Wye Oak Technology, Inc. v. Republic of Iraq

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued September 23, 2021 Decided February 4, 2022

No. 19-7162

WYE OAK TECHNOLOGY, INC.,

APPELLEE

v.

REPUBLIC OF IRAQ AND MINISTRY OF DEFENSE OF THE

REPUBLIC OF IRAQ,

APPELLANTS

Consolidated with 19-7169

Appeals from the United States District Court

for the District of Columbia

(No. 1:10-cv-01182)

Boaz S. Morag argued the cause for appellants/cross

appellees. With him on the briefs were Andrew A. Bernstein

and Timothy B. Mills.

Neal Kumar Katyal argued the cause for appellee/cross-

appellant. With him on the briefs were C. Allen Foster, Eric

C. Rowe, John H. Quinn, Jr., Patrick M. Klemz, Mitchell P.

Reich, Reedy C. Swanson, and Sundeep Iyer.

2

Before: HENDERSON and JACKSON, Circuit Judges, and

SENTELLE, Senior Circuit Judge.

Opinion for the Court filed by Circuit Judge JACKSON.

JACKSON, Circuit Judge: This appeal arises from a fully

litigated contract dispute between an American defense

contractor and a foreign government that resulted in a

multimillion-dollar plaintiff’s judgment. Wye Oak

Technology, Inc. first filed its complaint against the Republic

of Iraq in the U.S. District Court for the Eastern District of

Virginia (“EDVA”). Finding improper venue, that court

transferred the case to the U.S. District Court for the District of

Columbia (“DDC”), but not before flatly denying Iraq’s motion

to dismiss the complaint on sovereign immunity grounds. And

when the DDC eventually entered judgment in Wye Oak’s

favor nearly a decade later, after an eight-day bench trial, it did

so partly in reliance on an intervening ruling from the Fourth

Circuit, which rejected Iraq’s contention that none of the

exceptions to sovereign immunity in the Foreign Sovereign

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

Wye Oak’s breach of contract claims.

To be specific, the Fourth Circuit held that because Wye

Oak alleged that it had engaged in various acts inside the

United States pursuant to the parties’ agreement, the lawsuit

could proceed under the second clause of the FSIA’s

commercial activities exception. See 28 U.S.C. § 1605(a)(2)

(abrogating foreign sovereign immunity with respect to claims

that are “based upon . . . an act performed in the United States

in connection with commercial activity of the foreign state

elsewhere”). Thus, we are now called upon to decide whether

we agree with our sister circuit’s FSIA interpretation (as

applied in the context of the post-trial judgment in Wye Oak’s

3

favor that the DDC has entered against Iraq). We must also

determine, incidentally, whether the law of the case doctrine

somehow constrains our own assessment of Iraq’s alleged

immunity at this stage of the case.

In the opinion that follows, we first reject Wye Oak’s

argument that Iraq’s participation in the DDC bench trial

implicitly waived its sovereign immunity for the purpose of the

FSIA’s waiver exception. We then explain that the law of the

case doctrine does not require us to adhere to the Fourth

Circuit’s conclusions about the applicability of the FSIA’s

commercial activities exception, and, indeed, unlike the Fourth

Circuit, we conclude that the second clause of 28 U.S.C.

§ 1605(a)(2) does not apply to the established facts of this case.

But we do discern a plausible basis for sustaining the district

court’s jurisdictional ruling in the language of the commercial

activity exception’s third clause. See 28 U.S.C. § 1605(a)(2)

(abrogating immunity if the action is “based upon . . . an act

outside the territory of the United States in connection with a

commercial activity of the foreign state elsewhere and that act

causes a direct effect in the United States”). And we find that

the district court is best positioned to evaluate (or develop) the

record as necessary to determine, in the first instance, whether

the facts support application of that provision of the FSIA.

Therefore, the district court’s post-trial judgment is

vacated to the extent that it is premised on a finding of subject-

matter jurisdiction that rests on an erroneous interpretation of

the second clause of the commercial activities exception, and

this matter is remanded to the district court for a determination

of whether Iraq’s breach of contract caused “direct effects” in

the United States for the purpose of the third clause of 28

U.S.C. § 1605(a)(2).

4

I

The FSIA, 28 U.S.C. § 1602, et seq., affords the “sole

basis for obtaining jurisdiction over a foreign state” in United

States courts. Argentine Republic v. Amerada Hess Shipping

Corp., 488 U.S. 428, 434 (1989); see also Samantar v. Yousuf,

560 U.S. 305, 314 (2010). That statute “bars federal and state

courts from exercising jurisdiction when a foreign state is

entitled to immunity, and . . . confers jurisdiction on district

courts to hear suits . . . when a foreign state is not entitled to

immunity.” Diag Hum., S.E., v. Czech Republic-Ministry of

Health, 824 F.3d 131, 134 (D.C. Cir. 2016).

The FSIA establishes the general rule for granting foreign

sovereign immunity, 28 U.S.C. § 1604, and it also makes that

grant of immunity subject to nine exceptions, see id. §§ 1605–

1607; Mohammadi v. Islamic Republic of Iran, 782 F.3d 9, 13–

14 (D.C. Cir. 2015). The FSIA exceptions are exhaustive; if

none applies to the circumstances presented in a case, the

foreign state has immunity and the court lacks subject-matter

jurisdiction. Odhiambo v. Republic of Kenya, 764 F.3d 31, 34

(D.C. Cir. 2014).

The two FSIA exceptions that are relevant to this appeal—

waiver and commercial activity—appear at 28 U.S.C.

§ 1605(a)(1) and (2). In its entirety, that section of the statute

provides:

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

jurisdiction of 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

5

except in accordance with the terms of the

waiver;

(2) in which the action is based upon a

commercial activity carried on in the United

States by the foreign state; or upon an act

performed in the United States in connection

with a commercial activity of the foreign state

elsewhere; or upon an act outside the territory

of the United States in connection with a

commercial activity of the foreign state

elsewhere and that act causes a direct effect in

the United States.

Section 1605(a)(1) recognizes two species of waiver.

