other circuits that the ultimate burden of proving immunity belongs to the foreign state defendant. Where the plaintiff alleges that his claim is based on an exception to immunity, the defendant must establish a prima facie case that an exception does not apply. Meadoivs v. Dominican Republic, 817 F.2d 517, 522-23 (9th Cir. 1987). The plaintiff must then offer proof that one of the FSIA exemptions applies. Id. at 523. Then, "the defendant must prove its entitlement to immunity by a preponderance of the evidence." Id. See also Wilmington Trust, 934 F.2d at 1032 n. 9 ("The FSIA places the burden of proof on the entity attempting to place itself within the act. . . ."); Princz v. Fed, Rep. of Germany, 26 F.3d 1166, 1171 (D.C. Cir. 1994) ("It is the burden of the foreign sovereign in each case to establish its immunity by demonstrating that none of the exceptions is applicable."); Int'l Ins. Co. v. Caja National De Ahorro y Seguro, 293 F.3d 392, 397 (7th Cir. 2002) ("The ultimate burden of proving immunity would rest with the foreign state."). If the plaintiff merely alleges that an exception applies, that is sufficient proof to establish lack of immunity unless contested by the defendant. Given that the ultimate proof rests with the defendant, it is not unreasonable to require the defendant to raise the defense of immunity from execution in the first instance.
Finally, our decision in Wilmington Trust v. U.S. District Court, 934 F.2d 1026 (9th Cir. 1991) cannot be so easily distinguished. In addressing whether an international organization could assert sovereign immunity from execution, even where the foreign state was not a party to the action, we stated:
Congress intended the FSIA to supplant the earlier practice whereby a foreign sovereign would appeal to the State Department "to make a formal suggestion of immunity to the court." Congress transferred this decision to the courts. We hold that, based on the language of the statute and its legislative history, Congress intended requests for protection under the FSIA to originate from the foreign state party.
Id. at 1032-33 (internal citation omitted). Because Finland was not a party to the action, this holding strikes more at the question of whether the FSIA applies even where a foreign state is not a party, and is therefore somewhat inapposite to the case at hand. Nevertheless, we certainly seem to imply that, under the FSIA (as opposed to the historical practice predating its enactment) requests for sovereign immunity from execution must come from the foreign country itself and nowhere else — including from the courts.
For these reasons, I disagree with the majority's holding that courts can sua sponte adjudicate issues of sovereign immunity from execution under 28 U.S.C. § 1609. Because there is no reason here to violate the general rule against third party standing, I would hold that CMA CGM cannot assert sovereign immunity on Iran's behalf. I would therefore remand this issue to the district court to consider in the first instance whether Iran's right to payment was assignable under California law without reference to the FSIA.