Court Opinion

ID: 6986051
Source: CourtListenerOpinion
Date Created: 2022-07-24 03:10:04.248132+00
Date Added: 2024-06-11T16:09:27.450881
License: Public Domain

NOONAN, Circuit Judge:
The majority opinion opens with the declaration. “At the center of this case is an illegal contract between plaintiff James Adler and various Nigerian individuals including at least one government official, to convert Nigerian government funds for their personal use.” At the very center of this case, therefore, is a contract criminal in nature and purpose, which the majority for unexplained reasons contends constitutes commercial activity.
This case has no place in our courts. It began with a mistaken allegation of a fact conferring federal jurisdiction, a mistake that led to an opinion of this court properly assuming on a motion to dismiss that the allegation was true. On remand to the district court for trial, the mistake was laid bare. The factual allegation conferring jurisdiction was not true. Foundation for federal jurisdiction disappeared.
Nonetheless the trial continued because of the plaintiffs contention that he had engaged in a criminal conspiracy with officials of the Nigerian government. Jurisdiction does not exist on the foundation of this contention. A criminal conspiracy in violation of the laws of Nigeria and of the United States does not constitute commercial activity by Nigeria. Only commercial activity by Nigeria provides an exception to the immunity of this foreign state from the jurisdiction of our courts, 28 U.S.C. § 1605. As no commercial activity was conducted here, no jurisdiction exists or existed to try this case, 28 U.S.C. § 1330(c).
The Original Mistake. On July 1, 1996, the plaintiff filed his first amended complaint alleging that “the Nigerian National Petroleum Corporation [the NNPC], a quasi-governmental agency wholly owned and controlled by the Federal Republic of Nigeria, entered into a contract with a foreign corporation known as Strabarg & Company, Ltd., a company registered under the Nigerian Companies Act, 1968.” The complaint went on to state that the plaintiff had accepted assignment of proceeds due under this contract to computerize oil fields in Kaduna. Nigeria and the Nigerian officials moved to dismiss on the grounds of sovereign immunity. On appeal, we said: “The district court ruled that Nigeria engaged in commercial activity by entering into an agreement for the assignment of a contract in exchange for *879consideration. We agree.” Adler v. The Federal Republic of Nigeria, 107 F.3d 720, 725 (9th Cir.1997). The case returned to the district court for trial.
After trial, the district court found “that no contract existed between Adler and the NNPC. Additionally, it is undisputed that no contract existed between the NNPC and Strabarg to computerize the oil fields in Kaduna. In fact, no oil fields exist in Kaduna. Because no contract existed between the NNPC and Strabarg, no assignment of any contract could be made to Adler.”
The commercial activity alleged in the complaint and accepted as commercial activity by us was thus found to be a fiction. Not only had no assignment been made but no contract to be assigned had existed, and the subject of the contract, oil fields to be computerized, did not exist. The facts on which jurisdiction had been based were now stamped as wholly bogus.
The Plaintiff’s Criminal Activity. The district court further found after trial that “the evidence establishes that Adler intended to aid and abet Nigeria officials to pay themselves kickbacks.” Adler was asking the court’s help to recover monies paid by him “to further criminal activity.” “From August 1992, until the time that this lawsuit was filed, Adler knowingly and intentionally engaged in illegal conduct to obtain money to which he and his company were not entitled.” Throughout the period in question, “Adler engaged in numerous acts of bribery.” Even after the law suit was filed, “Adler made another $50,000 payment to obtain the proceeds to which he was not entitled.”
After making these findings, the court concluded:
The Court finds that Adler violated the Foreign Corrupt Practices Act, 15 U.S.C. § 78dd-2 (1997).... Adler traveled in interstate commerce and used instrumentalities of interstate commerce to make gifts and payments to foreign officials or persons he believed were foreign officials for the purpose of influencing their decisions to assist him in obtaining or returning business.
To prove his case, the plaintiff had proved himself to have been a criminal. Unashamedly, he had sought the help of a federal court to recover the promised share of his criminal endeavors. The district court resisted this desperate undertaking.
Criminal Activity Is Not Commercial Activity. Repulsing the attempt to make a federal court an accessory to crime, the district court nonetheless held that it retained jurisdiction because this activity was commercial. The opinion on appeal accepts this conclusion. It is a conclusion contrary to the controlling statute, to relevant precedent, and to common sense.
The basic fraud, notorious in Nigeria for its practice by skilled confidence men, is known to the Nigerian police as a “419”, because it is a violation of the Criminal Code Act of Nigeria, Chapter 77, § 419 (1990). A common kind of fraud, it involves no commerce and no activity of the government. To the extent, if any, that real governmental officials played a part in this “419”, they were not only violating the anti-fraud law but various other provisions of the criminal code, including § 98 (corruption); § 103 (false claims by officials); § 104 (abuse of office); and § 422 (conspiracy to defraud the public).
