IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

No. 10-20266

TRANSCOR ASTRA GROUP S.A.,

Plaintiff - Appellee

v.

PETROLEO BRASILEIRO S.A.-PETROBRAS,

Defendant - Appellant

Appeal from the United States District Court

for the Southern District of Texas

USDC No. 4:08-CV-2072

Before JOLLY, HIGGINBOTHAM, and SMITH, Circuit Judges.

PER CURIAM:

*

This interlocutory appeal arises from the dissolution of a joint venture

between subsidiaries of two foreign parent corporations, Plaintiff-Appellee

Transcor Astra Group S.A. (“Transcor”) and Defendant-Appellant Petrobras

Brasileiro S.A. – Petrobras (“Petrobras Brazil”). We are asked to review the

district court’s denial of Petrobras Brazil’s motion to dismiss for lack of subject

matter jurisdiction. The district court held that jurisdiction extends to this suit

under the “commercial activity” exception to the Foreign Sovereign Immunities

United States Court of Appeals

Fifth Circuit

F I L E D

February 3, 2011

Lyle W. Cayce

Clerk

 Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not *

be published and is not precedent except under the limited circumstances set forth in 5TH CIR.

R. 47.5.4.

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No. 10-20266

Act. After study of the briefs, review of the relevant portions of the record, and

thorough oral arguments, we have concluded that Transcor has alleged facts

sufficient to show that its claim is based upon commercial activity carried out by

Petrobras Brazil in the United States, or elsewhere having a direct effect in this

country, and accordingly we affirm the order of the district court.

I.

Transcor is a Belgian corporation with its principal place of business in

Belgium. Petrobras Brazil is a Brazilian corporation with its principal place of

business in Brazil. From 2006 to 2008, Transcor’s U.S. subsidiary, Astra Oil

Trading NV (“Astra Oil”), and Petrobras Brazil’s U.S. subsidiary, Petrobras

America, Inc. (“Petrobras America”), co-owned and operated an oil refinery in

Pasadena, Texas (“Pasadena Refining”) and the trading partnership that

supplied Pasadena Refining with its raw materials (“PRSI Trading”). Pursuant

to a contract concluded in March 2006, Astra Oil agreed to sell 50% of its interest

in Pasadena Refining to Petrobras Brazil, and the parties agreed to form PRSI

Trading to provide the raw materials and market the refined products.

Petrobras Brazil later assigned its right to purchase the 50% stake in Pasadena

Refining to Petrobras America.

Citing disagreements about their strategic plans for the venture, Petrobras

America and Astra Oil sought to dissolve entirely their business relationship in

2007. These disagreements eventually led to discussions about Petrobras

America buying out Astra Oil’s 50% interests in the refinery and the trading

partnership. Those discussions resulted in a two-page agreement, signed by

Transcor and Petrobras Brazil on December 5, 2007 (the “letter agreement”),

which was intended to govern the terms of the buyout. The letter agreement

provided that Petrobras Brazil would purchase Astra Oil’s interest in Pasadena

Refining for $700 million; the parties would liquidate PRSI Trading; and

Petrobras Brazil “would . . . be responsible for (and would reimburse Astra for)

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all capital expenditures or other contributions incurred after October 1st, 2007

by Astra or, any affiliate, to” the joint venture. The letter agreement stated that

it “intends to fix the agreement in principle regarding the main items of the

transaction. Based on this agreement in principle, both parties will negotiate,

in good faith and as soon as possible, the text of a definitive agreement.”

