Stichting Ter Behartiging Van De v. Schreiber

• Citation: 145 F.Supp.2d 356
• Decision Date: 12 June 2001
• Docket Number: No. 99 CIV 11441 JSR.,99 CIV 11441 JSR.
• Court: U.S. District Court — Southern District of New York
• Parties: STICHTING TER BEHARTIGING VAN DE BELANGEN VAN OUDAAN-DEELHOUDERS IN HET KAPITAAL VAN SAYBOLT INTERNATIONAL B.V. (Foundation of the Former Shareholders of Saybolt International B.V.), Plaintiff, v. Philippe S.E. SCHREIBER and Walter, Conston, Alexander & Green P.C., Defendants.

Page 356

145 F.Supp.2d 356

STICHTING TER BEHARTIGING VAN DE BELANGEN VAN OUDAAN-DEELHOUDERS IN HET KAPITAAL VAN SAYBOLT INTERNATIONAL B.V. (Foundation of the Former Shareholders of Saybolt International B.V.), Plaintiff, v. Philippe S.E. SCHREIBER and Walter, Conston, Alexander & Green P.C., Defendants.

No. 99 CIV 11441 JSR.

United States District Court, S.D. New York.

June 12, 2001.

Norris Wolff, Kleinberg, Kaplan, Wolff & Cohen, P.C., New York City, for plaintiff.

John Siffert, Rebecca Hollander-Blumoff, Daniel Reynolds, Lankler Siffert & Wohl LLP, for Philippe Schreiber.

David Ellenhorn, Margaret A. Dale, Caroline S. Press, Solomon, Zauderer, Ellenhorn, Frischer & Sharp, New York City, for Walter, Conston, Alexander & Green P.C.

MEMORANDUM ORDER

RAKOFF, District Judge.

On defendants' instant motion for summary judgment, the pertinent facts, either undisputed or, where disputed, taken most favorably to the plaintiff, are as follows. Plaintiff, a Dutch entity, represents the former shareholders of Saybolt International B.V., a Dutch company that at all times here relevant was the parent of two American entities, Saybolt North America and Saybolt Inc. (collectively, "Saybolt"). In late 1995, officers of Saybolt, in order to obtain a lease concession in Panama, arranged through a foreign affiliate of Saybolt to pay a bribe to a Panamanian official, in violation of the Foreign Corrupt Practices Act ("FCPA"), 15 U.S.C. § 78dd-2. After the bribe was uncovered, a Grand Jury in the District of Massachusetts indicted both Saybolt companies, and separately a Grand Jury in the District of New Jersey indicted David Mead, chief executive officer of Saybolt Inc. and vice-president of Saybolt North America at the time of the Panamanian transaction, and Frerik Pluimers, president of Saybolt International B.V. and chairman of the board of Saybolt North America. The two Saybolt defendants pleaded guilty and Mead was convicted by a jury, but Pluimers remains a fugitive.

Prior to arranging the bribe, Saybolt received legal advice relating thereto from defendant Philippe Schreiber, a lawyer who was both Saybolt's legal counsel and a director of Saybolt North America, as well as of counsel to co-defendant law firm Walter, Conston, Alexander & Green. While Schreiber repeatedly advised Saybolt that payment of the Panamanian bribe would be illegal if made by an American company, he also, according to plaintiff, not only advised Saybolt that a bribe payment by a foreign affiliate might be legal but also failed to advise Saybolt that any involvement by Saybolt or its officers in arranging the affiliate's payment could result in criminal liability. Claiming that it was on the basis of this misleading advice that Saybolt then authorized the bribe to be paid, plaintiff then brought the instant action for legal malpractice against Schreiber and Walter, Conston, Alexander & Green.

Defendants seek summary judgment on the ground, inter alia, that whether or not Schreiber's advice was erroneous or misleading, it is clear that Saybolt did not rely on it. This is because, if Saybolt had in good faith relied on Schreiber's advice, Saybolt would have believed that its arranging the bribe through a foreign affiliate was permissible and thus Saybolt would have lacked the mens rea necessary for a criminal conviction of violating the FCPA; whereas it has already been conclusively established in both of the parallel criminal cases that Saybolt knew at the time it authorized the bribe that what it was doing was illegal and corrupt.

The Court entirely agrees with this argument. Indeed, the Court concludes that Saybolt's own guilty plea to criminally violating the FCPA in arranging the bribe is sufficient in itself to grant defendants' motion. To enter such a plea Saybolt had to affirm, as it did, that it undertook the misconduct in question with knowledge of the corruptness of its acts. See Plea Transcript at 17, 32, United States v. Saybolt Inc. (D.Mass. Dec. 3, 1998) (No. 98-10266), Schreiber Notice of Mot. Ex. 8. Since, if it had in fact relied on Schreiber's allegedly erroneous and misleading advice, Saybolt would not have believed at the time that its misconduct was unlawful or corrupt, it could never have made this admission at its allocution or, indeed, entered its guilty plea at all. Conversely, since Saybolt did in fact plead guilty and admit its criminal intent, it is bound by those admissions, and therefore cannot now contend either that it relied on Schreiber's alleged advice or that that advice, even if erroneous, in any way proximately caused whatever damages, if any, were incurred by Saybolt. See Tinelli v. Redl, 199 F.3d 603, 606 (2d Cir.1999).

While Saybolt's guilty plea is therefore a sufficient basis in itself to grant defendants' motion, an independent and equally sufficient basis is provided by the collateral estoppel effect of the criminal proceedings that resulted in the conviction of Saybolt's former chief executive officer, Mead, whose own criminal mens rea, necessarily found by the jury that convicted him, is attributable to Saybolt by virtue of respondeat superior, see New York v. Cedar Park Concrete Corp., No. 85 Civ. 1887, 1997 WL 306909, at *10 (S.D.N.Y. Mar. 21, 1997), aff'd in relevant part sub nom. New York v. Julius Nasso Concrete Corp., 202 F.3d 82 (2d Cir.2000).¹

Like Saybolt, Mead was convicted of violating the FCPA by arranging the bribe at issue in this case. See Indictment, United States v. Mead (D.N.J.1998) (Crim. No. 98-240-01), Schreiber Notice of Mot. Ex. 11. Not only was Mead's corrupt intent a necessary element of that conviction, but also the very claim on which plaintiff here relies — Schreiber's alleged failure to advise Saybolt and its officers that payment of the bribe would be illegal even if channeled through a foreign corporate affiliate if arranged by Saybolt's U.S.-based officers — was squarely put before, and rejected by, the jury that convicted Mead. Indeed, Mead's counsel, on summation, made this the cornerstone of his defense, repeatedly arguing that Mead lacked criminal intent because he relied on Schreiber's allegedly erroneous and/or inadequate advice. See ...