Gater Assets Ltd. v. AO Moldovagaz ( 2021 )

19-3550(L)
Gater Assets Ltd. v. AO Moldovagaz
In the
United States Court of Appeals
FOR THE SECOND CIRCUIT
AUGUST TERM 2020
Nos. 19-3550, 19-3562,
19-3747, 19-4017,
19-4021, 19-4147
GATER ASSETS LIMITED,
Petitioner-Appellee-Cross-Appellant,
LLOYD’S UNDERWRITERS AT LONDON,
Petitioner,
v.
AO MOLDOVAGAZ, REPUBLIC OF MOLDOVA,
Respondents-Appellants-Cross-Appellees,
AO GAZSNABTRANZIT,
Respondent. *
On Appeal from the United States District Court
for the Southern District of New York
ARGUED: OCTOBER 20, 2020
DECIDED: JUNE 22, 2021
* The Clerk of Court is directed to amend the caption as set forth above.
Before: RAGGI, SULLIVAN, and MENASHI, Circuit Judges.
Appellants AO Moldovagaz and the Republic of Moldova
appeal the judgment of the U.S. District Court for the Southern
District of New York (Preska, J.) entered on November 1, 2019—and
explained in the district court’s opinions of September 30, 2018, and
September 27, 2019—in favor of Appellee Gater Assets Limited. Gater
sought to renew a default judgment, which the district court entered
in 2000, that enforced a Russian arbitration award in favor of Lloyd’s
Underwriters against the appellants. Lloyd’s assigned its default
judgment to Gater in 2012. The district court entered a renewal
judgment in Gater’s favor after concluding that it had personal
jurisdiction over the appellants as well as subject-matter jurisdiction
over the renewal claims. We disagree with those conclusions.
First, the district court lacked personal jurisdiction over
Moldovagaz. The Due Process Clause prohibits federal courts from
exercising personal jurisdiction over Moldovagaz because
Moldovagaz has no contacts with the United States. We have
recognized an exception to this rule when a defendant is a foreign
sovereign or a sovereign’s alter ego. But contrary to the district court’s
conclusion, Moldovagaz is not an alter ego of the Republic of
Moldova.
Second, the district court lacked subject-matter jurisdiction
over Gater’s claim for renewal against the Republic of Moldova. The
Foreign Sovereign Immunities Act (“FSIA”), 28 U.S.C. §§ 1330,
1391(f), 1441(d), 1602-11, provides that federal courts lack subject-
matter jurisdiction over claims brought against foreign states unless
one of the FSIA’s immunity exceptions applies. The Republic of
Moldova is a foreign state and no immunity exception applies to
2
Gater’s claim against it. The district court invoked the FSIA’s
exception for confirming awards that are issued pursuant to a
qualifying arbitration agreement “made by the foreign state.” 28
U.S.C. § 1605(a)(6). The Republic of Moldova, however, was not a
party to the underlying arbitration agreement and no equitable
theory, even assuming such theories apply under § 1605(a)(6),
supports abrogating the Republic’s sovereign immunity in this case.
Accordingly, we VACATE the district court’s judgment in
Gater’s renewal action and REMAND with instructions to dismiss the
renewal action for lack of jurisdiction. We nevertheless AFFIRM the
district court’s refusal to vacate its original default judgment because
the appellants have failed to demonstrate that the district court had
no arguable basis to exercise jurisdiction to enter that judgment.
MICHAEL MCGINLEY, Dechert LLP, Philadelphia, PA
(Selby P. Brown, Dechert LLP, Philadelphia, PA; May
Chiang, Dechert LLP, New York, NY; and Dennis H.
Hranitzky, Quinn Emanuel Urquhart & Sullivan, New
York, NY, on the brief), for Petitioner-Appellee-Cross-
Appellant Gater Assets Limited.
ROBERT KRY (Lauren M. Weinstein and Leonid Grinberg,
on the brief), MoloLamken LLP, New York, NY, for
Respondent-Appellant-Cross-Appellee AO Moldovagaz.
EDWARD BALDWIN, Steptoe & Johnson LLP, Washington,
DC, for Respondent-Appellant-Cross-Appellee Republic of
Moldova.
3
19-3550(L)
Gater Assets Ltd. v. AO Moldovagaz
MENASHI, Circuit Judge:
This suit involves a longstanding dispute over Moldovan gas
debts. In 2000, the U.S. District Court for the Southern District of New
York (Preska, J.) entered a default judgment against Respondents-
Appellants—the Republic of Moldova (“Republic”) and the
Moldovan corporation AO Moldovagaz (“Moldovagaz”)—in favor of
Lloyd’s Underwriters (“Lloyd’s”), a British underwriters association.
The default judgment confirmed a Russian arbitration award granted
to Lloyd’s after Moldovagaz’s predecessor-in-interest, AO
Gazsnabtranzit, defaulted on debt it owed to a Russian gas supply
company named Gazprom. Lloyd’s had reinsured the debt. In 2012,
Lloyd’s assigned its right to collect on the default judgment to
Petitioner-Appellee Gater Assets Limited (“Gater”), a British Virgin
Islands company. With the limitations period for enforcing the
default judgment nearing its end, Gater brought a renewal action in
the same district court pursuant to New York Civil Practice Law and
Rules § 5014, which allows for the renewal of a judgment and the
restarting of its limitations period. On November 1, 2019, the district
court entered a renewal judgment in Gater’s favor against both
Moldovagaz and the Republic. The district court explained its
underlying reasoning in opinions filed on September 30, 2018, 1 and
September 27, 2019. 2
1See Gater Assets Ltd. v. AO Gazsnabtranzit (Gater I), No. 16-CV-4118, 2018
U.S. Dist. LEXIS 171350 (S.D.N.Y. Sept. 30, 2018).
2 See Gater Assets Ltd. v. AO Gazsnabtranzit (Gater II), 413 F. Supp. 3d 304(S.D.N.Y. 2019).
Moldovagaz and the Republic contest the district court’s
jurisdiction to enter the renewal judgment. Because this case involves
only foreign parties and a cause of action that arises under New York
state law, this suit would seem to fall outside the subject-matter
jurisdiction of the federal courts under Article III of the Constitution.
A lawsuit between foreign parties does not implicate diversity
jurisdiction, see Mossman v. Higginson, 4 U.S. (4 Dall.) 12, 14 (1800), and
a claim under New York state law does not generally “aris[e] under
... the Laws of the United States,” U.S. Const. art. III, § 2; see Wilson v.
Sandford, 51 U.S. (10 How.) 99, 101-02 (1850).
Because of the particular respondents, however, jurisdiction
may exist pursuant to the Foreign Sovereign Immunities Act
(“FSIA”), 28 U.S.C. §§ 1330, 1391(f), 1441(d), 1602-11. The FSIA
provides federal district courts with “original jurisdiction” over “any
nonjury civil action against a foreign state as defined in [the FSIA] ...
with respect to which the foreign state is not entitled to immunity
either under [the FSIA] or under any applicable international
agreement.” Id. § 1330(a). In Verlinden B.V. v. Cent. Bank of Nigeria, the
Supreme Court held that this jurisdictional grant, when viewed in
light of the FSIA as a whole, suffices to provide federal courts with
arising-under jurisdiction. 461 U.S. 480, 496-97 (1983). Therefore, if the
respondents are foreign states for the purposes of the FSIA, then the
district court had subject-matter jurisdiction over Gater’s renewal
action so long as an exception to the general rule of foreign sovereign
immunity applies.
Yet subject-matter jurisdiction is not enough by itself. A court
must also have personal jurisdiction over a party in order to enter a
binding judgment against it. The FSIA provides that a court with
subject-matter jurisdiction pursuant to the FSIA also has “[p]ersonal
5
jurisdiction over a foreign state” so long as “service [was] made” in
accordance with the FSIA’s service rules. 28 U.S.C. § 1330(b). Neither
Moldovagaz nor the Republic argues that it did not receive proper
service. Still, the Due Process Clause of the Fifth Amendment
independently prohibits federal courts from exercising personal
jurisdiction over parties that lack “minimum contacts” with the
court’s forum. See Waldman v. Palestine Liberation Org., 835 F.3d 317,
330-31 (2d Cir. 2016).
That rule, too, has an exception. We have held that foreign
states do not enjoy due process protections from the exercise of the
judicial power because foreign states, like U.S. states, are not
“persons” for the purposes of the Due Process Clause. See Frontera
Res. Azerbaijan Corp. v. State Oil Co. of Azerbaijan Republic, 582 F.3d 393,
399 (2d Cir. 2009); see also U.S. Const. amend. V (“[N]or shall any
person ... be deprived of life, liberty, or property, without due process
of law.”). When applying the Fifth Amendment, moreover, we do not
define a foreign state in the same way the FSIA does. The FSIA’s
definition of a foreign state includes both the sovereign itself and its
agencies and instrumentalities, which are separate legal persons from
the sovereign. See 28 U.S.C. § 1603(a)-(b). Yet when it comes to the
Fifth Amendment, we have indicated—and today hold directly—that
only the sovereign itself and its “alter egos” are not “persons.”
Agencies and instrumentalities of foreign sovereigns retain their
status as “separate legal person[s],” id. § 1603(b)(1), and receive
protection from the exercise of personal jurisdiction under the Due
Process Clause.
All told, the requirements for exercising jurisdiction over the
claims against each Respondent-Appellant may be simply stated.
First, to pursue its claim for a renewal judgment against Moldovagaz,
6
Gater must establish (1) that Moldovagaz is a foreign state for the
purposes of the FSIA and that an FSIA immunity exception applies
(thus allowing the exercise of subject-matter jurisdiction), and (2) that
Moldovagaz either has minimum contacts with the district court’s
forum or is an alter ego of the Republic (thus allowing the exercise of
personal jurisdiction). Second, because the Republic is
unquestionably a foreign sovereign, Gater’s claim for a renewal
judgment against it must fit within an exception to sovereign
immunity under the FSIA (thereby allowing the exercise of both
subject-matter jurisdiction and personal jurisdiction).
As we explain below, the record here fails to establish that
Gater’s renewal action meets the jurisdictional requirements for its
claims against each Respondent-Appellant. With respect to
Moldovagaz, Gater concedes that Moldovagaz has no contacts with
the United States. And, contrary to the district court’s conclusion,
Moldovagaz is not an alter ego of the Republic. The Republic neither
exercises “extensive[] control” over Moldovagaz nor abused the
corporate form such that respecting Moldovagaz’s separate juridical
personhood “would work fraud or injustice.” First Nat'l City Bank v.