The majority rests its holding of jurisdiction on the letter from Chief Abba Gan-na (a wholly fictitious person) to Adler offering Adler 40% of $130 million from contracts “fantastically over-invoiced” by unnamed government officials. The letter was on the letterhead of something called “Benzil (Nig.) Ltd.” and is referred to by the district court as “the Benzil letter.”
The majority reasons that the activity was commercial because a contract was made between the plaintiff and the persons he supposed were Nigerian officials. The majority declares: “A contract for services is plainly commercial in nature. *880The fact that the contract was for an illegal purpose, and therefore unenforceable, does nothing to destroy its commercial nature.” This analysis seems to suppose that any contract for any service is “plainly commercial in nature.” But when a would-be murderer hires a hit man and furnishes his agent money and a gun, neither the consideration he gives nor the services he receives are commercial. Adler was not being offered $52 million in exchange for blank letterheads and his signature. He was offered this tempting amount for his services in aiding a moneylaundering operation. To say he was paid for the documents alone would be like saying the hit man was paid for the bullets he used. The services contract was a criminal instrument, proposing fraud by Adler to be compensated by criminal profits.
The majority attempts to distinguish an illegal contract from “a contract with an illegal purpose.” This exercise in hairsplitting ignores the actual finding of fact by the district court: “The Court finds that, on its face, the Benzil letter (Exhibit 1) involves criminal activity and Adler participated in that criminal activity.” Not only was the purpose of the contract found by the district court to be criminal, so was its nature found by the district court to be illegal: an attempt by an “obligor under a contract to assign the obligee’s rights to a third party” and “to convert funds belonging to the Nigerian government” to the use of Adler and his co-conspirators. It is intrinsically alien to the marketplace to contract to defraud a government. The nature of the contract was criminal and therefore its nature was not commercial. See Weltover, 504 U.S. at 614, 112 S.Ct. 2160. A contract of this kind is intrinsically evil or, in the traditional Latin phrase, malum in se.
It is sometimes difficult to distinguish what is intrinsically evil from what is wrong because it is prohibited. An example is a monopoly in violation of the antitrust laws. Arguably, at least, such a monopoly could be seen as merely malum prohibitum and a sovereign engaging in it as conducting commercial activity within the sense of the statute.
Such ambiguity does not exist where the contract in question is the instrument of fraud. No society treats fraud as innocent activity. In this case the contract that the court accepts as commercial activity was the instrument of fraud. That is not my characterization but the claim with which Adler launched this lawsuit: the defendants had defrauded him by offering him the contract purportedly signed by Chief Abba Ganna. The plaintiff is not free to repudiate his own characterization of the contract. He is in the position of contending that the government of Nigeria engaged in commercial activity by the practice of fraud, criminal both under the laws of Nigeria and the laws of California. Looked at in terms of Adler’s complaint, this criminal scheme was intrinsically dishonest. Looked at in terms of Adler’s own promised services pursuant to the contract, Adler entered into a criminal enterprise to hide what even the majority concedes were “stolen funds.” Either way, the central contract involved fraud and constituted malum in se.
After the district court determined that the alleged contract for the computerization for the oil fields did not exist, Adler’s one remaining claim was for misrepresentation and deceit. Any claim rising out of misrepresentation or deceit is expressly barred by 28 U.S.C. § 1605(a)(5)(B)
Hornbook law is that a contract is illegal if it either has an illegal purpose or was based on an illegal consideration. Witkin, Summary of Cal. Law (9th ed. 1987) Contracts § 441; 6A Corbin on Contracts § 1378 (1993). The contract with Chief Abba Ganna had an illegal purpose and was based on an illegal consideration. The alleged purpose of the contract was to moneylaunder cash fraudulently obtained at the expense of the government. The consideration offered was a portion of these criminal proceeds. Hornbook law maintains that a contract like this contract *881against good morals is malum in se. See Witkin, Summary of Cal. Law (1987) Contracts § 441. A contract which is malum in se is alien to the market.
A contract to commit murder does not become commercial activity because the hit man contracts with a payor for his services. See Letelier v. Republic of Chile, 748 F.2d 790, 797 (2d Cir.1984). An agreement as to the ransom between kidnappers and the parents of a kidnapped child does not become commercial activity because a contract for services is thereby entered into by the kidnappers. See Cicippio v. Islamic Republic of Iran, 30 F.3d 164, 168 (D.C.Cir.1994). A contract to evade the laws of Nigeria by furnishing false documents to deceive the government of Nigeria does not become commercial activity because there is a contract for the criminal services of the agent of the fraud; a fortio-ri, no commercial activity exists when the payment for the services is to be criminally-acquired and criminally-transported loot.
In the decided cases, the victim of a kidnapping could not sue in federal court the nation arranging the kidnapping because the kidnapping is not commercial activity; the victim of a murder plot could not sue federally the nation contracting for the murder, because murder is not commercial activity. We have discovered no case where the criminal himself had the effrontery to sue alleged accomplices asserting that the crimes in which he had participated were commercial activity.
