Amicus Curiae Brief — Republic of Philippines v. Pimentel

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BUPYF No.06-1204 Sire

_ INTHE

Supreme Court of the United States

REPUBLIC OF THE PHILIPPINES, PHILIPPINE

PRESIDENTIAL COMMISSION ON GOOD GOVERNMENT,

PHILIPPINE NATIONAL BANK, AND ARELMA, INC.,

Petitioners,

Vv.

MARIANO J. PIMENTEL, THE ESTATE OF ROGER ROXAS,

AND GOLDEN BUDHA CORP.,

Respondents.

On Writ of Certiorari to theUnited States

Court of Appeals for the Ninth Circuit

BRIEF OF MERRILL LYNCH, PIERCE,

FENNER & SMITH INCORPORATED AS

AMICUS CURIAE IN SUPPORT

OF NEITHER PARTY

CARTER G. PHILLIPS A. ROBERT PIETRZAK

RICHARD D. KLINGLER DANIEL A. MCLAUGHLIN*

SIDLEY AUSTIN LLP SIDLEY AUSTIN LLP

1501 K Street, N.W. 787 Seventh Avenue

Washington, D.C. 20005 New York, NY 10019

(202) 736-8000 (212) 839-5300

Counsel for Amicus Curiae

Merrill Lynch, Pierce, Fenner & Smith Incorporated

January 24, 2008 *Counsel of Record

[Additional Counsel Listed on Inside Cover]

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RULE 29.6 CORPORATE DISCLOSURE

STATEMENT

The parent corporation of amicus curiae Merrill

Lynch, Pierce, Fenner & Smith, Incorporated is

Merrill Lynch & Co., Inc., a publicly traded

corporation. No publicly held corporation, other than

Merrill Lynch & Co., Inc. owns 10% or more of the

stock of Merrill Lynch, Pierce, Fenner & Smith,

Incorporated. No publicly held corporation owns 10%

or more of the stock of Merrill Lynch & Co., Inc.

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TABLE OF CONTENTS

Page

RULE 29.6 CORPORATE DISCLOSURE

SEE NIIIUD: dihiconstitinsiadsercserecicoccececssnsechsesososes i

TABLE OF AUTHORITIES ................cssccsseesseesees iv

INTEREST OF AMICUS CURIAE...............0..0000+ 1

STATEMENT OF THE CASE.............:cccsceeseeeeees 3

SUMMARY OF ARGUMENT ............::csseesseeseees 8

Fs SIRES DS EC Y en OOP 11

I. MERRILL, AS STAKEHOLDER, HAS NO

ADEQUATE REMEDY IF THIS ACTION

Se aA sbiiisvassanscriropsiccasnvechcepeseoseese 11

Il. PCGG’S SOVEREIGN STATUS SHOULD

NOT ELIMINATE OR OUTWEIGH THE

EQUITABLE INTERESTS OF MERRILL

ADEE Ee PINE ve ckenecssvescesisinasniasesssosconecs 17

A. PCGG’s Sovereign Status Should Not

Preclude Consideration Of The Other

RE I I io 6.5. csscschcansninbedaciaseces 17

B.A Defendant’s Assertion Of Sovereign

Immunity Does Not Preclude A Full

Analysis Of The Practical Interests

iia sicicniendinshigadindatainionigsdinciibepiien 20

C.The Relevant Prejudice Is To PCGG’s

Right To Choose The Time And Venue

To File Suit In The Courts Of The

ii tibs cmesctesinadidiapsbessens 21

D. Prejudice To PCGG’s Right To Sue In A

Different Venue Is Limited....................... 25

E. A Judgment Here Would Be Adequate.... 29

IID liicch cacibldieiiiiinnidiscdctcdaiuianibaciiatenienss 31

(iii)

iv

TABLE OF AUTHORITIES

CASES

AmSouth Bank v. Miss. Chem. Corp., 465

F. Supp. 2d 1206 (D.N.M. 2006)................

Baena v. Woori Bank, 515 F. Supp. 2d 414

CE FF i Oe iisetlics isrsctiiistsibs taicintinetarenesies

Cloverleaf Standardbred Owners Ass’n v.

Nat’ Bank of Wash., 699 F.2d 1274 (D.C.

Curley v. Brignoli, Curley & Roberts

Assocs., 915 F.2d 81 (2d Cir. 1990)............

Dole Food Co. v. Patrickson, 538 U.S. 468

CIO dokilnsehckicecsibsnciiintphidhibagtnibheniumagmadei tiie

Extra Equipamentos E Exportacao Ltda. v.

Case Corp., 361 F.3d 359 (7th Cir. 2004)..

Fleet Nat Bank v. Kaplan, No. 02-11175,

2002 U.S. Dist. LEXIS 22781 (D. Mass.

Rahs, RE SI adecstivcnandeseanbicndeteescansieaesneendes

GTE Sylvania Inc. v. Consumer Prod.

Safety Comm’n, 598 F.2d 790 (3d Cir.

1979), aff'd, 447 U.S. 102 (1980) ...............

Horizon Bank & Trust Co. v. Flaherty, 309

F. Supp. 2d 178 (D. Mass.), appeal

dismissed as moot, 391 F.3d 48 (1st Cir.

GOD ii ciincvinicititicichiecisidasnisunnslaasicdeninientes:

Ins. Corp. of Hannover, Inc. v. Latino

Americana de Reaseguros, S.A., 868 F.

Supp. 520 (S.D.N.Y. 1994) ................eeeeeees

Ins. Corp. of Ir., Ltd. v. Compagnie Des

Bauxites de Guinee, 456 U.S. 694 (1982) ..

John J. Kassner & Co. v. City of New York,

415 N.Y.S.2d 785 (N.Y. 1979)............c000008

Koster v. Automark, 640 F.2d 77 (7th Cir.

Page

13

12

14

23

20

27

28

v

TABLE OF AUTHORITIES — continued ~~.

Page

Land v. Dollar, 330 U.S. 731 (1947),

overruled on other grounds, Larson v.

Domestic & Foreign Commerce Corp.,

I icetnces 20

Nat? City Bank v. Rep. of China, 348 U.S.

ES RR aD 22

Norex Petroleum, Ltd. v. Access Indus.,

Inc., 416 F.3d 146 (2d Cir. 2005)............... 28

In re Oil Spill by the Amoco Cadiz, 491 F.

Supp. 161 (N.D. Ill. 1979)......................... 23

Organizacion JD Lida. v. U.S. Dep't of

Justice, 18 F.3d 91 (2d Cir. 1994).............. 30

Owens-Illinois, Inc. v. Lake Shore Land

Co., 610 F.2d 1185 (3d Cir. 1979).............. 12

Powerex Corp. v. Reliant Energy Servs.,

Inc., 127 S. Ct. 2411 (2007).............ccecceeeee 19

Prescription Plan Serv. Corp. v. Franco,

552 F.2d 493 (2d Cir. 1977) ....................... 12

Provident Tradesmens Bank & Trust Co. v.

Patterson, 390 U.S. 102 (1968) .............. passim

Rep. of Arg. v. Weltover, Inc., 504 U.S. 607

RE A ce 21

Rep. of Austria v. Altmann, 541 U.S. 677

SES SRE CTR are oa 19

Rep. of China v. Am. Express Co., 195 F.2d

GES I 23

Robinson v. Gov't of Malay., 269 F.3d 133

ERA RE CER eee a 21

Saudi Arabia v. Nelson, 507 U.S. 349

cine 21

State v. Fenton, 414 N.Y.S.2d 58 (3d Dep't

ONES TE ER Ren CT aaa 27

State Farm Fire & Cas. Co. v. Tashire, 386

act aceetliieinn 15, 22

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vi

TABLE OF AUTHORITIES — continued

Tellabs, Inc. v. Makor Issues & Rights,

Ltd., 127 S. Ct. 2499 (2007) ..........cccccceeeeeee

Texas v. Florida, 306 U.S. 398 (1939)...........

