El-Hadad, Mohamed v. United Arab Emirates

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued May 19, 2000 Decided June 16, 2000

No. 99-7220

Mohamed Salem El-Hadad,

Appellee

v.

United Arab Emirates and

The Embassy of the United Arab Emirates,

Appellants

Appeal from the United States District Court

for the District of Columbia

(No. 96cv01943)

James M. Johnstone argued the cause for appellant. John

P. Szymkowicz was on the brief for appellant.

Sylvia J. Rolinski argued the cause and filed the brief for

appellee.

Before: Ginsburg, Tatel, and Garland, Circuit Judges.

Opinion of the court filed by Circuit Judge Garland.

Garland, Circuit Judge: Plaintiff Mohamed Salem El-

Hadad is a citizen of Egypt and a former employee of the

Embassy of the United Arab Emirates located in Washington,

D.C. After his employment was terminated, El-Hadad sued

both the Embassy and the United Arab Emirates (collective-

ly, "the U.A.E.") for alleged breach of contract and defama-

tion.1 The U.A.E. moved to dismiss, asserting immunity from

suit under the Foreign Sovereign Immunities Act (FSIA), 28

U.S.C. ss 1602 et seq. The district court denied the U.A.E.'s

motion on the pleadings, holding that the employment rela-

tionship between the U.A.E. and El-Hadad came within the

"commercial activity" exception to sovereign immunity be-

cause El-Hadad was not a national of the U.A.E. The court

also rejected the U.A.E.'s contention that even if plaintiff's

suit fell within the "commercial activity" exception, the FSIA

contains an "exception to that exception" for defamation

claims.

The U.A.E. appeals from the denial of its motion to dismiss.

We conclude that there are factual questions that must be

resolved before the relationship between El-Hadad and the

U.A.E. can be characterized as commercial rather than gov-

ernmental, and we therefore reverse in part and remand for

further proceedings. We agree with the district court, how-

ever, that if El-Hadad's action is based upon commercial

activity, the U.A.E. is not immune from his claim for defama-

tion.

I

The denial of a foreign state's motion to dismiss on the

ground of sovereign immunity is subject to interlocutory

appeal under the collateral order doctrine. See Trans-

__________

1 The complaint also named three individuals acting in their

official capacities. The district court granted the individuals' mo-

tion to dismiss for lack of personal jurisdiction, see El-Hadad v.

Embassy of U.A.E., 69 F. Supp. 2d 69, 76-79 (D.D.C. 1999), and

that decision is not at issue in this appeal.

america Leasing, Inc. v. La Republica de Venezuela, 200

F.3d 843, 847 (D.C. Cir. 2000). Because the district court

decided the motion on the pleadings, our standard of review is

de novo. See id.

The FSIA provides the sole avenue by which American

courts can obtain jurisdiction over foreign states. See Repub-

lic of Argentina v. Weltover, Inc., 504 U.S. 607, 611 (1992).

Under the FSIA, a foreign state is immune from the jurisdic-

tion of our courts unless certain statutory exceptions are met.

See 28 U.S.C. ss 1604-1605. The principal exception at issue

here is that for "commercial activity." The Act provides that

a "foreign state shall not be immune from the jurisdiction of

courts of the United States or of the States in any case-- ...

(2) in which the action is based upon a commercial activity

carried on in the United States by the foreign state...." Id.

s 1605(a).

Our precedent makes clear that the employment of person-

nel by a foreign state is not per se commercial activity under

the FSIA.2 In Broadbent v. Organization of American

States, applying an analysis based on the FSIA, we held that

the firing of staff members of the General Secretariat of the

Organization of American States (OAS) was not commercial

activity and therefore that the OAS was immune from suit for

improper discharge. See 628 F.2d 27, 35 (D.C. Cir. 1980). In

support, we cited the House Report on the FSIA, which

__________

2 The FSIA provides that: "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. s 1603(d). As the Supreme Court

recognized in Weltover, however, this definition "leaves the critical

term 'commercial' largely undefined." 504 U.S. at 612. The sen-

tence "merely specifies what element of the conduct determines

commerciality (i.e., nature rather than purpose), but still without

saying what 'commercial' means." Id. The Court concluded that

the defining "issue is whether the particular actions that the foreign

state performs (whatever the motive behind them) are the type of

actions by which a private party engages in trade and traffic or

commerce." Id. at 614 (internal quotation marks and citation

omitted).

