Filed: Aug. 21, 2012
Latest Update: Mar. 02, 2020
Summary: Case: 11-10126 Document: 00511964975 Page: 1 Date Filed: 08/21/2012 IN THE UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT United States Court of Appeals Fifth Circuit FILED August 21, 2012 No. 11-10126 Lyle W. Cayce Clerk BLAKE BOX, doing business as Blake Box Company, Plaintiff - Appellant, v. DALLAS MEXICAN CONSULATE GENERAL, Defendant - Appellee. Appeal from the United States District Court for the Northern District of Texas USDC 3:08-CV-1010 Before REAVLEY, ELROD, and HAYNES, Circuit J
Summary: Case: 11-10126 Document: 00511964975 Page: 1 Date Filed: 08/21/2012 IN THE UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT United States Court of Appeals Fifth Circuit FILED August 21, 2012 No. 11-10126 Lyle W. Cayce Clerk BLAKE BOX, doing business as Blake Box Company, Plaintiff - Appellant, v. DALLAS MEXICAN CONSULATE GENERAL, Defendant - Appellee. Appeal from the United States District Court for the Northern District of Texas USDC 3:08-CV-1010 Before REAVLEY, ELROD, and HAYNES, Circuit Ju..
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Case: 11-10126 Document: 00511964975 Page: 1 Date Filed: 08/21/2012
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit
FILED
August 21, 2012
No. 11-10126
Lyle W. Cayce
Clerk
BLAKE BOX, doing business as Blake Box Company,
Plaintiff - Appellant,
v.
DALLAS MEXICAN CONSULATE GENERAL,
Defendant - Appellee.
Appeal from the United States District Court
for the Northern District of Texas
USDC 3:08-CV-1010
Before REAVLEY, ELROD, and HAYNES, Circuit Judges.
PER CURIAM:*
Blake Box appeals the district court’s ruling that its earlier default
judgment against the Dallas Mexican Consulate General was void for lack of
subject matter jurisdiction. Because we conclude that the district court abused
its discretion in denying Blake Box the opportunity for limited discovery on the
issue of whether the Consulate’s officials lacked actual authority, we VACATE
and REMAND for additional proceedings consistent with this opinion.
*
Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH CIR.
R. 47.5.4.
Case: 11-10126 Document: 00511964975 Page: 2 Date Filed: 08/21/2012
No. 11-10126
I.
In 2006, the Mexican Consulate in Dallas began searching for new office
space. Appellant Blake Box alleges the former Ambassador Enriqué Hubbard
Urrea (Hubbard) and then Assistant Consul Hugo Juarez-Carillo (Juarez) hired
Box on behalf of the Consulate to provide various real estate services in
connection with their desire to identify and acquire a new consulate building.
Box ultimately located a suitable building within a three-building complex at
River Bend Drive.
When the River Bend property owner refused to sell just one of the
buildings, the Consulate allegedly agreed to enter a joint venture arrangement
in which Box and his investors would buy the entire property and sell back one
of the buildings to the Consulate. Box accordingly formed a partnership with
investors, negotiated a deal with the property owner, and obtained space plans,
construction proposals, and appraisal information, which he provided to the
Consulate. In May 2007, the Consulate sent all of Box’s documents to Mexico
City for approval, and in August, the Consulate communicated with Box to
receive additional appraisal information. Then in December 2007, Box learned
that the Consulate used Box’s plans to complete the same River Bend
transaction but with a third-party investor.
On March 11, 2008, Box’s lawyer sent a demand letter to Ambassador
Hubbard at the Consulate. Two days later, the Consulate’s Dallas lawyer Pablo
Alvarado responded on behalf of the Consulate, and the lawyers exchanged
several letters about Box’s demand.
Box sued the Consulate in federal district court on June 16, 2008, alleging
breach of contract, fraudulent inducement, breach of fiduciary duty, unjust
enrichment, quantum meruit, promissory estoppel, constructive trust, attorney
fees, and exemplary damages. On June 22, 2008, a Consulate spokesman told
reporters that the Consulate had knowledge of the lawsuit. Box served the
2
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No. 11-10126
Consulate on July 11, 2008 by delivery of both an English and Spanish
translation of the Summons and the Original Complaint to the Secretaria de
Relaciones Exteriores, Direccion General de Asuntos Juridicos in Mexico City
as required by Article 15 of the Hague Convention.1 When the Consulate failed
to answer or appear, Box’s counsel notified Alvarado, the Consulate’s Dallas
counsel, of the lawsuit and prior service, attaching copies of all the documents
served.
