[00:00:00] Speaker 00: Base number 23-7T09, Y.O. [00:00:03] Speaker 00: Technology, Inc. [00:00:06] Speaker 00: vs. Republic of Iraq and Ministry of Defense of the Republic of Iraq Appellants. [00:00:11] Speaker 00: Mr. Morag for the Appellants, Mr. Katyal for the Appellee. [00:00:17] Speaker 02: Good morning, and may it please the court, Boaz Morag for the Republic of Iraq and the, what we call IMOD, the Ministry of Defense. [00:00:26] Speaker 02: I've reserved three minutes for [00:00:29] Speaker 02: I'm happy to answer any questions the panel has with respect to the damages and issues and the cross appeal. [00:00:36] Speaker 02: But I would like to focus my remarks on the grounds that we think are the most straightforward ones for the mandate reversal, which is that the district court erred in holding that IMOD's failure to pay the invoices that Wye Oak instructed be paid in Baghdad had a direct effect in the United States under clause three of the commercial activities exception of the FSIA. [00:00:59] Speaker 02: This is, as you know, a straightforward breach of contract case. [00:01:03] Speaker 02: The contract, the broker services agreement was pitched by Wye Oak to Imad in Baghdad, entered into in Iraq solely between Wye Oak and Imad, and was for Iraq to refurbish or sell for scrap military equipment in Iraq. [00:01:19] Speaker 02: It is governed by Iraqi law, and the Iraqi defendants had no contact whatsoever with the United States [00:01:26] Speaker 02: And importantly, the BSA did not require or even contemplate any performance by Iraq or for Iraq in the United States. [00:01:35] Speaker 01: Let me ask you about that. [00:01:38] Speaker 01: In the letter accompanying Iraq's execution of the agreement, I'm quoting, this program will be administered with the assistance and cooperation of the United States military. [00:01:55] Speaker 01: Why isn't that sufficient to show there would be some performance in the United States? [00:02:03] Speaker 02: Because what that is referring to, Your Honor, is the assistance in Iraq, because the United States... Well, the United States military authority is here. [00:02:17] Speaker 01: Whatever happens in Iraq is going to be subject to direction from the United States. [00:02:22] Speaker 02: But the specific reference there to the bases where the Iraqi military equipment was located and it was this is part of the transition from Iraq from the. [00:02:35] Speaker 02: coalition that had invaded Iraq and occupied it, transferring sovereignty back over to Iraq. [00:02:42] Speaker 02: Yes, there was a need for access that the Iraqis and Y.O. [00:02:49] Speaker 02: needed to the Taji and Mufti Daya and other military bases. [00:02:53] Speaker 02: This is not a direct effect on the United States based on the standard that the Supreme Court in Weltover and this court [00:03:04] Speaker 02: in IT consultants and cruise connections required an immediate unavoidable or inexorable consequence. [00:03:15] Speaker 02: And that has to be felt in the United States. [00:03:18] Speaker 01: The other thing- Also provided that notice to be given of any circumstances was to be given to WIOC in Pennsylvania. [00:03:28] Speaker 01: Your honor- Probably because something was going on in Pennsylvania. [00:03:32] Speaker 02: No, that was simply where Y.O., as any U.S. [00:03:35] Speaker 02: plaintiff might be, had its address. [00:03:41] Speaker 02: No one has ever in the history of the FSIA relied on a notice provision to suggest that there is no claim here about the failure to give notice. [00:03:52] Speaker 01: Mr. Stauffel was doing things in the U.S. [00:03:55] Speaker 01: in furtherance of the performance of the contract. [00:03:58] Speaker 02: But that is the theory of the first judgment that was reversed by this court two years ago this month. [00:04:04] Speaker 02: That performance was not required by the contract, and so therefore it's not attributable in any way to Iraq. [00:04:16] Speaker 02: Where a US contractor chooses to pursue administrative tasks, which are not specified as either required or necessary under the contract, [00:04:28] Speaker 02: cannot create a direct effect in the United States. [00:04:31] Speaker 02: Recall that you've already decided that this case is simply the act for purposes of 1605A2 for the direct effect exception is the non-payment of the invoice. [00:04:45] Speaker 02: That is the act that resulted in the failure of money that was due and owing in Baghdad to be delivered in Baghdad. [00:04:52] Speaker 02: The question is, what is the immediate unavoidable and inexorable consequence of that act [00:04:58] Speaker 02: and did it occur in the United States? [00:05:01] Speaker 02: The district court agreed that there was a direct effect in Iraq, but erred in finding three other direct effects in the United States. [00:05:10] Speaker 02: And the reason that that's an error is because what the court found is not the immediate consequence and immediate meaning without interruption or intervening act, as Your Honor wrote in the Prince case, [00:05:28] Speaker 02: It has to logically follow that there is no way of avoiding this harm. [00:05:35] Speaker 02: And what the trial court relied on was why Oak's reaction to the harm, why Oak did not receive [00:05:44] Speaker 02: money in Iraq. [00:05:46] Speaker 02: That's a financial harm to a U.S. [00:05:48] Speaker 02: company that the Volumbia case and many others say is not sufficient to create a direct effect in the United States. [00:05:56] Speaker 05: There was letters that Iraq paid Mr. Uzzana and then Mr. Stoffel directed Mr. Uzzana to pay that money into a U.S. [00:06:10] Speaker 05: bank account. [00:06:12] Speaker 05: So that is that not because because the Supreme Court is recognizing weltover that funds that are supposed to go into US bank accounts and don't are in direct effect. [00:06:25] Speaker 02: Yes, your honor. [00:06:26] Speaker 02: That is the argument that the district court rejected that the that why has raised on appeal. [00:06:33] Speaker 02: The reason that the district court got that right is because the [00:06:39] Speaker 02: The contract let Why Oak specify where it was to be paid. [00:06:43] Speaker 02: It specified Baghdad. [00:06:45] Speaker 02: It insists and insists to this day and this court and the district court previously found that the breach occurred on October 28, 2004 when those invoices were not paid and they were paid immediately upon presentation. [00:07:00] Speaker 