# Petition for Writ of Certiorari — WS Kirkpatrick & Co. v. Environmental Tectonics Corp., Int'l > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385012_1425%3A02 ## Record - **Collection:** Supreme Court brief - **Document type:** Petition for Writ of Certiorari - **Published:** January 1, 1990 - **Citation:** 493 U.S. 400 ## Text IN THE Supreme Court of the United States Octoser Term, 1987 ——_——_— = W.S. KIRKPATRICK & CO., INC., D.1.C. (HOLDING) INC. And W.S. KIRKPATRICK & CO., INTERNATIONAL, Petitioners. - V8. — ENVIRONMENTAL TECTONICS CORPORATION, INTERNATIONAL, Respondent. PETITION FOR WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT THomas H. SEAR Counsel of Record for Petitioners 280 Park Avenue New York, New York 10017 (212) 286-4000 Of Counsel: RHonpa D. Onin SPENGLER CARLSON GUBAR Bropsky & FRISCHLING a QUESTIONS PRESENTED |. Does the Act of State Doctrine bar adjudication of an a tion which would require judicial determination of whether cne Government of Nigeria acted illegally in performing an act of state and which would prima facie have an impact on foreign relations?’ Does a complaint properly allege facts establishing a pat tern of racketeering activity under the Racketeering Influenced and Corrupt Organizations Act when that complaint auieges only that defendants had engaged in one non-continuous, completed scheme to influence improperly the award of a single contract? PARTIES TO THE PROCEEDINGS BELOW Environmental Tectonics Corporation, International was the plaintiff below. W.S. Kirkpatrick & Co., Inc., D.1.C. (Holding) Inc., Harry G. Carpenter, John M. Krankel, W.S. Kirkpatrick & Co., International, Emro Engineering Co., Inc., Robert W Ruppert, Ross E. Saxon and R.H. Edwards were named and ser. ed as defendants below. International Development Corporation, S.A. and Benson “Tunde” Akindele were named as defendants below but never served. Development Industrial Corporation was named and served as a defendant in the complaint but was drop ped from an amended complaint that was filed subsequently Pursuant to Rule 28.1 of the Rules of the Supreme Court of the United States, petitioners state that D.I1.C. (Holding) Inc. is the parent of W.S. Kirkpatrick & Co., Inc.; W.S. Kirkpatrick & Co., International is a subsidiary of W.S. Kirkpatrick & Co., Inc.; and International Development Corporation, S.A. is the parent of D.L.C. (Holding) Inc. W.S. Kirkpatrick & Co., Inc. has the following affiliates: Development Industrial Corporation, TIA Electric Co., Inc., Aeronautical Equipment Corp., R. Bruce Fike & Sons Dairy, Inc., Bulk Investments Corp., Daisy Lane "airy, Deep Creek Creamery, Inc., and Interhotels of America, In 1 AMI & ©) € ON ; | re ifira ‘ iit l ec + t State Doctrine 1) ver \ ; } Adiudication Of Thi Action | VW t ADI ti able | ex ’ ; ’ : APPENDIL\ ~ . ’ ' | 4 +? ; ; yet 4 - : > Ti Iw roe Supreme Court of the United States KIRKPATRICK & CO.. INC.. D.L.C. (HOLDING) ID : : , KIRAPATRICK & | INTERNATIONAI NMENTAL TECTONICS CORPORATI INTERNATIONAI Kes nae? ‘ PETITION FOR WRIT OF CERTIORARI | 'O THE UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUTI CTTATION TO OPINIONS BELOW States Court of Appeals tor the [hira ‘ no} m tnis ast T) May has not yet been reported, has \ / of the Append Z. 1¥55 I he heen reprinted at I attached heret: nited States District ‘ ourt tor tive L District t New lerss Cast T Ma ; I ell] he O} itil ed at 659 | SUD L365] ) N.] 1987 na hi t pages A. 38 through A. 75 of the Appendi JURISDICTION r’} - 7 : : . : lgmer! t the | nite States ( ourt tA peais | Phird Circuit VA a‘ entered OT) Ma\ Z I ele re ling the dismissal] of the Doctrine ersing and remay action on grounds of the Act of State and the dismissal of the cl aims under the Racketeerj; Influenced and ( orruy t Organizations Act and the N lerse’ Anti- Rac keteering Act. A copy of this Judgment has bee 76 through A. 78 of the Appendix. The action and thes claims Was entered In the United States District Con irt, District of New Jersey on Ma i, 1987. On May 26. 1988 the Third Circuit staved the issuance of a formal mandate unti} June 22, 1988, which stay will cor tinue until fina] disposition by this ¢ ourt if the Third Cin lit receives notice by June 22, 1988 that a petition tor a writ of ce: iorari has been tiled. A copy of this Order has been reprinted at page A. 79 of the Appendix Jurisdiction of this Ked under 28 1) S¢ 91254(] _ reprinted at pages A ‘ decision dismissing the our;rt : STATUTES AND DOK IRINES INVOLVED ne Act of Stats Doctring created hy, this ¢ ourt in { nderfit 1 é rnandez. i6k IS 250) 252 (189° which state: ke very »OveTeign state j bound to respect the is lependence of ever other »OverTeign state and th, urts Of One country wil] not sit ip judgment on the acts of the government of another, done within it: wi territor ihe Robin Pat " Act. | US L3 vi f it Nall be ltuawTtul for an person engaged i oO! lerce, in the course of such commerce, to pay or grant tO receive or accept anything ot value as a con ISssion brokerage Or other Compensation. or an allowance or discount ir lieu thereof except tor ser ices rendered in connection with the sale or purchase 4 goods, wares or merchandis either to the other Dar ich transaction or to an agent representative ier intermediary therei: where such intermediar is acting in tact tor or in behalt. or is subject to the direct or indirect control, of any party to such tran: action other than the person by whom such « OMmpel sation is so granted or paid Che tederal Racketeering Influenced and Corrupt Organiza tions Act. 18 U.S. § 1962/a). which states It shall be unlawful for any person who has recei\ ed any income derived, directly or indirectly, from a pattern of racketeering activity or through collectior of an unlawful debt in which such person has partici pated as a principal within the meaning of section 2 title 18, United States Code. to use or invest, direct) or indirectly, any part of such income, or the proceed of such income, in acquisition of any interest in, or the establishment or operation of, any enterprise which i: engaged in. or the activities of which affect. interstat: or toreign commerce he New Jersey Anti-Racketeering Act, N.].S. 2C:41.2, whict tates It shall be unlawful for any person who have recei ed any income derived, directly or indirectly, from a pattern of racketeering activity or through collection of an unlawful debt in which he has participated a a principal within the meaning of N.J.S. 2C:2-6 to us wr invest, directly or indirectly, any part of the incom: or the proceeds of the income, in acquisition of any nterest in, or the establishment or operation of an enterprise which is engaged in or the activities of whic! attect trade or commerce STATEMENT OF THE CASI t tual Bas kore und in YS] a New Jersey corporation WS Kirkpatrick i { In Kirkpatrick”), through a subsidiary, W.S. Kirkpatrick & international (“Kirkpatrick International’), entered into a contract with the Government of Nigeria. The contract piowid- ed for Kirkpatrick International to develop an aeromedical center at the Kaduna Air Force Base in Kaduna, Nigeria. The contract was awarded to Kirkpatrick International by the Ministry of Defense of the Nigerian government. In approximately 1984, the United States Department of Just’ e corr.nenced a grand jury investigation into the circumstances sur- rounding the award of the 198] contract. Kirkpatrick, which was then under new management, fully cooperated with the govern- ment in its investigation. In the course of the investigation, Kirkpatrick uncovered evidence which showed that an agent hired by Kirkpatrick, Benson “Tiande” Akindele, had represented to Kirkpatrick that officials and representatives of the Government of Nigeria had demanded that Kirkpatrick pay bribes to them in order to be awarded the contract. The evidence showed that, faced with these demands, Kirkpatrick's former management had apparently agreed to meke payments to that agent with the understanding that he would cause bribes to be paid to officials or representatives of the Nigerian Government. Although this evidence did not establish that a bribe actually was paid to anyone, the mere offer of payment or agreement to pay alone violates the Foreign Corrupt Practices Act, 15 U.S.C. § 78 dd-2. Accordingly, Kirkpatrick pled guilty to one count of violating the act and was sentenced to a fine of $75,000. The Civil Action Following the conclusion of the criminal action, ETC filed a complaint in United States District Court for the District of New Jersey. The jurisdiction of the Court was invoked pursuant to 18 U.S.C. §1964, 15 U.S.C. §15 and principles of pendent jurisdic- tion The complaint alleged that ETC was the competing bid- der for the Kaduna contract and that ETC would have been awarded the contract but for defendants’ payment of bribes. The complaint also alleged that in order to obtain that one contract the defendants had agreed to pay and had paid a single bribe in a series of installments through one intermediary, Akindele, for distribution to certain unnamed Nigerian officials. ETC claimed violations of the Robinson-Patman Act, 15 U.S.C. § 13(c), the Racketeer Influenced and Corrupt Organizations Act (“RICO”), specifically 18 U.S.C. §§ 1962(b), (c) and (d), and the New Jersey Anti-Racketeering Act, N.J.S. 2c:41-2. A total of eleven defendants were named in the complaint, inclw:ing, Kirkpatrick and Kirkpatrick International. Kirkpatrick and several other defendants moved to dismiss the complaint, alleging inter alia that the action was precluded by the Act of State Doctrine. Kirkpatrick argued that adjudication of this action would prima facie impact upon relations between this country and the Government of Nigeria in a manner and to an extent that would be far more offensive and embarrassing to the Government of Nigeria than was adjudication of the criminal action. First, this action would mandate adjudication of whether Nigerian government officials actually were paid bribes by Kirkpatrick's agent, Akindele. The criminal action did not reach or resolve that issue because, under the Foreign Corrupt Prac- tices Act, the mere payment of money to Akindele with the understanding that he would pay bribes constituted a violation. Second, this action would necessarily involve proof as to the iden- tity of the individual officials and representatives who allegedly accepted bribes and of all the specifics of the alleged bribe giv- ing and taking. In the criminal prosecution, such specific infor- mation was superfluous since there was no need to prove that a bribe was actually ever paid. Third, unlike the criminal ac- tion, this action would adjudicate whether demanding and receiv- ing bribes is customary for the Government of Nigeria. This issue cannot be avoided since, in order for ETC to prove causation, ETC would have to prove that it would have been awarded the contract without paying a bribe. A primary defense of the defen- dants would be that bribes are always extorted by Nigerian government officials and that in order to do business with the Nigerian government, bribes must be paid to its officials and representatives. Thus, defendants would necessarily attempt to prove that ETC would have been forced to pay a similar bribe in order to be awarded the contract and that, therefore, ETC has no standing to complain as to the payment of one by Kirkpatrick. In considering the Act of State issue, the District Court invited the Department of State to offer input on whether it objected to adjudication on foreign relations grounds. The State Depart- ment responded by letter that adjudication could prove detrimen- tal to foreign relations with Nigeria. However, the letter also stated, in contradictory fashion, that the State Department did not believe that adjudication was barred by the Act of State Doc- trine. The District Court determined that this letter provided no guidance about whether the action could be adjudicated. Also, while awaiting a response from the State Department to the Court's invitation to offer input, ETC privately wrote to the Nigerian government seeking a statement that the govern- ment has no objection to adjudication of this action. The govern- ment did not respond to ETC’s request. The District Court decided that the action was barred by the Act of State Doctrine and must be dismissed. The Court also held that the complaint failed to plead a pattern of racketeering ac- tivity under RICO. REASONS FOR GRANTING THE WRIT 1. The Third Circuit's Decision Creates a Direct and Irreconcilable Conflict Among Several Circuits Regarding the Proper Application of the Act of State Doctrine A. The Conflict The decision of the Third Circuit in this case squarely and ir- reconcilably conflicts with a decision reached by the Ninth Cir- cuit on substantially indistinguishable facts. See Clayco Petroleum Corp. v. Occidental Petroleum Corp., 712 F.2d 404 ‘9th Cir. 1983). The conflict, which regards the proper application of the Act of State Doctrine, impacts upon this country’s conduct of foreign relations as well as the fundamental constitutional prin- ciple of separation of powers. Since this case presents a direct conflict between circuits involving important constitutional issues, certiorari should be granted. See Aldinger v. Howard, 427 U.S. 1, 3 (1976); Rules of the Supreme Court of the United States, Rule 17.1(a). In Clayco, the plaintiff and the defendant, Occidental Petroleum, were in competition for an off-shore oi] concession offered by Um Al Quywayn. Clayco, the plaintiff, alleged that it was first offered the concession, but that Um Al Quywayn’s oil minister awarded Occidental, the defendant, the contract after Occidental paid the minister and his son more than $400,000 in bribes. After the media discovered and reported the bribery scheme, the SEC brought an action against Occidental that charg- ed violations of the Securities Exchange Act of 1934, based on the allegedly illegal payments. Occidental agreed to a perma- nent injunction, and to an internal review of its bidding prac- tices. Clayco brought suit after the report prepared pursuant to that review revealed that illegal payments had in fact been made. See Clayco, 712 F.2d at 405-06. The district court dismissed Clayco’s lawsuit on Act of State grounds and the Ninth Circuit affirmed the dismissal. The Ninth Circv it held that since a determination that bribery had in fact occurred would “impugn or question the nobility of a foreign nation’s motivation,” and since “the very existence of plaintiffs’ claim depends upon establishing that the motivation for the sovereign act was bribery,” the executive's conduct of foreign af- fairs was sure to be embarrassed by such a proceeding. See Clayco, 712 F.2d at 407. Clayco is on all fours with this case. Here, as in Clayco, the plaintiff and the defendants were in competition for a contract with a foreign