# Appendix — Marcos v. Republic of Philippines

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Appendix
- **Published:** January 1, 1989
- **Citation:** 490 U.S. 1035

## Text

Supierne Court, U.S,
kFiLED

| 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. > ‘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.

r 7 —
I? Lender . Hernandez 168 U.S. 250 ale 18
) ) a, ~ ] }
Ss. 83, 84, 42 L.] | 156 189% ne Co p NOUNCE
Defer ts ¢ 1 tl Republ failed q
f ler nt Ss pl i facie RICO case: the comn
fF . ex ( of a e} I ( }
rat r } ittern f r le oot ) 4 t T}
( d nt.ff failed t the agrecr ! !
t ) I ) nd tha tT} ( y ry
} ) T Y 1 T Terpris
i
> 1 1
1) ( t the Rey ,
Fa ’
) ) } ) , rs

Sa

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. ) rr
Zepada v. INS, 753 F.2d 719 (9th Cir. 1983) -......
Statutes:
Racketeer Influenced and Corrupt Organizations
Oe ere, Oe en OF SOG. ........................0.. 2...
BY noises nisasnnnnncnmronzncesssaccccumes
I eo snack nascar ectvssnencnasienes
I i ncomace gad aaanbannwesinsoenste
cg da datcesadscntonaicnaddannnsaasienidwans
pc nhnannad vesncshccnasnnnnsianante
ons gravae savannas inienaeananiceenseceas
Miscellaneous:
13B C. Wright, A. Miller & E. Cooper, Federal
Practice & Procedure, § 3567.1 (1984) —..............
D, Dobbs, Remedies $2.12 (1978) ........-....-..............
Restatement (Second) of Conflict of Laws (1971) :
acess chi diioncinamennnsnsanaceies
Tks dances an aienniweonninnnsnaun®
ie i ctcissicanenntaannsninesasente
ee goa po snip snnstlhnmsinnnaonninsicbaanases

Restatement agar of wiciien Relations Law
(Tent. Draft No. 7, 1986) :

110a

IN THE UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT

No. 86-6091, 86-6093

REPUBLIC OF THE PHILIPPINES,
Plaintiff-A ppellee,
v.

FERDINAND E. MARCOS, et al.,
Defendants-A ppellants.

On Appeal from the United States District Court
for the Central District of California

BRIEF FOR UNITED STATES OF AMERICA
AS AMICUS CURIAE

This brief is filed in response to the Court’s Order of
December 7, 1987 requesting the United States to file a
brief as amicus curiae in this case “addressing the act of
state doctrine.”

The United States appreciates this oppor tunity to pre-
sent its views to the court. As set forth below (sce pp.
30-37, infra), we believe that the act of state doctrine
is both narrower and more precise than the panel’s opin-
ion suggests. We also believe that, because of the un-
developed state of the record, it is not possible at this

llla

stage to determine to what extent the act of state doc-
trine may apply to this case. For those reasons, it is our
view that the act of state doctrine does not have any
major bearing on the question before the court on this
appeal: whether the preliminary injunction should be
affirmed.

It would not be appropriate, however, for us to leave
the matter there. The district court concluded that there
was a “substantial likelihood” that plaintiff would be
entitled to an accounting and a constructive trust cover-
ing all of the defendants’ assets, and on that basis pre-
liminarily enjoined the defendants from transferring any
Marcos property anywhere in the world. In our view, the
record before the district court did not furnish a basis
on which that court could find a “substantial likelihood”
that plaintiff would recover in that court on the non-
federal claims that constitutes the bulk of its claim for
relief. In these circumstances, for reasons we set forth
below, we do not believe it was appropriate to issue pre-
liminary relief of the scope granted by the district court.

The pane! reversed the injunction essentially on the
ground that plaintiff’s claim would be barred by the act
of state doctrine. We believe this, too, was error at this
stage of the proceedings; it is not now clear that any
“act of state’ will be involved in this case, or that the
doctrine will bar its adjudication. However, we believe
that some of the concerns expressed by the panel about
the amenability of plaintiff’s claim to resolution in the
district court do bear on the “likelihood of suecess’® and
should be considered at. this stage of the case. Such con-
cerns more properly fall under the headings “‘jurisdic-
tion,” “comity,” and “forum non conveniens.” Accord-
ingly, we first discuss below those issues which bear more
directly on the present question and follow with a de-
tailed interpretation of the act of state doctrine.

112a

STATEMENT OF THE CASE

1. Statement Of Facts And Course of Proceedings
Below.

On June 16, 1986, plaintiff Republic of the Philippines
filed the present civil action in the United States Dis-
trict Court for the Central District of California against
Ferdinand E. Marcos, the former President of the Philip-
pines, Imelda Marcos, and various other individuals and
corporations. Complaint © 4-11, ER 4-7.!. The complaint
asserted jurisdiction based on the federal question stat-
ute, 28 U.S.C. § 1331, and charged all defendants (except
Lloyds Bank) with three civil violations of the Racketeer
Influenced and Corrupt Organizations statute (“RICO”),
18 U.S.C. $$ 1961 et seg. Complaint 9% 2, 27-41, ER 3,
13-21. The complaint also alleged various pendent “state
law” claims against some or all of the defendants, includ-
ing conversion, fraud and deceit, constructive fraud, con-
structive trust, breach of implied contract, quiet title,
accounting and subrogation. Complaint % 42-86, ER 21-
31. The complaint sought treble damages and attorneys’
fees under RICO (18 U.S.C. § 1964(e)), compensatory
damages on the “state law” claims, an accounting, dis-

' All references to the Excerpts of Record filed by Appellants
herein will be referred to as “ER.”