02: Subsequently, Why Oak [00:07:03] Speaker 02: sent an email to Mr. Zena asking for a piece of that money to be paid to it in the United States. [00:07:10] Speaker 02: There is no case in the history of the FSIA that permits a plaintiff to, after the breach has occurred, [00:07:20] Speaker 05: change the place of performance [00:07:36] Speaker 05: direct the form and manner of payment, they were responding then to what Iraq had done. [00:07:42] Speaker 05: And the complaint itself has a more sort of comprehensive view of what the breach is in this case. [00:07:51] Speaker 05: But the contractual, by not paying these invoices, they breached their agreements, their agreement, which was both in the contract, August 30th Amendment, reaffirmed in Baghdad in December. [00:08:03] Speaker 05: So this review and this contract and the obligation to pay a sort of an ongoing [00:08:10] Speaker 05: duty on behalf of ROK until it actually did pay. [00:08:14] Speaker 05: And if its theory was, well, we paid Mr. Zena. [00:08:16] Speaker 05: And they said, fine, Zena send that money to the United States. [00:08:20] Speaker 05: So it seems complicated to me to say, no, there was just one breach. [00:08:25] Speaker 05: And then all their efforts after that to get the money aren't relevant. [00:08:31] Speaker 05: You say there's no cases. [00:08:31] Speaker 05: There's a case, say, in the opposite, that subsequent efforts to direct the money are irrelevant for FSIA purposes? [00:08:39] Speaker 02: All the cases say that the election of the United States has to be provided for in the agreement or agreed to by the sovereign before the failure to pay. [00:08:49] Speaker 05: But here the sovereign agreed, we'll pay wherever you tell us to pay. [00:08:53] Speaker 05: Yes. [00:08:53] Speaker 05: If they had said at the first point, pay us, so if the contract is written exactly as it is, and their first choice was pay us in the United States, here's a bank account in the United States, send the money there, would that satisfy Weltover? [00:09:08] Speaker 05: Yes. [00:09:09] Speaker 05: Okay. [00:09:10] Speaker 05: So then it doesn't have to be expressed in the contract. [00:09:13] Speaker 05: It has to be expressed by, at least under this contract, it has to be expressed by a broker, which is WIOC. [00:09:20] Speaker 05: And they expressed it when Iraq misdirected money. [00:09:25] Speaker 02: Your honor, several things. [00:09:26] Speaker 02: First of all, I misspoke. [00:09:28] Speaker 02: It would be acceptable. [00:09:30] Speaker 02: It would create a direct effect if when Iraq got that instruction, it agreed to do so before it decided not to pay. [00:09:38] Speaker 02: But the point here is that there's more than just the issue of the sequence. [00:09:48] Speaker 02: What distinguishes this case from every other where the person is owed money abroad and then comes back here and asks for it in the United States? [00:09:59] Speaker 02: The breach occurred where the contractual obligation existed. [00:10:08] Speaker 02: The FSIA and the Sachs decision by the Supreme Court require the plaintiff to identify the gravamen of its claim. [00:10:18] Speaker 02: And the gravamen here is that these invoices were not paid. [00:10:22] Speaker 02: Every piece of damage that is the second half of this appeal, they are still to this day asking for interest to accrue as of October 28, 2004. [00:10:31] Speaker 02: That's their choice. [00:10:34] Speaker 02: But if that's the claim that they've asserted and that the district court ruled on and they're still pursuing, that has a consequence for the based upon analysis [00:10:46] Speaker 02: which is what is it based upon? [00:10:47] Speaker 02: The act, it has to be based upon an act and that act has to create a direct effect in the United States. [00:10:55] Speaker 02: And so besides the issue of being able to direct change the place of payment after the breach, you also have the fact that, well, it changed again after that. [00:11:08] Speaker 02: So the point is that in December, [00:11:12] Speaker 02: They had the meeting, which was changed to you will get paid in cash in Baghdad. [00:11:18] Speaker 02: So the only place that on this record, Iraq ever agreed to pay because there's this entire issue that the district court did not address. [00:11:27] Speaker 02: that we raised over Zena's authority to act for Iraq on November 25, 2004, the date he received the email, and the day after he responds, I don't have the authority to pay you or to pay me. [00:11:40] Speaker 02: We need authorization from the Ministry of Defense. [00:11:45] Speaker 02: So on this record, and that did not come, this part is undisputed, until the December 5th all hands meeting in Baghdad. [00:11:53] Speaker 02: Can I ask a question about Yombo? [00:11:55] Speaker 03: Sure. [00:11:55] Speaker 03: I think, if I remember right, it does not discuss McKesson. [00:12:03] Speaker 02: It does not cite McKesson. [00:12:05] Speaker 02: Do you have a theory for why? [00:12:09] Speaker 02: Because I think McKesson is sui generis, as you made clear in Helmrich and Payne. [00:12:14] Speaker 02: McKesson is not a commercial contract case. [00:12:17] Speaker 02: McKesson is a case involving essentially an expropriation and a [00:12:23] Speaker 02: So what Iran did in McKesson, which Iraq did not do here, it wasn't an issue of not paying. [00:12:29] Speaker 02: It was an issue of directing the dairy in which McKesson was an investor, that it would no longer deal with McKesson as a counterparty on a technical services agreement, receive the goods and services that McKesson regularly sent over so that this dairy would create profits. [00:12:47] Speaker 03: I know what McKesson says. [00:12:50] Speaker 03: And it sounds like your answer, which may be the right answer, is that Odhiambo tells us what to do in a contracts case. [00:12:58] Speaker 03: There are other precedents that tell us what to do in, let's say, a torts case. [00:13:01] Speaker 03: It's like the Venezuela fraud thing. [00:13:04] Speaker 03: And then McKesson maybe tells us what to do in a takings case or an expropriation case. [00:13:10] Speaker 02: Well, that's partly it. [00:13:12] Speaker 02: We're not standing on a categorical distinction. [00:13:15] Speaker 02: We're just as to this is a contract case versus a tort case. [00:13:19] Speaker 02: But we're just trying to, we're putting before the court the precedents that seem the most on point for the facts