Appendix — Marcos v. Republic of Philippines
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Supierne Court, U.S,
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| MARL g8°
-1484°) j
No.
‘SS JOSEPH F. SPANIOL, J8
IN THE CLERK
Supreme Court of the United States ’
OCTOBER TERM, 1988
FERINAND MARCOS, IMELDA MARCOS, AND RAMON AZURIN,
x Petitioners,
REPUBLIC OF THE PHILIPPINES,
Respondent.
APPENDIX TO
PETITION FOR A WRIT OF CERTIORARI TO THE
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
RICHARD A. HIBEY
(Counsel of Record)
TIMOTHY M. BROAS
GORDON A. COFFEE
THOMAS P. STEINDLER
ANDERSON, HIBEY, NAUHEIM
& BLAIR
1708 New Hampshire Ave., N.W.
Washington, D.C. 20009
(202) 483-1900
JOHN J. BARTKO
BARTKO, WELSH, TARRANT
& MILLER
900 Front Street, Suite 300
San Francisco, CA 94111
Attorneys for Petitioners
Ferdinand and Imelda Marcos
and Ramon Azurin
WILSON - EPES PRINTING Co., INC. - 78S-O096 - WASHINGTON, D.C. 20001
INDEX TO APPENDIX
Opinion of the United States Court of Appeals for the
Ninth Cireuit in The Republic of the Philippines v.
Ferdinand E. Marcos, et al., 862 F.2d 1355 (9th Cir.
1988) (en banc)
Opinion of the United States Court of Appeals for the
Ninth Circuit in The Republic of the Philippines v.
Ferdinand E. Marcos, et al., 818 F.2d 1473 (9th Cir.
1987)
Order Issuing Preliminary Injunction by the United
States District Court for the Central District of Cali-
fornia, Civ. No. 86-3859-MRP (Gx), June 25, 1986....
Brief for the United States of America as Amicus
Curiae (submitted January 11, 1988) ..
Statutes
18 U.S.C.§ 1961...
USC 6290.....................
18 U.S.C. § 1963
18 U.S.C. § 1964
Page
la
APPENDIX
UNITED STATES COURT OF APPEALS
NINTH CIRCUIT
No. 86-6091
THE REPUBLIC OF THE PHILIPPINES,
Plaintiff-A ppellee,
Vv.
FERDINAND E. MARCOS, et al.,
Defendants-A ppellants,
Argued and Submitted Feb. 10, 1988
Decided Dec. 1, 1988
Special Concurrence, Dec. 2, 1988
Appeal from the United States District Court
for the Central District of California
Richard A. Hibey, Anderson, Hibey, Nauheim & Blair,
Washington, D.C., John J. Bartko, Bartko, Welsch, Tar-
rant & Miller, and Stephen Horn, Schmeltzer, Aptaker &
Sheppard, P.C., Washington, D.C., for defendants-appel-
lants Ferdinand E. Marcos, Imelda R. Marcos and Ramon
Azurin.
John J. Stumreiter, Rosenfeld, Meyer & Susman, Bev-
erly Hills, Cal. and Gerald Walpin, Rosenman, Colin,
2a
Freund, Lewis & Cohen, New York City, for defendants-
appellants Diosdado C. Ordonez and Ancor Holdings,
N.V.
Ronald L. Olson, Bradley S. Phillips, Richard B. Kend-
all. Munger, Tolles & Olson, Los Angeles, Cal., for plain-
tiff-appellee Republic of the Philippines.
Richard K. Willard, Asst. Atty. Gen., James M. Spears,
Deputy Asst. Atty. Gen., Robert C. Bonner, U.S. Atty.,
Robert E.. Kopp, John F. Cordes, and John P Schnitker,
Asst. U.S. Attys., Washington, D.C., for the amicus
curiae U.S.
Before BROWNING, Chief Judge, ANDERSON,”
SCHROEDER, FLETCHER, PREGERSON, ALARCON,
CANBY, NORRIS, BEEZER, BRUNETTI, and
NOONAN, Circuit Judges.
NOONAN, Circuit Judge:
The Republic of the Philippines (the Republic) brought
a civil suit against its former president, Ferdinand
Marcos, and his wife Imelda (the Marcoses), asserting
claims under the Racketeer Influenced and Corrupt Or-
ganizations Act (RICO), 18 U.S.C. $$ 1961 et seq., and
other applicable law. The district court on June 25, 1986
entered a pre'iminary injunction enjoining the Marcoses
from disposing of any of their assets save for the pay-
ment of attorney fees and normal living expenses. The
Marcoses appealed. A panel of this court reversed, 2-1.
818 F.2d 1473 (9th Cir.1987). We took the case en bane
and now affirm the district court.
Federal Jurisdiction
The Republic alleges that the Marcoses engaged in mail
fraud, wire fraud, and the transportation of stolen prop-
erty in the foreign or interstate commerce of the United
* Judge Anderson heard argument and participated in the dis-
cussion of this case, but died before the opinion was finally agreed
upon.
3a
States. The acts alleged are crimes under 18 U.S.C.
$$ 1341, 1343, and 2315. The Republic alleges that the
acts were repeated, forming a pattern of predicate acts
under RICO, 18 U.S.C. $1961, and thereby giving rise
to civil liability under RICO, 18 U.S.C. § 1964.
Contrary to the contention of the Marcoses, the Re-
public as a governmental body is a person within the
meaning of 18 U.S.C. § 1961(3). Illinois Department of
Revenue v. Phillips, 771 F.2d 312 (7th Cir.1985). The
foreign nature of the Republic does not deprive it of
statutory personhood. Cf. Pfizer, Inc. v. Government of
India, 434 U.S. 308, 98 S.Ct. 584, 54 L.Ed.2d 563 (1978).
Accordingly, the Republic has standing to assert the RICO
claims.
Contrary to the contention of the Marcoses, the com-
plaint, as interpreted by the district court, sufficiently
alleges a RICO offense. The Republic alleges that the
Marcoses and the cther defendants arranged for the in-
vestment in real estate in Beverly Hills, California of $4
million fraudulently obtained by the Marcoses; that the
Marcoses arranged for the creation of two bank accounts
in the name of Imelda Marcos at Lloyds Bank of Cali-
fornia totaling over $800,000 also fraudulently obtained
by the Marcoses; and that the Marcoses transported into
Hawaii money, jewels, and other property worth over $7
million also fraudulently obtained by them. Criminal con-
duct under RICO ‘forms a pattern if it embraces crimi-
nal acts that have the same or similar purposes, results,
participants, victims; or methods of commission, or other-
wise are interrelated by distinguishing characteristics
and are not isolated events.” Sedima, S.P.R.L. v. Imrex
Co., Inc., 473 U.S 479, 496 n. 14, 105 S.Ct. 3275, 3285,
n. 14, 87 L.Ed.2d 346 (quoting 18 U.S.C. § 3575(e)).
The purposes of the acts here alleged are the same-—to
invest and to conceal fraudulently-obtained booty. The
results are the same—the investment of tle booty. The
principals are the same—the Marcoses. The victim is
4a
the same—the Republic. The episodes are not isolated
events. They represent a plan and a practice of getting
the fruits of fraud out of the Philippines and into the
assumed safety of the United States. If proved, the alle-
gations show acts that form a pattern.
Contrary to the contention of the Marcoses, the com-
plaint as read by the district court also alleges a RICO
enterprise. A RICO enterprise has been found to consist
of ‘‘a group of individuals associated in fact for the
purpose of illegally trafficking in narcotics .. ., utilizing
the United States mail to defraud .. ., and corruptly
influencing . . . the outcome of state court proceedings.”
United Stutes v. Turkette, 452 U.S. 576, 579, 101 S.Ct.
2524, 2526, 69 L.Ed.2d 246 (1981). Here there is alleged
to be a group of individuals associated in fact for the
purpose of illegally investing the fruits of fraud and
illegally using the mails and wire and illegally transport-
ing in interstate commerce the fruits of the fraud.
The effect on the commerce of the United States of
engaging in mail or wire fraud or bringing stolen prop-
erty into the country is palpable. The Marcoses are
mistaken in arguing that such criminal acts have no con-
sequences for commerce to or in this country. The crimi-
nal enterprise which they are charged with conducting
consisted in operations taking place within the United
States. These operations had multiple effects on the do-
mestic and foreign commerce of this country. If the
operations were criminal, the operators incurred criminal
liability under our law. United States v. Stratton, 649
F.2d 1066, 1075 (5th Cir.1981) (appearance of out-of-
state litigants before court that was a criminal RICO
enterprise) ; United States v. Altomare, 625 F.2d 5 (4th
Cir.1980) (interstate telephone calls perpetuating RICO
enterprise affected interstate commerce). The Republic’s
allegations are sufficient to establish federal jurisdiction.
18 U.S.C. § 1964.
~
va
Pendent Jurisdiction
The gravamen of the Republic’s entire case is the
allegation that the Marcoses stole public money:
During his twenty years as President of the
Philippines, Mr. Marcos used his position of power
and authority to convert and cause to be converted,
to his use and that of his friends, family, and asso-
ciates, money, funds, and property belonging to the
Philippines and its people. Complaint, {12 (em-
phasis added).
This common allegation supports not only plaintiff’s
RICO claims but also the eight claims for conversion,
fraud and deceit, constructive fraud, constructive trust,
breach of implied contract, quiet title, accounting, and
subrogation. The claims for a constructive trust, to quiet
title, an accounting, and subrogation merely set forth
different forms of relief for the same underlying wrongs.
The Republic’s strategy of bringing suit in a number
of other jurisdictions is not decisive of the question
whether the claims are such that they would ordinarily
be tried in one judicial proceeding. The present location
of the sought-for funds in banks in various countries is
not determinative as to the underlying wrongs alleged in
the complaint. The claims brought in this suit would
ordinarily be tried in a single case. In both the RICO
and non-RICO claims, the Republic alleges that the Mar-
coses converted public funds while in office. The district
court concluded:
This Court has pendent jurisdiction over plaintiff’s
other claims under state and foreign law in that
such claims arise from a common nucleus of opera-
tive fact and are so intertwined with other matters
pending before the court as to make the exercise of
such jurisdiction over these claims appropriate.
6a
The district court was correct in asserting pendent
jurisdiction over these claims. They derive from “a com-
mon nucleus of operative fact” and are such that a plain-
tiff “would ordinarily be expected to try them all in
one judicial proceeding.” United Mine Workers v. Gibbs,
383 U.S. 715, 725, 86 S.Ct. 1130, 1138, 16 L.Ed.2d 218
(1966). The power of a federal court to deeide pendent
claims is “wide-ranging.” See Carnegie-Mellon Univ. v.
Cohill, ———U.S. , 108 S.Ct. 614, 618, 98 L.Ed.2d
720 (1988). The exercise of the power is discretionary
but ordinarily the power if it exists is exercised; only
exceptionally is the power not employed. See C. Wright,
A. Miller & E. Cooper 13B Federal Practice and Pro-
cedure § 3567.1 (1984 and 1988 Supp.).
The common nucleus of operative facts that binds the
RICO and non-RICO claims together is pleaded in para-
graph 12, which is incorporated by reference into each
claim for relief. To prove the predicates for RICO that
allegedly occurred in this country, the Repubite will have
to prove theft, the acceptance of bribes, extortion, con-
spiracy, and similar acts in the Marcoses’ conduct of the
government in the Philippines. For example, to prove
that stolen money was unlawfully transported in the
United States, the Republic will have to prove theft in
the Philippines. The operative facts necessary as part
of the proof of the RICO claim are also the facts neces-
sary to prove the theft. The RICO claims cannot be
proved without getting deeply into the pendent claims
and proving some or all of them. Because the acts
charged, if proved, support both the RICO and the non-
RICO claims, the district court has subject matter juris-
diction over all claims in the Republic’s complaint.
True, the pendent claims may involve more property
than that which entered into or affected the foreign or
domestic commerce of the United States. The dissent
appears to assume that jurisdiction over the pendent
claims cannot extend beyond this property. But that is
Fa
not the iaw. Properly pendent claims need not be for
the identical property involved in the federal! cause of
action. The pendent claims remain within the court’s
jurisdiction if the vital facts that must be proved as
predicates of the RICO claims are the same as those that
must be proved to establish the extortion, bribery, theft,
fraud, and conversions alleged by the pendent claims.
At “every stage of the proceeding” the district court
must exercise discretion as to the pendent claims. See
Carnegie-Melion Univ. v. Cohill, 108 S.Ct. at 618. In
light of a more fully developed record than that now
before this court, the district judge may conclude that
some or all of the pendent claims should be dismissed
notwithstanding our holding that the district court has
the power to assert. jurisdiction over those claims. Gibbs,
383 U.S. at 727, 86 S.Ct. at 1139. See also 3A J. Moore,
W. Taggert & J. Wicker, Moore’s Federal Practice
7 18.07[1.-3] at 18-36-37 (2d ed. 1987). As of the record
now before us, pendent jurisdiction exists and supports
an injunction based on the pendent claims.
Act of State and Political Question
3efore determining whether issuance of an injunction
was appropriate we consider two defenses which, if ac-
cepted, weuld block trial of the case: the Marcoses main-
tain, first, that their acts are insulated because they were
acts of state not reviewable by our courts; and second,
that any adjudication of these acts would involve the
investigation of political questions beyond our courts’
competence.
Acts of State. The classification of certain acts as
“acts of state’ with the consequence that their validity
will be treated as beyond judicial review is a pragmatic
device, not required by the nature of sovereign authority
and inconsistently applied in international law. Banco
Nacional de Cuba v. Sabbatino, 376 U.S. 398, 421-22,
84 S.Ct. 923, 936-37, 11 L.Ed2d 804 (1964). The pur-
8a
pose of the device is to keep the judiciary from embroil-
ing the courts and the country in the affairs of the
foreign nation whose acts are challenged. Minimally
viewed, the classification keeps a court from making pro-
nouncements on matters over which it has no power;
maximally interpreted, the classification prevents the
embarrassment of a court offending a foreign government
that is “extant at the time of suit.” Jd. at 428, 84 S.Ct.
at 940.
The “continuing vitality” of the doctrine depends on
“its capacity to reflect the proper distribution of func-
tions between the judicial and political branches of the
Government on matters bearing upon foreign relations.”
Id, at 427-28, 84 S.Ct. at 989-40. Consequently, there
are “constitutional underpinnings” to the classifica-
tion. Jd. at 423, 84 S.Ct. at 938. A court that passes
on the validity of an “act of state” intrudes into the
domain of the political branches. The proper application -
of the doctrine is illustrated by Occidental Petroleum
Corp. v. Buttes Gas & Oil Co., 331 F.Supp. 92 (C.D.Cal.
1971), aff'd per curiam, 461 F.2d 1261 (9th Cir.), cert.
denied, 409 U.S. 950, 93 S.Ct. 272, 34 L.Ed.2d 221
(1972).
As a practical tool for keeping the judicial branch
out of the conduct of foreign affairs, the classification of
“act of state’ is not a promise to the ruler of any foreign
country that his conduct, if challenged by his own coun-
try after his fall, may not become the subject of scrutiny
in our courts. No estoppel exists insulating a deposed
dictator from accounting. No guarantee has been granted
that immunity may be acquired by an ex-chief magistrate
invoking the magic words “act of state’ to cover his or
her past performance.
The classification might, it may be supposed, be used
to prevent judicial chailenge in our courts to many deeds
of a dictator in power, at least when it is apparent that
sustaining such challenge would bring our country into
a hostile confrontation with the dictator. Once deposed,
9a
the dictator will find it difficult to deploy the defense
successfully. The “balance of considerations” is shifted.
Sabbatino, 376 U.S. at 428, 84 S.Ct. at 940. A fortiori,
when a ruler’s former domain has turned against him
and seeks the recovery of what it claims he has stolen,
the classification has little or no applicability. The act of
state doctrine is supple, flexible, ad hoc. The doctrine is
meant to facilitate the foreign relations of the United
States, not to furnish the equivalent of sovereign immu-
nity to a deposed leader.
In the instant case the Marcoses offered no evidence
whatsover to support the classification of their acts as
acts of state. The burden of proving acts of state rested
upon them. Alfred Dunhill of London, Ine. v. Republic
of Cuba, 425 U.S. 682, 695, 96 S.Ct. 1854, 1861, 48
L.Ed.2d 301 (1976). They did not even undertake the
proof. The United States, invited by the court to address
this matter as an amicus, assures us that the Executive
does not at present see the applicability of this defense.
Brief of the United States of America as Amicus Curiae,
p. 11. The act of state doctrine, the Executive declares,
has “no bearing” on this case as it stands. As the doc-
trine is a pragmatic one, we cannot exclude the possibility
that, at some later point in the development of this liti-
gation, the Marcoses might produce evidence that would
warrant its application. On the present record, the de-
fense does not apply.
Political Questions. Bribetaking, theft, embezzlement,
extortion, fraud, and conspiracy to do these things are
all acts susceptible of concrete proofs that need not in-
volve political questions. The court, it is true, may have
to determine questions of Philippine law in determining
whether a given act was legal or illegal. But questions
of foreign law are not beyond the capacity of our courts.
See Zschernig v. Miller, 389 U.S. 429, 461, 88 S.Ct. 664,
681, 19 L.Ed.2d 683 (1968) (Harlan, J. concurring) ;
Fed.R.Civ.P. 44.1 (allowing consideration of foreign law
10a
materials). The court will be examining the acts of the
president of a country whose immediate political heritage
is from our own. Although sometimes criticized as a
ruler and at times invested with extraordinary powers,
Ferdinand Marcos does not appear to have had the au-
thority of an absolute autocrat. He was not the state,
but the head of state, bound by the laws that applied to
him. Our courts have had no difficulty in distinguishing
the legal acts of a deposed ruler from his acts for per-
sonal profit that lack a basis in law. As in the case of
the deposed Venezuelan ruler, Marcos Perez Jimenez, the
latter acts are as adjudicable and redressable as would be
a dictator’s act of rape. Jimenez v. Aristeguieta, 311
F.2d 547 (5th Cir.1962).
