Noah Rosenkrantz v. Inter-American Development Bank

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued February 15, 2022 Decided June 3, 2022

No. 21-7047

NOAH J. ROSENKRANTZ, ET AL.,

APPELLANTS

v.

INTER-AMERICAN DEVELOPMENT BANK,

APPELLEE

Appeal from the United States District Court

for the District of Columbia

(No. 1:20-cv-03670)

Gregory J. Wrenn argued the cause and filed the briefs for

appellants.

Griffith L. Green argued the cause for appellee. With him

on the brief was Laura C. Mulherin.

Charlotte H. Taylor and Ariel N. Volpe were on the brief

for amici curiae International Bank for Reconstruction and

Development, et al. in support of appellee.

2

Before: SRINIVASAN, Chief Judge, HENDERSON and

JACKSON *, Circuit Judges.

Opinion for the Court filed by Circuit Judge HENDERSON.

KAREN LECRAFT HENDERSON, Circuit Judge: Plaintiffs

Noah J. Rosenkrantz, Christopher Thibedeau and TTEK Inc.

(collectively, the Plaintiffs) sued the Inter-American

Development Bank (the IDB or the Bank), alleging that the

IDB violated its internal investigatory procedures when

investigating allegations that the Plaintiffs had engaged in

“Prohibited Practices”—e.g., corruption, fraud, coercion,

collusion, obstruction and misappropriation—in the

performance of IDB-financed contracts, an investigation that

ultimately led to the imposition of severe sanctions against the

Plaintiffs. The IDB moved to dismiss the suit for lack of subject

matter jurisdiction, asserting immunity under the International

Organizations Immunities Act (IOIA), 22 U.S.C. §§ 288–288l.

The Plaintiffs countered that their case fell within two

exceptions to IOIA immunity: the commercial activity

exception and the waiver exception. Rejecting the Plaintiffs’

arguments, the district court granted the IDB’s motion to

dismiss. As detailed infra, we affirm.

I. Background

On review of a dismissal order, “[w]e assume the truth of

all material factual allegations in the complaint and ‘construe

the complaint liberally, granting plaintiff the benefit of all

inferences that can be derived from the facts alleged.’” Am.

Nat’l Ins. Co. v. FDIC, 642 F.3d 1137, 1139 (D.C. Cir. 2011)

*

Circuit Judge Jackson was a member of the panel at the time

the case was argued but did not participate in the opinion.

3

(quoting Thomas v. Principi, 394 F.3d 970, 972 (D.C. Cir.

2005)). We recite the relevant facts accordingly.

A.

The IDB is an international financial institution created by

its member countries for “[t]he purpose of . . . contribut[ing] to

the acceleration of the process of economic and social

development of the regional developing member countries,

individually and collectively.” See Agreement Establishing the

Inter-American Development Bank (IDB Charter) art. I, § 1,

opened for signature Apr. 8, 1959, 10 U.S.T. 3068, reprinted

in Joint Appendix (J.A.) 0216–54. The IDB fulfills its chartered

objective by providing loans and grants to the governments and

government-controlled entities located in its borrowing

member countries—principally in the Latin American and

Caribbean regions—which, in turn, use those resources to fund

development activities. See Rosenkrantz v. Inter-Am. Dev.

Bank, No. CV 20-3670, 2021 WL 1254367, at *1 (D.D.C. Apr.

5, 2021). Forty-eight countries, including the United States, are

currently members of the IDB.

The IDB charter requires the bank to “take all necessary

measures to ensure that the proceeds of any loan made,

guaranteed, or participated in by the Bank are used only for the

purposes for which the loan was granted, with due attention to

considerations of economy and efficiency.” IDB Charter art.

III, § 9(b). Pursuant to this mandate, the IDB has adopted

internal policies prohibiting all parties involved in an IDB-

financed project from engaging in “Prohibited Practices,”

which encompass corruption, fraud, coercion, collusion,

obstruction and misappropriation. See IDB, Sanctions

Procedures (Sanctions Procedures) § 2.2 (2020), reprinted in

J.A. 148–66. This prohibition extends well beyond “parties

who contract with the Bank” to cover “any party involved” in

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an IDB-financed project, including, inter alia, borrowers, grant

recipients, bidders, suppliers, contractors and subcontractors,

service providers and financial intermediaries, as well as the

officers, employees and agents of these entities. Id. § 1.2; see

also id. § 2.2.

The IDB enforces its prohibition on Prohibited Practices

through a multi-step internal review process set forth in the

IDB’s Sanctions Procedures that is designed to identify and, if

necessary, penalize violations. See generally Sanctions

Procedures §§ 3–14; see also Rosenkrantz, 2021 WL 1254367,

at *2–3 (describing IDB’s sanctions process). First, allegations

of Prohibited Practices are referred to the IDB’s Office of

Institutional Integrity (OII) for investigation. See Sanctions

Procedures § 3.1. If the OII concludes that “a preponderance of

the evidence supports a finding of Prohibited Practice,” id.

§ 3.3, it issues a Statement of Charges and Evidence and refers

the matter, including all relevant evidence, to an IDB

President-appointed Sanctions Officer, id. §§ 3.2–3.4; see also

id. § 10.2, who, like the OII, determines whether “a

preponderance of the evidence supports a finding that the

Respondent engaged in a Prohibited Practice,” id. § 4.1. If the

Sanctions Officer determines the standard has been met, he

provides the respondent and the OII with a “Notice,” which

consists of, among other things, the Statement of Charges and

Evidence, the Sanctions Officer’s findings, and a description of

possible sanctions; the respondent has sixty days after delivery

of the Notice to respond. Id. §§ 4.5–4.7. A respondent’s failure

to respond is deemed an admission of the allegations set forth

in the Notice and a waiver of the opportunity to appeal. Id.

§ 4.8.

Once the sixty days are up, the Sanctions Officer evaluates

the submissions from the OII and, if any, the respondent. Id.

