Opinion ID: 659863
Heading Depth: 3
Heading Rank: 2

Heading: Commercial Activity of ABP

Text: 56 With respect to ABP, the district court found that it had jurisdiction over this defendant under two distinct theories. First, the district court found that it had subject matter jurisdiction under the third clause of the commercial activity exception because ABP engaged in commercial acts outside the U.S. that had a direct effect inside the U.S. Federal Ins. Co., No. 92-4177, 1993 WL 21327, at  5-6 (citing 28 U.S.C. Sec. 1605(a)(2); Republic of Argentina v. Weltover, Inc., --- U.S. ----, ----, 112 S.Ct. 2160, 2168, 119 L.Ed.2d 394 (1992)). The second and alternative theory relied upon by the district court is that piercing the corporate veil from USA Holding to ABP reveals that the two should be considered one corporate entity for purposes of FSIA analysis. Id. at  6 (citing Bancec ). The district court erred with respect to both theories. 57 We must reject the district court's second theory of jurisdiction over ABP because we have already determined that on this record the court erred as a matter of law in concluding that USA Holding relinquished its sovereign immunity. Thus, even if the district court's conclusion that it would further a fraud or be unjust to adhere to the presumption of the Dutch corporations' independent juridical status was correct, 16 piercing the corporate veil from USA Holding to ABP would not provide a sufficient basis for jurisdiction over ABP. 58 With respect to the district court's first theory, it has no subject matter jurisdiction over ABP under the third clause of the commercial activity exception because the claims alleged were not based upon acts performed in connection with ABP's commercial activity. See Nelson, --- U.S. at ----, 113 S.Ct. at 1478. The district court found that ABP engaged in the following commercial activities: (1) it provided an unsecured loan to USA One Associates for the purpose of financing the acquisition of a sixty-five percent interest in the partnership that owns One Meridian Plaza; and (2) the loan terms were negotiated and executed in the Netherlands, with payments to be made to ABP by its subsidiary in the Netherlands in U.S. dollars. Federal Ins. Co., No. 92-4177, 1993 WL 21327, at  1,  6. While negotiating and executing a loan is a contractual transaction that is commercial activity for purposes of the FSIA, see Stena Rederi, 923 F.2d at 387 n. 9, again, as with USA Holding, the legal claims did not arise from these commercial activities. 59 The various plaintiffs allege several tort-based theories of recovery stemming primarily from the design and construction of the building, as well as from the improper maintenance and operation of the building. The theory underlying all these claims is that One Meridian Plaza was managed in such a fashion as to ignore local, state, and national fire codes, which resulted in a fire causing numerous injuries to the various plaintiffs. The district court erred because these claims did not arise from the loan transaction that it found to be ABP's only commercial activity under the FSIA. 60 In Nelson, the Supreme Court noted that Congress made an important distinction between the first clause of the FSIA commercial activity exception and the second and third clauses. The Court theorized that there might be an important difference between a suit 'based upon' commercial activity and one 'based upon' acts performed 'in connection with' such activity. --- U.S. at ----, 113 S.Ct. at 1478. The second and third clauses of the FSIA commercial activity exception use the in connection with language, which arguably might allow for a more tenuous causal link between the claims alleged and the commercial activities. The Court did not describe the extent of a substantive connection required under the second and third clauses of the commercial activity exception in Nelson because the case raised an issue only under the first clause of the exception. 61 The present case raises an issue as to the required substantive nexus under the third clause of the FSIA commercial activity exception because the district court expressly relied on this clause for jurisdiction over ABP. Federal Ins. Co., No. 92-4177, 1993 WL 21327, at  5-6. The district court concluded that it had jurisdiction over ABP as a financier because USA One Associates' acquisition of a majority interest in the Meridian building followed as an 'immediate consequence' of this loan transaction. Id. at  6. The plaintiffs argue that the district court's interpretation was correct because the loan from ABP funded the acquisition of One Meridian Plaza; thus, the purchase followed as an immediate consequence of ABP's commercial activity. See Weltover, --- U.S. at ----, 112 S.Ct. at 2168. 62 In Weltover, the Supreme Court indicated that the foreign sovereign's commercial activity must have a direct effect in the United States in order for a court to have jurisdiction under the third clause of the FSIA commercial activity exception. Id. However, in that case it was uncontested that the cause of action was based upon a commercial activity undertaken outside the U.S. Id. at ----, 112 S.Ct. at 2165. The claims in Weltover involved allegations of breach of contract due to the rescheduling of the maturity dates on government bonds, which was the commercial activity undertaken by Argentina, the foreign state, for jurisdictional purposes. Id. at ---- - ----, 112 S.Ct. at 2164-65. Hence, the substantive connection between the commercial activity and the claims alleged was not in issue. 63 Weltover does not stand for the proposition that jurisdiction lies under the third clause of the FSIA commercial activity exception if the foreign state undertakes commercial activity outside the U.S. that has a direct effect inside the U.S. when the cause of action is not causally linked to the commercial activity. In the present case, ABP did undertake commercial activity in the Netherlands by means of providing a loan to USA One Associates and collecting payments on that loan. That activity did have a direct effect in the United States because the loan provided capital for USA One Associates to acquire a majority interest in One Meridian Plaza. 64 Nevertheless, the causes of action alleged in the lawsuit are not substantively connected to the loan transaction. As previously discussed, the claims are primarily tort-based and do not include a breach of contract allegation stemming from the loan transaction. There is no substantive nexus that satisfies the based upon requirement contained in the statutory language. Therefore, Weltover does not provide persuasive authority for the plaintiffs' argument that subject matter jurisdiction lies under the third clause of the FSIA commercial activity exception. In sum, the district court erred in concluding that it had subject matter jurisdiction over ABP under the third clause of the commercial activity exception because the claims alleged in the lawsuit were not based upon ABP's commercial loan transaction with its subsidiary USA One Associates.