Wye Oak Technology, Inc. v. Republic of Iraq , 72 F. Supp. 3d 356 ( 2014 )

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
WYE OAK TECHNOLOGY, INC., i
Plaintiff, i
v. 3 Civil No. 10-1182 (RCL)
REPUBLIC OF IRAQ, i
Defendant. ;
)
MEMORANDUM OPINION
Plaintiff Wye Oak Technology, Inc. brings suit against the Republic of Iraq for breach of
contract. Compl. at 12—13, ECF No. 1. The agreement at issue was executed between Wye Oak
and the Iraqi Ministry of Defense (the “‘Ministry”). Broker Services Agreement at 1, ECF No. l-
2. Jurisdiction in this Court is premised on the Foreign Sovereign Immunities Act (“FSIA”),
specifically § 1605(a)(2), the “commercial activity” exception to foreign sovereign immunity,
which is triggered by a suit based on commercial activities of a foreign state that are carried on in
this country or have “direct effect” in this country. 28 U.S.C. §§ 1330(a), 1605(a)(2). Today,
Wye Oak seeks partial judgment on the pleadings on a narrow question: May Iraq be held liable
for the alleged breach of the agreement, despite the fact that the signatory to that agreement is the
Ministry? Put somewhat differently, the Court must determine whether the Ministry’s liability
for breach, if any, can be attributed to Iraq.
For the following reasons and after consideration of the parties’ briefing and the relevant
legal standards, the Court concludes that Wye Oak has not established its entitlement to a partial
judgment on the pleadings with respect to the attribution of liability between the Ministry and
Iraq. Wye Oak’s motion is DENIED.
II. STANDARD OF REVIEW
Federal Rule of Civil Procedure 12(c) allows a party to move for judgment on the
pleadings “[a]fter the pleadings are closed——but early enough not to delay trial.” Fed. R. Civ. P.
12(c). The motion should be granted “if the moving party demonstrates that no material fact is in
dispute and that it is entitled to judgment as a matter of law.” Stewart v. Evans, 275 F.3d 1126,
1132 (DC. Cir. 2002) (internal citation and quotation marks omitted). A court reviewing a Rule
12(c) motion should “accept as true the allegations in the opponent’s pleadings and accord the
benefit of all reasonable inferences to the non-moving party.” 1d. (internal citation and quotation
marks omitted).
III. LEGAL STANDARD AND DISCUSSION
The FSIA provides federal courts with original jurisdiction over suits against foreign
states when the statute’s requirements are met. 28 U.S.C. § 1330. The Supreme Court has held,
however, that the FSIA does not “affect the substantive law detemiining the liability of a foreign
state or instrumentality, or the attribution of liability among instrumentalities of a foreign state.”
First Nat ’Z City Bank v. Banco Para El Comercio Exterior de Cuba, 462 US. 611, 620 (1983)
(“Bancec”). This conclusion is rooted in the statute’s provision that a foreign state against which
suit is brought under the FSIA “shall be liable in the same manner and to the same extent as a
private individual under like circumstances.” 28 U.S.C. § 1606. Thus, “where state law
provides a rule of liability governing private individuals, the FSIA requires the application of
that rule to foreign states in like circumstances.” Bancec, 462 US. at 622 n.11.
A wrinkle in this general rule that state substantive law governs FSIA claims arises in the
context of attribution of liability among state entities with separate juridical status. The Court
observed in Bancec that the F SIA is silent “concerning the rule governing the attribution of
liability among entities of a foreign state.” Id. (emphasis in original). The Court was
considering whether a juridical entity separate from Cuba under Cuban law could be held liable
for actions taken by the state. Id. at 621-22. After concluding that the FSIA did not govern the
matter, the Court held that “principles . . . common to both international law and federal common
law” should be applied to determine the instrumentality’s liability for the state’s actions. Id. at
621, 623. Thus, under FSIA causes of action arising out of state substantive law, federal courts
apply federal common law to the attribution of liability among state entities. Courts of appeals,
including that of this circuit, have interpreted the Court’s opinion in Bancec similarly. See, e. g.,
GSS Grp. Ltd. v. Nat ’1 Port Auth, 680 F.3d 805, 814 (DC. Cir. 2012) (“Bancec addressed the
liability of a foreign, state-owned firm for the acts of its sovereign parent”); Frontera Res.