here. [00:13:25] Speaker 05: What about Cruz Connections? [00:13:26] Speaker 05: Judge Ginsburg referenced the fact that, as you say repeatedly, Breeze, this is a small company, and it was a very big contract. [00:13:34] Speaker 05: And so they were going to have to have to involve their employees here in the United States, their computer equipments, their invoicing, Chanel here, to help organize this very, very large contractual [00:13:49] Speaker 05: undertaking. [00:13:50] Speaker 05: How is that record here different from Cruise Connections? [00:13:55] Speaker 02: Because Cruise Connections, the entire subject matter, the raison d'etre of the contract that the Canadians terminated was the acquisition of goods, the cruise ships, and services from the United States. [00:14:08] Speaker 02: In order to bid on the contract that Cruise... That's what that means, because this is a U.S. [00:14:13] Speaker 05: company, and so everything this contract was doing was going to be obtaining services [00:14:18] Speaker 05: skills, logistical support from the United States where WIOC is based. [00:14:27] Speaker 05: So that can't be the test. [00:14:29] Speaker 05: And there's nothing that I saw in cruise connections that required that contracting with the US cruise companies be done in the United States. [00:14:38] Speaker 05: You could do that contract from Canada or anywhere else. [00:14:41] Speaker 02: Yes, but the object of the contract was to obtain ships that were in the United States. [00:14:47] Speaker 05: The object here is to obtain skill and ability and functional resources from a company in the United States. [00:14:54] Speaker 05: I'm struggling with these lines as to when what you're doing in the US matters and when it doesn't. [00:15:02] Speaker 02: I don't see how you can reconcile your prior decision [00:15:06] Speaker 02: Because you're attributing legal significance to whatever they did in the United States. [00:15:11] Speaker 02: That doesn't qualify. [00:15:13] Speaker 02: Nothing. [00:15:14] Speaker 05: And what we did in cruise connections? [00:15:15] Speaker 02: No, because in cruise connections, what the court said, may I answer? [00:15:22] Speaker 02: What the court said was treat this as if you had a contract to buy $100 million of steel from a steel plant in the United States that the Canadians then terminate. [00:15:32] Speaker 02: That has an immediate consequence because you know that that steel has to be manufactured here because that's what the contract says. [00:15:39] Speaker 02: That is why the sovereign [00:15:43] Speaker 02: That's why the sovereign knows that it will have an immediate effect in the United States if it terminates that contract. [00:15:50] Speaker 02: Simply contracting with a U.S. [00:15:51] Speaker 02: entity, WIOC was not required to spend a penny of its own money. [00:15:57] Speaker 02: The object was clearly activity that would take place in Iraq. [00:16:01] Speaker 02: The choice by WIOC [00:16:03] Speaker 02: to use the brother in Pennsylvania to hold the computer as opposed to an employee in Amman, Jordan to do it, is not something that's attributable to the sovereign and cannot be seen anywhere in the contract. [00:16:19] Speaker 02: Those are distinctions that matter under your case law. [00:16:22] Speaker 01: Or do Yambo suggest that it needs to be expressed as long as it's implied or implicit in the contract? [00:16:28] Speaker 02: But there is no activity that is implied in the contract. [00:16:32] Speaker 02: You can't say for every contract there must be some sort of back office because then you have eviscerated the direct effects test. [00:16:42] Speaker 02: Recall that when under the FSIA, which the Verlinden opinion the Supreme Court tells us requires a substantial connection to the United States, the direct effect, the inexorable consequence is the only US connection. [00:16:57] Speaker 02: And so the fact that somebody in the United States [00:17:01] Speaker 02: chooses as a result of not getting paid in Iraq to stop certain activities is not consistent with this idea that this should be an exception and not swallow the entire rule of presumptive immunity that Congress afforded. [00:17:17] Speaker 02: There really are not that many, I mean, this is in terms of the sequence of events very much like [00:17:27] Speaker 02: the helmet champagne where you have the okay, there's an on payment. [00:17:32] Speaker 02: There's nothing stopping you from continuing to perform. [00:17:34] Speaker 02: Why does continue to perform until it decides when to stop? [00:17:39] Speaker 02: And it's entitled to do that. [00:17:43] Speaker 05: Thank you very much. [00:17:44] Speaker 05: We'll give you a couple of minutes on rebuttal. [00:18:07] Speaker 04: Thank you, Judge Millett, and may it please the court, Neil Katyal for WIOC. [00:18:10] Speaker 04: I'd like to reserve one minute for rebuttal in the cross-appeal. [00:18:14] Speaker 04: WIOC and Iraq signed a contract. [00:18:17] Speaker 04: General Petraeus, in our eight-day trial, testified at the trial that WIOC's work was a centerpiece of the effort to rebuild Iraq's military. [00:18:25] Speaker 04: Iraq refused to pay, even after WIOC's president was brutally murdered. [00:18:29] Speaker 04: And after 13 years of litigation, the district court held Iraq was not immune, and it breached the contract. [00:18:36] Speaker 04: Now, before this court, [00:18:37] Speaker 04: They're not contesting the breach, they just plead immunity. [00:18:40] Speaker 04: And last time this court recognized a plausible basis for direct effect remanded for factual consideration. [00:18:47] Speaker 04: The district court did that calling this a quintessential example of a clause three. [00:18:52] Speaker 04: That decision was right for three independent reasons. [00:18:55] Speaker 04: And notably, Iraq doesn't cite a single case reversing a district court's finding of a direct effect after a trial, not one, and they bear the burner proof. [00:19:05] Speaker 04: The first reason [00:19:06] Speaker 04: is that the district court correctly held that Iraq's failure. [00:19:10] Speaker 03: Can I ask a question based on some of the discussion with your opposing counsel? [00:19:14] Speaker 03: That is, when it comes to the place of payment, I think Iraq would suggest that we look either to the time of contract formation or at the latest, we look right up to the moment before the breach. [00:19:31] Speaker 03: I assume. [00:19:33] Speaker 