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

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

2002 International Law Update, Volume 8, Number 6 (June).

COMPETITION

In matter of first impression, Ninth Circuit rejects claim that material normally producible under 28 U.S.C. Section 1782 in U.S. for use by complainant in antitrust proceeding before EU Commission must also be discoverable under EC procedures

Advanced Micro Devices, Inc. (AMD), a manufacturer of microprocessors, filed a complaint with the European Commission, Directorate-General for Competition. It charged that Intel Corporation has been abusing its dominant market position in violation of Article 82 of the EC Treaty (abuse of dominant position in common market). To support its complaint, AMD filed a petition under Section 1782 in a California district court, seeking the production of documents and transcripts from a proceeding in another district court. Intel objected, arguing that the matter before the EC Commission is not a “proceeding in a foreign or international tribunal” within the meaning of Section 1782.

The district court disallowed the discovery, and AMD appealed. As a matter of first impression, the U.S. Court of Appeals for the Ninth Circuit reverses and remands. The Court addresses (1) whether the proceeding for which discovery is sought is taking place in a “foreign or international tribunal”, and (2) if so, whether Section 1782 requires a preliminary showing that the information sought would be discoverable or admissible in that proceeding.

Here, the Competition Directorate of the EC Commission conducts the investigation. Upon receipt of a complaint, the Directorate conducts a preliminary, nonadversarial investigation. The Director may seek information from the alleged infringer and may search the alleged infringer’s business premises. At the end of the investigation, the Directorate decides whether to pursue the complaint further. If the Directorate concludes that infringement may have occurred, it will hold a hearing. Thereafter, the Directorate will make a recommendation on how to proceed. If it decides to dismiss the matter, the complainant may appeal to the EC Court of First Instance. If it decides to proceed, the EC Advisory Committee will issue an opinion which may become enforceable within the EC if adopted by the Commission. While the EC Commission is an administrative body, the investigations it conducts constitute quasi-judicial or judicial proceedings.

The language of Section 1782 is broad and inclusive and does not distinguish between civil and criminal proceedings. Ninth Circuit cases have read Section 1782 broadly to include “bodies of quasi-judicial or administrative nature” as well as preliminary investigations leading to judicial proceedings.

“Intel argues that the process for which AMD seeks discovery is purely administrative in nature, and, at least with respect to a recommendation to proceed to a complaint, preliminary to a non-judicial proceeding. In the past, we have rejected applications for discovery where the ‘proceeding’ was a commission of inquiry authorized to investigate, report and make recommendations to a non-judicial body. [Cit.] But the Directorate makes its recommendations to the EC [European Commission] – a body authorized to enforce to enforce the EC Treaty with written, binding decisions, enforceable through fines and penalties. EC decisions are appealable to the Court of First Instance and then to the Court of Justice. Thus, the proceeding for which discovery is sought is, at minimum, one leading to quasi-judicial proceedings.” [Slip op. 8] Therefore, an EC proceeding qualifies as a “proceeding before a tribunal” within the meaning of 28 U.S.C. Section 1782.

The Court next turns to the discoverability or admissibility question. The First and Eleventh Circuits have held such a threshold applicable, but the Second and Third Circuits have declined to so hold. Staking out a middle ground, the Fourth and Fifth Circuits impose the showing upon requests from private parties but not upon those from the foreign or international tribunal itself.

The Ninth Circuit has already spurned a requirement that the evidence produced under Section 1782 has to be admissible in the foreign tribunal. In the instant case, the Court also rejects such a threshold requirement as to discoverability. It finds no statutory language on point, and nowhere does the legislative history mention it. Had Congress intended to demand a “discoverability” threshold, it could easily have done so. Finally, liberal production of evidence is consistent with the aims of Section 1782. By unilaterally providing broad assistance to tribunals and parties in foreign and international proceedings, Congress hoped to encourage foreign countries to provide reciprocal assistance to our courts.

Citation: Advanced Micro Devices, Inc. v. Intel Corp., 2002 WL 1225129, No. 02-15070 (9th Cir. June 6, 2002).

CONSTITUTIONAL LAW

As to Bivens claim by widow of Guatemalan rebel leader that U.S. government agencies had intentionally deceived her as to whereabouts of her husband to cover up their complicity in his torture and murder, U.S. Supreme Court holds that widow has failed to state constitutional claim of denial of access to courts

Jennifer K. Harbury sued various federal government agencies and officials as defendants in the District of Columbia federal court. Assuming the truth of her allegations, certain government officials had intentionally deceived her by hiding information that the Guatemalan government had detained her husband, Efrain Bamaca‑Velasquez, a Guatemalan rebel leader who disappeared in his own country in March 1992. After torturing him for more than a year to obtain information of interest to the Central Intelligence Agency (CIA), for which it paid, Guatemalan officials killed him. Those who took part included officers trained in the United States, who were paid and used as informants by the CIA. According to her complaint, governmental lying about these events denied her access to the courts (ATC) by leaving her without key information, or awareness that she ought to seek certain information. The result was that U.S. officials prevented her from developing a basis for a lawsuit that might have saved her husband’s life.

Plaintiff joined as defendants the CIA, the State Department, the National Security Council (NSC) and various officials of each of these agencies. Her legal theories involved common law and international law tort claims as well as constitutional claims under Bivens v. Six Unknown Fed. Narcotics Agents, 403 U.S. 388 (1971). She sued on behalf of her husband’s estate and on her own behalf for breach of, among other things, her ATC rights under the constitution.

