F I L E D
United States Court of Appeals
Tenth Circuit
PUBLISH
DEC 9 1999
UNITED STATES COURT OF APPEALS
PATRICK FISHER
Clerk
TENTH CIRCUIT
HENRY T. SOUTHWAY, aka
Butch Southway; SOUTHWAY
CONSTRUCTION COMPANY, INC.;
DOUGLAS HOUGHTON; RANDY
THURSTON; J. E. LOSAVIO, JR.; RUSS
GRAY, dba Gray Real Estate,
Plaintiffs-Appellees,
v. No. 98-1112
CENTRAL BANK OF NIGERIA;
REPUBLIC OF NIGERIA,
Defendants-Appellants,
and
LAW FIRM OF KIRK P. BROWN, P.C.;
KIRK PATTERSON BROWN, dba
The Communications Connection,
individually; HELEN TOMICICH, dba
The Communications Connection,
individually,
Defendants.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
(D.C. No. 96-B-2540)
(994 F. Supp. 1299)
Joseph E. Losavio, Jr., Law Offices of J. E. Losavio, Pueblo, Colorado, for
Plaintiffs-Appellees.
Steven David Plissey (Michael A. Williams with him on the brief), of Williams,
Youle & Koenigs, P.C., Denver, Colorado, for Defendants-Appellants.
Before TACHA, HOLLOWAY, and BALDOCK, Circuit Judges.
BALDOCK, Circuit Judge.
The general immunity provision of the Foreign Sovereign Immunities Act of
1976 (FSIA), 28 U.S.C. §§ 1330, 1602-1611, provides:
Subject to existing international agreements to which the United States is
a party at the time of enactment of this Act, 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. The FSIA provides the exclusive means by which federal and state
courts may obtain subject-matter jurisdiction over civil suits involving foreign states, their
agencies, or instrumentalities. Argentine Republic v. Amerada Hess Shipping Corp., 488
U.S. 428, 443 (1989). In this interlocutory appeal, we address two issues involving the
federal district court’s subject-matter jurisdiction under the FSIA: (1) Whether the FSIA
prohibits the district court from exercising subject-matter jurisdiction over civil actions
against foreign sovereigns based on a pattern of racketeering activity under the Racketeer
Influenced and Corrupt Organizations Act of 1970 (RICO), 18 U.S.C. §§ 1961-1968; and,
if not, (2) Whether the FSIA’s commercial activity exception, 28 U.S.C. § 1605(a)(2),
2
applies to the alleged racketeering activity of Defendants Central Bank of Nigeria (CBN)
and Republic of Nigeria (RN), thus obviating their sovereign immunity from suit under
the FSIA? We answer the first question “no,” and the second question “yes.”
I.
The detailed facts giving rise to this action are well stated in the district court’s
opinion, Southway v. Central Bank of Nigeria, 994 F. Supp. 1299, 1302-04 (D. Colo.
1998), and we need not repeat them here. Suffice it to say that this action arose from an
alleged scheme in which numerous individuals, including officials of Defendants CBN
and RN, sought to defraud Plaintiffs, a group of Colorado investors. Purported members
of the Nigerian National Petroleum Company (NNPC) allegedly solicited Defendant Kirk
Brown, a Pueblo, Colorado attorney, to assist them in collecting $21.3 million from an
“over-invoiced” contract for oil drilling machinery. In exchange for Brown’s assistance,
the NNPC members agreed to pay Brown a percentage of the proceeds. Between
November 1995 and April 1996, numerous communications occurred between Brown and
purported representatives of CBN, RN, and NNPC. Brown and his wife, Helen
Tomicich, recruited several Colorado investors to help them pay the “up-front costs,”
which CBN and RN officials demanded prior to the payoff. The Nigerians’ offer turned
out to be a scam in which the investors together lost over one-half million dollars.
This lawsuit followed.
3
In their complaint against Defendants CBN and RN,1 Plaintiffs invoked the
district court’s jurisdiction under the commercial activity exception to the FSIA.
