# Reply Brief — Fenn v. Alfadda > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385009_2888%3A3 ## Record - **Collection:** Supreme Court brief - **Document type:** Reply Brief - **Published:** January 1, 1991 - **Citation:** 502 U.S. 1005 ## Text f j Mis Ee) Bupreme vot, U.S. No. 91-641 Filipe | BUY 2 Shh IN THE 8 Sa ae : rciog OF THE CLERK Supreme Court of the WUnited St ——ein OCTOBER TERM, 1991 > RICHARD A. FENN; JAMAL RADWAN; SAUDI EUROPEAN INVESTMENT CORPORATION N.V.; ALEF INVESTMENT CORPORATION N.V.; ALEF BANK, S.A., sh Petitioners, —_vVvV.— ABDULAZIZ A. ALFADDA; ABDULLAH ABBAR; ABDULLA KANOO; ABDU- LAZIZ KANOO; YUSIF BIN AHMED KANOO (a Partnership Company); AHMED A. ZAINY, Respondents. ON PETITION FOR A WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT REPLY BRIEF IN FURTHER SUPPORT OF PETITION Of Counsel: GEORGE A. DAVIDSON* One Battery Park Plaza New York, New York 10004 (212) 837-6000 Attorney for Petitioners Jamal Radwan, Saudi European Investment Corporation N.V., Alef Investment Corporation N. V. and Alef Bank, S.A. Of Counsel: THOMAS J. KAVALER* 80 Pine Street New York, New York 10004 (212) 701-3000 Attorney for Petitioner Richard A. Fenn DANIEL H. WEINER ANDREW E. LUND HUGHES HUBBARD & REED PATRICK L. ROCCO CAHILL GORDON & REINDEL (a partnership including a professional corporation) *Counsel of Record eS TABLE OF CONTENTS THE COURT OF APPEALS REFUSED TO APPLY THE ‘‘CONDUCT OR EFFECTS’’ TEST IN ASSERTING JURISDICTION OVER RESPON- BATE MAUR Ch 5 6 6 os ce eb sc ccevessceieuess RESPONDENTS PRESENT AS ‘FACT’? UNSUP- PORTED ASSERTIONS WHICH NEITHER THE COURT OF APPEALS NOR THE DISTRICT CAPES PUG UNS 6 ic ea pense eV br cscovncees see A. The District Court Expressly Found That The Representations Upon Which Respondents Allegedly Relied Were Made In The Middle bss seks cere aane ee eees Weeweues Raven es B. Respondents’ Assertions Of Injury To SEIC Have No Relevance To Their Claim......... C. Respondents’ Assertion Regarding The Planned Investment Of Offering Proceeds Has No Relevance To Their Claim .............. D. The Individuals, Entities and Actions Involved In Respondents’ Stock Purchases Were Over- Se ES bs f'n oS 3 eb ogo oko 840 5e 8 bes CEPR MEET 64.65 Shc cae veendys sodeeesbes oeenetes TABLE OF AUTHORITIES Cases Abrams v. Donati, 66 N.Y.2d 951, 489 N.E.2d 751, 5G N.Y. B20 Tes Ca kc dan daub ecccasacw cscs Adams-Lundy v. Association of Professional Flight Attendants, 844 F.2d 245 (Sth Cir. 1988).......... Bank of Crete, S.A. v. Koskatos, No. 88 Civ. 8412 CMW) G.D.N.Y. Ase. Fe BOs oce c:dccnns eens: Bersch v. Drexel Firestone, Inc., 519 F.2d 974 (2d Cir.), cert. denied sub nom. Bersch v. Arthur Ander- sen & Co., 423 U8. BGG8 Ciiiee ca vdede ds skwonsrs Rand v. Anaconda-Ericsson, Inc., 794 F.2d 843 (2d Cir.), cert. denied, 479 U.S. 987 (1986) ........... Roeder v. Alpha Indus., Inc., 814 F.2d 22 (lst Cir. Sears v. Likens, 912 F.2d 889 (7th Cir. 1990)........ Stevens v. Lowder, 643 F.2d 1078 (Sth Cir. 1981).... Thornhill Publishing Co. v. General Tel. & Elec. Corp., 34 F.26 THO Cth Ca. BRIS) vdckcdescuucss Warren v. Manufacturers Nat’l Bank, 759 F.2d 542 Os SO. SS so bs 3 6a 00 deo eke eee eee Other Authorities 13 C. Wright, A. Miller & E. Cooper, Federal Practice & Procedure: Jurisdiction 2d § 3522 (1984) ........ 13 Fletcher Cyclopedia of the Law of Private Corpora- ona & S94). ME CSP a Ns x00 sc'essdncnsasenns anne PAGE 5n Sn 3n 4n Sn 4n iil PAGE Restatement (Third) of the Foreign Relations Law of ee CEE civ cceeeedsectcevesesyons 2 fiat a a s a i : a a ” oe ca 5 a aed | mo al , IN THE Supreme Court of the United States OCTOBER TERM, 1991 No. 91-641 a RICHARD A. FENN; JAMAL RADWAN; SAUDI EUROPEAN INVESTMENT CORPORATION N.V.; ALEF INVESTMENT CORPORATION N.V.; ALEF BANK, S.A., Petitioners, —V.