Title IT Consultants v. Pakistan
Argued November 7, 2003 Decided December 16, 2003
Subject Business
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United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued November 7, 2003 Decided December 16, 2003
No. 03-7016
I.T. CONSULTANTS, INC.,
APPELLEE
v.
THE ISLAMIC REPUBLIC OF PAKISTAN AND
KHAIR MOHAMED JUNEJO, MINISTER OF AGRICULTURE,
APPELLANTS
Appeal from the United States District Court
for the District of Columbia
(No. 01cv00241)
Nicholas H. Cobbs argued the cause and filed the briefs for
appellants.
Bruno A. Ristau argued the cause and filed the brief for
appellee.
Bills of costs must be filed within 14 days after entry of judgment.
The court looks with disfavor upon motions to file bills of costs out
of time.
2
Before: RANDOLPH and ROBERTS, Circuit Judges, and
WILLIAMS, Senior Circuit Judge.
Opinion for the Court filed by Circuit Judge ROBERTS.
ROBERTS, Circuit Judge: The Foreign Sovereign Immuni-
ties Act (FSIA) renders foreign states immune from the
jurisdiction of the federal courts in many circumstances, but
includes an exception for suits based on the foreign state's
commercial activity, if that activity ``causes a direct effect in
the United States.'' 28 U.S.C. §§ 1604, 1605(a)(2). We hold
in this case, in reliance on Republic of Argentina v. Weltover,
Inc., 504 U.S. 607 (1992), that a foreign sovereign's failure to
make a contractually required deposit in a bank in the United
States meets the statute's definition of a ``direct effect,''
without regard to whether the parties considered the place of
payment ``important,'' ``critical,'' or ``integral.'' We therefore
affirm the district court's conclusion that such a failure can
provide the basis for subject matter jurisdiction over the
Republic of Pakistan. We also affirm the court's ruling that
it can assert personal jurisdiction over Pakistan, but conclude
that the court improperly asserted personal jurisdiction over
the Pakistani government official involved in the transaction,
who was sued in his personal capacity.
I.
At the base of this dispute is an October 1995 contract
between appellee I.T. Consultants, Inc. (ITC) and appellant
the Republic of Pakistan. ITC was to receive $10 million for
manufacturing and installing geo-synthetic linings for a num-
ber of irrigation canals and watercourses in Pakistan. ITC
began its work, but Pakistan terminated the contract in 1997,
citing a shortage of funds. In September 1998, the parties
agreed to rescind the contract; under their agreement, Paki-
stan was to pay ITC approximately eleven percent of the total
contract price. No payment was ever made, however, and
ITC sued Pakistan in the District Court for the District of
Columbia in March 2000.
While that suit was pending, the parties held another round
of settlement negotiations; the Economic Coordination Com-
3
mittee (ECC) of the Government of Pakistan appointed an ad
hoc committee to negotiate with ITC. Those negotiations
yielded a Memorandum of Understanding (MOU) between
ITC and Pakistan's Ministry of Food, Agriculture, and Labor
(MINFAL), signed on June 3, 2000. The MOU, contingent
on ECC approval, provided that Pakistan would pay ITC
compensation (in a mixture of U.S. and Pakistani currency:
$1,143,965 and 10,535,000 rupees) to extinguish all of ITC's
claims under the contract and secure the dismissal of the
pending lawsuit. Memorandum of Understanding Between
I.T. Consultants and MINFAL (JA 16A). The MOU was
silent on the place of payment, but in a letter three weeks
later, ITC requested that the dollar-denominated portion of
the settlement (some eighty-seven percent of the total value)
be sent to an account at Riggs Bank in Alexandria, Virginia,
and the rupees to an account at a bank in Rawalpindi,
Pakistan. Letter from Farrakh A. Shah, President, ITC, to
Dr. Zafar Altaf, Secretary, MINFAL (June 24, 2000), at 2 (JA
19). The record contains a copy of this letter allegedly
returned to ITC, bearing the signature of Dr. Zafar Altaf, the
then-Secretary of MINFAL, and a handwritten notation --
the word ``Okay'' -- in the margin next to the Riggs Bank
information. Id.