§ 4.9. If the Sanctions Officer concludes again that a

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preponderance of the evidence supports the finding of a

Prohibited Practices violation, he may impose an appropriate

sanction, id. § 4.9.2, which may range from a formal reprimand

to debarment—a determination that the respondent is

“ineligible, either permanently or for a stated period of time, to

be awarded and/or participate in additional contracts for

Projects,” id. § 8.1–8.2. The Plaintiffs characterize debarment

as “career-ending” for them, akin to a “Scarlet A.” Appellants’

Br. 17. Parties subject to sanctions include not only the

respondent but also any entity that a respondent owns or

controls. Sanctions Procedures § 8.3.

If the respondent makes a submission to the Sanctions

Officer during the sixty-day period upon delivery of the Notice,

he has forty-five days to appeal the Sanctions Officer’s

determination to the Sanctions Committee. Id. § 6.1. The

Committee reviews the entire record that was presented to the

Sanctions Officer in order to determine—for, by now, a fourth

time—whether a preponderance of the evidence supports a

finding that the respondent engaged in a Prohibited Practice.

Id. § 7.1. If the Committee determines the standard is met, it

issues a final decision, which summarizes its findings and

sanctions and takes effects immediately. Id. § 7.3. The IDB is

permitted to disclose the identity of any sanctioned party, along

with the imposed sanctions, to borrowers, other international

and multinational organizations, governmental authorities and

the general public. Id. § 14.1.

Importantly, the Sanctions Procedures were “adopted to

guide the exercise of discretion” by the IDB and “do not

themselves confer any rights or privileges to any parties.” Id.

§ 15.1. Moreover, on the issue of immunity, the Sanctions

Procedures state that “[n]othing in these Procedures shall be

considered to alter, abrogate, or waive the immunities and

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privileges as set forth in” the IDB Charter or in other

agreements among member countries. Id. § 15.2.

B.

Over the course of 2010, the IDB entered into two

contracts with GreenLine Systems, Inc. (GreenLine)—referred

to as the ACRMS Contract and the KCP Contract—to provide

customs products to the Government of Barbados.

Rosenkrantz, 2021 WL 1254367, at *3. At the time,

Rosenkrantz was the co-founder, CEO and chairman of

GreenLine and Thibedeau was a GreenLine vice president. Id.

Both contracts, to which neither Rosenkrantz nor Thibedeau

was named a contracting party, id.; see Compl. ¶¶ 26, 32,

specified that “no promises, terms, conditions, or obligations

other than those contained herein” existed between the IDB and

GreenLine and made no reference to the Sanctions Procedures.

Rosenkrantz, 2021 WL 1254367, at *3; see J.A. 0036 (ACRMS

Contract); J.A. 0064 (KCP Contract).

In 2013, GreenLine was acquired by A-T Solutions, Inc.

(ATS); after the acquisition, Rosenkrantz left the company and

Thibedeau stayed on as a vice president of ATS. Rosenkrantz,

2021 WL 1254367, at *4. The acquisition was governed by the

“GreenLine Purchase Agreement,” which, according to the

Plaintiffs, obligated ATS and the “GreenLine

Securityholders,” a group that included Rosenkrantz and

Thibedeau, to “cooperate fully with each other in connection

with the defense, negotiation or settlement of any

Indemnifiable Claim.” Id. (quoting Compl. ¶ 62). In their view,

this agreement contractually obligated ATS, and any

successors in interest, to facilitate for the GreenLine

Securityholders “the retention and provision of records and

information reasonably relevant to such Indemnifiable

Claim[s],” as well as access to “employees . . . to provide

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additional information and explanation of any material

provided.” Id. (quoting Compl. ¶ 62).

In 2015, the Government of Barbados awarded ATS an

IDB-financed contract—referred to as the ESW Contract—for

another customs product. Id. Again, neither Rosenkrantz, who

had already left ATS, nor Thibedeau was a party to the contract.

Id. Although the IDB was also not a party, the contract required

all participants to comply with the IDB’s “Applicable Policies

in regard to fraud and corruption and prohibited practices.” Id.;

see J.A. 0087 (ESW Contract). During the ESW Contract

negotiations, ATS was acquired by Pacific Architects and

Engineers (PAE). Rosenkrantz, 2021 WL 1254367, at *4. After

the acquisition, Thibedeau became a PAE employee but left the

company in April 2016 and later formed TTEK as a Barbados

corporation under his control. Id.

At this point, the IDB surmised that something was amiss.

In 2015, the OII initiated an investigation of alleged Prohibited

Practices in connection with certain IDB-financed contracts, an

inquiry that eventually implicated the ACRMS, KCP and ESW

Contracts. See id. The OII requested documents and

information from PAE, which cooperated with the OII

investigation. Id. According to the Plaintiffs, the “IDB . . .

instruct[ed] PAE not to cooperate with the GreenLine

Securityholders in relation to the investigation,” Compl. ¶ 64,

thereby causing PAE to “decline[]” to provide Rosenkrantz and

Thibedeau with “records relating to the investigation,” see id.

¶ 69, in violation of the GreenLine Purchase Agreement. See

Rosenkrantz, 2021 WL 1254367, at *4; see generally Compl.

¶¶ 65–72. In April 2018, three years after beginning its

investigation, the OII requested to interview Rosenkrantz and

Thibedeau and soon after provided them with approximately

2,500 pages of potentially relevant records, which the Plaintiffs

contend was a small fraction of the nearly 300,000 pages they

8

believe the OII collected from PAE. Rosenkrantz, 2021 WL

1254367, at *5; Compl. ¶ 75. The OII then issued to

Rosenkrantz and Thibedeau a show-cause order, alleging that

the pair had engaged in Prohibited Practices and outlining the

supporting evidence. Rosenkrantz, 2021 WL 1254367, at *5.

Shortly before Rosenkrantz and Thibedeau filed their written

responses to the show-cause order, the IDB announced that it

executed a negotiated resolution agreement with GL

Systems—the PAE subsidiary that succeeded GreenLine and

ATS’s business—that resolved allegations of Prohibited

Practices in connection with the three customs contracts and

debarred GL Systems for four years. Id.

