Rote v. Zel Custom Manufacturing LLC

RECOMMENDED FOR FULL-TEXT PUBLICATION

Pursuant to Sixth Circuit I.O.P. 32.1(b)

File Name: 16a0058p.06

UNITED STATES COURT OF APPEALS

FOR THE SIXTH CIRCUIT

_________________

TROY ROTE; AMANDA ROTE, ┐

Plaintiffs-Appellees, │

│

│

v. │

> No. 15-3156

│

ZEL CUSTOM MANUFACTURING LLC, et al., │

Defendants, │

│

│

DIRECCIÓN GENERAL DE FABRICACIONES │

MILITARES, │

Defendant-Appellant. │

┘

Appeal from the United States District Court

for the Southern District of Ohio at Columbus.

No. 2:13-cv-01189—James L. Graham, District Judge.

Argued: October 8, 2015

Decided and Filed: March 7, 2016

Before: KEITH, CLAY, and WHITE, Circuit Judges.

_________________

COUNSEL

ARGUED: Lawrence D. Walker, TAFT STETTINIUS & HOLLISTER LLP, Columbus, Ohio,

for Appellant. Daniel N. Abraham, COLLEY SHROYER & ABRAHAM CO., LPA, Columbus,

Ohio, for Appellees. ON BRIEF: Lawrence D. Walker, TAFT STETTINIUS & HOLLISTER

LLP, Columbus, Ohio, for Appellant. Daniel N. Abraham, COLLEY SHROYER &

ABRAHAM CO., LPA, Columbus, Ohio, for Appellees.

KEITH, J., delivered the opinion of the court in which CLAY and WHITE, JJ., joined.

WHITE, J. (pp. 18–19), delivered a separate concurring opinion.

1

No. 15-3156 Rote, et al. v. Zel Custom Mfg., et al. Page 2

_________________

OPINION

_________________

DAMON J. KEITH, Circuit Judge. Plaintiff Troy Rote injured his right hand when a

round exploded as he loaded a rifle at a residence in Sunbury, Ohio. The round that exploded

was allegedly manufactured by Defendant Fabrica Militar Fray Luis Beltran a/k/a Dirección

General Fabricaciones Militares (“DGFM”). Rote and his wife (collectively, “Plaintiffs”) filed

this negligence and products-liability suit against several defendants, including DGFM.

DGFM moved to dismiss the Third Amended Complaint (or, “Complaint”) for lack of

subject-matter jurisdiction under Federal Rule of Civil Procedure 12(b)(1). In support of its

motion, DGFM argued that, as an instrumentality of the Republic of Argentina, it is immune

from suit under the Foreign Sovereign Immunities Act (“FSIA” or “Act”), 28 U.S.C. § 1602

et seq. In response, Plaintiffs argue that the “commercial activity” exception to the Act applies,

and hence, DGFM is not immune. The district court denied the 12(b)(1) motion and DGFM

appeals. For the reasons set forth below, we AFFIRM the district court’s decision denying the

motion.

I. FACTUAL BACKGROUND AND PROCEDURAL HISTORY

A. Plaintiffs’ Allegations in the Complaint.

For purposes of reviewing DGFM’s Rule 12(b)(1) motion, we take note of the following

relevant allegations in the Complaint:

Troy Rote was invited to Gary and Judith Buyer’s house, located in Sunbury, Ohio.

(Third Am. Compl. ¶¶ 21–22.) On or about September 10, 2011, Rote, along with twelve to

fifteen other guests, arrived at the Buyers’ home. (Id. ¶ 21.) One of those guests, Edward

Grimm, brought a rifle, consisting of a “.50 caliber upper and AR-15 lower receiver,” as well as

some ammunition. (Id. ¶ 23.) Grimm assembled the 0.50 caliber upper receiver and the lower

receiver at the residence. (Id. ¶ 24.)

No. 15-3156 Rote, et al. v. Zel Custom Mfg., et al. Page 3

At Grimm’s invitation, five or six guests fired the rifle. (Id. ¶ 25.) Grimm also invited

and encouraged Rote to fire the rifle and provided loading and firing instructions. (Id. ¶ 27.) As

Rote loaded the rifle, and before the bolt moved into a closed-and-secured position, the round

exploded and a “loud sound” was heard. (Id. ¶¶ 28, 29.) Rote “sustained severe damage to his

right hand.” (Id. ¶¶ 28, 34.) The round that exploded came from a “box of ammunition bearing

marks identifying it as being manufactured by [DGFM].” (Id. ¶ 34.) The allegedly defective

ammunition was purchased online through a New Jersey-based company, Ammoman. (Id. ¶¶ 8,

33.) The Complaint does not indicate from whom Ammoman purchased the ammunition.

Plaintiffs allege that DGFM “designed, manufactured, and sold and/or otherwise

introduced into the stream of commerce” the ammunition. (Id. ¶ 62.) Plaintiffs also allege that

DGFM’s wrongful acts consisted of defectively designing and manufacturing the rounds to have

a “protruding primer.” (See id. ¶ 106.) Plaintiffs further allege that DGFM failed to provide

adequate warnings about the dangerous condition posed by this protruding primer. (Id. ¶¶ 90–

93.)

Plaintiffs assert the following claims against DGFM: (1) product liability under Ohio

Rev. Code Ann. §§ 2307.74, 2307.75, and 2307.77; (2) supplier liability under Ohio Rev. Code

Ann. § 2307.78; and (3) loss of consortium.

B. District court decision.

DGFM moved to dismiss for lack of subject-matter jurisdiction under Federal Rule of

Civil Procedure 12(b)(1), arguing that, as an instrumentality of the Republic of Argentina, it is

immune from suit under the Act. The district court denied the motion. Rote v. Zel Custom Mfg.,

No. 2:13-cv-1189, 2015 WL 570973, at *10 (S.D. Ohio Feb. 11, 2015). In support of its ruling,

the court held that the design and manufacture of the ammunition qualified as “commercial

activity.” Id. at *6–7. The court also noted that DGFM’s actions caused a “direct effect” in the

United States. Id. at *10. Thus, the commercial-activity exception to the FSIA applied and

DGFM was not immune from suit. Id. at *1. DGFM timely appealed.

