2008 International Law Update, Volume 14, Number 1 (January)
Legal Analyses published by Mike Meier,
Attorney at Law. Copyright 2017 Mike Meier. www.internationallawinfo.com.
ARBITRATION
In arbitration dispute, Fifth Circuit holds that, where
it only has secondary jurisdiction under New York Arbitration Convention, it
should treat Plaintiff’s claims based on RICO and state fraud law that seek to
rectify harm suffered from unfavorable Swiss arbitration award as collateral
attacks subject to dismissal for lack of subject matter jurisdiction
In 1993, Petrec International, Inc. (Plaintiff) and Nigerian
National Petroleum Corporation (NNPC) (Defendant) entered into a joint venture
under which Plaintiff agreed to reclaim and salvage slop oil discarded by
Defendant during the course of its oil business off the Nigerian coast. For
this, the parties agreed to create a Nigerian company, Petrec (Nigeria) Limited
(PNL), to be jointly capitalized and owned by Petrec and NNPC. They also
consented to resolve any disputes arising under the conflict through
arbitration.
Later, when a dispute did arise, Plaintiff filed arbitration
proceedings in 1998 with the Chamber of Commerce and Industry of Geneva,
Switzerland. The panel issued a Partial Award on July 5, 2000, finding that
Plaintiff had standing to pursue its claims and that Defendant had failed in
one of its duties under the contract. The panel also ruled that the joint
venture agreement had not conferred exclusive rights to all of Defendant’s slop
oil on PNL, as Plaintiff had argued. Rather, Defendant’s obligation was only to
make available enough slop oil to keep PNL’s operations viable and profitable.
At a later session to determine the measure of damages,
Defendants produced evidence showing that Plaintiff was a Texas corporation
formed after the joint venture agreement, and therefore lacked capacity to
maintain its claims. The panel agreed, and issued a Final Award to that effect.
Plaintiff next challenged the Final Award in a Swiss federal
court on grounds that it violated Swiss arbitration law and public policy. In
April 2002, however, the Swiss court upheld the panel’s decision. Plaintiff
then filed a U.S. lawsuit in the Northern District of Texas to confirm the
Partial Award. The district court dismissed it for lack of subject matter
jurisdiction (SMJ). The court explained that, in seeking confirmation of the
Partial Award, Plaintiff, in effect, was asking the federal court to set aside
or modify the Final Arbitration Award.
In the court’s view, the Convention on the Recognition and
Enforcement of Foreign Arbitral Awards (usually dubbed the “New York
Convention”) precludes such a result. The court also held that the doctrines of
res judicata and international comity barred it from revisiting the Swiss
court’s decision to uphold the Final Award.
Petrec International, Inc. and other Plaintiffs (jointly
“Plaintiff”) brought the present action in the Eastern District of Texas, in
September 2005, presenting claims under both RICO and state law charging that
Defendant had won the Final Award through fraud, bribery, and corruption.
Defendants moved to dismiss based on lack of SMJ jurisdiction (1) under the New
York Convention and (2) under the Foreign Sovereign Immunities Act (FSIA).
The district court granted the motion on two grounds. It
first ruled that it lacked SMJ jurisdiction because one of Plaintiff’s claims
was a collateral attack on the Final Award, which the New York Convention does
not allow. It also found that it lacked personal jurisdiction over two of the
Defendants, and two others were entitled to immunity under the FSIA.
Plaintiff timely appealed. It conceded that the lower court
had properly dismissed its claim seeking vacatur of the Final Award for lack of
SMJ. Plaintiffs nevertheless urged that (1) the district court erred in ruling
that the Convention required dismissal of its remaining claims for lack of SMJ
and (2) that the court improperly relied upon F. R. Civ. P. 12(b)(1) in
dismissing their federal and state law claims for lack of SMJ. The U.S. Court
of Appeals for the Fifth Circuit, however, affirms.
The Court explains its rulings on the Convention. “The
Convention provides that it ‘shall apply to the recognition and enforcement of
arbitral awards made in the territory of a [country] other than the [country]
where the recognition and enforcement of such awards are sought.’ Convention,
Art. I(1).
“The award at issue in this case, ... is clearly a foreign
award within the scope of the Convention. ... the Convention ‘mandates very
different regimes for the review of arbitral awards (1) in the countries in
which, or under the law of which, the award was made, and (2) in other
countries where recognition and enforcement are sought.’ [Cite].” [Slip op. 5]
There was no dispute that Switzerland was the country of
primary jurisdiction with respect to the Final Award, and that the U.S. had
only secondary jurisdiction. “Although the Convention permits a primary
jurisdiction court to apply its full range of domestic law to set aside or
modify an arbitral award, secondary jurisdiction courts may only refuse or stay
enforcement of an award on the limited grounds specified in Articles V and VI.
... “ [Those Articles] ‘unequivocally lay down the principle that the court in
the country in which, or under the law of which, the award was made has the
exclusive competence to decide on the action for setting aside the award.’ ...
Accordingly, a U.S. court sitting in secondary jurisdiction lacks [SMJ]
jurisdiction over claims seeking to vacate, set aside, or modify a foreign
arbitral award.” [Slip op. 6]
“[Plaintiff] argue[d] that a fair reading of its complaint
shows that the RICO and state law claims are not disguised attempts to vacate
or attack the Final Award. Rather, it contend[ed] that it has alleged a pattern
of racketeering and conspiratorial conduct that, while arising in the context
of arbitration proceedings, constitutes an independent violation of federal and
state law and compels relief analytically distinct from vacatur. ... Like the
district court, [the Court of Appeals] conclude[d] that the claims asserted by
[Plaintiff[ are no more, in substance, than a collateral attack on the Final
Award itself.” [Slip op. 6]
Plaintiff contended that their RICO claims did not try to
relitigate the facts and defenses raised in the prior arbitration, and thus
were not collateral attacks on the Final Award. The Circuit Court disagrees:
“In one sense... [the claims] do seek to relitigate certain issues, since
[Plaintiff] asks for, as damages, the award it believes it should have received
in the arbitration, which would require an inquiry into questions of liability
that were already presented to the arbitration panel.”
