Blenheim Capital Holdings Ltd. v. Lockheed Martin Corp.

• Decision Date: 15 November 2022
• Docket Number: 21-2104
• Citation: 53 F.4th 286
• Parties: BLENHEIM CAPITAL HOLDINGS LTD. ; Blenheim Capital Partners Ltd., Plaintiffs - Appellants, v. LOCKHEED MARTIN CORPORATION; Airbus Defence and Space SAS, Defendants - Appellees, and Defense Acquisition Program Administration ; Republic of Korea, Defendants.
• Court: U.S. Court of Appeals — Fourth Circuit

53 F.4th 286

BLENHEIM CAPITAL HOLDINGS LTD. ; Blenheim Capital Partners Ltd., Plaintiffs - Appellants,

v. LOCKHEED MARTIN CORPORATION; Airbus Defence and Space SAS, Defendants - Appellees,andDefense Acquisition Program Administration ; Republic of Korea, Defendants.

No. 21-2104

United States Court of Appeals, Fourth Circuit.

Argued: September 16, 2022

Decided: November 15, 2022

ARGUED: Hamish P.M. Hume, BOIES, SCHILLER & FLEXNER, LLP, Washington, D.C., for Appellants. Marc Laurence Greenwald, QUINN EMANUEL URQUHART & SULLIVAN, LLP, New York, New York; Brian T. McLaughlin, CROWELL & MORING LLP, Washington, D.C., for Appellees. ON BRIEF: Samuel C. Kaplan, Jesse M. Panuccio, BOIES, SCHILLER & FLEXNER, LLP, Washington, D.C., for Appellants. Lyndsay A. Gorton, CROWELL & MORING LLP, Washington, D.C., for Appellee Lockheed Martin Corporation.

Before GREGORY, Chief Judge, and NIEMEYER and THACKER, Circuit Judges.

Affirmed by published opinion. Judge Niemeyer wrote the opinion, in which Chief Judge Gregory and Judge Thacker joined.

NIEMEYER, Circuit Judge:

Blenheim Capital Holdings Ltd. and Blenheim Capital Partners Ltd., Guernsey-based companies (collectively, "Blenheim"), commenced this action against Lockheed Martin Corporation, Airbus Defence and Space SAS, and the Republic of Korea and its Defense Acquisition Program Administration (the last two, collectively, "South Korea"), alleging that the defendants conspired to "cut it out" as the broker for a large, complex international military procurement transaction.^* Under the terms of the transaction, South Korea would acquire 40 F-35 fighter planes — valued at roughly $7 billion — manufactured by Lockheed and a "Next-gen" military satellite — valued at over $3 billion — manufactured by Airbus and equipped with capabilities for "integration with the F-35 fighter planes." South Korea would pay $7 billion for the F-35s and $150 million toward the cost of the military satellite, with the remaining value of the satellite serving as an "offset" to effectively reduce South Korea's costs and thus "sweeten" the transaction. Further, the $150 million payment by South Korea was to be paid to Lockheed and passed on to Blenheim in installments, which Blenheim would use as capital to procure the financing for the purchase of three satellites from Airbus. One of these satellites would be the military satellite for South Korea, and the other two would be retained by Blenheim, which it would operate, leasing their transmission capacity to earn income to pay for the satellite production and financing costs and provide Blenheim with "a total profit of at least $500 million." The entire transaction was subject to the approval and supervision of the U.S. government.

For reasons that are vigorously disputed by the parties, Lockheed terminated the brokerage arrangement with Blenheim and restructured the transaction to be a "direct procurement" between Lockheed, Airbus, and South Korea, again with the approval and supervision of the U.S. government. Blenheim was left to bear the costs it had incurred in designing and working on the transaction, and it was also denied the prospects for profit from owning and operating two satellites.

In its first amended complaint, Blenheim alleged that the defendants (1) tortiously interfered with its brokerage arrangement and its prospective business expectations; (2) conspired to do so; (3) were unjustly enriched; and (4) conspired to violate federal and state antitrust laws. For subject matter jurisdiction, it relied on federal question jurisdiction under 28 U.S.C. § 1331, based on its federal antitrust claim, and on the Foreign Sovereign Immunities Act of 1976, 28 U.S.C. §§ 1330(a), 1604, 1605(a)(2), and 28 U.S.C. § 1367 (supplemental jurisdiction) for its tort claims.

The district court granted the defendants' motions to dismiss under Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6). With respect to the tort claims, it concluded that it lacked subject matter jurisdiction by reason of the Foreign Sovereign Immunities Act because South Korea was presumptively immune from jurisdiction under the Act and had not been engaged in "commercial activity," which is excepted from the immunity from jurisdiction conferred by the Act. And on the antitrust claim, it held that the action was barred by both the applicable four-year statute of limitations and the Foreign Trade Antitrust Improvements Act of 1982, which requires that anticompetitive conduct have a sufficient effect on domestic or import commerce to be subject to U.S. antitrust laws.