03: So you disagree with that, right? [00:19:35] Speaker 04: I do. [00:19:35] Speaker 03: I don't think it's necessary here. [00:19:37] Speaker 03: I'll explain that. [00:19:40] Speaker 03: I think part of the appeal of that is that you can imagine concern about FSIA waiver being a part of the bargain that was struck. [00:19:52] Speaker 03: And so if [00:19:56] Speaker 03: why if why oak had wanted and the the effect of an fsi waiver then probably they would have had to given something up at the time of contract formation and if we can allow a post formation or the latest post post breach conduct to have the effect of an fsi waiver then it seems like we're upsetting the bargain that was struck to [00:20:21] Speaker 04: Yeah, so I'd say three things about that. [00:20:22] Speaker 04: First, just as a matter of housekeeping, there are three independent direct effects. [00:20:26] Speaker 04: This bank issue is one, the other is cut off of flow, and the other is the military impact that Judge Ginsburg was pointing out. [00:20:33] Speaker 04: They have to run the table and win all of them because it's a direct effect is the language of the statute. [00:20:39] Speaker 04: The second thing is I think Weltover directly rejects, Your Honor, that formulation. [00:20:44] Speaker 04: Argentina's brief to the court at, I think, page 30 and 31 made a version of this argument and said this would [00:20:50] Speaker 04: open the floodgates. [00:20:51] Speaker 04: But what Weltover said is, look, there was first a breach, and then after that, the party specified the place of performance, the New York bank account. [00:21:01] Speaker 04: That's at page 610. [00:21:03] Speaker 04: And this court and IT consultants read it that way. [00:21:06] Speaker 03: Was the contract there a pay anywhere contract, or was it you're going to pay in one of two or three or four places? [00:21:12] Speaker 04: Pay in one of four places. [00:21:14] Speaker 04: The US was listed. [00:21:15] Speaker 04: The US was listed. [00:21:16] Speaker 04: Well, I think Judge Ginsburg points out that Volombia says you can have a contractual obligation or otherwise. [00:21:22] Speaker 04: So I think this court's already done that. [00:21:24] Speaker 04: And here, this contract, I think, for all the reasons Judge Ginsburg was pointing out with respect to the other piece of the direct effects, did contemplate a lot of US performance. [00:21:33] Speaker 04: I mean, the whole question under direct effects is, is this an attenuated long chain of causation, or is this natural and predictable? [00:21:40] Speaker 04: This is a US headquartered company. [00:21:42] Speaker 04: Iraq is a war zone. [00:21:43] Speaker 04: It's not unforeseeable or [00:21:46] Speaker 04: something that is not natural and predictable to expect that United States performance would be done. [00:21:53] Speaker 01: Whose decision was it? [00:21:55] Speaker 01: efforts to enlist congressional help and executive branch help is not a direct effect. [00:22:01] Speaker 04: Oh, yeah, I don't think that by itself. [00:22:03] Speaker 04: We're certainly not saying that. [00:22:04] Speaker 04: I think we are saying the kind of thing that you said, which is the letter at Joint Dependents page, Joint Dependents page 486, that this contract will be administered with the help of the United States military in conjunction with the fact that this contract was all about standing up [00:22:22] Speaker 04: U.S. [00:22:23] Speaker 04: standing up Iraqi forces so its U.S. [00:22:25] Speaker 04: troops could stand out. [00:22:26] Speaker 04: We had testimony from General Petraeus at this trial explaining that as well as testimony from Bigadeer Clements and Mr. Beadle. [00:22:35] Speaker 04: That's a joint appendix pages 1405, 155, and 1067. [00:22:39] Speaker 04: This court routinely defers [00:22:42] Speaker 04: to military judgments in all kinds of circumstances? [00:22:45] Speaker 05: What did they say that the execution of this contract involved military officials in the United States as opposed to the military officials boots on the ground in Iraq? [00:22:57] Speaker 04: Well, I think what they said, and this is what the district court said, this is joint appendix 432, is quote, unlike in the Prince case, there are no intervening actors that cut off the chain of causation between Iraq's non-payment [00:23:08] Speaker 04: and the impact on the U.S. [00:23:10] Speaker 05: military's readiness to leave Iran. [00:23:14] Speaker 05: The letter sounds like the military is going to be helping to execute this contract, but there's no evidence that actually any military resources located in the United States or military personnel [00:23:29] Speaker 04: in the United States were involved in the execution. [00:23:39] Speaker 04: directed from the United States. [00:23:41] Speaker 05: No, the operations directed from the United States. [00:23:43] Speaker 05: How general would those operate? [00:23:45] Speaker 05: If it was, well, this slowed down, the Iraqis getting self-equipped, which then slowed down, removal of US forces from Iraq many, many, many years later, that's a different thing. [00:23:57] Speaker 04: Yeah, I don't think that's what the testimony was. [00:23:59] Speaker 04: And I think it's reasonable to infer, as Judge Ginsburg was saying, was that if there's an impact on US military operations, if you're going to have to keep more troops there, which is what the testimony was, [00:24:09] Speaker 04: Obviously, that's going to be something directed from the United States. [00:24:13] Speaker 04: It's, after all, a U.S. [00:24:14] Speaker 04: military campaign. [00:24:15] Speaker 03: General Medrea say outright, we kept troops in Iraq longer because of this breach. [00:24:20] Speaker 04: I don't think he quite said that, but I think the testimony of all of those officials together does say that, and that is what the district court found at the page I read to you before. [00:24:29] Speaker 04: I think that is a clear finding by the district court. [00:24:31] Speaker 03: There were a million factors. [00:24:32] Speaker 03: that went into when we're able to. [00:24:34] Speaker 04: And that's exactly what they argued at the district court. [00:24:37] Speaker 04: And that's exactly what the judge rejected after an eight day trial. [00:24:41] Speaker 04: And I don't certainly don't think it's clear error to go back to the bank account point. [00:24:45] Speaker 04: I just want to make one final point, which is