Where “explicit[]” waiver occurs, the foreign state expressly

consents to forgo its sovereign immunity with respect to a

certain class of disputes or a particular subject matter. See

World Wide Mins., Ltd. v. Republic of Kazakhstan, 296 F.3d

1154, 1162 (D.C. Cir. 2002). Generally speaking, because

explicit waivers of sovereign immunity are narrowly construed

“in favor of the sovereign” and are not enlarged “beyond what

the language requires[,]” id. (quoting Library of Cong. v. Shaw,

478 U.S. 310, 318 (1986)), a foreign state “will not be found to

have [explicitly] waived its immunity unless it has clearly and

unambiguously done so[,]” id.

The waiver provision that is most relevant here is the

FSIA’s reference to “implicit[]” waivers of sovereign

immunity, which the statute “does not define.” Creighton Ltd.

v. Gov’t of the State of Qatar, 181 F.3d 118, 122 (D.C. Cir.

1999). However, this circuit has “followed the ‘virtually

unanimous’ precedents construing the implied waiver

provision narrowly.” Id. (internal citations omitted). Thus, we

have long held that “implicit in § 1605(a)(1) is the requirement

6

that the foreign state have intended to waive its sovereign

immunity.” Id. (emphasis added). The legislative history of

the FSIA provides only three examples of implicit waivers by

a foreign state, H.R. Rep. No. 94-1487, at 18 (1976), and courts

have been reluctant to recognize an implicit waiver of

sovereign immunity in other circumstances. See Foremost-

McKesson, Inc. v. Islamic Republic of Iran, 905 F.2d 438, 444

(D.C. Cir. 1990) (explaining that an implied waiver occurs if

the foreign state agrees to arbitration, agrees that the law of a

particular country governs a contract, or has filed a responsive

pleading without raising the defense of sovereign immunity).

Under Section 1605(a)(2), a foreign state’s sovereign

immunity is subject to abrogation based on the state’s

commercial activities. This statutory exception codifies the

“restrictive theory” of sovereign immunity that the United

States Department of State first endorsed in 1952, Republic of

Argentina v. Weltover, Inc., 504 U.S. 607, 612 (1992), pursuant

to which foreign states were not afforded immunity in cases

“arising out of purely commercial transactions[,]” id. at 613

(quoting Alfred Dunhill of London, Inc. v. Republic of

Cuba, 425 U.S. 682, 703 (1976)). The Supreme Court had long

held that when “a foreign government acts, not as regulator of

a market, but in the manner of a private player within it,” id. at

614, its private acts might be sufficient to justify the invocation

of the jurisdiction of American courts, see id. (distinguishing

acts of the state as a market participant from undertakings

aimed at “fulfilling its uniquely sovereign objectives”); see

also Permanent Mission of India to the United Nations v. City

of New York, 551 U.S. 193, 199 (2007). Thus, the FSIA’s

commercial activities exception carves out, and exempts from

sovereign immunity, a sphere of private commercial action that

foreign states sometimes undertake.

7

Notably, as Congress has worded it, the commercial

activities exception is also designed to ensure that there is a

sufficient connection between the foreign state’s commercial

activity and the United States to warrant the exercise of

jurisdiction. See Jam v. Int’l Fin. Corp., 139 S. Ct. 759, 766

(2019). Thus, the first clause of section 1605(a)(2) requires a

plaintiff’s claim to be “based upon” an aspect of the foreign

state’s commercial activity that has a “substantial contact with

the United States.” Odhiambo, 764 F.3d at 36; see also Zedan

v. Kingdom of Saudi Arabia, 849 F.2d 1511, 1513 (D.C. Cir.

1988) (clarifying that the degree of contact required must be

more than isolated or transitory, and a plaintiff’s mere

citizenship status or place of residence will not suffice). The

second clause of the commercial activities exception permits a

suit against a foreign state when the plaintiff’s claim is based

“upon an act performed in the United States[,]” and that act is

taken “in connection with a commercial activity of the foreign

state elsewhere.” 28 U.S.C. § 1605(a)(2). And the third clause

of the exception permits a suit against a foreign state if the

claim is based upon an act outside the United States that is

related to the foreign state’s commercial activity if that act

“causes a direct effect in the United States.” Id.

II

A

After the fall of Saddam Hussein at the conclusion of the

United States-led military action in Iraq, the newly constituted

transitional government of Iraq sought to rebuild that country’s

armed forces. To this end and at the recommendation of the

United States government, the Iraqi Ministry of Defense

(“MoD”) engaged the services of Wye Oak, a private defense

contractor headquartered in Pennsylvania that specializes in

foreign military equipment. As part of this engagement, Wye

8

Oak committed to inventorying and assessing Iraq’s existing

military equipment; refurbishing any such equipment to the

extent possible; and arranging for scrap sales of any equipment

that was not salvageable.

MoD and Wye Oak entered into a written Broker Services

Agreement (“BSA”) in August of 2004. Under the express

terms of the BSA, Wye Oak was to serve as the sole and

exclusive broker for these equipment recovery and

refurbishment services for a one-year period. As

compensation for this work, Wye Oak was to receive a 10%

commission for scrap sales and 10% of the profit for any

refurbishing services.

To receive its compensation, Wye Oak was required to

provide the MoD with pro forma invoices detailing the work

that had been done. The BSA specifically provided that “[a]ll

payments to be made to [Wye Oak] under this Agreement shall

be made in United States Dollars in the form and manner as

directed by [Wye Oak].” Joint App’x 775.

Wye Oak began performing under the BSA in August of

2004. Wye Oak’s CEO, Dale Stoffel, and other Wye Oak staff

who were present in Iraq immediately began identifying,

assessing, and refurbishing military equipment on the ground

in that country. Meanwhile, David Stoffel—Dale’s brother and

the head of Wye Oak’s information technology department,

which was located in the United States—began to oversee all

I.T. services for Wye Oak. These services included purchasing

computer equipment and software and reviewing all email

communications that came through the server that housed Wye

Oak’s data.

In October of 2004, Wye Oak submitted three pro forma

invoices to the MoD, totaling $24,714,697.15. Each invoice

specifically instructed the MoD to remit its payment to Wye

9

Oak “at the Baghdad Iraq office of [the MoD].” Joint App’x

781–83. There is no dispute that the MoD never paid these

invoices.

