Republic Of Panama v. Bcci Holdings (Luxembourg) S.A.

The Republic of Panama filed this action in the Southern District of Florida asserting claims under the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. §§ 1961 et seq., and state law claims against several American and foreign banking entities.1 The complaint charged each of the defendants with participating in a scheme to assist former Panamanian military officer, Manuel Noriega, in illegally diverting Panamanian government funds for his personal use. The district court dismissed Panama's claims against First American Bank, N.A. and First American Bank of New York (the "First American defendants") for lack of personal jurisdiction and dismissed its claims with respect to the remaining defendants on the grounds of forum non conveniens. Panama appeals both rulings.

Addressing an issue that has divided district courts in this circuit, we conclude that the Due Process Clause of the Fifth Amendment provides an independent constitutional limitation on the court's exercise of personal jurisdiction over a domestic defendant served pursuant to a federal statute's nationwide service of process provision. On the facts of this case, we find no constitutional barrier to jurisdiction and therefore reverse the district court's order dismissing Panama's claims against the First American defendants for lack of personal jurisdiction. We nevertheless affirm the dismissal of these claims on the alternative ground that Panama failed to state a proper RICO claim against these defendants. We also affirm the dismissal of Panama's claims against the remaining defendants on the basis of forum non conveniens.

BCCI Holdings is the parent corporation of BCCI S.A. and BCCI Ltd. During the time period relevant to the complaint, these foreign defendants were the principal corporations in an international banking group operating in sixty-nine countries, including the United States. Collectively, they will be referred to as the "BCCI defendants" or as "BCCI." First American Bank, N.A. is an American bank with its principal place of business in the District of Columbia, and First American Bank of New York is a New York state bank with its principal place of business in New York City.

The complaint alleges that in 1981 the BCCI defendants "surreptitiously obtained control" of the First American defendants by demanding First American stock as security for loans. The complaint also alleges that the BCCI defendants actively misrepresented the nature of their control over the First American defendants and purposely concealed this ownership from federal regulators. Panama asserts that First American was the "alter ego" of BCCI and that the First American defendants were integrated into BCCI's worldwide legal and illegal banking operations with the "knowledge, agreement, and/or acquiescence" of Robert Altman. Altman served as a controlling officer of First American Bankshares, the parent company of the First American defendants, and as an officer and/or director of one of the conduit holding companies that BCCI used to control First American Bankshares.2

The complaint further alleges that beginning in 1981 Manuel Noriega illegally diverted millions of dollars from the Panamanian government into secret BCCI accounts throughout the world. BCCI laundered the diverted funds, redistributed them to various accounts throughout the world, and made them available to Noriega and his family for their personal use. The BCCI defendants allegedly conducted these transfers to conceal Noriega's illegal activities from the Republic of Panama and from other lawful authorities.

From 1986 through 1987, the First American defendants allegedly assisted the BCCI defendants in transferring the money stolen by Noriega and in making these unlawful proceeds available to him and his family in this country. Specifically, BCCI routinely channeled Noriega funds through its account with First American in Washington, D.C. On one occasion in 1987, First American issued a cashier's check for $71,600 to a Miami realtor. Issued from illegal Noriega proceeds, this check allegedly was used to assist the Noriegas in acquiring property in Miami.

In July 1991, banking regulators in the United States and elsewhere closed BCCI. Six months later, the courts in the Cayman Islands, England, and Luxembourg ordered the formal liquidation of BCCI and charged liquidators in these countries with collecting and distributing BCCI's remaining assets.3 The liquidation proceedings, which are ongoing in each of these three countries, operate according to pooling agreements by which all creditors share ratably in BCCI's limited assets.

In December 1991, the BCCI defendants pleaded guilty to criminal RICO charges in this country. Pursuant to the plea agreement, all of BCCI's assets in the United States were forfeited to the U.S. government and placed in a custodial account.4 As a result of the plea agreement and forfeiture, the BCCI defendants no longer have any assets in this country.

