Can-Am International, LLC v. Republic of Trinidad & Tobago

United States Court of Appeals

Fifth Circuit

F I L E D

No. 05-20007

-1- March 1, 2006

IN THE UNITED STATES COURT OF APPEALS Charles R. Fulbruge III

Clerk

FOR THE FIFTH CIRCUIT

_____________________

No. 05-20007

_____________________

CAN-AM INTERNATIONAL, LLC,

Plaintiff - Appellant,

v.

THE REPUBLIC OF TRINIDAD AND TOBAGO;

THE TOBAGO HOUSE OF ASSEMBLY,

Defendants - Appellees.

_________________________________________________________________

Appeal from the United States District Court

for the Southern District of Texas, Houston Division

_________________________________________________________________

Before GARWOOD, CLEMENT, AND PRADO, Circuit Judges.

EDWARD C. PRADO, Circuit Judge:*

Can-Am International, L.L.C. (“Can-Am”) appeals the district

court’s entry of final judgment dismissing its action for lack of

subject matter jurisdiction. The district court found that no

exception to sovereign immunity applies under the Foreign

Sovereign Immunity Act (“FSIA”), 28 U.S.C. § 1602 et seq., to

support jurisdiction over Appellees.

*

Pursuant to 5TH CIR. R. 47.5, the court has determined that

this opinion should not be published and is not precedent except

under the limited circumstances set forth in 5TH CIR. R. 47.5.4.

No. 05-20007

-2-

I

Appellant Can-Am International, L.L.C. is registered in

Texas. Laura Lee Sorsby is its founder and CEO. Appellees are

the Republic of Trinidad and Tobago and one of its political

bodies, the Tobago House Assembly.

The Republic of Trinidad and Tobago (“T&T”) comprises two

islands in the Caribbean Sea near Venezuela. After achieving

independence from Great Britain in 1962, the T&T central

government established the Tobago House of Assembly (“THA”) to

administer Tobago Island. The THA consists of an Executive

Council, which comprises several Secretaries, including the Chief

Secretary. The responsibilities of the Office of Chief Secretary

include planning Tobago Island development projects. At all

relevant times in this case, the House Chief Administrator or

Chief Secretary was either Allan Richards or Hochoy Charles.1

In 1997, Sorsby marketed her services as a financial

consultant to T&T and the THA. After learning that the THA

needed financing for various development projects, Sorsby

incorporated Can-Am International, L.L.C. (“Can-Am”) in Texas in

1998 and began submitting finance proposals to the THA.

Can-Am asserts that it sought funding proposals for

1

The titles of these individuals and the dates in which

they held these titles are not clear from the parties’ briefs,

but (like the district court noted in its order) these details do

not affect the court’s disposition.

No. 05-20007

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conventional financing to be backed by a government guarantee in

early 1998. Later, in November 1998, it sought funding proposals

for conventional financing to be collateralized by THA assets.

On February 5, 1999, Sorsby sent a letter to Richards outlining a

financing program Sorsby had arranged through a large United

States insurance company. In that letter she wrote:

We are willing to come back to Tobago and work with you in

order to try and put this whole thing together. But before

we come, we would appreciate it if you could appoint our

company as your consultant/agent. This does not commit the

Government to anything. You do not have to pay us anything

if the loan does not go though [sic]. If you decide you do

not wish to take the loan and participate in the trading

program, then the appointment becomes null and void.

On February 22, 1999, the THA appointed Sorsby, CEO of Can-

Am International, L.L.C., as the financial consultant for three

of its development projects. Paragraphs 5 and 6 of the

appointment letter read:

5. This agency will be revoked in writing if Ms. Sorsby has

failed to perform.

6. This agency agreement will remain in effect for six

months, with an option of renewal, subject to the Tobago

House of Assembly’s satisfaction with Ms. Laura-Lee [sic]

Sorsby’s performance and the continuance of its engagement

with ongoing financing arranged by Can-Am International

L.L.C.

Charles allocated THA office space to Sorsby along with this

appointment.

On March 27, 1999, the parties formalized their relationship

by outlining their respective responsibilities in a Memorandum of

No. 05-20007

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Understanding (“MOU”).2 Sorsby’s responsibilities included:

introducing different financing structures to the THA for

government review and selection; arranging the funding

institution subject to THA approval; providing contractual

arrangements with program managers of trading groups acceptable

to the THA; negotiating interest rates, if required, payable on

the funds held in T&T’s account, subject to the approval of the

THA; arranging for the profits generated by the financing program

to go into a THA trust account; working with the THA to arrange

collateral, if required, for the financing program selected by

the THA; and investigating and arranging the lowest interest

rates, if required, for the THA’s selection and approval.

