2015 International Law Update, Volume 21, Number 1 (January - February - March)

2015 International Law Update, Volume 21, Number 1 (January - February - March)

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

ALIEN TORT STATUTE

Seventh Circuit affirms dismissals without prejudice of lawsuits by Holocaust victims against Hungarian national railway, Hungarian national bank, and other private banks for their complicit role during World War II; international comity requires that Plaintiffs first exhaust available Hungarian remedies

Holocaust survivors and heirs of Holocaust victims (Plaintiffs) brought suits against the Hungarian national railway, the Hungarian national bank, and several private banks (Defendants) for the roles they or their predecessors played in carrying out genocide against Hungarian Jews during World War II.

Plaintiffs’ complaints described the seizure, transport, and murder of hundreds of thousands of Hungarian Jews during 1944 and 1945. Plaintiffs’ claims for takings of property during this period 70 years ago were asserted against both foreign sovereign entities and private banks with relatively few ties to the United States. They brought two separate suits: one against the Hungarian banks seeking to hold them jointly and severally responsible for damages of approximately $75 billion; and another against the Hungarian national railway seeking damages of approximately 1.25 billion. Plaintiffs alleged seven causes of action against the banks: genocide, aiding and abetting genocide, bailment, conversion, unjust enrichment, constructive trust, and accounting; and nine causes of action against the national railway: takings in violation of international law, aiding and abetting genocide, complicity in genocide, violations of customary international law, unlawful conversion, unjust enrichment, fraudulent misrepresentations, accounting, and declaratory relief pursuant to the Foreign Sovereign Immunities Act, 28 U.S.C. § 2201.

Plaintiffs relied on several bases of U.S. courts’ jurisdiction, including the Foreign Sovereign Immunities Act, 28 U.S.C. § 1330(a), the Alien Tort Statute, 28 U.S.C. § 1350, diversity jurisdiction under the Class Action Fairness Act (CAFA), 28 U.S.C. § 1332(d), and federal question jurisdiction, 28 U.S.C. § 1331.

The Foreign Sovereign Immunities Act (“FSIA”) “bars jurisdiction in United States federal courts against foreign sovereigns for claims for death or personal injury or damage to or loss of property that does not occur in the United States. See Abelesz v. Magyar Nemzeti Bank, 692 F.3d at 677, citing 28 U.S.C. § 1605(a)(5).” However, “the FSIA permits jurisdiction over foreign sovereigns for claims for takings of property in violation of international law. 28 U.S.C. § 1605(a)(3).” Plaintiffs’ claims focus on the role that the Hungarian banks played in expropriating money and other property from Jews alleging that these expropriations were essential to finance the continued German war effort and the Hungarian genocide itself.

In the 2012 appeals in these cases the Court held that the national railway and national bank could be sued on these claims in the United States federal court “only if plaintiffs could demonstrate on remand that they had exhausted any available Hungarian remedies or had a legally compelling reason for their failure to do so. Abelesz v. Magyar Nemzeti Bank, 692 F.3d 661 (7th Cir.2012).” On remand the District Court held that plaintiffs had not exhausted Hungarian remedies and had not provided a legally compelling reason for not doing so, and dismissed the claims against the national bank and national railway. Furthermore, the District Court also dismissed Erste Group Bank AG (“Erste Bank” – a private Austrian bank that had acquired a Hungarian bank that Plaintiffs alleged had participated in the Holocaust) from suit on forum non conveniens grounds. Plaintiffs appealed.

The U.S. Court of Appeals for the Seventh Circuit affirms all the dismissals. The key issue here is whether the district court has subject matter jurisdiction over a foreign state instrumentality under the expropriation exception to the Foreign Sovereign Immunities Act.

Before starting its analysis, the Court takes a look at the 2012 appeals.

“The national bank and national railway of Hungary are instrumentalities of a foreign sovereign under the FSIA. See 28 U.S.C. § 1603(b). Accordingly, the FSIA is the exclusive basis for exercising jurisdiction over those entities in United States courts. Argentine Republic v. Amerada Hess Shipping Corp., 488 U.S. 428, 43436, 109 S.Ct. 683, 102 L.Ed.2d 818 (1989). Under the FSIA, foreign sovereigns and their instrumentalities are immune from *854 suit in United States courts unless a specific statutory exception applies. 28 U.S.C. § 1604.”

“Plaintiffs argued that two FSIA exceptions might allow jurisdiction over the national bank: the waiver exception in § 1605(a)(1) and the expropriation exception in § 1605(a)(3). We rejected the waiver exception. While the Hungarian constitution recognized international law norms, it did not go so far as to waive sovereign immunity for those claims. Abelesz, 692 F.3d at 67071.”

The Court then turns to the expropriation exception question, and states:

“[…] We explained that the expropriation exception defeats sovereign immunity only where ‘(1) rights in property are in issue; (2) the property was taken; (3) the taking was in violation of international law; and (4) at least one of the two nexus requirements is satisfied.’ Id. at 671, citing Zappia Middle East Constr. Co. v. Emirate of Abu Dhabi, 215 F.3d 247, 251 (2d Cir.2000).”

As the plaintiffs argue that there may be some lingering ambiguity about the role that exhaustion of domestic remedies plays with respect to the expropriation exception to foreign sovereign immunity, the Court starts its analysis by addressing the exhaustion requirement for expropriation claims.

“Plaintiffs argue that we should revisit the exhaustion analysis in Abelesz v. Magyar Nemzeti Bank because we did not consider that the expropriations alleged here were ‘discriminatory.’ Plaintiffs rely on § 712(1) of the Restatement (Third) of the Foreign Relations Law of the United States, which says that a state is responsible *857 under international law for injury resulting from a taking by the state of the property of a national of another state that (a) is not for a public purpose, or (b) is discriminatory, or (c) is not accompanied by provision for just compensation. Plaintiffs reason that § 712 teaches that a ‘discriminatory’ taking is always a violation of international law, whether or not a domestic remedy offers just compensation, so no exhaustion should be required. For nondiscriminatory takings, by contrast, the violations arise only when the plaintiffs can demonstrate that the takings occurred without just compensation. Plaintiffs argue that they have alleged discriminatory takings that violated international law regardless of whether Hungarian law has offered any procedure to obtain compensation, so that they should not be required to exhaust domestic remedies in Hungary.”

“This argument misunderstands the relationship between finding a violation of international law and whether exhaustion is required. An exhaustion requirement could serve two distinct roles. On one hand, plaintiffs might be required to exhaust domestic remedies before they can even say that international law was violated. This might be the case, for example, when the violation is based on a taking without just compensation. There is no violation until the plaintiff has sought redress and has been unfairly denied just compensation. On the other hand, even if plaintiffs can allege a violation of international law, customary international law may impose an exhaustion requirement that limits plaintiffs’ ability to bring that claim outside the country against which they bring suit. To bring that claim in courts outside of the potentially offending nation—here, Hungary—plaintiffs would need to demonstrate that they exhausted remedies or that it could not be worthwhile to bring suit in that nation.”

“[…] Understood correctly, however, the prior opinion imposed an exhaustion requirement

that limits where plaintiffs may assert their international law claims. We did not hold that plaintiffs failed to allege violations of international law in the first instance. We made clear that the question was whether ‘international law require[s] plaintiffs to exhaust domestic remedies before pursuing expropriation claims elsewhere.’ Abelesz, 692 F.3d at 679. We said yes, but we did not ask or answer the question whether plaintiffs needed to exhaust domestic remedies before they might say that international law was violated. Without answering that question, we found that plaintiffs had alleged violations of international law due to the genocidal nature of the expropriations.”

The Court denies plaintiffs’ argument that the violations of international law can be supported by separate basis, such as that the takings were “discriminatory” within the meaning of § 712.

“Section 712 applies, by its terms, only to a state’s takings of property of nationals of other states, not to its takings of property from its own nationals, as alleged in these cases. The discrimination that concerns § 712 is discrimination against aliens, not discrimination among a state’s own nationals based on race, religion, ethnicity, or similar grounds, however despicable such discrimination might be. Comment f explains *858 that § 712 refers to discrimination against aliens generally, or against aliens of a particular nationality or particular aliens.”

“There is no doubt that the genocidal expropriations alleged by plaintiffs would be considered discriminatory based on religion and/or ethnicity. But that is not the concern of § 712, which does not suggest that another nation’s discriminatory takings of property from its own nationals based on race, religion, or ethnicity violate international law and can be the subject of litigation in the United States or any other nation.”

“Though we agreed […] that violations were alleged, that does not mean that international law allows those claims to be heard in any court in the world. We found that the comity at the heart of international law required plaintiffs either to exhaust domestic remedies in Hungary or to show a powerful reason to excuse the requirement. So long as plaintiffs might get a fair shake in a domestic forum, international law expects plaintiffs at least to attempt to seek a remedy there first.”

“The text and structure of the Third Restatement of Foreign Relations Law confirm this understanding of the role exhaustion plays with respect to any takings claim under international law. No matter what type of taking is alleged under § 712—whether discriminatory or otherwise—§ 713 explains that the same remedial scheme applies. And comment f of § 713 indicates that international law typically requires exhaustion of domestic remedies before any § 712 takings claim can be heard in a foreign court. In other words, comment f’s domestic exhaustion requirement applies equally to either type of taking specified in § 712, whether discriminatory or not. See Restatement (Third) of Foreign Relations Law § 713 and cmt. f.”

Plaintiffs also alleged that the court impermissibly implied an exhaustion requirement in the FSIA. Related to this allegation, the Court states that “[…] § 1605(a)(3) says nothing about a prudential exhaustion requirement based on international comity concerns.[2] As the Supreme Court recently held in Republic of Argentina v. NML Capital, Ltd., ___ U.S. ___, 134 S.Ct. 2250, 2256, 189 L.Ed.2d 234 (2014), ‘any sort of immunity defense made by a foreign sovereign in an American court must stand on the Act’s text. Or it must fall.’”

“But here defendants need not rely on a special immunity defense found in the FSIA. Rather, they seek to invoke the customary rule itself: the well-established rule that exhaustion of domestic remedies is preferred in international law as a matter of comity. And there is no reason to think that this well-established rule is limited to foreign sovereigns. See Sosa, 542 U.S. at 733 n. 21, 124 S.Ct. 2739 (indicating that ‘in an appropriate case’ international law may require that ‘the claimant must have exhausted any remedies available in the domestic legal system’); Kiobel, 133 S.Ct. at 1674 (Breyer, J., concurring in the judgment) (highlighting the limiting principles, such as exhaustion and forum non conveniens, that ‘help to minimize international friction’). The Court in NML Capital was addressing when a foreign sovereign can override the normal rule of post-judgment execution discovery and receive special treatment solely because it is a foreign sovereign. See NML Capital, 134 S.Ct. at 2255 (‘The single, narrow question before us is whether the Foreign Sovereign Immunities Act specifies a different rule when the judgment debtor is a foreign state.’). Because the FSIA’s text did not provide for special treatment, the foreign sovereign was subject to the normal rule of post-judgment Execution discovery. Id. at 2258. When foreign sovereigns rely on the normal rule of international law, however, as in these cases, the FSIA’s silence on the issue does not prevent them from doing so.”

“If the FSIA were read as preventing foreign nations from asking United States courts to apply a well-established international law principle—requiring exhaustion of domestic remedies—the result would be quite anomalous. It would become easier to sue foreign sovereigns than to sue private foreign entities in a United States court. The private entities could of course invoke the more general rule. Moreover, such a reading of the FSIA would call into question whether other settled practices such as forum non conveniens could still be invoked by foreign sovereigns.”

The Court then analyzes the reasons of why the plaintiffs failed to exhaust the available Hungarian remedies.

The first reason that the Court addresses is the existence of Hungarian remedies.

In the district court the Defendants identified judicial remedies that primarily include property-based claims and contractual claims that plaintiffs could assert against the banks. Defendants explained that Hungarian courts will also entertain international law claims. Because the plaintiffs have not shown that the remedies identified by defendants are illusory, the district court concluded that defendants had “shown that plaintiffs can bring a civil action in the Hungarian courts to seek a remedy for the wrongs” alleged in their complaints. Fischer, 2013 WL 4525408, at *1.

“We agree that these judicial remedies are sufficiently promising that plaintiffs should be required to bring suit in Hungary before their suits may proceed in the United States. Given the sort of international law and property claims available in Hungary, the claims are congruent enough to those that plaintiffs assert here that requiring plaintiffs to sue first in Hungary will not deprive plaintiffs of the remedy they seek. As we explained in the first appeal, remedies available in Hungary ‘need not be perfectly congruent with those available in the United States to be deemed adequate.’ See Abelesz, 692 F.3d at 685.”

The second reason the Court addressed were the potential procedural difficulties.

“Plaintiffs suggest that several procedural obstacles might still deny them access to the remedies defendants identified. In the related context of forum non conveniens, the Supreme Court has made clear that an ‘unfavorable change in law may be given substantial weight’ only when ‘the remedy provided by the alternative forum is so clearly inadequate or unsatisfactory that it is no remedy at all.’ See Piper Aircraft Co. v. Reyno, 454 U.S. 235, 254, 102 S.Ct. 252, 70 L.Ed.2d 419 (1981). ‘[T]he relief need not be as comprehensive or as favorable as a plaintiff might obtain in an American court.’ Chang v. Baxter Healthcare Corp., 599 F.3d 728, 736 (7th Cir.2010). None of the asserted procedural obstacles deny relief to the extent that plaintiffs can claim that Hungary provides no remedy at all.”

The third reason the Court considered are the structural issues concerning Hungarian courts.

“Plaintiffs also raise structural issues on the adequacy of Hungarian courts. They argue that even if remedies might be available to them in theory, limits on judicial independence would prevent those remedies from being effective. See generally Sarei v. Rio Tinto, PLC, 550 F.3d 822, 832 (9th Cir.2008) (en banc) (explaining that a ‘remedy must be available, effective, and not futile’ and that ‘a court must look at the circumstances surrounding the access to a remedy’ to measure effectiveness). For example, in Flomo v. Firestone Natural Rubber Co., 643 F.3d 1013, 1025 (7th Cir.2011), we said it would ‘border on the ridiculous’ to require litigants ‘to file suit in a court in Nazi Germany complaining about genocide’ before being allowed to bring suit in the United States. But we also made clear that as a ‘matter of international comity’ we might also ‘give the courts of the nation in which the violation had occurred a chance to remedy it, provided that the nation seemed willing and able to do that.’ Id. The courts of Nazi Germany—or those of the regime in Hungary at that time—would have been unable to handle genocide claims fairly. But we should not presume that the modern regimes replacing them many decades later are unwilling or unable to remedy the *863 wrongs asserted by plaintiffs, absent specific evidence to that effect.”

Plaintiffs offered two theories on why Hungary is not willing and able to provide otherwise available remedies: Hungarian government—and in particular, the judicial system—has been restructured so that claims like these would not receive a fair hearing in Hungary; and that rising anti-Semitic attitudes in Hungary suggest that they would not receive a fair and impartial hearing and that their safety would be jeopardized if they sued there. The Court declined both theories.

“Though one might worry that the speed with which change has been made to the judiciary signifies a lack of respect for the rule of law, we are also encouraged by the Hungarian government’s willingness to revisit these provisions. By doing so, the government has responded to international criticisms and shown some effort to respect international norms and values, including an independent judiciary. Again, we believe we understand plaintiffs’ concerns, but we believe they are too speculative to override the norm of requiring exhaustion of domestic remedies before resorting to foreign courts.”

“[…] And while there are some political groups who do not adhere to that positive vision of how Jews should be treated, the same might be said of other countries throughout Europe and the world. As plaintiffs acknowledge, anti-Semitism unfortunately has been on the rise throughout Europe and is also present in the United States. But absent *865 governmental policies or other evidence that such discrimination is barring access to or punishing resort to domestic remedies, United States courts should not take the step of hearing these claims without first giving the Hungarian courts a chance to rule on them. To hold otherwise would imply that United States courts should presume that the courts of other nations cannot fairly hear claims brought by historically persecuted groups.”

The Court then turns to analyze the district court’s dismissal of the claims against Erste Bank for forum non conveniens.

“A district court may dismiss a case on forum non conveniens grounds when it determines that there are ‘strong reasons for believing it should be litigated in the courts of another, normally a foreign, jurisdiction.’ Abad v. Bayer Corp., 563 F.3d 663, 665 (7th Cir.2009), citing Sinochem, 549 U.S. at 42930, 127 S.Ct. 1184, and In re Factor VIII or IX Concentrate Blood Products Litigation, 484 F.3d 951, 95456 (7th Cir.2007). While many considerations are part of this inquiry, the focus is ‘the convenience to the parties and the practical difficulties that can attend the adjudication of a dispute in a certain locality.’ Sinochem, 549 U.S. at 429, 127 S.Ct. 1184 (internal quotation marks and citation omitted); see also Kamel v. HillRom Co., 108 F.3d 799, 802 (7th Cir.1997) (forum non conveniens dismissal appropriate when dismissal ‘best serves the convenience of the parties and the ends of justice’), citing Gulf Oil Corp. v. Gilbert, 330 U.S. 501, 507, 67 S.Ct. 839, 91 L.Ed. 1055 (1947), and Koster v. Lumbermens Mutual Casualty Co., 330 U.S. 518, 527, 67 S.Ct. 828, 91 L.Ed. 1067 (1947). Thus, when an alternative forum has jurisdiction to hear a dispute, a case can be dismissed if trial in the plaintiff’s chosen forum would be more oppressive to the defendant than it would be convenient to the plaintiff or if the forum otherwise creates administrative and legal problems that render it inappropriate. See Sinochem, 549 U.S. at 429, 127 S.Ct. 1184; Kamel, 108 F.3d at 802.”

“Given the variety of relevant factors, their case-specific nature, and the absence of any formula for weighing them precisely, a district court’s decision to dismiss a suit for forum non conveniens is ‘committed to the sound discretion of the trial court’ and ‘may be reversed only when there has been a clear abuse of discretion.’ Piper Aircraft Co. v. Reyno, 454 U.S. 235, 257, 102 S.Ct. 252, 70 L.Ed.2d 419 (1981); see also Abad, 563 F.3d at 66566. ‘Where a district court has contemplated all relevant public and private interest factors and where its balancing of these factors is reasonable, its forum non conveniens determination warrants substantial deference.’ Kamel, 108 F.3d at 802, citing Piper, 454 U.S. at 254, 102 S.Ct. 252. Accordingly, we must take care not to ‘substitute[] [our] own judgment for that of the District Court.’ Piper, 454 U.S. at 257, 102 S.Ct. 252.”

“*867 To decide an appeal of a forum non conveniens dismissal, we determine first whether there is an adequate alternative forum available to hear the case. Kamel, 108 F.3d at 802. If so, we evaluate the various private and public interest factors to see whether a finding that the balance counseled in favor of dismissal was reasonable. Id. at 803.”

