Broidy Capital Management, LLC v. State of QatarBroidy Capital Management, LLC v. State of Qatar
FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE
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
SUMMARY*
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.
surreptitious intrusion into their servers and email accounts in order to obtain information and the dissemination of such information to others, including persons in the media, and this conduct did not qualify as commercial activity within the meaning of the FSIA.
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
subject matter jurisdiction, concluding that Qatar was immune under the Foreign Sovereign Immunities Act (“FSIA”),
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
for purposes of this appeal the additional well-pleaded contentions that are contained in that declaration of counsel. Considering these allegations together, we take the following factual assertions as true for purposes of this appeal.
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
The centerpiece of Qatar’s purported targeting of Broidy was a concerted series of cyberattacks aimed at BCM’s California-based computer servers. In the latter half of 2017, Qatar retained the New York-based firm of Global Risk Advisors LLC (“GRA”) to coordinate that effort, and GRA thereafter introduced Qatar “to cyber mercenaries in various countries to coordinate technical aspects of the illegal intrusion.” Thereafter, through a series of “spearphishing” attacks aimed at several persons connected to Broidy, including his executive assistant, the hackers obtained access to BCM’s Los Angeles-based servers. Beginning on January 16, 2018, and continuing through at least February 25, 2018, the hackers engaged in “thousands” of instances of unauthorized access into BCM’s servers and obtained “Plaintiffs’ private communications, emails, documents and intellectual property.”
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-
delivery. A New York-based public relations firm that Qatar had previously hired in connection with its efforts to influence U.S. public opinion, Stonington Strategies LLC (“Stonington”), participated in this plan to “organize and disseminate Plaintiffs’ stolen emails to media organizations.” The metadata from some of these leaked PDFs revealed timestamps from the Central and Eastern Time Zones, suggesting that the conversion of these files into PDF format took place in the United States. Plaintiffs also allege that “many of the instances of unlawful distribution of illegally obtained [documents] took place within the United States.”
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.
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’
occurring in the United States” as required by our decision in Olsen by Sheldon v. Government of Mexico, 729 F.2d 641, 646 (9th Cir. 1984), abrogated in part on other grounds as recognized in Joseph v. Office of Consulate Gen. of Nigeria, 830 F.2d 1018, 1026 (9th Cir. 1987). The district court concluded that all of the torts alleged by Plaintiffs were “premised on allegedly wrongful conduct by Qatar, its agents, or co-conspirators in gaining access to Plaintiffs’ data servers from outside the United States, making each tort transnational.” The alleged attacks from Vermont, the court held, “were merely the continuation of purported conduct allegedly originating in Qatar and ‘do not demonstrate an independent tort occurring entirely within the United States’” (citation omitted). The district court held that the commercial activity exception was inapplicable because Qatar’s alleged conduct—hacking and cyberespionage—did not qualify
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.
II
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).
The FSIA thus contains separate exceptions that permit certain actions against foreign states based on their commercial activities,
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.
A
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
fall within one of § 1605(a)(5)’s express exclusions from the tortious activity exception. Johnson v. Riverside Healthcare Sys., LP, 534 F.3d 1116, 1121 (9th Cir. 2008) (“[W]e may affirm based on any ground supported by the record.”). In addition to preserving a foreign sovereign’s immunity over a specified list of torts, § 1605(a)(5) also expressly precludes any tort claim against a foreign state “based upon the exercise or performance or the failure to exercise or perform a discretionary function regardless of whether the discretion be abused.”
