Kuo v. Gov't of Taiwan, No. 17-CV-10156 (S.D.N.Y. Jan. 4, 2019) [click for opinion]
According to a pro se complaint filed by Sheafen Kuo and Tina Kuo in the Southern District of New York, their father, Shih Jian Kuo, purchased a unit of military housing in Taiwan in 1951. That property, along with six other properties, was sold in 2009 for $65 million by the Ministry of National Defense of Taiwan (the "Ministry"). The Kuos claimed that their mother, who had inherited the house when their father passed away in 1997, was not compensated for the 2009 sale. The Kuos disputed the 2009 sale in proceedings in Taiwanese courts, which were ultimately unsuccessful.
In their pro se action in New York, the Kuos claimed that the 2009 sale constituted a taking that was actionable in U.S. courts under the Foreign Sovereign Immunity Act's expropriation exception, 28 U.S.C. § 1605(a)(3). To successfully invoke the expropriation exception and obtain subject matter jurisdiction in U.S. courts, a plaintiff must demonstrate each of four elements: (1) rights in property are in issue; (2) the property was "taken"; (3) the taking was in violation of international law; and (4) the nexus requirement is satisfied.
In evaluating the Kuos' claims, the court focused on the nexus requirement, which, under Section 1605(a)(3), may be satisfied in one of two ways. The stricter version of the requirement is met if the expropriated property "is present in the United States in connection with a commercial activity carried on in the United States by the foreign state." The more lenient version of the requirement is met if the expropriated property "is owned or operated by an agency or instrumentality of the foreign state and that agency or instrumentality is engaged in a commercial activity in the United States."
The stringency of the nexus requirement that applies in a given case depends on whether defendants constitute a "foreign state" or "an agency or instrumentality" of a foreign state. Here, the court had previously concluded that both the Government of Taiwan and its Ministry of National Defense were properly treated as foreign state defendants, such that the Kuos must satisfy the stricter threshold. The court held that the Kuos had failed to do so.
The Kuos had argued that the Ministry had transferred the sale proceeds of the house to the Taiwan Government Revenue Fund, and that the Government of Taiwan had used this money to purchase various products and services from the U.S. However, even assuming these items could be considered "property exchanged for [the expropriated] property," the Kuos failed to adequately allege that these items were present in the U.S., and indeed such items were presumably located in Taiwan.
The only property that the Kuos claimed was "present in the United States" were oil fields in Texas that the Kuos claimed were purchased by a state-owned energy company using money from the Taiwan Government Revenue Fund. The court found this bare allegation insufficient to infer that the oil fields were derived from the expropriated property. Moreover, by alleging that the property was owned by an instrumentality of Taiwan, and present in the U.S. in connection with the instrumentality's commercial activities, the Kuos failed to adequately allege that the property was present "in connection with a commercial activity carried on in the United States by the foreign state," as required by 28 U.S.C. § 1605(a)(3).
Having failed to establish the nexus requirement under the Foreign Sovereign Immunity Act's expropriated property exception, the court dismissed the claims for lack of subject matter jurisdiction.