Peré Ex Rel. Peré v. Nuovo Pignone, Inc.

Revised August 24, 1998

UNITED STATES COURT OF APPEALS

For the Fifth Circuit

No. 97-30572

NANCY G. PERÉ, on behalf of Marci Danielle Peré,

on behalf of Matthew Reed Peré, individually and

on behalf of her minor children,

Plaintiff-Appellee,

VERSUS

NUOVO PIGNONE, INC., et al.,

Defendants-Appellants,

VERSUS

COPPUS ENGINEERING; TUTHILL CORPORATION,

Defendants-Appellees.

Appeal from the United States District Court

For the Western District of Louisiana

August 7, 1998

Before POLITZ, Chief Judge, JONES, and DUHÉ, Circuit Judges:

JOHN M. DUHÉ, JR., Circuit Judge.

Appellee’s husband was killed while working on a platform off

the coast of West Africa when a starter turbine manufactured by

Coppus Engineering exploded. The starter turbine was a component

of a turbine system designed and manufactured by Nuovo Pignone.

Appellee sued for her husband’s wrongful death claiming that the

starter turbine and turbine system had been improperly designed

and/or manufactured. Appellant, Nuovo Pignone, an Italian company,

claimed sovereign immunity under the Foreign Sovereign Immunities

Act. 28 U.S.C. § 1602, et seq. The district court found that,

although Appellant was a foreign state, the commercial activity

exception to immunity applied and Appellant could be sued. We

disagree, holding that the Appellee failed to meet her burden of

proof that the commercial activity exception applied.

I.

In 1974, Nuovo Pignone, an Italian company that designs and

manufactures turbine systems, bought a starter turbine from Coppus

Engineering, a United States company. Nuovo Pignone then sold to

Cabinda Gulf Oil Company (“CABGOC”), FOB Italy, a turbine system

that incorporated the Coppus starter turbine. Nuovo Pignone

manufactured, tested, and inspected the turbine system in Italy.

It was then sent to Bayou Black, Louisiana for final assembly by

CABGOC’s contractor onto a platform. The completed platform was

sent to CABGOC in the Molongo field off the coast of Angola, West

Africa.

In 1993, Marcus Daniel Peré (“Peré”) was employed by Chevron

Overseas Petroleum and/or CABGOC as an instrument technician in

West Africa. Peré’s employer ordered him to a gas injection

platform to test the gas turbine system. During the test, the

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starter turbine exploded killing Peré. Peré’s widow sued1 on

behalf of herself and her two children claiming that the Coppus

turbine and Nuovo Pignone’s turbine system caused Peré’s death

because they had been defectively designed and/or manufactured.

Nuovo Pignone moved for summary judgement claiming sovereign

immunity by contending it was an agent or instrumentality of the

Italian government. It established that Ente Nazionale Idrocaburi

(“ENI”) was the majority shareholder at the time of the accident

and that the Republic of Italy created ENI to lead Italy’s oil and

gas exploration and development. Thus, Nuovo Pignone argued,

because ENI is an agent or instrumentality of the Italian

government, it was a foreign state entitled to immunity. The

district court agreed. It, however, denied Nuovo Pignone’s request

for dismissal concluding that Nuovo Pignone was not entitled to

sovereign immunity because of its commercial activities in the

United States. Nuovo Pignone appeals.

II.

The Foreign Sovereign Immunities Act of 1976 (“FSIA”), 28

U.S.C. § 1602 et. seq., provides the sole basis for obtaining

jurisdiction over a foreign state. Argentine Republic v. Amerada

Hess Shipping Co., 488 U.S. 428, 4443 (1989). The FSIA includes

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Coppus Engineering is also suing; however, it is doing so to

ensure that Nuovo Pignone remains a party to the litigation. To

avoid confusion, this opinion will treat Coppus’ arguments as

Peré’s.

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agents or instrumentalities2 of a foreign state within the

definition of “foreign state”. To bring suit, the plaintiff must

establish that one of the exceptions listed in §§ 1605 and 1607

applies. This Court must decide whether Nuovo Pignone is a

foreign state, and if it is, whether it may still be sued under the

commercial activity and implicit waiver exceptions, see §

1605(a)(1), (2) infra.

A. STANDARD OF REVIEW

We review a district court’s application of the FSIA de novo.

Tubular Inspection, Inc. v. Petroleos Mexicanos, 977 F.2d 180, 184

(5th Cir. 1992).

