United States Court of Appeals
For the First Circuit
No. 01-1713
GABRIEL FAGOT RODRIGUEZ, ET AL.,
Plaintiffs, Appellants,
v.
THE REPUBLIC OF COSTA RICA, ET AL.,
Defendants, Appellees.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF PUERTO RICO
[Hon. Daniel R. Domínguez, U.S. District Judge]
Before
Selya, Circuit Judge,
Coffin, Senior Circuit Judge,
and Lipez, Circuit Judge.
José G. Fagot-Díaz, with whom Fagot & Castal was on brief, for
appellants.
Verónica Ferraiuoli-Hornedo, with whom McConnell Valdés was on
brief, for appellees.
July 15, 2002
LIPEZ, Circuit Judge. This case raises several questions
of first impression for this circuit regarding the scope of the
Foreign Sovereign Immunities Act ("FSIA"), 28 U.S.C. §§ 1330, 1602-
1611. The FSIA provides the exclusive basis for acquiring subject
matter jurisdiction over foreign states and their agencies and
instrumentalities. Id. §§ 1330, 1604. Under the statute, "a
foreign state shall be immune from the jurisdiction of the courts
of the United States," id. § 1604, unless the case falls within one
of the exceptions to immunity set out in § 1605. At issue here are
the exceptions for actions arising out of a foreign state's
commercial or tortious activity, id. §§ 1605(a)(2) & (5), or
involving rights in immovable property, id. § 1605(a)(4). The
district court concluded that none of the exceptions applied. We
affirm.
I.
The relevant facts are not disputed. Appellants, Gabriel
Fagot Rodriguez and Angeles Diaz Rivera ("the Fagots"), own a house
and surrounding property in San Juan, Puerto Rico. In September,
1991, the Fagots agreed to lease the property to Hilda Fournier and
Angelo Greco Fournier ("the Fourniers") for two years, at a rate of
$2,500 per month. Although the Fourniers were then the Consul and
Vice-Consul of the Republic of Costa Rica, they signed the lease in
their individual capacities. The lease agreement provided that the
Fourniers were to use the property for residential purposes only
and prohibited them from subleasing to third parties without the
Fagots' prior written consent.
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Notwithstanding the restrictions in the lease agreement,
the Fourniers began to operate the Costa Rican Consulate ("the
Consulate") from the property. The Fagots were unaware of their
actions, however, and the Fourniers remained on the property
without conflict for most of the two-year lease term. The trouble
began in June of 1993, when -- following a dispute over an air
conditioner -- the Fourniers failed to pay the monthly rent. On
June 16, 1993, the Fagots notified the Fourniers by letter that the
lease was terminated effective immediately, and that the Fourniers
had to vacate the premises by July 16, 1993. The Fagots also
demanded that the Fourniers pay them $10,000 -- the total rent due
for the balance of the lease term.1
Two months passed, and the Fourniers neither vacated the
property, nor paid the requested amount. On August 19, 1993, the
Fagots sent another letter informing the Fourniers that "since a
lease contract no longer exists that stipulates the rent to be paid
for the use and enjoyment of the property, you will pay monthly,
retroactively to July 16, 1993, the sum of $5,000.00, that is from
the date you should have vacated the property." The letter
specified that the new $5,000 rental charge was to be paid "for the
months of July, August and September 1993."
Some time after mailing the August demand letter, the
Fagots learned that the Fourniers had been operating the Consulate
1
The lease agreement provided that, "[i]f the LESSEES [do]
not pay any monthly lease payment on the date the same is due, then
the lease contract will be considered to be totally due and the
LESSORS have the right to collect from the LESSEES the rent for the
duration of the contract."
-3-
from the property.2 On September 30, 1993 -- the last day of the
original lease term -- they filed suit against the Fourniers, the
Consulate, and the Republic of Costa Rica ("Costa Rica"), alleging
breach of contract, personal injury, and damage to or loss of
property. The complaint sought eviction as well as monetary
damages.
The parties quickly filed a flurry of motions. The
Fagots sought immediate eviction. Costa Rica and the Consulate
rejoined with claims of sovereign immunity and inadequate service.
In the meantime, the Fourniers and the Consulate remained on the
property, still without paying rent. They finally vacated the
property in October of 1994, 16 months after the Fagots terminated
the lease.
