Case of the Day: BAE Sys. Tech. Solution & Servs. v. Rep. of Korea's Def. Acquisition Prog. Admin., 2016 U.S. Dist. LEXIS 146593 (D. Md. Oct. 24, 2016)

Summary:

This is the most recent opinion from the same case as the one previously discussed on this blog here. After issuing a preliminary anti-suit injunction against the defendant Korean government, the court ordered additional briefing on the question of jurisdiction over the defendant.

The court first found that the defendant's appeal of the anti-suit injunction to the Fourth Circuit did not divest its jurisdiction. The court then found jurisdiction based on two alternate theories. First, the defendant waived its sovereign immunity when it answered the complaint and counterclaimed without explicitly raising Foreign Sovereign Immunities Act as an affirmative defense. Second, the complaint-of activity falls under the "commercial activity" of the FSIA, notwithstanding the fact that the contract in question involved the cost to upgrade Korea's fleet of F-16 fighter jets. The court found the exception applied because the claim was based on a commercial contract at its core.

Takeaway:

Earlier, I had described that the court's issuance of the anti-suit injunction as ridiculous. This time, the court's decision is not quite as ridiculous, but it is nonetheless very wrong. At the core, the activity in question is an upgrade of Korean military's fighter jet--the most quintessential sovereign activity that is immune from U.S. court's jurisdiction. The fact that money is paid for this military acquisition does not make this activity commercial. In this sense, this case is contrary to Colella v. Republic of Argentina, 2007 U.S. Dist. LEXIS 41262 (N.D. Cal. May 29, 2007), in which the court found that the presidential airplane of Argentina was immune from execution even if repair and servicing of the plane in the United States was a commercial activity, because such activity is incidental to the main purpose of the plane's use. 

The court in BAE cited Supreme Court's decision in Republic of Argentina v. Weltover, Inc., 504 U.S. 607 (1992), which held that a "contract to buy army boots or even bullets is a 'commercial' activity, because private companies can similarly use sales contracts to acquire goods." This is not on point. Private companies can certainly acquire army boots and bullets, but what private company in the world has a fleet of F-16 fighter jets to be upgraded?

There seems to be sloppy lawyering on the part of the defendant's counsel also. Korea should have never answered and counterclaimed, because answering the complaint almost always waives jurisdictional defense. To be fair, the counsel may have thought that FSIA gives a subject matter jurisdiction defense, which is not waivable. But since the statutory language of FSIA provides for the possibility of a waiver, it was a poor decision to answer the complaint; a motion to dismiss would have been more appropriate.