El-Hadad v. United Arab Emirates

• Decision Date: 27 July 2007
• Docket Number: No. 06-7075.,06-7075.
• Citation: 496 F.3d 658
• Parties: Mohamed Salem EL-HADAD, Appellee v. UNITED ARAB EMIRATES and The Embassy of the United Arab Emirates, Appellants.
• Court: U.S. Court of Appeals — District of Columbia Circuit

496 F.3d 658

Mohamed Salem EL-HADAD, Appellee v. UNITED ARAB EMIRATES and The Embassy of the United Arab Emirates, Appellants.

No. 06-7075.

United States Court of Appeals, District of Columbia Circuit.

Argued March 13, 2007.

Decided July 27, 2007.

Appeal from the United States District Court for the District of Columbia (No. 96cv01943).

Mary M. Baker argued the cause for appellants. With her on the briefs was Haig V. Kalbian.

Philip M. Musolino argued the cause for appellee. With him on the brief were Sylvia J. Rolinski and Danielle M. Espinet.

Before: TATEL, GARLAND and BROWN, Circuit Judges.

Opinion for the Court filed by Circuit Judge BROWN.

BROWN, Circuit Judge:

The chief question in this appeal is whether the Foreign Sovereign Immunities Act of 1976, 28 U.S.C. § 1602 et seq., shields the United Arab Emirates from the wrongful termination and defamation suit of its former employee, Mohamed Salem El-Hadad, once an accountant in the U.A.E.'s embassy here in Washington, D.C. The case turns on an application of the Act's commercial activity exception. Id. § 1605(a)(2). Since we conclude El-Hadad was not a civil servant under the Act, and his work did not involve the exercise of distinctively governmental powers, we affirm the district court in applying the commercial activity exception and denying immunity. A relatively minor issue—the district court's failure to discount El-Hadad's future lost earnings to present value—compels us to reverse in part and remand the case solely for correction of that aspect of the damages award.

I

The facts below summarize the district court's detailed findings after a bench trial, which we set aside only if clearly erroneous. See El-Hadad v. Embassy of U.A.E., No. 96-1943, 2006 WL 826098 (D.D.C. Mar.29, 2006); FED.R.CIV.P. 52(a).

El-Hadad is an Egyptian citizen who earned a bachelor's degree in accounting in 1976 and began a career marked for many years by one promotion and positive job review after another. From 1982 to 1992, he worked as an auditor for the government of the United Arab Emirates in Abu Dhabi (not an unusual arrangement for the U.A.E., whose population between the ages of 15 and 64 numbers about 75% non-nationals, El-Hadad v. U.A.E., 216 F.3d 29, 33 & n. 6 (D.C.Cir.2000)). In 1992, he formally resigned to begin work at the U.A.E.'s embassy in Washington, where he was an auditor and supervising accountant in the cultural attaché's office—and where he soon discovered that the cultural attaché, his deputy, and others were involved in embezzling no less than $2 million in U.A.E. state funds. El-Hadad exposed the embezzlement and helped with the subsequent investigation. In 1994, he was promoted and commended for his work while the cultural attaché and his accomplices were sacked.

About a year and a half later, in 1995, El-Hadad was accused of financial impropriety in connection with the very embezzlement he had exposed. Why he was accused—for the record and the district court's opinion make clear that the accusation was baseless to the core—is a mystery, though a letter the U.A.E.'s Minister of Finance wrote on El-Hadad's behalf gives a clue: "The existing disputes between the Cultural Attaché in Washington and the ... Ministry of Higher Education and Scientific Research have directly impacted the case of Mr. Mohammed El-Hadad ...." El-Hadad, 2006 WL 826098, at *4 (quoting Pl.'s Ex. 85). In fact, the U.A.E.'s Ambassador to the United States, the Minister of Finance, and the new cultural attaché each sent multiple letters vouching for El-Hadad's character and competence and refuting the allegations against him point-by-point—views the district court seconded in its factual findings, concluding that the documents in the record "demonstrate either that the alleged impropriety was not, in fact, improper or that if there was any fault, it lay elsewhere, such as with the embezzlers El-Hadad had detected and reported." Id. Nonetheless, the department named in the Minister of Finance's letter, the Ministry of Higher Education and Scientific Research, had final authority over El-Hadad's employment in the cultural attaché's office and, in 1996, ordered penal dismissal along with fines for the money El-Hadad allegedly mishandled.

After he was fired, El-Hadad briefly found work as an auditor with the U.A.E.'s military attaché, but the Ministry of Higher Education and Scientific Research viewed the job as a "circumvention of the penal termination imposed," id. at *5, and, in late summer 1996, had him fired again. At about the same time, a representative of the Ministry held a meeting about El-Hadad's dismissal with the fifteen or so employees of the cultural attaché's office, announcing that El-Hadad was fired for not doing his job properly or honestly. And since then, in application after application both here and in Egypt (where he returned in 1997), El-Hadad has been rejected from every accounting job for which he has applied, always after inquiries about the circumstances in which his prior employment ended. His efforts over the last decade to find work in other fields and to start his own business have failed as well.

