GERALD E. ROSEN, Chief Judge.
In this case, Plaintiff Triple A International, Inc., a Michigan corporation, seeks to collect on a debt allegedly owed to it by the Defendant Democratic Republic of the Congo ("DRC"), a nation located in central Africa. This debt arises from a contract entered into by Plaintiff and the DRC's predecessor, Zaire, in late 1993, under which Plaintiff procured light equipment for Zaire's military. According to Plaintiff's complaint, the DRC has repeatedly acknowledged its indebtedness to Plaintiff over the years, but has nonetheless failed to pay this debt, which allegedly amounts to over $14 million.
Through the present motion, the DRC seeks the dismissal of Plaintiff's complaint on four separate grounds. First, the DRC asserts that it is protected by sovereign immunity, and that the "commercial activity" exception to this immunity set forth in the Foreign Sovereign Immunities Act ("FSIA"), 28 U.S.C. § 1602 et seq., is not triggered by the allegations of Plaintiff's complaint. Next, even if the FSIA confers jurisdiction over this suit, the DRC contends that the Court should refrain from exercising this jurisdiction under the doctrine of forum non conveniens. Third, the DRC argues that Plaintiff has forfeited its right to seek judicial redress arising from the parties' dispute, by virtue of a provision in a 2009 memorandum of understanding that the DRC construes as a covenant not to sue. Finally, the DRC contends that Plaintiff's claims are barred by Michigan's six-year statute of limitations for breach-of-contract suits.
The DRC's motion has been fully briefed by the parties. Having reviewed the parties' written submissions in support of and
Plaintiff Triple A International, Inc. is "in the business of conducting and facilitating international business transactions throughout the world." (Complaint at ¶ 6.) The company was formed in 1991, is incorporated under Michigan law, and maintains its principal place of business in Dearborn, Michigan. At various times, Plaintiff has maintained satellite offices in Sierra Leone and the DRC.
In late 1993, the government of the African country then known as Zaire
After consulting catalogs and communicating with potential suppliers from its office in Dearborn, Michigan, Plaintiff ultimately selected a South Korean manufacturer to provide the goods sought by the DRC. A representative of the Plaintiff corporation then traveled to the DRC and to South Korea to make the necessary arrangements, culminating in Plaintiff's submission of a January 5, 1994 proposal to the DRC. (See Complaint, Ex. A.)
According to the complaint, Plaintiff fulfilled all of its obligations under the parties' contract, and a DRC government official issued instructions in October of 1994 to pay Plaintiff for the goods it had procured on the DRC's behalf. (See Complaint, Ex. C.) No payment was forthcoming, however. In early 1997, Plaintiff again secured a commitment from a DRC government official to pay the debt owed to the company, (see Complaint, Ex. D), but the DRC once again failed to make this payment.
From 1997 until 2003, the DRC was beset by war and its government was overthrown. After hostilities ceased in 2003, Plaintiff renewed its efforts to secure payment of the debt owed by the DRC, and in January of 2004, a DRC government official issued a certificate acknowledging the country's indebtedness to Plaintiff. (See Complaint, Ex. E.) Similarly, a government official requested in September of 2007 that the DRC pay the debt owed to Plaintiff. (See Complaint, Ex. F.) Most recently, the parties entered into negotiations in the spring of 2009, resulting in the execution of a memorandum of understanding in which the DRC acknowledged its debt to Plaintiff and agreed to repay this debt through fourteen monthly payments of just over $1 million each. (See Complaint, Ex. J.)
Through the present motion, the Defendant DRC seeks the dismissal of Plaintiff's complaint on a number of grounds. First and foremost, the DRC contends that this Court lacks subject matter jurisdiction in light of the sovereign immunity conferred upon foreign states under the Foreign Sovereign Immunities Act ("FSIA"), 28 U.S.C. § 1602 et seq. In addressing this jurisdictional challenge brought under Fed.R.Civ.P. 12(b)(1), the Court "takes the allegations in the complaint as true," inquiring whether these allegations establish a basis for the exercise of subject matter jurisdiction. Gentek Building Products, Inc. v. Sherwin-Williams Co., 491 F.3d 320, 330 (6th Cir.2007).
As the Sixth Circuit has observed, "[a]pplying the standards under [Rule] 12(b)(1) to the FSIA context is complicated by FSIA's burden-shifting process." O'Bryan, 556 F.3d at 376. "The party claiming FSIA immunity bears the initial burden ... of establishing a prima facie case that it satisfies the FSIA's definition of a foreign state; once this prima facie case is established, the burden of production shifts to the non-movant to show that an exception [to FSIA immunity] applies." O'Bryan, 556 F.3d at 376 (internal quotation marks and citation omitted). Yet, "[t]he party claiming immunity under FSIA retains the burden of persuasion throughout this process." 556 F.3d at 376. When addressing a facial jurisdictional challenge, such as the DRC is pursuing here, the Court must accept the complaint's allegations as true, and then — assuming the moving party has met its threshold burden of establishing its entitlement to immunity under the FSIA as a foreign state — inquire whether these allegations "bring the case within any of the FSIA exceptions to immunity invoked by the plaintiff." 556 F.3d at 376 (internal quotation marks, alteration, and citations omitted). With these standards in mind, the Court turns to the DRC's claim of sovereign immunity.
