[00:00:02] Speaker 02: Case number 18-7055, for head Azima versus Rack, investment authority appellant. [00:00:09] Speaker 02: Ms. [00:00:09] Speaker 02: Goldstein for the appellant, Ms. [00:00:10] Speaker 02: Ferguson for the appellant. [00:00:15] Speaker 01: Good morning. [00:00:15] Speaker 02: Good morning, Your Honors. [00:00:17] Speaker 02: May it please the Court, Linda Goldstein for the appellant RAC Investment Authority. [00:00:22] Speaker 02: The question on this appeal is whether any United States Court has the authority to hear a lawsuit alleging that RAC Investment Authority hacked plaintiff's laptop computers. [00:00:34] Speaker 02: We submit that no U.S. [00:00:35] Speaker 02: Court can hear this lawsuit or the allegations in it, which I should underscore, RAC Investment Authority vehemently denies. [00:00:45] Speaker 02: For two reasons. [00:00:46] Speaker 02: The first, lack of jurisdiction under the Foreign Sovereign Immunities Act, and second, the party's written agreement that this dispute must be decided under English law in an English court where Azima's false allegations of computer hacking are currently being litigated and where they are going to be tried commencing in January of 2020. [00:01:09] Speaker 02: Should we read your brief? [00:01:11] Speaker 04: as agreeing that R.E.K. [00:01:14] Speaker 04: is waiving its sovereign immunity against a counterclaim for damages in the English action? [00:01:19] Speaker 04: Yes or no? [00:01:21] Speaker 04: That is correct, Your Honor. [00:01:22] Speaker 04: Yes, you are waiving, so there will be no assertion of sovereign immunity. [00:01:25] Speaker 02: That is correct, Your Honor, and that necessarily flows from the party's forum selection agreement where we agreed to submit to jurisdiction [00:01:34] Speaker 02: in England and the English State Immunities Act provides that submission to jurisdiction of waves. [00:01:42] Speaker 04: There's a separate question of whether it would allow this type of counterclaim. [00:01:46] Speaker 04: That's what was very much debated and whether you could have [00:01:48] Speaker 04: submitted to that, but retained your sovereign immunity against counterclaims. [00:01:52] Speaker 04: And so that's why I was trying to be very specific that you are agreeing that you would have no sovereign immunity claim against a counterclaim for monetary damages based on the hacking, not the evidentiary issue that's there now, the counterclaim. [00:02:06] Speaker 04: Correct, Your Honor. [00:02:07] Speaker 02: And there really was no debate on that point in the district court. [00:02:13] Speaker 02: We said that the case should be brought in England. [00:02:18] Speaker 02: We submitted the farm selection clause with the submission to jurisdiction. [00:02:21] Speaker 02: It's all very different than waiving sovereign immunity from a counterclaim, but I appreciate you've made the statement now. [00:02:25] Speaker 02: We were to ask that literal question, Your Honor. [00:02:27] Speaker 02: We believed it was implicit. [00:02:28] Speaker 02: People can volunteer. [00:02:29] Speaker 02: We believed it was implicit in our submissions, Your Honor. [00:02:31] Speaker 02: It's implicit. [00:02:32] Speaker 02: It never works for waivers of sovereign immunity. [00:02:33] Speaker 02: It's explicit now, Your Honor. [00:02:35] Speaker 02: It's explicit. [00:02:35] Speaker 02: Got it. [00:02:36] Speaker 02: To begin with, the United States Foreign Sovereign Immunities Act, where we have not waived sovereign immunity, the ZEMA is trying to jam the proverbial square peg into a round hole by invoking the commercial activities exception as a basis for foreign tort claims based on alleged computer hacking. [00:02:56] Speaker 02: We submit that there are three reasons that the case does not meet the commercial activities exception. [00:03:02] Speaker 02: First, there is no commercial activity. [00:03:04] Speaker 02: by the foreign sovereign. [00:03:06] Speaker 02: Second, there is no connection between his claims and the relevant purported commercial activity. [00:03:15] Speaker 02: Correct, RAC Investment Authority. [00:03:18] Speaker 04: Does it do anything but commercial activity? [00:03:21] Speaker 02: It's a sovereign wealth fund. [00:03:23] Speaker 02: It develops the economy within the sovereign territory of RAC, so that would be sovereign activity. [00:03:33] Speaker 02: But yes, it does engage in multiple commercial activities. [00:03:38] Speaker 02: The key question for the Foreign Sovereign Immunities Act is whether the claim is [00:03:45] Speaker 02: connected to that activity to start with first principles. [00:03:51] Speaker 02: The commercial activity exception is the codification of the restrictive theory of sovereign immunity, which allows a sovereign to be sued in the United States for its private or its commercial acts. [00:04:10] Speaker 02: And there are three prongs, and the first prong has been before the Supreme Court a couple of times, and the Court has held that the connection [00:04:20] Speaker 02: between the claim and the commercial activity must be very strong. [00:04:25] Speaker 02: The connection is that the claim, or the commercial activity rather, must be the gravamen of the claim. [00:04:32] Speaker 02: And an equally strong bond exists between the claim and the commercial activity in the second and third prongs of the commercial activity exception. [00:04:44] Speaker 02: And there it's based on the connection between the act, [00:04:49] Speaker 02: on which the claim is based, and the commercial activity. [00:04:53] Speaker 02: And every court of appeals that has looked at this issue has said there must be a substantive, a causal, or a material connection between the act and the commercial activity. [00:05:08] Speaker 02: And no such connection has been forged here. [00:05:14] Speaker 04: Do you agree that this [00:05:17] Speaker 04: the authority was engaged in some commercial activities with Mr. Azima? [00:05:24] Speaker 02: There were commercial activities such as the joint venture, obviously. [00:05:31] Speaker 02: When it was commercial, we have not denied that. [00:05:33] Speaker 02: Where there is a factual dispute is on the only commercial