Southway v. Central Bank of Nigeria

F I L E D
United States Court of Appeals
Tenth Circuit
PUBLISH
MAY 13 2003
UNITED STATES COURT OF APPEALS
PATRICK FISHER
Clerk
TENTH CIRCUIT

HENRY T. SOUTHWAY, also known as
Butch Southway; DOUGLAS
HOUGHTON, also known as Doug
Houghton; J.E. LOSAVIO, JR.,

Plaintiffs-Appellants,

and

SOUTHWAY CONSTRUCTION
COMPANY; RANDY THURSTON;
RUSS GRAY, doing business as Gray
Real Estate,

Plaintiffs,

v. No. 01-1436

CENTRAL BANK OF NIGERIA;
REPUBLIC OF NIGERIA,

Defendants-Appellees,

and

KIRK PATTERSON BROWN, doing
business as The Communications
Connection, also known as Kirk P.
Brown, doing business as The
Communications Connection; HELEN
TOMICICH BROWN, doing business as
The Communications Connection,

Defendants-Appellants.
 APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
(D.C. No. 96-B-2540)

Submitted on the briefs:

Max Addison Wilson, Esq., Pueblo, Colorado, for Plaintiffs-Appellants and
Defendants-Appellants.

Robert J. Brown, David H. Fromm, and Fred G. Wexler of Brown, Gavalas & Fromm
LLP, New York, New York, for Defendants-Appellees.

Before HENRY, Circuit Judge, and HOLLOWAY and BRORBY, Senior Circuit
Judges.

HOLLOWAY, Senior Circuit Judge.

After examining the briefs and appellate record, this panel has determined

unanimously to grant the parties’ request for a decision on the briefs without oral

argument. See Fed. R. App. P. 34(f); 10th Cir. R. 34 1(G). The case is therefore ordered

submitted without oral argument.

This suit alleges fraud perpetrated by the government of Nigeria. Nigeria asserts

its sovereign immunity. The victims of the fraud counter by invoking the “commercial

activity” exception to the federal statute codifying a foreign state’s immunity, the Foreign

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Sovereign Immunities Act of 1976, 28 U.S.C. § 1330 et seq. (FSIA).1 We agree with the

district court’s conclusion that the Nigerian defendants have proven that the commercial

activity exception to the FSIA does not apply, and accordingly affirm.

I.

The facts of this case are set out extensively elsewhere, including in an earlier

published opinion from this court and two published decisions by the district court. See

Southway v. Cent. Bank of Nigeria, 198 F.3d 1210, 1212-13 (10th Cir. 1999); Southway v.

Cent. Bank of Nigeria, 149 F. Supp. 2d 1268, 1269-72 (D. Colo. 2001); and Southway v.

Cent. Bank of Nigeria, 994 F. Supp. 1299, 1302-04 (D. Colo. 1998). We give only an

abbreviated version here. The second opinion above, appearing in 149 F. Supp. 2d at

1268, which granted summary judgment to the defendants for lack of subject matter

jurisdiction under the FSIA on July 5, 2001, is the opinion on appeal for disposition by us

now.

1
The “commercial activity” exception appears in 28 U.S.C. § 1605:

(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 . . . .

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 In November 1995 Kirk Brown, a lawyer practicing in Pueblo, Colorado, was

contacted by a person claiming to be a Nigerian citizen representing a Nigerian

construction firm. The person told Brown that the Nigerian government owed his firm

$21 million as payment for building a major oil pipeline. He further said that the

government was searching for an offshore account in which to deposit the money, as well

as an escrow agent to settle all claims by subcontractors and suppliers. Brown, through a

company he operates, the Communications Connection, agreed to become the escrow

agent. In return he would receive a portion of the proceeds deposited into the escrow

account.

During the next few months, Brown, along with his wife and business partner

Helen Tomicich Brown, exchanged several letters and faxes with individuals claiming to

represent the Nigerian government and its central bank. The documents they received

from Nigeria all appeared on official-looking letterhead, bearing various stamps and

signatures. Over time, the Browns learned that before the proceeds from the pipeline

construction project could be disbursed to their escrow account they would have to pay

certain up-front taxes and fees, such as a “stamp duty,” a “bond fee,” and “exchange rate

levies.” The Browns wired payment of these fees into accounts established at different

New York banks. They also paid three men, whom they met in Vienna, Austria, $10,000

in cash as a “handling fee” related to what they called “the contract.”

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 Short of funds necessary to pay all the costs, the Browns recruited several

investors, all of whom were promised lucrative returns for their contributions once the

money from Nigeria arrived. In total, the Browns, who raised approximately $500,000

from their investors, paid more than $700,000 in putative fees, taxes, and other costs. The

proceeds from the construction project were never deposited into the escrow account.

