948 F.2d 90 (2nd Cir. 1991), 30, Antares Aircraft, L.P. v. Federal Republic of Nigeria

Docket Nº:30, Docket 91-7342.
Citation:948 F.2d 90
Party Name:ANTARES AIRCRAFT, L.P., Plaintiff-Appellant, v. FEDERAL REPUBLIC OF NIGERIA, and Nigerian Airports Authority, Defendants-Appellees.
Case Date:October 28, 1991
Court:United States Courts of Appeals, Court of Appeals for the Second Circuit

Page 90

948 F.2d 90 (2nd Cir. 1991)

ANTARES AIRCRAFT, L.P., Plaintiff-Appellant,

v.

FEDERAL REPUBLIC OF NIGERIA, and Nigerian Airports

Authority, Defendants-Appellees.

No. 30, Docket 91-7342.

United States Court of Appeals, Second Circuit

October 28, 1991

Argued Sept. 24, 1991.

Page 91

David F. Dobbins, New York City (Patterson, Belknap, Webb & Tyler, of counsel), for plaintiff-appellant.

Doris K. Shaw, New York City (Warshavsky, Hoffman & Cohen, P.C., of counsel), for defendant-appellee Federal Republic of Nigeria.

David Wippman, Washington, D.C. (Jeffrey Dunoff, Reichler & Soble, Washington, D.C. and James Reichler, White Plains, N.Y., of counsel), for defendant-appellee Nigerian Airports Authority.

Before LUMBARD, WINTER and ALTIMARI, Circuit Judges.

ALTIMARI, Circuit Judge:

Plaintiff-appellant Antares Aircraft, L.P. ("Antares"), a Delaware limited partnership with its principal place of business in New York, appeals from a judgment of the United States District Court for the Southern District of New York (John S. Martin, Jr., Judge), dismissing its claim against defendants-appellants

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the Federal Republic of Nigeria ("FRN") and the Nigerian Airports Authority ("NAA") for lack of subject matter jurisdiction under the Foreign Sovereign Immunities Act of 1976 ("FSIA"). See 28 U.S.C. §§ 1330, 1332(a)(2)-(4), 1441(d), and 1602-1611 (1988). Antares brought the underlying action to recover damages for the alleged conversion of its aircraft in Nigeria, claiming that the NAA, a Nigerian corporation established pursuant to governmental decree and responsible for the operation and management of all airports in Nigeria, wrongfully detained its aircraft in Nigeria until Antares paid certain airport parking and landing fees that its lessee allegedly owed to the NAA. Antares paid these fees using funds from its New York bank account. Antares attributed the NAA's conduct to the FRN by arguing that the NAA is not truly a separate entity, but is owned and operated by the FRN and is essentially the FRN's agent.

The defendants moved to dismiss the complaint, contending that the district court lacked subject matter jurisdiction under the FSIA because neither the FSIA's "commercial activity" exception, see 28 U.S.C. § 1605(a)(2), nor its "expropriation" exception, see 28 U.S.C. § 1605(a)(3), applied. The district court granted the motion and dismissed the case. The court reasoned that the "commercial activity" exception did not apply because the alleged conversion of Antares' aircraft in Nigeria did not have a "direct effect in the United States" within the meaning of § 1605(a)(2). Rather, according to the district court, the direct effect of the defendants' conduct occurred in Nigeria where the aircraft was detained and suffered damage from exposure to the elements. The court thus rejected Antares' contention that the financial loss it suffered as a result of the defendants' conduct overseas was alone sufficient to satisfy the "direct effect in the United States" test of § 1605(a)(2). The court further held that the "expropriation" exception did not apply because the NAA did not conduct any commercial activity in the United States, a necessary element of this exception. See 28 U.S.C. § 1605(a)(3).

Antares appeals from the judgment of dismissal, contending, among other things, that the district court erred in finding that the financial loss Antares incurred in the United States as a result of the alleged conversion of its aircraft in Nigeria was not "a direct effect in the United States" within the meaning of § 1605(a)(2) of the FSIA. Antares also argues that the district court erred in determining that Antares failed to allege facts sufficient to conclude that the NAA engaged in commercial activity in the United States, and consequently, in ruling that the "expropriation" exception did not apply. For the reasons set forth below, we affirm the judgment of the district court.

BACKGROUND

Plaintiff-appellant Antares is the owner of a DC-8-55 aircraft, its sole asset. In February 1988, Antares leased the plane to Gam Air, Ltd. ("Gam Air"), a Gambian corporation. Thereafter, Antares assigned its interest as lessor to Expert Air, Ltd. ("Expert Air"), a Nigerian company. Prior to November 1988, both Gam Air and Expert Air apparently defaulted on their respective obligations under these agreements. As a result of Expert Air's default, it appears that Antares regained possession of the aircraft.

