Wye Oak Technology, Inc. v. Republic of Iraq

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
WYE OAK TECHNOLOGY, INC.,
Plaintiff,
V.
Case No. 1:10-cv-1182-RCL
REPUBLIC OF IRAQ and MINISTRY OF
DEFENSE OF THE REPUBLIC OF IRAQ,
Defendants.
MEMORANDUM OPINION
This case concerns plaintiff Wye Technology, Inc. 's ("Wye Oak") nearly two decades-long
breach of contract dispute with defendants Republic of Iraq ("Iraq") and the Iraqi Ministry of
Defense ("MoD") pursuant to the Foreign Sovereign Immunities Act ("FSIA"), 28 U.S.C. § 1602et seq. Wye Oak's effort to collect its payment has brought the company to two U.S. district courts
and two U.S. circuit courts.
Following a bench trial in 2018, this Court entered judgment for Wye Oak and awarded
damages. Following an appeal, the Circuit vacated the judgment and remanded the case to this
Court to determine whether subject-matter jurisdiction exists based on the third clause of28 U.S.C.
§ 1605(a)(2), which abrogates sovereign immunity when a foreign state engages in 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."
After considering the record, the relevant filings, the applicable law, and the parties'
briefing, the Court once again concludes that it properly maintains subject-matter jurisdiction over
the case and will ENTER JUDGMENT for Wye Oak.
1
I. BACKGROUND
A. Factual Background
The factual background of this case has been described in detail in previous opinions from
this Court and the Circuit. See Wye Oak Tech. v. Republic of Iraq, No. 10-cv-1182 (RCL), 2019
WL 4044046, *1 (D.D.C. Aug. 27, 2019) ("Wye Oak I"); Wye Oak Tech. v. Republic of Iraq, 24
F.4th 686, 704 (D.C. Cir. 2022) ("Wye Oak II"). The Court includes below an overview of the
most salient relevant facts and procedural history for consideration of the case on remand.
After the fall of Saddam Hussein's regime, Iraq possessed large stocks of military
equipment, much of which consisted of Soviet-era weaponry. Wye Oak I, 2019 WL 4044046, at
*3. U.S.-led coalition forces, working closely with the newly constituted transitional government
oflraq, endeavored to rebuild Iraq's armed forces. Wye Oak II, 24 F.4th at 692. The Iraqi Military
Equipment Recovery ProjeQt ("IMERP") was developed to carry out this objective. See Wye Oak
I, 2019 WL 4044046, at *3--4. According to retired General David Petraeus, then-leader of the
group overseeing the rebuilding effort, IMERP "was a centerpiece" "to the establishment of a
mechanized and armored division for Iraq[.]" Petraeus Dep., ECF No. 418-1, at 33:25-34:2. In
particular, coalition forces and the Iraqi transitional government understood the critical importance
of equipping an armored brigade to ensure the safety and security of the January 2005
parliamentary election. See Trial Tr. 12/17/18 PM at 35:21-37:5 (Testimony of Brigadier General
Howard Clements); Trial Tr. 12/19/18 AM 25:9-26:14 (Testimony of Major Kevin Todd Neal);
Pl.'s Ex. 16 (Joe Kane, Iraqi Mech Brigade Moves Toward Initial Ops, THE ADVISOR, Oct. 9,
2004) at 1, 8. Successful completion of the election was a key milestone for Iraqi security forces'
self-sufficiency. See Petraeus Dep. 20:19-21:2, 28:19-30:3. And Iraqi security forces taking on
2
greater responsibility was a necessary precondition for coalition forces' expeditious withdrawal
from Iraq. See id.The U.S. military viewed Pennsylvania-based private defense contractor Wye Oak and its
chief executive officer, Dale Stoffel, as particularly well-equipped to carry out the IMERP, given
Dale Stoffel's extensive experience with Soviet military equipment and his global contacts. Wye
Oak I, 2019 WL 4044046, at *3-4. After reviewing Wye Oak's pitch, the MoD hired Wye Oak t9
complete a variety of tasks, including "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." Wye Oak II, 24 F.4th at 692. In August 2004, the
MoD and Wye Oak entered into a written Broker Services Agreement ("BSA"). Id. The BSA
outlined Wye Oak's broker responsibilities and period of performance. Id. The BSA also included
some of the details of Wye Oak's compensation, establishing that MoD would pay Wye Oak
according to pro forma invoices. Id.
After executing the BSA, Wye Oak began performing both in Iraq and in the United States.
Id. Wye Oak staff present in Iraq started "identifying, assessing, and refurbishing military
equipment on the ground in that country." Id. Wye Oak staff in the United States-including David
Stoffel, Dale Stoffel' s brother and head of the company's information technology department-
began purchasing computer equipment and software and overseeing all electronic
communications. Id. Around the same time, Wye Oak granted Lebanese businessman Raymond
Zayna a limited power of attorney to arrange financing and bank guarantees on behalf of Wye Oak
for its contract with MoD. Wye Oak I, 2019 WL 4044046, at *8-9. 1
1
Based on the evidence presented at trial, this Court concluded that "it is more likely than not that Zayna was inserted
at the behest of the MoD" but that "[n]either side offer[ed] definitive evidence on this point." See Wye Oak I, 2019
WL 4044046, at *9. -
3
In October 2004, Wye Oak submitted three pro forma invoices to the MoD, totaling
$24,714,697.15. Wye Oak II, 24 F.4th at 692. Each invoice instructed the MoD to remit payment
to Wye Oak "at the Baghdad Iraq office of [the MoD]." Pl. 's Ex. 18 (Invoices). It is undisputed
that the MoD never paid these invoices. Wye Oak II, 24 F.4th at 692.
In the weeks following Wye Oak's submission of the invoices, Wye Oak representatives
met with American and Iraqi officials at least twice to discuss the still-outstanding invoices. Id. at
693. Eventually, the MoD remitted payment on the three invoices to Zayna, even though Wye Oak
had not expressly or impliedly authorized that Zayna accept payment on its behalf. Wye Oak I,
2019 WL 4044046, at *13-14. At the same time, Wye Oak contacted and met with various U.S.
legislative and military figures in the United States-including U.S. senators and the office of
then-Secretary of Defense Donald Rumsfeld-to notify them that the MoD's nonpayment had
significantly impacted its mission. Id. at *15 (citing Trial Tr. 12/18/18 AM 59:17---60:20
(Testimony of David Stoffel)).
In addition to leveraging contacts in Washington, Wye Oak attempted to recover the funds
from Zayna. On November 25, 2004, Dale Stoffel contacted Zayna by email. Wye Oak I, 2019 WL
4044046, at *15. In that email, Dale Stoffel demanded that Zayna transfer money owed to Wye
Oak to Wye Oak's bank account at National City Bank of Pennsylvania in Monongahela,
Pennsylvania. See PI. 's Ex. 31. Zayna declined and instead urged Dale Stoffel to travel from the
United States to Iraq to sort out the payment details in person. 2 See Pl. 's Ex. 33.
2
Wye Oak maintains a consistent theory throughout its papers that Zayna was Iraq's agent and thus any actions or
statements by or directed to Zayna maybe attributed as made by or directed to Iraq. See, e.g., Pl.'s Reply at 10 ("Zayna
Was Iraq's Man, And Dale's Instruction To Zayna Was An Instruction To Iraq"). Wye Oak supports this position with
a handful of citations to Iraqi agency law, see, e.g., id. at 13 n.4, as well as a line from this Court's previous opinion
that "Zayna was MoD's agent[,)" see id. at 5 (citing Wye Oak I, 2019 WL 4044046, at *17). Ultimately, this Court
need not decide the precise legal contours of the agency relationship-which Iraq vigorously contests, see Defs.'
PFFCL at 38-43-because no conclusion herein turns on the existence of any agency relationship. Additionally, this
Court's previous statement regarding agency was made in the context of ruling that certain statements by Zayna were
admissible as a statement by a party opponent. This evidentiary ruling should not have preclusive effect on the agency
4
On December 5, 2004, American officials and MoD representatives met again and the MoD
again agreed to pay Wye Oak. Trial Tr. 12/17/18 PM 18:10-22:25 (Clements); Trial Tr. 12/20/18
AM 33: 11-34:25, 35:9-25, 36: 14-37: 1 (Testimony of Lieutenant Colonel Patrick Marr); Trial Tr.
12/20/18 PM 72:17-74:9 (Testimony of Professor Nicholas Beadle). Three days later, Dale Stoffel
was on his way to Baghdad to receive the payment when he was shot multiple times and killed.
Wye Oak I, 2019 WL 4044046, at * 17. After Dale Stoffel' s death, Wye Oak withdrew all of its
U.S. personnel from Iraq. Wye Oak II, 24 F.4th at 693. through local contractors, Wye Oak
coordinated the production of operational armored vehicles for Iraq's January 2005 parliamentary
election. Id. An Iraqi general declared that the election would be secure thanks to Wye Oak's work
refurbishing and equipping the military. See Wye Oak I, 2019 WL 4044046, at *19 (citing Pl.'s
Ex. 47 (Andrew Hughan, Iraqi Mechanized Brigade Assumes Mission, THE ADVISOR, Jan. 15,
2005) at 3).
Eventually, the lack of payment caused Wye Oak to cease operations in Iraq sometime
after the January 2005 election. Wye Oak II, 24 F.4th at 693.
B. ProceduralBackground
Wye Oak first filed its breach of contract complaint against the MoD and Iraq in the Eastern
District of Virginia. See Wye Oak Tech., Inc. v. Republic of Iraq, No. 09-cv-793, 2010 WL
2613323, at *1 (E.D. Va. June 29, 2010). Iraq moved to dismiss, claiming sovereign immunity.
