The World in US Courts: Orrick's Quarterly Review of Decisions Applying US Law to Global Business and Cross-Border Activities

Summer 2014

The Global law firm Orrick, Herrington & Sutcliffe LLP takes great pride in announcing the Summer 2014 edition of The World in US Courts: Orrick’s Quarterly Review of Decisions Applying US Law To Global Business and Cross-Border Activities. This issue contains our summaries of 29 new US federal court decisions, in areas of the law including Intellectual Property, Antitrust, Securities, and RICO.

We are also announcing the scheduling of a series of World in US Courts webinars. Each webinar will last one hour and will provide practical guidance to companies seeking to structure their affairs to avoid litigation in the US, or finding themselves in litigation that they do not believe should involve them. The webinar will cover the subjects discussed in our publication. There is no charge or obligation. If you would like to pre-register and receive special follow-up notices regarding the webinar, please click here. Those who have already pre-registered need not do so again.

Thank you for your interest in The World in US Courts. We hope you will be able to join us for the webinar.

Please take a moment to review the members of our Editorial Board, who are drawn from Orrick’s 25 offices in North America, Europe, and Asia. From this page, you may also go directly to the list of decisions discussed in this issue and the summaries of the cases and authorities. We have also provided a very brief summary description of the statutes that plaintiffs have sought to apply to conduct outside the US. To do any of these things, please click the appropriate link below.

Editorial Board

??Decisions Discussed in This Issue: Summer 2014

Copies of any case discussed in this issue are available upon request.
Please note that Orrick may be representing parties in the cases discussed below.  Nothing in the informal summaries contained in this publication should be taken as commenting on the merits of cases, or as a binding constructions of court opinions that are discussed.

Alien Tort Statute (ATS)/Torture Victims Protection Act (TVPA)/Victims of Trafficking and Violence Protection Act (VTVPA)/Foreign Sovereign Immunity Act (FSIA)

District Court Dismisses Holocaust-ERA Reparations Claim Under the ATS Because Preexisting Treaty Precluded Jurisdiction Under FSIA

Simon v. Republic of Hungary, US District Court for the District of Columbia, May 9, 2014

Holocaust survivors brought an ATS action for reparations against the Republic of Hungary, the Hungarian national railway, and a freight rail company, arising from alleged Nazi-era expropriations of the plaintiffs’ property. The US District Court in Washington, D.C. first addressed the question of the immunity from suit possessed by the Hungarian national and the railroad defendants, both of which were deemed to be sovereigns. The Court noted the basic rule that non-US nations and their instrumentalities could not be sued in US courts under the FSIA unless a statutory exception applied, and emphasized the role of international comity in deferring to the US Executive Branch in order to resolve suits that do not fall within one of the exemptions. Circumscribing the exceptions is a separate provision of law that deprives US courts of jurisdiction if a suit would conflict with a treaty obligation of the US entered into before the FSIA was passed in 1976. In this case, a 1947 treaty between the US and Hungary purported to address the restoration of Nazi-era confiscation of property, and the Court found that treaty to bar the action.

[Editor’s Note: The case’s discussion of personal jurisdiction issues relating to the freight rail company are addressed below]

Court of Appeals Holds That Alleged US Connections to Torture at Abu Graib Prison Overcome Presumption of no extraterritorial Application of ATS al Shimari v. CACI Premier Technology, Inc., US Court of Appeals for the Fourth Circuit, June 30, 2014

Plaintiffs, not US citizens, were prisoners in the Abu Graib prison in Iraq who claim to have been abused by interrogators employed by CACI, a US corporation. Their complaint, seeking damages against CACI and certain of its employees under the ATS and state common law, was transferred to the US District Court in Maryland and dismissed. The case was appealed to the US Court of Appeals for the Fourth Circuit.

The Court of Appeals addressed the question whether the ATS, a jurisdictional statute, supported a cause of action “for tortious conduct occurring outside the United States.” The issue had been addressed by the US Supreme Court in 2013 in Kiobel v. Royal Dutch Petroleum Co., which applied a presumption against the extraterritorial application of the ATS in a case where all of the relevant conduct took place outside the US. The Court of Appeals read Kiobel, however, as authorizing US suits for “claims” that “touch and concern” the US in a substantial way. In the case at bar, the Court of Appeals concluded that a sufficient connection to the US was established because the defendant CACI was a US corporation alleged to have been acting pursuant to a contract with the US Government, the interrogators alleged to have committed the tortious acts were hired in the US, and CACI managers in the US were alleged to have known about and tried to suppress the claimed abuse. The Court of Appeals’ decision reflects efforts by plaintiffs’ to escape the holding of Kiobel through detailed pleading of potential links between their claims and the US.

The Court of Appeals also considered the defense that the claims could not be heard because they raised “political questions,” but concluded that the case should be returned to the district court so that the factual record could be developed further.

Court of Appeals Applies Fifth Amendment, But Not Fourth Amendment, to Killing in Mexico Caused by Shots Fired from the US

Hernandez v. United States, US Court of Appeals for the Fifth Circuit, June 30, 2014

A Mexican citizen standing in Mexico was shot to death by US border patrol agents who were standing in the US. Hernandez, the deceased’s legal representative, sued the US and the agents on tort theories and for violation of the deceased’s constitutional rights.

The tort claims, which could only be brought against the US Government, were dismissed because US law (the Federal Tort Claims Act) specifically precludes liability where the injury occurs outside the US.

ATS claims against the US were dismissed on grounds of sovereign immunity—that the US can only be sued by consent, and that the ATS is not a waiver of sovereign immunity that could be taken as having given such consent.

The Court of Appeals then turned to so-called “Bivens” claims for damages, which can be brought against US federal employees for alleged violations of constitutional rights. The threshold question was whether the constitutional provisions at issue applied to actions in the US having an effect in Mexico. The Court of Appeals concluded that the answer required consideration of three prudential "objective factors and practical concerns": “(1) the citizenship and status of the claimant, (2) the nature of the location where the constitutional violation occurred, and (3) the practical obstacles inherent in enforcing the claimed right.”

Applying these factors and prior precedent, the Court of Appeals first concluded that the US Constitution’s Fourth Amendment protection against unreasonable searches and seizures did not apply because the deceased did not have “sufficient voluntary connections” with the US.

The Court of Appeals then addressed the claim that the agents used “excessive force” and that this conduct violated the Fifth Amendment’s prohibition against the taking of life without due process, even as to a Mexican citizen who was in Mexico at the time of his death. The Court of Appeals noted that precedent allowed for a greater extraterritorial applicability of the Fifth Amendment than the Fourth Amendment. Reviewing the “objective factors” cited above, it concluded that those favoring the applicability of the Fifth Amendment (notably, that the US exercised control over the border region and that the conduct alleged involved a high degree of culpability) outweighed those suggesting no constitutional protection (the fact that the plaintiff was not a US citizen).

With the applicability of the constitutional provision established, the Court of Appeals concluded that it was appropriate to extend a Bivens remedy to the facts, although such extensions beyond prior precedent are generally disfavored. A claim against the agent was allowed to proceed to trial; one against his supervisors was not because they were not shown to have had the necessary personal involvement in the actions in question.

District Court Dismisses ATS Claims, but Upholds Related TVPA Claims, Where All Relevant Acts Occurred in Bolivia

Mamani v. Berzain, US District Court for the Southern District of Florida, May 20, 2014

This ATS and TVPA suit arose as a result of the Bolivian Government’s alleged massacre of its own citizens in 2003. Plaintiffs are representatives of alleged victims; the defendants are two high-ranking former Bolivian officials now resident in the US.

