67 N.Y.2d 450 (1986)

A foreign state instrumentality can waive its sovereign immunity under the Foreign Sovereign Immunities Act (FSIA) by actively participating in litigation, asserting counterclaims, and utilizing procedural devices without initially raising the immunity defense.

Summary

This case addresses whether Gulf Aviation, a foreign government instrumentality, waived its sovereign immunity under the FSIA. Plaintiffs sued Gulf Aviation and Singapore Airlines for injuries resulting from a 1976 hijacking. Gulf Aviation initially answered, asserting affirmative defenses and a counterclaim, but did not raise sovereign immunity. After years of litigation, Gulf Aviation attempted to amend its answer to include the immunity defense. The court held that Gulf Aviation’s extensive participation in the litigation constituted an implied waiver of sovereign immunity, preventing it from asserting the defense later in the proceedings. Singapore Airlines, which raised the defense in its initial answer, did not waive its immunity.

Facts

Plaintiffs sued Singapore Airlines and Gulf Aviation to recover damages for injuries suffered during the hijacking of an Air France plane in 1976.
Plaintiffs alleged the defendant airlines failed to properly search the hijackers at the point of origin of their connecting flights.
Gulf Aviation initially answered the complaint asserting affirmative defenses such as failure to state a cause of action, lack of capacity of plaintiffs, forum non conveniens, and improper venue.
Gulf Aviation also asserted a counterclaim against the plaintiffs and their attorneys alleging prima facie tort.
Gulf Aviation only sought to assert sovereign immunity nearly four and a half years after commencement of litigation.

Procedural History

The summons and complaint were served in June 1978.
Gulf Aviation served its answer in July 1978, without raising sovereign immunity.
Further proceedings were stayed pending the determination of a related Illinois action.
The Illinois action was dismissed on forum non conveniens grounds.
Singapore Airlines moved to dismiss on forum non conveniens grounds, joined by Gulf Aviation; the motion was denied.
Gulf Aviation removed the action to Federal Court, then moved to amend its answer to assert sovereign immunity; the case was remanded back to state court.
Gulf Aviation moved in Supreme Court for leave to amend its answer to assert sovereign immunity; the motion was granted, but the court held that Gulf Aviation waived its immunity by litigating the case for many years.
The Appellate Division held Gulf Aviation waived sovereign immunity but found no exceptions to immunity applied to either defendant and dismissed the complaint against Singapore Airlines, which had properly preserved the defense by raising it in its answer.

Issue(s)

Whether Gulf Aviation implicitly waived its sovereign immunity under the FSIA by actively participating in litigation for an extended period, asserting affirmative defenses and a counterclaim, before attempting to assert the immunity defense.

Holding

Yes, because Gulf Aviation consciously decided to participate in the litigation by asserting affirmative defenses and a counterclaim without reservation, thus waiving its right to assert sovereign immunity later in the proceedings.

Court’s Reasoning

The court reasoned that while the FSIA generally grants foreign states immunity from jurisdiction, this immunity can be waived either explicitly or implicitly.
The court emphasized that “courts have discretion to determine that the conduct of a party in litigation does constitute a waiver of foreign sovereign immunity in light of the circumstances of a particular case” citing Canadian Overseas Ores v Compania de Acero del Pacifico, 727 F.2d 274, 278 (1984).
The court distinguished this case from others where the foreign entity had not actively participated in the litigation or had reserved its right to assert the immunity defense.
The court noted Gulf Aviation’s answer set forth affirmative defenses and a counterclaim without attempting to reserve the right to plead sovereign immunity. The counterclaim was asserted against both plaintiffs and their attorneys, who were not parties to the lawsuit.
The court stated that Gulf Aviation came forward with no reason why it had not earlier sought to raise the defense, although challenged by plaintiffs’ attorney to disclose why it had not previously done so.
The court rejected the argument that assertion of the counterclaim was defensive because the counterclaim was not pleaded conditionally, and there was no mention whatsoever in the original answer of sovereign immunity.
The court concluded that Gulf Aviation, by participating in and seeking affirmative benefit from the litigation without reservation, waived its defense of sovereign immunity. The court below correctly held that the defense as asserted in its amended answer is without merit.
The court also found Gulf Aviation engaged in substantial activity in the United States with offices and personnel in New York, Los Angeles and four other cities and annexed timetables and advertisements as proof.