Millen Industries, Inc. v. Coordination Council for North American Affairs

Decision Date30 August 1988
Docket NumberNo. 87-7075,87-7075
Citation855 F.2d 879,272 U.S.App.D.C. 240
CourtU.S. Court of Appeals — District of Columbia Circuit

Appeal from the United States District Court for the District of Columbia (Civil Action No. 86-00343).

Judith Richards Hope, with whom Bruce D. Ryan, John F. Sherlock, III, and Robert L. Muse, Washington, D.C., were on the brief, for appellants.

Thomas G. Corcoran, Jr., Washington, D.C., for appellee.

John P. Schnitker, Atty., Dept. of Justice, with whom Richard K. Willard, Asst. Atty. Gen., Joseph E. diGenova, U.S. Atty., and Michael Jay Singer, Atty., Dept. of Justice, Washington, D.C., were on the brief, for amicus curiae, U.S.

Before EDWARDS *, BUCKLEY and SENTELLE, Circuit Judges.

Opinion for the Court filed by Circuit Judge SENTELLE.

SENTELLE, Circuit Judge:

This is an appeal from an order of the District Court dismissing plaintiff's complaint because it failed to state claims upon which relief can be granted and, alternatively, because its claims are barred by the act of state doctrine. Since it appears that the District Court and this Court may lack jurisdiction, we remand for further proceedings to determine the jurisdictional questions.


This action arose out of the attempt of plaintiff-appellant Millen Industries, Inc. (Millen) 1 to establish and operate a shoe box manufacturing plant in Taiwan. According to the allegations of its amended complaint, which we take as true for purposes of this appeal, Doe v. United States Dep't of Justice, 753 F.2d 1092, 1102 (D.C.Cir.1985), defendant-appellee Coordination Council for North American Affairs (CCNAA), an instrumentality of the people of Taiwan, acted as "public relations agent and broker" for Taiwan in soliciting United States citizens to establish commercial ventures in Taiwan. As agent for Taiwan, CCNAA made authorized representations to Millen and agreed with Millen that Millen could locate a shoe box manufacturing plant anywhere on Taiwan, could ship to local shoe manufacturers, could import raw materials on a duty-free basis provided the raw materials were subsequently exported as finished shoe boxes containing shoes made in Taiwan, and that plaintiff's raw material imports would receive "easy access through Taiwanese customs," provided Millen established a completely export-oriented factory to produce high-quality packaging for Taiwan's footwear export trade. CCNAA promised Millen only the benefit of existing Taiwanese law, not any special concession or benefit that was not available to similarly qualified investors.

The complaint further alleges that, in reliance on these representations and promises, Millen organized a Taiwanese corporation, leased machinery to it, obtained all necessary approvals and licenses, and, in late 1983, commenced operations in Taiwan. From the beginning, however, Taiwan obstructed Millen's importation of machinery and raw materials and soon thereafter cancelled all duty-free importation of raw materials subsequently exported as finished goods. CCNAA knew that cancellation of duty-free treatment was "under consideration" by Taiwan when CCNAA made representations about the availability of such treatment, although those statements were "true when made." As a result of Taiwan's actions, Millen's Taiwan plant operated at a loss and closed in 1985. Taiwan has refused to permit Millen to withdraw its machinery and raw materials, and CCNAA "has acquiesced in this refusal."

Millen sought relief in the District Court based on breach of contract, "detrimental reliance," misrepresentation, and conversion. 2 The District Court dismissed the contract claim because the claim alleged promises relating directly to "uniquely sovereign" import-export activity and, therefore, was barred by the act of state doctrine. The District Court held, alternatively, that the complaint alleged no promises at all and, therefore, alleged no contract. The District Court based this conclusion on Paragraph 36 of Millen's First Amended Complaint, which reads: "All promises made to Plaintiffs by Defendant were promises that they would enjoy the benefits of existing law. Plaintiffs were promised no special concessions or benefits not available to other qualified prospective investors." The District Court dismissed the claim for detrimental reliance, which the District Court rechristened "promissory estoppel," on the same act of state grounds as it had dismissed the contract claim and dismissed the misrepresentation and conversion claims alternatively on act of state grounds and for failure to state a claim. This appeal followed.


