kirk patrick v. environmental tectonics

8/8/2019 Kirk Patrick v. Environmental Tectonics

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Supreme Court of the United StatesW.S. KIRKPATRICK & CO., INC., et al., Petitioners

v.ENVIRONMENTAL TECTONICS CORPORATION, INTERNATIONAL.

No. 87-2066.

Argued Nov. 27, 1989.Decided Jan. 17, 1990.

Competitor of company which obtained military procurement contract from foreign government brought RICO,Robinson-Patman Act, and state antiracketeering action. The United States District Court for the District of NewJersey, Alfred J. Lechner, Jr., J., 659 F.Supp. 1381, dismissed, and appeals were taken. The Court of Appeals,Third Circuit, Louis H. Pollak, District Judge, sitting by designation, 847 F.2d 1052,affirmed in part, reversed inpart, and remanded. After grant of certiorari, the Supreme Court, Justice Scalia, held that: (1) act of statedoctrine was not applicable to bar United States court from entertaining action alleging that company obtainedmilitary procurement contract from Nigerian government through bribery of Nigerian officials, and (2) act ofstate doctrine does not establish exception to obligation of United States courts to decide cases andcontroversies for cases and controversies that may embarrass foreign governments, but merely requires that, inprocess of deciding, acts of foreign sovereigns taken within their own jurisdictions be deemed valid.

Court of Appeals' judgment affirmed.

West Headnotes

[1] International Law 221 10.9

221 International Law 221k10.8 Domestic Effect of Foreign Acts and Laws 221k10.9 k. In general. Most Cited CasesAct of state doctrine was not applicable to bar United States court from entertaining action alleging thatcompetitor obtained military procurement contract from Nigerian government through bribery of Nigerianofficials; nothing in the suit required court to declare invalid the official act of foreign sovereign as neither claimnor any asserted defense would require determination of whether Nigerian contract was effective, even iffindings that would be required for plaintiff corporation to prevail would support finding the contract invalidunder Nigerian law.

[2] International Law 221 10.9

221 International Law 221k10.8 Domestic Effect of Foreign Acts and Laws 221k10.9 k. In general. Most Cited Cases

(Formerly 221k10.8)Act of state doctrine does not establish exception to obligation of United States courts to decide cases andcontroversies for cases and controversies that may embarrass foreign governments, but merely requires that, inprocess of deciding, acts of foreign sovereigns taken within their own jurisdictions be deemed valid.

**701*400 SyllabusFN*

FN* The syllabus constitutes no part of the opinion of the Court but has been prepared by the Reporterof Decisions for the convenience of the reader. See United States v. Detroit Lumber Co., 200 U.S. 321,

337, 26 S.Ct. 282, 287, 50 L.Ed. 499.

According to respondent's complaint, petitioners obtained a construction contract **702 from the NigerianGovernment by bribing Nigerian officials. Nigerian law prohibits both the payment and the receipt of suchbribes. Respondent, an unsuccessful bidder for the contract, filed an action for damages against petitioners andothers under various federal and state statutes. The District Court ruled that the suit was barred by the act ofstate doctrine, which in its view precluded judicial inquiry into the motivation of a sovereign act that wouldresult in embarrassment to the sovereign, or constitute interference with the conduct of United States foreignpolicy. The court granted summary judgment for petitioners because resolution of the case in favor ofrespondent would require imputing to foreign officials an unlawful motivation (the obtaining of bribes), andaccordingly might embarrass the Executive Branch in its conduct of foreign relations. The Court of Appealsreversed and remanded the case for trial, holding that on the facts of this case the doctrine did not applybecause no embarrassment of the Executive in its conduct of foreign affairs was evident.

1 | K i r k p a t r i c k v . E n v i r o n m e n t a l T e c t o n i c s
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Held: The act of state doctrine does not apply because nothing in the present suit requires a court to declareinvalid the official act of a foreign sovereign. See, e.g.,Ricaud v. American Metal Co., 246 U.S. 304, 38 S.Ct. 312,62 L.Ed. 733. It does not suffice that the facts necessary to establish respondent's claim will also establish thatthe Nigerian contract was unlawful, since the contract's legality is simply not a question that the District Courtmust decide.American Banana Co. v. United Fruit Co., 213 U.S. 347, 357-358, 29 S.Ct. 511, 513, 53 L.Ed. 826(Holmes, J.), distinguished. Nor does it suffice that judgment in favor of respondents will require the court toimpute to foreign officials improper motivation in the performance of official acts. To say that internationalcomity, respect for the sovereignty of foreign nations, and the avoidance of embarrassment to the Executive

Branch in its conduct of foreign relations are the policies underlying the act of state doctrine is not to say thatthe doctrine is applicable whenever those policies are implicated. The doctrine is not a rule of abstention whichprohibits courts from deciding properly presented cases or controversies simply because the Executive'sconduct of foreign relations may be adversely *401 affected; it is a rule of decision which requires that, in theprocess of deciding, the acts of foreign sovereigns taken within their own jurisdictions be deemed valid. Pp. 704-707.