Walsh v. Centeio, 692 F.2d 1239 (9th Cir.

TU csdachsnskdcies dcinsiussebscosislgiiabetatisabieiialiabe bbigeiteande

STATUTES

Civil Asset Forfeiture Reform Act of 2000,

Pub. L. No. 106-185, 114 Stat. 202............

Se Ce I ieaicesielicsiinsiteticinsisinincoadiimaniaisbaiii

ACI 14, 15, 18

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SIT iathhisiennerenenscecnnennnvmabentennnet

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IT iiicaninnicsncrrehatuntsteesdcinpiinis

SP ibepsninienercteneneeyeumnbiciaesnanin

IT ciinnitiincrrenocnesesemneieneieeniininnen

RULES

8 Ry § & Rs passim

EEE 12

ET sancenepiiitiiel 7, 14, 23

vii

TABLE OF AUTHORITIES — continued

LEGISLATIVE HISTORY Page

H.R. Res. 1658, 106th Cong. (2000).............. 24

SCHOLARLY AUTHORITIES

Stefan D. Cassella, The Civil Asset

Forfeiture Reform Act of 2000: Expanded

Government Forfeiture Authority and

Strict Deadlines Imposed on All Parties,

BT FB. Teeatie, DE GAT O I) ons cciccencescccsnarnscecsese 24

7 Charles Alan Wright, Arthur R. Miller &

Mary Kay Kane, Federal Practice &

a

j Procedure (3d ed. 2001).............c.cceceeeeeeeees 13, 16

F 4 James Wm. Moore et al., Moore’s Federal

Practice (3d. ed. 2007) .....-..cesscsessssvees 12, 13, 24

: John W. Reed, Compulsory Joinder of

F Parties in Civil Actions, 55 Mich. L. Rev.

) ETRE ae EARS a ia 12

| OTHER AUTHORITIES

| Restatement (Third) of Foreign Relations

Law of the United States (1987)................ 28

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INTEREST OF AMICUS CURIAE!

Merrill Lynch, Pierce, Fenner & Smith

Incorporated (“Merrill”) is a securities broker-dealer.

As a financial custodian of millions of accounts in the

names of individuals, families, retirement plans and

corporate and other entities, Merrill has an interest

in the continuing viability of the interpleader process

as a mechanism for resolving disputes between

competing claimants for assets (including assets that

may at some point be claimed by foreign sovereigns

or their instrumentalities) without exposing the

custodians of those assets to multiple liabilities. The

equitable balancing test of Federal Rule of Civil

Procedure 19(b) requires courts to consider the

interests of the stakeholder-plaintiff in not

dismissing an interpleader on the grounds that a

claimant who is unavailable is an indispensable

party. As set forth below, Merrill believes that the

standard proposed by Petitioners gives undue weight

to the interests of foreign sovereign claimants in

foreclosing use of the interpleader process by

innocent stakeholders and thus threatens the

viability of the interpleader process.

Merrill initially filed this interpleader action in

2000 in its capacity as a disinterested stakeholder

with no claim against the assets at issue and no

interest in their ultimate disposition. Merrill has

1 Pursuant to this Court’s Rule 37.6, amicus curiae states that

no counsel for any party authored this brief in whole or in part,

and no person or entity other than amicus curiae made a

monetary contribution to the preparation or submission of the

brief.

Pursuant to Rule 37.3, amicus curiae states that petitioners

and respondents have consented to the filing of this brief, and

written consents have been filed with the Court.

2

since been discharged by the district court and is no

longer a party to this action. Merrill remains neutral

as to the rightful ownership and disposition of the

assets, and takes no position as to whether the Court

should affirm the Ninth Circuit or remand for further

consideration, and no position as to whether

petitioners have the right to appeal. Merrill files this

brief solely to address the adverse consequences to it

as stakeholder if this action is dismissed.

Specifically, Merrill’s paramount interest is in a

final resolution of this dispute that avoids duplicative

litigation or inconsistent claims against Merrill.

Dismissal would put Merrill back where it started:

holding assets subject to dispute without any

practical means available to resolve the competing

claims. Petitioners the Republic of the Philippines

(“the Republic”), and the Philippine Presidential

Commission On Good Government (“PCGG”)? — who

created this impasse by successfully asserting

sovereign immunity under the Foreign Sovereign

Immunities Act (“FSIA”) — would still need to file suit

in a U.S. court to obtain the relief PCGG seeks. By

doing so, PCGG would waive its immunity under the

FSIA’s waiver and counterclaim provisions, 28 U.S.C.

§§ 1605(a)(1) & 1607(b)-(c), thus permitting Merrill to

initiate a new interpleader in which PCGG would

then participate. But such a ‘do-over’ would come at

the cost of delay and duplication of this entire

process, which has already consumed more than

seven years of litigation. Moreover, in that event,

Merrill would face continuing uncertainty while it

awaited such a filing by a party that has known of its

2 Because PCGG is the instrumentality charged with

prosecuting the Republic’s interests and those interests are

identical, this brief will refer to them collectively as “PCGG.”

3

interests in the subject assets for two decades and

has yet to file suit in the United States.

By contrast, a final judgment by the district court

binding on the remaining parties is adequate to

relieve Merrill of responsibility for the assets and

formally discharge it from liability to any claimant

other than PCGG. That would end the dispute unless

and until PCGG were to file suit against Merrill. As

discussed below, such a lawsuit would be subject to

dismissal on numerous legal and equitable grounds,

and thus PCGG could not seek money damages

against Merrill.

While this is an imperfect resolution, it is the least

inequitable to the parties. Merrill would have a

discharge and the burden of defending only a single

potential lawsuit of dubious merit. The other

claimants, including petitioners Arelma Inc.

(“Arelma”) and the Philippine National Bank

(“PNB”), have had their day in court and were not

prejudiced by the absence of PCGG. And any

prejudice to PCGG would be of its own making,

having sat out the interpleader on sovereign

immunity grounds in favor of relying on the right to

institute affirmative litigation against a party who

has done nothing but comply with all applicable court

orders and follow the course outlined in the Federal

Rules for resolving precisely this kind of dispute.

STATEMENT OF THE CASE

This case arises from a dispute over the ownership

of assets held in a brokerage account at Merrill in

New York in the name of Arelma, a Panamanian

corporation. Pet. App. 43a, 45a. The Arelma account

was opened in 1972 with a deposit in the amount of

$2 million, which had grown to $35 million by the

time Merrill filed this action in 2000. Id. at 45a-46a.

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Merrill claims no interest in these assets, and

accordingly instituted an interpleader in the United

States District Court for the District of Hawaii to

permit the various claimants to come forward and

assert their own claims.

