Kelly v. Syria Shell Petroleum Development B.V.

UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
_____________________

No. 99-20095
_____________________

ANNIE KELLY; JEANETTE CARPENTER,

Plaintiffs-Appellants,

versus

SYRIA SHELL PETROLEUM DEVELOPMENT B.V., ET AL.,

Defendants,

SYRIA SHELL PETROLEUM DEVELOPMENT B.V.;
AL FURAT PETROLEUM COMPANY;
N. V. KONINKLIJE NEDERLANDSCHE PETROLEUM
MATSENAPPIJ; ROYAL DUTCH PETROLEUM;
THE SHELL TRANSPORT AND TRADING COMPANY,

Defendants-Appellees.
_____________________

KATHY STRONG, Individually and as
Next Friend of John Strong, a minor,

Plaintiff-Appellant,

versus

SYRIA SHELL PETROLEUM DEVELOPMENT B.V.; ET AL.,

Defendants,

SYRIA SHELL PETROLEUM DEVELOPMENT B.V.;
AL FURAT PETROLEUM COMPANY; N. V. KONINKLIJE
NEDERLANDSCHE PETROLEUM MATSENAPPIJ, also
known as Royal Dutch Petroleum Company;
THE SHELL TRANSPORT AND TRADING COMPANY,

Defendants-Appellees.

_________________________________________________________________
 Appeal from the United States District Court
for the Southern District of Texas

_________________________________________________________________
May 31, 2000
Before BARKSDALE, BENAVIDES, and STEWART, Circuit Judges.

RHESA HAWKINS BARKSDALE, Circuit Judge:

Primarily at issue are whether, pursuant to the Foreign

Sovereign Immunities Act (FSIA), 28 U.S.C. §§ 1330, 1602-11, Al

Furat Petroleum Company is an “organ” of Syria for purposes of

defeating subject matter jurisdiction; and, if it is, whether

immunity is precluded by the FSIA commercial activity exception, 28

U.S.C. § 1605(a)(2). The district court dismissed Al Furat for

lack of subject matter jurisdiction; the other Appellees, for lack

of personal jurisdiction. As part of contesting those dismissals,

Appellants maintain they were denied adequate discovery. We

AFFIRM.

I.

On 3 May 1995, a Syrian well, operated by Al Furat Petroleum

Company, began leaking oil and gas. That same day, Warmenhoven,

who was employed in The Netherlands by SIPM, one of the Royal

Dutch/Shell group of companies, called Boots & Coots, L.P. (B&C) in

Houston, Texas, to determine its availability to perform well

control services.

The call was routed to John Wright, of Wright, Boots & Coots,

L.L.C. (WB&C), also in Houston, who confirmed WB&C’s availability.

Warmenhoven explained that he did not have authority to hire WB&C,

2
but told Wright he would suggest that Al Furat contact WB&C. When

deposed concerning jurisdiction for this action, discussed infra,

Wright described Warmenhoven as a “worldwide drilling

troubleshooter” who advised operating units on mobilization of

resources.

Wright proposed to Al Furat that he (Wright), as blowout

adviser, and three firefighters (Appellants’ decedents) travel to

Syria to perform well control services. After receiving

confirmation from Al Furat on fees for such services, Wright and

Appellants’ decedents traveled to Syria that same day.

On 5 May, two days after the leak began and Wright was

contacted, Al Furat signed a B&C work order, for B&C, as an

independent contractor, to assist in bringing the well under

control. The work order gives Al Furat complete authority,

dominion, and control over the well site; and Al Furat agreed to

indemnify B&C for personal injury claims and to pay it in Houston.

(The evidence submitted by Appellants shows that B&C invoiced WB&C

for decedents’ services; and that Al Furat was invoiced by, and

paid, WB&C for the work performed by decedents.)

Subsequently, Al Furat contracted with WB&C for it to perform

blowout response and well killing services. The contract, signed

in Syria on 10 and 11 June, but effective as of 3 May, provided:

Syrian law governed; Al Furat had complete custody of the well

site; WB&C was an independent contractor; Al Furat was to defend

3
and indemnify WB&C for personal injuries to personnel of Al Furat

and other contractors attributable to activities at the site; WB&C

was responsible for, and would defend and indemnify Al Furat and

other contractors for, personal injuries to WB&C and subcontractor

personnel attributable to activities at the site; on written

request of Al Furat, WB&C could be asked to place purchase orders

on behalf of Al Furat for equipment or materials; and preference

was to be given to Syrian products and subcontractors.

On 10 June, Appellants’ decedents died when gas escaping from

the well ignited. Two years later, decedents’ wrongful death

beneficiaries filed two actions in Texas state court (one by

Strong’s beneficiaries, the other by Kelly and Carpenter’s) against

Al Furat, Syria Shell Petroleum Development B.V. (Syria Shell),

Royal Dutch Petroleum Company (Royal Dutch), The Shell Transport

and Trading Company (Shell Transport), and others, claiming their

negligence and gross negligence caused the three deaths. Appellees

removed both actions to federal court. Approximately two weeks

later, Appellees moved in both actions for Al Furat’s dismissal for

lack of subject matter jurisdiction, claiming FSIA immunity, and

for all Appellees’ dismissal for lack of personal jurisdiction.

They also moved to stay discovery pending disposition of their

motions.

The two actions were later consolidated, over Appellants’

objections. In December 1997, approximately six months after

4
filing the actions, Appellants moved to conduct jurisdictional

discovery on FSIA issues. The following January, they moved to

compel discovery on personal jurisdiction, and requested a delay in

ruling on dismissal pending discovery. That February, Appellants

amended their complaints to claim Al Furat breached its contracts

with WB&C and B&C.

The magistrate judge to whom all of the motions were referred

recommended dismissal and staying discovery. The district court

overruled Appellants’ objections; adopted the recommendations; and

denied Appellants’ motions for reconsideration. (Prior to

Appellees’ dismissal, the other defendants had been dismissed.)

II.

Appellants challenge Al Furat’s dismissal under the FSIA for

lack of subject matter jurisdiction and that of Syria Shell, Royal

Dutch, and Shell Transport for lack of personal jurisdiction.

