United States Court of Appeals, Seventh Circuit affirms United States District Court for the Northern District of Indiana, South Bend Division denying antisuit injunctive relief

In 2009, Joaquim Salles Leite Neto entered into a trust agreement with Wells Fargo Bank to purchase an airplane for use in his business. Wells Fargo borrowed $6 million from 1st Source and pledged the aircraft as collateral. In January 2011, Neto signed a guarantee for that loan. § 3.02 of the Guarantee dealt with governing law and disputed choice-of-law and venue provisions. In June 2012, the Brazilian government seized the airplane. For several years, Neto continued to pay 1st Source for his debt on the plane, making almost $3 million in payments. Neto stopped making payments in December 2014. In June 2015, 1st Source sued Neto in the Northern District of Indiana to collect the remainder of the debt. In July 2016, 1st Source filed a substantively similar complaint against Neto in São Paolo, Brazil, seeking to recoup the remainder of the debt from the airplane transaction. At the time that 1st Source filed the Brazil lawsuit, Neto maintained certain assets, including the airplane at issue, in Brazil. In October, Neto sought antisuit injunctive relief in Indiana district court in an effort to prevent 1st Source from proceeding with the parallel action in Brazil. He argued that § 3.02 of the loan guarantee prohibited 1st Source from bringing suit in Brazil, and that the Brazil litigation was vexatious and duplicative. The district court denied Neto’s motion, concluding that § 3.02 allowed for the parallel litigation, and that Neto had not met his burden for showing that the Brazil litigation was vexatious. The appeal followed. *610

On appeal from decisions on injunctive relief, the Court of Appeals will review legal conclusions de novo, findings of fact for clear error, and equitable balancing for abuse of discretion.” Korte v. Sebelius, 735 F.3d 654, 665 (7th Cir. 2013).

Neto first argued that § 3.02 forbids 1st Source from filing suit in Brazil because giving effect to § 3.02’s second clause rendered the first clause—which, in Neto’s view, limited the venue to Indiana—meaningless. This reading of the loan guarantee was incorrect for two reasons. First, the language of the first clause only applied to Neto, not to 1st Source. § 3.02 contained no complementary promise on the part of 1st Source to agree to bring “all legal proceedings” in Indiana. Second, § 3.02’s first clause was not rendered meaningless by the second clause, as Neto argued. The first clause granted 1st Source the ability to pursue claims against Neto in Indiana, regardless of where Neto kept his assets. The second clause allowed 1st Source to initiate legal proceedings against Neto wherever his airplane or other assets were located. *611

Next, Neto argued that § 3.02 may permit a lawsuit in either Brazil or Indiana, but not simultaneously in both venues. However, the language of the second clause speaks of “legal proceedings” in the plural, that can be taken “in addition to” legal proceedings in Indiana. *611

Neto also contended that 1st Source was judicially estopped from arguing that it was permitted to sue in Brazil under § 3.02. Whether a party was judicially estopped from making an argument was a question of law subject to de novo review. United States v. Hook, 195 F.3d 299, 305 (7th Cir. 1999) (citation omitted). As a preliminary matter, Neto forfeited this judicial-estoppel theory by failing to raise it before the district court. See Econ. Folding Box Corp. v. Anchor Frozen Foods Corp., 515 F.3d 718, 720 (7th Cir. 2008). There are “certain clear prerequisites” that must obtain before judicial estoppel applies: “(1) the later position must be clearly inconsistent with the earlier position; (2) the facts at issue should be the same in both cases; and (3) the party to be estopped must have convinced the first court to adopt its position.” Hook, 195 F.3d at 306 (quoting Levinson v. United States, 969 F.2d 260, 264-65 (7th Cir. 1992)) (internal quotation marks omitted); see also New Hampshire v. Maine, 532 U.S. 742, 749-50, 121 S.Ct. 1808, 149 L.Ed.2d 968 (2001) (citations omitted). Aside from 1st Source’s amended complaint, Neto pointed to no other instance in which 1st Source argued that venue was only proper in Indiana. The first time the venue issue arose—in briefing on Neto’s motion for antisuit injunctive relief—1st Source took the position it maintained on appeal: Venue was proper in Indiana, Brazil, or both under § 3.02. Thus, a sua sponte finding of judicial estoppel was inappropriate in this case.

Finally, Neto argued that if § 3.02 does authorize suit in Brazil, then the provision is unenforceable as a matter of public policy. However, international forum-selection clauses are prima facie valid, especially when freely negotiated between private parties. M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 10, 92 S.Ct. 1907, 32 L.Ed.2d 513 (1972). Neto did not mention fraud or undue influence, claiming that litigating in Brazil would deprive him of his day in court, or cite to any “statute or judicial decision,” id., declaring Indiana’s public policy on this issue. Rather, Neto asserted that the clause was unreasonable because it “would permit remote courts around the world to apply differing procedural laws to this case, although the matter involves an Indiana bank and an Indiana Guarantee governed by Indiana law,” and would risk piecemeal or inconsistent litigation. *612

Even construing this assertion as a public-policy argument, it was misleading in several ways. First, § 3.02 did not authorize global jurisdiction over Neto. Rather, the second clause authorized suit in “in any jurisdiction where the aircraft may be located” and “in any jurisdiction where [Neto] maintains, temporarily or permanently, any asset.” Second, while it was true that the case involved an Indiana bank and loan guarantee, it also involved a Brazilian defendant, collateral and other assets located in Brazil, and, insofar as the Court was aware, no attachable assets inside Indiana. It was not unreasonable for a creditor in such a situation to seek to protect its interests by asking loan guarantors to agree to suit in jurisdictions where they hold assets that could be used to satisfy the loan obligations. Regardless, in the absence of a “statute or judicial decision” embodying a “strong public policy” that would be undermined by enforcing § 3.02, id., the parties’ otherwise-valid forum-selection clause “should be given full effect.” M/S Bremen, 407 U.S. at 10, 92 S.Ct. 1907. *613

Neto next argued that, even if § 3.02 authorized the Brazil lawsuit, an antisuit injunction was nevertheless appropriate because the Brazil suit was vexatious and duplicative of the Indiana action. Factors specific to the propriety of antisuit injunctive relief included, “whether or not the parties and the issues are the same, and whether or not the first action is dispositive of the action to be enjoined.” Id. (citation omitted). If both factors are met, the district court must then ask whether “letting the two suits proceed would be gratuitously duplicative, or as the cases sometimes say ‘vexatious and oppressive.’” Allendale Mut. Ins. Co. v. Bull Data Sys., Inc., 10 F.3d 425, 431 (7th Cir. 1993) (citation omitted).

Finally, because an “antisuit injunction operates to restrict the foreign court’s ability to exercise its jurisdiction as effectively as if it were addressed to the foreign court itself,” Kaepa, Inc. v. Achilles Corp., 76 F.3d 624, 630 (5th Cir. 1996) (citation omitted), a district court should issue an international antisuit injunction only when the interest in avoiding vexatious litigation outweighs the international-comity concerns inherent in enjoining a party from pursuing claims in a foreign court. See Rosenbloom v. Barclays Bank PLC, No. 13-CV-04087, 2014 WL 2726136, at *2 (N.D. Ill. June 16, 2014). *613

With respect to vexatiousness, the district court reviewed the two actions and concluded, "1st Source’s conduct in filing suit in Brazil could at worst be characterized as heavy handed. Neto presented nothing to establish that 1st Source’s conduct rose to the level of vexatiousness or oppressiveness. Given the minimally burdensome discovery proceedings in Indiana before filing the lawsuit in Brazil, the district court did not abuse its discretion in concluding that Neto had failed to demonstrate that 1st Source’s actions were either vexatious or oppressive. *614

On appeal, Neto did not present anything more than what he presented to the district court. 1st Source’s exercise of its contractual rights to protect its interests was a non-vexatious reason for pursuing parallel litigation in Brazil, so antisuit injunctive relief was not appropriate. The judgment of the district court was affirmed. *615

CITATION: 1st Source Bank v. Neto, 861 F. 3d 607—Court of Appeals, 7th Circuit 2017.

