Bolivarian Republic of Venezuela v. Helmerich & Payne Int'l Drilling Co.

137 S.Ct. 1312

197 L.Ed.2d 663

BOLIVARIAN REPUBLIC OF VENEZUELA, et al., Petitioners

v.HELMERICH & PAYNE INTERNATIONAL DRILLING CO., et al.

No. 15–423.

Supreme Court of the United States

Argued Nov. 2, 2016.

Decided May 1, 2017.

Catherine E. Stetson, Washington, DC, for Petitioners.

Elaine J. Goldenberg, for the United States as amicus curiae, by special leave of the Court, supporting the petitioners.

Catherine M.A. Carroll, Washington, DC, for respondents.

David W. Ogden, David W. Bowker, Catherine M.A. Carroll, Blake C. Roberts, Molly M. Jennings, Wilmer Cutler Pickering, Hale and Dorr LLP, Washington, DC, for Respondent.

Joseph D. Pizzurro, Robert B. Garcia, Kevin A. Meehan, Juan O. Perla, Curtis, Mallet–Prevost, Colt & Mosle LLP, New York, NY, Bruce D. Oakley, Hogan Lovells US LLP, Houston, TX, William L. Monts, III, Catherine E. Stetson, Mary Helen Wimberly, Hogan Lovells US LLP, Washington, DC, for Petitioners.

Justice BREYER delivered the opinion of the Court.

The Foreign Sovereign Immunities Act of 1976 (FSIA or Act), provides, with specified exceptions, that a "foreign state shall be immune from the jurisdiction of the courts of the United States and of the States...." 28 U.S.C. § 1604. One of the jurisdictional exceptions—the expropriation exception—says that

"[a] foreign state shall not be immune from the jurisdiction of courts of the United States or of the States in any case ... (3) in which rights in property taken in violation of international law are in issue and that property ... is owned or operated by an agency or instrumentality of the foreign state ... engaged in a commercial activity in the United States." § 1605(a)(3).

The question here concerns the phrase "case ... in which rights in property taken in violation of international law are in issue."

Does this phrase mean that, to defeat sovereign immunity, a party need only make a "nonfrivolous" argument that the case falls within the scope of the exception? Once made, does the existence of that nonfrivolous argument mean that the court retains jurisdiction over the case until the court decides, say, the merits of the case? Or does a more rigorous jurisdictional standard apply? To put the question more generally: What happens in a case where the party seeking to rely on the expropriation exception makes a nonfrivolous, but ultimately incorrect, claim that his property was taken in violation of international law?

In our view, a party's nonfrivolous, but ultimately incorrect, argument that property was taken in violation of international law is insufficient to confer jurisdiction. Rather, state and federal courts can maintain jurisdiction to hear the merits of a case only if they find that the property in which the party claims to hold rights was indeed "property taken in violation of international law." Put differently, the relevant factual allegations must make out a legally valid claim that a certain kind of right is at issue (property rights) and that the relevant property was taken in a certain way (in violation of international law). A good argument to that effect is not sufficient. But a court normally need not resolve, as a jurisdictional matter, disputes about whether a party actually held rights in that property; those questions remain for the merits phase of the litigation.

Moreover, where jurisdictional questions turn upon further factual development, the trial judge may take evidence and resolve relevant factual disputes. But, consistent with foreign sovereign immunity's basic objective, namely, to free a foreign sovereign from suit, the court should normally resolve those factual disputes and reach a decision about immunity as near to the outset of the case as is reasonably possible. See Verlinden B.V. v. Central Bank of Nigeria, 461 U.S. 480, 493–494, 103 S.Ct. 1962, 76 L.Ed.2d 81 (1983).

I

Since the mid–1970's a wholly owned Venezuela-incorporated subsidiary (Subsidiary) of an American company (Parent) supplied oil rigs to oil development entities that were part of the Venezuelan Government. In 2011 the American Parent company and its Venezuelan Subsidiary (the respondents here) brought this lawsuit in federal court against those foreign government entities. (The entities go by their initials, PDVSA, but we shall normally refer to them as "Venezuela" or the "Venezuelan Government.") The American Parent and the Venezuelan Subsidiary claimed that the Venezuelan Government had unlawfully expropriated the Subsidiary's oil rigs. And they sought compensation.

According to stipulated facts, by early 2010 the Venezuelan Government had failed to pay more than $10 million that it owed the Subsidiary. At that point the government sent troops to the equipment yard where the rigs were stored, prevented the Subsidiary from removing the rigs, and issued a " ‘Decree of Expropriation’ " nationalizing the rigs. App. 72–74. Subsequently, the president of the oil development entities led a rally at the Subsidiary's offices, where he referred to the Venezuelan Subsidiary as an " ‘American company’ " with " ‘foreign gentlemen investors.’ " Id ., at 54.