No. 15-3156 Rote, et al. v. Zel Custom Mfg., et al. Page 4

II. STANDARD OF REVIEW

An order denying a motion to dismiss for lack of subject matter jurisdiction under Federal

Rule of Civil Procedure 12(b)(1) is reviewed de novo. Westfield v. Fed. Republic of Germany,

633 F.3d 409, 413 (6th Cir. 2011). Rule 12(b)(1) motions “come in two varieties: a facial attack

or a factual attack.” O’Bryan v. Holy See, 556 F.3d 361, 375 (6th Cir. 2009) (citation and

quotation marks omitted). A facial attack—like the one DGFM mounts here—“questions merely

the sufficiency of the pleading.” Id. (citation and quotation marks omitted). In reviewing the

facial attack, courts must accept all allegations as true, id., and when reviewing the complaint,

we look for a “short and plain statement of the grounds for the court’s jurisdiction.” Fed. R. Civ.

P. 8(a); see also Owens v. Republic of Sudan, 531 F.3d 884, 894–95 (D.C. Cir. 2008).

“[C]onclusory allegations or legal conclusions masquerading as factual conclusions will not

suffice to prevent a motion to dismiss.” O’Bryan, 556 F.3d at 376 (citation omitted). If the

allegations in the Complaint establish federal claims, the exercise of subject-matter jurisdiction is

proper. Id.

III. ANALYSIS

A. Statutory framework: FSIA and its exceptions.

The FSIA provides the “sole basis” for the exercise of jurisdiction over a foreign state,

including its instrumentalities.1 Republic of Argentina v. Weltover, 504 U.S. 607, 611 (1992)

(citation omitted); see also 28 U.S.C. §§ 1603(a)–(b), 1604. Under the Act, a foreign state is

“immune from the jurisdiction of the courts of the United States and of the States” unless one of

the statutory exceptions applies. 28 U.S.C. § 1604. At issue in this case is the commercial-

activity exception, codified at 28 U.S.C. § 1605(a)(2).

Plaintiffs contend that the following clause of the exception, which is split into three

elements, applies in this case:

1

Plaintiffs allege that DGFM is an instrumentality of the Republic of Argentina. (Third Am. Compl. ¶ 16.)

For purposes of this opinion, we take that to be true. O’Bryan, 556 F.3d at 376 (explaining that courts accept

allegations in the complaint as true when reviewing a facial attack on the subject-matter jurisdiction alleged in the

complaint).

No. 15-3156 Rote, et al. v. Zel Custom Mfg., et al. Page 5

A foreign state shall not be immune from the jurisdiction of courts

of the United States . . . in any case –

. . . in which the action is based . . . [i] upon an act outside the

territory of the United States [ii] in connection with a commercial

activity of the foreign state elsewhere and [iii] that act causes a

direct effect in the United States.

28 U.S.C. § 1605(a)(2). (See Appellee Br. 11.). The statute defines “commercial activity” as

follows:

A ‘commercial activity’ means either a regular course of

commercial conduct or a particular 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).

B. This appeal.

This court has jurisdiction over this appeal because an order denying a motion to dismiss

under 28 U.S.C. § 1604 is immediately appealable under 28 U.S.C. § 1291. O’Bryan, 556 F.3d

at 372.

Three issues are relevant on appeal: (1) whether the design and manufacture of a product

constitutes a “commercial activity” under the FSIA; (2) whether a court must find that a foreign

state has minimum contacts with the United States in order to conclude that the state’s acts have

a direct effect here; and (3) whether the Complaint lacks a short and plain statement of

jurisdiction in violation of Federal Rule of Civil Procedure 8(a)(1).2 (Appellant Br. 3.). We

address each argument below.3

2

Despite Plaintiffs’ assertions to the contrary, this third issue is not waived. The essential premise of

DGFM’s 12(b)(1) motion is that the Complaint as a whole fails to comply with Rule 8(a)(1). See Doe v. Holy See,

557 F.3d 1066, 1073–74 (9th Cir. 2009).

3

As a preliminary matter, we must be assured that the commercial activity occurred outside the United

States. See 28 U.S.C. § 1605(a)(2). The Complaint does not allege that the design and manufacture took place

outside the United States. As the district court noted, however, the Complaint “supports a plausible inference that

[it] occurred in Argentina.” Rote, 2015 WL 570973, at *5. We agree, and DGFM does not take issue with this

particular conclusion on appeal. See Rux v. Republic of Sudan, 461 F.3d 461, 468 (4th Cir. 2006) (noting that a

challenge to subject-matter jurisdiction under the FSIA “is similar to that of Rule 12(b)(6), under which dismissal is

No. 15-3156 Rote, et al. v. Zel Custom Mfg., et al. Page 6

1. The design and manufacture of the ammunition qualifies as a “commercial activity.”

When we ascertain the applicability of the commercial-activity exception, two “distinct”

limitations apply. O’Bryan, 556 F.3d at 379. “First, the activity must be of the type in which

private individuals engage . . . .” Id. “[I]f the activities in question are not private, but sovereign

in nature, then the commercial activity exception will not apply.” Id; see also Weltover,

504 U.S. at 614 (“[W]hen a foreign government acts, not as a 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. . . .”). Second, courts must “ascertain the claim’s gravamen to determine

whether the FSIA plaintiff is simply using creative nomenclature as a semantic ploy to shroud

the true essence of its theory and obtain jurisdiction over a claim that Congress did not intend to

be brought against a foreign sovereign.” O’Bryan, 556 F.3d at 380 (citation and quotation marks

omitted). In other words, courts must “avoid the artful pleading of plaintiffs and look to the core

of the activities alleged to be commercial in nature.” Id.