The District Court in Florida first took up the ATS claim, noting that the US Supreme Court’s 2013 Kiobel decision recognized a presumption against extraterritorial application of the statute and held that federal courts could only hear cases "touching and concerning" the United States with "sufficient force" to displace the presumption. The Court further noted that, post Kiobel, courts had only sustained complaints where “at least some--if not a substantial portion--of the relevant conduct occurred domestically.” In the case at bar, by contrast, the Court found that none of the alleged conduct had occurred in the US, and on that basis dismissed the ATS claim. This conclusion was not affected by the fact that the defendants were permanent residents in the US and allegedly could not be sued elsewhere, and that the current Government of Bolivia supported the litigation.

The Court next considered the plaintiffs’ TVPA claim based upon the alleged “extrajudicial killing” orchestrated by the defendants. The Court observed that, unlike ATS, the TVPA does apply extrajudicially to reach defendants in the US responsible for covered conduct in other countries. The Court noted, however, that the TVPA also requires that a plaintiff have exhausted available remedies. That had occurred in this case, with the plaintiffs having participated in two Bolivian compensation schemes. The defendants argued that the existence of administrative remedies precluded an independent TVPA claim, but the Court disagreed, finding that the TVPA remedy would exist even if the plaintiffs had received “adequate” compensation in Bolivia. Next, the Court considered the defendants’ argument that resolution of the claim should be delayed because plaintiffs could still pursue civil actions against seven of the defendants’ subordinates who were convicted in Bolivia for their roles in the shootings. The Court noted that the defendants bore a “substantial” burden in making this argument, and concluded that their sketchy information from the press about potential civil suits was inadequate to warrant delay.

District Court Holds That Corporations May Be Liable Under the ATS, Clarifying Muddled Law in the Second Circuit

Ntsebeza v. Ford Motor Company, US District Court for the Southern District of New York, April 17,2014

Victims of apartheid brought ATS, TVPA, and VTVPA claims in US District Court for the Southern District of New York against a number of US and non-US corporations alleged to have aided and abetted violations of customary international law by the South African Government. At issue in this opinion was the question whether corporations may be sued under the ATS. Four US circuit courts of appeals had concluded that corporations may be so sued. Alone in deciding the question otherwise was the New York District Court’s own circuit, in a decision which predated the US Supreme Court’s decisions in Kiobel v. Royal Dutch Petroleum and Daimler AG v. Bauman (both of which were decided in the context of ATS cases). In this opinion, the District Court concludes that those intervening decisions of the Supreme Court as well as of the Second Circuit itself have left the question open for a fresh review. On this basis, and on the basis of policy considerations cited by other courts with which the judge clearly agrees, the District Court concludes that corporations may be sued under the ATS.

District Court Allows ATS Suit to Proceed Where Actions Supporting Alleged Violations in Sri Lanka Were Taken in the US

Krishanti v. Rajaratnam, US District Court for the District of New Jersey, April 28, 2014

Plaintiffs are victims of bombing attacks committed by the Liberation Tigers of Tamil Elam (“LTTE”), which is classified by the US Government as a terrorist organization. Defendants are individuals and a Sri Lanka based non-governmental organization that maintains offices in the US, all of which allegedly provided financial support to LTTE. The plaintiffs filed suit in US District Court in New Jersey claiming among other things violations of the ATS based on violations of international law.

The defendants first argued that the court lacked jurisdiction under the ATS because the injuries giving rise to the suit and the conduct of LTTE in allegedly causing them occurred in Sri Lanka. While the Court agreed that the ATS did not have extraterritorial effect, it noted that the basis for the suit was actions taken by the defendants in the US.

[Editor’s note: The Krishanti case is also addressed in this issue in connection with its discussion of personal jurisdiction and the doctrine of forum non conveniens.]

District Court Holds That Corporations May Be Liable Under the ATS But That US Corporation Organized to Bring Claims Lacked Standing to Sue

Sikhs for Justice Inc. v. Indian National Congress Party, US District Court for the Southern District of New York, April 25, 2014

Sikhs for Justice (SFJ), an organization representing Sikhs allegedly injured in the wake of the assassination of Indira Gandhi in 1984, sued the then-ruling Indian National Congress Party (INC) and an individual in US District Court in New York for various violations of human rights, in violation of the ATS and the TVPA.

INC moved to dismiss, first on the ground that it was a corporation and that corporations cannot be sued under the ATS. The Court rejected this argument, citing the Ntsebeza case discussed elsewhere in this issue and agreeing that it was free to address the question on its own because the law in the Circuit was so uncertain.

On the merits, the Court noted that the ATS was not given extraterritorial application, and concluded that the complaint failed to allege a sufficient connection between the actions claimed to give rise to the claim in the US. Specifically, SFJ argued that INC acted in the US through a New York subsidiary set up to advance INC’s interests in the US. SFJ also argued that the victims of the alleged crimes lived in the US and were suffering continued persecution because of ongoing activities by the defendants in India, including persecution of their family members. The Court rejected these grounds, finding the mere presence of the US subsidiary an inadequate basis, and the alleged injuries felt in the US to be irrelevant because all of the alleged conduct occurred in India. As alternative grounds for dismissal of the case, the Court concluded that SFJ, a US corporation, did not satisfy the ATS requirement that a plaintiff be an “alien,” and that it did not properly represent individual aliens who might have standing to sue.

District Court Concludes That Failure to Provide Adequate Electrical Service Cannot Support an ATS Claim, and States That a US Corporation is not Liable Under the ATS For Activities of a Subsidiary in Cameroun, Even Though Parent Profited From Alleged Conduct

William v. AES Corp., US District Court for the Eastern District of Virginia, June 26, 2014

A class comprised of all citizens and residents of Cameroun sued AES, a US power generation holding company, and its Cameroun subsidiary under the ATS for injuries allegedly suffered as a result of the provision of poor electrical service in Cameroun.

AES was dismissed because the plaintiffs had alleged no facts that allowed conduct of the Cameroun subsidiary to be imputed to its parent on a theory that the two companies were “alter egos” of one another.

As to the subsidiary, the District Court in Virginia concluded that the claims alleged did not rise to the level of violations of international law so as to generate a right of recovery. The plaintiffs alleged that the deprivation of reliable electrical service constituted the requisite “cruel, inhuman, and degrading treatment,” but the Court found that this standard required that a defendant be alleged to have engaged in “intentional, targeted persecution” of the defendant, which conduct was not alleged. In so ruling, the Court recognized that policy considerations militated against recognizing a new and actionable violation of international law based on a presumed right to regular electrical service.

In dictum, the Court also concluded that the complaint alleged “purely extraterritorial conduct,” and that the mere presence of AES as a US corporation was insufficient to establish the requisite domestic US action, even where it may have received profit from its subsidiary’s activities. The Court also indicated, in dictum, that it believed that liability under the ATS could apply to corporations.

Sherman Act/Antitrust/Foreign Trade Antitrust Improvements Act (FTAIA)

Court of Appeals Holds that Proximate Causation Standard Must be Used to Determine Whether Elements of “Direct” Injury and US Effect that “Gives Rise” to Claim Were Present to Support Jurisdiction

Lotes Co., Ltd. v. Hon Hai Precision Industry Co., Ltd., US Court of Appeals for the Second Circuit, June 4, 2014

The Lotes case was the subject of a special client alert that may be found here.