Concomitantly, they claim denial of adequate jurisdictional

discovery.

A.

Al Furat’s dismissal is reviewed de novo. E.g., Moran v.

Kingdom of Saudi Arabia, 27 F.3d 169, 171 (5th Cir. 1994); Walter

Fuller Aircraft Sales, Inc. v. Republic of Philippines, 965 F.2d

1375, 1383 (5th Cir. 1992) (“We review the district court’s

conclusions about sovereign immunity de novo.”).

A court may base its disposition of a motion
to dismiss for lack of subject matter

5
 jurisdiction on (1) the complaint alone; (2)
the complaint supplemented by undisputed
facts; or (3) the complaint supplemented by
undisputed facts plus the court’s resolution
of disputed facts. Where ... the district
court has relied on the third of these bases
and has made jurisdictional findings of fact,
those findings are reviewed for clear error.

Robinson v. TCI/US West Cable Communications Inc., 117 F.3d 900,

904 (5th Cir. 1997) (footnotes omitted).

Concerning Al Furat, “[t]he FSIA sets forth ‘the sole and

exclusive standards to be used’ to resolve all sovereign immunity

issues”. Arriba Ltd. v. Petroleos Mexicanos, 962 F.2d 528, 532

(5th Cir.) (quoting H.R. REP. NO. 1487, 94th Cong., 2d Sess. 12

(1976), 1976 U.S.C.C.A.N. 6604, 6610), cert. denied, 506 U.S. 956

(1992); see 28 U.S.C. § 1602 (“Claims of foreign states to immunity

should henceforth be decided by courts of the United States and of

the States in conformity with the principles set forth in this

chapter.”).

The FSIA gives federal courts jurisdiction over civil actions

against “a foreign state ... as to any claim for relief in personam

with respect to which the foreign state is not entitled to immunity

under [28 U.S.C. §§] 1605-1607 ... or under any applicable

international agreement”. 28 U.S.C. § 1330(a) (emphasis added).

“Personal jurisdiction over a foreign state shall exist as to every

claim for relief over which the district courts have [subject

matter] jurisdiction under [§ 1330](a) where service has been made

under [28 U.S.C. §] 1608”. 28 U.S.C. § 1330(b). Accordingly,

6
“personal jurisdiction, like subject-matter jurisdiction, exists

only when one of the exceptions to foreign sovereign immunity in §§

1605-07 applies”. Argentine Republic v. Amerada Hess Shipping

Corp., 488 U.S. 428, 434 n.3 (1989). See also Verlinden B.V. v.

Central Bank of Nigeria, 461 U.S. 480, 485 n.5 (1983) (“Under the

[FSIA], ... both statutory subject-matter jurisdiction ... and

personal jurisdiction turn on application of the substantive

provisions of the [FSIA].”).

“[A] foreign state shall be immune from the jurisdiction of

the courts of the United States and of the States except as

provided in [28 U.S.C. §§] 1605 to 1607”. 28 U.S.C. § 1604. A

“foreign state” includes “a political subdivision of a foreign

state or an agency or instrumentality of a foreign state as defined

in [§ 1603](b)”. 28 U.S.C. § 1603(a). Such foreign state “agency

or instrumentality” is:

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(b).

7
 It is undisputed that Al Furat satisfies § 1603(b)’s first and

third requirements for agency or instrumentality status. The

district court held Al Furat satisfied both prongs of the second

requirement, as well, holding it is an organ of a foreign state and

a foreign state owns a majority of Al Furat’s shares or other

ownership interest. Appellants challenge the rulings as to both

prongs.

Concerning § 1603(b)(2)’s “ownership” prong, the Syrian

government owns Syrian Petroleum Company (not a party), which owns

50% of Al Furat. Therefore, at issue for that prong is the

requisite majority status. But, because we conclude that Al Furat

is an organ of a foreign state, we need not consider § 1603(b)(2)’s

ownership requirements.

1.

Appellants claim Al Furat presented insufficient evidence to

establish organ status. Alternatively, they maintain the district

court erred by ruling without allowing them discovery. Resolution

of the discovery issue is best understood in the light of our

analysis of the first issue, including the sufficiency of the

evidence regarding Al Furat’s organ status. See Wyatt v. Kaplan,

686 F.2d 276, 278 (5th Cir. 1982).

a.

Most cases have determined § 1603(b)(2) agency/instrumentality

status using the “ownership”, rather than the “organ”, prong. See

8
Supra Med. Corp. v. McGonigle, 955 F. Supp. 374, 378-79 (E.D. Pa.

1997) (observing that only a few federal courts have examined the

“organ” prong, with no clear test to determine whether an entity so

qualifies). In Corporacion Mexicana de Servicios Maritimos, S.A.

de C.V. v. M/T Respect, 89 F.3d 650, 655 (9th Cir. 1996), Pemex-

Refining was held an organ of a foreign state, because it: was

created by Mexican law; is entirely owned by the Mexican

government; is controlled entirely by government appointees;

employs only public servants; and is charged with the exclusive

responsibility of refining and distributing Mexican government

property.

Citing Corporacion, the Supra district court listed five

factors for determining § 1603(b)(2) organ status:

(1) whether the foreign state created the
entity for a national purpose; (2) whether the
foreign state actively supervises the entity;
(3) whether the foreign state requires the
hiring of public employees and pays their
salaries; (4) whether the entity holds
exclusive rights to some right in the
[foreign] country; and (5) how the entity is
treated under foreign state law.

955 F. Supp. at 379.

Recently, Nippon Hoso Kyokai (NHK), the public television

broadcasting corporation of Japan, was held an organ of Japan.

Alpha Therapeutic Corp. v. Nippon Hoso Kyokai, 199 F.3d 1078, 1084-

85 (9th Cir. 1999). NHK was created by the Japanese broadcast law,

which required it to broadcast for the public welfare; its

9
programming had to satisfy government-mandated goals; its board

members were appointed by the Japanese Prime Minister, with the

consent of the Japanese parliament; a government minister

supervised the board and reviewed the budget, which had to be

approved by the parliament; its funding is derived from a

government-mandated fee collected from all Japanese television

owners; any amendment to its articles of incorporation that

governed its operation must be adopted and approved by the

government minister; it cannot earn profits and carries no

commercial advertisements; and it is the only broadcaster

designated by the Prime Minister as a “designated public

institution”. Id. at 1084. In rejecting plaintiffs’ contention

that NHK is not an organ of Japan because it has autonomy and

independence from the Japanese government, the Ninth Circuit noted

that “Japan has considerable control over the content of NHK’s

programming, budget, and operations”. Id. at 1085.

