Wye Oak Technology, Inc. v. Republic of Iraq ( 2022 )

United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued September 23, 2021 Decided February 4, 2022
No. 19-7162
WYE OAK TECHNOLOGY, INC.,
APPELLEE
v.
REPUBLIC OF IRAQ AND MINISTRY OF DEFENSE OF THE
REPUBLIC OF IRAQ,
APPELLANTS
Consolidated with 19-7169
Appeals from the United States District Court
for the District of Columbia
(No. 1:10-cv-01182)
Boaz S. Morag argued the cause for appellants/cross
appellees. With him on the briefs were Andrew A. Bernstein
and Timothy B. Mills.
Neal Kumar Katyal argued the cause for appellee/cross-
appellant. With him on the briefs were C. Allen Foster, Eric
C. Rowe, John H. Quinn, Jr., Patrick M. Klemz, Mitchell P.
Reich, Reedy C. Swanson, and Sundeep Iyer.
2
Before: HENDERSON and JACKSON, Circuit Judges, and
SENTELLE, Senior Circuit Judge.
Opinion for the Court filed by Circuit Judge JACKSON.
JACKSON, Circuit Judge: This appeal arises from a fully
litigated contract dispute between an American defense
contractor and a foreign government that resulted in a
multimillion-dollar plaintiff’s judgment. Wye Oak
Technology, Inc. first filed its complaint against the Republic
of Iraq in the U.S. District Court for the Eastern District of
Virginia (“EDVA”). Finding improper venue, that court
transferred the case to the U.S. District Court for the District of
Columbia (“DDC”), but not before flatly denying Iraq’s motion
to dismiss the complaint on sovereign immunity grounds. And
when the DDC eventually entered judgment in Wye Oak’s
favor nearly a decade later, after an eight-day bench trial, it did
so partly in reliance on an intervening ruling from the Fourth
Circuit, which rejected Iraq’s contention that none of the
exceptions to sovereign immunity in the Foreign Sovereign
Immunities Act (“FSIA”), 28 U.S.C. § 1602 et seq., applied to
Wye Oak’s breach of contract claims.
To be specific, the Fourth Circuit held that because Wye
Oak alleged that it had engaged in various acts inside the
United States pursuant to the parties’ agreement, the lawsuit
could proceed under the second clause of the FSIA’s
commercial activities exception. See 28 U.S.C. § 1605(a)(2)
(abrogating foreign sovereign immunity with respect to claims
that are “based upon . . . an act performed in the United States
in connection with commercial activity of the foreign state
elsewhere”). Thus, we are now called upon to decide whether
we agree with our sister circuit’s FSIA interpretation (as
applied in the context of the post-trial judgment in Wye Oak’s
3
favor that the DDC has entered against Iraq). We must also
determine, incidentally, whether the law of the case doctrine
somehow constrains our own assessment of Iraq’s alleged
immunity at this stage of the case.
In the opinion that follows, we first reject Wye Oak’s
argument that Iraq’s participation in the DDC bench trial
implicitly waived its sovereign immunity for the purpose of the
FSIA’s waiver exception. We then explain that the law of the
case doctrine does not require us to adhere to the Fourth
Circuit’s conclusions about the applicability of the FSIA’s
commercial activities exception, and, indeed, unlike the Fourth
Circuit, we conclude that the second clause of 28 U.S.C.
§ 1605(a)(2) does not apply to the established facts of this case.
But we do discern a plausible basis for sustaining the district
court’s jurisdictional ruling in the language of the commercial
activity exception’s third clause. See 28 U.S.C. § 1605(a)(2)
(abrogating immunity if the action is “based upon . . . an act
outside 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”). And we find that
the district court is best positioned to evaluate (or develop) the
record as necessary to determine, in the first instance, whether
the facts support application of that provision of the FSIA.
Therefore, the district court’s post-trial judgment is
vacated to the extent that it is premised on a finding of subject-
matter jurisdiction that rests on an erroneous interpretation of
the second clause of the commercial activities exception, and
this matter is remanded to the district court for a determination
of whether Iraq’s breach of contract caused “direct effects” in
the United States for the purpose of the third clause of 28
U.S.C. § 1605(a)(2).
4
I
The FSIA, 28 U.S.C. § 1602, et seq., affords the “sole
basis for obtaining jurisdiction over a foreign state” in United
States courts. Argentine Republic v. Amerada Hess Shipping
Corp., 488 U.S. 428, 434 (1989); see also Samantar v. Yousuf,
560 U.S. 305, 314 (2010). That statute “bars federal and state
courts from exercising jurisdiction when a foreign state is
entitled to immunity, and . . . confers jurisdiction on district
courts to hear suits . . . when a foreign state is not entitled to
immunity.” Diag Hum., S.E., v. Czech Republic-Ministry of
Health, 824 F.3d 131, 134 (D.C. Cir. 2016).
The FSIA establishes the general rule for granting foreign
sovereign immunity, 28 U.S.C. § 1604, and it also makes that
grant of immunity subject to nine exceptions, see id. §§ 1605–
1607; Mohammadi v. Islamic Republic of Iran, 782 F.3d 9, 13–
14 (D.C. Cir. 2015). The FSIA exceptions are exhaustive; if
none applies to the circumstances presented in a case, the
foreign state has immunity and the court lacks subject-matter
jurisdiction. Odhiambo v. Republic of Kenya, 764 F.3d 31, 34
(D.C. Cir. 2014).
The two FSIA exceptions that are relevant to this appeal—
waiver and commercial activity—appear at 28 U.S.C.
§ 1605(a)(1) and (2). In its entirety, that section of the statute
provides:
(a) A foreign state shall not be immune from the
jurisdiction of courts of the United States or of the
States in any case—
(1) in which the foreign state has waived its
immunity either explicitly or by implication,
notwithstanding any withdrawal of the waiver
which the foreign state may purport to effect
5
except in accordance with the terms of the
waiver;
(2) in which the action is based upon a
commercial activity carried on in the United
States by the foreign state; or upon an act
performed in the United States in connection
with a commercial activity of the foreign state
elsewhere; or upon an act outside 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.
Section 1605(a)(1) recognizes two species of waiver.