Wye Oak II, 24 F.4th at 693. In 2010, the Eastern District of Virginia determined that venue was
improper and transferred the case to this Court. See Wye Oak Tech., 2010 WL 2613323, at *11. In
the same opinion, the Eastern District of Virginia found that all three clauses of the FSIA's
question in a different context. Cf Secs. Ind. Ass'n v. Bd. of Govs., 900 F.2d 360,364 (D.C. Cir. 1990) ("Courts are
admonished not to permit "[u]nreflective invocation" of issue preclusion to gloss over serious questions of fairness
and the scope of prior litigation") (quoting Montana v. United States, 440 U.S. 147, 162-64 & n.11 (1979)).
5
commercial activities exception applied and thus the court had subject-matter jurisdiction. Id. at
*8-9. Iraq appealed that finding to the Fourth Circuit and this Court stayed the current case. Wye
Oak II, 24 F.4th at 694. The Fourth Circuit affirmed the Eastern District of Virginia's jurisdictional
finding, holding that the actions Wye Oak alleged to have taken inside of the United States meant
that "Wye Oak ha[ d] 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 28 U.S.C. § 1605(a). See Wye Oak Tech., Inc. v. Republic
ofIraq, 666 F.3d 205, 216-17 (4th Cir. 2011).
This Court lifted the stay following the Fourth Circuit's decision and the lawsuit proceeded,
culminating in an eight-day bench trial in December 2018. Wye Oak II, 24 F.4th at 694. In August
2019, this Court issued its findings of fact and conclusions of law, holding both that the Fourth
Circuit's decision with respect to clause two was binding on this Court based on the "law of the
case" doctrine and that the facts supported an independent determination of clause two's
applicability. Wye Oak I, 2019 WL 4044046, at *23-24. After determining that the exception to
sovereign immunity applied, this Court examined the evidence and concluded that MoD had
breached its contract with Wye Oak. 3 Id. at *27-28. Accordingly, this Court entered judgment for
Wye Oak and against the MoD and Iraq. J., ECF No. 466. 4 The Court also ordered the defendants
to pay Wye Oak's costs, including reasonable attorney fees and expenses. Mem. Order, ECF No.
3
The Court also concluded that "MoD is not separate from the Republic of Iraq-MoD and Iraq are legally one and
the same." Wye Oak I, 2019 WL 4044046, at *19.
4
The Court originally entered judgment against theMoD and Iraq in the amount of"$120,338,393.71, plus $10,909.11
per day for each day after October 9, 2019." J., ECF No. 466. Following various dueling motions and additional
considerations, the Court later amended the judgment to clarify that the MoD and Iraq were jointly and severally liable
for "the amount of $120,742,030.78, comprised of the final judgment amount of $120,338,393.71, plus $10,909.11
per day for each day after October 9, 2019 through and including November 15, 2019, the date of entry of Judgment."
Am. J., ECF No. 483-1. The Court further ordered that the "judgment set forth herein shall accrue interest from
November 15, 2019 at the legal rate pursuant to 28 U.S.C. § 1961 of 1.58%, and shall be computed daily and
compounded annually until paid in full." Id. ·
6
486; Order, ECF No. 517. Both parties appealed aspects of this Court's post-trial judgment and
corresponding orders. 5 Wye Oak II, 24 F.4th at 695-96.
On appeal, the D.C. Circuit vacated the judgment and remanded the case. Id. at 703--04.
The Circuit first determined that the Fourth Circuit's jurisdictional holding was not binding on this
Court or the Circuit based on the "law of the case" doctrine. 6 Id. at 698-99. Next, the Circuit
"disagree[d] 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." Id. at 702 (emphasis in original). The Circuit went on say that the inapplicability of the
second clause "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" id. at 703, because the
Circuit did "discern a plausible basis for sustaining the district court's jurisdictional ruling in the
language of the commercial activity exception's third clause." Id. at 690 (emphasis in original).
Because this Court had not specifically addressed the applicability of the third clause in its post-
trial opinion, and mindful that the "Court of Appeals should not ... resolve[ ] in the first instance
[a] factual dispute which had not been considered by the District Court[,] id. at 703 (quoting
Pullman-Standard v. Swint, 456 U.S. 273, 291-92 (1982) (alterations in original)), the Circuit
remanded the case for this Court to analyze the "direct effects arguments in the first instance." Id.
at 703.
5
Because the sole issue before this Court is the existence of subject-matter jurisdiction under clause three of the
commercial activities exception, the Court will not address other matters still disputed by the parties, such as the
Court's calculation of damages and attorney fees.
6The D.C. Circuit distinguished the different postures of the case, finding that the Fourth Circuit's determination that
Wye Oak had plausibly pleaded that there was jurisdiction under the second clause of the commercial activities
exception was sufficiently different from the Circuit's examination of the jurisdictional question following discovery
and a bench trial. Wye Oak II, 24 F.4th at 698-99.
7
On remand, the parties submitted supplemental briefing. See PI. 's Proposed Findings of
Fact and Conclusions of Law, ECF No. 542 [hereinafter "PL 's PFFCL"]; Defs.' Proposed Findings
of Fact and Conclusions of Law, ECF No. 546 [hereinafter "Defs.' PFFCL"]; Defs.' Resp. to Pl. 's
PFFCL, ECF No. 547; 7 Pl.'s Reply in Supp. of Pl.'s PFFCL, ECF No. 550 [hereinafter "Pl.'s
Reply"]. Wye Oak points the Court to four alleged direct effects in the United States due to Iraq's
failure to pay the three invoices. See PI.'s PFFCL at 6-7. Iraq argues that none of the effects
proposed by Wye Oak are sufficient to satisfy an abrogation of sovereign immunity under the third
clause of 28 U.S.C. § 1605(a)(2), and therefore this Court cannot properly exercise subject-matter
jurisdiction over the case. See Defs.' PFFCL at 15-17.
II. LEGALSTANDARD
Under the FSIA, a "foreign state shall be immune from the jurisdiction of the courts of the
United States and of the States" unless one of specific statutorily defined exceptions applies. 28
U.S.C. § 1604 (emphasis added). The FSIA is thus the "sole basis for obtaining jurisdiction over
a foreign state in our courts." Argentine Republic v. Amerada Hess Shipping Corp., 488 U.S. 428,
434 (1989). "The most significant of the FSIA's exceptions-and the one at issue in this case-is
the 'commercial' exception of§ 1605(a)(2)[.]" Republic ofArgentina v. Weltover, Inc., 504 U.S.
607, 611 (1992). Under Section 1605(a)(2)'s third clause, a foreign state is not immune when the
"lawsuit is (1) 'based ... upon an act outside the territory of the United States'; (2) that was taken
'in connection with a commercial activity' of [Iraq] outside this country; and (3) that 'cause[d] a
direct effect in the United States."' Id. (citing 28 U.S.C. § 1605(a)(2)).
A direct effect "is one which has no intervening element, but, rather, flows in a straight
line without deviation or interruption." Princz v. Fed. Republic of Germany, 26 F.3d 1166, 1172
7
ECF No. 546 and 547 appear to be the same document.
8
(D.C. Cir. 1994) (internal citation omitted). Though "jurisdiction may not be predicated on purely
trivial effects in the United States[,]" the Supreme Court has "reject[ ed] the suggestion that
§ 1605(a)(2) contains any unexpressed requirement of 'substantiality' or 'foreseeability.'"
Weltover, 504 U.S. at 618. While the plaintiff bears the burden of producing evidence that the
FSIA exception applies, Bell Helicopter Textron, Inc. v. Islamic Republic ofIran, 734 F .3d 1175,
1183 (D.C. Cir. 2013), "the [defendant foreign state] bears the ultimate burden of persuasion (i.e.,
to show that the commercial-activity exception does not apply)." FG Hemisphere Assocs., LLC v.
Democratic Republic of the Congo, 447 F.3d 835, 842 (D.C. Cir. 2006).
III. DISCUSSION
As a threshold matter, "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 of 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." Wye Oak 11, 24 F.4th at 703
(citing lvanenko v. Yanukovich, 995 F.3d 232,238 (D.C. Cir. 2021)). Therefore, the sole issue on
remand is "whether Iraq's breach of contract caused 'direct effects' in the United States for the
purpose of the third clause of28 U.S.C. § 1605(a)(2)." Id. at 690.
Wye Oak has posited four examples of direct effects in the United States flowing from
Iraq's breach of the BSA: (1) Iraq was required to submit payment to Wye Oak's U.S. bank
account, (2) Iraq specifically targeted Wye Oak because it knew that effects of its nonpayment
would be felt in the United States; (3) Iraq's nonpayment caused the cut-off of a flow of capital,
data, services, and personnel between the United States and Iraq; and (4) Iraq's nonpayment
aff~cted military and diplomatic operations in the United States. See id. at 703.
The Court will examine each of Wye Oak's theories in tum to determine whether it
9
constitutes a direct effect sufficient to satisfy the commercial activities exception. The Court
concludes that Wye Oak has not met its burden to produce evidence showing the applicability of
the sovereign immunity exception with respect to its first proposed direct effect. For the second,
Wye Oak has met its burden of production, but Iraq has, in tum, met its burden to demonstrate
entitlement to sovereign immunity. For the final two proposed direct effects, Wye Oak has met the
burden of production, and Iraq has not met its burden of persuasion. Therefore, the Court may
properly exercise subject-matter jurisdiction over the case.
A. Wye Oak Has Not Demonstrated That Iraq Had an Obligation to Deposit Funds
Into the Company's U.S. Bank Account
Wye Oak's first direct effect argument is that it designated its Pennsylvania-based bank
account as the place of payment and Iraq's failure to pay int~ that account caused a direct effect in
the United States. Pl.'s PFFCL at 12. Iraq's main rejoinder is that, because payment was due in
Iraq, not the United States, its nonpayment could not create a direct effect in the United States on
this basis. Defs.' PFFCL at 27.
In this Circuit, in determining whether there is a direct effect in the United States based on
the place of payment, "our touchstone is the Supreme Court's decision in Republic ofArgentina v.