The THA’s responsibilities under the MOU included: providing

the most feasible and high priority projects for financing;

getting all the necessary government approvals to implement the

financing program selected by the THA from those submitted by

Sorsby; executing all documents necessary to implement the

selected financing program; and arranging all necessary

government collateral as required.

The MOU states in paragraph 1.1, “All matters that require

financial commitments by the THA shall be brought to the notice

2

As noted by the district court, the MOU states that it is

between the THA and Sorsby, rather than the THA and the plaintiff

Can-Am. The district court did not decide “whether the party

designation was part of an on-going misrepresentation or merely a

drafting error.”

No. 05-20007

-5-

of the THA for agreement before any final commitments are made.”

The MOU’s fee clauses provide that:

THA agrees to pay the Financial Consultant a fee equal to

ten percent (10%) of all monies earned from the private

placement (or other funding programs) out of funds provided

to THA generated by the funding program arranged by the

Financial Consultant. . . .

In the event that THA selects a form of conventional

financing from the financing structures submitted by the

Financial Consultant, the parties shall negotiate . . . a

fee agreeable to both parties to compensate the Financial

Consultant for the services in arranging such financing.

As to duration, the MOU states:

1.4 The agency appointment will remain in effect from the

time trading begins or as long as THA is receiving funds

through any trading programs of financial arrangements

provided by the Financial Consultant . . . .

1.5 This agency appointment can only be revoked in writing

if the Financial Consultant fails to perform on the terms of

this MOU.

Furthermore, the MOU has a choice of law provision: “This

MOU and all amendments thereto shall be governed and constructed

in accordance with the laws of the Republic of Trinidad and

Tobago.”

The THA did not pursue the financing program outlined in

Sorsby’s February 5th letter. In early April 1999 Sorsby

arranged for the THA officials to travel to London, England, for

a series of meetings where various individuals presented

investment opportunities for the THA’s consideration.3 One

3

Although Appellees originally sought conventional

financing proposals, it considered financing through investment.

No. 05-20007

-6-

proposal came from a London firm called the Bower Cotton Group,

for which payment was guaranteed by a bank in Switzerland. The

proposal required Appellees to invest ten million United States

dollars. Three days afterwards,4 Sorsby wrote the THA’s Chief

secretary:

We have wonderful and timely news for the THA. Bower Cotton

. . . [has] available at the present time US$100 million

dollars of good clean funds. They have an investor they are

placing into the program. Because of the investor’s

contract with Bower Cotton . . . we are on a short time fuse

[sic].

After requesting a letter of intent, proof of funds, and pay

orders, Sorsby wrote, “We must have these things in order to get

your contract issued from the bank for your review and approval.”

Regarding the pay orders, she wrote, “Remember our pay orders are

generated through the trade, so if you do not go forward with the

contract, these pay orders will be worthless.”

Thus, upon returning to Tobago, the House Chief Secretary

executed various documents related to the Bower Cotton proposal

including a letter of intent, an “Irrevocable Pay Order” (“pay

order”), and a letter of exclusivity. These documents explicitly

reference a code specifically designated for the Bower Cotton

proposal and are signed by the THA Chief Secretary Charles. The

documents are dated April 19, 1999, but were signed on April 30,

1999.

4

The letter erroneously bears the date March 12, 1999. It

should have been dated April 12, 1999.

No. 05-20007

-7-

The letter of intent is addressed to Peter Newton,5 the

program manager for the potential investment, and states, “I

herewith grant you the exclusive right to provide me with the

best available investment program to facilitate the private

placement of these funds.” The letter provides that the THA

Chief Secretary is “willing and able to enter $ Ten Million US

[sic] dollars for participation into a private bank-secured

investment programme, subject to my [the Chief Secretary’s]

approval of the contract.”

