United States District Court, D. Maryland, Southern Division
W. Grimm United States District Judge.
case involves a contract dispute between BAE Systems
Technology Solutions & Services, Inc. (“BAE”)
and the Republic of Korea and its Defense Acquisition Program
Administration (collectively, “South Korea”)
arising out of South Korea's efforts to upgrade its F-16
fighter fleet. Each side has raised claims against one
another in this Court. Second Am. Compl. ¶¶ 68-96,
ECF No. 22; Am. Answer 12-19, ECF No. 53. In addition, South
Korea filed an analogous claim against BAE in South Korea,
but only after this litigation commenced. Feb. 4, 2016 Mem.
Op. & Order 2, ECF No. 43. BAE moved preliminarily to
enjoin the South Korea litigation. Pl.'s Mot. Prelim.
Inj., ECF No. 73. In its Opposition to BAE's Motion,
South Korea argued that the Court could not issue a
preliminary injunction because it lacks subject-matter
jurisdiction and because the act-of-state doctrine bars it
from exercising any jurisdiction it does possess. Defs.'
Opp'n Prelim. Inj. 24-27, ECF No. 80. Following a hearing
held on July 18, 2016, I preliminarily enjoined South Korea
“from taking any further action to prosecute the Korean
suit until I resolve the threshold issues of subject matter
and personal jurisdiction and the pending motion for summary
judgment, or until the parties agree to stay the Korean
lawsuit during the time that I take to resolve the
jurisdictional issues and summary judgment motion, whichever
occurs first.” July 19, 2016 Mem. Op. & Order 1-2,
ECF No. 84. South Korea has appealed this preliminary
injunction. Notice of Appeal, ECF No. 91.
construe the jurisdictional arguments raised in South
Korea's Opposition to Plaintiff's Motion for a
Preliminary Injunction as a Motion for Summary Judgment, and
I have permitted supplemental briefing on the issue.
See Defs.' Supp. Br., ECF No. 101; Pl.'s
Supp. Br., ECF No. 102. This Memorandum Opinion and Order
denies South Korea's Motion because the core of the
dispute involves South Korea's commercial activity, not a
foreign sovereign's official acts.
The United States Government hired BAE Systems Technology
Solution & Services, Inc. (“BAE”) as the lead
contractor for an agreement between the U.S. Government and
the Republic of Korea's Defense Acquisition Program
Administration (“DAPA”) “under the U.S.
Foreign Military Sales (‘FMS') Program to upgrade
South Korea's existing fleet of F-16 fighter aircraft for
approximately $1.7 billion.” Second Am. Compl. ¶
1, ECF No. 22. Before the governments finalized their
agreement, BAE entered into a Memorandum of Agreement
(“MOA”) with DAPA and “provided DAPA with a
Letter of Guarantee for Payment of Bid Bond in the amount of
$43, 250, 000” (“Guarantee”), under which
BAE agreed “to pay the bond if it failed to take
certain actions during the bid phase of the Upgrade
Program.” Id. ¶ 3. According to BAE,
“DAPA continued to insist that BAE  renew its Letter
of Guarantee, ” even after the FMS contract was in
effect, and BAE complied. Id. ¶ 23.
BAE “performed successfully the initial phases of work
under the KF-16 Upgrade Program.” Id. ¶
1. But then, “the U.S. Government informed South Korea
that the overall price of the Upgrade Program could increase
by as much as $800 million, ” id. ¶ 2,
and the U.S. Air Force “terminated for
convenience” BAE's contract, at South Korea's
direction to cancel BAE's “selection . . . as the
KF-16 system integrator for the KF-16 Upgrade Program,
” id. ¶ 4. DAPA now demands payment under
the renewed Guarantee, and in BAE's view, “bases
its claim for payment not on an alleged violation of the
terms of the Guarantee, but on BAE's inability to force
the U.S. Government to withdraw its proposed price
increases.” Id. ¶ 5.