In understanding the competing claims, it is

important to distinguish between (1) ownership and

control of shares of Arelma (the “Arelma shares”) and

(2) the assets held in Arelma’s name at Merrill (the

“Arelma assets”). It is the Arelma assets that were

held by Merrill and were deposited by Merrill with

the district court pursuant to 28 U.S.C. § 1335(a)(1).4

Thus, the question before the district court was who

was entitled to the Arelma assets: (a) Arelma and/or

the party controlling Arelma, or (b) a party with a

valid claim against Arelma. In the absence of a valid

claim against Arelma, Arelma’s authorized corporate

representative would ordinarily have the right, as the

holder of the account, to direct Merrill concerning

how to dispose of its assets. However, because the

shareholders of a corporation own the corporation

and not its assets,® Merrill could not safely direct the

assets to the corporation’s shareholders in the face of

8 Merrill was discharged by the district court on July 3, 2003

(JA 22-24) and was no longer a party when the district court

issued its findings of fact and conclusions of law. Merrill did not

participate in the subsequent appeal to the Ninth Circuit.

4 Federal law provides both for statutory interpleader under

28 U.S.C. § 1335 and “Rule interpleader” under Rule 22 of the

Federal Rules of Civil Procedure. While Merrill invoked both

the statute and the Rule, it is § 1335 that provides federal

subject matter jurisdiction for interpleader actions where there

is minimal diversity, which is present here.

5 This is a “basic tenet of American corporate law,” Dole Food

Co. v. Patrickson, 538 U.S. 468, 474-75 (2003), and the

claimants have not cited Panamanian law to the contrary.

5

a valid claim against the corporation or the assets

themselves. Moreover, Merrill could not safely follow

the direction of Arelma’s authorized corporate

representative if there were a significant dispute over

who had that authority. Accordingly, the district

court needed to determine the ownership of the

Arelma shares, but as an ancillary (not necessarily

dispositive) question to its determination of the

ownership of the Arelma assets.

While many claimants were named in _ the

interpleader, only five remain relevant:

1. PCGG contends that the Arelma assets were

misappropriated from the Philippine government by

then-President Ferdinand Marcos, and therefore that

any subsequent transfers of those assets were void ab

initio under Philippine law. Pet. Br. at 1-3. After the

fall of the Marcos government in 1986, the Republic

established its instrumentality PCGG to pursue and

recover assets misappropriated by the Marcos family.

Early on in this process, the Republic and PCGG

identified Arelma as holding assets potentially

recoverable by PCGG, and in litigation with Marcos

in 1987 the Republic obtained a court order in New

York freezing the Arelma account at Merrill. See Pet.

App. 47a. PCGG has pursued affirmative litigation

in both Switzerland and the Philippines to recoup

assets from Marcos, but Merrill has never been a

party to any of those actions.

While the claimants continue to dispute precisely

when and how these foreign lawsuits identified

Arelma and its assets, the Arelma shares have been

held in escrow on PCGG’s behalf since 1995 at PNB,

which obtained them from Swiss authorities. Pet.

6 Compare Pet. at 4-5 & Pet. Cert. Reply at 7 n.6, with Resp.

Cert. Opp. at 4 & n.3.

6

App. 7a, 46a, 49a-50a. PCGG represents that it is

presently pursuing litigation in the Sandiganbayan, a

Philippine court charged with handling such cases.

Pet. Br. at 6. A decision of the Sandiganbayan would

be appealable to the Philippine Supreme Court. See

id. at 5-6.

On May 8, 2000, PCGG notified Merrill that

instructions concerning the Arelma assets would be

forthcoming. CA9 E.R. 0285. On July 12, 2000,

PCGG requested that Merrill transfer the Arelma

assets to an escrow account with PNB. Id. at 0162.

Merrill responded by letter on July 19, citing

competing claims over the ownership of the Arelma

shares as a basis for refusing PCGG’s request. Id. at

0163-65.

The Ninth Circuit in 2002 concluded that PCGG

was a necessary party and at PCGG’s request briefly

stayed this action pending the resolution of the

litigation in the Sandiganbayan, a move Merrill did

not oppose at the time as an alternative to dismissal.

Pet. App. 39a-42a.7 More than five years later,

however, there has been no decision from the

7 Rule 19(a) deems a party’s joinder to be “required” (also

referred to as a “necessary party”) if, among other things:

(B) that person claims an interest relating to the subject of

the action and is so situated that disposing of the action in

the person’s absence may:

(i) as a practical matter impair or impede the person’s

ability to protect the interest; or

(ii) leave an existing party subject to a substantial risk

of incurring double, multiple, or otherwise inconsistent

obligations because of the interest.

Fed. R. Civ. P. 19(a)(1)(B). All cites to Rules 19 and 22 herein

are to the revised Rules adopted as of December 1, 2007. The

revisions to the rule were technical and “intended to be stylistic

only.” Fed. R. Civ. P. 19 & 22, advisory committee’s notes

(2007).

ay

7

Sandiganbayan. It is Merrill’s understanding that

the Philippine litigation is solely between PCGG and

the Marcos estate and Marcos-related interests. Pet.

at 24 n.10, 27; Pet. App. 56a, 59a. The Philippine

courts have asserted that they have in rem

jurisdiction over the Arelma shares (see Pet. at 18

n.7; Pet. App. 61a), but because the Arelma assets are

in the United States, any judgment against the

Marcos interests in the Sandiganbayan would be

entered without in rem jurisdiction over the Arelma

assets and without the participation of any of the

parties to this litigation.

2. PNB’s only claim to the Arelma assets is in its

role as escrow agent for the Arelma shares. Pet. Br.

at 4-9 & n.7. PNB and Arelma both participated in

the interpleader litigation, while objecting to the

absence of PCGG. See Pet. App. 50a-54a; Pet. Br. at

7-8 & n.7. The district court found that PNB’s claim

to the Arelma assets, to the extent it could exercise

the rights of a shareholder of Arelma, was derivative

of Arelma’s claim and rejected it on that basis. Pet.

App. 52a.

3. Arelma’s claim to the Arelma assets is based

on the corporation’s direct ownership of the account.

The district court, applying federal common law,

disregarded the corporate form of Arelma on the

grounds that it was an alter ego of Ferdinand Marcos,

and concluded that its assets could be used to satisfy

judgments against Marcos’ estate. Pet. App. 5la-52a,

54a.

4. Respondent Mariano Pimentel represents the

interests of a class of victims of human rights abuses

by the Marcos regime (the “Pimentel Class”), which

obtained a judgment against the Marcos Estate in the

District of Hawaii in 1996. Pet. App. 53a. The

Pimentel Class filed a lawsuit against Merrill in that

court, seeking the assets in the Arelma account to

satisfy that judgment, on September 6, 2000. CA9

S.E.R. 01-05. That lawsuit, combined with the other

claims against the Arelma assets or for control of

Arelma, led Merrill to file this action five days later.

The district court awarded the Arelma assets to the

Pimentel Class on the alter ego theory, as judgment

creditors of the Marcos estate. Pet. App. 53a-54a.

5. Respondents the Estate of Roger Roxas and

Golden Budha Corporation (collectively, “Roxas”) also

claimed the Arelma assets as individual victims of

the Marcos regime. The district court rejected those

claims on the theory that Roxas’s judgment was

against Marcos’s wife Imelda, not Marcos himself.

Pet. App. 54a.

Merrill takes no position on the propriety of the

district court’s disposition. The outcome of

Petitioners’ appeal, however, presents two choices:

dismissal of the entire action, or a judgment by the

district court binding on the parties to the

interpleader. In either event, Merrill is exposed to

the possibility of further litigation by PCGG, but a

dismissal would also expose it to litigation by the

other claimants, without a mechanism to resolve the

claims in a single forum.

SUMMARY OF ARGUMENT

1. Rule 19(b) establishes a four-factor test of

“equity and good conscience” for determining whether

a case should proceed in the absence of a party

deemed by the court to be “necessary” under Rule

19(a). The standard for evaluating this and other

Rule 19(b) factors is abuse of discretion.

