BROIDY CAPITAL MANAGEMENT, LLC; and ELLIOTT BROIDY v. STATE OF QATAR
No. 18-56256
United States Court of Appeals, Ninth Circuit
December 2, 2020
Opinion by Judge Collins
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
BROIDY CAPITAL MANAGEMENT,
LLC; and ELLIOTT BROIDY,
Plaintiffs-Appellants,
v.
STATE OF QATAR,
Defendant-Appellee.
No. 18-56256
D.C. No.
2:18-cv-02421-
JFW-E
OPINION
Appeal from the United States District Court for the
Central District of California
John F. Walter, District Judge, Presiding
Argued and Submitted February 11, 2020
Pasadena, California
Filed December 2, 2020
Before: Jay S. Bybee, Daniel P. Collins, and
Daniel A. Bress, Circuit Judges.
Opinion by Judge Collins
Foreign Sovereign Immunities Act
The panel affirmed the district court’s dismissal, for lack of subject matter jurisdiction under the Foreign Sovereign Immunities Act, of an action brought against the State of Qatar, alleging violation of the Computer Fraud and Abuse Act and other causes of action.
The panel held that neither the FSIA’s exception to immunity for tortious activity nor its exception for commercial activity applied, and the State of Qatar therefore was immune from jurisdiction.
The panel concluded that all of plaintiffs’ tort claims were barred under the discretionary function exclusion from the tortious activity exception because the challenged conduct met two criteria: (1) it was discretionary in nature or involved an element of judgment or choice; and (2) the judgment was of the kind that the exception was designed to shield. The first criterion was met because there was no showing that Qatari or international law proscribed Qatar’s actions. The second criterion was met because Qatar’s alleged actions involved considerations of public policy.
Plaintiffs argued that the commercial activity exception applied because their action was based upon a commercial activity carried on in the United States by Qatar. The panel concluded that plaintiffs’ claims were based on the alleged
* This summary constitutes no part of the opinion of the court. It has been prepared by court staff for the convenience of the reader.
COUNSEL
Shannen Wayne Coffin (argued), Filiberto Agusti, Christopher M. Re, Linda C. Bailey, and Mark C. Savignac, Steptoe & Johnson LLP, Washington, D.C., for Plaintiffs-Appellants.
David Meir Zionts (argued), Robert A. Long Jr., Jonathan Gimblett, Lauren K. Moxley, and Megan M. O’Neill, Covington & Burling LLP, Washington, D.C.; Mitchell A. Kamin, Neema T. Sahni, and Rebecca G. Van Tassell, Covington & Burling LLP, Los Angeles, California; for Defendant-Appellee.
OPINION
COLLINS, Circuit Judge:
Plaintiffs-Appellants Elliott Broidy and his investment firm, Broidy Capital Management, LLC, sued the State of Qatar and various other defendants after Qatari agents allegedly hacked into Plaintiffs’ computer servers, stole their confidential information, and leaked it to the media in a retaliatory effort to embarrass Broidy and thereby to neutralize his ability to continue to effectively criticize the Qatari regime and its alleged support of terrorism. The district court dismissed the claims against Qatar for lack of
I
A
Qatar’s motion to dismiss relied on a “facial attack on the subject matter jurisdiction of the district court” under the FSIA, and therefore, in reviewing de novo the district court’s order granting that motion, we take as true the well-pleaded allegations of Plaintiffs’ operative First Amended Complaint. Doe v. Holy See, 557 F.3d 1066, 1073 (9th Cir. 2009); see also Holden v. Canadian Consulate, 92 F.3d 918, 920 (9th Cir. 1996) (de novo review applies to dismissal for lack of jurisdiction under the FSIA). In addition, we note that Plaintiffs’ opposition to Qatar’s motion to dismiss requested leave to amend “in order to incorporate additional