That section 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–
...
(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). See also Verlinden B.V. v. Central Bank of Nigeria, 461 U.S.
480, 493 & n.20 (1983) (subject-matter jurisdiction under the FSIA depends on the
existence of a specified exception to the FSIA). Plaintiffs alleged that Defendants CBN
and RN “and others . . . conspired with one another to defraud and commit theft of money
from the plaintiffs . . . by means of fraudulent and deceptive schemes,” constituting
commercial activity within the meaning of § 1605(a)(2). Plaintiffs further alleged that
Defendants’ scheme violated RICO, 18 U.S.C. §§ 1961-1962 & 1964. The predicate acts
on which Plaintiffs based their civil RICO claims included, among others, mail fraud, 18
U.S.C. § 1341; wire fraud, 18 U.S.C. § 1343; and transfer of stolen property, 18 U.S.C.
§§ 2314-2315.
1
Plaintiffs did not name the purported members of the NNPC allegedly involved
in the scheme, or the NNPC itself, as parties to their suit.
4
Defendants CBN and RN moved to dismiss Plaintiffs’ complaint for lack of
subject-matter jurisdiction. See Fed. R. Civ. P. 12(b)(1). According to Defendants, the
FSIA did not provide the district court with jurisdiction over Plaintiff’s civil RICO
claims, because RICO requires such claims to be based on “indictable” acts. 18 U.S.C.
§ 1961(1)(B). Defendants argued that because a foreign sovereign is immune from
criminal indictment under the FSIA, the predicate acts upon which Plaintiffs’ based their
civil RICO claims were not indictable. Thus, Defendants claimed Plaintiffs’ civil RICO
action necessarily failed. In the alternative, Defendants argued that the FSIA’s
commercial activity exception did not apply to their conduct because (1) the alleged
scheme involved criminal activity in which commercial actors do not typically engage; (2)
Defendants CBN and RN had no contractual relationship with Plaintiffs; and (3) the
alleged scheme was based upon tortious conduct outside the FSIA’s exceptions under 28
U.S.C. § 1605(a)(5)(B).
The district court denied Defendants’ motion to dismiss, holding that (1) “the
FSIA plainly confers jurisdiction over civil RICO actions against a foreign sovereign”;
and (2) “the activity carried on by the Nigeria[n] defendants . . . [constituted] ‘commercial
activity’” within the meaning of the FSIA, thereby defeating Defendants’ claim to
sovereign immunity.2 Southway, 994 F. Supp. at 1306-09. Defendants CBN and RN
All parties agree that CBN and RN are “foreign states” within the meaning of the
2
FSIA. See 28 U.S.C. § 1603(a), (b) (the term “foreign state” includes agencies and
(continued...)
5
appealed, renewing their objections to the district court’s jurisdiction.
The denial of a claim to sovereign immunity is immediately appealable under
the collateral order doctrine. See Affiliated Ute Citizens v. Ute Indian Tribe, 22 F.3d
254, 255-56 (10th Cir. 1994). We review de novo the district court’s determinations
regarding subject-matter jurisdiction and sovereign immunity under the FSIA. See
Ordinance 59 Assoc. v. United States Dept. of the Interior Sec., 163 F.3d 1150, 1152
(10th Cir. 1998). Like the district court, we accept the complaint’s allegations as true and
ask whether those allegations are sufficient to establish Plaintiffs’ entitlement to proceed.
Id. Applying this standard, we affirm and remand for further proceedings.
II.
Defendants CBN and RN first argue that the district court has no subject-matter
jurisdiction over Plaintiffs’ civil RICO claims under 18 U.S.C. § 1964(c).3 Plaintiffs’
civil RICO claims are based on a pattern of racketeering activity under §§ 1961(1)(B) &
1962. As applicable to this appeal, 18 U.S.C. § 1961(1)(B) defines “racketeering
activity” as “any act which is indictable” under the federal mail fraud, wire fraud, or
transfer of stolen property statutes, 18 U.S.C. §§ 1341, 1343, 2314-2315. Defendants
(...continued)
2
instrumentalities of a foreign state).
