Keller v. Central Bank of Nigeria

• Decision Date: 07 August 2001
• Docket Number: DEFENDANTS-APPELLANTS,PLAINTIFFS-APPELLEES,No. 00-3369,00-3369
• Citation: 277 F.3d 811
• Parties: (6th Cir. 2002) H. HENRY KELLER; H.K. ENTERPRISES, INC.,, v. CENTRAL BANK OF NIGERIA; PAUL OGWUMA; ALHAJI RASHEED; ALHAJI M.A. SADIQ, Argued:
• Court: U.S. Court of Appeals — Sixth Circuit

Page 811

277 F.3d 811 (6th Cir. 2002)

H. HENRY KELLER; H.K. ENTERPRISES, INC., PLAINTIFFS-APPELLEES, v. CENTRAL BANK OF NIGERIA; PAUL OGWUMA; ALHAJI RASHEED; ALHAJI M.A. SADIQ, DEFENDANTS-APPELLANTS.

No. 00-3369

UNITED STATES COURT OF APPEALS FOR THE SIXTH CIRCUIT

Argued: August 7, 2001

Decided and Filed: January 16, 2002

Appeal from the United States District Court for the Northern District of Ohio at Cleveland. No. 98-01270--Kathleen McDonald O'Malley, District Judge. [Copyrighted Material Omitted] Eric H. Zagrans (argued and briefed), Zagrans Law Firm, Elyria, OH, for Plaintiffs-Appellees.

Paul S. Lefkowitz, Climaco, Climaco, Seminatore, Lefkowitz, & Garofoli, Cleveland, OH, David H. Fromm (argued and briefed), Brown, Gavalas & Fromm, LLP, New York, NY, for Defendants-Appellants.

Before: Keith, Norris, and Batchelder, Circuit Judges.

OPINION

Alan E. Norris, Circuit Judge.

In this case, H. Henry Keller and his closely held corporation, H.K. Enterprises, Inc. (collectively, "plaintiff"), filed suit against certain Nigerian individuals and the Central Bank of Nigeria ("CBN"), alleging that plaintiff had been the victim of a financial scam. The issues before this court on appeal involve a civil claim brought under the Racketeer Influenced and Corrupt Organizations Act ("RICO"). Defendants moved for dismissal based upon the Foreign Sovereign Immunity Act ("FSIA"). The district court denied the motion, however, concluding that the allegations fell within the "commercial activity" exception to the Act. While we agree that the commercial activity exception applies, for the reasons that follow, we disagree with the district court's reasoning in its decision to deny.

I.

In the fall of 1994, plaintiff, a sales representative for a Michigan-based manufacturer of prefabricated mobile hospital and medical centers, was contacted by an individual identifying himself as Prince Arthur Ossai, who said that he was royalty and a government official in Nigeria.¹ Ossai suggested that plaintiff grant him the exclusive distribution rights for plaintiff's hospital and emergency care facilities in Nigeria. This deal would be funded, said Ossai, with $25,000,000 on deposit at the CBN as the result of a previous government contract that had been overfunded. Ossai and plaintiff entered into an agreement, and Ossai, stating that he was acting as an agent for the Nigerian government, placed an order for five of plaintiff's mobile medical units. According to the district court's opinion, the following payment arrangements were agreed upon:

(1) Keller would give Ossai exclusive distribution rights to sell in Nigeria mobile hospital and medical equipment supplied by Keller; (2) Ossai would then sell to Nigeria $4.1 million worth of Keller's mobile hospital and medical equipment for a purchase price of $6.63 million; (3) Nigeria would pay to Keller the $6.63 million for the equipment, plus a $7.65 million "licensing fee;" (4) Ossai would receive from the government a $9.945 million commission; and (5) the $1.275 million remaining from the $25.5 million would be used for attorney's fees, wire charges, and so on. Ossai explained that, to make the deal work, the entire $25.5 million would have to be transferred into an escrow account set up by Keller himself, and disbursements made from there.

Keller v. Central Bank of Nigeria, No. 1:98-CV-1270, at 4 (N.D. Ohio Feb. 28, 2000).

The funds, however, were not transferred to plaintiff's account, and defendants Paul Ogwuma, Alhaji M.R. Rasheed, and Alhaji M.A. Sadiq, professing to act for the CBN, told plaintiff that he had to pay certain fees, wire charges, and assessments before the funds would be transferred. Plaintiff eventually paid a total of $28,950 in fees and charges. He also agreed to go to London to pick up the funds. No representative of the CBN showed up in London.