Judge Millett's point about how this is an ongoing duty to pay. [00:24:51] Speaker 04: And so it wasn't as if there was only a designation afterwards. [00:24:55] Speaker 04: And the district court here said, [00:24:58] Speaker 04: Look at the big concern in these direct effects cases of some opportunistic behavior and I take it that's true getting out with the FSI waiver point and the district court rejected all of that on the facts of this case saying that this was a contract that extensively required performance in the United States. [00:25:16] Speaker 04: that these opportunistic concerns don't apply in page 411. [00:25:19] Speaker 03: My point wasn't that opportunistic behavior occurred here. [00:25:22] Speaker 03: My point was it would seem odd, I think, to create a legal rule going forward that would either incentivize opportunistic behavior or disrupt the bargaining of a struck. [00:25:35] Speaker 04: Oh, yeah. [00:25:35] Speaker 04: So no, because after all, the contract, you know, anyone in the future, if they're worried about this, would just not agree to replace a payment clause [00:25:42] Speaker 04: a unilateral place of payment clause, the one that's in this contract. [00:25:45] Speaker 04: But these folks agree to that. [00:25:47] Speaker 04: So that is the third direct effect. [00:25:49] Speaker 04: The second one is the impact on the military. [00:25:51] Speaker 04: The first, we haven't even gotten to talk about yet, is the cutoff and the analogy to McKesson. [00:25:57] Speaker 04: And my friend's best argument on the other side is that it has to be unavoidable and inexorable. [00:26:05] Speaker 04: There is no case that says anything like that is part of the legal standard. [00:26:09] Speaker 04: It is true that there's an offhand observation [00:26:12] Speaker 04: and IT consultants saying that in that case, that it was sufficient to establish a direct cause of poison. [00:26:20] Speaker 03: On that point, let's assume that there was a cutoff of capital personnel data and intangible services between the United States and Iraq. [00:26:29] Speaker 03: Whose decision was it to cut it off? [00:26:31] Speaker 04: It was the natural and predictable result of Iraq. [00:26:34] Speaker 04: It's no different, Your Honor. [00:26:36] Speaker 03: Not when it was foreseeable, but who made the call? [00:26:38] Speaker 03: Somebody made the call. [00:26:39] Speaker 04: Yeah, I think Iraq did. [00:26:40] Speaker 04: And it's just like, here's an example. [00:26:42] Speaker 04: I don't pay my electricity bill, okay? [00:26:44] Speaker 04: And the electric company keeps the lights on for a while as they do, and then ultimately they turn them off. [00:26:49] Speaker 04: Nobody would say my lights being turned off is the result of the electric company. [00:26:56] Speaker 04: Yes, they made the final. [00:26:58] Speaker 03: And there's merit to that? [00:26:58] Speaker 03: I think that is different than McKesson, because in McKesson, [00:27:01] Speaker 03: Like Iran was the electric company. [00:27:03] Speaker 03: They shut the lights. [00:27:04] Speaker 04: So I think that's actually not right on the facts of McKesson. [00:27:07] Speaker 04: You can play the exact same games about the choice. [00:27:10] Speaker 04: So this court in McKesson, this is a 271 F third 1104. [00:27:14] Speaker 04: said it was a U.S. [00:27:15] Speaker 04: company that made the choice to withdraw the U.S. [00:27:19] Speaker 04: personnel. [00:27:20] Speaker 04: Paragraph 35 of the complaint, which is in their own appendix at page 34, says McKesson made that choice really reluctantly. [00:27:28] Speaker 04: And indeed, they kept the personnel in Iran [00:27:31] Speaker 04: after nationalization because it was part of their duty to mitigate and that's exactly what happened here they didn't pay their bills we tried to keep things going as part of our duty to mitigate we couldn't do that ultimately for too long because as the district were acknowledged and the sites to this are at our brief pages 20 to 21 when someone doesn't pay particularly when it's a small company in a big contract [00:27:54] Speaker 04: You can only keep going for only so long. [00:27:57] Speaker 04: And it is that as EIG says, which is a case that's buried in their reply brief, you look to what is the natural and predictable results when a foreign sovereign takes that action. [00:28:09] Speaker 04: The natural and predictable result of not paying these tens of millions of dollars is that. [00:28:15] Speaker 03: I think you're going to disagree with this. [00:28:16] Speaker 03: So tell me why it's wrong. [00:28:18] Speaker 03: McKesson tells us what to do in an expropriation case. [00:28:21] Speaker 03: the IG tells us what to do in a tort fraud case, or Donbo tells us what to do in a contract case? [00:28:26] Speaker 04: Yeah, I don't think that there are different standards for direct effects in each of those. [00:28:31] Speaker 04: I think the answer to your question about why Odhiambo doesn't cite McKesson is because in Odhiambo, there was zero US performance whatsoever. [00:28:41] Speaker 04: And that's why it didn't have any analogy in McKesson. [00:28:43] Speaker 04: Here, as Judge Millett was saying earlier, there's [00:28:46] Speaker 04: all sorts of stuff that is happening in the United States performing under this contract. [00:28:51] Speaker 04: If you look at volume four of the Joint Appendix, it's hundreds of pages about what's happening in the United States. [00:28:56] Speaker 03: At the time of contract formation, was it kind of inevitable in the eyes of Iraq that those things would be happening in the US? [00:29:04] Speaker 03: And one of the reasons I ask is because I think a lot of the equipment was probably [00:29:07] Speaker 03: Soviet era supplied equipment. [00:29:09] Speaker 03: So, you know, Iraq had to take a guess on who was going to be subcontracting with it. [00:29:15] Speaker 03: They might have guessed, you know, Russian or Eastern European subcontract. [00:29:19] Speaker 04: So two things, Your Honor. [00:29:20] Speaker 04: One is cruise connections directly forecloses that argument, as Judge Malik was saying earlier. [00:29:26] Speaker 04: It expressly says the foreign government doesn't need to agree in the contract to U.S. [00:29:30] Speaker 04: performance any part of it. [00:29:32] Speaker 03: The American subcontracting was expressed in the contract. [00:29:36] Speaker 04: Well, just the U.S. [00:29:37] Speaker 04: headquarter