Universal Trading & Investment Co. v. Bureau for Representing Ukrainian Interests in International & Foreign Courts
727 F.3d 10
1st Cir.2013Background
- UTICo, a Massachusetts asset-recovery firm, alleges UPGO (Ukrainian Prosecutor General's Office), the Bureau, and Ukraine contracted with it in 1998 to investigate, freeze, and help repatriate assets improperly taken by UESU principals (including Lazarenko) and to pay UTICo a 12% commission on recovered assets.
- The parties exchanged a May 15, 1998 letter (May Agreement), an October 2, 1998 confirming letter (October Agreement), and multiple Powers of Attorney authorizing foreign litigation/asset-freeze efforts; the letters bear UPGO letterhead and were delivered to UTICo in the U.S.
- UTICo claims it located and helped freeze hundreds of millions in assets across multiple foreign jurisdictions and that UPGO/Bureau failed to pay the agreed commission, prompting this breach-of-contract suit filed in Massachusetts in 2010.
- The district court denied defendants’ FSIA-based motion to dismiss as to the 1998 breach-of-contract claim, finding the commercial-activity exception applied; defendants appealed the immunity ruling.
- On appeal the First Circuit analyzed (1) whether a particular commercial transaction existed (contract formation/performance), (2) whether the activity was commercial in nature (not sovereign), and (3) whether there was a sufficient U.S. nexus under the FSIA commercial-activity exception.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Existence of a particular commercial transaction (contract formation / performance) | UTICo: May/October letters + POAs and UPGO admissions show unilateral contracts accepted by UTICo’s performance | Ukraine: Letters are unilateral offers to non-party lawyers; UTICo didn’t cause assets to be repatriated so no acceptance / no contract | Court: Sufficiently pleaded unilateral contract and performance for Rule 12(b)(6) purposes given letters, POAs, and UPGO admissions that UTICo performed |
| Commercial vs. sovereign nature of the contracted activity | UTICo: Services (investigation, evidence collection, asset freezing) are ordinary market asset-recovery tasks that private firms perform | Ukraine: Activities were assistance in criminal prosecution/asset forfeiture — uniquely governmental police functions | Court: Nature (not purpose) controls; activities were the type private actors perform (commercial), so FSIA commercial-activity exception applies |
| Nexus to the United States under 28 U.S.C. §1605(a)(2) | UTICo: Negotiations occurred in U.S.; agreements delivered to Massachusetts addresses; most performance and payment accounts were in Massachusetts, causing direct U.S. effects | Ukraine: Agreements not signed/executed in U.S.; insufficient nexus | Court: Pleaded facts show activity “carried on in the United States” (offers delivered here and substantial negotiation/performance) and alternatively a direct U.S. effect; nexus satisfied |
| Burden allocation under FSIA exception | UTICo: Met burden of production to show a commercial transaction; defendants must prove no exception applies | Ukraine: Challenges legal sufficiency of plaintiff’s allegations | Court: Applied Second Circuit burden-shifting; UTICo met production burden; defendants failed to meet preponderance burden to negate exception |
Key Cases Cited
- Republic of Argentina v. Weltover, 504 U.S. 607 (1992) (defines commercial activity by nature not purpose; government acting like a market participant is commercial)
- Verlinden B.V. v. Central Bank of Nigeria, 461 U.S. 480 (1983) (FSIA is sole basis for U.S. courts to assert jurisdiction over foreign states)
- Argentine Republic v. Amerada Hess Shipping Co., 488 U.S. 428 (1989) (presumption of foreign sovereign immunity subject to statutory exceptions)
- Virtual Countries, Inc. v. Republic of South Africa, 300 F.3d 230 (2d Cir. 2002) (burden-shifting framework for FSIA commercial-activity exception)
- Honduras Aircraft Registry, Ltd. v. Government of Honduras, 129 F.3d 543 (11th Cir. 1997) (sovereign contracting for technical services in marketplace is commercial)
- Guevara v. Republic of Peru, 468 F.3d 1289 (11th Cir. 2006) (offer to pay for information to locate a fugitive is commercial; sovereign’s purchase of information is market activity)