“A forum meets the adequate alternative forum requirement when the forum is both available and adequate. Kamel, 108 F.3d at 802. The availability requirement is satisfied here. An alternative forum is ‘available if all parties are amenable to process and are within the forum’s jurisdiction.’ Id. at 803. The other parties that plaintiffs sought to hold jointly and severally liable with Erste Bank—including private Hungarian banks and the national Hungarian bank—are all located in Hungary. All should be subject to the jurisdiction of the Hungarian courts. Also, the Austrian party (Erste Bank) consented to jurisdiction of the Hungarian courts. EA 17172 (declaration of Erste Bank’s chief legal officer). With all parties subject to jurisdiction in Hungary, it counts as an available forum. See Stroitelstvo Bulgaria Ltd. v. BulgarianAmerican

Enterprise Fund, 589 F.3d 417, 421 (7th Cir. 2009).”

“[…] [T]he adequacy of Hungary as a forum for these claims is hotly disputed. An ‘alternative forum is adequate when the parties will not be deprived of all remedies or treated unfairly.’ Kamel, 108 F.3d at 803. Because jurisdiction would otherwise be appropriate in the foreign forum, it is not enough to say that the transfer will ‘lead to a change in applicable law unfavorable to the plaintiff.’ In re Factor VIII or IX Concentrate, 484 F.3d at 956, citing Piper, 454 U.S. at 247, 254, 102 S.Ct. 252. Rather, only if ‘the remedy provided by the alternative forum is so clearly inadequate or unsatisfactory that it is no remedy at all’ should the unfavorable change be given substantial—or even dispositive—weight.’ Id., quoting Piper, 454 U.S. at 254, 102 S.Ct. 252. “

The Court agreed with the district court’s determination that the remedies provided by Hungary would not be so clearly inadequate so as to provide no remedy at all, and states:

“To be sure, the burden of proof differs between the two inquiries. In the exhaustion analysis, it was up to plaintiffs to point to a legally compelling reason that the remedies might be inadequate. Here, by contrast, the burden ultimately falls on defendants to establish that the remedies are adequate. Sinochem, 549 U.S. at 430, 127 S.Ct. 1184 (‘A defendant invoking forum non conveniens ordinarily bears a heavy burden in opposing the plaintiff’s chosen forum.’); 14D Wright & Miller, Federal Practice and Procedure Jurisdiction § 3828.3 (4th ed.).

Thus, it would be at least theoretically possible for a district court to find that neither side had met its burden of persuasion on the adequacy of remedies in the other forum.”

“Plaintiffs also suggest that a ‘loser pays’ fee-shifting mechanism renders any possible relief too burdensome. But that approach to attorney fees is common throughout the world. In re Factor VIII or IX Concentrate, 484 F.3d at 958 (noting that the ‘United States stands almost alone in its approach toward attorneys’ fees’); see also Piper, 454 U.S. at 252 n. 18, 102 S.Ct. 252. That it might be more expensive for plaintiffs to litigate in the alternative forum is not a sufficient reason, standing alone, to find that forum inadequate. See In re Factor VIII or IX Concentrate, 484 F.3d at 958; Stroitelstvo, 589 F.3d at 424 (holding that financial hardship caused by additional filing fees did not render alternative forum inadequate). We have rejected this particular difference in forum rules as a reason to find that a forum non convenience dismissal was inappropriate. In re Factor VIII or IX Concentrate, 484 F.3d at 958. […]”

“Where another adequate forum is available, to dismiss on forum non conveniens the district court must also balance the private interests of the parties and the public interests of the alternative forums and find that those balances favor a different forum. Stroitelstvo, 589 F.3d at 424; Kamel, 108 F.3d at 803, citing Gilbert, 330 U.S. at 508, 67 S.Ct. 839. More specifically, courts evaluate the private interest by focusing on the ‘(1) relative ease of access to sources of proof; (2) availability of compulsory process and costs for attendance of witnesses; (3) possibility of view of premises, if appropriate; and (4) other practical issues, including ease of enforcement of any ultimate judgment.’ In re Factor VIII or IX Concentrate, 484 F.3d at 958, citing Gilbert, 330 U.S. at 508, 67 S.Ct. 839. The court must also consider the public interest. Relevant public interest factors

 include the administrative difficulties stemming from court congestion; the local interest in having localized disputes decided at home; the interest in having the trial of a diversity case in a forum that is at home with the law that must govern the action; the avoidance of unnecessary problems in conflicts of laws or in the application of foreign law; and the unfairness of burdening citizens in an unrelated forum with jury duty

Stroitelstvo, 589 F.3d at 425 (citations omitted).”

The Court disagrees with plaintiffs’ argument that the district court did not sufficiently discuss each of these factors.

“Precedent makes clear that substantial deference is warranted when all relevant factors are discussed. Kamel, 108 F.3d at 802. Though the oft-quoted list is long, the Supreme Court has also noted that it did not catalogue all of the circumstances when forum non conveniens dismissal might be appropriate. Gilbert, 330 U.S. at 508, 67 S.Ct. 839, accord, Abad, 563 F.3d at 668. Perhaps that’s why the Court has made clear that the central focus is on the convenience of the parties and the practical difficulties of hearing a dispute in a certain locality. See Sinochem, 549 U.S. at 429, 127 S.Ct. 1184. And in the past we have responded to the ‘laundry list’ of factors provided by parties not by proceeding down the list but by considering whether the district judge reasonably concluded that the litigation should continue in the foreign forum. Abad, 563 F.3d at 668. We apply that approach here.”

“The district court acted well within its discretion in finding that the balance favored dismissal. It is hard to see how the district court might have reached any other result here given the weight of international comity concerns in this case. Because the national bank and other private banks were dismissed from the suit for lack of subject matter and personal jurisdiction, respectively, Erste Bank is the only bank defendant still subject to suit in the United States. That fact alone means that the Erste Bank litigation becomes less convenient in the United States and more so in Hungary. When dismissal might eliminate the need for similar litigation in multiple places, forum non conveniens is favored. See, e.g., Sinochem, 549 U.S. at 435, 127 S.Ct. 1184. While it is true that in other cases the related proceedings in the foreign forum had already begun, it is also true that Hungary is the only forum where all the litigation relating to these claims against all defendants might be heard. Requiring suit in Hungary is the best way to ensure that plaintiffs’ claims against the banks are litigated only once on the merits.”

Even plaintiffs suggested that they will not bring suit in Hungary against the previously dismissed parties, the Court concluded that the fact that plaintiffs will seek to hold Erste Bank jointly and severally liable for the entire amount of the substantial harm caused to them as a result of the crimes, it would be likely that Erste Bank would sue the national bank defendant and private bank defendants for either indemnification or contribution.

“*870 Such problems can sometimes be resolved by having a defendant join additional parties as third-party defendants. The fact that the United States does not have jurisdiction over the relevant parties precludes that solution here. This inability to join the other parties supports holding trial in Hungary. See Piper, 454 U.S. at 259, 102 S.Ct. 252. Also, we would be especially wary of ruling on these claims absent these third parties because doing so might affect the interests of a foreign sovereign who previously was dismissed from suit. See Republic of Philippines v. Pimentel, 553 U.S. 851, 86869, 128 S.Ct. 2180, 171 L.Ed.2d 131 (2008) (concluding that the immunity sovereigns enjoy is diminished ‘if an important and consequential ruling affecting the sovereign’s substantial interest is determined, or at least assumed, by a federal court in the sovereign’s absence and over its objection’). The national bank should have the opportunity to participate in any litigation that decides whether the various Hungarian banks are holding property in violation of Hungarian or international law.”

“Beyond the efficiency gains of litigating all claims in Hungary, the district court was right to point out that the dismissal of Erste Bank’s codefendants raises concerns about access to evidence. As we noted before, ‘Hungary is where much of the evidence and surviving witnesses are located.’ Abelesz, 692 F.3d at 684. While we take plaintiffs’ point that the testimony of plaintiffs themselves might be the most essential, Erste Bank also suggests that at least some important evidence is in the control of the dismissed parties. Erste Bank casts doubt on whether treaty obligations would oblige the national bank to comply with international discovery requests. See EA 17376 (declaration of Erste Bank’s lawyer and attached exhibit laying out Hungary’s reservations to the Hague Evidence Convention). That the district court might no longer be able to compel record evidence located in Hungary while plaintiffs could still bring that evidence (their testimony) to Hungary weighs in favor of dismissal. And without some of the bank records in this case, the already difficult task of determining the succession of bank property would become even more difficult if not impossible.”

“*871 In addition to the private interest factors tipping in favor of litigation in Hungary, public interest concerns make clear that Hungary is the better forum. As discussed at length above, Hungary has a significant legal interest in hearing these claims in Hungarian courts. That is why plaintiffs should be required to exhaust in Hungary before bringing suit here against the national defendants. Allowing plaintiffs to sue a private bank on substantially similar claims might unduly prejudice a foreign sovereign in a way that undermines the reason we dismissed the national bank for lack of exhaustion of domestic remedies. Dismissal for forum non conveniens accommodates international law norms and Hungary’s interest in being able to address these claims first. By contrast, while the United States has a general interest in ensuring that international law norms are enforced, in this particular case the executive branch has recommended ‘dismissal of claims against Erste Bank ... on any valid legal. ground(s).’ EA 70 (United States statement of interest). This suggests that the United States’ interest in this litigation is modest.”

“And the international comity concerns that would be raised if United States courts retained the case say nothing of the practical judicial problems. The public interest factors ‘point towards dismissal where the court would be required to `untangle problems in conflict of laws, and in law foreign to itself.’” Piper, 454 U.S. at 251, 102 S.Ct. 252 (citation omitted). It is at best uncertain what the basis for subject matter jurisdiction over Erste Bank might be. Even if jurisdiction in the United States were secure, it is likely that Hungarian law would apply to questions not governed by international law. See Abad, 563 F.3d at 66972.[5] A United States court would have to apply Hungarian law to a host of delicate issues, especially those concerning remedies. The application of foreign law—particularly that of a civil law system —favors dismissal in favor of a Hungarian forum. Stroitelstvo, 589 F.3d at 426; Abad, 563 F.3d at 670. In this case, a Hungarian court would be far better able to apply its own law than any United States court would be.”

“Plaintiffs argue that whatever the outcome of the balance might have been, the district court failed to give their choice of forum sufficient weight. A plaintiff’s choice is presumed convenient to a plaintiff who chooses his home forum. Kamel, 108 F.3d at 803. And because at least some of the plaintiffs here are United States residents, we assume they have opted for the most convenient forum by suing in the United States. The district court emphasized this presumption in its first ruling, and it did nothing to suggest it had shifted the burden when it considered these factors in its motion for reconsideration. That presumption of convenience has been rebutted by the strength of the private and public factors discussed above.”

The Court concludes that because Plaintiffs have not exhausted their Hungarian remedies and have not yet provided a legally compelling reason for their failure to do so, their claims against the national defendants were properly dismissed without prejudice by the district court. The district court did not abuse its discretion by dismissing the claims against Erste Bank without prejudice based on forum non conveniens.

The Court thus affirms the District Court.

Citation: Fischer v. Magyar Államvasutak Zrt., 777 F. 3d 847 (7th Cir. 2015).

ALIEN TORT STATUTE

In lawsuit brought by more than 4,000 Colombian victims of paramilitary forces that received support from Chiquita banana company, Eleventh Circuit dismisses based on the Alien Tort Statute’s presumption against extraterritoriality

Cardona v. Chiquita Brands International is a class-action suit brought on behalf of approximately 4,000 victims of state-sponsored terrorism in Colombia. The plaintiffs brought their suits based on the Alien Tort Statute (ATS) and the Torture Victim Protection Act (TVPA). Chiquita plead guilty in 2007 to funding the Colombian paramilitary—and former terrorist—organization, the Autodefensas Unidas de Colombia (AUC) (United Self-Defense Forces of Colombia), and other guerrilla groups during Colombia’s civil war.

Chiquita made at least 100 payments between 1997 and 2004 to the AUC. The paramilitary coalition of narco-traffickers has been responsible for the rape, torture, murder, disappearance, and forced displacement of hundreds of thousands of Colombians. The company paid AUC for security services, disguising the payments as accounting. Chiquita did all this against the express warnings of its attorneys and with the repeated and express authorization of the highest ranking executives at its Ohio headquarters.

Chiquita continues to dispute the nature of its dealings with the AUC. Its representatives insist that AUC was extorting payments from the company. But, beyond dispute, the paramilitary atrocities did further the company’s interests. According to the National Union School (ENS), 668 members of Colombia’s largest banana workers union were murdered between 1991 and 2006. By way of comparison, between 1999 and 2005, the rest of the world combined saw 314 similar killings of union members.

Bananas were not the only business that thrived under the AUC’s watch. The group moved cocaine and weapons through the same ports that fed U.S. demand for bananas. In November 2001, two months after the AUC was designated a terrorist group, Chiquita facilities were used to bring 3,400 AK-47 assault rifles and five million rounds of ammunition into the country from AUC trafficking partners in Nicaragua.

In 2007, Chiquita settled with the U.S. Justice Department for $25 million. During the period its conduct violated U.S. anti-terror law, Chiquita brought in $49.4 million—almost twice the penalty fee—from its Colombian holdings alone, according to the Justice Department. In 2005, the company informed its shareholders that it had sold those assets, its most valuable, for roughly $40 million, while also keeping distribution rights to the bananas they produced.

Chiquita has never faced prosecution in Colombia, where the AUC’s political and economic support networks remain largely intact. And neither Chiquita nor the U.S. government—which has sent billions to the Colombian military, in full knowledge of its extensive paramilitary ties and abysmal human rights record—has since made any attempt to compensate the millions of Colombian victims.

The suits allege that in 1997, Chiquita entered an agreement with the AUC in order to pacify the banana plantations amidst increasing activity by left-wing guerrilla groups. Between 1997 and 2004, Chiquita paid the AUC more than $1.7 million in regular monthly payments listed in books and records as “security services,” according to the suits.

The U.S. government designated AUC as a terrorist organization on Sept. 10, 2001, but Chiquita continued to make hundreds of thousands of dollars in secret payments to the group over the next three years, against the advice and wishes of outside counsel and board members.

The U.S. filed charges against Chiquita in 2007, and the company was fined $25 million after pleading guilty to violating federal anti-terrorism laws by doing business with a foreign terrorist organization, the petition states.

Following Chiquita’s settlement with the U.S. government, family members of individuals harmed by Colombian paramilitary groups during the civil war used the ATS to sue Chiquita in U.S. court. The plaintiffs claimed that Chiquita’s payments to the AUC and other groups aided and abetted extrajudicial killings, torture, forced disappearances, crimes against humanity and war crimes committed by Colombian paramilitaries. Chiquita filed motions to dismiss. The District Court denied the motions to dismiss, however, the court granted defendants’ motion for certification of certain controlling questions for interlocutory review under 28 U.S.C. § 1292(b). Pursuant to the authority of that certification, Chiquita timely petitioned this court for permission to appeal. The Court granted that petition.

The key issue here is whether the ATS applies extraterritorially.

The plaintiffs asserted this court’s jurisdiction under the Torture Victims Protection Act and the Alien Tort Statute. However, just a few weeks after the entry of the certification order in this case, the Supreme Court announced its decision in Mohamad v. Palestinian *1189 Authority, ___ U.S. ___, 132 S.Ct. 1702, 182 L.Ed.2d 720 (2012). Furthermore, during the pendency of this appeal, the Supreme Court has also acted with respect to the ATS with its decision in Kiobel v. Royal Dutch Petroleum Co., ___ U.S. ___, 133 S.Ct. 1659, 185 L.Ed.2d 671 (2013).

 “[…] In Mohamad, a unanimous Court held that the TVPA “authorizes liability solely against natural persons.” ___ U.S. at ___, 132 S.Ct. at 1708. The defendant-appellants are Chiquita Brands International, Inc., and Chiquita Fresh North America, LLC. Neither is a natural person. The claims under the TVPA must be dismissed.”

“In Kiobel v. Royal Dutch Petroleum Co., ___ U.S. ___, 133 S.Ct. 1659, 185 L.Ed.2d 671 (2013), the High Court considered a case in some ways parallel to the one before us. The Kiobel plaintiffs sued a corporate defendant under the ATS, alleging the cooperation of the corporation with the government of Nigeria in the commission of torts allegedly within the compass of that statute. The statute provides that ‘the district courts shall have original jurisdiction of any civil action by an alien for a tort only, committed in violation of the law of nations or a treaty of the United States.’ 28 U.S.C. § 1350. The Kiobel plaintiffs alleged acts committed by Nigeria and the corporate defendant ‘in violation of the law of nations’ in the territory of Nigeria. Kiobel, 133 S.Ct. at 1663. Similarly, plaintiff-appellants in this case alleged acts by Chiquita in conjunction with paramilitary actors within the territory of Colombia.”

In disposing of the claims in this case the Court applied the conclusion of the Kiobel Court, which states:

“We therefore conclude that the presumption against extraterritoriality applies to claims under the ATS, and that nothing in the statute rebuts that presumption.’[T]here is no clear indication of extraterritoriality here,’ and petitioners’ case seeking relief for violations of the law of nations occurring outside the United States is barred.”

“___ U.S. at ___, 133 S.Ct. at 1669 (quoting Morrison v. Nat’l Austl. Bank Ltd., 561 U.S. 247, 264, 130 S.Ct. 2869, 177 L.Ed.2d 535 (2010)).

”

“The Court noted in Kiobel that ‘all the relevant conduct took place outside the United States.’ Id. All the relevant conduct in our case took place outside the United States. The Court further noted that ‘even where the claims touch and concern the territory of the United States, they must do so with sufficient force to displace the presumption against extraterritorial application.’ Id.”

“Plaintiff-appellants attempt to anchor ATS jurisdiction in the nature of the defendants as United States corporations. Corporate defendants in Kiobel were not United States corporations, but were present in the United States. The Supreme Court declared that ‘[c]orporations are often present in many countries, and it would reach too far to say that mere corporate presence suffices.’Id. The distinction between the corporations does not lead us to any indication of a congressional intent to make the statute apply to extraterritorial torts. As the Supreme Court said in Kiobel, ‘[i]f Congress were to determine otherwise, a statute more specific than the ATS would be required.’ Id. There is no other statute. There is no jurisdiction.”

The Court then turns to address to the dissenting colleague.