of the two subcontractors, which is, of course, true here. [00:29:41] Speaker 04: You know, paragraph 11 of this contract says, why is it headquartered in the United States? [00:29:45] Speaker 04: So if we're going to... Contractor, but not the subcontractor. [00:29:48] Speaker 04: Well, I think if anything, that cuts the other way. [00:29:50] Speaker 03: Again, the whole question is... You have to come up with a rule that doesn't mean every time an American company does business with a foreign government that you went on direct effects. [00:29:57] Speaker 04: Yeah, and that's certainly not our argument. [00:29:58] Speaker 05: If there's background... For every small company. [00:30:01] Speaker 04: Yeah, but I think here the question is, you know, in here, as this case comes to the court, the district court made clear factual findings that with respect to this company, unlike in Helmer and Payne, and where there was no factual development, but in this company, if you cut off funds, you were starving them with the capital necessary to perform the contract [00:30:21] Speaker 04: That's what the district court said repeatedly, including a joint appendix page 421. [00:30:26] Speaker 04: And indeed, even this court. [00:30:27] Speaker 05: That's not an effect in the United States. [00:30:29] Speaker 05: Starving them off from the ability to execute the contract in Iraq does not necessarily mean an effect in the United States. [00:30:35] Speaker 04: Well, given all the ongoing performance that the district court isolated, it is. [00:30:40] Speaker 04: It's direct. [00:30:41] Speaker 04: It's not a long chain of causation. [00:30:43] Speaker 04: It is the most natural thing in the world. [00:30:45] Speaker 05: Were they on notice in the contract? [00:30:47] Speaker 05: that they were going to be responsible for these activities in the US, because it was this unusual contract where, as you said, they weren't laying out money, working with the military folks in Iraq. [00:30:58] Speaker 05: It was just an unusual contract. [00:31:01] Speaker 04: Yeah, I'd say two things about the honor. [00:31:02] Speaker 04: First is, it's at least as foreseeable as in cruise connections, of which the only mention was a US headquartered subcontractor. [00:31:11] Speaker 05: Here, for getting US cruise ships [00:31:15] Speaker 05: And so that's going to, if you're U.S. [00:31:17] Speaker 05: based and you're scheduled with, you're supposed to make contracts for them with U.S. [00:31:21] Speaker 04: Well, again, I don't know that they're supposed to be with the U.S. [00:31:24] Speaker 05: ships as part of the contract was U.S. [00:31:26] Speaker 05: cruise ships. [00:31:27] Speaker 04: They were U.S. [00:31:28] Speaker 04: cruise ships. [00:31:28] Speaker 04: Absolutely. [00:31:29] Speaker 04: They turned out to be just as here, even accepting your premise, it turned out to be performance in the United States. [00:31:35] Speaker 04: I think it stands to reason the contract itself recites Wyock's extensive experience in the area and David Stouffel [00:31:42] Speaker 04: And he's, of course, based in the United States. [00:31:44] Speaker 04: The second thing I'd say is it's not different than this court's decision in dispel, which involved, there wasn't even a written contract at all. [00:31:54] Speaker 04: Certainly nothing there saying US performance, but Hungary had agreed to promise to return the arts and art in that case to the Herzog family. [00:32:03] Speaker 04: Some of those members resided in the United States. [00:32:06] Speaker 04: This court found that enough to be a direct effect. [00:32:09] Speaker 04: And here, as this case comes to the court, you have, [00:32:12] Speaker 04: the district court saying, look, this is natural and predictable. [00:32:16] Speaker 04: A contract's being performed largely. [00:32:18] Speaker 05: Judge Walker's question, when is it not going to be natural and predictable that reaching a very multi-million dollar contract in the foreign country is not going to have a direct effect on [00:32:36] Speaker 05: the operations of the company in the United States? [00:32:39] Speaker 04: Yeah, I think at least in a circumstance like this in which it's a U.S. [00:32:42] Speaker 04: headquartered company with extensive United States expertise at a time when, as the district court found, there were all sorts of technological limitations in Iraq. [00:32:51] Speaker 04: So there was no real functioning Internet, no real functioning banking system and the like. [00:32:56] Speaker 04: A lot of that is going to have to happen in the United States. [00:32:58] Speaker 04: This is well before cloud computing and things like that. [00:33:01] Speaker 04: And this required, as the entire volume four of the Joint Appendix shows, [00:33:05] Speaker 05: the construction of a very extensive database in order to try and sounds like in any country that is either whether for war or other reasons is underdeveloped industrially that you're going to have a contract with the United States company is going to mean direct effects in the United States. [00:33:24] Speaker 04: I think again, the question is, would it be natural and predictable for a contract at this point in time in 2004 [00:33:30] Speaker 04: to be performed in the United States. [00:33:32] Speaker 05: We don't get to decide, we don't get to write an opinion that says this is good for 2004. [00:33:35] Speaker 05: And so I understand talking about a wartime there, but there's contractors, military contractors, all kinds of contractors all over this world, all over this world, and they're US-based companies. [00:33:47] Speaker 05: And there's no doubt that they are having communications with, no doubt that logistical issues [00:33:53] Speaker 05: are affecting you at that the probably even directed by folks in the US offices and I'm just very worried about I don't understand how I don't write the opinion how would you how would I write the opinion that says I think you were for one ticket you know to get one I'm not suggesting quite that I am just saying on the facts of this case and all you'd have to do I think is say look Judge Lamberth found at this moment in time [00:34:16] Speaker 04: There were technological limitations which made it absolutely foreseeable and a natural and predictable result that someone who's signing this contract with a U.S. [00:34:24] Speaker 04: headquartered company involving United States experience of its personnel, of its key