Verlinden B. V. v. Central Bank of Nigeria

PETITIONER: Verlinden B. V.
RESPONDENT: Central Bank of Nigeria
LOCATION: Central Bank of Nigeria Headquarters

DOCKET NO.: 81-920
DECIDED BY: Burger Court (1981-1986)
LOWER COURT: United States Court of Appeals for the Second Circuit

CITATION: 461 US 480 (1983)
ARGUED: Jan 11, 1983
DECIDED: May 23, 1983
GRANTED: Jan 11, 1982

ADVOCATES:
Abram Chayes - on behalf of the Petitioner
Paul M. Bator - as amicus curiae
Stephen N. Shulman - as amicus curiae

Facts of the case

Verlindin B.V., a Dutch Corporation, sued Central Bank of Nigeria in U.S. District Court for the Southern District of New York for breaching a letter of credit. Verlindin alleged that the court had jurisdiction under the Foreign Sovereign Immunities Act (FSIA). The FSIA grants jurisdiction for actions against foreign parties who are not entitled to immunity. Central Bank moved to dismiss the case due to lack of subject matter jurisdiction. The district court dismissed the case, holding that Central bank had sovereign immunity. The U.S. Court of Appeals for the Second Circuit affirmed, but held that the entire FSIA exceeded the scope of Article III of the U.S. Constitution.

Question

Does Article III of the Constitution preclude Congress from granting jurisdiction to United States District Courts over a suit against a foreign sovereign by a foreign corporation, asserting claims having a substantial connection with the United States?

Media for Verlinden B. V. v. Central Bank of Nigeria

Audio Transcription for Oral Argument - January 11, 1983 in Verlinden B. V. v. Central Bank of Nigeria

Warren E. Burger:

We will hear arguments first this morning in Verlinden against Central Bank of Nigeria.

Mr. Chayes, you may proceed whenever you're ready.

Abram Chayes:

Thank you, Mr. Chief Justice, and may it please the Court:

The question in this case may appear at first glance to be a technical and abstract one, but it touches directly and deeply the power of the national government to regulate and protect the foreign relations of the United States.

Congress in 1976, acting in the exercise of its powers over foreign affairs and foreign commerce, enacted the Foreign Sovereign Immunities Act which was comprehensive legislation establishing circumstances and conditions in which suit may be brought in the courts of this country against foreign sovereigns and the procedures regulating such suits.

The question here is whether as an aspect of this legislation Congress can, within the meaning of Article III of the Constitution, ensure that all such suits against foreign sovereigns may be brought in the federal courts, the courts of the nation.

The court below, the Second Circuit, held that there was an impenetrable constitutional barrier to this congressional choice.

Why?

The plaintiff here, petitioner in this Court, is Verlinden B. V., a Dutch corporation.

Thus, the suit is between a foreign corporation and a foreign sovereign.

The diversity clauses of Article III do not cover such a suit.

They cover suits between a citizen of the United States and a foreign sovereign, but not between an alien and a foreign sovereign.

So recourse must be had to the arising underclause of Article III which grants jurisdiction in a constitutional sense to the federal judiciary over suits arising under the laws of the United States.

But Judge Kaufmann below held that this case does not arise under the laws of the United States, and so he dismissed on the constitutional grounds.

It is our contention here and the main proposition in this case that the case does indeed arise under a law of the United States, and that law is the Foreign Sovereign Immunities Act.

Jurisdiction in this--

Warren E. Burger:

Absent that act what would be the situation in this case?

Abram Chayes:

--Absent that act we don't believe there would be jurisdiction.

Warren E. Burger:

Wouldn't be anything.

Abram Chayes:

No, sir.

Jurisdiction in this case is founded on the special jurisdictional section of the Foreign Sovereign Immunities Act that codified in 28 USC 1330; and that provides for original jurisdiction in the federal courts without regard to a mounting controversy of any nonjury civil action against a foreign state with respect to which the foreign state is not entitled to immunity.

So in order for jurisdiction to attach, the foreign state defendant must be one... must be not entitled to immunity with respect to the claim asserted.

Sandra Day O'Connor:

Mr. Chayes, is the absence of sovereign immunity as defined in the act an element of the plaintiff's cause of action, or is it an affirmative defense, in your view?

Abram Chayes:

We believe it is an element of the plaintiff's case, because it is a jurisdictional requirement under 1330 that sovereign immunity must be absent the federal rules, and in the absence of the federal rules, general pleading principles require that the plaintiff plead and prove subject matter jurisdiction in order to establish his case.

We did so in this case.

The situation is such that the defendant cannot waive or concede subject matter jurisdiction, because as we know and as happened in this case, the absence of subject matter jurisdiction can be raised by the court sua sponte or by any party at any time during the course of the case; and that's what happened here.

So... and the act provides, indeed, that in case of a default the court must determine that... on the evidence that the plaintiff is entitled to recover, which means that he must determine that there is no immunity.

And the cases in the lower courts in which there have been defaults have followed that practice.

So that within the narrowest notion of the arising underclause, as Your Honor suggested, the federal question of the sovereign immunity of the defendant is a central element of plaintiff's claim... of plaintiff's case in every instance arising under the act.

But I should say that the act is much more than a jurisdictional statute or a mere authorization to sue.