Republic of the Philippines v. Westinghouse Electric Corp.
1993 U.S. Dist. LEXIS 6609, 821 F. Supp. 292, 1993 WL 168636 (1993)
Rule of Law:
A federal court sitting in diversity jurisdiction must apply the choice-of-law rules of the forum state, which in New Jersey, prohibits the enforcement of foreign laws that are deemed penal in nature, meaning they seek to punish an offense against the public rather than to provide a private remedy, and where comity does not dictate otherwise.
Facts:
- The 600-megawatt Philippine Nuclear Power Plant (PNPP) was constructed in Bagac, Bataan, beginning in 1976.
- The Republic of the Philippines (Republic) alleged that Westinghouse Electric Corporation and Burns & Roe Enterprises, Inc. (Defendants) secured the contract to build the PNPP through bribery and deceit.
- The Republic claimed that Defendants bribed President Ferdinand E. Marcos to obtain the contracts.
- The Republic further alleged that this bribery interfered or conspired to interfere with President Marcos's fiduciary duties to the Philippine people as a whole.
Procedural Posture:
- The Republic of the Philippines (Republic) and the National Power Corporation (NPC) instituted an action in federal district court in New Jersey against Westinghouse Electric Corporation, Westinghouse International Projects Company, and Burns & Roe Enterprises, Inc.
- The initial complaint contained fifteen counts, but thirteen of these claims, largely asserted by NPC (e.g., breach of contract, fraud, RICO), were referred to arbitration or stayed.
- Only two counts, tortious interference and conspiracy to interfere with the fiduciary duties of President Marcos, asserted by the Republic, proceeded to trial in the district court.
- The Republic sought a ruling from the district court permitting it to present its claims for punitive damages to the jury.
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Issue:
Does a federal district court, sitting in diversity jurisdiction in New Jersey, have the authority to permit a claim for punitive damages under Philippine law, given that New Jersey choice-of-law rules generally prohibit the enforcement of foreign penal laws?
Opinions:
Majority - Debevoise, District Judge
No, a federal district court in New Jersey does not have the authority to permit a claim for punitive damages under Philippine law because the damages sought are penal in nature under New Jersey's choice-of-law rules, and principles of comity do not compel their enforcement. The court, sitting in diversity, must apply New Jersey's choice-of-law rules, which adhere to Chief Justice John Marshall’s observation that "[t]he Courts of no country execute the penal laws of another." New Jersey courts, guided by Huntington v. Attrill, determine whether a foreign law is penal by examining its substance, not its label. A law is penal if its purpose is to punish an offense against the public justice of the state, rather than to afford a private remedy to an injured person. In this case, the Philippine punitive sanctions are penal because they seek to punish an infringement of public duties to the Philippine people as a whole, the fines would accrue to the public authority (the Republic's public coffers), and they are calculated to punish past acts, deter future acts, and provide retribution, not to compensate. The Republic will recover compensatory damages through other means. Furthermore, comity does not dictate enforcement. The dissimilarity of remedies is a concern, as a New Jersey jury would struggle to apply Philippine cultural standards of 'wickedness' and deterrence, leading to unpredictable awards. New Jersey also lacks a strong public policy interest in enforcing foreign penal laws, especially for acts not likely to be repeated in New Jersey, and where no reciprocal enforcement agreement exists.
Analysis:
This case clarifies the application of forum state choice-of-law rules regarding the enforcement of foreign penal statutes in federal diversity jurisdiction. It reinforces the long-standing principle that courts generally will not enforce the penal laws of another sovereign, emphasizing the substantive nature of the law over its designation. The decision provides a useful framework, drawing on Huntington v. Attrill, for analyzing whether a foreign law is truly 'penal' by focusing on the purpose of the law, the beneficiary of the fines, and the intent behind the damages. It also illustrates how comity, while a factor, will not compel enforcement when there are significant practical difficulties (like assessing damages based on foreign cultural standards) or a lack of strong forum public policy interest.
