Blenheim Capital Holdings Ltd. v. Lockheed Martin Corporation ( 2022 )

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PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 21-2104
BLENHEIM CAPITAL HOLDINGS LTD.; BLENHEIM CAPITAL PARTNERS
LTD.,
Plaintiffs - Appellants,
v.
LOCKHEED MARTIN CORPORATION; AIRBUS DEFENCE AND SPACE
SAS,
Defendants - Appellees,
and
DEFENSE ACQUISITION PROGRAM ADMINISTRATION; REPUBLIC OF
KOREA,
Defendants.
Appeal from the United States District Court for the Eastern District of Virginia, at
Alexandria. Liam O’Grady, Senior District Judge. (1:20-cv-01608-LO-JFA)
Argued: September 16, 2022 Decided: November 15, 2022
Before GREGORY, Chief Judge, and NIEMEYER and THACKER, Circuit Judges.
Affirmed by published opinion. Judge Niemeyer wrote the opinion, in which Chief Judge
Gregory and Judge Thacker joined.
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ARGUED: Hamish P.M. Hume, BOIES, SCHILLER & FLEXNER, LLP, Washington,
D.C., for Appellants. Marc Laurence Greenwald, QUINN EMANUEL URQUHART &
SULLIVAN, LLP, New York, New York; Brian T. McLaughlin, CROWELL & MORING
LLP, Washington, D.C., for Appellees. ON BRIEF: Samuel C. Kaplan, Jesse M.
Panuccio, BOIES, SCHILLER & FLEXNER, LLP, Washington, D.C., for Appellants.
Lyndsay A. Gorton, CROWELL & MORING LLP, Washington, D.C., for Appellee
Lockheed Martin Corporation.
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NIEMEYER, Circuit Judge:
Blenheim Capital Holdings Ltd. and Blenheim Capital Partners Ltd.,
Guernsey-based companies (collectively, “Blenheim”), commenced this action against
Lockheed Martin Corporation, Airbus Defence and Space SAS, and the Republic of Korea
and its Defense Acquisition Program Administration (the last two, collectively, “South
Korea”), alleging that the defendants conspired to “cut it out” as the broker for a large,
complex international military procurement transaction. * Under the terms of the
transaction, South Korea would acquire 40 F-35 fighter planes — valued at roughly $7
billion — manufactured by Lockheed and a “Next-gen” military satellite — valued at over
$3 billion — manufactured by Airbus and equipped with capabilities for “integration with
the F-35 fighter planes.” South Korea would pay $7 billion for the F-35s and $150 million
toward the cost of the military satellite, with the remaining value of the satellite serving as
an “offset” to effectively reduce South Korea’s costs and thus “sweeten” the transaction.
Further, the $150 million payment by South Korea was to be paid to Lockheed and passed
on to Blenheim in installments, which Blenheim would use as capital to procure the
financing for the purchase of three satellites from Airbus. One of these satellites would be
the military satellite for South Korea, and the other two would be retained by Blenheim,
which it would operate, leasing their transmission capacity to earn income to pay for the
satellite production and financing costs and provide Blenheim with “a total profit of at least
*
For purposes of this appeal, when referring to Lockheed, we include its divisions,
subsidiaries, and affiliated companies, as alleged by Blenheim in its complaint; and when
referring to Airbus, we likewise include its affiliated companies, as alleged.
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$500 million.” The entire transaction was subject to the approval and supervision of the
U.S. government.
For reasons that are vigorously disputed by the parties, Lockheed terminated the
brokerage arrangement with Blenheim and restructured the transaction to be a “direct
procurement” between Lockheed, Airbus, and South Korea, again with the approval and
supervision of the U.S. government. Blenheim was left to bear the costs it had incurred in
designing and working on the transaction, and it was also denied the prospects for profit
from owning and operating two satellites.
In its first amended complaint, Blenheim alleged that the defendants (1) tortiously
interfered with its brokerage arrangement and its prospective business expectations;
(2) conspired to do so; (3) were unjustly enriched; and (4) conspired to violate federal and
state antitrust laws. For subject matter jurisdiction, it relied on federal question jurisdiction
under 28 U.S.C. § 1331, based on its federal antitrust claim, and on the Foreign Sovereign
Immunities Act of 1976, 28 U.S.C. §§ 1330(a), 1604, 1605(a)(2), and 28 U.S.C. § 1367(supplemental jurisdiction) for its tort claims.
