In a brief filed on Friday, the federal government urged the dismissal of a lawsuit filed to determine ownership of funds allegedly misappropriated by Ferdinand Marcos during his reign as Philippine president. The recommendation, submitted in support of a petition filed by the Philippines, urges the Court to review a Ninth Circuit decision that rejected the Philippine government’s claims to the funds despite a finding that the country had properly asserted sovereign immunity from the suit. The Solicitor General’s brief is available here, the original petition for certiorari can be found here, the consolidated brief in opposition here, and the petitioner’s reply brief here.

The case involves competing claims over a Merrill Lynch account Marcos created while in power that has since grown to more than $35 million. One group, a class of human rights victims previously awarded some $2 billion against Marcos’ estate, says the account contains the assets of a shell corporation Marcos created to hide his personal wealth. Another group seeking recovery claims that Marcos originally set up the account with proceeds from the legendary Yamashita Treasure stolen from Roger Roxas, a now-deceased Philippine locksmith. Meanwhile, the government of the Philippines argues that Philippine law allocates all funds illegitimately gained by public officials to the government.

In 2000, Merrill Lynch brought an interpleader action in federal district court in Hawaii to settle the competing claims. The Philippines was joined to the suit as a “necessary” party under Federal Rule of Civil Procedure 19(a), but, having asserted sovereign immunity, the government sought to dismiss the suit under Rule 19(b), which requires dismissal whenever a party “indispensable” to the litigation is otherwise unavailable. The district court rejected the Philippines’ motion and, after a bench trial, awarded all of the Merrill Lynch account to the human rights victims. Despite an earlier finding that the Philippines was entitled to sovereign immunity, the Ninth Circuit upheld the judgment on appeal. It found that while Rule 19(b)’s indispensability requirement might ordinarily require dismissal of a case against a foreign sovereign immune from suit, the Philippines as a practical matter had little likelihood of ever recovering the funds in the Merrill Lynch account.

In Friday’s filing, the Solicitor General recommended the Court grant the Philippines’ petition and hold that of the Roxas claimants pending its outcome. The government argues that the Ninth Circuit decision effectively deprived the Philippines of the benefit of sovereign immunity, and in the process raised significant foreign policy concerns for the United States. Citing decisions from the Second, Tenth and District of Columbia Circuits, the government contends that a party absent due to its sovereign status should almost always be considered “indispensable” to a suit under Rule 19(b), and thus entitled to dismissal in compulsory joinder claims.

As to the Philippines’ ability to recover the assets, the government argues that the Ninth Circuit prematurely concluded that U.S. courts would never enforce a potential judgment by a Philippine court ordering Merrill Lynch to return the money to the Philippine government. In closing, the government contends that by intruding into a sensitive matter of foreign relations and potentially making it more difficult for the U.S. government to successfully claim sovereign immunity in foreign courts in similar situations, the Ninth Circuit decision “threatens to undermine significant interests of the United States.”

Posted in Republic of the Philippines v. Pimentel, Uncategorized