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Date: 08-08-2021
Case Style:
United States of America v. PANGANG GROUP COMPANY, LTD.
Case Number: 19-10306
Judge: Daniel Paul Collins
Court: UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
Plaintiff's Attorney: Matthew M. Yelovich (argued), Assistant United States
Attorney; Merry Jean Chan, Chief, Appellate Section,
Criminal Division; David L. Anderson, United States
Attorney; United States Attorney’s Office
Defendant's Attorney:
Description:
San Francisco, California - Criminal defense lawyer represented defendant with violating the criminal provisions of the Economic Espionage Act charge.
Because Appellants’ motion to dismiss asserted a facial
challenge to the operative indictment, see infra at 13–14, we
take the following allegations of the indictment as true for
purposes of this appeal. See United States v. Fiander,
547 F.3d 1036, 1041 n.3 (9th Cir. 2008).
Titanium dioxide (“TiO2”) is a white pigment that is used
in products “ranging from paints to plastics to paper.” As
the Chinese economy grew in the 1990s, demand for TiO2
increased, but no company within China had been able to
develop a “clean, efficient” technology for producing it. E.I.
du Pont de Nemours & Company (“DuPont”) had managed
to successfully develop such a process “through intensive
research and development over many years,” but DuPont
was unwilling to sell or license that technology to Chinese
companies. DuPont’s “chloride-route” TiO2 production
technology included multiple trade secrets that DuPont took
extensive efforts to keep confidential.
Because of TiO2’s importance to manufacturing,
officials of the Chinese government decided to task Walter
Liew, a U.S. businessman, with obtaining and transferring
DuPont’s “chloride-route TiO2 technology” to China
through other means. Liew endeavored to do so by
“assembl[ing] a team that included former DuPont
employees,” including one with “detailed knowledge of
DuPont’s TiO2 technology” and “expertise in building TiO2
production lines.” As a result of the efforts of Liew and
others, certain DuPont trade secrets were unlawfully
transferred to the Pangang Companies. In “a line of effort
parallel” to Liew’s activities, the Pangang Companies also
arranged with unknown “computer hackers” to access
6 UNITED STATES V. PANGANG GROUP
DuPont computers without authorization and to steal “trade
secret information related to the chloride-route production of
TiO2.”
B
Liew was ultimately indicted and convicted on multiple
federal charges arising from his efforts to obtain DuPont’s
trade secrets, and he was sentenced to 144 months in prison.
See United States v. Liew, 466 F. Supp. 3d 1062, 1063 (N.D.
Cal. 2020). In 2012, the Pangang Companies were added as
co-defendants in a superseding indictment in Liew’s case.
The operative pleading against them is the Third
Superseding Indictment, which the Government sought and
filed in 2016 after Liew had already been tried before a jury
and convicted.
The indictment charges the Pangang Companies with
one count of conspiring to commit economic espionage for
the benefit of a foreign government or instrumentality in
violation of 18 U.S.C. § 1831(a)(5) and one count of
attempting to commit such economic espionage in violation
of § 1831(a)(4). As to the first count, the indictment alleges
that the Pangang Companies conspired with Liew and
others, inter alia, to steal DuPont trade secrets in violation
of § 1831(a)(1); to copy and convey such trade secrets
without authorization in violation of § 1831(a)(2); and to
receive, buy, and possess such trade secrets, knowing they
had been obtained without authorization, in violation of
§ 1831(a)(3). The second count alleges that the Pangang
Companies attempted to commit the same three offenses that
were the objects of the conspiracy. Under the terms of the
statute, the offenses must have been committed with
knowledge that they “will benefit any foreign government,
foreign instrumentality, or foreign agent.” Id. § 1831(a).
The indictment alleges that this requirement is satisfied
UNITED STATES V. PANGANG GROUP 7
because the charged offenses “would benefit a foreign
government, namely the PRC, and foreign instrumentalities,
namely [PGC], PGSVTC, [PGTIC], and P[G]IETC.”
C
After the Pangang Companies were named as codefendants in 2012, they repeatedly and successfully argued
that the Government’s efforts to serve summonses on the
indictment were inadequate under Federal Rule of Criminal
Procedure 4. Partly in response to the district court’s rulings
in this case, Rule 4 was formally amended, effective
December 1, 2016, so as to clarify the requirements for
serving foreign organizational defendants. See In re
Pangang Grp. Co., 901 F.3d 1046, 1050–53 (9th Cir. 2018).
