Mаnuel Kevork TERENKIAN; Pentonville Developers, Ltd.; Marblearch Trading, Ltd., Plaintiffs-Appellees, v. The REPUBLIC OF IRAQ; The Republic of Iraq, by and through State Oil Marketing Organization, Defendants-Appellants.
No. 10-56708.
United States Court of Appeals, Ninth Circuit.
Argued and Submitted Dec. 6, 2011. Filed Sept. 18, 2012.
1122
Before: JOHN T. NOONAN, RONALD M. GOULD, and SANDRA S. IKUTA, Circuit Judges.
Melinda W. Ebelhar (argued), Edward D. Vaisbort, G. David Rubin, Litchfield Cavo LLP, Pasadena, CA; Alan Gura, Gura & Possessky, PLLC, Alexandria, VA, for appellees Pentonville Developers, Ltd. and Marblearch Trading, Ltd.
ORDER
The opinion filed on July 16, 2012, and appearing at 686 F.3d 1061 is withdrawn. The superseding opinion will be filed concurrently with this order. The parties may file an additional petition for rehearing or rehearing en banc. All other pending motions are denied as moot.
OPINION
IKUTA, Circuit Judge:
Pentonville Developers, Ltd., and Marblearch Trading, Ltd., two Cyprus oil brokerage companies, sued the Republic of Iraq for unilaterally terminating two contracts for the purchase and sale of Iraqi oil. The district court held it had subject matter jurisdiction to hear this action notwithstanding Iraq‘s assertion of sovereign immunity under the Foreign Sovereign Immunities Act (FSIA),
I
Pentonville Developers, Ltd., and Marblearch Trading, Ltd., are oil brokerage companies that are headquartered in and formed under the laws of Cyprus. Manuel Terenkian is the president and sole shareholder of both companies. Beginning in 2000, Pentonville and Marblearch commenced negotiations with Iraq under the auspices of the United Nations Oil for Food Program to enter into transactions for the purchase and sale of Iraqi oil.1
In November 2000, pursuant to the Oil for Food Program requirements, Pentonville entered into a contract to purchase oil from the State Oil Marketing Organization (SOMO), a company formed under the laws of and wholly owned by the Republic of Iraq. A few months later, Marblearch also entered a contract to purchase oil from SOMO. As specified in the contracts, Pentonville agreed to purchase one million barrels of Kirkuk crude oil for the “Europe” market and two million barrels of Basrah light crude oil for the “USA/Far East” market. Marblearch agreed to purchase two million barrels of Kirkuk crude oil for “Europe and/or U.S.A.” The contracts were to be performed in Iraq or Turkey, where title to the crude oil would pass to the purchaser. Pentonville and Marblearch agreed that payment for each cargo of crude oil would be made from the proceeds of an irrevocable documentary letter of credit directly into a United Nations escrow account. The contracts additionally specified that Pentonville and Marblearch would process the oil in their own refineries; the companies could use the refineries of third parties only with SOMO‘s prior approval. Moreover, any breach of this obligation would constitute a default for which SOMO cоuld terminate the contracts. Finally, the contracts provided for arbitration in accordance with the rules of the International Chamber of Commerce to settle any disputes arising from the contracts, and designated the place of arbitration as Baghdad “or any other place mutually agreed upon.” These contracts were duly approved by the United Nations committee supervising the Oil for Food Program.
In July 2003, Pentonville, Marblearch, and Terenkian (collectively referred to here as the plaintiffs) filed a complaint against the Republic of Iraq by and through SOMO. As amended in May 2007, the complaint alleged that after the Pentonville contract had been executed at the Permanent Mission of Cyprus to the United Nations in New York, Iraqi officials
Based on these allegations, the plaintiffs filed a complaint claiming that Iraq and SOMO breached their contracts with Pentonville and Marblearch, causing Pentonville to lose no less than $3,750,000 in brokerage fees and Marblearch to lose no less than $2.5 million in brokerage fees.