The Court summarizes her factual contentions as follows. “Harbury makes three specific allegations of such Government deception, all involving State Department officials, while Bamaca was still alive. First, she says she contacted several unnamed State Department officials in March 1993 to express concerns about her husband, who, according to an eyewitness, was still alive. They ‘promised to look into the matter and to assist her,’ but they neither gave her nor made public any information about Bamaca, though CIA reports from as early as May 1993 confirmed he was still alive.”

“Second, in August 1993, Marilyn McAfee, then Ambassador to Guatemala, advised Harbury to submit a written report to the effect that remains found in a grave purported to be her husband's were not in fact his, as Harbury promptly did. Although McAfee promised that she would ‘investigate the matter immediately[,] report her findings,’ and keep Harbury ‘properly informed regarding her husband's situation,’she gave Harbury no information. Third, in September 1993 (the same month that the Government learned Bamaca was dead), Harbury engaged in a week‑long hunger strike in Guatemala City to focus public attention on her husband's plight, but the State Department told her nothing.” [N/A]

After Bamaca’s death, the lies and omissions allegedly became more blatant. Plaintiff repeatedly met with State Department and National Security Agency officials who kept telling her that they were making strenuous but unfruitful efforts to find out about her husband. All along, however, Government officials knew Bamaca’s fate but were doing their best to prevent disclosure of their complicity in his torture and murder.

The district court dismissed the ATC counts on two grounds. First, it ruled that plaintiff had failed to state a valid claim because, since she had filed no previous suit, she could only speculate how the alleged cover-up might have deprived -- or unduly limited -- her rights to bring a separate action. Secondly, her case failed because the defendants would, in any event, be entitled to qualified immunity. Plaintiff appealed the dismissal of her Bivens claims.

The U.S. Court of Appeals for the District of Columbia Circuit reversed and remanded only the dismissal of plaintiff’s Bivens claim against defendants State and NSC for denial of her ATC rights. The U.S. Supreme Court granted the governments petition for certiorari “because of the importance of this issue to the Government in its conduct of the Nation's foreign affairs.” With plaintiff arguing the case pro se, the highest Court unanimously reverses the case (with one vote concurring in the result) and remands it for further proceedings consistent with its opinion. It concludes that plaintiff has failed to state a claim for denial of her constitutional ATC rights.

The Court first explains that there are two types of ATC claims. First, there are allegations that systemic official action is frustrating a plaintiff in preparing and filing litigation at the present time, where plaintiff could pursue the suits once the blockage has been taken away. The second type consists of claims about specific cases that cannot go to trial, no matter what official action may be taken in the future. Regardless of which category is involved, the thrust of recognizing an ATC claim is to enable a plaintiff effectively to vindicate a separate and distinct right to ask for judicial relief for some wrong. As a result, the plaintiff has to lay out the underlying claim in his or her complaint as though it were being separately prosecuted. When, as in the instant case, the ATC claim looks backward, the complaint has to point to a remedy the court may provide her with as recompense but which is not otherwise available in some lawsuit that plaintiff may yet file. It must deal with the underlying claim and its lost remedy with allegations adequate to give defendants reasonable notice.

The factual background of the present case, the Court notes, highlights the importance of carefully stating a viable predicate cause of action. Defendants’ alleged behavior involved the management of foreign relations by the National Government. Any judicial enquiry into such matters will spawn worries over separation of powers by encroaching into areas committed to the political branches. Our courts should avoid having to decide such issues wherever they can. Consequently, pleadings in these areas should inform the trial courts as early as can be whether they can forestall a constitutional ruling where the ATC allegations fail to state a valid claim.

Plaintiff’s complaint here never came even close to laying out a constitutional ATC claim. It failed to specify the underlying claim which the alleged governmental disruption had stymied. This left the trial court and the defendants to guess (1) at the nature of the unstated cause of action allegedly lost to plaintiff and (2) at a sought-for remedy distinct from the relief that the complaint’s other counts might warrant. This does not satisfy plaintiff’s need to show that a backward-looking ATC claim furnished a remedy that she could not secure on her subsisting claims. After all, the counts of the complaint that identify certain CIA defendants, including the Guatemalan officer who had allegedly tortured and killed her husband, remain as tort claims that survived the motion to dismiss below. Plaintiff can ask for damages and possibly some form of injunctive relief for the injuries arising out of the infliction of emotional distress alleged in those counts. She cannot, of course, obtain the order that might have prevented her husband’s death. Nor can she get such a order on her ATC claim. Plaintiff thus cannot obtain compensation for the unique loss she alleges as a result of her inability to have brought an intentional-infliction action at an earlier time.

Citation: Christopher v. Harbury, No. 01-394 (S.Ct. June 20, 2002).

CONTRACTS

Australian High Court holds that Greek Orthodox Archbishop who left his diocese in United States to preside over Orthodox community in Australia was serving under “contract of employment” with rights to annual and other leave guaranteed by Australian labor law

Spyridon Ermogenous (plaintiff) was bishop of an Greek Orthodox community in the United States for many years. In 1970, the Greek Orthodox Community of South Australia (defendant) offered him an appointment as archbishop of their church and plaintiff accepted the offer. For over twenty years, plaintiff served in that capacity, receiving a regular agreed-upon compensation.

In 1994, plaintiff filed a claim against defendant in the Industrial Relations Court of South Australia which sought sums of money to compensate him under his employment contract for annual and long service leave. A statute defines “contract of employment” as including “a contract recognised at common law as a contract of employment under which a person is employed for remuneration in an industry.” (Nothing in this case turned on the reference to “industry” which was defined to mean, among other things, an “occupation in which employees are employed”).

