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