600 F.3d 661 (D.C. Cir. 2010), 09-7060, Cruise Connections Charter Management 1, LP v. Attorney General of Canada

Docket Nº09-7060.
Citation600 F.3d 661
Opinion JudgeTATEL, Circuit Judge:
Party NameCRUISE CONNECTIONS CHARTER MANAGEMENT 1, LP and Cruise Connections Charter Management GP, Inc., Appellants v. ATTORNEY GENERAL OF CANADA, Representing the Royal Canadian Mounted Police, et al., Appellees.
AttorneyJack M. Strauch argued the cause and filed the briefs for appellants. Deborah J. Israel entered an appearance. John M. Townsend argued the cause for appellees. With him on the brief was Scott H. Christensen.
Judge PanelBefore: TATEL, Circuit Judge, and SILBERMAN and WILLIAMS, Senior Circuit Judges.
Case DateApril 06, 2010
CourtUnited States Courts of Appeals, Court of Appeals for the District of Columbia Circuit

Page 661

600 F.3d 661 (D.C. Cir. 2010)

CRUISE CONNECTIONS CHARTER MANAGEMENT 1, LP and Cruise Connections Charter Management GP, Inc., Appellants

v.

ATTORNEY GENERAL OF CANADA, Representing the Royal Canadian Mounted Police, et al., Appellees.

No. 09-7060.

United States Court of Appeals, District of Columbia Circuit.

April 6, 2010

Argued Feb. 8, 2010.

Page 662

Appeal from the United States District Court for the District of Columbia (No. 1:08-cv-02054-JR).

Jack M. Strauch argued the cause and filed the briefs for appellants. Deborah J. Israel entered an appearance.

John M. Townsend argued the cause for appellees. With him on the brief was Scott H. Christensen.

Before: TATEL, Circuit Judge, and SILBERMAN and WILLIAMS, Senior Circuit Judges.

OPINION

TATEL, Circuit Judge:

Under the Foreign Sovereign Immunities Act, foreign governments engaging in commercial activities outside the United States enjoy immunity from suit in U.S. courts unless those activities have a " direct effect" in the United States. In this case the Canadian government terminated a contract with a U.S. company to provide cruise ship services in Canada. Because this left the U.S. company unable to consummate fully negotiated, multi-million-dollar subcontracts with U.S.-based cruise lines to provide the necessary ships, we conclude that Canada's termination of the contract had a " direct effect" in the United States.

I

In 2008, Cruise Connections, a U.S. corporation based in Winston-Salem, N.C., signed a contract with the Royal Canadian Mounted Police (RCMP) under which Cruise Connections would provide three cruise ships to dock in Vancouver during the 2010 Olympic Winter Games. RCMP planned to use the ships to house security staff needed for the Games. The contract required Cruise Connections to subcontract with two U.S.-based cruise lines, Holland America and Royal Caribbean, to provide the necessary ships. For this service, RCMP agreed to pay Cruise Connections a little more than $54 million (Canadian) in three direct payments.

Page 663

With the RCMP contract in hand, Cruise Connections entered " the final stages of negotiating" subcontracts, called Charter Party Agreements, with Holland America and Royal Caribbean to provide the three ships at a cost of approximately $39 million (U.S.). Tracey Kelly Aff. ¶ 7. Because the ships would remain in Vancouver for several weeks, the two companies demanded assurances that they would incur no liability for Canadian corporate income and payroll taxes. Although RCMP originally gave these assurances, promising to cover all taxes due, it reversed course just as Holland America and Royal Caribbean were set to sign the Charter Party Agreements and disavowed responsibility for any payroll and income taxes. Unprotected from tax liability, the two companies balked, leaving Cruise Connections unable to deliver signed Charter Party Agreements by the required date. RCMP then terminated its contract with Cruise Connections.

