## Facts

- William and Adelfa Callejo, Texas residents, purchased U.S.-dollar-denominated certificates of deposit (CDs) issued by Bancomer, S.A., a Mexican bank; the CDs were payable in Mexico.
- In August 1982, Mexico imposed exchange controls requiring deposits in Mexican banks, however denominated, to be repaid in Mexican pesos at official exchange rates.
- In September 1982, Mexico nationalized privately owned Mexican banks, including Bancomer.
- After the decrees, Bancomer informed the Callejos their dollar CDs would be repaid in pesos at the official rate, yielding less value than repayment at market rates.
- The Callejos sued Bancomer for contract-related relief (including rescission or damages) based on the altered repayment terms.
- The district court dismissed for lack of subject-matter jurisdiction, holding Bancomer was immune under the Foreign Sovereign Immunities Act (FSIA) and not reaching the act of state doctrine.

## Issues

1. Whether Bancomer was immune under the FSIA, or whether the claims fell within the FSIA commercial-activity exception.
2. Whether the act of state doctrine barred adjudication because the requested relief would require a U.S. court to question the validity or effect of Mexico’s exchange controls and bank nationalization.

## Decision

- The Fifth Circuit affirmed the dismissal but rejected the district court’s FSIA rationale.
- The court held Bancomer was not immune under the FSIA because the issuance and payment obligations of CDs are commercial activity.
- The court held the act of state doctrine nonetheless barred the suit because granting relief would require invalidating or disregarding Mexico’s sovereign decrees governing repayment and currency conversion within Mexico.
- The court rejected plaintiffs’ attempts to avoid the doctrine, including an asserted commercial-activity exception to act of state, a “Texas situs” theory, and a treaty-based argument tied to the IMF Articles of Agreement.

## Legal Principles

- Under the FSIA, a foreign state or its instrumentality is not immune when the action is based on commercial activity; issuance and repayment of certificates of deposit are commercial in nature even if the bank is state-owned.
- The act of state doctrine prevents U.S. courts from examining the validity or effect of a foreign sovereign’s public acts performed within its own territory.
- A court may have FSIA jurisdiction yet still be barred from granting relief by the act of state doctrine when the claim requires undoing or contradicting foreign sovereign economic measures.
- The act of state doctrine is not avoided merely because the underlying transaction is commercial; the focus is whether the relief would require passing on the foreign sovereign act itself.

## Conclusion

The Fifth Circuit held that Bancomer’s CD transactions were commercial for FSIA purposes, but affirmed dismissal because the act of state doctrine barred relief that would require a U.S. court to question Mexico’s exchange controls and bank nationalization governing repayment of the deposits in Mexico.


Callejo v. Bancomer, S.A., 764 F.2d 1101 (5th Cir. 1985)