The Browns, victims of a classic advance-fee scam, were unable as a result to fulfill their

obligations to their investors.

In the instant suit the investors sued the Browns, the Communications Connection,

as well the Central Bank of Nigeria (CBN) and the Republic of Nigeria, alleging a

violation of the Racketeer Influenced and Corrupt Organizations Act of 1970 (RICO),

18 U.S.C. § 1961 et seq. In turn, the Browns filed a similar third-party complaint against

the Nigerian government and its central bank (the Nigerian defendants).

As they have from the lawsuit’s inception, the Nigerian defendants deny any

involvement in the scam that defrauded the Browns and their investors. They claim that

all documents purportedly written by Nigerian officials were forgeries, that imposters

posed as Nigerian government officials, and that the Browns and their investors fell

victim to a scheme known in Nigeria as a “419” scam, which takes its name from the

section of Nigeria’s criminal code that prohibits such advance-fee frauds.2

2
The United States government and the Nigerian government have issued repeated
warnings about the 419 scam, and it has been a fount of litigation across the country. See Keller
v. Cent. Bank of Nigeria, 277 F.3d 811 (6th Cir. 2002); Adler v. Fed. Republic of Nigeria, 219
F.3d 869 (9th Cir. 2000); Intercontinental Res., N.A. v. Fed. Republic of Nigeria, No.

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 II.

This is not the first time this controversy has been before us. Two years ago, a

panel of this court rejected an interlocutory appeal brought by the Nigerian defendants.

That appeal sprang from a ruling by the district court denying the Nigerian defendants’

motion to dismiss, which they asserted on sovereign immunity grounds under the Foreign

Sovereign Immunities Act, 28 U.S.C. § 1330 et seq. Viewing only the allegations stated

in the complaint, and accepting them as true, this court held that the Nigerian defendants

were subject to suit. Southway v. Cent. Bank of Nigeria, 198 F.3d at 1217-18. The panel

concluded that the facts set out in the complaint implicated an exception to the statute’s

grant of immunity, an exception carved out of the statute to allow suits “based upon a

commercial activity carried on in the United States by the foreign state.” 28 U.S.C.

§ 1605(a)(2).3

The case returned to the district court, where the parties conducted a lengthy and

contentious round of discovery. The Nigerian defendants later renewed their immunity

98-CIV-5114, 1999 WL 219909 (S.D.N.Y. Apr. 15, 1999).
3
To be precise, we determined that the mere illegality of an act does not necessarily
negate its commercial character. We therefore held that the commercial activity exception vested
subject matter jurisdiction in the district court, at least at the motion to dismiss stage. Southway,
198 F.3d at 1217-18. See also Adler v. Fed. Republic of Nigeria, 219 F.3d at 875 (“The fact that
the contract was for an illegal purpose . . . does nothing to destroy its commercial nature.”);
Keller v. Cent. Bank of Nigeria, 277 F.3d at 816 (holding that any fraud and bribery involved in
the scheme did not bar application of commercial activity exception).
The full text of 28 U.S.C. § 1605 (a) (2), which embodies the commercial activity
exception, appears in n.1, supra.

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claim, this time in a motion for summary judgment. They asserted that the Browns and

their investors failed to uncover facts sufficient to support the so-called “commercial

activity” exception on which they relied to pierce the Nigerian defendants’ immunity.

The district court agreed and ruled that subject matter jurisdiction over the Nigerian

defendants was wanting and granted them summary judgment. Southway,

149 F. Supp. 2d. at 1278. The Browns and their investors (the plaintiff-appellants) now

appeal the district court’s grant of summary judgment on several grounds.

The Appellants’ Opening Brief, p. 2, states the contentions on appeal made by the

plaintiff-appellants as follows: (1) the trial court abused its discretion in failing to enter

sanctions against the Nigerian defendants for discovery violations; (2) the court misread

and improperly weighed the evidence and declined to give weight to the evidence of the

plaintiff-appellants; and (3) the court abused its discretion by denying plaintiff-appellants

a continuance. The principle arguments of the plaintiff-appellants focus on issue (2) and

the controlling question of subject matter jurisdiction under the Foreign Sovereign

Immunities Act, and the exception to the statute “based upon a commercial activity

carried on in the United States by the foreign state. . . . ” 28 U.S.C. § 1605(a)(2).

Because of its predominant importance in our disposition, we will turn first to our

analysis of the FSIA and its commercial activity exception.

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 III.

The FSIA is the exclusive source of jurisdiction for claims against foreign states or

their instrumentalities in the courts of this country. Argentine Republic v. Amerada Hess

Shipping Corp., 488 U.S. 428, 443 (1989). A foreign state is presumptively immune

under the statute and remains so unless one of the specific statutory exceptions applies.

