13-0618

Republic of Iraq v. ABB AG

UNITED STATES COURT OF APPEALS 1

FOR THE SECOND CIRCUIT 2

- - - - - - 3

August Term, 2013 4

(Argued: February 18, 2014 Decided: September 18, 2014) 5

Docket No. 13-0618 6

_________________________________________________________ 7

THE REPUBLIC OF IRAQ, including as Pare ns Patriae on behalf of the Citizens 8

of the Republic of Iraq, 9

Plaintiff-Appellant

, 10

- v. - 11

ABB AG; ABB AUTOMATION; ABB ELEKTRIC SANAYI AS; ABB 12

INDUSTRIE AC MACHINES; ABB INDUSTRIE CHAMPAGNE; ABB NEAR 13

EAST TRADING LTD.; ABB SOLYVENT-VENTEC; AGCO DENMARK A/S; 14

AGCO S.A.; VALTRA DO BRAZIL; AI R LIQUIDE ENGINEERING; AKZO 15

NOBEL N.V.; N.V. ORGANON; INTERV ET INTERNATIONAL B.V.; ASTRA 16

ZENECA AB.; MAIS CO. FOR MEDICAL PRODUCTS; ATLAS COPCO 17

AIRPOWER N.V.; ATLAS COPCO CMT; AWB, LTD.; B. BRAUN MEDICAL 18

FRANCE; B. BRAUN MELSUNGEN A.G.; B. BRAUN MEDICAL 19

INDUSTRIES SDN BHD (MALAYSIA); AESCULAP AG AND KG; 20

AESCULAP MOTRIC S.A.; AESCULAP SURGICAL INSTRUMENTS SDN; 21

BOSTON SCIENTIFIC S.A.; BNP PARI BAS USA; BNP PARIBAS (SUISSE) 22

SA; BNP PARIBAS HONG KONG; BNP PA RIBAS PARIS; BNP PARIBAS 23

UK HOLDINGS LIMITED; BNP PARIBAS LONDON BRANCH; BNP 24

PARIBAS (SUISSE) SA; BUHLER LTD.; DAVID B. CHALMERS, JR.; 25

CHEVRON CORP.; DAEWOO INTERNATIONAL CORP.; DAIMLER26

CHRYSLER AG; DOW AGROSCIENCE S; EASTMAN KODAK S.A.; EBEWE 27

PHARMA GES M.B.H.; ELI-LILLY EXPORT S.A.; EL PASO CORP.; 28

EVAPCO EUROPE S.R.L.; FIATAVIO; FLOWSERVE CORP.; FLOWSERVE 29

POMPES; FLOWSERVE B.V.; GLAXOSMITHKLINE WALLS HOUSE; 30

GLAXOSMITHKLINE EGYPT SAE; GLAXO WELLCOME EXPORT LTD.; 31

GLAXO WELLCOME SA (SOUTH AFRICA) (PRY) LTD.; SMITHKLINE 32BEECHAM INTERNATIONAL; ABG ALLGEMEINE BAUMASCHINEN1

GESELLSCHAFTMBH DRESSER INTERNATIONAL INGERSOLL-RAND 2

ITALIANA, SPA.; THERMO KING IRELAND LIMITED; INGERSOLL3

RAND BENELUX, N.V.; INGERSOLL-RAND WORLD TRADE LTD.; CILAG 4

AG INTERNATIONAL; JANSSEN PHARMACEUTICAL; KIA MOTORS; 5

LIEBHERR EXPORT AG;LIEBHER FRANCE, SA; SERONO PHARMA 6

INTERNATIONAL; MERIAL; NOVO NORDISK; PAUWELS; RAILTECH 7

INTERNATIONAL; F. HOFFMAN LA ROCHE; ROCHE DIAGNOSTICS 8

GMBH; ROHM AND HAAS FRANCE, S.A.; SECALT S.A.; SIEMENS S.A.A. 9

OF FRANCE; SIEMENS SANAYI VE TI CARET A.S. OF TURKEY; OSRAM 10

MIDDLE EAST FZE; SOLAR TURBINES EUROPE; ST. JUDE MEDICAL 11

EXPORT GMBH; SULZER BURCKHARDT ENGINEERING WORKS LTD.; 12

SULZER PUMPEN DEUTSCHLAND GMBH; SULZER TURBO LTD.; 13

TEXTRON, INC.; UNION PUMP S.A.S., formerly known as David Brown 14

Guinard Pumps S.A.S.; DAVID BROWN TRANSMISSIONS OF FRANCE S.A.; 15

RENAULT TRUCKS SAS; RENAULT AGRICULTURE & SONALIKA 16

INTERNATIONAL; RENAULT V. I.; VOLVO CONSTRUCTION 17

EQUIPMENT AB, a successor company to Volvo Construction Equipment 18

International; THE WEIR GROUP; OSCAR S. WYATT, JR.; VITOL, S.A.; 19

WOODHOUSE INTERNATIONAL; YORK AIR CONDITIONING AND 20

REFRIGERATION FZE, 21

Defendants-Appellees

. * 22

_________________________________________________________ 23

Before: KEARSE, WINTER, and DRONEY, Circuit Judges

. 24

Appeal from a judgment of the United States District Court for the Southern District 25

of New York, Sidney H. Stein, Judge , dismissing the amended complaint of plaintiff The Republic 26

of Iraq under the Racketeer Influenced and Corr upt Organizations Act, 18 U.S.C. §§ 1961 et seq. , the 27

Foreign Corrupt Practices Act, 15 U.S.C. §§ 78dd-1 et seq. , and common law, seeking recovery for 28

defendants' alleged conspiracy with Iraq's then-president Saddam Hussein and Iraq's ministries to 29

corrupt and plunder the Oil-for-Food Programme, an international humanitarian program administered 30

* The Clerk of Court is directed to amend the official caption to conform with the

above.

- - 2by the United Nations during the final years of Husse in's rule. The district court dismissed the 1

amended complaint on the grounds, inter alia , that plaintiff was in pari delicto with defendants and 2

that the Foreign Corrupt Practices Act does not confer a private right of action; finding that plaintiff's 3

remaining common-law claims arose under state rather than federal law, the court declined to exercise 4

supplemental jurisdiction over them. See 920 F.Supp.2d 517 (2013). 5

AFFIRMED. 6

Judge Droney concurs in part and dissents in part, in a separate opinion. 7

MARK MANEY, Houston, Texas (Roliff Purrington, Maney & 8

González-Félix, Houston, Texas; Stanley D. Bernstein, 9

Christian Siebott, Bernstein Liebhard, New York, New York, 10

on the brief), for Plaintiff-Appellant

. 11

BRANT W. BISHOP, Washington, D. C. (Thomas D. Yannucci, John 12

R. Bolton, Robert B. Gilmore, Kirkland & Ellis, Washington, 13

D.C., on the joint brief), for Defendants-Appellees Siemens 14

S.A.A. of France, Siemens Sanayi ve Ticaret A.S. of Turkey, 15

and OSRAM Middle East FZE

. 16

ROBERT S. BENNETT, Washington, D.C. (Christopher T. Handman, 17

Ellen S. Kennedy, Hogan Lovells, Washington, D.C.; Jennifer 18

L. Spaziano, Skadden, Arps, Slate, Meagher & Flom, 19

Washington, D.C., on the joint brief), for Defendants20

Appellees BNP Paribas USA, BNP Paribas (Suisse) SA, BNP 21

Paribas Hong Kong, BNP Paribas Paris, BNP Paribas UK 22

Holdings Limited, and BNP Paribas London Branch

. 23

AXINN, VELTROP & HARKRIDER (John D. Harkrider, New York, 24

New York, Gail L. Gottehrer, Hartford, Connecticut, on the 25

joint brief), for Defendant-Appellee Secalt S.A. 26

WILLIAMS & CONNOLLY (Robert A. Van Kirk, Katherine M. 27

Turner, Washington, D.C., on the joint brief), for Defendants28

Appellees Textron, Inc., Union Pump S.A.S., and David Brown 29

Transmissions of France, S.A. 30

PILLSBURY WINTHROP SHAW PITTMAN (John F. Pritchard, 31

Edward Flanders, Ranah L. Es maili, New York, New York, on 32

- - 3the joint brief), for Defendants-Appellees Atlas Copco 1

Airpower N.V. and Atlas Copco CMT

. 2

KIRKLAND & ELLIS (James P. Gillesp ie, Karen McCartan DeSantis, 3

Washington, D.C., on the joint brief), for Defendants4

Appellees ABB AG, ABB Automation, ABB Elektric Sanayi 5

AS, ABB Industrie AC Machines, ABB Industrie Champagne, 6

and ABB Near East Trading Ltd. 7

TROUTMAN SANDERS (Elliot Cohen, New York, New York, on the 8

joint brief), for Defendants-Appellees AGCO Denmark A/S, 9

AGCO S.A., and Valtra do Brazil

. 10

LEADER & BERKON (Michael J. Tiffany, New York, New York; 11

Christopher S. Riley, Barnes & Thornburg, Elkhart, Indiana, on 12

the joint brief), for Defendant-Appellee ABB Solyvent-Ventec

. 13

BAKER & McKENZIE (Darrell Prescott, New York, New York, on 14

the joint brief), for Defendant-Appellee Air Liquide 15

Engineering

. 16

COVINGTON & BURLING (Nancy Kestenbaum, New York, New 17

York, Mark H. Lynch, Washington, D.C., on the joint brief), 18

for Defendants-Appellees Akzo Nobel N.V., N.V. Organon, 19

Intervet International B.V., Astra Zeneca AB., Cilag AG 20

International, Janssen Pharmaceutical, and Merial

. 21

ALSTON & BIRD (Karl Geercken, Ne w York, New York, on the joint 22

brief), for Defendants-Appellees B. Braun Medical France, B. 23

Braun Melsungen A.G., B. Braun Medical Industries SDN 24

BHD (Malaysia), Aesculap AG and KG, Aesculap Motric S.A., 25

and Aesculap Surgical Instruments SDN

. 26

CRAVATH, SWAINE & MOORE (R obert H. Baron, Timothy G. 27

Cameron, New York, New York, on the joint brief), for 28

Defendant-Appellee AWB, Ltd. 29

PARK & JENSEN (Tai H. Park, New York, New York, on the joint 30

brief), for Defendant-Appellee Boston Scientific S.A. 31

PEPPER HAMILTON (Robert L. Hickok, Barak A. Bassman, 32

Philadelphia, Pennsylvania, Ke nneth J. King, New York, New 33

York, on the joint brief), for Defendants-Appellees 34

GlaxoSmithKline Egypt SAE, Glaxo Wellcome Export Ltd., 35

- - 4Glaxo Wellcome SA (South Africa) (PRY) Ltd., and 1

SmithKline Beecham International

. 2

SPAGNOLETTI & CO. (Francis I. Spagnoletti, David S. Toy, 3

Houston, Texas, on the joint brief), for Defendant-Appellee 4

David B. Chalmers, Jr. 5

SHEARMAN & STERLING (Philip E. Urofsky, Washington, D.C., 6

Danforth Newcomb, H. Miriam Farber, New York, New York, 7

on the joint brief), for Defendants-Appellees Buhler Ltd., 8

Daimler-Chrysler AG, ABG Allgemeine Baumaschinen9

GesellschaftmbH, Sulzer Pumpen Deutschland GmbH, Sulzer 10

Turbo Ltd., Renault Trucks SAS, Renault V.I., and Volvo 11

Construction Equipment AB

. 12

JONES DAY (Meir Feder, Thomas E. Lynch, New York, New York, 13

on the joint brief), for Defendant-Appellee Chevron Corp. 14

GIBBONS (Thomas R. Valen, Newark, New Jersey, on the joint brief), 15

for Defendants-Appellees Daewoo International Corp. and Kia 16

Motors

. 17

FULBRIGHT & JAWORSKI (Mark A. Robertson, New York, New 18

York, on the joint brief), for Defendant-Appellee El Paso Corp. 19

CADWALADER, WICKERSHAM & TAFT (Jason Jurgens, Nathan 20

M. Bull, New York, New York, on the joint brief), for 21

Defendant-Appellee Dow AgroSciences

. 22

BOWIE & JENSEN (R. Michael Smith, Towson, Maryland, on the 23

joint brief), for Defendant-Appellee Evapco Europe S.r.l. 24

KELLEY DRYE & WARREN (Thomas B. Kinzler, David Zalman, 25

Melissa E. Byroade, New York, New York, on the joint brief), 26

for Defendants-Appellees Flowse rve Corp., Flowserve Pompes, 27

and Flowserve B.V. 28

ROTHWELL, FIGG, ERNST & MANBECK (Robert P. Parker, 29

Washington, D.C., on the joint brief), for Defendant-Appellee 30

Ingersoll-Rand Benelux, N.V. 31

SIDLEY AUSTIN (Richard D. Klingler, Steven J. Horowitz, 32

Washington, D.C., Dorothy J. Sp enner, New York, New York, 33

on the joint brief), for Defendants-Appellees Eli-Lilly Export 34

- - 5S.A., Ingersoll-Rand Italiana, SpA., Thermo King Ireland 1

Limited, Ingersoll-Rand World Trade Ltd., and Novo Nordisk

. 2

WILLCOX & SAVAGE (Brett A. Spain, Norfolk, Virginia, on the 3

joint brief), for Defendants-A ppellees Liebherr Export AG and 4

Libher France, SA

. 5

NIXON PEABODY (Michael S. Cohen, Jericho, New York, on the 6

joint brief), for Defendant-Appellee Serono Pharma 7

International

. 8

EPSTEIN BECKER & GREEN (Peter L. Altieri, David J. Clark, New 9

York, New York, on the joint brief), for Defendant-Appellee 10

Railtech International

. 11

HARKINS CUNNINGHAM (John G. Harkins, Jr., Philadelphia, 12

Pennsylvania, on the joint brief), for Defendant-Appellee 13

Rohm and Haas France, S.A. 14

ALSTON & BIRD (John P. Doherty, New York, New York, on the 15

joint brief), for Defendant-Appellee Pauwels

. 16

DAVIS POLK & WARDWELL (Brian S. Weinstein, New York, New 17

York, Jason McCullough, Washington, D.C., on the joint 18

brief), for Defendants-Appellees F. Hoffman La Roche and 19

Roche Diagnostics GmbH

. 20

BAKER & HOSTETLER (Gregory L. Baker, Washington, D.C., on 21

the joint brief), for Defendant-Appellee Solar Turbines Europe

. 22

CARTER LEDYARD & MILBURN (Jud ith A. Lockhart, New York, 23

New York, on the joint brief), for Defendant-Appellee St. Jude 24

Medical Export GmbH

. 25

DRINKER BIDDLE & REATH (Clay J. Pierce, New York, New 26

York, on the joint brief), for Defendant-Appellee Renault 27

Agriculture & Sonalika International

. 28

CANALES & SIMONSON (J.A. Canales, Corpus Christi, Texas, on 29

the joint brief), for Defendant-Appellee Oscar S. Wyatt, Jr. 30

BAKER & McKENZIE (Larence Walker Newman, New York, New 31

York, on the joint brief), for Defendant-Appellee Sulzer 32

Burckhardt Engineering Works Ltd. 33

- - 6JONES DAY (Michael H. Ginsber g, Pittsburgh, Pennsylvania, on the 1

joint brief), for Defendant-Appellee The Weir Group

. 2

SULLIVAN & CROMWELL (Penny Shane, Andrew P. Giering, New 3

York, New York, on the joint brief), for Defendant-Appellee 4

Vitol, S.A. 5

K&L GATES (Walter P. Loughlin, New York, New York; Andrew 6

Siegel, Christopher A. Payne, Sandler Siegel, Dallas, Texas, on 7

the joint brief), for Defendant-Appellee Woodhouse 8

International

. 9

REED SMITH (Casey D. Laffey, Ne w York, New York, on the joint 10

brief), for Defendant-Appellee York Air Conditioning and 11

Refrigeration FZE

. 12

KEARSE, Circuit Judge : 13

Plaintiff The Republic of Iraq (or the "Re public") appeals from a judgment of the 14

