Pimental v. Philippines Decision of June 12, 2008

As predicted, the US Supreme Court reversed (7-2) the Ninth Circuit and held that Rule 19 of the Federal Rules of Civil Procedure requires dismissal of this action because certain "indispensable" parties (under the old wording of Rule 19; namely the Republic of the Philippines and the Presidential Commission on Goood Government) were not present in the case. Ultimately what the Court did was to side with the doctrine of sovereign immunity almost completely; it would be unseemly to adjudge the status of a foreign government's claim to assets in a US Court when that government was not even a party to the case--on sovereign immunity grounds. Thus, the case had to be dismissed because the action couldn't proceed without the Republic and the Commission. What will be the future status of the case and the issue, since the Philippine court ruling on ownership of the assets still hasn't ruled? Well, I will get to that in my final paragraphs below. First, however, let's go through the Court's argument regarding Rule 19 (formerly "necessary" and "indispensable" parties).

The Court's Legal Argument

The Court first noted that the language of Rule 19 had changed; instead of the confusing language about necessary and indispensable parties, the new rule just talks about "required" parties. Yet, the Court concluded, there really was no difference in substance between the old and new laws--just clarification of the language. Then, it talked about the application of the rule to the facts of this case (see here for my factual summary).

First, the Court spoke of the joinder of parties rule in general:

"Under Rule 19(a), nonjoinder even of a required person does not always result in dismissal. When joinder is not feasible, the question whether an action should proceed turns on nonexclusive considerations in Rule 19(b), which asks whether “in equity and good conscience, the action should proceed among the existing parties or should be dismissed.” The joinder issue can be complex, and the case-specific determinations involve multiple factors, some “substantive, some procedural, some compelling by themselves, and some subject to balancing against opposing interests,” Provident Tradesmens Bank & Trust Co. v. Patterson, 390 U.S. 102, 119, 88 S.Ct. 733, 19 L.Ed.2d 936."

One of the crucial factors in determining whether a party is required or not is the prejudice suffered to absent entities if they are not included. The Court held that the Ninth Circuit had not properly taken this prejudice into consideration.

"The first factor directs the court to consider, in determining whether the action may proceed, the prejudice to absent entities and present parties in the event judgment is rendered without joinder. Rule 19(b)(1). The Ninth Circuit gave insufficient weight to the sovereign status of the Republic and the Commission in considering whether they would be prejudiced if the case proceeded. Giving full effect to sovereign immunity promotes the comity and dignity interests that contributed to the development of the immunity doctrine. See, e.g., Verlinden B.V. v. Central Bank of Nigeria, 461 U.S. 480, 486, 103 S.Ct. 1962, 76 L.Ed.2d 81. These interests are concrete here. The entities' claims arise from historically and politically significant events for the Republic and its people, and the entities have a unique interest in resolving matters related to Arelma's assets. A foreign state has a comity interest in using its courts for a dispute if it has a right to do so. Its dignity is not enhanced if other nations bypass its courts without right or good cause. A more specific affront could result if property the Republic and the Commission claim is seized by a foreign court decree. This Court has not considered the precise question presented, but authorities involving the intersection of joinder and the United States' governmental immunity, see, e.g., Mine Safety Appliances Co. v. Forrestal, 326 U.S. 371, 373-375, 66 S.Ct. 219, 90 L.Ed. 140, instruct that where sovereign immunity is asserted, and the sovereign's claims are not frivolous, dismissal must be ordered where there is a potential for injury to the absent sovereign's interests. The claims of the Republic and the Commission were not frivolous, and the Ninth Circuit thus erred in ruling on their merits. The privilege of sovereign immunity from suit is much diminished if an important and consequential ruling affecting the sovereign's substantial interest is determined, or at least assumed, by a federal court in its absence and over its objection. The Pimentel class' interest in recovering its damages is not discounted, but important comity concerns are implicated by assertion of foreign sovereign immunity. The error is not that the courts below gave too much weight to the Pimentel class' interests, but that they did not accord proper weight to the compelling sovereign immunity claim.

As I said, the Court went for sovereign immunity all the way. Since these parties are required for the litigation, and since they opted out because of sovereign immunity, we have a problem. The Court resolved this question by ordering the District Court to dismiss the action.

Future Steps?

The Court of Appeals failed to give proper weight to the likely prejudice which the Republic and Commission would suffer if they were cut out from the litigation. But, the "balance of equities" might change in the future. Here is how the Court summarized both of those issues.

"The Court of Appeals' failure to give sufficient weight to the likely prejudice to the Republic and the Commission should the interpleader proceed in their absence would, in the usual course, warrant reversal and remand for further proceedings. In this case, however, that error and our further analysis under the additional provisions of Rule 19(b) lead us to conclude the action must be dismissed. This leaves the Pimentel class, which has waited for years now to be compensated for grievous wrongs, with no immediate way to recover on its judgment against Marcos. And it leaves Merrill Lynch, the stakeholder, without a judgment.

The balance of equities may change in due course. One relevant change may occur if it appears that the Sandiganbayan [i.e., the Philippine court] cannot or will not issue its ruling within a reasonable period of time. Other changes could result when and if there is a ruling. If the Sandiganbayan rules that the Republic and the Commission have no right to the assets, their claims in some later interpleader suit would be less substantial than they are now. If the ruling is that the Republic and the Commission own the assets, then they may seek to enforce a judgment in our courts; or consent to become parties in an interpleader suit, where their claims could be considered; or file in some other forum if they can obtain jurisdiction over the relevant persons. We do note that if Merrill Lynch, or other parties, elect to commence further litigation in light of changed circumstances, it would not be necessary to file the new action in the District Court where this action arose, provided venue and jurisdictional requirements are satisfied elsewhere. The present action, however, may not proceed.

Thus, the case isn't "over," but its present iteration is. We all must wait now for the Sandiganbayan to rule.

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