In December 2018, the OII concluded that Rosenkrantz

and Thibedeau had engaged in Prohibited Practices and issued

a Statement of Charges and Evidence, naming Rosenkrantz and

Thibedeau as “Respondents” and designating TTEK as an

“[o]ther party subject to sanctions.” Id. The Statement of

Charges included over 6,700 pages of relevant exculpatory or

mitigating evidence. Id. The matter was referred to a Sanctions

Officer, who, in May 2019, issued the Plaintiffs a Notice,

which included the Statement of Charges and all relevant

evidence; the Plaintiffs submitted their responses in August

2019. Id. In May 2020, the Sanctions Officer issued his

determination, concluding that Rosenkrantz and Thibedeau had

engaged in Prohibited Practices and debarring the pair, along

with TTEK, for terms ranging from four to ten years. Id. The

Plaintiffs then appealed to the Sanctions Committee. Id. 1

On December 14, 2020, the Plaintiffs sued the IDB,

alleging that it had violated its Sanctions Procedures by (1)

wrongfully instructing PAE not to cooperate with the Plaintiffs

1

The IDB Sanctions Committee eventually affirmed the

Sanctions Officer’s findings and determinations but reduced

Rosenkrantz’s term of debarment from ten years to eight years.

9

and declining the Plaintiffs’ requests for all 300,000 pages of

documents they believe PAE produced to the OII, id.; see

Compl. ¶¶ 65–79; (2) unfairly pre-determining the Plaintiffs’

guilt by settling with GL Systems before the Plaintiffs had

submitted their responses to the OII’s show-cause letter, see

Rosenkrantz, 2021 WL 1254367, at *5; see Compl. ¶¶ 78–94;

and (3) “wrongfully charg[ing]” TTEK as a party subject to

sanctions, Rosenkrantz, 2021 WL 1254367, at *5. From these

grievances, the Plaintiffs allege that the IDB breached duties

owed the Plaintiffs via the “contractually-imposed Sanctions

Procedures” (Count I), violated its implied duty of good faith

and fair dealing (Count II) and tortiously interfered with the

GreenLine Purchase Agreement (Count III). See Compl.

¶¶ 104–19. The Plaintiffs sought preliminary injunctive relief

to halt the IDB’s then-pending sanctions proceedings. See

Rosenkrantz, WL 1254367, at *6.

The IDB moved to dismiss the complaint on the ground of

immunity, pursuant to Federal Rule of Civil Procedure

12(b)(1). Id. The Plaintiffs opposed, arguing that their case fell

within two statutory exceptions to the IDB’s immunity—the

commercial activity exception, see 28 U.S.C. § 1605(a)(2), and

the waiver exception, see id. § 1605(a)(1); see also 22 U.S.C.

§ 288(a)(b) (IOIA waiver exception). Rosenkrantz, WL

1254367, at *6. The district court granted the IDB’s motion to

dismiss, finding neither exception applicable to the Plaintiffs’

claims. Id. at *16.

The Plaintiffs filed a timely notice of appeal of the district

court’s dismissal and we have appellate jurisdiction pursuant

to 28 U.S.C. § 1291.

II. Analysis

We review the district court’s organizational immunity

determinations de novo. See Odhiambo v. Republic of Kenya,

10

764 F.3d 31, 35 (D.C. Cir. 2014). “Where, as here, the

‘defendant contests only the legal sufficiency of plaintiff’s

jurisdictional claims, the standard is similar to that of Rule

12(b)(6), under which dismissal is warranted if no plausible

inferences can be drawn from the facts alleged that, if proven,

would provide grounds for relief.’” Valambhia v. United

Republic of Tanzania, 964 F.3d 1135, 1139 (D.C. Cir. 2020)

(quoting Schubarth v. Fed. Republic of Germany, 891 F.3d

392, 398 (D.C. Cir. 2018)).

The IOIA confers upon international organizations like the

IDB “the same immunity from suit and every form of judicial

process as is enjoyed by foreign governments, except to the

extent that such organizations may expressly waive their

immunity.” 2 22 U.S.C. § 288a(b). Although we deal here with

international organization immunity, the Supreme Court has

recently made clear that such immunity is coextensive with the

immunity afforded to foreign sovereigns pursuant to the

Foreign Sovereign Immunities Act (FSIA), 28 U.S.C. §§ 1330,

1604–1606. See Jam v. Int’l Fin. Corp., 139 S. Ct. 759, 772

(2019) (“[T]he Foreign Sovereign Immunities Act governs the

immunity of international organizations.”); id. at 768 (22

U.S.C. § 288a(b) “is best understood to make international

2

Pursuant to the IOIA, an “international organization” is “a

public international organization in which the United States

participates . . . and which shall have been designated by the

President through appropriate Executive order as being entitled” to

immunity under the IOIA. 22 U.S.C. § 288. The United States

became a member of the IDB pursuant to the Inter-American

Development Bank Act, Pub. L. No. 86-147, 73 Stat. 299 (1959)

(codified at 22 U.S.C. §§ 283–283z-13). President Eisenhower

subsequently designated the IDB as an IOIA international

organization on April 8, 1960. See Exec. Order No. 10,873, 25 Fed.

Reg. 3,097.

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organization immunity and foreign sovereign immunity

continuously equivalent”).

The FSIA provides that foreign states (and their

instrumentalities)—and, by extension, international

organizations—are generally “immune from the jurisdiction of

the courts of the United States.” 28 U.S.C. § 1604; see LLC

SPC Stileks v. Republic of Moldova, 985 F.3d 871, 877 (D.C.

Cir. 2021). But the presumption is subject to several statutory

exceptions, see 28 U.S.C. §§ 1605–1605B, 1607, which

constitute the sole basis to obtain subject matter jurisdiction of

a foreign state. See Odhiambo, 764 F.3d at 34. Two exceptions

are relevant here. First, immunity is excepted if the action is

based (1) “upon a commercial activity carried on in the United

States by the foreign state,” (2) “upon an act performed in the

United States in connection with a commercial activity of the

foreign state elsewhere,” or (3) “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).