In December of 1994, Costa Rica and the Consulate moved
for summary judgment on the ground that they were immune from suit
under the FSIA. The Fagots responded that the case fell into the
exceptions to immunity for actions involving rights in immovable
property, or arising out of commercial or tortious activity by a
foreign state. The district court initially concluded that none of
those exceptions applied and entered summary judgment for Costa
Rica. Fagot Rodriguez v. Republic of Costa Rica, 934 F. Supp. 493
2
It is unclear from the record when, exactly, the Fagots
learned that the Consulate was located on the property. However,
in a memorandum supporting their motion for summary judgment, the
Fagots represented that the August letter "was specifically
addressed to the Fourniers" because "at that particular point in
time (August 1993), the Fagots were unaware that Costa Rica and the
Consulate occupied the Property." Accordingly, we view it as
settled that the Fagots were unaware of the Consulate's presence
when they mailed the August demand letter.
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(D.P.R. 1996) (Fagot Rodriguez I).3 The Fagots moved for
reconsideration and for additional discovery. The court granted
their requests and vacated its judgment. Eventually, the Fagots
filed their own motion for summary judgment on the question of
jurisdiction under the FSIA. This time, the court determined that
the case could proceed under the commercial activity and tortious
activity exceptions. Fagot Rodriguez v. Republic of Costa Rica, 99
F. Supp. 2d 157 (D.P.R. 1999) (Fagot Rodriguez II). After holding
a hearing on the question of damages, it entered an order holding
Costa Rica and the Consulate jointly liable with the Fourniers for
non-payment of rent between August, 1993 and October, 1994. The
court concluded that the Fourniers -- but not Costa Rica and the
Consulate -- also were liable for rent due prior to August, 1993,
and for property damage and mental distress. Fagot Rodriguez v.
Republic of Costa Rica, 99 F. Supp. 2d 170 (D.P.R. 1999) (Fagot
Rodriguez III). The Fagots again moved for reconsideration,
arguing that Costa Rica and the Consulate were jointly liable for
all damages. Again, the district court agreed to reconsider its
judgment. However, instead of holding Costa Rica and the Consulate
liable for more damages, it reverted to its earlier view that none
of the exceptions provided a basis for jurisdiction under the FSIA,
and dismissed the claims against Costa Rica and the Consulate.
Fagot Rodriguez v. Republic of Costa Rica, 139 F. Supp. 2d 173
(D.P.R. 2001) (Fagot Rodriguez IV). This appeal followed.
3
At the same time, the court entered a default judgment
against the Fourniers. That judgment has not been appealed.
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II.
We review de novo the district court's conclusion that it
lacked jurisdiction under the FSIA. See Honduras Aircraft
Registry, Ltd. v. Gov't of Honduras, 129 F.3d 543, 546 (11th Cir.
1997) (conducting de novo review of FSIA jurisdictional question);
Export Group v. Reef Indus., Inc., 54 F.3d 1466, 1469 (9th Cir.
1995) ("[T]he existence of subject matter jurisdiction under the
FSIA is a question of law subject to de novo review."); cf. Irving
v. United States, 162 F.3d 154, 162 (1st Cir. 1998) (en banc)
(applying "plenary review" to the question of jurisdiction over the
United States government under the Federal Tort Claims Act). As
noted, the Fagots assert several bases for jurisdiction. First,
they argue that Costa Rica4 can be held liable for non-payment of
rent under the commercial activity exception, 28 U.S.C.
§ 1605(a)(2), based on an implied lease contract created by the
August, 1993, demand letter. Second, they maintain that Costa
Rica's use of the property amounted to a trespass, thus supporting
jurisdiction under the tortious activity exception, id.
§ 1605(a)(5). Finally, the Fagots argue that they can recover for
nonpayment of rent (or, in the alternative, damages for trespass)
under the exception for actions involving "rights in immovable
property," id., § 1605(a)(4). We address those claims in turn.
4
For ease of reference, we omit any further mention of the
Consulate in its role as defendant.
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A. Commercial Activity
Under § 1605(a)(2), a foreign state is subject to
jurisdiction in any case "in which the action is based upon a
commercial activity carried on in the United States by the foreign
state." The term "commercial activity" encompasses both "a regular
course of commercial conduct" and "a particular commercial
transaction or act." Id. § 1603(d). In assessing whether a
certain transaction or course of conduct is commercial in
character, courts must look to the "nature" of the activity rather
than its "purpose." Id. Thus,
the question is not whether the foreign
government [was] acting with a profit motive
or instead with the aim of fulfilling uniquely
sovereign objectives. Rather, the issue is
whether the particular actions that the
foreign state perform[ed] (whatever the motive
behind them) [were] the type of actions by
which a private party engages in "trade and
traffic or commerce."
Rep. of Argentina v. Weltover, Inc., 504 U.S. 607, 614 (1992).
