GLOBAL TECHNOLOGY, INC., а Michigan Corporation, Plaintiff-Appellee, v. YUBEI (XINXIANG) POWER STEERING SYSTEM CO., LTD., et al., Defendants, Aviation Industry Corporation of China, a People‘s Republic of China Corporation, Defendant-Appellant.
No. 14-2319
United States Court of Appeals, Sixth Circuit
Argued: July 29, 2015. Decided and Filed: Dec. 7, 2015.
806 F.3d 806
Before: BATCHELDER, GIBBONS, and WHITE, Circuit Judges.
IV. State law claims
Plaintiffs ask this Court to reinstate their state-law claims if any of their Lanham Act or RICO claims are reinstated. The decision to hear state-law claims over which a federal court has pendent jurisdiction is within the discretion of the trial court.
CONCLUSION
For the foregoing reasons, we REVERSE the order of the district court dismissing Plaintiffs’ Lanham Act claims for failure to state a claim and AFFIRM the order of the district court dismissing Plaintiffs’ RICO claims. We REMAND this case for further proceedings, in which the district court may, in its discretion, re-examine whether to reinstate any of Plaintiffs’ state law claims.
ARGUED: Paul D. Hudson, Miller, Canfield, Paddock and Stone, P.L.C., Troy, Michigan, for Appellant. Victoria A. Valentine, Valentine & Associates, P.C., West Bloomfield, Michigan, for Appellee. ON BRIEF: Paul D. Hudson, Matthew P. Allen, Conor T. Fitzpatrick, Miller, Canfield, Paddock and Stone, P.L.C., Troy, Michigan, for Appellant. Victoria A. Valentine, Stephen K. Valentine, Valentine & Associates, P.C., West Bloomfield, Michigan, for Appellee.
ALICE M. BATCHELDER, Circuit Judge.
Aviation Industry Corporation of China (“AVIC“) brings this interlocutory appeal of the district court‘s denial of its motion to dismiss asserting immunity under the Foreign Sovereign Immunities Act (FSIA). Because we conclude that AVIC‘s challenge to federal jurisdiction under
I.
A district court‘s denial of foreign sovereign immunity is immediately appealable under the collateral-order doctrine. O‘Bryan v. Holy See, 556 F.3d 361, 372 (6th Cir. 2009). A motion to dismiss for lack of subject-matter jurisdiction under
When a
II.
AVIC claims immunity under the Foreign Sovereign Immunities Act of 1976 (FSIA), Pub.L. No. 94-583, 90 Stat. 2891 (codifiеd as amended at
The federal statutory provision that potentially confers jurisdiction on the district court here provides:
The district courts shall have original jurisdiction without regard to amount in controvеrsy of any nonjury civil action against a foreign state as defined in section 1603(a) of [Title 28] as to any claim for relief in personam with respect to which the foreign state is not entitled to immunity either under sections 1605-1607 of [Title 28] or under any applicable international agreement.
any entity (1) which is a separate legal person, corporate or otherwise, and (2) which is an organ of a foreign state or political subdivision thereof, or a majority of whose shares or other ownership interest is owned by a foreign state or political subdivision thereof, and (3) which is neither a citizen of a State of the United States as defined in section 1332(c) and (e) of this title, nor created under the laws of any third country.
The FSIA “establishes a comprehensive framework for determining whether a court in this country ... may exercise jurisdiction over a foreign state.” Republic of Argentina v. Weltover, Inc., 504 U.S. 607, 610 (1992). A state-owned corporation can invoke certain protections under the FSIA if it is an instrumentality of a fоreign nation. Dole Food Co. v. Patrickson, 538 U.S. 468, 470, 473 (2003). We employ a burden-shifting approach in FSIA cases where the named defendant is not a sovereign state. See O‘Bryan, 556 F.3d at 376.
Ordinarily, the defendant bears the burden of claiming its status as a foreign state, see id., but here, the parties agree that AVIC is a foreign state for purposes of the FSIA. AVIC is therefore presumed to be immune from suit, and the burden of production shifts to the plaintiff to rebut this presumption by showing that an enumerated exception applies. If the plaintiff succeeds, the burden shifts to AVIC to demonstrate that its actions do not satisfy the claimed exception. Id. “The party claiming immunity under FSIA retains the burden of persuasion throughout this process.” Id.; accord Peterson v. Islamic Republic Of Iran, 627 F.3d 1117, 1125 (9th Cir. 2010); Orient Mineral Co. v. Bank of China, 506 F.3d 980, 991-92 (10th Cir. 2007); Cargill Int‘l S.A. v. M/T Pavel Dybenko, 991 F.2d 1012, 1016 (2d Cir. 1993); Arriba Ltd. v. Petroleos Mexicanos, 962 F.2d 528, 533 (5th Cir. 1992). In short, whether the district court here has jurisdiction “depends on the existence of оne of the specified exceptions to foreign sovereign immunity.” Verlinden B.V. v. Cent. Bank of Nigeria, 461 U.S. 480, 493 (1983).