The complaint also sets forth the alleged basis of the district court‘s subject matter jurisdiction over the Republic of Iraq, which plaintiffs alleged was the actual defendant in the suit. The “sole basis” for United States federal courts to obtain jurisdiction over a foreign state is the FSIA. Argentine Republic v. Amerada Hess Shipping Corp., 488 U.S. 428, 434 (1989). The FSIA “establishes a comprehensive framework for determining whether a court in this country, state or federal, may exercise jurisdiction over a foreign state.” Republic of Arg. v. Weltover, Inc., 504 U.S. 607, 610 (1992). Under
Because the plaintiffs aimed their action at Iraq, they had the preliminary burden of establishing that Iraq was not entitled to immunity. See Meadows v. Dominican Republic, 817 F.2d 517, 522 (9th Cir. 1987). In an effort to do so, the complaint alleged that the “commercial exception” to sovereign immunity, set forth in
(a) A foreign state shall not be immune from the jurisdiction of courts of the United States or of the States in any case—
(2) in which the action 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[.]
Courts have construed this commercial activity provision to have three independent clauses, and have used different criteria for each of the three separate clаuses to assess a claimed exception. See, e.g., Am. W. Airlines, Inc. v. GPA Grp., 877 F.2d 793, 796-97 (9th Cir. 1989) (applying a “nexus” requirement to the first clause); Siderman de Blake v. Republic of Arg., 965 F.2d 699, 709 (9th Cir. 1992) (applying a “material connection” requirement to the second clause); Adler v. Fed. Republic of Nigeria, 107 F.3d 720, 726-27 & n. 4 (9th Cir. 1997) (applying a “legally significant
After various delays,3 Iraq brought a motion to dismiss for lack of subject matter jurisdiction on the ground that the “commercial activity” exception to sovereign immunity under the third clause of
In their opposition to the motion to dismiss, the plaintiffs raised two new bases for abrogating Iraq‘s sоvereign immunity. Relying for the first time on the first clause of
The district court denied Iraq‘s motion to dismiss. After concluding that Iraq was а proper defendant (an issue not on appeal), the district court ruled that Iraq was not entitled to sovereign immunity because the “commercial activity” exception applied: namely, the lawsuit was based on “an act outside the territory of the United States in connection with a commercial
Finally, thе district court held that venue in the Central District of California was not proper and transferred venue to the District of Columbia. See
On appeal, Iraq argues that the district court lacked subject matter jurisdiction, or alternatively, that the case should have been dismissed for failure to arbitrate. Plaintiffs oppose Iraq‘s arguments on the merits, and they further argue that the appeal is time-barred because the notice of appeal was not filed until after the case was docketed in the District Court for the District of Columbia.
II
We begin by addressing the parties’ jurisdictional arguments.
A
We first turn to plaintiffs’ argument that we lack appellate jurisdiction because Iraq‘s appeal is time-barred. On April 13, 2010, court clerks entered the district court‘s order denying Iraq‘s motion to dismiss the case and transferring it to the District Court for the District of Columbia. That district court docketed the case on April 21, 2010. “[T]his court has adopted the docketing date in the transferee court as the time of effective transfer.” Wilson v. City of San Jose, 111 F.3d 688, 692 (9th Cir. 1997) (citing Lou v. Belzberg, 834 F.2d 730, 733 (9th Cir. 1987)). According to plaintiffs, “[o]nce the transferee court receives and dockets the case files, the transferor court generally loses jurisdiction over the case, as does the transferor court‘s appellate court.” In re Donald, 328 B.R. 192, 197 (9th Cir. BAP 2005) (citations omitted). As noted above, this case was docketed in the District Court for the District of Columbia on April 21, 2010. Therefore, according to plaintiffs, when Iraq filed its notice of appeal in the Court of Appeals for the D.C. Circuit, we had already lost jurisdiction, and the D.C. Circuit‘s transfer of the case to us was time-barred, and thus ineffective. According to plaintiffs, when Iraq failed to file a notice of appeal before April 21, 2010 (eight days after entry of the district court‘s order denying Iraq‘s motion to dismiss), no appellate court had jurisdiction to hear Iraq‘s appeal.
