R&R Int'l Consulting LLC v. Banco do Brasil, S.A., No. 19-20071-CIV-MORENO (S.D. Fla. May 31, 2019) [click for opinion]
Plaintiff, R&R International Consulting LLC ("R&R"), a Florida LLC, brought an action against Banco do Brasil, S.A. ("Banco do Brasil" or the "Bank") for breach of contract, after a Florida branch of the Bank refused to redeem thirty government bonds, or letras hipotecarias, issued in 1957 during the colonization period in Brazil (the "Colonization Bonds"). The Bank moved to dismiss the action based on, inter alia, lack of subject matter jurisdiction under the Foreign Sovereign Immunities Act ("FSIA") and the Act of State Doctrine.
In determining the Bank's motion, the district court first found that it lacked subject matter jurisdiction under the FSIA. The FSIA provides that a foreign state is immune from jurisdiction of the United States unless an exception is applicable. The court found that the Bank was considered a "foreign state" for purposes of the FSIA because the Brazilian government owned approximately 52.2% of the Bank's shares. Thus, the Bank would enjoy sovereign immunity unless an exception applied.
R&R contended that the commercial activity exception applied. The district court disagreed. It held that, although the activity in question—issuing bonds—was commercial, such activity did not have a direct effect in the United States. The reason for this was that the bonds had a twenty-year maturity period, followed by a twenty-year statute of limitations, which meant that the bonds were not enforceable after 1997. Because the bonds were not enforceable, there could be no effect in the U.S., direct or otherwise, arising from the Bank's unwillingness to satisfy the bonds. The commercial activity exception to FSIA immunity thus did not apply.
The court also found that it lacked subject matter jurisdiction because R&R's claim was precluded by the act of state doctrine. The act of state doctrine limits the courts from inquiring into the validity of a recognized foreign sovereign's public acts committed within its own territory. The district court refused to subvert the expectations of the government of Brazil that, at the time of issuance of the Colonization Bonds, it only expected to repay the bonds until, at most, 1997. The court also noted that the Brazilian Superior Court of Justice had already held that the bonds were no longer enforceable pursuant to the controlling statute of limitations. Questioning the validity of the Brazilian statute that created these Colonization Bonds and the judicial opinion, the court held, would violate the act of state doctrine.
Therefore, the district court granted the Bank's motion to dismiss with prejudice.