The Government thereafter again attempted service, and the
district court upheld that service as valid under the amended
rule. Id. at 1054. We denied the Pangang Companies’
ensuing mandamus petition, concluding that, in light of the
amendments to Rule 4, “the district court did not err, let
alone clearly err, in denying the Pangang Companies’
motion to quash service.” Id. at 1060.
The Pangang Companies pleaded not guilty in
September 2018, and the following July they moved to
dismiss the indictment for lack of jurisdiction and for failure
to state an offense. See Fed. R. Crim. P. 12(b)(2), (3)(B)(v).
In contesting the court’s subject matter jurisdiction, the
Pangang Companies asserted that (1) under the allegations
of the operative indictment, they were all “instrumentalities”
of the PRC for purposes of the FSIA; (2) the FSIA’s general
rule that instrumentalities of a foreign sovereign are
“immune from the jurisdiction of the courts of the United
States and of the States,” 28 U.S.C. § 1604, applies in
criminal cases; and (3) the FSIA’s exceptions to that
8 UNITED STATES V. PANGANG GROUP
immunity apply only in civil cases. After briefing and
argument, the district court denied the motion.
For purposes of its ruling, the district court assumed that
the indictment’s allegation that the Pangang Companies
were “foreign instrumentalit[ies]” under the EEA, 18 U.S.C.
§ 1839(1), was sufficient to establish that they were also
“agenc[ies] or instrumentalit[ies] of a foreign state” entitled
to immunity under the FSIA, 28 U.S.C. § 1603(a). The court
noted that there were some differences between the FSIA’s
definition of that latter phrase and the EEA’s definition of a
“foreign instrumentality,” but the court concluded that those
differences were “not material.” The court extensively
surveyed the caselaw addressing whether the FSIA applies
to criminal cases, but it ultimately concluded that it did not
need to definitively resolve this issue. Even “assuming the
FSIA applies in criminal cases,” the court explained, “its
exceptions apply as well.” Turning to the specific
exceptions invoked by the Government in opposing the
motion to dismiss, the court held that the Pangang
Companies’ conduct fell within the commercial activity
exception, see 28 U.S.C. § 1605(a)(2), and that their
litigation conduct triggered the waiver exception, id.
§ 1605(a)(1).
The Pangang Companies timely filed a notice of appeal.
II
The Government challenges our appellate jurisdiction
over the district court’s order, but we conclude that its
objections lack merit.
“[W]e have long held that ‘an order denying immunity
under the FSIA is appealable under the collateral order
doctrine.’” Gupta v. Thai Airways Int’l, Ltd., 487 F.3d 759,
UNITED STATES V. PANGANG GROUP 9
763 (9th Cir. 2007) (quoting Compañía Mexicana de
Aviación, S.A. v. U.S. Dist. Ct., 859 F.2d 1354, 1358 (9th
Cir.1988)); accord Terenkian v. Republic of Iraq, 694 F.3d
1122, 1130 (9th Cir. 2012); cf. Republic of Argentina v.
Weltover, Inc., 504 U.S. 607, 610 (1992) (addressing the
merits of an interlocutory appeal in an FSIA case in which
appellate jurisdiction below rested on the collateral order
doctrine).1 The Government argues that a different rule
should apply in the criminal context, but we disagree. Even
assuming that a criminal defendant invoking the collateral
order doctrine must point to “an explicit statutory or
constitutional guarantee that trial will not occur,” Midland
Asphalt Corp. v. United States, 489 U.S. 794, 801 (1989)
(emphasis added); cf. Digital Equip. Corp. v. Desktop
Direct, Inc., 511 U.S. 863, 875 (1994) (citing Lauro Lines,
490 U.S. at 499), we think that standard is satisfied here. The
Pangang Companies’ appeal invokes the explicit statutory
immunity from jurisdiction conferred by the FSIA, which—
if it applies to this criminal case—would bar the prosecution
from going forward at all. We recognize that a “party’s
agility” in “characterizing the right asserted” as “an
irreparable ‘right not to stand trial’” is not dispositive and
that the right must “rise to the level of importance needed for
recognition under § 1291.” Digital Equip., 511 U.S. at 871–
72, 877–79. But this particular claimed right—an asserted
right of a foreign sovereign entity not to be criminally
prosecuted in the United States—is surely one that (if it
exists) meets that standard. Indeed, the Supreme Court has
1 Under the collateral order doctrine, a “small class” of otherwise
interlocutory rulings are deemed to be “final” and appealable if they
“conclusively determine the disputed question, resolve an important
issue completely separate from the merits of the action, and [are]
effectively unreviewable on appeal from a final judgment.” Lauro Lines
s.r.l. v. Chasser, 490 U.S. 495, 498 (1989) (simplified).