The Convenience of the Forum
The Marecoses maintain that the Republic’s action
should have been dismissed, even if the district court
had jurisdiction, on the ground of forum non conveniens.
They point to the foreign character of the plaintiff, the
nature of the Republic’s claims about the Marcoses’ con-
duct in office, and the fact that the court will be called
upon to decide questions of Philippine law. The incon-
venience of the forum was argued by the Marcoses to
the district court. But the court did not address the
argument. On the present record the district court did
not abuse its discretion in refusing to dismiss the Re-
publie’s action on forum non conveniens grounds before
issuing the preliminary injunction.
Injunction Rather Than Attachment
Fed.R.Civ.P. 64 makes available all remedies for the
seizure of property “in the manner provided by the law
of the state in which the district court is held.” The
~ Marcoses argue that the freeze of their assets is an at-
tachment and that California law permits attachment
only in connection with a claim_based upon a contract.
lla
Cal.Civ.Proe.Code § 483.010(¢c). The Marcoses are mis-
taken. While a freeze of assets has the effect of an
attachment, it is not an attachment. F.7T.C. v. H.N.
Singer, Inc., 668 F.2d 1107, 1112 (9th Cir.1982). The
court has power to preserve the status quo by equitable
means. A preliminary injunction is such a means.
F.T.C., 668 F.2d at 1112. 7
The Standard for Issuance of the Injunction
The issuance of the preliminary injunction was not an
abuse of ciscretion by the district court if that court
properly concluded that the Republic had shown the prob-
ability of suecess on the merits of its pendent claims and
the possibility of irreparable injury, or that the pendent
claims raised serious questions and the balance of hard-
ships tipped sharply in favor of the Republic. Hoopa
Valley Tribe v. Christie, 812 F.2d 1097, 1102 (9th Cir.
1987). “These are not two distinct tests, but rather the
opposite ends of a single ‘continuum in which the re-
quired showing of harm varies inversely with the re-
quired showing of meritoriousness.’” Rodeo Collection,
Ltd. v. West Seventh, 812 F.2d 1215, 1217 (9th Cir.
1987) (quoting Son Diego Committee Against Reqistra-
tion and the Draft v. Governing Board of the Grossmont
Union High School Dist., 790 F.2d 1471, 1473 n. 3 (9th
Cir.1986)). “The critical element in determining the test
to be applied is the relative hardship to the parties. If
the balance of harm tips decidedly toward the plaintiff,
then the plaintiff need not show as robust a likelihood of
success on the merits as when the balance tips less decid-
edly.” Benda v. Grand Lodge of Int'l Assoc. of Machin-
ists & Aerospace Workers, 584 F.2d 308, 315 (9th Cir.
1978), cert. dismissed, 441 U.S. 937, 99 S.Ct. 2065, 60
L.Ed.2d 667 (1979) (citation omitted).
“e
For the purposes of injunctive relief, “serious ques-
tions” refers to questions which cannot be resolved one
way or the other at the hearing on the injunction and
_ 12a
as to which the court perceives a need to preserve the
status quo lest one side prevent resolution of the ques-
tions or execution of any judgment by altering the status
quo. Serious questions are “substantial, difficult and
doubtful, as to make them a fair ground for litigation
and thus for more deliberative investigation.” Hamilton
Watch Co. v. Benrus Watch Co., 206 F.2d 738, 740 (2d
Cir.1952) (Frank, J.). Serious questions need not prom-
ise a certainty of success, nor even present a probability
of success, but must involve a “fair chance of success on
the merits.” National Wildlife Fed’n v. Coston, 773 F.2d
1513, 1517 (9th Cir.1985) (Duniway, J.). Applying
these principles and definitions to this case, we conclude
that the district court did not abuse its discretion in
gran‘ing the preliminary injunction.
The district court stated orally that “the hardship is
clearly on the side of the plaintiff.” The district court
also made the written finding that there was more than
a mere pessibility of irreparable harm; in fact, it con-
cluded that the Republic “would be irreparably injured if
[the injunction] were not issued.” (emphasis added).
The Marcoses have offered no evidence of any hardship
they would suffer if the injunction were issued. Indeed,
the district court stipulated in the injunction that the
Marcoses may use their assets to cover normal living
expenses and legal fees. Irreparable injury was weighed
against zero evidence of hardship. On this record, the
balance of hardships tipped decidedly in the Republic’s
favor.
The district court also concluded that the Republic had
a “substantial likelihood” of prevailing on the merits.
Although we do not read this as a finding of probability
of success, we do believe that it represents a finding that
the Republic has at least a fair chance of success, which
is all that is required. See Benda, 584 F.2d at 315. We
agree with the district court that the Republic has at
13a
least a fair chance of prevailing on the merits, including
on the merits of its constructive trust claim.
The Republic presented evidence that in February 1986
the Marcoses had transported from the Philippines to
Hawali $8.2 million worth of cash, negotiable instru-
ments, jewelry, and other property, allegedly derived
from the Marcoses’ wrongdoing in the Philippines. Fer-
dinand Marcos swore by affidavit that it had not been his
intention to go to Hawaii and that he had been taken
there involuntarily by the government of the United
States. But as he sought to recover from the United
States Customs all of these items he clearly intended to
introduce them into the United States. He used the
United States mail and telephone services for this pur-
pose.
The Republic also presented evidence that since at
least 1968 the Marcoses had a checking account at a
bank in Beverly Hills. California and that this account
was used to make payments of $200,000 to “William
Saunders” and $100,000 to “Jane Ryan.” The Republic
introduced evidence that these names were aliases under
which Ferdinand Marcos and Imelda Marcos acted. The
Republic presented evidence of the creation by the Mar-
coses in 1970 of a Lichtenstein entity entitled the “Sandy
Foundation,” which in effect was a trust to make invest-
ments for the benefit of the Marcoses and their children,
Imelda, Ferdinand, and Irene, and which was funded by
the Marcoses with an initial capital of 100,000 Swiss
frances. The Republic presented evidence that “Jane
Ryan” and “William Saunders” transferred their ac-
counts to this trust and that Credit Suisse, a Zurich
bank, was “the administering bank” of the trust. The
Republic presented evidence of correspondence by the
Marcoses as customers of that bank and the use by
Imelda Marcos of the alias of Jane Ryan in dealing with
that bank.
l4a
According to the Republic’s evidence, a code was
worked out for contacts between the Marcoses and the
trust. According to a copy of a memorandum signed by
Ferdinand Marcos, if he cabled “Happy Birthday” to the
bank, its Hong Kong representative, Ralph Klein, would
proceed to Manila and “contact him through Col]. Fabian
C. Ver.” (Colonel Ver is now General Ver, associated
with the Marcoses in power and in their flight from the
Philippines. )
In addition to this evidence of secretive dealings in
substantial sums of money in the course of which the
Marcoses used a bank in California, the Republic sub-
mitted a statement by the Minister of the Budget of the
Philippines as to the total salaries authorized to be paid
Ferdinand Marcos as -president from 1966 to 1985 and
Imelda Marcos as a minister of government from 1976
to 1985. The total authorized amount is P 2,288,750, in
dollars less than $800,000. The Republic submitted what
purports to be a balance sheet signed by Ferdinand
Mareos as part of a tax return stating his assets as of
December 31, 1966 as P 150,000. in dollars less than
$60,000. The Republic submitted the sworn deposition,
executed June 16, 1986, of Rafael Fernando, Representa-
tive and Coordinator on the West Coast of the United
States of the Presidential Commission on Good Govern-
ment of the Republic of the Philippines. Fernando de-
clares that Swiss bank authorities have documented to
the government of the Republic the existence of bank ac-
counts owned by Ferdinand Mareos in the amount of
$200 million and have reported to the Republic the exist-
ence of other accounts held for or on behalf of him in
the amount of approximately $1.3 billion.
The Marcoses’ clandestine dealings with Credit Suisse
and the Lichtenstein trust and the discrepancy between
the purported balance sheet of 1966 and the reported
assets of 1986, coupled with the reported authorized sal-
aries of the Mareoses as members of the government of
15a
the Republic, give rise to the inference that very large
sums of money were amassed by the Marcoses by the un-
lawful means alleged by the Republic. The inference
depends in part on the hearsay statements of Fernando.
It was within the discretion of the district court to ac-
cept this hearsay for purposes of deciding whether to
issue the preliminary injunction. Flynt Distrib. Co., Ince.
v. Harvey, 734 F.2d 1389, 1394 (9th Cir.1984) (“The
urgency of obtaining a preliminary injunction necessi-
tates a prompt determination and makes it difficult to
obtain affidavits from persons who would be competent
to testify at trial. The trial court may give even inad-
missible evidence some weight, when to do so serves the
purpose of preventing irreparable harm before trial.”) ;
see also K-2 Ski Co. v. Head Ski Co., 467 F.2d 1087,
1088 (9th Cir.1972) (trial court may consider allega-
tions in verified complaint in issuing preliminary injunc-
tion). No affidavits countering the inference were pre-
sented by the Marcoses. See K-2 Ski Co., 467 F.2d at
1089. The Republic’s case remains to be proved. The
Republic has put forward enough to show a fair chance
of succeeding with its proof.
The Scope of the Injunction
The injunction is directed against individuals, not
against property; it enjoins the Marcoses and their asso-
ciates from transferring certain assets wherever they are
located. Because the injunction operates in personam, not
in rem, there is no reason to be concerned about its terri-
torial reach. See, e.g., Steele v. Bulova Watch Co., 344
U.S. 280, 289, 73 S.Ct. 252, 257, 97 L.Ed. 319 (1952)
(district court “in exercising its equity powers may com-
mand persons properly before it to cease to perform acts
outside its territorial jurisdiction”) (citations omitted).
A court has the power to issue a preliminary injunction
to prevent a defendant from dissipating assets in order to
preserve the possibility of equitable remedies. See, e.g.,
16a
F.T.C. v. H.N. Singer, Inc., 668 F.2d 1107, 1112 (9th
Cir.1982) (preliminary injunction appropriate to pre-
serve the possibility of equitable remedies). The injunc-
tion here enjoins the defendants from secreting those as-
sets necessary to preserve the possibility of equitable re-
hef.
Although the gravamen of the complaint is that the
Marcoses converted public property to their own use, the
seventh claim for relief. which alleges a constructive
trust, states an equitable cause of action and seeks equi-
table relief: “|The Marcoses], by virtue of their posi-
tion as President of the Philippines and Governor of -
Manila, respectively, occupied positions of trust as to the
Philippines ind its people. [The Marcoses] violated said
trust by their numerous acts of conversion, fraud, deceit,
constructive fraud. civil conspiracy, acts of racketeering,
and other un'awful ects.” As the result of these asserted
violations of trust, the Mareoses acquired specific funds
and real property, ine'uding the accounts with L'oyds
Bank, the real property in Beverly Hills, the deposits
with the Swiss banks and the property brought into
Hawaii. Complaint, ©" 62-67. In granting the prelimi-
nary injunction, the district court specifieally found “that
the Philippines will be entitled to an accounting for. 2nd
to impose a constructive trust upon, the property sub-
ject to this Order.” The district court found the prelimi-
nary injunction necessary to preserve the possibility of
equitable relief. On this record, the district court did
not abuse its discretion in entering an injunction of this
scope.
The district court remains free to modify or dissolve
the preliminary injunction if warranted by developments
in this czse subsequent to the noticing of this appeal.
Lyng v. Northwest Indian Cemetery Protective Assoe..
—— US. ——. 108 SCt. 1319. 1330. 99 L.Fd.2d 534
(1988). See also 7 J. Moore. W. Taggert & J. Wicker.
Moore’s Federal Practice © 65.07 at 65-114 (2d ed. 1987).
a
l7a
In Summation. Jurisdiction to hear the Republic’s
claims and to enter the preliminary injunction exists. A
serious question of liability has been presented and the
Republic has a fair chance of success on the merits of
its case. The Marcoses have not presented any preclusive
defense. The scope of the injunction is justified. It was
imperative for the district court to preserve the status
quo lest the defendants prevent resolution of the case by
putting their property beyond the reach of the court.
Hardship to the Republic would have been great and
irreparable if the district court had not taken its pru-
dent, amply justified action to keep the Marcoses’ assets
from disappearing.
AFFIRMED.
SCHROEDER, Circuit Judge. with whom CANBY, Cir-
cuit Judge, joins concurring in part and dissenting in
part.
I join in the majority’s conclusion that there is a well-
pleaded RICO claim providing federal subject matter
jurisdiction. I agree further that the act of state doc-
trine is not a threshold bar to considering the activities
of the defendants during the time that Mr. Marcos was
the Philippine head of state. Those were the principal
issues that a majority of the three-judge panel consid-
ered and that we undertook to decide in this en bane
proceeding.
The injunction we review, however, was entered only
a week after this suit was filed, and the record before
us is minimal. It does not provide support for the ma-
jority’s resolution of the further issues it must reach,
without reasoned analysis, in order to uphold this injunc-
tion. I therefore dissent from the affirmance.
The injunction is based upon the district court’s exer-
cise of pendent jurisdiction, not federal question jurisdic-
18a
tion. It is based on a complaint alleging, in the most
sweeping of generalities, pendent claims of fraud and
conversion by the Marcoses over the course of twenty
years. The pendent claims are alleged to be violations of
as vet unspecified laws of as yet unspecified states and
countries. The district court’s injunction purports to
reach over a billion dollars worth of assets, the bulk of
which are located in Switzerland. See Republic of the
Philippines v. Marcos, 8i8 F.2d 1473, 1476 (9th Cir.
1987).
To affirm this injunction, the majority must hold
that the district court properly exercised pendent ju-
risdictional authority to reach all of the Mareoses’
property, wherever located. I cannot agree. The basis
for federal jurisdiction is contained in RICO allegations
of illegal activities concerning assets now loeated in the
United States. There has been no showing that these
claims arise in any way from the same allegedly wrong-
ful transactions through which the Marecoses acquired
other property located elsewhere. Nor does the record
disclose any reason why a court in California, as op-
posed to courts in the Philippines or Switzerland, should
decide claims to property stolen from the Philippines and
transported to Switzerland. I therefore part company
with the majority when it affirms on this record the dis-
triet court’s issuance of a preliminary injunction prevent-
ing the Mareoses from disposing of any assets anywhere
in the world.
Im my view the existence of pendent jurisdiction over
claims reaching all the Mareoses’ assets has not yet been
established. As explained more fully> below this injune-
tion should be vaeated and the matter remanded to the
district court for consideration of pendent jurisdiction
and other issues on the basis of a fuller record.
a
19a
BACKGROUND
The plaintiff sought an injunction to be entered solely
in the exercise of pendent jurisdiction because RICO does
not authorize injunctive relief. See Religious Technology
Center v. Wollersheim, 796 F.2d 1076, 1088-89 (9th Cir.
1986), cert. denied, 479 U.S. 1103, 107 S.Ct. 1336, 94
L.Ed.2d 187 (1987). RICO, however, does provide the
requisite federal question jurisdiction.
For the RICO predicate acts in violation of the laws
of the United States, the complaint alleged violations of
18 U.S.C. $§ 1341, 1343, 2314, and 2315. The alleged
racketeering activities essentially involve mail and wire
fraud and the importation of stolen goods into the United
States. The showing before the district court of the Mar-
coses’ actual holdings in the United States included the
Marcoses’ interests in California real estate, the exist-
ence of a bank account with a California bank, and the
transporting to Hawaii of $8.2 million in funds and
property.
The district court granted the injunction in conclusory
fashion, finding:
(1) That there is a substantial danger that, if this
Order were not issued, the parties against whom
this Order is directed would transfer or conceal!
funds, property, books and records, placing said items
beyond the Court’s process and recovery by the Phil-
ippines in this action.
(2) That the Philippines therefore would be ir-
reparably injured if this Order were not issued.
(3) That there is a substantial likelihood that the
Philippines will prevail in this action, and that the
Philippines will be entitled to an accounting for, and
to impose a constructive trust upon, the property
subject to this Order.
20a
When this court first considered this appeal, a frac-
tured three-judge panel held that the complaint should
have been dismissed in its entirety. A majority of the
panel held that the act of state doctrine prevented the
court from inquiring into the Marcoses’ activities during
ihe period in question. Marcos, 818 F.2d at 1489-90. Be-
cause a majority of the panel concluded that the act of
state doctrine prevented the court from adjudicating any
of the claims, the majority did not need to consider, and
did not address. the issues of pendent jurisdiction.
Judge Hall, in a separate concurring opinion, concluded
additionally a lack of subject matter ju-
risdiction because no RICO claim had been well pleaded.
Id. at 1490-91.
that there was
Judge Nelson dissented, disagreeing with the other
ing with respect to the act of state doetrine was incon-
sistent with existing Supreme Court and Ninth Circuit
authority. /d.-at~- 1492-95. We granted en banc review
because of that inconsistency, which was the principal
focus of the petition for rehearing and rehearing en bane
filed by the Government of the Philippines.
RiCO CLAIMS AND FEDERAL
QUESTION JURISDICTION
In defense of the panel’s decision that the complaint
must be dismissed in its entirety, the Marcoses have fo-
cused upon Judge Hall’s separate opinion that there was
no well-pleaded RICO claim and hence no federal juris-
diction. See id. at 1490-91. The Marcoses have urged
that in order to make out a claim under RICO, the com-
plaint would have to allege that there was an adverse
economic impuct upon the United States by virtue of the
d
re . ee . ;
l@lTendants COonauc
Zila
RICO, however, was aimed at the destructive effect of
organized criminal activity on our society. Its provisions
do not focus on any adverse effect of specific activity or:
the nation’s GNP. Its history emphasizes the adverse
consequences of organized crime on our democratic proc-
esses, our domestic security and our general welfare, in-
cluding but not limited to the economic sysiem. See
RICO Statement of Findings and Purpose, Pub.L. No.
91-452, 84 Stat. 922 (1970), 91st Cong., 2d Sess., re-
printed in 1970 U.S. Code Cong. & Admin.News 1073.