Other individual defendants include Ramon Azurin, Gregorio
Araneta, Antonio O. Floirendo and Diosdado Ordonez. Jd. The
complaint also names the following corporate defendants: Calmo
Holdings, N.V., Krodo Properties, N.V., and Ancor Holdings. N.V..
ail alleged to be Netherlands Antilles corporations; Al Djebel
Corporation, a corporaticn alleged to be organized under the laws
of the Cayman Islands; and Lloyds Bank of California, a corpora-
tion organized under the laws of California. Jd. Plaintiff Republic
has stated that Lloyds Bank “is not alleged to have conspired or
participated in the other defendants’ scheme to defraud the Philip- |
pines” but is included by reason of its possession of certain funds
(two bank accounts) to which plaintiff contends it is entitled to
recover. Complaint © 61-69, ER 26-27 (constructive trust); Ap-
pellee’s Brief, at 5.

|

113a

gorgement of profits and other equitable relief, punitive

and exemplary damages, the costs of suit and ‘such
other relief 2s the Court may deem proper.’ Complaint,

Prayer For Relief, ER 31-36. While the Complaint sought
recovery of specific property alleged to be worth $4.8 mil-
lion and located within the district court’s jurisdiction,
the bulk of the property claimed ($1.5 billion) was al-
leged to be located in Switzerland. Complaint ‘" 16-24,
ER 9-12."

Plaintiff sought preliminary relief, alleging, inter alia,
that the assets held by or on behalf of Mr. and Mrs.
Mareos (some of which assets were specifically identi-
fied) “constitute unexplained wealth and would be ex-
tremely difficult, if not impossible, to explain from lawful
sources”’—7.¢., that substantially all of the Marcoses’ pres-
ent “‘net worth,” after subtracting their reported ‘net
worth” when Mr. Marcos took office, their salaries as
Philippine government officials and a reasonable return
thereon, must have been obtained illegally in contraven-
tion of plaintiff's rights. Alas Declaration ©" 3-5, ER
196, 197-200; Complaint © 12-14, ER 7-8. In support
of this claim, the plaintiff filed with the district court
copies of the Marcoses tax returns (ER 203-297), a cer-
tification as to their salaries as Philippine government
officials (ER 298), and a variety of documents purport-
ing to show assets held by the Marcoses or on their behalf
throughout the world. These documents included Notes
and Deeds of Trust to properties between the corporate
and or minor individual defendants and various third
parties (see ER 340-51, 391-405, 837-42), powers of

-The same day it filed its complaint, the Republic obtained a
temporary restraining order from the district court (Pfaelzer,
D.J.) restraining defendants from, inter alia: (1) transferring,
dissipating or otherwise disposing of any assets held by or on
behalf of Ferdinand or Imelda Marcos; and (2) destroying, con-
cealing or otherwise disposing of any of defendants’ records. June
16, 1986 Temporary Restraining Order And To Show Cause Re:
Preliminary Injunction, ER 59-64.

ll4a

y (ER 387-90, 724), various and sundry bank
records (ER 407-18, 725-38), and many pleadings and
orders from other civil actions filed by plaintiff against
defendants in other jurisdictions (ER 790-829, 843-56,
864-99), the latter of which were supplemented in some
cases by news articles about defendants’ claimed “wealth”
(e.g., ER 814-20).

attorney

On June 25, 1986, the district court, after a hearing,
entered a global preliminary injunction against defend-
ants. June 25 Order Issuing Preliminary Injunction, ER
47-58. The court held that it had subject matter juris-
diction under RICO because “plaintiff has adduced suffi-
cient evidence that defendants have committed predicate
acts of racketeering in the United States and in this ju-
dicial district” and “have operated, conducted the affairs
of, and invested in enterprises in violation of RICO.”
June 25 Order © 1.4 & B., ER 2-3. The court also found
that it had “pendent jurisdiction over plaintiff's other
claims under state and foreign law” because they “arise
from a common nucleus of operative fact and are so in-
tertwined with other matters pending before this court
as to make the exercise of such jurisdiction * * * ap-
propriate.” June 25 Order © 2, ER 4. Finally, the court
held that issuance of a preliminary injunction was “ap-
propriate on plaintiff's pendent claims, including * * *
those for constructive trust and accounting” because:
(1) “there is a substantial likelihood that the Philippines
will prevail in this action [and] be entitled to an ac-
counting, and * * * a constructive trust”; (2! “there is
a substantial danger [that defendants|] would transfer or
eoneen! funds. pronerty, books and records” resulting in
“irreparabl{e] injury” to plaintiff Republic, for which it
lacks an adequate remedy at law; and (3) “an injunction
is necessary to preserve the status quo.” June 25 Order
© 5, ER 50-52. The district court therefore ‘restrained
and enjoined” defendants ‘and “those persons in active
concert or participation with them who receive actual

_———— ee Ul

115a

notice of this order’), inter alia, ‘‘from, directly or in-
directly:

transferring, conveying, encumbering, dissipating,
converting, concealing, or otherwise disposing of in
any manner any funds, assets, claims or other prop-
erty or assets owned or controlled by, or in the
possession or custody of such individuals or entities,
held by or in any way on behalf of or for the benefit
of Ferdinand or Imelda Marcos * * *.”