“We do recognize that the specific allegations of bribery
and corruption are separate from the contract dispute over slop oil that was
the subject of the arbitration. However, it does not follow that these claims
cannot be construed as a collateral attack... The harm in this case did not
result when the arbitrators failed to disclose business dealings, engaged in ex
parte communications with Defendant, or were bribed.”
“Rather, it resulted from the impact that these acts had on
the Final Award. The relief [Plaintiff] seeks—the award it believes it should
have received, as well as costs, expenses, and consequential damages stemming from
the unfavorable award it did receive—shows that its true objective in this suit
is to rectify the harm it suffered in receiving the unfavorable Final Award.”
[Slip op. 9]
On the improper dismissal claim, the Court states its
reasoning. “Plaintiffs’ second challenge asserted that (1) there is no basis
for the notion that a complaint can be dismissed on [SMJ] grounds as a
collateral attack on an arbitral award, (2) the dismissal acted so as to create
an “arbitration exception” to federal subject matter jurisdiction, which would
entail undesirable results if upheld, and (3) any limitations imposed on courts
of secondary jurisdiction by the Convention should be overlooked in this case
because further relief is not available in the primary jurisdiction of Switzerland.
The court concluded that because the Convention bars the litigation of claims
that are collateral attacks on the Final Award in all courts save the courts of
the primary jurisdiction, dismissal for lack of [SMJ] was appropriate.”
Plaintiffs’ first argument rested on a lack of precedent for
an SMJ dismissal. In the Court’s view, Plaintiff has misread the precedent it
cites; the precedent does not guide the final disposition of the case, it shows
only that the Plaintiffs’ claims constitute a challenge to the Final Award.
Once this is clear, the Convention dictates the appropriate disposition.
The Court also spurned Plaintiff’s contention that the
absence of another chance to set aside the Award in the primary jurisdiction
should invalidate [Convention] protections. “In the interest of finality, every
primary jurisdiction undoubtedly will foreclose review of an award at some
point. It would seriously undermine the functioning of the Convention if the
fact that the opportunity for judicial review of an award in the primary
jurisdiction has passed could open the door to otherwise impermissible review
in a secondary jurisdiction. ...” [Cite] [Slip op. 11‑12]
Citation: Gulf Petro Trading Co. Inc. v. Nigerian
National Petroleum Corp., 2008 WL 62546, No. 06‑40713 (5th Cir. 2008).
DIVORCE (RELIGIOUS)
Where Jewish husband had agreed in writing with his
Jewish wife, that immediately after their Quebec civil divorce, the husband
would grant release from marriage under Jewish Law where he delayed doing so
for fifteen years, Supreme Court of Canada upheld award to wife of damages for
breach of contract as supported by balance of interests in favor of public
order and lack of countervailing religious considerations on husband’s part
The parties in this case are Stephanie Brenda Bruker (B),
and Jessel Benjamin Marcovitz (M), Canadian citizens who were married in 1969.
Civil divorce proceedings were filed in 1980 and three months later, the
parties negotiated a Consent to Corollary Relief (CCR). In ¶ 12 of the CCR,
both parties agreed to appear right after the civil divorce before the
appropriate rabbinical authorities to obtain a Jewish divorce, or get. The
civil divorce became final in 1981, when M was 48 and B was 31.
Under Jewish law, a wife cannot obtain a get unless and
until her husband voluntarily agrees to give it. Without one, she remains his
wife under Jewish law which would not recognize her right to remarry. The
husband has an absolute discretion as to whether or not to “release” his wife
from the marriage. The process would take place before a Beth Din, or
rabbinical court.
For B, an observant Jewish woman in Canada, this presents a
paradoxical scenario: under Canadian law, B is free to divorce her husband and
remarry irrespective of his consent; under Jewish law, however, B remains
married to him until he gives his consent. Jewish law would consider
“illegitimate” any children she would have on a purely civil remarriage.
The vast majority of adherents to the Jewish faith condemn
this practice of bargaining with the get as unfair. Since the diaspora,
however, there is no central Jewish authority to amend the Jewish legal code
which governs the get.
In this case, despite B’s repeated requests, M consistently
refused to provide a get until 15 years had passed, by which time B was almost
47. At this point, B sued for damages in the Quebec courts for breach of ¶ 12
of the CCR agreement. M argued that this agreement to give a get was not valid
under Quebec law and that his right to freedom of religion protected him from
having to pay civil damages for its breach.
The trial judge held (1) that the CCR was valid and binding
and (2) that the civil courts could decide a claim for damages based on a
breach of this civil obligation. When M appealed, the Court of Appeal allowed
M’s appeal. It reasoned that the substance of M’s breached obligation was
religious in nature. This made M’s specified duty purely a “moral” one and thus
unenforceable by the civil courts. When B applied to the Supreme Court of
Canada, however, it allowed her appeal in a 7 to 2 vote.
The majority opinion then explains its ruling. “There are,
... two issues raised by this case. The first is whether the agreement in the
[CCR] to give a get is a valid and binding contractual obligation under Quebec
law. If the commitment is legally binding under Quebec law, we must determine
whether the husband can rely on his freedom of religion rights to avoid the
legal result of failing to comply with a civil agreement.”
“This inquiry takes place within the boundaries set by the
provisions and principles of the Quebec Charter of Human Rights and Freedoms,
R.S.Q., c. C‑12, where the claim of the husband to religious freedom is
balanced against the claim of the wife that acceding to the husband’s argument
is disproportionately harmful to her personally, and, more generally, to
democratic values and Quebec’s best interests.”
“The judicial role in balancing and reconciling competing
interests and values when freedom of religion is raised, is one that protects
the tolerance Quebec endorsed in the Quebec Charter. Section 9.1 states that,
in exercising their fundamental freedoms and rights—including freedom of
religion—persons ‘shall maintain a proper regard for democratic values, public
order and the general well‑being of the citizens of Québec’. This provision is
a legislative direction that the courts are to protect the rights of Quebec’s
citizens in a way that is balanced and reconciled with other public values.”