government. The plaintiff alleged that it would have been awarded the contract but for the defendants’ payment of bribes to foreign officials and representatives. The defendants’ conduct came under scrutiny by officials in this country, resulting in confirmation that the defendants had violated the laws of this country. The plaintiff then sued on grounds that its rights had been violated. The similarity between this case and Clayco is underscored by the failure of ETC and the Third Circuit even to attempt to distinguish Clayco. Rather, ETC argued, and the Third Circuit found, that the Ninth Circuit's holding in Clayco was simply wrong. See Transcript of Argument on November 20, 1987, at 7; Environmental Tectonics Corp., Intl v. W.S. Kirkpatrick & Co., Inc., Nos. 87-5328 and 87-5546 at 17 (3rd Cir. May 2, 1988) (“Clayco’'s expansive application of the act of state doctrine seems at variance with the principle which has guided this cvurt. . .”). This conflict regarding the proper application of the Act of State Doctrine extends to the Second Circuit as well since chat circuit favors the view of the Act of State Doctrine that is reflected in Clayco. See Hunt v. Mobil Oil Corp., 550 F.2d 68 (2d Cir.), cert. denied, 434 U.S. 984 (1977). In Hunt, the Second Circuit held that the Act of State Doctrine rendered nonjusticiable a claim that required inquiry into the motives of a foreign government in performing certain acts. Citing Hunt, the Third Circuit here suggested that the Second Circuit's interpretation of the Act of State Doctrine is excessively strict. Environmental Tectonics Corp. Intl v. W.S. Kirkpatrick & Co., Inc. Nos. 87-5328 and 87-5546 at 17 n.9. Similarly, in O.N.E. Shipping Ltd. v. Flota Mercante Gran- colombiana, S.A., 830 F.2d 449, 453 (2d Cir. 1987), petition for cert. filed, (U.S. Feb. 8, 1988) (No. 87-1350), the Second Circuit again held that adjudication was precluded by the Act of State Doctrine when an action required inquiry into the motives of a foreign government in performing certain acts: ' The plaintiff in O.N.E. recently filed a Petition for a Writ of Certiorari, which is pending before this Court. O.N.E. Shipping Ltd. v. Flota Mercante Gran- colombiana, S.A., 830 F.2d 449 (2d Cir. 1987), petition for cert. filed, (US. Feb. 8, 1988) (No. 87-1350). The existence of this petition further demonstrates the importance of this issue and the need for resolution by this Court. However, O.N.E., which involved several issues, including comity and foreign compu)- sion considerations, does not present as straightforward an Act of State issi— as is presented here. Thus, this action provides a better vehicle for this Court to delineate the parameters of the doctrine. B. The Importance Of The Issue This Court recognized years ago in Banco Nacional de Cuba v. Sabbatino that the Act of State Doctrine bears importantly “on the conduct of this country’s foreign relations and more par- ticularly on the proper role of the Judicial Branch in this sen- sitive area.” See Banco Nacional de Cuba v. Sabbatino, 376 U.S. 398, 407 (1964). Indeed, the importance of these issues was the reason why this Court granted certiorari in that case. Id. More than two decades later, the proper construction and application of the Act of State Doctrine remains as critical as ever to both our conduct of foreign relations and the proper role of the judiciary. Thus, certiorari should be granted here to eliminate the conflict and confusion which has been generated by the re- cent decisions on this issue. 2. The Third Circuit's Decision That The Act of State Doctrine Does Not Proscribe Adjudication Of This Action Is In Conflict With Applicable Decisions of This Court The classic statement of the Act of State Doctrine is set forth in Underhill v. Hernandez, 168 U.S. 250, 252 (1897): Every sovereign state is bound to respect the in- dependence 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. As this Court stated in Sabbatino, the doctrine expresses the strong sense of the judiciary that its engagement in the task of passing on the validity of foreign acts of state may hinder rather than further this country’s pursuit of goals both for itself and for the community of nations as a whole in the international sphere. Sab- batino, 376 U.S. at 423. The Third Circuit's decision is in direct conflict with the doc- trine as outlined by this Court in Underhill and Sabbatino. Ac- cording to the decision, the Act of State Doctrine does not bar 10 adjudication of this action for two basic reasons: (i) adjudica- tion would require at most an inquiry into the motivations behind, rather than the legality of, the foreign government's acts; and (ii) defendants failed to demonstrate that adjudication was bound to result in conflict between the executive and the judiciary. Environmental Tectonics Corp., Intl v. W.S. Kirkpatrick & Co., Inc., Nos. 87-5328 and 87-5546 at 23. Thus, the Third Circuit apparently reasoned that judicial inquiry into the motivations behind a foreign government's acts is permissable under the doc- trine and that defendants who invoke the doctrine must prove that conflict between the judiciary and the executive is an in- evitable consequence of adjudication. Contrary to the Third Circuit's decision, the holding and reasoning of Sabbatino make clear that inquiry by the courts of this country into whether foreign government officials were in- fluenced by bribery in the award of a government contract is exactly the sort of inquiry that the Act of State Doctrine was designed to proscribe. Sabbatino, 376 U.S. at 401. If the doctrine, as created by this Court, has any meaning at all, it must mean that the courts of this country shall not sit in judgment on whether Nigerian government officials or representatives demanded in this case that bribes be paid to them, whether they awarded the con- tract on the basis of those bribes and whether they customarily demand bribes from anyone who wishes to do business with their country. Since bribery is almost universally recognized as a crime, adjudication of these questions by the courts of this country would necessarily be offensive to the government of Nigeria. Adjudica- tion therefore would inevitably affect our relations with that government as well as relations between the executive and the judiciary. 3. The Third Circuit's Finding That a Pattern Exists Under RICO Conflicts Directly with Sedima and with Decisions of Several Other Circuits This Court recently recognized the need for clarity in the deter- mination of what is a RICO pattern by granting certiorari in H.J. Inc. v. Northwestern Bell Tel. Co., 829 F.2d 648 (8th Cir. 1987), cert. granted, ___. U.S. ___, 108 S. Ct. 1219 (1988). This case would make an excellent companion case to H.J. and con- sideration of it by this Court along with H.J., which involved bribery allegations of a much more pervasive and variegated nature than present here, would help facilitate this Court's ef- forts to clarify an area of law that has been aptly characterized as “sheer bedlam.” See Furman v. Cirrito, 828 F.2d 898, 909 (2d Cir. 1987) (Pratt, ]., dissenting). In H.J., petitioners allege that from 1980 through the present, Northwestern Bell attempted to, or did, bribe com- missioners of the Minnesota Public Utilities Cornmission through a variety of methods. At least three distinct, dissimilar acts of bribery were described in the complaint, one involving payments made to commissioners through a middleman, one involving payments made to a former commissioner in “consulting fees”, and one involving the payment by re.pondent for parties, gifts and meals for commissioners. See Petition for Writ of Certiorari, HJ. Inc. v. Northwestern Bell Tel. Co. (87-1252) (filed Jan. 20, 1988), at 5. The Eighth Circuit dismissed the complaint on grounds that only one scheme existed for purposes of RICO and therefore that the pattern requirement was not satisfied. H_./., Inc., 829 F.2d at 650. On March 21 of this year, this Court agreed to review that decision. The Eighth Circuit's decision reflects what has been characterized as the restrictive interpretation of RICO’s pattern req Jrement. According to this interpretation, a RICO pattern exists only when a complaint alleges multiple separate criminal schemes or episodes. E.g. Superior Oil Co. v. Fulmer, 785 F.2d 252, 257 (Sth Cir. 1986). The approach is the opposite of the liberal view, which holds that two related acts may constitute a pattern when committed in furtherance of a single scheme. Fg. United States v. lanniello, 808 F.2d 184, 192 (2d Cir. 1986). Bet- ween these views lies the moderate approach, which involves the analysis of a number of factors to determine whether a pattern has been alleged. See Lawaetz v. Bank of Nova Scotia, 655 F. Supp. 1278, 1286 (D. Virgin Islands 1987). 12 In this case, the Third Circuit expanded the liberal approach in finding thai a RICO pattern had been pleaded and therefore stands a: the opposite end of the spectrum from H.J.. Here, the Third Circuit found that even though only one series of payments to effectuate a single bribe was alleged, the pattern requirement was nonetheless satisfied. See Environmental Tectonics Corp., Intl v. W.S. Kirkpatrick & Co., Inc., Nos. 87-5328 and 87-5546, at 25-26. Thus, there was less reason here to find a pattern than in H.J., yet in this case a pattern was found to have been pro- perly pleaded. An affirmance by the Court of the decision in H.J. would necessarily determine whether a RICO pattern has been alleg- ed in this case. However, a reversal of the decision in H.J. would not necessarily resolve that issue in this action or determine whether the “moderate” or “liberal” approach to determining what is necessary for a RICO pattern is appropriate or whether some variation ought to be applied. Thus, given the facts and decisions in this case and H.J., this case would be an excellent companion case to be decided along with H_J. because, with two cases at opposite ends of the spectrum, the RICO pattern issue could be fully considered and resolved. In any event, if this Court determines that its ruling in H.J. will fully resolve what is necessary to establish a RICO pattern, this Court should defer ruling on this petition for certiorari in- sofar as it relates to the pattern issue until after it decides HJ. See, e.g., Keney v. New York, 388 U.S. 440 (1967) (petition held by this Court until decisions were rendered in other cases rais- ing similar issues). CONCLUSION It should be resolved whether the Act of State Doctrine bars Respectfully submitted, Tuomas H. Sear Counsel of Record for Petitioners Of Counsel and On the Petition Ruonpa D. Onin SPENGLER CARLSON GUBAR Bropsky & FRISCHLING 280 Park Avenue New York, New York 10017 (212) 286-4000 —— A-l APPENDIX A UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT NOS. 87-5328 and 87-5546 ENVIRONMENTAL TECTONICS v. W.S. KIRKPATRICK INC., DEVELOPMENT INTERNATIONAL CORPORATION, DIC (HOLDING) INC., IDC INTERNATIONAL S.A. LUXEMBOURG, HARRY G. CARPENTER c/o W.S. Kirkpatrick, Inc. and BENSON “TUNDE” AKINDELE JOHN M. KRANKEL, EMRO ENGINEERING CO., INC. ROBERT W. RUPPERT c/o EMRO ENGINEERING CO., INC., ROSS E. SAXON c/o NAUTILUS ENVIRONMENTAL SYSTEMS, INC. & R.H. EDWARDS Environmental Tectonics Corporation International Appeilant in 87-5328 W.S. Kirkpatrick & Co., Inc.. W.S. Kirkpatrick & Co., International and D.1.C. (Holding) Inc., Appellants in No. 87-5546 A-2 On Appeal from the United States District Court for the District of New Jersey (D.C. Civil Action No. 86-0796) Argued November 20, 1987 BEFORE: GREENBERG and SCIRICA, Circuit Judges and POLLAK, District Judge* (Filed May 2, 1988) THOMAS H. SEAR, ESQ. (Argued) RHONDA D. ORIN, ESQ. SPENGLER, CARLSON, GUBAR. BRODSKY & FRISCHLING 280 Park Avenue New York, NY 10017 Attorneys for Appellee- Cross-Appellant. W.S. Kirkpatrick & Co., Inc., et al. THOMAS B. RUTTER, ESQ. (Argued) RUTTER, TURNER & STEIN 872 Public Ledger Building Philadelphia, PA 19106 Attorney for Appellant- Cross-Appellee., Environmental Tectonics International, Inc. * Honorable Louis H. Pollak. United States District Judge for the Eastern District of Pennsylvania, sitting by designation. A-3 THEODORE V. WELLS. JR.. ESQ. ROBERT L. KRAKOWER, ESQ. (Argued) LOWENSTEIN, SANDLER, KOHL, FISHER & BOYLAN 65 Livingston Avenue Roseland, NJ 07068 Attorneys for Appellee- Cross-Appellant. Harry G. Carpenter OPINION OF THE COURT POLLAK, District Judge: Appellant Environmental Tectonics Corporation International (“ETC”), a Pennsylvania corporation, brought this action to recover damages against several defendants for. inter alia, violations of the federal Racketeering Influenced Corrupt Organizations Acts. 18 U.S.C. 88 1962-1968, the New Jersey Anti-Racketeering Act, 2C N.J.C.S. § 41-1, and the Robinson-Patman Act, 15 U.S.C. 13(c). Essentially. ETC claims to have been injured by an apparently successful scheme, allegedly participated in by all of the defendants, to influence the award of a Nigerian defense contract through bribery of Nigerian government officials. The district court concluded that the act of state doctrine barred adjudication of ETC’s claims; and dismissed the action in its entirety. In the alternative, the court also ruled on other substantive and procedural issues. This action arose from the award of a contract by the Federal Republic of Nigeria to defendants W. S. A-4 Kirkpatrick & Co. (“Kirkpatrick”) and W. S. Kirkpatrick & Co. International (“Kirkpatrick International’), both of which are New Jersey corporations. Kirkpatrick is in the business of selling and brokering aircraft equipment, parts and facilities to airlines and foreign air forces. Kirkpatrick International, its wholly-owned subsidiary, was formed to carry out Kirkpatrick's duties under the contract to be awarded by the Nigerian government. Also named as defendants were Kirkpatrick's parent corporations, DIC (Holding) Inc. (“DIC”), a Delaware Corporation, and International Development Corporation, S.A. (“IDC”), a Luxembourg corporation. In 1980, when the events alleged in the amended complaint’ began, defendant Harry Carpenter was chairman of Kirkpatrick's board of directors and the company’s chief executive officer. In 1980, Carpenter learned that the Nigerian government was interested in purchasing aeromedical equipment, and in constructing and equipping an aeromedical center for the Nigerian Air Force at Kaduna Air Force Base (the “Air Force contract”). Kirkpatrick contracted with defendants Emro Engineering Co.. Inc. (“EMRO”) and Nautilus Environmedical Systems, Inc. (“Nautilus”) to provide engineering, design and related assistance needed to build the proposed facility and to supply the equipment. Carpenter hired a Nigerian national, defendant Benson (“Tunde™) Akindele, to act as Kirkpatrick's local agent in all matters pertaining to the Air Force contract. In or around March of 1981, Carpenter and Nautilus president Ross Saxon’ met with Akindele to l. The following factual recital is based primarily on the amended compiaint. 