l c a quintessential commercial transaction and it turned out that the entire transaction was an unfortunate scheme to defraud u s investors out of their property in china now this case has been around unfortunately for a long time and i read the case the hard times probably then i'd like to but once again as i began to prepare for today and i took a step back i was once again struck in reminded that when you look at the case law that covers all the circuits in the supreme court our case isn't like any of the cases where the courts say no this really isn't for the u s courts and courts have said that the foreign sovereign immunity is act sort of a complicated mass not in quite those words but when you review the case law the theme is almost really you know it when you see it even when you get down to the supreme court's decision in sacks and you get cases like sacks where the supreme has said look a lady falling on the railroad tracks in austria and isn't really have any connection to the united states except she bought her ticket here that's not the kind of case that we're going to say falls within the commercial activities exception but on the other hand we get cases that come after saks like atlantic a holdings where the courts have said when you direct misrepresentations to people in the united states in the sense of a business transaction securities fraud things like that those are the kind of cases where we're going to take a different look and in my case in this case when the tie to the united states is over the course of a couple of years different people and i'll get to the parties issue that we've been briefed in a moment different people went to the united states targeted my client specifically buy this factory send us your  money and then successfully grab that u s companies technology in china force it out send a pittance to my client to a u s bank account here in los angeles that's the kind of case that congress  suit was about because they're really fraud based claims your case is harder because so much of it was really based on contractual relationship in the breach in the termination that really occurred in china can you talk about particularly for the contract based claims what evidence of direct effects or allegations of direct effects terminations of the contractual relationship have in the united states sure  and i i would like a chance to address whether or not we are actually closer to atlantic holdings but let me turn to direct effects first so i think defendants essentially do argue that the case is based on acts in china in connection with commercial abroad so they centrally can see that point and the crux of the question is where is the direct effect in the united states for the misconduct abroad so let me start with one piece of the puzzle on that which is that there's a lot of case law talking about mere financial los not being enough and that's the phrase that's used and i agree that we're a financial loss is not enough but what does that really mean in the context of the case law atlantico holdings actually done really gives the court something important to think about there which is that in most of those mere financial loss cases we're talking about you know a downstream a vent the price of oil changes that affects someone somewhere in the u what atlanta holdings points out is that when you're talking about harm to a corporation where the injury itself that's alleged in the case is economic injury that isn't the sense of mere financial loss of the cases are talking about so we have an issue here where there is financial loss to my client and it's relevant my client is a us company it's suffered financial loss here and the supreme court in well to over even endorse the second circuit's view that an act that places the for plaintiff in immediate financial peril is enough so we do have the financial loss piece which i don't think can be ignored in addition to the financial loss my client lost its bargained for contract the two thousand and five contract as a result of the two thousand and eight there were effects on us companies here when we start was wells art wells our is a us company with whom my client had a contract that it could not fulfill as a result of the want wrongful conduct of the defendants abroad the response that we get from the defendants on this is well that wells our contract which is unable to fulfill its order to a u s company as a result of the defendant's wrongful conduct that's a direct effect that would satisfy any of the cases that we've cited we also believe that there were other s contracts that were lost as a result of this scheme the problem that my clients have is that they're able to testify to that fact and we have to declarations from j c chowk and tim chao talking about that very topic but when the two thousand and eight contract terminated this whole deal the defendants kept all of the documents and what the record shows you is that one the defendants have said over and over again only both chows my clients j c chow and tim chow intercontinental would know about the u s contracts they're the only ones who would know because they were running the factory at the time and second the defendants have destroyed or lost materials from that time frame now i'm not talking about spoliation whether it was done intentionally but the evidence is that there were other u s contracts that were lost then the other direct fact is your honor when it came to unwinding this whole deal in two thousand and eight my client was to receive payment in new york i mean sorry in los angeles at the international commercial bank of china and adler one and two both from this court teaches even not a small amount could do it the cases like adler cases like cider him and cases like atlantic and tell us that the difference as simplistic as it may be is what's happening in the united states and how does that relate to what occurred abroad and you're on right in after the contract was signed in two thousand and five was it and money was investment was made how long did the parties succeed in business together before it all started to fall apart well the parties were really in business together in that sense my client bought the factory began to run it believe where things began to fall apart and by two thousand and eight is when the second contract was entered into but i need to i need to confirm those exact dates so you know that's fine i can i can look at the record again so if we were to analyze this case as this was your theory is that there was a fraudulent scheme from the beginning so you're tying it all the way back from the initial negotiations all the way through signing of the two thousand and five contract and then beyond when it all fell apart there was some sort of fake fraudulent scheme hewing the fact close to atlanta if we were to disagree with that approach and say this was really  contractual based relationship where the contract was executed oversees all of the the operating of the business and purchase of this factory was done overseas can we then separate some of your fraud based claims from the contractual claims and say but well the now post analysis may differ with regard to the fraud claims because a lot of the misrepresentations were done in the united states and if the answer is yes we can separate that then what's your best case for that approach i guess i'm not sure what the court means by