In order to qualify for the commercial activity
exception, an action must be "based upon" commercial activity by
the defendant foreign state. 28 U.S.C. § 1605(a)(2). The Supreme
Court has explained that a claim is "based" on "those
elements . . . that, if proven, would entitle [the] plaintiff to
relief under his theory of the case." Saudi Arabia v. Nelson, 507
U.S. 349, 357 (1993). Here, the Fagots seek damages for, inter
alia, breach of contract. There is no dispute that contract
formation is an essential element of that claim, and that entering
into a contract for lease of property constitutes "commercial
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activity." See, e.g., Joseph v. Office of the Consulate General of
Nigeria, 830 F.2d 1018, 1024 (9th Cir. 1987); see also Walter
Fuller Aircraft Sales, Inc. v. Rep. of the Philippines, 965 F.2d
1375, 1386 (5th Cir. 1992) (noting the commercial nature of the
making or breaching of a contract); Rush-Presbyterian-St. Luke's
Med. Ctr. v. Hellenic Rep., 877 F.2d 574, 578 (7th Cir. 1989)
(noting that "contracts for the purchase or sale of goods or
services are presumptively 'commercial activities'"). The
important question is whether Costa Rica in fact contracted with
the Fagots for use of the property.
In the district court, the parties argued extensively
over whether Costa Rica was bound by the original lease agreement
between the Fourniers and the Fagots. The Fagots insisted that,
although the Fourniers signed the lease in their individual
capacities, Costa Rica could be held liable under agency
principles. They do not press that claim on appeal.5 Instead, the
Fagots argue that the events in the summer of 1993 gave rise to an
implied lease contract between themselves and Costa Rica.
5
Puerto Rico's Civil Code states:
When an agent acts in his own name the principal shall
have no action against the person with whom the agent has
contracted, nor the said persons against the principal.
In such case, the agent is directly liable to the person
with whom he has contracted, as if the transaction were
his own.
Laws of P.R. Ann. tit. 31, § 4429. Relying on that provision, the
district could held that Costa Rica was not liable for the
Fourniers' breach of the original lease agreement, since they
signed that contract "in [their] own name[s]," id., rather than as
agents of Costa Rica. See Fagot Rodriguez IV, 139 F. Supp. 2d at
186.
-8-
The Fagots offer two versions of an implied contract
theory. On the first theory, the August, 1993, demand letter --
stating that, in the absence of a lease agreement, the Fourniers
would be charged $5,000 for each month they remained on the
property -- constituted an offer for a month-to-month lease, at a
rate of $5,000. By remaining on the property, the argument goes,
Costa Rica accepted the offer and created a contract implied in
fact.
The Fagots recognize that an implied-in-fact contract
requires a "mutual intent to contract." Nevertheless, they have
not even attempted to show such mutual intent here. To begin with,
the Fagots have not argued -- much less established -- that they
intended to enter into a month-to-month lease agreement with Costa
Rica. The August demand letter was addressed to the Fourniers, not
Costa Rica. In the course of the proceedings before the district
court, the Fagots explained that "at that particular point in time
(August, 1993), the Fagots were unaware that Costa Rica and the
Consulate occupied the property." They argued that "[s]uch lack of
knowledge should not operate against them." That generalization is
not helpful. On the issue of an implied-in-fact contract, the
Fagots' lack of knowledge about the involvement of Costa Rica
undermines their claim that the demand letter was an offer to Costa
Rica.
Moreover, whatever the Fagots' intent, there is no
suggestion in the record that Costa Rica agreed to pay the Fagots
$5,000 per month for its use of the property. Thus, even if we
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treat the Fagots' demand letter as an offer to Costa Rica, there is
no evidence that Costa Rica accepted it. Given the absence of any
evidence showing a mutual intent to contract, we conclude that
Costa Rica did not enter into an implied-in-fact lease for the
property.
The Fagots' second theory posits a contract implied in
law, or "quasi contract."6 They point out correctly that a quasi
contract does not depend on the consent of the parties but is
"implied in law to prevent unjust enrichment of one party at the
expense of another." However, the Fagots have made no effort to
apply the general principles of quasi contract to the facts of this
case. Their sole authority is International General Electric v.