Panama first instituted this action in December 1990. It filed its Fourth Amended Complaint in August 1993. In May 1994, the district court granted the First American defendants' motion to dismiss for lack of personal jurisdiction and, in the alternative, ruled that Panama had failed to state a RICO claim against these defendants. In July 1995, the district court dismissed Panama's claims against the BCCI defendants on the basis of forum non conveniens and, in the alternative, international comity.

A. First American Defendants' Motion to Dismiss

Panama alleged that the district court had jurisdiction over the First American defendants under RICO's nationwide service of process provision, 18 U.S.C. § 1965(d), which provides that process may be served "on any person in any judicial district in which such person resides, is found, has an agent, or transacts his affairs." The district court concluded that although Panama had satisfied the requirements of this section, Panama had not alleged sufficient contacts with Florida to satisfy the Due Process Clause of the Fifth Amendment. The court therefore granted the First American defendants' motion under Fed.R.Civ.P. 12(b)(2) to dismiss Panama's claims against them for lack of personal jurisdiction. Without abandoning their attack on personal jurisdiction, the First American defendants urge us to put aside the jurisdictional issue and first review the district court's alternative ruling under Fed.R.Civ.P. 12(b)(6) addressing the merits of Panama's RICO claim.5

As a general rule, courts should address issues relating to personal jurisdiction before reaching the merits of a plaintiff's claims. See Madara v. Hall, 916 F.2d 1510, 1513-14 & n. 1 (11th Cir.1990); Charles A. Wright & Arthur R. Miller, Federal Practice and Procedure, Civil 2d § 1351, at 243-44 (1990). A defendant that is not subject to the jurisdiction of the court cannot be bound by its rulings. Madara, 916 F.2d at 1514. Thus, as a preliminary matter, courts should determine if they have the power to bind a defendant with a ruling on the merits of the case. Moreover, the fact that a dismissal for failure to state a claim is with prejudice whereas a dismissal for lack of jurisdiction is without prejudice counsels against bypassing the jurisdictional issue. See Madara, 916 F.2d at 1514 n. 1 (contrasting consequences of dismissals made under Fed. R. Civ. P. 12(b)(2) and Fed.R.Civ.P. 12(b)(6)) (citing Arrowsmith v. United Press Int'l, 320 F.2d 219, 221 (2d Cir.1963) (en banc )).

Although courts have held that it is permissible in some circumstances to bypass the issue of personal jurisdiction if a decision on the merits would favor the party challenging jurisdiction and the jurisdictional issue is difficult,6 we decline to depart from the general rule in this case. The jurisdictional issue presented in this appeal has perplexed and divided district courts in this circuit, and the lack of direction from this court has produced substantial inconsistency for litigants. See BankAtlantic v. Coast to Coast Contractors, Inc., 947 F.Supp. 480, 488 & n. 6 (S.D.Fla.1996) (noting lack of consensus and lack of guidance from this circuit).7 In addition, the jurisdictional issue in this case was addressed by the district court and was fully litigated by both parties on appeal. The factual record thus is sufficiently developed for us to decide the jurisdictional issue without further fact-finding. Although we recognize that here the jurisdictional issue presents difficult questions, we address this issue because it is properly before us, because it is well presented, and because it has produced conflicting rulings within our circuit.

The First American defendants nevertheless contend that we need not decide whether the Fifth Amendment Due Process Clause limits the reach of RICO's nationwide service of process provision because, having failed to state a claim under RICO, Panama should not be allowed to utilize that statute's nationwide service of process provision to establish jurisdiction over them.8 Because defendants failed to make this argument before the district court, we need not address it on appeal. See Narey v. Dean, 32 F.3d 1521, 1526-27 (11th Cir.1994). We consider this claim only to clarify the distinction between what a plaintiff asserting jurisdiction under a federal statute must allege to survive a defendant's 12(b)(1) or 12(b)(2) motion on the one hand, and a defendant's 12(b)(6) motion on the other. See IUE AFL-CIO Pension Fund v. Herrmann, 9 F.3d 1049, 1055-57 (2d Cir.1993) (comparing jurisdictional standards under 12(b)(1) and 12(b)(2) with 12(b)(6) standards), cert. denied, 513 U.S. 822, 115 S.Ct. 86, 130 L.Ed.2d 38 (1994).