“The short answer to her concerns is expressed in the application of Kiobel to the facts of this case. Any tort here, whether styled as torture or under some other theory, occurred outside the territorial jurisdiction of the United States. The ATS contains *1190 nothing to rebut the presumption against extraterritoriality. We further observe that to apply the ATS to the allegations before us would be inconsistent with the Supreme Court’s earlier holding in Sosa v. Alvarez-Machain, 542 U.S. 692, 124 S.Ct. 2739, 159 L.Ed.2d 718 (2004). Sosa makes it clear beyond cavil that the ATS created no causes of action but is purely jurisdictional. ‘[A]t the time of enactment the jurisdiction enabled federal courts to hear claims in a very limited category defined by the law of nations and recognized at common law.’ Id. at 712, 124 S.Ct. 2739. […]”

“As recognized by the Sosa Court, ‘[i]n the years of the early Republic, this law of nations comprised two principal elements:’ (1) ‘the general norms governing the behavior of national states with each other’ (executive and legislative in nature), and (2) ‘judge-made law regulating the conduct of individuals situated outside domestic boundaries and consequently carrying an international savor’ (which are, according to Blackstone, mercantile questions arising from the customary practices of international traders and admiralty). 542 U.S. at 714-15, 124 S.Ct. 2739. Additionally, the Sosa Court noted that ‘[t]here was ... a sphere in which these rules binding individuals for the benefit of other individuals overlapped with the norms of state relationships’ (Blackstone mentioned three in specific: ‘violation of safe conducts, infringement of the rights of ambassadors, and piracy’). Id. at 714-15, 124 S.Ct. 2739 (citing 4 W. Blackstone, Commentaries on the Laws of England 68 (1769)).”

“Nothing in the complaint before us falls within Blackstone’s three categories. It is true that a majority of the Supreme Court recognized the possibility that a court might recognize a cause of action outside the law of nations as it existed at the time of the enactment of the ATS, but the Court emphasized ‘that a decision to create a private right of action is one better left to legislative judgment in the great majority of cases.’ Id. at 727, 124 S.Ct. 2739. Therefore, the Court found itself ‘reluctant to infer ... a private cause of action where the statute does not supply one expressly.’ Id. Even aside from the presumption against extraterritoriality—not overcome by the allegations before us—Sosa counsels against recognizing a tort not previously recognized as within ATS jurisdiction.”

The Eleventh Circuit’s interpretation of the Kiobel decision was at odds with a recent articulation of the law by the Fourth Circuit Court of Appeals in Al Shimari v. CACI. There, the Fourth Circuit held that, where individuals in the U.S. approved conduct that violated international law abroad, victims of that conduct could use the ATS to sue the individuals who approved it (or their employer).

“It is true, as our colleague declares, that at least one circuit in a case decided long before the Supreme Court spoke in Sosa or Kiobel did conclude that extraterritorial torture fell within the law-of-nations category of the ATS. Filartiga v. Pena-Irala, 630 F.2d 876 (2d Cir.1980); see also Al Shimari v. CACI Premier Tech., Inc., 758 F.3d 516, 2014 WL 2922840 (4th Cir. June 30, 2014). However, this is by no means a unanimous conclusion of the circuits. In Saleh v. Titan Corp., 580 F.3d 1 (D.C.Cir. 2010), the District of Columbia Circuit rejected the claim that acts of abuse and torture inflicted upon Iraqi national detainees by private government contractors working for the United States military in Iraq violated settled norms of international law and thus were actionable under the ATS.”

“The Saleh court noted that ‘[a]lthough torture committed by a state is recognized as a violation of a settled international norm, that cannot be said of private actors.’ Id. at 15. Saleh, unlike Filartiga, came after the Supreme Court’s pronouncements *1191 in Sosa. That same circuit reached a similar conclusion in Ali v. Rumsfeld, 649 F.3d 762 (D.C.Cir.2011). Even before the Sosa decision, in Sanchez-Espinoza v. Reagan, 770 F.2d 202 (D.C.Cir.1985), that court held that actions taken by executive officials, in their private capacity, supporting forces bearing arms against the government of Nicaragua did not violate any treaty or ‘customary international law’ so as to confer original jurisdiction of a suit under the ATS. Id. at 206.”

“Again, we reiterate that the ATS does not apply extraterritorially. The torture, if the allegations are taken as true, occurred outside the territorial jurisdiction of the United States. As we emphasized above, to the extent the possibility of an exception to the presumption against extraterritoriality exists, the Kiobel Court made it clear that such exception could occur only, if at all, “where the claims touch and concern ... the United States... with sufficient force to displace the presumption against extraterritorial application.” Kiobel, ___ U.S. at ___, 133 S.Ct. at 1669. There is no allegation that any torture occurred on U.S. territory, or that any other act constituting a tort in terms of the ATS touched or concerned the territory of the United States with any force.”

“Finally, we consider our colleague’s humane observation that ‘the United States would fail to meet the expectations of the international community were we to allow U.S. citizens to travel to foreign shores and commit violations of the laws of nations with impunity.’ Even assuming the correctness of the assumption that the present complaint states violations of the law of nations, the dissent’s observation is not relevant to our determination in this case. Certainly, it may state desirable goals of foreign policy. But the determination of foreign policy goals and the means to achieve them is not for us. ‘The conduct of the foreign relations of our government is committed by the Constitution to the executive and legislative—`the political’—departments of the government, and the propriety of what may be done in the exercise of this political power is not subject to judicial inquiry or decision.’ Oetjen v. Cent. Leather Co., 246 U.S. 297, 302, 38 S.Ct. 309, 62 L.Ed. 726 (1918). This principle is most germane to the question of whether we should create a cause of action within the ATS jurisdiction against the caution of Sosa. In Sosa, the Supreme Court expressly stated, ‘a private right of action is better left to legislative judgment in the great majority of cases.’ 542 U.S. at 727, 124 S.Ct. 2739. While this observation was prompted by generally applicable concerns with reference to the legislative function, the Supreme Court went on to note the particular applicability to the area in which we now act. ‘[T]he potential implications for the foreign relations of the United States of recognizing such causes should make courts particularly wary of impinging on the discretion of the Legislative and Executive branches in managing foreign affairs.’ Id.”

“The Sosa Court further cautioned against judicial creation of such causes of action, observing “[w]e have no congressional mandate to seek out and define new and debatable violations of the law of nations, and modern indications of congressional understanding of the judicial role in the field have not affirmatively encouraged greater judicial creativity.” Id. at 728, 124 S.Ct. 2739. The Sosa Court also recognized that the Torture Victim Protection Act, supra, provides a basis for ‘federal claims of torture and extrajudicial killing,’ but as we observed above, that legislation does not extend to the complaints before us. See id. The noble goals expressed in *1192 our dissenting colleague’s observation should perhaps guide the foreign policy of the United States, but that is not for us to say. Certainly, noble goals cannot expand the jurisdiction of the court granted by statute.”

The United States Court of Appeals for the Eleventh Circuit reverses the orders denying the motion to dismiss and remands the case to the District Court for dismissal.

In its dissenting opinion Circuit Judge MARTIN concluded that Kiobel is not a good precedent for this case.

“The Kiobel opinion offers little assistance about what kinds of domestic connections would be necessary to overcome the presumption against extraterritoriality. But I see this case as one which does just that, for at least two reasons. First, the primary defendant in this case is Chiquita Brands International (Chiquita), a corporation headquartered and incorporated within the territory of the United States. Second, these plaintiffs are not seeking to hold Chiquita liable for conduct that took place on foreign soil. Rather, they allege that Chiquita participated in a campaign of torture and murder in Colombia by reviewing, approving, and concealing a scheme of payments and weapons shipments to Colombian terrorist organizations, all from their corporate offices in the territory of the United States. [2] For these reasons, I believe that we have jurisdiction to consider the plaintiffs’ claims.”

“First, the plaintiffs’ claims ‘touch and concern’ the territory of the United States because they allege violations of international law by an American national. Quite different from Kiobel, the plaintiffs in this case do not rely on Chiquita’s “mere corporate presence” in the United States to justify ATS jurisdiction. Id. Chiquita is incorporated in New Jersey and headquartered in Ohio. Principles of international law as well as historical materials tell us why this is a crucial difference and is ultimately dispositive of the case we consider here. Indeed, I am persuaded that the ATS was intended to provide a remedy for extraterritorial violations of the law of nations like those alleged to have been committed here by United States nationals like Chiquita.”

“[…][I]t is a fundamental principle of international law that every State has the sovereign authority to regulate the conduct of its own citizens, regardless of whether that conduct occurs inside or outside of the State’s territory. See Restatement (Third) of The Foreign Relations Law of the United States § 402(2) (1987) (‘[A] state has jurisdiction to prescribe law with respect to ... the activities, interests, status, or relations of its nationals outside as well as within its territory.’). This has been true from the beginnings of our union, and at the time the ATS was first enacted. See Rose v. Himely, 8 U.S. (4 Cranch) 241, 279, 2 L.Ed. 608 (1808) (observing that beyond its own territory, the laws of a country ‘can only affect its own subjects or citizens’); The Apollon, 22 U.S. (9 Wheat.) 362, 370, 6 L.Ed. 111 (1824) (‘The laws of no nation can justly extend beyond its own territories, except so far as regards its own citizens.’). In keeping with this fundamental principle, the same foreign governments who urged the Supreme Court to dismiss the claims in Kiobel also acknowledged that an ATS claim would have ‘a sufficiently close connection’ with the United States when the violation of the law of nations was committed by a United States citizen. See Kiobel, Brief for Gov’t of the Kingdom of the Netherlands et al. as Amici Curiae, 14. […]”

“More fundamentally, the framers of the ATS gave voice to the idea that the United States had not only the authority, but also international legal obligations to provide a forum for aliens to receive compensation for the most egregious offenses committed by Americans in other countries. Speaking on the law of nations, William Blackstone stated that ‘where the individuals of any state violate this general law, it is then the interest as well as duty of the government under which they live, to animadvert upon them with a becoming severity, that the peace of the world may be maintained.’ 4 William Blackstone, Commentaries on the Laws of England 68 (1769); see also Emmerich de Vattel, The Law of Nations or the Principles of Natural Law Applied to the Conduct and to the Affairs of Nations and of Sovereigns, bk. II, ch. VI § 77 (1758) (Charles G. Fenwick trans., 1916) (‘A sovereign who refuses to repair the evil done by one of his subjects, or to punish the criminal, or, finally, to deliver him up, makes himself in a way an accessory to the deed, and becomes responsible for it.’). The United States would fail to meet the expectations of the international community were we to allow U.S. citizens to travel to foreign shores and commit violations of the law of nations with impunity. See Filartiga v. Pena-Irala, 630 F.2d 876, 890 (2d Cir. 1980).”

“Another distinction between Kiobel and the case now before us is the plaintiffs here do not seek to hold Chiquita liable for any of its conduct on foreign soil. See id. Critically, the plaintiffs instead have alleged that Chiquita’s corporate officers reviewed, approved, and concealed payments and weapons transfers to Colombian terrorist organizations from their offices in the United States with the purpose that the terrorists would use them to commit extrajudicial killings and other war crimes.”

“This is not, therefore, a case where a defendant is being haled into court under the ATS exclusively for actions that took place on foreign soil. See, e.g., Kaplan v. Central Bank of Islamic Rep. of Iran, 961 F.Supp.2d 185, 205 (D.D.C.2013) (dismissing claims under Kiobel because ‘the attacks were allegedly funded by Iran, launched from Lebanon, and targeted Israel’). Neither is this a case in which plaintiffs are seeking to circumvent the Kiobel presumption by holding an American company vicariously liable for the unauthorized actions of its subsidiaries overseas. See, e.g., Balintulo v. Daimler AG, 727 F.3d 174, 192 (2d Cir.2013) (holding that the Kiobel presumption is not displaced where an American corporation is vicariously liable for actions taken within South Africa by a South African subsidiary). Rather, the plaintiffs seek to hold Chiquita liable for violations of international law it committed within the territory of the United States.”

Following a number of post-Kiobel decisions Judge Martin concluded that the plaintiffs’ claims here sufficiently “touch and concern” the territory of the United States because they allege that Chiquita violated international law from within the United States by offering substantial assistance to a campaign of violence abroad.

“[…] [T]he ‘touch and concern’ test satisfied when a defendant aids and abets overseas torts from within the United States. See Al Shimari v. CACI Premier Tech., Inc., 758 F.3d 516, 530-31, 2014 WL 2922840, at *12 (4th Cir. June 30, 2014) (finding that presumption was displaced in part because CACI’s managers in the United States gave tacit approval to the acts of torture, attempted to cover up the misconduct, and encouraged it); Sexual Minorities Uganda v. Lively, 960 *1195 F.Supp.2d 304, 323-24 (D.Mass.2013) (finding that the presumption was displaced because the defendant was a resident of the United States and provided assistance to an overseas campaign of persecution from the United States); Mwani v. Laden, 947 F.Supp.2d 1, 5 (D.D.C.2013) (holding that a terrorist attack that (1) was plotted in part within the United States, and (2) was directed at a United States Embassy and its employees displaced the presumption); Krishanti v. Rajaratnam, 2014 WL 1669873, at *10 (D.N.J. Apr. 28, 2014) (‘The Rajaratnam Defendants focus on the fact that all of the harm to Plaintiffs occurred in Sri Lanka. This argument would hold weight if the Plaintiffs were suing the LTTE for the actions it took in Sri Lanka. However, Plaintiffs are instead suing the Rajaratnam Defendants for their alleged actions that occurred within the United States.”); see also Du Daobin v. Cisco Sys., Inc., ___ F.Supp.2d ___, ___, 2014 WL 769095, at *9 (D.Md. Feb. 24, 2014) (observing that Kiobel may be distinguishable because (1) ‘Cisco is an American company’; and (2) plaintiffs alleged that Cisco’s actions ‘took place predominantly, if not entirely, within the United States).”

“In sum, I do not read Kiobel to be an impediment to providing a remedy to civilians harmed by a decades-long campaign of terror they plainly allege to have been sponsored by an American corporation. Again, these plaintiffs do not seek relief for the offenses of a foreign defendant on foreign soil. These plaintiffs seek relief in a United States court for violations of international law committed by United States citizens while on United States soil. Certainly, these extraterritorial claims ‘touch and concern the territory of the United States’ with great force. By failing to enforce the ATS under these circumstances, I fear we disarm innocents against American corporations that engage in human rights violations abroad. I understand the ATS to have been deliberately crafted to avoid this regrettable result.”

Citation: Cardona v. Chiquita Brands International, Inc., 760 F.3d 1185 (11th Cir. 2014)

ARBITRATION

U.S. Supreme Court reviews U.S.-UK investment treaty’s arbitration clause which allows either party to submit a dispute to a competent tribunal of the Contracting Party under certain conditions; issue is whether a court or the arbitrator has primary responsibility for interpreting and applying the local litigation requirement to an underlying controversy

In the early 1990s, BG Group PLC (BG), a British company, made a major investment in Argentina’s natural gas industry. On December 11, 1990, the United Kingdom and Argentina signed the Bilateral Investment Treaty (BIT). The purpose of the treaty was to promote foreign investment in the Argentine market to reduce inflation and public debt in Argentina.

Later, in the midst of an economic crisis, Argentina enacted an emergency law that required investors to collect tariff revenues in Argentinian pesos at a rate of one peso per dollar. Due to the weak international peso-to-dollar exchange rate, these changes made it difficult for BG to see a return on its investment. Simultaneously, Argentina adopted legislation that stayed all lawsuits arising from the emergency measures. BG sought recourse under the BIT between the United Kingdom and Argentina. The Treaty required that BG first attempt to resolve its dispute before a “competent tribunal” in Argentina for at least eighteen months. Instead, BG bypassed the Argentinian courts and submitted its dispute directly to an arbitral tribunal. The arbitral panel, seated in Washington, D.C., held that Argentina’s changes to its judicial system excused the eighteen-month precondition to arbitration and awarded BG over US $185 million in damages. Argentina petitioned the district court to vacate the award under the Federal Arbitration Act by arguing that the arbitral panel exceeded its powers. The court denied the petition. The U.S. Court of Appeals, District of Columbia Circuit reversed and held that the determination of whether BG could submit its dispute directly to arbitration must be made by a court, not the arbitral tribunal.

The District of Columbia District Court upheld the arbitration award, stating that the tribunal could decide its own jurisdiction. Accordingly, the court denied Argentina’s motion to vacate the award and granted BG’s motion to recognize and enforce the award. The Court overturned the district court decision and found that the tribunal did not have jurisdiction because the parties did not meet the preconditions for Article 8(2). BG filed a petition for a writ of certiorari with the United States Supreme Court, which granted the petition on June 10, 2013.

The key issue here is whether the arbitrators or the courts should determine whether a precondition for arbitration has been satisfied. In answering the question, the court treats the document before it as if it were an ordinary contract between private parties. Were that so, the court concludes, the matter would be for the arbitrators. However, the court then asks whether the fact that the document in question is a treaty makes a critical difference. The court concluded that it does not.

“Where ordinary contracts are at issue, it is up to the parties to determine whether a particular matter is primarily for arbitrators or for courts to decide. Steelworkers v. Warrior & Gulf Nav. Co., 363 U.S. 574, 582, 80 S.Ct. 1347, 4 L.Ed.2d 1409 (1960) (‘Arbitration is a matter of contract and a party cannot be required to submit to arbitration any dispute which he has not agreed so to submit’). If the contract is silent on the matter of who primarily is to decide threshold questions about arbitration, courts determine the parties’ intent with the help of presumptions.”

“On the one hand, courts presume that the parties intend courts, not arbitrators, to decide what we have called disputes about ‘arbitrability.’ These include questions such as ‘whether the parties are bound by a given arbitration clause,’ or ‘whether an arbitration clause in a concededly binding contract applies to a particular type of controversy.’ Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79, 84, 123 S.Ct. 588, 154 L.Ed.2d 491 (2002); accord, Granite Rock Co. v. Teamsters, 561 U.S. 287, 299-300, 130 S.Ct. 2847, 177 L.Ed.2d 567 (2010) (disputes over ‘formation of the parties’ arbitration agreement’ *1207 and ‘its enforceability or applicability to the dispute’ at issue are ‘matters ... the court must resolve’ (internal quotation marks omitted)). See First Options, supra, at 941, 943-947, 115 S.Ct. 1920 (court should decide whether an arbitration clause applied to a party who ‘had not personally signed’ the document containing it); AT & T Technologies, Inc. v. Communications Workers, 475 U.S. 643, 651, 106 S.Ct. 1415, 89 L.Ed.2d 648 (1986) (court should decide whether a particular labor-management layoff dispute fell within the arbitration clause of a collective-bargaining contract); John Wiley & Sons, Inc. v. Livingston, 376 U.S. 543, 546-548, 84 S.Ct. 909, 11 L.Ed.2d 898 (1964) (court should decide whether an arbitration provision survived a corporate merger). See generally AT & T Technologies, supra, at 649, 106 S.Ct. 1415 (‘Unless the parties clearly and unmistakably provide otherwise, the question of whether the parties agreed to arbitrate is to be decided by the court, not the arbitrator’).”