United States District Court for the Southern District of New Yor k, Sidney H. Stein, Judge , dismissing 15

its claims under the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. 16

§§ 1961 et seq. , the Foreign Corrupt Practices Act (o r "FCPA"), 15 U.S.C. §§ 78dd-1 et seq. , and 17

common law, against numerous defendants who are alleged to have conspired in 1997-2003 with 18

Iraq's then-president Saddam Hussein and Iraq's ministries and state-owned enterprises to corrupt and 19

plunder an international humanitarian program administered by the United Nations (or "U.N."), 20

known as the Oil-for-Food Programme (or the "Programme"). Defendants moved to dismiss the 21

Republic's First Amended Complaint (the "Amended Co mplaint" or "Complaint ") principally pursuant 22

to Fed. R. Civ. P. 12(b)(1) and 12(b)(6). They moved to dismiss pursuant to Rule 12(b)(1) on the 23

grounds that the Republic's claims are nonjusticiabl e by reason of the act-of-state doctrine and the 24

- - 7political-question doctrine and on the ground that th e Republic lacked standing to seek relief. 1

Defendants moved to dismiss pursuant to Rule 12(b)(6) for, inter alia , failure to state a claim on which 2

relief can be granted, arguing that RICO does not apply to a conspiracy involving primarily foreign 3

actors and foreign acts, that the FCPA does not provi de a private right of action, that the Republic was 4

in pari delicto with defendants, and that the Complaint failed to allege proximate causation. The 5

district court granted the Rule 12(b)(6) motions on those grounds; it also ruled that the Republic's 6

remaining claims arose under state law rather than federal law, and it declined to exercise 7

supplemental jurisdiction over them. 8

On appeal, the Republic challenges these rulings. As to the in pari delicto ruling, the 9

Republic contends principally that that doctrin e was inapplicable on the ground that the conduct of 10

Hussein and Iraq's ministries is not attributable to the Republic because that conduct was adverse to 11

the interests of Iraq and its citizens. For the reasons that follow, we conclude that (1) the RICO claims 12

were properly dismissed on the basis of in pari delicto ; (2) the Republic does not have a right of action 13

under the FCPA; and (3) the common-law claims arose under state law, and the district court properly 14

declined to exercise supplemental jurisdiction over them. We affirm the judgment on these bases and 15

need not address the Republic's challenges to the district court's other rulings. 16

I. BACKGROUND 17

The principal legal premise of the Republic's Amended Complaint is that the "Hussein 18

Regime," defined as "Saddam Hussein and his representatives" (Amended Complaint ¶ 2), although 19

it "was in de facto control of the nation, . . . was not a de jure or legitimate government" (id . ¶ 220). 20

- - 8The factual allegations of the Amended Complaint, together with public documents that were before 1

the district court, may be summarized, as relevant to this appeal, as follows. 2

A. Saddam Hussein's Regime in Iraq 3

Saddam Hussein, the former president of The Republic of Iraq, rose to power in 1979 4

in a military coup and rema ined in power for more than two decades. Hussein consolidated his 5

authority over Iraq by harshly and "systematically remov[ing] all opposition" and "install[ing] 6

officials under his direct control in all areas of the government." (Amended Complaint ¶¶ 217-218.) 7

The Hussein Regime further suppressed opposition by means of, inter alia , imprisonment and 8

execution of dissidents, and use of chemical w eapons and force against civilian opponents, causing 9

birth defects and many thousands of deaths. 10

In 1980, Hussein caused the Iraqi army to invade Iran, staring an eight-year war in 11

which Iraq used chemical weapons against Iranian troops and ballistic missiles against Iranian cities. 12

On August 2, 1990, Iraq invaded Kuwait, beginning a seven-month occupation during which Iraq 13

killed and committed numerous abuses against Kuwaiti civilians. Ultimately, after his regime was 14

deposed in 2003, Hussein was convicted in an Iraqi court for crimes against humanity, having been 15

found responsible for the systematic and widespread attack on civilian inhabitants of an Iraqi town, 16

and was executed by Iraqi authorities. 17

In the meantime, the international community's reaction to Iraq's invasion of Kuwait 18

was swift and censorious. The United Nations Secu rity Council ("Security Council"), on the day of 19

the invasion, "[c]ondemn[ed] the Iraqi invasion of Kuwait," "[d]emand[ed] that Iraq withdraw 20

immediately and unconditionally all its forces to th e positions in which they were located on 1 August 21

- - 91990," and "[c]all[ed] upon Iraq and Kuwait to begin immediately intensive negotiations for the 1

resolution of their differences." S.C. Res. 660, ¶¶ 1-3, U.N. Do c. S/RES/660 (Aug. 2, 1990) 2

("Resolution 660") (italics in original). On A ugust 3, 1990, the President of the United States--which 3

had established diplomatic relations with the Hussein-led government of Iraq in 1984, see U.S. 4

Department of State, Office of the Historian, A Guide to the United States' History of Recognition, 5

Diplomatic, and Consular Relati ons, by Country, since 1776: Iraq, at 6

http://history.state.gov/countries/iraq (last vi sited September 16, 2014); 1984 PUBLIC PAPERS OF 7

THE PRESIDENTS OF THE UNITED STATES: RONALD REAGAN 1834 (1987)--issued an 8

Executive Order finding that "the policies and actions of the Government of Iraq constitute an unusual 9

and extraordinary threat to the national security and foreign policy of the United States" and 10

"declar[ing] a national emergency to deal with that threat" (Amended Complaint ¶ 248 (internal 11

quotation marks omitted)). On August 6, 1990, Ira q not having complied with the Resolution 660 12

demands, the Security Council adopted a reso lution to impose on Iraq economic sanctions of 13

"unparalleled" "scope and intensity" (Amended Co mplaint ¶ 293 (internal quotation marks omitted)), 14

calling on all States to embargo trade and financial transactions with Iraq. See S.C. Res. 661, ¶¶ 3-5, 15

U.N. Doc. S/RES/661 (Aug. 6, 1990) ("Resolution 661"). The United States government 16

implemented these sanctions, and soon thereafter designated Iraq as a state sponsor of terrorism. 17

In February 1991, an international military coalition repelled Iraqi forces from Kuwait. 18

After United Nations fact-finding missions to Iraq in March 1991 found immense suffering in the 19

Iraqi population, the Security Council adopted a resolution that, while continuing most of the 20

sanctions imposed by Resolution 661, would have a llowed the export of foodstuffs to Iraq if Iraq 21

agreed to certain conditions. See S.C. Res. 687, ¶ 20, U.N. Doc. S/RES/687 (Apr. 3, 1991). Two 22

- - 10other Security Council resolutions in 1991 would have allowed the Hussein Regime to sell Iraqi oil 1

in return for food and medicine. The Hussein Re gime, however, was unwilling to participate in such 2

humanitarian transactions on the conditions required by the United Nations; instead, it used the 3

suffering of the Iraqi people as a negotiating tool in pressing for an end to the economic sanctions. 4

For years, the Iraqi people continued to suffer and starve. 5

B. The Oil-for-Food Programme 6

The impasse ended in 1996, when the Hussein Regime agreed, in a Memorandum of 7

Understanding ("MOU"), to participate in a ne w United Nations plan, the Oil-for-Food Programme. 8

See S.C. Res. 986, U.N. Doc. S/RES/986 (Apr. 14, 1995). Iraq was to be allowed to sell its petroleum 9

and petroleum products (co llectively "oil") to foreign purchasers and to use the proceeds of those sales 10

to purchase from foreign vendors food and othe r humanitarian goods to benefit Iraq's civilian 11

population. From the perspective of the United Nations, the Programme was intended "as a means 12

for reconciling strong sanctions against a corrupt Iraqi regime with [the] need[ to get] supplies of food 13

and medicines to an innocent and vulnerable population." (Amended Complaint ¶ 296 (internal 14

quotation marks omitted).) 15

The Programme, overseen by a United Nations international committee called the 16

"661 Committee"--named in reference to Resolution 661--was designed to prevent Iraqi leaders from 17

using proceeds of oil sales for political and personal ends. The Programme's features included 18

requirements for U.N. approval of every contract fo r Iraq's sale of oil and every contract for Iraq's 19

purchase of goods, and for the establishment of an "Escrow Account," at a bank selected by the 20

United Nations, through which all payments to and by Iraq would be made. 21

- - 11Each purchaser of Iraqi oil was required to make full disclosure of the terms of the 1

contract; every contract incorporated U.N. regula tions. The price to be paid, known as the "Official 2

Selling Price" or "OSP," was set monthly by the Unite d Nations in an attempt to reflect fair market 3

value. The contract price was supposed to repres ent the entire purchase price for the oil. The oil 4

purchases were guaranteed by letters of credit in favor of the Escrow Account, into which all moneys 5

would be paid. 6

The Programme permitted Iraq to use Escrow Account funds to purchase "medicine, 7

health supplies, foodstuffs and materials and supplie s for essential civilian needs," to be distributed 8

equitably to "the Iraqi population throughout the country." (Amended Complaint ¶ 280 (internal 9

quotation marks omitted); see id . ¶ 328.) Iraqi government ministries and state-owned enterprises 10

negotiated contracts for the purchase of these goods. The 661 Committee or its delegatee reviewed 11

each contract to see that it was in accordance w ith "normal commercial practice," acceptable "price 12

and value," and United Nations policies. (Id . ¶¶ 328, 335 (internal quotation marks omitted).) After 13

each contract was approved, the United Nations author ized the execution of a letter of credit against 14

the Escrow Account, from which payment would be made to the vendor upon delivery of the goods 15

in Iraq. 16

During the Programme's seven years, $64.2 billion was deposited into the Escrow 17

Account from the sale of Iraqi oil. Approxi mately $37 billion was spent to purchase humanitarian 18

goods, and another $18 billion was disbursed to satis fy Kuwaiti claims against the Iraqi government. 19

(See id . ¶ 306.) Following the downfall of the Hussein Regime, the remaining balance in the Escrow 20

Account was transferred to an account owned by the Republic. 21

- - 12C. Subversion of the Programme 1

Notwithstanding United Nations goals for a nd oversight of the Programme, the Hussein 2

Regime, which was concerned with maintaining its power, found ways to turn the Programme to its 3

own advantage and to undermine the economic sancti ons. The fact that the Programme permitted the 4

Iraqi government to choose with whom it dealt allowed the Hussein Regime to make covert side 5

arrangements both with foreign buyers of oil and with sellers of humanitarian goods and to divert 6

money intended for the welfare of the Iraqi people. 7

First, the Hussein Regime "curr[ied] political favor" and rewarded political allies 8

abroad by selling them oil at prices below fair market value. (Amended Complaint ¶¶ 355-361.) It 9

accomplished this, in part, by having allies provide a U.N. committee with "false market data" and 10

"lobb[y]" that committee to set an O SP that was artificially low. (Id . ¶¶ 384-385.) Such low prices 11

allowed purchasers to assign their interests (which was impermissible without U.N. approval) or to 12

resell at a profit, with no risk or effort. 13

Thereafter, Iraq began requiring that anyone who wanted to purchase oil under the 14

Programme pay "surcharges"--"illicit" side payments a dded to the per-barrel price of the oil sold. (Id

. 15

¶ 363; see , e.g. , id . ¶¶ 395, 423, 440, 468, 512.) In addition, the Hussein Regime began imposing new 16

surcharges characterized as "port fees," dema nding those payments before permitting cargo ships to 17

load oil at Iraqi ports. (Id . ¶ 365 (internal quotation marks omitted).) The purchasers of Iraq's oil paid 18

the surcharges through "bank accounts owned or controlled by the Hussein Regime" in foreign 19

countries. (Id . ¶ 363; see , e.g. , id . ¶¶ 426, 473, 512.) The approved contract prices for the oil were 20

sufficiently below the market price to allow these kickbacks to be paid and still allow the purchasers 21

to resell the oil and enjoy "excessive profits." (Id . ¶ 384.) Thus, instead of negotiating contracts for 22

- - 13the sale of oil at market value, all of the pro ceeds of which would have gone , via the Escrow Account, 1

toward the purchase of humanitarian goods, the Hussein Regime diverted a portion of that market 2

value into the Regime's coffers. 3

The Complaint alleged that the underpricing of oil ended in 2002 after the United 4

Nations became fully aware of it and instituted "retroactive oil pricing to ensure oil was purchased 5

at market rates." (Amended Complaint ¶ 378; see id . ¶ 1108.) Before that change, the surcharges that 6

would have been part of a market-value purchase pr ice, but were paid to the Hussein Regime instead 7

of to the Escrow Account, totaled approximately $228.8 million. (See id . ¶ 1101.) In all, the 8

underpricing, which ranged from $1 to $4 per barrel, resulted in losses to the Escrow Account of at 9

least $1.8 billion. (See id . ¶¶ 1103-1104.) 10

The Hussein Regime found even more lucrativ e ways to profit from the purchasing side 11

of the Programme. First, the Hussein Regime re quired all of Iraq's minist ries to fabricate "non12

negotiable 'transportation fees' on goods requiring inland delivery." (Id . ¶ 527.) Although the vendors 13

included charges for such transportation in their cont ract prices, and they received payments for those 14

charges from the Escrow Account, no legitimate tr ansportation services were provided, and the fees 15

thus included were kicked back to the Hussein Regime (see id . ¶¶ 530-535). 16

Thereafter, the Hussein Regime added so- called "after-sales-service-fee[s]" on all 17

purchase contracts under the Programme. (Id . ¶ 558 (internal quotation marks omitted).) These fees, 18

which were also included in the contract prices, were "mandatory kickback[s]" (id . ¶ 566 (internal 19

quotation marks omitted)) to the Hussein Regime, a nd ranged from 2 to 30 percent of the purchase 20

price of the goods (see id . ¶¶ 561, 563). 21

- - 14Both sets of fees violated the terms of the Programme, which permitted the payment 1

only of legitimate service fees for "services . . . ancillary to the supply of material goods" (id . ¶ 572 2

(internal quotation marks omitted)). The suppliers of humanitarian goods paid the kickbacks to the 3

Hussein Regime "in one of three ways: cash, tr ansfers to Regime-controlled accounts, or payments 4

to front companies controlled by individuals or companies loyal to the Hussein Regime." (Id . ¶ 565; 5

see , e.g. , id . ¶ 536 (cash); id . ¶¶ 599, 859 (foreign bank accounts); id . ¶¶ 530, 536 (front companies).) 6

The sham transportation and after-sales-service fees totaled some $1.55 billion. (See id . ¶¶ 555, 620, 7

1111.) 8

In addition to paying sham fees using es crowed funds, the vendors profited by pricing 9

their goods above fair market value, as well as by delivering substandard goods. (See Amended 10

Complaint ¶¶ 640-655.) The Complaint estimated that the cost to the Escrow Account of the delivery 11

of substandard and overpriced goods was at least $7 billion. (See id . ¶¶ 655, 1112.) 12