**** Mike Meier is an experienced business consultant. Fluent in German and Spanish, French and Japanese. Juris Doctor (1993) & Master of Laws with distinction (1997), Georgetown University; Master's Degree in Political Science (1988), University of Berlin (Germany), Yale Law School. - Attorney Website at https://mikemeierattorney.com/ - Attorney Profile at: https://solomonlawguild.com/mike-meier# - Attorney News at: https://attorneygazette.com/mike-meier%2C-consultant#

Fifth Circuit upheld judgment of united states district court for the southern district of Texas. Fifth circuit held that the district court’s grant of summary judgment on the ATS and TVPRA claims in favor of defendant was proper and that the district court did not abuse its discretion in dismissing the common law claims by refusing to equitably toll plaintiffs’ state law tort claims

In 2004, an Iraqi insurgent group kidnapped and murdered twelve Nepali men as they traveled through Iraq to a United States military base to work for Daoud & Partners (“Daoud”), a Jordanian corporation that had a subcontract with Defendant-Appellee Kellogg Brown Root (“KBR”). In 2008, Plaintiffs filed suit against KBR and Daoud. They asserted claims under the TVPRA and the ATS, and also brought common law negligence claims. In November 2009, the district court granted KBR’s motion to dismiss Plaintiffs’ common law negligence claims. KBR moved for interlocutory review of the district court’s TVPRA ruling under 28 U.S.C. § 1292(b). In response, the district court reconsidered its denial of summary judgment sua sponte on the TVPRA claim. The court reversed its previous decisions and held that the TVPRA like the ATS did not apply extraterritorially at the time of the alleged conduct in 2004.

Plaintiffs responded by filing motions for rehearing on the district court’s TVPRA and ATS rulings and for leave to amend their ATS claims. In March 2015, the district court denied these motions. The appeal followed. *191

Plaintiffs contended that KBR’s alleged involvement in the trafficking of the Deceased and Plaintiff Gurung and in the forced labor of Plaintiff Gurung at Al Asad constitute actionable torts under the ATS. KBR countered that Plaintiffs’ allegations of misconduct in foreign countries are barred by the presumption against extraterritoriality. *192

The presumption against extraterritoriality is a canon of statutory interpretation rooted in the “longstanding principle” that a federal statute “is meant to apply only within the territorial jurisdiction of the United States” absent congressional intent to the contrary. Morrison v. Nat’l Austl. Bank Ltd., 561 U.S. 247, 255, 130 S.Ct. 2869, 177 L.Ed.2d 535 (2010) (quoting EEOC v. Arabian Am. Oil Co., 499 U.S. 244, 248, 111 S.Ct. 1227, 113 L.Ed.2d 274 (1991)). *193

A two-step inquiry governs the presumption’s application to a statute. RJR Nabisco, Inc. v. European Cmty., ___ U.S. ___, 136 S.Ct. 2090, 2101, 195 L.Ed.2d 476 (2016). First, “we ask whether the presumption against extraterritoriality has been rebutted—that is, whether the statute gives a clear, affirmative indication that it applies extraterritorially.” Id. Second, “[i]f the statute is not extraterritorial, then ... we determine whether the case involves a domestic application of the statute, and we do this by looking to the statute’s ‘focus.’” Id. *193

As for the ATS, the Supreme Court in Kiobel addressed step one of the extraterritoriality inquiry: The Court held that the “presumption against extraterritoriality applies to claims under the ATS, and that nothing in the statute rebuts that presumption.” 133 S.Ct. at 1669. The Court did not foreclose the possibility that there may be circumstances in which the bar would not apply. Id. The Court stated that the ATS could create jurisdiction for “claims [that] touch and concern the territory of the United States ... with sufficient force to displace the presumption against extraterritorial application.” Id. (citing Morrison, 561 U.S. at 265-73, 130 S.Ct. 2869). Notably, in discussing claims that “touch and concern” the United States, the Court cited to Morrison and its “focus” inquiry. See Kiobel, 133 S.Ct. at 1669 (citing Morrison, 561 U.S. at 265-73, 130 S.Ct. 2869). *193

In deciding whether KBR’s conduct on Al Asad constitutes domestic conduct, the Court first addresses how to distinguish between domestic and foreign conduct for purposes of the presumption against extraterritoriality. *196 KBR contends that the question is a matter of de jure sovereignty, arguing that “Iraq’s retention of de jure sovereignty over Al Asad defeats characterizing it as U.S. territory.” See Coalition Provisional Authority Order No. 17 (Revised) § 9 (noting that any premises operated by the Multinational Forces in Iraq “remain Iraqi territory”). On this record, we are unconvinced that Al Asad constituted de facto territory of the United States in 2004. Consequently, because KBR’s actions at Al Asad occurred in Iraq and not the United States, those actions cannot constitute domestic conduct relevant to their ATS claims. *197

Plaintiffs also argue that U.S.-based conduct rebuts the presumption against extraterritoriality. First, they cite KBR’s domestic payments to Daoud, the subcontractor that hired the Deceased and Plaintiff Gurung. Second, they claim that employees based in Houston, Texas, were “aware of allegations of human trafficking at [KBR’s] worksites.” *197

Plaintiffs have failed to show how KBR’s alleged financial transactions permit a domestic application of the ATS. They contend that KBR “transferred payments to [Daoud] from the United States, using New York Banks.” However, they failed to connect the alleged international law violations to these payments or demonstrate how such payments—by themselves—demonstrate that KBR’s U.S.-based employees actually engaged in trafficking the Deceased or forcing Plaintiff Gurung to work on its base. *198

Further, Plaintiffs’ contention that KBR’s U.S.-based employees may have known about “allegations” of human rights abuse by Daoud or KBR overseas is not enough to raise a genuine fact dispute that those employees were directly liable for violating international law. In response to Plaintiffs’ motion for reconsideration of its ruling, the district court acknowledged that Plaintiffs had introduced some evidence suggesting KBR knew it obtained trafficked labor. However, it noted that such evidence only implicated KBR’s operations overseas.

We affirm the district court’s decision to deny leave to amend. As an initial matter, an aiding and abetting theory of liability was not presented to the district court. Amendment would bring Plaintiffs no closer to satisfying the test articulated in Morrison and in RJR Nabisco. Accordingly, amendment would be futile. *200

Plaintiffs alleged that KBR’s actions violated the TVPRA, 18 U.S.C. §§ 1589, 1590, which prohibits forced labor and human trafficking, respectively. In their first amended complaint, Plaintiffs cited 18 U.S.C. § 1595, the TVPRA’s civil-remedy provision. Section 1595 permits suits by private parties for violations of, inter alia, § 1589 or § 1590. After Plaintiffs filed their first amended complaint, 18 U.S.C. § 1596 became law. The parties did not dispute that 18 U.S.C. § 1596(a) (the "2008 Amendment”) enables federal courts to entertain a private party’s civil suit that alleges extraterritorial violations of the TVPRA. See Kiobel, 133 S.Ct. at 1665. Plaintiffs argued that § 1596—which explicitly rebuts the presumption against extraterritoriality—applies to their pending lawsuit.

