Petition for Writ of Certiorari — Lynne v. Australian Government Aircraft Factories
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supreme Court, U.S.
84-1014 -ILED
DEC 19 1984
No. ALEXANDER L. STEVAS
| CLARK |
in the Supreme Court of the United States
October Term, 1984
R. C. Lynne, Executor and Personal Representative of the
Estate of JImMy SHERMAN LYNNE, Deceased; MISSIONARY
AVIATION FELLOWSHIP, INc.; DONNA LYNNE, Individually
and as Parent and Next Friend of Kevin LYNNE and
Kurtis LYNNgE, Minors,
Petitioners,
versus
AUSTRALIAN GOVERNMENT AIRCRAFT FAcTorRIES and THE
COMMONWEALTH OF AUSTRALIA,
Respondents.
PETITION FOR WRIT OF CERTIORARI
TO THE UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
DARRELL PANETHIERE
Law Offices of
Windle Turley, P.C.
1000 University Tower
6440 N. Central
Expressway
Dallas, Texas 75206
214/691-4025
Counsel for Petitioners
i
QUESTIONS PRESENTED FOR REVIEW
1. Whether the survivors of an American killed abroad in a
plane crash allegedly caused by the negligence of a for-
eign state engaged in a commercial activity has sus-
tained a “direct effect” in the United States sufficient to
satisfy the “direct effect” exception to foreign sovereign
immunity of the Foreign Sovereign Immunities Act.
2. Whether an American corporation which lost an airplane
abroad in a plane crash allegedly caused by the negli-
gence of a foreign state engaged in a commercial activity
has sustained a “direct effect” in the United States
sufficient to satisfy the “direct effect” exception to foreign
sovereign immunity of the Foreign Sovereign Immunities
Act.
li
TABLE OF CONTENTS
Page
Questions Presented for Review .............-.:::cccceste i
IR a .scsessoiknconsnionemensennelliatiaagemennions ii
Table of Authorities 0. ieee. a ae
I I inci sinctersinirnenceconigueaiae eel 1
\ a i 2 ian ee 2
I a cscsneninsens sonciamsseleacaeesolelel-. ceelnocs 2
eres Te ii ooo sink ec cet ein css ceeneipceseessLhtonawes 2
Reasons for Granting the Petition ..................000.0 0000 5
I io vcvscesiccssvcsskeas occas ce chiscate aaa 33
eR RISE LE MER EeRD re Pen Mier icress ho A-1
iii
TABLE OF AUTHORITIES
Page
CASES: ;
Australian Government Aircraft Factories v. Lynne,
743 F.2d 672 (9th Cir. 1984) 200. passim
Berizzi Bros. Co. v. S. S. Pesaro,
oon cenlangyeesrorsvecsnspanessoeiésournesusesecovade 29
Berkovitz v. Islamic Republic of Iran,
735 F.2d 329 (9th Cir. 1984) 2. 19, 22, 25
Dralle v. Republic of Czechosolovakia,
[1950] Int.L.Rep. 155 (Supreme Court of
roots cssursseueaslanvoovocerscocess-roestecess 6
Alfred Dunhill, Inc. v. Republic of Cuba,
MN OO ions so csp cvcceecanecasensZesaceaeccersseiveravensed 6
Harris v. VAO Intourist, Moscow,
481 F.Supp. 1056 (E.D.N.Y. 1979) ............ 8-11, 15, 17-19
Harris Corp. v. Nat’l Iranian Radio & Television,
691 F.2d 1344 (11th Cir. 1982) 2000.0. 22
In re Rio Grande Transport, Inc.,
516 F.Supp. 1155 (S.D.N.Y. 1981) ooo. 25
Lynne v. Australian Government Aircraft Factories,
#CV 80-3198 (C.D.Cal., June 6, 1983), unpublished,
(See Appendix B) ....... PROG o Uae ea eleeis passim
Maritime Intern. Nominees v. Republic of Guinea,
693 F.2d 1094 (D.C.Cir. 1982) 200000. 13, 23
Persinger v. Islamic Republic of Iran,
729 F.2d 836 (D.C.Cir. 1984) ooo... 22-23
The Pesaro,
277 Fer. 473 (S.D.N.Y. 1921)
iv
TABLE OF AUTHORITIES — (Continued)
Page
Russello v. United States,
—-US——, 104 Be, TN SID sisccrsapntecnvevenecicosiovetst 18
The Schooner Exchange v. McFaddon,
11 US. ‘(7 Cranch) 116 (1812) 000 .....1...--.ccccseceeeseteenee 6
The S. S. Lotus,
FIOZT) P.C.1.d., BOR. Pig NO. MO: nn iecie cee cssiveceeniy teseeeee. 11
Texas Trading & Milling Corp. v. Federal Republic
of Nigeria, 647 F.2d 300 (2d Cir. 1981) .................. 22-24
Timberlane Lumber Co. v. Bank of America,
N.A. & S.A., 549 F.2d 597 (9th Cir. 1976) ................ 12, 17
Travis v. Anthes Imp. Ltd.,
OE ee sD nn siekcsncccinsien sean ctncnesestineovoians 17
Upton v. Empire of Iran,
459 F.Supp. 264 (D.D.C. 1978) 00.0.0... 8-11, 22
United States v. Aluminum Corp. of America, .
148 F.2d 416 (2d Cir. 1945) ....... re ie Rag rissa ca dias
United States v. Pizzarusso,
Be I I onc odes inencvcscnsssevescassvesssnsrrroncatr 12
Velidor v. L/P/G Benghazi,
BLES) fe | Se ener eee 22
Vencedora Oceanica Navigacion v. Compagnie
Nationale, 730 F.2d 195 (5th Cir. 1984) o.oo. 23
Verlinden, B.V. v. Central Bank of Nigeria,
— U.S.— , 103 S.Ct. 1962 (1983) ...... 5, 18-20, 26-27
Verlinden, B. V. v. Central Bank of Nigeria, ;
488 F.Supp: 1284 (S.D.N.Y. 1980) 000.00. 18, 24
Wyle v. Bank Melli of Tehran, Iran,
577 F.Supp. 1148 (N.D.Cal. 1983) 000000 25
Vv
TABLE OF AUTHORITIES — (Continued)
Page
STATUTES:
yg ee eee ener eae ret aaaatetecaesedirDi eter 5
28 U.S.C. § 1605(a) (2) .. Besrilasts\c orvionah cs eeehoai passim
MISCELLANEOUS:
Cook, Counting the Dragon’s Teeth: Foreign Sovereign
Immunity and Its Impact on International
Aviation Litigation, 46 Journal of Air Law &
Commerce 687 (1981) . i Se ba jue a
Crawford, A Foreign State Immunities Act on
Australia?, 8 Austral. Year Book of Int.L. .
71 (1983) -.. pene nts a a
House Report No. 94-1487, ‘94th Coie. inns
Sess., reprinted at [1976] U.S. Code Cong.
& Ad. News 6604 et seq... 7, 10-11, 18, 15, 17, 26-27
Note, Direct Effects Jurisdiction Under the Foreign
Sovereign Immunities Act of 1976, 13 N.Y.U.J.
of Int.L. & Pol. 571 (1981) 000... . 9-10, 20-21, 24
Note, Effects Jurisdiction Under the Foreign
Sovereign Immunities Act and the Due Process
Clause, 55 N.Y.U.L. Rev. 474 (1980) 0.000000. 19
Note, Establishing Jurisdiction Under the Commercial
Activities Exception to the Foreign Sovereign
Immunities Act of 1976, 19 Houston Law J.
I RN las eh eee a 22-23
Note, Extraterritorial Jurisdiction Over Foreign
States: the “Direct Effect” Provision of the
Foreign Sovereign Immunities Act of 1976:
Carey v. National Oil Corp., 13 J. of Int.L.
Es. Rt nrecen en 10, 12
vi
TABLE OF AUTHORITIES — (Continued)
Page
Note, Foreign Sovereign Immunity and Commercial
Activity: A Conflicts Approach, 83 Col.L.Rev.
I eek ac eat 10
Note, Foreign Sovereign Immunities Act of 1976:
Direct Effects and Minimum Contacts,
Ue Crenee Cn as BF CIE oss scasssssccccissercccces. 15-16
Restatement, Second, Conflicts of Law § 37 .................... 12
Restatement, Second, Foreign Relations Law of
ik Ree I BI ois sioes os seosps erred cetenevicdidinnees 11-19
Restatement, Second, Foreign Relations Law of
UE CI OE owes chca oncrstacscvcaceonccteasanpertemtoness 6
No.
In Che Supreme Court of the United States
October Term, 1984
R. C. Lynne, Executor and Personal Representative of the
Estate of JIMMY SHERMAN LYNNE, Deceased; MISSIONARY
AVIATION FELLOWSHIP, INC.; DoNNA LYNNE, Individually
and as Parent and Next Friend of Kevin LYNNE and
Kurtis LYNNE, Minors,
Petitioners,
versus
AUSTRALIAN GOVERNMENT AIRCRAFT FACTORIES and THE
COMMONWEALTH OF AUSTRALIA,
Respondents.
.F
PETITION FOR WRIT OF CERTIORARI
TO THE UNITED STATES COURT Cr APPEALS
FOR THE NINTH CIRCUIT
OPINIONS BELOW
This petition seeks review of the decision of the United
States Court of Appeals for the Ninth Circuit which held
that the “direct effect” clause of § 1605(a) (2) of the For-
eign Sovereign Immunities Act of 1976 did not encompass
either the wrongful death injuries or the property damages
suffered in the United States by petitioners as the result
of an airplane crash in Indonesia and thus did not allow
suit against the defendant state, Australia, in the courts of
the United States. Australian Government Aircraft Fac-
tories v. Lynne, 743 F.2d 672 (9th Cir. 1984). (See Appen-
dix A)
2
Petitioners’ suit was originally instituted in the United
States District Court for the Central District of California.
The question of the court’s subject matter jurisdiction was
raised by respondents’ motion to dismiss the complaint,
which m ‘ion was denied by the district court in an opinion
filed June 24, 1983. (See Appendix B)
Appeal was taken to the United States C«wrt of Appeals
for the Ninth Circuit which reversed the district court.
Petitioners filed their Suggestion for Rehearing En Banc
on October 9, 1984, which Suggestion has not yet been ruled
upon. No Petition For Rehearing was filed.
JURISDICTION
The decision of the Court of Appeals was rendered on
September 21, 1984. This petition was filed within 90 days
of the date the Court of Appeals entered judgment as per
28 U.S.C. § 2101(c). This Court’s jurisdiction is invoked ..
under 28 U.S.C. § 1254(1).
—_
STATUTES INVOLVED
Because of the length of the statute involved herein, the
Foreign Sovereign Immunities Act of 1976, 28 U.S.C. §§ 1330,
1391 (f), 1602 et seq., that Act is set out as Appendix C.
STATEMENT OF THE CASE
On July 23, 1979, a Nomad 22B aircraft piloted by Jimmy
Lynne crashed somewhere near Langda Mission in Irian
Jaya, Indonesia. The pilot was killed and the plane
destroyed as a result of that crash. Petitioners in this cause
are the surviving family of Jimmy Lynne and the executor
of his estate, as well as the Missionary Aviation Fellow-
3
ship, Inc., (“MAF”) owners of the aircraft. The individual
petitioners are all citizens of Ohio and of the United States,
and MAF is a nonprofit California corporation that provides
air transportation and radio services for missionary pro-
grams to developing nations.
Respondent Australian Government Aircraft Factories
(“GAF”) is in the business of making airplanes. GAF is
wholly owned: by the Australian government and produces
both military and civilian aircraft, which it sells throughout
the world.
GAF leased and later sold to MAF the Nomad 22B air-
craft which crashed on July 23, 1979. |
The Petitioners brought a negligence and strict products
liability action against GAF and the Commonwealth of
Australia in the Central District of California. This suit,
filed July 22, 1980, alleged that the defendants were liable
for defects in the design, manufacture, testing, inspection,
sale, and service of the aircraft. Lynne’s survivors sought
damages for wrongful death, and MAF claimed damages for
the loss and destruction of the aircraft.
Respondents GAF and the Commonwealth of Australia
resisted maintenance of this suit on the grounds that they
were immune from suit under the doctrine ot sovereign
immunity. In particular, the respondents argued that none
of the exceptions to immunity codified in the Foreign
Immunities Act of 1976 (“FSIA”), 28 U.S. C. § 1602 et seq.,
applied to the facts of the present action. On this basis, it
was claimed that the United States District Court for the
Central District of California lacked both subject matter
and personal jurisdiction over the defendants. The defend-
ants alternatively argued that venue was improper in that
district court and suggested transfer to the United States
District Court for the District of Columbia. All of these
arguments weré advanced by means of a
the complaint filed April 27, 1981.
The motion to dismiss was denied on all
June 24, 1983. The Order and Memorandum Opi
after “Mem. Op.”) fully addressed the sovereign
question and concluded that the decision to exerci
diction in this cause “gives effect to the spirit/and intent
behind Congress’ enactment of the FSIA.” (Mem. Op. 2).
Specifically, the district court concluded that the third listed
exception to immunity of section 1605(a) (2) was applicable
on the facts of this case. That section provides, in pertinent
part, that “A foreign state shall not be immune from the
jurisdiction of courts of the United States or of the States
in any case ... in which, the action is based upon an act
outside the territory of the United States in connection with
the commercial activity of the foreign state elsewhere and
that act causes a direct effect in the United States.” The
district court held that the wrongful death damages suffered
by the survivors of Jimmy Lynne in the United States and
the property damages sustained by MAF in the United
States were “direct effects” of an act (the plane crash) out-
side the territory of the United States (in Indonesia) in
connection with the commercial activity of the foreign state
elsewhere (the allegedly defective manufacture, sale, and
servicing of the airplane). (Mem. Op. 22-23).
Appeal was taken to the United States Court of Appeals
for the Ninth Circuit. That Court reversed in an opinion
entered September 21, 1984. It held that “the alleged injury
here was not a sufficiently direct effect for the assertion of
subject matter jurisdiction... [T]he direct injury to the
American interest in this case occurred overseas where the
loss of the plane took place.” Australian Government Air-
craft Factories v. Lynne, 743 F.2d 672, 675 (9th Cir. 1984).
5
REASONS FOR. GRANTING THE PETITION —
FOR WRIT OF CERTIORARI
This petition presents two questions of statutory inter-
pretation under the Foreign Sovereign Immunities Act of —
1976. 28 U.S.C. § 1602 et seq. They are, in their simplest
form: did the Lynnes suffer a “direct effect” in the United
States from the death of J. C. Lynne in Indonesia, and did
Missionary Aviation Fellowship, Inc. suffer a “direct effect”
in the United States from the crash of its airplane in
Indonesia? No issue concerning the “direct effect” clause
has been previously addressed by this Court. The Courts
of Appeal which have ruled on the issue are in conflict.
And the questions, concerning the amenability of foreign
sovereigns to suit in the courts of the United States and of
the States, is of the highest importance.
It is the position of the petitioners that the Ninth Circuit
has erred in its interpretation of the direct effects clause;
that its opinion is in direct conflict with the position of the
Second Circuit on this point; that the Second Circuit posi-
tion is to be preferred; and that the question involved is
of such paramount importance, touching as it does on ques-
tions of state, federal and international law, that review
should be granted in order to fulfill the Congressional
purpose of bringing uniformity and regularity to this sensi-
tive area where law and foreign relations intersect.
The Foreign Sovereign Immunities Act (“FSIA”) codi-
fies, as a matter of federal law, the restrictive theory of
sovereign immunity. Verlinden B. V. v. Central Bank of
Nigeria, —— U.S. ——, 103 S.Ct. 1962, 1968 (1983). It pro-
vides that immunity is the general rule when an action is
brought against a foreign state, 28 U.S.C. § 1604, subject to
certain enumerated exceptions, §§ 1605, 1607. The exception
6
relevant to this case provides that the normal rule of
sovereign immunity will not apply in suits “in which the
action is based upon ... an act outside the territory of the
United States in connection with the 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).
The exceptions to sovereign immunity in the area of com-
mercial activity which are embodied in § 1605(a) (2) of the
FSIA are well-established and internationally recognized
bases for the assertion of jurisdiction. The basic principle
is that a head of state who descends into the market place
must be treated like any private trader. Dralle v. Republic
of Czechoslovakia, [1950] Int.L.Rep. 155 (Supreme Court of
Austria, 1950), quoting Marshall, C.J. in The Schooner
Exchange v. McFaddon, 11 U.S. (7 Cranch) 116 (1812).
The Restatement, Second, of the Foreign Relations Law of
the United States is to the same effect: “The immunity of
a foreign state does not apply to a proceeding arising out
of commercial activity outside its territory...” Restatement,
§ 69. And this Court has recently reaffirmed that the asser-
tion of such jurisdiction is no insult to a foreign sovereign
when it deals in the commercial area. Alfred Dunhill, Inc. v.
