Kirkpatrick Co Inc v. Environmental Tectonics Corporation, International

• Decision Date: 17 January 1990
• Docket Number: No. 87-2066,87-2066
• Parties: W.S. KIRKPATRICK & CO., INC., et al., Petitioners v. ENVIRONMENTAL TECTONICS CORPORATION, INTERNATIONAL
• Court: U.S. Supreme Court

493 U.S. 400

110 S.Ct. 701

107 L.Ed.2d 816

W.S. KIRKPATRICK & CO., INC., et al., Petitioners

v ENVIRONMENTAL TECTONICS CORPORATION, INTERNATIONAL.

No. 87-2066.

Argued Nov. 27, 1989.

Decided Jan. 17, 1990.

Syllabus

According to respondent's complaint, petitioners obtained a construction contract from the Nigerian Government by bribing Nigerian officials. Nigerian law prohibits both the payment and the receipt of such bribes. Respondent, an unsuccessful bidder for the contract, filed an action for damages against petitioners and others under various federal and state statutes. The District Court ruled that the suit was barred by the act of state doctrine, which in its view precluded judicial inquiry into the motivation of a sovereign act that would result in embarrassment to the sovereign, or constitute interference with the conduct of United States foreign policy. The court granted summary judgment for petitioners because resolution of the case in favor of respondent would require imputing to foreign officials an unlawful motivation (the obtaining of bribes), and accordingly might embarrass the Executive Branch in its conduct of foreign relations. The Court of Appeals reversed and remanded the case for trial, holding that on the facts of this case the doctrine did not apply because no embarrassment of the Executive in its conduct of foreign affairs was evident.

Held: The act of state doctrine does not apply because nothing in the present suit requires a court to declare invalid the official act of a foreign sovereign. See, e.g., Ricaud v. American Metal Co., 246 U.S. 304, 38 S.Ct. 312, 62 L.Ed. 733. It does not suffice that the facts necessary to establish respondent's claim will also establish that the Nigerian contract was unlawful, since the contract's legality is simply not a question that the District Court must decide. American Banana Co. v. United Fruit Co., 213 U.S. 347, 357-358, 29 S.Ct. 511, 513, 53 L.Ed. 826 (Holmes, J.), distinguished. Nor does it suffice that judgment in favor of respondents will require the court to impute to foreign officials improper motivation in the performance of official acts. To say that international comity, respect for the sovereignty of foreign nations, and the avoidance of embarrassment to the Executive Branch in its conduct of foreign relations are the policies underlying the act of state doctrine is not to say that the doctrine is applicable whenever those policies are implicated. The doctrine is not a rule of abstention which prohibits courts from deciding properly presented cases or controversies simply because the Executive's conduct of foreign relations may be adversely affected; it is a rule of decision which requires that, in the process of deciding, the acts of foreign sovereigns taken within their own jurisdictions be deemed valid. Pp. 404-410.

847 F.2d 1052 (CA3 1988), affirmed.

SCALIA, J., delivered the opinion for a unanimous Court.

Edward Brodsky, New York City, for petitioners.

Thomas B. Rutter, for respondent.

Thomas W. Merrill for the U.S., as amicus curiae, in support of the respondent, by special leave of Court.

Justice SCALIA delivered the opinion of the Court.

In this case we must decide whether the act of state doctrine bars a court in the United States from entertaining a cause of action that does not rest upon the asserted invalidity of an official act of a foreign sovereign, but that does require imputing to foreign officials an unlawful motivation (the obtaining of bribes) in the performance of such an official act.

I

The facts as alleged in respondent's complaint are as follows: In 1981, Harry Carpenter, who was then chairman of the board and chief executive officer of petitioner W.S. Kirkpatrick & Co., Inc. (Kirkpatrick), learned that the Republic of Nigeria was interested in contracting for the construction and equipment of an aeromedical center at Kaduna Air Force Base in Nigeria. He made arrangements with Benson "Tunde" Akindele, a Nigerian citizen, whereby Akindele would endeavor to secure the contract for Kirkpatrick. It was agreed that, in the event the contract was awarded to Kirkpatrick, Kirkpatrick would pay to two Panamanian entities controlled by Akindele a "commission" equal to 20% of the contract price, which would in turn be given as a bribe to officials of the Nigerian Government. In accordance with this plan, the contract was awarded to petitioner W.S. Kirkpatrick & Co., International (Kirkpatrick International), a wholly owned subsidiary of Kirkpatrick; Kirkpatrick paid the promised "commission" to the appointed Panamanian entities; and those funds were disbursed as bribes. All parties agree that Nigerian law prohibits both the payment and the receipt of bribes in connection with the award of a government contract.