On September 19, 2008, the Consulate had still not appeared, and Box
requested entry of default judgment. The district court held an evidentiary
hearing on September 30, 2009, and signed a default judgment that same day.
The district court determined that the elements of the commercial activity
exception to the Foreign Sovereign Immunities Act (FSIA) existed because the
activity was commercial in nature and there was a sufficient nexus between the
activity and the United States. See 28 U.S.C. § 1605(a)(2) (“A foreign state shall
not be immune from the jurisdiction of the courts of the United States or of the
States in any case . . . in which the action is based upon a commercial activity
carried on in the United States by the foreign state . . . .”).
After the entry of default judgment, Ambassador Hubbard left his position
as Head of Mission on October 7, 2009. The new consular general, Ambassador
Cué-Vega (Cué), was appointed on November 16, 2009. At a press conference
that same day, Cué learned of the default judgment for the first time.2
On March 23, 2010, the Consulate moved to set aside the default
1
As discussed below, the parties dispute whether the service complied with all of the
conditions of the Hague Convention. Specifically, the Consulate argues that the Mexican
government never issued a certificate acknowledging receipt of service.
2
As evidence of the incoming Cué’s lack of knowledge, the Consulate relies on an
affidavit from Deputy Consul General Alberto Bernal Acero (Bernal), who served as the Acting
Consul General during the interim, that states Cué “was previously unaware of the Default
Judgment.” However, Bernal’s affidavit does not say that former Ambassador Hubbard or
Bernal himself had been unaware of the proceedings. Indeed, the Consulate conceded to the
district court that it was not challenging that it had received actual notice of the lawsuit.
3
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judgment. Specifically, the Consulate argued that the judgment was void under
Rule 60(b)(4) because the district court lacked subject matter and personal
jurisdiction, and that the judgment was the result of mistake, inadvertence,
surprise, or excusable neglect under Rule 60(b)(1). As to subject matter
jurisdiction, the Consulate argued that the commercial activity exception
requires the state actor to possess actual authority from the foreign
government, that Mexican law predicates actual authority to purchase real
estate on officials in Mexico City authorizing the purchase, and that Mexico
City never authorized any transaction with Box.
The Consulate introduced the following evidence to show that the
Consulate officials lacked the authority to act on behalf of the Mexican
government: (1) Mexico’s Internal Standards for the Administration of Mexican
Representation’s Real Property Abroad (the Standards); (2) Mexico’s Procedures
Manual for the Acquisition and/or Leasing of Real Property Assets Abroad (the
Procedures); and (3) an affidavit by Deputy Consul General Bernal.
The Standards provide:
It is mandatory that not only RME’s3 follow and apply these
Standards, but also the Ministry personnel involved in the process
of acquisition and leasing of property and of contracting public
works and their related services. . . .
All acquisition of property as well as leasing or any other
transaction involving the disposition of property, regardless of the
amount they represent, will require the OM’s4 authorization.
The Procedures state that the Consulate “must not sign any letter of
intent, pure and financial sales and leasing contracts” involving real property
“without the opinion of Legal Counsel and the authorization of the Chief
3
RME is an abbreviation for “Mexican Representations Abroad” or the Consulate.
4
OM is an abbreviation for the Chief Clerk of the General Office of Real Property
Assets and Material Resources.
4
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Clerk.”5
The Bernal affidavit quoted the above Standards and Procedures and
explained that compliance with them is mandatory under Mexican law. Then,
the affidavit made the following statements: “The Chief Clerk of the General
Office of Real Property Assets and Material Resources never approved of any
agreement with Blake Box” and “[n]either former Ambassador Enriqué
Hubbard Urrea, Mr. Hugo Juarez-Carillo, or anyone else at the Consulate had
authority to bind the Consulate or the government of Mexico to a contract with
Blake Box.” The Consulate relied on this affidavit to show that its officials
lacked actual authority for a transaction with Box.
The district court agreed, setting aside the default judgment for lack of
subject matter jurisdiction. The district court did not reach the Consulate’s
alternative arguments of lack of personal jurisdiction due to improper service
or of the judgment resulting from mistake or excusable neglect. Finally, the
district court denied Box’s request for limited discovery on subject matter
jurisdiction “[b]ecause the Court did not place the burden on Plaintiff to
establish subject matter jurisdiction.”
