Universal Trading & Investment v. Bureau for Representing Ukrain, 1st Cir. (2013)

7/26/2019 Universal Trading & Investment v. Bureau for Representing Ukrain, 1st Cir. (2013)

1/37

United States Court of AppealsFor the First Circuit

No. 12- 2283

UNI VERSAL TRADI NG & I NVESTMENT CO. , I NC. ,FOUNDATI ON HONESTY I NTERNATI ONAL, I NC. ,

Pl ai nt i f f s , Appel l ees ,

v.

BUREAU FOR REPRESENTI NG UKRAI NI AN I NTERESTS I N I NTERNATI ONAL

AND FOREI GN COURTS; UKRAI NI AN PROSECUTOR GENERAL' S OFFI CE;UKRAI NE,

Def endant s, Appel l ant s.

APPEAL FROM THE UNI TED STATES DI STRI CT COURTFOR THE DI STRI CT OF MASSACHUSETTS

[ Hon. Dougl as P. Woodl ock, U. S. Di st r i ct J udge]

Bef or e

Lynch, Chi ef J udge,Tor r uel l a and Howar d, Ci r cui t J udges.

Davi d G. Het zel , wi t h whomRober t M. Shaw and Hol l and & Kni ghtLLP, wer e on br i ef f or appel l ant s.

St ephen F. Rear don, wi t h whom Law Of f i ce of St ephen F.Rear don, was on br i ef f or appel l ee Uni ver sal Tradi ng & I nvest mentCo. , I nc.

August 12, 2013


2/37

TORRUELLA, Circuit Judge. We are asked t o r evi ew a

di st r i ct cour t ' s asser t i on of j ur i sdi cti on over a mat t er i nvol vi ng

a f or ei gn sover ei gn, t he Republ i c of Ukrai ne, and i t s agenci es and

i nst r ument al i t i es ( t he "Ukrai ni an def endant s" ) , f ol l owi ng an

al l eged f ai l ur e of t hose agenci es and i nst r ument al i t i es t o pay f or

asset r ecover y wor k per f or med by a pr i vat e ent i t y, Uni ver sal

Tr adi ng & I nvest ment Co. , I nc. ( "UTI Co") . Si nce we f i nd t hat t he

Ukrai ni an def endant s' t r ansact i ons wi t h UTI Co const i t ut e commer ci al

act i vi t y exempt f r om i mmuni t y under t he For ei gn Sover ei gn

I mmuni t i es Act ( "FSI A") , 28 U. S. C. 1604, we af f i r m t he di st r i ct

cour t ' s exer ci se of j ur i sdi ct i on over UTI Co' s br each of cont r act

cl ai m.

I. Background

The f ol l owi ng f act s ar e al l eged i n UTI Co' s compl ai nt and

were accept ed as t r ue by t he Ukr ai ni an def endant s f or t he pur poses

of t he mot i on t o di smi ss. I n our r evi ew, we accept as t r ue al l

wel l - pl ed f act s al l eged i n t he compl ai nt and dr aw al l r easonabl e

i nf er ences i n UTI Co' s f avor . Sant i ago v. Puer t o Ri co, 655 F. 3d 61,

72 ( 1st Ci r . 2011) .

A. Factual Background

Pl ai nt i f f UTI Co i s a Massachuset t s cor por at i on t hat

engages i n i nt er nat i onal asset r ecover y oper at i ons. Def endant s

Ukrai ne, t he Ukrai ni an Pr osecut or Gener al ' s Of f i ce ( "UPGO") , and

t he Bur eau f or Repr esent i ng Ukrai ni an I nt er est s i n I nt er nat i onal

-2-


3/37

and For ei gn Cour t s ( t he "Bur eau") ar e char ged i n UTI Co' s compl ai nt

wi t h a br each of cont r act f or servi ces UTI Co al l egedl y r ender ed t o

t hem, but whi ch r emai n uncompensat ed. Thi s t al e of i nt er nat i onal

di mensi ons begi ns when UPGO t ur ned t o UTI Co f or assi st ance t o

r ecover asset s expat r i at ed f r omUkrai ne by Uni t ed Ener gy Syst ems of

Ukr ai ne ( "UESU") , i t s pr i nci pal s ( i ncl udi ng f or mer Ukr ai ni an Pr i me

Mi ni st er Pavl o Lazar enko ( "Lazar enko") and Lazar enko' s assi st ant ,

Pet r o Ki r i t chenko ( "Ki r i t chenko" ) ) , and i t s par ent company, Uni t ed

Ener gy I nt er nat i onal , Ltd. 1 UPGO i s t he pr osecut or i al agency i n

Ukrai ne, and t he Bur eau i s r esponsi bl e f or payi ng and suppor t i ng

f or ei gn f i r ms act i ng under cont r act i n t he i nt er est s of Ukr ai ne.

Both UPGO and t he Bur eau are agenci es or i nst r ument al i t i es of t he

Ukr ai ni an government . 2

The ser vi ce agr eement s ( "Agreement s" ) bet ween UPGO and

UTI Co at i ssue i n t hi s appeal ar ose i n t he cont ext of UTI Co' s pr i or

wor k i nvest i gat i ng Cube, Lt d. ( "Cube") , whi ch was r eor gani zed t o

1 UTI Co' s compl ai nt i ncl uded ot her cl ai ms di smi ssed by t hedi st r i ct cour t , namel y, an addi t i onal cl ai m f or br each ofassi gnment and cl ai ms f or unj ust enr i chment , br each of f i duci ar ydut y, negl i gence, and mi sr epr esent at i on. The di smi ssal of t hosecl ai ms was not appeal ed.

2 Whi l e t he Ukrai ni an def endant s chal l enge t he di st r i ct cour t ' sdescr i pt i on of UPGO and t he Bur eau as "agenci es or

i nst r ument al i t i es" of Ukr ai ne, ar gui ng i nst ead t hat t hey ar epol i t i cal subdi vi si ons of Ukr ai ne, t hey concede t hat t hedi st i nct i on i s i r r el evant t o t he i mmuni t y anal ysi s. Thus, f or t hepur poses of our r evi ew her e, we wi l l t r eat al l of t he Ukr ai ni andef endant s as meet i ng t he def i ni t i on of " f or ei gn sover ei gn. " See28 U. S. C. 1603( a) ( def i ni ng "f or ei gn st at e" as i ncl udi ng"pol i t i cal subdi vi s i on[ s] of a f or ei gn stat e") .

-3-


4/37

become UESU. UESU, t hr ough t he i nt ervent i on of Lazarenko, had been

awarded a l ucr at i ve government cont r act t o handl e the i mport of

nat ur al gas f or di st r i but i on and del i ver y i n Ukrai ne, and t he

pr oceeds col l ect ed by UESU f or r esal e of nat ur al gas had been

conver t ed t hrough UESU' s parent company account s and t hen hi dden i n

UESU' s pr i nci pal s' secr et account s. I n t he cour se of UTI Co' s

i ndependent col l ect i on case agai nst Cube/ UESU, i t uncover ed

evi dence of Lazarenko' s i nvol vement i n t he cont r ol of UESU, and i t

had cont acted UPGO and other Ukr ai ni an agenci es t o repor t t he

uncover ed f r audul ent r el at i onshi p. Ukrai ne' s account agenci es

subsequent l y est i mat ed that t he t ot al pr oceeds mi sappr opr i at ed f r om

Ukr ai ne by UESU amount ed t o over $2 bi l l i on. I t was based on t hi s

and ot her of UTI Co' s di scover i es t hat UPGO, i n 1998, "expr essed

i nt er est i n cont r act i ng UTI Co f or cont i nued i nvest i gat i on of t he

wher eabout s of UESU- r el at ed asset s and f or t he f r eezi ng of t hose

asset s, par t i cul ar l y t hose appr opr i at ed by Lazar enko, anywher e i n

t he wor l d t hat t hey mi ght be f ound. " Pr i or t o i t s out r each t o

UTI Co, t he compl ai nt al l eges, UPGO had l i t t l e success i n i t s

ef f or t s t o col l ect evi dence i n f or ei gn j ur i sdi ct i ons i n i t s

i nvest i gat i ons and pr osecut i ons of Ukrai ni an nat i onal s, most

i mpor t ant l y i n i t s at t empt s at asset r ecover y.

UTI Co and UPGO r eached t hei r f i r st agr eement on May 15,

1998, when t he Ukr ai ni an Deput y Pr osecut or General , Ni kol ai

Obi khod, t r avel ed t o New Yor k and di scussed t he t erms of UTI Co' s

-4-


5/37

pr ovi si on of i t s ser vi ces wi t h UTI Co' s r epr esent at i ves ( "May

Agr eement " ) . That agr eement st ated as f ol l ows:

Taki ng i nt o account i nf or mat i on and assi st ancet hat Uni ver sal Tradi ng & I nvest ment Co. i s

pr ovi di ng i n r egar d t o t he act i vi t i es ofUni t ed Energy Syst ems of Ukr ai ne (Ukr ai ne,Dnepr opet r ovsk) and Uni t ed Ener gyI nt er nat i onal Ltd. ( London, U. K. ) , as wel l asi t s pr i nci pal s, shar ehol der s, and t he asset sof t he shar ehol der s, t he Pr osecut or Gener al ' sOf f i ce of Ukrai ne has agr eed t hat Uni ver salTr adi ng & I nvest ment Co. wi l l be at t r i but ed acommi ssi on of 12 ( t wel ve) per cent on al l andany above asset s t o be r et ur ned t o Ukrai ne, i nconnect i on wi t h t he Power of At t or ney of t heProsecut or Gener al ' s Of f i ce of May 14, 1998.

The Pr osecutor Gener al ' s Of f i ce of Ukr ai neconf i r ms i t s commi t ment t o engage f or t hat t heappr opr i at e St at e bodi es of Ukrai ne and t oappr opr i at el y secur e the per mi ssi on f or t heabove r emuner at i on, t aki ng i nt o account t hatt he r emuner at i on i s not payabl e f r omt he St at ebudget of Ukrai ne but f r om t he asset s t o ber epat r i at ed t o Ukr ai ne f r om out si de ofUkrai ne.

