FG Hemisphere Associates, LLC, v. Unocal Corporation and FG Hemisphere Associates, LLC, v. Democratic Republic of Congo, AKA Republic of Zaire, Nos. 12-56031 and 12-56110 (9th Cir. Mar. 4, 2104) [click for opinion]
Plaintiff sought to execute a judgment against the Democratic Republic of Congo. To get around Congo's immunity under the Foreign Sovereign Immunities Act ("FSIA"), Plaintiff invoked the commercial-activity exception, which applies when a foreign sovereign has property located and used for commercial activity in the U.S. The property in question was a tax debt owed to Congo by Unocal's subsidiary.
Under Ninth Circuit precedent, enforcement proceedings are governed by the law of the state in which the court sits. The case was brought in the Central District of California, so California law applied. Under California law, a debt is located where the debtor is located. The formal debtor, Unocal's subsidiary, is a Bermuda corporation. Plaintiff argued, however, that the alter ego doctrine should be used to impute the debt to Unocal, which is located in the U.S.
The Ninth Circuit, reversing the lower court, rejected the argument. Applying the alter ego doctrine to disregard the separate legal status of Unocal and its subsidiary in order to find Congo's right to payment is located in the U.S. would, the court noted, constitute a novel extension of California law. California courts have rejected similar attempts to expand the alter ego doctrine. The Ninth Circuit believed that the California courts would not extend the doctrine to these circumstances either.