Court Opinion

ID: 1027561
Source: CourtListenerOpinion
Date Created: 2013-07-05 07:25:45.492021+00
Date Added: 2024-06-11T12:29:39.055512
License: Public Domain

UNPUBLISHED

                    UNITED STATES COURT OF APPEALS
                        FOR THE FOURTH CIRCUIT

                              No. 07-2079

ALLFREIGHT WORLDWIDE CARGO, INC.,

                  Plaintiff - Appellant,

             v.

ETHIOPIAN AIRLINES ENTERPRISE,

                  Defendant - Appellee.

Appeal from the United States District Court for the Eastern
District of Virginia, at Alexandria.     Leonie M. Brinkema,
District Judge. (1:07-cv-00180-LMB)

Submitted:    November 26, 2008             Decided:      January 9, 2009

Before WILLIAMS,     Chief   Judge,   and   SHEDD   and    AGEE,   Circuit
Judges.

Affirmed by unpublished per curiam opinion.

Richard Murray, William C. Groh, III, POMPAN, MURRAY & WERFEL,
P.L.C., Alexandria, Virginia, for Appellant.   Terrance G. Reed,
Robert K. Moir, LANKFORD, COFFIELD & REED, P.L.L.C., Alexandria,
Virginia, for Appellee.

Unpublished opinions are not binding precedent in this circuit.
PER CURIAM:

       Allfreight Worldwide Cargo, Inc. (“Allfreight”) appeals the

district      court’s       dismissal        of     its     case     against      Ethiopian

Airlines      Enterprise         (“EAE”)      for         lack     of     subject      matter

jurisdiction.         For the reasons that follow, we affirm.

                                             I.

       Allfreight,      a   Virginia     Corporation,            brought    suit    against

EAE asserting a claim for breach of contract.                            In its complaint

Allfreight alleged that EAE breached a written agreement between

the    parties     known    as   the    “COMAT       FREIGHT       HANDLING      AGREEMENT”

(“COMAT Agreement”) by failing to use Allfreight as the sole

agent responsible for handling and shipping all parts, supplies

and other company materials (known as COMAT materials) into and

out    of    the   United    States     by        EAE.      Demeki       Meri,   the    Chief

Executive Officer of Allfreight, signed the contract on behalf

of Allfreight.          Worku Eddo and Mesay Shiferaw signed on behalf

of EAE.

       The Foreign Sovereign Immunities Act (“FSIA”), 28 U.S.C. §

1602    et    seq.,     “provides      the    sole        source    of    subject      matter

jurisdiction       in   suits    against      a     foreign      state.”         Velasco   v.

Indonesia, 370 F.3d 392, 397 (4th Cir. 2004) (citing Argentine

Republic v. Amerada Hess Shipping Corp., 488 U.S. 428, 434-39

(1989)).      Specifically, 28 U.S.C. § 1604 states that “a foreign

                                              2
state shall be immune from the jurisdiction of the courts of the

United States and of the States” unless one of the exceptions

set forth in the FSIA applies.            Allfreight does not dispute that

EAE    is   wholly   owned    by   the    Federal   Democratic         Republic   of

Ethiopia      and     therefore      qualifies          as     an      “agency    or

instrumentality      of   a   foreign    state”   as    that    term    is   defined

under 28 U.S.C. § 1603(B).

       Allfreight contends on appeal, as it did below, that the

“commercial activity” exception set forth in the FSIA waives

EAE’s immunity.      This statutory 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)(2006).

       EAE filed a motion to dismiss pursuant to Rule 12(b)(1) and

an    alternative    cross-motion       for   summary    judgment      pursuant   to

                                         3
Rule 56. 1         Essentially, EAE contended the district court lacked

subject      matter      jurisdiction       under       the   FSIA   because      Eddo   and

Shiferaw had no legally cognizable authority to bind EAE in a

contract          with   Allfreight.              The    district      court      properly

considered evidence outside the pleadings and specifically found

that evidence “very powerful that there was no actual authority”

on the part of Eddo and Shiferaw.                   See Velasco, 370 F.3d at 398

(“[W]hen a defendant challenges subject matter jurisdiction via

a Rule 12(b)(1) motion to dismiss, the district court may regard

the pleadings as mere evidence on the issue and may consider

evidence outside the pleadings without converting the proceeding

to one for summary judgment.").