“[In the majority’s view], an agreement between spouses to
take the necessary steps to permit each other to remarry in accordance with
their own religions, constitutes a valid and binding contractual obligation under
Quebec law. ... Such agreements are consistent with public policy, our approach
to marriage and divorce, and our commitment to eradicating gender
discrimination.”
“... Applying ... §
9.1 of the Quebec Charter, any harm to [B’s] religious freedom in requiring him
to pay damages for unilaterally breaching his commitment, is significantly
outweighed by the harm caused by his unilateral decision not to honor it.”
“This is not, ... an unwarranted secular trespass into
religious fields, nor does it amount to judicial sanction of the vagaries of an
individual’s religion. In deciding cases involving freedom of religion, the
courts cannot ignore religion. To determine whether a particular claim to
freedom of religion is entitled to protection, a court must take into account
the particular religion, the particular religious right, and the particular
personal and public consequences, including the religious consequences, of
enforcing that right.”
“Mediating these highly personal claims to religious rights
with the wider public interest is a task that has been assigned to the courts
by legislatures across [Canada]. It is a well‑accepted function carried out for
decades by human rights commissions under federal and provincial statutes and,
for 25 years, by judges under the Canadian Charter of Rights and Freedoms, to
ensure that members of the Canadian public are not arbitrarily disadvantaged by
their religion.”
“This case ... represents yet another case in which the
claim to religious protection is balanced against competing interests. The
Court is not asked to endorse or apply a religious norm. It is asked to
exercise its responsibility, conferred by the Quebec Charter, to determine
whether [B] is entitled to succeed in his argument that requiring him to pay
damages for the breach of a legally binding agreement violates his freedom of
religion. ... ” [¶¶ 14‑20]
“Based on the expert evidence, [the trial judge] concluded
that had [M] sought the get immediately, as he had agreed to do, it would have
been granted by the rabbinical court. This meant that [M’s] breach of the
obligation to appear before the rabbinical authorities was the cause of the
damages claimed by [B]. Finding that [M’s] failure to grant the get had direct
consequences on [B’s] life by depriving her ‘of the opportunity to marry within
her [religious] community during this period’ [the trial court] ordered a total
of $ 47,500 in damages.” [¶ 33]
“The fact that ¶ 12 of the [CCR] had religious elements does
not thereby immunize it from judicial scrutiny. We are not dealing with
judicial review of doctrinal religious principles, such as whether a particular
get is valid. Nor are we required to speculate on what the rabbinical court
would do. The promise by [M] to remove the religious barriers to remarriage by
providing a get was negotiated between two consenting adults, each represented
by counsel, as part of a voluntary exchange of commitments intended to have
legally enforceable consequences. This puts the obligation appropriately under
a judicial microscope.” [¶ 47]
“[A respected
treatise] explains the difference in enforceability between a moral and civil
obligation in the following way: ‘... A civil obligation is sanctioned by law,
which means that the creditor may enforce it in court. In contrast, a moral
obligation is outside the legal realm and is not sanctioned by law, and its
binding force is based solely on conscience, that is, on remorse.”
“The ‘creditor’ of a moral obligation may not seek to
enforce it in court, since it can only be performed voluntarily. Moral
obligations include the duty to give to charity and the duty to help one’s
neighbour—which should be distinguished from the civil obligation to assist a
person in danger.”
“[The majority does] not see the religious aspect of the
obligation in ¶ 12 of the [CCR] as a barrier to its civil validity. It is true
that a party cannot be compelled to execute a moral duty, but there is nothing
in the Civil Code preventing someone from transforming his or her moral
obligations into legally valid and binding ones.”
“Giving money to charity, for example, could be
characterized as a moral and, therefore, legally unenforceable obligation. But
if an individual enters into a contract with a particular charity agreeing to
make a donation, the obligation may well become a valid and binding one if it
complies with the requirements of a contract under the Civil Code of Quebec
(C.C.Q.).”
“A contract is
defined in Art. 1378, ¶ 1 of the C.C.Q. as ‘an agreement of wills by which one
or several persons obligate themselves to one or several other persons to
perform a prestation.’” [¶¶ 50‑52]
“[M] argues, however, that, contrary to Articles 1412 and
1413 of the C.C.Q., the ‘object’ of the contractual provision—the attendance of
the parties before the rabbinical court to obtain a divorce in accordance with
Jewish law to permit remarriage under that law—is against public order because
it is a violation of his right to freedom of religion.” [¶ 54]
“There are therefore only two limitations on the object of a
contract: it cannot be prohibited by law or be contrary to public order.
Consistent with the principle of freedom of contract, this offers a wide scope
for what is a legally permissible object.” [¶ 59]
“What constitutes public order, [cite] is variable: [The
content of public order] changes over time, since this concept basically
represents certain values at a given point in the evolution of society. Absent
any clear indication in the statute, it is the court that assesses whether the
provision in question is of public order and determines its concrete effect.”
“... [T]here may well be agreements with religious aspects
that would be against public order. It will obviously depend in each case on
the nature of the undertaking and, in particular, on the extent to which the
promise is consistent with our laws, policies, and democratic values. An
agreement to resolve a custody dispute in a way that offends a child’s best
interests, or an agreement that violates our employment laws, for example, will
likely be found to be contrary to public order.”
“There is no doubt ... however, about [M’s] agreement to
provide a get. It is consistent with, not contrary to, public order. The 1990
Divorce Act amendments ... contradict the argument that an agreement to grant a
get breaches the principle of public order. On the contrary, Parliament
manifested a clear intention to encourage the removal of religious barriers to
remarriage. Moreover, ... the enforceability of a promise by a husband to
provide a get harmonizes with Canada’s approach to religious freedom, to
equality rights, to divorce and remarriage generally, and has been judicially
recognized internationally.”
“Accordingly, since
the object is not contrary to public order, and since all the other
requirements for a valid contract in accordance with Quebec law exist, the
contractual obligation contained in [CCR] ¶ 12 is valid and legally binding
under Quebec law.”