Second, a foreign state may “waive[] its immunity either

explicitly or by implication.” Id. § 1605(a)(1). The IOIA, like

the FSIA, includes a waiver exception, albeit one that

recognizes express waiver only. See 22 U.S.C. § 228a(b)

(“International organizations . . . shall enjoy the same

immunity from suit . . . , except to the extent that such

organizations may expressly waive their immunity.”).

The Plaintiffs contend that their claims satisfy the

commercial activity and waiver exceptions to the IDB’s

immunity. For the reasons below, we disagree on both counts.

A. Commercial Activity Exception

The FSIA’s commercial activity exception, as relevant

here, permits suit against an international organization if “the

12

action is based upon a commercial activity carried on in the

United States by the [international organization].” 28 U.S.C.

§ 1605(a)(2) (emphasis added). Here, we ask only whether the

Plaintiffs’ action is “based upon” commercial activity and

conclude that it is not.

To determine whether a plaintiff’s action is based upon

commercial activity, we must first identify “the ‘particular

conduct’ that constitutes the ‘gravamen’ of the suit,” OBB

Personenverkehr AG v. Sachs, 577 U.S. 27, 35 (2015) (quoting

Saudi Arabia v. Nelson, 507 U.S. 349, 356, 357 (1993)),

“zero[ing] in on the core of [the plaintiff’s] suit,” that is, the

“wrongful conduct” that “led to [the] injuries suffered,” id.; see

also Jam v. Int’l Fin. Corp., 3 F.4th 405, 409 (D.C. Cir. 2021).

The mere fact that an activity “led to the conduct that

eventually injured” the plaintiff does not necessarily make that

activity the gravamen of the suit, see Nelson, 507 U.S. at 358,

and neither does the fact that an activity “would establish a

single element of a claim,” Sachs, 577 U.S. at 34. As the

Supreme Court has stressed, “any other approach would allow

plaintiffs to evade the [FSIA]’s restrictions through artful

pleading.” Sachs, 577 U.S. at 36; see also Fry v. Napoleon

Cmty. Schs., 137 S. Ct. 743, 755 (2017) (“What matters is the

crux—or, in legal-speak, the gravamen—of the plaintiff’s

complaint, setting aside any attempts at artful pleading.”).

The Plaintiffs assert that the gravamen of their action is the

IDB’s “violation of the Bank’s contractual duties, while

investigating and administering disciplinary procedures that

apply by commercial contract terms to the conduct of private

commercial suppliers and their personnel in the United States

in relation to the contracts.” Appellants’ Reply Br. 19–20. Yet,

despite framing their claims in contractual terms—relying on

the three IDB-financed contracts and the associated bid

solicitations—the Plaintiffs’ complaint, as the district court

13

correctly recognized, makes clear that the wrongful conduct

that in fact injured them centers around how the IDB carried

out the Sanctions Procedures. See Rosenkrantz, 2021 WL

1254367, at *10. The injurious conduct recounted in Count I

includes “blocking Plaintiffs’ access to historical records of

GreenLine necessary to prepare a defense,” “failing to provide

Plaintiffs access to records provided to IDB by PAE” and to

“documents that may be exculpatory or mitigating in nature,”

“publicly issuing a press release including information that

would identify Plaintiffs” and “pre-judging the responsibility

of Plaintiffs (by publicly announcing vicarious sanctions

against another entity) without first providing Plaintiffs the

opportunity to be heard on the charges.” Compl. ¶ 107; see also

id. ¶ 112 (recounting largely identical injuries in Count II); id.

¶ 118–19 (characterizing IDB’s instruction to PAE “not to

provide . . . cooperation or records to the [Plaintiffs]” as

“intentional interference” with GreenLine Purchase

Agreement); Rosenkrantz, 2021 WL 1254367, at *5

(acknowledging Plaintiffs’ argument that the IDB “wrongfully

charged” TTEK as party subject to sanctions). These alleged

injuries arose when the IDB “violat[ed] or act[ed] without

authority under the Sanctions Procedures.” Compl. ¶ 107.

Thus, the alleged wrongful conduct has very little, if anything,

to do with the IDB-financed contracts. At bottom, the Plaintiffs

are seeking “greater procedural fairness in IDB’s investigation

and prosecution of the charges against them, not the specific

performance of an enumerated duty under one of the three

challenged contracts.” Rosenkrantz, 2021 WL 1254367, at *10.

The fact that the Plaintiffs nevertheless styled their causes of

action as contract or contract-related claims is of no

consequence in light of the substance of their complaint. See

Sachs, 577 U.S. at 36.

Attempting to re-center the gravamen on the three IDB-

financed contracts, the Plaintiffs contend that the commercial

14

activity exception’s “based on” requirement is satisfied

whenever a commercial activity—say, a contract—forms “a

necessary element of [a] plaintiff’s claim.” Appellants’ Br. 42–

43 (citing Odhiambo v. Republic of Kenya, 764 F.3d 31 (D.C.

Cir. 2014), and Kirkham v. Société Air France, 429 F.3d 288

(D.C. Cir. 2005)). But the Supreme Court squarely rejected this

“single-element” approach to the gravamen analysis in OBB

Personenverkehr AG v. Sachs, 577 U.S. 27 (2015), a decision

postdating this Court’s decisions in Kirkham and Odhiambo. In

Sachs, the plaintiff had purchased a Eurail train pass in the

United States and was later injured at a government-owned

train station in Austria. 577 U.S. at 30. She attempted to sue

Austria’s railway operator and avail herself of the commercial

activity exception by arguing that her purchase of the Eurail

pass, a single element of her claim, involved commercial

activity. Id. at 35–36. The Ninth Circuit agreed, relying in part

on the same single-element approach this Court adopted in

Kirkham:

Because the sale of the Eurail pass is an

essential fact that Sachs must prove to establish

her passenger-carrier relationship with OBB, a

nexus exists between an element of Sachs’s

negligence claim and the commercial activity in

the United States. See Kirkham, 429 F.3d at 292

(“[S]o long as the alleged commercial activity

establishes a fact without which the plaintiff

will lose, the commercial activity exception

applies . . . .”).

