[00:00:00] Speaker 02: Case number 21-7047, Noah J. Rosencrantz et al at Belance versus Inter-American Development Bank. [00:00:08] Speaker 02: Mr. Wren for the at Belance, Mr. Green for the at Belief. [00:00:12] Speaker 00: Morning, counsel. [00:00:14] Speaker 00: Mr. Wren, please proceed when you're ready. [00:00:16] Speaker 02: Thank you, your honors. [00:00:17] Speaker 02: And may it please the court. [00:00:18] Speaker 02: I am Greg Wren. [00:00:19] Speaker 02: I am counsel for the appellants, Plaintiff Noah Rosencrantz, Christopher Thibodeau, and T-Tech Inc. [00:00:26] Speaker 02: And I've asked to reserve two minutes for rebuttal. [00:00:29] Speaker 02: In this de novo review of the district court decision below the defendant Inter-American Development Bank has the burden of proving its claim to immunity under the International Organizations Immunities Act and proving that plaintiffs claims do not fall within a statutory exception. [00:00:44] Speaker 02: Plaintiffs have brought claims for breach of contract, breach of the duty of good faith and fair dealing, and a related business tort. [00:00:51] Speaker 02: And these claims allege bad faith, arbitrary and capricious acts by bank personnel in the United States in breach of contractually required disciplinary procedures that apply to commercial contracts with US suppliers. [00:01:06] Speaker 02: So there are two exceptions to the bank's immunity that apply in this case waiver under the bank's charter and the commercial activities exception under the Foreign Sovereign Immunities Act. [00:01:17] Speaker 02: But I'd like to preface the discussion by highlighting an important point that Amiki made, which is that the privileges and immunities of international organizations are tailored [00:01:27] Speaker 02: They're tailored by the negotiations and agreements of the member states based on what they believe the organization needs in order to achieve its objectives, and then those privileges and immunities as we can see in this case become reflected in a charter the charter agreement the treaty by which the bank was formed. [00:01:45] Speaker 02: Then the president under the IOIA has been given authority by Congress to limit privileges and immunities that an organization might otherwise have in light of its functions. [00:01:57] Speaker 02: And this ensures that that tailoring that took place by the member states is sort of preserved when the organization then is being designated under the IOIA. [00:02:08] Speaker 02: And then finally, if it ever gets to a point where an organization feels like its privileges and immunities are not sufficient, not adequate. [00:02:17] Speaker 02: Well, the Supreme Court recently made clear in the GM decision that their remedy is to ask their member states to change their charter, but not to look to the judiciary to do that because that supplants the judiciary's judgment on really policy issues about its privileges and immunities that are really for the member states and the president to decide. [00:02:38] Speaker 02: So with that, let me turn to the commercial activities exception. [00:02:42] Speaker 02: First, and here it really is a straightforward application of the test that was again recently stated in the jam decision there the court said the commercial activity exception is broad, and the. [00:02:56] Speaker 02: Test is simply whether it is within the powers of private citizens in trade and commerce. [00:03:02] Speaker 02: If an activity is, then it is a commercial activity. [00:03:07] Speaker 02: Plaintiffs put forward several examples in the record below and here of private organizations that use similar disciplinary procedures. [00:03:19] Speaker 02: Even in sports leagues, for example, where the sanction might not just be being barred from a team, [00:03:26] Speaker 02: you can have a lifetime ban from the entire league. [00:03:28] Speaker 02: You can be completely out of the whole league. [00:03:31] Speaker 02: So we put in several examples there of those sorts of things that are in the power of private citizens to do in trade and commerce. [00:03:39] Speaker 02: The bank really only can. [00:03:40] Speaker 01: Can I just ask you, are your examples covering non-employees of these private entities? [00:03:46] Speaker 01: I mean, it seems like the relationship here between the sanctioning body [00:03:53] Speaker 01: and the people who are being sanctioned is a different