Transcor Astra Group S.A. v. Petroleo Brasileiro S.A.-Petrobras

Case: 10-20266 Document: 00511371586 Page: 1 Date Filed: 02/03/2011
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit
FILED
February 3, 2011
No. 10-20266 Lyle W. Cayce
Clerk
TRANSCOR ASTRA GROUP S.A.,
Plaintiff - Appellee
v.
PETROLEO BRASILEIRO S.A.-PETROBRAS,
Defendant - Appellant
Appeal from the United States District Court
for the Southern District of Texas
USDC No. 4:08-CV-2072
Before JOLLY, HIGGINBOTHAM, and SMITH, Circuit Judges.
PER CURIAM:*
This interlocutory appeal arises from the dissolution of a joint venture
between subsidiaries of two foreign parent corporations, Plaintiff-Appellee
Transcor Astra Group S.A. (“Transcor”) and Defendant-Appellant Petrobras
Brasileiro S.A. – Petrobras (“Petrobras Brazil”). We are asked to review the
district court’s denial of Petrobras Brazil’s motion to dismiss for lack of subject
matter jurisdiction. The district court held that jurisdiction extends to this suit
under the “commercial activity” exception to the Foreign Sovereign Immunities
*
Pursuant to 5TH CIR . R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH CIR .
R. 47.5.4.
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Act. After study of the briefs, review of the relevant portions of the record, and
thorough oral arguments, we have concluded that Transcor has alleged facts
sufficient to show that its claim is based upon commercial activity carried out by
Petrobras Brazil in the United States, or elsewhere having a direct effect in this
country, and accordingly we affirm the order of the district court.
I.
Transcor is a Belgian corporation with its principal place of business in
Belgium. Petrobras Brazil is a Brazilian corporation with its principal place of
business in Brazil. From 2006 to 2008, Transcor’s U.S. subsidiary, Astra Oil
Trading NV (“Astra Oil”), and Petrobras Brazil’s U.S. subsidiary, Petrobras
America, Inc. (“Petrobras America”), co-owned and operated an oil refinery in
Pasadena, Texas (“Pasadena Refining”) and the trading partnership that
supplied Pasadena Refining with its raw materials (“PRSI Trading”). Pursuant
to a contract concluded in March 2006, Astra Oil agreed to sell 50% of its interest
in Pasadena Refining to Petrobras Brazil, and the parties agreed to form PRSI
Trading to provide the raw materials and market the refined products.
Petrobras Brazil later assigned its right to purchase the 50% stake in Pasadena
Refining to Petrobras America.
Citing disagreements about their strategic plans for the venture, Petrobras
America and Astra Oil sought to dissolve entirely their business relationship in
2007. These disagreements eventually led to discussions about Petrobras
America buying out Astra Oil’s 50% interests in the refinery and the trading
partnership. Those discussions resulted in a two-page agreement, signed by
Transcor and Petrobras Brazil on December 5, 2007 (the “letter agreement”),
which was intended to govern the terms of the buyout. The letter agreement
provided that Petrobras Brazil would purchase Astra Oil’s interest in Pasadena
Refining for $700 million; the parties would liquidate PRSI Trading; and
Petrobras Brazil “would . . . be responsible for (and would reimburse Astra for)
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all capital expenditures or other contributions incurred after October 1st, 2007
by Astra or, any affiliate, to” the joint venture. The letter agreement stated that
it “intends to fix the agreement in principle regarding the main items of the
transaction. Based on this agreement in principle, both parties will negotiate,
in good faith and as soon as possible, the text of a definitive agreement.” 1
The district court found that after signing the letter agreement, Petrobras
Brazil and Transcor began to negotiate a final agreement and to draft the closing
documents. Petrobras Brazil contests this finding and argues that Petrobras
Brazil and Transcor were not parties to the 2008 negotiations; instead, Petrobras
Brazil argues, Petrobras America and Astra Oil negotiated independently of
their parent corporations. Undisputed is the fact that in 2008 Petrobras Brazil
wired approximately $202 million to Petrobras America, money that was then
used to fund Pasadena Refining and PRSI Trading. The wire transfer was made
in response to five requests from a Petrobras America employee, who stated that
the money was necessary to fund the joint venture. In a separate arbitration
proceeding, a Petrobras Brazil employee testified that in wiring these funds for
the joint venture, Petrobras Brazil was “just following in good faith” what was
written in the letter agreement.
Ultimately, the deal never closed, and Transcor now claims that the letter
agreement was an enforceable contract that Petrobras Brazil breached by failing
to conclude the buyout. Before the magistrate judge addressed the merits of this
complaint, Petrobras Brazil moved to dismiss for lack of jurisdiction and
standing. It contended, in relevant part, that because it is partly controlled by
the Brazilian government, it is immune from suit in the United States under the
Foreign Sovereign Immunities Act (“FSIA”). Transcor responded that Petrobras
Brazil is subject to suit under a statutory exception to the FSIA because it
1
The letter also contains an introductory sentence stating that what follows is “a
coordinated version of our agreements.”
3
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engaged in commercial—as opposed to sovereign—activity, both in the United
States and elsewhere having a direct effect in the United States.
The district court ruled that Transcor met its burden of alleging “some
facts” that Petrobras Brazil carried on commercial activity having substantial
contact with the United States. The court therefore denied the motion to dismiss
for lack of subject matter jurisdiction. Under the collateral-order doctrine, we
have jurisdiction over Petrobras Brazil’s appeal of the district court’s order.
Stena Rederi AB v. Comision de Contratos del Comite, 923 F.2d 380, 385 (5th
Cir. 1991).
II.
The Foreign Sovereign Immunities Act2 “provides the sole basis for
obtaining jurisdiction over a foreign state in the courts of this country.”
