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May 10, 1999


The opinion of the court was delivered by: Urbina, District Judge.


Denying Defendant's Motion to Dismiss

This case is brought by the plaintiff, Virtual Defense and Development International, Inc. ("Virtual"). against the defendant, the Republic of Moldova ("Moldova"), for breach of contract and quantum meruit. By Order dated March 31, 1999, the court denied the defendant's motion to dismiss this case. This Memorandum Opinion sets forth the reasons for the court's denial of the defendant's motion to dismiss.


Following the dissolution of the Union of Soviet Socialist Republics, Moldova emerged as a sovereign nation facing severe economic turmoil. In an effort to bolster its weakening economy Moldova arranged to sell to Iran several MiG-29 planes, which were capable of firing nuclear weapons. The United States of America strongly opposed this sale on grounds of international security and, in early 1997, requested that Moldova cancel the scheduled transfer to Iran. Moldova agreed to comply.

Subsequently, in May and June of 1997, Boris Birshtein, the Economic and Commercial Advisor to the Moldovan President, contacted Marty Miller, an international consultant in New York regarding economic opportunities in Moldova. Among the opportunities discussed was the sale of the MiG-29 planes. On August 5, 1997, Mr. Miller contacted Virtual to relay the message that Moldova was interested in having Virtual negotiate the sale of the MiG-29 planes to an entity approved by the United States. In September 1997 Virtual's President Michael Spak, traveled to Moldova to work out the details of such an agreement. Subsequently, on September 17, 1997, Ion Ciubuc, the Prime Minister of Moldova, sent a letter to Virtual stating that "[o]n behalf of the Republic of Moldova the Company [Virtual] is provided with authorization to initiate and sustain discussions with governments and/or private business entities concerning the realization of these aircrafts. This authorization is provided taking into account that this deal will be carried out with partners from [the] United States of America or other states with the authorization of the USA Government." (Pl's Opp. to Def's Mot. to Dismiss, Ex. A.)

Virtual alleges that a contract existed between it and Moldova whereby Virtual would receive a commission of fifteen percent upon successfully negotiating the sale of the MiG-29 planes. In its complaint, Virtual alleges that it negotiated a sale of the MiGs from Moldova to the United States for $60 million for which Virtual is entitled to its fifteen percent commission. In actuality, the MiGs were sold to the United States for $40 million in cash and $100 million in the form of economic aid. Contrary to Virtual's assertion that it negotiated this sale, Moldova alleges that "the negotiations between the United States and Moldova were nearly complete by the time Virtual was provided authorization to explore whether other possible purchasers for the MiGs existed." (Def.'s Mot. to Dismiss at 2.)

Following the sale, Virtual demanded payment of its commission in the amount of $9 million and was denied the fees. Consequently, Virtual filed a complaint in this court seeking damages for breach of contract and quantum meruit.


A. Legal Standard

The defendants argue that the plaintiffs complaint should be dismissed for one of two reasons: (1) sovereign immunity prohibits the court from exercising subject matter jurisdiction; and (2) the act of state doctrine requires the court to abstain from hearing the case. In deciding on a motion to dismiss, the court must accept as true all well-pled factual allegations and draw all reasonable inferences in favor of the plaintiff. See Antonelli v. Sheahan, 81 F.3d 1422, 1427 (7th Cir. 1996). However, the court need not accept as true the plaintiffs legal conclusions. See Papasan v. Allain, 478 U.S. 265, 286, 106 S.Ct. 2932, 92 L.Ed.2d 209 (1986).

B. Foreign Sovereign Immunities Act

Under the Foreign Sovereign Immunities Act ("FSIA"), foreign states are immune from the jurisdiction of the courts of the United States unless one of a limited number of exceptions applies. See 28 U.S.C. § 1604. Among these exceptions is the so-called "commercial activity" exception. See 28 U.S.C. § 1605. There is a two-part analysis to determine whether the FSIA allows a United States court to exercise jurisdiction over a foreign state in the context of the commercial activity exception. First, it is necessary to determine whether the activity at issue is a commercial activity for purposes of the FSIA. If the activity is not "commercial," then the FSIA precludes this court from exercising its ...

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