relationship than in a private administrative disciplinary proceeding, isn't it? [00:04:04] Speaker 01: Sorry to interrupt. [00:04:05] Speaker 01: No, I'm sorry. [00:04:07] Speaker 01: I was asking the question. [00:04:08] Speaker 02: Isn't it different in that way? [00:04:09] Speaker 02: No, it's a great question. [00:04:10] Speaker 02: Actually, I'm not even sure if any of the examples actually are directly to employee relations. [00:04:16] Speaker 02: And there's different examples. [00:04:18] Speaker 02: Sometimes you see them in just supply chain management, but they're with outside contractors and vendors. [00:04:23] Speaker 02: You can see them in professional associations. [00:04:26] Speaker 02: I think we had the AICPA, Accounting Association, where [00:04:31] Speaker 02: you know, it's a private membership. [00:04:33] Speaker 02: In Kumar, well, now Kumar was a case that we did cite that involved, I guess that was an employee situation. [00:04:39] Speaker 02: It was a professor at a private university. [00:04:42] Speaker 02: But actually, so usually the basis is contractual, but they're private agreements, private associations, but they're not even focused, I think, on employee. [00:04:53] Speaker 02: Those would be more important. [00:04:55] Speaker 01: But do we really have a similar contractual relationship here? [00:04:59] Speaker 02: Yes, and let me explain it. [00:05:04] Speaker 02: plaintiff's claims and we sort of identify and it gets a little confusing because there are a few projects and different papers, but we highlighted in our opening brief, the key sections from a contract that you had to agree to, to be able to bid on these projects that were being put out by the bank. [00:05:18] Speaker 02: And these are commercial supply agreements. [00:05:20] Speaker 02: So those are sort of prototypical commercial activity. [00:05:25] Speaker 02: And now there is an issue that the defendant has pointed out, or they keep saying we're not a party to the agreement, the plaintiffs. [00:05:34] Speaker 02: Well, the plaintiffs are claiming rights as ascertainable third party beneficiaries under District of Columbia law to assert the protections that are available for individuals under those procedures that were breached as part of this. [00:05:49] Speaker 00: They're not parties to the contracts. [00:05:51] Speaker 00: I mean that just that that seems like that is a difference between a sovereign function and a private function because you would imagine in a private situation. [00:05:59] Speaker 00: Private parties who are parties to the contract would be subject to the sanctions procedures, but a mark of a sovereign exercising its prerogative is that with its sanctions procedures, it can extend beyond parties, but it can extend to others. [00:06:14] Speaker 02: That's their argument, Your Honor. [00:06:15] Speaker 02: But actually, when you look at it, they are exercising certainly not a sovereign power because they're not a sovereign. [00:06:20] Speaker 02: And even the Thornburg report, in which they rely, points out the bank has no governmental power. [00:06:27] Speaker 02: The charter at Article 11, Section 2, says it's a juridical entity. [00:06:32] Speaker 02: So they're not doing anything that private parties can't do by contract. [00:06:36] Speaker 02: And we illustrate that in our reply brief. [00:06:39] Speaker 02: One of the sanctions, for example, [00:06:41] Speaker 02: can be a monetary sanction. [00:06:45] Speaker 02: The respondent can be required to reimburse investigation costs and things like that. [00:06:51] Speaker 02: Well, you simply have to ask, how would the bank enforce that sanction? [00:06:55] Speaker 02: How could they collect? [00:06:57] Speaker 02: Like any other private party, they only have two options. [00:07:00] Speaker 02: And one is to sue on a contracting court [00:07:04] Speaker 02: The other is to decide they're never gonna work with that company again or its personnel, that's a boycott. [00:07:10] Speaker 02: So they really have no power over third parties. [00:07:13] Speaker 02: They don't even have subpoena power under the Thornburg Report as it points out. [00:07:17] Speaker 02: They are doing nothing that a private party and private parties do. [00:07:22] Speaker 02: They're doing nothing that private parties can't do. [00:07:25] Speaker 02: They have no special power, no sovereign power for sure to do