The Agreement was addressed t o t he Pr esi dent of UTI Co, Y. A.

Lambert , and bore the UPGO l et t erhead, i ncl udi ng the Coat of Ar ms

of Ukr ai ne, as wel l as t he si gnat ur e of B. Fer ent s, t he Act i ng

Pr osecut or Gener al of Ukr ai ne. I t was del i ver ed t o UTI Co' s of f i ce

i n Massachuset t s.

Accordi ng t o the compl ai nt , t he May Agreement was

execut ed as t he " f i r st f r amework agr eement " t hat was f ol l owed by 14

addi t i onal cont r actual i nst r ument s between UTI Co and UPGO. The

most pr omi nent of t hese i nst r ument s i s an agr eement dated

Oct ober 2, 1998, i n whi ch t he newl y conf i r med Prosecut or General ,

-5-


6/37

Mi khai l o Potebenko, conf i r med t he May Agr eement ( "Oct ober

Agr eement " ) . That Agr eement , al so addr essed t o Y. A. Lambert as

Pr esi dent of UTI Co, st at es:

Wi t h r ef er ence t o our l et t er r egi st er ed No.12- 01379- 97 of May 15 of t hi s year and t hef ol l ow- up Power s of At t or ney of August 5 andSept ember 23 of t hi s year , t he pr esentst at ement i s t o cer t i f y t he pr evi ousl y agr eedt er ms i n r egar d t o t he unl awf ul asset s out si deof Ukrai ne of t he Ukrai ni an ci t i zens whoi l l egal l y became t he benef i ci ar i es of PFGUni t ed Energy Syst ems of Ukr ai ne and of Uni t edEner gy I nt er nat i onal Ltd. , and i n r egar d t owor k on t he ret ur n of such asset s t o Ukrai ne.

The Oct ober Agreement l et t er al so bor e t he UPGO l et t er head,

i ncl udi ng t he Coat of Ar ms of Ukrai ne, and t he si gnat ur e of t he new

Pr osecut or Gener al . I t was del i ver ed t o UTI Co by Ukrai ni an

of f i ci al s dur i ng t he Ukr ai ni an Pr i me Mi ni st er ' s t r i p t o Washi ngt on,

D. C.

Ot her i nst r ument s i ncl uded Power s of At t or ney ( "POAs" )

gr ant ed by UPGO t o UTI Co and/ or at t orneys sel ected by UTI Co t o

pur sue a ser i es of i nvest i gat i ons and act i ons on i t s behal f i n

mul t i pl e j ur i sdi cti ons out si de of Ukr ai ne. Speci f i cal l y, t hey

gr ant ed UTI Co and i t s sel ect ed at t or neys aut hor i t y to i nvest i gat e

and br i ng l egal act i ons t o r eveal and secur e t he f r eezi ng of asset s

i n a var i et y of j ur i sdi ct i ons, i ncl udi ng, i nt er al i a, t he Uni t ed

St at es, t he Br i t i sh Vi r gi n I sl ands, t he Bahamas, Panama, and

Barbados. UTI Co used t hese POAs t o accompl i sh i t s asset r ecover y

work on behal f of Ukr ai ne.

-6-


7/37

UTI Co cl ai ms t hat i t was i nst r ument al i n f r eezi ng

hundr eds of mi l l i ons of dol l ar s f or Ukrai ne t hr ough uncover i ng

f r aud engaged i n by t he pr i nci pal s of UESU and pr ovi di ng evi dence

vi t al t o t he pr osecut i on of Lazar enko, Ki r i t chenko, and ot her s.

For exampl e, i t st at es i n t he compl ai nt t hat i t pr ovi ded t he

evi dence t o UPGO t hat al l owed UPGO t o f r eeze $144 mi l l i on of asset s

i n t he Bal f or d Trust and an addi t i onal unknown amount of asset s i n

t he BL Trust mai nt ai ned by Cr edi t Sui sse AG Bank i n Guernsey, t he

Channel I sl ands, i n 1998. I t al so al l egedl y pr ovi ded evi dence t o

UPGO al l owi ng UPGO t o f r eeze over $100 mi l l i on of asset s hel d i n

Eur of ed Bank i n Ant i gua, Li t huani a, and Swi t zer l and i n 1999 and

2000. Fur t her , UTI CO cl ai ms i t col l ect ed evi dence i n t he Bahamas,

Panama, Cypr us, Naur u, t he I sl e of Man, J er sey, St . Ki t t s, and t he

Cayman I sl ands, whi ch UPGO t hen used t o pr osecut e cl ai ms f or st ol en

asset s i n excess of $1 bi l l i on i n Ukr ai ne.

B. Procedural History

On November 26, 2010, UTI Co f i l ed i t s compl ai nt i n t he

i nst ant act i on. The Ukrai ni an def endant s accept ed UTI Co' s f act s as

t r ue when t hey f i l ed a mot i on t o di smi ss t he compl ai nt on gr ounds,

i nt er al i a, t hat t hey wer e ent i t l ed t o i mmuni t y under t he FSI A.

The di st r i ct cour t deni ed def endant s' mot i on t o di smi ss

i n par t , al l owi ng UTI Co' s br each of cont r act cl ai m per t ai ni ng t o

t he 1998 Agr eement s t o go f or war d on gr ounds t hat j ur i sdi ct i on

coul d be assert ed over t hat cl ai m under t he commer ci al act i vi t y

-7-


8/37

except i on t o t he FSI A. See Uni ver sal Tr adi ng & I nv. Co. v. Bur eau

f or Repr esent i ng Ukr ai ni an I nt er est s i n I nt ' l & For ei gn Cour t s

( Uni ver sal I ) , 898 F. Supp. 2d 301 ( D. Mass. 2012) . Speci f i cal l y,

t he cour t f ound t hat , whi l e " t he Agr eement ' s l anguage i s

ambi guous, " and "ext r i nsi c evi dence wi l l be necessar y t o est abl i sh

t he par t i es' i nt ent , " pl ai nt i f f s had st at ed a cl ai m f or br each of

cont r act t hat was not j ur i sdi ct i onal l y bar r ed by t he FSI A. I d. at

314- 16, 319- 20. I n f i ndi ng t hat t he commer ci al act i vi t y except i on

appl i ed t o UTI Co' s br each of cont r act cl ai m, t he cour t st at ed:

Ukrai ne hi r ed an out si de agent - - UTI Co - - t oengage i n asset r ecover y on i t s behal f . I t i st he cont r act bet ween t hose t wo par t i es, andnot t he asset r ecover y i t sel f , t hat i s ati ssue i n t hi s case. The cont r act bet weenUkrai ne and UTI Co i s not i nher ent l ygovernment al and does not addr ess servi cest hat coul d be render ed t o or pr ovi ded by onl ya government al ent i t y.

. . . .

Ukrai ne . . . coul d have conduct ed i t s ownasset r ecover y pr ogr am. I nst ead, . . . i tchose t o ent er t he mar ket pl ace, and cont r act edwi t h UTI Co i n t he same manner t hat a pr i vat ecompany seeki ng t o r ecover mi sappr opr i atedasset s woul d. The under l yi ng act i vi t y ati ssue - - t he exchange of money f or ass i st ancei n r ecover i ng mi sappr opr i at ed asset s on ani nt er nat i onal scal e - - i s t he t ype negot i at edamong pr i vat e par t i es . . . . Ukr ai ne' sat t empt t o l ower t he l evel of gener al i t y f r om

a cont r act f or t he sal e of asset r ecover yser vi ces t o a cont r act f or t he sal e ofser vi ces t o r ecover publ i c asset si mper mi ssi bl y f ocuses on t he pur pose r at hert han t he nat ur e of t he t r ansact i on.

-8-


9/37

I d. at 314- 16 ( emphasi s i n or i gi nal ) . The Ukrai ni an def endant s

t i mel y appeal ed t he cour t ' s i mmuni t y det er mi nat i on, and on Apr i l 4,

2013, t he di st r i ct cour t st ayed pr oceedi ngs pendi ng t hi s appeal .

See Ungar v. Pal est i ne Li ber at i on Or g. , 402 F. 3d 274, 293 ( 1st Ci r .

2005) ( appeal on gr ounds of f or ei gn sover ei gn i mmuni t y per mi ssi bl e

under col l at er al or der doct r i ne) .

II. Discussion

The Ukr ai ni an def endant s make t hree ar gument s on appeal ,

al l r el at i ng t o t he appl i cabi l i t y of t he commer ci al acti vi t y

except i on t o t hei r sover ei gn i mmuni t y. Fi r st , t hey cont end t hat

"t he commer ci al act i dent i f i ed by t he Di st r i ct Cour t i n f i ndi ng

j ur i sdi ct i on - - UPGO' s al l eged ent er i ng i nto a cont r act wi t h UTI Co

- - di d not occur , " and t hus, t her e was no par t i cul ar t r ansact i on or

act t hat coul d come wi t hi n t he def i ni t i on of "commer ci al act i vi t y"

under 1603( d) of t he FSI A. Second, t hey chal l enge t he di st r i ct

cour t ' s det er mi nat i on t hat t he under l yi ng conduct const i t ut ed

commer ci al act i vi t y r at her t han sover ei gn act i vi t y, cl ai mi ng t hat

t he cour t "conduct ed i t s j ur i sdi ct i onal anal ysi s as t hough UTI Co

pr ovi ded r un- of - t he- mi l l asset recover y ser vi ces. " I nst ead, t he

Ukrai ni an def endant s char act er i ze t he under l yi ng cont r act ed- f or

act i vi t y as assi st ance wi t h a cr i mi nal i nvest i gat i on and asset

f or f ei t ur e, and i nsi st t hat when a sover ei gn cont r act s wi t h someone

t o per f or msuch "a uni quel y gover nment al , non- commer ci al , servi ce, "

t he act i vi t y may not come wi t hi n t he commer ci al act i vi t y except i on.

-9-


10/37

Fi nal l y, t he Ukrai ni an def endant s cont end t hat UTI Co' s cl ai ml acks

t he nexus t o t he Uni t ed St at es r equi r ed t o est abl i sh j ur i sdi ct i on

under t he commer ci al act i vi t y except i on. We addr ess each i ssue i n

t ur n.

