Missouri’s COVID Suit Against China Revived
January 17, 2024
The Eighth Circuit has breathed life back into Missouri’s attempts to hold the People’s Republic of China (PRC) responsible in U.S. court for the COVID-19 pandemic. Missouri filed this claim in April 2020 and, as Chimène Keitner outlined at the time, the case is rife with Foreign Sovereign Immunities Act (FSIA) issues. This latest decision characterizes the Chinese Communist Party (CCP) as a “foreign state” under the FSIA, highlights a disputed reading of the FSIA’s commercial activities exception, and offers a reminder of intensifying anti-China politics during the pandemic.
Missouri’s Claims
Missouri’s allegations in this case can be divided into two categories: First, Missouri blames various Chinese government entities for allowing COVID-19 to spread and alleges they engaged in a “coverup” of the virus, which led to various harms in the state. Second, Missouri asserts that these entities hoarded personal-protective equipment (PPE), specifically restricting the supply of high-quality masks and thereby causing further spread of the virus.
In a July 2022 decision, Judge Limbaugh in the Eastern District of Missouri dismissed the complaint in full. Although none of the defendants appeared at this stage, Judge Limbaugh independently took up the question of whether the district court had subject matter jurisdiction, as he is required to do. He found that the FSIA covered all the defendants, including the CCP, and that neither of the exceptions to immunity that Missouri relied on—the commercial activity exception and the noncommercial torts exception—applied.
The Eighth Circuit’s Decision
The Eighth Circuit largely affirmed Judge Limbaugh’s decision, but with one crucial difference.
First, the court of appeals agreed that the FSIA applies to all the defendants. In reaching this conclusion, the court found that the CCP essentially is, or is at least an alter ego of, the PRC itself. Quoting the Supreme Court’s 2010 decision in Samantar v. Yousuf, the Eighth Circuit described the CCP as “in substance the same ‘body politic that governs [China].’” The court also offered instructive hints in its citations, referring to the notion that an entity can be considered a “foreign state” for FSIA purposes “if it is an alter ego of a foreign state” and offering The American Heritage Dictionary’s definition of “state” as “[t]he supreme public power within a sovereign political entity.” Whatever precise theory the Eighth Circuit intended to adopt, this is a notable—if perhaps predictable—conclusion about the status of the CCP within China.
The Eighth Circuit also agreed with Judge Limbaugh’s assessment that the FSIA’s noncommercial tort exception does not apply to any of Missouri’s claims. In particular, the court concluded that, because none of the alleged conduct was “mandatory or forbidden in China,” it fell into the “discretionary functions” exception to the noncommercial tort exception. Put otherwise, even if the alleged conduct were tortious, the defendants would be immune from litigating the wisdom of those policy decisions in U.S. courts. And, in some sense, the conclusion that the noncommercial tort exception doesn’t apply to this case is overdetermined. Not only was the alleged conduct discretionary, but it also wouldn’t satisfy the exception’s requirement, left unmentioned by the court of appeals here, that the “entire tort” take place within the United States.
The Eighth Circuit also agreed with Judge Limbaugh that the commercial activity exception did not apply to the first category of Missouri’s allegations—allowing COVID-19 to spread and engaging in its “coverup”—since the exception’s “direct effect” requirement was not met. Missouri claimed that the defendants’ conduct in China caused various harms in the state. But, as the Eighth Circuit put it, “[n]o direct causal chain exists here”:
Start with the spread of the virus itself, which required intervening actors. At least one infected individual (and probably more) had to travel from China to other parts of the world. The virus then had to spread and eventually reach the United States. Only at that point could an infected individual have brought the virus to Missouri. It took several more steps from there for Missouri’s economy to suffer.
Accordingly, the Eighth Circuit affirmed Judge Limbaugh’s dismissal of Missouri’s first category of claims.
But the Eighth Circuit reversed the district court’s dismissal of Missouri’s PPE hoarding claim. Judge Limbaugh treated this claim as incidental to the core misconduct alleged—namely, the mishandling of the virus, which he held was not commercial activity. The Eighth Circuit, by contrast, considered the hoarding claim part of Missouri’s larger theory “that China leveraged the world’s ignorance about COVID-19,” and it characterized “[t]aking over mask-producing factories and buying up a substantial portion of the world’s supply of personal-protective equipment” as commercial in nature. A majority of the panel then concluded that the hoarding had a direct effect in the United States. Judges Stras and Kobes reasoned that, unlike the transmission of the virus itself, no intervening actors or events were necessary for the alleged anticompetitive behavior to raise the cost of masks and impede patient treatment in Missouri. Chief Judge Smith disagreed on this final point, highlighting the challenge in drawing the line between what constitutes an “immediate consequence” of particular conduct and what does not.
The Eighth Circuit judges’ disagreement over the effects of China’s alleged hoarding notwithstanding, this claim is a strange fit for the commercial activity exception. First, Missouri quoted Trump adviser Peter Navarro in its allegation that “China had essentially taken over factories that make masks on behalf of American companies.” In the source Missouri relied on, Navarro went on to describe China’s actions as “nationaliz[ing] effectively 3M.” Yet nationalization is typically characterized as sovereign, not commercial, activity. Contrary to the Eighth Circuit’s conclusion, a government “taking over … factories” is not “the action[] of ‘a private player’ in the market.” Moreover, this exception only applies if the action is “based upon” commercial activity, with the “basis” or “foundation” of an action understood as “those elements of a claim that, if proven, would entitle a plaintiff to relief under his theory of the case.” It is not at all clear, however, that Missouri would be entitled to relief even on its own theory of the case. In its complaint, Missouri asserts that China’s alleged hoarding constituted “breach of duty and negligence,” but Missouri defines the breached duty circularly as “a duty not to hoard PPE” without specifying any legal basis for such a duty. Indeed, if restricting exports is an actionable breach of duty under the commercial activity exception, then OPEC’s members could just as easily be sued in the Eighth Circuit.
Conclusion
Missouri’s case will now move forward on the PPE hoarding claim, with the Chinese defendants still not participating. As tensions in the U.S.–China relationship smolder and anti-China sentiment burns bright in the United States, the revival of this case could add fuel to the fire. The Eastern District of Missouri clerk of court has already entered a default in this case against the PRC, CCP, and other entities once before—apparently disregarding the heightened standard for default under the FSIA. Doing so again would lend credence to the politicized claim that China is to blame for the harms of COVID, and it would be a regrettable application of the FSIA’s commercial activity exception to immunity.