UNITED STATES COURT OF APPEALS FOR THE D.C. CIRCUIT


TRANSAMER LEASING

v.

LA REPUB VENEZUELA


98-7206b

D.C. Cir. 2000


*	*	*


Ginsburg, Circuit Judge: Twelve companies that leased  equipment to the
now defunct CompaNia Anonima Venezolana  de NavegaciOn (CAVN), a
shipping company owned by the  Republic de Venezuela, brought suit
against Venezuela and  the Fondo de Inversiones de Venezuela (FIV), an
instrumen- tality of the Venezuelan government created to assist in 
restructuring and privatizing state enterprises. The first  three
counts of the complaint allege that Venezuela and the  FIV are
derivatively liable for CAVN's breaches of contract.  The final count
alleges that Venezuela and the FIV are  directly liable for having
caused CAVN to breach its con- tracts with the plaintiffs.


In this interlocutory appeal, Venezuela and the FIV argue  that they
are immune from suit upon all counts under the  Foreign Sovereign
Immunities Act of 1976 (FSIA), 28 U.S.C.  s 1602 et seq., and that
they are immune from suit upon the  fourth count under the "act of
state" doctrine as well. We  hold that because they did not exercise
the requisite control  over CAVN, Venezuela and the FIV are indeed
immune from  suit upon the first three counts. We remand the case for
the  district court to consider in the first instance whether the 
defendants are immune from suit upon the fourth count.


I. Background


Although the parties vigorously dispute many details of the 
relationship between CAVN and the defendants, the basic  facts
underlying this case are uncontested. CAVN was an  international
shipping company created in 1917 by Venezuela  and operated as a
state-owned instrumentality until it filed  for bankruptcy in 1994. At
all relevant times, the FIV,  known under Venezuelan law as an
"autonomous institute,"  owned 99.86% of CAVN's stock and Venezuela,
through vari- ous ministries, owned the remainder. The plaintiffs are 
twelve corporations that leased to CAVN shipping equipment,  such as
containers and chassis, between 1982 and 1993.


In the early 1990s CAVN began experiencing severe finan- cial trouble,
in part because of the inefficient way in which it  handled leased
equipment. In September 1991 the FIV,  concerned about CAVN's mounting
losses, commissioned the  consulting firm Booz, Allen & Hamilton, Inc.
to assess  CAVN's financial health and operating procedures. Booz 
Allen recommended that CAVN restructure its operations,  upgrade its
fleet, overhaul its handling of leased equipment,  and in general
strengthen its management.


In 1992 CAVN requested financial assistance from the FIV,  which
referred the request to the Sectoral Cabinet for Eco- nomic and Social
Policy Issues, an organization that by law  must approve all such
requests before the FIV may act. The  Cabinet approved CAVN's request
conditioned upon CAVN's  agreement to restructure. When CAVN agreed to
that con- dition, the FIV commissioned Booz Allen to prepare a re-
structuring plan. The FIV made funds available to CAVN  through a
trust agreement under which the FIV is both  settlor and trustee and
CAVN is the beneficiary. Under the  agreement, CAVN had to place some
of its assets in trust  with the FIV as collateral.


Notwithstanding these efforts, CAVN began to fall behind  in its lease
payments and in 1993 the plaintiffs issued notices  of default and
termination. In November 1993 CAVN and  the lessors agreed to
restructure CAVN's payments; until  January 1994 the FIV provided
additional capital infusions to  allow CAVN to meet the restructured
payment schedules. In  April 1994 the lessors again agreed to
restructure CAVN's  payments. By July, however, CAVN was unable to
continue  operations: it filed for bankruptcy in October 1994.


In June 1997 the plaintiffs brought this suit against the  Republic of
Venezuela and the FIV (henceforth referred to  collectively as
"Venezuela" or "the Government"). In the  first three counts of the
complaint they allege that Venezuela  used CAVN as its "alter ego," or
as its "agent," or that it  cloaked CAVN with apparent authority to
bind the Govern- ment, and that Venezuela is therefore liable upon the
lease  agreements and restructured payment schedules. In the 


final count the lessors allege that Venezuela, by refusing to  continue
providing funds to CAVN, caused CAVN to breach  its contracts with the
plaintiffs. Venezuela moved to dismiss  the complaint in January 1998,
claiming that under the FSIA  it is immune from suit upon all counts
and that suit upon the  fourth count is precluded under the act of
state doctrine as  well.


