119 F.3d 935 (11th Cir. 1997), 95-4979, Republic of Panama v. BCCI Holdings (Luxembourg) S.A.

Docket Nº:95-4979.
Citation:119 F.3d 935
Party Name:RICO Bus.Disp.Guide 9321, REPUBLIC of PANAMA, Plaintiff-Appellant, v. BCCI HOLDINGS (LUXEMBOURG) S.A., Bank of Credit and Commerce International, S.A., Bank of Credit and Commerce International (Overseas) Limited, Amjad Awan, First American Bank, N.A., First American Bank of New York, a New York state bank, First American Bank, a California state b
Case Date:August 20, 1997
Court:United States Courts of Appeals, Court of Appeals for the Eleventh Circuit
 
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Page 935

119 F.3d 935 (11th Cir. 1997)

RICO Bus.Disp.Guide 9321,

REPUBLIC of PANAMA, Plaintiff-Appellant,

v.

BCCI HOLDINGS (LUXEMBOURG) S.A., Bank of Credit and Commerce

International, S.A., Bank of Credit and Commerce

International (Overseas) Limited, Amjad Awan, First American

Bank, N.A., First American Bank of New York, a New York

state bank, First American Bank, a California state bank,

Defendants-Appellees.

No. 95-4979.

United States Court of Appeals, Eleventh Circuit

August 20, 1997

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Thomas K. Equels, Holtzman, Krinzman & Equels & Sigars, Alan G. Greer, Robert C. Levine, M. Margaret Haley, Floyd Pearson Richman Greer Weil Brumbaugh & Russomanno, P.A., Miami, FL, for Plaintiff-Appellant.

Anne K. Toomey, James P. Davenport, Nussbaum & Wald, Washington, DC, Alvin B. Davis, Steel, Hector and Davis, Miami, FL, for Defendants-Appellees.

Appeal from the United States District Court for the Southern District of Florida.

Before BARKETT, Circuit Judge, KRAVITCH, Senior Circuit Judge, and HARRIS [*], Senior District Judge.

KRAVITCH, Senior Circuit Judge:

The Republic of Panama filed this action in the Southern District of Florida asserting claims under the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. §§ 1961 et seq., and state law claims against several American and foreign banking entities. 1 The complaint charged each of

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the defendants with participating in a scheme to assist former Panamanian military officer, Manuel Noriega, in illegally diverting Panamanian government funds for his personal use. The district court dismissed Panama's claims against First American Bank, N.A. and First American Bank of New York (the "First American defendants") for lack of personal jurisdiction and dismissed its claims with respect to the remaining defendants on the grounds of forum non conveniens. Panama appeals both rulings.

Addressing an issue that has divided district courts in this circuit, we conclude that the Due Process Clause of the Fifth Amendment provides an independent constitutional limitation on the court's exercise of personal jurisdiction over a domestic defendant served pursuant to a federal statute's nationwide service of process provision. On the facts of this case, we find no constitutional barrier to jurisdiction and therefore reverse the district court's order dismissing Panama's claims against the First American defendants for lack of personal jurisdiction. We nevertheless affirm the dismissal of these claims on the alternative ground that Panama failed to state a proper RICO claim against these defendants. We also affirm the dismissal of Panama's claims against the remaining defendants on the basis of forum non conveniens.

I. Background

BCCI Holdings is the parent corporation of BCCI S.A. and BCCI Ltd. During the time period relevant to the complaint, these foreign defendants were the principal corporations in an international banking group operating in sixty-nine countries, including the United States. Collectively, they will be referred to as the "BCCI defendants" or as "BCCI." First American Bank, N.A. is an American bank with its principal place of business in the District of Columbia, and First American Bank of New York is a New York state bank with its principal place of business in New York City.

The complaint alleges that in 1981 the BCCI defendants "surreptitiously obtained control" of the First American defendants by demanding First American stock as security for loans. The complaint also alleges that the BCCI defendants actively misrepresented the nature of their control over the First American defendants and purposely concealed this ownership from federal regulators. Panama asserts that First American was the "alter ego" of BCCI and that the First American defendants were integrated into BCCI's worldwide legal and illegal banking operations with the "knowledge, agreement, and/or acquiescence" of Robert Altman. Altman served as a controlling officer of First American Bankshares, the parent company of the First American defendants, and as an officer and/or director of one of the conduit holding companies that BCCI used to control First American Bankshares. 2

The complaint further alleges that beginning in 1981 Manuel Noriega illegally diverted millions of dollars from the Panamanian government into secret BCCI accounts throughout the world. BCCI laundered the diverted funds, redistributed them to various accounts throughout the world, and made them available to Noriega and his family for their personal use. The BCCI defendants allegedly conducted these transfers to conceal Noriega's illegal activities from the Republic of Panama and from other lawful authorities.

