Foreign Sovereign Immunities Act. Expropriation Exception. Notice of Default. District court finds expropriation exceptions to foreign sovereign immunity apply and allows the court to enforce sanctions judgments against Russia for failing to return a body of religious materials, but requires formal notice of the judgments, which were entered after Russia's default.

Chabad v. Russian Federation, No. 1:05-cv-1548-RCL (D.D.C. Feb. 27, 2023) [click for opinion]

Plaintiff Agudas Chasidei Chabad of the United States ("Chabad"), a Jewish non-profit organization, sued the Russian Federation, Russian Ministry of Culture and Mass Communication, Russian State Library, and Russian State Military Archive ("Russia") requesting that the court order Russia to return a collection of invaluable religious books and manuscripts seized by Russia.

Russia moved to dismiss Chabad's claim on the grounds that it was immune from being sued under international law. The lower court dismissed Chabad's claims in part, but the appellate court reversed and reinstated Chabad's claims in full. Since that time, Russia ceased participating in the lawsuit. The court entered a default judgment against Russia in 2010, ordering it to return the items to Chabad.

After determining that Russia had received adequate notice of the court's default judgment, the court instructed Russia to show cause why it should not be held in civil contempt. The court then directed Chabad to serve copies of its motion for sanctions and the order to show cause on Russia via mail, using the addresses Russia's former counsel provided. After Russia failed to return the items, the court imposed monetary sanctions, which over time accrued to $200 million.

To satisfy the sanctions debt, Chabad moved to attach and execute against property of Russia held or controlled by third parties VEB and Tenex-USA. VEB and Tenex-USA opposed on several grounds, including by arguing that (1) the court did not have subject-matter jurisdiction; (2) attachment immunity applied to any Russian property because the relevant judgments did not satisfy the first element of the expropriation attachment exception; (3) defendants had not received proper notice of the monetary sanctions judgments; and (4) Chabad had not identified specific Russian property used for a commercial activity in the United States.

The court first rejected VEB and Tenex's subject matter jurisdiction argument, explaining that the court and the circuit court had addressed the issue of jurisdiction under the Foreign Sovereign Immunities Act (the "FSIA") five separate times, and the circuit court had determined that there was jurisdiction pursuant to the expropriation exception, 28 U.S.C. § 1605(a)(3). While later cases had called into question the basis for the circuit court's decision—creating a higher bar for asserting jurisdiction over a sovereign, as opposed to a sovereign's agencies or instrumentalities—neither the Supreme Court nor the circuit court had overruled the decision, and the district court determined it retained subject matter jurisdiction.

The court next addressed VEB and Tenex-USA's challenge to the FSIA's expropriation attachment exception, § 1610(a)(3). Among other things, that exception requires that "the execution relates to a judgment establishing rights in property which has been taken in violation of international law or which has been exchanged for property taken in violation of international law." The court found the "relates to" requirement plainly satisfied because the court's sanctions order, and the associated interim judgments, were based entirely on the default judgment establishing Chabad's rights in the expropriated property. Specifically, the monetary sanctions were "calibrated to coerce compliance" with the 2010 default judgment. Accordingly, the FSIA's expropriation attachment exception to immunity applied.

However, the court determined that the FSIA's notice provisions had not been satisfied.The court held that the sanctions judgments entered following the 2010 default judgment were themselves "judgment[s] by default" and therefore should have been served in compliance with § 1608(e). And, because it was the sanctions judgments, and not the 2010 default judgment, that Chabad was seeking to enforce, notice of the 2010 default judgment could not provide the requisite notice. The court explained that it would not undermine the "important procedural protection[] for foreign states and their instrumentalities" and directed Chabad to serve each defendant in compliance with the manner prescribed for service in § 1608(e).

The court made clear, however, that after a reasonable period of time had elapsed—six weeks in its estimation would be sufficient—Chabad would be permitted to file its motion again. At that point, the court would consider whether Chabad had identified any particular Russian property in the United States used for a commercial activity in the United States, and thus subject to execution.

Halli Spraggins of the Washington DC office contributed to this summary.