When a jurisdictional motion to dismiss depends, as in this case, on the assertion of a right created by a federal statute, the court should dismiss for lack of jurisdiction only if "the right claimed is 'so insubstantial, implausible, foreclosed by prior decisions of this Court, or otherwise devoid of merit as not to involve a federal controversy.' " Id. at 1055 (citations omitted); see also Garcia v. Copenhaver, Bell & Assocs., 104 F.3d 1256 (11th Cir.1997) (dismissal for lack of subject matter jurisdiction is only appropriate when plaintiff's federal claim is "clearly immaterial or insubstantial"). The Second Circuit in Herrmann held that because plaintiffs had asserted a colorable claim under a federal statute, they were entitled to take advantage of that statute's nationwide service of process provision. 9 F.3d at 1056 (finding jurisdiction under Multi-employer Pension Plan Amendments Act ("MPPAA")). The Herrmann court therefore proceeded to decide that it had personal jurisdiction over defendants under MPPAA's nationwide service of process provision before addressing defendants' motion to dismiss for failure to state a claim under that statute. Id. at 1057 (distinguishing between a "colorable federal claim" and a "federal claim upon which relief can be granted").

We adopt the same approach and conclude that insofar as an asserted federal claim is not wholly immaterial or insubstantial, a plaintiff is entitled to take advantage of the federal statute's nationwide service of process provision. Because the First American defendants waived their argument challenging Panama's right to utilize RICO's nationwide service of process provision, we need not decide whether Panama has stated a colorable RICO claim.9 Instead, we must decide whether Panama properly has established under this provision the district court's jurisdiction over the First American defendants.

In analyzing a motion to dismiss for lack of personal jurisdiction under Fed.R.Civ.P. 12(b)(2), we first determine whether the applicable statute potentially confers jurisdiction over the defendant, and then determine whether the exercise of jurisdiction comports with due process. Sun Bank, N.A., v. E.F. Hutton & Co., Inc., 926 F.2d 1030, 1033 (11th Cir.1991) (diversity case); Go-Video, Inc. v. Akai Elec. Co., Ltd., 885 F.2d 1406, 1413 (9th Cir.1989) (federal question case).

In this case, we need not pause long over the first question. Section 1965(d) of the RICO statute provides for service in any judicial district in which the defendant is found. When a federal statute provides for nationwide service of process, it becomes the statutory basis for personal jurisdiction. In re Chase & Sanborn Corp., 835 F.2d 1341, 1344 (11th Cir.1988), rev'd on other grounds sub. nom, Granfinanciera, S.A. v. Nordberg, 492 U.S. 33, 109 S.Ct. 2782, 106 L.Ed.2d 26 (1989); see also Lisak v. Mercantile Bancorp, Inc., 834 F.2d 668, 671 (7th Cir.1987) (noting that section 1965 "creates personal jurisdiction by authorizing service"), cert. denied, 485 U.S. 1007, 108 S.Ct. 1472, 99 L.Ed.2d 700 (1988). Because the First American defendants are domestic corporations doing business in this country, the statutory basis for personal jurisdiction over these defendants is satisfied.

