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Copelco Capital, Inc. v. Brazilian Consulate General

IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF CALIFORNIA


June 8, 2005

COPELCO CAPITAL, INC, PLAINTIFF/COUNTERDEFENDANT,
v.
BRAZILIAN CONSULATE GENERAL, ET AL, DEFENDANTS/COUNTERCLAIMANTS.

The opinion of the court was delivered by: Vaughn R Walker United States District Chief Judge

ORDER

Before the court is plaintiff Copelco Capital, Inc's (Copelco) motion for an order allowing it to levy the assets of defendant Brazilian Consulate General (Consulate). Doc #169. Consulate filed its opposition to this motion on March 9, 2005. Doc #175. On April 22, 2005, the United States Department of Justice appeared, pursuant to 28 USC § 517, to attend to the interests of the United States by filing a statement in support of Consulate's opposition. Doc #187. The court heard oral argument on May 26, 2005. Very helpful and thoughtful guidance was offered by Copelco's counsel and by Rupa Bhattacharyya, representing the United States. Having carefully considered the arguments of counsel, and the applicable federal law, the court DENIES Copelco's motion.

I.

The court, the parties and the United States are quite familiar with the facts of this case. In July 1997, Consulate acquired a Konica copy machine for use in its San Francisco office. Through a finance lease agreement, Consulate did not have to pay Konica cash for the copier. Konica subsequently assigned the lease to Copelco. Consulate welched on its contract, however, and has failed to make any payments to Copelco pursuant to the lease.

After six years of litigation surrounding Consulate's undiplomatic refusal to honor its contract, on June 18, 2004, Copelco obtained a judgment against Consulate in the amount of $38,750.11. Doc #160. It is worth noting that the actual value of the copier is only $8,196.52; the additional $30,553.59 in Copelco's judgment represents the attorney fees and interest incurred during this rather absurdly prolonged litigation.

After five months and no indication from Consulate that it intended to pay any portion of the judgment, Copelco obtained a writ of execution from the Clerk of this court, submitted the writ to the United States Marshal (Marshal) and requested execution of Consulate's bank account located at the Citibank International Banking Center (Citibank) in San Francisco. Doc #170. The Marshal complied and the Citibank account was levied on November 9, 2004. Subsequently, counsel for Copelco and Consulate apparently agreed that the writ of execution should be recalled for failure to comply with 28 USC § 1610(c), which prohibits attachment or execution until a hearing has been conducted by the court. Accordingly, on December 16, 2004, Copelco voluntarily released the Citibank account. Doc #166, Ex B (Release Letter).

On January 14, 2005, Copelco filed the present motion requesting the court to find, pursuant to 28 USC § 1610(c), that a reasonable period of time has elapsed following the entry of the judgment against Consulate and thus an order allowing Copelco to levy the assets of Consulate is warranted. Doc #169 (Pla Mot). Copelco has furthered clarified that its motion is "directed specifically toward [the] Citibank account that was previously levied." Doc #190 at 1. Consulate opposes the motion, asserting that its Citibank account enjoys diplomatic immunity from attachment pursuant to the Vienna Convention on Consular Relations of 1969 (VCCR). Doc #175. Alternatively, Consulate asserts that its bank accounts are immune from attachment under the Foreign Sovereign Immunities Act (FSIA), 28 USC § 1602 et seq. Id. As mentioned above, the United States has filed, in essence, a memorandum amicus curiae in support of Consulate.

II. Vienna Convention

A.

"Believing that an international convention on diplomatic intercourse, privileges and immunities would contribute to the development of friendly relations among nations, irrespective of their differing constitutional and social systems," the Vienna Convention on Diplomatic Relations (VCDR) was ratified in 1961. Vienna Convention on Diplomatic Relations, [1961] 23 UST 3227, TIAS No 7502. The VCDR provided diplomatic immunity to ministers and diplomats sent from a "sending" signatory country to a "receiving" signatory country to head a "mission" (e g, negotiations, promoting relations and developments). In 1969, "believing that * * * consular relations" would benefit from a similar convention, the VCCR was enacted to provide diplomatic immunity to consuls of a "sending" signatory who reside in a foreign "receiving" signatory country to represent the commercial interests of the citizens of the sending signatory. Vienna Convention on Consular Relations, [1969] 21 UST 77, TIAS No 6820. Although their Articles are numerically different, both Vienna Conventions employ the same substantive language throughout. It is undisputed that the United States and Brazil are signatories to both the VCDR and VCCR.

Of great importance to the current motion is Article 28 of the VCCR, which provides that "[t]he receiving State shall accord full facilities for the performance of the functions of the consular post." 21 UST at 96 (emphasis added); see 23 UST at 3238, Art 25 (VCDR analog) ("The receiving State shall accord full facilities for the performance of the [diplomatic] mission.").

B.

Consulate concedes that "neither the VCDR nor the VCCR state specifically that official bank accounts used for purposes of a foreign mission enjoy immunity from attachment." Doc #176 at 4. Consulate, however, asserts that VCCR Article 28 prohibits Copelco from attaching its Citibank account. Id.

