United States Court of Appeals, District of Columbia Circuit
Argued April 8, 2014
Appeal from the United States District Court for the District of Columbia. (No. 1:12-cv-00441).
Robert W. Ludwig argued the cause and filed the briefs for appellant. With him on the briefs were W. Clifton Holmes and Thomas K. Kirui.
David I. Ackerman argued the cause for appellees. With him on the brief was Daniel D. Barnowski.
Before: GRIFFITH, KAVANAUGH, and PILLARD, Circuit Judges. OPINION filed by Circuit Judge KAVANAUGH, with whom Circuit Judge GRIFFITH joins. Opinion concurring in part and dissenting in part filed by Circuit Judge PILLARD.
Kavanaugh, Circuit Judge
Kenya wanted to crack down on tax evasion. So it enlisted help from the Kenyan public. The Kenya Revenue Authority issued an ad promising monetary rewards in exchange for information about undisclosed taxes. Enticed by that offer, Kenyan private bank employee Peter Odhiambo blew the whistle on hundreds of accountholders with potential tax deficiencies. Kenya responded by making some rewards payments to Odhiambo. But Odhiambo claimed that he was entitled to more -- millions more. When word got out that he was an informant, Odhiambo feared for his safety, and Kenyan officials helped him ultimately move to the United States as a refugee. Odhiambo then sued Kenya in federal district court in Washington, D.C., for breach of contract based on Kenya's alleged underpayment of rewards to Odhiambo.
Under the Foreign Sovereign Immunities Act, foreign governments are immune from suit in U.S. courts unless the plaintiff's claim falls into one of the statute's enumerated exceptions. See 28 U.S.C. § 1604. Odhiambo argues that his claims satisfy the FSIA's waiver and commercial activity exceptions. But Kenya has not waived its immunity in U.S. courts " either explicitly or by implication." Id. § 1605(a)(1). And Kenya's alleged breach of contract -- a contract that was offered, accepted, and performed in Kenya -- lacks the connection to the United States required by the commercial activity exception to the FSIA. See id. § 1605(a)(2). We therefore conclude, as did the District Court, that the FSIA bars Odhiambo's suit. We affirm.
For most of our Nation's history, foreign sovereigns enjoyed virtually absolute immunity from suit in U.S. courts. See Verlinden B.V. v. Central Bank of Nigeria, 461 U.S. 480, 486, 103 S.Ct. 1962, 76 L.Ed.2d 81 (1983); The Schooner Exchange v. M'Faddon, 11 U.S. 116, 136-46, 3 L.Ed. 287 (1812) (Marshall, C.J.). That changed in 1952, when the State Department and then the courts adopted the " restrictive theory" of sovereign immunity. Under the restrictive theory, foreign states retain immunity for sovereign public acts but not for private commercial acts. See Republic of Austria v. Altmann, 541 U.S. 677, 689-91, 124 S.Ct. 2240, 159 L.Ed.2d 1 (2004); Verlinden, 461 U.S. at 486-88. In the Foreign Sovereign Immunities Act of 1976, Congress codified the restrictive theory and further defined the scope of foreign sovereign immunity. See Pub. L. No. 94-583, 90 Stat. 2891. Since then, the FSIA has provided " the sole basis for obtaining jurisdiction over a foreign state in our courts." Argentine Republic v. Amerada Hess Shipping Corp., 488 U.S. 428, 434, 109 S.Ct. 683, 102 L.Ed.2d 818 (1989); see Peterson v. Royal Kingdom of Saudi Arabia, 416 F.3d 83, 86, 367 U.S.App.D.C. 421 (D.C. Cir. 2005). As the Supreme Court recently reiterated, the FSIA supplies a " comprehensive set of legal standards governing claims of immunity in every civil action against a foreign state." Republic of Argentina v. NML Capital, Ltd., 134 S.Ct. 2250, 2255,
189 L.Ed.2d 234 (2014)
(quoting Verlinden, 461 U.S. at 488).
