IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

No. 15-10717

JOAN GALE FRANK; JON A. BELL; DOCTOR SAMUEL BUKRINSKY; 

JAIME ALEXIS ARROYO BORNSTEIN; PEGGY ROIF ROTSTAIN; JUAN 

C. OLANO; JOHN WADE, in his capacity as trustee of the Microchip ID 

Systems, Inc. Retirement Plan, on behalf of themselves and all others 

similarly situated, 

 Plaintiffs–Appellees,

v.

THE COMMONWEALTH OF ANTIGUA AND BARBUDA, 

 Defendant–Appellant.

__________________________

Cons. w/ No. 15-10788

THE OFFICIAL STANFORD INVESTORS COMMITTEE, 

 Plaintiff–Appellee,

v.

ANTIGUA AND BARBUDA, 

 Defendant–Appellant.

Appeals from the United States District Court

for the Northern District of Texas

Before WIENER, PRADO, and OWEN, Circuit Judges.

United States Court of Appeals

Fifth Circuit

FILED

November 22, 2016

Lyle W. Cayce

Clerk

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EDWARD C. PRADO, Circuit Judge:

These consolidated cases involve Defendant–Appellant, the 

Commonwealth of Antigua and Barbuda (“Antigua”), and its alleged 

involvement with the Stanford Ponzi scheme. As a foreign nation, Antigua 

challenged the district court’s jurisdiction in each suit under the Foreign 

Sovereign Immunities Act (“FSIA”). The district court determined that it had 

jurisdiction over the suits under both the commercial activity and waiver 

exceptions of the FSIA. Antigua appeals these rulings. We REVERSE in part 

and REMAND.

I. FACTUAL AND PROCEDURAL BACKGROUND

The consolidated cases involved in this appeal are: (1) No. 15-10717, 

Frank et al. v. Commonwealth of Antigua & Barbuda and (2) No. 15-10788, 

Official Stanford Investors Committee v. Antigua & Barbuda. Plaintiffs in the 

first suit, the “Frank suit,” are individual customers1 of Stanford International 

Bank, Ltd. (“SIBL”) that “had money on deposit at SIBL, and held [certificates 

of deposit (“CDs”)] issued by SIBL.” Plaintiff in the second suit, the Official 

Stanford Investors Committee (“OSIC”), the “OSIC suit,” is a court-appointed 

committee representing the interests of SIBL depositors and the courtappointed receiver and receivership estates. Defendant–Appellant Antigua is 

an island nation located in the Caribbean. Both the Frank and OSIC suits were 

filed over Antigua’s alleged involvement with the Stanford Ponzi scheme and 

were consolidated on appeal solely to address whether the district court has 

jurisdiction over Antigua under the FSIA. 

 

1 The Frank suit was filed by several individuals as a class action, but, for clarity, we

will refer solely to the first named individual, Joan Gale Frank, on behalf of the potential 

class. 

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A. Stanford Ponzi Scheme

To understand the underlying allegations in both suits, a brief 

explanation of the Stanford Ponzi scheme is required.2 Allen Stanford owned 

and operated multiple financial entities, including the SIBL, which was an 

offshore bank located in Antigua. Janvey v. Democratic Senatorial Campaign 

Comm., Inc., 712 F.3d 185, 188 (5th Cir. 2013). Through these entities, 

Stanford sold CDs to investors, promising exceptionally high rates of return. 

Id. Most of the funds raised from the sale of these CDs were never invested, as 

promised, but were used to pay back other investors in the scheme. Id. When

the scheme collapsed in 2009, Stanford had sold over $7 billion in fraudulent 

CDs. Id. at 188–89. Stanford was subsequently convicted of multiple federal 

crimes and was sentenced to 110 years’ imprisonment. United States v. Kuhrt, 

788 F.3d 403, 412 (5th Cir. 2015); Janvey, 712 F.3d at 189.

B. Antigua’s Alleged Involvement in the Scheme 

The primary allegation in both the Frank and OSIC suits is that Antigua 

acted as an active and willing participant in Stanford’s scheme and knowingly 

provided Stanford and his businesses a safe harbor from regulatory scrutiny. 

