2007 International Law Update, Volume 13, Number 3 (March)

2007 International Law Update, Volume 13, Number 3 (March)

Legal Analyses published by Mike Meier, Attorney at Law. Copyright 2017 Mike Meier. www.internationallawinfo.com. 

ATTORNEY‑CLIENT PRIVILEGE

In copyright infringement case against German media conglomerate, Ninth Circuit rules that, in civil case in which party seeks outright disclosure of attorney‑client communications under crime‑fraud exception: (1) both parties have right to present evidence to district court, and (2) party seeking disclosure must prove by preponderance of evidence that exception applies; and (3) on facts of this case, Plaintiffs have not established crime‑fraud exception

In the main litigation transferred to a California federal court, UMG Recording, Inc. and nineteen other media companies and individuals (Plaintiffs), sued Bertelsmann AG (Defendant), a German media conglomerate, along with Bertelsmann, Inc. and seven other Defendants, both individuals and partnerships. Many of the copyright issues raised arise out of the demise and bankruptcy of Napster, the online file‑sharing music service also pending in the same court.

The complaint asserted Defendant’s vicarious and contributory liability for alleged copyright infringement based on Defendants’ substantial loans to Napster which thereby involved itself in Napster’s alleged infringements of Plaintiffs’ copyrights.

Plaintiffs alleged, inter alia, that Napster’s service facilitated the unauthorized reproduction and distribution of copyrighted digital music files. In July 2000, the district court ordered Napster to search for, and remove from its service, files that rights holders had identified as infringing. The Ninth Circuit substantially affirmed in February 2001.

Napster’s service was shut down in July 2001 after it failed to comply with the terms of a modified preliminary injunction. In June 2002, Napster filed for bankruptcy before the courts had ruled on its ultimate liability for copyright infringement.

Between October 2000 and October 2001, Defendant lent Napster about $85 million to finance its looked for transition to a licensed digital music distribution system. Napster failed fully to launch the new licensed system, however, before declaring bankruptcy. Defendant did not come away with Napster’s assets in the bankruptcy proceedings.

In April 2003, Plaintiffs and others separately filed suit against Defendant in a New York federal court, claiming that Defendant was vicariously and contributorily liable for copyright infringement by Napster and/or Napster’s users. More particularly, Plaintiffs claimed that, by lending Napster millions of dollars, Defendant took effective control over Napster’s infringing file‑sharing service, and prolonged its allegedly unlawful operations.

The plan was seemingly to avoid the loss of Napster’s 40 million or so users before the new licensed digital music distribution system became functional. The Multidistrict Litigation Panel transferred Plaintiffs’ suits against Defendant to the Northern District of California, where the In re Napster, Inc. Copyright Litigation was pending.

Defendant moved to dismiss Plaintiffs’ suits for failure to state a claim in July 2003. It argued that, as a matter of law, merely lending money to an alleged copyright infringer cannot give rise to liability under either a vicarious or contributory copyright infringement theory. Defendant further contended that its loan did not enable it to take control of Napster. The district court denied Defendant’s motion.

In November 2005, Plaintiffs moved to compel Defendant to produce all attorney‑client communications relating to a $50 million loan, convertible to equity, that Defendant had made to Napster in October 2000 while Napster was appealing the initial preliminary injunction.

Plaintiffs charged that, starting in September 2000 when drafting of the loan documents began, Defendant had taken part in a continuing scheme to defraud the courts. They argued that the crime‑fraud exception to the attorney‑client privilege applied to these communications relying on two theories of “fraudulent deceit” as defined in the California Civil Code.

First, Plaintiffs argued that Defendant’s “loan” to Napster was not in fact a loan. Instead, it consisted of cash tendered in exchange for an equity stake in the company. According to Plaintiffs, Defendant had its lawyers create sham loan documents aimed at disguising what was, in reality, a purchase of control over Napster. Plaintiffs further charged that Defendant, looking to future copyright infringement litigation, planned to use the spurious loan documents to hoodwink the courts into deciding that it was not an equity owner and thus was not liable for Napster’s wrongful actions.

In support of its “sham loan” theory, Plaintiffs pointed to several pieces of circumstantial evidence. They cited internal Defendant documents showing that the company’s executives and outside counsel tried to structure the transaction in such a way as to avoid copyright liability.

Moreover, by its express terms, the $50 million loan was convertible to equity in Napster in lieu of repayment once the licensed digital music distribution system got off the ground. In one e‑mail, for instance, counsel for Defendant stated that the “loan has to look like a loan, otherwise it will be characterized as equity and [Defendant] may have liability for copyright infringement in the minds of some lawyers.”

Under their second fraud theory, Plaintiffs contended that Defendant, through its lawyers, was trying to defraud the courts by omitting from the loan documents a secret “side agreement;” it allowed Napster to channel some of the $50 million into paying Napster’s litigation expenses. Plaintiffs argued that Defendant stood to benefit if continuing litigation allowed Napster’s existing service to stay operational until the anticipated new system was in place, thereby avoiding dispersion of the customer base. Plaintiffs cited several e‑mails in support of this theory plus other circumstantial evidence gleaned from discovery depositions.

In opposition, Defendant protested that evidence that it structured a corporate transaction to limit its liability did not prove either that the loan documents were a sham or that they were meant to defraud the courts. Defendant further contended that there was no such thing as a secret side agreement about litigation expenses. It cited various items of testimony in discovery depositions and elsewhere to support its position.

On April 20, 2006, the district court issued an order compelling Defendant to reveal all attorney‑client communications which had to do with the creation of the loan document and the use of that loan document in the bankruptcy proceedings and before the district court. The court held that Plaintiffs had made out a “prima facie” showing that the crime‑fraud exception applied under Ninth Circuit precedent, describing this test as “quite lenient.”

The lower court also ruled that, in deciding whether the crime‑fraud exception applied, it “need only consider the evidence offered by the moving party,” and that it does not have to take into account “conflicting evidence offered by the party seeking to uphold the privilege.” The court cited several items of evidence offered by Plaintiffs and said that, in any event, Defendant’s counter‑evidence would not have persuaded it.

After assessing the facts, the district court upheld the Defendant’s privilege and rejected the Plaintiffs’ crime or fraud contentions. Plaintiffs then filed an interlocutory appeal and a petition for mandamus. On March 14 , the U.S. Court of Appeals for the Ninth Circuit reverses and remands.

The underlying litigation being far from yielding a “final judgment” under 28 U.S.C. Section 1291, the Court of Appeals concludes it has appellate jurisdiction under the “collateral offshoot” doctrine. The issue in this interlocutory appeal is whether Plaintiffs may invade Defendant’s attorney‑client privilege because Defendant used, or intended to use, its counsel to commit a fraud on the courts.

“We conclude that the attorney‑client privilege issue presented in this interlocutory appeal is ‘completely separate from the merits of the action.’ That is, the privilege issue is ‘too important to be denied review and too independent of the cause itself to require that appellate consideration be deferred until the whole case is adjudicated.’ Cohen v. Beneficial Industrial Loan Corp., 337 U.S. 541, 546 (1949).” The Court, therefore, need not reach the questions posed by the mandamus petition.

The Court then launches on the thorny questions presented. “The attorney‑client privilege is the oldest and arguably most fundamental of the common law privileges recognized under Federal Rule of Evidence 501. See United States v. Zolin, 491 U.S. 554, 562 (1989). The assurance of confidentiality promotes open attorney‑client communications, which are ‘central to the legal system and the adversary process.’ United States v. Hodge & Zweig, 548 F.2d 1347, 1355 (9th Cir. 1977). The attorney‑client privilege protects fundamental liberty interests by allowing individuals to seek the legal advice they need ‘to guide them through [the] thickets’ of complex laws. United States v. Chen, 99 F.3d 1495, 1499 (9th Cir. 1996).”