allegations based on Plaintiffs’ discovery efforts,” and the then-current status of those discovery efforts were set forth in a contemporaneously filed declaration from Plaintiffs’ counsel. The district court, however, denied leave to amend based on its conclusion that “discovery had failed to provide any evidence that might cure or change the Court’s analysis that it lacks subject matter jurisdiction over Qatar” and that further amendment would be futile. Because we review that determination de novo, see Thinket Ink Info. Res., Inc. v. Sun Microsystems, Inc., 368 F.3d 1053, 1061 (9th Cir. 2004), and because we apply the same standards in evaluating the sufficiency of a proposed amendment as we do to the underlying complaint, see Miller v. Rykoff-Sexton, Inc., 845 F.2d 209, 214 (9th Cir. 1988), we likewise take as true
In response to being sanctioned diplomatically and commercially by several of its neighbors in June 2017 for its alleged “support for terrorism and its close ties to Iran,” Qatar launched “a wide-ranging and extremely well-resourced effort to influence public opinion in the United States.” In addition to attempting to burnish Qatar’s image with the U.S. Government, Qatar’s “public relations campaign” sought to “curtail[] the influence of individuals that could undermine the standing of the State of Qatar in the United States.” One of the persons whose influence Qatar sought to blunt was Elliott Broidy (“Broidy”), the CEO of an investment firm in Los Angeles called Broidy Capital Management, LLC (“BCM”). In addition to his business ventures, Broidy has been active in public affairs, serving on the Homeland Security Advisory Council for several years and also taking leadership roles in various political and civic organizations. Starting in March 2017, Broidy became an outspoken critic of Qatar, condemning it for its alleged support for terrorism. His activities were perceived by Qatar as thwarting its public relations efforts, such as when Broidy and others persuaded many “American Jewish leaders to refuse to meet with the Emir” of Qatar when the Emir traveled to New York in the fall of 2017 for the General Assembly of the United Nations. Qatar also perceived that Broidy “‘had been influential’ in shaping the White House’s views on Qatar.” As a result, one registered agent for Qatar noted that “Broidy’s name [came] up in Embassy meetings often,” and Qatar decided to target him in order to limit his future influence.
Subsequent forensic investigation revealed that the hackers were largely able to hide the origins of the attacks on BCM’s servers by routing their communications through Virtual Private Networks (“VPNs”). However, two brief glitches in the VPN system revealed that at least two attacks in February 2018 originated from an IP address in Doha, Qatar, that belongs to an internet service provider that is majority-owned by Qatar. Additional forensic analysis also established that persons using IP addresses from Vermont “directly accessed Plaintiffs’ servers 178 times from February 12, 2018 to February 25, 2018.” Plaintiffs contend that these Vermont-based attacks were direct, i.e., that they were not “associated with VPNs or similar anonymization tools.”
After the hackers obtained Plaintiffs’ private documents, the stolen materials were converted into PDF format and distributed to several U.S. media outlets via email and hand-
The result of the dissemination of the stolen materials was an unflattering series of articles in March 2018 in the Wall Street Journal, the New York Times, and the Huffington Post alleging that, in exchange for tens of millions of dollars, Broidy and his wife had sought to scuttle a criminal investigation connected to a Malaysian state investment fund. As a consequence, Plaintiffs suffered reputational harm and other injuries.
