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Cruise Connections Charter Management 1, LP v. Attorney General of Canada

July 15, 2009

CRUISE CONNECTIONS CHARTER MANAGEMENT 1, LP, ET AL., PLAINTIFFS,
v.
ATTORNEY GENERAL OF CANADA, ET AL., DEFENDANTS.



The opinion of the court was delivered by: James Robertson United States District Judge

MEMORANDUM

The plaintiffs, the North Carolina limited partnership Cruise Connections Charter Management and its general partner, sued the Attorney General of Canada, the Royal Canadian Mounted Police (RCMP), and Her Majesty the Queen for breach of contract and violations of the North Carolina Unfair and Deceptive Trade Practices Act. The defendants moved to dismiss for lack of subject matter jurisdiction under the Foreign Sovereign Immunities Act, or, in the alternative, pursuant to the doctrine of forum non conveniens. After hearing argument on June 9, 2009, I granted the defendants' motion for reasons given in open court. This memorandum explains that ruling in greater detail.*fn1

Background

Although I must settle any contested jurisdictional facts on a motion to dismiss for lack of subject matter jurisdiction, see Phoenix Consulting, Inc. v. Republic of Angola, 216 F.3d 36, 40 (D.C. Cir. 2000), the following alleged facts are taken as true because they do not bear directly on the jurisdictional issue.

The RCMP is in charge of coordinating security for the 2010 Winter Olympic Games, which will be held in Vancouver, Canada. With space ashore limited, the RCMP decided to house extra security personnel for the Games in ships berthed in Vancouver Harbor. After soliciting bids, the RCMP selected Cruise Connections to provide the necessary ships.

In July 2008, after the RCMP and Cruise Connections reached agreement (the contract price was approximately $54 million Canadian), Cruise Connections, which had no ships of its own, began negotiating charter party agreements (CPAs) with two American cruise lines, Royal Caribbean International and Holland America Line. The cruise lines sought assurance that the RCMP was contractually obligated to pay any corporate or personal taxes the ships might incur in Canada. When asked, two RCMP representatives, Kelly Meikle and Michael Day, confirmed by email that the RCMP was so obligated.

Satisfied, the cruise lines executed their CPAs with Cruise Connections. Cruise Connections then turned to the task of securing financing from the Royal Bank of Canada (RBC). Before Cruise Connections could finalize the financing arrangements, however, the RCMP replaced Meikle and Day with a new representative, Normande Morin. Morin reversed the RCMP's stated position and asserted that the cruise lines' taxes were not reimbursable. She also demanded that Cruise Connections put up a 90% letter of credit -- an obligation that had been cut from the final version of the contract. When Cruise Connections refused to proceed under Morin's terms, the RBC refused to provide financing. Shortly thereafter, on November 17, 2008, the RCMP terminated the contract, citing Cruise Connections' breach of its obligation to timely secure financing.

Analysis

The Foreign Sovereign Immunities Act (FSIA) "provides the sole basis for obtaining subject matter jurisdiction over a foreign state in the courts of this country." Argentine Republic v. Amerada Hess Shipping Corp., 488 U.S. 428, 443 (1989). In relevant part, the Act confers jurisdiction over actions based:

[1] upon a commercial activity carried on in the United States by the foreign state; or

[2] upon an act performed in the United States in connection with a commercial activity of the foreign state elsewhere; or

[3] 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 United States.

28 U.S.C. § 1605(a)(2).

The plaintiffs rely explicitly and exclusively on the third clause as the basis for jurisdiction. See Compl. ΒΆ 5. The defendants concede that their alleged breach of contract occurred in Canada, and that it came in connection with commercial activity in Canada, but they maintain that their alleged breach did not cause a "direct effect" in the United States. The defendants bear the burden of proving this claim by a ...


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