The ECC approved the MOU on September 4, 2000, but on
October 26, 2000, there was a leadership change at MINFAL
and Khair Mohamed Junejo became Secretary. Junejo or-
dered the payment to ITC stopped, explaining later that
`` t he payment was temporarily stopped with a view to refer-
ring the case back to the ECC for reconsideration with full
facts.'' Def. Answers to First Set of Interrogs. at 2 (JA 110).
At around the same time -- the exact order of these events is
unclear -- Junejo learned of a development in ITC's suit in
Washington: the district court had dismissed the suit without
prejudice on September 28, 2000, citing improper service of
process on Pakistan. See I.T. Consultants, Inc. v. Islamic
Republic of Pakistan, No. 000503 (D.D.C. Sept. 28, 2000).
Junejo concluded that Pakistan had ``won'' the lawsuit, but
admitted that at the time he did not understand the meaning
of the phrase ``without prejudice.'' On February 20, 2001, the
4
ECC ratified the hold on the payment to ITC and instructed
MINFAL to examine certain legal issues (including governing
law, court jurisdiction, and arbitration) in relation to the
original contract with ITC. Decision of the ECC, Case No.
ECC22/02/2001 (Feb. 20, 2001) (JA 133).
ITC filed the present action in the District Court for the
District of Columbia on January 31, 2001, naming Pakistan
and Junejo ``in his personal capacity'' as defendants. The
claim against Pakistan was for breach of the MOU; that
against Junejo was for tortious interference with the MOU.
Pakistan and Junejo moved to dismiss on grounds of, inter
alia, lack of subject matter jurisdiction and lack of personal
jurisdiction. The district court denied the motion in an order
on January 3, 2003, and subsequently issued an opinion. See
I.T. Consultants, Inc. v. Islamic Republic of Pakistan, No.
010241 (D.D.C. Feb. 12, 2003) (I.T. Consultants II). The
court first considered subject matter jurisdiction, concluding
that ``if ITC can prove that payment was to be made at
ITC's bank in Virginia in U.S. currency and that Pakistan
breached that obligation, these facts establish a direct effect''
and confer subject matter jurisdiction under Section
1605(a)(2) of the FSIA. Id., op. at 6 (JA 160). Turning to
personal jurisdiction, the court determined that personal ju-
risdiction over Pakistan was proper under 28 U.S.C.
§ 1330(b), which provides that `` p ersonal jurisdiction over a
foreign state shall exist as to every claim for relief over which
the district courts have subject matter jurisdiction'' under
the FSIA, so long as service of process is proper. The court
also found that it had personal jurisdiction over Junejo:
because he was alleged to have caused the breach of Paki-
stan's obligation to transfer U.S. dollars to the Riggs Bank in
Virginia, the court reasoned, he should reasonably have ex-
pected to be haled into court here. I.T. Consultants II, op. at
12 (JA 166) (citing Calder v. Jones, 465 U.S. 783, 790 (1984)).1
This interlocutory appeal followed.
1 The district court also rejected the defendants' other two pro-
posed grounds for dismissal -- official immunity for Junejo under
the FSIA, and forum non conveniens. I.T. Consultants II, op. at
5
II.
In ruling on the motion to dismiss on grounds of subject
matter and personal jurisdiction, the district court accepted
the allegations of the complaint as true. I.T. Consultants II,
op. at 4 (JA 158). Pakistan and Junejo of course dispute
these allegations -- including allegations arguably pertinent
to the question of sovereign immunity -- and could have
pressed the district court to resolve any relevant factual
disputes before ruling on sovereign immunity. See Phoenix
Consulting, Inc. v. Republic of Angola, 216 F.3d 36, 40 (D.C.
Cir. 2000) (if defendant challenges factual basis for court's
jurisdiction in FSIA case, court should ``go beyond the plead-
ings and resolve any disputed issues of fact the resolution of
which is necessary to a ruling upon the motion to dismiss'').
Instead, Pakistan sought a ruling on its immunity on the basis
of the allegations in the complaint. See Reply Mem. in Supp.
of Def. Mot. to Dismiss, at 1 (JA 83) (``Assuming the truth of
all of plaintiff's contentions, as the court must''). Under such
circumstances, the district court properly proceeded to deci-
sion on the basis of those allegations. See Price v. Socialist
People's Libyan Arab Jamahiriya, 294 F.3d 82, 91 (D.C. Cir.
2002).
