Wye Oak Tech., Inc. v. Republic of Iraq

• Decision Date: 29 December 2011
• Docket Number: No. 10–1874.,10–1874.
• Citation: 666 F.3d 205
• Parties: WYE OAK TECHNOLOGY, INCORPORATED, Plaintiff–Appellee, v. REPUBLIC OF IRAQ, Defendant–Appellant.
• Court: U.S. Court of Appeals — Fourth Circuit

666 F.3d 205

WYE OAK TECHNOLOGY, INCORPORATED, Plaintiff–Appellee,

v.REPUBLIC OF IRAQ, Defendant–Appellant.

No. 10–1874.

United States Court of Appeals, Fourth Circuit.

Argued: Oct. 25, 2011.Decided: Dec. 29, 2011.

ARGUED: Craig Crandall Reilly, Alexandria, Virginia, for Appellant. Robert James Pavich, Pavich Law Group, Chicago, Illinois, for Appellee. ON BRIEF: Timothy B. Mills, Maggs & McDermott, LLC, Washington, D.C., for Appellant. John H. Quinn, Jr., Matthew M. Connell, Quinn, Racusin & Gazzola Chartered, Washington, D.C.; John J. Pavich, Pavich Law Group, Chicago, Illinois; Anthony D'Amato, Northwestern University School of Law, Chicago, Illinois, for Appellee.

Before SHEDD and DUNCAN, Circuit Judges, and WILLIAM L. OSTEEN, JR., United States District Judge for the Middle District of North Carolina, sitting by designation.

Affirmed by published opinion. Judge DUNCAN wrote the majority opinion, in which Judge OSTEEN joined. Judge SHEDD wrote a dissenting opinion.

OPINION

DUNCAN, Circuit Judge:

Under the Foreign Sovereign Immunities Act, 28 U.S.C. §§ 1602–11 (“FSIA”), a federal court has subject matter jurisdiction over a claim against a foreign state only if that claim falls within one of the FSIA's exceptions to immunity. This appeal raises the question of whether, for purposes of analyzing subject matter jurisdiction under the FSIA, a foreign state and its armed forces are separate legal persons. For the reasons that follow, we conclude that, for jurisdictional purposes, they are not. We therefore hold that appellee Wye Oak Technology, Inc.'s (“Wye Oak”) claim against the Republic of Iraq (“Iraq”) alleging breach of a contract entered into by Iraq's Ministry of Defense (“IMOD”) falls within the FSIA's commercial activities exception. We accordingly affirm the district court's denial of Iraq's motion to dismiss Wye Oak's claim for lack of subject matter jurisdiction.¹

I.

A.

This case arises out of a contract entered into by IMOD and Wye Oak for the refurbishment and disposal of Iraqi military equipment. The contract, executed on August 16, 2004, appointed Wye Oak as IMOD's broker for, inter alia, “the accounting, inventory, and assessment of discarded and/or damaged Military Equipment,” for the purposes of “indentify[ing] which Military Equipment is salvageable and suitable for Military Refurbishment Services and which Military Equipment is scrap” and “arranging ... Scrap Sales.” J.A. 22. The contract went on to call for Wye Oak, as broker, to “use all reasonable commercial efforts ... in the development of markets and sales prospects for Military equipment.” J.A. 23. IMOD agreed under the contract to provide offices in Iraq for Wye Oak to facilitate the broker activities, but Wye Oak was “responsible for its own administrative costs.” J.A. 25. As to compensation, the contract called for IMOD to pay Wye Oak a commission equal to 10 percent of any sale of equipment and a commission equal to 10 percent of any refurbishment costs. The contract required IMOD to make “full payment” of these commissions “immediately upon presentation” to it of invoices by Wye Oak. J.A. 24. The contract was signed by Dr. Bruska Noori Shaways, Secretary General of IMOD, and Dale C. Stoffel, President of Wye Oak.

On the same day the contract was executed, Shaways signed a letter addressed to Stoffel, which referenced the contract as follows:

Wye Oak ... is commissioned as the sole and exclusive agent for the recovery and sale of all Iraqi Ministry of Defense material described as scrap military equipment in the territory of Iraq. Related thereto, Wye Oak is also commissioned to inventory, assess and recover any such equipment it determines as recoverable for the use or sale on behalf of the Ministry of Defense of the Republic of Iraq.

J.A. 29.

Less than five months later, Stoffel attended a meeting in Baghdad to discuss contract performance. Three days after the meeting, while still in Iraq, he was shot and killed by unidentified assailants.

B.