B
Based on these allegations, Plaintiffs filed this action against Qatar and various other defendants in the district court. In the operative First Amended Complaint, Plaintiffs asserted 10 causes of action against Qatar, GRA, Stonington, and numerous individuals arising from the alleged unauthorized access into Plaintiffs’ servers and the subsequent distribution of stolen materials. Specifically, Plaintiffs alleged that the unlawful intrusion into the servers to obtain information was actionable under the common law tort of intrusion upon seclusion, as well as under the civil suit provisions of the Computer Fraud and Abuse Act,
Qatar filed a motion to dismiss under Federal Rules of Civil Procedure 12(b)(1) and 12(b)(2) for lack of subject matter and personal jurisdiction, asserting that it was immune under the FSIA. In opposing Qatar’s motion, Plaintiffs argued that two of the FSIA’s exceptions—the tortious activity exception and the commercial activity exception—defeated Qatar’s claimed immunity. On August 8, 2018, the district court granted Qatar’s motion, finding both exceptions inapplicable. The tortious activity exception did not apply, according to the district court, because Plaintiffs had failed to “allege at least ‘one entire tort’
Shortly thereafter, the district court dismissed GRA, Stonington, and various individual defendants affiliated with those entities for lack of personal jurisdiction. With the approval of the district court, Plaintiffs’ claims against three remaining individual defendants, who had not been served, were voluntarily dismissed without prejudice and a formal “final, appealable judgment” was entered by the district court. See Galaza v. Wolf, 954 F.3d 1267, 1272 (9th Cir. 2020) (where dismissal of remaining claims without prejudice is done with “the approval and meaningful participation of the district court,” the resulting judgment is final and appealable). Plaintiffs timely appealed the judgment, challenging only the dismissal of the claims against Qatar.
The FSIA is the “‘sole basis’” for obtaining jurisdiction over a foreign state in a civil action. Republic of Argentina v. Weltover, Inc., 504 U.S. 607, 611 (1992) (citation omitted). Under the FSIA, a foreign state “shall be immune from the jurisdiction of the courts of the United States” unless one of the Act’s enumerated exceptions applies.
The Act, however, contains a number of explicit exceptions to this default rule of foreign sovereign immunity, thereby acknowledging that there are some limited situations in which a foreign state entity should be subject to suit. In establishing such exceptions, the FSIA generally codifies the so-called “restrictive theory” of sovereign immunity, under which immunity “is recognized with regard to sovereign or public acts (jure imperii) of a state, but not with respect to private acts (jure gestionis).” Siderman de Blake v. Republic of Argentina, 965 F.2d 699, 705–06 (9th Cir. 1992) (citation and internal quotation marks omitted). Although this “restrictive theory of sovereign immunity was developed in the context of commercial activities of states, . . . it is not limited to claims arising out of contractual relationships,” and in appropriate circumstances it also imposes liability upon a foreign state for torts, such as traffic accidents, committed by that state’s agents. See Restatement (Third) of the Foreign Relations Law of the United States § 454 cmt. a (Am. L. Inst. 1987).
There is, of course, no dispute that the State of Qatar qualifies as a “foreign state” for purposes of the FSIA, and it is therefore immune from jurisdiction here unless Plaintiffs’ claims fit within one of the FSIA’s enumerated exceptions. Plaintiffs invoke both the tortious activity exception and the commercial activity exception, and it is their burden to make an initial showing as to the applicability of one or both of them. Packsys, S.A. v. Exportadora de Sal, S.A., 899 F.3d 1081, 1088 (9th Cir. 2018). We agree with the district court that as a matter of law neither exception is applicable here, although our reasoning differs in some respects from the district court’s. We discuss each exception in turn.
Subject to two enumerated exclusions, the FSIA’s tortious activity exception allows a foreign sovereign to be sued in any case:
in which money damages are sought against a foreign state for personal injury or death, or damage to or loss of property, occurring in the United States and caused by the tortious act or omission of that foreign state or of any official or employee of that foreign state while acting within the scope of his office or employment.