Consulate argues that "[i]f the 'full facilities' to which the United States agreed to 'accord' consular immunity did not include bank accounts off the premises of the [consular post], the Consulate would have to take grossly inconvenient measures to protect its government accounts against seizures and [measures] that would severely hamper the Consulate's consular function." Doc #176 at 4. At first blush, this argument appears to stretch the words of the VCCR beyond their plain meaning. The Consulate's position, however, finds support in two district court cases. See Liberian Eastern Timber Corp v Government of the Republic of Liberia, 659 F Supp 606 (D DC 1987) (Harris, J) (hereinafter LETCO); see also Foxworth v Permanent Mission of the Republic of Uganda, 769 F Supp 761 (SD NY 1992) (Mukasey, J).

In LETCO, the Republic of Liberia (Liberia) granted a concession to Liberian Eastern Timber Corporation (LETCO) to harvest and exploit over 400,000 acres of Liberian timber. Ten years later, Liberia reduced this concession by almost half and later terminated the concession altogether. LETCO commenced arbitration under the Convention on the Settlement of Investment Disputes Between States and Nationals of Other States. The arbitration panel awarded LETCO $8,793,280. LETCO then successfully obtained an ex parte order directing the entry of judgment against Liberia in the United States District Court for the Southern District of New York in the amount of $9,076,857.25 (this included interest on the arbitration award). LETCO recorded the judgment in the United States District Court for the District of Columbia and that court issued writs of attachment to Riggs National Bank and First American Bank to seize the Liberian Embassy's bank accounts in an amount sufficient to satisfy the judgment. 659 F Supp at 607-08.

Liberia moved the district court to quash the writs of attachment, arguing that the bank accounts of the Embassy of Liberia were immune from attachment under Article 25 of the VCDR. The district court agreed. "The Liberian Embassy lacks the 'full facilities' the Government of the United States has agreed to accord if, to satisfy a civil judgment, the Court permits a writ of attachment to seize official bank accounts used or intended to be used for purposes of the diplomatic mission." 659 F Supp at 608. More specifically, the court stated:

If the 'full facilities' to which the United States agreed to 'accord' diplomatic immunity did not include bank accounts off the premises of the mission, the Liberian Embassy either would have to take grossly inconvenient measures, such as issuing only checks drawn on a Liberian bank, or would have to run the risk that judgment creditors of Liberia would cause the accounts the Embassy holds at banks located in the United States to be seized for an indefinite length of time, severely hampering the performance of the Embassy's diplomatic functions.

Id.

The LETCO court concluded that "although no provision of the [VCDR] states specifically that official bank accounts * * * enjoy diplomatic immunity from attachment * * * not affording [such] diplomatic immunity * * * is inconsistent with both the agreement set forth in Article 25 and the intention of the parties to the Vienna Convention." Id. While it is true that LETCO interpreted Article 25 of the VCDR (rather than Article 28 of the VCCR), this is a distinction without a difference: the language of both Articles is identical.

In Foxworth, an 80 year-old woman (Foxworth) was struck by an automobile owned by the Permanent Mission of the Republic of Uganda to the United Nations (Uganda). Foxworth suffered severe injuries to her legs as a result of the accident. 769 F Supp at 762. Foxworth filed suit in the Southern District of New York and, due to Uganda's failure to appear, a judgment by default was entered against Uganda in 1991. In 1992, again receiving no objection from Uganda, the court entered final judgment in the amount of $250,120. Id. Uganda failed to satisfy the judgment and a writ of execution was entered on a bank account held by Uganda at the Chemical Bank branch in Manhattan. "Evidently, the attachment of its bank account convinced [Uganda] that [Foxworth's] claim and the proceedings before th[e] court warranted its attention," for soon thereafter, Uganda appeared in the matter and moved to vacate the writ of execution on its bank account. Id. A representative of Uganda explained to the court that the Chemical Bank account, "the balance of which now [was] less than the outstanding judgment, [was] used for wages, allowances and travel expenses for Mission personnel and that a continued freeze would force the Mission to cease operations." Id (emphasis added). Moreover, the United States Department of State (appearing as amicus curiae) agreed with Uganda "that attachment of the account is in violation of obligations owed to * * * Uganda * * * because it impairs [Uganda's] ability to perform its official functions." Id (emphasis added).

Faced with two signatories of the VCDR agreeing that the Convention prohibited the attachment of diplomatic bank accounts, Judge Mukasey (implying that his hands were tied) held that Article 25 of the VCDR and its obligations to accord "full facilities" to a sending State prohibited the attachment of Uganda's bank account to satisfy Foxworth's civil judgment. Id at 763. But Judge Mukasey, explicitly stated the narrowness of his ruling:

[Uganda] * * * is admonished that the holding of this opinion is quite narrow; that is, it holds only that attachment of [Uganda]'s bank account is in violation of the * * * Vienna Convention because it would force [Uganda] to cease operations. * * *. Because attachment * * * will force Uganda to cease operations, [the motion to vacate] is granted.

Id at 763-64 (emphasis added).

