Refaat Abul Hosn v. Iraq Ministry of Transport ( 2020 )

NOT RECOMMENDED FOR PUBLICATION
File Name: 20a0237n.06
No. 19-1490
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
REFAAT F. ABUL HOSN, ) FILED
) Apr 30, 2020
Plaintiff-Appellant, ) DEBORAH S. HUNT, Clerk
)
v. )
)
IRAQ MINISTRY OF TRANSPORT, Public Land ) ON APPEAL FROM THE
Transport Co.; SECRETARY, DEPARTMENT OF ) UNITED STATES DISTRICT
DEFENSE, Colin Powell; COALITION ) COURT FOR THE EASTERN
PROVISIONAL AUTHORITY DIRECTOR, L. Paul ) DISTRICT OF MICHIGAN
Bremer, III, )
)
Defendants-Appellees. )
BEFORE: MERRITT, SUHRHEINRICH, and SUTTON, Circuit Judges.
SUHRHEINRICH, Circuit Judge. Appellant Refaat Abul Hosn filed a claim for breach of
contract against the Iraq Ministry of Transport, a division of a foreign government. In general, the
Foreign Sovereign Immunities Act bars federal courts from asserting jurisdiction over claims
against a foreign state. But Hosn contends that his claim meets an exception to the FSIA: a foreign
state is not immune from suits arising from commercial activity that has a direct effect in the United
States. The district court held that the contract at issue had no direct effect in the U.S. and therefore
dismissed Hosn’s complaint. We affirm.
No. 19-1490, Refaat Abul Hosn v. Iraq Ministry of Transport, et al.
I.
In May of 1998, a Lebanese company owned by Hosn1 agreed to deliver 200 trucks to IMT
in exchange for about $24 million worth of oil. According to Hosn, his company tendered the
trucks, but IMT reneged on the deal.
In 2016, after years of trying to resolve his dispute with the Iraqi government, Hosn filed
the present action in the Eastern District of Michigan. After an initial screening,2 the district court
determined that IMT had immunity under the FSIA and dismissed the case. Hosn appealed that
dismissal, and we reversed, finding that the district court failed to consider whether jurisdiction
existed under the FSIA exception for commercial activity that has a direct effect in the U.S. Hosn
v. Iraq Ministry of Transport, et al., No. 16-2286, slip op. at 3–4 (6th Cir. May 24, 2017).
The district court reopened the case and Hosn served IMT. When IMT failed to respond
to Hosn’s complaint, he moved for a default judgment. The district court noted that, because IMT
was a body of a foreign state, Hosn’s motion had to be addressed under the FSIA’s heightened
standard for default judgments, which requires the movant to “establish[] his claim or right to relief
by evidence satisfactory to the court.” 28 U.S.C. § 1608(e). Applying that standard, the district
court denied Hosn’s motion and directed him to refile it with additional support, including
evidence that the contract at issue met the FSIA’s direct-effect exception.
1
We note that Hosn is not a party to the contract at issue in this case. That fact would likely stand as an additional
reason that the district court lacked jurisdiction. See Thomas v. BBB, 79 F. App’x 748 (6th Cir. 2003) (holding that
the plaintiff “lacks standing to prosecute any claims on behalf of his construction company” even though he was the
sole owner because “an action to redress injuries by a corporation cannot be maintained by an owner in his own name”)
(citing Canderm Pharmacal, Ltd. v. Elder Pharms., Inc., 862 F.2d 597, 602–03 (6th Cir. 1988). However, because
neither the parties nor the district court addressed this issue, we focus on the district court’s holding that the FSIA
precluded it from asserting jurisdiction.
2
Hosn filed his complaint in forma pauperis, so the district court was required to dismiss the matter if it determined
that Hosn failed to state a claim on which relief may be granted. 28 U.S.C. § 1915(e)(2).
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In Hosn’s refiled motion for default judgment, he asserted that the direct-effect exception
applied because IMT renewed the 1998 contract in 2003 through his American company, CIF
International. Therefore, according to Hosn, IMT’s failure to execute the contract had a direct
effect in the U.S.
The district court reviewed Hosn’s refiled motion and determined that no contract existed
between IMT and Hosn’s American company. On that basis, the district court concluded that the
agreement at issue had no direct effect in the U.S. and dismissed the case for lack of jurisdiction.
II.
A.
In this appeal, Hosn challenges the district court’s determination that the FSIA precluded
it from asserting jurisdiction over IMT.
