Opinion ID: 1272032
Heading Depth: 1
Heading Rank: 9

Heading: Exclusive Federal Power Over Foreign Relations

Text: GAC claims that even if the act of state doctrines does not bar an American court from examining Gulf's cartel-related actions, the principle of exclusive federal power over the conduct of foreign relations nevertheless precludes an American state court from conducting such an examination. [53] GAC relies on Zschernig v. Miller, 389 U.S. 429, 88 S.Ct. 664, 19 L.Ed.2d 683 (1968), in which the United States Supreme Court struck down an Oregon intestacy statute as it had been applied by the Oregon Supreme Court. 243 Or. 567, 412 P.2d 781 (1966). The Oregon statute required that in order to take property belonging to an Oregon resident by succession or testamentary disposition a non-resident alien had to prove that (1) American residents had a reciprocal right to inherit in the alien's country; and (2) the non-resident alien would be able to receive the benefit, use or control of the proceeds of the Oregon estate without confiscation by his government. In Zschernig, the Court held that, as applied, the statute constituted an impermissible intrusion by the state into foreign affairs, an area which the Court said was entrusted by the United States Constitution solely to the President and Congress. The Court said that the statute required local probate courts to launch minute inquiries into the nature of foreign governments, the quality of rights which those governments accorded to both American citizens and their own citizens, the credibility of the representations of officials of foreign governments, and the actual administration of foreign legal systems. 389 U.S. at 433-35, 88 S.Ct. at 666-667. GAC contends that the Zschernig decision precludes state courts from exercising jurisdiction over issues relating to the foreign cartel because of the Canadian Government's relationship to the cartel. GAC argues that because the trial court was without jurisdiction to consider the cartel-related issues, it could not enter discovery orders directing the production of cartel documents. The Zschernig decision, which has not been applied by the United States Supreme Court outside of the limited context of the alien inheritance statutes at issue in that case, has nothing to do with this case. Unlike the statute at issue in Zschernig, the causes of action involved in this case are universally accepted by American jurisdictions-fraud, breach of fiduciary duty, commercial impracticability, economic coercion and antitrust. The effective enforcement of the antitrust laws is essential to the maintenance of free and fair business competition. [54] Unlike the alien inheritance statutes in Zschernig, [55] the causes of action in this case do not involve questionable attempts by states to directly affect the rights of citizens in foreign nations, nor are they related to the foreign policy attitudes of this or any other state court. In this litigation the courts of this State have not undertaken the type of analysis that Zschernig prohibits. No pejorative criticism has been directed at Canada or any other foreign government. No minute inquiry has been made into the actual administration of foreign law by a foreign government, or into the rights that such a government affords to its own citizens. The veracity of the representations of its diplomats has not been questioned. This case involves nothing more than an inquiry into what an American corporation has done in America, a situation which finds no appropriate analogy in Zschernig or its exceedingly limited progeny. The states of this country have little interest in how a foreign government treats its own citizens, but they have every conceivable interest in anti-competitive conduct by American corporations occurring within their own borders. Likewise, foreign governments have a legitimate interest in the rights they choose to afford their own citizens; but they have no legitimate interest in whether a state court in this country will lend its judicial processes to the enforcement of contracts entered into in the United States by corporations based in this country for the supply of a resource to be mined and milled in the United States. Our courts have done no more than seek to enforce state laws which are consistent with federal laws, and with actions of the United States Congress [56] and the United States Justice Department concerning Gulf's cartel activities. We therefore hold that neither Zschernig nor the act of state doctrine precludes the courts of New Mexico from litigating the cartel-related issues present in this case, or from seeking the production of documents which will facilitate the resolution of such litigation. 