A. Applicability of the Commercial Activity Exception

The exi st ence vel non of subj ect mat t er j ur i sdi ct i on

under t he FSI A i s a quest i on of l aw r evi ewed de novo. Rodr guez v.

Republ i c of Cost a Ri ca, 297 F. 3d 1, 5 ( 1st Ci r . 2002) . Si nce t he

Ukrai ni an def endant s' f i r st t wo ar gument s on appeal deal wi t h

whet her t he under l yi ng conduct const i t ut es commer ci al act i vi t y, we

consi der t hem t oget her .

The FSI A "provi des t he sol e basi s f or obt ai ni ng

j ur i sdi ct i on over a f or ei gn st at e i n f eder al cour t . " Ar gent i ne

Republ i c v. Amerada Hess Shi ppi ng Co. , 488 U. S. 428, 439 ( 1998) .

I t est abl i shes a pr esumpt i on of f or ei gn sover ei gn i mmuni t y f r omt he

j ur i sdi ct i on of t he cour t s of t he Uni t ed Stat es unl ess one of i t s

enumerated except i ons t o i mmuni t y appl i es. 28 U. S. C. 1604,

1605, 1605A; Ver l i nden B. V. v. Cent . Bank of Ni ger i a, 461 U. S. 480,

488 ( 1983) . Unl ess such an except i on appl i es, cour t s i n t he Uni t ed

St at es l ack bot h subj ect mat t er and per sonal j ur i sdi ct i on over a

sui t agai nst a f or ei gn sover ei gn. 28 U. S. C. 1330; Ver l i nden, 461

U. S. at 485 n. 5.

Under t he "commer ci al act i vi t y except i on" t o i mmuni t y, a

f or ei gn sover ei gn i s not i mmune f r om j ur i sdi ct i on wher e

-10-


11/37

t he act i on i s based [ ( 1) ] upon a commerci alact i vi t y car r i ed on i n t he Uni t ed St at es by af or ei gn st at e; or [ ( 2) ] upon an act per f or medi n t he Uni t ed St at es i n connect i on wi t h acommer ci al act i vi t y of t he f or ei gn st at eel sewher e; or [ ( 3) ] upon an act out si de t he

t er r i t or y of t he Uni t ed St at es i n connect i onwi t h a commer ci al act i vi t y of t he f or ei gnst at e el sewher e and t hat act causes a di r ectef f ect i n t he Uni t ed St at es.

28 U. S. C. 1605( a) ( 2) .

Sect i on 1603( d) of t he FSI A def i nes "commer ci al act i vi t y"

as "ei t her a r egul ar cour se of commer ci al conduct or a par t i cul ar

commer ci al t r ansact i on or act . The commerci al char act er of t he

act i vi t y shal l be det er mi ned by ref er ence t o the nat ur e of t he

cour se of conduct or par t i cul ar t r ansact i on or act , r at her t han by

r ef er ence t o i t s pur pose. " The Supr eme Cour t has not ed t hat t hi s

def i ni t i on " l eaves t he cr i t i cal t erm ' commerci al ' l argel y

undef i ned, " and i nst ead "si mpl y est abl i shes t hat t he commer ci al

nat ur e of an act i vi t y does not depend upon whet her i t i s a si ngl e

act or a r egul ar cour se of conduct ; and t he second sent ence merel y

speci f i es what el ement of t he conduct def i nes commer ci al i t y ( i . e. ,

nat ur e rat her t han pur pose) , but st i l l wi t hout sayi ng what

' commer ci al ' means. " Republ i c of Ar gent i na v. Wel t over , I nc. , 504

U. S. 607, 612 ( 1992) . Never t hel ess, t he Cour t di d st at e t hat ,

when a f orei gn gover nment act s, not as ar egul at or of a market , but i n t he manner of apr i vat e pl ayer wi t hi n i t , t he f or ei gnsover ei gn' s act i ons are "commer ci al " wi t hi nt he meani ng of t he FSI A. . . . [ T] he quest i oni s not whet her t he f or ei gn gover nment i sact i ng wi t h a pr of i t mot i ve or i nst ead wi t h

-11-


12/37

t he ai m of f ul f i l l i ng uni quel y soverei gnobj ect i ves. Rat her , t he i ssue i s whet her t hepar t i cul ar act i ons t hat t he f or ei gn st at eper f orms ( what ever t he mot i ve behi nd t hem) aret he t ype of act i ons by whi ch a pr i vat e par t yengages i n " t r ade and t r af f i c or commer ce. "

I d. at 614 ( ci t at i ons omi t t ed) . The Cour t of f er ed an exampl e t o

hi ghl i ght t he di st i nct i on bet ween commer ci al and sover ei gn

act i vi t y:

a f or ei gn gover nment ' s i ssuance of r egul at i onsl i mi t i ng f or ei gn cur r ency exchange i s asover ei gn act i vi t y, because such aut hor i t at i vecont r ol of commerce cannot be exer ci sed by apr i vat e par t y; wher eas a cont r act t o buy ar myboot s or even bul l et s i s a "commer ci al "act i vi t y, because pr i vat e compani es cansi mi l ar l y use sal es cont r act s t o acqui r egoods.

I d. at 614- 15.

Fur t her , t he FSI A r equi r es us t o f ocus our commer ci al

act i vi t y i nqui r y on t he act i vi t i es car r i ed on "by t he f or ei gn

st at e" upon whi ch t he ci vi l act i on i s based. 28 U. S. C. 1605

( a) ( 2) . Ther ef or e, our i nqui r y wi l l t ur n on "t he par t i cul ar

act i ons t hat t he f or ei gn st at e per f or ms, " Wel t over , 504 U. S. at

614, as opposed t o t he speci f i c act i ons per f or med by t he par t y wi t h

whom t he f or ei gn st at e cont r act ed.

The Fi r st Ci r cui t has not di r ect l y addressed t he bur dens

of t he par t i es wi t h r espect t o an FSI A act i on. However , si nce t he

par t i es do not chal l enge t he di st r i ct cour t ' s adopt i on of t he

Second Ci r cui t ' s bur den- shi f t i ng f r amewor k, we adopt t hat f r amewor k

her e f or t he pur poses of t hi s case. See Uni ver sal I , 898 F. Supp.

-12-


13/37

2d at 309 ( col l ect i ng cases showi ng t hat t he Second Ci r cui t

f r amewor k i s consi st ent wi t h t he bur den- shi f t i ng f r amewor k i n t he

Thi r d, Four t h, Fi f t h, Sevent h, Ni nth, Tent h, El event h and D. C.

Ci r cui t s) . For our pur poses, t hen, havi ng accept ed t hat def endant s

f i t wi t hi n t he def i ni t i on of "f or ei gn sover ei gn, " t he bur den of

pr oduct i on i s on UTI Co to of f er evi dence showi ng t hat , under one of

t he l i st ed except i ons, i mmuni t y shoul d not be gr ant ed t o t he

Ukrai ni an def endant s. See Vi r t ual Count r i es, I nc. v. Republ i c of

S. Af r . , 300 F. 3d 230, 241 ( 2d Ci r . 2002) . The ul t i mat e bur den of

per suasi on, however , r est s wi t h t he f or ei gn sover ei gn to show t hat

none of t he per t i nent except i ons appl y. I d. "Det er mi ni ng whether

t hi s bur den has been met i nvol ves a ' r evi ew [ of ] t he al l egat i ons i n

t he compl ai nt , t he undi sput ed f act s, i f any, pl aced bef or e [ t he

cour t ] by the par t i es, and - - i f t he pl ai nt i f f comes f or war d wi t h

suf f i ci ent evi dence t o car r y i t s bur den of pr oduct i on on t hi s i ssue

- - [ r esol ut i on of ] di sput ed i ssues of f act . ' " I d. ( quot i ng

Robi nson v. Gov' t of Mal aysi a, 269 F. 3d 133, 141 ( 2d Ci r . 2001) ) .

Wher e t he par t y asser t i ng i mmuni t y does not cont est t he al l eged

j ur i sdi ct i onal f act s, "but r at her , chal l enges t hei r l egal adequacy,

we r evi ew de novo t he compl ai nt ' s j ur i sdi ct i onal al l egat i ons t o

det er mi ne whet her t hey wer e suf f i ci ent t o el i mi nat e t he appel l ant s'

pr esumpt i ve i mmuni t y. " But l er v. Sukhoi Co. , 579 F. 3d 1307, 1313

( 11t h Ci r . 2009) .

-13-


14/37

1. Particular Commercial Transaction or Act

We f i r st consi der whether UTI Co met i t s bur den of

pr oduct i on i n showi ng t hat a par t i cul ar commer ci al t r ansact i on or

act occur r ed. See Saudi Ar abi a v. Nel son, 507 U. S. 349, 356 ( 1993)

( "We begi n our anal ysi s by i dent i f yi ng t he par t i cul ar conduct on

whi ch t he [ pl ai nt i f f ' s] act i on i s ' based' f or t he pur poses of t he

Act . " ) . As we have not ed i n pr i or cases, " [ t ] he i mpor t ant quest i on

i s whet her [ a sover ei gn] i n f act cont r acted wi t h t he [ pl ai nt i f f ] . "

See Rodr guez, 297 F. 3d at 6. I n t hi s ci r cumst ance, we exami ne

whet her t he compl ai nt suf f i ci ent l y al l eges UPGO' s ent r y i nt o

cont r act s and t hen br each - - t he commer ci al act i vi t y UPGO' s act i on

i s "based upon" - - even occur r ed. The Ukrai ni an def endant s car r y

t he ul t i mat e bur den of per suasi on t hat no except i ons t o FSI A

i mmuni t y appl y. Vi r t ual Count r i es, 300 F. 3d at 241.

