Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caDC-93-07135/USCOURTS-caDC-93-07135-0/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 

---

<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued November 10, 1994 Decided January 20, 1995

No. 93-7135

GEORGE JANINI, ET AL.,

APPELLANTS

v.

KUWAIT UNIVERSITY,

APPELLEE

Appeal from the United States District Court

for the District of Columbia

(No. 92cv00134)

Stephen M. Creskoff argued the cause for the appellants. Yousif Sulfab Ahmed and Adnan M. Waked

entered appearances pro se.

Daniel B. Silver argued the cause for the appellee. On brief was Julie A. Waddell.

Before SENTELLE, HENDERSON and TATEL, Circuit Judges.

Opinion for the court filed by Circuit Judge HENDERSON.

KAREN LECRAFTHENDERSON, Circuit Judge: The appellants, former employees of appellee

Kuwait University (University), brought this action to recover damages allegedly flowing from the

University's unilateral termination of their employment contracts. The district court dismissed the

action on the ground that the University, as an arm of the Kuwaiti Government, is entitled to

immunity under the Foreign Sovereign Immunity Act, 28 U.S.C. §§ 1330, 1602 et seq., (FSIA)

because the termination, which resulted from a Kuwaiti Government decree abrogating all contracts

with non-nationals, was a "sovereign" act. Because we conclude the district court incorrectly

characterized the abrogation decree, and its attendant termination of contracts, we vacate the order

dismissing the action and remand. On remand the district court is to determine whether the

University is otherwise entitled to sovereign immunity under the FSIA or, if not, whether the action

USCA Case #93-7135 Document #97670 Filed: 01/20/1995 Page 1 of 6
<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

1The motion also sought dismissal based on the Act of State and forum non conveniens

doctrines and on improper service. 

should be dismissed on the alternative grounds asserted in the University's motion below.

The facts material to the single issue presented are largely undisputed. The three appellants

were employed by the University when Iraq invaded Kuwait on August 2, 1990. Janini, the only

appellant to submit briefs and participate in oral argument, is an American citizen who applied for a

chemistry teaching position at the University in 1977, through the Kuwait University Office (KUO)

located inWashingtonD.C. Janini was hired and taught at the University, under successive contracts,

from September 1977 until the summer of 1991. His last employment contract was for a four-year

term, beginning in 1989, and required nine months' notice before termination. He was at his Maryland

residence, on summer leave from the University, when Iraq invaded Kuwait in August 1990.

In early 1991 the Kuwaiti Council of Ministers issued a decree, drafted in Arabic, which

provided in relevant part that "contracts concluded between the Government and those non-Kuwaiti

workerswho worked for it ...shallbe considered automaticallyabrogated because ofthe impossibility

of enforcement due to the Iraqi invasion which is considered to be a case of force majeure." Joint

Appendix (JA) 208 (emphasis in certified translation). According to Janini, despite subsequent

contact with the KUO, he was unaware of the decree until after he received a letter from the

University dated August 21, 1991 informing him his "services as a chemistry professor were not

needed." JA 97.

On January 14, 1993 Janini and 13 other former Universityemployees commenced this action

seeking pay and other benefits allegedly due on account of the contract termination. The University

moved to dismiss for lack of subject-matter jurisdiction claiming, inter alia, it was entitled to

sovereign immunity under the FSIA.1 The plaintiffs countered that the University was not immune

because the action fellwithin the commercial activityexceptionsto the FSIA, 28 U.S.C. § 1605(a)(2).

By memorandum and order dated March 31, 1993, the district court granted the University's motion

on the sovereign immunityground, reasoning that the plaintiffs' claims were "based upon" a sovereign

actthe wholesale abrogation of all contracts between Kuwait and non- nationalsrather than

USCA Case #93-7135 Document #97670 Filed: 01/20/1995 Page 2 of 6
<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

commercial activity that might trigger the section 1605(a)(2) exceptions. On appeal Janini offers

various argumentsfor reversal but we need address only the single issue decided by the district court:

whether the challenged action is based upon sovereign, rather than commercial, activity and therefore

outside the scope of the section 1605(a)(2) exceptions. We conclude that it is not.

The FSIA provides foreign governments with broad immunity from suit in United States

courts:

Immunity of a foreign state from jurisdiction

Subject to existing international agreements to which the United States is a

party at the time of enactment of this Act a foreign state shall be immune from the

jurisdiction of the courts of the United States and of the States except as provided in

sections 1605 to 1607 of this chapter.

28 U.S.C. § 1604. Among the statutoryexceptions to this immunity are three involving "commercial"

activity, all invoked by the plaintiffs below:

(a) A foreign state shall not be immune from the jurisdiction of courts of the

United States or of the States in any case

...

(2) in which the action is based upon a commercial activity carried on

in the United States by the foreign state; or upon an act performed in the

United States in connection with a commercial activity of the foreign state

elsewhere; or upon an act outside the territory of the United States in

connection with a commercial activity of the foreign state elsewhere and that

act causes a direct effect in the United States;

....

28 U.S.C. § 1605(a)(2). On its face this language deprives a foreign state of its immunity only in an

action based upon "commercial" activity or certain acts connected therewith. It cannot confer

jurisdiction over a foreign state "where a claim rests entirely upon activities sovereign in character,

... regardless of any connection the sovereign acts may have with commercial activity." Saudi Arabia

v. Nelson, 113 S. Ct. 1471, 1478 n.4 (1993). In reviewing the district court's decision, therefore, we

must first identify those acts upon which the action is (or is not) based. Like the district court, we

conclude the action is based upon the termination of the employment contracts and not, asJanini has

argued, upon any pre-employment negotiations or recruitment conducted in this country through the

KUO.

