Ingrid Wuerth on Personal Jurisdiction and the Fifth Amendment Due Process Rights of Foreign Sovereigns and State-Owned Enterprises
Posted on July 29, 2019
Ingrid Wuerth, Professor of law at Vanderbilt Law School and friend of Letters Blogatory (you can follow her at @WuerthIngrid on Twitter), has an important new forthcoming paper on foreign states’ status as “persons” under the Due Process Clause of the Fifth Amendment. I’m very happy that she’s previewing her paper here at Letters Blogatory. The basic claim is that foreign states should be treated as persons under the Fifth Amendment, and that even if the FSIA purports to give the courts personal jurisdiction in any FSIA case in which an exception to immunity does not apply, the courts must still do a constitutional analysis. There are some claims, she writes, where a foreign state probably is not subject to personal jurisdiction, e.g., terrorism claims. Congratulations to Ingrid on an interesting paper, and many thanks for posting on it here!
The Foreign Sovereign Immunities Act (FSIA) provides immunity to foreign states from lawsuits in the United States, with limited exceptions. If an exception applies, the statute gives federal courts both subject matter jurisdiction (28 U.S.C. § 1330(a)) and personal jurisdiction (28 U.S.C. § 1330(b)). The FSIA’s protections are extensive and generally allows suits to go forward against foreign states only if they are based upon conduct with a connection to the United States. The nexus required by the statute usually meets or exceeds the “minimum contacts” test developed by the Supreme Court under the Fourteenth Amendment, as applied to the entire United States under the Fifth Amendment. In some cases, however, especially ones involving terrorism or arbitration, the statute permits a lawsuit to go forward in which the relevant conduct has little connection the United States.
Such cases raise two questions that the Supreme Court has not yet resolved: (a) whether foreign states are entitled to due process under the Fifth Amendment, and (b) how Fifth Amendment due process limits personal jurisdiction in federal courts, in particular whether it requires “minimum contacts.” Lower courts have concluded foreign states are not entitled to Fifth Amendment due process protections and that the Fifth Amendment, like the Fourteenth, imposes a “minimum contacts” requirement for personal jurisdiction. The first conclusion is wrong, and the second is at least unwise, as I argue in a forthcoming paper and summarize below.
Foreign States are Persons Protected by the Fifth Amendment.
The Second and the D.C. Circuits have both held that foreign states are not persons entitled to personal jurisdiction protections under the Fifth Amendment. The leading case is Price v. Socialist People’s Libyan Arab Jamahiriya, 294 F.3d 82 (D.C. Cir. 2002), in which the plaintiffs alleged that they were tortured while in prison in Libya. The FSIA has an exception to immunity (now codified at 28 U.S.C. § 1605A) for cases brought against governments designated as “state sponsors of terrorism,” which at that time included Libya. The allegations in the complaint satisfied the statutory requirements for the state-sponsors-of-terrorism exception, although all of the relevant conduct took place in Libya.
Libya argued that its Fifth Amendment due process rights were violated because the minimum contacts test was not satisfied. The Court held that Libya was not entitled to due process because it was not a “person” protected by the Fifth Amendment. Had Libya been protected by the Fifth Amendment, its personal jurisdiction argument was almost certain to prevail. Although the plaintiffs were U.S. citizens, connection between the plaintiffs and the forum is insufficient to confer personal jurisdiction as the Court later made clear in Walden v. Fiore. Note, too, that the Second Circuit recently overturned a $655.5 million judgement against the Palestine Liberation Organization for lack of personal jurisdiction in a case involving terrorism abroad. But unlike the PLO, Libya lacks Fifth Amendment rights and thus has no constitutionally-based personal jurisdiction protections. The plaintiffs ultimately won a $7 million verdict in Price. Collecting on such judgment can be difficult, of course, but Congress has made that process easier for some litigants. Terrorism cases against foreign governments for conduct abroad continue to be brought, including Colvin v. Syria, which recently resulted in a $302 million default judgment for conduct by the Syrian government in Syria. Other FSIA exceptions also permit cases to go forward that might not satisfy a Fifth Amendment minimum-contacts test, including those governing arbitration or expropriation. In a case that went forward under the commercial activity exception, a bond (governed by Swiss law) was purchased in Venezuela (not by a U.S. national) and the instrument itself did not mention the United States. The court did not consider whether minimum contacts existed because Venezuela lacked due process rights. Constitutionally-based personal jurisdiction remains unsettled, but the Supreme Court has recently restricted its permissible scope under the Fourteenth Amendment, while the FSIA is frequently amended to expand the cases against foreign sovereigns. Cases against foreign sovereigns that would not satisfy a constitutionally-based minimum contacts test are likely to increase.