Banco Para El Comercio Exterior de Cuba (Bancec), 462 U.S. 611, 629
(1983). Therefore, the district court lacked personal jurisdiction over
Moldovagaz.
With respect to the Republic, Gater’s claim against it does not
fit within an FSIA immunity exception. The district court invoked the
exception for actions to confirm arbitration awards issued pursuant
to a qualifying agreement “made by the foreign state.” 28 U.S.C.
§ 1605(a)(6). But the Republic was not a party to the underlying
arbitration agreement. Recognizing this fact, the district court relied
on direct benefits estoppel to hold that the immunity exception
7
nevertheless applied. It is not clear to us, however, that a theory of
direct benefits estoppel can establish that a foreign state “made” an
agreement to which it was not a party. But even assuming that it can,
the direct benefits theory cannot support subject-matter jurisdiction
here because Gater fails to demonstrate either that the agreement
“expressly provide[d] [the Republic] with a benefit” or that the
Republic “actually invoke[d] the contract to obtain its benefit.” Trina
Solar US, Inc. v. Jasmin Solar Pty Ltd, 954 F.3d 567, 572 (2d Cir. 2020).
The district court, therefore, lacked subject-matter jurisdiction over
Gater’s renewal claim against the Republic.
Accordingly, we vacate the district court’s judgment in
Gater’s renewal action and remand with instructions to dismiss the
renewal action for lack of jurisdiction. We nevertheless affirm the
district court’s refusal to vacate its original default judgment because
the appellants have failed to demonstrate that the district court had
no arguable basis to exercise jurisdiction to enter that judgment.
BACKGROUND
I
Moldovans rely on natural gas supplied by Gazprom, a gas
supply company that is majority-owned by the Russian government.
Many Moldovan customers—especially those in the autonomous
region of Transnistria—use the gas without providing full payment.
See J. App’x 1181-82. As a result of this and other factors, the Republic
and some Moldovan gas entities accumulated large debts to Gazprom
in the early 1990s. To help address the mounting debt, in 1995 the
Republic formed a corporation called Gazsnabtranzit by privatizing
several Moldovan state-owned gas transmission companies and
giving Gazprom a majority equity stake in the resulting corporation.
8
When that effort did not succeed, the Republic, Transnistria,
and Gazprom incorporated Moldovagaz in 1998. To form
Moldovagaz, each of the parties contributed its stake in
Gazsnabtranzit. Combined, those stakes were valued at $170.5
million. Additionally, the Republic and Transnistria contributed
other gas holdings and property worth $120 million, bringing
Moldovagaz’s total capitalization to $290.5 million. In return,
Gazprom reduced the outstanding debt owed to it by $60 million.
The Republic owns 35.3 percent of Moldovagaz, Gazprom
owns 50 percent, and Transnistria owns 13.4 percent. In 2005,
Transnistria granted Gazprom the right to administer its stake in
Moldovagaz. As a result, Gazprom controls 63.4 percent of
Moldovagaz’s shares, and its representatives hold a majority of the
seats on Moldovagaz’s governing bodies. The Republic has remained
involved in Moldovagaz’s affairs from its inception.
II
In 1996, Gazsnabtranzit entered into an agreement with
Gazprom that set the price and quantity terms for the Gazprom gas
that Gazsnabtranzit would deliver to Moldovans in 1997. The
agreement specified that the parties would arbitrate any disputes
arising thereunder before the International Commercial Arbitration
Court of the Chamber of Commerce of the Russian Federation in
Moscow (“ICAC”). The next year, a dispute developed between
Gazprom and Gazsnabtranzit regarding money Gazprom claimed it
was owed under the agreement. Lloyd’s Underwriters, Gazprom’s
ultimate reinsurers, covered the allegedly unpaid debt. Lloyd’s,
which became subrogated to Gazprom’s rights under the agreement,
then brought an arbitration action against Gazsnabtranzit in the ICAC
9
pursuant to the arbitration clause. On November 12, 1998, the ICAC
awarded Lloyd’s $8.5 million plus costs against Gazsnabtranzit.
In December 1999, Lloyd’s filed a petition in the U.S. District
Court for the Southern District of New York to confirm the award
against Gazsnabtranzit, Moldovagaz (which by that time had
succeeded Gazsnabtranzit), and the Republic. Lloyd’s brought suit
pursuant to legislation implementing the Convention on the
Recognition and Enforcement of Foreign Arbitral Awards (“New
York Convention”). See 9 U.S.C. §§ 201-08. After the defendants failed
to appear, the district court entered a default judgment for Lloyd’s in
July 2000. In 2012, Lloyd’s assigned that judgment to Gater. As the
twenty-year statute of limitations to collect the judgment approached,
Gater filed an action under New York’s “renewal” statute, N.Y.
C.P.L.R. § 5014, which permits a plaintiff to obtain a renewed
judgment with its own limitations period by bringing a new action on
an existing judgment. This time, Moldovagaz and the Republic
appeared and sought dismissal of Gater’s renewal action pursuant to
Federal Rule of Civil Procedure 12(b)(1) (lack of subject-matter
jurisdiction) and 12(b)(2) (lack of personal jurisdiction). Moldovagaz
and the Republic also moved pursuant to Rule 60(b)(4) to vacate the
district court’s original 2000 default judgment as void due to a lack of
jurisdiction.
The district court denied the motions and granted judgment in
favor of Gater in its renewal action. The district court concluded that
Moldovagaz was an “organ” of the Republic and therefore qualified
as a foreign state under the FSIA. Gater I, 2018 U.S. Dist. LEXIS 171350,
at *22-43. This conclusion meant that the district court would have
subject-matter jurisdiction over the suit against Moldovagaz so long
as an exception to sovereign immunity under the FSIA applied. See
10
28 U.S.C. § 1330(a). The district court also held that Moldovagaz was
an “alter ego” of the Republic and that the court therefore had
personal jurisdiction over Moldovagaz so long as it was properly
served pursuant to the FSIA. See 28 U.S.C. § 1330(b); Gater II, 413
F. Supp. 3d at 313-25.
In addition, the district court held that neither the Republic nor
Moldovagaz was entitled to immunity under the FSIA because
Gater’s action for a renewal judgment fit into the FSIA’s immunity
exception for actions brought “to confirm an award made pursuant”
to an arbitration “agreement made by the foreign state“ that is
governed by “a treaty or other international agreement in force for the
United States.” Gater II, 413 F. Supp. 3d at 325-28 (quoting 28 U.S.C.
§ 1605(a)(6)); Gater I, at *53-56 (same). Finally, the district court ruled
that the Southern District of New York was a proper venue for the
renewal action because “a substantial part of the events or omissions
giving rise to the claim,” namely the original 2000 suit that resulted in
the default judgment Gater sought to renew, occurred in the Southern
District of New York. Gater II, 413 F. Supp. 3d at 328 (quoting 28
U.S.C. § 1391(f)(1)). Moldovagaz and the Republic timely appealed.
STANDARD OF REVIEW
We review a district court’s factual determinations in making
jurisdictional rulings under the FSIA for clear error. See Frontera, 582
F.3d at 395 (personal jurisdiction); Filler v. Hanvit Bank, 378 F.3d 213,
216 (2d Cir. 2004) (subject-matter jurisdiction). Under this standard,
we will disturb the district court’s findings only if we have a “definite
and firm conviction” that the district court made a mistake. Anderson
v. Bessemer City, 470 U.S. 564, 573 (1985). At the same time, we review
the district court’s legal conclusions on these issues de novo. EM Ltd.
11
v. Banco Central de la República Argentina, 800 F.3d 78, 89 (2d Cir. 2015)
(personal jurisdiction); Filler, 378 F.3d at 216 (subject-matter
jurisdiction). Here, because we identify certain clear errors of fact, we
will discount those factual findings and determine de novo if the
district court had jurisdiction over Gater’s renewal action with respect
to Moldovagaz and the Republic.
Regarding the Rule 12(b)(1) motions to dismiss Gater’s renewal
claims for lack of subject-matter jurisdiction, once a movant such as
the Republic “present[s] a prima facie case that it is a foreign
sovereign,” the non-movant then “has the burden of going forward
with evidence showing that, under exceptions to the FSIA, immunity
should not be granted.” Virtual Countries, Inc. v. Republic of South
Africa, 300 F.3d 230, 241 (2d Cir. 2002) (internal quotation marks and
emphasis omitted). If the non-movant can satisfy that burden of
production, the foreign state bears the “ultimate burden of persuasion
by a preponderance of the evidence.” Id. at 242. 3 As for Moldovagaz’s
Rule 12(b)(2) motion to dismiss Gater’s renewal claim for lack of
personal jurisdiction, Gater bears the burden of showing that the
district court had personal jurisdiction over Moldovagaz. In re
Magnetic Audiotape Antitrust Litig., 334 F.3d 204, 206 (2d Cir. 2003).
3 The parties cite Swarna v. Al-Awadi, which stated that the plaintiff bears
its burden of production “by a preponderance of the evidence.” 622 F.3d
123, 143 (2d Cir. 2010). But our earlier cases indicate that the
preponderance-of-the-evidence standard applies to the foreign sovereign’s
ultimate burden of persuasion, not to the plaintiff’s burden of production.
See Virtual Countries, 300 F.3d at 241-42. To the extent that these articulations
of the standard conflict, we are bound to follow the earlier precedent. See
Tanasi v. New All. Bank, 786 F.3d 195, 200 n.6 (2d Cir. 2015).
12
Moldovagaz and the Republic bear a heavier burden when it
comes to the Rule 60(b)(4) motions to vacate the district court’s
original default judgment. A party moving for relief under Rule 60(b)
generally must “present[] highly convincing ... evidence in support of
vacatur” and “show good cause for the failure to act sooner and that
no undue hardship be imposed on other parties.” Kotlicky v. U.S. Fid.