June 25 Order, ER 53-54.* The injunction applied to the
property of the Marcos defendants that allegedly is situ-
ated in Switzerland, or elsewhere in the world, in addition
to the United States. On June 26 and 30, 1986, de-
fendants filed Notices of Appeal to this Court from the
district court’s order. ER 1141-47.

2. The Panel Decision.

On June 4, 1987, a panel of this Circuit (Kozinski and
Hall, JJ., with Nelson. J., dissenting) vacated the pre-
liminary injunction and ordered the case remanded for
further proceedings. Republic of the Philippines v. Mar-
cos, 818 F.2d 1473, 1490 (9th Cir. 1987). In his opinion,
Judge Kozinski first determined that the district court

3 The district court’s order also restrained defendants, et al.,
from taking possession of certain property held by the Customs
Service, from transferring or otherwise disposing of certain identi-
fied pieces of property, and from destroying, concealing or otherwise
disposing of any books, records, etc. pertaining to the properties
in question or defendants’ activities. June 25 Order, ER 52-55.
The Order did permit Ferdinand and Imelda Marcos to use funds or
assets in their possession (other than certain specifically identified
property) “to pay attorneys’ fees and normal living expenses.” /d.

On July 11, 1986, an earlier panel of this Court (Fletcher,
Nelson and Thompson, JJ.) denied appellants’ motion for both a
stay of the preliminary injunction and a stay of the discovery
ordered by the district court, pending appeal. ER 1148-49. See
June 25 Order, ER 55.

ll6a

had subject matter jurisdiction over the action by virtue
of the RICO claims. Viewing the complaint under the
“exceedingly generous” standard applicable to motions to
dismiss, Judge Kozinski held that the RICO claims were

eee

not so Wholly insubstantial and frivolous’”* as to
warrant dismissal. 818 F.2d at 1477-78." Judge Kozinski
nevertheless held that the district court erred in issuing
the injunction because the plaintiff Republie could not
establish even a “fair chance of success on the merits”
on its claims as framed under the “net worth” theory.

To succeed under those claims as they are now pre-
sented, plaintiff would have to establish that prac-
tically 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 plaintiff's net worth
analysis, and with it, its ease. In these circum-
stances, We cannot say that the Republic has the
“fair chance of suecess on the merits’ needed to re-
mand for a balancing of hardships.

SIS F.2d at 1490 quoting Benda v. Grand Lodge of the
Int'l Assn of Machinists, 584 F.2d 308, 315 (9th Cir.
17s), cert. dismissed, 441 US. 937 (1979). Judge Hall

concurred in Judge Kozinski’s opinion, except for the

> Jackson Transit Auth. Vv. Local Division 128

t
n.o (1982) (quoting Bell Vv. Heod, 327 U.S. O78, 682-83 (1946

117a

finding of subject matter jurisdiction. She concluded
that plaintiff had not demonstrated the requisite “ad-
verse effects” on the economy of the United States to
sustain the jurisdiction of the district court. 818 F.2d
at 1489-90. Judge Nelson concurred with Judge Kozinski
on subject matter jurisdiction but dissented from the
vacation of the preliminary injunction. She concluded
that “fat this stage of the proceedings, the act of state
doctrine does not have a negative impact on the calculus
of the Philippines’ likelihood of success” and the district
court did not abuse its discretion in issuing the prelimi-
nary injunction. 818 F.2d at 1499, 1502. On November
16, 1987, this Court ordered that this case be reheard
en bane and withdrew the previous three-judge panel
assignment.

SUMMARY OF ARGUMENT

The district court concluded that ‘there is a substan-
tial likelihood that the Philippines will prevail in this
action” and therefore “‘be entitled to an accounting for,
and to impose a constructive trust upon” all property
held by, on behalf of, or for the benefit of Ferdinand or
Imelda Marcos wherever located. June 25 Order, ER 51,
53-54. Based on that conclusion, the district court issued
the preliminary injunction, applicable to assets located
anywhere in the world, that is before this court for re-
view. In our view, the record before the district court
did not justify a finding of “substantial likelihood” that
plaintiff will sueceed in this suit in federal district court
in California with respect to substantial portions of its
claims as presently framed, and, hence, did not warrant
an injunction of the scope issued.

A substantial probability of success on the merits is
the sine qua non of preliminary injunctive relief. The
district court record now before this court is extremely
sketchy and provides little detail on the nature of plain-
tiff’s claims against the Marcos defendants. The un-

enemas

118a

developed state of record prevents a complete analysis of
plaintiff’s claims or the district court’s power to adjudi-
cate them. The factual assertions presented remain non-
specific at this stage of the proceedings and, in our view,
are simply insufficient to justify a preliminary injunc-
tion of the scope issued by the district court.

When a preliminary injunction is sought in federal
district court on the basis of a claim on the merits in
that court, the ‘likelihood of success’’ inquiry includes the
question whether the federal court has the power to hear
the suit, and whether its adjudication of the claim is
appropriate as a matter of prudential doctrines of major
importance. The asserted basis for the district court’s
jurisdiction in this case is the Racketeer Influenced and
Corrupt Organizations Act (“RICO”), plus pendent ju-
risdiction. We agree with the district court and the
panel that certain of the RICO claims appear sufficient
to withstand a motion to dismiss those claims. But the
portion of the property at issue that is associated with
claims that may be cognizable under RICO appears thus
far to be only a small portion of the case. The bulk of
plaintiff's claims are contained in “state law’’ counts,
which appear, in fact, to arise under the substantive law
of the Philippines or perhaps other nations. (We refer
to these, for convenience, as the nonfederal claims. i

The record before the district court, which did not
include any detailed specification of the factual basis for
the bulk of the nonfederal claims, did not make it pos-
sible even to analyze the extent to which those claims
are properly before the court. First, it is not clear to
what extent the bulk of plaintiff’s nonfederal claims arise
from a “common nucleus of operative fact” with the
federal claims, as required for the exercise of pendent
jurisdiction. Moreover, on the present record, it is not
clear that the nonfederal claims will not so overwhelm
the federal claims as to make federal jurisdiction in-

119a

appropriate. The fact that the claims appear to arise
largely under foreign law may also weigh against the
exercise of pendent jurisdiction.