Venezuela asked the court to dismiss the case on the ground that Venezuela possessed sovereign immunity and that the court consequently lacked "jurisdiction" to hear the case. See 28 U.S.C. § 1604 ; Fed. Rules Civ. Proc. 12(b)(1) and (b)(2) ; Verlinden, supra, at 485, n. 5, 103 S.Ct. 1962 (explaining that a court lacks "subject-matter" and "personal" jurisdiction over a foreign sovereign unless an FSIA exception applies). The companies replied that the case falls within the expropriation exception. Venezuela in turn argued that the Subsidiary's expropriation claim did not satisfy the exception because " ‘international law does not cover expropriations of property belonging to a country's own nationals' "; the taking was not " ‘in violation of international law,’ " and the exception thus does not apply. Record in No. 11–cv–01735 (D DC), Doc. 22, p. 13. Venezuela further argued that the American Parent's nationality makes no difference because, "as a corporate parent, [it] does not own [the Subsidiary's] assets." Id., Doc. 24, at 12.

The parties agreed that the District Court should then decide whether the exception applies, and it should do so on the basis of governing law, taking all of the plaintiffs' well-pleaded allegations as true and construing the complaint in the light most favorable to the plaintiffs. App. 119. The court decided, in relevant part, that the exception did not apply to the Venezuelan Subsidiary's claim because the Subsidiary was a national of Venezuela. See 971 F.Supp.2d 49, 57–61 (2013). The court concluded that Venezuela consequently possessed sovereign immunity, and it dismissed the Subsidiary's claim on jurisdictional grounds. It rejected, however, Venezuela's argument that the Parent had no rights in property in the Subsidiary. It concluded that Venezuela's "actions have deprived [the Parent], individually, of its essential and unique rights as sole shareholder ... by dismantling its voting power, destroying its ownership, and frustratingits control over the company." Id., at 73.

The Venezuelan Subsidiary appealed the dismissal of its expropriation claim, and Venezuela appealed the court's refusal to dismiss the Parent's claim. The Court of Appeals for the District of Columbia Circuit reversed in part and affirmed in part the District Court's conclusions. It decided that both the Subsidiary's and the Parent's claims fell within the exception.

With respect to the Subsidiary's claim, the court agreed that a sovereign's taking of its own nationals' property normally does not violate international law. But, the court said, there is an "exception" to this rule. And that exception applies when a sovereign's expropriation unreasonably discriminates on the basis of a company's shareholders' nationality, 784 F.3d 804, 812 (C.A.D.C.2015) (citing Banco Nacional de Cuba v. Sabbatino, 307 F.2d 845 (C.A.2 1962) ). That exception, it added, might apply here, in which case the expropriation would violate international law, the FSIA's expropriation exception would apply, and the federal courts would possess jurisdiction over the case. 784 F.3d, at 813. With respect to the Parent's expropriation claim, the court agreed with the District Court that the expropriation exception applied because the Parent had " ‘put its rights in property in issue in a non-frivolous way.’ " Id., at 816.

For present purposes, it is important to keep in mind that the Court of Appeals did not decide (on the basis of the stipulated facts) that the plaintiffs' allegations are sufficient to show their property was taken in violation of international law. It decided instead that the plaintiffs might have such a claim. And it made clear the legal standard that it would apply. It said that, in deciding whether the expropriation exception applies, it would set an "exceptionally low bar." Id., at 812. Any possible, i.e., " ‘non-frivolous,’ " ibid., claim of expropriation is sufficient, in the Court of Appeals' view, to bring a case within the scope of the FSIA's exception. In particular: If a plaintiff alleges facts and claims that permit the plaintiff to make an expropriation claim that is not " ‘wholly insubstantial or frivolous, ’ " then the exception permits the suit and the sovereign loses its immunity. Ibid. (emphasis added). Given the factual stipulations, the Court of Appeals did not suggest further factfinding on this jurisdictional issue but, rather, decided that the Subsidiary had "satisfied this Circuit's forgiving standard for surviving a motion to dismiss in an FSIA case." Id., at 813.

Venezuela filed a petition for certiorari asking us to decide whether the Court of Appeals had applied the correct standard in deciding that the companies had met the expropriation exception's requirements. We agreed to do so.

II

Foreign sovereign immunity is jurisdictional in this case because explicit statutory language makes it so. See § 1604...