We disagree. A district court‘s transfer of a case to an out-of-circuit district court dоes not strip an appellate court of jurisdiction over an interlocutory but “immediately appealable, and timely appealed, decision” of a district court within its circuit. Wye Oak Tech., Inc. v. Republic of Iraq, 666 F.3d 205, 209 (4th Cir. 2011); see also Jones v. InfoCure Corp., 310 F.3d 529, 534 (7th Cir. 2002). Under
Indeed, as our sister circuits have recognized, interpreting a district court‘s transfer order as transferring an immediately appealable decision would make little sense: because the aggrieved party could not pursue an appeal in the transferee circuit, see
Here, the District Court for the Central District of California denied Iraq‘s motion to dismiss in an ordered entered April 13, 2010. This order was immediately appealable, as “we have long held that an order denying immunity under the FSIA is appealable under the collateral order doctrine.” Gupta v. Thai Airways Int‘l, Ltd., 487 F.3d 759, 763 (9th Cir. 2007) (quoting Compania Mexicana De Aviacion, S.A. v. U.S. Dist. Court for Cent. Dist. of Cal., 859 F.2d 1354, 1358 (9th Cir. 1988)) (internal quotation marks omitted). We thus had jurisdiction over this appeal under
B
Having established our appellate jurisdiction, we now turn to Iraq‘s argument
A district court‘s denial of a motion to dismiss for lack of subject matter jurisdiction is subject to interlocutory appeal under the collateral order doctrine. Phaneuf v. Republic of Indon., 106 F.3d 302, 304 (9th Cir. 1997). Under the burden-shifting framework of the FSIA, the defendant must establish a prima facie case “that it is a sovereign state and that the plaintiff‘s claim arises out of a public act.” Siderman, 965 F.2d at 708 n. 9 (quoting Meadows, 817 F.2d at 523) (internal quotation marks omitted). A presumption then arises “that the foreign state is protected by immunity.” Id. Once the plaintiff has met the threshold of alleging that the defendant was not entitled to immunity due to one of the FSIA exceptions, see Meadows, 817 F.2d at 522, the defendant may make either a facial or factual challenge to the district court‘s subject matter jurisdiction, see Doe v. Holy See, 557 F.3d 1066, 1073 (9th Cir. 2009) (differentiating between facial attacks and fact-based challenges to subject matter jurisdiction).
Where a defendant claims only “that the allegations contained in a complaint are insufficient on their face to invoke federal jurisdiction,” Safe Air for Everyone v. Meyer, 373 F.3d 1035, 1039 (9th Cir. 2004), we treat the challenge as “any other motion to dismiss on the pleadings for lack of jurisdiction,” Holy See, 557 F.3d at 1073. We therefore determine whether the complaint alleges “sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.‘” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)); see also Colony Cove Props., LLC v. City of Carson, 640 F.3d 948, 955 (9th Cir. 2011) (applying Iqbal‘s standards to a motion to dismiss for lack of subject matter jurisdiction and for failure to state a claim).
