# Amicus Curiae Brief — Union Mortgage Co. v. Barlow > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386011_0779%3A3 ## Record - **Collection:** Supreme Court brief - **Document type:** Amicus Curiae Brief - **Published:** January 1, 1992 - **Citation:** 506 U.S. 906 ## Text No. 91-1962 en _ IN THE Suprene Court of the United States OCTOBER TERM, 1992 UNION MORTGAGE COMPANY, IN(¢ Petitioner, Re spond nts. WILLIE MAE BARLOW and WILLIE J. GALY, On Petition for a Writ of Certiorari to the Supreme Court of Alabama MOTION FOR LEAVE TO FILE BRIEF AMICUS CURIAE AND BRIEF FOR THE REPUBLIC OF FINLAND AS AMICUS CURIAE IN SUPPORT OF PETITIONER GEORGE A. BERMANN Counsel of Record COLUMBIA UNIVERSITY SCHOOL OF LAW 435 West 116th Street New York, N.Y. 10027 (212) 854-4258 Attorney for Amicus Curiae Republic of Finland WASHINGTON, D.C. 20001 Inc. - 789-0096 - WILSON - EPES PRINTING CO IN THE Supreme Court of the Wuited States OCTOBER TERM, 1992 [INION MORTGAGE COMPANY, INC., Petitioner, WILLIE MAE BARLOW and WILLIE J. GALY, Re spond nts. On Petition for a Writ of Certiorari to the Supreme Court of Alabama MOTION FOR LEAVE TO FILE BRIEF AMICUS CURIAE he Renublic of Finland (“Finland”) hereby respect- fully moves for leave to file the attached brief amicus curiae in this ease on behalf of Petitioner.* 1. Parties Consenting and Refusing Consent The consent of the Petitioner has been obtained and has been lodged with the clerk of this Court. The consent of the Respondent was requested but refused. As Respondents received the Petition for Certiorari on June 10, 1992 (Brief of Respondents in Opposition to Petition for a Writ of Certiorari at 10). this motion is timely. Sup. Ct. R. 37.2. 2. Nature of Interest of the Republic of Finland Finland submits this brief in order to protect its interest in the treatment of its nationals under the Treaty and Protocol of Friendship, Commerce and Consular Rights between the United States of America and Finland of February 13, 1934, 49 Stat. 2659, as modified by the Protocal of Regents of December 4, 1952, 4 U.S.T. 2047 (the “Friendship Treaty”). Finland also submits this brief in support of its interest in having due respect accorded by the United States to public acts of Finland within its territory, in keenpins _ with principles of inter- national comity. In particular, Finland wishes to express its view that, by failing to accord a Finnish banking institution that has been taken over by the Bank of Finland the same protection from liability for punitive damages that would be accorded to American banking institutions taken over by governmental regulators, the decision below is incon- sistent with the United States’ obligations under the Friendship Treaty and with basic principles of interna- tional comity. 3. Issues Uniquely Addressed by Amicus Finland Finland is ina superior position, relative to the parties, to inform the Court of the potential for the instant case to affect the rights of Finland and of its nationals under the Friendship Treaty. Finland is also in a superior posi- tion to argue the appropriate application of principles of comity. Finland believes that the brief which it is requesting permission to file will contain a more complete argument on the international legal issues than the briefs filed by the parties to the case. These arguments, if accepted, would assist the Court in disposing of the case. Accord- ingly, Finland’s motion should be granted and the at- tached brief should be considered by the Court in its deliberation on the Petition for Certiorari. * subn ec] GEORGE A. BERMANN Counsel of Record COLUMBIA UNIVERSITY SCHOOL OF LAW : 35 West 116th Street New York, N.Y. 10027 (212) 854-4258 Att jfor Am Cur July 9, 1992 Republic of Finland TABLE OF CONTENTS TABLE OF AUTHORITIES INTEREST OF THE REPUBLIC OF FINLAND REASONS FOR GRANTING THE WRIT £ Il. THE DECISION BELOW IS INCONSISTENT WITH THE PRINCIPLE OF NATIONAL TREATMENT UNDER THE FRIENDSHIP TREATY . A. D. The Friendship Treaty Has The Authority Of Federal Law In The Courts Of The United States . The Friendship Treaty Guarantees Finnish Nationals The Same Treatment In The Con- duct Of Their Commercial Activities As Analogous United States Nationals Enjoy. . The Alabama Courts Failed To Accord Fin- nish Nationals The Equal Treatment To Which They Are Entitled Under The Friend- BEE NN icccticcacsiaecvisicanaiece etka 1. The Alabama Courts Failed To Respect The Separate Corporate Identities Of A Finnish Corporation And Its U.S. Incor- porated Subsidiary Where It Would Have Respected The Separate Existence Of A U.S. Corporation And Its Subsidiary ...... The Alabama Courts Failed To Accord A Finnish Entity The Same Protection From Punitive Damages To Which A U.S. Entity Would Be Entitled Under Like Circumstances ho Union May Raise The Issue Of Unequal Treatment Under The Friendship Treaty... THE DECISION BELOW IS INCONSISTENT WITH PRINCIPLES OF INTERNATIONAL SR RIIIINETE TE. ss ssassanccelicodataingtuanial aa anigladims ane tacadieis 6 10 11 il TABLE OF CONTENTS—Continued Principles Of International Comity Require United States Courts To Show Proper Con sideration For The Legitimate interests Of Foreign Governments 14 International Comity Counsels That U.S. Courts Not Impose Punitive Damages Un- der Circumstances In Which A Foreign State And Its Citizens Will Bear The Burden And In Which No Compelling Interest Of The United States Or Its Citizens Will Be Served 16 CONCLUSION 2() ili TABLE OF AUTHORITIES CASES Page In re Air Disaster at Lockerbie Scotland on Dee. 21, 1988, 928 F.2d 1267 (2d Cir.), cert. denied, 112 S. Ct. 331 (1991) 19 Asahi Metal Industry a. Supe rior Court, 480 U.S. 102 (1987) 14 Banco Nacional de Cuba v. Sabbatino, 376 U.S. 398 (1964) 14 Bangor Punta Operations, Inc. v. Ba ngor & Aroos- took R. Co., 417 U.S. 703 (1974) 8 Canada Southern Railway v. Gebhard, 109 U.S. 527 (1883) 17 City of Newport v. Fact Concerts, Inc., 453 U.S. 247 (1981) 10, 11,17 Colonial Bank v. Compagnie Generale Maritime