Republic of Cuba, 425 U.S. 682, 704 (1976).
The fact that this action is based upon the commercial
activity of Australian Government Aircraft Factories
(“GAF”) is not in dispute. As the district court recog-
nized, GAF is in the business of making airplanes, both
military and civilian, which it in turn sells all over the world.
(Mem. Op. 3). Nor is it in dispute that this action, sound-
ing in strict products liability and negligence, is based upon
an act outside of the territory of the United States in con-
nection with the commercial activity of the foreign state
elsewhere.
7
The only true dispute is whether the allegedly tortious
conduct of the respondents which caused the death of
Jimmy Lynne and the destruction of a valuable aircraft
owned and operated by Mission Aviation Fellowship had a
“direct effect” in the United States. Petitioners submit that,
in both instances, all of the damages for which the tort is
designed to provide recompense were sustained in the United
States. If the conduct of GAF -vas in fact tortious, then
it is clear that an essential, constituent element of the
tort — damages — occurred in the United States. This
should be considered sufficient to justify the assertion of
jurisdiction pursuant to the FSIA in this case.
THE NINTH CIRCUIT ERRED IN ITS
INTERPRETATION OF THE
“DIRECT EFFECTS” CLAUSE
Although the decision below turns on the court’s interpre-
tation of the phrase “direct effect,” the Ninth Circuit did not
attempt any analysis of that key phrase and simply ruled
in a conclusory fashion that torts have no direct effects.
743 F.2d at 674-675. The opinion seems to assert that if a
person dies, he dies, and no one who may suffer emotional
damage or loss is directly affected. If a plane crashes, it
crashes, and no one who suffers pecuniary loss therefrom
is directly affected. Particularly regrettable is the Ninth
Circuit’s failure to explain its novel interpretation of direct
effect in light of the district court’s thorough, contrary
analysis and in light of the clear legislative guide to interpre-
tation provided by the House Report.
In contrast to the Court of Appeals, the district court
realized that the issue was sufficiently complicated and dis-
puted among the various circuits-to require over sixteen
8
pages of carefully reasoned discussion. The district court
also recognized that the wrongful death claim presented
different considerations than did the property claim, while
the Court of Appeals simply ruled that all direct effects of
a plane crash must be located at the locus delictus, whether
personal injury or property claims. See Mem. Op., passim,
Appendix B. :
Emphasizing the logical force of the language employed
by Congress, the district court first expressed the view that
the wrongful death damages suffered by the Lynnes must
be considered to be direct, not indirect, effects of GAF’s
alleged negligence:
Defendants’ construction of “direct effect” is plagued
by a logic territorial limitation. This court believes
defendants’ construction is arbitrary and misconceived;
it ignores the real, life-shattering effect suffered by a
family of a person wrongfully killed. The effect on such
a family is direct no matter where the death occurred.
When, as in this case, the bereaved family lives in the
United States, the direct effect of the death of a father
and husband occurs in the United States.
(Mem. Op. 8). This common-sense interpretation of the
language of the statute, an interpretation that fulfills the
statutory purpose that no change in the substantive law be
effected by the adoption of the FSIA, was not addressed
by the Ninth Circuit.
The district court next turned to the few authorities avail-
able on this subject. It noted that there was a conflict
of authority on the question and that the cases of Upton v.
Empire of Iran, 459 F. Supp. 264 (D.D.C. 1978), aff’d mem.,
607 F.2d 494 (D.C.Cir. 1979), and Harris v. VAO Intourist,
Moscow, 481 F. Supp. 1056 (E.D.N.Y. 1979), provided some
support for the defendants’ limited reading of the direct
9
effects clause in the context of a wrongful death action.
However, the district court took the position, as do the peti-
tioners herein, that these cases have been incorrectly de-
cided and are in opposition to the intent of Congress.
The court in Upton also proposed to give a “common
sense” interpretation to the phrase “direct effect,” holding
that it connoted an effect “which has no intervening ele-
ment, but, rather, flows in a straight line without deviation
or interruption.” 459 F. Supp. at 266. The Upton court did
not explain why the wrongful death claim of the plaintiffs in
that case did not fit this simple definition. (See Mem.
Op. 9) The claim of the petitioners herein should fit this
definition as there is no intervening element of any sort
between the airplane crash in Indonesia and the suffering
and property damages realized in the United States.
The Upton decision, as well as the subsequent Harris
decision, can be further faulted for their failure to distin-
guish between subject matter jurisdiction, to which the
‘direct effects’ clause relates, and the question of in personam
jurisdiction over the defendant. Both Upton and Harris
approach this question backwards. By equating the two
concepts, they have concluded that since in personam juris-
diction was lacking’ therefore subject matter jurisdiction
1This conclusion is also suspect. Both cases drew analogy from
the long-arm statute of the District of Columbia but, as the district
court noted, “Most long-arm statutes have provisions granting state
courts jurisdiction where tortious acts occur outside that cause
injury within a state, where the defendant has minimum contacts
with the state.” (Mem. Op. 13). See also, Note, Direct Effects
Jurisdiction Under the Foreign Sovereign Immunity Act of 1976,
13 N.Y.U.J. of Int’l. & Pol. 571, 597 (1981): “Rather than searching
for a particular act or injury in the forum state as required by
domestic long-arm statutes, courts should instead focus their
analysis on the ‘effect’ in the United States.”
10-
was not present either under the statute. This conclusion
is not sound, and the district court below was correct to
point out the error and isolate the question of subject matter
jurisdiction. (Mem. Op. 11-12).?
Other textual approaches to the interpretation of “direct
effects” lead to the same conclusion, that the losses suffered
by the petitioners were comprehended by the Congressional
drafters of the FSIA. For example, Websters’ New Colle-
giate Dictionary has been quoted in this context to the
effect that “direct” means “marked by an absence of an
intervening agency, instrumentality or influence.” Id., at 323
(1975), quoted in Note, Extraterritorial Jurisdiction Over
Foreign States: the ‘Direct Effect’ Provision of the Foreign
Sovereign Immunities Act of 1976: Carey v. National Oil
Corp., 13 J. of Int'l. L. & Econ. 633, 644, n.72 (1979). It
is impossible to imagine in what respect the facts of the pres-
ent case fail to conform to this definition of “direct.”
Nor is there any possibility that the phrase “direct effect”
was accidentally or fortuitously chosen by Congress. The
House Report on this legislation states that “direct effect”
was meant to embrace “commercial conduct abroad having
direct effects within the United States which would subject
such conduct to the exercise of jurisdiction by the United
2The Harris and Upton cases are further distinguished by the fact
that all of the actionable events in those cases took place within
the territory of the foreign country. “Congress [didn’t] intend to
assert jurisdiction over foreign states for events occurring wholly
within their own territory.” Note, 13 N.Y.U.J. of Int. Law. & Pol.
571, 588 (1981). See also, Note, Foreign Sovereign Immunity
and Commercial Activity: A Conflicts Approach, 83 Col.L. Rev.
1440, 1449 (1982), for view that state will be most likely to
construe exercise of effects jurisdiction “as an instrusion upon its
sovereignty when the activity involved has occurred within or sub-
stantially within its own territory. ” The injury-producing act in
the present case occurred in Indonesia, not Australia.
11
States consistent with the principles set forth in § 18, Re-
statement of the Law, Second, Foreign Relations Laws of
the United States (1965).” H.R.Rep. No. 94-1487, 94th
Cong., Second Sess. 6604 (1976) (hereafter “House Re-
port’) ; Mem. Op. 15.
It is in interpreting the language of the Restatement that
the Harris and Upton cases most obviously err. Although
the Ninth Circuit relies on both of those cases, it does not
repeat their error of misinterpreting the text of the Restate-
ment; it chooses instead to wholly ignore the Congressional
reference to the Restatement and the entire body of Inter-
national Law on “direct effects” jurisdiction which it refer-
ences. Had more attention been paid to this body of law,
petitioners submit that the error embodied in the instant
decision of the Ninth Circuit, and the consequent conflict
between this decision and the decisions of other federal
courts, could have been avoided.
Section 18 of the Restatement of the Foreign Relations
Law of the United States succinctly summarizes the devel-
oped international law on the subject of jurisdiction to pre-
scribe law based on effects within the prescribing country.
International law has long recognized the fact that an effect
which occurs within a country provides a basis for prescrib-
ing law. This is in addition to the more commonly encoun-
tered bases justifying the prescription of law, such as terri-
toriality and nationality.
The modern source of effects jurisdiction is generally said
to be the decision of the Permanent Court of International
Justice in The S.S. Lotus, [1927] P.C.I.J., ser. A, No. 10,
wherein it was held that extraterritorial jurisdiction could be
exercised “if one of the constituent elements of the offense,
and more especially its effects, have taken place there.” Id.,
12
at 23. See Note, supra., 13 J. of Int’] L. & Econ. at 644. The
classic statement of the effects doctrine in American law is
contained in the opinion of Judge L. Hand in United States
v. Aluminum Co. of America, 148 F.2d 416, 443 (2d Cir.
1945):
[I]t is settled law . . . that any state may impose lia-
bilities, even upon persons not within its allegiance,
for conduct outside its borders that has consequences
within its borders which the state reprehends; and these
liabilities other states will ordinarily recognize. —
This form of extraterritorial jurisdiction is sometimes re-
ferred to as the “objective territorial principle.” United
States v. Pizzarusso, 388 F.2d 8, 10 (2d Cir. 1968); Timber-
lane Lumber Co. v. Bank of America, N.A. & S.A., 549 F.2d
597, 610, n. 15 (9th Cir. 1976).
Effects jurisdiction is also recognized among the various
American states and is embodied in Section 37 of the Re-
statement, Second, of the Conflict of Laws (1969). The
comments to that section note that “a state has a natural
interest in the effects of an act within its territory even
though the act was done elsewhere.” Comment a, p. 156.
The Restatement of the Foreign Relations Law recognizes,
in section 18, two sorts of effects jurisdiction. The first,
wholly applicable here, is jurisdiction based on the presence
of at least one constituent element of a crime or tort in
the prescribing country. The second is based on the con-
junctive presence of four further factors, which factors may
_ also be found to be present on the facts of the present case.
Effects jurisdiction under international law is summarized
by the Restatement as follows:
§ 18. Jurisdiction to Prescribe with Respect to Effect
within Territory
13
A state has jurisdiction to prescribe a rule of law attach-
ing legal consequences to conduct that occurs outside
its territory and causes an effect within its territory, if
either
(a) the conduct and its effect are generally recog-
nized as constituent elements of a crime or tort under
the law of states that have reasonably developed legal
systems, or
(b) (i) the conduct and its effect are constituent
elements of activity to which the rule applies; (ii) the
effect within the territory is substantial; (iii) it occurs
as a direct and foreseeable result of the conduct out-
side the territory, and (iv) the rule is not inconsistent
with the principles of justice generally recognized by
states that have reasonably developed legal systems.
It is the position of the petitioners that the simple applica-
tion of the plain language of the above provision, which the
House Report states is consistent with the “principles” of
the direct effects clause, demonstrates that the petitioners
herein have a right to maintain their actions for damages
in the courts of the United States, despite the claim of
immunity raised by the Commonwealth of Australia.’ This
for the reason that (a) the damages suffered herein were
constituent elements of the torts of negiigence and strict
products liability under the law of states that have reason-
ably developed legal systems, and/or (b) the negligence of
respondents and the damages caused thereby are (i) con-
stituent elements of the causes of action brought by peti-
*The direct application of section 18 of the Restatement to resolve
“direct effect” questions has been previously employed: “In view
of Congress’s statement, and of the not dissimilar functions of
section 18 and the third clause [of § 1605(a)(2)], we consider this
source of guidance a proper one.” Maritime Intern. Nominees uv.
Republic of Guinea, 693 F.2d 1094, 1111 (D.C. Cir. 1982).
14
tioners; (ii) the effect within the United States is substan-
tial, both in terms of monetary damages and emotional and
physical injury; (iii) these damages occurred as a direct
and foreseeable result of the negligent conduct outside of
the United States; and (iv) the recovery of these damages
is not inconsistent with the principles of justice generally
recognized by states that have reasonably developed legal
systems.
Subsection (a) of the Restatement:
The maxim de minimus non curat lex, and many other
similar principles of common law, have fully established the
proposition that without damages there is no tort. Prosser,
Torts § 30, p.143 (4th ed. 1971). Damages are undeniably
a constituent element of any tort. All of the injuries for
which the torts of negligence and strict product liability are
designed to provide recompense were sustained by the peti-
tioners in the United States. But for this element of the
tort, which occurred solely in the United States, there would
be no cause of action. Far from being a secondary, deriva-
tive, or, as the Ninth Circuit found, an “indirect effect,” the
damages suffered by the petitioners herein are essential to
the cause of action and, under any fair interpretation, are
direct effects of the allegedly negligent and tortious conduct
of the respondents.
The only court which has considered the effect of the
Restatement on the facts of this case has ruled that sub-
section (a) applies: “Under Section 18(a) an action for
negligence and strict liability clearly qualifies.” (Mem.Op.
16). The Ninth Circuit, in reversing the district court’s
holding, ignored entirely the applicable provisions of the
Restatement and the fact that the “principles set forth in
15
Section 18” have been specifically recommended by Congress
as a guide to the interpretation of the “direct effect” clause.
House Rep. at 6618.
Restatement § 18 sets one standard for torts and crimes
(subsection a) and a stricter standard for other actions
(subsection b). But the interpretation of Judge Weinstein
in Harris is that the direct effects clause embodies the
principles only of subsection (b). He argues that the Con-
gressional drafters, by employing the word ‘direct,’ meant
to eliminate the distinctions between subsections (a) and
(b) and thus the distinctions between crimes and torts on
the one hand and all other actions. Instead of the two cate-
gories specified in the Restatement, all actions under the
FSIA must satisfy the requirements of subsection (b).
Harris, 481 F.Supp. at 1063.
This argument is unconvincing. Had Congress intended
its use of the word ‘direct’ to so alter the traditional law of
effects jurisdiction it would not have stated that its use of
the phrase ‘direct effect’ was to be interpreted consistently
with the principles of all of § 18 of the Restatement. It could
have specifically referred to section 18(b) if, according to
Judge Weinstein, that were the only section that could be
relevant under the FSIA.*
Moreover, the distinction between the two subsections of
§18 of the Restatement is obviously justified on policy
*As one commentator has noted, “The court’s analysis is some-
what mystifying in light of § 18’s unambiguous distinction’ between
generally recognized torts or crimes and other acts. The Harris
court begs the question when it states that Congress’s use of
‘direct’ brings such cases within § 18(b) rather than § 18(a). The
principle of §18 as a whole determines whether the greater or
lesser restriction shall apply, not a tenuous interpretation of the
word ‘direct’.” Note, 14 Cornell Int. L.J. 97, 109-110, n. 63 (1981).
4
a
16
grounds: “[A] court will infer that a defendant who com-
mits a generally recognized crime or tort has reason to fore-
see the natural consequences of his activity.” Note, Foreign
Sovereign Immunities Act of 1976: Direct Effects and
Minimum Contacts, 14 Cornell Int. L.J. 97, 110 (1981).
In the present cause, it is obvious that one in the business of
manufacturing passenger aircraft, marketing and selling tnem
to foreign purchasers, must be aware of the potential for
wrongful death and property claims arising from a possibly
defective aircraft. When a state engages in such manufac-
ture, marketing, and sales, as has the Commonwealth of
Australia herein, it must be presumed to possess the same
awareness, and the Restatement is correct to require a
lesser level of contact with the forum jurisdiction as a pre-
requisite to the assertion of jurisdiction than would be
required in antitrust or securities actions.
Since a constituent element of both the wrongful death
action of the Lynnes and of the product liability action of
MAF occurred in the United States, the principle embodied
in subsection (a) of the Restatement was completely ful-
filled. The direct effect exception to sovereign immunity of
§ 1605 (a) (2) is met in this case.
Subsection (b) of the Restatement:
A direct application of section 18 of the Restatement
would end with consideration of subsection (a) since that
clause so clearly deals with the tort problem posed by this
case and because it is obvious that the requirements of the
subsection are met on the instant facts. Since section 18 is
written in the disjunctive, it is only necessary that a plain-
tiff satisfy one of the hases for jurisdiction set forth therein.
(Mem. Op. 16) But petitioners contend that application of
the second subsection also provides a basis for the assertion
of subject matter jurisdiction.
Se
a% 17
In contrast to subsection (a) which specifically relates to
criminal and tort actions, subsection (b) has been tra-
ditionally employed in resolving jurisdictional questions
which arise in antitrust and securities cases. See, e.g.,
Timberlane Lumber Co., supra, 549 F.2d at 610-612; Travis v.