The pay order provides that Sorsby, in her individual

capacity, will receive “[a] total of 10% (Ten Percent) of the net

disbursable profits received by [the THA] or any Company on their

behalf to facilitate the investment transaction . . . .” The pay

order names Sorsby as the beneficiary. It also states, “The

Irrevocable Pay Order is valid upon commencement of the start of

the transaction herein . . . .” The pay order also includes a

waiver of immunity rights, and it submits the transaction to

governance under the International Chamber of Commerce Rules of

Conciliation and Arbitration.

The letter of exclusivity is also addressed to Newton and

states in relevant part: “I [Charles], the undersigned, herewith

grant the trade program manager/administrator/facilitator full

5

Appellees identify Newton as an affiliate of Nikea, N.V.

(“Nikea”), an engineering company that Sorsby alleges would have

helped to construct the THA’s projects.

No. 05-20007

-8-

exclusive right as our sole agent for 20 banking days from the

above date [April 19, 1999], to enter these funds for me, or the

corporation into the best available bank-secured investment

program.”

Despite Sorsby’s recommendation to accept the Bower Cotton

proposal and a letter from her stating that there was a short

window of time to decide, the THA did not fund the Bower Cotton

proposal. On July 11, 1999, Sorsby wrote an email to Rennie

Dumas, a staff member at the THA, and stated, “. . . I cannot

afford to keep giving away my services . . . . [T]he letter

[Charles] prepared and the payorder [sic] meant nothing since

[the THA] did not go forward.” Sorsby continued to submit

investment proposals to the THA, which rejected them all. On

March 7, 2000, Sorsby wrote a letter addressed to Charles

expressing her frustration with the THA: “I have always tried to

get you what you need, lawyers, funding etc. [sic], and have not

ever charged you a dime.” Thereafter, some THA officials met

with some financiers introduced by Sorsby, but did not enter into

any agreement with them. The THA never obtained or received any

money from any financing source introduced by Sorsby or Can-Am.

II

In November 2001, Can-Am filed a complaint against T&T and

the THA in the District Court for the Southern District of Texas.

It later filed an amended complaint to include a claim for

No. 05-20007

-9-

quantum meruit. T&T and the THA filed a motion to dismiss, or

alternatively, a motion for summary judgment based primarily on

the Foreign Sovereign Immunity Act (FSIA). The district court

denied the motion because it needed discovery to decide the issue

of whether the FSIA applied to Appellees.

After discovery, in April 2004, T&T and the THA filed a

motion for summary judgment claiming the court did not have

jurisdiction over Can-Am’s claims pursuant to the FSIA.

Alternatively, they argued for summary judgment because no

genuine issue existed as to any material fact, and that both T&T

and the THA were entitled to judgment as a matter of law for all

claims.

On September 8, 2005, the district court judge dismissed

Can-Am’s claim for lack of subject matter jurisdiction. It

concluded that the FSIA precluded the court from reaching the

merits of the case, reasoning that “there is no basis to overcome

[Appellees’] presumption of immunity.” The district court denied

Can-Am’s motion for reconsideration on November 23, 2004.

III

Can-Am appeals the district court’s entry of final judgment

dismissing its action for lack of subject matter jurisdiction

after having found no exception to sovereign immunity applies to

No. 05-20007

-10-

Appellees. Can-Am argues that Appellees are subject to

jurisdiction under two exceptions to its sovereign immunity under

the FSIA, the waiver exception and the commercial activity

exception.

The existence of subject matter jurisdiction under the FSIA

is a question of law which is reviewed de novo. Stena Rederi AB

v. Comision de Contratos del Comite Ejecutivo General del

Sindicato Revolucionario de Trabajadores Petroleros de la

Republica Mexicana S.C., 923 F.2d 380, 386 (5th Cir. 1991). The

FSIA provides a framework for determining whether a court within

the United States may exercise jurisdiction over a foreign state.

The FSIA provides the sole basis for obtaining jurisdiction over

a foreign state in a court in the United States. Argentine

Republic v. Amerada Hess Shipping Corp., 488 U.S. 428, 434

(1989). Under the FSIA, a “foreign state shall be immune from

the jurisdiction of the courts of the United States and of the

States” unless one of the several statutorily defined exceptions

applies. 28 U.S.C. § 1604; see Verlinden B.V. v. Cent. Bank of

Nigeria, 461 U.S. 480, 488-89 (1983)(“When one of [the] specified

exceptions applies, ‘the foreign state shall be liable in the

same manner and to the same extent as a private individual under

like circumstances.’”)(citing 28 U.S.C. § 1606). The exceptions

are enumerated in 28 U.S.C. § 1605.