The constitutional question is considerably more involved. It is well established that when, as here, a federal statute provides the basis for jurisdiction, the constitutional limits of due process derive from the Fifth, rather than the Fourteenth, Amendment. Chase & Sanborn, 835 F.2d at 1344 ("The due process clause of the fifth amendment constrains a federal court's power to acquire personal jurisdiction via nationwide service of process."). There is considerable debate, however, over the scope of the limits imposed by the Fifth Amendment when jurisdiction is established over a domestic defendant via a nationwide service of process provision. Appellant urges us to adopt a "pure national contacts" approach. It asserts that the Fifth Amendment requires only that the defendant have "minimum contacts" with the United States as a whole. The First American appellees, on the other hand, contend that the "minimum contacts" inquiry is the same under the Fifth Amendment as it is under the Fourteenth Amendment. They therefore insist that under the Fifth Amendment courts must also focus on a defendant's contacts with the forum state rather than with the nation as a whole. The district court adopted yet a third approach--a "flexible minimum contacts" analysis that evaluates a defendant's contacts with the forum, but in a less demanding fashion than is required by the Fourteenth Amendment.

a. The Relevance of Jim Walter

In order to evaluate these contentions, we begin with this court's opinion in Federal Trade Comm'n v. Jim Walter Corp., 651 F.2d 251 (5th Cir. Unit A Jul.1981).10 In assessing the Fifth Amendment's constraints on the use of a federal statute's nationwide service of process provision, the court in Jim Walter concluded that "due process requires only that a defendant in a federal suit have minimum contacts with the United States." Id. at 256. Because the defendant was a "resident United States corporation," the court found that it "necessarily ha[d] sufficient contacts with the United States to satisfy the requirements of due process." Id. We rejected the notion that once minimum contacts had been established with the United States, fairness or convenience had any relevance in determining whether the court could constitutionally exercise jurisdiction over a particular defendant. Id. at 257.

In Jim Walter, we "grounded our holding on the understanding that '[t]he doctrine [of personal jurisdiction] arises out of the limitations inherent in the concepts of sovereignty.' " Busch v. Buchman, Buchman & O'Brien, 11 F.3d 1255, 1257 (5th Cir.1994) (quoting Jim Walter, 651 F.2d at 256). We found the doctrine's "application to federal jurisdiction ... unambiguous" because we concluded that personal jurisdiction is "[p]roperly understood as defining the limits on the exercise of the sovereign function." Jim Walter, 651 F.2d at 256-57 ("When minimum contacts exist with the relevant sovereign, due process no longer protects a defendant from distant litigation because the location of permissible venues is a matter of sovereign prerogative.").

The rationale of our holding in Jim Walter, however, subsequently was rejected by the Supreme Court in Insurance Corp. of Ireland v. Compagnie des Bauxites de Guinee, 456 U.S. 694, 702-03, 102 S.Ct. 2099, 2104-05, 72 L.Ed.2d 492 (1982), in which it clarified the constitutional underpinnings of personal jurisdiction.11 Justice White, writing for eight members of the Court, explained that "[t]he personal jurisdiction requirement recognizes and protects an individual liberty interest. It represents a restriction on judicial power not as a matter of sovereignty, but as a matter of individual liberty." 456 U.S. at 702, 102 S.Ct. at 2104-05;12 see also Pardazi v. Cullman Medical Center, 896 F.2d 1313, 1317 (11th Cir.1990) ("Unlike the rules of subject matter jurisdiction, the rules of personal jurisdiction protect an individual's rights, not a sovereign's rights.") (citing Bauxites, 456 U.S. at 704, 102 S.Ct. at 2104-05).