states in part: "Also public or governmental and not commer-

cial in nature, would be the employment of diplomatic, civil

service, or military personnel...." H.R. Rep. No. 94-1487, at

16 (1976).3 The words replaced by the ellipses in this quota-

tion will soon become important, but for now it is enough to

note that, as we concluded in Broadbent, the "report clearly

marks employment of civil servants as noncommercial for

purposes of restrictive immunity." 628 F.2d at 34.4

The U.A.E. contends that El-Hadad was a civil servant of

the U.A.E., and that his firing is therefore noncommercial

and immune from suit in our courts. Although El-Hadad is

an Egyptian citizen, it is uncontested that he worked for the

government of the U.A.E. for sixteen years.5 For the first

thirteen of those years, he worked in the U.A.E. as an

auditor. Beginning in January of 1993, El-Hadad worked as

an auditor in the Cultural Division of the U.A.E.'s Embassy

in Washington. The U.A.E. terminated El-Hadad's employ-

ment in February 1996. El-Hadad alleges that he was

terminated after he uncovered misappropriation of U.A.E.

public funds. The U.A.E. disputes this allegation, but con-

tends that even if it were true, the auditing function El-

Hadad performed is the work of a civil servant and the

U.A.E. is therefore immune from suits arising from such

activity.

__________

3 The Senate Report contains the same language, both on this

point and on the others quoted below. See S. Rep. No. 94-1310, at

16 (1976); see also id. at 20-21.

4 That point distinguishes Broadbent from Janini v. Kuwait

University, 43 F.3d 1534 (D.C. Cir. 1995), in which we held that the

firing of teachers at Kuwait University came within the commercial

activity exception. There was no claim in that case that the

teachers were civil servants of the government of Kuwait.

5 The district court decided the motion to dismiss on the plead-

ings, and we therefore assume that this and the following facts,

taken from p 9 of the complaint, are true. See Saudi Arabia v.

Nelson, 507 U.S. 349, 351 (1993). In any event, except where noted,

the U.A.E. does not contest their validity.

The district court held that regardless whether El-Hadad

was a member of the U.A.E.'s civil service, his employment

would nonetheless constitute commercial activity because he

is not a U.A.E. national. The court based that conclusion on

language in our Broadbent opinion, which stated that there is

"an exception from the general rule" that civil service employ-

ment is noncommercial "in the case of employment of Ameri-

can citizens or third country nationals by foreign states."

Broadbent, 628 F.2d at 34. The district court did note,

however, that other circuits have not invoked such an excep-

tion. Instead, those courts examine the specifics of the

employment relationship for indicia of civil service, treating

the employee's nationality--if they consider it at all--as a

non-dispositive factor. See Holden v. Canadian Consulate,

92 F.3d 918, 920-22 (9th Cir. 1996) (examining details of

American's employment with Canadian Consulate to deter-

mine whether Consulate was immune on ground that plaintiff

was member of civil service); Segni v. Commercial Office of

Spain, 835 F.2d 160, 165 & n.7 (7th Cir. 1987) (noting that

nationality can be a factor, but deciding the case by reference

to specifics of employment relationship rather than fact of

third country nationality).

We cannot fault the district court for its legal conclusion,

resting, as it did, on the language of Broadbent. But that

language was plainly dictum, not necessary to decide the case

and therefore not binding upon us. See, e.g., United States v.

Torres, 115 F.3d 1033, 1036 (D.C. Cir. 1997). While Broad-

bent did opine that third country nationality would be disposi-

tive in a case involving a sovereign state, Broadbent itself

involved an international organization. Notwithstanding that

some of the plaintiffs were Americans, the court declined to

apply a "third country nationality" exception to the civil

service rule in that case, reasoning that since an international

organization has no nationals of its own, applying such an

exception in the context of international organizations would

"swallow up the rule of immunity for civil service employment

disputes." Broadbent, 628 F.2d at 34.

Now that we are squarely faced with the question, we

conclude that a per se rule of non-immunity for a foreign

state's employment of third country nationals is inconsistent

with Congress' intent to immunize foreign governmental ac-

tivity from suit in American courts. Indeed, when pressed at

oral argument, both sides appeared to agree. Both con-

curred, for example, that if El-Hadad had been the U.A.E.'s

ambassador to the United States, the U.A.E. would have

immunity for firing him despite his Egyptian nationality.

Nor, apparently, is this scenario particularly far-fetched.

Both parties agreed that small countries such as the U.A.E.

do, at times, employ nationals of other countries (and particu-

larly citizens of regional neighbors) in high governmental

positions.6

We now return to the ellipses noted above. The full

quotation from the House Report is as follows: "Also public

or governmental and not commercial in nature, would be the

employment of diplomatic, civil service, or military personnel,

but not the employment of American citizens or third country

nationals by the foreign state in the United States." H.R.