Courts must apply the FSIA “in every action against a

No. 05-20007

-11-

foreign sovereign, since subject matter jurisdiction in any such

action depends on the existence of one of the specified

exceptions to foreign sovereign immunity.” Verlinden, 461 U.S.

at 493. The party claiming FSIA immunity must establish a prima

facie case that it satisfies FSIA’s definition of a foreign

state, thereby creating a presumption of immunity. United States

v. Moats, 961 F.2d 1198, 1205 (5th Cir. 1992); see also Keller v.

Cent. Bank of Nigeria, 277 F.3d 811, 815 (6th Cir. 2002); Export

Group v. Reef Indus., Inc., 54 F.3d 1466, 1470 (9th Cir. 1995).

Then, the burden of production shifts to the non-movant to

provide facts showing that an exception applies. Moats, 961 F.2d

at 1205. To overcome a presumption of immunity, Can-Am must

prove that the conduct that forms the basis of its complaint

falls within one of the statutorily defined exceptions. Republic

of Argentina v. Weltover, Inc., 504 U.S. 607, 610-11 (1992); see

28 U.S.C. 1605 (exceptions to the jurisdictional immunity of a

foreign state). Because it is undisputed that T&T is a foreign

state and that the THA is T&T’s instrumentality as defined in 28

U.S.C. § 1603, under the FSIA, they enjoy a presumption of

immunity. Accordingly, the issue of subject matter jurisdiction

turns on whether Can-Am rebuts the presumption of immunity

enjoyed by T&T and the THA.

Two FSIA immunity exception provisions are at issue. The

first is section 1605(a)(1), which discusses waiver. The second

No. 05-20007

-12-

is section 1605(a)(2), which discusses commercial activity. It

is Can-Am’s burden to show that Appellees waived their immunity,

or that Appellees’ conduct that forms the basis of Can-Am’s

complaint is commercial activity as defined by the FSIA. A

failure to satisfy the statute’s exceptions deprives a federal

court of subject matter jurisdiction. Stena, 923 F.2d at 386.

A. Whether T&T or the THA waived their immunity

Neither T&T nor the THA waived sovereign immunity with

respect to the conduct upon which Can-Am’s complaint stands,

because the document containing the waiver clause was

conditional, and the condition never occurred.

Subsection (a)(1) states:

(a) A foreign state shall not be immune from the

jurisdiction of the courts of the United States or of the

States in any case (1) in which the foreign state has waived

its immunity either explicitly or by implication,

notwithstanding any withdrawal of the waiver which the

foreign state may purport to effect except in accordance

with the terms of the waiver[.]

28 U.S.C. § 1605(a)(1).

To be effective, a waiver of sovereign immunity must be

either implicit or explicit. FSIA’s “waiver exception is

narrowly construed.” Pere v. Nuovo Pignone, Inc., 150 F.3d 477,

482 (5th Cir. 1998).6

6

Here, only an explicit waiver is at issue.

No. 05-20007

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The district court held that the the waiver of immunity

rights in the Bower Cotton pay order was “ineffective” and

“condition[al].” The district court stated:

[T]he pay order was never executed because no [THA] funds

ever transferred to the disbursement account. In fact, the

transaction ended with the [THA]’s decision to withhold its

funds. Without the transfer of funds, there is no

transaction and therefore, no pay order. Hence, there is no

waiver.

Can-Am disagrees with the district court’s reasoning. It claims

the waiver of immunity rights in the Bower Cotton pay order is a

general express waiver. The gravamen of Can-Am’s argument is

that the pay order is by its own terms “valid upon the

commencement of the start of the transaction herein,” such that

the transaction began with Charles’s submission of the pay order,

the letter of intent, and the letter of exclusivity. Can-Am

therefore claims that the THA’s “decision” to withhold funds was

a breach of its “obligation” to fund.

In addition, Can-Am argues that the district court’s

assertion that “[n]o evidence has been proffered that the Chief

Secretary ever approved the contract to fund the Bower Cotton

proposal” is false. It refers to the letter of intent, saying

that Charles “expressly approved the transaction” by signing it.

Can-Am then makes the leap that Charles approved the “contract”

through the letter of exclusivity by “granting the trade program

manager/administrator/facilitator full exclusive right as our

No. 05-20007

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sole agent for 20 banking days . . . to enter the funds . . . in

the best available bank-secured investment program.” Thus, Can-

Am maintains that a contract was formed through the THA’s

submission of these documents.