2016 Mem. Op. & Order 1-2.
BAE filed this declaratory judgment action against DAPA on
November 12, 2014, seeking a declaration of rights under the
MOA and Guarantees between it and DAPA. ECF No. 1;
see [Feb. 4, 2016] Mem. Op. 2. “Primarily, BAE
seeks a declaration that the Guarantee and its renewals are
‘incompatible with, and invalid under, the Foreign
Military Sales Program . . . and federal common law of the
United States, and . . . therefore unenforceable';
alternatively, it seeks a declaration that it ‘did not
fail to perform any obligations required of it under such
Letter(s) of Guarantee.'” [Feb. 4, 2016] Mem. Op.
2. Plaintiff then amended to name the Republic of Korea as a
second defendant. Am. Compl., ECF No. 12. . . .
In July 2015, the Republic of Korea filed suit in Seoul
Central District Court in South Korea, alleging breach of
contract. [Feb. 4, 2016] Mem. Op. 2. South Korea then filed a
motion to dismiss or, alternatively, to stay this case during
the pendency of the Republic of Korea's suit against BAE
in South Korea. ECF No. 26. I concluded that venue is proper
in this Court, and I declined to exercise my discretion to
dismiss this case under forum non conveniens, or to
stay it. I reasoned, based on the evidence before me at that
preliminary stage, that “the MOA's validity is
entwined with the FMS Program, which is a matter of national
security, such that venue certainly should be in this
Court.” [Feb. 4, 2016] Mem. Op. 3.
July 19, 2016 Mem. Op. & Order 2-3.
then moved for a preliminary anti-suit injunction against the
suit in Korea. Pl.'s Mot. Prelim. Inj. I granted the
injunction, noting that “it is not clear whether [this]
Court has jurisdiction or whether that jurisdiction is
threatened” but concluding that “BAE has shown
sufficiently that it is likely that the Court has
jurisdiction, that its jurisdiction is threatened, and that
national security interests are implicated, outweighing
considerations of comity to justify an injunction of brief
duration to enable me to resolve the preliminary matters of
jurisdiction and whether the contracts are divisible.”
July 19, 2016 Mem. Op. & Order 36.
this suit involves claims against a foreign government and
one of its agencies, it raises complex jurisdictional issues.
The Foreign Sovereign Immunities Act (FSIA) codified the
longstanding practice by U.S. courts to grant limited
immunity to foreign governments and their political
subdivisions as a matter of comity. See Curtis A.
Bradley, International Law in the U.S. Legal System
234-40 (2d ed. 2015). But the FSIA also recognizes several
exceptions to the general grant of immunity. 28 U.S.C. §
1605. The FSIA constitutes “[t]he only source of
subject matter jurisdiction over a foreign sovereign or its
instrumentalities in the courts of the United States.”
Blue Ridge Investments, L.L.C. v. Republic of
Argentina, 375 F.3d 72, 83 (2d Cir. 2013). In suits
against foreign states, the FSIA “intertwine[s]”
the “issues of personal jurisdiction, subject matter
jurisdiction, and immunity.” Bradley, supra,
at 240. The FSIA confers subject-matter jurisdiction to
federal courts “as to any claim for relief in personam
with respect to which the foreign state is not entitled to
immunity.” 28 U.S.C. § 1330(a). And
“personal jurisdiction [over a foreign state] exists
with respect to any claim for which there is federal subject
matter jurisdiction.” Bradley, supra, at 240.
Thus, “if the court finds that there is an exception to
immunity, and that proper service has been made, the court
automatically has personal and subject matter
jurisdiction” over the claim. Id. at 241. This
Court cannot, therefore, exercise jurisdiction over BAE's
claim unless a FSIA exception applies.
the act-of-state doctrine “precludes any review
whatever of the acts of the government of one sovereign State
done within its own territory by the courts of another
sovereign State.” First Nat'l Bank v. Banco
Nacional de Cuba, 406 U.S. 759, 763 (1972). Thus, even
if this Court has personal and subject-matter jurisdiction
over the matter, it must decline to exercise jurisdiction if
the acts that form the basis of the claim fall within the
doctrine. See id.