In case of Italian government's sale of majority share in Alitalia Airlines after Alitalia's removal of a case against it to federal court without jury under the FSIA, the Seventh Circuit holds that FSIA's bar on jury trials continues to apply
Olympia Express, Inc. and Neotours, Ltd. ("Plaintiffs") filed suit against Alitalia Airlines ("Defendant"), of which the Italian government was majority shareholder, in an Illinois state court for breach of contract under Illinois law. Alitalia removed the case to the United States District Court for the Northern District of Illinois under the Foreign Sovereign Immunities Act (FSIA), which allows for removal to federal court for a trial without jury. The Italian government sold its majority shareholding in Defendant, after the case was removed. Plaintiffs demanded a jury trail, which the District Court granted, resulting in an $8.5 million judgment for the Plaintiffs. Defendant appealed.
The United States Court of Appeals for the Seventh Circuit reverses the lower courts ruling and remanded the case for further proceedings.
The only basis of federal jurisdiction in this case, at least when it was filed and before Defendant's conversion to a private company, was the removal provision 28 U.S.C. § 1441(d). Because the action arose under state rather than federal law, it could not have been brought in (or removed to) a federal court under federal question jurisdiction or diversity jurisdiction.
"[T]he Supreme Court had held that whether the defendant is a foreign state within the meaning of the Foreign Sovereign Immunities Act is to be determined on the basis of the facts in existence when the suit was filed, and if this principle governs our case the jurisdictional basis has not changed." [Slip op. 2]
"'There is no doubt that 28 U.S.C. § 1330(a) and its counterpart dealing with removal, § 1441(d), are the sole source of a district court's jurisdiction over a civil action against a foreign state as defined by the FSIA.' Houston v. Murmansk Shipping Co., supra, 667 F.2d at 1153."
"A demand for a jury trial is made "after [rather than at] the commencement of the action and not later than 10 days after the service of the last pleading directed to [an issue triable of right by a jury].' Fed. R. Civ. P. 38(b). And while in this case the demand was filed much later, it could be argued that the deadline should be tolled whenever an unforeseen change eliminates a bar to the demand"
"The tolling of the 10 day deadline would certainly be impermissible were the bar to a jury trial in section 1441(d) itself jurisdictional. That section is, we have just seen, the only basis upon which this case is within federal jurisdiction." [Slip op. 3]
"The facts of Houston make us reluctant to conclude that the bar to a jury trial in a case under the Foreign Sovereign Immunities Act is jurisdictional, so that a jury trial in a case governed by the Act must be treated as a nullity even if the consequence would be to disserve the Act's purpose." [Slip op. 4]
"Our conclusion that the demand should not have been granted because of Alitalia's change of status follows not only from the statutory wording but also from considerations of judicial economy and of the underlying purpose of the Foreign Sovereign Immunities Act. The reason that Rule 38(b) of the civil rules sets a tight deadline for demanding a jury trial is that preparation for a trial often depends critically on whether it will be a jury trial or a bench trial."
"On all these counts it is vital, especially in a suit brought under the Foreign Sovereign Immunities Act, that the parties know as soon as possible after a case is filed whether if there is a trial it will be to the judge or to a jury." [Slip op. 5]
" [T]o provide further guidance on remand, we address an ambiguity in the meaning of the term "non jury trial." Does it mean that the trial must be conducted in the absence of a jury, or merely that the "verdict" must be rendered by the judge rather than by a jury? We think it is latter."
Upon remand, the magistrate judge should first decide whether the development of the facts at the first trial was sufficient to make his/her own findings of fact and conclusions of law on both liability and damages. If so, the judge need not conduct another evidentiary hearing.
Citation: Olympia Express, Inc. v. Linee Aeree Italiane, S.P.A., No. 07 1708 (7th Cir. November 30, 2007).
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