Finally, Can-Am takes issue with the notion that the waiver

is conditional on the funding of the Bower Cotton proposal. Can-

Am states, “[t]here is no language in the waiver provision or any

other evidence before the district court that limits or

conditions in anyway the explicit waiver.” Can-Am focuses on the

word “all” in the waiver clause found in the pay order:

This document binds all parties, their employees,

associates, transfers, assigns and/or designees. Any

facsimile of this document shall be deemed as legal and

binding on all parties hereto and shall be so construed to

any court of law regardless of State, nation, or Province

waiving all rights of immunity, regardless of whether

diplomatic, sovereign or otherwise, which shall give this

document full force and legal effect to true purpose and

intent of this agreement as so construed by its signing

parties.

(Emphasis added.) Thus, Can-Am argues that the waiver clause in

the pay order is explicit and unconditional.

Appellees maintain that Can-Am’s argument “is based on a

strained interpretation of language in a document ostensibly

prepared for a transaction that never occurred . . . .” They

emphasize that without a transfer of funds in connection with the

Bower Cotton proposal, there was no transaction. Without a

transaction, there is no applicable waiver.

No. 05-20007

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We agree with the district court that “the alleged waiver

was a limited waiver.” The waiver is contained in a document

that references a specific investment transaction for which there

is no contract. The waiver is limited in its scope, applying

solely to the Bower Cotton proposal. The pay order specifically

references the code designating the Bower Cotton proposal. The

word “all” in the waiver clause is also conditioned on the

funding of the Bower Cotton proposal. The payment authorized by

the order is conditioned on the investment transaction, which in

turn relied on the THA’s approval of and signature on a contract

between it and the bank. There was no investment transaction in

relation to the Bower Cotton proposal. Sorsby’s contingency fee

depended on profits generated by an investment that was never

made; the THA never signed a contract with a bank in relation to

such an investment. The waiver clause exists within a document

that specifically relates to an investment transaction which

never transpired. Thus, the waiver of “all rights of immunity”

also relates to the investment transaction which never

transpired. We find that Appellees did not waive their sovereign

immunity.

B. Whether T&T’s/the THA’s conduct fits the commercial activity

exception

Foreign sovereigns are not immune from judicial process in

actions based upon commercial activity that has a jurisdictional

No. 05-20007

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nexus with the United States, as defined by the FSIA. Stena, 923

F.2d at 386 (citing 28 U.S.C. § 1605(a)(2)). Because Can-Am’s

action is not based upon a commercial activity that has a

jurisdictional nexus with the United States, Appellees remain

immune.

In order to decide whether the commercial activity exception

applies, first, the relevant activity must be identified. “This

requires focusing on the acts of the named defendant, not on

other acts that may have had a causal connection with the suit.

In particular, we must isolate those specific acts of the named

defendant that form the basis of the plaintiff’s suit.” De

Sanchez v. Banco Central de Nicaragua, 770 F.2d 1385, 1391 (5th

Cir. 1985)(citation omitted).

Second, the court must determine if the relevant activity is

sovereign or commercial. The statutory definition of “commercial

activity” is “either a regular course of commercial conduct or a

particular commercial transaction or act.” 28 U.S.C. § 1603(d).7

The second sentence of § 1603(d) directs the courts to look at

7

Courts have accepted that the circular definition for

“commercial activity” in § 1603(d) was a mandate by Congress

authorizing the courts to define the concept on an case-by-case

basis. See H.Rep. No. 9401487, 94th Cong., 2d Sess. at 16

(stating that federal courts are given “a great deal of latitude

in determining what is a ‘commercial activity’” under the FSIA).

The statute does give us some guidance, however, in approaching

the task of distinguishing between sovereign and commercial

activities, as discussed below.

No. 05-20007

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the “nature” of an activity rather than its “purpose” in

determining whether it is commercial. Thus, the Supreme Court

has defined an activity as having a commercial nature for

purposes of FSIA immunity if it is of a type that a private

person would customarily engage in for profit. Weltover, 504

U.S. at 614; Callejo v. Bancome, S.A., 764 F.2d 1101, 1108 n.6

(5th Cir. 1985). A foreign government’s acts may be deemed

commercial when that foreign government is not acting “as a

regulator of the market, but in the manner of a private player

within it.”8 Weltover, 504 U.S. at 614.

