Lovati v. Bolivarian Republic of Venezuela

Background

Sergio Lovati, Rudi Lovati, Alessandra Sarago Lovati, and Alessandro Lucibello Piani brought breach-of-contract actions against the Bolivarian Republic of Venezuela. They alleged that Venezuela failed to make interest payments on bonds held under a July 25, 2001 Fiscal Agency Agreement.

The agreement provided for service on Venezuela’s consul general or an official of its consulate at 7 East 51st Street in New York. The plaintiffs alleged that the consul general had been recalled and the consulate had closed. The court then authorized alternative service at Venezuela’s embassy to the United Nations or embassy to the United States. The plaintiffs served papers at Venezuela’s United Nations mission at 335 East 46th Street in New York by personally delivering them to an authorized recipient.

Venezuela did not plead or otherwise defend the action. The clerk entered default. Venezuela moved to vacate that entry and to dismiss for lack of personal jurisdiction. The plaintiffs also moved for default judgment.

Personal jurisdiction and service

The court explained that under the Foreign Sovereign Immunities Act, personal jurisdiction over a foreign state requires both subject-matter jurisdiction and service that complies with the Act. The Act provides the exclusive methods for serving a foreign state and requires the methods to be attempted in a specified order.

The court focused on the first method, which permits service under a special arrangement between the plaintiff and the foreign state. It held that the Fiscal Agency Agreement was such a special arrangement. Because the agreement specified service at the consulate’s address, service at the different United Nations mission address did not strictly comply with the arrangement. Venezuela’s actual notice of the lawsuit did not cure the defect.

The court also rejected the argument that it could create or authorize a new alternative method under the service provision for foreign states. The court noted that another provision expressly allows court-directed service for certain entities but that the foreign-state provision does not contain similar language. The court therefore concluded that the plaintiffs’ alternative service was improper.

Rulings

The court nevertheless declined to dismiss the complaint. It stated that district courts may extend the time for service when there is a reasonable prospect that proper service can be accomplished. The court ordered the plaintiffs to serve Venezuela in strict compliance with 28 U.S.C. § 1608(a). It required a status report by January 15, 2021, if service was not completed within 60 days.

The court denied Venezuela’s motion to dismiss for lack of personal jurisdiction. It granted Venezuela’s motion to vacate the entry of default because ineffective service meant that the court lacked jurisdiction over Venezuela and the default entry was void. The court denied Venezuela’s motion for oral argument as moot.