Source: https://law.justia.com/cases/federal/appellate-courts/F2/977/180/305488/
Timestamp: 2019-04-23 13:55:21+00:00

Document:
Timothy M. McDaniel, E. John Gorman, Houston, Tex., for defendant-appellant.
John S. Warren, Lelaurin & Adams, Corpus Christi, Tex., for plaintiff-appellee.
This court has had several occasions recently to consider interlocutory appeals of district court orders denying motions by Mexico's national oil company, Petroleos Mexicanos (Pemex), to dismiss various actions for lack of subject matter jurisdiction under the Foreign Sovereign Immunities Act (FSIA), 28 U.S.C. §§ 1330, 1601-11.2 Once again, we are called upon to consider such an order, and although the facts of this latest appeal are unrelated to those at issue in our previous decisions, "the task [of interpreting the FSIA] is no easier now than it has been before." Stena, 923 F.2d at 382. The underlying claims brought against Pemex by an American Company, Tubular Inspectors, Inc. (Tubular USA), sound in contract and tort law. Besides disputing the applicability of the "commercial activities" exception to sovereign immunity, see § 1605(a) (2),3 Pemex argues in the alternative that the district court's exercise of personal jurisdiction over Pemex violates due process, and that the doctrine of forum non conveniens compels dismissal of the case. Concluding that the district court erred in finding jurisdiction under the FSIA, we reverse.
While the parties agree on many of the essential facts, each characterizes the sale differently. Pemex contends that the transaction arose, occurred and ended in Mexico. The oil company also insists that it contracted only with Tubular Mexico so as to comply with Mexican law requiring it to enter into commercial agreements exclusively with companies registered to do business in Mexico. Pemex paid for all 19 of the valves by issuing non-negotiable checks to Tubular Mexico, payable in pesos and drawn on, deposited in, and cashed by Mexican banks.
Almost contemporaneously with these events in Texas, Pemex was nominally following Mexican law, which mandated its procurement of the valves only from a Mexican supplier and only after a competitive bidding process. Pemex thus received Tubular Mexico's "bid" for the valves on August 19 and later bids from other would-be suppliers, even though the Tubular USA valves were imported to Mexico on August 25.8 A Mexican import/export agent billed $28,000 to "Tubular Mexico and/or Tubular USA" at Tubular Mexico's address for all customs charges and taxes as of that date. At the conclusion of the alleged competitive bidding process, Tubular Mexico invoiced Pemex for the four contested valves in December 1987. Pemex issued its checks in December, apparently in response to Tubular Mexico's invoice. The checks were made to the order of Tubular Mexico, nonnegotiable and payable in pesos. Tubular USA contends that neither it nor Tubular Mexico ever received the $234,000 balance owed by Pemex.
Although the act of non-payment did not occur in the United States, the goods were ordered from an American company in its name; there was an inspection of those goods in the United States; there was acceptance of those goods in the United States, and a further request for shipment to Mexico; delivery was accomplished as requested; an American invoice was sent by a permissible addressee of the purchase order; and payment may well have not been made. In conclusion, the Court holds that there is adequate jurisdictional nexus between the commercial activity and plaintiff's complaint.
It is our duty to review the district court's conclusions about sovereign immunity de novo. Walter Fuller, 965 F.2d at 1383.11 Based on the uncertain status of Pemex's Purchase Order No. 1054, the fact that "acceptance" and delivery of the valves to Mexico strangely preceded Pemex's formal bid procedure, and the parallel invoices issued by Tubular USA and Tubular Mexico, there is plainly room for legitimate disagreement as to (1) whether Pemex's purchase transaction amounted to commercial activity carried on in the United States, and (2) whether Tubular USA's claim was "based upon" that activity. Having considered the matter carefully, however, we must disagree for several reasons with the district court's characterization of the transaction, and with its conclusion that FSIA jurisdiction exists.