Anthes Imp. Limited, 473 F.2d 515, 528-530 (8th Cir. 1973).
The subsection requires the presence of each of four facters.
First, like subsection (a), the conduct and its effect must
be constituent elements of activity to which the rule applies.*
Second, the effect within the territory must be “substantial.”
Third, the effect must have occurred as a “direct and fore-
seeable result of the conduct outside the territory.” Finally,
the assertion of jurisdiction must not be “inconsistent with
the principles of justice generally recognized by states that
have reasonably developed legal systems.”
Unlike the Harris case, the Restatement does not indis-
criminately mix the terms “direct”, “substantial,” and “fore-
seeable” as modifiers of “effect.” Instead, each adjective is
used in a manner that indicates that the Restatement
drafters meant different things when they employed different
language. This is significant when one considers Congress’
decision to pattern the provision for effects jurisdiction under
the FSIA after the Restatement. House Rep. at 6618.
Congress did not, like the Restatement, require that the
effect sufficient to justify assertion of. jurisdiction under the
FSIA be “substantial,” though the Restatement employs
that concept in providing for non-criminal and non-tort
cases. Nor did Congress provide that the effect be “fore-
seeable,” although, again, the Restatement uses that
language. Instead, Congress stated that only one of the
three types of effects recognized under international law
5It will be observed that if this factor is present, and if the case
involves a crime or tort, then subsection (a) is satisfied, and there
is no need for further analysis. Therefore, subsection (b) can only
apply to cases which by definition are neither criminal nor tort.
a a iN a
18
must be present to satisfy the FSIA, and that effect is a
“direct effect.” Given this clear distinction in the two
statutes, it is incredible that Judge Weinstein in Harris
concluded that, “[A]s derived from section 18 of the |
Restatement (Second), of the Foreign Relations Laws of ;
the United States direct effect refers to an effect which is |
both substantial and the direct and foreseeable result of
conduct outside the jurisdiction.” 481 F.Supp at 1063. Thus, a
“direct” effect is one which is direct and then some. This is
a novel approach to statutory construction, which generally
posits that the decision to employ one word, and the corol-
lary decision not to employ other available words, means
that the rejected words are not intended. Russello v. United
States, —— U.S. , 104 S. Ct. 296, 300 (1983). Harris
rules precisely the opposite. Although the Restatement
speaks of “direct,” “substantial,” and “foreseeable” effects,
and although Congress only borrowed the single concept of
“direct” effect in drafting. the FSIA, Harris has held that
the FSIA’s direct effect is somehow a generic concept
enveloping every type of effect of which the Restatement
speaks. Under Harris, the FSIA “direct effect” is not only
direct, it is also substantial and foreseeable.
Harris has had a substantial impact in later cases which
have uncritically relied on its ‘construction’ of direct effect
as meaning more than direct, i.e., direct, substantial, and
foreseeable. Judge Weinfeld of the Southern District of
New York also held that the direct effects clause “can only
be invoked aaa roe effect within the territory
‘occurs as a direct nd foreseeable result of the conduct out-
side the territéry.’” Verlinden, B.V. v. Central Bank of
Nigeria, 488 F.Supp. 1284, 1298 (S.D.N.Y. 1980), aff’d on
other grounds, 647 F.2d 320 (2d Cir. 1981), rev’d on other
grounds, ——U.S.——, 103 S.Ct. 1962 (1983), quoting
Harris, supra, 481 F.Supp. at 1062-63 [emphasis in Ver-
Se a ae ae een
19
linden]. The only authority for Verlinden’s conclusion is the
demonstrably erroneous decision of Judge Weinstein in
Harris.°
The Ninth Circuit has given further life to this faulty
reading of the Restatement in both the present case and in
Berkovitz v. Islamic Republic of Iran, 735 F.2d 329, 332
(9th Cir. 1984).’ In both cases the court, in tort actions,
has applied the broadened definition of the “direct effects”
clause as derived from subsection (b) of the Restatement
and has ignored subsection (a) of the Restatement (which,
as demonstrated above, is the only subsection that can
logically apply in a tort action) without any critical analysis
beyond the rote citation of Harris.
Petitioners do not by the above argument concede that
the direct effects which they suffered in the United States
as a result of the actions of the respondents were not in fact
“substantial” and “foreseeable” under the Restatement
meaning. The district court fully addressed this issue in
finding that this case satisfied the requirements of both
sections of the Restatement, § 18:
Section 18(b) is satisfied because the conduct and
effect alleged by plaintiffs constitute elements of the
alleged causes of action. The loss of a husband and
father is “substantial” by any definition, as is the loss
of MAF’s airplane purchased at over four hundred
thousand dollars. The harm suffered by plaintiffs was
foreseeable. GAF sold the aircraft to MAF knowing
that it would be used outside of the United States.
It was foreseeable that if the aircraft was defective and
unreasonably dangerous the destruction of the aircraft
*“Foreseeability and substantiality are required by neither the
statute nor the nature of effects jurisdiction.” Note, Effects Juris-
diction Under the Foreign Sovereign Immunities Act and the Due
Process Clause, 55 N.Y.U.L. Rev. 474, 505, n. 173 (1980).
’The discussion of the “direct effect” clause in Berkovitz is clearly
dicta since that case initially held that plaintiff's claim did not
derive from commercial activity in the first place and thus
§ 1605(a)(2) and the direct effects clause were improperly invoked.
20
and the death of its pilot could result. Finally, there
can be no more “direct” effect on a pilot’s family than
the effect resulting from the crash of a negligently
designed and unreasonably dangerous aircraft.
(Mem. Op. 16-17).
The final argument which demonstrates the error of the
Ninth Circuit opinion is a reductio ad absurdum: if the
plaintiffs in the present action have not been affected in
the United States by the commercial tort of a foreign sover-
eign committed abroad, who ever will be? The only way that
the effect could be more direct is for the crash to have
occurred in the United States, and this situation is sep-
arately provided for in § 1605(a) (2). The statute as now
interpreted by the Ninth Circuit has been rendered nuga-
tory. This cannot have been the intent of Congress in clearly
specifying this theory of establishing liability, and in creat-
ing “a comprehensive set of legal standards governing claims
of immunity in every civil action against a foreign state or
its political subdivisions, agencies or instrumentalities.” Ver-
linden, 103 S.Ct. at 1968 [emphasis added]. “[T]he legis-
lative history does not indicate that direct effect jurisdiction
should turn on the place of injury, despite the ease with
which the drafters of the Act might have so indicated.”
Note, 13 N.Y.U.J. of Int.L. & Pol. at 597.
The Ninth Circuit’s position allows foreign states to
escape any tort liability for their commercial conduct no
matter how negligent, culpable, er sutrageous their acts
may be so long as the injured American citizens die on
foreign soil. As to property owners who suffer losses from
torts abroad, the statute has been read out of existence.
The Ninth Circuit has held that the fact that a $400,000
airplane may have been lost abroad due to another nation’s
tortious conduct has no effect on a corporation in America,
no matter that the corporation might have to replace the
plane, might have to indemnify others for the loss, might even
21
suffer a business reversal leading to insolvency. All of these
effects are simply “indirect” under the Ninth Circuit view.
743 F.2d at 675. But it is clear that the corporation suffered
no economic injury at the moment of the plane crash in
Indonesia. It would only be later that recompense would
have to be made. For instance, if the plane had been
bought on credit, then the only injury suffered occurs at
the point in time that they are required to make good on
the outstanding payments. The place of injury rule in com-
mercial cases is “a senseless factor upon which to base juris-
diction.” Note, 13 N.Y.U.J. of Int.L. & Pol. at 598. Every
injury for which the plaintiffs in this case seek recovery
was suffered in the United States. This is precisely the sort
of injury for which § 1605(a) (2) was designed to provide
a remedy.
THE IMPORTANCE OF THIS CASE
REQUIRES REVIEW OF THE DECISION BELOW
The issues raised by the present petition highlight the
unsettled nature of the law in this area and demonstrate
the importance for this Court to review the instant case.
Review on writ of certiorari is desirable in the present case
due to the existence of two of the specific considerations
governing review embodied in Rule 17 of the Rules of the
Supreme Court: (1) “a federal court of appeals has ren-
dered a decision in conflict with the decision of another
federal court of appeals on the same matter,” and (2) a
“federal court of appeals has decided an important question
of federal law which has not been, but should be, settled
by this Court.” Rule 17.1(a) (c).
Conflict Among the Circuits:
There is a conflict among the circuit courts of appeal on
the question of whether a plaintiff who has suffered dam-
ages in the United States from the act of a foreign sovereign
22
abroad has suffered\a “direct effect in the United States”
sufficient to satisfy that exception to immunity under the
FSIA. 28 U.S.C. § 1605(a) (2). The Ninth Circuit in the
present case and by dicta in the case of Berkovitz v. Islamic
Republic of Iran, 735 F.2d 329 (9th Cir. 1984), has held
that plaintiffs who have suffered such damages are not
directly affected by the action of the foreign sovereign. The
District of Columbia Court of Appeals also appears to sup-
port this view. Upton, supra, aff'd mem., 607 F.2d 494
(D.C. Cir. 1979).*
Taking the contrary position is the Second Circuit. In the
Nigerian cement cases, that court interpreted contracts for
the purchase of cement which called for payment to be
made in the United States. It was Nigeria’s failure to make
such payment, following a refusal of shipment in that coun-
try, which was held to have a direct effect on the American
corporations who suffered financial losses thereby. Texas
Trading & Milling Corp. v. Federal Republic of Nigeria, 647
F.2d 300 (2d Cir. 1981), cert. denied, 454 U.S. 1148 (1982).
The same rule obtains in the Eleventh Circuit, Harris Corp.
v. Nat’l. Iranian Radio & Television, 691 F.2d 1344, 1351
(11th Cir. 1982), and the Third Circuit also appears to sub-
scribe to this position. See, Velidor v. L/P/G Benghazi, 653
F.2d 812, 820, n. 13 (3d Cir. 1981), cert. dismissed, 455
U.S. 929 (1982); Note, Establishing Jurisdiction Under the
Commercial Activities Exception to the Foreign Sovereign
Immunities Act of 1976, 19 Houston Law J. 1003, 1004, n. 7
(1982).
*But see Persinger v. Islamic Republic , 729 F.2d 835,
842-843 (D.C. Cir. 1984), holding that the commercial tort excep-
tion under the FSIA (§ 1605(a)(2)) is broader than the non-
commercial tort exception for torts committed in the United States
(§ 1605(a)(5)). This is inconsistent with the Ninth Circuit’s holding
that, in effect, the scope of both sections is the same since at least
a part of the commercial tort must also, in the Ninth Circuit’s view,
occur in the United States.
23
The Texas Trading opinion contains the most thorough
discussion of the issues involved in the assertion of juris-
diction over a foreign sovereign in the courts of the United
States. This is understandable since the Second Circuit
has issued more’ FSIA opinions than have all of the other
federal circuits combined. See, Note, 19 Houston L. J., at
1004, n. 7. The opinion of the Second Circuit should be
entitled to great weight in this area involving international
commercial transactions. Because the opinion of the Ninth
Circuit herein directly contradicts the law of effects juris-
diction as established by the Second Circuit, the present
case should be reviewed by this Court in order that this
conflict can be resolved.
“For obvious reasons, it is highly desirable to avoid circuit
conflicts in the sensitive area of sovereign immunity.” Ven-
cedora Oceanica Navigacion v. Compagnie Nationale, 730
F.2d 195, 203 (5th Cir. 1984). The existence of this conflict
among the circuits regarding the interpretation of the “direct
effects” clause has been noted by many courts and commen-
tators. In particular, the conflict between Texas Trading and
the district court opinions on which the Ninth Circuit relies
herein has been recognized. Maritime Intern. Nominees v.
Republic of Guinea, 693 F.2d 1094, 1111 (D.C. Cir. 1982).
See also, Persinger v. Islamic Republic of Iran, 729 F.2d
835, 844 (D.C. Cir. 1984), Edwards, J., dissenting and con-
curring. Even an Australian commentator has noted the
“rather divergent results” obtained by the American courts
in interpreting the FSIA, Crawford, A Foreign State Im-
munities Act for Australia?, 8 Austral. Y.B. 71, 90-91, n.87
(1983).
To be sure, the Ninth Circuit has attempted to minimize
the conflict between its holdings and those of the Second,
Third, and Eleventh Circuits, but those efforts have been
based on obvious misreadings of the facts. Texas Trading
is said to be distinguishable because there, “no injury oc-
24
curred until the American companies were denied payment
from a New York bank .. .” Lynne, 743 F.2d at 675. The fact
that a “New York bank,” Morgan Guaranty Trust, was
involved is stressed three times. Id., at 675. The Ninth Cir-
cuit is mistaken in its facts.
Some but not all of the cases ruled by the Second Circuit’s
opinion in Texas Trading involved payment through a New
York bank. That decision decided four cases consolidated
on appeal. In at least one of the other cases, Chenax Maj-
esty, Inc. v. Fed. Rep. of Nigeria, there was no American
bank involved. Rather, payment was to be made by letter of
credit through a West German bank. 647 F.2d at 303. In
any event, the role of the bank is insignificant: “As in Ver-
linden, Morgan Guaranty’s role [in Texas Trading] was
deemed insignificant to the jurisdictional inquiry.” Note, 13
N.Y.U.J. of Int’l L. & Pol. at 591, n. 132.°
Subsequent cases arising from the same incident have
also been decided consistently with Texas Trading although
lacking the diacritical fact which the Ninth Circuit relies
on. In Reale Intern. Inc. v. Fed. Republic of Nigeria, 562
F.Supp. 54 (S.D.N.Y. 1982), it was held that a direct effect
was suffered in the United States by the breach of contract
even though payment on the letter of credit could have been
made through either a bank in the United States or one in
Spain. Id., at 56-57, relying on Chenax. Clearly, in all of the
Nigerian concrete cases it is not the location of the financing
bank which is relevant to the “direct effects” issue. Rather,
it is the fact that American companies suffered undisputed
financial losses because of the action of the State of Nigeria
outside of the United States. “Texas Trading, [held] that
financial loss to a United States corporation would satisfy,
*Also, the significance of the location of the bank may be factually
irrelevant. In Verlinden, supra., 488 F.Supp. at 1284, it was noted
that since Morgan Guaranty Trust was only a correspondent bank,
its contacts could not be the predicate for jurisdiction. The same
factual distinction is relevant to the Texas Trading cases.
25
without more, . . . the statutory requirement of a ‘direct
effect.’” Wyle v. Bank Melli of Tehran, Iran, 577 F.Supp. |
1148, 1159 (N.D. Cal. 1983). The Missionary Aviation Fel-
lowship, a United States corporation, has undoubtedly suf-
fered a financial loss. This, without more, would satisfy the
direct effects requirement in the Second Circuit. Texas
Trading, supra.
The Ninth Circuit also errs in its attempt to reconcile
its position with that taken in In re Rio Grande Transport,
Inc., 516 F.Supp. 1155, 1163-64 (S.D.N.Y. 1981). See Berko-
vitz, 735 F.2d at 332. Rio Grande is extremely close on its
facts to the instant case. It appears to be the only other
reported case in which a court has decided the “direct
effects” issue in an action involving both property loss to
a corporation and personal injury damages arising from the
same event. The district court held that it had jurisdiction
over both types of claims; over the property claims because
the financial loss to the shipping company in the United
States was a direct effect of a shipwreck abroad, and over
the personal injury claims because they were pendent to
the first claims. 516 F.Supp. at 1163-1164. The finding that
the court had pendent jurisdiction over the death claims
relieved it of the responsibility for determining whether the
plaintiffs suffered any direct effects in the United States
from their @cedents’ deaths abroad, but the Ninth Circuit
derived a holding on this undecided issue from the Rio
Grande case. Berkovitz, 735 F.2d at 332. Had the true hold-
ings of Rio Grande been endorsed by the Ninth Circuit, as
they were by the district court below (Mem.Op. 36, n. 17),
then jurisdiction would have been found to hear all of the
petitioners’ claims in this present suit. But, even if Rio
Grande is read as prescribing different results in property
cases than in death cases, the Ninth Circuit has still erred
in denying to all of the present plaintiffs jurisdiction to
recover for their losses in this country.
26
The present Petition presents two discrete issues of sub-
ject matter jurisdiction under the FSIA. Petitioners contend
that both issues should be decided the same: wrongful death
claimants are as direcily affected by torts committed abroad
as are property claimants. But, whether this position is
correct, or whether the two classes of claimants should be
treated differently, or whether, as the Ninth Circuit has
held, the claims of both classes should be rejected, it is
clear that there is widespread disagreement on when and
under what circumstances a “direct effect” is suffered in
the United States from the commercial activity of a foreign
sovereign abroad. For that reason, this petition should be
granted and the decision below reviewed by this Court.