— ABDULAZIZ A. ALFADDA; ABDULLAH ABBAR; ABDULLA KANOO; ABDULAZIZ KANOO; YUSIF BIN AHMED KANOO (A Partnership Company); AHMED A. ZAINY, Respondents. PETITION FOR A WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT > REPLY BRIEF IN FURTHER SUPPORT OF PETITION Petitioners submit this reply brief in further support of their petition for a writ of certiorari to review the judgment of the United States Court of Appeals for the Second Circuit in this case. It is plain from the face of its opinion that the court of appeals did not apply to civil RICO the ‘‘substantial conduct or effects in the United States’’ test for determining United States subject matter jurisdiction. Rather, the Second Circuit ignored this test—adopted by every other federal court that 2 has addressed the issue and endorsed by the Restatement (Third) of the Foreign Relations Law of the United States (1987)—and instead crafted an entirely different standard that greatly expands the extraterritorial reach of civil RICO. Respondents now attempt to avoid review of the Second Circuit’s test for RICO subject matter jurisdiction by present- ing a response rife with irrelevant factual issues. None of the new purported bases for jurisdiction argued by respondents in their opposing brief was accepted by the court of appeals or the district court, and none is supported by the evidence in the record. ARGUMENT THE COURT OF APPEALS REFUSED TO APPLY THE “CONDUCT OR EFFECTS’? TEST IN ASSERTING JURISDICTION OVER RESPONDENTS’ RICO CLAIM. Respondents challenge petitioners’ showing that the Second Circuit failed to apply to civil RICO the traditional test of ‘substantial conduct or effects in the United States’’ to determine whether a transnational transaction is to be gov- erned by United States law. (Opp. Br. 17-19.)' The opinion of the court of appeals, which grounds subject matter juris- diction over respondents’ RICO claim entirely upon the alleged use of United States mails and wires a handful of times in connection with subsequent sales to two foreign non- parties, is clear. After identifying petitioners’ alleged use of the mails and wires regarding those sales (Sa-6a), the Second Circuit held: ‘‘The sales to Lincoln American Investments and AI- Turki were predicate acts which occurred primarily in l References to ‘‘Opp. Br. » are to respondents’ brief in opposi- tion to this Petition. References to ‘‘ a’’ are to the pages of the Appendix to the Petition. References to ‘‘A "are ”” are to the pages of the Joint Appendix and Exhibits, respectively, filed in the court of appeals. the United States, and hence, serve as a basis of subject matter jurisdiction for the RICO claims.”’ (1la) (emphasis added). The court of appeals—which expressly acknowledged the applicability of the ‘‘substantial conduct or effects’’ test to respondents’ federal securities law claim—did not once invoke that limitation upon the extraterritorial application of domestic statutes when it asserted jurisdiction over respon- dents’ RICO claim. (9a-lla.) Far from requiring substantial conduct or effects in the United States to sustain the applica- tion of civil RICO to the foreign transactions at issue, the Second Circuit accepted respondents’ argument that this test is not applicable in the civil RICO context.” The Second Cir- cuit created an entirely different test for civil RICO subject matter jurisdiction, in which two predicate acts involving the wires or mails in the United States will suffice to make an otherwise wholly foreign transaction subject to United States substantive law.’ RESPONDENTS PRESENT AS ‘‘FACT’’ UNSUPPORTED ASSERTIONS WHICH NEITHER THE COURT OF APPEALS NOR THE DISTRICT COURT ACCEPTED. Rather than defending what the Second Circuit actually decided, respondents now present this Court with unsup- ported theories of subject matter jurisdiction which 2 Respondents maintained that ‘‘[t]here is no basis in law or logic to engraft the conduct and effects tests used in the securitiés fraud con- text onto RICO. The court below committed error in having done so. . . .”’ (Respondents’ Brief on Appeal to the Second Circuit, dated February 8, 1991, at 46.) 3 The holding of the court of appeals has been so understood by the district court. Bank of Crete, S.A. v. Koskatos, No. 88 Civ. 8412 (KMW) (S.D.N.Y. Aug. 30, 1991), citing Alfadda v. Fenn, 935 F.2d 475, 479 (2d Cir. 1991). 4 were not accepted by the court of appeals or the district court.