The district court granted the defendants’ motions to dismiss under Federal Rules
of Civil Procedure 12(b)(1) and 12(b)(6). With respect to the tort claims, it concluded that
it lacked subject matter jurisdiction by reason of the Foreign Sovereign Immunities Act
because South Korea was presumptively immune from jurisdiction under the Act and had
not been engaged in “commercial activity,” which is excepted from the immunity from
jurisdiction conferred by the Act. And on the antitrust claim, it held that the action was
barred by both the applicable four-year statute of limitations and the Foreign Trade
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Antitrust Improvements Act of 1982, which requires that anticompetitive conduct have a
sufficient effect on domestic or import commerce to be subject to U.S. antitrust laws.
Finding no reversible error in the district court’s analysis, we affirm.
I
According to Blenheim’s complaint, Blenheim “specializes in developing,
structuring, and modeling international ‘offset’ transactions, which are often part of
government procurements.” “Offset” transactions are those in which the supplier in a
procurement contract provides a collateral “sweetener” to the procuring government to
reduce the procuring government’s cost in the transaction. Offset transactions are
“common in defense procurements.”
Beginning in 2011, Blenheim worked with Lockheed to structure an offset
transaction that would secure the sale of 40 F-35 fighter planes to South Korea after South
Korea “accelerated its plans to enhance stealth-fighter capabilities in response to public
outcry over North Korean aggression.” The F-35 is a fifth-generation fighter plane
manufactured by Lockheed for the U.S. government, and it represents the state-of-the-art
in such military equipment and includes classified technology. Because of the F-35’s high
cost, Lockheed and Blenheim recognized that South Korea would require an offset
transaction. Following much work, Blenheim proposed and the relevant parties accepted,
with the approval of the U.S. Department of Defense, the terms of an offset transaction in
which (1) Lockheed would provide South Korea with 40 F-35 planes with a value of
roughly $7 billion; (2) Blenheim would arrange to have Airbus manufacture three satellites,
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one of which — a military satellite designed with “Next-gen” capabilities, including
“integration with the F-35 fighter planes” — would be provided to South Korea, with the
other two to be retained by Blenheim to operate; (3) South Korea would pay for the 40 F-
35s and contribute $150 million toward the cost of the military satellite, which had an offset
value of “more than $3.1 billion,” effectively reducing South Korea’s overall cost by
almost one-half; (4) the $150 million payment would be transferred (via the U.S.
Department of Defense) to Lockheed and then in installments to Blenheim for the purpose
of obtaining financing for the cost of the satellites; (5) Blenheim would then operate the
two satellites provided to it, leasing their transmission capacity to generate income to pay
for all three satellites and to provide it with an estimated profit of $500 million.
Blenheim thus functioned as a broker in the transaction in accordance with the terms
of an “International Brokerage Agreement” between it and Lockheed. Because the
transaction involved highly sensitive military equipment designed and manufactured for
the U.S. military, it could be accomplished only as a “Foreign Military Sale,” requiring
approval and control by the U.S. Department of Defense. Indeed, negotiations for the
transaction took place in the offices of the U.S. Department of Defense, including the
Pentagon, because the negotiations “involved classified information.” The statutes and
regulations governing the sale of the F-35s to South Korea required all aspects of the
transaction to be approved and managed by the U.S. government, including the U.S.
government’s receipt and disbursal of all monies in the manner agreed, including even the
$150 million that South Korea paid to Lockheed for payment to Blenheim.
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Blenheim’s complaint alleged that, beginning sometime in 2015, Lockheed and
Airbus (and later on, South Korea) conspired to “cut Blenheim out” of the offset
transaction. Lockheed’s motivation for doing so, according to Blenheim, was that
Lockheed became concerned that carrying out the transaction would position Blenheim to
compete with a division of Lockheed that was in the market for satellite transmission
capacity. The complaint thus alleged that Lockheed, in furtherance of the conspiracy,
delayed paying Blenheim the installments of the $150 million that it had received from
South Korea via the U.S. Department of Defense. Lockheed made the first payment of $45
million on June 15, 2016 — which was after its due date — and then made no further
payments. And finally, by letter dated October 6, 2016, it terminated Blenheim’s role as
the broker in the offset transaction. The letter stated:
This letter will serve as formal notice by Lockheed Martin Oversees
Corporation and its affiliates (“LMOC”) to Blenheim Capital Partners and its
affiliates (“Blenheim”) of the immediate termination of International Broker
Agreement LMOC-07-51 between LMOC and Blenheim dated October 26,
2007, including all amendments, exhibits, appendices, and attachments
thereto (the “IBA”).