1
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
regulations, and any other relevant binding source of law. But the policy discretion of a foreign sovereign is not evaluated by those same constraints, but rather by the corresponding limitations that bind that sovereign, whether contained in its own domestic law or (we will assume) in applicable and established principles of international law. We drew precisely this distinction in Risk v. Halvorsen, 936 F.2d 393 (9th Cir. 1991), in which we upheld Norway’s immunity under the FSIA on the ground that the discretionary function exclusion applied to the challenged actions of Norwegian officials, despite the fact that those actions “may constitute a violation of California criminal law.” Id. at 396–97. We
The alleged actions that Qatar took here have not been shown to violate either Qatari law or applicable international law. The parties do not dispute that, under Qatari law, the various criminal prohibitions against hacking, theft, or disclosure of trade secrets do not bind government agents acting in accordance with official orders. Indeed, it would perhaps be surprising if the domestic law of any country prohibited its own government agents from engaging in covert cyberespionage and public relations activities aimed at foreign nationals in other countries. Nor have the specific forms of cyberespionage alleged here been shown to violate judicially enforceable principles of international law. Cf. Letelier, 488 F. Supp. at 673. The status of peacetime espionage under international law is a subject of vigorous debate, see, e.g., Patrick C.R. Terry, “The Riddle of the Sands”—Peacetime Espionage and Public International Law, 51 Geo. J. Int’l L. 377, 380–85 (2020); A. John Radsan, The Unresolved Equation of Espionage and International Law, 28 Mich. J. Int’l L. 595, 601–07 (2007), and the parties have not pointed us to any sufficiently clear rule of international law that would impose a mandatory and judicially enforceable duty on Qatar not to do what it allegedly did here. Cf. Sosa v. Alvarez-Machain, 542 U.S. 692, 724–31 (2004) (explaining why courts should exercise great caution before purporting to identify and enforce norms of international law).
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”
concerning alleged “covert surveillance program” aimed at mosque (emphasis added)).
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
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
involving policy judgment.” Letelier, 488 F. Supp. at 673; see also Macharia v. United States, 334 F.3d 61, 67 (D.C. Cir. 2003) (because matters of embassy location and security involved considerations that “‘affect foreign relations,’” they satisfied Gaubert’s “second step” (citation omitted)). We therefore conclude that Qatar’s alleged conduct here involved “the type of discretionary judgments that the exclusion was designed to protect.” Holy See, 557 F.3d at 1084.
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.”
As noted, the “crucial” first step “in determining whether the basis of this suit was a commercial activity is defining the ‘act complained of here.’” MOL, Inc. v. People’s Republic of Bangladesh, 736 F.2d 1326, 1328 (9th Cir. 1984) (citation omitted); see also Saudi Arabia v. Nelson, 507 U.S. 349, 356 (1993). “Although the Act contains no definition of the phrase ‘based upon,’” the Supreme Court has held that the “phrase is read most naturally to mean those elements of a claim that, if proven, would entitle a plaintiff to relief under his [or
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.”
that the “commercial character of an activity shall be determined by reference to the nature” of the activity, “rather than by reference to its purpose.” Id. In assessing whether the “nature” of particular state actions is commercial, courts look to whether they “are the type of actions by which a private party engages in trade and traffic or commerce.” Weltover, 504 U.S. at 614 (simplified); see also Adler v. Federal Republic of Nigeria, 219 F.3d 869, 875–76 (9th Cir. 2000) (considering whether the defendants’ challenged conduct was “what every private party does in the open market (notwithstanding the fact that their precise undertakings were illegal)”); Cicippio v. Islamic Republic of Iran, 30 F.3d 164, 167 (D.C. Cir. 1994) (“[W]e take from Weltover the key proposition that in determining whether a given government activity is commercial under the [FSIA], we must ask whether the activity is one in which commercial actors typically engage.”). “[W]hether a state acts ‘in the manner of’ a private party is a question of behavior, not motivation.” Nelson, 507 U.S. at 360 (citation omitted).
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).
Plaintiffs point out that there are bad actors in the commercial sphere who employ similar tactics, but any application of this argument to the particular facts of this case seems difficult to reconcile with Nelson. In that case, plaintiff Scott Nelson was allegedly arrested, imprisoned, and
perform uniquely sovereign actions, such as occurred in this case, is not sufficient to distinguish Nelson. Cicippio, 30 F.3d at 168.
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
omitted), and we agree with the district court that they were not.
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.