The magistrate ruled in plaintiff’s favor. He found that the officers of defendant decided almost all issues relating to church policy and to plaintiff’s duties, leaving very little discretion to plaintiff. From these and other factors, he concluded that plaintiff had been serving under an enforceable employment contract and that the law applicable to such contracts required defendant to pay plaintiff sums equivalent to the accumulated annual, and long service, leave. The magistrate decided that the defendant was liable to the plaintiff for $23,989.35 for payment in lieu of accumulated annual leave plus $10,672.80 for accumulated long service leave. Judgment against defendant consisted of the sum of these amounts with interest.

Defendant appealed to a single judge of the Industrial Relations Court of South Australia and later to the Full Industrial Relations Court but both dismissed its appeals. Upon review by the Full Court of the Supreme Court of South Australia, however, that Court, citing English and American cases, allowed the appeal and issued an order dismissing plaintiff’s claims. With leave, plaintiff took his case to the High Court of Australia. The High Court allows the appeal and remands the case to the S.A. Supreme Court for further proceedings consistent with its opinion.

After examining the record, the High Court first concludes that the industrial magistrate’s findings did not support a conclusion by the Full Court of the S.A. Supreme Court that the law should look upon the “church” as wholly distinct from defendant. Defendant dealt in religious, cultural and athletic activities and not all members belonged to the Orthodox Church.

Nor is it sound to analyze arrangements between religious or similar bodies and ministers of religion based on presumptions. For example, it does not make sense to “presume” that these arrangements are predominantly “spiritual” or that neither party to religious arrangements relating to property or economic rights intends them to be enforceable at law. “At best, the use of that language does no more than invite attention to identifying the party who bears the onus of proof. In this case, where issue was joined about the existence of a legally binding contract between the parties, there could be no doubt that it was for the [plaintiff] to demonstrate that there was such a contract. Reference to presumptions may serve only to distract attention from that more basic and important proposition.” [N/A]

The record also indicates that the magistrate did, in fact, make the parties’ contractual intentions a central focus of his rulings. “He undertook a similarly close examination of the evidence that had been called at the trial of this matter about those subjects. That is, he examined, with care, all of the objective circumstances which bore on whether the parties intended to make a contract, as distinct from an arrangement binding only in honour.” [N/A] The bottom line is that the Supreme Court drew inferences as to the lack of contractual intent that the magistrate’s findings cannot support.

Citation: Ermogenous v. Greek Orthodox Community of S.A., Inc., 187 A.L.R. 92 (Aust. High Ct., March 7, 2002).

JUDGMENTS

In legal malpractice action, Ontario Court of Appeal dismisses appeal by Canadian plaintiff from judgment that found that plaintiff had not relied on counsel’s bad advice to default in New York case against it because of likely jury bias against foreign plaintiff

Sovereign General Insurance Company (SGI) (plaintiff) sought damages from the Alberta, Canada, law firm of Atkinson, McMahon and one of its senior partners, Terrence McMahon (defendants) for giving it negligent legal advice. Occidental Chemical Corporation (OCC) had lodged a suit against SGI in a New York state court. Defendants had advised plaintiff not to defend that lawsuit and to allow the New York court to enter a default judgment against it. This advice had several components and appeared in a letter from defendants to plaintiff in December 1989 and signed by Terrence McMahon.

OCC duly got their default judgment from the New York court and filed proceedings in the Ontario courts to enforce this judgment. After OCC moved for summary judgment, plaintiff agreed to settle and ended up paying OCC $2,921,168. This is the damage figure that plaintiff is trying to recover from the defendants in the present case. The trial court granted defendants’ motion for summary judgment, however, and plaintiff sought appellate relief. The Ontario Court of Appeal, however, dismisses plaintiff’s appeal with costs.

The first element of the defendants’ letter analyzes recent developments in Canadian law on the enforcement of foreign country judgments. It declared: “We must point out that there is recent authority, currently on appeal to the Supreme Court of Canada, which states that the residency and submission arguments are no longer available as defences against the recognition of judgments from other provinces (as opposed to other countries). Based on this recent development, there is some risk that the principle could be extended to include cases such as the one at hand, thereby allowing recognition of a New York judgment in Canada even where the defendant is not resident in New York or has not submitted to the jurisdiction.” [Slip op. 2-3]

While a challenge to the jurisdiction of the foreign court over a defendant has been a traditional defense to the enforcement of foreign country judgments, some recent Canadian authority suggests some changes in this view. “The second passage referred to Morguard v. DeSaroye, [1990] 3 S.C.R. 1077 (‘Morguard’), in which, a year after Mr. McMahon gave his advice, the Supreme Court of Canada established a new rule for the recognition and enforcement of judgments of courts in other provinces. The rationale in Morguard was then applied by Ontario courts to foreign [country] judgments: see Arrowmaster Inc. v. Unique Forming Ltd. (1993), 17 O.R. (3d) 407 (Gen. Div.) and United States of America v. Ivey (1995), 26 O.R. (3d) 533 (Gen. Div.). Thus, by the time Occidental sued Sovereign in Ontario to enforce its New York judgment, the law of Ontario had changed. In other words, the ‘some risk’ to which Mr. McMahon adverted in his opinion had in fact come to fruition.” [Slip op. 3-4]

Plaintiff concentrates its attack on the advice given in the final paragraph of the McMahon letter. “There may, however, be a more substantial risk involved in defending the Writ in New York. A New York jury deciding a case brought by a New York company against a foreign bonding company may, in any event, be sympathetic to the New York company. If Sovereign General defends, and judgment is obtained against it, our courts would be inclined to enforce the judgment in Canada on the ground that there was submission to the foreign jurisdiction. Accordingly, we advise not to defend in New York and to face Occidental in Canada raising the defence that the New York court acted without jurisdiction in the matter.” [emphasis supplied] [Slip op. 4]