The district court denied Venezuela's motion to dismiss.  Based upon
the pleadings and the extensive evidence submit- ted supporting and
opposing the motion, the district court  found that Venezuela, which
had appointed the Board, exert- ed extensive control over CAVN's
everyday operations,  played a major role in CAVN's financial
restructuring, and  appeared to have authorized CAVN to act on its
behalf.  From these findings the district court concluded both that 
CAVN had in fact acted as the Government's agent, and that  it had
apparent authority to act for the Government, in its  dealings with
the plaintiffs, and therefore that Venezuela is  amenable to a suit
based upon the activities of CAVN. The  court did not discuss the
final count of the complaint, in which  the plaintiffs seek to hold
Venezuela liable for causing CAVN  to breach its contracts, and with
respect to which the Govern- ment raises the act of state objection.


II. Analysis


Venezuela filed this interlocutory appeal in order to press  its claim
of immunity from suit. Under the FSIA a "foreign  state [is] immune
from the jurisdiction of the courts of the  United States and of the
States," subject to certain enumerat- ed exceptions. 28 U.S.C. s 1604.
For this purpose, "foreign  state" includes any "agency or
instrumentality" thereof. 28  U.S.C. s 1603(a). Both Venezuela and the
FIV are immune  from suit upon the plaintiffs' claims, therefore,
unless those  claims fall within one of the listed exceptions. The
plaintiffs  contend that their claims are within the "commercial
activity"  exception, which provides that:


(a) A foreign state shall not be immune from the juris- diction of
courts of the United States or of the States in  any case--


* * *


(2) in which the action is based upon a commercial  activity carried on
in the United States by the foreign  state; or upon an act performed
in the United States in  connection with a commercial activity of the
foreign state  elsewhere; or 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;


28 U.S.C. s 1605(a)(2).


Venezuela implicitly concedes that the first three counts of  the
complaint are based upon "commercial activities" within  the meaning
of 28 U.S.C. s 1605(a)(2), but maintains that it is  not amenable to a
suit based upon the commercial activities of  CAVN because CAVN was
not its agent. As to the final  count, Venezuela argues first that the
activities alleged there  are not "commercial activities," and second
that they are acts  of state for which the Government is immune from
trial in  any event.


The district court's denial of a foreign state's motion to  dismiss
upon the ground of sovereign immunity is subject to  interlocutory
appeal under the collateral order doctrine. See  Foremost-McKesson,
Inc. v. Islamic Republic of Iran, 905  F.2d 438, 443 (D.C. Cir. 1990)
(citing Cohen v. Beneficial  Industrial Loan Corp., 337 U.S. 541,
545-47 (1949)). We  review the district court's findings of fact for
clear error, see  Jungquist v. Sheikh Sultan Bin Khalifa Al Nahyan,
115 F.3d  1020, 1028 (D.C. Cir. 1997), and in this case we find none. 
We review de novo the district court's determination that  Venezuela
is not entitled to immunity, see id., to which task  the balance of
this opinion is devoted.


A. Subject matter jurisdiction, Counts I-III


A government instrumentality "established as [a] juridical  entit[y]
distinct and independent from [its] sovereign should  normally be
treated as such"; thus, it is presumed to have  legal status separate
from that of the sovereign. First  National City Bank v. Banco Para El
Comercio Exterior de 


Cuba, 462 U.S. 611, 627 (1983) (Bancec). That presumption  can be
overcome in two situations: First, "where a corporate  entity is so
extensively controlled by its owner that a relation- ship of principal
and agent is created," id. at 629 (citing  NLRB v. Deena Artware,
Inc., 361 U.S. 398, 402-404 (1960));  and second, where recognition of
the instrumentality as an  entity apart from the state "would work
fraud or injustice."  Id. (citing Taylor v. Standard Gas & Electric
Co., 306 U.S.  307, 322 (1939)). Although the Supreme Court in Bancec 
recognized these as exceptions to the rule that a foreign  sovereign
is not liable for the acts of an instrumentality of the  state, we
have since held that they serve also as exceptions to  the rule that a
foreign sovereign is not amenable to suit based  upon the acts of such
an instrumentality. See, e.g.,  Foremost-McKesson, 905 F.2d at 446-47.
Accordingly, the  present plaintiffs argue both reasons--agency and
injustice-- for holding that Venezuela is amenable to suit based upon
the  activities of CAVN.