D. The Claims Against Defendants 13

On the basis of these events, the Amended Complaint asserted claims against three 14

groups of defendants. Five defendants are char acterized as "Oil Purchasing Defendants." They 15

include defendants David B. Chalmers, Jr., and Oscar S. Wyatt, Jr., who had personal ties to the 16

Hussein Regime and who have pleaded guilty to conspiracy offenses related to Programme corruption. 17

(See Amended Complaint ¶¶ 397-407, 478-492.) The other three Oil Purchasing Defendants are 18

energy firms, one of which was a ffiliated with Wyatt. These firms purchased Iraqi oil through the 19

Programme, either directly or indirectly, and paid su rcharges, either directly or indirectly, to the Iraqi 20

government. (See id . ¶¶ 421-475.) Two of these firms entere d into non-prosecution agreements with 21

- - 15the Department of Justice, and the third pleaded gu ilty in state court to grand larceny, in relation to 1

their roles in the Programme corruption. (See id . ¶¶ 424, 442, 462-464.) 2

Six other defendants, BNP Paribas USA and five affiliates (collectively "BNP"), are 3

banking entities. BNP was the bank at which the United Nations established the Escrow Account 4

through which the Oil Purchasing De fendants paid for Iraqi oil and through which Iraq paid for the 5

humanitarian goods it purchased. The Escrow Acc ount was located at BNP Paribas USA in New 6

York City. (See Amended Complaint ¶¶ 286, 975, 978.) Under the terms of its agreement with the 7

United Nations and a United States government license to deal in Iraqi funds, BNP was obligated to 8

conform its conduct to the Programme's rules. Notwithstanding this obligation, BNP, which issued 9

letters of credit for a majority of the oil purchases under the Programme, contravened Programme 10

regulations and its agreement with the United Nations by, inter alia , "cooperati[ng] with the Oil 11

Purchasing Defendants to hide material informa tion from the UN" including its knowledge that "oil 12

purchasers were paying a substantial premium over the OSP" and that some oil purchasers "were 13

financing the purchase of oil . . . by others" (id . ¶¶ 1022-1024); "ma[king] payments of Escrow funds 14

without proper authorization from the United Nations" (id . ¶ 1038); and being "involved in the 15

transfer of approximately $10 million in illicit su rcharges paid to the Hussein Regime" (id . ¶ 1050). 16

All of the remaining defendants discussed in the Complaint are characterized as 17

"Vendor Defendants." Their businesses involved the sale of foodstuffs, pharmaceuticals, medical and 18

agricultural supplies, industrial machinery, and vehi cles; all of these defendants are alleged to have 19

participated in the scheme to overcharge for their pr oducts and to pay part of the overage back to the 20

Hussein Regime. (See Amended Complaint ¶¶ 800-974.) Several of the Vendor Defendants have 21

admitted--in deferred prosecution agreements, plea agreements, or other public admissions--that they 22

secretly paid illegal kickbacks on Programme contracts. (See id . ¶¶ 662-799.) 23

- - 16The Complaint principally asserted claims against all defendants under RICO. It 1

alleged that the Oil-for-Food Programme was a RICO enterprise, either in itself or as associated in 2

fact with, inter alia , defendants and the 661 Committee; the Complaint alleged that defendants 3

conducted or participated in the conduct of the en terprise through a pattern of racketeering activity 4

involving, inter alia , mail and wire fraud, money laundering, a nd bribery, in violation of 18 U.S.C. 5

§ 1962(c), and conspired to do so in violation of id . § 1962(d). The Complaint also alleged that, by 6

paying kickbacks to the Hussein Regime, the Ve ndor and Oil Purchasing Defendants violated the 7

Foreign Corrupt Practices Act, 15 U.S.C. §§ 78dd-1 et seq. 8

The Complaint asserted, inter alia , common-law claims against BNP for breach of its 9

fiduciary duty to Iraq; claims against two of the Oil Purchasing Defendants for inducing BNP to 10

breach that fiduciary duty; claims against all defe ndants for fraud and conspiracy to commit fraud in 11

dealing with the United Nations in connection with the Programme, for breach of their contractual 12

commitments to the United Nations, and for unjust enrichment resulting from the excessive profits 13

made as a result of their illegal kickbacks to the Hussein Regime; and claims against all defendants 14

for inducing the Hussein Regime to breach its fiduciary duties to the Iraqi people. 15

E. The District Court Decision 16

Defendants moved to dismiss the Amended Complaint pursuant to Rule 12(b)(1) on 17

a variety of jurisdictional grounds, and pursuant to Rule 12(b)(6) for failure to state a claim for a 18

variety of reasons. In a thorough opinion reporte d at 920 F.Supp.2d 517, the district court rejected 19

defendants' jurisdictional arguments; but it granted defendants' motions to dismiss the Republic's 20

RICO claims on the alternative grounds of (1) lack of extraterritorial applicability of RICO, (2) the 21

defense of in pari delicto , and (3) the Amended Complaint's failure to allege that defendants' 22

- - 17racketeering activity was the proximate cau se of the Republic's injuries. See id . at 542-50. The court 1

also agreed with defendants that "the FC PA offers no private right of action." Id . at 551. And, 2

concluding that the Republic's common-law claims aros e under state rather than federal law, the court 3

declined to exercise supplemental jurisdiction as to those claims. See id

. 4

In addressing the in pari delicto defense, the district court stated in part as follows: 5

Iraq has attempted to fit this wrongdoi ng into the mold of a civil action. 6

At its heart, Iraq says, its case amounts to a principal seeking to recover for the 7

harms caused to it by a wayward agent--Saddam Hussein--and his co8

conspirators the defendants in this action. . . . 9

Defendants have now moved to dismiss Iraq's First Amended 10

Complaint ("Complaint") on a variety of theories, almost all of which touch on 11

the relationship of Iraq to the wrongs for which it seeks relief. The parties 12

agree that the injustices alleged were instigated and directed by Hussein and 13

his Regime . But the parties dispute whether the Republic of Iraq must bear 14

responsibility for the acts of the Husse in Regime and, if so, what that 15

responsibility means for this action. 16

The Court concludes that the Complaint alleges conduct by the Hussein 17

Regime that, as a matter of law, is attr ibutable to plaintiff itself, the Republic 18

of Iraq. The alleged misconduct has a governmental character. Therefore, the 19

conduct comes within the default rule that a regime's governmental conduct 20

redounds to the sovereign. The Court re jects Iraq's view that it may sidestep 21

responsibility because the conduct was illegal or the actors held power 22

illegitimately. Sovereigns . . . cannot escape the consequences of their 23

representatives' governmental misconduct. Questions of attribution are distinct 24

from questions of lawfulness or legitimacy. 25

The legal relationship between Iraq a nd Hussein frames the case . . . . 26

Having engineered the wrongdoing alleged in the Complaint, and having 27

alleged that the wrongdoing directly harmed the Programme, Iraq cannot 28

recover from that wrongdoing

. 29

920 F.Supp.2d at 524 (emphases added). 30

The district court noted that "the U.S. G overnment treated the Hussein Regime as the 31

effective government during the relevant time period," that "[t]he United Nations also treated the 32

Hussein Regime as the effective Iraqi government," and that plaintiff's couns el during oral argument 33

- - 18stated, inter alia , "'We agree his regime was the presiden t of Iraq, the government of Iraq, the agent 1

of Iraq.'" Id . at 535. 2

The legal relationship between the sovereign Republic of Iraq, the 3

Hussein Regime, and the Iraqi people fram es this litigation. That relationship 4

rests on time-tested principles: 5

# The change in governments--fro m the Hussein Regime; to the 6

Coalition Provisional Authority that governed subsequent to the fall of 7

Saddam Hussein; to the contemporary Republic--did not create an 8

entirely new state. Rather, those changes altered the leadership and 9

government of a continuously existing state. Therefore, the Republic 10

of Iraq is the same sovereign entity as the one controlled by the 11

Hussein Regime. . . . 12

# [T]he rights of a sovereign state are vested in the state rather than in 13

any particular government which may purport to represent it. . . . That 14

is, Hussein, the Hussein Regime, a nd the Republic of Iraq are not one 15

and the same; they are different governments over time that represent 16

the same sovereign state. . . . 17

# Notwithstanding the distinction between a state and its government, a 18

government may bind the sovereign it represents. . . . 19

920 F.Supp.2d at 535-36 (inter nal quotation marks omitted). Based on these principles, the court 20

concluded that "as a matter of law, the Republic of Iraq bears responsibility in this action for the 21

Hussein Regime's corruption of the Programme." Id . at 536. 22

Because sovereigns operate through their governments, both domestic 23

and international law ordinarily impute to a sovereign the acts of its 24

government. For example, government s set policy, hold pr operty, a nd conduct 25

foreign affairs. The consequences of these governmental acts trace back to the 26

sovereign. . . . So do wrongful acts by those governments. "A state is 27

responsible for any violation of its ob ligations under international law resulting 28

from action or inaction by [ ] the government of the state. . . ." Restatement 29

(Third) of Foreign Relations Law of the United States § 207 (1987) . . . . 30

Moreover, the consequences of one government's acts may redound to 31

the sovereign even after that government has been replaced. 32

920 F.Supp.2d at 536. While noting that "it is possi ble for the persons who comprise the government 33

- - 19to act without acting as the government," id . at 537, the court recognized that "a sovereign may be 1

held to account for the governmental conduct of the persons serving as its government." Id . (emphasis 2

in original). The court concluded that the "the Hussein Regime's Programme misconduct" alleged in 3

the Amended Complaint was governmental. Id . at 538. 4

The Complaint alleges conduct by the Hussein Regime done under the 5

color of its authority as the government of Iraq. Therefore, the Programme 6

conduct of the Hussein Regime should be attributed to Iraq for the purposes 7

of this action. 8

First, the Complaint alleges that the Hussein Regime's "main goal" was 9

to "undermine UN sanctions and the U.S. law prohibiting transactions with 10

State Sponsors of Terrorism." (Compl. ¶ 7.) Hussein declared the Iraq 11

Sanctions Program to be a form of " economic occupation" implemented by the 12

"enemy." (Id. ¶ 302.) Thus, the alleged misconduct represents choices made 13

by the Regime in the conduct of its foreign affairs. . . . 14

Second, the Complaint alleges that the Hussein Regime implemented 15

its scheme by using its powers to enga ge with the UN. The Hussein Regime 16

made the corruption possibl e, not just because it was in a position to corrupt 17

the Programme, but because it agreed to the creation of the Programme in the 18

first place: it did so in its capacity as the Government of Iraq. (See MOU § 10 19

(signature of Abdul Amir Al-Anbari "for Government of Iraq").) Additionally, 20

the Complaint alleges that the Hussein Regime (and defendants) effectuated 21

their scheme by submitting false contr acts to the UN. The Hussein Regime 22

could negotiate those contracts only by vi rtue of its status as the effective 23

government of Iraq. Thus, the Regime engaged in international transactions 24

of an official character. 25

Third, the Complaint alleges that the Hussein Regime acted through 26

government offices and officers to pursue its goal of frustrating the Iraq 27

Sanctions Program: 28

# Hussein ordered government agencies to effectuate the scheme. "[O]n 29

October 25, 2000, all Iraqi ministries were informed that Saddam 30

Hussein had ordered the imposition of kickbacks of at least 10% in 31

order to subvert the policies of the UN and the United States 32

government." (Compl. ¶ 302.) 33

# Government agencies negotiated the transactions. "The Iraqi State Oil 34

Marketing Organization (SOMO) was the legal entity that entered into 35

the contracts with companies purchasing oil under the Programme." 36

- - 20(Id . ¶ 323.) On the goods side of the Programme, "a company wishing 1

to sell humanitarian goods under the Programme contracted with the 2

appropriate Iraqi Ministry or St ate-Owned Enterprise. . . ." (Id . ¶ 329.) 3

# Government agents and agencies received the illicit funds. The 4

Hussein Regime collected surcharges in accounts held "under the 5

names of two SOMO employees" a nd then transferred the funds to 6

"accounts of the Central Bank of Iraq." (Id . ¶¶ 473-74.) [The 7

Complaint] alleges that the Iraqi vi ce president directed that the after8

sales-service fee revenue "be transferred to general treasury." (Id

. 9

¶ 568.) It also alleges that various governmental units or government10

owned businesses collected fees and bribes. (E.g. , id . ¶ 546 (Iraqi 11

Ministry of Transportation); ¶ 550 (payments "going back to the Iraq 12

Government"); ¶ 565 ("payments were transferred to Iraq in cash").) 13

In sum, Iraq alleges that its injuri es resulted from the Hussein Regime's 14

prosecution of its foreign affairs policy. The Complaint alleges a public goal, 15

undertaken with public resources, pursued for political purposes, and using 16

means available only to state actors. Th ese features lead the Court to conclude 17

the Hussein Regime acted under the color of its authority as the government 18

of Iraq for the purposes of this motion. 19

920 F.Supp.2d at 538-39. 20

The district court concluded that "the Complaint alleges that the Hussein Regime 21

conceived and orchestrated the wrongful conduct with defendants' assistance and thus it cannot 22

proceed due to the defense of in pari delicto." Id . at 550. 23

II. DISCUSSION 24

On appeal, the Republic challenges most of the district court's unfavorable rulings. 25

With respect to the dismissal of its RICO claims on the basis of in pari delicto , the Republic contends 26

principally that that doctrine was inapplicable, ar guing that the conduct of the Hussein Regime is not 27

attributable to the Republic because that conduct was adverse to the interests of Iraq and its citizens. 28

The Republic also argues that the question of comparative fault is a fact question that could not 29

- - 21properly be resolved on a Rule 12(b)(6) motion; alte rnatively, it argues that the district court should 1

have allowed it to amend its Amended Complaint. The Republic challenges the dismissal of its claims 2

under the Foreign Corrupt Practices Act, arguing that the "line of authority" relied on by the district 3

court for the proposition that the FCPA does not provide an implied priv ate right of action "is in error" 4

(Republic brief on appeal at 56) and that the legi slative history demonstrates that Congress intended 5

that such an implied right of action be recognized by the courts. The Republic also contends that, 6

given the interest of the United States in speak ing with a single voice on matters affecting foreign 7

relations, the district court erred in ruling that th e Republic's nonstatutory claims arose under state law 8

rather than federal common law. 9

Defendants, in addition to endorsing the dist rict court's Rule 12(b)(6) rulings, renew 10

their challenge to the Republic's standing under Article III of the Constitution to recover for injuries 11

to the Republic's proprietary interests, arguing that "Iraq itself instigated the alleged wrongs and 12

received the illicit payments" (Defendants' brief on a ppeal at 31). We reject this standing argument 13

for substantially the reasons stated by the district court, see 920 F.Supp.2d at 531-32. 14

With respect to the RICO claims, we affirm the district court's dismissal on the basis 15

of the in pari delicto doctrine, and we thus need not address the Republic's challenges to the other 16

grounds on which the district court dismissed those claims. This dismissal was properly based on the 17

Republic's pleading, and we see no abuse of discretion in the district court's denial of leave to amend 18

the Amended Complaint. We also reject the Republic 's challenges to the dismissal of its FCPA claims 19

and its nonstatutory claims. 20

A. The RICO Claims 21

The doctrine of in pari delicto , a term meaning "of equal fa ult," reflects the principle 22

that a plaintiff who has participated in wrongdoing equally with another person may not recover from 23

- - 22that other person damages resulting from the wrongdoing. The principal contexts in which the 1

Supreme Court has discussed the applicability of in pari delicto to a cause of action created by federal 2

statutes are the antitrust laws, see Perma Life Mufflers, Inc. v. International Parts Corp. , 392 U.S. 134 3

(1968) ("Perma Life "), overruled on other grounds by Copperweld Corp. v. Independence Tube Corp.