2. Saxon and Robert Ruppert. Emro's president. were also named as defendants. Two other Kirkpatrick officers. Robert H. Edwards and John M. Krankel. were named as well. A-5 discuss their bid strategy. According to a contemporaneous memorandum written by Carpenter. Akindele told Carpenter and Saxon that to secure the bid Kirkpatrick should be prepared to pay a sales commission totalling twenty percent (20%) of the contract price. Most of this commission was to be paid to Nigerian political and military officials.’ Akindele explained that Nigerian officials generally expected such payments from contract bidders, and that American companies often lost Nigerian defense contracts to their European competitors because they failed to make such arrangements. Through a written agreement with Akindele. Kirkpatrick agreed to pay the commissions to two Panamanian corporations. In May of 1981, these corporations -- which were controlled by Akindele -- were established to receive the commissions and to distribute them to Nigerian officials. On March 19. 1982, the Nigerian Defense Ministry entered into an agreement awarding the Air Force contract to Kirkpatrick International. In September of 1982, the Nigerian government made the first of four contract payments to Kirkpatrick. The remaining payments were made in December of 1982, in February of 1983. and in August of 1983. After each of the four contract payments, the defendants via the United States mails and wire transfers paid a portion of the promised commissions to Akindele’s Panamanian corporations, whence the monies were distributed to Nigerian officials. In the end, Kirkpatrick's commission payments to the Panamanian corporations, and thus. 3. ETC alleged in its complaint that the 20% commission was to be distributed as follows: 2 1/2% for Akindele. 5% for the Nigerian Air Force, 2 1/2% for the medical group. 5% for a political party. 2 1/2% for the relevant cabinet minister. and 2 1/2% for other key defense personnel. A-6 to Akindele and various Nigerian officials, totalled over Sl. illion. 7 - the latter half of 1981 and 1982, while Kirkpatrick was impiementing the bid strategy described above, ETC, which is also in the business of selling aeromedical equipment to foreign governments, was p ng its own bid for the Air Force project. ETC submitted its pricing information to the Nigerian government in February of 1981, and it continued in contact with Nigerian military and diplomatic officials throughout the course of that year. ETC’s president met with Nigerian oificials in Nigeria, and submitted a formal bid for the Air Force contract in December of 1981. ETC submitted its final formal bid in February of 1982, a month before the Nigerian government awarded the contract to Kirkpatrick. ETC states that it decided to investigate the Nigerian government's award of the Kaduna contract to Kirkpatrick in April of 1983, after learning that its bid had been far lower than Kirkpatrick's. ETC reported its findings to the Nigerian Air Force* and to the United States Embassy in Lagos, Nigeria. After an investigation by the United States Justice Department, Carpenter and Kirkpatrick each were charged with violating the Foreign Corrupt Practices Act, 15 U.S.C. § 78dd-2 (hereinafter “FCPA”). As part of its plea negotiations on the United States charges, Kirkpatrick and Carpenter both agreed to offers of proof which outlined the Air Force contract scheme in its entirety, including Carpenter's hiring of Akindele, and Akindele’s control of the Panamanian corporations. Both offers of proof also stated that Akindele and Carpenter agreed that the money paid to 4. Both bribery and the acceptance of a bribe by a government official are illegal under Nigerian law. See Decree No.38 (November 22. 1975) in Federal Republic of Nigeria Official Gazette Extraordinary, No. 59, December 2. 1975. A-7 the Panamanian corporations as commissions would be distributed to Nigerian political and military officials. Carpenter and Kirkpatrick both pled guilty to one FCPA violation, and were eventually sentenced: Carpenter to two hundred hours of community service and a fine of $10,000, and Kirkpatrick to a fine of $75,000, payable over a five-year period.* 5. At Kirkpatrick's sentencing on January 6. 1986. Assistant United States Attorney Steven Levy, who was in charge of Carpenter's and Kirkpatrick's prosecutions, made the following representation to the court: Your Honor, | guess | would also like to say that the political impact of this case. of this case cannot be underestimated [sic]. ...l can say that the government of Nigeria as well as the State Department [of the United States] have shown a vital interest in this case. In fact. the State Department has been very concerned about the possible political impact upon the government of Nigeria if the Grand Jury disclosed certain information about who possibly received the payments which are set forth in the memorandum that Mr. Carpenter wrote to other senior officers of the corporation. I have as attorney for the Government (of the United States], your Honor. been resisting attempts by the Nigerian government to find out this information because | have not had a disclosure order and the S.ate (Djepartment has its concerns about what would happen if the government of Nigeria actually knew who was involved in this scheme to sort of rip off money from this Nigerian contract. This is not a case where there is not a victim. Shagari. who was the president of Nigeria at the time of this contract{.| is now under house arrest. Some of these other individuals |.] and | can name them if the Court is interested. are very prominent military figures who are still in power in Nigeria. The Nigerian government would certainly like to have their names..... Transcript of Sentencing of Kirkpatrick, dated January 6, 1986. p. 9.1. 2l top. 10 1. 22. A-8 ETC filed this action shortly after Kirkpatrick's sentencing. Defendants filed a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6), which contended, inter alia, that the plaintiff had failed to allege a “pattern of racketeering activity” as required by the federal and state RICO statutes. ETC filed an amended complaint that responded to some of the issues raised by the defendants’ motion to dismiss, and that added common law counts to ETC’s antitrust. RICO, and anti-racketeering counts. ETC also filed an answer to the remainder of the defendants’ motion to dismiss. In their reply to ETC’s answer to their motion. defendants moved for dismissal of the action in its entirety on act of state grounds. The district court requested further submissions from the parties in the form of answers to specific questions. The court also requested a Bernstein letter, i.e.. an opinion from the State Department on whether the act of state doctrine should be applied in the circumstances presented by this case.*® Legal Adviser Abraham Sofaer responded to 6. The term “Bernstein letter” is derived from the Second Circuit's opinion in Bernstein v. N.V. Nederlandsche- Amerikaansche Stoomvaart-Maatschappij, 210 F.2d 375 (2nd Cir. 1954). Plaintiff Bernstein. a German national. owned a corporation that was confiscated by the Nazi government during World War II. The corporation's main asset was a ship; Bernstein was forced to relinquish title to the ship, as well as all other interest in the corporation. The Second Circuit initially dismissed Bernstein's Suit against the ship's st:bsequent owners on act of state grounds. See Bernstein v. Van Heygen Freres Societe Anonyme, 163 F.2d 246 (2nd Cir. 1947). The court reversed itself after receiving a letter from the State Department's Legal Adviser, which stated that it was United States policy to permit the courts to exercise jurisdiction over claims to recover property expropriated by Nazi officials. The Supreme Court subsequently determined that. while it was proper for a federal court to consider a Bernstein letter. | | A Nt I i tt tt A-9 the court’s request in a letter dated December 10. 1986, which is appended to this opinion. Treating defendants’ motion to dismiss as a motion for summary judgment. the district court dismissed the action on act of state grounds. See Environmental Tectonics Corp., International v. W.S. Kirkpatrick & Co., Inc., 659 F. Supp. 1381, 139198 (D.N.J. 1987). Although the dismissal on act of state grounds embraced ETC's entire claim against all the defendants, the district court went on to rule, in the alternative, on other issues: The court rejected defendants’ contention that ETC lacked standing to assert antitrust and RICO claims. The court did. however, dismiss the RICO count for failure to allege a pattern of racketeering activity. For the same reason. the court dismissed the New Jersey Anti-Racketeering count. In addition, the court upheld a magistrate's determination that Carpenter was entitled to decline to answer, on Fifth Amendment grounds, certain questions put to him on deposition. Finally, the court held that ETC’s amended complaint adequately stated a case for holding IDC and DIC legally responsible for Kirkpatrick's scheme to obtain the Air Fore contract. ETC appeals from the act of state, RICO, and Fifth Amendment rulings. The defendants, in addition to urging the correctness of these rulings. have cross-appealed from those alternative rulings that were the Legal Adviser's recommendation in any given case was not (o be considered binding on the court. In First National City Bank v. Baaco Nactonal de Cuba. 406 U.S. 759 (1972). Justice Rehnquist. announcing the judgment of the court, argued that the federal courts should defer to the view of the State Department: but only two other members of the court. Chief Justice Burger and Justice White, joined in his opinion. Justices Douglas and Powell. each of whom concurred separately. rejected the view that the State Department's view should control. So. too. did Justice Brennan. joined by Justices Stewart. Marshall, and Blackmun in dissent. A-10 adverse to them. Since the district court's grant of summary judgment on act of state grounds, if affirmed here, would obviate consideration of all other issues. we turn first to the act of state question. II. On review of a district court's grant of summary judgment, we utilize the same standard that the district court was required to apply. See Tigg Corp. v. Dow Corning Corp., 822 F.2d 358, 361 (3rd Cir. 1987). There is no real disagreement on the facts relevant ‘o the district court's act of state determination. On this appeal, therefore, we are called upon to decide whether the appellees were entitled to judgment as a matter of law. See Fed. R. Civ. P. 56(c). ETC’s challenge to the district court's grant of summary judgment raises important issues about the proper application of the act of state doctrine. The doctrine is the judiciary's institutional response to the foreign relations tensions that can be generated when a United States court appears to sit in judgment on a foreign state's regulation of its internal affairs. Under the doctrine, the courts of this country will refrain from judging the validity of a foreign state's governmental acts in regard to matters within that country’s borders. See Restatement (Revised) of Foreign Relations Law of the United States § 469( 428) (1986). The party moving for the doctrine’s application has the burden of proving that dismissal is an appropriate response to the circumstances presented in the case. See Alfred Dunhill of London. Inc. v. Cuba, 425 U.S. 682. 694 (1976): Williams v. Curtiss-Wright, 694 F.2d 300, 303 n.4 (3rd Cir. 1982). Although earlier formulations of the doctrine were grounded in notions of comity among sister states.’ 7. See Underhill v. Fernandez. 168 U.S. 250. 252 (1898). Restatement (Revised) of U.S. Foreign Relations Law § 469 |428) comment a. A-11 the core concern of modern act of state jurisprudence is preserving the separation of powers between the federal judiciary and the political branches of our government -- especially. the executive branch, where primary responsibility for the conduct of foreign affairs is lodged. As explained by the Supreme Court in Banco Nacional de Cuba v. Sabbatino, 376 U.S. 398 (1964), the doctrine “expresses the strong sense of the Judicial Branch that its engagement in the task of passing on the validity of foreign acts of state may hinder rather than further this country’s pursuit of goals both for itself and for the community of nations as a whole in the international sphere.” Id. at 423. Thus, courts are required to decline to exercise jurisdiction over cases that may embarrass or impede the political branches of government in their conduct of foreign affairs. See First Nat. City Bank v. Banco Nacional de Cuba, 406 U.S. 759. 765-68 (1972) (hereinafter “Citibank’). Sensitively applied. the doctrine can prevent judicial entanglement in international conflicts that are more appropriately resolved through political channels. Individual litigants and the enforcement of national policies pay a price, however. for this institutional self-discipline -- its application in effect means that “on occasion individual litigants may have to forgo decisions on the merits of their claims because the involvement of the courts in such a decision might frustrate the conduct of the Nation's foreign policy.” Citibank. 406 U.S. at 769 (opinion of Rehnquist, J.). For this reason. the Supreme Court has not laid down rigid rules to govern the doctrine’s application. but leaves it to the lower courts to determine whether a conflict between the judicial and political branches exists in a particular case. See id. at 775-76 (Powell. J. concurring): Mannington Mills v. Congoleum Corp.. 595 F.2d 1287. 1293 (3rd Cir. 1979) (courts should A-12 analyze the nature of the questioned conduct and the effect upon the parties in addition to appraising the sovereign's role). The main issue raised by ETC’s appeal involves the proper application of the doctrine when a litigant invokes the doctrine as a defense to a suit for damage or injury stemming from a course of events that included some acts by officials of a foreign government. Sabbatino and the Supreme Court's other modern act of state cases have focused on state expropriations of private property, the clearest example of a political act that, to paraphrase Justice Harlan, touches on the nerves of the international community. See Sabbatino, 376 U.S. at 428. This has, however, left a broad range of governmental conduct -- e.g.. court decisions; the granting of a license, patent. or some other state monopoly; or. as in this case, the award of a construction or procurement contract -- for lower courts to consider. The appellant has advanced several objections to the district court's act of state determination. Two of these objections lack merit. First. we agree with the district court’s conclusion that the award of a military procurement contract can be, in certain circumstances, a sufficiently formal expression of a government's public interests to trigger application of the doctrine. It is true that certain governmentally authorized acts. such as the award of a patent or the acts of a bankruptcy trustee. are considered so routine as to be not of substantial concern to the political branches in their conduct of foreign policy. See Remington Rand Corp. v. Business Systems. Inc.. 830 F.2d 1260. 