Where “explicit[]” waiver occurs, the foreign state expressly
consents to forgo its sovereign immunity with respect to a
certain class of disputes or a particular subject matter. See
World Wide Mins., Ltd. v. Republic of Kazakhstan, 296 F.3d
1154, 1162 (D.C. Cir. 2002). Generally speaking, because
explicit waivers of sovereign immunity are narrowly construed
“in favor of the sovereign” and are not enlarged “beyond what
the language requires[,]” id. (quoting Library of Cong. v. Shaw,
478 U.S. 310, 318 (1986)), a foreign state “will not be found to
have [explicitly] waived its immunity unless it has clearly and
unambiguously done so[,]” id.The waiver provision that is most relevant here is the
FSIA’s reference to “implicit[]” waivers of sovereign
immunity, which the statute “does not define.” Creighton Ltd.
v. Gov’t of the State of Qatar, 181 F.3d 118, 122 (D.C. Cir.
1999). However, this circuit has “followed the ‘virtually
unanimous’ precedents construing the implied waiver
provision narrowly.” Id. (internal citations omitted). Thus, we
have long held that “implicit in § 1605(a)(1) is the requirement
6
that the foreign state have intended to waive its sovereign
immunity.” Id. (emphasis added). The legislative history of
the FSIA provides only three examples of implicit waivers by
a foreign state, H.R. Rep. No. 94-1487, at 18 (1976), and courts
have been reluctant to recognize an implicit waiver of
sovereign immunity in other circumstances. See Foremost-
McKesson, Inc. v. Islamic Republic of Iran, 905 F.2d 438, 444
(D.C. Cir. 1990) (explaining that an implied waiver occurs if
the foreign state agrees to arbitration, agrees that the law of a
particular country governs a contract, or has filed a responsive
pleading without raising the defense of sovereign immunity).
Under Section 1605(a)(2), a foreign state’s sovereign
immunity is subject to abrogation based on the state’s
commercial activities. This statutory exception codifies the
“restrictive theory” of sovereign immunity that the United
States Department of State first endorsed in 1952, Republic of
Argentina v. Weltover, Inc., 504 U.S. 607, 612 (1992), pursuant
to which foreign states were not afforded immunity in cases
“arising out of purely commercial transactions[,]” id. at 613(quoting Alfred Dunhill of London, Inc. v. Republic of
Cuba, 425 U.S. 682, 703 (1976)). The Supreme Court had long
held that when “a foreign government acts, not as regulator of
a market, but in the manner of a private player within it,” id. at
614, its private acts might be sufficient to justify the invocation
of the jurisdiction of American courts, see id. (distinguishing
acts of the state as a market participant from undertakings
aimed at “fulfilling its uniquely sovereign objectives”); see
also Permanent Mission of India to the United Nations v. City
of New York, 551 U.S. 193, 199 (2007). Thus, the FSIA’s
commercial activities exception carves out, and exempts from
sovereign immunity, a sphere of private commercial action that
foreign states sometimes undertake.
7
Notably, as Congress has worded it, the commercial
activities exception is also designed to ensure that there is a
sufficient connection between the foreign state’s commercial
activity and the United States to warrant the exercise of
jurisdiction. See Jam v. Int’l Fin. Corp., 139 S. Ct. 759, 766
(2019). Thus, the first clause of section 1605(a)(2) requires a
plaintiff’s claim to be “based upon” an aspect of the foreign
state’s commercial activity that has a “substantial contact with
the United States.” Odhiambo, 764 F.3d at 36; see also Zedan
v. Kingdom of Saudi Arabia, 849 F.2d 1511, 1513 (D.C. Cir.
1988) (clarifying that the degree of contact required must be
more than isolated or transitory, and a plaintiff’s mere
citizenship status or place of residence will not suffice). The
second clause of the commercial activities exception permits a
suit against a foreign state when the plaintiff’s claim is based
“upon an act performed in the United States[,]” and that act is
taken “in connection with a commercial activity of the foreign
state elsewhere.” 28 U.S.C. § 1605(a)(2). And the third clause
of the exception permits a suit against a foreign state if the
claim is based upon an act outside the United States that is
related to the foreign state’s commercial activity if that act
“causes a direct effect in the United States.” Id.II
A
After the fall of Saddam Hussein at the conclusion of the
United States-led military action in Iraq, the newly constituted
transitional government of Iraq sought to rebuild that country’s
armed forces. To this end and at the recommendation of the
United States government, the Iraqi Ministry of Defense
(“MoD”) engaged the services of Wye Oak, a private defense
contractor headquartered in Pennsylvania that specializes in
foreign military equipment. As part of this engagement, Wye
8
Oak committed to inventorying and assessing Iraq’s existing
military equipment; refurbishing any such equipment to the
extent possible; and arranging for scrap sales of any equipment
that was not salvageable.
MoD and Wye Oak entered into a written Broker Services
Agreement (“BSA”) in August of 2004. Under the express
terms of the BSA, Wye Oak was to serve as the sole and
exclusive broker for these equipment recovery and
refurbishment services for a one-year period. As
compensation for this work, Wye Oak was to receive a 10%
commission for scrap sales and 10% of the profit for any
refurbishing services.
To receive its compensation, Wye Oak was required to
provide the MoD with pro forma invoices detailing the work
that had been done. The BSA specifically provided that “[a]ll
payments to be made to [Wye Oak] under this Agreement shall
be made in United States Dollars in the form and manner as
directed by [Wye Oak].” Joint App’x 775.
Wye Oak began performing under the BSA in August of
2004. Wye Oak’s CEO, Dale Stoffel, and other Wye Oak staff
who were present in Iraq immediately began identifying,
assessing, and refurbishing military equipment on the ground
in that country. Meanwhile, David Stoffel—Dale’s brother and
the head of Wye Oak’s information technology department,
which was located in the United States—began to oversee all
I.T. services for Wye Oak. These services included purchasing
computer equipment and software and reviewing all email
communications that came through the server that housed Wye
Oak’s data.
In October of 2004, Wye Oak submitted three pro forma
invoices to the MoD, totaling $24,714,697.15. Each invoice
specifically instructed the MoD to remit its payment to Wye
9
Oak “at the Baghdad Iraq office of [the MoD].” Joint App’x
781–83. There is no dispute that the MoD never paid these
invoices.