Under the FSIA, "a foreign state is presumptively immune from the jurisdiction of United States courts," and "unless a specified exception applies, a federal court lacks subject-matter jurisdiction over a claim against a foreign state." Saudi Arabia v. Nelson, 507 U.S. 349, 355, 113 S.Ct. 1471, 1476, 123 L.Ed.2d 47 (1993); see also 28 U.S.C. § 1604 (providing that "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"). In this case, the parties agree that the Defendant DRC qualifies as a "foreign state" as this term is defined in the FSIA. It follows that subject matter jurisdiction is lacking here unless the allegations of Plaintiff's complaint trigger one of the exceptions set forth in the FSIA.
In this case, Plaintiff appeals to the FSIA's "commercial activity" exception. In particular, the pertinent FSIA provision withholds a foreign state's usual immunity from suit where
28 U.S.C. § 1605(a)(2). The jurisdictional allegations of Plaintiff's complaint invoke the first and third clauses of this provision. (See Complaint at ¶ 3.) In its response to the DRC's motion, however, Plaintiff expressly disavows any reliance on the third clause of § 1605(a)(2), and instead rests its claim of subject matter jurisdiction solely upon the first clause. (See Plaintiff's Response Br. at 9-11.)
Accordingly, the existence of subject matter jurisdiction here turns on the question whether Plaintiff's claims are "based upon a commercial activity carried on in the United States by" the DRC.
Yet, this seemingly straightforward inquiry into the locus of the DRC's activities is complicated by another FSIA provision, which broadens the definition of "commercial activity carried on in the United States by a foreign state" to encompass "commercial activity carried on by such state and having substantial contact with the United States." 28 U.S.C. § 1603(e). Under this definition, then, a foreign state evidently need not conduct any commercial activity in the United States, so long as its commercial activity carried on elsewhere has "substantial contact" with the United States. As stated in the FSIA's legislative history:
H.R.Rep. No. 94-1487, at 17 (1976), reprinted in 1976 U.S.C.C.A.N. 6604, 6615-16.
In Plaintiff's view, the activity in which the DRC engaged is comparable to at least two of the examples cited in this passage of the FSIA's legislative history as illustrative of commercial activity having a "substantial contact" with the United States. First, Plaintiff contends that the parties engaged in an "import-export transaction[]" within the meaning of this passage. While the goods purchased by the DRC in the parties' transaction were manufactured in South Korea and shipped directly from this South Korean supplier to the DRC, (see Plaintiff's Response, Ex. Q), Plaintiff notes that it made the arrangements for this purchase and shipment from its offices in the United States. These U.S.-based activities, according to Plaintiff, serve as the "substantial contact" required under the statute to trigger the "commercial activity" exception to sovereign immunity.
The case law cited by Plaintiff in support of this "import-export" theory of jurisdiction, however, is readily distinguishable and not especially helpful. First, Plaintiff points to the court's observation in Zedan v. Kingdom of Saudi Arabia, 849 F.2d 1511, 1513 (D.C.Cir.1988), that "a contractual arrangement, one part of which is to be performed in the United States, constitutes a substantial contact with the United States." Yet, this statement in Zedan is pure dicta, reflecting the court's broad characterization and general understanding of the above-quoted passage from the FSIA's legislative history. In fact, the court in Zedan determined that the first clause of § 1605(a)(2) did
The second case cited by Plaintiff, while more on point, is nonetheless factually distinguishable. In Gibbons v. Udaras na Gaeltachta, 549 F.Supp. 1094, 1115 (S.D.N.Y.1982), the court found that a transaction between the plaintiffs, two American citizens, and the defendant instrumentality of the Republic of Ireland (Gaeltarra Eireann, or "GE") had the requisite
The facts here are different in two respects. First, the parties' contract negotiations evidently were held exclusively in the DRC, with no portion of these negotiations conducted in the United States. Indeed, as noted earlier, the DRC engaged in no activities whatsoever in the United States in connection with its contractual relationship with Plaintiff. Next, there is nothing in the parties' contract that reflects any promise or shared understanding that a substantial portion of Plaintiff's obligations would be performed in the United States. So far as the record reveals, the DRC was indifferent as to the location from which Plaintiff would obtain and ship the requested military supplies — and, of course, these goods ultimately were manufactured in and shipped from South Korea, not the United States. In addition, Plaintiff's proposal called for payment to be made into an account at the Bank of Zaire, (see Complaint, Ex. A), and the DRC's acceptance stipulated that this payment would be made in the currency of Zaire, (see Complaint, Ex. B). In short, then — and in contrast to the facts presented in Gibbons — the bulk of the parties' contractual obligations were to be performed in the DRC (or at other, unspecified locations), rather than in the United States.