In light of the well-established presumption against extraterritoriality, we conclude that § 1595 unambiguously did not apply extraterritorially until § 1596 was enacted.

However, in seeking to apply § 1596 to pre-enactment conduct, Plaintiffs confronted a different canon of statutory interpretation: the presumption against retroactivity. Nothing in the text of the pre-2008 TVPRA or in the text of § 1596 indicates that a plaintiff was allowed to sue for extraterritorial violations of the TVPRA before 2008. Accordingly, given that nothing in the text of the TVPRA either in 2004 or today indicates that Plaintiffs could assert a civil remedy for extraterritorial violations before § 1596 was enacted, the amendment’s timing fails to persuade us that the law was a clarifying amendment. *202

Plaintiffs alternatively rely on the Military Extraterritorial Jurisdiction Act (“MEJA”) as a basis for jurisdiction for the TVPRA civil claims. It is undisputed that the TVPRA provisions KBR is alleged to have violated—§ 1589 and § 1590—could have been prosecuted under MEJA. However, this Court declines to find that MEJA’s grant of criminal jurisdiction over felony offenses committed abroad gives Plaintiffs an alternative jurisdictional basis for their civil claims. *207

In the alternative, Plaintiffs argue that if California or Texas law applies, the Court should apply equitable tolling. Plaintiffs argue that the civil conflict in Nepal delayed their suit. The district court rejected this argument, finding that “[g]eographic location and personal hardship cannot provide the sole basis for tolling an otherwise applicable statute of limitations.” Moreover, the district court cited Plaintiffs’ other potential avenues for relief. We find the district court did not abuse its discretion in denying tolling.

The Circuit Court affirmed the Judgment of the District Court.

James E. Graves, Jr., Circuit Judge dissenting in part held that the majority adopts an unnecessarily restrictive view as to the meaning of Kiobel’s “touch and concern” language by engaging in a formalistic application of the Morrison “focus” test.

“In deciding whether KBR’s conduct on Al Asad constitutes domestic conduct, we first address how to distinguish between domestic and foreign conduct for purposes of the presumption against extraterritoriality. KBR contends that the question is a matter of de jure sovereignty, arguing that ‘Iraq’s retention of de jure sovereignty over Al Asad defeats characterizing it as U.S. territory.’ See Coalition Provisional Authority Order No. 17 (Revised) § 9 (noting that any premises operated by the Multinational Forces in Iraq ‘remain Iraqi territory’). KBR’s assertion is not without support in recent Supreme Court case law. In Kiobel, the Court held that the issue was whether a claim under the ATS ‘may reach conduct occurring in the territory of a foreign sovereign.’ 133 S.Ct. at 1664 (emphasis added). RJR Nabisco also suggests that domestic conduct is that which ‘occurred in the United States’ rather than ‘in a foreign country.’ 136 S.Ct. at 2101. Nevertheless, the Supreme Court in Kiobel and RJR Nabisco did not squarely address whether what constitutes the United States also encapsulates its de facto territory.” [196]

“Further, nothing in the text of § 1596 expressly indicates that Congress intended to clarify rather than change the TVPRA. See Middleton, 578 F.3d at 664; Belli, 981 F.2d at 841. Rather, as the provision’s title indicates, it provided ‘[a]dditional jurisdiction.’ [7] Indeed, the two courts to address TVPRA’s civil remedy provision before 2008 held that the law did not provide a cause of action for extraterritorial conduct. See Nattah v. Bush, 541 F.Supp.2d 223, 234 (D.D.C. 2008), aff’d in part, rev’d in part on other grounds, 605 F.3d 1052 (D.C. Cir. 2010); John Roe I v. Bridgestone Corp., 492 F.Supp.2d 988, 999-1004 (S.D. Ind. 2007). As such, in contrast to cases where this Court has held an amendment was clarifying, there was no circuit split or conflict that “provoked” Congress to “enact an amendment to clarify rather than change the law.” Cowden, 895 F.2d at 1501.” [202]

“Second, Plaintiffs cite the “transitory tort doctrine,” arguing that KBR would have been liable under state tort law. But Plaintiffs’ state law claims are barred by the statute of limitations. Allowing Plaintiffs to retroactively bring a TVPRA claim would eliminate that defense, thereby imposing new liability to KBR. See Hughes Aircraft, 520 U.S. at 948, 117 S.Ct. 1871.

Additionally, Plaintiffs’ rights or remedies under expired claims cannot be said to parallel the remedies that the TVPRA would make available if applied. Consequently, allowing Plaintiffs to bring a TVPRA claim would have an impermissible retroactive effect.” [206]

CITATION: Adhikari v. Kellogg Brown & Root, Inc., 845 F. 3d 184—Court of Appeals, 5th Circuit 2017.

**** Mike Meier is an experienced business consultant. Fluent in German and Spanish, French and Japanese. Juris Doctor (1993) & Master of Laws with distinction (1997), Georgetown University; Master's Degree in Political Science (1988), University of Berlin (Germany), Yale Law School. - Attorney Website at https://mikemeierattorney.com/ - Attorney Profile at: https://solomonlawguild.com/mike-meier# - Attorney News at: https://attorneygazette.com/mike-meier%2C-consultant#

Ninth Circuit upholds district court decision that defendants are entitled to immunity under the Westfall Act. As plaintiff did not exhaust her administrative remedies against the United States, the district court properly dismissed the case for lack of subject matter jurisdiction

Plaintiff Sundus Shaker Saleh sues several individuals who served as high-ranking officials in the administration of President George W. Bush. Plaintiff claims that the former officials conspired to engage in, and did engage in, a war of aggression against Iraq and that, in doing so, they violated the “law of nations” within the meaning of the Alien Tort Statute (“ATS”), 28 U.S.C. § 1350.

In 2003, Kurdish Army troops forced Plaintiff and her family to leave their home in Jalawla, Iraq, and flee to Baghdad. The troops, who were aligned with the United States, were taking part in what has become known as the Iraq War, a military action that officially began on March 19, 2003, but that, Plaintiff claims, Defendants had been planning for years.

Plaintiff brought this action in 2013. She alleges that Defendants’ conduct in planning and executing the Iraq War amounted to the “crime of aggression” and a conspiracy to commit the crime of aggression, which she claims was a violation of the “law of nations” within the meaning of the ATS. After she filed an amended complaint in September 2013, the United States filed a certification that Defendants had been acting within the scope of their federal office or employment at the time of the incidents at issue in this matter. Under Westfall Act, 28 U.S.C. § 2679(d)(1), the United States was then substituted as the sole defendant. Thereafter, the amended complaint was dismissed because Plaintiff had failed to exhaust her administrative remedies as required by the FTCA, 28 U.S.C. § 2675(a). Plaintiff filed a second amended complaint. The United States again filed a “scope certification,” and the district court again substituted the United States and dismissed the action, this time with prejudice. The district court also denied Plaintiff’s motion for an evidentiary hearing to challenge the scope certification. Plaintiff timely appealed both the dismissal of the action and the denial of her motion for an evidentiary hearing.

The Westfall Act, which was enacted in response to the Supreme Court’s decision in Westfall, accords federal employees absolute immunity from common-law tort claims arising out of acts they undertake in the course of their official duties. The immunity extends to both “negligent” and “wrongful” “acts or omissions of any employee acting within the scope of his office or employment.” When determining whether a federal officer’s actions fall within “the scope of his office or employment” for purposes of the Westfall Act, the court applies “the principles of respondent superior of the state in which the alleged tort occurred.”