Concrete Builders of Puerto Rico, Inc., 104 P.R.R. 1221 (1976), in
which the Puerto Rico Supreme Court found a contract implied in law
where the plaintiff reasonably relied on the defendant's assurance
that it would pay for certain services. The court noted that it
was immaterial that the defendant did not actually intend to pay
for the services; it was enough that "the terms of [the defendant's
correspondence] were worthy of the trust of the [plaintiff] which
had no reason to doubt of the good faith of the representation it
was given." Id. at 1228-29. Thus, the court concluded, because
the defendant "caused a legal situation upon which [plaintiff]
relied, it cannot assume now a conduct contradictory to the one
6
The Fagots' claim of an implied-in-law contract was poorly
developed both before the district court and on appeal. Not
surprisingly, therefore, the district court did not mention that
claim in any of its four published opinions in this case.
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which gained [plaintiff's] trust." Id. at 1229 (citations
omitted).
Notwithstanding their reliance on Concrete Builders, the
Fagots did not attempt to show before the district court that Costa
Rica's conduct reasonably led them to believe that $5,000 in rent
per month would be forthcoming, such that Costa Rica should be
estopped from resisting such payment. See id. at 1231 (explaining
that the defendant's behavior must "be the basis of the trust of
[the plaintiff who] has acted in good faith and . . . in a manner
which would cause him prejudice if his trust was defrauded"). The
Fagots' only interaction with Costa Rica was through its agents,
the Fourniers, who refused to pay any rent after the dispute over
the air conditioner in June of 1993, and who stubbornly ignored the
Fagots' repeated requests that they vacate the property. Such
actions would not reasonably inspire trust.
Moreover, the Fagots' own conduct in the summer of 1993
belies any suggestion of detrimental reliance. The Fagots
instructed the Fourniers to vacate the property by July 16, 1993.
When the Fourniers did not comply, the Fagots mailed them a letter
demanding $5,000 for every month they remained on the property
without a lease agreement. The Fagots then learned that the
Fourniers had been operating the Consulate from the property.
Roughly one month later, they filed suit against Costa Rica, the
Consulate, and the Fourniers, alleging that the lease agreement was
terminated in June of 1993, and that the defendants had since been
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in "adverse possession." Their complaint sought, among other
things, to evict the defendants from the property.
Given the Fagots' repeated attempts to terminate their
relationship with Costa Rica and the Fourniers, they cannot now be
heard to argue that they were lulled into inaction by Costa Rica's
purported willingness to compensate them fully for its use of the
property. Accordingly, we conclude that there was no implied-in-
law contract between Costa Rica and the Fagots under the principles
described in Concrete Builders.
B. Tortious Activity
We turn, then, to the tortious activity exception to
foreign sovereign immunity. Section 1605(a)(5) removes sovereign
immunity for actions in which
money damages are sought against a foreign
state for . . . damage to or loss of property,
occurring in the United States and caused by
the tortious act or omission of that foreign
state or of any official or employee of that
foreign state while acting within the scope of
his office or employment.
That exception extends only to non-discretionary torts; it does not
apply to "any claim based upon the exercise or performance or the
failure to exercise or perform a discretionary function regardless
of whether the discretion be abused." 28 U.S.C. § 1605(a)(5)(A).
Here, the Fagots seek damages for tortious trespass.
They argue, first, that both Costa Rica and the Fourniers were
trespassing at least from July of 1993 -- the date by which they
had been instructed to leave -- until they vacated the property in
October of 1994. Second, they maintain that Costa Rica was
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trespassing on the property from the beginning of the lease period
in September, 1991. In support of that more expansive claim, the
Fagots argue that the lease agreement prohibited the Fourniers from
subletting the property or using it for non-residential purposes;
that the Consulate is a separate legal entity from the Fourniers;
and, therefore, that Costa Rica (through the Consulate) was
trespassing on the property even when the Fourniers were not.
We assume, without deciding, that the Fagots have stated
a claim for tortious trespass for the entire period of tenancy --
that is, from September of 1991 until October of 1994. We further
assume that the Fourniers were acting within the scope of their
employment when they committed the alleged trespass. See 28 U.S.C.
§ 1605(a)(5). We need not dwell on such questions because we
conclude that the Fagots' trespass claims are "based upon the
exercise or performance . . . [of] a discretionary function," id.
§ 1605(a)(5)(A), and therefore are outside the scope of
§ 1605(a)(5).
The so-called "discretionary function" limitation set out
in § 1605(a)(5)(A) of the FSIA is modeled on a similar exception to
jurisdiction under the Federal Tort Claims Act ("FTCA"), 28 U.S.C.
§ 2680(a). See H.R. Rep. No. 94-1487, at 21 (1976), reprinted in
1976 U.S.S.C.A.N. 6604, 6620 (hereafter "House Report"). The
latter statute has received extensive judicial treatment, and
decisions construing its discretionary function exception are
useful in applying the parallel provision in the FSIA. The Supreme
Court has crafted a two-part test for determining whether a
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challenged government action is protected as "discretionary" under
the FTCA. The first question is whether the conduct in question
"is a matter of choice for the acting employee." Berkovitz v.