The Supreme Court has stated:
RICO is to be read broadly. This is the lesson not
only of Congress’ self-conscious!y expansive language
and overall-approach, ... but also of its express
admonition that RICO is to “be liberally construed
to effec.uate its remedia! purposes.” ... RICO was
an aggressive initiative to supp'ement o!d remedies
and deve'op new methods for fighting crime.
Sedima, S.P.R.L. v. Imrex Co., Inc., 473 U.S. 479, 497-
105 $.Ct. 3275, 3286, 87 L.Ed.2d 346 (1985): see also
Russello v. United States, 464 U.S. 16, 26, 104 S.Ct. 296,
302, 78 L.Ed.2d 17 (1983) (*jtjhe legislative history
clearly demonstrates that the RICO statute Was intended
to provide new weapons of unprecedented scope for an
assault upon organized crime and its economic roots”)
Whi it RICO does rem lire is “a pattern of racketeering
activity.”” 18 U.S.C. < 1962. By definition, “racketeering
activity’ necessitates a viclation of one of our state or
federal laws. 18 U.S.C. sigperiee Federal RICO jurisdic-
tion thus attaches only to those activities that allegedly
violate our domestic sags
In this case, in Count One of the Complaint, the plain-
iif alleges that the Mareoses engaged in mail und wire
fraud, and impor ation of sto’en properiy into the Unite ed
States In violation of 18 U.S.C. $$ 1341, 1343, 2314, 2315.
In engaging in these activities, the plaintiff alleges that
22a
the Muarcoses were conducting a RICO enterprise as part
of an association in fact with the other defendants. These
allegations, on their face at least, would survive a motion
to dismiss for lack of subject matter jurisdiction. I there-
fore agree that there is a RICO basis for federal subject
matter jurisdiction.
Finding a basis for federal question jurisdiction is but
a first step, however, in reviewing the propriety of this
injunction. The claims on which this injunction rests are
pleaded as claims pendent to the RICO claims. The next
step is thus to consider whether the relationship between
the pendent claims and the federal claims are sufficiently
close to permit the district court to assume jurisdiction
over pendent claims reaching the Marcoses’ worldwide
holdings. See United Mine Workers v. Gibbs, 383 U.S.
715, 725, 86 S.Ct. 1130, 1188, 16 L.Ed.2d 218 (1966).
THE INJUNCTION AND PENDENT JURSIDICTION
In holding that the district court had pendent juris-
diction over claims to the Marcoses’ assets wherever lo-
cated in the world, the majority fails to appreciate that
pendent jurisdiction can derive only when there is a
sufficient factual connection between the activities giving
rise to the pendent claims and the activities giving rise to
the federal claims. In this case, such pendent jurisdic-
tion should properly derive only from activities directly
related to the alleged RICO violations of United States
law. These comprise the alleged fraudulent dealings in
this country and illegal importation of assets into the
United States. It is not enough to the majority to charac-
terize all the claims as involving criminal misconduct.
See majority op. at 1359-1360.
Plaintiff claims the assets now in the United-States are
traceable to thefts of assets mghtfully belonging to the
people of the Philippines. There may well be a sufficient
factual nexus to sustain pendent jurisdiction for claims
arising from the original wrongful appropriations of the
————ooEOEeEeEeEeEeEee
23a
property now found in this country. This is because the
property is the same. No such factual link as yet exists
for the pendent claims to property transferred from the
Philippines to other countries.
It is an elementary legal principle that federal courts
are courts of limited jurisdiction. There are constitu-
tional restraints on their exercise of jurisdiction. The
Constitution restricts federal courts’ jurisdiction to
claims “arising under [the] Constitution, the Laws of
the United States, and Treaties made, or which shall be
made, under their Authority.” U.S. Const., art. III, § 2.
When a plaintiff pleads a federal claim within a district
court’s federal subject matter jurisdiction, a_ plaintiff
may not automatically bring any other claim against
the same defendant. Subject matter jurisdiction of non-
federal claims, under the judicially-created doctrine of
pendent jurisdiction, depends upon the relationship be-
tween those claims and the federal claims.
The Supreme Court initially set out the concept under-
lying pendent jurisdiction in 1824 in Osborn v. Bank of
the United States, 22 U.S. (9 Wheat.) 738, 6 L.Ed. 204
(1824). There, the Court stated that
when a question to which the judicial power of the
Union is extended by the constitution, forms an in-
gredient of the criginal cause, it is in the power of
of congress to give the Circuit Courts jurisdiction
of that cause, although other questions of fact or of
law may be invoived in it.
Id. at 823. The Court subsequently expanded the Osborn
doctrine in Siler v. Louisville & Nashville R.R. Co., 2138
U.S. 175, 29 S.Ct. 451, 53 L.Ed 753 (1909), then nar-
rowed pendent jurisdiction’s scope in Hurn v. Oursler,
289 U.S. 238, 53 S.Ct. 586, 77 L.Ed. 1148 (1933).
Finally, more than two decades ago, the Court clarified
the scope of pendent jurisdiction in United Mine Workers
v. Gibbs, 383 U.S. 715, 86 S.Ct. 1130, 16 L.Ed.2d 218
(1966).
24a
In Gibbs, a unanimous Court rejected Hura as “un-
necessarily grudging,” id at 725, 86 S.Ct. at 1138, and
adopted a two-part test resting on considerations of
power and discretion. In evaluating a federal court’s
power to hear a pendent claim, the Court stated that:
[plendent jurisdiction, in the sense of judicial power,
exists whenever there is a claim “arising under [the]
Constitution, the Laws of the United States, and
Treaties made, or which shall be made, under their
Authority ...,” U.S. Const., Art. III, § 2, and the
relationship between that claim and the state claim
permits the conclusion that the entire action before
the court comprises but one constitutional ‘case.’
The federal claim must have substance sufficient to
confer subject matter jurisdiction on the court... .
The state and federal claims must derive from a
common nucleus of operative fact. But if, considered
without regard to their federal or state character, a
plaintiff’s claims are such that he would ordinarily
be expected to try them all in one judical proceeding,
then, assuming substantiality of the federal issues,
there is power in federal courts to hear the whole.
Id.
Thus, federal claims and pendent claims must. all
derive from a “common nucleus of operative fact.” They
must also be the sort that would ordinarily be tried in
“one judicial proceeding.” 7d. The majority opinion does
not analyze the pendent claims. Instead, it merely an-
nounces that the pendent claims arose from a nucleus of
operative fact common to the RICO claims. Majority op.
at 1399.
In reviewing the entry of the preliminary injunction,
we should consider the nature of the asserted pendent
jurisdiction and address the two jurisdictional issues
that Gibbs requires courts to address when dealing with
pendent claims.
25a
The first question, therefore, is whether the RICO
claims and all of the pendent claims arise from a “com-
mon nucleaus of operative fact.” They do not. The RICO
claims of necessity have to do with the defendants’ activi-
ties that violated the criminal laws of the United States.
The pendent claims-are not limited to those activities and
reach property that has not been shown to have any con-
nection with the United States itself or violations of our
law.
Upholding pendent jurisdiction in such circumstances
is thus contrary to the teaching of decisions following
Gibbs that have focused on the nexus between events
underlying the federal cause of action and those under-
lying pendent state causes of action. See, e.g., Finn v.
Gunter, 722 F.2d 711, 713 (11th Cir.1984) (finding
pendent jurisdiction) ; PAAC v. Rizzo, 502 F.2d 306, 312-
13 (3d Cir.1974), cert. denied, 419 U.S. 1108, 95 S.Ct.
780, 42 L.Ed.2d 804 (1975) (no pendent jurisdiction) ;
see also C, Wright, A. Miller & E. Cooper, 13B Federal
Practice and Procedure § 3567.1 (1984). Our circuit
also evaluates pendent claims under the nexus test. See,
e.g., Klaus v. Hi-Shear Corp., 528 F.2d 225, 231 (9th
Cir.1975). The plaintiffs have provided us with no ex-
planation of how the pendent claims are related to the
RICO claims. The only factual connection between all
the claims of wrongdoing in this case appears to be a
common plaintiff and common defendants. Under Gibbs
and the constitutional restraints on the exercise of power
by the federal judiciary in Article III, that is not suffi-
cient.
Moreover, even assuming there is a common nexus of
fact reaching all the Marcoses’ assets, pendent jurisdic-
tion would exist only as to the claims that would ordi-
narily be tried in one judicial proceeding. Gibbs, 383
U.S. at 725, 86 S.Ct. at 1138. These are not such claims.
The RICO claims allege violations of the United States’
criminal laws through activities in this country. ‘The
OO eeOOooeee
26a
pendent claims, on the other hand, encompass allegations
of fraud and conversion stemming from the Marcoses’
actions in the Philippines spanning a twenty-year period.
Further, the bulk of the property claimed, according to
the complaint, is located in Switzerland. The claims
against the Marcoses are in fact already the subject of
multiple judicial proceedings. See, e.g., Republic of the
Philippines v. Marcos, litigation in the Southern District
of New York, 86 Civ. 2294 (PNL), and Republic of the
Philippines v. Marcos, litigation in the District of Hawaii,
No. CV-86-0155 HMF. The plaintiff cites no case re-
motely similar in scope to this case. The claims here are
not those ordinarily tried in one judicial proceeding.
ACT OF STATE DOCTRINE
The majority of our three-judge panel concluded that
the act of state doctrine bars consideration of the plain-
tiffs’ claims. I agree with the majority of this en banc
court that such a holding is not appropriate on this
record. I do not agree with the majority, however, that
this injunction can be affirmed without any regard to the
act of state doctrine.
The panel majority’s use of the act of state doctrine as
a threshold bar in the circumstances of this case is not
consistent with the development of that doctrine under
Supreme Court authority. See, e.g., Alfred Dunhill of
London, Ine. ve. Cuba, 425 U.S. 682, 96 S.Ct. 1854, 48
L.iéd.2d 3801 (1976); Banco Nacional de Cuba v. Sabha-
tino, 876 U.S. 398, 84 S.Ct. 923, 11 L.Ed.2d 804 (1964).
We have expressly stated that the act of state doctrine
is not jurisdictional. See Jnternational Association of
Machinists and Aerospace Workers v. OPEC, 649 F.2d
sod, 1359 (9th Cir.1981), cert. denied, 454 U.S. 1163,
102 8.Ct. 10386, 71 L.Ed.2d 319 (1982); Timberlane
Lumber Co. v. Bank of America, 549 F.2d 597, 602. (9th
Cir.1976), cert. denied, 472 U.S. 1032, 105 S.Ct. 3514,
S7 L.ed.2d 643 (1985). Rather, the doctrine involves the
ata
judiciary’s prudential decision to refrain from adjudicat-
ing the legality of a foreign sovereign’s public acts that
were committed within its own territory. See OPEC, 649
F.2d at 1359: see also Sabbatino, 376 U.S. at 401, 84
S.Ct. at 926. The Supreme Court, in addressing the act
of state doctrine, has stated:
“very sovereign state is bound to respect the inde-
pendence of every other sovereign state, and the
courts of one country will not sit in judgment on the
acts of the government of another, done within its
own territory. Redress of grievances by reason of
such acts must be obtained through the means open
the be availed of by sovereign powers as between
themselves.
Sabbatino, 376 U.S. at 416, 84 S.Ct. at 934 (quoting
Underhill v. Hernandez, 168 U.S. 250, 252, 18 S.Ct. 83,
84, 42 L.Ed. 456 (1897) ).
The act of state doctrine “expresses the strong sense
of the Judicial Branch that its engagement in the task
of passing on the validity of foreign acts of state may.
hinder rather than further this country’s pursuit of goals
both for itself and for the community of nations as a
whole in the international sphere.” Sabbatino, 376 U.S.
at 423, 84 S.Ct. at 938. The Court further elaborated
that the doct»*"e involves separation of powers:
[The doctrine’s| continuing vitality depends on its
capacity to reflect the proper distribution of func-
tions between the judicial and political branches of
the Government on matters bearing upon foreign
affairs. . . . [Slome aspects of international law
touch much more sharply on national nerves that do
others; the less important the implications of an
issue are for our foreign relations, the weaker the
justification for exclusivity in the political branches.
... |Wle decide not only that the Judicial Branch
will not examine the validity of a taking of property
= —
—_— i. a awe”
28a
within its own territory by a foreign sovereign gov-
ernment, extant and recognized by this country at
the time of suit.
Id. at (27-28, 848.Ct. at 940.
However, these eonsiderations are less eompelling in
the sifuntion before us, where the foreign government
has itself invoked our jurisdiction, and the challenged
actions involve a government no longer in power. In
Sabbuiine, the Supreme Court observed that, [t]he bal-
ance of relevant considerations may also be shifted if the
government Which perpetrated the challenged act of state
is no Joneerw in existence... for the political interest
ot this country may, as a result, be measurably altered.”
876 US. at 428, 84 S.Ct. at 940. “Moreover, the act of
aie doctrine refleets respect for foreign states, so that
when a state eomes into our courts and asks that our
courts serutinize its actions, the justification for applica-
tion of the doctrine may well be significantly weaker.”
Pepublic of the Philippines v. Marcos, 806 F.2d 344, 309
Further, the Supreme Court has noted that for doctrine
to apply the acts in question must have involved public
ts of the sovereign. The Court stated that in each of
its aet of state decisions, the Iacts were sufficient to
le ) rate (née
the conduct in question was the public act of those
ith authority to exercise sovereign powers and was
entitled to respect in our courts. [H]ere, no statute,
decree, order, or resolution of the Cuban Government
itself was offered in evidence indicating that Cuba
had repudiated its obligations in general or any class
hereof or that it had as a sovereign matter deter-
mined to contiseate the amounts due three foreign
nnorters
Alfred Dunhill, 425 U.S. at 694-99, 96 S.Ct. at 1861
29a
Accordingly, the courts have insisted that the act of
state doctrine precludes review of public acts of the
sovereign. See, e.g., Marcos, 806 F.2d at 358 (“|tlhat
the acts must be public acts of the sovereign has been
repeatedly affirmed’) (emhasis in original) ; Filartiga v.
Pena-Irala, 630 F.2d 876, 889 (2d Cir.1980) (“we doubt
whether action by a state official in violation of the
Constitution and laws of the Republic of Paraguay, and
wholly unratified by that nation’s government, could
properly be characterized as an act of state”); Arango
v. Guzman Travel Advisors Corp., 621 F.2d 1371, 1380
(5th Cir. 1980) (“{t]he act of state doctrine only precludes
judicial inquiry into the legality, validity, and propriety
of the acts and motivations of foreign sovereigns acting in
their governmental roles within their own boundaries”’) ;
Jiminez v. Aristequieta, 311 F.2d 547, 557 (5th Cir.
1962) (“judicial authorities cannot review the acts done
by a sovereign in his own territory to determine illegal-
itv’): Sharon « Time, Inc., 599 F.Supp. 538, 544 (S.D.
N.Y.1984) (‘“{t]he doctrine is limited to laws, decrees,
decisions, seizures, and other officially authorized ‘public
acts’): see also Restatement (Second) of Foreign Re-
lations Law $41 (1965) ‘(doetrine involves refraining
“for examining the validity of an act of a foreign state
hy which that state has exercised its jurisdiction to give
effect to its public interest”).
As the dissenting opinion of Judge Nelson quite rightly
pointed out, the act of state doctrine cannot bar the plain-
tiff’s action at this stage in the proceedings due to the
distinction between the official acts and the private con-
duct of a former head of state. As Judge Nelson stated:
Mareos and his agents no doubt exercised broad
power, especially after the imposition of martial law
in 1972. But the appropriate inquiry is not te invoke
the talismanie label “dictator.” The district court
should determine which of the challenged acts were
official and which were not. Only by doing so can the
30a
court determine the extent to which the act of state
doctrine may apply.
SIS F.2d at 1494-95.
At this point, no determinations have been made re-
garding the capacity in which the Marcoses were acting
when the alleged unlawful conduct occurred. Accordingly,
the original panel majority erred in finding that, at this
stage of the litigation, the act of state doctrine bars ad-
judieation of the bulk of the Philippine government’s
pendent claims.
The majority decision here, however, goes much fur-
ther. It declares that the injunction ean be affirmed with-
out regard to the act of state doctrine. In my view, we
should instead instruct the district court to consider to
what extent, 1f any, the doctrine applies in the circum-
stunees of this case, and on the basis of the record which
has developed more fully during the pendency of this in-
terlocutory appeal. Untilsuch consideration can be given,
an injunction of this breadth is not appropriate.
This en bane court requested the amicus views of the
Department of State on the act of state issues. Its brief
eoneludes that the application of the act of state doctrine
at this stage is speculative and the injunction premature.
The majority’s reliance upon the position of the United
States as support for its holding is wholly misplaced. The
government urges that an injunction should not have been
entered on the basis of this record. The government
amicus curiae brief states in appropriate context as
lhe reeord before the district court. which
Sa ae er eee, ae mee 7 ere, Oa Mere S ee
Inciude anv detauled speeineation of tne Tactual odasis
aA ee Laced
. - i. ‘ WV . i . = “ . = bed
for the bulk of the nonfederal claims. did not make
;t ~7}5] 1WwpHN ¢ annal«eava tha avtant + ae
li peassldoie even TO analvze tne eXtent tO whnien tnose
“ar ) } ,
,7 a *“¥ “cy . . . \ *,) > > ‘3 ?
claims are properiv belore the court. ...
4
>
—"
ae
~~
Even assuming jurisdiction, it is not clear at this
stage that the district court should, as a prudential
matter, undertake to adjudicate the bulk of the non-
federal claims. The court’s capacity to do so fairly
and expeditiously and without offending the sensibil-
itv of other nations cannot be resolved on this record.
