Earlier this month, I wrote a piece for Just Security titled “Don’t Bother Suing China for Coronavirus.” I explained why U.S. courts do not have jurisdiction over private class action lawsuits brought against Chinese government defendants for their alleged misconduct in allowing the coronavirus to spread. On Tuesday, Missouri’s attorney general filed a suit seeking damages for harm to Missouri and its inhabitants. The suit was praised by Donald Trump Jr. as “a very appropriate move.” Meanwhile, National Security Adviser Robert O’Brien incautiously remarked that “the Chinese have a lot of assets around the world” and “we’ll see what happens” with these lawsuits. Although the analysis in my prior post also applies to this complaint, there are a few nuances worth addressing.
To the Missouri AG staff’s credit, this complaint is much better written than the others filed to date. In addition to blaming China for allowing the virus to spread by concealing the extent of its transmission (including from the World Health Organization), Missouri’s complaint includes allegations of personal protective equipment (PPE) “hoarding,” as well as social media censorship (which opens up a whole other can of worms). It remains unclear that China owes any legal duty to the state of Missouri that could form the basis of a tort claim, let alone (as alleged) a duty under Missouri law. Even if there was a breach of such a duty, however, Missouri’s claims cannot be adjudicated in a U.S. court for the same reasons that equivalent tort claims against the United States could not be adjudicated in foreign courts. Missouri was one of the last U.S. states to issue a stay-at-home order, which would also be taken into account in any calculation of damages. In one observer’s assessment, however, “anything less than a total victory is an epochal loss for China.” Missouri has certainly raised the stakes by jumping on the “sue China” bandwagon.
Circumventing the FSIA by Naming Different Defendants
The Missouri AG attempts to avoid the Foreign Sovereign Immunities Act (FSIA) by arguing that the Communist Party of China (CCP) is not covered by the FSIA, and that the CCP “exercised direction and control” over all the other named defendants. Courts generally do not view attempts to “plead around” the FSIA favorably. The complaint cites an unpublished opinion by a federal district court in Michigan finding that the CCP does not fall under the FSIA, but that determination was inconsequential, because the plaintiff’s claims had other fatal defects. However, in a different unpublished opinion, a federal district court in New York found in a decision, upheld on appeal, that China Central Television is an instrumentality of China because it is the “mouthpiece of the Chinese Communist Party.” Similarly, a federal district court in Florida found that the Communist Party of Cuba is an agency or instrumentality of Cuba, a designated state sponsor of terrorism under the FSIA. On the other hand, a New York district court issued a default judgment against ZANU-PF, whose First Secretary was Zimbabwean President Robert Mugabe (the judgment was overturned for improper service).
At least two of the private class action complaints name the CCP as a defendant, but only Missouri makes the argument that the CCP does not fall within the FSIA’s scope. Yet, political parties in China are not the same as political parties in other countries. As a practical matter, there are no other political parties, leading China to be dubbed a “Party-State.” The bipartisan U.S.-China Economic and Security Review Commission recommended in its 2019 report that the United States stop referring to Xi Jinping by the “unearned title of President” and instead refer to him as “General Secretary” of the CCP, since that is the position that provides him with governmental authority. As a decision issued shortly after the FSIA was enacted noted, the FSIA’s definition of agency or instrumentality “seems designed to establish the degree of the foreign state’s identification with the entity under consideration [and] is ill-suited to concepts which exist in socialist states.” In China, the CCP arguably is the state.
The Missouri complaint also names the government-run Chinese Academy of Sciences, which allegedly administers the Wuhan Institute of Virology. Even if these entities end up falling outside the FSIA’s definition of a foreign State or an agency or instrumentality of a foreign State (which is unlikely), the Supreme Court indicated in Samantar v. Yousuf (2010) that the FSIA would apply when the State is the “real party in interest.” This observation provides a basis for treating the suit as if it were filed against China, if the plaintiffs seek assets from China. In addition, the Republic of Philippines v. Pimentel (2008) holds that a suit may not go forward if a sovereign foreign State is an indispensable party, which China would very likely be here. Finally, if a defendant falls outside the scope of the FSIA, that defendant must be properly served with process, and there must be a basis for asserting personal jurisdiction over that defendant (in addition to subject-matter jurisdiction over the claim). The Supreme Court has virtually eliminated general personal jurisdiction over entities unless they are either headquartered or incorporated in the forum State, and it has also limited the exercise of specific personal jurisdiction over non-resident defendants. Any of these defects would be grounds for dismissing the claims at the pleading stage.
Misconstruing the Commercial Activity and Territorial Tort Exceptions
Perhaps anticipating these obstacles, Missouri attempts to fit the entire complaint within the commercial activity exception to sovereign immunity, as well as the exception for territorial torts. However, just because one or more of the named defendants engages in commercial activity, does not mean that this exception applies. The crux of Missouri’s complaint is summarized in its opening paragraph:
During the critical weeks of the initial outbreak, Chinese authorities deceived the public, suppressed crucial information, arrested whistleblowers, denied human-to-human transmission in the face of mounting evidence, destroyed critical medical research, permitted millions of people to be exposed to the virus, and even hoarded personal protective equipment—thus causing a global pandemic that was unnecessary and preventable.