847 F.2d 1052 (CA3 1988), affirmed.

SCALIA, J., delivered the opinion for a unanimous Court.Edward Brodskyargued the cause for petitioners. With him on the briefs was Sarah S. Gold.

Thomas B. Rutterargued the cause and filed a brief for respondent.

Deputy Solicitor General Merrill argued the cause for the United States as amicus curiae urging affirmance. With

him on the brief were Solicitor General Starr, Acting Assistant Attorney General Schiffer, Edwin S. Kneedler,Michael Jay Singer,John P. Schnitker, andAbraham D. Sofaer.*

* Briefs ofamici curiae were filed for the Republic of China by Daniel K. Mayers, David Westin, and Gary B. Born;and for the American Bar Association by L. Stanley Chauvin, Jr., Michael D. Sandler, and Roger B. Coven.

Justice SCALIA delivered the opinion of the Court.

In this case we must decide whether the act of state doctrine bars a court in the United States from entertaininga cause of action that does not rest upon the asserted invalidity of an official act of a foreign sovereign, but thatdoes require imputing to foreign officials an unlawful motivation (the obtaining of bribes) in the performance ofsuch an official act.

I

The facts as alleged in respondent's complaint are as follows: In 1981, Harry Carpenter, who was then chairmanof the board and chief executive officer of petitioner W.S. Kirkpatrick & Co., Inc. (Kirkpatrick), learned that theRepublic of Nigeria was interested in contracting for the construction and equipment of an aeromedical center at**703 Kaduna Air Force Base in Nigeria. He made arrangements with Benson Tunde Akindele, a Nigeriancitizen, whereby *402 Akindele would endeavor to secure the contract for Kirkpatrick. It was agreed that, in theevent the contract was awarded to Kirkpatrick, Kirkpatrick would pay to two Panamanian entities controlled byAkindele a commission equal to 20% of the contract price, which would in turn be given as a bribe to officialsof the Nigerian Government. In accordance with this plan, the contract was awarded to petitioner W.S.Kirkpatrick & Co., International (Kirkpatrick International), a wholly owned subsidiary of Kirkpatrick; Kirkpatrickpaid the promised commission to the appointed Panamanian entities; and those funds were disbursed asbribes. All parties agree that Nigerian law prohibits both the payment and the receipt of bribes in connectionwith the award of a government contract.

Respondent Environmental Tectonics Corporation, International, an unsuccessful bidder for the Kaduna contract,

learned of the 20% commission and brought the matter to the attention of the Nigerian Air Force and theUnited States Embassy in Lagos. Following an investigation by the Federal Bureau of Investigation, the UnitedStates Attorney for the District of New Jersey brought charges against both Kirkpatrick and Carpenter forviolations of the Foreign Corrupt Practices Act of 1977, 91 Stat. 1495, as amended, 15 U.S.C. 78dd-1 et seq.,and both pleaded guilty.

Respondent then brought this civil action in the United States District Court for the District of New Jersey againstCarpenter, Akindele, petitioners, and others, seeking damages under the Racketeer Influenced and CorruptOrganizations Act,18 U.S.C. 1961 et seq., the Robinson-Patman Act, 49 Stat. 1526,15 U.S.C. 13 et seq., andthe New Jersey Anti-Racketeering Act, N.J.Stat.Ann. 2C:41-2 et seq. (West 1982). The defendants moved todismiss the complaint under Rule 12(b)(6) of the Federal Rules of Civil Procedure on the ground that the actionwas barred by the act of state doctrine.
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*403 The District Court, having requested and received a letter expressing the views of the legal adviser to theUnited States Department of State as to the applicability of the act of state doctrine, treated the motion as onefor summary judgment under Rule 56 of the Federal Rules of Civil Procedure and granted the motion. 659F.Supp. 1381 (1987). The District Court concluded that the act of state doctrine applies if the inquiry presentedfor judicial determination includes the motivation of a sovereign act which would result in embarrassment to thesovereign or constitute interference in the conduct of foreign policy of the United States. Id., at 1392-1393(citing Clayco Petroleum Corp. v. Occidental Petroleum Corp., 712 F.2d 404, 407 (CA9 1983)). Applying thatprinciple to the facts at hand, the court held that respondent's suit had to be dismissed because in order to

