2015 International Law Update, Volume 21, Number 4 (October – November - December)

2015 International Law Update, Volume 21, Number 4 (October – November - December)

Legal Analyses published by Mike Meier, Attorney at Law. Copyright 2017 Mike Meier. www.internationallawinfo.com. 

DISCOVERY

Eleventh Circuit considers whether § 1782 precludes the use, in civil litigation in the United States, of evidence previously obtained for use in a proceeding in a foreign or international tribunal

Helga Glock (“Plaintiff”) and Gaston Glock, Sr. were husband and wife who in 1963 founded Glock KG, an Austrian limited partnership that manufactured guns. In 1982, Gaston Glock created the Glock 17 handgun for the Austrian army. Four years later, Glock’s guns started selling in the United States. In 2011, Gaston and Helga began their divorce proceedings in Austria.

In 2013, Helga filed an application pursuant to 28 U.S.C. § 1782 in the U.S. District Court for the Northern District of Georgia, seeking to discover evidence from Glock, Inc., Glock Professional, Inc., and Consultinvest, Inc. (collectively, “Glock Entities”), in the United States for use in the Austrian divorce proceedings. The parties agreed to a protective order that limited Helga’s use of any materials that the Glock Entities marked “confidential” to proceedings to which she was a party (the “Protective Order”).

A year and a half after she filed her § 1782 application, Helga filed a separate Racketeer Influenced and Corrupt Organizations Act (“RICO”) lawsuit in U.S. District Court against Gaston and the Glock Entities (“the RICO Action”). Moreover, she returned to the § 1782 court to seek authorization to allow her to disclose the documents she obtained in that litigation to her RICO attorney, for potential use in the RICO Action. The magistrate judge granted Helga’s motion in a paperless order. The Glock Entities then filed their response opposing Helga’s use of the documents, asserting that, as a matter of law, documents obtained under § 1782 may not be used in domestic litigation, and even if they could, the Protective Order precluded the use of the § 1782 documents in Helga’s domestic litigation.

In November 2014, the magistrate judge vacated her earlier paperless order; entered a written order granting Helga permission to use the documents in the RICO Action; and rejected the Glock Entities’ argument that granting her use of the documents would intrude on the RICO Action judge’s prerogatives.

The Glock Entities filed objections to the magistrate judge’s order pursuant to Rule 72(a), Fed. R. Civ. P., contending that the order was contrary to law because § 1782 prohibits documents obtained for use in foreign proceedings to be used in litigation in the United States.

The District Court sustained the Glock Entities’ objections, concluding that the magistrate judge’s determination was “contrary to law.” It also opined with respect to the Protective Order that, although it did not expressly exclude use of the documents in civil lawsuits in the United States, it must be construed to prohibit such use since it was entered into in the context of a § 1782 action. The Court stated that “This order does not preclude Helga Glock from seeking the documents in the [RICO] Action.” Helga appealed.

The United States Court of Appeals for the Eleventh Circuit reverses the district court’s order.

The key issue here is whether § 1782 precludes the use, in civil litigation in the United States, of evidence previously obtained under the statute.

In a de novo review, the Court starts its analysis by considering what, if any, limitations § 1782 imposes on the later use of documents obtained pursuant to § 1782 in United States civil litigation.

“In relevant part, § 1782 provides,

The district court of the district in which a person resides or is found may order him to give his testimony or statement or to produce a document or other thing for use in a proceeding in a foreign or international tribunal. . . . The order may prescribe the practice and procedure, which may be in whole or part the practice and procedure of the foreign country or the international tribunal, for taking the testimony or statement or producing the document or other thing. To the extent that the order does not prescribe otherwise, the testimony or statement shall be taken, and the document or other thing produced, in accordance with the Federal Rules of Civil Procedure.

28 U.S.C. § 1782(a). The plain language of this statute creates a procedure by which a person may obtain discovery in the United States ‘for use in a proceeding in a foreign or international tribunal.’ Though it is clear from the statutory language that the law does not also establish a method for procuring discovery for use in a domestic proceeding, we find nothing in the language of § 1782 that purports to limit later uses of evidence that have been properly obtained under § 1782. Had Congress intended to restrict the use of evidence previously obtained under § 1782 to proceedings in foreign or international tribunals, it easily could have expressed that intention in any number of ways, even by simply adding the word ‘only’ or ‘solely’ to the phrase ‘for use in a proceeding in a foreign or international tribunal.’ But it did not do that.”

“On the other hand, neither did Congress include a sentence in the statute providing that once discovery is lawfully received under § 1782, it may be used for other legal purposes, including United States litigation. Instead, the statute is entirely silent on the issue of whether material procured under § 1782 may be used after it is lawfully obtained and used for the purpose for which it was obtained.”

As nothing in the statutory language or in the Senate Report accompanying the law suggests that Congress ever specifically contemplated whether documents previously obtained under § 1782 could later be used in civil United States proceedings, and no circuit has addressed this issue, the court considers the analogy of how domestic litigation works.

“First, though, we pause to distinguish between the concepts of using evidence and admitting evidence in court proceedings: A party may use evidence—whether or not it is admissible in court under the Federal Rules of Evidence—to develop a theory of the case, to prepare a complaint, to lead it to admissible evidence, to help it to settle a case, and to accomplish other aspects of prosecuting or defending a case. That fact, however, does not mean that the court will admit the evidence or even that the evidence is potentially admissible. Indeed, our discovery rules expressly contemplate the use of inadmissible evidence in prosecuting or defending a case. See Fed. R. Civ. P. 26(b)(1) (‘Relevant information need not be admissible at the trial if the discovery appears reasonably calculated to lead to the discovery of admissible evidence.’).”

“As a general rule, in United States litigation, to help prosecute or defend their lawsuits, parties may use any evidence they lawfully possess. If, for example, a plaintiff obtains documents in discovery from a defendant in one case, nothing precludes her from using that evidence in a wholly separate lawsuit against the same defendant or a different party, even though she would not have had those documents to use in the second case had she not lawfully received them as discovery in the first case. The law does not require her to rediscover the documents in the second case. Nor must she apply to the court in either lawsuit before being able to, say, draft a complaint in the second case based on information contained in the documents discovered in the first case. This is so even though no rule or law expressly authorizes a party to use, in furtherance of litigation, evidence that it lawfully possesses, whether as a result of earlier litigation or other circumstances.”

“[…] As the Federal Rules of Civil Procedure suggest, goals of our system of civil litigation include ‘secur[ing] the just, speedy, and inexpensive determination” of the proceeding. See Fed. R. Civ. P. 1. Allowing parties to use, for purposes of litigation, documents they have lawfully obtained, regardless of whether they could have obtained them through discovery in the case in which they use them, furthers these goals. We see no reason why a different rule should apply to the use, in United States litigation, of documents that were previously lawfully obtained under § 1782.”

The court does not accept the Glock Entities’ argument based on the decision in In re Letter of Request from Crown Prosecution Service of the United Kingdom, 870 F.2d 686 (D.C. Cir. 1989), where the district court “did not abuse its discretion by not entering a `protective order to guard against improper use of the evidence in auxiliary or unrelated proceedings here or abroad. The district court’s order does not permit the Commissioners to do anything but send the evidence to the British prosecutors . . . and any other use by them would require court permission.’”

As for the third Intel factor: “In Intel, the Supreme Court explained that once a party satisfies § 1782’s statutory requirements to obtain discovery, the district court has the authority to grant a § 1782 application, but whether then to do so falls within the district court’s discretion. See id., 542 U.S. at 264, 124 S. Ct. at 248283. To guide the district court’s exercise of its discretion, the Supreme Court set forth four factors for consideration. See id. at 26465, 124 S. Ct. at 2483. The third Intel factor[8] suggests evaluating whether the § 1782 application ‘conceals an attempt to circumvent foreign proof-gathering restrictions or other policies of a foreign country or the United States.’ Id. at 26465, 124 S. Ct. at 2483. […]”

“We acknowledge that a § 1782 applicant could attempt to abuse the statute to obtain documents outside the discovery procedures set forth in the Federal Rules of Civil Procedure. But it naturally follows from the existence of the third Intel factor that this kind of subterfuge is a valid reason to reject a § 1782 application in the first place. Parties concerned in a particular case that a § 1782 applicant is attempting to use foreign litigation as a ruse for obtaining discovery in the United States without complying with the usual procedures of the Federal Rules of Civil Procedure can and should bring evidence of such chicanery to the § 1782 court’s attention.”