, 4

467 U.S. 752 (1984), and the securities laws, see Bateman Eichler, Hill Richards, Inc. v. Berner , 472 5

U.S. 299 (1985) ("Bateman Eichler "); Pinter v. Dahl , 486 U.S. 622 (1988) ("Pinter "). 6

In Perma Life , the Supreme Court reversed lower-court rulings that had upheld an in 7

pari delicto defense asserted by a franchisor, Midas Muffler ("Midas"), against franchisees who 8

alleged that their franchise agreements violated th e antitrust laws. While stating that "the doctrine of 9

in pari delicto , with its complex scope, contents, and effect s, is not to be recognized as a defense to 10

an antitrust action," 392 U.S. at 140, the Court noted that even a narrower de fense of shared fault 11

would have been inapplicable in the case before it because the record showed that "the illegal scheme 12

was thrust upon the[ franchisees] by Midas," id . at 141. Five Justices, how ever, opined that a defense 13

to an antitrust claim should be recognized if the plaintiff really bore at least substantially equal 14

responsibility for the violation. See id . at 146 (White, J ., concurring); id . at 147 (Fortas, J ., concurring 15

in result); id . at 149 (Marshall, J ., concurring in result); id . at 156 (Harlan, J ., joined by Stewart, J

., 16

concurring in relevant part and dissenting in part). 17

In Bateman Eichler , the Supreme Court described Perma Life in part as follows: 18

In reversing . . . , the opinion for th is Court emphasized that there was no 19

indication that Congress had intended to incorporate the defense into the 20

antitrust laws, which "are best served by insuring that the private action will 21

be an ever-present threat to deter anyone contemplating [illegal] business 22

behavior." [392 U.S.] at 139. Acco rdingly, the opinion concluded that "the 23

doctrine of in pari delicto , with its complex scope, contents, and effects, is not 24

to be recognized as a defense to an antitrust action." Id ., at 140. The opinion 25

reserved the question whether a plain tiff who engaged in "truly complete 26

involvement and participation in a monopolistic scheme"--one who 27

"aggressively support[ed] and further[ ed] the monopolistic scheme as a 28

necessary part and parcel of it"--could be barred from pursuing a damages 29

- - 23action, finding that the muffler dealers had relatively little bargaining power 1

and that they had been coerced by the fr anchisor into agreeing to many of the 2

contract's provisions . Ibid

. 3

In separate opinions, five Justices agreed that the concept of "equal 4

fault" should be narrowly defined in litigation arising under federal regulatory 5

statutes. "[B]ecause of the strong public interest in eliminating restraints on 6

competition, . . . many of the refinements of moral worth demanded of 7

plaintiffs by . . . many of the variations of in pari delicto should not be 8

applicable in the antitrust field." Id ., at 151 (MARSHALL, J., concurring in 9

result). The five Justices concluded, how ever, that where a plaintiff truly bore 10

at least substantially equal responsibility for the violation, a defense based on 11

such fault --whether or not denominated in pari delicto --should be recognized 12

in antitrust litigation

. 13

Bateman Eichler , 472 U.S. at 308-09 (footnote omitted) (emphases added). 14

The Bateman Eichler Court concluded that "the views expressed in Perma Life apply 15

with full force to implied causes of action under the federal securities laws." 472 U.S. at 310; see also 16

Pinter , 486 U.S. at 635 (same with respect to express causes of action). The Bateman Eichler Court 17

distilled a two-pronged standard incorporating both c onsideration of the plaintiff's relative degree of 18

fault and concern for minimizing the frustration of law-enforcement goals. Thus, it stated that "a 19

private action for damages" under the securities laws 20

may be barred on the grounds of the plai ntiff's own culpability only where (1) 21

as a direct result of his own actions, the plaintiff bears at least substantially 22

equal responsibility for the violations he seeks to redress, and (2) preclusion 23

of suit would not significantly interfere with the effective enforcement of the 24

securities laws and protection of the investing public. 25

472 U.S. at 310-11. As the Court noted in Pinter , "[t]he first prong of this test captures the essential 26

elements of the in pari delicto doctrine," 486 U.S. at 633. Not only must the plaintiff "be an active, 27

voluntary participant in the unlawful activity that is the subject of the suit," but it is necessary that 28

"the degrees of fault [be] essentially indistingui shable or the plaintiff's responsibility [be] clearly 29

greater." Id . at 636. "The second prong . . . embodies the doctrine's traditional requirement that 30

- - 24public policy implications be carefu lly considered before the defense is allowed," thus "ensur[ing] that 1

. . . judge-made law does not undermine . . . congressional policy." Id . at 633. 2

Applying its two-part test in the context of claims for violations of federal securities 3

laws, the Supreme Cour t in Bateman Eichler affirmed the rejection of an in pari delicto defense 4

against plaintiff investors who claimed that a broker-dealer gave them false and misleading 5

information that was represented to be accurate inside information. It concluded that an investor who 6

engaged in trading on the basis of an insider tip is not necessarily as blameworthy as a corporate 7

insider or broker-dealer who discloses th e information for personal gain. See 472 U.S. at 312-14. In 8

Pinter , considering claims between sellers of unreg istered securities, the Court remanded for a 9

determination of relative fault. See 486 U.S. at 639-41. Comparison of the parties' degree of fault, 10

and thus the applicability of the first prong of the Bateman Eichler test, will often depend on findings 11

of fact as to the circumstances plaintiff's involvement. See , e.g. , id .; Gatt Communications, Inc. v. 12

PMC Associates, L.L.C. , 711 F.3d 68, 80-81 (2d Cir. 2013) (noting th at "several of our sister circuits 13

[that] have recognized an in pari delicto defense in civil antitrust litigation . . . have generally done 14

so on appeal from summary judgment or after trial, when the extent and circumstances of the culpable 15

plaintiff's involvement have been factually devel oped, and the possibility that the plaintiff's behavior 16

was motivated by economic duress--a factor that c ould relieve the plaintiff of an in pari delicto bar-- 17

has been examined"). But a court may "appl[y] the in pari delicto doctrine at the pleadings stage . . . . 18

where . . . the outcome is plain on the face of the pleadings." In re Bernard L. Madoff Investment 19

Securities LLC. , 721 F.3d 54, 65 (2d Cir. 2013), cert. denied , 134 S. Ct. 2895 (2014). 20

Neither the Supreme Court nor this Cour t has decided whether in pari delicto is a valid 21

defense to a civil RICO claim. The courts of app eals that have reached this question have concluded 22

that it is. See Official Committee of Unsecured Creditors of PSA, Inc. v. Edwards , 437 F.3d 1145, 23

- - 251152-56 (11th Cir.) ("Edwards "), cert. denied , 549 U.S. 811 (2006); Rogers v. McDorman , 521 F.3d 1

381, 387-91 (5th Cir. 2008). 2

RICO itself, while expressly authorizing a person injured in its business or property 3

to bring a civil action for treble damages, see 18 U.S.C. § 1964(c), is silent as to the availability of 4

any common-law defense. Such silence does not nece ssarily mean that such defenses are unavailable, 5

however, because "Congress is understood to le gislate against a background of common-law 6

adjudicatory principles." Astoria Fe deral Savings & Loan Ass'n v. Solimino , 501 U.S. 104, 108 7

(1991). "Thus, where a common-law principle is well es tablished, . . . the courts may take it as given 8

that Congress has legislated with an expectation th at the principle will apply except when a statutory 9

purpose to the contrary is evident." Id . (internal quotation marks omitted). 10

The in pari delicto principle is well established. The Bateman Eichler Court traced the 11

"classic formulation" of the doctrine back to th e eighteenth century. 472 U.S. at 306-07 & n.12; see

, 12

e.g. , Nisselson v. Lernout , 469 F.3d 143, 151 (1st Cir. 2006) (in pari delicto "has long been woven 13

into the fabric of federal law"), cert. denied , 550 U.S. 918 (2007). The Pinter Court noted that the in 14

pari delicto defense "traditionally has been applied in any action based on conduct that transgresses 15

statutory prohibitions," 486 U.S. at 634 (internal quotation marks omitted), and stated that it will be 16

"available when Congress expressly provides for private remedies," id . at 635, so long as application 17

of the defense would not frustrate the purpos e of the federal statute in question, see id . at 633, 637-38. 18

Applying the Bateman Eichler test to the Republic's RICO claims in the present action, 19

we have no difficulty concluding that the district court's dismissal on the basis of in pari delicto was 20

correct. 21

- - 261. Prong One: Responsibility 1

The very premise of the Republic's Complaint is that the Hussein Regime "designed 2

and instigated" the corruption of the Oil-for-F ood Programme. (Amended Complaint ¶ 4.) The 3

Complaint is replete with descri ptions of demands made on the Oil Purchasing Defendants and the 4

Vendor Defendants to pay all manner of "mandatory kickback[s]" (id . ¶ 566 (internal quotation marks 5

omitted)) and illicit surcharges. (See Part I.C. above.) Even a de fendant who had close personal ties 6

to the Hussein Regime was forced against his will to pay illegal kickbacks in order to do business with 7

Iraq in the Oil-for-Food Programme. (See Amended Complaint ¶¶ 352, 499-503.) Under the Hussein 8

Regime's policy, "[n]o company [was to] be exempted for any reason." (Id . ¶ 502 (internal quotation 9

marks omitted).) The Complaint portrays BNP as having concealed from the United Nations 10

information about contract irregul arities and having facilitated improper payments of escrowed funds, 11

thereby assisting the Hussein Regime to achie ve its "corrupt and wrongful intentions" (id . ¶ 980; see

, 12

e.g. , id . ¶¶ 1022-1024, 1038). Because it is evident from the face of the Complaint that the Hussein 13

Regime was the instigator and dominant force behind the scheme to subvert the Programme, the 14

conclusion is inescapable that the Hussein Regime bears at least substantially equal responsibility for 15

the Programme's corruption. 16

The Republic attempts to escape the ramifications of this responsibility through an 17

argument that the Regime's wrongdoing should not be attributed to the Republic. That argument is 18

meritless. Our law has long recognized that the le gal position of a foreign state survives changes in 19

its government. Thus, a foreign state's proprietary ri ghts, and its causes of action in our courts, persist 20

following a change in its form of government. See The Sapphire , 78 U.S. (11 Wall.) 164, 168 (1871); 21

Lehigh Valley R. Co. v. State of Russia , 21 F.2d 396, 399-401 (2d Cir.), cert. denied , 275 U.S. 571 22

(1927). Similarly, the obligations of a foreign st ate are unimpaired by a change in that state's 23

- - 27government. See Comanche County v. Lewis , 133 U.S. 198, 205 (1890). Because "the rights of a 1

sovereign state are vested in the state rather th an in any particular government which may purport to 2

represent it," Guaranty Trust Co. v. United States , 304 U.S. 126, 137 (1938) ("Guaranty Trust "), when 3

a foreign "government changes, the nation remains, with rights and obligations unimpaired," United 4

States ex rel. Kessler v. Watkins , 163 F.2d 140, 143 (2d Cir.) (interna l quotation marks omitted), cert. 5

denied , 332 U.S. 838 (1947). 6

The Republic's own allegations demonstrate that, during the times relevant to the 7

Complaint, Saddam Hussein's regime constituted the government of Iraq. The Complaint alleged that 8

Hussein and his political party "controlled Iraq" from the time of a 1979 "military coup" until the 9

regime was "ousted" in 2003. (Amended Complaint ¶¶ 7, 216, 219.) During his years of power, 10

Hussein--whose title was President--"installed official s under his direct control in all areas of the 11

government" (id . ¶ 218), whom he used to control "a ll Iraqi ministries and agencies" (id . ¶ 562; see 12

id . ¶ 302). As described in the Complaint, these included the ministries of oil (see id . ¶¶ 412, 490, 13

575, 742, 747), transportation (see id . ¶ 527), finance (see id . ¶ 569), and defense (see id . ¶¶ 569, 656). 14

The Hussein Regime also controlled the State Oil Marketing Organization (see , e.g. , id . ¶ 323), which 15

was integral to the scheme to corrupt the Pr ogramme, and various state-owned enterprises that 16

purchased goods from the Vendor Defendants (see id . ¶ 329). The Hussein Regime acted as the 17

"Government of Iraq" (id . ¶ 490), as the United Nations and the United States acknowledged, and as 18

was universally understood. As the Republic acknowledged before the district court, the Hussein 19

Regime was "the president of Iraq[ and] the government of Iraq." 920 F.Supp.2d at 535 (internal 20

quotation marks omitted). 21

The Republic insists that although the Hussein Regime "was in de facto control of the 22

nation, it was not a de jure or legitimate government." (Amended Complaint ¶ 220.) It alleged that 23

- - 28the Hussein Regime assumed and retained power in contravention of domestic laws, and committed 1

vile and genocidal acts, thereby making the Regime "[il]legitimate" from domestic and international 2

perspectives (id . ¶¶ 220, 223). These allegations, however, are irrelevant to the question of whether 3

the acts of the Hussein Regime were acts of Iraq. A foreign government's actions are attributed to the 4

state regardless of whether they are "legal under the municipal law of the foreign state," Banco de 5

Espana v. Federal Reserve Bank of New York , 114 F.2d 438, 443 (2d Cir. 1940); see , e.g. , Bernstein 6

v. Van Heyghen Freres Societe Anonyme , 163 F.2d 246, 248-49 (2d Cir.), cert. denied , 332 U.S. 772 7

(1947); Westfield v. Federal Republic of Germany , 633 F.3d 409, 418 (6th Cir. 2011), and whether 8

they "are done by the authority of a de jure or titular, or of a de fact o, government," Underhill v. 9

Hernandez , 65 F. 577, 582 (2d Cir. 1895), aff'd , 168 U.S. 250 (1897). Thus, the district court properly 10

ruled that the actions of the Hussein Regime, while it acted as the government of Iraq, are to be 11

attributed to The Republic of Iraq. 12

Of course, not every action that happens to be taken by officials of a foreign state is 13

properly attributable to that state. For instance, in considering the applicability of the act-of-state 14

doctrine--the affirmative defense that "precludes th e courts of this country from inquiring into the 15

validity of the public acts a recognized foreign s overeign power committed within its own territory," 16

Banco Nacional de Cuba v. Sabbatino , 376 U.S. 398, 401 (1964) ("Sabbatino ")--courts distinguish 17

"between public and private acts of a foreign official," Republic of the Philippines v. Marcos , 806 18

F.2d 344, 359 (2d Cir. 1986) ("Marcos "), cert. denied , 481 U.S. 1048 (1987); see , e.g. , Jimenez v. 19

Aristeguieta , 311 F.2d 547, 557-58 (5th Cir. 1962), cert. denied , 373 U.S. 914 (1963). 20

But this distinction, although useful in dete rmining whether a foreign official's conduct 21

is attributable to his government or sovereign state, is beside the point where the alleged acts are those 22

not of an individual governmental official, but instead acts coordinated pursuant to the policies of an 23

- - 29entire government. It is apparent from the Complain t that the Hussein Regime's effort to subvert the 1

Programme was the policy of the Iraqi government. The Republic alleged that "the fundamental goal 2

of the Hussein Regime [was] to maintain and ex tend its power." (Amended Complaint ¶ 299.) "From 3

the perspective of the Hussein Regime, the main goal of the conspiracy was to undermine UN 4

sanctions" and thus to obtain foreign currency that would allow the Regime to "remain[] in power." 5

