IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
No. 98-60288
CORTEZ BYRD; ET AL,
Plaintiffs,
CORTEZ BYRD; SIMMONS LUMBER COMPANY S.A.,
Plaintiffs-Appellees,
versus
CORPORACION FORESTAL Y INDUSTRIAL DE OLANCHO S.A., ET AL,
Defendants,
CORPORACION FORESTAL Y INDUSTRIAL DE OLANCHO S.A.; ISRAEL PACHECO;
ALBERTO FIGUEROA,
Defendants-Appellants.
______________________________________________________________________________
GREAT SOUTHERN LUMBER COMPANY LLC, ET AL,
Plaintiffs,
versus
WILLIAM E SIMMONS III, ET AL,
Defendants.
.
Appeal from the United States District Court
for the Southern District of Mississippi
August 10, 1999
Before WISDOM, STEWART, and DENNIS, Circuit Judges.*
CARL E. STEWART, Circuit Judge:
Defendants-appellants filed motions to dismiss with the court below, arguing that they are
immune from suit pursuant to the Foreign Sovereign Immunities Act (“FSIA”), and because the court
below did not have personal jurisdiction over them. The district court denied their motions, and
defendants-appellants brought this immediate appeal. We conclude that we have appellate
jurisdiction over the district court’s decision as to FSIA immunity pursuant to the collateral order
doctrine, and AFFIRM t hat decision by the district court. We also conclude that we do not have
appellate jurisdiction over the personal jurisdiction issue, and DISMISS this portion of the appeal.2
FACTUAL & PROCEDURAL BACKGROUND3
This case begins with a sawmill in Honduras. The sawmill is owned by defendant-appellant
Corporacion Forestal y Industrial de Olancho, S.A., (“CORFINO”), a private corporation
organized and existing under the laws of Honduras, and which is almost entirely (98% of its shares)
owned and controlled by the Republic of Honduras through a governmental entity known as
*
Judge Wisdom was a member of the panel that heard oral arguments, but due to his death on
May 15, 1999 did not participate in this decision. This case is being decided by a quorum. See 28
U.S.C. § 46(d) (1996).
2
In their original brief, appellants had argued that the collateral order doctrine permitted them to
bring appellate challenges to personal jurisdiction. In their reply brief, appellants reported to this
Court that they had discovered that there existed strong case law against this position. See
Appellants Reply Brief at 12 (citing Lauro Lines v. Chasser, 490 U.S. 495, 501 (1989)). In Lauro
Lines, the Supreme Court held that an interlocutory order of district court denying a defendant's
motion to dismiss based upon a contractual forum selection clause was not immediately appealable
under collateral order doctrine. See Lauro Lines, 490 U.S. at 501. In making this decision, the
Supreme Court observed that a challenge to venue under a forum selection is as effectively vindicable
on appeal as a claim that the trial court lacked personal jurisdiction. See id. As appellants
acknowledge, this case appears to conclusively deny appellate jurisdiction, based on the collateral
order doctrine, to them. The Court thanks the appellants, and their attorneys, for their candor.
3
For the ease of the reader, the first mention of either a plaintiff or a defendant is emphasized in
bold.
2
Corporation Hondureña de Desarrolla Forestal (“COHDEFOR”). Running CORFINO at the time
the facts alleged in this lawsuit took place are the two remaining defendant s-appellants: Israel
Pacheco, CORFINO’s executive vice-president; and Alberto Figueroa, CORFINO’s President.4
Both Pacheco and Figueroa are adult resident citizens of Honduras.
Briefly, the factual setting of this case revolves around a power struggle between CORFINO’s
former business partners as to the control of the sawmill and its accompanying financial rewards. The
losers of this struggle are suing the winners on several business-related legal theories, such as breach
of contract. Defendants-appellants’ relationship to this struggle is at the same time at the center and
the outskirts of the struggle: the center, because defendants-appellants own the sawmill in question,
and are alleged to have co nspired with the other defendants to remove the plaintiffs from their
positions in the sawmill’s management; and on the outskirts, because defendants-appellants are not
alleged to have directly participated in the actions taken against the plaintiffs.
A
On April 28, 1995, CORFINO leased its chief asset, the sawmill, to defendant William E.