In addition to its default, Gam Air also failed to pay the pilots and crew of the aircraft in a timely fashion. In order to recover the wages allegedly due, the pilots and crew of the aircraft commenced an action in Nigeria against Gam Air and Expert Air sometime after November 10, 1988. In connection with that action, a Nigerian court issued an order of attachment covering the aircraft. At that time, the aircraft was at the Murtala Muhammed Airport in Lagos, Nigeria.

To protect its interest in the aircraft, Antares sought from the Nigerian court, and was granted, the right to intervene as a defendant in the action. Subsequently, the Nigerian court lifted the order of attachment and Antares planned to fly the

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aircraft to the United States. However, according to Antares, the NAA refused to allow it to remove the aircraft until it paid certain parking and landing fees allegedly incurred by Gam Air and owed to the NAA. Negotiations ensued in Nigeria between Antares' representatives and the NAA concerning the amount of fees due. Antares claims that, in order to regain control of its aircraft, it was forced to make a series of payments to the NAA from January 1989 until May 1989 totaling approximately $100,000. The bulk of these payments were wired from Antares' New York bank account to the NAA's agent in Nigeria. Antares also claims that the NAA directed that one payment be deposited into a California bank account. That account did not, however, belong to the NAA, but apparently belonged to Antares' local Nigerian counsel. In any event, after paying the outstanding parking and landing fees, Antares flew the aircraft out of Nigeria in May 1989.

Five months later, Antares commenced the underlying action against the FRN and the NAA in the United States District Court for the Southern District of New York to recover damages stemming from the detention and alleged conversion of the aircraft in Nigeria. The complaint alleged that the NAA wrongfully detained the aircraft as part of a scheme to extort payments from Antares. While Antares did not claim that the FRN participated directly in this undertaking, it sought to hold the FRN liable on the theory that the FRN owned and operated the NAA and that the NAA was, in effect, an agent of the FRN, and not a separate corporate instrumentality.

The defendants moved to dismiss the complaint pursuant to Fed.R.Civ.P. 12(b)(1) for lack of subject matter jurisdiction under the FSIA. Under the FSIA, federal and state courts are without subject matter jurisdiction to entertain an action against a "foreign state," as defined in 28 U.S.C. § 1603(a), unless the claim falls under one of the statutory exceptions set forth in 28 U.S.C. §§ 1605-1607. See 28 U.S.C. § 1604; Argentine Republic v. Amerada Hess Shipping Corp., 488 U.S. 428, 434, 109 S.Ct. 683, 687, 102 L.Ed.2d 818 (1989); Shapiro v. Republic of Bolivia, 930 F.2d 1013, 1017 (2d Cir.1991). The parties agreed that the alleged actions qualify as the activities of a "foreign state," and thus the FRN and the NAA were entitled to immunity unless one of the FSIA exceptions applied. The district court dismissed the case after finding, among other things, that neither the "commercial activity" exception, 28 U.S.C. § 1605(a)(2), nor the "expropriation" exception, 28 U.S.C. § 1605(a)(3), applied.

With regard to the "commercial activity" exception, the court found that the detention and alleged conversion of the aircraft in Nigeria did not cause a "direct effect in the United States" within the meaning of the statute. According to the district court, the direct effect of the NAA's conduct occurred in Nigeria where the plane was detained and where it supposedly suffered damage from exposure to the elements. Although the alleged conversion may have caused Antares financial loss in the United States to the extent that it had to pay the parking and landing fees out of its New York bank account, the court concluded that this loss was an indirect consequence of the defendants' activity. The district court thus rejected Antares' claim that the financial loss it suffered in the United States as a result of the defendants' conduct overseas was alone a sufficient jurisdictional nexus to this country to satisfy § 1605(a)(2). The district court observed that the statutory test was not satisfied even assuming, as Antares alleged, that some of the funds transferred to the NAA were first paid into a California bank account (apparently belonging to Antares' Nigerian local counsel) at the NAA's request.

The district court also held that the "expropriation" exception did not apply because Antares failed to allege sufficient facts from which it could be inferred that the NAA conducted "commercial activity in the United States," a necessary element of this exception. See 28 U.S.C. § 1605(a)(3). The court pointed out that the NAA had submitted sworn affidavits demonstrating

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the absence of commercial activity in this country.

Because the district court found that none of the FSIA exceptions applied, it dismissed the complaint against both defendants. This appeal followed.

DISCUSSION

The FSIA...

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