Importance of Unresolved Federal Question:
The present Petition, presenting a question of interpreta-
tion of the “direct effects” clause of the Foreign Sovereign
Immunities Act, involves an unresolved question of federal
law which this Court has not previously addressed. Although
the specific question presented is one of interpretation under
a federal statute, the resolution of the question will also
have a significant impact on international law and on cer-
tain areas of procedure in the state courts.
One of the announced purposes of the Foreign Sovereign
Immunities Act was to bring consistency and uniformity
to the issue of when and under what circumstances foreign
sovereigns may be sued in the courts of the United States.
House Report No. 94-1487, p. 7 (1976), reprinted in [1976]
U.S.Code Cong. & Ad.News 6604. This Court has previ-
ously noted that the Act also seeks “to clarify the governing
standards” in this area of the law. Verlinden B.V. v. Central
Bank of Nigeria, ——U.S. ——, 103 S.Ct. 1962, 1968 (1983).
The unusual importance of the sovereign immunity issue
obviously derives from the nature of the defendant. Before
the adoption of the FSIA, it was common for the state
department to intervene in questions of immunity whenever
27
a foreign government was joined in a lawsuit in this country.
Congress and this Court have both recognized the “potential
sensitivity of actions against foreign states and the impor-
tance of developing a uniform’ body of law in this area.”
Verlinden, 103 S.Ct. at 1969, quoting H.R,Rep.No. 94-1487,
at 32. The Ninth Circuit has in the present case, by adopt-
ing a position different from that of the Second Circuit, intro-
duced an undesirable degree of uncertainty into this
sensitive area of law and foreign policy. As such, the opinion
below directly contravenes the goals of the FSIA. Instead
of bringing regularity and uniformity td the law of sovereign
immunity, the Ninth Circuit has created a dual system of
law whereby a foreign sovereign is immune from the direct
effects of its tortious conduct in some areas of the United
States, but answerable in tort for the very same conduct
in other areas of the United States. Indeed, it is quite easy
to imagine this disparate treatment arising from a single
incident such as a plane crash involving passengers from
both New York and California. Unless this Court reviews
the present case and provides a uniform answer to the
question decided below, it would appear that the estates
of the New York passengers could successfully sue the
foreign state airline or aircraft manufacturer, while the
survivors of the California passengers would be deemed,
under the Ninth Circuit’s view, to have suffered no direct
effect from the deaths abroad. Similarly, the question of
whether a corporation could recover for the loss of its air-
craft abroad will turn on the wholly irrational fact of
whether the corporation is located in New York or in
California.
The FSIA is also unusual in that it prescribes the juris-
dictional bases for sovereign immunity both in the state
as well as the federal courts. 28 U.S.C. §§ 1602, 1604-1605.
Therefore, the uncertainty created by the opinion of the
Ninth Circuit in this case will be amplified by the course
of future litigation in the states. Should the various state
28
courts consider themselves bound by the decisions of their
respective federal circuits on this question, then a foreign
sovereign will be amenable to suit in New York as well as
in the Second Circuit, just as it will not be amenable in
California as in the Ninth Circuit in any wrongful death
case or other case with facts similar to the present one.
There is also the possibility that the state courts will
interpret the federal statute differently and present the truly
anomalous situation of a foreign sovereign being immune to
suit in a particular federal circuit while amenable to suit
in a state within that same circuit. Such incentives to forum
shopping, while always undesirable, are wholly unacceptable
when the defendant who may feel abused by the disparate
legal rules is a foreign sovereign. For this further reason,
the present case should be reviewed by this Court in order
to bring American law into a consistent position on this
sensitive question of jurisdiction and immunity in the area
of foreign affairs.
This case also presents questions of unusual importance
because of the subject matter of the suit: an airplane crash
involving an aircraft manufactured by a state-owned manu-
facturing company. In a recent year, it was calculated that
there were approximately one hundred major foreign air
carriers and fifty major foreign air frame and component
suppliers operating in the world. Cook, Counting the
Dragon’s Teeth: Foreign Sovereign Immunity and Its
Impact On International Aviation Litigation, 46 Journal
of Air Law & Commerce 687, 705 (1981). At least 37 of
these foreign carriers appear to be wholly owned by a
foreign state or are over 50% state-owned. Id., at 705, n.
86. (See Appendix D) It is also common for foreign states
to manufacture airplanes for both commercial and private
use. Id., at 706, n. 86. From these numbers alone, it is
apparent that there is a very great potential for the reoc-
currence of the exact conflict presented by the facts of the
29
present case. It is important that this case be heard in
order that those who will potentially suffer liability under
the FSIA be made aware of the exact nature of the liability
imposed or assumed.
The failure to provide parties who have suffered damages
in the United States with any opportunity for relief in the
courts of this country, as the Ninth Circuit’s opinion does,
will have a substantial adverse affect on international trade
. and foreign relations. Indeed, the effect of the Ninth Cir-
cuit’s decision will ultimately impact adversely on the
Commonwealth of Australia in their business dealings. This
consideration was specifically recognized by early critics of
the United States’ former policy of absolute immunity:
To deprive parties injured in the ordinary course of
trade of their common and well-established legal
remedies would not only work great hardship on them,
but in the long run it would operate to the disadvantage
and detriment of those in whose favor the immunity
might be granted. Shippers would hesitate to trade with
government ships, and salvors would run few risks to
save the property of friendly sovereigns, if they were
denied recourse to our own courts and left to prosecute
their claims in foreign tribunals in distant lands.
The Pesaro, 277 Fed. 473, 481 (S.D.N.Y. 1921), opinion
later vacated, see Berizzi Bros. Co. v. S. S. Pesaro, 271 U.S.
562, 576 (1926). It is clear that problems of this nature,
as well as the growth in the governmental conduct of com-
mercial activities throughout the twentieth century, finally
prompted the government of the United States to adopt the
restrictive theory of sovereign immunity.
The present case well-illustrates the hardship foreseen by
the court in The Pesaro. The Ninth Circuit has told the
Missionary Aviation Fellowship, Inc. that even though the
plane which Australia sold them may have been defective,
no recovery can be obtained because the plane did not crash
in the United States. But, had they purchased the plane
30
from a private manufacturer, they could have maintained
suit in an American court wherever the plane may have
crashed. Can there be any doubt that when MAF purchases
a replacement aircraft they will not again make the mistake
of purchasing the plane from a government manufacturer?
On the other hand, if this Court should review the decision
of the Ninth Circuit and reverse its judgment, then the
Commonwealth of Australia, as well as the numerous other
state manufacturers of aircraft and other products, will be
able to market their goods on an equal footing with private
‘manufacturers. And, more importantly, unwary American
purchasers of products manufactured abroad will not have
their legitimate product liability claims defeated by the
disingenuous argument that their substantial financial losses
are not a ‘direct effect’ of the loss-producing event.
CONCLUSION
For the foregoing reasons, the petitioners, R. C. and
Donna Lynne, and the Missionary Aviation Fellowship, Inc.,
pray that this Honorable Court grant the instant Petition
for Writ of Certiorari and, upon review, reverse the decision
of the Ninth Circuit Court of Appeals, and reinstate the
Order of the District Court for the Central District
of California denying respondents’ claims of sovereign
immunity.
Respectfully submitted,
Darrell Panethiere
Law Offices of Windle Turley, P.C.
1000 University Tower
6440 N. Central Expressway
Dallas, Texas 75206
214/691-4025
Counsel for Petitioners.
APPENDIX A
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
-
NO. 83-6272
in
DC # CV 80-03198-CBM
mo
—
AUSTRALIAN GOVERNMENT ArrcrarT Factories and THE
COMMONWEALTH OF AUSTRALIA,
Petitioners-Appellants,
Us.
R. C. Lynne, Executor and Personal Representative of the
Estate of Jmummy SHERMAN Lynne, Deceased; MISSIONARY
AVIATION FELLOWSHIP, INc.; DONNA Lynng, Individually
and as Parent and Next Friend of Kevriy Lynne and
Kurtis Lynne, Minors,
Respondents-Appellees.
OPINION
Appeal from the United States District Court
for the Central District of California
Consuelo B. Marshall, District Judge, Presiding
Argued May 9, 1984
Submitted May 30, 1984
Before: ELY, TANG and BOOCHEVER, Circuit Judges.
TANG, Circuit Judge:
The Commonwealth of Australia and Government Air-
craft Factories bring an interlocutory appeal of the district
court’s order denying their motion to dismiss for lack of
subject matter jurisdiction, personal jurisdiction and
improper venue. We reverse.
A-2
L
Government Aircraft Factories, wholly owned and
operated by the Department of Industry and Commerce
of the Commonwealth of Australia, produces military and
civilian aircraft for use throughout the world. In 1976, it
leased one of its planes, a Nomad 22B, to Missionary
Aviation Fellowship (MAF), a Caiifornia nonprofit cor-
poration that provides transportation and radio services to
missionary operations in developing countries. In 1977, MAF
exercised its option to buy the plane in Avalon, Australia.
On July 23, 1979, the plane crashed in Indonesia, killing
its American pilot, J. S. Lynne.
MAF and Lynne’s survivors brought an action in the
Central District of California against Government Aircraft
Factories and the Commonwealth of Australia alleging that
the defendants were liable under strict liability and neg-
ligence theories for defects in the design, manufacture,
testing, inspection, sale, and service of the aircraft. Lynne’s
survivors seek damages for wrongful death and MAF claims
damages for the loss and destruction of the aircraft.
The defendants moved to dismiss the complaint for lack
of subject matter jurisdiction, personal jurisdiction and
improper venue, arguing that the Commonwealth and GAF,
which is not legally distinct from the Commonwealth, are
immune from suit under the Foreign Sovereign Immunities
Act, 28 U.S.C. §§ 1330, 1602-1611 (1976) (FSIA). They
alleged that they lacked sufficient contacts with the forum
for the assertion of personal jurisdiction and that venue was
ee, SS Se ee ee ee ee
umbia.
The district court denied the motion to dismiss on June 24,
1983, and certified its order on August 19, 1983, for immed-
iate. appeal. This court granted permission for an inter-
locutyry gppeal under 28 U.S.C. § 1292(b).
A-3
The Australian government contends that the district
court erred in its conclusion that it could assert subject
matter jurisdiction over this case under an exception to the
general rule of foreign sovereign immunity. We agree.
Under the FSIA, a foreign sovereign maintains immunity
from suit for its public acts but not for its commercial acts
causing a direct effect in the United States. H. R. Rep.
94-1487, pp. 7-8, reprinted in 1976 Code Cong. & Ad. News
6605-06; Verlinden v. Central Bank of Nigeria, 103 S.Ct.
1962, 1968 (1983). The statutory scheme of the Act imple-
ments the doctrine of immunity but specifies several excep-
to the general rule of foreign sovereign immunity.
SC. §§ 1605-07. If one of these exceptions applies,
listrict court may assert subject matter jurisdiction
Act. 28 U.S.C. § 1330. The district court held
exception ryt in § 1605(a) (2) established the
or subject matter jurisdiction. That section provides
foreign state shall not be immune in any case in
is based “upon an act outside the territory
ited States in connection with a commercial
the foreign state elsewhere and that act causes
a direct effect in the United States.”
Concluding that the death of the pilot and the damage to
the plane overseas caused “direct effects” to the pilot’s sur-
vivors and the California corporation which owned the
plane, the district court held that it could assert jurisdiction
over the case in accordance with § 1605(a) (2).
The commercial nature of the Australian government’s
decision to market its aircraft is not disputed. The issue
before us is whether the injuries sustained by persons and
entities inside the United States as a result of the plane
crash abroad are sufficiently “direct” to fall within “direct
effect” exception to the general rule of sévereign immunity.
This court has recently addressed the question of whether
the effect on survivors of a death occurring abroad as a
Hee
es
SEE
8
rs.
&
2.
A-4
result of a foreign sovereign’s commercial activity consti-
tutes a direct effect within the meaning of the FSIA. In
Berkovitz, v. Islamic Republic of Iran, 735 F.2d 329, (9th
Cir. 1984), an American citizen was murdered in Iran by
an Iranian revolutionary group. His survivors brought an
action against Iran for wrongful death, but the district court
dismissed the case, concluding that Iran was protected by
sovereign immunity. This court affirmed, holding that the
FSIA exception for foreign actions abroad causing direct
effects in the United States was not applicable. The court
concluded that the direct effect of the Iranian action was
the death of the victim inside Iran. The incidental effect
on the victim’s survivors in the United States, however, was
insufficient to constitute a direct effect. “‘In such cases,’ ”
the court observed, “‘the injury to the victim’s bereaved
relatives living in the United States is not sufficiently
“direct” or “substantial” to support the assertion of Federal
jurisdiction.’ ” Id. at 332 (quoting Verlinden, B. V. v. Central
Bank of Nigeria, 488 F. Supp. 1284, 1298 (S.D.N.Y. 1980),
aff'd on other grounds, 647 F.2d 320 (2d Cir. 1981), rev’d on
other grounds, 103 S.Ct. 1962 (1983). See also Harris v.
VAO Intourist, Moscow, 481 F. Supp. 1056 (E.D.N.Y. 1979)
(injuries to family of American killed in Moscow hotel fire
not a “direct effect”); Upton v. Empire of Iran, 459 F. Supp.
264 (D.D.C. 1978), aff'd without opinion, 607 F.2d 494
(D.C. Cir. 1979) (effect on family of American killed when
Iranian Airport terminal collapsed not a “direct effect’).
Berkovitz controls the disposition of this case. The direct
effects of the plane crash in Indonesia are the loss of the
pilot’s life and the destruction of the aircraft. Under the
reasoning of Berkovitz, the injuries to the pilot’s family,
though tragic and painful, are indirect consequences of
the accident and thus cannot support the assertion of
subject matter jurisdiction under the direct effect exception
to foreign sovereign immunity.
Similarly, the property damage claim of Missionary Avia-
tion Fellowship for the loss of the aircraft is an
insufficient basis to assert subject matter jurisdiction under
§ 1605 (a) (2).
A-5
MAF seeks to impose liability on the defendants for the
losses sustained from its purchase of an allegedly defective
aircraft. The financial loss it seeks to recover, however, is
not sufficiently “direct” to overcome the general rule of
sovereign immunity. The direct effect of the alleged miscon-
duct was the destruction of the aircraft and the loss of its
use when it crashed in Indonesia. The financial loss, includ-
ing the cost of replacement, which was sustained in the
United States by MAF is an indirect consequences of the
plane’s destruction and the loss of its functional use.
The plaintiff's reliance on Texas Trading and Milling
Corporation v. Federal Republic of Nigeria, 647 F.2d 300
(2d Cir. 1981), cert. denied, 454 U.S. 1148 (1982), is mis-
placed. There, American companies entered into contracts
with Nigeria under which the companies would ship cement
to Nigeria in exchange for payments to be received through
a New York bank. When Nigerian ports became blocked,
Nigeria repudiated the contracts and the companies sued.
Nigeria claimed immunity under the Foreign Sovereign
Immunities Act, but the second circuit, relying on the “direct
effect” exception to sovereign immunity, held that the dis-
trict court could properly assert subject matter jurisdiction
over the case. 647 F.2d at 313. The court reasoned that the
companies suffered a “direct” effect because “[t]hey were
the beneficiaries of the contracts that were breached” and
the Nigerian breach precluded payment in the United States
through a New York bank. Jd. at 312. The court did not
have to decide whether an injury to an American corpo-
ration overseas would be sufficient in itself to cause an
effect inside the United States. The court expressly left
open the question of whether a company injured overseas
suffers a direct effect in the United States. Id. at 312 n.5.
We conclude that the alleged injury here was not a
sufficiently direct effect for the assertion of subject matter
jurisdiction. Unlike Texas Trading, where no injury occurred
until the American companies were denied payment from a
New York bank as a result of Nigeria’s repudiation of
cement contracts, the direct injury to the American interest
O
ae
A-6
in this case occurred overseas where the loss of the plane
took place.
We conclude that the injuries alleged in this case were
indirect effects of the plane crash overseas. Hence, the
“direct effect” exception of 28 U.S.C. § 1605(a) (2) is not
available to these plaintiffs to abrogate the general rule of
foreign sovereign immunity. Because we conclude that the
district court lacked subject matter jurisdiction under the
FSIA, we need not address the personal jurisdiction or
venue issues.