To be sure, Plaintiff carried out some of its contractual obligations — including identifying possible sources for the military supplies sought by the DRC, and arranging for the manufacture and shipment of these goods from a South Korean supplier to the DRC — from its office in Michigan, and the above-quoted passage from the FSIA's legislative history references commercial transactions performed "in whole or in part" in the United States. Yet, in the various documents exchanged between the parties leading up to their contractual relationship, there is no indication that the DRC sought this U.S.-based performance, or placed any importance on the likelihood that Plaintiff might undertake some of its contractual duties from its Michigan office. Indeed, this documentary record leaves open the possibility that the DRC was not even aware of the place of Plaintiff's performance. Most notably, Plaintiff presented its proposal on company letterhead that listed its offices in Michigan and the DRC, (see Complaint, Ex. A), and nothing in the record evidences the DRC's understanding or belief that Plaintiff would operate exclusively (or even primarily) out of its Michigan office as it procured the military supplies referenced in its proposal. From this record, then, it appears that Plaintiff's performance of some of its contractual duties in Michigan was largely a product of happenstance or Plaintiff's own choice or convenience, rather than a result of the DRC's deliberate engagement in commercial activity having "substantial contact" with the United States. As noted in the above-quoted congressional
Against this backdrop, the Court finds that one of the decisions cited by the DRC, Tubular Inspectors, Inc. v. Petroleos Mexicanos, 977 F.2d 180 (5th Cir.1992), is particularly instructive here. In that case, Mexico's national oil company, defendant Petroleos Mexicanos ("Pemex"), agreed to purchase 19 valves from the plaintiff corporation's Mexican subsidiary, Tubular Mexico. Pemex paid for 15 of these valves, and claimed that it paid the remaining balance by presenting a check to two men who identified themselves as Tubular Mexico employees. The plaintiff corporation, Tubular USA, asserted that these men were not authorized to accept payment on its behalf, and it brought suit in a federal district court to collect the unpaid balance of Pemex's debt. The district court determined that it could exercise subject matter jurisdiction under the first clause of § 1605(a)(2), but the Fifth Circuit reversed, finding that Pemex had "purposefully structured" the parties' transaction to "anchor it in Mexico," and that "Pemex's contacts with Tubular USA in Texas were sufficiently isolated to deny subject matter jurisdiction." Tubular Inspectors, 977 F.2d at 185-86.
In so ruling, the court acknowledged that the "case presents a close[] FSIA jurisdictional issue." 977 F.2d at 185 (footnote omitted). In particular, Pemex's transaction had a number of connections with the United States, including (i) the valves, which were of U.S. origin and were obtained by Tubular USA in the United States, (ii) the purchase orders issued by Pemex, which were addressed to "Tubular Mexico `and/or' Tubular USA," and (iii) a visit by Pemex officials to Houston, Texas to inspect the valves and accept them for
Tubular Inspectors arguably could be viewed as demarcating the outer limit of decisions in which a foreign state's contacts with the United States are deemed insufficiently "substantial" to satisfy the first clause of § 1605(a)(2), and this Court cannot say whether it would have decided that case the same way. The transaction at issue here, however, entailed far more limited contacts with the United States. The goods purchased by the DRC were not manufactured in or shipped from the United States, nor did the parties' agreement call for the DRC to make payment in the United States or in U.S. currency. Moreover, no DRC officials traveled to the United States (or even left their own country) in connection with the parties' transaction, whether to negotiate the parties' agreement, inspect the goods that Plaintiff proposed to provide, or address the repayment of the DRC's outstanding indebtedness. Under this record, the only connection between the DRC's commercial activity and the United States was the DRC's decision to retain a U.S. — based company to find and procure supplies for its military. Even then, however, the DRC (i) selected a company with an office in the DRC, (ii) agreed to make payment to a local bank in the country's own currency, and (iii) sent correspondence addressed to Plaintiff's office in Kinshasa and written in the DRC's official language, French. (See Complaint, Exs. B, E.) As in Tubular Inspectors, then, the DRC "attempt[ed] to craft a [DRC-based] transaction," Tubular Inspectors, 977 F.2d at 185, never reaching beyond its borders in its dealings with Plaintiff. Under this record, the mere fact that the DRC contracted with a U.S.-based company that carried out some of its duties from its Michigan office does not give rise to "commercial activity carried on by [the DRC] and having substantial contact with the United States." 28 U.S.C. § 1603(e).