& Guar. Co., 817 F.2d 6, 9 (2d Cir. 1987) (internal quotation marks and
citation omitted); see also United States v. Int'l Brotherhood of Teamsters,
247 F.3d 370, 391 (2d Cir. 2001). “A motion to vacate a default
judgment as void” under Rule 60(b)(4), however, usually “may be
made at any time.” Grace v. Bank Leumi Tr. Co. of N.Y., 443 F.3d 180,
190 (2d Cir. 2006). Still, “[i]n the context of a Rule 60(b)(4) motion, a
judgment may be declared void for want of jurisdiction only when
the court ‘plainly usurped jurisdiction,’ or, put somewhat differently,
when ‘there is a total want of jurisdiction and no arguable basis on
which it could have rested a finding that it had jurisdiction.’” Cent. Vt.
Pub. Serv. Corp. v. Herbert, 341 F.3d 186, 190 (2d Cir. 2003) (quoting
Nemaizer v. Baker, 793 F.2d 58, 65 (2d Cir. 1986)). Considering the
general rule that a movant bears the burden in Rule 60(b) motions, see
Kotlicky, 817 F.2d at 9, and that neither Moldovagaz nor the Republic
argues on appeal that it lacked actual notice of the original action that
led to the default judgment, we place the burden on Moldovagaz and
the Republic to show that vacatur was warranted under the standard
set out in Herbert. See “R” Best Produce, Inc. v. DiSapio, 540 F.3d 115,
126 (2d Cir. 2008) (“[I]n a collateral challenge to a default judgment
under Rule 60(b)(4), the burden of establishing lack of personal
13
jurisdiction is properly placed on a defendant who had notice of the
original lawsuit.”).4
DISCUSSION
The district court lacked jurisdiction over Gater’s renewal
action. Moldovagaz has no contacts with the United States and,
contrary to the district court’s conclusion, it is not an alter ego of the
Republic. Due process protects a party from being subject to personal
jurisdiction in a forum with which it has no connection. See, e.g., Int'l
Shoe Co. v. Washington, 326 U.S. 310, 316 (1945). Although we have
denied this protection to foreign sovereigns and their alter egos, see
Frontera, 582 F.3d at 399, that exception does not extend to all agencies
or instrumentalities of foreign states as defined by the FSIA.
Therefore, the district court lacked personal jurisdiction over
Moldovagaz even if it is an agency or instrumentality of the Republic.
The Republic, meanwhile, was not a party to the arbitration
agreement that the district court held triggered the FSIA’s immunity
exception for arbitral awards. The district court nevertheless bound
the Republic to this arbitration agreement and abrogated its
immunity under a theory of direct benefits estoppel. For the FSIA
arbitration immunity exception to apply, however, the relevant
agreement must have been “made by” the Republic, 28 U.S.C.
§ 1605(a)(6), and it is not clear to us that a direct benefits estoppel
4 We express no view regarding whether an exception to the general rule
that the movant bears the burden in a Rule 60(b) motion exists when
circumstances indicate that a movant challenging personal jurisdiction
lacked actual notice of the original lawsuit. Cf. Middleton v. Green Cycle
Hous., LLC, 689 F. App’x 12, 13 (2d Cir. 2017) (“We need not resolve the
issue of whether a defendant who concedes service, but not actual notice,
bears the burden of disproving jurisdiction.”).
14
theory can establish that a foreign state “made” an agreement to
which it was not a party. But even assuming the point arguendo, direct
benefits estoppel cannot support subject-matter jurisdiction here
because Gater failed to demonstrate either that the agreement
“expressly provide[d] [the Republic] with a benefit” or that the
Republic “actually invoke[d] the contract to obtain its benefit.” Trina
Solar, 954 F.3d at 572. Because no other FSIA exception applies here,
the district court lacked subject-matter jurisdiction over Gater’s claim
against the Republic.
Because we conclude that the district court was powerless to
entertain Gater’s renewal action against either Moldovagaz or the
Republic, we do not address the other issues raised here—namely,
whether Moldovagaz is an agency or instrumentality of the Republic
as defined by the FSIA, whether a renewal action under N.Y. C.P.L.R.
§ 5014 qualifies as an action to “confirm” an arbitration award under
the FSIA’s arbitration immunity exception, and whether venue for the
renewal action was proper in the district court.
I
The Due Process Clause of the Fourteenth Amendment protects
a party from being subject to personal jurisdiction in a state court if it
does not have “minimum contacts” with the forum state. Int'l Shoe,
326 U.S. at 316. This protection applies to domestic and foreign parties
alike. See Goodyear Dunlop Tires Operations, S.A. v. Brown, 564 U.S. 915,
918-20 (2011); Daimler AG v. Bauman, 571 U.S. 117, 120-22 (2014).
Although the Fourteenth Amendment does not limit the district
court’s power in this case, 5 we have held that the Fifth Amendment’s
5Often, federal courts effectively face the same Fourteenth Amendment
personal jurisdiction limitations as state courts. See Fed. R. Civ. P. 4(k)(1)(A)
15
Due Process Clause places similar constitutional constraints on the
exercise of federal judicial power. Waldman, 835 F.3d at 330 (“This
Court’s precedents clearly establish the congruence of due process
analysis under both the Fourteenth and Fifth Amendments.”). 6
Here, all parties agree that Moldovagaz “has no contacts with
the United States.” Gater I, 2018 U.S. Dist. LEXIS 171350, at *56 n.8
(quoting Gater’s brief before the district court). Ordinarily, then, the
district court would have lacked personal jurisdiction over
Moldovagaz. Yet we have recognized an exception to the minimum
contacts requirement when a sovereign state is the defendant. See
Frontera, 582 F.3d at 399. Sovereign states may not invoke the
protection of the Fifth Amendment’s Due Process Clause because that
(“Serving a summons or filing a waiver of service establishes personal
jurisdiction over a defendant who is subject to the jurisdiction of a court of
general jurisdiction in the state where the district court is located.”). That
rule does not apply, however, when service is independently “authorized
by a federal statute.” Fed. R. Civ. P. 4(k)(1)(C). The FSIA authorizes service
and personal jurisdiction so long as service is made pursuant to the FSIA’s
requirements. See 28 U.S.C. §§ 1330(b), 1608.
6 Recently the Supreme Court has been careful to avoid addressing this
issue. See Bristol-Myers Squibb Co. v. Superior Court, 137 S. Ct. 1773, 1783-84
(2017). But earlier decisions from the Court indicate that the Fifth
Amendment’s Due Process Clause limits the ability of a federal court to
exercise personal jurisdiction over parties with no connection to the court’s
forum; the open question is whether, for the purposes of the Fifth
Amendment, the court’s forum consists of the entire United States or is
limited to the state in which the court sits. See Omni Capital Int‘l, Ltd. v.
Rudolf Wolff & Co., 484 U.S. 97, 102 n.5 (1987); Asahi Metal Indus. Co. v.
Superior Court, 480 U.S. 102, 113 n.* (1987) (plurality opinion). Our court has
endorsed the former view. See Chew v. Dietrich, 143 F.3d 24, 28 n.4 (2d Cir.
1998). This issue does not affect the outcome of this case because all parties
agree that Moldovagaz has no contacts at all with the United States.
16
clause protects only “person[s],” and our precedent considers foreign
states, like U.S. states, not to be “persons” under the Fifth
Amendment. Id. (citing South Carolina v. Katzenbach, 383 U.S. 301, 323-
24 (1966)). For that reason, a court may exercise personal jurisdiction
over a foreign sovereign without regard to minimum contacts. Id.Moldovagaz is a gas company rather than a sovereign. Still, we
have held that entities that are alter egos of foreign sovereigns also
cannot claim the protection of the Fifth Amendment’s Due Process
Clause. Id. at 400. To determine whether an entity is an alter ego of a
foreign sovereign, we use the framework set out in the Supreme
Court’s decision in Bancec, 462 U.S. 611. See Frontera, 582 F.3d at 400.
Although Bancec addressed whether a court could pierce the
corporate veil between a corporation and a sovereign for the purpose
of imposing liability, the standards set out in that case allow us to
assess when a corporate entity may share an identity with the
sovereign and therefore lack personhood for the purposes of the Fifth
Amendment. See id. at 400-01; see also GSS Grp. Ltd v. Nat’l Port Auth.,
680 F.3d 805, 815, 817 (D.C. Cir. 2012) (“[When] a foreign sovereign
controls an instrumentality to such a degree that a principal-agent
relationship arises between them, the instrumentality receives the
same due process protection as the sovereign: none.”).
An alter ego relationship is not easily established. In Bancec, the
Supreme Court explained that basic legal principles, the FSIA’s
legislative history, and considerations of comity and respect for
foreign sovereigns all dictate that “duly created instrumentalities of a
foreign state are to be accorded a presumption of independent
status.” 462 U.S. at 625-28. This “presumption of separateness is a
strong one.” Zappia Middle E. Const. Co. v. Emirate of Abu Dhabi, 215
F.3d 247, 252 (2d Cir. 2000). Nonetheless, it “may be overcome” in two
17
circumstances: “where a corporate entity is so extensively controlled
by its owner that a relationship of principal and agent is created” or
where recognizing the instrumentality’s separate juridical status
“would work fraud or injustice.” Bancec, 462 U.S. at 628-29.
In applying Bancec’s “extensive control” prong, “the touchstone
inquiry” is “whether the sovereign state exercises significant and
repeated control over the instrumentality’s day-to-day operations.”
EM Ltd., 800 F.3d at 91. 7 An entity does not become a sovereign’s alter
ego merely because it “assist[s]” the sovereign in carrying out the
sovereign’s “policies and goals.” EM Ltd., 800 F.3d at 94. To qualify as
sufficiently extensive under Bancec, the sovereign’s control over an
entity must rise above the level that corporations would normally
tolerate from significant shareholders or expect from government
regulators. See EM Ltd., 800 F.3d at 93 (“[A]n exercise of power
incidental to ownership ... is not synonymous with control over the
instrumentality’s day-to-day operations.”); GSS Grp. Ltd. v. Nat’l Port
Auth. of Liber., 822 F.3d 598, 606 (D.C. Cir. 2016) (“[A] government can
wield power not only as [a] shareholder but also as [a] regulator.”)
(internal quotation marks omitted).
7 Factors relevant to this inquiry include “whether the sovereign nation:
(1) uses the instrumentality’s property as its own; (2) ignores the
instrumentality’s separate status or ordinary corporate formalities;
(3) deprives the instrumentality of the independence from close political
control that is generally enjoyed by government agencies; (4) requires the
instrumentality to obtain approvals for ordinary business decisions from a
political actor; and (5) issues policies or directives that cause the
instrumentality to act directly on behalf of the sovereign state.” EM Ltd., 800
F.3d at 91.
