# Petition for Writ of Certiorari — MCI Telecommunications Corp. v. United Arab Emirates > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386004_1481%3A1 ## Record - **Collection:** Supreme Court brief - **Document type:** Petition for Writ of Certiorari - **Published:** January 1, 1996 - **Citation:** 519 U.S. 1007 ## Text Supremes Court, 0.8, PILED No. (1) __96 4 34 SEP 17 19% ore OF THE Cite In THE Suprene Cont of the United States OCTOBER TERM, 1996 MCI TELECOMMUNICATIONS CORPORATION, Petitioner, Vv. UNITED ARAB EMIRATES, MINISTRY OF DEFENSE OF THE UNITED ARAB EMIRATES, Respondents. Petition for a Writ of Certiorari to the United States Court of Appeals for the Fifth Circuit PETITION FOR A WRIT OF CERTIORARI THOMAS F. O’NEtL IIT DONALD B. VERRILLI, JR.* ADAM H. CHARNES SEAN H. DONAHUE MCI TELECOMMUNICATIONS JENNER & BLOCK CORPORATION 601 13th Street, N.W. 1133 19th Street, N.W. Washington, D.C. 20005 Washington, D.C. 20086 (202) 689-6000 (202) 872-1600 * Counsel of Record WILSON - Epes PRINTING Co., Inc. - 789-0096 - WasnINGTON, D.C. 20001 QUESTION PRESENTED Whether promises made by a representative of a foreign state to a United States company pledging that the foreign state would pay debts owed by its citizens if the com- pany agreed not to pursue legal action against them con- stitute “commercial activity” under the Foreign Sovereign Immunities Act, thereby subjecting the foreign state to suit in United States courts upon breach of the promises. (i) ii RULE 29.6 STATEMENT MCI Telecommunications Corporation is a wholly owned subsidiary of MCi Communications Corporation. a TABLE OF CONTENTS Page QUESTION PRESENTED o................c:ccceccsescescsesecessoee i DOUPee COIS MC Pa RUN MU ila sscss ssa beware lascarennerensnce ii TABLE OF AUTHORITIES ...n...........ccc.ccccsceccccsscsececesese iii ERR Stand RL BRO NOMENA A Re 1 PIE Ceiba h alist cakaahateaids lbacniiiniconibtctibiliatestibiocnni 1 a ileriinsaheassseissnshicnssiinesvcnaninsenandisibiccakannsncnicecs 2 STATEMENT OF THE CASB ooo. ecceccccecceeeeeee 2 REASONS FOR GRANTING THE WRIT .......... 8 I. THE COURT OF APPEALS’ SWEEPING HOLDING THAT “PROMISES THROUGH DIPLOMATIC CHANNELS DO NOT CON- STITUTE COMMERCIAL ACTIVITY” IS PLAINLY WRONG AND CONFLICTS WITH THE DECISIONS OF OTHER COURTS OF ae sisi nseacipstianceainsthtnss Seer cortsansese. b RA ERMa et Rac RiGee ncpaNee 2 The Foreign Sovereign Immunities Act, 28 U.S.C. § 1330 a aleianialiibuccmeibiesds 2 > RFI ior amet eMNeeenee e 5 Bt a, PLETE Sere Oe 5 Be IIIS visiseiniscssdseciasilbinniobidetiboigmiaoeininaabony 2 § 1603 (d) .. papitata eg My i SHS 2,9, 16 Be PID ucschaesindhsivarisscanicondietdingenhduapiicsneandiaiaine 2 FID CP i csicenscmeqeepsinwenrinnel 6, 13, 14, 16 Vv TABLE OF AUTHORITIES—Continued MISCELLANEOUS Page H.R. Rep. No. 94-1487 (1976), reprinted in 1976 ee EE eR RE BUR aes eaters es ere ee 18, 21 Joseph W. Dellapenna, Suing Foreign Govern- ments and their Corporations (1988) .................. 11,18 Joan E. Donoghue, Taking the “Sovereign” Out of the Foreign Sovereign Immunities Act: A Func- tional Approach to the Commercial Activity Ex- ception, 17 Yale J. Int’l L. 489 (1992) 0... 14 3 Richard A. Lord, Williston on Contracts (4th ed. OE Sense sinsichectcon saigogiebnidilalesldicnd titaddieniia nie tein 20 Restatement (Second) of Contracts, § 86... 20 In THE Sipwrene Cmut of the United States OCTOBER TERM, 1996 No. MCI TELECOMMUNICATIONS CORPORATION, - Petitioner, UNITED ARAB EMIRATES, MINISTRY OF DEFENSE OF THE UNITED ARAB EMIRATES, Respondents. Petition for a Writ of Certiorari to the United States Court of Appeals for the Fifth Circuit PETITION FOR A WRIT OF CERTIORARI MCI Telecommunications Corporation (“MCI”) re- spectfully petitions for a writ of certiorari to the United States Court of Appeals for the Fifth Circuit. OPINIONS BELOW The opinion of the court of appeals, reported at 82 F.3d 658, is reproduced at page la of the appendix to this petition (“Pet. App.”). The unreported order of the United States District Court for the Western Dis- trict of Texas denying respondents’ motion to set aside the default judgments against them is reproduced at Pet. App. 15a. JURISDICTION The judgment of the court of appeals was rendered on May 13, 1996. The court denied MCI’s petition for 2 rehearing and suggestion for rehearing en banc on June 19, 1996. The jurisdiction of this Court is invoked pursuant to 28 U.S.C. § 1254(1). STATUTES The Foreign Sovereign Immunities Act (FSIA or Act), 28 U.S.C. §§ 1330, 1602-1611, provides in relevant part: A foreign state shall not be immune from the juris- diction of courts of the United States or of the States in any case— (2) in which the action is based upon a com- mercial activity carried on in the United States by the foreign state; or upon an act performed in the United States in connection with a com- mercial activity of the foreign state elsewhere; or upon an act outside the territory of the United States in connection with a commercial activity of the foreign state elsewhere and that act causes a direct effect in the United States. 28 U.S.C. § 1605(a). The FSIA defines “commercial activity” as either a regular course of commercial conduct or a particular commercial transaction or act. The com- mercial 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 ref- erence to its purpose. 28 U.S.C. § 1603(d). STATEMENT OF THE CASE This case arises from express promises made by officials of the United Arab Emirates and its Ministry of Defense (collectively, “UAE”) to MCI that the UAE would ee ee ae 3 reimburse MCI for over $1 million in unauthorized long- distance telephone calls placed by members of the UAE’s “Student Battalion” while on a training assignment at a Texas military installatior. MCI acted in reliance upon the UAE’s promises when it opted at the urging of UAE Officials not to pursue criminal and other remedies against the UAE nationals in question. However, once the UAE military personnel responsible for the unauthorized calls were safely beyond the reach of U.S. courts, the UAE Officials refused to honor their promise. The court below | held that the district court lacked jurisdiction to entertain MCT’s action to enforce the UAE’s promises to pay be- cause the promises were not “commercial” in character, and therefore did not defeat the UAE’s immunity under the FSIA. On September 23, 1986, the UAE entered into an agree- ment with the United States Department of Defense for _the training of UAE military under the sponsorship of the United States Army at Fort Bliss, Texas (“Military Train- ing Agreement”). R. Vol. II, pp. 316-23. Pursuant to Note 5 of the Military Training Agreement, the UAE assumed responsibility for the debts incurred by members of Student Battalion for their personal living expenses. Note 5 of the Agreement stated that: Students will be responsible for payment of charges for transportation, meals, laundry service, and any other services or personal living expenses they incur. Purchaser [UAE] agrees to ensure prompt payment for such expenses. R. Vol. Il, p. 319. In August 1987, MCI commenced an investigation of unauthorized calling activity made over an unbilled MCI “maintenance circuit.” MCI’s investigation revealed that the unauthorized calls were being placed from certain lines in Fort Bliss, Texas to the UAE and other overseas destinations. Information obtained from Southwestern 4 Bell, the local telephone carrier, and from United States Army officials at Fort Bliss revealed that these unbilled calls were being placed by members of the UAE Student Battalion. MCI confirmed from its own records that the identified individuals had made additional, billed calls to the same destinations as the unauthorized calls. R. Vol. I, pp. 92-94. MCI ultimately determined that, beginning around October 1986, the UAE personnel had made more than 40,000 unauthorized long-distance calls worth more than $1 million. Pet. App. 15a, 25a. Although MCI was prepared to press criminal charges against the members of the Student Battalion who had made the unauthorized calls, it opted to pursue the matter first with the UAE government. On January 6, 1988, MCI representatives met with the UAE’s ambassador and military attaché in Washington, D.C. Pet. App. 21a; R. Vol. I, pp. 75-76. At that meeting, the ambassador told the three MCI representatives that if the unauthorized calls were attributable to members of the Student Bat- talion, the UAE would assume responsibility and would pay MCI for the calls. Pet. App. 21a; R. Vol. I, pp. 76- 77. The Ambassador requested that MCI take no further legal action with respect to the matter, and that MCI forward to him information relating to its investigation and its conclusion that the illegal calls were being placed by members of the Student Battalion. Pet. App. 21a; R. Vol. I, pp. 76-77. As requested, MCI promptly provided the UAE’s am- bassador with a list of the members of the Student Battal- ion who made the unauthorized calls and with computer printouts of the call records. Pet. App. 22a; R. Vol. I, p. 77. On January 18, 1988, the ambassador informed MCI that he had transferred the information to the mili- tary attaché for investigation. On February 17, 1988, the attaché informed an MCI manager that the UAE would “definitely” compensate MCI for its losses if mem- bers of the Student Battalion were involved. R. Vol. I, i a a cc 5 p. 78. The UAE requested a written breakdown of the unauthorized calls by destination. Pet. App. 23a; R. Vol. I, pp. 77-78. Texas law enforcement officials urged MCI to decide whether it would accept restitution as a substitute for criminal prosecution of the members of the Student Bat- talion who had made the unauthorized calls. Accordingly, MCI requested another meeting with the UAE ambassa- dor. In June 1988, MCI provided the ambassador with a detailed breakdown of the unauthorized calls which | MCI had prepared at substantial expense, and indicated the need to resolve the matter expeditiously. Pet. App. 23a; R. Vol. I, pp. 78-79. At a July 1988 meeting with MCI representatives, the ambassador and military attaché contended that MCI had failed to provide adequate documentation that Student Battalion members had made the illegal calls and that they had not promised MCI any compensation. After again reviewing records provided by MCI, the ambassador Stated that 10% of the individuals listed by MCI were : not members of the UAE personnel, although he acknowl- edged that 90% of the individuals were UAE personnel. | Pet. App. 23a-24a; R. Vol. I, p. 80. In August 1988, the UAE informed MCI that it would not honor its agreement to pay for the calls, and refused to meet again with MCI. By that time, all but one of the UAE military personnel whom MCI believed responsible for the unauthorized calls had returned to the UAE. Pet. App. 24a; R. Vol. I, p. 81; R. Vol. II, pp. 344-49, On May 11, 1989, MCT filed suit in the United States District Court for the Western District of Texas against the UAE, the UAE Ministry of Defense, and the individ- ual members of the UAE’s Student Battalion who had made the telephone calls.' The complaint sought damages } Jurisdiction was based upon 28 U.S.C. §§ 1880(a) and 18382 (a) (2). | en ee ee 6 for the unauthorized and unpaid long distance services, on theories including fraud, conversion, quantum meruit, promissory estoppel, and implied contract. Pet. App. 43a-48a. The promissory estoppel and implied contract counts rested on the UAE ambassador’s assurance that the UAE would pay MCI for the unauthorized telephone calls made by the members of the Student Battalion, and MCI’s reliance on these assurances. Pet. App. 46a-48a. MCI also sought damages under Note 5 of the Military Training Agreement, on the theory that the UAE had breached the agreement by failing to ensure payment by the UAE military trainees for telecommunications services provided to them by MCI. Pet. App. 45a-46a. MCI was not able to obtain service on the individual defendants.” MCI obtained service on the UAE and the Ministry of Defense, but neither filed an answer or other- wise responded to the complaint. At a hearing on Octo- ber 20, 1989, MCI presented evidence on its damages and expenses as a consequence of the unauthorized telephone calls and the UAE’s subsequent conduct. Pet. App. 27a; R. Vol. II, p. 286. The district court entered default judgments against the UAE Ministry and the UAE on November 7, 1989 and January 5, 1990, respectively. Pet. App. 28a, 29a. More than three years later, on May 21, 1993, the UAE and the UAE Ministry moved to vacate the default judg- ments on the ground that the district court had lacked subject matter jurisdiction under the FSIA. The district court ruled that the UAE and the UAE Ministry of De- fense were not entitled to sovereign immunity because their actions in promising to reimburse MCI for the un- authorized calls fell within the “commercial activity” ex- ception to the FSIA, 28 U.S.C. § 1605(a)(2). Pet. App. 15a. The court reasoned that these promises were com- 2 One individual defendant initially entered an appearance through counsel, but the parties stipulated to dismissal as to him after he returned to the UAE. R. Vol. I, p. 4; R. Vol. II, pp. 344-49. jie 7 mercial acts “because private parties would normally make such promises while participating in the market.” Pet. App. 17a (citing Republic of Argentina v. Weltover, Inc., 504 U.S. 607, 613-14 (1992)). A divided panel of the Fifth Circuit reversed. The majority held the “commercial activity” exception inap- plicable because the UAE’s “alleged promises” had been made “through diplomatic channels.” Pet. App. 7a. Despite acknowledging that contracts to procure goods and services are ordinarily a form of commercial activity under the FSIA, the court reasoned that “(negotiations over the payment of illegal telephone calls” were “not commercial in nature,” emphasizing that MCI’s purpose in approaching respondents was to recover losses caused by third parties. Pet. App. 8a.* Judge Garza dissented. He concluded that there was “nothing sovereign about UAE’s behavior—the alleged making and breaching of a contract with MCI.” Pet. App. 14a. According to the dissent, the UAE's promises to MCI amounted to “simply a contract for services which UAE felt it was morally obligated to enter into.” Pet. App. 14a. Judge Garza reasoned that the UAEF’s actions were not authorized by any power peculiar to a sovereign State, but instead that “any private person could have engaged in these actions.” Pet. App. 14a.