Welbel v. Polska

Page 727

215 F.3d 727 (7th Cir. 2000)

EDWARD HAVEN and ALLEN WELBEL, Plaintiffs-Appellants, v. RZECZPOSPOLITA POLSKA, SKARB PANSTWA, State Treasury of Poland, POWSZECHNY ZAKLAD UBEZPIECZEN S.A., Defendants-Appellees.

No. 99-3823

In the United States Court of Appeals For the Seventh Circuit

Argued April 6, 2000

Decided June 8, 2000

Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 99 C 1727--Milton I. Shadur, Judge. [Copyrighted Material Omitted]

[Copyrighted Material Omitted] Before POSNER, Chief Judge, and FLAUM and RIPPLE, Circuit Judges.

RIPPLE, Circuit Judge.

Edward Haven and Allen Welbel brought this action seeking the return of property allegedly belonging to them and their families. They claim that the property was seized by the Polish government after World War II. The district court dismissed the action on the ground that it lacked subject matter jurisdiction. For the reasons set forth in the following opinion, we affirm the judgment of the district court.

I BACKGROUND¹

Edward Haven and Allen Welbel both emigrated from Poland to the United States after World War II because of the Polish government's anti- Semitic policies. Both of them left behind real property owned by their families. Mr. Haven's property was insured by Powszechny Zaklad Ubezpieczen ("PZU"), a Polish insurance company. Mr. Haven and Mr. Welbel allege that their family lands were illegally seized by the state, and Mr. Haven also alleges that PZU failed to honor its insurance contract. PZU itself was nationalized by Poland after World War II.

In 1960, Poland and the United States entered into a treaty by which Poland agreed to compensate United States nationals for property seized by Poland after World War II (the "Treaty"). The Treaty provided that Poland would pay $40,000,000 in full settlement of all claims made by nationals of the United States. The United States set up an administrative procedure by which its nationals could obtain a portion of the settlement.

In March 1999, Mr. Haven and Mr. Welbel brought this action in the district court.² The complaint sought the return of property and damages from the Republic of Poland and the State Treasury of the Republic of Poland (collectively "Poland"). It also sought damages from Poland for interfering with PZU's contracts and from PZU for failing to perform its contracts. Mr. Haven and Mr. Welbel served process on the Polish government on May 7. On July 8, the Polish Consulate in Chicago delivered a letter to the district court, purporting to express the Polish Ministry of Justice's view that service was improper under the Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters (the "Hague Convention"). The district court postponed a default hearing scheduled for July 12, and on July 13 counsel for Poland and PZU entered an appearance.

On August 10, Poland and PZU filed a motion to dismiss the case on several grounds, including lack of subject matter jurisdiction due to sovereign immunity. There is no dispute that all of the defendants in this case are "foreign states" within the meaning of the 1976 Foreign Sovereign Immunity Act ("FSIA"), 28 U.S.C. sec. 1602 et seq. The district court entered an order on August 24 holding that the FSIA could be applied retroactively to claims arising before its passage. On September 29, the district court ruled that it lacked subject matter jurisdiction because the action did not fall within any of the exceptions to the general rule that foreign sovereigns are immune from suit in United States courts. First, the court held that the Polish Consulate's July 8 letter was not a knowing relinquishment of rights that waived sovereign immunity.³ Second, it held that the Treaty had not expressly waived sovereign immunity.⁴ Third and finally, the district court found that PZU had not waived its sovereign immunity by undertaking commercial activity in the United States.

II DISCUSSION

We review de novo a district court's dismissal for lack of subject matter jurisdiction. See Fedorca v. Perryman, 197 F.3d 236, 239 (7th Cir. 1999); Kaplan v. United States, 133 F.3d 469, 472-73 (7th Cir. 1998). Foreign sovereigns historically enjoyed immunity from common law suit in United States courts. See In re Air Crash Disaster Near Roselawn, Ind., 96 F.3d 932, 945-46 (7th Cir. 1996); Goar v. Compania Peruana de Vapores, 688 F.2d 417, 425-26 (5th Cir. 1982). The FSIA provides a statutory codification of that immunity. See Verlinden B.V. v. Central Bank of Nigeria, 461 U.S. 480, 488 (1983); Employers Ins. of Wausau v. Banco De Seguros Del Estado, 199 F.3d 937, 941 (7th Cir. 1999); Wolf v. Federal Republic of Germany, 95 F.3d 536, 540-41 (7th Cir. 1996). The FSIA also provides exceptions to the rule of sovereign immunity. See Verlinden, 480 U.S. at 488; Wolf, 95 F.3d at 541. Because those exceptions are in derogation of the common law, we must not read them broadly. Statutes in derogation of the common law are narrowly construed. See Norfolk Redevelopment & Housing Auth. v. Chesapeake & Potomac Tel. Co., 464 U.S. 30, 35 (1983); In re Liberatore, 574 F.2d 78, 85 (2d Cir. 1978); Picker v. Searcher's Detective Agency, 515 F.2d 1316, 1319 (D.C. Cir. 1975).

