breach of contract, fraud, negligence, civil conspiracy, RICO violations, antitrust violations, and various pendent state claims, all of which have been before Geneva arbitrators for several years, as well as certain minor claims against Burns & Roe that have been stayed. Only two counts were asserted on behalf of the Philippines, tortious interference and conspiracy to interfere with the fiduciary duties of President Marcos. It is these two counts that are now on trial in this court.
The Republic wishes to present to the jury a claim under Philippine law for punitive damages. Defendants urge that, in a federal district court sitting in diversity jurisdiction in New Jersey, no punitive damages are available.
A. Choice of Law
The threshold question is whether to apply the Philippine laws of punitive sanctions or the law of another jurisdiction. As a practical matter, this question has already been answered. The parties themselves have agreed that Philippine substantive law must apply, and I found in an earlier opinion that all of the significant events and circumstances of this case tie it to the Philippines. 774 F. Supp. at 1449-1451.
The next question is which law to use in evaluating whether to present the Republic's punitive claims to the jury. It is well-settled that a federal court sitting in diversity jurisdiction applies the choice-of-law rules of the state in which the court sits. Klaxon Co. v. Stentor Electric Mfg. Co., 313 U.S. 487, 496, 85 L. Ed. 1477, 61 S. Ct. 1020 (1941). This rule extends not just to traditional choice of law questions, but also to cases like the present, in which a court must decide whether to enforce foreign punitive laws. Transcontainer Services (Basel) A.G. v. Security Forwarders, Inc., 752 F.2d 483 (9th Cir. 1985) (court should apply local choice-of-law rules in action where private party sought exemplary damages under English law); Smyth Sales, Inc. v. Petroleum Heat & Power Co., 128 F.2d 697, 702 (3d Cir. 1942) (court should apply local choice-of-law rules in action where private parties sought exemplary damages under law of another state). Accordingly, New Jersey law will govern the question of whether the Republic can recover punitive damages under Philippine law in a New Jersey federal court.
B. Enforcement of a Judgment versus Trial of a Claim
Much of the pertinent New Jersey case-law involves actions in which a plaintiff has sought to enforce laws or judgments of another state. There are two potential distinctions between this case-law and the present case: first, the present case involves the law of a foreign country rather than that of another state; and second, the present case involves the trial of a claim rather than the enforcement of a judgment.
The law of another state carries more authority than that of another country because the laws of other states are protected, at least in part, by the Full Faith and Credit Clause of Article IV, Section I of the U.S. Constitution. Phillips Petroleum Co. v. Shutts, 472 U.S. 797, 86 L. Ed. 2d 628, 105 S. Ct. 2965 (1985); Allstate Insurance Co. v. Hague, 449 U.S. 302, 66 L. Ed. 2d 521, 101 S. Ct. 633 (1981); Milwaukee County v. M.E. White Co., 296 U.S. 268, 275, 80 L. Ed. 220, 56 S. Ct. 229 (1935); Home Ins. Co. v. Dick, 281 U.S. 397, 74 L. Ed. 926, 50 S. Ct. 338 (1930). In addition, as discussed below, concerns of comity and policy may weigh more heavily in favor of enforcing the laws of other states than those of other countries.
Judgments also carry special authority. Judgments of other states are particularly authoritative, because these judgments wield the full power of the Full Faith and Credit Clause. By comparison, acts of state legislatures depend for their enforcement on a combination of state policy, comity, the Full Faith and Credit Clause, and the Due Process Clause of the Fourteenth Amendment. Phillips Petroleum Co. v. Shutts, 472 U.S. 797, 86 L. Ed. 2d 628, 105 S. Ct. 2965 ; Allstate Insurance Co. v. Hague, 449 U.S. 302, 66 L. Ed. 2d 521, 101 S. Ct. 633 ; Milwaukee County v. M.E. White Co., 296 U.S. at 275.
In New Jersey, judgments may carry special authority even when the judgments are those of other countries. For example, the New Jersey Supreme Court has stated that "we recognize that the reduction of the penalty to a civil judgment is a significant change in its status. That metamorphosis diminishes the penal nature of the claim and enhances the enforceability of the judgment under the Full Faith and Credit Clause." Philadelphia v. Austin, 86 N.J. 55, 61, 429 A.2d 568 (1981) (emphasis added). Thus, a New Jersey court might enforce a penal judgment from a foreign country even if the court would decline to assess the penalty at trial. Id.; Connolly v. Bell, 286 A.D. 220, 141 N.Y.S.2d 753 (App. Div. 1955), modified, 309 N.Y. 581, 132 N.E.2d 852 (1956).
Neither of these factors can enhance the authority of the punitive sanctions sought by the Republic here The sanctions do not arise under the law of another state, nor have they been reduced to judgment. Accordingly, the Republic's claims must stand on their own, without the support of the Full Faith and Credit Clause and without the authority of a judgment that masks their penal nature.
C. The Penal Nature of the Philippine Law Given that the claims at trial are to be tried under Philippine law, the next question is whether a New Jersey court would recognize the Republic's claims for punitive damages. New Jersey's Supreme Court, like other courts to consider the issue, has adopted Chief Justice John Marshall's observation in The Antelope, 23 U.S. 66, 123, 6 L. Ed. 268 (1825), that "the Courts of no country execute the penal laws of another."
