Philippine National Bank v. United States District Court for the District of Hawaii ( 2005 )

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
In re: PHILIPPINE NATIONAL BANK,
PHILIPPINE NATIONAL BANK,
Petitioner,
v.
No. 04-71843
UNITED STATES DISTRICT
D.C. No.
COURT FOR THE DISTRICT OF
MDL-00840-MLR
HAWAII,
OPINION
Respondent,
MAXIMO HILAO; ESTATE OF
FERDINAND MARCOS; IMELDA R.
MARCOS; FERDINAND R. MARCOS,
JR.,
Real Parties in Interest.
Petition for Writ of Mandamus to the
United States District Court for the
District of Hawaii
Argued and Submitted
June 16, 2004--San Francisco, California
Filed February 4, 2005
Before: Alfred T. Goodwin, William C. Canby, Jr., and
Richard C. Tallman, Circuit Judges.
Opinion by Judge Canby
1563
1564
1565
COUNSEL
Jay R. Ziegler, Buchalter, Nemer, Fields & Younger, Los
Angeles, California, for the petitioner.
Robert A. Swift, Kohn, Swift & Graf, PC, Philadelphia, Penn-
sylvania; John J. Bartko, William I. Edlund, Bartko, Zankel,
Tarrant & Miller, San Francisco, California; for real parties in
interest.
_________________________________________________________________
OPINION
CANBY, Circuit Judge:
The Philippine National Bank petitions this court for a writ
of mandamus to prevent the district court from pursuing con-
tempt and discovery proceedings against the Bank because of
the Bank's transfer of funds to the Republic of the Philippines
pursuant to a judgment of the Philippine Supreme Court.1 We
conclude that the district court's orders violated the act of
state doctrine, and we accordingly issue the writ.
_________________________________________________________________
1 We have jurisdiction pursuant to 28 U.S.C. § 1651(a).
1566
BACKGROUND
This mandamus petition represents one more chapter in a
long-running dispute over the right to the assets of the estate
of former Philippine President Ferdinand E. Marcos. On one
side is a class of plaintiffs who obtained a large judgment in
the federal district court in Hawaii against the Marcos estate
for human rights violations by the Marcos regime. The judg-
ment included an injunction restraining the estate and its
agents or aiders and abettors from transferring any of the
estate's assets.2 On the other side is the Republic of the Philip-
pines, which independently has sought forfeiture of the Mar-
cos estate's assets on the ground that they were stolen by
Marcos from the Philippine government and its people.
In an earlier case, we dealt with the attempt of class plain-
tiffs to reach assets of the Marcos estate located in Swiss
banks. Credit Suisse v. U.S. Dist. Ct. for the Cent. Dist. of
Cal., 130 F.3d 1342, 1347-48 (9th Cir. 1997). The Swiss
assets had been frozen by the Swiss government at the request
of the Republic, which was seeking to recover them. The class
plaintiffs obtained an injunction from the district court requir-
ing the Swiss banks to hold the assets for the benefit of the
class plaintiffs. We held that the injunction violated the act of
state doctrine, which precludes our courts from declaring "in-
valid" a foreign sovereign's official act -- in this case the
freeze order of the Swiss government. Id. We accordingly
granted a writ of mandamus directing dismissal of the district
court's order, and ordering the district court:
_________________________________________________________________
2 The district court's injunction included a finding of fact that the
Republic of the Philippines, which was not a party to the litigation, was
an agent or aider and abettor of the Estate. On appeal by the Republic, we
vacated the injunction to the extent that it purported to restrain the Repub-
lic, because sovereign immunity precluded district court jurisdiction over
the Republic. In re Estate of Ferdinand Marcos Human Rights Litig., 94
F.3d 539, 548 (9th Cir. 1996).
1567
to refrain from taking any further action in [this]
action or any other case involving any or all of the
[class plaintiffs] and any assets of the Estate of Fer-
dinand E. Marcos held or claimed to be held by the
Banks.
Id. at 1348.3
Thereafter, the Swiss government released the funds frozen
in Switzerland for transfer to the Philippine National Bank in
escrow pending a determination of proper disposal by a com-
petent court in the Philippines. The Philippine National Bank
deposited the funds in Singapore. The Philippine Supreme
Court subsequently held that the assets were forfeited to the
Republic of the Philippines.