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The district court found that after signing the letter agreement, Petrobras

Brazil and Transcor began to negotiate a final agreement and to draft the closing

documents. Petrobras Brazil contests this finding and argues that Petrobras

Brazil and Transcor were not parties to the 2008 negotiations; instead, Petrobras

Brazil argues, Petrobras America and Astra Oil negotiated independently of

their parent corporations. Undisputed is the fact that in 2008 Petrobras Brazil

wired approximately $202 million to Petrobras America, money that was then

used to fund Pasadena Refining and PRSI Trading. The wire transfer was made

in response to five requests from a Petrobras America employee, who stated that

the money was necessary to fund the joint venture. In a separate arbitration

proceeding, a Petrobras Brazil employee testified that in wiring these funds for

the joint venture, Petrobras Brazil was “just following in good faith” what was

written in the letter agreement.

Ultimately, the deal never closed, and Transcor now claims that the letter

agreement was an enforceable contract that Petrobras Brazil breached by failing

to conclude the buyout. Before the magistrate judge addressed the merits of this

complaint, Petrobras Brazil moved to dismiss for lack of jurisdiction and

standing. It contended, in relevant part, that because it is partly controlled by

the Brazilian government, it is immune from suit in the United States under the

Foreign Sovereign Immunities Act (“FSIA”). Transcor responded that Petrobras

Brazil is subject to suit under a statutory exception to the FSIA because it

The letter also contains an introductory sentence stating that what follows is “a 1

coordinated version of our agreements.”

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engaged in commercial—as opposed to sovereign—activity, both in the United

States and elsewhere having a direct effect in the United States.

The district court ruled that Transcor met its burden of alleging “some

facts” that Petrobras Brazil carried on commercial activity having substantial

contact with the United States. The court therefore denied the motion to dismiss

for lack of subject matter jurisdiction. Under the collateral-order doctrine, we

have jurisdiction over Petrobras Brazil’s appeal of the district court’s order.

Stena Rederi AB v. Comision de Contratos del Comite, 923 F.2d 380, 385 (5th

Cir. 1991).

II.

The Foreign Sovereign Immunities Act “provides the sole basis for

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obtaining jurisdiction over a foreign state in the courts of this country.”

Argentine Republic v. Amerada Hess Shipping Corp., 488 U.S. 428, 443 (1989).

We review the district court’s application of the FSIA de novo. Pere v. Nuovo

Pignone, Inc., 150 F.3d 477, 480 (5th Cir. 1998). To the extent the district court

has made “jurisdictional findings of fact,” they are reviewed for clear error. Kelly

v. Syria Shell Petroleum Dev. B.V., 213 F.3d 841, 845 (5th Cir. 2000) (quoting

Robinson v. TCI/US W. Commc’ns Inc., 117 F.3d 900, 904 (5th Cir. 1997)).

“Under the FSIA, a foreign state is presumptively immune from

jurisdiction of the United States courts; unless a specified exception applies, a

federal court lacks subject-matter jurisdiction over a claim against a foreign

state.” UNC Lear Servs., Inc. v. Kingdom of Saudi Arabia, 581 F.3d 210, 215

(5th Cir. 2009), cert. denied, 130 S. Ct. 1689, and cert. denied, 130 S. Ct. 1713

(2010) (internal quotation marks and citations omitted). For purposes of the

FSIA, a “foreign state” includes “an agency or instrumentality of a foreign state.”

Bd. of Regents of Univ. of Texas System v. Nippon Tel. & Tel. Corp., 478 F.3d

The FSIA is codified at Title 28, United States Code, §§ 1330, 1332, 1391(f), 1441(d),

2

and 1602–1611.

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274, 278 (5th Cir. 2007) (quoting 28 U.S.C. § 1603(b)). It is undisputed that

Petrobras Brazil is an agency or instrumentality of Brazil.