The United States entered this case as amicus curiae at the appellate stage pursuant to 28 U.S.C. Sec. 517 (1982), which authorizes the Attorney General to "attend to the interests of the United States in a suit pending in a court of the United States." In the present litigation, this interest is triggered by the lower court's application of "act of state" doctrine and its failure to invoke the jurisdictional provisions of the Foreign Sovereign Immunities Act, 28 U.S.C. Secs. 1330, 1602-1611 (1982) (FSIA or Act). While we have previously recognized that a principal purpose of the FSIA was to settle responsibility in the courts rather than the Executive for determining the jurisdiction of United States courts over foreign sovereigns, the foreign policy implications of the application of that Act obviously occasion a continuing involvement by the Executive. See Practical Concepts, Inc. v. Republic of Bolivia, 811 F.2d 1543, 1552 n. 21 (D.C.Cir.1987) (citing Letter from the Legal Adviser of the State Department to the Attorney General (Nov. 10, 1976), 75 Dep't St.Bull. 649-50 (1976)). For the same reason, the courts recognize the value of obtaining views of the Executive Branch in matters relating to the application of the act of state doctrine and giving appropriate weight to those views. First National City Bank v. Banco Nacional de Cuba, 406 U.S. 759, 765-70, 92 S.Ct. 1808, 1812-14, 32 L.Ed.2d 466 (1972) (plurality). While we will further discuss the FSIA in Section III, infra, an initial understanding of the District Court's use of the act of state doctrine and its implications is necessary to the development of this opinion, as the amicus United States has suggested.

Although the United States does not "take a formal position ... at this time," Brief for the United States as Amicus Curiae at 22, on whether the act of state doctrine applies to the present case, its counsel has "been informed by the Department of State, however, that--putting to one side whatever generalized considerations of international comity and separation of powers may underlie the act of state doctrine where it is found applicable--there are no foreign policy interests of the United States in our present relations in the Far East that should bar adjudication of the present suit." Id. at n. 22. The act of state doctrine is grounded in concerns that "application of customary principles of law to judge the acts of a foreign sovereign might frustrate the conduct of foreign relations by the political branches of the government." First National City Bank, 406 U.S. at 767-68, 92 S.Ct. at 1813-14. That doctrine mandates that "generally the courts of one nation will not sit in judgment on the acts of another nation within its own territory...." Id. at 761, 92 S.Ct. at 1810. The doctrine applies with reference to Taiwan even though the United States does not recognize that government. In the Taiwan Relations Act (TRA), Congress specified that "[w]henever the laws of the United States refer or relate to foreign countries, nations, states, governments, or similar entities, such terms shall include and such laws shall apply with respect to Taiwan." 22 U.S.C. Sec. 3303(b)(1) (1982). It appears to us that, given the plainly expressed intent of Congress in the TRA and the strong similarity between this doctrine and the FSIA, there can be no question that the act of state doctrine applies to Taiwan as fully as if Taiwan were recognized by this country. 3

The District Court, rightly noting that the claims asserted by plaintiff relate primarily to acts done in Taiwan by the Taiwanese government, dismissed a portion of the claims pursuant to that doctrine. However, a further development of the jurisdictional facts may establish that neither the District Court nor this Court have jurisdiction under the FSIA to pass on Millen's claims at all. Obviously if after the limited fact finding necessary to determine the jurisdictional facts it appears that there is no subject matter jurisdiction, then neither the act of state question nor any questions relating to the adequacy of the claims need be reached.

Even if jurisdiction is found, our holding may require a recasting of the complaint, which may affect the analysis under the act of state doctrine. It may further appear either at summary judgment or trial stage that the facts alluded to by the amicus curiae may bring this case, if jurisdiction exists at all, within an exception to the act of state doctrine arising from Bernstein v. N.V. Nederlandsche--Amerikaansche Stoomvaart--Maatschappij, 210 F.2d 375 (2d Cir.1954) (per curiam). That exception, as applied by the courts of the Second Circuit, counsels that "as a matter of principle where the Executive publicly advises the Court that the act of state doctrine need not be applied, the Court should proceed to examine the legal issues raised by the act of a foreign sovereign within its own territory as it would any other legal question before it." First National City Bank, 406 U.S. at 764, 92 S.Ct. at 1811. The Bernstein exception was adopted by a plurality but not a majority of the Supreme Court in First National City Bank v. Banco Nacional de Cuba. 4 The necessity for...

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