In holding Al Furat is an organ of Syria, the district court

applied the Supra factors, and they are utilized by both sides

here. Accordingly, we shall apply them.

This notwithstanding, we agree with the Alpha and Supra courts

that there is no “clear test” for determining agency or

instrumentality status under the § 1603(b)(2) “organ” prong. See

Alpha, 199 F.3d at 1084; Supra, 955 F. Supp. at 378-79. Therefore,

although the Supra factors provide a helpful framework, we will not

10
apply them mechanically or require that all five support an organ-

determination.

Our analysis must also take into account the nature of FSIA

immunity, which is immunity not only from liability, but from the

burdens of litigation as well. See, e.g., United States v. Moats,

961 F.2d 1198, 1203 (5th Cir. 1992) (“sovereign immunity is an

immunity from the burdens of becoming involved in any part of the

litigation process, from pretrial wrangling to trial itself”).

And, our analysis must also be guided by the well-established

principle that, although a party claiming FSIA immunity retains the

ultimate burden of persuasion on immunity, it need only present a

prima facie case that it is a foreign state; and, if it does, the

burden shifts to the party opposing immunity to present evidence

that one of the exceptions to immunity applies. E.g., Byrd v.

Corporacion Forestal y Industrial de Olancho S.A., 182 F.3d 380,

388 (5th Cir. 1999); Walter Fuller Aircraft Sales, 965 F.2d at

1383; Arriba, 962 F.2d at 533.

To support dismissal, Al Furat submitted declarations of its

operations manager, Olsen, and the chief executive officer of

Syrian Petroleum Company, Dr. Mualla. The latter declaration

states: Syrian Petroleum Company was established according to

Syrian law; its principal place of business is in Syria; and it is

owned entirely by the Syrian government.

11
 Olsen’s declaration states: he is familiar with Al Furat’s

corporate records and activities; it is a citizen of Syria and has

its principal place of business there; it is a private, non-profit-

making, non-asset owning agent company incorporated under Syrian

law; it is owned 50% by Syrian Petroleum Company, 31.25% by Syria

Shell, and 18.75% by Deminex Syria GmbH; it was formed pursuant to

a government authorization decree stating that Al Furat’s objective

is to develop identified petroleum reserves in Development Lease

Areas in Syria; its by-laws require that, for its eight-member

board, four be appointed by Syrian Petroleum Company, with one

always serving as chairman; and, in view of Syria’s declared

policy, supported by Syrian law, that all minerals under the

surface remain the property of Syria and will be explored and

developed in a way to best serve the interests of Syria, Syrian

Petroleum Company’s representatives on the board have invariably

been Syrian government officials representing the highest level of

government.

Relying on those declarations, the district court concluded Al

Furat had made a prima facie showing of immunity under the §

1603(b)(2) organ prong. It reasoned: Al Furat was created for a

national purpose, because it was formed by government decree to

develop and explore Syria’s mineral resources, control over which

is a basic aspect of sovereignty; and it had the exclusive right to

develop those resources. The court noted also that, in Ebrahim v.

12
Shell Oil Co., 847 F. Supp. 65, 67 (S.D. Tex. 1994), Al Furat had

been determined to be a Syrian agency or instrumentality. See

Atwood Turnkey Drilling, Inc. v. Petroleo Brasileiro, S.A., 875

F.2d 1174, 1176 (5th Cir. 1989) (citing district court cases

recognizing Petrobas’ foreign sovereign status to support

conclusion it was foreign sovereign), cert. denied, 493 U.S. 1075

(1990).

Asserting that the evidence presented by Al Furat pertains to

only the first (foreign state-created entity for national purpose)

and fourth (entity holds exclusive rights to some right in foreign

country) Supra factors, Appellants contend the district court erred

by concluding Al Furat is an organ of Syria in the absence of any

evidence as to the remaining factors (whether Syria requires Al

Furat to hire public employees and pays their salaries; whether

Syria actively supervises it; and its treatment under Syrian law).

And, they contend the evidence pertaining to the fourth Supra

factor does not support the district court’s conclusion that Al

Furat has the exclusive right to develop Syria’s mineral resources.

They contend further that the district court erred by relying

solely on Olsen’s declaration regarding the provisions of Syrian

law and Al Furat’s by-laws, claiming his declaration raises more

questions than it answers with respect to: governmental

supervision and control over Al Furat; whether Olsen has expertise

qualifying him to testify regarding Syrian law and policy; and the

13
identity of Syrian government officials who have served on Al

Furat’s board. In sum, Appellants maintain that the conclusion is

not supported by sufficient evidence, because Al Furat addressed

only two of the five Supra factors, and the documents referenced in

Olsen’s declaration were not provided to the court.

The evidence is sufficient to support the district court’s

conclusion that Al Furat made a prima facie showing it is an organ

of Syria. With respect to the first Supra factor, Olsen’s

declaration establishes that Al Furat was created by a Syrian

government decree for a national purpose: the development and

exploration of Syria’s mineral resources, pursuant to Syria’s

policy that all minerals under the surface remain the property of

Syria and will be explored and developed in a manner that will best

serve the interests of Syria. Contrary to Appellants’ assertion,

the evidence that Syrian Petroleum Company appoints four of the

eight Al Furat board members, including the chairman, and that such

appointees have invariably been high-level Syrian government

officials, supports a determination of organ status under the

second and third Supra factors. And, also contrary to Appellants’

contention, the evidence supports the district court’s conclusion,

with respect to the fourth Supra factor, that Al Furat has the

exclusive right to explore and develop Syria’s identified petroleum

reserves, which are the property of the Syrian government.

