Southway v. Cent. Bank of Nigeria, 98-1112

• Decision Date: 09 December 1999
• Docket Number: No. 98-1112,98-1112
• Citation: 198 F.3d 1210
• Parties: (10th Cir. 1999) HENRY T. SOUTHWAY, aka Butch Southway; SOUTHWAY CONSTRUCTION COMPANY, INC.; DOUGLAS HOUGHTON; RANDY THURSTON; J. E. LOSAVIO, JR.; RUSS GRAY, dba Gray Real Estate, Plaintiffs-Appellees, v. CENTRAL BANK OF NIGERIA; REPUBLIC OF NIGERIA, Defendants-Appellants, and LAW FIRM OF KIRK P. BROWN, P.C.; KIRK PATTERSON BROWN, dba The Communications Connection, individually; HELEN TOMICICH, dba The Communications Connection, individually, Defendants
• Court: U.S. Court of Appeals — Tenth Circuit

Page 1210

198 F.3d 1210 (10th Cir. 1999)

HENRY T. SOUTHWAY, aka Butch Southway; SOUTHWAY CONSTRUCTION COMPANY, INC.; DOUGLAS HOUGHTON; RANDY THURSTON; J. E. LOSAVIO, JR.; RUSS GRAY, dba Gray Real Estate, Plaintiffs-Appellees, v. CENTRAL BANK OF NIGERIA; REPUBLIC OF NIGERIA, Defendants-Appellants, and LAW FIRM OF KIRK P. BROWN, P.C.; KIRK PATTERSON BROWN, dba The Communications Connection, individually; HELEN TOMICICH, dba The Communications Connection, individually, Defendants.

No. 98-1112

UNITED STATES COURT OF APPEALS TENTH CIRCUIT

December 9, 1999

APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLORADO. D.C. No. 96-B-2540.

[Copyrighted Material Omitted] Joseph E. Losavio, Jr., Law Offices of J. E. Losavio, Pueblo, Colorado, for Plaintiffs-Appellees.

Steven David Plissey (Michael A. Williams with him on the brief), of Williams, Youle & Koenigs, P.C., Denver, Colorado, for Defendants-Appellants.

Before TACHA, HOLLOWAY, and BALDOCK, Circuit Judges.

BALDOCK, Circuit Judge.

The general immunity provision of the Foreign Sovereign Immunities Act of 1976 (FSIA), 28 U.S.C. 1330, 1602-1611, provides:

Subject to existing international agreements to which the United States is a party at the time of enactment of this Act, a foreign state shall be immune from the jurisdiction of the courts of the United States and of the States except as provided in sections 1605 to 1607 of this chapter.

28 U.S.C. 1604. The FSIA provides the exclusive means by which federal and state courts may obtain subject-matter jurisdiction over civil suits involving foreign states, their agencies, or instrumentalities. Argentine Republic v. Amerada Hess Shipping Corp., 488 U.S. 428, 443 (1989). In this interlocutory appeal, we address two issues involving the federal district court's subject-matter jurisdiction under the FSIA: (1) Whether the FSIA prohibits the district court from exercising subject-matter jurisdiction over civil actions against foreign sovereigns based on a pattern of racketeering activity under the Racketeer Influenced and Corrupt Organizations Act of 1970 (RICO), 18 U.S.C. 1961-1968; and, if not, (2) Whether the FSIA's commercial activity exception, 28 U.S.C. 1605(a)(2), applies to the alleged racketeering activity of Defendants Central Bank of Nigeria (CBN) and Republic of Nigeria (RN), thus obviating their sovereign immunity from suit under the FSIA? We answer the first question "no," and the second question "yes."

I.

The detailed facts giving rise to this action are well stated in the district court's opinion, Southway v. Central Bank of Nigeria, 994 F. Supp. 1299, 1302-04 (D. Colo. 1998), and we need not repeat them here. Suffice it to say that this action arose from an alleged scheme in which numerous individuals, including officials of Defendants CBN and RN, sought to defraud Plaintiffs, a group of Colorado investors. Purported members of the Nigerian National Petroleum Company (NNPC) allegedly solicited Defendant Kirk Brown, a Pueblo, Colorado attorney, to assist them in collecting $21.3 million from an "over-invoiced" contract for oil drilling machinery. In exchange for Brown's assistance, the NNPC members agreed to pay Brown a percentage of the proceeds. Between November 1995 and April 1996, numerous communications occurred between Brown and purported representatives of CBN, RN, and NNPC. Brown and his wife, Helen Tomicich, recruited several Colorado investors to help them pay the "up-front costs," which CBN and RN officials demanded prior to the payoff. The Nigerians' offer turned out to be a scam in which the investors together lost over one-half million dollars. This lawsuit followed.

In their complaint against Defendants CBN and RN,¹ Plaintiffs invoked the district court's jurisdiction under the commercial activity exception to the FSIA. That section provides:

(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 upon a commercial activity carried on in the United States by the foreign state; or upon an act performed in the United States in connection with a commercial activity of the foreign state elsewhere; or 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.