Under O’Bryan’s first limitation, we conclude that the design and manufacture of a

product is the type of activity “in which private individuals engage.” O’Bryan, 556 F.3d at 379.

Our sibling circuits have reached the same conclusion. See Aldy on Behalf of Aldy v. Valmet

Paper Mach., 74 F.3d 72, 76 (5th Cir. 1996); Vermeulen v. Renault, U.S.A., Inc., 985 F.2d 1534,

1544 (11th Cir. 1993). For example, in Aldy, the Finland-based defendant manufacturer moved

for summary judgment, arguing in part that it was immune under the FSIA. 74 F.3d at 74. The

trial court denied the motion, and the Fifth Circuit affirmed the denial. Id. at 74–76. In that case,

the plaintiff alleged that the manufacturer was in the “business of designing and manufacturing

paper machines in Finland.” Id. at 75. As part of their wrongful-death lawsuit, the plaintiffs

claimed that the defendant’s negligent design of those machines caused the death of two

individuals. Id. at 73–74. The Fifth Circuit concluded that “the plaintiffs’ suits appear to be

classic design and manufacturing defect suits, which the third clause of the commercial activities

exception is broad enough to cover.” Id. at 75; see also Vermeulen, 985 F.2d at 1544 (holding

that the defendant’s design and manufacture of vehicles “unquestionably were acts connected to

warranted if no plausible inferences can be drawn from the facts alleged that, if proven, would provide grounds for

relief.”) (citation omitted) (emphasis added).

No. 15-3156 Rote, et al. v. Zel Custom Mfg., et al. Page 7

a commercial activity”); see generally Lyon v. Agusta S.P.A., 252 F.3d 1078, 1082 (9th Cir.

2001) (noting the parties’ agreement that the design, manufacture, and sale of an aircraft were

“in connection with a commercial activity”); Peré v. Nuovo Pignone, Inc., 150 F.3d 477, 481

(5th Cir. 1998) (stating that the “[t]he 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.”). We agree with the sound reasoning of our sibling circuits and find no reason to

depart from their conclusions here.

Second, a review of the Complaint does not reveal a “semantic ploy” by Plaintiffs to

recast a governmental activity to be “commercial” in nature. O’Bryan, 556 F.3d at 380. Indeed,

the type of the activity at issue here is far from analogous to the type of activity that courts have

described as “sovereign” in nature. See, e.g., Weltover, 504 U.S. at 614 (“[A] foreign

government’s issuance of regulations limiting foreign currency exchange is a sovereign activity,

because such authoritative control of commerce cannot be exercised by a private party.”); see

also Saudi Arabia v. Nelson, 507 U.S. 349, 361–63 (1993) (holding that the abuse of police

power was sovereign in nature and so the Saudi Arabian government was immune); Beg v.

Islamic Republic of Pakistan, 353 F.3d 1323, 1326–27 (11th Cir. 2003) (holding that the

Pakistani government’s expropriation of property and failure to pay for that expropriation

involved the sovereign power of eminent domain and was thus not commercial in nature); Park

v. Shin, 313 F.3d 1138, 1145 (9th Cir. 2002) (“[A]n activity is commercial unless it is one that

only a sovereign state could perform.”). Therefore, the Complaint easily passes muster under

O’Bryan’s second limitation.

DGFM offers a different reading of the exception altogether. Although it does not clearly

explain its position, we understand it to be as follows: the third clause of the commercial-

activity exception comprises three elements. See Section III.A, supra. The first element—the

wrongful act outside the United States—is the negligent design and manufacture of the

ammunition, which DGFM arguably concedes is met here. (Reply Br. 5.) But DGFM argues

that the second element—the wrongful act’s connection with a commercial activity—is not met

here. (Id.) DGFM contends that Plaintiffs cannot rely on the design and manufacture of

ammunition to satisfy both elements, which are “separate and distinct,” and argues that

No. 15-3156 Rote, et al. v. Zel Custom Mfg., et al. Page 8

commercial activity must consist of either the marketing, sale, or distribution of the ammunition

rather than mere design or manufacture. (Id.; Appellant Br. 11.) In support of these

propositions, DGFM cites, among other cases, Vermeulen, which expressed that “[t]he sale of

merchandise is a quintessential commercial activity.” 985 F.2d at 1544.

DGFM’s reading of the statute and case law is strained. Granted, in Lyon and Vermeulen,

the Ninth and Eleventh Circuits, respectively, referred to the defendants’ sale of defective

products when determining if the exception applied. Vermeulen, 985 F.2d at 1544; Lyon,

252 F.3d at 1082. In Vermeulen, for instance, the court noted that the defendant designed and

built the automobiles for sale “throughout the world,” and that these sales constituted

“quintessential commercial activity.” Vermeulen, 985 F.2d at 1544. While we agree that the

sale of goods qualifies as “quintessential commercial activity,” it does not follow that the sale of

goods is a necessary predicate to a finding that an activity is “commercial” in nature. In Aldy,

the Fifth Circuit did not rely on the defendant’s sale of the paper machines to conclude that the

defendant engaged in commercial activity; the court merely relied on the design and manufacture

of the paper machines to reach that conclusion. Aldy, 74 F.3d at 75. So, we do not—and

cannot—read those cases to conclude that a defective product must be marketed, sold, or

otherwise distributed for the commercial-activity exception to apply. To be sure, and as

discussed further below, we have previously cautioned courts not to read “unexpressed

requirements” into the FSIA. See Keller v. Cent. Bank of Nigeria, 277 F.3d 811, 818 (6th Cir.