separate the two you've got contract based claims right got fraught based claims you want it to be one big fraudulent scheme and that's the grab them and of the case under your theory if we were to disagree with that and look at this case as their contract based claims which would be barred by the foreign sovereign immunit but let's take a closer look at the fraud based claims which involve a lot of misrepresentations that appeared to be done in the us can we separate those two claims i think i understand the court's question and if we can separate the two claims what case best stands for that proposition and i think the answer is that well let me start with tax right the supreme court has said in sacks we are not addressing today what we do when of contract in breach of contract here the real problem in of the claim is that there were fraudulent misrepresentations made in the offering materials for those securities i don't think there's been a case that has since sachs tackled this and i don't disagree with the court that the breach of contract claim does seem to be more rooted in china than the fraud claim but really the core i do think that the core of our claim is this was a scheme that there were misrepresentations made at the outset that it would approve and protect my clients investment help resolve business disputes in its favor receive ownership of the factory and would be fully responsible for those debts and part of that is i mean to us that is the core of what happened here it was all a fraudulent scheme i i don't think the court can separate each cause of peanut in damages while the breach of contract claim might not but otherwise the damage would the underlying economic damage would be would be the same as it matter no because if the fraud claims arise from the mis read ledge misrepresentations nade in the united states that's one prong of the exemptions and then the contract claims that it is pretty clear the breach occurred in china that that would be the direct then you do to show the direct effects right if you were going to separate them and analyze them under different progs if the breach of contract claim is what we're focused on then direct effects or i think the problem to also would work because prong two deals with acts performed in the united states in connection with commercial activity  so there's definitely acts that are taking place in the united states that may be in connection with that commercial activity abroad under however you you view the activity or what the grabbing menace i think we get to the same place and yes i think direct effects is the easiest pronk to achieve if you believe that really the grab them and of the cases in state and personal jurisdiction arguments that were made and the reason for that is those are going to be with the district court didn't consider this your court did not and the court has discretion i grant you and often the court will remain but this was fully brief below twice and the case has been pending for a very long time that whatever the result if we are sent back to brief those issues i'm confident we'll be back here again two years from now and so we think the court can no issues on this appeal and we would ask that it do so i see them running short on time so i'd like to reserve the remainder of my time but all right thank coun industrial holdings through company which is a state owned company that owns and manages properties for the city of will hon not for who be a province there is no dispute that who bay province and ho ldings are presumptively immune from suit and we're back before this court after a year of very intensive proceedings where in for continental or i see had an opportunity to amend an opportunity to see jurisdictional discovery and we still don't have any facts that they can point to to show clear error in the district or its jurisdictional findings and we believe the judgment of dismissal for lack of jurisdiction should be affirmed we think sax is very clear that in determining whether a suit is based upon a particular conduct you have to look at the grab them and of the suit sacks rejected the  idea that you would look at an element by element analysis of the conduct and nelson rejected the claim by claim approach sacks in fact noted that nelson had looked out the suit as a whole rather than going through and assessing claim by claim so we think that in deciding the based upon question here as the district court did the court should look out look for the grob of men of the suit what is the conduct that underlies every one of i c's claims and that conduct here is the breach and interference of the two thousand and five contract in china without those events in china there would be no claim there'd be no breach of contract claim there was the mention of footnote two out of the sax case and we would say there is whatever case the court supreme court was keeping open for in that reference and footnote to this is not one of those cases in fact this case actually is similar to the failure to warn claim that was at issue in sacks where there was nothing inherently wrong feel about the sale of the your real pass and there was there was no harm to the plaintiff until you got to the events that occurred in austria when the when she was actually injured here or we even if we focus on support for an investment but even setting that aside i see wasn't harmed until they took their money they went to china they bought a factory and things didn't go the way they had hoped in china so the injury occurred in china from all of the events that occurred in china and so we would believe that the based upon prong for the government this suit is the events in china and that's i think the big he wanted one of the distinctions with atlanta cuz you know the elantra that makes clear this hard to rank and made clear that these downstream effects to a u s entity are not were executed contracts with third party and u s corporations that were not fulfilled as a result of the breach in breach of the contract in china to that that is the allegation here and the supreme court in well to over made clear that for in effect in the u s to qualify as a direct effect for the commercial activity exception that the effect must follow as an immediate consequence of the defendant's activity and we have seen in a number of cases acknowledging that where a contract contemplates performance in the united states that the breach of that contract could result in a direct effect in the united states this court noted what about what counsel said about the last contract with a forget the company's name now they had a contract that they couldn't fulfill because of the conduct that occurred three of the excerpts and that that's a contract between i i see which is identified in the contract as a chinese company the contract was executed in china it does not provide for any us place of delivery in fact the only reference to performance is this f o b seller contract that would would indicate that the risk of loss would pass to the buyer when the product is given to the transport in china the district court noted there are all sorts of other uncertain terms in that contract such as you know price timing where the delivery even if you're just giving it to the transport where is that going to go and all of that would need to be the subject of further negotiations and further agreements before you could even get