     10-828-cv
     SerVaas, Inc. v. Republic of Iraq, Ministry of Industry of the Republic of Iraq
 1                                       UNITED STATES COURT OF APPEALS
 2                                           FOR THE SECOND CIRCUIT
 3
 4                                               AMENDED SUMMARY ORDER
 5
 6   RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A
 7   SUMMARY ORDER FILED ON OR AFTER JANUARY 1, 2007, IS PERMITTED AND IS GOVERNED
 8   BY FEDERAL RULE OF APPELLATE PROCEDURE 32.1 AND THIS COURT’S LOCAL RULE 32.1.
 9   WHEN CITING A SUMMARY ORDER IN A DOCUMENT FILED WITH THIS COURT, A PARTY
10   MUST CITE EITHER THE FEDERAL APPENDIX OR AN ELECTRONIC DATABASE (WITH THE
11   NOTATION “SUMMARY ORDER”). A PARTY CITING A SUMMARY ORDER MUST SERVE A COPY
12   OF IT ON ANY PARTY NOT REPRESENTED BY COUNSEL.
13
14          At a stated term of the United States Court of Appeals for the Second Circuit, held
15   at the Daniel Patrick Moynihan United States Courthouse, 500 Pearl Street, in the City of
16   New York, on the 16th day of February, two thousand eleven.
17
18   PRESENT: GUIDO CALABRESI,
19            GERARD E. LYNCH,
20                          Circuit Judges
21            DENISE COTE,
22                          District Judge.*
23
24   ------------------------------------------------------------------
25
26   SERVAAS INC.,
27                                                            Plaintiff-Appellee,
28
29                                     v.                                              No. 10-828-cv
30
31   REPUBLIC OF IRAQ, MINISTRY OF INDUSTRY OF THE REPUBLIC OF IRAQ,
32                            Defendants-Appellants.
33
34   --------------------------------------------------------------------
35
36   FOR APPELLANT:                               TENNANT D. MAGEE, SR. (Timothy B. Mills, on the brief),
37                                                Maggs & McDermott LLC, Washington, D.C., and Stephen
38                                                Albright, Law Offices of Stephen Albright, Commack, New
39                                                York.
40
41   FOR APPELLEE:                                JOHN A. PISKORA, Loeb & Loeb LLP, New York, New
42                                                York.
43


                *
            Honorable Denise Cote of the United States District Court for the Southern District
     of New York, sitting by designation.
 1          Appeal from the United States District Court for the Southern District of New

 2   York (Richard M. Berman, J.).

 3          UPON DUE CONSIDERATION, IT IS HEREBY ORDERED, ADJUDGED,

 4   AND DECREED that the judgment of the district court is AFFIRMED.

 5          Defendants appeal an order of the district court denying their motion to dismiss for

 6   lack of subject matter jurisdiction under the Foreign Sovereign Immunities Act (“FSIA”),

 7   lack of personal jurisdiction, and failure to state a claim with respect to the Republic of

 8   Iraq upon which relief can be granted. We assume the parties’ familiarity with the

 9   underlying facts, the procedural history of the case, and the issues on appeal.

10                                          DISCUSSION

11   I. Subject Matter and Personal Jurisdiction under the FSIA

12          The FSIA provides “the sole basis for obtaining jurisdiction over a foreign state in

13   our courts.” Argentine Republic v. Amerada Hess, 488 U.S. 428, 434 (1989). Under the

14   statute, foreign sovereigns as well as their agencies and instrumentalities are

15   presumptively immune from suit unless one of several enumerated exceptions applies.

16   Saudi Arabia v. Nelson, 507 U.S. 349, 354-55 (1993). “The standard of review

17   applicable to district court decisions regarding subject matter jurisdiction under the FSIA

18   is clear error for factual findings and de novo for legal conclusions.” In re Terrorist

19   Attacks on Sept. 11, 2001, 538 F.3d 71, 79 (2d Cir. 2008) (internal quotation marks

20   omitted).