Nor is it disputed that Wye Oak made many concerted
efforts to collect the fee. For example, in the two months
between Wye Oak’s October submission of the invoices and
December 8, 2004—when Dale Stoffel was tragically slain in
Baghdad on his way to organize the release of funding—Wye
Oak representatives met with American and Iraqi officials at
least twice to discuss the project’s progress and to address the
still-outstanding invoices. As relevant here, these in-person
meetings took place at MoD’s headquarters in Baghdad. Wye
Oak reported on the status of the project and also expressed its
concerns about Iraq’s failure to pay the invoices, including the
specific worry that the lack of funding could interfere with Wye
Oak’s ability to execute subcontracts, such as an anticipated
construction services agreement with Wye Oak’s sister
company, CLI Corporation, an American construction firm
headquartered in Pennsylvania. During the meetings, Wye Oak
managed to secure additional payment promises from Iraq.
Wye Oak also undertook various diplomatic efforts to
secure the overdue funding. Its representatives reached out to
American government officials (such as then-Secretary of
Defense Donald Rumsfeld) to discuss the non-payment
dilemma. And Wye Oak contacted General Investment Group,
s.a.l. (“GIG”), a Lebanese company run by financier Raymond
Zayna, which had entered into separate funding agreements
with Wye Oak and Iraq related to the military equipment-
recovery project. GIG had agreed to provide some financing
for the project, and in its post-invoice conversations with GIG,
Wye Oak stressed the necessity of payment of the invoices, and
implored GIG to authorize that such payments be made to Wye
Oak’s bank account in Pennsylvania.
10
Despite these overtures, Wye Oak’s invoices remained
overdue when Dale Stoffel died on December 8, 2004. In the
wake of that tragedy, the company withdrew all of its U.S.
personnel from Iraq. It subsequently relied on local contractors
with respect to its performance under the BSA, which included
coordinating the production of operational armored vehicles
for Iraq’s January 2005 parliamentary election. Wye Oak
ceased all operations in Iraq shortly after the January 2005
election, due to the lack of funding.
B
1
Wye Oak filed a complaint against Iraq in the EDVA on
July 20, 2009, claiming that Iraq breached the BSA by refusing
to pay the generated invoices. Wye Oak Tech., Inc. v. Republic
of Iraq, No. 09CV793, 2010 WL 2613323, at *1 (E.D. Va. June
29, 2010). Iraq responded with a motion to dismiss Wye Oak’s
complaint, contending primarily that, as a sovereign nation, it
is entirely immune from suit under the FSIA. See Joint App’x
72 (“As a matter of law . . . the [c]ourt lacks subject matter
jurisdiction because no exception to Defendant’s sovereign
immunity applies under the Foreign Sovereign Immunities
Act.”).
On June 29, 2010, the EDVA issued a lengthy opinion that,
among other things, examined each of the three clauses of the
FSIA’s commercial activities exception to assess Iraq’s
sovereign immunity contention. The court evaluated “the
factual allegations of the complaint and referenced writings”
with respect to each clause, Wye Oak Tech., 2010 WL 2613323at *7, and concluded, for each, that “Wye Oak has sufficiently
established at this stage that this exception to the FSIA’s
sovereign immunity applies” such that “the [c]ourt may
exercise subject matter jurisdiction over Iraq in this case[,]” id.11
at *8. The EDVA further held that venue was not proper
because a “substantial part of the events or omissions giving
rise to Wye Oak’s claim” did not occur in the Eastern District
of Virginia. Id. at *11 (finding as much based on Wye Oak’s
allegations). Therefore, in addition to ruling on Iraq’s motion
to dismiss, that court also transferred the case “forthwith” to
the federal district court in the District of Columbia. Id.Iraq could not appeal the part of the EDVA’s order that
affected the transfer. Ukiah Adventist Hosp. v. F.T.C., 981 F.2d
543, 546 (D.C. Cir. 1992). But it did appeal that court’s
concomitant rejection of its sovereign immunity argument. See
Wye Oak Tech., Inc. v. Republic of Iraq, 666 F.3d 205, 206 (4th
Cir. 2011).
On appeal, the Fourth Circuit began its consideration of
Iraq’s sovereign immunity argument with a discussion of the
threshold question of whether it even had jurisdiction to
entertain an appeal from the transferred case. Id. at 210. The
panel majority acknowledged that it was not appropriate for the
EDVA to have ruled on the merits of Iraq’s motion to dismiss
once it had determined that venue was improper. Id. at 209.
However, over a vigorous dissent, the majority held that
appellate jurisdiction could be invoked nonetheless, because
the EDVA’s sovereign immunity holding was an “immediately
appealable” order, and that particular decision was thus
“effectively severed from the balance of the case,” in
accordance with circuit authority. Id. at 209–10 (quoting
Technosteel, LLC v. Beers Constr. Co., 271 F.3d 151, 159–60
(4th Cir. 2001)).
With respect to the merits of the sovereign immunity
question, the majority affirmed the EDVA’s ruling based on
the complaint’s allegations of fact. The panel concluded that
Iraq was engaged in commercial activity under the contract
12
with Wye Oak. Id. at 216–17. And it homed in on various acts
that Wye Oak had allegedly undertaken inside the United
States in connection with the BSA, including its alleged
creation of computer programming software, contacts with
agents of foreign nations, and provision of accounting services.
Id. at 216. According to the panel majority, if true, these
domestic acts meant that “Wye Oak made a sufficient showing
that its breach of contract claim [was] based upon an act
performed in the United States in connection with a
commercial activity of the foreign state elsewhere” under the
second clause of the FSIA. Id. Therefore, the panel held that
section 1605(a)(2) of the FSIA authorized Wye Oak to litigate
its claims against Iraq in federal court. Id. at 217.
The dissenting judge rejected the conclusion that appellate
review was available in this circumstance based on the circuit’s
precedents. Id. at 218 (Shedd, J., dissenting). And he further
maintained that the panel should forgo ruling on the sovereign
immunity issue once the transfer had occurred, because, in his
view, if the D.C. Circuit disagreed with the Fourth Circuit’s
immunity holding it “would create a circuit split in the same
case[,]” which the law of the case doctrine could not fix. Id.
219 (describing the “tenuous situation” that would arise “if the
courts in the District of Columbia were to find that subject
matter jurisdiction does not exist”).