See 28 U.S.C. § 1605 (listing exceptions). Subject matter jurisdiction depends on the

existence of an exception. Verlinden B.V. v. Cent. Bank of Nigeria, 461 U.S. 480, 493 &

n.20 (1983). “Once a foreign state makes a prima facie showing of immunity, the

plaintiff seeking to litigate in the United States then has the burden of showing that an

exception applies.” Gen. Elec. Capital Corp. v. Grossman, 991 F.2d 1376, 1382 (8th Cir.

1993). If the plaintiff comes forward with evidence implicating an exception, the

defendant must meet its ultimate burden of proving that the exception does not apply.

Cargill Int’l S.A. v. M/T Pavel Dybenko, 991 F.2d 1012, 1016 (2d Cir. 1993).

Here the plaintiff-appellants accept the proposition that the Nigerian defendants

are foreign states as that term is defined by the FSIA, and thus they accept the fact that the

Nigerian defendants have made a prima facie showing of sovereign immunity.4 However,

4
In their complaint the plaintiff-appellants state:

The defendant Central Bank of Nigeria is an agency or
instrumentality of the defendant Republic of Nigeria, as defined in
28 U.S.C. § 1603(b). The defendant, Republic of Nigeria . . . is a
foreign state as defined in the FSIA and to which said Act applies.

1 App. 31 (Complaint).

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they challenge the district court’s view that their suit cannot overcome that immunity by

means of the commercial activity exception. Under this exception to the FSIA’s grant of

immunity, a plaintiff may sue a foreign state if the action is based upon commercial

activity “by” or “of” the foreign state:

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[.]

28 U.S.C. § 1605(a)(2). This statutory exception reflects Congress’s intent to restrict a

foreign state’s immunity “‘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.’” Southway v. Cent. Bank of Nigeria, 198

F.3d at 1216 (quoting legislative history).

IV.

The Nigerian defendants moved below for summary judgment, arguing that the

district court lacked subject matter jurisdiction as they are immune from suit under the

Foreign Sovereign Immunities Act. After reviewing the summary judgment materials and

the briefs submitted, the judge granted the motion for summary judgment, dismissed the

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claims against the Central Bank of Nigeria and the Republic of Nigeria, and awarded

costs to the bank and the republic. 149 F. Supp. 2d at 1278. The ruling was announced in

a persuasive and detailed opinion whose findings and conclusions are convincing to us.

See 149 F. Supp. 2d 1268-1278.

We review the district court’s legal conclusions de novo and its factual findings for

clear error in view of the factual challenge to subject matter jurisdiction. Holt v. United

States, 46 F.3d 1000, 1003 (10th Cir. 1995). Here the district judge held that given “the

quantity and quality of the evidence presented by the Nigerian defendants, I conclude that

they have [met] their ultimate burden to prove by a preponderance of the evidence that the

[commercial activity] exception to the FSIA does not apply, and subject matter

jurisdiction does not exist.” Southway, 149 F. Supp. 2d at 1277. The district judge based

his decision on three parts of the evidence: the signed declarations of three Nigerian

officials, the deposition of M.R. Rasheed, and the declaration of Dr. David A. Crown, an

expert in questioned documents.

We feel that the district judge did not clearly err in his factual findings regarding

the signed declarations of Mr. Victor Moore from CBN’s Legal Department, Idenyemih

Stella Omiyi of the Nigerian Ministry of Justice, and M.R. Rasheed, Director of CBN’s

Foreign Operations Department. In their declarations, Moore and Omiyi both state that

plaintiffs were involved in an advanced fee fraud scam through which private individuals

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in Nigeria impersonate employees of the Nigerian government. IV App. 717 (Moore

declaration); IV App. 723 (Omiyi declaration).

Moore states that neither CBN nor Nigeria authorize such scams or benefit from

the fraudulently obtained money. IV App. 718 (Moore declaration). Omiyi asserts that

the Nigerian government does not authorize these scams and their commission constitutes

a violation of the Nigerian criminal code. IV App. 723 (Omiyi declaration). Moore,

Omiyi, and Rasheed state that the letters attached to plaintiffs’ complaint are forgeries.

IV App. 718-20 (Moore declaration); IV App. 723 (Omiyi declaration); IV App. 726-7

(Rasheed declaration). Moore says that the alleged authors of the letters do not exist or

are unknown to him, except M.R. Rasheed, who Moore admits is the director of CBN’s

Foreign Operations Department. IV App. 718-20 (Moore declaration). Omiyi admits that

Major General Joe Garba is an actual person, but claims that he has “been retired for

several years and . . . has never acted or been authorized to act as Chairman of any such

entity as a ‘Foreign Exchange Allocation Department.’” IV App. 723 (Omiyi

declaration). Finally Rasheed states that he did not write either of the letters attached to

plaintiffs’ complaint which bear his name and that both are forgeries. IV App. 726-27

(Rasheed declaration). Thus the district judge’s factual findings regarding the

declarations of Moore, Omiyi, and Rasheed are fully supported by the record.