The Appeal court agrees with the lower court that the correct jurisdictional advice was what plaintiff actually had relied upon -- not the recommendation based on the alleged jury bias point. “The trial judge's analysis on the causation issue was strongly supported by the record before him. He engaged in a careful review of the structure and contents of the letter. He also considered the testimony of the two principal Sovereign witnesses, Mr. Wingerter and Mr. Bowes, and concluded that it did not support Sovereign's position that the 'jury sympathy' point was an important factor in terms of Sovereign's final decision. He also considered the testimony of six expert witnesses, including Clifton O'Brien, an experienced Alberta counsel who ‘considered McMahon's opinion to be accurate and his advice to refrain from defending the New York action to be sound and reasonable.’ In the end, we can see no basis for overturning the judgment of the trial judge. His analysis was comprehensive and lucid. His conclusion was, in our view, correct.” [Slip op. 5-6]

Citation: Occidental Chemical Corporation v. Sovereign General Insurance Company v. Atkinson McMahon and Terrence McMahon, 2002 Ont. C. A. LEXIS 142 (Ct. App. Ont. April 8).

JURISDICTION (SUBJECT MATTER)

In contract suit in federal court based on alienage jurisdiction, U.S. Supreme Court holds that British Virgin Islands corporations are “citizens or subjects of a foreign state” within meaning of 28 U.S. C. s. 1332(a)(2) on subject matter jurisdiction

Traffic Stream (BVI) Infrastructure Ltd. (TSI) is a corporation organized under the laws of the British Virgin Islands (BVI), an Overseas Territory of the United Kingdom. In 1998, JP Morgan, at that time known as Chase Manhattan Bank (Chase), decided to provide financial support to certain TSI projects involving the building and operating of toll roads in China. Under their contract, New York law was to be the applicable law and TSI consented to submit to the personal jurisdiction of the U.S. District Court for the Southern District of New York. Some time later, Chase sued TSI in that court, claiming that the latter had failed to live up to its contractual duties.

As to subject matter jurisdiction, the Court relied upon the alienage diversity provisions of 28 U.S.C. s. 1332. Subdivision (a)(2) grants district courts jurisdiction over civil actions where the controversy, inter alia, is “between citizens of a State and citizens or subjects of a foreign state.” Chase moved for summary judgment and the Court granted the motion. The U.S. Court of Appeals for the Second Circuit reversed. It concluded sua sponte that, as a citizen of an “Overseas Territory,” TSI’s relationship to an independent foreign state was too “attenuated” to meet the demands of the jurisdictional statute.

The U.S. Supreme Court granted certiorari (1) because the ruling below conflicted with rulings in the Third, Fourth and Seventh Circuits, and (2) because it implicated “serious issues of foreign relations.” The Court unanimously reverses and remands (with one opinion concurring only in the judgment), holding that TSI’s citizenship was enough to bring the BVI corporation within Section 1332(a)(2).

The Court first notes that a corporation organized under the laws of a foreign state is a “subject” of that state for jurisdictional purposes. It is true that the U.S. Executive Branch does not recognize the British Virgin Islands as an independent foreign state. This Court, however, has never expressly read Section 1332(a)(2) as limited to citizens of a formally recognized state but not to those residents of a state’s legal dependency. Indeed, this distinction is not meaningful under the alienage jurisdiction statute.

The British Crown, the Court notes, had established the BVI Constitution. Moreover, the United Kingdom wields extensive power over the BVI. For example, the British Monarch may annul any statute enacted by the BVI government and itself may legislate for the BVI. In addition, the Crown represents the BVI in its international relations.

“The Crown's representatives have not slept on their powers, which have recently been exercised to impose laws and international obligations upon the territory, as in the Caribbean Territories (Abolition of Death Penalty for Murder) Order 1991, and the Merchant Shipping (Salvage Convention) (Overseas Territories) Order 1997, the latter of which brought the BVI into compliance with the International Convention on Salvage, 1989. In a very practical sense, then, the statutes that permit incorporation in the BVI, see BVI Companies Act (CAP.285); BVI International Business Companies Act (CAP.291), are laws enacted in the exercise of the political authority of the United Kingdom, and it seems fair to regard a BVI company as a citizen or subject of this ultimate political authority.” [N/A]

Whether a federal statute should apply to an Overseas Territory turns upon its goal. “Both during and after the Revolution, state courts were notoriously frosty to British creditors trying to collect debts from American citizens, and state legislatures went so far as to hobble British debt collection by statute, despite the specific provision of the 1783 Treaty of Paris that creditors in the courts of either country would ‘meet with no lawful impediment’ to debt collection. Definitive Treaty of Peace, United States‑Great Britain, Art. IV, 8 Stat. 82. [Cite] Ultimately, the States' refusal to honor the treaty became serious enough to prompt protests by the British Secretary of State, particularly when irked by American demands for treaty compliance on the British side. See 31 Journals of the Continental Congress, 1774‑1789, pp. 781‑784 (J. Fitzpatrick ed. 1934).” [N/A]

This historical context explains why the Framers included jurisdiction based on alienage in Article III of the Constitution. The First Congress implemented Article III by statute. In 1875, congress amended this provision to track the language of Article III. The relationship between the British Crown and the powers of the BVI government over corporations noted above brings the United Kingdom within the scope of the concerns that animated Article III and Section 1332(a)(2).

In supporting the inapplicability of Section 1332(a)(2), TSI made two further contentions. First, it pointed to the fact that the U. K. does not treat BVI residents as full-fledged U. K. citizens or subjects. Secondly, it argued that, in any event, corporations are legally nothing more than a group of shareholders who happen to live in the BVI.