et Financiere, 645 F. Supp. 1457 (S.D.N.Y. 1986) 6 Cornfeld v. Investors Overseas Services, Ltd., 471 F. Supp. 1255 (S.D.N.Y.), aff’d without opinion, 614 F.2d 1286 (2d Cir. 1979) 17 Craig v. Boren, 429 U.S. 190 (1976) ' 13 Cunard Steamship Co. v. Salem Reefer Services AB, 773 F.2d 452 (2d Cir. 1985) 17 First National City Bank v. Banco Para el Com- ercio Exterior de Cuba, 462 U.S. 611 (1983) 8,9 Floyd v. Eastern Airlines, 872 F.2d 1462 (11th Cir. 1989), rev'd, 111 S. Ct. 1489 (1991) 19 Fortino v. Quasar Co., 950 F.2d 389 (7th Cir. 1991) 3, 13 Matter of GAC Corp., 681 F.2d 1295 (11th Cir. 1982) tes 10 Gau Shan Co. v. Bankers Trust Co., 956 F.2d 1349 (6th Cir. 1992) 15 Gearhart v. Uniden Corp. of America, 781 F.2d 147 (8th Cir. 1986) vane 9 In re Goerg, 844 F.2d 1562 (11th Cir. 1988), cert. denied, 488 U.S. 1034 (1989) 17 Hammond v. City of Gadsden, 493 So. 2d 1374 (1986) 11 HCA Health Services v. National Bank of Com- merce, 745 S.W.2d 120 (Ark. 1988) 9 iv TABLE OF AUTHORITIES—Continued Herman v. Hess Oil Virgin Islands Corp., 379 F. Supp. 1268 (D. St. Croix, 1974) Hilton v. Guyot, 159 U.S. 113 (1895) Ingersoll Milling Machine Co. v. Granger, 833 F.2d 680 (7th Cir. 1987) Kolovrat v. Oregon, 366 U.S. 187 (1961) In re Korean Air Lines Disaster of Sept. 1, 1983, 932 F.2d 1475 (D.C. Cir.), cert. denied, 112 S. Ct. 616 (1991) Kwick Set Components, lnc. v. Davidson Industries, Ine., 411 So. 2d 134 (Ala. 1982) Saas! Laker Airways Ltd. v. Sabena, Belgian World Air- lines, 731 F.2d 909 (D.C. Cir. 1984) ae Lanz v. Resolution Trust Corp., 764 F. Supp. 176 (S.D. Fla. 1991) MacNamara v. Korean Air Lines, 1987 U.S. Dist. LEXIS 10218 (E.D. Pa. 1988), rev’d, 863 F.2d 1135 (3d Cir. 1988), cert. denied, 493 U.S. 944 (1989) Matrix-Churchill v. Springsteen, 461 So. 2d 782 (Ala. 1984) er Messick v. Moring, 514 So. 2d 892 (Ala. 1987) Miller Brewing Co. v. Best Beers of Bloomington, 579 N.E.2d 626 (Ind. App. 1991) M S Bremen v. Zapata Offshore Co., 407 U.S. 1 (1972) Pacific Muiual Life Insurance Co. v. Haslip, 111 S. Ct. 10382 (1991) Piper Aircraft Co. v. Reyno, 454 U.S. 235 (1981) Resolution Trust Corp. v. Mooney, 592 So. 2d 186 (1991) : rir Romero v. International Terminal Operating Co., 358 U.S. 354 (1958) Schlesinger v. Councilman, 420 U.S. 738 (1975) Secretary of State of Maryland v. Joseph H. Mun- son Co., 467 U.S. 947 (1984) Singleton v. Wulff, 428 U.S. 106 (1976) Société Nationale Industrielle Aérospatiale v. U.S. District Court, 482 U.S. 522 (1987) .................. 6, v TABLE OF AUTHORITIES—Continued Page Somporter Ltd. v. Philadelphia Chewing Gum Corp., 453 F.2d 435 (3d Cir. 1971), cert. denied, Te BE I onto tesicresoeceoss 14 Spiess v. C. Itoh & Co. (America), 643 F.2d 353 (5th Cir. 1981) : ; 6 Sumitomo Shoji America, Inc. v. . Avagliano, 457 U.S. 176 (1982) 6, 12 Taylor v. Standard Gas Co., 306 U.S. 307 (1939) . 9 United States v. Pink, 315 U.S. 203 (1942) 5 Velasquez-Rodriquez Case, Inter-American Court of Human Rights, Decision on Compensation (Ser. C.) gee 21, 1989) .. fakes Seneca oe 19 Verlinden B.V. v. Central Bonk of Nigeria, 461 U.S. 480 (1988) . raat 14 Yamaha Corp. of America v. United States, 961 F.2d 245 (D.C. Cir. 1992) Re LG ite (Es Younger v. Harris, 401 U.S. 37 (1971) ets 4 Zschernig v. Miller, 389 U.S. 429 (1968) 6, 14 STATUTES Ala. Code § 6-11-26 (Supp. 1991) 18 11 U.S.C. § 304(c) (1988) : 17 28 U.S.C. § 1606 (1988) ... 19 28 U.S.C. § 2674 (1988) ...... . . 18 42 U.B. § 1968 (1968) .....::..:............ 58 ile . 10 TREATIES Treaty and Protocol of Friendship, Commerce and Consular Rights between the United Scates of America and Finland, Feb. 13, 1934, 49 Stat. 2659, arts. I, XVI, XVII, as modified by the Pro- tocol of Regents of Dec. 4, 1952, 4 U.S.T. 2047..passim CONSTITUTIONAL PROVISIONS if. Bp a a § ee Or vi TABLE OF AUTHORITIES—Continued MISCELLANEOUS Page E. Aurejarvi, General Principles of The Law of Obligation, in THE FINNISH LEGAL SYSTEM (J. Uotila, ed., 2d ed., 1985) 20 XI INTERNATIONAL ENCYCLOPEDIA OF COMPARA- TIVE LAW (A. Tunc, ed., 1986) 19 RESTATEMENT (THIRD) OF FOREIGN RELATIONS LAW (1987) ee eR S es 15, 19 RESTATEMENT (SECOND) OF CONFLICT OF LAWS (1971) 16 E. Riedel, Damages, in 10 ENCYCLOPEDIA OF PUB- LIC INTERNATIONAL LAW (1987) 19 8 M. WHITEMAN, DIGEST OF INTERNATIONAL LAW (1967) Brahe 19 IN THE Supreme Court of the United States OCTOBER TERM, 1992 No. 91-1962 UNION MORTGAGE COMPANY, INC.. Petitioner, V. WILLIE MAE BARLOW and WILLIE J. GALY. Respondents. On Petition for a Writ of Certiorari to the Supreme Court of Alabama BRIEF FOR THE REPUBLIC OF FINLAND AS AMICUS CURIAE IN SUPPORT OF PETITIONER The Republic of Finland (“Finland”) submits this brief in support of the petition of Union Mortgage Company, Ine. (“Union”) for a writ of certiorari in this case. INTEREST OF THE REPUBLIC OF FINLAND Finland submits this brief in order to protect its in- terest in the treatment of its nationals under the Treaty and Protocol of Friendship, Commerce and Consular Rights between the United States of America and Finland of February 13, 1934, 49 Stat. 2659, as modified by the Protocol of Regents of December 4, 1952, 4 U.S.T. 2047 (the “Friendship Treaty”). (Pet. App. 41a.) Finland also submits this brief in support of its interest in having 2 due respect accorded by the United States to public acts of Finland within its territory, in keeping with principles of international comity. Finland believes that, by failing to accord a Finnish banking institution that has been taken over by the Bank of Finland the same protection from liability for punitive damages that would be accorded to an American banking ‘nstitution taken over by the Federal Deposit Insurance Corporation «“FDIC”) or the Resolution Trust Corpo- ration (“RTC”), the decision below is inconsistent with the obligations of the United States under the Friend- ship Treaty and with basic principles of international comity. The impact of the failure to accord protection here is that the burden of the punitive damages awarded by the