28 U.S.C. 1605(a)(2). See also Verlinden B.V. v. Central Bank of Nigeria, 461 U.S. 480, 493 & n.20 (1983) (subject-matter jurisdiction under the FSIA depends on the existence of a specified exception to the FSIA). Plaintiffs alleged that Defendants CBN and RN "and others . . . conspired with one another to defraud and commit theft of money from the plaintiffs . . . by means of fraudulent and deceptive schemes," constituting commercial activity within the meaning of 1605(a)(2). Plaintiffs further alleged that Defendants' scheme violated RICO, 18 U.S.C. 1961-1962 & 1964. The predicate acts on which Plaintiffs based their civil RICO claims included, among others, mail fraud, 18 U.S.C. 1341; wire fraud, 18 U.S.C. 1343; and transfer of stolen property, 18 U.S.C. 2314-2315.

Defendants CBN and RN moved to dismiss Plaintiffs' complaint for lack of subject-matter jurisdiction. See Fed. R. Civ. P. 12(b)(1). According to Defendants, the FSIA did not provide the district court with jurisdiction over Plaintiff's civil RICO claims, because RICO requires such claims to be based on "indictable" acts. 18 U.S.C. 1961(1)(B). Defendants argued that because a foreign sovereign is immune from criminal indictment under the FSIA, the predicate acts upon which Plaintiffs' based their civil RICO claims were not indictable. Thus, Defendants claimed Plaintiffs' civil RICO action necessarily failed. In the alternative, Defendants argued that the FSIA's commercial activity exception did not apply to their conduct because (1) the alleged scheme involved criminal activity in which commercial actors do not typically engage; (2) Defendants CBN and RN had no contractual relationship with Plaintiffs; and (3) the alleged scheme was based upon tortious conduct outside the FSIA's exceptions under 28 U.S.C. 1605(a)(5)(B).

The district court denied Defendants' motion to dismiss, holding that (1) "the FSIA plainly confers jurisdiction over civil RICO actions against a foreign sovereign"; and (2) "the activity carried on by the Nigeria[n] defendants . . . [constituted] 'commercial activity'" within the meaning of the FSIA, thereby defeating Defendants' claim to sovereign immunity.² Southway, 994 F. Supp. at 1306-09. Defendants CBN and RN appealed, renewing their objections to the district court's jurisdiction.

The denial of a claim to sovereign immunity is immediately appealable under the collateral order doctrine. See Affiliated Ute Citizens v. Ute Indian Tribe, 22 F.3d 254, 255-56 (10th Cir. 1994). We review de novo the district court's determinations regarding subject-matter jurisdiction and sovereign immunity under the FSIA. See Ordinance 59 Assoc. v. United States Dept. of the Interior Sec., 163 F.3d 1150, 1152 (10th Cir. 1998). Like the district court, we accept the complaint's allegations as true and ask whether those allegations are sufficient to establish Plaintiffs' entitlement to proceed. Id. Applying this standard, we affirm and remand for further proceedings.

II.

Defendants CBN and RN first argue that the district court has no subject-matter jurisdiction over Plaintiffs' civil RICO claims under 18 U.S.C. 1964(c).³ Plaintiffs' civil RICO claims are based on a pattern of racketeering activity under 1961(1)(B) & 1962. As applicable to this appeal, 18 U.S.C. 1961(1)(B) defines "racketeering activity" as "any act which is indictable" under the federal mail fraud, wire fraud, or transfer of stolen property statutes, 18 U.S.C. 1341, 1343, 2314-2315. Defendants assert that because foreign states, their agencies, and instrumentalities are immune from criminal indictment under the FSIA, the predicate acts upon which Plaintiffs' rely for their civil RICO claims are not "indictable."

Defendants' argument that the FSIA does not provide the district court with subject-matter jurisdiction over Plaintiffs' RICO-based civil claims rests upon the questionable presumption that Congress intended to provide foreign sovereigns with immunity from criminal indictment under the FSIA. We are unwilling to presume that Congress intended the FSIA to govern district court jurisdiction in criminal matters. The FSIA's grant of jurisdiction to the district courts addresses only civil actions: "The district courts shall have original jurisdiction . . . of any nonjury civil action against a foreign state . . . as to any claim for relief . . . with respect to which the foreign state is not entitled to immunity either under sections 1605-07 of this title or under any applicable international agreement." 28 U.S.C. 1330(a). (emphasis added). In Verlinden B.V., the Supreme Court explained that the FSIA "contains a comprehensive set of legal standards governing claims of immunity in every civil action against a foreign state or its political subdivisions, agencies, or instrumentalities." Verlinden B.V., 461 U.S. at 488 (emphasis added). At least one circuit has relied on Verlinden B.V. to expressly state that the FSIA does not address foreign sovereign immunity in the criminal context. United States v. Noriega, 117 F.3d 1206, 1212 (11th Cir. 1997).

Because the FSIA makes no mention of foreign sovereign immunity in the criminal context, the question of whether Defendants CBN and RN may commit "indictable" acts under RICO is much more uncertain than Defendants suggest.⁴ A court of law, however, has no business attempting to define the scope of foreign sovereign immunity in the first instance. See In re Doe, 860 F.2d 40, 45 (2d Cir. 1988) (declining to apply the FSIA to resolve a head-of-state immunity issue). If Congress intended defendants...