* A. The District Court Expressly Found That The Representa- tions Upon Which Respondents Allegedly Relied Were Made In The Middle East. Respondents admit that they received the Private Place- ment Memorandum upon which they allege reliance in the Middle East. (Opp. Br. 8.) However, respondents now assert that the Private Placement Memorandum was ‘‘drafted and prepared in the United States.’’ (Opp. Br. 6.) That is flatly incorrect: the district court expressly found that the Private Placement Memorandum ‘‘was prepared primarily outside the United States, and cannot be said to have emanated from here.’’ (19a.) The court of appeals in no way disturbed that factual finding. B. Respondents’ Assertions Of Injury To SEIC Have No Relevance To Their Claim. Respondents argue that petitioners’ alleged fraud was not ‘‘consummated”’ until the alleged post-1984 diversion and misuse of the proceeds of the SEIC share offering. (Opp. Br. 11-12.) The district court properly rejected this claim, holding that any fraud on these respondents ‘* ‘was committed by placing the allegedly false and mis- leading prospectus in the purchasers’ hands’. . . Here, it is uncontroverted that the prospectus was sent to the plaintiffs from Paris or Geneva, or hand-delivered in Saudi Arabia or Bahrain.’’ 4 Respondents do not challenge petitioners’ showing that, in the face of an evidentiary attack, respondents had the burden of proof in estab- lishing subject matter jurisdiction. See Thornhill Publishing Co. v. General Tel. & Elec. Corp., 594 F.2d 730, 733 (9h Cir. 1979) (and cases cited therein); 13 C. Wright, A. Miller & E. Cooper, Federal Practice & Procedure: Jurisdiction 2d § 3522, at 63-65 (1984). (18a) (citing Bersch v. Drexel Firestone, Inc., 519 F.2d 974, 987 (2d Cir.), cert. denied sub nom. Bersch v. Arthur Ander- sen & Co., 423 U.S. 1018 (1975)).° Neither the court of appeals nor the district court has ever held that respondents’ claim of diversion of the proceeds of the SEIC offering is at issue in this litigation. Since any claim that the offering proceeds were diverted from SEIC belongs to SEIC, and could only be asserted by or on behalf of SEIC, respondents lack standing to sue on such a claim.°® Respondents’ allegations of lost corporate opportunities for SEIC are also claims belonging solely to SEIC.’ The assertion that certain ‘‘favored shareholders’’ of SEIC participated in transactions at SEIC’s expense (Opp. Br. 11-12) does not allege an injury specific to respondents, since such actions, even if true, would have equally affected the value of all shares of SEIC.® In sum, each of the asserted injuries to respondents is not an injury to respondents themselves, and thus has no place in this action. 5 Subject matter jurisdiction would not exist even if the fraud alleged by respondents was incomplete until respondents paid for their SEIC shares and until SEIC issued additional shares which allegedly **diluted’’ respondents’ SEIC shareholdings, because this conduct did not occur in the United States. Respondents paid for their shares abroad (E 496-97, 640-41, 697-729); respondents themselves allege that petitioners’ authorization to issue additional SEIC shares occurred entirely abroad. (A 146-47.) 6 See, e.g., Sears v. Likens, 912 F.2d 889, 892 (7th Cir. 1990); Adams- Lundy v. Association of Professional Flight Attendants, 844 F.2d 245, 250 (Sth Cir. 1988); Roeder v. Alpha Indus., Inc., 814 F.2d 22, 29 (Ist Cir. 1987); Rand v. Anaconda-Ericsson, Inc., 794 F.2d 843, 849 (2d Cir.), cert. denied, 479 U.S. 987 (1986); Warren v. Manufacturers Nat’! Bank, 759 F.2d 542, 544 (6th Cir. 1985); Stevens v. Lowder, 643 F.2d 1078, 1080 (Sth Cir. 1981). 7 See Abrams v. Donati, 66 N.Y.2d 951, 952, 489 N.E.2d 751, 752, 498 N.Y.S.2d 782, 783 (1985); 13 Fletcher Cyclopedia of the Law of Private Corporations § $941.10 (1991). 8 The district court thus specifically noted that respondents’ allega- tions regarding Gulf Oil Trading Company (‘‘GOTCO”’) (Opp. Br. 11- 12, 24) were purely derivative. (A 78.) 