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 nonfederal claims.
The court’s capacity to do so fairly and expeditiously and
without offending the sensibility 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 non conveniens.

The act of state doctrine seems to us to have little or
no bearing on this case at this stage of its development.
The doctrine provides, in general, that the validity of
specific acts of a foreign sovereign is not subject to chal-
lenge in oar courts; the circumstances of a particular
case may, however, make that general principle inap-
plicable. On the present record, it is not clear that any
act of state—an act of a sovereign within its territorial
jurisdiction on matters 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
proceed. Under these circumstances, the bearing, if any,
of the act of state doctrine on this case should be deter-
mined only after further development of the case on the
merits.

120a
ARGUMENT

I THE RECORD BEFORE THE _ DISTRICT
COURT DID NOT FURNISH AN ADEQUATE
BASIS FOR IT TO FIND A “SUBSTANTIAL
LIKELIHOOD” OF SUCCESS ON THE BULK
OF THE PLAINTIFF’S CLAIM SO AS TO JUS-
TIFY A PRELIMINARY INJUNCTION OF
THE SCOPE ENTERED.

The district court based its global preliminary injune-
tion on the finding that “there is a substantial likelihood
that the Philippines will prevail in this action.” June 25
Order, ER 51. In reaching this finding, the district court
failed to give sufficient consideration to several factors
that, on the present record, may pose substantial ob-
stacles to plaintiff's succeeding, in that court, on most of
its claim en the merits. Taken together, these factors
substantially reduce the likelihood that plaintiff will suc-
ceed on the merits with respect to the bulk of its claim
as presently pleaded.’ Accordingly, in our view, the
district court erred in concluding that plaintiff had shown
a “substantial likelihood” of suecess on the merits as to
the bulk of its claim sufficient to warrant an injunction
of the scope issued.

A. Factual And Legal Underpinnings Of Plain-
tiff’s Case.

l. Standards For Preliminary Relief. It is axiomatie

that a plaintiff must make the requisite showing of like-

“We emphasize again that our analysis is based upon the case
as pleaded in the complaint upon which the district court entered
the preliminary injunction. Very different questions would be pre-
sented by: (1) a complaint making claims whose resolution in the
district court could be more specifically analyzed; (2) a complaint
seeking to recover more specifically identified peoperty within the
jurisdiction of the district court; or (3) a request for preliminary
relief as to property located within the jurisdiction of the district

court pending an adjudication elsewhere of the bulk of plaintiff's

claims against the defendants. Compare Republic of the Philippines

V. Marcos, 806 F.2d 344, 361 (2d Cir. 1986

121la

lihood of success on the merits with respect to a sub-
stantial portion of its claim to warrant preliminary
relief of the scope requested. See Amoco Production Co.
Vv. Village of Gambell, —— U.S. ——, 107 S.Ct. 1396.
1404 n.12 (1987); University of Texas v. Camenisch,
451 U.S. 390, 392 (1981); Doran v. Salem Inn, Inc., 422
U.S. 922, 931 (1975).* A plaintiff who makes a suffi-
cient showing of likelihood of entitlement to recover iden-
tifiable assets in specie may be entitled to preliminary
relief to protect those assets, and a plaintiff who makes
a sufficient showing on a substantial damage claim may
be entitled to preliminary relief to protect the enforce-
ability of that claim; on the other hand, a small claim.
however valid, will not support a world-wide preliminary
injunction against a wealthy defendant where the injunc-
tion is much broader than necessary to protect the claim.
As this court has stated in another context, “[a] district
court’s power to issue a preliminary injunction should
not be broader in scope * * * than its power following

* Plaintiff argues that a preliminary injunction can be sustains d
nm some lesser standard of probable success, such as whether
“serious questions are presented.” See Brief of Plaintiff-Appellee,
at 56-57; Petition For Rehearing And Suggestion For Rehearing
En Bane, at 7 & n.5; Reply Brief In Support Of Petition For Re-
hearing And Suggestion For Rehearing En Bane, at 5 & n.2. We
disagree and believe that the proper standard is whether plaintiff
has shown “a likelihood of success on the merits.” See Amoco
Production Co. Vv. Village of Gambell. U.S. , 107 S.Ct. 1396,
1404 n.12 (1987) and cases cited pp. 15 supra. We also question

”

Whether a preliminary injunction, issued in the district court’s
discretion after consideration of both the probabilities on the merits
and the risk of harm to the parties, could be sustained on a entirely
different legal standard than that explicitly adopted by the district
court in granting plaintiff’s request. In any event, it would be

entirely inappropriate to issue a global injunction against any

defendant without requiring the plaintiff to show at least “a fair
chance of success on the merits.” Sierra On-Line, Ine. Vv. Phoenix
Software, Inc., 739 F.2d 1415, 1421 (9th Cir. 1984) quoting Benda
V. Grand Lodge of the Int'l Ass'n of Machinists, 584 F.2d at 315.
“No chance of success at all, however, will not suffice.” Jd.

a full trial on the merits.” Zepeda y. INS, 753 F.2d 719,
728 n.1 (9th Cir. 1985).’