In an interpleader action, the fourth factor,

“whether the plaintiff would have an adequate

remedy if the action were dismissed for nonjoinder,”

refers to the interest of the stakeholder who files the

action rather than the interests of competing

claimants. Here, Merrill would not have an adequate

remedy if this action were dismissed after seven

years of litigation: it would be left without direction

as to the proper disposition of the Arelma assets, and

without protection from duplicative litigation over

those assets. The absence of any alternative forum to

resolve all the competing claims is a powerful factor

counseling against dismissal, and doubly so on appeal

from a fully litigated judgment.

2. The first Rule 19(b) factor is “the extent to

which a judgment rendered in the [necessary party’s]

absence might prejudice that person.” The Court

should not accord dispositive weight to PCGG’s

sovereign status; instead, the potential prejudice to

PCGG should be evaluated as a practical matter,

taking full account of the equitable considerations

embedded in the Rule 19(b) factors. In weighing

those factors, a court should examine the nature of

the interests asserted by a foreign sovereign and the

available alternatives. Congress, in enacting Rule

19(b), the interpleader statute and rules, and the

FSIA, did not provide any unique exception from the

usual Rule 19(b) analysis for actions in which a

foreign sovereign is a necessary party. A preliminary

inquiry touching on the merits of the case is no

different from, and no more intrusive than, other

preliminary inquiries ordinarily permitted or

required under the FSIA.

Because this case involves a dispute over assets

located in the United States, PCGG would need to file

suit affirmatively in U.S. courts in order to recover

any assets. Thus, the relevant prejudice here is not

to PCGG’s immunity from suit per se, but to PCGG’s

10

right to use that immunity as both a sword and a

shield to choose the timing and venue in which it may

file suit in U.S. courts. If PCGG did file such a suit,

it would then waive its immunity from joinder in an

interpleader action. Accordingly, for purposes of the

first Rule 19(b) factor, PCGG should be held to the

consequences of deliberately choosing not to

participate in an interpleader when it had the

opportunity. The equities do not and should not favor

such a litigant.

Prejudice to PCGG is further lessened because

certain of its theories of relief are derivative of

Arelma’s, and are properly foreclosed, while any

claims it could have brought directly against Merrill

in U.S. courts would in anv event be time-barred. To

the extent that PCGG would be prejudiced in its

ability to recover on future remedies, that prejudice

must be weighed against the significant costs of delay

in bringing such claims, the self-inflicted nature of

the prejudice from its strategic decision to delay filing

suit, and the obstacles that such lawsuits would

themselves face.

The third Rule 19(b) factor, “whether a judgment

rendered in the person’s absence would be adequate,”

refers to the public stake in resolving controversies

efficiently and this additionally favors upholding the

district court’s disposition of this case. Whereas a

dismissal would reopen the entire controversy, the

judgment of the district court would limit the dispute

to one in which the remaining claims PCGG could

bring against Merrill would be contingent on

uncertain future events and unlikely as a practical

matter to proceed beyond the pleading stage.

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ARGUMENT

I. MERRILL, AS STAKEHOLDER, HAS NO

ADEQUATE REMEDY IF THIS ACTION IS

DISMISSED.

The absence of a “necessary” party whose interests

may be impaired does not automatically compel

dismissal of an action. Rule 19(b) instead requires

courts to apply an equitable, rather than a legal test,

considering a non-exclusive list of four factors to

“determine whether, in equity and good conscience,

the action should proceed among the existing parties

or should be dismissed.” Fed. R. Civ. P. 19(b). Any

analysis of the equities in this case must consider the

fact that dismissal would leave Merrill, as

stakeholder-plaintiff, exposed to multiple lawsuits

with no relief in sight.

The Rule 19(b) analysis begins with the fact that

“the plaintiff has an interest in having a forum” to

bring “the same action, against the same parties”

plus the absent party; “before trial, the strength of

this interest obviously depends upon whether a

satisfactory alternative forum exists.” Provident

Tradesmens Bank & Trust Co. v. Patterson, 390 U.S.

102, 109, 112, 116 (1968). The absence of any

alternative forum is a powerful argument against

dismissal; “where a plaintiff will not have an

adequate remedy elsewhere .. . district courts should

ordinarily retain the case and not dismiss it pursuant

to Rule 19(b).” Cloverleaf Standardbred Owners

Ass'n v. Natl Bank of Wash., 699 F.2d 1274, 1279

(D.C. Cir. 1983) (R. Ginsburg, J., joined by Scalia, J.)

8 The fourth Rule 19(b) factor is “whether the plaintiff would

have an adequate remedy if the action were dismissed for

nonjoinder.” Fed. R. Civ. P. 19(b)(4).

%

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12

(quotation omitted). The drafters of the Federal

Rules counseled courts to “consider whether there is

any assurance that the plaintiff, if dismissed, could

sue effectively in another forum where better joinder

would be possible.” Fed. R. Civ. P. 19, advisory

committee’s note (1966).1°

The plaintiffs interest is especially compelling on

appeal from a final judgment. “On appeal ... [the]

interest in preserving a fully litigated judgment

should be overborne only by rather greater opposing

considerations than would be required at an earlier

stage” when the “only concern” was which forum to

choose. Provident, 390 U.S. at 110, 112. This

interest is closely associated with the public interest

in judicial economy embodied in the third Rule 19(b)

factor; “[ajfter trial, considerations of efficiency of

course include the fact that the time and expense of a

trial have already been spent.” Jd. at 111." This is

° Accord Curley v. Brignoli, Curley & Roberts Assocs., 915

F.2d 81, 90 (2d Cir. 1990); Prescription Plan Serv. Corp. v.

Franco, 552 F.2d 493, 497 (2d Cir. 1977).

10 See also John W. Reed, Compulsory Joinder of Parties in

Civil Actions, 55 Mich. L. Rev. 327, 336-37 (1957) (possibility

that dismissal for absence of indispensable party could foreclose

plaintiff's claim entirely “is a factor which should prompt the

court to proceed to a hearing and determination of the case if it

possibly can do so.”), cited in Provident, 390 U.S. at 111 n.9, as

an example of commentary on the problems leading to the 1966

revisions of Rule 19.

11 See also Curley, 915 F.2d at 91-92; Owens-Illinois, Inc. v.

Lake Shore Land Co., 610 F.2d 1185, 1191 (3d Cir. 1979); GTE

Sylvania Inc. v. Consumer Prod. Safety Comm'n, 598 F.2d 790,

798 (3d Cir. 1979), affd, 447 U.S. 102 (1980); 4 James Wm.

Moore et al., Moore’s Federal Practice § 19.02[4][b] (3d. ed. 2007)

(after judgment “there is less interest in an alternative forum

and greater public interest in preserving a valid judgment .. .

even though some prejudice might result from failure to join the

Ps

13

especially the case in an interpleader, the entire point

of which is to serve “the public stake in settling

disputes by wholes, whenever possible.” Jd. at 111.

District judges have “substantial discretion” in

balancing the equitable Rule 19(b) factors, and “the

Rule does not call for ... ordering [them] by rank.”

