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OHNTRUP v. FIREARMS CTR. INC.

June 30, 1981

Robert and Beverly OHNTRUP
v.
FIREARMS CENTER INCORPORATED et al. v. MAKINA VE KIMYA ENDUSTRISI KURUMU



The opinion of the court was delivered by: POLLAK

MEMORANDUM

Plaintiffs Robert and Beverly Ohntrup commenced this action on March 11, 1976 to recover, under theories of warranty, product liability and negligence, for injuries allegedly sustained by Robert Ohntrup when a gun he was using malfunctioned. Plaintiffs, citizens of Pennsylvania, invoked the diversity jurisdiction of this court to bring suit against Firearms Center Incorporated ("FCI") and the Waynes, citizens of Texas, from whom plaintiffs had purchased the allegedly defective gun. On August 30, 1976, these defendants impleaded Makina ve Kimya Endustrisi Kurumu ("Makina"), a Turkish corporation whose stock is wholly owned by the Turkish Government, on the ground that Makina had manufactured the gun and sold it to defendants. Plaintiffs amended their complaint, on December 21, 1977, to include claims against Makina. On the eve of trial, Makina moved to dismiss the claims against it on the ground that it is entitled to invoke sovereign immunity, hence depriving this court of jurisdiction over the claims asserted against it.

 A. Sovereign Immunity Goes to The Subject-Matter Jurisdiction of the Court.

 Makina's motion to dismiss was untimely, and Makina more than once failed to comply with this court's directions as to the filing of the papers required for the determination of the motion. Therefore, in a letter dated December 18, 1980, Makina was notified by the court that non-compliance with the directions contained in that letter would be deemed to be a waiver by Makina of its defense of sovereign immunity. As Makina failed to comply with the directions contained in that letter, the first question to be determined is whether the court may decline to entertain the defense of sovereign immunity or whether, as contended by Makina, sovereign immunity goes to this court's subject-matter jurisdiction. This requires an initial determination of whether the Foreign Sovereign Immunities Act of 1976 (the "Act"), 28 U.S.C. §§ 1330, 1602 et seq. governs the entire action, or whether it applies only to the plaintiffs' claims against Makina, which were filed after the effective date of the Act, and not to FCI's third-party claims, which were filed prior to that date.

 Plaintiffs and Makina agree that the issues presented by this motion are governed by the Act. Under the Act, the jurisdiction of this court is governed by 28 U.S.C. § 1330(a), which provides that "district courts shall have original jurisdiction ... as to any claim for relief in personam with respect to which the foreign state is not entitled to immunity ... under sections 1605-1607 of this title...." The district court must, therefore, first consider whether a foreign state is entitled to immunity under sections 1605-1607 of the Act: If it is, the court loses subject-matter jurisdiction over the claim against that state. Thus, a determination that Makina is entitled to immunity under the Act would deprive this court of subject-matter jurisdiction over plaintiffs' claims against Makina; and, if, in addition, the Act is given retroactive application to FCI's claims against Makina, a determination that Makina is entitled to immunity would deprive this court of subject-matter jurisdiction over all claims against Makina in this controversy. Sugarman v. Aeromexico, Inc., 626 F.2d 270 (3d Cir. 1980).

 The substantive immunity principles set forth in the Act have been given retroactive application, the courts relying on the language of the Act's Preamble, which states that "henceforth" claims of immunity should be decided in accordance with the principles of the Act. See e.g. Yessenin-Volpin v. Novosti Press Agency, 443 F. Supp. 849 (S.D.N.Y.1978). But, in the only case to pose the retroactive applicability of the provision conferring subject matter jurisdiction, the Second Circuit Court of Appeals concluded that the language in the Preamble was intended to apply to substantive immunity law alone, and declined to give the subject-matter jurisdiction provisions retroactive effect. Moreover, the court reasoned that the retroactive application of a provision affecting subject-matter jurisdiction would be open to constitutional question. Corporacion Venezolana de Fomento v. Vintero Sales Corporation, 629 F.2d 786, 790 (2d Cir. 1980). This need not, however, be decided in this action as, under the principles applicable prior to the enactment of the Act, the determination that a defendant was entitled to invoke sovereign immunity acted to deprive the court of subject-matter jurisdiction:

 
The commander of the national vessel exercises a part of his sovereign power; and in such a case no consent to submit to the ordinary judicial tribunals of the country can be implied.... Such consent is implied where the municipal law, previously provides and changes the law of nations... But it cannot be implied where the law of nations is unchanged, nor where the implication is destructive of the independence, the equality and dignity of the sovereign. Such jurisdiction is not given by the constitution of the United States, nor is it mentioned in the judiciary act. If so important a jurisdiction was intended to be given, it would certainly have been mentioned and regulated by law...

 The Schooner Exchange v. M'Faddon, 11 U.S. 116, 121, 7 Cranch 116, 123-124, 3 L. Ed. 287 (1812). Thus, under either the law as it existed prior to the passage of the Act, or the Act, a determination that Makina is entitled to invoke sovereign immunity would operate to deprive this court of subject matter jurisdiction. This court is therefore not free to determine that Makina's untimely motion and its subsequent dilatory conduct acted to waive its defense of sovereign immunity.

 B. Makina's Entitlement to Invoke Sovereign Immunity

 The substantive provisions of the Act are applicable to determine Makina's entitlement to invoke sovereign immunity, both as to plaintiffs' claims, and retroactively as to FCI's claim. Corporacion Venezolana, supra. Makina is a Turkish corporation whose stock is wholly owned by the Turkish government, and it is not incorporated in any other country. It is therefore, a "foreign state" within the meaning of the Act, 28 U.S.C. §§ 1603(a) and (b), and immune from this suit, 28 U.S.C. § 1604, unless it comes within one of the exceptions listed in Section 1605. Plaintiffs argue that (1) Makina has waived the defense of sovereign immunity, Section 1605(a)(1), and (2) that this transaction falls within the commercial exceptions listed in Section 1605(a) (2).

 1. Waiver Under Section 1605(a)(1)

 Plaintiffs *fn1" argue that, pursuant to Section 1605(a)(1), *fn2" Makina has impliedly waived any right it might have to invoke sovereign immunity in Item 11 of the Sales Agreement between Makina and FCI:

 
Any dispute between the parties, arising in connection with the application of this agreement, will be handled and solved by Paris International Court.

 A waiver of sovereign immunity may be inferred from an agreement to arbitrate a dispute in another country or to refer disputes ...


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