“Notwithstanding its importance, the attorney‑client privilege is not absolute. The ‘crime‑fraud exception’ to the privilege protects against abuse of the attorney‑client relationship. Hodge & Zweig, id. As the Supreme Court wrote in Clark v. United States, 289 U.S. 1 (1933), ‘The privilege takes flight if the relation is abused. A client who consults an attorney for advice that will serve him in the commission of a fraud will have no help from the law. He must let the truth be told.’ Id. at 15.”

“The attorney need not have been aware that the client harbored an improper purpose. Because both the legal advice and the privilege are for the benefit of the client, it is the client’s knowledge and intent that are relevant. [Cites]. The planned crime or fraud need not have succeeded for the exception to apply. The client’s abuse of the attorney‑client relationship, not his or her successful criminal or fraudulent act, vitiates the privilege. [Cite]. Despite the fundamental importance and long history of the attorney‑client privilege and the crime‑fraud exception, the procedures for preserving the privilege against a crime‑fraud challenge are surprisingly unclear.”

“Among [the unanswered questions are], first, what procedures are to be followed when an order to compel outright disclosure (rather than in camera review) is at stake? Second, what is the burden of proof on the party seeking to compel outright disclosure under the crime‑fraud exception?”

“The two questions relevant to this appeal are subsets of the questions noted above that were left unanswered by Zolin. First, in a civil case, should the district court consider not only the evidence adduced by the party seeking to vitiate the attorney‑client privilege by invoking the crime‑fraud exception, but also the evidence adduced by the party seeking to preserve the privilege? Second, in a civil case, what is the burden of proof for the party seeking to establish the crime‑fraud exception? We address these questions in turn.”

“We begin our analysis with Zolin, in which the Internal Revenue Service sought to vitiate the attorney‑client privilege under the crime‑fraud exception. The question in Zolin was whether a party seeking to establish that the crime‑fraud exception applies must rely entirely on sources independent of the disputed attorney‑client communications, or whether a district court ‘may ever honor’ a request that it conduct in camera review of some of the communications to assist in the determination that the privilege has been vitiated. Zolin supra, at 560‑61, 565.”

“The Court first looked to Federal Rule of Evidence 104(a), which provides that ‘[p]reliminary questions concerning . . . the existence of a privilege . . . shall be determined by the court . . . . In making its determination it is not bound by the rules of evidence except those with respect to privileges.’ Zolin, supra at 565. Neither [side] in this case requested that the district court conduct in camera review of the disputed communications.”

“We have never squarely ruled on the question whether a party in a civil case, seeking to preserve the attorney‑client privilege against a crime‑fraud challenge, has the right to present countervailing evidence when the district court is deciding whether to order outright disclosure. ...We hold that in civil cases where outright disclosure is requested, the party seeking to preserve the privilege has the right to introduce countervailing evidence. In so holding, we agree with the well‑reasoned decision of Judge Aldisert for the Third Circuit in Haines v. Liggett Group, Inc., 975 F.2d 81, 96‑97 (3d Cir. 1992). That court wrote: ‘Deciding whether the crime‑fraud exception applies is another matter [from deciding whether to conduct in camera review]. If the party seeking to apply the exception has made its initial showing, then a more formal procedure is required than that entitling plaintiff to in camera review. The importance of the privilege, ... as well as fundamental concepts of due process require that the party defending the privilege be given the opportunity to be heard, by evidence and argument, at the hearing seeking an exception to the privilege.’”

“We are not convinced that in all cases it is necessary for the district court to conduct a live hearing with oral argument; in appropriate cases, the court may decide the matter on the papers. But we are convinced, ... that, in a civil case, the party resisting an order to disclose materials allegedly protected by the attorney‑client privilege must be given the opportunity to present evidence and argument in support of its claim of privilege.”

The second key point addressed by the Appellate Court deals with burden of persuasion issues. “The Court in Zolin adhered to the cryptic statement made more than fifty years earlier in Clark that the burden of proof on the party seeking to vitiate a privilege was to make ‘a showing of a prima facie case sufficient to satisfy the judge that the light should be let in.’ Clark, supra, at 14.”

“We have never squarely addressed the question whether our ‘reasonable cause to believe’ standard, applicable in grand jury cases, is also applicable in civil cases. In [cite], a criminal appeal rather than a grand jury case, we wrote without elaboration: ‘All the government needed to show was evidence that, if believed by the jury, would establish the elements of an ongoing violation.’”

“For several reasons, we conclude that, in a civil case, the burden of proof that must be carried by a party seeking outright disclosure of attorney‑client communications under the crime‑fraud exception should be preponderance of the evidence. First, requiring a moving party to establish the existence of the crime‑fraud exception by a preponderance of the evidence is consonant with the importance of the attorney‑client privilege.”

“Second, the phrase ‘prima facie case,’ used by the Court in Clark and then fifty years later in Zolin, is not inconsistent with a preponderance of the evidence standard. ... As it relates to the crime‑fraud exception, ‘[t]he prima facie standard has always been poorly defined, inconsistently interpreted and generally misunderstood.’ Paul R. Rice, Attorney‑Client Privilege in the United States Section 8.6, at 44 (2d ed. 1999).”

“Zolin is therefore not directly on point, but we believe that it signals that preliminary questions concerning the existence or non‑existence of the attorney‑client privilege—including whether the crime‑fraud exception ‘terminate[s] the privilege,’—must be established under Rule 104(a). And we know from Bourjaily v. United States, 483 U.S. 171 (1987), that preliminary questions of fact under Rule 104(a) must be established by a preponderance of the evidence.”

“Finally, the problem of limited access to proof by the party seeking to vitiate the attorney‑client privilege is mitigated by the possibility of in camera review of the communications by the district court under the far less demanding standard of Zolin. We do not regard in camera review as a panacea, for a ‘blanket rule allowing in camera review ... would place the policy of protecting open and legitimate disclosure between attorneys and clients at undue risk.’”

“But judicious use of in camera review, combined with a preponderance burden for terminating privilege, strikes a better balance between the importance of the attorney‑client privilege and deterrence of its abuse than a low threshold for outright disclosure. Looking at the evidence presented in this case under the preponderance standard, we hold that even if all of the evidence proffered by [Plaintiffs] is believed, there is an insufficient basis to hold that the attorney‑client privilege may be vitiated under the crime‑fraud exception.”

“... [Plaintiffs] rely on two theories of fraud on the court. The first is that the entire loan was a sham intended for use in future legal proceedings as a means of disguising [Defendant’s] purchase of control of Napster. [Plaintiffs’] second theory is that [Defendant] undertook a scheme to defraud the courts by hiding a side agreement that allowed Napster to use a portion of the loan proceeds to pay its litigation expenses.”

“Even if we credit the Barry e‑mail, the Timm memorandum, and the Barry deposition testimony relied on by the district court, and even if we conclude that [Defendant] agreed with Napster that the term ‘overhead costs’ in the loan documents would include litigation expenses, we would not conclude that this evidence establishes an intentional, material misrepresentation directly ‘aimed at the court.’”

“Taken either alone or along with [Defendant’s] evidence, [Plaintiffs’] evidence does not establish that the loan terms constituted a fraud. Rather, the evidence shows routine wrangling over contract terms and a lawyerly attempt to make inconspicuous the fact that some of the money could be used for litigation expenses. Second, even if we were to conclude that the written terms of the loan misrepresented the parties’ agreement to allow some of the funds to be used for litigation expenses, [Plaintiffs’] evidence nowhere suggests that [Defendant] selected these terms with the intent to defraud the courts.”

“Third, even assuming, arguendo, that [Defendant’s] failure to spell out in the loan documents that ‘overhead costs’ included litigation expenses was an intentional misrepresentation, we do not see how it could have deceived a court into concluding that Bertelsmann provided no financial support to, or had no financial stake in, the existing Napster company.”

