Peterson v. Royal Kingdom of Saudi Arabia

Decision Date29 July 2005
Docket NumberNo. 04-7159.,04-7159.
Citation416 F.3d 83
PartiesJohn W. PETERSON, On behalf of himself and others similarly situated, Appellant v. The ROYAL KINGDOM OF SAUDI ARABIA and General Organization of Social Insurance, an Instrumentality of the Kingdom of Saudi Arabia, Appellees.
CourtU.S. Court of Appeals — District of Columbia Circuit

Appeal from the United States District Court for the District of Columbia (No. 03cv01771).

Stephen A. Saltzburg argued the cause for the appellant. Eric L. Siegel was on brief.

B. Thomas Peele, III argued the cause for the appellees. John F. Hundley entered an appearance.

Before: EDWARDS, HENDERSON and TATEL, Circuit Judges.

Opinion for the court filed by Circuit Judge HENDERSON.

KAREN LECRAFT HENDERSON, Circuit Judge.

John Peterson sued the Royal Kingdom of Saudi Arabia and one of its agencies, the General Organization of Social Insurance (collectively, Saudi Arabia), seeking to recover mandatory contributions his employers made to a retirement program. Finding no exception in the Foreign Sovereign Immunities Act (FSIA or Act), 28 U.S.C. §§ 1602 et seq., applicable to Peterson's claims, the district court dismissed his law suit for lack of jurisdiction. See Peterson v. Royal Kingdom of Saudi Arabia, 332 F.Supp.2d 189 (D.D.C.2004), reprinted in Joint Appendix (J.A.) at 342-58. He now appeals, arguing that Saudi Arabia is not entitled to sovereign immunity because the FSIA's "expropriation" and "commercial activity" exceptions apply to the claims he presses. Neither exception applies, we conclude, and thus there is no basis for federal court jurisdiction over Saudi Arabia for the purpose of Peterson's suit. We therefore affirm the district court's judgment.

I.

We accept as true the facts Peterson alleges in his complaint and briefly recount them now.1 In November 1969, Saudi Arabia established the General Organization of Social Insurance (GOSI) by Royal Decree "to promote foreign commerce and attract badly needed foreign workers to Saudi Arabia." J.A. 3-4. GOSI has two distinct branches: the Occupational Hazards Branch, which provides insurance coverage for employment-related injuries, and the Annuities Branch, which provides retirement and death benefits.

From 1969 until 1987, Saudi Arabia required employers and their employees, regardless of national origin or citizenship, to make contributions to GOSI. Employers were required to contribute two per cent of their employees' salaries to the Occupational Hazards Branch. Each employer and each employee were responsible for contributing "thirteen . . . percent of the total value of the employee's wages and other benefits" to the Annuities Branch, the employer contributing eight-per cent and the employee the remaining five per cent. J.A. 6. "All contributions," however, "were made for the benefit of, and in the name of, the employee." J.A. 6. GOSI invested the contributions it received in domestic corporations and organizations as well as international banks.

In 1987 Saudi Arabia issued Royal Decree No. M/43, "which excluded non-Saudi workers from GOSI's Annuit[ies] Branch." J.A. 6. The upshot of the Royal Decree was that non-Saudi workers were no longer eligible for retirement and death benefits. At some point between 1987 and 1990, however, Saudi Arabia decided to refund to non-Saudi workers a portion of the contributions made to the Annuities Branch in their names. Peterson, who had worked for multiple engineering and construction companies in Saudi Arabia from 1979 to 1990 and made contributions to GOSI, applied for and eventually received in 1988 a refund of the five per cent contribution he made to the Annuities Branch. Along with his refund check, Peterson received the following notice: "Attached is a check for the value of your entitlements, due to you as per the applicable rules for this purpose. This payment represents your full dues from GOSI." J.A. 22.

Peterson alleges that Saudi Arabia failed to publicize the refund program, failed to explain its decision to refund only five per cent of the contributions made in his name and failed to "state when the remaining eight percent would be paid." J.A. 9. Throughout June 2003, Peterson contacted the Saudi Arabian Embassy in Washington, D.C., by telephone, by mail and by facsimile to ask for a date certain by which he would receive the remaining eight-per cent contribution his employers made in his name. Peterson notified the embassy that he would give Saudi Arabia until June 23, 2003 to answer his inquiry and that he would deem its failure to respond a constructive denial of his request. He received no answer.