“There remains [M’s] argument that he is exonerated by § 3
of the Quebec Charter [on freedom of religion] from the consequences of
breaching ¶ 12 of the [CCR]. M asserts that an award of damages would be a
violation of his freedom of religion because it would condemn him ex post facto
‘for abiding by his religion in the first place.’”
“This Court’s most recent decision examining the scope of
this provision is Syndicat Northcrest v. Amselem, [2004] 2 S. C. R. 551, 2004
S.C.C. 47. Orthodox Jews who owned units in a condominium building in Montréal
sought to construct small enclosed structures known as succahs on their
balconies for the Jewish festival of Succot. A by‑law in the declaration of co‑ownership
prohibited them from doing so.”
“The test applied by the majority in Amselem examines whether
an individual’s sincerely held and good faith religious belief is being
unjustifiably limited to a non‑trivial degree. Applying this test to the facts
of this case, I see no prima facie infringement of [M’s] religious freedom.”
“[Query] whether M, in good faith, sincerely believed that
granting a get was an act to which he objected as a matter of religious belief
or conscience. It is not clear [to the Court] what aspect of his religious
beliefs prevented him from providing a get. He never, in fact, offered a
religious reason for refusing to provide a get.”
“Rather, he said that his refusal was based on the fact
that, in his words, ‘[B] harassed me, she alienated my kids from me, she stole
some money from me, she stole some silverware from my mother, she prevented my
proper visitation with the kids. Those are the reasons ....’”
“This concession confirms, ... that his refusal to provide
the get was based less on religious conviction than on the fact that he was
angry at [B]. His religion does not require him to refuse to give [B] a get.
The contrary is true. There is no doubt that, at Jewish law, he could refuse to
give one, but that is very different from [M] being prevented by a tenet of his
religious beliefs from complying with a legal obligation he voluntarily entered
into and of which he took the negotiated benefits.”
“Even if requiring him to comply with his agreement to give
a get can be said to conflict with a sincerely held religious belief and to
have non‑trivial consequences for him, both of which [the Court has] difficulty
discerning, such a prima facie infringement does not survive the balancing
mandated by this Court’s jurisprudence and the Quebec Charter.”
“[The majority starts] the balancing analysis with the
provenance of this Court’s robust interpretation of freedom of religion, R. v.
Big M Drug Mart Ltd., [1985] 1 S. C. R. 295, 336‑7. ‘... The essence of the
concept of freedom of religion is the right to entertain such religious beliefs
as a person chooses, the right to declare religious beliefs openly and without
fear of hindrance or reprisal, and the right to manifest religious belief by
worship and practice or by teaching and dissemination.’”
“Notably, [we] also confirmed that religious freedoms were
nonetheless subject to limitations when they disproportionately collided with
other significant public rights and interests: ... The values that underlie our
political and philosophic traditions demand that every individual be free to
hold and to manifest whatever beliefs and opinions his or her conscience
dictates, provided, inter alia, only that such manifestations do not injure his
or her neighbours or their parallel rights to hold and manifest beliefs and
opinions of their own. [Id at 346; Emphasis added by Court.]” [¶¶ 61‑72]
“[M’s] claim must therefore be weighed against the
‘democratic values, public order and the general well‑being of the citizens of
Québec’ stipulated by § 9.1. We thereby enter the complex, nuanced, fact‑specific
territory referred to at the outset of these reasons.
“[M] ... has little to put on the scales. To begin, he
freely entered into a valid and binding contractual obligation and now seeks to
have it set aside based on ex post facto religious compunctions. In [our] view,
it is this attempt to resile from his binding promise, not the enforcement of
the obligation, that offends public order.”
“But the public policy benefit of preventing individuals
from avoiding the usual legal consequences of their contractual breaches, is
only one of the factors that weighs against his claim. The significant
intrusions into our constitutionally and statutorily articulated commitments to
equality, religious freedom and autonomous choice in marriage and divorce that
flow from the breach of his legal obligation are what weigh most heavily
against him.”
“Section 21.1 of the Divorce Act, which gives a court
discretionary authority to rebuff a spouse in civil proceedings who obstructs
religious remarriage, is a clear indication that it is public policy in this
country that such barriers are to be discouraged. ... [T]hese amendments
received overwhelming support from the Jewish community, including its more
religious elements, reflecting a consensus that the refusal to provide a get
was an unwarranted indignity imposed on Jewish women and, to the extent
possible, one that should not be countenanced by Canada’s legal system.”
“We also accept the right of Canadians to decide for
themselves whether their marriage has irretrievably broken down and we attempt
to facilitate, rather than impede, their ability to continue their lives,
including with new families.”
“Moreover, under Canadian law, marriage and divorce are
available equally to men and women. A get, on the other hand, can only be given
under Jewish law by a husband. For those Jewish women whose religious
principles prevent them from considering remarriage unless they are able to do
so in accordance with Jewish law, the denial of a get is the denial of the
right to remarry. ... [Such a] the law has a disparate impact on women.”
“There is also support internationally for courts protecting
Jewish women from husbands who refuse to provide a religious divorce. The use
of damages to compensate someone whose spouse has refused to provide a get was
upheld by the European Commission of Human Rights. In D. v. France, 35 Eur.
Comm. H. R. D. R. 199, 202 (1983), the husband had been ordered by a French
court to pay his ex‑wife 25,000 francs to compensate her for his refusal to
deliver a get. The husband [unsuccessfully] applied to the Commission, arguing
that his right to freedom of conscience and religion under the European
Convention on Human Rights was violated by this award of damages. ...” [¶¶ 78‑83]
“In the United Kingdom, courts have also been willing to
attach civil consequences to a husband’s refusal to provide a get and have
recognized that the inability to remarry within one’s religion represents a
serious compensable injury. Cf. Brett v. Brett, [1969] 1 All E. R. 1007. ...”
[¶ 86]
“American courts, relying primarily on the rationale that
obtaining a get is not solely a religious act but one that has the secular
purpose of finalizing the dissolution of the marriage, have been willing to
order parties to submit to the jurisdiction of the Beth Din. In Avitzur v.