2002), abrogated on other grounds by Samantar v. Yousuf, 560 U.S. 305 (2010).4

At oral argument, DGFM’s counsel noted that one of the unintended consequences of war

is that ammunition and machinery, which may have been manufactured exclusively for military

purposes, end up in the hands of the public. This court, so the argument goes, risks subjecting

DGFM to the jurisdiction of the United States courts when it possibly never intended for the

4

The two elements that DGFM misconstrues merely “ensure” that there “must be a connection between the

plaintiff’s cause of action and the commercial acts of the foreign sovereign.” Aldy, 74 F.3d at 75 (citation omitted)

(emphasis omitted). Here, DGFM’s alleged wrongful acts—i.e., the defective design and manufacture of

ammunition and failure to warn of its hazards—are commercial in nature and form the basis of Plaintiffs’ claims of

supplier and product liability, as well as loss of consortium.

No. 15-3156 Rote, et al. v. Zel Custom Mfg., et al. Page 9

ammunition to get into the hands of civilians like Rote. Stated another way, DGFM asserts that

there is a fundamental difference between the ammunition at issue here and the paper machines

at issue in Aldy or the cars at issue in Vermeulen: the defective products in those cases were

clearly intended for some non-governmental end-user, whereas the same cannot be said for the

ammunition. Cf. Aldy, 74 F.3d at 75; Vermeulen, 985 F.2d at 1544.

We are not persuaded by this argument. Both the Supreme Court and this court have

followed Congress’ mandate to look to the “nature” of the act, and not the “purpose” behind it.

Weltover, 504 U.S. at 614; O’Bryan, 556 F.3d at 378–79; accord 28 U.S.C. § 1603(d).

Accordingly, whether the ammunition was used or intended for military purposes is of no

consequence. See, e.g., Weltover, 504 U.S. at 614–15 (“[A] contract to buy army boots or even

bullets is a ‘commercial’ activity[] because private companies can similarly use sales contracts to

buy goods”); McDonnell Douglas Corp. v. Islamic Republic of Iran, 758 F.2d 341, 349 (8th Cir.

1985) (“[A] contract by a foreign government to buy equipment for its armed services constitutes

a commercial activity to which sovereign immunity does not apply.”). What matters is that

DGFM acted like a private market participant when it designed and manufactured the allegedly

defective product; and DGFM does not assert that only governmental actors manufacture and

design ammunition. If we give any weight to the fact that the ammunition was manufactured for

military purposes, we would in effect flout Congress and the Supreme Court’s express

instruction that courts must look to the nature of the wrongful activity rather than its purpose.

Accordingly, we conclude that DGFM’s alleged negligent design and manufacture of the

defective ammunition qualifies as a “commercial activity” for purposes of the FSIA. This

conclusion, however, does not end our inquiry. For the commercial-activity exception to apply,

the activity must also have a “direct effect” in the United States. See 28 U.S.C. § 1605(a)(2).

2. Plaintiffs have adequately alleged that DGFM’s acts had a “direct effect” in the United

States.

DGFM argues that that a foreign state’s wrongful act will have a direct effect only if the

foreign state’s contacts with the United States are “substantial,” (Appellant Br. 16.) (quoting

Verlinden B.V. v. Cent. Bank of Nigeria, 461 U.S. 480, 490 (1983)), or if the foreign state has

“contacts, ties, and relations” with the United States, (Appellant Br. 18) (quoting World-Wide

No. 15-3156 Rote, et al. v. Zel Custom Mfg., et al. Page 10

Volkswagen Corp. v. Woodson, 444 U.S. 286, 299 (1980)). DGFM argues that for subject-matter

jurisdiction to exist under the FSIA, a court must conduct a “minimum contacts” inquiry under

International Shoe Co. v. Washington, 326 U.S. 310 (1945). In other words, DGFM asserts that

subject-matter jurisdiction is only proper if personal jurisdiction over the foreign state complies

with the Due Process Clause of the Fifth Amendment. (Appellant Br. 17.) In support of this

reading, DGFM relies on the legislative history of the FSIA, which states that the “requirements

of minimum jurisdictional contacts and adequate notice are embodied in . . . [28 U.S.C.

§ 1330(b), FSIA’s long-arm statute].” H.R. Rep. No. 94-1487 (1976), at 13, reprinted in 1976

U.S.C.C.A.N. 6604, 6612. According to the House Report, several jurisdictional prerequisites

embodied elsewhere in the law are “carefully interconnected” with the FSIA’s provisions. Id. at

13–14; (See Appellant Br. 17.).

a. Waiver.

As an initial matter, we must determine if this argument is waived because DGFM did

not raise it before the district court. See Hayward v. Cleveland Clinic Found., 759 F.3d 601,

614–15 (6th Cir. 2014) (discussing general rule that arguments not raised at the district court

level are not considered on appeal). Because DGFM’s motion contested the district court’s

exercise of subject-matter jurisdiction in general, we conclude that failure to raise the argument

below does not compel a finding of waiver. See Clinton v. City of New York, 524 U.S. 417, 428

(1998) (“Because the argument poses a jurisdictional question (although not one of constitutional

magnitude), it is not waived by the failure to raise it in the District Court.”); Static Control

Components, Inc. v. Lexmark Int’l, Inc., 697 F.3d 387, 408 n.8 (6th Cir. 2012) (holding that a

standing argument not raised at the district court level could not be waived because it related to a

“jurisdictional requirement”). More critically, “we have an independent duty to inquire

sua sponte whenever a doubt arises as to the existence of federal question jurisdiction.”

Ky. Press Ass’n, Inc. v. Kentucky, 454 F.3d 505, 508 (6th Cir. 2006) (internal quotation marks

and citation omitted). In keeping with that duty, we now address DGFM’s argument.

No. 15-3156 Rote, et al. v. Zel Custom Mfg., et al. Page 11

b. Incorporation of “minimum contacts” test.

To determine whether the “direct effect” element incorporates the “minimum contacts”

test, we start with the plain language of the statute. See Brilliance Audio, Inc. v. Haights Cross

Comm’ns, Inc., 474 F.3d 365, 371 (6th Cir. 2007) (“As with any question of statutory

interpretation, we must first look to the language of the statute itself.”); In re Comshare Inc. Sec.