Plaintiff next argued that the Westfall Act should not be interpreted so as to regard as “official” an act condemned by treaty. Plaintiff cited as support for this proposition the United Kingdom case of Regina v. Bartle & the Commissioner of Police for the Metropolis & Others ex parte Pinochet (No. 3), [2000] 1 A.C. 147 (H.L.). This argument suffered from at least two fatal flaws. First, the equivalent of the “scope of employment” test in the Pinochet case was a creature of international law, not a test set out by a domestic statute. Second, although the court had suggested that ambiguous statutes should be interpreted to avoid conflicts even with non-self-executing treaties, the Westfall Act was not, in any relevant way, ambiguous.

“We assume, without deciding, that the prohibition against aggression is a jus cogens norm. But even assuming that the prohibition against aggression is a jus cogens norm, Plaintiff’s argument that Congress cannot provide immunity to federal officers in courts of the United States for violations of that norm is in serious tension with our case law. In Siderman de Blake, we held that Congress could grant a foreign government immunity from suit for alleged violations of the jus cogens norm against torture. Id. at 718-19. After recognizing that immunity might not be available as a matter of customary international law, we noted that we were dealing ‘not only with customary international law, but with an affirmative Act of Congress’—in that case, the Foreign Sovereign Immunities Act. Id. at 718.”

“Siderman de Blake dealt with foreign sovereign immunity, whereas this case concerns the official immunity of domestic officers. But, if anything, that difference cuts against Plaintiff. The immunity of foreign officials in our courts flows from different considerations than does the immunity of domestic officials. Sanchez-Espinoza v. Reagan, 770 F.2d 202, 207 n.5 (D.C. Cir. 1985); accord Universal Consol. Cos. v. Bank of China, 35 F.3d 243, 245 (6th Cir. 1994).”

“When the Westfall Act was passed, it was clear that this immunity covered even heinous acts. See, e.g., Hoston v. Silbert, 681 F.2d 876, 877-80 (D.C. Cir. 1982) (per curiam) (holding that United States Marshals were acting in the scope of their employment when they allegedly beat an unarmed, shackled prisoner and left him to die in a holding cell).”

“In short, the treaties and charters cited by Plaintiff do not alter our conclusion that the Westfall Act, by its plain terms, immunizes Defendants from suit.”

CITATION: Saleh v. Bush, 848 F. 3d 880—Court of Appeals, 9th Circuit 2017.

**** Mike Meier is an experienced business consultant. Fluent in German and Spanish, French and Japanese. Juris Doctor (1993) & Master of Laws with distinction (1997), Georgetown University; Master's Degree in Political Science (1988), University of Berlin (Germany), Yale Law School. - Attorney Website at https://mikemeierattorney.com/ - Attorney Profile at: https://solomonlawguild.com/mike-meier# - Attorney News at: https://attorneygazette.com/mike-meier%2C-consultant#

ACT OF STATE DOCTRINE

In action by victims of human rights violations to levy on assets of former Philippine dictator, Ninth Circuit dismisses because requested interference with Swiss freeze of Marcos assets would violate Act of State Doctrine

In a Multi-District Litigation [Case No. 840 (D. Hawaii)], 9,539 victims of human rights violations in the Philippines won a $1,964,005,859.90 award against the Estate of Ferdinand Marcos. The judgment enjoined the Estate and its agents from transferring any funds pending satisfaction of the judgment. 

The plaintiffs then registered their judgment in the Central District of California and served notices of levy on the California offices of Credit Suisse and Swiss Bank Corp. (jointly “Credit Suisse”), incorporated and headquartered in Switzerland.  On appeal, the Ninth Circuit  held that the post-judgment enforcement must comply with California law. This required “personal service” at the Swiss office where the bank carried the account. The plaintiffs then filed an action in California district court directly against Credit Suisse, seeking to enjoin any transfer on behalf of the Marcos Estate (the "Rosales action"). Credit Suisse unsuccessfully argued in district court that the Rosales action violated the Act of State Doctrine.  It then petitioned the Court of Appeals for a writ of mandamus to dismiss the case.

The U.S. Court of Appeals for the Ninth Circuit grants the petition to dismiss the Rosales action on Act of State grounds.  The Act of State Doctrine bars an action if (1) there is an official act of a foreign sovereign performed within its own territory, and (2) the relief sought or the defense interposed in the action would require a U.S. court to invalidate the foreign sovereign’s official act.

First, the Swiss Federal Council, the governing body of the Swiss Executive Branch, had frozen Marcos’ Swiss assets in 1986.  The Cantons where Marcos’ assets are held -- Geneva, Fribourg and Zürich -- later issued cantonal freeze orders that superseded the federal freeze and remain in effect today.  These acts are clearly official acts of a foreign sovereign performed within its own territory.

Second, the injunction sought by the plaintiffs would compel  Credit Suisse to subject Marcos’ assets to the district court’s orders, even though Swiss orders have kept the assets frozen. Therefore, subjecting the frozen assets to U.S. court orders would allow a U.S. court to question and, in fact, declare invalid the official act of a foreign sovereign. The writ of mandamus directs the district court to dismiss the case and to refrain from taking further action regarding the Marcos Estate.

Citation: Legal Commentary by Attorney Mike Meier. Credit Suisse v. U.S. District Court for the Central District of California, No. 97-70193 (9th Cir. December 3, 1997).

ARBITRATION

Second Circuit enforces clause requiring arbitration in Italy because plaintiff failed to show specifically that defendants had fraudulently induced plaintiff to accept arbitration abroad

In 1974, Saporiti Italia S.p.A. signed an agreement with Campaniello Imports, Ltd. under which the latter would act as the exclusive North American distributor for the former's furniture. Business went well until the 1990s.  By January 1994, however, Saporiti fell upon hard times and went into liquidation in Italy.  Two months later, Campaniello filed a fraud and breach of contract suit against Saporiti in New York federal court.  The suit sought compensatory and punitive damages.  Saporiti then petitioned the local Italian tribunal for a Concordato Preventivo, a mode of relief under Italian law similar to Chapter 11 restructuring under U.S. law. The Tribunal authorized another Italian furniture company, Gidatex S.R.L., to see if it could take over Saporiti operations for ten months.  This might keep Saporiti afloat so as to elude final liquidation.

Gidatex then proposed to Campaniello an agreement whereby the latter could remain a Saporiti distributor for ten months if it dismissed its New York lawsuit.  The two sides met in Italy and finalized this “Gidatex” agreement in June 1994.  In July the parties finalized a separate “Settlement Agreement” under which Campaniello would drop its U.S. law suit “with prejudice.”  The Italian provincial court approved it.  The parties then amended the Gidatex agreement to fine tune the business relationships.  The amendments contained the following arbitration-in-Italy clause that said: “any controversy between the two parties regarding the above agreement will be resolved by arbitration.”  The agreement, however, did not work out and, in April 1995, Gidatex gave notice of termination to Campaniello.

In September 1995, Campaniello filed the instant action in New York federal court, alleging that Gidatex had fraudulently induced them to enter into the Settlement Agreement.  It sought rescission and damages.  Defendants moved to dismiss, inter alia, on the grounds that the agreement demanded arbitration of contract disputes.  The district court granted the motion.

