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Nos. 93-1474/1475/1476/1477/1478/1479/1480/1481 Federal Insurance Co. v. Rubin

filed: December 28, 1993.




On Appeal from the United States District Court for the Eastern District of Pennsylvania. (D.C. Nos. 92-04177, 91-02171, 91-02172.

Before: Greenberg, Cowen and Seitz, Circuit Judges.

Author: Cowen

Opinion OF THE COURT

Cowen, Circuit Judge.

These cases arise from the February 23, 1991 fire that engulfed One Meridian Plaza, an office building in Philadelphia, Pennsylvania. The catastrophic fire resulted in substantial destruction of the thirty-eight story office tower, the deaths of three firefighters who responded to the blaze, and lawsuits alleging losses of nearly $600 million. While procedurally distinct, these appeals all raise the same issue: whether the district court properly concluded that two Dutch parent corporations,*fn1 whose subsidiary owns sixty-five percent of the partnership that owns the office building, are proper defendants under the commercial activity exception to the Foreign Sovereign Immunities Act of 1976 ("FSIA"), 28 U.S.C. §§ 1602-1611.

The district court ruled that the Dutch parent corporations are amenable to suit under the FSIA commercial activity exception, id. § 1605(a)(2), and because granting the corporations' motion to dismiss would "work fraud or inJustice" on the legislative policies of the FSIA. Although raised in the motions to dismiss, the district court declined to address whether the "non-commercial tort" exception, id. § 1605(a)(5), would make the corporations subject to suit in federal district court. We will reverse the district court in all three cases because it erred in its interpretation of the FSIA commercial activity exception.*fn2

I. FACTS AND PROCEDURAL HISTORY

A.

Three separate but related cases have been consolidated in this appeal. In the first case, Docket No. 93-1157, the plaintiffs consist of fourteen insurance companies who have brought a subrogation action against the owners and managers of One Meridian Plaza. With respect to this case, the Federal Insurance plaintiffs allege several theories of liability, including negligence and breach of contract. At issue in this case is whether the district court properly denied the motion to dismiss filed by Algemeen Burgerlijk Pensioenfonds ("ABP") and USA Holding B.V. ("USA Holding"), two of the many owner/manager defendants. For purposes of this opinion, this case will be referred to as the "Federal Insurance litigation."

The second case consists of eight docketed appeals*fn3 in which the "nontenants"*fn4 have sued the owner/manager defendants on theories of negligence per se, negligence, strict liability, trespass, private nuisance, and public nuisance. At issue in this case is whether the district court properly denied the motion to dismiss filed by ABP. For purposes of this opinion, this case will be referred to as the "class action litigation."

In the third case, Docket No. 93-1590, the estate of a firefighter ("Holcombe plaintiff") has sued the owner/manager defendants for economic damages resulting from pain and suffering and wrongful death.*fn5 At issue in this case is whether the district court properly denied ABP's motion for summary judgment. For purposes of this opinion, this case will be referred to as the "Holcombe case."

The owner/manager defendants consist of several U.S. and Dutch entities. These cases concern only the top two rungs in a five-tier Dutch corporate arrangement that was formed to purchase and own a sixty-five percent share in One Meridian Plaza.*fn6 Defendant ABP is a corporation organized and existing pursuant to the laws of the Netherlands and serves as the Netherlands' general civil employees pension fund. This corporation was created by an act of the Dutch Parliament and maintains its principal place of business in the Netherlands.

ABP is the parent corporation of defendant USA Holding, which is also a Dutch corporation with its principal place of business in the Netherlands. USA Holding, in turn, is the parent corporation of two wholly-owned subsidiary defendants, USA One B.V. and USA Two B.V.,*fn7 which were incorporated "to invest in, purchase, sell, manage, and rent real estate in the United States." Federal Ins. Co. v. Richard I. Rubin & Co., No. 92-4177, 1993 WL 21327, at * 1 (E.D. Pa. Jan. 26, 1993). While USA One B.V. and USA Two B.V. are Dutch corporations, they are general partners in defendant USA One Associates, a Pennsylvania partnership formed to acquire an ownership interest in E/R Associates, a joint venture that owns the One Meridian Plaza building. At its formation, USA One Associates was capitalized with approximately $29,700,000 from USA One B.V. and $300,000 from USA Two B.V.

Defendant ABP financed USA One Associate's acquisition of a sixty-five percent interest in E/R Associates through an unsecured loan of $96,300,000 at a market interest rate of ten percent. The loan was executed pursuant to the laws of the Netherlands, and payments were made to ABP in the Netherlands in U.S. dollars. Once USA One Associates acquired its interest in E/R Associates, it retained defendant Rodin Investment Administration Company ("Rodin") to oversee the daily operations of this investment, including making management and operations decisions concerning One Meridian Plaza. Defendant U.S. Alpha, Inc. later replaced Rodin in its capacity to make decisions regarding the management of the building.

B.

