Gotham Asset Locators Inc. v. State of Israel, No. 14-cv-5 (S.D.N.Y. June 17, 2004) [click for opinion]

In 1982, Minnie Miller executed a last will and testament in which she left her brother a life estate in real property in Brooklyn. Her will directed that, upon her brother's death, the property was to be sold and the net proceeds divided and paid in equal amounts to the State of Israel and the Jewish Child Care Association of New York. After Miller's brother died in December 1994, the will was admitted for probate. The property, however, was not sold as directed by the will. Instead, over the next few years, a series of fraudulent deeds were recorded on the property, leading ultimately to foreclosure proceedings after mortgages and city taxes on the property went unpaid.

In early 2007, the Jewish Child Care Association and the Jewish National Fund hired Gotham Asset Locators Inc. to represent their interests in the estate proceedings. In the ensuing years, Gotham took a number of legal steps in an effort to clear title to the property and prepare it for sale. In January 2014, Gotham sued the State of Israel in the District Court for the Southern District of New York, claiming that it had performed work that benefitted Israel—given Israel's fifty-percent interest in the proceeds of the sale of the property—but that Israel had contributed nothing to the work. Gotham sought money damages under theories of unjust enrichment and quantum meruit.

Israel moved to dismiss the complaint on the ground that it was not subject to jurisdiction under the Foreign Sovereign Immunities Act ("FSIA"). The court explained that the FSIA provides the sole basis for obtaining jurisdiction over a foreign state in federal court. Further, under the FSIA, a foreign state is presumptively immune from suit unless a specific exception to the FSIA applies.

Here, Gotham invoked two exceptions. First, it argued that jurisdiction was proper under the FSIA's "immovable-property exception." That exception provides that a foreign state shall not be immune from suit "in any case . . . in which rights in property in the United States acquired by succession or gifts in immovable property situated in the United States are in issue." 28 U.S.C. § 1605(a)(4). The court explained that the immovable-property exception has been construed narrowly by courts, applying only in cases where the sovereign's rights in real property are actually "in issue," and not in disputes that merely "arise out of" such rights. Thus, as the court observed, the exception has been held to apply to a suit by a municipality against foreign states to establish the validity of tax liens, because the suit concerned the extent of the foreign sovereigns' obligations (i.e., property taxes) arising directly out of their ownership of real property in the United States, and thus implicated rights in immovable property.

Here, in contrast, the court concluded that the resolution of Gotham's quasi-contractual claims for money damages would not affect Israel's property interests in, or rights to possession of, the Brooklyn property. Accordingly, the court rejected Gotham's invocation of the immovable-property exception as a basis for FSIA jurisdiction.

Second, Gotham argued that Israel had impliedly waived its sovereign immunity under the implied-waiver exception, 28 U.S.C. § 1605(a)(1), which provides that "[a] foreign state shall not be immune . . . " where "the foreign state has waived its immunity . . . by implication." Gotham claimed that Israel had waived its immunity when, during the estate proceedings, it petitioned the surrogate's court to have Israel's nominee appointed as the co-administrator of the Miller estate. The court, however, rejected Gotham's argument. The court stated that, for the implied-waiver exception to apply, courts generally require that the circumstances of the waiver be "unambiguous." The court noted that while there is some authority stating that a foreign state can waive its immunity by affirmatively prosecuting litigation in the United States, that theory requires a "direct connection between the sovereign's activities in the United States courts and the plaintiff's claims for relief." Here, according to the court, there was no direct connection between Gotham's claims in this lawsuit and Israel's actions in the probate proceedings, where it "simply acted to protect its interest in the property." The circumstances supporting a finding of implied waiver were thus far from "unambiguous," the court concluded.

Accordingly, the Court determined that Israel was immune from suit under the FSIA and granted its motion to dismiss the case.