The U.S. Court of Appeals for the Second Circuit affirms.  The Court first examines whether the parties had actually agreed to arbitrate and, secondly, whether the scope of the agreement included the claims asserted below.  Though plaintiff admits the presence of the clause, it contends that defendants had fraudulently induced plaintiff to enter into the contract that bore it.  Citing Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395, 403‑04 (1967), the Court points out that plaintiff must show that the alleged fraud went fairly specifically to the arbitration clause and not merely to the contract as a whole.  As to this, plaintiffs argued that part of the fraud was to make sure that contract disputes would not go before the American courts with its wider range of remedies but to the Italian arbitrator.  The Court, however, rejects plaintiff’s effort as one to metamorphose general contract fraud into arbitration fraud.

“In Prima Paint, the Supreme Court clearly distinguished between fraud in the inducement of the arbitration clause itself, which may be considered by the federal court, and fraud in the inducement of the contract generally. This distinction would be eviscerated if a claimant could transform a general fraud claim into fraud in the inducement of the arbitration clause merely by stating that the arbitration clause is an element of the scheme to defraud. This fact becomes evident if one considers the evidentiary trial that would have to be conducted in this case to determine if there was fraud in the inducement of the arbitration clause. Since there is no fraud or misrepresentation that relates directly to the arbitration clause, the District Court would have to determine whether the appellees defrauded appellants into settling their case and accepting a sham contract with an arbitration clause; in short, the District Court would have to adjudicate the entire fraud claim. Similarly, in every instance where there is a fraud going to the contract generally and an allegation that the arbitration clause was ‘part of the scheme to defraud,’ the court would have to adjudicate the entire scheme to defraud. Consequently, there would never be an instance where a claim of fraud going to a contract generally would be sent to arbitration by a federal court.” [667]

Citation: Legal Commentary by Attorney Mike Meier. Campaniello Imports Ltd. v. Saporiti Italia S.P.A., 117 F.3d 655 (2d Cir. 1997).

CHOICE OF LAW

In litigation over Saskatchewan accident, British Columbia Court of Appeal retrospectively applies later Canadian Supreme Court ruling that statutes of limitations were no longer "procedural" for choice-of-law purposes

In Saskatchewan, Ms. Stewart, a resident of British Columbia was injured in May 1993 while riding as a passenger with her father, Daniel Stewart, in a company car.  Fifteen months later, she sued her father and the corporate owner in a B.C. court.  Both defendants "resided" in Saskatchewan.

Saskatchewan law provided for a one‑year limitation period in tort cases, but B.C. law had a two‑year period.  As the law stood in May 1993 and in October, 1994, when plaintiff filed her suit, the B.C. courts were entitled to apply their longer limitation period.  The theory was that the statute constituted a "procedural" matter in which the forum can apply its own law. 

In December, 1994, however, the Supreme Court of Canada handed down Tolofson v. Jensen, [1994] 3 S.C.R. 1022, 100 B.C.L.R. (2d) 1, 120 D.L.R. (4th) 289.  Tolofson held (1) that, in multijurisdictional tort cases, the substantive law of the place of the wrong (lex loci delicti) governed, and (2) that courts should classify limitation periods as "substantive." 

Plaintiff, however, relied upon § 13 of the B.C. Limitation Act.  It said that, if the law of a jurisdiction other than B.C. is applicable and if private international law would classify the limitation law of that jurisdiction as procedural, the B.C. court has two options.  It may apply its own limitation law or it may apply the limitation law of the other jurisdiction if this produces a more just result.  After unsuccessfully moving to dismiss the action on the ground that Saskatchewan law barred the action, defendants took an appeal.

   The British Columbia Court of Appeal allows the appeal.  In the Court's view, § 13 did not apply.  In light of Tolofson, the B.C. courts could no longer characterize the Saskatchewan limitation law as "procedural."  In Canadian jurisprudence, judicial decisions are usually retrospective in effect.  The theory is that when a court overrules prior decisions, it does not change the law.  Rather, it merely reveals the true law as it always existed and corrects past errors.  As Blackstone indicates, it is not that the overturned law was bad; it was not law at all.  Thus, the Saskatchewan limitation period barred the action although plaintiff had filed her suit relying upon the legal regime that existed before Tolofson.

Citation: Legal Commentary by Attorney Mike Meier. Stewart v. Stewart, 145 D.L.R.4th 228 (B.C.C.A. 1997).

EVIDENCE

In case of first impression, First Circuit approves admission of English deposition of prosecution witness as evidence against accused despite claim of incompatibility with Confrontation Clause

David McKeeve and his business partner, both UK citizens, ran a Scottish company through which they acquired U.S. computer equipment for the Libyan Government.  Even though McKeeve was aware of the U.S. restrictions on trade with Libya, he bought the equipment in Massachusetts. The U.S. Customs Service held the shipment at port though “Cyprus” was the stated destination. It is allegedly a notorious clearinghouse for goods being shipped to embargoed countries.

McKeeve was convicted of violating the International Emergency and Economic Powers Act (IEEPA) [50 U.S.C. §§ 1701-1706 (1994)] and related Executive Orders and regulations.  His conviction rested in part on the deposition testimony of Alex Redpath, the British shipping agent, taken in the UK.  Redpath testified that McKeeve had told him to forward the computer equipment from Cyprus to Libya. McKeeve’s main argument on appeal was that use of the foreign deposition against him had violated the Confrontation Clause.

The U.S. Court of Appeals for the First Circuit affirms.  Redpath had given his deposition before a British magistrate in a Court in Birmingham, England.  McKeeve monitored the proceedings through a live telephone link. A solicitor prepared a transcript of the deposition.

“When the government conducts a [Fed.R.Crim.P.] Rule 15 deposition in a foreign land with a view toward introducing it at trial, the Confrontation Clause requires, at a minimum, that the government undertake diligent efforts to facilitate the defendant’s presence.  ... We caution, however, that although such efforts must be undertaken in good faith, they need not be heroic, and the possibility of using a deposition does not evaporate even if those efforts prove fruitless.  In that event the district court must determine, on a case-specific basis, whether reasonable alternative measures can preserve adequately the values that underpin the defendant’s confrontation rights.  In cases where actions by, or the laws of, a foreign nation effectively preclude the defendant’s presence, furnishing the defendant with the capability for live monitoring of the deposition, as well as a separate (private) telephone line for consultation with counsel, usually will satisfy  the demands of the Confrontation Clause.” [slip op., 12-13]

Such extrajudicial statements are admissible as long as they possess sufficient indicia of reliability.  Fed.R.Evid. 804(b)(1) provides a hearsay exception for the former testimony of an unavailable witness.  Based on this “firmly-rooted” hearsay exception, the Court finds no violation of the Confrontation Clause by admitting the foreign deposition testimony. To pass muster under Rule 804(b)(1), the witness must be unavailable, and the deposition must constitute former testimony.

“The standard test for unavailability is whether the witness’s attendance could be procured ‘by process or other reasonable means.’ Fed.R.Evid. 804(a)(5).  In a criminal context, however, Confrontation Clause concerns color the Rule 804 availability inquiry and heighten the government’s burden. ... Thus, the prosecution must actively attempt to secure the witness’s presence at trial. ... Here, ... the government made an assiduous effort to convince Redpath to attend the trial ... The remaining question is whether Redpath’s deposition amounted to ‘former testimony’ within the purview of Fed.R.Evid. 804(b)(1). ... To be sure, the deposition did not comport in all respects with American practice, but that circumstance alone does not render the testimony not ‘in compliance with law’ and therefore beyond the reach of Rule 804(b)(1). ... ‘[U]nless the manner of examination required by the law of the host nation is so incompatible with our fundamental principles of fairness or so prone to inaccuracy or bias as to render the testimony inherently unreliable, ... a deposition taken ... in accordance with the law of the host nation is taken ‘in compliance with law’ for purposes of Rule 804(b)(1).’” [slip op., 16-18]

 

Among the indicia of reliability cited by the Court are the administration of the oath, oversight by a judicial officer, unlimited direct and cross-examination, as well as linguistic compatibility.