The order of the district court denying the motion to
dismiss for lack of subject matter jurisdiction is REVERSED
and the cause is REMANDED for entry of an order of
wold
DATED: September 21, 1984
APPENDIX B
%
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
oo
—"
CV 80-3198
-
—_
ORDER AND MEMORANDUM
OPINION DENYING DEFENDANTS’
MOTION TO DISMISS THE COMPLAINT
R. C. Lynne, Executor and Personal Representative of the
Estate of JIMMY SHERMAN LYNNE, Deceased; MISSIONARY
AVIATION FELLOWSHIP, INc.; DONNA LYNNE, Individually
and as Parent and Next Friend of Kevin LYNNE and
Kurtis LYNNE, Minors,
Plaintiffs,
vs.
AUSTRALIAN GOVERNMENT AIRCRAFT Factories and THE
COMMONWEALTH OF AUSTRALIA,
Defendants.
This matter is before the court on defendants’ motion to
dismiss the complaint for lack of subject matter jurisdiction,
lack of personal jurisdiction and for improper venue. The
underlying lawsuit is based upon the crash of an Australian-
made Nomad 22B aircraft, and the death of its pilot, Jimmy
S. Lynne (“J.S. Lynne”). Plaintiffs allege that defendants
are liable for the crash under either a negligence or strict
products liability theory. They seek damages for wrongful
death and the destruction of the aircraft.
Defendants Government Aircraft Factories (“GAF’’) and
the Commonwealth of Australia claim that they are immune
from suit under the doctrine of sovereign immunity, codi-
fied in the Foreign Sovereign Immunities Act of 1976
B-2
(“FSIA”), 28 U.S.C. § 1602 et. seq.’ Specifically, defendants
argue that this court lacks subject matter and personal
jurisdiction because plaintiffs’ action does not come within
any of the exceptions to immunity enumerated in the FSIA.
Alternatively, defendants urge that venue is improper in
this court and that the case should be transferred to the
United States District Court for the District of Columbia.
Defendants’ motion is denied on all grounds. In reaching
its decision, the court was faced with difficult issues requir-
ing interpretation of an act of Congress — the FSIA — that
is as vaguely worded as it is complex. The court was also
faced with issues that have not yet been addressed by the
Ninth Circuit. The court believes, nevertheless, that its
decision to exercise jurisdiction over defendants gives effect
to the spirit and intent behind Congress’ enactment of the
FSIA. .
BACKGROUND FACTS
Plaintiffs in the instant suit are Missionary Aviation Fel-
lowship (“MAF”), a nonprofit California corporation that
1H.R. Rep. No. 94-1487, 94th Cong., 2d Sess. 6604 (1976)
(hereinafter “(House Report”) accompanied the enactment of the
FSIA. In the House Report, Congress explains that the intent of
the Act is to codify.:
the ‘restrictive’ principle of sovereign immunity, as presently
recognized in international law . . . Under this principle, the
immunity of a foreign state is ‘restricted’ to suits involving a
foreign state’s public acts (juri imperii) and does not extend
to suits based on its commercial or private acts (jure gestionis. )
This principle was adopted by the Department of State in 1952
and has been followed by the courts and by the executive
branch ever since . . . [I]t is regularly applied against the
United States in suits against the United States government
in foreign courts . . . [T]he bill would insure that this
restrictive principle of immunity is applied in litigation before
U.S. courts . . . A principle purpose of this bill is to transfer
the determination of sovereign immunity from the executive
to the judicial branch, thereby reducing the foreign policy
implications of immunity determinations and assuring litigants
that these often crucial decisions are made on purely legal
grounds and under procedures that insure due process. House
Report at 6605, 6606.
B-3
provides air transportation and radio services for missionary
programs to developing nations; R.C. Lynne, executor and
personal representative of the estate of J.S. Lynne; and
Donna Lynne, J.S. Lynne’s widow, who sues in her indi-
vidual capacity and as guardian of the decedent’s two minor
children. J.S. Lynne was an employee of MAF.
Defendant GAF is in the business of making airplanes.
GAF is wholly owned by the Australian government.? GAF
produces both military and civilian aircraft: The record is
clear that GAF sells its airplanes all over the world. GAF
manufactured the Nomad 22B aircraft that is the subject
of this litigation.
According to defendants, GAF, on behalf of the Australian
government, agreed on or about September 30, 1976 to
lease the Nomad 22B to MAF for one year with an option
to buy. Defendants allege that the negotiations for this lease
took place in Fisherman’s Beard, Australia. The aircraft was
’ delivered at Avalon, Australia. MAF exercised its option
to purchase the aircraft on September 1, 1977, in Avalon.
On July 23, 1979, J.S. Lynne was killed when the MAF-
owned Nomad 22B he was piloting crashed somewhere near
Langda Mission in Irian Jaya, Indonesia.
Plaintiffs contend that the crash of the aircraft and J.S.
Lynne’s death occurred as a result of defects and negligence
in the design, testing, manufacture, inspection, sale and
after sale service of the Nomad 22B. Plaintiffs. further assert
that jurisdiction and venue properly lie with this court, pur-
suant to the FSIA.
?GAF claims sovereign immunity on the grounds that it is the
same legal entity as the Commonwealth of Australia. GAF bases
this contention on the fact it was formed by the Australian govern-
ment primarily for naticnal defense purposes, pursuant to that
country’s Supply and Development Act of 1939. Clearly, GAF’s
production of war planes are acts by a sovereign power. These are
public acts under the FSIA. But GAF’s sideline of selling non-
military airplanes to private buyers throughout the world constitutes
“commercial” activity and brings GAF under the jurisdiction of
this court as provided for by the FSIA.
B-4
The task before this court is one of construction. The
FSIA carves out broad exceptions to sovereign immunity
where an American is involved in a suit arising out of the
commercial activities of a foreign state.* The exceptions to
immunity enumerated in the FSIA cover three basic situa-
tions out of which a lawsuit may arise and be properly
heard in courts of the United States: where the suit is
based on commercial activity in the United States; where
the suit is based on an act in the United States that is
itself based on commercial activity elsewhere; and finally,
where the suit is based on an act outside of the United
States in connection with a commercial activity elsewhere
and that act hes a direct effect in the United States. Sec-
tion 1605(a) (2). Plaintiffs claim that their suit falls in
this last category. This court agrees with plaintiffs. The
basis for the court’s decision is an inquiry that must begin
with a careful reading of the FSIA itself.
8’The House Report indicates that Congress intended that “com-
mercial activity” include
a broad spectrum of endeavor, from an individual commercial
transaction or act to a regular course of commercial conduct.
A ‘regular course of commercial conduct’ includes the carrying
on of a commercial enterprise such as a mineral extraction
company, an airline or a state trading corporation. Certainly,
if an activity is customarily carried on for profit, its commercial
nature could readily be assumed. At the other end of the
spectrum, a single contract, if of the sam. character as a
contract which might be made by a private person, could
constitute a ‘particular transaction or act.’
[I]t is the essentially commercia! nature of an activity or trans-
action that is crucial.
The courts . . . have a great deal of latitude in determining
what is a ‘commercial activity’ for purposes of this bill .. .
Activities such as a foreign government’s sale of a service or
of a product, its leasing of property, its borrowing of money,
its employment or engagement of laborers, clerical staff or
public relations or marketing, or its investment in a security of
an American corporation, would be among those included within
the definition. House Report at 6614, 6615.
B-5
RELEVANT PROVISIONS OF TITLE 28,
THE FOREIGN SOVEREIGN IMMUNITIES ACT.
Section 1330. Actions against foreign states
(a) The district courts shall have original jurisdic-
tion without regard to amount in controversy for any
nonjury civil action against a foreign state as defined
in section 1603(a) of this title as to any claim for
relief in personam with respect to which the foreign
state is not entitled to immunity either under sections
1605-1607 of this title or under any applicable inter-
national agreement.
(b) Personal jurisdiction over a foreign state shall
exist as to every claim for relief over which the district
courts have jurisdiction under subsection (a) where ser-
vice has been made under section 1608 of this title.
(c) For purposes of subsection (b), an appearance
by & foreign state does not confer personal jurisdiction
with respect to any claim for relief not arising out of
any transaction or occurrence enumerated in sections
1605-1607 of this title.
Section 1602. Findings and declaration of purpose
The Congress finds that the determination by United
States courts of the claims of foreign states to immunity
from the jurisdiction of such courts would serve the
interests of justice and would protect the rights of both
foreign states and litigants in United States courts.
Under international law, states are not immune from
the jurisdiction of foreign courts insofar as their com-
mercial activities are concerned, and their commercial
property may be levied upon for the satisfaction of
judgments rendered against them in connection with
their commercial activities. Claims of foreign states to
immunity should henceforth be decided by courts of
the United States and of the States in conformity with
the principles set forth in this chapter.
ee
B46
Section 1603. Definitions
For purposes of this chapter —
(a) A “foreign state’, except as used in section 1608
of this title, includes a political subdivision of a foreign
state or an agency or instrumentality of a foreign state
as defined in subsection (b).
(b) An ‘agency or instrumentality of a foreign state’
means any entity —
(1) which is a separate legal person, corporate or
otherwise, and
(2) which is an organ of a foreign state or political
subdivision thereof, and
(3) which is neither a citizen of a State of the
United States as defined in section 1332(c) and (d)
of this title, nor created under the laws of any third
country.
(c) The ‘United States’ includes all territory and
waters, continental or insular, subject to the jurisdic-
tion of the United States.
(d) A ‘commercial activity’ means either a regular
course of commercial conduct or a particular commer-
cial transaction or act. The commercial character of an
activity shall be determined by reference to the nature
of the course of conduct or particular transaction or
act, rather than by reference to its purpose.
(e) A ‘commercial activity carried on in the United
States by a foreign state’ means commercial activity
carried on by such state and having substantial con-
tact with the United States.
Section 1605. General exceptions to the jurisdictional
immunity of a foreign state
B-7
(a) A foreign state shall not be immune from the
jurisdiction of courts of the United States or of the
States in any case —
(2) in which the action is based upon a commer-
cial activity carried on in the United States by the
foreign state; or upon an act performed in the United
States in connection with the commercial activity of
a foreign state elsewhere; or upon an act outside the
territory of the United States in connection with the
commercial activity of the foreign state elsewhere
Pee that act causes a direct effect in the United
tates.
Section 1606. Extent of liability
As to any claim for relief with respect to which a
foreign state is not entitled to immunity under section
1605 . . . of this chapter, the foreign state shall be
liable in the same manner and to the same extent as
a private individual under like circumstances; but a
foreign state except for an agency or instrumentality
thereof shall not be liable for punitive damages; if,
however, in any case wherein death was caused, the
law of the place where the action or omission occurred
provides, or has been construed to provide, for dam-
ages only punitive in nature, the foreign state shall be
liable for actual or compensatory damages measured
by the pecuniary injuries resulting from such death
which were incurred by the persons for whose benefit
the action was brought.
SUBJECT MATTER JURISDICTION
Under the facts of this case, the relevant exception to
sovereign immunity appears in section 1605(a) (2), supra.
Clause three of this section denies immunity when the suit
is based “upon an act outside the territory of the United
States in connection with a commercial activity of the
B-8
foreign state elsewhere and that act causes a direct effect in
the United States.”
In order to assert jurisdiction under the FSIA, plaintiffs
must make a threshold showing that defendants’ activities
giving rise to the suit are “commercial” in nature, as defined
in section 1603(d). Here, it is beyond dispute that GAF’s
business of making and selling airplanes constitutes a
“regular course of commercial conduct,” and GAF’s sale of
the Nomad 22B to MAF constitutes a “particular commer-
cial transaction or act.” Therefore, the instant lawsuit arises
out ee “commercial activity” as defined in section
1603 (d).
The court now faces the dispositive issue: whether defen-
dants’ activities giving rise to the suit caused a direct effect
in the United States. The court must decide this issue
separately as to plaintiffs’ respective property damage and
wrongful death claims. Is the ioss to J. S. Lynne’s family
of a husband, father and provider a direct effect in the
United States of defendants’ alleged negligence? Does the
financial loss suffered by MAF, an American corporation,
from the destruction of its aircraft in Indonesia constitute
a direct effect in the United States?’ This court concludes
that both claims fall within the FSIA’s exception to
immunity. The Lynne family’s wrongful death claim is by
far the more difficult to apply under the direct effect clause.
The court will address this issue first.
A. THE LYNNE FAMILY’S WRONGFUL DEATH CLAIM
AND THE DIRECT EFFECT CLAUSE OF THE FSIA.
This court believes that defendants’ alleged negligence in
Australia, resulting in the crash of MAF’s Nomad 22B and
the death of J. S. Lynne in Indonesia, caused a direct effect
in the United States such that this court has subject matter
jurisdiction under the FSIA over plainiffs’ wrongful death
cause of action against defendants GAF and the Common-
wealth of Australia.
Defendants argue that tortious acts or omissions by
foreign sovereign states that cause injury or death to
B-9
American citizens abroad, do not have a direct effect in the
United States. Defendants sieze upon the word “direct”
and argue that the “direct” effect of their alleged negligence
occurred in Indonesia where the plane crashed and J. S.
Lynne died. Defendants view the loss thus incurred by the
Lynne family — the loss of a husband and father —, and
the damages sought for his wrongful death, as merely
“indirect” effects. This court disagrees. Defendants’ con-
struction of “direct effect” is plagued by a logic of territorial
limitation. This court believes defendants’ construction is
arbitrary and misconceived; it ignores the real, life-shattering
effect suffered by a family of a person wrongfully killed.
The effect on such a family is direct no matter where the
death occurred. When, as in this case, the bereaved family
lives in the United States, the direct effect of the death of
a father and husband occurs in the United States.
Defendants are not without legal precedent for their
restrictive interpretation of what constitutes a direct effect
in the United States under the FSIA. Although the issue has
not been addressed in this circuit, two federal courts have
considered whether injury to an American abroad causes
a direct effect in the United States, and have answered the
question in the negative. See Upton v. Empire of Iran, 459
F.Supp 264 (D.D.C. 1978), aff'd mem., 607 F.2d 494 (D.C.
Cir. 1979) and Harris v. VAO Intourist, Moscow, 481 F.Supp.
1056 (E.D.N.Y. 1979). Because these two cases are the
only ones to address in the context of a suit for wrongful
death what constitutes a direct effect under the FSIA, this
court shall examine them in detail.
Upton involved an action for wrongful death, survival and
personal injury brought in the United States District Court
for the District of Columbia against the Empire of Iran and
Iran’s Department of Civil Aviation. The suit arose out of
the deaths of two Americans and the serious injury of
another when the roof of the main hall of the Mehrabad
International Airport terminal building in Tehran, Iran,
collapsed on them as they were awaiting departing flights.
Plaintiffs charged defendants with negligence and strict
B-10
liability in tort, relying on section 1605(a) (2), cl. 3 of the
FSIA. The dispositive issue before the court was whether
or not defendants’ negligent operation and maintenance of
the airport terminal building caused a direct effect in the
United States.
The Upton court answered this question in the negative.
In doing so, the court relied on language in the House
Report that accompanied the statute that describes the
FSIA as a federal long-arm statute over foreign states,
patterned after the District of Columbia’s long-arm statute.‘
The court literally interpreted this reference and found that
“causing injury to American citizens abroad is insufficient
to satisfy the requirements of the District of Columbia long-
arm statute.” Id. at 266. The court also ruled that “mere
ownership of an airport abroad does not establish sufficient
contacts to satisfy [the minimum jurisdictional require-
ments] of International Shoe.” Id.°
The Upton court’s definition of “direct effect in the
United States” demonstrates an extremely restrictive view
of causation —a view that this court believes is contrary
to traditional American tort law. This is apparent in the
Upton court’s reasoning that any injuries suffered by plain-
tiffs in the United States caused by defendants’ negligence
in Iran were “indirect.” In Upton, the “common sense”
interpretation of a “direct effect” is “one which has no
intervening element, but, rather, flows in a straight line
without deviation or interruption.” The Upton court did not
specify why plaintiffs’ wrongful death claim did not fit this
definition.
The narrow reasoning in L pton was followed by the Harris
court. 481 F.Supp 1056. In Harris, suit was brought against
two state-owned Soviet tourist services and the Soviet Union
itself to recover damages for the alleged wrongful death
of an American tourist in a Moscow hotel fire. The court
*House Report at 6612.
*International Shoe Co. v. Washington, 326 U.S. 310 (1945).
B-11
granted defendants’ motion to dismiss on the grounds that
it lacked subject matter jurisdiction because the action did
not come within any of the exceptions to immunity enum-
erated in sections 1605-1607 of the FSIA.
The defendants in Harris had sufficient minimum contacts
to satisfy the due process requirements of International
Shoe for in-personam jurisdiction. But the Harris court was
analyzing the subject matter jurisdictional provisions of
the direct effect clause of the FSIA, and so correctly
reasoned that:
the essential factual issue is not the degree of oblique
contacts of the National Hotel with the United States,
but rather whether the allegedly negligent activity of
the National Hotel had a ‘direct effect’ in the United
States . . . Systematic and continuous contacts with
the United ‘States do not provide the grounds for finding
an exception to the [FSIA] and a basis for jurisdiction.