Sachs v. Republic of Austria, 737 F.3d 584, 600 (9th Cir. 2013)

(en banc) (alteration in original).

The Supreme Court rejected the Ninth Circuit’s single-

element test as unnecessarily requiring “an exhaustive claim-

15

by-claim, element-by-element analysis” of a cause of action.

Sachs, 577 U.S. at 34. It directed courts to instead examine the

plaintiff’s asserted claims and “zero[] in on” the wrongful

conduct on the part of the defendant that “actually injured” the

plaintiff. Id. at 35. This is precisely what we have done here by

identifying the IDB’s alleged non-adherence to the Sanctions

Procedures—not the breach of any provision in the IDB-

financed contracts—as the source of the Plaintiffs’ injuries. To

the extent that either Kirkham or Odhiambo may have left the

door open for a single-element approach to the gravamen

analysis, whereby a plaintiff’s pleading decisions could dictate

a court’s jurisdiction, Sachs has since slammed it shut. 3

Having identified the gravamen of the Plaintiffs’ action—

the IDB’s alleged non-adherence to the procedures set forth in

the Sanctions Procedures—we must next determine whether it

constitutes “commercial activity” under the FSIA. 28 U.S.C.

§ 1605(a)(2). An international organization “engages in

commercial activity . . . where it exercises ‘only those powers

that can also be exercised by private citizens,’ as distinct from

those ‘powers peculiar to sovereigns.’” Nelson, 507 U.S. at 360

(quoting Republic of Argentina v. Weltover, Inc., 504 U.S. 607,

614 (1992)); see also de Csepel v. Republic of Hungary, 714

F.3d 591, 599 (D.C. Cir. 2013) (“[A] foreign state’s repudiation

of a contract is precisely the type of activity in which a ‘private

player within the market’ engages.” (quoting Nelson, 507 U.S.

3

As for Odhiambo, this Court simply confirmed Kirkham’s

adoption of a single-element approach to the gravamen analysis,

iterating that “the alleged commercial activity must establish ‘a fact

without which the plaintiff will lose.’” Odhiambo, 764 F.3d at 36

(quoting Kirkham, 429 F.3d at 292); see id. (“[A] claim is ‘based

upon’ commercial activity if the activity establishes one of the

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

under his theory of the case.’” (quoting Nelson, 507 U.S. at 357)).

Thus, Odhiambo, like Kirkham, is of no help in light of Sachs.

16

at 360)). Simply put, if the alleged conduct is not “typically

performed by participants in the market,” it is not commercial

activity under the FSIA. Mwani v. bin Laden, 417 F.3d 1, 17

(D.C. Cir. 2005) (quoting Cicippio v. Islamic Republic of Iran,

30 F.3d 164, 168 (D.C. Cir. 1994)). The question “whether a

state acts ‘in the manner of’ a private party is a question of

behavior, not motivation.” Nelson, 507 U.S. at 360 (quoting

Weltover, 504 U.S. at 614); see 28 U.S.C. § 1603(d) (“The

commercial character of an activity shall be determined by

reference to the nature of the course of conduct or particular

transaction or act, rather than by reference to its purpose.”).

As we see it, the IDB’s application of its Sanctions

Procedures is not the sort of activity “typically performed by

participants in the market” but rather more akin to those powers

exercised by a sovereign. Mwani, 417 F.3d at 17 (quoting

Cicippio, 30 F.3d at 168). The IDB is mandated by charter—

or, more accurately, a multilateral agreement of forty-eight

member nations—to “take the necessary measures to ensure

that” bank funds “are used only for the purposes for which”

they are allocated, “with due attention to considerations of

economy and efficiency.” IDB Charter art. III, § 9(b). In

accordance with this mandate, the IDB uses its Sanctions

Procedures, and the threat of debarment, to identify, root out

and deter fraud and waste in the use of public funds, in the same

manner as many sovereigns, including the United States, see

generally 48 C.F.R. subpart 9.4 (debarment procedures for

federal contractors and subcontractors), and the European

Union, see Council Directive 2014/24, art. 57, 2014 O.J.

(L 121) 127–29 (EU) (grounds for “exclud[ing] an economic

operator from participation in a procurement procedure”). See

Rosenkrantz, 2021 WL 1254367, at *12.

Granted, the Plaintiffs are correct that private market

actors use similar investigatory and disciplinary tools to root

17

out internal fraud but their proffered examples involve actions

by private institutions to investigate and discipline parties with

whom they have a direct contractual relationship, often to

simply terminate or limit existing rights under that relationship.

See Appellants’ Br. 38–40 (citing Kumar v. George

Washington Univ., 174 F. Supp. 3d 172, 175 (D.D.C. 2016)

(demotion of professor and closure of his laboratory for

misconduct related to scientific research)). The IDB’s

investigatory and disciplinary power, as encapsulated in the

Sanctions Procedures, is derived from its charter, not a singular

and discrete contractual relationship, see IDB Charter art. III,

§ 9(b), and the Sanctions Procedures permit the IDB to take

disciplinary action against any party involved with an IDB-

financed contract, regardless of the existence of a contractual

relationship with the IDB, see Sanctions Procedures §§ 1.2,

8.3. Further still, debarment effectively removes a private party

from the market for IDB or IDB-financed contracts and could

result in “cross-debarment” with other development banks,

governments and private parties, thereby excluding it from the

entire market. See Appellants’ Br. 17. The IDB’s ability to

exercise such influence over a wide array of parties and

markets—potentially to the point of total exclusion of a

particular party from the market—plainly constitutes the

exercise of a “power[] peculiar to sovereigns.” Weltover, 504

U.S. at 614.