“Our system does not require a party to ‘rediscover’ evidence that it has properly obtained, so the substantive United States court’s authority is not implicated prior to the filing of the subsequent lawsuit. And once the substantive case has been filed, it is the substantive United States court that makes all decisions regarding the admissibility of evidence, though it may choose to do so, in part, if it wishes, based on the conclusions of the § 1782 court regarding whether a litigant improperly used § 1782 for the purpose of obtaining United States discovery that otherwise would not have been authorized.”

“But a rule that would categorically hold that documents lawfully obtained under § 1782 can never be used in United States civil litigation lacks a basis in the statutory language and has significant potential to adversely affect the goals and efficiency of United States litigation. […]Along the same lines, a blanket rule prohibiting the use of evidence obtained under § 1782 would create a perverse incentive for a party responding to a § 1782 order to flood the applicant with evidence in an effort to insulate itself from United States litigation by precluding the requesting party’s ability to use any of the evidence obtained in any future United States litigation.”

The Court concludes that “[t]he restrictions on subsequent use of evidence obtained under § 1782 urged here by the Glock Entities are simply not supported by statutory text, legislative history, conventional discovery practice, or policy considerations. In short, we find that § 1782 does not preclude, as a matter of law, the use of evidence procured pursuant to it in subsequent United States civil litigation.”

The Court reverses the district court’s order finding it erroneous as a matter of law.

Citation: Glock v. Glock, Inc., 797 F. 3d 1002 (11th Cir. 2015).

DISCOVERY

Second Circuit sets the minimum requirements in determining whether the § 1782 applicant seeking discovery is an “interested person,” and whether the discovery sought is “for use” in a foreign proceeding

Plaintiffs-appellants are certain funds, accounts, and/or investment vehicles managed by affiliates of Fortress Investment Group, LLC (“the Funds”) who held interests in two Saudi conglomerates, the Saad Group (“Saad’) and Ahmad Hamad Algosaibi and Brothers Company (“AHAB”). The Funds hold interests in the Golden Belt 1 (“GB1”) sukuk, a financial instrument issued by Saad, and various other investments issued by Saad and AHAB, including participation in a Cayman Islands holding corporation for Saad’s assets outside of Saudi Arabia, valued at $35 million.

When in 2009 AHAB began reporting financial problems, traced to fraud and embezzlement of Saad owner Maan Al Sanea, the Saudi Arabian Monetary Authority froze all of Al Sanea’s assets. This was followed by other international regulatory authorities, including the Central Bank of Bahrain, which seized control of several subsidiaries of Saad and AHAB, and the Grand Court of the Cayman Islands, which issued a worldwide freezing order against Al Sanea, including the companies in which the Funds held their $35 million interest. These resulted in all of the financial instruments of Saad and AHAB being in default and various legal actions being instituted in several countries in the wake of the conglomerates’ default.

Nearly five years after the Saudi conglomerates’ default, the Funds sought leave to take discovery against KPMG International Cooperative, PricewaterhouseCoopers L.L.P., and PricewaterhouseCoopers International Limited (collectively, “the firms”), the audit firms, filing an ex parte application in the United States District Court for the Southern District of New York pursuant to 28 U.S.C. § 1782 seeking documents and other evidence relevant to these foreign proceedings. KPMG L.L.P. and PricewaterhouseCoopers L.L.P. are United States-based accounting firms (“the U.S. firms”), while KPMG International Cooperative and PricewaterhouseCoopers International Limited are firms incorporated in Switzerland and England (“the international firms”). The Funds contended that the firms were likely to have information about the finances of the two conglomerates because their affiliates in Saudi Arabia, Egypt and Dubai audited various companies owned by AHAB and Saad that were involved in the offerings and investments that the Funds held. As the Funds argued, these documents would be highly useful and relevant to the pending proceedings in the various foreign jurisdictions, as well as in the several legal actions that it planned to initiate directly.

The district court denied the Funds’ § 1782 application, holding that the Funds sought documents primarily from the international firms, which are both different entities from the New York-based U.S. firms. The international firms were not “found” in the judicial district in which the application was filed; the information the Funds sought was not “for use” in a foreign proceeding, because the Funds were not a party to any of the pending proceedings, and there was no “discernible procedural mechanism” whereby the discovered material would actually be used in the foreign proceedings; and the Funds had failed to demonstrate that they were “interested person[s]” in the context of the pending foreign proceedings, because they had no role in those proceedings and did not establish that they had a right to submit evidence to the foreign tribunals in question.

The district court concluded that the Funds failed to meet the statutory requirements that establish the court’s authority to order discovery under § 1782, thus it did not reach the discretionary factors that determine whether to grant the application. The Funds appealed.

The United States Court of Appeals for the Second Circuit affirms the district court’s judgment.

The key issue here is the meaning of terms “interested person” and “for use” under 28 U.S.C. § 1782.

“28 U.S.C. § 1782 provides, in pertinent part: ‘The district court of the district in which a person resides or is found may order him to . . . produce a document . . . for use in a proceeding in a foreign or international tribunal . . . upon the application of any interested person. . . .’ We have summarized the statute as setting forth three requirements: that ‘(1) the person from whom discovery is sought resides (or is found) in the district of the district court to which the application is made, (2) the discovery be for use in a proceeding before a foreign tribunal, and (3) the application be made by a foreign or international tribunal or any interested person.’ Brandi-Dohrn v. IKB Deutsche Industriebank AG, 673 F.3d 76, 80 (2d Cir. 2012). […]”

The court reviews this case de novo.

“To satisfy the second and third statutory requirements, an applicant for a § 1782 order must be an ‘interested person,’ and must establish that the discovery sought is ‘for use in a proceeding before a foreign tribunal.’ Brandi-Dohrn, 673 F.3d at 80. The Supreme Court analyzed these statutory requirements in Intel Corp. v. Advanced Micro Devices, Inc., 542 U.S. 241 (2004). […] [However], [w]e make two preliminary observations about the Supreme Court’s decision in Intel. First, the Court did not lay down minimum requirements or tests to be met in determining whether the party seeking discovery is an ‘interested person’ or whether the discovery is sought ‘for use’ in a foreign proceeding. The Court appeared to regard the case before it as an easy one, in effect finding that the facts before it were sufficient to satisfy the requirements of the statute, and not suggesting that facts identical to those in Intel were necessary to meet those requirements. Second, the Court’s analysis suggests that, while the ‘interested person’ and ‘for use’ requirements are independent, there is considerable overlap between them. The applicant’s ‘participation rights’ in Intel, on which the Court relied in finding that the applicant was an ‘interested person,’ prominently included the applicant’s ability to use the evidence it sought in the U.S. courts before the foreign administrative tribunal and courts by submitting the evidence to the investigating agency in the foreign proceedings.”

The Court accepts defendant firms’ argument that the Funds are not “interested person[s]” with respect to the ongoing proceedings in Saudi Arabia, Bahrain and the Cayman Islands, because they lack the kind of “participation rights” possessed by the applicant in Intel.

“It is unquestionably true that the Funds do not have participation rights similar to the § 1782 applicant in that case. The Funds have made no showing that they are able to present evidence to any of the tribunals conducting those proceedings, or to appeal or otherwise seek further review, in courts or other institutions, of any decision reached in those proceedings, as the applicant could do with respect to the Commission proceedings in Intel. If such rights are necessary for an entity to constitute an ‘interested person’ within the meaning of § 1782, the Funds do not qualify.”