If the defendant instead makes a factual attack on subject matter jurisdiction, the defendant may introduce testimony, affidavits, or other evidence to “dispute[] the truth of the allegations that, by themselves, would otherwise invoke federal jurisdiction.” Safe Air for Everyone, 373 F.3d at 1039. Under these circumstances, “no presumptive truthfulness attaches to plaintiff‘s allegations.” Holy See, 557 F.3d at 1073 (quoting Roberts v. Corrothers, 812 F.2d 1173, 1177 (9th Cir. 1987)) (internal quotation marks omitted). “The plaintiff then has the burden of going forward with the evidence by offering proof that one of the FSIA exemptions applies.” Siderman, 965 F.2d at 708 n. 9 (quoting Meadows, 817 F.2d at 522-23); see also Gates v. Victor Fine Foods, 54 F.3d 1457, 1463 (9th Cir. 1995). Once the plaintiff has presented such evidence, the defendant bears the burden of proving by a preponderance of the evidence that the exception to sovereign immunity does not apply. Siderman, 965 F.2d at 708 n. 9 (quoting Meadows, 817 F.2d at 522-23). Even where the material facts are disputed, the trial court may still evaluate the merits of the jurisdictional claims. See Holy See, 557 F.3d at 1073; see also William W. Schwarzer, A. Wallace Tashima & James M. Wagstaffe, California Practice Guide: Federal Civil Procedure Before Trial ¶ 9:104, at 9-31 (The Rutter Group 2009).
In this case, Iraq made fact-based challenges to plaintiffs’ assertion of jurisdiction, and both parties submitted documentary evidence to the district court. On appeal, we must determine whether plaintiffs have carried their burden of offering proof that one or more FSIA exceptions to sovereign immunity are applicable, and
III
Plaintiffs relied on the first and third clauses of the “commercial activity” exception to sovereign immunity as set forth in
A
The first clause of
The courts have also explained what it means for an action to be “based upon” a commercial activity. According to the Supreme Court, the phrase “based upon” is “read most naturally to mean those elements of a claim that, if proven, would entitle a plaintiff to relief under his theory of the case.” Nelson, 507 U.S. at 357; see also id. (“An action is based upon the elements that prove the claim, no more and no less.” (quoting Santos v. Compagnie Nationale Air France, 934 F.2d 890, 893 (7th Cir. 1991) (internal quotation marks omitted))). Thus a court must begin its analysis “by identifying the particular conduct” on which the plaintiff‘s legal action is “based.” Id. at 356. That “particular conduct” must be a “commercial activity” as defined by the Act, although “the first clause of
Finally, the requirement that the commercial activity be “carried on in the United States,”
Moreover, the commercial activities in the United States must be significant ones. See Grossman, 991 F.2d at 1384. For example, while a foreign nation‘s contract negotiations, including a meeting, and telephone and wire communications, are commercial activity in the United States, they are insufficiently significant to meet this exception. See id. at 1383-84. Similarly, where a plaintiff‘s claim was based on activities in Saudi Arabia (and sounded in tort rather than contract), the plaintiff could not abrogate the foreign nation‘s sovereign immunity under the first clause of the FSIA by pointing to preliminary commercial activities in the United States. See Nelson, 507 U.S. at 357-58.
In sum, in order for a foreign state to lose its sovereign immunity under the first clause of
B
The third clause of
In analyzing the third clause, courts have focused on the language requiring that the act which forms the basis of the lawsuit cause “a direct effect in the United States.” In interpreting this language in Weltover, the Supreme Court held that an effect is “direct” “if it follows ‘as an immediate consequence of the defendant‘s activity.‘” 504 U.S. at 618 (alteration in original) (quoting Weltover, Inc. v. Republic of Arg., 941 F.2d 145, 152 (2d Cir. 1991)); see also Adler, 107 F.3d at 726-27.5 We have explained that a consequence is “immediate” if no intervening act breaks “the chain of causation leading from the asserted wrongful act to its impact in the United States.” Lyon v. Agusta S.P.A., 252 F.3d 1078, 1083 (9th Cir. 2001); see also id. at 1083 n. 3 (holding that the relevant meaning of “immediate” in this context is ” ‘acting or being without the intervention of another object, cause, or agency’ ” (quoting Webster‘s Third New International Dictionary 1129 (1986))); Guirlando v. Τ.C. Ziraat Bankasi A.S., 602 F.3d 69, 75 (2d Cir. 2010) (stating that ” ‘the requisite immediacy’ is lacking where the alleged effect ‘depend[s] crucially on variables independent of the conduct of the foreign state’ ” (alteration in original) (quoting Virtual Countries, Inc. v. Republic of S. Afr., 300 F.3d 230, 238 (2d Cir. 2002))).