The “most significant of the FSIA‘s exceptions,” Weltover, 504 U.S. at 611, and the exception relevant here, provides that a foreign state is not immune when a suit:
is based [1] upon a commercial activity carried on in the United States by the foreign state; or [2] upon an act performed in the United States in connection with a commercial activity of the foreign state elsewhere; or [3] upon an act outside the territory of the United States in connection with a commercial activity of the foreign state elsewhere and that act causes a direct effect in the United States.
“A commercial activity carried on in the United States by a foreign state” is defined as “commercial activity carried on by such state and having substantial contact
Under the FSIA‘s commercial activity exception, a foreign nation “is immune from the jurisdiction of foreign courts as to its sovereign or public acts (jure imperii), but not as to those that are private or commercial in character (jure gestionis).” Saudi Arabia v. Nelson, 507 U.S. 349, 359-60 (1993). Such commercial activity is that involving “only those powers that can alsо be exercised by private citizens” in contrast to “powers peculiar to sovereigns.” Weltover, 504 U.S. at 614 (internal quotation marks omitted). The rule is that “when a foreign government acts, not as regulator of a market, but in the manner of a private player within it, the foreign sovereign‘s actions are ‘commercial’ within the meaning of the FSIA.” Id. These actions are assessed in terms of thе types of actions by which private actors participate in the marketplace. The motive or purpose of the state-owned actor—that is, whether it was acting pursuant to a private corporate motive (e.g., profit-seeking) as opposed to a governmental motive (e.g., regulating the economy)—is not determinative. Id.
A lawsuit claiming jurisdiction under the first clause of the commercial exception must be “based upon a commercial activity carried on in the United States by the foreign state,”
III.
AVIC‘s claim here is that under the FSIA, the true facts of the case deprive the federal judiciary of subject-matter jurisdiction. This is a factual attack on the complaint. The district court has not yet established the jurisdictional facts of this case. On this much, however, the parties clearly agree:
The Peоple‘s Republic of China (“PRC“) owns AVIC. The company has a business license for both military products and “general business items,” including automobile parts. AVIC‘s business license shows a stamp of the official seal of the State Administration for Industry and Commerce of the People‘s Republic of China, and the license states that AVIC is “Owned by the Whole People.” AVIC is a Fortune 500 company, with over 400,000 employees and $23 billion in annual revenue, directly owned by China‘s State Council (the chief administrative authority of the Chinese central government). The State Council‘s State-Owned Assets Supervision and Administration Commission supervises and manages the state-owned assets of enterprises like AVIC.
In 2008, GTI undertook to pursue an alliance between Yubei, AVIC, and Delphi Corporation‘s Global Steering Division (“Delphi“), another Michigan company. In September 2009, Yubei‘s president wrote to Delphi‘s president to express Yubei‘s desire to purchase Delphi. The letter explained that Yubei is a subsidiary of AVIC and touted AVIC‘s “significаnt industrial strength.” However, General Motors (GM)—yet another Michigan company—ultimately purchased Delphi and renamed the company “Nexteer.”
When GTI then attempted to buy the renamed Nexteer, GM expressed concern that another company claimed to have AVIC‘s support in the Nexteer acquisition. AVIC executive Wang Jian later met representatives from GM, Yubei, and GTI in Michigan. At this meeting, Wang Jian offered $350 million to General Motors to acquire Nexteer. That offer was not accepted. In 2010, General Motors sold Nexteer to Pacific Century Motors, also a Chinese company, for $450 million. In 2011, AVIC Auto—another subsidiary of AVIC—purchased fifty-one percent of Pacific Century‘s shares, giving AVIC Auto control of Pacific Century аnd Nexteer.
