United States District Court, M.D. Pennsylvania
CHERYL B. CANFIELD, Plaintiff
STATOIL USA ONSHORE PROPERTIES INC., STATOIL NATURAL GAS LLC, and STATOIL ASA, Defendants.
MALACHY E. MANNION United States District Judge
before the court are a motion to dismiss filed by defendant
Statoil Natural Gas LLC (“SNG”), (Doc.
25), and a motion to dismiss filed by defendants
Statoil USA Onshore Properties, Inc. (“SOP”) and
Statoil ASA (“Statoil ASA”), (Doc. 31).
The defendants' motions seek dismissal of all of the
putative class actions claims brought by plaintiff Cheryl B.
Canfield (“Canfield”), as detailed in her
complaint, (Doc. 1). SOP and SNG are both wholly
owned, indirect subsidiaries of Statoil ASA. Canfield is the
lessor of a lease currently held, in part, by lessee SOP.
Having reviewed the parties submissions regarding
Canfield's putative class action claims, and based on the
foregoing, SNG's motion, (Doc. 25), is GRANTED
in its entirety and Statoil ASA's and SOP's motion,
(Doc. 31), is GRANTED IN PART and DENIED IN PART.
FACTUAL BACKGROUND 
is the owner of property located at 3835 State Route 3004,
Meshoppen, Pennsylvania in the Marcellus Shale region. The
Marcellus and Utica shale regions in and around Pennsylvania
contain one of the largest natural gas formations in the
world. On May 6, 2008, Canfield entered into an oil and gas
lease with Cabot Oil & Gas Corporation (“Cabot
Oil”) for the exploration of oil and natural gas on her
land. Her lease was subsequently acquired in part by
defendant SOP, in part by Chesapeake Appalachia, L.L.C.
(“Chesapeake”), and in part by Epsilon Energy
Ltd. Although Canfield's complaint, (Doc. 1),
asserts various claims against the defendants, her dispute
primarily revolves around the royalty clause in her lease
agreement as it has been interpreted by lessee SOP.
Canfield's Oil & Gas Lease
royalty clause in Canfield's lease provides for both an
in-kind percentage of oil or natural gas products to be
delivered to Canfield's tank and for a percentage of the
“amount realized” from the sale of any oil or
natural gas products extracted from her land. Specifically,
clause three of the lease provides as follows:
Lessee . . . shall pay the Lessor on gas, including
casinghead gas and other gaseous substances, produced and
sold from the premises fifteen percent (15%) of the amount
realized from the sale of gas at the well. “The amount
realized from the sale of the well” shall mean the
amount realized from the sale of the gas after deducting
gathering, transportation, compression, fuel, line loss, and
any other post-production costs and/or expenses incurred for
the gas whether provided by a third party, Lessee or by a
wholly owned subsidiary of Lessee. Lessee is authorized by
Lessor to provide gathering, transportation, compression,
fuel, and other services for Lessor's gas either on its
own or through one or more wholly owned subsidiaries of
Lessee and to deduct from the royalty to be paid to the
Lessor the costs and/or expenses of providing such services
including, without limitation, line-loss.
(Doc. 1-2, at 1, ¶3) (emphases added).
above language in Canfield's royalty clause allowed for
the deduction of post-production fees. Post-production fees
are normally incurred in order to transform the raw natural
gas product into a finished, marketable product to be sold
downstream in the commercial chain. (See Doc.
1, at ¶30). A superceding addendum to the
primary lease document that was attached to the lease and
signed and dated the same day as the initial lease document
modified the original lease terms. (Doc. 1-2, at
3-4). The addendum states that if there are any
inconsistences between the added terms in the addendum and
the printed lease terms, the added terms will control and
supercede the printed terms of the lease. (Id. at
3). Within this addendum is a “ready for sale or use
clause” directing the lessee to exclude any production
or post-production costs in its calculation of royalties,
stating as follows:
Royalties shall be paid without deductions for the cost of
producing, gathering, storing, separating, treating,
dehydrating, compressing, transporting, or otherwise making
the oil and/or gas produced from the lease premises ready for
sale or use.
(Id. at 4, ¶13). This language modified the
royalty provision of the lease, and expressly provides that
the lessee shall not deduct certain post-production fees.