District Court Calls for Briefing on Question Whether FTAIA Applies to State-Law Antitrust Claims

Proview Technology Inc. v. Optronics Corp., US District Court for the Northern District of California, April 18, 2014

Plaintiff Proview Technology was an “indirect purchaser” of thin film transistor liquid crystal display (TFT-LCD) panels alleged to have been the subject of price-fixing by numerous defendants. Thus, Proview did not purchase the panels directly from the defendants. Rather, it purchased finished products in the US from original equipment manufacturers (OEMs) outside the US with which it was affiliated that did buy panels directly from the defendants. Proview brought Sherman Act claims and also claims under the Cartwright Act (California’s antitrust statute) based on its alleged overpayments.

Proview’s federal antitrust claims were dismissed because it was an “indirect purchaser” and therefore did not have standing to sue under the Sherman Act; an exception to this principle for situations where a direct and a related indirect purchaser essentially represent a single economic entity were found by the US District Court in San Francisco not to have been adequately alleged.

The defendants also argued that Proview’s federal claims would be barred by the FTAIA because of a failure to allege a “direct, substantial, and reasonably foreseeable” effect on US commerce, and in such case that Proview’s state law “indirect purchaser” claims would likewise have to be barred, as state antitrust jurisdiction could not exceed the scope of federal Sherman Act claims. The Proview plaintiffs responded that the FTAIA applied only to federal claims and that, in any event, its indirect purchaser claims were based on its status as a California business making purchases in California, and so the FTAIA was inapplicable by its own terms.

The Court requested briefing on the foregoing questions, declining to address at this juncture the question whether and to what extent the FTAIA would be found to preclude state antitrust claims based on facts that (it assumed for present purposes) might not support a claim under federal law.

District Court Precludes Antitrust Claims Against Microsoft Involving US Sales of VOIP Services to Indian Customers Because No Injury Alleged to US “Export Business”

TI Investment Services, LLC. v. Microsoft Corp., US District Court for the District of New Jersey, May 30, 2014

The plaintiffs brought federal and state antitrust claims against Microsoft for allegedly attempting to monopolize the market for Voice-over Internet Protocol (VOIP) services for calls made between the US and India. The complaint alleges that Microsoft failed to comply with Indian licensure requirements, and as a result was able to charge less than the plaintiffs to US consumers seeking to place VOIP calls to India, and Indian customers seeking to place VOIP calls to the US.

The US District Court in New Jersey concluded that the complaint failed to state a claim, finding among others a failure to allege antitrust standing and injury and the elements of a predatory pricing claim. In the alternative, the Court considered the application of the FTAIA to the claims. Most notably, it considered separately whether the allegations as to sales of VOIP services to US and to Indian customers met FTAIA requirements.

As to US customers, the Court did not consider the FTAIA to be implicated at all because such sales do not involve “foreign commerce” but instead merely reflect sales by a US corporation to US customers; it did not matter for purposes of the FTAIA that those customers were placing calls to India. By contrast, the court found that Microsoft’s sales efforts in India did implicate “foreign commerce,” The Court also found that the sales had the “direct, substantial, and reasonably foreseeable effect” on export commerce necessary for a federal antitrust claim to be brought. However, the court cited a provision of the FTAIA that limited claims in such cases only to alleged “injury to export business” in the US. In the case at bar, by contrast, the Court found that the injury alleged was to “foreign competitors of a US exporter in a foreign market,” and concluded that such claims were therefore specifically barred.

Employment Discrimination

District Court Holds that Lack of Extraterritorial Application of Title VII Warrants Dismissal Even Though Certain Non-US Employees Were Alleged to Have “Worked” in the US Electronically, Via the Internet and by Telephone

Davenport v. HansaWorld USA, Inc., US District Court for the Southern District of Mississippi, June 30, 2014

Plaintiff Davenport sued her employer for discrimination under Title VII of the Civil Rights Act of 1964. Her complaint was dismissed as to one defendant on grounds that it employed an insufficient number of employees in the US to be subject to the statute. On a motion for reconsideration, the Court rejected Davenport’s argument that 45 employees working outside the US should be deemed to be working in the US for purposes of Title VII because of the extent of their communication with the US via the Internet, telephone, and the US Mail.

Intellectual Property (Patent)

District Court Refuses to Assess Damages Based on Manufacture and Sale of Allegedly Infringing Product Outside the US Under “Hypothetical Negotiation” Theory

France Telecom SA v. Marvell Semiconductor Inc., US District Court for the Northern District of California, April 14, 2014

France Telecom sued Marvell, a US semiconductor manufacturer, for patent infringement in connection with chips sold outside the US by a non-US corporate affiliate of Marvell that was not named in the suit. The production and sale of allegedly infringing chips occurred outside the US, but certain of the chips were later imported into the US.

The District Court in San Francisco concluded that there was no evidence that the non-US affiliate, referred to as MAPL, was the “alter ego” of Marvell through control or overlapping organization, so as to make Marvell responsible for the actions of an independent legal entity that was not sued. Moreover, the Court found that the production and sale of allegedly infringing chips by MAPL outside the US could not constitute infringement of France Telecom’s US patent, even if such ex-US sales were the “direct and foreseeable result of the US infringement.” Among other things, the Court cited precedent that such noninfringing activities outside the US broke the “chain of causation” necessary to support damages.

Nevertheless, France Telecom offered several theories under which it could still collect damages. First, it argued that a “hypothetical negotiation” with Marvell for a license would have included sales by MAPL. The Court characterized this contention as too “weak” and speculative to create a genuine issue of fact for trial, noting as well that Marvell would not have faced liability for such sales in the event of litigation and thus would have no reason to negotiate. The Court then rejected France Telecom’s argument that damages could be attributable to products made and sold outside the US but later imported into the US, finding that the noninfringing sale outside the US precluded subsequent claims for infringement.

Intellectual Property (Trademark)

District Court Finds Lanham Act Jurisdiction to Consider Damages Stemming From Performances in Australia Where All Parties Are US Entities

Herb Reed Enterprises v. Monroe Powell’s Platters, US District Court for the District of Nevada, June 17, 2014

This long-running dispute involves ownership of rights to the name of the musical group, The Platters. Plaintiff claims to own the name, and as relevant here seeks damages for a series of performances by the defendant in Australia.

The US District Court in Nevada applied the complicated test for extraterritorial application of the Lanham Act that exists in the Ninth Circuit. The first two requirements can be satisfied where there is monetary loss in the US, even though only non-US transactions and consumer deception is involved. The Court found this portion of the test to be satisfied by the plaintiff’s allegation that it books internationally through an agent in the US and that its ability to secure engagements has been hurt by the defendant’s alleged conduct.

The third requirement, described through seven sub-tests, seeks to balance the interests and links to US commerce with other nations against those other nation’s own interests. The Court found this element to be satisfied as well, principally because all parties were US entities.

Racketeer Influenced and Corrupt Organizations Act (RICO)

Court of Appeals Rewrites Test for Extraterritorial Application of RICO, Focusing on Extraterritorial Scope of Underlying “Predicate Offenses” Implicated

European Community v. RJR Nabisco, Inc., US Court of Appeals for the Second Circuit, April, 23, 2014

The European community and 26 member states sued RJR Nabisco and related entities for RICO and other violations, alleging a global money laundering scheme in connection with cigarette smuggling and the nonpayment of taxes. A trial court dismissed the claim, finding among other things that the allegations were extraterritorial in nature and thus outside the scope of the RICO statute. The US Court of Appeals in New York reversed this decision and reinstated the complaint.