1. The agency exception: Principles


Our previous decisions applying the agency exception to the  rule of
sovereign immunity have generally focused upon how  much control the
sovereign exercised over the instrumentali- ty, without explicating
why and the circumstances in which  control is relevant to the
question of the sovereign's amena- bility to suit. See, e.g., McKesson
Corp. v. Islamic Republic  of Iran, 52 F.3d 346, 352 (1995). Control
by the sovereign is  relevant in two distinct contexts, as discussed


a. Control


First, control is relevant when it significantly exceeds the  normal
supervisory control exercised by any corporate parent  over its
subsidiary and, indeed, amounts to complete domina- tion of the
subsidiary. A sovereign is amenable to suit based  upon the actions of
an instrumentality it dominates because  the sovereign and the
instrumentality are in those circum- stances not meaningfully distinct
entities; they act as one.  Indeed, in the case cited by the Supreme
Court to illustrate  the agency exception, various corporations were


operated as a "single enterprise." See NLRB v. Deena  Artware, Inc.,
361 U.S. 398 (1960).


In that case, the NLRB had ordered an employer to offer  reinstatement
and backpay to former employees. See id. at  399. Although the
employer initially complied with the order,  it soon ceased operations
without having paid back wages.  See id. The employer was, however,
only one of several  wholly-owned subsidiaries of the same parent
corporation.  See id. at 399-400. The Board petitioned the court of
appeals  to hold not only the subsidiary employer but also its parent 
and the sister subsidiaries in civil contempt. The Board  proceeded in
part upon the theory that the various corpora- tions were operated as
a "single enterprise" with each per- forming "a particular function,
as a department or division of  the one enterprise in the manufacture,
sale and distribution of  the common product." Id. at 401. The court
of appeals  dismissed the petition but the Supreme Court reinstated it
 and granted the Board discovery on the "single enterprise"  issue.


In the course of reaching that decision, the Supreme Court  offered
numerous examples of situations where one company  so dominated
another that the courts held the controlling  company liable for the
obligations of the controlled company.  Thus, if one corporation is
"operated as a division of another,"  then the latter may be held
responsible for the acts of the  former. Id. at 403 & n.2 citing, for
example, Foard Co. v.  Maryland, 219 F. 827, 829 (4th Cir. 1914)
(involving subsid- iary that did not handle any funds and paid all
profits to  parent "as a charge for managing the business"), and
Dillard  & Coffin Co. v. Richmond Cotton Oil Co., 140 Tenn. 290, 293-
94 (1918) (involving parent that could at any time dismiss 
subsidiary's Board of Directors and appoint new directors of  its
choosing, that received "daily reports of each transaction" 
consummated by subsidiary, and that paid financial obli- gations of
subsidiary). Or the "affairs of the group may be so  intermingled that
no distinct corporate lines are maintained."  Id. at 403 & n.4,
citing, for example, The Willem Van Driel,  Sr. v. Pennsylvania R.R.
Co., 252 F. 35, 37 (4th Cir. 1918)  (involving railroad that dictated


ny's clients, appointed own officers to run elevator company, 
controlled elevator company's accounts, and used elevator  company's
profits for its own purposes). In addition, a  parent corporation may
be held liable for the acts of a  subsidiary that is a "shell,
inadequately financed." Id. at 403  & n.3, citing, for example,
Luckenbach S.S. Co., Inc. v. W.R.  Grace & Co. Inc., 267 F. 676, 681
(4th Cir. 1920) (involving  subsidiary that was undercapitalized,
issued 94% of its stock  to owner of parent, leased equipment from
parent at "far  below ... rental value," and was "personally managed"


Second, control is relevant when the sovereign exercises its  control
in such a way as to make the instrumentality its  agent; in that case
control renders the sovereign amenable to  suit under ordinary agency
principles. See Gilson v. Repub- lic of Ireland, 682 F.2d 1022, 1026
n.16, 1029 (D.C. Cir. 1982)  ("An agent's actions may provide the
basis for jurisdiction  over the principal"). The relationship of
principal and agent  depends, however, upon the principal having "the
right to  control the conduct of the agent with respect to matters 
entrusted to [the agent]." Restatement (Second) of Agency  s 14


