Braka v. Bancomer, S.N.C.

762 F.2d 222 (1985)

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Braka v. Bancomer, S.N.C.

United States Court of Appeals for the Second Circuit
762 F.2d 222 (1985)

Facts

In 1981, several United States citizens including David Braka (collectively, the depositors) (plaintiffs) purchased certificates of deposit (CDs) from Bancomer, SA, then a private Mexican bank. The CDs were contracts that obligated Bancomer to pay the depositors a return on the investments at a later date. The CDs provided that the place of deposit and payment of principal and interest was in Mexico. Some of the CDs were denominated in dollars, but Bancomer only agreed to pay the amounts due at maturity in Mexico. Occasionally, the depositors’ deposits were accepted and transmitted, via interbank transfers, from Bancomer’s New York agency to Mexico. In 1982, just before the first CD was set to mature, the Mexican government ordered that all domestic debts be paid in pesos at a prescribed exchange rate and banned the use of foreign currency for debt payments. Mexico also nationalized its private banks, including Bancomer, and mandated a system of currency-exchange controls. As a result of these decrees, when the CDs matured, the depositors received pesos at the less favorable exchange rate prescribed by the Mexican government rather than the actual exchange rate set by the market. The depositors sued Bancomer in federal district court in New York, claiming over $900,000 in damages for Bancomer’s breach of its payment obligations under the CDs. Bancomer motioned to dismiss the suit for lack of jurisdiction. The district court granted Bancomer’s motion on the ground that the depositors’ complaint was barred by the act-of-state doctrine. The depositors appealed.

Rule of Law

Issue

Holding and Reasoning (Meskill, J.)

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