The Court rejects both submissions as flawed. For one thing, the modern notion of a corporation is clearly that of a free-standing legal entity distinct from its shareholders. Nor is the U.K.’s treatment of BVI residents decisive since U.S. federal statutory law -- not British law -- governs the jurisdiction of federal courts. Thus, TSI’s status under U. K. law does not disable it from qualifying it as a “citizen or subject of a foreign state” under governing U.S. jurisdictional law. Nothing in Section 1332 hints that the members of a polity under a sovereign’s authority are not “subjects” merely because their laws confer fewer rights on them, e.g., than on English citizens. Finally, TSI has admitted that BVI citizens are U. K. “nationals.” Thus, it does not matter whether the law of the U. K. may set up differing rights of abode for persons in its territories.

Citation: JP Morgan Chase Bank v. Traffic Stream (BVI) Infrastructure Ltd., 2002 Daily Journal D. A. R. 6353, 2002 WL 1270591 (U.S. Sup. Ct. June 10, 2002).

MARITIME LAW

In case where marine cargo unexpectedly caught fire, Second Circuit holds as matter of first impression that, under COGSA, shipper is strictly liable where neither carrier nor shipper had actual or constructive knowledge of cargo’s hazardous nature

In 1994, the M/V Tokyo Senator was damaged en route to Norfolk, Virginia, when the cargo of 300 drums of Chinese thiourea dioxide (TDO) ignited. TDO is a white powder used in the bleaching of fibers such as paper and textiles. The fire apparently broke out within a TDO container and resulted from TDO’s inherently dangerous properties. TDO was considered a stable chemical at the time of shipment, but since then its classification has changed. The U.S. listed TDO as hazardous in the International Maritime Dangerous Goods Code (IMDGC) in 1998, and in the U.S. Department of Transportation Hazardous Materials Table in 1999.

The carrier, Senator Linie GmbH & Co. KG (Senator), brought this admiralty action in U.S. district court against the shippers of the TDO, Zen Continental Co., China National Chemicals Import & Export Corp. and others (jointly “defendants”). The Carriage of Goods by Sea Act (COGSA) codifies the U.S. obligations under the International Convention for the Unification of Certain Rules of Law Relating to Bills of Lading (the “Hague Rules”). It applies to all contracts for the carriage of goods between the U.S. and foreign countries.

The district court found that for a shipper of inherently dangerous goods to be liable under COGSA at 46 U.S.C. Section 1304(6), the shipper must have had preshipment knowledge of the danger. Furthermore, the district court held that general maritime law in both the Second Circuit and the United Kingdom did not require a shipper to absolutely warrant its cargo as non-hazardous. The court also concluded that the scientific literature at the time did not put any party on notice that TDO could ignite during transport. Senator appealed from the part of the judgment granting motions for judgment to the defendants. The U.S. Court of Appeals for the Second Circuit vacates and remands.

The application of Section 1304(6) to the unusual facts of this case presents an issue of first impression in the Second Circuit. In essence, the Court holds that where neither the carrier nor the shippers had actual or constructive knowledge of the inherently dangerous nature of the shipped goods, Section 1304(6) imposes strict liability on the shippers for damages and expenses arising out of the shipment of those goods.

As a threshold matter, the Court examines whether the shippers did have actual or constructive knowledge of TDO’s dangerous properties. The Court finds no clear error in the district court’s findings that they did not.

The Court then turns to the question of whether Section 1304(6) requires actual or constructive knowledge of the inherent danger of the shipped goods. The Court first examines the plain meaning of the statute which provides: “Goods of an inflammable, explosive, or dangerous nature ... whereof the carrier ... has not consented with knowledge ... may at any time before discharge be landed at any place or destroyed ... without compensation, and the shipper of such goods shall be liable for all damages ...”

The only reference to “knowledge” implicates the carrier, suggesting that it is the carrier’s knowledge of the goods’ dangerous nature, not the shipper’s, that triggers liability. Thus, Section 1304(6) sets forth a risk-allocating rule that renders a shipper strictly liable for damages in the event that neither the shipper nor the carrier knew or should have known that the shipped goods were inherently dangerous.

Second, the Court turns to the legislative purpose and history of COGSA and the Hague Rules. The Court disagrees with the defendants’ position that COGSA incorporates the shipper-liability rule set forth in The Wm. J. Quillan, 180 F. 681 (2d Cir. 1910) (shippers do not have to give an absolute warranty for the fitness of the cargo). In fact, the COGSA legislators in 1936 did not have the benefit of a coherent and settled federal maritime common law of shipper liability. While the history of COGSA and the Hague Rules does not clearly state the kind of liability intended by the drafters, the history is not inconsistent with imposing strict liability on shippers of inherently dangerous goods.

Third, the Court analyzes whether Section 1304(6) would displace otherwise inconsistent maritime common law. “Because we have determined that Section 1304(6), by its plain meaning, does not imply a shipper scienter requirement, we conclude that the provision does speak directly to the question of whether a shipper of inherently dangerous goods may be held liable for damages resulting directly or indirectly from such shipment when neither the shipper nor the carrier had actual or constructive preshipment knowledge of the danger. We hold that Section 1304(6) answers that question in the affirmative. It follows that Quillan and other pre-1936 decisions that set forth a rule of general maritime law that is inconsistent with Section 1304(6) have been superseded by that provision, [Cit.] and that post-1936 decisions ... that construe Section 1304(6) as incorporating such an inconsistent common-law rule are incorrect.”