Plaintiffs in both suits allege that Stanford and Antigua engaged in a quid pro 

quo relationship in which Stanford provided Antigua financial incentives to 

encourage and ensure its involvement in his scheme by bribing public officials 

and providing loans to Antigua, which were never repaid. Specifically, 

Plaintiffs allege that the “loans were merely a way to transfer the proceeds of 

the Ponzi scheme to Antigua.” In exchange for the loans, they allege that

“Antigua assisted Stanford by conferring legitimacy on the fraudulent 

enterprise and on Stanford himself, providing assurance to investors that the 

 

2 For more information on the Stanford Ponzi scheme, see United States v. Stanford, 

805 F.3d 557 (5th Cir. 2015), and Janvey v. Democratic Senatorial Campaign Comm., Inc., 

712 F.3d 185 (5th Cir. 2013). 

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activities of SIBL and Stanford were legitimate and subject to regulatory 

authority.” 

Plaintiffs contend that as part of its involvement in the Ponzi scheme, 

Antigua allowed Stanford undue influence over the regulations his 

organizations would be subject to. They also allege that Stanford exerted 

undue influence over the individuals charged with ensuring that he and his 

organizations were in compliance with the relevant regulations. Crucial to 

Antigua’s alleged involvement with Stanford’s scheme was the Financial 

Services Regulatory Commission of Antigua (“FSRC”) and Leroy King, the 

FSRC’s Administrator and Chief Executive Officer, who were tasked with 

regulating the SIBL. Plaintiffs allege that Stanford bribed King in order to 

allow the SIBL to escape regulatory scrutiny from the FSRC. 

C. Frank Suit

In July 2009, Frank filed a complaint on behalf of himself and similarly 

situated individuals alleging various claims under the Racketeer Influenced 

and Corrupt Organizations Act (“RICO”), a claim for aiding and abetting fraud, 

and a claim to recover fraudulent transfers under the Texas Uniform 

Fraudulent Transfer Act (“TUFTA”). Antigua filed a motion to dismiss in 

December 2010, alleging that the district court lacked jurisdiction under the 

FSIA and that Frank failed to state a claim upon which relief could be granted. 

Frank subsequently abandoned the RICO claims. In June 2015, the district 

court granted Antigua’s motion in part and denied it in part. Specifically, the 

district court dismissed Frank’s TUFTA claim for lack of standing and held 

that it had jurisdiction under the FSIA over the aiding and abetting fraud 

claim, which is the only remaining claim on appeal. 

D. OSIC Suit

In February 2013, OSIC filed a complaint alleging two breach of contract 

claims, a claim for avoidance and recovery of fraudulent transfers under 

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TUFTA, a claim for aiding and abetting fraud, a claim for aiding and abetting 

a breach of fiduciary duty, civil conspiracy, and a claim for aiding and abetting 

violations of the Texas Securities Act. Antigua moved to dismiss in January 

2014, arguing that the district court lacked jurisdiction under the FSIA and 

that OSIC failed to state a claim upon which relief could be granted. The 

district court granted Antigua’s motion in part and denied it in part. 

Specifically, the district court dismissed OSIC’s TUFTA claims for constructive 

fraudulent transfers occurring prior to February 15, 2009, but held that it had 

jurisdiction over all of OSIC’s remaining claims, including its TUFTA claims 

for actual fraudulent transfers. 

II. JURISDICTION AND STANDARD OF REVIEW

Under the collateral order doctrine,3 this Court has interlocutory 

appellate jurisdiction over a motion to dismiss on the basis of sovereign 

immunity. Rodriguez v. Transnave Inc., 8 F.3d 284, 286 n.4 (5th Cir. 1993). 

Our review of a district court’s sovereign immunity ruling under the 

FSIA is de novo. Id. at 287. This Court may “decide only legal issues when [it] 

review[s] an appeal from a collateral order.” United States v. Moats, 961 F.2d 

1198, 1202 (5th Cir. 1992). “This rule carries even more weight here because 

the district court resolved FSIA immunity . . . on the basis of the complaint,” 

id. (citation omitted),4 and, as such, we must assume the truth of the facts 

asserted, see Saudi Arabia v. Nelson, 507 U.S. 349, 351 (1993). 

 

3 “[T]he collateral order doctrine accommodates a ‘small class’ of rulings, not 

concluding the litigation, but conclusively resolving ‘claims of right separable from, and 

collateral to, rights asserted in the action.’” Will v. Hallock, 546 U.S. 345, 349 (2006) (quoting 

Behrens v. Pelletier, 516 U.S. 299, 305 (1996)). These claims are “too important to be denied 

review and too independent of the cause itself to require that appellate consideration be 

deferred until the whole case is adjudicated.” Id. (quoting Cohen v. Beneficial Indus. Loan 

Corp., 337 U.S. 541, 546 (1949)). 

4 In FSIA cases, jurisdictional discovery may be permitted to resolve factual disputes 

crucial to determining whether a foreign state is immune from suit. Arriba Ltd. v. Petroleos 

Mexicanos, 962 F.2d 528, 534 (5th Cir. 1992). No such discovery was conducted in this case. 