“For the foregoing reasons, in a civil case in which outright disclosure of attorney‑client communications is sought under the crime‑fraud exception, we hold that (1) both parties have a right to present evidence to the district court, and (2) the party seeking disclosure must prove by a preponderance of the evidence that the exception applies. We further hold that on the facts of this case the crime‑fraud exception has not been established.” [Slip op. 7‑15].

Citation: In re: Napster, Inc. Copyright Litigation, 479 F.3d 1078 (9th Cir. 2007).

CRIMINAL LAW

Ninth Circuit rules that Protect Act does not apply to criminal sexual acts of U.S. pedophile who committed them in Cambodia because his foreign travel had ended before enactment of the Act

A federal grand jury indicted Gary Jackson (Defendant) for violating 18 U.S.C. Section 2423, the Prosecutorial Remedies and Other Tools to end the Exploitation of Children Today Act [PROTECT Act], which prohibits U.S. citizens and permanent residents from traveling in foreign commerce to engage in illicit sexual conduct. Defendant and his domestic partner, James Kleven, relocated to Cambodia in 2001. The statute went into effect on April 30, 2003. The pair traveled within Thailand for a few months and then settled in their new home in Phnom Penh in January 2002. In June 2003, Cambodian police arrested Defendant for having had sex with three young boys. The U.S. took jurisdiction and the authorities escorted Defendant to the U.S. for trial.

Defendant entered into a plea agreement which admitted the facts but reserved his right to challenge the indictment on constitutional, jurisdictional and statutory grounds. The district court ended up dismissing the indictment. It held that the statute did not apply retroactively to Defendant’s foreign travel prior to April 30, 2003. The Government appealed. The U.S. Court of Appeals for the Ninth Circuit, however, affirms.

The application of the statute to individuals whose travel took place before its effective date is a matter of first impression in the Circuit Courts. The statute at issue seeks to contribute to the control of international child‑sex tourism. It provides in relevant part that “Any United States citizen or alien admitted for permanent residence [1] who travels in foreign commerce, and [2] engages in illicit sexual conduct with another person shall be fined ... or imprisoned for not more than 30 years, or both.” 18 U.S. C. Section 2423(c). Analyzing the relationship between the two elements of the offense, the Court holds that Section 2423(c) does not apply where the travel took place before its effective date even though Defendant committed the alleged illicit act thereafter.

“Our conclusion follows largely from the plain language of the statute. Critical to our statutory interpretation is that Section 2423(c) specifies, as one of the crime’s two elements, that it covers ‘[a]ny United States citizen . . . who travels in foreign commerce.’ 18 U.S.C. Section 2423(c) ... The use of the present tense suggests that statutory element does not apply to travel that occurred before the statute’s enactment.” [Slip op. 6]

“ ... [Defendant’s] travel had ended by April 30, 2003.... As of that date, it had been nearly eighteen months since his last airplane flight from the United States, and almost sixteen months since he had begun residing in a Phnom Penh home purchased for him. As of April 30, 2003, [Defendant] had given up his residence in the United States, begun fulfilling Cambodia’s five‑year residency requirement, and intended then to apply for Cambodian citizenship. The government does not dispute those facts. Instead, it admits in its brief that [Defendant] ‘took up residence in Cambodia.’”

“It is thus evident that [Defendant] had both arrived in Cambodia and resettled in that country before Section 2423(c) was passed. His travel had ended on either plausible interpretation of the term ‘travel’ as used in Section 2423(c). As Congress did not intend to cover those whose travel ended before that date, he could not be charged under Section 2423(c).” [Slip op. 12]

Citation: United States v. Jackson, 2007 WL 925730 (9th Cir. 2007).

ELEVENTH AMENDMENT

In bankruptcy proceeding brought by foreign government agency in New York federal court to recover assets of failed foreign banks seized by New York Superintendent of Banks, Second Circuit rejects New York agency’s defense of immunity from suit under Eleventh Amendment

The Superintendent of Banks of the State of New York (Defendant) seized $100 million in assets and property from two failed banks in Yugoslavia, namely, Jugobanka and Beogradska Banka. The banks had held licenses from the New York banking authorities for their New York operations, and were thus subject to New York’s banking regulations. In 1992, amidst ethnic unrest within Yugoslavia, President George H. W. Bush froze the assets of certain Yugoslav entities, including the above banks.

The Deposit Insurance Agency of the former State Union of Serbia and Montenegro (Plaintiff) is now administering the banks in bankruptcy. Plaintiff petitioned to recover the frozen assets pursuant to the (since repealed) Section 304 of the U.S. Bankruptcy Code. It provides that a representative of a foreign claimant may begin a federal case ancillary to a foreign proceeding by filing a petition in the bankruptcy court.

The Defendant opposed the Plaintiff’s petition based on a state’s immunity from suit under the Eleventh Amendment to the U.S. Constitution. The District Court, however, rejected the immunity defense. The Plaintiff then filed the present interlocutory appeal. The U.S. Court of Appeals for the Second Circuit, however, affirms.

The Eleventh Amendment immunizes a U.S. state and its entities from suit in federal court. This immunity, however, is not absolute. Congress may abrogate it based on a valid exercise of constitutional authority. Assuming that the Eleventh Amendment would ordinarily bar this suit, there is an exception based on Ex parte Young, 209 U.S. 123 (1908). Under Young, the Amendment does not bar a plaintiff from suing a state official acting in his official capacity for “prospective injunctive relief” against violations of federal law.

“Here, application of the straightforward inquiry suggests that the Eleventh Amendment does not prevent this suit against the Superintendent. The gravamen of the Agency’s petition is that the Superintendent is committing an ongoing violation of federal law by taking possession of, and retaining, assets that—under 11 U.S.C. Section 304(b) & (c) (empowering a bankruptcy court to enjoin such proceedings and order turnover of the assets, and outlining the legal standards pursuant to which this relief may be granted)—must be released to the foreign Agency that represents the banks ... for foreign insolvency proceedings.”

“This allegation is plainly ‘neither insubstantial nor frivolous’ as a legal claim, and thus satisfies the first requirement of the Ex parte Young doctrine. ... Moreover, it is undisputed that the injunctive relief sought – turnover of the assets and enjoinment (sic) of any state insolvency proceedings – is prospective in nature, satisfying the second prong of the inquiry.”

“The Superintendent does not argue that the relief is retrospective or designed to compensate for a past violation of federal law, nor does she contend that any turnover of the assets would even minimally deplete New York’s public fisc. ... In short, a prima facie case for permitting suit under Ex parte Young is here established.” [Slip op. 7‑8]

Citation: In re: Deposit Insurance Agency, 2007 WL 927138 (2d Cir. 2007).

EUROPEAN UNION (CUSTOMS )

In referral from Dutch court for advisory opinion under Article 234EC, European Court of Justice holds that Applicant’s obtaining of higher definitive refunds from Dutch government for importing cheese to be sold in U.S. market some of which was immediately re‑exported to Canada where refunds were lower requires national courts to secure proof that exporter intentionally abused refund laws before they demand that Applicant repay excess refunds

Between 1988 and 1994, Vonk Dairy Products BV, the Dutch Applicant in the main proceedings in the courts of Holland, exported 300 consignments of Italian “pecorino” cheese per year to the United States, a total of 2,100 consignments. With respect to those exports, the Applicant received from Productschap Zuivel (Dairy Products Board) (Defendant) differentiated refunds granted on the basis of Regulation No. 3665/87.

These became final after the release of the securities provided when the Defendant received the documents showing that the cheese consignments had been released for free circulation in the U.S. A key factor is that the amount of the refunds for the pecorino cheese would be higher if exported for sale in the U.S. market than to Canada.

The General Inspectorate (the AID) of the Ministry of Agriculture, Nature Management and Fisheries, initially investigated the exports of cheese at issue. That inquiry turned up certain irregularities on the Applicant’s part. The AID, therefore, asked the U.S. Customs in New York to launch an administrative investigation into the exports Applicant made between 1988 and 1994.