The Relationship Between Canfield and the Statoil
Canfield originally entered into the lease agreement with
Cabot Oil, at some time in or around 2006, Chesapeake engaged
in an aggressive lease acquisition program to exploit natural
gas from properties in the Marcellus shale region, which
included Canfield's property. At some point after she had
entered into the agreement with Cabot Oil in 2008,
Canfield's lease was transferred to Chesapeake,
presumably as part of Chesapeake's overall plan to
acquire leasehold interests in the area. In or around
November 2008, Chesapeake also entered into industry
participation agreements or joint venture agreements with
Under this agreement, SOP was to receive a minority interest
in Chesapeake's holdings, including its lease interests.
In return, SOP was to provide Chesapeake with an up front
cash payment and would finance 75% of Chesapeake's
drilling and completion costs until $2.125 billion had been
paid. Canfield is unsure whether her specific lease was
assigned to SOP from Chesapeake pursuant to this joint
venture agreement or if an assignment to SOP occurred
simultaneously with the assignment to Chesapeake from Cabot
Oil. In any event, both companies now own a partial interest
in her lease originally entered into with Cabot Oil.
natural gas operations are distinct, however, from
Chesapeake's operations, which ultimately results in
noticeably different royalty payments to Canfield. Upon
extraction at the wellhead, SOP takes title to its in-kind
percentage of the natural gas extracted from Canfield's
land and immediately sells the natural gas to its own
affiliate, defendant SNG, pursuant to an agreement between
the two entities. Under this agreement, SNG takes title to
the raw product at the wellhead and then contracts with third
parties for post-production services, transforming the raw
product into a finished product. SNG also contracts with
pipeline companies to transport the natural gas through the
interstate pipeline system. SNG, ultimately, resells the
final product to third-party buyers at receipt/delivery gates
along the interstate system, at Citygates. Thus, SOP holds
the lease interests for immediate sale and SNG serves as a
marketing company, taking title at the well, transforming the
product into a finished one, and then selling the
post-production product to distribution companies, industrial
customers, and power generators downstream.
at issue in this action is the agreement between SOP and SNG
for the price of the raw natural gas at the wellhead where
title is transferred from SOP to SNG. Their agreement fixes
the price of the raw natural gas to a uniform hub price or
index price for natural gas, regardless of whether the
natural gas is ever delivered to that particular hub on the
interstate pipeline system. SOP does not dispute that it
fixes the price at the wellhead to an index price. The Fifth
Circuit Court of Appeals has explained the use of index
prices as follows:
Natural gas is transported throughout North America via a
network of pipelines. The gas transportation network is
centered around ‘hubs, ' which are geographical
locations where major pipeline systems interlink. These hubs
act as separate markets, at which supply and demand dictate
prices that may differ between the hubs.
* * *
The market index prices for physical gas are most prominently
published in two privately owned newsletters: [Platts']
Inside FERC Gas Market Report (“Inside
FERC”) and Natural Gas Intelligence
(“NGI”). Both of these publications
publish the natural gas price marketing indicators at the
major pipeline hubs and market centers in the United States,
and it is undisputed that both publications are highly
influential to market prices for physical gas. The indexes
are also are used to determine royalties and public gas
contracts, among other things. The publications gather
pricing information about the various markets and pipeline
hubs by requesting data about physical gas transactions from
natural gas traders. After receiving data from the gas
traders, and taking a variety of other factors into account,
the publications release indexes that purport to represent
the price of natural gas at different delivery points.
United States v. Brooks, 681 F.3d 678, 685 (5th Cir.
around April 2010, SOP and SNG began using this index price
as opposed to what Canfield describes as an “actual
negotiated price” at the direction of Statoil ASA.