Finally, if the relevant activity is commercial in nature,

the court must determine whether it had the requisite

jurisdictional nexus with the United States. A foreign state

will not be immune in a case

[a] in which the action is based upon a commercial activity

carried on in the United States by the foreign state; or [b]

upon an act performed in the United States in connection

with a commercial activity of the foreign state elsewhere;

or [c] upon an act outside the territory of the United

States in connection with a commercial activity of the

8

Courts have typically held that contracts for the

procurement of goods and services are commercial rather than

governmental in nature. See United States v. Moats, 961 F.2d

1198, 1205 (5th Cir. 1992)(contract for settlement agreement is

commercial); Rush-Presbyterian-St. Luke’s Med. Ctr. v. Hellenic

Republic, 877 F.2d 574, 581 (7th Cir. 1989)(contract for purchase

of medical services is commercial); Practical Concepts, Inc. v.

Republic of Bolivia, 811 F.2d 1543, 1550 (D.C. Cir. 1987)

(contract for developing rural areas is commercial; Tex. Trading

& Milling Corp. v. Federal Republic of Nigeria, 647 F.2d 300, 310

(2d Cir. 1981)(contract for purchase of cement is commercial).

No. 05-20007

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foreign state elsewhere and that act causes a direct effect

in the United States[.]

28 U.S.C. § 1605(a)(2). Any one of these connections with the

United States, if met, provides a sufficient basis for

jurisdiction. Stena, 923 F.2d at 386.

Stena further states, “[n]ot only must there be a

jurisdictional nexus between the United States and the commercial

acts of the foreign sovereign, there must be a connection between

the plaintiff’s cause of action and the commercial acts of the

foreign sovereign.” Id. See also NYSA-ILA Pension Trust Fund v.

Garuda Indonesia, 7 F.3d 35, 38 (2d Cir. 1993)(“In construing the

commercial activity exception, courts have required that a

significant nexus exist between the commercial activity in this

country upon which the exception is based and a plaintiff’s cause

of action.”)(citations omitted); Moats, 961 F.2d at 1205-06;

Vencendora Oceanica Navigacion, S.A. v. Compagnie Nationale

Algerienne de Navigation, 730 F.2d 195, 200 (5th Cir. 1984). The

phrase “‘[based upon’] is read most naturally to mean those

elements of a claim that, if proven, would entitle a plaintiff to

relief under his theory of the case.” Saudi Arabia v. Nelson,

507 U.S. 349, 357 (1993). The court must therefore focus only on

the conduct on which Can-Am’s action is based. Id. at 356.

Can-Am’s action is based on the appointment of Sorsby as

No. 05-20007

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financial consultant for Appellees and the MOU defining Sorsby’s

and the THA’s responsibilities. It argues that the MOU is an

enforceable contract for Can-Am’s services. Thus, Can-Am argues

that T&T and the THA are subject to jurisdiction under each of

the three parts to the commercial activity exception.

1. Commercial activity in the United States

Section 1603(e) of the FSIA states: “A ‘commercial activity

carried on in the United States by a foreign state’ means

commercial activity carried on by such state and having

substantial contact with the United States.”

The district court held that Can-Am failed to present any

evidence indicating that T&T or the THA carried on any activity

that had substantial contact with the United States. It went on

to state that none of the THA’s relevant activities, including

its appointment of Sorsby as its financial consultant and its

consideration of various financing and investment proposals,

occurred in the United States. However, Can-Am disputes this

conclusion, pointing to Sorsby’s acts “as CEO of Can-Am,

conducting financial consulting services for and on behalf of

[Appellees], as their agent and financial consultant, in the

United States.” Can-Am invokes agency theory to meet the

requirement that the requisite acts be those of the named

No. 05-20007

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defendant.

Appellees respond that Can-Am has not alleged anywhere that

Appellees engaged in any commercial activity in the United

States. Rather, they point out that all meetings between Can-Am

and T&T or the THA occurred in either Trinidad & Tobago or

London, and that all documents were signed in Tobago. Appellees

also state that the THA “declined to participate in [an] alleged

investment opportunity that would have required representatives

to travel to New York and deposit funds in an unnamed bank there

. . . .” Appellees do not respond to Can-Am’s allegation that

Sorsby was T&T’s and/or the THA’s agent, likely because Can-Am

did not substantiate its theory.