A sovereign does not create an agency relationship merely  by owning a
majority of a corporation's stock or by appoint- ing its Board of
Directors. See Foremost-McKesson, 905  F.2d at 448; Restatement
(Second) of Agency s 14M. If  majority stock ownership and appointment
of the directors  were sufficient, then the presumption of
separateness an- nounced in Bancec would be an illusion. At the same
time, a  sovereign need not exercise complete dominion over an in-
strumentality--to the point of stripping it of any meaningful 
separate identity--in order to establish a relationship of  principal
and agent. If such domination were required, then  agency principles
would be superfluous because, as discussed  above, the sovereign would
be subject to suit on the ground  that instrumentality and sovereign


Courts have long struggled, often with confusing results, to  explain
how much control is required before parent and  subsidiary may be
deemed principal and agent. Cf. Berkey v.  Third Avenue Railway Co.,
244 N.Y. 84, 155 N.E. 58, 61  (1926) ("The whole problem of the
relation between parent  and subsidiary corporations is one that is
still enveloped in  the mists of metaphor"); Restatement (Second) of
Agency  s 14M reporter's notes ("When liability is fastened upon the 
parent it is said that the subsidiary is a 'mere agent' [which  has
resulted in] a weakening and muddying of the term  'agent' and a
failure by courts to state the real reasons for  their decisions").
The question defies resolution by "mechan- ical formula[e]," for the
inquiry is inherently fact-specific.  See Bancec, 462 U.S. at 633. At
a minimum, however, we can  confidently state that the relationship of
principal and agent  does not obtain unless the parent has manifested
its desire  for the subsidiary to act upon the parent's behalf, the
subsid- iary has consented so to act, the parent has the right to 
exercise control over the subsidiary with respect to matters 
entrusted to the subsidiary, and the parent exercises its  control in
a manner more direct than by voting a majority of  the stock in the
subsidiary or making appointments to the  subsidiary's Board of
Directors. See Restatement (Second)  of Agency s 1 ("Agency is the
fiduciary relation which results  from the manifestation of consent by
one person to another  that the other shall act on his behalf and
subject to his  control, and consent by the other so to act").


That a state and a state-owned corporation may in some  circumstances
be, respectively, principal and agent does not  necessarily mean,
however, that in those circumstances the  sovereign is amenable to a
suit based upon the acts of the  agent. For example, "jurisdiction
[over the sovereign] cannot  be maintained if the agent's actions are
not related to the  substance of plaintiff's cause of action." Gilson,
682 F.2d at  1029-30. Nor, under principles of agency, is a sovereign 
amenable to suit upon a contract that its agent made on its  own
account though, unbeknownst to the contracting plaintiff,  the
sovereign had authorized the agent to make the contract 


on the sovereign's behalf. See Restatement (Second) of  Agency s 199.


b. Apparent authority


A plaintiff might contend that a corporation, even if not an  agent of
the sovereign, had apparent authority to act on the  sovereign's
behalf. In that case the plaintiff would have to  show that it
reasonably relied upon a manifestation by the  sovereign to that
effect. See Restatement (Second) of Agency  s 27 ("[A]pparent
authority to do an act is created as to a  third person by [a
manifestation] of the principal which,  reasonably interpreted, causes
the third person to believe  that the principal consents to have the
act done on his behalf  by the person purporting to act for him"); see
also Restate- ment (Second) of Agency s 27 cmt. d (explaining that a 
manager "has apparent authority to do those things which  managers in
that business ... customarily do"); Restate- ment (Second) of Agency s
159 & cmt. b; Restatement  (Second) of Agency s 8 & cmt. a. For
example, if a sover- eign falsely represented to a third party that an
instrumental- ity of the state was authorized to act as the
sovereign's agent  and the third party reasonably relied upon that
representa- tion when contracting with the instrumentality, then under
 agency principles the third party could sue the sovereign  upon the
contract under a theory of apparent authority even  though the
sovereign and the instrumentality were not, in  fact, related as
principal and agent. See, e.g., Restatement  (Second) of Agency s 8
cmt. a, illus. 3. We doubt, however,  that a case of merely apparent
authority falls within the  agency exception--an exception limited by
its terms to situa- tions in which the instrumentality "is so
extensively controlled  by [the sovereign] that a relationship of
principal and agent is  created." Bancec, 462 U.S. at 629. (Still, in
an appropriate  case a court might attribute the acts of the