Satisfying the requirement that an effect be “immediate” and thus “direct” is not sufficient by itself to satisfy the “direct effect” prong of the commercial activity exception, however, because the effect must also be more than “purely trivial” or “remote and attenuated.” Weltover, 504 U.S. at 618. In considering this factor, a court must ” ‘look to the place where legally significant acts giving rise to the claim occurred’ in determining the place where a direct effect may be said to be located.” Adler, 107 F.3d at 727 (quoting United World Trade, Inc. v. Mangyshlakneft Oil Prod. Ass‘n, 33 F.3d 1232, 1239 (10th Cir. 1994)); see also id. at 727 n. 4 (citing cases and noting that the Second, Tenth, and Eighth Circuits apply the “legally significant acts” tеst); Gregorian v. Izvestia, 871 F.2d 1515, 1527 (9th Cir. 1989) (to establish a direct effect, the plaintiff must show that ” ‘something legally significant actually happened in the U.S.’ ” (quoting Zedan v. Kingdom of Saudi Arabia, 849 F.2d 1511, 1515 (D.C. Cir. 1988))).
Following this reasoning, courts have held that a mere tangential effect in the United States from a breach that occurs elsewhere does not constitute a “direct effect” as contemplated in the third clause of
On the other hand, when a foreign sovereign breaches a contract by failing to complete a contractual obligation that must be performed in the United States, such a breach is sufficient to be a direct effect in the United States. See, e.g., Weltover, 504 U.S. at 618-19. In Weltover, Argentina issued bonds and agreed to repay certain bondholders by making deposits into those bondholders’ New York banks as the bonds matured. Id. at 609-10. When Argentina breached its obligation to make those payments, the bondholders sued in New York district court. Id. at 610. The Supreme Court held that Argentina‘s act of rescheduling the maturity dates on the bonds, which was the basis of the plaintiffs’ breach of contract action in the United States, had a direct, non-trivial effect in the United States. Id. at 618-19. As the Court explained, “[b]ecause New York was the place of performance for Argentina‘s ultimate contractual obligations, the rescheduling of those obligations necessarily had а ‘direct effect’ in the United States: Money that was supposed to have been delivered to a New York bank for deposit was not forthcoming.” Id. at 619; see also Adler, 107 F.3d at 727 (holding that, because the plaintiff had instructed Nigeria to make payments to the plaintiff‘s account in New York, “New York was the place of performance of Nigeria‘s ultimate contractual obligation,” and “its failure to satisfy
Accordingly, there is an exception to a foreign sovereign‘s immunity under the third clause when (1) an act outside the United States forms the basis of the plaintiffs’ lawsuit (i.e., constitutes an element of a claim that if proven would entitle a plaintiff to relief on his theory of the case); (2) the act is taken in connection with a foreign sovereign‘s commercial activity; (3) there is a direct connection between the act and the effect, without any intervening object, cause, or agency; and (4) the effect of the act is legally significant and non-trivial.
IV
We now apply these principles to this case to determine whether Iraq has met its burden of showing that neither of the exceptions to sovereign immunity contained in the first and third clauses of
A
We begin by considering the plaintiffs’ assertion that Iraq does not have sovereign immunity from suit under the FSIA because the first clause of the commercial exception in
According to the plaintiffs’ argument, their complaint is based on the cancellation of the contracts, and the contracts are the product of Iraq‘s commercial activities carried on in the United States because (1) the contracts were made under the auspices of the Oil for Food Program administered in New York by the United Nations and (2) the contracts were executed at the Cyprus Mission to the United Nations, which is located in New York. As further support for this argument, plaintiffs ask us to take judicial notice of documents filed in other district court proceedings in which Iraq tоok the litigation position that contracts made under the auspices of the Oil for Food Program constitute commercial activity carried on in the United States.