“[W]e have been mindful of COGSA’s overarching purpose to ‘allocate risk of loss and create predictable liability rules on which [not] only carriers but others can rely.’ [Cits.] The recognition that, in the rare circumstances of a case such as this, the strict-liability rule of Section 1304(6) supersedes the varying and uncertain rule of maritime common law will help ensure predictability in the allocation of risk between maritime parties. ... If an unwitting party must suffer, it should be the one that is in a better position to ascertain ahead of time the dangerous nature of the shipped goods. That party in many cases will be the shipper.” [Slip Op. 61-64]

Finally, the Court observes that its interpretation of Section 1304(6) conforms to the one given to its British counterpart by the House of Lords. This consistency furthers COGSA’s and the Hague Rules’ broader purpose, which is international uniformity in the law dealing with carriage of goods by sea.

Citation: Senator Linie GmbH & Co. KG v. Sunway Line, Inc., 291 F.3d 145 (2d Cir. 2002).

TERRORISM

In wrongful death action by parents of terrorist victim in Israel who had dual Israeli and U.S. citizenship, Seventh Circuit affirms denial of motion to dismiss various organizations as defendants that may have contributed to terrorist activities

In 1996, Palestinian militants shot and killed David Boim, a 17-year-old dual citizen of Israel and the U.S., while he was walking to a bus stop in the West Bank. Someone identified his attackers as Amjad Hinawi and Tawfiq Al-Sharif, both members of the military wing of Hamas. Pursuant to 8 U.S.C. Section 1189, the U.S. government had listed Hamas in 1997 as a “terrorist organization.” The statute defines “terrorist activity” to include assassinating any person by firearm as well as conspiring to do so. The statute also comprises giving “material support” to anyone who intends, or is known, to carry out terrorist attacks, such as by furnishing funds, weapons, or training.

Plaintiffs Joyce and Stanley Boim, the victim’s parents, sued the Quranic Literacy Institute (“QLI”) and the Holy Land Foundation for Relief and Development (“HLF”), alleging that these organizations are the main U.S. fronts for Hamas. HLF’s director has previously admitted giving money to Hamas. Moreover, QLI employed an individual named Mohammed Abdul Hamid Khalil Salah. The FBI has seized $1.4 million in cash and assets from Salah based on his admission that he is the U.S.-based leader of Hamas’ military wing. Thus, both organizations have had ties to Salah and other members of Hamas.

The Boims brought their suit pursuant to 18 U.S.C. Section 2333 (U.S. nationals injured by act of international terrorism may sue in district court and recover treble damages), and asserted that the defendants had aided and abetted the killers by giving material support to Hamas. Damages included compensation for emotional and mental distress, for depriving society of their son’s talents and person, for the physical pain David suffered before his death, for legal fees, and for the cost of David’s funeral. They sought $100,000,000 in compensatory damages and $100,000,000 as punitive damages.

Plaintiffs allege that QLI, HLF and similar associations disguise their true nature behind ostensibly charitable missions. According to the Boims, ALI and ALF raise money from both knowledgeable and oblivious American contributors. These organizations then launder the money in a variety of ways, e.g., through real estate deals and Swiss bank accounts, before they wire it overseas. Hamas operatives in Gaza and the West Bank then use the money to finance terrorist activities. For example, Hamas regularly drew from this pool of laundered funds to pay for weapons, training, personnel, transportation, and other operating costs.

Plaintiffs believe this pool of money paid for the vehicle, machine guns, and ammunition used to kill David Boim. In addition, these funds allegedly helped to finance the training of the gunmen and later supported a stipend for Al-Sharif’s family to encourage suicide-bombing. In fact, some time after murdering David, Al-Sharif killed himself in a suicide mission.

Defendant organizations moved to dismiss the complaint for failure to state a claim upon which relief may be granted. They contended that Section 2333 does not support civil causes of action for aiding and abetting acts of international terrorism. Plaintiffs answered that the criminal provisions of the statute support a civil action for aiding and abetting. The district court denied the motion to dismiss. Defendants obtained leave to file an interlocutory appeal to the U.S. Court of Appeals for the Seventh Circuit. That Court affirms the ruling below.

The Court considers the following issues: (a) does funding, by itself, of an international terrorist organization constitute an act of terrorism under 18 U.S.C. Section 2331? (b) Does 18 U.S.C. Section 2333 incorporate the definitions of international terrorism found in 18 U.S.C. Sections 2339A and 2339B?, and (c) does a civil cause of action lie under the criminal provisions of 18 U.S.C. Sections 2331 and 2333 for aiding and abetting international terrorism? The Court also points out that Federal Rule of Civil Procedure 8(a)(2) requires only that a complaint give the defendants fair notice of what their claim is and the grounds upon which it rests. It discourages plaintiffs from detailing all of the evidence upon which they base their claim. The Seventh Circuit finds that the Plaintiffs did indeed state a claim upon which relief may be granted.

The Court rules, however, that funding alone is not enough to qualify as an act of terrorism under Section 2331. While the legislative history clearly implies that Congress meant to allow a plaintiff to recover from anyone along the causal chain of terrorism, plaintiff’s reading is overly broad and sweeping. Such an interpretation would create First Amendment problems by punishing mere association with groups that engage in terrorism. In addition to proof of funding, plaintiffs have to show knowledge of, and intent to further, the payee’s violent criminal acts.

Furthermore, the language of the statute demands proof of foresight as a component of proximate cause. In other words, to establish proximate causation, the Boims must show that donating money to QLI or HLF would have the reasonably foreseeable, or intended, result of murdering David Boim.