“On the other hand, courts presume that the parties intend arbitrators, not courts, to decide disputes about the meaning and application of particular procedural preconditions for the use of arbitration. See Howsam, supra, at 86, 123 S.Ct. 588 (courts assume parties ‘normally expect a forum-based decisionmaker to decide forum-specific procedural gateway matters.’ These procedural matters include claims of ‘waiver, delay, or a like defense to arbitrability.’ Moses H. Cone Memorial Hospital v. Mercury Constr. Corp., 460 U.S. 1, 25, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983). And they include the satisfaction of ‘prerequisites such as time limits, notice, laches, estoppel, and other conditions precedent to an obligation to arbitrate.’ Howsam, supra, at 85, 123 S.Ct. 588 (quoting the Revised Uniform Arbitration Act of 2000 § 6, Comment 2, 7 U.L.A. 13 (Supp.2002). See also § 6(c) (‘An arbitrator shall decide whether a condition precedent to arbitrability has been fulfilled’); § 6, Comment 2 (explaining that this rule reflects ‘the holdings of the vast majority of state courts’ and collecting cases).”

However, the provision before the court concerns the structure and text of the provision and makes it clear that it is a procedural condition precedent to arbitration. It states that a dispute “shall be submitted to international arbitration” if “one of the Parties so requests,” as long as “a period of eighteen months has elapsed” since the dispute was submitted to a local tribunal and the tribunal “has not given its final decision.” Art. 8(2). The language in Article 8 does not give substantive weight to the local court’s determinations on the matters at issue between the parties. To the contrary, Article 8 provides that only the “arbitration decision shall be final and binding on both Parties.” Art. 8(4). The litigation provision is consequently purely procedural—a claims-processing rule that governs when the arbitration may begin, but not whether it may occur or what its substantive outcome will be on the issues in dispute.

Moreover, the court finds no support in Article 8 or elsewhere in the Treaty that might overcome the ordinary assumption. It nowhere demonstrates a contrary intent as to the delegation of decisional authority between judges and arbitrators. Thus, were the document an ordinary contract, it would call for arbitrators primarily to interpret and apply the local litigation provision.

The court ultimately asks whether the fact that the document before it is a treaty makes a critical difference to its analysis. The Solicitor General argues that the local litigation provision may be “a condition on the State’s consent to enter into an arbitration agreement.” Brief for United States as Amicus Curiae 25. He further adds that courts should “review de novo the arbitral tribunal’s resolution of objections based on an investor’s non-compliance” with such a condition. Ibid. Finally, he recommends that the court remand this case to the Court of Appeals to determine whether the court-exhaustion provision is such a condition. Id., at 31-33.

Despite his efforts, the court did not accept the Solicitor General’s view as applied to the treaty in question. “As a general matter, a treaty is a contract, though between nations. Its interpretation normally is, like a contract’s interpretation, a matter of determining the parties’ intent. Air France v. Saks, 470 U.S. 392, 399, 105 S.Ct. 1338, 84 L.Ed.2d 289 (1985) (courts must give ‘the specific words of the treaty a meaning consistent with the shared expectations of the contracting parties’); Sullivan v. Kidd, 254 U.S. 433, 439, 41 S.Ct. 158, 65 L.Ed. 344 (1921) (‘[T]reaties are to be interpreted upon the principles which govern the interpretation of contracts in writing between individuals, and are to be executed in the utmost good faith, with a view to making effective the purposes of the high contracting parties’); Wright v. Henkel, 190 U.S. 40, 57, 23 S.Ct. 781, 47 L.Ed. 948 (1903) (‘Treaties must receive a fair interpretation, according to the intention of the contracting parties’). And where, as here, a federal court is asked to interpret that intent pursuant to a motion to vacate or confirm an award made in the United States under the Federal Arbitration Act, it should apply the presumptions supplied by United States law. See New York Convention, Art. V(1)(e) (award may be ‘set aside or suspended by a competent authority of the country in which, or under the law of which, that award was made’). […]”

The court found that parties often submit important matters to arbitration and the word consent could be attached to a highly procedural precondition to arbitration, such as a waiting period, which the parties are unlikely to have intended that courts apply without saying so. While the court leaves the matter open for future argument, the court does not see why the presence of the term “consent” in a treaty warrants abandoning, or increasing the complexity of, our ordinary intent-determining framework. Howsam, 537 U.S., at 83-85, 123 S.Ct. 588; First Options, 514 U.S., at 942-945, 115 S.Ct. 1920; John Wiley, 376 U.S., at 546-549, 555-559, 84 S.Ct. 909.

Although a treaty may contain evidence that shows the parties had intent contrary to ordinary presumptions related to arbitration, the treaty before the court does not demonstrate any such contrary intention. The court concedes that the local litigation requirement appears in Paragraph (1) of Article 8, while the Article does not mention arbitration until the subsequent paragraph, Paragraph (2). Moreover, a requirement that a party exhaust its remedies in a country’s local courts before seeking arbitration may seem particularly important to a country offering protection to foreign investors. Likewise, the placing of an important matter prior to any mention of arbitration suggests intent by Argentina, the United Kingdom, or both, to have courts rather than arbitrators apply the litigation requirement.

The text and structure of the litigation requirement set forth in Article 8 make clear that it is a procedural condition precedent to arbitration—a step that a party must undertake before giving notice of arbitration. The Treaty nowhere specifies that the provision is to operate as a substantive condition on the formation of the arbitration contract, or that it is a matter of such high importance that it is to be determined by courts.

“[…] International arbitrators are likely more familiar than judges with the expectations of foreign investors and recipient nations regarding the operation of the provision. Howsam, supra, at 85, 123 S.Ct. 588. And the Treaty itself authorizes the use of international arbitration associations, the rules of which provide that arbitrators shall have the authority to interpret provisions of this kind. Art. 8(3) (providing that the parties may refer a dispute to the International Centre for the Settlement of Investment Disputes (ICSID) or to arbitrators appointed pursuant to the arbitration rules of the United Nations Commission on International Trade Law (UNCITRAL)); accord, UNCITRAL Arbitration Rules, Art. 23(1) (rev. 2010 ed.) (‘[A]rbitral tribunal shall have the power to rule on its own jurisdiction’); ICSID Convention, Regulations and Rules, Art. 41(1) (2006 ed.) (‘Tribunal shall be the judge of its own competence’). Cf. Howsam, supra, at 85, 123 S.Ct. 588 (giving weight to the parties’ incorporation of the National Association of Securities Dealers’ Code of Arbitration into their contract, which provided for similar arbitral authority, as evidence that they intended arbitrators to ‘interpret and apply the NASD time limit rule’).”

The result is that the court’s presumption applies and it is not overcome. The interpretation and application of the local litigation provision is primarily for the arbitrators to decide. The court concluded that it cannot review the decision de novo. Rather, it must do so with considerable deference.

The Court then turns to analyze the dissent opinion, and states:

“The dissent interprets Article 8’s local litigation provision differently. In its view, *1211 the provision sets forth not a condition precedent to arbitration in an already-binding arbitration contract (normally a matter for arbitrators to interpret), but a substantive condition on Argentina’s consent to arbitration and thus on the contract’s formation in the first place (normally something for courts to interpret). It reads the whole of Article 8 as a ‘unilateral standing offer’ to arbitrate that Argentina and the United Kingdom each extends to investors of the other country. Post, at 1219-1220 (opinion of ROBERTS, C. J.). And it says that the local litigation requirement is one of the essential “`terms in which the offer was made.’” Post, at 1218 (quoting Eliason v. Henshaw, 4 Wheat. 225, 228, 4 L.Ed. 556 (1819); emphasis deleted).”

“While it is possible to read the provision in this way, doing so is not consistent with our case law interpreting similar provisions appearing in ordinary arbitration contracts. [...] Consequently, interpreting the provision in such a manner would require us to treat treaties as warranting a different kind of analysis. […] That is a matter of some concern in a world where foreign investment and related arbitration treaties increasingly matter.”

“[…] [T]he local litigation provision on its face concerns arbitration’s timing, not the Treaty’s effective date; or whom its arbitration clause binds; or whether that arbitration clause covers a certain kind of dispute. Cf. Granite Rock, 561 U.S., at 296-303, 130 S.Ct. 2847 (ratification date); First Options, 514 U.S., at 941, 943-947, 115 S.Ct. 1920 (parties); AT & T Technologies, 475 U.S., at 651, 106 S.Ct. 1415 (kind of dispute). The dissent points out that Article 8(2)(a) ‘does not simply require the parties to wait for 18 months before proceeding to arbitration,’ but instructs them to do something—to ‘submit their claims for adjudication.’ Post, at 1219. That is correct. But the something they must do has no direct impact on the resolution of their dispute, for as we previously pointed out, Article 8 provides that only the decision of the arbitrators (who need not give weight to the local court’s decision) will be ‘final and binding.’ Art. 8(4). The provision, at base, is a claims-processing rule. And the dissent’s efforts to imbue it with greater significance fall short.”

“[…] [T]he bulk of international authority supports our view that the provision functions as a purely procedural precondition to arbitrate. See 1 G. Born, International Commercial Arbitration 842 (2009) (‘A substantial body of arbitral authority from investor-state disputes concludes that compliance with procedural mechanisms in an arbitration agreement (or bilateral investment treaty) is not ordinarily a jurisdictional prerequisite’); Brief for Professors and Practitioners of Arbitration Law as Amici Curiae 12-16 (to assume the parties intended de novo review of the provision by a court ‘is likely *1212 to set United States courts on a collision course with the international regime embodied in thousands of [bilateral investment treaties]’). See also Schreuer, Consent to Arbitration, supra, at 846-848 (‘clauses of this kind ... creat[e] a considerable burden to the party seeking arbitration with little chance of advancing the settlement of the dispute,’ and ‘the most likely effect of a clause of this kind is delay and additional cost’).”

Although the Court agrees with the dissent that a sovereign’s consent to arbitration is important and that the sovereigns can condition their consents to arbitrate by writing various terms into their bilateral investment treaties, it does not agree that that is the issue here. “The question is whether the parties intended to give courts or arbitrators primary authority to interpret and apply a threshold provision in an arbitration contract—when the contract is silent as to the delegation of authority. We have already explained why we believe that where, as here, the provision resembles a claims-processing requirement and is not a requirement that affects the arbitration contract’s validity or scope, we presume that the parties (even if they are sovereigns) intended to give that authority to the arbitrators.”

The Court accepts Argentina’s argument that is entitled to a court review of the arbitrators’ decision to excuse BG Group’s noncompliance with the litigation requirement, and to take jurisdiction over the dispute. However, it does not agree with Argentina that the arbitrators “exceeded their powers” in concluding their jurisdiction.

“The arbitration panel made three relevant determinations:

(1) ‘As a matter of treaty interpretation,’ the local litigation provision ‘cannot be construed as an absolute impediment to arbitration,’ App. to Pet. for Cert. 165a;

(2) Argentina enacted laws that ‘hindered’ ‘recourse to the domestic judiciary’ by those ‘whose rights were allegedly affected by the emergency measures,’ id., at 165a-166a; that sought ‘to prevent any judicial interference with the emergency legislation,’ id., at 169a; and that ‘excluded from the renegotiation process’ for public service contracts ‘any licensee seeking judicial redress,’ ibid.;

(3) under these circumstances, it would be ‘absurd and unreasonable’ to read Article 8 as requiring an investor to bring its grievance to a domestic court before arbitrating. Id., at 166a.”

“The first determination lies well within the arbitrators’ interpretive authority. Construing the local litigation provision as an ‘absolute’ requirement would mean Argentina could avoid arbitration by, say, passing a law that closed down its court system indefinitely or that prohibited investors from using its courts. Such an interpretation runs contrary to a basic objective of the investment treaty. Nor does Argentina argue for an absolute interpretation.”

“As to the second determination, Argentina does not argue that the facts set forth by the arbitrators are incorrect. Thus, we accept them as valid.”

“The third determination is more controversial. Argentina argues that neither the 180-day suspension of courts’ issuances of final judgments nor its refusal to allow litigants (and those in arbitration) to *1213 use its contract renegotiation process, taken separately or together, warrants suspending or waiving the local litigation requirement. We would not necessarily characterize these actions as rendering a domestic court-exhaustion requirement “absurd and unreasonable,’ but at the same time we cannot say that the arbitrators’ conclusions are barred by the Treaty. The arbitrators did not “`stra[y] from interpretation and application of the agreement’” or otherwise “`effectively “dispens[e]”’” their “`own brand of ... justice.’” Stolt-Nielsen S.A. v. Animal Feeds Int’l Corp., 559 U.S. 662, 671, 130 S.Ct. 1758, 176 L.Ed.2d 605 (2010) (providing that it is only when an arbitrator engages in such activity that “`his decision may be unenforceable’” (quoting Major League Baseball Players Assn. v. Garvey, 532 U.S. 504, 509, 121 S.Ct. 1724, 149 L.Ed.2d 740 (2001) (per curiam))).”

The U.S. Supreme Court concludes that the arbitrators’ jurisdictional determinations are lawful and reverse the Court of Appeals judgment.

In its concurring opinion Justice SOTOMAYOR states:

“The Court’s dictum on this point is not only unnecessary; it may also be incorrect. It is far from clear that a treaty’s express use of the term “consent” to describe a precondition to arbitration should not be conclusive in the analysis. We have held, for instance, that “a gateway dispute about whether the parties are bound by a given arbitration clause raises a `question of arbitrability’ for a court to decide.” Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79, 84, 123 S.Ct. 588, 154 L.Ed.2d 491 (2002). And a party plainly cannot be bound by an arbitration clause to which it does not consent. See Granite Rock Co. v. Teamsters, 561 U.S. 287, 299, 130 S.Ct. 2847, 177 L.Ed.2d 567 (2010) (“Arbitration is strictly `a matter of consent’” (quoting Volt Information Sciences, Inc. v. Board of Trustees of Leland Stanford Junior Univ., 489 U.S. 468, 479, 109 S.Ct. 1248, 103 L.Ed.2d 488 (1989))).”

“Consent is especially salient in the context of a bilateral investment treaty, where the treaty is not an already agreed-upon arbitration provision between known parties, but rather a nation state’s standing offer to arbitrate with an amorphous class of private investors. In this setting, a *1214 nation-state might reasonably wish to condition its consent to arbitrate with a previously unspecified investor counterparty on the investor’s compliance with a requirement that might be deemed ‘purely procedural’ in the ordinary commercial context, ante, at 1207-1208. Moreover, as THE CHIEF JUSTICE notes, ‘[i]t is no trifling matter’ for a sovereign nation to ‘subject itself to international arbitration’ proceedings, so we should ‘not presume that any country ... takes that step lightly. […]”

“[…] [A] dispute as to consent is ‘the starkest form of the question whether the parties have agreed to arbitrate.” […] And we ordinarily presume that parties intend for courts to decide such questions because otherwise arbitrators might ‘force unwilling parties to arbitrate a matter they reasonably would have thought a judge ... would decide.’ First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 945, 115 S.Ct. 1920, 131 L.Ed.2d 985 (1995).”

“Accordingly, if the local litigation requirement at issue here were labeled a condition on the treaty parties’ ‘consent’ to arbitrate, that would in my view change the analysis as to whether the parties intended the requirement to be interpreted by a court or an arbitrator. As it is, however, all parties agree that the local litigation requirement is not so denominated. See Agreement for the Promotion and Protection of Investments, Art. 8(2), Dec. 11, 1990, 1765 U.N.T.S. 38. Nor is there compelling reason to suppose the parties silently intended to make it a condition on their consent to arbitrate, given that a local court’s decision is of no legal significance under the treaty, ante, at 1207-1208, and given that the entire purpose of bilateral investment agreements is to ‘reliev[e] investors of any concern that the courts of host countries will be unable or unwilling to provide justice in a dispute between a foreigner and their own government,’ Brief for Professors and Practitioners of Arbitration Law as Amici Curiae 6. Moreover, Argentina’s conduct confirms that the local litigation requirement is not a condition on consent, for rather than objecting to arbitration on the ground that there was no binding arbitration agreement to begin with, Argentina actively participated in the constitution of the arbitral panel and in the proceedings that followed. See Eastern Airlines, Inc. v. Floyd, 499 U.S. 530, 546, 111 S.Ct. 1489, 113 L.Ed.2d 569 (1991) (treaty interpretation can be informed by parties’ postenactment conduct).”

In his dissenting opinion Chief Justice ROBERTS, with whom Justice KENNEDY joins, states:

“When there is no express agreement between the host country and an investor, they must form an agreement in another way, before an obligation to arbitrate arises. The Treaty by itself cannot constitute an agreement to arbitrate with an investor. How could it? No investor is a party to that Treaty. Something else must happen to create an agreement where there was none before. Article 8(2)(a) makes clear what that something is: An investor must submit his dispute to the courts of the host country. After 18 months, or an unsatisfactory decision, the investor may then request arbitration.”

“Submitting the dispute to the courts is thus a condition to the formation of an agreement, not simply a matter of performing an existing agreement. Article 8(2)(a) constitutes in effect a unilateral offer to arbitrate, which an investor may accept by complying with its terms. To be sure, the local litigation requirement might not be absolute. In particular, an investor might argue that it was an implicit aspect of the unilateral offer that he be afforded a reasonable opportunity to submit his dispute to the local courts. Even then, however, the question would remain whether the investor has managed to form an arbitration agreement with the host country pursuant to Article 8(2)(a). That question under Article 8(2)(a) is—like the same question under Article 8(2)(b)—for a court, not an arbitrator, to decide. […]”

“The majority acknowledges—but fails to heed—”the first principle that underscores all of our arbitration decisions: Arbitration is strictly `a matter of consent.’” Granite Rock Co. v. Teamsters, 561 U.S. 287, 299, 130 S.Ct. 2847, 177 L.Ed.2d 567 (2010) (quoting Volt Information Sciences, Inc. v. Board of Trustees of Leland Stanford Junior Univ., 489 U.S. 468, 479, 109 S.Ct. 1248, 103 L.Ed.2d 488 (1989)); see ante, at 1206-1207. We have accordingly held that arbitration ‘is a way to resolve those disputes—but only those disputes—that the parties have agreed to submit to arbitration.’ First Options of Chicago, Inc., supra, at 943, 115 S.Ct. 1920. The same ‘first principle’ underlies arbitration pursuant to bilateral investment treaties. See C. Dugan, D. Wallace, N. Rubins, & B. Sabahi, Investor-State Arbitration 219 (2008) (Dugan); J. Salacuse, The Law of Investment Treaties 385 (2010); K. Vandevelde, Bilateral Investment Treaties: History, Policy, and Interpretation 433 (2010). So only if Argentina agreed with BG Group to have an arbitrator resolve their dispute did the arbitrator in this case have any authority over the parties.”