Further support for this conclusion is found in the statutory requirement that to overcome the sovereign immunity enjoyed by the defendant foreign state, a plaintiff's suit must be "based upon" the defendant's commercial activity carried on in the United States. 28 U.S.C. § 1605(a)(2). As the Supreme Court has explained, this statutory language is satisfied only if the foreign state's commercial activity in the United States forms the basis for one or more of "those elements of a claim that, if proven, would entitle a plaintiff to relief under his theory of the case." Nelson, 507 U.S. at 357, 113 S.Ct. at 1477. The "based upon" language of § 1605(a)(2) "calls for something more than a mere connection with, or relation to, commercial activity." Nelson, 507 U.S. at 358, 113 S.Ct. at 1478. Rather, to exercise jurisdiction under the FSIA's "commercial activity" exception,
In this case, there is only a tenuous connection between the fairly limited commercial activity carried out in the United States — solely by Plaintiff, and not the DRC — and Plaintiff's breach-of-contract claim. First, it is immaterial to the DRC's alleged breach of its contractual obligation that Plaintiff conducted some of its activities in the United States. Whether Plaintiff consulted catalogs and communicated with potential suppliers from its Michigan office, its office in the DRC, or elsewhere, the DRC's contractual obligation, and its alleged breach of this obligation, would remain precisely the same. See Kensington International Ltd. v. Itoua, 505 F.3d 147, 156 (2d Cir.2007) (finding that the "requisite nexus does not exist between [the defendant foreign state's] commercial activity in the United States ... and the gravamen of [the plaintiff's] complaint," where the defendant's "acts in the United States had no bearing on [the plaintiff's] ability or inability to recover the money owed by" the defendant); Gerding v. Republic of France, 943 F.2d 521, 527 (4th Cir.1991) (holding that the FSIA's "commercial activity" exception did not apply where the defendant foreign state's limited contacts with the United States had "no material connection with the [plaintiffs'] cause of action").
Moreover, because the parties' contract called for the DRC to issue payment to an account at the Bank of Zaire, the breach of this obligation occurred in the DRC, and this was the principal locus of the harm felt by Plaintiff as a result of the DRC's failure to pay. See United World Trade, Inc. v. Mangyshlakneft Oil Production Ass'n, 33 F.3d 1232, 1239 (10th Cir.1994) ("The fact that [the plaintiff], had it received additional funds in London pursuant to the contract, would have then transferred those funds to the United States does not allow us to conclude that the loss suffered by [the plaintiff] was sufficiently `in the United States' to warrant jurisdiction under § 1605(a)(2)."). In addition, out of the over $14 million in damages sought by Plaintiff, surely only a small fraction of this amount could possibly be attributable to Plaintiff's fairly modest activities in the United States, while the bulk of this requested award is likely based on the underlying cost of the military supplies identified through Plaintiff's efforts — supplies which were manufactured in and shipped from South Korea, and not the United States. Finally, while Plaintiff recognizes that a breach-of-contract suit arising from the DRC's initial failure to pay its debt back in 1994 would surely be barred by the statute of limitations, it alleges that this otherwise time-barred claim has been revived by virtue of the DRC's repeated acknowledgment of its debt over the years. See Mich. Comp. Laws § 600.5866 (providing for the revival of an otherwise time-barred breach-of-contract claim through "the acknowledgment or promise of the party to be charged"). These acknowledgments,
In a final effort to support its appeal to the first clause § 1605(a)(2) as a basis for overcoming the DRC's sovereign immunity, Plaintiff points to another passage in the above-quoted legislative history indicating that the "commercial activity" exception applies where the foreign state "receives financing from a private or public lending institution located in the United States." H.R.Rep. No. 94-1487, at 17, reprinted in 1976 U.S.C.C.A.N. at 6615-16. Because the parties' contract evidently called for the DRC to pay for the requested supplies at or after the time of delivery,
The Court does not believe that the parties' transaction can fairly be characterized as entailing "financing from a ... lending institution located in the United States." First, nothing in the record suggests that Plaintiff qualifies as a "lending institution," or that it generally (or even occasionally) engages in lending. Next, and more importantly, there was no "financing" component to the parties' transaction, at least as that term is commonly understood. The parties' agreement did not include any provisions for payment in installments, the accrual of interest, or any other terms that one would typically expect to see in a financing arrangement. Rather, so far as the record reveals, the DRC was expected to make a single lump-sum payment upon receipt of the requested military supplies.
For the reasons set forth above,
NOW, THEREFORE, IT IS HEREBY ORDERED that Defendant's April 11, 2011 motion to dismiss (docket # 19) is GRANTED as to Defendant's appeal to