Nor is it disputed that Wye Oak made many concerted

efforts to collect the fee. For example, in the two months

between Wye Oak’s October submission of the invoices and

December 8, 2004—when Dale Stoffel was tragically slain in

Baghdad on his way to organize the release of funding—Wye

Oak representatives met with American and Iraqi officials at

least twice to discuss the project’s progress and to address the

still-outstanding invoices. As relevant here, these in-person

meetings took place at MoD’s headquarters in Baghdad. Wye

Oak reported on the status of the project and also expressed its

concerns about Iraq’s failure to pay the invoices, including the

specific worry that the lack of funding could interfere with Wye

Oak’s ability to execute subcontracts, such as an anticipated

construction services agreement with Wye Oak’s sister

company, CLI Corporation, an American construction firm

headquartered in Pennsylvania. During the meetings, Wye Oak

managed to secure additional payment promises from Iraq.

Wye Oak also undertook various diplomatic efforts to

secure the overdue funding. Its representatives reached out to

American government officials (such as then-Secretary of

Defense Donald Rumsfeld) to discuss the non-payment

dilemma. And Wye Oak contacted General Investment Group,

s.a.l. (“GIG”), a Lebanese company run by financier Raymond

Zayna, which had entered into separate funding agreements

with Wye Oak and Iraq related to the military equipment-

recovery project. GIG had agreed to provide some financing

for the project, and in its post-invoice conversations with GIG,

Wye Oak stressed the necessity of payment of the invoices, and

implored GIG to authorize that such payments be made to Wye

Oak’s bank account in Pennsylvania.

10

Despite these overtures, Wye Oak’s invoices remained

overdue when Dale Stoffel died on December 8, 2004. In the

wake of that tragedy, the company withdrew all of its U.S.

personnel from Iraq. It subsequently relied on local contractors

with respect to its performance under the BSA, which included

coordinating the production of operational armored vehicles

for Iraq’s January 2005 parliamentary election. Wye Oak

ceased all operations in Iraq shortly after the January 2005

election, due to the lack of funding.

B

1

Wye Oak filed a complaint against Iraq in the EDVA on

July 20, 2009, claiming that Iraq breached the BSA by refusing

to pay the generated invoices. Wye Oak Tech., Inc. v. Republic

of Iraq, No. 09CV793, 2010 WL 2613323, at *1 (E.D. Va. June

29, 2010). Iraq responded with a motion to dismiss Wye Oak’s

complaint, contending primarily that, as a sovereign nation, it

is entirely immune from suit under the FSIA. See Joint App’x

72 (“As a matter of law . . . the [c]ourt lacks subject matter

jurisdiction because no exception to Defendant’s sovereign

immunity applies under the Foreign Sovereign Immunities

Act.”).

On June 29, 2010, the EDVA issued a lengthy opinion that,

among other things, examined each of the three clauses of the

FSIA’s commercial activities exception to assess Iraq’s

sovereign immunity contention. The court evaluated “the

factual allegations of the complaint and referenced writings”

with respect to each clause, Wye Oak Tech., 2010 WL 2613323

at *7, and concluded, for each, that “Wye Oak has sufficiently

established at this stage that this exception to the FSIA’s

sovereign immunity applies” such that “the [c]ourt may

exercise subject matter jurisdiction over Iraq in this case[,]” id.

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at *8. The EDVA further held that venue was not proper

because a “substantial part of the events or omissions giving

rise to Wye Oak’s claim” did not occur in the Eastern District

of Virginia. Id. at *11 (finding as much based on Wye Oak’s

allegations). Therefore, in addition to ruling on Iraq’s motion

to dismiss, that court also transferred the case “forthwith” to

the federal district court in the District of Columbia. Id.

Iraq could not appeal the part of the EDVA’s order that

affected the transfer. Ukiah Adventist Hosp. v. F.T.C., 981 F.2d

543, 546 (D.C. Cir. 1992). But it did appeal that court’s

concomitant rejection of its sovereign immunity argument. See

Wye Oak Tech., Inc. v. Republic of Iraq, 666 F.3d 205, 206 (4th

Cir. 2011).

On appeal, the Fourth Circuit began its consideration of

Iraq’s sovereign immunity argument with a discussion of the

threshold question of whether it even had jurisdiction to

entertain an appeal from the transferred case. Id. at 210. The

panel majority acknowledged that it was not appropriate for the

EDVA to have ruled on the merits of Iraq’s motion to dismiss

once it had determined that venue was improper. Id. at 209.

However, over a vigorous dissent, the majority held that

appellate jurisdiction could be invoked nonetheless, because

the EDVA’s sovereign immunity holding was an “immediately

appealable” order, and that particular decision was thus

“effectively severed from the balance of the case,” in

accordance with circuit authority. Id. at 209–10 (quoting

Technosteel, LLC v. Beers Constr. Co., 271 F.3d 151, 159–60

(4th Cir. 2001)).

With respect to the merits of the sovereign immunity

question, the majority affirmed the EDVA’s ruling based on

the complaint’s allegations of fact. The panel concluded that

Iraq was engaged in commercial activity under the contract

12

with Wye Oak. Id. at 216–17. And it homed in on various acts

that Wye Oak had allegedly undertaken inside the United

States in connection with the BSA, including its alleged

creation of computer programming software, contacts with

agents of foreign nations, and provision of accounting services.

Id. at 216. According to the panel majority, if true, these

domestic acts meant that “Wye Oak made a sufficient showing

that its breach of contract claim [was] based upon an act

performed in the United States in connection with a

commercial activity of the foreign state elsewhere” under the

second clause of the FSIA. Id. Therefore, the panel held that

section 1605(a)(2) of the FSIA authorized Wye Oak to litigate

its claims against Iraq in federal court. Id. at 217.

The dissenting judge rejected the conclusion that appellate

review was available in this circumstance based on the circuit’s

precedents. Id. at 218 (Shedd, J., dissenting). And he further

maintained that the panel should forgo ruling on the sovereign

immunity issue once the transfer had occurred, because, in his

view, if the D.C. Circuit disagreed with the Fourth Circuit’s

immunity holding it “would create a circuit split in the same

case[,]” which the law of the case doctrine could not fix. Id.

219 (describing the “tenuous situation” that would arise “if the

courts in the District of Columbia were to find that subject

matter jurisdiction does not exist”).

2

Meanwhile, after the transferred case arrived in the DDC,

on December 17, 2010, the court stayed its proceedings at the

parties’ request, in light of the pending Fourth Circuit appeal.