Plaintiff then realized that he was the victim of a scam. Plaintiff filed an action against the CBN, its former governor Ogwuma, six of its employees (Rasheed, Sadiq, David Hastrup, Charles Ime, Oba Adeleja, and M. Umar Bui), Prince Arthur Ossai, Ahmed Adaraniji, and two U.S. banks, Citibank NA and American Express Bank Ltd.² He asserted civil claims for violations of RICO, 18 U.S.C. §§ 1961 et seq., common law fraud, intentional misrepresentation, and negligent misrepresentation; against Ossai, he also asserted claims of breach of contract and quantum merit. He alleged that defendants defrauded him of approximately $40,000.

The district court entered a default judgment against Hastrup, Ime, Adeleja, and Bui. The CBN, Ogwuma, Rasheed, and Sadiq (collectively, "defendants") moved to dismiss the claims against them. The district court granted the motion in part, dismissing the fraud and misrepresentation claims because it concluded that plaintiff, by entering into a scheme "that was certainly questionable, and most probably illegal," had "unclean hands" and was barred from asserting these claims in equity. Keller, No. 1:98-CV-1270, at 16. The court concluded, however, that defendants were not immune under the FSIA because the deal fell within the "commercial activity" exception to the Act. The court therefore allowed the civil RICO claims to go forward against the four moving defendants, who now appeal the denial of foreign sovereign immunity on the civil RICO claims.

II.

Ordinarily, the "denial of a motion to dismiss, even when the motion is based on jurisdictional grounds, is not immediately reviewable." Catlin v. United States, 324 U.S. 229, 236 (1945). However, since sovereign immunity is an immunity from trial, not just a defense to liability on the merits, the denial of a claim of sovereign immunity is immediately appealable under the collateral order doctrine as a final decision, pursuant to 28 U.S.C. § 1291. See Gould, Inc. v. Pechiney Ugine Kuhlmann, 853 F.2d 445, 450 (6th Cir. 1988). Where there has been a factual challenge to subject matter jurisdiction, as in this case, we review a district court's legal conclusions de novo and its factual findings for clear error. RMI Titanium Co. v. Westinghouse Elec. Corp., 78 F.3d 1125, 1135 (6th Cir. 1996). The party claiming FSIA immunity bears the initial burden of proof of establishing a prima facie case that it satisfies the FSIA's definition of a foreign state; once this prima facie case is established, the burden of production shifts to the non-movant to show that an exception applies. Gould, 853 F.2d at 451-52. Nevertheless, the party claiming FSIA immunity retains the ultimate burden of persuasion throughout. Id. at 452 & n.5.

A. Commercial Activity Exception to Foreign Sovereign Immunity Act

The parties dispute the applicability of immunity under the FSIA. The statute provides, in relevant part:

Subject to existing international agreements to which the United States is a party at the time of enactment of this Act a foreign state shall be immune from the jurisdiction of the courts of the United States and of the States except as provided in sections 1605 to 1607 of this chapter.

28 U.S.C. § 1604. A "foreign state" includes "an agency or instrumentality of a foreign state," 28 U.S.C. § 1603(a), and normally foreign sovereign immunity extends to individuals acting in their official capacities as officers of corporations considered foreign sovereigns. See, e.g., El-Fadl v. Central Bank of Jordan, 75 F.3d 668, 671 (D.C. Cir. 1996) (individual sued for actions on behalf of government bank was immune from suit under FSIA). Individuals who act outside the scope of their authority are not entitled to immunity. See Chuidian v. Philippine Nat'l Bank, 912 F.2d 1095, 1106-07 (9th Cir. 1990) (explaining that "[s]overeign immunity . . . will not shield an official who acts beyond the scope of his authority," but defendant was authorized to perform the types of acts alleged, even if he did so for improper motives). Plaintiff does not contest the district court holding that defendants fall within the FSIA's definition of a foreign sovereign or instrumentality. We construe the plaintiff's silence on the authority question as a concession that, for purposes of the motion to dismiss, the individual defendants enjoyed the authority of the sovereign in the actions alleged here. The moving defendants are therefore to be deemed agents of the sovereign entitled to foreign sovereign immunity unless a statutory exception applies.

Defendants claim the district court erred when it found that the commercial activity exception applies. The commercial activity exception provides that a foreign state will not be immune in a 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[.]

28 U.S.C. § 1605(a)(2). Plaintiff proceeds under the third clause (alleging acts outside the United States). Defendants respond that they were not involved in commercial activity, and there was no direct effect in the United States.

1. Commercial Activity

Defendants advance two arguments against the commercial nature of their acts. First, they claim that the illegality of the deal alleged precludes a finding that it is commercial activity. The FSIA defines "commercial activity" as "either a regular course of commercial conduct or a particular commercial transaction or act. The commercial character of an activity shall be determined by reference to the nature of the course of conduct or particular transaction or act, rather than by reference to its purpose." 28 U.S.C. § 1603(d). The Supreme Court has elaborated on the definition of "commercial": "when a foreign government acts, not as regulator of a market, but in the manner of a private...