Adler v. Federal Republic of Nigeria, No. 96-56119

• Court: United States Courts of Appeals. United States Court of Appeals (9th Circuit)
• Writing for the Court: FARRIS
• Citation: 107 F.3d 720
• Parties: 97 Cal. Daily Op. Serv. 1105, 97 Daily Journal D.A.R. 1706 James E. ADLER, aka Jaime Adler; El Surtidor del Hogar, S.A. de C.V., a Mexican corporation, Plaintiffs-Appellees, v. The FEDERAL REPUBLIC OF NIGERIA, a Sovereign State; Central Bank of Nigeria; Paul Ogwuma, aka Paul Oguma; Nigerian National Petroleum Corporation, Defendants-Appellants.
• Docket Number: No. 96-56119
• Decision Date: 19 February 1997

Page 720

107 F.3d 720 97 Cal. Daily Op. Serv. 1105, 97 Daily Journal
D.A.R. 1706 James E. ADLER, aka Jaime Adler; El Surtidor del Hogar,
S.A. de C.V., a Mexican corporation, Plaintiffs-Appellees,
v.
The FEDERAL REPUBLIC OF NIGERIA, a Sovereign State; Central
Bank of Nigeria; Paul Ogwuma, aka Paul Oguma;
Nigerian National Petroleum Corporation,
Defendants-Appellants. No. 96-56119. United States Court of Appeals,
Ninth Circuit. Argued and Submitted Dec. 10, 1996.
Decided Feb. 19, 1997.

Page 722

David H. Fromm, Chalos & Brown, New York City, and Donald G. Rez, Sullivan, Hill, Lewin, Rez, Engel & LaBazzo, San Diego, California, for defendants-appellants.

Richard E. McCarthy, Solomon, Ward, Seidenenwurm & Smith, San Diego, California, for plaintiffs-appellees.

Appeal from the United States District Court for the Southern District of California, Irma E. Gonzalez, District Judge, Presiding. D.C. No. CV-94-00779-IEG.

Before: FARRIS, BEEZER, and TASHIMA, Circuit Judges.

FARRIS, Circuit Judge:

The Federal Republic of Nigeria, the Central Bank of Nigeria, the Nigerian National Petroleum Corporation, and Paul Ogwuma appeal the district court's denial of their motion to dismiss on the basis of sovereign immunity. We affirm.

I.

In June 1992, James Adler, a U.S. citizen and majority shareholder of the Mexican corporation El Surtidor del Hogar, received a letter from Chief Abba Ganna Hen George describing an investment opportunity from which Adler could receive a substantial commission. The letter explained that former members of the Nigerian ruling party had used their positions to create companies and award themselves over-invoiced contracts, and that the new Nigerian government had "given its blessing for the payment of these contracts." Adler could receive a commission, the letter explained, by arranging for the payment of one of these contracts. Adler would have to provide blank copies of El Surtidor's letterhead and invoice statements, as well as a non-Nigerian bank account into which 130 million dollars would be transferred. After the transfer, 40% of the total would go to Adler; 50% would go to Nigerian government officials; and 10% would go for expenses.

Two months later, Adler, on behalf of and with El Surtidor, agreed to the assignment of a Nigerian government contract on which the work had been completed, but a balance remained. The underlying contract, Adler was told, was between a foreign company and the Nigerian National Petroleum Corporation for the computerization of certain Nigerian oil fields. The foreign company had apparently finished the work, but had not received full payment. Nigerian law, Adler was informed, permitted the contract to be assigned to a foreign company. Adler provided the defendants with copies of El Surtidor's invoices and letter head, and directed that the funds be transferred to El Surtidor's bank account in the Cayman Islands.

Adler traveled to Nigeria to finalize the agreement. After Adler signed the contract, Nigerian officials informed him that the funds could not be transferred until he paid a "short fall deposit" of $570,000 to insure against a loss in currency value during the transaction. Adler refused to pay and left the country, but the negotiations continued. Adler took subsequent trips to Nigeria in both December 1992 and May 1994, where he met with various government officials, including Nigeria's Minister of Finance, and both the Governor and Deputy Governor of the Central Bank of Nigeria. To facilitate the transaction, Adler eventually paid not only a short fall deposit, but also numerous transfer fees, cable charges, taxes, surcharges, stamp duties, and the like, totaling over five million dollars.

Page 723

In December 1993, Adler wrote the Central Bank, instructing it to transfer the funds to El Surtidor's bank account in New York, rather than the account in the Cayman Islands. ¹ The money was never paid, and Adler filed suit in district court against Nigeria, the Central Bank of Nigeria, the Nigerian National Petroleum Corporation, and eighteen Nigerian citizens.

Defendants moved to dismiss on the ground that they were immune from the jurisdiction of the district court. The court found that the defendants did not enjoy sovereign immunity because their actions fell within the "commercial activity" exception of the Foreign Sovereign Immunities Act. Nigeria, the Central Bank, the National Petroleum Corporation, and defendant Paul Ogwuma appeal.