(Id . ¶ 7; see also id . ¶ 362 (referring to Hussein Regime goal of "generat[ing] . . . illicit income . . . , 6

which the Regime could use for non-humanitarian purpos es").) As the district court aptly concluded, 7

"[t]he Complaint allege[d] a public goal, undert aken with public resources, pursued for political 8

purposes, and using means available only to state actors." 920 F.Supp.2d at 539. We agree, and thus 9

conclude that the actions of the Hussein Regime are attributable to The Republic of Iraq. 10

We are not persuaded by the Republic's argument that, under general principles of 11

agency law, a government's actions should not be attributed to the state it governs when the 12

government abuses its power to contravene the nati onal interest. As a preliminary matter, we note 13

that the question of whether to attribute the conduct of a foreign government and its officials to their 14

state is a matter of federal law because "all questions relating to an act of state are questions of federal 15

law," Republic of Iraq v. First National City Bank , 353 F.2d 47, 51 (2d Cir. 1965) ("First National "), 16

cert. denied , 382 U.S. 1027 (1966). The partie s here, who are in agreement that this issue is a matter 17

of federal law, have not identified material differe nces between state and federal law, and we are not 18

aware of any. 19

General principles of agency law, such as those upon which the Republic relies, are 20

relevant to the question of whether the conduct of an official should be attributed to the state he 21

represents. See First Fidelity Bank, N.A. v. Government of Antigua & Barbuda--Permanent Mission

, 22

877 F.2d 189, 193 (2d Cir. 1989). Howeve r, we are not aware of any cases in which agency principles 23

- - 30of attribution were deemed relevant to the relationship between a government and its state. The 1

Republic relies on the case of The Sapphire , which incidentally used the word "agent" while holding 2

that a successor government stands in the legal shoes of its predecessor, see 78 U.S. (11 Wall.) 3

at 168-69. But that case does not stand for the proposition that a government is to be treated as a 4

separate entity that is an agent of its state. Nor should it be, because a government and the sovereign 5

state it rules do not have separate legal personalities. See Guaranty Trust , 304 U.S. at 137 ("the rights 6

of a sovereign state are vested in the state rather than in any particular government which may purport 7

to represent it"). 8

Even assuming that Iraq could be regarded as a principal and the Hussein Regime its 9

agent, under the general rule of agency the agent's actions are normally attributed to the principal. 10

To escape application of this general rule, the Repub lic seeks to invoke what is known as the "'adverse 11

interest' exception," under which "acts of the agent will not be charged to the [principal] if although 12

the agent purportedly acts for the [principal], he is really committing a fraud for his own benefit," In 13

re Bennett Funding Group, Inc. , 336 F.3d 94, 100 (2d Cir. 2003) (int ernal quotation marks omitted). 14

However, "this [is the] most narrow of exceptions," "reserve[d] . . . for those cases--outright theft or 15

looting or embezzlement--where the insider's misconduc t benefits only himself or a third party; i.e., 16

where the fraud is committed against a [principal] rather than on its behalf." Kirschner v. KPMG 17

LLP , 15 N.Y.3d 446, 466-67, 912 N.Y.S.2d 508, 519 (2010) ("Kirschner ") (emphasis in original). 18

"To come within the exception, the agent must have totally abandoned his 19

principal's interests and be acting entirely for his own or another's purposes. 20

It cannot be invoked merely because he ha s a conflict of interest or because he 21

is not acting primarily for his principal" . . . . 22

Id . at 466, 912 N.Y.S.2d at 519 (quoting Ce nter v. Hampton Affiliates, Inc. , 66 N.Y.2d 782, 784-85, 23

497 N.Y.S.2d 898, 900 (1985)) (emphases in Kirschner ). "Thus, [s]hould the agent act[ ] both for 24

- - 31himself and for the principal, . . . application of the exception would be precluded . . . ." Kirschner

, 1

15 N.Y.3d at 467, 912 N.Y.S.2d at 519 (internal quotation marks omitted). "This rule avoids 2

ambiguity where there is a benefit to both th e [agent] and the [principal] . . . ." Id . at 466, 912 3

N.Y.S.2d at 519 (internal quotation marks omitted). 4

The adverse-interest excepti on is inapplicable to the Republic in light of the 5

Complaint's allegations of Hussein Regime conduct that, rather than totally abandoning Iraq's 6

interests, in part benefited Iraq. The Complaint alle ged, for example, that millions of dollars of secret 7

illegal surcharges were paid "to the Government of Iraq" (Amended Complaint ¶ 483 (internal 8

quotation marks omitted)) to enable "the Government of Iraq to achieve its objective of collecting the 9

illegal surcharges on oil" (id . ¶ 482 (internal quotation marks omitted )). The Complaint also alleged 10

that the Vice President of the Hu ssein Regime had ordered that all of the sham after-sales-service 11

fees--which totaled "about $1.02 billion . . . by March 2003" (id . ¶ 620)--"'be transferred to general 12

treasury '" (id . ¶ 568 (emphasis added)). Thus, even if Iraq were regarded as a principal and the 13

Hussein Regime its agent, the adverse-interest ru le would be inapplicable because some of the 14

misconduct was committed on behalf of Iraq. 15

The Republic argues that in order to "support application of the adverse interest 16

exception," it should have been allowed to amend the Amended Complaint to clarify and amplify 17

allegations that "Hussein utilized his control over the Iraqi government to serve his personal goals." 18

(Republic brief on appeal at 31.) But even in making that argument the Republic reveals its futility. 19

The Republic states that it would allege that "H ussein and his family stole a material portion of the 20

funds paid illegally to the Hussein Regime by th e Defendants." (Republic brief on appeal at 35 21

(emphasis added).) As the Republic has alleged that the Hussein Regime ordered some of the illegally 22

obtained funds to be deposited in Iraq's treasury a nd used for political purposes, the interests of Iraq 23

- - 32were not totally abandoned. The adverse-interest exception cannot apply to allegations that Saddam 1

Hussein's government and its coconspirators obtai ned funds by fraud on behalf of, among others, the 2

Iraqi State. 3

Finally, the fact that Saddam Hussein's government was deposed in favor of a 4

constitutional democracy provides no basis to avoid imputing its conduct to the Republic. The change 5

in the structure of a foreign government "works no change in the national sovereignty or its rights," 6

The Sapphire , 78 U.S. (11 Wall.) at 168, because those "rights . . . are vested in the state rather than 7

in any particular government which may purport to represent it," Guaranty Trust , 304 U.S. at 137. 8

Likewise, where a plaintiff in Iraq's position bears fault, it does not escape the consequence of its 9

wrongdoing on the basis of a change in leadership. Cf . Baena v. KPMG LLP , 453 F.3d 1, 9-10 (1st 10

Cir. 2006) (doubting an exception to in pari delicto for cases "where prior management was at fault" 11

even where "the claim [is] asserted on behalf of [innocent] creditors or shareholders"). 12

In sum, the Complaint reveals that the government of Iraq was the instigator and 13

dominant party in the frauds and breaches that corrupted the Oil-for-Food Programme. Its 14

responsibility for the wrongs perpetrated was at least as great as that of a ny defendant. The district 15

court properly attributed that responsibility to the Republic. 16

2. Prong Two: Policy 17

The second prong of the Bateman Eichler test asks whether recognition of the in pari 18

delicto defense to a federal statutory cause of action would comport with the pur poses of the statute. 19

The Eleventh Circuit has aptly explained why "the application of in pari delicto to bar [a 20

coconspirator's RICO claim] advances the policy of civil liability under the federal RICO statute," 21

Edwards , 437 F.3d at 1155: 22

- - 33Under RICO, "[i]t shall be unlawful for any person employed by or associated 1

with any enterprise . . . to conduct or participat e . . . in the conduct of such 2

enterprise's affairs through a pattern of racketeering activity or collection of 3

unlawful debt." 18 U.S.C. § 1962(c) (emphas[e]s added). It would be 4

anomalous, to say the least, for the RICO statute to make racketeering 5

unlawful in one provision, yet award the violator with treble damages in 6

another provision of the same statute. Congress intended RICO's civil 7

remedies to help eradicate organized cr ime from the social fabric by divesting 8

the association of the fruits of ill-gotten gains. . . . [Plaintiff]'s recovery under 9

RICO would not divest RICO violators of their ill-gotten gains; it would result 10

in a wealth transfer among similarly situated conspirators. 11

437 F.3d at 1155 (other internal quotation marks omitted). We agree. Thus, it is consistent with the 12

purpose of RICO to recognize an in pari delicto defense in cases where, as a direct result of the 13

plaintiff's "affirmative wrongdoing," id ., the plaintiff bears "at least substantially equal responsibility," 14

Bateman Eichler , 472 U.S. at 310, for the RICO violations of which it complains. 15

We see no error in the district court's ruli ng that application of the in pari delicto 16

doctrine in the present case does not offend public policy. We conclude that the Republic's RICO 17

claims were properly dismissed on the basis of that doctrine. 18

3. A Few Words About the Dissent 19

Our dissenting colleague's disagreement with our affirmance of the district court's 20

dismissal of the Republic's RICO claims on the basis of the in pari delicto defense prompts us to make 21

several observations as to the dissent's analysis of that defense and of the effect of its application. 22

a. The Dissent's Interpretation of Bateman Eichler 23

The dissent appears to accept that, in de termining whether "the in pari delicto defense 24

is allowed," we should look to the two- pronged test set out in Bateman Eichler , Dissenting Opinion 25

post at 20-21. However, we disagree with the disse nt's interpretation of each prong of that test. 26

- - 34As to the first pron g, we do not agree that the in pari delicto defense--as contrasted 1

with the doctrine of unclean hands--is "founded 'upon the court's repugnance to the suitor personally,'" 2

id . at 27 (quoting Art Metal Works, Inc. v. Abraham & Straus, Inc. , 70 F.2d 641, 646 (2d Cir. 1934) 3

("Art Metal Works I ") (L. Hand, J ., dissenting), on reconsideration, dissent adopted by Art Metal 4

Works, Inc. v. Abraham & Straus, Inc. , 107 F.2d 944 (2d Cir.) ("Art Metal Works II "), cert. denied

, 5

308 U.S. 621 (1939) (collectively "Art Metal Works ")), or with our dissenting colleague's view that 6

"in pari delicto 'has nothing do with the rights or liabilities of the parties,'" Dissenting Opinion post 7

at 22 (quoting Art Metal Works I , 70 F.2d at 646 (L. Hand, J ., dissenting). Art Metal Works I was 8

decided on the basis of the doctrine of unclean hands. See 70 F.2d at 644 (majority opinion) 9

("[a]pplying th[e] principle of equ ity" that "one coming into a court of equity must do so with clean 10

hands"); id . at 646 (L. Hand, J ., dissenting) ("The doctrine is confessedly derived from the 11

unwillingness of a court, originally and still nominally one of conscience, to give its peculiar relief 12

to a suitor who in the very controversy has so conducted himself as to shock the moral sensibilities 13

of the judge."). 14

Although the doctrines of unclean hands and in pari delicto are often mentioned in the 15

same breath, they are "distinct terms for . . . distinct situations," Perma Life , 392 U.S. at 153 n.1 16

(Harlan, J ., concurring in part and dissenting in part). Only the former was at issue in Art Metal 17

Works , and only the latter is at issue here. The in pari delicto doctrine was not mentioned in any of 18

the Art Metal Works opinions, and indeed could not have had application in that case. As the 19

Supreme Court has described the Bateman Eichler test, the in pari delicto doctrine does not depend 20

upon the plaintiff's morality, but instead permits the "defendant [to] escape liability" to the plaintiff 21

based on the plaintiff's "at least substantially equal responsibility for the underlying illegality ," Pinter

, 22

486 U.S. at 635-36 (emphasis added); see id . at 636 ("Plaintiffs who are truly in pari delicto are those 23

- - 35who have themselves violated the law in cooperation with the defendant ." (internal quotation marks 1

omitted) (emphasis ours)). In Art Metal Works , a case involving patent infringement, there was no 2

suggestion that the plaintiff shared any responsibility for the defendant's infringement. 3

We agree, of course, that the in pari delicto "doctrine[] require[s] that the plaintiff be 4

. . . 'an active, voluntary participant in the unlawful activity that is subject of the suit,'" Dissenting 5

Opinion post at 27 (quoting Pinter , 486 U.S. at 636). But we are awar e of no authority in federal law 6

requiring such responsibility to be "personal[]" ra ther than "derivative," Dissenting Opinion post at 7

27 (internal quotation marks omitted), especially in the context of a govern ment's action, given the 8

principle, discussed above, that the rights and lia bilities of a sovereign state are unaltered by the 9

upheaval of its government. 10

We also disagree with the dissent's interpretation of the second prong of the Bateman 11

Eichler test. The dissent focuses on the United States policy interest in providing humanitarian aid 12

to the people of Iraq. However, the appropriate fo cus for a court considering the applicability of the 13

in pari delicto defense to a federal cause of action is the public policy that underlies the particular 14

statute that provides that cause of action. See , e.g. , Pinter , 486 U.S. at 638 (considering "the 15

underlying statutory policies . . . . of the Securities Act"); Bateman Eichler , 472 U.S. at 315 16

(considering "the primary objective of the federal securities laws"); Edwards , 437 F.3d at 1155 17

(considering "the policy of civil liability under the federal RICO statute"). The dissent's approach 18

would free courts to disregard the in pari delicto defense on the basis of any "policy" articulable by 19

a creative plaintiff. 20

b. Additional Observations 21

We are compelled to make three additional observations as to views expressed by the 22

dissent as to the effect of our decision. First, the view that our decision "deprive[s] the ultimate 23

- - 36victims of the defendants' conduct of any remedy," Dissenting Opinion post at 5 (emphasis added), 1

appears to focus on the Republic's original atte mpt to pursue this action in parens patriae . The district 2

court ruled that the Republic "does not have parens patriae standing , [and] it may not pursue claims 3

in this action for harms to its quasi-sovereign interests or general harm inflicted on the people of Iraq ," 4

920 F.Supp.2d at 533 (emphases added). The Republic has not challenged this ruling on appeal. 5

Second, the dissent appears to endorse the view of the Republic "that it was the victim 6

of a fraud," Dissenting Opinion post at 37 (emphasis added). Howe ver, as the Amended Complaint 7

reveals, the government of Iraq was not the fraud's victim but its perpetrator and enforcer. 8

Finally, we reject the dissent's notion that our decision "release[s]" and "immunize[s] 9

the defendants from liability for conduct that was illegal under U.S. law," Dissenting Opinion post 10

at 5, 36. Plainly, our conclusion--that RICO's treble damages provision is not meant to enrich the 11

entity that instigated and coordinated the illegal scheme--does not preclude either more appropriate 12

civil lawsuits or the criminal prosecution of lawbreakers. 13

B. The Foreign Corrupt Practices Act 14

The Amended Complaint alleged that the surcharges and kickbacks paid by the Vendor 15

and Oil Purchasing Defendants violated the antib ribery provisions of the FCPA. The Republic 16

contends that the district court should have recogni zed an implied private right of action for violations 17

of those provisions despite a consistent line of cases holding to the contrary. The Republic is 18

particularly critical of Lamb v. Phillip Morris, Inc. , 915 F.2d 1024 (6th Cir. 1990) ("Lamb "), cert. 19

denied , 498 U.S. 1086 (1991), the leading case declining to recognize such a cause of action. The 20