18
We also deem an entity to be the sovereign’s alter ego when
failing to do so “would work fraud or injustice.” Bancec, 462 U.S. at
629. This occurs when a sovereign has “abused the corporate form”
vis-à-vis the entity. EM Ltd., 800 F.3d at 95; see also De Letelier v.
Republic of Chile, 748 F.2d 790, 794 (2d Cir. 1984) (remarking that
Bancec’s veil-piercing criteria relate to “classic abuse of corporate
form”); First Inv. Corp. of Marsh. Is. v. Fujian Mawei Shipbuilding, Ltd.,
703 F.3d 742, 755 (5th Cir. 2012) (“[T]o meet [the fraud or injustice]
prong it is not sufficient ... merely to point out an injustice that would
result from an adverse decision. Rather, [the plaintiff] must show how
the [sovereign] manipulated [the instrumentality’s] corporate form to
perpetuate a fraud or injustice.”).
II
Applying Bancec’s standards to this appeal, we conclude that
Moldovagaz is not an alter ego of the Republic.8
A
To establish that Moldovagaz is the Republic’s alter ego under
Bancec’s “extensive control” prong, Gater must show that the
Republic “exercises significant and repeated control over
[Moldovagaz’s] day-to-day operations.” EM Ltd., 800 F.3d at 91.
Although the district court determined that the Republic “extensively
controlled” Moldovagaz, most of the facts on which it relied are
incidents of the Republic’s due exercise of its ownership interest in or
8 Because neither prong of the Bancec analysis justifies piercing the veil
between Moldovagaz and the Republic, we do not address Moldovagaz’s
argument that Gazprom’s majority stake in Moldovagaz necessarily
forecloses the possibility that Moldovagaz is an alter ego of the Republic.
19
regulatory power over Moldovagaz. While some aspects of the
Republic’s relationship with Moldovagaz appear somewhat
irregular, those aspects do not sufficiently demonstrate that the
Republic “exercise[d] significant and repeated control over
[Moldovagaz’s] day-to-day operations.” EM Ltd., 800 F.3d at 91. These
facts, therefore, are insufficient to rebut the strong “presumption” in
favor of recognizing Moldovagaz’s “independent status.” Bancec, 462
U.S. at 627.
1. The Republic’s Regulation of Moldovagaz
As the district court emphasized, the Republic sets the rates
that Moldovagaz may charge customers for gas. Gater II, 413
F. Supp. 3d at 315, 317, 319, 325. The Republic does so through its
ratemaking agency, the National Energy Regulatory Agency
(“ANRE”). But governments routinely engage in ratemaking for
companies in important sectors of their national economies, especially
public utilities. See generally Charles F. Phillips Jr., The Regulation of
Public Utilities (1988). That does not make those companies their alter
egos. 9
9 On one occasion, the ANRE directed Moldovagaz to apply a new,
reduced rate retroactively from the beginning of the calendar year. The
district court thought it significant that the Moldovan prime minister had
earlier voiced an opinion in favor of that reduced rate—as well as its
retroactive application—and demanded that Moldovagaz work out a
system to issue the appropriate refunds if the ANRE adopted his view. See
Gater II, 413 F. Supp. 3d at 315, 319. A politician’s statement in favor of a
position, however, does not indicate alter ego status for an entity that later
acts in accordance with that view. See, e.g., Bernie Woodall & David
Shepardson, Chided by Trump, Ford Scraps Mexico Factory, Adds Michigan
Jobs, Reuters (Jan. 3, 2017).
20
Gater argues that Moldovagaz is a special case because the
ANRE has historically set rates that force Moldovagaz to operate at a
deficit. Yet Moldovagaz generated a profit from 2016 to 2018.
Regardless, setting rates below cost does not necessarily indicate that
a sovereign has crossed the boundary from regulator to alter ego. In
fact, Moldovagaz has challenged the ANRE’s rates in Moldovan
courts over eighty times and complained about those rates to the
International Monetary Fund, the World Bank, the European Energy
Community, and the European Court of Human Rights.10
10 The district court recognized that Moldovagaz has challenged the
ANRE’s rates, but it discounted this evidence because the Moldovagaz
chairman behind these complaints, Alexandru Gusev, was eventually
prosecuted by the Republic and fled the country. See Gater II, 413
F. Supp. 3d at 321. But the news article on which the district court relied to
infer improper influence by the Republic merely reported that the
Moldovan government opened the prosecution after investigations into
“several fraudulent schemes to write off funds due to unaccounted gas
losses and overestimate[s] in purchasing gas metering and other
equipment” as well as “frauds in the purchase of currency.” J. App’x 1805.
Although one unnamed source quoted in the article surmised that the
Republic undertook the prosecution to remove Gusev from his position,
this speculation cannot support a finding that the Republic undertook a
criminal investigation in bad faith. See Chettri v. Nepal Rastra Bank, 834 F.3d
50, 54 (2d Cir. 2016) (“[C]onclusory criticisms of the manner in which [a
sovereign] has conducted [an] investigation are insufficient to prove a
violation of international law.”); Atl. Mut. Ins. Co. v. Balfour Maclaine Int’l
Ltd., 968 F.2d 196, 198 (2d Cir. 1992) (“[A]rgumentative inferences favorable
to the party asserting jurisdiction should not be drawn.”). Even if it could
support such a finding, moreover, the fact that a sovereign would need to
initiate a prosecution to drive a corporate executive out of the country
would suggest that the sovereign did not exercise extensive control over the
corporation’s day-to-day activities in the first place. The record indicates
that the Republic could not simply remove the chairman or direct
Moldovagaz to change its policies. See J. App’x 1806 (reporting a statement
21
Gater also observes that the Republic mandates that
Moldovagaz service and maintain the country’s gas pipelines and
regulates how Moldovagaz must carry out that obligation. But
governments routinely enact maintenance requirements and safety
regulations without rendering companies subject to that oversight the
government’s alter ego. Compare J. App’x 631-35 (Moldovan pipeline
maintenance law), with 49 U.S.C. §§ 60101-41 (U.S. pipeline safety
regulations).
Finally, Gater notes that the Moldovan Parliament has
conducted two investigations into Moldovagaz in the past twenty
years. A government’s investigation of a business, however, is not
remarkable. And these investigations in particular do not establish
extensive control. The first investigation lasted one month and
occurred as part of the Parliament’s investigation of the entire
Moldovan electricity and natural gas industry. The second
investigation was focused on Moldovagaz, but it lasted only four
months and apparently ended because the commission conducting
the investigation could not subpoena witnesses or appoint experts.
Thus, it appears that these investigations did not significantly impact
Moldovagaz’s operations.
2. The Republic’s Exercise of Its Minority Interest in
Moldovagaz
The Republic also exercises some authority over Moldovagaz
via its ownership interest, but that authority is not enough to render
of the head of the Moldovan Parliament’s Commission for Economy,
Budget, and Finance) (“Moldovan authorities ... have been trying to dismiss
[the chairman] for a year already, but Moscow, which has four votes out of
six in the Moldovagaz supervisory board, disagrees.”).
22
Moldovagaz the Republic’s alter ego. Moldovagaz’s governance
structure works as follows: Certain fundamental decisions, such as
amending the corporate charter, are reserved for shareholder
meetings. Aside from those decisions, Moldovagaz is governed by a
Supervisory Council (akin to a board of directors) and managed by a
Board (the duties and powers of which resemble those of officers).
The Republic appoints some directors to the Supervisory Council, and
many of its appointees have been civil servants. But these directors
constitute only a minority of the Council; Gazprom appoints the
majority of the Council’s members. Gazprom’s representatives also
hold a majority of the positions on the Board.
Gater notes that Gazprom’s representatives at shareholder and
Council meetings do not vote on any transactions between
Moldovagaz and Gazprom. According to Gater, these are the “most
critical votes, which ultimately determine the day-to-day affairs” of
Moldovagaz. Brief for Petitioner-Appellee-Cross-Appellant Gater
Assets Limited 26. Moldovagaz’s shareholders and Council, however,
make important decisions that do not involve transactions with
Gazprom. For example, the Council votes to approve nominees to
Moldovagaz’s Board. Moreover, the fact that Gazprom and its
appointees are conflicted out of votes regarding possible self-dealing
transactions is an unremarkable result of ordinary corporate law,
which hardly establishes Moldovagaz as the alter ego of the Republic.
See, e.g., 3 William M. Fletcher et al., Fletcher Cyclopedia of the Law of
Corporations § 913 (2020); N.Y. Bus. Corp. Law § 713; 8 Del. Code § 144.
Even if the inability of Gazprom’s representatives to vote on
transactions with Gazprom meant that the Republic effectively wields
the power of a majority shareholder over Moldovagaz—a conclusion
that the record does not support—such authority does not in itself
23
establish extensive control. Black letter corporate law provides that a
corporation and its controlling shareholder are distinct entities. See
United States v. Bestfoods, 524 U.S. 51, 61 (1998); see also Transamerica
Leasing, Inc. v. La Republica de Venezuela, 200 F.3d 843, 849 (D.C. Cir.
2000) (“If majority stock ownership and appointment of the directors
were sufficient, then the presumption of separateness announced in
Bancec would be an illusion.”).11
The fact that the Republic appoints civil servants to exercise its
ownership interest on Moldovagaz’s Council similarly does not
establish extensive control. Appointing loyal board members is a due
“exercise of power incidental to ownership.” EM Ltd., 800 F.3d at 92-
93. Indeed, “courts have consistently rejected the argument that the
appointment or removal of an instrumentality’s officers or directors,
standing alone, overcomes the Bancec presumption because the
exercise of such powers is not synonymous with control over the
instrumentality’s day-to-day operations.” Arch Trading Corp. v.
