Republic of Iraq Ex Rel. Citizens of the Republic of Iraq v. ABB AG
768 F.3d 145
2d Cir.2014Background
- From 1997–2003 Iraq (under Saddam Hussein) participated in the U.N. Oil‑for‑Food Programme, which required U.N. approval of oil sales and purchases and use of an escrow account at BNP Paribas in New York for humanitarian proceeds.
- The Amended Complaint alleges the Hussein Regime orchestrated a scheme: underpriced oil sales, illicit surcharges, sham transportation/after‑sales fees, and overpriced/substandard goods; vendors, oil purchasers, and BNP allegedly assisted or concealed the scheme, diverting billions from the escrow account.
- Plaintiff (the Republic of Iraq, under its post‑2003 government) sued dozens of defendants under RICO, the FCPA, and state common law for losses to the Programme and the escrow account; several defendants made criminal or deferred‑prosecution admissions.
- District court dismissed RICO claims chiefly on in pari delicto and extraterritorial/proximate‑cause grounds, held no private FCPA cause of action, and declined supplemental jurisdiction over state‑law claims; the Republic appealed.
- The Second Circuit affirmed: RICO claims barred by in pari delicto because the Complaint attributes at least substantially equal responsibility to the Hussein Regime (imputed to the Republic); no private FCPA remedy; state‑law claims properly dismissed for lack of federal common law basis.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Applicability of in pari delicto to RICO claim | Republic: Hussein Regime’s misconduct was adverse to the state and not attributable to plaintiff, so in pari delicto shouldn't bar recovery | Defendants: Republic (through the Regime) instigated and substantially participated in the wrongdoing; imputation bars RICO relief | Held: In pari delicto applies — Regime’s governmental conduct is attributed to the Republic; plaintiff bears at least substantially equal responsibility, so RICO claims dismissed |
| Whether imputation can be defeated by “adverse interest” exception | Republic: Regime acted for personal/illegitimate ends; exception (agent acted entirely for self) should preclude attribution | Defendants: Allegations show some proceeds were treated as state receipts and used politically, so the adverse‑interest exception doesn't apply | Held: Exception inapplicable — allegations show regime benefited the state; attribution stands |
| Implied private right of action under the FCPA | Republic: Legislative history and policy support recognizing an implied private remedy | Defendants: FCPA provides public enforcement mechanisms; Congress did not create a private remedy | Held: No private right — courts should not imply a private remedy where statute’s text/structure and legislative history do not show intent to create one |
| Federal common law for nonstatutory claims | Republic: Federal common law should govern to speak with one voice in foreign‑relations matters | Defendants: Claims are traditional torts/contracts suited to state law; no uniquely federal interest | Held: State law governs; district court properly declined to exercise supplemental jurisdiction over the state‑law claims |
Key Cases Cited
- Perma Life Mufflers, Inc. v. Int'l Parts Corp., 392 U.S. 134 (U.S. 1968) (discusses limits on applying in pari delicto in antitrust context)
- Bateman Eichler, Hill Richards, Inc. v. Berner, 472 U.S. 299 (U.S. 1985) (sets two‑prong test for in pari delicto in securities context: substantial equal fault and policy interference)
- Pinter v. Dahl, 486 U.S. 622 (U.S. 1988) (clarifies first prong: plaintiff must be active, voluntary participant; stresses policy analysis)
- Sandoval (Alexander v. Sandoval), 532 U.S. 275 (U.S. 2001) (private rights of action must be created by Congress; text/structure controls)
- Banco Nacional de Cuba v. Sabbatino, 376 U.S. 398 (U.S. 1964) (act‑of‑state doctrine — courts generally will not question validity of foreign sovereign acts within its territory)
- Guaranty Trust Co. v. United States, 304 U.S. 126 (U.S. 1938) (state rights vest in the state despite changes in government)
- W.S. Kirkpatrick & Co. v. Environmental Tectonics Corp., Intl., 493 U.S. 400 (U.S. 1990) (act‑of‑state doctrine considerations and when it does not bar litigation)
- Official Comm. of Unsecured Creditors of PSA Inc. v. Edwards, 437 F.3d 1145 (11th Cir. 2006) (recognizes in pari delicto defense in RICO context)
- Rogers v. McDorman, 521 F.3d 381 (5th Cir. 2008) (recognizes in pari delicto defense to RICO claims)
- In re Bernard L. Madoff Inv. Sec. LLC, 721 F.3d 54 (2d Cir. 2013) (noting in pari delicto can be applied at pleading stage where outcome is plain on face of pleadings)