“The nature of the obligations a sovereign incurs in agreeing to arbitrate with a private party confirms that the local litigation requirement is a condition on a signatory country’s consent to arbitrate, and not merely a condition on performance of a pre-existing arbitration agreement. There are good reasons for any sovereign to condition its consent to arbitrate disputes on investors’ first litigating their claims in the country’s own courts for a specified period. It is no trifling matter for a sovereign nation to subject itself to suit by private parties; we do not presume that any country—including our own—takes that step lightly. Cf. United States v. Bormes, 568 U.S. ___, ___, 133 S.Ct. 12, 16, 184 L.Ed.2d 317 (2012) (Congress must ‘unequivocally express[]’ its intent to waive the sovereign immunity of the United *1220 States (quoting United States v. Nordic Village, Inc., 503 U.S. 30, 33, 112 S.Ct. 1011, 117 L.Ed.2d 181 (1992); internal quotation marks omitted)). But even where a sovereign nation has subjected itself to suit in its own courts, it is quite another thing for it to subject itself to international arbitration. Indeed, ‘[g]ranting a private party the right to bring an action against a sovereign state in an international tribunal regarding an investment dispute is a revolutionary innovation’ whose ‘uniqueness and power should not be over-looked.’ Salacuse 137. That is so because of both the procedure and substance of investor-state arbitration.”

Citation: BG Group PLC v. Republic of Argentina, 134 S.Ct. 1198 (U.S. Supreme Court 2014).

CHEMICAL WEAPONS

In case of criminal charges against individual who used toxic chemicals to injure spouse’s lover, U.S. Supreme ponders whether such acts are covered by the Implementation Act of the international Chemical Weapons Convention

Carol Anne Bond (Bond) is a microbiologist from Lansdale, Pennsylvania. Bond sought revenge against Myrlinda Haynes, with whom her husband had an affair which resulted in a pregnancy. In retaliation, Bond spread two toxic chemicals on Haynes’s car, mailbox, and door knob in hopes that Haynes would develop an uncomfortable rash. On one occasion, Haynes suffered a minor chemical burn that she treated by rinsing with water, but Bond’s attempted assaults were otherwise unsuccessful. Haynes repeatedly called the local police to report the suspicious substances, but they took no action. When Haynes found powder on her mailbox, she called the police again, who told her to call the post office. Haynes did so, and postal inspectors placed surveillance cameras around her home. The cameras caught Bond opening Haynes’s mailbox, stealing an envelope, and stuffing potassium dichromate inside the muffler of Haynes’s car.

Federal prosecutors charged Bond with two counts of mail theft, in violation of 18 U.S.C. § 1708. In addition, they also charged Bond with two counts of possessing and using a chemical weapon, in violation of section 229(a) Chemical Weapons Convention Implementation Act. Bond moved to dismiss the chemical weapon counts on the ground that section 229 violates the Tenth Amendment. When the District Court denied Bond’s motion, Bond pleaded guilty but reserved right to appeal. The District Court sentenced Bond to six years in federal prison plus five years of supervised release, and ordered her to pay a $2,000 fine and $9,902.79 in restitution. Bond appealed, raising a Tenth Amendment challenge to her conviction. The Third Circuit initially held that Bond lacked standing to raise her Tenth Amendment challenge, but the decision was reversed. The U.S. Supreme Court granted certiorari the first time. On remand, the Third Circuit rejected both Bond’s Tenth Amendment argument and her additional argument that section 229 does not encompass her conduct.

The U.S. Supreme Court granted certiorari a second time.

The key issue presented by this case is whether the Implementation Act extends to a purely local crime, i.e., an amateur attempt by a jilted wife to injure her husband’s lover, which resulted in only a minor thumb burn readily treated by rinsing with water.

Since our constitutional structure leaves local criminal activity primarily to the States, courts have been reluctant to read federal law in a manner which would encroach upon that responsibility, unless Congress has expressly indicated that the law should have such reach. In this case the Court concluded that the Chemical Weapons Convection Implementation Act does not cover the unremarkable local offense at issue in this case. In reaching this conclusion the Court states:

“[…] The Convention was conceived as an effort to update the Geneva Protocol’s protections and to expand the prohibition on chemical weapons beyond state actors in wartime. Convention Preamble, 1974 U.N.T.S. 318 (the State Parties are ‘[d]etermined for the sake of all mankind, to exclude completely the possibility of the use of chemical weapons, ... thereby complementing the obligations assumed under the Geneva Protocol of 1925’). The Convention aimed to achieve that objective by prohibiting the development, stockpiling, or use of chemical weapons by any State Party or person within a State Party’s jurisdiction. Arts. I, II, VII. It also established an elaborate reporting process requiring State Parties to destroy chemical weapons under their control and submit to inspection and monitoring by an international organization based in The Hague, Netherlands. Arts. VIII, IX.”

“The Convention provides:

‘(1) Each State Party to this Convention undertakes never under any circumstances:

‘(a) To develop, produce, otherwise acquire, stockpile or retain chemical weapons, or transfer, directly or indirectly, chemical weapons to anyone;

‘(b) To use chemical weapons;

‘(c) To engage in any military preparations to use chemical weapons;

‘(d) To assist, encourage or induce, in any way, anyone to engage in any activity prohibited to a State Party under this Convention.’ Art. I, id., at 319.”

“‘Chemical Weapons’ are defined in relevant part as ‘[t]oxic chemicals and their precursors, except where intended for purposes not prohibited under this Convention, as long as the types and quantities are consistent with such purposes.’ Art. II(1)(a), ibid. ‘Toxic Chemical,’ in turn, is defined as ‘Any chemical which through its chemical action on life processes can cause death, temporary incapacitation or permanent harm to humans or animals. This includes all such chemicals, regardless of their origin or of their method of production, and regardless of whether they are produced in facilities, in munitions or elsewhere.’ Art. II(2), id., at 320. ‘Purposes Not Prohibited Under this Convention’ means ‘[i]ndustrial, agricultural, research, medical, pharmaceutical or other peaceful purposes,’ Art. II(9)(a), id., at 322, and other specific purposes not at issue here, Arts. II(9)(b)-(d).”

“Although the Convention is a binding international agreement, it is ‘not self-executing.’ W. Krutzsch & R. Trapp, A Commentary on the Chemical Weapons Convention 109 (1994). That is, the Convention creates obligations only for State Parties and ‘does not by itself give rise to domestically enforceable federal law’ absent ‘implementing legislation passed by Congress.’ Medellín v. Texas, 552 U.S. 491, 505, n. 2, 128 S.Ct. 1346, 170 L.Ed.2d 190 (2008). It instead provides that ‘[e]ach State Party shall, in accordance with its constitutional processes, adopt the necessary measures to implement its obligations under this Convention.’ Art. VII(1), 1974 U.N.T.S. 331. ‘In particular,’ each State Party shall ‘[p]rohibit natural and legal persons anywhere ... under its jurisdiction ... from undertaking any activity prohibited to a State Party under this Convention, including enacting penal legislation with respect to such activity.’ Art. VII(1)(a), id., at 331-332.”

“*2085 Congress gave the Convention domestic effect in 1998 when it passed the Chemical Weapons Convention Implementation Act. See 112 Stat. 2681-856. The Act closely tracks the text of the treaty: It forbids any person knowingly ‘to develop, produce, otherwise acquire, transfer directly or indirectly, receive, stockpile, retain, own, possess, or use, or threaten to use, any chemical weapon.’ 18 U.S.C. § 229(a)(1). It defines ‘chemical weapon’ in relevant part as ‘[a] toxic chemical and its precursors, except where intended for a purpose not prohibited under this chapter as long as the type and quantity is consistent with such a purpose.’ § 229F(1)(A). ‘Toxic chemical,’ in turn, is defined in general as ‘any chemical which through its chemical action on life processes can cause death, temporary incapacitation or permanent harm to humans or animals. The term includes all such chemicals, regardless of their origin or of their method of production, and regardless of whether they are produced in facilities, in munitions or elsewhere.’ § 229F(8)(A). Finally, ‘purposes not prohibited by this chapter’ is defined as ‘[a]ny peaceful purpose related to an industrial, agricultural, research, medical, or pharmaceutical activity or other activity,’ and other specific purposes. § 229F(7). A person who violates section 229 may be subject to severe punishment: imprisonment ‘for any term of years,’ or if a victim’s death results, the death penalty or imprisonment ‘for life.’ § 229A(a).”

“In the Government’s view, the conclusion that Bond ‘knowingly’ ‘use[d]’ a ‘chemical weapon’ in violation of section 229(a) is simple: The chemicals that Bond placed on Haynes’s home and car are ‘toxic chemical[s]’ as defined by the statute, and Bond’s attempt to assault Haynes was not a ‘peaceful purpose.’ §§ 229F(1), (8), (7). The problem with this interpretation is that it would ‘dramatically intrude[] upon traditional state criminal jurisdiction,’ and we avoid reading statutes to have such reach in the absence of a clear indication that they do. United States v. Bass, 404 U.S. 336, 350, 92 S.Ct. 515, 30 L.Ed.2d 488 (1971).”

Furthermore, “[p]art of a fair reading of statutory text is recognizing that ‘Congress legislates against the backdrop’ of certain unexpressed presumptions. EEOC v. Arabian American Oil Co., 499 U.S. 244, 248, 111 S.Ct. 1227, 113 L.Ed.2d 274 (1991). As Justice Frankfurter put it in his famous essay on statutory interpretation, the correct reading of a statute ‘demands awareness of certain presuppositions.’ Some Reflections on the Reading of Statutes, 47 Colum. L. Rev. 527, 537 (1947). For example, we presume that a criminal statute derived from the common law carries with it the requirement of a culpable mental state—even if no such limitation appears in the text—unless it is clear that the Legislature intended to impose strict liability. United States v. United States Gypsum Co., 438 U.S. 422, 437, 98 S.Ct. 2864, 57 L.Ed.2d 854 (1978). To offer another example, we presume, absent a clear statement from Congress, that federal statutes do not apply outside the United States. Morrison v. National Australia Bank Ltd., 561 U.S. 247, 255, 130 S.Ct. 2869, 177 L.Ed.2d 535 (2010). So even though section 229, read on its face, would cover a chemical weapons crime if committed by a U.S. citizen in Australia, we would not apply the statute to such conduct absent a plain statement from Congress. The notion that some things ‘go without saying’ applies to legislation just as it does to everyday life.”

“[…] It has long been settled, for example, that we presume federal statutes do not abrogate state sovereign immunity, Atascadero State Hospital v. Scanlon, 473 U.S. 234, 243, 105 S.Ct. 3142, 87 L.Ed.2d 171 (1985), impose obligations on the States pursuant to section 5 of the Fourteenth Amendment, Pennhurst State School and Hospital v. Halderman, 451 U.S. 1, 16-17, 101 S.Ct. 1531, 67 L.Ed.2d 694 (1981), or preempt state law, Rice v. Santa Fe Elevator Corp., 2089*2089 331 U.S. 218, 230, 67 S.Ct. 1146, 91 L.Ed. 1447 (1947).”

“Closely related is the well-established principle that “`it is incumbent upon the federal courts to be certain of Congress’ intent before finding that federal law overrides’” the “usual constitutional balance of federal and state powers.” Gregory v. Ashcroft, 501 U.S. 452, 460, 111 S.Ct. 2395, 115 L.Ed.2d 410 (1991) (quoting Atascadero, supra, at 243, 105 S.Ct. 3142). To quote Justice Frankfurter, if the Federal Government would “`radically readjust[ ] the balance of state and national authority, those charged with the duty of legislating [must be] reasonably explicit’” about it. BFP v. Resolution Trust Corporation, 511 U.S. 531, 544, 114 S.Ct. 1757, 128 L.Ed.2d 556 (1994) (quoting Some Reflections, supra, at 539-540; second alteration in original). Or as explained by Justice Marshall, when legislation ‘affect[s] the federal balance, the requirement of clear statement assures that the legislature has in fact faced, and intended to bring into issue, the critical matters involved in the judicial decision.’ Bass, supra, at 349, 92 S.Ct. 515.”

“[Courts] have applied this background principle when construing federal statutes that touched on several areas of traditional state responsibility. See Gregory, supra, at 460, 111 S.Ct. 2395 (qualifications for state officers); BFP, supra, at 544, 114 S.Ct. 1757 (titles to real estate); Solid Waste Agency of Northern Cook Cty. v. Army Corps of Engineers, 531 U.S. 159, 174, 121 S.Ct. 675, 148 L.Ed.2d 576 (2001) (land and water use). Perhaps the clearest example of traditional state authority is the punishment of local criminal activity. United States v. Morrison, 529 U.S. 598, 618, 120 S.Ct. 1740, 146 L.Ed.2d 658 (2000). Thus, ‘we will not be quick to assume that Congress has meant to effect a significant change in the sensitive relation between federal and state criminal jurisdiction.’ Bass, 404 U.S., at 349, 92 S.Ct. 515.”

In Bass, the court interpreted a statute that prohibited any convicted felon from “‘receiv[ing], possess[ing], or transport[ing] in commerce or affecting commerce ... any firearm.’” Id., at 337, 92 S.Ct. 515. The Government argued that the statute barred felons from possessing all firearms and that it was not necessary to demonstrate a connection to interstate commerce. The court ultimately rejected that interpretation because it would “render[] traditionally local criminal conduct a matter for federal enforcement and would also involve a substantial extension of federal police resources.” Id., at 350, 92 S.Ct. 515, and states: “we instead read the statute more narrowly to require proof of a connection to interstate commerce in every case, thereby ‘preserv[ing] as an element of all the offenses a requirement suited to federal criminal jurisdiction alone.’ Id., at 351, 92 S.Ct. 515.”

“Similarly, in Jones v. United States, 529 U.S. 848, 850, 120 S.Ct. 1904, 146 L.Ed.2d 902 (2000), the court confronted the question whether the federal arson statute, which prohibited burning “`any ... property used in interstate or foreign commerce or in any activity affecting interstate or foreign commerce,’” reached an owner-occupied private residence. Once again the court rejected the Government’s ‘expansive interpretation,’ under which ‘hardly a building in the land would fall outside the federal statute’s domain.’ Id., at 857, 120 S.Ct. 1904. Instead, the court held that the statute was ‘most sensibly read’ more narrowly to reach only buildings used in ‘active employment for commercial purposes.’ Id., at 855, 120 S.Ct. 1904. We noted that ‘arson is a paradigmatic common-law state crime,’ id., at 858, 120 S.Ct. 1904, and that the Government’s proposed broad reading would “`significantly change[ ] the federal-state 2090*2090 balance,’” ibid. (quoting Bass, 404 U.S., at 349, 92 S.Ct. 515), ‘mak[ing] virtually every arson in the country a federal offense,” 529 U.S., at 859, 120 S.Ct. 1904.”

The precedent strongly suggest that it is appropriate to refer to basic principles of federalism embodied in the Constitution to resolve ambiguity in a federal statute. In the instant case, the ambiguity derives from the improbably broad reach of the key statutory definition given to the term “chemical weapon”, the deeply serious consequences of adopting such a boundless reading and the lack of any apparent need to do so in light of the context from which the statute arose, namely as a treaty about chemical warfare and terrorism. See Bass, supra, at 349, 92 S.Ct. 515.

Therefore, the court reasoned that “[…] the global need to prevent chemical warfare does not require the Federal Government to reach into the kitchen cupboard, or to treat a local assault with a chemical irritant as the deployment of a chemical weapon. There is no reason to suppose that Congress—in implementing the Convention on Chemical Weapons—thought otherwise”.

In conclusion, the Supreme Court found that the Implementation Act was not intended to cover such activities as Bond’s local poisoning attempt.

The Court reversed the Court of Appeals decision and remanded the case for further proceedings consistent with this opinion.

In its concurring opinion Justice SCALIA, with whom Justice THOMAS joins, and with whom Justice ALITO joins as to Part I, states:

“It is the responsibility of ‘the legislature, not the Court, ... to define a crime, and ordain its punishment.’ United States v. Wiltberger, 5 Wheat. 76, 95, 5 L.Ed. 37 (1820) (Marshall, C.J., for the Court). And it is ‘emphatically the province and duty of the judicial department to say what the law [including the Constitution] is.’ Marbury v. Madison, 1 Cranch 137, 177, 2 L.Ed. 60 (1803) (same). Today, the Court shirks its job and performs Congress’s. As sweeping and unsettling as the Chemical Weapons Convention Implementation Act of 1998 may be, it is clear beyond doubt that it covers what Bond did; and we have no authority to amend it. So we are forced to decide—there is no way around it—whether the Act’s application to what Bond did was constitutional.”

“I would hold that it was not, and for that reason would reverse the judgment of the Court of Appeals for the Third Circuit.”

Citation: Bond v. United States, 134 S.Ct. 2077 (U.S. Supreme Court 2014).

CHILD ABDUCTION

Second Circuit addresses novel issues under Hague Child Abduction Convention, including whether separating a child from autism therapy is sufficiently grave to trigger exceptions to the general rule that children wrongfully removed or retained should be returned to their country of habitual residence

The case Ermini v. Vittori arose out of the marital dissolution of an Italian couple. The couple moved to the United States with their two sons and signed a one-year lease on a New York apartment in August 2011 after they were unable to secure adequate treatment in Italy for their autistic son Daniele. They enrolled Daniele in a Comprehensive Application of Behavior Analysis to Schooling (“CABAS”) program in Stony Point, New York. The program offered personalized instruction with an educational team, including a special educational teacher, an occupational therapist, a speech and language therapist, several classroom assistants, and a full-time one-on-one teaching assistant. Daniele’s mother, Viviana Vittori (Vittori), instituted divorce proceedings against Daniele’s father, Emiliano Ermini (Ermini) in April 2012 after numerous incidences of domestic abuse. Ermini had remained employed in Italy and traveled between Italy and the United States to visit his family, but petitioned the district court during the divorce proceedings and ensuing custody dispute to have both children returned to Italy pursuant to the Hague Convention on the Civil Aspects of International Child Abduction. Specifically, Ermini petitioned the return of his two sons to Italy alleging that the two boys who were Italian citizens had been retained in the United States by Vittori, also an Italian citizen without Ermini’s consent. After a trial, the district court denied the petition without prejudice to renewal if Daniele was not able to continue with his current CABAS program. The Italian court system issued a final order requiring the return of the children to Italy.