14
 And, in addition to the Olsen and Dr. Mualla declarations

establishing that Al Furat was created for the purpose of

developing identified petroleum reserves in Development Lease Areas

in Syria, Al Furat also supported its dismissal motion with a copy

of the legislative decree creating Syrian Petroleum Company (again,

wholly owned by the Syrian government, owns 50% of Al Furat, and

appoints half of its board, including the chairman). The decree

provides that Syrian Petroleum Company “shall handle all the works

that aim[] to discover[] oil wealth[] in the country and to exploit

and develop such wealth”.

There is no evidence as to how Al Furat is treated under

Syrian law (the fifth Supra factor). But, this does not undermine

our conclusion that, on balance, Al Furat presented sufficient

evidence to establish a prima facie case for organ status.

b.

Alternatively, in maintaining they were not allowed necessary

discovery regarding the extent of Syria’s control over Al Furat,

Appellants claim the district court abused its discretion by not

allowing them to depose Olsen and review the documents and laws

referenced in his declaration.

Again, FSIA immunity is immunity not only from liability, but

also from the costs, in time and expense, and other disruptions

attendant to litigation. See Moats, 961 F.2d at 1203 (“sovereign

immunity is an immunity from the burdens of becoming involved in

15
any part of the litigation process, from pretrial wrangling to

trial itself”); In re Papandreou, 139 F.3d 247, 251 (D.C. Cir.

1998) (“[s]overeign immunity is an immunity from trial and the

attendant burdens of litigation, and not just a defense to

liability on the merits” (internal quotation marks and citation

omitted)).

Accordingly, when FSIA immunity has been claimed, unlimited

jurisdictional discovery is not permitted as a matter of course.

Instead, it “should be ordered circumspectly and only to verify

allegations of specific facts crucial to an immunity

determination”. Arriba, 962 F.2d at 534; see also First City,

Texas-Houston, N.A. v. Rafidain Bank, 150 F.3d 172, 176 (2d Cir.

1998) (comity concerns implicated by allowing jurisdictional

discovery from foreign sovereign “require a delicate balancing

between permitting discovery to substantiate exceptions to

statutory foreign sovereign immunity and protecting a sovereign’s

or sovereign agency’s legitimate claim to immunity from

discovery”); Papandreou, 139 F.3d at 253 (“discovery [authorized]

to determine whether immunity bars jurisdiction must proceed with

circumspection, lest the evaluation of the immunity itself encroach

unduly on the benefits the immunity was to ensure”).

The district court “is given the authority to resolve factual

disputes, along with the discretion to devise a method for making

a determination with regard to the jurisdictional issue”. Moran,

16
27 F.3d at 172. The procedure it adopts “may include considering

affidavits, allowing ... discovery, hearing oral testimony,

conducting an evidentiary hearing”. Id. As stated, “discovery ...

should be limited to only that which is necessary to determine the

preliminary jurisdictional issue”. Id. “A necessary prerequisite

to an order for limited discovery is a district court’s clear

understanding of the plaintiff’s claims against a sovereign

entity.” Arriba, 962 F.2d at 534.

In denying discovery, the district court relied on our court’s

opinion in Arriba. Appellants assert that Arriba, which addressed

discovery regarding whether an exception to immunity applied, is

inapplicable, because they instead sought discovery to ascertain

whether Al Furat was a sovereign. They contend it was circuitous

for the district court to deny is-Al Furat-a-sovereign-discovery on

the ground that its status as a sovereign protected it from such

discovery. Appellants maintain that deposing Olsen regarding

Syria’s supervision and control of Al Furat, and reviewing the

documents referenced in his declaration, were crucial for

determining whether Al Furat is an organ of Syria.

Our review of the record reveals no abuse of discretion in

denying the discovery. As discussed infra, although Appellants

were not prohibited from seeking discovery for over three months,

they did not make any formal requests to conduct it on the immunity

17
issue until after being informed by the magistrate judge that a

recommendation on dismissal was imminent.

Both actions (Kelly/Carpenter and Strong) were removed on 10

July 1997. Al Furat’s dismissal motions were filed approximately

two weeks later, on 25 July.

On 8 August, Appellant Strong moved to conduct discovery prior

to the FED. R. CIV. P. 26(f) conference, maintaining she could not

adequately respond to Al Furat’s motion until after deposing Olsen

and Dr. Mualla. See FED. R. CIV. P. 26(d) (“Except when authorized

under these rules or by local rule, order, or agreement of the

parties, a party may not seek discovery from any source before the

parties have met and conferred as required by subdivision (f).”

(emphasis added)). And, in their 14 August opposition to Al

Furat’s motions, Appellants requested that ruling on dismissal be

deferred pending completion of discovery regarding the factual

allegations in the declarations supporting dismissal, including

deposing Olsen and Dr. Mualla.

In its 4 September reply to the Kelly and Carpenter

Appellants’ opposition to dismissal, Al Furat asserted that,

because sovereign immunity is immunity from the attendant burdens

of suit as well as from liability, and because Appellants had made

no showing of what they hoped to obtain by discovery, the court

should not permit a “fishing expedition”. And, on 8 September, Al

18
Furat moved in the Strong action to stay discovery pending ruling

on dismissal.

The two actions were consolidated on 8 October. Al Furat, on

17 October, filed a supplemental motion to stay discovery and to

defer Rule 26 matters, pending ruling on dismissal.

None of the motions were ruled on prior to the 7 November Rule

26(f) conference. On 11 November, the parties submitted their Rule

26(f) joint discovery/case management plan, with Appellants stating

they were ready to begin discovery immediately, and Al Furat

opposing discovery pending ruling on dismissal.

At oral argument here, Appellants conceded they had not been

prohibited from conducting discovery between the 7 November 1997

Rule 26(f) conference and 24 February 1998, when the magistrate

judge made her discovery recommendation. Although by motion and

supplemental response to Al Furat’s dismissal motion, both filed in

early December, Appellants stated their desire to conduct

discovery, they did not formally request it until 19 January 1998

(over two months after the Rule 26(f) conference), when they

noticed the deposition of Wright of WB&C.