The issue presented in this appeal is whether the commercial activity

exception to the FSIA applies in this case. Under that exception, “a foreign state

shall not be immune from the jurisdiction of United States courts in any case ‘in

which the action is based upon a commercial activity carried on in the United

States by the foreign state.’” Saudi Arabia v. Nelson, 507 U.S. 349, 356 (1993)

(quoting 28 U.S.C. § 1605(a)(2)). “Commercial activity” is defined as “either a

3

regular course of commercial conduct or a particular commercial transaction or

act. The commercial character of an activity shall be determined by reference

to the nature of the course of conduct or particular transaction or act, rather

than by reference to its purpose.” 28 U.S.C. § 1603(d). The commercial activity

must have “substantial contact with the United States.” Id. § 1603(e). Transcor

bears the burden to “produce some facts to show that the commercial activity

exception to immunity applies,” but Petrobras Brazil “retains the ultimate

burden of proof on immunity.” See Arriba Ltd. v. Petroleos Mexicanos, 962 F.2d

528, 533 (5th Cir. 1992).

We hold that the commercial activity exception to the FSIA applies in this

case because Transcor’s claim is—at least in part—“based upon” Petrobras

Brazil’s commercial activities in the United States. For purposes of the FSIA,

The commercial activity exception provides specifically that a foreign state or 3

instrumentality thereof may be subject to suit in the United States where

the action is based upon a commercial activity carried on in the United States

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

connection with a commercial activity of the foreign state elsewhere; or upon an

act outside the territory of the United States in connection with a commercial

activity of the foreign state elsewhere and that act causes a direct effect in the

United States. 

28 U.S.C. § 1605(a)(2).

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a claim is based upon “those elements of [the] claim that, if proven, would entitle

a plaintiff to relief under his theory of the case.” Nelson, 507 U.S. at 357.

Transcor’s breach-of-contract claim requires it to establish: “(1) the existence of

a valid contract; (2) performance or tendered performance by the plaintiff; (3)

breach of the contract by the defendant; and (4) damages sustained by the

plaintiff as a result of the breach.” Mullins v. TestAmerica, Inc., 564 F.3d 386,

418 (5th Cir. 2009) (internal quotation marks and citations omitted). The FSIA

jurisdictional inquiry requires us to “isolate those specific acts of the named

defendant that form the basis of the plaintiff’s suit.” de Sanchez v. Banco

Central De Nicar., 770 F.2d 1385, 1391 (5th Cir. 1985). We conclude that the

following commercial activities having substantial contact with the United

States are attributable to Petrobras Brazil and form the basis for at least one

element of Transcor’s claim:

(1) the $202 million payment from Petrobras Brazil to Petrobras America,

which evidences the existence of a valid contract (i.e., the letter agreement)

between the parties and partial performance thereunder; and

(2) the negotiations in the United States conducted by Michael Ditchfield,

who was transferred by Petrobras Brazil from its Argentinian subsidiary to

Petrobras America after the signing of the letter agreement and who, by his own

admission, worked closely with lawyers for Petrobras Brazil and with Astra Oil’s

CEO to negotiate a buyout agreement in accordance with the letter agreement.

We note also that the district court was not clearly erroneous in

determining that buyout negotiations took place in the United States concerning

ownership of a U.S. corporate entity pursuant to the terms of the letter

agreement. In the light of this observation, we further conclude that Petrobras

Brazil’s letter agreement with Transcor “cause[d] a direct effect” in the United

States, for purposes of jurisdiction under the FSIA, in the sense that it prompted

these further negotiations.

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Because these activities are sufficient to sustain Transcor’s burden of

producing “some facts” to show that its claim is based upon Petrobras Brazil’s

commercial activity either carried out in the United States or having a direct

effect here, we need not proceed any further. We hold that the district court has

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subject matter jurisdiction over this suit under the commercial activity exception

to the Foreign Sovereign Immunities Act, and we therefore AFFIRM the district

court’s order denying the motion to dismiss.

AFFIRMED.

 Specifically, we find it unnecessary to address the parties’ additional arguments as 4

to whether Petrobras Brazil’s intervention in a related arbitration proceeding after the filing

of the instant complaint may confer jurisdiction under the commercial activity exception, and

whether the “direct effects” version of the exception was satisfied when Petrobras Brazil failed

to close the buyout and remit payment in 2008.

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