Simmons, III, an adult resident citizen of Mississippi. Later that year, plaintiff-appellee Cortez Byrd
was contacted to evaluate and inspect the sawmill in Honduras, to examine lumber for the purpose
of determining marketability, and to evaluate the financial feasibility of becoming involved in
marketing production from the sawmill.
After Byrd expressed an interest in the sawmill project, several parties entered into a contract
designated as a Memorandum of Understanding (hereinafter “Memorandum”). This contract is dated
January 1, 1996. Importantly, none of the defendants-appellants are parties to the Memorandum. The
parties to the Memorandum are:
(1) defendant Simmons;
(2) defendant Great Southern Lumber Company (“Great Southern”). Great
Southern is a Mississippi limited liability company, and all of its shares are
4
Figueroa was also sub-gerente general of COHDEFOR. Both Figueroa and Pacheco have been
since dismissed from their CORFINO positions due to “irregular activities.”
3
owned by American citizens. None of the appellants own part of Great
Southern. Byrd was at this point CEO of Great Southern, but was later
removed from this position. Great Southern’s existence predated the
Memorandum.
(3) plaintiff John S. Roberts, Sr;
(4) plaintiff John S. Roberts, Jr.;
(5) plaintiff-appellee Byrd;
(6) plaintiff-appellee Simmons Lumber Company, S.A. (“Simmons Lumber”).
Simmons Lumber is a private corporation, organized at the time the Memorandum
was created, and exists under the laws of Honduras. Simmons Lumber is owned
exclusively by American citizens Simmons, Byrd, Roberts Jr., Roberts, Sr., and
plaintiff Doug Grissom. None of the appellants own part of Simmons Lumber. Byrd
was at this point President and CEO of Simmons Lumber, and Grissom was at this
point Chief Financial Officer of Simmons Lumber.
After this Memorandum was signed, Simmons assigned his lease in the sawmill to Simmons Lumber.
Simmons Lumber was then acquired by Great Southern.
As CEO of Great Southern, as well as President and CEO of Simmons Lumber, Byrd
contends that the sawmill project offered him a potentially large financial reward. He claims he was
to receive a $30,000 fee for bringing the mill into operation, reimbursement of expenses, full authority
over the mill’s operations, a fixed amount per thousand feet of board produced by the mill, a monthly
salary in the event no logs were available, and certain options to purchase stock in Simmons Lumber
or Great Southern. Appellants note that they were not the ones who owed these payments to Byrd.
B
In June 1996, defendant-appellant Pacheco met with Byrd, Grissom, and Gary Stewart in his
Honduras office, and agreed to form a company called PROSEMA. PROSEMA purchased edges
sawn off from timbers at the sawmill, at a very low price, to be used to process broomsticks.
However, PROSEMA failed to pay Simmons Lumber a debt of $22,000. In September 1996, Byrd
(as Great Southern’s CEO and president, and as Simmons Lumber’s CEO) cut off PROSEMA’s
credit.
Plaintiffs-appellees Byrd and Simmons Lumber allege that this event triggered a series of
retaliatory actions against them. That same month, defendant John Pearson allegedly began
colluding with the other defendants, in particular defendants Simmons and Carl Swan, to oust Byrd
4
from his management position and illegally take over the sawmill project. Both Pearson and Swan
are adult resident citizens of Oklahoma. In September and October 1996, Pearson traveled to
Honduras and allegedly conspired with the defendants – including defendants-appellants – in a series
of “secret meetings” to illegally act in furtherance of a scheme to take over the mill.
In late October, 1996, Byrd discovered that one of the secret meetings was to take place.
Byrd alleges that, as CEO of Simmons Lumber, he instructed Simmons not to meet with defendant-
appellant Figueroa. When it became clear that Simmons planned to attend, Byrd sent a letter to
defendant-appellant Figueroa in which he authorized a Honduran attorney by the name of Cesar
Gonzalez to appear at all meetings on behalf of Simmons Lumber. Defendants refused to allow the
attorney to attend, however, and at the meeting allegedly made sensitive decisions regarding the mill
and the CORFINO lease.
