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Canfield v. Statoil USA Onshore Properties Inc.

United States District Court, M.D. Pennsylvania

March 22, 2017

CHERYL B. CANFIELD, Plaintiff
v.
STATOIL USA ONSHORE PROPERTIES INC., STATOIL NATURAL GAS LLC, and STATOIL ASA, Defendants.

          MEMORANDUM

          MALACHY E. MANNION United States District Judge

         Currently 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.[1] 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.

         I. FACTUAL BACKGROUND [2]

         Canfield 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.

         A. Canfield's Oil & Gas Lease

          The 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.[3] 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).

         The 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).[4] This language modified the royalty provision of the lease, and expressly provides that the lessee shall not deduct certain post-production fees.

         B. The Relationship Between Canfield and the Statoil Entities

         Though 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 SOP.[5] 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.

         SOP's 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.[6] 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.

         Partly 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. 2012).

         In or 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.

         In 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.

         The 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.

         II. PROCEDURAL BACKGROUND

         On 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 claim.

         Several 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 royalty calculations.

         Canfield 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).

         In 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 plausible claim.

         On 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.

         III. STATOIL ASA'S JURISDICTIONAL CHALLENGE

         Statoil 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[7] and that jurisdiction over such an entity is only proper under 28 U.S.C. §1330. Thus, Canfield's jurisdictional statement is clearly deficient.

         Assuming 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.

         A. Standards of Review

         i. Rule 12(b)(1)

         Rule 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).

         An 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.

         With 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).

         ii. Rule 12(b)(2) and Rule 12(b)(5)

         Rule 12(b)(2) provides for the dismissal of a complaint due to a “lack of personal jurisdiction.” Fed. R. Civ. P. 12(b)(2).

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.

         Rule 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.” Id.

         However, 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.

         B. Subject-Matter Jurisdiction

         Statoil 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 Statoil ASA.

         The 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.

         Based 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.

         Canfield 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.

         The 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 action is:

(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 elsewhere; or
(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.

Id.

         The 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.

         Each of 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.

         Canfield relies on the first clause of the commercial activity exception.[8]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.); and
(5) Statoil ASA's alleged tortious interference with Canfield's gas lease, (Id.).

         Statoil 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 exception.[9]

         The 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 ...


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