* *The court of appeals unanimously held that Note 5 of the Military Training Agreement could not provide a basis for juris- diction under the FSIA’s commercial activity exception because the agreement as a whole did not relate to the purchase of goods and services and because it was between “two sovereign parties” — the United States and the UAE—rather than between the UAE and MCI. Pet. App. 8a-9a. * Judge Garza also complained that the majority had improperly failed to place the burden of proof for establishing sovereign im- munity under the FSIA upon the defendants. Pet. App. lla. The court of appeals denied MCI’s petition for rehear- ing and suggestion for rehearing en banc on June 19, 1996. Pet. App. 18a. REASONS FOR GRANTING THE WRIT This case presents important issues concerning the ap- plication of the FSIA’s commercial activity exception, the “most significant” of the grounds enumerated in the FSIA upon which United States courts may entertain an action against a foreign state or its instrumentality. See Welt- over, 594 U.S. at 611-12. “The determination of whether particular behavior is ‘commercial’ is perhaps the most important decision a court faces in an FSIA suit.” Texas Trading & Milling Corp. v. Federal Republic of Nigeria, 647 F.2d 300, 308 (2d Cir. 1981), cert. denied, 454 U.S. 1148 (1982). The Fifth Circuit’s interpretation of the “commercial activity” exception conflicts with the text of the FSIA, with this Court’s teachings in Weltover and Saudi Arabia v. Nelson, 507 U.S. 349 (1993), and with the law of other circuits. It creates broad and wholly novel restric- tions on the commercial activity exception, and corre- spondingly expands foreign states’ immunity in ways not contemplated by Congress. In a few bold strokes, the court created new propositions of “commercial activity exception” jurisprudence that set the Fifth Circuit apart from the law prevailing in other circuits. In particular, it is now Fifth Circuit law that * a foreign government’s promise to pay is not a commercial act within the meaning of the FSIA if the promise is “made through diplomatic channels”; * a foreign government’s promise to pay its citizen- employees’ debts to United States citizens is a sov- ereign act, and cannot be enforced in United States courts; * a foreign government’s promise to undertake an obligation owed by another is not a commercial ac- 9 tivity unless there is a preexisting contractual relation- ship between the government and the promisee; * negotiation, formation, and breach of a contract between a foreign government and a private party is not “commercial activity” unless the parties have an overall commercial relationship or “nexus”; * negotiations between a foreign government and a private party that lack a profit motive—such as nego- tiations seeking restitution for “illegal” use of serv- ices—are not “commercial” within the meaning of the Act. At the same time, the Fifth Circuit failed to heed the FSIA’s instruction, elaborated in Weltover, that “Tt}he 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,” 28 U.S.C. § 1603(d). The Fifth Circuit also flouted this Court’s teaching in Weltover that the central inquiry in commercial activity exception cases is whether the “particular actions that the foreign state performs . . . are the type of actions by which a private party engages in ‘trade and traffic or commerce.’” 504 U.S. at 614 (emphasis in original) (citation omitted). The decision below introduces needless confusion into the interpretation of a provision that already presents ample difficulty for courts, see Nelson, 507 U.S. at 359: Export Group v. Reef Indus., 54 F.3d 1466, 1473 (9th Cir. 1995), and is likely to lead the Fifth Circuit to re- sults that will diverge sharply from the restrictive view of foreign sovereign immunity that prevails in other cir- cuits. To begin with, the Fifth Circuit is now flatly at odds with the Ninth and District of Columbia Circuits on the issue whether activity undertaken through diplo- matic channels can be “commercial” within the meaning of the FSIA. See Joseph v. Office of the Consulate Gen., 830 F.2d 1018 (9th Cir. 1987), cert. denied, 485 USS. 905 (1988); Transamerican S.S. v. Somali Democratic 10 Republic, 767 F.2d 998 (D.C. Cir. 1985). The Fifth Circuit is also in conflict with the Second and Seventh Circuits as to whether a foreign government’s agreement to guarantee the legal obligations of a third party can be “commercial” activity for FSIA purposes. See Rush- Presbyterian-St. Luke’s Medical Center v. Hellenic Re- public, 877 F.2d 574 (7th Cir. 1989); Gemini Shipping, Inc. v. Foreign Trade Org. for Chem. & Foodstuffs, 647 F.2d 317 (2d Cir. 1981). The particular issues presented by this case are likely to recur with some frequency. Indeed, it is to be expected that promises by diplomatic officials to guarantee the obli- gations of foreign nationals and foreign corporations will be the subject of continuing litigation in United States courts. More broadly, the Fifth Circuit has set itself on a course likely to lead to a significant expansion of the scope of FSIA immunity in cases arising within its borders. The rules of law announced in the decision below will have application far beyond the particular facts pre- sented here, and will likely bring the Fifth Circuit into conflict with the law prevailing in other circuits on a host of particular FSIA questions. In light of the strong public interest in clear standards in foreign sovereign immunity matters—an interest that gave rise to the FSIA’s enact- ment, see, e.g., Verlinden B.V. v. Central Bank of Nigeria, 461 U.S. 480, 488 (1983)—review by this Court is plainly warranted. I. THE COURT OF APPEALS’ SWEEPING HOLDING THAT “PROMISES THROUGH DIPLOMATIC CHANNELS DO NOT CONSTITUTE COMMERCIAL ACTIVITY” IS PLAINLY WRONG AND CONFLICTS WITH THE DECISIONS OF OTHER COURTS OF APPEALS. The Fifth Circuit stated a flat rule that “alleged prom- ises made through diplomatic channels do not constitute commercial activity.” Pet. App. 7a.° That rule departs 5 The court’s observation that the promises here were merely “alleged”—in the sense that they were never proven at trial—is 11 Sharply from the general FSIA principle that the “com- mercial” or “noncommercial” status of the relevant foreign government entity at issue is irrelevant to the immunity question, which instead turns on whether the “cause of action arose out of . . . a commercial act.” Joseph W. Dellapenna, Suing Foreign Governments and Their Cor- porations 148 (1988) (emphasis added). The mere fact that a promisor is a “diplomatic” official or entity clearly does not defeat immunity, as other Circuits have con- cluded. E.g., Holden v. Canadian Consulate, 1996 U.S. App. LEXIS 20064 (9th Cir. Aug. 9, '1996) (denying consulate’s claim of immunity in employment discrimina- tion case because employee’s job resembled private post); Joseph v. Office of the Consulate Gen., 830 F.2d 1018 (9th Cir. 1987) (rejecting claim of immunity from suit on consulate’s lease of private residence for use by con- sular officials), cert. denied, 485 U.S. 905 ( 1988); Transamerican S.S. v. Somali Democratic Republic, 767 F.2d 998, 1003 (D.C. Cir. 1985) (Somali embassy’s affirmative efforts to assist Somali agency in dispute with American shipping company defeated immunity under commercial activities exception ). It would be odd indeed to cloak the actions of am- bassadors and other diplomatic representatives with im- munity because they transact business through “diplomatic channels,” while denying immunity to foreign entities that transact business by means of legislation, executive decree, or administrative order—avenues no less sovereign in nature than the agreements of diplomats. Cf. Weltover, true but immaterial. The court iself recognized that, by opting not to respond to MCI’s suit and taking a default judgment instead, the UAE had “los[t] its right to defend on the merits.” Pet. App. 6a (citing Practical Concepts, Inc. v. Republic of Bolivia, 811 F.2d 1543, 1547 (D.C. Cir. 1987) (R. B. Ginsburg, J.) and insurance Corp. of Ireland, Ltd. v. Compagnie des Bauxites de Guinee, 456 U.S. 694, 706 (1982)). In this light, the court was obligated to take MCI’s allegations as true. 12 504 U.S. at 615 (denying immunity based on acts of Argentinean “government”); Janini v. Kuwait Univ., 43 F.3d 1534 (D.C. Cir. 1995) (denying immunity for abrogation of employment contract even though it was accomplished by a governmental decree voiding all em- ployment contracts with non-nationals). The focus is not on which governmental official undertakes the allegedly commercial act; as Weltover makes clear, the immunity question turns on the “nature” of the act itself. 504 U.S. at 615. In Transamerican, 767 F.2d 998, the D.C. Circuit re- jected an argument strikingly similar to that embraced by the panel majority here. There, a Somali-government- owned agency sought to impose special fees on an Amer- ican shipper for delivering grain at a Somali port. The shipper claimed these fees were unlawful, but decided to pay them in order to free its vessel from detention by the agency, and delivered a check made out to the agency to the Somali embassy in the United States. The em- bassy, however, refused to accept a check made out to the agency, and instructed that the shipper transfer the funds directly into Somalia’s commercial account. The court of appeals in Transamerican rejected the claim that the Somali embassy had played a merely “diplomatic” role, and held that the Somali government was subject to suit based on the embassy’s commercial activities ir helping to collect the payment for the agency. The court explained that “[t]he embassy took an active rather than a_ passive role in the transaction by refusing to accept payment by a check made out to the Agency and insisting instead on an electronic transfer of funds directly into [Somalia’s] own commercial bank account in Washington.” 767 F.2d at 1003. The embassy’s actions were not the impartial ac- tions of a distinctively governmental “diplomatic” nature, but were “normal commercial functions” of the sort that private banks and collection agencies perform routinely; thus they were not entitled to immunity. Jd. See also Holden, 1996 U.S. App. LEXIS 20064 at *9. 13 The Fifth Circuit’s decision in the present case is squarely at odds with the D.C. Circuit’s approach in Trans- american. The UAE ambassador’s actions here were more clearly “commercial” in character than the Somali em- bassy’s actions in that case. The UAE’s ambassador and its military attaché made promises directly to MCI, a private party, for the purpose of inducing MCI to take specific course of action—refraining from legal action against UAE nationals. This was “active” participation of the plainest sort. As the district court and the dissent- ing circuit judge recognized, the UAE’s actions in promis- ing to pay restitution closely resembled those of a private employer that sought to extricate its overseas employees from legal difficulties in their host country. The use of “diplomatic channels” might sometimes be relevant to the “commercial activity” question, but it should not have the per se immunizing effect it now has in the Fifth Circuit. The panel majority’s holding that an ambassador’s explicit promise to pay money to a private party is an act of “diplomacy” cloaked with sovereign immunity confirms that its sweeping language immuniz- ing “promises made through diplomatic channels” was no slip of the tongue. Under the decision below, for- eign government will be able to escape responsibility for otherwise actionable promises by making them through “diplomatic channels.” Equally unfortunate, United States citizens will be loathe to rely on promises by foreign diplomats. The decision below transformed a statute in- tended to ensure that United States “citizens will have access to the courts in order to resolve ordinary legal disputes,” H.R. Rep. No. 94-1487, at 6 (1976), reprinted in 1976 U.S.C.C.A.N. 6604, into a means for foreign diplomats to shield their nationals from having to answer in United States courts for ordinary legal wrongs. This result is plainly inconsistent with the statute, this Court’s decisions, and the decisions of other circuits. 14 II. THE COURT BELOW APPLIED A NOVEL “COM- MERCIAL ACTIVITY” TEST THAT HAS NO BASIS IN THE ACT AND THAT CONFLICTS WITH WELTOVER, NELSON, AND THE DECISIONS OF NUMEROUS COURTS OF APPEALS. A. Failure to Apply the “Private Person” Test. A state “engages in commercial activity” under § 1605(a)(2) “where it exercises only those powers that can also be exercised by private citizens, as distinct from those powers peculiar to sovereigns.” Nelson, 507 U.S. at 360 (cita- tion and internal quotation marks omitted); accord Welt- over, 504 U.S. 607; Texas Trading & Milling Corp., 647 F.2d at 309 (“if the activity is one in which a private person could engage, it is not entitled to immunity”). Courts and commentators have referred to this standard as the “private person” test. E.g., Rush-Presbyterian-St. Luke’s Medical Center v. Hellenic Republic, 877 F.2d 574, 578 & n.4 (7th Cir. 1989); Joan E. Donoghue, Taking the “Sovereign” Out of the Foreign Sovereign Im- munities Act: A Functional Approach to the Commercial Activity Exception, 17 Yale J. Intl L. 489, 505-12 (1992). The panel majority below made a reference to the private person test, Pet. App. 7a & n.5, but never applied it. It did not even purport to consider whether the UAE’s actions in promising to pay MCI for the unauthorized telephone calls are “the type of actions by which a private party engages in ‘trade and traffic or commerce.’” Welt- over, 504 U.S. at 416 (emphasis in original, citation omitted). If the court had conducted the proper inquiry, it would necessarily have concluded, as Judge Garza con- cluded in dissent, Pet. App. 12a-14a, that the UAE’s ac- tions here plainly qualify as “commercial activity” under the Act. Indeed, this is a textbook case in which the complaint describes conduct in which private parties regularly en- 15 gage.° The relevant causes of actions against the UAE— MCT’s claims of promissory estoppel and implied contract —turn upon the ambassador’s and attaché’s promises to pay the telephone charges in question in exchange for MCI’s agreement to forgo legal action, and on MCI’s re- liance on those promises. As with the issuance of bonds in Weltover, there is nothing distinctively governmental about the UAE’s conduct here “(other than perhaps its purpose) that would cause it always to be classified as jure imperii.” Weltover, 504 U.S. at 615. The UAE's promises here were “garden variety” offers to settle a dis- pute. See ibid. According to MCI’s complaint (Pet. App. 46a-47a), the UAE offered to pay restitution to MCI in exchange for MCI’s agreement to refrain from proceeding against UAE citizen-soldiers. This was a promise of the sort that a private employer might well make to a person injured by one of its employees. Private parties commonly insure or assume others’ debts, and they do so both before and after the debts are incurred. A private employer in a foreign country would be particularly likely to agree to debts incurred by its employees, in order to preserve good relations with the host nation or to avoid dis- ruption of its operations.’ Many parents could be ex- pected to offer payment for illegal or overdue telephone calls placed by their children. * The court below did not question that, if the UAE’s promise to repay was a commercial act, MCI’s suit was “based upon” a com- mercial activity within the meaning of § 1605 ( a) (2). In Nelson, the Court explained that an action is “based upon” the elements necessary to establish the claim. 504 U.S. at 615. 7 As the district court observed, “fijn the private arena, if a company sent several employees to a foreign nation and those em- ployees engaged in the subject activity, the corporation would likely make similar promises as those made by Ambassador Makarrab and Colonel Mubarak [the military attaché] to protect its image and standing in the foreign nation.” Pet. App. 17a. 16 The panel majority reasoned that because the telephone calls at issue had been “illegal,” the UAE’s promise to pay for the calls could not be “commercial in nature.” Pet. App. 8a. But this notion has no support in the Act or in judicial precedent under it.* The settlement of claimed legal wrongs—even of those that are potentially criminal—is a staple of private commerce. Because agreement to pay restitution for an employee’s, an asso- ciate’s, or a family member’s unlawful acts is plainly the sort of act in which private parties can and do engage, the UAE’s conduct here should plainly have been classified as “commercial” for purposes of § 1605(a)(2). Although the court referred to the negotiations be- tween the UAE and MCI as “clothed with a diplomatic nature,” Pet. App. 8a, it never explained how the UAE’s promises to MCI could embody any power “peculiar to sovereigns,” Nelson, 507 U.S. at 360. In fact, as Judge Garza noted, no essentially sovereign power was impli- cated here. The fact that a government-to-government arrangement concerning military training was “in the background,” Transamerican, 767 F.2d at 1003, did not alter the commercial nature of the UAE’s specific acts any more than did the sovereign uses to which Argentina put the money raised by the bonds at issue in Weltover. B. Improper Reliance on Purpose. The panel major- ity’s decision directly conflicts with the statutory com- mand that the nature of the specific acts in question, and not their overall purpose, is the determinative factor under § 1605(a)(2). See Weltover, 504 U.S. at 617. Indeed, the court of appeals’ error was particularly fla- grant, for the court relied on private party MCI’s purpose 8In Transamerican, 767 F.2d 998, for example, the court did not hesitate to find “commercial activity” even though the surcharges the Somali embassy had helped collect were alleged to be unlawful; nor did the court in Joseph, 830 F.2d 1018, consider it relevant that the destruction of property alleged to be the basis of the breach of contract was probably both tortious and criminal. 17 in concluding that the UAE’s acts were not “commercial.” The court reasoned that “MCI approached the [UAE] not to form a contract for goods or services, but to try and recover its losses from the unauthorized use of its services by third parties.” Pet. App. 8a. Under the plain lan- guage of 28 U.S.C. § 1603(d), the parties’ purposes and motives are simply “irrelevant to the question of [their] activity’s commercial character.” Nelson, 507 USS. at 363. As for the court of appeals’ statement that MCI was seeking to “recover its losses” rather than “form a con- tract for goods or services,” this Court specifically stated in Weltover that “commercial activity” need not have a “profit motive.” 504 U.S. at 614; accord Rush, 877 F.2d at 578 n.4 (observing that a profit motive requirement would “virtually eliminate” the commercial activity excep- tion). “[T]he use of profit motive as a threshold require- Ment for applying the commercial activity exception would inconsistent with the FSIA’s focus on the nature of the transaction at issue rather than its purpose.” Joseph, 830 F.2d at 1024. C. The “Nexus” Requirement. The court of appeals never denied that a contract existed between the UAE and MCI (indeed, in the face of MCI’s allegations and the UAE’s default, such a finding would have been difficult to sustain).’ Instead, the court declared that it could find “no nexus between MCI and Defendants-Appellants sufti- cient to find a contract or agreement that would be ‘com- mercial’ in nature so as to constitute commercial activity.” Pet. App. 8a. The Fifth Circuit’s new “nexus” require- ment is unprecedented and unwarranted: the question is not the larger relationship between MCI and the UAE, but whether the UAE’s “particular actions,” Weltover, ® Judge Garza concluded that, according to MCI’s allegations con- cerning the ambassador’s promises, a contract had been formed and breached. Pet. App. 14a. 18 504 U.S. at 614, were the kind of actions that private parties perform in the market. Before the decision below, it was “clearly settled” that “the conduct of the foreign state giving rise to the claim must be part of a commer- cial act, but the relationship on which the suit is based need not be commercial, if by commercial one means a relationship involving commerce.” Dellapenna, supra, at 148 (emphasis added). Courts of appeals have recognized that contracts be- tween foreign states and United States nationals for the purchase of goods or services presumptively count as “com- mercial activity” under the Act, with the possible excep- tion of instances in which the subject matter of the contract is inherently governmental. See Rush, 877 F.2d at 578-79. But cf. Weltover, 504 U.S. at 614-15 (a government’s execution of contract to purchase “army boots or even bullets” is commercial activity, because private companies use contracts to acquire goods). The panel majority’s decision simply ignored this analytical framework. The court’s new “nexus” requirement creates a phantom class of contracts that, while neither based on any articulable sovereign attribute nor dealing in a subject that is inherently governmental, nonetheless fall outside the “commercial activity” exception.”® In this respect as well, the decision below is bound to sow confusion. © The contract between the UAE and MCI can reasonably be char- acterized as a contract for the telecommunications services that had been utilized by the UAE soldiers. See Pet. App. 14a (Garza, J., dissenting). In any event, the commercial! nature of the UAE's actions does not depend on whether the ambassador’s promise to MCI involved a sale of “goods” or “services.” Although courts frequently refer to such contracts as the paradigm “commercial” contract, e.g., Weltover, 504 U.S. at 614-15, such contracts plainly do not exhaust the realm of commercial activities under the FSIA. E.g., Joseph, 830 F.2d 1018 (lease); H.R. Rep. No. 94-1487, at 16-17 (1976), reprinted in 1976 U.S.C.C.A.N. 6604, 6615-16 (pur- chasing securities is a commercial activity). 19 D. Settlement of Third Party Debts. The court of ap- peals concluded that the UAE’s “alleged promises” could not be “commercial” in character because the debt owed to MCI was for “services provided to third parties.” Pet. App. 8a. But this distinction, once again unsupported by any authority, is flatly inconsistent with the “commer- cial activity” test as elaborated in Weltover, Nelson, and numerous court of appeals decisions. Those decisions make clear that the governing test is whether the activity is one in which private parties could engage in the market. E.g., Nelson, 507 U.S. at 360; Weltover, 504 U.S. at 613: Holden, 1996 U.S. App. LEXIS 20064 at *4-*8; Janini, 43 F.3d at 1536. If the answer to that question is in the affirmative, the activity is “commercial” regardless of whether a third party is involved. If the panel ma- jority’s emphasis on the “third party” aspect of this trans- action was a demand for conformity with common-law contract requirements, it was in direct conflict with Welt- over, in which this Court observed that “[e]ngaging in a commercial act does not require the receipt of fair value, or even compliance with the common-law requirements of consideration.” 504 U.S. at 615." ™ The court’s reference to the affected UAE military. personnel as “third parties” ignores the close practical and legal relationship between military personnel stationed overseas and their govern- ment. Because of its major financial, logistical, and reputational stake in its soldiers’ fate while stationed in the United States, the UAE itself clearly secured a benefit for its promise to pay for the student Battalion members’ telephone calls—avoiding the cost and embarrassment of having more than 20 of its soldiers hailed into court in a foreign land. That benefit would very likely have been sufficient to qualify as legal consideration for the UAE’s promise. The UAE’s clear obligation under Note 5 of the Military Training Agreement to ensure payment by UAE military trainees’ personal debts further illustrates that the UAE benefited by virtue of its promise to reimburse MCI—by reimbursing MCI for the unauthor- ized calls, the UAE would avoid responsibility to the Department of Defense under Note 5. 20 Under the “private person” standard, the UAE’s promise was plainly commercial in character even if one regards the Student Battalion as “third parties.” Private parties often undertake to pay or insure others’ debts. And while common-law enforceability is not a requirement for a commercial act under § 1605(a)(2), Weltover, 504 U.S. at 611, it is notable that the UAE here received concrete benefits in exchange for assuming this “third party” debt, and that the promisee, MCI, detrimentally relied on the UAE’s promise. Contrary to the court of appeals’ view here, Pet. App. 8a, the fact that the UAE did not have a pre- existing contractual relationship with MCI did not defeat MCT’s claim that the UAE’s promise to pay the Student Battalion members’ debts was itself a commercial act. Once again, the panel majority’s did not apply the appro- priate test: whether the UAE’s actions were of the sort in which private parties can engage. Promises to assume responsibility for a preexisting debt are regularly made and honored by private parties. E.g., 3 Richard A. Lord, Williston on Contracts § 7.31 (4th ed. 1992); Restate- ment (Second) of Contracts, § 86. The court’s insistence upon a preexisting contractual relationship as a precondition for finding “commercial activity” has no support in decisions under the FSIA. It is also flatly inconsistent with Gemini Shipping, Inc. v. For- eign Trade Org. for Chem. & Foodstuffs, 647 F.2d 317 (2d Cir. 1981), in which the court held the commercial activity exception applicable on the basis of Syrian gov- ernment agencies’ guarantee that they would pay demur- rages incurred by the private shipper plaintiff (which had no contractual relationship with the agencies) if the shipper was detained at port while executing a contract with another private entity to deliver grain to Syria. See id. at 318-19. 21 The FSIA leaves it to the courts to “work out progres- sively, on a case-by-case basis . . . the distinction between commercial and governmental” activities. Texas Trading, 647 F.2d at 308-09. Case-by-case adjudication will in- evitably produce arguably anomalous results. In many cases, disparities among results—necessary by-products of applying the FSIA’s vague language in diverse circum- stances—will not require intervention by this Court. Pe- titioner submits, however, that the decision below merits review because it departs from the entire framework gov- erning “commercial activity” cases, fails to apply the standards recently set forth by this Court in Weltover and Nelson, and introduces a number of wide-ranging new principles that have no basis in the FSIA and are likely to distort the future growth of the law. CONCLUSION The petition for a writ of certiorari should be granted. Respectfully submitted, THOMAS F, O’NeEt III DONALD B, VERRILLI, JR.* ADAM H. CHARNES SEAN H. DONAHUE MCI TELECOMMUNICATIONS JENNER & BLOCK CORPORATION 601 18th Street, N.W. 1183 19th Street, N.W. Washington, D.C. 20005 Washington, D.C. 20086 (202) 639-6000 (202) 872-1600 September 17, 1996 * Counsel of Record APPENDICES la APPENDIX A UNITED STATES COURT OF APPEALS FIFTH CIRCUIT No. 95-50161 MCI TELECOMMUNICATIONS CORPORATION, Plaintiff-A ppellee, Vv. SUBHI ALHADHOOD, Captain, et al., Defendants. Appeal from the United States District Court for the Western District of Texas May 13, 1996 Before HIGGINBOTHAM, EMILIO M. GARZA and BENAVIDES, Circuit udges. BENAVIDES, Circuit Judge: Defendants-Appellants appeal the district court’s order denying their motion to vacate default judgment on the basis of their sovereign immunity under the Foreign Sover- eign Immunities Act (“FSIA”). The district court found that Defendants-Appellants made promises to Plaintiff- Appellee MCI Telecommunications Corporation (“MCT”) that qualified as commercial activity under the commercial activity exception of the FSIA, 28 U.S.C. § 1605(a) (2) 2a because private parties would normally make such prom- ises while participating in the market. We reverse based on our finding that the actions of Defendants-Appellants did not constitute commercial activity under the FSIA. I. BACKGROUND On September 26, 1986, Defendant-Appellant United Arab Emirates (“UAE”) entered into an agreement/ contract with the United States Department of Defense for the training of UAE military personnel (“Student Battalion”) under the sponsorship of the U.S. Army at Fort Bliss, Texas. Note 5 of the agreement addressed the expenses covered by the Student Battalion: Students will be responsible for payment of charges for transportation, meals, laundry service, and any other services or personal living expenses they incur. Purchaser agrees to ensure prompt payment for such expenses. In August 1987, MCI instituted an investigation of unauthorized and unbillable calling activity reported by MCTI’s Richardson, Texas office. Through its investiga- tion, MCI established that, beginning approximately October 1986, in excess of $1 million in telephone calls using unauthorized codes and dial-up numbers were placed by members of the Student Battalion to the UAE and other overseas locations. MCI contends that it first attemped to recover its dam- ages through diplomatic channels by meeting with UAE Ambassador Ahmed Salim Al Mokarrab and UAE Mili- tary Attache Colonel Mubarak Rashid Al Ghafli at the UAE Embassay in Washington, D.C. on January 6, 1988. MCI asserts that at that meeting Ambassador Mokarrab explicitly told representatives of MCI that if the unau- thorized calls were attributable to the Student Battalion the UAE would assume responsibility and pay MCI their damages. MCI contends that the Ambassador requested 3a that MCI take no further legal action, but instead forward information to him on MCI’s investigation. MCI contends that it took no further legal action in reliance on the Ambassador’s statements at the January 6, 1988 meeting.’ Throughout the early part of 1988, MCI forwarded detailed information regarding the members of the Student Battalion allegedly involved in the unauthor- ized telephone activity. MCI claims that Ambassador Mokarrab repeatedly delayed any further meetings until July 6, 1988, when Colonel Mubarak stated that he would not assist MCI because MCI failed to prove that any individual Student Battalion member made any of the unauthorized calls. MCI also contends that at that same meeting Ambassador Mokarrab stated that he had never promised MCI compensation. Then in August 1988, the UAE officially informed MCI that it would not compen- sate MCI for any of the telephone calls. _ On May 11, 1989, MCI filed a complaint against the UAE, the UAE Ministry of Defense (“Ministry”) and the individual members of the Student Battalion identified as having made the unauthorized calls. Service was ob- tained upon the UAE and the Ministry only.” One of the individual members of the Student Battalion filed an an- swer, but neither the UAE or the Ministry filed an answer. Because neither the UAE nor the Ministry answered or responded within the required time, default judgments were entered against the Ministry on November 8, 1989 and against the UAE on January 8, 1990.° 1 Five years later, Ambassador Mokarrab executed an affidavit denying that he made any promises to pay MCI for the unauthor- ized telephone calls. 2 All the individual defendants were later dismissed. 3 Prior to entering default judgments against the UAE and the Ministry, the district court held a hearing at which MCI presented evidence as to the amount of damages suffered and expenses in- curred by MCI. MCI also filed a memorandum of law in support of its motion for default judgment on the issue of immunity under the FSIA at the court’s request. 4a On May 21, 1993, the UAE and the Ministry moved to vacate the default judgments on the ground that they were immune from suit under the FSIA. The district court entered an order on February 10, 1995 denying the motion, finding that the UAE and the Ministry were not able to assert sovereign immunity for the unauthor- ized calls because the promises made by Ambassador Mokarrab and Colonel Mubarak to MCI to pay for the calls qualified as “commercial activity” under that excep- tion to the FSIA. Both the UAE and the Ministry now appeal. Il. JURISDICTION This appeal arises from a denial of a motion to vacate default judgments entered against Defendants-Appellants. Separate default judgments were entered against the Ministry on November 8, 1989 and against the UAE on January 8, 1990. Defendants-Appellants filed their mo- tion to vacate on May 21, 1993, more than three years after the last default judgment was entered. In their motion to vacate the default judgments, Defendants- Appellants claimed immunity from suit under the FSIA, and the district court denied the motion based on its find- ing that their actions fell under the “commercial activity” exception to the FSIA. Immediate appeal, under the col- lateral order doctrine, is permitted from an order denying sovereign immunity under the FSIA because it raises the issue of the court’s subject matter jurisdiction. Stena Rederi AB v. Comision de Contratos, 923 F.2d 380, 385 (Sth Cir.1991). However, the question raised from the appeal in the instant case is whether entry of default judgment prior to Defendants-Appellants claim of sover- eign immunity under the FSIA waives their right to claim immunity or challenge the default judgment entered by the district court on the same ground. This Court has held in the context of the FSIA that [w]hen a defendant foreign state has appeared and asserts legal defenses, albeit after a default judgment Sa has been entered, it is important that those defenses be considered carefully and, if possible, that the dis- pute be resolved on the basis of all relevant legal argument. Hester Intern’tl Corp. v. Federal Republic of Nigeria, 879 F.2d 170, 175 (5th Cir.1989) (quoting Practical Con- cepts, Inc. v. Republic of Bolivia, 811 F.2d 1543, 1552 (D.C.Cir. 1987)). A claim of sovereign immunity under the FSIA is waived only when the sovereign state fails to assert immunity in a responsive pleading. See Rodriquez v. Transnave Inc., 8 F.3d 284, 287 (Sth Cir.1993); Fore- most-McKesson, Inc. v. Islamic Republic of Tran, 905 F.2d 438, 443 (D.C.Cir.1990). Thus, a waiver of sov- ereign immunity cannot be implied from a foreign state’s failure to appear. Such a waiver would be inconsistent with section 1608(e) of the FSIA, which requires the court to satisfy itself that jurisdiction exists prior to entering a default judgment.* “[E]ven if the foreign state does not enter an appearance to assert an immunity defense, a dis- trict court still must determine that immunity is unavail- able under the Act.” Verlinden B.V. v. Central Bank of Nigeria, 461 U.S. 480, 493-94 n. 20, 103 S.Ct. 1962, 1971 n. 20, 76 L.Ed.2d 81 (1983). Neither does the FSIA or its legislative history state when sovereign immunity must be raised. The D.C. Cir- cuit has concluded that a foreign state’s failure to appear, even after default judgment has been entered, does not constitute a waiver. Practical Concepts, 811 F.2d at 1547. In Practical Concepts, the Court states that a defendant sovereign state that believes the district court lacks juris- 4 Section 1608(e) provides in pertinent part: No judgment by default shall be entered by a court of the United States or of a State against a foreign state, a political subdivision thereof, or an agency or instrumentality of a for- eign state, unless the claimant establishes his claim or right to relief by evidence satisfactory to the court. 28 U.S.C. § 1608(c). 6a diction may choose one of two paths; it may appear, raise the jurisdiction objection, and ultimately pursue it on di- rect appeal; or it may challenge the court’s jurisdiction in a collateral proceeding by refraining from appearing, thereby exposing itself to the risk of a default judgment, and asserting the jurisdictional objection when enforce- ment of the default judgment is attempted. Jd. See also Insurance Corp. of Ireland, Ltd. v. Compagnie des Baux- ites de Guinee, 456 U.S. 694, 706, 102 S.Ct. 2099, 2106, 72 L.Ed.2d 492 (1982) (“A defendant is always free to ignore the judicial proceedings, risk a default judgment, and then challenge that judgment on jurisdictional grounds in a collateral proceeding.”). By deferring its jurisdic- tional challenge, the foreign state only loses its right to defend on the merits. 7d. In the instant case, Defendants- Appellants did not file a responsive pleading prior to en- try of default judgment; they elected to wait and see if a default judgment would be entered against them. Defend- ant-Appellants then asserted their claim of sovereign im- munity in a collateral proceeding through a motion to vacate the default judgments. Although their appearance might otherwise be characterized as “untimely,” we can- not infer a waiver of immunity from Defendants-Appel- lants’ rouch delayed appearance in this case. Il. COMMERCIAL ACTIVITY EXCEPTION TO THE FSIA “We review the district court’s conclusions about sov- ereign immunity de novo.” Walter Fuller Aircraft Sales, Inc. v. Republic of the Philippines, 965 F.2d 1375, 1383 (Sth Cir.1992) (citing Stena, 923 F.2d at 386). The FSIA provides foreign states immunity from suit in fed- eral and state courts unless a specified exception applies. 28 U.S.C. § 1604. One such exception, “commercial ac- tivity,” is defined under the Act as “either a regular trans- action or act.” 28 U.S.C. § 1603(d). “The commercial character of an activity shall be determined by reference to the nature of the course of conduct or particular trans- 7a action or act, rather than by reference to its purpose.” /d. See also Republic of Argentina v. Weltover, Inc., 504 U.S. 607, 614, 112 S.Ct. 2160, 2166, 119 L.Ed.2d 394 (1992). We have stated “that an activity has a commer- cial nature for purposes of FSIA immunity if it ‘is a type that a private person would customarily engage in for profit.” Walter Fuller, 965 F.2d at 1384 (Sth Cir.1992) (quoting Callejo v. Bancomer, S.A., 764 F.2d 1101, 1108 n. 6 (5th Cir.1985)).° A. Promises to Pay Defendants-Appellants contend that their alleged prom- ises to pay MCI for the unauthorized calls did not make them private players within the market, as defined by the U.S. Supreme Court in Weltover, because the non-com- mercial activity of stealing telephone services did not create a “market” to which their alleged promises could relate. On the other hand, MCI asserts that Defendants- Appellants’ promises to pay were made in the context of their attempt to resolve a private dispute, which is ex- actly the type of activity in which private parties engage. See United States v. Moats, 961 F.2d 1198, 1205 (Sth Cir.1992) (“[t]he negotiation of contracts, including en- try into a settlements agreement, clearly is the type of act performed by private persons”). Thus, MCI argues, the Defendants-Appellants’ express promises to pay consti- tuted “commercial activity” within the meaning of § 1605(a) (2). We find that alleged promises made through diplomatic channels do not constitute commercial activity. As we stated in Walter Fuller, “courts typically hold that con- tracts for the procurement of goods and services are com- 5 This approach has been approved by the U.S. Supreme Court in Weltover, 504 U.S. at 614, 112 S.Ct. at 2166 (“the issue is whether the particular actions that the foreign state performs (whatever the motive behind them) are the type of actions by which a private party engages in ‘trade and traffic or commerce’ ’’). mercial rather than governmental in nature.” 965 F.2d at 1384 (internal citations omitted). Negotiations over the payment of illegal telephone calls, however, are not commercial in nature. Private parties may engage in talks, negotiations, and may even make promises to resolve dis- putes, but not all such activity will be deemed “commer- cial.” See Rush-Presbyterian-St. Luke’s Medical Center v. Hellenic Republic, 877 F.2d 574, 578-79 (7th Cir.), cert. denied, 493 U.S. 937, 110 S.Ct. 333, 107 L.Ed.2d 322 (1989). MCI approached Defendants-Appellants not to form a contract for goods or services, but to try and re- cover its losses from the unauthorized use of its services by third parties. Thus, we find no nexus between MCI and Defendants-Appellants sufficient to find a contract or agreement that would be “commercial” in nature so to constitute commercial activity. In addition, any attempt to resolve the dispute related to services provided to third parties, and not Defendants-Appellants in this instance, and are clothed with a diplomatic nature, not a commer- cial one.* B. Contract for Personal Living Expenses Addressed as an alternative argument for affirming the district court’s judgment, MCI contends that Note 5 of the military training agreement between the UAE and the United States expressly makes the UAE a guarantor of the payment of personal expenses incurred by the Student Bat- talion. MCI argues that by agreeing to act as a guarantor for debts incurred by the Student Battalion, which in- cludes telephone calls, the UAE is, like a private party, engaging in commercial activity. Relying on Weltover, MCI asserts that the agreement constitutes commercial *In this regard we note that MCI admits that instead of filing criminal charges against the Student Battalion members who made the unauthorized calls, it sought to recover its losses through “diplomatic channels” at the UAE Embassy. The negotiations were not related to any contract for services between the UAE and MCI, as no such contract was ever in existence. 9a activity not for its “purpose,” but by its “nature”; al- though the agreement has a governmental purpose, the guarantee contained in Note 5 constitutes commercial ac- tivity. See Weltover, 504 U.S. at 614, 112 S.Ct. at 2166. MCI also argues that the guaranty in Note 5 is unam- biguously written without any limitation for the benefit of all creditors providing services of a personal nature to the Student Battlion. Thus, under Texas law, MCI claims it- self as a third-party beneficiary under the agreement." We find no merit in MCI’s arguments. The cases relied on by MCI are inapplicable in that they involve contracts or agreements between a sovereign state and the complaining party for either the sale of goods or services.” The contract in this case involves a military training agreement between two sovereign parties, the United States and the UAE. No goods or services were purchased or required to be purchased from MCI under the terms of the contract. Therefore, we find noth- ing in the nature of this agreement, even considering the provisions of Note 5, that would constitute commercial activity. C. Unauthorized Telephone Calls As a second alternative argument, MCI contends that because the procuring of telephone services is a basic ac- tivity undertaken by private persons on a daily basis, the placing of long distance telephone calls by members of the Student Battalion constitutes “commercial activity” within the meaning of the FSIA. MCI argues that each use of MCI’s authorization codes created federal tariff obliga- tions on the caller to pay MCI for the long distance tele- TSee United States v. Allstate Ins. Co., 910 F.2d 1281, 1284 (5th Cir.1990) (citing Hermann Hosp. v. Liberty Life Assurance Co. of Boston, 696 S.W.2d 87 (Tex.App.—Ilous.1985, error refused n.r.e.)). 8 See Hellenic Republic, supra; Gemini Shipping v. Foreign Trade Org., 647 F.2d 817 (2d Cir.1981). 10a phone services procured, and such activity is commercial, even in the context of an implied rather than express con- tract. MCI asserts that this argument is even stronger in the instant case because the implied agreement to pay MCI for its provision of tariffed telephone services is not permeated by any overriding governmental function or purpose. We find no merit in MCI’s contentions. At first glance, this argument appears as an attempt to apply the “tortious activities” exception to the FSIA, since it involves the ac- tions of the UAE’s “employees” (i.e., the Student Batta- lion).