anything beyond that. [00:07:33] Speaker 02: And I'll just point out, if I may, the entire context. [00:07:36] Speaker 02: is these commercial supply agreements. [00:07:39] Speaker 02: These procedures only apply to outside external parties. [00:07:43] Speaker 02: They only apply to these sort of commercial arrangements in these projects. [00:07:47] Speaker 02: They, by their terms, apply only to people who are either a direct party to a contract or have a nexus. [00:07:54] Speaker 02: And that nexus, as you look at it, is exactly what we base, because what makes the plaintiffs ascertainable third-party beneficiaries who have a right to come in and enforce [00:08:04] Speaker 02: things in their benefit under the contract, even though they're not a direct party, direct privity, they have that right. [00:08:11] Speaker 02: And so that's the point. [00:08:12] Speaker 02: And even for example, if you look at the Kumar case as just the types of things that violated good faith and fair dealing and so on, they're very similar here. [00:08:23] Speaker 02: So I see my time has run out unless there's a question. [00:08:26] Speaker 01: Do you want to address the waiver basis at all? [00:08:30] Speaker 02: Yes, I'd be happy to do that now. [00:08:32] Speaker 02: So this court has consistently construed Article 11, Section 3 of the bank's charter as a waiver agreement. [00:08:41] Speaker 02: And the parties don't disagree. [00:08:43] Speaker 02: It's a waiver, and the parties don't disagree about that. [00:08:45] Speaker 02: The parties disagree is, which of this court's precedents construing that waiver apply to this case? [00:08:52] Speaker 02: Now, in the plaintiffs win under either test anything that is applied, but we've also argued that the proper application here is the first decision by this court in the lecture case that also involved external parties external contract related claims implied claims under contract. [00:09:11] Speaker 02: The defendant argues that subsequent decisions in Mundaro and Atkinson, which involved internal civil servant claims, should apply. [00:09:21] Speaker 02: And that imposed a test that was not found in lecture, the corresponding benefit test. [00:09:27] Speaker 01: Why are they wrong about that? [00:09:28] Speaker 01: Usually we do apply more recent standards. [00:09:35] Speaker 01: So, aren't they correct that we're really supposed to be looking at Darrow in this circumstance. [00:09:41] Speaker 02: Respectfully no and I'll explain, I think there's a couple reasons. [00:09:45] Speaker 02: One of course is is distinguishable on the facts, they claim it's to start a decisive those cases dealt with internal civil servant claims. [00:09:53] Speaker 02: Also, under the law of the circuit doctrine, if there's a conflict, and there is, if you try to apply to external parties, external commercial contract relationships, the tests are different. [00:10:08] Speaker 02: And I'll just point out in Mondaro, unlike the Lutcher decision, [00:10:14] Speaker 02: Mindaro and Atkinson did not discuss at all the legislative history of the bank, of the United States joining the bank. [00:10:23] Speaker 02: They did not discuss at all the deference that was due to President Kennedy's executive order that limited and required a strict construction of that waiver. [00:10:32] Speaker 01: All right, so if we disagree with you, Mr. Wren, if we think Mindaro applies, do you lose? [00:10:38] Speaker 01: I mean, you're struggling very hard to not have us look at that test. [00:10:41] Speaker 01: And I'm wondering whether that means that if we apply it, you think it doesn't come out your way. [00:10:47] Speaker 02: No, that's a totally fair question. [00:10:50] Speaker 02: I think this is an opportunity for the court to kind of look at the jurisprudence, address it. [00:10:54] Speaker 02: But no, and here's the reason why. [00:10:56] Speaker 02: As the bank points out in their brief, [00:10:58] Speaker 02: But the parties that have succeeded, where the waiver has been construed to apply, is based on this hesitancy. [00:11:07] Speaker 02: Would third parties of this sort be hesitant to do business with the bank if the bank was not susceptible to judicial process? [00:11:19] Speaker 02: And so it's a hesitancy argument and it's sort of well established that well that hesitancy is met with private commercial suppliers, you know, if you're not going to get paid on the