2
Meanwhile, after the transferred case arrived in the DDC,
on December 17, 2010, the court stayed its proceedings at the
parties’ request, in light of the pending Fourth Circuit appeal.
The DDC lifted its stay approximately 18 months later, once
the Fourth Circuit had ruled. The parties then engaged in pre-
trial proceedings until August of 2019, when an eight-day
bench trial commenced.
13
At the conclusion of the bench trial, the trial judge ordered
the parties to submit Proposed Findings of Fact and
Conclusions of Law; notably, the briefing that ensued was the
first time that either party asked the DDC to address the
sovereign immunity issue. Wye Oak filed the first brief, and it
suggested therein that the district court should hold expressly
that Iraq did not have sovereign immunity under the second or
third clauses of the commercial activity exception. Iraq’s
proposed findings and conclusions eschewed any analysis of
these purported statutory bases for abrogating its sovereign
immunity. Instead, Iraq’s brief merely maintained that
“[p]laintiff bears the burden of proving at trial the existence of
sufficient facts to establish that the Court possesse[d] [subject-
matter] jurisdiction” and the court “shall determine its
jurisdiction accordingly.” Joint App’x 505.
On August 27, 2019, the DDC issued findings of fact and
conclusions of law in support of its post-trial judgment. See
Wye Oak Tech., Inc. v. Republic of Iraq, No. 10-CV-01182,
2019 WL 4044046 (D.D.C. Aug. 27, 2019). The district court
specifically held that it had subject-matter jurisdiction “under
clause two of the [FSIA’s] commercial activity exception[,]”
id. at *22, acknowledging first that the Fourth Circuit had held
as much, and reasoning that the Fourth Circuit’s opinion was
“law of the case[,]” id. at *23. The district court further found
that “the Fourth Circuit’s immunity determination was
substantively correct[,]” id., because the evidence at trial
established that Wye Oak had, in fact, engaged in various acts
in the United States in connection with the BSA, such as
managing the company’s “electronic communications[,]” and
“writing a computer program that could ultimately be used to
inventory and track all the equipment Wye Oak was
refurbishing[,]” id. at *24. Based on these acts, the DDC
concluded that “Wye Oak’s [breach of contract] action” was
based upon “an act performed in the United States in
14
connection with a commercial activity of the foreign state
elsewhere” within the meaning of clause two of the commercial
activities exception. Id.The district court further concluded that the evidence
presented at trial established that Iraq had materially breached
the BSA. Id. at *27. As a remedy, the court awarded Wye Oak
approximately $88.9 million in compensation, including
approximately $20.5 million for damages actually incurred
plus $68.4 million for lost profits and prejudgment interest. Id.
at *54. The district court also specifically rejected Wye Oak’s
argument that it was entitled to “complementary damages”
under Iraqi law, because, in the court’s view, complementary
damages were similar to punitive damages, which the FSIA
forecloses. Id. at 52.
C
Iraq and Wye Oak now cross-appeal from the district
court’s post-trial judgment. As relevant here, Iraq argues that
the district court erred in concluding that the second clause of
the commercial activities exception applies, and that it was
therefore entitled to invoke immunity under the FSIA.
Appellants’ Br. 18, 24. Wye Oak insists that the district court
properly exercised jurisdiction over its claims under the FSIA
for several independent reasons. It argues that Iraq “waived
any immunity defense under 28 U.S.C. § 1605(a)(1) by failing
to preserve or press that defense at trial.” Appellee’s Br. 15. It
also contends that the Fourth Circuit’s jurisdictional ruling “is
law of the case,” id. at 20, and that, regardless, its claims satisfy
both the second and third clauses of the FSIA’s commercial
activities exception, id. at 25, 30.
This cross-appeal relates additionally to both parties’
objections to various aspects of the district court’s damages
calculation. See, e.g., Appellants’ Br. 16–17 (arguing that the
15
district court erred by awarding Wye Oak certain damages,
including costs Wye Oak did not incur, speculative lost profits,
and prejudgment interest on the lost profit award); Appellee’s
Br. 17 (challenging the district court’s conclusions concerning
prejudgment interest and complementary damages). Because
we conclude that the district court’s jurisdictional holding must
be reconsidered, we decline to address the parties’ damages
arguments.
III
The relative burdens of the parties with respect to
establishing the applicability (or not) of an exception to
sovereign immunity under the FSIA are well established, as is
the applicable standard of review. “[T]he FSIA begins with a
presumption of immunity, which the plaintiff bears the initial
burden to overcome by producing evidence that an exception
applies, . . . and once shown, the sovereign bears the ultimate
burden of persuasion to show the exception does not apply[.]”
Bell Helicopter Textron, Inc. v. Islamic Republic of Iran, 734
F.3d 1175, 1183 (D.C. Cir. 2013); see also Helmerich & Payne
Int’l Drilling Co. v. Bolivarian Republic of Venezuela, 743 F.
App’x 442, 449 (D.C. Cir. 2018). And when a district court
considers the sovereign immunity question and rules that it has
subject-matter jurisdiction over a legal claim brought in federal
court against a foreign sovereign, that denial of immunity is
reviewed de novo. See Odhiambo, 764 F.3d at 35.
IV
For the reasons explained below, we cannot accept the
contentions that Iraq has implicitly waived its sovereign
immunity or that the law of the case doctrine requires us to
accept the Fourth Circuit’s conclusions about the applicability
of the second clause of the FSIA’s commercial activities
exception. And because we find that the second clause is only
16
applicable when the act inside the United States upon which
the plaintiff’s claim is based is an act of the foreign sovereign,
we conclude that the district court’s invocation of subject-
matter jurisdiction over Wye Oak’s claims against Iraq must be
sustained, if at all, on the basis of another FSIA provision.
A
It is important to note, at the outset, that Wye Oak’s
argument that Iraq implicitly waived its immunity defense for
the purpose of FSIA section 1605(a)(1)—the first immunity-
related contention that Wye Oak makes on appeal—appears
nowhere in the post-trial briefs that Wye Oak filed in the
district court, and the trial judge did not address it. That
omission alone raises the specter of forfeiture. NetworkIP,
LLC v. F.C.C., 548 F.3d 116, 120 (D.C. Cir. 2008) (explaining
that arguments in favor of subject-matter jurisdiction can be
forfeited by inattention or deliberate choice).