Avitzur, 459 N.Y.S.2d 572 (1983) , the New York Court of Appeals found that a
clause in a Jewish marriage contract, requiring both parties to appear before
the Beth Din upon the breakdown of the marriage for the purposes of obtaining a
get was enforceable and did not violate the constitutional prohibition against
excessive entanglement between church and state.” [¶ 88]
“[M] cannot, therefore, rely on the Quebec Charter to avoid
the consequences of failing to implement his legal commitment to provide the
get.”
“The public interest in protecting equality rights, the
dignity of Jewish women in their independent ability to divorce and remarry, as
well as the public benefit in enforcing valid and binding contractual
obligations, are among the interests and values that outweigh [M’s] claim that
enforcing ¶ 12 of the CCR would interfere with his religious freedom.”
“Despite the moribund state of her marriage, [B] remained,
between the ages of 31 and 46, [M’s] wife under Jewish law, and dramatically
restricted in the options available to her in her personal life. This
represented an unjustified and severe impairment of her ability to live her
life in accordance with this country’s values and her Jewish beliefs. Any
infringement of [M’s] freedom of religion is inconsequential compared to the
disproportionate disadvantaging effect on [B’s] ability to live her life fully
as a Jewish woman in Canada.” [¶¶ 91‑ 93]
Citation: Bruker v. Marcovitz, 2007 S. C. C. 54;
[2007] S. C. J. No. 54 (Sup. Ct. Can. Dec. 14, 2007).
FEDERAL TORT CLAIMS ACT
On appeal in damage actions against senior federal
officials by four U.K. citizens detained at Guantanamo Bay, D.C. Circuit
affirms dismissal of claims under Alien Tort Claims Act, Geneva Conventions,
and U.S. Constitution, holding (1) that Federal Tort Claims Act (FTCA)
controlled and that Defendants’ alleged mistreatment of Plaintiffs lay in
course of U.S. officials’ employment thus barring such claims and (2) that
Religious Freedom Restoration Act does not apply extraterritorially to aliens
The U.S. government held the four Plaintiffs, Shafiq Rasul,
Asif Iqbal, Rhuhel Ahmed and Jamal Al‑Harith, all citizens and residents of the
United Kingdom, at Guantanamo Bay, Cuba, from 2002 until their repatriation to
the U.K. in 2004. All came into U.S. custody in Afghanistan; they claim that
they were there only for humanitarian and religious purposes.
Their complaint alleges that, on December 2, 2002, Donald
Rumsfeld, then Secretary of Defense (Defendant), approved harsh interrogation
techniques such as alleged beatings, the shackling of detainees in painful
stress positions, exposure to extreme temperatures and deprivation of adequate
sleep, food, sanitation and medical care, intimidation with dogs, 24‑hour
interrogation sessions, the shaving of detainees’ facial hair, solitary
confinement in darkness and silence, as well as the use of “mild non‑injurious
physical contact.” Defendant Rumsfeld later withdrew his approval of these
tactics. The Plaintiffs allege that prison guards systematically and repeatedly
tortured them throughout their two‑year detention.
The U.S. let the Plaintiffs go in March 2004 and they went
back to the U. K. In October 2004, they filed suit in the District of Columbia
federal court. It alleged that Defendant and others had committed three
violations of the Alien Tort Claims Act (ATCA), 28 U.S.C. § 1350: (1) by
prolonged arbitrary detentions, (2) through torture and (3) the use of cruel,
inhuman or degrading treatment.
They further relied upon violations of the Geneva
Conventions, the Fifth and Eighth Amendments to the U.S. Constitution, plus
breaches of the Religious Freedom Restoration Act (RFRA), 42 U.S.C. §§ 2000bb
et seq. They seek damages for the physical and psychological trauma they
suffered as a result of their detention.
In March 2005, all Defendants moved to dismiss for lack of
subject matter jurisdiction and failure to state a claim. The District Court
dismissed the ATCA, Geneva Conventions and Constitutional claims; it ruled that
the Federal Tort Claims Act (FTCA) provided the exclusive remedy for alleged
torts by federal officials or employees committed within the scope of their
employment.
The FTCA pre‑empts the ATCA and Geneva Conventions claims
because the Defendants’ alleged authorization, implementation and supervision
of the Plaintiffs’ detention and torture lay within the scope of their
employment. Finally, no relevant FTCA exceptions favored Plaintiffs’ claims.
Responding to Plaintiffs’ two Constitutional claims,
Defendants’ argued that the Plaintiffs had failed to allege the violation of
any right protected by the U.S. Constitution for two reasons. First, the
Plaintiffs, as detainees at Guantanamo Bay, Cuba, constituted aliens located
outside sovereign U.S. territory at the time of the alleged violations.
Alternatively, Defendants maintained that the law had not
clearly recognized any such rights as of the time the alleged violations had
taken place. The District Court agreed with Defendants’ alternative contention
and dismissed Plaintiffs’ constitutional claims.
The District Court did, however, find for Plaintiffs’ on
their RFRA claims. The RFRA provides in part that the “Government shall not
substantially burden a person’s exercise of religion” unless the Government “demonstrates
that application of the burden to the person— (1) is in furtherance of a
compelling governmental interest; and (2) is the least restrictive means of
furthering that compelling governmental interest.”
In repudiating the Defendants’ argument that RFRA does not
apply extraterritorially, the court cited Rasul v. Bush, 542 U.S. 466, 475
(2004) and reasoned that if the terms “territory and possession” is to have any
meaning, it must include areas such as [Guantanamo], over which the U.S.
exercises “perhaps as much control as it possibly could short of ‘ultimate
sovereignty.’”
The Plaintiffs then appealed the dismissals of the ATCA,
Geneva Conventions and Constitutional claims. Defendants also filed an
interlocutory appeal from the denial of their qualified immunity under RFRA.
The U.S. Court of Appeals for the District of Columbia Circuit, however,
affirms the District’s Court’s dismissals of Plaintiffs’ complaint and reverses
the District Court’s denial of the Defendants’ motion to dismiss.