activity that the amended complaint [00:05:42] Speaker 02: asserts is connected to the alleged hacking and that is the assistance that Mr. Azima provided in negotiating with Qatar Massad. [00:05:54] Speaker 04: The paragraph 64 of the complaint does a lot more than that. [00:05:58] Speaker 04: It lists the joint venture as well as the work in negotiation as amongst the commercial activities in which they were engaged [00:06:08] Speaker 04: and for which the hacking was undertaken to give the authority allegedly more control. [00:06:13] Speaker 02: It lists those activities to be sure, but paragraph 56 says specifically it was connected to [00:06:23] Speaker 02: what it calls Rekia's commercial agreement to have Mr. Razima serve as a mediator. [00:06:29] Speaker 02: And there is a factual dispute on that issue, which we raised by submitting the declaration of Mr. Buchanan, who said there was no commercial engagement. [00:06:40] Speaker 04: So if you told the district court you weren't making a factual challenge, you're only making a facial challenge. [00:06:43] Speaker 02: That's not correct, Your Honor. [00:06:45] Speaker 02: We made a factual challenge. [00:06:46] Speaker 02: When did you make that factual challenge? [00:06:48] Speaker 02: By submitting his declaration when we submitted our moving papers. [00:06:51] Speaker 02: What paper was it submitted with? [00:06:53] Speaker 02: It was submitted with our moving paper. [00:06:55] Speaker 02: With the opening or the reply? [00:06:57] Speaker 04: With the opening papers. [00:06:58] Speaker 04: And did you make an argument in your opening papers that you were making a factual argument? [00:07:03] Speaker 04: We made... My understanding from the district court's questioning as well is that it wasn't made until your reply brief. [00:07:10] Speaker 02: There is one point that I believe Mr. Azima makes, which he says was made too late. [00:07:18] Speaker 02: If I may, the facts surrounding Mr. Azima's, I guess, the non-engagement, his role, that was all spelled out in the Buchanan Declaration, and it was extensively briefed in our moving brief. [00:07:32] Speaker 00: But the Buchanan Declaration doesn't attend to the accusation that's made with regard to Gerard. [00:07:38] Speaker 02: Yes, it does. [00:07:39] Speaker 02: It says that there was a meeting. [00:07:41] Speaker 00: It just says no one did it except that it doesn't really join issue. [00:07:46] Speaker 02: It said there were two lawyers. [00:07:47] Speaker 00: The fact that the determination to be made, it does not clearly refute what they're claiming. [00:07:52] Speaker 00: I mean, I think if you have an argument, the direct effect is your argument to be making it, but that's up to you. [00:07:57] Speaker 00: The connection certainly looks like it's there enough to be able to get to the next target, I think. [00:08:04] Speaker 02: Your Honor. [00:08:05] Speaker 02: There was a meeting. [00:08:06] Speaker 02: It was in July of 2016. [00:08:08] Speaker 02: Mr. Buchanan testified that two lawyers attended the meeting. [00:08:14] Speaker 02: I suppose we wanted to be circumspect and we didn't mention Mr. Gerard by name. [00:08:18] Speaker 02: Mr. Gerard's name does appear in an earlier declaration that's part of the record, the Fatherby Declaration, which identifies Mr. Fatherby and Mr. Gerard as being the two lawyers from Deckard who were at that meeting. [00:08:31] Speaker 02: Mr. Buchanan says in no uncertain terms that [00:08:34] Speaker 02: so-called threat of collateral damage was not made. [00:08:40] Speaker 04: So it's the authority's position, let me clarify for me, that Azeema was [00:08:46] Speaker 04: or was not providing negotiation assistance to the authority in regard to this matter? [00:08:51] Speaker 02: He was providing negotiation assistance, but that negotiation was... To the authority. [00:08:56] Speaker 02: He was to both parties, Your Honor. [00:08:58] Speaker 02: He said he wanted to serve as an honest broker. [00:09:02] Speaker 02: That's undisputed, Mr. Seema. [00:09:03] Speaker 04: I don't want you to talk about what he was doing for the other party. [00:09:05] Speaker 04: You don't get to speak to that. [00:09:06] Speaker 04: So he was providing negotiation assistance to the authority in conjunction with this dispute with Mr. Massad, correct or not correct? [00:09:14] Speaker 02: He was serving as an intermediary. [00:09:18] Speaker 02: He set up meetings. [00:09:19] Speaker 02: He ferried messages. [00:09:20] Speaker 02: He was providing negotiation assistance to the authority in conjunction with the Assad dispute, yes or no? [00:09:24] Speaker 02: Which he was, and that's very different from being engaged to serve as a commercial mediator. [00:09:29] Speaker 02: It's undisputed. [00:09:30] Speaker 02: He did not ask for money. [00:09:32] Speaker 02: He did not receive money. [00:09:34] Speaker 02: He has [00:09:36] Speaker 02: sued in the United States. [00:09:38] Speaker 02: He has not asked for money here for mediation services. [00:09:41] Speaker 02: He's in litigation with us in the United Kingdom. [00:09:44] Speaker 02: He asked for money for mediation services here. [00:09:46] Speaker 01: But his involvement is cited as one of the reasons for the inducement of the settlement agreement, right? [00:09:51] Speaker 01: There was something of value that was given. [00:09:53] Speaker 02: It is a subject matter of the settlement agreement. [00:09:55] Speaker 02: And this gets to the core contradiction in the district court's analysis. [00:10:02] Speaker 02: If we take [00:10:04] Speaker 02: Mr. Azima's allegations on their face that his negotiation assistance was a commercial activity. [00:10:13] Speaker 02: and that the hacking was connected to that commercial activity, then this case necessarily falls within the forum selection clause that the parties agree to. [00:10:24] Speaker 02: Because as Your Honor just pointed out, the negotiation assistance is mentioned in the settlement agreement. [00:10:31] Speaker 02: And therefore, the negotiation assistance is one of the subject matters of the settlement agreement. [00:10:37] Speaker 01: Or at the very least, it's in connection with the formation [00:10:40] Speaker 02: