Lockheed Martin dodges claims arising out of $7B sale

Listen to this article

Where a company alleged that Lockheed Martin and other defendants conspired to “cut it out” as the broker for a large, complex international military procurement transaction, but the court lacked subject matter jurisdiction over the tort claims, and the antitrust claims were time barred, the claims were dismissed.

Background

Blenheim Capital Holdings Ltd. and Blenheim Capital Partners Ltd. commenced this action against Lockheed Martin Corporation, Airbus Defence and Space SAS, and the Republic of Korea, alleging that the defendants conspired to “cut it out” as the broker for a large, complex international military procurement transaction.

Under the terms of the transaction, South Korea would acquire 40 F-35 fighter planes manufactured by Lockheed and a “Next-gen” military satellite manufactured by Airbus. South Korea would pay $7 billion for the F-35s and $150 million toward the cost of the military satellite, with the remaining value of the satellite serving as an “offset” to effectively reduce South Korea’s costs and thus “sweeten” the transaction. Further, the $150 million payment by South Korea was to be paid to Lockheed and passed on to Blenheim in installments, which Blenheim would use as capital to procure the financing for the purchase of three satellites from Airbus.

Lockheed allegedly terminated the brokerage arrangement with Blenheim and restructured the transaction to be a “direct procurement” between Lockheed, Airbus and South Korea. Blenheim accordingly alleged that the defendants (1) tortiously interfered with its brokerage arrangement and its prospective business expectations; (2) conspired to do so; (3) were unjustly enriched; and (4) conspired to violate federal and state antitrust laws.

With respect to the tort claims, the district court concluded that it lacked subject matter jurisdiction by reason of the Foreign Sovereign Immunities Act, or FSIA, because South Korea was presumptively immune from jurisdiction under the Act and had not been engaged in “commercial activity.” And on the antitrust claim, it held that the action was

barred by both the applicable four-year statute of limitations and the Foreign Trade Antitrust Improvements Act of 1982.

FSIA

Blenheim contends first that the district court erred in dismissing its tort claims against South Korea for lack of subject-matter jurisdiction under FSIA, because the basis for its claims was “commercial activity” by South Korea, which is excepted from the immunity conferred by the Act.

When the sovereign engages in a transaction peculiar to sovereigns — one in which private parties cannot engage — it is engaged in sovereign activity that is not excepted from the immunity conferred by the FSIA, even if it involves the purchase of goods. Here, the court concludes that South Korea was engaged in conduct peculiar to sovereigns and therefore was not engaged in “commercial activity.” Such activity, by its nature, involves the transfer of military assets only to sovereigns and then only in furtherance of U.S. public policy and mutual military cooperation between countries.

Antitrust

An antitrust action “accrues” “when a defendant commits an act that injures a plaintiff’s business.” Here, not only do the complaint’s allegations place Oct. 6, 2016, as the date when Blenheim was cut out of the offset transaction, they also describe how, as of that date, Blenheim was injured in its business and property and Lockheed, Airbus and South Korea were enriched by the product of Blenheim’s years of work and effort, seizing the fruits and denying Blenheim the benefits of the deal.

Blenheim argues that it was not injured until January 2017 because it was only then that Lockheed legally terminated the brokerage agreement. But the question of whether Lockheed’s October 2016 termination of the brokerage agreement caused Blenheim injury does not depend on whether that termination was legal. The complaint alleges clearly that Lockheed’s October 2016 termination, whether legal or illegal, cut Blenheim out of the transaction and thus deprived it of its anticipated benefits.

Also, Blenheim’s alternative argument that the accrual date of its action was extended until the restructured offset transaction was complete, i.e., when the satellite was launched in 2020, lacks legal support. The fact that some damages were to accrue in the future does not extend the accrual date.

Affirmed.

Blenheim Capital Holdings Ltd. v. Lockheed Martin Corporation, Case No. 21-2104, Nov. 15, 2022. 4th Cir. (Niemeyer), from EDVA at Alexandria (O’Grady). Hamish P.M. Hume for Appellants. Marc Laurence Greenwald and Brian T. McLaughlin for Appellees. VLW 022-2-241. 23 pp.