As to their ATCA claims, Plaintiffs argued that Defendants
authorized, implemented, supervised and condoned their torture and detention
and thereby violated customary international law. In 2005, the Attorney General
certified that all Defendants were acting within the scope of their employment
at the time of the conduct alleged in the complaint. Under the Westfall Act,
the FTCA precludes “any other civil action or proceeding for money damages” for
any tort committed by a federal official or employee “while acting within the
scope of his office or employment.” 28 U.S. C. § 2679(b)(1).
The Court of Appeals, however, rejects Plaintiffs’ claims.
“As the district court correctly noted, ‘the complaint alleges torture and
abuse tied exclusively to the Plaintiffs’ detention in a military prison and to
the interrogations conducted therein.’ ... The underlying conduct—here, the
detention and interrogation of suspected enemy combatants—is the type of
conduct the Defendants were employed to engage in. ... The detention and
interrogation of suspected enemy combatants is a central part of the
Defendants’ duties as military officers charged with winning the war on
terror.”
“While the Plaintiffs challenge the methods the Defendants
used to perform their duties, the Plaintiffs do not allege that the Defendants
acted as rogue officials or employees who implemented a policy of torture for
reasons unrelated to the gathering of intelligence. Therefore, the alleged
tortious conduct was incidental to the Defendants’ legitimate employment
duties.” [Slip op. 13]
As to the Convention issues, “[T]he Westfall Act provides
that ‘[t]he remedy against the Government under the FTCA is exclusive of any
other civil action or proceeding for money damages . . . against the employee’
... [Cite.] The Plaintiffs’ claim based on the Geneva Conventions is for money
damages and the alleged conduct falls within the Defendant’s scope of
employment.” [Slip op. 16‑17]
The D.C. Circuit, relying on its previous decision in
Boumediene v. Bush, 476 F.3d 981, 984 (D.C. Cir. 2007), cert. granted, 127
S.Ct. 3078 (2007) [Suspension Clause challenge to the Detainee Treatment Act of
2005, and the Military Commissions Act of 2006], as well as Johnson v.
Eisentrager, 339 U.S. 763 (1950), agrees with Defendants, and rejects
Plaintiffs’ claims that the more favorable Rasul case (above) should govern.
The Court, however, distinguishes Rasul because it dealt with statutory habeas
corpus, and had not reached any constitutional issues that would be relevant in
a Bivens action. See Bivens v. Six Unknown Named Agents of Federal Bureau of
Narcotics, 403 U.S. 388 (1971).
As to the RFRA, the Plaintiffs’ contended that the
Defendants had inhibited and constrained religiously motivated conduct central
to Plaintiffs’ religious beliefs, imposed a substantial burden on Plaintiffs’
abilities to exercise or express their religious beliefs and regularly and
systematically engaged in practices specifically aimed at disrupting
Plaintiffs’ religious practices in violation of RFRA . ...” [Slip op. 21]
Because the RFRA does not define the term “person,” the
appellate Court looks beyond the statutory language and examines other sources
in order to determine its meaning. It declares that “as originally enacted [the
RFRA] did not expand the scope of the exercise of religion beyond that
encompassed by the First Amendment,” and that “[b]ecause RFRA’s purpose was
thus to restore what, in the Congress’s view, is the free exercise of religion
guaranteed by the Constitution, the term ‘person’ as used in RFRA should be
interpreted as it is in constitutional provisions.” [Slip op. 24]
The Court then examines previous cases about the meaning of
“people” and “person” under the Fourth and Fifth Amendments, citing both
Eisentrager and United States v. Verdugo‑Urquidez, 494 U.S. 259 (1990), for
their rejection of extraterritorial application of the Constitution. “RFRA’s
use of ‘person’ should be interpreted consistently with the Supreme Court’s
interpretation of ‘person’ in the Fifth Amendment and ‘people’ in the Fourth
Amendment to exclude non‑resident aliens. Because the Plaintiffs are aliens and
were located outside sovereign U.S. territory at the time their alleged RFRA
claim arose, they do not fall with the definition of ‘person.’ Accordingly, the
district court erred in denying the Defendants’ motion to dismiss the
Plaintiffs’ RFRA claim.” [Slip op. 24‑25]
Citation: Rasul v. Myers, 2008 WL 108731, No. 06‑5209
(D.C. Cir. January 11, 2008).
FORUM SELECTION CLAUSE
In case of parallel litigation where parties’ contract
contained clause designating Australian court as proper forum, Federal Court of
Australia rules that, where defending U.S. party’s challenge to its
jurisdiction is still pending, Australian party’s request for notices for U.S.
party to produce documents is premature
Smurfit Stone Container Corporation (Plaintiff),
headquartered in Chicago, IL, installed technology proprietary to Armacel Pty.
Ltd. of Australia (Defendant) at its corrugated cardbord plant in Pennsylvania.
It appears, however, that the technology did not perform as expected and caused
regulatory compliance problems.
In October 2007, Plaintiff brought a civil action against
Defendant in a Pennsylvania federal court asking for a declaratory judgment as
to the rights of the parties under their contract. Defendant moved the U.S.
court to dismiss the Pennsylvania action, contending that the contract’s forum
selection clause (FSC) specified New South Wales as the proper forum for
resolving their contract disputes. The following month, Defendant sued
Plaintiff in the Federal Court of Australia, New South Wales District.
On December 27, 2007, the U.S. Court denied the motion. It
reasoned that, when parties merely “consent” to litigate in a particular forum,
they do not rule out the jurisdiction of other fora. On the other hand, an FSC
that clearly and unequivocally designates one forum, however, will generally
preclude jurisdiction elsewhere.
Here, the U.S. Court finds that the FSC at issue does not
absolutely require litigation to take place only in New South Wales. The Court,
therefore, denies Respondent’s motion to dismiss and declines to stay its
proceedings while the parties are litigating in Australia.
Meanwhile, in New South Wales, Defendant obtained leave to
serve Plaintiff outside the jurisdiction (namely in the U.S.), to obtain
document production. Plaintiff moved to set aside two notices to produce, dated
November 15 and 26 of 2007. To this end, Plaintiff entered a limited appearance
to challenge the Australian Court’s jurisdiction over the dispute.