Cloverleaf, 699 F.2d at 1279 & n.1l. See also

Provident, 390 U.S. at 120-21, 126 (citing Elmendorf

v. Taylor, 23 U.S. (10 Wheat.) 152, 166-68 (1825)

(Marshall, C.J.)); 4 Moore, supra, § 19.05 (“whether to

proceed or dismiss is vested in the sound discretion of

the district judge”). Accordingly, courts of appeals

generally review Rule 19(b) findings under the abuse

of discretion standard. See Cloverleaf, 699 F.2d at

1276 (“de novo balancing should not occur on appeal;

instead, the district court’s application of Rule 19(b)’s

‘equity and good conscience’ test should be reviewed

under an ‘abuse of discretion’ standard.”).!2

Rule 19(b) speaks of the “remedy” available to “the

plaintiff’ in the event of a dismissal. The parties and

the Ninth: Circuit appear to assume that “the

plaintiff’ refers to the Pimentel Class..° But the

logical reading of this language, in an interpleader

action, is that the “plaintiff” is the stakeholder who

initiates the action and seeks a discharge, rather

than one of several claimants. It is the stakeholder

absentee.”); 7 Charles Alan Wright, Arthur R. Miller & Mary

Kay Kane, Federal Practice & Procedure § 1618, at 283 (3d ed.

2001) (A “court’s concern for the expense and time that has been

expended is a good illustration of the use of pragmatic

considerations not specifically mentioned in Rule 19”).

12 Accord Extra Equipamentos E Exportacao Ltda. v. Case

Corp., 361 F. 3d 359, 361 (7th Cir. 2004) (Posner, J.) (collecting

cases); Walsh v. Centeio, 692 F.2d 1239, 1242 (9th Cir. 1982).

13 See Pet. App. 9a-10a; Pet. Br. at 45-47; Resp. Cert. Opp. Br.

at 12-13.

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14

who files the complaint and names the parties to be

joined. This is consistent with the plain language of

28 U.S.C. § 1335 (requiring “the plaintiff’ to deposit

the funds with the court) and Rule 22 (“[p]ersons with

claims that may expose a plaintiff to double or

multiple liability may be joined as defendants”) Fed.

R. Civ. P. 22(a)(1) (emphasis added). Lower courts

have generally treated the stakeholder as the

plaintiff for Rule 19(b) purposes, and this Court

should do so as well.

Merrill has no adequate remedy if this action is

dismissed for nonjoinder due to PCGG’s assertion of

sovereign immunity. The Arelma assets, currently on

deposit with the district court, would presumably be

returned to Merrill, there being no enforceable order

directing a different disposition. Merrill would be left

without guidance from the courts as to the proper

disposition of those assets (or who properly controls

the Arelma account), and could potentially be forced —

after years of litigation over a res in which Merrill

has never claimed any interest — to defend lawsuits

by the various claimants in different jurisdictions,

possibly leading to inconsistent judgments. The

interpleader remedy, created to resolve precisely such

dilemmas, would be unavailable to Merrill unless and

until PCGG chose to file suit and thus waive its

immunity. Particularly given that Merrill is a mere

disinterested stakeholder and no party has alleged

any misconduct by Merrill, this would be deeply

inequitable.

4 See, e.g., AmSouth Bank v. Miss. Chem. Corp., 465

F. Supp. 2d 1206, 1211 (D.N.M. 2006); Horizon Bank & Trust

Co. v. Flaherty, 309 F. Supp. 2d 178, 196-97 (D. Mass.), appeal

dismissed as moot, 391 F.3d 48 (1st Cir. 2004); Fleet Nat? Bank

v. Kaplan, No. 02-11175, 2002 U.S. Dist. LEXIS 22781, at *3 (D.

Mass. Oct. 11, 2002).

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15

Petitioners do not explain how dismissal of this

action could possibly provide Merrill with the relief it

sought when it filed this case. They frankly assert

that “the unavailability of a forum is a consequence of

the Republic’s immunity,” and urge dismissal in favor

of litigation in the Philippines. Pet. Br. at 15, 47.

The Philippine court, however, has still not ruled

more than seven years after this case was filed, and

even if it did, it lacks the power to discharge Merrill

from competing claims, and lacks the power to order

distribution. of the Arelma assets without

confirmation of that judgment in an American court.

Dismissal, as discussed infra, likely would result in a

new interpleader action if the Sandiganbayan rules

in favor of PCGG and if that ruling is upheld by the

Philippine Supreme Court and if PCGG then files

suit in the United States, thus waiving its immunity

from joinder in essentially the same interpleader all

over again. As this Court observed in Provident, this

is cold comfort:

In short, the net result of dismissal here would

presumably have been a diversity action

identical with this one, except that [the plaintiff]

would have been compelled to wait upon the

convenience of plaintiffs over whom it had no

control, and would have been dependent upon a

victory by those plaintiffs in [another lawsuit].

Provident, 390 U.S. at 127 (emphasis added).

“Equity and good conscience” do not support

shifting the burden of one claimant’s purposeful

unavailability onto a disinterested custodian of assets

that itself seeks no independent judicial relief. The

federal interpleader statute, 28 U.S.C. § 1335, “is

remedial and [should] be liberally construed.” State

Farm Fire & Cas. Co. v. Tashire, 386 U.S. 523, 533

(1967). Interpleader is an ancient equitable remedy

16

dating back many centuries, protecting stakeholders

against “the risk of loss ensuing from the demands in

separate suits of rival claimants to the same debt or

legal duty.” Texas v. Florida, 306 U.S. 398, 495-06

(1939). See also 7 Wright, Miller & Kane, supra,

§ 1701, at 524-25. In the modern, interconnected

world of global investing, interpleader is more

important than ever for financial institutions beset

by geographically disparate claimants. With the

proliferation of investments by sovereign entities or

entities with sovereign investors or business

partners, or by entities that may for one reason or

another come under the regulatory scrutiny of foreign

governments, the potential for one claimant out of

several to be a foreign sovereign within the meaning

of the FSIA increases. See 28 U.S.C. § 1603(b)(2)

(“foreign state” includes corporations majority-owned

by foreign states). The test proposed by Petitioners,

under which the assertion of sovereign immunity by a

foreign sovereign claimant is a showstopper, would

cripple the interpleader process and subject innocent

stakeholder financial institutions to unfair and

unpredictable litigation, uncertainty and delay.

Accordingly, the Court should prefer this litigation,

however imperfect, to the complete absence of a

forum for resolution of the conflicting claims

confronting Merrill, In the event that the Court does

not affirm the decision of the Ninth Circuit, it should

not order a dismissal] but instead should remand with

instructions to consider the weighty equitable

interests of Merrill in receiving a discharge.

17

II. PCGG’S SOVEREIGN STATUS SHOULD

NOT ELIMINATE OR OUTWEIGH THE

EQUITABLE INTERESTS OF MERRILL

AND THE COURTS.

The first Rule 19(b) factor is “the extent to which a

judgment rendered in the [necessary party’s] absence

might prejudice that person.” Fed. R. Civ. P. 19(b).

Petitioners argue that, where a foreign sovereign

entity is the absent necessary party, that fact alone is

dispositive, precluding a case-by-case examination of

the nature of the prejudice to the foreign sovereign

entity or a balancing of its interests against the other

equitable Rule 19(b) factors. This reading of Rule

19(b) is inconsistent with this Court’s decision in

Provident and the structure of Rule 19, and reads

into the Rule an exception not found in the FSIA,

Rule 19 or the interpleader statutes and rules.

A. PCGG’s Sovereign Status Should Not

Preclude Consideration Of The Other

Rule 19(b) Factors.

Because it is invoked only when an absent party is

found to be necessary under Rule 19(a), the

indispensable party inquiry under Rule 19(b) always

involves some party whose rights will be affected or

whose absence affects the rights of the remaining

litigants, and presupposes that the equities may

counsel continuing on with the remaining parties,

especially if the alternatives would be worse. Thus,

this Court has rejected formalistic indispensability

rules, stressing that the equities relevant under Rule

19(b)

can only be determined in the context of

particular litigation ... [and] must be based on

factors varying with the different cases, some

such factors being substantive, some procedural,

18

some compelling by themselves, and some

subject to balancing against opposing interests.

