Vipula Valambhia v. United Republic of Tanzania
964 F.3d 1135
| D.C. Cir. | 2020Background
- In 1985 the United Republic of Tanzania contracted with Transport Equipment Ltd. (TEL), a company directed by Devram P. Valambhia, to buy military equipment.
- TEL and Valambhia signed a 1989 Irrevocable Agreement by which TEL agreed to surrender 45% of amounts due under the 1985 contract to Valambhia and family (calculated then at about $50.6 million); Tanzania’s Bank and Ministry of Defence acknowledged the arrangement.
- Tanzanian courts later litigated competing claims between TEL and Valambhia; the High Court of Tanzania issued a 1991 decree awarding Valambhia 45% and a 2001 Garnishee Order directing the Bank of Tanzania to pay about $55 million, but Tanzania did not pay.
- Valambhia’s wife and children (U.S. residents and later citizens) sued in D.C. federal court in 2018 seeking recognition of the Tanzanian judgments under D.C.’s foreign-country money-judgment recognition statute.
- The district court dismissed for lack of subject-matter jurisdiction under the Foreign Sovereign Immunities Act (FSIA), 28 U.S.C. § 1605(a)(2) (commercial-activity exception); the Valambhias appealed.
- The D.C. Circuit affirmed, holding the complaint did not plead a required “direct effect in the United States” under clause three (and clause two did not furnish a viable alternative).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether FSIA §1605(a)(2) clause 3 applies (act abroad causing a direct effect in U.S.) | The suit is based on Tanzanian High Court judgments and Tanzania’s failure to pay under those judgments and the underlying commercial contract; those acts were connected to commercial activity abroad and caused a direct effect in the U.S. | The judgments/withholding did not cause a direct effect in the U.S.; any U.S. connections (past payments via a New York account; plaintiffs’ U.S. residence/citizenship) are too remote. | Claimed acts abroad did not cause a direct effect in the U.S.; clause three not satisfied. |
| Whether past use of a New York bank account satisfies the direct-effect requirement | Payments made from Tanzania’s New York account (in the 1980s) show a U.S. effect and so satisfy clause three. | Use of a U.S. account before the judgments is not an immediate consequence of the judgments/withholding; no contract required U.S. payment. | NY-account payments were not an immediate consequence of the challenged acts and do not establish a direct effect. |
| Whether plaintiffs’ U.S. residence/citizenship creates a direct effect | Tanzania knew the family lived in the U.S.; nonpayment to U.S. residents/citizens causes a U.S. effect. | U.S. citizenship/residence alone cannot satisfy the direct-effect requirement; harm to a U.S. citizen is insufficient. | Citizenship/residence without a closer nexus is insufficient to establish a direct effect. |
| Whether clause 2 (act performed in U.S. in connection with commercial activity elsewhere) or other arguments save jurisdiction | Clause 2 or the district court’s alleged legal errors provide alternate jurisdictional grounds. | The gravamen of the suit is recognition of foreign judgments, not U.S. payments; clause 2 therefore does not apply. | Clause 2 inapplicable because the suit is based on a recognition claim; other asserted legal errors do not change result. |
Key Cases Cited
- OBB Personenverkehr AG v. Sachs, 136 S. Ct. 390 (2015) (FSIA provides sole basis for jurisdiction over foreign states and defines analysis of what an action is "based upon")
- Republic of Argentina v. Weltover, Inc., 504 U.S. 607 (1992) (an effect is "direct" if it follows as an immediate consequence of the defendant’s activity)
- Odhiambo v. Republic of Kenya, 764 F.3d 31 (D.C. Cir. 2014) (no direct effect where U.S. payment was optional or not contractually specified)
- de Csepel v. Republic of Hungary, 714 F.3d 591 (D.C. Cir. 2013) (direct effect satisfied where government promised performance to U.S.-resident plaintiffs)
- Cruise Connections Charter Mgmt. 1, LP v. Att’y Gen. of Canada, 600 F.3d 661 (D.C. Cir. 2010) (harm to a U.S. citizen alone cannot satisfy clause-three direct-effect requirement)
- Peterson v. Royal Kingdom of Saudi Arabia, 416 F.3d 83 (D.C. Cir. 2005) (clause-three analysis and requirement of a direct effect)
- Goodman Holdings v. Rafidain Bank, 26 F.3d 1143 (D.C. Cir. 1994) (place-of-payment facts matter to direct-effect inquiry)