## Facts

- Jack West and other American investors purchased peso- and dollar-denominated certificates of deposit (CDs) issued by Mexican banks, including Multibanco Comermex, Bancomer, and Banamex.
- The banks solicited U.S. residents for these deposits, including by mailing promotional materials into the United States; Banamex distributed a brochure titled “Mexico’s Other Great Climate ... Investment,” advertising high returns (especially on peso accounts).
- When the investors bought the CDs, the banks were privately owned and operating as part of Mexico’s regulated banking sector.
- By 1982, Mexico faced a severe foreign-currency shortage associated with heavy foreign borrowing and declining oil revenues.
- In response, Mexico adopted exchange-control measures that restricted access to foreign currency and altered how certain foreign-currency deposits could be paid, including conversion of some dollar-denominated accounts into pesos at official rates.
- Mexico also nationalized the private banking system.
- The investors suffered major losses and sued the banks in federal court to recover the face value of their investments, alleging (1) federal securities-law violations based on the banks’ solicitations and (2) that Mexico’s decrees functioned as an expropriation of their property.
- The banks moved to dismiss, arguing that (a) the CDs were not “securities,” (b) the expropriation theory was barred by the act of state doctrine because it required a U.S. court to pass on the validity of Mexico’s sovereign decrees, and (c) the Second Hickenlooper Amendment did not apply because the asserted interests were intangible contract rights, not property of the type covered by the Amendment.
- The district court treated the motion as one for summary judgment and entered summary judgment for the banks; the investors appealed.

## Issues

1. Whether the Mexican banks’ peso- and dollar-denominated CDs sold to U.S. investors were “securities” under the federal securities laws.
2. Whether the act of state doctrine barred adjudication of the investors’ expropriation/taking theory based on Mexico’s exchange controls and bank nationalization, and whether the Second Hickenlooper Amendment removed that bar.

## Decision

- The Ninth Circuit affirmed the district court’s grant of summary judgment for the banks.
- The court held that the CDs were not “securities” for purposes of the federal securities laws on these facts.
- The court held that the act of state doctrine barred the investors’ expropriation/takings claims because deciding them would require evaluating the validity and effect of Mexico’s sovereign monetary and banking measures.
- The court rejected reliance on the Second Hickenlooper Amendment to avoid the act of state doctrine in this setting, where the asserted interests were deposit/contract rights affected by Mexico’s decrees.

## Legal Principles

- Bank CDs are generally treated as deposit obligations rather than “securities,” particularly where they resemble traditional bank products and operate within a banking regulatory framework, consistent with the approach in *Marine Bank v. Weaver*.
- The act of state doctrine prevents U.S. courts from deciding claims that would require a judgment on the validity of a foreign sovereign’s official acts performed within its own territory, including exchange-control and nationalization decrees.
- A plaintiff cannot avoid the act of state doctrine by suing private parties when the claimed liability turns on whether a foreign sovereign’s public acts were lawful or effective.
- The Second Hickenlooper Amendment does not automatically permit adjudication of claims framed as expropriation when the interests alleged are intangible deposit or contract rights and resolving the dispute would still require a U.S. court to pass on the foreign sovereign’s monetary or banking decrees.

## Conclusion

In *West v. Multibanco Comermex*, the Ninth Circuit affirmed summary judgment for Mexican banks sued by U.S. CD holders after Mexico imposed exchange controls and nationalized its banks, holding that the CDs were not securities and that the investors’ expropriation theory was nonjusticiable because it required U.S. courts to evaluate Mexico’s sovereign acts, with the Second Hickenlooper Amendment providing no basis to proceed.


West v. Multibanco Comermex, S.A., 807 F.2d 820 (1987)