Argentine Republic v. Amerada Hess Shipping Corp., 488 U.S. 428, 443 (1989).
We review the district court’s application of the FSIA de novo. Pere v. Nuovo
Pignone, Inc., 150 F.3d 477, 480 (5th Cir. 1998). To the extent the district court
has made “jurisdictional findings of fact,” they are reviewed for clear error. Kelly
v. Syria Shell Petroleum Dev. B.V., 213 F.3d 841, 845 (5th Cir. 2000) (quoting
Robinson v. TCI/US W. Commc’ns Inc., 117 F.3d 900, 904 (5th Cir. 1997)).
“Under the FSIA, a foreign state is presumptively immune from
jurisdiction of the United States courts; unless a specified exception applies, a
federal court lacks subject-matter jurisdiction over a claim against a foreign
state.” UNC Lear Servs., Inc. v. Kingdom of Saudi Arabia, 581 F.3d 210, 215
(5th Cir. 2009), cert. denied, 130 S. Ct. 1689, and cert. denied, 130 S. Ct. 1713(2010) (internal quotation marks and citations omitted). For purposes of the
FSIA, a “foreign state” includes “an agency or instrumentality of a foreign state.”
Bd. of Regents of Univ. of Texas System v. Nippon Tel. & Tel. Corp., 478 F.3d
2The FSIA is codified at Title 28, United States Code, §§ 1330, 1332, 1391(f), 1441(d),
and 1602–1611.
4
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274, 278 (5th Cir. 2007) (quoting 28 U.S.C. § 1603(b)). It is undisputed that
Petrobras Brazil is an agency or instrumentality of Brazil.
The issue presented in this appeal is whether the commercial activity
exception to the FSIA applies in this case. Under that exception, “a foreign state
shall not be immune from the jurisdiction of United States courts in any case ‘in
which the action is based upon a commercial activity carried on in the United
States by the foreign state.’” Saudi Arabia v. Nelson, 507 U.S. 349, 356 (1993)
(quoting 28 U.S.C. § 1605(a)(2)).3 “Commercial activity” is defined as “either a
regular course of commercial conduct or a particular commercial transaction or
act. The commercial character of an activity shall be determined by reference
to the nature of the course of conduct or particular transaction or act, rather
than by reference to its purpose.” 28 U.S.C. § 1603(d). The commercial activity
must have “substantial contact with the United States.” Id. § 1603(e). Transcor
bears the burden to “produce some facts to show that the commercial activity
exception to immunity applies,” but Petrobras Brazil “retains the ultimate
burden of proof on immunity.” See Arriba Ltd. v. Petroleos Mexicanos, 962 F.2d
528, 533 (5th Cir. 1992).
We hold that the commercial activity exception to the FSIA applies in this
case because Transcor’s claim is—at least in part—“based upon” Petrobras
Brazil’s commercial activities in the United States. For purposes of the FSIA,
3
The commercial activity exception provides specifically that a foreign state or
instrumentality thereof may be subject to suit in the United States where
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.
28 U.S.C. § 1605(a)(2).
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a claim is based upon “those elements of [the] claim that, if proven, would entitle
a plaintiff to relief under his theory of the case.” Nelson, 507 U.S. at 357.
Transcor’s breach-of-contract claim requires it to establish: “(1) the existence of
a valid contract; (2) performance or tendered performance by the plaintiff; (3)
breach of the contract by the defendant; and (4) damages sustained by the
plaintiff as a result of the breach.” Mullins v. TestAmerica, Inc., 564 F.3d 386,
418 (5th Cir. 2009) (internal quotation marks and citations omitted). The FSIA
jurisdictional inquiry requires us to “isolate those specific acts of the named
defendant that form the basis of the plaintiff’s suit.” de Sanchez v. Banco
Central De Nicar., 770 F.2d 1385, 1391 (5th Cir. 1985). We conclude that the
following commercial activities having substantial contact with the United
States are attributable to Petrobras Brazil and form the basis for at least one
element of Transcor’s claim:
(1) the $202 million payment from Petrobras Brazil to Petrobras America,
which evidences the existence of a valid contract (i.e., the letter agreement)
between the parties and partial performance thereunder; and
(2) the negotiations in the United States conducted by Michael Ditchfield,
who was transferred by Petrobras Brazil from its Argentinian subsidiary to
Petrobras America after the signing of the letter agreement and who, by his own
admission, worked closely with lawyers for Petrobras Brazil and with Astra Oil’s
CEO to negotiate a buyout agreement in accordance with the letter agreement.
We note also that the district court was not clearly erroneous in
determining that buyout negotiations took place in the United States concerning
ownership of a U.S. corporate entity pursuant to the terms of the letter
agreement. In the light of this observation, we further conclude that Petrobras
Brazil’s letter agreement with Transcor “cause[d] a direct effect” in the United
States, for purposes of jurisdiction under the FSIA, in the sense that it prompted
these further negotiations.
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Because these activities are sufficient to sustain Transcor’s burden of
producing “some facts” to show that its claim is based upon Petrobras Brazil’s
commercial activity either carried out in the United States or having a direct
effect here, we need not proceed any further.4 We hold that the district court has
subject matter jurisdiction over this suit under the commercial activity exception
to the Foreign Sovereign Immunities Act, and we therefore AFFIRM the district
court’s order denying the motion to dismiss.
AFFIRMED.
4
Specifically, we find it unnecessary to address the parties’ additional arguments as
to whether Petrobras Brazil’s intervention in a related arbitration proceeding after the filing
of the instant complaint may confer jurisdiction under the commercial activity exception, and
whether the “direct effects” version of the exception was satisfied when Petrobras Brazil failed
to close the buyout and remit payment in 2008.
7