2. State Of The Record. The record before the district
court did not set forth the factual basis for more than
a small fraction of the plaintiff’s claim. Instead, plain-
tiff relied on a showing of the Marcoses’ unexplained
‘net worth” to demonstrate that plaintiff will eventually
be able to prove its entitlement to recover substantially
all of that property.

However useful the “net worth” approach may be as
a means of esiimating the size of the Marcoses’ alleged
misdeeds, this approach makes it extraordinarily difficult
to estimate how much of plaintiff’s claim is properly
before the district court. That court simply had no way
of judging, for example, how much of the specific mis-
conduct that will eventually be alleged actually occurred
in or had a nexus to California ‘or the United States) ;
to what extent plaintiff or individual Philippine citizens
whom plaintiff seeks to represent were injured by actions
having such a nexus; how much of the claimed property
is in or ever passed through the United States; what
“common nuclei of operative fact” exist between plain-
tiff’s (and its citizens’) claims arising under U.S. federal
law and other claims over which plaintiff seeks to have
the court exercised pendent jurisdiction; what states’ or
countries’ substantive law is applicable to what portions
of the claims; where witnesses and evidence bearing on
many of the claims are likely to be located; or what
foreign countries’ sensibilities may be affected by the
relief requested on the merits. Compounding the prob-

9 This court's standard of review of issuance of the preliminary
injunction is whether the district court abused its discretion by
applying either an erroneous !egal standard or reaching a clearly
erroneous finding of fact. Regents of Univ. of California v. ABC,
Inec., 747 F.2d 511, 515 (9th Cir. 1984). Legal issues are, of course,
reviewed de novo. International Molders’ & Allied Workers’ Local
Union No. 164 V. Nelson, 799 F.2d 547, 551 (9th Cir. 1986).

123a

lems resulting from lack of other factual allegations is
the difficulty that plaintiffs offered no explication of
Philippine law-—which, as foreign law, must be alleged
and proven—that allegedly rendered unlawful the Marcos
defendants’ acquisition of the property in question from
the Philippines and its people. Nor does the complaint
contain allegations concerning other foreign law that may
be applicable, such as that of Switzerland, where most
of the Marcos defendants’ assets are said to be located.
These features of the complaint before the district court
when it entered the preliminary injunction make it im-
possible to estimate what difficulties the court may en-
counter in resolving substantive legal issues.

3. Basis For Federal Jurisdiction. To bring the issues
which the present appeal presents properly into focus, an
analysis of the source of the substantive rights that form
the basis for plaintiff’s claims—and the relationship of
the bulk of those claims to the jurisdiction of the federal
courts—is necessary.

Under our federal system, the federal courts are courts
of limited jurisdiction, and the States ordinarily have
authority only with respect to matters having an effect
within their borders. These limitations on the exercise of
jurisdiction serve to confine federal and state courts to
matters with which they may properly be concerned and
that are presented to them in a manner that is appro-
priate for judicial resolution under our system of sepa-
rated powers. The plaintiff in this action seeks to re-
cover, in the aggregate, all of the assets of the Marcos
defendants, which it contends were improperly obtained
from plaintiff and those Philippine citizens who were the
victims of the defendants’ actions over the course of 20
years. However, each separate transaction or occurrence
by which the defendants allegedly acquired a given por-
tion of the Marcos defendants’ current assets from plain-
tiff or one or more Philippine citizens presumably would
give rise to a separate claim for damages and or return

i eee

124a

of property. Some of those distinct claims might have
a nexus to the United States ‘and to California, the
forum state), and some might not. For these reasons,
it is necessary, solely as a matter of the domestic law
of the United States applicable to judicial proceedings
generally, to determine which of the claims comprising
the plaintiff's aggregate submission actually may be
brought in the particular court whose jurisdiction the
plaintiff has invoked.

Subject matter jurisdiction in this case is invoked
under the federal question statute, 28 U.S.C. 1331, based
on claims arising under the Racketeer Influenced and
Corrupt Organizations statute (“RICO”), 18 U.S.C.
$1961 et seq., plus pendent jurisdiction. Complaint © 2,
ER 35. The RICO claims include allegations of: (1)
transportation and or receipt of stolen property in inter-
state and or foreign commerce in violation of 18 U.S.C.
$$ 2314, 2315 (i.e, transfer of stolen funds for acquisi-
tion of both real and personal property within Califor-
nia}; (2) mail and wire fraud in interstate and or for-
eign commerce in violation of 18 U.S.C. $$ 1341, 1343
i'i.e., use of mail and wire communications in connection
with investments in California of funds from the alleged
fraudulent scheme!; (3) investment of proceeds derived
from a pattern of racketeering activity in other enter-
prises in interstate and or foreign commerce (including
property and bank accounts in California); and (4)
conspirecy to commit violations ‘including certain overt
acts allelgedly committed in California'. Complaint
"7 18-24, 27-32, 34-37, 38-41, ER 13-21. The district
court and the panel concluded that the pleadings set
forth a basis for RICO jurisdiction sufficient to avoid
dismissal. We agree. See Jackson Transit Auth. v. Local
Division 1285, 457 U.S. 15, 21 n.6 (1982); Bell v. Hood,
327 U.S. 678, 682-83 (194611. See also Sedima, S.P.R.L.
Vv. Imrex Co., Ine., 473 U.S. 496 & n.14 (19851; Sun Sav.
& Loan Ass’y V. Dierdorff, 825 F.2d 187 (9th Cir.
1987); United States v. Wyatt, 807 F.2d 1480, 1483 ‘Sth

