# Amicus Curiae Brief — Republic of Philippines v. Pimentel

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URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385016_0527%3A13

## Record

- **Collection:** Supreme Court brief
- **Document type:** Amicus Curiae Brief
- **Published:** January 1, 2008
- **Citation:** 553 U.S. 851

## Text

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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

STN io inntin:iihiciniaedesidemmidiidaniae
ESTE SP SSeS E

BIE incipsesnecnicnuceneiitininecetngnteh

ID
7

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

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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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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).

4
|
f
a
7
:

28

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).

»
“
7
a
,

~ ¥ Shy a ay OF Eee ee

TEN ed ip ee ee PARE ae tee Te eS

31

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

---

Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385016_0527%3A13. Public record. Not legal advice.