Azerbaijan Corp. v. State Oil Co. of the Azerbaijan Republic, 582 F.3d 393, 400 (2d Cir. 2009)
(describing Bancec as “ask[ing] when a state instrumentality can be treated like its state for ‘the
attribution of liability’”).
Under Bancec, “government instrumentalities established as juridical entities distinct and
independent from their sovereign should normally be treated as such.” Bancec, 462 U.S. at 626—
28 (describing this as a “presumption” of respect for separate legal status). This presumption
may be triggered by an “unequivocal statement in [an entity’s] enabling law establishing its
independent juridical identity.” DRC, Inc. v. Republic of Honduras, -——F. Supp. 3d---, Civil
Action No. 10-0003, 2014 WL 5390182, at *7 (D.D.C. Oct. 23, 2014); see also Compagnie
Noga D’Importation et D’Exportation SA. v. Russian Fed ’n, 361 F.3d 676, 686 (2d Cir. 2004)
(holding that, under Russian law, the Russian Government was not a separate party from the
Russian Federation, in part, because the Federation had not shown that the “Government is a
separate juridical entity that can sue and be sued in Russian courts . . . for any legal obligations”).
In this case, the Court holds that the Ministry and Iraq are separate juridical entities as a matter
of Iraqi law. According to expert opinion provided to the Court, the Law of Executive Authority
(Law Number 50 of 1964) establishes the “legal structure of the State of Iraq and the Ministries
of the Government of Iraq.” Dr. Ali Kadhum Aziz Decl. 11 9, ECF No. 103-1. That law states, in
paragraph two, article one, that “[t]he Cabinet and each Ministry of the Ministries has a legal
personality to exercise the rights stipulated in the Civil Code and other Laws and each of them
shall be regarded as the meaning of the word ‘Government.’” Dr. Aziz Decl., Ex. 1 at 17, ECF
No. 103-1. The Civil Code at Article 47 states that “juristic persons” include the State—i.e.,
Iraq—and the “administrations and the public institutions which by virtue of the law are granted
a juristic personality independent of the State’s personality in accordance with the conditions laid
down herein.” 1 Law in Iraq: A Document Companion 267 (Chibli Mallat & Hiram Chodosh
eds., 2012). Article 48 of the Civil Code sets forth the rights of juristic persons, including that
each such person has its own patrimonium1 and the right of litigation. Id. at 268. These
provisions demonstrate to the Court that the Ministry is a separate juridical entity from Iraq, by
operation of the Law of Executive Authority, and that this law further sets out that the Ministry
has the right to exercise rights accruing to juridical persons under the Civil Code. Civil Code
Article 47 confirms the effect of the Law of Executive Authority—it states that juridical persons
include “public institutions which by virtue of the law [i.e. the Law of Executive Authority] are
granted a juristic personality independent of the State’s personality.”
1 Black’s Law Dictionary defines patrimony—identified as a synonym of patrimoniumw—as, within civil law
systems, “All of a person’s assets and liabilities that are capable of monetary valuation and subject to execution for a
creditor’s benefit.” Black ’5 Law Dictionary 1242 (9th ed. 201 l).