(Doc. 1, at 26). Canfield alleges that the original
hub price was set at the Dominion South Point Hub
(“DSPH”), with this hub changing to the Tennessee
Zone 4 “300 Leg” index price or hub in or around
September 2013. Canfield's royalties are calculated using
this fixed, index price.
contrast to SOP, Chesapeake pays a royalty to leaseholders
based on a price paid by third-parties downstream of the
wellhead. Chesapeake's royalty price is, thus, based on
the final natural gas product after the deduction of
post-production costs and is calculated using the sale price
of the finished product. Like SOP, Chesapeake also deals with
an affiliate marketing entity. This marketing entity
aggregates all the natural gas held under various leases and
sells it downstream from the well. To calculate royalties to
landowners, Chesapeake uses a weighted average sales price
(“WASP”) that uses prices paid by downstream
buyers. According to Canfield, Chesapeake also deducts any
costs incurred for post-production services before
calculating royalties-i.e., usage of the net-back
method to arrive at a wellhead price.
differences in Chesapeake's royalty calculation compared
to SOP's calculation results in a different price paid to
leaseholders, including Canfield, dependant on whether or not
the lessee is Chesapeake or SOP. This is true even though the
underlying lease is the same. As an illustration of this
point, Canfield provided tables of her royalty unit payments
for the months of September 2013 through September 2015.
These payments were calculated using a per metric cubic foot
(mcf) measurement of natural gas extracted from
Canfield's land. The tables indicate that during nearly
all of the months from September 2013 to September 2015, with
the exception of December 2014, Canfield received a higher
royalty per mcf of natural gas extracted from her land from
Chesapeake as compared to SOP. Thus, Chesapeake's
different interpretation of the same lease agreement has led
to a divergence in royalties payments to Canfield for the
same quantities of natural gas even though both entities'
lease document is held by the same lessor and contains the
same royalty provision.
January 15, 2016, Canfield filed a putative class action
complaint against Statoil ASA, SOP, and SNG alleging seven
separate causes of action. Three of these claims were solely
against SOP. In her first claim, Canfield alleged that SOP
breached the express terms of the royalty clause in her lease
agreement by using an index price that did not reflect an
actual market price for natural gas. In her second claim,
Canfield alleged that SOP breached the lease by engaging in
an affiliate sale with SNG which did not constitute an
“arms'-length transaction.” (Doc. 1,
¶40). In her fourth claim, Canfield alleged that SOP
breached the implied covenant of good faith and fair dealing
in the lease by engaging in an affiliate sale. She also
alleged that SOP “had an obligation to use reasonable
best efforts to market the gas to achieve the best price
available.” (Id. ¶50). Thus, the fourth
claim is a duty of good faith claim and/or a duty to market
claims were brought against all the defendants collectively.
In her third claim, Canfield brought a civil conspiracy
claim, alleging that the defendants “acted together
with a common purpose to unlawfully cheat Landowners and
their contractual rights” by orchestrating “sham
sale transactions among themselves.” (Id.
¶¶45-50). In her fifth claim, Canfield brought a
quasi-contract claim against all the defendants alleging they
were unjustly enriched. In her seventh claim, Canfield sought
an accounting against all of the defendants for gas and
brought one claim against Statoil ASA and SNG alone. In this
sixth claim, Canfield alleged that Statoil ASA and SNG
tortiously interfered with her contract/lease with SOP by
“deliberately and without justification” causing
SOP to breach the gas lease. (Id. ¶59).
response to Canfield's complaint, on July 9, 2016, SNG
filed one of the current motions to dismiss and a supporting
brief. (Doc. 25, Doc. 26). Also on July 9,
2016, SOP and Statoil ASA, collectively, filed a motion to
dismiss with a supporting brief. (Doc. 31, Doc.
32). The defendants' motions seek dismissal of
all the claims in Canfield's complaint. Unique among the
defendants, Statoil ASA primarily seeks dismissal pursuant to
Federal Rules of Civil Procedure 12(b)(1), 12(b)(2),
and 12(b)(5), arguing that this court lacks subject-matter
over claims against the entity and lacks personal
jurisdiction over the entity. Statoil ASA's
subject-matter jurisdiction argument is premised on its
alleged immunity from suit under the Foreign Sovereign
Immunities Act of 1976 (“FSIA”), Pub. L. No.
94-583, 90 Stat. 2891 (codified at and amending
scattered sections of 28 U.S.C.). In addition, and in the
alternative for Statoil ASA, the defendants seek dismissal
pursuant to Federal Rule of Civil Procedure
12(b)(6), arguing that Canfield has failed to state any
August 22, 2016, after requesting and receiving an extension
of time, Canfield filed a brief in opposition to the
defendants motions. (Doc. 40). On September 30,
2016, after requesting and receiving an extension of time,
SNG filed a reply brief in support of its motion, (Doc.
