The World in U.S. Courts: Summer and Fall 2016 - Personal Jurisdiction/Forum Non Conveniens/ Foreign Sovereign Immunity Act (FSIA)
Plaintiff Sarkar, a U.S. citizen, sued defendant Petrotrin, a petroleum company incorporated in Trinidad and Tobago (“T&T”). The T&T government owns and operates Petrotrin. Sarkar and Petrotrin entered into an employment contract but Petrotrin was unable to obtain a work permit for Sarkar. When Petrotrin terminated the contract, Sarkar sued Petrotrin for breach of contract and sued HRC (his recruiter) for negligence and negligent misrepresentation. Petrotrin moved to dismiss on the basis that it was immune from suit under the FISA which, subject to certain exceptions, declares that foreign states and their agencies and instrumentalities are immune from suit in the U.S.
Sarkar conceded that Petrotrin is an agent/instrumentality of a foreign state within the meaning of FSIA, but argued that Petrotrin implicitly waived sovereign immunity through its agreement in Sarkar’s employment contract to comply with U.S. tax law. The District Court in Texas rejected this argument, noting that implicit waivers of sovereign immunity are narrowly construed and ordinarily occur in just three situations: (1) a foreign state agrees to arbitration in another country; (2) a foreign state agrees that the contract is governed by the laws of another country; or (3) a foreign state fails to raise the immunity defense in its answer. Here, the Court explained that the employment contract recited that it was explicitly governed by T&T law and that the reference to U.S. tax law would not therefore be given the weight necessary for an implied waiver of sovereign immunity.
Petrotrin also moved to dismiss based on the “commercial activity” exception to FSIA—requiring a material connection between the cause of action and the sovereign's commercial acts, which must have a direct effect (or take place) in the U.S. The Court explained that Petrotrin’s actions in recruiting in the U.S. had no material connection to the cause of action; Petrotrin and HRC’s communications with Plaintiff while he was in the U.S. were minimal, consisting of a few emails, a few phone calls, and one letter. The Court held that these actions did not rise to the level of “commercial activity carried on in the U.S.” Nor did the Court could consider Petrotrin’s other isolated or unrelated contacts in the U.S. Finally, the Court noted that Petrotrin was not required to pay Plaintiff in the U.S., and because the contract was governed by T&T law, failure to pay Sarkar his termination fee had no direct effect in the U.S. despite Sarkar’s intention to transfer his compensation to the U.S. Thus, the Court granted Petrotrin’s motion to dismiss based on sovereign immunity.
Defendant HRC moved to dismiss for lack of personal jurisdiction. The Court first rejected the assertion of general personal jurisdiction over HRC. General personal jurisdiction requires contacts between a defendants and a forum that are so substantial and continuous that the defendants can be considered “at home” there—a standard usually reserved for the places where corporations were formed or have their principal place of business. Neither test was met as to HRC, which is incorporated and has its principal place of business in T&T.
The Court then turned to specific personal jurisdiction, which it said could be exercised over a nonresident defendant if the defendant has “minimum contacts” with the forum State. Minimum contacts require a showing that: (1) the defendant purposefully directed its activities at the forum state; and (2) the suit arose out of or is related to at least one of those activities. If these requirements have been met, then a Court may exercise jurisdiction if it is additionally fair and reasonable to do so.
HRC’s employees and office were located entirely in T&T, and its recruiting activities in Texas consisted solely of job postings via LinkedIn. HRC’s failure to submit a proper work permit application occurred in T&T. Additionally, no HRC employee ever traveled to the U.S. to meet with Sarkar; all meetings between HRC and Plaintiff took place in in person in T&T, including HRC’s representation that the work permit process was merely a formality. HRC did not purposefully recruit a Texas resident when it advertised the position on LinkedIn. And, although HRC knew Plaintiff was a Texas resident when it reached out to him, Plaintiff’s negligence claim was not related to that contact, as the negligent acts occurred in T&T.
The Court thus dismissed both defendants from the case.