Citation: Legal Commentary by Attorney Mike Meier. United States v. McKeeve, No. 96-2273 (1st Cir. December 5, 1997).

EVIDENCE

In prosecution for exports of banned U.S. technologies to Libya, Second Circuit holds that Malta Customs documents are inadmissible under exceptions to hearsay rule if government did not follow procedure for admission of foreign documents under 1984 Crime Control Act

A federal jury convicted Thomas Doyle and Robert Vance of illegally exporting fuel pumps to Libya.  They appeal their convictions for conspiracy and selling U.S. equipment to Libya in violation of the trade embargo against Libya [International Emergency Economic Powers Act, 50 U.S.C. §§ 1701, 1702, 1705(b); 31 C.F.R. Part 550].

The background facts are as follows.  A 1986 Executive Order of the U.S. President [Exec. Order No. 12,543, 51 Federal Register 875 (1986)] prohibited trade with Libya.  Libya’s national oil company nevertheless sought to purchase spare parts for American-made oil field technologies.  Doyle, who had connections within U.S. army intelligence, and his nephew Vance, sold fuel pumps and other parts to a German company, declaring them as "auto spares" in the shipping papers.  The German company, in turn, sold them to Libya.  Some of the items were shipped to Libya with a stopover in Malta.

The U.S. Government requested, and the district court issued, international letters rogatory to the Maltese government as part of the investigation.  One letter asked for official Maltese records dealing with the defendants' shipments of fuel pumps to Libya.  In response, a Maltese government official signed and certified  several customs documents as authentic.  The Malta Customs Department had generated some of the documents.  Private companies had filed others with the Department. A Senior Malta Customs Official appended a sworn statement of authenticity.  The U.S. Consul on Malta received and transmitted the documents to U.S authorities.  The government introduced them as "foreign government public documents" at trial.

The U.S. Court of Appeals for the Second Circuit reverses and remands because of erroneous instructions to the jury.  The Court, however, also discusses various evidentiary issues in its opinion.

The Appellants challenge, among other things, the admission of the Malta Customs documents as authentic under Federal Rule of Evidence 902(3) [self-authentication of government records].  They particularly object to the documents generated by private parties and filed with the Malta Customs Department.  Their complaint was (1) that Rule 902(3) applied only to the authentication of government documents, and (2) that the documents were also hearsay.

The Court explains.  "The requirement that the document be 'certified as correct' means only that the authenticating official certify that the copy delivered to the court is an accurate copy of the government record.  To satisfy Rule 903, the official does not need to attest to the truth or trustworthiness of the facts contained in the document; accuracy of its contents is the concern of other Federal Rules, such as the many rules concerning hearsay in Rules 801, et seq.  The only concern of Rules 901, et seq. is assuring that evidence is what it purports to be.  The certification of the Maltese officials was clearly adequate to show that these were the records of the Customs Department.  We therefore rule that all documents delivered to the district court by Malta were properly self-authenticated pursuant to Rule 903(3) and (4)." [71-72]

As for the hearsay issue, the documents could be admissible under Rule 803(6), the hearsay exceptions for business records, or Rule 803(8), the exception for government records. The government did not lay a proper foundation, however, for the business records provision.  For example, the Maltese Senior Customs Official could not testify as to the record-keeping practices of the private businesses involved.

The Rule 803(8) question is a closer one. "Rule 803(8)(B) can encompass statements of non-governmental parties who act as agents for the government under duties imposed by law. ...  The Senior Inspector's sworn statement stated that the documents he delivered 'set forth matters which are required by the laws of Malta to be recorded and filed.'  In this case, however, there was no showing of procedures that assure the documents are reliable, of any standards applied to the recordation of the documents, or of any monitoring by Malta of their accuracy.  Malta may, in some fashion, punish the making of false statements to the customs agency, but the Government has pointed us to no authority saying that it does so.  Furthermore, we doubt that a legal 'request' for filing records with a government agency would alone qualify the records for the hearsay exception without some showing that the records were reliable, such as a showing that the private party was acting as an agent of the government." [slip op., 77-78]

[The Crime Control Act of 1984 sets forth a procedure for establishing a foundation for foreign documents for purposes of complying with the business records exception.  The Government, however, did not provide a foreign certification based on the Act, and did not notify the Appellants or the court of its intention to rely on this procedure.]

The Court concludes that the admission of privately-generated, business records without further foundation, even though in the possession of a foreign government agency, is improper.  If there is other evidence that the documents recorded with the Maltese Customs Department are verified or otherwise reliable, they may be admissible.

Citation: Legal Commentary by Attorney Mike Meier. United States v. Doyle, No. 96-1542 (2d Cir., December 4, 1997).

INVESTMENT DISPUTES

ICSID panel rules in favor of U.S. corporation and awards it $9,000,000 in its claim that soldiers of Zaire had looted and destroyed one of its local manufacturing complexes

In January 1993, American Manufacturing & Trading, Inc. (AMT), a Delaware corporation, began a proceeding against the Republic of Zaire in the International Centre for the Settlement of Investment Disputes (ICSID). It alleged that Zaire had breached AMT's rights under a 1984 U.S.‑Zaire bilateral investment treaty (BIT).  According to AMT, Zaire failed to compensate AMT for property damage and losses caused by elements of Zaire's armed forces in September 1991 and January 1993. 

AMT claimed that, on two occasions, Zaire soldiers destroyed property in a local industrial complex run by SINZA, S.P.R.L.  AMT owned 94% of SINZA stock.  The complex had been producing  automotive and dry cell batteries.  Specifically, the soldiers broke into the complex and demolished it.  They then hauled away all finished goods, nearly all raw materials and other valuable objects.  After the second set of incursions, AMT had to shut the SINZA complex down permanently.  AMT sought $14,300,000 as the fair market value of its losses, reimbursement for loss of profits (lucrum cessans), 8% interest and the costs of the arbitral proceedings. The Centre appointed three arbitrators to the panel.

Zaire did not disavow the damages nor did it appear at the oral hearing.  Instead, it contended that the Tribunal lacked jurisdiction and that the AMT claim was inadmissible for several procedural reasons.  For example, Zaire questioned whether there was a legal dispute (ratione materiae); whether there was a controversy between a State and a national of another State (ratione personae); and whether both of the Parties have consented (ratione voluntatis).  Zaire also contended that the most‑favored‑nation and national-treatment provisions excused it from paying damages to AMT and that Zaire domestic law, that bars claims like AMT's, preempts the BIT.  The Tribunal rebuffed all of Zaire's reasoning.

The Tribunal ultimately ruled for AMT and entered an award for $ 9,000,000  along with 7.5% overdue interest after 60 days and $ 104,828 to cover one half of costs advanced by AMT.

Citation: Legal Commentary by Attorney Mike Meier. American Manufacturing & Trading, Inc. v. Republic of Zaire, ICSID Case Arb/93/1, released February 21, 1997, 36 I.L.M. 1531. [According to an I.L.M. editorial note: " [t]his is the first award ever given under the law of a bilateral investment treaty to which the United States is a contracting party."]