On November 8, 1996, Pearson allegedly hand-delivered a letter to the Board of Directors
for Simmons Lumber and Great Southern, in which he stated his objective to obtain an ownership
interest in both companies and proposing a breach of the Memorandum whereby he would replace
Grissom as Chief Financial Officer, while Simmons would replace Byrd as CEO and Chairman.
Pearson further proposed that an executive committee be formed, and that it include Pearson, Swan,
Simmons, and Roberts, Sr. According to the proposal, the executive committee would run the
operation of the companies with limited involvement in management by the Board of Directors. The
proposal also called for the appointment of defendant Oscar Alvarenga as Simmons Lumber’s
attorney in Honduras, and that he be authorized and directed to correct or void the minutes of past
Board of Directors’ meetings, on file in Honduras.
On January 28, 1997, Simmons, Swan, and other unspecified individuals called together a
managers meeting for Great Southern. There, they terminated Byrd’s services. None of the
defendants-appellants were at this meeting.
In roughly the same time period, defendants-appellants allegedly began complaining that the
CORFINO lease, which at this point was assigned to Simmons Lumber, was in jeopardy due to
5
noncompliance with certain lease terms. Plaintiffs contend that this complaint was without
foundation. Plaintiffs also allege that defendant Simmons began colluding with CORFINO officials,
including defendants-appellants Figueroa and Pacheco, to undermine the CORFINO lease in order
to oust plaintiff-appellee Byrd from his position as CEO and general manager of the sawmill project.
Plaintiffs further contend that this collusion ultimately resulted in appellant CORFINO issuing a sixty
day notice to Simmons Lumber in March 1997, instructing Simmons Lumber that it would cancel the
lease if t he lease noncompliance were not cured. Plaintiffs also allege that defendant Simmons
“signed off” on this notice prior to its issuance by CORFINO, and that Simmons withheld notifying
plaintiffs about the 60 day notice for an additional seven days. According to plaintiffs, this delay
deprived them of an opportunity to address and cure the alleged deficiencies, and thus constituted
actions in furtherance of a fraudulent scheme to take over the sawmill project.
Immediately prior to the issuance of this notice, plaintiffs allege that Glenn Taylor, an attorney
representing Simmons, Pearson, and Swan, mailed illegal minutes and other fraudulent
misrepresentations to the State Bank and Trust in Mississippi. Taylor also allegedly provided similar
material to Bob Riley, of the United States Embassy located in Tegucigalpa, Honduras. These
documents were allegedly sent with the knowledge of all of the defendants, including appellants, and
were intended to convince Bank and Embassy officials that Simmons controlled Simmons Lumber’s
management. Plaintiffs also allege that Simmons and defendant Myra Berlioz, an adult citizen of
Honduras, had previously presented fraudulent documentation to Riley representing that Simmons
was in control of Simmons Lumber.
On March 15, 1997, the defendant corporation Maderas de Exportacion, S.A.
(“MADEXPO”) was formed in the Republic of Honduras.5 The vice-president of MADEXPO is
defendant Swan. None of the appellants are on the MADEXPO board of directors, nor do they own
any part of MADEXPO. On March 16, 1997, Simmons Lumber assigned its lease to MADEXPO.
5
Appellants and appellee disagree as to whether this company is legally valid under Honduran law.
6
Plaintiffs contend that Simmons did this by purporting to act as President of the Board of Directors
of Simmons Lumber. Plaintiffs contend that this assignment occurred without CORFINO’s prior
approval, as required by the lease, and led to Simmons instituting “an armed takeover of the sawmill
complex.” See Blue Brief, at 16; Red Brief at 14. During this takeover, plaintiff-appellee Byrd alleges
that Simmons stole $50,000 worth of lumber belonging to Simmons Lumber. Byrd also alleges that
this act constituted “international terrorism” and that he was assaulted and denied access to the mill
by the armed guards under Simmons’ control.
In sum, plaintiffs-appellees contend that they suffered significant monetary damage as a result
of the illegal scheme to oust Byrd from his management positions. They allege (1) tortious
interference of the Memorandum; (2) interference with business opportunity; (3) conspiracy to
interfere with contract and business relations; (4) conversion of property; (5) conspiracy to convert
property; (6) breach of contract; (7) breach of the duty of good faith and fair dealing with respect to
the Memorandum; (8) breach of fiduciary duty by Simmons; (9) conspiracy by defendants to breach
fiduciary duty; and (10) RICO violations. Among other damages, Plaintiffs-appellees claim damages
for: (1) failing to receive benefits under the Memorandum; (2) Byrd being ousted from his
management positions at Great Southern and Simmons Lumber; (3) the theft of lumber from
Simmons Lumber; (4) loss of money due t o the repayment of loans and the payment of insurance
policies; and (5) loss to business in the form of investors, customers, etc.