                                                   2
 1          Personal jurisdiction under the FSIA exists when a court concludes that it has

 2   subject matter jurisdiction pursuant to one of the statute’s exceptions and that the plaintiff

 3   has complied with the service of process requirements set forth in 28 U.S.C. § 1608.

 4   Capital Ventures Int’l v. Republic of Argentina, 552 F.3d 289, 293 n.3 (2d Cir. 2009).

 5          A. The Ministry of Industry

 6          The district court found that it had jurisdiction over SerVaas’s claims against the

 7   Ministry of Industry (“the Ministry”) pursuant to the “Commercial Activity” exception to

 8   the FSIA. We agree.

 9          Under the commercial activity exception, a foreign sovereign forfeits its immunity

10   from suit if the plaintiff can show that, as relevant here, his claims are “based upon . . . an

11   act outside the territory of the United States in connection with a commercial activity of

12   the foreign state elsewhere and that act causes a direct effect in the United States.” 28

13   U.S.C. § 1605(a)(2).

14          In applying the commercial activity exception to an action for recognition of a

15   foreign judgment, we look to the underlying conduct that gave rise to the judgment. See,

16   e.g., International Housing Ltd. v. Rafidain Bank Iraq, 893 F.2d 8, 11-12 (2d Cir. 1989).

17   Here, the underlying conduct—contracting for the purchase of goods, services and

18   technology—is quintessentially commercial. Cf. Republic of Argentina v. Weltover, Inc.,

19   504 U.S. 607, 614 (1992) (“[W]hen a foreign government acts, not as regulator of a

20   market, but in the manner of a private player within it, the foreign sovereign's actions are

21   ‘commercial’ within the meaning of the FSIA.”).



                                                    3
 1           Nor is there any question that this activity had a direct effect in the United States.

 2   An effect is “direct” under the commercial activity exception “if it follows ‘as an

 3   immediate consequence of the defendant’s . . . activity.’” Weltover, 504 U.S. at 618,

 4   quoting Weltover, Inc. v. Republic of Argentina, 941 F.2d 145, 152 (2d Cir. 1991)

 5   (ellipsis in original). There is no requirement that the effect be substantial. Id. In this

 6   case, the Ministry bought goods and services from SerVaas, an American corporation,

 7   shipped shell casings for testing to the United States, and made payments using a bank

 8   headquartered in Atlanta. Any of these activities alone might have been sufficient to

 9   satisfy the statute; taken together they clearly do so.

10          Given our conclusion that the Ministry’s purchase of refining assistance was

11   commercial activity that had a direct effect in the United States, the district court did not

12   err in finding that it had subject matter jurisdiction over SerVaas’s claims against the

13   Ministry. Furthermore, because the Ministry does not contend that it was improperly

14   served, the district court also had personal jurisdiction over the Ministry. Cf. Texas

15   Trading & Milling Corp. v. Federal Republic of Nigeria, 647 F.2d 300, 308 (2d Cir.

16   1981) (Under the FSIA, “subject matter jurisdiction plus service of process equals

17   personal jurisdiction.”).

18          B. The Republic of Iraq

19          Defendants contend that the Ministry of Industry is an instrumentality that is

20   separate and independent from the Republic of Iraq (“the Republic”) and that,

21   consequently, the commercial activity of the Ministry cannot be imputed to the Republic

                                                    4
 1   for the purposes of determining the Republic’s susceptibility to suit under the FSIA. In

 2   support of their argument, defendants cite First National City Bank v. Banco Para el

 3   Comercio Exterior de Cuba, in which the Supreme Court set forth the rule that

 4   “government instrumentalities established as juridical entities distinct and independent

 5   from their sovereign[s] should normally be treated as such.” 462 U.S. 611, 626-27 (1983)

 6   (“Bancec”).