JUDICIAL ASSISTANCE

Despite major efforts of plaintiffs and Minnesota Court in complex tobacco litigation to develop requests for oral testimony abroad that comply with English law, English Court of Appeal concludes that they fail to pass muster

The State of Minnesota and that state's Blue Cross and Blue Shield filed suit in a Minnesota state court against a number of tobacco companies including British-American Tobacco Company (BAT) and its associated companies.  The complex action sought substantial damages to compensate plaintiffs for the expenses of treating tobacco-related diseases.  It also asked for punitive damages because of defendants' conspiracy to cover up evidence of the addictive nature of tobacco and of the lethal nature of cigarettes.  The English companies denied liability and also the jurisdiction of the Minnesota courts.

At plaintiffs' behest, the state judge issued a request for the taking of testimony by videotape in England from four former high officials of BAT, not for pretrial discovery purposes but for use at the trial.  On July 8, 1997 an English trial judge narrowed the request considerably and then ordered the witnesses to testify.  He acted pursuant to the Evidence (Proceedings in Other Jurisdictions) Act of 1975 which had implemented the Hague Evidence Convention.  From this order, defendants appealed. The English Court of Appeal (Civil Division) allows the appeal.

In his opinion, Lord Woolf, Master of the Rolls, first points out that traditional oral discovery American style, especially of non-parties, is far broader than that allowed in the U.K.  Although the 1975 Evidence Act does not let English courts help American courts to carry out pretrial "discovery" in the sense of a "fishing expedition," the present matter involves a request for admissible trial evidence. 

In that context, English courts describe "fishing" as amounting to "a roving inquiry, by means of the examination and cross‑examination of witnesses, which is not designed to establish by means of their evidence allegations of fact which have been raised bona fide with adequate particulars, but to obtain information which may lead to obtaining evidence in general support of a party's case."

Noting that the inquiry extends back 40 years, Lord Woolf concludes that the 1975 Act does not authorize international judicial cooperation here.  Excessively "wide and uncertain" requests remain despite the American court's conscientious efforts and the lower court's pruning actions.  It is unfair to disable the witnesses from being able to get ready to respond and from protecting themselves against irrelevant inquiries.

Judge Gibson agrees. Quoting from the Minnesota rules, he stresses the pervasive use of costly oral depositions in American practice in contrast with English procedure.  Though plaintiffs did try to designate the documents to which they would refer the witnesses, there were literally millions of potential documents to ask about. This made the designation task impracticable and of little or no help to the witnesses.  Nor could or should the English judge try to "blue pencil" the request to make it acceptable.

Judge Otton essentially concurs with the above reasoning.

Citation: Legal Commentary by Attorney Mike Meier. State of Minnesota v. Philip Morris Inc., 30 July 1997 [Ct. App. (Civ. Div.)] [Transcript: Smith Bernal].

JURISDICTION (PERSONAL)

New Jersey federal court dismisses injury suit against Italian hotel company for lack of general jurisdiction over it based merely upon state citizens’ access to its internet site

Itajolly Compagnia Italiana Dei Jolly Hotels operates 32 hotels in Italy as an Italian subsidiary of Jolly Hotels, Inc.  It had an arrangement to make available to Grand Circle Travel certain rooms in the Jolly Diodoro Hotel in Taormina, Sicily.  Eileen Weber was a frequent user of GCT and, in 1994, used it to book several hotels in Italy including the Jolly Diodoro. 

On December 7, 1994, Weber fell and injured herself in that hotel and filed suit against Itajolly and Jolly Hotels in New Jersey state court.  She claimed that defendant Itajolly should have known of the dangerous condition that led to her fall.  Defendants removed it to federal court based on diversity of citizenship.  Itajolly moved to dismiss for lack of personal jurisdiction over it. The U.S. District Court for the District of New Jersey grants the motion.

The Court finds that defendant does not personally conduct any business in New Jersey.  It does, however, have a web site on the Internet.  The site provides photographs of hotel rooms, summaries of hotel facilities, as well as data about numbers of rooms and telephone numbers. Plaintiff argued there was “general” jurisdiction in that the web site constituted advertising and hence doing business in New Jersey.  The Court sees no merit in this argument.

   The Court divides the cases dealing with this issue into three categories.  “The first category includes cases where defendants actively do business on the Internet. In those instances, personal jurisdiction is found because defendants ‘enter into contracts with residents of a foreign jurisdiction that involve the knowing and repeated transmission of computer files over the Internet.’ The second category deals with situations ‘where a user can exchange information with the host computer. In these cases, the exercise of jurisdiction is determined by examining the level of interactivity and commercial nature of the exchange of information that occurs on the Web site.’ ... The third category involves passive Web sites; i.e., sites that merely provide information or advertisements to users. ... Districts courts do not exercise jurisdiction in  the latter cases because ‘a finding of jurisdiction . . . based on an Internet web site would mean that there would be nationwide (indeed, worldwide) personal jurisdiction over anyone and everyone who establishes an Internet web site. Such nationwide

jurisdiction is not consistent with traditional personal jurisdiction case law . ...’” [Slip op. 14-15]

   In the Court’s view, this case clearly falls into category three. Defendant placed information about its hotels on the Internet to advertise and not to conduct business. “Thus, the Court finds that exercising jurisdiction over a defendant who merely advertises its services or product on the Internet would violate the Due Process Clause of the Fourteenth Amendment. Exercising jurisdiction in such a case would be unjust and would disrespect the principles established by International Shoe and its progeny.” [Slip op. 17]

Citation: Legal Commentary by Attorney Mike Meier. Weber v. Jolly Hotels, Inc., 977 F. Supp. 327 (D.N.J. 1997).

TECHNOLOGY

U.S. and EU sign Science & Technology Agreement providing for joint research and training operations as well as personnel exchanges

On December 5, prior to the opening of the U.S.-EU Summit in Washington, D.C., the U.S. and the EU signed a Science and Technology Agreement. The Agreement sets up a framework for expanding U.S.-EU scientific cooperation through joint endeavors.  It also looks to the protection of intellectual property rights resulting from joint research.

The sectors for joint activities include the environment, biomedicine and health (including AIDS research), biotechnology, and social sciences (Article 4). The joint activities will include, for example, joint research, seminars, training activities, sharing of equipment, and exchange of scientific personnel between EU scientific institutions and U.S. government agencies [including the Environmental Protection Agency (EPA) and the national Institutes of Health (NIH)]. A joint Consultative Group (JCG) will monitor the activities pursuant to the Agreement (Article 6).  A specific Annex determines the intellectual property rights in the resulting research results.  Basically, each party has a non-exclusive, irrevocable, royalty-free license in all countries to reproduce, distribute and use the written research (Annex, Paragraph II.A.).  Other intellectual property will be administered according to a joint “technology management plan.” (Annex, Paragraph II.B.2(a)).

The Agreement is valid for 5 years, and the parties may extend it for additional 5-year periods.  It will enter into force once the parties have notified each other that they have properly implemented the Agreement into national law.

Citation: Legal Commentary by Attorney Mike Meier. Agreement for Scientific and Technological Cooperation between the European Community and the Government of the United States of America, available at the website of the EC Commission in Washington DC at http://www.eurunion.org/ partner/science.htm;  European Union News press release No. 81/97 (December 5, 1997); U.S. Department of State Press Briefing (December 5, 1997).

TELECOMMUNICATIONS

U.S. and EU conclude Agreement on Global Electronic Commerce

On December 5, 1997, at the U.S.-EU Summit on Guidelines for Future Work on Trade in Global Electronic Commerce (GEC), the U.S. and the EU concluded an Agreement on GEC trade including a commitment to “duty free cyberspace.”  The parties issued a joint statement to this effect.

With the “Joint EU-U.S. Statement on Electronic Commerce,” both parties agree that:

- When parties order goods electronically and deliver them physically, there will be no additional import duties because of the electronic communications (Section 4.(i)).

