or otherwise express authorization" from the defendant to the plaintiff
or any other sufficient evidence on the record to support the finding of
an agency relationship, the court noted other cases in which courts have
found the nexus requirement was satisfied. In Baker's Trust Co. v.
Worldwide Transp. Services, Inc., 537 F. Supp. 1101 (E.D.Ark. 1982), for
example, the court found that the first clause of the "commercial
activity" exception of the FSIA was fulfilled by activities performed by
a bank and a company, which were acting as the defendant's agents in the
United States. See MINE, 693 F.2d at 1106 (citing Baker's Trust Co.).
Similarly, the actions taken by the agents of Moldova in the United
States fulfill the first clause of the "commercial activity" exception.
Not only was Virtual an agent of Moldova, but Marty Miller also acted as
an agent of Moldova when he contacted Virtual in its Bethesda, Maryland
office. Consequently. the court finds that the actions taken by Virtual
in its capacity as an agent of Moldova satisfy the nexus requirement in
the first clause of the commercial activity exception of the FSIA.
b. Activities Carried on in Moldova
Alternatively, if the commercial activity at issue is characterized as
the actual negotiations to hire Virtual to broker the sale of the MiGs,
then the third clause of the commercial activity exception is
applicable. The nexus requirement of the commercial activity exception of
the FSIA may be fulfilled if the action at issue was based "upon an act
outside of 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 U.S." 28 U.S.C. § 1605(a)(2). Here, Virtual
traveled to Moldova to discuss and negotiate an agreement by which it
would broker the sale of the MiG-29 planes. The actual negotiations took
place in Moldova.
The focus of the inquiry then is whether the breach of the agreement,
which was formed in Moldova. had a direct effect in the United States.
"[T]he relevant inquiry under the direct effect clause when plaintiff is
a corporation is whether the corporation has suffered a `direct'
financial loss." Texas Trading & Milling Co. v. Federal Republic of
Nigeria, 647 F.2d 300, 312 (2d Cir. 1981). Moldova argues that there is
no nexus between the commercial activity and the United States because it
was never specified by the parties that the United States would be the
place where payment would be made under the alleged commission agreement.
In Goodman Holdings v. Rafidain Bank, 26 F.3d 1143 (D.C.Cir. 1994), the
court held that 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" by the defendant to the plaintiffs the
action did not satisfy the direct effect requirement of the third
clause. Goodman Holdings, 26 F.3d at 1146. In Goodman Holdings, however,
Judge Wald wrote a separate concurrence "to emphasize that, for an act to
have a `direct effect' in the United States, there is no prerequisite
that the United States be contractually designated as the place of
performance." Goodman Holdings, 26 F.3d at 1147. Furthermore, in Callejo
v. Bancomer, 764 F.2d 1101, 1111-12 (5th Cir. 1985), the court
distinguished the Goodman Holdings opinion by differentiating between
plaintiffs that were based in the United States and those that were not.
The court stated that "where the effects in the United States of an
activity abroad are less fortuitous, courts have been much more willing
to characterize them as `direct.'" Callejo, 764 F.2d at 1111. For
example, "nonpayment of a note payable in the United States to a United
States company has been held to cause a direct effect in the United
States for the purposes of Section 1605(a)(2)." Callejo, 764 F.2d at
1111 (citing Texas Trading, 647 F.2d at 312 and Wyle v. Bank Melli of
Tehran, 577 F. Supp. 1148, 1158-59 (N.D.Cal. 1983) ("financial loss to
American plaintiffs sufficient
to constitute a direct effect in the United States")). Ultimately the
court in Callejo found that, even though the United States was not
specified as the place of payment, the fact that the plaintiffs lived in
the United States was sufficient evidence that they were injured there.
Callejo, 764 F.2d at 1111-12 ("In the present context, however, the
question of whether there was a direct effect in the United States can be
resolved without reference to the place of payment. Since the Callejos
were located in the United States, the effects of Bancomer's breach were
inevitably felt by them there. . . . [W]e do not perceive any material
difference whether the legal place of payment was Mexico or the United
Because Virtual is solely a United States corporation and the alleged
contract contemplated that Virtual would receive compensation from the
profits of the sale of the MiG-29 planes, the court concludes that the
alleged breach of contract had a direct effect in the United States. In
sum, whether the commercial activity in this case is described as (1) the
actions taken by Virtual in its position as an agent of Moldova, or (2)
the negotiation process to hire Virtual to act on behalf of Moldova, the
court concludes that the nexus requirement is satisfied. Accordingly, the
court concludes that it may exercise jurisdiction over Moldova for the
purposes of this lawsuit.
C. The Act of State Doctrine
Having determined that it has jurisdiction over this case, the court
must next consider the appropriateness of exercising its jurisdiction
over a foreign state in light of the "act of state" doctrine. Unlike the
FSIA, the act of state doctrine is not jurisdictional, but prudential.
"The act of state doctrine is similar to the political question doctrine
in domestic law. It requires that the courts defer to the legislative and
executive branches when those branches are better equipped to resolve a
politically sensitive question." International Ass'n of Machinists and
Aerospace Workers v. Organization of Petroleum Exporting Countries,
649 F.2d 1354, 1358-9 (9th Cir. 1981) [hereinafter IAM]. In addition, the
act of state doctrine aims to keep the courts "from deciding a case when
the outcome turns upon the legality or illegality (whether as a matter of
United States, foreign, or international law) of official action by a
foreign sovereign performed within its own territory." Riggs Nat'l Corp.