Litig., 183 F.3d 542, 549 (6th Cir. 1999) (“When interpreting a statute, we must begin with its

plain language . . . .”). “If the language of the statute is clear, then the inquiry is complete, and

the court should look no further.” Brilliance, 474 F.3d at 371 (citations omitted). “Only if the

statute is inescapably ambiguous should a court look to other persuasive authority”—such as

legislative history—“in an attempt to discern legislative meaning.” Id. (citation and internal

quotation marks omitted); see also In re Danny’s Markets, Inc., 266 F.3d 523, 525 (6th Cir.

2001) (“When . . . a statutory term is ambiguous, it is our duty to examine the legislative history

in order to render an interpretation that gives effect to Congress’s intent.”) (citation and internal

quotation marks omitted).

Here, the phrase “an act [that] causes a direct effect in the United States” is not

ambiguous. See 28 U.S.C. § 1605(a)(2). The operative words are “direct effect.” Although the

statute does not define these terms, we must give them their ordinary meaning if possible.

See Weltover, 504 U.S. at 618 (“[A]n effect is ‘direct’ if it follows ‘as an immediate consequence

of the defendant’s . . . activity.’”) (citation omitted). Because we can give these words their

ordinary meaning without any resulting ambiguity, resort to legislative history is not necessary.

See Lockhart v. Napolitano, 573 F.3d 251, 258, 262 (6th Cir. 2009) (reasoning that resort to

legislative history was unnecessary where the undefined term could be given its “ordinary,

contemporary, common meaning”); Limited, Inc. v. C.I.R., 286 F.3d 324, 335 (6th Cir. 2002)

(concluding that tax court erred in examining legislative history of the statute where statutory

term should have been given its ordinary and natural meaning); Bass v. Stolper, Koritzinsky,

Brewster & Neider, S.C., 111 F.3d 1322, 1325–26 (7th Cir. 1997) (“Although appellants would

have us delve into legislative history to cast a different light on the [undefined] term

‘transaction,’ we must give meaning to the plain language actually used by Congress.”). Even if

we do look at legislative history, DGFM’s argument is still unpersuasive where the legislative

No. 15-3156 Rote, et al. v. Zel Custom Mfg., et al. Page 12

history is being used to inject into the statute additional “unexpressed requirement[s],” Weltover,

504 U.S. at 618, rather than resolve any inherent ambiguity. Indeed, this case is markedly

different from other cases where courts have concluded that resort to legislative history was

proper because a term or phrase had multiple meanings. See, e.g., Brilliance, 474 F.3d at 372

(concluding that phrase was ambiguous because the parties identified two “plausible readings”);

In re Vause, 886 F.2d 794, 796 (6th Cir. 1989) (explaining that disputed term had “two possible

meanings” and was thus “inherently ambiguous”); United States v. Graham Mortg. Corp.,

740 F.2d 414, 417 (6th Cir. 1984) (“Where the language of the statute is ambiguous and can be

interpreted to support readings either imposing or not imposing criminal liability . . . the court

must turn to the legislative history of the statute.”) (citations omitted).

Our approach today is consistent with the Supreme Court’s approach in Weltover. There,

the question was whether the “direct effect” element was met. Weltover, 504 U.S. at 617. The

defendant in that case argued that the effect must be both “substantial” and “foreseeable” in

order for a court to conclude that it is “direct.”5 Id. In support, the defendant relied on FSIA’s

legislative history—specifically, the House Report. Id. at 617–18. According to the House

Report, “conduct covered by the third clause of § 1605(a)(2) would be subject to the jurisdiction

of American courts ‘consistent with principles set forth in section 18, Restatement of the Law,

Second, Foreign Relations Law of the United States (1965).’” Id. That section states that

“American laws are not given extraterritorial application except with respect to conduct that has,

as a ‘direct and foreseeable result,’ a ‘substantial’ effect within the United States.” Id. at 618.

The Supreme Court, however, found that legislative history inapposite and rejected the idea that

the Act intended an “unexpressed requirement of ‘substantiality’ or ‘foreseeability.’” Id.;

see also Minn-Chem, Inc. v. Agrium, Inc., 683 F.3d 845, 857 (7th Cir. 2012) (en banc)

(“Weltover reached its definition of ‘direct’ for FSIA purposes only after refusing to import from

the legislative history of that statute the notion that an effect is ‘direct’ only if it is both

‘substantial’ and ‘foreseeable.’”) (citation omitted); Olden v. LaFarge Corp., 383 F.3d 495, 501–

5

In addition to this issue, Weltover faced the question at issue here—whether the “direct effect” element

incorporates the “minimum contacts” test. 504 U.S. at 619–20. The Supreme Court, however, did not resolve the

question. Id; see Vermeulen, 985 F.2d at 1545 (“[T]he [Weltover] Court did not resolve whether section 1605(a)(2)

incorporates the minimum contacts test.”)

No. 15-3156 Rote, et al. v. Zel Custom Mfg., et al. Page 13

02 (6th Cir. 2004) (concluding that a statute overruled a particular Supreme Court holding

notwithstanding the legislative history to the contrary).

We followed Weltover’s approach in Keller when we interpreted the “direct effect”

element. Keller, 277 F.3d at 817–18. In that case, the question was whether an act must be

“legally significant” in order for a court to conclude that it has a “direct effect” here. Id. at 817.

In concluding that the answer was no, we interpreted Weltover as an “admonishment to courts

not to add any unexpressed requirements to the language of the statute.”6 Id. at 818 (citation

omitted). Taken together, Weltover and Keller counsel us that we may not read anything into the

statute, but must, quite simply, read it.7

This approach makes even more sense if we consider how courts have interpreted the

“direct effect” element. Indeed, the scope of this element has been the subject of much litigation.

For example, must an act be “legally significant” in order for it to have a “direct effect” (Keller)?