Under the FSIA, a district court has subject matter jurisdiction over a suit against a foreign state if -- and only if -- the plaintiff's claim falls within a statutorily enumerated exception. See 28 U.S.C. § § 1330(a), 1604, 1605. In other words, the FSIA exceptions are exhaustive; if no exception applies, the district court has no jurisdiction. See Saudi Arabia v. Nelson, 507 U.S. 349, 355, 113 S.Ct. 1471, 123 L.Ed.2d 47 (1993); Peterson, 416 F.3d at 86.
Two FSIA exceptions are relevant to this case. The first is the waiver exception, which permits a suit when " the foreign state has waived its immunity either explicitly or by implication." Id. § 1605(a)(1). The second is the commercial activity exception, which permits a suit when " the action is based  upon a commercial activity carried on in the United States by the foreign state; or  upon an act performed in the United States in connection with a commercial activity of the foreign state elsewhere; or  upon an act outside the territory of the United States in connection with a commercial activity of the foreign state elsewhere and that act causes a direct effect in the United States." Id. § 1605(a)(2).
The dispute here arises from an " Information Reward Scheme" developed by the Kenya Revenue Authority to enlist public cooperation in enforcing Kenya's tax laws. The scheme " rewards persons who provide information as below:
o Information leading to the identification of hitherto undisclosed taxes -- a reward amounting to 1% of the tax identified [up to] a maximum of [100,000 Kenyan shillings].
o Information leading to the recovery of hitherto undisclosed taxes -- a reward amounting to 3% of the taxes collected."
J.A. 16. In essence, the rewards program encouraged whistleblowers to come forward with information about tax evasion by offering them a share of the proceeds -- not unlike our country's False Claims Act or the common law qui tam action. See 31 U.S.C. § § 3729-3733; Vermont Agency of Natural Resources v. United States ex rel. Stevens, 529 U.S. 765, 768, 774-77, 120 S.Ct. 1858, 146 L.Ed.2d 836 & n.1 (2000).
The rewards program had its intended effect on Peter Odhiambo, an auditor at a private Kenyan bank called Charterhouse Bank. In April 2004, Odhiambo turned over records implicating more than 800 accountholders in possible tax evasion. The Kenya Revenue Authority rewarded Odhiambo with an initial payment of 200,000 Kenyan shillings (about $2,600). A year later, the Authority made an additional payment of roughly 250,000 Kenyan shillings (about $3,300).
At some point, Charterhouse apparently learned that Odhiambo was the informant behind the investigation. Odhiambo then reported receiving disquieting phone calls telling him to leave Kenya. He was also the victim of alleged police harassment, which he reported to the Kenya National Commission on Human Rights. Believing Odhiambo's safety at risk, Kenyan officials supported his application for asylum in the United States. He was granted asylum and arrived here as a refugee in September 2006.
Before and after his relocation, Odhiambo insisted that Kenya owed him more money for the tips that he had provided about tax evasion at Charterhouse. Odhiambo pressed his claims through written correspondence and in face-to-face meetings with Kenyan officials in the United States. Still unsatisfied, Odhiambo sued
Kenya for breach of contract in federal district court in Washington, D.C. He sought approximately $24.5 million in damages to compensate him for Kenya's alleged underpayment of rewards. See Odhiambo v. Republic of Kenya, 930 F.Supp.2d 17, 20-24 (D.D.C. 2013) ( Odhiambo I ).
Kenya moved to dismiss Odhiambo's complaint based on its sovereign immunity to suit in U.S. courts. The District Court agreed with Kenya that the FSIA bars the suit. See id. at 23-35. We review the District Court's sovereign immunity determination de novo. See Cruise Connections Charter Management 1, LP v. Attorney General of Canada, 600 F.3d 661, 664, 390 U.S.App.D.C. 130 (D.C. Cir. 2010).
Odhiambo invokes two FSIA exceptions to establish district court jurisdiction over his suit: the waiver and commercial activity exceptions. We consider each in turn.
Odhiambo first contends that the FSIA does not bar his suit because the waiver exception applies. The waiver exception provides in relevant part that sovereign immunity will not apply when a " foreign state has waived its immunity either explicitly or by implication." 28 U.S.C. § 1605(a)(1).
