filed: December 20, 1994; As Amended January 5, 1995.
APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW JERSEY. (D.C. Civil No. 88-cv-05150).
Before: Becker and Lewis, Circuit Judges, and Pollak, District Judge*fn*
This case raises important issues at the intersection of two principles: our deep-seated belief that a district court must be permitted to protect the integrity of its fact-finding process, and the settled considerations which courts in the United States must heed when considering whether to enjoin the executive activities of a foreign sovereign carried out in that sovereign's own territory. The district court found that the Republic of the Philippines was harassing witnesses who had testified against it in a suit it had brought in federal court in New Jersey. Thus, the court enjoined the Republic from continuing this harassment. The court also denied interlocutory certification of an underlying jury verdict so as to enforce its injunction, and ordered that any settlement in the case be conditioned upon acceptance of the court's continuing jurisdiction to enforce its injunctions. Because the district court exceeded its authority, we will reverse.
In 1988, the Republic of the Philippines (the "Republic") and the National Power Corporation ("NPC") filed a complaint against Westinghouse Electrical Corporation and Westinghouse International Projects Company (collectively "Westinghouse") and Burns and Roe Enterprises, Inc. ("Burns and Roe") concerning the construction of a nuclear power plant in Bagac, Bataan. The fifteen-count complaint alleged breach of contract, fraud, tortious interference with fiduciary duties, negligence, civil conspiracy, violations of state and federal racketeering statutes, and violations of the Robinson-Patman Act and the New Jersey Consumer Fraud Act. The district court determined that all but two of the counts against Westinghouse were subject to international arbitration. Republic of the Philippines v. Westinghouse Electric Corp., 714 F. Supp. 1362 (D. N.J. 1989). Thus, most of the Republic's claims against Westinghouse were referred to arbitration under the Rules of Conciliation and Arbitration of the International Chamber of Commerce.*fn1 In the remaining two counts, the Republic and NPC alleged that Westinghouse and Burns and Roe had conspired to bribe then-President Ferdinand Marcos in order to win the power plant contract, and had thus tortiously interfered with the fiduciary duties that Marcos had owed the people of the Philippines.
While preparation for the trial on the tortious interference counts proceeded in New Jersey, arbitration implicating the other counts proceeded apace in Geneva. In late 1991, reaching the bribery allegations in the context of the Republic's challenge to the validity of the contract's arbitration clause, the arbitrators found that the Republic had failed to show that Westinghouse had bribed President Marcos. When the arbitrators included this finding in a preliminary award for in favor of Westinghouse and Burns and Roe entered in December, 1991, the defendants moved for summary judgment in the district court, claiming the arbitrators' preliminary award collaterally estopped the Republic and NPC from litigating the bribery and tortious interference claims. The district court denied the motion and, when settlement Discussions broke down, the case went to trial in March, 1993.
As the district court noted in the opinion supporting the order now before us, "from all accounts in the Philippine press, [the filing of the suit against Westinghouse and Burns and Roe and the arbitration in Geneva] assumed enormous importance in the eyes of Philippines leaders." District Court Opinion ("Op." at 5. The court explained that "construction of the power plant had been undertaken to help solve the desperate electrical power shortage in the Philippines. Huge foreign loans were incurred to pay for the project." Id. When Marcos left the Philippines and the Aquino government suspended construction of the power plant, "the Republic found itself with a partially completed plant which was producing no electricity, an ever worsening shortage of electrical power, and a huge foreign debt burden on which, it is said, interest alone amounts to $300,000 each day." Id. Thus, the court surmised that "it appears that the leaders of the Republic looked to a judgment in this case and in the arbitration proceedings as the solution to these staggering problems." Id. The court further surmised that this factual context "may provide some explanation of the untoward events which transpired after the jury rendered a verdict against the Republic." Id.
During the trial, two Filipino Westinghouse workers, Pedro A. Padre, Jr. and Jerry R. Orlina, testified for Westinghouse. In addition, Westinghouse introduced an affidavit from Perfecto V. Fernandez, a professor of law at the government-owned University of the Philippines. The affidavit had been rendered two years prior to the trial, when Westinghouse had moved for summary judgment, and discussed Philippine law relevant to the issues in the case. This testimony, the subsequent actions threatened and taken by the Republic against the witnesses, and the court's responses are the subjects of this appeal.
After a lengthy trial, the jury returned a verdict for Westinghouse and Burns and Roe on the bribery and tortious interference counts. Because the other claims were still stayed pending arbitration, the Republic filed a motion for certification pursuant to Fed. R. Civ. P. 54(b) to appeal the issues that had been adjudicated. At a hearing held on June 28, 1993 to consider this motion, the court was inclined to grant certification, stating that "there is no case more appropriate for certification than this one" (Joint Appendix ("J.A.") at 41) and that "clearly [the case] should be certified" (J.A. at 44).
However, Westinghouse then advised the court that it had evidence that Padre, Orlina and Fernandez were being harassed and subjected to retaliation by Philippine officials because of their testimony on behalf of Westinghouse. When these allegations were brought to its attention, the court abruptly changed its mind about certification, stating that although the facts needed to be developed,
if there is a basis to [the allegation of harassment], it is a very, very serious charge, because nobody could come into this Court and then abuse people who come and testify. Some very dramatic, drastic remedies would have to be provided . . . It would be destructive of our whole system. No foreign government should be allowed to use our court system and then not play fair with the witnesses in the case. I can't think of anything more destructive of our system, and simply could not permit it.
J.A. at 49-50. The court concluded that it must "hold off" on signing the Rule 54(b) certification because it would lose jurisdiction once the notice of appeal was filed. Id. at 50.