Weltover." Valambhia v. United Republic of Tanzania, 964 F.3d 1135, 1140 (D.C. Cir. 2020). In
Weltover, the government of Argentina issued U.S. dollar-dominated bonds as part of a foreign
exchange program. 504 U.S. at 609. Bondholders were permitted to elect one of four cities-one
of which was New York-as the place to receive payment upon the bonds' maturity date. Id. at
609-10. When the bonds matured, Argentina attempted to reschedule the payments. Id. at 610.
Several bondholders, exercising their rights under the bonds' terms, then demanded full payment
i11 New York. Id. After Argentina failed to make the payments, the bondholders sued under 28
U.S.C. § 1605(a)(2)'s third clause. Id. The Supreme Court agreed with the bondholders that the
10
court properly maintained subject-matter jurisdiction because "New York was thus the place of
performance for Argentina's ultimate contractual obligations, the rescheduling of those obligations
necessarily had a 'direct effect' in the United States: Money that was supposed to have been
delivered to a New York bank for deposit was not forthcoming." Id. at 619.
Contrary to Wye Oak's insistence that "[t]his case is directly and obviously analogous to
Weltover," Pl.'s PFFCL at 8, there is one significant difference here: the BSA did not designate
any possible places of payment. Instead, Section 5(b) of the BSA, the section devoted to payment
instructions, merely stated:
Payments to [Wye Oak] of the aforementioned commission will be paid pursuant
to proforma invoices submitted by [Wye Oak] and then reconciled by final invoice.
Upon providing such proforma invoice, [the MoD] will make full payment on such
invoice immediately upon presentation. All 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].
See Pl.'s Ex. 5 (BSA), at§ 5(b).
Wye Oak, focusing on the last sentence of Section 5(b), insists that payment was due in the
United States because Wye Oak designated its U.S. bank account in its November 25, 2004 email
to Zayna. PL' s PFFCL at 9-10. Iraq, focusing on the first sentence of Part 5(b), counters that the
MoD's office in Baghdad, Iraq was the location of payment because that was the place designated
in Wye Oak's October 2004 proforma invoices. Defs.' PFFCL at 28-29. 8
Under the law of this Circuit, there is no direct effect in the United States when a foreign
sovereign did not have an obligation pay in the United States. Since Weltover, the Circuit's cases
8
Iraq also resists the notion that the November 25, 2004 email created an obligation to pay into a U.S. bank account
because it was sent after Iraq's breach and it was directed to Zayna, not Iraq. See Defs.' PFFCL at 35-43. Iraq further
argues that even if the email created an obligation, it was superseded by Dale Stoffel's return to Iraq in December
2004 to accept payment in Iraq. See id. at 91-92. Because the Court finds that Iraq did not have an obligation to pay
Wye Oak in the United States based on the terms of the BSA or the parties' course of performance, the Court need
not address these remaining arguments.
11
"draw a very clear line: For purposes of clause three of the FSIA commercial activity exception,
breaching a contract that establishes or necessarily contemplates the United States as a place of
performance causes a direct effect in the United States, while breaching a contract that does not
establish or necessarily contemplate the United States as a place of performance does not cause a
direct effect in the United States." Odhiambo v. Republic of Kenya, 764 F.3d 31, 40 (D.C. Cir.
2014). Accordingly, the Circuit has found a direct effect when the parties knew at the time of
contracting that performance was to occur in the United States: See de Csepel v. Republic of
Hungary, 714 F.3d 591, 601 (D.C. Cir. 2013) ("Hungary promised to return the artwork to
members of the Herzog family it knew to be residing in the United States and then breached that
obligation by refusing to do so"); IT Consultants, Inc. v. Republic of Pakistan, 351 F.3d 1184,
1186, 1190 (D.C. Cir. 2003) (finding a direct effect when a memorandum of understanding
required payment to a U.S. company's U.S. bank account because "the involvement of a U.S. bank
was immediate and unavoidable").
More often, however, the Circuit has found no direct effect when an agreement was silent
on where payment was to occur. See Valambhia, 964 F.3d at 1140-42 (Irish corporation held a
judgment against Tanzania but Tanzania was under no obligation to satisfy the judgment in the
plaintiffs' New York-based account); Odhiambo, 764 F.3d at 40 (Kenya was not obliged to pay a
whistleblower award to a Kenyan national in the United States); Peterson v. Kingdom of Saudi
Arabia, 416 F.3d 83 (D.C. Cir. 2005) (Saudi Arabia had no obligation to pay retirement funds to
former employee in the United States); Goodman Holdings v. Rafidain Bank, 26 F.3d 1143 (D.C.
Cir. 1994) (Iraqi bank had no obligation to make payments in the United States on letters of credit
12
issued to Irish corporations). 9 Put differently, it is not enough, under this Circuit's precedent, that
a foreign sovereign might have anticipated that payment would occur in the United States. The
foreign sovereign must have been bound under a contractual obligation, express or implied, to
make a payment in the United States. See Valambhia, 964 F.3d at 1142.
Here, neither MoD nor Iraq under an obligation to pay Wye Oak in the United States. The
BSA specified that Wye Oak would be paid pursuant to the proforma invoices it submitted. See
Pl.'s Ex. 5. In October 2004, Wye Oak submitted pro forma invoices designating Iraq, not the
United States, as the location of payment. Presumably, Wye Oak considered the invoices it
submitted to be sufficiently detailed; it was only after the MoD had failed to pay them, and Wye
Oak repeatedly sought to recover the funds, that Dale Stoffel sent the email with Wye Oak's bank
account information. 10 Even if, at the time of contracting, Iraq might have contemplated that Wye
Oak would demand payment in the United States, Iraq was not specifically bound to do so. 11
Wye Oak insists that the pro forma invoices lacked all of the details necessary for Iraq to
successfully make payments, and, therefore, the Court should look to Dale Stoffel' s November 25,
2004 email to Zayna to resolve the ambiguity. See Pl.'s PFFCL 12-17; Pl.'s Reply at 10-32. By
providing the account and routing numbers for payment to Wye Oak's Pennsylvania-based
account, see PL' s Ex. 31, and addressing the email to Zayna, Wye Oak contends that this email
9
Iraq's reliance on Zedan v. Kingdom of Saudi Arabia, however, is misplaced. See Defs.' PFFCL at 100. That case
relied on the pre-Weltover requirement that a direct effect be "one that is substantial and foreseeable." Zedan v.
Kingdom ofSaudi Arabia, 849 F.2d 1511, 1514 (D.C. Cir. 1988).
10
The parties·engage in an extended discussion of whether a direct effect can be established if an obligation to make
a payment arises after a party's breach. See, e.g., Defs.' PFFCL at 83-87; Pl.'s Reply at 17-18. Because the Court
concludes there was no obligation, the Court need not answer this question.
11
Wye Oak argues that certain clues in the BSA-such as its English language, the requirement that payment be made
in U.S. dollars, and the directive to send written notices and requests to Wye Oak's address in the United States-put
Iraq on notice that the United States was the place of performance for payment. See Pl. 's PFFCL at 12. These facts,
without more, are not enough to establish a direct effect in the United States. See Friedman v. Gov 't of Abu Dhabi,
U.A.E., 464 F. Supp. 3d 52, 65 (D.D.C. 2020).
13
created binding obligations on Iraq. See Pl.'s PFFCL at 13-16; Pl.'s Reply at 10-14,. However,
Wye Oak has not sufficiently explained why the invoices lacked the necessary details to enable
Iraq to pay especially when, by the terms of the BSA, the parties apparently contemplated that
payment could-and would-be made according to the invoices' instructions. Similarly, even if
the BSA's payment provision and the invoices, or both, were ambiguous, Wye Oak has not
demonstrated to this Court whether Iraqi law, which governs the BSA, permits the introduction of
email communications to explain the potential ambiguity.
To be sure, this case plainly does not evince the same concerns animating the various panels
finding no direct effect when the agreement was silent on place of payment, namely, preventing
"opportunistic plaintiffs from unilaterally haling foreign sovereigns into United States courts[.]"
See Odhiambo, 764 F.3d at 47 (Pillard, J., concurring in part). Nor is this the sort of"'pay wherever
you are' scenario[] in which the asserted direct effect in the United States is simply that plaintiffs
reside or are citizens here, without more[.]" Valambhia, 964 F.3d at 1142. There is, simply put,
much more to Wye Oak's connection to the United States than its Pennsylvania bank account. At
all relevant times, Wye Oak was, and continues to be, a U.S. corporation headquartered in the
United States. Wye Oak performed essential services for the contract from the United States. At
the time of contracting, Iraq could very well have predicted that Wye Oak's forthcoming pro form.a
invoices would have sought payment in the United States for its services. With these facts in mind,
the direct effects "result should be different where, for example, a foreign government hires an
American [ ] firm abroad without specifying place of performance, and, once the work is complete,
reneges on payment[.]" Odhiambo, 764 F.3d at 45 (Pillard, J., concurring in part).
Nevertheless, this Court is bound by the Circuit's precedent requiring an obligation on the
14
part of the foreign sovereign to deposit funds to a U.S. account. 12 See Goodman Holdings, 26 F.3d
at 1146 (no direct effect because "[n]either New York nor any other United States location was
designated as the 'place of performance' where money was 'supposed' to have been paid");
Peterson, 416 F.3d at 91 (no direct effect because "Saudi Arabia 'might well have paid' [the
plaintiff] in the United States 'but it might just as well have done so' outside of the United States")
(internal citations omitted).
Because Wye Oak has not demonstrated that Iraq was obligated to make a payment in the
United States, Wye Oak's first putative direct effect is insufficient to abrogate Iraq's sovereign
immunity. See Bell Helicopter, 734 F.3d at 1183 .