Alternatively, Plaintiff asked the Court to rule that it does not have to
answer the notices. It also has a motion pending to set aside the original
order allowing service outside the jurisdiction.
The Australian Court decides that the U.S. Plaintiff is not
required to turn over documents based on a notice to produce (compare subpoena
duces tecum, a notice to appear with specified documents, in U.S. law) where
its own jurisdiction is up in the air. “¼[A]n applicant proceeds
upon the basis that it need only establish the existence of a prima facie case
at the stage in the proceeding where the procedures of the court, including
discovery, have not been invoked.” [Slip op. 1]
“¼[A]
respondent seeking to challenge the jurisdiction of the court should not have
imposed upon it one of the Court’s compulsory processes in aid of establishing
the jurisdiction. ¼I
do not consider that, at this stage of the proceedings in which the
jurisdiction is under challenge, the applicant can invoke the compulsory
process of the Court. The rules of the Federal Court provide that a notice to
produce has the force and effect of a subpoena. Accordingly, the issue of a
notice to produce must be considered as [a premature] attempt to invoke the
Court’s compulsory processes¼” [Slip op. 2]
Citation: Armacel Pty Limited v. Smurfit Stone
Container Corporation [2007] F. C. A. 1928 (December 6, 2007) [Australian
proceeding]. See also Smurfit Stone Container Corp. v. Armacel Proprietary
Ltd., 2007 WL 4571116, No. 4:07‑CV‑1822 (M. D. Pa. 2007).
JURISDICTION (SUBJECT MATTER)
Third Circuit holds that, for federal subject matter
jurisdiction to exist, Plaintiff with dual U.S. and foreign citizenship (1) may
not rely upon her foreign nationality while living abroad as basis for alienage
jurisdiction and (2) cannot rely on diversity clause, since Plaintiff was
unable to show that she is domiciled in U.S. state diverse from that of all
Defendants
Plaintiff Merlene Frett‑Smith was born in the British Virgin
Islands (BVI), raised in the U.S. Virgin Islands (USVI), and became a
naturalized U.S. citizen in 1975. After attending college in Virginia, she
moved to Atlanta, Georgia, and then to Miami, Florida, before moving back to
the USVI in 1990. In 1998, a light fixture at Plaintiff’s place of employment
fell upon her causing injuries. In 2000, she brought a § 1332 suit there against
the parties who had installed the light, Vanterpool Enterprises Inc., and
Builder’s Emporium, Inc. (jointly Defendants).
Alleging that she was a citizen and resident of the BVI and
that Defendants were citizens and residents of the USVI, Plaintiff successfully
asserted diversity jurisdiction under 28 U.S.C. § 1332(a)(2). After a trial,
the jury returned a Plaintiff’s verdict for over $1.2 million.
Defendants then moved to dismiss the action for lack of
subject matter jurisdiction. They contended that Plaintiff was a U.S. citizen
living abroad in the BVI, and as such, could not invoke diversity jurisdiction
even if she were also a citizen of the BVI. Plaintiff responded that, even so,
she was entitled to invoke diversity of state citizenship jurisdiction under 28
U.S. C. § 1332(a)(1). Plaintiff argued that she had changed her domicile from
the USVI to Florida in December of 1998 when she traveled there for treatment
of her injuries. In the alternative, Plaintiff claimed that she had not given
up her Florida domicile in 1990 when she had moved back to the USVI.
In dismissing Plaintiff’s suit, the court ruled that
Plaintiff was either a resident of the BVI or a domiciliary of the USVI,
neither of which would support a suit under § 1332. Despite Plaintiff’s appeal,
the U.S. Court of Appeals for the Third Circuit affirms.
The Court addresses two issues: (1) whether Plaintiff can
invoke “alienage” jurisdiction under 28 U.S.C. §1332(a)(2) if she possesses dual
citizenship; (2) whether the District Court committed clear error when it found
that Plaintiff was not a domiciliary of Florida for purposes of § 1332(a)(1).
Deciding a jurisdictional issue of first impression in the
Circuit, the Court explains its affirmance. “A number of our sister Courts of
Appeals have already held that, for a dual national citizen, only the American
nationality is relevant for purposes of diversity under 28 U.S. C. § 1332.”
“These courts [also] agree that ‘diversity jurisdiction may
be properly invoked only when a dual citizen’s domicile, and thus his [state]
citizenship, is in a state diverse from that of adverse parties.’ [Cites].
Thus, an American national, living abroad, cannot sue or be sued in federal
court under § 1332(a)(2). The only way ... is under § 1332(a)(1) if that
national is a citizen, i.e., domiciled, in one of the fifty U.S.
states.[Cite.].” [Slip op. 4]
The Court agrees with its sister circuits. “Because
[Plaintiff] is a U.S. citizen, her initial reliance on alienage jurisdiction
was in error. Furthermore, if [Plaintiff] was domiciled abroad at the time her
Complaint was filed, she would not be a citizen of any [U.S.] state and
diversity jurisdiction under § 1332(a)(1) would also fail. ...” [Slip op. 4]
On Plaintiff’s claimed domicile in Florida, the Circuit
Court has this to say. “The District Court found that [Plaintiff] did abandon
her Florida domicile in 1990 when she moved to the USVI. This finding is
supported by the evidence of record indicating that [Plaintiff] established a
residence in the USVI, obtained employment there, filed USVI tax returns, and
relinquished her Florida driver’s license to obtain a USVI driver’s license.”
“Indeed, by her own admission, [Plaintiff] confirmed that
she did not consider Florida her home until, ‘in December of 1998, [she
testified], I moved to Miami, Florida and began considering it my home from
that point forward.’ Thus, we cannot consider clearly erroneous the District
Court’s finding that [Plaintiff] ‘became a domiciliary of the [USVI] when she
moved there in 1990.’ ...”
“The District Court also rejected [Plaintiff’s] contention
that she abandoned the USVI as her domicile when she went to Florida in
December of 1998, and established a new domicile in Florida that she maintained
at the time she filed her Complaint in 2000.” [Slip op. 5]
The Court looked at the evidence suggesting that Plaintiff
was, at the time of filing, a domiciliary and resident of Tortola in the BVI.
