American Bar Association
Media Alerts
Media Alerts - Second Circuit- Republic of Iraq v. ABB AG
Decrease font size
Increase font size
September 18, 2014
  Second Circuit- Republic of Iraq v. ABB AG
Headline: Second Circuit Affirms Dismissal of Republic of Iraq's Claims Against Corporations and Individuals for Conspiring with Saddam Hussein During His Regime to Profit from the Humanitarian Oil-for-Food Programme.

Area of Law: RICO, International Law; Civil Procedure

Issue(s) Presented: Whether the post-Hussein Republic of Iraq may recover damages resulting from defendants' alleged conspiracy with the former Hussein Regime to illegally profit from the UN Oil-for-Food Programme.

Brief Summary: The Republic of Iraq filed a complaint against dozens of corporations and two individuals claiming that, over the last several years when Saddam Hussein ruled Iraq (the "Hussein Regime"), these defendants conspired with Hussein and plundered the humanitarian "oil for food program," giving rise to claims under the Racketeer Influenced and Corrupt Organizations Act (RICO), the Foreign Corrupt Practices Act (FCPA), and common law. The United States District Court for the Southern District of New York dismissed the amended complaint, holding that the post-Hussein Republic of Iraq was in pari delicto with the Hussein Regime, and therefore could not recover under RICO, and that no private right of action exists under the FCPA. The district court declined to exercise supplemental jurisdiction on the common law claims. A divided panel affirmed. Judge Droney concurred in the FCPA holding, but dissented from the RICO holding.

The full text of the opinion may be found at:
http://www.ca2.uscourts.gov/de...bd1112c3f68/1/hilite/

Extended Summary: In response to Iraq's invasion of Kuwait in 1990, the United Nations Security Council imposed harsh economic sanctions against Iraq, calling on all states to embargo trade and financial transactions with Iraq. In 1991, the Security Council discovered immense suffering among the Iraqi people, and adopted a series of resolutions to allow Iraq's government led by Saddam Hussein (the "Hussein Regime") to sell oil in exchange for food and medicine. For several years, Hussein refused to meet the conditions set for the aid and the people of Iraq continued to suffer. In 1996, Hussein agreed to participate in the United Nation ("UN") Oil-for-Food Programme, which allowed the regime to sell oil to foreign purchasers and use the proceeds to purchase food and other humanitarian goods for the benefit of the Iraqi people.

Under the Programme, each purchase of Iraqi oil was required to disclose all the terms of the contract. The price of Iraqi oil was to be set each month by the UN. Hussein's Regime conspired with foreign allies purchasing the oil to provide market data reflecting artificially low oil rates, causing the UN to set the price of Iraqi oil below market value. The Regime's allies, five defendants characterized as "Oil Purchasing Defendants," then purchased Iraqi oil below market and immediately sold it at market for profit. In exchange, the allies paid surcharges to the Regime, rather than the Programme. Six of the defendants, banking entities, allegedly helped the Oil Purchasing Defendants hide transactions with the regime from the UN. The remaining "Vendor Defendants," were suppliers of humanitarian goods, who allegedly overcharged for their products, and delivered substandard products, then kicked-back part of the overage to Hussein's Regime.

In 2003, Hussein's Regime fell and the Oil-for-Food escrow account was dispersed to the post-Regime Republic of Iraq. The Republic discovered that billions of dollars had been siphoned from the humanitarian Oil-for-Food Programme to Hussein's Regime.

The Republic of Iraq filed a complaint against dozens of corporations and two individuals claiming that they had conspired with Hussein and plundered the humanitarian Oil-for-Food Programme, giving rise to claims under the Racketeer Influenced and Corrupt Organizations Act (RICO), the Foreign Corrupt Practices Act (FCPA), and common law. The United States District Court for the Southern District of New York dismissed the amended complaint, holding the Republic of Iraq was in pari delicto with the Hussein Regime on the RICO claim and that there was no private right of action under the FCPA. The court declined to exercise supplemental jurisdiction on the common law claims.

A divided panel affirmed. The Second Circuit held for the first time that in pari delicto is an available defense to a private RICO claim. The in pari delicto defense reflects the principle that a plaintiff who participated equally in a wrongdoing may not recover damages resulting from the wrongdoing. The parties did not dispute the Hussein Regime's wrongdoing or role in the corruption, and the court held that the legal position of a foreign state survives changes in government. The majority rejected the Republic's argument that the Hussein Regime was illegal, noting that Hussein's title was President and he acted as the government of Iraq and was recognized as such by the United States and UN. The majority found that Hussein's Regime was the government of Iraq and that government instigated and was the dominant party in the frauds and breaches that corrupted the Oil-for-Food Programme and, accordingly, held that the district court properly attributed that wrongdoing to the Republic.

Judge Droney concurred with majority holding that no private right of action exists under the FCPA, but dissented from the court's RICO holding. Judge Droney distinguished between the Hussein Regime and the post-Hussein Republic and asserted that the Republic should not be treated as complicit in the fraud against the humanitarian effort. He reasoned that to do so would "release defendants of liability for conduct that, if true, constituted a clear violation of United States law and subversion of United States policy, and [] deprive the ultimate victims of the defendants' conduct of any remedy."