Daniele was diagnosed with autism on March 14, 2008, when he was approximately two years old. Both parents were committed to helping Daniele and took him to several doctors in Italy as well as abroad to Scotland for medical treatment. When their own resources were inadequate to pay for the treatments, they solicited donations through a website dedicated to Daniele. Dr. Antonucci was Daniele’s primary treating professional in Italy from December 2008 until May 2010. One of the treatments that Dr. Antonucci recommended was hyperbaric oxygen therapy, which was eventually administered in a hyperbaric chamber installed in the family home in Italy. Daniele’s support teacher in Italy was not familiar with any specific techniques for treating autistic children. On their own initiative, the parents attended training in Applied Behavioral Analysis (“ABA”) techniques at a private institution. With permission from Daniele’s school principal, Vittori spent two hours daily at Daniele’s school instructing the support teacher in ABA techniques. Both parents consulted another physician in Italy, Dr. Claudia Lerz, to develop an ABA treatment plan for Daniele. According to Vittori’s expert, Dr. Fiorile, ABA therapy is the most common treatment for children with autism in the United States and it can have an enormous impact on the life of an autistic child. Dr. Antonucci also endorsed ABA treatment. Vittori estimated that she personally provided 70-80% of Daniele’s thirty to forty weekly hours of ABA treatment while the family was living in Italy. Professional ABA treatment would have been preferable but very expensive. The Italian national health care system covered 90 minutes a week of psycho-motility therapy for the first year after Daniele’s autism diagnosis, with an extra 90 minutes of speech therapy during the second year. However, it did not cover other types of treatment or therapy. Both parents were dissatisfied with the options for Daniele’s schooling and therapy in Italy as they did not see results in his developmental progress. They began to look elsewhere for treatment options. In Spring 2010, the parents met Dr. Giuseppina Feingold in Italy. Dr. Feingold was an Italian-speaking pediatrician with a practice in Suffern, New York specializing in children with special needs. In August 2010, they traveled with both sons to Suffern so that Dr. Feingold could assess and begin treating Daniele. The family stayed with Vittori’s cousins at their Connecticut home.

During that visit, they met other parents at Dr. Feingold’s clinic who shared provisions for special needs children at the local schools in Suffern. Both were impressed by the treatment options available in the United States. Around this time, they began to formulate a plan to relocate to the United States for two or three years, during which time they would decide if it would be feasible to make a permanent move to the United States. Meanwhile, Ermini met with Marcello Russodivito about potentially investing in Russodivito’s restaurant so that he could obtain a business visa for himself and derivative ones for his family in order to pursue treatment for Daniele in the United States. On September 2, 2011, the couple co-signed a one-year lease for a house near Russodivito’s restaurant. On September 15, 2011, Vittori and her two sons moved into that house. In September and November, the boys were enrolled in the local public school. In an email to Vittori, Ermini said that they should ship “books, clothing, any furniture we can’t sell, ornaments, dishes, sheets, blankets” in a cargo container from Italy to the United States. On September 13, 2011, he wrote to the U.S. Consulate in Rome to apply for visas for himself and his family for the purpose of “exploring the possibilities of entering into a business partnership with Mr. Marcello Russodivito who already owns an established Italian restaurant in the city of Suffern, NY. I also wish to request a B-2 visa for my wife and 2 children, who will accompany me in this trip to the United States.” Vittori traveled with the children to Italy to renew their visas in November 2011 and then returned to Suffern. Meanwhile Ermini traveled to Italy to finish settling the family’s affairs and did not return to the United States until December 2011. Ermini left again for Italy in early January 2012, following an altercation with Vittori. Although the children had not left the United States since November 2011, but Vittori left the country again in April 2012 to attend court proceedings in Italy. On December 1, 2012, Vittori and the two children moved to their current residence in Suffern. Ermini never relocated to the United States.

Meanwhile, on September 20, 2012, Ermini had applied to the Italian court for an order directing Vittori to return to Italy with the children. With only Ermini in attendance, the court in Velletri ordered Vittori to return to Italy with the children and also ordered temporary measures including that the parents live separately but share parental authority; Vittori and the children would live in the family home; Ermini could visit 8–12 hours per week; and that Ermini would pay spousal and child support of 1,600 Euros per month. At the time of trial, Vittori had not complied with the Italian court’s order to return to Italy with the children, nor had there been visitation or other contact between Ermini and the children. Vittori appealed the Velletri court’s order and on April 5, 2013, the Court of Appeals in Rome vacated several provisions of the September 20, 2012, order and granted her exclusive custody of the children. The April 5, 2013 order also withdrew the Velletri Court’s order thereby revoking both the award of the family home to Ermini. However it did not preclude Ermini’s application to the district court because it was only a temporary order, which appeared to have been designed to conform with U.S. Family Court protective orders.

Due to Daniele’s limited capacity for speech, he did not appear in court. Vittori testified that she took care of feeding Daniele, grooming him and ensuring that he was properly supervised. According to Vittori and Dr. Fiorile, Daniele had shown significant progress in his school environment in the United States. When he first began school in the United States, Daniele’s test results were far below average; at age six, he demonstrated the motor skills of a three-year old. Dr. Fiorile suggested that Daniele performed poorly on the testing because his Italian treatments had been deficient. According to Dr. Fiorile, the CABAS program offered the best ABA curriculum available to autistic children. Dr. Fiorile further testified that Daniele had one-to-one instruction throughout the day and had made exceptional progress. Dr. Fiorile explained that the high level of intervention in Daniele’s current classroom setting was the key to his success. Moreover, she believed that Daniele required this program in order to continue experiencing meaningful progress in cognition, language, social and emotional skills. While the United States has over 4,000 board certified ABA practitioners, Dr. Fiorile knew of fewer than twenty in Italy. Therefore, she concluded in her January 11, 2013 report that if Daniele were separated from his CABAS program, he “will most certainly fail to make the same level of progress and will, without doubt, demonstrate significant skill regression” and that it would be “extremely harmful” to return him to Italy at this time. The Court found that separating Daniele from CABAS would put him in an intolerable situation due to the grave risk of deterioration of his condition and denial of needed rehabilitation.

On the contrary, Ermini argued that Vittori and the children did not currently have legal immigration status in the United States, as they had overstayed their visas in April 2012. In October or November of 2012, Vittori applied for a visa for both herself and the children on the basis of the domestic abuse. Her application was currently pending.

The district court found that the then couple intended to move to the United States as a family for a period of two to three years, during which time medical and rehabilitative treatment would be pursued for Daniele, and also agreed that it was possible that the move would be made permanent at the end of the three-year period, circumstances permitting. Notwithstanding the plan to sell their house in Italy to fund the restaurant investment, there was no agreement to abandon the family’s ties to Italy.

The court ultimately concluded that the children’s habitual residence for Hague Convention purposes at the time of their retention in the United States was Italy; that the retention was in breach of Ermini’s custody rights under the law of Italy; and that Ermini was exercising those rights at the time of the children’s retention in the United States.

The burden then shifted to Vittori to assert affirmative defenses against the return of the children to Italy. The court accepted Vittori’s argument that return to Italy posed a “grave risk” of harm to Daniele, pursuant to Hague Convention, Article 13(b), which precludes repatriation of a child where there “is a grave risk that his or her return would expose the child to physical or psychological harm or otherwise place the child in an intolerable situation”, and ruled in Vittori’s favor.

The district court denied Ermini’s petition for return to Italy as to both children without prejudice to renewal if Daniel is no longer able to participate in the CABAS program. Ermini appealed.

The United States Court of Appeals for the Second Circuit affirmed the district court’s denial and amended the judgment to deny the petition with prejudice.

The key issue here is whether the psychological and physical harms of separating a child from autism therapy were sufficiently grave to allow a displaced child to remain in the country where they receive the therapy.

The Court reviewed de novo the district court’s interpretation of Hague Convention.

“The Hague Convention is a pact among nation-states to protect children in limited, though important, circumstances. It establishes uniform standards, on one side, for ensuring the swift return of children wrongfully removed or retained from their home states, and, on the other, for barring return to a home state when doing so would create a grave risk of harm to the children or violate their fundamental human rights and freedoms. See Hague Convention, arts. 13 & 20.”

“The Convention was adopted in 1980 ‘to protect children internationally from the harmful effects of their wrongful removal or retention and to establish procedures to ensure their prompt return to the State of their habitual residence, as well as to secure protection for rights of access.’ Hague Convention, pmbl., 51 Fed.Reg. at 10498. The Convention is not designed to adjudicate custody claims, but only to determine the merits of claims of wrongful removal and abduction. See id., art. 19 (‘A decision under this Convention concerning the return of the child shall not be taken to be a determination on the merits of any custody issue.’)”

“Under the Convention, removal or retention of a child is deemed ‘wrongful’ when:

[1] it is in breach of rights of custody attributed to a person, an institution or any other body, either jointly or alone, under the law of the State in which the child was habitually resident immediately before the removal or retention;

and

[2] at the time of removal or retention those rights were actually exercised, either jointly or alone, or would have been so exercised but for the removal or retention.

Hague Convention, art. 3.”

“Wrongful removal or retention, however, does not end the matter. If a parent establishes that the removal or retention was wrongful, the child is to be returned unless the defendant establishes one of four defenses. See Blondin v. Dubois (Blondin II), 189 F.3d 240, 245 (2d Cir. 1999); see also 42 U.S.C. § 11601(a)(4). These defenses, or as they are also called, “exceptions,” are to be are to be construed narrowly. See 42 U.S.C. § 11601(a)(4).”

“Two of the four exceptions are to be established by clear and convincing evidence. See id. § 11603(e)(2)(A). The first applies if ‘there is a grave risk that [the child’s] return would expose the child to physical or psychological harm or otherwise place the child in an intolerable situation.’ Hague Convention, art. 13(b). The second governs when the return of the child ‘would not be permitted by the fundamental principles ... relating to the protection of human rights and fundamental freedoms.’ Id., art. 20. The remaining exceptions are to be established by a preponderance of the evidence. See 42 U.S.C. § 11603(e)(2)(B). The first exception subject to this lesser standard applies if judicial proceedings were not commenced within one year of the child’s abduction and the child is well-settled in the new environment. Hague Convention, art. 12. The second applies if the plaintiff not actually exercising custody rights at the time of the removal. Id., art. 13(a).”

“Finally, it should be noted that, since the Convention is a pact among nation-states, Congress has emphasized ‘the need for uniform international interpretation of the Convention.’ 42 U.S.C. § 11601(b)(3)(B). In light of this necessity, the Supreme Court has made clear that, in interpreting the Convention, we are to give the opinions of our sister signatories ‘considerable weight.’ Air France v. Saks, 470 U.S. 392, 404, 105 S.Ct. 1338, 84 L.Ed.2d 289 (1985) (quoting Benjamins v. British European Airways, 572 F.2d 913, 919 (2d Cir.1978)).” (internal quotation marks omitted).

“The Hague Convention does not concern itself with situations where two parents commit to settle a family in a new location, and where in so migrating, neither parent breaches the other’s custody rights. Familial migration across borders is a facet of family life for many, and unless there is wrongful removal or retention of children from their habitual residence and breach of custody rights, the Hague Convention is neither concerned nor involved. […]”

While the Court accepts the district court’s findings that both wrongful retention and breach of custody rights had occurred here, thereby triggering the Convention’s applicability, it doubts as to the district court’s conclusions of law on these issues.

“We have before stated that, in determining habitual residence, courts are to focus on whether a ‘child’s presence at a given location is intended to be temporary, rather than permanent.’ Gitter v. Gitter, 396 F.3d 124, 132 (2d Cir.2005). And the two-three year trial period here may well have influenced the district court’s conclusion that this move was temporary. We have also earlier credited a district court’s finding that a habitual residence did not change because a move was of a ‘trial nature’ and ‘conditional. Id. at 135. And here, the district court, again with reason, focused on the fact that the parents were to reassess their stay in the United States at the end of what appeared to be a trial period. Ermini, 2013 WL 1703590, at *11-12.”

“But we stress that the period of time of a move is not the only relevant factor in the analysis. Indeed, our sister signatories have clarified that a habitual residence may be established even when a move is for a ‘limited period’ and indeed ‘indefinit[e].’ Shah v. Barnet London Borough Council and other appeals, [1983] 1 All E.R. 226, 235 (Eng.H.L). Drawing on the approach in Shah, the Ninth Circuit has placed emphasis on divining not just the duration of the move but instead, more broadly, the shared intent and ‘settled purpose’ of the parents. Mozes v. Mozes, 239 F.3d 1067, 1074 (2001). As the Third Circuit has stated, when similarly confronted with a two-year relocation, ‘the fact that the agreed-upon stay was of a limited duration in no way hinders the finding of a change in habitual residence. Rather, ... the parties’ settled purpose in moving may be for a limited period of time....’ Whiting v. Krassner, 391 F.3d 540, 550 (3d Cir.2004); see also Gitter, 396 F.3d at 132 (adopting the ‘shared intent’ approach). We thus want to emphasize that the time period attached to a move is but one factor in determining, in a fact-intensive manner, what the settled intent among the parents was in making the move.”

“Nor, as we see it, is it clear that Vittori breached Ermini’s custody rights. Rights of custody are ‘rights relating to the care of the person of the child and, in particular, the right to determine the child’s place of residence.’ Hague Convention, art. 5(a). Custody rights are provided by ‘the law of the State in which the child was habitually resident immediately before the removal or retention.’ Id., art. 3(a). The district court determined, quite properly, that, under Italian law, custody rights are defined by ‘mutual agreement’ of the parents, and therefore focused on Ermini and Vittori’s agreement. Ermini, 2013 WL 1703590, at *14; see also Title IV, Italian Civil Code of Law, Art. 316 (‘A child is subject to the authority of its parents until majority ... or emancipation. The authority is exercised by both parents by mutual agreement....’).”

“[…][T]he legal issues surrounding custody rights, and defining the family’s habitual residence, are complicated. As a result, while we have doubts about the district court’s conclusions and thought it important to clarify the governing legal standards, we choose not to ground our decision on those issues. The case can be resolved, and the district court’s decision readily affirmed, because we believe—even assuming arguendo that the children’s habitual residence was in Italy and that Vittori breached Ermini’s custody rights—that return would be barred because the children faced a ‘grave risk’ of harm if returned. […]”

The Court then turns to analyze the “grave risk” of harm issue under the Convention. Although the Court agrees with the district courts finding that the risk of harm Daniele faced if removed from his therapy and returned to Italy was grave enough to meet the Hague Convention’s standards, the Court also holds that Ermini’s history of domestic violence towards Vittori and the children was itself sufficient to establish the Hague Convention’s “grave risk” of harm defense.

“We have in the past ruled that a ‘grave risk’ of harm does not exist when repatriation ‘might cause inconvenience or hardship, eliminate certain educational or economic opportunities, or not comport with the child’s preferences.’ Blondin IV, 238 F.3d at 162. But we have also stressed that a grave risk of harm exists when repatriation would make the child ‘face[] a real risk of being hurt, physically or psychologically.’ Id. The potential harm ‘must be severe,’ and there must be a ‘probability that the harm will materialize.’ Souratgar v. Lee, 720 F.3d 96, 103 (2d Cir.2013).”

“Domestic violence can satisfy the defense when the respondent shows by clear and convincing evidence a ‘sustained pattern of physical abuse and/or a propensity for violent abuse.’ Id. at 104 (internal quotation marks omitted). And we concluded that a ‘grave risk’ of harm from abuse had been established where the ‘petitioning parent had actually abused, threatened to abuse, or inspired fear in the children in question.’ Id. at 105. Spousal violence, in certain circumstances, can also establish a grave risk of harm to the child, particularly when it occurs in the presence of the child. See id. at 103-04 (stating that spousal abuse is relevant insofar as it ‘seriously endangers the child’); see also *165 Khan v. Fatima, 680 F.3d 781, 787 (7th Cir.2012). We have also been careful to note that ‘[s]poradic or isolated incidents of physical discipline directed at the child, or some limited incidents aimed at persons other than the child, even if witnessed by the child, have not been found to constitute a grave risk.’ Id. at 104.”

As stated above, the Court finds district court’s conclusion of law as correct when district court concluded that a “grave risk” of harm existed if Daniele would be removed from his current therapy and returned to Italy.

“This is the first occasion for this Court to consider this kind of psychological harm pursuant to Article 13(b). We note, however, that Article 13(b) explicitly lists ‘psychological’ harm and ‘physical’ harm as appropriate harms for triggering the Convention’s affirmative defenses, both of which are implicated by a developmental disorder such as autism. And we hold that the facts as found by the district court lend themselves straightforwardly to the conclusion that the risk of harm was grave.”

“First, the district court’s findings established there was a ‘probability that the harm w[ould] materialize.’ Souratgar, 720 F.3d at 103. Indeed, the district court credited testimony that does not speak in terms of probability but instead of near certainty: ‘if [Daniele] leaves the Stony Point CABAS program even temporarily, he will face a significant regression in his skills and [] without such an intensive, structured program, [Daniele] will not develop the cognitive, language, social, emotional and independent living skills that he is likely to acquire through such a program.’ Ermini, 2013 WL 1703590, at *16 (emphasis added).”

“Second, the court’s finding that Daniele would lose the ability to develop cognitive, emotional, and relational skills, and potentially lead an independent life, if removed from his current therapy and repatriated, establishes harm of a ‘severe’ magnitude manifestly sufficient to satisfy the exception. Souratgar, 720 F.3d at 103. The harm, in fact, is of such a severity that it threatens to strike to the very core of the child’s development individually and of his ability to participate as a member of society.”

In support of its determination, the Court of Appeals cited a number of cases from countries who were also signatories to the Hague Convention and had ruled on the harm inherent in removing an autistic child from treatment:

J.M.H. v. A.S., [2010] 367 N.B.R.2d 200 (N.B.Fam.Ct.) (Can.) (concluding that the risk to the wellbeing of a child who exhibited signs of autism in removing the child from treatment was sufficiently grave);

DP Commonwealth Cent. Auth., [2001] HCA 39 (High Ct. Austl.) (finding that a lack of adequate treatment facilities for a child with autism in his country of habitual residence was a reason for refusing to return the child).

The Court also agreed with the district court’s decision related to the separation of children, and states:

“[I]n light of the children’s close relationship to each other, and, significantly, the conclusion we reached with respect to abuse, we determine as well that it was not error for the district court to decline to separate the children. See Ermini, 2013 WL 1703590, at *17 (“Courts in this Circuit have frequently declined to separate siblings, finding that the sibling relationship should be protected even if only one of the children can properly raise an affirmative defense under the Hague Convention.’).”

The Court, however, does not agree with district court denial of Ermini’s petition without prejudice to renewal if Daniele is not able to continue with his current CABAS program and the Italian court system issues a final order requiring the return of the children to Italy.

“[…][A]s we believe the district court’s approach—which is, so far as we can tell, the first such instance of denial without prejudice in a Hague Convention case—to constitute an error of law, neither justified nor allowed by the Convention. Since the ‘proper interpretation of the Hague Convention is an issue of law,’ we review the district court’s decision de novo. Blondin IV, 238 F.3d at 158 (internal quotation marks omitted).”

“‘In interpreting a treaty, it is well established that we begin with the text of the treaty and the context in which the written words are used.’ Swarna v. Al-Alwadi, 622 F.3d 123, 132 (2d Cir.2010) (internal quotation marks and alteration omitted). The Hague Convention provides either for the ‘return of the child forthwith’ if the child is wrongfully removed, pursuant to Article 12, or for a ‘determin[ation] that the child is not to be returned,’ pursuant to Article 16. The Convention authorizes these decisions alone, and stresses the importance of deciding matters ‘expeditiously.’ See Hague Convention., art. 11. It also explicitly keeps courts out of deciding, or acting under the Convention, ‘on the merits of rights of custody.’ Id., art. 16.”

