Wye Oak Technology, Inc. v. Republic of Iraq, No. 10-1874

Decided Dec. 29, 2011

Wye Oak entered into a contract with Iraq’s Ministry of Defense (IMOD) for refurbishing, selling, or disposing of used military equipment. After a period of alleged nonpayment, Wye Oak sued the nation of Iraq for breach of contract, claiming roughly $24 million in damages. Iraq moved to dismiss for, inter alia, lack of jurisdiction first under the Foreign Sovereign Immunities Act and later for insufficient pleading—arguing that IMOD was actually a separate legal entity than the Republic of Iraq and that Iraq had no contract with Wye Oak. The district court denied the motion to dismiss and transferred the case to the D.C. Circuit; nonetheless, Iraq filed an interlocutory appeal to the Fourth Circuit that stayed proceedings in that court.

The Fourth Circuit affirmed the denial of dismissal. First, it noted that though Iraqi law treats the Republic and IMOD as separate legal persons, it is the FSIA, not the foreign law that determines whether the Act will apply in U.S. courts. The court then found that IMOD was a political subdivision and not merely an agent or instrumentality of Iraq. Thus, they are “legally one and the same” for purposes of the FSIA. Second, the court held that IMOD, and therefore Iraq, were not protected by the FSIA because of the “commercial activities exception.” Specifically: “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 an act performed in the United States in connection with a commercial activity of the foreign state elsewhere.” 28 U.S.C. § 1605(a).

Judge Shedd filed a dissenting opinion arguing that the Fourth Circuit should not have jurisdiction to hear the appeal once the case was transferred to another circuit. Indeed, the general rule is that once a case is transferred, the circuit court loses jurisdiction to hear appeals from the court below absent the exception found in TechnoSteel, LLC v. Beers Const. Co., 271 F.3d 151 (4th Cir. 2001). Here, Judge Shedd argued that TechnoSteel was inapplicable because since each court has a duty to assess its own subject matter jurisdiction of any pending action before it, it was not necessary for the Fourth Circuit to decide the interlocutory appeal determination of jurisdiction before allowing the D.C. court to take up the matter.

Full Opinion

-C. Alexander Cable

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