10 UNITED STATES V. PANGANG GROUP
stated that the asserted right of a foreign sovereign “to [be]
free . . . from suit” is so important that a court normally
should “reach a decision about immunity as near to the outset
of the case as is reasonably possible.” Bolivarian Republic
of Venezuela v. Helmerich & Payne Int’l Drilling Co.,
137 S. Ct. 1312, 1317 (2017).
Nevertheless, the Government asserts that, even if a
foreign state instrumentality would ordinarily be able to file
an immediate appeal of a denial of foreign sovereign
immunity, the Pangang Companies cannot do so here in light
of the unique EEA backdrop to this case. According to the
Government, the collateral order doctrine’s requirement that
the appeal involve “important questions completely separate
from the merits,” Digital Equip., 511 U.S. at 867 (emphasis
added), is not met here, because the question of whether the
Pangang Companies qualify as “agenc[ies] or
instrumentalit[ies] of a foreign state” under the FSIA
happens to overlap with the merits issue of whether they are
“foreign instrumentalit[ies]” under the EEA who were
benefitted by the theft of trade secrets. This argument fails,
because jurisdiction under the collateral order doctrine
“must be determined at a higher level of generality” and does
not turn on such case-specific fortuities. Id. at 876–77.
Applying that higher level of generality, we perceive no
basis for departing from the well-settled caselaw allowing
immediate appeals, under the collateral order doctrine, from
a denial of foreign sovereign immunity. Cf. Bolivarian
Republic, 137 S. Ct. at 1324 (noting that, outside the context
of expropriation cases, “cases in which the jurisdictional
inquiry does not overlap with the elements of a plaintiff’s
claims have been the norm in cases arising under other
exceptions to the FSIA”).
UNITED STATES V. PANGANG GROUP 11
We also reject the Government’s suggestion that the
appeal is unripe. While the question of whether the Pangang
Companies are actually foreign instrumentalities under the
FSIA has not been definitively resolved, that does not
preclude us from deciding the claim of immunity that the
district court has rejected—viz., the Pangang Companies’
argument that, taking the allegations of the indictment as
true, they are immune under the FSIA. See Doe v. Holy See,
557 F.3d 1066, 1073–74 (9th Cir. 2009) (asserting appellate
jurisdiction over denial of motion to dismiss in which the
defendant asserted that “on the face of the complaint,” it was
immune under the FSIA); Padilla v. Yoo, 678 F.3d 748, 757
(9th Cir. 2012) (applying similar standard in reviewing
denial of motion to dismiss complaint at the outset based on
qualified immunity). And the fact that this appeal involves
a threshold question of whether the defendants qualify as
instrumentalities of a foreign state does not change the
jurisdictional analysis. See Funk v. Belneftekhim, 861 F.3d
354, 364 (2d Cir. 2017) (“[T]his court has exercised
appellate jurisdiction over interlocutory denials of sovereign
immunity based solely on a finding that a party is not an
agency or instrumentality of a foreign state under the FSIA.”
(citing Filler v. Hanvit Bank, 378 F.3d 213, 216–17 (2d Cir.
2004)); cf. Puerto Rico Aqueduct & Sewer Auth. v. Metcalf
& Eddy, Inc., 506 U.S. 139, 147 (1993) (immediate appellate
jurisdiction extends to denial of Eleventh Amendment
immunity even when claim of immunity “presents difficult
factual questions as to whether an agency is an ‘arm of the
State’”).
III
We therefore turn to the merits of the Pangang
Companies’ appeal. The companies claim that they are
12 UNITED STATES V. PANGANG GROUP
immune from prosecution in this case by virtue of the terms
of § 1604 of the FSIA, which provides:
Subject to existing international agreements
to which the United States is a party at the
time of the enactment of this Act a foreign
state shall be immune from the jurisdiction of
the courts of the United States and of the
States except as provided in sections 1605 to
1607 of this chapter.
28 U.S.C. § 1604. The parties vigorously dispute whether
this provision confers immunity from all jurisdiction, civil
or criminal, or whether it instead applies only to jurisdiction
over civil cases. If § 1604’s immunity does apply to criminal
cases, the parties further dispute whether, and to what extent,
the exceptions to immunity listed elsewhere in the FSIA also
apply in such cases. But we cannot properly reach such
issues unless and until the threshold predicate for application
of the FSIA is first satisfied—namely, that the party seeking
to invoke the FSIA’s immunity is a “foreign state” within the
meaning of the FSIA. Accordingly, we begin by considering
that issue. And because we find it dispositive, we do not
reach or decide whether, or to what extent, the FSIA applies
in criminal cases.