As discussed at length in previous written communications, Blenheim has
materially breached the IBA (and relevant appendices and exhibits thereto).
Such material breaches remain uncured. Accordingly, pursuant to Section
11.B. of the IBA, the IBA is terminated for cause.
The complaint alleged that Lockheed, Airbus, and South Korea then restructured
the offset transaction, cutting Blenheim out of it, such that Lockheed agreed to provide 40
F-35s to South Korea and Airbus agreed to provide the military satellite. The U.S.
Department of Defense approved the restructured transaction, and the military satellite for
South Korea was launched from Cape Canaveral on July 20, 2020.
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Blenheim commenced this action on December 31, 2020, alleging that the
defendants (1) tortiously interfered with its International Brokerage Agreement and
prospective business expectancies; (2) conspired to do so; and (3) were unjustly enriched.
And by its first amended complaint, filed on May 21, 2021, Blenheim added claims under
federal and state antitrust laws.
In response, the defendants filed motions to dismiss under Federal Rules of Civil
Procedure 12(b)(1) (lack of subject-matter jurisdiction) and 12(b)(6) (failure to state a
claim), contending, first, that the district court lacked jurisdiction over Blenheim’s tort
claims by reason of the Foreign Sovereign Immunities Act and, second, that the complaint
failed to state antitrust claims because they were barred by the applicable four-year statute
of limitations and, in any event, failed to satisfy the requirements of the Foreign Trade
Antitrust Improvements Act. The district court agreed with the defendants’ positions and,
by order dated September 30, 2021, dismissed Blenheim’s first amended complaint.
From the district court’s order, Blenheim filed this appeal, contending (1) that the
offset transaction or the separate brokerage agreement was “commercial activity” and
therefore was excepted from the immunity conferred by the Foreign Sovereign Immunities
Act; (2) that the antitrust claims “accrued” within four years of its original complaint and
that its first amended complaint adding the antitrust claims related back to the filing date
of the original complaint; and (3) that its antitrust claims satisfied the requirements of the
Foreign Trade Antitrust Improvement Act based on the alleged anticompetitive conduct’s
sufficient effect on U.S. commerce.
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II
Blenheim contends first that the district court erred in dismissing its tort claims
against South Korea for lack of subject-matter jurisdiction under the Foreign Sovereign
Immunities Act (“FSIA”), 28 U.S.C. §§ 1330, 1602–1611, because the basis for its claims
was “commercial activity” by South Korea, which is excepted from the immunity conferred
by the Act.
The FSIA provides 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 of
this chapter.” 28 U.S.C. § 1604 (emphasis added); see also id. § 1330 (providing district
courts with original jurisdiction over foreign states “not entitled to immunity under
§§ 1605-1607”). Blenheim contends, however, that its claims fall within the exception
relating to “commercial activity” as set forth in § 1605(a)(2). That section provides:
A foreign state shall not be immune from the jurisdiction of courts of the
United States or of the States in any case — in which the action is based:
upon a commercial activity carried on in the United States by the
foreign state; or
upon an act performed in the United States in connection with a
commercial activity of the foreign state elsewhere; or
upon an act outside the territory of the United States in connection
with a commercial activity of the foreign state elsewhere and that act
causes a direct effect in the United States.
28 U.S.C. § 1605(a)(2) (emphasis added) (reformatted for clarity). And “commercial
activity,” which is the subject of each exception, is defined as:
either a regular course of commercial conduct or a particular commercial
transaction or act. The commercial character of an activity shall be
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determined by reference to the nature of the course of conduct or particular
transaction or act, rather than by reference to its purpose.
Id. § 1603(d).
Blenheim’s argument thus raises, at its core, the question of whether its tort claims
are based on “commercial activity,” as excepted from the immunity from jurisdiction
conferred by § 1604.