Lower courts have erred, however, in concluding that foreign states are not entitled to Fifth Amendment due-process protections. They have reasoned that foreign states are not “persons” under the Fifth Amendment, but with little or no analysis of history or constitutional text. Multiple historical sources and multiple arguments link the words “process” and “persons” to foreign sovereigns. That linkage is not accidental and it is not based on a technicality divorced from the goals that animated the Constitution. Read Article III and note that foreign actors—including foreign states—are explicitly protected by the “judicial power” of the United States. Article III itself required personal jurisdiction as a prerequisite to the exercise of “judicial power” over “cases,” protections that were duplicated, at least in part, in the Fifth Amendment.
Conferring due process rights on foreign corporations but not on foreign states has an additional problem. It creates the difficult issue of whether foreign state-owned corporations should be treated like foreign states (without constitutional rights) or foreign states (with constitutional rights). Lower courts have applied the Supreme Court’s test from First National City Bank v. Banco Para el Comercio Exterior de Cuba (Bancec), which creates a presumption that SOEs are distinct from states and should be treated as corporations unless they are extensively controlled by the foreign state or some sort of fraud or injustice would result. The Bancec rule comes from federal common law, public international law, comity, domestic corporate law, and the history of the FSIA. It has been constitutionalized with no analysis of the Fifth Amendment or what the rule has to do with the meaning of the word “person”—which is the purported basis for the constitutional distinction in the first place.
Personal Jurisdiction and the Fifth Amendment
Courts should hold that foreign states, like foreign corporations, are persons entitled to Fifth Amendment due process protections, for the reasons provided above. But the impact of so holding is not clear because of the second unresolved issue: the personal jurisdiction limitations flow from the Fifth Amendment for any kind of defendant. The Supreme Court has held that the Fourteenth Amendment requires that the defendant have minimum contacts with the forum state (for specific jurisdiction) and that the exercise of jurisdiction is reasonable, but it has not ruled on the Fifth Amendment issue. Fifth Amendment limitations on personal jurisdiction are not litigated very often because Federal Rule of Civil Procedure 4(k)(1)(A) authorizes personal jurisdiction in federal courts to the extent that a state court in the forum would have personal jurisdiction, making state long-arm statutes and the Fourteenth Amendment relevant in most federal cases. Rule (4)(k)(2) does authorize personal jurisdiction in federal question cases based upon contacts with the United States as whole, but only if there is no state with jurisdiction over the defendant and if the exercise of jurisdiction is constitutional. As noted above, for foreign states, federal courts have subject matter and personal jurisdiction if an exception to the FSIA is applicable. Almost all cases against foreign sovereigns go forward in federal courts and the Fifth Amendment applies, not the Fourteenth.
Lower courts have assumed or held that the Fifth and Fourteenth Amendments impose comparable limitations, except that the Fifth Amendment analysis is based on contacts with the United States as whole rather than with an individual state. Commentators generally agree. There are strong policy arguments against using minimum contacts as the constitutional test under the Fifth Amendment, however. The test has generated confusion and uncertainty in the Fourteenth Amendment context, as many commentators have noted. It is also not anchored in an historical or textual understanding of either the Fifth Amendment or due process.
Early cases against foreign sovereigns suggest that although the Constitution requires courts to have personal jurisdiction, the actual jurisdictional standards or rules are supplied by general law or international law, or an act of Congress. Recall that the Full Faith and Credit Clause works in a similar way: in order for the judgment to be valid, the court issuing it must have subject matter jurisdiction under its own rules, not under the rules where enforcement takes place. As some have reasoned in the Fourteenth Amendment context (contrary to the Supreme Court’s current approach), due process might serve as a tool to challenge judgments that are invalid for lack of personal jurisdiction, but not as “the source of the standards for validity.” An analogous approach to personal jurisdiction and the Fifth Amendment would entitle defendants only to the jurisdictional protections that Congress chooses to give them. This approach—which would apply to all defendants, not just foreign states—would have the disadvantage of using one standard for the Fourteenth Amendment (minimum contacts as the standard of validity) and another for the Fifth Amendment (defendants are entitled to whatever protections are given by the applicable law). It would, however, have the advantage of simplifying Fifth Amendment personal jurisdiction doctrine in a way that is consistent with some historical sources. In any event however, whatever the personal jurisdiction protections provided by the Fifth Amendment, they apply to foreign states as they do to other defendants. What exactly that will mean in practice depends upon how the Supreme Court interprets Fifth Amendment due process for all defendants.