FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
EMBASSY OF THE ARAB REPUBLIC OF
EGYPT; THE ARAB REPUBLIC OF
EGYPT; THE CULTURAL AND
EDUCATIONAL BUREAU,
Defendants-cross-defendants- No. 08-15486
Appellants, D.C. No.
v. 2:01-CV-00227-
LKK-EFB
MOHAMED E. LASHEEN,
Plaintiff-Appellee, OPINION
THE LOOMIS COMPANY,
Defendant-cross-claimant-
Appellee.
Appeal from the United States District Court
for the Eastern District of California
Lawrence K. Karlton, District Judge, Presiding
Argued and Submitted
December 8, 2009—San Francisco, California
Filed May 10, 2010
Before: Mary M. Schroeder and Consuelo M. Callahan,
Circuit Judges, and Carlos F. Lucero,* Circuit Judge.
Opinion by Judge Lucero
*The Honorable Carlos F. Lucero, Circuit Judge for the Tenth Circuit,
sitting by designation.
6845
EMBASSY OF EGYPT v. LASHEEN 6847
COUNSEL
Randy M. Andrus, Andrus Attorneys, Folsom, California, for
Mohamed E. Lasheen.
Laura D. Castner, Zuber & Tallieu LLP, Los Angeles, Cali-
fornia, for the Embassy of the Arab Republic of Egypt, Arab
6848 EMBASSY OF EGYPT v. LASHEEN
Republic of Egypt, and The Embassy of Egypt Cultural and
Education Bureau.
John S. Pierce, Barger & Wolen LLP, San Francisco, Califor-
nia, for The Loomis Company.
OPINION
LUCERO, Circuit Judge:
We consider the appeal of the Arab Republic of Egypt, the
Embassy of the Arab Republic of Egypt, and the Embassy of
Egypt Cultural and Educational Bureau (collectively, the
“Egyptian Defendants”). The Egyptian Defendants seek
reversal of a district court judgment denying their claim of
immunity under the Foreign Sovereign Immunities Act
(“FSIA”), 28 U.S.C. §§ 1602-1611, from claims brought by
the Loomis Company and the estate of Mohamed E. Lasheen.1
The district court determined that it possessed subject matter
jurisdiction over the Egyptian Defendants under both the
commercial activities exception and the waiver exception to
the FSIA. We affirm in part, reverse in part, and remand to
the district court to determine in the first instance whether the
Egyptian Defendants are immune from Lasheen’s claims.
I
Lasheen was an Egyptian national who came to the United
States as a visiting scholar in March 2000 and enrolled in the
Embassy of Egypt Health Care Benefits Plan (the “Plan”).
Loomis, a Pennsylvania-based corporation authorized to do
business in California, contracted with the Cultural and Edu-
cational Bureau to provide administrative services for the Plan
pursuant to a Benefit Services Management Agreement (the
1
We use “Lasheen” to refer to both Mohamed Lasheen and his estate.
EMBASSY OF EGYPT v. LASHEEN 6849
“Agreement”). The Agreement provides that “the Cultural and
Educational Bureau, Embassy of Egypt” would indemnify
Loomis and “hold it harmless against loss, damage, and
expense, including attorneys’ fees, occasioned by claims,
demands or lawsuits brought against [Loomis] to recover ben-
efits under the [Plan].”
While enrolled in the Plan, Lasheen was diagnosed with
liver cancer. He requested coverage for a liver transplant, but
Loomis denied his request on the ground that his health prob-
lems resulted from a preexisting condition not covered by the
Plan. Lasheen died in December 2000 as a result of his ill-
ness.
In February 2001, Lasheen’s estate sued Loomis and the
Egyptian Defendants in the United States District Court for
the Eastern District of California, alleging violations of the
Employee Retirement Income Security Act (“ERISA”), 29
U.S.C. § 1001 et seq. The district court entered default judg-
ment against the Egyptian Defendants in April 2001; how-
ever, the default was set aside in July 2003 because the sixty-
day answer time period provided by the FSIA, see 28 U.S.C.
§ 1608(d), had not run at the time the default was entered.
In November 2005, Loomis filed a cross-claim against the
Egyptian Defendants for breach of contract and sought indem-
nity against Lasheen’s claims. After the Egyptian Defendants
failed to respond to Loomis’ cross-claim, the district court
struck their answer to Lasheen’s claims and again entered
default judgment in favor of both Loomis and Lasheen.