® Clearly, the making of unauthorized long distance telephone is not within the Student Battalion’s scope of employment. See Moran v. Kingdom of Saudi Arabia, 27 F.3d 169, 173 (Sth Cir.1994). Even if we were to at- tempt to apply the commercial activity exception, the na- ture of the calls, which are stolen, could not be found to be “commercial.” IV. CONCLUSION Finding Defendants-Appellants’ actions did not con- stitute “commercial activity” so that Defendants-Appel- lants are entitled to immunity from suit under the FSIA, we VACATE the default judgment of the district court and DISMISS the case for lack of subject matter juris- diction. ®* The “tortious activities” exception provides in pertinent part: (a) A foreign state shall not be immune form the jurisdiction of courts of the United States or of the States in any case— (5) ...in which money damages are sought against a foreign state for personal injury or death, or damage to or loss of property, occurring in the United States and caused by the tortious act or omission of that foreign state or of any official or employee of that foreign state while acting within the scope of his office or employment... . 28 U.S.C. § 1605 (a) (5). lla EMILIO M. GARZA, Circuit Judge, dissenting: The majority in Part LII.A. holds that UAE’s actions— “its promises to pay”—did not constitute “commercial ac- tivity” under the commercial activity exception of the FSIA, 28 U.S.C. § 1605(a)(2). Because I believe that UAE and MCI’s alleged contract negotiations constituted “commercial activity” under the FSIA, I dissent.’ My disagreement with the majority opinion begins with its failure to address the burden of proof. Under the FSIA, “[o]nce the defendant alleges that it is a ‘foreign state’, the plaintiff must produce some facts to show that the commercial activity exception to immunity applies, but the defendant retains the ultimate burden of proof on im- munity.” Arriba Ltd. v. Petroleos Mexicanos, 962 F.2d 528, 533 (Sth Cir.), cert. denied, 506 U.S. 956, 113 S.Ct. 413, 121 L.Ed.2d 337 (1992). In this case, UAE has the burden of proving that it is immune from suit un- der the FSIA. However, instead of analyzing whether UAE has met this burden, the majority opinion focuses solely on discrediting MCI’s arguments. “The commercial character of an activity shall be de- termined by reference to the nature of the course of con- duct or particular transaction or act, rather than by refer- ence to its purpose.” Republic of Argentina v. Weltover, Inc., 504 U.S. 607, 614, S.Ct. 2160, 2166, 119 L.Ed.2d 394 (1992). The Court in Weltover emphasized that the “commercial activity” exception to the FSIA embodies the restrictive rather than the absolute view of foreign sover- eign immunity. /d. at 613, 112 S.Ct. at 2165. Pursuant to this restrictive theory, the Court held that “when a for- eign government acts, not as regulator of a market, but in the manner of a private player within it, the foreign sov- ereign’s actions are ‘commercial’ within the meaning of the FSIA.” 7d. at 614, 112 S.Ct. at 2166. The determi- 1] concur in Part II and Parts III.B. and C. of the majority opinion. 12a native factor is not whether the foreign government is act- ing to fulfill uniquely sovereign objectives. “Rather, the issue is whether the particular actions that the foreign state performs (whatever the motive behind them) are the type of actions by which a private party engages in ‘trade and traffic or commerce.’” /d. (quoting Black’s Law Dic- tionary 270 (6th ed. 1990) ). Applying this rule, the Weltover Court held that Argen- tina had “participated in the bond market in the manner of a private actor,” and therefore engaged in a “commer- cial activity,” when it issued bonds to restructure debt. /d. at 615-19, 112 S.Ct. at 2167-68. Focusing on the nature of the Argentine government’s behavior, not its purpose, the Court rejected the argument that the context in which the Argentine government created the bonds—to fulfill its obligations under a foreign exchange program designed to address a domestic credit crisis and to control the nation’s critical shortage of foreign exchange—made these bonds “sovereign” instead of “commercial” in nature. Jd. at 615, 112 S.Ct. at 2167. The Court stated that “it is irrelevant why Argentina participated in the bond market in the manner of a private actor; it matters only that it did so.” Id.’ Because the focus is on the nature of the foreign sover- eign’s behavior, most contracts entered into by a foreign sovereign will fall within the commercial activity excep- tion.* We have previously noted the commercial nature of 2 Applying Weltover, the Court in Saudi Arabia v. Nelson, 507 U.S. 349, 118 S.Ct. 1471, 123 L.Ed.2d 47 (1993) stressed that a state engages in commercial! activity only when it exercises powers that can also be exercised by private citizens, as distinct from those powers that are peculiar to sovereigns. Jd. at 360, 113 S.Ct. at 1479. Applying this logic, the Court held that Saudi Arabia’s alleged wrongful arrest, imprisonment and torture of the plaintiff constituted an abuse of the state’s police power, the exercise of which is “peculiarly sovereign in nature.” /d. 8 The legislative history of the FSIA specifically states that “a single contract, if of the same character as a contract which might 13a the making or breaching of a contract. See Walter Fuller Aircraft Sales, Inc. v. Republic of Philippines, 965 F.2d 1375, 1386 (Sth Cir.1992) holding that the breach of a contract for the sale of aircraft is a commercial activity); United States v. Moats, 961 F.2d 1198, 1205 (Sth Cir. 1992) (“The negotiation of contracts, including entry into a settlement agreement, clearly is the type of act performed by private persons”); Stena Rederi AB v. Comision de Contratos del Comite, 923 F.2d 380, 389 n. 11 (Sth Cir. 1991) (“A single contract or course of dealing executed within this nation’s boundaries typically will constitute commercial activity carried on in the United States.” ). Other circuits have also noted that a foreign govern- ment’s formation or breach of a contract will typically constitute commercial activity. In Rush-Presbyterian-St. Luke’s Med. Ctr. v. Hellenic Rep., 877 F.2d 574 (7th Cir.), cert. denied, 493 U.S. 937, 110 S.Ct. 333, 107 L.Ed.2d 322 (1989), the Seventh Circuit stated that al- though “contracts for purchase or sale of goods or services are presumptively ‘commercial activities,’ . . . certain con- tracts, although generally of a type in which a private per- son could enter, are by their nature governmental, since only a sovereign entity deals in the particular kind of goods or services.” 877 F.2d at 578. Examples of non- commercial contracts that the court cited included a con- tract to allow a private party a license to exploit the State’s natural resources and employment contracts be- tween a state and its civil servants or military personnel. Id. at 578-79. In Janini v. Kuwait University, 43 F.3d 1534, 1537 (D.C.Cir.1995), the D.C. Circuit held that the Kuwait University’s unilateral termination of employ- ment contracts was a commercial activity, despite the fact that it was accomplished by a formal decree of abrogation as the result of the Iraqui invasion of Kuwait. be made by a private person,” is an example of the type of behavior that the “commercial activity” exception was designed to encompass H.R.Rep. No. 1487, 94th Cong., 2d Sess. 16 (1976), U.S.C.C.A.N. 1976, at 6615. 14a In this case, there is nothing sovereign about UAE’s be- havior—the alleged making and breaching of a contract with MCI. This is simply a contract for services which UAE felt it was morally obligated to enter into. The fact that the telephone calls were unauthorized, or that UAE had a military training agreement with the United States is irrelevant to the nature of UAE’s actions. UAE’s ac- tions were not authorized by a power peculiar to a for- eign state; the making and breaching of this contract was not the result of UAE’s exercise of its police powers or power over the state’s resources, or even its power over the military. Instead, any private person could have en- gaged in these actions. For the foregoing reasons, I respectfully dissent from the majority opinion, and I would hold that UAE’s alleged making and breaching of a contract with MCI constituted “commercial activity” under 28 U.S.C. § 1605(a) (2). 15a APPENDIX B [Filed Feb. 10, 1995] IN THE UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF TEXAS No. EP-89-CA-164-H MCI TELECOMMUNICATIONS CORPORATION, Plaintiff, v. MEDHAT JAssiIM ALSoorI, Defendant. ORDER REGARDING MOTION TO VACATE DEFAULT JUDGMENT This is a civil action for damages for commercial torts allegedly committed by several members of the United Arab Emirates’ armed forces (the “Individual Defend- ants”). Plaintiff MCI Telecommunications Corporation (“MCI”) alleged the Individual Defendants made 41,057 unauthorized international and domestic long distance phone calls through MCI’s network from Fort Bliss in El Paso, Texas. The Individual Defendants were at Fort Bliss pursuant to a military training agreement between the United Arab Emirates and the United States. MCI also sued the United Arab Emirates (the “UAE”) and the Ministry of Defense of the United Arab Emirates (the “Ministry of Defense”) alleging they were answerable for the unauthorized phone calls. Only one defendant, Medhat Jassim Alsoori, is left in the case. The Court dismissed the other Individual De- fendants for lack of service of process pursuant to Rule 16a 4(j) of the Federal Rules of Civil Procedure. The UAE and the Ministry of Defense are no longer parties because they never filed answers. The Court entered a default judgment against the Ministry of Defense on November 11, 1989 and against the UAE on January 5, 1990. The UAE and the Ministry of Defense finally responded to the default judgments three and a half years later on May 21, 1993 when they filed a motion to vacate the default judg- ments entered against them pursuant to Rule 60(b) (4). They base the motion on the claim that the UAE and the Ministry of Defense are immune to suit under the Foreign Sovereign Immunities Act (“FSIA”), 42 U.S.C. § 1602, et seq. This motion is now before the Court for decision. If a foreign state is entitled to immunity under the FSIA, a court lacks both personal and subject matter jur- isdiction over any suit brought against the foreign state and default judgments against it are void. De Sanchez v. Banco Central de Nicaragua, 770 F.2d 1385, 1389 (Sth Cir. 1985). The FSIA gives foreign states immunity from suit in the United States unless, among other exceptions, the foreign state engaged in commercial activity. 28 U.S.C. § 1605(a)(2). A foreign state engages in com- mercial activity if it acts, not as a regulator of a market, but in the manner of a private player within the market. Republic of Argentina v. Weltover, Inc., U.S. q 112 S.Ct. 2160, 2166 (1992). In the instant case, the Court finds the UAE and the Ministry of Defense are not entitled to foreign sovereign immunity, and, therefore, the default judgments were proper. Ambassador Mokarrab, the UAE’s ambassador to the United States, and Colonel Mubarak, the UAE’s military attaché in Washington, made certain promises to MCI that qualify as commercial activity on the part of the UAE and the Ministry of Defense. They promised to pay for the unauthorized phone calls made by UAE military personnel if MCI did not seek legal action against the per- sonnel and did not publicize what happened. The prom- 17a ises were commercial acts because private parties would normally make such promises while participating in the market. See Republic of Argentina v. Weltover, Inc., supra at 2166, In the private arena, if a company sent several employees to a foreign nation and those employees engaged in the subject activity, the corporation would likely make similar promises as those made by Ambassador Mokarrab and Colonel Mubarak to protect its image and standing in the foreign nation. The UAE’s ambassador and military attache did nothing other than what any pri- vate employer would do if its reputation and business de- pended on the promises. See United States v. Moats, 961 F.2d 1198, 1205 (Sth Cir. 1992). It is therefore ORDERED that the motion of Defend- ants United Arab Emirates and the Ministry of Defense of the United Arab Emirates to vacate the default judg- ments against them, be, and it is hereby, DENIED. . SIGNED AND ENTERED this 10th day of February, 1995. /s/ Harry Lee Hudspeth Harry LEE HUDSPETH United States District Judge 18a APPENDIX C [Filed Jun. 19, 1996] UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT No. 95-50161 MCI TELECOMMUNICATIONS CORPORATION, Plaintiff-A ppellee Vv. SUBHI ALHADHOOD, Captain; AL Bousui, Captain; MuSsTASA IBRAHIM, Captain; AHMED ABBAS, Major; MOHAMMED SAID HASSAN, Major; MOHAMMED SAEED, Sergeant; ABDULLAH AL-SHAMSI, Sergeant, ALY SALEM SreF, Sergeant; MOHAMMED SAEED, Private; ABDUL- LATEAF, Private; KHLFAN, Private; KHALED, Private; ABDULLAH ABDUL ALHAMMADI; SALEH ALMANSOUR; JEHAD HASSAN; AYAD HASSAN; MOHAMMED BAKRAD; KOTYBAH AZUAR; MEDHAT JASSIM ALSOORI; SAEED SALEM AL BAAD; MOHAMMED ALISALEH ALAKAR; SALEM ALKAABI; ANGELOS PAPPAS; MOHAMMED ALI; HussAN SAYED HASHEM, Defendants and THE MINISTRY OF DEFENSE OF THE UNITED ARAB EMIRATES; STATE OF THE UNITED ARAB EMIRATES, Defendants-A ppellants Appeal from the United States District Court for the Western District of Texas, El] Paso 19a ON SUGGESTION FOR REHEARING EN BANC (June 19, 1996) Before HIGGINBOTHAM, EMILIO M. GARZA and BENAVIDES, Circuit Judges. PER CURIAM: (“) Treating the Suggestion for Rehearing En Banc as a Petition for Panel Rehearing, the Petition for Panel Re- hearing is DENIED. No member of the panel nor judge in regular active service of the court having requested that the court be polled on Rehearing En Banc (FRAP and Local Rule 35), the Suggestion for Rehearing En Banc is DENIED. ENTERED FOR THE COURT: /s/ [Illegible] United States Circuit Judge 20a APPENDIX D [Filed Aug. 2, 1993] UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF TEXAS EL PASO DIVISION No. EP-89-CA-164H MCI TELECOMMUNICATIONS CORPORATION, ” Plaintiff, CAPTAIN ALHADHOOD, et al., Defendants. AFFIDAVIT DISTRICT OF COLUMBIA ) SS. JOHN M. SCORCE, being duly sworn, deposes and says: 1. I am Director of International Regulatory Affairs for Plaintiff MCI Telecommunications Corporation (“MCT”). My office is located at 1801 Pennsylvania Avenue, N.W., Washington, D.C. 20006. The facts that I attest to herein are made upon my personal knowledge and, if called to testify as to these facts in a court of law, I could and would be able to testify competently as to these facts. 