       EAE        produced   substantial      evidence         in    the   form    of    its

Management          Policy     and    Procedures         Manual      (“Manual”),        which

provides that “[n]o contract, lease or other agreement . . .

shall be negotiated or entered into on behalf of [EAE] unless .

. . approved by the Office of the General Counsel in accordance

with       this    Section.”         J.A.   327.        In    addition,    EAE’s    acting

General Counsel, Rahel Zerihun, submitted a sworn declaration

       1
       EAE also based its motion to dismiss on Rule 12(b)(2),
(4), (5), and (6).     However, the district court granted the
motion based on a lack of subject matter jurisdiction under Rule
12(b)(1) and did not address the remaining bases for dismissal.
Those alternative bases for dismissal are not issues raised on
appeal and we do not consider them.

                                              4
stating that EAE’s Office of General Counsel “is responsible for

review and approval of all contracts executed on behalf of” EAE,

that    “all”   of     EAE’s    officers          and   management    personnel    must

adhere to the Manual and that the COMAT Agreement was never

submitted to EAE’s Office of General Counsel for approval.                         J.A.

343-44 (emphasis added).

       Allfreight, on the other hand, produced a document on EAE

letterhead titled, “Delegation of Authority,” authorizing Eddo

and    Shiferaw   to    enter    into     a       contract   for     the   handling   of

company materials.         The Delegation of Authority stated, in its

entirety, as follows:

       As you know there is an urgent need to locate a
       Freight Forwarder in USA following a destination
       change to IAD.

       To this effect you are hereby delegated to negotiate,
       select and sign a contract, or Memo of Understanding,
       as the case may be, with a freight forwarder company
       (ies) to handle COMAT (company materials) to and from
       the united states [sic].

J.A.   77.      The    Delegation    of       Authority      was   signed    by   Sultan

Hassen with a title of “DVM Materials Management”.                         The document

also contained an “approved by” designation signed by Tewolde

Gebremariam, EAE’s Executive Officer of Marketing and Sales, and

                                              5
Abate     Digafe,      the    Executive        Officer     of    Maintenance    and

Engineering. 2      (J.A. 217).

     Based      upon   this   evidence     the    district      court   found   that

while Eddo and Shiferaw had been authorized to sign a contract

for the handling of materials, no such contract could be binding

upon EAE without first being submitted to the General Counsel’s

office    for    approval.        Contrary       to   Allfreight’s      assertions,

nothing    in    the   Delegation     of       Authority    permitted    Eddo   and

Shiferaw to circumvent the procedures in the Manual regardless

of the urgency of locating a COMAT handler.                     The district court

concluded that Eddo and Shiferaw thus lacked actual authority to

enter into the contract, granted EAE’s motion and dismissed the

case for lack of subject matter jurisdiction. 3                  Allfreight timely

appealed to this Court and we have jurisdiction under 28 U.S.C.

§ 1291.

     2
       We find nothing in the record, and Allfreight references
nothing, to establish that Hassen, Gebremariam and Digafe, had
any authority to dispense with the authorization procedures
required by the Manual.     None of these persons could impart
authority to Eddo and Shiferaw that they themselves lacked.
     3
       In addition to its ruling on EAE’s Rule 12(b)(1) motion to
dismiss the district court determined that even if it had
jurisdiction it “would have granted the motion for summary
judgment” because the COMAT Agreement was not an exclusive
contract.   J.A. 384.   Based on our affirmance of the district
court’s dismissal for lack of subject matter jurisdiction we
need not address this issue.

                                           6
        In Velasco we joined the Ninth Circuit in holding “that the

commercial activity exception may be invoked against a foreign

state only when its officials have actual authority.”                                    370 F.3d

at 400 (emphasis added); see also Dale v. Colagiovanni, 443 F.3d

425,     429     (5th    Cir.     2006)     (holding          “that        an       agent's     acts

conducted        with     the     apparent           authority        of        the    state      is

insufficient to trigger the commercial exception to FSIA”).                                       To

avoid the result our decision in Velasco mandates, Allfreight

contends that the district court erred for several reasons.