“ 125a

Cir. 1987); Schreiber Distributing Co. v. Serv-Well Fur-
niturve Co., 806 F.2d 1393 (9th Cir. 1986) ; United States
v. Tiile, 729 F.2d 615 (9th Cir.), cert. denied, 469 U.S.
845 (1984).’" To the extent, however, that plaintiff’s al-
legations concern activities lacking any nexus to the United
States, we do not believe such allegations could provide
a basis for federal jurisdiction as such. See Timberlane
Lumber Co. v. Bank of America, N.T. & S.A., 549 F.2d
597, 608-15 (9th Cir. 1977)."

Thus, most of plaintiff’s claims as pleaded do not prop-
erly arise under RICO. Nor do they have any articulated
connection with the Central District of California—or,
indeed, the United States. Substantially all of the con-
duct by which the defendants are alleged to have actually
deprived plaintiff and the people of the Philippines of
their property took place in the Philippines. Complaint
©], 12-14, 16-17 (1.5 billion dollars acquired through
fraudulent conversion of properties in the Philippines de-
posited in Swiss banks), ER 2, 7-8, 9. While plaintiff has
alleged certain conduct in the United States involving
$4.8 million worth of property located within California
that was acquired with the proceeds of unlawful conduct
in the Philippines (Complaint ©" 6, 9, 19-24, ER 4-7,
9-11), that is less than 1‘? of the total amount claimed by
the plaintiff in this case. Almost all of the property
claimed by the Republic is allegedly located in Switzer-
land. Complaint * 6, ER 4-5."°

10 However, the ability to survive a motion to dismiss, under the
Ninth Circuit’s standard, does not preclude the possibility that the
RICO claims will later be dismissed on jurisdictional grounds—
a possibility that may affect the overall assessment of plaintiff’s
likelihood of success on the merits.

11 We, of course, do not suggest that conduct occurring outside
the United States cannot properly be regarded as part of the activi-
ties of a RICO enterprise for purpose of a criminal prosecution in
the United States.

12.$50 million in illegally acquired property is allegedly located in
New York, where it is subject to separate proceedings brought by

126a

The vast majority of plaintiff’s claims (by dollar vol-
ume) appears to be nonfederal claims arising from con-
duct, and relating to property, situated outside of the
United States. Complaint ©" 43, 49-52, 57-59, 71-74, ER
21, 23-24, 25-26, 28. Such claims could be considered by
the federal district court only through the exercise of
pendent jurisdiction, applying state law. Moreover, they
are state law claims only in the sense that the district
court presumably should look to California’s choice of
law rules, since California cannot prescribe substantive
rules governing conduct occurring ‘and property located)
wholly outside of that state that has no effect within
that state, and the laws of the United States (including
those of the states) ordinarily do not reach conduct out-
side the United States that has no effect on the United
States and does not involve its nationals. See e.g., Re-
statement (Proposed) of Foreign Relations Law § 403
(Tent. Draft No. 7, 1986) (limitations on jurisdiction to
prescribe). See also Timberlane Lumber Co. v. Bank of
America, N.T. & S.A., 549 F.2d 597 (9th Cir. 1977);
United States v. Aluminum Co. of America, 148 F.2d
416, 443 (2d Cir. 1945) (L. Hand, J.).

Rather, where the conduct by which the defendants
allegedly acquired the property in the first instance oc-
curred in the Philippines, the lawfulness of that conduct
will presumably turn on the Philippine law governing
conversion, breach of trust, bribery, extortion or other
means by which plaintiff in the future might allege with
greater particularity that the defendants wrongfully
acquired specific property from the plaintiff or its people.
And because plaintiff aHeges that the vast majority of
the Marcos defendants’ property that represents the pro-

the plaintiff that resulted in an order of attachment. See Republic
of the Philippines Vv. Marcos, 806 F.2d 344 (2d Cir. 1986). $7 million
is allegedly located in Hawaii (Complaint © 6, ER 4-5), where, again,
it is subject to separate proceedings. Azurin V. Von Raab, 803 F.2d
993 (9th Cir. 1986).

127a

ceeds of that conduct is situated in Switzerland, the
question of the application of a constructive trust to that
property presumably must be informed by Swiss law.
Under California’s choice of law rules, either Philippine
or Swiss substantive law will govern the vast majority
of plaintiff’s claims for damages and to recover (or have
a constructive trust imposed upon) certain property. See
Restatement (Second) of Conflict of Laws ss 6, 145,
221, 222 (1971) ‘applying the law of the state with the
“most significant relationship” to the case). Compare
Complaint ‘© 12, 16, ER 7, 9.

B. Potential Obstacles Which The Court Should
Consider In Assessing Plaintiff’s Likelihood
Of Success On The Merits.

“The discussion above demonstrates that, for present
purposes, the majority of the assets plaintiff seeks to
recover should be regarded as associated with plaintiff’s
claims that do not arise directly under U.S. federal law.
The general nature of plaintiff’s allegations at this stage
of the litigation prevents a definitive analysis of the like-
lihood that plaintiff will succeed on the merits of those
claims. But at least on the present record, it appears that
considerations of pendent jurisdiction, comity, and forwm
non conveniens may pose significant obstacles and there-
fore must be taken into account in considering the pro-
priety of preliminary injunctive relief of world-wide
scope.

