Discovery In Aid Of Attachment Permitted With Limitations Against The Arab Republic Of Egypt, The Egyptian Embassy, And Egypt’s Cultural And Educational Bureau

The World in U.S. Courts: Winter 2018 - Foreign Sovereign Immunity Act (FSIA) | October.04.2017

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Lasheen v. The Loomis Company, US District Court for the Eastern District of California, October 4, 2017

The plaintiff Lasheen was an Egyptian national who came to the US as a visiting scholar and enrolled in the health plan of the Embassy of Egypt. The defendant Loomis contracted with the embassy to manage the plan. Lasheen became ill and ultimately died in the US, and a dispute arose as to his coverage. Default judgments were entered against defendants the Arab Republic of Egypt, the Egyptian embassy, and Egypt’s Cultural and Educational Bureau, and Lasheen’s estate sought post-judgment discovery regarding certain of the Egyptian defendants’ assets in the US. The Egyptian defendants opposed the discovery as overbroad because it sought mostly information about assets that are immune from execution under the FSIA.

The Court explained that the FSIA does not confer immunity from discovery, but the statute indirectly can have that effect: discovery in general is limited to information likely to lead to relevant facts, and the FSIA’s “execution immunity” informed what facts were relevant. Specifically, the statute limits the circumstances in which property held by non-US states and their agencies and instrumentalities could be attached and sold in satisfaction of judgments.

As regards non-US sovereigns like the Arab Republic of Egypt, property held in the US for “commercial purposes” is subject to attachment and execution if one or more of 7 conditions is met, generally described as follows: (i) the non-US state has waived its FSIA rights, (ii) the property is or was used for a commercial purpose on which the underlying judgment was based, (iii) the execution relates to property taken or exchanged in violation of international law, (iv) the execution relates to a judgment that established rights to property that either were acquired by succession or gift or that is “immovable” and not used for diplomatic purposes, (v) the property subject to execution is an insurance-related contractual indemnification, (vi) the judgment followed from an arbitration award, or (vii) the judgment related to a claim for which the non-US state was not immune under certain FSIA provisions. The Court found the condition numbered (ii) above applied, but only to the extent the property about which discovery was sought related to the health plan that was the subject of the underlying judgment. The Court found that Egypt had only partially produced relevant information, and required it to finish the job.

Property held by “agencies or instrumentalities” of a non-US sovereign are subject to attachment and sale under a different and more generous standard from that applicable to a sovereign and its “political subdivisions.” In determining whether the Egyptian embassy and the Cultural and Educational Bureau qualified under these rules, the Court noted that “instrumentalities” typically refer to an economic actor chartered by a sovereign for some commercial purpose. It also noted that neither party provided information sufficient to allow the Court to determine the status of the embassy and the bureau, and for purposes of analysis the Court assumed both would be “instrumentalities.” Attachment and sale of property held in the US by such entities for commercial purposes is permitted under the FSIA where one or more of two conditions is met, generally described as follows: (i) the agency or instrumentality has waived its FSIA rights, or (ii) the judgment related to a claim for which the agency or instrumentality was not immune under certain FSIA provisions (different and more expansive provisions than those identified in subpart (vii) above). The Court found the second subsection applicable because the judgment arose out of the defendants’ commercial activities in the US, and so found discovery relating to the property should proceed.

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