The DDC lifted its stay approximately 18 months later, once

the Fourth Circuit had ruled. The parties then engaged in pre-

trial proceedings until August of 2019, when an eight-day

bench trial commenced.

13

At the conclusion of the bench trial, the trial judge ordered

the parties to submit Proposed Findings of Fact and

Conclusions of Law; notably, the briefing that ensued was the

first time that either party asked the DDC to address the

sovereign immunity issue. Wye Oak filed the first brief, and it

suggested therein that the district court should hold expressly

that Iraq did not have sovereign immunity under the second or

third clauses of the commercial activity exception. Iraq’s

proposed findings and conclusions eschewed any analysis of

these purported statutory bases for abrogating its sovereign

immunity. Instead, Iraq’s brief merely maintained that

“[p]laintiff bears the burden of proving at trial the existence of

sufficient facts to establish that the Court possesse[d] [subject-

matter] jurisdiction” and the court “shall determine its

jurisdiction accordingly.” Joint App’x 505.

On August 27, 2019, the DDC issued findings of fact and

conclusions of law in support of its post-trial judgment. See

Wye Oak Tech., Inc. v. Republic of Iraq, No. 10-CV-01182,

2019 WL 4044046 (D.D.C. Aug. 27, 2019). The district court

specifically held that it had subject-matter jurisdiction “under

clause two of the [FSIA’s] commercial activity exception[,]”

id. at *22, acknowledging first that the Fourth Circuit had held

as much, and reasoning that the Fourth Circuit’s opinion was

“law of the case[,]” id. at *23. The district court further found

that “the Fourth Circuit’s immunity determination was

substantively correct[,]” id., because the evidence at trial

established that Wye Oak had, in fact, engaged in various acts

in the United States in connection with the BSA, such as

managing the company’s “electronic communications[,]” and

“writing a computer program that could ultimately be used to

inventory and track all the equipment Wye Oak was

refurbishing[,]” id. at *24. Based on these acts, the DDC

concluded that “Wye Oak’s [breach of contract] action” was

based upon “an act performed in the United States in

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connection with a commercial activity of the foreign state

elsewhere” within the meaning of clause two of the commercial

activities exception. Id.

The district court further concluded that the evidence

presented at trial established that Iraq had materially breached

the BSA. Id. at *27. As a remedy, the court awarded Wye Oak

approximately $88.9 million in compensation, including

approximately $20.5 million for damages actually incurred

plus $68.4 million for lost profits and prejudgment interest. Id.

at *54. The district court also specifically rejected Wye Oak’s

argument that it was entitled to “complementary damages”

under Iraqi law, because, in the court’s view, complementary

damages were similar to punitive damages, which the FSIA

forecloses. Id. at 52.

C

Iraq and Wye Oak now cross-appeal from the district

court’s post-trial judgment. As relevant here, Iraq argues that

the district court erred in concluding that the second clause of

the commercial activities exception applies, and that it was

therefore entitled to invoke immunity under the FSIA.

Appellants’ Br. 18, 24. Wye Oak insists that the district court

properly exercised jurisdiction over its claims under the FSIA

for several independent reasons. It argues that Iraq “waived

any immunity defense under 28 U.S.C. § 1605(a)(1) by failing

to preserve or press that defense at trial.” Appellee’s Br. 15. It

also contends that the Fourth Circuit’s jurisdictional ruling “is

law of the case,” id. at 20, and that, regardless, its claims satisfy

both the second and third clauses of the FSIA’s commercial

activities exception, id. at 25, 30.

This cross-appeal relates additionally to both parties’

objections to various aspects of the district court’s damages

calculation. See, e.g., Appellants’ Br. 16–17 (arguing that the

15

district court erred by awarding Wye Oak certain damages,

including costs Wye Oak did not incur, speculative lost profits,

and prejudgment interest on the lost profit award); Appellee’s

Br. 17 (challenging the district court’s conclusions concerning

prejudgment interest and complementary damages). Because

we conclude that the district court’s jurisdictional holding must

be reconsidered, we decline to address the parties’ damages

arguments.

III

The relative burdens of the parties with respect to

establishing the applicability (or not) of an exception to

sovereign immunity under the FSIA are well established, as is

the applicable standard of review. “[T]he FSIA begins with a

presumption of immunity, which the plaintiff bears the initial

burden to overcome by producing evidence that an exception

applies, . . . and once shown, the sovereign bears the ultimate

burden of persuasion to show the exception does not apply[.]”

Bell Helicopter Textron, Inc. v. Islamic Republic of Iran, 734

F.3d 1175, 1183 (D.C. Cir. 2013); see also Helmerich & Payne

Int’l Drilling Co. v. Bolivarian Republic of Venezuela, 743 F.

App’x 442, 449 (D.C. Cir. 2018). And when a district court

considers the sovereign immunity question and rules that it has

subject-matter jurisdiction over a legal claim brought in federal

court against a foreign sovereign, that denial of immunity is

reviewed de novo. See Odhiambo, 764 F.3d at 35.

IV

For the reasons explained below, we cannot accept the

contentions that Iraq has implicitly waived its sovereign

immunity or that the law of the case doctrine requires us to

accept the Fourth Circuit’s conclusions about the applicability

of the second clause of the FSIA’s commercial activities

exception. And because we find that the second clause is only

16

applicable when the act inside the United States upon which

the plaintiff’s claim is based is an act of the foreign sovereign,

we conclude that the district court’s invocation of subject-

matter jurisdiction over Wye Oak’s claims against Iraq must be

sustained, if at all, on the basis of another FSIA provision.

A

It is important to note, at the outset, that Wye Oak’s

argument that Iraq implicitly waived its immunity defense for

the purpose of FSIA section 1605(a)(1)—the first immunity-

related contention that Wye Oak makes on appeal—appears

nowhere in the post-trial briefs that Wye Oak filed in the

district court, and the trial judge did not address it. That

omission alone raises the specter of forfeiture. NetworkIP,

LLC v. F.C.C., 548 F.3d 116, 120 (D.C. Cir. 2008) (explaining

that arguments in favor of subject-matter jurisdiction can be

forfeited by inattention or deliberate choice).