contract if you can't sue to enforce it. [00:11:31] Speaker 02: Well, you know that the bank wouldn't be able to do business with third party suppliers, and that's not the situation right we're not talking about a claim of. [00:11:40] Speaker 01: by these people that they haven't been paid under a either a regular contract or a quasi contract sort of circumstance. [00:11:48] Speaker 01: This is about the application of sanctioned procedures. [00:11:52] Speaker 01: And so what is the argument that unless they're allowed to sue for enforcing those kinds of procedures, they would not want to do business with the bank. [00:12:02] Speaker 02: Yes, fair question. [00:12:03] Speaker 02: So here's the issue. [00:12:05] Speaker 02: If the concern about collecting on a contract, because this is contractual and the claims being brought and that will be addressed on the merits are contractual. [00:12:13] Speaker 02: If bringing a claim just to collect money is enough to make one hesitant, such that the bank needs to, the court infers that a waiver is implied. [00:12:25] Speaker 02: We've pointed out what happens in a sanctions procedure has and what happened to the plaintiffs here has been called the corporate death penalty. [00:12:33] Speaker 02: So how much more hesitant would someone be when what you have at risk is not just collecting money on your contract, but that you and the people that you work with can be barred, your career can be ruined and your company can be ruined. [00:12:48] Speaker 01: And so let me ask you about this. [00:12:49] Speaker 01: You sort of boiled it all down, the Madaro test to the hesitancy. [00:12:54] Speaker 01: But what about [00:12:56] Speaker 01: What about the negative or harmful effect on the bank itself if it is subject to all of these suits? [00:13:04] Speaker 01: I thought that was part of the test as well. [00:13:06] Speaker 01: It's not just the hesitancy, the fact that people may not want to contract anymore. [00:13:12] Speaker 01: It is, if we allow these sorts of suits, what harm will befall the institution? [00:13:19] Speaker 01: And it seems to me that there's a real concern that having these kinds of lawsuits brought [00:13:25] Speaker 01: from all these different jurisdictions with various circumstances would be a problem if this was allowed. [00:13:36] Speaker 02: So fair enough. [00:13:36] Speaker 02: Here's why I don't believe it is. [00:13:38] Speaker 02: First of all, if you look at the history of Sarin and the Villa cases, for example, when it's been external parties, there has not been that concern. [00:13:47] Speaker 02: And there's never been a showing that there's going to be this wave of [00:13:52] Speaker 02: debilitating lawsuits or things like that. [00:13:54] Speaker 02: That was a concern in Mondaro, which involved employee related claims, and those could be scattered over jurisdictions. [00:14:00] Speaker 02: In these contracts, there's several things that make it not that risk. [00:14:04] Speaker 02: First of all, we pointed out the data in the brief. [00:14:06] Speaker 02: They only had the most recent data was 30 active investigations a year. [00:14:11] Speaker 02: And so one can presume not all of them are going to be complaining. [00:14:15] Speaker 02: Secondly, for it to be a problem to interfere at all with what the bank's doing, somebody has to get a preliminary injunction, which is what we attempted here, but we couldn't get past the immunity issue in the court below. [00:14:25] Speaker 02: And that is an extremely high standard. [00:14:29] Speaker 01: And we've also shown that just these- You're saying that having to respond to litigation, having to respond to a preliminary injunction is not [00:14:41] Speaker 01: cost? [00:14:43] Speaker 02: It's a cost, but that kind of cost was not enough to outweigh the concerns in Oseran and Villa, for example. [00:14:52] Speaker 02: Nobody wants to be sued, but this is an issue about whether these parties in commercial relationships can have their claims heard. [00:15:01] Speaker 02: The bad faith conduct that took place here [00:15:03] Speaker 02: to have the opportunity to bring contract claims, which by the contracts that the bank consistently uses, do not scatter claims around. [00:15:14] Speaker 02: They require venue and choice of law in the district. [00:15:17] Speaker 01: I understood that there was, I understood that there is at least a dispute