Finding no reversible error in the district court's analysis, we affirm.

I

According to Blenheim's complaint, Blenheim "specializes in developing, structuring, and modeling international ‘offset’ transactions, which are often part of government procurements." "Offset" transactions are those in which the supplier in a procurement contract provides a collateral "sweetener" to the procuring government to reduce the procuring government's cost in the transaction. Offset transactions are "common in defense procurements."

Beginning in 2011, Blenheim worked with Lockheed to structure an offset transaction that would secure the sale of 40 F-35 fighter planes to South Korea after South Korea "accelerated its plans to enhance stealth-fighter capabilities in response to public outcry over North Korean aggression." The F-35 is a fifth-generation fighter plane manufactured by Lockheed for the U.S. government, and it represents the state-of-the-art in such military equipment and includes classified technology. Because of the F-35's high cost, Lockheed and Blenheim recognized that South Korea would require an offset transaction. Following much work, Blenheim proposed and the relevant parties accepted, with the approval of the U.S. Department of Defense, the terms of an offset transaction in which (1) Lockheed would provide South Korea with 40 F-35 planes with a value of roughly $7 billion; (2) Blenheim would arrange to have Airbus manufacture three satellites, one of which — a military satellite designed with "Next-gen" capabilities, including "integration with the F-35 fighter planes" — would be provided to South Korea, with the other two to be retained by Blenheim to operate; (3) South Korea would pay for the 40 F-35s and contribute $150 million toward the cost of the military satellite, which had an offset value of "more than $3.1 billion," effectively reducing South Korea's overall cost by almost one-half; (4) the $150 million payment would be transferred (via the U.S. Department of Defense) to Lockheed and then in installments to Blenheim for the purpose of obtaining financing for the cost of the satellites; (5) Blenheim would then operate the two satellites provided to it, leasing their transmission capacity to generate income to pay for all three satellites and to provide it with an estimated profit of $500 million.

Blenheim thus functioned as a broker in the transaction in accordance with the terms of an "International Brokerage Agreement" between it and Lockheed. Because the transaction involved highly sensitive military equipment designed and manufactured for the U.S. military, it could be accomplished only as a "Foreign Military Sale," requiring approval and control by the U.S. Department of Defense. Indeed, negotiations for the transaction took place in the offices of the U.S. Department of Defense, including the Pentagon, because the negotiations "involved classified information." The statutes and regulations governing the sale of the F-35s to South Korea required all aspects of the transaction to be approved and managed by the U.S. government, including the U.S. government's receipt and disbursal of all monies in the manner agreed, including even the $150 million that South Korea paid to Lockheed for payment to Blenheim.

Blenheim's complaint alleged that, beginning sometime in 2015, Lockheed and Airbus (and later on, South Korea) conspired to "cut Blenheim out" of the offset transaction. Lockheed's motivation for doing so, according to Blenheim, was that Lockheed became concerned that carrying out the transaction would position Blenheim to compete with a division of Lockheed that was in the market for satellite transmission capacity. The complaint thus alleged that Lockheed, in furtherance of the conspiracy, delayed paying Blenheim the installments of the $150 million that it had received from South Korea via the U.S. Department of Defense. Lockheed made the first payment of $45 million on June 15, 2016 — which was after its due date — and then made no further payments. And finally, by letter dated October 6, 2016, it terminated Blenheim's role as the broker in the offset transaction. The letter stated:

This letter will serve as formal notice by Lockheed Martin Oversees Corporation and its affiliates ("LMOC") to Blenheim Capital Partners and its affiliates ("Blenheim") of the immediate termination of International Broker Agreement LMOC-07-51 between LMOC and Blenheim dated October 26, 2007, including all amendments, exhibits, appendices, and attachments thereto (the "IBA").

As discussed at length in previous written communications, Blenheim has materially breached the IBA (and relevant appendices and exhibits thereto). Such material breaches remain uncured. Accordingly, pursuant to Section 11.B. of the IBA, the IBA is terminated for cause.

The complaint alleged that Lockheed, Airbus, and South Korea then restructured the offset transaction, cutting Blenheim out of it, such that Lockheed agreed to provide 40 F-35s to South Korea and Airbus agreed to provide the military satellite. The U.S. Department of Defense approved the restructured transaction, and the military satellite for South Korea was launched from Cape Canaveral on July 20, 2020.

Blenheim commenced this action on December 31, 2020, alleging that the defendants (1) tortiously interfered with its International Brokerage Agreement and prospective business expectancies; (2)...