Alabama courts will be borne by Finnish taxpayers. In affirming the $6 million punitive damage jury verdict against Union, both the Alabama trial court and the Ala- bama Supreme Court looked directly past Union to the resources of its parent, Skopbank. (Pet. App. 22a-23a, 38a-39a.!' Skopbank is a Finnish banking corporation which serves as the central bank for all of the savings banks of Finland and which has its principal place of business in Helsinki, Finland. Skopbank was taken over 1In considering the economic impact of the punitive award on the defendant, the Alabama Supreme Court quoted with approval the trial court’s statement that it has considered the economic relationship between Skopbank and its wholly-owned subsidiary Union Mortgage. Skopbank has extended to Union Mortgage an unsecured line of credit totaling $550,000,000.00 dollars through a w holly-owned United States holding company. ” Based upon the evidence pre- sented at that [Hammond] hearing of April 9, 1991, this Court finds that a substantial portion of the $550,000,000 represents a contribution of capital by Skopbank of Helsinki, Finland, to its wholly-owned subsidiary Union Mortgage. Pet. App. 39a; see also Pet. App. 22a-28a. ) In fact, the amount of the credit line and its characterization as a “contribution of cap- ital” were unsupported by the evidence and are inaccurate. (Pet. App. 76a.) by the Bank of Finland afier the award was affirmed by the trial court, but before it was affirmed by the Alabama Supreme Court. The seizure of Skopbank resulted from a drastic de- terioration in its financial condition in 1991. (Pet. App. 46a. 72a-75a.) In order to restore confidence in Skop- hank’s activities and the Finnish interbank money market, the Bank of Finland, in cooperation with the Finnish Banking Supervision Office, took over majority beneficial ownership and voting control of Skopt yank. (Pet. App. 46a. 72a-73a, 91a.) The effect was to place Skopbank in the equivalent of FDIC or RTC conservatorship.” Although Alabama punitive damage review procedures give parties the right to bring new facts bearing on fi- nancial hardship to the attention of the appellate court, and Union did so, the Alabama Supreme Court ignored the Bank of Finland’s takeover of Skopbank and Union's demonstration that the impact of the award would con- sequently fall on the Finnish taxpayer." 2On June 15, 1992. the Bank of Finland transferred its owne ship interest in Skopbank to the Government Guarantee Fund “GGF”). a governmental institution, which was create by the Finnish Parliament in March 1992 and whose membership inciuces representatives from the Parliamentary Supervisory Board, the Ministry of Finance, the Bank of Fi nland,. and the Banking Supe! vision Office. In general terms, the GGF is similar in nature function to the FDIC and the RTC. The measures take! Bank of Finland from September 1991 were of the same kind that the GGF could have ahem had it existed at the time +? tespondents argue that these matters may not be consider appeal. (Brief of Respondents in Opposition to Petition for a Wr of Certiorari at 3.) This is mistaken, not only for the re forth in the Petition for Certiorari, but also because where, as here U.S. treaty obligations and princi les of comity are implicated comity itself warrants consideration for the first time on appeal issues that would otherwise be deemed not to have been rails di timely fashion. Fortin Quasar Co., 950 F.2d 389, 391 (7th Cir 1991 permitting issues relating to U.S.-Japanese Friendst 4 At the time of the verdict in this case, Union’s net worth was less than the amount of the punitive damage award. (Pet. App. 58a-59a.) As a result of the punitive damages exposure ignited by this verdict, Union effec- tively ceased operating activities and had a negative net worth as of September 1991. (Pet. App. 68a-69a, 76a, 78a, 90a.) Because Union’s exposure to punitive damages far exceeds its net worth and the Finnish Government is not able to identify anyone willing to purchase it, Union is one of the risks which the Finnish Government is likely to have to retain even if the Finnish Government is suc- cessful in finding a buyer for a reorganized Skopbank. Skopbank is by far Union's largest creditor, with a credit line balance of approximately $126 million as of February 1992. (Pet. App. 46a.) Accordingly, Skop- bank’s resources will be further diminished as the puni- tive award significantly impairs Union’s ability to satisfy this debt. The financial impact will ultimately be felt by the Finnish taxpayers, who already have contributed to fund a massive governmental capital infusion in order to save Skopbank from insolvency. (Pet. App. 46a-47a, 7T5a-7b6a.! This added burden on the Finnish taxpayer would not have occurred if the Alabama courts had re- spected the separate corporate identities of Union and Skopbank or if they had accorded Skopbank the same punitive damage immunity that they would have accorded an American bank taken over by the FDIC or the RTC. Treaty to be raised for first time on appeal); cf. Schlesinger v. Councilman, 420 U.S. 738, 743 (1975) (raising sua sponte comity issues between the state and federal governments); Younger v. Harris, 401 U.S. 37, 40 (1971) (same). REASONS FOR GRANTING THE WRIT The Friendship Treaty between the United States and Finland requires United States courts, state and federal, to afford the same civil and commercial rights and pro- tections to Finnish nationals (including Finnish corpo- rate entities! doing business in the United States as they afford to similarly situated U.S. nationals. By affirming the punitive damages award, not on the basis of the financial resources of Union, but on those of its Finnish parent, Skopbank, the Alabama courts gave Union less favorable treatment than they would have given a domestically-owned company, and thus acted in a manner inconsistent with the obligation of national treatment un- der the Friendship Treaty. International comity, recognized