Business 8th Edition by Marianne Jennings

تمرين 14

Pesos to Dollars: Exchange Rates Can Kill Investments
Facts
W. Christian Riedel, a resident of Ohio, had an account with Unibanco, S.A., and asked that it transfer $100,000 to Banca Metropolitan, S.A. (Bamesa) (predecessor to Bancam) for investment in a certificate of deposit (CD). Bamesa merged with another bank to form Bancam, and Mr. Riedel's CD was renewed with the newly merged bank.
Shortly after Mr. Riedel's renewal, the government of Mexico issued new rules governing accounts from foreigners in Mexican banks. The rules required the banks to pay the CDs in pesos at a rate that was substantially below exchange rates. A month after these rules were put into effect, Bancam was nationalized.
When Mr. Riedel's CD came due, the exchange rate was 74.34 pesos to the dollar. He was paid $53,276.23 for his $100,000 investment.
Mr. Riedel brought suit in a U.S. federal district court, alleging that Bancam had violated both federal and Ohio securities laws in selling the CDs in the United States without registration. Bancam filed a motion to dismiss the suit on the ground that the Sovereign Immunities Act of 1976 precluded U.S. courts from taking jurisdiction over the matter. Bancam also claimed protection under the act of state doctrine. Finally, Bancam claimed that the CD was not a security for purposes of U.S. securities laws.
The district court dismissed Mr. Riedel's suit on the grounds that it lacked jurisdiction over the claims under Ohio law and also on grounds of sovereign immunity and the act of state doctrine. Mr. Riedel appealed.
Judicial Opinion
KENNEDY, Circuit Judge
In this appeal, Riedel does not challenge the District
Court's conclusion that the certificates of deposit that Bancam issued are not "securities" under federal securities law. Instead, Riedel argues that the "act of state doctrine" does not bar his breach of contract and Ohio securities law claims. The District Court, however, did not refer to the "act of state doctrine" in denying Riedel's motion for a new trial. In addition to holding, as a matter of law, that the certificate of deposit involved in this case was not a "security" under federal securities law, the District Court ruled that it did not have jurisdiction over Riedel's breach of contract and Ohio securities law claims. The District Court concluded that: "Diversity jurisdiction pursuant to 28 U.S.C. Section 1332 does not permit a citizen of this state to sue a foreign government, or agency thereof, in a federal district court."
We agree that the District Court did not have jurisdiction under 28 U.S.C. § 1332 over the breach of contract and Ohio securities law claims. Title 28 U.S.C. § 1332(a)(4) confers original jurisdiction on the district courts over civil actions between a foreign state, as plaintiff, and a citizen of a State. Title 28 U.S.C. § 1332(a)(4), however, does not apply to suits between a citizen of a State and a foreign state, as defendant. A "foreign state," under 28 U.S.C. § 1603(a), "includes a political subdivision of a foreign state or an agency or instrumentality of a foreign state...." Since the Government of Mexico nationalized Bancam on September 1, 1982, Bancam qualifies as an "agency or instrumentality of a foreign state" under 28 U.S.C. § 1603(b)(2). Therefore, this action involves an Ohio citizen and a "foreign state," as a defendant. Consequently, 28 U.S.C. § 1332(a)(4) does not apply. Accordingly, we hold that the District Court properly concluded that it did not have jurisdiction under 28 U.S.C. § 1332 over the breach of contract and Ohio securities law claims.
We conclude, however, that the District Court may have had jurisdiction over the breach of contract and Ohio securities law claims under the [Foreign Sovereign Immunities Act (FS1A) 28 U.S.C § 1330]. Although the FSIA ordinarily entitles foreign states to immunity from federal jurisdiction, 28 U.S.C. § 1605(a)(2) creates a "commercial activity" exception to this immunity. Title 28 U.S.C. § 1605(a)(2) provides in pertinent part:
A foreign state shall not be immune from the jurisdiction of courts of the United States or of the States in any case... in which the action is based upon 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.
Accordingly 28 U.S.C. § 1605(a)(2) applies only when a foreign state's "commercial activity" has the required jurisdictional nexus with the United States.
We hold that the sale of the certificates of deposit in this case was a "commercial activity."...
The "act of state doctrine" precludes courts in this country from questioning the validity and effect of a sovereign act of a foreign nation performed in its own territory....
Under the "act of state doctrine," courts exercise jurisdiction but prudentially "decline to decide the merits of the case if in doing so we would need to judge the validity of the public acts of a sovereign state performed within its own territory."
Accordingly, we affirm the portion of the District Court's order denying Riedel's motion for a new trial on the breach of contract claim. The "act of state doctrine" however, does not bar the Ohio securities law claim.
Riedel bases that claim on Bancam's failure to register the certificate of deposit with the Ohio Division of Securities and not on Bancam's failure to repay dollars at the certificate's maturity.
Since the District Court may have had the subject matter jurisdiction, we remand the Ohio securities law claim for further proceedings consistent with this opinion. We also note that even if the District Court concludes that it has subject matter jurisdiction, Bancam has also argued that the District Court does not have personal jurisdiction. Assuming that the District Court decides that it has subject matter jurisdiction under the FSIA, the District Court will also have to make findings of fact to determine whether Bancam has sufficient "contacts" with the United States to satisfy due process.
What did he get back from his original investment?