But even if we consider the merits of Wye Oak’s implicit
waiver assertion, Wye Oak does not explain how that
argument—which is based upon Iraq’s decision to participate
in the DDC’s bench trial and its failure to engage on the
immunity issue in its trial briefs —squares with this court’s
holdings on the subject. Wye Oak cites Phoenix Consulting,
Inc v. Republic of Angola, 216 F.3d 36 (D.C. Cir. 2000), which
does admit the possibility that a foreign state’s “failure to assert
the immunity after consciously deciding to participate in the
litigation may constitute an implied waiver of immunity,” id.
at 39. But, here, Iraq did “assert its immunity under the FSIA
. . . in its responsive pleading.” Id. Moreover, and importantly,
we have never varied from the basic principle that “[a]n
implied waiver depends upon the foreign government’s having
at some time indicated its amenability to suit.” Princz v.
Federal Republic of Germany, 26 F.3d 1166, 1174 (D.C. Cir.
17
1994) (emphasis added); accord Creighton, Ltd., 181 F.3d at
122.
Far from demonstrating that it intended to waive sovereign
immunity, Iraq squarely raised an immunity defense in a
motion to dismiss that it timely filed at the first opportunity
after Wye Oak filed the complaint, and it then vigorously
litigated the EDVA’s denial of that motion, including pursuing
a separate appeal of that court’s no-immunity ruling. To be
sure, having lost that appeal, Iraq knowingly proceeded to
litigate the claims against it, and ultimately responded to Wye
Oak’s post-trial jurisdictional arguments with a tepid statement
about the court’s needing to make its own decision about
subject-matter and personal jurisdiction. But nothing in the
record establishes that Iraq ever disclaimed or withdrew its
long-preserved assertion of sovereign immunity. And, again,
we have consistently concluded that what matters when
discerning any type of waiver of sovereign immunity is the
foreign sovereign’s actual intent. See Foremost-McKesson,
905 F.2d at 444; see also Phoenix Consulting Inc., 216 F.3d at
39 (explaining that “if the sovereign makes a conscious
decision to take part in the litigation, then it must assert its
immunity under the FSIA either before or in its responsive
pleading” (internal quotation marks and citation omitted)).
Thus, we cannot conclude that Iraq’s trial participation and
post-trial argument, standing alone, “fit in th[e] selective
company” of implied waiver cases, Khochinsky v. Republic of
Poland, 1 F.4th 1, 9 (D.C. Cir. 2021), or otherwise indicates
Iraq’s intent to abandon the immunity that it has asserted from
the outset of this case, such that the FSIA’s section 1605(a)(1)
applies.
18
B
We also disagree with both of Wye Oak’s paired assertions
that (1) the law of the case doctrine requires us to accept the
Fourth Circuit’s holding that the second clause of the FSIA’s
commercial activities exception applies to abrogate Iraq’s
sovereign immunity, and, in any event, (2) the Fourth Circuit’s
analysis of the applicability of the second clause of section
1605(a)(2) to Wye Oak’s breach of contract claims is
substantively correct.
1
The “[l]aw-of-the-case doctrine refers to a family of rules
embodying the general concept that a court involved in later
phases of a lawsuit should not re-open questions decided . . . by
that court or a higher one in earlier phases.” Crocker v.
Piedmont Aviation, Inc. 49 F.3d 735, 739 (D.C. Cir. 1995)
(internal quotation marks omitted). Colloquially speaking, the
doctrine ensures that “the same issue presented a second time
in the same case in the same court should lead to the same
result.” Kimberlin v. Quinlan, 199 F.3d 496, 500 (D.C. Cir.
1999) (internal quotation marks and citation omitted); see also,
Musacchio v. United States, 577 U.S. 237, 244–45 (2016).
The law of the case doctrine is a principle that guides
courts in the exercise of their discretion, not a binding rule.
Thus, rigid adherence to rulings made at an earlier stage of a
case is not required under all circumstances, as other circuits
have recognized. See Murphy v. F.D.I.C., 208 F.3d 959, 966
(11th Cir. 2000); see also Pepper v. United States, 562 U.S.
476, 506 (2011) (explaining that the doctrine “directs a court’s
discretion, it does not limit the tribunal’s power”).
Furthermore, there are certain situations in which it is widely
accepted that courts should not apply the doctrine to preclude
reconsideration of a prior legal determination, even if the issue
19
was previously litigated in the context of that case. See, e.g.,
Crocker, 49 F.3d at 740 (explaining that “an intervening
change of law” will “support a departure from the previously
established law of the case”); see also Pepper, 562 U.S. at 506–
07 (authorizing setting aside the doctrine “if the court is
‘convinced that [the prior decision] is clearly erroneous and
would work a manifest injustice’” (internal citations omitted)).
That said, Wye Oak’s argument that the Fourth Circuit’s
ruling qualifies as law of the case falters at the threshold,
because under the circumstances presented here—and, in
particular, the distinct procedural postures in which the
immunity issue arises—this court and the Fourth Circuit panel
are actually addressing different questions.
The Fourth Circuit’s de novo review of the EDVA’s ruling
was a targeted assessment of the legal sufficiency of Wye
Oak’s complaint for the purpose of proceeding to discovery.
See Wye Oak Tech., Inc., 666 F.3d at 216 (concluding that Wye
Oak presented sufficient facts to support a reasonable inference
that its breach of contract claim is based upon an act performed
in the United States in connection with a commercial activity
of the foreign state elsewhere). At most, the panel held that the
allegations in Wye Oak’s complaint could plausibly support a
finding that the second clause of the FSIA’s commercial
activity exception applies such that sovereign immunity did not
preclude continued litigation of Wye Oak’s claims. Neither
party asked the district court or this court to revisit that
determination.
Instead, the full course of litigation commenced, and when
the trial court in the DDC undertook to address whether Iraq
was immune from judgment nearly a decade later, in order to
assess whether it had subject-matter jurisdiction to issue a post-
trial order against that foreign state, the DDC engaged in a
20
fundamentally distinct legal analysis and had a different
assortment of tools with which to make its determination.
Specifically, at that stage of the proceedings, the district court
had the benefit of a full adversarial hearing of the issues and a
developed factual record, and its task was to determine whether
any FSIA exception had been triggered such that Iraq’s
immunity from judgment was abrogated and a post-trial
judgment could be issued against it, in light of the established
facts of the case.
