## Facts

- Orlando Letelier and Ronni Moffitt were killed in Washington, D.C., and Michael Moffitt was injured when a bomb detonated under Letelier’s car.
- Representatives of Letelier and Moffitt obtained a default judgment for damages against the Republic of Chile in the U.S. District Court for the District of Columbia, based on the FSIA tort exception.
- The judgment creditors registered the judgment in the Southern District of New York and sought to execute against New York assets of Linea Aérea Nacional–Chile (LAN), Chile’s wholly owned national airline.
- The judgment creditors argued that LAN was sufficiently controlled by Chile that LAN’s assets should be treated as Chile’s property for execution purposes.
- The district court, relying in part on adverse inferences drawn from Chile’s discovery noncompliance, found Chile controlled LAN’s assets and used LAN in connection with the assassination plot.
- The district court disregarded LAN’s separate corporate status, held LAN’s assets subject to execution under FSIA § 1610(a)(2), and appointed a receiver over LAN.
- LAN appealed the execution order and receivership.

## Issues

1. Whether FSIA execution immunity permits attachment or execution against a foreign state’s wholly owned airline’s U.S. assets to satisfy a judgment against the foreign state.
2. Whether LAN’s separate juridical status could be disregarded under Bancec principles so that LAN’s assets would be treated as Chile’s property for execution.
3. Whether the property sought was “used for the commercial activity upon which the claim is based” within FSIA § 1610(a)(2) when the underlying claim was a tort for assassination.
4. Whether discovery sanctions based on Chile’s noncompliance could support adverse findings against LAN or justify collapsing Chile’s and LAN’s separate identities.

## Decision

- The Second Circuit reversed the district court’s execution order and the appointment of a receiver.
- The court held the presumption of LAN’s separate juridical status was not overcome; LAN’s assets could not be treated as Chile’s assets for execution.
- The court held FSIA § 1610(a)(2) did not authorize execution because the underlying claim was not based on commercial activity, and the statutory nexus between the property and “the commercial activity upon which the claim is based” was not satisfied.
- The court rejected using discovery sanctions against Chile as a basis to impose findings against LAN or to disregard LAN’s separate corporate existence.

## Legal Principles

- FSIA distinguishes jurisdictional exceptions permitting suit against a foreign state from separate, narrower exceptions permitting attachment or execution against property; a valid judgment does not itself create execution rights.
- A foreign state’s instrumentality, even if wholly owned, is presumed to be a separate juridical entity; its assets are not available to satisfy the sovereign’s debts absent a showing, under Bancec-type standards, of abuse or alter-ego circumstances warranting disregard of separateness.
- FSIA § 1610(a)(2) permits execution only when the property is property of the foreign state and is (or was) used for the commercial activity upon which the claim is based; a tort claim for assassination is not converted into a “commercial activity” claim by alleged use of an instrumentality’s facilities in the events.
- Discovery sanctions cannot be used to treat a non-defaulting instrumentality as identical to the sovereign where the legal standard for disregarding corporate separateness has not been met.

## Conclusion

The Second Circuit held that FSIA’s execution provisions did not permit judgment creditors to reach a foreign state’s wholly owned airline’s U.S. assets to satisfy a judgment against the state, because the airline’s separate juridical status remained intact and the statutory requirements for execution under § 1610(a)(2) were not met.


Letelier v. Republic of Chile, 748 F.2d 790 (2d Cir. 1984)