“We are cautious about reaching that conclusion in the absence of a need to reach the question, however. As noted above, the Intel Court did not state that such rights were necessary for an applicant to constitute an ‘interested person,’ appearing to find that ‘participation rights’ such as those possessed by the applicant there qualified it as an interested person ‘within any fair construction of that term.’ Id. at 256. Moreover, in rejecting Intel’s argument that ‘interested person[s]’ under the statute must be ‘litigants’ or formal parties to a proceeding, the Court cited with approval the expansive definition provided by Hans Smit, a leading academic commentator on the statute who played a role in its drafting. Id. at 25657. Professor Smit maintained that the phrase ‘any interested person’ is ‘intended to include not only litigants before foreign and international tribunals, but also foreign and international officials as well as any other person . . . [who] merely possess[es] a reasonable interest in obtaining the assistance.’ Hans Smit, International Litigation Under the United States Code, 65 Colum. L. Rev. 1015, 1027 (1965).”

However, on appeal the Funds argued that they are “interested person[s]” in the broader sense, because they have a reasonable interest in obtaining judicial assistance in the ongoing foreign proceedings. The Funds based this argument on their substantial financial interest in the entities that are the subject of the ongoing proceedings, their ability to influence those proceedings through the Delegate or trustees pursuing claims in the respective proceedings, and because of their status as creditors of the Saad and AHAB affiliates being liquidated in the Cayman Islands and Bahrain. The court rejects this argument, and states:

“Preliminarily, we doubt that the Funds’ financial interest in the outcome of the foreign proceedings alone could be sufficient to confer ‘interested person’ status under the statute. Various entities may have a financial stake in litigation to which they have no direct connection: Shareholders in a company facing a products liability suit are likely to have a financial interest in the outcome of that suit; multiple competitors may have a financial interest in an antitrust case brought by the government; a wide range of media companies may have a financial interest in a libel case involving one newspaper. Most legal cases involve such externalities and have implications, including financial ones, for persons beyond the parties formally participating in the case. Congress cannot have intended to confer ‘interested person’ status on all possible amici curiae when it passed § 1782.”

“Whether the Funds are ‘interested person[s]’ based on their alleged ability to put evidence before other persons who are parties to the foreign proceedings, or by dint of their status as creditors in the liquidation actions, are closer questions. On the one hand, the ability simply to pass on information to parties in a proceeding, without more, cannot confer ‘interested person’ status any more than the ability of amicus counsel to pass along evidence and arguments to counsel representing one of the parties in litigation. On the other hand, an established right to provide evidence and have the party consider it, as the § 1782 applicant had in Intel, 542 U.S. at 256, or a recognized relationship, such as that of an agent and principal, see Lancaster Factoring Co. Ltd. v. Mangone, 90 F.3d 38, 42 (2d Cir. 1996) […], may be sufficient to make an otherwise stranger to the proceeding an ‘interested person.’ Similarly, the role of a creditor under the relevant jurisdiction’s law might confer certain procedural rights that allow the creditor to participate and submit evidence in the proceeding. See, e.g., 11 U.S.C. § 1109(b) (under U.S. bankruptcy law, ‘[a] party in interest, including . . . a creditor . . . may raise and may appear and be heard on any issue in a case under this chapter’).”

The Court holds that the Funds have not identified a way in which they can “use” the evidence they sought in any of the ongoing foreign proceedings. According to the court, “Without some means of injecting the evidence into the proceeding, a § 1782 applicant cannot show that it has a role in the proceeding, such that it may ‘use’ the information, or, as we have recently said, employ it ‘with some advantage.’ Mees v. Buiter, ___ F.3d ___, 2015 WL 4385296, at *4 (2d Cir. July 17, 2015). Consequently, even assuming that the Funds are ‘interested person[s]’ in the pending proceedings in Saudi Arabia, the Cayman Islands, and Bahrain, we agree with the district court that their application fails to satisfy the statute’s ‘for use’ requirement, because the Funds have not met their burden of establishing that they are in a position to use the evidence they seek through their § 1782 application in those ongoing foreign proceedings.”

The Court also rejects as misplaced the Funds’ argument that the information they seek regarding Saad’s and AHAB’s financial status is “for use” in the pending proceedings and that such information will be “highly relevant” to those proceedings.

“[…] The relevance of the information sought to the subject of the proceeding is not sufficient in and of itself to authorize the district court to order discovery.[7] By adopting the phrase ‘for use,’ Congress plainly meant to require that § 1782 applicants show that the evidence sought is ‘something that will be employed with some advantage or serve some use in the proceeding.’ Mees, 2015 WL 4385296, at *4. The key question, therefore, is not simply whether the information sought is relevant, but whether the Funds will actually be able to use the information in the proceeding. Framing the question that way shows that the Funds’ asserted relationships to the parties in the foreign proceedings and their alleged participation rights are insufficient to establish that they will be able to use the evidence obtained as required by the statute.”

Moreover, as the Funds asserted that a 25% stake in GB1 sukuk is necessary to direct the Delegate’s actions, while they only held a 20% interest, the court concluded that the Funds are not in a position to direct the Delegate to consider their evidence or submit that evidence to the tribunal.

“That is no different from a third party providing information to a private litigant that it believes might be useful in a lawsuit, or a witness approaching a prosecutor’s office claiming to have knowledge of a crime. Such information might be relevant or interesting to the recipient, but it is not ‘for use’ in any proceeding in which the recipient is a party unless the recipient takes some further, independent action to introduce it.”

The Court also rejects the Funds’ claims that they “may submit probative evidence to the foreign tribunal”, as well as the assertion that their status as creditors in the Cayman Islands proceedings authorizes them to “request the removal of an official liquidator; coordinate with other investors to request that the liquidator apply to the court for a discovery order[;] request the ability to participate in an oral examination; apply to the court with respect to the exercise or proposed exercise of the liquidators’ powers; . . . and seek to inspect the company’s records.”

“All of these supposed participation rights allow the Funds, at best, to ‘seek’ or ‘request’ to participate in the proceeding, or, perhaps, to challenge the liquidator’s decision in a separate proceeding. See In re Ishihara Chem. Co., 251 F.3d 120, 126 (2d Cir. 2001) (evidence sought was not for use in proceeding that had concluded, and was instead for use in new, separate proceeding), abrogated on other grounds by Intel, 542 U.S. 241. Contrast that to the right of the applicant in Intel to seek review of the agency’s determination within the proceeding itself, and thus to use the evidence obtained through its § 1782 application in that proceeding. 542 U.S. at 257 (applicant “could ‘use’ evidence in the reviewing courts . . . by submitting it to the Commission in the current, investigative stage”). Undoubtedly, information that the Funds could obtain regarding the firms’ audits of the conglomerates might be helpful to the trustees in the liquidation proceedings in determining the proper distribution of the conglomerates’ assets. To that end, however, there is nothing preventing the trustees—or the GB1 Delegate in the Saudi proceeding—from seeking discovery in U.S. courts pursuant to § 1782. Such information might also be useful to the Funds in determining whether to attempt to challenge aspects of the liquidation. But that does not imply that there is any way for the Funds to introduce that information as evidence in the liquidation proceedings or on appeal. The Funds accordingly have failed to establish that any of the evidence they seek could actually be used in any of the foreign proceedings that were pending at the time they made their application.”

The Court concludes that the Funds failed to show any way that they could put before the foreign tribunals the information they sought to discover, and found no errors in the district court’s conclusion that the evidence sought was not “for use” in the ongoing foreign proceeding.

The Court affirms the district court’s denial of plaintiffs-appellants’ § 1782 application.

Citation: Certain Funds, Account and/or Inv. Vehicles v. KPMG LLP, 798 F.3d 113 (2nd Cir. 2015).