Republic argues that Lamb erred in its analysis of the legislative history of the FCPA and that that 21

history suggests that the reason Congress did not e xpressly provide for a priv ate right of action was 22

to avoid creating a "negative inference" (Republic brief on appeal at 58 (internal quotation marks 23

- - 37omitted)), that would dissuade judicial recogniti on of implied private rights of action under other 1

provisions of the Securities Exchange Act of 1934, to which the FCPA was an amendment. We are 2

unpersuaded. 3

"[P]rivate rights of action to enforce fe deral law must be created by Congress." 4

Alexander v. Sandoval , 532 U.S. 275, 286 (2001) ("Sandoval "). A federal statute may create a private 5

right of action either expressly or, more rarely, by implication. In considering whether a statute 6

confers an implied private right of action, "[t]he judicial task is to interpret the statute Congress has 7

passed to determine whether it displays an intent to create not just a private right but also a private 8

remedy." Id . To discern Congress's intent, "we look first to the text and structure of the statute." 9

Lindsay v. Association of Professional Flight Attendants , 581 F.3d 47, 52 (2d Cir. 2009), cert. denied

, 10

130 S. Ct. 3513 (2010). To "illuminate" this analysis, id . at 52 n.3, we also consider factors 11

enumerated in Cort v. Ash , 422 U.S. 66 (1975), which include the following: 12

First, is the plaintiff one of the class for whose especial benefit the statute was 13

enacted, . . . --that is, does the statute create a federal right in favor of the 14

plaintiff? Second, is there any indication of legislative intent, explicit or 15

implicit, either to create such a remedy or to deny one? . . . . Third, is it 16

consistent with the underlying purposes of the legislative scheme to imply such 17

a remedy for the plaintiff? 18

Id . at 78 (emphasis in Cort v. Ash ) (internal quotation marks omitted). In our analysis, we are mindful 19

that "the Supreme Court has come to view the imp lication of private remedies in regulatory statutes 20

with increasing disfavor." Hallwood Realty Partners, L.P. v. Gotham Partners, L.P. , 286 F.3d 613, 21

618 (2d Cir. 2002). 22

The antibribery provisions of the FCPA prohibit certain entities and persons from, inter 23

alia , corruptly making payments to foreign officials for the purpose of influe ncing official action in 24

order to obtain business. See 15 U.S.C. §§ 78dd-1(a), 78dd-2(a), 78dd-3( a). The text of the statute 25

contains no explicit provision for a private right of action, although it does provide for civil and 26

- - 38criminal penalties, see id . §§ 78dd-2(g), 78dd-3(e), 78ff( c), and permits the Attorney General to seek 1

injunctive relief, see id . §§ 78dd-2(d), 78dd-3(d). Because "[t] he express provision of one method 2

of enforcing a substantive rule suggests that Congress intended to preclude others," Sandoval , 532 3

U.S. at 290, the structure of the statute, by focusing on public enforcement, tends to indicate the 4

absence of a private remedy. 5

The Cort v. Ash factors also do not support recognition of a private right. The statute's 6

prohibitions focus on the regulated entities; the FC PA contains no language expressing solicitude for 7

those who might be victimized by act s of bribery, or for any particular class of persons. "Statutes that 8

focus on the person regulated rather than the indivi duals protected create no implication of an intent 9

to confer rights on a particular class of persons." Sandoval , 532 U.S. at 289 (internal quotation marks 10

omitted). 11

Nor does the legislative history of the FCPA demonstrate an intention on the part of 12

Congress to create a private right of action. As discussed in Lamb , 915 F.2d at 1029, a bill introduced 13

by Senator Church in the 94th Congress included an express right of action for competitors of those 14

who bribed foreign officials, see S. 3379, 94th Cong. § 10, 122 Cong. Rec. 12,605, 12,607 (1976); 15

that provision, however, was deleted by a committee of the Senate, see S. Rep. No. 94-1031, at 13 16

(1976). 17

In the 95th Congress, which finally enact ed the FCPA, a committee of the House of 18

Representatives, in reporting out a bill that did not provide expressly for a private right of action, 19

made a statement that the House "Committee intends that the courts shall recognize a private cause 20

of action based on this legislation . . . on behalf of persons who suffe r injury as a result of prohibited 21

corporate bribery," H.R. Rep. No. 95-640, at 10 (1977). We have three main problems with the 22

Republic's reliance on this statement, and other aspects of the FCPA's legislative history, as 23

justification for judicial implication of a private right of action in its favor. 24

- - 39First, the House committee's statement was not repeated (and no endorsement of its 1

substance was in any way suggested) in the reports of either the Senate committee considering the 2

FCPA or the conference committee that reconciled th e views of the House and Senate to produce the 3

language of the FCPA as it was ultimately enacted. See S. Rep. No. 95-114 (1977); H.R. Rep. 95-831 4

(1977). Indeed, in the debate on the conference committee report, one conferee stated that the 5

question of whether "courts will recognize [an] implie d private right of action . . . . was not considered 6

in the Senate or during the conference, and thus [it] cannot be said that any intent is expressed at all 7

on this issue ." 123 Cong. Rec. 38,601, 38,602 (1977) (stateme nt of Sen. Tower) (emphasis added). 8

Second, although the legislative history contains additional references to the 9

desirability of a private right of action, they do not provide any clear indication of congressional intent 10

to create one. See generally Siegel, The Implication Doctrine a nd the Foreign Corrupt Practices Act, 11

79 Colum. L. Rev. 1085, 1105-12 (1979) (canvassing the legislative history in detail and finding "no 12

conclusive evidence of congressional intent to grant private actions"). 13

Third, we note that this case illustrates the wisdom of Lamb , which avoids the question 14

of what class of parties the FCPA was designed to protect. Although we agree that the statute was 15

"primarily designed to protect the integrity of American foreign policy and domestic markets," Lamb

, 16

915 F.3d at 1029, one might argue that it is princi pally the foreign governments whose processes 17

might be corrupted. The Republic's claim highlight s the obvious problem with the latter concern here: 18

The foreign government supposedly to be "protect [ed]" by the FCPA was th e entity that demanded 19

the bribes in the first place. 20

Finally, we note that although it has been n early a quarter of a century since Lamb was 21

decided, and although Congress has more recently amended the FCPA, see International Anti-Bribery 22

and Fair Competition Act of 1998, Pub. L. No. 105-366, 112 Stat. 3302 (1998), Congress has not 23

chosen to override Lamb . We conclude that there is no private right of action under the antibribery 24

- - 40provisions of the FCPA and that the district c ourt did not err in dismissing the Republic's FCPA 1

claims. 2

C. The Common-Law Causes of Action 3

The nonstatutory causes of action asserted in the Amended Complaint included claims 4

of fraud, breach of fiduciary duty, breach of cont ract, and unjust enrichment. The district court, 5

having dismissed the Republic's statutory causes of action, declined to exercise supplemental 6

jurisdiction over these common-law claims. The Republic, citing First National , 353 F.2d 47, and 7

Marcos , 806 F.2d 344, contends that the court should have entertained the nonstatutory claims as a 8

matter of federal common law, in the interest of having "the nation . . . speak with a united voice" in 9

order avoid complicating "foreign relations." (R epublic brief on appeal at 59 (internal quotation 10

marks omitted).) The Republic's reliance on these cases is misplaced. 11

"There is no federal general common law," Erie R. Co. v. Tompkins , 304 U.S. 64, 78 12

(1938), although federal common law has been held to displace state law in a few "narrow areas" 13

involving "uniquely federal interests," including wher e the "international nature of the controversy 14

makes it inappropriate for state law to control," Texas Industries, Inc. v. Radcliff Materials, Inc. , 451 15

U.S. 630, 641-42 (1981) (internal quotation marks omitte d). However, courts are to recognize the 16

"judicial creation of a special federal rule" only in those rare "situations where there is a significant 17

conflict between some federal policy or interest and the use of state law." O'Melveny & Myers v. 18

FDIC , 512 U.S. 79, 87 (1994) (internal quotation marks omitted). 19

In First National , we simply applied the existing rule that the applicability of the act20

of-state doctrine is a question of federal law. See 353 F.2d at 50-51. It has long been established that 21

the question of whether to "pass[] on the validity of fo reign acts of state" is a "uniquely federal" issue, 22

Sabbatino , 376 U.S. at 423-24. In Marcos , we concluded that there was federal jurisdiction over a suit 23

- - 41brought by a foreign state against its former president to "regain pr oper[t]y allegedly obtained as the 1

result of acts when he was head of state"; we so held for a number of reasons, one of which was "the 2

necessary implications of such an action for Unite d States foreign relations ." 806 F.2d at 354. Such 3

a consideration, quite similar to that underlying the act-of-state doctrine, is not present here. 4

In the present case, the Complaint's assertion of nonstatutory wrongs describes 5

traditional types of torts by private entities. The Republic identifies no uniquely federal interest in 6

the rules of decision to be applie d, nor any conflict between a federal policy or interest and the use 7

of state law. We conclude that the district cour t correctly determined that these claims arose under 8

state law rather than federal common law. And ha ving dismissed the federal statutory claims "at the 9

very beginning of the case," Brzak v. United Nations , 597 F.3d 107, 114 (2d Cir.), cert. denied , 131 10

S. Ct. 151 (2010), the district cour t properly declined to exercise supplemental jurisdiction over the 11

state-law claims. 12

CONCLUSION 13

The Republic of Iraq's allegations in this case paint a sorry portrait of a greedy and 14

ruthless government colluding with venal individuals and business firms to divert funds intended for 15

the benefit of a suffering population, and using thos e funds to cement political power while scoffing 16

at the humanitarian concerns of the international community and the laws of the United States. The 17

principal question here, however, has been whethe r United States law permits the Republic, through 18

its present government, to recover damages from its former government's coconspirators on the basis 19

of the actions that they took in response to that former government's demands. Applying settled 20

principles of state responsibility and statutory in terpretation, we have concluded that it does not. 21

- - 42Having considered all of the Republic's argum ents on this appeal, we find in them no 1

basis for reversal. The judgment of the district court dismissing the Amended Complaint is affirmed. 2

- - 43DRONEY, Circuit Judge

, concurring in part and dissenting in part: 1

In response to Iraq’s 1990 invasion of Kuwait, the United 2

Nations Security Council implemented economic sanctions—widely 3

characterized as the most far

‐ reaching in history—against the 4

regime of Saddam Hussein (the “Hussein Regime” or the “Regime”). 5

The U.S. Congress enforced the sanctions through the Iraq Sanctions 6

Act of 1990, which made all trade for economic gain with the 7

Hussein Regime a criminal offense. Pub. L. No. 101

‐ 513, § 8

586E(2)(B), 104 Stat. 1979, 2049, 50 U.S.C. § 1701, note. To 9

“reconcile[e] strong sanctions against a corrupt Iraqi regime with 10

[the] need[]

. . . [to provide] food and medicines to an innocent and 11

vulnerable population,” the U.N. Security Council then 12

implemented—again with the U.S.’s support—the Oil

‐ for

‐ Food 13

Programme (the “Programme”). The Programme permitted Iraq to 14

sell oil on the international market on the condition that all of the 15

proceeds were placed into a U.N. escrow account established at the 162 New York branch of the Banque Nationale de Paris (“BNP”), to be 1

used only for the humanitarian needs of the Iraqi people, 2

administrative costs for the Programme, and war reparations to 3

Kuwait. 4

The invasion of Iraq and overthrow of the Hussein Regime by 5

a U.S.

‐ led coalition of forces in the spring of 2003 revealed pervasive 6

corruption in the Programme, described by some as the “largest 7

financial fraud in human history.” The corruption of the Programme 8

was documented in detail in a report of the U.N. Independent 9

Inquiry Committee into the United Nations Oil

‐ for

‐ Food 10

Programme. Based largely on this report, the defendants in this 11

litigation—two individuals, along with numerous business 12

entities—are alleged to have conspired with the Hussein Regime to 13

violate the sanctions and subvert the Programme. By purchasing oil 14

from the Regime at below

‐ market prices or selling humanitarian 15

supplies (often of sub

‐ standard quality) to it at above

‐ market prices 163 while making side

‐ payments to the Regime—or, in the case of the 1

BNP defendants, facilitating such payments—the defendants 2

allegedly diverted at least ten billion dollars intended for 3

humanitarian aid to the Regime. The two individual defendants 4

named here have already pled guilty to criminal charges relating to 5

their role in corrupting the Programme, and many of the business 6

entity defendants have entered into non

‐ prosecution or deferred 7

prosecution agreements with the U.S. Department of Justice in 8

which they admit to involvement in the scheme. 9

The majority nevertheless concludes that the Republic of Iraq 10

(the “Republic”) may not bring suit, through its current government, 11

to recover funds allegedly unlawfully siphoned off from the U.N. 12

escrow account. Because the Hussein Regime orchestrated the fraud, 13

the majority reasons, the Republic participated in the fraud as well, 14

and thus stands in equal fault ( in pari delicto ) with the defendants. I 15

disagree. In pari delicto is an “equitable defense

. . . [,] rooted in the 164 common

‐ law notion that a plaintiff’s recovery may be barred by his 1

own wrongful conduct.” Pinter v. Dahl

, 486 U.S. 622, 632 (1988). But 2

the majority’s analysis does not rest on the Republic’s “own 3

wrongful conduct.” Instead, the majority begins its analysis with a 4

general principle of state responsibility under which “the obligations 5

of a foreign state are unimpaired by a change in that state’s 6

government,” Maj. Op., ante

, at 28—a principle that we have never 7

before recognized in this context, where the conduct that the 8

defendants are alleged to have engaged in with a foreign 9

government was illegal under U.S. law from the beginning. The 10

majority then concludes, based on this purported principle of state 11

responsibility, that the post

‐ Hussein Republic should be treated as 12

complicit in the Regime’s fraud on a humanitarian relief program 13

specifically designed to aid the civilian population while not 14

enriching the Regime. The in pari delicto defense is founded on the 15

twin premises that ”courts should not lend their good offices to 165 mediating disputes among wrongdoers

. . . [and] that denying 1

judicial relief to an admitted wrongdoer is an effective means of 2

deterring illegality.” Bateman Eichler, Hill Richards, Inc. v. Berner

, 472 3

U.S. 299, 306 (1985). Yet here it functions to release defendants of 4

liability for conduct that, if true, constituted a clear violation of U.S. 5

law and subversion of U.S. policy, and to deprive the ultimate 6

victims of the defendants’ conduct of any remedy. 7

I therefore concur only in the majority’s holding that the 8

Foreign Corrupt Practices Act does not create a private right of 9

action; otherwise, I respectfully dissent. 10

I. 11

The majority presents its decision as deriving from the long

‐ 12

established principle that “the legal position of a foreign state 13

survives changes in its government.” Maj. Op., ante

, at 28. In 14

articulating this principle, the majority draws on two distinct lines of 15

cases. The first concerns foreign sovereigns’ conduct within the U.S.: 166 it holds that, when a foreign sovereign acts under U.S. law—such as 1

by litigating in U.S. courts or entering into transactions—it does so 2

through its then

‐ recognized government and the government’s 3

designated representatives, such as ambassadors. See, e.g.

