Case of the Day: Villoldo v. Castro

The case of the day is Villoldo v. Castro (1st Cir. 2016). Westlaw calls the case Villoldo v. Ruz. I’m no Spanish naming convention expert, but that seems clearly wrong. Anyway, Alfredo and Gustavo Villoldo were Cuban brothers. In 1959, the Cuban government confiscated their father’s property and threatened them, even after they fled to Miami. The brothers sued the Cuban government and high officials, namely Fidel and Raul Castro, in the Florida state court in 2008. The Florida case ended in a $2.79 billion default judgment. The brothers then sued on the Florida judgment in the federal court in New York. Again, the case ended in a default judgment. The brothers registered the judgment in the District of Massachusetts, and the District Court authorized them to seek an attachment. So the brothers served a subpoena on Computershare, a transfer agent in Canton, Massachusetts. Computershare produced documents identifying hundreds of securities accounts blocked under the Cuban Assets Control Regulations. The brothers moved for an order requiring Computershare to turn over the accounts and filed a trustee process complaint against Computershare. Computershare argued that the accounts were not the property of Cuba and thus could not be turned over to satisfy the judgment. After some procedural complexities, the district court ultimately concluded that the accounts were not subject to the turnover order.

If the accounts were the property of Cuba, then everyone agreed that the accounts could be turned over, because the terrorism exception to the FSIA’s immunity from attachment applied. But Compushare claimed the accounts were not Cuba’s property. Under the Act of State Doctrine, a foreign state’s acts within its territory become “a rule of decision for the courts of this country.” So if Cuba confiscates property in Cuba, the US courts will recognize the consequences of its acts. But there is an exception for extraterritorial acts. If the property is in the United States at the time of the confiscation, then the US courts will recognize the foreign act of state only if it is consistent with US law and policy. And in general, the US courts will not recognize extraterritorial confiscations of property in light of the policy of the Takings Clause, which prohibits taking private property without just compensation.

Thus the irony in the case. The brothers whose family’s property had been expropriated were in the position of arguing that the US courts should recognize the expropriation as an act of the Cuban state. The US government argued that the brothers had misconstrued Cuban law. But the court didn’t have to reach that issue, since even construing the law as the brothers claimed, US courts would not give effect to the extraterritorial confiscation, particularly where the executive branch was not urging that result. The brother’s argument that the Terrorism Risk Insurance Act of 2002 embodied a US policy in favor of ensuring that victims of terrorism to collect on judgments was not persuasive. The argument said nothing about what property should, or should not, be considered property of the relevant foreign state. Thus the court affirmed the district court’s judgment.

About Ted Folkman

Ted Folkman is a shareholder with Murphy & King, a Boston law firm, where he has a complex business litigation practice. He is the author of International Judicial Assistance (MCLE 2d ed. 2016), a nuts-and-bolts guide to international judicial assistance issues, and of the chapter on service of process in the ABA's forthcoming treatise on International Aspects of US Litigation, and he is the publisher of Letters Blogatory, the Web's first blog devoted to international judicial assistance, which the ABA recognized as one of the best 100 legal blogs in 2012, 2014, and 2015.

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