Bainbridge Fund Ltd. v. Republic of Argentina

102 F.4th 464

BAINBRIDGE FUND LTD., Appellant v. REPUBLIC OF ARGENTINA, Appellee

No. 23-7112

United States Court of Appeals, District of Columbia Circuit

Argued March 12, 2024

Decided May 24, 2024

Appeal from the United States District Court for the District of Columbia (No. 1:22-mc-00070)

Anthony J. Costantini argued the cause for appellant. With him on the briefs was Drew T. Dorner.

Carmine D. Boccuzzi Jr. argued the cause for appellee. With him on the brief was Rathna J. Ramamurthi.

Before: Henderson, Circuit Judge, and Edwards and Ginsburg, Senior Circuit Judges.

Karen Lecraft Henderson, Circuit Judge:

Bainbridge Fund Ltd. (Bainbridge) seeks to attach property owned by the Republic of Argentina (Argentina) in partial satisfaction of a judgment entered against Argentina in 2020. Pursuant to the Foreign Sovereign Immunities Act (FSIA), 28 U.S.C. § 1602 et seq., the property of a foreign sovereign cannot be attached unless the sovereign waives immunity and the property is used for commercial activity in the United States. The district court denied Bainbridge's application after evaluating Argentina's waiver of sovereign immunity in the bond giving rise to the judgment and finding that the property in question is not used for commercial activity.

Bainbridge appeals, arguing that the totality of the circumstances shows that the property is used for commercial activity and, alternatively, Argentina's waiver extended to an agreement not to invoke FSIA defenses, including the commercial activity requirement. But the facts show only aberrational commercial use over the last 25 years. In addition, Argentina's contractual waiver is subject to the FSIA's restrictions and does not amount to an explicit promise not to raise FSIA defenses. As detailed infra, we affirm the district court's denial of Bainbridge's application.

I. BACKGROUND

On December 1, 2020, in the Southern District of New York, Bainbridge obtained a judgment against Argentina for $95,424,899.38. The judgment arose out of Argentina's default on a bond owned by Bainbridge and remains unpaid.

The bond giving rise to the judgment contained the following waiver of sovereign immunity by Argentina:

To the extent that the Republic or any of its revenues, assets or properties shall be entitled . . . to any immunity from suit . . . from attachment in aid of execution of judgment, from execution of a judgment or from any other legal or judicial process or remedy . . . the Republic has irrevocably agreed not to claim and has irrevocably waived such immunity to the fullest extent permitted by the laws of such jurisdiction and consents generally for the purposes of the Foreign Sovereign Immunities Act to the giving of any relief or the issue of any process in connection with any Related Proceeding or Related Judgment . . . .

J.A. 129.

Bainbridge now seeks to attach and execute upon the Chancery Annex, a building owned by Argentina and located at 2136 R Street NW, Washington, D.C. The property was used to "house both diplomats and commercial tenants" several decades ago but since 1997 has been "uninhabited and in a state of disrepair." TIG Ins. Co. v. Republic of Argentina, 967 F.3d 778, 780 (D.C. Cir. 2020) (discussing the Chancery Annex). The property is subject to residential property taxes. The Chancery Annex is used to store diplomatic files and access to the building is limited to members of Argentina's Ministries of Foreign Affairs and Defense. It is allocated to the Argentine Ministry of Foreign Affairs, International Trade & Worship and displays the Argentine flag and seal.

The Chancery Annex is not currently for sale but Argentina has listed the property twice. Both times Argentina attempted to sell the property, creditors unsuccessfully sought attachment. Argentina first listed the property in 2003 and removed the listing from the market in January 2004. NML Cap., Ltd. v. Republic of Argentina, 2005 WL 8161968, at *14 (D.D.C. Aug. 3, 2005). In August 2005, the district court reviewed the property's history and quashed the attempted attachment because it was no longer on the market and "there [was] no evidence to support Argentina's present intent to sell." Id. Argentina relisted the property in 2018 and received multiple offers. TIG Ins. Co., 967 F.3d at 780. A creditor filed a writ to attach the property and Argentina took the listing down three days later. Id. The TIG Insurance proceedings are ongoing. See TIG Ins. Co. v. Republic of Argentina, 2022 WL 3594601 (D.D.C. Aug. 23, 2022), appeal filed, No. 23-7064 (D.C. Cir.).

