899 F.3d 1081
9th Cir.2018Background
- ESSA is a Mexican salt producer 51% owned by the Mexican government; its Director General (Portillo) was appointed by the President of Mexico.
- ESSA’s board adopted a general resolution (Resolution 51) authorizing a commercialization approach for residual brine but did not set prices or approve any specific contract.
- Portillo executed a 40‑year contract selling ESSA’s residual brine to Packsys with a California choice‑of‑law clause, but the ESSA board never passed an explicit resolution approving that specific contract.
- Mexican law (LFEP Article 58(III)) and ESSA policy reserve price‑setting and long/dollar‑value contracts to the board and prohibit delegation; under those rules the Packsys contract required board approval.
- Packsys sued in California for breach; ESSA asserted sovereign immunity under the FSIA. The district court dismissed for lack of jurisdiction; the Ninth Circuit affirmed.
Issues
| Issue | Plaintiff's Argument (Packsys) | Defendant's Argument (ESSA) | Held |
|---|---|---|---|
| Whether the FSIA commercial‑activity exception applies when an agent acted with apparent (but not actual) authority | Apparent authority should suffice, especially for private/commercial acts; therefore §1605(a)(2) applies | Phaneuf requires actual authority; Portillo lacked actual authority because Mexican law and ESSA policy required board approval | Actual authority required; apparent authority insufficient — exception not met |
| Whether ESSA ratified the contract (so as to invoke commercial‑activity exception) | ESSA’s subsequent conduct (presentations, meetings, sample shipments, dinner) amounts to ratification | Ratification under Mexican law would require an explicit board resolution; purported acts by individuals would be ultra vires and cannot ratify | No valid ratification — no board resolution; ratification theory fails |
| Whether the contract’s California choice‑of‑law clause waived sovereign immunity under §1605(a)(1) | The choice‑of‑law clause constitutes an explicit waiver of immunity | The clause was entered without actual authority and therefore cannot be imputed to ESSA | Waiver requires an act of the foreign state; absent actual authority there is no waiver |
| Whether jurisdictional discovery was improperly denied | Packsys sought discovery to prove actual authority/ratification | District court found Packsys identified no specific jurisdictional facts and the determinative fact (no board resolution) was undisputed | Denial of discovery was not an abuse of discretion; request was too speculative |
Key Cases Cited
- Phaneuf v. Republic of Indon., 106 F.3d 302 (9th Cir. 1997) (an agent’s acts trigger FSIA commercial‑activity exception only if the agent had actual authority)
- Terenkian v. Republic of Iraq, 694 F.3d 1122 (9th Cir. 2012) (standards of review for FSIA dismissal and analysis of direct‑effect requirement)
- OBB Personenverkehr AG v. Sachs, 136 S. Ct. 390 (2015) (FSIA shields foreign states unless an enumerated exception applies)
- Republic of Arg. v. Weltover, 504 U.S. 607 (1992) (defines the direct‑effect requirement under the FSIA commercial‑activity exception)
- Samantar v. Yousuf, 560 U.S. 305 (2010) (FSIA governs sovereign immunity determinations post‑enactment)
- Joseph v. Office of Consulate Gen. of Nigeria, 830 F.2d 1018 (9th Cir. 1987) (contractual choice‑of‑law clause can constitute waiver of sovereign immunity)