Absolutely, Your Honor, absolutely. [00:10:43] Speaker 01: And if we agreed with you on the forum non-convenience argument, we wouldn't need to deal with the Foreign Servants and Unity Act. [00:10:50] Speaker 01: That's correct, Your Honor. [00:10:51] Speaker 02: That's the Supreme Court's holding in Sinochem. [00:10:53] Speaker 02: And in Sinochem, the court in fact said that if the issues on the jurisdictional... So what's your strongest argument about the forum selection clause? [00:11:04] Speaker 02: On the forum selection clause, that Mr. Zima has pleaded himself into it. [00:11:08] Speaker 00: What? [00:11:09] Speaker 00: Say that again? [00:11:10] Speaker 02: He has pleaded himself into it by saying that the hacking was connected to the negotiation assistance or by saying that it was connected to the negotiation of the settlement agreement itself. [00:11:25] Speaker 02: He has pleaded himself into the form selection clause because those subject matters relate to the formation of the settlement agreement and its subject matter and are therefore covered by the clause. [00:11:38] Speaker 02: In addition, [00:11:39] Speaker 02: He has alleged a claim of unfair competition, asserting that he was disparaged by having his data placed on the internet. [00:11:50] Speaker 02: And there's a non-disparagement provision, a mutual non-disparagement provision in the settlement agreement. [00:11:56] Speaker 02: any claim that he was disparaged by RAC investment authority after the date of that settlement agreement, and the posting on the internet took place five months later, would fall squarely, squarely within that clause. [00:12:14] Speaker 02: If I can address direct effect for a moment. [00:12:21] Speaker 02: Mr. Zima had three bites at the apple here. [00:12:25] Speaker 02: It was lucidly clear that to allege a direct effect, he had to allege that his computer was in the United States at the time it was hacked. [00:12:39] Speaker 02: He put in his first complaint. [00:12:42] Speaker 02: His first complaint said nothing about it. [00:12:45] Speaker 02: The district court directed him to spell out a factual basis for his foreign sovereign immunity exception. [00:12:55] Speaker 02: and he did not say where his laptop was at the time of any of the alleged hacks. [00:13:01] Speaker 02: That was his second bite at the apple. [00:13:03] Speaker 02: We then submitted our motion to dismiss, pointing out that he had not alleged where his loved any of the alleged hacks. [00:13:14] Speaker 02: and he did not provide any kind of response. [00:13:17] Speaker 02: All we have is that his laptop is U.S. [00:13:21] Speaker 02: based. [00:13:21] Speaker 02: Laptops are inherently portable. [00:13:24] Speaker 02: Mr. Azima has a home in London. [00:13:26] Speaker 02: He spends his summers in Paris. [00:13:28] Speaker 02: He has a home in Missouri. [00:13:32] Speaker 04: Why isn't a reasonable inference from U.S. [00:13:34] Speaker 04: based for someone who lives in the United States that during [00:13:41] Speaker 04: I think, I'm sorry, was it an 18 or 14-month period, 11-month period, it was a long period while this hacking continued, that he was in the United States during some point, including the fact that the record shows that he was in the United States during some of that time period. [00:13:54] Speaker 02: Because part of the guarantee of the Foreign Sovereign Immunities Act is that the foreign sovereign is protected not just from liability, but also from becoming embroiled in U.S. [00:14:04] Speaker 02: litigation unnecessarily. [00:14:06] Speaker 02: and what the district court was doing because this fact is within Mr. Azima's control. [00:14:12] Speaker 02: Let there be no doubt about this. [00:14:14] Speaker 02: He submitted the declaration of an expert who had 23 years of experience with the FBI who said that he had conducted an extensive forensic examination of Mr. Azima's computers and his cloud-based accounts and he identified only one hack [00:14:32] Speaker 02: And all Mr. Azima had to do was say that he was in the United States on October 14, 2015, and he didn't do that. [00:14:40] Speaker 02: And he had three opportunities to do that, and he didn't provide a single one. [00:14:45] Speaker 04: Before your time's up, could you just give me an update on the status of the English litigation? [00:14:53] Speaker 04: Generally and in particular, as I understand it, it was addressing this hacking, at least in the context of evidentiary admissions. [00:15:02] Speaker 02: Yes, Your Honor. [00:15:04] Speaker 02: In September of last year, Mr. Azima amended his defense in the case to raise computer hacking as a defense to the entire case. [00:15:17] Speaker 02: The case, as I said, has been scheduled for trial in January of 2020. [00:15:22] Speaker 02: At the moment, the parties are engaged in active discovery. [00:15:27] Speaker 02: Documents will be disclosed on March 21. [00:15:29] Speaker 02: Witness statements will be exchanged in May. [00:15:32] Speaker 02: Expert disclosures will be made through the summer. [00:15:37] Speaker 02: And am I right? [00:15:38] Speaker 04: I could very well be wrong that there's a preliminary dispute about whether materials that were discovered during the hack can be admitted into evidence in that proceeding? [00:15:49] Speaker 04: That is the nature of the defense, Your Honor. [00:15:51] Speaker 04: That doesn't sound like a defense. [00:15:52] Speaker 04: It sounds like an evidentiary issue. [00:15:54] Speaker 02: Will that be decided before or during the trial? [00:15:57] Speaker 04: I'm sorry, I just didn't know if that was going to be decided before trial or that will be something that will be resolved during the trial. [00:16:02] Speaker 02: At this point, it's going to be resolved during the trial. [00:16:07] Speaker 02: There's also something called abusive process, which I don't completely understand, but that's not just directed to the documents, but it's intended to strike out the entire [00:16:17] Speaker 02: claim. [00:16:18] Speaker 02: I believe that's also at issue. [00:16:19] Speaker 02: My time is up, Your Honor, so can I reserve a few minutes for a final? [00:16:32] Speaker 03: Good morning. [00:16:32] Speaker 