A
Because we have never addressed whether the FSIA
applies in criminal cases, we have never considered how the
issue of foreign sovereign immunity would properly be
raised or analyzed in a criminal case. We need not
definitively resolve those questions here. Assuming
arguendo that the FSIA does apply in criminal cases, we see
no reason not to further assume that the same basic
procedural framework that we have applied in the civil
UNITED STATES V. PANGANG GROUP 13
context would also apply, mutatis mutandis, in the criminal
context.
Under that framework, when (as here) it is “not obvious
or uncontested” that the defendant is a “foreign state,”
Peterson v. Islamic Republic of Iran, 627 F.3d 1117, 1128
(9th Cir. 2010), the defendant seeking to assert FSIA
immunity “bears the initial burden to ‘make a prima facie
case that it is a foreign state,’” Packsys, S.A. de C.V. v.
Exportadora de Sal, S.A. de C.V., 899 F.3d 1081, 1087 (9th
Cir. 2018) (quoting Peterson, 627 F.3d at 1124). Once this
prima facie case has been established, the burden shifts to
the plaintiff to make a sufficient showing that an exception
to the FSIA applies. See Packsys, 899 F.3d at 1087–88;
Terenkian, 694 F.3d at 1131. “‘If the plaintiff satisfies [this]
burden of production, jurisdiction exists unless the
defendant demonstrates by a preponderance of the evidence
that the claimed exception does not apply.’” Packsys,
899 F.3d at 1088 (quoting Peterson, 627 F.3d at 1125).
In seeking to invoke this burden-shifting framework, and
in asserting immunity from jurisdiction, a defendant “may
make either a facial or factual challenge to the district court’s
subject matter jurisdiction.” Terenkian, 694 F.3d at 1131. If
the defendant makes a factual challenge, “the defendant may
introduce testimony, affidavits, or other evidence to dispute
the truth of the allegations that, by themselves, would
otherwise invoke federal jurisdiction.” Id. (simplified). In
this posture, “‘no presumptive truthfulness attaches to
plaintiff’s allegations.’” Id. (quoting Doe v. Holy See,
557 F.3d at 1073). If the defendant makes only a facial
challenge, then “we treat the challenge as ‘any other motion
to dismiss on the pleadings for lack of jurisdiction.’” Id.
(quoting Doe v. Holy See, 557 F.3d at 1073).
14 UNITED STATES V. PANGANG GROUP
In moving to dismiss the operative indictment here, the
Pangang Companies raised only a facial challenge. They did
not present any evidence in support of their motion, but
instead relied entirely on the allegations of the indictment,
which they took as true, to carry their threshold burden to
establish that each of them was a “foreign state” within the
meaning of the FSIA. In opposing the Pangang Companies’
motion to dismiss the indictment, the Government likewise
did not present any evidence, but instead relied solely on the
allegations of the indictment in arguing that the immunity
conferred by the FSIA was inapplicable. As framed here,
the question therefore is whether the Pangang Defendants’
reliance on the allegations of the indictment, taken as true, is
sufficient to carry their “initial burden to ‘make a prima facie
case’” that they are “‘foreign state[s].’” Packsys, 899 F.3d
at 1087 (citation omitted). This raises a “question[] of law
which we review de novo.” Corzo v. Banco Cent. de Reserva
del Peru, 243 F.3d 519, 522 (9th Cir. 2001).
B
Taking the allegations in the indictment as true, we
conclude that the Pangang Companies failed to establish a
prima facie case that they qualify as “foreign states” under
the FSIA.
1
The immunity afforded by the FSIA applies only to a
“foreign state,” a phrase that § 1603 defines to “include[] a
political subdivision of a foreign state or an agency or
instrumentality of a foreign state as defined in subsection
(b).” 28 U.S.C. § 1603(a). There is no contention that the
Pangang Companies are “political subdivision[s]” of the
“foreign state” of the PRC, and so the only question is
whether they qualify as “agenc[ies] or instrumentalit[ies] of
UNITED STATES V. PANGANG GROUP 15
a foreign state as defined in subsection (b).” That
subsection, in turn, defines that phrase to mean:
[A]ny entity—
(1) which is a separate legal person,
corporate or otherwise, and
(2) which is an organ of a foreign state
or political subdivision thereof, or a
majority of whose shares or other
ownership interest is owned by a foreign
state or political subdivision thereof, and
(3) which is neither a citizen of a State
of the United States as defined in section
1332(c) and (e) of this title, nor created
under the laws of any third country.
28 U.S.C. § 1603(b). Because there is no dispute that the
Pangang Companies are separate corporate persons and that
they were organized under the laws of the PRC, the
requirements of § 1603(b)(1) and (b)(3) are not at issue here.