The Ukr ai ni an def endant s make t hree ar gument s chal l engi ng

t he exi st ence of any cont r act on appeal . Fi r st , t hey cl ai m t hat

t he POAs at i ssue di d not empower UTI Co, but onl y non- part y

l awyer s, "pr esent ed t o [ UPGO] by UTI Co. "3 Second, t hey cont end

3 Whet her or not t he POAs empowered UTI Co i t sel f , t he May 14, 1998POA was expl i ci t l y i ncor por at ed by r ef er ence i nt o t he MayAgreement , and t he August 5, 1998 and Sept ember 23, 1998 POAs wer ei ncorporated by r ef erence i nt o t he Oct ober Agr eement . Fur t hermore,

an Oct ober 1999 submi ss i on by t he Deput y Pr osecut or of Ukr ai ne, i nwhi ch he st at ed t hat t he "commi ssi on agr eement " bet ween UTI Co andUPGO was " deemed f ul f i l l ed, " st at ed t hat t he Apr i l 30, 1999 POA"det er mi ned t he subj ect and t he scope of wor ks t hat t he ent r ust edpar t y, t he f i r m UTI Co, was t o under t ake. " Si nce UTI Co' s cont r actcl ai m i s based on these Agr eement s and the Ukrai ni an def endant s'concessi on t hat UTI Co had per f or med under t hem, i t i s t her ef or e

-14-


15/37

t hat , si nce the Agr eement s were not si gned by UTI Co, t hey are at

best uni l at er al cont r act s t hat ar e val i d onl y i f t he of f er ee

act ual l y per f or med. Si nce, t hey cl ai m, UTI Co di d not cause any

asset s t o be repat r i at ed t o Ukrai ne, UTI Co f ai l ed t o make a showi ng

t hat a cont r act i n f act exi st ed bet ween i t sel f and t he Ukrai ni an

def endant s. Thi r d, t hey di r ect l y chal l enge t he di st r i ct cour t ' s

det er mi nat i on t hat UTI Co' s br each of cont r act cl ai mst at ed a cl ai m

under Rul e 12( b) ( 6) si nce t he cour t f ound t he Agr eement ' s l anguage

t o be "ambi guous. " Accor di ng t o t he di st r i ct cour t , i t was "not

cl ear f r omt he Agr eement what const i t ut es a ' r et ur n' [ of asset s t o

Ukrai ne] - - such a r et ur n mi ght r equi r e t hat t he asset s be

t r ansf er r ed t o Ukrai ne' s bank account s or i t mi ght r equi r e onl y

t hat t he asset s si mpl y be made avai l abl e f or Ukrai ne' s col l ect i on. "

Uni ver sal I , 898 F. Supp. 2d at 319. Def endant s asser t t hat ,

wi t hout maki ng a pr oper f i ndi ng r egardi ng UTI Co' s per f ormance on

t he al l eged uni l at er al cont r act, t he di st r i ct cour t er r ed i n

f i ndi ng t hat UTI Co had met i t s bur den f or Rul e 12( b) ( 6) pur poses i n

showi ng t hat a cont r act was f ormed.

We revi ew de novo t he di st r i ct cour t ' s det er mi nat i on t hat

a uni l at er al cont r act was f or med. Mass. Eye & Ear I nf i r mar y v. QLT

Phot ot her apeut i cs, I nc. , 412 F. 3d 215, 229 ( 1st Ci r . 2005) .

UTI Co' s pr of f er ed evi dence of i t s cont r act ual agr eement s wi t h UPGO

consi st s of t he May and Oct ober Agr eement s as wel l as accompanyi ng

based on t hese POAs as wel l .

-15-


16/37

and subsequent l y i ssued POAs. Asi de f r om t he t er ms of t he

Agr eement s t hemsel ves, whi ch ref erence UTI Co' s assent t o agr eed-

upon t er ms, 4 t he Agreement s and POAs ar e si gned by UPGO onl y.

Ther ef or e, t hey cannot proper l y const i t ute "an exchange of

pr omi ses" as ordi nar i l y under st ood under Massachuset t s l aw, so t hey

at best may be const r ued as of f er s f or uni l at er al cont r act s. 5 See

Uni t ed St at es v. Papal eo, 853 F. 2d 16, 19 ( 1st Ci r . 1998)

( di st i ngui shi ng an agr eement t hat i s an "exchange of pr omi ses" f r om

a mer e of f er " f or a uni l at er al cont r act ") . Si nce t he Ukr ai ni an

def endant s' ar gument s ar e pr emi sed on t hei r char act er i zat i on of t he

Agr eement s sol el y as " of f ers, " we move on t o assess whether t he

compl ai nt pl eads t hei r t erms were accept ed.

Under Massachuset t s l aw,

That an of f er f or a uni l at er al cont r act i saccept ed by the act or act s of t he of f er ee i naccor dance wi t h t he of f er i s not quest i oned. . . . [ A] n accept ance of an of f er must be i naccor dance wi t h i t s t er ms, t hat i s, by f ul lper f or mance by the of f er ee, i n or der t hat acont r act may come i nt o exi st ence.

Nor t hampt on I nst . f or Sav. v. Put nam, 313 Mass. 1, 7 ( 1943) .

4 From t he Oct ober Agr eement : " [ T]he pr esent st at ement i s tocer t i f y t he pr evi ousl y agr eed t er ms i n r egar d t o t he unl awf ulasset s out si de of Ukr ai ne of t he Ukr ai ni an ci t i zens who i l l egal l y

became the benef i ci ar i es of PFG Uni t ed Energy Syst ems of Ukr ai neand of Uni t ed Ener gy I nt er nat i onal Lt d. , and i n r egar d t o wor k ont he r et ur n of such asset s t o Ukrai ne. " ( emphasi s added) .

5 The par t i es appl y Massachuset t s common l aw t o t he cont r actcl ai ms i n t he br i ef i ng on appeal and i n t he br i ef i ng bel ow. SeeUni ver sal I , 89 F. Supp. 2d at 318.

-16-


17/37

We f i r st exami ne what woul d const i t ut e accept ance based

on t he t erms of UPGO' s of f er . The t erms of t he Oct ober Agr eement ,

whi ch conf i r med t he May Agr eement , do not appear t o pl ace a cl ear

obl i gat i on on UTI Co t o "r et ur n" asset s t o Ukr ai ne i n or der t o f ul l y

per f or m t her eunder . Rat her , t he May Agr eement l i st s UTI Co' s

obl i gat i ons i n t he f i r st cl ause of i t s f i r st sent ence as pr ovi di ng

"i nf or mat i on and assi st ance . . . i n r egar d t o t he act i vi t i es of

Uni t ed Ener gy Syst ems of Ukrai ne . . . and Uni t ed Ener gy

I nt er nat i onal Lt d. , as wel l as i t s pr i nci pal s, shar ehol der s, and

t he asset s of t he shar ehol der s. " I n r et ur n, t he Agr eement st at es,

UPGO "has agr eed t hat [ UTI Co] wi l l be at t r i but ed a commi ss i on of 12

( t wel ve) per cent on al l and any above asset s t o be r et ur ned t o

Ukrai ne, i n connect i on wi t h t he Power of At t or ney of t he Pr osecut or

Gener al ' s Of f i ce of May 14, 1998. " Whi l e t he Agr eement r ef er ences

r et ur ned asset s t o Ukrai ne, i t appear s t o do so i n t er ms of

def i ni ng t he compensat i on t o be pr ovi ded UTI Co. However , we agr ee

wi t h t he di st r i ct cour t t hat , gi ven t he vagar i es of t he t r ansl at i on

and t he l ack of def i ni t i on of what mi ght const i t ut e a " r et ur n"

under t he t erms of t he Agr eement , t here r emai ns some ambi gui t y as

t o what t hat t er m means. We t hus r est wi t h t he di st r i ct cour t ' s

f i ndi ng, concur r i ng t hat t he meani ng of t hat t er m woul d sur el y

benef i t f r om t he i nt r oduct i on ext r i nsi c evi dence.

As f or evi dence pr of f er ed t o demonst r at e UTI Co' s

accept ance thr ough per f or mance, UTI Co f i r st poi nt s t o a

-17-


18/37

Sept ember 15, 2003 l et t er f r omt he Prosecut or Gener al of Ukr ai ne t o

t he Presi dent of Ukrai ne, whi ch demonst r at es UPGO' s r ecogni t i on

t hat UTI Co had accompl i shed per f ormance at l east as t o asset s

l ocat ed and bl ocked i n t he banks of Guernsey, Ant i gua, and other

count r i es. Fur t her , as ref er enced supr a, UTI Co submi t t ed a l et t er

f r om Deput y Pr osecut or Kudr i avtsev t o t he Pr esi dent of Ukrai ne,

f i l ed wi t h t he Ukrai ni an muni ci pal cour t , admi t t i ng t he exi st ence

of a "commi ss i on agr eement " by vi r t ue of whi ch:

one si de ( t he ent r ust ed par t y) under t akes t oact i n t he name of t he other and at t heexpense of t he ot her si de ( t he ent r ust i ngpar t y) under t aki ng cer t ai n l egal act i ons.. . . The f i r m UTI Co i n accor dance wi t h t hepowers gi ven t o i t embarked on accompl i shi ngt hose wor ks, i t accompl i shed t hose wor ks i nt he ent i r e vol ume, by vi r t ue of whi ch underAr t i cl e 42 of t he Ci vi l Code of Ukrai ne t hatagr eement i s deemed f ul f i l l ed.

Ther ef or e, prof f er ed evi dence by UTI Co i ndi cat es t hat a

r epr esent at i ve of UPGO acknowl edged UTI Co' s f ul l per f ormance under

t he Agr eement s and POAs. Together wi t h t he other evi dence of f ered,

we can concl ude f or t he pur poses of our r evi ew on a mot i on t o

di smi ss t hat suf f i ci ent f act s have been pl ed i ndi cat i ng t hat a

uni l at er al cont r act was f or med.