Rule 19 does not prevent the assertion of

compelling substantive interests; it merely

commands the courts to examine each

controversy to make certain that the interests

really exist. To say that a court “must” dismiss

in the absence of an indispensable party and that

it “cannot proceed” without him puts the matter

the wrong way around: a court does not know

whether a particular person is “indispensable”

until it has examined the situation to determine

whether it can proceed without him.

Provident, 390 U.S. at 118-19. Petitioners’ insistence

that foreign sovereign immunity is always per se a

compelling interest pretermits this fact-bound,

equitable inquiry. If Rule 19(b) had been intended tw

“create[] a federal, common-law, substantive right in

a certain class of persons” such as foreign sovereigns,

it easily could have been written to do so. Id. at 119.

Instead, the Rule provides a single standard, and

courts are instructed that the four Rule 19(b) factors

“must be examined in each case” and cannot be short-

circuited by the contention that some interests have

“substantive” weight as “a substitute for the analysis

required by that Rule.” Jd. at 109, 118-25 (emphasis

added).

Congress has nowhere granted a per se right to a

foreign sovereign entity to quash an interpleader by

its refusal to participate. Both the FSIA and the

interpleader statute are complex and detailed

statutory schemes, with provisions governing subject

matter jurisdiction, venue, and attachment and other

remedial powers. See, e.g., 28 U.S.C. §§ 1330(a),

1335(a), 1397, 1441(d), 1607-1611, & 2361. The FSIA

specifically precludes, in certain specified circum-

19

stances, attachment of assets under the sovereign’s

control, even to satisfy valid judgments, see 28 U.S.C.

§§ 1609-1611, but neither statute makes any similar

provision to protect the foreign sovereign entity

against interpleader to resolve the sovereign’s

unliquidated causes of action against assets in the

custody of domestic individuals or businesses. In the

absence of any statutory exception to the normal

operation of interpleader and Rule 19, the logical

conclusion is that Congress intended that when a

necessary party is absent from an interpleader due to

foreign sovereign immunity, the district court should

engage in the usual case-by-case balancing of the

equities. See Powerex Corp. v. Reliant Energy Servs.,

Inc., 127 S. Ct. 2411, 2420 & n.5 (2007) (declining to

create “implicit FSIA exception” to rule barring

appeals of remands, despite “undesirable [policy]

consequences in the FSIA context,” where FSIA did

not amend appeal statute).'®

15 Petitioners’ invocation of policy considerations (Pet. Br. at

27-34) and citation to cases involving the United States or

Native American Tribes ignores the distinct nature of the

immunities involved. The U.S. and tribal governments enjoy

sovereign immunity in U.S. courts as an adjunct to actual

sovereignty, and its protections are broadly construed to

effectuate the sovereign’s right, in appropriate cases, to take

direct executive or legislative action or to limit remedies to

specially constituted tribunals. A foreign sovereign, by contrast,

has no ability to assert sovereign power within the territorial

United States; its immunity is a creature of statute granted by

Congress as a matter of comity. The FSIA displaced the prior

common law approach to such immunity, including the more

restrictive approach that prevailed before 1952. See Rep. of

Austria v. Altmann, 541 U.S. 677, 688-91 (2004).

20

B. A Defendant’s Assertion Of Sovereign

Immunity Does Not Preclude A Full

Analysis Of The Practical Interests

Involved.

Petitioners characterize the lower courts’

examination of the practical barriers to the remedies

available to PCGG — specifically, the statute of

limitations applicable to any claims PCGG might

bring in American courts — as itself an undue

intrusion on PCGQ’s sovereignty. Pet. Br. at 8, 34-

36, 39-40. This ignores the practical need of federal

courts to conduct preliminary inquiries before

dismissing a case on procedural grounds.

As a general rule, federal courts have the power to

conduct basic factfinding in determining their

jurisdiction.'® Here, the district court did not require

PCGG to present affirmative evidence or participate

in discovery; it merely analyzed the legal issues

presented on the pleadings for purposes of the

practical inquiry required by Rule 19(b).17 A

pragmatic evaluation of what alternative lawsuits

could feasibly be filed by the parties and what other

forums remain open to hear the dispute is always a

part of the court’s “examinfation of] the actual

interest of the nonjoined person” including “the

actual threat of relitigation” by the absent party.

Provident, 390 U.S. at 116, 122. Requiring a foreign

16 See, e.g., Ins. Corp. of Ir., Ltd. v. Compagnie Des Bauxites de

Guinee, 456 U.S. 694, 704-09 (1982); Land v. Dollar, 330 U.S.

731, 734-35 & n.4 (1947), overruled on other grounds, Larson v.

Domestic & Foreign Commerce Corp., 337 U.S. 682 (1949).

17The district court took note of prior judicial proceedings,

which are subject to judicial notice on a motion on the pleadings.

See, e.g., Tellabs, Inc. v. Makor Issues & Rights, Ltd., 127 S. Ct.

2499, 2509 (2007).

21

sovereign to brief the Rule 19(b) issue in conjunction

with a motion to dismiss under the FSIA is neither

uncommon nor unduly burdensome and is necessary

to enable the district court’s informed decision on a

request for the drastic remedy of dismissal of the case

in its entirety.18

C. The Relevant Prejudice Is To PCGG’s

Right To Choose The Time And Venue

To File Suit In The Courts Of The

United States.

Much of Petitioners’ argument for dismissal hinges

on the premise that PCGG has an absolute right to

refuse to appear in American courts. This ignores

“the pragmatic consideration of the effects of the

alternatives of proceeding or dismissing” required by

Rule 19(b). Provident, 390 U.S. at 118 n.12. In fact,

because the assets are located in the United States

and subject to conflicting claims here, PCGG would

sooner or later need to appear in a U.S. court to

prosecute its claim — at which time it would waive its

immunity from an interpleader. Thus, the relevant

“prejudice” to PCGG’s rights is not an intrusion on its

right to claim the assets without waiving immunity,

but rather on PCGG’s right to choose the time and

the venue to waive and pursue affirmative litigation.

In weighing the equities, that interest can and should

be subordinate to Merrill’s right to finality and

certe*nty and the public interest in speedy and

efficient resolution of the controversy.

18 See, e.g., Saudi Arabia v. Nelson, 507 U.S. 349, 356-60

(1993) (examining factual allegations to determine availability

of exception to sovereign immunity); Rep. of Arg. v. Weltover,

Inc., 504 U.S. 607, 615-19 (1992) (same); Robinson v. Gov't of

Malay., 269 F.3d 133, 141 & n.7 (2d Cir. 2001) (discussing

burden-shifting procedures and evaluation of evidence on

motion to dismiss under FSIA).

22

An interpleader involving a single, disputed res in

the possession of a disinterested stakeholder is

functionally not so much a claim against the

claimants as an invitation for all potential claimants

to appear and press their case. See State Farm, 386

U.S. at 534-35 (where disinterested stakeholder

deposits fund and files interpleader, “the fund itself is

the target of the claimants” and “marks the outer

limits of the controversy”). In that sense, requiring a

foreign sovereign entity to choose between appearing

to pursue its claim and abandoning its practical

ability to recover on that claim is no more of an

imposition on the foreign sovereign than compliance

with any other procedural rule regarding venue,

personal or subject matter jurisdiction, the statute of

limitations, or the discovery rules. Any plaintiff in

the U.S. court system, sovereign or otherwise, must

abide by such rules in order to obtain relief through

American courts.!9 While the FSIA gives a foreign

sovereign claimant who has not filed suit a right —

unavailable to private litigants -— to refuse to

participate, that right is not without cost: by

choosing not to sue, it forgoes the possibility of

recovering the assets. What the FSIA does not give

foreign sovereigns is a preemptive veto over any

litigation by U.S. litigants over assets located in the

United States in which the foreign sovereign might

someday come forward to claim an interest.