In short, the gravamen of the Plaintiffs’ action—the IDB’s

alleged failure to adhere to the Sanctions Procedures—is not

commercial activity within the scope of the FSIA. The IDB’s

mandate under its charter and the Sanctions Procedures to

protect the integrity of its funds and regulate the market for

international development funds is much more akin to a

sovereign’s effort to do the same than to that of a private party.

The commercial activity exception therefore does not abrogate

the IDB’s immunity from the Plaintiffs’ claims, as the district

18

court correctly concluded. See Rosenkrantz, 2021 WL

1254367, at *14.

B. Waiver Exception

Failing to find refuge in the commercial activity exception,

the Plaintiffs contend that the IDB nevertheless waived its

immunity by virtue of its charter. The Plaintiffs point to Article

XI, section 3, which provides, in relevant part:

Actions may be brought against the Bank only

in a court of competent jurisdiction in the

territories of a member in which the Bank has

an office, has appointed an agent for the purpose

of accepting service or notice of process, or has

issues or guaranteed securities. No action shall

be brought against the Bank by member or

person acting for or deriving claims from

members.

IDB Charter, art. XI, § 3.

This appeal is not the first time our Court has interpreted

Article XI, section 3 of the IDB Charter. In Atkinson v. Inter-

Am. Dev. Bank, 156 F.3d 1335 (D.C. Cir. 1998), abrogated on

other grounds by Jam, 139 S. Ct. 759, the Court specifically

interpreted Article XI, section 3 of the IDB Charter as a limited

waiver of immunity, “not a blanket waiver of immunity from

every type of suit not expressly prohibited elsewhere in the

articles of agreement.” Id. at 1338. 4 We relied heavily on our

4

Although the Supreme Court abrogated Atkinson’s holding

that international organizations possessed absolute immunity under

the IOIA, see Jam, 139 S. Ct. at 770–71, 772, it denied certiorari on

the waiver issue. See Petition for a Writ of Certiorari, Jam v. Int’l

Fin. Corp., No. 17-1011 (Jan. 19, 2018), granted in part by 138 S.

19

earlier decision in Mendaro v. World Bank, 717 F.2d 610 (D.C.

Cir. 1983), which declined to read “an identical waiver

provision” as “evincing an intent by the members of the Bank

to establish a blanket waiver of immunity from every type of

suit not expressly prohibited.” Id. at 614–15; see also Vila v.

Inter-Am. Investment Corp., 570 F.3d 274, 278–79 (D.C Cir.

2009) (similarly interpreting “nearly identical” language in

Inter-American Investment Corporation’s charter). Instead, the

Court construed section 3 as waiving immunity only if the IDB

receives a corresponding benefit: “[T]he [organization]’s

immunity should be construed as not waived unless the

particular type of suit would further the [organization]’s

objectives.” Atkinson, 156 F.3d at 1338 (emphases in original);

see also Mendaro, 717 F.2d at 617 (“A nonspecific waiver . . .

should be more broadly construed when the waiver would

arguably enable the organization to pursue more effectively its

institutional goals.”). The corresponding benefit test therefore

asks “whether a waiver of immunity to allow this type of suit,

by this type of plaintiff, would benefit the organization over the

long term.” Osseiran v. Int’l Fin. Corp., 552 F.3d 836, 840

(D.C. Cir. 2009) (emphases in original) (citing Atkinson, 156

F.3d at 1338, and Mendaro, 717 F.2d at 618). But even if the

organization accrues benefits as a result of judicial scrutiny,

immunity is not waived if such benefits “would be substantially

Ct. 2026, 2025 (2018); Jam, 3 F.4th 405, 411 (D.C. Cir. 2021)

(noting partial denial of certiorari). Thus, Atkinson’s waiver holding

still controls. See United States v. Adewani, 467 F.3d 1340, 1342

(D.C. Cir. 2006) (“When the Supreme Court vacates a judgment of

this court without addressing the merits of a particular holding in the

panel opinion, that holding ‘continue[s] to have precedential weight,

and in the absence of contrary authority, we do not disturb’ it.”

(alteration in original) (quoting Action All. of Senior Citizens of

Greater Philadelphia v. Sullivan, 930 F.2d 77, 83 (D.C. Cir. 1991)).

20

outweighed by the burdens caused by judicial scrutiny” of the

organization’s operations. Mendaro, 717 F.2d at 617.

In the context of a multilateral bank like the IDB, the Court

has generally looked to whether waiver of immunity serves to

“enhance the marketability” of an international organization’s

financial products “and the credibility of its activities in the

lending markets.” Mendaro, 717 F.2d at 618. From this view,

waiver may encourage commercial parties to partner with a

multilateral bank like the IDB by providing “reassurance” that

its partners “would be fairly compensated” if their contracts

with the bank fail. See Vila, 570 F.3d at 282; see also Osseiran,

552 F.3d at 840. For example, allowing unjust enrichment

claims brought by independent consultants “would mitigate

possible hesitancies” by commercial parties “to negotiating and

entering into formal contracts” with the organization. See Vila,

570 F.3d at 282; cf. Osseiran, 552 F.3d at 840 (permitting

claims arising out of “sales agreements” with an organization

to proceed “might help attract prospective investors by

reinforcing expectations of fair play”); Lutcher S.A. Celulose e

Papel v. Inter-Am. Dev. Bank, 382 F.2d 454, 456–57 (D.C. Cir.

1967) (finding waiver of immunity from suit by debtors to

enforce loan agreement with organization). In contrast,

permitting judicial review of an international organization’s

internal affairs—such as the organization’s employment

practices—would yield the organization no conceivable benefit

and would likely hamstring the fulfillment of its chartered

mandates. For example, in Atkinson, this Court concluded that

permitting a wage garnishment action against an IDB employee

to proceed would “provide[] no conceivable benefit in

attracting talented employees” and therefore would not

“further the Bank’s objectives.” 156 F.3d at 1338 (emphasis in

original); see also Mendaro, 717 F.2d at 618–20 (declining to

find waiver of immunity from World Bank employee’s sexual

harassment and discrimination suit as doing so “would lay the

21

Bank open to disruptive interference with its employment

policies” and “obstruct[] . . . the Bank’s purposes”).