2. Canada's Uranium Information Security Regulations GAC also contends that the trial court's discovery orders commanded conduct in violation of the Canadian Uranium Information Security Regulations, and were therefore prohibited by the act of state doctrine and the Zschernig decision. a. Act of State Doctrine Clearly, the Uranium Information Security Regulations were an act of state. They were promulgated by the Canadian Government pursuant to the Canadian Atomic Energy Control Act. They have been upheld by Canadian courts. The Regulations have been considered by both the Canadian executive and judicial branches to be in the public interest of Canada. However, it does not follow that because the Regulations were an act of state, the discovery orders were precluded by the act of state doctrine. The trial court never ordered GAC, Gulf, or Gulf Canada to violate the Regulations, and never questioned the validity of those Regulations. In October 1977, the court ordered GAC to produce all non-privileged cartel records, [i]nsofar as it is lawful so to do. (Emphasis added.) The court went on to say that to the extent that it might be a violation of Canadian law to produce . . [cartel] documents housed in Canada, GAC had an obligation to make an immediate diligent and good faith effort to obtain a lawful waiver of or dispensation from such Canadian prohibitions and to the extent thereafter lawful at the earliest possible date, actually produce for inspection and copying of such documents. (Emphasis added.) In subsequent orders the trial court expressly refused to order identification or production of cartel documents in violation of Canadian law. Instead, it relied on Rule 37 sanctions to redress the dilemma resulting from the absence of the documents or the identification thereof. [57] Further, the act of state doctrine is inapplicable insofar as the Regulations are concerned under the decision of the United States Supreme Court in Societe Internationale v. Rogers, 357 U.S. 197, 78 S.Ct. 1087, 2 L.Ed.2d 1255 (1958). In that case the plaintiff, a Swiss holding company, had assets seized by the Alien Property Custodian during the Second World War pursuant to the Trading With The Enemy Act. After the War, the plaintiff filed suit against the Attorney General of the United States seeking to recover the property on the ground that it had not been an enemy within the meaning of the Act. The Government sought production of records which were in the possession of a Swiss banking company controlled by the plaintiff, which it claimed were relevant to the issue of the plaintiff's alleged enemy taint. The plaintiff failed to produce the documents because Swiss law prohibited production of the records. The district court dismissed the plaintiff's complaint, Societe Internationale, Etc. v. McGranery, 111 F. Supp. 435 (D.D.C. 1953). The Court of Appeals affirmed. Societe Internationale v. Brownell, 95 U.S.App.D.C. 232, 225 F.2d 532 (D.C. Cir.1955). The Supreme Court unanimously reversed the two lower courts. Two aspects of the Supreme Court's decision are pertinent to this case-first, the propriety of a court's order to produce records located in a foreign country whose laws prohibit disclosure of the records; and second, the appropriateness of the sanctions imposed for a party's failure to comply with such an order where the failure is due to the proscriptions of foreign law. In this section of the opinion we are concerned only with the first question; the latter aspect is considered in Section III A, infra. In Societe Internationale, the Court stated: Whatever its reasons, petitioner did not comply with the production order. Such reasons, and the willfulness or good faith of petitioner, can hardly affect the fact of noncompliance and are relevant only to the path which the District Court might follow in dealing with petitioner's failure to comply. 357 U.S. at 208, 78 S.Ct. at 1094 (emphasis added). This passage implies that foreign nondisclosure laws are not relevant to the propriety of production orders. Rather, it states that the reason for nonproduction is relevant only to the question of appropriate sanctions for noncompliance with the order. This distinction is significant. In Re Westinghouse Elec. Corp. Uranium, Etc., 563 F.2d 992, 997, 999 (10th Cir.1977); Arthur Andersen & Co. v. Finesilver, 546 F.2d 338, 341 (10th Cir.1976), cert. denied, 429 U.S. 1096, 97 S.Ct. 1113, 51 L.Ed.2d 543 (1977); In Re Uranium Antitrust Litigation, supra, 480 F. Supp. at 1144-48; Wright, Discovery, 35 F.R.D. 39, 81 (1963); Note, Discovery of Documents Located Abroad in U.S. Antitrust Litigation: Recent Developments in the Law Concerning the Foreign Illegality Excuse for Non-production, 14 Va.J.Int.L. 747, 753 (1974). In Societe Internationale the Court did not refer to the act of state doctrine or to principles of international comity. The reason for that lack of reference to these principles is simple. Neither in Societe nor in this case did the trial court order a litigant to violate the nondisclosure laws of the foreign sovereign. Neither court criticized the foreign sovereign or its laws, or engaged in an examination of such laws or the motivations which gave rise to them. Both courts sought only to maintain the integrity of the judicial process and efficacy of the laws upon which the cause of action in each case was based. In both cases, those laws reflected very significant policies of this country. [58] b. Exclusive Federal Power over Foreign Relations The principles set forth in Zschernig v. Miller, supra , are inapplicable to the Uranium Information Security Regulations for largely the same reasons that the act of state doctrine does not apply. The discovery orders in this case which sought cartel document production involved none of the problems the Supreme Court was confronted with in Zschernig. See e.g., n. 55, supra, and accompanying text. D.