1. Pendent Jurisdiction. In United Mine Workers v.
Gibbs, 383 U.S. 715 (1966), the Supreme Court set forth
the analysis to be used in determining whether nonfederal
claims are properly “pendent.” The Court noted that if
the “state and federal claims * * * derive from a common
nucleus of operative fact,” then “there is power in the
federal courts to hear the whole [case],” provided that
“plaintiff's claims are such that he would ordinarily be
expected to try them all in one judicial proceeding.” 383

128a

U.S. at 725 (emphasis in original). However, the Court
emphasized that the doctrine was one “of discretion, not
of plaintiff's right” and was motivated by “considera-
tion of judicial economy, convenience and fairness to liti-
gants.” 383 U.S. at 725.

[I]f these [considerations] are not present a federal
court should hesitate to exercise jurisdiction over
state claims, even though bound to apply state law
to them. [citation omitted]. Needless decisions of
state law should be avoided both as a matter of
comity and to promote justice between the parties,
by procuring for them a surer-footed reading of ap-
plicable law. * * * Similarly, if it appears that the
state issues substantially predominate, whether in
terms of proof, of the scope of the issues raised, or
of the comprehensiveness of the remedy sought, the
state claims may be dismissed without prejudice and
left for resolution to state tribunals.

383 U.S. at 726-27 (footnotes omitted). The Court added
that “recognition of a federal court’s wide latitude to
decide ancillary questions of state law does not imply
that it must tolerate a litigant’s effort to impose upon
it what is in effect only a state law case. Once it appears
that a state claim constitutes the real body of a case, to
which the federal claim is only an appendage, the state
claim may fairly be dismissed.” 383 U.S. at 726-27.
See also 13B C. Wright, A. Miller & E. Cooper, Federal
Practice & Procedure, $ 3567.1, at 139 n.23 (1984).

It is very difficult to even analyze the application of
the Gibbs considerations to plaintiff’s nonfederal claims
on the record that was before the district court when it
entered the preliminary injunction." First, the present

13 We note the existence of case authority supporting issuance of
a preliminary injunction on pendent “state law” claims in a RICO
case brought by foreign plaintiffs against a foreign defendant.
USACO Coal Co. v. Carbomin Ene rgy, Inc., 689 F.2d 94, 96-98 (6th

129a

record does not make it clear that there is a “common
nucleus of operative fact” between the RICO claims re-
lated to property (and transactions) in California and
the bulk of the nonfederal claims.'' Second, quite aside
~from this fundamental jurisdictional prerequisite, the
pendent claims as pleaded appear to involve substantial
questions—only some of which can even be identified—
of Philippine ‘and perhaps other foreign) law for which
a foreign forum would provide “a surer-footed reading
of applicable law” than a federal district court in Cali-
fornia.'? Third, since it appears on the present record

/

Cir. 1982}. However, the injunction in that case was not of a world-
wide scope but was limited to “such proceeds or properties which
are within the jurisdiction of this Court until a court of competent
jurisdiction has determined finally the question of whether or not
the [foreign plaintiffs] have a rightful claim to the properties and
monies held * * * in this country.” USACO Coal Co. v. Carbomin
Energy, Inc., 539 F. Supp. 807, 814-15, 816 (W.D. Ky. 1982) (em-
phasis added), aff'd, 689 F.2d 94 (6th Cir. 1982).

14The RICO claims on which the district court rested its juris-
diction depend upon proof of predicate acts in the United States
and the Central District of California (ER 13-21); the “pendent’~
claims under foreign law, by contrast, do not. Moreover, although
the RICO claims based on activities in the United States (upon
which the district court relied) presumably will also depend upon a
showing that the property at issue was illegally obtained by means
of particular transactions or conduct in the Philippines, the com-
plaint and record do not establish that those transactions or conduct
underlying the RICO claims share a common nucleus of operative
facts with other transaction or occurrences in the Philippines by
which the defendants allegedly obtained the property that is in
Switzerland and that underlies most of plaintiff’s pendent claims.

15 For example, plaintiff has claimed that Mr. and Mrs. Marcos,
by reason of their positions as President of the Philippines and
Governor of Manila respectively, committed constructive fraud
against plaintiff Republic as a result of breach of the trust and
confidence repesed in them in those positions. Complaint ©© 56-60,
ER 25-26. Plaintiff also alleges that Ferdinand Marcos individually
breached an implied contract with plaintiff Republic by failing to
adhere to his oath of office. Complaint ©© 70-75, ER 27-28. See dis-
cussion of forum non conveniens, at p. 27-30, infra.

that only a small fraction of the asserts involved in the
complaint is covered by the federal claims as presently
pleaded, the present record does not provide any basis to
escape the conclusion that “state law issues” substen-
tially predominate with respect to the “terms of proof,

* * |

the scope of the issues raised, |and! the compre-
hensiveness of the remedy sought.” United Mine Workers
V. Gibbs, 383 U.S. at 726."*

2. International Comity. Considerations of interna-
tional comity present an additional reason to question
whether the district court should exercise pendent juris-
diction over plaintiff's “state law” claims and whether
the global preliminary injunction was proper. As we
have noted above, the vast bulk of the pendent claims
appears, on the present record, to require the application
of the law of a foreign country to transactions occurring
Within its own borders and in which the recovery claimed
also involves assets with no articulated connection with
the United States.