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III. DISCUSSION

A. The FSIA

A suit is properly dismissed when a court lacks subject matter 

jurisdiction over the case. Home Builders Ass’n of Miss., Inc. v. City of Madison, 

143 F.3d 1006, 1010 (5th Cir. 1998). The FSIA “provides the sole source of 

subject matter jurisdiction in suits against a foreign state.” Dale v. 

Colagiovanni, 443 F.3d 425, 427–28 (5th Cir. 2006); see also 28 U.S.C. § 1604. 

“The general rule under the FSIA is that foreign states are immune from the 

jurisdiction of the United States Courts.” Dale, 443 F.3d at 428 (quoting Byrd 

v. Corporacion Forestal y Industrial de Olancho S.A., 182 F.3d 380, 388 (5th 

Cir. 1999), abrogated on other grounds by Samantar v. Yousuf, 560 U.S. 305 

(2010)). 

“However, a district court can exercise subject matter jurisdiction over a 

foreign state if one of the statute’s exceptions apply.” Id. at 428 (quoting Byrd, 

182 F.3d at 388). A foreign state “need only present a prima facie case that it 

is a foreign state; and, if it does, the burden shifts to the party opposing 

immunity to present evidence that one of the exceptions to immunity applies.” 

Kelly v. Syria Shell Petroleum Dev. B.V., 213 F.3d 841, 847 (5th Cir. 2000). 

Once the party seeking the exception has “assert[ed] at least some facts that 

would establish the exception,” “the party seeking immunity bears the 

ultimate burden of proving the nonapplicability of the exception[] raised by its 

opponent.” Stena Rederi AB v. Comision de Contratos del Comite Ejecutivo 

General del Sindicato Revolucionario de Trabajadores Petroleros de la 

Republica Mexicana, S.C., 923 F.2d 380, 390 n.14 (5th Cir. 1991). 

This appeal involves two exceptions to sovereign immunity under the 

FSIA—the commercial activity exception and the waiver exception. We will 

address each in turn.

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B. Commercial Activity Exception 

On appeal, Antigua contests the district court’s application of the 

commercial activity exception in both suits. It does not contest the application 

of this exception to the breach of contract claims in the OSIC suit “to the extent 

that they are . . . limited to the contracts alleged in the OSIC Complaint.”

Therefore, regardless of our resolution of this appeal, the OSIC suit will 

proceed on the breach of contract claims.5 Therefore, we address only the 

district court’s holding on the commercial activity exception as it applies to 

OSIC’s tort and TUFTA claims, as well as Frank’s aiding and abetting claim. 

The commercial activity exception contains three clauses,6 each 

describing different circumstances in which the exception applies. See 28 

U.S.C. § 1605(a)(2). This appeal involves the third clause of the exception, 

which provides that a foreign state is not immune from suit in the United 

States when “[1] the action is based . . . upon an act outside the territory of the 

United States [2] in connection with a commercial activity of the foreign state 

 

5 Determining if subject matter jurisdiction exists under the FSIA requires a court to 

answer two questions—first, whether a party is a “foreign state” to which the Act applies, 

and second, whether any exception to the presumption of foreign sovereign immunity applies 

under the circumstances. See Verlinden B.V. v. Cent. Bank of Nigeria, 461 U.S. 480, 488–89 

(1983). Although these together determine subject matter jurisdiction, it appears that the 

second part of the inquiry—regarding exceptions to foreign sovereign immunity—may be 

waived per the wording of the statute itself. See 28 U.S.C. § 1605(a)(1) (providing that a party 

can expressly or implicitly waive its immunity from the jurisdiction of the United States 

courts). As such, we see no reason why a party should not be permitted to waive the 

application of foreign sovereign immunity by failing to dispute the application of a particular 

exception under the Act. 6 In full, the commercial activity exception provides that: 

(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). 

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elsewhere and [3] that act causes a direct effect in the United States.” Id. “The 

first two elements ensure that ‘there must be a connection between the 

plaintiff’s cause of action and the commercial acts of the foreign sovereign.’”

Aldy ex rel. Aldy v. Valmet Paper Mach., 74 F.3d 72, 75 (5th Cir. 1996) 

(emphasis omitted) (quoting Stena Rederi, 923 F.2d at 386). The third element 

ensures there is a jurisdictional nexus with the United States. Arriba, 962 F.2d 

at 533. Our analysis focuses on the “direct effect” requirement.