Prior decisions applying the presumption against RICO having extraterritorial applicability reflected a split of authority: some decisions stated that the focus of the analysis should be on the geographic reach of the “enterprise” while others stated that the focus should be on the reach of the “pattern of racketeering activity.” The Court of Appeals in New York disagreed with both approaches. It reasoned that, while the RICO statute was itself silent as to extraterritorial application, certain of the underlying “predicate” violations of law that make up the required “pattern of racketeering activity” clearly reflect an intent that they be applied to conduct outside the US, and that the scope of RICO should follow the scope of those violations. Thus, the Court of Appeals reasoned, where the alleged “pattern of racketeering activity” was comprised of conduct outside the US that nonetheless violated a provision of law that was a RICO predicate, there was no reason to deny application of the RICO statute itself. The Court of Appeals accordingly held that RICO’s geographic scope would follow the geographic scope of the alleged “predicate” offenses implicated by the facts alleged.

Applying this standard to the complaint, the Court of Appeals concluded that the alleged predicate violations of money laundering and material support of terrorism did have extraterritorial applicability, whereas those of wire fraud and money fraud and the Travel Act (interstate or travel to destinations outside of the US in aid of a violation of law) did not. As to these latter violations, however, the Court of Appeals stated that the complaint’s allegation that the money laundering scheme had been orchestrated from the US was sufficient to establish US-based jurisdiction without the concept of extraterritoriality even being raised. Further, the Court of Appeals believed that the complaint alleged schemes directed to the US and that had a substantial US effect, further supporting its conclusion that RICO should apply.

US District Court Upholds Indictment Alleging US-Based RICO Violation, Even Though Scheme Implemented Via Servers Located in Russia

United States v. Frederick Thomas, US District Court for the District of Nevada, May 1, 2014

Defendant Frank Thomas was indicted for criminal RICO violations, and he moved to dismiss on a number of grounds, including that servers apparently instrumental to the alleged violation were located in Russia. The District Court in Nevada cited precedent that addressed the geographic scope of RICO in terms of the location of the alleged “racketeering activity,” and found such activity in the US through allegations that the defendants operated throughout the US in connection with a scheme to manufacture and sell counterfeit US drivers’ licenses and “access devices” owned and used by US financial institutions. Thus, while defendants utilized the Internet and servers (wherever located), the Court concluded that the indictment was properly based on allegations of US racketeering activity.

White Collar Criminal

Court of Appeals Concludes That Claim of Improper Extraterritorial Application of Criminal Statute Goes to the Merits of the Charge, Not the Court’s Jurisdiction to Consider it.

United States v. Yousef, US Court of Appeals for the Second Circuit, April 29, 2014

Yousef was indicted on a criminal charge of providing support to a terrorist organization and plead guilty. He subsequently argued that he should be freed because the indictment failed to allege any relationship between his conduct and the US, in which case the Due Process Clause of the US Constitution would preclude his prosecution. Because a guilty plea waives all but jurisdictional objections, the Court of Appeals in New York was required to determine whether the alleged defect in the indictment would have impacted the trial court’s jurisdiction to hear the case or merely created a ground for dismissing the charges on the merits. Reviewing changing law in the area that expanded the concept of subject matter jurisdiction in this context, the Court of Appeals concluded that a claim that a criminal statute was given an improper extraterritorial application goes to the merits of a charge, not whether the court has jurisdiction to hear it, and thus rejected Yousef’s argument.

District Court Finds That Defendant’s Participation in Conspiracy to Attack US Helicopters in Colombia Establishes Sufficient “Nexus” With US to Establish Constitutionality of Criminal Prosecution

Al Kassar v. United States, United States District Court for the Southern District of New York, April 8, 2014

Defendant Al Kassar was convicted of conspiring to kill United States citizens and to illegally acquire and use anti-aircraft missiles, providing material support to terrorist organizations, and money laundering. Among other things, the conspiracy involved an effort to acquire missiles in Europe that were intended to be used to destroy US helicopters in Colombia. Al Kassar argued after his conviction that, because the conduct for which he was convicted occurred entirely outside the US, the alleged conspiracy did not have a “sufficient nexus” with the US to support a prosecution consistent with the Due Process Clause of the US Constitution. A US magistrate judge in New York rejected this argument. He first concluded that the statute under which Al Kassar was convicted had extraterritorial effect, extending to actions against US property no matter where in the world located. He then concluded that the “sufficient nexus with the US” requirement was to be judged with reference to the “intent” of the conspiracy, and that the conspiracy’s intent here to harm US property satisfied the Due Process Clause.

Securities Law

Court of Appeals Rejects “Listing Theory” as Basis for Extending Reach of Securities Laws to Actions to Injuries Allegedly Suffered in Purchase of Non-US Securities on Non-US Exchanges

City of Pontiac Policemen’s and Firemen’s Retirement System v. UBS AG, US Court of Appeals for the Second Circuit, May 6, 2014

Various plaintiffs based in the US and in other countries filed class action litigation against UBS and other corporate and individual defendants arguing that the sale of UBS shares in Europe violated US securities laws because of failures to disclose to purchasers potential US civil and criminal liabilities. Among other issues, the US Court of Appeals in New York considered whether the securities laws could reach alleged misstatements made in connection with stock issued and sold on exchanges outside the US, given that the shares were also traded on the New York Stock Exchange.

A 2010 decision of the US Supreme Court (Morrison v. National Australia Bank Ltd.) had established that the basic antifraud provision of the US securities laws did not apply to the sale of such securities where they were not traded on a US exchange. This case considered, for the first time, whether the fact that the securities were simultaneously traded in the US would lead to a different result, under the so-called “Listing Theory.” The Court of Appeals rejected the Listing Theory, and upheld dismissal of the case.

The Listing Theory was developed by plaintiffs following a statement in the Morrison decision that US securities laws would apply where a stock was “listed on [US] exchanges.” Plaintiffs had wanted that statement to be read broadly to establish a basis for liability whenever a security was traded on a US exchange, whether or not the transaction giving rise to the claim otherwise had any connection with the US. The issue was presented with respect to the plaintiffs’ so-called “foreign cubed” claims brought by non-US purchasers of non-US securities that were traded on a non-US exchange—here, one in Switzerland. The Court of Appeals rejected the Listing Theory, holding that that the Supreme Court had intended its reference to US listing to be a “proxy” for claims having arisen from a US transaction—the only basis for potential liability that existed.

Another plaintiff presented “foreign squared” claims: It was a US entity that placed a “buy order” for non-US securities that was filled on the Swiss exchange. The buyer relied on an alternative ground for US jurisdiction stated in Morrison, namely, that injuries arose from the “purchase” of a security “in the United States.” The Supreme Court had explained further that a “purchase” would be deemed to have occurred in the US where the parties incurred “irrevocable liability” to carry out the transaction within the United States or where title is passed within the United States. The Court of Appeals found that neither condition was met by the submission of a purchase order, citing prior precedent that the citizenship and residency of the purchaser party was not relevant to the inquiry.

Court of Appeals Finds Sufficient US Conduct to Support Conviction

United States v. Mandell, US Court of Appeals for the Second Circuit, May 16, 2014

Two individuals were convicted of securities fraud and mail and wire fraud. Apparently the defrauded purchasers were not in the US, and as relevant here the defendants argued that there was insufficient contact with the US to support a securities fraud conviction.