03: May I please the court? [00:16:34] Speaker 03: I'm Laura Ferguson, counsel for Peli Farhadazima. [00:16:38] Speaker 03: Based on the questions that I've heard so far, I'd like to address the applicability of the settlement agreements, form selection provision, and also address direct effects and the relationship between the U.S. [00:16:49] Speaker 03: litigation and the U.S. [00:16:50] Speaker 03: litigation. [00:16:51] Speaker 03: So turning first to the settlement agreement, it's our position that the district court correctly interpreted the settlement agreement to unambiguously not apply to the hacking claim. [00:17:04] Speaker 04: Do we review that de novo? [00:17:07] Speaker 04: How do we review that aspect of the court's decision? [00:17:10] Speaker 03: the contract to the extent you can look at the four corners of the contract and conclude that it's unambiguous, that is a de novo determination. [00:17:19] Speaker 03: If there's a determination that the contract is in fact ambiguous, then there would need to be a remand for consideration of extrinsic evidence. [00:17:28] Speaker 03: The district court was doing a facial determination not considering extrinsic evidence and decided based on the four corners of the settlement agreement [00:17:37] Speaker 03: it unambiguously did not apply to the hacking claim, largely because the conclusion of the whereas clause says that the parties wish to resolve all outstanding disputes related to the joint venture agreement. [00:17:49] Speaker 03: That's the 2007 joint venture agreement. [00:17:52] Speaker 01: As I recall, she didn't grapple at all with the language of formation in the settlement agreement, right? [00:18:01] Speaker 01: I don't remember any analysis in there about that. [00:18:03] Speaker 03: Yeah, but there's nothing one could conclude from the court. [00:18:07] Speaker 01: Wouldn't that be Iraq's strongest argument here for? [00:18:10] Speaker 03: Well, you would have to look at the four corners of the settlement agreement, or else we're concluding that it's ambiguous and we're going to consider extrinsic evidence, in which case this is entirely unappropriate as an exercise of supplemental appellate jurisdiction, because now we have a messy factual issue that in any event should be decided by... I miss it. [00:18:29] Speaker 01: If we were to look at the language of the Forum Selection Clause, this settlement agreement and any dispute or claim arising out of or in connection with it [00:18:39] Speaker 01: or its subject matter or formation. [00:18:43] Speaker 03: The complaint alleges that that hacking activity does not arise out of the settlement agreement. [00:18:49] Speaker 03: It doesn't discuss the settlement agreement. [00:18:50] Speaker 03: It says that the hacking arose out of the mediation and the breakdown of that mediation. [00:18:57] Speaker 01: Right, and that's referred to in the whereas. [00:19:00] Speaker 01: Clause or E. That's referring to the breakdown of the mediation agreement, so. [00:19:06] Speaker 03: It's not referring to the breakdown of the mediation. [00:19:10] Speaker 03: It's as a sort of general background recitation of facts, as you'd often see in a settlement agreement. [00:19:17] Speaker 03: It's just referencing that Mr. Azima had played this role. [00:19:20] Speaker 03: It's not suggesting there's any dispute. [00:19:22] Speaker 01: Doesn't it suggest that that interchange, that that relationship that came out of the mediation agreement is related to [00:19:30] Speaker 01: the settlement agreement? [00:19:32] Speaker 01: I mean, it is part of why the settlement agreement was formed, and now we have language in the Forum Selection Clause that says if there's a dispute arising out of the formation of this agreement and part of this agreement involves [00:19:45] Speaker 03: But at the very least... The negotiations, why isn't that clearly... We don't have to look outside the... At the very least, what would create the ambiguity is the clear statement that the dispute that the parties are resolving are issues related to the joint venture agreement. [00:19:59] Speaker 03: And I would also... That doesn't address formation. [00:20:01] Speaker 04: I thought the point of a whereas clause was to say, here's why. [00:20:06] Speaker 03: But that doesn't mean that anything tangentially related to... Not tangentially, it's mentioned specifically in the whereas clause. [00:20:13] Speaker 03: But the hacking is not expressly mentioned, right? [00:20:16] Speaker 04: That's where the complaint doesn't work for you. [00:20:18] Speaker 04: In paragraph 64, when it says the hacking was intended to interfere with commercial activities, plural, and lists as those commercial activities both this mediation and his role in the joint venture. [00:20:31] Speaker 03: The complaint alleges that the hacking is related to the commercial activity that gave rise to the [00:20:42] Speaker 03: the direct effects of the U.S. [00:20:43] Speaker 03: I mean, the hacking is the very commercial activity that the complaint is talking about. [00:20:47] Speaker 03: And I think if one interpreted the settlement agreement to... If I am misreading paragraph 64, please tell me. [00:20:56] Speaker 04: It says, I'm engaged in all these commercial activities, in listing and specifically, amongst other things, the joint venture, which the settlement resolved, and the mediation. [00:21:07] Speaker 04: and that the actions of this hacking were intended to cause and inflict harm and damage because of, related to, and in connection with the commercial activities, plural, that were just listed. [00:21:22] Speaker 03: The complaint elsewhere more specifically ties the hacking to the mediation. [00:21:30] Speaker 03: So I think some of these other commercial relationships are [00:21:34] Speaker 03: are sort of referenced to put in context that the overall relationship with Rakhia and Ms. [00:21:41] Speaker 03: Razima tended to be commercial in nature, but this lawsuit arises out of a particular interaction, which was the mediation. [00:21:49] Speaker 03: and the mediation is only referenced by way of a background recital in the settlement agreement. [00:21:56] Speaker 03: And if one were to interpret the settlement