The Customs investigation uncovered the following facts. During the above period, Orlando Food Corporation, Applicant’s U.S. intermediary, almost immediately re‑exported 75 consignments of pecorino cheese to Canada, usually to the National Cheese & Food Company (NCF) in Ontario. It also appeared that the Applicant did not limit its role to exporting these consignments of cheese to the U.S. Applicant not only knew that Orlando was forwarding the cheese to Canada but also played a part in the Canadian marketing of those consignments. Applicant had also corresponded with NCF on these matters.

Next, the Public Prosecutor in Roermond, Netherlands, started a judicial investigation of the Applicant and its officers as to possible falsification of documents. For example, the applications for the differentiated refunds referred to the United States as the country of destination for consumption, although Applicant knew that some consignments of cheese ended up being sold in Canada . The AID included these findings in its official report of March 1997.

In April 2001, the Defendant revoked its decisions granting refunds as to the 75 consignments in dispute and demanded the repayment of the sum of NLG 2,795, 841.72. This sum consisted of the difference between the applicable refunds for goods sent to the U.S. market and those applicable to Canada, plus 15 percent.

When the Defendant rejected as unfounded the Applicant’s objection to that decision, the Applicant filed an appeal before the Administrative Court for Trade and Industry (ACTI). In support of that appeal, the Applicant submitted that it had satisfied all the conditions set forth in ... Regulation No 3665/87 for obtaining differentiated refunds as to the consignments of cheese at issue. Moreover, it claimed that the later re‑exportation of some of those consignments to Canada should have no legal effect on the original grant of those refunds.

The Applicant also contended that the alleged irregularities were neither continuous nor repeated and that most of the consignments which it exported to the U.S. were not re‑exported. Moreover, it complained that the judicial investigation dealt with the alleged falsification of documents and not with the revocation of refunds or the demand for repayment.

The Defendant, on the other hand, considers the lawsuit to be unfounded. It stresses that it is essential with respect to the payment of differentiated refunds that the covered goods actually reach their designated market. The fact that Applicant had taken part in re‑exporting a certain quantity of the pecorino cheese to Canada implies that the Applicant has a duty to repay the differentiated refunds at issue in the main proceedings.

In those circumstances, the ACTI decided to stay the proceedings and to refer questions on the applicable EU law to the European Court of Justice (ECJ) for a preliminary advisory ruling pursuant to Article 234EC.

The ECJ responds to the first inquiry. “By its first question, the national court seeks, in essence, to ascertain whether, in proceedings for the withdrawal and recovery of differentiated refunds which have been definitively paid on the basis of Regulation No 3665/87, a finding that those refunds have been wrongly paid means that evidence of abuse on the part of the exporter must be furnished.”

“In particular, it is apparent from the order for reference that the Defendant ... did not use the option in ... Regulation No 3665/87 to request, before the refunds at issue were made definitive, additional evidence of such a kind as to establish that the products concerned had actually been placed on the market in the non‑member country of import in an unaltered state.” [¶ 28].

“It is important to point out that, ... the decision to demand the repayment of those refunds is not based on the defective nature of the import documents furnished by the Applicant ... but on the fact that some consignments of cheese were re‑exported to another non‑member country almost immediately after being imported into the United States.” [¶ 30].

“A finding that the differentiated refunds definitively granted for the purposes of Regulation No 3665/87 were wrongly paid thus requires, where a proportion of all the products concerned was almost immediately re‑exported to another non‑member country, evidence of abuse on the part of the exporter.”

“That evidence involves first, a combination of objective circumstances from which it is apparent that, despite formal observance of the conditions laid down by the Community rules, the purpose of those rules has not been achieved, and, second, a subjective element consisting in the intention to obtain an advantage from the Community rules by creating artificially the conditions laid down for obtaining it . [Cite]. The existence of that subjective element can be established, inter alia, by evidence of collusion between the exporter receiving the refunds and the importer of the goods in a non‑member country other than the country of importation.”

“It is for the national court to verify whether the factors constituting such an abuse are present in the case before it in accordance with the rules of evidence of national law, provided that the effectiveness of Community law is not undermined. [Cite].”

“The Netherlands Government submits, ... that evidence of abuse in terms ... on the part of the exporter has to be furnished only in cases where all the formal conditions for the grant of the refunds are satisfied, which is not true of the case in the main proceedings because, as the consignments of cheese which were re‑exported to Canada were not released for consumption on the United States market, the condition with respect to release for consumption in the non‑member country within the meaning of ... Regulation No 3665/87 has not been satisfied.”

“That argument cannot be accepted. It is apparent, firstly, ... that the Applicant ... satisfied at a formal level all the conditions provided for by Regulation No 3665/87 in respect of the grant of the differentiated refunds at issue in the main proceedings, including those provided for in Article 17(3) of the Regulation, with the result that those refunds were definitively paid to it without the competent authorities of the Member States concerned having deemed it appropriate to require at the outset, on the basis of ... Regulation No 3665/87, that additional evidence be provided that the product had actually been placed on the market in the non‑member country of import in an unaltered state. Secondly, ... the Member State concerned in the main proceedings is not justified in requiring the repayment of definitively paid refunds, unless abuse on the part of the exporter is proven.” [¶¶ 32‑36].

“In the light of the foregoing, the answer to the first question referred for a preliminary ruling must be that, in proceedings for the withdrawal and recovery of differentiated refunds which have been definitively paid on the basis of Regulation No 3665/87, a finding that those refunds have been wrongly paid must be substantiated by evidence of abuse on the part of the exporter, furnished in accordance with the rules of national law.”

“Since the first question has been answered in the affirmative, it is unnecessary to answer the second question.” [¶¶ 38‑39].

“By its third question, the national court seeks, in essence, to ascertain the criteria applicable when assessing, whether an irregularity is to be regarded as continuous or repeated for the purposes of ... Regulation No 2988/95. It does so, in particular, with regard to a situation where the irregularity relates to a relatively small proportion of all the transactions in a given period and always concerns different consignments.”

“...[A]n irregularity is continuous or repeated for the purposes of ... Regulation No 2988/95 where it is committed by a Community operator who derives economic advantages from a body of similar transactions which infringe the same provision of Community law.”

“The fact that, ... the irregularity relates to a relatively small proportion of all the transactions carried out in a given period and that the transactions in which the irregularity has been detected always concern different consignments is immaterial in this respect. Those factors cannot be decisive for the purposes of establishing the existence of a continuous or repeated irregularity, otherwise operators may seek to avoid the application of ... Regulation No 2988/95 by artificially dividing their transactions.”

“It is for the national court to verify, in accordance with the rules of evidence of national law, provided that the effectiveness of Community law is not undermined, whether action constituting a continued or repeated irregularity has taken place ... .”

“... [T]he answer to the third question must be that, for the purposes of ... Regulation No 2988/95, an irregularity is continuous or repeated where it is committed by a Community operator who derives economic advantages from a body of similar transactions which infringe the same provision of Community law. The fact that the irregularity relates to a relatively small proportion of all the transactions carried out in a given period and that the transactions in which the irregularity has been detected always concern different consignments is immaterial . ...” [¶¶ 40‑44].

Citation: Vonk Dairy Products BV v. Productschap Zuivel, Case C‑279/05 (Eur. Ct. Just., 1st Chamber, 2007).

EXTRADITION

Fourth Circuit holds that Foreign Affairs Reform and Restructuring Act (FARR) deprives federal court of jurisdiction to decline extradition on allegations of future possible violations of U.N. Convention against Torture

In his home country of Romania, a court convicted Petru Mironescu (Petitioner) in absentia of automotive crimes. Authorities later arrested him in the U.S. A magistrate judge certified his extraditability to the U.S. Secretary of State. Mironescu petitioned for a writ of habeas corpus, claiming that the U.S. should not extradite him because Romanian authorities might subject him to torture.