Moreover, the Pangang Companies have not contended that
they are “organ[s] of a foreign state or political subdivision
thereof.” The only question, therefore, is whether “a
majority of [each of the Pangang Companies’] shares or
other ownership interest is owned by a foreign state or
political subdivision thereof.” Id. § 1603(b)(2).
The literal language of this phrase presents a threshold
question whether its use of the phrase “foreign state” is
recursive, such that it might be applied in a chain-like
fashion to reach successive layers of related entities. Thus,
for example, if a “foreign state” owns a majority of the
shares of a separate corporation organized under its laws,
16 UNITED STATES V. PANGANG GROUP
that corporation qualifies as an “agency or instrumentality of
a foreign state” under subsection (b), which means, in turn,
that it is included within the definition of a “foreign state”
under subsection (a). Because that corporation is thus
generally treated as a “foreign state” for purposes of the
FSIA, see id. § 1603(a), can it then be treated as a “foreign
state” in subsection (b)(2) when determining whether
another entity meets subsection (b)’s definition of “agency
or instrumentality”? If so, that would mean that a
corporation that is majority owned by another corporation
that is majority owned by a foreign state would count as a
“foreign state” that is entitled to immunity.
The problem with this reading of § 1603 is that it ignores
a critical difference in language between subsection (a) and
subsection (b)(2). The general definition of “foreign state”
in subsection (a) provides that, as used in the FSIA, that
phrase includes not only what one would ordinarily think of
as the “foreign state”—i.e., the foreign nation itself—but
also both “a political subdivision of a foreign state” and “an
agency or instrumentality of a foreign state.” 28 U.S.C.
§ 1603(a). But when defining which state-owned entities are
foreign “agenc[ies] or instrumentalit[ies],” subsection (b)(2)
requires ownership “by a foreign state or political
subdivision thereof,” thereby conspicuously omitting the
phrase “agency or instrumentality of a foreign state.”
28 U.S.C. § 1603(b)(2) (emphasis added). The difference in
language must be given significance, and it precludes the
above-described recursive reading. See Russello v. United
States, 464 U.S. 16, 23 (1983) (“Where Congress includes
particular language in one section of a statute but omits it in
another section of the same Act, it is generally presumed that
Congress acts intentionally and purposely in the disparate
inclusion or exclusion.” (simplified)).
UNITED STATES V. PANGANG GROUP 17
Moreover, a recursive reading would render subsection
(b)(2)’s explicit reference to a “political subdivision”
surplusage inasmuch as a “political subdivision” would
already be included within the reinserted definition of
“foreign state.” That is a further reason why the recursive
reading cannot be correct. See Reiter v. Sonotone Corp.,
442 U.S. 330, 339 (1979) (“In construing a statute we are
obliged to give effect, if possible, to every word Congress
used.”). Accordingly, the statutory text makes clear that the
reference to “foreign state” in subsection (b)(2) means only
the foreign sovereign itself and not any additional entity
included within the definition of “foreign state” by
subsection (a).
Although its opinion did not explicitly address the
recursive reading, the Supreme Court necessarily rejected
that construction of subsection (b)(2) when it squarely held,
in Dole Food Co. v. Patrickson, 538 U.S. 468 (2003), that a
“corporation is an instrumentality of a foreign state under the
FSIA only if the foreign state itself owns a majority of the
corporation’s shares.” Id. at 477 (emphasis added). The
Court thus construed the reference to “foreign state” in
subsection (b)(2) as referring only to the actual “foreign state
itself,” i.e., the foreign sovereign, and not to any “agency or
instrumentality” of that foreign state. Id. Under that
understanding of the statute, the defendant “Dead Sea
Companies” in that case, which were indirectly owned by
the State of Israel through “one or more intermediate
corporate tiers,” were not agencies or instrumentalities of a
foreign state within the meaning of the FSIA. Id. at 473–77.
The Dead Sea Companies in Dole Food instead
attempted to squeeze themselves into subsection (b)’s
definition of “agency or instrumentality” by arguing for an
expansive reading of the phrase “owned by a foreign state.”
18 UNITED STATES V. PANGANG GROUP
According to the companies, the term “owned” includes
indirect ownership, at least as that term is used in “common
parlance” and in its “colloquial sense.” 538 U.S. at 474. The
Court rejected this contention, concluding that it ignores
both the language of the FSIA and the background principles
of corporate law that would necessarily inform the
understanding of the statute’s terms. Id. In particular, the
Court noted that subsection (b)(2) “refers to ownership of
‘shares,’ showing that Congress intended statutory coverage
to turn on formal corporate ownership.” Id. (emphasis
added). And although subsection (b)(2) also refers to a
foreign state’s owning a majority of an “ownership interest”
other than “shares,” that phrase was “best understood” as
referring to the possibility of “ownership forms in other
countries, or even in this country, that depart from
conventional corporate structures.” Id. at 476.