3
Section 1964(c) provides in relevant part: “Any person injured in his business or
property by reason of a violation of section 1962 of this chapter may sue therefor in any
appropriate United States district court and shall recover threefold the damages he
sustains and the cost of the suit, including a reasonable attorney’s fee . . . .” 18 U.S.C.
§ 1964(c).
6
assert that because foreign states, their agencies, and instrumentalities are immune from
criminal indictment under the FSIA, the predicate acts upon which Plaintiffs’ rely for
their civil RICO claims are not “indictable.”
Defendants’ argument that the FSIA does not provide the district court with
subject-matter jurisdiction over Plaintiffs’ RICO-based civil claims rests upon the
questionable presumption that Congress intended to provide foreign sovereigns with
immunity from criminal indictment under the FSIA. We are unwilling to presume that
Congress intended the FSIA to govern district court jurisdiction in criminal matters. The
FSIA’s grant of jurisdiction to the district courts addresses only civil actions: “The
district courts shall have original jurisdiction . . . of any nonjury civil action against a
foreign state . . . as to any claim for relief . . . with respect to which the foreign state is not
entitled to immunity either under sections 1605-07 of this title or under any applicable
international agreement.” 28 U.S.C. § 1330(a). (emphasis added). In Verlinden B.V.,
the Supreme Court explained that the FSIA “contains a comprehensive set of legal
standards governing claims of immunity in every civil action against a foreign state or its
political subdivisions, agencies, or instrumentalities.” Verlinden B.V., 461 U.S. at 488
(emphasis added). At least one circuit has relied on Verlinden B.V. to expressly state that
the FSIA does not address foreign sovereign immunity in the criminal context. United
States v. Noriega, 117 F.3d 1206, 1212 (11th Cir. 1997).
Because the FSIA makes no mention of foreign sovereign immunity in the criminal
7
context, the question of whether Defendants CBN and RN may commit “indictable” acts
under RICO is much more uncertain than Defendants suggest.4 A court of law, however,
has no business attempting to define the scope of foreign sovereign immunity in the first
instance. See In re Doe, 860 F.2d 40, 45 (2d Cir. 1988) (declining to apply the FSIA to
resolve a head-of-state immunity issue). If Congress intended defendants such as CBN
and RN to be immune from criminal indictment under the FSIA, Congress should amend
the FSIA to expressly so state. The executive and legislative branches of our government
are the principal players in the field of foreign relations and international comity,
and consequently are much better equipped than a court of law to address the question
of foreign sovereign immunity in the criminal context.5
4
Lest any confusion exist, we do not hold that the FSIA confers criminal
jurisdiction over foreign sovereigns. We simply conclude that because the FSIA does not
address criminal sovereign immunity, Defendants’ argument that they enjoy criminal
sovereign immunity under the FSIA, and thus cannot commit indictable “acts” for
purposes of a civil RICO claim, necessarily fails.
5
Defendant CBN and RN rely on Berger v. Pierce, 933 F.2d 393 (6th Cir. 1991),
to suggest that they are unamenable to Plaintiffs’ civil RICO claims. In Berger, the Sixth
Circuit correctly held that a federal agency was not subject to a civil RICO claim:
Section 1962 states a requirement of “racketeering activity” as a predicate
for a civil RICO action. Section 1961(1), in turn, defines “racketeering
activity,” which requires that the defendant be, variously, “chargeable,”
“indictable,” or “punishable” for violations of specific state and federal
criminal provisions. The assertion that the . . . [federal agency] was
engaged in a RICO conspiracy under section 1962(d) was patently defective
as a matter of law, since it is self-evident that a federal agency is not subject
to state or criminal prosecution.
Id. at 397. Accord McNeily v. United States, 6 F.3d 343, 350 (6th Cir. 1993). Consistent
with Berger, Chief Justice Marshall established long ago that “[t]he universally received
(continued...)