No. Must the effect be “substantial” and “foreseeable” in order to be considered “direct”

(Weltover)? No. Had this court or the Supreme Court answered these questions in the

affirmative, we would have given courts free rein to read into the statute requirement upon

requirement to no end in sight, widening the gulf between the statute as enacted and the statute as

6

Because of Weltover’s admonishments, we are not persuaded by a concurring opinion from this Circuit

that reads the “minimum contacts” requirement into the statute. See Triple A Int’l., Inc. v. Democratic Republic of

Congo, 721 F.3d 415, 418 (6th Cir. 2013) (Merritt, J., concurring). The concurring opinion in Triple A, relying on

the FSIA’s legislative history, stated that “[w]hether the Constitution—as distinguished from the Act—requires such

[minimum] ‘contacts’ is not the point. The Act itself explicitly requires such contacts.” Concurring opinions,

however, do not constitute binding authority, and we do not follow this particular one here. Fed. Exp. Corp. v.

Tenn. Pub. Serv. Comm’n, 925 F.2d 962, 966 n.2 (6th Cir. 1991).

7

Of course, we do not mean to imply that the decision to rely on legislative history is never appropriate.

After all, the Supreme Court itself took a different approach in Samantar from the approach it took in Weltover.

There, the majority relied on legislative history in interpreting the FSIA statute; three Justices wrote separate

concurrences, disapproving of the majority’s reliance. Samantar, 560 U.S. at 326–29. The issue was whether the

FSIA “covers the immunity claims of foreign officials.” Id. at 313. The majority turned to the plain meaning of the

statute, 28 U.S.C. § 1603 (containing definitions of certain terms and phrases), to determine whether an official

would be immune. Id. at 314. The Samantar majority then relied on legislative history to support its reading of the

plain meaning of the statute. Id. at 323. Samantar’s approach is not as applicable in this case where DGFM

suggests that we read additional unexpressed requirements into the statute rather than rely on its plain meaning. For

that reason, Weltover’s approach is more applicable. See Olden, 383 F.3d at 505–06 (“[T]he primary rule of

statutory interpretation . . . is that a court will not look beyond the statutory text if the text is unambiguous. Of

course, if the statutory text and legislative history are consistent, the primary rule is unnecessary because the result

will be the same regardless of whether a court follows the rule or not.”) (internal citation omitted).

No. 15-3156 Rote, et al. v. Zel Custom Mfg., et al. Page 14

interpreted. In holding that the “direct effect” requirement does not incorporate the “minimum

contacts” test, this court avoids this danger altogether.

At best, what DGFM advances here is a personal-jurisdiction argument disguised as one

sounding in subject-matter jurisdiction. To the extent that DGFM asserts a personal jurisdiction

defense, that defense is not properly before this court because DGFM never moved for dismissal

for lack of personal jurisdiction under Federal Rule of Civil Procedure 12(b)(2) in the district

court. Hayward, 759 F.3d at 614–15. Further, allowing foreign instrumentalities to make their

arguments about minimum contacts that are relevant to a 12(b)(2) defense through the backdoor

of a Rule 12(b)(1) motion would essentially relieve them from compliance with the Federal

Rules of Civil Procedure.

In reaching our conclusion that the “direct effect” element does not incorporate the

“minimum contacts” test, we acknowledge that the Ninth Circuit has adopted DGFM’s reading.

Corzo v. Banco Cent. de Reserva del Peru, 243 F.3d 519, 525–26 (9th Cir. 2001) (engaging in

“minimum contacts” analysis to conclude that activity had no “direct effect”) (citing Sec. Pac.

Nat’l Bank v. Derderian, 872 F.2d 281, 286–287 (9th Cir. 1989)).8 Even so, we do not find the

8

Other circuits have suggested that the “direct effect” analysis and “minimum contacts” test are related, but

the Ninth Circuit appears to stand alone in expressly incorporating the “minimum contacts” test wholesale. The

Eleventh Circuit, for example, has noted the overlap without holding that minimum contacts are required to exercise

subject-matter jurisdiction. Guevara v. Republic of Peru, 608 F.3d 1297, 1309–10 (11th Cir. 2010) (analyzing the

“direct effect” element and analogizing to, but not incorporating, the “minimum contacts” test); S & Davis Int’l, Inc.

v. The Republic of Yemen, 218 F.3d 1292, 1304 (11th Cir. 2000) (“The ‘direct effects’ language of § 1605(a)(2)

closely resembles the ‘minimum contacts’ language of constitutional due process, and these two analyses have

overlapped.”). Similarly, the Second Circuit has held that the questions of subject-matter jurisdiction and personal

jurisdiction may be so “inextricably intertwined” that appellate courts should exercise pendent jurisdiction over a

personal-jurisdiction claim on interlocutory appeal of a decision denying a motion to dismiss for lack of subject-

matter jurisdiction. U.S. Fid. & Guar. Co. v. Braspetro Oil Servs., Co., 199 F.3d 94, 97 (2d Cir. 1999) (per curiam);

see also Abi Jaoudi & Azar Trading Corp. v. Cigna Worldwide Ins. Co., 391 F. App’x 173, 181 (3d Cir. 2010)

(acknowledging that the district court’s ruling on personal jurisdiction may be “inextricably intertwined” with the

district court’s ruling on sovereign immunity). And although the Second Circuit once held that the “direct effect”

requirement was not met because a defendant did not satisfy the “minimum contacts” test in a pre-Weltover case, see

Carey v. Nat’l Oil Corp., 592 F.2d 673, 676 (2d Cir. 1979) (per curiam), the court has more recently acknowledged

that subject-matter jurisdiction may lie even when personal jurisdiction does not, Rein v. Socialist People’s Libyan

Arab Jamahiriya, 162 F.3d 748, 760 n.8 (2d Cir. 1998) (noting it is “possible that a foreign sovereign could be

subject to subject matter jurisdiction under the commercial activities exception without being within the personal

jurisdiction of an American court”). Tellingly, recent Second Circuit cases have analyzed the FSIA’s “direct effect”

element without reference to minimum contacts. See, e.g., Rogers v. Petroleo Brasileiro, S.A., 673 F.3d 131, 138–

40 (2d Cir. 2012); Guirlando v. T.C. Ziraat Bankasi A.S., 602 F.3d 69, 79–81 (2d Cir. 2010); Kensington Int’l Ltd. v.