In other words, our consideration of the sovereign
immunity question, which stems from our review of the DDC’s
post-trial judgment, plainly transcends the Fourth Circuit’s
threshold conclusions about the plausible boundaries of Wye
Oak’s pleading for law of the case purposes. Cf. Sherley v.
Sebelius, 689 F.3d 776, 782 (D.C. Cir. 2012) (explaining that
the preliminary injunction exception to the law of the case
arose because “[a]n appellate court in a later phase of the
litigation with a fully developed record, full briefing and
argument, and fully developed consideration of the issue
[should] not bind itself to the time-pressured decision it made
earlier on a less adequate record”).
It is also quite significant that the core legal issue that we
are purportedly constrained to consider based on the Fourth
Circuit’s ruling itself pertains to the defense of immunity, and
therefore the court’s own subject-matter jurisdiction. Applying
the law of the case doctrine to constrain a court’s post-trial
assessment of its own jurisdiction based on an earlier
determination of that question is inherently incompatible with
the established ongoing duty of a court to determine its own
jurisdiction at every stage of the legal proceedings. Cf. Steel
Co. v. Citizens for a Better Env’t, 523 U.S. 83, 95 (1998)
(“[E]very federal appellate court has a special obligation to
satisfy itself not only of its own jurisdiction, but also that of the
21
lower courts in a cause under review[.]” (internal quotation
marks and citation omitted)); see also Henderson ex rel.
Henderson v. Shinseki, 562 U.S. 428, 434 (“[F]ederal courts
have an independent obligation to ensure that they do not
exceed the scope of their jurisdiction, and therefore they must
raise and decide jurisdictional questions that the parties either
overlook or elect not to press.”). Applying the law of the case
doctrine to constrain subsequent jurisdictional analyses is also
in tension with the federal rules that make clear that alleged
jurisdictional defects are not waivable, see Fed. R. Civ. P.
12(h)(1), and can be raised “at any time[,]” Fed. R. Civ. P.
12(h)(3); see also Union Pac. R. Co. v. Bhd. of Locomotive
Eng’rs & Trainmen Gen. Comm. of Adjustment, Cent. Region,
558 U.S. 67, 81 (2009) (explaining that arguments against
subject-matter jurisdiction can never be forfeited or waived).
Thus, it is hard to accept the suggestion that the law of the
case doctrine must be rigidly applied to calcify a threshold
determination that a court has subject-matter jurisdiction. Cf.
Bishop v. Smith, 760 F.3d 1070, 1085 (10th Cir. 2014)
(explaining that, while jurisdictional issues are not excluded
from the law of the case doctrine, issues such as subject-matter
jurisdiction may be particularly suitable for reconsideration,
even where the law of the case doctrine might otherwise
counsel against it). At the very least, there is considerable
support for the notion that, when the issue on review is
jurisdictional in nature, a doctrine that already incorporates a
degree of discretion and flexibility should give way as needed
to facilitate consideration of similar jurisdictional questions
that may arise at subsequent (but procedurally distinct) stages
of this case. See Am. Canoe Ass’n v. Murphy Farms, Inc., 326
F.3d 505, 515 (4th Cir. 2003) (“Law of the case, which is itself
a malleable doctrine meant to balance the interests of
correctness and finality, can likewise be calibrated to reflect
22
the increased priority placed on subject matter jurisdictional
issues generally[.]” (emphasis added)).
Sherley v. Sebelius, does not hold otherwise. 689 F.3d at
776. Wye Oak points to that opinion and argues that, where
the relevant facts are the same at both the pleading and the trial
stages of the proceedings, the posture of the case should not
matter. See Tr. of Oral Arg. 27–28. But this court in Sherley
adhered to the earlier preliminary injunction ruling in that case
primarily due to the earlier court’s fulsome consideration of the
legal issues based upon an already fully developed factual
record. 689 F.3d at 782. Not so here. Again, the Fourth Circuit
made its immunity determination in the context of a motion to
dismiss that tested the sufficiency of Wye Oak’s pleading,
which is substantively different than accelerated consideration
of the merits of a plaintiff’s claims under the preliminary
injunction standard.
In addition, as noted above, the scant and unproven factual
allegations in Wye Oak’s complaint were no match for the trial
record; the latter included extensive evidence that both sides
had presented about Iraq’s commercial activity, Wye Oak’s
various acts of performance, and Iraq’s alleged breach of the
parties’ agreement. Thus, when it came time for the final
analysis of whether there was subject-matter jurisdiction to
enter a post-trial judgment against this foreign state under the
FSIA framework, the DDC’s assessment was a far more
significant undertaking than the threshold inquiry into whether
the complaint’s allegations provide a sufficient basis for the
parties to proceed to litigate despite Iraq’s immunity defense.
And the latter is all that the Fourth Circuit addressed.
Therefore, we hold that we are not here being presented
with “the same issue” that the Fourth Circuit decided in a
23
manner that implicates the law of the case doctrine. Kimberlin,
199 F.3d at 500. 1
2
The district court below not only determined that law of
the case required it to find that the second clause of the FSIA’s
commercial activities exception was satisfied, it also found
affirmatively that the Fourth Circuit’s immunity conclusions
were correct, given the actions that Wye Oak took in the United
States to perform under the BSA. Wye Oak Tech., 2019 WL
4044046, at *23-*25. Wye Oak has reiterated that same
substantive argument on appeal. See Appellee’s Br. 25. And
it is one that we reject for the following reasons.
To start, we note that the district court’s factual findings
concerning Wye Oak’s conduct are reviewed for clear error.
Massachusetts v. Microsoft Corp., 373 F.3d 1199, 1207 (D.C.
Cir. 2004). We consider de novo the district court’s
interpretation and application of 28 U.S.C. § 1605(a)(2).
Odhiambo, 764 F.3d at 35.