8
The broad language of the FSIA itself dictates our conclusion that the FSIA does
not prohibit the district court from exercising subject-matter jurisdiction over civil RICO
actions against foreign sovereigns. The FSIA’s jurisdictional grant provides the district
court with subject-matter jurisdiction over “any nonjury civil action against a foreign state
. . . as to any claim for relief” as to which one of the FSIA’s enumerated exceptions
applies. 28 U.S.C. § 1330(a) (emphasis added). Moreover, the FSIA’s commercial
activity exception expressly states that “[a] foreign state shall not be immune from the
jurisdiction of courts of the United States . . . in any case . . . in which the action is
based upon a commercial activity . . . .” Id. at 1605(a)(2) (emphasis added).6 Surely,
Plaintiffs’ civil RICO claims against Defendants CBN and RN, premised upon the
5
(...continued)
opinion is that no suit can be commenced or prosecuted against the United States.”
Cohens v. Virginia, 19 U.S. 264, 411-412 (1821). Since then, the Supreme Court has
repeatedly endorsed the principle that the United States cannot be lawfully sued without
its consent in any case, and only Congress can consent to suit against the United States.
See Erwin Chemerinsky, Federal Jurisdiction § 9.2 at 544-45 (2d ed. 1994). Prior to
1952, foreign states may have enjoyed the same absolute immunity from suit as the
United States and its agencies. In 1952, however, the State Department officially
announced that it would suggest immunity for the public acts of foreign states but would
withhold this suggestion for private acts. The Department’s suggestions were dispositive
in all suits prior to passage of the FSIA. See Note, Ex-Head of State Immunity: A
Proposed Statutory Tool of Foreign Policy, 97 Yale L.J. 299, 300-01 & n.5 (1987). See
also Republic of Argentina v. Weltover, 504 U.S. 607, 613 (1992) (“[A]fter the State
Department endorsed the restrictive theory of foreign sovereign immunity in 1952, the
lower courts consistently held that foreign sovereigns were not immune from the
jurisdiction of American courts in cases arising out of purely commercial transactions.”)
(internal quotations omitted).
6
Notably, RICO’s language also supports our conclusion. Section 1961(1)(B)
speaks to indictable “acts,” not actors.
9
purported commercial activity of Defendants, fall within the category of “any” civil
claim, action, or case.
Furthermore, because Congress viewed sovereign immunity under the FSIA as
an affirmative defense to be specially pleaded or waived, rather than a jurisdictional bar
to suit, Congress surely viewed commercial acts such as those in which Defendants CBN
and RN allegedly engaged, as “indictable” for purposes of a civil RICO claim. The
legislative history of the FSIA reveals that Congress viewed a foreign state’s sovereign
immunity not as a bar to suit, but as an affirmative defense which the foreign state
ultimately has the burden of proving:
[S]ince sovereign immunity is an affirmative defense which must be
specially pleaded, the burden will remain on the foreign state to produce
evidence in support of its claim of immunity. Thus, evidence must be
produced to establish that a foreign state or one of its subdivisions, agencies
or instrumentalities is the defendant in the suit and that the plaintiff’s claim
relates to a public act of the foreign state–that is, an act not within the
exceptions in sections 1605-07.
H.R. 94-1487, at 17 (1976), reprinted in 1976 U.S.C.C.A.N. 6604, 6616. Whether the
doctrine of sovereign immunity is jurisdictional or simply an affirmative defense which
a foreign state may waive is unimportant to our analysis. See Verlinden B.V., 461 U.S. at
493 n.20 (notwithstanding the FSIA’s legislative history, subject-matter jurisdiction under
the FSIA turns on the existence of an exception in §§ 1605-1607; thus, district court must
determine the availability of immunity under the FSIA regardless of foreign state’s
appearance). What is important for the purpose of ascertaining Congressional intent is
10
that Congress viewed sovereign immunity under the FSIA as an affirmative defense to
be specially pleaded or waived.