As a general principle, the subject-matter jurisdiction of a district court is a question
of law for the court, not the jury, to decide. When a defendant files a motion under Rule
12(b)(1) challenging subject-matter jurisdiction and relying simply on the allegations of
the complaint, the court must take the jurisdictional facts alleged as true — as in the case
of a motion filed under Rule 12(b)(6) — and determine, as a matter of law, whether the
court has jurisdiction. See Kerns v. United States, 585 F.3d 187, 192 (4th Cir. 2009). But
if the defendant disputes the facts alleged for jurisdiction, providing the court with
contradicting facts, the court “may go beyond the complaint, conduct evidentiary
proceedings, and resolve the disputed jurisdictional facts.” Id.Under the FSIA, a foreign state is “presumptively immune” from the jurisdiction of
U.S. courts, Saudi Arabia v. Nelson, 507 U.S. 349, 355 (1993), and when the foreign state
asserts immunity from jurisdiction under the Act, the “focus shifts” to whether the plaintiff
has demonstrated an exception to such immunity, a question of law, Wye Oak Tech., Inc.
v. Republic of Iraq, 666 F.3d 205, 212 (4th Cir. 2011) (quoting Phoenix Consulting Inc. v.
Republic of Angola, 212 F.3d 36, 40 (D.C. Cir. 2000). We review the district court’s ruling
on FSIA jurisdiction de novo, see BAE Sys. Tech. Sol. & Servs., Inc. v. Republic of Korea’s
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Def. Acquisition Program Admin., 884 F.3d 463, 473 (4th Cir. 2018), although we review
the court’s underlying findings of fact under the clear error standard. Here, however, the
governing facts are those of the complaint, which we accept as true for purposes of our
analysis.
In this case, when the defendants asserted a lack of jurisdiction under the FSIA,
Blenheim contended that the conduct alleged in the complaint was based on “commercial
activity,” as excepted from immunity from jurisdiction under § 1605(a)(2). Focusing
mostly on its obligation under the transaction to procure the military satellite for South
Korea, it now asserts:
Blenheim’s claims are principally based upon the commercial transaction
that provided a military satellite to South Korea as an “offset” for the F-35
purchase. This transaction was implemented through commercial contracts
executed solely by South Korea and Lockheed (to deliver the satellite and
related services to South Korea), and by Lockheed with Airbus SAS (to
supply the satellite to Lockheed). The U.S. government was not a party to
those contracts, and was not permitted to be a party to those contracts.
* * *
The U.S. government never took title to the satellite, and thus did not act as
an intermediary for this “offset” in the way it did for the F-35s. The district
court’s conclusion with respect to the F-35 sale is therefore inapplicable to
the satellite piece of the transaction.
* * *
Blenheim’s claims are based principally upon the procurement and financing
of the satellite purchase, which was clearly commercial activity.
Blenheim argues that, following the FSIA’s directive to consider the “nature” of the
activity, the offset transaction was commercial because it simply involved “the purchase
and sale of goods.” It argues further that it is irrelevant whether the goods being purchased
could only be purchased by sovereigns for sovereign purposes, “such as military equipment
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acquired for national defense,” or whether they were “sold through the [Foreign Military
Sales] Program.”
The defendants do not deny Blenheim’s characterization of the offset transaction as
the sale of goods to South Korea, but they contend that Blenheim’s argument is framed at
too general a level. Rather, they argue, the inquiry must focus on whether the activity was
of a type “exclusively reserved to sovereigns.” When the inquiry is so directed, they
maintain, it becomes clear that the sale of the F-35s and the military satellite, as a “Foreign
Military Sale,” could only be made between sovereigns exercising sovereign authority. As
they argue:
In [a Foreign Military Sale], the sovereign has no privity of contract with the
private contractor. . . . In fact, the foreign sovereign effectively delegates
control to the U.S. Government, from negotiating terms with the
manufacturer’s price and more, and it cannot directly sue the contractor for
its performance. . . . [Foreign Military Sales] transactions are also subject to
various national security and defense policies, and the foreign sovereign must
meet a host of conditions. . . . Indeed, the [Arms Export Control Act]
conditions [Foreign Military Sales] on a finding by the President that such
sale will strengthen the security of the United States and promote peace.
At the outset, we agree with the defendants’ observation that Blenheim’s definition
of commercial activity is made at too general a level, such that it would essentially
encompass every purchase or sale of goods involving a foreign sovereign. We conclude
that not every purchase of goods by a sovereign is “commercial activity.” Some by their
nature are, and some are not. Nonetheless, the issue is somewhat different. As the Supreme
Court has pointed out, it is “whether the particular actions that the foreign state performs”
are “the type of actions by which a private party engages in trade or commerce.” Republic
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of Argentina v. Weltover, Inc., 504 U.S. 607, 614 (1992) (first emphasis added) (cleaned
up).