SOVEREIGN IMMUNITY

Eleventh Circuit considers whether Caribbean Airlines, Ltd., a company majority-owned by the Minister of Finance of Trinidad and Tobago, qualifies for jury immunity under the Foreign Sovereign Immunities Act, 28 U.S.C. § 1330, in a negligence action

Rovin Singh, a Florida resident, suffered a stroke while on board of Caribbean Airlines, Ltd. (CAL). CAL is an international airline based in the Republic of Trinidad and Tobago (Trinidad and Tobago) and is 84-percent owned by the Minister of Finance of Trinidad and Tobago (Minister). The Minister is a corporation organized under the “Minister of Finance (Incorporation) Act” responsible for all financial or fiscal matters of Trinidad and Tobago, including administering the Ministry of Finance of Trinidad and Tobago (Ministry), and holding and administering the state’s property.

Singh originally filed his complaint in state court, and it was later removed to the Southern District of Florida. In his amended complaint, Singh included a jury demand, which CAL moved to strike, citing the Foreign Sovereign Immunities Act (FSIA), 28 U.S.C. § 1441(d). CAL claimed it qualified as a “foreign state” as defined in the FSIA, see 28 U.S.C. § 1603(a), and asserted its immunity from a jury trial. The district court applied a “core function” test and concluded that the Minister should be considered a “political subdivision” of Trinidad and Tobago, unless it was a legal entity separate from the government of Trinidad and Tobago. The district court held that it was not and granted CAL’s motion. After a bench trial, in which it found that CAL was not negligent, the district court entered judgment in CAL’s favor. Singh then appealed that judgment and the underlying order granting the motion to strike.

The United States Court of Appeals for the Eleventh Circuit affirms the district court’s order striking the jury demand and the final judgment.

The issue here is whether an agency or instrumentality of a foreign state qualifies for jury immunity under the FSIA, 28 U.S.C. § 1330, in a negligence action.

Before deciding this issue, the Court has to determine whether CAL is an agency or instrumentality of a foreign state.

“As a general matter, the FSIA standardizes the sovereign immunity of foreign states. See id. § 1604. That general rule has exceptions. See id. §§ 1605-07. Still, a foreign state is granted immunity from jury trials and is entitled to a bench trial should such an exception apply. See id. § 1441(d). ‘A `foreign state’ . . . includes a political subdivision of a foreign state or an agency or instrumentality of a foreign state as defined in subsection (b).’ Id. § 1603(a). Subsection (b) defines an ‘agency or instrumentality of a foreign state” to include “any entity . . . a majority of whose shares or other ownership interest is owned by a foreign state or political subdivision thereof.’ Id. § 1603(b) (internal quotation marks omitted). Thus, an agency or instrumentality of a political subdivision of a foreign state may be treated as a foreign state for purposes of § 1441(d).”

“At first glance, it may seem that majority ownership by an agency or instrumentality, which would be deemed a foreign state under the FSIA, would make the subsidiary itself an agency or instrumentality, and thus, a foreign state under the FSIA. However, Supreme Court precedent squarely forecloses any such ‘corporate tiering’ theory whereby a corporate subsidiary could claim foreign state status under the FSIA because its parent is majority-owned by a foreign state. See Dole Food Co. v. Patrickson, 538 U.S. 468, 47378, 123 S. Ct. 1655, 165962 (2003) (‘A corporation is an instrumentality of a foreign state under the FSIA only if the foreign state itself owns a majority of the corporation’s shares.’). In that opinion, the Court affirmed the Ninth Circuit’s rejection of the contention that agency or instrumentality status of a parent confers the same status on a majority-owned subsidiary. See id. at 473, 123 S. Ct. at 1659.”

Singh argued that Dole Food settles this appeal. CAL pointed out that, even if a subsidiary of an agency or instrumentality is not entitled to foreign state immunity under the FSIA, the Minister is not an agency or instrumentality, but a political subdivision of Trinidad and Tobago. Moreover, majority-owned subsidiaries of political subdivisions are themselves entitled to foreign state status under the FSIA. “[…] See § 1603(b)(2) (‘An `agency or instrumentality of a foreign state’ means any entity . . . a majority of whose shares or other ownership interest is owned by a foreign state or political subdivision thereof. . . .’).”

As Singh only disputed the Minister’s characterization as a political subdivision of Trinidad and Tobago, the Court turns to analyze this question applying the “core functions” test.

“The core functions test asks ‘whether the core functions of the foreign entity are predominantly governmental or commercial.’ Transaero, Inc. v. La Fuerza Aerea Boliviana, 30 F.3d 148, 151 (D.C. Cir. 1994). The rationale behind this test is based largely on the FSIA’s purpose of standardizing federal courts’ jurisdiction over the commercial activities of foreign states. See 28 U.S.C. § 1602; see also Republic of Argentina v. Weltover, Inc., 504 U.S. 607, 611, 112 S. Ct. 2160, 2164 (1992) (‘The most significant of the FSIA’s exceptions [to the sovereign immunity of foreign states] . . . is the `commercial’ exception of § 1605(a)(2). . . .’). The lesser protections the FSIA offers to agencies or instrumentalities of foreign states reflect the significance of its distinction between traditional governmental activities and commercial activities. See 28 U.S.C. § 1606 (‘[A] foreign state except for an agency or instrumentality thereof shall not be liable for punitive damages. . . .’ (emphasis added)); id. § 1610(a)(b), (d) (limiting execution against property owned by foreign states to property “used for a commercial activity’). The distinction is appropriate because the FSIA repealed sovereign immunity for commercial activity while preserving the same for inherently governmental functions. See Transaero, 30 F.3d at 15152. […]”

The conclusions from the factual findings were that the Minister conducts much of the financial, fiscal and administrative functions of Trinidad and Tobago and the Ministry; that the Minister is responsible for holding and administering Trinidad and Tobago’s property; and that the Minister is appointed by the President in accordance with the provisions of the Constitution of Trinidad and Tobago. The Court thus agrees with the district court’s holding that the Minister “is part of the Ministry” and, accordingly, a political subdivision of Trinidad and Tobago.

“Singh contends that the Minister’s creation by the Minister of Finance (Incorporation) Act and the fact that it is organized as a corporation sole do not distinguish this case. See First Nat’l City Bank v. Banco Para El Comercio Exterior de Cuba, 462 U.S. 611, 62627, 103 S. Ct. 2591, 2600 (1983) (‘[G]overnment instrumentalities established as juridical entities distinct and independent from their sovereign should normally be treated as such.’). We first note that separate legal identity does not foreclose political subdivision status. With that in mind, record evidence that the Minister ‘is not incorporated under the laws of Trinidad and Tobago for the purpose of carrying on a trade or business for gain and, as `corporate sole,’ is expressly excluded from the definition of a `body corporate’ under’ Trinidad and Tobago’s law governing private companies weighs in favor of governmental status and against commercial status.”

“Furthermore, to the extent that Dole Food holds that corporate subsidiaries are not entitled to agency or instrumentality status, that case does not accommodate the circumstances here. There, the Court did not have to consider whether the corporate parent was itself a political subdivision because the subsidiaries did not so argue. In fact, the Court described the corporate parent directly owned by the foreign state as an instrumentality. See Dole Food, 538 U.S. at 473, 123 S. Ct. at 1659 (expressly agreeing with the Ninth Circuit’s holding characterizing the corporate parent as an instrumentality). Here, CAL has squarely argued that the Minister, the analogue of Dole Food’s corporate parent, is a political subdivision.”

“Because we conclude that the district court correctly held that the Minister is a political subdivision of Trinidad and Tobago, CAL qualifies as an agency or instrumentality of Trinidad and Tobago, and the district court’s strike of Singh’s jury demand was not erroneous.”

The Court affirms the district court’s order and the final judgment.

Citation: Singh Ex. Rel. Singh v. Caribbean Airlines Ltd., 798 F.3d 1355 (11th Cir. 2015).

SOVEREIGN IMMUNITY

District of Columbia Circuit held that where a Bilateral Investment Treaty (BIT) exists between two sovereign countries, the BIT and a notice to arbitrate satisfy FSIA’s jurisdictional requirements

In 1973, Chevron and Ecuador signed an agreement allowing Chevron to develop oil fields in exchange for below-market oil to the Ecuadorian government to be used for domestic purposes. This deal was supposed to expire in 1992. However, as the expiration date approached, Chevron filed several breach of contract suits against Ecuador. Subsequently in 1995, Chevron and Ecuador signed an agreement which terminated all obligations between the parties and provided for the continuation of the pending lawsuits.