, Guar. 4

Trust Co. of N.Y. v. United States

, 304 U.S. 126, 137

‐ 41 (1938). The 5

second—the act of state doctrine—concerns foreign governments’ 6

conduct within their own territory: it holds that generally “the 7

courts of this country [will not] inquir[e] into the validity of the 8

public acts [of] a recognized foreign sovereign power committed 9

within its own territory.” Banco Nacional de Cuba v. Sabbatino

, 376 10

U.S. 398, 401 (1964). Neither of these doctrines applies here. 11

A. 12

The principle that a foreign state acts under U.S. law through 13

its recognized government has long been established. In The 14

Sapphire

, the Supreme Court held that the deposition of Emperor 15

Napoleon III did not abate a tort suit previously brought by France 167 to recover for damages caused to a French ship in a collision in San 1

Francisco harbor. 78 U.S. 164, 168 (1870). “The reigning Emperor, or 2

National Assembly, or other actual person or party in power, is but 3

the agent and representative of the national sovereignty,” the 4

Supreme Court held, such that “[a] change in such representative 5

works no change in the national sovereignty or its rights.” Id. at 168. 6

Similarly, in Lehigh Valley Railroad Co. v. Russia

, this Court held that 7

the then

‐ recognized representative of the provisional Russian 8

government could bring suit to recover for the destruction of 9

Russian

‐ owned ammunition and explosives while in transit in the 10

United States. 21 F.2d 396, 401 (2d Cir. 1927). Although the explosion 11

occurred in 1916, under the Imperial Russian Government, we held 12

that “[t]he suit did not abate by the change in the form of 13

government in Russia; the state is perpetual, and survives the form 14

of its government.” Id. at 401. Finally, and by the same logic, in 15

Guaranty Trust Co. of New York v. United States

, the Supreme Court 168 held that, where the prior recognized government of a foreign 1

sovereign allowed the statute of limitations for a claim to run, the 2

U.S.’s subsequent recognition of a new government did not revive 3

the time

‐ barred claim. 304 U.S. at 141. Again, because “the rights of a 4

sovereign state are vested in the state rather than in any particular 5

government which may purport to represent it,” the change in the 6

recognized government effected no change in the time

‐ barred claim. 7

Id. at 137. 8

The majority identifies no decisions, however, in which this 9

principle of state “responsibility” operates—as it does here—to 10

release a non

‐ state defendant from liability for conduct that was 11

illegal under U.S. law from its inception. Such a conclusion is 12

inconsistent with the premise underlying the rule articulated in 13

Guaranty Trust. There the Supreme Court rejected the argument that 14

recognition of a new government of a foreign sovereign “renders of 15

no effect transactions here with a prior recognized government in 169 conformity to the declared policy of our own government.” Id. at 1

140. It rooted this conclusion both in the separation of powers and in 2

the need to protect legitimate reliance on the finality of a recognized 3

government’s acts. “What government is to be regarded here as 4

representative of a foreign sovereign state is a political rather than a 5

judicial question, and is to be determined by the political 6

department of the government,” the Court observed. Id. at 137. “The 7

very purpose of the recognition by our government,” the Court 8

continued, “is that our nationals may be conclusively advised with 9

what government they may safely carry on business transactions 10

and who its representatives are. If those transactions, valid when 11

entered into, were to be disregarded after the later recognition of a 12

successor government,” the Court concluded, “recognition would be 13

but an idle ceremony, yielding none of the advantages of established 14

diplomatic relations in enabling business transactions to proceed, 1510 and affording no protection to our own nationals in carrying them 1

on.” Id. at 140

‐ 41. 2

Here, however, the United States had no diplomatic relations 3

with the Regime during the relevant time, and the side

‐ agreements 4

allegedly entered into between the defendants and the Hussein 5

Regime were not in any sense “valid when entered into” or “in 6

conformity [with] the declared policy of our own government.” On 7

the contrary, the side

‐ agreements stood in clear violation of U.S. law 8

and violated the U.S.’s trade embargo policy towards Iraq. The rule 9

articulated in Guaranty Trust serves to prevent courts from 10

questioning determinations properly left to the political branches, 11

and to protect legitimate reliance “upon the finality and legality of 12

[a] government’s acts.” Banco de Espana v. Fed. Reserve Bank of N.Y.

, 13

114 F.2d 438, 444 (2d Cir. 1940). But the political branches prohibited 14

transactions with the Hussein Regime, except those that took place 15

through the Programme. The defendants here could have no 1611 legitimate expectations in the “finality” or “legality” of a side

‐ 1

agreement with the Hussein Regime. Indeed, attempting to enforce 2

one of these alleged agreements in a U.S. court would likely entail 3

admitting to a felony. Under these circumstances, the rule 4

articulated in Guaranty Trust has no application. 5

B. 6

The majority further asserts that the actions of the Hussein 7

Regime are properly attributed to the Republic because the Regime 8

“acted as the government of Iraq.” Maj. Op., ante

, at 30. This 9

conclusion again relies on a principle that does not apply to this 10

case. The decisions that the majority cites in support of this assertion 11

primarily involve the act of state doctrine, which, in its traditional 12

formulation, holds that “the courts of one country will not sit in 13

judgment on the acts of the government of another, done within its 14

own territory.” Underhill v. Hernandez

, 168 U.S. 250, 252 (1897). The 15

court below, however, found that the act of state doctrine did not 1612 preclude the Republic’s claims, Republic of Iraq v. ABB AG

, 920 F. 1

Supp. 2d 517, 533

‐ 34 (S.D.N.Y. 2013), and the majority does not reject 2

this conclusion. 3

The district court was correct in its determination that the act 4

of state doctrine does not preclude the Republic’s claims. 5

Adjudicating Iraq’s claim would not require a court to “inquir[e] 6

into the validity of the public acts a recognized foreign sovereign 7

power committed within its own territory.” Banco Nacional de Cuba

, 8

376 U.S. at 401. In W.S. Kirkpatrick & Co. v. Environmental Techtonics 9

Corp., International

, an unsuccessful bidder for a contract with the 10

Nigerian government sued a successful bidder, contending that the 11

successful bidder violated RICO, the Robinson

‐ Patman Act, and 12

New Jersey state anti

‐ racketeering laws in procuring the contract by 13

paying bribes to Nigerian officials. 493 U.S. 400, 402 (1990). The 14

successful bidder argued that the act of state doctrine precluded the 15

litigation, since the facts necessary to establish that the bribery 1613 occurred would also “support a finding that the contract [was] 1

invalid under Nigerian law.” Id. at 406. The Supreme Court rejected 2

this argument. Id. “Act of state issues only arise when a court must 3

decide —that is, when the outcome of the case turns upon—the effect 4

of official action by a foreign sovereign,” the Court found. Id. 5

(emphasis in original). “When that question is not in the case, 6

neither is the act of state doctrine.” Id. 7

Here, similarly, although a finding against the defendants 8

would tend to imply that the Hussein Regime violated its 9

international obligations by corrupting the Programme (a conclusion 10

that, in any event, seems beyond dispute), no aspect of the 11

Republic’s claims turns on the validity of the Hussein Regime’s 12

conduct. The Republic’s complaint challenges the conduct of non

‐ 13

state defendants under U.S. law

. 1 Indeed, if adjudicating the 14

1 That the Republic’s claims are based on domestic law, and are asserted against non

‐

state defendants, also explains the inapplicability of the rule that “[a] state is responsible

for any violation of its obligations under international law resulting from action or

inaction by [] the government of the state.” Restatement (Third) of Foreign Relations Law

of the United States § 207 (1987). The district court cited this rule in support of its14 Republic’s claims against the defendants required an inquiry into 1

the validity of the Hussein Regime’s official acts, then the criminal 2

convictions of the two individual defendants and the non

‐ 3

prosecution agreements entered into between the Department of 4

Justice and various corporate defendants would stand on faulty 5

premises: a U.S. court could never adjudicate such charges without 6

violating the act of state doctrine. 7

Furthermore, the Republic’s claims do not implicate acts by 8

the Hussein Regime performed solely on Iraqi territory. See 9

Underhill

, 168 U.S. at 252; Banco de Espana

, 114 F.2d at 443 (“It has 10

been squarely held that the courts of this country will not examine 11

the acts of a foreign sovereign within its own borders

, in order to 12

conclusion that the Hussein Regime’s conduct redounds to the Republic, see Republic of

Iraq

, 920 F. Supp. 2d at 536, but the majority does not appear to rely on it. The majority is

correct not to base its decision on this rule. The rule governs state responsibility for

violations of “obligations under international law”; it is a rule of international law. As the

Third Restatement observes, “[t]he principal persons under international law are states,”

and it is primarily states that “have legal personality and rights and duties under

international law.” Restatement (Third) of Foreign Relations Law of the United States pt.

II, intro. note (1987). I see no basis for applying a principle of state responsibility under

international law to immunize non

‐ state defendants from liability for conduct under

domestic law.15 determine whether or not those acts were legal under the municipal 1

law of the foreign state.” (emphasis added)); see also Bernstein v. Van 2

Heyghen Freres Societe Anonyme

, 163 F.2d 246, 249 (2d Cir. 1947) 3

(barring, under the act of state doctrine, U.S. court from hearing 4

claim based on conversion of property committed in Germany by 5

German officials). Instead, the Republic contends that the 6

defendants—individuals and corporations located outside of Iraq— 7

conspired with the Hussein Regime to subvert an international 8

humanitarian relief program, run out of the U.N. headquarters in 9

New York, in ways that diverted money that would otherwise have 10

been placed in an escrow account established at a bank branch in 11

New York. Indeed, the requirement that all transactions be 12

approved by the U.N. and pass through an escrow account outside 13

of Iraqi control was plainly crucial to the functioning Programme, 14

since it was designed to ensure that the proceeds of oil sales were 15

not diverted from humanitarian uses. Because “[a]cts of foreign 1616 governments purporting to have extraterritorial effect

. . . by 1

definition[] fall[] outside the scope of the act of state doctrine,” the 2

conduct of the Hussein Regime in subverting the Programme cannot 3

be encompassed by the doctrine. Allied Bank Int’l v. Banco Credito 4

Agricola de Cartago

, 757 F.2d 516, 522 (2d Cir. 1985). 5

Even if the act of state doctrine were implicated in this case, 6

that would not end the analysis. Once a court determines the 7

doctrine’s “technical availability,” it then considers whether “the 8

policies underlying the act of state doctrine” indicate that it “should 9

nonetheless not be invoked.” W.S. Kirkpatrick & Co.

, 493 U.S. at 409. 10

Key among these considerations is whether “the government that 11

committed the challenged act of state is no longer in existence.” Id. 12

(internal quotation marks omitted). Even in cases that—unlike this 13

case— do require a U.S. court to assess the validity of a foreign 14

government’s acts within its own territory, therefore, we do not 15

apply an inflexible rule that imputes the conduct of a former 1617 government to a current government. Because the act of state 1

doctrine protects against litigation that would “embarrass or hinder 2

the executive in the realm of foreign relations,” it would contravene 3

the doctrine’s purpose to prevent the current government of a 4

foreign state from repudiating the conduct of a prior government on 5

the foreign state’s territory. Bigio v. Coca

‐ Cola Co.

, 239 F.3d 440, 452 6

(2d Cir. 2000). In Bigio v. Coca

‐ Cola Co.

, for instance, we found that 7

the act of state doctrine did not bar plaintiffs’ action to recover 8

property that a former Egyptian government had confiscated 9

because the plaintiffs’ were Jewish. 239 F.3d at 453. We noted that 10

the Nasser regime, which effected the property seizure, was “long 11

gone,” and that “the current government

. . . has apparently 12

repudiated the acts in question and has sought to have the property 13

or its proceeds returned to the [plaintiffs].” Id. Here, not only is the 14

regime that committed the wrongdoing no longer in existence, but 15

its successor government is itself the plaintiff in this matter. Indeed, 1618 a conclusion that the Republic is barred from seeking redress against 1

these defendants in the U.S. courts—even as the U.S. government 2

itself extracts fines from many of the same defendants for the same 3

conduct—arguably poses a greater risk of “interfer[ing] with the 4

relationship between [the Republic of Iraq] and the United States” 5

than allowing the litigation to proceed. Id. 6

Because the Republic’s claims do not require that the court 7

assess the validity of the Iraqi government’s acts on Iraqi territory, 8

the act of state doctrine does not apply to this case. And because the 9

act of state doctrine does not apply, the fact that “the Hussein 10

Regime’s effort to subvert the Programme was the policy of the Iraqi 11

government” does not preclude the Republic’s claims. Maj. Op., ante

, 12

at 30. Indeed, the majority’s reliance on act of state case law leads to 13

the paradoxical conclusion that defendants are insulated from 14

liability to the Republic for their conduct precisely because they did 15

not merely aid a single corrupt Iraqi official in embezzling funds for 1619 personal benefit, but instead conspired with an entire authoritarian 1

regime in a concerted scheme to violate U.S. law and subvert U.S. 2

foreign policy. In concluding that the alleged conspiracy pursued a 3

“public goal,” the majority notes that the Hussein Regime regarded 4

the corruption of the Oil

‐ for

‐ Food Programme as crucial to 5

undermining the sanctions and remaining in power. Maj. Op., ante

, 6

at 31. But it was the public goal of our government to weaken the 7

Hussein Regime through economic sanctions while minimizing, 8

through the Oil

‐ for

‐ Food Programme, the suffering of the Iraqi 9

civilian population. I see no basis in our law for treating the 10

defendants’ conduct differently simply because they conspired with 11

a foreign government to achieve a “public goal” that was directly at 12

odds with U.S. policy. 13

II. 14

The absence of a rule that treats the Republic as complicit in 15

the Regime’s wrongdoing and the deleterious impact of the 1620 defendants’ alleged actions on U.S. policy have special salience here. 1

The doctrinal mechanism through which Iraq’s purported 2

“participation” in the Regime’s conduct operates to bar the 3

Republic’s claims— in pari delicto —has been recognized under 4

federal law only in its traditional formulation, in which it “was 5

narrowly limited to situations where the plaintiff truly bore at least 6

substantially equal responsibility for his injury.” Bateman Eichler

, 472 7

U.S. at 307. The Supreme Court has emphasized, moreover, that 8

“public policy implications [must] be carefully considered before the 9

defense is allowed” to “ensure[] that the broad judge

‐ made law does 10

not undermine the congressional policy favoring private suits as an 11

important mode of enforcing federal [] statutes.” Pinter

, 486 U.S. at 12

633 (internal citation omitted). Under federal law, therefore, the in 13

pari delicto defense is allowed “only where (1) as a direct result of his 14

own actions, the plaintiff bears at least substantially equal 15

responsibility for the violations he seeks to redress, and (2) 1621 preclusion of suit would not significantly interfere with the effective 1

enforcement of the

. . . laws.” Id. at 310

‐ 11. The defendants here 2

satisfy neither of these two prongs. 3

To satisfy the first prong, the defendant must establish that 4

the plaintiff was an “an active, voluntary participant in the unlawful 5

activity that is subject of the suit.” Pinter

, 486 U.S. at 636. This 6

requirement reflects the in pari delicto doctrine’s equitable origins in 7

the idea that a party that has morally tainted itself in a matter cannot 8

invoke the court’s equitable powers. For instance, Judge Learned 9

Hand wrote for this Court that the closely related “unclean hands” 10

defense is “derived from the unwillingness of a court

. . . to give its 11

peculiar relief to a suitor who in the very controversy has so 12

conducted himself as to shock the moral sensibilities of the judge.” 13

Art Metal Works, Inc. v. Abraham & Straus

, 70 F.2d 641, 646 (2d Cir. 14

1934) (Hand, J., dissenting), original decree vacated and dissent adopted 15

as opinion of the court on reh’g

, 107 F.2d 944 (2d Cir. 1939) (per 1622 curiam). Accordingly, for “immoral conduct to be relevant,” it “must 1

touch and taint the plaintiff personally”; actions that are “imputed to 2

[the plaintiff] legally[] do not impugn his conscience vicariously.” Id. 3

The Republic’s supposed participation in the fraud derives, in 4

the majority’s analysis, from the principle that “the obligations of a 5

foreign state are unimpaired by a change in that state’s 6

government.” Maj. Op., ante

, at 28. But, like the unclean hands 7

defense, in pari delicto “has nothing to do with the rights or liabilities 8

of the parties.” Art Metal Works

, 70 F.2d at 646 (Hand, J., dissenting). 9

Even if the principle of state responsibility that the majority 10

identifies had any applicability under the circumstances of this 11

case—where the agreements that the foreign government allegedly 12

entered into were illegal under U.S. law from the very beginning—it 13

does not establish the direct responsibility demanded by the first 14

prong of the in pari delicto defense. 1523 To apply the defense in the absence of direct conduct is 1

especially inappropriate here, where the “agent” is an authoritarian 2

regime and the “principal”—to which the agent’s “sins” are 3

imputed—is the state that the regime tyrannized. The majority does 4

not cite to—nor do I know of—any decisions where the in pari delicto 5

defense has been applied against a foreign sovereign based on its 6

prior government’s conduct, much less under the extraordinary 7

circumstances as issue here, where the wrongful conduct imputed to 8

the foreign sovereign involved the subversion of a humanitarian 9

relief program designed to benefit the people of the foreign 10

sovereign. Courts have, however, long rejected efforts to invoke 11

equitable defenses against the U.S. government and its agencies, 12

concluding that such defenses may not be “applied to frustrate the 13

purpose of [the United States’] laws or to thwart public policy.” Pan

‐ 14

Am. Petroleum & Transp. Co. v. United States

, 273 U.S. 456, 506 (1927); 1524 see, e.g.