In considering plaintiffs’ second theory, the Court points out that 2339A and 2339B are not themselves civil provisions. Rather, the mechanism that would give rise to civil liability under these Sections is 2333. Thus, the plaintiffs would have to show that HLF and QLI knowingly and intentionally violated either Section 2339A or 2339B in order to satisfy the definition of “international terrorism” under Sections 2333 and 2331, and thereby give rise to civil liability under Section 2333.

Evaluation of the plaintiffs’ third argument turns on the interpretation by the Court of the word “involves” as included in Section 2333 (1). Because 18 U.S.C. Section 2 criminalizes aiding and abetting the commission of a felony, plaintiffs assert that there can be no doubt that Congress meant the word “involves” to include aiding and abetting. The statute, however, does not use the terms “aid and abet.” But Congress did explicitly use words broad enough to encompass all kinds of secondary liability. The Court finds that Section 2333 does implicitly incorporate aid and abetment. Congress plainly expressed its intent in Section 2333 to make civil liability at least as extensive as criminal liability for terrorist violence. Therefore, by incorporating violations of any criminal laws that involve violent acts or acts dangerous to human life, Congress was expressly including aiding and abetting to the extent that this activity would “involve” violence.

Defendants argue that Section 2339B imposes liability without regard to the donor’s intent and therefore runs afoul of the First Amendment. Moreover, the section unnecessarily interferes with the associational rights of contributors who donate money solely for humanitarian purposes by failing to limit liability to those who intend to support the illegal goals of an organization. Finally, the Defendants’ assert that Section 2339B will chill legitimate fund-raising for legitimate purposes if a charitable organization could be prosecuted for providing food for the needy in the Middle East that happens to end up in the mouths of families of terrorists.

The Court rejects the defense arguments. The statute does not seek to impose liability for mere association, but rather for involvement in acts of international terrorism. Courts should consider Section 2339B only as clarifying the conduct Congress intended to include in its definition of “international terrorism.” If plaintiffs can prove that HLF and QLI knowingly provided legitimate-looking fronts for fundraising to support the terrorist operation resulting in the murder of David Boim, then their claim will not run afoul of the First Amendment. The courts should not read the First Amendment as aiding organizations in purposefully contributing to international terrorism while hiding behind the skirts of association rights.

Citation: Boim v. Quranic Literacy Institute, 2002 WL 1174558, Nos. 01-1969 & 01-1970 (7th Cir. June 5).

U.S. Treasury implements Executive Order blocking assets of persons who threaten stabilization in Western Balkans. Based on the authority granted by the International Emergency Economic Powers Act (50 U.S.C. 1701) and other laws, the U.S. President issued Executive 13219 (June 26, 2001) on “Blocking Property of Persons Who Threaten International Stabilization Efforts in the Western Balkans.” The Executive Order intended to block the assets of person who contribute to extremist violence in the former Yugoslav Republic of Macedonia, southern Serbia, the Federal Republic of Yugoslavia, and elsewhere in the Western Balkans region. It identifies persons and gives criteria for the addition of persons whose assets will be blocked. Effective May 30, 2002, the U.S. Department of the Treasury, Office of Foreign Assets Control (OFAC), has now issued implementing regulations (Western Balkan Regulations, 31 C.F.R. Part 588). The Regulations set forth the prohibitions of the Executive Order, describe how to hold blocked assets, and list any exempted transactions and assets. The OFAC website will periodically announce the names of affected persons. Citation: 67 Federal Register 37671 (May 30, 2002).

Russia and U.S. sign treaty on Strategic Offensive Reductions of nuclear weapons. On May 24, 2002, at the U.S.-Russia Summit Meeting in Moscow, the U.S. and the Russian Federation signed the Treaty on Strategic Offensive Reductions (Treaty of Moscow), and a Joint Declaration on the “New Strategic Relationship.” The Treaty provides that each side gradually reduce its arsenals to between 1,700 and 2,200 warheads over ten years. Each party, however, will determine for itself “the composition and structure of its strategic offensive arms.” The Joint Declaration addresses political cooperation in resolving regional conflicts, in economic cooperation, in “people-to-people” contacts, in preventing the proliferation of weapons of mass destruction and in resisting international terrorism. It also mentions the desirability of further Strategic Offensive Reductions. Citation: Public Papers of Presidents, Joint Declaration by President George W. Bush and President Vladimir V. Putin on New Strategic Relationship Between United States of America and Russian Federation (May 27, 2002); The Washington Post, page A1 (May 25, 2002); Ministry of Foreign Affairs of Japan press release (May 24, 2002).

Sri Lanka and Cape Verde sign “Open Skies” agreements with U.S. On June 11, 2002, the U.S. Secretary of State and the Sri Lankan Foreign Minister signed an Open Skies Air Transport Agreement. It is the second such agreement to come into force with a South Asian country (Pakistan being the first in 1999). The agreement provides for cooperation in air traffic security and safety. It also breaks new ground in creating opportunities to build up economic relations between the United States and Sri Lanka through closer links in transport, trade and tourism. These include, for example, substantially open route rights, unrestricted capacity and frequencies as well as code‑sharing opportunities. A transitional annex provides for full implementation of the remaining Open Skies provisions within a few years and covers pricing, ground‑handling, passenger charters and U.S.‑Sri Lanka‑India passenger service. -- Finally, the U.S. and Cape Verde have initialed a similar Open Skies air transport agreement. This counts as the 58th such U.S. agreement worldwide and the twelfth with an African nation. Other Open Skies partners in Africa are: Benin, Burkina Faso, The Gambia, Ghana, Namibia, Nigeria, Morocco, Rwanda, Senegal, Tanzania and Uganda. Citation: Fact Sheet, Office of Spokesman, U.S. Department of State, Washington, DC, released June 11, 2002 (Sri Lanka); Media Note, Office of Spokesman, Washington, D. C., released June 21, 2002 (Cape Verde).