2. The agency exception: Application


With these background principles in mind, we turn to the  facts of the
case at bar. Recall that the district court denied  Venezuela immunity
under the FSIA based upon its conclu-


sions that CAVN was an agent of the State and that CAVN  had apparent
authority to act for the State. Upon appeal, the  plaintiffs also seem
to argue that Venezuela so dominated  CAVN as to deprive it of
separate juridical identity.


a. Control


In our view, the plaintiffs, whether understood to contend  that
Venezuela so dominated CAVN that the corporation  lacked a distinct
identity, or merely that CAVN acted as the  Government's agent, have
failed to demonstrate that Vene- zuela controlled CAVN to a degree
sufficient to render the  State amenable to suit based upon the
actions of the corpora- tion.


The district court focused upon five facts that led it to  attribute
the actions of CAVN to the Government: Venezuela  (1) owned a majority
of CAVN's stock; (2) appointed the  Board of Directors and the
Chairman of the Board and  President; (3) was involved in CAVN's
"day-to-day" opera- tions by overseeing the restructuring of CAVN's
intermodal  operations and approving the sale of three of CAVN's
vessels;  and (4) aided CAVN financially by allowing the FIV to enter 
into a trust agreement with CAVN; while (5) the President of  CAVN,
with apparent authority to bind Venezuela, assured  one of the
plaintiffs that the Government would support  CAVN. Before this court,
the plaintiffs press these consider- ations as support for both their
domination and their agency  theories of the case.


In our view however, the facts as found, considered as a  whole,
establish neither that Venezuela dominated CAVN nor  that CAVN was
Venezuela's actual or apparent agent. The  first two facts--that the
Government owned CAVN's stock  and could appoint CAVN's Board of
Directors and the Chair- man and President--are relevant but as a
matter of law do  not by themselves establish the required control,
see  Foremost-McKesson, 905 F.2d at 448, and the remaining  factors do
not make up the shortfall.


As for the third fact, the Government's purported role in  CAVN's
"day-to-day operations," the district court found that 


"CAVN's Board of Directors appointed Captain Antonio  Romero
Sierraalta, a maritime professional and officer in the  Venezuelan
Navy, with full power and authority, to head a  new Intermodal
Division," and that the Board directed him to  implement Booz Allen's
recommendations for restructuring.  After describing the extensive
changes Capt. Sierraalta made  in that managerial capacity and noting
that " 'the [B]oard of  [Directors] was aware of [the] details ...' of
these efforts,"  the district court concluded that the Government,
"through  the appointment of Capt. Sierraalta, effectively comman-
deered the principal intermodal operations of CAVN." These  findings,
however, describe nothing more than the sole share- holder exercising
its influence, through the Board of Di- rectors, to put its own chosen
manager in charge of a  corporation that was suffering severe
operational problems-- and leaving to him the task of running
"day-to-day" opera- tions. If that were enough to make the shareholder
answera- ble for the acts of the corporation, then the holding of 
Foremost-McKesson that majority stock ownership and con- trol over the
Board of Directors are insufficient to transform  parent to principal
and instrumentality to agent would be  limited to cases in which the
shareholder is utterly quiescent;  let it exert itself at all to
protect its interests and it loses its  legal identity separate from
that of the corporation. That is  not the law. See, e.g., Restatement


The court also found that the Government was involved in  CAVN's
"day-to-day" operations because "the Economic De- partment for the
Sector, an agent of ... Venezuela, autho- rized the sale of [three] of
CAVN's vessels." This finding  adds no support for the proposition
that Venezuela exercised  the requisite control over CAVN. First, the
sale of a portion  of its fleet as part of a massive restructuring
hardly qualifies  as CAVN's "day-to-day" business. Second, it is not
uncom- mon for a government--as regulator, not as shareholder--to 
require approval for certain transactions in the transportation 
sector. See, e.g., 49 U.S.C. s 11323(a)(2)(requiring that the  Surface
Transportation Board approve a "purchase, lease, or  contract to
operate property of another rail carrier"); 46 App. 