The “direct effect” requirement involves a determination of whether the 

acts the suits are “based upon” had “a direct effect in the United States.” 28 

U.S.C. § 1605(a)(2). “[A]n effect is ‘direct’ if it follows ‘as an immediate 

consequence of the defendant’s . . . activity,’” Republic of Arg. v. Weltover, Inc., 

504 U.S. 607, 618 (1992) (second alteration in original) (quoting Weltover, Inc. 

v. Republic of Arg., 941 F.2d 145, 152 (2d Cir. 1991)), and “is one which has no 

intervening element, but, rather, flows in a straight line without deviation or 

interruption,” Princz v. Fed. Republic of Ger., 26 F.3d 1166, 1172 (D.C. Cir. 

1994) (quoting Upton v. Empire of Iran, 459 F. Supp. 264, 266 (D.D.C. 1978)).

There is no requirement that the effect be “‘substantial’ or ‘foreseeable,’” but it 

cannot be “purely trivial.” Id. (quoting Weltover, 504 U.S. at 618).7

In determining whether an act had a direct effect in the United States, 

“[t]he question is, was the effect sufficiently ‘direct’ and sufficiently ‘in the 

United States’ that Congress would have wanted an American court to hear 

the case?” Callejo v. Bancomer, S.A., 764 F.2d 1101, 1111 (5th Cir. 1985) 

(quoting Tex. Trading & Milling Corp. v. Fed. Republic of Nigeria, 647 F.2d 

300, 313 (2d Cir. 1981)). 

 

7 In its brief, Antigua argues that “a specific act causing the direct effect must be 

legally significant to the cause of action.” While many other circuits have adopted this 

requirement, the Fifth Circuit has expressly rejected it. See Voest-Alpine Trading USA Corp. 

v. Bank of China, 142 F.3d 887, 894 (5th Cir. 1998).

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Although place of payment is not a decisive factor on its own, id. at 1112, 

this Court has previously held “that a financial loss incurred in the United 

States by an American plaintiff, if it is an immediate consequence of the 

defendant’s activity, constitutes a direct effect sufficient to support jurisdiction 

under the third clause of the commercial activity exception to the FSIA,” VoestAlpine Trading USA Corp. v. Bank of China, 142 F.3d 887, 897 (5th Cir. 1998).8

In Voest-Alpine the Bank of China refused to pay on a letter of credit owed to 

the plaintiff, and the plaintiff sued for breach. Id. at 890–91. This Court held 

that the plaintiff, which was an American company, “suffered a nontrivial 

financial loss in the United States in the form of funds not remitted to its 

account at a Texas bank” and that failure to be paid was an “‘immediate 

consequence’ of the Bank of China’s actions.” Id. at 896. Therefore, the “direct 

effect” requirement was met. Id. at 897.

A “direct effect” may also exist when a contract with a foreign nation was 

to be performed and payment was to be made in the United States. See UNC 

Lear Servs., Inc. v. Kingdom of Saudi Arabia, 581 F.3d 210, 218–19 (5th Cir. 

2009). In Weltover, the Supreme Court held that Argentina’s rescheduling of 

bond maturity dates had a “direct effect” in the United States. 504 U.S. at 618–

19. Explaining its conclusion, the Court noted that “[b]ecause 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.” Id. at 619.

 

8 In its brief, Antigua urges that Voest-Alpine is distinguishable because “the alleged 

commercial activities of Antigua are quite removed from (and unrelated to) the Appellees’ 

financial losses.” This argument rests on a misunderstanding of the third clause of the 

commercial activity exception. Antigua appears to believe the “direct effect” element must 

relate to the “commercial activity.” Rather, the “direct effect” element requires that the 

conduct the suit is “based upon” have a direct effect in the United States. See 28 U.S.C. 

§ 1605(a)(2).

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On appeal, Frank and OSIC argue that two different financial losses had

a “direct effect” on investors in the United States: (1) Stanford’s Ponzi scheme 

itself and (2) Antigua’s failure to repay the loans it received from Stanford. In 

regard to the argument that Antigua’s actions had a “direct effect” on American 

investors who bought Stanford’s fraudulent CDs, unlike Weltover and VoestAlpine, the financial loss to American investors involved in Stanford’s Ponzi 

scheme is not an “immediate consequence” of Antigua’s actions. “Defining 

‘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.” 

Virtual Countries, Inc. v. Republic of S. Afr., 300 F.3d 230, 238 (2d Cir. 2002). 