Regardless of whether this passage in Bauxites marked a fundamental change in the Supreme Court's personal jurisdiction jurisprudence, it unquestionably undermined the rationale and precedential effect of Jim Walter.13 In Chase & Sanborn, we indicated that the question previously answered by Jim Walter was unsettled in this circuit. 835 F.2d 1341, 1344-45 n. 8 (11th Cir.1988) ("We note, without deciding the issue, that there is a lack of consensus among the courts as to whether a due process analysis is necessary where the defendant is a domestic corporation served via nationwide service of process.").14

Similarly, the Fifth Circuit recently determined that the Supreme Court had "rejected [Jim Walter 's] sovereignty analysis" in Bauxites. Busch, 11 F.3d at 1257. As a result, the Fifth Circuit concluded that it was necessary to revisit the constitutional question posed in Jim Walter and apply the due process standards articulated by the Court in Bauxites. Id. (nevertheless affirming the result reached in Jim Walter ). Like the Fifth Circuit, we conclude that Bauxites requires us to revisit the issue presented in Jim Walter and to determine anew what limits the Due Process Clause of the Fifth Amendment provides in the context of nationwide service of process.

b. Due Process under the Fourteenth Amendment

Although the Supreme Court has never addressed the scope of due process protection under the Fifth Amendment in the jurisdictional context,15 it often has discussed the due process protections afforded by the Fourteenth Amendment. Because the language and motivating policies of the due process clauses of these two amendments are substantially similar, opinions interpreting the Fourteenth Amendment due process clause provide important guidance for us in determining what due process requires in cases involving nationwide service of process. See Chase & Sanborn, 835 F.2d at 1345 ("We look to International Shoe v. Washington and its progeny [ (Fourteenth Amendment cases) ] for guidance in determining whether due process is satisfied [under the Fifth Amendment].") (citation omitted).

In articulating the due process limits of the Fourteenth Amendment, the Supreme Court frequently has returned to the seminal case of International Shoe Co. v. Washington, in which it stated that due process requires that "the maintenance of the suit ... not offend 'traditional notions of fair play and substantial justice.' " 326 U.S. 310, 316, 66 S.Ct. 154, 158, 90 L.Ed. 95 (1945) (citation omitted). In its more recent opinions, the Court has clarified the meaning of this familiar phrase and increasingly emphasized that due process protects individual liberty interests by protecting parties from the unreasonable demands of litigating in a faraway forum.

In World-Wide Volkswagen v. Woodson, 444 U.S. 286, 291-92, 100 S.Ct. 559, 564, 62 L.Ed.2d 490 (1980), the Court described the International Shoe test as performing "two related, but distinguishable, functions." First, due process under the Fourteenth Amendment acts as "the guarantor against inconvenient litigation" by "protect[ing] the defendant against the burdens of litigating in a distant or inconvenient forum." Id. at 292, 100 S.Ct. at 564-65 (describing protection in terms of "reasonableness" and "fairness"). Second, due process acts to ensure that states do not reach out beyond the limits imposed on them as coequal sovereigns in a federal system. Id. at 291-92, 100 S.Ct. at 564.

Two years later, in Bauxites, the Court clarified the relation between these two functions by suggesting that due process serves primarily to protect individual liberty. 456 U.S. at 702-03, 102 S.Ct. at 2104-05 (noting that "the requirement of personal jurisdiction represents first of all an individual right"). The restriction on sovereign power described in World-Wide Volkswagen therefore "must be seen as ultimately a function of the individual liberty interest preserved by the Due Process Clause." Id. 456 U.S. at 702-03 & n. 10, 102 S.Ct. at 2104-05 & n. 10.

The Court again revisited the limits of due process and the relation of sovereignty to individual liberty in Burger King Corp. v. Rudzewicz, 471 U.S. 462, 105 S.Ct. 2174, 85 L.Ed.2d 528 (1985). The Court reasoned that the limits on state power under the Fourteenth Amendment are designed to protect individuals by providing them with fair notice that their activities will render them liable to suit in a particular forum. Id. 471 U.S. at 470-77, 105 S.Ct. at 2181-84. "[T]his 'fair warning' requirement is satisfied if the defendant has 'purposefully directed' his activities at residents of the forum." Id. 471 U.S. at 472, 105 S.Ct. at 2182 (quoting Keeton v. Hustler Magazine, Inc., 465 U.S. 770, 774, 104 S.Ct. 1473, 1478, 79 L.Ed.2d 790 (1984)).16 Activities purposefully directed within a forum justify a sovereign's exercise of power in requiring an individual to litigate within its borders.