, United States v. Philip Morris, Inc.

, 300 F. Supp. 2d 61, 75

‐ 76 1

(D.D.C. 2004). 2

The majority cites to New York case law holding that the 3

wrongdoing of corporate managers and agents may be imputed to 4

the corporation in the application of the in pari delicto defense. See 5

Maj. Op. at 32

‐ 33 (discussing Kirschner v. KPMG LLP

, 15 N.Y.3d 446, 6

466

‐ 67 (2010). But even in that context courts are not uniform in their 7

views. In deciding whether to give effect to the in pari delicto 8

doctrine, other states have “draw[n] a sharp distinction between 9

those who deal in good faith with the principal

‐ corporation

. . . and 10

those who do not,” concluding that “the ordinary rationale 11

supporting imputation breaks down completely in scenarios 12

involving secretive, collusive conduct between corporate agents and 13

third parties,” such as where an auditor conspires with corporate 14

management to defraud a corporation. Official Comm. of Unsecured 15

Creditors of Allegheny Health Educ. & Research Found. v. 1625 PricewaterhouseCoopers, LLP

, 605 Pa. 269, 305

‐ 06 (2010). “[B]ecause 1

imputation rules justly operate to protect third parties on account of 2

their reliance on an agent’s actual or apparent authority,” these 3

courts reason, “such principles do not (and should not) apply

. . . 4

where both the agent and the third party know very well that the 5

agent’s conduct goes unsanctioned by one or more of the tiers of 6

corporate governance.” Id. at 307; see also NCP Litig. Trust v. KPMG 7

LLP

, 187 N.J. 353, 371 (2006) (“[T]he imputation defense exists to 8

protect innocent third parties from being sued by corporations whose 9

agents have engaged in malfeasant behavior against those third 10

parties.” (emphasis added)). The same logic applies here, where the 11

defendants allegedly engaged in secretive, collusive conduct with 12

the Hussein Regime, while knowing full well that their conduct was 13

illegal under U.S. law. 14

The relationship between a corporation and its officers also 15

differs in several obvious respects from the relationship between a 1626 sovereign state and its government—particularly where that 1

government is an authoritarian regime—rendering the policy 2

justifications that might support imputation in the former context 3

altogether inapplicable in the latter. The New York Court of Appeals 4

has justified imputing the acts of corporate officers to the 5

corporation itself by observing that “imputation fosters an incentive 6

for a principal to select honest agents and delegate duties with care.” 7

Kirschner

, 15 N.Y.3d at 466. But Saddam Hussein seized power in a 8

military coup; his regime maintained its control over the Iraqi state 9

through “extensive, systematic, and continuing human rights abuses 10

. . . , including summary executions, mass political killings, 11

disappearances, widespread use of torture, arbitrary arrest and 12

prolonged detention without trial of thousands of political 13

opponents, forced relocation and deportation, denial of nearly all 14

civil and political rights such as freedom of association, assembly, 15

speech, and the press, and the imprisonment, torture, and execution 1627 of children.” § 586F(a)(4), 164 Stat. at 250. Allowing the in pari delicto 1

defense under these circumstances excises the doctrine’s 2

requirement that the plaintiff be an “an active, voluntary participant 3

in the unlawful activity that is subject of the suit,” Pinter

, 486 U.S. at 4

636—transforming a defense founded “upon the court’s repugnance 5

to the suitor personally,” Art Metal Works

, 70 F.2d at 646 (Hand, J. 6

dissenting), into a rule of derivative guilt. 7

Insulating the defendants from liability to the Republic for 8

their alleged wrongdoing is, moreover, contrary to public policy, the 9

second prong of the in pari delicto test. RICO’s express private right 10

of action is designed to aid “in eradicating organized crime from the 11

social fabric” by “divest[ing] the [defendant] of the fruits of its ill

‐ 12

gotten gains.” United States v. Turkette

, 452 U.S. 576, 585 (1981). This 13

goal is especially important when the alleged conspiracy 14

undermined a trade embargo established—with the support of both 15

political branches—in response to “an unusual and extraordinary 1628 threat to the national security and foreign policy of the United 1

States,” Exec. Order No. 12,722, 55 Fed. Reg. 31,803 (Aug. 2, 1990); § 2

586C, 104 Stat. at 2048, and corrupted a humanitarian relief program 3

designed to alleviate the “near apocalyptic results” that the embargo 4

and the Hussein Regime’s ongoing brutality had on the Iraqi people. 5

The in pari delicto defense is “based not on solicitude for the 6

defendant, but on concern for the public welfare, and thus when 7

application of the doctrine would not be in the public interest, the 8

courts will permit recovery.” In re Leasing Consultants Inc.

, 592 F.2d 9

103, 110 (2d Cir. 1979). Accordingly, I do not believe that we should 10

allow the defense where it leads to results so clearly at odds with 11

U.S. public policy. 12

Indeed, the application of the in pari delicto defense in this case 13

leads to a result that directly contradicts U.S. policy towards Iraq 14

throughout the relevant time. U.S. policy towards Iraq did not treat 15

the Iraqi state as collectively complicit in the Hussein Regime’s 1629 conduct. From the beginning, the economic sanctions recognized an 1

exception for “donations of articles intended to relieve human 2

suffering, such as food, clothing, medicine and medical supplies 3

intended strictly for medical purposes.” Exec. Order No. 12,722 § 4

2(b); see also § 586C(b), 104 Stat. at 2048; Exec. Order No. 12,724 § 5

2(b), 55 Fed. Reg. 33,089 (Aug. 9, 1990); S.C. Res. 661, para. 4, U.N. 6

Doc. S/RES/661 (Aug. 6, 1990) (recognizing exception for “payments 7

exclusively for strictly medical or humanitarian purposes”). The core 8

premise of the Oil

‐ for

‐ Food Programme was that the Hussein 9

Regime should be permitted to sell its oil on the international 10

market, provided “that all States

. . . take any steps that may be 11

necessary

. . . to ensure that the proceeds of the sale [were] not 12

diverted from” the authorized purposes. S.C. Res. 986, paras. 8, 14, 13

U.N. Doc. S/RES/986 (Apr. 14, 1995). Far from treating the entire 14

state as complicit in the Regime’s conduct, in 1998, in the midst of 15

the trade embargo, the U.S. Congress approved the appropriation of 1630 five million dollars to support “Iraqi democratic opposition” 1

through “such activities as organization, training, communication 2

and dissemination of information, developing and implementing 3

agreements among opposition groups, [and] compiling information 4

to support the indictment of Iraqi officials for war crimes

. . . .” 1998 5

Supplemental Appropriations and Rescission Act, Pub. L. No. 105– 6

174, § 10008, 112 Stat. 58, 101. 7

The majority’s discussion of the second prong of the in pari 8

delicto defense concludes in general terms that “it is consistent with 9

the purpose of RICO to recognize an in pari delicto defense in cases 10

where, as a direct result of the plaintiff’s affirmative wrongdoing, 11

the plaintiff bears at least substantially equal responsibility for the 12

RICO violations of which it complains.” Maj. Op., ante

, at 35 13

(internal citations and quotation marks omitted). Other circuits that 14

have recognized the in pari delicto defense in the RICO context, 15

however, did so in circumstances where allowing the plaintiff to 1631 recover “under RICO would not divest RICO violators of their ill

‐ 1

gotten gains; it would result in a wealth transfer among similarly 2

situated conspirators.” Official Comm. of Unsecured Creditors of PSA, 3

Inc. v. Edwards

, 437 F.3d 1145, 1155 (11th Cir. 2006); see also Rogers v. 4

McDorman

, 521 F.3d 381, 391 (5th Cir. 2008) (recognizing in pari 5

delicto defense to RICO claims where the “scheme could not work 6

without [the plaintiffs’] active participation,” and observing that 7

“[t]his is not a situation where an innocent or passive victim is being 8

deprived of a RICO remedy”). Here, by contrast, allowing the 9

Republic to recover under RICO from the individuals and 10

corporations that allegedly conspired to subvert the Programme 11

would divest RICO violators of their illegal profits, and would allow 12

compensation for the ultimate victims of the defendants’ alleged 13

fraud. 14

The application of the in pari delicto defense demands that 15

courts carefully scrutinize the specific plaintiff’s alleged conduct in 1632 relation to the relevant public policy. In Perma Life Mufflers, Inc. v. 1

International Parts Corp.

, for instance, the Supreme Court addressed 2

the question of whether Midas Muffler franchisees who knew about 3

allegedly anti

‐ competitive clauses in their franchise agreements 4

could later bring an antitrust claim. 392 U.S. 134, 140 (1968). 5

Observing that “the purposes of the antitrust laws are best served by 6

insuring that the private action will be an ever

‐ present threat to 7

deter anyone contemplating business behavior in violation of the 8

antitrust laws,” the Court declined to bar antitrust plaintiffs’ claims, 9

concluding that, in light of the economic power of the franchisor, the 10

franchisees’ “participation was not voluntary in any meaningful 11

sense.” Id. at 139

‐ 40. In Bateman Eichler, Hill Richards, Inc. v. Berner

, 12

the Supreme Court again declined to apply the in pari delicto defense, 13

this time in the context of a securities action brought by investors 14

who made trades on the basis of “inside information” that turned 15

out to be false. 472 U.S. at 301

‐ 02, 317. Noting the important role that 1633 private actions play in the securities enforcement system, the Court 1

rejected the suggestion “that an investor who engages in [insider] 2

trading is necessarily as blameworthy as a corporate insider or 3

broker

‐ dealer who discloses the information for personal gain,” 4

concluding that such a finding would ignore “important distinctions 5

between the relative culpabilities of tippers, securities professionals, 6

and tippees.” Id. at 312

‐ 13. Finally, in Pinter v. Dahl —another 7

securities action, this time involving claims based on the unlawful 8

sale of unregistered securities—the Supreme Court rejected the 9

suggestion that “a purchaser’s knowledge that the securities are 10

unregistered can[], by itself, constitute equal culpability, even where 11

the investor is a sophisticated buyer who may not necessarily need 12

the protection of the Securities Act.” 486 U.S. at 636. “Because the 13

[Securities] Act is specifically designed to protect investors,” the 14

Court reasoned, “even where a plaintiff actively participates in the 15

distribution of unregistered securities, his suit should not be barred” 1634 except where his role was “more as a promoter than as an investor.” 1

Id. at 638

‐ 39. 2

Aside from demonstrating how narrowly the in pari delicto 3

defense is circumscribed in light of public policy considerations, 4

these decisions reflect the specificity with which the Supreme Court 5

determines the defense’s availability. The question answered in 6

these decisions is not simply whether the in pari delicto defense 7

operates in the context of an antitrust or securities claim. Rather, the 8

question is whether the Court should recognize a “broad rule of 9

caveat tippee ,” Bateman Eichler

, 472 U.S. at 315, or whether the in pari 10

delicto defense bars a claim by “a plaintiff [who] actively participates 11

in the distribution of unregistered securities” but whose 12

“promotional efforts are incidental to his role as an investor,” Pinter

, 13

486 U.S. 638

‐ 39. 14

Even if the in pari delicto defense may properly be applied to 15

bar a plaintiff’s RICO claims in some circumstances, therefore, I do 1635 not believe that it should here. The U.S. public policy behind the 1

economic sanctions against Iraq and the Programme was critically 2

important to our national interests. There are, moreover, “important 3

distinctions between the relative culpabilities” of the defendants, 4

which allegedly participated in the fraud of their own choosing and 5

for vast profits, and the Republic, whose “responsibility” for a 6

scheme that deprived its own civilian population of desperately 7

needed humanitarian relief is entirely derivative of an authoritarian 8

regime that has now been overthrown. Bateman Eichler

, 472 at 312

‐ 13. 9

* * * 10

Courts should proceed cautiously in cases that implicate 11

foreign relations, cognizant that the “courts[’]

. . . powers to further 12

the national interest in foreign affairs are necessarily circumscribed 13

as compared with those of the political branches.” Banco Nacional de 14

Cuba

, 376 U.S. at 412. But allowing the Republic’s claims to proceed 15

in this case would not cross the guideposts that have long operated 1636 to ensure that the courts do not encroach on areas properly reserved 1

for the political branches. Allowing the Republic’s claims to proceed 2

would not violate the doctrine that U.S. nationals may safely carry 3

on business transactions with the recognized government of a 4

foreign state, confident that the validity of such agreements will not 5

be called into question based on the legitimacy of the government or 6

its subsequent overthrow. See Guar. Trust Co. of N.Y.

, 304 U.S. at 137. 7

Nor would allowing the Republic’s claims to proceed in any way 8

conflict with the act of state doctrine, since adjudicating the case 9

would not “require[] a court in the United States to declare invalid 10

the official act of a foreign sovereign performed within its own 11

territory.” W.S. Kirkpatrick & Co.

, 493 U.S. at 405. 12

But I see no reason to embrace a novel application of the in 13

pari delicto defense to immunize the defendants from liability for 14

conduct that was illegal under U.S. law from the very beginning and 15

that undermined an important U.S. policy. The Supreme Court has 1637 cautioned against “expanding judicial incapacities” to hearing cases 1

simply because they have an international dimension, observing that 2

“[c]ourts in the United States have the power, and ordinarily the 3

obligation, to decide cases and controversies properly presented to 4

them.” Id. at 409. The plaintiff here alleges that it was the victim of a 5

fraud. The vast scale of the alleged fraud does not render the 6

Republic’s allegations any less proper for judicial resolution, and I 7

believe it is more consistent with principles of equity to hold the 8

defendants accountable for their own role than to impute to the 9

plaintiff the wrongdoing of its former authoritarian regime. 10