Further, we hold that the district judge did not clearly err in his factual finding

concerning the deposition of M.R. Rasheed. A review of the record reveals that in his

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deposition, Rasheed states that he has never referred to himself as Dr. M. Rasheed.

IV App. 738. Rasheed also claimed not to have met any of the plaintiffs in this or any

other 419 case except during depositions, IV App. 737 (Rasheed deposition 170-71). The

district judge is correct that Rasheed “details the ways in which one schooled in Nigerian

procedures and customs would be tipped off that a scam was occurring.” Southway,

149 F. Supp. 2d at 1277. The record shows that Rasheed stated that the Nigerian currency

is not traded on the international market outside of Nigeria, IV App. 734 (Rasheed

deposition 133), IV App. 739 (Rasheed deposition 230). The departments and offices

listed on the letters the Browns received do not exist, IV App. 738 (Rasheed deposition

213-14); stamp fees in Nigeria “are not handled by the Central Bank” and do not involve

foreign citizens or corporations, IV App. 733 (Rasheed deposition 103); the CBN does

not use the Nigerian government crest on its documents, IV App. 736 (Rasheed

deposition 151); and the CBN does not keep accounts abroad in third parties’ names.

IV App. 735 (Rasheed deposition 138-39).

Lastly we find no error in the district judge’s factual findings regarding the

declaration of Dr. Crown. The record shows that the district court is correct that

Dr. Crown states that the signatures of “M.R. Rasheed” on four letters “were not written

by M.R. Rasheed.” In addition, the signatures on these letters “appear to be the writing of

one individual.” IV App. 762, ¶ 4 (Crown declaration). The record reveals that

Dr. Crown also states that the signatures of “M. Rasheed” on other correspondence are

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not the signatures of the authentic M.R. Rasheed, and were not written by the same

person who signed other letters “M.R. Rasheed.” IV App 763-3, ¶ 4 (Crown declaration).

In addition, the signatures of “P.A. Oguma” and “B. Ogama” received in other documents

are not authentic signatures of Paul Ogwuma. IV App 763, ¶ 6. Further Dr. Crown states

that numerous documents which purport to be from the Central Bank of Nigeria are not

authentic. IV App 763, ¶ 7. Thus we conclude that the district judge did not err in any of

his findings regarding Dr. Crown’s declaration.

Whether subject matter jurisdiction is raised under Rule 12(b)(1) or Rule 56, the

plaintiff’s burden remains the same–plaintiff must present affidavits or other evidence

sufficient to establish the court’s subject matter jurisdiction by a preponderance of the

evidence. United States ex rel. Hafter v. Spectrum Emergency Care, Inc., 190 F.3d 1156,

1160 n.5 (10th Cir. 1999). The district judge here concluded that the plaintiffs had come

forward with some facts showing that an exception to immunity applies, and the Nigerian

defendants had to satisfy their ultimate burden of proof by a preponderance of the

evidence that the exception to the FSIA does not apply. 149 F. Supp. 2d at 1276. We are

persuaded by the district judge’s conclusion that, on this summary judgment record, the

commercial activity exception to the FSIA did not apply. The Nigerian defendants, as the

judge found, provided proof that the plaintiffs fell prey to an advanced fee scam in which

private individuals in Nigeria impersonated employees of the Nigerian government and its

agency. We conclude that the Nigerian defendants have established that the perpetrators

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of the fraud were neither agents nor employees of the Nigerian government and for this

reason the commercial activity exception to the FSIA does not apply.

V.

We are persuaded that the district judge did not abuse his discretion by not

affording an opportunity for additional discovery to the plaintiffs. There was no proper

Fed. R. Civ. P. 56 affidavit submitted showing with specificity why extra time was

needed and how that time and material that was sought would rebut the summary

judgment motion. Int’l Surplus Lines Ins. Co. v. Wyo. Coal Ref. Sys., Inc., 52 F.3d 901,

905 (10th Cir. 1995). Moreover we agree with the judge that issues about discovery had

been extensively litigated before the magistrate judge so that further delay for discovery

was unwarranted.

VI.

In sum, the findings of the judge are not clearly erroneous and his conclusions

were sound. Accordingly the decision granting summary judgment, dismissing claims

against the defendants Central Bank of Nigeria and the Republic of Nigeria, and the

award of costs is

AFFIRMED.

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