IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
No. 95-30295
LYNDA ALDY, on behalf of Charles Durwood Aldy,
Individually and as legal representative;
JANET M. WALKER,
Plaintiffs-Appellees,
versus
VALMET PAPER MACHINERY, GLOBE INC., THORNTON
INDUST. INC., FENNER FLUID POWER, FENNER
P.L.C., and J.H. FENNER & CO., LTD.,
Defendants,
versus
VALMET OY,
Defendant-Appellant.
*******************************
MARY ANN BUGGS MALONE, MARCUS T. MALONE, KEITH
T. MALONE and MIA SHALETTE MALONE,
Plaintiffs-Appellees,
versus
VALMET PAPER MACHINERY and THORNTON
INDUSTRIES, INC.,
Defendants,
versus
VALMET OY,
Defendant-Appellant.
Appeal from the United States District Court
for the Western District of Louisiana
January 22, 1996
Before REAVLEY, HIGGINBOTHAM, and BARKSDALE, Circuit Judges.
HIGGINBOTHAM, Circuit Judge:
This case presents the applicability of the commercial
activities exception to the Foreign Sovereign Immunities Act, 28
U.S.C. §§ 1602 et seq., in a products liability suit asserting
failure to warn, design, and manufacturing defects in a machine
designed and manufactured in Finland and installed in Louisiana.
We conclude that the exemption is applicable and affirm the
district court’s refusal to dismiss for lack of jurisdiction.
I.
On March 18, 1991, Charles Aldy and Charley Malone were
crushed to death while they were working in a paper machine at the
Stone Container Corporation's paper mill in Hodge, Louisiana.
Aldy's wife and daughter brought a wrongful death action naming,
among others, the alleged manufacturer of the paper machine, Valmet
Paper Machinery, as a defendant under Louisiana's product liability
statute. See La.R.S. §§ 9:2800.52-57. In a separate action,
Malone's survivors sued VPI, also alleging that VPI's faulty design
and construction of the paper machine caused Malone's death. VPI
removed both actions to the United States District Court for the
Western District of Louisiana. After the Aldys and the Malones
discovered that VPI had no connection to the paper machine, they
amended their complaints to name Valmet Oy as a defendant. Valmet
had designed, manufactured, and supervised the on-site construction
of the paper machine.
Valmet moved to dismiss the Aldys' complaint for lack of
subject matter jurisdiction, claiming immunity under the Foreign
2
Sovereign Immunities Act. Magistrate Judge Simon issued his report
and recommendation concluding that the Aldys' suit fell within the
commercial activities exception to the FSIA.1 The Magistrate Judge
pointed to the third clause of § 1605(a)(2), which provides that a
foreign sovereign is not immune from suit in any case in which the
action is based "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." The magistrate judge found that Valmet was in the
business of producing paper-making machines in Finland and that the
Aldys' suit was based upon Valmet's allegedly negligent acts of
designing and manufacturing the paper machine in Finland.
Moreover, the magistrate judge found that the Aldys' complaint
alleged that Valmet's faulty design and manufacture "caused a
direct effect in the United States, that is the death of the
plaintiffs' decedent."
In addition, the magistrate judge rejected Valmet's argument
that the Aldys must identify specific defects in the design or
manufacture of the paper machine that caused the accident in order
to establish jurisdiction under the FSIA. While the magistrate
judge noted that the failure to identify such defects would subject
the Aldys to dismissal on a motion for summary judgment on the
merits, he concluded that the complaint's allegations were
sufficient to assert subject matter jurisdiction over the claims
1
28 U.S.C. § 1605(a)(2).
3
against Valmet. The district court adopted the magistrate judge's
report.
Valmet moved for summary judgment in both the Aldys' and the
Malones' suits. It reurged its argument that it was immune under
the FSIA, this time because there was allegedly no evidence in the
record to indicate that Valmet was negligent in designing or
manufacturing the paper machine. The district court denied
Valmet's motion, noting that the court had already addressed and
rejected Valmet's FSIA arguments. The district court later
consolidated the Aldy and Malone suits.
After discovery had been completed, Valmet once again moved
for summary judgment. Valmet argued that the Aldys and Malones had
failed to produce any evidence that the paper machine was
unreasonably dangerous as a result of Valmet's design or
manufacture of the machine. Once again, it reurged its argument
that is was immune from suit under the FSIA because the Aldys and
the Malones had failed to demonstrate a specific defect in the
design or manufacture of the paper machine. Finally, Valmet argued
that Louisiana's statute of peremption barred their claims.
The district court disagreed and denied Valmet's motion. The
district court found that the Aldys and Malones had produced
sufficient evidence that the paper machine was unreasonably
dangerous to withstand Valmet's motion for summary judgment.
Regarding Valmet's FSIA argument, the district court noted that
Valmet had not demonstrated any reason for the court to revisit its
earlier rulings holding that the commercial activities exception
4
applied to the Aldys' and Malones' claims against Valmet. Finally,
the court held that Louisiana's statute of peremption only applied
to contracts to build and not to contracts for the sale of
immovable property. Noting that Valmet had only shown that it
built the paper machine and then sold it to Stone Container's
predecessor, the district court held that the Aldys' and Malones'
suits were not barred by Louisiana's statute of peremption. This
timely appeal followed.