Appellees moved for a protective order to preclude Wright’s

deposition, asserting discovery should be stayed pending ruling on

dismissal. The magistrate judge, at a telephonic hearing on 22

January, allowed Wright’s deposition on personal jurisdiction only,

because Appellants had not shown immunity discovery should be

19
allowed. During that conference, the magistrate judge advised she

was ready to make a recommendation on dismissal.

At Wright’s deposition the next day, 23 January, Appellants

stated on the record they wanted to depose Warmenhoven, Olsen, and

Anderson (the latter was believed to be associated with Al Furat)

on jurisdictional matters; Al Furat would not agree. On 27

January, despite there being no outstanding discovery requests,

Appellants moved to compel discovery and to delay ruling on

dismissal. The documents at issue in the motion to compel had been

requested at Wright’s 23 January deposition, but he had refused to

produce them because of a confidentiality agreement with Al Furat.

Appellants eventually received them.

Al Furat’s immediate response was that, in the light of the

magistrate judge’s statement that a recommendation on dismissal was

imminent, it was hardly surprising it refused the verbal request to

produce for depositions three persons who lived overseas. Al Furat

asserted further that the court should require Appellants to give

a better reason to depose overseas witnesses than disbelief in

their sworn declarations. (Anderson did not file a declaration.)

At a 29 January hearing on the motion to compel, the

magistrate judge expressed frustration at Appellants’ failure,

despite repeated requests, to demonstrate a need for discovery by

articulating specific facts crucial to the immunity issue. The

magistrate judge stated further that Appellants had not taken any

20
steps to conduct discovery other than deposing Wright, which she

had allowed, albeit only as to personal jurisdiction. The

magistrate judge, “in utmost generosity and abundance of caution”,

stated she would allow Appellants, on or before 9 February, to file

supplemental responses to Al Furat’s motion to stay discovery,

giving them yet another opportunity to make the requisite showing

to obtain discovery from Al Furat on immunity.

In their 9 February memorandum in support of allowing

discovery and delaying ruling on dismissal, Appellants asserted:

they were entitled to all documentation regarding Al Furat’s

creation; they should be allowed discovery on other indicia of

ownership interest by Al Furat’s owners, and on issues of actual

control, financial arrangements between the parties, and

distribution of profits and proceeds, including production of crude

oil and gas; because their claims are based on duties created by Al

Furat’s contracts with WB&C and B&C, they were entitled to

discovery regarding those contracts, the rights and

responsibilities of the parties under them, and the effect of the

contracts on Al Furat’s activities in the United States; and they

should be allowed to depose Olsen to determine the background and

sources of the information in his declaration. They asserted also:

the court should not be entirely dependent on Olsen’s

interpretation of Syrian law, because there was no showing he was

qualified to make the legal conclusions in his declaration or had

21
any authority to speak for the Syrian government; they expected

discovery to show Al Furat has many current or former Shell

employees or contractors playing significant roles; and there were

questions concerning whether “Shell” controlled Al Furat.

According to Appellees (and not disputed by Appellants),

Appellants propounded their first written discovery on 17 February

1998. One week later, on 24 February, the magistrate judge

recommended staying discovery. Two days later, the magistrate

judge recommended dismissal. Both recommendations were adopted on

31 March.

Appellants attempt to excuse their lack of discovery diligence

on the ground that, because Al Furat had steadfastly expressed its

opposition, it was readily apparent that specific discovery

requests would only lead to additional opposition and, because such

motions were already pending, it would have been an unnecessary

waste of effort to serve specific discovery requests or notice

depositions. Such alleged futility does not excuse not making

specific discovery requests, and obtaining a ruling in the event of

objection by Al Furat. Although free to do so after 7 November,

Appellants did not make any specific, formal discovery requests on

immunity until after the magistrate judge had advised a

recommendation regarding dismissal was imminent.

Moreover, despite repeated attempts by the magistrate judge to

obtain from Appellants the requisite showing of a need for immunity

22
discovery from Al Furat, Appellants essentially claimed only

entitlement to cross-examine Olsen and to examine the documents and

laws referenced in his declaration to determine whether he had told

the truth. In her recommendation on the discovery issues, the

magistrate judge noted Appellants had been given several

opportunities to make the requisite showing for justifying immunity

discovery, but had not alleged specific facts which, if true, would

show Al Furat was not entitled to immunity, or that any exception

to immunity applied. The magistrate judge stated further that

Appellants had offered no reason to question that Olsen was

credible or that, as Al Furat’s operations manager, he was

qualified to testify about Al Furat’s structure; and that they had

not provided legal support for blanket disregard of his sworn

statements in the absence of such question.

Considering Appellants’ failure to diligently seek discovery

and their concomitant failure to allege specific facts crucial to

immunity which demonstrated a need for discovery, the district

court did not abuse its discretion by not allowing Appellants to

conduct such discovery prior to ruling on dismissal.

2.

Notwithstanding Al Furat being an organ of Syria, Appellants

contend the district court erred by refusing to apply the 28 U.S.C.

§ 1605(a)(2) commercial activity exception to immunity. A foreign

state is not immune from suit in United States courts when

23
 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) (emphasis added). “Commercial activity” is

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).

Appellants rely on the first clause of § 1605(a)(2):

“commercial activity carried on in the United States by the foreign

state”, defined by the FSIA as “commercial activity carried on by

such state and having substantial contact with the United States”.

28 U.S.C. § 1603(e). They claim Al Furat carried on commercial

activity in the United States by entering into contracts with WB&C

and B&C, which required performance in both Syria and the United

States. Appellants maintain: the B&C work order required Al Furat

to pay B&C invoices in Texas (although, as noted, there is no

evidence it did so); in the WB&C contract, Al Furat appointed WB&C

as its agent for procuring equipment, materials, and services in

the United States; and, as a result of that agency relationship, Al

Furat, through its agent WB&C, purchased goods and services from

24
various contractors in the United States, including B&C, which

employed Appellants’ decedents. Appellants assert their claims are

based on Al Furat’s breach of its contractually imposed duties to

monitor the work and set safety standards; therefore, the claims

are based upon Al Furat’s commercial activity in the United States.