Adjudication in this district court may turn out to be
barred by considerations of international comity and
forum ron ecorvverntens,
The act of state doctrine seems to us to have little
or no bearing on this case at this stage of its de-
velopment. The doctrine provides, in general, that
the validity of specific acts of a foreign sovereign is
not subject to challenge in our courts; the circum-
stances of a particular case may, however, make that
general principle inapplicable. On the present record,
it is not clear that any act of state—an act of a
sovereign within its territorial jurisdiction on mat-
ters pertaining to its governmental sovereignty—is
involved in this case. Nor is it clear that the case
would require an adjudication of the validity of such
an act, without which the case could not fairly pro-
ceed. Under these circumstances, the bearing, if any,
of the act of state doctrine on this case should be
determined only after further development of the
case on the merits.
Amicus brief at 11-12.
The United States’ views are wholly in accord with
those expressed in this dissent and are in conflict with
the majority.
a
a
An
ond
CONCLUSION
This injunction is unprecedented in its breadth. To
decide the merits of the pendent claims, the district court
would have to unravel all of the Marcoses’ financial trans-
actions over a long period of time and over much of the
globe. It would take a corps of historians years to accom-
plish the task. We are not yet told why a single district
judge in California should undertake it.
I would vacate the injunction and remand the matter
to the district court for further consideration of the
appropriate scope of a preliminary injunction.
FLETCHER, Circuit Judge, concurring specially in
Judge SCHROEDER’s concurring and dissenting opinion:
[I concur fully in the following portions of Judge
Schroeder’s opinion: its discussion of the basis for find-
ing jurisdiction based on a well-pleaded RICO claim; its
discussion of the basis for concluding that the act of state
doctrine is not a prudential bar at this stage of the pro-
ceerlings in this case.
I concur only in its conclusion that the injunction
should be vacated and remanded for further consideration
in that I do not agree with its restrictive view of pendent
jurisdiction ‘by the same token, I cannot agree with the
majority’s expansive approach). Also, I would stay the
vacation of the injunction for a reasonable period of time
to allow the district court to reconsider the injunction
and its scope in light of the current state of the record.
29
ov
oa
UNITED STATES COURT OF APPEALS
NINTH CIRCUIT
Nos. 86-6091, 86-6093
THE REPUBLIC OF THE PHILIPPINES,
Pla inti ff A ppe lee,
FERDINAND E. MARCOS, IMELDA R. MARCOS,
RAMON AZURIN, DIOSDADO C. ORDONEZ and
ANCOR HOLDINGS, N.V..
Defendants A ppe llants.
Argued and Submitted Oct. 3, 1986
Decided June 4, 1987
As Amended June 24, 1987
Appeal from the United States District Court
for the Central District of California
Ronald L. Olson, Richard B. Kendall, Los Angeles.
Cal., for plaintiff /appellee.
Gerald Walpin, Lawrence G. Golde, Dorothy Heyl, New
York City, Richard A. Hibey, Washington, D.C., for
Sor
‘ > ‘ ‘ el
defendants ‘appellants.
1}
Before NELSON, HALL and KOZINSKI, Circuit
J udges.
_—_
|
34a
KOZINSKI, Circuit Judge.
We review a preliminary injunction entered against
the former president of the Philippines, his wife, several
of their associates, corporations allegedly controlled by
some or all of them, and a bank where Mrs. Marcos has
an account.
Facts
A. Background
On February 7, 1986, a special presidential election was
held in the Philippines. There were allegations of massive
fraud against the existing government and outbreaks of
violence against these supporting the opposition. The
precise vote count may never be known, but the official
tabulation, which showed an overwhelming victory for
Ferdinand Marcos, was rejected by the Philippine people.
On February 25, 1986, realizing perhaps that his regime
was nearing its end, Mareos and his wife left. His suc-
cessor, President Corazon Aquino, was almost immedi-
ately recognized by our paige an as the legitimate
leader of the Philippines. N.Y. Times, Feb. 26, 1986, at
When the Marecoses arrived in Hawaii, they brought
along numerous crates filled with currency, jewels, pre-
cious metals and negotiable instruments. These crates
were impounded by the United States Customs Service.
Litigation began. On el aaes 28, the Central Bank of
the Philippines sued in the United States District Court
for the District of Hawaii, seeking the return of 22 crates
full of Philippine currency. On March 13, the Marcoses’
agents petitioned for a writ of mandamus against the
Commissioner of Customs, seeking the release of all the
erates. On March 21, the Central Bank sued for the
return of all the crates or their monetary equivalent.
All these-actions were consolidated in Hawaii. The man-
damus suit against the Commissioner of Customs was
: , - : ‘ , «a ; a
decided, On an expedited Dasls, against ne (ommissioner,
35a
then reversed by another panel of this court. Azurin v.
Von Raab, 893 F.2d 993 (9th Cir. 1986).
Assets allegedly belonging to the Marcoses, or held for
their benefit, began to turn up around the world. The
Republic of the Philippines (the Republic) has begun
litigation in Switzerland, state and federal courts in
California, and federal courts in New York, New Jersey
and Texas. In each case, the Republic is trying to recover
or freeze specific assets that it regards as property of the
Philippines improperly possessed or controlled by the
Marcoses.
B. The Complaint
The complaint in this case was filed on June 16, 1986.
Unlike the eases filed in other jurisdictions, e.g., Republic
of the Philippines v. Marcos, 806 F.2d 344, 361 (2d Cir.
196), this one does not simply seek the recovery or
freezing of specific property. Instead, it alleges that dur-
ing his tenure as president of the Philippines, Marcos
committed depredations that enabled him to gain enor-
mous riches at the expense of the Republic and its citizens.
Raising various federal and state law claims, the Republic
seeks to have all or part of this_wealth returned; it also
seeks $50 billion in punitive damages.
The thrust of the Republic’s claim is that the Marcoses
abused their authority, depriving the Philippines and its
people of wealth that is rightfully theirs. Paragraph 12
of the complaint charges that ‘Mr. Marcos used his posi-
tion of power and authority to convert and cause to be
converted, to his use and that of his friends, family, and
associates, money, funds, and property belonging to the
Philippines and its people.” This allegation is incorporated
into, and forms the basis of, every claim for relief in
]
the complaint. In addition, plointiff alleges as follows:
Tl|he Philippines existed as a sovereign government
and thus con-tituted a RICO “enterprise” .... De-
36a
fendants conducted or participated . . . in the conduct
of the affairs of the Philippines through a pattern of
racketeering activity ... [Complaint {§ 28, 29(a).]
Mr. Marcos represented on countless occasions to the
Philippines and its people that he was governing and
would govern fairly and honestly, pursuant to his
oath of office and the Constitution and Laws of the
Philippines. He further made numerous and frequent
declarations to his people that he had never taken
money, property, or funds belonging to the Philip-
pines or its people for his own personal use, nor that
of his friends, family and associates. [J/d. § 49.]
Mrs. Marcos [as Governor of Manila] made similar
representations of honesty, integrity and willingness
to act within and not above the laws to the people of
the Philippines residing in Manila. |J/d. { 50.}
|The Marcoses}] intended that the Philippines and its
people rely on these misrepresentations and thereby
permit Mr. and Mrs. Mareos to remain in power and
positions of authority. [/d. § 51.}
They further intended that the people of the Philip-
pines would be deceived and not realize that Mr. and
Mrs. Marcos, and their accomplices, family, and asso-
ciates were plundering the wealth of the country to
envich themselves at the expense of the Philippines
and its people. [{/d. |
Plaintiff [the Republic] relied to its detriment on
the representations of Mr. and Mrs. Marcos, and
their accomplices, by permitting them to remain in
positions of power and authority for twenty years
and by allowing, through ignorance, the plunder of
the country. |/d. at © 52.]--Mr. Mareos as President,
1 Mrs. Marcos as Governor of Manila, occupied
positions of trust and confidence as to the govern-
ment and people of the Philippimes. [/d. at © 57.]
———eEEEEEE———EEEe
ola
Mr. and Mrs. Marcos breached that trust and con-
fidence by committing numerous acts of fraud, deceit,
conversion, civil conspiracy, acts of racketeering, and
other unlawful acts [and that as a consequence
thereof plaintiff] permitted them to remain in posi-
tions of power and to conduct the affairs of the
Philippines virtually unchecked. [J/d. {§ 58-59.]
Mr. and Mrs. Marcos, by virtue of their position
[sic] as President of the Philippines and Governor
of Manila, respectively, occupied positions of trust as
to the Philippines and its people. [J/d. § 62.1
[Before] Mr. Marcos assumed the office of President
of the Philippines... he took the Oath of Office. ...
By accepting the duties and obligations imposed by
the oath, in consideration for the remuneration
provided by Philippine law, Mr. Marcos entered into
an implied contract with the Philippine government
to use the power of the Presidency according to law,
in good faith, and not for personal aggrandizement.
[I[d. ©" 71-72. |
The complaint also alleges that during Marcos’ rule,
he and his wife converted and caused to be converted
property worth $1.55 billion belonging to the Philippine
government and its citizens. Most of this, approximately
$1.5 billion, allegedly went into Swiss bank accounts;
four million dollars went to buy a house in Beverly Hills;
some $800,000 went into two bank accounts at Lloyds
Bank in California; and property worth $7 million is
in the Hawaii crates.
Only Ferdinand and Imelda Marcos are charged with
having participated in all of these transactions. Defend-
ants Ramon Azurin and Gregorio Araneta are alleged to
have been the Marcoses’ agents for bringing the crates of
money and jewelry into Hawaii. Defendants Antonio
Floriendo, Diosdado Ordonez, Calno Holdings N.V., Krodo
Properties N.V., and Al Djebel Corp. (collectively the
b
por st
, 38a
,
-
f
“minor defendants”) participated only in the acquisition
and holding of the Beverly Hills property. Lloyds Bank
was named as a defendant only because it held the two
accounts in the name of Mrs. Marcos. There are no
specific allegations of wrongdoing against Ancor Holdings,
Ine.
On this foundation, the Republic strives to build eleven
claims. Only the first three, based on the Racketeer In-
fluenced and Corrupt Organizations Act (RICO), 18
U.S.C. $$ 1961-1968 (1982), are grounded on federal law;
the remainder are pendent. The first RICO claim charges
the Marcoses and the minor defendants with conducting a
RICO enterprise, consisting either of the Philippine gov-
ernment itself or, alternatively, of an association-in-fact
made up of the defendants with an existence apart from
the racketeering activity in which they allegedly engaged.
The specific activities alleged are: (a) the transfer, by
mail and wire, of converted funds, which the Republic
claims amounted to mail or wire fraud; (b) the trans-
portation of the crates to Hawaii, which the Republic
claims was the knowing transportation of stolen goods in
foreign commerce; (c) the acquisition of the Beverly Hills
property by Calno (later transferred to Krodo and Al
Djebel) with funds that the Republic claims were stolen,
and so known to be by all the defendants involved; (d)
the knowing concealment of stolen goods moved in foreign
commerce; and ‘e) the sale of a deed of trust to the
Beveriy Hills property (part of Calno’s disposition of the
property) knowing that the deed was stolen or taken by
fraud.
The second federal claim charges investments of funds
produced by racketeering into two “enterprises”: the
Beverly Hills property and the Lloyds Bank accounts.
_The third claim alleges a conspiracy among the defend-
ants to conduct the RICO enterprise and invest the funds.
The remainder of the complaint propounds various
state law theories of recovery on the same allegations of
39a
fact. They include, in particular, requests that the court
impose a constructive trust on the disputed assets and
require an accounting of the defendants.
C. District Court Proceedings
The Republic moved for a preliminary injunction to
prevent the transfer of property held anywhere in the
world by or on behalf of the Marcoses. On June 25,
1986, the district court granted the injunction. It held
that RICO established a basis for federal] jurisdiction and
the pendent causes of action entitled the Republic to an
injunction. The court based the preliminary injunction
on the pendent claims for constructive trust and account-
ing, finding that the Republic had a substantial likelihood
of prevailing. It also found that the Marcoses’ alleged
propensity to move assets would irreparably harm the
Republic if the injunction were not granted. The Re-
public had made no attempt to win an attachment of
any assets and the district court held that it was not
required to do so.
Defendants appeal, raising four major contentions.
First, they argue that the district court had no jurisdic-
tion over this action. They contend that the RICO claims
are so remote as to be frivolous. Second, they argue that
even if plaintiff has made a colorable claim sufficient to
establish subject matter jurisdiction, the district court
abused its discretion by issuing the injunction. They
argue that the plaintiff's case is just too weak, particu-
larly when their likely affirmative defenses are con-
sidered, to support a finding that it will probably suc-
ceed on the merits. Third, defendants argue that the
injunction was improvidently granted because the Re-
public will not sustain irreparable harm if the injune-
tion is dissolved, the Marcoses having agreed to a freeze
of their assets for the Republic to litigate the case in the
Philippines. Finally, defendants contend that, in any case,
40a
the injunction—covering the Marcoses’ property world-
wide—is far toe broad, sweeping in a multiude of assets
that have no connection to the pendent state law claims.
Discussion
A district court may grant a preliminary injunction
when the movant demonstrates probable success on the
merits and the possibility of irreparable injury. San
Diego Comm. Against Registration & the Draft v. Gov-
erning Bd., 790 F.2d 1471, 1473 n. 3 (9th Cir.1986).
Where the balance of relative hardships “tips decidedly
toward the plaintiff,’ however, “the plaintiff need not
show as robust a likelihood of success on the merits.”
Benda v. Grand Lodge of the Int'l Ass’n of Machinists,
o84 F.2d 308, 315 (9th Cir.1978), cert. dismissed, 441
U.S. 937, 99 S.Ct. 2065, 60 L.Ed.2d 667 (1979). As
often noted, preliminary injunctions may be issued at any
point on a continuum along which the likelihood of suc-
cess varies inversely with the potential of harm to the
plaintiff. /d. In this ease, the district court based its
decision to grant a preliminary injunction on its con-
clusion that the Philippines had a substantial likelihood
of success on both its RICO and pendent state claims,
and that there was a “substantial danger” of irreparable
harm. The court made no findings on the balance of rela-
tive hardships necessary to support an injunction at the
oppesite end of the spectrum.
The grant of a preliminary injunction may be re-
versed if the district court abused its discretion or based
its decision on an erroneous lege! standard or on clearly
erroneous findings of facet. Sierra On-Line, Ine. vo Phoe-
nix Software, lic. 739 F.2d 1415, 1421 19th Cir.1984.
Legal issues underlying the preliminary injunetion de-
cision ure reviewed de novo. lvtervational Molders’ v
Allied Workers’ Local Union No. 164 0. Nelson, 799 F.2d
O47, 951 19th Cir. less:
ae a
4la
I.
SUBJECT MATTER JURISDICTION
The defendants contend that the Republic’s RICO
claims are so frivolous that they cannot form the basis
of jurisdiction in the district court. But we view juris-
dictional claims under an exceedingly generous standard
at this stage of the proceedings. As we stated in Kenis-
ton v. Roberts, 717 F.2d 1295, 1298 (9th Cir.1983), ‘‘the
complaint must fulfill only two criteria: (1) it must
‘claim a right to recover under the Constitution and laws
of the United States,’ and (2) the claim must not be
‘wholly insubstantial and frivolous.’ Jackson Transit Au-
thority v. Local Division 1285, 457 U.S. 15, 21 n. 6 {102
S.Ct. 2202, 2206 n. 6, 72 L.Ed.2d 639] (1982) (quoting
dell v. Hood, 327 U.S. 678, 681, 682-83 [66 S.Ct. 773,
775, 776, 90 L.Ed. 939] (1946) ).”
While generous, this standard is not toothless. We reg-
ularly uphold the dismissal of claims where they are so
insubstantial that the district court plainly lacks jurisdic-
tion. See, e.g., Ellis v. Cassidy, 625 F.2d 227 (9th Cir.
1980); Standage Ventures, Inc. v. Arizona, 499 F.2d 248
(9th Cir.1974). However, we deem claims insubstantial
only where the law is clear or where a plaintiff has
persistently failed to allege an essential element. Under
this narrow standard, we cannot conclude that all the
RICO claims made by plaintiff here are frivolous. The
law is neither so clear, nor are the allegations of the
complaint so patently and irremediab!y defective, that
we can say with confidence that plaintiff has failed to
establish a colorable basis for jurisdiction in the district
court. Assuming the truth of the matters alleged in the
complaint, as we must, we find all of the elements of
a RICO violation: the existence of a criminal enterprise,
Complaint ©f 28, 29(bi; the conduct of its affairs through
a pattern of racketeering activity, id. ©" 29'a', 291¢),
30; and injury caused thereby, © 32. Plaintiff's complzaint
1} }
seems to allege at least prima facie RICO violations by
the Marcoses.'
Where, as here, plaintiff's claim is based upon trans-
actions that take place fully or partty outside the United
States, We must make one further inquiry: whether our
law was meant to reach the conduct in question insofar
as it 1s extraterritorial in nature. See, e.g., SEC v. United
Financial Group, Inc., 474 F.2d 354, 355 (9th Cir.1973) ;
Des Brisay v. Goldfield Corp., 549 F.2d 133, 135 (9th
Cir.1977)}. Here the alleged thefts by Mr. Marcos and
his confederates took place in the Philippines and quite
probably that conduct cannot be reached by USS. ie:
However, plaintiff does not base its claim directly upon
the alleged thefts in the Philippines. Its claim is based
upon conduct that it charges took place in the oe
States: mail fraud and transportation of stolen 4 perty
across International borders in violation of 18 U.S.C.
S$ 1541, 1343, 2314, 2315.
Assuming that the property in question is in fact stolen,
the charged acts—all of which took place within the
United States—would clearly violate U.S. law. Again,
assuming that the allegations of the complaint are true,
the violations appear to be sufficient predicate acts under
RICO. When all is said and done, it may well prove
| . = ns Ds n?¢ om P olay . P +] rs
otherwise. But at this early stage of the proceedings,
P ; ‘
where predicate icts are alleged to have b en committed
1 , . 7 1 } }
Within the United States, we cannot s e dis «
court Was with Jurisdiction to ente plaintiff's
)»
RI () « i1]1ms
| a
‘ 4
( () ~~ ~ }
This Bain ni nhusual Case The current rovern-
ment of a friendly foreign nation is pursuing tl na-
tion’s form 1 ruler. seeking t litioate in ur eourt the
ion er ruler, seeking to litigate in our court re
legality of his actions during more than 20 years in office
While Mr. Marcos had the title of president he was, in
the words of Rafael Fernando, the West Coast represen-
tative of the Philippine Commission on Good Government.