to some potential downstream effect in the united states and given that  effect it is several steps down the road it from the breach of the two thousand and five contract in china it would be after further negotiation after further agreement and after i see is own breach of the contract that is not the immediate consequence that well tov are contemplated and that's where it is that the district court noted a number of courts have recognized that you can't have that immediate consequence from the from the breach of the contract ensued unless you have a tie to these u s contracts in that two thousand and five agreement and not something as a district court  found and does not is not disputed we don't have here there are some allegations in this case that intellectual property that belong to the plaintiffs was of use their words effectively stolen in this case and incorporate first i just know there's there are no infringement or mis appropriation claims in the sloss suit on which the court could ground jurisdiction been even even so a foreign ip infringement which is what we have here does not have a direct effect in the united states just because the plaintiff is located here that's the bell helicopter case and here are all of the infringement that is alleged to have occurred happened overseas in china began with multiple misrepresentations targeted to a company in the united states to induce them into entering into this relationship and then that led to the conduct in china so what do we do with all of the misrepresentation allegations in this case and how does that fit into the analysis of the contractual based claims or your honor the misrepresentation claims i you know it would first step back and note that all of that is based on statements allegedly made by the mayor of rouhani or only at a single meeting in los angeles in two thousand and three that meeting was followed by two years of extensive negotiations where mr chow we went to china he went to wu han to see the factory was going to buy it went to hong kong that all of that that the contract was signed overseas you know grounding jurisdiction and the comments of a city official who did not have authority to be talking on behalf of who bay province i'm happy to talk further about that i also do not have authority to be speaking on behalf of holdings is one far removed from the conduct that actually injured the plaintiff which all occurred in china and also is not sufficiently significant to constitute you know the sort of significant contacts with the us that would be needed to trigger the commercial activity exception and as i noted that we don't think that conduct would be sufficiently significant to ground jurisdiction we also would note that the district court found and we think the record you know amply supports that mayor lee in whatever he was doing did not have actual authority to act on behalf of who a prominent and there's no dispute here that actual authority is what he would need to have to be able to to be able to attribute a ruling jurisdiction through his conduct the district court looked at for example the declaration of professors out the dean of the law school his declaration was an rebutted and he went through in great detail in section one of his declaration all of the the structure and explained why a city's mayor like mayor lee does province it in gauged in commercial activity of its own and it did not have the day to day control over will one holdings that would be needed and certainly merely did not have actual authority to work for it  and with respect to han holdings and who bears well we don't have the you know the conduct or sorry the suit here is based upon the events in china with respect by counsel noted act of state were to be considered that it would be appropriate to send those are those those issues back to the district court to make the necessary factual findings in the first instance as the court does  questions i think the court thank you very much coun was led down this path into this transaction because a group of government officials came to los angeles met with him and said you come you negotiate you do this contract and we're going to make sure you're taking care of and it took a while after he got there and got the factory running and turning a profit for that scheme to turn around the council made reference to clear error there really are no truly any facts that are in dispute in the district court or ultimately the question of whether there was authority things like that those are going to be legal conclusions at this court's going to draw on what is largely an undisputed record i would council seems to suggest that there wasn't really a contract because not all the terms were agreed to for example where performance was to take place here i don't know that that was the position but if it was that's that's absolutely not true that the records say it was given to the corner there's a signed contract what's that what council is referring to is that there wasn't a place identified in this contract for the parts and things that had been negotiated with wells are to be shipped but you can see in the contract that wells art is the purchasing party it's located in pomona there's an insurance references to marine shipments do we know that the contract was in fact breached and fortunately yes mr chow both of the chow declarations explain what happened when the cases talk about a direct and immediate consequence they mean things like oil prices aren't affected because of what happened this was a direct legally significant act in adler the direct effect was that adler used the us meals and wires to commit bribery it doesn't mean that there has to be in it just doesn't mean what council wants it's i mean that intellectual property point that was referred to were not the infringement isn't really the issue the issue is our client took that machine over to china and it was kept and they don't have it anymore they lost to that property and just in clos g because i know that i'm i'm out of time if the court doesn't have their questions i would just say that congress and the fs wanted to recognize that when government act like commercial actors when they go and buy and sell businesses then their immunity from suit is gone and the actual authority the point that was made it's absolutely there my client declaration talks about all of the times when the government officials went over to the u s that's undisputed in commercial they went on a trip that the defendants admit was sanctioned by the huge government some of those officials it's undisputed in this record went over and met with my client the people who did made the misrepresentations that are at the heart of this case it's undisputed and it's commercial and after that meeting this is in the chowder multiple who by officials confirmed that the event essentially they ratified it if they didn't have the authority to go there when they did all of the undisputed evidence shows that they agreed that it was and then holdings defendant holdings undisputed went on to negotiate a deal with my client through faxes and letters that were directed here who bay and this is my very last point who pay the government required revisions to these contracts and only would approve the contract with those revisions made that's commercial activity by who bay i think the court writes time only to ask that the court reverse and