The FSIA defines “commercial activity” as “a regular course of commercial
conduct” or a “particular commercial transaction.” 28 U.S.C. § 1603(d). But it does not
define “commercial.” Rather, it provides only interpretative guidance, stating:
The commercial character of an activity shall be determined by reference to
the nature of the course of conduct or particular transaction or act, rather
than by reference to its purpose.
Id. (emphasis added). The Supreme Court observed, “If this is a definition, it is one
distinguished only by its diffidence; as we observed in our most recent case on the subject,
it ‘leaves the critical term “commercial” largely undefined.’” Nelson, 507 U.S. at 359(quoting Weltover, 504 U.S. at 612). But the Court nonetheless undertook to define the
term, beginning with its initial observation that Congress intended the immunity to apply
to “sovereign or public acts (jure imperii)” and not to acts that are “private or commercial
in character (jure gestionis).” Id. at 360. It then concluded:
[A] state engages in commercial activity . . . where it exercises only those
powers that can also be exercised by private citizens, as distinct from those
powers peculiar to sovereigns. Put differently, a foreign state engages in
commercial activity . . . only where it acts in the manner of a private player
within the market.
Id. (emphasis added) (cleaned up); see also Weltover, 504 U.S. at 614. Thus, when the
sovereign engages in a transaction peculiar to sovereigns — one in which private parties
cannot engage — it is engaged in sovereign activity that is not excepted from the immunity
conferred by the FSIA, even if it involves the purchase of goods.
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Applying this test to the offset transaction in which Blenheim was a participant and
from which it was subsequently “cut out,” we conclude that South Korea was engaged in
conduct peculiar to sovereigns and therefore was not engaged in “commercial activity” as
excepted from the immunity from jurisdiction conferred by the FSIA.
We begin with the observation that the F-35s and the coordinating military satellite
— the subjects of the offset transaction — involved highly advanced technology and that
the sale of F-35s was restricted as a Foreign Military Sale and therefore could only be made
with the approval and supervision of the U.S. government, and then only to a friendly
country. It was also subject to controlling considerations of national security and public
policy. While the satellite was manufactured by Airbus, a foreign company outside the
United States, it was nonetheless to be designed with next-generation capabilities that
included the capability of engaging with the F-35s, and its inclusion in the offset transaction
was subject to the United States’ approval and supervision. Indeed, the money for the
satellite had to be paid to the United States and only then was disbursed by it, as provided
by the terms of the approved transaction.
Foreign Military Sales cannot be made except in compliance with the Arms Export
Control Act, 22 U.S.C. § 2751 et seq., which requires approval of sales by the President of
the United States and certification to Congress. And the President can approve such a
transaction only if, among other things, (1) the President finds that the defense articles “will
strengthen the security of the United States and promote world peace”; (2) the country to
whom the articles are to be provided agrees “not to transfer title to, or possession of” them
without the consent of the President; and (3) the country receiving the goods agrees to
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“maintain the security” of them. Id. § 2753(a). Moreover, private parties participating in
Foreign Military Sales are subject to criminal penalties if they are not appropriately
registered and licensed. Id. § 2778(b), (c).
In this case, the nature of the offset transaction was a military procurement by South
Korea from the United States of military items manufactured by Lockheed and Airbus,
which was subject to plenary U.S. government control in furtherance of a policy of
“international defense cooperation among the United States and those friendly countries to
which it is allied by mutual defense treaties.” 22 U.S.C. § 2751. And transactions such as
the offset transaction in this case can be approved “only when they are consistent with the
foreign policy interests of the United States.” Id. It is clear that a private party could not
engage in such a procurement, whether as buyer or seller. Such activity, by its nature,
involves the transfer of military assets only to sovereigns and then only in furtherance of
U.S. public policy and mutual military cooperation between countries. Moreover, it is not
activity directed or influenced by the market but rather by the President’s and Congress’s
judgment on national security concerns. Foreign Military Sales “reflect[] the national
security interests of the United States,” Sec’y of State for Defence v. Trimble Navigation
Ltd., 484 F.3d 700, 707 (4th Cir. 2007), and therefore have a special contract structure that
does not permit designation of the transaction as a “commercial activity.”