45), and SOP and Statoil ASA filed their own,
separate reply brief in support of their motion, (Doc.
46). On November 23, 2016, over six weeks after the
defendants had filed their reply briefs, Canfield filed a
motion for leave to file a sur-reply to the defendants'
reply briefs. (See Doc. 56). SOP and
Statoil ASA opposed this request. (See Doc.
57, Doc. 60). The court denied
Canfield's request to file a sur-reply because it was
untimely, not in compliance with local rules, and not
warranted. (See Doc. 66, Doc. 67).
The defendants' motions are, thus, ripe for review.
STATOIL ASA'S JURISDICTIONAL CHALLENGE
ASA challenges the subject-matter and personal jurisdiction
of this court. Canfield alleges in her complaint that
subject-matter jurisdiction is premised on 28 U.S.C.
§1332 and that all of the defendants' business
activities are “within the flow of, and have affected
substantially, interstate trade and commerce.” (Doc.
1, ¶7). However, Statoil ASA is a Norwegian
corporation with its principle office located in Stavanger,
Norway and, based on a 2014 Form 20-F SEC filing attached to
Statoil ASA's motion to dismiss, the Kingdom of Norway
owns a two-thirds direct ownership interest in the company.
(Doc. 32-2, at 10). Based on this information, both
parties agree that Statoil ASA is an instrumentality of the
Kingdom of Norway as defined by the FSIA and that
jurisdiction over such an entity is only proper under 28
U.S.C. §1330. Thus, Canfield's jurisdictional
statement is clearly deficient.
this court would allow the plaintiff to cure the technical
deficiency in her jurisdictional statement, the only
remaining issue is whether Canfield's claims against
Statoil ASA fit within an exception to FSIA immunity, vesting
this court with subject-matter jurisdiction. Also at issue is
whether Statoil ASA was properly served and whether Statoil
ASA maintained sufficient minimum contacts with the forum to
satisfy the constitutional requirements of personal
jurisdiction. Based on the foregoing, the court finds that it
lacks subject-matter over Canfield's claims against
Statoil ASA and lacks personal jurisdiction over Statoil ASA.
Standards of Review
12(b)(1) provides for the dismissal of a complaint based on a
“lack of subject-matter jurisdiction.” Fed.
R. Civ. P. 12(b)(1). “A motion to dismiss under
Rule 12(b)(1) challenges the jurisdiction of the court to
address the merits of the plaintiff's complaint.”
Vieth v. Pennsylvania, 188 F.Supp.2d 532, 537 (M.D.
Pa. 2002). Because the district court is a court of limited
jurisdiction, the burden of establishing subject-matter
jurisdiction always rests upon the party asserting it.
See Kokkonen v. Guardian Life. Ins. Co. of America,
511 U.S. 375, 377 (1994). Generally, however, district courts
“enjoy substantial flexibility in handling Rule
12(b)(1) motions.” McCann v. Newmann Irrevocable
Trust, 458 F.3d 281, 290 (3d Cir. 2006).
attack on the court's jurisdiction may be either
“facial” or “factual” and the
“distinction determines how the pleading must be
reviewed.” Constitution Party of Pennsylvania v.
Aichele, 757 F.3d 347, 357 (3d Cir. 2014). A facial
attack tests the sufficiency of the pleadings, while a
factual attack challenges whether a plaintiff's claims
fail to comport factually with jurisdictional prerequisites.
Id. at 358; see also S.D. v. Haddon Heights Bd.
of Educ., 833 F.3d 389, 394 n. 5 (3d Cir. 2016). If the
defendant brings a factual attack, the district court may
look outside the pleadings to ascertain facts needed to
determine whether jurisdiction exists, which is distinct from
a facial attack. Id. If there are factual
deficiencies, the court's jurisdictional determination
may require a hearing, particularly where the disputed facts
are material to finding jurisdiction. McCann, 458
F.3d at 290.
regard to facial deficiencies, “[d]efective allegations
of jurisdiction may be amended, upon terms, in the trial or
appellate courts” to fix jurisdictional defects in a
pleading. 28 U.S.C. §1653. “Section 1653 gives
both district and appellate courts the power to remedy
inadequate jurisdictional allegations, but not defective
jurisdictional facts.” USX Corp. v. Adriatic Ins.