1265 (3rd Cir. 1987): Mannington Mills. 995 F.2d at 1294. But the award of a major defense contract generally does not result from a near-mechanical exercise of narrowly-defined governmental discretion. The award of a military A-13 contract. particularly one for a major project, is usually influenced by national security considerations -- considerations that are far from routine. We also agree with the district court that the so-called “commercial” exception to the act of state doctrine -- an exception endorsed by a plurality of the Supreme Court but neither acquiesced in nor rejected by a majority, see Alfred Dunhill of London v. Cuba. 425 U.S. 682 (1976) -- has no application to this case." Under the commercial exception’s terms, a court would not abstain from deciding a case involving the purely commercial act of a sovereign or one of its instrumentalities. See Dunhill, 425 U.S. at 695 (plurality opinion of White, J.). To determine whether an act is purely commercial in character, a court looks not to the purpose of the act but to its nature, i.e.. whether the activity is of the type that an individual would carry on for profit. Cf. Letelier v. Republic of Chile, 748 F.2d 790, 797 (2nd Cir. 1984)(applying the Foreign Sovereign Immunity Act's definition of “commercial”), cert. denied 471 U.S. 1125 (1985); Texas Trading v. Federal Republic of Nigeria, 647 F.2d 300, 310 (2nd Cir. 1981)(same), cert. denied 454 U.S. 1148 (1982). While the act of contracting will in many circumstances be properly characterized as commercial conduct. the decision to award a defense contract to one bidder or another is by its very nature governmental. See Curtiss-Wright, 694 F.2d at 302. We part company with the district court, however. on the remainder of its act of state analysis. The district court employed a formulation of the doctrine that barred the adjudication of ETC’s claims “if the inquiry presented for judicial determination includes 8. In Curtiss-Wright, 694 F.2d at 302 n.2. this court noted that the commercial exception has not been endorsed by a majority of the Supreme Court. We have no occasion here for going beyond what was said in Curtiss-Wright. A-14 ‘the motivation of a sovereign act which would result in “embarrassment to the sovereign or constitute interference in the conduct of the foreign policy of the United States.” ETC, 659 F. Supp. at 1392-93. The court found that adjudication of ETC’s claims would lead inevitably to an examination of the Nigerian government's motives in awarding the Nigerian contract to Kirkpatrick. Because the district court was convinced that such a finding would be interpreted as criticism of the Nigerian Government, it concluded that this case presents the type of situation which precludes judicial inquiry. See id. at 1393. In reaching its conclusion, the district court relied primarily on the interpretation of the act of state doctrine advanced in a Ninth Circuit case. Clayco Petroleum v. Occidental Petroleum, 712 F.2d 404 (9th Cir.), cert. denied 464 U.S. 1040 (1984). In Clayeo, the plaintiff and the defendant, Occidental Petroleum. were in competition for an off-shore oil concession offered by Um Al Quywayn. Clayco alleged that it was first offered the concession, but that Um Al Quywayn’s oil minister awarded Occidental the contract after Occidental paid the minister and his son over $400,000 in bribes. After the media discovered and reported the bribery scheme, the SEC brought an action against Occidental that charged violations of the Securities Exchange Act of 1934, based on the allegedly illegal payments. Occidental agreed to a permanent injunction, and to an internal review of its bidding practices. Clayco brought suit after the report prepared pursuant to that review revealed that illegal payments had in fact been made. See Clayco, 712 F.2d at 405-06. The district court dismissed Clayco's lawsuit on act of state grounds. In a per curiam opinion, the Ninth Circuit affirmed the dismissal. concluding that the act of state A-15 doctrine barred adjudication of Clayco’s claims. Although calling for a “flexible” approach to the doctrine’s application, the court expressed its unwillingness to permit judicial inquiry into the motivation behind Um Al Quywayn’s award of the concession. Since a determination that bribery had in fact occurred would “impugn or question the nobility of a foreign nation’s motivation,” and since “the very existence of plaintiffs’ claim depends upon establishing that the motivation for the sovereign act was bribery.” the court concluded that the executive's conduct of foreign affairs was sure to be embarrassed by such a proceeding. See Clayco, 712 F.2d at 407. Clayco’s expansive application of the act of state doctrine seems at variance with the principle which has guided this court, that the doctrine “is not lightly to be imposed...."* Mannington Mills, 595 F.2d at 1293. In Mannington Mills, the plaintiff claimed that defendant Congoleum violated the antitrust laws by using patents it allegedly procured by fraud to restrict the plaintiff's trade abroad. In bringing its suit, plaintiff did not ask the court to declare the foreign patents invalid. Instead, Mannington argued that its 9. One commentator has noted that Clayco has adopted the “strict” view of the act of state doctrine favored by other courts, most notably the Second Circuit in Hunt v. Mobil Oil, 550 F.2d 68 (2nd Cir.). cert. denied 434 U.S. 984 (1977), that precludes examination of a foreign sovereign’s motivations. See Bazyler. Abolishing the Act of State Doctrine, 134 U. Pa. L. Rev. 325, 357 n.190 (1986). Courts and commentators alike have criticized this interpretation of the doctrine as discouraging effective enforcement of United States regulatory policies against those who violate the law by engaging in illegal or anticompetitive conduct abroad. See. e.g.. Industrial Investment Development Corp. v. Mitsui & Co.. Ltd.. 594 F.2d 48. 55 (5th Cir. 1979). cert. denied 445 U.S. 903 (1980): Sage International, Ltd. v. Cadillac Gage Co., 534 F. Supp. 896 (E.D. Mich. 1981): Bazyler. supra, at 347. This court has expressed similar concerns with too sweeping an application of the doctrine. See Curtiss-Wright. 694 F.2d at 304 & n.5 A-16 action was concerned only with proving Congoleum's violations of United States trade regulations. See Mannington Mills, 595 F.2d at 1290-91. In Mannington Mills this court held, through Judge Weis, that the act of state doctrine did not bar adjudication of the plaintiffs claims. The court focused on the nature of the questioned conduct -- the grant of a patent, an essentially routine act that raised no serious foreign policy concerns. See id. at 1294. But implicit in the opinion was an unwillingness to allow litigants to shield themselves from the consequences of illegal conduct abroad by invoking the act of state doctrine as a defense in American courts. See id. at 1293. What was implicit in Mannington Mills became explicit in Williams v. Curtiss-Wright. Plaintiff Williams alleged that defendant Curtiss-Wright monopolized the international market for a certain kind of jet engine, and claimed violations of the federal antitrust laws, as well as injury caused by common-law torts. Curtiss-Wright moved to dismiss Williams compiaint on act of state grounds, arguing that the doctrine precluded the examination of foreign governments’ motives in refusing to buy engine parts from the plaintiff. The district court denied Curtiss-Wright's motion. See Curtiss-Wright, 694 F.2d at 301-02. . On appeal, this court, again speaking through Judge Weis, affirmed. This court rejected an approach to the doctrine that would in all circumstances foreclose judicial scrutiny of the motivations behind the military procurement decisions of a foreign government. Judge Weis noted that a private litigant is not necessarily immune from antitrust liability simply because the illegal scheme involves some acts by an agent of a foreign government. See id. at 304 (citing Continental Ore v. Union Carbide & Carbon Corp.. A-17 370 U.S. 690 (1962)). The opinion stressed the importance of insuring that the act of state coctrine not interfere with the implementation of the policies served by antitrust and other regulatory statutes. “The act of state doctrine should not be applied to thwart legitimate American regulatory goals in the absence of a showing that adjudication may hinder international relations.... " See id. at 304 (citations omitted). Having found that the record did not show that litigation of Williams’ claims would impede the exec utive’s conduct of foreign relations, this court held that application of the doctrine was not called for. The formulation of the act of state doctrine outlined in Mannington Mills and Curtiss-Wright does not allow a court to invoke the doctrine on the basis of mere conjecture about the effect that the disclosure of certain facts might have on the sensibilities of foreign governments. Instead, these cases require that a defendant come forward with proof that adjudication of a plaintiffs claim poses a demonstrable. not a speculative, threat to the conduct of foreign relations by the political branches of the United States government. In the instant case, the district court's dismissal was based on little more than speculation about the effect that ETC’s lawsuit might have on relations between the United States and Nigeria. The traditional justification for involving the doctrine. i.e., avoiding a judicial determination of the legal validity of a state's act within its own borders, is not present in this case. Appellant does not seek to have the Air Force contract invalidated, nor does it seek compensation for its alleged losses from the Nigerian government. No Nigerian official is named as a defendant in the complaint. Thus. to resolve ETC’s claims on their merits, the district court would be called on simply to determine as A-18 a factual matter whether the appellees’ alleged bribery of Nigerian officials motivated the award of the contract. The only information before the court authoritatively measuring the impact such a determination might have on the executive's conduct of foreign policy was the letter from Legal Adviser Sofaer.'® That official pronouncement of State Department policy, as it relates to this litigation, reads as follows: In recent years, the United States Executive Branch has addressed the question of whether the act of state doctrine requires dismissal of Avceedings that may call for judicial inquiry into the motivations (as opposed to the legal validity) of the public acts of foreign states. Specifically, as the United States stated in an amicus curiae brief before the United States Supreme Court: (Wjhile judicial exar-ination of purpose may on occasion implicate some of the concerns underlying the act of state doctrine, that doctrine only precludes judicial questioning of the validity or legality of foreign government actions.... None of this Court's decisions suggest that the act of state doctrine precludes all iudicial inquiries that may embarrass a foreign state or affect the political branches’ conduct of foreign relations. Rather, the act of state doctrine is based on the aeed to avoid unprincipled decisions resulting from the absence of legal standards, and the unique embarrassment, and the particular interference with the conduct of foreign affairs. that may result from the judicial determination 10. Assistant United States Attorney Levy's representations at Kirkpatrick's sentencing. supra note 5, were not made in the course of these proceedings. were not addressed to act of state questions. and antedated the Legal Adviser's letter by nearly a year a A-19 that a foreign sovereign’s acts are invalid. Judicial inquiry into the purpose of a foreign sovereign's acts would not require a court to rule on the legality of those acts. and a finding concerning purpose would not entail the particular kind of harm that the act of state doctrine is designed to avoid. Dismissal of a complaint before the development of evidence, merely because adjudication raises the bare possibility of embarrassment, constitutes an unwarranted expansion of the act of state doctrine and is contrary to the flexibility with which that doctrine should be applied. These statements represent our views. As the Department understands the allegations in the instant suit, the validity of the Nigerian Government's decision to award the contract in question is not in question. If the adjudication of this suit were to involve a judicial inquiry into the motivations of the government of Nigeria's decision to award the contract, the Department does not believe the act of state doctrine would bar the court from adjudicating this dispute. See Letter from Abraham D. Sofaer. Appendix to this Opinion (December 10. 1986) (emphasis in original). In sum, the State Department is satisfied that the conduct of American foreign policy relative to Nigeria will not be compromised by orderly federal court adjudication of ETC’s lawsuit.'' We appreciate. of : 11. The Legal Adviser's letter does urge the court to exercise “caution and due regard for foreign sensibilities” at each stage of the litigation. In particular. the court is asked “to endeavor to assure that no unnecessary inquiries are made. or allegations tested. during the course of discovery or trial.” Interpreting this passage as a failure on the part of the Legal Adviser to “sign off” completely on the act of state question. the district court dismissed A-20 course, that the Department's legal conclusions as to the reach of the act of state doctrine are not controlling on the courts.'? But the Department's factual assessment of whether fulfillment of its responsibilities will be prejudiced by the course of civil litigation is entitled to substantial respect.’ As against that assessment, defendants have not developed a factual record “showing that adjudication may hinder international relations ...." Curtiss-Wright, 694 F.2d at 304. the Legal Adviser's caveats with respect to the production of evidence as impractical and unconstitutional. See ETC, 659 F. Supp. at 1398. The Legal Adviser's expressions of concern about the possible damage to foreign relations that may result from wide-ranging discovery against foreign officials should not have been interpreted as a sign of ambivalence about the act of state question. Rather, the Legal Adviser simply urged the court to exercise appropriate supervision over discovery and other trial preparation to limit damage to foreign sensibilities. This advice is far from impractical. Foreign governments have often expressed their dissatisfaction with the wide discovery authorized under the Federal Rules, finding it intrusive and overbroad when compared to the European version of the fact-finding process. See Comment. Antitrust Suits Involving Foreign Commerce. 135 U. Pa. L. Rev. 1003, 1013-17 (1987). American judicial insensitivity to this foreign reaction has resulted in the enactment of “blocking” laws. i.e. laws that are specifically designed to block the Federal Rules’ discovery provisions. See id. at 1016. The State Department's advice on this matter should be read as nothing more than a reminder to the district court of the complaints about American litigation with which the executive has become familiar. 12. See supra note 6. 13. That respect is. in our judgment. enhanced when the Legal Adviser ts one who, in his former capacity as a federal judge. has addressed act of state problems with marked sensitivity and rigor in a particularly demanding context. See Sharon v. Time. 599 F. Supp. 538 (S.D.N.Y. 1984). A-21 This litigation falls squarely within the teaching of Curtiss-Wright. In both cases, the plaintiff sought damages from defendants who allegedly used illegal tactics to influence a foreign government's award of a contract. In both cases, adjudicating the claims before the court would have required at most an inquiry only into the motivations behind. rather than the legality of, the foreign government's acts. And, finally, the defendants in each case failed to demonstrate that the litigation process was bound to result in the type of institutional conflict between the political and judicial branches that would justify invoking the doctrine. We therefore will reverse the court's grant of summary judgment, and will remand the case for further proceedings. '* III. Having found that the act of state doctrine is no bar to appellant's claims, we turn to the remaining issues presented. First, ETC argues that the district court erred in dismissing the state and federal racketeering claims. Second, ETC seeks reversal of the district court's order barring the depositicn testimony of defendant Carpenter. who asserted his Fifth Amendment privilege when examined about Kirkpatrick’s Air Force contract bid. Third, all of the defendants challenge the district court's determination that ETC has standing to bring its antitrust and RICO claims. And, fourth, defendant DIC reiterates its contention that it is insulated from liability fer any misdeeds of Kirkpatrick and Carpenter. We address these questions in turn. 14. ETC has also argued that Mannington Mills’ ten-factor balancing test should not result in a dismissal of the case on the basis of international comity. See Mannington Mills, 595 F.2d at 1297-98. Since the issue apparently was not raised below, and the record is substantially devoid of the sort of information called for by A-22 A. The district court dismissed ETC’s state and federal RICO claims because it concluded that the amended complaint failed to allege facts establishing a pattern of racketeering activity. Noting that this court had not formulated a definition of the pattern requirement, the district court adopted a definition of pattern which would have required the appellant to allege facts establishing either (1) more than one criminal scheme undertaken by the defendants. or (2) a single, open-ended scheme. See Environmental Tectonics v. W. S. Kirkpatrick & Co., et al., 659 F. Supp. 1381, 1390 (D.N.J. 1987). The district court found that ETC’s amended complaint met neither prong of this test because it alleged a single scheme which was neither “continuous” nor “on-going.” The pattern requirement accepted by the district court has since been rejected by this court. In Barticheck v. Fidelity Unién Bank, 832 F.2d 36 (3rd Cir. 1987), this court held that allegations of illegal conduct that cdénstitute a single, completed criminal episode are in some circumstances sufficient to describe a pattern of racketeering activity. To determine whether a “pattern” exists, a court should consider a combination of specific factors such as the number of unlawful acts, the length of time over which the acts were committed, the similarity of the acts, the number of victims, the number of perpetrators, and the character of the unlawful activity. See id. at 38-39: “.aporito et al. v. Combustion. Engineering. No. 87-5144 Slip Op. at 24 (March 29, 1988). The factual allegations in ETC’s amended complaint satisfy this more flexible interpretation of RICO's pattern requirement. The predicate acts alleged the Mannington Mills test. it would be inappropriate for this issue to be examined for the first time on appeal. A-23 in the amended complaint -- mail and wire fraud, bribery, and violations of the Foreign Corrupt Practices Act -- were all committed in connection with (or. to facilitate) the payments by Kirkpatrick to the Panamanian corporations. One could view these payments as a single illegal payment separated into installments, and thus as a one-time affair, rather than as “criminal activity that, because of its organization, duration, and objectives poses, or during its existence posed, a threat of a series of injuries over a significant period of time.” Marshall-Silver Construction Co. v. Mendel. et al., 835 F.2d 63, 66-67 (3rd Cir. 1987). But. to focus only on the series of payments -- i.e.. one bribe divided into four parts -- is to ignore the complexity of Kirkpatrick's scheme. If the appellant's allegations are true, a European conglomerate, and two American corporations -- successfully, and over a two-year period -- organized to influence a foreign country's award of a procurement contract by illegal, means. To facilitate their scheme, they hired a consultant who had contacts with Nigerian officials who were amenable to such an arrangement. This consultant also developed a sophisticated and outwardly legal front for the payments. thereby increasing the difficulty already inherent in detecting such a scheme. The wire and mail communications used to implement this undertaking account for numerous violations of federal law. The nature of the acts alleged and the number of victims are also important considerations in this analysis. See Barticheck, 832 F.2d at 39. ETC claims to have suffered direct economic injury from the appellees’ scheme. By illegally influencing the decisions of appellees’ public officials. however. appellees have also created an even larger class of victims, the citizens of Nigeria. Cf. Town of Kearny v. Hudson Meadows Urban Renewal “orp., 829 F.2d 1263, 1268 (3rd Cir. A-24 1987) (two separate schemes to bribe local government officials made victims of the “taxpayers and residents of the Town of Kearny”). Moreover, because bribery of foreign o‘ficials by American businessmen diminishes this nation’s stature and influence abro* 4. conduct of the kind here alleged victimizes the citizens of this nation as weil. Our assessment of the amended compiaint in light of Barticheck’s specific factors persuades us that ETC has alleged a “pattern of racketeering activity” within the meaning of the statute. ETC may proceed on its RICO claim, and -- assuming, as have the district court and the parties, that the pattern requirements for the New Jersey Anti-Racketeering act are substantially similar -- on its state racketeering claims as well. B. ETC'’s final ground of appeal challenges the district court's decision that the Fifth Amendment privilege against self-incrimination shielded Carpenter from responding to deposition questions the answers to which might yield evidence that Carpenter had committed crimes under Nigerian law. ETC argues that the record does not establish any significant likelihood that responding to deposition questions here would expose Carpenter to trial in the courts of Nigeria. ETC also argues that, in any event. the Fifth Amendment is not a shield against foreign prosecution. As summarized by the court below, the evidence adduced by Carpenter to establish the risk of criminal prosecution in Nigeria was as follows: Prior to his deposition, Carpenter submitted an affidavit...setting forth his reasons for fearing criminal prosecution in Nigeria and detailing the factual basis of the privilege. As discussed earlier A-25 in the opinion, defendants Kirkpatrick and Carpenter both pled guilty to violations of the FCPA in connection with the Nigerian Contract. According to Akindele, Carpenter's plea and sentencing were receiving considerable media attention and were “front page news” in Nigeria. Apparently, local news coverage of Carpenter's plea and sentencing were subsequently reported by Nigerian newspapers. Akindele also told Carpenter of certain Nigerian government officials’ desire to prosecute Carpenter in connection with the Nigerian contract. Akindele further warned Carpenter not to travel to Nigeria and to exercise care in travelling in Europe or Africa because there was a risk he would be taken by force to Nigeria. In January, 1986, Carpenter's attorney was informed by a United States Government official that “the Nigerians wanted to get (Carpenter| to Nigeria.” This information, which originally came from Interpol, was relayed to Carpenter. Carpenter has since been again warned not to travel abroad “and that the Nigerian interest in [his] case has not abated.” ’ The magistrate reviewed this evidence in the light of the factors relevant to the risk of foreign prosecution enumerated by the Second Circuit in In re Grand Jury Subpoena of Flanagan, 691 F.2d 116, 121 (2nd Cir. 1982): [Tihe court in resolving the issue {must focus on| whether there is an existing or potential prosecution of [the witness]; what foreign charges could be filed against him; whether prosecution of them would be initiated or furthered by his testimony: whether any such charges would entitle the foreign jurisdiction to have him extradited from the United States: and whether there is a A-26 likelihood that his testimony given here would be disclosed to the foreign government. The magistrate found “that. by defendant Carpenter's affidavit, there is a real fear that he might involuntarily be subject to the criminal jurisdiction of Nigeria.” The district court concluded that “[t/he Magistrate's decision has not been shown to be clearly erroneous or contrary to law.” ETC, 659 F. Supp. at 1401. We disagree. We have no doubt that the testimony ETC sought to elicit at deposition might aid in a criminal prosecution of Carpenter by Nigeria. if such a prosecution were undertaken. However, it is not contended that Carpenter. who has already pleaded guilty to the criminal charges brought by the United States, could be extradited to Nigeria for the alleged bribes. The entire risk of prosecution in Nigeria rests. therefore, on the possibility that Carpenter would be kidnapped by Nigerian authorities; and we do not think that possibility comes close enough to being a significant likelihood to carry the day. We are prepared to assume that a real fear. substantially grounded in fact, of being kidnapped by the agents of a foreign government with a view to prosecution by that government might well justify a witness’ assertion of his or her fifth amendment privilege. But the fact that Carpenter has been admonished to avoid being kidnapped does not. in our judgment. constitute substantial proof that the feared conspiracy is more than gossamer. Nothing in this record supports an inference that kidnapping foreigners not resident in Nigeria in order to bring them to trial in Nigeria is characteristic of Nigerian law enforcement personnel. That Carpenter is sincere in his apprehension of the risk does not mean that the apprehension justifies his assertion of the privilege. “The apprehension.” as the court noted in Flanagan. “must be a real and A-27 reasonable one, based on objective facts as distinguished from _ subjective...speculation.” Flanagan, 691 F.2d at 121. And this is because, as the Supreme Court made plain in Zicarelli v. New Jersey State Commission of Investigation, 406 U.S. 472. 478 (1972), rejecting the Fifth Amendment claim presented there, “the privilege protects against real dangers, not remote and speculative possibilities.” In short, we think the record made by Carpenter does not constitute substantial evidence of “real dangers.” As noted above, ETC further contends that the Fifth Amendment is only a domestic shield, which guards against self-incrimination in other American courts, whether state or federal,'* but does not protect 15. Carpenter might have met his burden under this standard if he had been officially warned by the United States Government to forgo travelling abroad in order to avoid capture by Nigerian agents seeking to bring him to Nigeria for triai. Other evidence -- €.g. a pending prosecution or the institution or threatened institution of extradition proceedings -- might also have supported Carpenter s assertion of the privilege. The justifications that Carpenter advances in this case. however. amount to nothing more than speculation about Nigeria's intentions. First. the warnings by Benson Akindelc, who does not appear to be a Nigerian official. do not. standing alone. provide a basis for Carpenter's fear of pro’ -cution. And the somewnat ambiguous representation of Assistant United States Attorney Steven Levy with respect to Nigeria's ‘vital interest” in the American prosecution of Carpenter. supra note 5. falls short of suggesting that Nigeria was preparing to prosecute Carpenter. Second, what Carpenter identifies as a warning from the United States is actually something more remote. The record suggests that the’ Nigerian government. if interested at all in Carpenter, sought only to question him about others rather than prosecute him. Moreover. Carpenter himself was not troubled enough by the warning to stay in the United States: he later travelled to the Bahamas. To justify his invocation of the privilege. Carpenter would have had to come forward with a good deal more than he presented to the magistrate. 