Indeed, apart from the Arms Export Control Act, the entire procurement activity and
transaction in this case was inherently sovereign activity. Activities such as creating and
maintaining armed forces and obtaining for them arms and other tools of war — supplied
only by sovereigns and to sovereigns in furtherance of mutual defense arrangements — are
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peculiarly sovereign activities. And while the activity here did not involve the creation of
armed forces, it did involve providing them with F-35s that can only be obtained from the
U.S. government and only provided to a friendly government. Moreover, the sale of F-35s
to South Korea was conditioned on the U.S. government’s determination that the
transaction would advance goals related to foreign relations and national defense. Even
the F-35s’ manufacturer cannot engage in that activity, much less other private parties.
Thus, the activity at issue in this case was not the type that could be pursued by private
citizens or corporations. A sovereign “engages in commercial activity . . . only where it
acts in the manner of a private player within the market.” Nelson, 507 U.S. at 360 (cleaned
up). It follows that South Korea was not engaged in “commercial activity” within the
meaning of the FSIA.
Blenheim seeks to avoid this conclusion by arguing that the harm to it was isolated
to its arrangement with Airbus for the manufacture and sale of three satellites, two of which
Blenheim would have operated itself. It thus seeks to break out its contract benefits from
the offset transaction as a whole in order to argue that the satellite transaction was
commercial because a private person or corporation could purchase satellites from Airbus.
But this argument ignores Blenheim’s own characterization of the transaction. The
complaint described South Korea as having an indispensable role. It also described the
satellite as satisfying South Korea’s needs and military specifications, which were
classified. Moreover, it alleged that the offset transaction, including Blenheim’s
arrangement with Airbus for the manufacture of the satellites, was complicated, integrating
many components and parties and requiring Blenheim’s expertise to design it. Blenheim’s
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arrangement with Airbus was a necessary and integral part of the procurement by South
Korea of the F-35s. As Blenheim alleged, it designed the entire transaction as an integrated
offset deal, in which “all four major stakeholders” would benefit — South Korea,
Lockheed, Airbus, and Blenheim. It also alleged that the U.S. Department of Defense
“play[ed] a major role in the sales” and was an “essential player.” Indeed, Blenheim’s
particular arrangement with Airbus for the purchase of the satellites was also regulated by
the United States. As Blenheim alleged, “[E]ven though sovereigns demand offsets as a
‘sweetener’ for defense procurements from foreign suppliers, in the U.S. [Foreign Military
Sales] context, those sovereigns end up footing the bill for the offset with all monetary
transactions flowing through the Pentagon.” (Emphasis added).
Blenheim relies on two district court cases to argue that even taking the offset
transaction as an integrated activity involving South Korea, the offset transaction by its
nature was commercial activity. In the first case, Virtual Def. & Dev. Int’l, Inc. v. Republic
of Moldova, 133 F. Supp. 2d 1 (D.D.C. 1999), Moldova was seeking to sell Russian-made
MiG fighter planes “to bolster its weakening economy.” Id. at 2. The MiGs were being
sold on the open market, drawing interest from Iran, to the alarm of the United States.
Moldova then entered into a contract with Virtual Defense as broker to help it find a buyer
that the United States would approve. The MiGs were thereafter purchased by the United
States, and Virtual Defense then sued Moldova for its commission on the transaction. The
district court concluded that the transaction was an open market transaction in which any
private entity could have participated and was therefore “commercial” for purposes of the
FSIA. Id. at 4. It explained:
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In the instant case, Moldova acted as a private participant in the market when
i[t] engaged in discussions with Virtual regarding the sale of the MiGs and
when it eventually sold the MiGs to the United States. The mere fact that the
goods sold by Moldova were MiG-29 planes does not change the nature of
Moldova’s actions. Accordingly, the court concludes that the relevant
actions of Moldova constitute commercial activities within the definition
espoused in the FSIA.
Id. The transaction in Virtual Defense is clearly distinct from the highly regulated offset
transaction in this case involving South Korea’s procurement of F-35s and a related
military satellite. While Virtual Defense did involve the sale of technically advanced
military aircraft, the structure of the transaction was nothing more than an ordinary
commercial sale by Moldova, without any regulatory oversight. Indeed, the United States
became involved precisely because the MiGs were being sold on the open market, and
possibly to Iran.
The second case relied on by Blenheim, Simon v. Republic of Hungary, 443 F. Supp.