2. Commercial Act or Sovereign Act

We next t ur n to t he quest i on of whet her t he under l yi ng

act i vi t y at i ssue i n t hi s case may be pr oper l y deemed "commer ci al "

as opposed t o "sover ei gn" or "gover nment al . " I n doi ng so, we ar e

r equi r ed t o f ocus not on t he pur pose of t he act i vi t y, but r at her on

-18-


19/37

t he nat ur e of t he cour se of conduct or par t i cul ar t r ansact i on or

act . See 28 U. S. C. 1603( d) ; Wel t over , 504 U. S. at 612. The

under l yi ng conduct at i ssue here can be char acter i zed as UPGO' s

al l eged cont r act i ng f or UTI Co' s servi ces and UPGO' s al l eged br each

t hereof . Those Agr eement s, al ong wi t h t he POAs t hat f ol l owed t hem,

i ndi cat e that t he pur pose of cont r act i ng f or UTI CO' s asset r ecover y

ser vi ces i s t o "r eveal , . . . est abl i sh t he pr esence, and . . .

secur e t he f r eezi ng [ of asset s] . . . as wel l as t o accompl i sh t he

due measur es f or subsequent r est i t ut i on and/ or r epat r i at i on of

i l l egal l y cr eat ed asset s t o Ukr ai ne. " The nat ur e of UTI Co' s

cont r act ed- f or servi ces, as l i st ed i n t he Agr eement s and POAs,

i ncl uded, i nt er al i a, exchangi ng i nf or mat i on and assi st ance,

"conduct i ng t he i nvest i gat i on of a number of cr i mi nal cases, " and

"r epr esent [ i ng] [ UPGO] i n var i ous l egal mat t er s out si de of

Ukrai ne. "

The al l egat i ons i n t he compl ai nt i ndi cat e t hat UTI Co' s

per f ormance under t he Agreement s, t aken on behal f of UPGO, wer e

i ndi st i ngui shabl e f r om or di nar y asset recover y ser vi ces. UTI Co' s

compl ai nt st at es t hat i t : met wi t h var i ous gover nment of f i ci al s

r egar di ng t he f r aud al l egat i ons agai nst Lazar enko and Ki r i t chenko;

secur ed di scovery or ders and obt ai ned evi dence about asset s;

appl i ed f or pr ot ect i ve or der s f r eezi ng asset s; and submi t t ed

evi dence i t gat her ed t o UPGO, whi ch ent i t y was t hen r esponsi bl e f or

r equest i ng f orei gn government i ssuance of subpoenas. These

-19-


20/37

act i vi t i es are act i ons t hat any asset r ecover y agent woul d per f or m

whi l e ent r ust ed wi t h a power of at t or ney, whet her f r oma sover ei gn

or a pr i vat e par t y. Even i f t he f i nal goal or pur pose of t he

i nf or mat i on and assi st ance was uni quel y gover nment al - - pr osecut i ng

cr i mi nal conduct and r epat r i at i ng st ol en asset s i nt o a sover ei gn

t r easur y - - t he FSI A i s cl ear t hat cour t s ar e not t o det er mi ne t he

commer ci al char act er of an act i vi t y "by ref er ence t o i t s pur pose. "

28 U. S. C. 1603( d) .

Case l aw suppor t s our const r ual of t he under l yi ng

act i vi t y as commer ci al . I n Wel t over , t he Supr eme Cour t hel d t hat

t he Republ i c of Ar gent i na was not ent i t l ed t o i mmuni t y agai nst a

br each of cont r act cl ai m br ought by t wo cor por at i ons and a bank

when Ar gent i na uni l at er al l y r eschedul ed t he mat ur i t y dat es on bonds

i ssued t o t hem. 504 U. S. 607. The Cour t r easoned t hat t he

i ssuance of bonds was a "commerci al act i vi t y" because bonds were i n

al most al l r espect s gar den- var i et y debt i nst r ument s, and i t was

i r r el evant why Ar gent i na par t i ci pat ed i n t he bond mar ket as a

pr i vat e actor . I d. at 615- 17.

Most r el evant f or our di scussi on her e i s t he Cour t ' s

el abor at i on of t he di st i nct i on bet ween t he "nat ur e" and "pur pose"

of commer ci al act i vi t y. On appeal , Ar gent i na i nsi st ed t hat , even

t hough a cour t i s bar r ed f r omconsi der i ng an act i vi t y' s pur pose, i t

must nonet hel ess f ul l y consi der t he cont ext of a t r ansact i on i n

or der t o det er mi ne whet her or not i t i s "commer ci al . " I d. at 615.

-20-


21/37

The Cour t r ej ect ed t hat ar gument , st at i ng t hat , " [ h] owever

di f f i cul t i t may be i n some cases t o separ at e ' pur pose' ( i . e. , t he

r eason why the f or ei gn st at e engages i n t he act i vi t y) f r om' nat ur e'

( i . e, t he out war d f or m of t he conduct t hat t he f or ei gn st at e

perf orms or agr ees t o per f orm) , t he st atut e unmi st akabl y commands

t hat t o be done. " I d. at 618 ( ci t at i ons omi t t ed) . The nat ur e of

t hose act i vi t i es are f i r ml y def i ned as t hose power s not pecul i ar t o

sover ei gns, but r at her as "power s t hat can al so be exer ci sed by

pr i vat e ci t i zens. " Al f r ed Dunhi l l of London, I nc. v. Republ i c of

Cuba, 425 U. S. 682, 704 ( 1976) ( emphasi s added) . Or di nary asset

r ecover y servi ces of t he t ype descr i bed i n UTI Co' s compl ai nt ar e

exact l y t he sor t f or whi ch pr i vat e ci t i zens cont r act .

Fur t her , t he servi ces f or whi ch t he Ukrai ni an def endant s

cont r act ed di d not r equi r e UTI Co t o per f or m any gover nment al

f unct i ons, t hey mer el y obl i gat ed UTI Co t o assi st t he Ukrai ni an

def endant s i n l at er per mi t t i ng t hose def endant s t o car r y out

gover nment al f unct i ons t hemsel ves. Two El event h Ci r cui t deci si ons

ar e i l l umi nat i ng i n t hi s r egar d. I n Hondur as Ai r craf t Regi st r y,

Lt d. v. Gover nment of Hondur as, 129 F. 3d 543 ( 11t h Ci r . 1997) , t he

Government of Hondur as cont r act ed wi t h t wo pl ai nt i f f compani es t o

assi st i t i n upgr adi ng and est abl i shi ng a moder n ci vi l aer onaut i cs

pr ogr am. Under t he cont r act , t he pl ai nt i f f compani es wer e gi ven

"t he r i ght t o i nspect commer ci al ai r craf t f or cer t i f i cat i on i n

Hondur as and t o char ge t he ai r cr af t owner s a f ee f or t hat servi ce, "

-21-


22/37

but onl y Hondur as coul d per f or m t he sover ei gn act s of act ual l y

admi t t i ng ai r craf t t o i t s r egi st r y: "[ The cont r act] pr ovi de[ d] onl y

t hat pl ai nt i f f s woul d pr ovi de t he means and do the t echni cal wor k

so t hat Hondur as i t sel f coul d t hen r egi st er t he ai r craf t i n

accor dance wi t h t he cont r act . " I d. at 546- 48. Accor di ngl y, t he

cour t char act er i zed Hondur as' act i vi t y as "vent ur [ i ng] i nt o t he

mar ket pl ace t o f i nd t he exper t i se and r esour ces needed t o

accompl i sh [ sover ei gn] t asks, " and "exer ci s[ i ng] i t s busi ness

j udgment and cont r act [ i ng] i n t he mar ket pl ace wi t h non- gover nment

compani es t o do and suppl y what i t needed. " I d. at 547. "Wi t hout

pl ai nt i f f compani es' pr i vat e hel p, " t he cour t cont i nued, "Hondur as

l i kel y woul d not have had a new ai r cr af t i nspect i on and

cer t i f i cat i on ser vi ce. " I d. Ther ef or e, the cour t hel d t hat

Hondur as was act i ng as a pr i vat e act or woul d as i t "di d not ent er

t he techni cal assi st ance mar ket t o r egul at e t hat mar ket as a

sover ei gn, but t o par t i ci pat e i n i t as an i ndi vi dual coul d. " I d.

at 548.

I n a case even cl oser t o t he f act s her e, Guevar a v.

Republ i c of Per , 468 F. 3d 1289 ( 11t h Ci r . 2006) , t he El event h

Ci r cui t consi der ed whet her t he Republ i c of Per ' s of f er of a r ewar d

i n r et ur n f or i nf or mat i on enabl i ng i t t o l ocat e and capt ur e t he

f ugi t i ve f or mer head of Per ' s Nat i onal I nt el l i gence Syst em f el l

wi t hi n t he commer ci al act i vi t y except i on t o sover ei gn i mmuni t y. I n

t hat case, Per , desper at e f or l eads af t er an i nt er nat i onal manhunt

-22-


23/37

went st al e, i ssued an emer gency decr ee est abl i shi ng a $5 mi l l i on

r ewar d f or accur at e i nf or mat i on enabl i ng t he aut hor i t i es t o l ocat e

and capt ur e Vl adi mi r o Leni n Mont esi nos Tor r es. I d. at 1293.

Pl ai nt i f f Guevar a had assi st ed Mont esi nos i n Venezuel a by pr ovi di ng

hi m wi t h a saf e- house and a secur i t y det ai l ; but he bet r ayed

Mont esi nos' wher eabout s t o FBI agent s i n exchange f or , he bel i eved,

i mmuni t y f r om f eder al pr osecut i on and t he hi gh Per uvi an monet ar y

r ewar d. I d. When Per r ef used t o pay, Guevar a f i l ed a l awsui t i n

Fl or i da contendi ng t hat Per was not i mmune under t he commerci al

act i vi t y except i on. I d. at 1294. The di st r i ct cour t di smi ssed hi s

compl ai nt on i mmuni t y gr ounds, and the El event h Ci r cui t r ever sed,

hol di ng t hat t he "under l yi ng act i vi t y at i ssue - - t he exchange of

money f or i nf or mat i on - - i s ' commer ci al i n nat ur e and of t he t ype

negot i abl e among pr i vat e par t i es. ' " I d. at 1299 ( ci t i ng Hondur as

Ai r craf t Regi st r y, 129 F. 3d at 547) . Speci f i cal l y, t he cour t f ound

cent r al t he f act t hat

Per coul d have at t empt ed t o use i t s pol i ceand i nvest i gat or y power s t o sear ch f orMont esi nos wi t hout of f er i ng money f ori nf or mat i on f r om anyone out s i de t hegovernment . However , Per di d not have t her esour ces or exper t i se i t needed t o get t hej ob done. Af t er t he t r ai l r an col d, Pervent ur ed i nt o t he mar ket pl ace t o buy t hei nf ormat i on needed t o get i t s man. Guevara

pr ovi ded t hat i nf or mat i on f or a pr i ce, t hepr i ce bei ng t he f i ve mi l l i on dol l ar s t hat Per had of f er ed t o pay f or i t .