& Subsidiaries v. Commissioner of Internal Revenue Serv., 163 F.3d 1363,
1367 (D.C.Cir. 1999) (citing W.S. Kirkpatrick & Co., Inc. v.
Environmental Tectonics Corp., 493 U.S. 400, 406, 110 S.Ct. 701, 107
L.Ed.2d 816 (1990)). The burden of proving that the court should apply
the act of state doctrine and abstain from hearing the case is on the
party asserting the applicability of the doctrine. See Alfred Dunhill v.
Republic of Cuba, 425 U.S. 682, 691, 96 S.Ct. 1854, 48 L.Ed.2d 301
(1976). Consequently, the burden in this case is on Moldova to
demonstrate that the act of state doctrine should be applied.
Essentially, if a state is acting in the public interest then it is
asserting its sovereignty and the act of state doctrine may apply. This
may be so even if a court has jurisdiction over the foreign sovereign
pursuant to the commercial activity exception to the FSIA. Consequently,
under the act of state doctrine, a United States court would be
discouraged from hearing even cases premised on commercial activities if
hearing such cases would require the court to pass judgment on an
underlying sovereign act. As the Ninth Circuit has noted,
[t]he act of state doctrine is not diluted by the
commercial activity exception which limits the
doctrine of sovereign immunity. While purely
commercial activity may not rise to the level of an
act of state, certain seemingly commercial activity
will trigger act of state considerations. . . . While
the FSIA ignores the underlying purpose of a state's
action, the act of state doctrine does not.
IAM, 649 F.2d at 1360.
The Supreme Court has suggested a "balancing approach" when deciding
the act of state doctrine applies. It is necessary to balance the
judiciary's interest in hearing a case involving a commercial activity
with the desire to avoid matters of foreign affairs controlled by the
executive or legislative branches. See Banco Nacional de Cuba v.
Sabbatino, 376 U.S. 398, 428, 84 S.Ct. 923, 11 L.Ed.2d 804 (1964) ("Some
aspects of international law touch more sharply on national nerves than
do others; the less important the implications of an issue are for our
foreign relations, the weaker the justification for exclusivity in the
political branches."). In balancing these interests, a court should be
mindful that the decision to deny judicial relief to a party should not
be made lightly. See IAM, 649 F.2d at 1360. Viewing the facts of this
case in light of this standard, the court concludes that the defendant
has not met its burden of showing that the act of state doctrine should
To meet its burden and show that the act of state doctrine should apply
to the sale of the MiG-29 planes and the alleged agreement to pay Virtual
a commission fee, Moldova must show that it was acting in the public
interest of its country and that a judicial inquiry into this action
would either (1) cause harm to the interests of another branch of the
United States government or (2) question the legality of Moldova's
sovereign actions. This case is distinguishable from other instances in
which courts chose to apply the act of state doctrine. In IAM the court
was asked to question the validity of OPEC's alleged price fixing
practices. Despite the commercial aspect of the action the court chose not
to hear the case noting that "OPEC's `price fixing' activity has a
significant sovereign component. . . . [T]he act of state doctrine
remains available when such caution is appropriate, regardless of any
commercial component of the activity involved." 649 F.2d at 1360. The IAM
court reasoned that use of the act of state doctrine was appropriate
because the record "contain[ed] extensive documentation of the
involvement of our executive and legislative branches with the oil
question. . . . It is clear that OPEC and its activities are carefully
considered in the formulation of American foreign policy." 649 F.2d at
1360. Additionally, "[t]he United States and other nations have supported
the principle of supreme state sovereignty over natural resources." 649
F.2d at 1361.
Here, the court is not asked to question the validity of a sovereign
action, such as price fixing, but is merely asked to adjudicate a
contract claim. In Alfred Dunhill of London v. Republic of Cuba,
425 U.S. 682, 706, 96 S.Ct. 1854, 48 L.Ed.2d 301 (1976), the court
"declined to extend the act of state doctrine to acts committed by
foreign sovereigns in the course of their purely commercial operations.
Because the act relied on by respondents in this case was an act arising
out of the conduct by Cuba's agents in the operation of cigar businesses
for profit, the act was not an act of state." The actions that took place
between Virtual and Moldova in this case are more similar to the
activities at issue in Alfred Dunhill of London than they are to the
sovereign actions of the OPEC countries at issue in IAM. Furthermore,
Moldova has offered little evidence to demonstrate that the executive or
legislative branches of the United States government have considerable
involvement or interest in the issues presented by this case. In absence
of evidence to the contrary, the court finds that this case involves a
contract question that does not tread upon Moldova's sovereignty or
hamper the objectives of another branch of the United States government.
Accordingly, the court concludes that application of the act of state
doctrine is not appropriate in this case.
The commercial activity exception to the Foreign Sovereign Immunities
Act provides this court with jurisdiction over Moldova for the purposes
of this lawsuit. In
addition, Moldova has not provided sufficient evidence to meet its burden
and establish that the act of state doctrine should preclude the court
from hearing this case. For these reasons, Moldova's motion to dismiss
was denied by Order dated March 31, 1999.
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