Eckert Intern., Inc. v. Government of Sovereign Democratic Republic of Fiji

• Decision Date: 05 August 1994
• Docket Number: No. 93-1985,93-1985
• Citation: 32 F.3d 77
• Parties: ECKERT INTERNATIONAL, INCORPORATED, Plaintiff-Appellee, v. The GOVERNMENT OF the SOVEREIGN DEMOCRATIC REPUBLIC OF FIJI, Defendant-Appellant.
• Court: U.S. Court of Appeals — Fourth Circuit

Page 77

32 F.3d 77

63 USLW 2108

ECKERT INTERNATIONAL, INCORPORATED, Plaintiff-Appellee, v. The GOVERNMENT OF the SOVEREIGN DEMOCRATIC REPUBLIC OF FIJI,

Defendant-Appellant.

No. 93-1985.

United States Court of Appeals, Fourth Circuit.

Argued April 12, 1994.

Decided Aug. 5, 1994.

ARGUED: Stephen Laurence Joseph, Washington, DC, for appellant. Joseph B. Tompkins, Jr., Sidley & Austin, Washington, DC, for appellee. ON BRIEF: Nelson J. Kline, Washington, DC, for appellant. David M. Krasnostein, Christopher R. Drahozal, Sidley & Austin, Washington, DC, for appellee.

Before WILKINSON, Circuit Judge, BUTZNER, Senior Circuit Judge, and GODBOLD, Senior Circuit Judge of the United States Court of Appeals for the Eleventh Circuit, sitting by designation.

Affirmed by published opinion. Senior Judge GODBOLD wrote the opinion, in which Judge WILKINSON and Senior Judge BUTZNER joined.

OPINION

GODBOLD, Senior Circuit Judge:

The Government of Fiji, a foreign state, entered into an agreement with Eckert International, Inc., a United States corporation. Fiji canceled the contract, and Eckert sued for breach in federal court in Virginia. Fiji asserted sovereign immunity, and the district court held that it had waived immunity, 834 F.Supp. 167. Fiji appeals. We review the matter de novo, reach the same conclusion as the district court, and affirm.

Facts

In 1988 the Government of Fiji entered into a three-year agreement with Eckert, the owner and president of which, Fred J. Eckert, is a former ambassador to Fiji. Under the agreement Eckert was to serve as consultant to Fiji in representing its interests with specified agencies of the federal government, and with other governments, and with the tourism industry, promote the political, economical and cultural objectives of Fiji in the United States, and prepare a public relations program designed to restore Fiji's image. In return Fiji was to pay Eckert $250,000 per year. The agreement contained the following choice of law provision:

In the event of any controversy, this Agreement shall be construed and interpreted according to the laws of the state of Virginia in the United States which is the official corporate headquarters of Eckert Associates, Inc. ¹ at the time of any such need of legal interpretation.

(footnote added). Both parties satisfactorily performed their duties under the agreement for the three year period. In 1991 the agreement was renewed for another three years. In November 1992 Fiji informed Eckert that it had decided to terminate the 1991 agreement.

Eckert sued Fiji in the U.S. District Court, E.D.Va., pursuant to 28 U.S.C. Sec. 1330(a), which establishes jurisdiction over a nonjury civil action against a foreign state as to any claim for relief with respect to which the foreign state is not entitled to sovereign immunity. Eckert sought damages for wrongful repudiation and breach of the 1991 agreement. Fiji moved to dismiss on the basis of sovereign immunity, the act of state doctrine, and the political question doctrine. The latter two grounds spring from contentions by Fiji that Fred J. Eckert was to personally perform the services required of the corporation and that he was no longer complying with a requirement of the contract that he be politically loyal and faithful to the Fiji government and instead is loyal to a political adversary of the Prime Minister of Fiji. The district court held that Fiji had waived sovereign immunity and that the act of state and political question doctrines did not apply.

We review only Fiji's assertion that the district court erred in denying it sovereign immunity. Orders denying sovereign immunity are immediately appealable collateral orders. See Walter Fuller Aircraft Sales, Inc. v. Republic of Philippines, 965 F.2d 1375, 1379 n. 4 (5th Cir.1992); Compania Mexicana De Aviacion, S.A. v. U.S. Dist. Court., 859 F.2d 1354, 1358 (9th Cir.1988); Segni v. Commercial Office of Spain, 816 F.2d 344, 347 (7th Cir.1987). We do not reach other issues raised by Fiji because the district court denied Fiji's motion to certify them under 28 U.S.C. Sec. 1292(b).

Discussion

The existence of subject matter jurisdiction under the Foreign Sovereign Immunities Act of 1976, 28 U.S.C. Sec. 1602 et seq., is a question of law. Siderman de Blake v. Republic of Argentina, 965 F.2d 699, 706 (9th Cir.1992), cert. denied, --- U.S. ----, 113 S.Ct. 1812, 123 L.Ed.2d 444 (1993). Thus, we review the district court's denial of sovereign immunity de novo. See Commercial Bank of Kuwait v. Rafidain Bank, 15 F.3d 238, 241 (2d Cir.1994).