A.

Mr. Haven's and Mr. Welbel's first argument that jurisdiction is appropriate relies on the letter mailed to the district court by the Polish Consulate. Mr. Haven and Mr. Welbel contend that this letter brings Poland within an exception to sovereign immunity:

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 foreign state has waived its immunity either explicitly or by implication, notwithstanding any withdrawal of the waiver which the foreign state may purport to effect except in accordance with the terms of the waiver.

28 U.S.C. sec. 1605(a)(1). If a sovereign files a responsive pleading without raising the defense of sovereign immunity, then the immunity defense is waived. See Frolova v. Union of Soviet Socialist Republics, 761 F.2d 370, 377 (7th Cir. 1985) (per curiam); accord Drexel Burnham Lambert v. Committee of Receivers, 12 F.3d 317, 326 (2d Cir. 1993); United States v. Crawford Enters., 643 F. Supp. 370, 378-79 (S.D. Tex. 1986). The letter sent by the Polish Consulate to the district court did not raise any sovereign immunity defense; therefore, if the letter was a responsive pleading, sovereign immunity has been waived. Mr. Haven and Mr. Welbel argue that the letter was a responsive pleading.

Rule 7 of the Federal Rules of Civil Procedure explains that only certain filings may be considered responsive pleadings, including a complaint, an answer, a reply to a counterclaim, an answer to a cross-claim, a third-party complaint, and a third-party answer. "No other pleading shall be allowed." Fed. R. Civ. P. 7. A responsive pleading need only be filed after proper service has been made. See Silva v. City of Madison, 69 F.3d 1368, 1376 (7th Cir. 1995) ("[A] responsive pleading is required only after service has been effected and the party has been made subject to the jurisdiction of the federal courts."); Bowman v. Weeks Marine, Inc., 936 F. Supp. 329, 336-37 (D.S.C. 1996).

Although objections to service of process may be made in a responsive pleading, they may also be made through a Rule 12 motion to dismiss. As Rule 12(b) explains:

Every defense, in law or fact, to a claim for relief in any pleading . . . shall be asserted in the responsive pleading thereto if one is required, except that the following defenses may at the option of the pleader be made by motion: . . . (5) insufficiency of service of process.

Fed. R. Civ. P. 12 (emphasis added). We have acknowledged that the insufficiency of service of process may properly be raised through a motion to dismiss. See, e.g., Troxell v. Fedders of North Am., Inc., 160 F.3d 381, 382-83 (7th Cir. 1998) (affirming district court's grant of defendant's "motion to dismiss" for insufficient process). A motion to dismiss is not a responsive pleading. See Duda v. Board of Educ. of Franklin Park, 133 F.3d 1054, 1056-57 & n.2 (7th Cir. 1998); Camp v. Gregory, 67 F.3d 1286, 1289 (7th Cir. 1995); Scam Instrument Corp. v. Control Data Assoc., 458 F.2d 885, 889 (7th Cir. 1972).⁵

The Federal Rules of Civil Procedure also specifically contemplate that foreign sovereigns will be allowed to object to the adequacy of service. Rule 4, which governs service of process, requires that service on foreign sovereigns comply with 28 U.S.C. sec. 1608. See Fed. R. Civ. P. 4(j)(1). The Hague Convention itself is attached to Rule 4 as an appendix. Article 4 of the Convention allows foreign sovereigns to object to the service of process.⁶

The Federal Rules of Civil Procedure, and our case law interpreting those rules, require us to hold that sovereign immunity was not waived by the Polish Consulate's letter. The only court filing that can waive a sovereign immunity defense is a responsive pleading that does not raise the defense. The Consulate's letter objecting to the propriety of service is properly treated as a motion to dismiss, not a responsive pleading. See Hirsh v. State of Israel, 962 F. Supp. 377, 380 (S.D.N.Y.) ("Although an implied waiver may be found where a foreign state files a responsive pleading that fails to raise the defense of sovereign immunity, Germany's letter is not a 'responsive pleading.'" (citation omitted)), aff'd, 133 F.3d 907 (2d Cir. 1997).⁷ Indeed, until it was established that service of process had been properly executed, Poland was under no obligation to file any responsive pleading. See Silva, 69 F.3d at 1368. Because the letter was not a responsive pleading, its failure to raise the sovereign immunity defense did not compromise Poland's ability to raise that defense.

Our holding that Poland's letter objecting to service of process did not waive sovereign...