C
On April 30, 1997, CORFINO sent Yuri Melara Berlioz (defendant Myra Berlioz’s nephew)
from Honduras to Mississippi. Pursuant to a letter issued by appellant Pacheco, Berlioz attempted
to collect approximately $55,000 from a bank guaranty issued by State Bank & Trust Company in
Brookhaven, Mississippi. This bank guaranty had been issued in favor of CORFINO to secure the
obligations of Simmons Lumber to pay for utilities under the lease. The CORFINO lease had
required the lessee to obtain, inter alia, financial security in the form of a bank guaranty for monies
owed to the local power company that provides electricity to the mill. Importantly, CORFINO alleges
7
it had requested that a Honduran bank be used, but Simmons Lumber decided to use a Mississippi
bank. Plaintiffs allege that appellants knew and accepted the use of the Mississippi bank. When
Berlioz attempted to cash in the guaranty, the bank refused to issue any funds to the Berlioz or
CORFINO.
D
Plaintiffs filed their complaint against all of the defendants on May 14, 1997 in Mississippi
state court. On June 13, 1997, all of the defendants filed their notice to remove. Removal was
successfully predicated upon: (1) 28 U.S.C. § 1441(a), as plaintiffs’ claims include alleged RICO
violations; and (2) § 1441(d), as defendants-appellants CORFINO, Figueroa, and Pacheco each
qualify as an agency or instrumentality of a foreign state under 28 U.S.C. § 1603(b). The case then
moved to federal district court in the Southern District of Mississippi.
On July 21, 1997, defendants-appellants CORFINO, Figueroa, and Pacheco filed their motion
to dismiss, contending they were immune from suit pursuant to the Foreign Sovereign Immunities Act
(“FSIA”) and that the federal district court lacked personal jurisdiction over them. On July 29, 1997,
their motion was supplemented with affidavits. On March 31, 1998, the district court denied their
motions to dismiss. Defendants-appellants filed their notice of appeal to this court on April 13, 1998
– thirteen days after their motion to dismiss was denied.
APPELLATE JURISDICTION
Where the district court denies a party’s motion to dismiss on the grounds of FSIA immunity,
that order is immediately appealable under 28 U.S.C. § 1291 and the collateral order doctrine. See,
Stena Rederi AB v. Comision de Contratos del Comite Ejecutivo General del Sindicate
Revolucionairo de Trabajabores Petroleros de Law Republica Mexicana S.C., 923 F.2d 380, 385 (5th
Cir. 1991). Appellees agree to this general rule, but contest the rule’s application in this particular
case on two grounds.
A
8
Appellees co ntend that the appeal in this case was not perfected because it was not timely
filed. The notice t o appeal in this case was filed thirteen days after the district court denied their
motion to dismiss. Appellees contend that this is three days over the time required in FED. R. APP. P.
5(a), which requires notices of appeals from interlocutory orders in ten days. Appellees also observe
that Rule 5 requires appellants to have filed several other documents, which were not done in this
case; for instance, Rule 5(a) requires that this notice be in the form of a petition for permission to
appeal.
The flaw in this argument, however, lies in the fact that this case is not governed by Rule 5
at all. Instead, it is governed by Rule 4. The former Rule concerns appeals brought under 28 U.S.C.
§ 1292(b), whereas the latter Rule governs appeals brought under 28 U.S.C. § 1291. As noted earlier,
the appeal at bar has been brought under the collateral order doctrine pursuant to § 1291.
Appellees’ argument to the contrary is unpersuasive. Appellees contend that our conclusion
is wrong as appeals taken pursuant to the collateral order doctrine are not challenging a final order
under § 1291. See Stena Rederi, 923 F.2d at 385 (distinguishing between appeals of final orders
under § 1291 and appeals brought under the collateral order doctrine). Rather, appellees contend that
they are interlocutory appeals, and thus subject to all of the usual appellat e rules governing
interlocutory appeals. See United States v. Moats, 961 F.2d 1198, 1293 (5th Cir. 1992).