Itoua, 505 F.3d 147, 157–59 (2d Cir. 2007); Virtual Countries, Inc. v. Republic of South Africa, 300 F.3d 230, 236–

41 (2d Cir. 2002). Thus, although there is overlap between questions of subject-matter jurisdiction and personal

No. 15-3156 Rote, et al. v. Zel Custom Mfg., et al. Page 15

Ninth Circuit’s approach persuasive. In reading the “direct effect” element, the Ninth Circuit

went beyond the plain meaning of the FSIA’s terms and relied on the same legislative history we

reject to read into the statute requirements that are simply not there. See, e.g., Derderian, 872

F.2d at 285–86 n.11. Further, Derderian pre-dates Weltover, and so the court did not have the

benefit of Weltover’s admonishment that we must not read “unexpressed requirements” into the

statute. Keller, 277 F.3d at 817. That Derderian is still cited by courts after Weltover, see, e.g.,

Corzo, 243 F.3d at 525–26, makes little difference. In the end, the Ninth Circuit’s approach, in

this post-Weltover period, is not persuasive.

c. Direct effect in product-liability cases.

Having concluded that the “direct effect” element does not incorporate the “minimum

contacts” test, we must now determine whether Plaintiffs have adequately alleged that DGFM’s

actions have a direct effect here in the United States. The Supreme Court has held that “an effect

is ‘direct’ if it follows as an immediate consequence of the defendant’s . . . activity.” Weltover,

504 U.S. at 618 (citation omitted). “The common sense interpretation of a direct effect . . . is

one which has no intervening element, but, rather, flows in a straight line without deviation or

interruption.” Guirlando, 602 F.3d at 74–75 (quotation marks and citation omitted).

In some contexts, “[c]ourts have struggled to announce objective standards and clear

rules for determining what does and does not qualify as a direct effect in the United States.”

Westfield, 633 F.3d at 414. Yet, in the context of product-liability cases, courts have routinely

held that an injury caused by an allegedly defective product meets the “direct effect” element.

Vermeulen, 985 F.2d at 1545; Lyon, 252 F.3d at 1083; Aldy, 74 F.3d at 75. In Vermeulen, for

example, the plaintiff suffered injuries in a car accident as a result of the defective design and

manufacture of the car. Vermeulen, 985 F.2d at 1537. The court expressed that it could “hardly

imagine a more immediate consequence of the defendant’s activity.” Id. at 1545.9 In Lyon, the

survivors of persons killed in a plane crash sued the foreign defendants that designed and

jurisdiction, most circuits appear to treat the inquiries as distinct. Cf. I.T. Consultants, Inc. v. Republic of Pakistan,

351 F.3d 1184, 1188–91 (D.C. Cir. 2003) (addressing questions separately).

9

Vermeulen, while determining whether federal jurisdiction exists, performed the “minimum contacts” test.

985 F.2d at 1545–52. However, it acknowledged that Weltover never resolved the question of whether the “direct

effect” element incorporated the test, see id. at 1545, and therefore, it was not bound by Weltover to do so.

No. 15-3156 Rote, et al. v. Zel Custom Mfg., et al. Page 16

manufactured the aircraft. Lyon, 252 F.3d at 1081. The foreign defendants were

instrumentalities of the Republic of Italy. Id. In determining whether the “direct effect” element

was met, the Lyon court, relying on Vermeulen, answered in the affirmative. Id. at 1083. Lyon

also acknowledged the possibility of a defective product “chang[ing] hands,” and concluded that

while “speculation about the ravages of others along the way . . . may affect proof, they do not

affect jurisdiction.” Id. at 1084. Finally, like the courts in Vermeulen and Lyon, the Aldy court

concluded that the death of the plaintiffs satisfied the “direct effect” element. Aldy, 74 F.3d at

75.

Applying the reasoning of Vermeulen and Lyon here, this court notes that Rote alleges

that he was injured as a result of the defective ammunition manufactured by DGFM. (See, e.g.,

Third Am. Compl. ¶ 34 (alleging that the round that exploded came from a box of ammunition

identifying manufacturer as DGFM); ¶¶ 90–92 (describing defects affecting the ammunition and

DGFM’s wrongful acts); ¶¶ 35–37 (describing physical, emotional, and economic injuries

sustained by Rote)). Thus, we hold that the “direct effect” requirement was met here, and the

exercise of subject-matter jurisdiction is proper under the FSIA’s commercial-activity exception.

3. DGFM fails to demonstrate that the Complaint otherwise lacks a plain and short

statement of jurisdiction.

DGFM advances other arguments in support of its Rule 12(b)(1) motion. As shown

below, none of these is availing.

First of all, DGFM contends that Plaintiffs were required to “mention” which exception

to the FSIA applied, and that failure to do so was “fatal.” (Appellant Br. at 8, 10.) That is not

the case. AmSouth Bank v. Dale, 386 F.3d 763, 779 (6th Cir. 2004) (“Affirmative pleading of

the precise statutory basis for federal subject matter jurisdiction is not required as long as a

complaint alleges sufficient facts to establish jurisdiction.”) (quoting In re Mailman Steam

Carpet Cleaning Corp., 196 F.3d 1, 5 (1st Cir. 1999)); see also Universal Trading & Inv. Co.,

Inc. v. Bureau for Representing Ukrainian Interests in Int’l & Foreign Courts, 898 F. Supp. 2d

301, 309 n.3 (D. Mass. 2012), aff’d, 727 F.3d 10 (1st Cir. 2013) (rejecting defendant’s

contention that “any applicable exception [to the FSIA] must be alleged in the complaint”).