B. Iraq Has Met Its Burden of Persuasion to Show That Iraq Did Not "Target" Wye
Oak
Wye Oak's second direct effects theory is that Iraq "targeted" Wye Oak, "clearly
kn[owing] that a U.S. company would feel the loss in the United States when Iraq failed to pay."
Pl.' s PFFCL at 10. Wye Oak contends that such "targeting" occurred both before and during the
relationship between the parties. See id.; see also Pl. 's Reply at 33. Wye Oak points to the Circuit's
decision inE/G Energy Fund XIVv. Petroleo Brasileiro, 894 F.3d 339 (D.C. Cir. 2018) in support
of its position. In that case, the Circuit found that a U.S. company had "made out a prima facie
case for [subject-matter] jurisdiction" when it alleged that Petrobras, a state-owned oil company
in Brazil, "specifically targeted U.S. investors" for its foreign investment vehicle Sete Brasil
Participa96es, S.A. ("Sete"), all the while "intentionally conceal[ing] the ongoing fraud at
12
Likewise, even if the funds had been delivered to Wye Oak in Iraq in accordance with the pro fonna invoices, the
possibility that the funds might eventually have made their way to Wye Oak's account in the United States is
insufficient to establish a direct effect based 011 failure to pay into a U.S. bank account. After all, by the plain tem1s of
the BSA, which sets out the financial obligations that forni the basis of Wye Oak' claims, Iraq theoretically could
have satisfied those obligations by depositing funds in "any other country." See Daou v. BLC Bank, S.A.L., 42 F.4th
120, 136 (2d Cir. 2022).
15
Petrobras and Sete" and using "money invested in Sete" "to pay bribes and kickbacks." Id. at 345(emphasis in original). Iraq counters that there is no evidence that it targeted a U.S. company, and
if there was any targeting, it was Wye Oak that targeted Iraq. 13 In reply, Wye Oak refines its
"targeting" argument as "Iraqi officials carefully 'insert[ing]' Zayna into the relationship with Wye
Oak, intentionally craft[ing] the 'fraudulent' [contract of financial agreement], 14 and generally
orchestrat[ing] '[a] scheme' 'to steal millions of dollars."' Pl.'s Reply at 33 (quoting Wye Oak I,
2019 WL 4044046, at *9, 13).
Based on a careful review of the trial record, the Court concludes that the facts in the instant
case are sufficiently different in kind from the actions in EIG Energy so as to render the "targeting"
theory inapplicable. Thus, Iraq's sovereign immunity is not pierced by Wye Oak's second direct
effects argument. To support the finding of "specific targeting" giving rise to FSIA jurisdiction,
the Circuit in EIG Energy noted that Petrobras had undertaken concrete actions in the United States
to initiate the relationship with the U.S. company, including disseminating multiple documents
and presentations in the United States as well as sending Petrobras representatives to the United
13
Iraq's other arguments are without merit. Iraq first disputes Wye Oak's targeting theory because the IMERP and
BSA were conceived of, presented in, and did not contemplate any performance outside of Iraq. See Defs.' 46-52.
Assuming without deciding that Iraq's version of facts is correct, none of those facts is directly responsive to the
targeting argument. Iraq also argues that EIG Energy is not controlling because it was a tort, rather than contract, case.
Defs.' PFFCL at 22-23, 92, 93-94. There is no such categorical approach to evaluating the FSIA in this Circuit. See
EIG Energy, 894 F.3d at 349. Iraq further urges the Court not to adopt Wye Oak's targeting theory, warning that it is
a "sweeping proposition" and would mean that "such a rule that would strip sovereign immunity where a foreign
government simply seeks to do business with a U.S. individual or corporation." Defs.' PFFCL at 94. The Court does
not view Wye Oak's papers as advancing such a theory. See Pl. 's PFFCL at 32-33. Regardless, the Court understands
Wye Oak's legal argument to be based in EIG Energy, which, as this Court will explain, is distinguishable from this
case.
14
In October 2004, the MoD and Zayna discussed, and Wye Oak did not object to, concluding an agreement whereby
Zayna's company would finance the IMERP. Wye Oak I, 2019 WL 4044046, at *12 (citing Pl.'s Ex. 21 (Contract of
Financial Agreement}). In 2011, three MoD officials involved in negotiating and executing the agreement were
criminally convicted for "conclud[ing] a financial agreement" with Zayna's company. See id. (citing Defs.' Suppl.
Mem. in Opp'n to Pl.'s Mot. for Sanctions, ECF No. 430, and Ex. A. to Pl.'s Mot. to Reopen Evid., ECF No. 438-1).
Because the parties, subject matter, tirneframe, and amounts involved in the summary of the conviction matched the
facts admitted into evidence at trial, the Court concluded that the conviction "more likely than not refers to the [contract
of financial agreement]." Id. The Court further remarked that the existence of this conviction evidence "strongly
indicate[d]" "a fraudulent scheme between these MoD officials and Zayna to steal millions of dollars." Id.16
States to meet with the U.S. company on at least two occasions. See EIG Energy, 894 F.3d at 342.
These actions were essential to the jurisdictional analysis in the U.S. company's fraudulent
inducement lawsuit because "[a]t least some of the misstatements and omissions in service thereof
took place in the United States, where the ultimate consequences of the fraud were later felt." Id.
at 348.
Here, the record does not show any affirmative actions taken by Iraq or the MoD in the
United States to identify Wye Oak. Instead, it appears that the significant steps to begin the
relationship between the parties were taken by Wye Oak and were carried out in Iraq. Wye Oak
representatives had a history of operating in Iraq and were present in Iraq in early 2004. William
Felix Dep., ECF No. 418-10, at 7:14-25:14. Wye Oak approached the MoD and coalition leaders
with an early version of the IMERP concept in February or March 2004. See Pl. 's Ex. 8.3. In April
2004, Wye Oak submitted a more detailed plan to the MoD in Iraq. See Pl.' s Ex. 8.4. In June 2004,
Wye Oak sent the MoD a letter formally proposing the IMERP in Iraq. See Pl.'s Ex. 1. In August
2004, Wye Oak and the MoD officially executed the BSA in Iraq. See Pl.'s Ex. 5. This evidence
indicates that Wye Oak initiated the relationship with Iraq.
Wye Oak's secondary argument, that the "targeting" occurred during the existence of the
relationship, is not supported by this Circuit's caselaw. Wye Oak contends that "Zayna's key
email," from December 2, 2004, establishes targeting because Zayna urged Dale Stoffel to travel
from the United States to Iraq with the promise of payment, all the while knowing that Iraq had no
intention of paying Wye Oak. See Pl.'s Reply at 33 (citing Pl.'s Ex. 33). That Zayna's
"misstatements and omissions in service of the fraud were affirmatively directed into the United
States," see Pl.' s Reply at 33 (emphasis added), such as they were, is not enough to meet the
targeting standard set forth in EIG Energy. As previously explained, EIG Energy focused on the
17
fact that "the misstatements and omissions in service thereof took place in the United States." 15
894 F.3d at 348 (emphasis added). The absence of such actions here is dispositive.
Furthermore, Nnaka v. Fed. Republic ofNigeria, 756 Fed. App' x 16 (D.C. Cir. 2019) (per
curiam), which Wye Oak cites for the proposition that a letter sent from abroad to the United States
can support FSIA jurisdiction, is inapposite. The letter at issue in that case was "an
intergovernmental communication from Nigeria to the United States regarding who had authority
to represent the Nigerian government in an asset-forfeiture action" and receipt of such "letter
caused the district court to dismiss [the plaintiff] from the asset forfeiture case[.]" Nnaka, 756 Fed.
App'x at 18. The letter thus had immediate legal consequences in the United States. By contrast,
there were no immediate legal consequences of Zayna's email to Dale Stoffel.
Finally, Wye Oak's contention that "Iraq knew that the losses [due to its nonpayment]
would be felt in the United States" is insufficient to establish a direct effect under this Circuit's
precedent. See Pl.'s PFFCL at 21. Wye Oak's argument proceeds as follows: (1) Iraq "knew it
targeted a U.S. company"; 16 (2) Iraq knew that Wye Oak was carrying out administrative functions
in the United States in support of the BSA and that Wye Oak expected the pro forma invoices to
compensate the company for these activities; (3) payment was required to be made in U.S. dollars;
and (4) thus, Iraq knew that nonpayment would directly cause a loss to Wye Oak in the United
15
Relatedly, even if the operative fraudulent action was not Zayna's email but the contract of financial agreement
between the MoD and Zayna's company, this argument would similarly fall short of EIG Energy. In that case, the
Circuit remarked that the injury occurred to the U.S. company when " Petrobras successfully induced [it] to invest in
the Petrobras-Sete project,' which 'occurred, at least jn part, in the United States."' EIG Energy, 894 F.3d at 344
(internal citation omitted) (alteration in original). Here, the contract of financial agreement was negotiated and
concluded in Iraq. Wye Oak I, 2019 WL 4044046, at* 12-13. Moreover, the agreement "did not legitimately implicate
the BSA, as the evidence establishes the [agreement] was not agreed to-let alone signed-by Wye Oak and therefore
did not meet the requirements set forth in the BSA' s modification clause." Id. (citing Pl. ' s Ex. 5).
16Based on facts such as the English language of the BSA, a September 2004 Limited Power of Attorney document
bearing Wye Oak's U.S.-based contact information and corporate seal, and the fact that the BSA required notices to
be sent to Wye Oak's U.S.-based address. See Pl. ' s PFFCL at 17-21.
18
States. See Pl. 's PFFCL at 17-21. Even if these facts are true, they do not together establish a
direct effect in the United States, but rather, a kind of indirect effect on the Wye Oak balance sheet
in this country. To conclude that this chain of facts satisfies 28 U.S.C. § 1605(a)(2)'s third clause
would so expand the Circuit's "targeting" rule from EIG Energy as to cover potentially the vast
majority of large business deals between foreign sovereigns and U.S. companies. Therefore, the
Court is unable to find that Iraq's nonpayment caused a direct effect in the United States on this
basis.