In order for Can-Am’s claim under this prong to survive, the

commercial acts must be of the named Defendant. De Sanchez, 770

F.2d at 1391 (citation omitted). Can-Am argues that, as

financial consultant, it acted as Appellees’ agent and that its

actions can be imputed to T&T and the THA.

Can-Am cites to Weltover to support its contention. But, as

Appellees identified in their brief, Weltover does not conclude

that the acts of the plaintiff within the United States may be

attributed to the defendant to defeat sovereign immunity.

Rather, it is the acts of the foreign government that determine

No. 05-20007

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if the foreign sovereign’s acts are “commercial” within the

meaning of the FSIA. Weltover, 504 U.S. at 614-16.

The burden of proving an agency relationship, which would

enable Can-Am to hold T&T and the THA liable, falls upon Can-Am.

See Walter Fuller Aircraft Sales, Inc. v. Republic of the

Philippines, 965 F.2d 1375, 1381 (5th Cir. 1992). “Our precedent

. . . indicates . . . we look to the ownership and management

structure of the instrumentality, paying particularly close

attention to whether the government is involved in day-to-day

operations, as well as the extent to which the agent holds itself

out to be acting on behalf of the government.” Id. at 1382

(citing Hester Int’l Corp. v. Fed. Rep. of Nigeria, 879 F.2d 170,

178, 181 (5th Cir. 1989)). The record does not support the

allegation that Appellees, as the supposed principal to Sorsby’s

agent, had both the right to assign Sorsby’s task and control the

means and details of the process by which she would accomplish

it. Can-Am did not meet its burden of proof in proving the

existence of a principal-agent relationship between it and

Appellees.9

9

Can-Am also points to Texas law, citing Holloway v.

Skinner, 898 S.W.2d 793 (Tex. 1995), for the proposition that the

acts of an agent on behalf of the principal are deemed to be the

principal’s acts. Even if we chose to rely on Texas law, Can-

Am’s argument would fail since it does not cite any facts to show

it was controlled by T&T and the THA. See Walker Ins. Servs. v.

No. 05-20007

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Since Can-Am does not identify acts carried on in the United

States having substantial contact with the United States by the

named Appellees, we lack jurisdiction over Appellees under this

prong of the commercial activity exception.

2. Acts performed in the United States in connection with

commercial activity elsewhere

Acts of a foreign sovereign in the United States in

connection with foreign commercial activity may give rise to

subject matter jurisdiction. Stena, 923 F.2d at 388. In Stena,

the court held that the connection between the commercial

activity and the plaintiff’s complaint had to be material. Id.

“Any material connection between ‘commercial activity elsewhere’

and the plaintiff’s complaints . . . is irrelevant to the

determination of subject matter jurisdiction.” Id. at 388. The

material connection must be between the act performed in the

United States and the plaintiff’s cause of action. Pere, 150

F.3d at 482.

The district court disposed of Can-Am’s argument with regard

to this prong in one sentence, which stated that “this prong does

not apply because the facts do not identify a commercial act

Bottle Rock Power Corp., 108 S.W.3d 538, 549 (App. Ct. Tex.

2003)(stating that the defining feature of the agency

relationship is the principal’s right to control the actions of

the agent).

No. 05-20007

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performed in the United States.”

Can-Am argues we have jurisdiction because Sorsby traveled

throughout the United States to meet and negotiate with potential

investors, and that Sorsby was Appellees’ agent, whose acts are

imputed to Appellees. Appellees respond that since the proposed

transaction with a third party never occurred, Can-Am cannot

satisfy this prong of the commercial activity exception requiring

that an act be performed in the United States.10

Can-Am asserts that its financial consulting services are

the “commercial act[s] performed in the United States.” In the

instant case, the material connection must exist between Can-Am’s

financial consulting services and Appellees’ alleged breach of

contract, fraud, or negligent misrepresentation. First, there is

a question as to whether Sorsby’s acts in the United States

qualify as “commercial activities.” There are no cases to

support the notion that investigating potential investment

options constitute commercial activity under the FSIA. Second,

Can-Am’s allegation that it acted as an agent of Appellees is not

substantiated. Third, it is illogical that plaintiff’s own acts

create the required material connection underlying its cause of

10

Appellee’s brief also correctly notes, “In fact, Can-Am

fails to allege in its Amended Complaint that either T&T [or the]

THA has conducted any commercial activity anywhere.”