Cruise Connections sued RCMP, Her Majesty the Queen in Right of Canada, and the Attorney General of Canada in the United States District Court for the District of Columbia, alleging both breach of contract and unfair trade practices. Although acknowledging that RCMP, as an " agency or instrumentality" of the federal government of Canada, 28 U.S.C. § 1603(b), generally enjoys immunity from suit in U.S. courts under the Foreign Sovereign Immunities Act (FSIA), 28 U.S.C. §§ 1602-11, Cruise Connections argued that the FSIA's commercial activities exception applies. As relevant here, that exception abrogates sovereign immunity

in any case ... in which the action is based ... 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.

Id. § 1605(a)(2). RCMP conceded that contracting for chartered ships qualifies as a commercial activity and that its alleged breach satisfies the " act" requirement. It argued, however, that the alleged breach had no " direct effect in the United States" and moved to dismiss for lack of jurisdiction. See 28 U.S.C. § 1330(a) (providing district courts with subject matter jurisdiction over cases against foreign governments only when an FSIA exception applies).

Cruise Connections responded with two arguments. First, it contended that the contract required RCMP to pay it via wire transfer to a U.S. bank and that RCMP's failure to make those payments qualified as a direct effect in the United States. Second, it argued that RCMP's cancellation also caused a direct effect in the United States because it resulted in the loss of U.S. business to Cruise Connections and the cruise lines. This loss included not only the millions of dollars to charter the three ships, but also an additional $4.5 million (U.S.) that Cruise Connections estimated it lost because the Charter Party Agreements contained standard provisions for on-board revenue-passenger purchases for alcoholic beverages, gift items, etc.-under which Cruise Connections would guarantee a set amount of revenue and then receive anything collected in excess of that base amount. In addition, Cruise Connections had arranged with a U.S. travel agency to charter one of the cruise ships as it sailed between San Diego, its home base, and Vancouver. Under that agreement, the travel agency would have paid Cruise Connections a flat rate of $1.25 million (U.S.).

The district court rejected both arguments. With respect to the place of payment, the court read the contract to require " payments to an account of Cruise Connections' choosing" rather than specifically

Page 664

to an account in the United States. Cruise Connections Charter...