The district court then issued the orders that precipitated
the present petition for mandamus. The district court ruled
that the Philippine Supreme Court had violated "due process
by any standard" and that its judgment was entitled to no def-
erence. It ordered reinstatement of an earlier settlement agree-
ment in the district court litigation that had been rejected
when the Philippine courts refused to approve it and the
Republic failed to give its consent to the agreement.4 The dis-
trict court further stated in an Order Directing Compliance:
The Court's Special Master has brought to the
_________________________________________________________________
3 We subsequently clarified that the mandate did not preclude the district
court from participating in settlement discussions or otherwise performing
its duties under Fed. R. Civ. P. 23, "so long as such duties do not involve
an attempt to reach Marcos assets held or claimed to be held by the
[Swiss] banks . . . ." Unpub. Order, No. 97-70193 (9th Cir. Dec. 23, 1997).
4 The Republic of the Philippines appealed the order reinstating the set-
tlement and the Order Directing Compliance, but we dismissed the appeal
on the ground that the Republic lacked standing because it was neither a
party to the litigation nor a person or banking institution bound by the
Order Directing Compliance. Hilao v. Estate of Marcos, _______ F.3d _______,
2004 WL 2985245 (9th Cir. Dec. 28, 2004).
1568
Court's attention that there is an imminent threat that
the monies transferred from Swiss banks to Singa-
pore, pursuant to a "certain escrow agreement[,"]
may be released by the banking officials pursuant to
claims filed by the Philippine Commission on Good
Government.
***
IT IS HEREBY ORDERED that any such transfer,
without first appearing and showing cause in this
court as to how such transfer might occur without
violating the Court's injunction shall be considered
contempt of the Court's earlier order. Any and all
persons and banking institutions participating in such
transfers . . . are hereby notified that such transfer
would be considered in contempt of this Court's
injunction[.]
The district court then issued an Order to Show Cause against
the Philippine Bank, which was not a party to the litigation in
the district court, requiring the Bank to show why it should
not be held in contempt for violating the court's injunction
against transfer of assets by the estate. A hearing on the Order
to Show Cause was held, but not concluded because the dis-
trict court ruled that a Bank officer's declaration could not be
considered unless the officer was deposed. The district court
set a time and place for the deposition.
The Bank then filed the present petition for mandamus in
this court, seeking to restrain the district court from enforcing
its Order to Show Cause and from pursuing discovery against
the Bank officer. The Bank asserts that it has transferred
nearly all of the funds in issue to the Republic pursuant to the
judgment of the Philippine courts.5 The Bank contends that
_________________________________________________________________
5 Certain of the funds held in another bank in Singapore were not trans-
ferred because the bank refused to release the funds and instead filed an
interpleader action in Singapore.
1569
the officer's deposition would violate Philippine bank secrecy
laws. More important, the Bank contends that the entire pro-
ceeding against the Bank for its transfer of funds violated the
act of state doctrine. We stayed the proceedings in district
court pending our ruling on the mandamus petition.
DISCUSSION
1. The act of state doctrine.
[1] Every sovereign state is bound to respect the
independence of every other sovereign state, and the
courts of one country will not sit in judgment on the
acts of the government of another, done within its
own territory. Redress of grievances by reason of
such acts must be obtained through the means open
to be availed of by sovereign powers as between
themselves.
Underhill v. Hernandez, 168 U.S. 250, 252 (1897). The act of
state doctrine originally was deemed to arise from interna-
tional law, but more recently has been viewed as a function
of our constitutional separation of powers. W.S. Kirkpatrick &
Co. v. Envtl. Tectonics Corp., Int'l, 493 U.S. 400, 404 (1990).
So viewed, the doctrine reflects " ``the strong sense of the
Judicial Branch that its engagement in the task of passing on
the validity of foreign acts of state may hinder' the conduct
of foreign affairs." Id. (quoting Banco Nacional de Cuba v.
Sabbatino, 376 U.S. 398, 423 (1964)).
The district court's orders in issue violated this principle.
In order to obtain assets from the Philippine Bank, or to hold
the Bank in contempt for the transfer of those assets to the
Republic, the district court necessarily (and expressly) held
invalid the forfeiture judgment of the Philippine Supreme
Court. We conclude that this action of the district court vio-
lated the act of state doctrine.
