I.T. Consultants, Inc. v. Republic of Pakistan

• Decision Date: 16 December 2003
• Docket Number: No. 03-7016.,03-7016.
• Citation: 351 F.3d 1184
• Parties: I.T. CONSULTANTS, INC., Appellee, v. THE ISLAMIC REPUBLIC OF PAKISTAN and Khair Mohamed Junejo, Minister of Agriculture, Appellants.
• Court: U.S. Court of Appeals — District of Columbia Circuit

351 F.3d 1184

I.T. CONSULTANTS, INC., Appellee, v. THE ISLAMIC REPUBLIC OF PAKISTAN and Khair Mohamed Junejo, Minister of Agriculture, Appellants.

No. 03-7016.

United States Court of Appeals, District of Columbia Circuit.

Argued November 7, 2003.

Decided December 16, 2003.

COPYRIGHT MATERIAL OMITTED

Appeal from the United States District Court for the District of Columbia (No. 01cv00241).

Nicholas H. Cobbs argued the cause and filed the briefs for appellants.

Bruno A. Ristau argued the cause and filed the brief for appellee.

Before: RANDOLPH and ROBERTS, Circuit Judges, and WILLIAMS, Senior Circuit Judge.

Opinion for the Court filed by Circuit Judge ROBERTS.

ROBERTS, Circuit Judge:

The Foreign Sovereign Immunities Act (FSIA) renders foreign states immune from the jurisdiction of the federal courts in many circumstances, but includes an exception for suits based on the foreign state's commercial activity, if that activity "causes a direct effect in the United States." 28 U.S.C. §§ 1604, 1605(a)(2). We hold in this case, in reliance on Republic of Argentina v. Weltover, Inc., 504 U.S. 607, 112 S.Ct. 2160, 119 L.Ed.2d 394 (1992), that a foreign sovereign's failure to make a contractually required deposit in a bank in the United States meets the statute's definition of a "direct effect," without regard to whether the parties considered the place of payment "important," "critical," or "integral." We therefore affirm the district court's conclusion that such a failure can provide the basis for subject matter jurisdiction over the Republic of Pakistan. We also affirm the court's ruling that it can assert personal jurisdiction over Pakistan, but conclude that the court improperly asserted personal jurisdiction over the Pakistani government official involved in the transaction, who was sued in his personal capacity.

I.

At the base of this dispute is an October 1995 contract between appellee I.T. Consultants, Inc. (ITC) and appellant the Republic of Pakistan. ITC was to receive $10 million for manufacturing and installing geo-synthetic linings for a number of irrigation canals and watercourses in Pakistan. ITC began its work, but Pakistan terminated the contract in 1997, citing a shortage of funds. In September 1998, the parties agreed to rescind the contract; under their agreement, Pakistan was to pay ITC approximately eleven percent of the total contract price. No payment was ever made, however, and ITC sued Pakistan in the District Court for the District of Columbia in March 2000.

While that suit was pending, the parties held another round of settlement negotiations the Economic Coordination Committee (ECC) of the Government of Pakistan appointed an ad hoc committee to negotiate with ITC. Those negotiations yielded a Memorandum of Understanding (MOU) between ITC and Pakistan's Ministry of Food, Agriculture, and Labor (MINFAL), signed on June 3, 2000. The MOU, contingent on ECC approval, provided that Pakistan would pay ITC compensation (in a mixture of U.S. and Pakistani currency: $1,143,965 and 10,535,000 rupees) to extinguish all of ITC's claims under the contract and secure the dismissal of the pending lawsuit. Memorandum of Understanding Between I.T. Consultants and MINFAL (JA 16A). The MOU was silent on the place of payment, but in a letter three weeks later, ITC requested that the dollar-denominated portion of the settlement (some eighty-seven percent of the total value) be sent to an account at Riggs Bank in Alexandria, Virginia, and the rupees to an account at a bank in Rawalpindi, Pakistan. Letter from Farrakh A. Shah, President, ITC, to Dr. Zafar Altaf, Secretary, MINFAL (June 24, 2000), at 2 (JA 19). The record contains a copy of this letter allegedly returned to ITC, bearing the signature of Dr. Zafar Altaf, the then-Secretary of MINFAL, and a handwritten notation — the word "Okay" — in the margin next to the Riggs Bank information. Id.

The ECC approved the MOU on September 4, 2000, but on October 26, 2000, there was a leadership change at MINFAL and Khair Mohamed Junejo became Secretary. Junejo ordered the payment to ITC stopped, explaining later that "[t]he payment was temporarily stopped with a view to referring the case back to [the] ECC for reconsideration with full facts." Def. Answers to First Set of Interrogs. at 2 (JA 110). At around the same time — the exact order of these events is unclear — Junejo learned of a development in ITC's suit in Washington: the district court had dismissed the suit without prejudice on September 28, 2000, citing improper service of process on Pakistan. See I.T. Consultants, Inc. v. Islamic Republic of Pakistan, No. 00-0503 (D.D.C. Sept. 28, 2000). Junejo concluded that Pakistan had "won" the lawsuit, but admitted that at the time he did not understand the meaning of the phrase "without prejudice." On February 20, 2001, the ECC ratified the hold on the payment to ITC and instructed MINFAL to examine certain legal issues (including governing law, court jurisdiction, and arbitration) in relation to the original contract with ITC. Decision of the ECC, Case No. ECC-22/02/2001 (Feb. 20, 2001) (JA 133).