The FSIA establishes the scope of the sovereign immunity of foreign states in U.S. courts. Under that Act a foreign state is immune from the jurisdiction of U.S. courts unless one of the listed exceptions in Secs. 1605 and 1607 applies. 28 U.S.C. Sec. 1605(a)(1) 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--

(1) in which the foreign state has waived its immunity either explicitly or by implication, notwithstanding any withdrawal of the waiver which the foreign state may purport to effect except in accordance with the terms of the waiver;....

The district court found that Fiji waived its immunity by implication when it agreed to the choice of law provision contained in the consulting contract. The court also found that Fiji had no immunity because, under 28 U.S.C. Sec. 1605(a)(2), the action was based upon a commercial activity carried on in the United States; it is not necessary for us to address this ground.

The House Report accompanying the passage of the FSIA provides three examples of implied waivers under Sec. 1605(a)(1):

With respect to implicit waiver, the courts have found such waivers in cases where a foreign state has agreed to arbitration in another country or where a foreign state has agreed that the law of a particular country should govern a contract. An implicit waiver would also include a situation where a foreign state has filed a responsive pleading in an action without raising the defense of sovereign immunity.

H.R.Rep. No. 1487, 94th Cong., 2d Sess. 18 (1976), reprinted in 1976 U.S.C.C.A.N. 6604, 6617 (emphasis added). Citing this legislative history, a number of cases have held that various choice of law provisions in contracts constitute implied waivers of sovereign immunity. See Marlowe v. Argentine Naval Comm'n, 604 F.Supp. 703, 709 (D.D.C.1985) (defense of sovereign immunity waived because foreign state agreed that contract would be "governed by and construed in accordance with the laws of the District of Columbia"); Resource Dynamics Int'l, Ltd. v. General People's Committee for Communications and Maritime Transp. in Socialist People's Libyan Arab Jamahiriya, 593 F.Supp. 572, 575 (N.D.Ga.1984) (implicit waiver by provision saying "[t]his Agreement and the performance or breach hereof shall be governed by the procedural and substantive laws in effect in the State of Virginia."). Several circuit courts have cited in dicta the legislative history and recognized that an agreement to be governed by the laws of the U.S. or its states constitutes an implied waiver under Sec. 1605(a)(1). See, e.g., Rodriguez v. Transnave Inc., 8 F.3d 284, 287 (5th Cir.1993); Drexel Burnham Lambert Group Inc. v. Committee of Receivers for A.W. Galadari, 12 F.3d 317, 325 (2d Cir.1993); Frolova v. Union of Soviet Socialist Republics, 761 F.2d 370, 377 (7th Cir.1985). In Transamerican Steamship Corp. v. Somali Democratic Republic, 767 F.2d 998 (D.C.Cir.1985), the D.C. Circuit held that the Somali Democratic Republic ("SDR") could not claim sovereign immunity because it had carried on a commercial activity in the U.S., within the meaning of Sec. 1605(a)(2). Circuit Judge Patricia M. Wald, concurring in the judgment, wrote separately to express her view that an implicit waiver of sovereign immunity should have been found under Sec. 1605(a)(1). The Agency for International Development ("AID") had approved a $20 million famine relief program, under 7 U.S.C. Sec. 1721, to ameliorate starvation and malnutrition in Somalia. AID and the Somali government executed a Transfer Authorization Agreement to implement the program, which specifically incorporated by reference the provisions of AID Regulation 11, under which the commodities shipped must be admitted duty free and exempt from all taxes. Judge Wald thought that "SDR's contractual agreement to be bound by regulation 11 ... waives sovereign immunity in an action for damages allegedly caused by the SDR's violation of regulation 11." Id. at 1005 (Wald. J., Concurring). Citing the House Report, she explained that Congress believed that "after making ... a promise [that an agreement be governed by U.S. law], the foreign country could not equitably deny that voluntarily assumed obligations under United States law were enforceable against it." Id. at 1006.

Several reasons undergird our analysis for holding that the choice of law provision constitutes an implied waiver of Fiji's sovereign immunity: (1) identification of the forum best able to address the issues; (2) the implied intent of the parties; and (3) the pragmatic assessment of fairness made by the Congress. With respect to the best qualified forum Judge Wald observed: "The courts of this country are clearly best able to interpret and apply the laws of this country." Id. at 1006. The parties in this case agreed to look to Virginia law. The Virginia courts are the forum that can best give that guidance. A court of another country would face the task of identifying the Virginia law, and then of both construing and applying it pursuant to Virginia principles. Efforts to determine and apply foreign law often involve reference to secondary sources and to competing testimony of experts concerning the content of the law of a jurisdiction far distant and possibly differently structured.

Second, the implicit intent of the parties was that...