Republic of Ecuador, 839 F.3d 193, 203 (2d Cir. 2016) (internal quotation
marks and citation omitted). To establish extensive control, Gater
must additionally show that the Republic “use[d] its influence over
these directors in order to interfere with the instrumentality’s
ordinary business affairs.” EM Ltd., 800 F.3d at 93. Gater identifies a
provision of Moldovan law, which applies to all representatives of the
11 Gater also points to Moldovagaz’s 90 percent supermajority requirement
for measures to pass at shareholder meetings as evidence of the Republic’s
extensive control of Moldovagaz. This argument fails for two reasons. First,
whatever veto power this rule effectively gives to the Republic, it also
effectively gives to Gazprom. Second, control over votes at shareholder
meetings does not necessarily render the corporation the alter ego of the
controlling entity. See Transamerica Leasing, 200 F.3d at 849.
24
Republic’s ownership interest on corporate boards, that requires the
Republic’s representative to notify the Republic’s government of any
decision the board makes “that prejudices the interests of the State”
and then submit “a substantiated demand concerning the repeal ... or
the suspension” of that decision. J. App’x 645. But as the district court
noted, there is nothing in this law that provides that the board must
then accede to that demand. Gater I, 2018 U.S. Dist. LEXIS 171350, at
*34-35.
The Republic also nominates Moldovagaz’s chief officer, the
Board chairman. The Republic’s nominee, however, must be
approved by the Council, of which Gazprom’s representatives
constitute the majority. Undisputed evidence shows that the Council
has blocked the Republic’s nominee on at least two occasions in the
past five years. Thus, even if direct appointment of corporate officers
could establish that a shareholder controls a corporation’s day-to-day
operations, the record will not admit a finding that the Republic
wielded such power over Moldovagaz. Moreover, as previously
noted, at least one former Moldovagaz chairman repeatedly clashed
with the Republic, further indicating that the Republic’s ability to
nominate the chairman does not mean that it controls Moldovagaz’s
day-to-day operations.12
3. Apparent Irregularities in the Republic-Moldovagaz
Relationship
Gater identifies some instances in which the Republic arguably
intruded into Moldovagaz’s affairs to a degree atypical of a
shareholder or government regulator. Yet this evidence still falls short
12 See supra note 10 and accompanying text.
25
of establishing that the Republic “exercise[d] significant and repeated
control over the instrumentality’s day-to-day operations,” EM Ltd.,
800 F.3d at 91, such that Gater can “overcome” the strong
“presumption” in favor of Moldovagaz’s “independent status,”
Bancec, 462 U.S. at 627-29.
First, Gater identifies an agreement the Republic signed with
the Russian government in 2001 that dictated many aspects of
Moldovagaz’s business relationship with Gazprom. The agreement
bound Moldovagaz to terms regarding the price it would pay
Gazprom for gas, how Moldovagaz would make those payments to
Gazprom, and the interest rate on Moldovagaz’s debt to Gazprom.
Moldovagaz responds that the agreement cannot evidence extensive
control because it expressly provided that Gazprom and Moldovagaz
would determine “amounts and conditions for the sale” of gas.
J. App’x 948. Moldovagaz also posits that the agreement resembles
trade agreements into which foreign states routinely enter with one
another. For purposes of the personal jurisdiction inquiry in this case,
we need not decide whether this kind of an agreement can establish
extensive control. 13 That is because this 2001 agreement expired in
2006. Since then, Moldovagaz itself—not the Republic—has
negotiated these issues with Gazprom. A bilateral agreement that
13While participation in negotiations can sometimes indicate control over
ordinary business decisions, we have held that “nonspecific oversight of
and participation in contractual negotiations, standing alone,” does not
suffice “to permit us to conclude that [instrumentalities] are mere shells for
corporate activity.” Arch Trading, 839 F.3d at 204 (internal quotation marks
omitted). The Republic’s role in the negotiation of this 2001 agreement,
however, appears to exceed mere “nonspecific oversight ... and
participation.” Id.
26
terminated over a decade ago has limited probative value in
determining whether Moldovagaz was the Republic’s alter ego at the
time of Gater’s renewal action.14
Second, Gater relies on a 2014 Moldovan law that purportedly
directed Moldovagaz to invest in a specific compressor station and
pipeline. That decree, however, directed the Republic’s Ministry of
Economy—which administers the Republic’s stake in Moldovagaz—
to “facilitate the insertion” of these capital improvements into
Moldovagaz’s investment program. J. App’x 998. The district court
called this a “striking example” of “active control over the day-to-day
activities of Moldovagaz” and relied on it to conclude that the
Republic “sets specific priorities for Moldovagaz.” Gater II,
413 F. Supp. 3d at 315-16. But while the decree may have set priorities
for the Ministry of Economy, the law did not direct Moldovagaz to
take any action. The mere fact that the Republic, which maintains a
35.3 percent ownership interest in Moldovagaz, sought to advance
certain investment goals does not show that the Republic exercised
any outsized authority over Moldovagaz. Neither the district court
nor Gater identifies evidence indicating that the Ministry of Economy
forced Moldovagaz to invest in these improvements or even that it
14 On a few occasions in its opinion, the district court implied that the
Republic still binds Moldovagaz to contracts the Republic signs, dictates the
price that Moldovagaz pays Gazprom for gas, and sets the interest rates on
Moldovagaz’s debts to Gazprom. See Gater II, 413 F. Supp. 3d at 315, 318-19.
Such a finding lacks support in the record. To the extent the district court
relied on Gater’s briefs, see id., the only evidence identified therein are the
2001 agreement that expired in 2006; the subsequent agreement, which was
entered into by Moldovagaz; and the instance discussed above, supra note
9, in which the Republic’s prime minster expressed a view in favor of
retroactive application of a reduced rate.
27
could have done so, given that Gazprom controls Moldovagaz’s
governing bodies. Regardless, Gater does not produce any other
examples of such control, and one instance of an alleged directed
investment over the course of twenty years is insufficient as a matter
of law to demonstrate “significant and repeated control over ... day-
to-day operations.” EM Ltd., 800 F.3d at 91.
Third, Gater notes that the Republic has negotiated with
Gazprom and the Russian government regarding important issues
relating to Moldovagaz, including its debts to and contracts with
Gazprom. High ranking Moldovan officials, including the president
and prime minister, have met with Gazprom and Russian officials on
several occasions to discuss these issues, often alongside members of
Moldovagaz’s Board. In light of Bancec’s admonition that
“government instrumentalities established as juridical entities
distinct and independent from their sovereign should normally be
treated as such,” 462 U.S. at 626-27, we cannot conclude that a
government’s intercession on behalf of an important domestic utility
company renders that company its alter ego—especially where the
government’s efforts are related to promoting the company’s interests
vis-à-vis other entities rather than directing the company’s day-to-
day operations. Additionally, the Republic and Gazprom are both
shareholders of Moldovagaz and, as such, would normally negotiate
over their jointly owned corporation’s affairs. These negotiations do
not indicate that the Republic, the minority shareholder, exercised
more authority over Moldovagaz than Gazprom, the majority
shareholder. Therefore, while the Republic may have a special
interest in Moldovagaz’s affairs, the negotiations do not indicate a
principal-agent relationship sufficient to establish alter ego status.
28
Finally, Gater points out that, during one negotiation, the
Moldovan president stated that Moldovagaz’s debt to Gazprom “is
the total debt of Moldova.” J. App’x 1185. (After this statement caused
a small uproar, the president clarified that “this is not a debt of
Moldova, of the country’s Government, but the debt of
‘Moldovagaz.’” J. App’x 1560.) Similarly, a June 2018 press release
from the Republic reported that “officials” at another meeting “noted
that Moldova ... performs on time and in full the gas payments ...
[and] has managed to pay some of the historical debts.” J. App’x 1207.
These statements reflect the Republic’s special interest in
Moldovagaz’s affairs and might even serve as evidence that the
Republic does not always recognize Moldovagaz’s separate status—
a factor we have recognized as relevant to the “extensive control”
inquiry. See EM Ltd., 800 F.3d at 91. But two isolated statements—one
of which was retracted—do not suffice to establish extensive control
by the sovereign over a corporation. See Bancec, 462 U.S. at 625 (noting
that courts should generally honor the separate legal status of
“utilities and industries which are given priority in the national
development plan” in “countries which have insufficient private
venture capital to develop”).
4. The Failure to Show Extensive Control
In sum, Gater has failed to show that the Republic “exercises
significant and repeated control over [Moldovagaz’s] day-to-day
operations.” EM Ltd., 800 F.3d at 91. Therefore, the district court erred
in concluding that Moldovagaz is the Republic’s alter ego under
Bancec’s extensive control prong.
Gater insists that the facts here resemble those in a recent Third
Circuit case in which the court concluded that Venezuela extensively
29
controlled the oil company Petróleos de Venezuela (“PDVSA”). See
Crystallex Int’l Corp. v. Bolivarian Republic of Venezuela, 932 F.3d 126,
146-49 (3d Cir. 2019). In that case, the evidence showed that
Venezuela actively interfered in the operations of PDVSA in a way
that rendered PDVSA little more than Venezuela’s political tool. The
Venezuelan government forced PDVSA to sell oil “for no, or de
minimis, consideration” and ordered sales to political allies at a “steep
discount.” Id. at 146-47. It also ordered the company to spend more
than $4 billion on “social programs and projects” that had “nothing
to do with its business.” Id. Additionally, Venezuela wholly owned
PDVSA. Id. at 148. Here, by contrast, the Republic owns a minority
stake in Moldovagaz and has not exercised the level of control that
Venezuela did in Crystallex.15
B
Turning to Bancec’s second prong, Gater has failed to show that
recognizing Moldovagaz’s separate juridical status “would work
fraud or injustice.” Bancec, 462 U.S. at 629. It may be true, as the
district court observed, that “[a]s a practical matter ... whatever
corporate arrangements the Republic has with Moldovagaz, they
have thus far worked to prevent Plaintiff from collecting its
15 The district court’s opinion in Crystallex further illustrates how PDSVA
differs from Moldovagaz. The court explained that (1) Venezuela forced
PDVSA to provide oil to China and Russia as repayment for loans those
countries had made to Venezuela; (2) Venezuela used PDVSA’s property,
“including aircraft and tanker trucks, for its own political purposes”;
(3) PDVSA identified Venezuela’s extensive control as a risk factor in its
bond offering documents; and (4) Venezuela appointed PDVSA’s entire
board. Crystallex Int’l Corp. v. Bolivarian Republic of Venezuela, 333
F. Supp. 3d 380, 402 (D. Del. 2018). No comparable facts are present here.
30
judgment.” Gater II, 413 F. Supp. 3d at 322. However, to meet Bancec’s
fraud or injustice prong, Gater must do more than “merely to point
out an injustice that would result from an adverse decision.” First Inv.,
703 F.3d at 755. Rather, it must demonstrate that the Republic or
Moldovagaz has “abused the corporate form” to “avoid[] their
obligations.” EM Ltd., 800 F.3d at 95.