B. ANALYSIS

1. Whether the FSIA Applies

Peré argues that the district court erred in applying the FSIA

because it looked to Nuovo Pignone’s ownership at the time the

explosion occurred, rather than at the time suit was filed. When

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28 U.S.C. § 1603(a), (b)(1), (b)(2) provide:

(a) A “foreign state”. . . includes a political subdivision of

a foreign state or an agency or instrumentality of a

foreign state as defined in subsection (b).

(b) An “agency or instrumentality of a foreign state” means

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[.]

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Peré sued, Nuovo Pignone was no longer a foreign state because ENI

had transferred a majority of the Nuovo Pignone stock to a

consortium of private companies. In support of her argument, Peré

cites F. Straub v. A.P. Green, 38 F.3d 448 (9th Cir. 1994) which

looked at the defendant’s identity at the time suit was filed. She

acknowledges that General Electric Corp. v. Grossman, 991 F.2d 1376

(8th Cir. 1993) holds that whether an entity qualifies as a foreign

sovereign is determined at the time the litigated event occurred.

Peré contends, however, that the Straub court’s reasoning is better

because it is more in keeping with the FSIA’s legislative history.

The FSIA’s purpose was to promote harmonious international

relations. Pullman Construction Industries, Inc. v. United States,

23 F.3d 1166, 1169 (7th Cir. 1994). Peré argues that generally

international relations would remain unaffected when a plaintiff

sues an entity which was immune at the time of the disputed event

but is now private, therefore, giving Nuovo Pignone immunity does

not achieve any governmental purpose. We disagree.

Whether the FSIA covers an entity now private that was state

owned at the time of the disputed event(s) is an issue of first

impression within this Circuit. Having studied both Straub and

General Electric, we are persuaded by the Eighth Circuit’s

reasoning in General Electric. As the Eighth Circuit stated, “the

doctrine of foreign state sovereign immunity was created to

effectuate general notions of comity among nations.” Id. at 1381

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(internal quotations and citations omitted). The foreign policy

concerns underlying sovereign immunity do not necessarily disappear

when a defendant loses its foreign status before suit is filed.

Thus, courts are to look to the defendant’s status at the time the

litigated events occurred. Straub is distinguishable because it

addresses different facts. In Straub, the Ninth Circuit was

determining how to treat a corporation that became a foreign state

for FSIA purposes after the disputed events occurred but before

suit was filed.3 Straub, 38 F.3d at 451. We, therefore, affirm

the district court’s finding that Nuovo Pignone is a foreign state

under the FSIA.

2. FSIA Exceptions

a. Commercial Activity

The district court found that the “commercial activities”

exception to the FSIA applied. Under § 1605(a)(2), a foreign state

is not immune when 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.”

“Commercial activity” is defined as “a regular course of commercial

conduct or a particular commercial transaction or act.” 28 U.S.C.

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This opinion does not address such a situation.

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§ 1603(d). In determining the commercial character of an activity,

courts look to the nature rather than the purpose of the act or

transaction. Id. For the commercial activity exception to apply

here, Nuovo Pignone’s actions must fall within the second listed

exception. In other words, the suit must be “based upon . . . an

act performed within the United States in connection with a

commercial activity of the foreign state elsewhere”. The district

court correctly found that the commercial activity upon which the

plaintiff’s cause of action was based was the design and

manufacture of turbine systems. It further found that the act

performed in the United States in connection with that activity was

Nuovo Pignone’s sending a representative to Bayou Black to consult

in the final assembly of the system onto the platform. We

disagree.

We turn first to the issue of each party’s burden of proof.

Initially, the party seeking immunity must show the district court

that it is a foreign state potentially entitled to immunity under

the FSIA. Once that party makes such a showing, the burden shifts

to the opposing party to raise the exceptions to sovereign immunity

and to assert facts that would establish these exceptions. The

ultimate burden of proving that the FSIA applies, though, remains

upon the party seeking immunity. Stena Rederi AB v. Comision de

Contratos del Comite Ejecutivo General del Sindicato Revolucionario

de Trabajadores Petroleros de la Republica Mexicana, 923 F.2d 380,

390 n. 14 (5th Cir. 1991); Arriba Ltd. v. Petroleos Mexicanos, 962

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F.2d 528, 533 (5th Cir. 1992). Here, Nuovo Pignone has proven that

it is a foreign state entitled to immunity; thus, the burden has

shifted to Peré to prove that Nuovo Pignone performed an act within

the United States in connection with the commercial activity

performed elsewhere. Peré asserts that Nuovo Pignone’s sending

representatives to Bayou Black, Louisiana to consult on the final

assembly was such an act. Assuming arguendo that the consultation

was a commercial act performed within the United States, Peré still

fails to meet her burden of proof.