1570
The class plaintiffs in the district court argue that the act
of state doctrine is directed at the executive and legislative
branches of foreign governments, and does not apply to judi-
cial decisions. Although the act of state doctrine is normally
inapplicable to court judgments arising from private litigation,
there is no inflexible rule preventing a judgment sought by a
foreign government from qualifying as an act of state. See Liu
v. Republic of China, 892 F.2d 1419, 1433-34 & n.2 (9th Cir.
1989) (citing RESTATEMENT (SECOND) OF FOREIGN RELATIONS
OF THE UNITED STATES § 41 cmt. d (1965)) ("A judgment of a
court may be an act of state."). There is no question that the
judgment of the Philippine Supreme Court gave effect to the
public interest of the Philippine government. The forfeiture
action was not a mere dispute between private parties; it was
an action initiated by the Philippine government pursuant to
its "statutory mandate to recover property allegedly stolen
from the treasury."6 In re Estate of Ferdinand Marcos Human
Rights Litig., 94 F.3d at 546. We have earlier characterized
the collection efforts of the Republic to be governmental. Id.
The subject matter of the forfeiture action thus qualifies for
treatment as an act of state.
The class plaintiffs next argue that the act of state doc-
trine is inapplicable because the judgment of the Philippine
Supreme Court did not concern matters within its own terri-
tory. Generally, the act of state doctrine applies to official acts
of foreign sovereigns "performed within [their ] own territo-
ry." Credit Suisse, 130 F.3d at 1346 (internal quotations omit-
ted). The act of the Philippine Supreme Court was not wholly
external, however. Its judgment, which the district court
declared invalid, was issued in the Philippines and much of its
_________________________________________________________________
6 The Philippine judgment is therefore distinguishable from the foreign
judgment in Timberlane Lumber Co. v. Bank of America, 549 F.2d 597
(9th Cir. 1976), relied on by the class plaintiffs here. Timberlane refused
to consider the foreign judgment an act of state in part because the "judi-
cial proceedings [ ] were initiated by Caminals, a private party and one of
the alleged co-conspirators, not by the Honduran government itself." Id.
at 608.
1571
force upon the Philippine Bank arose from the fact that the
Bank is a Philippine corporation. It is also arguable whether
the bank accounts have a specific locus in Singapore,
although they apparently were carried on the books of bank
branches there.7 See Callejo v. Bancomer, S.A, 764 F.2d 1101,
1121-25 (5th Cir. 1985) (discussing differing theories of situs
of intangibles). Even if we assume for purposes of decision
that the assets were located in Singapore, we conclude that
this fact does not preclude treatment of the Philippine judg-
ment as an act of state in the extraordinary circumstances of
this case. "[T]he [act of state] doctrine is to be applied prag-
matically and flexibly, with reference to its underlying con-
siderations." Tchacosh Co. v. Rockwell Int'l Corp., 766 F.2d
1333, 1337 (9th Cir. 1985). Thus, even when an act of a for-
eign state affects property outside of its territory, "the consid-
erations underlying the act of state doctrine may still be
present." Callejo, 764 F.2d at 1121 n.29. Because the Repub-
lic's "interest in the enforcement of its laws does not [ ] end
at its borders," id., the fact that the escrow funds were depos-
ited in Singapore does not preclude the application of the act
of state doctrine. The underlying governmental interest of the
Republic supports treatment of the judgment as an act of state.
It is most important to keep in mind that the Republic
did not simply intrude into Singapore in exercising its forfei-
ture jurisdiction. The presence of the assets in Singapore was
a direct result of events that were the subject of our decision
in Credit Suisse. There we upheld as an act of state a freeze
order by the Swiss government, enacted in anticipation of the
request of the Philippine government, to preserve the Philip-
pine government's claims against the very assets in issue
_________________________________________________________________
7 The class plaintiffs cite Hilao v. Estate of Marcos, 95 F.3d 848, 851
(9th Cir. 1996), for the proposition that the locus of a bank deposit is the
branch where the deposit is made. Hilao, however, was applying a Califor-
nia statute that specified the place and manner of levying execution; it did
not purport to state a general rule for determining the locus of bank
accounts.