The district court rejected the commercial activity exception

because the contracts were executed in Syria; decedents were not

third party beneficiaries to the contracts; and Appellants’ claims

are not based upon those contracts. As discussed infra, the

commercial activity exception does not apply, because Appellants’

claims are not based upon Al Furat’s assumed commercial activity in

the United States. (Therefore, we do not address Appellants’

contentions regarding the first two bases for the ruling on the

exception.)

We assume arguendo that Al Furat engaged in commercial

activity in the United States when it entered into contracts with

WB&C and B&C for well control services. See Republic of Argentina

v. Weltover, Inc., 504 U.S. 607, 614 (1992) (“when 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”); Walter Fuller

Aircraft Sales, 965 F.2d at 1384 (“courts typically hold that

contracts for the procurement of goods and services are commercial

rather than governmental in nature”).

25
 Nevertheless, as stated in § 1605(a)(2), the commercial

activity exception applies only if Appellants’ claims are “based

upon” that activity. See, e.g., Voest-Alpine Trading USA Corp. v.

Bank of China, 142 F.3d 887, 892 (5th Cir.) (“the cause of action

[must] be ‘based upon’ a certain act or activity of the foreign

state, that is, the act or activity must form the basis of at least

some element of the cause of action”), cert. denied, 525 U.S. 1041

(1998); Walter Fuller Aircraft Sales, 965 F.2d at 1384 (“suit must

be based upon ‘commercial activity’ which has at least one of the

three jurisdictional connections with the United States set forth

in § 1605(a)(2)”); Arriba, 962 F.2d at 533 (“the commercial

activity that provides the jurisdictional nexus with the United

States must also be the activity on which the lawsuit is based”

(internal quotation marks and citation omitted)); Moats, 961 F.2d

at 1205 (“the applicability of the commercial activities exception

depends on whether the particular conduct giving rise to the claim

in question actually constitutes or is in connection with

commercial activity, regardless of the defendant’s generally

commercial or governmental character”).

In Saudi Arabia v. Nelson, 507 U.S. 349, 357 (1993), the Court

stated that the § 1605(a)(2) “based upon” phrase “is read most

naturally to mean those elements of a claim that, if proven, would

entitle a plaintiff to relief under his theory of the case”. In

Nelson, plaintiff alleged he was recruited in the United States by

26
Saudi Arabia for employment there and, while in Saudi Arabia, was

imprisoned and tortured by the Saudi government. Id. at 352-54.

The Supreme Court rejected plaintiff’s contention that the first

clause of the commercial activity exception applied, explaining

that, although Saudi Arabia’s commercial activity in the United

States (recruiting plaintiff for employment in Saudi Arabia) “led

to the conduct that eventually injured” plaintiff, that commercial

activity was “not the basis for” plaintiff’s action, which claimed

he suffered “personal injuries caused by [Saudi Arabia’s]

intentional wrongs and by [its] failure to warn”. Id. at 358

(emphasis added). “Those torts, and not the arguably commercial

activities that preceded their commission, form[ed] the basis for

[plaintiff’s] suit.” Id. (emphasis added).

As noted, Appellants did amend their complaints to claim

breach of contract. But, because they do not challenge the ruling

they are not third-party beneficiaries of the WB&C contract or the

B&C work order, they have apparently abandoned their claim they

have standing to sue for breach of contract. Instead, their focus

on appeal seems to be that the WB&C contract establishes the

requisite duty element for their negligence claims.

They maintain proof of the duty element is established by Al

Furat’s contract with WB&C, which imposed on Al Furat duties to

monitor the work and set safety standards applicable to contractors

at the well site. Appellants thus contend the Al Furat/WB&C

27
contract is an essential element of their negligence claims against

Al Furat, and assert their claims are based on that contract, on

the ground that Al Furat’s claimed breach of those contractually-

imposed duties proximately caused the deaths.

Obviously, one of the essential elements of the negligence

claims is the existence of a duty imposed on Al Furat. But, simply

because the WB&C contract imposes duties on Al Furat, the breach of

which allegedly caused the deaths, does not make that contract an

essential element of the claims. Because Appellants are neither

parties to, nor third-party beneficiaries of, that contract, any

duty owed by Al Furat to decedents arose by operation of law,

independent of the existence of that contract. As in Nelson, the

alleged “torts, and not the arguably commercial activities that

preceded their commission, form the basis for [Appellants’] suit”.

507 U.S. at 358 (emphasis added).

Accordingly, the district court correctly concluded that the

commercial activity exception does not apply.

B.

We review de novo the lack of personal jurisdiction dismissal

of Syria Shell, Royal Dutch, and Shell Transport (collectively,

Shell Appellees). Alpine View Co. Ltd. v. Atlas Copco AB, 205 F.3d

208, 214 (5th Cir. 2000). Although Appellants bear the burden of

proof, it is not necessary for them to “establish personal

jurisdiction by a preponderance of the evidence; prima facie

28
evidence of personal jurisdiction is sufficient”. Wyatt, 686 F.2d

at 280. We accept their “uncontroverted allegations, and resolve

in [their] favor all conflicts between the facts contained in the

parties’ affidavits and other documentation”. Alpine, 205 F.3d at

215.

The Texas long-arm statute, TEX. CIV. PRAC. & REM. CODE ANN. §

17.042, authorizes personal jurisdiction over a nonresident

defendant to the fullest extent allowed by the United States

Constitution. See Wilson v. Belin, 20 F.3d 644, 647 & n.1 (5th

Cir.), cert. denied, 513 U.S. 930 (1994). Accordingly, we need

only determine whether exercising jurisdiction over Shell Appellees

is consistent with the Due Process Clause. See Alpine, 205 F.3d at

214.

Due process standards for personal jurisdiction are well-

established.

The Due Process Clause ... permits the
exercise of personal jurisdiction over a
nonresident defendant when (1) that defendant
has purposefully availed [itself] of the
benefits and protections of the forum state by
establishing minimum contacts with the forum
state; and (2) the exercise of jurisdiction
over that defendant does not offend
traditional notions of fair play and
substantial justice.