In 1993, the United States and Ecuador signed a Bilateral Investment Treaty (“BIT”), formally known as the Treaty Between the Government of the United States of America and the Government of the Republic of Ecuador for the Encouragement and Reciprocal Protection of Investment. The BIT took effect in 1997. Under the BIT, Ecuador offered American investors an avenue to arbitrate disputes involving investments that existed on or after the treaty’s effective date.

In 2006, Chevron commenced an international arbitration action claiming that Ecuador had violated the BIT by failing to timely resolve its lawsuits. Ecuador objected to the tribunal’s jurisdiction, arguing that it never agreed to arbitrate with Chevron. Ecuador then contended that Chevron’s investments in Ecuador had terminated two years prior to the BIT. The tribunal rejected the jurisdictional challenge and concluded that Chevron’s lawsuits were “investments” within the meaning of the BIT, and ultimately decided against Ecuador, awarding Chevron approximately $96 million. Ecuador challenged the award in the Dutch court system but the challenge was rejected by the District Court of The Hague, The Hague Court of Appeal and the Dutch Supreme Court.

On July 27, 2012, Chevron petitioned the District Court to confirm the arbitral award under the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (“New York Convention”). Ecuador raised three arguments in opposition: (1) the District Court lacked subject matter jurisdiction under the Foreign Sovereign Immunities Act (“FSIA”); (2) confirmation should be denied under the New York Convention; and (3) that a stay should be granted until the Dutch Supreme Court could resolve the then-pending appeal of the award.

The District Court determined that it had subject matter jurisdiction under 28 U.S.C. § 1605(a)(6), which provides that sovereign immunity does not prevent a suit to confirm an award made pursuant to an arbitration agreement governed by an international treaty, because the award was made pursuant to the BIT and governed by the New York Convention. The District Court rejected Ecuador’s argument that the FSIA required the District Court to undertake a de novo analysis of whether the dispute was arbitrable under the BIT. The District Court found that the parties had “clearly and unmistakably agreed” that the tribunal would resolve such questions. Upon making this determination, the District Court concluded that it was clearly supported by the text of the BIT. The District Court then rejected Ecuador’s argument that the order was against public policy and denied the requested stay. Ecuador subsequently appealed.

The United States Court of Appeals for the District of Columbia Circuit affirms District Court’s decision.

The FSIA typically grants foreign states immunity from the jurisdiction of U.S. courts. 28 U.S.C. § 1604. By enacting the FSIA, Congress set forth several exceptions to this jurisdictional restriction. These exceptions provide the basis for obtaining jurisdiction over a foreign state in federal court.” Argentine Republic v. Amerada Hess Shipping Corp., 488 U.S. 428, 439 (1989); see also Verlinden B.V. v. Cent. Bank of Nigeria, 461 U.S. 480, 488-89 (1983).

The District Court concluded that the jurisdictional requirements of the FSIA were met because “the Award’s own language indicates it was rendered pursuant to the BIT” and “the Award is clearly governed by the New York Convention.” Chevron Corp. v. Republic of Ecuador, 949 F. Supp. 2d 57, 62 (D.D.C. 2013). Ecuador argues that the District Court failed to determine that an arbitration agreement existed, instead deferring to the judgment of the arbitrator. Chevron argues that the statute permits jurisdiction provided that the plaintiff presents a non-frivolous claim that the foreign sovereign has consented to arbitration.

“There are two types of jurisdictional authorizations: (1) ‘jurisdiction that depends on particular factual propositions’ and (2) ‘jurisdiction that depends on the plaintiff’s asserting a particular type of claim.’Agudas Chasidei Chabad of U.S. v. Russian Fed’n, 528 F.3d 934, 940 (D.C. Cir. 2008). Ecuador argues that the § 1605(a)(6) exception requires the District Court to make three findings: (1) a foreign state has agreed to arbitrate; (2) there is an award based on that agreement; and (3) the award is governed by a treaty signed by the United States calling for the recognition and enforcement of arbitral awards.’ Chevron argues that the exception allows jurisdiction any time a plaintiff asserts a non-frivolous claim involving an arbitration award. . Appellee’s Br. at 30-31.”

As the plaintiff, Chevron bears the burden of supporting its claim that the FSIA exception applies. The court concludes that Chevron has met its burden of production by producing the BIT, Chevron’s notice of arbitration against Ecuador, and the tribunal’s arbitration decision. Ecuador does not dispute the existence of the BIT, but challenges the District Court’s conclusion that the BIT (or the combination of the BIT and Chevron’s notice of arbitration) is an arbitration agreement between Ecuador and Chevron.

Ecuador argues that the FSIA required the District Court to make a de novo determination of whether Ecuador’s offer to arbitrate in the BIT encompassed Chevron’s breach of contract claims. According to Ecuador, if Chevron’s claims are not covered by the BIT, then Ecuador never agreed to arbitrate with Chevron, and the District Court consequently lacked jurisdiction. According to Ecuador, the arbitrability question is a jurisdictional question that must be addressed by the District Court.

“[…] For FSIA purposes, Chevron made a prima facie showing that there was an arbitration agreement by producing the BIT and the notice of arbitration. Once Chevron made this showing, the burden shifted to Ecuador to demonstrate by a preponderance of the evidence that the BIT and the notice to arbitrate did not constitute a valid arbitration agreement between the parties. Chabad, 528 F.3d at 940. The jurisdictional task before the District Court was to determine whether Ecuador had sufficiently rebutted the presumption that the BIT and Chevron’s notice of arbitration constituted an agreement to arbitrate.”

“The Supreme Court’s recent decision in BG Group, PLC v. Republic of Argentina, 134 S.Ct. 1198 (2014), is instructive on this point. In BG Group, Argentina’s primary argument was similar to Ecuador’s in the present case. By its terms, the Bilateral Investment Treaty between the United Kingdom and Argentina required an investor to litigate its claims in the local court system before submitting the claims to arbitration. 134 S. Ct. at 1204. The arbitration panel concluded that Argentina had waived the local litigation requirement and found in BG Group’s favor on the merits. Id. at 1204-05. When BG Group sought to confirm the award in the District Court for the District of Columbia, the District Court deferred to the arbitrators’ determination regarding the local litigation requirement. Republic of Argentina v. BG Group PLC, 715 F. Supp. 2d 108, 121-22 (D.D.C. 2010). This Court reversed, holding that “[b]ecause the Treaty provides that a precondition to arbitration of an investor’s claim is an initial resort to a contracting party’s court… the question of arbitrability is an independent question of law for the court to decide.’ Republic of Argentina v. BG Group PLC, 665 F.3d 1363, 1371 (D.C. Cir. 2012).”

“The Supreme Court reversed. The Court “treat[ed] the document . . . as if it were an ordinary contract between private parties”—Argentina and BG Group—and concluded that the parties had intended to allow the arbitrator to determine whether the local litigation requirement had been satisfied. BG Group, 134 S. Ct. at 1206 (majority op.). In doing so, the Court implicitly rejected Argentina’s contention that its offer to arbitrate only applied to investors who complied with the local litigation requirement.[…]”

“For purposes of the BIT, ‘investment’ means every kind of investment in the territory of one Party owned or controlled directly or indirectly by nationals or companies of the other Party . . . and includes . . . a claim to money or a claim to performance having economic value, and associated with an investment.’ BIT Article I.1(a)(iii), J.A. 294. Ecuador argues that the final phrase — ‘and associated with an investment’ — means that a lawsuit must be associated with an investment that existed within the effective period of the BIT in order to qualify as an investment under the BIT. This is a misreading of the treaty terms for two reasons.”