16. See Murphy v. Waterfront Commission, 378 U.S. 52 | 1962). \ A-28 one from American court orders which would compel testimony that might threaten incrimination in the courts of a foreign sovereign. That issue, which the Supreme Court found unnecessary to resolve in zicarelli, supra, has generated a contrariety of views in the lower courts. The Tenth Circuit, In re Parker, 411 F.2d 1067, 1070 (10th Cir. 1969), vacated as moot, 397 U.S. 96 (1970), and the Fourth Circuit, United States v. (Under Seal), 794 F.2d 920 (4th Cir. 1986), have rejected the contention that the Fifth Amendment is extra-territorial in scope. The chief authority in support of an extra-territorial application is Judge Newman's opinion in In re Cardassi, 351 F. Supp. 1080 (D.Conn. 1972). Cardassi has been subscribed to by Judge Hufstedler, concurring in In re Federal Grand Jury Witness, 597 F.2d 1166, 1169 (9th Cir. 1979), and has been followed by two district courts in this circuit. See United States v. Trucis, 89 F.R.D. 671 (E.D.Pa. 1981); United States v. Kowalchuk, No. 77-118 (E.D.Pa. 1978)."” Because we have determined that the present record does not, in any event, present a substantial risk that Carpenter would be subject to prosecution in : the courts of Nigeria, we find it unnecessary to resolve the important constitutional question as to the reach of the Fifth Amendment that would otherwise be presented. Cc. On cross-appeal, defendants raise two objections to rulings by the district court. The first contention, joined in by all of the defendants, is that the district court erred in concluding that ETC had standing to 17. The question has been discussed. but not resolved. by the District of Columbia Circuit in In re Sealed Case. 825 F.2d 494. 497 (D.C.Cir. 1987), and by the Second Circuit in Flanagan, 691 F.2d at 124. A-29 press its antitrust. RICO, and New Jersey Anti-Racketeering Act claims. This argument is premised on what the defendants perceive as factual deficiencies in ETC’s amended complaint. In their view, ETC has not pleaded any facts which would establish, if true, that but for the defendants’ illegal conduct it would have received the Air Force contract. The defendants also argue that ETC has pleaded no facts that would establish the payment of illegal commissions from the defendants to Nigerian government officials. The district court concluded that the amended complaint’s allegations were sufficient to confer standing on ETC, and we agree with that assessment. As far as ETC’s antitrust standing is concerned, the allegations in the amended complaint as a whole make out an actionable violation of section 2(c) of the Robinson-Patman Act, 15 U.S.C. § 13(c).'* Congress enacted section 2(c), the Act’s brokerage provision, primarily to curb one particular abuse by large chain store buyers, namely the use of “dummy” brokerage fees as a means of securing price rehates. See Seaboard Supply Co. v. Congoleum Corp.. 770 F.2d 367. 371 (3rd Cir. 1985). The section has also been 18. 15 U.S.C. § 13(c) states: It shall be unlawful for any person engaged in commerce. im the course of such commerce. to pay or grant, or to receive or accept, anything of value as a commission, brokerage, or other compensation, or any allowance or discount in lieu thereof, except for services rendered in connection with the sale or purchase of goods. wares. or merchandise. either to the other party to such transaction or to an agent. representative or intermediary therein where such intermediary is acting in fact for or in behalf, or is subject to the direct or indirect control of any party to such transaction other than the person by whom such compensation is so granted or paid. A-30 applied, however. in cases that involve commercial bribery. See id. at 371; see also Rangen, Inc. v. Sterling Nelson & Sons, Inc., 351 F.2d 851 (9th Cir. 1965), cert. denied 383 U.S. 936 (1966)(company which bribed state purchasing agent liable to competitor for state contract under 2(c)). Although this court has concluded that as a general matter commercial bribery is actionable under 2(c), it has ai 9 held that a plaintiff must show that the illegal payments in question crossed the line from buyer to seller or vice versa. See Seaboard Supply. 770 F.2d at 379. The amended complaint alleges that Kirkpatrit k paid the illegal commissions to the Akindele-controlled corporations. from which they were distributed to unnamed Nigerian officials. Though the allegation is not a detailed one, it clearly charges that illegal payments were passed from a seller to a buyer -- a violation of 2(c). Not every plaintiff who alleges an actionable claim under the antitrust laws has standing, however. to bring a private antitrust action. In order to proceed with a claim, a plaintiff must be able to demonstrate that it is within the class of those injured in their business or property who, based on a variety of factors. are best suited to further the purposes of the statute by remedying the violation alleged. See Alberta Gas Chemicals, Ltd. v. E.1. Du Pont De Nemours and Co.. 826 F.2d 1235, 1240 (3rd Cir. 1987). A private plaintiff does not have to prove price discrimination to recover for a violation of 2(c), Seaboard Supply, 770 F.2d at 371 n.3, but the plaintiff must still meet the standing requirements to proceed. See Larry R. George Sales Co. v. Cool Attic Corp., 587 F.2d 266. 270-72 (Sth Cir. 1979). Because of the standing doctrine’s malleability. it would be difficult to define with precision the contours of the class of potential plaintiffs who have standing to A-31 assert 2(c) claims. Indeed, this court's case-by-case approach to the standing requirement argues against such an attempt. See Alberta Gas Chemicals, 826 F.2d at 1239-41. We need not do so in this case, moreover, because it is generally agreed that a direct competitor of a company that obtains a contract through commercial bribery has standing to press a 2(c) claim against the briber. See Cool Attic, 587 F.2d at 271-72: Municipality of Anchorage v. Hitachi Cable, 547 F. Supp. 633. 640 (D. Alaska- 1982): Computer Statistics v. Blair, 418 F. Supp. 1339, 1348 (S.D. Tex. 1976); Ill E. Kintner and J. Bauer, Federal Antitrust Law § 26.12, at 529-30 (1982). We agree with the district court that ETC’s amended complaint alleged sufficient facts to establish the kind of injury that would confer standing to bring a claim against the defendants. Plaintiff alleged that it and the defendants are both in the business of supplying aeromedical facilities and equipment to foreign air forces. and that both plaintiff and defendants were in direct competition for the Nigerian Air Force bid. As the district court noted, short of alleging that it was next in line for the Nigerian contract, ETC could not have pleaded a more direct injury from defendants alleged violation of section 2(c). The question of ETC’s standing to bring its RICO and Anti-Racketeering Act claims is somewhat easier to resolve. To have standing to assert a civil RICO claim, ETC need only allege an injury to its business or property resulting from some or all of the predicate acts that comprise the RICO violation. See Town of Kearny, 829 F.2d at 1268 (quoting Marshall & Ilsley Trust Co. v. Pate. 819 F.2d 806 (7th Cir. 1987)). ETC's allegations in the amended complaint of injury from the bribery scheme -- a scheme that the amei.ded complaint charges with sufficient factual specificity -- meet this standard. We also assume. as did the district A-32 court and the parties, that the New Jersey Anti-Racketeering Act's requirements are essentially _ the same as the federal standards. D. Finally, defendant DIC, one of Kirkpatrick's corporate parents, contends that the it is entirely immune from liability. ETC claims that liability for the alleged wrongful acts of the Kirkpatrick group can be imputed to DIC on either of two theories: by piercing the defendant's corporate veil. Melikian v. Corradetti. 791 F.2d 274 (3rd Cir. 1986), or by finding that Carpenter acted as DIC’s agent in carrying out the bribery scheme, Japan Petroleum Co. v. Ashland Oil. 456 F. Supp. 831 (D. Del. 1978). The district court found that the amended complaint minimally alleged “a relationship among [DIC], IDC, Carpenter, and Kirkpatrick sufficient to support the potential imposition of liability upon [DIC] or IDC for wrongtul! acts committed by Carpenter and/or Kirkpatrick.” ETC, 659 F. Supp. at 1388. The court also concluded that ETC and the defendants should have the opportunit, é9 proceed with discovery so that the facts definim, the ré:ationship of DIC, IDC, Carpenter and Kirkpe!t ick may be fully developed. See id. at 1389. We find no “e®son “o question such a course, which should produce a record on the basis of which the question of DIC’s liability can be properly determined. See Craig v. Lake-Asbestos of Quebec, Lid.. No. 87-1254 (3rd Cir. March 31, 1988). Conclusion We therefore will reverse the district court on its act of state decision, its dismissal of plaintiffs RICO and Anti-Racketeering Act claims. and its affirmance of the magistrates decision upholding Carpenter's assertion of the Fifth Amendment privilege. As to the A-33 other issues, we will affirm the district court. We will remand this case for proceedings consistent with this opinion. A-34 APPENDIX United States Department of State The Legal Adviser Washington, D.C. 20520 December 10, 1986 The Honorable Alfred J. Lechner, Jr. United States District Court Judge District of New Jersey U.S. Post Office and Courthouse Newark, N.J. 07101 Re: Environmental Tectonics Corporation, International v. W.S. Kirkpatrick & Co. Inc.. et al., Civil Action No. 86-796 Dear Judge Lechner: I am writing on behalf of the Department of State in reply to the Court's invitation to the Department to express its views of the above-referenced civil action in light of defendant's motion to dismiss on the basis of the act of state doctrine. This court has indicated in particular that it might become necessary to examine the motivation of officials of the Republic of Nigeria in taking certain public actions. The Department appreciates the Court's consideration in offering this opportunity for comment. In recent years, the United States Executive Branch has addressed the question of whether the act of state doctrine requires dismissal of proceedings that may call for judicial inquiry into the motivations (as opposed to the legal validity) of the public acts of foreign states. Specifically, as the United States stated in «nm amicus curiae brief before the United States Supreme Court: A-35 (W]hile judicial examination of purpose may on occasion implicate some of the concerns underlying the act of state doctrine, that doctrine only precludes judicial-questioning of the validity or .egality of foreign government actions... . None of this Court's decisions suggest that the act of state doctrine precludes all judicial inquiries that may embarrass a foreign state or affect the political branches’ conduct of foreign relations. Rather, the act of state doctrine is based on the need to avoid unprincipled decisions resulting from the absence of legal standards. and the unique embarrassment, and the particular interference with the conduct of foreign affairs, that may result from the judicial determination that a foreign sovereign’s acts are invalid. Judicial inquiry into the purpose of a foreign sovereign’s acts would not require a court to rule on the legality of those acts. and a finding concerning purpose would not entail the particular kind of harm that the act of state doctrine is designed to avoid. Dismissal of a complaint before the development of evidence. merely because adjudication raises the bare possibility of embarrassment, constitutes an unwarranted expansion of the act of state doctrine and is contrary to the flexibility with which that doctrine should be applied. (Emphasis added). See United States Government briefs amicus curiae in support of petitions for a writ of certiorari in Industrial Investment Development Corp. v. Mitsui & Co., Ltd.. 594 F.2d 48 (5th Cir. 1979). cert. denied, 445 U.S. 903 (1980): and in Hunt v. Mobil Oil Corp.. 550 F.2d 68 (2d Cir. 1977), cert. denied, 434 U.S. 984 (1977). excerpts reprinted in 1979 Digest of U.S. Practice in International Law at 965 and 969, respectively. A-36 These statements represent our views. As the Department understands the allegations in the instant suit, the validity of the Nigerian Government's decision to award the contract in question is not in question. If the adjudication of this suit were to involve a judicial inquiry into the motivations of the Government of Nigeria's decision to award the contract, the Department does not believe the act of state doctrine would bar the Court from adjudicating this dispute. Moreover, the Department is of the view that the act of state doctrine may not apply to the award of the contract in question, to the extent that such award does not constitute a sufficiently formal expression of Nigeria's public policy or interests. See, e.g., Alfred Dunhill of London, Inc. v. Republic of Cuba, 425 U.S. 682, 695 (1976); compare Sage Int'l., Ltd v. Cadillac Gage Co., 534 F. Supp. 896, 908 (E.D. Mich. 1981) with General Aircraft Corp. v. Air America, Inc., 482 F. Supp. 3 (D.D.C. 1979). Apart from the act of state question, however, inquiries into the motivation and validity of foreign states’ actions and discovery against foreign government officials may seriously affect United States foreign relations. These concerns, in the context of this litigation, counsel that caution and due regard for foreign sovereign sensibilities be exercised at each relevant stage in the proceedings. Moreover, the court should endeavor to assure that no unnecessary inquiries are made, or allegations tested, during the course of discovery or trial. I hope this letter will be helpful in your disposition of the above-referenced action. Sincerely, Abraham D. Sofaer A-37 cc: Alan A. Turner, Esq. Thomas H. Sear, Esq. Lawrence S. Horn, Esq. Theodore V. Well, Esq. A True Copy: Teste: Clerk of the United States Court of Appeals for the Third Circuit A-38 APPENDIX B ENVIRONMENTAL TECTONICS CORP, INTERNATIONAL. Plaintiff, Vv. W.S. KIRKPATRICK & CO., INC.., et al.. Defendants. Civ. A. No. 86-796. United States District Court, D. New Jersey. May 1, 1987. Corporation engaged in manufacture and sale of aircraft equip- ment and facilities brought action against corporate competitors and individuals, seeking damages in connection with award of contract with government of Nigeria, which was allegedly pro- cured in violation of antitrust and racketeering laws. Defendants moved to dismiss for failure to state claim upon which relief could be granted. The District Court, Lechner, J., held that: (1) allega- tions that competitors engaged in mail and wire fraud and com- mitted bribery were insufficient to establish pattern of racketeer- ing activity, and (2) act of state doctrine precluded action. A-39 Thomas B. Rutter, and Alan Turner, Rutter, Turner & Stein, Haddonfield, N.J., for plaintiffs. Thomas H. Sear, and Rhonda D. Orin, Spengler, Carlson, Gubar, Brodsky & Frischling, New York City, and Lawrence S. Horn, Sills, Beck, Cummis, Zuckerman, Radin, Tischman & Eps- tein, Newark, N.J., for defendant Kirkpatrick and DIC Holding. Robert L. Krakower, Lowenstein, Sandler, Kohl, Fisher & Boylan, Roseland, N.J., for defendant Harry Carpenter. Robert W. Delventhal, Crummy, DelDeo, Dolan, Griffinger & Vecchione, Newark, N.J., for defendants Emro and Ruppert. Jerome L. Merin, Asst. U.S. Atty., Office of the U.S. Atty., Newark, N.J., for Dept. of Justice. Dominic F. Amorosa, Short Hills, N.J., for defendant John M. Krankel. John J. Barry, Clapp & Eisenberg, Newark, N.J., for defen- dant R.H. Edwards. OPINION LECHNER, District Judge. This action was brought by Environmental Tectonics Corpora- tion, International (“ETC”) against W.S. Kirkpatrick, Inc. and certain other corporations and individuals. ETC seeks damages in connection with the award of a contract which contract ETC alleges was procured in violation of antitrust and racketeering laws. Defendants have moved to dismiss the complaint for failure to state a claim upon which relief may be granted. ETC has filed an amended complaint more specifically alleging certain aspects of the original complaint while adding and dropping certain defendants. The motions were filed by defendants pursuant to Federal Rule of Civil Procedure 12(b)(6). With the exception of the act of state A-40 portion of these motions, it is assumed for the sole purpose of the disposition of these motions the facts alleged in the amend- ed complaint are true and all reasonable inferences have been drawn in favor of ETC. See D.P. Enterprises, Inc. v. Bucks County Community College, 725 F.2d 943, 944 (3d Cir.1984). According- ly, the description of the facts concerning these motions is based in large part upon ETC’s allegations. With regard to the act of state argument, additional information has been requested from counsel and, as well, from the United States Department of State ' which information has been considered together with the exhibits attached to ETC’s brief in opposition. Therefore, this aspect of the defendants’ motions will be treated as a motion for summary judgment under Rule 56 of the Federal Rules of Civil Procedure: all parties have been so informed and have been given an op- portunity to respond. This opinion also addresses plaintiff's ap- peal of three orders entered by Magistrate Hedges. I. Procedural History ETC filed a three count complaint naming the following defen- dants: W.S. Kirkpatrick & Co., Inc. (“Kirkpatrick”)(erroneously named as W.S. Kirkpatrick, Inc.); Development International Corporation (“DIC”); DIC (Holding) Inc. (“Holding”); IDC In- ternational S.A. Luxembourg; Harry G. Carpenter (“Carpenter”): and Benson “Tunde” Akindele (“Akindele”). The complaint alleged that defendants’ tactics in obtaining a contract with the govern- ment of Nigeria violated sections of the Racketeer Influenced and Corrupt Organizations Act (“RICO”) (18 U.S.C. § 1962, et seg.), the New Jersey Anti-Racketeering Act (§ 2c:41-2, et seq.) and the Robinson-Patman Act (15 U.S.C. § 13(c) et seq.) ‘ The Department of State was notified by telephone of this matter on September 10, 1986 (a copy of the transcript of the telephone call was made available to all parties). In addition, a copy of all relevant documents was forwarded to the Department of State on September 12, 1986. Because of numerous internal problems, the Department of State repeatedly requested extensions of the time within which to respond to the issues presented by the act of state portion of the motions. On December 10, 1986 a response of the same date was received from the Department of State. A-41 ETC filed an amended complaint which added new counts and more specifically alleged certain aspects of its origing com- plaint. The amended complaint added the following defendants: John M. Krankel; WS. Kirkpatrick & Co. International (“Kirkpatrick International”); International Development Cor- poration, S.A. (“IDC”); Emro Engineering Co., Inc. (“Emro’); Robert W. Ruppert; Ross E. Saxon; and R.H. Edwards. DIC was not named in the amended complaint. The amended complaint recited the original counts and added a defamation count against Emro and Ruppert, as well as allegations of interference with prospective contract relations against all the defendants.’ Kirkpatrick moved to dismiss the complaint for failure to state a claim upon which relief may be granted. Holding, DIC, Carpenter, Krankel, Kirkpatrick International, and Edwards joined the motion brought by Kirkpatrick. These defendants are referred to herein collectively as the “Moving Defendants”.’ {1] The motions collectively raise four distinct issues: first, whether ETC’s pleadings allege facts establishing that Carpenter and Kirkpatrick are sufficiently related to Kirkpatrick's corporate parents to warrant the inclusion of the corporate parents as defen- dants to this action; second, whether ETC’s pleadings allege facts showing ETC suffered injury as a result of defendants’ alleged antitrust and RICO violations; third, whether ETC’s pleadings allege facts to establish a “pattern of racketeering activity,’ as required by the federal and state racketeering laws; and fourth, whether ETC’s claims are barred by the act of state doctrine.’ ? This case and the motions filed were reassigned to this Court by Order, dated July 16, 1986. » Although the Moving Defendants’ motions are brought against the sufficien- cy of the pleadings as set forth in the original complaint, upon review of the record the issues raised by the motions are properly raised against the suffi- ciency of the pleadings as set forth in the amended complaint. I shal! consider the motions accordingly. * The results of the third and fourth issues, the RICO and the act of state por- tions of the motions, are applicable to those defendants who have not so moved or have not yet been served with the complaint or not yet answered the complaint. A-42 II. Facts In 1954, Carpenter became an employee of Kirkpatrick, a New Jersey corporation, which is involved in the business of selling and brokering aircraft equipment and facilities. At some point prior to 1978, Carpenter became a major shareholder, Chair- man of the Board of Directors and Chief Executive Officer of Kirkpatrick. In 1978, Carpenter sold all of his stock and equity interest in Kirkpatrick to Holding. Also in 1978, pursuant to the terms of a consulting and employment agreement, Carpenter agreed to remain as Chairman of the Board and Chief Executive Officer of Kirkpatrick for a period of five years. The stock of Holding was, at all times relevant to this motion, owned by IDC, a Lux- embourg corporation. ETC is a Delaware corporation having its principal place of business in Pennsylvania and is engaged in the business of manufacturing and selling aircraft equipment and facilities. At some point during the period 1980-1981, both ETC and Kirkpatrick or Kirkpatrick International sought to procure a con- tract with the Republic of Nigeria to construct an aeromedical facility at Kaduna Air Force Base in Nigeria and to provide equip- ment for that facility (the “Nigerian Contract”). In an effort to obtain the Nigerian Contract, Carpenter negotiated an agree- ment with Akindele, A Nigerian citizen (the “Akindele Agree- ment”), whereby Akindele was to act on behalf of certain defen- dants in seeking to procure the Nigerian Contract. The Akindele Agreement provided that certain defendants would pay a “com- mission” to two Panamanian entities controlled by Akindele if the Nigerian Contract was procured for defendants. The com- mission was to equal 20% of the Nigerian Contract price; a ma- jority of the commission was to be paid, in turn, as bribes to of- ficials of the Nigerian Government for the award of the Nigerian Contract. During this same period, ETC was negotiating with Nigerian officials to procure the Nigerian Contract, and at some point submitted a bid for the Nigerian Contract. A-43 On March 19, 1982 the Nigerian Contract was awarded to Kirkpatrick International, a wholly-owned subsidiary of Kirkpatrick. Payments on the Nigerian Contract by the Nigerian Government began in September, 1982 and shortly thereafter defendants’ payments of the agreed upon commissions to the two Panamanian entities were effected. The alleged commissions were made on four separate occasions, September 30, 1982, December 21, 1982, February 2, 1983 and August 8, 1983, and totaled ap- proximately $2 million. ETC alleges Kirkpatrick International obtained the Nigerian Contract as a result of the commissions paid or promised as bribes to Nigerian officials who otherwise would have awarded the Nigerian Contract to ETC. Carpenter was prosecuted for a violation of the Foreign Cor- rupt Practices Act of 1977, 15 U.S.C. §§ 78dd-l et seq. (Supp. V 1981) (“FCPA”).* On October 2, 1985 the United States Attorney for the District of New Jersey filed in the Carpenter matter an offer of proof which was signed by Carpenter. This offer of proof establishes certain facts which include the Akindele Agreements and the payment of the commission to the two Panamanian en- tities in connection with the Nigerian Contract. However, the offer of proof does not establish the payment or promise of bribes to Nigerian government officials. Kirkpatrick was also prosecuted for violations of FCPA. Both Carpenter and Kirkpatrick pled guil- ~ ty to violation of FCPA. On January 6, 1986 at the sentencing of Kirkpatrick, Assis- tant United States Attorney Steven Levy made the following representations to the court: Your Honor, I guess I would also like to say that the political impact of this case, of this case cannot be underestimated. ... I can say that the government of Nigeria as well as the State Department [of the United States} have shown a vital interest in this case. In fact, the State Depart- ment has been very concerned about the possible political ‘ This document and a transcript of a sentencing of Kirkpatrick for violation of FCPA were submitted by ETC in opposition to defendants’ motions. A-44 impact upon the government of Nigeria if the Grand Jury disclosed certain information about who possibly received the payments which are set forth in the memorandum that Mr. Carpenter wrote to other senior officers of the corporation. I have as attorney for the Government [of the United States], your Honor, been resisting atieipts by the Nigerian government to find out this information because I have not had a disclosure order and the State [D]Jepartment has its concerns about what would happen if the government of Nigeria actually knew who was involved in this scheme to sort of rip off money from this Nigerian contract. This is not a case where there is not a victim. Shagari, who was the president of Nigeria at the time of this con- tract[,] is now under house arrest. Some of these other in- dividuals{,] and I can name them if the Court is interested, are very prominent military figures who are still in power in Nigeria. The Nigerian government would certainly like to have their names..... (Transcript of Sentencing of Kirkpatrick, dated January 6, 1986, p. 9, 1. 21 to p. 10 1. 22) (hereinafter “Levy Representations” ) The views of the United States Department of State, dated December 10, 1986 (the “State Department Position”) indicate two positions relevant to this matter: If the adjudication of this suit were to involve a judicial inquiry into the motivation of the Government of Nigeria's decision to award the [Nigerian] contract, the Department does not believe the act of state doctrine would bar the Court from adjudicating this dispute. Apart from the act of state question, however, inquiries into the motivation and validity of foreign states’ actions and discovery against foreign government officials may A-45 seriously affect United States foreign relations. These con- cerns, in the context of this litigation, counsel that caution and due regard for foreign sovereign sensibilities be exer- cised at each relevant stage in the proceedings. Moreover, the court should endeavor to assure that no unnecessary in- quiries are made, or allegations tested, during the course of discovery or trial. State Department Position, at 2-3 (attached as Appendix A). The government of “Nigeria was informed not later than the end of November, 1985 [of the bribery charges with regard to the Nigerian Contract] as a result of the publicity surrounding the admissions of guilt [to violations of FCPA] and senteuces with respect thereto oa behalf of Kirkpatrick and Carpenter...” See submission, dated August 26, 1986, of counsel to plaintiff. On July 31, 1986 counsel for ETC forwarded a letter to the Nigerian Embassy in Washington, D.C. to request a declaration from the Republic of Nigeria “to the effect that the prosecution of this civil action in the American Federal Courts will not have any impact whatsoever on the relations between the Republic of Nigeria and the United States of America.” The stated pur- pose of this requested declaration was to nullify the defendants’ “act of state” argument to dismiss ETC’s complaint. To date, it appears the Republic of Nigeria has not responded to either the publicity surrounding the FCPA prosecutions or the July 31 letter not has it taken any action with regard to the allega- tions surrounding the Nigerian Contract. III. Discussion A. Inclusion of Holding and IDC In its complaint, ETC appears to present two theories sup- porting the imputation of liability to Holding and IDC for the alleged wrongful acts of Kirkpatrick and Carpenter: first, that Carpenter acted as an agent of Holding and IDC when he negotiated the Akindele Agreement; and second, that Kirkpatrick A-46 ~ was a “mere instrumentality” of Holding and IDC. Holding and IDC maintain ETC has failed to allege facts showing Holding and IDC are sufficiently related to, or responsible for, Kirkpatrick and Carpenter to support the imposition of liability on Holding and IDC for actions taken by Kirkpatrick and Carpenter. In ad- dition, Holding and IDC maintain ETC has failed to allege facts establishing Carpenter acted as an agent, servant or employee of Holding and IDC during negotiations in connection with the Nigerian Contract. In support of their position, Holding and IDC assert that ETC’s pleadings on these issues establish nothing more than Holding and IDC own Kirkpatrick and that Carpenter entered into an employment contract with Kirkpatrick and/or Holding. [2] Whether an agency relationship exists between a parent corporation and employees a parent corporation and employees or officers of its subsidiary or whether a subsidiary is an in- strumentality of the parent is normally a question of fact and degree. The central factual issue .s control, ie, whether the parent corporation dominates the activities of the subsidiary. See Japan Petroleum Co. (Nigeria), Ltd. v. Ashland Oil, Inc., 456 F.Supp. 831, 840-41 (D.Del.1978). Accord, Hoffman v. United Telecom- munications, Inc., 575 F.Supp. 1463, 1478 (D.Kansas 1983). [3] In addressing the problem of relationships between parent and subsidiary corporations, courts have cited the criteria set forth in Fish v. East, 114 F.2d 177, 191 (10th Cir.1940), to aid in deter- mining whether a subsidiary is such an instrumentality of the parent corporation that treating the two as one is warranted. See, e.g., Steven v. Roscoe Turner Aeronautical Corp., 324 F.2d 157. 