Because this Court is not persuaded that Iraq specifically targeted a U.S. company, let alone
Wye Oak, Iraq has met its burden to demonstrate that there is no exception to sovereign immunity
on this basis. See FG Hemisphere Assocs., 447 F.3d at 842.
C. Iraq's Nonpayment Directly Resulted in the Cut-Off of the Flow of Data, Services,
Capital, and Personnel Between the United States and Iraq
This Court's conclusion that Wye Oak's first two direct effects arguments do not carry the
day is not the end of the inquiry, because Wye Oak next argues that "Iraq's breach cut off the flow
of capital, personnel, data, and intangible services between the United States and Iraq." Pl. 's
PFFCL at 22. Wye Oak points to two main examples of such a cut-off: (1) "Iraq disrupted Wye
Oak's subcontract with CLI [Construction ("CLI")], a U.S. company that was also to operate in
Iraq," and (2) "[Iraq] starved Wye Oak of the funds it needed to expand its U.S. presence for its
own operations in the United States and Iraq, forced Wye Oak to cease providing administrative
and digital services in the United States related to operations in Iraq, disrupted the flow of data
and services between the two countries, and ultimately required Wye Oak to withdraw[] its
personnel from Iraq because they were not being paid." Id. at 10. Iraq argues that neither the facts
nor the law support Wye Oak's theory. See Defs.' PFFCL at 23-24.
Based on its review of the extensive record and the parties' briefing, the Court concludes
19
that Wye Oak has established that Iraq's nonpaymeiit resulted in a direct effect in the United States
based on the cut-off of data, services, capital, and personnel, and Iraq has failed to meet its burden
to convince this Court otherwise.
1. Interference with Subcontractor Relationship is Not a Direct Effect
Wye Oak first claims that Iraq's nonpayment caused its relationship with its mam
subcontractor to be disrupted. Specifically, Wye Oak claims that Iraq's failure to pay the invoices
prevented Wye Oak from proceeding with a formal subcontracting relationship with CLI, another
Pennsylvania-based corporation of which Dale Stoffel was a co-owner. See Pl.' s PFFCL at 27.
Iraq insists that any inability to form this subcontracting relationship, if it occurred, does not
qualify as a direct effect for FSIA purposes because the BSA did not expressly require Wye Oak
to hire CLI as a subcontractor nor was there a formal, written agreement between Wye Oak and
CLI. See Defs.' PFFCL at 97-99.
Wye Oak's argument turns on the proper interpretation of Cruise Connections Charter
Mgmt. 1, LP v. Attorney General of Canada, 600 F.3d 661 (D.C. Cir. 2010). In that case, a U.S.
company signed a contract with the Canadian government which, by its terms, required the U.S.
company to subcontract with U.S.-based cruise lines as part of the U.S. company's performance
in Vancouver. See Cruise Connections, 600 F.3d at 662. Under the subcontracts, the U.S. company
"would have received a flat fee" from the cruise lines while performing. See id. at 664-65. The
U.S. company and U.S. cruise lines had already drafted the subcontracts and were waiting on final
assurances from the Canadian government regarding the cruise lines' tax liability before
consummating the agreements. See id. at 663-64. The Circuit found that the Canadian
government's termination of the main contract, thereby scuttling the subcontracts, caused a direct
effect in the United States because the action's result was that "revenues that would otherwise have
20
been generated in the United States were 'not forthcoming."' See id. at 665 (citing Weltover, 504
U.S. at 619).
After review, the Court concludes that Wye Oak has not met its burden to demonstrate that
its inability to enter into a formal subcontracting relationship with CLI was a direct effect in the
United States caused by Iraq's nonpayment. Like the U.S. company and its would-be
subcontractors in Cruise Connections, Wye Oak and CLI drafted an extensive, written subcontract
agreement; the document introduced at trial totaled some 60 pages. See Pl.'s Ex. 25. And like
Cruise Connections, the subcontract agreement went unsigned while Wye Oak and CLI awaited
action from Iraq. See Trial Tr. 12/18/18 AM 53:8-25 (Stoffel). But unlike Cruise Connections,
and dispositively, the BSA did not require Wye Oak to hire CLI.
Wye Oak's response is that Iraq was aware of Wye Oak's need for and intention to hire
CLI, even if not expressly stated in the BSA, due to factors such as the nature and scope of the
work under the IMERP, CLI' s connection to Wye Oak, and CLI' s experience working on similar
projects in Iraq. See Pl.'s PFFCL at 18-20. However, the possibility of Wye Oak hiring CLI is
not enough to show a direct effect under the standard laid out in Cruise Connections. In that case,
the Circuit focused on the fact that the subcontracts guaranteed a flat fee to the U.S. company, that
the subcontracts were required by the main agreement, and that the Canadian government's actions
interfering with the subcontracts necessarily deprived the U.S. company of guaranteed revenue.
See Cruise Connections, 600 F.3d at 662-65. Here, the record does not establish what revenues, if
any, Wye Oak was deprived of due to its inability to consummate its relationship with CLI. 17
Moreover, and distinct from Cruise Connections, Wye Oak engaged other subcontractors
17
Dale Stoffel, as sole owner of Wye Oak and part-owner ofCLI, may have lost out on revenue. See Felix Dep. at
7:3-5. Still, the Court has not been presented with evidence of what share of the revenue, if any, Dale Stoffel would
have received. Regardless, additional fact-finding is not necessary because the Court, which "is in a much better
21
even though Wye Oak could not finalize its agreement with CLI. Wye Oak hired local Iraqi
subcontractors to complete some aspects of the IMERP. See Trial Tr. 12/18/18 PM 64:10-24
(Stoffel); Trial Tr. 12/21/18 PM 94:2-14 (Testimony of Dr. John Gale). Thus, Iraq's nonpayment
did not prevent Wye Oak from hiring any subcontractors, just this one. Even if CLI's unique
experience in Iraq and the field would have made CLI the best subcontractor possible for the job,
the lack of an obligation on Wye Oak's part to hire CLI as well as the lack of guaranteed revenue
for Wye Oak means that the argument about interference with the subcontractor relationship,
standing alone, does not establish a direct effect. 18
2. Cut-Off ofData, Services, Capital, and Personnel is a Direct Effect
Wye Oak finds firm footing, at last, in the second part of its third argument. Wye Oak
insists that Iraq's nonpayment disrupted flows of data, services, capital, and personnel between the
United States and Iraq, thus establishing a direct effect. Wye Oak bases its legal argument in
McKesson HBOC, Inc. v. Islamic Republic of Iran, 271 F.3d 1101 (D.C. Cir. 2001), partially on
other grounds, 320 F.3d 280 (D.C. Cir. 2003). In that case, McKesson, a U.S. corporation, owned
a minority stake in an Iranian dairy farm, a relationship that involved McKesson's contribution of
capital and members to the farm's board of directors in return for McKesson's receipt of annual
dividends. McKesson, 271 F.3d at 1104. Both the capital and personnel flows ceased in the wake
position than [the Circuit is] to analyze Wye Oak's direct effects arguments in the first instance," has determined that
Wye Oak has established a direct effect on two other bases. Wye Oak II, 24 F .4th at 703.
18
Iraq advances other arguments concerning why the subcontractor relationship is insufficient, none of which have
merit. Iraq argues that the subcontractor relationship theory is insufficient because it did not have any role in selecting
CLI or subcontractors. See Defs.' PFFCL at 99. "The FSIA, however, requires only that effect be 'direct,' not that the
foreign sovereign agree that the effect would occur." Cruise Connections, 600 F.3d at 665 (citing Weltover, 504 U.S.
at 618). Iraq also disputes that CLI was a U.S. corporation because the address listed for CLI in the draft subcontract
agreement is in Iraq. See Defs.' PFFCL at 58. This is incorrect because a corporation's mailing address alone does not
dictate its domicile. Richard v. Bell Atlantic Corp., 946 F. Supp. 54, 73-74 (D.D.C. 1996). Finally, Iraq contends that
any performance by CLI was not required to be in the United States. See Defs.' PFFCL at 97. Circuit precedent plainly
holds that a direct effect in the United States can be established even if the subcontractor performance is to occur
outside of the country. See Cruise Connections, 600 F.3d at 662.
22
of the 1979 Islamic Revolution and the Iranian government's takeover of the dairy farm. Id. The
Circuit held that the district court properly maintained subject-matter jurisdiction over McKesson's
suit alleging illegal expropriation by Iran because Iran's action resulted in two independent direct
effects (1) "the cut-off of the constant flow of capital, management personnel, engineering data,
machinery, equipment, materials and packaging between the two companies," and (2) "the abrupt
end of McKesson's role as an active investor." McKesson, 271 F.3d at 1105 (internal quotations
and citations omitted).
Wye Oak carried out a number of activities in the United States daily in connection with
the IMERP program. As the Circuit already determined, "[t]here is no error, much less clear error,
with respect to the district court's determination that 'Wye Oak performed work in the United
States'" to support the BSA. Wye Oak II, 24 F.4th at 700 (quoting Wye Oak I, 2019 WL 4044046,
at *15). Specifically, this Court found that David Stoffel "focused on writing a computer program
that could ultimately be used to inventory and track all the equipment Wye Oak was refurbishing
and would potentially broker for sales," Wye Oak I, 2019 WL 4044046, at *24 (citing Trial Tr.
12/18/18 AM 38:11--41 :17 (Stoffel); Pl.'s Ex. 65 (D. Stoffel Logistics Application Code)), that he
"oversaw the company's electronic communications from his perch in the U.S.," id. (citing Trial
Tr. 12/18/18 AM 44:9-19 (Stoffel)), and that "Wye Oak performed administrative activities in the
U.S. in support of the BSA" including "purchas[ing] computer equipment and materials, such as
software, for the business in the U.S." 19 Id. at 15 (citing Trial Tr. 12/18/18 AM 44:5-10 (Stoffel)).
