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REPUBLIC OF THE PHILIPPINES v. MARCOS

July 7, 1986

THE REPUBLIC OF THE PHILIPPINES, Plaintiff,
v.
FERDINAND MARCOS and IMELDA MARCOS, et al., Defendants



The opinion of the court was delivered by: LEVAL

PIERRE N. LEVAL, U.S.D.J.

OPINION AND ORDER

I

 Defendants move to stay all further discovery pending the decision of the Court of Appeals on defendants' appeal from this court's grant of a preliminary injunction.

 The reasons advanced for the relief are: that the decision of the Court of Appeals could dismiss the action, alternatively its decision might alter the scope and nature of discovery proceedings, and that, in any event, plaintiff has no need for discovery while protected hy the existing preliminary injunction.

 As to the likelihood of dismissal of the action by the Court of Appeals, defendants cite Shaffer v. Heitner, 433 U.S. 186, 53 L. Ed. 2d 683, 97 S. Ct. 2569 (1977) for its requirement of minimum jurisdictional contacts, Islamic Republic of Iran v. Pahlavi, 94 A.D.2d 374, 464 N.Y.S.2d 487 (1st Dep't 1983), aff'd, 62 N.Y.2d 474, 478 N.Y.S.2d 597, 467 N.E.2d 245 (1984) for dismissal based on forum non conveniens ; and Ope Shipping Ltd. v. Allstate Insurance Co., 687 F.2d 639 (2d Cir. 1982 ) for the inappropriateness of piercing the corporate veil beyond the property holding corporations.

 Although these contentions would no doubt require careful attention if advanced in a proper manner on an adequate record, that has not been done. First, as to the principles of minimum jurisdictional contacts under Shaffer v. Heitner, such arguments belong to Ferdinand and Imelda Marcos, who are in default -- not to these defendants. No motion to dismiss has been made based on the Shaffer principles. (I note further that documents discovered by plaintiff in the Philippines, some of which are mentioned in this court's opinion granting preliminary injunction, show evidence of New York activity on the part of the Marcoses, conducted personally and through agents, which after inquiry, might well satisfy Shaffer requirements.)

 As to forum non conveniens, although these defendants have made passing references to it, there has been no motion to dismiss on that basis. Such a motion generally turns on many issues of fact none of which have been explored or even considered. Furthermore, as noted in the court's opinion of June 26, 1986, this lawsuit, unlike Pahlevi, does not set out to explore and adjudicate allegation of wrongful conduct by President Marcos during his presidency. It seeks only the enforcement of Philippine decrees -- an existing Philippine decree freezing various assets and asking foreign governments to cooperate in entering such freeze, and a future decree of confiscation. The factors that supported the finding of forum non conveniens in Pahlevi are largely absent here.

 As to the appropriateness of piercing corporate veils, such questions depend on the facts and are obviously premature prior to discovery. And once again, no motion to dismiss has been made based on that theory.

 Defendants have also argued that any acquisition of property by Marcos during his presidency is protected from U.S. court adjudication by the principles of Banco De Espana v. Federal Reserve Bank, 114, F.2d 438 (2nd Cir. 1940) and that any Philippine decree of confiscation will be unenforceable in U.S. courts under authority of Republic of Iraq v. First National City Bank, 353 F.2d 47 (2d Cir. 1965), cert. denied, 382 U.S. 1027, 15 L. Ed. 2d 540, 86 S. Ct. 648 (1966). No motion to dismiss has been made on either ground. (Indeed, defendants have never moved to dismiss the action on any theory in the district court.) It is evident, furthermore, that if motions were made on either ground at this stage of the proceeding, they could not be sustained; the issue would be raised prematurely.

 Banco de Espana ruled that a particular Spanish governmental decree affecting the ownership of property would be upheld against challenge in the U.S. courts, based on the act of state doctrine. That case simply does not support the proposition that any and all acquisitions of property by a foreign president during his tenure, no matter how accomplished, must be accorded immunity in U.S. courts under the act of state doctrine. What is more, the Banco de Espana precedent is barely applicable to the defendants' proposition. The U.S. court is not being asked in this case, as it was there, to rule on the legitimacy of acquisition of property in the foreign country. It is being asked, as noted above, to give effect to Philippine governmental decrees affecting the Marcos's assets. If anything, the Banco de Espana precedent instructing U.S. courts to honor foreign governmental decrees altering ownership of property of foreign subjects, is more helpful to the plaintiff than to the defendants on the present state of the record.

 As to Iraq, it is premature for defendants to contend it commands dismissal of the action. In Iraq, the Court of Appeals ruled that a particular foreign decree of confiscation was not entitled to recognition affecting property in the United States because it contravened "the law and policy of the United States." Id. at 52. Whether any future Philippine governmental action will contravene or comport with the "law and policy" of the United States cannot be Judged at this time. As to the existing freeze decree promulgated by the Philippine government, no reason has been advanced why such a provisional stay preserving the status quo to allow time for investigation and considered action contravenes our law and policy.

 Because no motion has been made in the district court seeking dismissal on any of the asserted grounds, no district court ruling has ever been made which is now on appeal. In addition, it appears (based on such sketchy discussion as there has been of these contentions in the district court) that further information and discovery would be necessary to an adjudication of dismissal on any of those grounds. Defendants' contention that the action is likely to be terminated by the decision of the Court of Appeals, therefore, seems unlikely and gives insufficient reason for staying discovery.

 Nor would a dissolution of the preliminary injunction by the Court of Appeals necessarily be a reason to terminate discovery (depending, of course, on the grounds). If such dissolution were based on a finding of insufficient showing by plaintiff, plaintiff would need further discovery to attempt to remedy the insufficiency. It is true that a dissolution of the preliminary injunction might, as a practical matter, moot the action, by permitting the defendants to transfer ownership of the buildings beyond the court's jurisdiction, or to draw out the equity in the buildings by taking ...


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