I d. ( i nt er nal quot at i on mar ks and ci t at i ons omi t t ed) . The cour t

shar pl y di st i ngui shed t he r ol es of t he sover ei gn f r om t hat of t he

-23-


24/37

pr i vat e par t y wi t h whomi t cont r act ed by separ at i ng out t he pol i ce

powers and government al f unct i ons r etai ned by the f ormer i n t he

t r ansact i on:

We t hi nk t hat i nf or mat i on about a f ugi t i ve' swher eabout s i s t o a war on cr i me as mi l i t ar ysuppl i es ar e t o a mor e t r adi t i onal war . Bot hcommodi t i es are usef ul t o a st at e' sper f or mance of a sover ei gn f unct i on, but acont r act f or t he pur chase of ei t her does notr equi r e t he st at e t o per f or m a sover ei gnf unct i on. I n bot h si t uat i ons per f or mance oft he cont r act by t he pr i vat e par t y enabl es t hest at e t o engage i n a sover ei gn f unct i on i f i twi shes, but does not mandat e that i t do so.What i t mandat es i s t hat t he st at e pay t hepr omi sed amount f or t he ot her par t y' sper f or mance. Payi ng an amount owed under acont r act i s not i t sel f a sover ei gn act .

I d. at 1300. The cour t al so r ej ect ed Per ' s ar gument t hat Guevar a

was a mer e "subr ogee" or agent of t he sover ei gn' s aut hor i t y

per f or mi ng a sover ei gn f unct i on, of f er i ng t he f ol l owi ng anal ogy:

" I f a bai l bondsman of f er ed a rewar d f or i nf or mat i on enabl i ng t he

l ocat i on and capt ur e of a f ugi t i ve who had ski pped out on a bond,

he coul d not successf ul l y def end a l awsui t seeki ng t o col l ect on

t he r ewar d by asser t i ng sover ei gn i mmuni t y. " I d. at 1301. The

cour t went on t o concl ude, " [ i ] f an agent act i ng f or t he sover ei gn

coul d not successf ul l y cl ai m sover ei gn i mmuni t y, t he sover ei gn

coul d not ei t her . " I d.

We f i nd t hi s r easoni ng most cl osel y appl i cabl e to the

f act s al l eged her e. Accor di ng t o t he compl ai nt , t he Ukrai ni an

def endant s had t r i ed on t hei r own t o obt ai n t he conver t ed asset s

-24-


25/37

absconded f r om t he count r y at t he hands of Lazarenko, Ki r i t chenko

and other s, and had f ai l ed i n t hei r own at t empt s. Def endant s t hen

ent er ed i nt o t he mar ket pl ace t o obt ai n i nf or mat i on and assi st ance

i n r ecover i ng t hose asset s, benef i t t i ng f r om t he exper t i se and

r esour ces of pr of essi onal asset r ecover y ser vi ces l i ke t hose UTI Co

br ought t o bear , and deci ded t o cont r act wi t h UTI Co to accompl i sh

t hose tasks i n exchange f or a commi ss i oned amount . As i n Hondur as

Ai r cr af t Regi st r y, t he Ukrai ni an def endant s " coul d have expl or ed

t he possi bi l i t y of hi r i ng pl ai nt i f f s and pl ai nt i f f s ' per sonnel as

gover nment empl oyees, " but i nst ead, t hey "exer ci sed t hei r busi ness

j udgment and cont r act ed i n t he mar ket pl ace wi t h non- gover nment

compani es t o do and suppl y what [ t hey] needed. " 129 F. 3d at 547.

Fur t her , UTI Co was al l egedl y hi r ed t o pr ovi de the means

and t he t echni cal wor k t o assi st i n asset r et ur n and evi dence

gat her i ng so t hat Ukr ai ne i t sel f coul d ei t her r et ur n any asset s

f ound by UTI Co i nt o i t s t r easur y or pr osecut e t he UESU pr i nci pal s,

shoul d i t choose t o do so. J ust as was t he case i n Guevar a, t he

Agr eement s her e do not i mpi nge on Ukr ai ne' s soverei gnt y because

t hey do not f or ce Ukrai ne' s hand ei t her way regar di ng t he exer ci se

of i t s pol i ce power over Lazarenko and Ki r i t chenko, nor do they

r equi r e i t t o r eappr opr i at e any asset s i nt o t he Ukr ai ni an t r easur y

t hat def endant s deci de not t o reappr opr i at e.

I t i s f or t hese r easons t hat t hi s case i s di st i ngui shabl e

f r om t he cases ci t ed by t he Ukr ai ni an def endant s. Fi r st , i t i s

-25-


26/37

di st i ngui shabl e f r om di ct a i n I n r e Est at e of Fer di nand Mar cos

Human Ri ght s Li t i gat i on, 94 F. 3d 539 ( 9t h Ci r . 1997) , because, i n

t hat case, t he under l yi ng act i vi t y at i ssue was not t he cont r act i ng

f or publ i c asset r ecover y by a sover ei gn. Rat her , t he under l yi ng

act i vi t y i nvol ved t he di r ect pur sui t by a gover nment al agency of

t he Republ i c of t he Phi l i ppi nes, under a st at ut or y mandat e, t o

r ecover pr oper t y al l egedl y conver t ed by t he di ct at or Fer di nand

Mar cos, hi s wi f e, I mel da Mar cos, and t hei r associ at es, af t er t he

coupl e f l ed t o Hawai i . I d. at 542, 546. I n t hat pur sui t , t he

agency ut i l i zed i t s f ul l pol i ce power i n i t s at t empt s t o di r ectl y

r eappr opr i at e t he asset s i nt o t he Republ i c' s t r easur y. I d. at 546.

Fur t her , accor di ng t o t he al l egat i ons i n t he compl ai nt , t he asset s

i n t hi s case wer e not absconded f r om t he Ukrai ni an t r easur y, but

wer e r at her al l eged t o have been r ecei ved as i l l egal ki ckbacks f r om

publ i c ent er pr i ses i n Ukrai ne. The det er mi nat i on of whet her or not

t hose asset s i n f act bel onged wi t hi n t he Ukrai ni an t r easur y was one

onl y a soverei gn coul d make, and was a t ask UTI Co was not

cont r act ed t o per f or m. 6 I n any event , t o t he extent I n r e Mar cos

6 Ther e was ext ensi ve l i t i gat i on i n Cal i f or ni a i n whi ch UTI Coat t empt ed t o r ecover asset s i n t he San Fr anci sco ar ea f r omLazar enko and Ki r i t chenko, pur suant t o a pur port ed assi gnment byUPGO t o UTI Co of i t s i nt er est i n t hi s pr oper t y. See Uni ver sal

Tr adi ng & I nv. Co. v. Ki r i t chenko, 130 S. Ct . 3504 ( Mem) ( 2010) ;Uni ver sal Tr adi ng & I nv. Co. v. Ki r i t chenko, 346 Fed. Appx. 232( 9t h Ci r . 2009) ; Uni ver sal Tr adi ng & I nv. Co. v. Ki r i t chenko, No.C- 99- 3073, 2008 U. S. Di st . LEXI S 51307 ( N. D. Cal . J une 16, 2008) ;Uni ver sal Tr adi ng & I nv. Co. v. Ki r i t chenko, No. C- 99- 3073, 2007U. S. Di st . LEXI S 66317 ( N. D. Cal . Sept . 7, 2007) . Whi l e UTI Cobr ought some cl ai ms i n t he pr esent act i on based on t hi s Cal i f or ni a

-26-


27/37

suppor t s a di f f er ent r esul t t han t he one we r each her e, we di sagr ee

wi t h i t s anal ysi s and decl i ne t o f ol l ow i t .

The Ukr ai ni an def endant s at t empt t o l i ken t hi s case t o

cases i nvol vi ng mi l i t ar y per sonnel . We have no need t o det er mi ne

whet her we wi l l adopt a speci al "mi l i t ar y per sonnel " r ul e as t hi s

case does not di r ect l y r ai se t he i ssue and i s di st i ngui shabl e. I n

But t er s v. Vance I nt er nat i onal , I nc. , 225 F. 3d 462 ( 4t h Ci r . 2000) ,

t he Four t h Ci r cui t hel d t hat a pr i vat e secur i t y company was

ent i t l ed t o der i vat i ve FSI A i mmuni t y f r om t he Ki ngdom of Saudi

Ar abi a i n a gender di scr i mi nat i on sui t . The f act s under l yi ng t he

case wer e t hat t he pl ai nt i f f was al l egedl y di scr i mi nat ed agai nst

when a pr i vat e company, at t he di r ect i on of t he Saudi government ,

r ef used t o pr omote her i nt o a command post . I d. at 464. The cour t

char act er i zed t he under l yi ng act i vi t y as " a f or ei gn sover ei gn' s

deci si on as t o how best t o secur e t he saf et y of i t s l eader s, " whi ch

i t hel d t o i nvol ve a cor e pol i ce power . I d. at 465. Her e,

however , t he cont r act ed- f or act i vi t y di d not i nvol ve the di r ect

pr ot ect i on of f or ei gn di gni t ar i es, nor ar e t her e any al l eged f act s

al l egi ng t hat t he pr i vat e par t y - - UTI Co - - had been gi ven by

cont r act t he t ypes of pol i ce power s at i ssue i n But t er s: accor di ng

l i t i gat i on, t he di st r i ct cour t di smi ssed al l of t hose cl ai ms, seeUni ver sal I , 898 F. Supp. at 318- 19, 323- 24, and UTI Co has notappeal ed f r omt hi s di smi ssal . Thi s case i s ther ef or e not based ont he Ukr ai ni an def endant s' act i vi t y wi t h r espect t o t he Cal i f or ni al i t i gat i on, and we need not consi der whet her t he act i vi t y al l egedt her ei n const i t ut es commer ci al act i vi t y under t he FSI A.