El-Hadad sued the U.A.E. and its Washington embassy for breach of his employment contract and defamation in August 1996, just after being fired from his job with the military attaché. Claiming immunity from suit under the Foreign Sovereign Immunities Act, the U.A.E. moved to dismiss. The district court, applying the Act's "commercial activity" exception, denied the motion. El-Hadad v. Embassy of U.A.E., 69 F.Supp.2d 69 (D.D.C.1999) (El-Hadad I). On interlocutory appeal (under the collateral order doctrine), we reversed in part and remanded with a list of questions for the district court to answer before characterizing the employment relationship between El-Hadad and the U.A.E. as commercial. El-Hadad v. U.A.E., 216 F.3d 29 (D.C.Cir. 2000) (El-Hadad II). Applying the analytic framework we had laid out, the district court once again held the commercial activity exception to apply. El-Hadad v. Embassy of U.A.E., No. 96-1943 (D.D.C. July 16, 2001) (El-Hadad III). The parties agreed to a bench trial, after which the district court reaffirmed its decision to deny immunity and concluded on the merits that the U.A.E. breached its employment contract with El-Hadad ($1,245,961 in damages, plus interest) and defamed him ($500,000 in damages). El-Hadad v. Embassy of U.A.E., No. 96-1943, 2006 WL 826098 (D.D.C. Mar.29, 2006) (El-Hadad IV). The U.A.E. now appeals.

II

The chief issue before us is the U.A.E.'s claim to immunity under the Foreign Sovereign Immunities Act. Before passage of the 1976 Act, American courts had generally regarded foreign sovereigns as absolutely immune from suit (with exceptions where the political branches made case-specific recommendations to suspend immunity). Verlinden B.V. v. Cent. Bank of Nig., 461 U.S. 480, 486-88, 103 S.Ct. 1962, 76 L.Ed.2d 81 (1983) (discussing the legacy of Chief Justice Marshall's opinion in The Schooner Exchange v. M'Faddon, 11 U.S. (7 Cranch) 116, 3 L.Ed. 287 (1812)). But almost from the outset, courts recognized a distinction "between the public and governmental acts of sovereign states on the one hand and their private and commercial acts on the other." Alfred Dunhill of London, Inc. v. Republic of Cuba, 425 U.S. 682, 695, 96 S.Ct. 1854, 48 L.Ed.2d 301 (1976); see also United States v. Planters' Bank of Ga., 22 U.S. (9 Wheat) 904, 907, 6 L.Ed. 244 (1824) (Marshall, C.J.) ("[W]hen a government becomes a partner in any trading company, it devests itself, so far as concerns the transactions of that company, of its sovereign character, and takes that of a private citizen."). That distinction became the basis for a "`restrictive' theory of foreign sovereign immunity," a theory Congress codified in the Foreign Sovereign Immunities Act of 1976. Verlinden B.V., 461 U.S. at 487, 103 S.Ct. 1962. So while the Act announces that foreign states "shall be immune from the jurisdiction of the courts of the United States and of the States," 28 U.S.C. § 1604, the Act's principal effect is in the list of exceptions that follows, and the "most significant" exception, Republic of Argentina v. Weltover, Inc., 504 U.S. 607, 611, 112 S.Ct. 2160, 119 L.Ed.2d 394 (1992), the one at the heart of the restrictive theory as a whole and at issue in this appeal, is the commercial activity exception of § 1605(a)(2): "A foreign state shall not be immune ... in any case ... in which the action is based upon a commercial activity carried on in the United States by the foreign state. . . ." A state engages in commercial activity, the Supreme Court has explained (since the Act never defines the term), "where it exercises `only those powers that can also be exercised by private citizens,' as distinct from those `powers peculiar to sovereigns,'" Saudi Arabia v. Nelson, 507 U.S. 349, 360, 113 S.Ct. 1471, 123 L.Ed.2d 47 (1993) (quoting Republic of Argentina, 504 U.S. at 614, 112 S.Ct. 2160) (internal quotation marks omitted).

Since El-Hadad's action is "based upon" breach of his employment contract and defamation in connection with that breach, this case involves the commercial activity exception as applied in the employment context. See Saudi Arabia, 507 U.S. at 357, 113 S.Ct. 1471 (holding that the term "based upon" in the Act indicates "those elements of a claim that, if proven, would entitle a plaintiff to relief under his theory of the case").¹ The Act doesn't speak directly to this context, but its legislative history does: "[P]ublic or governmental and not commercial in nature, would be the employment of diplomatic, civil service, or military personnel," while commercial and not public or governmental in nature would be the "employment or engagement of laborers, clerical staff, or public relations or marketing agents." H.R. REP. No. 94-1487, at 16 (1976), as reprinted in 1976 U.S.C.C.A.N 6604, 6615; see also S. REP. No. 94-1310...