Id. at 1060.
This court agrees with Harris that an in-personam analysis
is improper under the direct effect clause. The subject
matter jurisdictional inquiry must remain distinct from
requirements of personal jurisdiction. Under the FSIA,
standards for both subject matter and personal jurisdiction
must be met. If the court finds it has subject matter juris-
diction — that is, if defendants’ activities caused a direct
effect in the United States—only then must the court
proceed to evaluate defendants’ contacts with the forum
for the purpose of asserting in-personam jurisdiction as well.
This distinction appears to be obscured in other portions of
the Harris opinion.
Like Upton, Harris relied on interpretations given the
District of Columbia long-arm provisions in its treatment
of the direct effect clause of the FSIA. Curiously enough,
the Harris court appears not to have considered the pos-
sible argument that the District of Columbia’s long-arm
statute would itself confer jurisdiction over a wrongful death
B-12
suit in this type of factual situation.’ Instead, the Harris
court held that “indirect injurious consequences within this
country of an out-of-state act are not sufficient contacts to
satisfy the ‘direct effect’ requirement of section 1605 (a) (2).”
Id. at 1062.
In reaching this conclusion, the Harris court emphasized
Congress’ intent that jurisdiction of the courts pursuant to
the direct effect clause of the FSIA should be exercised
consistent with the principles set forth in Section 18,
Restatement of the Law, Second, Foreign Relations Laws of
the United States. H.R.Rep. No. 94-1487, 94th Cong., 2d
Sess. 13. Harris adopted language from the Restatement
to define a “direct effect” as “an effect which is both sub-
stantial and the direct and foreseeable result of conduct out-
side the jurisdiction.” Id. at 1063. The court apparently did
°*The long-arm provision of the District of Columbia statute,
provides in pertinent part:
(a) A District of Columbia court may exercise personal
jurisdiction over a person, who acts directly or by an agent,
as to a claim for relief from the person’s—
(1) transacting any business in the District of Columbia;
(2) contracting to supply services in the District of
Columbia;
(3) causing tortious injury in the District of Columbia by
an act or omission outside the District of Columbia if he
regularly does or solicits business, engages in any per-
sistent course of conduct, or derives substantial revenue
from goods used or consumed, or services rendered, in the
District of Columbia; . . .
(5) having an interest in, using, or possessing real prop-
erty in the District of Columbia; or
(6) contracting to insure or act as surety for or on any
person, property, or risk, contract, obligation, or agreement
located, executed, or to be performed within the District of
Columbia at the time of contracting, unless the parties
otherwise provide in writing.
13 D.C. Code § 13-423 (1973).
See discussion, infra, suggesting application under section 13-
423(a)(4) of the D.C. Code — tortious injury in the District .
by an act or omission outside. This section provides for long-arm
jurisdiction if certain contacts are present between the defendants
and the forum.
B-13
not consider the nature of an effect that is “substantial”
and “foreseeable,” having previously concluded that it was
dealing only with “indirect” effects. This court disagrees
with the manner in which the Harris court applies the
Restatement in interpreting the direct effect clause of the
FSIA.
The court believes that plaintiffs correctly assert that in
Upton and Harris the “direct effect” discussions are con-
fused and intertwined with the issue of in personam juris-
diction. Part of the confusion is attributable to the wording
and structure of the FSIA itself. The staute was aptly
described by the Second Circuit as:
a marvel of compression . . . Within the bounds of a
few tersely-worded sections, it purports to provide
answers to three crucial questions in a suit against a
foreign state: The availability of sovereign immunity as
a defense, the presence of subject matter jurisdiction
over the claim, and the propriety of personal jurisdiction
over the defendant.
Texas Trading and Milling Corp. v. Federal Republic of
Nigeria, 647 F.2d 313 (2nd Cir. 1981), citing the House
Report at 6611-12. |
This court is of the opinion that Upton and Harris failed
to distinguish between personal and subject matter juri-
diction, in applying the direct effect clause of the FSIA.
Upton and Harris improperly relied on the District of
Columbia’s long-arm statute to interpret the subject matter
— direct effect — provision at issue. The District of Colum-
bia’s long-arm statute is primarily concerned with personal
jurisdiction, not subject matter jurisdiction.’ In Upton the
court clearly spoke in terms of personal jurisdiction when
it found that “causing injury to American citizens abroad
is insufficient to satisfy the requirements of the District of
Columbia’s long-arm statute ... [and] . . . mere ownership
713 D.C. Code § 13-423 begins, “A District of Columbia court
may exercise personal jurisdiction over a person . . .” (emphasis
added).
B-14
of an airport abroad does not establish sufficient contacts
with the district to satisfy International Shoe.” 495 F.Supp
264, 266.
It is true in Upton that the court was without personal
_jurisdiction; the only contacts defendants had with the
United States were the wrongful death and personal injury
damages arising out of the collapse of the terminal building
roof. But the court did not limit its holding to this issue.
Instead, it interjected its finding of no personal jurisdiction
into its interpretation and application of the direct effect
clause of section 1605(a) (2).° The decision in Upton to
grant defedants’ motion to dismiss was correct, not because
®*The court’s determination of whether it has personal jurisdiction
over the parties must remain distinct from the question of subject
matter jurisdiction over the cause of action. This is evident in the
House Report sections that discuss these two bases of jurisdiction
under the FSIA. Congress’ reference to the District of Columbia
long-arm statute appears under the section entitled Personal Juris-
diction (p. 6612); section 1605(a)(2) cl. 3— the direct effect pro-
vision of the FSIA at issue here — appears under the section entitled
Subject Matter Jurisdiction. (p. 6611).
These two sections must be read together, but applied distinctly.
This court interprets Congress’ intent to be, simply, that if the act
complained of is related to a commercial activity and that act has
a direct effect in the United States, then the court has subject
matter jurisdiction. Personal. jurisdiction must also exist under the
independent, due process requirements of International Shoe. The
“direct effect” itself will not satisfy due process notions of
in-personam jurisdiction. There must be other “minimum contacts.”
The FSIA and the District of Columbia statutes are identical on
this point. The only difference is that the FSIA has one section,
1605(a)(2) cl. 3, that deals exclusively with subject matter juris-
diction, while section 13-423(a)(4) of the District of Columbia
statute — granting personal jurisdiction when tortious injury occurs
in the district by an act outside, if the actor has certain other
minimum contacts with the district — collapses the notions of sub-
ject matter and personal jurisdiction into one clause.
The manner in which Harris and Upton apply the District of
Columbia long-arm statute to the direct effect clause of the FSIA
consists of a double application of a personal jurisdiction analysis.
This is most evident in Harris, where the court held (1) sufficient
minimum contacts existed for due process assertion of personal
jurisdiction, but (2) the death of an American abroad does not
constitute a “direct effect” in the United States under the FSIA.
» Senne ee eee oa =
B-15
defendants were immune from suit under the subject matter
provisions of the FSIA, but because the court was without
personal jurisdiction over the defendants as poqened by
International Shoe.
The Harris court purports to make the crucial distinction
between subject matter and personal jurisdiction, noting
that the defendants clearly have sufficient minimum con-
tacts with the United States to support a finding of personal
jurisdiction. But then the distinction is obscured when the
court relies on the restrictive interpretation — of personal
jurisdiction — given the District of Columbia’s long-arm
statute to find that it is without jurisdiction over plaintiffs’
wrongful death claim. This is most evident when the Harris
court justifies its refusal to assert jurisdiction by citing
Maryland, Virginia and District of Columbia cases wherein
those courts rejected long-arm jurisdiction “when the only
contact in the forum is an injurious consequence of an out-
of-state act or omission.” Harris, at 1064. These cases are
inapposite. The Harris court itself found that the defen-
dants had numerous and substantial contacts with the forum
beyond the damages suffered by plaintiffs. Indeed, under
The court reached the second half of its holding utilizing standards
developed in cases construing the District of Columbia long-arm
statute — a statute concerned with in-personam jurisdiction. This
treatment represents a Catch-22 that Congress could not have
intended.
This court believes it is incorrect under the FSIA to attempt to
interpret the direct effect clause by way of the District of Columbia’s
or any other state’s long-arm statute. State long-arm statutes are
concerned with American federalism, not international relations.
This court agrees with the Second Circuit in Texas Trading &
Milling, Corp. v. Federal Republic of Nigeria, 647 F.2d 300 (2nd
Cir. 1981), that when interpreting the words “direct effect,”
[c]ourts construing either term should be mindful more of
Congress’ concern with providing ‘access to the courts’ to those
aggrieved by the commercial acts of a foreign sovereign, than
with cases defining ‘direct’ or locating effects under state
statutes passed for dissimilar purposes. Before the FSIA,
plaintiffs enjoyed a broad right to bring suits against foreign
states, subject only to State Department intervention and the
presence of attachable asses. Congress in the FSIA certainly did
not intend significantly to constrict jurisdiction; it intended to
regularize it,
B-16
the facts of Harris, the District of Columbia’s long-arm
statute, if applied, would have given the court jurisdiction.°
Most long-arm statutes have provisions granting state courts
jurisdiction where tortious acts occur outside that cause
injury within a state, where the defendant has minimum
contacts with the state. The Harris court, however, appears
not to explore this line of’ analysis. Instead, the court
bifurcates the issue of personal jurisdiction, applying it
correctly under the standards of International Shoe, but
misapplying it to what should have been an analysis of
subject matter jurisdiction under the direct effect clause of
the FSIA.”° This court respectfully disagrees with the rea-
soning employed and the conclusion reached in Harris.
In the instant case, the court is equally skeptical of defen-
dants’ argument that their alleged tortious conduct, result-
ing in the crash of the Nomad 22B and the death of-J. S.
Lynne, did not cause a direct effect in the United States.
Defendants’ basic argument — that the direct effect of their
alleged tortious conduct occurred in Indonesia, the location
of the crash — relies more on the logic of semantics than
the logic of tort liability. To argue that liability should not
attach under the FSIA because the effects on plaintiffs are
only “indirect” suggests a simplistic view of cause and effect
that this court cannot share. Nor does this court believe
that Congress intended to engage in such a fine distinction
by inserting the word “direct” before “effect.” Causation is
an elusive concept. The word “direct” is itself relative; one
is unsure where it falls in the chain of cause and effect.”
°Texas Trading at 312, citing House Report at 6605-6606.
10See n.6, supra.
See n. 8, supra.
For example, one could argue that the “direct” effect of defendants’
alleged negligence occurred in Australia where the plane was built
and the actual negligent acts, if any, took place. This would be an
argument of questionable validity, however, because substantive tort
law is more concerned with the locus of the injury than with the
locus of the act causing the injury. In the instant case, this court
is of the opinion that, even though J. S. Lynne’s death occurred in
Indonesia, the injury to his family occurred in the United States.
Thus, with respect to plaintiffs’ wrongful death cause of action,
— alleged negligence had a “direct effect” in the United
tates.
at ats CO el Ce OP Nit TE LIS SN +
Acree.
B-17
Congress intended to limit the scope of subject matter
jurisdiction. to some extent. It is the finding of this court,
however, that Congress did not intend to limit the scope of
the direct effect clause to the extent that defendants urge.
Any such intent would have to be manifested with greater
articulation than the meaning this court is able to glean from
a single word. In the absence of clear legislative direction,
this court believes its decision to reject defendants’ argu-
ment is in keeping with Congress’ basic intent that the act
is to provide a forum in United States courts for suits by
United States citizens against foreign states.”
The court finds merit in plaintiffs’ argument that if it were
to adopt defendants’ narrow view of what constitutes a
direct effect under the FSIA, this clause would be rendered
meaningless. The direct effect clause states that a foreign
state will not be immune from jurisdiction of courts of
the United States “in any case ... in which the action is
based . . . upon an act outside the territory of the United
States in connection with a commercial activity elsewhere
and that act causes a direct effect in the United States...
“Id. (emphasis added). This language explicitly requires
that the act and the commercial activity occur outside of
the United States. Therefore, the liability elements of the
cause of action must take place outside of the United States.
The losses or damages suffered in the United States are the
only effects that can be caused by the covered acts. Plaintiffs
correctly assert that the only way the effect could be more
direct would be if the crash occurred in the United States.
This is provided for separately in section 1605(a) (2) of
the FSIA.
Congress provides some insight into how this court should
interpret and apply the term “direct effect” in the House
Report accompanying the FSIA. There, Congress states that
22House Report at 6604-6605. See also Sugarman v. Aeromexico,
Inc. 626 F.2d 270 (3rd Cir. 1980); Verlinden v. The Central Bank
of Nigeria, 488 F.Supp. 1284 (S.D.N.Y. 1980).
B-18
“direct effect” is meant to~embrace: “commercial conduct
abroad having direct effects within.the United States which
subject such conduct to the exercise.of jurisdiction by the
United States consistent with the principles set forth in
Section 18, Restatement of the Law, Second, Foreign Rela-
tions Laws of the United States (1965).”’* This court previ-
ously noted that the Harris court only summarily considered
the Restatement in rendering its restrictive interpretation
of the direct effect clause. Inasmuch as this court is of the
opinion that the Restatement supports its finding that
defendants’ alleged negligence did have a direct effect in
the United States, the Restatement will be examined in
greater detail.
Section 18 of the Restatement provides:
A state has jurisdiction to prescribe a rule of law
attaching legal consequences to conduct that occurs
outside its territory and causes an effect within its
territory if either
(a) the conduct and its effect are generally recog-
nized as constituent elements of a crime or tort under
the law of states that have reasonably developed legal
systems, or
(b) (i) the conduct and its effect are constituent
elements of activity to which the rule applies; (ii) the
effect within: the territory is substantial; (iii) it occurred
as a direct and foreseeable result of the conduct outside
the territory; and (iv) the rule is not inconsistent with
the principles of justice generally recognized by states
that have reasonably developed legal systems.
Under section 18(a), an action for negligence and strict
liability clearly qualifies. Section 18(b) prescribes a stricter
standard; however, the disjunctive “or” that separates
Sections 18(a) and (b) must be read to mean that if the
first section is satisfied, the second need not be. Nonetheless,
plaintiffs’ action satisfies the requirements of either section.
13House Report at 6618.
B-19
Section 18(b) is satisfied because the conduct and effect
alieged by planitiffs constitute elements of the alleged
causes of action. The loss of a husband and father is “sub-
stantial” by any definition, as is the loss of MAF’s airplane
purchased at over four hundred thousand dollars. The harm
suffered by plaintiffs was foreseeable. GAF sold the aircraft
to MAF knowing that it would be used outside of the United
States. It was foreseeable that if the aircraft was defective
and unreasonably dangerous the destruction of the aircraft
aud the death of its pilot could result. Finally, there can be
no more “direct” effect on a pilot’s family than the effect
resulting from the crash of a negligently designed and
unreasonably dangerous aircraft.
Although the concept of “direct effect” remains elusive, the
evaluation of “causes,” “effects” and “consequences” is not
new to the law. They have been given considerable attention
in tort law, especially where the cause of action is based upon
negligence. Discussing “direct causation,” which is considered
a more restrictive alternative to foreseeable consequences,
Professor Prosser states:
‘Direct’ consequences are those which follow in se- |
quence from the effect of the defendant’s act upon con-
ditions existing and forces already in operation at the
time, without intervention of any external forces which
came into active operation later... There is an analogy
to knocking over the first of a row of blocks, after which
all of the rest fall down without the assistance of any
other force...so long as new forces do not intervene."
Under the facts of this case, defendants’ alleged negligence
appears to have the “direct consequence” of killing J. S.
Lynne. The effect on J. S. Lynne’s family is also a direct
consequence of defendants’ alleged negligence. Plaintiffs’
cause of action in wrongful death is the legal consequence
of defendants’ conduct. To analogize to Professor Prosser’s
14Prosser, Handbook of the Law Of Torts, 263 (1967).
B-20
falling blocks, the legal effect and the physical effect of
defendants’ alleged negligence are two sides of the same
block. A cause of action for wrongful death vested in Donna
Lynne the instant her husband was killed.
Similarly, the legal concept of “proximate cause” is of
central importance in the court’s interpretation of the mean-
ing of direct effect under the FSIA. One respected commen-
tator describes the doctrine in the following terms:
The breach of duty — the negligent act or omission
— must be the ‘proximate’ cause [termed ‘legal cause’
in the Torts Restatement] of the plaintiff’s injury.
The first element of legal [or proximate] cause is
cause in fact: i.e., it is necessary to show that the
defendant’s negligence contributed in some way to the
plaintiff's injury, so that “but for” the defendant’s neg-
ligence the injury would not have been sustained.