But even if we consider the merits of Wye Oak’s implicit

waiver assertion, Wye Oak does not explain how that

argument—which is based upon Iraq’s decision to participate

in the DDC’s bench trial and its failure to engage on the

immunity issue in its trial briefs —squares with this court’s

holdings on the subject. Wye Oak cites Phoenix Consulting,

Inc v. Republic of Angola, 216 F.3d 36 (D.C. Cir. 2000), which

does admit the possibility that a foreign state’s “failure to assert

the immunity after consciously deciding to participate in the

litigation may constitute an implied waiver of immunity,” id.

at 39. But, here, Iraq did “assert its immunity under the FSIA

. . . in its responsive pleading.” Id. Moreover, and importantly,

we have never varied from the basic principle that “[a]n

implied waiver depends upon the foreign government’s having

at some time indicated its amenability to suit.” Princz v.

Federal Republic of Germany, 26 F.3d 1166, 1174 (D.C. Cir.

17

1994) (emphasis added); accord Creighton, Ltd., 181 F.3d at

122.

Far from demonstrating that it intended to waive sovereign

immunity, Iraq squarely raised an immunity defense in a

motion to dismiss that it timely filed at the first opportunity

after Wye Oak filed the complaint, and it then vigorously

litigated the EDVA’s denial of that motion, including pursuing

a separate appeal of that court’s no-immunity ruling. To be

sure, having lost that appeal, Iraq knowingly proceeded to

litigate the claims against it, and ultimately responded to Wye

Oak’s post-trial jurisdictional arguments with a tepid statement

about the court’s needing to make its own decision about

subject-matter and personal jurisdiction. But nothing in the

record establishes that Iraq ever disclaimed or withdrew its

long-preserved assertion of sovereign immunity. And, again,

we have consistently concluded that what matters when

discerning any type of waiver of sovereign immunity is the

foreign sovereign’s actual intent. See Foremost-McKesson,

905 F.2d at 444; see also Phoenix Consulting Inc., 216 F.3d at

39 (explaining that “if the sovereign makes a conscious

decision to take part in the litigation, then it must assert its

immunity under the FSIA either before or in its responsive

pleading” (internal quotation marks and citation omitted)).

Thus, we cannot conclude that Iraq’s trial participation and

post-trial argument, standing alone, “fit in th[e] selective

company” of implied waiver cases, Khochinsky v. Republic of

Poland, 1 F.4th 1, 9 (D.C. Cir. 2021), or otherwise indicates

Iraq’s intent to abandon the immunity that it has asserted from

the outset of this case, such that the FSIA’s section 1605(a)(1)

applies.

18

B

We also disagree with both of Wye Oak’s paired assertions

that (1) the law of the case doctrine requires us to accept the

Fourth Circuit’s holding that the second clause of the FSIA’s

commercial activities exception applies to abrogate Iraq’s

sovereign immunity, and, in any event, (2) the Fourth Circuit’s

analysis of the applicability of the second clause of section

1605(a)(2) to Wye Oak’s breach of contract claims is

substantively correct.

1

The “[l]aw-of-the-case doctrine refers to a family of rules

embodying the general concept that a court involved in later

phases of a lawsuit should not re-open questions decided . . . by

that court or a higher one in earlier phases.” Crocker v.

Piedmont Aviation, Inc. 49 F.3d 735, 739 (D.C. Cir. 1995)

(internal quotation marks omitted). Colloquially speaking, the

doctrine ensures that “the same issue presented a second time

in the same case in the same court should lead to the same

result.” Kimberlin v. Quinlan, 199 F.3d 496, 500 (D.C. Cir.

1999) (internal quotation marks and citation omitted); see also,

Musacchio v. United States, 577 U.S. 237, 244–45 (2016).

The law of the case doctrine is a principle that guides

courts in the exercise of their discretion, not a binding rule.

Thus, rigid adherence to rulings made at an earlier stage of a

case is not required under all circumstances, as other circuits

have recognized. See Murphy v. F.D.I.C., 208 F.3d 959, 966

(11th Cir. 2000); see also Pepper v. United States, 562 U.S.

476, 506 (2011) (explaining that the doctrine “directs a court’s

discretion, it does not limit the tribunal’s power”).

Furthermore, there are certain situations in which it is widely

accepted that courts should not apply the doctrine to preclude

reconsideration of a prior legal determination, even if the issue

19

was previously litigated in the context of that case. See, e.g.,

Crocker, 49 F.3d at 740 (explaining that “an intervening

change of law” will “support a departure from the previously

established law of the case”); see also Pepper, 562 U.S. at 506–

07 (authorizing setting aside the doctrine “if the court is

‘convinced that [the prior decision] is clearly erroneous and

would work a manifest injustice’” (internal citations omitted)).

That said, Wye Oak’s argument that the Fourth Circuit’s

ruling qualifies as law of the case falters at the threshold,

because under the circumstances presented here—and, in

particular, the distinct procedural postures in which the

immunity issue arises—this court and the Fourth Circuit panel

are actually addressing different questions.

The Fourth Circuit’s de novo review of the EDVA’s ruling

was a targeted assessment of the legal sufficiency of Wye

Oak’s complaint for the purpose of proceeding to discovery.

See Wye Oak Tech., Inc., 666 F.3d at 216 (concluding that Wye

Oak presented sufficient facts to support a reasonable inference

that its breach of contract claim is based upon an act performed

in the United States in connection with a commercial activity

of the foreign state elsewhere). At most, the panel held that the

allegations in Wye Oak’s complaint could plausibly support a

finding that the second clause of the FSIA’s commercial

activity exception applies such that sovereign immunity did not

preclude continued litigation of Wye Oak’s claims. Neither

party asked the district court or this court to revisit that

determination.

Instead, the full course of litigation commenced, and when

the trial court in the DDC undertook to address whether Iraq

was immune from judgment nearly a decade later, in order to

assess whether it had subject-matter jurisdiction to issue a post-

trial order against that foreign state, the DDC engaged in a

20

fundamentally distinct legal analysis and had a different

assortment of tools with which to make its determination.

Specifically, at that stage of the proceedings, the district court

had the benefit of a full adversarial hearing of the issues and a

developed factual record, and its task was to determine whether

any FSIA exception had been triggered such that Iraq’s

immunity from judgment was abrogated and a post-trial

judgment could be issued against it, in light of the established

facts of the case.