The court ordered briefing and requested a motion from Westinghouse formally requesting relief from the court. Westinghouse filed a motion requesting that the court (1) enjoin the Republic from further harassing any witnesses, (2) sanction the Republic by barring it from further prosecuting its claims before the district court or appealing the adverse jury verdict, and (3) grant Westinghouse its attorneys' fees incurred on the motion.
The court held a hearing in early July, 1993, at which argument was presented on the documentary evidence submitted by the parties relating to the Westinghouse motion, including affidavits of various parties, transcripts of television programs, news clippings, and other data. In correspondence with the parties after the hearing, the court explained that, having considered materials submitted by the Republic with a renewed motion for certification, it believed that "the Republic had anticipated some of the requirements which are contained in my proposed order [addressing the allegations of harassment], although others remain to be fulfilled." J.A. at 107. Thus, the court circulated its proposed opinion and order and scheduled another hearing for September 27, 1993, at which it heard argument about the actions the Republic had taken to address the court's concerns. Not fully satisfied with the Republic's explanations at this final hearing, however, the district court indicated that it would finalize its opinion and order shortly.
On October 4, 1993, the court filed the opinion and order. The court found that, since the jury verdict, Orlina, Padre, and Professor Fernandez had been "the target of vilification in the public press inspired by officials in the Philippines government and each has been the target of actual or threatened government action." Op. at 15. The court stated that the "attacks" were "spearheaded" by Francisco A. Villa, Overall Deputy Ombudsman of the Republic, a presidential appointee whose duties include initiating investigations and directing "any public official to perform any act required by law and to request assistance from any governmental agency." Id. at 16.
The court found that Deputy Ombudsman Villa had threatened on numerous occasions to take legal action for tax fraud against Padre and Orlina as a result of their testimony on behalf of Westinghouse. The court found that both Padre and Orlina had faced public censure and lost business opportunities because of the Republic's actions, and that they would be financially ruined if tax evasion charges were brought against them. In this regard, the court also found it significant that another Filipino who had been involved in the same activities as Padre and Orlina had agreed to testify for the Republic -- and was then granted immunity from prosecution for tax evasion. Op. at 13, 19.
The court also documented that Villa had initiated disciplinary proceedings against Professor Fernandez for having allegedly violated Philippine law by testifying against the government while under its employ. Although the Republic had known about Fernandez' affidavit when it was submitted to the court in 1991, Villa filed charges relating to the affidavit on May 31, 1993, twelve days after the verdict. Villa charged that, by filing an affidavit on behalf of Westinghouse, Fernandez had violated his duty as a public officer "to be loyal at all times to the Republic and the Filipino people . . . ." Op. at 21, quoting administrative complaint. The court noted that the administrative complaint concluded by stating that Fernandez, "in a cowardly attempt to escape the clutches of the law, whimpered 'I'm not even a government official. I'm just a lowly college professor.'" Op. at 21, quoting administrative complaint, which quotes Philippines Daily Inquirer (May 20, 1993). The complaint also quoted approvingly from a news columnist who had written that "Professor Fernandez should not only be fired from the State University but should be hanged in public at the courtyard of the Nuclear Plant in Morong, Bataan . . . ." Id. The court additionally found that Villa had called Fernandez a traitor "on a number of occasions, including a television show," and that "this characterization was repeated in the Philippine press." Id. Based on the tone and substance of the administrative complaint, as well as the circumstances surrounding its filing, the court concluded that the charges against Fernandez were "motivated by rage at the jury verdict rather than considered judgment . . . ." Id.
The Republic had submitted an affidavit from Villa purporting to establish that he did not institute proceedings against Fernandez because of the jury verdict, that Padre's and Orlina's fears are unwarranted, and that the Ombudsman's Office has not harassed any witness and had no intention of doing so. Op. at 24. However, the court found that Villa lacked credibility. Given the evidence of record, "for [Villa] to state that '[Padre's and Orlina's] fears and apprehensions are unfounded' is poppycock." Id. at 25. Furthermore, according to the court, the statements about Fernandez in Villa's affidavit continued to "reflect the Republic's rage at losing the case and its intent to strike out at one of the three persons seized upon as scapegoats for that loss." Id. And the court found that Villa's assertion that the Ombudsman's Office was not guilty of harassment was "simply not true." Id. at 25.
Although the evidence of harassment centered on Villa, the court determined that other members of the Philippines government had supported Villa's efforts. The court found ample evidence that Villa "was acting in accordance with the policies of the Office of the Executive, President Ramos." Op. at 22. The court also found that the harassment was not confined to the executive branch of government. Id. at 17 (noting that a Philippine senator had urged a study of the "culpability" of the three witnesses).
The court acknowledged that the Republic had submitted evidence purporting to show that the government did not support any action designed to harass or intimidate witnesses, and that the government specifically did not intend to pursue any charges against Padre, Orlina, or Fernandez.*fn2 The court noted that the evidence demonstrated "a partial retreat from the retaliatory conduct" the court had documented and indicated that the Republic intends "not to pursue the retaliatory conduct further against Padre and Orlina." Op. at 28. However, the court noted that the proceedings against Fernandez "continued unabated." Id. at 30.
Because the court found that the Republic's actions "threaten both the integrity of a United States District Court and the foundations of our system of Justice" (Op. at 32), it concluded that it must take action. Accordingly, it (1) enjoined the Republic from harassing any witness who had given evidence or will give evidence in this case or the arbitration proceeding; (2) directed the Republic to renounce and abandon its retaliatory actions, and to advise Padre and Orlina officially of its actions and intended actions with respect to their personal income taxes; (3) denied certification under Fed. R. Civ. P. 54(b) until the Republic established that it was in compliance with the injunctive provisions of the court's order and that the proceedings against Fernandez were resolved "in a manner which cures the retaliatory actions"; and (4) directed that any ...