“the dictator of the G ment of the Philippines and
personaily controlled the s2id government.” Declaration
f Rafael Fernand Support of Temps ‘vy Res -
g Order and Orver to Show Cause (Fernand 1 7
During much of Mr. Mareos’ tenure in office. he ned
bv deer nde ‘e nN of n } , ] As ? n-
tiff alleges, during this time the M: Ss were
conduct the affairs of the Philippines v unchecked.”
Complaint * 59.
A few of Marcos’ alleged misdeeds, as charged in the
complaint and the Fernando declaration. may amount to
’ +] oO ry ‘O th y eComn ’ 1) ra r +] r “+ c mp] shed
4 hy 14 the exe cfs . ( men hny ot +] e
; . 7 +} ] ! 1) ) ] .
st majority of the rer eg S © quite it
ferent in character; they are activities that Marcos could
only have undertaken pursuant to his powers as Presi-
dent of the Philippines: expropriation of private Dp
ertv: « Ing public monopolies: “grant!ing]l gover
ment f rs, contraets. licens ONS ind other publie
he} | : Ie »*? ) ‘ ‘ Tn + } . 2 ) 1. ne »*} aps the
. " . a) . ' > ; .
MOST Te ne snect of p l tiff S COS S i#9es }ys ry
for relief P] ntiff there illeg s that “the P} ilipping
existed as sovereign government and thus constitute
RICO ‘enterprise’ within the meaning of 18 U.S.C
96164 nd I d endants eonducted,. o1 par-
44a :
ticipated directly or indirectly in the conduct of the af-
fairs of the Philippines through a pattern of racketeer-
ing activity... .” Complaint "28, 29. Plaintiff is thus
claiming that the Philippine government headed by Mar-
cos Was 2 criminal enterprise under U.S. law.”
Moreover, plaintiff presents issues that are different
in character, not merely in degree, from the normal case
brought under RICO and the various state causes of aec-
tion. Thus, paragraph 72 of the Complaint puts squraely
in issue the manner in which Mr. Marcos discharged his
responsibilities as President of the Philippines. Citing
the oath of office Mr. Marcos took in 1965, plaintiff
charges that he “entered into an implied contract with
the Philippine government to use the power of the Presi-
deney according to law, in good faith, and not for per-
sonal aggrandizement.” Paragraph 73 then charges that
“Mr. Marcos breached this contract.”
Paragraph 51 of the complaint charges that Mr. and
Mrs. Marcos made numerous misrepresentations “to the
Philippines and its people,” with the result that they were
allowed “to remain in power and positions of authority.”
Paragraph 52 charges that “|p|laintiff relied to its detri-
ment on [these misrepresentations!, by permitting them
‘oO remain in positions of power and authority for twenty
years and by allowing, through ignorance, the plunder of
the country.” Mr. Fernando, in his declaration, charges
that the “amounts purloined by Mr. Marcos are of such
significance as to affect the general economic conditions
of the Republie of the Philippines and its people.” Fer-
nando © 8,
- The Republic alleges in the alternative that the defendants.
except Lloyds Bank, were part of an association in fact. But under
either theory, the Republic alleges that the defendants conducted
the affairs of the Philippines for their own benefit. and urges us
to examine closely the conduct of that government in the past to
decide the motivations for its actions.
45a
Plaintiff’s case is a ringing indictment of Mr. Marcos’
conduct as President of the Philippines during his 20
years in office. As such, it challenges not merely indi-
vidual misdeeds or indiscretions but the very way in
which Mr. Marcos wielded governmental power, retained
that power and ran the Philippine government. This
raises a variety of serious and sensitive questions about
the ability of our courts to adjudicate this issue, and the
propriety of their doing so. In effect, we must consider
whether our courts are the appropriate forum for adju-
dicating what appears to be at least in part a political
dispute between the Philippines’ current government and
its former ruler.
B.
Our jurisdiction in this case is based solely on RICO,
a statute that does not authorize the court to grant in-
junctive relief. Religious Technology Center v. Woller-
sheim, 796 F.2d 1076. 1088-89 (9th Cir.1986), cert. de-
nied, —— U.S. ——, 107 S.Ct. 13836, 94 L.Ed.2d 187
(1987). Thus, as the district court properly recognized,
if an injunction is to be issued at all, it must be on the
basis of the pendent state claims. Nevertheless, proba-
bility of success on the RICO claims is not entirely ir-
relevant. The purpose of a preliminary injunction is to
preserve the court’s power to render meaningful relief
after actrial on the merits. 11 C. Wright & A. Miller.
Federal Practice & Procedure § 2947 (1973). If the fed-
eral claims are exceedingly weak, or subject to meritori-
ous affirmative defenses, they are likely to succumb to a
motion to dismiss or an early motion for summary judg-
ment. In that event, the pendent state claims may well
be subject to dismissal also. See, e.g., Kelley v. IBEW,
803 F.2d 516, 519 (9th Cir.1986) ; Arizona v. Cook Paint
& Varnish Co., 541 F.2d 226, 227-28 (9th Cir.1976), cert.
denied, 430 U.S. 915, 97 S.Ct. 1327, 51 L.Ed.2d 593
(1977) (court may not reach out to decide state law
——————————————————EEeeeEerorreae eee
46a
claims if court and litigants have not already spent con-
siderable time and effort on the case).
For purposes of our discussion, we need not, however,
differentiate between the state and federal causes of ac-
tion because all of plaintiff's claims hinge on certain key
allegations of the complaint. See pp. 1474-75, supra.
Although these allegations are made in elaborate detail,
they have one common nucleus: Plaintiff is claimng that
the Mareoses (with the help of their confederates! ac-
quired substantially all of their wealth illegally. Thus,
in order to establish the requisite predicate acts in the
United States for purposes of RICO—mail fraud, wire
, , 4 . . 4 7 —— : : } . re 64 a 4
fraud. transportation of stolen property—plaintif mus
pro}
| 1] | that tho ; ta 3 nection were in fact
r ) o show that the assets In question were In fac
: ) ¢laea4 ‘ + a0 roa mts . : oral a3 oe °9 40 P _ +}
stolen or that the transaetions involving Wire and the
m:i's involved property to which neither the Muarcoses
ae f mine ware % ee =] beau? :
nor their eonfederates were legally entitled. Similarly,
plaintiff must show that the property in question was
evined by “fraud. necident, mistake, undue influence, the
violation of an trust. or other wrongful act.” Cal.Civ.Code
$2224 + West App.1987). To be entitled to an account-
ing. plaintiff must show that the defendants aequired th
S-eTs by I ul i\ Ki ae G Shuler Corp Aine Z yy
Cal.App.2d 383, 396, 66 Cal. Rptr. 330, 3388 (1968). It
plaintiff cannot show that the property was obtained il-
legally. all of its claims—state and federal—will fail.
While plaintiff has made sweeping allegations of il-
legality, it has not attempted to match particular illegal!
acts with specific property in California or elsewhere. In-
stead p Lint ff relies on w] cil ] C2) s al ne Wort! } -
vsis to show that virtually all of the Marcoses’ wealt!
Wis acquired illegally. Plaintiff asserts that Marcos had
a net worth of $60,000 in 1966, a year after taking of-
fice: it claims that he now has a net worth over $1.5 bil-
lion. In the meantime. Mareos earned ¢and declared on
1 .
° . »2OO . , * ,
,y. ¢ eat yy yer my > + > .
Nis TaN Ve rns! income of some 551,000 Trom Nis si
7a
as President of the Philippines. Plaintiff therefore ar-
gues that practically everything the Marcoses own must
have been stolen and therefore belongs to the Philippines.
Plaintiff seeks to bolster this net worth analysis with
the Fernando declaration. In his declaration, Mr. Fer-
nando 2sserts that the Marcos presidency was marked by
“widespread purloining of funds and properties which
were and are the property of the Philippine government.”
Fernando © 8. Describing the illegal activity, Mr. Fer-
nando states:
The said taking of Government properties was ef-
fected by a range of techniques, including but
limited to accepting payments, bri
terests in business ventures, and ot!
value in exchange for the grant of government
’* .
ors. contracts, licenses, franchises, lonns, and oft
public benefits; expropriating outright private prop-
c
° ;
;ront-
erty for the benefit of persons beholden to or
ing for Mr. Marcos, the said expropriation being at
times effected by violence or the threat of violence
or incarceration; arranging loans by the Philippine
Government to private parties beholden to and front-
ine for Mr. Marcos: direct raiding of the public
treasury: diverting loans, credits and advances from
other governments intended for use by the Philippine
Government: creating public monopolies placed 1
the hands of persons beholden to and fronting for
Mr. Mareos. The said actions of the defendants were
in violation of the laws of the Republic prohibiting
malversation and corrupt practices.
Fernando "8. Mr. Ferando provides no cirect evidence
to support this litany of offenses; his only knowledge of
these “‘facts comes Trom “countiess newpaper and first
4 99 is . = | }
hand necounts” relating them. /d
P = aoe et és , 28.99 at , *
In order to sueceed under its “net worth eory, piain-
aa } : , . .
I] SNOW I) Pacing Is unnece ry ve sf p C-
48a
tically all of the Marcoses’ wealth was obtained illegally.
Plaintiff's theory breaks down if Marcos can show that
he acquired a substantial portion of his wealth legally
or if the court is unable to adjudicate the legality or il-
legality of a substantial portion of Marcos’ acquisitions.
In that case, plaintiff would have the burden of linking
up specific acts of illegality with specific property, some-
thing plaintiff has not attempted.
We note, without addressing them, defendants’ nu-
erous challenges to the sufficiency of plaintiff’s prima
facie case.’ We turn instead to what we consider to be
the heart of this case: plaintiff’s assertion, and the dis-
trict court’s assumption, that all of the Marcoses’ wealth
must have been stolen. Specifically, we consider whether
laintiff’s multitudinous claims of illegality ean all be
adjudiea ed by the district court or whether, as Marcos
strenuously contends, ney are subject to dismissal under
the related act of state and political question doctrines
If we determine that a substantial — of Marcos’
conduct is likely to be shielded by one or both of these
doctrines, plaintiff's net worth theory would collapse, and
With it its probability of success on the merits, at le:
INSsOLaY as Its Case 1s NOW framed.
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concisely the act of state doctrine: “Every sovereign
State is bound to respect the independence of every other
sovereign State, and the courts of one country will not
sit In judgment on the acts of the government of another
done within its own territory.” See also Hatch v. Baez,
7 Hun. 596, 599 (N.Y.App.Div.1876) (‘by the universal
comity of nations and the established rules of interna-
tional law, the courts of one country are bound to abstain
from sitting in judgment on the acts of another govern-
bent done within its own territory”). Although the doc-
trine has been modified in the intervening years, Under-
Mill still expresses its essence as it is applied in our
courts today.*
As the Court explained in Banco Nacional de Cuba
v. Sabbatino, 376 U.S. 398, 423, 84 S.Ct. 923, 938, 11
L.Ed.2d 804 (1964), the doctrine has “ ‘constitutional’
underpinnings. It arises out of the basic relationships
between branches of government in a system of separa-
tion of powers. It concerns the competency of—dissimilar
institutions to make and implement particular kinds of
decisions in the area of international relations.” The doc-
trine, as developed by precedent, expresses a strong sense
that in questioning the validity of foreign acts of state
the judiciary may hinder this country’s international
diplomacy and “embarrass the United States in the eyes
of the world.” International Ass’n of Machinists & Aero-
space Workers v. OPEC, 649 F.2d 1354, 1358 (9th Cir.
1981), cert. denied, 454 U.S. 1163, 102 S.Ct. 1036, 71
L.Ed.2d 319 (1982).°
+ As late as 1964, the Court noted that “!nlone of this Court’s
ibsequent cases in which the act of state doctrine was directly
erally involved manifest any retreat from Underhill.” Sab-
376 US. at 416, 84 S.Ct. at 934.
or "Iph
)
)
Bake. no,
*The act of state doctrine applies with as much force to the
state law claims as it does to those based on federal law. <A the
Court stated in Oetjen v. Central Leather Co., 246 U.S. 297, 20°
38 S.Ct. 309, 311, 62 L.Ed. 726 (1918): “The principle that the
50a
Plaintiff’s case implicates the act of state doctrine in
its most fundamental sense. In order to resolve plaintiff’s
various claims against Marcos, the court will have to
adjudicate whether Marcos’ actions as President were
lawful under Philippine law. A number of the acts plain-
tiff challenges are purely governmental ones, such as ex-
propriation of property and creation of public monopolies.
These were not merely the acts of Ferdinand Marcos,
private citizen, while he happened to be president; they
were an exercise of his authority as the country’s head
of state and, as such, were the sovereign acts of the
Philippines. As the Second Circuit recently noted, to the
extent that ‘“Marcos’s wealth was obtained through official
expropriation decrees or public monopolies,” they were
public acts. Marcos, 806 F.2d at 359.°
Moreover, resolution of various issues raised by plain-
tiff could interfere with the conduct of foreign relations
by the political branches of our government or otherwise
entangle the judiciary in foreign affairs. Thus, it could
well embarrass the United States for the court to hold,
as plaintiff would have us do, that a foreign government
that the United States recognized and considered its ally
for many years, with which it entered into various treaties
and otherwise had extensive dealings, was actually a
criminal enterprise under our law. Also, this litigation
may not be concluded for years. It is, therefore, difficult
conduct of ene independent government cannot be successfully
questioned in the courts of another is as applicable to a case in-
volving the title to property brought within the custody of a court
[as it is in cases] in which claims for damages were based
upon acts done in a foreign country ... .”
5 The dissent points out, quite correctly, that the defendants
bear the burden of proving that conduct is covered by the act of
state doctrine. Nelson Dissent at 1495. However, we base our |
analysis on plaintiff's own characterization of defendants’ acts,
power and status. See p. 1479 supra. In gauging the likelihood
of success on the merits, we simply adopt plaintiff’s view as to what
the evidence is likely to show.
5la
to predict what effects the court’s ruling will have on the
political situation in the Philippines or on our relations
with that country at that time. Our decision will be rela-
tively innocuous only if it is in favor of the plaintiff,
if our government’s attitude toward the Philippines is
unchanged and if the current Philippine government is
still in power.
Plaintiff nevertheless advances a variety of arguments
to the effect that this doctrine is not applicable. We con-
sider each of its contentions in turn.
1. Plaintiff first argues that, in the words of the dis-
trict judge, “the court is [not] going to be asked to decide
anything about the affairs of the government of the
Philippines. The question is what did Mr. Marcos do
with the assets and the property and the money that he
shouldn’t have done.” Trans. June 16, 1986, at 19, E.R.
at 84. In support of this argument, plaintiff cites De-
Roburt v. Gannett Co., 733 F.2d 701 (9th Cir.1984),
cert. denied, 469 U.S. 1159, 105 S.Ct. 909, 83 L.Ed.2d
923 (1985); and Sharon v. Time, Inc., 599 F.Supp. 538,
546 (S.D.N.Y.1985). Both cases were libel suits by offi-
cial of foreign governments challenging news _ reports
alleging that they had engaged’ in misconduct in the course
of doing their jobs. Both officials denied committing the
misconduct and the only question presented was whether
they had in fact done so. In holding that the act of state
doctrine was inapplicable, the DeRoburt and Sharon courts
noted that validity of the acts was not at issue since
everyone agreed that the acts, if committed, were illegal.’
The cases therefore resolved themselves into a simple dis-
pute about whether DeRoburt and Sharon in fact did
what they were reported to have done. As the court noted
TIn DeRoburt, the act was the making of an illegal loan. 733
F.2d at 702. In Sharon, it was abetting the massacre of civilian
refugees in West Beirut after the Isracli invasion of Lebanon.
599 F.Supp. at 542-43.
52a
in Sharon, “(t]he issue in this litigation is not whether
such acts are valid, but whether they occurred.” 559
F.Supp. at 5462-—___
Our case is quite different. At issue is not merely
whether Marcos did what he is alleged to have done, but
whether it was leg$l-for-him to do so as the country’s
dictator. Or, to put the matter somewhat differently,
plaintiff cannot establish that the Marcoses obtained all
of their wealth jllegally without calling into question the
legality of many of Mr. Marcos’ acts as President of the
Philippines. Unlike the DeRoburt and Sharon courts, the
court here would have to pass on the validity of Mr.
Marcos’ acts, not merely determine whether he committed
them.*
2. Plaintiff next argues that the act of state doctrine
is inapplicable because Marcos’ acts, to the extent they
were illegal under Philippine law, were ultra vires and
therefore not ‘public acts ... [undertaken] in the exer-
cise of governmental authority.” Alfred Dunhill of Lon-
don, Inc. v. Republic of Cuba, 425 U.S. 682, 706, 96 S.Ct.
1854, 1867, 48 L.Ed.2d 301 (1976) (opinion of White,
Powell and Rehnquist, JJ., and Burger, C.J.) (emphasis
in original).® This argument proves too much. Since the
SIn DeRoburt ourscourt clearly drew this distinction. We ap-
proved the dismissal of the third amended complaint involving plain-
tiff’s claims that ‘‘defendant falsely accused the Republic of Nauru
of secretly backing the separation, of the Marshall Islands from
Micronesia, {and}-of making an illegal loan to the Marshall Islands
in 1974, and falsely accused himself of making secret and illegal
loans to the Marshall Islands in 1974 and 1978.” 733 F.2d at 703.
We held that “litigation of those claims would involve serious in-
trusion into the propriety of the acts and policies of a foreign state
and thus clearly call into play the act of state doctrine.” Jd.