The facts on which the district court relied to pierce the veil
between the Republic and Moldovagaz do not indicate an abuse of
the corporate form. The district court emphasized that the Republic
has at times provided funds to pay some of Moldovagaz’s debts to
Gazprom but not to other creditors. See Gater II, 413 F. Supp. 3d at 322-
23. Yet Gater does not cite any authority establishing that preferring
certain creditors qualifies as an abuse of the corporate from. In EM
Ltd., we held that there was “nothing irregular or fraudulent” about
Argentina preferring the International Monetary Fund over other
creditors because such a policy was necessary “to protect the funds of
[the IMF’s] member states.” 800 F.3d at 93 n.70, 96. Here too there is
nothing “irregular or fraudulent” about the Republic and
Moldovagaz preferring Gazprom, which supplies Moldovans with an
essential commodity, over other creditors.
The district court also pointed to Moldovagaz’s “chronic
undercapitalization” and to Moldovagaz’s efforts to evade the ICAC’s
arbitral award judgment when it was originally issued. Gater II, 413
F. Supp. 3d at 322. But the record does not suggest that those
circumstances involved a manipulation of Moldovagaz’s corporate
form. The district court cited no evidence that the Republic
undercapitalized Moldovagaz for the purpose of evading its
31
creditors. 16 Rather, the evidence suggests that Moldovagaz’s dire
finances result from other circumstances. Almost 90 percent ($6.04
billion) of Moldovagaz’s $6.76 billion debt stems from losses in the
autonomous region of Transnistria. Customers there take gas from
the supply lines that pass through that region and refuse to pay for it
in full, and the Republic has no practical power to make them pay. 17
By contrast, a 2016 report on which Gater relies attributed under
3 percent ($140.5 million) of Moldovagaz’s debts to the Republic’s
regulatory policies. There is no record basis to conclude, in light of
Gazprom’s majority stake, that the Republic could successfully
undercapitalize Moldovagaz to avoid its creditors—the largest of
which was Gazprom itself.
16 The parties agree that according to relevant American corporate law,
undercapitalization at the time of incorporation can be evidence of an abuse
of the corporate form. See Response and Reply Brief for Respondent-
Appellant-Cross-Appellee Moldovagaz 27-28 (citing 1 Fletcher § 41.33); see
also Brief for Petitioner-Appellee-Cross-Appellant Gater Assets Limited 59
& n.11. If an entity is undercapitalized at that point, it “reveals ... the
corporation was created to avoid liability.” 1 Fletcher § 41.33. “Inadequate
capitalization after incorporation” meanwhile, “is generally relevant if the
capital was removed as part of a fraudulent conveyance scheme. In such a
scheme, the inappropriate transfer of assets and not the level of
capitalization would be the prevailing factor in determining whether to
pierce the corporate veil.” NLRB v. Bolivar-Tees, Inc., 551 F.3d 722, 730 n.7
(8th Cir. 2008). Even assuming that debt accumulated post-incorporation
could show abuse of the corporate form, see 1 Fletcher § 41.55 (noting that
“[i]nsolvency” is a factor that may be “considered ... in deciding whether to
pierce the corporate veil”), the debt in this case does not show such abuse.
17 Some record evidence suggests that Gazprom is complicit in this state of
affairs, providing gas to the separatist region of Transnistria in exchange
for political fealty.
32
In a separate part of its opinion, the district court found that the
Republic failed to adequately capitalize Moldovagaz at the time of its
incorporation. Gater II, 413 F. Supp. 3d at 324. The record does not
support that conclusion. Moldovagaz’s constitutive contract indicates
an initial capitalization of $290.5 million. The district court apparently
disregarded the contract in part because it believed there was no
“independent valuation” of those capital contributions. Gater II, 413
F. Supp. 3d at 324. But Moldovan law and Moldovagaz’s charter both
required an independent valuation. Moreover, Moldova’s
Commission on Financial Markets may not register a corporation’s
securities until it receives an independent report on the market value
of the capital contributions, and the Commission did register
Moldovagaz’s shares. The district court therefore clearly erred in
concluding that no independent valuation was completed simply
because Moldovagaz could not produce a copy of a document—more
than twenty years after Moldovagaz was created—that contained the
initial valuation. See Gater II, 413 F. Supp. 3d at 324.
The district court also thought that a July 2000 decree from the
Republic’s Parliament showed that “the capital contributions had not
been made in full” by that date. Id. But that decree does not indicate
that there was a delay in contributing capital to Moldovagaz; it refers
to a delay in Russia’s recognition of Gazprom’s new ownership stake
and the debt reduction that should have resulted. 18 Gater attempts to
18 See J. App’x 1820. (“[T]he Government shall[] turn to the Government of
the Russian Federation with regard to the question of accelerating the legal
formalization of the transfer to ... Gazprom on the account of repayment of
the indebtedness of the Republic [of] Moldova[,] property in the amount of
93.3 million US dollars as the participatory share of participation in ...
Moldova-Gaz S.A.”) (internal quotation marks omitted) (emphasis added).
33
provide further support for the district court’s conclusion that the
Republic undercapitalized Moldovagaz at its inception, but the only
additional evidence it identifies relates to the Republic’s alleged
undercapitalization of Gazsnabtranzit, not Moldovagaz.
This case does not resemble those circumstances that we have
said justify piercing the veil between a sovereign and a related entity
to avoid a fraud or injustice:
[I]n Bridas S.A.P.I.C. [v. Gov't of Turkmenistan, 447 F.3d
411 (5th Cir. 2006)], the Fifth Circuit found “fraud or
injustice” where Turkmenistan dissolved a state-owned
oil company that was in breach of a joint venture with
plaintiff, and replaced it with an under-capitalized state-
owned oil company endowed with newly-enacted
immunity protection [in order to escape liability]. And in
... Kensington International Ltd. v. Republic of Congo, [No.
03-CV-4578, 2007 WL 1032269 (S.D.N.Y. Mar. 30, 2007),]
the Republic of Congo structured its relationship to its
purportedly independent oil company by, inter alia:
(1) designing the company’s corporate structure to allow
Congo to engage in “unnecessarily complex transactions
and charades for the purpose of confounding its
creditors”; (2) passing all proceeds from oil sales on to
the government, rather than permitting the company to
exercise its right to collect a percentage on transactions;
and (3) commingling state and company assets. ...
In Bancec, Cuba sought relief in a court of the United
States while simultaneously trying to shield itself from
liability by asserting its claim through its dissolved
instrumentality.
EM Ltd., 800 F.3d at 95 (footnotes omitted). And in Corporacion
Mexicana De Mantenimiento Integral, S. De R.L. De C.V. v. Pemex-
34
Exploracion Y Produccion, we disregarded an entity’s separate status
when it tried to argue that it simultaneously was an independent
corporation “for personal jurisdiction purposes” and should be
“treated ... as [a] foreign sovereign” for “other issues in th[e]
litigation.” 832 F.3d 92, 103 (2d Cir. 2016). Unlike those cases, the
evidence and litigation history here do not suggest that the Republic
or Moldovagaz has been inconsistent or abusive with respect to
Moldovagaz’s corporate form. 19 The district court erred in
concluding that Moldovagaz qualified as the Republic’s alter ego
under Bancec’s fraud or injustice prong.
In the end, the district court’s conclusion that Moldovagaz is
the Republic’s alter ego seems to have been influenced by the fact that
“Moldovagaz was created to pay down part of the Republic’s debt to
Gazprom and to provide for Moldova’s citizens’ energy needs.” Gater
II, 413 F. Supp. 3d at 325; see also id. at 317, 320. But a sovereign may
form a separate entity to help it address problems such as these, and
that entity retains its separate juridical status even if it “assist[s]” the
sovereign in achieving the sovereign’s “policies and goals.” EM Ltd.,
800 F.3d at 94; see also Seijas v. Republic of Argentina, 502 F. App’x 19,
22 (2d Cir. 2012) (noting that an instrumentality’s conduct taken “in
accordance with [the sovereign’s] policy preferences” and “as a
vehicle for the government to obtain ... financial resources ... does not
demonstrate that [the instrumentality] was an alter ego of [the
sovereign]”) (internal quotation marks and citation omitted). Such an
entity loses its “presumption of independent status” only if the
sovereign “so extensively control[s]” it “that a relationship of
19 In contrast to the Pemex case, here Moldovagaz argues that it should not
be treated like a foreign state for any purpose.
35
principal and agent is created” or if recognizing that separate status
“would work fraud or injustice.” Bancec, 462 U.S. at 627-29. Here,
neither the Republic nor Moldovagaz has acted in a way that justifies
denying Moldovagaz its status as a corporation juridically separate
from the Republic.