 7          Our court has previously recognized, however, that the Bancec presumption does

 8   not apply where the entity asserting independence operates as a political organ of the

 9   state, such that “‘no meaningful legal distinction’” can be drawn between the two. Garb

10   v. Republic of Poland, 440 F.3d 579, 592 (2d Cir. 2006), quoting Companie Noga

11   D’Importation Et D’Exportation S.A. v. Russian Fed’n, 361 F.3d 676, 688 (2d Cir. 2004).

12   As counsel for Iraq acknowledged at oral argument, in making this inquiry we follow the

13   “core functions” test first articulated by the U.S. Court of Appeals for the District of

14   Columbia Circuit in Transaero, Inc. v. La Fuerza Area Boliviana, 30 F.3d 148 (D.C. Cir.

15   1994). Thus, whether we may impute the commercial activity of the Ministry to the

16   Republic turns on “‘whether the core functions of the [Ministry] are predominantly

17   governmental or commercial.’” Garb, 440 F.3d at 591, quoting Transaero, 30 F.3d at

18   151.

19          We have no difficulty concluding that the core functions of the Ministry are

20   primarily governmental. Iraq’s own submissions to the district court repeatedly quote

21   Article 1 of the Iraqi Law of Executive Authority, which provides that “each Ministry of

                                                   5
 1   the Ministries . . . shall be regarded as the meaning of the word ‘Government.’” Law of

 2   Executive Authority No. (50) 1964, art. I, para. 2.. The Ministry is headed by a

 3   politically-appointed member of the Council of Ministers, which the Iraqi constitution

 4   charges with “plan[ning] and execut[ing] the general policy and general plans of the State

 5   and oversee[ing] the work of the ministries.” Article 80, Doustour Joumhouriat al-Iraq

 6   [The Constitution of the Republic of Iraq] of 2005, available at http://www.uniraq.org/

 7   documents/iraqi_constitution.pdf (last visited Feb. 9, 2011). Furthermore, among its

 8   many duties, the Ministry is charged with reviewing and recording applications for

 9   trademark registration, a regulatory function that we view as quintessentially

10   governmental. Trademarks and Descriptions Law No. 21 of 1957, art. 2 (Iraq).1

11          In short, although there may be cases in which it is difficult to distinguish between

12   an independent instrumentality and a political subdivision of a foreign sovereign, this is

13   not one of them. Based on our assessment of the Ministry’s core functions, we see “no

14   meaningful legal distinction” between it and the Republic. Noga, 361 F.3d at 688. The

15   district court, therefore, properly treated them as a single entity in establishing subject

16   matter and personal jurisdiction under the FSIA.

17   II. Failure to State a Claim Upon Which Relief Can Be Granted

18          In addition to ruling on the jurisdictional issues under the FSIA, the district court

19   considered and rejected Iraq’s claim that SerVaas had failed to state a claim against the


            1
             Although neither Iraq’s constitution nor the Trademarks and Descriptions Law is
     included in the record of this case, both are appropriate subjects of judicial notice, which may
     be taken at any stage of the proceeding. See Garb, 440 F.3d at 594 n.18.
                                                    6
 1   Republic under the New York Foreign Money-Judgments Recognition Act (N.Y.

 2   C.P.L.R. § 5301). Iraq acknowledges that we generally lack jurisdiction to review the

 3   district court’s denial of a motion to dismiss under Rule 12(b)(6), but suggests that we

 4   may do so in this case pursuant to the doctrine of pendent appellate jurisdiction. We may

 5   assert our pendent jurisdiction where “the same specific question underl[ies] both the

 6   appealable order and the non-appealable order, or where resolution of the non-appealable

 7   order [is] subsidiary to resolution of the appealable order.” Stolt-Nielsen SA v. Celanese

 8   AG, 430 F.3d 567, 576 (2d Cir. 2005). That, however, is not the case here. At oral

 9   argument, counsel for Iraq stressed repeatedly that the New York act and the FSIA

10   impose different standards for determining whether the Ministry should be considered an

11   alter ego of the Republic. Faced with this assertion, we must conclude that the two

12   questions are sufficiently separate to deprive us of jurisdiction to review the district

13   court’s Rule 12(b)(6) ruling.

14                                         CONCLUSION

15          We have considered defendants’ remaining arguments and find them to be without

16   merit. For the reasons stated above, we AFFIRM the judgment of the District Court.

17
18
19                                       FOR THE COURT:
20                                       Catherine O’Hagan Wolfe, Clerk of Court




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