Appellees, however, overlook a critical portion of Moats. While we said in Moats that appeals
taken pursuant to the collateral order doctrine are subject to all of the usual appellate rules governing
interlocutory appeals, we also specifically identified Rule 4. See id. Moreover, it would turn the
collateral order doctrine on its head to suggest that it is derived from § 1292(b) as opposed to § 1291.
See Lauro Lines v. Chasser, 490 U.S. 495, 498 (1989) (“Section 1291 thus permits an appeal only
if an order denying a motion to dismiss based upon a forum-selection clause falls within the “narrow
exception to the normal application of the final judgment rule [that] has come to be known as the
collateral order doctrine.’”) (quoting Midland Asphalt Corp. v. United States, 489 U.S. 794, 798
9
(1989). Therefore, we find no reason to subject appellants to the rigors of 1292(b) certification via
Rule 5. See Weir v. Propst, 915 F.2d 283 (7th Cir. 1990) (Posner, J.) (agreeing with this result).
B
Next, appellees contend that factual questions preclude appellate jurisdiction over the FSIA
immunity question. Appellees point to five factual issues that remain in dispute which, they say,
prevent us from reviewing the district court’s order denying the motion to dismiss.
This is, at first glance, a tricky issue. In Moats, we noted that “we have authority to decide
only legal issues when we review an appeal from a collateral order.” 961 F.2d at 1202 (emphasis
added) (citing Mitchell v. Forsyth, 472 U.S. 511, 527-528 (1985)).6 This decision plainly implies,
although it does not actually decide, that we would be precluded from asserting appellate jurisdiction
over this immediate appeal from the interlocutory order if there were factual issues in dispute.
However, the Moats court also explains that we need not confront this issue if we conclude that the
asserted factual disputes are not relevant to the question of whether FSIA immunity exists. See 961
F.2d at 1202 (emphasis added) (finding that “there is no real dispute over the facts relevant to the
existence of immunity” and t hus asserting appellate jurisdiction). We therefore proceed to this
preliminary inquiry.
Appellants claim that they are “foreign states” as defined by the FSIA, see 28 U.S.C. § 1603,
and are thus immune from suit in federal district court. They also claim that they do not lose their
immunity through the “commercial activity exception” to the FSIA, as appellees charge. 28 U.S.C.
§ 1605(a)(2). To assess if there are factual disputes relevant to our subject matter jurisdictional
analysis under the FSIA, we must place the appellees’ factual disputes alongside the jurisdictional
facts which must exist as a minimum for us to rule, and then determine if there is any overlap. Such
6
But see Brown v. Valmet-Appleton, 77 F.3d 860, 862 & n.6 (5th Cir. 1996) (reviewing for “clear
error” the factual findings of a district court’s interlocutory order denying a motion to dismiss based
on FSIA immunity) (citing Walter Fuller Aircraft Sales v. The Republic of the Phillippines, 965 F.2d
1375 (5th Cir. 1992)). As Moats was handed down before both Brown and Walter Fuller, however,
we are bound by the earlier panel’s decision. See Goodwin v. Johnson, 132 F.3d 162, 175 (5th Cir.
1997) (citing Ryals v. Estelle, 661 F.2d 904, 906 (5th Cir. Nov. 1981)).
10
overlap would mean that the jurisdictional facts are controverted, and force us to decide whether to
remand, decide the factual issues ourselves (as appellants suggest in the alternative), or to dismiss this
appeal for lack of appellate jurisdiction. On the other hand, the lack of overlap would mean that the
jurisdictional facts are uncontraverted and that, like the Moats court, we can take appellate
jurisdiction over this case.
First, appellees claim that there is a factual dispute as to whether appellants Figueroa and
Pacheco’s actions were taken in their official capacities as CORFINO officials. We acknowledge that
this issue is at the heart of whether Figueroa and Pacheco are “foreign states” as defined by the FSIA.