No. 05-20007

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action, because, after all, Can-Am maintains that it met its end

of the bargain. Can-Am does not assert that Appellees performed

any other commercial activities within the United States that

give rise to its cause of action.

Another possible basis for Can-Am’s claim is its contingent

fee based on the breach of an alleged contract entered into in

Tobago. However, Can-Am’s services were to be rendered in

Tobago, and payment of Can-Am’s contingent fee was to be paid,

not from the United States, but from profits (if any) of the

alleged investment program held in a Swiss bank. Therefore, we

have no jurisdiction under this prong of the commercial activity

exception.

3. Commercial activity outside the United States that has a

direct effect in the United States

Finally, Can-Am argues that “the [Appellees’] breach caused

a direct effect on the United States” because Sorsby, an American

citizen and CEO of an American company, expected to be

compensated for her work in the United States. The only direct

effect claimed by Can-Am is the financial loss to Sorsby from

Appellees’ alleged breach.

The Supreme Court addressed the “direct effect” exception in

Weltover, 504 U.S. 607 (1992). In Weltover, the plaintiffs held

certain Argentine bonds. These bonds required Argentina to make

No. 05-20007

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payment of principal and interest to bondholders in U.S. dollars.

Payment could be made through transfer on the London, Frankfurt,

Zurich, or New York market, at the election of the creditor.

When the bonds began to mature, Argentina unilaterally extended

the time for payment and offered bondholders substitute

instruments. The plaintiffs, two Panamanian corporations and a

Swiss bank, refused to accept the rescheduling and insisted on

full payment, specifying New York as the place where payment

should be made. The plaintiffs then brought suit in the U.S.

District Court alleging that Argentina’s failure to pay the bonds

according to the original terms was a breach of contract.

Jurisdiction was alleged under section 1605(a)(2) of the FSIA.

The plaintiffs argued that Argentina’s refusal to make payment

caused a “direct effect” in the U.S. because payment that was

supposed to have been made in New York was not made. The Supreme

Court agreed. The Supreme Court stated that “an effect is

‘direct’ if it follows ‘as an immediate consequence of

defendant’s . . . activity.’” Weltover, 504 U.S. at 618

(citation omitted). After noting that the plaintiffs had

designated their accounts in New York as the place of payment,

the Court concluded, “Because New York was thus the place of

performance for Argentina’s ultimate contractual obligations, the

rescheduling of those obligations necessarily had a ‘direct

No. 05-20007

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effect’ in the United States: Money that was supposed to have

been delivered to a New York bank for deposit was not

forthcoming.” Id. at 619.11

We agree with the district court that Can-Am’s losses in

pursuit of an acceptable investment opportunity for the Appellees

are not enough to meet this prong of the commercial activity

exception. Even if Can-Am did provide evidence of its financial

losses, this prong still would not be met. It is undisputed that

neither T&T nor the THA ever transferred money in connection with

any alleged investment opportunity identified by Can-Am; hence,

the type of activity found to be commercial in Weltover and other

cases is absent here. Can-Am’s alleged financial loss in the

United States in and of itself is not enough to meet this prong

of the commercial activity exception.

IV

Neither the waiver exception nor the commercial activity

exception to the FSIA apply to Appellees. While the THA did

include a waiver clause in the pay order, the pay order was

11

Other examples of direct effect include when a defendant

agrees to pay funds to an account in the United States and then

fails to do so, Voest-Alpine Trading USA Corp. v. Bank of China,

142 F.3d 887, 896 (5th Cir. 1998), and where a defendant’s

default on a letter of credit for which plaintiff had designated

payment to its bank account in New York, Hanil Bank v. PT. Bank

of Negara Indonesia, 148 F.3d 127, 132 (2d Cir. 1998).

No. 05-20007

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conditioned on a transaction that never occurred, and the waiver

itself never went into effect. Further, Appellees did not

perform any commercial activities in the United States, nor did

they perform any commercial activities in the United States with

a material connection to the conduct that forms the basis of Can-

Am’s complaint. Finally, Appellees did not perform any

commercial activities outside the United States that had a direct

effect in the United States. Because no exception under the FSIA

applies, Appellees are entitled to sovereign immunity. We

AFFIRM.