1572
today. Credit Suisse, 130 F.3d at 1346-47. Indeed, the Philip-
pine National Bank argues that the district court's orders vio-
lated our mandate in Credit Suisse "directing the district court
to refrain from taking any further action" with regard to assets
of the Marcos estate "held or claimed to be held by the
[Swiss] Banks." Id. at 1348. The district court held that our
mandate did not apply to the assets once they left the hands
of the Swiss banks. We need not decide the correctness of that
ruling because we conclude that, in these circumstances, the
Philippine forfeiture judgment is an act of state. The Swiss
government did not repudiate its freeze order, and the Swiss
banks did not transfer the funds in the ordinary course of busi-
ness. They delivered the funds into escrow with the approval
of the Swiss courts in order to permit the very adjudication of
the Philippine courts that the district court considered invalid.
To permit the district court to frustrate the procedure chosen
by the Swiss and Philippine governments to adjudicate the
entitlement of the Republic to these assets would largely nul-
lify the effect of our decision in Credit Suisse. In these
unusual circumstances, we do not view the choice of a Singa-
pore locus for the escrow of funds to be fatal to the treatment
of the Philippine Supreme Court's judgment as an act of state.
2. The mandamus remedy.
We also conclude that the district court's error qualifies for
correction by a writ of mandamus. In so ruling, we consider
the factors set forth in Bauman v. U.S. Dist. Ct., 557 F.2d 650
(9th Cir. 1977):
(1) The party seeking the writ has no other adequate
means, such as a direct appeal, to attain the relief he
or she desires. (2) The petitioner will be damaged or
prejudiced in a way not correctable on appeal. (This
guideline is closely related to the first.) (3) The dis-
trict court's order is clearly erroneous as a matter of
law. (4) The district court's order is an oft-repeated
error, or manifests a persistent disregard of the fed-
1573
eral rules. (5) The district court's order raises new
and important problems, or issues of law of first
impression.
Id. at 654-55. "None of these guidelines is determinative and
all five guidelines need not be satisfied at once for a writ to
issue." Credit Suisse, 130 F.3d at 1345. Rarely will all five
"guidelines point in the same direction" or even be relevant
to the particular inquiry. See id.
With regard to the first two factors, we conclude that
the district court's error is not sufficiently correctable on
appeal. No appeal will lie unless a contempt order is issued
and sanctions have been imposed. See Estate of Domingo v.
Republic of the Philippines, 808 F.2d 1349, 1350 (9th Cir.
1987). The Bank has made a sufficient showing that subject-
ing its officer to cross-examination will place the officer and
the Bank in danger of violating Philippine bank secrecy laws.
Requiring the Bank "to choose between being in contempt of
court and violating [Philippine] law clearly constitutes severe
prejudice that could not be remedied on direct appeal." Credit
Suisse, 130 F.3d at 1346.
As for the third Bauman factor, our discussion of the act
of state doctrine makes clear that the district court's orders are
erroneous as a matter of law. In addition, the district court is
attempting to apply its injunction against transfer of assets to
the Philippine National Bank as an aider and abettor or agent
of the estate of Marcos. But the Bank can hardly have been
acting as an aider and abettor or agent of the estate when it
transferred assets to the Republic pursuant to the forfeiture
judgment of the Philippine Supreme Court, entered over the
opposition of the Marcos estate. The error in the district
court's orders is apparent.
With regard to the fourth Bauman factor, we cannot say
that the district court's error is "oft-repeated. " The fifth factor,
however, favors mandamus because the district court's ruling
1574
raises new and important problems regarding the act of state
doctrine.
Four of the five Bauman factors thus favor issuance of
the writ. We therefore grant the Bank's petition. The district
court's order, dated February 25, 2004, to the Philippine
National Bank to show cause, and its order, dated April 8,
2004, to the Bank to produce its employee, Rogel L.
Zenarosa, for a deposition are vacated. The district court is
directed to refrain from any further action against the Philip-
pine National Bank in this action or any other action involv-
ing any of the funds that were the subject of the decision of
the Philippine Supreme Court dated July 15, 2003. This court
retains jurisdiction over the district court litigation, MDL No.
840, to the extent that it involves any action against the Phil-
ippine National Bank.
WRIT OF MANDAMUS ISSUED.
1575