Reply Brief — Kempe v. Ocean Drilling & Exploration Co.

Supreme Court, U.S,

(3) FILED

No. 89-299 OCT 5S 4989

JOSEPH F. SPANIO

CLERK ty Re

IN THE

Supreme Court of the United States

OCTOBER TERM, 1989

_—

CHARLES W. KEMPE, JR. and MICHAEL J. ARNOLD, in their

capacity as Joint Liquidators of Mentor Insurance Limited,

Petitioners,

om —_—vV.—

OCEAN DRILLING & EXPLORATION COMPANY, et al.,

Respondents,

—and—

PINNACLE REINSURANCE COMPANY LIMITED,

Respondent.

ON PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

REPLY BRIEF FOR PETITIONER

MICHAEL J. MURPHY

Counsel of Record

LORD Day & LORD, BARRETT SMITH

1675 Broadway

New York, New York 10019-5874

(212) 969-6000

LAURIE E. FOSTER

JONATHAN GLASSER

Of Counsel

TABLE OF AUTHORITIES

Cases: PAGE

Ee Parte Comets, 337 U.S. 55 CPG) occ ccccccccccccss 4

Piper Aircraft Co. v. Reyno, 454 U.S. 235 (1981)...... 3

Shearson/American Express, Inc. v. Aéchahon, 482

PC AGehpsecasesacentectebeetesheeess 5

Transunion v. PepsiCo, Inc., 811 F.2d. 127 (2d Cir.

‘United States v. National City Lines, 337 U.S. 78 (1949) 4

United States v. National City Lines, 334 U.S. 573 (1948) 4, 5

Constitution and Statutes:

U.S. Constitution, Amendment VII.................. 3

yr Re oe PPP TTTITETT ETT TTT 4

RICO Legislative History:

Se es I MEP vc cccccnccaccccccecesis 5

a eee ee ee

IN THE

Supreme Court of the United States

OCTOBER TERM, 1989

No. 89-299

i -

CHARLES W. KEMPE, JR. and MICHAEL J. ARNOLD, in their

capacity as Joint Liquidators of Mentor Insurance Limited,

Petitioners,

N

—Y.—

OCEAN DRILLING & EXPLORATION COMPANY, et al.,

Respondents,

—and—

PINNACLE REINSURANCE COMPANY LIMITED,

Respondent.

ON PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

>

REPLY BRIEF FOR PETITIONER

Reply Statement of the Case

1. The Respondents would have this case perceived as one

involving a local Bermudian dispute concerning Bermudian

companies and Bermudian accountants (Br. at 2).' Far from it;

the RICO issues in this case are concerned with whether the

financial statements of Mentor Insurance Limited (‘‘Mentor’’),

publicly disseminated throughout the United States via the

1 References to Respondents’ Brief in Opposition to Petition for a

Writ of Certiorari will be styled ‘‘(Br. at oe

2

United States mails, were intentionally falsified as a result of a

scheme formulated in and carried out from Louisiana by Loui-

siana residents.

Those financial statements were purportedly prepared pursu-

ant to principles and standards promulgated by the American

Institute of Certified Public Accountants. For example, Men-

tor’s 1982 and 1983 publicly reported financial results were con-

tained in the Annual Report of Respondent Mentor Holdings

Corporation. They were prepared in New Orleans and mailed

throughout the United States from New Orleans. They were

certified and opined on by the New Orleans office of Peat,

Marwick, Mitchell & Co. (‘‘Peat Marwick’’). Critical informa-

tion concerning Mentor’s reinsurance transactions was deliber-

ately withheld by the New Orleans based defendants from those

New Orleans accountants, as well as Peat Marwick personnel in

New York and Bermuda.

2. Respondents point out that Petitioners have brought suit

against Peat Marwick in Bermuda (Br. at 3); aside from the fact

that the matter is dehors the record, they do not say why that

action was instituted. The Petitioners did bring a negligence/

malpractice action in New York State Supreme Court against

Peat Marwick and its Bermudian affiliate. After the decision of

the District Court in this case, the New York Court issued an

opinion that the Complaint in that case stated a valid claim

against Peat Marwick, that it had personal jurisdiction over

Peat Marwick’s Bermudian affiliate, but that it would neverthe-

less dismiss the malpractice lawsuit on the grounds of forum

non conveniens relying in great part on the decision of the Dis-

trict Court in this case. That decision is now being appealed by

the defendants.

Before the New York decision was rendered, the Petitioners

were forced to file a precautionary writ against Peat Marwick in

the Bermuda Supreme Court to stop the running of the statute

of limitations in Bermuda in the event that the New York Court

granted the then-requested forum dismissal without requiring

that defendants waive their limitations defenses in Bermuda.

That precautionary writ is the ‘‘suit against Peat Marwick in

3

Bermuda’’ referred to by the Respondents (Br. at 3). It is com-

pletely irrelevant to the issues presented by this Petition.