“First, Article I.3 provides that any alteration of the form in which assets are invested shall not affect their character as investment. In conjunction with the BIT’s non-exhaustive definition of ‘investment,’ Article I.3 suggests that an investment continues to exist until it has been fully wound up and all claims have been settled. Chevron’s lawsuits were therefore continuations of its initial investment in Ecuador and protected by the BIT.”

“Second, Article XII limits the application of the BIT ‘to investments existing at the time of entry into force as well as to investments made or acquired thereafter.’ J.A. 300. The investments referred to by this article are investments as defined in Article I, and include ‘a claim to money or a claim to performance having economic value, and associated with an investment.’ J.A. 294. Ecuador argues that the Article XII temporal limitation applies both to the claim and to the investment with which that claim is associated. We disagree. I our view, Article XII applies only to ‘investments’ as defined by Article I, and not to the use of the term ‘investments’ within the definitional paragraph. A lawsuit that existed at the time of entry into force of the BIT is consequently an ‘investment’ for BIT purposes so long as that lawsuit is associated with an investment as generally defined: ‘An expenditure to acquire property or assets in order to produce revenue; the asset so acquired.’ BLACK’S LAW DICTIONARY (6th ed. 1990). Chevron’s breach of contract lawsuits indisputably were associated with its pre-BIT investment activities, and the lawsuits indisputably existed when the BIT entered into force. The lawsuits were therefore “investments” within the meaning of the treaty.”

The court concludes that the District Court correctly determined that the BIT and Chevron’s notice to arbitrate satisfied the jurisdictional requirements of the FSIA, and states that “even if the FSIA required the de novo review of arbitrability suggested by Ecuador, the District Court would still have properly exercised jurisdiction because Ecuador failed to demonstrate by a preponderance of the evidence that Chevron’s lawsuits were not protected by the BIT.”

“As recognized by the court below, ‘the [New York Convention] affords the district court little discretion in refusing or deferring enforcement of foreign arbitral awards.’ Belize 668 F.3d 724, 727 (D.C. Cir. 2012). […] Ecuador asserts two grounds on which confirmation of the award should be denied: Articles V(1)(c) and V(2)(b) of the New York Convention. Article V(1)(c) provides that an award may be refused if it ‘deals with a difference not contemplated by or not falling within the terms of the submission to arbitration,’ and V(2)(b) allows refusal if ‘the recognition or enforcement of the award would be contrary to the public policy’ of the country in which enforcement is sought.”

“Ecuador’s reliance on Article V(1)(c) is misplaced. The District Court did not need to reach the question of whether Chevron’s lawsuits fell within the terms of submission to arbitration because the BIT allows the arbitration tribunal to make that determination. […] ‘Where ordinary contracts are at issue, it is up to the parties to determine whether a particular matter is primarily for arbitrators or for courts to decide. If the contract is silent on the matter . . . courts presume that the parties intend courts, not arbitrators, to decide . . . disputes about `arbitrability.’ BG Group, 134 S. Ct. at 1206 (internal citations omitted). The BIT is not silent on who decides arbitrability. Article VI of the BIT provides that the investor company may submit a matter to arbitration ‘in accordance with the Arbitration Rules of the United Nations Commission on International Trade Law (UNCITRAL).’ BIT Art. VI(3)(a)(iii), J.A. 298. Under these rules, which the BIT incorporates by reference, ‘[t]he arbitral tribunal shall have the power to rule on objections that it has no jurisdiction, including any objections with respect to the existence or validity of the arbitration clause,’ and ‘shall have the power to determine the existence or the validity of the contract of which an arbitration clause forms a part.’ UNCITRAL Arbitration Rules, G.A. Res. 31/91 art. 21 (Dec. 15, 1976). Ecuador therefore consented to allow the arbitral tribunal to decide issues of arbitrability—including whether Chevron had ‘investments’ within the meaning of the treaty. See also Oracle America, Inc. v. Myriad Group A.G., 724 F.3d 1069, 1077 (9th Cir. 2013)(‘Incorporation of the UNCITRAL arbitration rules . . . constitutes clear and unmistakable evidence that the parties agreed to arbitrate arbitrability.’); Schneider v. Kingdom of Thailand, 688 F.3d 68, 72 (2d Cir. 2012) (‘[A] bilateral investment treaty’s incorporation of the … UNCITRAL rules [is] clear and unmistakable evidence that the parties intended questions of arbitrability to be decided by the arbitral panel in the first instance.’) (internal quotation marks omitted). There was no need for the District Court to independently determine that Chevron’s suits satisfied the BIT’s parameters once it had concluded that the parties had delegated this task to the arbitrator.”

The court further determines that Ecuador’s Article V (2)(b) arguments are similarly rooted in the “erroneous premise” that the BIT is inapplicable. Ecuador identified two aspects of American public policy that are inconsistent with confirmation of the award. First, Ecuador argues that “the Award is repugnant to the policy that forum-selection clauses in agreements between sophisticated parties will be upheld” because Chevron and Ecuador had contractually agreed that Chevron’s claims would be litigated in Ecuadorian courts. Appellant’s Br. at 57-58. Second, Ecuador argues that confirmation is inconsistent with respect for foreign sovereignty, claiming that “the Tribunal effectively usurped the jurisdictional authority of the Ecuadorian judiciary, the only adjudicative body authorized to hale the Republic into court to respond to Chevron’s lawsuits.”

“The primary flaw with the first argument is that it misconstrues the nature of Chevron’s action. Chevron’s breach of contract claims were brought in Ecuadorian courts, as required by the initial investment agreement and ratified by the 1995 settlement agreement. Chevron’s arbitration action alleged that Ecuador had unduly delayed resolution of those claims in violation of the BIT. J.A. 813-14. The issue initially before the arbitration panel was not whether Ecuador had breached its contract with Chevron, but instead whether Ecuador had breached the BIT by failing to resolve the contract suits in a timely fashion. In signing the BIT, Ecuador agreed to arbitration of precisely this type of action. See Art. II(7), J.A. 297 (‘Each Party shall provide effective means of asserting claims and enforcing rights with respect to investment, investment agreements, and investment authorizations.’).”

“Contrary to Ecuador’s protestations, enforcement of the arbitral award is fully consistent with the public policy of the United States, most notably the ‘emphatic federal policy in favor of arbitral dispute resolution,’ Mitsubishi Motors Corp. v. Chrysler-Plymouth, Inc., 473 U.S. 614, 631 (1985). By signing the BIT, Ecuador agreed to allow independent and neutral arbitrators to determine whether an investor company could take advantage of the substantive and procedural protections in the BIT. Chevron followed the proper procedure to request arbitration under the BIT, and the arbitrator determined that it had jurisdiction. Four courts have also considered and rejected Ecuador’s argument that Chevron did not have the right to avail itself of the BIT’s arbitration clause. Ecuador has given us no reason to conclude that these many authorities ruled in error.”

The Court affirms the District Court’s confirmation of Chevron’s arbitral award.

Citation: Chevron Corp. v. Ecuador, 795 F.3d 200 (D.C. Cir. 2015).

SURVEILLANCE

In order to establish standing to sue in a “bulk data collection” case, District of Columbia Circuit held that a plaintiff has to show “substantial likelihood” that the government is collecting his/her data or that he/she is suffering any cognizable injury

Section 215 of the USA PATRIOT Act, Pub. L. No. 10756, 115 Stat. 272 (2001), empowered the FBI to request, and the Foreign Intelligence Surveillance Court (“FISC”) to enter, orders “requiring the production of any tangible things (including books, records, papers, documents, and other items) for an investigation . . . to protect against international terrorism.” Id. at § 215, 115 Stat. at 291, codified as amended at 50 U.S.C. § 1861(a)(1). Through a program called “bulk data collection” the government collected in bulk call records produced by telephone companies containing telephone numbers dialed (incoming and outgoing), times, and durations of calls. The collected metadata will then be consolidated into a government database, where the NSA may access it only after demonstrating to the FISC a “reasonable articulated suspicion” that a particular phone number is associated with a foreign terrorist organization. Gov’t’s Br. at 11-12. The government could only use the data “in conjunction with a range of analytical tools to ascertain contact information that may be of use in identifying individuals who may be associated with certain foreign terrorist organizations because they have been in communication with certain suspected-terrorist telephone numbers or other selectors. Id. at 9, 15.”