Accordingly, what mattered in Dole Food was whether
Israel owned a majority of “the Dead Sea Companies as a
matter of corporate law, irrespective of whether Israel could
be said to have owned the Dead Sea Companies in everyday
parlance.” Id. at 474. Because the Dead Sea Companies had
corporate shares, and not some other form of “ownership
interest,” their status turned on who owned a majority of
those shares. Id. at 473–75 (simplified). Because “Israel did
not own a majority of shares in the Dead Sea Companies,”
but instead “owned a majority of shares, at various times, in
companies one or more corporate tiers above the Dead Sea
Companies,” the latter companies, as subsidiaries, were not
agencies or instrumentalities of Israel. Id. at 475 (emphasis
added). As the Court stated, “only direct ownership of a
majority of shares by the foreign state satisfies the statutory
requirement,” and Israel lacked such direct ownership. Id.
at 474.
UNITED STATES V. PANGANG GROUP 19
Dole Food also addressed the separate question of
whether a defendant’s status as an instrumentality should be
judged as of the time of the underlying conduct or as of the
time of the suit. 538 U.S. at 478–80. The Court held that,
because subsection (b)(2) “is expressed in the present tense,”
it “requires that instrumentality status be determined at the
time suit is filed.” Id. at 478 (emphasis added). The Court
noted that this understanding of the statute was also
“consistent with the longstanding principle that the
jurisdiction of the Court depends upon the state of things at
the time of the action brought.” Id. (citations and internal
quotation marks omitted). Assuming that the FSIA applies
in the criminal context, this aspect of Dole Food would
indicate that a defendant’s status as an “agency or
instrumentality of a foreign state” must be determined as of
the time it was first indicted.
2
With these standards in mind, we consider whether the
allegations of the indictment here are sufficient to establish
that the Pangang Companies were “agenc[ies] and
instrumentalit[ies] of a foreign state” within the meaning of
the FSIA as of February 7, 2012, the day that they were first
indicted.
a
The indictment includes several allegations about the
ownership structure of the Pangang Companies, which we
take as true for purposes of this appeal. See supra at 13–14.
Like the other allegations of the indictment, these claims
about corporate structure are alleged to be true “at all
relevant times.” Because the dates of the alleged conspiracy
are 1998 through October 2011, at least that timeframe is
included within the indictment’s understanding of the
20 UNITED STATES V. PANGANG GROUP
“relevant times.” Although that timeframe does not
expressly include the date of the indictment four months
later, the latter date is close enough in time that we will
assume, for purposes of argument, that the indictment’s
allegations concerning the companies’ corporate structure
on October 2011 may properly be relied upon to establish a
prima facie case as to the corporate structure as of February
2012.
As to PGC, the indictment alleges that it was a “stateowned enterprise controlled by” the “State-Owned Assets
Supervision and Administration Commission of the State
Council (SASAC),” which is a “special government agency”
of the PRC. The remaining Pangang Companies—
PGSVTC, PGTIC, and PGIETC—are alleged to be direct or
indirect “subsidiaries” of PGC. Specifically, the indictment
states that PGC “controlled” the “subsidiar[y]” PGSVTC,
“which shared senior management” with PGC. PGTIC and
PGIETC were “subsidiaries” that “w[ere] owned and
controlled by [PGC] and PGSVTC.”
In light of these allegations, we can readily dispose of
three of the four entities charged in this case. Taken as true,
the allegations affirmatively negate the premise that
PGSVTC, PGTIC, or PGIETC may be considered agencies
or instrumentalities of the PRC. The indictment describes
all three of these entities as being “subsidiaries” of the fourth
defendant—i.e., PGC. Because the corporate-law concept
of a “subsidiary” refers to a company in which the parent
“has a controlling share,” see Corporation—subsidiary
corporation, Black’s Law Dictionary (11th ed. 2019); see
also 1 F. Hodge O’Neal & Robert B. Thompson, Close
Corporations and LLCs: Law and Practice § 1:7 (Rev. 3d ed.
2021) (“Subsidiary corporations” are those “where all or
most of the stock is owned by another corporation.”), the
UNITED STATES V. PANGANG GROUP 21
indictment indicates that PGC is a parent corporation
between the other three companies and SASAC. PGC, of
course, is not the “foreign state itself,” Dole Food, 538 U.S.
at 477, nor is it a “political subdivision thereof,” 28 U.S.C.