ITC filed the present action in the District Court for the District of Columbia on January 31, 2001, naming Pakistan and Junejo "in his personal capacity" as defendants. The claim against Pakistan was for breach of the MOU; that against Junejo was for tortious interference with the MOU. Pakistan and Junejo moved to dismiss on grounds of, inter alia, lack of subject matter jurisdiction and lack of personal jurisdiction. The district court denied the motion in an order on January 3, 2003, and subsequently issued an opinion. See I.T. Consultants, Inc. v. Islamic Republic of Pakistan, No. 01-0241 (D.D.C. Feb. 12, 2003) (I.T. Consultants II). The court first considered subject matter jurisdiction, concluding that "if [ITC] can prove that payment was to be made at [ITC's] bank in Virginia in U.S. currency and that Pakistan breached that obligation, these facts establish a direct effect" and confer subject matter jurisdiction under Section 1605(a)(2) of the FSIA. Id., op. at 6 (JA 160). Turning to personal jurisdiction, the court determined that personal jurisdiction over Pakistan was proper under 28 U.S.C § 1330(b), which provides that "[p]ersonal jurisdiction over a foreign state shall exist as to every claim for relief over which the district courts have [subject matter] jurisdiction" under the FSIA, so long as service of process is proper. The court also found that it had personal jurisdiction over Junejo: because he was alleged to have caused the breach of Pakistan's obligation to transfer U.S. dollars to the Riggs Bank in Virginia, the court reasoned, he should reasonably have expected to be haled into court here. I.T. Consultants II, op. at 12 (JA 166) (citing Calder v. Jones, 465 U.S. 783, 790, 104 S.Ct. 1482, 1487-88, 79 L.Ed.2d 804 (1984)).¹ This interlocutory appeal followed.

II.

In ruling on the motion to dismiss on grounds of subject matter and personal jurisdiction, the district court accepted the allegations of the complaint as true. I.T. Consultants II, op. at 4 (JA 158). Pakistan and Junejo of course dispute these allegations — including allegations arguably pertinent to the question of sovereign immunity — and could have pressed the district court to resolve any relevant factual disputes before ruling on sovereign immunity. See Phoenix Consulting, Inc. v. Republic of Angola, 216 F.3d 36, 40 (D.C.Cir.2000) (if defendant challenges factual basis for court's jurisdiction in FSIA case, court should "go beyond the pleadings and resolve any disputed issues of fact the resolution of which is necessary to a ruling upon the motion to dismiss"). Instead, Pakistan sought a ruling on its immunity on the basis of the allegations in the complaint. See Reply Mem. in Supp. of Def. Mot. to Dismiss, at 1 (JA 83) ("Assuming the truth of all of plaintiff's contentions, as the court must"). Under such circumstances, the district court properly proceeded to decision on the basis of those allegations. See Price v. Socialist People's Libyan Arab Jamahiriya, 294 F.3d 82, 91 (D.C.Cir.2002).

Although the district court's interlocutory ruling declining to dismiss on grounds of Pakistan's sovereign immunity is thus not a conclusive determination of the immunity question, but instead subject to change in light of further development of the facts, we nonetheless have appellate jurisdiction to review it. See id. ("[A]n FSIA defendant can take an immediate appeal if the District Court rejects its argument that the facts alleged in the plaintiff's complaint do not bring the case within one of the statute's immunity exceptions."); see also Behrens v. Pelletier, 516 U.S. 299, 307, 116 S.Ct. 834, 839, 133 L.Ed.2d 773 (1996) ("[A]n order rejecting the defense of qualified immunity at either the dismissal stage or the summary judgment stage is a `final' judgment subject to immediate appeal."). We also have jurisdiction over Junejo's appeal. See Jungquist v. Sheikh Sultan Bin Khalifa Al Nahyan, 115 F.3d 1020, 1025-27 (D.C.Cir.1997).

A. Subject Matter Jurisdiction Under the FSIA

One of the key allegations taken as true is that "[p]ursuant to the MOU, eighty seven percent (87%) of the payment (U.S. $1.144 million) was to be made in United States currency by [Pakistan] into [ITC's] account at the Riggs Bank in Alexandria Virginia." Compl. ¶ 6 (JA 9). In particular, "[t]he modality of payment was proposed by [ITC] in a letter dated June 24, 2000, to the Chairman of the negotiating committee who received the letter and approved the method of payment." Id. Pakistan believes that even when these facts are assumed, Pakistan's failure to make the payment does not constitute a direct effect that would support jurisdiction under the FSIA. The question thus becomes whether this case is distinguishable from Weltover, the Supreme Court's leading case on the FSIA's direct effect requirement....