Loomis also filed a motion for summary judgment against
Lasheen, which the district court denied. Loomis appealed the
denial of the motion. However, Lasheen and Loomis later
reached a settlement agreement conditioned on the district
court’s determination that the FSIA does not shield the Egyp-
tian Defendants from liability. Lasheen and Loomis filed a
joint special motion seeking such a declaration. To enable
6850 EMBASSY OF EGYPT v. LASHEEN
consideration of the joint motion, the district court set aside
its default judgment for the limited purpose of allowing the
Egyptian Defendants to oppose the motion. In February 2008,
the district court concluded that the FSIA did not deprive fed-
eral courts of jurisdiction over the claims against the Egyptian
Defendants because the commercial activities and waiver
exceptions applied. The Egyptian Defendants appealed.
II
We first review the district court’s determination that the
FSIA does not immunize the Egyptian Defendants against
Loomis’ claims due to the commercial activities exception.
We agree with the district court that Loomis’ claims arise out
of the Egyptian Defendants’ commercial activities within the
United States, and thus the Egyptian Defendants are not
immune.
[1] Pursuant to the FSIA, “a foreign state shall be immune
from the jurisdiction of the courts of the United States and of
the States except as provided in” the FSIA. 28 U.S.C. § 1604.
“Under the Act, a foreign state is presumptively immune from
the jurisdiction of United States courts; unless a specified
exception applies, a federal court lacks subject-matter juris-
diction over a claim against a foreign state.” Saudi Arabia v.
Nelson, 507 U.S. 349, 355 (1993). Once a party “offers evi-
dence that an FSIA exception to immunity applies, the party
claiming immunity bears the burden of proving by a prepon-
derance of the evidence that the exception does not apply.”
Joseph v. Office of the Consulate Gen. of Nig., 830 F.2d 1018,
1021 (9th Cir. 1987). We review FSIA immunity determina-
tions de novo. Corzo v. Banco Cent. de Reserva del Peru, 243
F.3d 519, 522 (9th Cir. 2001).
[2] The FSIA does not provide foreign sovereign immunity
“in any case . . . in which the action is based upon a commer-
cial activity carried on in the United States by the foreign
state.” § 1605(a)(2). It is undisputed that each of the three
EMBASSY OF EGYPT v. LASHEEN 6851
Egyptian Defendants qualifies as a “foreign state” under the
FSIA.2 Thus, application of the commercial activities excep-
tion turns on whether the claims before us are “based upon a
commercial activity carried on in the United States.”
“Commercial activity” is defined in the FSIA as “either a
regular course of commercial conduct or a particular commer-
cial transaction or act.” § 1603(d). “Commercial activity car-
ried on in the United States by a foreign state” refers to
commercial activity carried on by the foreign state that has
substantial contact with the United States. § 1603(e). “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.”
§ 1603(d).
[3] In Nelson, the Supreme Court held that commercial
activity under the FSIA refers to “only those powers that can
also be exercised by private citizens, as distinct from those
powers peculiar to sovereigns.” 507 U.S. at 360 (quotations
omitted). “[A] foreign state engages in commercial activity
. . . where it acts in the manner of a private player within the
market.” Id. (quotation omitted); see also Restatement (Third)
of Foreign Relations Law § 451 (1987) (“Under international
law, a state or state instrumentality is immune from the juris-
diction of the courts of another state, except with respect to
claims arising out of activities of the kind that may be carried
on by private persons.”). Thus the relevant question “is
whether the particular actions that the foreign state performs
. . . are the type of actions by which a private party engages
in trade and traffic or commerce.” Argentina v. Weltover, Inc.,
504 U.S. 607, 614 (1992) (quotation omitted). We do not con-
sider whether the specific act was one that only a sovereign
2
A foreign state includes “political subdivision of a foreign state or an
agency or instrumentality of a foreign state.” § 1603(a). An “agency or
instrumentality of a foreign state” includes “an organ of a foreign state or
political subdivision thereof.” § 1603(b).
6852 EMBASSY OF EGYPT v. LASHEEN
would actually perform. Sun v. Taiwan, 201 F.3d 1105, 1109
(9th Cir. 2000). Instead, we consider whether the “category of
conduct” is commercial in nature. Id.
Application of the commercial activities exception is predi-
cated on the existence of a sufficient nexus between the plain-
tiff’s asserted cause of action and the foreign state’s
commercial activity. “The commercial activity relied upon . . .
to establish jurisdiction must be the activity upon which the
lawsuit is based. The focus must be solely upon those specific
acts that form the basis of the suit.” Am. W. Airlines, Inc. v.