All of the defendants’ alleged acts occurred outside of the United States. The relevant commercial activity exception provides jurisdiction over a civil action “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.” As the Restatement (Fourth) of Foreign Relations indicates, this exception “requires a substantive connection or a causal link between the act and commercial activity” (§ 454, rep. note 7). In addition, the “direct effect” requirement does not include effects that are “remote or attenuated” consequences of the act, or effects that are caused by an intervening act (§ 454, rep. note 8). The complaint recites these statutory requirements, but it does not appear to satisfy them. Similarly, although the complaint further alleges that “each of the counts” are “torts occurring in the United States” for purposes of the non-commercial tort exception, the Restatement (Fourth) makes clear that this exception applies to injuries in the United States “caused by the tortious act or omission of the foreign state in the United States” (§ 457(1), emphasis added). It also excludes claims “based upon an exercise of or failure to exercise a discretionary function,” as well as claims for misrepresentation or deceit. As Comment (a) to this section indicates:
In the United States and other jurisdictions, limitations on sovereign immunity were initially developed in the context of commercial activities of foreign states, but today a foreign state may also be held responsible for damages on a basis comparable to a private person or corporation when that state’s tortious conduct in the forum state causes death or injury to private persons or damage to property in the forum state. For instance, the driver of an official vehicle on official business may be engaged in a governmental function, but if the driver injures a pedestrian, the state may be subject to suit for damages based on the injury.
In sum, although it is possible that the intricacies of the commercial activity exception might tempt a district court to allow very limited jurisdictional discovery, the “gravamen” of the complaint is that the Chinese government, acting outside the United States, breached its international obligations, with disastrous consequences for the rest of the world. The FSIA does not provide jurisdiction over these claims.
Another Missouri official, Republican Senator Josh Hawley, appears to have recognized that suits against China for damages caused by coronavirus cannot be brought in U.S. courts. He has proposed changing U.S. law to allow these claims (a move that would have disastrous foreign relations consequences). Another proposal by Republican Senators Marsha Blackburn and Martha McSally (the ‘‘Stop China-Originated Viral Infectious Diseases Act of 2020’’ or the ‘‘Stop COVID Act of 2020”), would create an exception to sovereign immunity where a foreign State is alleged “whether intentionally or unintentionally, to have discharged a biological weapon.” The text of a third proposed amendment to the FSIA introduced by Rep. Dan Crenshaw (R-Texas) and Senator Tom Cotton (R-Ark.) targets foreign States, but it unironically condemns those
responsible for, or complicit in ordering, controlling, or otherwise directing acts intended to deliberately conceal or distort the existence or nature of COVID-19, if such acts are found to have likely contributed to the global COVID-19 pandemic.
Congress cannot create an exception to foreign sovereign immunity every time the United States is adversely affected—even catastrophically—by another country’s actions. Not only would this likely violate international law, but it would virtually guarantee reciprocal lawsuits in other countries’ courts. Instead of crafting legislation that will ultimately harm U.S. interests, Congress should prioritize finding out what the U.S. government knew or should have known about the virus, and why it failed to act sooner.
It is entirely appropriate–indeed, essential–for the international community to find out what caused the outbreak of this virus and where China’s response fell short, and to take effective measures to prevent a similar outbreak from happening again. Hawley’s proposal that the State Department “lead an international effort to secure compensation from the Chinese government” does not require a new statute to move forward, although it seems in tension with the Trump administration’s hostility toward compulsory international adjudication. Meanwhile, lawsuits against China in U.S. courts should not detract from the continued responsibility of U.S. federal and state governments to prevent the further spread of the virus.
[On Wednesday, April 22, Mississippi Attorney General Lynn Fitch announced her intention to sue China, and urged Mississippi’s Congressional delegation to support creating a new exception to the FSIA. The complaint was filed on May 12.]
[Update: As Ted Folkman pointed out at Letters Blogatory, Missouri has notified the district court that it plans to use the FSIA to serve process on all defendants. Missouri cannot use the FSIA to serve entities that do not come within the FSIA’s scope. In other words, it cannot simultaneously argue that the CCP is not a foreign state for immunity purposes, but that it is a foreign state for service purposes. Meanwhile, the Florida lawyers amended their complaint on May 4 to include the CCP. It’s not clear how the various private class action lawyers who have named the CCP as a defendant are handling service, or how they plan to establish personal jurisdiction over the CCP outside the FSIA. The FSIA provides that defendants have 60 days to respond once they are served. A court cannot issue a default judgment unless “the claimaint establishes his claim or right to relief by evidence satisfactory to the court.”]