In the Federal Insurance litigation case, ABP and USA Holding (jointly the "Dutch parent corporations") moved to dismiss all claims brought against them because they are agencies or instrumentalities of a foreign state, and are immune from suit in the United States because none of the FSIA exceptions waiving immunity is applicable. The motion was made pursuant to Federal Rules of Civil Procedure 12(b)(1) and 12(b)(2) for lack of subject matter and personal jurisdiction. The district court denied this motion in an unpublished opinion, finding that the Dutch parent corporations engaged in commercial activity within the meaning of the commercial activity exception to the FSIA. Federal Ins. Co., No. 92-4177, 1993 WL 21327, at * 5-6. With respect to USA Holding, the district court held that this corporation engaged in commercial activity in the United States, within the meaning of the first clause of this exception, by virtue of its ownership of USA One B.V. and USA Two B.V. Id. at * 5.

Turning to ABP, the district court found sufficient commercial activity to relinquish immunity based on two alternative theories. First, the court held that ABP committed acts outside the U.S. "'in connection with a commercial activity elsewhere that caused a direct effect in the United States.'" Id. (quoting 28 U.S.C. § 1605(a)(2)). Specifically, the court found that ABP's financing of the One Meridian Plaza acquisition through an unsecured loan was sufficient to allow the court to exercise subject matter jurisdiction over ABP pursuant to the third clause of the FSIA commercial activity exception. Id. at * 5-6.

Second, the district court concluded that ABP was subject to jurisdiction by "piercing the corporate veil" so as to consider ABP and USA Holding one entity. Id. at * 6. Under this theory, the court found that there was not sufficient evidence to conclude that there was a principal-agent relationship between the two companies, id., but that the corporate veil should be pierced anyway to "avoid fraud and inJustice in contravention of [FSIA] legislative policies," id. at * 7. The district court held that dismissing ABP would be unjust because ABP would be using the FSIA to avoid liability as a defendant, while simultaneously reaping the benefits of U.S. law through its investment in subsidiaries owning real estate in the United States. Id.

Thus, the district court denied ABP and USA Holding's motion to dismiss in the Federal Insurance litigation case.*fn8 In the class action litigation, ABP moved the court to dismiss all counts against it for the same reason--because the district court lacked personal and subject matter jurisdiction over it. The court summarily rejected this motion by stating that the "issue has been resolved in an order dated January 26, 1993, denying ABP's motion to dismiss on the same grounds in a related case before this court." In re One Meridian Plaza Fire Litig., 820 F. Supp. 1460, 1491 (E.D. Pa. 1993) (citing Federal Ins. Co., No. 92-4177, 1993 WL 21327). In the Holcombe case, ABP filed a motion for summary judgment on the ground that the district court had no subject matter jurisdiction because ABP's activities did not fall into any of the FSIA exceptions. The district court denied this motion in an order dated May 24, 1993 without opinion or reference to the earlier related Dispositions.

II. JURISDICTION

A. Jurisdiction of the District Court

These cases were brought by various plaintiffs against the owner/manager defendants, which include the Dutch parent corporations. The parties do not dispute that ABP and USA Holding are agencies or instrumentalities of the Dutch government, and the district court found that both are foreign sovereigns as contemplated by the FSIA. Federal Ins. Co., No. 92-4177, 1993 WL 21327, at * 2-3. Thus, the district court had jurisdiction over all claims against ABP and USA Holding, which are agencies or instrumentalities of a foreign sovereign, pursuant to 28 U.S.C. § 1330. See Rex v. Cia. Pervana de Vapores, S.A., 660 F.2d 61, 64-65 (3d Cir. 1981), cert. denied, 456 U.S. 926, 102 S. Ct. 1971, 72 L. Ed. 2d 441 (1982). The district court had supplemental jurisdiction over all other claims pursuant to 28 U.S.C. § 1367. In this appeal, the Dutch parent corporations contend that the district court improperly denied their motions to dismiss or for summary judgment on the grounds of immunity from suit conferred by the FSIA. The parties disagree as to whether this court has appellate jurisdiction pursuant to 28 U.S.C. § 1291.

B. Appellate Jurisdiction

Ordinarily, we review only "final" decisions of the district court under 28 U.S.C. § 1291. United States v. Santtini, 963 F.2d 585, 591 (3d Cir. 1992). A decision is final only when there is a "decision by the district court that 'ends the litigation on the merits and leaves nothing for the court to do but execute the judgment.'" Id. (quoting Van Cauwenberghe v. Biard, 486 U.S. 517, 521, 108 S. Ct. 1945, 1949, 100 L. Ed. 2d 517 (1988)). However, the Dutch parent corporations contend that the orders denying their motions to dismiss or for summary judgment are appealable as of right under the "collateral order" doctrine articulated in Cohen v. Beneficial Industrial Loan Corp., 337 U.S. 541, 545-47, 69 S. Ct. 1221, 1225-26, 93 L. Ed. 1528 (1949).

We may exercise jurisdiction over interlocutory appeals, such as the present cases, under the collateral order doctrine only if the order "'[1] conclusively determines the disputed question, [2] resolves an important issue completely separate from the merits of the action, and [3] is effectively unreviewable on appeal from a final judgment.'" Kulwicki v. Dawson, 969 F.2d 1454, 1459 (3d Cir. 1992) (quoting Nixon v. Fitzgerald, 457 U.S. 731, 742, 102 S. Ct. 2690, ...


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