Defendants CBN and RN essentially ask us in construing RICO and the FSIA to
ascribe an intent to Congress which would effectively insulate foreign states, their agents,
and instrumentalities from the scope of civil RICO. We do not believe Congress
envisioned such a construction of RICO and the FSIA. Congress’ purpose in enacting the
FSIA was to codify the “restrictive” principle of sovereign immunity–to restrict the
sovereign immunity of foreign states “to cases involving acts of a foreign state which are
sovereign or governmental in nature, as opposed to acts which are either commercial in
nature or those which private persons normally perform.” H.R. 94-1487, at 14 (1976),
reprinted in 1976 U.S.C.C.A.N. 6604, 6613. Meanwhile, in enacting RICO, Congress
expressly instructed courts to liberally construe its provisions “to effectuate its remedial
purpose.” Pub. L. No. 91-452, § 904(a), 84 Stat. 947 (1970). RICO’s “‘remedial
purposes’ are nowhere more evident than in the provision of a private action for those
injured by racketeering activity,” Sedima, S.P.R.L. v. Imrex Co., Inc., 473 U.S. 479, 498
(1985), activity which often will be commercial in nature.
Accordingly, we hold that the FSIA confers subject-matter jurisdiction upon
the district court over civil RICO claims against foreign states, their agencies, and
instrumentalities, provided that the commercial activity exception, or another exception
contained in §§ 1605-07 of the FSIA applies. We next address the applicability of the
11
FSIA’s commercial activity exception to this case.
III.
The district court relied on the third clause of the FSIA’s commercial activity
exception to establish its subject-matter jurisdiction over Plaintiffs’ action:
(a) A foreign state shall not be immune from the jurisdiction of courts of
the United Sates . . . in any case–
...
(2) 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). See Southway, 994 F. Supp. at 1307-08. As the district court
noted, application of the commercial activity exception under the third clause of
§ 1605(a)(2) above, requires the following: Plaintiffs’ action must (1) be based on an act
outside the United States; (2) that was done “in connection with” a commercial activity;
and (3) that caused a “direct effect” in the United States. Id. at 1308. Because we agree
with the district court that Defendants’ conduct falls within the third clause of
§ 1605(a)(2), we need not address the applicability of the commercial activity exception’s
first and second clauses. See supra, at 4.
A.
Defendants do not challenge that Plaintiffs’ suit is based on acts occurring outside
the United States, but which had a direct effect in the United States. Instead, Defendants
CBN and RN claim that the alleged “scam to steal money” was not done “in connection
with” a commercial activity as required, because illegal acts do not qualify as
12
“commercial activity” under the FSIA. Contrary to Defendants’ position, we believe
that illegal acts may be done “in connection with” a commercial activity as to invoke
the FSIA’s commercial activity exception.
The FSIA defines “commercial activity” as “either a regular course of commercial
conduct or a particular commercial transaction or act. 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.” 28 U.S.C.
§ 1603(d). In Republic of Argentina v. Weltover, 504 U.S. 607 (1992), the Supreme
Court further explained the meaning of “commercial” as used in the FSIA:
[W]hen a foreign government acts, not as regulator of a market, but in the
manner of a private player within it, the foreign sovereign’s actions are
“commercial” within the meaning of the FSIA. . . . [B]ecause the Act
provides that the commercial character of an act is to be determined by
reference to its “nature” rather than its “purpose,” 28 U.S.C. § 1603(d), the
question is not whether the foreign government is acting with a profit
motive or instead with the aim of fulfilling uniquely sovereign objectives.
Rather, the issue is whether the particular actions that the foreign state
performs (whatever the motive behind them) are the type of actions by
which a private party engages in “trade and traffic and commerce.”
Id. at 614 (emphasis in original).
Undoubtedly, the purpose of Defendants CBN and RN’s alleged scheme was to
defraud Plaintiffs (and perhaps Defendants Brown and Tomicich), and steal from them.