§ 1603(b)(2). Because PGSVTC, PGTIC, and PGIETC thus
“were subsidiaries of [an]other corporation[],” 538 U.S. at
475, they were not directly owned by the PRC or SASAC,
and they therefore cannot be deemed to be “agenc[ies] or
instrumentalit[ies] of a foreign state” within the meaning of
§ 1603(b).
The indictment’s allegations as to the ownership
structure of PGC require a somewhat different analysis. The
operative indictment alleges that, “at all times relevant,”
PGC was a “state-owned enterprise controlled by SASAC,”
a “special government agency” of the PRC. Even assuming
arguendo that SASAC counts as a “political subdivision” of
the PRC rather than an “agency or instrumentality,” cf.
Ministry of Def. & Support for the Armed Forces of the
Islamic Republic of Iran v. Cubic Def. Sys., Inc., 495 F.3d
1024, 1034–36 (9th Cir. 2007) (Iranian Defense Ministry is
part of the Iranian State rather than an “agency or
instrumentality”), rev’d on other grounds, 556 U.S. 366
(2009), the indictment’s allegations are insufficient to
establish a prima facie case that PGC is an agency or
instrumentality of SASAC.
As an initial matter, the allegation that PGC was
“controlled by SASAC” is not enough. Dole Food explicitly
rejected the proposition that, “in determining instrumentality
status under the [FSIA], control may be substituted for an
ownership interest.” 538 U.S. at 477. The crucial question,
instead, is whether a “majority of [PGC’s] shares or other
ownership interest is owned” by SASAC or the PRC.
28 U.S.C. § 1603(b)(2). The indictment’s unadorned
22 UNITED STATES V. PANGANG GROUP
allegation that PGC is “state-owned” does not resolve that
issue, because it does not indicate whether that term is used
merely in the “colloquial sense of that term”—which would
include indirect ownership—or whether the term is instead
meant to refer to “own[ing] shares . . . as a matter of
corporate law.” Dole Food, 538 U.S. at 474. The former
sense of ownership is not sufficient to satisfy § 1603(b)(2),
and direct ownership of a majority of shares is required. See
supra at 17–18. Because the indictment’s ambiguous
allegation that PGC is “state-owned” glosses over this
distinction, alleging nothing about ownership of shares, it is
insufficient to establish the requisite “direct ownership of a
majority of shares by the foreign state.” Dole Food,
538 U.S. at 474.
Two other points underscore the inherent ambiguity in
the indictment’s use of the phrased “state-owned.” First, the
indictment refers to PGTIC and PGIETC as being “owned
and controlled by [PGC] and PGSVTC,” but the indictment
also alleges that PGSVTC, PGTIC, and PGIETC are each
“subsidiaries” of PGC (emphasis added). The indictment
thus alleges that PGTIC and PGIETC are owned by two
companies (PGC and PGSVTC) that are at different levels
of the corporate hierarchy (given that PGSVTC is itself a
subsidiary of PGC). Perhaps the indictment means that
ownership of PGTIC and PGIETC is split between the two
other companies (i.e., PGC, and its subsidiary, PGSVTC), or
perhaps it means that PGTIC and PGIETC are subsidiaries
of PGSVTC, which in turn is a subsidiary of PGC. But, in
all events, because two companies cannot both have “direct
ownership of a majority of shares” of another company, Dole
Food, 538 U.S. at 474, it seems clear that the indictment is
not using “owned” in the corporate law sense when it says
that PGTIC and PGIETC are “owned and controlled by
[PGC] and PGSVTC.” Instead, the indictment appears to be
UNITED STATES V. PANGANG GROUP 23
using “owned” only in the “colloquial sense of that term”—
which Dole Food held is insufficient. Id. Consequently,
when the indictment alleges that PGC is “state-owned,” it
likewise presumably uses that term only in its colloquial
sense.
Second, we note that the Government, in opposing the
Pangang Companies’ earlier efforts to quash service of
summons, submitted evidence affirmatively asserting that
SASAC’s ownership of PGC was indirect. Specifically, the
Government contended that in 2010, after a reorganization,
PGC was “100 percent owned by the Anshan Iron and Steel
Group Corporation, which is 100 percent owned by central
SASAC.” Although we do not take judicial notice of the
truth of this earlier-submitted evidence concerning the
Government’s theory of PGC’s corporate ownership, we can
take judicial notice of the fact that the Government asserted
such a theory. See Lee v. City of Los Angeles, 250 F.3d 668,
689–90 (9th Cir. 2001). And the fact that the Government
did so further underscores the already amply-supported
conclusion that the indictment’s use of the term “stateowned” was not intended to speak to the corporate-structure
issues that are dispositive under Dole Food.
b
In the district court, the Pangang Companies relied
principally on the indictment’s additional allegation that
each company was a “foreign instrumentality” under the
EEA, and they contended that this allegation was sufficient
to establish their status as instrumentalities under the FSIA.