The Court of Appeals in New York stated that the test for applying US securities laws to conduct occurring in part outside the country was settled in the prior case of US v. Vilar [discussed in the Fall 2013 issue of World in US Courts]. Specifically, that case held that US laws apply in criminal cases where there has been fraud in connection with a security listed on a US exchange or purchased or sold in the US. With respect to the latter inquiry, a security is deemed to have been purchased or sold in the US where the parties incurred “irrevocable liability” to consummate the transaction or title passed in the US.

In the case at bar, prospective purchasers were required to submit applications to a US company, which could then accept or reject them. Additionally, there apparently were purchases of securities in the US. The Court of Appeals concluded that in both of the foregoing situations the US securities laws would apply.

Personal Jurisdiction

District Court Finds no Specific or Personal Jurisdiction Over Parties in Connection With Acts Leading to Power Outage in Cameroon

William v. AES Corp., US District Court for the Eastern District of Virginia, June 26, 2014

Plaintiffs brought suit under the ATS against AES Corp., an American company headquartered in Virginia, and its Cameroonian subsidiary, Sonel, a power company, claiming violations of international law surrounding power failures in Cameroon that injured the Plaintiffs. Sonel moved to dismiss the action due to lack of general and specific personal jurisdiction.

The Court first analyzed specific personal jurisdiction, finding none. Plaintiff’s claims related only to acts concerning the power failure within Cameroon and did not allege any acts directed at Virginia or the United States. As for general personal jurisdiction, the Court found the parent corporation’s mere presence in Virginia was an inadequate basis, as definitively held by the US Supreme Court in Goodyear Dunlop Tires Operations, S.A. v. Brown. Because Plaintiffs made no allegations that Sonel was “at home” in Virginia, as required by Goodyear, the Court declined to find general personal jurisdiction. The Court also noted that Sonel has not had any contact with Virginia, let alone “continuous and systematic” contact.

In the alternative, Plaintiffs argued Sonel was a mere “alter ego” of the parent corporation, AES Corp., meaning jurisdiction over the parent extends to the subsidiary. However, the Court perfunctorily “disregarded” this argument, as the Plaintiffs failed to “plausibly allege” any facts that Sonel was an alter ego of the parent corporation. As a result, the Court dismissed Sonel from the suit.

[Editor’s note: The AES Corp. case is also addressed in this report in connection with its discussion of the Alien Tort Statute.]

District Court Finds No Personal Jurisdiction Over German Corporations That Were Aware Their Products Were Being Sold Into the Forum State, but had not Targeted That Jurisdiction for Sales

Tile Unlimited, Inc. v. Blanke Corp., United States District Court for the Northern District of Illinois, June 9, 2014

In a products liability suit with multiple cross-claims among the parties related to an allegedly faulty “tile underlayment” product purchased by Plaintiffs and manufactured by the Defendants, Defendants Blanke Germany and Interplast, both German corporations, moved to dismiss the claims against them for lack of personal jurisdiction. Plaintiffs purchased and installed Defendants’ product, which allegedly made an “audible crunching sound” when walked upon.

Plaintiff alleged the Defendants placed their product into the “stream of commerce,” which under J. McIntyre Mach., Ltd. v. Nicastro can form the basis for personal jurisdiction if “the defendant’s activities manifest an intention to submit to the power of a sovereign.” Physical entry by the Defendant into the United States is a relevant but not dispositive factor in the jurisdictional analysis. Plaintiffs did not dispute that Blanke Germany had never sold or shipped the product directly to the United States. However, Blanke Germany was aware that its products were being sold throughout the United States (including in the forum state of Illinois). The Court found this knowledge inadequate to find personal jurisdiction. Instead, it determined that a corporation must have actually targeted the forum jurisdiction for sale or distribution. Plaintiffs filed numerous spreadsheets showing sales in Illinois, but the Court found the volume was not sufficient to demonstrate any specific targeting of Illinois over other states and countries where the product was sold. The Court also rejected Plaintiff’s arguments that Blanke Germany’s website or the CEO’s ten meetings in the United States over ten years exhibited the contact necessary to find jurisdiction. As to Interplast, the Court similarly held the company did not ship, sell, or manufacture any products in Illinois. Although Plaintiff’s pointed to a 2006 state court case in Colorado finding jurisdiction over Interplast, the Court rejected jurisdiction here because personal jurisdiction law has evolved significantly since 2006 and contacts with Colorado are irrelevant to contacts with Illinois.

Court of Appeals Rejects Effort to Enforce Arbitration Against Parent of Turkish Conglomerate Whose Subsidiaries Did Business in US

Soneras Holding B.V. v. Cukurovas Holding, United States Court of Appeals for the Second Circuit, April 25, 2014

Sonera Holding, a Dutch Corporation, filed suit in District Court in New York, seeking to enforce a final arbitration award against Cukurova Holding, the parent company of a Turkish conglomerate. The parties participated in arbitration in Switzerland over failed negotiations for Senora’s purchase of shares of a holding company with a controlling stake in a Turkish mobile phone operator. The arbitration tribunal found for Plaintiff Senora and ordered Cukurova to pay $932 million in damages for failing to deliver the shares. Senora filed to enforce the award in jurisdictions around the world.

The Court rejected Cukurovas’s motion to dismiss for lack of personal jurisdiction and issued four orders confirming the arbitration award. Cukurova appealed, arguing, among other things, that the Court lacked personal jurisdiction over it.

Sonera argued that personal jurisdiction existed because (1) Cukurova itself engaged in systematic and continuous contact with New York, and (2) even if Cukurova’s contacts were not sufficient, numerous subsidiaries of Cukurova did have contacts that would support jurisdiction over the parent. The Court of Appeals addressed New York law of personal jurisdiction, noting that the required “doing business” in New York “do[es] not necessarily need to be conducted by the foreign corporation itself.” However, while New York law had approved an “agency” theory by which parents would be liable for the conduct of their subsidiaries under certain circumstances, the Court of Appeals noted that this theory had been rejected as a matter of US constitutional law by the US Supreme Court in Daimler AG v. Bauman.

The Court of Appeals thus restricted its analysis solely to Cukurova’s direct contacts with New York. First, Sonera argued several intermittent contacts with New York provided jurisdiction, including (1) unsuccessful negotiations to sell an entity to New York-based private equity funds, (2) the sale of an entity to a London underwriter, who in turn offered it for sale in New York, (3) an agreement with a US corporation to provide digital television content, (4) an office in New York used by two subsidiaries, and (5) statements on a subsidiary’s website promoting it as “Cukurova’s connection to the United States.” The Court rejected these arguments because, even if all contacts were imputed to Cukurova, its principal place of business remained in Turkey, which prevents finding general personal jurisdiction. The Court also rejected specific personal jurisdiction, rejecting Sonera’s argument that Cukurova had consented to jurisdiction because the agreement to arbitrate contained a provision allowing enforcement of any award. The Court found this provision did not amount to a waiver of personal jurisdiction in the United States.

District Court Finds No General Personal Jurisdiction Over Hungarian Railroad Company

Simon v. Republic of Hungary, United States District Court for the District of Columbia, May 9, 2014

Plaintiffs are Hungarian Holocaust survivors. They filed suit against the Republic of Hungary and two state-owned Hungarian railroad corporations, alleging Defendants transported Plaintiffs to labor and death camps in other countries and transported stolen property of the Plaintiffs during World War II. One of the railroad corporations, RCH, moved to dismiss for lack of personal jurisdiction, among other grounds.