The full text of the opinion may be found at
http://www.ca2.uscourts.gov/de...bd1112c3f68/1/hilite/

Panel (if known): Circuit Judges Kearse, Winter, and Droney

Argument Date: 02/18/2014

Argument Location: New York, NY

Date of Issued Opinion: 09/18/2014

Docket Number: No. 13-0618

Decided: Affirmed

Case Alert Author: Joan O'Connor Archer

Counsel: MARK MANEY, Houston, Texas (Roliff Purrington, Maney & González-Félix, Houston, Texas; Stanley D. Bernstein, Christian Siebott, Bernstein Liebhard, New York, New York, on the brief), for Plaintiff-Appellant.
BRANT W. BISHOP, Washington, D.C. (Thomas D. Yannucci, John R. Bolton, Robert B. Gilmore, Kirkland & Ellis, Washington, D.C., on the joint brief), for Defendants-Appellees Siemens S.A.A. of France, Siemens Sanayi ve Ticaret A.S. of Turkey, and OSRAM Middle East FZE.
ROBERT S. BENNETT, Washington, D.C. (Christopher T. Handman, Ellen S. Kennedy, Hogan Lovells, Washington, D.C.; Jennifer L. Spaziano, Skadden, Arps, Slate, Meagher & Flom, Washington, D.C., on the joint brief), for Defendants-Appellees BNP Paribas USA, BNP Paribas (Suisse) SA, BNP Paribas Hong Kong, BNP Paribas Paris, BNP Paribas UK Holdings Limited, and BNP Paribas London Branch.
AXINN, VELTROP & HARKRIDER (John D. Harkrider, New York, New York, Gail L. Gottehrer, Hartford, Connecticut, on the joint brief), for Defendant-Appellee Secalt S.A.
WILLIAMS & CONNOLLY (Robert A. Van Kirk, Katherine M. Turner, Washington, D.C., on the joint brief), for Defendants-Appellees Textron, Inc., Union Pump S.A.S., and David Brown
Transmissions of France, S.A.
PILLSBURY WINTHROP SHAW PITTMAN (John F. Pritchard, Edward Flanders, Ranah L. Esmaili, New York, New York, on 1 the joint brief), for Defendants-Appellees Atlas Copco Airpower N.V. and Atlas Copco CMT.
KIRKLAND & ELLIS (James P. Gillespie, Karen McCartan DeSantis, Washington, D.C., on the joint brief), for Defendants-Appellees ABB AG, ABB Automation, ABB Elektric Sanayi AS, ABB Industrie AC Machines, ABB Industrie Champagne,and ABB Near East Trading Ltd.
TROUTMAN SANDERS (Elliot Cohen, New York, New York, on the joint brief), for Defendants-Appellees AGCO Denmark A/S,AGCO S.A., and Valtra do Brazil.
LEADER & BERKON (Michael J. Tiffany, New York, New York; Christopher S. Riley, Barnes & Thornburg, Elkhart, Indiana, on the joint brief), for Defendant-Appellee ABB Solyvent-Ventec.
BAKER & McKENZIE (Darrell Prescott, New York, New York, on the joint brief), for Defendant-Appellee Air Liquide Engineering.
COVINGTON & BURLING (Nancy Kestenbaum, New York, New York, Mark H. Lynch, Washington, D.C., on the joint brief), for Defendants-Appellees Akzo Nobel N.V., N.V. Organon, Intervet International B.V., Astra Zeneca AB., Cilag AG International, Janssen Pharmaceutical, and Merial.
ALSTON & BIRD (Karl Geercken, New York, New York, on the joint brief), for Defendants-Appellees B. Braun Medical France, B. Braun Melsungen A.G., B. Braun Medical Industries SDN BHD (Malaysia), Aesculap AG and KG, Aesculap Motric S.A., and Aesculap Surgical Instruments SDN.
CRAVATH, SWAINE & MOORE (Robert H. Baron, Timothy G. Cameron, New York, New York, on the joint brief), for Defendant-Appellee AWB, Ltd.
PARK & JENSEN (Tai H. Park, New York, New York, on the joint brief), for Defendant-Appellee Boston Scientific S.A.
PEPPER HAMILTON (Robert L. Hickok, Barak A. Bassman, Philadelphia, Pennsylvania, Kenneth J. King, New York, New York, on the joint brief), for Defendants-Appellees
GlaxoSmithKline Egypt SAE, Glaxo Wellcome Export Ltd.,Glaxo Wellcome SA (South Africa) (PRY) Ltd., and SmithKline Beecham International.
SPAGNOLETTI & CO. (Francis I. Spagnoletti, David S. Toy, Houston, Texas, on the joint brief), for Defendant-Appellee David B. Chalmers, Jr.
SHEARMAN & STERLING (Philip E. Urofsky, Washington, D.C., Danforth Newcomb, H. Miriam Farber, New York, New York, on the joint brief), for Defendants-Appellees Buhler Ltd.,