personnel, that is going to be performed in the United States at this moment in time. [00:34:34] Speaker 04: Some other contract could be done differently. [00:34:36] Speaker 05: What do you mean involving United States experience of its personnel? [00:34:39] Speaker 04: Well, I mean that these are, you know, the stove holes were United States people, they were, you know, they had hypothetical. [00:34:46] Speaker 05: That's any question this US space companies. [00:34:48] Speaker 04: Yeah. [00:34:49] Speaker 04: And I think, you know, if you have, I mean, if, if, if you have a contract with some other company is [00:34:55] Speaker 04: not have the locus of its expertise in the United States, I think it becomes less the natural and predictable results. [00:35:01] Speaker 05: But on these facts, as this district court found... That doesn't give me any reassurance about writing an opinion that means every time a US-based company sends some people over abroad to help, overseas to help execute a contract in a foreign country that they're not always going to have... Well, I think that, again, I think it may be different now because of the role of technology and the fact that there's cloud computing, it'd be harder to anticipate performance [00:35:23] Speaker 05: in the United States and then if the logistical designs are put on computers and created in the United States if the spreadsheets are all done in the United States if how we're going to do we have great tech here not great tech there are we going to bridge that is decided in the United States they're all going to be [00:35:40] Speaker 04: Quite understand it, Your Honor. [00:35:41] Speaker 04: If you're worried about that, I think the answer to that is I was saying to Judge Walker that the contracts itself can specify whatever they want about performance. [00:35:48] Speaker 04: They could say it's not performed in the United States or whatever. [00:35:51] Speaker 04: But at least in a contract like this, in which I think all the indicia and hallmarks are that this is the natural and predictable result, that's enough. [00:35:59] Speaker 04: And of course, that's only about direct effects. [00:36:01] Speaker 04: We haven't talked about the impact on the military or the bank account as two other reasons for direct effects. [00:36:09] Speaker 03: If I could. [00:36:10] Speaker 03: Can I read a couple things from the reply brief? [00:36:13] Speaker 03: I suspect you agree with some of these statements and disagree with them. [00:36:15] Speaker 03: I just want to know, agree or disagree. [00:36:18] Speaker 03: WIO pitched the contract in Iraq? [00:36:20] Speaker 03: WIO pitched the contract in Iraq? [00:36:22] Speaker 03: Yes. [00:36:24] Speaker 03: Signed the contract in Iraq? [00:36:25] Speaker 03: Yes. [00:36:26] Speaker 03: Governed it under Iraqi law? [00:36:29] Speaker 03: Yes. [00:36:30] Speaker 03: And I think you're going to disagree with this. [00:36:32] Speaker 04: Well, the contract itself says that. [00:36:34] Speaker 04: But then, obviously, as our briefs explain in the district court, [00:36:38] Speaker 04: there were all sorts of concessions with respect to specific arguments that Iraqi law wasn't different than the United States law. [00:36:44] Speaker 04: It was not different. [00:36:45] Speaker 03: Right. [00:36:45] Speaker 03: And then I think you disagree with this. [00:36:47] Speaker 03: Why was to perform all work under the contract in Iraq? [00:36:50] Speaker 04: Oh, yeah. [00:36:51] Speaker 04: Absolutely disagree. [00:36:52] Speaker 04: And my friend on the other side said that. [00:36:54] Speaker 03: That's part of the debate. [00:36:55] Speaker 03: Yeah. [00:36:55] Speaker 03: And then this is not from the reply brief, but David Stauff will continue to perform up to the January 25 election. [00:37:06] Speaker 03: Is that right? [00:37:07] Speaker 04: I think that's about right. [00:37:08] Speaker 04: I'm not sure if the exact date, but yes, there was continued performance for a couple of months. [00:37:12] Speaker 03: And U.S. [00:37:13] Speaker 03: officials, Senator Santorum, et cetera, they took no action after the breach until YL freaked out to them. [00:37:23] Speaker 04: Is that correct? [00:37:23] Speaker 04: I'm not quite sure about whether that's true or not. [00:37:27] Speaker 04: You know, it was the case that Joint Appendix pages 584 and 429 [00:37:34] Speaker 04: The district court says that the reason why U.S. [00:37:38] Speaker 04: officials got diplomatically involved was because of the failure to pay. [00:37:42] Speaker 03: But what actions did they take before WIOC reached out to them? [00:37:45] Speaker 04: I'm not sure they took actions necessarily before, but they certainly did once there was a failure to pay. [00:37:50] Speaker 05: How long after the breach did WIOC notify somebody in the U.S. [00:37:54] Speaker 05: military about the breach? [00:37:56] Speaker 04: I think it was done pretty quickly. [00:37:58] Speaker 05: What's that mean? [00:37:58] Speaker 04: I mean, it probably a matter of weeks. [00:38:01] Speaker 04: I'm not sure exactly, but it was a fairly fast, rapid situation because this contract was so important to the United States, for reasons Judge Ginsburg was saying, so important to Iraq right before the elections that everything was done to try and make sure that that contract was preserved. [00:38:17] Speaker 04: And we're certainly not saying that alone is enough of a direct effect. [00:38:20] Speaker 03: We talked earlier about what General Petraeus did and didn't say. [00:38:24] Speaker 03: Just in terms of your contention, is it your contention that [00:38:28] Speaker 03: If Iraq had not breached the agreement, U.S. [00:38:32] Speaker 03: forces from Iraq would have returned sooner. [00:38:36] Speaker 04: Some U.S. [00:38:37] Speaker 04: forces would. [00:38:38] Speaker 04: No, we're not saying every troop would have come home, but that was the testimony at the trial. [00:38:42] Speaker 04: That's what Judge Lamberth found after hearing that after eight days. [00:38:47] Speaker 03: I think this is my last question, but as you know, Odhiambo has some language, very unhelpful to you. [00:38:52] Speaker 03: For example, breaching a contract that establishes a non-U.S. [00:38:56] Speaker 03: place of performance can affect the United States only indirectly as the result of some intervening event. [00:39:01] Speaker 03: Do you think we have to at least disagree with the language in Odeonbo