Plaintiffs argued personal jurisdiction existed under Federal Rule of Civil Procedure 4(k)(2), which allows for personal jurisdiction when no one state has general personal jurisdiction, if (1) the claim against the defendant arises under federal law, (2) a summons has been served, (3) the defendant is not subject to personal jurisdiction in any state court of general jurisdiction, and (4) the exercise of personal jurisdiction by the federal court comports with due process. To comport with due process, the Defendant must be “at home” in the United States. The Court held RCH, a Hungarian-owned corporation with its principal place of business in Budapest, was not. Although RCH maintained a “generally accessible” website to solicit business, these allegations fell “woefully short” of the required connection to the US. The Court also declined to order jurisdictional discovery because, taken together, the potential contacts could not satisfy due process to find personal jurisdiction.

[Editor’s note: The Simon case is also addressed in this report in connection with its discussion of the Alien Tort Statute.]

In Bankruptcy Proceeding, District Court Finds No General Personal Jurisdiction Over Individuals and Entities Operating Principally Outside US

Refco Group, LLC v. Cantor Fitzgerald L.P., United States District Court for the Southern District of New York, June 10, 2014

Plaintiff, a reorganized entity in bankruptcy, alleged that Defendants siphoned funds and assets away from the subsidiaries of a limited partnership, of which Plaintiff held a 10% interest. Defendants are all companies and individual executives of the Cantor group of companies, many of which are organized and operate outside the US. These individuals and entities moved to dismiss the claims for lack of personal jurisdiction.

Because the claims arise out of a bankruptcy proceeding, only the federal personal jurisdiction test is at issue, rather than New York law. The Court declined to find personal jurisdiction over the Cantor entities, concluding that Plaintiffs failed to allege continuous or systematic contacts with the United States. As such, the entities could not be considered “at home” in the United States and general personal jurisdiction—the only kind alleged—did not exist. Furthermore, the Court noted that its jurisdiction over related US entities could not confer jurisdiction.

District Court Finds No General Personal Jurisdiction Over Mexican Helicopter Operator Arising Out of Accident in Mexico

Gonzales v. Seadrill Americas, Ltd., United States District Court for the Southern District of Texas, June 27, 2014

Plaintiffs are two offshore-oil-rig workers who were injured during a helicopter ride in Mexico. Plaintiffs filed suit against the oil rig operator and the helicopter operator, Pegaso Mexico, a Mexican corporation. Defendant oil rig operator also filed a cross-claim against Pegaso. Pegaso moved to dismiss the claims for lack of personal jurisdiction.

After jurisdictional discovery, the Court first held that general personal jurisdiction could not be found. Because Pegaso operated almost exclusively in Mexico, operating only three to five flights a year into Texas, and had no offices or employees in the United States, Pegaso could not be said to be “at home” in the United States. Although Pegaso’s subsidiaries operated in the United States, leasing three helicopters from American companies that are subleased to Pegaso, the law does not permit the actions of a US subsidiary to be imputed to the parent. However, even if the subsidiaries contacts were imputed, the Court nevertheless found the contacts were not sufficient to confer jurisdiciton. As to specific personal jurisdiction, the Court held that although the contacts may be sufficient under the less exacting specific jurisdiction standard, the Plaintiffs’ injuries did not arise from those contacts. As such, specific personal jurisdiction could not be found.

District Court Finds Personal Jurisdiction Defense Waived Despite Evolution of the Law

Gilmore v. Palestinian Interim Self-Government Authority, United States District Court for the District of Columbia, June 23, 2014

Plaintiffs are the estate and family members of a US citizen killed in East Jerusalem in 2000. Plaintiffs filed suit against the Palestinian Interim Self-Government Authority (“PA”), the Palestinian Liberation Organization (“PLO”), and various individuals under the Anti-Terrorism Act of 1991. The suit was initially filed in 2001, and Defendants initially failed to file a responsive pleading. The Court entered a default judgment, after which Defendants appeared through counsel and sought to vacate the default judgment and dismiss the claim for failure to state a claim and lack of subject matter jurisdiction. The individual Defendants also moved to dismiss for personal jurisdiction, but the PA and PLO did not. The Court granted the Individual Defendants’ motion to dismiss but denied PA and PLO’s attempt to dismiss the case. After a lengthy discovery phase, the PA and PLO filed for Judgment on the Pleadings for lack of personal jurisdiction in 2014.

Although Defendants argued the US Supreme Court’s decision in Daimler AG v. Bauman dictated that they be dismissed from the suit, the Court held the PA and PLO had waived their defense of personal jurisdiction by not raising the issue for over a decade. Personal jurisdiction is a waivable defense and must be raised in the first available motion, as required by the Federal Rules of Civil Procedure 12(g) and (h). Because Defendants moved to dismiss on other grounds, but failed to raise lack of personal jurisdiction, which was available, the defense was waived. Defendants argued the defense was not available in practice because the Supreme Court had not yet held in Daimler that a foreign defendant is subject to general personal jurisdiction only if its contacts with the US are so continuous and systematic so as to render it “at home” in this country. The Court rejected this argument, observing that Defendants had argued personal jurisdiction in multiple filings, despite failing to formally file for dismissal on that basis. Because Defendants had previously argued that their pre-Daimler personal jurisdiction arguments were in fact “available and meritorious,” they could not now argue the defense was not available. Furthermore, the Court noted that the “at home” rule had been first set out by the US Supreme Court in a 2011 case, meaning that too much time had passed before Defendants cited the rule in her 2014 motion.

District Court Finds No General or Specific personal Jurisdiction Over Russian Air Freight Company That Contracted in the US for Delivery of Jet Fuel in Kenya

Associated Energy Group v. Air Cargo Germany, United States District Court for the Southern District of New York, June 4, 2014

Plaintiff AEG filed suit for breach of contract against two air freight companies, alleging Defendants failed to pay for jet fuel delivered in Nairobi, Kenya. Defendant VDA, a Russian company, filed to dismiss for lack of personal jurisdiction.

VDA argued a lack of general personal jurisdiction because it is incorporated in and has it principal place of business in Russia. However, Plaintiff argued that VDA has purchased jet fuel from Plaintiff and other Texas suppliers. The Court held such transactions, although amounting to $3 million, were insufficient because the US Supreme Court had stated in Daimler AG v. Bauman that mere purchases in the US, even if at regular intervals, could not establish personal jurisdiction. The Court also rejected Plaintiff’s arguments that a subsidiary’s Texas-based office conferred jurisdiction, as Daimler also rejected this basis for personal jurisdiction.

As to specific personal jurisdiction, Plaintiff argued VDA’s purchase of Texas jet fuel was a sufficient contact, as it represented VDA’s decision to choose to contract with Plaintiff and thus to “purposefully avail” itself of the jurisdiction. However, the Court rejected this argument because “merely contracting with a Texas resident is not enough.” Furthermore, the contracts were not such as to make foreseeable that VDA would be sued in Texas, rendering the case law cited by Plaintiffs inapposite.

District Court Finds No Specific Personal Jurisdiction Where Plaintiffs Cannot Show That “But For” the Defendant’s Activities in the Forum State, Their Injuries Would Not Have Occurred

Krishanti v. Rajaratnam, US District Court for the District of New Jersey, April 28, 2014

Plaintiffs are victims of bombing attacks allegedly committed by the Liberation Tigers of Tamil Elam (“LTTE”), a Sri Lankan group classified by the US Government as a terrorist organization. Defendants are individuals and a Sri Lanka based non-governmental organization that maintains offices in the US, the Tamil Rehabilitation Organization (“TRO”). All of the defendants allegedly provided financial support to LTTE. The plaintiffs filed suit in US District Court in New Jersey claiming among other things violations of the Alien Tort Statute based on violations of international law.