3d 88 (D.D.C. 2020), likewise does not significantly advance Blenheim’s argument. While
Simon concluded that the Foreign Military Sale involved there was commercial activity, it
did so by analyzing the transaction at issue as one “like a contract to buy army boots,” id.
at 110 (cleaned up), which stands in sharp contrast to the goods being procured here and
the circumstances of the procurement. Moreover, the court’s reasoning gave scant
attention to the manner in which Foreign Military Sales transactions are structured and
regulated.
At bottom, we conclude that the offset transaction in this case was not the type of
activity in which a private party could have participated and that South Korea did not act
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in the manner of a private party in its procurement of the F-35s and the military satellite.
See Nelson, 507 U.S. at 360 (quoting Weltover, 504 U.S. at 614).
Because we conclude that the offset transaction was not commercial activity as
excepted from the immunity from jurisdiction conferred in the FSIA, we affirm the district
court’s conclusion that it lacked jurisdiction over Blenheim’s tort claims. See 28 U.S.C.
§§ 1604, 1367.
III
With respect to Blenheim’s antitrust claims, the district court dismissed them based
on both the applicable four-year statute of limitations and its conclusion that they were
barred by the Foreign Trade Antitrust Improvements Act (“FTAIA”), 15 U.S.C. § 6a.
Blenheim contends that both rulings were in error.
On the limitations ruling, the district court concluded that Blenheim’s claims
“accrued” on October 6, 2016, when, as alleged in the complaint, Lockheed sent Blenheim
a letter giving it “formal notice . . . of the immediate termination of the [International
Brokerage Agreement]” between Lockheed and Blenheim. While Blenheim commenced
this action on December 31, 2020, more than four years after the October 2016 date, it
contends that it had challenged the October 2016 letter as invalid because Lockheed did
not have cause to terminate the arrangement and that the agreement was actually terminated
only when Lockheed responded to that challenge in January 2017 with a no-cause 30 days’
notice of termination, which was within the four-year period before Blenheim filed its
original complaint. Blenheim also argues that its injury “was not complete” until the
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restructuring of the offset transaction was completed and the military satellite was actually
launched in 2020, thus deferring or extending to 2020 when its action accrued.
The Clayton Act, under which Blenheim brought its federal antitrust claim, creates
a private cause of action for “any person who shall be injured in his business or property
by reason of anything forbidden in the antitrust laws.” 15 U.S.C. § 15(a) (emphasis added).
And § 15b provides that such actions “shall be forever barred unless commenced within 4
years after the cause of action accrued.” Id. § 15b. The Virginia statute, on which
Blenheim brings its state antitrust claim, provides similarly. See Va. Code Ann. §§ 59.1-
9.12(b), 59.1-9.14.
An antitrust action “accrues” “when a defendant commits an act that injures a
plaintiff’s business.” Zenith Radio Corp. v. Hazeltine Research, Inc., 401 U.S. 321, 338
(1971) (emphasis added). “Thus, if a plaintiff feels the adverse impact of an antitrust
conspiracy on a particular date, a cause of action immediately accrues to him to recover all
damages incurred by that date and all provable damages that will flow in the future from
the acts of the conspirators on that date.” Id. at 339; see also GO Computer, Inc. v.
Microsoft Corp., 508 F.3d 170, 177 (4th Cir. 2007) (noting that “a cause of action generally
accrues when a defendant commits an act that causes economic harm to a plaintiff”).
Of course, a defense based on the statute of limitations is ordinarily raised as an
affirmative defense, see Fed. R. Civ. P. 8(c), and the burden of establishing that affirmative
defense rests on the defendant, see Goodman v. Praxair, Inc., 494 F.3d 458, 464 (4th Cir.
2007). Therefore, the limitations defense cannot usually be addressed on a motion to
dismiss under Rule 12(b)(6), which challenges only the legal sufficiency of the complaint,
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not usually affirmative defenses that the defendant can assert to the complaint. “But in the
relatively rare circumstances where facts sufficient to rule on an affirmative defense are
alleged in the complaint, the defense may be reached by a motion to dismiss filed under
Rule 12(b)(6).” Id.; see also Richmond, Fredericksburg & Potomac R.R. v. Forst, 4 F.3d
244, 250 (4th Cir. 1993). In this case, the defendants relied solely on the allegations of the
complaint in moving to dismiss the antitrust claims as untimely. Accordingly, to review
the district court’s ruling granting that motion, we must turn to the complaint.