6 C. Respondents’ Assertion Regarding The Planned Invest- ment Of Offering Proceeds Has No Relevance To Their Claim. Respondents urge the Court to approve the finding of sub- ject matter jurisdiction over their RICO claim by virtue of SEIC’s plan to invest a portion of the offering proceeds in the United States. (Opp. Br. 6-7.) There can be no fraud in that fact, however, since the Private Placement Memorandum expressly disclosed that this use was among the purposes of the SEIC offering. (A 178.) Neither the court of appeals nor the district court accepted this argument when respondents presented it below. Respon- dents’ argument would require United States courts to apply United States law to, for example, securities fraud claims by Japanese investors who purchased, in Japan, stock in a Japa- nese automobile manufacturer which thereafter planned to invest funds in the United States. That cannot be the law. D. The Individuals, Entities and Actions Involved In Respondents’ Stock Purchases Were Overwhelmingly For- eign. The court of appeals did not disturb the district court’s express finding that none of the respondents and only one of the petitioners was a United States resident. (24a-25a.) Despite this factual determination, respondents now go to great lengths to demonstrate that some of the petitioners con- ducted some business in the United States. (Opp. Br. 3-5.)’ That has never been in issue. The questicn faced by the courts below was not whether there is personal jurisdiction over petitioners, but rather whether there is subject matter 9 Respondents’ assertion that petitioner Jamal Radwan ‘‘spends much of his time in New York’’ (Opp. Br. 3) grossly misstates the record. Examination of the citation for that statement reveals that Radwan is president of a bank in Paris, has a home in England, and spends ‘‘most of the year’’ in Geneva, Paris and Bahrain in addition to busi- ness travel to New York. (E 392.) The district court expressly found that Radwan ‘‘appears from all the materials submitted to be a resi- dent of France, not of the United States.’’ (24a-2Sa.) 7 jurisdiction over respondents’ claims. As the district court properly held, the focus in that inquiry is upon the extent of United States activities in connection with the overseas repre- sentations to, and share purchases by, these Saudi Arabian and Bahraini respondents. (22a-25a.)"° 10 Respondents’ claim that the actions of Ronald Reilly and Mario Diaz-Cruz, III, somehow confer jurisdiction over their RICO claim is unsupported in the record. Reilly’s work with SEIC began in Paris in mid-October 1983, where he negotiated his contract with SEIC. (E 734, 846-47.) During his preparation and marketing of the 1984 SEIC private placement, Reilly maintained his office in Paris. When he was not in Paris, he was travelling in Europe and the Middle East. (E 734, 739-61, 840-41, 849.) There is no suggestion that Diaz-Cruz was in any way involved in representations to respondents in the Middle East in the first part of 1984, when respondents learned of the private placement and made their share purchases. While respondents harp on Diaz-Cruz’s involve- ment in September and October 1984 in the printing of SEIC stock cer- tificates and drafting of form letters and share custody certificates (Opp. Br. 10-11), these events occurred many months after respon- dents had paid for their shares. (E 148-52, 199, 203-07.) Moreover, the letters in question were neither sent to respondents from the United States nor were they sent by Diaz-Cruz. (E 210-15.) 8 CONCLUSION For the foregoing reasons and the reasons set forth in peti- tioners’ opening memorandum, the petition for a writ of cer- tiorari should be granted. Dated: New York, New York November 26, 1991 Of Counsel: DANIEL H. WEINER ANDREW E. LUND HUGHES HUBBARD & REED Of Counsel: PATRICK L. ROCCO CAHILL GORDON & REINDEL (a partnership including a professional corporation) *Counsel of Record Respectfully submitted, GEORGE A. DAVIDSON* One Battery Park Plaza New York, New York 10004 (212) 837-6000 Attorney for Petitioners Jamal Radwan, Saudi European Investment Corporation N.V., Alef Investment Corporation N.V. and Alef Bank, S.A. THOMAS J. KAVALER* 80 Pine Street New York, New York 10004 (212) 701-3000 Attorney for Petitioner Richard A. Fenn --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385009_2888%3A3. Public record. Not legal advice.