Daimler-Chrysler AG, ABG Allgemeine Baumaschinen-GesellschaftmbH, Sulzer Pumpen Deutschland GmbH, Sulzer Turbo Ltd., Renault Trucks SAS, Renault V.I., and Volvo
Construction Equipment AB.
JONES DAY (Meir Feder, Thomas E. Lynch, New York, New York, on the joint brief), for Defendant-Appellee Chevron Corp.
GIBBONS (Thomas R. Valen, Newark, New Jersey, on the joint brief), for Defendants-Appellees Daewoo International Corp. and Kia Motors.
FULBRIGHT & JAWORSKI (Mark A. Robertson, New York, New York, on the joint brief), for Defendant-Appellee El Paso Corp.
CADWALADER, WICKERSHAM & TAFT (Jason Jurgens, Nathan M. Bull, New York, New York, on the joint brief), for Defendant-Appellee Dow AgroSciences.
BOWIE & JENSEN (R. Michael Smith, Towson, Maryland, on the joint brief), for Defendant-Appellee Evapco Europe S.r.l.
KELLEY DRYE & WARREN (Thomas B. Kinzler, David Zalman, Melissa E. Byroade, New York, New York, on the joint brief), for Defendants-Appellees Flowserve Corp., Flowserve Pompes, and Flowserve B.V.
ROTHWELL, FIGG, ERNST & MANBECK (Robert P. Parker, Washington, D.C., on the joint brief), for Defendant-Appellee Ingersoll-Rand Benelux, N.V.
SIDLEY AUSTIN (Richard D. Klingler, Steven J. Horowitz, Washington, D.C., Dorothy J. Spenner, New York, New York, on the joint brief), for Defendants-Appellees Eli-Lilly Export
S.A., Ingersoll-Rand Italiana, SpA., Thermo King Ireland Limited, Ingersoll-Rand World Trade Ltd., and Novo Nordisk.
WILLCOX & SAVAGE (Brett A. Spain, Norfolk, Virginia, on the joint brief), for Defendants-Appellees Liebherr Export AG and Libher France, SA.
NIXON PEABODY (Michael S. Cohen, Jericho, New York, on the joint brief), for Defendant-Appellee Serono Pharma International.
EPSTEIN BECKER & GREEN (Peter L. Altieri, David J. Clark, New York, New York, on the joint brief), for Defendant-Appellee Railtech International.
HARKINS CUNNINGHAM (John G. Harkins, Jr., Philadelphia, Pennsylvania, on the joint brief), for Defendant-Appellee Rohm and Haas France, S.A.
ALSTON & BIRD (John P. Doherty, New York, New York, on the
joint brief), for Defendant-Appellee Pauwels.
DAVIS POLK & WARDWELL (Brian S. Weinstein, New York, New York, Jason McCullough, Washington, D.C., on the joint brief), for Defendants-Appellees F. Hoffman La Roche and
Roche Diagnostics GmbH.
BAKER & HOSTETLER (Gregory L. Baker, Washington, D.C., on the joint brief), for Defendant-Appellee Solar Turbines Europe.
CARTER LEDYARD & MILBURN (Judith A. Lockhart, New York, New York, on the joint brief), for Defendant-Appellee St. Jude Medical Export GmbH.
DRINKER BIDDLE & REATH (Clay J. Pierce, New York, New York, on the joint brief), for Defendant-Appellee Renault Agriculture & Sonalika International.
CANALES & SIMONSON (J.A. Canales, Corpus Christi, Texas, on the joint brief), for Defendant-Appellee Oscar S. Wyatt, Jr.
BAKER & McKENZIE (Larence Walker Newman, New York, New York, on the joint brief), for Defendant-Appellee Sulzer Burckhardt Engineering Works Ltd.
JONES DAY (Michael H. Ginsberg, Pittsburgh, Pennsylvania, on the joint brief), for Defendant-Appellee The Weir Group.
SULLIVAN & CROMWELL (Penny Shane, Andrew P. Giering, New York, New York, on the joint brief), for Defendant-Appellee Vitol, S.A.
K&L GATES (Walter P. Loughlin, New York, New York; Andrew Siegel, Christopher A. Payne, Sandler Siegel, Dallas, Texas, on the joint brief), for Defendant-Appellee Woodhouse
International.
REED SMITH (Casey D. Laffey, New York, New York, on the joint brief), for Defendant-Appellee York Air Conditioning and Refrigeration FZE.

Author of Opinion: Judge Kearse (for the majority); Judge Droney (concurs in part, dissents in part)

Circuit: 2nd Circuit

Case Alert Circuit Supervisor: Elyse Diamond Moskowitz

Edited: 09/19/2014 at 06:27 AM by Elyse Diamond

    Posted By: Elyse Diamond @ 09/18/2014 08:52 PM     2nd Circuit  

FuseTalk Enterprise Edition - © 1999-2018 FuseTalk Inc. All rights reserved.

Discussion Board Usage Agreement

Back to Top