The Plaintiffs seize upon this surface-level dichotomy in

our case law and attempt to fit their claims in the first category,

casting themselves as commercial partners with the IDB by

virtue of the three IDB-financed contracts and proposing that

allowing their suit to proceed would benefit the IDB’s

organizational interests by easing commercial parties’ worry

that the IDB “is beyond judicial process for bad faith handling”

of its Sanctions Procedures. Appellants’ Br. 35. But, as the

district court correctly noted, the Plaintiffs’ “mere identity as

‘commercial partners’ of an international organization” is

largely irrelevant. Rosenkrantz, 2021 WL 1254367, at *16. Our

precedent may “draw[] a distinction between external activities

and the internal management of international organizations”

but it does not “create[] an artificial category of waived claims”

and “[t]he court still is required to engage in a weighing of the

benefits and costs that a waiver may entail.” Vila, 570 F.3d at

281.

Weighing the costs and benefits here, we see no reason to

find a waiver of immunity. It is true that the IDB is obligated

to, among other things, “promote the investment of public and

private capital for development purposes” and “encourage

private investment,” IDB Charter art. I, § 2(a), meaning that the

Plaintiffs’ argument that judicial review would assuage

commercial partners’ “fears that [the Sanctions Procedures]

will be applied in bad faith,” and thereby promote investment,

is, at the very least, colorable, Appellants’ Br. 35–36; see

Osseiran, 552 F.3d at 840 (“The thought was that parties may

hesitate to do business with an entity insulated from judicial

process; promises founded on good faith alone are worth less

than obligations enforceable in court.”). Yet even if this

purported benefit is well-founded, permitting judicial scrutiny

22

of IDB sanctions proceedings would simultaneously conflict

with the IDB’s mandate to “take all necessary measures to

ensure that the proceeds of any loan made, guaranteed, or

participated in by the Bank are used only for purposes for

which the loan was made, with due attention to considerations

of economy and efficiency.” IDB Charter art. III, § 9(b)

(emphasis added). One can reasonably foresee future subjects

of sanctions proceedings “halt[ing] or delay[ing] those

proceedings by filing suits in the courts of the IDB’s member

countries,” thereby frustrating the IDB’s ability to

“expeditiously root[] out corruption in its projects” and

“safeguard[] its funds” with any sort of economy and

efficiency. Rosenkrantz, 2021 WL 1254367, at *16. This would

be especially true if such suits are, over time, brought in the

courts of different IDB member states, potentially leading to

inconsistent judgments and directives. Cf. Broadbent v. Org. of

Am. States, 628 F.2d 27, 35 (D.C. Cir. 1980) (“Denial of

immunity opens the door to divided decisions of the courts of

different member states passing judgment on the rules,

regulations, and decisions of the international bodies.”). Thus,

the Plaintiffs’ proffered benefit is substantially outweighed by

the burdens caused by judicial scrutiny and we, like the district

court, are compelled to conclude that Article XI, section 3 of

the IDB Charter should not be construed to waive the IDB’s

immunity from the Plaintiffs’ claims. See Rosenkrantz, 2021

WL 1254367, at *16.

The Plaintiffs, for their part, contend that we should look

not to Atkinson and Mendaro but rather to an even earlier

decision of our Court that interpreted Article XI, section 3 of

the IDB Charter: Lutcher S.A. Celulose e Papel v. Inter-Am.

Dev. Bank, 382 F.2d 454 (D.C. Cir. 1967). The Plaintiffs

primarily point to the following language in Lutcher with

reference to Article XI, section 3:

23

The drafters thus manifested full awareness of

the immunity problem and we conclude they

must have been aware that they were waiving

immunity in broad terms rather than treating

narrowly a venue problem. Thus we cannot read

it in a restrictive sense; we read it as permitting

the assertion of a claim against the Bank by one

having a cause of action for which relief is

available.

382 F.3d at 457. As the Plaintiffs see it, section 3 waives

immunity broadly, meaning that Lutcher is irreconcilable with

the narrower corresponding benefit test outlined in Mendaro

and Atkinson and, being the earlier of the three decisions,

should control. Appellants’ Br. 29–30; see also Vila v. Inter-

Am. Inv. Corp., 583 F.3d 869, 870–71 (D.C. Cir. 2009) (order

denying rehearing en banc) (statement of Williams, J.) (finding

Lutcher and Mendaro “impossible to reconcile”).

It is true that “when a conflict exists within our own

precedent, we are bound by the earlier decision.” United States

v. Old Dominion Bd. Club, 630 F.3d 1039, 1045 (D.C. Cir.

2011). But we should not be hasty to “discard a later precedent

that distinguished—or is distinguishable from—an earlier

decision.” Id. Accordingly, we decline to act with such haste.

First, a brief sketch of Lutcher: An IDB debtor alleged that

the IDB breached a loan agreement and argued that section 3

waived the IDB’s immunity from the suit. 382 F.2d at 455–56.

Noting that section 3 was “hardly a model of clarity,” the Court

nonetheless concluded that it presented either a venue

provision or a waiver provision and adopted the latter

interpretation. Id. at 456–47. Noting further that other sections

of Article XI expressly reserved immunity in certain contexts,

such as by barring suit by the IDB’s members, the Court

24

concluded that “[t]he drafters . . . must have been aware that

they were waiving immunity in broad terms rather than treating

narrowly a venue problem” and read section 3 “as permitting

the assertion of a claim against the Bank by one having a cause

of action for which relief is available.” Id. at 457. The Court

therefore rejected the IDB’s contention that section 3 limited

any waiver to “suit[s] by bondholders, creditors, and

beneficiaries of its guarantees, on the theory that in such cases

vulnerability to suit contributes to the effectiveness of the

Bank’s operation.” Id. at 456. In doing so, the Court found that

suits brought by debtors were just as necessary as those brought

by creditors, given that “responsible borrowers committing

large sums and plans on the strength of the Bank’s agreement

to lend would be reluctant to enter into borrowing contracts if

thereafter they were at the mercy of the Bank’s good will,

devoid of means of enforcement.” Id. at 459–60.