agreement to include the hacking claim, to determine from the settlement agreement that the parties, when they sat down to negotiate this, intended to settle a hacking claim or to include within the scope of the agreement a hacking claim, then presumably it would come within this language [00:22:16] Speaker 03: on 3.1 of the settlement agreement. [00:22:19] Speaker 04: Why does there be a hacking claim as opposed to something tied to the joint venture or to the negotiation role that he had? [00:22:29] Speaker 04: Why wouldn't either, as long as the charge, the complaint is about, the dispute is about the role of the hacking in either or both of those ventures, would it be within the forum clause? [00:22:42] Speaker 03: If the complaint focused on the connection between the hacking and the resolution of the joint venture agreement, I think there would be a stronger case. [00:22:54] Speaker 03: But the complaint instead focuses and alleges that it's the mediation and the breakdown of that mediation that gave rise to the hacking claim. [00:23:07] Speaker 04: What was the point under the complaint? [00:23:11] Speaker 04: The hacking started before, did it start before the mediation? [00:23:15] Speaker 03: The hacking started in September 2015, a few months after the, it was hard to pin down the exact timing of when the mediation started, but the complaint alleges that the hacking started a few months after the mediation began. [00:23:30] Speaker 04: And where was the joint venture negotiation in that same time frame? [00:23:33] Speaker 03: The joint venture negotiations, I think they're, [00:23:43] Speaker 03: perhaps December 2015 or maybe some discussions on that. [00:23:49] Speaker 04: That was going on at the same time, too. [00:23:52] Speaker 03: Correct. [00:23:52] Speaker 04: They were all going on. [00:23:53] Speaker 04: The briefings were going on at the same time. [00:23:55] Speaker 03: I guess if one interprets the settlement agreement as encompassing disputes that arose out of this mediation relationship, then 3.1 would say that the settlement agreement is in full and final settlement of all claims, whether or not presently known to them or to the law that Mr. Zima or heavy lift would have. [00:24:14] Speaker 03: So if this settlement agreement was intended to be all-encompassing and not just settle the joint venture claim, then Raqiya would be arguing, you don't have a hacking claim to bring to England. [00:24:26] Speaker 03: You've settled it. [00:24:27] Speaker 03: But that's not what they're saying. [00:24:28] Speaker 03: I think they know that's a bridge too far. [00:24:31] Speaker 03: So if the hacking claim wasn't resolved by the settlement agreement, [00:24:36] Speaker 03: Why does the foreign selection provision apply? [00:24:39] Speaker 04: Did the settlement agreement happen? [00:24:42] Speaker 04: Was he aware of the hacking at the time he signed the settlement agreement? [00:24:47] Speaker 04: Was he aware of the hacking at the time? [00:24:49] Speaker 04: He was not. [00:24:50] Speaker 04: He was not. [00:24:50] Speaker 04: Right. [00:24:51] Speaker 04: So the question isn't whether the hacking was covered by the settlement agreement. [00:24:55] Speaker 04: It's whether the things that the settlement agreement covers [00:24:59] Speaker 04: were the things that the hacking, the activities that the hacking also happened to be targeting as two commercial roles? [00:25:07] Speaker 03: Well, again, the complaint focuses on a specific commercial role and the settlement agreement is about an entirely, I would say, separate commercial relationship. [00:25:16] Speaker 03: But I think where this leads us is that the district court has looked at this agreement and concluded that it unambiguously did not apply to the [00:25:26] Speaker 03: mediation relationship or hacking claim that would arise out of that. [00:25:31] Speaker 03: And so if you're looking at the agreement and concluding something different, I would argue that there's now been a finding of ambiguity, and this is not something that can be resolved by the Court of Appeals. [00:25:43] Speaker 03: that there needs to then be a remand to the district court for consideration of extrinsic evidence. [00:25:48] Speaker 03: What do the parties really mean? [00:25:49] Speaker 03: Because you could read this agreement both ways. [00:25:51] Speaker 03: I mean, we maintain with the district court that it should be read to exclude this hacking claim, that the form selection provision, which covers the subject matter of the settlement agreement, that that's the joint venture, not the mediation. [00:26:08] Speaker 03: But if that's for Raqiya, I believe we have an ambiguity [00:26:12] Speaker 03: which would require remand, which means that this is not an issue that can be terminated on appeal, so therefore there's not a grounds for this court to exercise supplemental jurisdiction. [00:26:22] Speaker 03: There's not the inextricable entwinement, and it doesn't meet the task that if the court takes it up and decides on Rocky's favor, it would completely terminate the action. [00:26:32] Speaker 01: Because at best there would be- Why is it not the case if we disagreed with the analysis of the district court, if we thought she had overlooked [00:26:39] Speaker 01: the role that formation is supposed to play in this, for example, and we thought it was clear for the face that the Forum Selection Clause applies, why wouldn't that resolve the case? [00:26:50] Speaker 03: I was positing that you agreed there was an ambiguity. [00:26:53] Speaker 01: I see. [00:26:54] Speaker 03: I'm sorry. [00:26:54] Speaker 03: If you agree it's unambiguous, I agree. [00:26:56] Speaker 03: I have more of a problem. [00:27:02] Speaker 03: What's happening in the UK proceeding, I think it's important to note that Mr. Azima has not brought a counterclaim for damages for hacking. [00:27:15] Speaker 03: It's called a defense in the UK system, but you should think of it as a motion to eliminate. [00:27:20] Speaker 03: He's saying that when Rakhia is pursuing this claim against me, they should not be allowed to introduce into evidence. [00:27:27] Speaker 04: Why hasn't he brought a counterclaim, too? [00:27:29] Speaker 