The Court noted, however, that demonstrating "purposeful availment" does not, by itself, satisfy the demands of due process. Once it has been established that a defendant has purposefully directed his activities at a particular forum, courts still should determine if "the assertion of personal jurisdiction would comport with 'fair play and substantial justice.' " Id. 471 U.S. at 476, 105 S.Ct. at 2184 (quoting International Shoe, 326 U.S. at 320, 66 S.Ct. at 160). Justice Brennan cautioned that "minimum requirements inherent in the concept of 'fair play and substantial justice' may defeat the reasonableness of jurisdiction even if the defendant has purposefully engaged in forum activities." Id., 471 U.S. at 477-78, 105 S.Ct. at 2185; see also Madara v. Hall, 916 F.2d 1510, 1517 (11th Cir.1990) (after purposeful availment has been established, court must examine fairness of requiring defendant to litigate in plaintiff's chosen forum).

c. Fairness under the Fifth Amendment

We discern no reason why these constitutional notions of "fairness" and "reasonableness," see World-Wide Volkswagen, 444 U.S. at 291-92, 100 S.Ct. at 564, should be discarded completely when jurisdiction is asserted under a federal statute rather than a state long-arm statute. The language of the Fifth Amendment is virtually identical to that of the Fourteenth Amendment,17 and both amendments were designed to protect individual liberties from the same types of government infringement. See Mathews v. Eldridge, 424 U.S. 319, 331-32, 96 S.Ct. 893, 901, 47 L.Ed.2d 18 (1976) (relying on Fourteenth Amendment cases to define limits of the Fifth Amendment's procedural due process protections). Although the fact that the United States is the sovereign asserting its power undoubtedly must affect the way the constitutional balance is struck, the assertion of federal power should not cause courts to abandon completely their role as protectors of individual liberty and fundamental fairness.18

Accordingly, several circuits have concluded that the Fifth Amendment, like the Fourteenth Amendment, protects individual litigants against the burdens of litigation in an unduly inconvenient forum. See, e.g., Chase & Sanborn, 835 F.2d at 1345 (indicating that Fifth Amendment inquiry focuses on "fairness and reasonableness" of requiring defendant to litigate in particular forum);19 Handley v. Indiana & Michigan Electric Co., 732 F.2d 1265, 1272 (6th Cir.1984) ("In a case like the present one, where the federal court is sitting in a federal question case, the purpose of minimum contacts is to protect the defendant 'against the burdens of litigating in a distant or inconvenient forum.' ") (quoting World-Wide Volkswagen, 444 U.S. at 292, 100 S.Ct. at 564); Horne v. Adolph Coors Co., 684 F.2d 255, 259 (3d Cir.1982) ("The only constitutional limitation on Congressional power to provide a forum is whatever fairness is required by fifth amendment due process."); Lone Star Package Car Co. v. Baltimore & O.R. Co., 212 F.2d 147, 155 (5th Cir.1954) (when "cases are governed by federal law, the question of whether they are to be tried in one locality or another is now to be tested ... by basic principles of fairness").20

In order to evaluate whether the Fifth Amendment requirements of fairness and reasonableness have been satisfied, courts should balance the burdens imposed on the individual defendant against the federal interest involved in the litigation. See Asahi, 480 U.S. at 114, 107 S.Ct. at 1033 (reasonableness depends on burden to defendant, interest of sovereign, and plaintiff's interest in obtaining relief); World-Wide Volkswagen, 444 U.S. at 292, 100 S.Ct. at 564 (noting that the burden on the defendant, "while always a primary concern, will ... be considered in light of other relevant factors"). As in other due process inquiries, the balancing seeks to determine if the infringement on individual liberty has been justified sufficiently by reference to important governmental interests.

We note, however, that courts must engage in this balancing only