161 (7th Cir.1963); Hoffman, 575 FSupp. at 1478; Japan Petroleum Co., Ltd., 456 F.Supp. at 841. The factors to be ex- amined include ownership of the subsidiary’s stock, identity of officers and directors of the corporations, financial arrangements of the corporations, responsibility over day-to-day operations of the subsidiary and payment of the subsidiary’s salaries and ex- penses. These criteria aid the Court in determining whether: from all the facts and circumstances it is apparent that the relationship between the parent and subsidiary is so intimate. the parents control over the subsidiary is so dominating, and A-47 the business and assets of the two so mingled, that recogni- tion of the distinct entity would result in an injustice to third- party persons.... Hoffman, 575 F.Supp. at 1478 (quoting from two other cases). [4] ETC’s amended complaint alleges (1) that in 1978 Carpenter entered into an employment contract with Kirkpatrick and/or Holding; (2) that in 1978 Carpenter sold all of his “major” shareholdings and equity interest in Kirkpatrick to Holding; and (3) that various financial aspects of the relationships among the corporate defendants indicate they are engaged, to some extent, in a single economic enterprise.’ Although ETC’s pleadings are not exhaustive, it cannot be said, as a matter of law, the pleadings fail to allege a relationship among Holding, IDC, Carpenter and Kirkpatrick sufficient to support of the potential imposition of liability upon Holding or IDC for wrongful acts committed by Carpenter and/or Kirkpatrick. As Holding and IDC point out in their brief, “whether an agen- cy relationship has been created is a factual question.” (Memoran- dum of DIC and Holding at 14.) ETC relies on Melikian v. Cor- radetti, 791 F.2d 274, 282 (3d Cir.1986) which, although ot directly on point, provides some guidance: “[t he issue of whether the corporate veil can be pierced is primarily a question of fact. Plaintiffs have alleged sufficient facts to state a claim and should be permitted to proceed with discovery to further develop the factual record.” Accordingly, the ETC pleadings are adequate in this regard. B. ETC’s Standing (5] The Moving Defendants argued that under the facts plead- ed in ETC’s complaint, ETC lacks standing to bring its antitrust * Specifically, the amended complaint alleges that Holding is the “manager” of Kirkpatrick and that Holding has authority over financial aspects of Kirkpatrick's operations, including payments made in connection with the Nigerian Contract. A-48 and RICO claims against them. The Moving Defendants con- tend ETC’s pleadings fail to establish the requisite injury because there are insufficient facts pleaded to show ETC would have won the Nigerian Contract but for the improper actions of the Mov- ing Defendants. Although the original von plaint may have been insufficient, the amended complaint pleads ETC’s injury suffi- ciently to survive these motions to dismiss. The amended com- plaint alleges ETC was competing with the Moving Defendants for the Nigerian Contract and “upon information and belief” but for the alleged improprieties of the Moving Defendants, ETC would have obtained the Nigerian Contract. (Amended Com- plaint { 40.) Absent unequivocal evidence that ETC was next in line to obtain the Nigerian Contract, ETC could not have pleaded its injury with more particularity. Facts may surface showing these allegations are untrue; for present purposes, however, ETC has alleged injury as a result of the actions of the Moving Defendants and has standing to bring its claims. C. Pattern Requirement of RICO RICO prohibits the use or investment of funds in an enter- prise involved in interstate commerce if the funds are “derived. directly or iadirectly, from a pattern of racketeering activity... .” 28 U.S.C. § 1962(a). RICO defines a pattern of rucketeering ac- tivity as requiring “at least two acts of racketeering activity . . .. 28 USC. § 1961(5). ETC contends the four separate payments of the commissions and the further payment of those commissions as bribes constitute separate acts of racketeering activity to support a finding of the requisite pattern. The Moving Defendants argue RICO’s “pat- tern” mandate requires a showing of separate criminal episodes. Prior to the Supreme Court's decision in Sedima, S.PR.L. v. Imprex Co., Inc., 473 U.S. 479, 105 S.Ct. 3275, 87 L.Ed.2d 346 (1985), courts were divided over the proper construction and ap- plication of RICO’s pattern of racketeering activity requirement. Some courts held multiple criminal acts in furtherance of a single criminal scheme constituted the requisite pattern. See, e.g., A-49 United States v. Weatherspoon, 581 F.2d 595, 602 (7th Cir.1978) (each mailing in furtherance of scheme to defraud constitutes a separate act of racketeering, thereby establishing a pattern). Other cases held multiple criminal episodes were necessary to establish the pattern of racketeering activity requirement. See, e.g., Teleprompter of Erie, Inc. v. City of Erie, 537 F.Supp. 6, 12-13 (W.D.Pa.1981) (series of payments in single bribery scheme insufficient to establish RICO pattern). . The Supreme Court's Sedima decision offers some guidance in resolving the pattern controversy. Quoting from the Senate Report on RICO, the Court stated: “The infiltration of legitimate business normally requires more than one ‘racketeering activity’ and the threat of continuing activity to be effective . . . . S.Rep. No. 91-617 p. 158 (1969).” Sedima, 105 S.Ct. at 3285 n. 14. The Court’s opinion then referred to another section of RICO pro- viding that “ ‘criminal conduct forms a pattern if it embraces criminal acts that have the same or similar purposes, results, par- ticipants, victims, or methods of commission, or otherwise are interrelated by distinguishing characteristics and are not isolated events. 18 U.S.C. § 3575(e). This language may be useful in in- terpreting other sections of the Act.” Id. Many courts have relied on footnote 14 of the Sedima opinion in declining to find a pattern of racketeering activity where the alleged acts were committed in furtherance of a single fraudulent scheme posing no threat of continuing activity. See, e.g. Superior Oil Co. v. Fulmer, 785 F.2d 252, 255-57 (8th Cir.1986) (several acts of mail and wire fraud in pursuit of single isolated conver- sion or theft claim fail to establish requisite pattern); Em- manouilides v. Buckthorn, Ltd., 642 F.Supp. 964, 966 (S.D.N.Y.1986) (several fraudulent mail and wire communications not a pattern; “rather, they are components of a single activity, the alleged vessel fraud”); Eastern Corporate Federal C redit - Union v. Peat, Marwick, Mitchell & Co., 639 F.Supp. 1532, 1534 (D.Mass.1986) (“Ia applying civil RICO, therefore, it is essential to identify threats of continuing criminal activity, as opposed to isolated criminal events.”); Temporaries, Inc. v. Maryland Nat1 Bank, 638 FSupp. 118, 124 (D.Md.1986) (“Without an open-ended series of activities which comprise a continuing scheme, more ee A-50 than one scheme should be required to establish a ‘pattern’ of racketeering activity”)’ Kredietbank, N.V. v. Joyce Morris, Inc.., No. 84-1903, slip op. at 8 (D.N.J. January 9, 1986) [available on Westlaw, DCTU database] (“the repetition of an act taken against a single victim or w > ‘Tra 1 t the Nigerian interest ice ha t 2 , ta g (arpentel rirti Amenament yr > H ar. " ' + . : a” - + + "4 7 att Cuyt appuct ik DUeCiiiK a7 | Iteu f)) } ’ . ’ 4 ; Tt. J ~ , : rest iT i] as Lit ZA * it.i 2 ‘ rianag afi 1eTe : ibpoenaed to appear Defore a federal grand jul vnc! . ber ¥ ' Your" ¥ : ry) } seria ¥ ’ ’ r " " ‘ liga yg an aliegea Zul mugging pirat pera ’ . / : : : + ‘ ene4;rit t the Lrish Republican AI mn ireia tent t nvoke the Fitth Amendment was & wl lete iva Vas granted lil nit tT tive ‘ ’ tect | -_ ’ } ePcjut : Cen . > ¥ : . >? > : iva : I | \ | ‘ arg : eT t that re ) 4 Try vTa > > : - iT re TY *)| —. > : ’ re . 4 ; ‘ ; rive with the Fifth \ eT i. 4 ; 4 ‘ \ ; > ’ . rcuit found “Flanagan s tear ot elg en ’ : ’ ry ret Té : ~ ’ V ; , > > : ; a hs ; a MA : | ” . en x tne ractol etal rianaga i ene tf the risk b ing af , . —_ : 7 : , _ _ ‘ c% ’ rei¢g!i aw nuit ‘ en | ai acts il estiol vhether the testn ’ ‘ ‘ VeTTITTN -* saek ext] vere : : whether the te ‘ : : ; ; ; | : ‘ ; AC 11S osed id : ih bs : a Mia 2 nsideredc these tactor;rs as a ea to ' ent 7 thy 7 4 ‘ : ‘ 4 . ii ae | } i Ts rive few? art 4 , , | ; iment + availanbie to Larpenter DecauM ‘ iS airea : J . , : af . aart } re « : | pt Pract 4 \ : : ,? eTT re I if 1} : ite¢ thy ey terw. : : ‘ " ’ rs if : : 7 7 ; | \ te] at . | i te 1 . ' 1 ’ ’ ’ rent : : A-70 The Fifth Amendment guarantees every person freedom from self-incrimination and protects a witness against providing testimony “leading to the inflictions of penalties affixed to criminal acts.” Kastigar v. United States, 406 U.S. 441, 453. 92 S.Ct. 1653, 1661, 32 L.Ed.2d 212 (1972) reh’g denied, 408 U.S. 931, 92 S.Ct. 2478, 33 L.Ed.2d 345 (1972) (citations omitted). The protection is available where the testimony “would furnish a link in the chain of evidence needed to prosecute” the witness for a crime, provided “the witness has reasonable cause to ap- prehend danger from a direct answer.” Hoffman v. United States. 341 U.S. 479, 486, 71 S.Ct. 814, 818, 95 L.Ed. 1118 (1951). Con- sideration of ETC’s arguments necessitate a review of the stan- dard for invoking claims of the Fifth Amendment privilege. The extent to which the Fifth Amendment privilege may pro- perly be asserted on the grounds of potential prosecution in foreign countries is unclear. United States v. Kowalchuk. No. 77-118, slip op. (E.D.Pa. Oct. 20, 1978)." There is, however. agree- ment that the Fifth Amendment only protects against real and substantial threats of incrimination, not speculative or theoretical possibilities. Zicaredi v. New Jersey Investigation Commission. 406 U.S. 472, 478, 92 S.Ct. 1670, 1675, 32 L.Ed.2d 234 (1972). In assessing the severity of threat, one court has found there to be a common theme to all of the reported cases in that questions relating directly to criminal activities in foreign countries pose a more serious threat of incrimination than do ques- tions about events and activities within this country hav- ing only direct and remote connection to foreign culpability. Kowalchuk, slip op. at 4, citing In re Parker, 411 F.2d 1067 (10th Cir.1969), vacated as moot, Parker v. United States. 397 US. 96, 90 S.Ct. 819, 25 L.Ed.2d 81 (1970); In re Cardassi. 351 F.Supp. 1080 (D.Conn.1972). " This unreported decision was included in Carpenter's opposition to the ap peal and was therefore available to all counsel A.71 ETC contends the Fifth Amendment protection is not availabi to Carpenter in light of Carpenters previous plea of guilty t violation of the FCPA. This argument is not persuasive tor tw reasons. First. there would be no need to depose Carpenter 1 the information sought had been disclosed in connection w ith Carpenter's earlier prosecution. It is logical then to assume th« requested information goes bevond the investigation under the FCPA. Therefore, Carpenter may invoke the Fifth Amendment to avoid further incrimination. Second, case law supports pro tection of Carpenter's testimony because prior disclosure is not held to be a waiver of the pris ilege United States v. Yurnasovw h 580 F.2d 1212. 1218-1220 (3d Cir.1978 The initial statement is incriminating, a subsequent stat nent on the same subject would necessarily be further in criminating because the second statement would corroborate the earlier statement, making it more difficult for the witnes: to discount the earlier statement and hence increasing the langer of conviction Carter-Wallace. Inc. v. Hartz Mountain Industries, in 55 F.Supp. 45, 49 (S.D.N.1 1982) quoting E.F. Hutton © ‘ lupiter Development Corp., 91 F.R.D. 110, Llo (5 D.N.Y.198! 31] ETC also challenges Carpenter's assertion of the F itt! 4 mendment on the ground that Carpenter s fear of toreign p! secution is not founded. This argument ignores certain relevant facts. As previously detailed, Carpenter has been informed on more than on occasion of the danger he faces by travelling in Europe or Africa (Carpenter Aff. at q 4) and ot Nigerian official : desire to prosecute him. (/d. at 4 3) These tacts are not proper! ignored because determinations as to whether the privileg ‘ustified are to be made by the trial court based on the particular circumstance of each case. Hoffman v. nited States, 341 U.S i179. 486. 71 S.Ct. 814, 818, 95 I F.d.2d 1118 (195! 3?! Furthermore, contrary to ETC’'s contentions, 2 | nding foreign pro ecution is not a prerequisite to Fifth Amendment pro tection. See Kawalchuk, slip op. at 5 “tlhe actual pendency ol riminal proceedings is not a prerequisite to the successt vocation ot the Fitth Amendment privilege.’), /n re Cardassi F.Supp. at 1085 (interpreting Zicarelli, not to require any indi tion that a foreign prosecution is “imminent [he magistrate’s decision to uphold ¢ arpenters Fifth Amer nent claim has not been shown to be clearly erroneous or c ry rary to law. Based on the magistrate’s thorough discussion an 1s courts independent analysis of the relevant tacts and at licable case law, the magistrates decision shall be affirmed 1. Appeal of the January 20. 1978 Ord: As part of discovery, ETC issued a deposition notice and poena duces tecum to Steven Levy. an attorney with the Ds part ment of Justice. ETC sought Mr. Levy's deposition and produc tion of materials obtained by Mr. Levy in connection with a: ongoing grand jury investi gation. The United States of Ameri the Government”) moved to quash the subpoena pursuant t Rule 26ic) Fed. R.Civ P On January 20, 1987, Magistrate Hedges granted in ’ ATT al lenied in part the Government's motion to quash, and ET‘ A} pealed. At oral argument it was determined the issues on ai pea! had been rendered moot be AUS t he ibpoena Va withdrawn /6/87 Ir. 61:6-] ‘ rhe lusion Because E TC's amended omplaint alleges tacts sufficient, { the purposes of these motions to dismiss the pleading, to establis! a relationship among Holding, IDC, Carpenter and Kirkpatrick to support the potential imposition of liability upon Holding and LDC tor wrongful actions of ¢ arpenter and Kirkpatrick, the tion to dismiss Holding and IDC as defendants is denied Because I It . amended ( omplaint alle ves that | IC tailed t rocure the Nigerian ( ontract because of the alls ged antitrust and RI¢ {) violations committed Db detendants the motion t dismiss those claims for lack of standing is denied : ’ | _ ial! « i i a ta ed ' eve iplishin [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385012_1425%3A02. Public record. Not legal advice.