Respondent Environmental Tectonics Corporation, International, an unsuccessful bidder for the Kaduna contract, learned of the 20% "commission" and brought the matter to the attention of the Nigerian Air Force and the United States Embassy in Lagos. Following an investigation by the Federal Bureau of Investigation, the United States Attorney for the District of New Jersey brought charges against both Kirkpatrick and Carpenter for violations of the Foreign Corrupt Practices Act of 1977, 91 Stat. 1495, as amended, 15 U.S.C. § 78dd-1 et seq., and both pleaded guilty.

Respondent then brought this civil action in the United States District Court for the District of New Jersey against Carpenter, Akindele, petitioners, and others, seeking damages under the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. § 1961 et seq., the Robinson-Patman Act, 49 Stat. 1526, 15 U.S.C. § 13 et seq., and the New Jersey Anti-Racketeering Act, N.J.Stat.Ann. § 2C:41-2 et seq. (West 1982). The defendants moved to dismiss the complaint under Rule 12(b)(6) of the Federal Rules of Civil Procedure on the ground that the action was barred by the act of state doctrine.

The District Court, having requested and received a letter expressing the views of the legal adviser to the United States Department of State as to the applicability of the act of state doctrine, treated the motion as one for summary judgment under Rule 56 of the Federal Rules of Civil Procedure and granted the motion. 659 F.Supp. 1381 (1987). The District Court concluded that the act of state doctrine applies "if the inquiry presented for judicial determination includes the motivation of a sovereign act which would result in embarrassment to the sovereign or constitute interference in the conduct of foreign policy of the United States." Id., at 1392-1393 (citing Clayco Petroleum Corp. v. Occidental Petroleum Corp., 712 F.2d 404, 407 (CA9 1983)). Applying that principle to the facts at hand, the court held that respondent's suit had to be dismissed because in order to prevail respondent would have to show that "the defendants or certain of them intended to wrongfully influence the decision to award the Nigerian Contract by payment of a bribe, that the Government of Nigeria, its officials or other representatives knew of the offered consideration for awarding the Nigerian Contract to Kirkpatrick, that the bribe was actually received or anticipated and that 'but for' the payment or anticipation of the payment of the bribe, ETC would have been awarded the Nigerian Contract." 659 F.Supp., at 1393 (footnote omitted).

The Court of Appeals for the Third Circuit reversed. 847 F.2d 1052 (1988). Although agreeing with the District Court that "the award of a military procurement contract can be, in certain circumstances, a sufficiently formal expression of a government's public interests to trigger application" of the act of state doctrine, id., at 1058, it found application of the doctrine unwarranted on the facts of this case. The Court of Appeals found particularly persuasive the letter to the District Court from the legal adviser to the Department of State, which had stated that in the opinion of the Department judicial inquiry into the purpose behind the act of a for- eign sovereign would not produce the "unique embarrassment, and the particular interference with the conduct of foreign affairs, that may result from the judicial determination that a foreign sovereign's acts are invalid." Id., at 1061. The Court of Appeals acknowledged that "the Department's legal conclusions as to the reach of the act of state doctrine are not controlling on the courts," but concluded that "the Department's factual assessment of whether fulfillment of its responsibilities will be prejudiced by the course of civil litigation is entitled to substantial respect." Id., at 1062. In light of the Department's view that the interests of the Executive Branch would not be harmed by prosecution of the action, the Court of Appeals held that Kirkpatrick had not met its burden of showing that the case should not go forward; accordingly, it reversed the judgment of the District Court and remanded the case for trial. Id., at 1067. We granted certiorari, 492 U.S. 905, 109 S.Ct. 3213, 106 L.Ed.2d 563 (1989).

II

This Court's description of the jurisprudential foundation for the act of state doctrine has undergone some evolution over the years. We once viewed the doctrine as an expression of international law, resting upon "the highest considerations of international comity and expediency," Oetjen v. Central Leather Co., 246 U.S. 297, 303-304, 38 S.Ct. 309, 311, 62 L.Ed. 726 (1918). We have more recently described it, however, as a consequence of domestic separation of powers, reflecting "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, Banco Nacional de Cuba v. Sabbatino, 376 U.S. 398, 423, 84 S.Ct. 923, 937, 11 L.Ed.2d 804 (1964). Some Justices have suggested possible exceptions to application of the doctrine, where one or both of the foregoing policies would seemingly not...