U.S.C. s 1704(a) (giving Federal Maritime Commission juris- diction
over certain agreements among "ocean common carri- ers"). Because the
record evidence cited by the district court  in support of its finding
is somewhat cryptic, it is unclear why  the Department for the Sector
approved the sale of the ships  and even whether its approval was
required. There is at  least some evidence in the record that
Venezuela generally  regulates the sales of vessels. Without more, we
cannot say  that requiring a shipping company to obtain governmental 
approval for the sale of vessels represents the exercise of 
Venezuela's authority as shareholder rather than its exercise  of
governmental power in the ordinary course of regulation.


Finally, the district court considered the Government's  "financial
involvement" with CAVN. The court found that  CAVN's counsel, in a
letter to the United States Federal  Maritime Commission, had
"acknowledged that the operating  assets of CAVN were owned and
controlled by ... Venezue- la." In context, however, that statement is
utterly innocuous.  The letter was sent in response to a request from
the FMC  for information, which included the following question:


Are your operating assets directly or indirectly owned or  controlled
by a government under whose registry any of  your vessels operate? ...
For purposes of this ques- tion, ownership or control is deemed to
exist if a majority  interest in the carrier, or its operating assets,
is owned  or controlled in any manner by a government ... or  entity
controlled by such government.


Counsel answered the question by stating, "Yes, the Republic  of
Venezuela," which he had to do simply because "a majority  interest in
the carrier ... [was] owned by [the] government"  of that country. As
we have seen, however, mere ownership  does not imply control of the
sort that could render the  Government amenable to suit based upon the
acts of the  corporation.


Also under the heading of financial involvement, the district  court
found that Venezuela had "decided to inject funds into  CAVN as part
of the restructuring plan" and that the FIV  had entered into the
trust agreement with CAVN so that 


CAVN could "satisfy its debts and attain liquidity." Far  from
demonstrating that Venezuela and the FIV exercised  the type of
control over CAVN that would justify attributing  the corporation's
actions to them, the facts as found reflect  only a normal
relationship between a sovereign and an instru- mentality of the
state. Indeed in Bancec the Court noted  that a "typical government
instrumentality" has primary re- sponsibility for its own finances
"[e]xcept for appropriations  to provide capital or to cover losses."
Bancec, 462 U.S. at  624. In other words, the infusion of state
capital to cover  CAVN's losses was a normal aspect of the relation
between a  government and a government-owned corporation, not an 
instance of "day-to-day" involvement in the affairs of the 
corporation, and hence does not tend to justify stripping  Venezuela


The other findings marshaled by the district court as  evidence of the
Government's involvement in CAVN's finan- cial affairs similarly
demonstrate only that Venezuela provid- ed funds to CAVN in order to
reorganize the ailing company  and to bail it out of debt. Taken
together, the district court's  findings do not show that Venezuela
controlled CAVN in a  manner sufficient to forfeit its immunity under


The plaintiffs direct our attention to still other evidence in  the
record that was not the subject of the district court's  findings--and
all of which the defendants contest--that they  claim justifies
attributing CAVN's actions to Venezuela. We  will neither rehearse nor
resolve these disputes here. View- ing the disputed facts favorably to
the plaintiffs, however, we  remain unconvinced that Venezuela
exercised such control  over CAVN as to make the Government amenable
to suit  based upon CAVN's actions under the principal and agent 
exception announced in Bancec.


Our decision in McKesson, contrary to the plaintiffs' argu- ment, does
not indicate a different result. McKesson in- volved a suit brought by
American holders of a minority  interest in an Iranian dairy against
the Government of Iran  and several instrumentalities thereof. The
shareholders al- leged that Iran had acted through its
instrumentalities unlaw-


fully to divest them of their equity in the dairy. See McKes- son, 52
F.3d at 348. We affirmed both the district court's  conclusion that
the instrumentalities had acted as agents of  Iran in divesting the
plaintiffs of their equity and its holding  that the acts of the
instrumentalities were attributable to  Iran, which was not,
therefore, immune from the suit under  the FSIA. See id. at 352.