- They will support self-regulatory codes of conduct and technologies to gain consumer confidence, involving all market players including consumer advocates (Section 5.(i)), and

- They will cooperate in R&D and electronic commerce technologies within the framework of the EU-U.S. Science and Technology Agreement (Section 5.(iv)).

Citation: Legal Commentary by Attorney Mike Meier.  U.S. Trade Representative press release 97-103 (December 9, 1997), available through the USTR Fax Retrieval System at (202) 395-4809, or at the USTR website www.ustr.gov.

TELECOMMUNICATIONS

U.S. implements market-opening commitment of WTO Basic Telecom Agreement by adopting new standard for foreign participation in U.S. satellite services market

The U.S. Federal Communications Commission (FCC) has issued a Report and Order adopting a new standard for allowing foreign companies to take part in the U.S. satellite services market. The Report and Order carry out the market-opening commitments of the WTO Agreement on Basic Telecommunications Services [WTO Basic Telecom Agreement] [incorporated into the General Agreement on Trade in Services (GATS) by the Fourth Protocol of GATS, 36 I.L.M. 336 (1997)]. Under the WTO Basic Telecom Agreement, the U.S. must let foreign suppliers provide basic telecommunications services, including satellite services, in the U.S.  Some 68 other WTO Members have made similar commitments.

The regulatory changes provide a framework for evaluating requests by non-U.S. licensed satellites for access to the U.S. economy.  The FCC will review the applications to decide whether a grant of authority comports with the public interest, convenience, and necessity [47 U.S.C. 301].  It will take into account such public interest factors as the effect on competition in the U.S., spectrum availability, eligibility and operating requirements, as well as national security, law enforcement, and foreign policy concerns.  The FCC presumes that WTO Member access promotes competition in the U.S. satellites market.

The Commission will publish the effective date of the changes once the Office of Management and Budget has approved the information collection requirements for participating businesses.

Citation: Legal Commentary by Attorney Mike Meier. 62 Federal Register 64167 (December 4, 1997).

TRADE

U.S. prevails before WTO panel in dispute over Argentina’s ad valorem import tax and duties

A WTO Dispute Settlement Panel has upheld the U.S. challenge to Argentina’s duties and taxes on imports.  The underlying facts are as follows. Most of Argentina’s import tariffs are determined in ad valorem terms.  For textiles, apparel, and footwear, however, it used “minimum specific import duties” (Derechos de Importación Específicos Mínimos, DIEM). For each textile, apparel and footwear tariff categories, Argentina established an average import price. Argentina then multiplied that price by the bound rate of 35% to determine the specific minimum duty for all products in that category.  Argentina then applied either the specific minimum duty or the ad valorem rate, whichever was higher.  In addition, Argentina applied a 3% tax on imported products.

The U.S. had requested a WTO dispute settlement panel on January 9, 1997.  The Panel Report became available on November 25, 1997.

In brief, the panel considered Argentina’s specific duties on textiles and apparel excessive, and Argentina’s 3% tax on almost all imports impermissible. Specifically, Argentina’s duties on textiles and apparel violate GATT Article II.  Argentina may not impose specific duties where it bases its tariffs exclusively in ad valorem terms.

Furthermore, Argentina’s 3% statistical tax violates GATT Article VIII. Non-tariff charges on imports must approximate the cost of any service rendered to the individual importer or shipment at issue.  The Panel rejected Argentina’s argument that it needs to levy the tax to meet general fiscal requirements imposed by the IMF.  Article VIII mandates that non-tariff charges may recoup only the cost of providing services to a particular importer.

Citation: Legal Commentary by Attorney Mike Meier. Argentina - Measures Affecting Imports of Footwear, Textiles, Apparel and Other Item, Report of the Panel (WT/DS56/R, 25 November 1997), available at the WTO website www.wto.org; U.S. Trade Representative press release 97-99 (November 25, 1997), available through the USTR Fax-on-Demand system at (202) 395-4809, or the USTR website www.ustr.gov.

TRADE

U.S. Federal Trade Commission decides to continue "all or virtually all" standard for "Made in USA" products

For purposes of advertising and labeling, the Federal Trade Commission (FTC) has decided to keep the "all or virtually all" standard for products designated "Made in USA."  It has published an Enforcement Policy Statement to this effect.

In the past, the FTC has held that a product must be wholly domestic or all or virtually all made in the U.S. to be called "Made in USA."  In 1995, the FTC issued "Proposed Guides" for the use of U.S. origin claims, which would have required a "reasonable basis" for making a "Made in USA" claim.  After reviewing comments from interested parties, the FTC decided to continue the current "all or virtually all" standard because consumers are likely to understand the claim "Made in USA" in such a way.

The FTC explains that "all or virtually all" ordinarily means that all significant parts of the product and processing are of U.S. origin.  The foreign content of the product should be de minimis.  In making this determination, the Commission will focus on several factors.  Examples include the place of final assembly or processing, manufacturing costs imputable to U.S. parts, and the distance of the finished product from any foreign content.  The effective date of the Enforcement Policy was December 1, 1997.

Citation: Legal Commentary by Attorney Mike Meier. 62 Federal Register 63756 (December 2, 1997).

TRADE

U.S. Treasury Department issues “Reasonable Care List” to aid importers to comply with customs rules

To provide guidance to importers, the U.S. Department of the Treasury has published a “Reasonable Care Checklist” to simplify  compliance with customs rules.  Section 484 of the Tariff Act, as amended, requires an importer of record to use “reasonable care” in filing information with the Customs Service.  Since the circumstances of every import transaction differ, it has been difficult to define what “reasonable care” means in practice.

Therefore, the “Reasonable Care List” provides checklists that the importer should review for each transaction.  The “General Questions for all Transactions” include two questions of special interest.  The first is whether a knowledgeable individual has reviewed the Customs Regulations, the Harmonized Tariff Schedule, and the GPO publication “Customs Bulletin and Decisions.”  The second asks whether different ports or customs offices handle identical transactions or merchandise differently.

The list arranges additional questions by topic, for example “Merchandise Description & Tariff Classification, “Valuation,” and “Intellectual Property Rights.”  The effective date was December 4, 1997.

Citation: Legal Commentary by Attorney Mike Meier. 62 Federal Register 64248 (December 4, 1997).

IN BRIEF

- WTO Panel finds against U.S. in dispute with Japan over whether latter unfairly excludes foreign photographic film and paper from its market.  On December 5, 1997, a Dispute Settlement Panel of the WTO ruled that Japan has not unfairly excluded Kodak film from the Japanese market.  The U.S. had alleged that informal barriers exist in the Japanese market because of close networks among Japanese manufacturers, distributors, and government agencies [keiretsu] (in this case favoring Fuji Photo Film Co.). -- This is the first WTO case that the U.S. has lost. Citation: Legal Commentary by Attorney Mike Meier. Japan - Measures Affecting Consumer Photographic Film and Paper (WT/DS44); U.S. Trade Representative press release 97-102 (December 5, 1997); World Trade Panel Sides with Japan in Kodak Sales Dispute, Washington Post (December 6, 1997), page A1. [The Japanese Ministry of Trade and Industry (MITI) has made its government's submissions to the Panel available on its website: www.miti.go.jp.  Also, MITI summarized a survey of the Japan Fair Trade Commission on Transactions Among Firms in the Consumer Color Photographic Film and Paper Markets (July 23, 1997), available from Mr. Masabumi Suzuki, Americas Division, International Trade Policy Bureau, Phone: (81)(3) 3501-1094.]