about whether or not these claims actually qualify as contract claims. [00:15:24] Speaker 01: So if we disagree with you, that the sanction procedure provisions are actually in the contracts, do you lose them? [00:15:32] Speaker 02: Well, no, actually, first, I mean, one, if you actually just apply the Supreme Court's test to what is commercial activity, the sanctions procedures, even if they're standing alone, still fall in that. [00:15:44] Speaker 02: They're all about commercial activity and they're all about supply chain management. [00:15:48] Speaker 02: They're all about relationships with outside vendors. [00:15:50] Speaker 02: That being said, we did show in our opening brief, we don't actually have to rely on the procedures per se. [00:15:56] Speaker 02: There is an explicit set of provisions. [00:15:59] Speaker 02: in the first RFP that were put out without the qualifications. [00:16:07] Speaker 02: It just says, this shall be a summary of the whole procedures. [00:16:12] Speaker 02: And that was accepted in writing by plaintiff Rosencrantz, who was the CEO. [00:16:18] Speaker 02: And so there is a direct contract there. [00:16:22] Speaker 02: that is sort of separate from the procedures. [00:16:25] Speaker 02: And we also showed, for example, these are facts that should be construed in the plaintiff's favor as well. [00:16:31] Speaker 02: We showed that the bank uses the contracts to, even there was evidence that shows in their own reports that when they did not have these contractual, what they call them the integrity provisions, when they were not in a contract, they said that limits our ability to investigate. [00:16:50] Speaker 02: they're sort of acknowledging themselves. [00:16:53] Speaker 02: They rely on the contracts too, because again, they have no subpoena power. [00:16:57] Speaker 02: So the only way they can investigate, the only way they can get witnesses and documents is they have relied on the contract claims that give them the right to do that sort of stuff. [00:17:08] Speaker 00: Let me make sure my colleagues don't have additional questions for you at this time, Mr. N. Not for me. [00:17:15] Speaker 00: Thank you. [00:17:15] Speaker 00: We'll give you a little bit of time for rebuttal. [00:17:17] Speaker 00: Thank you. [00:17:18] Speaker 00: Mr. Green, we'll hear from you now. [00:17:21] Speaker 03: Good morning. [00:17:22] Speaker 03: May it please the court. [00:17:23] Speaker 03: My name is Griffith Green for the Inter-American Development Bank. [00:17:27] Speaker 03: This case is a challenge to the internal procedures that the IDB uses to protect its development funds by suspending or debarring parties that have been found to have engaged in prohibited practices from being awarded IDB-funded contracts in the future. [00:17:43] Speaker 03: The IOIA and the Foreign Sovereign Immunities Act make the IDB immune from this type of claim. [00:17:49] Speaker 03: The IOIA grants the bank the same immunities in foreign states. [00:17:55] Speaker 03: So the bank stands in the shoes of a foreign state in a challenge to that state's demarbering procedures to, you know, to disqualify someone from being given government contracts in the future. [00:18:08] Speaker 03: Similar arrangement there. [00:18:11] Speaker 03: Plaintiffs argue that there are two exceptions to this immunity, both a waiver by the IDB's charter [00:18:17] Speaker 03: and also the commercial activity exception. [00:18:20] Speaker 03: Let me address the waiver issue first. [00:18:23] Speaker 03: The issue of how the IDB's charter and when that charter waives its immunity has been dealt with by this court many times over the last 40 years. [00:18:36] Speaker 03: Mindaro articulated a detailed test for analyzing that that has been followed in multiple cases, including Atkinson, Osirin, Vila, and most recently Jam. [00:18:46] Speaker 01: But Mr. Redd says it's not applicable here. [00:18:49] Speaker 01: So what's your argument? [00:18:51] Speaker 01: He says we're supposed to be applying Lutcher and not Mindaro. [00:18:55] Speaker 03: Well, Mindaro specifically considered Lutcher in formulating its test. [00:19:00] Speaker 03: And plaintiffs are not the first litigants to argue that Lutcher and Mindara were inconsistent. [00:19:07] Speaker 03: Indeed, in the jam one decision, the first decision by this court before it went to the Supreme Court, this court specifically dealt with