UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 07-2079
ALLFREIGHT WORLDWIDE CARGO, INC.,
Plaintiff - Appellant,
v.
ETHIOPIAN AIRLINES ENTERPRISE,
Defendant - Appellee.
Appeal from the United States District Court for the Eastern
District of Virginia, at Alexandria. Leonie M. Brinkema,
District Judge. (1:07-cv-00180-LMB)
Submitted: November 26, 2008 Decided: January 9, 2009
Before WILLIAMS, Chief Judge, and SHEDD and AGEE, Circuit
Judges.
Affirmed by unpublished per curiam opinion.
Richard Murray, William C. Groh, III, POMPAN, MURRAY & WERFEL,
P.L.C., Alexandria, Virginia, for Appellant. Terrance G. Reed,
Robert K. Moir, LANKFORD, COFFIELD & REED, P.L.L.C., Alexandria,
Virginia, for Appellee.
Unpublished opinions are not binding precedent in this circuit.
PER CURIAM:
Allfreight Worldwide Cargo, Inc. (“Allfreight”) appeals the
district court’s dismissal of its case against Ethiopian
Airlines Enterprise (“EAE”) for lack of subject matter
jurisdiction. For the reasons that follow, we affirm.
I.
Allfreight, a Virginia Corporation, brought suit against
EAE asserting a claim for breach of contract. In its complaint
Allfreight alleged that EAE breached a written agreement between
the parties known as the “COMAT FREIGHT HANDLING AGREEMENT”
(“COMAT Agreement”) by failing to use Allfreight as the sole
agent responsible for handling and shipping all parts, supplies
and other company materials (known as COMAT materials) into and
out of the United States by EAE. Demeki Meri, the Chief
Executive Officer of Allfreight, signed the contract on behalf
of Allfreight. Worku Eddo and Mesay Shiferaw signed on behalf
of EAE.
The Foreign Sovereign Immunities Act (“FSIA”), 28 U.S.C. §
1602 et seq., “provides the sole source of subject matter
jurisdiction in suits against a foreign state.” Velasco v.
Indonesia, 370 F.3d 392, 397 (4th Cir. 2004) (citing Argentine
Republic v. Amerada Hess Shipping Corp., 488 U.S. 428, 434-39
(1989)). Specifically, 28 U.S.C. § 1604 states that “a foreign
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state shall be immune from the jurisdiction of the courts of the
United States and of the States” unless one of the exceptions
set forth in the FSIA applies. Allfreight does not dispute that
EAE is wholly owned by the Federal Democratic Republic of
Ethiopia and therefore qualifies as an “agency or
instrumentality of a foreign state” as that term is defined
under 28 U.S.C. § 1603(B).
Allfreight contends on appeal, as it did below, that the
“commercial activity” exception set forth in the FSIA waives
EAE’s immunity. This statutory exception provides that
(a) A foreign state shall not be immune from the
jurisdiction of courts of the United States or of the
States in any case--
. . . .
(2) 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)(2006).
EAE filed a motion to dismiss pursuant to Rule 12(b)(1) and
an alternative cross-motion for summary judgment pursuant to
3
Rule 56. 1 Essentially, EAE contended the district court lacked
subject matter jurisdiction under the FSIA because Eddo and
Shiferaw had no legally cognizable authority to bind EAE in a
contract with Allfreight. The district court properly
considered evidence outside the pleadings and specifically found
that evidence “very powerful that there was no actual authority”
on the part of Eddo and Shiferaw. See Velasco, 370 F.3d at 398
(“[W]hen a defendant challenges subject matter jurisdiction via
a Rule 12(b)(1) motion to dismiss, the district court may regard
the pleadings as mere evidence on the issue and may consider
evidence outside the pleadings without converting the proceeding
to one for summary judgment.").
EAE produced substantial evidence in the form of its
Management Policy and Procedures Manual (“Manual”), which
provides that “[n]o contract, lease or other agreement . . .
shall be negotiated or entered into on behalf of [EAE] unless .
. . approved by the Office of the General Counsel in accordance
with this Section.” J.A. 327. In addition, EAE’s acting
General Counsel, Rahel Zerihun, submitted a sworn declaration
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EAE also based its motion to dismiss on Rule 12(b)(2),
(4), (5), and (6). However, the district court granted the
motion based on a lack of subject matter jurisdiction under Rule
12(b)(1) and did not address the remaining bases for dismissal.
Those alternative bases for dismissal are not issues raised on
appeal and we do not consider them.
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stating that EAE’s Office of General Counsel “is responsible for
review and approval of all contracts executed on behalf of” EAE,
that “all” of EAE’s officers and management personnel must
adhere to the Manual and that the COMAT Agreement was never
submitted to EAE’s Office of General Counsel for approval. J.A.
343-44 (emphasis added).
Allfreight, on the other hand, produced a document on EAE
letterhead titled, “Delegation of Authority,” authorizing Eddo
and Shiferaw to enter into a contract for the handling of
company materials. The Delegation of Authority stated, in its
entirety, as follows:
As you know there is an urgent need to locate a
Freight Forwarder in USA following a destination
change to IAD.
To this effect you are hereby delegated to negotiate,
select and sign a contract, or Memo of Understanding,
as the case may be, with a freight forwarder company
(ies) to handle COMAT (company materials) to and from
the united states [sic].
J.A. 77. The Delegation of Authority was signed by Sultan
Hassen with a title of “DVM Materials Management”. The document
also contained an “approved by” designation signed by Tewolde
Gebremariam, EAE’s Executive Officer of Marketing and Sales, and
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Abate Digafe, the Executive Officer of Maintenance and
Engineering. 2 (J.A. 217).
