Supreme Court issued a decision, described below, of interest to the business
Republic of Philippines et al. v. Pimentel, No. 06-1204
(previously discussed in the
December 3, 2007 Docket Report).
Court ruled today that the Ninth Circuit Court of Appeals gave insufficient
weight to the sovereign status of the Republic of the Philippines when it held
that an interpleader suit purporting to dispose of assets claimed by the
Republic could proceed in the Republic's absence under Federal Rule of Civil
Procedure 19(b). While noting that Rule 19 "indicates that the determination
whether to proceed [with a case without a necessary party] will turn upon
factors that are case specific," the Court held that "where sovereign immunity
is asserted, and the claims of the sovereign are not frivolous, dismissal of the
action must be ordered where there is a potential for injury to the interests of
the absent sovereign." Given the Court's broad holding, the case may have
implications for future litigation involving claims against sovereign entities.
The subject of
the interpleader action in question was a Merrill Lynch account containing
approximately $35 million in assets misappropriated from the Republic by the
former government of Ferdinand Marcos through a shell corporation known as
Arelma. In district court, the Republic successfully asserted its sovereign
immunity from suit and, along with other parties, sought dismissal of the action
for failure to join an indispensable party under Rule 19(b). The district court
declined to dismiss the case, instead awarding the Arelma assets to a class of
plaintiffs who were judgment creditors of the Marcos Estate. The Court of
Appeals affirmed, holding that the Republic was not an indispensable party and
thus that the interpleader action could proceed in its absence.
The Supreme Court disagreed, finding that the lower courts "failed to give
full effect to sovereign immunity" when they held that the action could proceed
without the Republic. The Court reasoned that the distribution of assets
misappropriated by the Marcos regime were events of great historical and
political significance to the Republic, and thus that principles of comity
favored allowing the Republic to adjudicate ownership of the assets in its own
courts. Permitting the interpleader action to proceed in US courts without the
participation of the Republic would substantially prejudice the interests of the
Republic. Accordingly, the Court ordered dismissal of the interpleader suit.
Mayer Brown LLP represented the Petitioners in the case.