        First,     Allfreight        asserts          that     because           EAE’s        agents

believed they had actual authority to enter into the contract,

EAE     should     have    been     required           to     prove        this       belief    was

objectively       unreasonable.            Second,        Allfreight         argues      that     it

cannot be charged with notice that Eddo and Shiferaw were acting

without        actual    authority     since          the     Manual        requiring          their

submission of the contract to the Office of General Counsel was

not     publicly    available.            In    short,        Allfreight             argues     that

apparent authority is sufficient to bind a foreign state where

the    sovereign’s        agents    violate          an     internal       operating          policy

(i.e.     a     policy    not      directly          authorized        by       a     statute     or

regulation) because internal procedures do not afford sufficient

notice of the agents’ limited authority.                               Lastly, Allfreight

asserts that the district court should have considered that the

apparent       authority     of     Eddo       and    Shiferaw        was       sufficient        to

                                                7
trigger    the    commercial         activity      exception       because        the     COMAT

contract was signed in connection with EAE’s commercial airline

operations.       In light of our holding in Velasco, each argument

is unavailing.

    We review the district court’s findings of fact regarding a

determination of jurisdiction for clear error, but the legal

conclusions are reviewed de novo.                  Velasco, 370 F.3d at 398.                In

Velasco    we     plainly      and    succinctly         held    that    the      commercial

activity exception to the FSIA may be invoked against a foreign

state    (and    its   agents)       “only    when      its     officials      have     actual

authority” to bind the sovereign.                       370 F.3d at 400; see also,

Phaneuf v. Indonesia, 106 F.3d 302, 308 (9th Cir. 1997) (holding

that the commercial activity exception only applies if agent

acted with actual authority).                     Allfreight’s second and third

arguments       rest   on    the      erroneous         proposition        that     apparent

authority       can,   under    these    facts,         be    sufficient       to    abrogate

EAE’s immunity under the commercial activity exception.                                   Both

arguments       contradict      our     decision         in     Velasco.          Given    the

undisputed       evidence      that    Eddo       and    Shiferaw       did    not      obtain

contract approval from the Office of General Counsel as mandated

by EAE’s controlling Manual, both arguments clearly fail.

        Allfreight’s sole remaining argument is that the district

court improperly failed to consider whether Eddo and Shiferaw

reasonably believed they had actual authority to enter into the

                                              8
COMAT Agreement.           However, whether Eddo and Shiferaw reasonably

believed in their authority to enter into the COMAT Agreement is

of no consequence.

      In Velasco we acknowledged that recognition of a foreign

entity’s      sovereign         immunity      is      analogous        to   the    sovereign

immunity      of    the    United        States      and    the   derivative           immunity

extended to its own contractors and common law agents.                                 370 F.3d

at   399.      We   also        acknowledged         that   “courts      have     imposed     an

affirmative obligation upon a person transacting business with

an agent of the United States to determine whether the agent is

vested with authority to bind the Government.”                               Id.; see also

Federal Crop Ins. Corp. v. Merrill, 332 U.S. 380, 384 (1947)

(“[A]nyone     entering          into    an   arrangement         with      the   Government

takes   the    risk       of    having    accurately        ascertained         that    he   who

purports to act for the Government stays within the bounds of

his authority.”); United States v. Willis, 164 F.2d 453, 455

(4th Cir. 1947) (“He who deals with an agent of the government

must look to his authority, which will not be presumed but must

be established. He cannot rely upon the scope of dealing or

apparent authority as in the case of a private agent.”).                                     The

evidence in the record establishes that Eddo and Shiferaw made a

factual     mistake        as     to     their       authority     –     that     they       were

authorized to enter into a contract without first submitting it

to EAE’s General Counsel.                  Their mistake, even if reasonable,

                                                 9
cannot    abrogate    the    sovereign’s     immunity      by   creating   actual

authority    where    none   exists.        See,   e.g.,    Federal   Crop   Ins.

Corp., 332 U.S. at 384 (“The scope of [the agent’s] authority

may be explicitly defined by Congress or be limited by delegated

legislation, properly exercised through the rule-making power.

And this is so even though, as here, the agent himself may have

been     unaware     of   the   limitations        upon     his   authority.”).

Accordingly, Allfreight’s final argument is without merit and

thus establishes no exception to the statutory FSIA immunity.

         For the foregoing reasons we find no error in the judgment

of the district court and therefore affirm that judgment.

                                                                       AFFIRMED

                                       10