The district court denied the Government’s motion to dismiss Petitioner’s habeas corpus proceeding, and enjoined the Government from extraditing him to Romania. The Government appealed. The U.S. Court of Appeals for the Fourth Circuit reverses and remands for dismissal because the district court lacked jurisdiction to consider the merits of Petitioner’s case.

The specific issue is whether Article 3 of the United Nations Convention Against Torture and Other Cruel, Inhuman or Degrading Treatment or Punishment (CAT) [ adopted Dec. 10, 1984, 23 I. L. M. 1027, 1028, 1465 U.N. T. S. 85, 114], and by Section 2242 of the FARR Act of 1998, see Pub. L. No. 105‑277, div. G, 112 Stat. 2681‑822 (codified at 8 U.S.C. Section 1231 note)] constrains the Government’s discretion in extradition matters by barring the return or extradition of a person to a country where he or she might be subject to torture. Under the pertinent regulations, the U.S. State Department applies a “more likely than not” burden on the Petitioner.

At the outset, the Court describes the extradition process. In general, there is no obligation for one nation to surrender fugitive criminal suspects to another in the absence of a bilateral treaty to that effect. “The process begins with the submission by a foreign government of an extradition request to the U.S. Department of State. See Restatement (Third) of Foreign Relations Law Section 478 cmt. a (1987).”

The State Department then determines whether a treaty governs the request. “If it does, the matter is referred to the Justice Department for screening. ... Assuming that the Justice Department deems the request to be valid, it is referred to the United States Attorney for the district in which the fugitive is believed to be located. ...”

“At that point, the U.S. Attorney files a complaint in the district court, seeking (a) certification of the fugitive’s extraditability and (b) a warrant for his arrest. See 18 U.S. C. A. Section 3184 ... Once the fugitive is in custody, a ... judge ... conducts a hearing to determine whether (1) there is probable cause to believe that the fugitive has violated one or more of the criminal laws of the country requesting extradition; (2) the alleged conduct would have been a violation of American criminal law, if committed here; and (3) the requested individual is the one sought by the foreign nation for trial on the charge at issue.”

“Provided that these requirements are satisfied and that the applicable treaty provides no other basis for denying extradition, the judge certifies to the Secretary of State (the Secretary) that the fugitive is extraditable. See Section 3184. Although a judge’s certification of extraditability is not appealable, a fugitive may obtain limited collateral review of the certification in the form of a petition for a writ of habeas corpus. ... In considering such a habeas petition, the district court generally determines only whether the judge had jurisdiction, whether the charged offense is within the scope of the applicable treaty, and whether there was any evidence supporting the probable cause finding. ...”

“Following certification by the district court, the Secretary must decide whether to extradite the fugitive. See Section 3186 ... (‘The Secretary of State may order the person . . . to be delivered to any authorized agent of such foreign government, to be tried for the offense of which charged.’). In deciding whether to extradite, the Secretary may consider ‘factors affecting both the individual defendant as well as foreign relations factors that may be beyond the scope of the ... judge’s review.’ ...”

“The broad range of options available to the Secretary includes (but is not limited to) reviewing de novo the judge’s findings of fact and conclusions of law, refusing extradition on a number of discretionary grounds, including humanitarian and foreign policy considerations, granting extradition with conditions, and using diplomacy to obtain fair treatment for the fugitive. ...” [Slip op. 2‑3]

The Court then turns to the Government’s argument that the Petitioner here may not raise CAT or FARR Act considerations in habeas proceedings. The scope of habeas review in extradition cases is limited. Under the “rule of non‑inquiry,” the courts of the requested nation do not evaluate the penal system of the requesting nation as Petitioner asks it to do.

“ ... [T]he Government maintains that, regardless of the fact that the Secretary’s extradition of Petitioner would violate federal law if extradition will likely result in Petitioner’s torture, the rule of non‑inquiry should preclude habeas review here because courts are ill‑equipped to ‘second‑guess[ ] the expert opinion of the State Department’ regarding whether torture is likely to occur in Romania. ...”

“We do not agree. It is important to emphasize that a habeas court reviewing CAT or FARR Act claims would not be called upon to consider whether extradition would further our foreign policy interests or, if so, how much to weigh those interests. Rather, it would be required to answer only the straightforward question of whether a fugitive would likely face torture in the requesting country.”

“American courts routinely answer similar questions, including in asylum proceedings and in applying the political offense exception, under which the political nature of, and motivation for, a crime may negate extraditability. ... We have no reason to doubt that district courts could adequately perform this function in this context as well.” [Slip op. 11]

The district court, however, should have granted the Government’s motion below because Section 2242(d) of the FARR Act bars consideration of Mironescu’s petition. Section 2242(d) provides that “... nothing in this section shall be construed as providing any court jurisdiction to consider or review claims raised under the Convention or this section, ..., except as part of the review of a final order of removal pursuant to ... the Immigration and Nationality Act ...” Thus, Section 2242(d) deprives the district court of jurisdiction to consider Petitioner’s claims.

Citation: Mironescu v. Costner, 2007 WL 852356 (4th Cir. 2007).

LETTERS ROGATORY

With respect to district court’s compliance with letters rogatory from Panamanian court seeking information on assets of Panamanian citizen residing in Florida, Eleventh Circuit upholds lower court’s power and its exercise of discretion under 28 U.S.C. Section 1782

Patricio Clerici (Respondent) is a citizen of Panama residing in Miami, Florida. He sued NoName Corporation (Petitioner) and others in Panama, requesting the attachment of Petitioner’s property. Respondent failed to prosecute his case, however, and, in 2000, the court dismissed it. Petitioner then filed a lawsuit in Panama, claiming damages caused by Respondent’s lawsuit and the attempted attachment of his assets. The Panamanian Court awarded Petitioner 1.9 million Balboas in damages and 294,589.70 Balboas in costs.

Petitioner did not try to enforce this judgment in the U.S. It merely petitioned the Panamanian Court to ask Respondent about his assets. Petitioner’s nine questions to Respondent included the total amount and locations of his assets and where he does his banking. The Panamanian Court submitted written questions in the form of Letters Rogatory to a Florida federal court. Citing the Inter‑American Convention on Letters Rogatory [in force for the U.S. August 27, 1988, T.I.A.S.______] (the Convention), the request stated that the Petitioner plans to use the evidence in Panamanian civil proceedings.

The U.S. Government filed an ex parte application based on 28 U.S.C. Section 1782. The district court then appointed an Assistant U.S. Attorney to obtain sworn answers from Respondent for transmission to the Panamanian Court.

Respondent objected to the Government’s application, however, arguing that Petitioner’s Panamanian judgment is invalid and unenforceable in Florida. He also voiced several procedural objections. The district court denied Respondent’s motion to vacate the Panamanian Government’s application for judicial assistance, and granted its request for evidence. Respondent appealed but the U.S. Court of Appeals for the Eleventh Circuit affirms.

Section 1782 (a) authorizes federal courts to render judicial assistance in obtaining evidence in the U.S. under certain conditions. These are: (1) the request is from a foreign or international tribunal, or from any interested person; (2) the request seeks evidence in the form of testimony or production of documents; (3) the evidence is for use in a proceeding in a foreign or international tribunal; and (4) the Respondent is within the district court’s jurisdiction.

The second and third requirements are at issue here. “As to the second statutory requirement ‑ that the request must seek evidence ‑ [Respondent] argues that the Panamanian Court is not seeking evidence, but rather is trying to enforce its judgment through a Section 1782 request. We disagree because the Panamanian Court asked for assistance in obtaining only [Respondent’s] sworn answers to questions regarding his assets and other financial matters. The district court recognized this key distinction and properly concluded that the request for assistance ... was proper under Section 1782.”

“Unlike the requests for judicial assistance in the cases cited in [Respondent’s] brief. ... , the Panamanian Court never requested that the district court sequester, levy on, or seize control of [Respondent’s] assets or otherwise help enforce [Petitioner’s] judgment. ... The Panamanian Court requested only assistance in obtaining evidence ‑ sworn answers from [Respondent] to written questions ‑ and this is the primary purpose of Section 1782. Therefore, the second requirement for a proper request under Section 1782 is met.”