4
The Court’s understanding of these provisions and their legal effect aligns with the
interpretation of Iraqi law by the International Court of Arbitration of the International Chamber
of Commerce in Greek Powder and Cartridge C0. SA. (Greece) v. the Ministry of Defence
(Iraq), the only judicial or arbitral authority presented to the Court interpreting the juridical
status of Iraqi Ministries as a matter of Iraqi law. See Case No. 7094/CK/AEIUACS at 31, ECF
No. 103—2 (“The Arbitral Tribunal consequently cannot accept Pyrkal’s contention that under
Iraqi laws the Ministry of Defence and the State are the same legal person”). It also comports
with expert opinions submitted to the Court. Dr. Aziz Decl. fl l3.B (“The State of Iraq is not
responsible or liable for the contractual acts of the Ministry of Defense with respect to the
alleged contract between Wye Oak and the Ministry of Defense, nor for any other Ministries, due
to the fact that the State of Iraq is a separate juridical entity in accordance with Iraqi laws . . . .”).
Thus, the Ministry is presumed to be a legally separate entity from Iraq for purposes of
determining liability in this case.
The separate status accorded by the foreign state’s own laws is not the last word on the
matter however. The presumption of separate status~and therefore the presumption of non—
attribution of liability—will yield “if a foreign ‘corporate entity is so extensively controlled by
its owner that a relationship of principal and agent is created’ . . . or when “broader equitable
principle[s]’ dictate that separate treatment ‘would work fraud or injustice.”’ GSS Grp. Ltd, 680
F.3d at 814 (quoting Bancec, 462 US. at 629). In general, the test for determining when the
presumption of separateness will give way is not a “mechanical formula;” instead, it involves an
“equitable” determination in light of the facts presented by the particular case. See Bancec, 462
US. at 632—34.
Under the agency exception described above, a sovereign may assert “complete
domination of the subsidiary” such that the entities are not distinct in reality, but instead act as
one. DRC, Inc, 2014 WL 5390182, at *9 (quoting Transamerica Leasing, Inc. v. La Republica
de Venezuela, 200 F.3d 843, 848 (DC. Cir. 2000)). The exception can also be met when the
sovereign exercises sufficient control over the other entity to allow it to be held liable under
ordinary principles of agency law. Id. (quoting Transamerica Leasing, Inc, 200 F.3d at 849).
As to the exception for instances of fraud or injustice, circumstances that might warrant a
disregard for the separate juridical status of an entity include, for example, instances where the
“foreign sovereign intentionally seeks to gain a benefit while using the legally separate status of
its instrumentality as a shield to guard against concomitant costs or risks;” situations where the
“sovereign otherwise unjustly enriches itself through the instrumentality;” or cases where the
“instrumentality has been cloaked with the apparent authority of the sovereign, and the
complaining party reasonably relies upon that manifestation of authority.” Id. at *12 (citing
Transamerz'ca Leasing, Inc, 200 F.3d at 850, 854 and Bancec, 462 US. at 630—33).
In its answer to Wye Oak’s complaint, Iraq has stated that the agreement underlying this
suit was made between Wye Oak and the Ministry, that the Ministry is a separate juridical entity,
and that it has separate assets to satisfy judgments entered against it. Answer at 1, EC F No. 78.
The Court must, on a motion for judgment on the pleadings, accept as true all facts pled by the
non-moving party and make all reasonable inferences favorable to the non-movant. Stewart, 275
F.3d at 1132. Given that the Bancec test for overcoming the presumption of juridical
separateness is necessarily fact-dependent, the Court cannot make the determination that the
presumption should yield in this case solely on the face of the pleadings. See 5C Charles Alan
Wright et al., Federal Practice and Procedure § 1367 (3d ed. 2004) (“The motion for a judgment
on the pleadings only has utility when all material allegations of fact are admitted or not
controverted in the pleadings and only questions of law remain to be decided by the district
court”). The matter is more appropriately addressed upon a factual record——at summary
judgment or trial.
IV. CONCLUSION
The Court concludes that Wye Oak is not entitled to partial judgment on the pleadings
because it has failed to demonstrate, at this stage of proceedings, that the Ministry’s liability for
its alleged breach of contract can be attributed to Iraq. Wye Oak’s motion is denied.
An Order consistent with this Opinion shall issue this date.
Signed by Royce C. Lamberth, United States District Judge, on November 5, 2014.