-27-


28/37

t o t he compl ai nt ' s al l egat i ons, UTI Co per sonnel wer e not deput i zed,

had no power s of ar r est , wer e not ar med as t r adi t i onal secur i t y

woul d be, and ar e not al l eged t o have had any l aw enf orcement

aut hor i t y. I n f act , t he al l egat i ons i ndi cat e t hat Ukr ai ne had t o

st ep i n at var i ous poi nt s t o per f or m f unct i ons onl y i t coul d

per f or m t hat t he cont r act ual agr eement di d not cont empl at e ( f or

exampl e, usi ng evi dence submi t t ed t o i t by UTI Co t o r equest f r om

t he Bai l i f f ( gover nor ) of Guer nsey t he i ssuance of a subpoena t o

Cr edi t Sui sse f or document pr oduct i on i n r el at i on t o t he asset

r ecover y; usi ng evi dence obt ai ned by UTI Co t o seek t he det ent i on of

Lazar enko i n Swi t zer l and; usi ng evi dence obt ai ned by UTI Co t o f i l e

an appl i cat i on t o t he Ukrai ni an par l i ament t o st r i p Lazar enko of

par l i ament ar y i mmuni t y and f or hi s ar r est , et c. ) .

Thi s case i s l i kewi se di st i ngui shabl e f r om UNC Lear

Ser vi ces, I nc. v. Ki ngdom of Saudi Ar abi a, 581 F. 3d 210 ( 5t h Ci r .

2009) , where Saudi Ar abi a was hel d t o be i mmune f r om an act i on

al l egi ng br each of a ser vi ce cont r act wi t h a pr i vat e company t o

pr ovi de t r ai ni ng and suppor t servi ces t o t he Royal Saudi Ai r For ce

( "RSAF") . Ther e, t he pr i vat e empl oyees per f or med t hei r wor k i n

Saudi Ar abi a and were f ound t o be so i nt egr ated wi t h t he RSAF as t o

be consi der ed "mi l i t ar y per sonnel . " I d. at 216. The l egi sl at i ve

hi st or y of t he FSI A i s cl ear t hat empl oyment cont r act s wi t h

mi l i t ar y per sonnel ar e not commer ci al i n nat ur e, H. R. Rep. No. 94-

1487, at 16 ( 1976) , as r epr i nt ed i n 1976 U. S. C. C. A. N. 6604, 6614,

-28-


29/37

and t he pr i vat e ser vi ce per sonnel under t he f act s of t hat case wer e

i ndi st i ngui shabl e f r om gover nment per sonnel . Such ar e not t he

f act s her e, as di scussed above.

I t i s f or t he same r easons t hat t hi s case i s al so

di st i ngui shabl e f r omot her gover nment per sonnel cases ci t ed by the

Ukrai ni an def endant s, i ncl udi ng Kat o v. I shi har a, 360 F. 3d 106 ( 2d

Ci r . 2004) and the recent unpubl i shed deci si on by t he Ni nt h

Ci r cui t , Er i nger v. Pr i nci pal i t y of Monaco, No. 11- 56570 ( 9t h Ci r .

J ul y 10, 2013) . I n Kat o, a ci vi l ser vi ce empl oyee f or t he Tokyo

Met r opol i t an Government sued her empl oyer f or sexual harassment and

r et al i at i on i n vi ol at i on of Ti t l e VI I , at t empt i ng t o asser t a

commerci al act i vi t y except i on on t he basi s t hat her empl oyment

act i vi t i es i nvol ved t he commer ci al pr omot i on of J apanese compani es

i n t he Uni t ed St at es. 360 F. 3d at 109. The cour t hel d t hat t he

under l yi ng act i vi t y at i ssue was not commer ci al i n nat ur e because

i t consi st ed i n pr ovi di ng "gener al busi ness devel opment assi st ance,

i ncl udi ng pr oduct pr omot i on, t o busi ness ent er pr i ses of [ a] count r y

seeki ng t o engage i n commer ce i n t he Uni t ed St ates. " I d. at 114.

Here, f or t he same r easons st ated above, based on t he compl ai nt ' s

al l egat i ons, UTI Co can nei t her be char act er i zed as a gover nment

empl oyee nor was i t cont r act ed t o pr ovi de servi ces aki n t o t hose

pr ovi ded by t he pl ai nt i f f i n Kat o. Speci f i cal l y, t he Ukr ai ni an

def endant s, i n cont r act i ng wi t h UTI Co, wer e al l egedl y not engaged

i n t he pr ocess of r egul at i ng and pr omot i ng commer ci al act i vi t y i n

-29-


30/37

a f or ei gn count r y i n r el at i on t o i t sel f , but wer e r at her ent er i ng

i nt o t he market pl ace i n t he Uni t ed St ates t o engage i n commerce,

cont r acti ng f or speci f i c ser vi ces t o assi st i n f i el ds such as

cr i mi nal pr osecut i on and publ i c asset r eappr opr i at i on t hat t hey

r et ai ned t he ul t i mat e power t o regul at e.

I n Er i nger , t he pl ai nt i f f was t he f or mer Di r ect or of

Monaco I nt el l i gence Servi ces and had assi gnment s t hat onl y a

gover nment empl oyee coul d per f or m - - " l i ai si ng wi t h ot her

i nt el l i gence agenci es, i nvest i gat i ng pot ent i al Gover nment

appoi nt ment s, i nvest i gat i ng suspi ci ons of cor r upt i on and ot her

i l l egal acti vi t y i n Monaco, and pr ot ecti ng [ Pr i nce Al ber t I I ] f r om

i mpr oper f or ei gn i nf l uence. " No. 11- 56570, at *1. Er i nger ' s

f act s, si mi l ar t o t hose of But t er s and Kat o, ar e di st i ngui shabl e

f r om t hose al l eged her e f or t he same reasons t hose t wo cases are:

UTI Co empl oyees can nei t her be charact er i zed as government nor

mi l i t ar y per sonnel , and t he under l yi ng act i vi t y di d not i nvol ve

conduct t hat onl y a sover ei gn coul d per f or m. Not hi ng i n t he t er ms

of t he Agr eement s, t he POAs or t he al l eged f act s of UTI Co' s

per f or mance i ndi cat e t hat UTI Co was ei t her t asked wi t h, had been

gi ven t he aut hor i t y, or had t he capaci t y t o per f or m t he ki nds of

pol i ce- power act i vi t y t hat a di r ect or of an i nt el l i gence pr ogr am

wor ki ng i nsi de a gover nment coul d per f or m, nor di d Ukrai ne al l ow i t

t o do so.

-30-


31/37

UTI Co havi ng met i t s bur den of pr oduct i on on t hi s scor e,

we now t urn t o whet her t he Ukr ai ni an def endants have made

asser t i ons at t hi s st age t o meet t hei r bur den, by a pr eponder ance

of t he evi dence, t o show t hat UTI Co' s cl ai ms do not f al l wi t hi n t he

commer ci al act i vi t y except i on. We f i nd t hat t hey have not . The

Ukr ai ni an def endant s make an asser t i on t hat no asset s have been i n

f act " r et ur ned" t o Ukrai ne. We have f ound t hat t he act ual r et ur n

of asset s was not cl ear l y st at ed one of UTI Co' s per f or mance

obl i gat i ons on t he f ace of t he Oct ober Agr eement . The Ukrai ni an

def endant s have concent r ated i nst ead on t he pur pose of t he

agr eement s and t he goal of i t s r el at i onshi p wi t h UTI Co. Si nce we

have f ound i t i mper mi ssi bl e t o f ocus on t he pur pose rat her t han t he

nat ur e of t he under l yi ng act i vi t y, we cannot f i nd t hat t he

Ukr ai ni an def endant s have met t hei r bur den of persuasi on here.

B. Nexus to the United States

We now t ur n t o the Ukr ai ni an def endant s' f i nal argument :

t hat UTI Co' s cl ai m on i t s pl eadi ngs l acks t he nexus t o t he Uni t ed

St at es r equi r ed t o est abl i sh j ur i sdi ct i on under t he commer ci al

act i vi t y except i on. For a cour t t o exer ci se j ur i sdi ct i on over a

f or ei gn sover ei gn under t he commer ci al act i vi t y except i on, t he FSI A

r equi r es t hat some f or m of nexus be est abl i shed bet ween t he

sover ei gn' s act i vi t y and t he Uni t ed St at es. As st at ed above, a

nexus bet ween a def endant ' s commerci al act i vi t y and t he Uni t ed

Stat es may be shown under one of t hree ci r cumst ances under t he

-31-


32/37

st at ut e: ( 1) t he act i vi t y was "car r i ed on i n t he Uni t ed St at es";

( 2) t he act i vi t y per f or med i n t he Uni t ed St at es i s " i n connect i on

wi t h a commer ci al act i vi t y of t he f or ei gn st at e el sewher e" ; or ( 3)

t he act i vi t y occur r ed "out si de t he t er r i t or y of t he Uni t ed St at es

i n connect i on wi t h a commer ci al act i vi t y of t he f or ei gn st at e

el sewher e and t hat act causes a di r ect ef f ect i n t he Uni t ed

St at es. " 28 U. S. C. 1605( a) ( 2) . The Act f ur t her def i nes

"commer ci al act i vi t y car r i ed on i n t he Uni t ed St at es by a f or ei gn

st at e" as meani ng "commer ci al act i vi t y car r i ed on by such st at e and

havi ng subst ant i al cont act wi t h t he Uni t ed St at es. " I d. 1603( e) .

The Ukr ai ni an def endant s cont end t hat t he di st r i ct cour t

er r ed i n not anal yzi ng whet her t he pl eadi ngs i n UTI Co' s sur vi vi ng

br each of cont r act cl ai m pl ed a suf f i ci ent nexus wi t h t he Uni t ed

St at es t o establ i sh j ur i sdi ct i on. The di str i ct cour t i n f act di d

not consi der t he nexus r equi r ement as mandated by t he st atut e. I n

doi ng so her e, we concl ude t hat pl ai nt i f f al l eges suf f i ci ent f act s

t o suppor t t he nexus r equi r ement f or j ur i sdi ct i on.