“As to the third statutory requirement, we reject [Respondent’s] contention that the requested evidence was not ‘for use in a proceeding’ before the Panamanian Court. Here, there is a proceeding currently pending before the Panamanian Court that allows [Petitioner] or the Panamanian Court to question [Respondent] under oath about his properties, rights, credits, sustenance means, and other sources of income from the date of his court‑ordered obligation.”

“Had [Respondent] been residing in Panama, [Petitioner] or the Panamanian Court would have been able to interrogate [Respondent] directly with the questions proposed by [Petitioner]. Because [Respondent] was residing in Florida, however, the Panamanian Court issued a letter rogatory seeking international assistance in order to obtain this evidence. The Panamanian Court’s letter rogatory itself stated that this evidence ‘will be used in the civil process before this court.’ Such a request is clearly within the range of discovery authorized under Section 1782 and comports with the purpose of the statute to provide assistance to foreign tribunals.” [Slip op. 7‑8]

That does not mean, however, that the district court has no discretion and must grant the request. Intel Corp. v. Advanced Micro Devices, Inc., 542 U.S. 241 (2004) set forth the following discretionary factors for the court to consider in Section 1782 proceedings: (1) whether “the person from whom discovery is sought is a participant in the foreign proceeding”; (2) “the nature of the foreign tribunal, the character of the proceedings underway abroad, and the receptivity of the foreign government or the court or agency abroad to U.S. federal‑court judicial assistance”; (3) “whether the Section 1782(a) request conceals an attempt to circumvent foreign proof‑gathering restrictions or other policies of a foreign country or the United States”; and (4) whether the request is otherwise “intrusive or burdensome.” Intel at 264‑65. Unduly intrusive or burdensome requests may be rejected or trimmed. Id. at 265.”

“Here, none of the Intel factors favors Respondent. First, even though Respondent is a party to the Panamanian proceeding, he is not present there. Second, the Panamanian proceeding is not of the kind that would give the district court any reason to refuse judicial assistance. Third, the Panamanian request is not an attempt to avoid rules or policies. Finally, the request is not unduly intrusive. Thus, the district court did not abuse its discretion in granting the Section 1782 application.

Petitioner, of course, cannot enforce the Panamanian judgment in the U.S. until it has been “domesticated.” Meanwhile, the district court does have the power to provide limited judicial assistance to the Panamanian court through Section 1782.

Citation: In re Clerici, 2007 WL 840327 (11th Cir. 2007).

MARITIME JURISDICTION

In appeal of U.S. capture of stateless drug‑laden vessel in international waters, First Circuit finds that Maritime Drug Law Enforcement Act (MDLEA) does not require jurisdictional nexus with U.S.

In April 2004, the U.S. Coast Guard (USCG) cutter DEPENDABLE encountered the M/V CONQUISTADOR in international waters, 180 nautical miles south of Santo Domingo, Dominican Republic. The CONQUISTADOR lacked a registration number, port identification or country flag. When a USCG officer asked for the vessel’s nationality, the crew claimed to be Colombian. (He also noticed a strong odor of marijuana emanating from the vessel). Upon the USCG’s inquiry, the Colombian authorities stated that they do not know the nationality of the CONQUISTADOR and suggested that the USCG proceed under “international law.”

The MDLEA [46 U.S.C. app. Section 1903(c)] permits the U.S. to enforce its drug laws outside the U.S. and to exercise jurisdiction over stateless vessels. Based on this authority, the USCG officer boarded the vessel and observed several bales of marijuana. The Coast Guard then detained the vessel’s five crew members and had them sent to the U.S.

A federal court convicted a crew member named Alfre Luis Bravo (Defendant) plus several others of possessing more than 1,000 pounds of marijuana. Defendant and others appealed several issues. The U.S. Court of Appeals for the First Circuit, however, affirms. One of Defendant’s arguments on appeal was that the vessel had not been subject to U.S. jurisdiction. The Circuit Court, however, sees no merit in this point.

“Under the MDLEA, ‘a ‘vessel subject to the jurisdiction of the United States’ includes . . . a vessel without nationality.’ 46 U.S. C. app. Section 1903(c)(1)(A). Additionally, ‘a ‘vessel without nationality’ includes . . . a vessel aboard which the master or person in charge makes a claim of registry and the claimed nation of registry does not affirmatively and unequivocally assert that the vessel is of its nationality.’ Id. Section 1903(c)(2)(c).”

“Here, the vessel master claimed registry in Colombia, and, after contacting the appropriate Colombian authorities, the USCG received a ‘Response to the Action’ form from Colombia neither confirming nor refuting the vessel’s registration in Colombia. Since Colombia, as the nation of alleged registry, could not confirm the vessel’s registration, the vessel qualifies as a ‘vessel without nationality’ under the MDLEA, and is within the jurisdiction of the federal courts of the United States.” [Slip op. 5]

Moreover, MDLEA jurisdiction does not require a specific nexus to the U.S., for example, that the marijuana on the vessel would ultimately end up in the U.S. While some cases have required a U.S. nexus for applying the Comprehensive Drug Abuse and Control Act of 1970 [Section 1013, 21 U.S.C. Section 963] to a vessel apprehended in international waters, that is not so under the MDLEA.

Citation: United States v. Bravo, 480 F.3d 88 (1st Cir. 2007).

MILITARY JURISDICTION

Ninth Circuit holds that Military Extraterritorial Jurisdiction Act (MEJA) gave district court power to try Defendant for killing her husband on U.S. base in Turkey but reverses her conviction for voluntary manslaughter for district court’s failure to instruct jury that they might convict Defendant of involuntary manslaughter

A kitchen knife held by LaTasha Lorraine Arnt, a/k/a Latasha Lorraine Simpson and Latasha L. Cummings, (Defendant) caused the death of her drunken husband, Staff Sergeant Matthias Anthony Arnt, III, (the Deceased) during a family fracas on Incirlik Air Base, Turkey, where Deceased was serving as a member of the security forces unit. Claiming jurisdiction under the Military Extraterritorial Jurisdiction Act of 2000 (MEJA), 18 U.S.C. Sections 3261‑3267, the U.S. charged Defendant with murder. After a mistrial, a second jury convicted her of the lesser‑included offense of voluntary manslaughter.

Defendant filed a timely notice of appeal, raising several challenges to her conviction and sentence. She asserted, inter alia, that the indictment failed to allege an essential element and challenged several aspects of her conviction, including the sufficiency of the evidence and the court’s refusal to give an involuntary manslaughter instruction. The U.S. Court of Appeals for the Ninth Circuit reverses and remands for a new trial on the latter point.

The Court first clarifies the basis for U.S. jurisdiction over a crime alleged to have been committed on foreign soil. “Congress enacted MEJA in response to a jurisdictional gap created by host nations’ reluctance to prosecute crimes against Americans committed by civilians accompanying the Armed Forces outside the United States. [Cite]. To close this gap, MEJA creates federal jurisdiction over those who commit felonies while ‘accompanying the Armed Forces outside the United States.’ 18 U.S.C. Section 3261(a)(1).”

“A person is ‘accompanying the Armed Forces outside the United States,’ if she satisfies three requirements: she must be ‘(A) [a] dependent of ... a member of the Armed Forces; (B) residing with such member ... outside the United States; and (C) not a national of, or ordinarily resident in, the host nation.’ 18 U.S.C. Section 3267(2).”

“[Defendant] challenges the indictment’s failure to allege that she resided with [the Deceased]. She contends that Section 3267(2)(B)’s residency requirement is an essential element both to confer federal jurisdiction under MEJA and to fulfill the indictment’s purpose of giving her notice of the elements of the crime with which she was charged.” [1161].