Therefore, this would be relevant to our subject matter jurisdictional analysis. However, appellees
are mistaken to describe this as a factual dispute. Indeed, it is more akin to a mixed question of law
and fact in which the facts are uncontraverted. As will be discussed below, appellees claim that
Figueroa and Pacheco were not acting within their “official capacity” because they were acting out
of personal motives. Appellants concede (by not directly challenging the claim in their motion to
dismiss or attached affidavits) for purposes of subject matter jurisdiction that they were acting out
of personal motives, but argue that this fact is legally insufficient to render their “official capacity”
status as invalid. As the fact underlying our jurisdictional inquiry on this point is undisputed, we have
a green light as to this “factual” dispute.
Second, appellees claim that there are factual disputes as to (1) whether Simmons Lumber
alone, or acting with CORFINO, made the decision to agree on a bank guarantee issued by the
Mississippi bank, and (2) whether or not CORFINO preferred and requested a Honduran bank.
Appellees argue that these factual disputes are relevant to the issue o f whether appellants qualify
under the “act performed in the United States” clause of commercial activity exception. We
acknowledge that these factual disputes are related to appellees’ argument on this issue, which rests
exclusively upon CORFINO’s act in sending its agent Yuri Melara Berlioz to Mississippi to make a
bank demand on a bank guarantee issued by the State Bank and Trust in Brookhaven, Mississippi.
However, we find that this relationship is best described as tangential; no one disputes Berlioz took
11
the trip to Mississippi and why. This uncontraverted fact is enough for us to conduct our FSIA
jurisdictional inquiry.
Finally, appellees claim that there are factual disputes as to (1) whether or not appellants were
involved or knew of the “secret meetings” that took place in Honduras, and (2) whether or not
appellants Figueroa and Pacheco colluded with the other defendants to issue the sixty day notice
referenced in the complaint. Appellees argue that the factual disputes preclude us from properly
analyzing whether the third clause of the commercial activity exception applies. To obtain subject
matter jurisdiction over appellants under the “direct effect” clause of commercial activity exception,
appellees point to five acts which took place in Honduras but had a “direct effect” in the United
States. They are:
1. Appellants’ leasing the sawmill, which produces and sells woods products;
2. Appellants’ knowledge that Byrd and others would obtain a loan of $1 million
to refurbish the mill;
3. Appellants’ request of proof of Byrd and Simmons Lumbers’ good financial
standing;
4. Appellants’ knowledge that the lease required the appellees would acquire fire
insurance (worth $2 million), a bank guarantee to cover utilities (worth
$55,000); and
5. Appellants’ knowledge and implicit consent, every step of the way, that
Americans were being involved in the project.
Examining each of these alleged disputes, it becomes quickly apparent that none have to do with the
asserted bases for subject-matter jurisdiction. None are referenced or even mentioned in any of the
five asserted bases for subject-matter jurisdiction. We do not believe that they are even tangentially
related, and find that they do not preclude our appellate jurisdiction.
As the facts necessary for our subject matter jurisdictional inquiry are uncontraverted, we
hold that we have appellate jurisdiction over this appeal under the collateral order doctrine. As did
the Moats court, we now proceed directly to the merits of the case.
DISCUSSION
12
“The general rule under the FSIA is that foreign states are immune from the jurisdiction of
the United States Courts.” Moran v. The Kingdom of Saudi Arabia, 27 F.3d 169, 172 (5th Cir. 1994).
“However, a district court can exercise subject matter jurisdiction over a foreign state if one of the
statute’s exceptions apply.” Id. The party claiming FSIA immunity, in this case appellants, have the
initial burden of proof of establishing a prima facie case that it satisfies the definition of a “foreign
state” within the meaning of the FSIA. See id. Once this prima facie case is established, the burden
of production shifts to the non movant, in this case the appellees, to raise the exceptions and prove
that they apply in this case. See id. Nevertheless, the party claiming FSIA immunity retains the
ultimate burden of persuasion throughout. See id.
I
The threshold issue is whether the party claiming FSIA immunity is a “foreign state” within
the meaning of the statute.
(a) A "foreign state" . . . includes a political subdivision of a foreign state or an
agency or instrumentality of a foreign state as defined in subsection (b).
