# Petition for Writ of Certiorari — Lynne v. Australian Government Aircraft Factories > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385017_1903%3A1 ## Record - **Collection:** Supreme Court brief - **Document type:** Petition for Writ of Certiorari - **Published:** January 1, 1985 - **Citation:** 469 U.S. 1214 ## Text _— is 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 [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385017_1903%3A1. Public record. Not legal advice.