III
Our recognition of Moldovagaz’s status as a corporate juridical
entity separate from the Republic should dispose of the personal
jurisdiction question in this case. Because we do not equate
Moldovagaz with a foreign sovereign, due process requires that it
have minimum contacts with the United States before an American
court may exercise jurisdiction over it. Gater does not suggest that
Moldovagaz has such contacts. Instead, Gater asks us to expand the
exception we announced in Frontera and rule that agencies and
instrumentalities of foreign sovereigns, as defined in the FSIA, are
also not “persons” entitled to due process protections, even if those
agencies and instrumentalities do not qualify as the sovereign’s alter
ego. 20
20 We left this question open in Frontera. See 582 F.3d at 401 (noting that “it
would be premature for us to address” whether “a corporation owned by a
foreign state but not the state’s agent [under Bancec] was entitled to the Due
Process Clause’s protections”). In Pemex, we quoted Frontera in stating that
“[t]he jurisdictional protections of the Due Process Clause do not apply to
‘foreign states and their instrumentalities.’” 832 F.3d at 102 (quoting
Frontera, 582 F.3d at 399). The Pemex court proceeded to state that “[t]he
same conclusion does not follow for foreign corporations ... which are
persons at law.” Id. at 103. It then analyzed the case before it the same way
that the Frontera court did, using the Bancec framework. Id. (“The line
between a foreign sovereign and a foreign corporation ... is informed by
[Bancec].”). The language that Pemex quoted from Frontera regarding
36
We decline to do so. Foreign corporations are plainly persons
entitled to the personal jurisdiction protections that litigants receive
as a matter of due process. See Pemex, 832 F.3d at 103 (“The
jurisdictional protections of the Due Process Clause ... apply to ...
foreign corporations. ... [D]ue process rights can only be exercised by
persons, including corporations, which are persons at law.”) (internal
citations omitted); see also Goodyear Dunlop Tires, 564 U.S. at 918-20;
Daimler, 571 U.S. at 120-22. This remains true regardless of which Due
Process Clause applies. See Waldman, 835 F.3d at 330 (“This Court’s
precedents clearly establish the congruence of due process analysis
under both the Fourteenth and Fifth Amendments.”). Our conclusion
that Moldovagaz is not an alter ego of the Republic necessarily
implies that we recognize its status as a foreign corporation. It may be
a foreign corporation that serves as an agency or instrumentality of a
foreign sovereign—as the FSIA defines that term—but Gater offers no
compelling reason to conclude that while the Fifth Amendment’s use
of the word “person” generally includes corporations, it excludes
those corporations that have a close relationship with a foreign
sovereign. 21 Nor does it cite authority to establish that a corporation’s
“foreign states and their instrumentalities,” id. at 102, therefore, is properly
understood as referring to instrumentalities that are alter egos under the
Bancec test, not to all entities that may be considered agencies or
instrumentalities under the FSIA. In quoting and relying on Frontera, the
court in Pemex did not purport to resolve the question that Frontera left
open.
21 Congress, meanwhile, has expressed its view that corporations
qualifying as agencies or instrumentalities under the FSIA are persons. By
definition, an “agency or instrumentality of a foreign state” must be “a
separate legal person, corporate or otherwise.” 28 U.S.C. § 1603(b)(1)
(emphasis added).
37
juridical personhood is dependent on the identities of its
shareholders. 22
We therefore join two of our sister circuits in holding that
foreign corporations that do not meet Bancec’s veil-piercing standards
“enjoy all the due process protections” regularly afforded to litigants
challenging personal jurisdiction. GSS Grp., 680 F.3d at 815; see also
First Inv., 703 F.3d at 752-55. This remains true regardless of whether
the corporation qualifies as an agency or instrumentality of a foreign
state under the FSIA. Because Moldovagaz is not the Republic’s alter
ego under Bancec, “United States courts may not exercise personal
jurisdiction over [Moldovagaz] unless [it] has ‘minimum contacts’
with the relevant forum.” GSS Grp., 680 F.3d at 817. It is undisputed
that Moldovagaz “has no contacts with the United States apart from
this litigation.” Gater I, 2018 U.S. Dist. LEXIS 171350, at *56 n.8
(quoting Gater’s brief before the district court). Therefore, the district
court lacked personal jurisdiction over Moldovagaz for Gater’s
renewal action.23
22 The FSIA’s definition of an “agency or instrumentality of a foreign state”
includes, with narrow exceptions, all corporations “a majority of whose
shares or other ownership interest is owned by a foreign state or political
subdivision thereof,” regardless of the corporation’s activities. 28 U.S.C.
§ 1603(b). We doubt that the reach of the Due Process Clauses depends on
whether only private as opposed to public entities hold ownership interests
in a corporation otherwise entitled to protection. Cf. Lochner v. New York,
198 U.S. 45, 75 (1905) (Holmes, J., dissenting) (“The 14th Amendment does
not enact Mr. Herbert Spencer’s Social Statics.”).
23 Recent scholarship suggests that we err in viewing due process as an
independent constraint on a court’s exercise of personal jurisdiction. See
Stephen E. Sachs, Pennoyer Was Right, 95 Tex. L. Rev. 1249, 1323 (2017)
(“[D]ue process requires jurisdiction, full stop, with the actual jurisdictional
38
IV
Having concluded that the district court lacked personal
jurisdiction over Moldovagaz, we turn to Gater’s renewal claim
against the Republic. As a foreign sovereign, the Republic may not
protest that allowing this suit to proceed against it would violate due
process limits on personal jurisdiction. See Frontera, 582 F.3d at 399. 24
Instead, the Republic argues that the district court lacked subject-
matter jurisdiction over Gater’s claim against it. We agree.
standards supplied by other sources of law.”). In the United States, a
forum’s legislature always had ultimate authority to determine when its
courts should exercise the judicial power. Id. at 1284-87; see also Picquet v.
Swan, 19 F. Cas. 609, 615 (Story, Circuit Justice, C.C.D. Mass. 1828). Here,
Congress has expressly provided for personal jurisdiction so long as a
foreign state is served pursuant to the FSIA’s requirements. See 28 U.S.C.
§ 1330(b). Moldovagaz does not argue that it was not properly served.
Therefore, under this view, if Moldovagaz is a foreign state under the
FSIA—a category that includes a sovereign’s agencies and
instrumentalities, see 28 U.S.C. § 1603(a))—then the district court would
have had personal jurisdiction regardless of minimum contacts or an alter
ego analysis. See Ingrid Wuerth, The Due Process and Other Constitutional
Rights of Foreign Nations, 88 Fordham L. Rev. 633, 681-86 (2019). However
compelling this view might be, it conflicts with controlling precedent. See
Waldman, 835 F.3d at 329-31.
24 Recent scholarship questions our earlier holding in Frontera that foreign
sovereigns do not qualify as persons under the Due Process Clause. See
Brief of Amicus Curiae Professor Ingrid Brunk Wuerth in Support of
Neither Party 6-13 (detailing evidence that, at the time of the founding,
foreign sovereigns were considered “persons” entitled to “process”). Yet
we remain bound by Frontera here. See In re Sokolowski, 205 F.3d 532, 534-35
(2d Cir. 2000) (“[T]his court is bound by a decision of a prior panel unless
and until its rationale is overruled, implicitly or expressly, by the Supreme
Court or this court en banc.”).
39
“The FSIA provides the sole basis for obtaining jurisdiction
over a foreign state in the courts of this country.” Barnet v. Ministry of
Culture & Sports of the Hellenic Republic, 961 F.3d 193, 199 (2d Cir. 2020).
Because the FSIA directs that a “foreign state shall be immune from
the jurisdiction of the courts of the United States and of the States
except as provided in sections 1605 to 1607,” sovereign immunity
from suit “is the default rule, subject only to specific exceptions.” Id.The district court held that Gater’s claim against the Republic
fits into section 1605’s exception for actions “to confirm an award
made pursuant” to a qualifying “agreement to arbitrate” that was
“made by the foreign state.” 28 U.S.C. § 1605(a)(6); see Gater II, 413
F. Supp. 3d at 325-28. For that immunity exception to apply here, the
relevant arbitration agreement must have been “made by” the
Republic. 28 U.S.C. § 1605(a)(6). All parties agree that the qualifying
“agreement to arbitrate” in this case is a 1996 contract entered into by
Gazprom and Moldovagaz’s predecessor, Gazsnabtranzit. The award
Gater seeks to collect resulted from an arbitration that occurred
pursuant to the arbitration clause in that contract.
It is undisputed that the Republic never signed that contract,
and nowhere does the contract indicate that the Republic was a party
to it.25 Nevertheless, the district court concluded that the contract was
“made by” the Republic because the Republic could be bound to the
25 In one clause, the contract stipulates that “Moldova will produce a
timetable for paying off” certain debts. J. App’x 32. But the clause notes that
this obligation “result[s]” from “the inspection of [certain] joint
settlements,” implying that it does not derive from the contract itself.
J. App’x 32. In addition, a section of the contract titled “Responsibilities and
Obligations of the Parties” does not assign any obligations to the Republic.
J. App’x 32-33.
40
contract’s arbitration clause under a “direct benefit[s] estoppel
theory”—a theory under which courts may “bind[] nonsignatories to
arbitration agreements.” Gater II, 413 F. Supp. 3d at 325-27 (citing
Thomson-CSF, S.A. v. Am. Arbitration Ass'n, 64 F.3d 773, 776 (2d Cir.
1995)). 26 The district court found that the Republic directly benefited
from the Gazsnabtranzit-Gazprom agreement because the Republic
discharged a preexisting treaty obligation to Russia by causing
Gazsnabtranzit to enter into the contract. Id. at 326. The district court
concluded that a direct benefits estoppel theory may apply so long as
a party accepts any benefit that flows from a contract’s formation,
even if that benefit does not derive from any terms in the contract
itself. See id. at 327.
We have suggested in dicta that direct benefits estoppel can
apply not only to bind a private party to an arbitration agreement but
also to abrogate a state’s immunity under the FSIA’s arbitration
26 In addition to finding subject-matter jurisdiction on this alternative basis,
the district court concluded that Moldovagaz, as Gazsnabtranzit’s
successor-in-interest, assumed Gazsnabtranzit’s obligations under the
contract. Gater Assets, 2018 U.S. Dist. LEXIS 171350, at *53-56. The district
court then relied on its determination that Moldovagaz is the Republic’s
alter ego to hold that the Republic “made” the contract. Gater II, 413
F. Supp. 3d at 326. Because we conclude that Moldovagaz is not the
Republic’s alter ego, this reasoning can no longer support subject-matter
jurisdiction over Gater’s claim against the Republic. If Gazsnabtranzit itself
were the Republic’s alter ego, that might support the application of the
FSIA’s arbitration exception here. See Thomson-CSF, 64 F.3d at 777. The
district court, however, did not make any conclusions regarding
Gazsnabtranzit’s possible alter ego status and Gater does not pursue this
theory on appeal. Accordingly, we deem this argument waived. See Graves
v. Finch Pruyn & Co., 457 F.3d 181, 184 (2d Cir. 2006).
41
immunity exception.27 Yet the applicability of this equitable doctrine
to the FSIA is far from clear. When Congress codified the arbitration
immunity exception, it specified that the exception applied only in the
presence of an agreement “made by the foreign state.” 28 U.S.C.
§ 1605(a)(6). A contract can be said to be “made by” only the parties
to it.28 While we have said that courts should use their “equitable”
powers to “estop[]” a party “from denying its obligation to arbitrate
when it receives a direct benefit from a contract containing an
arbitration clause,” Am. Bureau of Shipping v. Tencara Shipyard S.P.A.,
170 F.3d 349, 353 (2d Cir. 1999), that does not necessarily mean that
parties in such a position “made” the underlying contract.