(b) An "agency or instrumentality of a foreign state" means any entity –
(1) which is a separate legal person, corporate or otherwise, and
(2) which is an organ of a foreign state or political subdivision thereof, or
a majority of whose shares or other ownership interest is owned by a
foreign state or political subdivision thereof, and
(3) which is neither a citizen of a State of the United States as defined in
section 1332(c) and (d) of this title, nor created under the laws of any
third country.
28 U.S.C. § 1603. Appellees concede that CORFINO, a Honduran corporation whose stock is
almost entirely in the hands of a Honduran governmental entity, is a foreign state for purposes of the
FSIA. However, appellees argue that appellants Pacheco and Figueroa, both officers in CORFINO,
do not similarly fall within the definition of a foreign state.
Normally, the FSIA extends to protect individuals act ing within their official capacity as
officers of corporations considered foreign sovereigns. See, e.g., El-Fadl v. Central Bank of Jordan,
75 F.3d 668, 671 (D.C. Cir. 1996). The FSIA’s protections cease, however, when the individual
officer acts beyond his official capacity. See Chuidian v. Philippine National Bank, 912 F.2d 1095,
13
1106 (9th Cir. 1990) ( “An obvious example would be if a dispute occurs pertaining to the sale of an
employee’s personal house, his government employment provides him no shield to liability.”).
Appellees argue that Pacheco and Figueroa acted beyond their official capacity, and therefore
fall outside the shelter of the FSIA. Appellees claim that Figueroa and Pacheco’s conduct
demonstrates that they acted out of personal gain and that they subverted their official positions to
advance their personal objectives. In particular, appellees allege that Figueroa and Pacheco were
acting in retaliation against Byrd and Simmons Lumber, who had discontinued credit to their private
company PROSEMA. These allegations, however, are not legally sufficient to strip FSIA immunity
from Pacheco and Figueroa. See Chuidian, 912 F.2d at 1106-07. In Chuidian, the Ninth Circuit
rejected the argument that personal motives convert an o fficial action into an individual one. The
court observed that “[t]he most [plaintiff] Chuidian can allege is that [defendant] Danza experienced
a convergence between his personal interest and his official duty and authority.” Id. at 1107. “Such
a circumstance does not serve to make his action any less an action of his sovereign.” Id. The Ninth
Circuit reasoned that:
. . . Chuidian once more confuses the motive with the actions arising from the motive
. . . . Under Chuidian’s view, every otherwise proper sovereign action would be
subject to judicial examinations to ensure that the acting officer did not derive some
personal satisfaction from the commission of his official duty. There is no authority
to support such a radical expansion of the exceptions to sovereign immunity.
We adopt the reasoning of Chuidian and thus reject the contrary argument by the appellees.
II
Having established that each appellant is a “foreign state” as defined by the FSIA, we now
examine whether any of the appellants lose that immunity pursuant to one of the statute’s several
exceptions. Appellees contend that the commercial activity exception to the FSIA strips each
appellant of their immunity.7
7
That exception provides:
(a) A foreign state shall not be immune from the jurisdiction of courts of the United
States or of the States in any case –
14
The commercial activity exception to the FSIA provides subject matter jurisdiction over
foreign sovereigns when the plaintiff’s claim has a sufficient connection, or more precisely a
“jurisdictional nexus,” with the United States. See Stena Rederi AB v. Comision de Contratos del
Comite Ejecutivo General del Sindicate Revolucionairo de Trabajabores Petroleros de Law Republica
Mexicana S.C., 923 F.2d 380, 386 (5th Cir. 1991). There are three types of acts which satisfy this
jurisdictional nexus requirement:
(1) a commercial activity carried on in the United States;
(2) an act performed in the United States in connection with a commercial
activity carried on outside the United States; and
(3) a commercial activity carried on outside the United States that has a direct
effect in the United States.
28 U.S.C. § 1605(a)(2). In addition, “there must be a connection between the plaintiff’s cause of
action and the commercial acts of the foreign sovereign.” Stena Rederi, 923 F.2d at 386. This
connection is critical. “Isolated or unrelated commercial actions of a foreign sovereign in the United
States are insufficient to support a commercial activities exception to sovereign immunity.” Id. at 387.
Instead, the connection “must be material.” Id.
Appellees attempt to establish subject matter jurisdiction through the latter two clauses of
§ 1605(a)(2). We addresses each in turn.