United States, 486 U.S. 531, 536 (1988). If a "federal statute,
regulation or policy specifically prescribes a course of action for
an employee to follow," then there is no room for choice and the
discretionary function exception does not apply. Id.
Second, assuming that the challenged conduct "involves an
element of judgment," that judgment must be "of the kind that the
discretionary function exception was designed to shield." Id. The
purpose of the exception is to "prevent judicial 'second guessing'
of legislative and administrative decisions grounded in social,
economic and political policy through the medium of an action in
tort." United States v. S.A. Empresa de Viacao Aerea Rio Grandense
(Varig Airlines), 467 U.S. 797, 814 (1984). Thus, it "protects
only governmental actions and decisions based on considerations of
public policy." Berkovitz, 486 U.S. at 537 (citing Dalehite v.
United States, 346 U.S. 15, 36 (1953) ("Where there is room for
policy judgment and decision there is discretion.")).
With respect to the first prong of the test, the Fagots
do not dispute that the Fourniers had authority to set up a
consulate in Puerto Rico, and that, generally speaking, that task
involved an element of choice or judgment. However, they maintain
that the particular choices the Fourniers made -- namely, to
install the Consulate on the property in violation of the terms of
the lease agreement, and to remain on the property without paying
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rent after the lease was terminated -- were impermissible ones. In
other words, although the Fourniers' authority was essentially
discretionary, they acted outside that authority when they set up
the Consulate in violation of Puerto Rico landlord-tenant and
trespass law.
The Fagots' primary support for that argument is a 1948
treaty between the United States and Costa Rica, which provides
that either country may establish consulates in the other, and may
buy or lease land for that purpose "in accordance with such
conditions as may be prescribed by the laws of the receiving
state." Consular Convention, Jan. 12, 1948, U.S.-Costa Rica,
art. V, para. 1, 1 U.S.T. 247. The Fagots argue that "it is
axiomatic that the laws of Puerto Rico and the United States, as
the receiving state, require the landowners' consent for the use of
property." Under the treaty, therefore, the Fourniers had no
discretion to use the property in a manner proscribed by the lease
agreement.
We note that it is unclear whether the phrase "the laws
of the receiving state" is meant to refer to local Puerto Rican law
as well as federal law. Moreover, it is unlikely that the drafters
of the treaty intended that every violation of local or federal law
would translate into a breach of the treaty itself. We need not
resolve those questions, however, because even if we adopt the
Fagots' reading of the treaty, it does not follow that the
Fourniers' actions were non-discretionary.
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Treaty or no treaty, the Fourniers were bound to comply
with United States law, both local and federal. The treaty does
not impose any special obligations on foreign officials; nor does
it "specifically prescribe[] a course of action" for such officials
to follow when setting up a Consulate in the United States.
Berkovitz, 486 U.S. at 536. A general obligation to avoid unlawful
activity -- applicable to everyone in the United States -- is
hardly sufficient to remove all room for choice. See Shansky v.
United States, 164 F.3d 688, 691 (1st Cir. 1999) (concluding that
"statements at [a high] level of generality do not
satisfy . . . Berkovitz's specific prescription requirement"). A
more specific directive is required before we can conclude that the
Fourniers' conduct was non-discretionary in the sense that it was
not "the product of judgment or choice." Berkovitz, 486 U.S. at
536.7
The Fagots' argument suffers from a still more basic
flaw. Although they acknowledge that the Fourniers had
7
The Fagots also argue that, under the Foreign Missions Act
("FMA"), 22 U.S.C. § 4304(b), Costa Rica was obligated to acquire
any "benefits" in the United States -- including "the acquisition
of real property by purchase [or] lease" -- only through the
Secretary of State. They point out that there is no evidence that
the Fourniers complied with that provision. However, § 4304(b)
provides only that "[i]f the Secretary determines that such action
is reasonably necessary on the basis of reciprocity or
otherwise . . . then the Secretary may require a foreign
mission . . . to obtain benefits from or through the Secretary."
(Emphasis added.) Thus, if the Secretary of State has not
exercised his authority under § 4304 -- and the Fagots do not argue
that he has -- then there is no basis for the claim that the
Fourniers violated the FMA by failing to obtain the Secretary's
consent before entering into the lease agreement.