It reasoned that it could not construe as clearly erroneous the lower court’s
finding that, at the relevant time, [Plaintiff] was either a resident of
Tortola BVI, or a domiciliary of the [USVI].
“If, on [her filing date of] May 3, 2000, [Plaintiff] was a
resident of Tortola BVI, she cannot maintain this action. [Plaintiff] is a U.S.
citizen, and therefore, she may not utilize her foreign nationality while
living abroad for the jurisdictional purposes of § 1332(a)(2).”
“Further, if [Plaintiff] was domiciled in the BVI [in 2000],
she would not [have been] a citizen of any [U.S.] state for purposes of
diversity jurisdiction under § 1332(a)(1). [Plaintiff] must be a ‘citizen,’
i.e., domiciled in a particular state of the U.S., [diverse from] that of [all
Defendants] in order to confer subject matter jurisdiction on the District
Court under § 1332. Because it is undisputed that the [Defendants] are citizens
of the USVI and [Plaintiff’s] claim that she is a domiciliary of a different
state fails, we will affirm the District Court’s order [of dismissal].” [Slip
op. 7]
Citation: Frett‑Smith v. Vanterpool, 2008 WL 43721,
No. 06‑4169 (3rd Cir. 2008).
TOPICS IN BRIEF
U.S. Treasury Department announces new tax agreements
with four nations. On January 2, 2008, the Treasury Department reported
some recent developments in international tax agreements. In the case of
Belgium, a new income tax treaty and, for three other nations, protocols
entered into force on December 28, 2007. The three protocols modify existing
tax treaties with Denmark, Finland and Germany. Two types of provision are
common to the agreements with Belgium, Denmark, Finland and Germany: (1) the
elimination of source‑country withholding taxes on certain dividends; and (2)
the modernization of the their treaties’ limitations on benefits provisions.
Only Germany and Belgium have added a provision requiring arbitration of
certain tax disputes that competent authorities have been unable to resolve
within a specified period. These changes generally apply to tax years beginning
on, or after, January 1, 2008. Certain provisions of the protocols with both
Germany and Finland are effective, however, on, or after, January 1, 2007. Citation:
U.S. Federal News (HT Syndication), Washington, D.C., Wednesday, January 2,
2008; 2008 W. L. N. R. 211267.
Heads of EU Member States sign new Treaty on EU
governance. Meeting in the ornate 16th‑century monastery of Geronimos near
Lisbon, Portugal, European Union leaders signed a new treaty on December 13,
2007, that will change the political machinery for running the 27‑nation bloc.
Those changes include the creation of a permanent post of EU President with a 2‑1/2‑year
term. The treaty would also enable the EU to make more governmental decisions
by majority vote rather than unanimously. Finally, the new charter will vest
Foreign Policy duties in a single new Representative. The European leaders
praised the treaty, asserting that it would help the Union conquer the
political drift which has plagued it since the 2005 referenda in France and the
Netherlands defeated the proposed constitution. A few of the achievements of
the EU thus far consist of (1) the establishing open borders among the Member
States, and (2) the joining of several former Communist nations in 2004; and
(3) the adoption of the Euro as a common currency in more than one half of the
Member States. Among the Members which have not yet adopted the Euro are Great
Britain, Sweden, Denmark and the 10 new states that joined the EU in 2004.
While the heads of state were signing the treaty, a choir in the background was
singing Beethoven’s “Ode to Joy,” the EU’s quasi‑official anthem. Ireland is
the only Member State that plans to put the ratification of the new treaty to a
popular vote. In the other 26 countries, parliamentary ratifications seem less
problematic; if all goes well, the treaty could take effect as early as 2009. Citation:
The New York Times; Brussels, Belgium; Friday, December 14, 2007, Section
A, page 14 (Stephen Castle reporting from Brussels and Graham Bowley reporting
from New York); 2007 W. L. N. R. 24656584.
U.S. reports on its arrangements with many nations to
destroy or effectively guard portable anti‑aircraft missiles. Man‑Portable
Air Defense Systems (MANPADS), or shoulder‑fired anti‑aircraft missiles, pose a
constant threat of being acquired by criminals and terrorists, and used against
international aviation. On a bilateral basis and in international fora since
2003, the Office of Weapons Removal and Abatement (OWRA) in the U.S. Department
of State’s Bureau of Political‑Military Affairs, with the aid of the Defense
Threat Reduction Agency (DTRA), has been helping at least 22 countries to
destroy over 24,000 of their MANPADS; these were either obsolete, excess to
their defense needs, or at risk of falling into the wrong hands. Pursuant to
continuing agreements, the U.S. has assisted, inter alia, Afghanistan, Albania,
Bosnia and Herzegovina, Burundi, Cambodia, Chad, Guinea, Hungary, Liberia,
Nicaragua, Sao Tome and Principe, Serbia, and Sudan. The OWRA and the DTRA have
also striven to strengthen controls over the export of MANPADS and over
stockpile security. Over 95 countries have pledged to abide by the recommended
standards. During 2003, for example, G‑8 Evian Summit leaders agreed on a U.S.
initiated MANPADS Action Plan. The Wassenaar Arrangement, the first
multilateral arrangement covering conventional weapons and sensitive dual‑use
goods and technologies, has also upgraded its guidelines for controlling MANPADS
transfers. The following year, the Organization for Security and Cooperation in
Europe (OSCE) and the Asia Pacific Economic Cooperation Forum (APECF) adopted
equivalent policies. During 2005, the OAS’s 35th General Assembly also embraced
these standards. In the same year, the U.S. announced the start of a NATO
Partnership for Peace Trust Fund Project to help Ukraine destroy its stockpiles
of excess munitions, small arms, light weapons and MANPADS. In another
signature 2005 event, the U.S. and the Russian Federation signed an Arrangement
on Cooperation in Enhancing Control of Man‑Portable Air Defense Systems. Citation:
U.S. Department of State release 2008/052, Office of the Spokesman, Washington
D.C., Thursday, January 24, 2008.