Although the district court's interlocutory ruling declining
to dismiss on grounds of Pakistan's sovereign immunity is
thus not a conclusive determination of the immunity question,
but instead subject to change in light of further development
of the facts, we nonetheless have appellate jurisdiction to
review it. See id. (`` A n FSIA defendant can take an imme-
diate appeal if the District Court rejects its argument that
the facts alleged in the plaintiff's complaint do not bring the
case within one of the statute's immunity exceptions.''); see
also Behrens v. Pelletier, 516 U.S. 299, 307 (1996) (`` A n
order rejecting the defense of qualified immunity at either
the dismissal stage or the summary judgment stage is a `final'
judgment subject to immediate appeal.''). We also have
1316 (JA 16770). ITC does not challenge the latter ruling in this
appeal, and we do not reach the former in light of our holding that
the district court lacks personal jurisdiction over Junejo.
6
jurisdiction over Junejo's appeal. See Jungquist v. Sheikh
Sultan Bin Khalifa Al Nahyan, 115 F.3d 1020, 102527 (D.C.
Cir. 1997).
A. Subject Matter Jurisdiction Under the FSIA
One of the key allegations taken as true is that `` p ursuant
to the MOU, eighty seven percent (87%) of the payment (U.S.
$1.144 million) was to be made in United States currency by
Pakistan into ITC's account at the Riggs Bank in Alexan-
dria, Virginia.'' Compl. ¶ 6 (JA 9). In particular, `` t he
modality of payment was proposed by ITC in a letter dated
June 24, 2000, to the Chairman of the negotiating committee
who received the letter and approved the method of pay-
ment.'' Id. Pakistan believes that even when these facts are
assumed, Pakistan's failure to make the payment does not
constitute a direct effect that would support jurisdiction
under the FSIA. The question thus becomes whether this
case is distinguishable from Weltover, the Supreme Court's
leading case on the FSIA's direct effect requirement.
In Weltover, the Argentine government had issued bonds
(denominated in U.S. dollars) that permitted the bondholder
to specify one of four cities -- London, Frankfurt, Zurich, or
New York -- as the place where payment was to be made
when the bonds matured. On the maturity date, Argentina
was unable to meet its payment obligations, and attempted to
reschedule the payments unilaterally. Several bondholders
balked at this and demanded full payment, naming New York
as the place of payment. 504 U.S. at 60910. Argentina
failed to make the payments and the bondholders sued,
asserting that subject matter jurisdiction existed under the
FSIA because Argentina's failure to pay had a direct effect in
the United States. The Supreme Court agreed, noting that
`` b ecause New York was TTT the place of performance for
Argentina's ultimate contractual obligations, the rescheduling
of those obligations necessarily had a `direct effect' in the
United States: Money that was supposed to have been deliv-
ered to a New York bank for deposit was not forthcoming.''
Id. at 619 (emphasis added).
7
Pakistan argues that the instant case differs from Weltover
in two principal respects -- in Weltover the provision for
payment in the United States was ``part of a written contract
between the parties,'' and the place of payment was critical to
the underlying agreement. Appellants Br. at 11. Pakistan
suggests that a case more directly on point is Goodman
Holdings v. Rafidain Bank, 26 F.3d 1143 (D.C. Cir. 1994), in
which this court distinguished Weltover and held that an Iraqi
government bank's failure to honor certain letters of credit it
had issued did not support subject matter jurisdiction under
the FSIA. The Iraqi bank in Goodman Holdings did use
some United States banks to make payments on other letters
of credit, but we concluded that the failure to honor the
particular letters at issue in the case did not have a direct
effect in the United States because `` n either New York nor
any other United States location was designated as the `place
of performance' where money was `supposed' to have been
paid.'' Id. at 1146.