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discretionary authority in general, they maintain that the Fagots
had no discretion to violate Puerto Rican landlord-tenant or
trespass law. The crux of their claim, therefore, is that the
Fourniers' actions were non-discretionary because they were
wrongful.
That argument conflates an abuse of discretion with an
absence of discretion. The discretionary function exception
explicitly extends to abuses of discretionary authority. See
28 U.S.C. § 1605(a)(5)(A) (excepting claims based on the exercise
of discretion "regardless of whether the discretion be abused").
"The exercise of discretion could not be abused without negligence
or a wrongful act." Dalehite, 346 U.S. at 33. Accordingly, the
fact that the Fourniers' actions may have been wrongful under
Puerto Rican law governing landlord and tenant relationships
cannot, by itself, render those actions non-discretionary.
Indeed, the Fagots' interpretation reads the
discretionary function exception out of the statute entirely. As
explained above, the exception functions as a limitation on the
general rule that a foreign sovereign is susceptible to suit for
the tortious acts of its employees. The only cases in which the
exception can possibly apply are those in which a foreign sovereign
or one of its agents or employees is accused of a wrongful,
tortious act. Thus, if a tortious act were, by definition, non-
discretionary, the discretionary functions exception would be a
dead letter. See Fagot Rodriguez IV, 139 F. Supp. 2d at 190 n.16
(noting that the Fagots' argument "effectively means that Costa
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Rica, as a result of that innocuous clause [in the treaty], may
never enjoy sovereign immunity in any claim dealing with embassy
property and real estate since any claim for money damages under
the FSIA would obviously be founded on a violation of the law").
We reject such a reading of the statute, and conclude that the
Fourniers' conduct was "discretionary" in the sense that it
involved an element of judgment or choice.
We turn, therefore, to the second prong of the test, and
ask whether the Fourniers' choices were the type that the
discretionary function exception was designed to protect. As we
have explained in the context of the FTCA, the critical question
here is "whether the acts or omissions that form the basis of the
suit are susceptible to a policy-driven analysis" or, put
differently, "whether some plausible policy justification could
have undergirded the challenged conduct." Shansky, 164 F.3d at 692;
accord United States v. Gaubert, 499 U.S. 315, 325 (1991)
(explaining that "[t]he focus of the inquiry is not on the agent's
subjective intent in exercising the discretion . . . , but on the
nature of the actions taken and on whether they are susceptible to
policy analysis"). The Fourniers' decisions regarding the
Consulate satisfy that standard. The initial choices as to
whether, where, and how to set up the Consulate clearly implicated
policy issues. See MacArthur Area Citizens Ass'n v. Rep. of Peru,
809 F.2d 918, 922 (D.C. Cir. 1987) ("It is beyond serious question
that establishing a chancery in the District of Columbia to conduct
foreign relations is a discretionary public policy decision and
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that this decision undergirds the specific acts which the
Association bewails."); cf. Joseph, 830 F.2d at 1020 n.1, 1027
(concluding that "the acquisition and operation of [a consular
residence] was a discretionary policy decision," but finding that
tenants' "purely destructive acts" -- including extensive damage to
the property and the removal of fully grown trees, appliances,
furniture, light fixtures, shutters and drapes -- "can hardly be
considered part of [that] policy decision"). The same is true of
the Fourniers' actions in the summer of 1993, when they were
confronted with early termination of the lease agreement and the
Fagots' demand for $5,000 monthly rent. As the district court
explained:
[A]n evaluation of the range of alternatives
available to the [Fourniers] at the time of
the June termination notice reveals that there
were countervailing political and economic
costs and benefits attendant to each course of
action. Perhaps Costa Rica and the consuls
could have moved the Consulate to a different
building, increased their diplomatic relations
budget, temporarily shut down the Consulate or
scrapped it altogether. However, the Court
cannot sit in de novo review and select a
lawful alternative that would have been
superior.
Fagot Rodriguez IV, 139 F. Supp. 2d at 190.
We agree, and hold that the Fagots' trespass claims are
"based upon the exercise or performance or the failure to exercise
or perform a discretionary function." 28 U.S.C. § 1605(a)(5)(A).
As such, they are excluded from the exception to immunity for
tortious activity.
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C. Immovable Property
The Fagots contend that their claims fall within the
exception to sovereign immunity for "any case in which . . . rights
in immovable property situated in the United States are at issue."
Id. § 1605(a)(4). The district court disagreed, reasoning that the
immovable property exception extends only to actions involving
rights to "actual possession or title." Fagot Rodriguez IV, 139 F.