On June 2, 2015, Congress enacted the USA Freedom Act, See Pub. L. No. 11423, Tit. I, 129 Stat. 268, 26977 (2015), codified at 50 U.S.C. § 1861. The Act’s changes took effect 180 days after the date of enactment. The legislation provided that the pre-existing authority will continue until the effective date of the new legislation.

In their Third Amended Complaint ¶ 53, Klayman v. Obama, 13cv851 (D.D.C. Feb. 10, 2014), ECF No. 77, plaintiffs contended that this bulk collection constitutes an unlawful search under the Fourth Amendment. They sought injunctive and declaratory relief and damages. The district court issued a preliminary injunction barring the government from collecting plaintiffs’ call records, and stayed its order pending appeal.

The United States Court of Appeals for the District of Columbia Circuit reverses the judgment of the district court and orders the case remanded to the district court for the reasons stated in the opinions of Judge Brown and Judge Williams.

Judge Brown joins the court in vacating the preliminary injunction entered by the district court and expresses his opinion on the fact that the plaintiffs have not met the bare requirements of standing.

“In order to establish his standing to sue, a plaintiff must show he has suffered a ‘concrete and particularized’ injury. Lujan v. Defenders of Wildlife, 504 U.S.555, 560-61 (1992). In other words, plaintiffs here must show their own metadata was collected by the government. See, e.g., Clapper v. Amnesty International, 133 S. Ct. 1138, 1148 (2013) (‘[R]espondents fail to offer any evidence that their communications have been monitored under § 1881a, a failure that substantially undermines their standing theory.’); ACLU v. NSA, 493 F.3d 644, 655 (6th Cir. 2007) (‘If, for instance, a plaintiff could demonstrate that her privacy had actually been breached (i.e., that her communications had actually been wiretapped), then she would have standing to assert a Fourth Amendment cause of action for breach of privacy.’); Halkin v. Helms, 690 F.2d 977, 999-1000 (D.C. Cir. 1982) (‘[T]he absence of proof of actual acquisition of appellants’ communications is fatal to their watchlisting claims.’).”

As the plaintiffs supported their claim with the specific facts that NSA operates a bulk telephony-metadata collection program and that on April 25, 2013, the FISC issued an order requiring Verizon Business Network Services to produce its subscribers’ call detail records to the NSA on a daily basis from April 25, 2013 to July 19, 2013, Judge Brown noted that this left some doubt about whether plaintiffs’ own metadata was ever collected. The judge highlights the fact that plaintiffs are Verizon Wireless subscribers and not Verizon Business Network Services subscribers.

“[T]he burden on plaintiffs seeking a preliminary injunction is high. Plaintiffs must establish a ‘substantial likelihood of success on the merits.’ Sottera, Inc., 627 F.3d at 893. Although one could reasonably infer from the evidence presented the government collected plaintiffs’ own metadata, one could also conclude the opposite. Having barely fulfilled the requirements for standing at this threshold stage, Plaintiffs fall short of meeting the higher burden of proof required for a preliminary injunction.”

“On remand it is for the district court to determine whether limited discovery to explore jurisdictional facts is appropriate. See, e.g., Natural Resources Defense Council v. Pena, 147 F.3d 1012, 1024 (D.C. Cir. 1998). Of course, I recognize that, in order for additional discovery to be meaningful, one of the obstacles plaintiffs must surmount is the government’s unwillingness to make public a secret program. See United Presbyterian Church in the U.S.A., 738 F.2d at 1382; cf. ACLU, 493 F.3d at 655. […]It is entirely possible that, even if plaintiffs are granted discovery, the government may refuse to provide information (if any exists) that would further plaintiffs’ case. Plaintiffs’ claims may well founder in that event. But such is the nature of the government’s privileged control over certain classes of information.”

Senior Circuit Judge Williams writes separately.

“’[A] party seeking a preliminary injunction must demonstrate, among other things, a likelihood of success on the merits.’ Munaf v. Geren, 553 U.S. 674, 690 (2008) (internal quotations and citations omitted) […] In this context, the ‘merits’ on which plaintiff must show a likelihood of success encompass not only substantive theories but also establishment of jurisdiction. The ‘affirmative burden of showing a likelihood of success on the merits . . . necessarily includes a likelihood of the court’s reaching the merits, which in turn depends on a likelihood that plaintiff has standing.’ Nat’l Wildlife Fed’n v. Burford, 835 F.2d 305, 328 (D.C. Cir. 1987) (Williams, J., concurring and dissenting). And to show standing, a plaintiff must demonstrate an ‘injury in fact’ that is ‘actual or imminent, not conjectural or hypothetical.’ Friends of the Earth, Inc. v. Laidlaw Envt’l Servs. (TOC), Inc., 528 U.S. 167, 180 (2000).”

Like Judge Brown, Judge Williams also highlights the fact that the government has acknowledged targeting for bulk collection Verizon Business Networks, while plaintiffs are subscribers of Verizon Wireless.

“[…]Thus, unlike some others who have brought legal challenges to the bulk collection program, plaintiffs lack direct evidence that records involving their calls have actually been collected. Cf. ACLU v. Clapper, 785 F.3d 787, 801 (2d Cir. 2015) (finding that Verizon Business subscribers had standing to challenge the bulk collection program because ‘the government’s own orders demonstrate that appellants’ call records are indeed among those collected as part of the telephone metadata program’).”

The government consistently maintained that its collection never encompassed all, or even virtually all, call records. The district court found standing in plaintiffs’ contention that the government collected the data from Verizon Wireless, which was inferred from the existence of the bulk collection program itself. Judge Williams concluded:

“[…] Yet, in the face of the government’s representations that it has never collected ‘all, or even virtually all’ call records, I find plaintiffs’ claimed inference inadequate to demonstrate a ‘substantial likelihood’ of injury.”

Judge Williams then analyzes this case in light of the Supreme Court’s most recent evaluation of comparable inference, Clapper v. Amnesty International, 133 S. Ct. 1138 (2013) which “[c]uts strongly against plaintiffs’ claim that they have a substantial likelihood of prevailing as to standing. […]”

“But as the Court observed, the Clapper plaintiffs had ‘no actual knowledge of the Government’s § 1881a targeting practices’ and accordingly ‘merely speculate[d] and ma[d]e assumptions about whether their communications with their foreign contacts will be acquired under § 1881a.’ Id. at 1148. The premises for their speculation were hardly trivial. They claimed (and it was not disputed) (1) that they engaged in communications eligible for surveillance under the disputed section, (2) that the government had a strong motive to intercept these particular communications because of the subject matter and identities involved, (3) that the government had (under separate legal authority) already intercepted 10,000 phone calls and 20,000 emails involving one individual who is now in regular communication with one of the plaintiffs, and (4) that the government had the capacity to intercept these communications. Id. at 1157-59. The Court held that these allegations left it merely ‘speculative whether the Government w[ould] imminently target communications to which respondents [we]re parties,’ and so provided an inadequate basis for standing. Id. at 1148-49 (citations and some quotations omitted).”

“Here, the plaintiffs’ case for standing is similar to that rejected in Clapper. They offer nothing parallel to the Clapper plaintiffs’ evidence that the government had previously targeted them or someone they were communicating with (No. 3 above). And their assertion that NSA’s collection must be comprehensive in order for the program to be most effective is no stronger than the Clapper plaintiffs’ assertions regarding the government’s motive and capacity to target their communications (Nos. 2 & 4 above).”

“Accordingly, I find that plaintiffs have failed to demonstrate a ‘substantial likelihood’ that the government is collecting from Verizon Wireless or that they are otherwise suffering any cognizable injury. They thus cannot meet their burden to show a ‘likelihood of success on the merits’ and are not entitled to a preliminary injunction.”