To determine whether the availability to consult during the

Bayou Black assembly was in connection with Nuovo Pignone’s

design/manufacture in Italy, we look to our prior cases to find the

definition of “in connection with”. In Stena, we held that the

connection between the commercial activity and the plaintiff’s

complaint had to be material. Id. at 387. However, when the “in

connection with” prong applies, “any material connection between

‘commercial activity elsewhere’ and the plaintiff’s complaints. .

. is irrelevant to the determination of subject matter

jurisdiction.” Id. at 388. Under this prong, the material

connection must exist between the act performed in the United

States and plaintiff’s cause of action. Here, then, the material

connection must exist between the availability for consultation

during final assembly in Bayou Black and Peré’s allegations of

wrongful death due to improper design and/or manufacture. Peré

fails to show such a material connection. The components of the

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turbine system were manufactured, tested, and delivered to CABGOC

in Italy. More importantly, once the components arrived in Bayou

Black, Nuovo Pignone did not perform the final assembly; rather, it

was CABGOC’s contractor who performed this task. Concededly, Nuovo

Pignone did send representatives to consult on the mechanical

erection of the components onto the platform; however, there is no

indication in the record concerning the extent or nature of the

consultation or to show it as an integral part of the design or

manufacture. While this Court is told that the Nuovo Pignone

representatives consulted, we are left to guess at what the

consultation involved. There is simply no indication that the

final assembly in Bayou Black was a part of the design or

manufacture that occurred in Italy. Thus, we cannot say that there

is a material connection between Nuovo Pignone sending consultants

to Bayou Black and Peré’s wrongful death action.

b. Waiver

Peré argues that the district court did not have to consider

the commercial activity exception because Nuovo Pignone has

implicitly waived its immunity. The FSIA allows a foreign state to

waive its immunity either explicitly or implicitly, 28 U.S.C. §

1605(a)(1), but it does not state how implicit waiver occurs. The

legislative history reveals, though, that implicit waiver may be

found in three situations: 1) when a foreign state agrees to

arbitration in another country; 2) when a foreign state agrees that

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the laws of another country govern a contract; and 3) when a

foreign state files a responsive pleading without raising the

immunity defense. H. Rep. No. 1487, 94th Cong. 2d Sess. 18,

reprinted in 1976, U.S.C.C.A.N. 6604, 6617. See also, Arriba

Ltd.,962 F.2d at 539 n. 22. The waiver exception is to be narrowly

construed. Joseph v. Office of the Consulate General of Nigeria,

830 F.2d 1018, 1022 (9th Cir. 1987).

Here, Peré argues that Nuovo Pignone implicitly waived its

sovereign immunity by virtue of a 1985 contract it made with

CABGOC. That contract concerned the overhaul of the FC-1C

compressor train that included the starter turbine that exploded.

In provision 19 of that contract, Nuovo Pignone agreed that the

laws of Texas would govern questions concerning the performance or

execution of the overhaul contract. Peré contends that this

provision is an implied waiver. We disagree.

First, in cases in which implied waiver based upon a contract

has been found, the contract was between the parties suing and

being sued. See Eckert International v. The Government of the

Sovereign Democratic Republic of Fiji, 32 F.3d 77 (4th Cir. 1994);

Joseph v. Office of the Consulate of Nigeria, 830 F.2d 1018 (9th

Cir. 1987); Kramer v. Boeing, Co., 705 F. Supp. 1392 (D. Minn.

1989). That is not the case here. Moreover, when courts analyze

whether a contract’s choice of law provision constitutes implicit

waiver, they look to the implied intent of the parties. See Eckert

Int’l, 32 F.3d at 80. Having studied the 1985 agreement, we find

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no implied intent of Nuovo Pignone to be responsible to third

parties. Hence, Nuovo Pignone has not impliedly waived its

sovereign immunity.

CONCLUSION

For the reasons stated, we AFFIRM IN PART, REVERSE IN PART and

REMAND.

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