II.
The denial of summary judgment is not a final order appealable
under 28 U.S.C. § 1291, under the collateral order doctrine
established in Cohen v. Beneficial Industrial Loan Corp., 337 U.S.
541 (1949), but we have jurisdiction over interlocutory orders
denying claims of immunity under the FSIA. Stena Rederi AB v.
Comision de Contratos del Comite, 923 F.2d 380, 385 (5th Cir.
1991).
Valmet also appeals the district court's ruling that
Louisiana's statute of peremption does not bar the Aldys' and
Malones' suits. Unlike the district court's denial of sovereign
immunity, the denial of summary judgment on the grounds of a
statute of limitations is neither a final order, Weinstock Hermanos
& CIA Ltda v. American Aniline & Extract Co., 406 F.2d 1327, 1328
(3rd Cir. 1969), nor does it fit within that small category of
claims subject to immediate appeal under the Cohen doctrine.
United States v. Levine, 658 F.2d 113, 129 (3d Cir. 1981). We may
not consider the merits of Valmet's statute of peremption argument.
5
III.
No one disputes that Valmet qualifies as a foreign sovereign.
See 28 U.S.C. § 1603(b)(2). As such, it is immune from suit in the
United States unless one of the enumerated exceptions to the FSIA
applies.
The third clause of the commercial activities exception
provides that a foreign sovereign is not immune from suit in any
case in which the action is based "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). The
plain language of the provision limits our analysis to determining
whether the Aldys' and Malones' lawsuits are 1) based upon an act
outside the U.S., 2) that was taken in connection with a commercial
activity of Valmet outside the U.S.; and, 3) that caused a direct
effect in the U.S. Republic of Argentina v. Weltover, Inc., 504
U.S. 607, 611 (1992).
The first two elements ensure that "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 (emphasis
added). The Aldys' and Malones' suits are based upon the
commercial acts of Valmet outside the U.S. Valmet does not dispute
that it is in the business of designing and manufacturing paper
machines in Finland, nor does it dispute that it designed and
manufactured the paper machine in which Aldy and Malone were
killed. Moreover, the gravamen of the plaintiffs' suits are that
6
the paper machine "was unreasonably dangerous in its construction,
make-up composition and design." In short, the plaintiffs' suits
appear to be classic design and manufacturing defect suits, which
the third clause of the commercial activities exception is broad
enough to cover. See, e.g., Ohntrup v. Firearms Center Inc., 516
F.Supp. 1281, 1286-87 (E.D. Pa. 1981), aff’d, 760 F.2d 259 (3d Cir.
1985).
Valmet's next contention that the plaintiffs have failed to
prove that there is a direct causal nexus between Valmet's
commercial activity and the plaintiffs' injuries fares no better.
"[A]n effect is 'direct' if it follows 'as an immediate consequence
of the defendant's . . . activity.’" Weltover, 504 U.S. at 618.
Although there may be instances in which the causal chain of events
on which a plaintiff's suit is based is too attenuated to support
subject matter jurisdiction under the FSIA, this suit is not that
case. The plaintiffs maintain that Aldy's and Malone's deaths
resulted from either the negligent design or manufacture of the
paper machine or both. Stated another way, the Aldys and Malones
contend that Aldy's and Malone's deaths were an immediate
consequence of Valmet's negligent design and manufacturing of the
paper machine. These allegations are sufficient to confer subject
matter jurisdiction. See Ohntrup, 516 F.Supp. at 1287 (holding
that subject matter jurisdiction exists where defective product
that was designed and manufactured abroad caused injury to U.S.
purchaser).
7
Finally, Valmet argues that the commercial activities
exception does not encompass failure to warn claims. Relying upon
In re Air Crash Disaster Near Warsaw, Poland, 716 F.Supp. 84
(E.D.N.Y. 1989), rev'd on other grounds, 907 F.2d 1328 (2d Cir.
1990), Valmet argues that the failure to act is not an "act"
sufficient to confer subject matter jurisdiction under the FSIA.
We disagree. In re Air Crash Disaster held that "a failure to warn
does not constitute an 'act performed in the United States in
connection with a commercial activity of the foreign state
elsewhere' as required by the second commercial activity exemption
in the statute." 907 F.2d at 1333 (emphasis added). That case did
not hold that a failure to warn of a defect in a product designed
and manufactured outside the U.S. cannot be an act outside the U.S.
sufficient to confer subject matter jurisdiction under the third
clause of § 1605(a)(2). To the contrary, an omission is an act.
The critical question is whether the plaintiff's suit is based upon
an omission--the failure to warn--that occurred outside the U.S.
but caused a direct effect in the U.S.2 We have already answered
that question in the affirmative in this case.
IV.
We AFFIRM the order of the district court denying Valmet's
motion for summary judgment for lack of subject matter jurisdiction
2
The third clause of § 1605(a)(2) was unavailable to the
plaintiffs in In re Air Crash Disaster. The act upon which the
plaintiffs had based their suit did not cause a direct effect in
the U.S. since the deaths of plaintiffs' family members had
occurred outside the U.S. Stated another way, the plaintiffs in
that case were forced to argue that the failure to warn was an act
inside the U.S.
8
under the FSIA and we DISMISS Valmet's appeal from the district
court's order denying its state law statute of peremption defense.
9