” Plaintiff also relies on a statement in Sharon to the effect that
“a fairly stringent degree of formality may be required in proving
[an officially authorized} act by a public official.” 599 F.Supp. at
544. We reject this standard for three reasons. First, it was dictum.
[Continued ]
53a
act of state doctrine prohibits inquiry into the legality
of official governmental acts, such acts surely cannot be
official only if they are legal. This theory, if accepted,
would emasculate the act of state doctrine.
In Banco de Espana v. Federal Reserve Bank, 114
F.2d 438 (2d Cir.1940), the court rejected a similar re-
quest by a Spanish bank, backed by Spain’s current gov-
ernment, seeking to set aside a transfer of silver bullion
by an official of the country’s prior government. Banco
de Espana argued that the former Minister of Finance
had been selling the silver in violation of Spanish law.
The court refused to second-guess the legality of the
Finance Minister’s action, noting as follows:
It should make no difference whether the foreign act
is, under local law, partially or wholly, technically or
fundamentally, illegal. No such distinction may be
gleaned from the cases. So long as the act is the act
® [Continued }
As discussed above, Sharon was simply not a case involving the
validity of official acts; Judge Sofaer’s ruminations as to how the
doctrine would operate if it were applicable are interesting but
beside the point. Second, the Second Circuit, in a recent opinion,
has expressed skepticism about this portion of the Sharon opinion.
Thus, recognizing that “Dunhill appears to require a certain amount
of formality to indicate that the act is in fact the act of the sov-
ereign,” the Second Circuit noted that it is ‘‘probably not the degree
of formality suggested by former Judge Sofaer in Sharon, 599
F.Supp. at 544-45.” Marcos, 806 F.2d at 359. Finally, formality is
required not as an end in itself, but to show that these were indeed
sovernmental acts and not private ones. Even Sharon recognized
that the requirement of formality is usually only applicable where an
act of state is alleged “with respect to a subject not normally con-
trolled by public acts.” 599 F.Supp. at 544. Where the acts in ques-
tion are inherently governmental—such as expropriation of private
property or creation of public monopolies—the formality require-
ment serves no purpose. Such acts can only be effective if they
were recognized and treated as official governmental acts. Here,
_Mr. Marcos could only have enriched himself by such acts if they
were recognized and accepted as an exercise of his governmental
authority.
54a
of the foreign sovereign, it matters not how grossly
the sovereign has transgressed its own laws.
Id., at 444. See also Bernstein v. Van Heyghen Freres
S.A., 163 F.2d 246, 249-50 (2d Cir.) (rejecting attack
on Nazi confiscation based on failure to comply with
German law), cert. denied, 332 U.S. 772, 68 S.Ct. 88, 92
L.Ed. 357 (1947).?°
Plaintiff argues, however, that Mr. Marcos’ actions
were not the sovereign acts of the Philippines because
they were not authorized by Philippine law. Banco de
Espana rejected this very argument:
{Banco de Espana] contends that the acts, if they
took place, were unlawful under Spanish law, that
under Spanish law an illegal act by a public officer
strips him of his official cloak and makes his act a
private one, and that such a ‘“‘private’”’ act cannot be
10 Similarly in Hatch v. Baez counsel argued that
[i]t is only to the extent of-his just and proper exercise of
constitutional and legal powers that the president of Dominica
[sic] is to be regarded as the executive of that republic. No
unjust or oppressive act committed by his direction upon any
one of his subjects, or upon others entitled to protection, is in
any true sense the act of the executive in his public and rep-
resentative capacity, but of the man simply, rated as other
men are rated in private stations; for in the perpetration of
unauthorized offenses of this nature, he divests himself of his
“regal prerogatives,” and descends to the level of those untitled
offenders, against whose crimes it is the highest purpose of
government to afford protection.
7 Hun. at 596-97 (emphasis in original) (citations omitted). The
court flatly rejected this argument, noting as follows:
The acts of the defendant for which he is sued were done by
him in the exercise of that part of the sovereignty of St.
Domingo which belongs to the executive department of that
government. To make him amenable to a foreign jurisdiction
for such acts, would be a direct assault upon the sovereignty
and independence of his country.
Id., at 599.
55a
deemed governmental. But this is only a variation
of the argument we have just rejected. By a “gov-
ernmental act” is meant no more than a step physi-
cally taken by persons capable of exercising the
sovereign authority of the foreign nation. The offi-
cials of the then-recognized Spanish government pos-
sessed such authority. If they purported to act in
their official capacity, that physical fact precludes us
from examining the validity of their acts under local
law. The Spanish local law as a whole is of no
concern to us, and it follows that we may not em-
ploy one doctrine of that law—that the illegal act of
a public officer is deemed a private act—in order to
gainsay the physical occurrence of an official act by
an officer of the Spanish government.
114 F.2d at 444. Cf. West v. Multibanco Comermex,
S.A., 807 F.2d 820, 828 (9th Ci:. 87) (court should,
as a matter of comity, “presume that Mexican officials
are acting in a manner consistent with the requirements
of Mexican law’’).
As plaintiff admits, Mr. Marcos was the country’s ruler
for some two decades. He clearly was “capable of exer-
cising the sovereign authority” of the Philippines during
that time. In Underhill v. Hernandez, the Court noted
that the act of state doctrine “‘|cannot] be confined to
lawful or recogized governments. . . . The immunity of
individuals from suits brought in foreign tribunals for
acts done within their own States, in the exercise of
governmental authority, whether as civil officers or as
military commanders, must necessarily extend to the
agents of government ruling by paramount force as a
matter of fact.” 168 U.S. at 252, 18 S.Ct. at 84.!! This
11 The court seemed to go even farther, suggesting that even a
putative revolutionary government that failed to gain control of
the country would be entitled to protection from liability for actions
taken in pursuit of the revolution. 168 U.S. at 252-53, 18 S.Ct. at
84-85.
56a
would seem to apply a fortiori to Mr. Marcos, who was
the recognized head of the Philippine government through-
out the relevant period. See DeRoburt, 733 F.2d at 703
(approving dismissal of third amended complaint because
allegations, inter alia, that defendant falsely accused the
president of Nauru of making secret and illegal loans to
the Marshall Islands “clearly call into play the acts
[sic] of state doctrine’); West, 807 F.2d at 828 (“[tl]he
public capacity of the actors involved . .. may serve to
trigger the act of state doctrine’’).
3. Plaintiff advances the somewhat related argument
that the act of state doctrine does not apply because the
acts in question were not in the “public interests” of the
Philippines, having been undertaken by Mr. Marcos for
venal, immoral or selfish purposes. The dissent agrees
with plaintiff, apparently arguing that acts done by an
official “for his own private personal gain”’ are unofficial
acts which may be scrutinized by this court. Nelson
Dissent at 1492-93.
12 The dissent relies upon the Fifth Circuit’s decision in Jimenez
w Aristeguieta, 311 F.2d 547 (Sth Cir. 1962), cert: denied, 373 U.S.
914, 83 St.Ct. 1302, 10 L.Ed.2d 415 (1963). as support for its
contention that official acts of a former dictator do not include acts
done for personal gain. Nelson Dissent at 1493-94. Although the
alleged misdeeds of Jimenez and Marcos are similar in nature, the
contexts in which judicial review is sought are very different.
In Jimenez, the Government of Venezuela sought the return to
Venezuela of its former dictator pursuant to its Treaty of Extra-
dition with the United States. 311 F.2d at 550-51. The Fifth Cir-
cuit held that the act of state doctrine did not bar the court, in
habeas corpus review of extradition proceedings, from determining
whether there was probable cause of guilt such that extradition to
Venezuela was proper. ZJd., at 557. The court relied on the fact
that the political branches had, pursuant to a treaty, expressly
contemplated judicial review of the official’s actions. Jd., at 558.
The act of state doctrine is clearly not a bar under such cireum-
stances. See Sabbatino, 376 U.S. at 428, 84 S.Ct. at 940 (act of
state doctrine does not bar inquiry into validity of sovereign act
where there is a treaty defining controlling international law).
Here, there is no treaty directing the court to act.
57a
Of course, not everything a public official does is an
official act; to the extent Mr. Marcos engaged in actions
as a private citizen, he is subject to suit like anyone else.
See DeRoburt, 733 F.2d at 704. Thus, if he entered the
public treasury at gunpoint and walked out with money
or property belonging to the Philippines, he would not be
protected by the act of state doctrine. However, if he
gained access to the public monies by statute, decree,
resolution. order, or some other “governmental act” as
president, the act of state doctrine would be triggered.
See Dunhill, 425 U.S. at 693-95, 96 S.Ct. at 1860-61;
West, 807 F.2d at 828; Restatement of Foreign Relations
Law of the United States § 469, note 3 (Tent.Draft No.
7, 1986).
Once the acts in question are itentified as governmental
in character, our courts have uniformly refused to ques-
tion the integrity or nobility of the reasons underlying
them. See, e.g., Clayco Petrol. Corp. v. Occidental Petrol.
Corp., 712 F.2d 404, 407 (9th Cir.1983) (refusal to in-
quire whether foreign government’s award of oil conces-
sion motivated by bribery), cert. denied, 464 U.S. 1040,
104 S.Ct. 703, 79 L.Ed.2d 168 (1984). “[S]uch inquiries
by this court into the authenticity and motivation of the
acts of foreign sovereigns would be the very sources of
diplomatic friction and complication that the act of state
doctrine aims to avert.’”’ Occidental Petrol. Corp. v. Buttes
Gas & Oil Co., 331 F.Supp. 92, 110 (C.D.Cal.1971),
aff'd, 461 F.2d 1261 (9th Cir.), cert. denied, 409 U.S.
950, 93 S.Ct. 272, 34 L.Ed.2d 221 (1972), quoted with
approval in Northrop Corp. v. McDonnell Douglas Corp.,
705 F.2d 1030, 1047 (9th Cir.), cert. denied, 464 U.S.
849, 104 S.Ct. 156, 78 L.Ed.2d 144 (1983).
The governmental acts of a country’s chief executive
necessarily reflect complex political and policy choices.
That one of the motives behind a particular governmental
act may have been selfish, or that it was intended to serve
otherwise improper ends, does not make that act any less
a pronouncement of the sovereign or render it any less
entitled to respect as such from other government. See
West, 807 F.2d at 828; Restatement §$ 469, comment 7.
It would greatly weaken the act of state doctrine if par-
ties could put in question the validity of official govern-
ment acts simply by attacking the motives of the govern-
ment official who undertake them.
4. Plaintiff next advances the argument that, whatever
force the act of state doctrine may have when it is in-
voked by the government or the country whose actions
are questioned, it has little or no force here, where it is
the Philippines itself that is asking us to look into the
actions of its former dictator.’ The acquiescence of the
country’s current government, and the fact that the ac-
tions in question were taken by a government no longer
in power, do have a bearing on the application of the act
of state doctrine. In Sabbatino, the Supreme Court hinted
that this might be a relevant consideration, 376 U.S. at
428, 84 S.Ct. at 940, and one other court has so intimated.
See Marcos, 806 F.2d at 359.
There is some reason for this. Where the country’s
current government seeks an adjudication of these mat-
ters, there is obviously less of a possibility that our pro-
nouncements will embarrass our relations with that gov-
ernment.'' But, just as the position of our own executive
'S Plaintiff also appears to be arguing that Marcos is not pro-
tected by the act of state doctrine because he is no longer presi-
dent. The court in Hatch answered a similar argument as follows:
The fact that the defendant has ceased to be president of St.
Domingo does not destroy his immunity. That springs from the
capacity in which the acts were done, and protects the indi-
vidual who did them, because they emanated from a foreign and
friendly government.
7 Hun. at 600. We agree.
MWe say “less of a possibility” rather than “no possibility”
because, even as things stand, a judicial pronouncement on some of
the issues presented could raise foreign relations concerns. For
59a
branch is not dispositive on the issue, First National City
Bank v. Banco Nacional de Cuba, 406 U.S. 759, 762, 92
S.Ct. 1808, 1810-11, 32 L.Ed.2d 466 (1972); Marcos,
806 F.2d at 358, so can we not give dispositive effect to
the pronouncement of a foreign sovereign, particularly
one with a stake in the current litigation. Banco de
Espana, 114 F.2d at 444. Embarrassment of our rela-
tionship with a foreign government is, after all, only one
reason underlying the act of state doctrine. As the court
stated in Sabbatino, there are others. 376 U.S. at 427-
37, 84 S.Ct. at 940-45. While the acquiescence—indeed
anxious invitation—-of the current Philippine government
allays one concern, it heightens others, making us leery
of judicial involvement in this dispute.
We cannot shut our eyes to the political realities that
give rise to this litigation, nor to the potential effects of
its conduct and resolution. Mr. Marcos and President
Aquino represent only two of the competing political
factions engaged in a struggle for control of the Philip-
pines.’” While the struggle seems to be resolving itself
in favor of President Aquino, this may not be the end
of the matter.'* Only four years ago, the tables were
turned, with Mr. Marcos in power and Mrs. Aquino and
her husband in exile in the United States. While we are
example, we wonder how the current Philippine government would
react to a pronouncement by the court of the United States that
Mr. Marcos’ actions were entirely legal”and proper. Of course,
plaintiff hopes to prove otherwise, bit in assessing whether the act
of state doctrine is implicated, we cannot prejudge the outcome of
the dispute. Nor can we necessarily assume that the current govern-
ment will be in power when the case is finally resolved. See p. 1486
& n. 16, infra.
15 See, e.g., Woman of the Year, Vime, Jan. 5, 1987 at 18-33;
Wall St.J., Dee. 29, 1986, at 1, col. 3; N.Y. Times, Dee. 24, 1986,
at 7, col. 4.
16Tn January, for example, some troops of the Philippine Army
attempted a putsch with the Marcoses’ apparent support. N.Y.
Times, Jan. 30, 1987, at 1, col. 1.
60a
in no position to judge these things, we cannot rule out
the possibility that the pendulum will swing again, or
that some third force will prevail. What we can say with
some certainty is that a pronouncement by our courts
along the lines suggested by plaintiff would have a sub-
stantial effect on what may be a delicate political bal-
ance, as would a contrary pronouncement exonerating
Mr. Marcos.
Moreover, litigation proceeds at its own pace and the
answer, Whatever it may be, may well come at a time
most inopportune from the point of view of our foreign
policy as it is then conceived.’* Judicial pronouncements
that can have such effects surely implicate “the proper
distribution of functions between the judicial and political
branches of the Government on matters bearing upon
foreign affairs.” Sabbatino, 376 U.S. at 427-28, 84 S.Ct.
at 940. Absent express encouragement from the political
branches of our government,'® see, e.g., Jiminez, 311 F.2d
17 As this court stated in Jnternational Ass'n of Machinists, 649
F.2d at 1358, the judiciary must focus on single disputes and make
decisions on the basis of legal principles. The timing of our de-
cisions is largely a result of our caseload and of the random tactical
considerations which motivate parties to bring lawsuits and to seek
delay or expedition. When the courts engage in piecemeal adjudica-
tion of the legality of the sovereign acts of states, they risk disrup-
tion of our country’s international diplomacy. The executive may
utilize protocol, economic sanction, compromise, delay, and per-
suasion to achieve international objectives. Ill-timed judicial deci-
sions challenging the acts of foreign states could nullify these tools
and embarass the United States in the eyes of the world.
18 This was the crux of the Court’s holding in Sabbatino:
[Rjather than laying down or reaffirming an inflexible and all-
encompassing rule in this case, we decide only that the Judicial
Branch will not examine the validity of a taking of property
within its own territory by a foreign sovereign government,
extant and recognized by this country at the time of suit, in
the absence of a treaty or other unambiguous agreement re-
garding controlling legal principles, even if the complaint
alleges that the taking violates customary international law.
376 U.S. at 428, 84 S.Ct. at 940 (emphasis added).
61la
at 558, we are reluctant to embark upon such an endeavor.
As the Second Circuit recognized with respect to this con-
troversy, “the plaintiff’s claims necessarily require de-
terminations that will directly and significantly affect
American foreign relations.”” Marcos, 806 F.2d at 352.
The dissent argues that we may not consider the for-
eign relations consequences of this litigation because “the
executive branch has clearly spoken on the question of
potential embarrassment to the United States.” Nelson
Dissent at 1496. This assertion is based on statements
made by the Second Circuit in Marcos, noting that the
government had filed a statement supporting jurisdiction
in that case, as well as in a case before the Court of
International Trade. See Marcos, 806 F.2d at 356-57,
357 n. 3. The dissent deduces that the executive branch
would take the same position in all other cases between
the Philippines and the Marcoses, including ours. We are
reluctant to accept this generalization.
In the first place, we do not know precisely what the
executive branch said in those eases, nor the rationale
for its position. No documents were filed by the State
Department in our case and we do not have copies of
those filed elsewhere. All we know about the State De-
partment’s position comes from the opinion of the Second
Circuit. We find that characterization far too nebulous
to permit sweeping inferences about the position of the
executive branch. Other than emphasizing the importance
of our relations with the Philippines, the Declaration of
Undersecretary of State Armacost “refers to the establish-
ment of the official Presidential Commission on Good
Government headed by former Philippine Senator Jovito
Salonga and to the United States’ agreement to receive
Senator Salonga at a diplomatic level.” Jd. at 357 n. 3.
The Second Circuit then concludes: “Undersecretary Ar-
macost asserted that the Aquino government will view
the United States’ actions on this matter as an important
indicator of the future course of our bilateral relations
and stated that it is in the foreign policy interests of
the United States to honor the Philippine government’s
“requests at the earliest possible time.” 806 F.2d at 357
n. 3 (emphasis added). Since the Armacost Declaration
was not addressing the Second Circuit litigation but a case
before the Court of International Trade, we find it im-
possible to deduce what “matter” Undersecretary Arma-
cost refers to and what action is expected of the United
States. Equally ambiguous is the reference to the “Philip-
pine government’s requests” mentioned by Armacost.