2. I submit this Affidavit in support of MCI’s Opposi- tion to the Motion of Defendant The United Arab Emi- rates (“UAE”) To Vacate Default Judgments in the above-captioned action. 3. After MCI discovered that the perpetrators of the unauthorized telephone calls were members of the Student Battalion, Air Defense Command, UAE (“Student Bat- talion”) at Fort Bliss, Texas, I was asked by MCI Assist- ant General Counsel John A. Fraser to attempt to deal with this matter on a diplomatic level. The diplomatic ap- 2la proach was favored for the following reasons. First, MCI was concerned because the social and military rank of some of the personnel involved could cause unwanted pub- licity for the UAE, a nation friendly to the United States. Second, MCI was concerned that the enforcement of United States law might disrupt the training schedules for the Student Battalion, thus involving the Departments of Justice, State, and Defense and perhaps raising issues of federal cooperation with Texas officials. Third, the United States Secret Service, through a high-ranking director, re- quested that MCI consider a diplomatic approach prior to any direct law enforcement contact with UAE personnel. 4. On January 6, 1988, Mr. Fraser, Hassan Shatah, MCI’s Manager for the Middle East and South Asia, and I met with Mr. Ahmed Salim Al Mokarrab, who then was Ambassador to the United States for the UAE and Mu- barak Rashid Al Ghafli, who then was the Military At- taché at the UAE Embassy, to discuss the matter of the unauthorized calls by the members of the Student Batta- lion. The meeting was held at the UAE Embassy at 600 New Hampshire Avenue, N.W., in Washington, D.C. 5. We informed Ambassador Moka‘rab of the losses and expenses incurred by MCI as a result of the unauth- orized telephone calls made by the members of the Student Battalion and of how the calls were made. 6. Contrary to the statement in his Affidavit, Ambas- sador Mokarrab explicitly told us that if the unauthorized telephone calls were attributable to the members of the Student Battalion, the UAE would assume responsibility for the calls and would pay MCI for such services. At the same time, Ambassador Mokarrab, contrary to the state- ments made in his Affidavit, specifically requested that MCI take no further legal action with respect to this mat- ter and, instead, that it forward to him information relat- ing to its investigation and its claim that the unauthorized calls were placed by officers and enlisted men of the Stu- dent Battalion. Ambassador Mokarrab did not say at this wr 4 22a meeting, or, at any other time before August 1988, that the UAE did not hold itself legally responsible to MCI for the unauthorized telephone calls made by the members of the Student Battalion. 7. Relying on Ambassador Mokarrab’s representation at the meeting on January 6, 1988, MCI agreed to for- bear bringing legal action against the members of the Student Battalion. 8. On January 12, 1988, I sent Ambassador Mokarrab a list of the 35 members of the Student Battalion who made the unauthorized telephone calls and computer printouts of the call records contained in two volumes. Each volume of the call records had a “key” taped to its insider cover and contained tapes that added up the cost of each unauthorized telephone call. 9. My cover letter submitted with the information dis- cussed in paragraph 8 above again detailed for Ambassa- dor Mokarrab the results of MCI’s investigation into the unauthorized calls. My January 12, 1988 letter with the list of Student Battalion members attached is attached hereto as Exhibit 1. Due to their size, the two volumes ci call records are not attached to Exhibit 1. MCI will bring these materials to the hearing. 10. On January 18, 1988, Ambassador Mokarrab called me and told me that he had turned the information submitted by MCI over to Colonel Mubarak for investi- gation. 11. On February 25, 1988, Marcel Scheidegger, an MCI International Senior Manager, and I met with Colo- nel Mubarak to explain to him MCI’s proof that the mem- bers of the Student Battalion had made the unauthorized telephone calls. During this meeting, Colonel Mubarak requested a written breakdown of the unauthorized tele- phone calls by destination. 23a 12. Although preparing a written breakdown of the unauthorized telephone calls by destination was very ex- pensive and time consuming, MCI prepared the data and delivered it to Ambassador Mokarrab on June 10, 1988. The new data was contained in two reports. As requested by Colonel Mubarak, Report No. | sorted the fraudulent telephone calls by the telephone number called and Re- port No. 2 sorted the calls by date. In addition, both reports contained a listing of the MCI authorization code used, the date the call was made, the digits dialed, and the duration of the call in minutes. | 13. While MCI was working with the UAE Embassy to resolve this matter, the law enforcement authorities were fully prepared to arrest the members of the Student Battalion and they were pressuring MCI to make a deci- sion regarding restitution. Since MCI feared that it might lose its chance at both restitution and prosecuting the members of the Student Battalion, MCI pressed for an- other meeting with Ambassador Mokarrab. However, Ambassador Mokarrab repeatedly delayed scheduling a meeting with MCI, purportedly because Colonel Mubarak was not available. 14. On June 10, 1988, I sent a Ambassador Mokarrab a letter explaining that due to pressure from law enforce- ment authorities to prosecute certain members of the Stu- dent Battalion, MCI was anxious to resolve this matter quickly. Enclosed with this letter was the data requested by Colonel Mubarak at the February 25, 1988 meeting which is discussed in paragraphs 11-12 above. Mr. Scorce’s June 10, 1988 letter is attached hereto as Exhibit 2. Due to its large size, the data requested by Colonel Mubarak is not attached to Mr. Scorce’s letter, MCI will bring this data to the hearing. 15. Prior to Ambassador Mokarrab’s arrival at the meeting, Colonel Mubarak stated that MCI had failed to prove that any individual Student Battalion member made any of the unauthorized telephone calls. He suggested that MCI simply send the Student Battalion members bills 24a for the calls. Finally, Colonel Mubarak stated that he would not assist MCI due to the lack of proof. 16. When Ambassador Mokarrab arrived at the meet- ing, he stated that he had never promised MCI any com- pensation and that MCI’s failure to provide proof that the members of the Student Battalion made the calls was “serious.” 17. Mr. Fraser and I again reviewed MCI’s proof against the list of Student Battalion members which MCI had provided to the Ambassador in January 1988. After reviewing the list, Ambassador Mokarrab and Colonel Mubarak left the room and compared the list with some other list of UAE personnel. After returning to the room, Ambassador Mokarrab stated that 10% of the individuals on MCT’s list were not UAE personnel. When asked to respond as to the 90% who were UAE personnel, he said that they had not been prepared for the meeting and that he wanted to adjourn the meeting for four weeks to review the situation. Ambassador Mokarrab never disputed that 90% of the individuals on the list were in fact members of the UAE Student Battalion. 20. In or about August 1988, the UAE informed MCI that the UAE would not honor its agreement to MCI that it would assume responsibility for the use of the unauth- orized codes by the officers and enlisted men of the Stu- dent Battalion, as previously represented. Ambassador Mokarrab refused to meet again with MCI to discuss this matter. 21. By the time that the UAE informed MCI that it would not honor its agreement to MCT, the officers and enlisted men of the Student Battalion who had made the unauthorized telephone calls had been rotated back to the UAE—where no United States court could obtain per- sonal jurisdiction over them. FURTHER AFFIANT SAYETH NOT. /s/ John M. Scorce JOHN M. SCORCE aia iii iii 25a APPENDIX E [Filed Jun. 11, 1992] UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF TEXAS EL PASO DIVISION No. EP-89-CA-164H MCI TELECOMMUNICATIONS CORPORATION, Plaintiff, Vv. CAPTAIN ALHADHOOD, ef al... Defendant. EX PARTE ORDER OF ATTACHMENT AND EXECUTION On January 5, 1990, this Court entered Judgment in this action in favor of Plaintiff MCI TELECOMMUNI. CATIONS CORPORATION (“MCIT”) and against De- fendant UNITED ARAB EMIRATES in the amount of $1,155,010.39 plus costs of court and post-judgment in- terests at the prevailing rate from the date of judgment until paid (“Judgment”). The Judgment provided that MCIT shall have “all writs of execution and other process necessary to enforce this judgment.” On May 7, 1990, the Judgment was properly served upon Defendant UNITED ARAB EMIRATES pursuant to 28 U.S.C. § 1608. Pursuant to 28 U.S.C. § 1610(c), the Court has deter- mined that a reasonable period of time has elapsed follow- ing entry of the Judgment against the UNITED ARAB EMIRATES and service of the Judgment upon said De- 26a fendant and that MCIT may therefore attach the property of the UNITED EMIRATES in the United States in aid of execution and may execute upon said property in satis- faction of the Judgment. It is therefore ORDERED that MCI TELECOMMUNICATIONS CORPORATION may attach the property of Defend- ant UNITED ARAB EMIRATES in the United States in aid of execution to the extent provided for in 28 U.S.C. § 1610 and may execute upon said property in order to satisfy the Judgment. Dated this 10th day of June, 1992. /s/ Harry Lee Hudspeth United States District Judge 27a APPENDIX F [Filed Jan. 5, 1990] IN THE UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF TEXAS EL PASO DIVISION No. EP-89-CA-164H MCI TELECOMMUNICATIONS CORPORATION, Plaintiff, Vv. CAPTAIN SUBHI ALHADHOOD, et al., Defendant. JUDGMENT AND ORDER On the Sth day of January, 1990, came on to be heard the application of Plaintiff MCI TELECOMMUNICA- TIONS CORPORATION (“MCIT”) for entry of judg- ment against UNITED ARAB EMIRATES. MCIT had previously moved for entry of default against UNITED ARAB EMIRATES and a default was entered by the clerk of the Court on December 7, 1989. The Court finds that at a hearing held on October 20, 1989 in sup- port of MCIT’s Motion for Judgment against the MIN- ISTRY OF DEFENSE OF THE UNITED ARAB EMIRATES, MCIT appeared through counsel and pre- sented both testimonial and documentary evidence as to the amount of damages it suffered and the expenses it incurred as a consequence of the conduct of the MIN- ISTRY OF THE UNITED ARAB EMIRATES. Based upon the pleadings and official records on file in this cause, the Court entered judgment against the MIN- 28a ISTRY OF DEFENSE OF THE UNITED ARAB EMIRATES and in favor of MCIT in the amount of $1,155,010.39. The Court having found that the same testimony and documentary evidence introduced on October 20, 1989 supports the entry of default against UNITED ARAB EMIRATES, one of the Defendants herein. It is therefore ORDERED that judgment be entered against UNITED ARAB EMIRATES in favor of MCI TELECOMMU- NICATIONS CORPORATION in the amount of $1,155,010.39. It is further ORDERED that Plaintiff be granted judgment for post- judgment interest at the prevailing rate from date of judgment until paid and costs of Court. It is further ORDERED that nothing contained herein shall affect Plaintiff's causes of action against any of the other De- fendants named in this cause. It is further ORDERED that there being no just reason for delay, this final judgment shall be entered against UNITED ARAB EMIRATES pursuant to Fed. R. Civ. P. 54(b). It is further ORDERED that Plaintiff have all writs of execution and other process necessary to enforce this judgment. /s/ Harry Lee Hudspeth Harry LEE HUDSPETH United States District Judge DATED: January 5, 1990 SERPS ARYA, IO es 29a APPENDIX G [Filed Aug. 28, 1989] IN THE UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF TEXAS EL PASO DIVISION No. EP-89-CA-164H MCI TELECOMMUNICATIONS CORPORATION, Plaintiff, Vv. UNITED ARAB EMIRATES, ef al., Defendants. CLERK’S ENTRY OF DEFAULT AGAINST THE MINISTRY OF DEFENSE OF THE UNITED ARAB EMIRATES AND MEDHAT JASSIM ALSOORI On the 28th day of August, 1989, came on to be heard Plaintiff's Motion for Entry of Partial Default Judgment against The Ministry of Defense of the United Arab Emirates and Bedhat Jassim Alsoori and Affidavit in Support. Based upon same as well as my review of the pleadings in this matter, I find as follows: 1. On May 11, 1989, MCT filed with this Court a Complaint for Damages against The Ministry of Defense of the United Arab Emirates, Medhat Jassim Alsoori, and others. 2. On May 11, 1989, this Court issued a summons to be served on Defendant Medhat Jassim Alsoori. Said summons was served on this Defendant on July 11, 1989, 30a The original summons is and has been made an official part of the Court’s record in this matter. 3. On May 11, 1989, this Court issued a summons to be served on Defendant The Ministry of Defense of the United Arab Emirates pursuant to 28 U.S.C. § 1608 (a)(3). A certified mail receipt was received and re- turned on May 25, 1989 as is reflected by item 2 on the Court’s docket sheet in this matter. The original certified mail receipt is and has been made an official part of the Court’s record in this matter. 