We agree that Iraq‘s entry into the two contracts for the sale of oil constituted commercial activity. But neither of the activities identified by plaintiffs constitute a “commercial activity carried on in the United States by the foreign state” for purposes of the first clause of
Nor do we agree with plaintiffs’ argument that the execution of the contracts at the Cyprus Mission in New York is sufficiently significant to satisfy the first clause of the commercial activity exception. First, as Iraq argues, plaintiffs presented no evidence that any Iraqi official actually executed the contract in New York. Iraq has established that it is a sovereign state, and so it is entitled to a presumption that it has immunity from suit. See Siderman, 965 F.2d at 708 n. 9. Because Iraq relies on a fact-based challenge to subject-matter jurisdiction, see Holy See, 557 F.3d at 1073, plaintiffs had the burden of presenting their evidence that the disputed FSIA exemption applied. See Siderman, 965 F.2d at 708 n. 9. Plaintiffs have presented no evidence regarding the locale where Iraq signed the contract. Because plaintiffs failed to carry their initial burden of offering evidence that an exception to immunity applies, we may reject their argument on this ground. See id.
But even assuming that plaintiffs provided evidentiary support for this factual allegation, their legal argument is wrong: execution of a contract in the Unit-
Finally, Iraq‘s litigation position in other legal proceedings is not relevant to our considerations here. Even if Iraq conceded in other litigation that contracts made pursuant to the Oil for Food Program were commercial activities carried on in the United States, judicial estoppel is not a substitute for subject matter jurisdiction, as plaintiffs concede.8 Rather, a federal court must assure itself of its own jurisdiction to entertain a claim regardless of the parties’ arguments or concessions. See Am. Fire & Cas. Co. v. Finn, 341 U.S. 6, 17-18 (1951) (“The jurisdiction of the federal courts is carefully guarded against expansion by judicial interpretation or by prior action or consent of the parties.“); see also Hansen v. Harper Excavating, Inc., 641 F.3d 1216, 1227-28 (10th Cir. 2011) (declining to apply judicial estoppel to the question whether the court had Article III jurisdiction to entertain the claim); Gray v. City of Valley Park, Mo., 567 F.3d 976, 980-82 (8th Cir. 2009) (same).
Accordingly, we hold that Iraq has met its burden of showing that the exception to sovereign immunity contained in the first clause of
B
We next turn to plaintiffs’ argument that the exception to sovereign immunity
The plaintiffs argue that Iraq‘s breach of the contracts had multiple direct effects in the United States. Specifically, the plaintiffs allege that under the contracts, some of the oil intended for purchase was meant for the U.S. market and payment for any oil purchased was to be made by deposit into a New York bank account. Due to the cancellation of the contracts, plaintiffs argue, the oil never reached the United States, and the money was never paid in New York. Therefore, the plaintiffs allege that their complaint is based on Iraq‘s breach of the two contracts, which resulted in a “direct effect” in the United States.
We reject this argument because the alleged effects in the United States, the non-deposit of payments for oil in a New York bank (due to the non-purchase of the oil) and the non-sales of the non-purchased oil to potential customers in the United States, do not constitute direct effects as defined in
Weltover and Adler are not to the contrary. Those cases held that the foreign sovereign‘s failure to perform its obligation to make certain payments necessarily had a direct effect in the United States where the foreign sovereign‘s place of performance was the United States. See Weltover, 504 U.S. at 619 (“Because New York was thus the place of performance for Argentina‘s ultimate contractual obligations, the rescheduling of those obligations necessarily had a ‘direct effect’ in the United States . . . .“); Adler, 107 F.3d at 730 (“Nigeria was obligated to make payment in New York. Nigeria‘s acts had a direct effect in the United States.“). But here, Iraq had no obligation to perform in the United States; the contracts required Iraq only to deliver oil to the possession of the plaintiffs in either Iraq or Turkey, and the act that forms the basis of plaintiffs’ lawsuit, Iraq‘s cancellation of the contracts, occurred in Iraq. See Guirlando, 602 F.3d at 76 (“The decision by a foreign sovereign not to perform is itself an act, but it is not an act in the United States; it is an act in the foreign state.“). While the failure of the breaching party to perform a contractual obligation in the United States is a “direct effect,” see Weltover, 504 U.S. at 618-19, here, by contrast, there was neither a failure by Iraq to perform in the United States nor any other legally significant event in this country.