The parties vigorously dispute how Olsen’s “entire tort” rule applies to Plaintiffs’ allegations in this case, but we find it unnecessary to address this issue because Plaintiffs’ claims
As we have previously observed, “[t]he language of the discretionary function exclusion closely parallels the language of a similar exclusion in the Federal Tort Claims Act (‘FTCA’), so we look to case law on the FTCA when interpreting the FSIA’s discretionary function exclusion.” Holy See, 557 F.3d at 1083. Accordingly, the FSIA’s discretionary function exclusion applies if the challenged conduct “meets two criteria: (1) it is ‘discretionary in nature’ or ‘involve[s] an element of judgment or choice’ and (2) ‘the judgment is of the kind that the discretionary function exception was designed to shield.’” Id. at 1083–84 (quoting United States v. Gaubert, 499 U.S. 315, 322–23 (1991)). Although Qatar ultimately has the burden to establish that the exclusion applies, that burden arises only if Plaintiffs have “‘advance[d] a claim that is facially outside the discretionary function exception.’” Id. at 1084 (citation omitted). We conclude that the particular tortious conduct that Plaintiffs allege in this case facially satisfies both of Gaubert’s criteria, and that the discretionary function exclusion therefore applies.
As the Supreme Court has recognized, “conduct cannot be discretionary unless it involves an element of judgment or choice.” Berkovitz v. United States, 486 U.S. 531, 536 (1988). Accordingly, the discretionary function exclusion cannot apply when an applicable “statute, regulation, or policy specifically prescribes a course of action.” Id. (emphasis added). Put another way, a defendant is not exercising discretion if it is “bound to act in a particular way.” Gaubert, 499 U.S. at 329. Applying similar reasoning, we have also held that the FTCA’s comparable discretionary function exception does not apply when the defendants’ assertedly discretionary actions are specifically proscribed by applicable law. Fazaga v. FBI, 965 F.3d 1015, 1065 (9th Cir. 2020) (conduct that violates “federal constitutional or statutory directives” is not within the FTCA’s discretionary function exception); Tobar v. United States, 731 F.3d 938, 946 (9th Cir. 2013) (same where conduct violated agency’s “own regulations and policies” (emphasis omitted)); Galvin v. Hay, 374 F.3d 739, 758 (9th Cir. 2004) (“‘[F]ederal officials do not possess discretion to violate constitutional rights.’” (citation omitted)). Plaintiffs contend that “[t]his principle is dispositive here,” because their operative complaint alleges multiple violations of specific federal and state statutory prohibitions. We disagree.
In drawing upon the relevant caselaw applicable to the U.S. Government under the FTCA’s discretionary function exception, we must apply those principles mutatis mutandis in construing the scope of the similar language used in the FSIA with respect to a foreign state. The discretion of the U.S. Government is, of course, cabined by the applicable limitations in the U.S. Constitution, federal statutes and
In the absence of a showing that Qatari or international law proscribes Qatar’s actions here, that alleged conduct involves an exercise of discretion by Qatar that satisfies the first Gaubert criterion. Cf. Fazaga, 965 F.3d at 1024, 1065 (to the extent that “Defendants did not violate any federal constitutional or statutory directives, the discretionary function exception will bar Plaintiffs’ FTCA claims”
2
There is, however, a further element that must be satisfied before the FSIA’s discretionary function exclusion may be applied, viz., the “judgment” involved must be “‘of the kind that the discretionary function exception was designed to shield.’” Holy See, 557 F.3d at 1083–84 (citation omitted). This criterion is satisfied if the challenged “‘governmental actions and decisions’” are “‘based on considerations of public policy.’” Id. at 1084 (citation omitted); see also Risk, 936 F.2d at 395 (challenged acts must be “‘grounded in social, economic, and political policy’” (citation omitted)). Thus, “[a]lthough driving requires the constant exercise of discretion, the official’s decisions in exercising that discretion can hardly be said to be grounded in regulatory policy.” Gaubert, 499 U.S. at 325 n.7. Here, there can be little doubt that Qatar’s alleged actions involved considerations of public policy that are sufficient to satisfy Gaubert’s second criterion.