See Philadelphia v. Austin, 86 N.J. at 58.
The New Jersey Supreme court has circumscribed chief Justice Marshall's succinct but sweeping observation to conform with a number of constitutional and local considerations, including the Full Faith and credit clause, due process, public policy, and comity. In other words, even though a New Jersey court need not enforce the penal laws of another sovereign, the court must nonetheless must give full faith and credit to the judgments of another state, recognize foreign laws in accordance with due process, deny recognition to foreign laws when they offend public policy, and give comity to the laws of another country. As a consequence, New Jersey and other states' courts have read The Antelope quite narrowly. See Peter B. Kutner, Judicial Identification of "Penal Laws" in the Conflict of Laws, 31 OKLA. L. REV. 590 (1978).
The present case, involving the law of a foreign country, is governed by comity rather than by the Full Faith and credit clause. However, it is useful to examine New Jersey's cases under the Full Faith and credit clause because these reveal New Jersey's understanding of the meaning of the word "penal." In addition, comity and Full Faith and credit analysis may often give the same result. Philadelphia v. Austin, 86 N.J. 55, 429 A.2d 568.
As a general matter, in determining whether to enforce a punitive law, New Jersey courts always look to the substance of the foreign law rather than to its form. See, e.g., Philadelphia v. Austin, 86 N.J. 55, 429 A.2d 568 ; New York v. Sacco, 242 N.J. Super. 699, 577 A.2d 1333 (Super. Ct. Law Div. 1990). "The test is not by what name the statute is called by the legislature or the courts of the state in which it was passed, but whether it appears, to the tribunal which is called upon to enforce it, to be, in its essential character and effect, a punishment of an offense against the public, or a grant of a civil right to a private person." Huntington v. Attrill, 146 U.S. 657, 682, 36 L. Ed. 1123, 13 S. Ct. 224 (1892).
New Jersey courts have often avoided the strictures of The Antelope by finding non-penal purposes in laws that appear to impose penalties. For example, in New York v. Coe Mfg. Co., 112 N.J.L. 536, 172 A. 198 (N.J.), cert. denied, 293 U.S. 576, 79 L. Ed. 674, 55 S. Ct. 89 (1934), New York asked New Jersey to enforce a judgment against a corporation for unpaid franchise taxes and fines. The New Jersey Supreme Court found that the taxes were not penal because they were simply a fee for the privilege of doing business in New York. The fines were more problematic, but the Court ultimately concluded that the defendant's agreement to pay franchise taxes resembled a contract, and the fines resembled liquidated damages. The court held that laws at issue were not penal laws which, "strictly and properly, are those imposing punishment for an offense committed against the State." 112 N.J.L. at 538 . As authority for its holding, the court relied primarily on Huntington v. Attrill and The Antelope.
In Pennhurst State School v. Estate of Goodhartz, 42 N.J. 266, 200 A.2d 112 (1964), the Supreme court again refused to find that a sister-state's law was penal. In this case, Pennsylvania brought an original action to compel the defendants to pay the fees of the relatives who were receiving services at a state facility. The Supreme court held that the purpose of the Pennsylvania statute at issue was to enforce familial obligations, not to impose penalties. In addition, the court noted that the law did not violate the public policies of New Jersey, since New Jersey had similar laws.
The Appellate Division faced a similar issue and reached a similar result in Terenzio v. Nelson, 107 N.J. Super. 223, 258 A.2d 20 (Super. Ct. App. Div. 1969). In Terenzio, however, the court had to overcome New York's own characterization of the laws as "penal in nature." The court found that the laws were penal only in the sense that they should be strictly construed, but that otherwise the laws were analogous to those in Pennhurst. Thus, New York's characterization of the laws as penal did not bind New Jersey -- "[a] rose by any other name is still a rose." Id. at 228.
New Jersey continues to apply a narrow definition of "penal" in its decisions involving foreign laws and judgments. In New York v. Sacco, 242 N.J. Super. 699, 577 A.2d 1333, the court found that New York's sanctions for contempt were not penal because they were designed to coerce, not to punish. The court relied on In re Daniels, 118 N.J. 51, 570 A.2d 416, cert. denied, 498 U.S. 951, 112 L. Ed. 2d 333, 111 S. Ct. 371 (1990), in which the New Jersey Supreme court distinguished between civil contempt, designed to coerce future action, and criminal contempt, designed to punish past misdeeds. In Philadelphia v. Smith, 82 N.J. 429, 413 A.2d 952 (1980), the court found that fines associated with foreign tax judgments were not assessed as punishment, but rather to compensate the state for its expenses in collecting the fines. Again, the court looked to Huntington v. Attrill:
The privilege of refusing to enforce the sister State judgment, if it exists at all, is a narrow one. The Supreme Court has stated that a cause of action is not penal in the sense here used unless "its purpose is to punish an offense against the public justice of the State" rather than "to afford a private remedy to a person injured by the wrongful act." Huntington v. Attrill, 146 U.S. 657, 673-4, 36 L. Ed. 1123, 13 S. Ct. 224 (1892).