These attempts to distinguish this case from Weltover are
unpersuasive. First, Pakistan's attempt to direct our atten-
tion to the presence or absence of a payment term in the
``written contract between the parties'' is inconsistent with
Pakistan's recognition that we should accept the allegations of
the complaint -- including the allegation that payment was to
be made in Virginia `` p ursuant to the MOU'' -- as true. See
Appellants Br. at 9. For purposes of its motion to dismiss,
Pakistan has elected not to challenge what this court at oral
argument described as ``the assumption the district court was
operating on -- that there was a contract obliging Pakistan to
pay the bank in Virginia.''2 Having permitted that assump-
2 The district court treated the allegation that payment was to be
made in Virginia as true for purposes of the motion to dismiss. See
I.T. Consultants II, op. at 9 (JA 163) (``Pakistan agreed to make
payment to plaintiff in a Virginia bank account''); id. at 11 (JA 165)
(`` T he foreign sovereign in this case agreed to TTT deposit the
money in plaintiff's bank located in the United States.''). Accord
Hanil Bank v. Pt. Bank Negara Indonesia, 148 F.3d 127, 132, 134
(2d Cir. 1998) (affirming denial of motion to dismiss on sovereign
8
tion, it is no use for Pakistan to quibble over how that
payment obligation arose, or whether it arose by means
different from those in Weltover, where the payee's specifica-
tion of place of payment was also not contemporaneous with
the signing of the underlying agreement giving rise to the
obligation to pay.
Second, we reject the suggestion that the degree of impor-
tance the parties attach to the place of payment is relevant to
the question whether a failure to pay has a direct effect.
Neither Weltover nor the subsequent case law of this circuit
suggests that only ``important'' contractual terms may give
rise to a direct effect. Any attempt to rank the various terms
of a contract in order of their importance to the parties would
require the court to delve deeply into the facts before making
a threshold finding of jurisdiction -- an undesirable pros-
pect -- and would be ultimately standardless. For example,
under Pakistan's reasoning, a contract that specified New
York as the place of payment would not create a direct effect
if the parties did not consider that term important, even if the
amount to be paid was $100 billion. And conversely, if the
parties to a different contract believed that payment in New
York was extremely important, Pakistan's reasoning would
support a finding of a direct effect even if the amount due
under the contract was merely $1000. And what are we to do
if we determine that place of payment was important for one
party, but not the other? Pakistan's proposed analysis found-
ers because it bears no relation to the statutory term it
purports to illumine -- ``direct effect.''
The facts of this case differ in significant respects from
those on which this court relied in Goodman Holdings when
it found Weltover distinguishable. In Goodman Holdings,
the nexus with bank accounts in the United States was the
fact that the Iraqi sovereign defendant might have used those
accounts to make the payments due to its creditor (an Irish
corporation), as it had sometimes done before. The ``immedi-
ate consequence'' that Weltover requires was not present, the
immunity grounds although defendant denied that it expressly
agreed to New York as place of payment).
9
court found, because the payments could have been made
from the defendant's other accounts -- outside the United
States -- and there was no requirement that the payments be
made into an account in New York or anywhere else in the
United States. Goodman Holdings, 26 F.3d at 114647. In
short, the transaction at issue in Goodman Holdings could
have occurred without the involvement of a United States
bank at any stage. Similarly, in United World Trade, Inc. v.
Mangyshlakneft Oil Prod. Ass'n, 33 F.3d 1232 (10th Cir.
1994), the parties' contract provided for payment in U.S.
dollars to a bank in Paris; the Tenth Circuit found that even
though a bank in the United States might have been involved
in converting the payment to U.S. currency, that aspect of the
transaction was ``simply too attenuated from the defendants'
actions to be considered a `direct effect.' '' Id. at 1238. In
this case, by contrast -- assuming, as we do at this stage, that
the agreement between the parties did provide for payment
in Virginia -- the involvement of a U.S. bank was immediate
and unavoidable. We conclude that Pakistan's failure to meet
its payment obligation under such a contract would qualify as
an act that ``causes a direct effect in the United States'' under
the FSIA. 28 U.S.C. § 1605(a)(2).
B. Personal Jurisdiction over Pakistan
Once subject matter jurisdiction exists under the FSIA,
personal jurisdiction over a foreign state defendant is estab-
lished. As a statutory matter, 28 U.S.C. § 1330(b) provides
that `` p ersonal jurisdiction over a foreign state shall exist as
to every claim for relief over which'' subject matter jurisdic-
tion exists under the FSIA, so long as the defendant was
properly served. See Practical Concepts, Inc. v. Republic of
Bolivia, 811 F.2d 1543, 1548 n.11 (D.C. Cir. 1987) (R. B.