the argument that those cases were inconsistent and in its opinion found that they were not. [00:19:22] Speaker 03: Indeed, the concurring opinion specifically started with the observation that Mindara provides a test for deciding this case. [00:19:30] Speaker 03: So that issue, whether Lutcher and Mandar are inconsistent, has already been considered and was decided in Jam 1 that they were not, that they were reconcilable and that Mandar are simply elaborated on Lutcher. [00:19:43] Speaker 03: And that's correct because if you apply the rule in Lutcher, [00:19:48] Speaker 03: Sorry, the rule in Mindaro to the Lutcher case, the plaintiffs still win. [00:19:52] Speaker 03: So, they're not inconsistent. [00:19:54] Speaker 03: Which means that the rules that Mr. Ren cites about going to the first in time and so on just don't apply because the cases are not irreconcilable. [00:20:04] Speaker 03: So, Mindaro is what applies. [00:20:07] Speaker 03: Mindaro's rule states that the charter does not waive immunity [00:20:14] Speaker 03: unless such waiver would further the bank's ability to achieve its objectives. [00:20:19] Speaker 03: That's a little bit counterintuitive, and the usual explanation is think of a contract to buy office supplies, that the bank wouldn't be able to buy office supplies on normal commercial terms if the supplier didn't know that it could get paid. [00:20:33] Speaker 03: And so in those circumstances, a waiver benefits the bank. [00:20:39] Speaker 03: There is no benefit to the bank from this type of lawsuit. [00:20:42] Speaker 03: There is nothing about having its internal procedures reviewed by the courts of one of its member nations that furthers its objectives in protecting its funds from prohibited practices and regulating the market for its contracts. [00:20:59] Speaker 01: So I heard Mr. Wren say the benefit is that people would be more likely to engage in contracts if they knew that they could enforce [00:21:10] Speaker 01: these sanction procedures through the courts. [00:21:13] Speaker 01: Why is he wrong about that? [00:21:16] Speaker 03: Your honor, in this case, I don't think there's a benefit ever in that. [00:21:24] Speaker 03: But in this particular case, this is not a lawsuit by a party that contracted with the IDB. [00:21:30] Speaker 03: It's a lawsuit by employees of parties that contracted with the IDB. [00:21:34] Speaker 03: And indeed, one of the contracts on which they claim to be suing neither [00:21:38] Speaker 03: plaintiffs nor the IDB were parties to the contract. [00:21:41] Speaker 03: It was a contract with the government of Barbados. [00:21:44] Speaker 03: So the argument that people would be reluctant to contract with the IDB just doesn't work in this case because they're not the contracting parties. [00:21:54] Speaker 03: More broadly, you know, it's highly speculative. [00:21:58] Speaker 03: It really seems to be pushing the edge of plausibility to argue that [00:22:03] Speaker 03: someone who's looking to sell goods or services in a contract to develop the third world is really going to be hesitant because of the fear that if someday down the road after the contract is performed and paid for, there might be an investigation, there might be sanctions proceedings, and the bank might not follow its internal procedures in the way that I want them to. [00:22:31] Speaker 03: That just doesn't seem to be the type of tangible benefit that was found in, for example, or Siren or Vila, where it was found that in those cases, those type of claims, and again, it's a type analysis, not necessarily particulars, would further the bank's objectives. [00:22:48] Speaker 00: More important than that... Because of the likelihood that the concern would come to pass, right? [00:22:53] Speaker 00: I mean, it seems to me that we are [00:22:54] Speaker 00: You're not you're not saying that there could even as a matter of conceivability, never be a concern. [00:22:59] Speaker 00: It's just that as compared with some of the situations in which waiver has been found to be in the party's interest, it's just unlikely that the set of circumstances in which that concern would come about would actually come to pass. [00:23:12] Speaker 03: That's right, Your Honor. [00:23:13] Speaker 03: I mean, I mean, people can be concerned about a lot of things, but that's not really a reasonable or palpable concern for parties who are looking to sell