Co., 345 F.3d 190, 204 (3d Cir. 2003). Further, a
district court may be abusing its discretion by not allowing
a plaintiff the opportunity to cure technical deficiencies in
the jurisdictional statements found in the plaintiff's
complaint. See Scattergood v. Perelman, 945 F.2d
618, 627 (3d Cir. 1991).“The court should freely give
leave [to amend] when justice so requires.” Fed. R.
Civ. P. 15(a)(2).
Rule 12(b)(2) and Rule 12(b)(5)
12(b)(2) provides for the dismissal of a complaint due to a
“lack of personal jurisdiction.” Fed. R. Civ.
To survive a motion to dismiss for lack of personal
jurisdiction, a plaintiff bears the burden of establishing
the court's jurisdiction over the moving defendants.
However, when the court does not hold an evidentiary hearing
on the motion to dismiss, the plaintiff need only establish a
prima facie case of personal jurisdiction and the plaintiff
is entitled to have its allegations taken as true and all
factual disputes drawn in its favor.
Miller Yacht Sales, Inc. v. Smith, 384 F.3d 93, 97
(3d Cir. 2004) (internal citation omitted). “Once these
allegations are contradicted by an opposing affidavit,
however, plaintiff must present similar evidence in support
of personal jurisdiction.” In re Chocolate
Confectionary Antitrust Litig., 674 F.Supp.2d 580, 595
(M.D. Pa. 2009). The plaintiff will not be able to rely on
the bare pleadings alone. Id. “Once the motion
is made, plaintiff must respond with actual proofs, not mere
allegations.” Patterson ex rel. Patterson v.
F.B.I., 893 F.2d 595, 604 (3d Cir. 1990) (quoting
Time Share Vacation Club v. Atlantic Resorts, Ltd.,
735 F.2d 61, 67 n. 9 (3d Cir. 1984)). Courts may look beyond
the pleadings when ruling on a motion brought under Rule
12(b)(2). In re Chocolate Confectionary Antitrust
Litig., 674 F.Supp.2d at 595. “A Rule
12(b)(2) motion . . . is inherently a matter which
requires resolution of factual issues outside the
pleadings.” Patterson, 893 F.2d at 603
(quoting Time Share Vacation Club, 735 F.2d at 67 n.
9). Thus, “[c]onsideration of affidavits submitted by
the parties is appropriate and, typically, necessary.”
In re Chocolate Confectionary Antitrust Litig., 674
F.Supp.2d at 595.
12(b)(5) provides for the dismissal of a complaint based on
“insufficient service of process.” Fed. R.
Civ. P. 12(b)(5). “The party asserting the
validity of service bears the burden of proof on that
issue.” Kohar v. Wells Fargo Bank, N.A., No.
15-1469, 2016 WL 1449580, at *2 (W.D. Pa. April 13, 2016)
(quoting Grand Entm't Grp., Ltd. v. Star Media Sales,
Inc., 988 F.2d 476, 488 (3d Cir. 1993)). “That
party must do so by a preponderance of the evidence using
affidavits, depositions, and oral testimony.”
where an objection has been raised under Rule 12(b)(2) based
on a lack of personal jurisdiction, a defendant need not
raise a separate personal jurisdiction objection based on
insufficient service; a defendant is not required to raise an
identical objection twice. McCurdy v. Am. Bd. of Plastic
Surgery, 157 F.3d 191, 196 (3d Cir. 1998).
“Where personal jurisdiction is lacking,
‘[c]learly, a Rule 12(b)(2) motion . . . [is]
more appropriate' than one under Rule 12(b)(5).”
Id. (quoting 5A Charles Alan Wright & Arthur R.
Miller, Federal Practice and Procedure: Civil
§1353 at 278-79 (2d ed. 1990)) (alterations in
original). Under the FSIA, proper service is a prerequisite
to personal jurisdiction. See 28 U.S.C.