But as § 1603(d) and Weltover tell us, the purpose or motive behind Defendants’ actions
is irrelevant. See Weltover, 404 U.S. at 617 (“[I]t is irrelevant why . . . [the foreign state]
participated in the bond market in the manner of a private actor; it matters only that it did
13
so.”) (emphasis in original). Simply because the activities of a “foreign state” are illegal
or, as the district court put it, “nefarious,” Southway, 994 F. Supp. at 1309, does not mean
those activities can never be commercial in nature or connected with a commercial
activity. See Cicippio v. Islamic Republic of Iran, 30 F.3d 164, 167-68 (D.C. Cir. 1994)
(suggesting that the illegal character of alleged acts may be irrelevant in judging their
commercial character under the FSIA). Rather, in determining whether the alleged
activity of Defendants CBN and RN was commercial, we must focus on the nature of the
course of conduct among the parties, and ask whether the activity is one in which
commercial actors typically engage. See id. at 167.
Accepting the factual allegations of Plaintiffs’ complaint as true, we easily
conclude that Defendants’ alleged conduct constituted acts done “in connection with
a commercial activity” under § 1605(a)(2) of the FSIA. Given the commercial nature of
contractual relationships in the marketplace, many contracts entered into by a “foreign
state” will fall within the FSIA’s commercial activity exception precisely because those
contracts are of a type in which private actors might enter. This case is no exception.
Congress intended the FSIA’s commercial activity exception to encompass a “broad
spectrum of endeavor.” H.R. 94-1487, at 16, reprinted in 1976 U.S.C.C.A.N. 6604,
6614-15. “Certainly, if an activity is customarily carried on for profit, its commercial
nature could readily be assumed.” Id.
Here, we deal with an assignment contract–a contract for the assignment of
14
proceeds arising from a purported contract between NNPC and a foreign contractor for oil
drilling machinery. The alleged assignment contract assigned to Defendant Brown the
right to receive partial payment on the underlying contract between NNPC and the foreign
contractor in exchange for Brown allowing the two parties to use his United States bank
account to facilitate the transfer of over-invoiced funds. The NNPC engaged alleged
representatives of Defendants CBN and RN to assist in executing the funds transfer.
Defendant Brown similarly engaged Plaintiffs. In this case, nothing sovereign stands out
about Defendants’ behavior–the alleged assistance in the execution of an assignment
contract involving the proceeds from the sale of drilling equipment. See Adler v.
Republic of Nigeria, 107 F.3d 720, 725-26 (9th Cir. 1997) (holding that defendant
engaged in conduct “in connection with” a commercial activity by entering into an
agreement for the assignment of a service contract). Accordingly, we hold that
Defendants CBN and RN’s alleged conduct falls within the FSIA’s commercial activity
exception.
B.
Defendants next claim that the district court improperly imputed the alleged
commercial activities of the NNPC to Defendants CBN and RN to establish subject-
matter jurisdiction under the FSIA. As Defendants point out, Plaintiffs did not allege that
Defendants were involved in making or performing the underlying NNPC contract. Nor
did Plaintiffs allege that Defendants CBN and RN were personally responsible for the
15
purported assignment of the NNPC contract to Defendant Brown. Be that as it may, we
do not believe, contrary to Defendants’ suggestion, that a direct contractual relationship
between Defendants and Plaintiffs is necessary to sustain Plaintiffs’ cause of action
against Defendants under the FSIA.
A fair reading of the district court’s opinion in this matter indicates that the court
did not improperly impute NNPC’s conduct to Defendants. In its ruling, the district court
considered matters outside the pleadings which Defendants submitted in support of their
claim. Southway, 994 F. Supp. at 1311. In fairness to Plaintiffs, the court permitted
Plaintiffs to undertake limited discovery “on the questions of agency and whether the
Nigerian defendants actually participated in the alleged conduct,” to show that CBN and
RN officials “acted within the scope of their employment on behalf of Nigeria and CBN.”