Although the district court had made extensive findings  detailing
Iran's pervasive control over the instrumentalities,  we focused upon
four facts. First, the instrumentalities  owned a majority of the
dairy's stock and controlled six of the  seven seats on its Board of
Directors. See id. at 351.  Second, the Government of Iran had issued
anti-American  policy statements to the instrumentalities, which they
reason- ably believed the Government wanted them to carry out in 
their dealings with the dairy's American shareholders. For  example,
the Managing Director of one of the instrumentali- ties, who
eventually chaired the dairy's Board of Directors,  stated that the
dairy "was no longer a 'joint stock company'  whose primary fiduciary
duty was to its stockholders" and  declared it the dairy's "main
objective ... to protect the  interests of the country." Id. at 351.
Third, Iran directly  controlled "[r]outine business decisions, such
as declaring and  paying dividends to shareholders and honoring the
dairy's  contractual commitments"; indeed, the dairy's Board of Di-
rectors had "deferred [their] decision to withhold dividends  from
[one of the American shareholders]" until they had  received approval
from "Iran's Cabinet Ministers (and offi- cials answerable to them)."
Id. at 351-52. Finally, we  emphasized that the dairy had not "simply
carr[ied] out a  state commercial policy as a normal part of the
corporation's  mission, without any state involvement" but instead had
acted  to effectuate a governmental policy "designed to injure some 
of the corporation's own shareholders ... through a corpo- rate policy
guided by government representatives." Id. at  352.


Beyond the features inherent in a state-owned corporation,  namely the
government's ownership of stock and control of  the Board of
Directors, this case bears no resemblance to  McKesson. Venezuela did
not evince an intent to have 


CAVN act as its agent in dealing with the plaintiffs. No one  at CAVN
sought the Government's approval for routine busi- ness decisions. In
short, McKesson is to this case what the  Chicago Manual of Style was
to e.e. cummings: not control- ling.


b. Apparent authority


The district court next considered whether Venezuela had  indicated to
the plaintiffs that CAVN could act as its agent,  that is, whether
Venezuela had apparently given CAVN au- thority to act for it. Upon
appeal the plaintiffs also pursue  this theory in support of the
district court's holding.


In reaching the conclusion that CAVN had apparent au- thority to bind
the Government, the court found that Vice  Admiral Efraim Diaz TarazOn
of the Venezuelan Navy, who  also served for a time as President and
Chairman of the  Board of CAVN, had assured one of the
plaintiffs--while  wearing his naval uniform, no less--that "Venezuela
would  support CAVN." This finding, which is the only support for  the
district court's conclusion that Venezuela had cloaked  CAVN with
apparent authority, is insufficient to render the  State liable for
the acts of the corporation. Appointing  TarazOn as President of CAVN
certainly cloaked him with  authority to bind CAVN, see Restatement
(Second) of Agen- cy s 27 cmt. d, above, but something more would be
required  before a creditor of CAVN could reasonably infer that Tara-
zOn was thereby authorized to bind the Government. Tara- zOn's
decision to dress as an Admiral when he met with one of  the lessors
is just that--TarazOn's sartorial decision--not an  indication coming
from the Government that it had authorized  him to commit government
funds outside the normal channels  running through the Cabinet and the
FIV. In the absence of  any evidence of such an authorization from the
Government,  we reject the plaintiffs' argument that CAVN had apparent
 authority to bind Venezuela.


3. The exception for fraud or injustice


We turn now to the exception for fraud or injustice recog- nized in
Bancec. 462 U.S. at 629. Although the district court 


did not address it, the plaintiffs argue in passing that this 
exception, too, applies to this case. Their theory, in a nut- shell,
is that the "[d]efendants' failure to adequately provide  CAVN with
the financial resources and the basic tools neces- sary to run a
commercial shipping line and to perform its  contracts with and
commitments to" the plaintiffs "provides  an independent basis to
attribute CAVN's commercial activi- ties to the [d]efendants for FSIA
purposes." The plaintiffs  cite two cases for support, but neither is


In Anderson v. Abbott, 321 U.S. 349 (1944), the Supreme  Court dealt
with a suit against some of the shareholders of a  bank holding
company, 321 U.S. at 354, the only substantial  asset of which was
stock in its subsidiary banks. Id. at 358.  By statute, stock in the
banks carried "double liability,"  meaning that both the banks and
their shareholders were  liable to the depositors. Id. at 358-59. The
Court held the  shareholders of the holding company liable for the
depositors'  claims against the subsidiary banks because allowing the 
holding company to insulate them "would allow stockholders  of banks
to retain all of the benefits of ownership without the  double
liability which Congress had prescribed." Id. at 358.