On the surface, it would appear that Lutcher’s broad

interpretation of section 3 would be fatal to the IDB’s immunity

defense. But if we dig a little deeper—as this Court has done in

the past—we find this superficial reading of Lutcher

unfounded. In Lutcher, the plaintiff was the IDB’s debtor and

the IDB argued that any waiver of immunity under section 3

was limited to bondholders and other creditors, not debtors. Id.

at 455–56. The Court thus treated the issue on those terms—

creditor versus debtor. See id. at 458 (“Provision for suit in any

member country where the Bank has an office must have been

designed to facilitate suit for some class other than creditors

and bondholders, i.e., borrowers[.]”); id. at 459 (citing

congressional testimony from U.S. State Department official

asserting, as “one . . . possibility,” IDB “might have a liability

to private persons in the United States on bonds which it had

issued” and concluding such testimony “does not indicate that

suits by creditors were the only ones permissible” (internal

quotation marks and citation omitted)). In doing so, we

25

declined to define immunity according to “the identity of the

suitor,” including a creditor or a debtor, or “the type of action

a particular suit represents,” whether it be a bondholder seeking

to enforce bond obligations or a debtor seeking to enjoin the

Bank from acting contrary to the terms of a loan agreement. Id.

at 459. Moreover, the Court acknowledged the same functional

approach taken later in Mendaro and Atkinson: “[T]he

doctrine” of sovereign immunity “has developed around the

nature and function of the defendant.” 5 Id. at 459; see also id.

at 459–60 (“Even if [the Court] accepted . . . the distinction”

between creditor versus debtor, “it may be that responsible

borrowers . . . would be reluctant to enter into borrowing

contracts if thereafter they were at the mercy of the Bank’s

good will, devoid of means of enforcement”). Lutcher therefore

has much in common with cases like Vila and Osseiran, which

applied the corresponding benefit test to find a waiver of

immunity.

Mendaro, for its part, acknowledged Lutcher and

discussed it on its decidedly narrower facts and posture. The

5

At the time of Lutcher, the international legal community

similarly embraced the functional necessity doctrine—i.e., the

principle that international organizations should possess at least the

minimum immunities necessary to perform their chartered

functions—as a theoretical limitation on organizational immunity.

See, e.g., Restatement (Second) of the Foreign Relations Law of the

United State § 83 (Am. Law. Inst. 1965) (“An international

organization has such immunity from the jurisdiction of a member

state to prescribe or enforce rules of law as is necessary for the

fulfillment of its purpose as they are stated in its constitution.”)

(emphasis added); Josef L. Kunz, Privileges and Immunities of

International Organizations, 41 Am. J. Int’l L. 828, 847 (1947)

(“The functional principle as the basis” of international organization

immunity is “almost universally recognized,” the “raison d’être” of

immunity).

26

Court concluded that “[a]lthough the [Lutcher] court

construed” section 3 “broadly enough to uphold its jurisdiction,

the action clearly arose out of the Bank’s external lending

activities,” namely “suits by the Bank’s borrowers,” when

waiver of immunity “would directly aid the Bank in attracting

responsible borrowers.” Mendaro, 717 F.2d at 620; see also

Vila, 583 F.3d at 869–70 (order denying rehearing en banc)

(statement of Rogers, J.) (Mendaro “did not overlook Lutcher”

but rather clarified its scope). The Court reasoned that

Lutcher’s purportedly broad reading of a waiver provision like

Article XI, section 3 is “logical only if the waiver provisions

are read in a vacuum, without reference to the interrelationship

between the functions of the [international organization] set

forth in [its charter] and the underlying purposes of

international immunities”; it instead elected to construe such a

waiver provision to the extent the international organization

“intended to waive . . . immunity from suits by its debtors,

creditors, bondholders, and those other potential plaintiffs to

whom the [it] would have to subject itself to suit in order to

achieve its chartered objectives.” Mendaro, 717 F.2d at 615.

Atkinson subsequently observed Mendaro’s “reject[ion]” of the

broad reading of Lutcher, see Atkinson, 156 F.3d at 1338, and

our later decisions have similarly acknowledged the narrower

understanding of Lutcher’s holding, see, e.g., Osseiran, 552

F.3d at 840 (citing Lutcher in support of the proposition that

“parties may hesitate to do business with an entity insulated

from judicial process”); Vila, 570 F.3d at 279 (doing same); see

also Sampaio v. Inter-Am. Dev. Bank, 806 F. Supp. 2d 238, 244

(D.D.C. 2011) (characterizing Lutcher as holding Inter-

American Development Bank “may be sued by a debtor to

enforce a loan agreement”), aff’d, 468 F. App’x 10 (D.C. Cir.

2012).

Thus, if we were to give significant weight to Lutcher’s

sweeping conclusion that Article XI, section 3 of the IDB

27

Charter “permit[s] the assertion of a claim against the Bank by

one having a cause of action for which relief is available,” 382

F.2d at 457, we would run the risk of needlessly and

inadvisably transforming dicta into a holding. See Seminole

Tribe of Fla. v. Florida, 517 U.S. 44, 67 (1996) (“[I]t is not

only the result but also those portions of the opinion necessary

to that result by which we are bound.”) (emphasis added); Doe

v. Fed. Democratic Republic of Ethiopia, 851 F.3d 7, 10 (D.C.

Cir. 2017) (“[B]inding circuit law comes only from the

holdings of a prior panel, not from its dicta.” (quoting Gersman

v. Grp. Health Ass’n, 975 F.2d 886, 897 (D.C. Cir. 1992)).

For the foregoing reasons, the district court’s judgment is

affirmed.

So ordered.