The constant connection between Wye Oak's U.S. and Iraqi operations bears worth
repeating: David Stoffel testified that because "[ e]-mail communications and internet connections
19
Iraq seems to argue that because the BSA did not specifically . harge Wye Oak with carrying out work in the United
States, "[t)he work David Stoffol did in the United State. was not compensab le under the BSA' and in Iraq s view
cannot be considered in the direct effects analysis. See Defs.' PFFCL at 53. The Court is aware of no authority
espousing such a narrow view of the commercial activities exception and rejects such a limitation.
23
were challenging at that time, particularly in Iraq," "part of[his] regular job was to read and receive
or at least review every e-mail that came into the [server]" and to follow up with Wye Oak
representatives, through email or telephonic communications, as needed. Trial Tr. 12/18/18 AM
44:11-19. Moreover, David Stoffel maintained a computer server in Ohio and paper files in
Pennsylvania related to the IMERP. Trial Tr. 12/18/18 AM 31:7-32:1, 32:25-33:5, 44:11-20
(Stoffel). These activities necessarily involved managing the flow of data and services, and these
activities stopped when Wye Oak stopped working on the IMERP as a result oflraq's nonpayment.
In addition to the cut-off of the flow of data and services between the United States and
Iraq, Iraq's nonpayment disrupted capital flows between the two countries. Wye Oak had clear
plans to use funds from the project to expand its business in the United States to support the BSA
and the company's work in Iraq. Pl.'s PFFCL at 21. For example, at trial, David Stoffel testified
that Wye Oak planned to expand its computer infrastructure and hire additional U.S.-based
personnel to support the IMERP program. Trial Tr. 12/18/18 AM at 49:6-18, 54:22-55:9. Iraq's
nonpayment obviously, and predictably, prevented Wye Oak from carrying on these activities. To
be sure, it may often be the case that a U.S. company that signs a business contract with a foreign
sovereign has plans to do more business in the United States, and that the breaching foreign
sovereign's nonpayment necessarily disrupts those plans. These facts alone would not create
subject-matter jurisdiction based on direct effect. However, the relationship between Wye Oak and
Iraq was not that of a typical contractor and customer. The parties participated in commercial
activity intertwined with a consequential transnational mission. The size, scope, and importance
of the project, as well as Wye Oak's existing infrastructure--or lack thereof-was apparent from
the start of the relationship.
Along with the flow of data, services, and capital between the two countries, Wye Oak
24
facilitated the flow of personnel between United States and Iraq, and Iraq's failure to pay resulted
in both the loss of human life and the halting of the flow of Wye Oak personnel between the United
States and Iraq. Prior to December 2004, Wye Oak personnel, particularly Dale Stoffel, made
frequent trips between the United States and Iraq. PL 's PFFCL at 30-31. Evidence at trial
established that Dale Stoffel last traveled to Iraq in early December 2004 in an attempt to secure
payment and that on December 8, 2004, Dale Stoffel and CLI representative Joe Wemple were
shot and killed on their way to Baghdad to arrange for funding to be released later that day. Trial
Tr. 12/18/18 PM 5:3-6:11 (Stoffel); Pl.'s Ex. 42 (Emails between W. Felix and Capt. J.
O'Sullivan). 20 William Felix, Dale Stoffel's successor as Wye Oak's chief executive officer,
testified that the deaths of Dale Stoffel and Joe Wemple resulted in the cessation of all travel by
Wye Oak and CLI personnel from the United States to Iraq. 21 Felix Dep. 48:24-49:7. See PI. 's Ex.
49 (Email from W. Felix to Gen. D. Petraeus and others); Trial Tr. 12/18/18 PM 50:13-16
(Stoffel); Trial Tr. 12/19/18 PM 84:10-16 (Marr).
In addition to the disruption of Wye Oak personnel traveling in support of the IMERP,
Iraq's nonpayment dismantled the larger personnel network Wye Oak was building. As Iraq
concedes, Professor Nicholas Beadle, the coalition's senior advisor to the MoD at the time,
testified at trial that one of the reasons that Wye Oak was especially well-qualified to carry out the
IMERP was its extensive contact list of experts in refurbishing Soviet military equipment. See
Defs.' PFFCL at 54, 61 (citing Trial Tr. 12/20/18 PM 44:8-45:2). And David Stoffel testified that
Wye Oak was in the process of building that network. See Defs.' PFFCL at 54-55 (citing Trial Tr.
20
As this Court previously stated, "[bJut for MoD' s breach of the BSA, Dale Stoffel may very well not have been
murdered." Wye Oak I, 2019 WL 4044046, at *33.
21
Wye Oak notes that Dale Stoffel's death caused lasting emotional impacts on William Felix and David Stoffel as
well as Dale Stoffel's widow and four children. Pl.'s PFFCL at 26-27. This Court draws no conclusion as to whether
a foreign sovereign's commercial activity causing a direct emotional effect on individuals in the United States, if true,
would be sufficient to establish jurisdiction under 28 U.S.C. § 1605(a)(2)'s third clause.
25
12/18/18 PM 64:10-24; 65:5-9). This network consisted of representatives from Ukraine,
Moldova, Belarus, and Russia, in addition to Wye Oak personnel and local Iraqi employees. See
Defs.' PFFCL at 63 (citing Pl.'s Ex. 8.9-8.10 (IMERP Presentation Slides), Pl.'s Ex. 11 (Letter
from D. Stoffel to M. Morozov), Felix Dep. at 103:2, Trial Tr. 12/18/18 PM 16:8-11; 65:17-20
(Stoffel)). Iraq's nonpayment directly resulted in Wye Oak's inability to continuing building or
maintaining this network. 22
Iraq's arguments to the contrary are unavailing. Iraq first contends that McKesson does not
apply to Wye Oak's case because "McKesson was a substantial investor" and Iran's actions
"interrupted substantial flows of McKesson personnel, equipment, and technical know-how from
the United States to Iran." See Defs.' PFFCL at 23 (emphases added) (citing Foremost-McKesson,
Inc. v. Islamic Republic of Iran, 905 F.2d 438, 451 (D.C. Cir. 1990)). This argument is a red
herring: nothing in the McKesson case states or even implies that a substantiality showing is
required to establish a direct effect. What's more, Iraq's citation to pre-Weltover precedent is
ineffective in the face of the Supreme Court's clear command: "[W]e reject the suggestion that
§ 1605(a)(2) contains any unexpressed requirement of 'substantiality. '" Weltover, 504 U.S. at 618.
Even if some substantiality standard were required, the facts demonstrate that the effect of
nonpayment here was indeed substantial in its disruption of data, services, capital, and personnel
between the United States and Iraq.
Iraq also argues that Wye Oak's inability to expand or continue its U.S. operations "is an
inherently indirect consequence of [MoD]'s nonpayment and irrelevant to [MoD]'s obligations
under the BSA" because the agreement did not contemplate Wye Oak's ''business activities" in
22
Iraq seems to suggest that a disruption to personnel cannot serve as a direct effect if the personnel were non-
Americans. See Defs.' PFFCL at 53-54. McKesson imposes no such requirement. A direct effect is established when
the foreign sovereign's actions prevent personnel affiliated with the U.S .-based company from carrying on their roles.
See McKesson, 271 F.3d at 1105-06.
26
the United States. Defs.' PFFCL at 99. In an apparently related argument, Iraq contends that any
flow of personnel or information "was entirely incidental to the express terms of the BSA and
solely for Wye Oak's account." Id. at 96-97. Iraq misconstrues Wye Oak's argument and thus its
entitlement to jurisdiction. Wye Oak advances, and the trial record establishes, that Iraq's failure
to pay the invoices as required by the BSA prevented Wye Oak from expanding or continuing U.S.
operations devoted to the IMERP, not the company's activities in general. See Pl.'s PFFCL at 33-
34. This is a clear example of a direct effect in the United States. And the fores.eeability of the
direct effect to the foreign sovereign is immaterial for the jurisdictional analysis. See Cruise
Connections, 600 F.3d at 665.
Iraq next seems to suggest, unconvincingly, that Wye Oak's status as an independent
contractor, and not an investor, renders the instant case sufficiently distinguishable from
McKesson. See Defs.' PFFCL at 24-25, 96-97. The U.S. company's status as an investor in a
foreign corporation had potential relevance in McKesson only as another, independent example of
a direct effect in the United States of a foreign country's action, separate and apart from the direct
effect consisting of the cut-off of capital, data, personnel, equipment, and materials. See 271 F.3d
at 1105. 'Accordingly, Wye Oak's status as an independent contractor is irrelevant to the direct
effect argument it advances and this Court accepts.
Finally, Iraq's insistence that "[t]his case more closely resembles" the Circuit's opinion in
Rong v. Liaoning Province Gov 't, 452 F.3d 883 (D.C. Cir. 2006) falters on several levels. From
the start, the primary issue in that case was whether a Chinese province's takeover of a business
in which the plaintiffs had invested was "commercial activity" under 28 U.S.C. 1605(a)(2)'s third
clause, and, because the Circuit determined it was not, the court expressly did not consider the
plaintiffs' direct effects argument. See Rong, 452 F.3d at 889. Therefore, the majority's position
27
m that case does not shed any light on the issue at bar. Iraq's invocation of Judge Karen
Henderson's concurrence in that case is equally unhelpful. Judge Henderson would have also
found there not be subject-matter jurisdiction under the FSIA because the province's action did
not cause a direct effect in the United States. See id. at 515 (Henderson, J., concurring). In reaching
her decision, Judge Henderson distinguished the alleged direct effect in Rong-"only the monetary
loss of a Chinese national resident in the U.S."-from the direct effect in McKesson-"not merely
nonpayment but also cessation of the 'flow of capital, management personnel, engineering data,
machinery, equipment, materials and packaging' between Iran and the United States." See id.