Here, in contrast to Abbott, the sovereign shareholder of  CAVN did not
use the corporation to defeat any statutory  policy of either
Venezuela or the United States. Nor was  CAVN, unlike the holding
company in Abbott, thinly capital- ized from its inception--a fact
relevant to the fraud or  injustice exception later given separate
recognition in Bancec.  These two critical differences render Abbott
inapplicable to  the case at bar.


In Hystro Products, Inc. v. MNP Corporation, 18 F.3d  1384 (7th Cir.
1994), the plaintiff brought suit under state law  against the parent
of a corporation that had not paid it for  certain goods before
ceasing operations. See id. at 1386-87.  The jury, finding that the
subsidiary was the "alter-ego" of  the parent, awarded damages to the
plaintiff. Id. The court  of appeals affirmed on the grounds that a
reasonable jury  could have concluded both that the parent and its
subsidiary  had not maintained their "separate identities," see id. at


and that the parent "allowed [its subsidiary] to continue to  place
orders knowing that it would 'stiff' [the plaintiff] on the  final
bill." Id. at 1392.


Hystro Products is inapplicable to the present case for two  reasons.
First, while the parent in Hystro Products dominat- ed its subsidiary,
the plaintiffs here, as we have seen, have  not shown that Venezuela
dominated CAVN. Second, in  Hystro Products there was evidence that
the parent had  planned for months to shut down its subsidiary and had
 neither told the plaintiff of those plans nor otherwise indicat- ed
that the subsidiary was having financial difficulty. The  jury
therefore reasonably could have concluded that the  parent had used
its subsidiary unjustly to obtain goods for  which it had no intention
of paying. Here, Venezuela did not  manipulate CAVN in order to obtain
a financial benefit from  the plaintiffs before CAVN went bankrupt; it
simply failed in  the end to bail CAVN out. The Government's extensive
but  ultimately unsuccessful efforts to save CAVN from bankrupt- cy
are a far cry from the fraud involved in Hystro Products.


We therefore hold that Venezuela is not amenable to suit  upon the
first three counts of the plaintiffs' complaint under  the fraud or
injustice exception. Those counts are dismissed.


B. Subject matter jurisdiction, Count IV


In the final count of the complaint the plaintiffs allege that 
Venezuela caused CAVN to breach its contracts with them by  "failing
to restore CAVN's accumulated deficits and by refus- ing to allow CAVN
to fully perform its obligations under the  Equipment Lease Agreements
and the restructuring and  repayment plans." Venezuela contends both
that the FSIA  and the act of state doctrine protect it from suit upon
this  count. The district court did not address either assertion.


In light of our dismissal of the first three counts of the  complaint,
and of the district court's failure to discuss the  final count, we
leave to the district court in the first instance  the question
whether Venezuela and the FIV are, by reason  of the FSIA, immune from
suit upon the final count. We do  not reach Venezuela's act of state
defense because it is not 


properly subject to interlocutory appeal. See Walter Fuller  Aircraft
Sales, Inc. v. Republic of the Philippines, 965 F.2d  1375, 1387 (5th
Cir. 1992). The act of state doctrine is a  substantive rule of law
that precludes the district court from  inquiring into the legality of
a sovereign's public acts; it is  not strictly an immunity from suit.
See id.


Although Venezula has asked this court to exercise  pendent
jurisdiction over the act of state issue, we decline to  do so. We
exercise such jurisdiction "sparingly" and not so  as to "reach[ ] an
issue that might be mooted or altered by  subsequent district court
proceedings." Gilda Marx, Inc. v.  Wildwood Exercise, Inc., 85 F.3d
675, 678, 679 (D.C. Cir.  1996). Because the district court is yet to
determine whether  Venezuela is immune from suit upon count four
pursuant to  the FSIA, we will not rush in to resolve the act of state
issue  at this juncture.


III. Conclusion


For the forgoing reasons, the first three counts of the  complaint are
dismissed. We remand this matter to the  district court to consider
whether the defendants are immune  under the FSIA from suit upon the
fourth count of the  complaint, and if not, then to take up
Venezuela's act of state  defense.


It is so ordered.