§1330(b). Thus, Statoil ASA's service argument
is simply an alternative basis for finding a lack of personal
jurisdiction and will be treated as such.
ASA's attack on subject-matter jurisdiction is both
facial and factual. Statoil ASA argues that Canfield's
complaint is deficient with respect to asserting jurisdiction
over a foreign instrumentality. Statoil ASA also argues that
it is presumptively entitled to immunity under the FSIA.
Canfield has argued that an exception to immunity applies
based on the relationship between Statoil ASA and its
indirect subsidiaries. The court, however, finds that it
lacks subject-matter jurisdiction over the claims against
FSIA “provides the sole basis for obtaining
jurisdiction over a foreign state[, including an
instrumentality of a foreign state, ] in the courts of this
country.” OBB Personenverkehr AG v. Sachs, 136
S.Ct. 390, 393 (2015) (quoting Argentine Republic v.
Amerada Hess Shipping Corp., 488 U.S. 428, 443 (1989)).
Once an entity is determined to be a foreign state for
purposes of the FSIA, the entity is “presumptively
immune from the jurisdiction of United States courts”
unless an exception to the FSIA applies. Id.
(quoting Saudi Arabia v. Nelson, 507 U.S. 349, 355
(1993)); see also Fed. Ins. Co. v. Richard I. Rubin &
Co., 12 F.3d 1270, 1285 (3d Cir. 1993). After
presumptive immunity is found, the burden of production then
shifts to the plaintiff to show an exception applies.
Fed. Ins. Co., 12 F.3d at 1285; see also
Richardson v. Donovan, No. 14-3753, F. App'x, 2016
WL 7240172, at *2 (3d Cir. Dec. 15, 2016) (non-precedential).
However, the ultimate burden of proving immunity, that of
persuasion, always remains with the party seeking immunity.
Id. The parties agree that Statoil ASA is an
instrumentality of a foreign state and is, therefore,
presumptively immune from suit.
on the above alone, the court agrees with Statoil ASA that
Canfield's complaint is facially deficient. It does not
reference the FSIA or the specific exception that applies.
See Fed.R.Civ.P. 8(a)(1) (providing that a pleading
must contain “a short and plain statement of the
grounds for the court's jurisdiction”). However, as
further discussed below, an exception may or may not apply
based on the allegation in Canfield's complaint that
Statoil ASA “exercised complete control” over SNG
and SOP and “directed the activities” of these
indirect subsidiaries to “maximize its own corporate
profits.” (Doc. 1, ¶3). Canfield has
argued extensively in her opposition brief that an exception
does apply, in part, based on this language. If the facial
deficiency were the end of the matter the court would grant
Canfield leave to amend her complaint to include an FSIA
exception in the spirit of Rule 15(a)(2). However, based on
the arguments presented by both parties, the court finds that
Canfield's argument for subject-matter jurisdiction is
also factually deficient and that no FSIA exception applies.
argues that the commercial activity exception, 28 U.S.C.
§1605(a)(2), applies to save her claims against
Statoil ASA. Despite the varying degrees of ownership and
their separate corporate status, Canfield asserts in her
complaint that Statoil ASA “exercised complete
control” over SNG and SOP and “directed the
activities” of these indirect subsidiaries. (Doc.
1, ¶3). Canfield argues that this conduct is
sufficient to satisfy the commercial activity exception.
Statoil ASA argues that this conduct is not sufficient and
that in the event Canfield seeks to use an alter ego theory
to impute the actions of SOP and SNG to Statoil ASA this
attempt should fail.
FSIA provision granting courts with subject-matter
jurisdiction provides as follows:
The district courts shall have original jurisdiction without
regard to amount in controversy of any nonjury civil action
against a foreign state as defined in section 1603(a) of this
title as to any claim for relief in personam with respect to
which the foreign state is not entitled to immunity either
under sections 1605-1607 of this title or under any
applicable international agreement.
28 U.S.C. §1330(a). Thus, subject-matter
jurisdiction is defined in the negative to capture all
foreign states who are not immune based on an enumerated
exception. Canfield relies on the commercial activity
exception to save her claims. See 28 U.S.C.