“Furthermore, as the Hague Convention’s Explanatory Report—which we have construed as being an authoritative and official history of the Convention proceedings, see Blondin II, 189 F.3d at 246 n. 5-has explained, the Convention ‘is not concerned with establishing the person to whom custody of the child will belong at some point in the future, nor with the situations in which it may prove necessary to modify a decision ... on the basis of facts which have subsequently changed.’ Elisa Perez-Vera, Explanatory Report: Hague Conference on Private International Law, in 3 Acts and Documents of the Fourteenth Session 426 (1980), (“Explanatory Report”) ¶ 71.”

“By denying the petition without prejudice to renewal, the district court allows the parties to call upon future events and engage in prospective modifications in light of changed facts in precisely the way the Convention intended to prohibit. As the Explanatory Report shows, the Convention is concerned with events at a particular *168 moment: it either requires return or, in light of the risks of harm or other circumstances, it does not. Once a determination properly applying the Convention to the facts at hand has been made, all other issues leave the realm of the treaty’s domain. The Convention is not, and cannot be, a treaty to enforce future foreign custody orders, nor to predict future harms or their dissipation. See, e.g., Redmond v. Redmond, 724 F.3d 729, 741 (7th Cir.2013) (‘The Hague Convention targets international child abduction; it is not a jurisdiction-allocation or full-faith-and-credit treaty. It does not provide a remedy for the recognition and enforcement of foreign custody orders or procedures for vindicating a wronged parent’s custody rights more generally.’); Mota v. Castillo, 692 F.3d 108, 112 (2d Cir.2012) (‘[T]he Convention’s focus is simply upon whether a child should be returned to her country of habitual residence for custody proceedings.’). Indeed, the Convention stresses the need for, and importance of, establishing swiftly a degree of certainty and finality for children.[12] See, e.g., Chafin v. Chafin, ___ U.S. ___, 133 S.Ct. 1017, 1030, 185 L.Ed.2d 1 (2013) (Ginsburg, J., concurring) (‘Protraction ... is hardly consonant with the Convention’s objectives.’); Blondin II, 189 F.3d at 244 n. 1 (noting the necessity that procedural and substantive decision-making be expeditious so they do not exceed the time that the child can endure the uncertainty of the process).”

The Court affirms the District Court’s denial of appellant’s petition, and amends its judgment to deny that petition with prejudice.

Citation: Ermini v. Vittori, 758 F.3d 153 (11th Cir. 2014).

DISCOVERY

In dispute over foreign shipping contract where one party filed for discovery in Florida under 28 U.S.C. Section 1782, Eleventh Circuit affirms that discovery may proceed because the lawsuits contemplated in Ecuador were “within reasonable contemplation”

Consorcio Ecuatoriano de Telecomunicaciones. (“CONECEL”) and Jet Air Services Equador (“JASE”) were parties to a long-term contract involving the provision of logistics services by JASE to CONECEL for the international shipment of mobile phones and accessories. In 2008, the relationship fractured and CONECEL asserted that it had been overbilled by JASE by millions of dollars, through collusion between JASE and two of CONECEL’s former employees. JASE denied the allegations, and asserted that CONECEL had, in fact, missed several payments under the contract. JASE thereafter initiated arbitration proceedings in Ecuador in accordance with an arbitration clause in the logistics services contract.

CONECEL subsequently filed an ex parte application for relief in the United States District Court for the Southern District of Florida, requesting that the court grant it leave to issue a subpoena on JAS USA – a US affiliate of JASE which CONECEL maintained was involved in the processing of the allegedly inflated bills – seeking evidence pertaining to invoice generating and calculation. In addition to use in the private Ecuadorian arbitration initiated by JASE, CONECEL also submitted that it needed the evidence for civil and criminal collusion proceedings it planned to initiate against JASE and the former CONECEL employees in the Ecuadorian commercial courts. CONECEL maintained that it required this evidence before filing the contemplated collusion actions because the courts in Ecuador mandate that all evidence in support of such proceedings be filed with the initial pleadings. The statute upon which CONECEL relied in making its ex parte application was 28 U.S.C. §1782. That statute states in the relevant part:

“The district court of the district in which a person resides or is found may order him to give his testimony or statement or to produce a document or other thing for use in a proceeding in a foreign or international tribunal, including criminal investigations conducted before formal accusation. The order may be made pursuant to a letter rogatory issued, or request made, by a foreign or international tribunal or upon the application of any interested person and may direct that the testimony or statement be given, or the document or other thing be produced, before a person appointed by the court.... To the extent that the order does not prescribe otherwise, the testimony or statement shall be taken, and the document or other thing proper *1267 in accordance with the Federal Rules of Civil Procedure. 28 U.S.C. § 1782(a).”

The district court granted the ex parte application and authorized CONECEL to serve the subpoena upon JAS USA. JASE then sought to intervene in the proceedings to quash the subpoena on the grounds, among others, that (1) the Ecuadorian judicial proceedings had not been commenced and, therefore, the application was not ripe, and that (2) a private foreign arbitration was not a “foreign or international tribunal” within the meaning of §1782. The court permitted JASE to intervene but denied its application to quash, finding against JASE on both issues. JASE subsequently appealed to the Eleventh Circuit.

The U.S. Court of Appeals for the Eleventh Circuit affirms the District Court’s decision. The key issue here is whether the foreign private arbitration panels are the “foreign or international tribunals” contemplated by 28 U.S.C. § 1782(a).

In a de novo review the Court first turned to the language of §1782 itself and noted that it had four requirements that must be met before a district court has the authority to accede to a request made pursuant to the statute: 

“(1) the request must be made “by a foreign or international tribunal,” or by “any interested person”; (2) the request must seek evidence, whether it be the “testimony or statement” of a person or the production of “a document or other thing”; (3) the evidence must be “for use in a proceeding in a foreign or international tribunal”; and (4) the person from whom discovery is sought must reside or be found in the district of the district court ruling on the application for assistance.

 In re Clerici, 481 F.3d at 1331-32 (footnote omitted) (quoting 28 U.S.C. § 1782(a)).”

Applying these criteria to the facts before it, the court noted that JASE did not dispute that three of them were undoubtedly met. Clearly, CONECEL was an “interested person” as a main party to the dispute; it was seeking evidence pertaining to invoice processing and calculation; and JAS USA, the target of the subpoena at issue, had an office in Miami, Florida, within the district in which the court sat. The main dispute was thus distilled to whether the third criteria above—requiring proceedings in a “foreign or international tribunal”—had been met.

CONECEL advanced two theories as to why the present facts mandated a finding that §1782 permitted the court to grant the relief requested. First, it argued that the foreign private arbitration satisfied the “foreign or international tribunal” language of the statute. Second, it argued that, regardless of whether or not the Ecuadorian collusion proceedings had yet been initiated, existing U.S. case law supported the proposition that §1782 merely required that the proceedings “be within reasonable contemplation”, and need not be “pending or imminent”. The court, after noting that it need not address the second argument concerning the “reasonable contemplation” standard because it found for CONECEL strictly on the foreign arbitration theory, turned to the guidance of prior U.S. Supreme Court jurisprudence in addressing the question before it.

While not directly on point, the Court relied heavily on the Supreme Court case of Intel Corp. v. Advanced Micro Devices, Inc.,  542 U.S. at 264-65, 124 S.Ct. 2466. There, the Supreme Court was presented with the issue of whether the directorate-general for competition of the European Commission was a “tribunal” under §1782. The Supreme Court began by noting that the original language of the statute was amended in 1964 to substitute “tribunal” for “judicial proceeding”, and that the Senate report documenting the substitution stated that it was made “to ensure that ‘assistance is not confined to proceedings before conventional courts’, but extends also to ‘administrative and quasi-judicial proceedings’”. As the Court states:

“In Intel, the Supreme Court explained that ‘Section 1782(a) does not limit the provision of judicial assistance to `pending’ adjudicative proceedings. In 1964, when Congress eliminated the requirement that a proceeding be `judicial,’ Congress also deleted the requirement that a proceeding be `pending.’” Intel, 542 U.S. at 258, 124 S.Ct. 2466. Instead, the Supreme Court held that section 1782(a) requires only that a proceeding ‘be within reasonable contemplation.’ Id. at 259, 124 S.Ct. 2466; accord In re Letter of Request from the Crown Prosecution Serv. of the U.K., 870 F.2d 686, 691 (D.C.Cir.1989) (Ginsburg, J.). The future proceedings must be more than speculative, however, and a ‘district court must insist on reliable indications of the likelihood that proceedings will be instituted within a reasonable time.’ Crown Prosecution Serv., 870 F.2d at 692; see also id. at 691 (describing the ‘decisive’ question as whether there was ‘sufficient indication that a proceeding in court would eventuate in which the evidence gathered can be weighed impartially’).”

JASE argued that CONECEL’s failure to bring an action demonstrates that any civil or criminal proceeding is not within reasonable contemplation. In response to this argument CONECEL point out that under Ecuadorian law it must submit its evidence with the pleading at the time it commences the civil action, and that it had not yet brought any action against its former employees because it was still waiting for the evidence it seeks pursuant to the instant discovery application.

“The Supreme Court in Intel noted that ‘[i]n civil law countries, documentary evidence is generally submitted as an attachment to the pleadings or as part of a report by an expert.’ 542 U.S. at 262 n. 14, 124 S.Ct. 2466 (quoting Hans Smit, Recent Developments in International Litigation, 35 S. Tex. L.Rev. 215, 235-36 n. 94 (1994)).

Because “a district court is not required to grant a § 1782(a) discovery application simply because it has the authority to do so.” Intel, 542 U.S. at 264, 124 S.Ct. 2466 (citing United Kingdom, 238 F.3d at 1319), JASE also argued, that even if the statutory requirements have been met, the district court abused its discretion in granting CONECEL’s application anyway.

“’Whether, and to what extent, to honor a request for assistance pursuant to § 1782 has been committed by Congress to the sound discretion of the district court,’ and ‘this court may overturn the district court’s decision only for abuse of discretion.’ United Kingdom, 238 F.3d at 1318-19. We have made clear that ‘[t]his deferential standard is identical to that used in reviewing the district court’s ordinary discovery rulings.’ Id. at 1319; cf. Harris v. Chapman, 97 F.3d 499, 506 (11th Cir.1996) (‘District judges are accorded wide discretion in ruling upon discovery motions, and appellate review is accordingly deferential’).”

“Interpreting the Supreme Court’s decision in Intel, a panel of this Court already has spelled out four factors that should be considered by the district court in exercising its discretion:

Once the prima facie requirements are satisfied, the Supreme Court in Intel noted these factors to be considered in *1272 exercising the discretion granted under § 1782(a): (1) whether ‘the person from whom discovery is sought is a participant in the foreign proceeding,’ because ‘the need for § 1782(a) aid generally is not as apparent as it ordinarily is when evidence is sought from a nonparticipant’; (2) ‘the nature of the foreign tribunal, the character of the proceedings underway abroad, and the receptivity of the foreign government or the court or agency abroad to U.S. federal-court judicial assistance’; (3) ‘whether the § 1782(a) request conceals an attempt to circumvent foreign proof-gathering restrictions or other policies of a foreign country or the United States’; and (4) whether the request is otherwise ‘unduly intrusive or burdensome.’ The Supreme Court in Intel added that ‘unduly intrusive or burdensome requests may be rejected or trimmed.’

 In re Clerici, 481 F.3d at 1334 (citation omitted) (quoting Intel, 542 U.S. at 264-65, 124 S.Ct. 2466). JASE’s argument that the district court abused its discretion only focuses on the fourth factor. JASE claims that CONECEL’s request for discovery from JAS USA is overbroad and improperly seeks confidential and proprietary information related to how both JAS USA and JASE price their services.”

“The main problem with JASE’s claim is that it fails to provide us with any sound basis for overturning the district court’s exercise of discretion or for upending the district court’s determination that the discovery request was narrowly tailored. This Circuit has held that once the section 1782 factors are met and the district court is therefore authorized to grant the application, ‘the federal discovery rules, Fed. R.Civ.P. 26-36, contain the relevant practices and procedures for the taking of testimony and the production of documents.’ Weber v. Finker, 554 F.3d 1379, 1384-85 (11th Cir.2009) (quoting In re Clerici, 481 F.3d at 1336). As we explained in Weber:

Section 1782 does not require that every document discovered be actually used in the foreign proceeding. Quite the opposite. Section 1782 expressly provides that the district court should grant discovery under the Federal Rules of Civil Procedure. Pursuant to Rule 26(b)(1) of the Federal Rules of Civil Procedure, ‘[p]arties may obtain discovery regarding any nonprivileged matter that is relevant to any party’s claim or defense—including the existence, description, nature, custody, condition, and location of any documents....’ Fed.R.Civ.P. 26(b)(1).

 Id. at 1385.”

Because CONECEL’s application refers strictly to the information related directly to CONECEL, the Court find unpersuasive JASE’s claim that JAS USA’s compliance with the subpoena would require the disclosure of confidential pricing information that would harm its competitiveness in the marketplace.

“Moreover, JASE does not appear to have taken any steps to meet CONECEL somewhere in the middle or to narrow the discovery request in any particular way; rather, it has taken an all-or-nothing approach *1273 seeking to remove JAS USA from the burden of having to produce any documents or deposition testimony, even those that seem unambiguously relevant. We have previously recognized that such an approach is problematic:

 ‘Finally, as to the fourth Intel factor—whether the § 1782 request is unduly intrusive—the district court’s order granting the § 1782 application specifically indicated that if Clerici wished to pursue his ‘unduly intrusive’ argument, Clerici should file a motion to limit discovery. Clerici never did so and instead chose to appeal the grant of any discovery whatsoever. On appeal, as in the district court, Clerici does not identify the terms of the written request that are overly broad or assert how the scope of the request should be narrowed. Thus, we, like the district court, have no occasion to address the scope of the Panamanian Court’s discovery request.

’ In re Clerici, 481 F.3d at 1335.”

Furthermore, the Court also looks at the Seventh Circuit’s findings related to the all-or-nothing challenges in the course of reversing a district court’s complete denial of a section 1782 application as an abuse of discretion:

“Heraeus’s discovery demands are broad.... For all we know, they are too broad. But if so, it doesn’t follow that Heraeus is not entitled to any discovery. It’s not as if its demands were frivolous; it obviously needs a good deal of discovery in order to prepare its case against Biomet. If it’s asking for too much, the district court can and should cut down its request, but not to nothing, as it did. That was unreasonable, and therefore reversible.

 Heraeus Kulzer, GmbH v. Biomet, Inc., 633 F.3d 591, 597-98 (7th Cir.2011); see also id. at 598 (noting that the district court’s denial of any discovery ‘was all the more unreasonable because Biomet had refused to meet with Heraeus to negotiate a reduction in the amount of discovery sought’ and because of Biomet’s ‘refusal to present any evidence of the burdens that granting Heraeus’s discovery request would impose’). These concerns are persuasive. In this case, JASE has failed to identify which particular discovery requests in CONECEL’s application are unduly burdensome or to provide any specific evidence to support its blanket claim that JAS USA should be exempted from having to comply with any and all discovery obligations due to overarching concerns about confidentiality that are stated only at the highest order of abstraction.”

The Court also addressed to JASE’s claim that the district court erred in denying its motion for reconsideration under Fed.R.Civ.P. 59 and 60 which permits relief from a final judgement, order, or proceeding based on “newly discovered evidence”.

“In this Circuit, we employ a five-part test that a movant must meet in order to be entitled to such relief:

 (1) the evidence must be newly discovered since the trial [or final judgment or order]; (2) due diligence on the part of the movant to discover the new evidence must be shown; (3) the evidence must not be merely cumulative or impeaching; (4) the evidence must be material; and (5) the evidence must be such that a new trial [or reconsideration of the final judgment or order] would probably produce a new result.

 Waddell v. Hendry Cnty. Sheriff’s Office, 329 F.3d 1300, 1309 (11th Cir.2003) (citing Toole v. Baxter Healthcare Corp., 235 F.3d 1307, 1316 (11th Cir.2000)).”

As the Court explained, although JASE’s evidence met the first three factors in the Waddell analysis, they fall short under the fourth and fifth Waddell factors. JASE claimed that the suit broth by Egas, one of CONECEL’s employees, established that any potential civil action by CONECEL against its former employees would be baseless and without merit, thereby confirming that there were no reasonably contemplated proceedings and that CONECEL’s section 1782 application was merely a fishing expedition designed to harass JASE and JAS USA.

“But we cannot simply assume that the allegations in Egas’s lawsuit are true and the allegations in CONECEL’s section 1782 application are false. Like the district court, we are in no position to assess the merits of either CONECEL’s potential suit against Egas or Egas’s retaliatory suit for slander.”

“In short, JASE’s newly discovered evidence proffered in its motion for reconsideration was not material evidence nor evidence that would have probably changed the outcome of the district court’s decision. See Waddell, 329 F.3d at 1309. Indeed, the bulk of JASE’s motion for reconsideration just reiterated JASE’s already-rejected arguments. The district court, therefore, acted entirely within its sound discretion in denying JASE’s motion for reconsideration. See Richardson, 598 F.3d at 740 (‘A motion for reconsideration cannot be used `to relitigate *1275 old matters, raise argument or present evidence that could have been raised prior to the entry of judgment.’” (quoting Michael Linet, Inc. v. Vill. of Wellington, 408 F.3d 757, 763 (11th Cir. 2005))).

The Court affirms the District Court’s denial of JASE’s motion to vacate the order granting CONECEL’s 28 U.S.C. 28 U.S.C. § 1782 application, and the District Court’s denial of JASE’s motion for reconsideration.

Citation: Application of CONECEL v. JAS Forwarding (USA), 747 F.3d 1262 (11th Cir. 2014).

STANDING

District of Columbia Circuit finds than an informer lacks standing under the Neutrality Act; informer had claimed benefits by denouncing the outfitting in the U.S. of vessels that were to be used against Israel, a country at peace with the U.S.

Dr. Alan Bauer (Bauer) is a biologist and U.S. citizen who was injured in a 2002 terrorist attack in Jerusalem. According to the complaint, the terrorist organization Hamas seized power in the Gaza Strip in 2007 and began carrying out attacks against civilian targets in Israel soon thereafter. Israel responded by imposing a naval blockade on the Gaza Strip. Bauer alleges that “anti-Israel organizations” in the United States and other countries retaliated by organizing efforts to breach the blockade and to provide support to Hamas. Bauer further alleges that several organizations and individuals in the U.S., such as the “Free Gaza Movement” and the “U.S. Boat to Gaza Project”, raised funds that were ultimately used to equip the defendant vessels with the means to commit hostilities against the state of Israel.

On June 13, 2011, Bauer sent a letter to Attorney General Eric Holder, identifying an alleged violation of the Neutrality Act (Act) and provided the names of 14 vessels that were involved. On July 11, Bauer then filed a complaint in the District Court, setting out the allegations above and requesting that the court commence forfeiture proceedings against the vessels.