In other words, our consideration of the sovereign

immunity question, which stems from our review of the DDC’s

post-trial judgment, plainly transcends the Fourth Circuit’s

threshold conclusions about the plausible boundaries of Wye

Oak’s pleading for law of the case purposes. Cf. Sherley v.

Sebelius, 689 F.3d 776, 782 (D.C. Cir. 2012) (explaining that

the preliminary injunction exception to the law of the case

arose because “[a]n appellate court in a later phase of the

litigation with a fully developed record, full briefing and

argument, and fully developed consideration of the issue

[should] not bind itself to the time-pressured decision it made

earlier on a less adequate record”).

It is also quite significant that the core legal issue that we

are purportedly constrained to consider based on the Fourth

Circuit’s ruling itself pertains to the defense of immunity, and

therefore the court’s own subject-matter jurisdiction. Applying

the law of the case doctrine to constrain a court’s post-trial

assessment of its own jurisdiction based on an earlier

determination of that question is inherently incompatible with

the established ongoing duty of a court to determine its own

jurisdiction at every stage of the legal proceedings. Cf. Steel

Co. v. Citizens for a Better Env’t, 523 U.S. 83, 95 (1998)

(“[E]very federal appellate court has a special obligation to

satisfy itself not only of its own jurisdiction, but also that of the

21

lower courts in a cause under review[.]” (internal quotation

marks and citation omitted)); see also Henderson ex rel.

Henderson v. Shinseki, 562 U.S. 428, 434 (“[F]ederal courts

have an independent obligation to ensure that they do not

exceed the scope of their jurisdiction, and therefore they must

raise and decide jurisdictional questions that the parties either

overlook or elect not to press.”). Applying the law of the case

doctrine to constrain subsequent jurisdictional analyses is also

in tension with the federal rules that make clear that alleged

jurisdictional defects are not waivable, see Fed. R. Civ. P.

12(h)(1), and can be raised “at any time[,]” Fed. R. Civ. P.

12(h)(3); see also Union Pac. R. Co. v. Bhd. of Locomotive

Eng’rs & Trainmen Gen. Comm. of Adjustment, Cent. Region,

558 U.S. 67, 81 (2009) (explaining that arguments against

subject-matter jurisdiction can never be forfeited or waived).

Thus, it is hard to accept the suggestion that the law of the

case doctrine must be rigidly applied to calcify a threshold

determination that a court has subject-matter jurisdiction. Cf.

Bishop v. Smith, 760 F.3d 1070, 1085 (10th Cir. 2014)

(explaining that, while jurisdictional issues are not excluded

from the law of the case doctrine, issues such as subject-matter

jurisdiction may be particularly suitable for reconsideration,

even where the law of the case doctrine might otherwise

counsel against it). At the very least, there is considerable

support for the notion that, when the issue on review is

jurisdictional in nature, a doctrine that already incorporates a

degree of discretion and flexibility should give way as needed

to facilitate consideration of similar jurisdictional questions

that may arise at subsequent (but procedurally distinct) stages

of this case. See Am. Canoe Ass’n v. Murphy Farms, Inc., 326

F.3d 505, 515 (4th Cir. 2003) (“Law of the case, which is itself

a malleable doctrine meant to balance the interests of

correctness and finality, can likewise be calibrated to reflect

22

the increased priority placed on subject matter jurisdictional

issues generally[.]” (emphasis added)).

Sherley v. Sebelius, does not hold otherwise. 689 F.3d at

776. Wye Oak points to that opinion and argues that, where

the relevant facts are the same at both the pleading and the trial

stages of the proceedings, the posture of the case should not

matter. See Tr. of Oral Arg. 27–28. But this court in Sherley

adhered to the earlier preliminary injunction ruling in that case

primarily due to the earlier court’s fulsome consideration of the

legal issues based upon an already fully developed factual

record. 689 F.3d at 782. Not so here. Again, the Fourth Circuit

made its immunity determination in the context of a motion to

dismiss that tested the sufficiency of Wye Oak’s pleading,

which is substantively different than accelerated consideration

of the merits of a plaintiff’s claims under the preliminary

injunction standard.

In addition, as noted above, the scant and unproven factual

allegations in Wye Oak’s complaint were no match for the trial

record; the latter included extensive evidence that both sides

had presented about Iraq’s commercial activity, Wye Oak’s

various acts of performance, and Iraq’s alleged breach of the

parties’ agreement. Thus, when it came time for the final

analysis of whether there was subject-matter jurisdiction to

enter a post-trial judgment against this foreign state under the

FSIA framework, the DDC’s assessment was a far more

significant undertaking than the threshold inquiry into whether

the complaint’s allegations provide a sufficient basis for the

parties to proceed to litigate despite Iraq’s immunity defense.

And the latter is all that the Fourth Circuit addressed.

Therefore, we hold that we are not here being presented

with “the same issue” that the Fourth Circuit decided in a

23

manner that implicates the law of the case doctrine. Kimberlin,

199 F.3d at 500. 1

2

The district court below not only determined that law of

the case required it to find that the second clause of the FSIA’s

commercial activities exception was satisfied, it also found

affirmatively that the Fourth Circuit’s immunity conclusions

were correct, given the actions that Wye Oak took in the United

States to perform under the BSA. Wye Oak Tech., 2019 WL

4044046, at *23-*25. Wye Oak has reiterated that same

substantive argument on appeal. See Appellee’s Br. 25. And

it is one that we reject for the following reasons.

To start, we note that the district court’s factual findings

concerning Wye Oak’s conduct are reviewed for clear error.

Massachusetts v. Microsoft Corp., 373 F.3d 1199, 1207 (D.C.

Cir. 2004). We consider de novo the district court’s

interpretation and application of 28 U.S.C. § 1605(a)(2).

Odhiambo, 764 F.3d at 35.

There is no error, much less clear error, with respect to the

district court’s determination that “Wye Oak performed work

1

In their briefs, the parties spill a considerable amount of ink

debating whether, assuming the law of the case doctrine is

applicable, one or more of the established exceptions to that doctrine

applies. One such exception is where the previous decision was

“clearly erroneous and would work a manifest injustice.” Crocker,

49 F.3d at 740. We note here that our disagreement with the Fourth

Circuit’s substantive determination about the applicability of the

second prong of the FSIA’s commercial activity exception as a

matter of law—which is detailed in Part 2 of this section—makes it

quite likely that, even if the law of the case doctrine were applicable

to the instant circumstances, the “clearly erroneous” exception to the

doctrine would relieve us of the constraints that the doctrine imposes.