prevail respondent would have to show that the defendants or certain of them intended to wrongfully influencethe decision to award the Nigerian Contract by payment of a bribe, that the Government of Nigeria, its officialsor other representatives knew of the offered consideration for awarding the Nigerian Contract to Kirkpatrick,that the bribe was actually received or anticipated and that but for the payment or anticipation of the paymentof the bribe, ETC would have been awarded the Nigerian Contract. 659 F.Supp., at 1393(footnote omitted).

The Court of Appeals for the Third Circuit reversed. 847 F.2d 1052 (1988). Although agreeing with the DistrictCourt that the award of a military procurement contract can be, in certain circumstances, a sufficiently formalexpression of a government's public interests to trigger application of the act of state doctrine, id., at 1058, itfound application of the doctrine unwarranted on the facts of this case. The Court of Appeals found particularlypersuasive the letter to the District**704 Court from the legal adviser to the Department of State, which hadstated that in the opinion of the Department judicial inquiry into the purpose behind the act of a foreign *404sovereign would not produce the unique embarrassment, and the particular interference with the conduct offoreign affairs, that may result from the judicial determination that a foreign sovereign's acts are invalid. Id., at1061. The Court of Appeals acknowledged that the Department's legal conclusions as to the reach of the act of

state doctrine are not controlling on the courts, but concluded that the Department's factual assessment ofwhether fulfillment of its responsibilities will be prejudiced by the course of civil litigation is entitled tosubstantial respect. Id., at 1062. In light of the Department's view that the interests of the Executive Branchwould not be harmed by prosecution of the action, the Court of Appeals held that Kirkpatrick had not met itsburden of showing that the case should not go forward; accordingly, it reversed the judgment of the DistrictCourt and remanded the case for trial. Id., at 1067. We granted certiorari, 492 U.S. 905, 109 S.Ct. 3213, 106L.Ed.2d 563 (1989).

II

This Court's description of the jurisprudential foundation for the act of state doctrine has undergone someevolution over the years. We once viewed the doctrine as an expression of international law, resting upon thehighest considerations of international comity and expediency, Oetjen v. Central Leather Co., 246 U.S. 297,303-304, 38 S.Ct. 309, 311, 62 L.Ed. 726 (1918). We have more recently described it, however, as a

consequence of domestic separation of powers, reflecting the strong sense of the Judicial Branch that itsengagement in the task of passing on the validity of foreign acts of state may hinder the conduct of foreignaffairs, Banco Nacional de Cuba v. Sabbatino, 376 U.S. 398, 423, 84 S.Ct. 923, 937, 11 L.Ed.2d 804 (1964).Some Justices have suggested possible exceptions to application of the doctrine, where one or both of theforegoing policies would seemingly not be served: an exception, for example, for acts of state that consist ofcommercial transactions, since neither modern international comity nor the current position of ourExecutive*405 Branch accorded sovereign immunity to such acts, see Alfred Dunhill of London, Inc. v. Republic of Cuba, 425 U.S. 682, 695-706, 96 S.Ct. 1854, 1861-1867, 48 L.Ed.2d 301 (1976) (opinion of WHITE, J.); or anexception for cases in which the Executive Branch has represented that it has no objection to denying validity tothe foreign sovereign act, since then the courts would be impeding no foreign policy goals, see First NationalCity Bank v. Banco Nacional de Cuba, 406 U.S. 759, 768-770, 92 S.Ct. 1808, 1813-1815, 32 L.Ed.2d 466 (1972)(opinion of REHNQUIST, J.).

[1] The parties have argued at length about the applicability of these possible exceptions, and, more generally,about whether the purpose of the act of state doctrine would be furthered by its application in this case. We find

it unnecessary, however, to pursue those inquiries, since the factual predicate for application of the act of statedoctrine does not exist. Nothing in the present suit requires the Court to declare invalid, and thus ineffective asa rule of decision for the courts of this country, Ricaud v. American Metal Co., 246 U.S. 304, 310, 38 S.Ct. 312,314, 62 L.Ed. 733 (1918), the official act of a foreign sovereign.