as part of American law, was also disserved by the affirmance of a punitive damages award that will effectively be borne by an arm of the Finnish Government that has taken control of a Finnish company—in effect, by the Finnish taxpayer. Such punitive damages are unavailable against the United States government or the State of Alabama or against foreign governments sued directly in United States courts. International comity looks unfavorably on such a result. I. THE DECISION BELOW IS INCONSISTENT WITH THE PRINCIPLE OF NATIONAL TREATMENT UNDER THE FRIENDSHIP TREATY. A. The Friendship Treaty Has The Authority Of Fed- eral Law In The Courts Of The United States. International treaties to which the United States is.a party enjoy supremacy under the United States Constitu- - tion. U.S. Const. art. VI; United States v. Pink, 315 U.S. 203, 231 (1942). Bilateral treaties of friendship, commerce and navigation, of which the Friendship Treaty is an example, have been uniformly interpreted as giving nationals of both parties legally enforceable rights which 6} must be given effect in U.S. courts.*. As a class such treaties bind each State party on its territory to accord nationals of the other State party the same level of pro- tection in broadly stated domains as it accords to its own nationals.® This Court has many times emphasized that state law, whether legislative or judicial, should not be allowed to impair the federal foreign relations power or otherwise disturb U.S. relations with foreign states. F.g., Zschernig vr. Miller, 389 U.S. 429, 440-41 (1968). This is particu- larly important where a treaty of the United States gives rise to legitimate expectations of protection on the part of a foreign state. Kolovrat v. Oregon, 366 U.S. 187, 191- 96 (1961); Zschernig, 389 U.S. at 448, 451-57 (Harlan, J., concurring). B. The Friendship Treaty Guarantees Finnish Na- tionals The Same Treatment In The Conduct Of Their Commercial Activities As Analogous United States Nationals Enjoy. Article I of the Friendship Treaty provides that the nationals of each party “within the territory of the other shall be permitted * * * to carry on every form of commercial activity upon the same terms as Nna- tionals of the state of residence in so far as may be permitted by local law.” Among the burdens that Article I specifically guards against, under the principle of na- * * 4+E.y., Kolovrat v. Oregon, 366 U.S. 187, 196 (1961); Spiess v. C. [toh & Co. Am., 643 F.2d 353, 356 (5th Cir. 1981) (interpreting Friendship, Commerce and Navigation Treaty as self-executing) ; MacNamara v. Korean Air Lines, 1987 U.S. Dist. LEXIS 10218, at *3-4, (E.D. Pa..1987), rev'd on other grounds, 863 F.2d 1135 (3d Cir. 1988), cert. denied, 493 U.S. 944 (1989). 5 B.g., Sumitomo Shoji Am., Inc. v. Avagliano, 457 U.S. 176, 186- : 88 (1982): Yamaha Corp. of Am. v. United States, 961 F.2d 245, 258-59 (D.C. Cir. 1992): MacNamara, 1987 U.S. Dist. LEXIS 10218, at *6-7; Colonial Bank v. Compagnie Generale Maritime et Financiere, 645 F. Supp. 1457, 1460 (S.D.N.Y. 1986). ~ tional treatment, is “the payment of any internal charges * * * other or higher than those that are exacted of and paid by its nationals,” and among the general guarantees extended is “the most constant protection and security for * * * property.” (Pet. App. 41a-42a.) Article XVII of the Friendship Treaty underscores that the Treaty’s protections extend not only to natural, but also to juridical persons. Nationals of both States are guaranteed rights and privileges ‘with respect to the organization of and participation in limited liability and other corporations and associations, for pecuniary profit or otherwise.” (Pet. App. 43a.) Such entities, if “or- ganized or controlled or participated in by the nationals of either High Contracting Party within the territory of the other,” are entitled to all the protections recognized in the territory where they do business. (Jd.) This is con- firmed by Article XVI, which gives “[l]imited liability and other corporations and associations, whether or not for pecuniary profit,” the same rights provided they are “organized in accordance with and under the laws * * * of either High Contracting Party and maintain a central office within the territory thereof.” (Pet. App. 42a.) Accordingly, under the Treaty, juridical persons, no less than natural persons, are to be regarded as nationals of the contracting parties and are entitled to equal treat- ment to the extent provided for in Article I.° ® Even if Articles XVI and XVII were interpreted as according corporations only most favored nation treatment, the fact that other friendship treaties accord corporations national treatment means that most favored nation treatment is national treatment. 8 C. The Alabama Courts Failed To Accord Finnish Na- tionals The Equal Treatment To Which They Are Entitled Under The Friendship Treaty. 1. The Alabama Courts Failed To Respect The Separate Corporate Identities Of A Finnish Corporation And Its U.S. Incorporated Subsidiary Where It Would Have Respected The Separate Existence Of A U.S. Corporation And Its Sub- sidiary. Article XVI of the Friendship Treaty provides that “corporations * * * which have been or may hereafter be organized in accordance with and under the laws * * * of either High Contracting Party * * * shall have their juridical status recognized by the other High Contracting Party provided that they pursue no aims within its territory contrary to its laws.” (Pet. App. 42a) (emphasis added). Thus, the Treaty itself obligates the courts of the United States to give the same respect to the separate juridical status of Finnish corporations such as Skopbank as to American corporations.’ It is well established under the law of Alabama that the corporate form separating an American parent and its subsidiary must be respected, absent a basis for pierc- ing the corporate veil. E.g., Messick v. Moring, 514 So. 2d 892, 894-95 (Ala. 1987); Matrix-Churchill v. Spring- steen, 461 So. 2d 782 (Ala. 1984) ; Kwick Set Components, Inc. v. Davidson Tndus., Inc., 411 So. 2d 1384 (Ala. 1982). Similarly, this Court has long recognized the principle that the doctrine of corporate identity must generally be respected. E.g., Bangor Punta Operations, 7 Even apart from the Friendship Treaty, United States law re- quires that respect for separate corporate identity be shown to foreign state-owned corporations. First Nat’l City Bank v. Banco Para el Comercio Exterior de Cuba, 462 U.S. 611, 626-27 (1983) [hereinafter “Bancec’’|] (“government instrumentalities established as juridicial entities distinct and independent from their sovereign normally should be treated as such’). Inc. v. Bangor & Aroostcok R. Co., 417 U.S. 703, 713 (1974); Taylor v. Standard Gas Co., 306 U.S. 307, 322 (1939). Had the punitive award been assessed against a subsidiary of a U.S. corporation, the financial resources of the parent could not have been considered without first establishing a basis for doing so by traditional alter ego analysis.* The obligation to respect corporate identity was not honored here. As shown above, the Alabama trial court and the Alabama Supreme Court disregarded the separate juridical status of Union and Skopbank when they affirmed the $6 million punitive award based upon the financial resources of Skopbank.* In so doing, the courts did not even attempt to justify this unwarranted veil-piercing. By failing to give a Finnish Corporation and its U.S. subsidiary the benefit of this protection, the Alabama courts acted in a manner inconsistent with both Article XVI and the equal treatment obligation embodied in the Friendship Treaty, as well as with “principles of comity between nations” (further discussed below). Bancec, 462 U.S. at 626-27." SE.g., Gearhart v. Uniden Corp. of Am., 781 F.2d 147, 153 (8th Cir. 1986) ; Herman v. Hess Oil VI. Corp., 379 F. Supp. 1268, 1276- 77 (D. St. Croix, 1974); HCA Health Servs. v. National Bank of Commerce, 745 S.W.2d 120, 123-24 (Ark. 1988); Miller Brewing Co. v. Best Beers of Bloomington, 579 N.E.2d 626, 641-42 (Ind. App. 1991). ® Indeed, Skopbank had not yet acquired Union at the time the events underlying this cause of action took place. (Pet. App. 46a.) 10The Alabama courts compounded the error of looking past Union to Skopbank by their failure, in so doing, to take account of Skopbank’s actual financial distress. Such distress was manifest both at the time of the trial court’s affirmance and even more so at the time of the Alabama Supreme Court’s affirmance, at which point Skopbank’s financial condition had deteriorated to such an extent that it was in the Finnish equivalent of FDIC or RTC conservator- ship. 10 2. The Alabama Courts Failed To Accord A Finnish Entity The Same Protection From Punitive Dam- ages To Which A U.S. Entity Would Be Entitled Under Like Circumstances. It is well established under United States law that the assessment of punitive damages is improper when their burden will effectively be borne by innocent third parties whose “punishment” will serve neither the retributive nor deterrent purposes that punitive damages are supposed to serve. Thus, the Alabama Supreme Court held in Resolu- tion Trust Corp. v. Mooney, 592 So. 2d 186 (1991), under highly analogous circumstances, that an award of punitive damages may not be entered against a domestic company taken over by the RTC, because the burden of such dam- ages would necessarily fall on creditors who are not re- sponsible for the wrongdoing and who are not appro- priate targets of punishment or deterrence. /d. at 190; accord Matter of GAC Corp., 681 F.2d 1295 13801 (11th Cir. 1982) (punitive damages may not be awarded against a company in a Chapter X reorganization pro- ceeding since “the effect of allowing a punitive damages claim would be to force innocent creditors to pay for the bankrupt’s wrongdoing”); Lanz v. Resolution Trust Corp., 764 F. Supp. 176, 178 (S.D. Fla. 1991) (“punitive * * * damages cannot be recovered against FSLIC as conservator”). The same general principle was given powerful ex- pression by this Court in a somewhat different context in City of Newport v. Fact Concerts, Inc., 453 U.S. 247 (1981). There, this Court held that the Civil Rights Act 42 U.S.C. § 1983 (1988), could not properly be interpreted as authorizing the award of punitive damages against a municipality for civil rights violations committed by its employees. The Court found that imposing liability on a public entity based solely upon the wrongful conduct of its employees does not substantially further either the retributive or deterrent aims of punitive damages and thus could not be justified: . a 11 Indeed, punitive damages imposed on a municipality are in effect a windfall to a fully compensated plain- tiff and are likely accompanied by an increase in taxes or a reduction of public services for the citizens footing the bill. Neither reason nor justice suggests that such retribution should be visited upon the shoulders of blameless or unknowing taxpayers. City of Newport, 453 U.S. at 267. Because Union has a negative net worth, and Skopbank is Union’s parent and largest creditor, the award here effectively imposes punitive damages liability initially on Skopbank. However, because Skopbank has been taken over by an arm of the Finnish Government, ultimately the Finnish taxpayers will bear the burden of the punitive award. Such a result advances neither the retributive nor the deterrent objective of punitive damages. Agencies of the United States would be spared punitive damages lia- bility in like circumstances. National treatment accord- ingly calls for giving Finnish corporate and governmental entities the same consideration. Moreover, United States Supreme Court precedent and Alabama law require that, in their review of a punitive damages verdict, the Alabama courts at least consider the impact of the award on innocent third parties. Pacific Mut. Life Ins. Co. v. Haslip, 111 S. Ct. 1032, 1044 (1991) ; Hammond v. City of Gadsden, 493 So. 2d 1374, 1379 (1986). Since a U.S.