Peterson then sued Saudi Arabia in the district court on August 21, 2003. His complaint alleges four claims based on Saudi Arabia's failure to refund the full amount paid into the GOSI Annuities Branch in his behalf: (1) arbitrary and discriminatory expropriation of his property in violation of international law; (2) breach of contract; (3) conversion of his property; and (4) unjust enrichment. Saudi Arabia subsequently filed a motion to dismiss, which the district court granted on August 23, 2004. See Peterson, 332 F.Supp.2d at 202.

The district court concluded that it lacked jurisdiction to entertain Peterson's suit under FSIA because his claims failed to meet the Act's "expropriation" or "commercial activity" exceptions. See id. at 196-201. With respect to the "expropriation" exception, the district court concluded that "the eight percent GOSI contribution, characterized by the plaintiff as an expectation interest in payments, does not qualify as a right in tangible property and the expropriation exception does not apply here for that reason." Id. at 197. "The fact that the property in question is not `tangible' property is," it explained, "dispositive of the question whether the expropriation exception of the FSIA can apply to defendants." Id. at 198. Turning to FSIA's "commercial activity" exception, the district court found it inapplicable as well because "[t]he termination of GOSI benefits for foreign workers is a sovereign, not a commercial, act and the termination cannot be understood to have had a `direct effect' in the United States." Id. at 201 (quoting 28 U.S.C. § 1605(a)(2)). The termination was "distinctly sovereign," to the court's mind, because "a private player in the market certainly could not engage in the particular actions of initiating, administering, and ending a scheme of mandatory social insurance." Id. at 200 (internal quotation marks omitted). And there was no "direct" effect in the United States, the court explained, because "[b]ased on the record before the Court, it appears that, to the extent Peterson expected a refund of his GOSI contributions in a particular place, it can at most be described as an implied agreement for payment in the United States." Id. at 201. In the alternative, the district court further concluded that Peterson's claims were "barred under any applicable statute of limitations." Id.

He now appeals. See 28 U.S.C. § 1291. On de novo review, we affirm the judgment of the district court, see Princz v. Fed. Republic of Germany, 26 F.3d 1166, 1168 (D.C.Cir.1994) (foreign government's entitlement to sovereign immunity is question of law subject to de novo review), cert. denied, 513 U.S. 1121, 115 S.Ct. 923, 130 L.Ed.2d 803 (1995), as set forth below.

II.

In the United States, there is only one way for a court to obtain jurisdiction over a foreign state and it is not a particularly generous one—the FSIA. See Argentine Republic v. Amerada Hess Shipping Corp., 488 U.S. 428, 443, 109 S.Ct. 683, 102 L.Ed.2d 818 (1989) ("[T]he FSIA provides the sole basis for obtaining jurisdiction over a foreign state in the courts of this country . . . ."); accord World Wide Minerals, Ltd. v. Republic of Kazakhstan, 296 F.3d 1154, 1161 (D.C.Cir.2002). FSIA provides that a district court has jurisdiction over a civil action against a foreign sovereign for any claim "with respect to which the foreign state is not entitled to immunity." 28 U.S.C. § 1330(a); see World Wide Minerals, Ltd., 296 F.3d at 1161. But under the Act, a foreign state is immune from the jurisdiction of federal and state courts alike, see 28 U.S.C. § 1330(a); id. § 1604, and remains so unless an international agreement, see id. §§ 1330(a), 1604, or one of several exceptions in the statute provides otherwise, see id. §§ 1605, 1607. See Phoenix Consulting, Inc. v. Republic of Angola, 216 F.3d 36, 39 (D.C.Cir.2000). In the absence of an applicable exception, the foreign sovereign's immunity is "complete""[t]he district court lacks subject matter jurisdiction over the plaintiff's case." Id. (citation omitted); see also Saudi Arabia v. Nelson, 507 U.S. 349, 355, 113 S.Ct. 1471, 123 L.Ed.2d 47 (1993) ("[U]nless a specified exception applies, a federal court lacks subject-matter jurisdiction over a claim against a foreign state." (citations omitted)). Peterson maintains that Saudi Arabia is not entitled to sovereign immunity under either of two FSIA exceptions—the "expropriation" exception or the "commercial activity" one. We conclude neither applies.

Peterson first maintains that Saudi Arabia is not entitled to sovereign immunity because it arbitrarily and discriminatorily expropriated his property in violation of international law. Under FSIA,

[a] foreign state shall not be immune from the jurisdiction of courts of the United States or of the States in any case. . . in which rights in property taken in violation of international law are in issue and that property or any property exchanged for such property is present in the United States in connection with a commercial activity carried on in the United States by the foreign state; or that property or any property exchanged for such property is owned or operated by an agency or instrumentality of the foreign state and that agency or instrumentality is engaged in a commercial activity in the...

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