goods or services into the development market. [00:23:24] Speaker 03: Also, [00:23:24] Speaker 03: Under Atkinson, you don't just look at the benefits. [00:23:28] Speaker 03: If there's no benefit, then it's a full stop. [00:23:30] Speaker 03: If there is a benefit, then the court is required to weigh the costs as well. [00:23:34] Speaker 03: And the costs here are very large. [00:23:37] Speaker 03: You know, this suit was filed expressly for the purpose of stopping the bank sanctions procedures, the process through which it decides who will be eligible for sanctions for bank-funded contracts. [00:23:50] Speaker 03: Mr. Wren says that it's not a worry, it's not really a concern for the bank because they sought a PI and didn't get one. [00:24:00] Speaker 03: I would submit to you that it's rather expensive for the bank to defend these suits, that the lawsuit also sought a permanent injunction and economic damages and more importantly involves the courts of one country of the US in supervising what is a collective enterprise by 48 countries. [00:24:20] Speaker 03: Also, the point that it doesn't impose costs on the bank because a PI is hard to get is kind of a weird standard because [00:24:31] Speaker 03: It would suggest that there's jurisdiction if the plaintiffs are likely to lose, but no jurisdiction if they're likely to win because that would impose costs. [00:24:40] Speaker 03: That's not the analysis that this court has engaged in previously. [00:24:44] Speaker 03: It has looked at the costs, both in terms of disruption to the internal processes and disruption to the collective governance principles of multilateral organizations like the bank. [00:24:57] Speaker 01: Do you want to speak to the commercial activity exception? [00:25:02] Speaker 03: Yes. [00:25:02] Speaker 03: Thank you, Your Honor. [00:25:04] Speaker 03: The commercial activity exception is a three-part inquiry, and it's important to keep the parts separate because they involve different inquiries. [00:25:13] Speaker 03: The first step is to decide the gravamen of the case, and this is driven principally by Sachs. [00:25:21] Speaker 03: Under Sachs, the question for the court is, what is the core of this case? [00:25:25] Speaker 03: What actually injured plaintiffs [00:25:27] Speaker 03: What are they complaining about? [00:25:29] Speaker 03: Now, in this case, the complaints about the procedural aspects of the sanctions procedures have been couched in terms of contract. [00:25:37] Speaker 03: And that approach was specifically rejected in Sachs. [00:25:41] Speaker 03: In that case, the plaintiff had purchased a railway ticket in the US and was later injured by a train in Salzburg, Austria. [00:25:50] Speaker 03: Plaintiffs argue, relying on Kirkham, principally on Kirkham, that [00:25:57] Speaker 03: that what is actually applied is a one element test, that if any element in any of their claims involves a commercial activity, then it's also the exception. [00:26:10] Speaker 03: Sachs specifically, Sachs abrogated the rule in Kirkham. [00:26:14] Speaker 03: Those cases are factually indistinguishable. [00:26:17] Speaker 03: Sachs was a railway ticket bought in the US with a personal injury at a railway platform in Austria, [00:26:26] Speaker 03: Kirkham was the purchase of an airline ticket in the U.S. [00:26:30] Speaker 03: and an injury at an airport in France. [00:26:33] Speaker 03: In fact, so they're factually indistinguishable if after Sachs, Kirkham has to come out the other way. [00:26:39] Speaker 03: Also the Ninth Circuit opinion in Sachs specifically relied on Kirkham for its rule and then got reversed by the Supreme Court. [00:26:47] Speaker 01: So the plaintiff- So I guess I'm understanding you, Mr. Green, to suggest that the gravamen of this lawsuit you say is not commercial. [00:26:55] Speaker 01: that? [00:26:57] Speaker 03: Well, it's a two part test, Your Honor. [00:26:59] Speaker 03: I'm saying that the gravamen is the bank's administration of its sanctions procedures, that sort of, and then the analysis is after defining the gravamen, is that conduct commercial in nature? [00:27:13] Speaker 03: So if the gravamen is the running the sanctions procedures or sanctioning parties, then the question is that commercial? [00:27:20] Speaker 03: And that's sovereign activity for a couple reasons. [00:27:25] Speaker 03: First, [00:27:25] Speaker 03: The bank's procedures are modeled