Supp. 2d at 195. Neither of those rights is at issue here: none
of the defendants has used or possessed the Fagots' property since
October of 1994, and they never challenged the Fagots' title.
Thus, the only right at stake is the Fagots' right to compensation
for non-payment of rent or for trespass. Like the district court,
we conclude that purely compensatory rights, without more, are
insufficient to sustain jurisdiction under the immovable property
exception.
The legislative history to the FSIA indicates that the
immovable property exception was intended to codify existing
international practice. See House Report, supra, at *20. Under
that practice, a foreign sovereign generally was not immune from
"an action to obtain possession of or establish a property interest
in immovable property located in the territory of the state
exercising jurisdiction." Restatement (Second) of Foreign
Relations Law of the United States § 68(b) (1965), quoted in
Asociacion de Reclamantes v. United Mexican States, 735 F.2d 1517,
1521 (D.C. Cir. 1984). However, the exception to immunity for
claims involving immovable property did not extend to cases, such
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as slip-and-fall suits seeking damages for injury suffered on a
foreign state's property, in which the state's title or rights of
use and possession were not contested. See Restatement, supra,
§ 68(b) cmt. d.
The traditional real property exception was founded on
the view that "[a] territorial sovereign has a primeval interest in
resolving all disputes over use or right to use of real property
within its own domain." Asociacion de Reclamantes, 735 F.2d at
1521. Such disputes not only implicate core sovereignty interests;
they also raise questions of institutional competence. Put simply,
foreign courts typically are "not well equipped to decide property
interests or rights to possession with regard to land outside their
jurisdiction, particularly land located in a foreign nation." Id.
Thus, it is important for property disputes to be adjudicated by
local courts, notwithstanding foreign sovereign immunity.
Those concerns suggest that the immovable property
exception "was not intended broadly to abrogate immunity for any
action touching upon real estate." MacArthur Area Citizens Ass'n,
809 F.2d at 921. Rather, like the traditional exception it was
intended to codify, its purpose is to permit jurisdiction in cases
where the United States' interests in adjudicating the dispute are
particularly strong. It is difficult to understand how a simple
contract dispute over nonpayment of rent -- without more -- falls
within that category. The Fagots do not cite, nor can we find, any
case so holding. To the contrary, courts have construed the
immovable property exception to apply only in cases that implicate
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rights of ownership, use, or possession. See, e.g., City of
Englewood v. Socialist People's Libyan Arab Jamahiriya, 773 F.2d
31, 36 (3d Cir. 1985) (describing immovable property exception as
a "title dispute exception" codifying "the recognized principle of
international law that a sovereign may resolve disputes over title
to real estate within its geographic limits"); cf. Logan v. Dupuis,
990 F. Supp. 26, 29 (D.D.C. 1997) (interpreting the analogous
exception to diplomatic immunity to exclude suits for breach of a
rental contract).
In support of their expansive reading of the immovable
property exception, the Fagots point to the legislative history of
the FSIA. They emphasize certain language in the House Report
suggesting that the pre-existing real property exception to
sovereign immunity extended to suits involving "questions of
ownership, rent, servitudes, and similar matters." House Report,
supra, at *20 (emphasis added).8 We do not believe that one
passing reference to "rent" in the legislative history is
sufficient to show that Congress intended the immovable property
exception to apply broadly to garden-variety contract disputes in
which title or possession is not in dispute. As the court
explained in Asociacion de Reclamantes, 735 F.2d at 1522 n.5,
"actions for rent frequently involve issues of title and
possession." Thus, the reference to "rent" in the House Report
8
Specifically, the House Report stated that such suits "seem
to be permitted" under the Vienna Convention on Diplomatic
Relations, which exempts diplomatic or consular property from
"search, requisition, attachment or execution." House Report,
supra, at *20 (internal quotation marks omitted).
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"does not establish any departure from the traditional principle
that the real estate exception to sovereign immunity is bounded by
concern for those issues." Id.
The Fagots also rely on the Restatement (Third) of
Foreign Relations § 455, cmt. b, which states that the immovable
property exception includes "controversies concerning payment of
rent, taxes, and other fees concerning [consular premises]." Like
the legislative history, however, the Restatement is silent on the
question whether such controversies are cognizable when they
involve only the payment of rent or other debts. Comment b to
§ 455 states in full:
Title to land and to buildings on land
traditionally is subject to adjudication by
the courts of the state where the land is
situated. The fact that the land (or
buildings, apartments, or appurtenances) in
controversy is owned or leased by a foreign
state does not detract from the desirability
of adjudicating controversies in local courts.