First, the district court made too much of the fact that Pemex addressed its order to Tubular Mexico "and/or" Tubular USA. All of the sales documentation was in Spanish, all of it was addressed to Tubular Mexico's Reynosa address, and Pemex only sent representatives to Houston when specifically asked to do so by Tubular USA. Pemex's efforts to comply with the letter (if not the spirit) of Mexican law, by purchasing through a Mexican supply company and seeking competitive bids, and by making payment to the Mexican company in pesos in Mexico, should not lightly be disregarded. That Tubular Mexico and Tubular USA were joint addressees is not inconsistent with Pemex's attempt to craft a Mexican transaction.
Second, the district court misperceived the significance of Pemex's inspection and acceptance of the valves in the United States. While it made some sense for Pemex officials to verify before shipment to Mexico that $234,000 in industrial valves conformed to their specifications, it was clearly imperative for Tubular USA to gain Pemex's early approval. Tubular USA did not want to risk sending its valuable property to Mexico only to have it held up there for nonconformity with the contract. "Acceptance" by Pemex in this context meant only that the goods met the purchaser's technical requirements. Acceptance did not connote, as the district court may have believed, that Tubular had completed performance or was free of subsequent claims. Our conclusion is borne out by Tubular Mexico's or Tubular USA's having been responsible for paying the customs agent and for "nationalizing" the valves by importation to Tubular Mexico's home town of Reynosa. Tubular clearly continued to have responsibility for the valves until they were delivered to the Salina Cruz refinery.
Third, invoices for the valves represented in Purchase Order No. 1054 were sent both by Tubular USA and Tubular Mexico to Pemex, and payment was not made until after Tubular Mexico had submitted invoices, which occurred several months after Tubular USA sent its invoices. Further, the Pemex payments conformed to the 50% "advance"/50% "completion" mode requested only by Tubular Mexico, and they were directed to Tubular Mexico through its Mexican banks. The inescapable inference from this sequence of events, corroborated by the way in which Pemex paid for valves covered by Purchase Orders No. 1053 and 1055 in the face of similar duplicate invoices, is that Pemex intended to and did pay Tubular Mexico.
Fourth, not only is the jurisdictional nexus between Pemex's commercial activity and the United States insubstantial, but, as the district court acknowledged, there is no direct nexus between Pemex's meetings in this country and the breach of contract or conversion claims. Two mysterious Mexican individuals walked off with the proceeds of Pemex checks that only Tubular Mexico should have been permitted to cash and then only at its bank in Mexico. We do not hold that by itself, the occurrence on foreign soil of a cause of action arising from a sovereign's commercial activity in this country precludes domestic jurisdiction under the first clause of § 1605(a) (2). The contrary would often be true. See Santos v. Compagnie Nationale Air France, 934 F.2d 890, 892-94 (7th Cir. 1991). Here, however, the check was not even payable to an American entity, and the circumstances of its disappearance easily raise suspicions beyond simple malfeasance by Pemex.
Pemex has also moved to dismiss on the grounds that the exercise of personal jurisdiction over it by the district court would violate due process. In light of the foregoing discussion, we need not address that question14 nor do we decide the applicability of the forum non conveniens doctrine.
The judgment of the district court is REVERSED with instructions to DISMISS with prejudice.
(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) (emphasis added). Under the FSIA, foreign states and their agencies and instrumentalities are immune from suit in the courts of the United States except as otherwise provided in the Act. 28 U.S.C. § 1604. A failure to satisfy the statute's exceptions deprives the district court of subject matter jurisdiction. See Walter Fuller Aircraft Sales v. Rep. of Philippines, 965 F.2d 1375 (5th Cir. 1992).
The district court agreed with Tubular USA that the timing of the bidding process was "suspicious," citing "the almost contemporaneous inspection, acceptance, and request for delivery by Pemex in Houston and the subsequent importation of the valves into Mexico, while a national bidding procedure designed to insure the integrity and cost-efficiency of the valve purchased by Pemex was in progress...."

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