II.
Box argues the district court erred in denying limited discovery on the
issue of subject matter jurisdiction. He maintains that the answer to the
question of whether the Chief Clerk authorized the transaction “lies within the
exclusive custody or control of the defendant.” The district court ruled that
“[b]ecause the Court did not place the burden on Plaintiff to establish subject
matter jurisdiction, Plaintiff’s alternative request to conduct discovery to prove
subject matter jurisdiction is DENIED.” This rationale for denying discovery
5
The Consulate argues in its brief that the Standards and Procedures require “express
written approval from the proper Mexican authority.” Nothing in the cited portions of the
Standards and Procedures or the accompanying affidavit state that the approval must be
written.
5
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conflicts with the district court’s ruling against Box that “Plaintiff provides no
evidence of authorization or approval from the Chief Clerk, nor does he aver
that such approval exists.”
District courts enjoy “broad discretion in all discovery matters” and “such
discretion will not be disturbed ordinarily unless there are unusual
circumstances showing a clear abuse.” Alpine View Co. Ltd. v. Atlas Copco AB,
205 F.3d 208, 220 (5th Cir. 2000) (internal quotation marks omitted).
Nevertheless, when “there is a factual question regarding a foreign sovereign’s
entitlement to immunity [under the FSIA], and thus a factual question
regarding a district court’s jurisdiction, the district court must give the plaintiff
ample opportunity to secure and present evidence relevant to the existence of
jurisdiction.” Hansen v. PT Bank Negara Indon. (Persero), TBK,
601 F.3d 1059,
1063–64 (10th Cir. 2010) (internal quotation marks omitted); see also McAllister
v. FDIC,
87 F.3d 762, 766 (5th Cir. 1996) (“When a district court makes factual
determinations decisive of a motion to dismiss for lack of jurisdiction, it must
give plaintiffs an opportunity for discovery and a hearing that is appropriate to
the nature of the motion to dismiss.”). The Consulate responds that extensive
jurisdictional discovery must be limited in the sovereign immunity context to
protect the government’s immunity from the costs of litigation. Kelly v. Syria
Shell Petroleum Dev. B.V.,
213 F.3d 841, 849 (5th Cir. 2000) (“FSIA immunity
is immunity not only from liability, but also from the costs, in time and expense,
and other disruptions attendant to litigation.”); Arriba Ltd. v. Petroleos
Mexicanos,
962 F.2d 528, 534 (5th Cir. 1992) (“Several courts have observed the
tension between permitting discovery to substantiate exceptions to statutory
sovereign immunity and protecting a sovereign’s . . . legitimate claim to
immunity from discovery.”). Box replies that in each of the cases cited by the
Consulate to illustrate the need to limit discovery in the FSIA context the
district courts had in fact allowed some tailored form of jurisdictional discovery.
6
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No. 11-10126
The Consulate cites Arriba for the proposition that district courts have
the discretion to deny discovery on jurisdiction. In that case, the plaintiff
brought “generalized conspiratorial allegations” that could not “be proved
without massive, intrusive discovery in Mexico on highly sensitive domestic
issues.” Arriba, 962 F.2d at 536. The court held that the plaintiff failed to
allege a commercial activity, and distinguished cases that allowed limited
jurisdictional discovery where the plaintiffs had alleged specific facts that would
establish FSIA jurisdiction.
Id. at 537. “At the very least, discovery should be
ordered circumspectly and only to verify allegations of specific facts crucial to
an immunity determination.”
Id. at 534. Unlike the case in Arriba, Box
disputes and seeks discovery on the discrete issue that Hubbard and Juarez
were authorized to purchase the consulate building, which if true would
establish FSIA jurisdiction.
The Consulate also cites Kelly as a Fifth Circuit case that emphasizes the
importance of limiting discovery when dealing with FSIA immunity. There, the
plaintiffs argued that the district court should have allowed additional
jurisdictional discovery prior to dismissal. Kelly, 213 F.3d at 855. However,
this court affirmed the district court’s denial of more discovery because the
plaintiffs “did not take advantage of the ample opportunity to conduct
discovery” earlier in the proceedings and the district court must only provide
“an opportunity for discovery.”
Id. (emphasis in original). Rather than
supporting the Consulate’s position, Kelly suggests abuse of discretion where
the district court did not provide an opportunity for limited discovery in the first
instance.