(internal citation omitted). Iraq responds that Wye Oak's loss, like that of the unsuccessful
plaintiffs in Rong, was merely monetary. Defs.' PFFCL at 97. But as previously outlined, Wye
Oak has established several other losses beyond payment due under the invoices and lost profits.
Thus, Wye Oak has shown a direct effect.consistent with Judge Henderson's position in Rong.
Based on the Court's review of the record, Iraq's nonpayment resulted in the cut-off of
capital, personnel, data, and intangible services between the United States and Iraq, a flow which
occurred daily for months. Thus, Iraq's action created a direct effect in the United States. 23
D. Iraq's Nonpayment Directly Affected U.S. Diplomatic and Military Operations in
the United States
Wye Oak's final proffered example of a direct effect is that "Iraq's breach directly affected
U.S. military and diplomatic operations." Pl.'s PFFCL at 11. In terms of harm to diplomatic
operations, Wye Oak argues there was a direct effect in the United States because various U.S.
government officials in the legislative and executive branches "became involved in attempting to
23
Iraq expresses a concern that finding a direct effect here would expose a foreign sovereign to U.S. courts' jurisdiction
any time the sovereign hires a U.S. company to carry out services. See Defs.' PFFCL at 24. The Court takes under
consideration the defendants' concern about expanding FSIAjurisdiction beyond the line provided for in this Circuit's
case law but is confident that the record here supports subject-matter jurisdiction in this highly unusual, fact-specific
instance.
28
get Wye Oak paid so the IMERP program could get back on track." Id. at 34. Additionally, because
Wye Oak's work on the "IMERP program was critical to the effort to return U.S. troops to the
United States from Iraq[,]" Wye Oak's inability to complete the program due to nonpayment
delayed the return of U.S. forces from Iraq to the United States. Id. Iraq disputes t~at its breach of
the BSA caused any effect on U.S. diplomatic or military operations, and, if it did, the effect was
only in Iraq. Defs.' PFFCL at 100-01. Additionally, Iraq argues that the IMERP program was only
a part of the overall U.S. exit strategy, such that any changes to U.S. policy due to hiccups in the
IMERP program caused by Iraq's nonpayment would not be sufficiently direct for purposes of 28
U.S.C. § 1605(a)(2)'s third clause. Id. at 101-02. The Court will address each argument in turn.
1. Involvement by US. Government Officials is a Direct Effect
It is undisputed that, after Iraq refused to pay Wye Oak's invoices, Wye Oak corresponded
with a variety of U.S. governmental officials through written, telephonic, and in-person
communications in an attempt to secure payment. Such officials included then-Senator Rick
Santorum, then-Deputy Under Secretary for International Technology Security John Shaw, the
office of then-Secretary of Defense Donald Rumsfeld, and others. See Trial Tr. 12/18/18 AM
59: 17--60:20 (Stoffel); Wye Oak I, 2019 WL 4044046, at* 15. After corresponding or meeting with
Wye Oak, certain U.S. government officials took action to attempt to secure payment for Wye
Oak. For example, upon learning of Wye Oak's nonpayment predicament, then-Senator Rick
Santorum contacted the State Department and asked what actions that department had taken to
help Wye Oak. See Pl. 's Ex. 60.6 (Letter :from Sen. R. Santorum to Asst. Sec. Kelly). The State
Department reported that it had discussed the matter with the Department of Defense. See Pl.' s Ex.
60.9--60.10 (Letter from Asst. Sec. Kelly to Sen. R. Santorum). Additionally, after Wye Oak
representatives met with Deputy Shaw, he appointed a Defense Department representative to serve
29
as an advisor to the MoD and to make weekly reports to the Defense Department. Trial Tr.
12/19/18 PM 91:19-92:5; 94:23-95:10 (Marr). Following Dale Stoffel's death, William Felix sent
a letter to then-Senator Arlen Spector as another effort to receive payment. See Pl.'s Ex. 51.
The thrust of Iraq's opposition to the notion that efforts by U.S. diplomatic officials to
secure payment on behalf of Wye Oak cannot be a direct effect centers on-and misunderstands-
the causation standard required under the FSIA. Iraq first argues that, under the prevailing law, the
"immediate consequence" of Iraq's nonpayment must be felt in the United States and, because
"[MoD]'s nonpayment was felt first by Wye Oak in Iraq[,]" this cannot be a direct effect. See
Defs.' PFFCL at 100 (emphasis in original). Iraq cites Millicom Int 'l Cellular v. Republic of Costa
Rica, 995 F. Supp. 14 (D.D.C. 1998) as authority for this proposition. In that case, cellular
telephone operators based in Luxembourg and Costa Rica alleged that the Costa Rican government
had engaged in a number of illegal activities preventing the operators' customers from placing
calls to the United States on the operators' network and instead requiring customers to place calls
on the Costa Rican government's network. See Millicom, 995 F. Supp. at 21. The district court
found that there was no direct effect in the United States because the "immediate consequence" of
the sovereign's activity was the operators' "inability to compete in that market," not the customers'
inability to place international calls to the United States. Id.There are several reasons why Iraq's position, and its reliance on Millicom, is mistaken.
The Circuit has not adopted the district court's strict reading of the immediacy requirement. To
the contrary, the Circuit has consistently rejected a "highly restrictive causation requirement" in
the FSIA context. See EIG Energy, 894 F .3d at 346 ( citing Kilburn v. Socialist People's Libyan
Arab Jamahiriya, 376 F.3d 1123 (D.C. Cir. 2004)). Most recently, the Circuit limited a direct effect
only in so far as it is not "purely trivial" or too "remote and attenuated." Valambhia, 964 F.3d at
30
1140 (citing Weltover, 504 U.S. at 618). Here, while Wye Oak certainly felt the effect of Iraq's
nonpayment in Iraq, the company also felt the effect contemporaneously, and non-trivially, in the
United States.
In a related argument, Iraq contends that the meetings and correspondence Wye Oak had
with U.S. officials do not satisfy the immediacy requirement because they "were dependent upon
intervening events and actors; Wye Oak chose to set up such meetings, the members of Congress
or their staff or Pentagon officials decided to accept those meetings, and then those individuals
chose whether or not to take any action." See Defs.' PFFCL at 92-93. 24
The two, out-of-circuit cases Iraq cites in anothereffort to support its strict construction of
immediacy are inapposite. Frank v. Antigua & Barbuda concerned an Antigua-based bank that
engaged in a ponzi scheme by selling fraudulent certificates of deposit. 842 F.3d 362, 365-66 (5th
Cir. 2016). The Fifth Circuit h~ld that the Antiguan government had not caused any direct effect
in the United States when U.S.-based investors bought the fraudulent certificates, even though
"Antigua may have helped facilitate" the scheme, because the bank's "criminal activity served as
an intervening act interrupting the causal chain between [the] Antigua[ n government's] actions
and any effect on investors." Id. at 370. In Virtual Countries, Inc. v. Republic ofSouth Africa, the
Second Circuit held that there was no direct effect in the United States when South Africa issued
a negative press release about a U.S. company's business, South African media outlets publicized
the press release, the U.S. company's potential investors and potential business partner learned of
the press release, and then the potential investors and business partner declined to engage with the
U.S. company. 300 F.3d 230, 237 (2d Cir. 2002). Both cases cited the specific concern that
24
In the same section, Iraq cites to two cases for the proposition that courts in this Circuit have not considered the
involvement of U.S. government officials in remedying a contractual breach to be a "direct effect." See Defs.' PFFCL
at 103 (citing Friedman, 464 F. Supp. 3d at 65 and Odhiambo, 764 F.3d at 45). This statement is misleading. Neither
case specifically addressed the question.
31
"[ d]efining 'direct effect' to permit jurisdiction when a foreign state's actions precipitate reactions
by third parties, which reactions then have an impact on a plaintiff, would foster uncertainty in
both foreign states and private counter-parties." Id. at 238 (emphasis added). Such a concern is not
present here. It was Iraq's actions-failing to pay the invoices-that caused the impact on Wye
Oak, which then precipitated actions or reactions by third parties (U.S. government officials).
Evidence at trial established that Iraq was aware that Wye Oak was not just any U.S.
company, but one that was closely connected to and supported by the U.S. government. Part of
Wye Oak's pitch to Iraq was that it "had government contacts throughout the world." Wye Oak I,
2019 WL 4044046, at *4 (citing Trial Tr. 12/18/18 PM 65:7-9 (Stoffel)). MoD ultimately hired
Wye Oak "at the recommendation of the United States government[.]" Wye Oak 11, 24 F.4th at
692. And "[a]lthough the IMERP program [was] an Iraqi funded program, it [was] clearly a joint
program with the US and Coalition Forces." Pl.'s Ex. 36 (Email from D. Stoffel to Capt. J.
O'Sullivan). Thus, Iraq's commercial activity, in the form of the IMERP, was inextricably tied up
in its relationship with the U.S. government, and by extension, Wye Oak's relationship with the
U.S. government. Because of these close connections, U.S. government officials' attempts to
secure payment for Wye Oak were an "immediate consequence" of Iraq's nonpayment. See
Weltover, 504 U.S. at 618.