in order to decide for you? [00:39:07] Speaker 04: I don't think so. [00:39:08] Speaker 04: So first of all, that is only going to get to the cutoff of funds thing. [00:39:11] Speaker 04: I think it won't get to the military impact that Judge Ginsburg was isolating or the bank account. [00:39:17] Speaker 04: that Judge Millett was getting to. [00:39:18] Speaker 04: But with respect to the language from Odeonbo, that case had no United States connection at all. [00:39:25] Speaker 04: It involved no performance by any party in the United States. [00:39:28] Speaker 04: It was just brought by someone who brought you in elaborately. [00:39:30] Speaker 03: And that's an argument that Odeonbo's holding doesn't control. [00:39:33] Speaker 03: And I know you think that. [00:39:35] Speaker 03: But the language that it gets repeated at least twice expressly in Odeonbo. [00:39:39] Speaker 03: And then, as you know, I think it was Judge Pillard says, I don't agree with this language in Odeonbo. [00:39:47] Speaker 03: I guess I'm asking do you agree. [00:39:48] Speaker 04: So I think it could be read more loosely and I think you should read it that way. [00:39:52] Speaker 04: I think Judge Mollett in the case and versus Trump case said you've got to read cases in light of this court's decisions in light of other decisions and to read it for all it's worth the way that I think my friend on the other side is. [00:40:04] Speaker 04: would run it headlong into EIG, after all, which says it's the natural, unpredictable result that is the relevant test. [00:40:12] Speaker 04: And so I would just, I agree, Odombo is their best case on the cutoff of funds. [00:40:17] Speaker 04: I just don't think it could be read to be that way, because if it is, then EIG, I think, comes out the other way. [00:40:24] Speaker 04: McKesson, as I was explaining to you, would come out the other way, because it was the US company's choice. [00:40:29] Speaker 04: to keep its personnel there after the nationalization and and you know I think it's also inconsistent with Columbia as I was saying to judge Ginsburg earlier because that's a case that says it doesn't need to be in the contract expressly. [00:40:43] Speaker 04: its contract or otherwise is the relevant language in Volumbia. [00:40:47] Speaker 04: And the last thing I'd say about this is- Very, very, very fast. [00:40:50] Speaker 04: And the last thing I'd say about this is my friend makes a big point about immediate in his briefs, but there's two different senses of the word immediate. [00:40:58] Speaker 04: One is causal and one is temporal. [00:41:00] Speaker 04: It's clearly, the use of that phrase in Weltover is clearly causal because the language at page 618 of the Supreme Court decision says, [00:41:09] Speaker 04: We agree with the Court of Appeals about the test. [00:41:13] Speaker 04: And the test from the Court of Appeals, and this is 941F, second 152, is that, quote, an effect is direct where there is no intervening element. [00:41:22] Speaker 04: Here, for those three direct effects, there's no intervening element. [00:41:25] Speaker 05: Thank you very much. [00:41:31] Speaker 05: All right, Mr. Morag, we'll give you two minutes for rebuttal. [00:41:35] Speaker 02: Thank you. [00:41:38] Speaker 02: Just some points on the case law that was raised. [00:41:40] Speaker 02: The Shepple clearly is about the decision. [00:41:43] Speaker 02: What it found was that Hungary had promised to make specific performance obligations in the United States. [00:41:49] Speaker 02: That's what was alleged. [00:41:51] Speaker 02: That's what Judge Tatel relied on for his decision. [00:41:54] Speaker 02: This test that's being referred to about the natural and foreseeable was in fact rejected in Weltover because this is a question [00:42:06] Speaker 02: where foreseeability was rejected. [00:42:08] Speaker 02: Yes, it is causal, but it's approximate cause analysis. [00:42:11] Speaker 02: It's not a but, you don't look at every but for issue. [00:42:15] Speaker 02: And the point of that is that you look at what the sovereign was required to do and you look at what happened next. [00:42:24] Speaker 02: All of these points about why Oaks, it has to matter whether why Oaks could perform for three months or three years [00:42:32] Speaker 02: after the breach that it claims is gravamen in this offense. [00:42:36] Speaker 05: I thought I heard you say that Iraq agreed to pay in cash in Baghdad for this contract performance. [00:42:46] Speaker 05: Does the record say somewhere that it was in cash? [00:42:51] Speaker 02: Yes, I believe so. [00:42:52] Speaker 02: That was the whole point. [00:42:53] Speaker 05: December? [00:42:54] Speaker 02: That Mr. Mr Stoffel left the Taji base to pick up the funds in the green zone in Baghdad. [00:43:01] Speaker 05: Arrange for the payment and get it. [00:43:03] Speaker 05: Get it. [00:43:04] Speaker 05: So that could equally mean he was going there to arrange a wire transfer to us. [00:43:08] Speaker 02: There is there was no there were no wire transfers going on. [00:43:10] Speaker 02: There's testimony about that from Captain Neil that wire transfers were not happening. [00:43:15] Speaker 02: That's why [00:43:16] Speaker 02: Everyone understood that this payment would have to come in Iraq, as it, in fact, did come to Mr. Zehna for reasons having to do with the- Do you have a record citation for where it was gonna be in cash? [00:43:28] Speaker 02: Or not off the top of your head? [00:43:33] Speaker 02: The description in the 2019 decision by Judge Lamberth discussing the events, and there's an email that was sent where [00:43:46] Speaker 02: before the date where Mr. Stoffel says I'm going to get the money, whether it's a cash or a check, it was still going to be some instrument in Baghdad. [00:43:59] Speaker 05: Okay, thank you. [00:43:59] Speaker 05: Thank you very much. [00:44:01] Speaker 05: Mr. Katyal, you wanted to reserve one minute for your cross appeal. [00:44:04] Speaker 05: I'm not sure it has come up at all in oral argument, but if there's something that you fairly want to say and rebuttal on that issue, feel free, but otherwise, [00:44:13] Speaker 04: just that we isolate three reasons on the cross appeal for why the district court made some errors and we think it should just be remanded for discussion of those. [00:44:22] Speaker 04: If there are any questions. [00:44:24] Speaker 05: Thank you very much. [00:44:24] Speaker 05: The case is submitted.