Rep. No. 94-1487, at 16. Broadbent read the language begin-

ning with "but not" (for which we substituted the ellipses

above) as creating a per se exception from the general rule

that civil service employment is governmental rather than

commercial. See Broadbent, 628 F.2d at 34. That is surely a

reasonable interpretation. But we think it at least as likely

that Congress was attempting to contrast civil service (and

diplomatic and military employment, not at issue here) with

non-civil service employment, operating on the assumption

that it was unlikely a country would employ an American or

third country national in such a position. This view of the

legislative history is bolstered by the next paragraph of the

House Report, which lists, as additional examples of commer-

cial activity, a foreign government's "employment or engage-

ment of laborers, clerical staff or public relations or market-

ing agents," H.R. Rep. No. 94-1487, at 16--job categories

__________

6 An estimated 75% of the U.A.E.'s population between the ages

of 15 and 64 consists of non-nationals. See CIA, The World Fact

Book 1999, at 504 (available at <http://www.odci.gov/cia/

publications/factbook/tc.html>).

which Congress apparently also thought unlikely to be occu-

pied by members of a government's civil service.

In any event, the language that must control our decision is

that of the statute rather than of the somewhat muddy

legislative history. Under the FSIA, the immunity exception

depends solely on whether the action is based upon a "com-

mercial activity," without any mention of the nationality of the

participants. See 28 U.S.C. s 1605(a)(2). We have no war-

rant, therefore, for formulating a test that turns solely on

nationality. To the contrary, because under the usual under-

standing of the terms a foreign state can engage in non-

commercial (i.e., governmental) activity through third country

nationals, the statutory language dictates that the inquiry

cannot end with the fact that the employee is not a citizen of

the employing state. At oral argument, both parties agreed.

II

Because defendants' motion was dismissed on the plead-

ings, we remand the case to the district court to undertake a

further inquiry. The ultimate question to be answered is

whether El-Hadad's employment constituted commercial ac-

tivity. As we held in Broadbent, the employment of civil

servants is noncommercial for purposes of the FSIA. See

Broadbent, 628 F.2d at 34-36. Hence, the operative question

is whether El-Hadad was a member of the U.A.E.'s civil

service. In order to guide the proceedings on remand, we

suggest some questions that appear relevant to making that

determination in this case. We do not regard them as an

exclusive list, nor as necessarily applicable in all cases.

First, how do the U.A.E.'s own laws define its civil service,

and do El-Hadad's job title and duties come within that

definition?

Second, what was the nature of El-Hadad's employment

relationship with the U.A.E.? Did he have a true contractual

arrangement, or is his "contract" claim instead based, as the

U.A.E. contends, solely upon the civil service laws of the

U.A.E.?

Third, what was the nature of El-Hadad's employment

relationship when he worked in the U.A.E., and how did his

subsequent employment at the Embassy relate to that prior

tenure? The U.A.E. contends that El-Hadad was a long-time

resident and member of its domestic civil service, who was

merely "transferred" to Washington to perform the same

functions (governmental audits) he had been performing at

home. El-Hadad contends, on the other hand, that he quit

his position in the U.A.E. and began a "new" job in the

United States, "separate from his previous employment."

Fourth, what was the nature of El-Hadad's work? As

noted above, Congress indicated that the "employment or

engagement of laborers, clerical staff or public relations or

marketing agents" would come within the definition of com-

mercial activity. H.R. Rep. No. 94-1487, at 16.

Fifth, what is the relevance of El-Hadad's Egyptian nation-

ality on the facts of this case? Is the U.A.E. a country in

which, as the House Report assumed, non-nationals are un-

likely to be employed as governmental officers? Or does the

U.A.E. often employ non-nationals in governmental positions?

We appreciate that this multi-factor inquiry is not analyt-

ically precise. That is a consequence of Congressional prefer-

ences, however, rather than our own. Congress expressly

concluded that it was "unwise to attempt an excessively

precise definition" of "commercial activity," and chose instead

to give the "courts ... a great deal of latitude in determining

what is a 'commercial activity' for purposes of" the FSIA,

providing only a few (sometimes conflicting) examples of the

kinds of employment it regarded as falling within that catego-

ry. Id. at 16. Although the Supreme Court has repeatedly

lamented this situation, see Saudi Arabia v. Nelson, 507 U.S.

349, 359 (1993) (noting that the FSIA "leaves the critical term

'commercial' largely undefined") (quoting Weltover, 504 U.S.

at 612), it has also noted that courts "do not have the option

to throw up [their] hands" and must instead accept "judicial

responsibility to determine what a 'commercial activity' is for

purposes of the Act." Id.

III

The U.A.E. contends that even if its termination of El-

Hadad were regarded as coming within the "commercial

activity" exception to sovereign immunity, plaintiff's claim

that he was defamed in connection with that termination

would nonetheless have to be dismissed under a "defamation"

exception to that exception. As the district court correctly

held, however, defamation is not an "exception to the excep-

tion" for commercial activity, but rather an exception to a

separate FSIA exception for noncommercial torts.

The FSIA provides that a "foreign state shall not be

immune from the jurisdiction of courts of the United States

... in any case" in which one of several exceptions applies.