In every case in which we have held the act of state doctrine applicable, the relief sought or the defenseinterposed would have required a court in the United States to declare invalid the official act of a foreignsovereign performed within its own territory. InUnderhill v. Hernandez, 168 U.S. 250, 254, 18 S.Ct. 83, 85, 42L.Ed. 456 (1897), holding the defendant's detention of the plaintiff to be tortious would have required denyinglegal effect to acts of a military commander representing the authority of the **705 revolutionary party asgovernment, which afterwards succeeded and was recognized by the United States. In Oetjen v. CentralLeather Co., supra, and in Ricaud v. American Metal Co., supra, denying title to the party who claimed through

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4/5

purchase from Mexico would have required declaring that government's prior seizure of the property, within itsown territory, legally ineffective. See Oetjen, supra, 246 U.S., at 304, 38 S.Ct., at 311; Ricaud, supra, 246 U.S., at310, 38 S.Ct., at 314. In Sabbatino,*406 upholding the defendant's claim to the funds would have required aholding that Cuba's expropriation of goods located in Havana was null and void. In the present case, by contrast,neither the claim nor any asserted defense requires a determination that Nigeria's contract with KirkpatrickInternational was, or was not, effective.

Petitioners point out, however, that the facts necessary to establish respondent's claim will also establish thatthe contract was unlawful. Specifically, they note that in order to prevail respondent must prove that petitioner

Kirkpatrick made, and Nigerian officials received, payments that violate Nigerian law, which would, they assert,support a finding that the contract is invalid under Nigerian law. Assuming that to be true, it still does notsuffice. The act of state doctrine is not some vague doctrine of abstention but a principle of decision binding onfederal and state courts alike. Sabbatino, supra, 376 U.S., at 427, 84 S.Ct., at 939 (emphasis added). As wesaid in Ricaud, the act within its own boundaries of one sovereign State ... becomes ... a rule of decision for thecourts of this country. 246 U.S., at 310, 38 S.Ct., at 314. Act of state issues only arise when a court mustdecide-that is, when the outcome of the case turns upon-the effect of official action by a foreign sovereign.When that question is not in the case, neither is the act of state doctrine. That is the situation here. Regardlessof what the court's factual findings may suggest as to the legality of the Nigerian contract, its legality is simplynot a question to be decided in the present suit, and there is thus no occasion to apply the rule of decision thatthe act of state doctrine requires. Cf. Sharon v. Time, Inc., 599 F.Supp. 538, 546 (SDNY 1984) (The issue in thislitigation is not whether [the alleged] acts are valid, but whether they occurred).

In support of their position that the act of state doctrine bars any factual findings that may cast doubt upon thevalidity of foreign sovereign acts, petitioners cite Justice Holmes' opinion for the Court in *407American Banana

Co. v. United Fruit Co., 213 U.S. 347, 29 S.Ct. 511, 53 L.Ed. 826 (1909). That was a suit under the United Statesantitrust laws, alleging that Costa Rica's seizure of the plaintiff's property had been induced by an unlawfulconspiracy. In the course of a lengthy opinion Justice Holmes observed, citing Underhill, that a seizure by astate is not a thing that can be complained of elsewhere in the courts. 213 U.S., at 357-358, 29 S.Ct., at 513.The statement is concededly puzzling. Underhill does indeed stand for the proposition that a seizure by a statecannot be complained of elsewhere-in the sense of being sought to be declared ineffective elsewhere. Theplaintiff in American Banana, however, like the plaintiff here, was not trying to undo or disregard thegovernmental action, but only to obtain damages from private parties who had procured it. Arguably, then, thestatement did imply that suit would not lie if a foreign state's actions would be, though not invalidated,impugned.

Whatever Justice Holmes may have had in mind, his statement lends inadequate support to petitioners' positionhere, for two reasons. First, it was a brief aside, entirely unnecessary to the decision. American Banana wassquarely decided on the ground (later substantially overruled, see Continental Ore Co. v. Union Carbide &

Carbon Corp., 370 U.S. 690, 704-705, 82 S.Ct. 1404, 1413-1414, 8 L.Ed.2d 777 (1962)) that the antitrust lawshad no extraterritorial application, so that **706 what the defendant did in Panama or Costa Rica is not withinthe scope of the statute. 213 U.S., at 357, 29 S.Ct., at 513. Second, whatever support the dictum might providefor petitioners' position is more than overcome by our later holding in United States v. Sisal Sales Corp., 274 U.S.268, 47 S.Ct. 592, 71 L.Ed. 1042 (1927). There we held that,American Banana notwithstanding, the defendant'sactions in obtaining Mexico's enactment of discriminating legislation could form part of the basis for suit underthe United States antitrust laws.274 U.S., at 276, 47 S.Ct., at 593. Simply put,American Banana was not *408an act of state case; and whatever it said by way of dictum that might be relevant to the present case has notsurvived Sisal Sales.