Personal jurisdiction over TRO was first claimed via service in the US on one of the individual defendants, who was a director of the organization. The Court rejected this contention, concluding that personal service upon a director of a corporation could suffice only to obtain jurisdiction over that director, not the corporation. Turning to the question whether TRO’s activities in New Jersey could support general personal jurisdiction, the Court first decided that it was required to consider TRO’s activities over a “reasonable period” including before the complaint was filed. Applying the test stated in the US Supreme Court’s Daimler AG decision, however, the Court concluded that general personal jurisdiction did not exist because TRO’s activities in New Jersey were not so “continuous and systematic” as to render the organization “at home” in the forum state. As a final alternative, the Court considered specific personal jurisdiction, which would attach if TRO “purposefully directed” its activities towards New Jersey and the plaintiffs’ injuries “arise out of and relate to” those activities. Although the Court found that the first part of the test was satisfied, it concluded that the second part was not. At a minimum, a plaintiff must show that its injuries “would not have arisen” absent the contacts alleged to be the basis for specific personal jurisdiction, and the Court found that the activities alleged—including fundraising and donations--could not be so linked to the bombings that gave rise to the suit. The Court thus concluded that TRO could not be held to answer for the claims made in the complaint.

[Editor’s note: The Krishanti case is also addressed elsewhere in this report in connection with the Alien Tort Statute and the doctrine of forum non conveniens.]

Forum Non Conveniens

District Court Concludes That None of the Factors Necessary to Support Dismissal Based on New Jersey Being an Inconvenient and Unfair Jurisdiction in Which to Litigate Dispute had been Satisfied

Krishanti v. Rajaratnam, US District Court for the District of New Jersey, April 28, 2014

Plaintiffs are victims of bombing attacks allegedly committed by the Liberation Tigers of Tamil Elam (“LTTE”), which is classified by the US Government as a terrorist organization. Defendants are individuals and a Sri Lanka based non-governmental organization that maintains offices in the US, all of which allegedly provided financial support to LTTE. The plaintiffs filed suit in US District Court in New Jersey claiming among other things violations of the Alien Tort Statute based on violations of international law.

Among other arguments, the defendants sought dismissal of the case on grounds of forum non conveniens--the doctrine pursuant to which a court balances a plaintiff’s interest in bringing a case where it wishes against the interests of a defendant which may be forced to defend itself in a distant and inconvenient location. The court applied a three-part test to determine whether to dismiss the case on forum non conveniens grounds. The first factor is whether an adequate alternative forum exists—one where jurisdiction over the defendants could be obtained, the subject matter of the lawsuit could be addressed under local law, and that appropriate relief would be available. The Court concluded that there was no adequate alternative forum for the present claims, because the case at bar sought relief for conduct occurring in the US, not the actions in Sri Lanka which directly caused the plaintiffs to suffer injury. The second factor is the extent of deference to be paid to a plaintiff’s choice of forum. Here, although the plaintiffs did not live in the US and that would ordinarily undermine their claims of convenience, the defendants were in the US, as was most of the evidence likely to be admitted at trial. Thus, the Court concluded that the second factor similarly did not suggest a basis for dismissal. Finally, the Court weighed relevant public and private interests, with the defendants having to show that these interests tipped “decidedly” in favor of dismissal for the factor to benefit their motion. The Court concluded instead that the public interest of a state seeking to ensure that its citizens do not support terrorism is strong, and the private interests of convenience cut both ways. Because none of the three factors favored the defendants, the Court declined to dismiss the case.

[Editor’s note: The Krishanti case is also addressed elsewhere in this report in connection with its discussion of the Alien Tort Statute and Personal Jurisdiction.]

Laws Discussed

We provide below alphabetically very brief summaries of key US laws addressed by cases summarized in this edition. Please note that these summaries provide a very simplified overview of the statutes and are not intended to describe fully what they may prohibit and require. They are only provided as a guide for the convenience of the reader.

Alien Tort Statute (“ATS”), 28 U.S.C. § 1350 (also called the Alien Tort Claims Act)

The ATS is a jurisdictional statute that allows US courts to decide cases brought by a foreign citizen for torts committed in violation of international law or a US treaty. Much litigation under the statute involves the nature of the claims that can be brought; although treaties have specified terms, "international law" is a more general term. To support ATS jurisdiction, violations of international law "must be of a norm that is specific, universal, and obligatory."

Commodities Exchange Act (“CEA”) §§ 4o, 9(a), 22(a), 7 U.S.C. §§ 6o, 13(a), 25(a)

The CEA applies to the sale of commodities and imposes restrictions similar to those imposed on stock exchanges. Section 4o of the CEA generally makes unlawful the use of any means of fraud or deceit in connection with the sale of commodities or futures contracts involving commodities. Section 22(a) authorizes private individuals to sue for violations of Section 4o in certain limited circumstances. Finally, Section 9(a) prohibits manipulating the price of commodities or their futures contracts.

Dodd-Frank Wall Street Reform and Consumer Protection Act-Anti-Retaliation Provision, 15 U.S.C. § 78u-6(h)(1)(A)

The 2010 Dodd-Frank Act was reform legislation passed in the wake of the financial crisis. As relevant here, one provision expanded incentives for and protection of “whistleblowers” in specific circumstances. Most notably, the provision protects certain individuals from retaliation for making disclosures that are “required or protected” under previously-enacted securities laws or SEC rules. Other important limitations apply.

Foreign Sovereign Immunities Act of 1976(FSIA), 28 U.S.C. Sec. l330, l332(a), l39l(f) and l60l-l6ll

The FSIA codifies the longstanding US rule that non-US Governments generally are immune from suit in US courts. The statute establishes a presumption against suit, and sets out a number of specific exceptions. These include:

  • Explicit or implicit waiver of immunity by the foreign state;
  • Commercial activity carried on in the United States or an act performed in the United States in connection with a commercial activity elsewhere, or an act in connection with a commercial activity of a foreign state elsewhere that causes a direct effect in the United States;
  • Property taken in violation of international law is at issue;
  • Rights in property in the United States acquired by succession or gift or rights in immovable property situated in the United States are at issue;
  • Money damages are sought against a foreign state for personal injury or death, or damage to or loss of property, occurring in the United States and caused by the tortious act or omission of that foreign state;
  • Action brought to enforce an agreement made by the foreign state with or for the benefit of a private party to submit to arbitration;
  • Money damages are sought against a foreign state for personal injury or death that was caused by an act of torture, extrajudicial killing, aircraft sabotage, hostage taking, or the provision of material support or resources for such an act, if the foreign state is designated as a state sponsor of terrorism under section 6(j) of the Export Administration Act of 1979 (50 U.S.C. App 2405(j) or Section 620A of the Foreign Assistance Act of 1961 (22 U.S.C. 2371).
  • A suit in admiralty is brought to enforce a maritime lien against a vessel or cargo of the foreign state which maritime lien is based upon a commercial activity of the foreign state. 

Foreign Trade Antitrust Improvements Act (“FTAIA”), 15 U.S.C. § 6a

The FTAIA is the principal US statute governing the applicability of US antitrust (competition) laws to foreign conduct. The statute is both complicated and unclear, and has been the subject of extensive litigation. Basically, the FTAIA provides that foreign conduct cannot be the basis of a violation of the US antitrust laws unless certain exceptions apply. These exceptions include, most significantly, foreign conduct that has a “direct, substantial, and reasonably foreseeable effect” on competition or prices in a US market, so long as the conduct also independently violates the substance of a US antitrust law. The FTAIA also permits antitrust claims to be brought where US export commerce is affected by anticompetitive acts outside the US. One important qualification is that the FATIA does not apply to claims that there has been an injury to the import trade into the US. Those claims must satisfy a different test under a different statutory regime.