-owned entity would at a mini- mum be entitled to have the impact of the punitive award upon innocent third parties considered by a reviewing court under these circumstances, the refusal of the Ala- bama courts to accord even this minimum procedural safeguard to a Finnish-owned entity is also inconsistent with the obligation of national treatment. D. Union May Raise The Issue Of Unequal Treatment Under The Friendship Treaty. Among the rights accorded to Finnish nationals under the Friendship Treaty is the right under Article XVII to aint aaa eee 12 “the organization of and participation in limited liability and other corporations and associations for pecuniary profit or otherwise.” (Pet. App. 48a.) Once a Finnish national establishes such a local corporation under Article XVII of the Friendship Treaty, the obligation of national treatment contained in Article I requires that the local subsidiary be “considered for purposes of the Treaty to be la] compan[y] of the country in which |/it is] incorpo- rated; [it is] entitled to the rights, and subject to the responsibilities of other domestic corporations.” Sumitomo Shoji Am., Inc. v. Avagliano, 457 U.S. 176, 188 (1982). In Sumitomo, this Court refused to allow the U.S.- Japanese Friendship Treaty to be used to give the Ameri- ‘an subsidiary of a Japanese company an immunity from federal employment laws to which American companies are not entitled. Such preferential and unequal status would have offended the cardinal principle of ‘national treatment” which lies at the heart of treaties of friend- ship. The same principle of equal treatment that made the subsidiary in Sumitomo subject to Title VII should operate here to secure for Union the same protections that a similarly situated American company would enjoy." This court accords “great weight” to treaty interpretations which have been agreed to by both parties. Sumitomo, 457 U.S. at 185; Kolovrat v. Oregon, 366 U.S. 187, 194 (1961). In its submission to this Court in Sumitomo, the United States took the same position with respect to the rights of foreign-owned subsidiaries under the U.S.-Japanese Friendship Treaty that Finland takes with respect to the Friendship Treaty here: o [The Treaty] ensures “national treatment” for Japan-controlled companies incorporated in the United States—i.e., it places them on an equal footing with American-controlled corporations in the United States * * * [T]he national treatment provided by the Treaty furnishes appropriate assurance against dis- criminatory measures directed at the foreign-owned company that could adversely affect the favorable investment climate the Treaty was intended to create. Brief for United States as amicus curiae at 13-14, Sumitomo Shoji Am., Inc, v..Avagliano, 457 U.S. 176 (1982). a 13 Later cases confirm that friendship treaties would be violated if a domestic subsidiary were “treated * * * dif- ferently under [{U.S. law] solely because it is a wholly owned subsidiary of a foreign corporation.” Yamaha Corp. of Am. v. United States, 961 F.2d 245, 258 (D.C. Cir. 1992) ; accord MacNamara v. Korean Airlines, 1987 U.S. Dist. LEXIS 10218, at *6-7 (E.D. Pa. 1987), rev'd on other grounds, 863 F.2d 1135 (8d Cir. 1988), cert. denied, 493 U.S. 944 (1989). Union can also raise Skopbank’s equal treatment rights under the doctrine of jus terti standing. That doctrine permits a party to assert the rights of a third person if (1) “the enjoyment of the right is inextricably bound up with the activity the litigant wishes to pursue,” and (2) there is “some genuine obstacle” to the third person’s assertion of his own right. Singleton ». Wulff, 428 US. 106, 114-16 (1976); accord Secretary of State of Md. ». Joseph H. Munson Co., 467 U.S. 947, 956 (1984): Craig v. Boren, 429 U.S. 190, 195-96 (1976). Here, the relationship between Skopbank and Union is such that Union “is fully, or very nearly, as effective a proponent” of the right to equal treatment as Skophbank. Singleton, 428 U.S. at 115. Moreover, as Skopbank’s rights were not violated until the Alabama courts affirmed the jury’s verdict, and as Skopbank is not and never was a party in this case, Skopbank is not able to assert its own rights. Accordingly, Union has jus terti standing to assert Skopbank’s rights under the Friendship Treaty. See Fortino v. Quasar Co., 950 F.2d 389, 393 (7th Cir. ‘ 1991) (“subsidiary [may] assert any of its parent’s [friendship] treaty rights * * * to the extent necessary to prevent the treaty from being set at naught”). 14 Il. THE DECISION BELOW IS INCONSISTENT WITH PRINCIPLES OF INTERNATIONAL COMITY. A. Principles Of International Comity Require United States Courts To Show Proper Consideration For The Legitimate Interests Of Foreign Governments. International comity has long played a critical role in litigation in U.S. courts-that implicates the legitimate in- terests of foreign states. This Court has defined comity as “the recognition which one nation allows within its ter- ritory to the legislative, executive or judicial acts of another nation, having due regard both to international duty and convenience, and to the rights of its own citizens or of other persons who are under the protection of its laws.” Hilton v. Guyot, 159 U.S. 118, 164 (1895)." Comity is not confined to cases in which a foreign sovereign is a party (as under the doctrine of sovereign immunity) or in which the validity of an act of a foreign sovereign on its own soil is directly called into question (as under the act of state doctrine).'* On the contrary, this Court and lower federal courts have applied the doctrine of comity to a broad range of purely private litigation whenever respect for the fundamental interests of a foreign sovereign require them to do so." 12 Accord Somporter Ltd. v. Philadelphia Chewing Gum Corp., 453 F.2d 435, 440 (3d Cir. 1971), cert. denied, 405 U.S. 1017 (1972) (“Comity should be withheld only when its accceptance would be contrary or prejudicial to the interest of the nation called upon to give it effect.”); Laker Airways Ltd. v. Sabena, Belgian World Airlines, 731 F.2d 909, 927 (D.C. Cir. 1984). 