Petitioners insist, however, that the policies underlying our act of state cases-international comity, respect forthe sovereignty of foreign nations on their own territory, and the avoidance of embarrassment to the ExecutiveBranch in its conduct of foreign relations-are implicated in the present case because, as the District Court found,a determination that Nigerian officials demanded and accepted a bribe would impugn or question the nobilityof a foreign nation's motivations, and would result in embarrassment to the sovereign or constitute

interference in the conduct of foreign policy of the United States. 659 F.Supp., at 1392-1393. The UnitedStates, as amicus curiae, favors the same approach to the act of state doctrine, though disagreeing withpetitioners as to the outcome it produces in the present case. We should not, the United States urges, attachdispositive significance to the fact that this suit involves only the motivation for, rather than the validity of, aforeign sovereign act, Brief for United States asAmicus Curiae 37, and should eschew any rigid formula for theresolution of act of state cases generally,id., at 9. In some future case, perhaps, litigation ... based on allegedcorruption in the award of contracts or other commercially oriented activities of foreign governments couldsufficiently touch on national nerves' that the act of state doctrine or related principles of abstention wouldappropriately be found to bar the suit,id., at 40 (quotingSabbatino, 376 U.S., at 428, 84 S.Ct., at 940), and weshould therefore resolve this case on the narrowest possible ground, viz., that the letter from the legal adviserto the District Court gives sufficient indication that, in the setting of this case, the act of state doctrine posesno bar to adjudication, ibid.FN*
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FN* Even if we agreed with the Government's fundamental approach, we would question itscharacterization of the legal adviser's letter as reflecting the absence of any policy objection to theadjudication. The letter, which is reprinted as an appendix to the opinion of the Court of Appeals, see847 F.2d 1052, 1067-1069 (CA3 1988), did not purport to say whether the State Department would likethe suit to proceed, but rather responded (correctly, as we hold today) to the question whether the actof state doctrine was applicable.

*409 These urgings are deceptively similar to what we said in Sabbatino, where we observed that sometimes,

even though the validity of the act of a foreign sovereign within its own territory is called into question, thepolicies underlying the act of state doctrine may not justify its application. We suggested that a sort of balancingapproach could be applied-the balance shifting against application of the doctrine, for example, if thegovernment that committed the challenged act of state is no longer in existence. 376 U.S., at 428, 84 S.Ct., at940. But what is appropriate in order to avoid unquestioning judicial acceptance of the acts of foreignsovereigns is not similarly appropriate for the quite opposite purpose of expanding judicial incapacities wheresuch acts are not directly (or even indirectly) involved. It is one thing to suggest, as we have, that the policiesunderlying the act of state doctrine should be considered in deciding whether, despite the doctrine's technicalavailability, it should nonetheless not be invoked; it is something quite different to suggest that those underlyingpolicies are a doctrine unto themselves, **707 justifying expansion of the act of state doctrine (or, as the UnitedStates puts it, unspecified related principles of abstention) into new and uncharted fields.

[2] The short of the matter is this: Courts in the United States have the power, and ordinarily the obligation, todecide cases and controversies properly presented to them. The act of state doctrine does not establish anexception for cases and controversies that may embarrass foreign governments, but merely requires that, in the

process of deciding, the acts of foreign sovereigns taken within their own jurisdictions shall be deemed valid.That doctrine has no application to the *410 present case because the validity of no foreign sovereign act is atissue.

The judgment of the Court of Appeals for the Third Circuit is affirmed.

It is so ordered.

U.S.N.J.,1990.W.S. Kirkpatrick & Co., Inc. v. Environmental Tectonics Corp., Intern.493 U.S. 400, 110 S.Ct. 701, 107 L.Ed.2d 816, 58 USLW 4140, 1990-1 Trade Cases P 68,894, RICOBus.Disp.Guide 7399

END OF DOCUMENT

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kirk patrick v. environmental tectonics

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