On March 14, 2012, GTI filed suit against Yubei, AVIC, and AVIC Auto in the Eastern District of Michigan2 alleging that AVIC orchestrated this series of events to avoid its financial obligations to GTI by creating AVIC Auto to “independently” buy Nexteer. GTI filed an amended complaint in October 2012, bringing a claim against Yubei for breach of contract, and claims against all defendants for promissory estoppel and unjust enrichment. The defendants filed motions to dismiss under
AVIC filed a motion to dismiss for lack of subject-matter jurisdiction under
“[S]ince entitlement of a party to immunity from suit is such a critical preliminary determination, the parties have the responsibility, and must be afforded a fair opportunity, to define issues of fact and law, and to submit evidence necessary tо the resolution of the issues.” Gould, Inc. v. Pechiney Ugine Kuhlmann, 853 F.2d 445, 451 (6th Cir. 1988). In an
Because the court‘s jurisdiction is at issue, the trial court has “substantial authority” at the pleadings stage to “weigh the evidence and satisfy itsеlf as to the existence of its power to hear the case.” RMI Titanium Co. v. Westinghouse Elec. Corp., 78 F.3d 1125, 1134 (6th Cir. 1996) (internal quotation marks and emphasis omitted). District courts have “wide discretion to allow affidavits, documents, and even a limited evidentiary hearing to resolve jurisdictional facts.” Gentek, 491 F.3d at 330. However, a district court should not weigh the evidence if the facts necessary to sustain jurisdiction implicate the merits of the plaintiff‘s claim. Id. If “an attack on subject-matter jurisdiction also implicates an element of the cause of action, then the district court should ‘find that jurisdiction exists and deal with the objection as a direct attack on the merits of the plaintiff‘s claim.‘” Id. (internal quotation marks and citation omitted). A district court has “considerable latitude in devising the procedurеs it will follow to ferret out the facts pertinent to jurisdiction.” Foremost-McKesson, Inc. v. Islamic Republic of Iran, 905 F.2d 438, 449 (D.C. Cir. 1990) (internal quotation marks omitted). Courts must look past artful pleading to determine the underlying reality of the core activities being challenged, to determine if the gravamen of the complaint truly falls within one of the exceptions Congress wrote into the FSIA. O‘Bryan, 556 F.3d at 380. The district court here has broad discretion in shaping the сourse of factual development, but does not have discretion not to develop those facts.
IV.
Many of GTI‘s allegations involve Yubei personnel. GTI argues that AVIC controls Yubei‘s actions here, while AVIC insists that Yubei makes its own decisions. So in examining whether GTI overcomes AVIC‘s presumption of immunity, the district court must determine which—if any—of the complained-of actions аre legally attributable to AVIC, or, instead, if those actions are legally attributable to Yubei only. This circuit has no controlling authority for piercing the corporate veil when considering claims under the FSIA. Lacking guidance from the Supreme Court, other courts of appeals have fashioned their own rules. See, e.g., Transamerica Leasing, Inc. v. La Republica de Venezuela, 200 F.3d 843, 848-49 (D.C. Cir. 2000); Foremost-McKesson, 905 F.2d at 447-48.
Once the district court decides which acts are legally attributable to AVIC, it must determine whether those acts satisfy the commercial activity exception. The parties agree that AVIC is an instrumentality of the Chinese government. So upon remand GTI bears the burden of production, which here means providing facts supporting that AVIC engaged in commercial activity. If GTI makes that showing, then the burden shifts back to AVIC, which must be afforded the opportunity to explain why its actions are not the sort of private commercial activities that a private corporation would perform in the competitive marketplace, as to which it bears the ultimate burden of persuasion. For example, a government‘s promoting its nation‘s business interests abroad is a legitimate governmental activity, as is providing general business devel
V.
We also must consider AVIC‘s argument that GTI waived any claim that AVIC‘s аctions abroad fulfill the direct-effect exception to the FSIA. AVIC‘s “effect is direct if it follows as an immediate consequence of the defendant‘s activity,” and must be more than trivial. Weltover, 504 U.S. at 618 (internal quotation marks omitted); see also DRFP LLC v. Republica Bolivariana de Venezuela, 622 F.3d 513, 516-17 (6th Cir. 2010).
GTI did not waive the right to raise arguments under this exception. The amended complaint does allege that actions giving rise to this lawsuit directly affected GTI, but those allegations are dirеcted against all Defendants here, not just AVIC. However, once AVIC claimed sovereign immunity, separate from GTI‘s claim against AVIC for alleged commercial activity within the United States, GTI also claimed that AVIC‘s actions abroad had a direct effect in the United States. The district court must determine whether the true facts of the case satisfy this FSIA exception as well.
VI.
For thе foregoing reasons, we VACATE the judgment of the district court and REMAND the case for further proceedings consistent with this opinion.
ALICE M. BATCHELDER
CIRCUIT JUDGE