04: just to protect himself on two fronts. [00:27:31] Speaker 03: I mean, it's not clear that that's even allowed under UK law. [00:27:37] Speaker 03: The only case they cited was involved the Daily Mayor scandal where there was phone hacking of a number of British celebrities, which is an entirely different situation from whether a UK court would take jurisdiction over [00:27:52] Speaker 03: a computer hacking claim brought by a U.S. [00:27:55] Speaker 03: citizen against a foreign sovereign where it has no nexus to the United States, unless it also concluded that the forum selection regime applied. [00:28:03] Speaker 03: But as in that, there would be no reason for that claim to be heard in the UK. [00:28:07] Speaker 04: Are you questioning whether there's – so you're not questioning the waiver of sovereign immunity. [00:28:11] Speaker 04: You agree that they're not asserting sovereign immunity for it, and your position would be [00:28:18] Speaker 04: If the forum selection clause applied, they still wouldn't let you bring this claim? [00:28:23] Speaker 03: They never had clearly waived sovereign immunity before. [00:28:26] Speaker 03: Now I hear them to be saying, if the forum selection provision applies to this claim and Mr. Zima litigates it there, [00:28:37] Speaker 03: we would agree to be bound by the form selection provision. [00:28:40] Speaker 04: I heard them expressly waive sovereign immunity without any such conditions. [00:28:44] Speaker 03: I heard it tied to the fact that they had entered into this contractual agreement, that that was the basis for their waiver. [00:28:53] Speaker 01: Turning to the... Which makes me wonder why they would have ever entered into that agreement. [00:28:57] Speaker 01: Right. [00:28:59] Speaker 01: That's a different question. [00:29:00] Speaker 03: Turning to the foreign sovereign immunity issues, in terms of the commercial aspect of it, whether the activity was commercial in nature, there was a factual attack on that question, and the district court weighed the evidence. [00:29:15] Speaker 03: It weighed Mr. Buchanan's declaration and his characterization of the relationship against contemporaneous email. [00:29:21] Speaker 03: And in weighing the evidence concluded that Mr. Azima was in fact fulfilling a mediation role, which is inherently a private role. [00:29:29] Speaker 03: It's not an inherently sovereign role. [00:29:31] Speaker 03: And that finding would be – could be reversed only for clear error. [00:29:36] Speaker 03: With respect to the other elements, the in-connection within the direct effects, Raqiya, in fact, did make only a facial attack, as they squarely announced. [00:29:46] Speaker 03: On their reply brief, they raised this notion of whether the threat was made at the meeting. [00:29:52] Speaker 03: That was argued for the first time on reply. [00:29:54] Speaker 03: We would argue that the complaint more than sufficiently alleges a connection between the mediation and the hacking, and in addition, more than sufficiently alleges that the hacking caused an effect in the United States to survive. [00:30:10] Speaker 04: Where is that more than sufficient allegation of direct effects in the U.S.? [00:30:13] Speaker 04: ? [00:30:13] Speaker 03: So the complaint of paragraph 78 alleges a hack of Mr. Zuma's both U.S.-based business and personal laptops. [00:30:24] Speaker 04: On paragraph – What does it mean for a laptop to be U.S.-based? [00:30:27] Speaker 04: I would have thought the complaint would have quite easily just said – and the hack occurred during times when his laptops were in the United States. [00:30:41] Speaker 03: So the hacking occurs over an extended period of time. [00:30:45] Speaker 03: Mr. Azim is a U.S. [00:30:46] Speaker 03: resident. [00:30:47] Speaker 03: There was also a clarification at the hearing on the motion to dismiss that, in fact, they're desktops that he has, not a laptop. [00:30:55] Speaker 03: So that's in the record. [00:30:57] Speaker 03: So these are desktop computers? [00:30:59] Speaker 03: These are desktop computers, although the complaint alleges — On a desk in Missouri? [00:31:03] Speaker 03: Yes, correct. [00:31:05] Speaker 04: Where's that in the record? [00:31:06] Speaker 03: So that is at JA 1205 and 1206. [00:31:10] Speaker 03: It's the motion to dismiss hearing where Mr. Azima's counsel clarified that, in fact, the computers were desktop computers. [00:31:19] Speaker 03: The complaint alleges computers in the U.S. [00:31:24] Speaker 03: or at one point U.S.-based business and personal laptops, but there was a clarification at the hearing before the judge if they were, in fact, desktops, and again, that's at JA 1205, 1206. [00:31:35] Speaker 03: But in any event, there's certainly – the court could draw a plausible inference from the allegations of the complaint that Mr. Azima, as a U.S. [00:31:44] Speaker 03: resident, aware the hacking occurred over an extended period of time, some of which he was definitively in the U.S. [00:31:53] Speaker 03: For example, at JA-1428 there's an email referencing a November 2015 discussion in Mr. Azima's Kansas City home. [00:32:02] Speaker 03: So that was during the period of hacking that ties him – even if you go with the laptop theory, that ties him to the U.S. [00:32:09] Speaker 03: during a period of hacking. [00:32:11] Speaker 03: Certainly, Raqiyah knew that Mr. Azima was a U.S. [00:32:15] Speaker 03: resident. [00:32:15] Speaker 03: The settlement agreement lists his Kansas City address as his main address. [00:32:20] Speaker 03: So for purposes of surviving a motion to dismiss under the Trombley-Iqbal standard, [00:32:27] Speaker 03: be more than sufficiently alleged that the computers were U.S. [00:32:33] Speaker 03: computers, and certainly there is no difficulty seeing how hacking directed at a U.S. [00:32:39] Speaker 04: computer would meet the — The fact that they were desktop computers in the U.S. [00:32:44] Speaker 04: be considered since it was in a briefing paper and it's not in a complaint? [00:32:47] Speaker 04: I'm trying to figure out whether that can even be credited. [00:32:50] Speaker 03: Well, it was representation by counsel at the hearing on the motion to dismiss. [00:32:56] Speaker 04: What's the law about that? [00:32:57] Speaker 04: Does that amend the complaint? [00:32:59] Speaker 03: I honestly don't know. [00:33:01] Speaker 03: I will say that even if one assumes they're laptops, there's sufficient evidence that Mr. Azima spends enough time in the United States and is a US resident that is a highly plausible inference that during the period from September 2015 to, I think it was August 2016, [00:33:19] Speaker 03: of the hacking that he was in the U.S. [00:33:21] Speaker 03: during some of that period, and Rocky would have expected him as a U.S. [00:33:25] Speaker 03: resident to be here. [00:33:27] Speaker 03: So in the same way that in the Petrobras case that the court recently decided where there was a fraud that was, in a sense, directed at U.S. [00:33:35] Speaker 03: investors because Petrobras knew the investors were U.S.