There is no error, much less clear error, with respect to the
district court’s determination that “Wye Oak performed work
1
In their briefs, the parties spill a considerable amount of ink
debating whether, assuming the law of the case doctrine is
applicable, one or more of the established exceptions to that doctrine
applies. One such exception is where the previous decision was
“clearly erroneous and would work a manifest injustice.” Crocker,
49 F.3d at 740. We note here that our disagreement with the Fourth
Circuit’s substantive determination about the applicability of the
second prong of the FSIA’s commercial activity exception as a
matter of law—which is detailed in Part 2 of this section—makes it
quite likely that, even if the law of the case doctrine were applicable
to the instant circumstances, the “clearly erroneous” exception to the
doctrine would relieve us of the constraints that the doctrine imposes.
24
in the United States” in connection with the BSA such as
“writing a computer program[,]” “maintaining e-mail
communications[,]” and performing “administrative
activities.” Wye Oak Tech., 2019 WL 4044046, at *24.
However, that court’s legal analysis is mistaken, because the
second clause of the FSIA—which provides that foreign states
are not immune when the legal action is “based . . . upon an act
performed in the United States in connection with a
commercial activity of the foreign state elsewhere,”
§ 1605(a)(2)—requires that the act at issue be one that the
foreign state has performed in the United States in connection
with its commercial activity elsewhere.
The first clue that this is the correct interpretation of the
commercial activities exception’s second clause is the
language and structure of that provision, taken as a whole.
Section 1605(a)(2) is commonly considered with reference to
its isolated clauses, but all three appear in a single subsection.
See 28 U.S.C. § 1605(a)(2). And the first and third clauses
have long been interpreted to relate only to the conduct of the
foreign state—i.e., it is the foreign state that has to have
engaged in activity that took place in the United States, or that
has to have engaged in acts elsewhere that have an effect inside
the United States. See Odhiambo, 764 F.3d at 36 (explaining
that under clause one of the commercial activities exception,
the plaintiff's claim must be “based upon some commercial
activity by” the foreign state); Cruise Connections Charter
Mgmt. 1, LP v. Att’y Gen. of Canada, 600 F.3d 661, 662 (D.C.
Cir. 2010) (“[F]oreign governments engaging in commercial
activities outside the United States enjoy immunity from suit in
U.S. courts unless those activities have a direct effect in the
United States.”); see also Atlantica Holdings v. Sovereign
Wealth Fund Samruk-Kazyna JSC, 813 F.3d 98, 112 (2d Cir.
2016) (explaining that the “focus” of the direct effects clause
of the commercial activities exception is “the activity of the
25
sovereign” and if such activity has a direct effect in the United
States).
Consistent with the purposes of section 1605(a)(2), this
court has previously determined that if the foreign state carries
on commercial activity inside the United States (clause one), or
if it engages in an act elsewhere in connection with its
commercial activity elsewhere and that act has a direct effect
inside the United States (clause three), there is no immunity for
legal actions based upon that foreign state’s domestic
commercial activity or its impactful foreign act. See, e.g.,
Odhiambo, 764 F.3d at 36–38. And our careful and considered
application of the first and third clauses to link abrogation of
sovereign immunity to the fact and implications of the foreign
state’s own activities renders it entirely anomalous for us to
now read clause two to dispense with immunity if just anyone
performs an act in the United States in connection with the
foreign state’s commercial activity.
The view that the second clause of the commercial
activities exception is triggered only by acts of the foreign state
is not an unusual position. Indeed, an established treatise that
Wye Oak relies on specifically states that “the [commercial
activities] exception’s second clause provides for jurisdiction
where a defendant qualifying as a ‘foreign state’ under the
statute engages in acts in the United States in connection with
a commercial activity abroad.” Ernesto J. Sanchez, The
Foreign Sovereign Immunities Act Deskbook 137 (2013)
(emphasis added). So, too, have this court and others routinely
focused on whether the defendant (the foreign state) has
performed acts inside the United States in connection with its
commercial activity elsewhere when undertaking the second-
clause commercial activities exception inquiry. See, e.g.,
Kensington Int’l Ltd. v. Itoua, 505 F.3d 147, 157 (2d Cir. 2007)
(holding that the appellant’s claims did not fall under the
26
second clause of the commercial activities exceptions because
it failed to allege any acts performed by the foreign defendant
in the United States as the basis of its complaint); Can-Am Int’l,
LLC v. Republic of Trinidad & Tobago, 169 F. App’x 396, 406
(5th Cir. 2006) (stating that the acts of a foreign sovereign in
the United States in connection with foreign commercial
activity may give rise to subject-matter jurisdiction); Gilson v.
Republic of Ireland, 682 F.2d 1022, 1027 (D.C. Cir. 1982),
abrogated on other grounds by Saudi Arabia v. Nelson, 507
U.S. 349 (1993), (concluding the court had jurisdiction under
the second clause of the commercial activities exception
because Ireland performed an act in the United States by
enticing Gilson to enter into a commercial contract); see also
Termorio S.A. E.S.P. v. Electrificadora Del Atlantico S.A.
E.S.P., 421 F. Supp. 2d 87 (D.D.C. 2006), judgment aff'd, 487
F.3d 928 (D.C. Cir. 2007) (finding no jurisdiction over a breach
of contract claim because no element of the claim was based
on any of the foreign defendant’s commercial activities in
United States).
To the extent that one might think that the second clause
is ambiguous with respect to whose act counts because it lacks
a qualifier that expressly links the referenced “act” to “the
foreign state,” the legislative history of section 1605(a)(2)
leaves no doubt. Prior to the passage of the FSIA, the House
Judiciary Committee produced a house report that analyzed
each proposed section of the FSIA and explained the situations
in which a foreign state would not be immune. See H.R. Rep.
No. 94-1487, at 18–19 (1976). Significantly for present
purposes, the Committee stated plainly that the second clause
of the commercial activities exception “looks to conduct of the
foreign state in the United States.” Id. at 19 (emphasis added).
And the Senate Judiciary Committee echoed that exact same
sentiment. See S. Rep. No. 94-1310, at 12 (1976) (stating that
the “act performed in the United States in connection with a
27
commercial activity of the foreign state elsewhere, looks to
conduct of the foreign state in the United States[.]”).