We receive this case in an unusual procedural posture. The district court raised the
jurisdictional issue sua sponte and did not rely on any particular rule of civil procedure to do so.
However, because the district court’s analysis most closely resembles that applied to a motion to
dismiss for lack of subject matter jurisdiction under Federal Rule of Civil Procedure 12(b)(1), we
will review the dismissal under the standards applicable to that rule.
In particular, because the district court engaged in fact-finding when analyzing Hosn’s
motion for default judgment, the analysis below was a “factual attack” on the court’s jurisdiction.
See Am. Telecom Co., LLC v. Republic of Lebanon, 501 F.3d 534, 537 (6th Cir. 2007) (“A Rule
12(b)(1) motion to dismiss for lack of subject matter jurisdiction may involve a facial attack or a
factual attack.”). When a Rule 12(b)(1) motion attacks a complaint’s factual predicate, the court
does not presume that the plaintiff’s factual allegations are true. Russell v. Lundergan-Grimes,
784 F.3d 1037, 1045 (6th Cir. 2015). The party invoking federal jurisdiction has the burden to
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prove that jurisdiction. See id. When examining a factual attack under Rule 12(b)(1), “the court
can actually weigh evidence to confirm the existence of the factual predicates for subject-matter
jurisdiction.” Carrier Corp. v. Outokumpu Oyj, 673 F.3d 430, 440 (6th Cir. 2012). For Rule
12(b)(1) factual attacks, we accept the district court’s findings of fact unless the findings are clearly
erroneous. See Russell, 784 F.3d at 1045. We review de novo the district court’s legal conclusions
regarding those facts. Id.
B.
The FSIA limits federal courts’ jurisdiction over claims against foreign states. See 28
U.S.C. § 1330(a) (“The district courts shall have original jurisdiction without regard to amount in
controversy of any nonjury civil action against a foreign state as defined in section 1603(a) of
[Title 28] as to any claim for relief in personam with respect to which the foreign state is not
entitled to immunity either under sections 1605–1607 of [Title 28] or under any applicable
international agreement.”). “Under the FSIA, a foreign state is presumptively immune from suit
unless a specific exception applies.” Permanent Mission of India to the United Nations v. City of
New York, 551 U.S. 193, 197 (2007).
The question in this case is whether Hosn’s complaint fell under the FSIA’s exception for
disputes arising from “a commercial activity of the foreign state” that “causes a direct effect in the
United States.” See 28 U.S.C. § 1605(a)(2). “[A]n effect is ‘direct’ if it follows as an immediate
consequence of the defendant’s activity.” Republic of Argentina v. Weltover, Inc., 504 U.S. 607,
618 (1992).
The district court determined that the agreement at issue would not directly affect the
United States. Hosn does not contend that the 1998 contract—between IMT and Hosn’s Lebanese
company—had a direct effect in the U.S. Instead, he alleges that the agreement began to directly
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affect the U.S. in 2003 when he and IMT renewed the contract through Hosn’s American company,
CIF International. However, the district court found that IMT did not renew the contract in 2003.
The record supports the district judge’s conclusion that IMT never formed a contract with
Hosn’s American company. Plaintiff offered two documents purporting to establish that the
contract was renewed in 2003, but those documents actually indicate that IMT needed further
approval before the agreement could be renewed. The first document, a letter dated December 25,
2003, states that Hosn met with the IMT’s Land Transportation Company to discuss ways to
execute the 1998 contract, possibly by entering into a substitute agreement between IMT and CIF
International. However, that letter ended with the Land Transportation Company’s representative
requesting that the IMT’s general director “kindly submit the matter to the respectful minister to
get his approval on the above-mentioned proposal.” The second document is a similar letter, dated
May 7, 2007, in which the IMT requests approval to renew the 1998 agreement, stating: “Please
kindly view and let us know the opinion of your esteemed committee on the possibility of signing
the contract . . . .”
Because IMT did not form an agreement with Hosn’s American company in 2003, the only
commercial arrangement before the district court was the 1998 contract, in which a Lebanese
company agreed to provide trucks to the Iraqi government in exchange for oil. That contract did
not directly affect the United States. Accordingly, the FSIA precluded the district court from
asserting jurisdiction over Hosn’s claim against IMT.
III.
For those reasons, we AFFIRM the district court’s dismissal of Hosn’s complaint.
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