There are limits on the degree to which a United States
court should attempt to resolve such wholly foreign dis-
putes. As the Supreme Court noted in the case of Hilton

6 Tt appears that, prior to seeking federal eourt relief, plaintiff
had previously sought (and received) from a California state court
preliminary relief in the form of a temporary restraining order,
prohibiting defendants from transferring or otherwise secreting
the bank accounts in the possession of Lloyd’s Bank, which accounts
are referred to in paragraphs 22-24 of plaintiff's federal complaint.
Compare Complaint © 22-24, ER 11-12 with May 20, 1986 Order To
Show Cause Re: Preliminary Injunction and Ti mporary Restrain-
ing Order (Sup. Ct., Cty. of Los Angeles), ER 426-28 We under-
stand that plaintiff has also now filed a Complaint before thi
Superior Court of the County of Los Angeles containing allegations

that encompass all of the allegations made in its initial complaint
in this case, including the claims under RICO. Republic of th.
Philippines Vv. Marcas, No. 637903 (Sup. Ct., Cty. of Los Angeles

See Lou v. Belzberg, No. 86-6057 (9th Cir. November 12, 1987
(concurrent state and federal jurisdiction over RICO claims).

l5la

v. Guyot, “|n|o law has any effeet, of its own force, be-
yond the limits of the sovereignty from which its author-
itv is derived.” 159 U.S 113, 163-64 (1895). Rather,
there are limits to ‘‘the extent to which the law of one
nation, as put in force within its territory, whether by
executive order, by legislative act, or by judicial decree,
shall be allowed to operate within the dominion of an-
other nation * * *.” These limits—commonly described
under the term “‘comity’’—are part of the “spirit of co-
operation in which a domestic tribunal approaches the
resolution of cases touching the laws and interests of
other sovereign states.”’ See alse Societe Nationale In-
dustrielle Aerospatiale v. United States District Court
For The Southern District Of fowa, —— U.S, ——, 107
S.Ct. 2542, 2555 n.27 (1987). The primary reasons for
these limits are the avoidance of conflict and discord with
foreign authorities, see, e.g., Canadian Filter (Harwich)
Ltd. v. Lear-Siegler, Inc., 412 F.2d 577, 578 (1st Cir.
1969): Vanity Fair Mills, Inc. v. T. Eaton Co., 234 F.2d
633, 647 (2d Cir.), cert. dented, 352 U.S. 871 (1956),
and the very basic concern of “whether a decree will be
practically enforceable.” D. Dobbs, Remedies, $ 2.12, at

133 (1973).

In Timberlane Lumber Co. v. Bank of America, N.T.
& S.A., 549 F.2d 597 (9th Cir. 1977), this Court dis-
cussed the limitations on the extraterritorial exercise of
federal jurisdiction in much the same terms, noting that
au court, seeking to resolve such an issue, would have to
weigh: :

the degree of conflict with foreign law or policy, the
nationality or allegiance of the parties and the loca-
tion or principal places of business of corporations,
the extent to which enforcement by either state can
be expected to achieve compliance, the relative sig-
nificance of effects on the United States us compared

with those elsewhere, the extent to which there is

132a

explicit purpose to harm or affect American com-
merce, the foreseeability of such effect, and the rela-
tive importance to the violations charged of conduct
within the United States as compared with conduct
abroad.

549 F.2d at 614."7

These concerns are obviously relevant to this ease, al-
though their relevance is difficult to specify or quantify
on the present record. But, for example, the trial in a
federal court in California of claims concerning prop-
erty that never passed through the United States and is
now allegedly located in Switzerland—where plaintiff al-
leges most of its property came to rest. Complaint © 16,
ER 9—might well cause needless conflict with Swiss au-
thorities. And, any decree entered by the California dis-
trict court regarding that property in Switzerland may
well run into very practical problems of both acceptance
and ultimate enforcement by those same Swiss authori-
ties.'*

17 These “comity” concerns also lend additional weight to the
doubts raised above concerning pendent jurisdiction in this case.
In Vespa Of America Corp. vy. Bajaj Auto, Ltd., 550 F. Supp. 224
(N.D. Cal. 1982), the court was faced with a dispute between two
Wholly foreign corporations over a contract entered into abroad
Where plaintiff's claim under the Lanham Act the sole basis for
federal jurisdiction—involved a mere 2000 units sold in the U.S.
out of 80,000 units world-wide. Viewing plaintiff’s pendent claims
under foreign law as attempts to circumvent th limitations estab-
lished under Timberlane, the district court analyzed whether th:
vast bulk of plaintiff’s foreign law claims in that case were properly
pendent by application of the Timberlane factors. 550 F. Supp. at
229-31. Ultimately, the district court concluded that it would
adjudicate the limited federal Lanham Act claim but would remit
plaintiff to the foreign fora for resolution of its pendent claims.
Id. at 231.

1’ Thus, it is not a sufficient answer to these comity concerns to
note that the plaintiff here is the Republic of th Philippines. Fur-
ther, comity is not a matter only of foreign relations but also con-

133a

3. Forum Non Conveniens. Finally, the doctrine of
forum non conveniens also bears on the appropriateness
of adjudicating the bulk of plaintiff’s claims in the dis-
trict court. In general, the doctrine provides that when
an available, alternative forum has jurisdiction to hear
a case, a federal court may, in the exercise of its sound
discretion—considering the interests of both the litigants
and of the forum—dismiss the case and direct the plain-

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385002_0980%3A2. Public record. Not legal advice.