Since we do not know the context in which the Armacost
declaration was filed, we have no way of knowing what
Armacost was referring to. His mention of the Philip-
pine Commission on Good Government gives us a hint,
however. In the papers filed before us is a copy of one
of President Aquino’s executive orders which sets forth
the charter of that commission:
The Commission on Good Government is hereby au-
thorized to request and appeal to foreign counties
wherein any such assets or properties may be found
to freeze them and otherwise prevent their transfer,
conveyance, encumbrance, concealment or liquidation
by former President Ferdinand E. Marcos and Mrs.
Imelda Romualdez Marcos, their close relatives, sub-
ordinates, business associates, dummies, agents, or
nominees, pending the outcome of appropriate pro-
ceedings in the Philippines to determine whether such
assets or properties were acquired by such persons
through improper or illegal use of funds belonging
to the Government of the Philippines or any of its
branches, instrumentalities, enterprises, banks, or fi-
nancial institutions or by taking undue advantage of
their office, authority, influence, connections or rela-
tionship.
President of the Philippines, Exec.Order No. 2 at 3
(March 12, 1986) ‘emphasis added). We assume that
the requests to which Mr. Armacost refers are those men-
tioned in the commission’s charter, namely for foreign
63a
governments to freeze assets of the Marcoses while the
matter of ownership is litigated in the Philippines. That
is precisely what happened in the Second Circuit."
The Second Circuit case is materially different from
ours in ways that are highly relevant to the application
of the act of state doctrine. See n. 25 infra. Most sig-
nificant, in that case “the district court will not be asked
to try the basic issues accusing President Marcos of un-
lawful takings,” 806 F.2d at 361, since such matters are
to be determined in the Philippines. In our case, these
matters would be litigated here.”
5. Finally, we consider it significant that such law as
there may be to apply in determining whether Marcos’
actions were legal is that of a foreign nation. As the
Court noted in Sabbatino, “[al]n inquiry by United States
19 Equally unhelpful is the executive branch’s pronouncement in
Marcos itself. The most the Second Circuit was able to say about
that statement is that “[b]y implication [the Justice Department |
position carries with it the proposition that the United States does
not consider this suit to be an improper intrusion on its manage-
ment of forcign affairs.” Jd., at 357 (emphasis added, footnote
omitted).
20If an inference is to be drawn from the State Department’s
pronouncements, it would be from its failure to speak in this case
while it did in two others involving the same parties and some-
what related issues. But it 1s a highly sensitive and delicate under-
taking to deduce our State Department’s attitude from what it has
failed to say. As the Court noted in Sabbatino, “[o|ften the State
Department will wish to refrain from taking an official position,
pe vicularly at a moment that woul” be Cictated bw the development
of private litigation but might be in.-.-- .“.2 dipiomatically.” 376
U.S. at 436, 84 S.Ct. at 944. It suffices to vonclude that we are not ~
precluded from addressing this issue by what the executive branch
has said and done in other cases.
In any event, we doubt that a State Department pronouncement
even in this case would materially change our analysis. While em-
barrassment of foreign relations is a matter we consider, it is a
relatively minor consideration in light of the other serious issues
raised by plaintiff’s case.
eee
64a
courts into the validity of an act of an official of a for-
eign state under the law of that state would .. . be ex-
ceedingly difficult... .” 376 U.S. at 415 n. 17, 84 S.Ct.
at $33 n. 17. Moreover, it is not the Philippines’ private
law we would be interpreting, but important aspects of
its public law. The question of whether Mr. Marcos prop-
erly invoked martial law, or whether he exercised it prop-
erly, if it has an answer in Philippine law at all, is no
doubt of considerable importance and sensitivity to that
country and its people. So is Mr. Marcos’ invocation of
presidential immunity under Article VII, Section 17 of
the Philippine Constitution in force at the time Mr.
Marcos was president,?’ a provision that, apparently. has
been carried forward into the current constitution. Were
we to answer this latter question, it would be as if
Nivon wv. Fitzgerald, 457 U.S. 731, 102 S.Ct. 2690. 73
L.Ed.2d 349 (1982), defining the immunity of American
presidents, had been decided by the Supreme Court of the
Philippines. As Sabhatino noted, such a determination
‘if wrongly made, would be likely to be highly offensive
to the state in question.” 376 U.S. at 415 n. 17, &4 S.Ct.
at 933 n. 17.
D.
In International Association of Machinists, we noted
that “tlhe act of state-doctrine is similar to the political
question doctrine in domestic law.” 649 F.2d at 1358;
see also Sharon, 599 F.Supp. at 547. Questions that ap-
pear to implicate one doctrine are sometimes best re-
solved by reference to the urher. See, e.g.. Occidental of
Umm al Qaywayn, Inc. v. A Certain Cargo of Petroleum,
“1 This section provides:
The President shall be immune from suit during his tenure.
Thereafter, no suit whatsoever shall lie for official acts done
by him or by others pursuant to his specific orders during his
tenure.
The immunities herein provided shall apply to the incumbent
President referred to in Article XVII of this Constitution.
65a
577 F.2d 1196, 1201 (5th Cir.1978), cert. denied, 442
U.S. 928, 99 S.Ct. 2857, 61 L.Ed.2d 296 (1979).
Thus, even if we put to one side the foreign affairs
implications of any decision an American court may
reach on the merits, and even if our own political branches
were to pronounce their willingness for us to hear the
case, we would still be faced with the intractable prob-
lem of adjudicating the essentially political questions
raised by plaintiff’s complaint.
These problems lie at the very heart of the Republic’s
ease. Plaintiff asserts that ‘“|o]n September 21, 1972
{Mr. Marcos] declared martial law. From and after the
declaration of martial law, Mr. Marcos was the dictator
of the Government of the Philippines and personally con-
trolled the said government.” Fernando § 7. In adjudi-
eating plaintiff’s claims, our courts would have to de-
termine the legality of the actions of a foreign head of
state, exercising dictatorial powers under a reign of mar-
tial law. It is hard to imagine what judicially manage-
able standards the courts could apply in making such a
determination. A dictator is a ruler holding absolute
authority; he is generally subject to no legal constraints,
only physical and political ones.*? Martial law constitutes
the suspension of civil authority and invocation of rule
by decree of a military commander.**
22 The American Heritage Dictionary (New Coll.Ed. 1976), de-
fines dictator as “[a] ruler having absolute authority and supreme
jurisdiction over the government of a state; especially, one who is
considered tryannical or oppressive.” J/d., at 366. Black’s Law
Dictionary (5th ed. 1979) defines a dictator as “[o]ne in whom
supreme authority in any line is invested, one who rules auto-
cratically, and one-who prescribes for others authoritatively, and
[often] oppressively.” Jd., at 409 (citing Houston Printing Co. v.
Hunter, 105 S.W.2d 312, 317 (Tex.Ct.Civ.App. 1937) ).
23 Black’s Law Dictionary defines martial law as follows:
A system of law, obtaining only in time of actual war and
growing out of the exigencies thereof, arbitrary in its character,
66a
If, in adjudicating this dispute, the court were to ac-
cept plaintiff’s characterization, it is difficult to see what
law to apply to Mr. Marcos’ actions. By its nature, dic-
tatorial rule is arbitrary and unrestrained by legal au-
thority; martial law is a suspension of the normal rule
of law. Offensive_as such absolute government may be
to our sense of justice, no legal restraints can prevail
against dictatorial power. A dictator can do whatever
he can get away with. A court of law in this country
simp'y cannot second-guess how that power is exercised.
See Underhill, 168 U.S. at 254, 18 S.Ct. at 85.
Plaintiff is in no better position if it seeks to challenge
Mr. Marcos’ invocation of martial law and assumption of
dictatorial power. Again, there are no judicially manage-
able standards for us to apply in second-guessing that
decision. Just as we cannot second-guess the outcome of
an election, or the success of a revolution in a foreign
country, see id. at 252-53, 18 S.Ct. at 84-85, so can we
not adjudicate whether Mr. Marcos was within his rights
in asserting dictatorial control over the Philippines start-
ing in 1972,
We must take as given that Mr. Marcos was the
country’s president, that he was recognized as its head
of state by our government,”* Oetjen v. Central Leather
and depending only on the will of the commander of an army,
which is established and administered in a place or district of
hostile territory held in belligerent possession, or, sometimes,
in places occupied or pervaded by insurgents or mobs, and
which suspends all existing civil laws, as well as the civil
authority and the ordinary administration of justice.
Id. at 878-79. Webster’s Third Internationa! Dictionary defines the
term as “military rule exercised by a nation or state over its citizens
or subjects in a situation where they are not legally enemies and
when an emergency justifies such action.” Jd. at 1386.
“4 See 1975 Dig.U.S.Prac.Int’] L. 344-45 & n.1 (noting that Marcos
had been granted head of state immunity in a libel action; ‘‘a Head
of State performs important functions which should not be inter-
fered with by the necessity of defending l:tigation in foreign
countries’’).
67a
Co., 246 U.S. 297, 302, 38 S.Ct. 309, 311, 62 L.Ed. 726
(1918), and that, as plaintiff so bluntly admits, he and
his wife were “permitted . . . to remain in positions of
power and to conduct the affairs of the Philippines vir-
tually unchecked.” Complaint © 59. Whether the Philip-
pine people so permitted the Marcoses to rule them out of
ignorance, because they were misled, because they con-
sidered it to be in their self-interest, or because they were
powerless to do otherwise, is something we do not know
and have no way of finding out. It is simply beyond the
capacity of our courts to adjudicate.
a?
In light of these considerations, we hold that the dis-
trict court erred in concluding that plaintiff is likely to
succeed on the merits of its state claims, or its federal
claims for that matter. To succeed under those claims
as they are now presented, plaintiff would have to estab-
lish that practically all of Mr. Marcos’ wealth was stolen.
In light of plaintiff's own claims and assertions, we
believe that it will be unable to do so because, as to many
of the assets in question, adjudication will be barred by
the act of state doctrine, the political question doctrine or
both. Since plaintiff has not sought to trace specific assets
to specific alleged misdeeds, the exclusion of large portions
of Mr. Marcos’ wealth from adjudication will defeat plain-
tiff’s net worth analysis, and with it, its case. In these
circumstances, we cannot even say that the Republic has
the “fair chance of success on the merits’ needed to
remand for a balancing of the hardships. See Benda,
584 F.2d at 315.”
*5 While our dissenting colleague relies heavily on language drawn
from the Second Circuit’s opinion in Marcos, we view our approach
as consistent with that of the Second Circuit. In that case, the court
asserted jurisdiction over a claim by the Philippines for a very
limited purpose: to ‘freeze [Marcos’| property in the United
States subject to future process in [the Philippines!.” 806 F.2d
at 354. It would therefore be the Philippine courts that would decide
68a
Conclusion
The order granting the preliminary injunction is re-
versed and the preliminary injunction is ordered vacated.
The case is remanded to the district court for proceedings
consistent with this opinion. To avoid duplication of
effort, the panel retains jurisdiction over any further
appeals in this case.
CYNTHIA HOLCOMB HALL, Circuit Judge, con-
curring in part and dissenting in part:
I concur in the result reached in Judge Kozinski’s opin-
ion. Indeed, if the district court had had jurisdiction to
enter the preliminary injunction, I could agree with it
entirely. I respectfully dissent, however, from the juris-
dictional holding of Part I of the opinion and join in the
remainder.
The majority, in finding that the district court had
jurisdiction, relies on the case of Keniston v. Roberts,
717 F.2d 1295 (9th Cir.1983), for the proposition that
at this stage of the proceedings the complaint must meet
whether Marcos’ conduct amounted to theft under Philippine law.
Id. at 361. Moreover, the claims in that case covered only specific
“assets in New York.” Jd. In short, the Second Circuit case was
“merely ancillary to an eventual Philippine decree or judgment and
was brought in the Southern District only because the real estate
is located {t|here.”” Jd. The Second Circuit contrasted the case of
Islamic Republic of Iran v. Pahlavi, 94 A.D.2d 374, 464 N.Y.S.2d
487 (1983), aff'd, 62 N.Y.2d 474, 478 N.Y.S.2d 597, 467 N.E.2d 245
(1984), cert. denied, 469 U.S. 1108, 105 S.Ct. 783, 83 L.Ed.2d 778
(1985), where plaintiff sought to impose a constructive trust ‘‘on
assets of the defendants throughout the world.” Jd. 94 A.D.2d at
377, 464 N.Y.S.2d at 490. Our case is far more analogous to Jslamic
Republic.
Quite significant, and unaddressed by the dissent, is the Second
Circuit’s recognition that to the extent ‘‘Marcos’s wealth was ob-
tained through oflicial expropriation decrees or public monopolies”
they were public acts, potentially subject to the act of state doc-
trine. 806 F.2d at 359.
69a
only two criteria. First, it must claim a right to recover
under the Constitution and laws of the United States.
Id., at 1298. Second, the claim set forth in the complaint
must not be wholly insubstantial and frivolous. Jd. The
test set forth in Keniston, however, is used only “ ‘for
the purposes of determining whether [the plaintiff] stated
a cause of action on which relief could be granted.’ ”
Id. (quoting Jackson Transit Authority v. Local Division
1285, 457 U.S. 15, 21 n. 6, 102 S.Ct. 2202, 2206 n. 6, 72
L.Ed.2d 639 (1982)). The test of whether to grant a
motion to dismiss under Fed.R.Civ.P. 12(b) (6) is in-
applicable to the question of whether a plaintiff has made
a sufficient showing of subject matter jurisdiction to ob-
tain a preliminary injunction. At the preliminary injunc-
tion stage, a more stringent, test applies.
In SEC v. United Financial Group, Inc., 474 F.2d 354
(9th Cir.1973), a case both procedurally and factually
similar to this one, we addressed the question of whether
the district court had subject matter jurisdiction to enter
a preliminary injunction. The SEC claimed that the de-
fendants were violating United States securities laws.
The district court entered a preliminary injunction in
favor of the SEC. On appeal, the defendants argued that
all offers and sales of shares were confined to foreigners
and, therefore, that the district court did not have sub-
ject matter jurisdiction to grant the preliminary injunc-
tion. ZJd., at 356. In reviewing the defendants’ claim,
this court did not appfy the frivolity standard set forth
in Keniston. Instead, we engaged in a thorough evalua-
tion of the effect that the defendants’ activities had had
upon investors in the United States holding that ‘focus
should be upon appellants’ activities within the United
States and the impact of those activities upon American
investors.” /d., at 356-57. See also Des Brisay v. Gold-
field Corp., 549 F.2d 133, 134 (9th Cir.1977) (focus in
determining whether United States securities laws apply
to foreign transactions should be on adverse impact of the
70a
transactions on American securities markets); Hurim-
Pharm GmbH v. Pfizer Inc., 593 F.Supp. 1102, 1105 n. 3
(S.D.N.Y.1984) (focus in determining whether United
States antitrust laws apply to international business
transactions is on the situs of the effect).
The ‘‘effects” test applied in securities and antitrust
cases should also be applied in RICO cases. When it
passed RICO, Congress was concerned with the harmful
effect of organized crime on the economy of the United
States:
The Congress finds that (1) organized crime in the
United States is a highly sophisticated, diversified,
and widespread activity that annually drains billions
of dollars from America’s economy ... (3) this
money and power are increasingly used to infiltrate
and corrupt legitimate business and labor unions and
to subvert and corrupt our democratic processes;
(4) organized crime activities in the United States
weaken the stability of the Nation’s economic system,
harm innocent investors and competing organizations,
interfere with free competition, seriously burden in-
terstate and toreign commerce, threaten the domestic
security, and undermine the general welfare of the
Nation end its citizens...
RICO Statement of Findings and -Purpose, Pub.L. No.
91-452, 84 Stat. 922 (1970), 91st Cong., 2d Sess., re-
printed in 1970 U.S. Code Cong. & Admin.News 1073,
1073 ‘emphasis added). See also United States v. Bag-
nariol, 665 F.2d 877, 892 (9th Cir.1981) (effect on com-
merce is an essential element of 2 RICO violation), cert.
denied, 456 U.S. 962, 102 S.Ct. 2040, 72 L.Ed.2d 487
(1982). Thus, in order to maintain a lawsuit under
RICO, a plaintiff must demonstrate that the transactions
in question adversely affected the economy of the United
States.
71a
The complaint before us in this case fails to make the
requisite allegations of harm to the economy of the
United States;’ the majority does not hold otherwise.
Rather than arguing that the “effects” test is met on the
facts of this case, the majority erroneously applies a
“conduct” test utilized in the securities law setting. See
Grunenthal GmbH v. Hotz, 712 F.2d 421, 424-25 (9th
Cir.1983) (where conduct in the United States was sig-
nificant with respect to the alleged violation, there is
federal jurisdiction under United States securities laws).
The ‘“‘conduct” test used in the securities context is not
applicable in RICO cases. Cf. United States v. Bagnariol,
665 F.2d 877, 892 (9th Cir.1981) (effect on commerce
is an essential element of a RICO violation), cert. de-
nied, 456 U.S. 962, 102 S.Ct. 2040, 72 L.Ed.2d 487
(1982). In passing RICO, Congress was concerned with
the effect of organized crime on the economy of the
United States. Therefore, the “effects” test is the only
applicable one. Even if the majority were correct in its
assumption that the “conduct” test applies in the RICO
context, the test would not be met on the facts of this
case. The defendants’ conduct in the United States was
not a significant element of the harm alleged by the
plaintiff. See, e.g., Grunenthal, 712 F.2d at 425. As the
plaintiff conceded at oral argument, the investment of
funds in the United States was no more injurious to the
Philippines than if the funds had been kept in a mattress
in the Philippines. -
I would vacate the injunction on the ground that
the district court lacked subject matter jurisdiction to
enter it.
1At oral argument, we were advised that the plaintiff had
amended its complaint subsequent to the issuance of the preliminary
injunction. The propriety of a preliminary injunction under the
amended complaint is not before us.