For all these reasons, we disagree with the view of the
district court (and, for that matter, the Fourth Circuit) that the
second clause of the commercial activities exception can be
satisfied for FSIA purposes based on the various acts that the
plaintiff (Wye Oak) took inside the United States to perform
under the BSA. Again, we have no quarrel with the district
court’s finding that, while inside the United States, Wye Oak
“wr[ote] a computer program that could ultimately be used to
inventory and track all the equipment Wye Oak refurbish[ed]”
pursuant to the BSA, and that it also handled electronic
communications about the performance of the company’s
contractual obligations “to ensure Wye Oak’s leadership was
aware of all messages they received.” Wye Oak Tech., 2019
WL 4044046, at *24. We only hold that, regardless, the
necessary “act performed” that implicates the second clause of
section 1605(a)(2) is an act of the foreign sovereign; therefore,
the district court’s application of that provision to support its
jurisdiction based on Wye Oak’s actions cannot be sustained. 2
2
The “based upon” language that appears in section 1605(a)(2)
relates to all three clauses of that section, and it is, incidentally, yet
another reason why Wye Oak’s clause two argument fails. The
Supreme Court has made clear that, to determine what an action is
“based upon” for FSIA purposes, the court must “zero[] in on the
core of the . . . suit” and assess whether “the particular conduct
constitutes the gravamen of the suit.” OBB Personenverkehr AG v.
Sachs, 577 U.S. 27, 35 (2015). And while neither the district court
nor the Fourth Circuit discussed this responsibility, it is reasonably
obvious that the gravamen of the Wye Oak’s breach of contract suit
is not any act of performance that Wye Oak undertook pursuant to
the BSA. Rather, it is Iraq’s nonperformance of its promised
obligations, including its failure to pay for the services Wye Oak
rendered, and that nonperformance occurred in Iraq, not in the United
28
C
Our conclusion that the second clause of the FSIA’s
commercial activities exception is inapplicable does not mean
that Iraq must be found to have retained its sovereign immunity
with respect to Wye Oak’s breach of contract claims—at least
not yet—because Wye Oak points to one other potential basis
for concluding that the district court has subject-matter
jurisdiction to enter its post-trial judgment. The third clause of
the commercial activities exception abrogates a foreign state’s
immunity if the legal action “is based . . . upon an act outside
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). And there is no dispute that Wye Oak’s lawsuit
relates to Iraq’s commercial activity and is based upon an act
of Iraq that took place outside United States’ territory: its
failure to pay the invoices. Thus, the first two requirements for
application of clause three of the FSIA’s commercial activities
exception are satisfied. See Ivanenko v. Yanukovich, 995 F.3d
232, 238 (D.C. Cir. 2021).
Wye Oak now maintains that the trial record also
established the only other requirement for finding that clause
States. See Zedan, 849 F.2d at 1514 (explaining that the plaintiff’s
suit was not based “upon an act performed in the United States,” but
upon a contract entered into in Saudi Arabia, which was breached);
Petersen Energía Inversora S.A.U. v. Argentine Republic, 895 F.3d
194, 207 (2d Cir. 2018) (holding in a breach-of-contract case that the
plaintiff’s “lawsuit [was] ‘based on’ Argentina’s breach of a
commercial obligation”); Devengoechea v. Bolivarian Republic of
Venezuela, 889 F.3d 1213, 1223 (11th Cir. 2018) (determining that
“[t]he conduct that actually injured [plaintiff]—and therefore that
makes up the gravamen of [his] lawsuit—is Venezuela’s failure to
return [certain artwork] to [him]” in breach of a bailment agreement).
29
three of the commercial activities exception applies, because
Iraq’s nonpayment had direct effects inside the United States.
And from what we have seen so far, given the law in this area,
we find that Wye Oak’s clause-three argument is at least
plausible. See Weltover, 504 U.S. at 607; see also EIG Energy
Fund XIV, L.P. v. Petroleo Brasileiro, S.A., 894 F.3d 339, 345
(D.C. Cir. 2018).
In particular, as examples of direct effects in the United
States that flowed directly from the breach, Wye Oak points to
the fact that Iraq was required to submit payment for Wye
Oak’s services to a bank in the United States, and that Iraq’s
nonpayment resulted in the cut-off of a flow of capital and
personnel between the United States and Iraq. Wye Oak also
argues that Iraq specifically targeted it (a Pennsylvania
company) to engage in these services because Iraq knew that,
when the bill was not paid, that loss of revenue would be felt
in the United States. More generally, Wye Oak further
maintains that Iraq’s failure to make good on its payment
obligations directly affected military and diplomatic operations
in the United States.
These factual contentions are not uncontested; indeed, Iraq
vigorously rejects Wye Oak’s allegations in this regard. More
importantly, however, Iraq asserts that the DDC did not make
the “factual findings necessary for this [c]ourt to rule that any
of Wye Oak’s claimed consequences satisfy clause three, nor
could it have on the record presented.” Appellants’ Reply Br.
14. And we also observe that there is no indication in the
record that the district court specifically considered the
disputed factual allegations about the impact of Iraq’s failure
to pay or any other facts that allegedly support application of
the third clause of the commercial activities exception.
“Factfinding is the basic responsibility of district courts,
30
rather than appellate courts,” Pullman-Standard v. Swint, 456
U.S. 273, 291–92 (1982) (internal quotations and citation
omitted), and in this regard, we are fully cognizant of our
limitations, see id. (“[T]he Court of Appeals should not
. . . resolve[ ] in the first instance [a] factual dispute which had
not been considered by the District Court.”). The district court
is in a much better position than we are to analyze Wye Oak’s
direct effects arguments in the first instance, and to engage in
additional fact-finding, as may be necessary, if the existing
record is unclear. Therefore, the current judgment will be
vacated, and we are remanding this matter back to the district
court for this purpose.
V
For the reasons explained above, we cannot accept Wye
Oak’s argument that Iraq waived its sovereign immunity, nor
do we agree with the Fourth Circuit’s conclusion that the
second clause of the FSIA’s commercial activities exception
applies based on the various activities that Wye Oak carried out
in the United States in connection with its contract with Iraq.
As for Wye Oak’s alternative argument that the district court
had subject-matter jurisdiction over its breach of contract
claims because the third clause of the commercial activities
exception applies to the facts established during the bench trial,
we remand to the district court to make that assessment in the
first instance. 3
So ordered.
3
We do not opine on the sufficiency of the existing record to support
a determination that the district court has jurisdiction to enter the
judgment here on the basis of clause three of the commercial
activities exception, nor do we comment on the need to further
develop the record to permit the district court to assess its own
jurisdiction.