4. Over thirty (30) days have passed since Medhat Jassim Alsoori was served and over sixty (60) days have passed since The Ministry of Defense of the United Arab Emirates and Medhat Jassim Alsoori were served with the summons or Complaint in this action. Neither has answered, moved, or otherwise responded to the summons and Complaints. Accordingly, MCI is entitled to have a default entered against Defendants The Ministry of Defense of the United Arab Emirates and Medhat Jassim Alsoori. SIGNED AND ENTERED this 28th day of August, 1989. /s/ William T. [Illegible] Deputy Clerk of the United States District Court for the Western District of Texas, El] Paso Division 3la APPENDIX H [Filed Jan. 11, 1989] IN THE UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF TEXAS EL PASO DIVISION Civil Action No. EP-89-CA-164 JuRY TRIAL DEMANDED MCI TELECOMMUNICATIONS CORPORATION, Plaintiff, v. CAPTAIN SUBHI ALHADHOOD, CAPTAIN AL-Bousul, Cap- TAIN MUSTASA IBRAHIM, MAyor AHMED ABBAS, Ma- JOR MOHAMMED Salp HASSAN, SERGEANT MOHAMMED SAEED, SERGEANT ABDULLAH AL-SHAMSI, SERGEANT ALI SALEM SIEF, PRIVATE MOHAMMED SAEED, PRIVATE ABDULLATEAF, PRIVATE KHLFAN, PRIVATE KHALED, ABDULLAH ABDUL ALHAMMaADI, SALEH ALMANSOUR, JEHAD Hassan, Ayap HASSAN, MOHAMMED BAKRAD, KOTYBAH AZUAR, MEDHAT JAssIM ALSooRI, SAEED SALEM AL Baap, MOHAMMED ALISALEH ALAKAR, SALEM ALKAABI, ANGELOS Pappas, MOHAMMED ALI, Hussan SAYED HASHEM, THE MINISTRY OF DEFENSE OF THE UNITED ARAB EMIRATES, STATE OF THE UNITED ARAB EMIRATES, COMPLAINT FOR DAMAGES MCI Telecommunications Corporation (“MCI”), by and through its counsel of record, complains against the individual defendants named above, the Ministry of De- 32a fense of The United Emirates (“Ministry of Defense”) and the State of the United Arab Emirates (“UAE”) representing as follows: INTRODUCTION 1. This is an action for injury suffered by MCI as a result of the activities of the individual defendants in their capacity as agents for the Ministry of Defense and the UAE in conspiring to defraud MCI in connection with their obtaining long distance telephone service and converting property of MCI and the refusal of the UAE to ensure payment of the services incurred as required under a written agreement entered into between the United States Department of Defense and the UAE. It is also an action against the individual defendants, the Ministry of Defense and the UAE for money damages suffered by MCI on the basis of services provided to the individual defendants and for damages suffered by MCI as the result of representations made by the UAE with respect to the payment for telephone services improperly obtained by the individual defendants. PARTIES 2. MCI is a Delaware corporation organized and exist- ing under the laws of the state of Delaware with its cor- porate offices located at 1133 19th Street, N.W., Wash- ington, D.C. 20036. MCI is duly authorized to do busi- ness within the state of Texas and at all times pertinent to the Complaint was conducting business within the state. 3. Upon information and belief, CAPTAIN SUBHI ALHADHOOD is an officer in the armed forces of the UAE who is or was previously assigned to the Student Battalion, Air Defense Command, UAE at Fort Bliss, El Paso, Texas. 4. Upon information and belief, CAPTAIN AL- BOUSHI is an officer in the armed forces of the UAE 33a who is or was previously assigned to the Student Battalion, Air Defense Command, UAE at Fort Bliss, El Paso, Texas. 5. Upon information and belief, CAPTAIN MUS- TASA IBRAHIM is an officer in the armed forces of the UAE who is or was previously assigned to the Student Battalion, Air Defense Command, UAE at Fort Bliss, El Paso, Texas. 6. Upon information and belief, MAJOR AHMED ABBAS is an officer in the armed forces of the UAE who is or was previously assigned to the Student Battalion, Air Defense Command, UAE at Fort Bliss, El Paso, Texas. 7. Upon information and belief, MAJOR MOHAM- MED SAID HASSAN is an officer in the armed forces of the UAE who is or was previously assigned to the Student Battalion, Air Defense Command, UAE, at Fort - Bliss, El Paso, Texas. 8. Upon information and belief, SERGEANT MO- HAMMED SAEED is a member in the armed forces of the UAE who is or was previously assigned to the Student Battalion, Air Defense Command, UAE at Fort Bliss, El Paso, Texas. 9. Upon information and belief, SERGEANT AB- DULLAH AL-SHAMSI is a member in the armed forces of the UAE who is or was previously assigned to the Student Battalion, Air Defense Command, UAE at Fort Bliss, El Paso, Texas. 10. Upon information and belief, SERGEANT ALI SALEM SIEF is a member of the armed forces of the UAE who is or was previously assigned to the Student Battalion, Air Defense Command, UAE at Fort Bliss, El Paso, Texas. 11. Upon information and belief, PRIVATE MO- HAMMED SAEED is a member of the armed forces of 34a the UAE who is or was previously assigned to the Student Battalion, Air Defense Command, UAE at Fort Bliss, El Paso, Texas. 12. Upon information and belief, PRIVATE ABDUL- LATEAF is a member of the armed forces of the UAE who is or was previously assigned to the Student Battalion, Air Defense Command, UAE at Fort Bliss, El Paso, Texas. 13. Upon information and belief, PRIVATE KHLFAN is a member of the armed forces of the UAE who is or was previously assigned to the Student Battalion, Air Defense Command, UAE at Fort Bliss, El Paso, Texas. 14. Upon information and _ belief, PRIVATE KHALED is a member of the armed forces of the UAE who is or was previously assigned to the Student Battal- ion, Air Defense Command, UAE at Fort Bliss, El Paso, Texas. 15. Upon information and belief, ABDULLA ABDUL ALHAMMADI is a member of the armed forces of the UAE who is or was previously assigned to the Student Battalion, Air Defense Command, UAE at Fort Bliss, El Paso, Texas. 16. Upon information and belief, SALEH ALMAN- SOUR is a member of the armed forces of the UAE who is Or was previously assigned to the Student Battalion, Air Defense Command, UAE at Fort Bliss, El Paso, Texas. 17. Upon information and belief, JEHAD HASSAN is a member of the armed forces of the UAE who is or was previously assigned to the Student Battalion, Air Defense Command, UAE at Fort Bliss, El Paso, Texas. 18. Upon information and belief, AYAD HASSAN is a member of the armed forces of the UAE who is or was previously assigned to the Student Battalion, Air Defense Command, UAE at Fort Bliss, El Paso, Texas. 35a 19. Upon information and belief, MOHAMMED BAKRAD is a member of the armed forces of the UAE who is or was previously assigned to the Student Battal- ion, Air Defense Command, UAE at Fort Bliss, El Paso, Texas. 20. Upon information and belief, KOTYBAH AZUAR is a member of the armed forces of the UAE who is or was previously assigned to the Student Battal- ion, Air Defense Command, UAE at Fort Bliss, El Paso, Texas. 21. Upon information and belief, MEDHAT JASSIM ALSOORI is a member of the armed forces of the UAE who is or was previously assigned to the Student Battal- ion, Air Defense Command, UAE at Fort Bliss, El Paso, Texas. 22. Upon information and belief, SAEED SALEM AL BAAD is a member of the armed forces of the UAE - who is or was previously asigned to the Student Battalion, Air Defense Command, UAE at Fort Bliss, El Paso, Texas. 23. Upon information and belief, MOHAMMED ALISALEH ALAKAR is a member of the armed forces of the UAE who is or was previously assigned to the Student Battalion, Air Defense Command, UAE at Fort Bliss, El Paso, Texas. 24. Upon information and belief, SALEM ALKAABI is a member of the armed forces of the UAE who is or was previously assigned to the Student Battalion, Air Defense Command, UAE at Fort Bliss, El Paso, Texas. 25. Upon information and belief, ANGELOS PAP- PAS is a member of the armed forces of the UAE who is Or was previously assigned to the Student Battalion, Air Defense Command, UAE at Fort Bliss, El Paso, Texas. 26. Upon information and belief, MOHAMMED ALI is a member of the armed forces of the UAE who is or 36a was previously assigned to the Student Battalion, Air De- fense Command, UAE at Fort Bliss, El Paso, Texas. 27. Upon information and belief, HUSSAN SAYED HASHEM is a member of the armed forces of the UAE who is or was previously assigned to the Student Battal- ion, Air Defense Command, UAE at Fort Bliss, El Paso, Texas. 28. THE MINISTRY OF DEFENSE is an agency or instrumentaiity of the UAE. The Student Battalion, Air Defense Command, UAE is, upon information and belief, a component of the UAE armed forces under the direct control of the Ministry of Defense. The Student Battal- ion, Air Defense Command, UAE is presently located at Fort Bliss, El Paso, Texas, and the above-referenced individuals are or have been assigned to the Student Bat- talion in connection with their status as members of the armed forces of the UAE. 29. THE UNITED ARAB EMIRATES is a foreign state which maintains personnel, agencies and instruinen- talities within the United States. JURISDICTION 30. This Court has jurisdiction over this action with respect to the individual defendants pursuant to 28 U.S.C. § 1332(a)(2), in that the individual defendants are, upon information and belief, citizens or subjects of a foreign state and the amount in dispute exceeds $10,000. This Court has jurisdiction over the Ministry of Defense and the UAE pursuant to 28 U.S.C. § 1330(a) in that the Ministry of Defense is an agency or instrumentality of the UAE and the UAE is a foreign state which, under 28 U.S.C. § 1605-1607, is not entitled to immunity for the acts complained of herein. 31. Venue in this Court with respect to the individual defendants is appropriate pursuant to 28 U.S.C. § 1391 (a) and (d) in that this is the district in which the claims a ee ee ee en ee mr 37a arose and, upon information and belief, each of the in- dividual defendants is an alien. Venue in this Court is appropriate as to the Ministry of Defense and the UAE pursuant to 28 U.S.C. § 1391(f)(1), in that this is the district in which a substantial portion of the events giving rise to this action occurred. FACTS COMMON TO ALL COUNTS 32. MCI is engaged in the business of selling long distance telephone services to the general public. Among the telephone services which MCI makes available to its customers is a service known as “MCI Dial-Up Service”. Customers who subscribe to this service agree to pay a prescribed rate for telephone calls made by them through this service and such customers are provided by MCI with a unique, confidential code number (the “authoriza- tion code”) which enables them to enter into the system. 33. B entering an authorization code into MCTI’s cyumputer records through the key-pad of a touch tone telephone, MCI customers may obtain long distance tele- phone service to any foreign country throughout the world and to any area within the United States. Once an authorization code is activated, charges for long distance calls made by an authorized customer will be billed by MCT to that customer’s account. 34. Upon information and belief, beginning in approx- imately October, 1986, officers and enlisted men of the Student Battalion, Air Defense Command, UAE (“Stu- dent Battalion, UAE”) at Fort Bliss, Texas, including the above named defendants and others, came into possession of one or more MCI authorization codes without the knowledge, consent or authorization of MCI (the “un- authorized codes” ). 35. At or about the same time, the officers and en- listed men of the Student Battalion, UAE and others came into possession of a number for a maintenance circuit within the MCI telephone system without the knowledge, 38a consent or authorization of MCI (the “unauthorized cir- cuit”). Because telephone calls made through a mainte- nance circuit are not charged to a customer of MCI, the telephone calls made by the officers and enlisted men of the Student Battalion, UAE and others using the un- authorized code numbers and entered through the mainte- nance circuit went undetected for a substantial period of time. 36. On or about August 17, 1987, MCT first began to investigate the high level of calling activity through the maintenance circuit which had been noted by MCI per- sonnel and which could not be attributed to a particular customer. In connection with its investigation of a poten- tial unauthorized use of MCI’s facilities, MCI obtained a trap trace through Southwestern Bell Telephone Company which revealed that telephone calls using the unauthorized codes and unauthorized circuit were being made from telephones maintained in the names of the individual de- fendants, other telephones located at the Student Battal- ion, UAE at Fort Bliss, as well as telephones maintained by other individuals in the El Paso community. In addi- tion, as a result of its investigation, MCI was able to establish that during the period from October, 1986 through March, 1988, more than $1,500,000 in calls using the unauthorized codes and unauthorized circuit were placed from the El Paso, Texas area to the UAE and other overseas locations. 37. Because the unauthorized codes were being utilized in connection with an unauthorized circuit, the unauthor- ized telephone activity was not easily detectable and MCI had no reasonable basis to suspect that its facilities were being improperly and illegally utilized until it began its investigation in August of 1987. During the period from August, 1987 through March, 1988, MCI undertook vari- ous measures to prevent individuals who had obtained access to the unauthorized codes from utilizing such codes in the MCT system. Role ere + APA OO le 8 AS alge NB NE BEA, OBIE GME ER AEE GE A CL * Sp Rs IGG CELE LER DOME LIE 8 GSA ipl M8 Sy 39a 38. The officers and enlisted men of the Student Bat- talion, UAE agreed to and used one or more of the unauthorized codes and the unauthorized circuit to obtain long distance telephone services without paying MCI for the services and with the intent not to pay for these services. 39. Upon information and belief, the officers and en- listed men of the Student Battalion, UAE, and others at various times gave and transferred the unauthorized code numbers and instructions on their use to other persons, both known and unknown, who used the unauthorized code numbers to obtain long distance telephone services for themselves from MCI without paying for such serv- ices. Upon information and belief, those same individuals gave and transferred the unauthorized code numbers and instructions on their use to other individuals who also used the unauthorized code numbers to obtain phone services and/or transferred the unauthorized code num- bers in a continuing chain of unauthorized use. 40. Each use of one of the unauthorized code num- bers described above constituted a representation to MCI by the user that he was a duly authorized user of the account to which the authorization code was assigned and that the service obtained from MCI through such an au- thorization code would be paid. In reliance upon this implied representation, MCI was induced to provide, with- out compensation, long distance telephone services for which it is entitled to receive compensation in an amount which is yet unknown but which exceeds the minimal jurisdictional limits of this Court. 41. On September 23, 1986 the UAE entered into a contract with the United States Department of Defense for the training of the members of the UAE Armed Forces (“Agreement”). Note 5 to the Agreement pro- vided that the UAE would ensure prompt payment of any personal expenses incurred by its officers and enlisted men in the United States. 40a 42. The actions by the officers and the enlisted men of the Student Battalion, UAE in obtaining long distance phone services through the use of unauthorized access codes and the UAE’s agreement to ensure payment of personal expenses incurred by its officers and enlisted men constitute commercial activity of the Ministry of Defense and the UAE undertaken by its duly authorized agents. 