24

in the United States” in connection with the BSA such as

“writing a computer program[,]” “maintaining e-mail

communications[,]” and performing “administrative

activities.” Wye Oak Tech., 2019 WL 4044046, at *24.

However, that court’s legal analysis is mistaken, because the

second clause of the FSIA—which provides that foreign states

are not immune when the legal action is “based . . . upon an act

performed in the United States in connection with a

commercial activity of the foreign state elsewhere,”

§ 1605(a)(2)—requires that the act at issue be one that the

foreign state has performed in the United States in connection

with its commercial activity elsewhere.

The first clue that this is the correct interpretation of the

commercial activities exception’s second clause is the

language and structure of that provision, taken as a whole.

Section 1605(a)(2) is commonly considered with reference to

its isolated clauses, but all three appear in a single subsection.

See 28 U.S.C. § 1605(a)(2). And the first and third clauses

have long been interpreted to relate only to the conduct of the

foreign state—i.e., it is the foreign state that has to have

engaged in activity that took place in the United States, or that

has to have engaged in acts elsewhere that have an effect inside

the United States. See Odhiambo, 764 F.3d at 36 (explaining

that under clause one of the commercial activities exception,

the plaintiff's claim must be “based upon some commercial

activity by” the foreign state); Cruise Connections Charter

Mgmt. 1, LP v. Att’y Gen. of Canada, 600 F.3d 661, 662 (D.C.

Cir. 2010) (“[F]oreign governments engaging in commercial

activities outside the United States enjoy immunity from suit in

U.S. courts unless those activities have a direct effect in the

United States.”); see also Atlantica Holdings v. Sovereign

Wealth Fund Samruk-Kazyna JSC, 813 F.3d 98, 112 (2d Cir.

2016) (explaining that the “focus” of the direct effects clause

of the commercial activities exception is “the activity of the

25

sovereign” and if such activity has a direct effect in the United

States).

Consistent with the purposes of section 1605(a)(2), this

court has previously determined that if the foreign state carries

on commercial activity inside the United States (clause one), or

if it engages in an act elsewhere in connection with its

commercial activity elsewhere and that act has a direct effect

inside the United States (clause three), there is no immunity for

legal actions based upon that foreign state’s domestic

commercial activity or its impactful foreign act. See, e.g.,

Odhiambo, 764 F.3d at 36–38. And our careful and considered

application of the first and third clauses to link abrogation of

sovereign immunity to the fact and implications of the foreign

state’s own activities renders it entirely anomalous for us to

now read clause two to dispense with immunity if just anyone

performs an act in the United States in connection with the

foreign state’s commercial activity.

The view that the second clause of the commercial

activities exception is triggered only by acts of the foreign state

is not an unusual position. Indeed, an established treatise that

Wye Oak relies on specifically states that “the [commercial

activities] exception’s second clause provides for jurisdiction

where a defendant qualifying as a ‘foreign state’ under the

statute engages in acts in the United States in connection with

a commercial activity abroad.” Ernesto J. Sanchez, The

Foreign Sovereign Immunities Act Deskbook 137 (2013)

(emphasis added). So, too, have this court and others routinely

focused on whether the defendant (the foreign state) has

performed acts inside the United States in connection with its

commercial activity elsewhere when undertaking the second-

clause commercial activities exception inquiry. See, e.g.,

Kensington Int’l Ltd. v. Itoua, 505 F.3d 147, 157 (2d Cir. 2007)

(holding that the appellant’s claims did not fall under the

26

second clause of the commercial activities exceptions because

it failed to allege any acts performed by the foreign defendant

in the United States as the basis of its complaint); Can-Am Int’l,

LLC v. Republic of Trinidad & Tobago, 169 F. App’x 396, 406

(5th Cir. 2006) (stating that the acts of a foreign sovereign in

the United States in connection with foreign commercial

activity may give rise to subject-matter jurisdiction); Gilson v.

Republic of Ireland, 682 F.2d 1022, 1027 (D.C. Cir. 1982),

abrogated on other grounds by Saudi Arabia v. Nelson, 507

U.S. 349 (1993), (concluding the court had jurisdiction under

the second clause of the commercial activities exception

because Ireland performed an act in the United States by

enticing Gilson to enter into a commercial contract); see also

Termorio S.A. E.S.P. v. Electrificadora Del Atlantico S.A.

E.S.P., 421 F. Supp. 2d 87 (D.D.C. 2006), judgment aff'd, 487

F.3d 928 (D.C. Cir. 2007) (finding no jurisdiction over a breach

of contract claim because no element of the claim was based

on any of the foreign defendant’s commercial activities in

United States).

To the extent that one might think that the second clause

is ambiguous with respect to whose act counts because it lacks

a qualifier that expressly links the referenced “act” to “the

foreign state,” the legislative history of section 1605(a)(2)

leaves no doubt. Prior to the passage of the FSIA, the House

Judiciary Committee produced a house report that analyzed

each proposed section of the FSIA and explained the situations

in which a foreign state would not be immune. See H.R. Rep.

No. 94-1487, at 18–19 (1976). Significantly for present

purposes, the Committee stated plainly that the second clause

of the commercial activities exception “looks to conduct of the

foreign state in the United States.” Id. at 19 (emphasis added).

And the Senate Judiciary Committee echoed that exact same

sentiment. See S. Rep. No. 94-1310, at 12 (1976) (stating that

the “act performed in the United States in connection with a

27

commercial activity of the foreign state elsewhere, looks to

conduct of the foreign state in the United States[.]”).