On July 20, 2009, Wye Oak filed suit against Iraq, but not IMOD, in the U.S. District Court for the Eastern District of Virginia, seeking damages for breach of contract. Wye Oak alleged in its complaint that it “performed under the Contract by, among other things ... identifying and arranging for the sale of scrap military equipment.” J.A. 13. Wye Oak also alleged that, pursuant to the contract, it performed activities in the United States, including “[a]ccounting,” creating “[c]omputer programs for tracking military equipment,” “[c]ontacting agents of foreign governments who might have been interested in buying scrap,” and “[c]reating spread-sheet systems to ensure that pricing of scrap equipment ... could be compared and correlated with ... world market prices.” J.A. 14. Wye Oak further alleged that it submitted invoices to IMOD in October 2004 totaling more than $24 million but that no payment was received. Wye Oak alleged that during the December 5, 2004, meeting, “[i]t was agreed that payment [on the invoices], which had been authorized by [Iraq] in October 2004, would be made to Wye Oak directly and immediately.” J.A. 16. Finally, Wye Oak alleged that despite this agreement, no payment was made and that “[b]y not paying these invoices ... [Iraq] breached” the contract. J.A. 17.

On March 29, 2010, Iraq moved to dismiss Wye Oak's complaint pursuant to Federal Rules of Civil Procedure 12(b)(2) and (5) for lack of personal jurisdiction, 12(b)(1) for lack of subject matter jurisdiction, and 12(b)(3) for improper venue.

As to subject matter jurisdiction, Iraq argued that it was immune from suit pursuant to the FSIA and fell within none of its exceptions. Wye Oak responded that Iraq was subject to jurisdiction under the FSIA's commercial activities exception.

The FSIA provides that “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. Thus, a foreign state is immune from suit in U.S. courts unless an exception applies. Section 1605, in turn, provides the exception to immunity that is at the heart of this appeal, the commercial activities exception, which we will discuss more fully in our analysis below.

After the parties completed initial briefing, Iraq sought and was granted leave to present the new argument that because the contract giving rise to the claim was between Wye Oak and IMOD, and not between Wye Oak and Iraq, Wye Oak failed to plead particular facts sufficient to make out a prima facie case that the commercial activities exception applied to Wye Oak's claim. Iraq presented as evidence a declaration by Omar Ghassan Jamil Al–Wiswasi, Acting Director General of the Legal Department of the Ministry of Justice of Iraq, in which it is asserted, inter alia, that IMOD “was and continues to be a separate and independent legal person from ... the Republic of Iraq ... with separate legal identity, including ... for purposes of entering into and fulfilling contracts and for liability under any contracts entered into by [IMOD].” J.A. 44–45. The district court took this assertion as true for the purposes of deciding the motion to dismiss.

On June 22, 2010, the district court held a hearing and on June 29, 2010, the district court denied Iraq's motion to dismiss. The district court concluded that the allegations and facts presented were sufficient to bring Wye Oak's claim against Iraq within the commercial activities exception. The district court held that the commercial activities exception would be applied to the claim against Iraq in this case—even though the contract was with IMOD and Iraqi law makes IMOD a separate legal person from Iraq—because under the FSIA, Iraq and IMOD “are treated as one and the same.” J.A. 150. The district court further noted that the separate question of whether Iraq could ultimately be held liable for the acts of IMOD, given the state of Iraqi law, “is inextricably bound up with the ultimate merits of the case, as framed by the complaint, and cannot be resolved within the present posture of the case.” J.A. 151.

In its order denying Iraq's motion to dismiss, the district court also concluded that venue was improper. Rather than dismiss the complaint, however, the district court chose to cure the venue defect by immediately transferring the case to the U.S. District Court for the District of Columbia.² This appeal followed. The transferee district court has stayed the case pending the outcome of this appeal.

II.

We begin with an examination of our jurisdiction to hear this appeal. Both parties argued in supplemental briefing that we have such jurisdiction under our decision in Technosteel, LLC v. Beers Constr. Co., 271 F.3d 151 (4th Cir.2001). We agree.

Preliminarily, however, we feel compelled to note that our consideration of the issue before us has not been aided by the procedural posture in which it is presented. The district court could have done one of two things that would have greatly aided our review. First, it could have transferred the case to the district court in the District of Columbia prior to reaching the issue of jurisdiction, so that the D.C. district court could have considered the issue, with review by the D.C. Circuit in the normal course. Alternatively, the district court could have stayed its transfer order pending our consideration of the interlocutory appeal. As we and other courts have stated, when an immediately appealable order is issued prior to transfer, “the better practice would be for the district court to stay any transfer for the thirty-day appeal period and, if an appeal is filed, during the time the appeal ... is pending in our court.” Technosteel, 271 F.3d at 161 n. 8. That it did neither requires us to address the nature of our review in somewhat anomalous circumstances.

When a case has been transferred, generally “the transferor court—and the appellate court that has...