13 See Verlinden B.V. v. Central Bank of Nigeria, 461 U.S. 480 (1983) (sovereign immunity); Banco Nacional de Cuba v. Sab- batino, 376 U.S. 398 (1964) (act of state). ME .g., Asahi Metal Indus. v. Superior Court, 480 U.S. 102 (1987) (refusal to assert personal jurisdiction over aiiens); Piper Aircraft Co. v. Reyno, 454 U.S. 235 (1981) (application of forum non conveniens in deference to foreign forum); M’ S Bremen v. Zapata Offshore Co., 407 U.S. 1 (1972) (respect for choice of non- U.S. forum); Zschernig v. Miller, 389 U.S. 429 (1968) (non- LE 15 This Court recently set out its analysis for applying comity in the context of deciding whether resort to the Hague Evidence Convention is required in obtaining evi- dence located abroad for use in U.S. judicial proceedings. In Société Nationale Industrielle Aérospatiale v. U.S. District Court, 482 U.S. 522 (1987), both the five-member majority and the four-member minority agreed that com- ity dictated the answer. The majority favored a case by case application of comity in which courts consider the totality of the circumstances through a “particular- ized analysis of the respective interests of the [two - nations.|” 482 U.S. at 543-44. The minority, in its par- tial concurrence, went even further, concluding that com- ity required an analysis of “the foreign interests, the in- terests of the United States, and the mutual interests “ “ * in a smoothly functioning international legal re- gime,” and that this analysis dictated a general rule fav- oring exclusive use of the Hague Convention. 482 USS. at 955 (Blackmun, J., concurring). Both approaches taken in Aérospatiale are consistent with the framework of comity analysis provided for by the RESTATEMENT (THIRD) OF FOREIGN RELATIONS LAW $403 (1987) and the various factors cited there.” See enforceability of reciprocity requirements imposed by state law against foreign governments) : Romero v. International Terminal Operating Co., 358 U.S. 354, 381-84 (1958) (application of foreign law where foreign nation’s interests are significantly implicated) : Hilton v. Guyot, 159 U.S. 113 (1895) (recognition and enforcement of foreign judgments); Gaw Shen Co. v. Bankers Trust Co., 956 F.2d 1349 (6th Cir. 1992) (refusal to enjoin foreign judicial pro- ceedings) ; Ingersoll Milling Mach. Co. v. Granger, 833 F.2d 680 (7th Cir. 1987) (stay of U.S. proceedings in deference to foreign proceedings). 1S Section 403(2) requires courts, in deciding whether to apply local law to a person or activity having connections with a foreign state, to consider among other things: (c) the character of the activity to be regulated, the importance of the regulation to the regulatory state * * * and the degree to which the desirability of such regulation is generally accepted; also RESTATEMENT (SECOND!) OF CONFLICT OF LAWS § 6 comment d (1971). B. International Comity Counsels That U.S. Courts Not Impose Punitive Damages Under Circumstances In Which A Foreign State And Its Citizens Will Bear The Burden And In Which No Compelling Interest Of The United States Or Its Citizens Will Be Served. Under any application of international comity, it is appropriate to balance the strength of a foreign govern- ment’s interest in receiving a particular form of con- sideration against the competing interests of the private parties in obtaining, and the United States in according, treatment unaffected by the needs of comity. Such a balaneing here weighs heavily in favor of showing def- erence to the acts of institutions of the Finnish Govern- ment in respect of the takeover of Skopbank: 1. The Finnish Government maintains a strong inter- est in the application of comity in this case. First, it has an interest in protecting its taxpayers and the financial soundness of its banking system from ruinous financial liabilities in the form of punitive damages. Second, application of international comity is called for to protect Finland’s substantial interest in the in- tegrity of its reorganization law. As early as 1883, this Court ruled that a New York action to recover on the bonds of a Canadian railroad company undergoing d) the existence of justified expectations that might be pro- tected or hurt by the regulation; (e) the importance of the regulation to the international political, legal, or economic sys- tem: ‘f) the extent to which the regulation is consistent with the traditions of the international system; (g) the extent to which another state may have an interest in regulating the activity; and (h) the likelihood of conflict with regulation by another state. Section 403(3) further counsels that “‘a state should defer to the other state if that state’s interest is clearly greater.” a 17 reorganization in Canada was barred by the pendency of the Canadian proceedings: Uniess all parties in interest, wherever they reside, can be bound by the arrangement which jt js sought » have legalized the [reorganization] scheme may fail. All home creditors can be bound by the arrange- ment. What is needed is to bind those who are abroad. : Re T lhe true spirit of inte rnational comity me Te Ss that seh wes of this characte r ee should AY. recoqnized in othe) countrie $s. Canada S. Ry. v. Ge bhard, 109 U.S. 527. 639 (1&&3) (emphasis added) ,"" 2. At the same time, depriving a United States plain- tiff of punitive damages cannot be regarded as a signifi- cant hardship, whether viewed as a general proposition or in the specific context of this case. Punitive damages are by definition not compensatory in nature. In other words, they are not required in order to make a tort victim “whole.” They represent a windfall. As this Court acknowledged in City of Newport, “|p|unitive damages by definition are not intended to compensate the injured party, but rather to punish the tortfeasor whose wrongful action was intentional or malicious and to deter him and others from similar extreme conduct.” 