If PCGG were to sue Merrill to recover the Arelma

assets, its appearance would waive its immunity from

'9This Court has previously recognized the distinction

between “an attempt to bring a recognized foreign government

into one of our courts as a defendant” and “a foreign government

invoking our law” that “wants our law, like any other litigant,

but it wants our law free from the claims of justice.” Nat? City

Bank v. Rep. of China, 348 U.S. 356, 361-62 (1955).

23

related claims and expose it to the commencement of

an interpleader action by Merrill, either as a

counterclaim for defensive interpleader or as a

separate action. See 28 U.S.C. §§ 1605(a)(1) (waiver

exception to immunity), 1607(b) (providing that in

any action brought by a foreign state in federal or

state court, the foreign state waives immunity to any

counterclaim “arising out of the transaction or

occurrence that is the subject matter of the claim of

the foreign state”); Fed. R. Civ. P. 22 (allowing

defendant to obtain interpleader by making a cross-

claim or counterclaim and stating that statutory

interpleader actions under 28 U.S.C. § 1335 shall be

conducted in accordance with the rule’s provisions).

This would follow even if PCGG sued to enforce a

judgment rendered in a Philippine court. See, e.g.,

Ins. Corp. of Hannover, Inc. v. Latino Americana de

Reaseguros, S.A., 868 F.Supp. 520, 523, 526

(S.D.N.Y. 1994) (foreign claimant seeking to enforce

Panamanian judgment permitted to intervene in

interpleader action). An interpleader by Merrill of

claimants to the disputed res would clearly be

sufficiently connected to a PCGG suit over the same

assets to implicate the FSIA’s waiver and

counterclaim provisions. See, e.g., In re Oil Spill by

the Amoco Cadiz, 491 F. Supp. 161, 166-68 (N.D. IIl.

1979) (foreign sovereign entities waived immunity

from third party claims and counterclaims arising out

of the same oil spill as claims brought by the

sovereign entities in a multidistrict litigation). See

also Rep. of China v. Am. Express Co., 195 F.2d 230,

233-34 (2d Cir. 1952) (pre-FSIA case; in action to

recover a deposit, foreign sovereign waived immunity

from counterclaim interpleading adverse claimant to

deposited funds). Accordingly, for purposes of the

balancing of the equities required under Rule 19(b),

PCGG is no different from a private non-intervening

24

litigant that chose not to participate in the

interpleader action. The equities do not and should

not favor such a litigant. See 4 Moore, supra,

§ 19.05[2][c] (“An absentee’s refusal to intervene may

be considered in calculating prejudice should the case

proceed without the absentee.”).

The fact that PCGG seeks to vindicate public

interests against official corruption (Pet. Br. at 47-52)

does not alter this analysis. Such aims should be

accomplished through the policymaking branches of

government, not through ad hoc rewriting of the

Federal Rules of Civil Procedure. As Petitioners note,

Congress has provided express authority to the

Executive Branch, in appropriate cases, to obtain

judicial assistance for the law enforcement efforts of

foreign sovereigns in repatriating misappropriated or

otherwise forfeit assets. See 28 U.S.C. § 2467(c); Pet.

Br. at 41 n.18.2° This mechanism, unlike a bare

dismissal under Rule 19(b), provides a variety of

_ procedural protections: a final, non-appealable

judgment from the foreign court (§ 2467(b)(1)(B)-(C)),

assurances that such court had jurisdiction and gave

notice to affected parties (§ 2467(b)(1)(C) & (d)), and a

policy determination by the Attorney General to

assist the foreign government (§ 2467(b)(1)-(2)). Such

procedures, if timely invoked, would presumably

preempt other claims to the seized assets; certainly

other claimants could not sue a financial institution

20 28 U.S.C. § 2467 was enacted in 2000 as part of the Civil

Asset Forfeiture Reform Act of 2000, Pub. L. No. 106-185, 114

Stat. 202, “to encourage international cooperation in asset for-

feiture cases.” Stefan D. Cassella, The Civil Asset Forfeiture

Reform Act of 2000: Expanded Government Forfeiture Authority

and Strict Deadlines Imposed on All Parties, 27 J. Legis. 97,

115-16 (2001); see 28 U.S.C. § 2467 (2007); H.R. Res. 1658, 106th

Cong. (2000).

a. ae ee ee

25

for complying with a district court’s forfeiture order

under § 2467. Nor does the text of § 2467

contemplate that the Attorney General would seek

civil damages against a custodian that had disposed

of the assets in accordance with a prior court order.

The contrast to the consequences of a dismissal here

is stark.

D. Prejudice To PCGG’s Right To Sue In A

Different Venue Is Limited.

To determine what an absent party will actually

lose if the case proceeds in its absence, a court must

look beyond the formalistic assertion of competing

interests that animate Rule 19(a) and “examine each

controversy to make certain that the interests really

exist.” Provident, 390 U.S. at 119. Here, that means

considering what PCGG could have accomplished by

suing Merrill.?!

As the district court and the Ninth Circuit found,

any claim to the Arelma assets would have to be

brought in New York, the location of the res and of

21 Petitioners, citing out of context statements made by

Merrill before the full extent of the dispute over the Arelma

assets became apparent, contend that “had it not been for this

litigation, there is every reason to believe that Merrill Lynch

would have transferred the Arelma assets to the Philippines in

response to a favorable ruling of the Sandiganbayan.” Pet. Br. at

6 n.5 & 39-40. This ignores the fact that it was Merrill that

instituted this litigation. Merrill would gladly have abided by a

domesticated Philippine judicial order giving PCGG control of

Arelma if there were no other competing claimants, but that is

not the situation Merrill faced. With multiple parties seeking

control of Arelma and its assets, guidance from a court with the

ability to resolve the largest number of competing claims at once

was and is essential.

26

Merrill’s headquarters. See Pet. App. 8a-9a, 57a.22

Petitioners suggest three possible causes of action

against Merrill; none would provide a viable basis to

survive a motion to dismiss:

1. PCGQ’s asserted right to the assets arises from:

Marcos’s misappropriation of public funds, under a

Philippine statute providing that “assets derived from

misuse of public office are forfeit to the Republic from

the moment they are appropriated.” Pet. Br. at 3.

Petitioners note that this statute contains no

limitations period. See id. at 40. But this would not

end the inquiry. New York’s “borrowing statute”

applies to time-bar claims filed in New York courts

where the cause of action accrued to a non-New York

resident outside of New York, if the claim would be

untimely under the shorter of the New York or

foreign limitations period — even when the claims are

asserted under the statutory law of a foreign country.

See N.Y. C.P.L.R. § 202 (2005); Baena v. Woori Bank,

515 F. Supp. 2d 414, 422 (S.D.N.Y. 2007).

The analogous limitations period under New York

law would be for actions by the state “based upon the

spoliation or other misappropriation of public

property,” for which a six-year statute of limitations

begins to run upon “discovery by the state of the facts

relied upon.” N.Y. C.P.L.R. § 213(5).22 PCGG

discovered Marcos’ misappropriation of the Arelma

22 Merrill will thus discuss the obstacles to recovery under

New York law. Petitioners have never suggested at any stage of

this case any alternative forum that would present lesser

obstacles.