Based upon this evidence the district court found that
while Eddo and Shiferaw had been authorized to sign a contract
for the handling of materials, no such contract could be binding
upon EAE without first being submitted to the General Counsel’s
office for approval. Contrary to Allfreight’s assertions,
nothing in the Delegation of Authority permitted Eddo and
Shiferaw to circumvent the procedures in the Manual regardless
of the urgency of locating a COMAT handler. The district court
concluded that Eddo and Shiferaw thus lacked actual authority to
enter into the contract, granted EAE’s motion and dismissed the
case for lack of subject matter jurisdiction. 3 Allfreight timely
appealed to this Court and we have jurisdiction under 28 U.S.C.
§ 1291.
2
We find nothing in the record, and Allfreight references
nothing, to establish that Hassen, Gebremariam and Digafe, had
any authority to dispense with the authorization procedures
required by the Manual. None of these persons could impart
authority to Eddo and Shiferaw that they themselves lacked.
3
In addition to its ruling on EAE’s Rule 12(b)(1) motion to
dismiss the district court determined that even if it had
jurisdiction it “would have granted the motion for summary
judgment” because the COMAT Agreement was not an exclusive
contract. J.A. 384. Based on our affirmance of the district
court’s dismissal for lack of subject matter jurisdiction we
need not address this issue.
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In Velasco we joined the Ninth Circuit in holding “that the
commercial activity exception may be invoked against a foreign
state only when its officials have actual authority.” 370 F.3d
at 400 (emphasis added); see also Dale v. Colagiovanni, 443 F.3d
425, 429 (5th Cir. 2006) (holding “that an agent's acts
conducted with the apparent authority of the state is
insufficient to trigger the commercial exception to FSIA”). To
avoid the result our decision in Velasco mandates, Allfreight
contends that the district court erred for several reasons.
First, Allfreight asserts that because EAE’s agents
believed they had actual authority to enter into the contract,
EAE should have been required to prove this belief was
objectively unreasonable. Second, Allfreight argues that it
cannot be charged with notice that Eddo and Shiferaw were acting
without actual authority since the Manual requiring their
submission of the contract to the Office of General Counsel was
not publicly available. In short, Allfreight argues that
apparent authority is sufficient to bind a foreign state where
the sovereign’s agents violate an internal operating policy
(i.e. a policy not directly authorized by a statute or
regulation) because internal procedures do not afford sufficient
notice of the agents’ limited authority. Lastly, Allfreight
asserts that the district court should have considered that the
apparent authority of Eddo and Shiferaw was sufficient to
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trigger the commercial activity exception because the COMAT
contract was signed in connection with EAE’s commercial airline
operations. In light of our holding in Velasco, each argument
is unavailing.
We review the district court’s findings of fact regarding a
determination of jurisdiction for clear error, but the legal
conclusions are reviewed de novo. Velasco, 370 F.3d at 398. In
Velasco we plainly and succinctly held that the commercial
activity exception to the FSIA may be invoked against a foreign
state (and its agents) “only when its officials have actual
authority” to bind the sovereign. 370 F.3d at 400; see also,
Phaneuf v. Indonesia, 106 F.3d 302, 308 (9th Cir. 1997) (holding
that the commercial activity exception only applies if agent
acted with actual authority). Allfreight’s second and third
arguments rest on the erroneous proposition that apparent
authority can, under these facts, be sufficient to abrogate
EAE’s immunity under the commercial activity exception. Both
arguments contradict our decision in Velasco. Given the
undisputed evidence that Eddo and Shiferaw did not obtain
contract approval from the Office of General Counsel as mandated
by EAE’s controlling Manual, both arguments clearly fail.
Allfreight’s sole remaining argument is that the district
court improperly failed to consider whether Eddo and Shiferaw
reasonably believed they had actual authority to enter into the
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COMAT Agreement. However, whether Eddo and Shiferaw reasonably
believed in their authority to enter into the COMAT Agreement is
of no consequence.
In Velasco we acknowledged that recognition of a foreign
entity’s sovereign immunity is analogous to the sovereign
immunity of the United States and the derivative immunity
extended to its own contractors and common law agents. 370 F.3d
at 399. We also acknowledged that “courts have imposed an
affirmative obligation upon a person transacting business with
an agent of the United States to determine whether the agent is
vested with authority to bind the Government.” Id.; see also
Federal Crop Ins. Corp. v. Merrill, 332 U.S. 380, 384 (1947)
(“[A]nyone entering into an arrangement with the Government
takes the risk of having accurately ascertained that he who
purports to act for the Government stays within the bounds of
his authority.”); United States v. Willis, 164 F.2d 453, 455
(4th Cir. 1947) (“He who deals with an agent of the government
must look to his authority, which will not be presumed but must
be established. He cannot rely upon the scope of dealing or
apparent authority as in the case of a private agent.”). The
evidence in the record establishes that Eddo and Shiferaw made a
factual mistake as to their authority – that they were
authorized to enter into a contract without first submitting it
to EAE’s General Counsel. Their mistake, even if reasonable,
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cannot abrogate the sovereign’s immunity by creating actual
authority where none exists. See, e.g., Federal Crop Ins.
Corp., 332 U.S. at 384 (“The scope of [the agent’s] authority
may be explicitly defined by Congress or be limited by delegated
legislation, properly exercised through the rule-making power.
And this is so even though, as here, the agent himself may have
been unaware of the limitations upon his authority.”).
Accordingly, Allfreight’s final argument is without merit and
thus establishes no exception to the statutory FSIA immunity.
For the foregoing reasons we find no error in the judgment
of the district court and therefore affirm that judgment.
AFFIRMED
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