43. As a result of the actions of the officers and en- listed men of the Student Battalion, UAE, MCI has in- curred, in addition to the cost of the unauthorized services, additional costs, including, without limitation, costs for replacement of authorization codes which it would not have incurred but for the aforementioned conduct. COUNT I CONSPIRACY TO DEFRAUD 44. MCI repeats and realleges the allegations of para- graphs 1-43 as if specifically set forth herein. 45. The officers and enlisted men of the Student Bat- talion, UAE, acting in their canacity as agents of the Ministry of Defense and the UAE, as well as others, con- spired together to defraud MCI by obtaining and utilizing access codes for MCI telephone service which they knew were unauthorized, by making the unauthorized codes available to other individuals, by concealing their actions from MCI and by continuing the conspiracy at MCI’s expense. 46. Defendants and the other persons to whom un- authorized code numbers were transferred knew that MCI would not provide the long distance telephone services, if MCI knew that the telephone services were being ob- tained through the use of the unauthorized codes and the unauthorized circuit. 47. Defendants, and the other persons to whom the unauthorized code numbers were transferred, conspired 4la to misrepresent and conceal the use of the unauthorized codes and the unauthorized circuit from MCI in order to obtain unlawfully long distance telephone services from MCI without paying MCI for the telephone services. 48. Defendants, and the other persons to whom the unauthorized code numbers were transferred, continue to participate in the conspiracy by attempting to conceal the existence of the conspiracy from MCI. 49. As a direct and proximate result of the conspiracy and the acts of the individual defendants, MCI has suf- fered damage for which each of the individual defendants, the Ministry of Defense and the UAE are jointly and severally liable to MCI in an amount equal to the cost of the services provided by MCI. 50. In addition, because defendants knowingly, inten- tionally and maliciously sought to defraud MCI, MCI is entitled to recover punitive damages in an amount to be determined by the trier of fact. COUNT II CONSPIRACY TO CONVERT PROPERTY OF MCI 51. MCI repeats and realleges the allegations of para- graphs 1-50 as if specifically set forth herein. 52. The officers and enlisted men of the Student Bat- talion, UAE, acting in their Capacity as agents of the Ministry of Defense and the UAE, conspired together to unlawfully convert property of MCI by exercising domin- ion over such property and placing unauthorized calls through MCT’s long distance telephone system, by conceal- ing their actions from MCI and by continuing the con- spiracy at MCI’s expense. 53. Each authorization code is the property of MCI and MCT is the leasee or owner of certain equipment and facilities through which the long distance calls were placed by each individual defendant and each of the other per- 42a sons to whom the unauthorized code numbers as described above were transmitted. 54. Each use of the unauthorized code numbers of MCI equipment and facilities as described above consti- tuted an unlawful and unauthorized act of dominion over the property of MCI inconsistent with the rights of MCI. 55. Defendants, and others to whom the unauthorized codes were transferred, continue to participate in the con- spiracy to convert property of MCI by attemtping to con- ceal the existence of the conspiracy from MCI. 56. As a direct and proximate result of the con- spiracy to convert property of MCI, MCI has suffered damages for which each individual defendant, the Min- istry of Defense and the UAE are jointly and severally liable to MCI in an amount equal to the cost of the serv- ices provided by MCI. 57. In addition, because defendants knowingly, inten- tionally and maliciously sought to convert property of MCI, MCI is entitled to recover punitive damages in an amount to be determined by the trier of fact. COUNT Iii AIDING AND IN ABETTING FRAUD AND CONVERSION 58. MCI repeats and realleges the allegations of para- graphs 1-57 as if specifically set forth herein. 59. Having received unauthorized codes, the officers and enlisted men of the Student Battalion, UAE had ac- tual knowledge that the codes were unauthorized and that use of the codes constituted a fraud against MCI and conversion of its property. By agreeing to and by trans- ferring the unauthorized code numbers and instructions on their use to other individuals, both known and un- known, the individual defendants substantially aided and abetted these other individuals in defrauding MCI and converting property belonging to MCI. 43a 60. The individual defendants acted knowingly in aiding and abetting other individuals to defraud MCI and to convert its property. 61. MCI was injured as a direct and proximate result of the defendants’ tortuous activity and MCI has suffered damages for which each individual defendant, the Min- istry of Defense and the UAE are jointly and severally liable to MCI in an amount equal to the cost of the services provided by MCI. 62. In addition, because defendants knowingly and intentionally aided and abetted others to defraud MCI and convert its property, MCI is entitled to recover puni- tive damages in an amount to be determined by the trier of fact. COUNT IV FRAUD 63. MCI repeats and realleges the allegations set forth in paragraphs 1-62 as if specifically set forth herein. 64. Each of the individual defendants herein repre- sented to MCI that he was a duly authorized user of its authorization codes and that the services obtained from MCT through such use would be paid. 65. These material representations to MCI were false when made and were known by the individual defendants to be false at the time they obtained long distance tele- phone services through the use of the unauthorized code numbers. 66. Each individual defendant misrepresented said material facts to MCI for the specific purpose of induc- ing MCI to provide long distance telephone services without paying MCI for the services. 67. MCI reasonably relied upon the material misrep- resentations of each individual defendant by providing long distance telephone services to each such defendant. 44a 68. As a direct and proximate result of the material misrepresentation of each individual defendant, MCI has suffered damages for which each individual defendant, the Ministry of Defense and the UAE are jointly and severally liable to MCI in an amount equal to the cost of the services provided by MCI. 69. In addition, because defendants knowingly, inten- tionally and maliciously made such misrepresentations, MCT is entitled to recover punitive damages in an amount to be determined by the trier of fact. COUNT V CONVERSION 70. MCI repeats and realleges the allegation set forth in paragraphs 1-69 as if specifically set forth herein. 71. Each authorization code utilized by the individual defendants is the property of MCI. 72. Each use of the unauthorized codes constituted an unlawful and unauthorized act of dominion over the prop- erty of MCI inconsistent with the rights of MCI. As a result of these activities, each of the individual defendants has converted and/or misappropriated the property of MCT to his own use and benefit. 73. As a direct and proximate result of the activities of the defendants, MCI has suffered damages for which each individual defendant, the Ministry of Defense and the UAE are jointly and severally liable to MCI in an amount equal to the cost of the services provided by MCI. 74. In addition, because defendants acted knowingly, intentionally and maliciously, MCI is entitled to punitive damages in an amount to be determined by the trier of fact. 45a COUNT VI QUANTUM MERUIT 75. MCI repeats and realleges the allegations set forth in paragraphs 1-74 as if specifically set forth herein. 76. During the period from October of 1986 through March of 1988, MCI provided long distance telephone Services to each of the individual defendants at the re- quest of various members of the Student Battalion, UAE, and each of the officers and enlisted men in their capacity as agents of the Ministry of Defense and the UAE im- plicitly agreed to pay MCI the charges lawfully imposed for services pursuant to tariffs duly filed. 77. During the period from October of 1986 through March of 1988, the individual defendants, in their capac- ities as officers and enlisted men of the Student Battalion, UAE, enjoyed the benefits of long distance telephone services provided to them by MCI. Each individual de- fendant, the Ministry of Defense and the UAE has failed to and refused to pay MCI for the services provided to the officers and enlisted men of the Student Battalion, UAE. 78. As a direct result thereof, MCI has suffered dam- ages for which each individual defendant, the Ministry of Defense and the UAE is jointly and severally liable to MCI in an amount equal to the value of the services pro- vided by MCI. COUNT VII MONEY DUE AND OWING 79. MCI repeats and realleges the allegations set forth in paragraphs 1-78 as if specifically set forth herein. 80. Pursuant to Note 5 of the Agreement between the UAE and the United States Department of Defense, the UAE agreed to ensure payment of personal expenses in- curred by individuals training in the United States under the Agreement. 46a 81. During the period from October 26, 1986 through March 1988, the individual defendants, in their capacities as officers and enlisted men of the Student Battalion, UAE enjoyed the benefits of long distance telephone service provided by MCI. Despite demand, the UAE has failed to ensure payment to MCI for the services provided to the officers and enlisted men of the Student Battalion, UAE as represented in the Agreement between the UAE and the United States Department of Defense. 82. As a direct result thereof, MCI has suffered dam- ages for which the UAE is liable to MCI in an amount equal to the value of the services provided by MCI. COUNT VIII PROMISSORY ESTOPPEL 83. MCI repeats and realleges the allegations set forth in paragraphs 1-82 as if specifically set forth herein. 84. MCI having discovered, as a result of its investi- gation, that the officers and enlisted men of the Student Battalion, UAE made extensive use of unauthorized codes to place long distance telephone calls through MCI’s communications system, MCI in early 1988 sought to obtain restitution directly from the UAE. 85. In January of 1988, representatives of MCI’s In- ternational Division met with The Honorable Ahmed Al-Mokarrab, the UAE Ambassador to the United States. At this meeting, the Ambassador told the representatives of MCI that, if the unauthorized telephone calls were attributable to the members of the Student Battalion, UAE, the UAE would assume responsibility for the un- authorized telephone services and pay MCI for such services. At the same time, the Ambassador requested that MCI take no further legal action with respect to this matter and, instead, that it forward to the Ambassador information relating to its investigation and its claim | RES alg Yar pn re pee 2 47a that the unauthorized calls were placed by officers and enlisted men of the Student Battalion, UAE. 86. These representations were reaffirmed by the Am- bassador and by Colonel Mubarak, the military attache for the UAE, between January 1988 and June 1988. 87. As a result of the representations made by Am- bassador Al-Mokarrab and Colonel Mubarak, MCI re- frained from continuing to pursue its legal rights against the officers and enlisted men in the Student Battalion, UAE and the UAE. 88. In July 1988, a further meeting was held be- tween representatives of MCI and The Honorable Ahmed Al-Mokarrab and Colonel Mubarak. At this meeting the Ambassador requested that MCI refrain from taking ac- tion in the case for another month in order for the Ambassador to attempt to finally resolve the matter. In or about August 1988, the UAE informed MCI that the UAE would not honor its agreement to MCI that it would assume responsibility for the use of the unau- thorized codes by the officers and enlisted men of the Student Battalion, UAE, as previously represented. 89. Having agreed to assume responsibility for and pay for the unauthorized calls attributable to the officers and enlisted men of the Student Battalion, UAE, the UAE is bound by the actions of Ambassador Al-Mokarrab and Colonel Mubarak, and MCI is entitled to recovery from the UAE an amount equal to the cost of the services provided by MCI. COUNT IX IMPLIED CONTRACT 90. MCI repeats and realleges the allegations set forth in paragraphs 1-89 as if specifically set forth herein. 91. Having specifically agreed to assume responsibility for and to pay for the unauthorized calls attributable 48a to the officers and enlisted men of the Student Battalion, UAE, the UAE assumed full responsibility for the unau- thorized telephone service and MCI is entitled to recover from the UAE an amount equal to the value of the services provided by MCI. WHEREFORE, MCI prays this Court to enter judg- ment as follows: A. As to Counts I-VI, MCI demands the follow- ing relief against each of the individual defendants, the Ministry of Defense and the UAE jointly and severally: 1. Money damages in excess of $1,500,000 and in such amount as will be determined at trial; 2. Punitive damages in an amount to be deter- mined at trial; 3. Attorney’s fees, pre-judgment interest and costs; 4. Such other and further relief as this Court shall deem appropriate and just. B. As to Counts VII-[IX, MCI demands the fol- lowing relief against the UAE: 1. Damages in an amount in excess of $1,500,000 and in such amount as will be determined at trial; and 2. Attorney’s fees, pre-judgment interest and costs; 3. Such other and further relief as this Court shall deem appropriate and just. 49a Respectfully submitted, MCI Telecommunications Corporation LAXALT, WASHINGTON, PERITO & Dusuc By: /s/ John P. Wintrol JOHN P. WINTROL Robert E. Pokusa 1120 Connecticut Avenue, N.W. Washington, D.C. 20036 (202) 857-4000 and ScoTT, HULSE, MARSHALL, FEUILLE, FINGER & THURMOND, P.C. By: /s/ Stuart R. Schwartz STUART R. SCHWARTZ Texas Commerce Bank Building 11th Floor 201 E. Main Street El Paso, Texas 79901 (915) 533-2493 50a JURY DEMAND Plaintiff demands a trial by jury as to all appropriate claims and issues. --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386004_1481%3A1. Public record. Not legal advice.