-based, here the hacking was directed at what was known to be a U.S. [00:33:43] Speaker 03: resident and would have been known to affect its U.S. [00:33:45] Speaker 00: computers. [00:33:49] Speaker 00: that he had laptops and won't you assume that sometimes those laptops were in the United States, I guess? [00:33:56] Speaker 03: Well, that it damaged his laptops, installed malware on his laptops, it disrupted his business, which is U.S.-based. [00:34:03] Speaker 03: So a disruption of his business, a disruption of his computers, a stealing of his data. [00:34:08] Speaker 00: What was the allegation with respect to disrupting U.S.-based businesses? [00:34:13] Speaker 03: Let's see, paragraph 76 alleges unauthorized – I'm quoting – unauthorized access occurred in the United States and the damage to Mr. Azima's businesses occurred in the United States. [00:34:24] Speaker 00: And what is that damage? [00:34:27] Speaker 00: Is there any allegation with regard to that? [00:34:31] Speaker 00: Well, I think he – That doesn't mean anything. [00:34:35] Speaker 03: I mean, certainly there's allegations in terms of how the data was deployed, it was [00:34:42] Speaker 03: on websites and there was a risk that it was going to interfere with his reputation. [00:34:46] Speaker 00: No, I'm just asking. [00:34:47] Speaker 00: I don't know what the answer is. [00:34:48] Speaker 00: I couldn't find it. [00:34:49] Speaker 00: Is there any allegation with respect to how a U.S.-based business was damaged? [00:34:53] Speaker 03: Well, for example, there was a period when he could not use his computer. [00:34:59] Speaker 00: And the allegations are? [00:35:02] Speaker 03: I don't know that it's – it talks about his need to repair his computer and the damages associated with that. [00:35:10] Speaker 00: And I think it's a plausible inference. [00:35:11] Speaker 00: So what you're saying is there really are no allegations with respect to U.S.-based businesses and how they may have been adversely affected? [00:35:17] Speaker 03: Only to the extent one infers from the fact that Mr. Azima is a U.S. [00:35:21] Speaker 03: resident and spends most of his time here, that the [00:35:28] Speaker 03: widespread hacking of his computers, which he uses for his business and the theft of his data. [00:35:34] Speaker 00: Yeah, but there's no connection to any business that we're talking about. [00:35:37] Speaker 00: His business is overseas, too. [00:35:39] Speaker 03: The main focus of the draft effect is so we don't get off on a tangent. [00:35:42] Speaker 03: I mean, the main focus is on the damage to the computer and the theft of data. [00:35:47] Speaker 03: Does he have businesses in the U.S.? [00:35:49] Speaker 03: ? [00:35:51] Speaker 03: The complaint, I think, is not specific about exactly where his businesses are located. [00:35:56] Speaker 04: Does he have businesses in the U.S.? [00:35:58] Speaker 04: Can you answer that? [00:35:59] Speaker 03: And he certainly does business from the United States in terms of where particular businesses are incorporated. [00:36:06] Speaker 03: I can't speak to that. [00:36:08] Speaker 04: So we don't even know that he has a business in the U.S. [00:36:11] Speaker 04: that would have been affected. [00:36:12] Speaker 03: He certainly operates his business out of the U.S. [00:36:15] Speaker 03: in terms of whether particularly, like, heavy lift or something isn't corporate in the United States. [00:36:20] Speaker 03: The complaint doesn't address that. [00:36:22] Speaker 00: So I mean, what you're answering us by saying with our allegation is he owns laptops. [00:36:27] Speaker 00: He's sometimes in the US and the laptops. [00:36:30] Speaker 00: You should assume that those laptops that he owns were adversely affected, period. [00:36:34] Speaker 00: That's it. [00:36:35] Speaker 00: There's no connection to any business. [00:36:36] Speaker 03: Well, it is a hacking claim. [00:36:38] Speaker 03: So it's under a federal statute that provides a US citizen a federal cause of action when their computers are hacked. [00:36:46] Speaker 03: So the focus is what's happened to your computer. [00:36:48] Speaker 03: I mean, this is a crime that relates to computers. [00:36:52] Speaker 03: So I think the complaint more than sufficiently establishes that the computers were in the U.S. [00:36:59] Speaker 03: for at least some of the relevant period and were known to be the computers of a U.S. [00:37:03] Speaker 03: resident, wouldn't have been expected to be in the U.S. [00:37:06] Speaker 03: So I think when you look at it, consider the claim that's being brought. [00:37:10] Speaker 03: I mean, it's a claim about [00:37:13] Speaker 03: improper access to his electronic data and the hacking of his computer. [00:37:18] Speaker 03: That is the gravamen of the claim. [00:37:21] Speaker 03: So therefore the direct effect relates to the computer because that's what the claim is about. [00:37:27] Speaker 00: The complaint doesn't say X laptop and computer was in the United States during this period, and it was hacking that adversely affected it. [00:37:37] Speaker 00: I mean, that's what's missing at all. [00:37:38] Speaker 03: Well, I mean, it certainly does allege that the hacking – You're wanting us to draw big inferences. [00:37:45] Speaker 00: I don't know. [00:37:46] Speaker 00: He's – in a lot of