“Because [Defendant] first challenged her indictment after trial, we review the indictment for plain error,. ... The key question as to the sufficiency of an indictment ‘is whether an error or omission in an indictment worked to the prejudice of the accused.... Absent such prejudice, the conviction may not be reversed for any omission in the indictment. [Cite].”

“Reviewing for plain error, we find this indictment adequate. A defendant is not prejudiced where her counsel has notice of the omitted element and the jury is properly instructed regarding the missing element. Id. [Defendant’s] counsel had notice of the residency requirement from the statute itself, specifically cited in the indictment and, at least two months before trial, from the first trial’s jury instructions and the government’s trial memorandum, both of which inform as to the Section 3267 residency requirement.”

“The jury in the second trial was properly instructed on the residency requirement, both at the beginning of trial and in the jury instructions. With notice of the omitted element and proper jury instructions, [Defendant] suffered no prejudice from the indictment’s failure to allege residence.”

“[Defendant] challenges the indictment on the alternative grounds that its failure to assert residence stripped the district court of jurisdiction to hear the case. ... In general, ‘defects in an indictment do not deprive a court of its power to adjudicate a case.’ United States v. Cotton, 535 U.S. 625, 630 (2002). Although an indictment challenged before trial may be held insufficient for failure to assert an essential jurisdictional element, [cite] for the reasons stated above, this tardily challenged indictment was adequate.”

Defendant additionally contended that the trial evidence was not enough to establish, beyond a reasonable doubt, her residence in Turkey as required by Section 3267(2)(B) to establish MEJA jurisdiction. “We review the sufficiency of evidence in a criminal trial de novo, asking whether, after ‘viewing the evidence in the light most favorable to the prosecution, any rational trier of fact could have found the essential elements of the crime beyond a reasonable doubt.’ United States v. Shipsey, 363 F.3d 962, 971 n. 8 (9th Cir.2004)”

“Keeping this standard in mind, we turn to the evidence of residency in the record. The parties stipulated, and read into the record, several facts bearing on residence: that [the Deceased’s] ‘permanent home of record’ was in Riverside, California; that [the Deceased] and [Defendant] transferred to Incirlik Air Base August 1, 2001; that [Defendant] resided with her grandmother in Riverside, California, from early March 2003 to May 23, 2003; and that [Defendant] and her infant daughter returned to Incirlik Air Base, Turkey on May 24, 2003.”

“[Defendant] testified that she left for the United States in December 2002 due to an imminent civilian evacuation of Incirlik and that she returned to Turkey once the evacuation was lifted. Several witnesses referred to the residence on the base as ‘the Arnts’ house.’ [Defendant] herself referred to it as ‘our house.’ [Defendant] acted as though the house at the base were her own, cleaning it upon her arrival from the United States and storing important papers there.” [1162].

“On the basis of these facts, a rational jury could conclude beyond a reasonable doubt that [Defendant] resided with [the Deceased] at Incirlik and, thus, the evidence was sufficient to support the verdict.” [1163]

On the issue that leads to reversal and a new trial, the Court reviews the facts in the record and finds that a rational jury could have convicted Defendant of involuntary manslaughter if the judge had given them the option to do so.

The Deceased’s state of intoxication was three times higher than the DUI standard in most jurisdictions. Defendant was holding a kitchen knife and the jury could have believed that the drunken husband was trying to aim a punch at the Defendant which caused him to stagger and fall on the knife. Defendant’s obvious attempts to get emergency medical help for the Deceased tended to corroborate her version of events.

Thus, it was reversible error not to give the requested involuntary manslaughter instruction. This would have given the jury the chance to decide whether Defendant’s actions amounted either to murder or to voluntary manslaughter or to involuntary manslaughter.

Citation: United States v. Arnt, 474 F.3d 1159 (9th Cir. 2007).

WORLD TRADE ORGANIZATION

WTO compliance panel finds that United States continues to violate WTO trading rules and Panel recommendations by failing to prosecute unlawful internet gambling by domestic providers but barring such gambling by foreign providers

On March 30, 2007, a compliance panel of the World Trade Organization (WTO) issued its report on the complaint brought by Antigua and Barbuda (hereinafter “Antigua”). This dispute began in March 2003 when Antigua asked for consultations under WTO auspices. A WTO Dispute Settlement Body (DSB) Panel issued its report in November 2004, finding the U.S. in violation of trading rules. See 2004 International Law Update 173.

According to the Panel, three U.S. federal laws (the Wire Act, the Travel Act, and the Illegal Gambling Business Act), as well as several state laws, ban the cross‑border supply of gambling services, despite U.S. commitments to free market access. Thus, the U.S. failed to accord Antiguan services and service suppliers treatment that is no less favorable than that provided in the General Agreement on Trade in Services (GATS) commitments. These discriminations violated Articles XVI:1 and XVI:2 of the GATS. The WTO Appellate Body Report (ABR) largely confirms the prior Panel findings.

By 2005, the parties could still not agree on a reasonable period of time for the U.S. to comply with WTO trading rules. An arbitrator later set a deadline of April 3, 2006. In a statement of the U.S. Department of Justice (DOJ), the U.S. claimed to be in compliance. That statement declared that current criminal statutes ban the interstate as well as cross‑border transmission of bets or wagers, including wagers on horse races.

Moreover, the DOJ claimed that the Interstate Horse Racing Act (IHA) (15 U.S.C. Sections 3001‑3007) did not amend existing criminal statutes. Antigua, on the other hand, maintained that the Act, on its face, recognizes domestic betting service providers, but bars foreign providers.

On October 10, 2006, the U.S. President signed the Unlawful Internet Gambling Enforcement Act (UIGEA), which made Internet gambling in the U.S. unlawful. The statute bars U.S. credit card companies and banks from collecting the payment of bets made at online gambling sites. At the time, it was uncertain how the new law might affect the pending dispute with Antigua.

In light of the parties’ disagreements over U.S. compliance with the Panel recommendations, the WTO set up a Panel to look into U.S. compliance. Antigua alleged that the U.S. had done nothing to comply. The U.S. claimed, on the other hand, to have taken steps to conform with GATS. On March 30, 2007, the compliance Panel issued its report.

The Report finds that the U.S. has so far failed to obey the DSB’s recommendations and rulings. The Panel notes that the DOJ is unaware of any prosecutions of U.S. suppliers of online wagering on horse racing. Federal law seemingly tolerates (if not allows) online wagering services by domestic providers.

The UIGEA excludes certain activities from its scope, such as certain intrastate and intratribal transactions. As for interstate betting on horses, the statute specifically exempts activities which the IHA allows. Nor does it define or alter what type of internet gambling is unlawful in the U.S.

Therefore, the Panel agrees with the DSB that “there is ambiguity as to the relationship between, on the one hand, the amendment to the IHA and, on the other, the Wire Act, the Travel Act and the Illegal Gambling Business Act.” (Original Panel Report, paragraph 6.599). In fact, the UIGEA confirms the ambiguity at issue in this dispute. The U.S., therefore, has failed to remove the ambiguity.

Citation: United States—Measures affecting the cross‑border supply of gambling and betting services, Recourse to Article 21.5 of the DSU by Antigua and Barbuda, Report of the Panel (WT/DS285/RW) (30 March 2007).

EU to assist Russian Federation in destruction of chemical weapons. The Council of the European Union (EU) has issued a Joint Action to support the efforts of the Russian Federation (RF) in destroying chemical weapons. This Action is part of the EU Strategy against Proliferation of (sic) Mass Destruction, and the purpose is to have the RF comply with the 1993 Convention on the Prohibition and Development, Production, Stockpiling and Use of Chemical Weapons and on their Destruction (see www.opcw.org). Most importantly, the EU will contribute more than EURO 3.1 million to the construction of a chemical weapon destruction facility in Shchuch’ye, R F. The technical implementation of the facility will be in the hands of the U. K.’s Secretary of Defense. Citation: European Union, Council Joint Action 2007/178/CFSP, 2007 O. J. of the European Union (L 81) 30, 22 March 2007.