Nevertheless, we need not conclusively decide whether direct
27 In Monegasque De Reassurances S.A.M. v. Nak Naftogaz of Ukraine, we
affirmed the district court’s forum non conveniens dismissal of a petition to
enforce an arbitration award against Naftogaz and Ukraine. 311 F.3d 488,
501 (2d Cir. 2002). Because we affirmed on forum non conveniens grounds,
we declined to “address the [petitioner’s] substantive contentions” that an
arbitration agreement that bound Naftogaz could abrogate Ukraine’s
immunity under the FSIA because Naftogaz was either Ukraine’s agent or
alter ago. Id. at 494-95. In bypassing that argument, we included “estoppel”
on a list of “theories under which a non-signatory party may be bound by
an arbitration agreement and thus subject to the jurisdiction of the court in
proceedings to compel arbitration or confirm an arbitration award.” Id. at
495.
28 In fact, Congress added the arbitration exception “to implement the
Inter-American Convention on International Commercial Arbitration.”
Pub. L. No. 100-669, 102 Stat. 3969 (1988). That convention, in turn, speaks
of “parties” who have “undertake[n] to submit to arbitral decision any
differences that may arise or have arisen between them” in an “agreement
... set forth in an instrument signed by the parties, or in the form of an
exchange of letters, telegrams, or telex communications.” Inter-American
Convention on International Commercial Arbitration, art. 1, done Jan. 30,
1975, T.I.A.S. 90-1027, 1438 U.N.T.S. 245.
42
benefits estoppel can abrogate a foreign state’s immunity under the
FSIA. 29 Even assuming that direct benefits estoppel can apply here,
Gater cannot avail itself of such a theory.
To be bound under a theory of direct benefits estoppel, “[t]he
nonsignatory beneficiary must actually invoke the contract to obtain
29 The Supreme Court’s recent decision in GE Energy Power Conversion
France SAS, Corp. v. Outokumpu Stainless USA, LLC, 140 S. Ct. 1637 (2020),
does not compel the conclusion that direct benefits estoppel applies to the
FSIA. In a case involving private parties, the Court reiterated that the
Federal Arbitration Act “permits courts to apply state-law doctrines related
to the enforcement of arbitration agreements,” including “equitable
estoppel.” Id. at 1643-44. The Court then held that the New York
Convention, to which the Federal Arbitration Act’s rules apply absent a
conflict, “does not conflict” with “the equitable estoppel doctrines
permitted under” the Federal Arbitration Act. Id. at 1644-45, 1648. That the
Federal Arbitration Act and the New York Convention permit the
application of estoppel doctrines does not suggest that such doctrines
establish that a foreign state “made” an arbitration agreement and must
answer claims based on that agreement in an American court. 28 U.S.C.
§ 1605(a)(6). Unlike the arbitration context generally, there is no “strong
and ‘liberal federal policy favoring arbitration agreements’” that would
subject foreign states to the jurisdiction of American courts. Thomson-CSF,
64 F.3d at 776 (quoting Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth,
Inc., 473 U.S. 614, 625 (1985)). Moreover, the application of the estoppel
doctrine in GE Energy “allow[ed] a nonsignatory to a written agreement
containing an arbitration clause to compel arbitration where a signatory to
the written agreement must rely on the terms of that agreement in asserting
its claims against the nonsignatory.” 140 S. Ct. at 1644 (emphasis added).
Here, by contrast, a signatory’s assignee (Gater) seeks to use the arbitration
agreement against a nonsignatory (the Republic) not only to collect an
arbitral award but also—through an equitable theory—to abrogate its
immunity under the FSIA and to require it to answer in an American court.
GE Energy did not consider, much less compel, the extension of direct
benefits estoppel to confer jurisdiction in a case like the one before us.
43
its benefit, or the contract must expressly provide the beneficiary with
a benefit.” Trina Solar, 954 F.3d at 572; see also MAG Portfolio Consult,
GMBH v. Merlin Biomed Grp. LLC, 268 F.3d 58, 62 (2d Cir. 2001)
(holding this theory applies only when a nonsignatory “knowingly
exploited [a] purchase contract and thereby received a direct benefit
from the contract”) (alterations and internal quotation marks
omitted). As district courts in this circuit have recognized, “the mere
fact of a nonsignatory’s affiliation with a signatory will not suffice to
estop the nonsignatory from avoiding arbitration, no matter how
close the affiliation is.” Life Techs. Corp. v. AB Sciex Pte. Ltd., 803
F. Supp. 2d 270, 274 (S.D.N.Y. 2011). Examples of direct benefits
serving as the basis for estoppel have included, for example, (1) the
right of a foreign affiliate to use the “Deloitte” trade name, arising
from an agreement resolving an intellectual property dispute to
which that particular affiliate was not a signatory but which expressly
conferred the trade name right on the affiliate, Deloitte Noraudit A/S v.
Deloitte Haskins & Sells, U.S., 9 F.3d 1060, 1062, 1064 (2d Cir. 1993); and
(2) the right of a vessel owner, which had commissioned a custom
racing sailboat, to take advantage of lower maritime insurance rates
and to register a vessel under a particular flag, Tencara Shipyard, 170
F.3d at 353.
As the district court acknowledged, the Gazsnabtranzit-
Gazprom agreement gave the Republic no rights to purchase or
receive gas. Rather, Gater argued—and the district court found—that
the Republic derived direct and substantial benefits from the
Gazsnabtranzit-Gazprom agreement by “discharging [the Republic’s]
obligations” under an earlier 1996-97 Moldova-Russia trade
agreement. Gater II, 413 F. Supp. 3d at 326.
44
The record does not support the conclusion that this alleged
benefit binds the Republic to arbitration under a direct benefits
estoppel theory. The Gazsnabtranzit-Gazprom agreement did not
“expressly provide the [Republic] with a benefit” with respect to the
trade agreement. Trina Solar, 954 F.3d at 572. Moreover, the trade
agreement required only that the Republic “instruct” the relevant
state bodies “to prepare proposals” for the inter-country shipment of
specified quantities of over fifty products, including natural gas.
J. App’x 1104, 1107-10. The specific purchase terms and even the
consummation of the Gazsnabtranzit-Gazprom agreement were not
necessary for the Republic to discharge its obligations under the trade
agreement. By contrast, our cases have estopped nonsignatories only
when the agreement itself confers a “tangible and definite” benefit.
Specht v. Netscape Commc’ns Corp., 306 F.3d 17, 39-40 (2d Cir. 2002)
(discussing Deloitte, 9 F.3d 1060, and Tencara Shipyard, 170 F.3d 349).
Additionally, the record here does not indicate that the
Republic “actually invoke[d]” the Gazsnabtranzit-Gazprom
agreement to obtain any benefit the agreement might have provided
with respect to the discharge of the Republic’s obligations to Russia
under the trade agreement. Trina Solar, 954 F.3d at 572-73 (rejecting
direct benefits estoppel because, although a nonsignatory “surely
benefited” from the contract by receiving solar panels, “no record
evidence” indicated that the nonsignatory “invoked the Contract to
demand delivery of the solar panels” or “invoke[d]” a signatory’s
“duties” in order to “seek or obtain” any benefits at all). Absent
evidence of a direct and definite benefit, Gazsnabtranzit’s and
Gazprom’s agreement to arbitrate disputes over gas supplied to the
45
Republic in 1997 does not estop the Republic from claiming immunity
here. 30
In sum, the Republic was not a party to the Gazsnabtranzit-
Gazprom agreement, and that agreement does not bind the Republic
to arbitration or abrogate its immunity under 28 U.S.C. § 1605(a)(6). 31
The district court, therefore, lacked subject-matter jurisdiction over
Gater’s renewal claim against the Republic.
V
While we have concluded that the district court lacked
jurisdiction over both parties for the renewal action, we must now
consider whether the district court erred by denying the motions to
vacate the original default judgment under Rule 60(b)(4). 32 It did not.
A party appealing the denial of a Rule 60(b)(4) motion must carry a
heavy burden to merit vacatur of the original judgment. It must show
30 The district court itself recognized “concern about [its] broader reading
of direct benefit estoppel theory” but considered that concern “mitigate[d]”
by “the unique alter ego relationship between the Republic and
Moldovagaz.” Gater Assets, 413 F. Supp. 3d at 328. As we have held,
however, the record does not support the conclusion that Moldovagaz is an
alter ego of the Republic.
31 If the Republic—rather than Moldovagaz—had assumed
Gazsnabtranzit’s obligations under the contract, that might establish that
the Republic “made” the agreement and must answer to Gater’s claims
premised on it because, as a legal matter, the Republic would have stepped
into Gazsnabtranzit’s shoes. See Thomson-CSF, 64 F.3d at 777. Yet Gater does
not establish that the Republic assumed these obligations.
32 Only the Republic specifically requests that we vacate the original
default judgment, but Moldovagaz adopted the Republic’s arguments
pursuant to Federal Rule of Appellate Procedure 28(i) to the extent that
those arguments are applicable to Moldovagaz.
46
that the district court in that original action “plainly usurped
jurisdiction” such that there was “a total want of jurisdiction and no
arguable basis on which [the district court] could have rested a
finding that it had jurisdiction.” Herbert, 341 F.3d at 190.
To determine whether the district court had jurisdiction to issue
the default judgment, we would need to analyze the relationship
between Moldovagaz and the Republic when Lloyd’s filed the
original action to confirm its arbitral award in December 1999. But the
arguments in this appeal focus on the Moldovagaz-Republic
relationship at the time of Gater’s renewal action and rely heavily on
facts that postdate the default judgment. We therefore conclude that
neither the Republic nor Moldovagaz has satisfied its burden to show
that vacatur is warranted.
CONCLUSION
For the foregoing reasons, the district court lacked jurisdiction
over Gater’s renewal action. Accordingly, we VACATE the district
court’s judgment in the renewal action and REMAND with
instructions to dismiss the renewal action for lack of jurisdiction.
Nevertheless, because Moldovagaz and the Republic failed to
demonstrate that the district court lacked an arguable basis to exercise
jurisdiction over the original action, we AFFIRM the district court’s
denial of the Rule 60(b)(4) motions.
47