From 1986 through 1987, the First American defendants allegedly assisted the BCCI defendants in transferring the money stolen by Noriega and in making these unlawful proceeds available to him and his family in this country. Specifically, BCCI routinely channeled Noriega funds through its account

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with First American in Washington, D.C. On one occasion in 1987, First American issued a cashier's check for $71,600 to a Miami realtor. Issued from illegal Noriega proceeds, this check allegedly was used to assist the Noriegas in acquiring property in Miami.

In July 1991, banking regulators in the United States and elsewhere closed BCCI. Six months later, the courts in the Cayman Islands, England, and Luxembourg ordered the formal liquidation of BCCI and charged liquidators in these countries with collecting and distributing BCCI's remaining assets. 3 The liquidation proceedings, which are ongoing in each of these three countries, operate according to pooling agreements by which all creditors share ratably in BCCI's limited assets.

In December 1991, the BCCI defendants pleaded guilty to criminal RICO charges in this country. Pursuant to the plea agreement, all of BCCI's assets in the United States were forfeited to the U.S. government and placed in a custodial account. 4 As a result of the plea agreement and forfeiture, the BCCI defendants no longer have any assets in this country.

Panama first instituted this action in December 1990. It filed its Fourth Amended Complaint in August 1993. In May 1994, the district court granted the First American defendants' motion to dismiss for lack of personal jurisdiction and, in the alternative, ruled that Panama had failed to state a RICO claim against these defendants. In July 1995, the district court dismissed Panama's claims against the BCCI defendants on the basis of forum non conveniens and, in the alternative, international comity.

II. Discussion

A. First American Defendants' Motion to Dismiss

Panama alleged that the district court had jurisdiction over the First American defendants under RICO's nationwide service of process provision, 18 U.S.C. § 1965(d), which provides that process may be served "on any person in any judicial district in which such person resides, is found, has an agent, or transacts his affairs." The district court concluded that although Panama had satisfied the requirements of this section, Panama had not alleged sufficient contacts with Florida to satisfy the Due Process Clause of the Fifth Amendment. The court therefore granted the First American defendants' motion under Fed.R.Civ.P. 12(b)(2) to dismiss Panama's claims against them for lack of personal jurisdiction. Without abandoning their attack on personal jurisdiction, the First American defendants urge us to put aside the jurisdictional issue and first review the district court's alternative ruling under Fed.R.Civ.P. 12(b)(6) addressing the merits of Panama's RICO claim. 5

As a general rule, courts should address issues relating to personal jurisdiction before reaching the merits of a plaintiff's claims. See Madara v. Hall, 916 F.2d 1510, 1513-14 & n. 1 (11th Cir.1990); Charles A. Wright & Arthur R. Miller, Federal Practice and Procedure, Civil 2d § 1351, at 243-44 (1990). A defendant that is not subject to the jurisdiction of the court cannot be bound by its rulings. Madara, 916 F.2d at 1514. Thus, as a preliminary matter, courts should determine if they have the power to bind a defendant with a ruling on the merits of the case. Moreover, the fact that a dismissal for failure to state a claim is with prejudice whereas a dismissal for lack of jurisdiction is without prejudice counsels against bypassing the jurisdictional issue. See Madara, 916 F.2d at 1514 n. 1 (contrasting consequences of dismissals made under Fed. R. Civ. P. 12(b)(2) and Fed.R.Civ.P. 12(b)(6)) (citing Arrowsmith v. United Press Int'l, 320 F.2d 219, 221 (2d Cir.1963) (en banc )).

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Although courts have held that it is permissible in some circumstances to bypass the issue of personal jurisdiction if a decision on the merits would favor the party challenging jurisdiction and the jurisdictional issue is difficult, 6 we decline to depart from the general rule in this case. The jurisdictional issue presented in this appeal has perplexed and divided district courts in this circuit, and the lack of direction from this court has produced substantial inconsistency for litigants. See BankAtlantic v. Coast to Coast Contractors, Inc., 947 F.Supp. 480, 488 & n. 6 (S.D.Fla.1996) (noting lack of consensus and lack of guidance from this circuit). 7 In addition, the jurisdictional issue in this case was addressed by the district court and was fully litigated by both parties on appeal. The factual record thus is sufficiently developed for us to decide the jurisdictional issue without further fact-finding. Although we recognize that here the jurisdictional issue presents difficult questions, we...

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