USCA Case #93-7135 Document #97670 Filed: 01/20/1995 Page 3 of 6
<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

2At this stage, it appears that the termination occurred entirely outside this country, precluding

the plaintiffs' reliance on subsection (a)(2)'s second exception (for an "action ... based ... upon an

act performed in the United States in connection with a commercial activity of the foreign state

elsewhere"). 

In Saudi Arabia v. Nelson, the Supreme Court construed the phrase "based upon" in section

1605(a)(2) to "denot[e] conduct that forms the "basis,' or "foundation,' for a claim," and concluded

it "is read most naturally to mean those elements of a claim that, if proven, would entitle a plaintiff

to relief under his theory of the case." Id. at 1477-78. Applying this reading, the Nelson Court held

that the plaintiff American couple's action for false imprisonment and assault in Saudi Arabia,

allegedly inflicted on the husband by the government in retaliation for hisreporting safety hazards at

the Saudi hospitalwhere he worked, did not come within subsection (a)(2)'sfirst clause as one "based

upon" his recruitment and hiring in this country, even though the latter activity "led to the conduct

that eventually injured" the plaintiffs. Id. at 1478. Rather, the Court concluded, the action was based

upon "torts" perpetrated abroad, namely Saudi Arabia's "intentional wrongs" and "negligent failure

to warn," the acts that allegedly caused the injuriesfor which the plaintiffssought compensation. Id.

Similarly here, the action is based upon the conduct that caused the losses alleged, namely the

termination ofthe employment contracts, and not upon pre-employment contact with the KUO in this

country. Cf. Goodman Holdings v. Rafidain Bank, 26 F.3d 1143, 1145-46 (D.C. Cir. 1994) (action

to recover for nonpayment of funds due under letters of credit issued by Iraqi national bank held not

"based upon" other Iraqi banking activities in this country).2

Having concluded that this action is based upon the termination of the plaintiffs' employment

contracts, we next review the district court's crucial determination that the termination was a

sovereign act not subject to section 1605(a)(2)'s commercial activity exceptions. For the following

reasons, we reject that holding.

In deciding whether particular activity is sovereign or commercial we must ask "not whether

the foreign government is acting with a profit motive or instead with the aim of fulfilling uniquely

sovereign objectives" but "whether the particular actions that the foreign state performs (whatever

the motive behind them) are the type of actions by which a private party engages in "trade and traffic

USCA Case #93-7135 Document #97670 Filed: 01/20/1995 Page 4 of 6
<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

or commerce.' " Republic of Argentina v. Weltover, Inc., 112 S. Ct. 2160, 2166 (1992) (quoting

Black's Law Dictionary 270 (6th ed. 1990)) (emphasis in opinion). Thus, a state engages in

commercial activity "where it exercises "only those powers that can also be exercised by private

citizens,' as distinct fromthose "powers peculiarto sovereigns.' " Nelson, 113 S. Ct. at 1479 (quoting

Weltover, 112 S. Ct. at 2166). "Put differently, a foreign state engages in commercial activity ... only

where it acts "in the manner of a private player within' the market." Id. (quoting Weltover, 112 S.

Ct. at 2166). Applying this approach, the Weltover Court concluded that, in issuing bonds to

restructure debt, Argentina had "participated in the bond market in the manner of a private actor" and

therefore engaged in a "commercial activity," 112 S. Ct. at 2167-68, while the Nelson Court held that

SaudiArabia's alleged wrongful arrest, imprisonment and torture of the plaintiff husband constituted

an abuse of the state's police power, the exercise of which is "peculiarly sovereign in nature," 113 S.

Ct. at 1479. Kuwait's alleged misconduct here, like Argentina's in Weltover, is commercial activity

that may be subject to the subsection (a)(2) exceptions.

Contrary to the district court's conclusion, there is nothing "peculiarly sovereign" about

unilaterallyterminating anemployment contract. Private parties often repudiate contracts in everyday

commerce and may be held liable therefor. See generally Restatement (Second) of Contracts ch. 10,

topic 3 ("Effect of Prospective Non-Performance"). That the termination here may have been

accomplished by a formal decree of abrogation does not affect its commercial nature. Nor does

Kuwait's characterization of the invasion as a "force majeure" which necessitated abrogation of all

contracts with non-nationals. As we explained above, Kuwait's reasons for terminating the contracts

are immaterial to our inquiry. See Weltover, 112 S. Ct. at 2167 ("[I]t is irrelevant why Argentina

participated in the bond market in the manner of a private actor; it matters only that it did so."). So

long as the act of termination is a commercial one, of the sort in which "private players" routinely

engageas we have found it to beit is subject to the section 1605(a)(2) commercial activity

exceptions.

We emphasize that we have not determined this action falls outside the immunity conferred

by the Act. Many questions remain regarding the effect, if any, of the commercial activity exceptions.

USCA Case #93-7135 Document #97670 Filed: 01/20/1995 Page 5 of 6
<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

The district court decided and we have reviewed only one aspect of the immunity inquiry: whether

this action is based upon "commercial" rather than "sovereign" activity. There remains the question

whether the activity, which we conclude is commercial, was "carried on in the United States" or, if

not, was either "an act performed in the United States in connection with a commercial activity ...

elsewhere" or "an act outside the territory of the United States in connection with a commercial

activity ... elsewhere" that "causes a direct effect in the United States." As the district court did not

address these primarily factual issues, we must remand the case for further proceedings. See Millen

Indus., Inc. v. Coordination Council, 855 F.2d 879 (D.C. Cir. 1988) (remanding case against foreign

state for determination of jurisdictional facts under FSIA).

So ordered.

USCA Case #93-7135 Document #97670 Filed: 01/20/1995 Page 6 of 6