Id. What Plaintiffs’ limited discovery will uncover remains uncertain at this stage, for the
record on appeal provides no indication that such discovery has yet been undertaken.
At this stage, however, a fair reading of Plaintiffs’ complaint suggests that
Defendants CBN and RN are proper parties to this suit. The complaint plainly states that
CBN and RN officials conspired with NNPC and others to defraud Plaintiffs. The
complaint incorporates various letters evidencing communications between Defendant
Brown and individuals purporting to be representatives of Defendants CBN and RN.
These include (1) a letter from “Bunu Isiaka, Debt Reconciliation Officer of CBN’s
Office of Debt Reconciliation Committee, Foreign Operations Department in Tinubu
16
Square, Lagos, Nigeria” to Brown; (2) a letter from “Dr. M. R. Rasheed, Director,
Foreign Operations Department” of CBN to Brown; and (3) a letter on government
letterhead from “Major General Joe Garba” of the “Foreign Exchange Allocation
Department, Office of the Presidency, Garki District Office, Abuja, Nigeria” to Brown.
On its face, the complaint is quite sufficient to withstand Defendants’ argument that
Plaintiffs improperly named them as parties to their suit.
C.
Finally, Defendants CBN and RN claim that the FSIA’s tort exception and
applicable restrictions, contained in 28 U.S.C. § 1605(a)(5) & (a)(5)(B), respectively,
provide them with immunity from Plaintiffs’ civil RICO claims. That section provides
in relevant part:
(a) A foreign state shall not be immune from the jurisdiction of courts of
the United States . . . in any case–
...
(5) not otherwise encompassed in paragraph (2) above [i.e., the
commercial activity exception], in which money damages are sought against
a foreign state for . . . damage to or loss of property, occurring in the United
States and cause by the tortious act or omission of that foreign state or of
any official or employee of that foreign state while acting within the scope
of his office or employment; except this paragraph shall not apply to–
...
(B) any claim arising out of . . . misrepresentation, deceit, or interference
with contract rights.
Id. (emphasis added). Defendants argue that because the alleged scheme to defraud
Plaintiffs involved misrepresentation and deceit, § 1605(a)(5)(B) restores their sovereign
immunity from suit. In other words, Defendants CBN and RN suggest that subsection
17
(a)(5)(B) limits the commercial activity exception in § 1605(a)(2), as well as the tort
exception in § 1605(a)(5). Defendants’ argument is meritless.
The plain language of § 1605(a)(5) indicates that the tort exception applies to tort
actions for money damages “not otherwise encompassed” by § 1605(a)(2)’s exception
relating to commercial activity. Even assuming Plaintiffs’ claims against Defendants
sound in tort rather than contract, those claims nonetheless are based upon alleged
commercial activity, and thus encompassed by § 1605(a)(2). See Export Group v. Reef
Industries, Inc., 54 F.3d 1466, 1477 (9th Cir. 1995) (holding that § 1605(a)(5)(B)’s
restrictions on the FSIA’s “non-commercial torts” exception do not restore sovereign
immunity for FSIA claims based on a foreign state’s “commercial activities”).
The legislative history of the FSIA’s tort exception confirms our understanding of
this provision. In enacting § 1605(a)(5), Congress intended to address the problem of
“noncommercial torts,” namely traffic accidents: “The purpose of section 1605(a)(5) is to
permit the victim of a traffic accident or other noncommercial torts to maintain an action
against a foreign state to the extent otherwise provided by law.” H.R. 94-1487, at 21
(1976), reprinted in 1976 U.S.C.C.A.N. 6604, 6620 (emphasis added). Thus, where
§ 1605(a)(2)’s commercial activity exception applies, as in this case, § 1605(a)(5)(B)’s
restriction on subsection (a)(5)’s tort exception for torts arising out of misrepresentation
and deceit simply has no application. This is so because subsection (a)(5)(B) of § 1605
18
by its express language applies only to subsection (a)(5).
AFFIRMED and REMANDED.
19