A
As for the seco nd clause of § 1605(a)(2), appellees rely on CORFINO’s act in sending its
agent Yuri Melara Berlioz to Mississippi to make a demand on a bank guarantee issued by the State
Bank and Trust in Bro okhaven, Mississippi. This act was performed in the United States, and
undeniably has connection with CORFINO’s business activities conducted in Honduras. As such,
(2) in which the action is based upon a commercial activity carried on in the
United States by a foreign state; or upo n 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).
15
appellee argue this act provides the jurisdictional nexus to establish subject matter jurisdiction over
the appellants.
We cannot agree. The act specified in second clause of § 1605(a)(2) is “generally understood
to apply to non-commercial acts in the United States that relate to commercial acts abroad.” Voest-
Alpine Trading USA Corp. v. Bank of China, 142 F.3d 887, 892 n.5 (5th Cir.) (emphasis added), cert.
denied 119 S.Ct. 591 (1998). Because appellees point to an exclusively commercial action in the
United States they have not proven this exception applies. Perhaps more importantly, appellants also
argue that this unconsummated demand on the Mississippi bank has nothing to do with the appellees’
contract, tort, property, and RICO claims. As such, we decline to find subject matter jurisdiction on
the basis of this act.
B
Next, appellees contend that appellants’ Honduras business activities, upon which the
complaint was based, had a direct effect in the United States, and that these activities serve as a
jurisdictional nexus for our subject matter jurisdiction. Appellees point to five business activities:
(1) Appellants’ leasing the sawmill, which produces and sells woods products;
(2) Appellants’ knowledge that Byrd and others would obtain a loan of $1 million
to refurbish the mill;
(3) Appellants’ request of proof of Byrd and Simmons Lumbers’ good financial
standing;
(4) Appellants’ knowledge that the lease required the appellees would acquire fire
insurance (worth $2 million), a bank guarantee to cover utilities (worth
$55,000); and
(5) Appellants’ knowledge and implicit consent, every step of the way, that
Americans were being involved in the project.
In making this argument, appellees rely heavily on our decision in Voest-Alpine Trading USA Corp.
v. Bank of China, 142 F.3d 887 (5th Cir.), cert. denied 119 S.Ct. 591 (1998). In Voest-Alpine, we
held that a nontrivial financial loss to a plaintiff was sufficient to confer the district court with subject
matter jurisdiction. See id. at 897. There, an American corporation brought an action against the
Bank of China when that bank refused to honor a letter of credit it had issued to the benefit of the
American corporation. See id. at 890. The plaintiff corporation had instructed the defendant bank
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to wire the $1.2 million to plaintiff’s Texas bank. See id. at 890. We found that the failure to pay
on a letter of credit caused a direct effect in the United States because “Voest-Alpine’s nonreceipt
of funds in its Texas bank account followed as an immediate consequence of the Bank of China’s
actions.” Id. at 896.
Appellants submit that Voest-Alpine is distinguishable. In that case, t he plaintiff and
defendant had a relationship between themselves. See id. at 890. In the instant appeal, say
appellants, the appellees had a relationship with others, who in turn had a contractual relationship
with appellants. The lease connecting them had another party (defendant Simmons) as the lessee, and
appellees only entered into the scene as an assignee. This renders the relationship indirect.
Appellants rightly acknowledge that there is a danger of expanding the third clause of §
1605(a)(2) to include too much. See id. at 897 (Reavley, J., concurring) (“If the mere financial loss
resulting from the breach or tort satisfies the statute, an American plaintiff need only prove
commercial activity. Perhaps that was the intent of Congress, but I agree with other circuits.”). On
these facts, however, we cannot agree with the appellants. According to appellees’ allegations,
appellants foresaw and perhaps even helped to plan the financial harms which occurred to appellees.
There mere fact that appellees were the assignee of the lease at issue does nothing to weaken the
relationship between appellees and appellants; appellees’ status as assignee means that they replace
for all effective purposes the original lessee. We therefore conclude that the district court correctly
asserted subject matter jurisdiction over the appellants under this clause of the commercial activity
exception to the FSIA..
CONCLUSION
For the reasons set forth above, we assert appellate jurisdiction over part of the appeal,
DISMISS the remainder, and AFFIRM the relevant decision of the district court.
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