Gun Control Act, 18 U.S.C. ch. 44

The Gun Control Act of 1968 restricts the sales of firearms the numerous classes of persons, including fugitives from justice, drug addicts, persons unlawfully in the US, certain persons suffering from mental illness, and persons convicted of felony crimes.

Hobbs Act, 18 U.S.C. § 1951

The Hobbs Act is a criminal statute that prohibits actual or attempted robbery or extortion affecting interstate commerce between the US and other countries. It is often used in labor disputes and cases involving commercial disputes and public corruption.

Lanham Act, 15 U.S.C. § 1051, et seq.

The Lanham Act is the principal trademark infringement statute in the US, and also creates additional remedies related to false advertising and “cybersquatting.” The statute makes unlawful the use of both registered and unregistered marks that create a “likelihood of confusion” with a pre-existing trademark. More generally, it also prohibits the use of false or misleading statements made in advertising where the effect may be the likely injury to a business. Amendments to the Lanham Act in 1999 prohibited the use of confusingly similar domain names in internet web sites. Parties that violate the Lanham Act may be subject to damages as well as injunctions.

Maritime Drug Law Enforcement Act (“MDLEA”), 46 U.S.C. § 70501, et seq.

The MDLEA makes unlawful drug trafficking on the high seas. It provides that an individual may not “knowingly or intentionally manufacture or distribute, or possess with intent to manufacture or distribute, a controlled substance on board (1) a vessel of the United States or a vessel subject to the jurisdiction of the United States; or (2) any vessel if the individual is a citizen of the United States or a resident alien of the United States.” The statute expressly provides for application to conduct occurring outside the territorial jurisdiction of the US.

Patent Act, 35 U.S.C. § 271 (Patent Infringement)

Under US law, patent infringement occurs generally where a person, “without authority makes, uses, offers to sell, or sells any patented invention, within the United States or imports into the United States any patented invention during the term of the patent therefor.” Prior knowledge of the patent is irrelevant for purposes of patent infringement liability. A person who “actively induces” the infringement of a patent is also liable as an infringer. Parties that commit patent infringement face monetary penalties as well as an injunction.

Racketeer Influenced and Corrupt Organizations Act (“RICO”), 18 U.S.C. § 1961, et seq.

RICO establishes civil and criminal liability for persons employed by or associated with an “enterprise” that has been engaging in a “pattern of racketeering.” The applicability of the statute turns on the meanings of these two terms. The term “enterprise” is broadly defined and can include formal legal entities such as corporations, as well as more informal associations-in-fact, which are “a group of persons associated together for a common purpose of engaging in a course of conduct.” A “pattern of racketeering” is defined in turn to be the commission of at least two “predicate acts” during a ten-year period, where those acts were sufficiently related to one another to be considered part of a “pattern.” The RICO statute lists 35 state and federal crimes that constitute “predicate acts,” including mail and wire fraud, bribery, obstruction of justice, embezzlement, money laundering, immigration fraud, and an assortment of crimes of violence.

Securities Act of 1933, 15 U.S.C. § 77a, et seq.

The Securities Act generally prohibits a security from being offered or sold to the public unless it is either registered with the Securities and Exchange Commission or an exemption from the registration requirement applies.

Securities Exchange Act of 1934 (“1934 Act”) §§ 10(b) & 15(a)(1), 15 U.S.C. §§ 78j(b) & 78o(a)(1) (also referred to as Exchange Act)

Section 10(b) of the 1934 Act is a broad provision prohibiting fraudulent activities with respect to securities listed on US exchanges, including American Depositary Receipts (“ADRs”). In addition, pursuant to Section 10(b), the Securities and Exchange Commission has promulgated Rule 10b-5, which extends Section 10(b)’s prohibition to fraudulent activity in connection with the purchase or sale of any security, registered or unregistered securities, publicly held or closely held companies, and any kind of entity that issues securities, including federal, state, and local government securities.

Section 15(a)(1) of the 1934 Act prohibits any person or company to from acting as a broker or dealer without first registering with the Securities and Exchange Commission.

Sherman Antitrust Act, 15 U.S.C. §§ 1 & 2

The Sherman Antitrust Act is the most generally applicable antitrust statute in US law. Section 1 of the Act makes unlawful any agreement “in restraint of trade.” For most agreements affecting commercial transactions, the statute only makes unlawful agreements that unreasonably restrain trade, meaning that they have an actual anticompetitive effect on a market for goods or services in the US that is not outweighed by precompetitive benefits. Certain narrow classes of agreements, including price-fixing, bid rigging, and agreements among competitors to divide customers or territories, are per se violations of law as to which the facts, if proved, allow for no defenses. Section 2 of the Sherman Act makes unlawful monopolization and attempted monopolization, which may be undertaken by a company acting unilaterally.

Title VI of the Civil Rights Act of 1964

This federal statute broadly prohibits discrimination by covered employers. It declares an “unlawful employment practice” for an employer to take various actions, including to discriminate against any individual with respect to compensation, terms, or conditions of employment because of such individual’s race, color, religion, sex, or national origin.

Torture Victims Protection Act of 1991 (“TVPA”), Pub. L. No. 102–256, 106 Stat. 73 (1992), codified at 28 U.S.C. § 1350

The TVPA was passed for the purpose of giving a US civil remedy to victims of torture and/or murder. The statute, however, only authorized lawsuits against individuals, not corporations or political groups. When filing suit, the plaintiff must show that he or she pursued all “adequate and available” local remedies. Plaintiffs need not be US citizens to sue.

Victims of Trafficking and Violence Protection Act, 18 U.S.C. § 1581 et seq.

The Victims of Trafficking and Violence Protection Act of 2000, Public Law 106-386, as amended, declares illegal the trafficking in persons, including forced labor, involuntary servitude, slavery and sex trafficking. 18 USC § 1595 creates a private right of action in US federal court for victims of such conduct, allowing them to collect actual damages, punitive damages, and attorneys’ fees. Section 1596 of Title 18 establishes that the remedy applies extraterritorially.

Wire Act, 18 U.S.C. § 1084

The Interstate Wire Act of 1961 prohibiting the operation of certain types of betting businesses in the United States. The statute has been construed to be limited to betting on sporting events, and not to apply to other forms of online gambling.

42 U.S.C. § 1981 

This federal statute provides that “all persons within the jurisdiction of the United States shall have the same right in every State and Territory to make and enforce contracts, to sue, be parties, give evidence, and to the full and equal benefit of all laws and proceedings for the security of persons and property as is enjoyed by white citizens, and shall be subject to like punishment, pains, penalties, taxes, licenses, and exactions of every kind, and to no other.” The statute is intended to advance the goal that all persons within its scope or equal under the law. Courts have concluded in many cases that it may be enforced by lawsuits in federal court.

 

 

Topics:  Alien Tort Statute, Antitrust Litigation, Antitrust Provisions, Compliance, Cross-Border, FSIA, Multinationals, Patents, RICO, VTVPA

Published In: Antitrust & Trade Regulation Updates, Civil Procedure Updates, Intellectual Property Updates, Personal Injury Updates, Securities Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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