Havi ng char act er i zed t he commer ci al act i vi t y at i ssue as

t he Ukrai ni an def endant s' cont r act i ng f or i nf or mat i on and

assi st ance i n exchange f or a commi ssi on, we begi n by l ooki ng at t he

f act s al l eged per t ai ni ng t o t he Agr eement s and t he POAs. The

negot i at i ons wi t h UTI Co' s management and counsel pert ai ni ng t o t he

Agr eement s are al l eged t o have occur r ed i n t he Uni t ed St at es, al l

of t he cont r act ual i nst r ument s wer e di r ect ed t o U. S. addr esses i n

-32-


33/37

Massachuset t s, and t hose i nst r ument s wer e al l egedl y del i ver ed i n

ei t her Massachuset t s or Washi ngt on, D. C. , t o r epr esent at i ves of a

cor por at i on or gani zed under t he l aws of Massachuset t s wi t h i t s

pr i nci pal pl ace of busi ness i n Massachuset t s.

UPGO does not cont est t hat t he Agreement s were del i ver ed

i n t he Uni t ed St at es. However , i t does poi nt out i n i t s br i ef i ng

t hat "UTI Co does not al l ege t hat ei t her of t he t wo l et t er s on whi ch

[ t he br each of cont r act cl ai m] i s based wer e act ual l y execut ed i n

t he Uni t ed St at es. " Even i f t he Agr eement s wer e execut ed out si de

t he Uni t ed St at es, i t i s not di sposi t i ve as t he Agr eement s wer e

act ual l y uni l at er al cont r act s. As such, we may l ook t o wher e t he

uni l at er al cont r act was of f er ed si nce i t was t he of f er t hat i n f act

est abl i shed a nexus or l i nk bet ween t he Ukr ai ni an def endant s i n

t hi s case and UTI Co, and i t was t hr ough t hat of f er t hat t he f or ei gn

sover ei gn engaged i n commer ce and of f i ci al l y ent er ed the

mar ket pl ace i n t he Uni t ed St ates. Si nce t he Ukrai ni an def endant s

do not di sput e t hat both Agr eement s were del i ver ed t o UTI Co wi t hi n

t he Uni t ed St at es, we concl ude t hat UTI Co al l eged suf f i ci ent f act s

t hat t he commer ci al act i vi t y at i ssue was " car r i ed on i n t he Uni t ed

St at es. " See al so Guevar a v. Republ i c of Per ( "Guevar a I I " ) , 608

F. 3d 1297, 1307 ( 11t h Ci r . 2010) ( f i ndi ng i nsuf f i ci ent nexus wi t h

t he Uni t ed St at es t o est abl i sh j ur i sdi ct i on wher e t he of f er of a

r ewar d f or i nf or mat i on enabl i ng t he capt ur e of a f ugi t i ve

const i t ut ed t he commer ci al act i vi t y at i ssue i n t he case, but t he

-33-


34/37

of f er was publ i shed as an Emer gency Decr ee i n an of f i ci al

publ i cat i on i n Per ) ; Sant os v. Compagni e Nat i onal e Ai r France, 934

F. 2d 890, 894 ( 7t h Ci r . 1991) ( st at i ng t hat an empl oyment cont r act

made i n the Uni t ed St ates f or f orei gn empl oyment pr ovi des

j ur i sdi ct i on f or a cl ai m f or breach of t hat agr eement si nce t he

pl ai nt i f f cl ai ms a br each of dut y that ar ose wi t hi n t he Uni t ed

States).

We al so not e UTI Co' s submi ssi on t o t he di st r i ct cour t of

a decl ar at i on f r om i t s chai r man, W. Scot t Thompson, st at i ng t hat

t he May Agr eement was executed " [ a] f t er several mont hs of

negot i at i ons i ncl udi ng i n New Yor k i n Apr i l of 1998. " See

Terenki an v. Republ i c of I r aq, 694 F. 3d 1122, 1137 ( 9th Ci r . 2012)

( f i ndi ng t he nexus r equi r ement sat i sf i ed wher e "subst ant i al pr i or

cont r act ual negot i at i ons . . . occur r ed wi t hi n t he Uni t ed

St at es. " ) . The decl ar at i on f ur t her st at ed t hat "mor e t han 90% of

work" by UTI Co i n "i mpl ement i ng t he 1998 Agreement s" was " per f ormed

i n Massachuset t s. " See Zedan v. Ki ngdomof Saudi Ar abi a, 849 F. 2d

1511, 1513 ( D. C. Ci r . 1988) ( ci t i ng H. R. Rep. No. 1487, 94t h Cong. ,

2d Sess 17 ( 1976) , as st at i ng t hat t he nexus r equi r ement may be met

i n "cases based on commer ci al t r ansact i ons per f or med i n whol e or i n

par t i n t he Uni t ed St at es. ") .

Even i f we wer e t o f i nd t hat t he Ukrai ni an def endant s'

al l eged commer ci al act i vi t y was not "car r i ed on i n t he Uni t ed

St at es, " suf f i ci ent f act s wer e al l eged t o est abl i sh a nexus based

-34-


35/37

on t hei r act i vi t y "out si de t he t er r i t or y of t he Uni t ed St at es i n

connect i on wi t h a commer ci al act i vi t y . . . [ t hat ] causes a di r ect

ef f ect i n t he Uni t ed St at es. " 28 U. S. C. 1605( a) ( 2) . Thompson' s

decl ar at i on i ndi cat es t hat t he Bur eau woul d have per f or med i t s

obl i gat i ons under t he Agr eement s i n Massachuset t s: "UTI Co' s

account s payabl e concerni ng t he Bur eau ( as wel l as any ot her

account s payabl e) have been i n Massachuset t s, " so "[ i ] f t he Bur eau

pai d UTI Co, t he f unds woul d have been r ecei ved on i t s account s i n

Massachuset t s. " I n Wel t over , t he Supr eme Cour t di scussed t hi s

t hi r d t ype of nexus as not r equi r i ng "subst ant i al i t y" or

"f or eseeabi l i t y" of ef f ect s i n t he Uni t ed St at es, def i ni ng t he

ef f ect r equi r ed i nst ead as "' di r ect ' i f i t f ol l ows ' as an i mmedi at e

consequence of t he def endant ' s . . . act i vi t y. ' " 504 U. S. at 618

( quot i ng Wel t over , I nc. v. Republ i c of Ar gent i na, 941 F. 2d 145, 152

( 2d Ci r . 1991) ) . The Cour t al so not ed t hat t he sover ei gn

def endant s

had desi gnated t hei r account s i n New Yor k ast he pl ace of payment , and Ar gent i na made somei nt er est payment s i nt o t hose account s bef or eannounci ng t hat i t was r eschedul i ng t hepayment s. Because New York was t hus t he pl aceof per f or mance f or Ar gent i na' s ul t i mat econt r act ual obl i gat i ons, t he r eschedul i ng oft hose obl i gat i ons necessar i l y had a "di r ectef f ect " i n t he Uni t ed St at es: Money t hat was

supposed t o have been del i vered t o a New Yorkbank f or deposi t was not f or t hcomi ng.

I d. at 619.

-35-


36/37

I n addi t i on, UTI Co, as an Amer i can company, al l egedl y

suf f er ed si gni f i cant f i nanci al har m when t he Ukrai ni an def endant s

r ef used t o remi t t he commi ss i on due under t he Agreement s, whi ch

cr eat es a suf f i ci ent di r ect ef f ect t o meet t he r equi r ement s of t he

except i on. See, e. g. , Byr d v. Cor por aci n For est al y I ndust r i al de

Ol ancho S. A. , 182 F. 3d 380, 390- 91 ( 5t h Ci r . 1999) ( hol di ng t hat an

Amer i can company suf f er i ng f i nanci al har m af t er a Hondur an publ i c

ent i t y br eached i t s cont r act creat ed a "di r ect ef f ect " suf f i ci ent

f or j ur i sdi ct i on) ; Voest - Al pi ne Tr adi ng USA Cor p. v. Bank of Chi na,

142 F. 3d 887, 896 ( 5t h Ci r . 1998) ( hol di ng t hat an Amer i can

company' s "nont r i vi al f i nanci al l oss i n t he Uni t ed St at es i n t he

f or m of f unds not r emi t t ed t o i t s account at a Texas bank" was a

di r ect ef f ect ) . We t her ef or e f i nd t hat UTI Co has put f or war d

suf f i ci ent f act s t o est abl i sh a nexus wi t h t he Uni t ed St at es, and

t he di st r i ct cour t di d not er r i n asser t i ng j ur i sdi cti on over t hi s

case. Si nce t he Ukrai ni an def endant s put f or war d no addi t i onal

f act s beyond t hose cont ai ned i n UTI Co' s compl ai nt and af f i davi t s

r egar di ng nexus, but r at her poi nt t o t he si gni f i cant i nt er nat i onal

asset r ecover y work UTI Co per f ormed, we cannot f i nd that t hey have

met t hei r bur den of per suasi on by a pr eponder ance. UTI Co' s al l eged

i nt er nat i onal r ecover y wor k, whi l e subst ant i al , i s not t he f ocus of

our i nqui r y. I nst ead, we f ocus on t he Ukrai ni an def endant s' own

commer ci al act i vi t y as al l eged i n t he compl ai nt as car r i ed on or

cr eat i ng an ef f ect i n t he Uni t ed St at es.

-36-


37/37

III. Conclusion

We concl ude that t he di st r i ct cour t di d not er r when i t

deni ed t he Ukrai ni an def endant s' mot i on t o di smi ss UTI Co' s br each

of cont r act cl ai m under t he commer ci al act i vi t y except i on t o

f or ei gn sover ei gn i mmuni t y. Accor di ngl y, t he deci si on of t he

di str i ct cour t i s af f i r med.

Affirmed.

Universal Trading & Investment v. Bureau for Representing Ukrain, 1st Cir. (2013)

Documents

Transcript of Universal Trading & Investment v. Bureau for Representing Ukrain, 1st Cir. (2013)