Premises used for an embassy, consulate, or
diplomatic mission come under this rule, so
that controversies relating to rights of
ownership, possession, occupation, or use, as
well as controversies concerning payment of
rent, taxes, and other fees concerning such
premises are subject to adjudication in local
courts.
The phrase "as well as" certainly could mean that "controversies
concerning the payment of rent" can, by themselves, support
jurisdiction under the immovable property exception. However, it
also could mean that a plaintiff can recover "rent, taxes, and
other fees" in the process of adjudicating "rights of ownership,
possession, occupation or use." The latter reading finds support
in the first sentence of the comment, which emphasizes the
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traditional importance of settling questions about "title" to real
property. Although actions for rent sometimes involve such
questions, a simple controversy over the breach of a rental
contract -- unaccompanied by issues of ownership, possession, or
use -- usually will not implicate the special concerns regarding
real property located on United States territory.
We conclude that the immovable property exception applies
only in cases in which rights of ownership, use, or possession are
at issue. As noted, those rights are not implicated here: the
defendants voluntarily vacated the property in October of 1994, and
they never questioned the Fagots' ownership. The only remaining
dispute concerns Costa Rica's liability for non-payment of rent.
The peculiar circumstances of this case should not obscure the fact
that such a dispute is, first and foremost, a contract dispute.
Thus, plaintiffs seeking to recover unpaid rent usually will be
able to proceed under the commercial activity exception to foreign
sovereign immunity.
That approach may fail where -- as here -- the foreign
sovereign did not in fact agree to pay the rent demanded. However,
the possibility that jurisdiction will be lacking in some cases
should not lead us to adopt an unduly broad reading of the
immovable property exception. The very purpose of the FSIA is to
restrict the class of cases in which United States courts can
adjudicate claims against foreign sovereigns. As we have seen,
each of the exceptions to the FSIA has its own specific
requirements designed to identify cases in which immunity is or is
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not appropriate. Plaintiffs should not be allowed to circumvent
those requirements simply because their claims are somehow related
to real property.
III.
One final matter requires our attention. The Fagots
claim that Costa Rica failed to produce certain documents in its
possession relevant to the exceptions for commercial and tortious
activity. They argue that the district court erred in entering
judgment "without affording [the Fagots] an opportunity to conclude
jurisdictional discovery" as to those exceptions, and without
imposing sanctions on Costa Rica for its failure to comply with the
Fagots' discovery requests. See Fed. R. Civ. P. 37(d) (authorizing
sanctions for discovery misconduct). "We review a district court's
handling of pretrial matters, including discovery, for an abuse of
discretion." Cummings v. Standard Register Co., 265 F.3d 56, 68
(1st Cir. 2001); see also Guex v. Allmerica Fin. Life Ins. &
Annuity Co., 146 F.3d 40, 41 (1st Cir. 1998) (explaining that
district court's decisions regarding sanctions under Rule 37 are
subject to abuse of discretion review). Assuming, arguendo, that
the requested documents might have been important in establishing
an implied contract or a non-discretionary tort, we find no abuse
here.
The Fagots do not seriously dispute that the district
court gave them an adequate opportunity to conduct discovery. They
argue instead that the court did not do enough to ensure that Costa
Rica responded to their requests for documents. However, they have
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given us no basis to believe that any problem existed for the
district court to remedy. Costa Rica insists that it turned over
all the documents in its possession, and the Fagots have not
suggested any reason why we should doubt that claim.
Nor did the Fagots present a coherent claim of discovery
abuse to the district court. As noted above, the court first
entered summary judgment for Costa Rica and the Consulate in its
1996 decision in Fagot Rodriguez I. The Fagots moved for
reconsideration and for additional discovery, and the court allowed
them 60 days for discovery on the commercial and tortious activity
exceptions. At that point, the Fagots submitted a request for
documents, which they claim Costa Rica ignored. (Costa Rica
responds that the request mirrored an earlier request for
production, with which they already had complied fully.) Although
the Fagots mentioned the matter at a hearing in 1997 -- prior to
the court's decision in Fagot Rodriguez II -- they never lodged a
formal objection regarding Costa Rica's alleged non-compliance, or
moved to compel disclosure under Rule 37(a)(2). Instead, they
forged ahead with their motion for summary judgment, relying on
facts obtained through a request for admissions. Indeed, between
the hearing in 1997 and the court's final decision in 2001, the
Fagots did not mention the discovery issue. Given that history, we
have no trouble concluding that the district court did not abuse
its discretion by failing to take some unspecified initiative
directed at some unspecified discovery abuse by Costa Rica.
Affirmed.
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