If the accident would have happened anyway, whether
the defendant was negligent or not, then his negligence
was not a cause in fact, and of course cannot be the
legal or responsible cause. The ‘but for’ rule has tradi-
tionally been applied to determine cause in fact.
Where, subsequent to the defendant’s negligent act,
an independent intervening force actively operates to
produce the injury, the chain of causation may be
broken . . . If the risk of injury might have been rea-
sonably foreseen, the defendant is liable, but . . . if the
independent intervening act is highly unusual or extra-
ordinary, not reasonably likely to happen and hence not
foreseeable, it is a superseding cause, and the defendant
is not liable.
4 Witkin, Summary of California Law, 2901-2910 (citations
omitted) .
It is clear to this court that if defendants in the instant
case were negligent as plaintiffs claim, then their negligence
was the proximate cause of the crash of the aircraft and
J. S. Lynne’s death. Substantive tort law would hold defend-
B-21
ants liable to J. S. Lynne’s family because the injuries they
suffered, and will continue to suffer, from J. S. Lynne’s
death were also proximately caused by defendants’ same
acts of negligence. In no sense is the cause of plaintiffs’
wrongful death injuries from intervening or superseding
elements. Defendants’ negligence would seem to be the
cause in fact of plaintiffs’ injuries. But for defendants’
negligence the Lynne family would not have suffered the
loss of J. S. Lynne.**
’ This court finds it conceptually impossible to think of
plaintiffs’ injuries as an indirect effect of defendants’ negli-
gence, if defendants’ negligence is the proximate cause of
plaintiffs’ injuries. If the effect is direct enough to consti-
tute proximate cause and legal liability, it is direct enough
to constitute “direct” within the meaning of section 1605 (a)
(2).
Thus, in terms of causation, injuries redressed in the
wrongful death cause of action are no less direct than the
actual death upon which the cause of action is based. If one
negligent act can be the proximate cause of more than one
injury —in this case, the death of J. S. Lynne and the
pecuniary interest of J. S. Lynne’s family — then more than
one injury, to more than one person, can be the “direct
effect” of a single negligent act. A negligent act that has the
direct effect of killing a person has the additional direct
effect of giving his beneficiaries a cause of action for wrongful
death. Under the law, it is the same “direct effect.” The
location of the death is irrelevant under the FSIA; but
extremely relevant is the location of the persons in whom
“Defendants would also seem to be liable under the Restate-
ment’s formulation of causation and legal liability. The Restate-
ment substitutes the words “proximate cause” with the term “sub-
stantial factor”:
To denote the fact that the defendant’s conduct has such an
effect in producing the harm as to lead reasonable men to
regard it as the cause, using that word in the popular
in which there always lurks the idea of responsibility. Rest.
Torts §§ 281(c), 430.
S
B-22
the cause of action accrues. J. S. Lynne’s widow and chil-
dren suffer the direct effect of his wrongful death in this
country.
The law recognizes the cause of action for wrongful death
for the very reason that the effect on plaintiff's life is so
direct and so personal. In California, the wrongful death
statute creates a new and independent cause of action in
favor of the decedent’s heirs and beneficiaries in which they
recover the damages they have and will suffer by reason of
the person’s death. Curry v. Fred Olsen Line, 367 F.2d 921
(9th Cir. 1966). This cause of action does not derive from
any rights the decedent may have had, but, as Professor
Prosser states, “[t]he action proceeds on the theory of com-
pensating the individual beneficiaries for loss of economic
benefit which they might reasonably have expected to receive
from the decedent in the form of support, services, or con-
tributions during the remainder of his life-time if he had not
been killed.” Prosser, supra at 908. Also, pecuniary loss
“may extend beyond mere contributions of food, shelter,
money or property; and there is now a decided tendency to
find that the society, care and attention of the deceased are
‘services’ to the survivor with a financial value, which may
be compensated.” Id. Thus, not only does the tortious con-
duct resulting in the death of an American abroad have a
direct effect in the United States — legally manifested in
a cause of action for wrongful death — but +e direct effect
is ongoing, measured by the jury over the decedent’s life
expectancy and even applied to such intangibles as lost
consortium.
The court finds support for its decision today in Texas
Trading & Milling Corp v. Federal Republic of Nigeria, 647
F.2d 300 (2d Cir. 1981).** There the Second Circuit held
“For an interpretation of what constitutes a “direct effect” under
the FSIA that is arguably consistent with this court’s view, see
National American Corp. v. Federal Republic of Nigeria, 448 F Supp
622, 637-639 (S.D.N.Y. 1978) aff'd, 597 F.2d 314 (2nd Cir. 1979)
(New York letter of credit payable through New York banks
where beneficiary was a New York corporation met requirements
of “direct effect”); Yessenin-Volpin v. Novosti Press Agency, Tass,
443 F Supp 849, 855 (S.D.N.Y. 1978) (suggests injury in the
United States to good name and reputation is a direct effect).
B-23
that, in a breach of contract action, financial losses that
occur in the United States caused by a foreign sovereign’s
wrongful conduct in connection with its involvement in a
“commercial activity” outside of the United States, consti-
tute a “direct effect” in the United States under the FSIA,
where corporations rather than individuals are involved.
The facts in Texas Trading centered upon contracts for
the purchase and delivery of cement entered into by Nigeria
with a large number of trading companies throughout the
world, four of which were American. Financial arrangements
consisted of letters of credit established by Nigeria with the
Central Bank of Nigeria payable through Morgan Guaranty
Trust Company of New York. Nigeria had contracted for
more cement than it could possibly use. Its harbors became
clogged with ships waiting to unload their cement cargos.
Nigeria breached its contracts and instructed Morgan not
ee ee oe ee Mennenons lawonits
ollowed.
The Court of Appeals held that: (1) jurisdiction existed
under the FSIA over claims arising out of Nigeria’s breach
of contracts to purchase cement and breach of related letters
of credit; and (2) Nigeria had sufficient contacts with the
United States to permit the exercise of personal jurisdiction
over it. Addressing the direct effect clause of the FSIA, the
court cites Upton and Harris “for a pardigm of ‘direct.’ ”
The court then distinguished the case before it:
Applying the term to a corporation is not so simple.
Unlike a natural person, a corporate entity is intangible;
it cannot be burned or crushed. It can only suffer finan-
cial loss. Accordingly, the relevant inquiry under the
direct effect clause when plaintiff is a corporation is
whether the corporation has suffered a ‘direct’ financial
loss. Here . . . breach of the cement contracts or breach
of the letters of credit, [had a ‘direct’ effect on the
suppliers]. They were beneficiaries of the contracts that
were breached.
B-24
Texas Trading at 312.
The court further found that the direct effect occurred “in
the United States,” because (1) the cement breaches pre-
cluded cement suppliers from receiving payment in the
United States and (2) the plaintiffs were American corpo-
rations."’
"The Texas Trading court limited its holding to the finding that
the “direct effect” of Nigeria’s contract breaches occurred in the
United States because the corporation’s financial injury resulted
from an American bank’s refusal to honor Nigerian letters of credit.
Since the parties’ contract called for payment in the United States,
this country became the location of the financial injury when pay-
ment was not forthcoming. The Texas Trading court expressly re-
served judgment on whether an American corporation suffering
financial injury abroad would also constitute a “direct effect” in
the United States.
This issue was answered in the affirmative by the court in In Re
Rio Grande Transport, Inc., 516 F.Supp 1115 (S.D.N.Y. 1981). The
case involved a collision on the high seas between two ships, one
of which was owned by an American corporation. The American
ship sunk. Its cargo was lost; a number of crew members were
killed and others were seriously injured. The owner of the Algerian
ship, a national corporation of the Republic of Algeria, anticipating
various claims for wrongful death, personal injury and cargo loss
to be filed against it, moved for summary judgment on the grounds
of sovereign immunity. The district court relied on Texas Trading
and held that the collision and sinking of the American ship had
a “direct effect” in the United States because the ship’s corporate
owner was a New York corporation, the ship was its sole source of
income and without it the corporation was unable to earn freight or
other monies for a considerable period of time. Jd. at 1163.
The Rio Grande court also held that once it found one “direct
effect” sufficient to convey subject matter jurisdiction it had juris-
icti out of the ision;
is court agrees with the court’s approach in Rio Grande.
This court finds that it has subject matter jurisdiction over all
ea a each independently constitutes a direct effect under
B-25
It is but a simple step to analogize the American corporate
entity that suffers financial loss from a breach of contract to
the American family that suffers the loss of a father and
husband. Although the family’s loss can be measured only by
its pecuniary interest in the life of the deceased, money can
never make it whole. The dollars and cents impact on a
corporation from a breach of contract pales in comparison.
There is no question that the loss suffered by the Lynne
plaintiffs occurred in the United States. Utilizing the exact
logic of the Second Circuit in Texas Trading, J. S. Lynne’s
family was (1) to receive support, services and contributions
from the decedent, which it was precluded from doing so
by defendants’ alleged negligence in the manufacture, sale
and service of the Nomad 22B aircraft; and (2) each plain-
tiff is an American citizen.
This court agrees with the opinion rendered in Texas
Trading. The court cannot, however, agree with the Second
Circuit’s approval of Upton and Harris, and the disparate
treatment thereby afforded the American corporation over
the American family. Justice demands equal treament. Con-
gress could have intended no less. Furthermore, Congress
certainly did not intend to undermine the wrongful death
cause of action — a cause of action that was painfully slow
in developing, but develop it did as mid-century society
came to grips with accidental death caused by corporate
indifference and neglect."*
Congress’ purpose in enacting the FSIA was to regulate
citizens’ “access to the courts in order to resolve ordinary
legal disputes,” “arising out of their contact with foreign
states and entities owned by foreign states.” House Report
at 6605. “The [FSIA] is not intended to affect the sub-
stantive law of liability.” Id. at 6610. Therefore, this court
concludes that Congress intended the FSIA to provide all
American citizens, corporate and natural, with a means to
redress the types of injury alleged in this action.
a ee ee 17 Stan. L.Rev. 1043
(1965).
B-26
Specifically, this court finds that the FSIA confers upon it
subject matter jurisdiction to entertain plaintiffs’ wrongful
death suit. The alleged negligence of defendants GAF and
the Commonwealth of Australia, resulting in the death of
J. S. Lynne outside of the United States, has a direct effect
within the United States within the meaning of section
1605 (a) (2).
B. MAF’S CLAIM FOR PROPERTY DAMAGES UNDER
THE DIRECT EFFECT CLAUSE
This court also finds that it has subject matter jurisdic-
tion over plaintiff MAF’s claim for property damages caused
by the destruction of its aircraft. In accordance with Texas
Trading, the loss of MAF’s aircraft — allegedly the result of
defendants’ negligence— caused a direct effect in the
United States within the meaning of section 1605(a) (2).
PERSONAL JURISDICTION
A. STATUTORY PERSONAL JURISDICTION
Personal jurisdiction under the FSIA is governed by the
provisions of section 1330(b). This section provides for per-
sonal jurisdiction over a foreign state as to any claim that
the district court has subject matter jurisdiction pursuant
to section 1330(a) “so long as service of process has been
made under section 1608.” Texas Trading at 313. Service of .
process is not an issue in this case. Therefore, the court,
having determined that subject matter jurisdiction exists,
satisfying section 1330(a), finds that statutory personal
jurisdiction exists under section 1330(b).
B. CONSTITUTIONAL DUE PROCESS
The court’s finding that statutory personal jurisdiction
exists under the FSIA only begins the inquiry. Due process
requires more. The assertion of personal jurisdiction over a
non-resident defendant is constitutionally permissible only
if the defendant has “certain minimum contacts with [the
forum] such that the maintenance of the suit does not
B-27
offend ‘traditional notions of fair play and substantial jus-
tice.’” International Shoe Company v. Washington, 326
U.S. 310, 216 (1945). It is also clear that due process
applies in suits where personal jurisdiction is asserted over
foreign states. Thos. P. Gonzalez Corp. v. Consejo Nacional
de Produccion de Costa Rica, 614 F.2d 1247 (9th Cir. 1980) ;
See also, Texas Trading, supra at 313, citing Gonzalez. In
personam jurisdiction may be exercised over a non-resident
defendant when that defendant’s contacts with the forum
have been either “substantial” or “continuous and syste-
matic.” Insurance Company of North America v. Marina
Salina Cruz, 649 F.2d 1266, 1270 (9th Cir. 1981); Data Disc,
Inc. v. Systems Technology Assoc., 557 F.2d 1280, 1287 (9th
Cir. 1977) ; International “supra at 319.
This court evaluates GAF’s nationwide contacts for the
purpose of asserting persona! jurisdiction. The court is not
limited to defendants’ contacts with the state of California.
This is because when a federal statute authorizes world-
wide service of process, the relevant contacts of an alien
defendant are not limited to the forum in which the suit
is brought, but may encompass the entire United States.
Wells Fargo and Co. v. Wells Fargo Express Co., 556 F.2d
406, 418 (9th Cir. 1977) (dictum, citing 15 U.S.C. sections
22, 25, 77 78aa.) In actions brought pursuant to the FSIA,
the Second Circuit has held that when service of process is
made under 28 U.S.C. section 1608, “the relevant area in
delineating contacts is the entire United States.” Texas
Trading at 314.
The court must analyze defendants’ contacts with the
United States based upon four separate determinations:
(1) the extent to which the defendant availed itself of the
privileges of American law; (2) the extent to which liti-
gation in the Unite? States was foreseeable to defendants;
(3) the inconvenience to the defendants of litigating in the
United States; and (4) the countervailing interest of the
United States in hearing the suit. Worldwide Volkswagen
Corp. v. Woodson, 444 U.S. 286 (1980); Kulko v. Superior
Court, 436 U.S. 84 (1977); Hanson v. Denckla, 357 U.S. 235
B-28
(1958); McGee v. Interzational Life Insurance Co., 355
U.S. 220 (1957) ; International Shoe, supra.
The following contacts clearly satisfy the above standards
and demonstrate that GAF’s relationship to the United
States arising out of its business of selling aircraft is “sub-
stantial ... continuous and systematic.” Marina Salina Cruz,
supra, and International Shoe, supra.
1) GAF sold the Nomad 22B to MAF with specific knowl-
edge that MAF was a California based corporation. GAF’s
knowledge of this fact is evident in phone conversations and
correspondence carried on in the course of the negotiations
surrounding the sale of the aircraft. It is further evident to
this court that at least some portion of the negotiations
culminating in the contract took place in California.”
2) In manufacturing the Nomad 22B, GAF purchased and
installed major components made in the United States. The
most significant American-made components were two air-
craft engines, produced by the Detroit Diesel Allison Divi-
sion of General Motors (Model 250-B17B), and two Hartzell
propellers, made in Piqua, Ohio. GAF is clearly “doing bus-
iness” in the United States in relationship to the manu-
facture of its Nomad 22B.”°
3) The Nomad 22B was produced and certified in accord-
ance with the Type Certificate Data Sheet issued by the
Federal Aviation Administration (“FAA”) and presumably
necessary to render the aircraft eligible for sale in the
United States. Also, the FAA issued Regulatory Dockets
specifically relating to the Nomad 22B and defects in its
manufacture. This is further evidence that GAF regularly
does business in the United States and for that privilege
must conform to United States laws. These Regulatory
Dockets, entitled Airworthiness Directives, are issued pur-
19See Exhibit A., Plaintiffs’ Suppiemental Response to Defen-
dants’ Motion To Dismiss Complaint (hereinafter ‘Plaintiffs’
Response’”’).
20See Exhibits N and O, Plaintiffs’ Response.
B-29
suant to 14 C.F.R., part 39, under Title 14 (Aeronautics
and Space) and require specific changes to be made due to
unsafe conditions. There is evidence before the court that
GAF responded to the FAA’s Airworthiness Directives in
its “Alert Service Bulletins,” offering owners of aircraft new
parts at “no charge” where the FAA mandates the change;
these parts are provided through GAF’s Nomad American
distributions.”
4) GAF distributes the Nomad 22B and replacement parts
through Hughes Aviation Service, Aircraft Sales Division,
Las Vegas, Nevada. Hughes is GAF’s nationwide sales and
service facility for the Nomad 22B.”
5) GAF extensively advertises the Nomad 22B through-
out California and the United States. Plaintiffs specifically
draw the court’s attention to advertisements in the national
aircraft industry magazine, Aviation Week and Space Tech-
nology, wherein the following language appeared with pic-
tures of the aircraft: “During the last decade, Nomads have
flown on full-schedule service . . . in the U.S.A. — from
Alaska through to Nebraska and the Caribbean . . . [The]
Nomad Filoatmaster shows its usefulness in and around the
lake regions of North America.” This is persuasive evidence
that defendants intended to enter into the United States’
market and take advantage of the commercial opportunities
therein.**
6) Finally, the court considers an additional area of con-
tacts defendants have with the United States arising out of
\ their sale of the aircraft in question to MAF. This area
centers upon the damages alleged by plaintiffs to have been
caused by the defendants’ negligence. By including MAF’s
claim of property damage and the Lynne family’s claim of
wrongful death in evaluating whether personal jurisdiction
exists, the court is not confusing personal and subject matter
21See Exhibits B and E through K, Plaintiffs’ Response.