§1605(a)(2). This exception provides three distinct
circumstances where a foreign state will not be immune. It
provides that a foreign state will not be immune when the
(1) based upon a commercial activity carried on in the United
States by the foreign state; or
(2) based upon an act performed in the United States in
connection with a commercial activity of the foreign state
(3) based upon an act outside the territory of the United
States in connection with a commercial activity of the
foreign state elsewhere and that act causes a direct effect
in the United States.
phrase “commercial activity” arises in each of
the three types of conduct described in the commercial
activity exception and is a crucial element to obtaining
subject-matter jurisdiction. Velidor v. L/P/G
Benghazi, 653 F.2d 812, 817 (3d Cir. 1981). The FSIA
defines commercial activity as “either a regular course
of commercial conduct or a particular transaction or
act.” 28 U.S.C. §1603(d). The definition
goes on to state that “[t]he commercial character of an
activity shall be determined by reference to the nature of
the course of conduct or particular transaction or act,
rather than by reference to its purpose.” Id.
The Supreme Court of the United States has defined this
phrase further, particularly the term commercial, to comply
with the restrictive theory of foreign sovereign immunity
that was prevalent during the time of the statute's
enactment. Republic of Argentina v. Weltover, 504
U.S. 607, 612-13 (1992). Under the Supreme Court's
definition of the term, “when a foreign government
acts, not as regulator of market, but in the manner of a
private player within it, the foreign sovereign's actions
are ‘commercial' within the meaning if the
FSIA.” Id. at 614. The important inquiry is
not the profit motive or lack thereof of the foreign state,
but whether the particular action is the type of action a
private party would engage in. Id.; Nelson, 507
U.S. at 358-362.
the three clauses also requires that the action be
“based upon” the activity or act conferring
jurisdiction. 28 U.S.C. §1605(a)(2). In
Saudi Arabia v. Nelson, the Court compared the
phrase “based upon a commercial activity” in the
first clause to the “based upon” language as
applied to the second and third clause. 507 U.S. at
358. Unlike the first clause, the second and third
clauses simply require an action “based upon”
acts performed “in connection with” some
commercial activity. 28 U.S.C. §1605(a)(2).
Analyzing these distinctions, the Court found that the
“based upon” language as applied to the first
clause required that there be “more than a mere
connection with, or relation to commercial activity.”
Id. In OBB Personenverkehr AG v. Sachs, the
Court further defined the “based upon” language
as applied to the first clause to mean that, in order to fall
within the first clause, the commercial activity must form
the “gravamen” or “core” of the claim
when looking at the particular activity or conduct underlying
the plaintiff's claim. 136 S.Ct. at 395-97.
relies on the first clause of the commercial activity
exception.Canfield's brief in opposition provides
various types of activities engaged in by the defendants to
try and qualify Statoil ASA's conduct under this
particular exception. Some of these activities include:
(1) Statoil ASA's “directing” or
“controlling” the conduct of SOP and SNG, (Doc.
40, at 8);
(2) SOP's purchase of natural gas from landowners,
(Id. at 9);
(3) SOP's resale of natural gas to SNG, (Id.);
(4) SOP's royalty payment to Canfield, (Id.);
(5) Statoil ASA's alleged tortious interference with
Canfield's gas lease, (Id.).
ASA's alleged tortious interference itself is not
commercial activity and, thus, can never qualify under the
commercial activity exception. See Nelson, 507 U.S.
at 358 (finding that the defendant's “tortious
conduct itself fail[ed] to qualify as ‘commercial
activity' within the meaning of the [FSIA]”).
Statoil's “directing” or
“controlling” of Statoil ASA are, allegedly, the
tortious actions. Again, this tortious conduct itself cannot
qualify under the commercial activity
remaining activities that Canfield cites to-i.e.,
those not relating to alleged tortious activity-are plausibly
within the commercial activity exception, but only when using
an alter ego or veil piercing theory to impute the activities
of SOP to Statoil ASA. The purchase of natural gas, resale of
the natural gas, and the payment of royalties are all part of
the actions that form the basis of Canfield's claims.
See Sachs, 136 S.Ct. at 395. However, these actions
were all performed by SOP, not Statoil ASA, a separate
entity. Thus, the only way to ...