Id. at 214-15 (internal quotation marks and citation omitted;

emphasis added).*

*
For the first prong of this two-part test, as discussed
infra, Appellants have not made a prima facie showing that Shell

29
 The “minimum contacts” requirement can be established through

contacts sufficient to assert either specific or general

jurisdiction. Id. at 215.

Specific jurisdiction over a nonresident
corporation is appropriate when that
corporation has purposefully directed its
activities at the forum state and the
litigation results from alleged injuries that
arise out of or relate to those activities.
General jurisdiction, on the other hand, will
attach where the nonresident defendant’s
contacts with the forum state, although not
related to the plaintiffs’ cause of action,
are continuous and systematic.

Id. (emphasis added) (internal quotation marks and citation

omitted). Appellants claim Syria Shell’s contacts with Texas

support specific jurisdiction, while the contacts by it and the

other two Shell Appellees support general jurisdiction.

1.

We first address specific jurisdiction vel non for Syria

Shell, which owns almost a third of Al Furat.

a.

Appellants implicitly concede Syria Shell had no direct

contacts with Texas. Nevertheless, they base specific jurisdiction

on their claims allegedly arising out of the contract between Al

Furat and WB&C, which provided that, in entering into that

Appellees have the requisite minimum contacts with Texas.
Therefore, we need not consider the second prong — whether
exercising personal jurisdiction would offend “traditional notions
of fair play and substantial justice”.

30
contract, Al Furat was acting as an agent for Syria Shell, and

which appointed WB&C as agent for Al Furat and Syria Shell for

obtaining goods and services from Texas for use in controlling the

well. Appellants assert that, by entering into a contract with a

Texas company for services to be performed in Texas, Syria Shell,

through its claimed agent, Al Furat, established the requisite

minimum contacts with Texas. (Appellants also rely on evidence

that Warmenhoven, an employee of a “Shell” entity, initially

contacted WB&C to secure the services of Appellants’ decedents in

Syria; and that Beasely, a “Shell” employee, negotiated the

contract between Al Furat and WB&C. But, they do not explain how

such evidence supports specific jurisdiction for Syria Shell.)

The language relied on in Al Furat’s contract with WB&C does

not provide that Al Furat is acting as agent for Syria Shell in

executing that contract. Instead, it states that Al Furat was “an

agent for [Syria Shell] in executing the service contract for the

exploration of oil ratified by law number 43 1977”. Obviously,

this recitation does not make Al Furat an agent for Syria Shell for

purposes of the WB&C contract.

But, even assuming Al Furat’s contacts with Texas, in entering

into and performing the contract with WB&C, are properly

attributable to Syria Shell, specific jurisdiction does not exist

for it, because Appellants’ claims do not arise out of those

31
contacts. Instead, they arise out of alleged tortious acts

committed by Al Furat in Syria.

Accordingly, the district court correctly concluded there was

no specific jurisdiction for Syria Shell.

b.

Alternatively, Appellants contend they should have been

allowed more jurisdictional discovery prior to Syria Shell’s

dismissal. A district court has “broad discretion in all discovery

matters”, and “such discretion will not be disturbed ordinarily

unless there are unusual circumstances showing a clear abuse.”

Wyatt, 686 F.2d at 283 (internal quotation marks and citation

omitted).

A district court is not required to defer ruling on a

jurisdictional motion until all discovery contemplated by the

plaintiff has been accomplished; instead, an opportunity for

discovery is required. See Patterson v. Dietze, Inc., 764 F.2d

1145, 1147 n.4 (5th Cir. 1985). Our discussion of Appellants’ lack

of diligence regarding FSIA immunity discovery is relevant to our

analysis of discovery issues relating to personal jurisdiction,

because the discovery motions and responses generally dealt with

both types of jurisdiction.

As discussed, Appellants did not take advantage of the ample

opportunity to conduct discovery. Despite there being no formal

prohibition on discovery after the 7 November 1997 Rule 26(f)

32
conference, Appellants made no specific discovery requests until

they noticed Wright’s deposition on 19 January. The magistrate

judge allowed them to depose Wright regarding personal

jurisdiction, and they obtained the requested documents regarding

the communications between Al Furat and WB&C about their contract.

After being informed by the magistrate judge that a recommendation

on dismissal was imminent, Appellants did not notice any other

depositions, and sent their first written discovery request only

one week before the magistrate judge made her recommendation on

discovery, and only nine days before she made her recommendation on

dismissal.

Moreover, “[d]iscovery on matters of personal jurisdiction ...

need not be permitted unless the motion to dismiss raises issues of

fact”. Wyatt, 686 F.2d at 284. “When the lack of personal

jurisdiction is clear, discovery would serve no purpose and should

not be permitted.” Id. Appellants’ brief does not describe the

discovery they contend should have been allowed, what facts they

hoped to obtain from such discovery, or how it would produce

information that would support specific jurisdiction for Syria

Shell. In any event, no amount of information on Syria Shell’s

contacts with Texas, through its claimed agent, Al Furat, would

strengthen Appellants’ assertion of specific jurisdiction for Syria

Shell, because, as stated, their claims did not arise from such

contacts.

33
 Accordingly, the district court did not abuse its discretion

by not allowing additional jurisdictional discovery prior to ruling

there was no specific jurisdiction for Syria Shell. See id. (“this

Court affirms denials of discovery on questions of personal

jurisdiction in cases where discovery sought could not have added

any significant facts” (internal quotation marks and citation

omitted)).

2.

Appellants claim general jurisdiction for Syria Shell and the

other two Shell Appellees (Royal Dutch and Shell Transport).

a.

Appellants maintain the ongoing relationship between WB&C and

Syria Shell, through its claimed agent, Al Furat, is sufficient to

constitute continuous and systematic contacts for general

jurisdiction for Syria Shell. They assert that, if the district

court had allowed discovery on the nature and extent of that

relationship, they could have developed evidence of such contacts’

systematic and continuous nature.

Even assuming Al Furat’s contacts with Texas, through its

contractual relationships with WB&C and B&C, are attributable to

Syria Shell, they were not continuous and systematic and thus do

not confer general jurisdiction for Syria Shell. See Helicopteros

Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 415-19 (1984).