When asked at the hearing on the motion to dismiss whether
it disagreed with this representation, the Government said
that it did not. In its subsequent order, the district court noted
that there are “some differences” between the relevant
definitions in the EEA and the FSIA, but it concluded that
24 UNITED STATES V. PANGANG GROUP
they were “not material.” The court therefore proceeded on
the assumption that the indictment’s allegation that the
Pangang Companies were “foreign instrumentalities” under
the EEA was sufficient to establish that they were
instrumentalities under the FSIA.
Because the issue goes to subject matter jurisdiction, we
are not bound by the Government’s failure to object below
to the Pangang Companies’ argument on this score. See
Stock West, Inc. v. Confederated Tribes of the Colville Rsrv.,
873 F.2d 1221, 1228 (9th Cir. 1989) (“[A] party cannot
waive by consent or contract a court’s lack of subject matter
jurisdiction.”). Considering the jurisdictional issue
independently, see Herklotz v. Parkinson, 848 F.3d 894, 897
(9th Cir. 2017), we conclude that the allegation that the
Pangang Companies are “foreign instrumentalities” under
the EEA, without more, is insufficient to trigger applicability
of the FSIA.
As noted earlier, one of the elements of the charged
offenses under the EEA is that the defendant must have acted
“intending or knowing that the offense will benefit any
foreign government, foreign instrumentality, or foreign
agent.” 18 U.S.C. § 1831(a). The indictment asserts that
this element was satisfied because the defendants knew that
the charged offenses “would benefit a foreign government,
namely the PRC, and foreign instrumentalities, namely
[PGC], PGSVTC, [PGTIC], and P[G]IETC” (emphasis
added). The EEA expressly defines the term “foreign
instrumentality” to “mean[] any agency, bureau, ministry,
component, institution, association, or any legal,
commercial, or business organization, corporation, firm, or
entity that is substantially owned, controlled, sponsored,
commanded, managed, or dominated by a foreign
government,” 18 U.S.C. § 1839(1), and so the indictment
UNITED STATES V. PANGANG GROUP 25
necessarily alleges that each of the Pangang Companies met
this definition.
On its face, however, the EEA’s definition of “foreign
instrumentality” is much broader than the FSIA’s definition
of “agency or instrumentality of a foreign state,” as
construed in Dole Food. In particular, the EEA’s definition
is satisfied if the “corporation” is “controlled” by the foreign
government, see 18 U.S.C. § 1839(1) (emphasis added), but
Dole Food expressly rejected the view that “control may be
substituted for [the] ownership interest” required by the
FSIA’s definition of covered instrumentalities. 538 U.S.
at 477; see id. (“Control and ownership . . . are distinct
concepts.”); see also 28 U.S.C. § 1603(b)(2) (requiring that
a “majority” of “shares or other ownership interest” be
“owned” by the foreign state or its political subdivision).
And unlike the FSIA’s definition, the EEA’s does not
mention “shares” or other similar corporate formalities. Cf.
Dole Food, 538 U.S. at 474 (“The language of § 1603(b)(2)
refers to ownership of ‘shares,’ showing that Congress
intended statutory coverage to turn on formal corporate
ownership.”). Instead, a company falls under the EEA’s
definition merely by being “substantially owned” by the
foreign government. 18 U.S.C. § 1839(1) (emphasis added).
Because the EEA’s definition of “foreign
instrumentality” sweeps so much more broadly than the
FSIA’s definition of “agency or instrumentality of a foreign
state,” the indictment’s allegation that the Pangang
Companies satisfy the former is insufficient to establish a
prima facie case that they meet the latter.
IV
For these reasons, the allegations of the indictment,
standing alone, are insufficient to establish that the Pangang
26 UNITED STATES V. PANGANG GROUP
Companies were instrumentalities of the PRC on the date
they were indicted. Because the Pangang Companies relied
solely upon the indictment’s allegations, and presented no
evidence to support their motion to dismiss, they necessarily
failed to establish a prima facie case that they were “foreign
state[s]” entitled to immunity under § 1604 of the FSIA.
Their motion to dismiss was therefore properly denied
Outcome: AFFIRMED
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