Blenheim’s complaint alleged, as relevant to when its antitrust causes of action
accrued, that “from 2012 through 2016 Blenheim Capital devised and structured an
innovative offset deal,” as described in detail. After Blenheim had “conceived, modeled,
and begun the implementation” of the offset transaction, Lockheed, Airbus, and South
Korea “conspired to cut Blenheim out of the deal,” and they thus “benefitted from years of
work and effort by Blenheim . . . to maximize their own advantages and profits.” The
complaint alleged further that the defendants “agreed to proceed with a restructured
transaction that cut out Blenheim in late 2016” (emphasis added), thus misappropriating
Blenheim’s “years of effort” on the offset transaction and leaving it with nothing in return.
In addition, the complaint alleged that while South Korea had paid Lockheed $150 million,
which Lockheed was to pay to Blenheim in installments as seed money to finance the
satellites, Lockheed paid Blenheim only one installment of $45 million, leaving $105
million unpaid. According to the complaint, by late 2016, Blenheim had paid $20 million
of the $45 million to Airbus as commitment for the financing, which never occurred. And
Blenheim was cut out from the transaction because, as alleged, Lockheed became
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concerned that “Blenheim would become a competitor . . . for the sale and leasing of
satellite capacity.” In furtherance of the conspiracy, “on October 6, 2016, [Lockheed]
provided Blenheim with a purported ‘formal notice . . . of the immediate termination’ of
the [International Brokerage Agreement] for cause.” Thereafter, “[h]aving conspired to
cut Blenheim out of the offset transaction, Lockheed, Airbus, and South Korea proceeded
with the military satellite procurement and worked to obtain the necessary approvals . . . to
do so. On July 20, 2020, the satellite was launched from Cape Canaveral, Florida. . . .
Though the launch was the fruit of Blenheim’s labors, it received nothing.”
Not only do the complaint’s allegations place October 6, 2016, as the date when
Blenheim was cut out of the offset transaction, they also describe how, as of that date,
Blenheim was injured in its business and property and Lockheed, Airbus, and South Korea
were enriched by the product of Blenheim’s years of work and effort, seizing the fruits and
denying Blenheim the benefits of the deal. Indeed, as of that time, October 6, 2016,
Blenheim had already paid $20 million to Airbus as a finance commitment, for which it
received nothing because of the October 6, 2016 termination. Finally, as the complaint
alleged, Blenheim was also denied, as of that date, the benefit of procuring satellites and
obtaining a profit from their operation. Indeed, the complaint stated dramatically that after
October 6, 2016, Blenheim “received nothing.” Under these circumstances, we conclude
that Blenheim’s cause of action accrued on October 6, 2016, when Blenheim felt the
“adverse impact of [the] antitrust conspiracy.” Zenith Radio Corp., 401 U.S. at 339.
Blenheim argues that it was not injured until January 2017 because it was only then
that Lockheed legally terminated the brokerage agreement. But the question of whether
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Lockheed’s October 2016 termination of the brokerage agreement caused Blenheim injury
does not depend on whether that termination was legal. The complaint alleges clearly that
Lockheed’s October 2016 termination, whether legal or illegal, cut Blenheim out of the
transaction and thus deprived it of its anticipated benefits.
Also, Blenheim’s alternative argument that the accrual date of its action was
extended until the restructured offset transaction was complete, i.e., when the satellite was
launched in 2020, lacks legal support. The fact that some damages were to accrue in the
future does not extend the accrual date. See Zenith Radio Corp., 401 U.S. at 339. As the
Supreme Court noted, to recover future damages, the plaintiff still must “sue within the
requisite number of years from the accrual of the action,” when it first felt “the adverse
impact of [the] antitrust conspiracy.” Id. Because Blenheim felt adverse impacts
immediately upon Lockheed’s October 2016 termination of the brokerage agreement, the
date of the satellite launch is not relevant to the date when the cause of action accrued.
Accordingly, we affirm the district court’s ruling that Blenheim’s antitrust claims
are barred by the applicable four-year statute of limitations.
While the district court also concluded, indeed persuasively, that the FTAIA barred
Blenheim’s antitrust claims because the anticompetitive conduct alleged did not
sufficiently affect U.S. domestic or import commerce, we do not address that issue in light
of our ruling affirming dismissal on the basis of the statute of limitations.
The judgment of the district court is, accordingly,
AFFIRMED.
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