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MAGNUS ELEC., INC. v. ROYAL BANK OF CANADA

October 8, 1985

MAGNUS ELECTRONICS, INC., PLAINTIFF,
v.
ROYAL BANK OF CANADA, ET AL., DEFENDANTS.



MEMORANDUM OPINION AND ORDER

Magnus Electronics, Inc. ("Magnus") originally sued Aerolineas Argentinas ("Aerolineas") and Royal Bank of Canada ("Bank") because of the nondelivery of Magnus' goods sold to Argentine purchaser Alfredo DiLullo ("DiLullo"). When Magnus struck out against Aerolineas (see this Court's three opinions reported beginning at 611 F. Supp. 436), it shifted to an attack on the Argentine Republic ("Argentina") via its Second Amended Complaint (the "Complaint"). Argentina promptly moved for dismissal for lack of jurisdiction (both over it, Fed.R.Civ.P. ("Rule") 12(b)(2), and over the subject matter, Rule 12(b)(1)). It is right on both grounds, and this action is dismissed.

Facts*fn1

In October 1981 Magnus entered into a written contract to sell goods to DiLullo (Complaint ¶ 3). Under the contract Magnus was to cause the goods to be delivered to DiLullo in Buenos Aires through Bank, which was to assure that the goods were delivered only against payment of the purchase price (Complaint ¶ 4). Magnus' freight forwarder caused the goods to be shipped to Miami, where Aerolineas took possession under an airway bill designating Bank as sole consignee (id.).

On November 11, 1981 (shortly after the goods had arrived in Buenos Aires) "agents of the Argentine Air Force, acting in their capacity on behalf of the Argentina [sic] military, unlawfully seized and took possession of [Magnus'] goods in Argentine customs" (Complaint ¶ 7). That conversion was implemented by use of at least one forged document (id.), information of the seizure and conversion was suppressed and the goods were classified as "War Secret" material (Complaint ¶ 8). Magnus believes DiLullo "also participated in the aforesaid fraud and withheld information of the unauthorized release" (id.).

"In so acting to cause [Magnus'] goods to be fraudulently converted for Argentine military purposes, the Country of Argentina has acted in violation of international law" (Complaint ¶ 9). Those acts of fraud and conversion are alleged to be "without the scope of sovereign judicial immunity" (Complaint ¶ 10).

Lack of Personal Jurisdiction

Argentina is a sovereign state. As with any sovereign, it is amenable to suit only by strict and literal compliance with the Foreign Sovereign Immunities Act of 1976 (the "Act"), 28 U.S.C. § 1330 and 1602-1611,*fn2 for "the comprehensive scheme established by the [Act] is the exclusive means by which foreign countries may be sued in American courts." Frolova v. Union of Soviet Socialist Republics, 761 F.2d 370, 372 (7th Cir. 1985) (per curiam).

Section 1608(a)(3) mandates service on Argentina's Ministry of Foreign Affairs "by any form of mail requiring a signed receipt." In this case it appears Magnus arranged for delivery to the Argentine Ministry by an Argentine notary, instead of service by mail.

That noncompliance with the Act's literal requirements (though it certainly did provide notice) deprives this Court of personal jurisdiction.*fn3 But because such a procedural defect is obviously curable, this opinion goes on to deal with the noncurable subject matter deficiency in Magnus' claim.

Lack of Subject Matter Jurisdiction

Again the sovereign status of Argentina forces Magnus to invoke the Act, without whose provisions Argentina is invulnerable to suit here. Magnus seeks to call into play Section 1605(a)(2):

    (a) A foreign state shall not be immune from the
  jurisdiction of courts of the United States or of the
  States in any case —
      (2) in which the action is based upon a
    commercial activity carried on in the United States
    by the foreign state; or upon an act performed in
    the United States in connection with a commercial
    activity of the foreign state elsewhere; or upon an
    act outside the territory of the United States in
    connection with a commercial activity of the
    foreign state elsewhere and that act causes a
    direct effect in the United States.

First it is clear the action, predicated on an alleged fraudulent seizure and conversion of Magnus' goods in Argentina, is not within the statute's first clause, referring to "commercial activity carried on in the United States by the foreign state." Though Magnus, playing fast and loose with the rules, goes outside the record to ascribe Aerolineas' United States activities to Argentina, even it does not say that provision applies. And of course the ...


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