While Antigua may have helped facilitate Stanford’s sale of the fraudulent 

CDs, Stanford’s criminal activity served as an intervening act interrupting the 

causal chain between Antigua’s actions and any effect on investors. See, e.g.,

Guirlando v. T.C. Ziraat Bankasi A.S., 602 F.3d 69, 79–80 (2d Cir. 2010); 

Zedan v. Kingdom of Saudi Arabia, 849 F.2d 1511, 1515 (D.C. Cir. 1988).

Therefore, Plaintiffs’ first theory fails to satisfy the “direct effect” requirement.

Plaintiffs’ second theory—that Antigua’s failure to repay Stanford’s 

loans resulted in financial loss in the United States—similarly fails. Plaintiffs 

have offered some evidence indicating that at least two of the loans identified 

in the complaint may require payment in the United States. Additionally, at 

least one of the loan agreements indicates that the lender, Stanford, was 

located in the United States. But, the relationship between Antigua and 

Plaintiffs is too indirect to satisfy the “direct effect” requirement. 9 Unlike 

 

9 This Court has previously held that the “direct effect” element was met in a 

transaction involving an “indirect” relationship. See Byrd, 182 F.3d at 391. In Byrd, the 

indirect relationship at issue was between an assignee to a lease and one of the original 

parties to the contract. Id. at 390–91. As this Court noted in Byrd, an assignee to a lease 

stands in the place of the original party to the contract. Id. at 391. Therefore, the relationship

between Plaintiffs and Antigua is distinguishable, as Plaintiffs do not have the same rights 

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Voest-Alpine and Weltover, the financial loss in this case was not directly felt 

by Plaintiffs, who are investors and customers of Stanford and the SIBL. The 

financial loss due to Antigua’s failure to repay the loans was most directly felt 

by Stanford who was the actual lender in the loan transactions. 

Because we find that Antigua’s actions did not cause a “direct effect” in 

the United States, we need not consider the other elements of the commercial 

activity exception’s third clause. Accordingly, we reverse the district court’s 

holding that the commercial activity exception applies to the Frank suit and 

OSIC’s tort and TUFTA claims.

C. Waiver Exception

Under 28 U.S.C. § 1605(a)(1), a foreign state is not immune from suit 

when the “foreign state has waived its immunity either explicitly or by 

implication.” This case involves explicit waiver, which requires “an intentional 

and knowing relinquishment of [a] legal right.” Walker Int’l Holdings Ltd. v. 

Republic of Congo, 395 F.3d 229, 234 (5th Cir. 2004) (quoting Good v. Aramco 

Servs. Co., 971 F. Supp. 254, 258 (S.D. Tex. 1997)). 

In responding to Antigua’s motion to dismiss, OSIC argued Antigua 

waived sovereign immunity in two loan agreements it entered into with 

Stanford. The agreement for the first of the loans, referred to as the “$40 

Million Loan,” was provided to Antigua to “pay salaries and for other 

discretionary purposes.” The second loan, referred to as the “$31 Million Loan,” 

was provided to Antigua by Stanford to build a hospital. The district court 

found that provisions of both loan agreements explicitly waived sovereign 

immunity for OSIC’s contract claims based on either loan.

 

and remedies as Stanford to recover for Antigua’s failure to pay back the loans. As such, 

because the financial loss resulting from Antigua’s failure to repay the loans was not directly 

felt by Plaintiffs, the “direct effect” requirement is not met.

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Although Antigua contests the merits of the district court’s waiver 

ruling, Antigua does not contest the application of the commercial activity 

exception to OSIC’s breach of contract claims.10 As such, OSIC’s breach of 

contract claims will proceed under the commercial activity exception 

regardless of whether we overturn the district court’s holding on the waiver 

exception.

Antigua also contests the scope of the district court’s waiver ruling and 

asks this Court to limit the district court’s ruling on the waiver exception to 

apply only to $71 million ($31 Million Loan + $40 Million Loan) in breach of 

contract claims. But, the district court’s order itself already provides Antigua 

with the relief it seeks. While OSIC pleaded damages of “approximately $90 

million” as a result of five different loans between Stanford and Antigua, the 

district court’s order only addressed the $31 Million Loan and the $40 Million 

loan. Therefore, the district court has already provided Antigua with the relief 

it seeks on appeal. As such, we decline to further address the scope of the 

district court’s waiver ruling.

IV. CONCLUSION

For the foregoing reasons, we REVERSE in part and REMAND for

further proceedings consistent with this opinion.

 

10 In its brief, OSIC also argues that the waiver exception applies to its TUFTA claims. 

But, as OSIC makes this argument for the first time on appeal, it is waived. See Barrie v. 

Intervoice-Brite, Inc., 397 F.3d 249, 263 (5th Cir. 2005).

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