22See Exhibit M, Plaintiffs’ Response.
28See Exhibits C and D, Plaintiffs’ Response.
B-30
jurisdiction under the FSIA. The court simply believes
that once subject matter jurisdiction is found, based upon
damages that constitute a “direct effect in the United
States,” those damages can then again be evaluated in terms
of asserting personal jurisdiction. Such damages alone may
not be sufficient contacts for the assertion of personal juris-
diction. Personal jurisdiction clearly lies, however, when
these damages are evaluated in conjunction with defendants’
other forum contacts. This analysis is in keeping with tradi-
tional long-arm, in personam inquiries.”
Defendants’ contacts with the United States and this
court’s assertion of personal jurisdiction over defendants
easily meet the four part constitutional standard enunciated
above. First, defendants availed themselves of the privileges
of American law. Defendants abided by FAA regulations
and tcok advantage of the United States market. Second, it
is reasonable to hold that it was foreseeable to defendants
that their extensive, purposeful business activity in Calli-
fornia and the United States would become the subject of
litigation, thus requiring their presence before a court of the
United States. Worldwide Volkswagen, supra. Third, the
court finds that GAF and the Commonwealth of Australia
will be little burdened in defending plaintiff’s suit in this
court. On this point, the Supreme Court commented in
24See n.11, supra, setting forth the District of Columbia long-arm
statute. 13 D.C. Code § 12-423(a)(3) provides for jurisdiction when
injury is caused within the district by a tortious act outside. See
also, section 410.10 of the California Code of Civil Procedure, which
staies in its entirety: “A court of this state may exercise jurisdic-
tion on any basis not inconsistent with the Constitution of this
state or of the United States.” In the Judicial Council’s comment
accompanying the statute, No. 9 addresses “Causing Effect in State
by Act or Omission Elsewhere”:
A state has power to exercise judicial jurisdicti
individual who causes effects in the state an omission or
act done elsewhere with respect to causes of action arising from
these effects, unless the nature of the effects and of the indi-
vidual’s relationship to the state make the exercise of such juris-
diction unreasonable. Hanson v. Denckla, 357 U.S. 235 (1958)
and McGee v. International Life Ins. Co., 355 U.S. 220 (1957).
B-31
Worldwide Volkswagen that “modern transportation and
communication have made it much less burdensome for a
party to defend himself in a state where he engages in
economic activity.” Worldwide Volkswagen at 293, quoting
McGee v. International Life Insurance Company at 222-223.
Unlike the defendants in Worldwide Volkswa efer.iants
here are clearly engaging in business actiyity in California
| and the United States with manufactyfers, distributors,
| advertisers and purchasers of their aircraft.
Finally, a court of the United States has a significant
interest in hearing this suit. This interest is underscored
by Congress’ purpose in enacting the FSIA: to codify the
“restrictive” application of sovereign immunity and to pro-
vide American residents with “access to the courts” to
resolve “ordinary legal disputes” arising out of their com-
mercial interaction with foreign states. House Report at
6605. Furthermore, the Supreme Court has recognized a
forum’s “manifest interest in providing effective means of
redress for its residents.” McGee at 223.
At this stage of the proceedings, plaintiffs need make
only a prima facie showing of jurisdictional facts to support
this court’s exercise of persona! jurisdiction over defendants
GAF and the Commonwealth of Australia, Data Disc, Inc. v.
Systems Technology Assoc., 557 F.2d at 1285. This court is
convinced that plaintiffs have made more than a prima facie
showing. Therefore, the court finds that its exercise of per-
sonal jurisdiction over defendants satisfies the constitutional
due process requirements of International Shoe.
VENUE
Defendants’ final contention is that even if the court
does find that it has jurisdiction over the subject matter
and parties of this action, venue properly lies in the District
Court for the District of Columbia, and that the case should
therefore be transferred. This court is not so inclined. The
issue of venue under the FSIA has received scarce atten-
tion by the courts. However, this court finds that Congress’
taal
B-32
intent is clearly manifested in the language of the FSIA,
and in the House Report accompanying its enactment.
Venue under the FSIA is established by 28 U.S.C.
§ 1391(f). This provision states in pertinent part:
A civil action against a foreign state ... may be brought —
(1) in any judicial district in which a substantial
part of property that is the subject of the action is
situated;
(3) in any judicial district in which the agency or
instrumentality is licensed to do business or is doing
business, if the action is brought against an agency or
instrumentality of a foreign state as defined in section
1603 (b) of this title; or
(4) in the United States District Court for the
District of Columbia if the action is brought against
a foreign state or political subdivision.
Defendants argue that GAF and the Commonwealth of
Australia constitute the same legal entity under Australian
law, and that, essentially, there is only one defendant in
this suit, the Commonwealth of Australia. Defendants dis-
tinguish between a foreign state and an agency or instru-
mentality thereof, arguing that since GAF and the Common-
wealth constitute the same legal entity, venue is only proper
in the District of Columbia. The FSIA does not so hold.
Even if defendants are a foreign state, section 1391 (f) (4)
does not mandate that the District of Columbia is the only
judicial district in which venue is proper. Section 1391 (f) (4)
allows venue in the District of Columbia; it does not
require it.
This interpretation renders the venue provisions of the
FSIA internally consistent. Defendants construction ignores
section 1391(f) (1). This section allows venue “in any judi-
cial district in which a substantial part of the events or
s
£
~
B-33
omissions giving rise to the claim occurred . . .” Because
the court believes section 1391(f) (1) applies to both foreign
states and their agencies or instrumentalities, it is unneces-
sary to address defendants’ argument that GAF and the
Commonwealth of Australia constitute the same legal entity.
The question, instead, is whether “a substantial part of the
events or omissions giving rise to the claim occurred .. .”
in this judicial district. The answer is yes.
Consistent with this court’s previous discussion of subject
matter jurisdiction, the court now finds that the injury
suffered by MAF — the loss of its airplane and the financial
damages thus incurred — constitutes “a substantial part of
the events or omissions giving rise to the claim . . .” The
court is guided to this conclusion by the House Report.
Therein, discussing section 1391(f) (1), Congress states:
This provision is analogous to 28 U.S.C. section 1391 (e),
which allows an action against the United States to be
brought, inter alia, in any judicial district in which ‘the
cause of action arose.’ The test adopted, however, is
the newer test recommended by the American Law
Institute and incorporated in S. 1876, 92 Congress, 1st
session, which does not imply that there is only one
such district applicable in each case. In cases under
section 1605(a)(2), involving a commercial activity
abroad that causes a direct effect in the United States,
venue would exist wherever the direct effect generated
‘a substantial part of the events’ giving rise to the
claim. (emphasis supplied).
This court has ruled in accordance with Texas Trading,
647 F.2d 300, that MAF’s financial loss constitutes a “direct
effect” within the meaning of section 1605 (a) (2). The court
further finds that the “direct effect” is located in MAF’s
state of incorporation, California. Venue properly lies in
the Central District and with this court because MAF’s
principal place of business is in Fullerton, California.
oj
B-34
In the interest of justice, convenience to the parties, and
to avoid multiple lawsuits arising out of the same trans-
action or occurrence, the court also finds that venue
proper in this district as to plaintiffs’ wrongful death claim.
CONCLUSION
The court, having considered the arguments and docu-
ments of counsel, and having found that it has jurisdiction
over the parties and subject matter of this action, denies
defendants’ motion to dismiss the complaint. The court,
having further found that venue is proper in this district,
also denies defendants alternative motion to transfer plain-
tiffs’ action to the District of Columbia.
IT IS SO ORDERED.
DATE: June 24, 1983
/s/
Consuelo B. Marshall, Judge _
United States District Court
APPENDIX C
C-1
28 U.S.C. § 1320 provides:
§ 1330. Actions against foreign states
(a) The district courts shall have original jurisdiction
without regard to amount in controversy of any nonjury
civil action against a foreign state as defined in section
1603(a) of this title as to any claim for relief in personam
with respect to which the foreign state is not entitled to
immunity either under sections 1605-1607 of this title or
under any applicable international agreement.
(b) Personal jurisdiction over a foreign state shall exist
as to every claim for relief over which the district courts
have jurisdiction under subsection (a) where service has
been made under section 1608 of this title.
(c). For purposes of subsection (b), an apperance by a
foreign state does not confer personal jurisdiction with
respect to any claim for relief not arising out of any trans-
action or occurrence enumerated in sections 1605-1607 of
this title.
28 U.S.C. § 1391(f) provides:
§ 1391. Venue generally
(f) A civil action against a ioreign state as defined in
section 1603(a) of this title may be brought —
(1) in any judicial district in which a substantial
part of the events or omissions giving rise to the claim
occurred, or a substantial part of property that is the
subject of the action is situated; .
(2) in any judicial district in which the vessel or
cargo of a foreign state is situated. If the claim is
asserted under section 1605(b) of this title;
(3) in any judicial district in which the agency or
instrumentality is licensed to do business or is doing
business, if the action is brought against an agency or
instrumentality of a foreign state as defined in sect’un
1603 (b) of this title; or
C-2
(4) in the United States District Court for the Dis-
trict of Columbia if the action is brought against a
foreign state or political subdivision thereof.
28 U.S.C. §§ 1602-1606 provide:
§ 1602. Findings and declaration of purpose
The Congress finds that the determination by United
States courts of the claims of foreign states to immunity
from the jurisdiction of such courts would serve the interests
of justice and would protect the rights of both foreign states
and litigants in United States courts. Under international
law, states are not immune from the jurisdiction of foreign
courts insofar as their commercial activities are concerned,
and their commercial property may be levied upon for the
satisfaction of judgments rendered against them in connec-
tion with their commercial activities. Claims of foreign states
to immunity should henceforth be decided by courts of the
United States and of the States in conformity with the
principles set forth in this chapter.
§ 1603. Definitions
For purposes of this chapter —
(a) A “foreign state”, except as used in section 1608
of this title, includes a political subdivision of a foreign
state or an agency or instrumentality of a foreign state
as defined in subsection (b).
(b) An “agency or instrumentality of a foreign state”
means any entity —
(1) which is a separate legal person, corporate or
otherwise, and
(2) which is an organ of a foreign state or political
subdivision thereof, or a majority of whose shares or
other ownership interest is owned by a foreign state
or political subdivision thereof, and
(3) which is neither a citizen of a State of the
United States as defined in section 1332(c) and (d)
C-3
of this title, nor created under the laws of any third
country.
(c) The “United States” includes all territory and
waters, continental or insular, subject to the jurisdiction
of the United States.
(d) A “commercial activity” means either a regular
course of commercial conduct or a particular commercial
transaction or act. The commercial character of an
activity shall be determined by reference to the nature
of the course of conduct or particular transaction or act,
rather than by reference to its purpose.
(e) A “commercial activity carried on in the United
States by a foreign state” means commercial activity
carried on by such state and having substantial contact
with the United States.
§ 1604. Immunity of a foreign state from jurisdiction
Subject to existing international agreements to which the
United States is a party at the time of enactment of this
Act a foreign state shall be immune from the jurisdiction of
the courts of the United States and of the States except as
provided in sections 1605 to 1607 of this chapter.
§ 1605. General exceptions to the jurisdictional immu-
nity of a foreign state
(a) A foreign state shall not be immune from the juris-
diction of courts of the United States or of the States in
any case —
(1) in which the foreign state has waived its immun-
ity either explicitly or by implication, notwithstanding
any withdrawal of the waiver which the foreign state
may purport to effect except in accordance with the
terms of the waiver;
(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
C-4
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;
(3) in which rights in property taken in violation of
international law are in issue and that property or any
property exchanged for such property is present in the
United States in connection with a commercial activity
carried on in the United States by the foreign state; or
that property or any property exchanged for such prop~
erty is owned or operated by an agency or instru~-
mentality of the foreign state and that agency or instru-
mentality is engaged in a commercial activity in the
United States;
(4) in which rights in property in the United States
acquired by succession or gift or rights in immovable
property situated in the United States are in issue; or
(5) not otherwise encompassed in paragraph (2))
above, in which money damages are sought against a
foreign state for personal injury or death, or damage to
or loss of property, occurring in the United States and
caused by the tortious act or omission of that foreigm
state or of any official or employee of that foreign statie
while acting within the scope of his office or employ-
ment; except this paragraph shall not apply to —
(A) any claim based upon the exercise or per-
formance or the failure to exercise or perform a discre-
tionary function regardless of whether the discretion
be abused, or
(B) any claim arising out of malicious prosecutiom,
abuse of process, libel, slander, misrepresentatiom,
deceit, or interference with contract rights.
(b) A foreign state shall not be immune from the juriis-
diction of the courts of the United States in any case iin
which a suit in admiralty is brought te enforce a maritime
C-5
lien against a vessel or cargo of the foreign state, which
maritime lien is based upon a commercial activity of the
foreign state: Provided, That —
(1) notice of the suit is given by delivery of a copy
of the summons and of the complaint to the person, or
his agent, having possession of the vessel or cargo
against which the maritime lien is asserted; but such
notice shall not be deemed to have been delivered, nor
may it thereafter be delivered, if the vessel or cargo is
arrested pursuant to process obtained on behalf of the
party bringing the suit — unless the party was unaware
that the vessel or cargo of a foreign state was involved,
in which event the service of process of arrest shall be
deemed to constitute valid delivery of such notice; and
(2) notice to the foreign state of the commencement
of suit as provided in section 1608 of this title is initiated
within ten days either of the delivery of notice as
provided in subsection (b) (1) of this section or, in the
case of a party who was unaware that the vessel or cargo
of a foreign state was involved, of the date such party
determined the existence of the foreign state’s interest.
Whenever notice is delivered under subsection (b) (1) of
this section, the maritime lien shall thereafter be deemed to
be an in personam claim against the foreign state which at
that time owns the vessel or cargo involved: Provided, That
a court may not award judgment against the foreign state in
an amount greater than the value of the vessel or cargo upon
which the maritime lien arose, such value to be determined
as of the time notice is served under subsection (b) (1) of
this section.
§ 1606. Extent of liability
As to any claim for relief with respect to which a foreign
state is not entitled to immunity under section 1605 or 1607
of this chapter, the foreign state shall be liable in the same
manner and to the same extent as a private individual under
like circumstances; but a foreign state except for an agency
or instrumentality thereof shall not be liable for punitive
C-6
damages; if, however, in any case wherein death was caused,
the law of the place where the action or omission occurred
provides, or has been construed to provide, for damages
only punitive in nature, the foreign state shall be liable for
actual or compensatory damages measured by the pecuniary
injuries resulting from such death which were incurred by
the persons for whose benefit the action was brought.
APPENDIX D
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D-1
Counting The Dragon’s Teeth: Foreign Sovereign
Immunity And Its Impact On International Aviation
Litigation, 46 Journal of Air Law & Commerce 687
(1981)
[T]he following 14 foreign air carriers appear to be 100%
state owned:
Arelinte Eireann Ireland
Aeromexico Mexico
Aero Peru Peru
Air Canada Canada
Air India India
Air New Zealand New Zealand
Argentine Airlines Argentina
British Airways United Kingdom
British West Indian Trinidad and Tobago
Iran Air Iran
Lan-Chile Chile
Nigeria Airways Nigeria
Olympic Greece
Quantas Australia
The following 14 foreign air carriers appear to be at least
majority state-owned by the percentage shown:
Air France
Air Jamaica
Air Pacific
Air Zaire
Alitalia
Bahamasair
Dutch Antillean Air
Finnair
KLM
Lufthansa
Pakistan International
Royal Air Maroc
Sabena
Viasa
France
Jamaica
Fiji
Zaire
Italy
Bahamas
Netherlands
Finland
Netherlands
Germany
Pakistan
Morocco
Belgium
Venezuela
98.55
60.00
60.69
64.00
75.50
84.00
96.00
73.00
70.00
74.31
90.00
67.73
65.00
55.00
D-2
The following nine foreign air carriers appear to be over
50% state-owned, but their exact ownership interests are
not clear:
Aeroflot U.S.S.R.
Avianca Columbia
Czechoslovak Airlines Czechoslavakia
El Al Israel
Iberia Spain
LOT Poland
South African Airways South Africa
TAP Portugal
TAROM Romania
(46 J. of Air L. & Com. 687, 705-706, n. 86)
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