Consulate argues that LETCO and Foxworth, and thus the obligation of Article 28 of the VCCR, should guide the court to "accord full facilities for the performance of the functions of the consular post" by prohibiting Copelco from attaching Consulate's Citibank account. Doc #176 at 4 ("Bank accounts of diplomatic and consular posts are * * * immune from attachment under the Vienna Convention") (citing LETCO and Foxworth).

On April 22, 2004, pursuant to 28 USC § 517, the United States filed its statement of interest in support of Consulate's above-recited immunity argument. Doc #187. In addition to repeating Consulate's arguments that Article 28 of the VCCR prohibits the levy of the Citibank account and that LETCO and Foxworth should govern the present motion, the United States makes an additional argument: "[A]ny order by the court allowing such attachment * * * in light of international reciprocity, also could undermine efforts to protect U[nited] S[tates] diplomatic and consular properties located abroad." Id at 5. Most important to the disposition of the current motion, at oral argument the attorney for the United States, Ms Bhattacharyya, eloquently described the slippery slope upon which the court would embark if a "wealthy consulate" exception to the reasoning of LETCO and Foxworth were to be created. Additionally, she presented specific and thorny problems that could arise abroad between foreign countries and United States consulates abroad. Finally, both the United States and Consulate inform the court that Copelco can potentially recover on its judgment by pursuing remedies in the courts of Brazil. Copelco admits it has not attempted to pursue available remedies in Brazil.

The court doubts that consulate bank account immunity necessarily flows from the VCCR. Furthermore, LETCO and Foxworth are distinguishable in important respects from the present case. Nonetheless, the court is constrained to stay its hand in light of the United States' position.

The court cannot improve on the words of Chief Justice Stone, speaking for the Court:

It is a guiding principle in determining whether a court [should grant a suggestion of immunity], that the courts should not so act as to embarrass the executive arm in its conduct of foreign affairs. In such cases the judicial department of this government follows the action of the political branch, and will not embarrass the latter by assuming an antagonistic jurisdiction. It is therefore not for the courts to deny an immunity which our government has seen fit to allow * * *.

Republic of Mexico v Hoffman, 324 US 30, 35 (1945) (citation and internal quotation marks omitted).

Aside from the desire not to embarrass the executive branch, "[t]he determination to grant (or not grant) immunity can have significant implications for this country's relationship with other nations." Wei Ye v Zemin, 383 F3d 620, 627 (7th Cir 2004). Indeed, Ms Bhattacharyya spoke in depth regarding these implications. In such a case, "[a] court is ill-prepared to assess these implications and resolve the competing concerns the Executive Branch is faced with in determining whether to [provide immunity]." Id. See also Spacil v Crowe, 489 F2d 614, 619 (5th Cir 1974) ("Separation-of-power principles impel a reluctance in the judiciary to interfere with or embarrass the executive in it constitutional role as the nation's primary organ of international policy." (citing United States v Lee, 106 US 196, 209 (1882)).

Moreover, this deference is especially warranted in light of the fact that Copelco has not exhausted other avenues of potential remedies; it has not attempted to recover in the courts of Brazil. Refusing to accept two signatories' joint interpretation of the VCCR is not something this court should embark upon lightly even in light of the strong equities evident here. Copelco can resort to other means in attempting to recover on its judgment. Consulate's counsel has represented that this is the route by which claims against the government of Brazil are normally asserted. Further, Consulate's counsel has represented that Brazil understands its duty to honor its contractual obligations. The court -- with some reservation to be sure --accepts these representations and is loathe to suggest that a sovereign nation, such as Brazil, would do otherwise. Still, Consulate's refusal to make timely payments has almost quadrupled the amount due Copelco. The longer the debt goes unpaid, the greater the ultimate reckoning will be. Furthermore, Consulate's resting on the VCCR is not solid ground, but a quicksand. Consulates need copiers and lots of other things to perform their mission; many of which must be acquired in the host country. If suppliers in those countries cannot expect to be paid and in the event of non-payment not have the normal remedies available in commercial transactions, then suppliers will simply not furnish the needed goods and services, except perhaps for cash on the barrel head. Consulate should be very wary of acquiring the reputation of a deadbeat.

III.

In sum, based upon the United States' representations that attachment of Consulate's Citibank account could create international discord toward United States consulates abroad and because Copelco could potentially obtain a remedy without requiring the court to attach the Citibank account, the court DENIES Copelco's motion (Doc #169) without prejudice to its renewal in the event Copelco can demonstrate that a good faith effort to seek and obtain redress through the channels that Consulate has represented will be availing in this matter has proven fruitless.

To be clear, the denial of Copelco's motion represents this court's deference to the executive branch regarding an issue of diplomacy; the court in no way condones Consulate's conduct.

The clerk is DIRECTED administratively to close this file and terminate all pending motions, subject to re-opening at any time that Copelco can demonstrate that it has been frustrated in its efforts to obtain full redress through the means Consulate has represented are proper. This closing is for the administrative convenience of the court and not intended in any way to affect the substantive or procedural rights of the parties herein.

IT IS SO ORDERED.

20050608

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