## Facts

- Foremost-McKesson, Inc., a U.S. corporation, helped establish an Iranian dairy company (Pak Dairy) and became a significant minority shareholder with management participation.
- After the 1979 Iranian Revolution, Iranian governmental or quasi-governmental entities allegedly took control of Pak Dairy.
- Foremost alleged that its equity interest was effectively expropriated and that dividends were withheld.
- Foremost sued Iran in federal court under the Foreign Sovereign Immunities Act (FSIA), asserting that Iran’s conduct fell within the FSIA commercial activity exception.
- Iran moved to dismiss for lack of subject-matter jurisdiction (sovereign immunity) and challenged personal jurisdiction.
- The district court denied dismissal, concluding the commercial activity exception potentially applied; Iran appealed.

## Issues

1. Whether Iran was immune from suit under the FSIA or whether the commercial activity exception in 28 U.S.C. § 1605(a)(2) could apply to the alleged expropriation and dividend denial.
2. Whether the conduct of Iranian entities involved with Pak Dairy could be attributed to Iran for FSIA purposes based on agency/instrumentality principles and the degree of state control.
3. Whether personal jurisdiction could be exercised over Iran if an FSIA exception applied.

## Decision

- The court of appeals held Iran was not categorically immune at the pleading stage, but that FSIA jurisdiction turned on unresolved factual questions.
- The court vacated the district court’s jurisdictional ruling to the extent it rested on insufficient factual findings regarding Iran’s relationship to Pak Dairy and related entities.
- The case was remanded for jurisdictional fact-finding on whether the relevant entities acted as Iran’s agents or instrumentalities and whether the challenged conduct constituted commercial activity under § 1605(a)(2).
- The court approved the use of jurisdictional discovery and evidentiary development to determine whether an FSIA exception applied and whether personal jurisdiction was proper.

## Legal Principles

- FSIA provides a presumption of foreign sovereign immunity, subject to enumerated exceptions; subject-matter jurisdiction exists only if an exception applies.
- Under § 1605(a)(2), immunity may be denied when an action is based on commercial activity by the foreign state, including certain acts outside the United States connected to commercial activity that cause a direct effect in the United States.
- Acts of formally separate entities are not automatically attributable to the sovereign; attribution depends on agency/instrumentality analysis and fact-specific findings on the degree of governmental control.
- Courts may conduct jurisdictional discovery and make preliminary factual determinations to resolve FSIA immunity and related personal-jurisdiction questions.
- Guidance from international-law principles on state responsibility (including Restatement-based control factors) may inform attribution determinations under the FSIA.

## Conclusion

The D.C. Circuit required the district court to develop a factual record on Iran’s control over the entities involved with Pak Dairy and the commercial character of the alleged conduct before deciding whether the FSIA commercial activity exception removes Iran’s immunity and permits jurisdiction.


Foremost-McKesson, Inc. v. Islamic Republic of Iran, 905 F.2d 438 (D.C. Cir. 1990)