Ginsburg, J.) (in FSIA cases, ``subject matter jurisdiction plus
service of process equals personal jurisdiction'') (internal quo-
tation marks and citation omitted). And as a constitutional
matter, there is no constitutional matter. The law of this
circuit, under Price, is that ``foreign states are not `persons'
protected by the Fifth Amendment.'' 294 F.3d at 96. We
therefore do not need to examine whether Pakistan has the
minimum contacts that would otherwise be a prerequisite for
10
personal jurisdiction under the Due Process Clause of the
Fifth Amendment.
C. Personal Jurisdiction over Junejo
Personal jurisdiction over Junejo is not as easy. Junejo is
quite obviously a ``person'' entitled to the protections of the
Due Process Clause, so the traditional minimum contacts
requirement applies. See International Shoe Co. v. Washing-
ton, 326 U.S. 310, 316 (1945). In addition, for personal
jurisdiction in the District Court for the District of Columbia
to be proper, Junejo must be covered by the District of
Columbia's long-arm statute. See United States v. Ferrara,
54 F.3d 825, 828 (D.C. Cir. 1995).
ITC conceded below that personal jurisdiction over Junejo
does not lie under the District's long-arm statute, D.C. Code
§ 13423(a)(4). See Pl. Supplemental Br. at 11 n.5 (JA 106)
(``The District of Columbia long-arm statute TTT cannot serve
as a predicate for personal jurisdiction over Mr. Junejo in
this case.''). ITC argued instead that Junejo was an ``agency
or instrumentality'' of Pakistan, and that the FSIA itself thus
provided the basis for personal jurisdiction over him, just as
it automatically provides personal jurisdiction ``over a foreign
state.'' Id. at 11 (JA 106) (citing 28 U.S.C. §§ 1330(b),
1603(a)). The district court properly rejected this argument
as inconsistent with the fundamental precept of AngloAmeri-
can jurisprudence that you cannot have your cake and eat it,
too: ITC cannot simultaneously sue Junejo in his personal
capacity and treat him as ``a foreign state'' for purposes of
personal jurisdiction. See I.T. Consultants II, op. at 10 (JA
164); see also Jungquist, 115 F.3d at 1027 (``Individuals
acting in their official capacities are considered `agenc ies or
instrumentalit ies of a foreign state' '' (alterations in original)
(emphasis added)). That conclusion -- coupled with ITC's
concession that the District's long-arm statute does not reach
Junejo -- should have been dispositive on the question of
personal jurisdiction over Junejo in the District Court for the
District of Columbia.
The district court, however, considered the constitutional
question of whether Junejo ``has sufficient `minimum contacts
11
with this forum such that the maintenance of the suit does
not offend traditional notions of fair play and substantial
justice,' '' I.T. Consultants II, op. at 11 (JA 165) (quoting
International Shoe, 326 U.S. at 316) (other quotation marks
omitted; bracketed language added by district court), assum-
ing that the District's long-arm statute allows the exercise of
personal jurisdiction to the full extent permitted by the
Constitution. See id. at 12 n.5 (JA 166); but see GTE New
Media Servs. Inc. v. Bellsouth Corp., 199 F.3d 1343, 1347
(D.C. Cir. 2000) (``The drafters of subsection (a)(4) of Section
13423 apparently intended that it would not occupy all of
the constitutionally available space.'') (quotation omitted).
The court concluded that the ``minimum contacts'' test was
satisfied, and that it could exercise personal jurisdiction over
Junejo, because of the allegation that Junejo took steps that
``had the direct effect in the United States of Pakistan's
breaching its obligation to transfer U.S. dollars to the Riggs
Bank in VirginiaTTTT'' I.T. Consultants II, op. at 12 (JA
166). But that allegation says nothing about Junejo's con-
tacts with the District of Columbia, as opposed to the Eastern
District of Virginia. Nothing in the record supports the
exercise of personal jurisdiction over Junejo by the court
below.3
III.
For the foregoing reasons, we affirm the district court's
denial of the motion to dismiss for lack of subject matter and
personal jurisdiction with respect to Pakistan. We reverse
the denial of the motion to dismiss for lack of personal
jurisdiction over Junejo. The case is remanded for further
proceedings.
3 Indeed, counsel for ITC all but abandoned ITC's claims against
Junejo at oral argument before this court, announcing at the outset
that ``I will not spend my precious time on Junejo; Junejo has long
ago been canned, and I have no idea where he is.''
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