We are cognizant of the district court’s broad discretion over discovery
issues and the heightened concern in the FSIA immunity context.
Nevertheless, we hold that the district court abused its discretion here because
actual authorization is a discrete issue conducive to limited discovery, the
7
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No. 11-10126
relevant documents reside exclusively with the defendant, and Box never
received an opportunity for even narrowly tailored discovery.6 To hold
otherwise would allow any foreign government to escape jurisdiction by simply
attesting in an affidavit that the requisite authorization was never provided.
Finally, the district court’s stated rationale for denying discovery—that the
plaintiff did not bear the burden—contradicts the court’s subsequent focus on
the plaintiff’s lack of evidence of actual authority.
III.
The Consulate also argued to the district court that the default judgment
was void under Rule 60(b)(4) for lack of personal jurisdiction, and that the
judgment could be set aside under Rule 60(b)(1) for mistake, inadvertence,
surprise, or excusable neglect. The district court did not reach these arguments,
and the Consulate reiterates them on appeal as alternative grounds for
affirming the district court.
A.
First, the Consulate contends that the district court lacked personal
jurisdiction because Box’s service was inadequate under the Hague Convention.
Specifically, the Consulate complains that although Box sent the correct
documents to the correct agency, the Hague Convention requires the foreign
state to issue a certificate indicating service on itself, which Mexico never did
in this case. Thus, the sole argument for lack of personal jurisdiction is that the
Mexican government did not issue this certificate.
Service of process under the FSIA is governed by 28 U.S.C. § 1608. The
relevant provision allows Box to serve the Consulate “by delivery of a copy of
6
We also note that the fact the Consulate subsequently purchased the exact property
suggests that some form of actual authority might have existed for the transaction.
Interestingly, the Bernal affidavit produced by the Consulate does not unequivocally deny that
the Chief Clerk authorized the transaction more generally, but rather narrowly emphasized
that the Chief Clerk “never approved of any agreement with Blake Box.” Given these
circumstances, limited discovery is all the more appropriate.
8
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the summons and complaint in accordance with an applicable international
convention on service of judicial documents.” § 1608(a)(2). Moreover, “plaintiffs
must strictly comply with the statutory service of process provisions” of
§ 1608(a), and actual notice is insufficient. Magness v. Russian Fed’n, 247 F.3d
609, 616 (5th Cir. 2001).
The Consulate argues that the Hague Convention, as the applicable
international convention, requires the Central Authority of the foreign
government to complete a certificate stating “that the document has been
served and shall include the method, the place and the date of service and the
person to whom the document was delivered.” Hague Convention Art. 6, Nov.
15, 1966, 20 UST 361. The Convention allows for default judgment without the
certificate if “every reasonable effort has been made to obtain it through the
competent authorities.” Id. Art. 15. The Consulate cites two district court cases
from California where failure to acquire the certificate rendered the service of
process incomplete. See OGM, Inc. v. Televisa, S.A. de C.V.,
2009 WL 1025971,
at *3 (C.D. Cal. April 15, 2009); Universal Trading & Inv. Co. v. Kiritchenko,
2007 WL 660083, at *4 (N.D. Cal. Feb. 28, 2007) (finding that a “single call” to
the Antigua Governor’s office does not constitute “every reasonable effort” to
obtain the certificate). In both of these cases, however, the plaintiffs sought to
serve a complaint against foreign corporations rather than the foreign
government itself, rendering the certificate explaining service to the corporation
more important than explaining service on itself. More importantly, the fact
that the foreign government is the defendant—whose lawyer had already
contacted Box’s legal counsel about this dispute—means that any direct
communication with Mexican officials would constitute an ethical violation.
Tex. R. Prof. Conduct 4.02. Therefore, Box made “every reasonable effort” when
it took the only step ethically permitted by informing Mr. Alvarado of the case
and providing him a duplicate of all the service documents, making service
9
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proper under the Hague Convention.
Moreover, we note that courts have found “that service of process was
properly perfected under the Hague Convention, notwithstanding the failure
of the Central Authority to return a Certificate” when the plaintiff attempts in
good faith to comply with the Hague Convention and the defendant had
sufficient notice “that no injustice would result.” Burda Media, Inc. v. Viertel,
417 F.3d 292, 301 (2nd Cir. 2005) (citation omitted). After all, “[i]t was certainly
not [Box’s] fault that the [Mexican] authorities did not return a formal
Certificate.”