GPA Group, Ltd., 877 F.2d 793, 796-97 (9th Cir. 1989) (quo-
tation, emphasis, and citation omitted). In other words, the
phrase “based upon” in § 1605(a)(2) “is read most naturally
to mean those elements of a claim that, if proven, would enti-
tle a plaintiff to relief under [its] theory of the case.” Nelson,
507 U.S. at 357.
[4] Loomis alleges that the Egyptian Defendants failed to
indemnify it for the costs of litigating against Lasheen as
required by the Agreement. By contracting with a company to
manage a health benefits plan and agreeing to indemnify that
company, the Egyptian Defendants did not act with the pow-
ers peculiar to a sovereign, but instead acted as private players
in the market. Contrary to the Egyptian Defendants’ asser-
tions, it is irrelevant whether entering into the Agreement was
“incidental” to sponsoring an educational program, even
assuming that sponsoring an educational program is a sover-
eign activity. See § 1603(d). Thus, entering into the Agree-
ment and allegedly breaching that Agreement constitute
commercial activity.
Loomis’ claim is based upon this commercial activity. To
the extent that the Egyptian Defendants argue that Loomis’
claims are based on Egyptian sponsorship of an educational
program, they are simply incorrect; whether or not the Egyp-
tian Defendants were engaged in running an educational pro-
gram does not relate to Loomis’ recovery in any way. In
EMBASSY OF EGYPT v. LASHEEN 6853
contrast, the Egyptian Defendants’ alleged breach of the
Agreement determines whether Loomis is entitled to relief
under its theory of the case. See Nelson, 507 U.S. at 357.
The Egyptian Defendants also argue that even if the com-
mercial activities exception applies to claims against the
Embassy of Egypt and the Cultural and Educational Bureau,
it does not apply to claims against Egypt because there is no
admissible evidence that Egypt was involved with the Agree-
ment or the Plan. This assertion is inaccurate. A Loomis
employee declared: (1) “All fees, premiums and claim funds
came directly from Egypt”; (2) “The Plan was funded entirely
by the Egyptian Government”; and (3) “No documents related
to the provisions and/or administration of the Plan were ever
approved or signed without the permission of the Government
of Egypt.” Even assuming that the involvement of its
Embassy and the Cultural and Educational Bureau was insuf-
ficient to demonstrate Egypt’s involvement with the Plan, the
employee’s declaration supports a determination that Egypt
was involved in both the provision and administration of the
Plan.
[5] Finally, the Egyptian Defendants assert in their reply
brief that Lasheen and Loomis can “point to no specific con-
duct of [Egypt] within the United States forming an element
of their claims.”3 However, the above-quoted statements
regarding Egypt’s payment history and signing authorizations
rebut this claim. Further, the fact that Loomis and the Cultural
and Educational Bureau were physically located in the United
States at all relevant times leads us to conclude that Egypt’s
commercial activities had “substantial contact with the United
3
Normally the Egyptian Defendants would have waived this argument
because they did not raise it in their opening brief. Bazuaye v. INS, 79 F.3d
118, 120 (9th Cir. 1996). However, because the argument challenges our
subject matter jurisdiction, and challenges to subject matter jurisdiction
cannot be waived, we will address it. See Am. Fire & Cas. Co. v. Finn,
341 U.S. 6, 18 n.17 (1951).
6854 EMBASSY OF EGYPT v. LASHEEN
States.” § 1603(a). Loomis’ claims against all three Egyptian
Defendants arose out of the Defendants’ direct involvement in
commercial activity within the United States. We therefore
agree with the district court’s determination that the Egyptian
Defendants are not immune from Loomis’ claims under the
FSIA. Because the commercial activities exception applies to
Loomis’ claims against the Egyptian defendants, we need not
address whether the waiver exception also applies to these
claims.
III
The Egyptian Defendants also argue that the district court
erred in failing to address separately whether they were enti-
tled to sovereign immunity against Lasheen’s claims. We
agree that the district court should have conducted this dis-
tinct analysis and remand to the district court to make that
determination in the first instance.
Instead of analyzing whether the FSIA immunized the
Egyptian Defendants against Lasheen’s claims, the district
court reasoned that “the moving parties ha[d] only argued that
the . . . exception[s] appl[y] to the Agreement between
Loomis and the Egyptian defendants.” (emphasis omitted).
Based on this reasoning, the court did not consider whether
the Egyptian Defendants are entitled to sovereign immunity as
to Lasheen’s claims.
[6] We conclude the district court erred in holding that the
question of immunity against Lasheen was not before it.