The Court vacates the preliminary injunction entered by the district court and remands the case for further proceedings.

Citation: Obama v. Klayman, 800 F.3d 559 (D.C. Cir. 2015).

TERRORISM

In the context of a criminal trial of supporters of allegedly terrorist organization in Somalia, Eighth Circuit considers whether the Secretary of State’s designation of a foreign organization as a “terrorist organization” violates due process

Amina Farah Ali and Hawo Mohamed Hassan, both from Somalia, are United States naturalized citizens living in Minnesota. In February 2008, the Secretary of State designated al Shabaab as a foreign terrorist organization. That same year, the FBI learned that Ali had contacted members of al Shabaab. Both Ali and Hassan were criminally charged.

During the ten-day trial in 2011, the jury learned about the history of Somalia and the goal of al Shabaab “to impose [its] version of Islamic law on Somalia”, as explained by the expert witness, Matthew Bryden.

The Government presented evidence that Ali and Hassan planned and participated in fundraising teleconferences in which a speaker would give a lecture; that Hassan kept track of the donors’ phone numbers; that Ali spoke with Hassan Afgoye, who at one time was responsible for al Shabaab’s finances, and discussed money that she arranged to be sent to him or to his associates; that Ali also spoke with Agoye about the activities of al Shabaab in Somalia, and was happy to learn that enemies were killed; and that Hassan spoke with members of al Shabaab and he was happy to hear about the killings carried out by this group. Furthermore, the Government presented evidence of Ali’s and Hassan’s connection with groups both inside and outside of Somalia, and with terrorists such as Hassan Dahir Aweys, and demonstrated that al Shabaab had connections to al Qaeda. The Government further presented evidence related to two false-statement counts against Hassan which were related to statements made in 2009 to an FBI agent that Ali did not know anyone who sent money to al Shabaab and similar groups; nor that Ali had ever asked that money be sent to Somalia or elsewhere through a “hawala” (an informal value transfer system based on the performance and honor of a network of money brokers).

In their closing arguments, Ali and Hassan defended their actions as an intention to provide humanitarian relief to Somalia. The jury returned a guilty verdict on all counts. The district court sentenced Ali to 240 months in prison and Hassan to 120 months in prison. Both Ali and Hassan appealed.

The United States Court of Appeals for the Eighth Circuit affirms the district court’s decision.

In a de novo review, the Court decides the issue raised by Ali and Hassan on whether the designation of a foreign organization as a terrorist organization by the Secretary of State violates their due process.

First, Ali and Hassan claimed that their material-support convictions violate the Due Process Clause of the Fifth Amendment.

“As relevant here, the material-support statute forbids ‘knowingly provid[ing] material support or resources to a foreign terrorist organization, or attempt[ing] or conspir[ing] to do so.’ 18 U.S.C. § 2339B(a)(1). The phrase ‘foreign terrorist organization’ is a term of art that is defined in 8 U.S.C. § 1189(a)(1). Under this provision, the Secretary of State may designate an organization a foreign terrorist organization if the Secretary finds that (1) the organization is a ‘foreign organization’; (2) the organization engages in ‘terrorist activity’ or ‘terrorism’ or ‘retains the capability and intent to engage in terrorist activity or terrorism’; and (3) ‘the terrorist activity or terrorism of the organization threatens the security of United States nationals or the national security of the United States.’ Id. Section 1189 also provides a mechanism by which an organization can seek judicial review of its designation as a foreign terrorist organization in the United States Court of Appeals for the District of Columbia Circuit. Id. § 1189(c)(1). However, this ability to challenge a designation belongs to the organization, not a defendant in a criminal proceeding. Id. § 1189(a)(8).”

Second, Ali and Hassan argued that prohibiting them from challenging the Secretary of State’s designation of al Shabaab as a foreign terrorist organization also offends due process.

“[…]For purposes of the Due Process Clause, the Supreme Court has stated that ‘in determining what facts must be proved beyond a reasonable doubt the . . . legislature’s definition of the elements of the offense is usually dispositive.’ McMillan v. Pennsylvania, 477 U.S. 79, 85 (1986). Under 18 U.S.C. § 2339B, ‘Congress has provided that the fact of an organization’s designation as [a foreign terrorist organization] is an element of [the crime], but the validity of the designation is not.’ Hammoud, 381 F.3d at 331. Thus, like our sister circuits, we hold that it comports with due process to prohibit a criminal defendant from challenging the validity of the Secretary of State’s designation of a foreign terrorist organization. See id.; Afshari, 426 F.3d at 1155-59. In reaching this conclusion, we note that an organization’s designation as a foreign terrorist organization is not wholly immune from challenge. The statute provides a method by which an organization, rather than a criminal defendant, can contest the Secretary of State’s designation. 8 U.S.C. § 1189(c); see Lewis v. United States, 445 U.S. 55, 65-67 (1980).”

The Court also rejects Ali’s and Hassan’s argument that allowing the Secretary of State to designate foreign terrorist organizations amounts to an unconstitutional delegation of legislative power.

“The longstanding rule is that ‘Congress may delegate its legislative power if it `lay[s] down by legislative act an intelligible principle to which the person or body authorized to [act] is directed to conform.’ South Dakota v. U.S. Dep’t of Interior, 423 F.3d 790, 795 (8th Cir. 2005) (alterations in original) (quoting J.W. Hampton, Jr., & Co. v. United States, 276 U.S. 394, 409 (1928)). Congress has ‘wide latitude in meeting the intelligible principle requirement . . . [because] `Congress simply cannot do its job absent an ability to delegate power under broad general directives.’ Id. (quoting Mistretta v. United States, 488 U.S. 361, 372 (1989)). ‘Congress fails to give sufficient guidance in its delegations only if it `would be impossible in a proper proceeding to ascertain whether the will of Congress has been obeyed.’ Id. at 796 (quoting Yakus v. United States, 321 U.S. 414, 426 (1944)).”

“The statutory scheme governing the designation of foreign terrorist organizations provides an intelligible principle. See Humanitarian Law Project v. Reno, 205 F.3d 1130, 1137 (9th Cir. 2000) (explaining that § 1189(a) ‘does not grant the Secretary unfettered discretion in designating the groups to which giving material support is prohibited). […]As the Ninth Circuit has observed, ‘[t]he Secretary could not, under this standard, designate the International Red Cross or the International Olympic Committee as [foreign] terrorist organizations. Rather, the Secretary must have reasonable grounds to believe that an organization has engaged in terrorist acts—assassinations, bombings, hostage-taking and the like—before she can place it on the list.” Humanitarian Law Project, 205 F.3d at 1137.[…]”

Ali and Hassan also argued against the requirement that the Secretary of State determines that an organization “threatens the security of United States nationals or the national security of the United States.” 8 U.S.C. § 1189(a)(1)(C). Furthermore, they argued that the term “national security” is “defined without meanings.”

“[…] But the statute defines ‘national security’ to mean ‘the national defense, foreign relations, or economic interests of the United States.’ Id. § 1189(d)(2). That this definition is general and broad does not an unintelligible principle make. See South Dakota, 423 F.3d at 795. Moreover, ‘[t]he Supreme Court has repeatedly underscored that the intelligible principle standard is relaxed for delegations in fields in which the Executive traditionally has wielded its own power.’ Hepting v. AT&T Corp. (In re Nat’l Sec. Agency Telecomms. Records Litig.), 671 F.3d 881, 89798 (9th Cir. 2011) (collecting cases); see Zemel v. Rusk, 381 U.S. 1, 17 (1965) (‘Congress—in giving the Executive authority over matters of foreign affairs—must of necessity paint with a brush broader than it customarily wields in domestic areas.’). For these reasons, we hold that granting the Secretary of State the ability to designate an organization a foreign terrorist organization does not constitute an unconstitutional delegation of legislative authority.”

The Court affirms district court’s decision.

Citation: US v. Ali, 799 F.3d 1008 (8th Cir. 2015).