Plaintiffs’ complaint alleges that, in response to a diplomatic and economic boycott, Qatar undertook the challenged actions as one component of a public-relations strategy “to influence public opinion in the United States” by “curtailing the influence of individuals,” such as Broidy, who “could undermine the standing of the State of Qatar in the United States.” Indeed, although the Letelier court found that the discretionary function exclusion did not apply to the challenged assassination in that case because it “clearly” violated international law—i.e., because it failed what we have described as Gaubert’s first criterion—that court also expressly acknowledged that Chile’s act, however reprehensible it might have been, was “one most assuredly
Because Plaintiffs have failed to “‘advance a claim that is facially outside the discretionary function’” exclusion, the tortious activity exception to foreign sovereign immunity in
B
Plaintiffs also contend that the FSIA’s commercial activity exception allows the U.S. courts to assert jurisdiction over Plaintiffs’ claims against Qatar, but we again disagree.
Section 1605(a)(2) contains three separate clauses that set forth three alternative variations for asserting jurisdiction over a foreign state based on its commercial activities. In this court, Plaintiffs rely only on one of the formulations, namely, the one that allows jurisdiction over a foreign state in a “case . . . in which the action is based upon a commercial activity carried on in the United States by the foreign state.”
The next question, then, is whether Qatar’s “tortious conduct itself . . . qualif[ies] as ‘commercial activity’ within the meaning of the Act.” Nelson, 507 U.S. at 358. The FSIA defines “commercial activity” as “either a regular course of commercial conduct or a particular commercial transaction or act.”
We have little difficulty in concluding that, without more, a foreign government’s conduct of clandestine surveillance and espionage against a national of another nation in that other nation is not “one in which commercial actors typically engage.” Cicippio, 30 F.3d at 167; see also, e.g., Democratic Nat’l Comm. v. Russian Fed’n, 392 F. Supp. 3d 410, 429 (S.D.N.Y. 2019) (“Transnational cyberattacks are not the ‘type of actions by which a private party engages in trade and traffic or commerce.’” (citation omitted)). A foreign government engaged in such conduct is not exercising “powers that can also be exercised by private citizens,” but rather is employing powers that—however controversial their status may be in international law—are “peculiar to sovereigns.” Nelson, 507 U.S. at 360 (citations and internal quotation marks omitted).
Having determined that Qatar’s conduct of the espionage action against Plaintiffs was not a commercial activity, we also reject Plaintiffs’ argument that Qatar’s subsequent use of the materials it obtained constituted a “commercial” activity within the meaning of the FSIA. Although Plaintiffs contend that the materials that were accessed and disseminated included commercially sensitive materials, including trade secrets, there is no allegation that Qatar made commercial use of the materials. Plaintiffs contend that any consideration of Qatar’s subsequent uses is an improper consideration of purpose, but we disagree. The Supreme Court confirmed in Weltover that it was not precluding consideration of the “context” of a sovereign’s actions, and what a foreign sovereign does with covertly obtained intelligence is certainly an aspect of the “outward form of the conduct that the foreign state performs.” Weltover, 504 U.S. at 615, 617. To paraphrase the D.C. Circuit, when the outward actions are judged in context, there is an objective difference between (1) stealing the trade secrets of a “commercial rival” and deploying them against that rival and (2) stealing confidential materials from a policy critic and publishing embarrassing excerpts from them. Cf. Cicippio, 30 F.3d at 168 (“Perhaps a kidnapping of a commercial rival could be thought to be a commercial activity.”). Here, the context confirms that Qatar was not acting “in the manner of a private player” in the marketplace. Weltover, 504 U.S. at 614. Although the materials were of commercial value to Plaintiffs, the statute’s focus is on whether the particular actions that the foreign sovereign took amounted to the conduct of “‘trade and traffic or commerce,’” id. (citation
III
Our ruling in this case is neither an affirmation that the alleged conduct actually occurred nor an endorsement of any such conduct. Our task is to assume the allegations to be true and then to apply the limitations of the FSIA according to the statute’s plain terms. Having done so, we conclude that the FSIA bars Plaintiffs’ claims against Qatar here.
The judgment of the district court is AFFIRMED.