453 U.S. at 266-67, * A long line of cases establishes that under comity, U.S. courts owe deference to the overriding interest of foreign states in their conduct of conservatorship and like proceedings. See, e.g., In re Goerg, 844 F.2d 1562, 1568 (11th Cir. 1988), cert. denied, 488 U.S. 1034 (1989); Cunard S.S. Co. v. Salem Reefer Servs. AB, 773 F.2d - 452, 456 (2d Cir. 1985); Cornfeld v. Investors Overseas Servs., Ltd., 471 F. Supp. 1255, 1260, 1262 (S.D.N.Y.). ayt'd without opinion, 614 F.2d 1286 (2d Cir. 1979) (citing “the public interest in international cooperation” and “principles of international comity” The Bankruptcy Reform Act of 1978. 11 U.S.C. §$ 304(c) (1988 also cites “comity” as a factor in a court’s decision whether to enjoin or stay an action against a debtor respecting property in- volved in a foreign proceeding. 18 3. Although Alabama may have a general retributive and preventive interest in punitive damage awards, that interest is necessarily diminished, if not wholly extin- guished, when the party ultimately bearing the burden of the award is not at fault. 4. The mutual interest of all nations in reciprocity, commerce, and the smooth functioning of the interna- tional regime likewise militate heavily in favor of apply- ng comity principles to this case. First, the United States has clearly evinced in its own Federal Tort Claims Act a hostility to the recovery of punitive damages in tort claims against the government or its instrumentalities. 28 U.S.C. § 2674 (1988). This statutory waiver of sovereign immunity in tort expressly precludes the award of punitive damages in government tort cases. Similarly, the State of Alabama has statutorily waived its immunity in tort, but expressly reserved for itself, its counties and its municipalities virtually complete im- munity from the imposition of punitive damages. Ala. Code § 6-11-26 ‘Supp. 1991). The attitudes of Congress and the States forbidding punitive damages against governmental entities are a strong indication of the consideration that courts in the United States properly owe a sovereign foreign govern- ment under like circumstances. The spirit of mutuality underlying the comity doctrine supports according a for- eign government the same degree of protection against punitive damages that the United States and the State of Alabama claim for themselves. Second, international law and practice counsel strongly against the imposition of punitive damages where their impact will fall upon a foreign state and its taxpayers. indeed, with the possible exception of international crimes such as genocide, slavery and torture, principles of cus- 19 tomary international law prohibit the imposition of puni- tive damages against a foreign state." Under the U.S. Foreign Sovereign Immunities Act. foreign states and their political subdivisions are cate- gorically shielded, insofar as they may be defendants in federal or state court, from exposure to punitive dam- ages in tort. 28 U.S.C. $1606 (1988). Similarly, the Convention for the Unification of Certain Rules Relat- ing to International Transportation by Air (Warsaw Convention) has been uniformly interpreted as prohibit- ing the award of punitive damages.’* International comity suggests that the same policy be extended to cases in which a foreign government, though not a named de- fendant, will as a practical matter bear the burden of a punitive award. Finally, punitive damages are an institution that is. to put the matter simply, alien to most foreign legal systems, including the Finnish one. XI INTERNATIONAL ENCYCLOPEDIA OF COMPARATIVE LAW, Ch. 8, § 124 (A. Tune, ed., 1986). A fundamental notion in most civil law and civil law-influenced systems is that tort and crimina] law form distinctive legal domains, and that the compen- satory purposes of the former and the retributive and de- terrent purposes of the latter should not be confused. Accordingly, the only recoverable damages in tort cases, indeed in all categories of cases, are compensatory in 'T Velasquez Rodriquez Case, Inter-American Court of Human Rights, Decision on Compensation (Ser. C) (July 21, 1989); Rer- STATEMENT (THIRD) OF FOREIGN RELATIONS LAW § 90] Reporter’s Note 5 (1987); E. Riedel, Damages, in 10 ENCYCLOPEDIA OF PUBLIC INTERNATIONAL LAW 71 (1987); 8 M. WHITEMAN, DIGEST OF INTER- NATIONAL LAW 1215 (1967). ISE’.g., In re Korean Air Lines Disaster of Sept. 1, 1983, 932 F.2d 1475 (D.C. Cir.), cert. denied, 112 S. Ct. 616 (1991): In re Air Disaster at Lockerbie Scotland on Dee. 21, 1988, 928 F.2d 1267 (2d Cir.), cert. denied, 112 S. Ct. 33 (1991); Floyd v. Eastern Airlines, 872 F.2d 1462 (11th Cir. 1989). rev'd on other grounds, 111 S. Ct. 1489 (1991). Sn 20 character. E. Aurejarvi, General Principles of the Law of Obligations, in THE FINNISH LEGAL SYSTEM, 134-36 (J. Uotila, ed., 2d ed., 1985). The singular character of punitive damages from the foreign perspective supports application of comity principles, particularly when a for- eign government is their effective target. Thus, all considerations relevant to the traditional ap- plication of international comity in U.S. courts—most notably the strength of Finland’s interest in the integrity of its banking system and reorganization !aw and in the protection of its taxpayers, the insignificance of the U.S. interests, and the absence of hardship to the Respondents —-support review by this Court of the affirmance of the punitive damages award in this case. CONCLUSION For the reasons stated above, the Republic of Finland supports the petition for a writ of certiorari. Respectfully submitted, GEORGE A. BERMANN Counsel of Record COLUMBIA UNIVERSITY SCHOOL OF LAW 435 West 116th Street New York, N.Y. 10027 (212) 854-4258 Attorney for Amicus Curiae, July 9, 1992 Republic of Finland --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386011_0779%3A3. Public record. Not legal advice.