Nor is there any immediate connection between Iraq‘s cancellation of the contracts and the failure of oil to reach customers in the United States. While the
Accordingly, because no legally significant act had a direct effect in the United States, we hold that Iraq has met its burden of showing that the third clause of
V
Iraq has therefore carried its burden of proving that neither of the “commercial activity” exceptions to sovereign immunity raised by plaintiffs is applicable. Plaintiffs’ claim is based on neither a legally significant commercial act that occurred in the United States nor an act that had a direct and legally significant effect in the United States. Accordingly, the federal courts have no subject matter jurisdiction over Iraq in this action. See
REVERSED, VACATED, AND REMANDED.
NOONAN, Circuit Judge, dissenting:
Iraq, run by the dangerous despot, Saddam Hussein, entered into two contracts to
The majority suggests that the place of formation of the contracts was not significant because their formation is not at issue. Formation was the first essential element for the plaintiffs to establish in order to establish jurisdiction. The plaintiffs established that formation occurred in New York City. The majority finds that the place where payment was to be made was not significant. In our case, as in most cases, the place of performance of a promise to pay is significant. Terenkian would not have wanted payment to be made in Baghdad.
The majority argues that Iraq‘s participation in the Oil for Food Program was not commercial activity by Iraq but, rather, a humanitarian relief program undertaken to obtain food for the people of Iraq. The majority cites as authority Republic of Argentina v. Weltover, Inc., 504 U.S. 607 (1992) and Adler v. Republic of Nigeria, 107 F.3d 720 (1997). Each of these cases found a foreign government to be liable for its commercial activity in the United States.
As Justice Scalia set out for a unanimous Supreme Court “commercial” is the key to the exception for commercial activity created by the Foreign Sovereign Immunities Act. Its meaning is to be found in “the restrictive theory at the time the statute was enacted.” Weltover at 613. Under this approach, a foreign state that exercises powers that can also be exercised by private parties is not immune as a sovereign. Id. at 614. So in Weltover, Argentina acted not “as regulator of a market” but “as a private player within it” and was not immune. Id. As Justice Scalia pointed out, the motive of the state was irrelevant. It was the type of action that counted. Id. at 614. In our case, the majority focuses on Iraq‘s “humanitarian” motive, which is irrelevant. What Iraq was doing was what any private player could do, trading oil to obtain money for food.
In Adler, we followed Weltover and looked not to “the motive” or “the purpose” of the foreign government but to whether its actions were of the type “by which a private party engages in commerce.” Adler at 724. Hence, we held Nigeria might be sued when through the government-owned Nigerian National Petroleum Corporation it entered into a computerization of certain oil fields in Nigeria. As we observed “there is nothing uniquely sovereign about computerizing oil fields.” Id. So here there is nothing specifically sovereign about bartering oil.
The majority brushes off the showing that in New York today Iraq takes the position that there is federal jurisdiction of claims under the Oil for Food Program. The majority characterizes that as a “litigation position,” which does not create jurisdiction. True, it does not create jurisdiction. But positions cannot be taken arbitrarily or fraudulently in filing or answering a complaint. A position asserted in such a document is sworn to be true. Iraq may not honestly say there is jurisdiction in New York and deny that there is jurisdiction of similar claims in Sаn Diego.
In our case, in order to protect its treasury the Republic of Iraq has chosen to
I would affirm the district court.