Id. The Consulate does not dispute that Box sent the correct
documents to the correct office, and the record indicates that both Mexico and
the Consulate had notice of the lawsuit and an ability to defend.7 In fact, Box
argues that the Consulate’s own motion to set aside the default judgment
violates Article 16 of the Hague Convention that authorizes judges to relieve
defendant from failure to appeal only if the defendant “did not have knowledge
of the [service] in sufficient time to defend, or knowledge of the judgment in
sufficient time to appeal.” Hague Convention Art. 16(a).8
7
On October 2, 2008, the Assistant Director of International Jurisdiction for Mexico,
Bertha Sanchez Miranda, wrote a letter to the process server acknowledging receipt of service
but claiming she lacked the means to notify the consulate because the Consulate was not
“within the jurisdiction.” The Consulate spokesman had already acknowledged its awareness
of the lawsuit. At the district court, the Consulate admitted that they had knowledge of the
lawsuit:
The Court: So do you disagree that Bertha Sanchez-Miranda received this
packet? Ms. McComas: Somebody there received it and gave it to her, or she
received it herself. I don’t know. I don’t know how it got to her. Clearly,
someone in that office received it, and I don’t dispute that. I want to make one
other thing clear. I’m also not disputing we had knowledge of the lawsuit, and
I think that’s clear from what we just said. Because I think Mr. Dennis
misunderstood me when he said no knowledge of the lawsuit until 2009. What
I’m saying is that I can’t tell you why they didn’t act on it. I think they did have
knowledge.
8
“When a writ of summons or an equivalent document had to be transmitted abroad
for the purpose of service, under the provisions of the present Convention, and a judgment has
been entered against a defendant who has not appeared, the judge shall have the power to
relieve the defendant from the effects of the expiration of the time for appeal from the
10
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No. 11-10126
B.
Finally, the Consulate argues the judgment should be set aside for
mistake, inadvertence, surprise, or excusable neglect under Rule 60(b)(1), or
“for any other reason that justifies relief” under Rule 60(b)(6).
Under this heading, the Consulate seeks to raise what it claims are
“multiple meritorious defenses to Box’s claims.” These include the statute of
frauds for the oral agreement, failure to receive Secretary of State approval via
the Foreign Missions Act,9 and excessiveness of the damages award. Litigating
such substantive arguments at this late hour is untimely and unfair. “Attempts
by a defendant to escape the effects of his default should be strictly
circumscribed; he should not be given the opportunity to litigate what has
already been considered admitted in law.” Nishimatsu Constr. Co., Ltd. v.
Hous. Nat’l Bank, 515 F.2d 1200, 1206 (5th Cir. 1975). Although a defendant
in federal court “is always free to ignore the judicial proceedings, risk a default
judgment, and then challenge that judgment on jurisdictional grounds,”
Jackson, 302 F.3d at 522 (emphasis added) (citation omitted), the defendant
should not be able to sandbag a default judgment with ordinary defenses on the
merits.10
judgment if the following conditions are fulfilled—(a) the defendant, without any fault on his
part, did not have knowledge of the document in sufficient time to defend, or knowledge of the
judgment in sufficient time to appeal, and (b) the defendant has disclosed a prima facie
defense to the action on the merits.” Hague Convention Art. 16.
9
“The Secretary shall require any foreign mission . . . to notify the Secretary prior to
any proposed acquisition, or any proposed sale or other disposition, of any real property by or
on behalf of such mission. The foreign mission (or other party acting on behalf of the foreign
mission) may initiate or execute any contract, proceeding, application, or other action required
for the proposed action [only after giving notification].” 22 U.S.C. § 4305(a)(1).
10
The Consulate suggests in its brief that the new Ambassador responded expeditiously
when he entered office and learned of the past default judgment. However, the Consulate
concedes that it had actual notice of the lawsuit since the initial filing in 2008. There is simply
no basis on this record for arguing surprise or excusable neglect.
11
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No. 11-10126
IV.
The district court abused its discretion in not allowing limited discovery
on the issue of whether the Consulate’s officials lacked actual authority. For
this reason, we VACATE the district court’s ruling that its earlier default
judgement was void for lack of subject matter jurisdiction, and REMAND for
limited discovery and further proceedings in accordance with this opinion.
12