No. 15-3156 Rote, et al. v. Zel Custom Mfg., et al. Page 17

Therefore, Plaintiffs’ omission of the statutory provision identifying the commercial activity

exception, 28 U.S.C. § 1605(a)(2), does not divest this court of jurisdiction.

Next, DGFM implies that our jurisdictional review of Plaintiffs’ allegations related to the

commercial-activity exception is confined to the section of the Complaint entitled “Jurisdiction

and Venue,” which fails to demonstrate that the exercise of jurisdiction is proper.10 (Appellant

Br. 10.) That argument is overly technical and not correct. In determining whether there is a

proper basis for the exercise of jurisdiction, we read the complaint “holistically.” In re Mailman,

196 F.3d at 5; see also J&J Sports Prods., Inc. v. Rose’s Dream, Inc., 818 F. Supp. 2d 1, 3

(D.D.C. 2010) (explaining that defendant’s argument that the complaint should be amended to

include proper jurisdictional allegations was “overly technical” where the basis for jurisdiction

was “clear from the face of the complaint.”) (citations omitted); Harary v. Blumenthal, 555 F.2d

1113, 1115 n.1 (2d Cir. 1977) (“When the complaint pleads facts from which federal jurisdiction

may be inferred . . . the insufficiency of the jurisdictional allegation is not controlling, and the

action need not be dismissed.”) (citations omitted). As shown in Sections III.B.1 and B.2, a

review of the entire Complaint demonstrates that subject-matter jurisdiction exists here; so, the

Complaint complies with Rule 8(a)’s basic requirements.

IV. CONCLUSION

For the reasons set forth above, this court AFFIRMS the decision of the district court.

10

Counsel for DGFM seemingly retreated from this particular position at oral argument. We nonetheless

address it here.

No. 15-3156 Rote, et al. v. Zel Custom Mfg., et al. Page 18

_________________

CONCURRENCE

_________________

HELENE N. WHITE, Circuit Judge, concurring. I join in the affirmance but write

separately to address the House Report relied on by DGFM and the Ninth Circuit in concluding

that the subject-matter inquiry subsumes the personal-jurisdiction/minimum-contacts inquiry.

The House Report states:

(b) Personal Jurisdiction.—Section 1330(b) provides, in effect, a Federal long-

arm statute over foreign states (including political subdivisions, agencies, and

instrumentalities of foreign states). It is patterned after the long-arm statute

Congress enacted for the District of Columbia. Public Law 91-358, sec. 132(a),

title I, 84 Stat. 549. The requirements of minimum jurisdictional contacts and

adequate notice are embodied in the provision. Cf. International Shoe Co. v.

Washington, 326 U.S. 310 (1945), and McGee v. International Life Insurance Co.,

355 U.S. 220, 223 (1957). For personal jurisdiction to exist under section

1330(b), the claim must first of all be one over which the district courts have

original jurisdiction under section 1330(a), meaning a claim for which the foreign

state is not entitled to immunity. Significantly, each of the immunity provisions

in the bill, sections 1605–1607, requires some connection between the lawsuit and

the United States, or an express or implied waiver by the foreign state of its

immunity from jurisdiction. These immunity provisions, therefore, prescribe the

necessary contacts which must exist before our courts can exercise personal

jurisdiction. Besides incorporating these jurisdictional contacts by reference,

section 1330(b) also satisfies the due process requirement of adequate notice by

prescribing that proper service be made under section 1608 of the bill. Thus,

sections 1330(b), 1608, and 1605–1607 are all carefully interconnected.

H.R. Rep. 94-1487, at 13–14 (1976) (footnotes omitted).

This subsection of the House Report explains the intent behind the FSIA’s long-arm

statute—which permits the district courts to exercise personal jurisdiction over a foreign

sovereign whenever the federal courts have subject-matter jurisdiction over a claim and the

sovereign has been properly served, 28 U.S.C. § 13301—and the relationship between the

1

In full, 28 U.S.C. § 1330(a) and (b) provide:

No. 15-3156 Rote, et al. v. Zel Custom Mfg., et al. Page 19

various provisions of the FSIA. It shows only that Congress believed that the contacts set forth

in the immunity provisions satisfy due-process requirements. That assessment does nothing to

change the meaning of “direct effect.”

The House Report supports our conclusion that Congress intended that district courts

exercise personal jurisdiction over a properly served foreign sovereign that performed an act

outside the United States in connection with a commercial activity if that act caused a direct

effect in the United States. It is a separate question whether Congress was correct in its

assumption that this connection satisfies due-process requirements. If there is a minimum-

contacts requirement for foreign sovereigns—a question the Supreme Court has left open, see

Republic of Argentina v. Weltover, 504 U.S. 607, 619 (1992)—that issue is properly raised in a

challenge to the district court’s personal jurisdiction over the foreign sovereign, not its subject-

matter jurisdiction over the claim, and a factual record would need to be developed accordingly.

See Rein v. Socialist People’s Libyan Arab Jamahiriya, 162 F.3d 748, 760 n.8 (2d Cir. 1998)

(noting it is “possible that a foreign sovereign could be subject to subject matter jurisdiction

under the commercial activities exception without being within the personal jurisdiction of an

American court”).

Thus, I agree that the direct-effect requirement does not incorporate a minimum-

contacts/due-process analysis.

(a) The district courts shall have original jurisdiction without regard to amount in controversy of

any nonjury civil action against a foreign state as defined in section 1603(a) of this title as to any

claim for relief in personam with respect to which the foreign state is not entitled to immunity

either under sections 1605–1607 of this title [including the commercial-activity exception,

§ 1605(a)(2)] or under any applicable international agreement.

(b) Personal jurisdiction over a foreign state shall exist as to every claim for relief over which the

district courts have jurisdiction under subsection (a) where service has been made under section

1608 of this title [the service-of-process provision].