ICAO complaint against most EU Member States withdrawn by U.S. In a meeting of the Council of the International Civil Aviation Organization (ICAO) on July 12, the United States announced that it was withdrawing its complaint against 14 of the 15 European Union respondents in the longstanding US‑EU “hushkits” dispute. The U.S. had complained to the ICAO in March 2000 against the 15 EU Member States. It challenged the EU’s adoption of a Regulation that restricted the operation within Europe of certain aircraft fitted with hushkit noise reduction devices, and those re‑engined with engines of a certain design. Effective in April, 2002, the EU repealed the hushkit Regulation, and replaced it with a new Directive to manage noise at EU airports. The U.S., however, will continue to maintain its ICAO case against Belgium. After the Regulation’s repeal, Belgium adopted a decree that restricted the operation of certain aircraft at Belgian airports between the hours of 11 pm and 6 am. In the U.S.’s opinion, Belgium has based its new decree on a design standard rather than on a performance standard, thus perpetuating the discriminatory aspects of the former Regulation. Citation: Press Statement, Philip T. Reeker, Deputy Spokesman, Washington, D.C., June 13, 2002. [See http://www.state.gov/r/pa/prs/ps/ for all press statements].

Monacan court holds New Yorker for trial on voluntary homicide charges. An appellate court in the Principality of Monaco has rejected an American defendant’s request to dismiss, or at least reduce, the charges against him arising out of the deaths of 67-year-old billionaire banker Edmond Safra, who suffered from Parkinson’s disease, and his nurse. Prosecutors blame these deaths on a penthouse fire set by male nurse Ted Maher from Stormville, New York. The Court held that Maher has to stand trial for “voluntarily” causing these two deaths, a charge that could lead to a life sentence. Early in the morning of December 3, 1999, Maher had stumbled into the lobby of Safra’s bank, bleeding from knife wounds, to report that he had gotten his wounds while fighting off masked intruders. Police at first believed Maher’s story and kept firefighters out of the building for over an hour for fear of the intruders. Meanwhile, toxic fumes from the fire killed Safra and his nurse, Vivian Torrente. Several days later, Maher confessed -- allegedly under illegal duress -- that the fire was his staged scenario to get on Safra’s good side. Maher’s scheme was to invent imaginary intruders, and then to wound himself in the course of heroically rescuing Safra. Maher’s attorney argued that the deaths accidentally resulted from decisions by police and firefighters. He plans to appeal to the Cour de Revision, Monaco’s highest court. Citation: Court TV report by John Springer, 2002 Cable News Network, LP, an AOL Time Warner Company. See www.CNN.com.

EU establishes framework for judicial cooperation in civil matters. With the new Regulation No 743/2002, the European Union (EU) has established a framework for judicial cooperation in civil matters. The framework includes all EU Member States except Denmark. The Regulation lists the candidate countries of Central and Eastern Europe along with Cyprus, Malta, and Turkey as potentially taking part. The framework aims to increase legal certainty, to ensure access to justice, to promote mutual recognition of judicial decisions, and to improve the Member States’ access to legal information. The framework will be in place through December 31, 2006. Citation: 2002 O.J. of European Communities (L 115) 1, May 1, 2002.

U.S. decides not to take part in International Criminal Court. On May 6, 2002, in a letter written by John R. Bolton, Under Secretary of State for Arms Control and International Security, and delivered to the Secretary General of the United Nations, the U.S. declared that it would not become a party to the Rome Statute of the International Criminal Court (ICC). The letter declared that the U.S. has no legal obligations resulting from President Clinton’s signing of the Treaty on December 31, 2000. -- The ICC is expected to begin operations on July 1, 2002, but probably will not consider cases until sometime in 2003 to give it time to set up its administrative structures, to choose court personnel and to fashion procedures. Citation: U.S. Department of State press statement (May 6, 2002) (with text of letter); European Union press release 8864/02 (Presse 141) (14 May 2002) (available at “ue.eu.int/newsroom”); 79 Interpreter Releases 786 (May 20, 2002).

U.S. State Department announces revisions of consular fees. In a rule dated May 16, 2002, the U.S. State Department announced revisions in fees for consular services (effective June 1) and for passports (effective August 19) to bring these fees into line with the actual costs of these services as Congress requires. Overseas, the nonimmigrant visa application fee will go up from $45 to $65. Immigrant visa fees will increase from $325 to $335. Fee changes affecting U.S. citizens abroad will include the Consular Report of Birth Abroad documentation fee. It will go up from $40 to $65. On the other hand, the fee for providing notarial services will change from being a flat fee of $55 to a two-level schedule costing from $20 to $30 proportionately to the service actually rendered. Citation: Statement by Richard Boucher, spokesman, U.S. Department of State, released May 17, 2002. [For all press statements, see http://www.state.gov/r/pa/prs/ps/].

U.S. Commerce Department updates rules for exports of encryption equipment. The U.S. Department of Commerce announced a rule to amend the Export Administration Regulations (EAR) and to update and clarify assorted provisions of the EAR pertaining to encryption export controls. One of the changes included in the rule is that mass market encryption commodities and software with key lengths (symmetric) over 64 bits may now be exported and re-exported to most destinations sans a license under Export Control Classification Numbers 5A992 and 5D992, so long as a 30-day review has been conducted by the Bureau of Industry and Security (BIS).  Also, equipment that is controlled under ECCN 5B002 may be exported and re-exported under License Exception ENC. Restrictions concerning exports and reexports of encryption items to terrorist-supporting countries remain unaltered. Citation: 67 Federal Register 38855.