U.S. and South Korea sign major trade agreement. On April 1, 2007, the U.S. and South Korea signed a Free Trade Agreement (KORUS FTA). The Agreement will open the Korean agriculture markets to U.S. produce and meat by gradually phasing out tariffs and quotas. Within three years, almost 95 percent of the bilateral trade in consumer and industrial products will become duty‑free. Also, the Agreement provides stringent protections for intellectual property rights, including copyrights, trademarks and patents, based on U.S. standards. Citation: U.S. Trade Representative press release of April 2, 2007, available at www.ustr.gov.

New York company fined for violating U.S. defense export laws. The ITT Corporation of White Plains, New York is the foremost maker of night‑vision equipment for the U.S. military. On March 28, it was expected to plead guilty in a Virginia federal court to two felony counts. One charge deals with the unlicensed export of defense articles and the other involves misleadingly omitting material facts in its reports on arms exports, both activities in breach of the Arms Export Control Act of 1976. Apparently to reduce its costs, ITT had allowed defense‑related technical data to reach contractors in China, Singapore and the United Kingdom. ITT will agree to pay a $2 million criminal fine, to forfeit $28 million in illegal profits to the U.S. government and to pay $20 million to the State Department. Finally, ITT will pay $50 million in restitution to the U.S. military, the victims of their offenses. The fine will be suspended for five years and ITT can reduce it dollar‑for‑dollar by investing in the development and production of more advanced night‑vision technology. In this way, it is hoped that the U.S. military maintains battlefield advantage. As part of the agreement, the company is subject to independent monitoring and an extensive remedial action program. Citation: The Associated Press (online), Roanoke, Virginia, Wednesday, March 28, 2007 at 00:44:21Z (byline of Sue Lindsey, AP writer, with contributing AP Business Writer, Dan Caterinicchia).

Bosnian paramilitary leader convicted of crimes against humanity. On February 16, 2007, the Trial Panel of the Court of Bosnia and Herzegovina (BiH) found Bosnian paramilitary leader Gojko Jankovic (Defendant) guilty of crimes against humanity and sentenced him to 34 years’ in prison. On November 15, 2005, the International Criminal Tribunal for the former Yugoslavia (ICTY) had referred the case against Defendant to the Court of BiH. The latter Court found that, as a leader of a military unit within the Army of the Srpska Republika BiH, Defendant took part in widespread and systematic attacks by the army, police and paramilitary formations on the non‑Serb civilian population between April 1992 and November 1993. The Trial Panel stated that in July 1992, Defendant led a group of soldiers who attacked Muslim civilians hiding in the forest on the Kremnik hill. The attack killed three civilians and wounded several others. Defendant’s forces captured seven men and 30 women and children. After the soldiers had questioned and brutally beaten the prisoners, Defendant’s soldiers shot the captured men. Several times during the summer of 1992, Defendant raped a female captive and kept two other minor females in sexual slavery. Citation: Press release (online), Case information sheet, The Hague Justice Portal, February 16, 2007 (All Rights Reserved).

French appeals court reverses judgment for damages awarded against French railway system for transporting family toward death camps. European Green Party lawmaker Alain Lipietz, his sister, Helene, and other family members sued on behalf of four of their relatives taken in railway cattle cars to a Nazi transit camp at Drancy near Paris in May 1944. Drancy was a transfer point for Jews deported to Nazi death camps including Auschwitz. The Plaintiffs alleged that the four family members had to ride in SNCF cattle cars from southwest France to a camp at Drancy and remained there for several months until allied forces liberated the camp in July 1944. In a case of first impression, the administrative court in Toulouse had ordered the state and the SNCF rail authority to pay the Plaintiffs the equivalent of US$82,000 for its role in World War II deportations. The SNCF appealed the decision; the French state did not. On March 27, 2007, an appeals court in Bordeaux overturned this ruling. The court did so first on grounds that the case lay outside the Toulouse court’s jurisdiction. As to the merits, the appeals court pointed out that the SNCF lacked legal responsibility because it had acted under the orders of the French state as directed by the Nazi occupying forces. Citation: The Associated Press (online); Bordeaux, France; Tuesday, March 27, 2007 at 09:50:14Z .

Russian appellate tribunal overturns conviction of school principal for illegally installing Microsoft programs. On March 27, 2007, a Russian court reportedly ordered a retrial of Alexander Ponosov, a school principal, accused of violating intellectual property rights by installing pirated Microsoft software on his school’s computers. The Perm regional court reversed a February ruling of a lower court to end the principal’s prosecution. Charged with installing bootleg versions of the Windows operating system and Microsoft Office software, Ponosov insisted that the computers had come with the software already installed. The ruling came in response to appeals by both the defendant and prosecution. Ponosov wants to be formally acquitted; the prosecution is still seeking to convict him. Many have looked upon the case as a wrong‑headed effort to lower the boom on software bootlegging. The lower court itself had characterized the case as insignificant. In addition, Microsoft said it had nothing to do with the charges, and that the company had decided during 2006 not to file a civil action against the school official. Industry experts allegedly consider Russia to be second only to China in bootlegging audio recordings, DVDs and computer software. Citation: The Associated Press (via Findlaw), Moscow, Russian Federation, Tuesday, March 27, 2007 at 09:09:07Z.

Individual web designer in U. K. succeeds in protecting domain name against large U.S. company. Corbis Corporation is a private Seattle–based digital rights image licensing company owned by Microsoft Corp. Chairman Bill Gates had taken a case to the United Nation’s World Intellectual Property Organization (WIPO) in Geneva in a bid to seize control of the Internet domain name corbis.net from Mr. John Pickworth. Pickworth runs a Web design company in Blackpool, England. Corbis, which runs the domain corbis.com, said it had the right to safeguard its trademark from “cybersquatters”or others using identical names. But the U.N. agency’s arbitration panel decided that Corbis had “failed to show that the Respondent (Pickworth) has registered and used the disputed domain name in bad faith.” The decision by WIPO’s one‑person panel is a rare example of a large company being unable to gain control of a domain name from an individual. Respondent claimed that he had been using the name “Corbis” since his teenage years. Moreover, when he had registered the domain to showcase his Web design work, he had been unaware that the U.S. company even existed. Pickworth said he was consoled to have successfully defended his use of the domain name. He has in mind to write a guide book for other individuals in similar situations. “It might make some of the larger companies think twice before they take on the little guys,” he is quoted as saying. Citation: Associated Press (online), Geneva, Switzerland, Monday, March 26, 2007 at 13:35:50Z.

U.S. approves sea turtle protections by Madagascar and Nigeria. [The U.S. Department of State has issued the following Media Note, here somewhat reduced in length]. “On January 10, 2007, the Department of State certified Madagascar and re‑certified Nigeria as meeting the requirements set by Section 609 of P. L. 101‑162 for continued importation of shrimp into the United States. ... This import prohibition does not apply in cases where the Department of State certifies to Congress that the government of the harvesting nation has taken certain specific measures to reduce the incidental taking of sea turtles in its shrimp trawl fisheries—or that the fishing environment of the harvesting nation does not pose a threat to sea turtle species. ... The chief component of the U.S. sea turtle conservation program is a requirement that commercial shrimp boats use sea turtle excluder devices (TEDs) to prevent the accidental drowning of sea turtles in shrimp trawls. Madagascar and Nigeria join fourteen other countries : Belize, Colombia, Costa Rica, Ecuador, El Salvador, Guatemala, Guyana, Honduras, Mexico, Nicaragua, Pakistan, Panama, Suriname, and Venezuela as meeting this standard. ... [TEDs] can be 97 percent effective in excluding sea turtles from trawl nets, and have resulted in an estimated 11 percent increase per year in some endangered sea turtle nesting populations in the Gulf of Mexico.” Citation: Media Note #2007/16, Office of Spokesman for U.S. Department of State, Washington, D.C., Wednesday, January 10, 2007.