after the federal acquisition regulations on purpose. [00:27:31] Speaker 03: It is, you know, sanctioning parties, regulating the market and deciding who can participate in government funded or IDB funded contracts is a sovereign activity. [00:27:41] Speaker 03: It follows that pattern. [00:27:43] Speaker 03: It follows that form very closely. [00:27:46] Speaker 03: That form is very different from example, you know, disciplinary proceedings for [00:27:51] Speaker 03: university professors or professional athletes. [00:27:54] Speaker 03: Also, the function, the purpose of it is quite different in that, like the U.S. [00:27:59] Speaker 03: government administering FAR, the IDBE, through its sanctions proceedings, is trying to decide who can protect its funds by deciding who can participate in the market for development contracts. [00:28:10] Speaker 03: So it acts as a market regulator, not as a party simply buying [00:28:17] Speaker 03: office supplies are engaging in the market in a way that a private party would do. [00:28:25] Speaker 00: Thank you, Mr. Green. [00:28:26] Speaker 00: Let me make sure my colleagues don't have additional questions for you. [00:28:28] Speaker 01: None for me. [00:28:31] Speaker 01: No. [00:28:32] Speaker 00: Thank you, Mr. Wren. [00:28:32] Speaker 00: We'll give you your two minutes that you asked for for rebuttal. [00:28:36] Speaker 02: Thank you, Your Honor. [00:28:38] Speaker 02: Maybe let me start with the arguments that were just being made on the commercial activity exception. [00:28:44] Speaker 02: First of all, the purpose of the Gravaman test is to find out whether the case is really torsious conduct occurring abroad. [00:28:53] Speaker 02: all the activity in this case is taking place in the United States, whatever you wanna call it, this is not on a case abroad. [00:28:59] Speaker 02: So really it does come down to the test for what is commercial activity. [00:29:03] Speaker 02: That is the Supreme Court's test. [00:29:05] Speaker 02: Is it in the power of private citizens in trade and commerce? [00:29:09] Speaker 02: Because what that tells you is it's not a uniquely governmental function. [00:29:13] Speaker 01: And- So Mr. Green says that what is really happening here is this body's [00:29:21] Speaker 01: use of its authority to determine who is able to participate in the market for development contracts, that that's the relevant activity of the IDB. [00:29:34] Speaker 01: Where is the private analog for that kind of activity? [00:29:40] Speaker 02: For example, sports leagues. [00:29:41] Speaker 02: And we put in the record and refer to an article that goes into that. [00:29:45] Speaker 02: A sports league, as I mentioned before, several different teams, lots of different players, coaches, [00:29:51] Speaker 02: all through private arrangements, private contractual arrangements, and it can result in a lifetime ban if there's gambling. [00:29:58] Speaker 01: Is the contract relevant to that determination? [00:30:02] Speaker 01: Isn't the contractual relationship really what is doing the work in allowing the sports league to make those determinations? [00:30:09] Speaker 02: Yes, it is. [00:30:10] Speaker 02: And that is also the case with the sanctions procedures here. [00:30:13] Speaker 02: They have no authority. [00:30:15] Speaker 02: They have no authority, no jurisdiction. [00:30:17] Speaker 02: They're a juridical entity. [00:30:18] Speaker 02: It's a corporation. [00:30:19] Speaker 02: So they only can rely on contracts to impose these things. [00:30:23] Speaker 02: Or, as I said before, the boycott power, just to decide they're not going to do business with someone. [00:30:28] Speaker 02: Again, private companies do that and can do that. [00:30:31] Speaker 02: So there's nothing. [00:30:34] Speaker 02: They talk about sovereign power. [00:30:35] Speaker 02: They are not a sovereign. [00:30:37] Speaker 02: And as we pointed out before, the immunities are different and have been tailored by organization. [00:30:43] Speaker 02: And in this one, they have not been given those privileges and immunities. [00:30:51] Speaker 00: All right. [00:30:51] Speaker 00: Let me make sure my colleagues don't have further questions for you, Mr. Wren. [00:30:56] Speaker 00: No. [00:30:56] Speaker 00: Thank you, counsel. [00:30:57] Speaker 00: Thank you to both counsel. [00:30:58] Speaker 00: We'll take this case under submission.