For all these reasons, we disagree with the view of the

district court (and, for that matter, the Fourth Circuit) that the

second clause of the commercial activities exception can be

satisfied for FSIA purposes based on the various acts that the

plaintiff (Wye Oak) took inside the United States to perform

under the BSA. Again, we have no quarrel with the district

court’s finding that, while inside the United States, Wye Oak

“wr[ote] a computer program that could ultimately be used to

inventory and track all the equipment Wye Oak refurbish[ed]”

pursuant to the BSA, and that it also handled electronic

communications about the performance of the company’s

contractual obligations “to ensure Wye Oak’s leadership was

aware of all messages they received.” Wye Oak Tech., 2019

WL 4044046, at *24. We only hold that, regardless, the

necessary “act performed” that implicates the second clause of

section 1605(a)(2) is an act of the foreign sovereign; therefore,

the district court’s application of that provision to support its

jurisdiction based on Wye Oak’s actions cannot be sustained. 2

2

The “based upon” language that appears in section 1605(a)(2)

relates to all three clauses of that section, and it is, incidentally, yet

another reason why Wye Oak’s clause two argument fails. The

Supreme Court has made clear that, to determine what an action is

“based upon” for FSIA purposes, the court must “zero[] in on the

core of the . . . suit” and assess whether “the particular conduct

constitutes the gravamen of the suit.” OBB Personenverkehr AG v.

Sachs, 577 U.S. 27, 35 (2015). And while neither the district court

nor the Fourth Circuit discussed this responsibility, it is reasonably

obvious that the gravamen of the Wye Oak’s breach of contract suit

is not any act of performance that Wye Oak undertook pursuant to

the BSA. Rather, it is Iraq’s nonperformance of its promised

obligations, including its failure to pay for the services Wye Oak

rendered, and that nonperformance occurred in Iraq, not in the United

28

C

Our conclusion that the second clause of the FSIA’s

commercial activities exception is inapplicable does not mean

that Iraq must be found to have retained its sovereign immunity

with respect to Wye Oak’s breach of contract claims—at least

not yet—because Wye Oak points to one other potential basis

for concluding that the district court has subject-matter

jurisdiction to enter its post-trial judgment. The third clause of

the commercial activities exception abrogates a foreign state’s

immunity if the legal action “is based . . . upon an act outside

the territory of the United States in connection with a

commercial activity of the foreign state elsewhere and that act

causes a direct effect in the United States.” 28 U.S.C.

§ 1605(a)(2). And there is no dispute that Wye Oak’s lawsuit

relates to Iraq’s commercial activity and is based upon an act

of Iraq that took place outside United States’ territory: its

failure to pay the invoices. Thus, the first two requirements for

application of clause three of the FSIA’s commercial activities

exception are satisfied. See Ivanenko v. Yanukovich, 995 F.3d

232, 238 (D.C. Cir. 2021).

Wye Oak now maintains that the trial record also

established the only other requirement for finding that clause

States. See Zedan, 849 F.2d at 1514 (explaining that the plaintiff’s

suit was not based “upon an act performed in the United States,” but

upon a contract entered into in Saudi Arabia, which was breached);

Petersen Energía Inversora S.A.U. v. Argentine Republic, 895 F.3d

194, 207 (2d Cir. 2018) (holding in a breach-of-contract case that the

plaintiff’s “lawsuit [was] ‘based on’ Argentina’s breach of a

commercial obligation”); Devengoechea v. Bolivarian Republic of

Venezuela, 889 F.3d 1213, 1223 (11th Cir. 2018) (determining that

“[t]he conduct that actually injured [plaintiff]—and therefore that

makes up the gravamen of [his] lawsuit—is Venezuela’s failure to

return [certain artwork] to [him]” in breach of a bailment agreement).

29

three of the commercial activities exception applies, because

Iraq’s nonpayment had direct effects inside the United States.

And from what we have seen so far, given the law in this area,

we find that Wye Oak’s clause-three argument is at least

plausible. See Weltover, 504 U.S. at 607; see also EIG Energy

Fund XIV, L.P. v. Petroleo Brasileiro, S.A., 894 F.3d 339, 345

(D.C. Cir. 2018).

In particular, as examples of direct effects in the United

States that flowed directly from the breach, Wye Oak points to

the fact that Iraq was required to submit payment for Wye

Oak’s services to a bank in the United States, and that Iraq’s

nonpayment resulted in the cut-off of a flow of capital and

personnel between the United States and Iraq. Wye Oak also

argues that Iraq specifically targeted it (a Pennsylvania

company) to engage in these services because Iraq knew that,

when the bill was not paid, that loss of revenue would be felt

in the United States. More generally, Wye Oak further

maintains that Iraq’s failure to make good on its payment

obligations directly affected military and diplomatic operations

in the United States.

These factual contentions are not uncontested; indeed, Iraq

vigorously rejects Wye Oak’s allegations in this regard. More

importantly, however, Iraq asserts that the DDC did not make

the “factual findings necessary for this [c]ourt to rule that any

of Wye Oak’s claimed consequences satisfy clause three, nor

could it have on the record presented.” Appellants’ Reply Br.

14. And we also observe that there is no indication in the

record that the district court specifically considered the

disputed factual allegations about the impact of Iraq’s failure

to pay or any other facts that allegedly support application of

the third clause of the commercial activities exception.

“Factfinding is the basic responsibility of district courts,

30

rather than appellate courts,” Pullman-Standard v. Swint, 456

U.S. 273, 291–92 (1982) (internal quotations and citation

omitted), and in this regard, we are fully cognizant of our

limitations, see id. (“[T]he Court of Appeals should not

. . . resolve[ ] in the first instance [a] factual dispute which had

not been considered by the District Court.”). The district court

is in a much better position than we are to analyze Wye Oak’s

direct effects arguments in the first instance, and to engage in

additional fact-finding, as may be necessary, if the existing

record is unclear. Therefore, the current judgment will be

vacated, and we are remanding this matter back to the district

court for this purpose.

V

For the reasons explained above, we cannot accept Wye

Oak’s argument that Iraq waived its sovereign immunity, nor

do we agree with the Fourth Circuit’s conclusion that the

second clause of the FSIA’s commercial activities exception

applies based on the various activities that Wye Oak carried out

in the United States in connection with its contract with Iraq.

As for Wye Oak’s alternative argument that the district court

had subject-matter jurisdiction over its breach of contract

claims because the third clause of the commercial activities

exception applies to the facts established during the bench trial,

we remand to the district court to make that assessment in the

first instance. 3

So ordered.

3

We do not opine on the sufficiency of the existing record to support

a determination that the district court has jurisdiction to enter the

judgment here on the basis of clause three of the commercial

activities exception, nor do we comment on the need to further

develop the record to permit the district court to assess its own

jurisdiction.