On its own motion, the District Court issued an order to show cause why Bauer’s complaint should not be dismissed for lack of standing. The court also requested that the Department of Justice file a statement of interest on standing in the case. After receiving submissions from Bauer and the United States Government (Government), the District Court dismissed the complaint on the ground that the Act did not authorize a private suit for forfeiture and, therefore, Bauer had failed to state a claim on which relief could be granted. Bauer appeals.

The U.S. Court of Appeals for the District of Columbia affirms the District Court’s dismissal.

The key issue here is whether an informer has a standing to pursue action under the Neutrality Act.

The Act, also known as 18 U.S.C. § 962 which was initially passed in 1794 makes it unlawful to furnish, fit out, or arm a vessel within the United States with the intent of having the vessel used in the service of a foreign state or people to commit hostilities against another foreign state or people with whom the United States is at peace. The Act also provides that any person who violates the Act shall be fined or imprisoned not more than three years, or both. In addition, vessels that are covered by the Act are subject to forfeiture, and persons who give information leading to the seizure of such vessels may recover a bounty, with one half to the use of the informer and the other half to the use of the United States.

In his complaint, Bauer stated that he had informed the Government of vessels that had been furnished by anti-Israel organizations in the United States in clear violation of the Act. Further, his complaint asserted that the vessels were to be employed in the service of Hamas, a terrorist organization in the Gaza Strip, to commit hostilities against Israel. Bauer claimed that as an informant, he had the right to condemn the vessels for forfeiture and to share in the bounty.

The District Court dismissed the complaint, on the ground that the Act lacks an express private cause of action. Accordingly, the case was dismissed for Bauer’s failure to state a claim upon which relief may be granted.

In its brief to this court, the Government agreed that “a private individual has no authority to bring an action under the Act. Furthermore, according to the Government, “even assuming a private party can bring an action under the statute, the Government’s participation would be required, and the Government declined to participate in Bauer’s suit.” Finally, the Government asserted that Bauer’s suit should be dismissed for lack of standing.

Although Bauer concedes that the Act does not provide an express cause of action, Bauer insists that a private cause of action may be judicially implied. In support of this position, Bauer contends that statutes that contain a bounty provision and that do not expressly forbid a private cause of action should be understood to implicitly grant a private cause of action to informers. To support his stance, Bauer seems to assume that if a party has a private cause of action to sue, he necessarily has standing.

“It is well understood that a party who seeks to pursue an action in federal court must first establish Article III standing. As the Supreme Court explained in Lujan v. Defenders of Wildlife, 504 U.S. 555 (1992):

 ‘The irreducible constitutional minimum of standing contains three elements. First, the plaintiff must have suffered an injury in fact and (b) actual or imminent, not conjectural or hypothetical. Second, there must be a causal connection between the injury and the conduct complained of—the injury has to be fairly traceable to the challenged action of the defendant, and not the result of the independent action of some third party not before the court. Third, it must be likely, as opposed to merely speculative, that the injury will be redressed by a favorable decision.’ Id. at 560-61 (citations, internal quotation marks, and alterations omitted).”

The Court recognized that when a plaintiff’s alleged injury arises solely from a statute, questions concerning standing and the availability of a private cause of action under the statute may be intertwined. Nevertheless, standing and a failure to state a cause of action are not one in the same.

“The question whether a federal statute creates a claim for relief is not jurisdictional. Nw. Airlines, Inc. v. Cnty. of Kent, Mich., 510 U.S. 355, 365 (1994). Therefore, an objection to a party’s failure to state a claim upon which relief can be granted can be forfeited if it is not properly raised. Arbaugh v. Y&H Corp., 546 U.S. 500, 507 (2006). However, standing is jurisdictional and it can never be forfeited or waived. Steel Co. v. Citizens for a Better Env’t, 523 U.S. 83, 94-95 (1998). ‘Standing can be raised at any point in a case proceeding and, as a jurisdictional matter, may be raised, sua sponte, by the court.’ Steffan v. Perry, 41 F.3d 677, 697 n.20 (D.C. Cir. 1994) (en banc). And ‘when there is doubt about a party’s constitutional standing, the court must resolve the doubt, sua sponte if need be.’ Lee’s Summit, Mo. v. Surface Transp. Bd., 231 F.3d 39, 41 (D.C. Cir. 2000). Given this mandate, the court considered the requirements of Article III and concluded that Bauer’s suit must be dismissed for lack of standing, not for failure to state a cause of action.”

The Court’s decision is informed by the Supreme Court’s decision in Vermont Agency of Natural Resources v. United States ex rel. Stevens, 529 U.S. 765 (2000).

“In Stevens, the Court held that bounty hunters like Bauer have standing to sue only through ‘the doctrine that the assignee of a claim has standing to assert the injury in fact suffered by the assignor.’ Id. at 773. […] The Stevens Court found that:

 ‘the statute gives the relator himself an interest in the lawsuit, and not merely the right to retain a fee out of the recovery. Thus, it provides that ‘a person may bring a civil action for a violation of section 3729 for the person and for the United States Government,’ § 3730(b); gives the relator ‘the right to continue as a party to the action’ even when the Government itself has assumed ‘primary responsibility’ for prosecuting it, § 3730(c)(1); entitles the relator to a hearing before the Government’s voluntary dismissal of the suit, § 3730(c)(2)(A); and prohibits the Government from settling the suit over the relator’s objection without a judicial determination of ‘fairness, adequacy and reasonableness,’ § 3730(c)(2)(B).’ Stevens, 529 U.S. at 772. In light of these statutory provisions, the Court held that the False Claims Act ‘can reasonably be regarded as effecting a partial assignment of the Government’s damages claim.’ Id. at 773. It reached this conclusion in part because the False Claims Act ‘gives the relator himself an interest in the lawsuit, and not merely the right to retain a fee out of the recovery.’ Id. at 772.”

However, “[t]here is no such assignment under the Neutrality Act. An informer under the Neutrality Act has nothing more than a conditional interest in a bounty, which hinges on whether the Government pursues a forfeiture action. Therefore, an informer like Bauer cannot establish injury-in-fact and thus has no standing to pursue this action on his own to enforce the Government’s interests in neutrality in foreign affairs.”

The Neutrality Act was a “bounty only” statute. As the court explained, no judicial decision of which we are aware has ever construed the Neutrality Act to afford standing to a private party to prosecute an alleged criminal infraction or to independently pursue a forfeiture claim.

The District Court focused on the question whether Bauer’s complaint states a cause of action. To assess the case in these terms is to assume that Bauer has standing, which is a threshold jurisdictional requirement. The court failed to accept this assumption. As the Court noted in Bender v. Williamsport Area School District, 475 U.S. 534 (1986):

‘Federal courts are not courts of general jurisdiction; they have only the power that is authorized by Article III of the Constitution and the statutes enacted by Congress pursuant thereto. For that reason, every federal appellate court has a special obligation to satisfy itself not only of its own jurisdiction, but also that of the lower courts in a cause under review, even though the parties are prepared to concede it. And if the record discloses that the lower court was without jurisdiction this court will notice the defect, although the parties make no contention concerning it. When the lower federal court lacks jurisdiction, we have jurisdiction on appeal, not of the merits but merely for the purpose of correcting the error of the lower court in entertaining the suit.

’ Id. at 541 (citations, internal quotation marks, and brackets omitted).Under Article III, a party who invokes the court’s authority “must have suffered an injury in fact—an invasion of a legally protected interest which is (a) concrete and particularized, and (b) actual or imminent, not conjectural or hypothetical.” Lujan, 504 U.S. at 560. In this case, Bauer has failed to show that he has suffered or been assigned any injury in fact, and he cannot show that his alleged injury will be redressed by a favorable action of the court. Therefore, we are obliged to dismiss his complaint because we have no jurisdiction to hear it.”

“Critical to this holding is the court’s finding that a person who claims to be an informer under the Neutrality Act has nothing more than an inchoate and conditional interest in collecting a bounty, which does not ripen unless the Government seeks forfeiture of the vessels identified by the purported informer. […] Similarly, although the Act also authorizes a civil action for forfeiture, it does not afford standing to purported informers to pursue forfeiture on their own. […]”

“Dr. Bauer is also unable to satisfy the redressability prong of Article III standing because the court cannot compel the Government to pursue action to seek forfeiture of the disputed vessels. Without such action by the Government, Dr. Bauer has nothing to claim under the Neutrality Act. An informer may be disappointed if the Government declines to pursue forfeiture, but disappointment of this sort is a far cry from the injury and redressability required to prove Article III standing. See, e.g., Miami Bldg. & Constr. Trades Council v. Sec’y of Def., 493 F.3d 201, 202, 205-06 (D.C. Cir. 2007) (holding that ‘disappointment’ at a ‘lost opportunity’ is not enough for standing where the possibility for redress rests in the discretion of a third party who has declined to take action necessary to serve the plaintiff’s interests); see also Lujan, 504 U.S. at 562 (no standing if an element of standing ‘depends on the unfettered choices made by independent actors not before the courts and whose exercise of broad and legitimate discretion the courts cannot presume either to control or to predict’(citation and internal quotation marks omitted)).”

In the analysis below, the court illustrates that the language, purpose, and historical context of the Neutrality Act support its finding that informers have no standing to sue for forfeiture on their own.

“’It is settled law that an informer can in no case sue in his own name to recover a forfeiture given in part to him, unless the right to sue is accorded by the statute raising the forfeiture. That is why the terms and structure of the particular statute are decisive.’ Conn. Action Now, Inc. v. Roberts Plating Co., 457 F.2d 81, 84 (2d Cir. 1972) (citation and internal quotation marks omitted). Focusing on the terms and structure of a statute also ensures fealty to the proper judicial role: ‘Raising up causes of action where a statute has not created them may be a proper function for common-law courts, but not for federal tribunals.’ Alexander v. Sandoval, 532 U.S. 275, 287 (2001) (citation and internal quotation marks omitted).”

“The Neutrality Act was one of many bounty statutes passed in the early days of the Republic, and many of those statutes explicitly authorized informers to sue. The express inclusion in some statutes of language granting private parties a right to sue certainly suggests that Congress did not intend for such a right to be implied in the absence of express authorization.”

“The absence of any provision in the Neutrality Act affording standing to private parties to pursue actions for forfeiture on their own is unsurprising in light of the Government’s primacy in the management of international affairs. See United States v. Curtiss-Wright Export Corp., 299 U.S. 304, 320 (1936); Olivier v. Hyland, 186 F. 843, 843 (5th Cir. 1911) (per curiam) (‘The enforcement of the neutrality laws of the United States is of necessity under the control of the government of the United States. . . .’). As the Supreme Court has reminded us, courts must be ‘particularly wary of impinging on the discretion of the Legislative and Executive Branches in managing foreign affairs’ because of the ‘potential implications for the foreign relations of the United States.’ Sosa v. Alvarez-Machain, 542 U.S. 692, 727 (2004). And as this court has previously noted in the context of a separate provision of the Neutrality Act (albeit one without a bounty provision), it would ‘be doubly difficult to find a private damage action within the Neutrality Act, since this would have the practical effect of eliminating prosecutorial discretion in an area where the normal desirability of such discretion is vastly augmented by the broad leeway traditionally accorded the Executive in matters of foreign affairs.’ Sanchez-Espinoza v. Reagan, 770 F.2d 202, 210 (D.C. Cir. 1985) (Scalia, J.) (citation omitted); see also Smith v. Reagan, 844 F.2d 195, 201 (4th Cir. 1988) (courts should be wary of ‘tread[ing] on matters of foreign policy which have long been recognized as the exclusive province of the political branches,’ and courts ‘must be especially certain of congressional intent before inferring a private cause of action’ in the realm of foreign affairs).”

“Dr. Bauer has not cited a single decision issued by the Supreme Court or any federal appellate court in which a private party has been allowed to prosecute either a criminal action or a forfeiture pursuant to the Neutrality Act. Indeed, historical practice has been manifestly to the contrary. Because ‘private citizen[s] lack[] a judicially cognizable interest in the prosecution or nonprosecution of another,’ Linda R.S., 410 U.S. at 619, criminal actions under the Neutrality Act have been pursued only by Government prosecutors. See, e.g., United States v. Quincy, 31 U.S. 445 (1832) (Government criminal prosecution for violations of the Neutrality Act); United States v. Reyburn, 31 U.S. 352 (1832) (same); United States v. Trumbull, 48 F. 99 (S.D. Cal. 1891) (same). Neutrality Act forfeitures have likewise been pursued only by Government officials. See, e.g., The Three Friends, 166 U.S. 1 (seizure and forfeiture by the Government); Gelston v. Hoyt, 16 U.S. 246, 320 (1818) (noting that only a Government official has the ‘authority to make the seizure, or to enforce the forfeiture’); The Laurada, 98 F. 983 (3d Cir. 1900), affirming The Laurada, 85 F. 760 (D. Del. 1898) (action filed on behalf of the United States praying that vessel be condemned and declared forfeited for an alleged violation of the Neutrality Act); The City of Mexico, 28 F. 148 (S.D. Fla. 1886) (decree of forfeiture issued in favor of the Government).”

“As the court held in Olivier:

‘The enforcement of the neutrality laws of the United States is of necessity under the control of the government of the United States. Where a seizure is made on complaint of an informer for violation of [the Neutrality Act], and the United States, through its proper representatives, intervenes, disavows, and declines to ratify the seizure, as in the instant case, the informer can have no such inchoate or other interest as will permit the further prosecution of the case in his behalf.

’ 186 F. at 843.”

To overcome the overwhelming weight of authority against him, Bauer points to dictum in a footnote in the Supreme Court’s decision in United States ex rel. Marcus v. Hess, 317 U.S. 537 (1943). The footnote describes qui tam actions generally, and then states that “statutes providing for a reward to informers which do not specifically either authorize or forbid the informer to institute the action are construed to authorize him to sue.” Id. at 541 n.4 (citing Adams v. Woods, 6 U.S. (2 Cranch) 336 (1805)). However, the Court held that this dictum has never been applied or otherwise followed by the Supreme Court or any federal appellate court.

Bauer suggests that the dictum in Hess refers to the Adams Court’s statement that when “the statute which creates the forfeiture does not prescribe the mode of demanding it [,] either debt or information would lie.” 6 U.S. (2 Cranch) at 341. The court was not convinced of this statement’s relevance. “Indeed, Adams does not address whether a private party can pursue a forfeiture action under the Neutrality Act. Rather, Adams confronted the question of which causes of action were covered by a statute of limitations that applied to ‘forfeiture.’ 6 U.S. (2 Cranch) at 336-40. […] The Court’s statement merely recognized that when a statute provides for forfeiture, the prosecuting party can normally bring either an information or an action of debt—two distinct causes of action at common law.”

“The Court in Adams said nothing about who could bring these actions. Indeed, that question was not contested: the statute at issue in the case, the Slave Trade Act of 1794, explicitly authorized a private party to sue. § 2, 1 Stat. at 349. Neither does the Court’s statement that forfeiture implies an action of debt compel the conclusion that private parties may pursue forfeiture claims on their own under the Neutrality Act. On this score, the Supreme Court has made it clear that the United States itself can bring a civil action of debt to recover forfeited property. Stockwell v. United States, 80 U.S. 531, 542-43 (1871).”

Furthermore, Bauer also points to some cases for their dicta regarding an informer’s right to seize a vessel. “Apart from the fact that the right to seize is not at issue here, none of the cases cited stands for the proposition that a Neutrality Act informer can prosecute the forfeiture itself. See Olivier, 186 F. at 843 (noting that an informer’s ‘seizure’ can be disavowed by the government; not recognizing any informer’s right to execute forfeiture); The Venus, 180 F. 635, 635 (E.D. La. 1910) (‘expressing no opinion’ as to whether an informer can institute an action of seizure); The City of Mexico, 28 F. at 148 (governmental seizure); see also Gelston, 16 U.S. at 310, 319-20 (discussing the right of an informer ‘to seize’ a vessel, but distinguishing between seizure and forfeiture).”

Holding that the Neutrality Act is an informer statute, the Court proceeded to explain why the history of enforcement actions brought pursuant to such statues does not support Bauer’s standing.

“As the Supreme Court has noted, the violation of a law such as the Neutrality Act does not injure the informer directly; the violation injures only the Government. See Stevens, 529 U.S. at 771-73 (identifying both ‘the injury to [the Government’s] sovereignty arising from violation of its laws . . . and [any] proprietary injury resulting from the’ crime). Therefore, it is clear that Dr. Bauer himself was not directly, concretely, and specifically injured by the acts of the Gaza flotilla organizers that he alleged in his complaint. A bounty may give an informer such as Dr. Bauer a ‘concrete private interest in the outcome of [the] suit,’ but such an interest is ‘unrelated to injury in fact [and] insufficient to give [an informer] standing.’ Id. at 772 (first alteration in original) (citations and internal quotation marks omitted). Because Dr. Bauer suffered no injury to a legally protected right from the alleged violation of the law, he does not have personal standing to bring a claim arising from the asserted violation.”

“There is more to it, however, because the Court in Stevens made it clear that an informer in a qui tam action may have standing through ‘the doctrine that the assignee of a claim has standing to assert the injury in fact suffered by the assignor.’ Id. at 773. Thus, in Stevens, the Court held that the False Claims Act ‘effect[ed] a partial assignment of the Government’s damages claim’ by granting private plaintiffs the right (subject to government control) to bring a qui tam action against those who defrauded the government. See id. The assignment in the False Claims Act context is ‘partial’ because the Government retains the right in those cases to intervene and dismiss the claim. ‘Dismissal ends the assignment.’ See Swift v. United States, 318 F.3d 250, 254 n.* (D.C. Cir. 2003). The controlling question in this case, then, is whether the Neutrality Act is a qui tam statute comparable to the False Claims Act and other such statutes. That is, does the Neutrality Act include an assignment of all or a portion of the Government’s interest in the statutory bounty sufficient to confer standing on an informer like Dr. Bauer? We hold that it does not.”

Bauer has failed to cite a single decision issued by the Supreme Court or any federal appellate court in which a private party has been afforded standing to prosecute either a criminal action or forfeiture pursuant to the Neutrality Act. Furthermore, the court found only one state court decision whose holding appears to support Dr. Bauer’s position. Chi. & Alton R.R. Co. v. Howard, 38 Ill. 414 (1865). In that case, the Illinois Supreme Court interpreted a state statute with informer language similar to the language in the Neutrality Act, and held that it afforded an informer a right to pursue a qui tam action for the recovery of various statutory penalties. The Court held that this decision is neither controlling nor convincing, so it offers no redress to Bauer here.

The District Court ultimately dismissed the complaint on the ground that Bauer lacks standing to pursue his action under the Neutrality Act.

Citation: Bauer v. Mavi Marmara, No. 13-7081 (D.C. Cir. 2014).