Opinion Recap: Republic of the Philippines v. Pimentel

Recent Stanford graduate Anna Neill wrote the following recap of Thursday’s decision in Republic of Philippines v. Pimentel.

In Thursday’s opinion from Justice Kennedy in Republic of Philippines v. Pimentel, the Court held that Federal Rule of Civil Procedure 19 required the dismissal of Merrill Lynch’s interpleader action in the absence of the Republic of the Philippines.The case arose out of a class action by human rights victims against the former president of the Philippines, Ferdinand Marcos. The class obtained a nearly $2 billion judgment in federal district court, and later sought to attach the assets of Arelma, S.A., a company that had been incorporated by Marcos. The Republic of the Philippines also claimed entitlement to the same assets under a Philippine law providing that property derived from misuse of public office is forfeited to the Republic from the moment of misappropriation; the Republic’s entitlement to the Arelma assets is currently the subject of litigation in the Philippine court system. Merrill Lynch, the broker which currently holds the Arelma assets, brought an interpleader action to determine the ownership of these assets.

The Republic asserted its sovereign immunity and also sought to dismiss the action pursuant to Rule 19(b), arguing that the action could not proceed without it. The Republic was subsequently dismissed from the suit, but the Rule 19(b) motion was denied, with the district court ruling that the action could proceed against the remaining defendants (which included Arelma, S.A. and the Philippine National Bank, which holds some of the disputed assets in escrow). Ultimately, the district court awarded the assets in question to the Pimentel class, and the Ninth Circuit affirmed, holding that although the Republic was a required party under Rule 19(a), dismissal under Rule 19(b) was not warranted because the Republic had so little likelihood of success on the merits that the action could proceed without it.

The first issue the Court addressed was whether the Republic, having been dismissed from the action by virtue of its sovereign immunity, had the right to seek review in the Supreme Court of the Ninth Circuit’s decision that Rule 19(b) did not require dismissal. The Court determined that it need not rule on this point, because the remaining defendants – Arelma and the Philippine National Bank – had also moved to dismiss under Rule 19(b) and were petitioners in this action. Further, these defendants’ failure to petition for certiorari on the merits of the underlying decision did not rob them of standing to seek review of the Rule 19(b) claim.

Turning to the Rule 19(b) considerations, the Court found that the Ninth Circuit erred in not giving sufficient weight to the Republic’s assertion of sovereign immunity. In considering Rule 19(b)’s first factor – namely, if the Republic would be prejudiced if the case were to proceed it its absence – the Ninth Circuit incorrectly considered the merits of the Republic’s claims to the assets. In so doing, the Ninth Circuit denied the Republic the comity interest in using its own courts to decide a dispute. Finding that the claims of the Republic were not frivolous, the Court determined that the Ninth Circuit erred in proceeding on the assumption that those claims would be decided against the Republic after it had asserted its sovereign immunity.

In considering the remaining Rule 19(b) factors, the Court determined that no alternative remedies or forms of relief appeared to be available that would lessen or avoid the prejudice to the Republic, and that any judgment rendered without the Republic would not be adequate because the Republic would not be bound by any judgment to which it was not a party. Additionally, although the Ninth Circuit made much of the class members’ lack of an alternative forum, the plaintiff in the interpleader action was Merrill Lynch, not the class. Although the tort victims’ interests are not irrelevant in Rule 19(b)’s equitable balance, Merrill Lynch’s interests would be served by a dismissal, since it could rely on such a ruling as an effective defense against piecemeal litigation.

Justices Stevens and Souter both wrote opinions concurring in part and dissenting in part. While agreeing that the Ninth Circuit erred in affirming a judgment that the assets belonged to the class action plaintiffs, both Justices would prefer to see the judgment vacated and the case remanded with directions to stay the case pending a decision from the Philippine court or to order the case reassigned to a new district judge whose impartiality was less questionable, in which case there were indications that the Republic would not assert its sovereign immunity and would instead consent to suit on this issue.