28 U.S.C. s 1605(a). The second exception, contained in

paragraph (2) of s 1605(a), is the one considered above: any

case "in which the action is based upon commercial activity

carried on in the United States by the foreign state." Id.

s 1605(a)(2). Paragraph (2) does not contain a defamation

exception to its commercial activity exception. There is,

therefore, no indication that defamation arising out of a

commercial activity is immune from suit.

It is the fifth exception to immunity, contained in para-

graph (5) of s 1605(a), that is implicated by the U.A.E.'s

argument here. That paragraph applies to any case "not

otherwise encompassed in paragraph (2) above, in which

money damages are sought against a foreign state for ...

damage to or loss of property occurring in the United States

and caused by the tortious act or omission of that foreign

state." Id. s 1605(a)(5). Unlike the exception for commer-

cial activity, this tort exception does contain an exception for,

inter alia, defamation: "[T]his paragraph," the FSIA states,

"shall not apply to ... any claim arising out of ... libel, [or]

slander...." Id. s 1605(a)(5), (a)(5)(B).

The U.A.E. contends that the defamation exception to

paragraph (5) is applicable not only to the torts covered by

that paragraph, but also to the commercial activity covered by

paragraph (2). That reading, however, is expressly contra-

dicted by the language of the statute. As just quoted,

paragraph (5) begins by stating that it applies only to cases

"not otherwise encompassed in paragraph (2) above," i.e., only

to those tort cases not encompassed by the commercial

activity paragraph. And in subsequently introducing its own

exceptions, paragraph (5) goes on to state that "this para-

graph"--i.e., paragraph (5)--"shall not apply to" libel or

slander. Id. s 1605(a)(5), (a)(5)(B) (emphasis added). The

language therefore makes clear that paragraph (5) and its

defamation exception are inapplicable to tort cases based

upon commercial activity.

This reading is confirmed by the legislative history, which

repeatedly refers to the category encompassed by paragraph

(5) as "noncommercial torts." H.R. Rep. No. 94-1487, at 20,

21 (emphasis added); see Argentine Republic v. Amerada

Hess Shipping Corp., 488 U.S. 428, 439 (1989) (referring to

s 1605(a)(5) as the "noncommercial torts exception"); cf.

Nelson, 507 U.S. at 361-62 (finding that the tortious activity

alleged in that case, wrongful arrest by Saudi police, failed to

qualify as commercial activity because it was "not the sort of

action by which private parties can engage in commerce").

Paragraph (5), the House Report states, "is directed primari-

ly at the problem of traffic accidents but is cast in general

terms as applying to all tort actions for money damages, not

otherwise encompassed by section 1605(a)(2) relating to com-

mercial activities." H.R. Rep. No. 94-1487, at 20-21 (empha-

sis added). Its "purpose," the Report continues, "is to permit

the victim of a traffic accident or other noncommercial tort to

maintain an action against the foreign state to the extent

otherwise provided by law." Id. at 21.

This reading is also consistent with the case law. This

circuit has previously stated that the exceptions to paragraph

(5) do not limit the commercial activity exception. See Gilson

v. Republic of Ireland, 682 F.2d 1022, 1028 n.27 (D.C. Cir.

1982) (stating that 28 U.S.C. s 1605(a)(5)(B) "does not limit

id. s 1605(a)(2)"). Those of our sister circuits that have

considered the question have reached the same conclusion.

See Southway v. Central Bank of Nigeria, 198 F.3d 1210,

1219 (10th Cir. 2000); Export Group v. Reef Industries, Inc.,

54 F.3d 1466, 1473-77 (9th Cir. 1995); see also Letelier v.

Republic of Chile, 748 F.2d 790, 795 (2d Cir. 1984) (noting

that the statutory language "suggests that the commercial

activity exception to jurisdictional immunity under paragraph

(2) and the tort exception under (5) are mutually exclusive").

Accordingly, we affirm the district court's decision that activi-

ty encompassed by the waiver of sovereign immunity con-

tained in 28 U.S.C. s 1605(a)(2) does not become subject to

suit by virtue of the provisions of s 1605(a)(5)(B).7

IV

The decision of the district court is reversed in part and the

case is remanded for further proceedings consistent with this

opinion.

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7 We reject the U.A.E.'s argument that foreign sovereigns

should be immune from actions for defamation under the FSIA

because the United States is immune from such actions under the

Federal Tort Claims Act (FTCA), 28 U.S.C. s 2680(h). Although

both statutes contain defamation exceptions, see H.R. Rep. No. 94-

1487, at 21, the analogy becomes inapposite when applied in the

context of the FSIA's commercial activity exception because there

is no comparable immunity exception under the FTCA. See Export

Group, 54 F.3d at 1476 (describing FSIA's commercial activity

exception as "ha[ving] no counterpart in the FTCA").