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27 practice notes
  • 806 S.E.2d 45 (N.C.App. 2017), COA16-1102, Green v. Green
    • United States
    • North Carolina Court of Appeals of North Carolina
    • 3 Octubre 2017
    ...in the Cruise case in April 2010. See generally Cruise Connections Charter Mgmt. 1, LP v. Attorney General of Canada, 600 F.3d 661 (D.C. Cir. 2010). After Plaintiff and Defendant separated, the firm obtained summary judgment on liability in the Cruise case. Defendan......
  • The Commercial Activity Exception
    • United States
    • The Foreign Sovereign Immunities Act Deskbook The Fsia and subject matter jurisdiction
    • 23 Mayo 2013
    ...corresponding bank, “direct efect” had occurred in U.S.). 107. See Cruise Connections Charter Mgmt. 1, LP v. Attorney General of Canada, 600 F.3d 661, 664-66 (D.C. Cir. 2010) (Royal Canadian Mounted Police’s (RCMP) termination of contract with U.S. company to provide cruise ships to RCMP ha......
  • What Is a Political Subdivision?
    • United States
    • The Foreign Sovereign Immunities Act Deskbook The Fsia’s territoriality and scope
    • 23 Mayo 2013
    ...legal entity but only an organ of the Chilean government”); but see Cruise Connections Charter Mgmt. 1 v. Attorney General of Canada, 600 F.3d 661, 663-64 (D.C. Cir. 2010) (Royal Canadian Mounted Police did not dispute categorization as “agency or instrumentality” where dispute solely raise......
  • 964 F.3d 1135 (D.C. Cir. 2020), 19-7040, Valambhia v. United Republic of Tanzania
    • United States
    • Federal Cases United States Courts of Appeals Court of Appeals for the District of Columbia Circuit
    • 10 Julio 2020
    ...cannot satisfy the direct effect requirement." Cruise Connections Charter Mgmt. 1, LP v. Attorney General of Canada, 600 F.3d 661, 665 (D.C. Cir. 2010). And we have further rejected the contention that "pay wherever you are" scenarios in which the ass......
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23 cases
  • 806 S.E.2d 45 (N.C.App. 2017), COA16-1102, Green v. Green
    • United States
    • North Carolina Court of Appeals of North Carolina
    • 3 Octubre 2017
    ...in the Cruise case in April 2010. See generally Cruise Connections Charter Mgmt. 1, LP v. Attorney General of Canada, 600 F.3d 661 (D.C. Cir. 2010). After Plaintiff and Defendant separated, the firm obtained summary judgment on liability in the Cruise case. Defendan......
  • 964 F.3d 1135 (D.C. Cir. 2020), 19-7040, Valambhia v. United Republic of Tanzania
    • United States
    • Federal Cases United States Courts of Appeals Court of Appeals for the District of Columbia Circuit
    • 10 Julio 2020
    ...cannot satisfy the direct effect requirement." Cruise Connections Charter Mgmt. 1, LP v. Attorney General of Canada, 600 F.3d 661, 665 (D.C. Cir. 2010). And we have further rejected the contention that "pay wherever you are" scenarios in which the ass......
  • Wye Oak Technology, Inc. v. Republic of Iraq, 062910 VAEDC, 1:09cv793 (AJT/JFA)
    • United States
    • Federal Cases United States District Courts 4th Circuit Eastern District of Virginia
    • 29 Junio 2010
    ...is an American corporation." Id. at 312. Similarly, in Cruise Connections Charter Mgmt 1, LP v. Attorney General of Canada, 600 F.3d 661, 665 (D.C. Cir. 2010), the court held that the alleged breach of a contract to provide cruise ship services in Canada had a direct effect in the Unit......
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    • United States
    • Federal Cases United States Courts of Appeals Court of Appeals for the Ninth Circuit
    • 18 Septiembre 2012
    ...claim brought by Cruise Connections, a U.S. corporation, against Canada. See Cruise Connections Charter Mgmt. 1, LP v. Att'y Gen. of Can., 600 F.3d 661, 662-63 (D.C.Cir.2010). Cruise Connections had entered into a contract with Canada to provide three cruise ships for housing Canadian secur......
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4 books & journal articles
  • The Commercial Activity Exception
    • United States
    • The Foreign Sovereign Immunities Act Deskbook The Fsia and subject matter jurisdiction
    • 23 Mayo 2013
    ...corresponding bank, “direct efect” had occurred in U.S.). 107. See Cruise Connections Charter Mgmt. 1, LP v. Attorney General of Canada, 600 F.3d 661, 664-66 (D.C. Cir. 2010) (Royal Canadian Mounted Police’s (RCMP) termination of contract with U.S. company to provide cruise ships to RCMP ha......
  • What Is a Political Subdivision?
    • United States
    • The Foreign Sovereign Immunities Act Deskbook The Fsia’s territoriality and scope
    • 23 Mayo 2013
    ...legal entity but only an organ of the Chilean government”); but see Cruise Connections Charter Mgmt. 1 v. Attorney General of Canada, 600 F.3d 661, 663-64 (D.C. Cir. 2010) (Royal Canadian Mounted Police did not dispute categorization as “agency or instrumentality” where dispute solely raise......
  • THE IMPLICIT BAN ON FREE AND OPEN SOURCE SOFTWARE AND STATUTORY OVERREACH IN THE FCC'S REVISED RF DEVICE AUTHORIZATION RULES.
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    • Rutgers Computer & Technology Law Journal Vol. 43 Nbr. 2, September 2017
    • 22 Septiembre 2017
    ...(134.) 47 U.S.C. [section] 302a(a)(2016). (135.) FCC v. Midwest Video Corp., 440 U.S. 689, 706 (1979). (136.) Comcast Corp., 600 F.3d at 661. (137.) 111. Citizens Comm. for Broad, v. FCC 467 F.2d 1397, 1399 (7th Cir. 1972). (138.) See id. (139.) Am. Library Ass'n v. FCC, 406 F.3d 689, 691 (......
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