Loomis and Lasheen’s joint motion requested an order stating
that the Egyptian Defendants “are not immune to this Court’s
jurisdiction because statutory exceptions to the Foreign Sov-
ereign Immunities Act (‘FSIA’) are applicable here.” Simi-
larly, Loomis and Lasheen’s memorandum refers to the
Egyptian Defendants’ potential immunity from suit generally.
Because both Loomis and Lasheen filed the joint motion, the
district court should have considered whether the Egyptian
EMBASSY OF EGYPT v. LASHEEN 6855
Defendants are entitled to sovereign immunity against each
plaintiff.
Moreover, the existence of an exception under the FSIA for
Loomis’ claims does not control whether the FSIA blocks
Lasheen’s claims. The commercial activities exception
applies when “the action is based upon a commercial activity
carried on in the United States by the foreign state,” and the
waiver exception applies when “the foreign state has waived
its immunity either explicitly or by implication.”
§ 1605(a)(1)-(2). A court must analyze each claim and deter-
mine if it is “based upon” commercial activity or whether the
foreign state has waived its sovereign immunity as to that
claim.
The fact that an exception to the FSIA permits Loomis’
claims does not indicate that the exception applies to Lash-
een’s claims. Lasheen sued the Egyptian Defendants for vio-
lations of ERISA. In contrast, Loomis asserts a claim against
the Egyptian Defendants for breach of contract. These claims
have different factual and legal bases; it is entirely possible
that Loomis’ claims arise out of the Egyptian Defendants
commercial activities, but Lasheen’s do not. Similarly, even
assuming the Egyptian Defendants have waived their sover-
eign immunity with respect to all claims brought by Loomis,
they may not have waived their immunity against Lasheen’s
claims.
[7] The parties disagree as to whether the record permits us
to determine the applicability of the commercial activities and
waiver exceptions to Lasheen’s claims. We decline to resolve
this disagreement because the district court should have the
opportunity to determine questions of sovereign immunity in
the first instance. We therefore reverse the district court’s
determination that the question of whether the FSIA immu-
nized the Egyptian Defendants from Lasheen’s claims was not
before it and remand to the district court to determine whether
6856 EMBASSY OF EGYPT v. LASHEEN
either the commercial activities or waiver exception permits
Lasheen’s claims to proceed.
IV
[8] Finally, Loomis and Lasheen move for an award of
attorneys’ fees and costs. Although the Agreement states that
the Egyptian Defendants must “indemnify [Loomis] and hold
it harmless against loss, damages, and expense, including
attorneys’ fees,” the Agreement expressly limits this indemni-
fication to loss “occasioned by claims, demands or lawsuits
brought against [Loomis] to recover benefits under the
[Plan].” Under Pennsylvania law,4 an indemnitee may recover
attorneys’ fees and costs incurred in the underlying defensive
action, but not those incurred during the indemnification
action. Boiler Eng’g & Supply Co. v. Gen. Controls, Inc., 277
A.2d 812, 814 (Pa. 1971); see also Fleck v. KDI Sylvan Pools,
Inc., 981 F.2d 107, 117 (3d Cir. 1992). Although the Agree-
ment may give Loomis the right to recover attorneys’ fees and
costs incurred in defending against Lasheen’s action, the con-
tract gives it no right to recover attorneys’ fees incurred in the
matter before us. Loomis and Lasheen have not pointed to any
statutory provision, either within the FSIA or elsewhere, that
allows recovery of costs or attorneys’ fees in this case.5 We
accordingly deny their request.
V
For the stated reasons, we AFFIRM the district court’s
determination that the FSIA does not deprive the federal
courts of subject matter jurisdiction over Loomis’ claims
4
The Agreement provides that it “shall be enforced under the laws of the
Commonwealth of Pennsylvania.”
5
If such a statutory provision does exist, Loomis and Lasheen have
waived their right to recover pursuant to that provision because
“[a]rguments made in passing and inadequately briefed are waived.” Mal-
donado v. Morales, 556 F.3d 1037, 1048 n.4 (9th Cir. 2009).
EMBASSY OF EGYPT v. LASHEEN 6857
against the Egyptian Defendants. We REVERSE the district
court’s determination that the issue of whether the FSIA
immunizes the Egyptian Defendants against Lasheen’s claims
was not before it and REMAND for it to make that determi-
nation in the first instance. The appellees’ request for costs
and attorneys’ fees on appeal is DENIED. Each party shall
bear its own costs on appeal.
AFFIRMED IN PART, REVERSED IN PART, AND
REMANDED.