In July 2022, Bainbridge filed its application seeking both attachment of the Chancery Annex to satisfy the judgment in part and a writ of fieri facias. Pursuant to the FSIA, "property in the United States of a foreign state shall be immune from attachment" unless the property falls into one of the Act's enumerated exceptions. 28 U.S.C. § 1609. The exception at issue here provides that property "used for a commercial activity in the United States" is not immune from attachment if "the foreign state has waived its immunity from attachment in aid of execution." 28 U.S.C. § 1610(a)(1). We look to the totality of the circumstances at the time the application was filed to determine whether a property is "used for a commercial activity." TIG Ins. Co., 967 F.3d at 782, 788.

The district court denied Bainbridge's application. It held that Section 1610(a)(1) contains two separate requirements for attachment: (1) the building must be "used for a commercial activity" and (2) the foreign state must waive immunity. The parties agreed that Argentina had waived immunity but disputed whether the Chancery Annex is used for a commercial activity. The district court found that the building's commercial uses were in the distant past and, at the time of filing, the building had some limited diplomatic uses and was otherwise in a state of disrepair. Considering the totality of the circumstances, the district court concluded that Bainbridge failed to meet its burden to show that the property was used for commercial activity.

II. ANALYSIS

The determination as to whether a property is used for commercial purposes "requires a court to both make factual findings concerning how the property was used and to reach legal conclusions concerning whether that particular use was 'for commercial purposes.' " Af-Cap Inc. v. Republic of Congo, 383 F.3d 361, 368 (5th Cir.), decision clarified on reh'g, 389 F.3d 503 (5th Cir. 2004). We review the district court's determination for clear error with respect to factual findings and de novo as to legal conclusions and the application of law to fact. Id.; Price v. Socialist People's Libyan Arab Jamahiriya, 389 F.3d 192, 197 (D.C. Cir. 2004).

At this stage in the proceedings, Bainbridge bears the burden of persuasion to show that the FSIA authorizes attachment. Execution immunity is a " 'default presumption' that the judgment creditor must defeat at the outset." Weinstein v. Islamic Republic of Iran, 831 F.3d 470, 482 (D.C. Cir. 2016) (quoting Rubin v. Islamic Republic of Iran, 637 F.3d 783, 800 (7th Cir. 2011)), abrogated on other grounds by Rubin v. Islamic Republic of Iran, 583 U.S. 202, 138 S.Ct. 816, — L.Ed.2d — (2018); accord TIG Ins. Co., 967 F.3d at 781. Only after Bainbridge defeats the presumption of execution immunity does the burden shift to the sovereign to show by a preponderance of the evidence that the claimed exception does not apply. Bell Helicopter Textron, Inc. v. Islamic Republic of Iran, 734 F.3d 1175, 1183 (D.C. Cir. 2013).

A.

Bainbridge argues that under the totality of the circumstances, the Chancery Annex satisfies the FSIA's "commercial activity" requirement. Bainbridge points to two kinds of commercial use the property has been put to. First, in the 1980s and 1990s, Argentina leased the property to commercial tenants, an "unquestionably commercial activity." NML Cap., Ltd., 2005 WL 8161968, at *14 (discussing the Chancery Annex). Second, Argentina contracted with a real estate agency and listed the property for sale in 2003-2004 and 2018. See Friedman v. Gov't of Abu Dhabi, 464 F. Supp. 3d 52, 70 (D.D.C. 2020) ("Contracts for services are generally considered commercial activities when entered into in the United States." (quotation omitted)). Bainbridge also claims that the district court ignored important facts in the record: the U.S. State Department has not considered the property diplomatic in nature for "many years," J.A. 184; the District of Columbia designates the property as "residential," J.A. 112; and Argentina has paid residential property taxes since at least 2005.

Reviewing these facts and considering the totality of the circumstances, we find no error in the district court's conclusion that the Chancery Annex was not "used for commercial activity" at the time of filing.

As used in the FSIA, "commercial activity" means "either a regular course of commercial conduct or a particular commercial transaction or act." 28 U.S.C. § 1603(d). Our precedent instructs that the phrase "used for a commercial activity" is "best interpreted as an adjectival phrase characterizing the kind of property that may be attached" rather than indicating any particular time frame for assessing the property's use. TIG Ins. Co., 967 F.3d at 786. The property "retains its immunity protection where its commercial uses, considered holistically and in context, are bona fide exceptions to its otherwise noncommercial use." Id. at 786 (quoting Af-Cap Inc., 383 F.3d at 370). We must avoid "an artificially narrow lens" that would "allow[ ] one-time or aberrational uses to dictate the fate of the property." Id.; see also id. at 788 ("[J]ust as they need to steer clear of relying on the purely future commercial uses . . . , district courts examining the totality of the circumstances should avoid finding speculative or aberrational commercial uses, or uses in the distant past, sufficient to satisfy the 'used for a commercial activity' requ...