The Issues Raised are not

Matters of Settled Law

(i) The circumstances, if any, under which a District Court

has the procedural power to destroy substantive RICO rights is

not an issue of settled law. Piper Aircraft Co. v. Reyno, 454

U.S. 235 (1981) (‘‘Piper’’), relied upon by the Respondents (Br.

at 8-10) for that proposition, had nothing to do with the issue.

Piper was a negligence action in federal court solely by virtue of

diversity jurisdiction. No federally created cause of action con-

taining a special] venue statute (as a matter of right) was

involved.

(ii) The fact that there is only one other Circuit case involv-

ing forum non conveniens and RICO, Transunion Corp. v.

PepsiCo, Inc., 811 F.2d 127 (2d Cir. 1987), does not reflect the

settled nature of the issue (Br. at 11). It demonstrates just the

opposite.” If anything, the paucity of case law on the issue illus-

trates the inappropriateness of forum non conveniens to RICO

actions. The viability of RICO actions depends on the commis-

sion of predicate acts which in turn consist of violations of

American criminal statutes, federal and state. Since those predi-

cate acts involve violations of American criminal laws, forum

non conveniens should generally have no application, as it

should not have had here.

(iii) By their silence, even the Respondents concede that there

are no cases deciding the Constitutional issue of whether a Dis-

trict Court has the discretionary power to destroy a right to a

jury trial guaranteed by the Seventh Amendment (Br. at 17-18).

Piper never addressed the issue. It is hardly a settled issue of

law.

2 As pointed out in the Petition, in Transunion RICO was not ade-

quately pled. Transunion, 811 F.2d at 129; 640 F. Supp. 1211, 1213-14

(S.D.N.Y. 1986); (Petn. at 7 n.3).

4

(iv) The fact that Bermuda regulates its insurance companies

has no relevance to the issues raised (Br. at 13). If as a Constitu-

tional matter a District Court does noi have the discretionary

power to destroy substantive RICO claims or the right to a jury

trial, the existence of foreign regulation of the plaintiff does not

substitute for that lack of power.

The Respondents’ argument also focuses on regulation of the

wrong party. To the extent that regulation by one particular

jurisdiction is relevant in a forum analysis, the issue involved is

whether there is regulation of the defendant and its wrongful

conduct, not regulation ofthe victim of that conduct. What

regulatory interest does a foreign land have as to whether a

group of Americans violated American criminal! statutes in the

United States? When that occurs, the litigation involving these

violations should take place in the United States whether or not

the victim of that conduct is regulated abroad.

(v) We fail to see what comfort the respondents take from

United States v. National City Lines, 337 U.S. 78 (1949)

(‘‘National City Lines IT’) and Ex Parte Collett, 337 U.S. 55

(1949) (Br. at 14-15). They merely held that when Congress

enacted the then-recent 28 U.S.C. § 1404(a) to the effect that

‘fany civil action’’ may be transferred to another federal district

on grounds of convenience, it meant it. They certainly do not

stand for the proposition that federally created causes of action

such as RICO may be destroyed by a forum non conveniens dis-

missal in favor of litigation in a foreign country.

(vi) The Respondents’ legislative history argument is also

misplaced. According to the Respondents, and the Fifth Circuit

(Br. at 15-16), the relevant inquiry is whether there is an indica-

tion in the legislative history that Congress intended that RICO

be immune from the doctrine of forum non conveniens. No leg-

islative history of any statute could ever be expected to so pro-

vide. According to this Court, the relevant inquiry is a very

different one, i.e., whether there is an indication that Congress

intended that ‘‘the courts would have discretionary power to

decline the exercise of jurisdiction conferred.’’ United States v.

5

National City Lines, 334 U.S. 573, 587 (1948) (‘‘National City

Lines I’). Nothing in the legislative history of RICO reflects

such an intention. Thus, for example, when Representative

Steiger made the statement quoted by this Court in Shearson/

American Express, Inc. v. McMahon, 482 U.S. 220 (1987), that

the victims of the proscribed conduct ‘‘should at least be given

access to a legalremedy. . . . It is the intent of this body, Iam

certain, to see that innocent parties. . . have a right to obtain

proper redress. . . .’’ (482 U.S. at 240-41) (emphasis added),

he clearly did not contemplate that that right could be with-

drawn at the procedural discretion of a District Court because

of perceived convenience. See also, 116 Cong. Rec. 35295

(1970) (Statement of Rep. Poff) (‘‘the committee has provided

that private persons injured. . . may recover treble damages in

Federal Courts. . . .’’) (emphasis added).

Conclusion

This case raises important federal Constitutional and juris-

dictional questions. It squarely focuses on the scope of judicial

power to supersede Congressional and Constitutional man-

dates. Its importance far transcends the interests of these partic-

ular litigants, substantial as they are. It should be heard by this

Court.

Dated: October, 1989

Respectfully submitted,

MICHAEL J. MURPHY

Counsel of Record’

LORD DAY & LORD, BARRETT SMITH

1675 Broadway

New York, New York 10019-5814

(212) 969-6000

LAURIE E. FOSTER

JONATHAN GLASSER

Of Counsel!