23 The only alternative limitations periods would be the three-

year limitations period for statutory claims and the default six-

year limitations period. See N.Y. C.P.L.R. §§ 213(1), 214(2);

Baena, 515 F. Supp. 2d at 422.

-

27

assets no later than 1987. See Pet. App. 47a. Thus,

any claim under the Philippine statute would have

been time-barred by 1993.

2. To the extent that Petitioners contend that

PCGG could have sued Merrill on a breach of contract

theory by virtue of its control of the Arelma shares,”4

such a claim would encounter at least two obstacles.

First, Merrill has no contract with anyone other than

the holder of the account — Arelma. Any claim by

PCGG to Arelma’s assets by virtue of its control of the

Arelma shares is derivative of Arelma’s own rights,

which were adequately protected in the interpleader

by Arelma’s participation in the interpleader action.

Second, the New York statute of limitations for

breach of contract actions is six years. See N.Y.

C.P.L.R. § 213(2). A claim for breach of contract

accrues upon the defendant’s refusal to perform an

obligation due under the contract, which here would

be the non-payment of the Arelma assets.2> Any

claim of breach of contract thus accrued no later than

July 2000, when PCGG requested that Merrill

transfer the Arelma assets to the PNB and Merrill

refused. CA9 E.R. 0162-65. The limitations period

has come and gone and no action was ever instituted

by PCGG on that demand. Petitioners cite no

authority for reviving an expired limitations period

by re-making the same request after the limitations

period has run. See Pet. Br. at 40.

3. Petitioners claim that a judgment in the

Philippines would be enforceable in New York courts

24 See Pet. Br. at 40-41; Pet. at 18 n.7.

25 See, e.g., John J. Kassner & Co. v. City of New York, 415

N.Y.S.2d 785, 788-89 (N.Y. 1979); State v. Fenton, 414 N.Y.S.2d

58, 59 (3d Dep’t 1979) (claim for unpaid tuition accrued when

payments due).

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against Merrill. Pet. Br. at 40-41. This, too, fails for

several reasons. First, Merrill was not named as a

party to the Philippine litigation, which is between

the Republic and the Marcos estate. Section 5303 of

the C.P.L.R. only allows for recognition and

enforcement of a foreign country’s money judgment

that “is conclusive between the parties.” N.Y. C.P.L.R.

§ 5303 (emphasis added). Petitioners would likewise

need to show that the Philippine court had personal

jurisdiction over Merrill. See id. §§ 5304(2) & 5305.6

To the extent that such a judgment is to be enforced

against the assets themselves, while the Philippine

court has apparently asserted in rem jurisdiction over

the shares of Arelma, it is at best uncertain whether

such assertion of jurisdiction would be recognized by

U.S. courts as being over the Arelma assets, given

that they were held in the United States at the time

the action commenced in the Sandiganbayan. See

Restatement (Third) of Foreign Relations Law of the

United States § 421(2) (1987) (a foreign “state’s

exercise of jurisdiction to adjudicate with respect to a

person or thing is reasonable if . . . the person or

thing is present in the territory of the state, other

than transitorily’).

Thus, in the absence of the interpleader, the sole

feasible options for PCGG would be to register a

judgment against the Marcos estate and either seek

to attach Arelma’s assets as a judgment creditor of

the Marcos estate (the approach taken by the

26 Accord Restatement (Third) of the Foreign Relations Law of

the United States § 482 (setting forth circumstances under

which U.S. courts “need not” recognize a foreign judgment,

including, inter alia, lack of personal jurisdiction). See also, e.g.,

Norex Petroleum, Ltd. v. Access Indus., Inc., 416 F.3d 146, 160-

62 (2d Cir. 2005); Koster v. Automark, 640 F.2d 77, 81 (7th Cir.

1981).

ed te all bl ee

29

Pimentel Class), or to ask the Attorney General to

initiate the forfeiture procedure set forth in 28 U.S.C.

§ 2467. As discussed above, either option is

contingent upon a series of future events that have

yet to come to pass years after the district court’s

judgment, and the former would trigger a defensive

interpleader by Merrill. The prejudice to PCGG from

its refusal to participate in the interpleader must

thus be weighed not against any present alternative

but against a contingent future claim — and

Petitioners do not suggest any realistic alternative for

what Merrill was or is supposed to do to insulate

itself from the competing claims in the intervening

years.

E. A Judgment Here Would Be Adequate.

The third Rule 19(b) factor is “whether a judgment

rendered in the person’s absence would be adequate.”

Fed. R. Civ. P. 19(b)(3).27. This factor implicates “the

interest of the courts and the public in complete,

consistent, and efficient settlement of controversies.”

Provident, 390 U.S. at 111. Here, despite Petitioners’

suggestion to the contrary, a judgment that is

technically not binding on PCGG would nonetheless

resolve this controversy as a practical matter. Thus,

even if “[ijt might have been preferable, at the trial

level, if there were a forum available in which [all the

claimants] could have been made defendants, to

dismiss the action and force the plaintiffs to go

elsewhere” — and there was no such forum — there is

now “no reason ... to throw away a valid judgment

27 The second Rule 19(b) factor, “the extent to which any

prejudice could be lessened or avoided” through remedial orders

of the court, is not contested here; no party has suggested any

protective measures to balance the competing claims or to

provide a globally binding release for Merrill.

30

just because it [does] not theoretically settle the

whole controversy.” Id. at 116.

If the district court’s judgment is affirmed by this

Court or by the Ninth Circuit on remand, the Arelma

assets will be distributed to the Pimentel Class, and

all parties appear to agree that this cannot be

undone. Even if PCGG subsequently filed suit for

damages against Merrill, its claims would be barred

by the obstacles set forth above; PCGG’s only remedy

would be to attach assets that Merrill deposited with

the district court more than seven years ago and

cannot get back.28 Accordingly, the district court’s

judgment here is the most adequate and equitable

resolution possible under these circumstances.

28 If the district court’s judgment is affirmed, any effort to

enforce a Philippine judgment in New York would then be

furthet barred as “conflict[ing] with another final and conclusive

judgment.” N.Y. C.P.L.R. § 5304(5). Such a judgment would

also further preclude any breach of contract action against

Merrill for damages, as the doctrine of impossibility excuses a

party’s contractual obligation where prohibited by judicial order.

See, e.g., Organizacion JD Lida. v. U.S. Dep't of Justice, 18 F.3d

91, 95 (2d Cir. 1994).

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TEN ed ip ee ee PARE ae tee Te eS

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CONCLUSION

For the reasons set forth above, this Court should

not order dismissal of this action.

Respectfully submitted,

CARTER G. PHILLIPS A. ROBERT PIETRZAK

RICHARD D. KLINGLER DANIEL A. MCLAUGHLIN*

SIDLEY AUSTIN LLP SIDLEY AUSTIN LLP

1501 K Street, N.W. 787 Seventh Avenue

Washington, D.C. 20005 New York, NY 10019

(202) 736-8000 (212) 839-5300

DANIEL R. SPECTOR

OFFICE OF GENERAL

COUNSEL

MERRILL LYNCH, PIERCE,

FENNER & SMITH

INCORPORATED

222 Broadway

New York, NY 10038

Counsel for Amicus Curiae

Merrill Lynch, Pierce, Fenner & Smith Incorporated

January 24, 2008 *Counsel of Record