Recent Development: The D.C. Circuit’s Latest FSIA Decision

The D.C. Circuit’s decision last week in Bell Helicopter Textron, Inc.v. Islamic Republic of Iran, — F.3 —, 2013 WL 5853916 (D.C. Cir. Nov. 1, 2013), raises several issues of interest under the FSIA.

First, the affirmance of the district court’s grant of Iran’s motion to vacate the judgment — a motion that was filed nearly a year after the default judgment was entered against the sovereign — acknowledges a powerful tool in the arsenal of foreign states in FSIA cases.  It is significantly easier for foreign sovereigns to vacate default judgments in federal court than it is for non-sovereign corporations or individuals, and that could have important strategic implications in certain cases.

Second, Bell Helicopter is one of relatively few cases in which a plaintiff was found to have failed to meet the burden of production under the FSIA’s burden-shifting scheme.  To function properly, the FSIA’s burden-shifting regimen should require plaintiffs to meet a substantial burden — a burden of production “with bite.”  With the Ninth Circuit’s 2010 decision in Peterson (see Peterson v. Islamic Republic of Iran, 627 F.3d 1117, 1125 (9th Cir. 2010)) and now with Bell Helicopter, that trend may be gathering steam in FSIA cases.

Third, Bell Helicopter properly refused to recognize remote, attenuated or speculate effects as sufficient for purposes of the “direct effect” requirement of the commercial activity exception’s third clause.  The Court of Appeals’ decision is consistent with appellate courts’ recent resistance to accepting creative “direct effect” arguments from plaintiffs’ attorneys in FSIA cases.  Early in FSIA jurisprudence, Judge Leval recognized the danger of a liberal construction of the direct effect requirement:

[T]he direct/indirect distinction serves a meaningful end in relation to the statute’s objectives in foreign relations. The statute seeks a balance between the provision of a convenient forum for claimants aggrieved in commercial dealings with foreign states and the promotion of comity and harmony between the United States and other nations. To extend jurisdiction to claims brought by all persons indirectly injured by commercial acts of foreign states would subject them to the jurisdiction of United States courts in an enormously expanded number of cases (including, no doubt, many that would eventually be dismissed for failure to state a cause of action). Given the proclivity of the United States population to devise lawsuits for every contretemps, the harassment of foreign sovereigns by exposure to the jurisdiction of United States courts would no doubt be considerable. Thus the statutory clause limiting jurisdiction over foreign sovereignties to instances of “direct” effect serves a valuable goal of foreign relations and should not be nullified by freehanded court interpretation.

Colonial Bank v. Compagnie Generale Mar. et Financiere, 645 F. Supp. 1457, 1465 (S.D.N.Y. 1986) (citation omitted).  Judge Leval’s words hold true nearly thirty years later, and it is good to see that federal courts continue to be cognizant of that danger today.

One response

  1. Pingback: The FSIA’s Recurring Burden Problem « FSIA LAW

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