2. Impact on US. Military Operations is a Direct Effect
Wye Oak's observation that Iraq's nonpayment had a direct impact on U.S. military
operations in the United States has even more force. Evidence introduced at trial repeatedly
illustrated the importance of the IMERP program to the U.S. military's overall strategy with
respect to Iraq after the fall of Saddam Hussein's regime. As General Petraeus testified, Wye Oak's
work on the IMERP was the "centerpiece" to "the establishment of a mechanized and armored
32
division for Iraq, starting with a battalion the would be available ... for the elections in January
of2005." Petraeus Dep. at 34:1--4. See Trial Tr. 12/17/18 PM at 36:7-10 (Clements) ("So the Iraqi
forces had to step up to the plate by the 30th of January. They needed the weapons and equipment
to do it. And the target was to equip the Iraqi armored brigade, and get them on the streets by
then"); Trial Tr. 12/19/18 AM 25:9-25 (Neal). Professor Beadle, whose "testimony was especially
convincing," Wye Oak/, 2019 WL4044046, at *11 n.3, further testified that "the obvious inference
from managing to get an [Iraqi] armed forces, which included a small element of the Air Force
and Navy as well, in due course, was the faster that he [Gen. Petraeus, through the IMERP
program] could build it, then the easier it was for the U.S. and for the Coalition troops to step
back."). Trial Tr. 12/20/18 PM 44:3-7. General Petraeus similarly added: "The entire concept for
Iraq from the U.S. and coalition perspective was I think succinctly stated by President George W.
Bush when he said, As the stand up, the Iraqi security forces, we will stand down"). Petraeus Dep.
at 29:1-5.
Communications made shortly before and after Dale Stoffel' s death underscored the
continuing importance the U.S. military placed on the program. For example, on December 2,
2004, Dale Stoffel wrote an email to Captain John "Ronnie" O'Sullivan, the deputy to Brigadier
General Clements, a key U.S. military representative on the IMERP program in Iraq, relaying his
impressions from meetings he had the previous day: "The senior Pentagon people and the
Secretary's Office are really intense and passionate about the IMERP program and its success. In
their words, there is nothing of higher priority in theater than this program with respect to its
success and speed." See PL 's Ex. 36 (emphasis added). Shortly after Dale Stoffel's death, General
Petraeus wrote to his widow emphasizing her late husband's accomplishments, particularly the
fact that "Iraq is on track to have a battalion's worth of soldiers trained and equipped prior to
33
January's elections" and "[n]one of this would have been possible without your husband's
visionary leadership, relentless drive, and complete dedication." Petraeus Dep. 26:23-27:25; Pl.'s
Ex. 43. And recall, re-equipping the Iraqi military was a necessary first step for the United States
and coalition forces to withdraw from Iraq. Petraeus Dep. at 20:19-21:2, 28:19-30:3.
In its main attempt to rebut Wye Oak's argument, Iraq again disputes the proper definition
of causation. Iraq posits that any effect that its breach may have had on overall U.S. military policy
with respect to Iraq is too attenuated to be a direct effect. Defs.' PFFCL at 101-02. In support, Iraq
cites Princz v. Federal Republic of Germany, 26 F.3d 1166, 1172 (D.C. Cir. 1994) and Energy
Allied Int'! Corp. v. Petroleum Oil & Gas Corp. of South Africa, Civ. No. H-082387, 2009 WL
2923035, at *4 (S.D. Tex. Sept. 4, 2009). In Princz, the Circuit found that the work the plaintiff
performed as a slave laborer in Poland and Germany for Nazi-supporting employers did not have
a direct effect in the United States because "[m]any events and actors necessarily intervened
between" his work and the United States' military effort against Nazi-controlled territories. 26
F.3d at 1172. In Energy Allied Int'! Corp., the district court determined that a hypothetical oil
shortage in the United States resulting from a South African state-owned oil company's refusal to
participate in a joint venture with a Texas corporation in Egypt was too attenuated to serve as a
direct effect. 2009 WL 2923035, at *4. Both cases are far afield from Wye Oak. Iraq's nonpayment
caused an impact on the U.S. military that was far from hypothetical. Multiple U.S. military leaders
linked the overall success of the U.S. mission in the Iraq with Wye Oak's work to equip the Iraqi
military and the Iraqi military's correspondil).g ability to achieve self-sufficiency. 25 Wye Oak was
25
Iraq expresses concern that there are not enough facts in the record for the Court to determine "when U.S. forces
would have departed Iraq for the U.S. had [the MoD] paid Wye Oak's Invoices by October 28, 2004." See Defs.'
PFFCL at 102. The Circuit recently rejected such "a highly restrictive causation requirement under which contributing
factors readily and predictably caused by the defendant's same act would preclude jurisdiction." See EIG Energy, 894
F.3d at 346.
34
only able to equip one Iraqi brigade, Wye Oak I, 2019 WL 4044046, at * 19. While still a success,
one brigade was not sufficient for Iraqi forces to take on enough security responsibility and allow
the coalition forces to withdraw. Id. at *3-4. And unlike in Princz, there are no intervening actors
that cut off the chain of causation between Iraq's nonpayment and the impact on the U.S. military's
readiness to leave Iraq.
Iraq was repeatedly made aware of the close relationship between Wye Oak and the U.S.
military. In July 2004, before Iraq and Wye had finalized the BSA, Iraqi Defense Minister Hazim
al-Shalan wrote to General Petraeus requesting access to coalition-controlled military equipment
depositories in Taji. See Pl.' s Ex. 2. In granting the request, General Petraeus wrote: "I fully
support the Iraqi Ministry of Defense in initiating and expediting the Iraqi Military Equipment
Recovery Project." See Pl.'s Ex. 3. He further stressed that the U.S. military would "provide all
necessary documentation and escort" for the MoD and Wye Oak delegations. Id. Representatives
from the U.S. military attended key meetings between the MoD and Wye Oak. See, e.g., Trial Tr.
12/20/18 AM 13:21-14:19, 33:3-34:25 (Marr); Pl.'s Ex. 20.6 (Letter from P. Marr to MoD); Trial
Tr. 12/17/18 PM 19:4-20:11 (Clements); Trial Tr. 12/20/18 PM 71:17-72:16 (Beadle). And the
U.S. military worked shoulder-to-shoulder with Wye Oak on its IMERP operations. See Trial Tr.
12/19/18 AM 42:1-43:4 (Neal); see Pl.'s Ex. 64 (Photographs). Thus, through statements and
actions directed to or in the presence of Iraq, the U.S. military demonstrated its commitment to
Wye Oak's work.
Iraq, seemingly recognizing this fact, accuses Wye Oak of impermissibly co-opting effects
on the U.S. military, a third party, into the direct effect analysis. See Defs.' PFFCL at 103~4. This
argument is easily dispatched of through the cases that Iraq itself cites. Most critically, the Circuit
has unambiguously stated that "[n]othing in the FSIA requires that the 'direct effect in the United
35
States' harm the plaintiff."26 Cruise Connections, 600 F.3d at 666 (citing 28. U.S.C. § 1605(a)(2)).
"The commercial activities exception requires only that the foreign government's act outside the
territory of the United States cause a direct effect in the United States." Id. (internal citation,
quotations, and alterations omitted). This requirement is clearly met here. And, as the Circuit has
counseled, the relationship between the direct effect and the plaintiffs injury is relevant to the
question of damages, not whether this Court has jurisdiction over the case. Id.
In sum, Iraq' s nonpayment of Wye Oak caused a direct effect in the United States by
disrupting a program that bore directly on the U.S. military's readiness to withdraw from Iraq.
That, along with the other bases identified above, is sufficient to abrogate Iraq's sovereign
immunity in this suit.
***
"As the FSIA cases consistently demonstrate, there is no single factual sine qua non of a
United States direct effect." Odhiambo, 764 F.3d at 46 (Pillard, J., concurring in part) (emphasis
in original). Wye Oak's case is a quintessential example of"[w]here the facts, taken together, show
that a foreign government's commercial activity has a direct effect in the United States," and thus
"claims in United States court relating to that commercial activity are not barred by the FSIA." Id.
Consistent with this tradition, the Court therefore holds that Iraq's breach of the BSA caused a
direct effect in the United States because its nonpayment to Wye Oak, a U.S. company carrying
out a program essential to U.S. diplomatic and military policy, resulted in the cut-off of the flow
26
Puzzlingly, Iraq similarly looks to side-step Exxon Mobil Corp. v. Corporaci6n CIMEX S.A., 534 F. Supp. 3d 1, 20
(D.D.C. 2021) which xelied on the same proposi.tion from Crui e Connections, by apparently arguing that the ESIA' s
Jack-of-injury-to-the-plaintiff requirement somehow ought to be viewed differently in tort and contract cases. See
Defs.' PFFCL at I 04. The Court sees no basis for this distinction. In addition, the Court is unsure what effect Iraq' s
position would even have on the current case, as both this case and Cruise Connections involved breach of contract
claims. Moreover, the Court is unsure why Iraq cites an out-of-circuit district court case, Morris v. People's Republic
of China 478 F. Supp. 2d 561 ,569 (S.D.N.Y. 2007), for a similar position, see Defr.' PFFCL at 103--04, as the case
suggests amore expan ive reading of subject-matter jurisdiction than the Circuit permits.
36
of capital, personnel, data, and intangible services between the United States and Iraq, triggered
actions by top U.S. officials, and straightforwardly impacted U.S. military operations. That is
precisely an effect that is "sufficiently 'direct' and sufficiently 'in the United States' that Congress
would have wanted an American court to hear the case[.]" Frank, 842 F.3d at 369 (quoting Tex.
Trading & Milling Corp. v. Fed. Republic ofNigeria, 647 F.2d 300,313 (2d Cir. 1981)).27
IV. CONCLUSION
This Court concludes that Iraq's breach of the BSA caused "direct effects" in the United
States for the purpose of the third clause of 28 U.S.C. § 1605(a)(2) and thus an exception to Iraq's
presumption of sovereign immunity applies. Therefore, the Court properly maintains subject-
matter jurisdiction over the case and will re-enter judgment for Wye Oak. A separate and consistent
Order shall issue this date.
SIGNED this -,...Ill- day of December, 2022.
Royce C. Lamberth
United States District Judge
27Because Wye Oak has demonstrated that subject-matter jurisdiction is proper under the theories outlined, this Court
need not consider whether additional factfinding to establish other theories of subject-matter jurisdiction is
appropriate. See Wye Oak II, 24 F.4th at 703, 704 n.3.
37