II.

Because the defendants based their motion to dismiss on sovereign immunity grounds, the district court's denial of that motion is an appealable interlocutory order under the collateral order doctrine. Schoenberg v. Exportadora de Sal, S.A. de C.V., 930 F.2d 777, 779 (9th Cir.1991).

The existence of subject matter jurisdiction under the FSIA is a question of law reviewed de novo. In re Estate of Ferdinand Marcos Human Rights Litigation, 94 F.3d 539, 543 (9th Cir.1996). A district court's factual findings on jurisdictional issues are reviewed for clear error. Schoenberg, 930 F.2d at 779.

III.

The Foreign Sovereign Immunities Act "establishes a comprehensive framework for determining whether a court in this country, state or federal, may exercise jurisdiction over a foreign state." Republic of Argentina v. Weltover, Inc., 504 U.S. 607, 610, 112 S.Ct. 2160, 2164, 119 L.Ed.2d 394 (1992). Under the FSIA, a foreign state, as well as its agents and instrumentalities, "shall be immune from the jurisdiction of the courts of the United States" unless one of several statutory exceptions applies. 28 U.S.C. § 1604. The FSIA confers original jurisdiction to the district courts over any nonjury civil action against a foreign state where the foreign state is not entitled to immunity under the Act. 28 U.S.C. § 1330. Section 1330 "provides the sole basis for obtaining jurisdiction over a foreign state in the courts of this country." Argentine Republic v. Amerada Hess Shipping Corp., 488 U.S. 428, 443, 109 S.Ct. 683, 693, 102 L.Ed.2d 818 (1989).

Adler does not contest that the defendants fall within the purview of the FSIA. The Federal Republic of Nigeria is a foreign state as defined in 28 U.S.C. § 1603. See Joseph v. Office of Consulate General of Nigeria, 830 F.2d 1018, 1021 (9th Cir.1987). Both the Central Bank of Nigeria and the Nigerian National Petroleum Corporation are instrumentalities of the Federal Republic of Nigeria. See Verlinden, B.V. v. Central Bank of Nigeria, 461 U.S. 480, 482, 103 S.Ct. 1962, 1965, 76 L.Ed.2d 81 (1983); Caribbean Trading and Fidelity Corp. v. Nigerian National Petroleum Corp., 948 F.2d 111, 112 (2nd Cir.1991). Defendant Paul Ogwuma is allegedly an agent of one or more of these entities. Defendants are thus immune from jurisdiction unless one of several statutory exceptions applies.

Page 724

A. The Commercial Activity Exception

The district court held that Nigeria was not immune from jurisdiction because its conduct falls within the commercial activity exception of the Act, 28 U.S.C. § 1605(a)(2). Section 1605(a)(2) provides that a foreign state is not immune from suit in any case

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.

The district court relied only on the third clause of § 1605(a)(2) to establish jurisdiction and Adler argues solely under that clause in this appeal. We must thus determine whether Adler's action is (1) "based ... upon an act outside the territory of the United States"; (2) that was taken "in connection with a commercial activity" of Nigeria outside this country; and (3) that "cause[d] a direct effect in the United States." Weltover, 504 U.S. at 611, 112 S.Ct. at 2164.

That Adler's causes of action are based on acts outside the United States is uncontested. The dispute pertains to whether defendants' actions were made "in connection with a commercial activity" of Nigeria, and whether those actions had a "direct effect in the United States."

1. Were the acts forming the basis of the complaint made "in connection with a commercial activity"?

The "commercial activity" prong of the third clause of § 1605(a)(2) requires us to make two distinct inquiries: (1) whether Nigeria engaged in a commercial activity; and (2) whether the acts complained of were made "in connection with" that activity.

(a) Did Nigeria engage in "commercial activity"?

The FSIA defines "commercial activity" as:

[E]ither a regular course of commercial conduct or a particular commercial transaction or act. The commercial nature of an activity shall be determined by reference to the nature of the course of conduct, rather than by reference to its purpose. 28 U.S.C. § 1603(d).

As the Supreme Court has observed, however, this definition leaves "the critical term 'commercial' largely undefined." Weltover, 504 U.S. at 612, 112 S.Ct. at 2165.

Nevertheless, the Supreme Court has concluded that "when a foreign government acts, not as a regulator of the market, but as a private player within it, the foreign sovereign's actions are 'commercial' within the meaning of the FSIA." Weltover, 504 U.S. at 614, 112 S.Ct. at 2166. Because section 1603(d) requires that an act's commercial character is to be determined by reference to its "nature" rather than its "purpose," the issue "is not whether the foreign government is acting with a profit motive or instead with the aim of fulfilling uniquely sovereign objectives." Id. Rather, the court must determine "whether the particular actions that the foreign state performs (whatever the motive behind them) are the type of actions by which a private party engages in 'trade and traffic or commerce.'...