places. [00:37:49] Speaker 00: Why wouldn't we assume? [00:37:49] Speaker 00: I don't know. [00:37:50] Speaker 00: We don't know whether he brings his laptops with him when he comes to the United States, because we don't even know that he has any businesses in the United States. [00:37:58] Speaker 03: Well, I mean, we could remand for a further amendment of the complaint to clarify that the laptops are in fact desktops, that they're in fact desktops in the U.S. [00:38:11] Speaker 03: But leaving that aside, I think given the extended period of the hacking and that Mr. Zima was in the record in the U.S. [00:38:20] Speaker 03: during some of that period, that's sufficient. [00:38:24] Speaker 03: because it's a claim about its computers. [00:38:29] Speaker 03: I see my time is up. [00:38:31] Speaker 01: Thank you. [00:38:33] Speaker 01: Ms. [00:38:33] Speaker 01: Goldstein, we'll give you back a couple minutes. [00:38:35] Speaker 02: Yes, thank you. [00:38:36] Speaker 02: I'll try to speak really fast. [00:38:40] Speaker 02: Just to focus on direct effect for a moment, this court's precedents are quite clear that the effect must be both direct and immediate. [00:38:48] Speaker 02: So if a computer is damaged when it's in Paris or London, [00:38:52] Speaker 02: And then it's brought back to Missouri. [00:38:54] Speaker 02: That's not a direct effect, because the damage happened when it was in Paris or London. [00:39:00] Speaker 02: There is no desktop computer in the record. [00:39:03] Speaker 02: The complaint says it was a laptop. [00:39:06] Speaker 02: Mr. Azima had an opportunity to fix that when he submitted his opposition. [00:39:10] Speaker 02: Can you deny that they made that representation at the hearing? [00:39:12] Speaker 02: He made that representation and is inconsistent with the subsequent proceedings in the United Kingdom where, as part of the disclosures, he has described computers as laptops. [00:39:22] Speaker 02: So that is, the representations have been made both ways by his counsel, Your Honor. [00:39:30] Speaker 02: Which is something that Mr. Zima is trying to do here. [00:39:34] Speaker 02: He first told the district court that there was no connection between this case and the case in England. [00:39:40] Speaker 02: And he's now asserting the very same factual allegations in England. [00:39:45] Speaker 04: Well, you told the district court he wasn't a mediator. [00:39:47] Speaker 04: He didn't have anything to do with you. [00:39:49] Speaker 04: He was working for the other side, even when the settlement agreement said the opposite. [00:39:52] Speaker 04: So it seems like everybody's been trying to have their cake and eat it, too. [00:39:55] Speaker 02: The court did not find that there was any inconsistency. [00:39:57] Speaker 02: He was providing negotiation assistance, and Mr. Buchanan's declaration acknowledges that he was providing negotiation assistance. [00:40:06] Speaker 04: To the authority? [00:40:08] Speaker 02: Yes, well, to both sides, obviously. [00:40:10] Speaker 02: I should point out on the factual challenge that we made to the complaint, [00:40:16] Speaker 02: We followed Phoenix Consulting. [00:40:19] Speaker 02: Phoenix Consulting says you make a factual challenge by submitting factual information. [00:40:24] Speaker 02: That's what we did. [00:40:25] Speaker 02: In Phoenix Consulting, in fact, the factual information that was submitted by the foreign sovereign was submitted on its reply. [00:40:33] Speaker 02: in response to a claim that the plaintiff had made in its opposition papers. [00:40:37] Speaker 04: So your view is district courts are bound to accept it when a foreign sovereign, having told the district court that it's a facial challenge in its reply, says, now I'd like to make a factual challenge, even though it's too late for the other side to contest it? [00:40:48] Speaker 02: We believe that the district court really should not have asked us to make that characterization ab initio, because the structure of the Foreign Sovereign Immunities Act, we're immune until the plaintiff makes [00:41:00] Speaker 02: showing that we're not. [00:41:04] Speaker 02: There is no authority that we found, Your Honor, from this Court or any other appellate court that requires a foreign sovereign. [00:41:19] Speaker 02: to declare a major in its papers. [00:41:22] Speaker 02: We did submit a factual challenge by submitting facts. [00:41:25] Speaker 04: I just want to make Claire understand here. [00:41:28] Speaker 04: You're saying that something in sovereign immunity allows you to wait until your reply brief to say, oh, we're making a factual argument here and to make that factual argument? [00:41:39] Speaker 04: No, no. [00:41:40] Speaker 04: We submitted the facts with our moving papers. [00:41:42] Speaker 04: Did you make the argument? [00:41:44] Speaker 02: We made the argument that there was no connection in our moving papers. [00:41:48] Speaker 02: Did you make a factual argument in your opening brief? [00:41:52] Speaker 02: We argued in our moving papers that there was no collateral damage threat. [00:41:57] Speaker 02: Yes, that was in our motion papers. [00:41:59] Speaker 02: If I could turn for a second back to [00:42:03] Speaker 02: The other allegations of direct effect, the so-called impact on his business, this court's authorities, in particular Bell Helicopter, make it quite clear that generalized allegations about harm to a U.S. [00:42:19] Speaker 02: business [00:42:19] Speaker 02: do not suffice to cause a direct effect. [00:42:24] Speaker 02: If I could also point out a fact in the record which Mr. Zima submitted in the district court which is at page 988 which is an email that Mr. Zima wrote to Mr. Buchanan where clearly the heavy lift discussions because he had raised his heavy lift claim and his initiation of the [00:42:49] Speaker 02: and Qatar-Massad negotiations are discussed in the same document. [00:42:54] Speaker 02: So clearly, it is related to the formation of the settlement agreement, as we've said before. [00:43:05] Speaker 01: We have – unless my colleagues have further questions, we have your argument. [00:43:09] Speaker 01: Thank you very much. [00:43:09] Speaker 01: The case is submitted.