72a
NELSON, Circuit Judge, dissenting:
The majority opinion characterizes this case largely as
a political dispute between competing governments, de-
signed to challenge the legitimacy of Marcos’ reign. Ma-
jority op. at 1475, 1479, 1479-80. This characterization
distorts the proper focus of our analysis. In my view,
this appeal concerns the attempt by the Republic of the
Philippines to secure a preliminary injunction to prevent
Ferdinand and Imelda Marcos, and their alleged agents,
from transferring, conveying, or encumbering specific
properties in California, and other as yet unidentified
properties, allegedly purchased with funds stolen from
the Republic of the Philippines, pending a final deter-
mination of ownership of the properties. The district
court concluded that it had subject matter jurisdiction
under RICO. Under the pendent claims for conversion,
fraud, and deceit, which sought money damages, an ac-
counting, and return of property under a constructive
trust,! the court issued a preliminary injunction to pre-
serve the status quo pending a determination on the
merits. Because I believe that the act of state doctrine
does not compel reversal, and that the district court
clearly did not abuse its discretion in issuing the pre-
liminary injunction, I respectfully but strenuously dis-
sent from the majority’s result and all except part I of
1The Philippines’ verified complaint includes among its allega-
tions of private unlawful conduct:
—that Ferdinand Marcos “converted, to his use and that of his
friends, family, and associates, money, funds—and property belong-
ing to the Philippines and its people.” Complaint { 12.
—that the Marcoses committed “numerous acts of fraud, deceit,
conversion, civil conspiracy, acts of racketeering, and other unlaw-
ful acts.” Id. § 58.
—that the Marcoses stole and transported in their flight from
the Philippines to Hawaii approximately $7 million belonging to the
Philippine people, including currency, negotiable instruments, and
transportable property. Jd. © 25-26.
75a
the majority opinion, which upholds_the finding of sub-
ject matter jurisdiction under the federal claims.*
I. THE ACT OF STATE DOCTRINE
The majority would reverse the decision to issue the
preliminary injunction because it believes that the act of
state doctrine renders the Philippines’ likelihood of suc-
cess on the merits low. I believe that the majority’s anal-
ysis of the act of state doctrine is incorrect in substantial
part as a matter of law and wholly unsupported by the
facts and procedural posture of this case. Below I set
forth the principal points on which I disagree with the
majority’s analysis.
A. The Scope of the Doctrine: Official and Unofficial
Acts
Under the act of state doctrine, the courts of this coun-
try will not inquire into the_legality of official acts of
sovereign nations done within their own territories. Al-
fred Dunhill of London, Inc. v. Republic of Cuba, 425
U.S. 682, 691 n.7, 96 S.Ct. 1854, 1859 n.7, 48 L.Ed.2d
301 (1976) ; First Nat'l City Bank v. Banco Nacional de
Cuba, 406 U.S. 759, 763, 92 S.Ct. 1808, 1811, 32 L.Ed.2d
466 (1972); Banco Nacional de Cuba v. Sabbatino, 376
U.S. 398, 416, 84 S.Ct. 923, 934, 11 L.Ed.2d 804 (1964).
The doctrine applies to “the public and governmental acts
of sovereign states,” but not to “their private and com-
mercial acts.” Dunhill, 425 U.S. at 695, 96 S.Ct. at 1862;
see also Republic of the Philippines v. Marcos, 806 F.2d
344, 358 (2d Cir. 1986) (holding that, for the act of
“I emphasize that the Philippines has alleged serious federal
offenses under RICO, including mail and wire fraud and the con-
cealment and transportation of stolen property. I also note that
the Second Circuit’s Marcos case predicated federal jurisdiction
on the federal question arising from the foreign policy considera-
tions posed by that action. Republic of the Philippines v. Marcos,
806 F.2d 344, 352-54 (2d Cir. 1986).
| | —E
74a
state doctrine to apply, “the acts must be public acts of
the sovereign’); Restatement (Revised) of Foreign Re-
lations Law § 469, at 51 (Tent. Draft No. 7, 1986) (stat-
ing that the doctrine applies only to sovereign “acts of a
governmental character’). Although the doctrine also
applies to the official acts of government officials vested
with sovereign authority, see Bernstein v. Van Heyghen
Freres, S.A., 163 F.2d 246, 249 (2d Cir.), cert. denied,
332 U.S. 772, 68 S.Ct. 88, 92 L.Ed. 357 (1947); Banco
de Espana v. Federal Reserve Bank, 114 F.2d 438 (2d
Cir. 1940), it does not apply to private, unofficial con-
duct of government officials, including heads of state.
Marcos, 806 F.2d at 359; see DeRoburt v. Gannett Co.,
733 F.2d 701, 704 (9th Cir. 1984), cert. denied, 469 U.S.
1159, 105 S.Ct. 909, 83 L.Ed.2d 923 (1985). Therefore,
to the extent that Ferdinand Marcos, Imelda Marcos, and
their agents have engaged in unofficial acts, the act of
state doctrine has no application.
The majority’s analysis blurs the distinction between
the official or unofficial character of the defendants’ acts.
It first concedes, almost in passing, that “[a] few of
Marcos’ alleged misdeeds . . . may amount to nothing
more than common fraud or theft.” Majority op. at
1479; see also id. at 1485. Yet the majority’s analysis
then broadly assumes that Marcos is a “dictator” who
“ean do whatever he can get away with,” id. at 1478,
1483 n.9, 1489, and that the challenged acts of the de-
fendants reflect ‘complex political and policy choices,”
even if undertaken in part “to serve otherwise improper
ends,’ a. at 1485. In short, the majority all but ignores
the private, unofficial character of the challenged acts and
appears to embrace the sweeping position that the acts
of a dictator are necessarily official and insulated from
judicial review.*
3In Section I.D below, I address the consequences of a more
generous reading of the majority’s analysis that would in fact
permit inquiry into the defendants’ unofficial acts of “common
fraud or theft.”
75a
The majority characterizes the Philippines’ complaint
as challenging, inter alia, Marcos’ governmental acts of
“expropriation of private property; creating public mo-
nopolies; ‘grant[ing] government favors, contracts, li-
censes, loans, and other public benefits.’” Majority, op.
at 1478 (quoting Fernando declaration { 8). In fact, how-
ever, the Fernando declaration clearly distinguishes be-
tween official governmental acts and private, unofficial
acts. The full passage quoted in part by the majority
states:
The said taking-of Government properties was ef-
fected by a range of techniques, including but not
limited to accepting payments, bribes, kickbacks, in-
terests in business ventures, and other things of
value in exchange for the grant of government
favors, contracts, licenses. franchises, loans, and
other public benefits; expropriating outright private
property for the benefit of persons beholden to or
fronting for Mr. Marcos, the said expropriation at
times effected by violence or the threat of violence or
incarceration; arranging loans by the Philippine
Government to private parties beholden to and front-
ing for Mr. Marcos; direct raiding of the public
treasury; diverting loans, credits and advances from
other governments intended for use by the Philip-
pine Government; creating public monopolies placed
in the hands of persons beholden to and fronting for
Mr. Marcos.
Fernando declaration "8 (emphasis added). That a gov-
ernment official may obtain kickbacks, bribes, and _ in-
terests from the commission of otherwise governmental
acts—-such as granting a public monopoly or govern-
mental contract—does not convert the acquisition of
those kickbacks, bribes, and interests into official, public
acts. The majority evidently believes that whatever acts
are associated with an ostensibly governmental function
are thereby rendered official. I cannot adhere to the posi-
76a
tion that the alleged acts of receiving bribes, plundering
the treasury, and extortion are the result of “complex
political and policy choices.” Majority op. at 1485. Even
a dictator is capable of performing private, unofficial
acts.
In Jimenez v. Aristequieta, 311 F.2d 547 (5th Cir.
1962). the Fifth Circuit drew a clear distinction between
the official acts and private conduct of a former head of
state who was characterized as a dictator. The Republic
of Venezuela alleged that Marcos Perez Jimenez, the
former president of Venezuela, had committed “financial
crimes for his own private personal gain” during the
period he served as president. Id. at 552. The financial
crimes included receiving kickbacks and commissions on
government contracts, misappropriating and diverting
government payments on construction contracts and land
purchases, and securing improvements to his private es-
tate at public expense. Jd. Jimenez contended that the
acts alleged were “ ‘acts done in the exercise of or in
color of his sovereign authority’ ” and, as such, could not
be examined by the courts of this country “ ‘inasmuch as
the judicial authorities cannot review the acts done by
a sovereign in his own territory to determine illegality.’ ”
Id. at 557. Jimenez argued “that as a ‘dictator’ he him-
self would be the sovereign—the government of Vene-
zuela---and that all his acts constituting the financial
crimes with which he is charged... are acts of state or
sovereign acts, the legality of which the Act of State
Doctrine precludes [courts from adjudicating].” Jd. The
Fifth Circuit disagreed:
Even though characterized as a dictator, appellant
was not himself the sovereign—government—of Vene-
zuela within the Act of State Doctrine. He was
chief executive, a public officer, of the sovereign na-
tion of Venezuela. It is only when officials having
sovereign authority act in an official capacity that
the Act of State Doctrine applies.
Tla
Appellani’s acts constituting the financial crimes
of embezzlement or malversation, fraud or breach of
trust, and receiving money or valuable securities
knowing them to have been unlawfully obtained. . .
were not acts of Venezuela sovereignty. ... [F]ach
of these acts was “for the private financial benefit”
of the appellant. They constituted common crimes
committed by the Chief of State done in violation of
his position and not in pursuance of it. They are
as far from being acts of state as rape.
Id. at 557-58 (citations omitted) (emphasis added) ; *
see also DeRoburt, 733 F.2d at 704 (distinguishing be-
tween the official sovereign acts of the Republic of Nauru,
to which the act of state doctrine may apply, and the
private, unofficial conduct of its current president, to
which the doctrine does not apply).
The Second Circuit also made this distinction clear in
its analysis of the applicability of the act of state doc-
___trine-to the financial crimes alleged to have been com-
mitted by Ferdinand Marcos. Marcos, 806 F.2d at 358-
59. As in Jimenez, Marcos was characterized as a “dic-
tator . . . with personal control over [the] government
and economy.” Jd. at 348. The Second Circuit held:
Appellants simply fail to make the crucial distine-
tion between acts of Marcos as head of state, which
may be protected from judicial scrutiny even if il-
+The majority apparently concedes the distinction drawn in
Jimenez between official and unofficial acts of a dictator, but dis-
tinguishes Jimenez on the ground that judicial review in that case
was permitted because of the existence of an extradition treaty.
Majority op. at 1484 n.12. I agree, but do not see the point.
Jimenez still supports the distinction between official and unofficial
acts, even for a dictator. The existence of a treaty is relevant to
‘the separate question of embarrasement of our executive branch,
discussed below. I do not understand the majority to suggest that
the absence of a treaty in this case requires invocations of the act
of state doctrine. We must look to other indications from our execu-
tive branch. See infra Section I.C.
78a
legal under Philippine law, and his purely private
acts. Although the distinction between public and
private acts of a foreign official may be difficult to
determine, our courts have repeatedly done so.
Id. at 359 (‘citations omitted).
Therefore, to the extent that the majority holds that
the act of state doctrine necessarily bars inquiry into
Marcos’ acts because of his status as a “dictator,” I can-
not agree. The doctrine applies only to his official acts.°
As a descriptive matter, Marcos and his agents no doubt
exercised broad power, especially after the imposition of
martial law in 1972. But the appropriate inquiry is not
to invoke the talismanic label “dictator.” The district
court should determine which of the challenged acts were
official and which were not. Only by doing so can the
court determine the extent to which the act of state doc-
trine may apply. The majority’s analysis sweeps them
~ all together.
B. The Burden of Asserting the Act of State Doctrine
The majority also fails to take heed of the well-
established rule that the burden of establishing that par-
ticular conduct constitutes an “act of state’ subject to
the act of state doctrine is on the party invoking the
defense. See Dunhill, 425 U.S. at 695, 96 S.C. at 1861;
Marcos, 806 F.2d at 359. In granting the preliminary
injunction against Marcos in the Second Circuit case,
District Judge Leval held:
[T]he applicability of the doctrine is not demon-
strated on the present record. Defendants have made
5 The Philippine Constitution itself recognizes a distinction be-
tween official and unofficial acts of the president. It affords the
president complete immunity from any suit brought during his
tenure, but provides immunity from suit after he leaves office only
for ‘official acts done by him or by others pursuant to his specific
orders during his tenure.”” Philippine Const. art. VII, § 17.
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79a
no showing that the acts alleged against Ferinand
Marcos, much less Imelda Marcos, would necessarily
be protected from United States court adjudication.
New York Land Co. v. Republic of the Philippines, 634
F. Supp. 279, 289 (S.D.N.Y.), aff'd, Republic of the
Philippines v. Marcos, 806 F.2d 344 (2d Cir. 1986). The
Second Cireuit agreed. “Since the burden of proof is on
the party is on the party invoking the act of state de-
fense, appellants must ultimately demonstrate that the
challenged acts of Marcos were in fact public acts ‘the
allegations of the complaint covering both public and
private acts).” Marcos, 806 F.2d at 359-60 ‘citations
omitted). The Second Circuit concluded:
In short, the district court will necessarily scru-
tinize the acts that The Republic challenges. De-
fendants must present evidence that these acts were
public (‘e.g., that Marcos’s wealth was obtained
through official expropriation decrees or public mo-
nopolies). The court then must decide whether to
examine these public acts in light of the considera-
tions discussed above. If it chooses not to do so—
and the determination whether the Marcoses obtained
their wealth illegally . . . is impossible without such
scrutiny—the court should consider deferring to a
Philippine adjudication that comports with due proc-
ess. But in any event, at this stage we agree with
the position of the United States ... that the de-
fendants have not discharged their burden of prov-
ing an act of state. Only after that burden is met
do other relevant factors need to be considered.
Td. at 359.
In this case, Mareos and his co-defendants have not
pointed to even a single official sovereign act by which
Mereos has acauired any portion of the funds used to
purchase the- real property and invest in the accounts at
issue here. Instead, Marcos merely asserts that al/ of
80a
his conduct during the past twenty years, private and
sovereign alike, is subject to the act of state doctrine.
The majority’s assertion that Marcos is a “dictator”
whose acts are insulated from judicial scrutiny eviscer-
ates the defendants’ burden of establishing the applica-
bility of the defense to particular acts. Indeed. most of
the majority’s analysis proceeds on the theory that the
plaintiff must show that the doctrine does not apply.
Majority op. at 1482-88. At this stage of the proceed-
ings, Marcos and his co-defendants have not met their
burden of establishing that the challenged acts were offi-
cial acts to which the act of state doctrine may apply.
C. The ASsertion of Embarrassment to the United
States Executive Branch
The act of state doctrine was “judicially created to
effec‘ uate general notions of comity among nations and
-among the respective branches of the Federal Govern-
ment.” First Nat’l City Bank, 406 U.S. at 762, 92 S.Ct.
at 1811. “{T]he doctrine was not compelled by the na-
ture of sovereignty, by international law, or by the text
of the Constitution. ‘Rather, it derives from the judi-
ciary’s eencern for its possible interference with the con-
duct of foreign affairs by the political branches of the
governmnt.’” DeRoburt, 733 F.2d at 703 (cuoting
Timher'ane Lumber Co. v. Bank of America, 549 F.2d
597, 605 (9th Cir. 1°76) (citatiors omitted! : see also
Sabbatino, 376 U.S. at 421-23, 84 S.Ct. at 936-38.
Particularly disturbing in the majoritv’s analysis are
the bare essertions that invocation of the act of state
doctrine is necessary to prevent embarrassment to the
executive branch of the United States by this litigation.
Majority op. at 1482, 1386 n.14, 1486. The majority
states that “lolur decision will be relatively innocuous
only if it is in favor of the plaintiff, if our gove:nment’s
attitudes toward the Philippines is unchanged and if the
current Philippine government is still in power.” Jd. at
8la
1482. It asserts that to permit this action to proceed in
a United States court may embarrass the United States
because the “pendulum” of power between President
Aquino and Mr. Marcos or “some third force” may
“swing again.” Jd. at 1486.
Putting aside the likelihood of these political predic-
tions actually coming to pass, it is not clear why the
majority believes that such potential embarrassment would
outweigh the certain, immediate embarrassment in our
relations with the current Philippine government if our
courts were to shut the door to the Philippines’ request
for adjudication of the claims. “[T]he act of state coc-
trine reflects respect for foreign states, so that when a
state comes into our courts and asks that our courts
scrutinize its actions, the justification for application of
the doctrine may well be significantly weaker.” ° Marcos,
806 F.2d at 359. “The balance of relevant considerations
may also be shifted if the government which perpetrated
the challenged act of state is no longer in existence...
for the political interest of this country may, as a result,
be measurably altered.” Sabbatino, 376 U.S. at 428, 84
®In another Marcos case, the Fourth Circuit recently rejected
the Marcoses’s argument that they should be entitled to head-of-
state immunity, a doctrine of custoimary international law. The
Fourth Circuit explained:
Head-of-state immunity is founded on the need for comity
among nations and respect for the sovereignty of other nations;
it should apply only when it serves those goals. In this case,
application of the doctrine to Ferdinand and Imelda Marcos
would clearly offend the present Philippine government, which
has sought to waive the Marcos[es]|’ immunity, and would
therefore undermine the international comity that the immunity
doctrine is designed to promote. Our view is that head-of-state
immunity is primarily an attribute of state sovereignty, not an
individual right. Respect for Philippine sovereignty requires
us to honor the Philippine government’s revocation of the
head-of-state immunity of Mr. and Mrs. Marcos.
In re Grand Jury Proceedings: John Doe #700, 817 F.2d 1108,
1110-11, (4th Cir. 1987).
ie)
4 -
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S.Ct. at 940. In such a ease, “the danger of interference
with the Executive’s conduct of foreign policy is surely
much less than the typical case where the act of state is
that of the current foreign government.” Marcos, 806
F.2d at 359. If at some future time a new political
upheaval should bring Marcos back to power, the district
court could then reassess the balance of considerations
determining the applicability of the act of state doctrine.
Regardless of the merits of the majority’s speculation
as to the foreign policy consequences of any action or
inaction by our courts, I believe that such speculation
is entirely inappropriate in this case. The majority opin
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