Article

Prior History: This appeal is from the United States District Court for the District of Utah (d. Ct. No. 2:06-CV-00109-DB-PMW) Hansen v. Native Am. Refinery Co., 2008 WL 4168149 (D. Utah, Sept. 3, 2008). See also Hansen v. Native American Refinery Co., No. 2:06-CV-109, 2010 WL 1949749 (D.C. Utah May 10, 2010) [USA] summarized in 2011 Annual Review on the prior page.

Note: When Theodore Hansen, Interests Energy Corporation, and Triple M, L.L.C. (Assignee/Beneficiary) presented letters of credit and guarantees purportedly "assigned" to them by Bank of Negara Indonesia (Bank) branches of New York City, Bank refused to honor the presentations, claiming that the guarantees and letters of credit were fraudulent and not issued by it. In an action by Assignee/Beneficiary to enforce the undertakings, Bank's motion for judgment on the pleadings was denied and Bank was ordered by the U.S. District Court for the District of Utah, Tacha, J., to submit to limited discovery focused on whether Bank fell within the commercial exception of the United States Foreign Sovereign Immunity Act (FSIA). On Appeal, the 10th Circuit Court of Appeals, McKay and Gorsuch, J.J., in an opinion by Tacha J., affirmed the district court's denial of Bank's motion for judgment on the pleadings based on sovereign immunity, and dismissed Bank's appeal of the discovery order for lack of jurisdiction.

The commercial activity exception to FSIA, found in 28 U.S.C. § 1605(a)(2), provides:

A foreign state shall not be immune from the jurisdiction of the courts of the United States or of the States in any case - -

(2) in which 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 and the act causes a direct effect in the United States.

The appellate court reasoned that because the Assignee/Beneficiary had initially proven the applicability of the commercial activity exception, Bank was required to prove by a preponderance of the evidence that the FSIA did not apply. The appellate court reasoned that evidence presented by Bank was, "minimal and primarily self-serving," and therefore did not prove by a preponderance of the evidence that none of its agents or employees dealt with the transaction. Questions of fact remained about the extent of the Bank's commercial activity in the United States, and thus the denial of Bank's motion for a judgment on the pleadings was upheld.

Furthermore, the appellate court dismissed Bank's appeal regarding the discovery order based on a lack of jurisdiction. The trial court had ordered limited jurisdictional discovery on the issue of whether Bank or its officials "conducted commercial activity that satisfies the commercial activity exception under the [FSIA]." The appellate court reasoned that FSIA is relevant to the discovery process and that, "we have jurisdiction to consider [Bank's] claim only if the district court's order did not adequately limit permissible discovery to the question of [Bank's] immunity." While recognizing the tension between qualified immunity and discovery, the appellate court based its decision on the general rule that discovery orders are not immediately appealable if they are "narrowly tailored to uncover only those facts needed to rule on the immunity claim." Noting that the discovery order was narrowly tailored to a precise jurisdictional fact question presented and that the trial court had assured Bank that a motion for further limiting of the order would be entertained in the event that Bank felt the discovery was unduly burdensome, the appellate court dismissed the appeal for lack of jurisdiction.

[JEB/tss]

COPYRIGHT OF THE INSTITUTE OF INTERNATIONAL BANKING LAW & PRACTICE

The views expressed in this Case Summary are those of the Institute of International Banking Law and Practice and not necessarily those of ICC or the other partners in DC-PRO.