In the district court, Odhiambo argued that Kenya had implicitly waived its sovereign immunity to suit in the United States by facilitating his asylum here. In essence, Odhiambo's claim was that Kenya should not be allowed to collect both the benefits of his performance on the contract and the benefits of sovereign immunity while simultaneously reneging on its bargain and creating an environment in which he had to flee the country. The District Court rejected that conception of implicit waiver as inconsistent with the case law, which has found implicit waiver only where the foreign state had " at some point indicated its amenability to suit." Odhiambo v. Republic of Kenya, 930 F.Supp.2d 17, 24 (D.D.C. 2013) ( Odhiambo I ) (quoting Princz v. Federal Republic of Germany, 26 F.3d 1166, 1174, 307 U.S.App.D.C. 102 (D.C. Cir. 1994)). Odhiambo does not renew this argument on appeal, so we do not consider it.
Odhiambo now claims that Kenya waived its sovereign immunity with respect to claims like his when it acceded to the 1951 Convention Relating to the Status of Refugees. We disagree for two alternative and independent reasons. First, in his submissions to the district court, Odhiambo did not mention the Refugee Convention, much less contend that Kenya's accession constituted a waiver of sovereign immunity in U.S. courts. Odhiambo has therefore forfeited this argument. See World Wide Minerals, Ltd. v. Republic of Kazakhstan, 296 F.3d 1154, 1161, 353 U.S.App.D.C. 147 & n.10 (D.C. Cir. 2002). Second, even if we were to overlook Odhiambo's failure to timely raise this argument, it would have little merit. The ambiguous and generic language of the Refugee Convention falls far short of the exacting showing required for waivers of foreign sovereign immunity. See id. at 1162. Indeed, the Supreme Court has explained that it cannot " see how a foreign state can waive its immunity under § 1605(a)(1) by signing an international agreement that contains no mention of a waiver of immunity to suit in United States courts." Argentine Republic v. Amerada Hess Shipping Corp., 488 U.S. 428, 442, 109 S.Ct. 683, 102 L.Ed.2d 818 (1989). The waiver exception to the FSIA does not permit Odhiambo's suit.
Odhiambo next relies on the commercial activity exception. That exception applies when
the action is based  upon a commercial activity carried on in the United States by the foreign state; or  upon an act performed in the United States in connection with a commercial activity of the foreign state elsewhere; or  upon an act outside the territory of the United States in connection with a commercial activity of the foreign state elsewhere and that act causes a direct effect in the United States.
28 U.S.C. § 1605(a)(2).
Clause one of the commercial activity exception permits a suit against a foreign sovereign when the plaintiff's " action is based upon a commercial activity carried on in the United States by the foreign state." Id. § 1605(a)(2). The FSIA in turn defines the phrase " commercial activity carried on in the United States by a foreign state" to mean " commercial activity carried on by such state and having substantial contact with the United States." Id. § 1603(e). Thus, to invoke the district court's jurisdiction under clause one, the plaintiff's claim must be " based upon some commercial activity by" the foreign state " that had substantial contact with the United States." Saudi Arabia v. Nelson, 507 U.S. 349, 356, 113 S.Ct. 1471, 123 L.Ed.2d 47 (1993) (internal quotation marks omitted).
In the district court, Odhiambo alleged several instances of commercial activity by Kenya that had substantial contact with the United States, including the meetings that Kenyan officials held with him in the United States to discuss the disputed rewards. The problem for Odhiambo is that his breach-of-contract claim is not " based upon " that activity. 28 U.S.C. § 1605(a)(2) (emphasis added). As the Supreme Court has explained, a claim is " based upon" commercial activity if the activity establishes one of the " elements of a claim that, if proven, would entitle a plaintiff to relief under his theory of the case." Nelson, 507 U.S. at 357. In other words, the alleged commercial activity must establish " a fact without which the plaintiff will lose." Kirkham v. Socié té Air France, 429 F.3d 288, 292, 368 U.S.App.D.C. 291 (D.C. Cir. 2005); see Goodman Holdings v. Rafidain Bank, 26 F.3d 1143, 1146, 307 U.S.App.D.C. 79 (D.C. Cir. 1994) (commercial activity unrelated to elements of claim is " legally irrelevant" ). ...