34
 With respect to their inadequate-discovery contention,

Appellants have not described the discovery they contend should

have been allowed, or how it could produce evidence establishing

the propriety of general jurisdiction for Syria Shell. Moreover,

as discussed, Appellants did not exercise diligence in discovery.

b.

The other two Shell Appellees, Royal Dutch and Shell

Transport, had no direct contacts with Texas. General jurisdiction

is claimed because of their ownership of Shell Petroleum Inc.,

which owns Shell Oil Company, which has its principal place of

business in Texas. Appellants do so by attributing Shell Oil

Company’s contacts with Texas to Royal Dutch and Shell Transport.

Concomitantly, they claim the district court erred by dismissing

Royal Dutch and Shell Transport without allowing depositions of

those Appellees regarding their relationship with, and control

over, Shell Oil Company, as well as to determine whether they

maintained other contacts with Texas.

(1)

To attribute Shell Oil Company’s contacts with Texas to Royal

Dutch and Shell Transport, which own Shell Petroleum Inc.,

Appellants would have to establish: (1) Royal Dutch and Shell

Transport are the alter egos of Shell Petroleum, which owns Shell

Oil Company; and (2) Shell Petroleum is the alter ego of Shell Oil

Company. There is no evidence to support either conclusion.

35
 The prerequisites for establishing personal jurisdiction over

a corporation, based on the contacts of its subsidiary, are

described in Hargrave v. Fibreboard Corp., 710 F.2d 1154 (5th Cir.

1983).

[S]o long as a parent and subsidiary maintain
separate and distinct corporate entities, the
presence of one in a forum state may not be
attributed to the other.... Generally, our
cases demand proof of control by the parent
over the internal business operations and
affairs of the subsidiary in order to fuse the
two for jurisdictional purposes.... The
degree of control exercised by the parent must
be greater than that normally associated with
common ownership and directorship.... All the
relevant facts and circumstances surrounding
the operations of the parent and subsidiary
must be examined to determine whether two
separate and distinct corporate entities
exist.

Id. at 1160 (internal quotation marks and citations omitted). See

also Access Telecom, Inc. v. MCI Telecommunications Corp., 197 F.3d

694, 717 (5th Cir. 1999) (“typically, the corporate independence of

companies defeats the assertion of jurisdiction over one by using

contacts with the other”); Dickson Marine, Inc. v. Panalpina, Inc.,

179 F.3d 331, 338 (5th Cir. 1999) (“Courts have long presumed the

institutional independence of related corporations, such as parent

and subsidiary, when determining if one corporation’s contacts with

a forum can be the basis of a related corporation’s contacts”;

presumption may be overcome by “clear evidence”); Southmark Corp.

v. Life Investors, Inc., 851 F.2d 763, 773-74 (5th Cir. 1988) (“it

is well-settled that where ... a wholly owned subsidiary is

36
operated as a distinct corporation, its contacts with the forum

cannot be imputed to the parent”).

In support of dismissal, Shell Appellees submitted the

declarations of van der Vlist, the General Attorney of Royal Dutch;

Munsiff, the Secretary of Shell Transport; and Paul, the Assistant

Secretary of Shell Oil Company. Those declarations establish:

Royal Dutch and Shell Transport are holding companies, which own

investments in various entities known collectively as the Royal

Dutch/Shell group of companies; Shell Oil Company is a wholly-owned

subsidiary of Shell Petroleum Inc.; Royal Dutch and Shell Transport

have indirect investments in Shell Oil Company, by virtue of their

ownership of Shell Petroleum Inc.; Shell Oil Company is not a

division of Royal Dutch or Shell Transport; Shell Oil Company has

its own capital and its own employee benefit programs; Shell Oil

Company’s board consists of 11 members, one being an officer of

Royal Dutch and one a director of Shell Transport; and Shell Oil

Company’s officers are not officers of Royal Dutch or Shell

Transport.

Appellants have not made a prima facie showing that Shell

Transport and Royal Dutch so control the activities of Shell

Petroleum Inc., and that, in turn, it so controls the activities of

Shell Oil Company, that the latter’s contacts with Texas may be

attributed to Shell Transport and Royal Dutch for purposes of

general jurisdiction. Appellants presented no evidence that:

37
Royal Dutch and Shell Transport financed the operations of Shell

Oil Company; Royal Dutch and Shell Transport caused the

incorporation of Shell Oil Company; Shell Oil Company is grossly

undercapitalized; Royal Dutch and Shell Transport paid the salaries

and other expenses of Shell Oil Company; Shell Oil Company received

all its business from Royal Dutch and Shell Transport; Royal Dutch

and Shell Transport used Shell Oil Company’s property as their own;

daily operations of the corporations were not separate; or Shell

Oil Company does not observe corporate formalities. See Gundle

Lining Const. Corp. v. Adams County Asphalt, Inc., 85 F.3d 201,

208-09 (5th Cir. 1996) (listing factors considered in determining

whether subsidiary is alter ego of parent corporation); see also

Gardemal v. Westin Hotel Co., 186 F.3d 588, 593 (5th Cir. 1999)

(under Texas law, alter ego doctrine “applies when there is such

unity between the parent corporation and its subsidiary that the

separateness of the two corporations has ceased and holding only

the subsidiary corporation liable would result in injustice”

(internal quotation marks and citation omitted)).

Accordingly, the district court correctly held that there was

no general jurisdiction for Royal Dutch and Shell Transport based

on Shell Oil Company’s contacts with Texas.

(2)

Appellants offer nothing to support their conclusory assertion

they could have established evidence to support their alter ego

38
theory had discovery not been restricted. The declarations of the

Royal Dutch, Shell Transport, and Shell Oil Company corporate

representatives negate the possibility that, by virtue of their

ownership of Shell Petroleum Inc., Royal Dutch and Shell Transport

are the alter egos of Shell Oil Company. Appellants offer no basis

whatsoever to support an inference that those corporate

representatives’ deposition testimony would contradict their sworn

declarations. And, once again, Appellants did not act diligently

in discovery.

Accordingly, the district court did not abuse its discretion

by dismissing Royal Dutch and Shell Transport without allowing

additional jurisdictional discovery.

III.

For the foregoing reasons, the judgment is

AFFIRMED.

39