It is an insult to every honest trader or businessman to suppose that a cunning criminal scheme, if initiated by a contract, is commercial activity.
It is an insult to any foreign country, and in this instance to Nigeria, to maintain that a contract proposing a fraud on the government of Nigeria is commercial activity being carried on by the government. The government is not in business to defraud itself. Corruption is not commerce.
The opinion quotes from Republic of Argentina v. Weltover, 504 U.S. 607, 614, 112 S.Ct. 2160, 119 L.Ed.2d 394 (1992): “when a foreign government acts, not as a regulator of a market, but in a manner of a private player within it, the foreign sovereign’s actions are ‘commercial’ within the meaning of the FSIA.” The opinion then declares: “The agreement to convert Nigerian government funds satisfies the Weltover definition of commercial activity” — as if a government scheming to defraud itself was acting “in the manner of a private player”! When the Supreme Court contrasted private players with regulators, it did not sweep all racketeers under the role of private players; the distinction drawn was merely between government as regulator and government as manager of its own finances. The Supreme Court reiterated that to have jurisdiction the acts must be “the type of actions by which a private party engages in ‘trade and traffic or commerce’.” Id.
The opinion takes out of context a dictum in Justice White’s concurrence in Nelson, 507 U.S. at 369, 113 S.Ct. 1471. Justice White opined hypothetically that governmental thugs performing torture in connection with the commercial operation of a hospital could make the government liable; it was the connection with the Saudi government’s commercial activity that brought the commercial exception into play. See Cicippio, 30 F.3d at 168. There is nothing in the opinion of the court in Nelson that justifies the majority here in stretching for a dictum from a hypothetical in a concurrence.
The definition of a criminal conspiracy is an agreement to violate a law. Every conspiracy depends on this kind of contract. That a contract is made is evidence not of commercial dealing but of crime. Congress cannot have meant to make conspiracy a type of commerce for foreign governments to engage in.
The Contract Was Void. A corollary of the criminal nature of the contract is that it was void in California where the offer was accepted. Smith v. Bach, 183 Cal. 259, 262, 191 P. 14 (1920); R.M. Sherman Co. v. W.R. Thomason, Inc., 191 Cal.*882App.3d 559, 563, 236 Cal.Rptr. 577 (1987); Witkin, Summary of Cal. Law (9th ed.1987) Contracts § 441. A void contract cannot be sued upon. It is a nullity. A nullity cannot qualify under the FSIA requirement of “a regular course of commercial conduct or a particular commercial transaction or act.” 28 U.S.C. § 1603(d). Engaging in an act that is legally nothing is not engaging in commerce. For this reason, too, no federal jurisdiction exists.
As no commercial activity was engaged in by Nigeria, there is no occasion to consider the statutory phrase “in connection with commercial activity.” Before that phrase can kick in, some commercial activity must be identified. Here there is only fraud and conspiracy and bribery from the plaintiffs first involvement up to and after this lawsuit was filed in federal court.
Two further peculiarities of the majority opinion may be observed. First, it finds “the direct effect in the United States caused by the defendants’ acts” to be Adler’s payment of bribes. No such finding was made by the district court. No such point was made by Adler in his briefs or in his oral argument on appeal. No doubt there is a reason that Adler did not advance this argument: it underscored his criminal conduct and his audacity in asking a federal court to help him recover payments made in defiance of federal law. It is also far from clear how the original contract with Chief Abba Ganna, if taken seriously as a business transaction, implied that Adler would bribe anyone: he was merely being asked to assist in the production of forgeries and falsified documentation.
Second, the test offered by the majority for pronouncing activity to be commercial is entirely novel and without foundation in any precedent: that the act of a sovereign is commercial if it is what “every private party does in the open market.” The implication is that only what is “uniquely sovereign” is immune. This test is not in the statute. The test has been explicitly rejected by the Supreme Court: “the question is not whether the foreign government is acting ... with the aim of fulfilling uniquely sovereign objectives.” Republic of Argentina v. Weltover, 504 U.S. at 614, 112 S.Ct. 2160. It is a gloss that substitutes a wholly different term for the statutory “commercial activity.”
Conclusion. In summary, the contract at the center of the crux is a contract made with a fictitious person, Chief Abba Ganna, never shown to have been an official of the Nigerian government and indeed never shown to have existed. The contract was criminal in nature and criminal in purpose. It was void under California law. On this fragile foundation the majority has found jurisdiction over a sovereign state presumptively immune from suit in our courts.
The district court threw out the plaintiffs case because of his unclean hands. This court is ready to affirm this result. But a further cleansing of the courthouse is needed. If the truth had been known, we had no jurisdiction on the first appeal. As the truth has come out at trial, we have no jurisdiction now, nor had the district court. This disgraceful effort by the plaintiff to make us parties to a criminal conspiracy should never have darkened our doors. It is time to expunge it wholly.