Case 4

W.S. Kirkpatrick & Co. v. Environmental Tectonics Corp.

Facts:In 1981, Harry Carpenter, a U.S. citizen and chairman of the board and chief executive officer of W. S. Kirkpatrick & Co., Inc. (Kirkpatrick), learned that the Republic of Nigeria was interested in contracting for the construction of an aeromedical center at Kaduna Air Force Base in Nigeria. He made arrangements with Benson Tunde Akindale, a Nigerian citizen, whereby Akindale would help secure the contract for Kirkpatrick by paying bribes to Nigerian officials. In accordance with the plan, the contract was awarded to a wholly owned subsidiary of Kirkpatrick; Kirkpatrick paid the agreed-upon funds to Akindale, which were dispersed as bribes to Nigerian officials. Nigerian law prohibits both the payment and the receipt of such bribes. Environmental Tectonics Corporation, International (Environmental), an unsuccessful bidder for the Kaduna contract, learned of the bribes and informed the U.S. embassy in Lagos, Nigeria. In a criminal action, Carpenter and Kirkpatrick pleaded guilty to violating the U.S. Foreign Corrupt Practices Act. Environmental then brought this civil action against Carpenter, Kirkpatrick, and Akindale seeking damages under federal and state racketeering and antitrust laws. The district court held that the action was barred by the act of state doctrine and dismissed the complaint. The Court of Appeals reversed. The defendants appealed to the U.S. Supreme Court.

Issue:WON the act of state doctrine bar the plaintiffs civil suit against the defendants?

Ruling:The act of state doctrine does not apply.

Act of state issues arise only when a court must decidethat is, when that outcome of the case turns uponthe effect of official action by a foreign sovereign. When that question is not in the case, neither is the act of state doctrine. That is the situation here. Regardless of what the courts factual findings may suggest as to the legality of the Nigerian contract, its legality is simply not a question to be decided in the present suit, and there is thus no occasion to apply the rule of decision that the act of state doctrine requires.

The short of the matter is this: Courts in the United States have the power, and ordinarily the obligation, to decide cases and controversies properly presented to them. The act of state doctrine does not establish an exception for cases and controversies that may embarrass foreign governments, but merely requires that, in the process of deciding, the acts of foreign sovereigns taken within their own jurisdictions shall be deemed valid. That doctrine has no application to the present case because the validity of no foreign sovereign act is at issue.ISSUE: Does the act of state doctrine arise in this case? In other words, does the outcome of the case turn on whether the court gives legal effect to the act of the foreign government in its own territory?

The lower court says that it does for Tectonics to win, it would have to prove that the Nigerian government took a bribe, and, because of that bribe, awarded the job to Kirkpatrick

Remember: it does not matter that the Nigerian government is not a party to the suit, because the act of state doctrine may come into play where none of the parties is a state so long as the outcome of the case depends on whether a court gives legal effect to the act of a state

But the Supreme Court says that the act of state doctrine does NOT apply here

Act of state issues only arise when a court must decide that is, when the outcome of the case turns upon the effect of official action by a foreign sovereign. When that question is not in the case, neither is the act of state doctrine. That is the situation here. Regardless if what the courts factual findings may suggest as to the legality of the Nigerian contract, its legality is simply not a question to be decided in the present suit.

The determination as to whether the bribe took place and influenced the outcome of the contract does not require the court to decide whether or not to give legal effect to an official act of Nigeria in is own territory.W.S. Kirkpatrick and Co. v. Environmental Tectonics Corp., International493 U.S. 400 (1990) Kirkpatrick and ETC were both trying to win a construction contract in Nigeria. ETC won.

ETC won by bribing Nigerian officials.

Bribery is technically illegal in Nigeria.

Kirkpatrick sued ETC in US Federal Court for damages.

ETC claimed that since the contract was an official act of the country of Nigeria, suits in US Courts were barred by the Act of State Doctrine.

The Trial Court dismissed the case. Kirkpatrick appealed.

The Trial Court found that the suit was barred by the Act of State Doctrine.

The Court found that a judicial inquiry into the motivation of a sovereign act might result in embarrassment to the sovereign, or constitute interference with the conduct of US foreign policy.

The Court found that allowing Kirkpatrick to make a bribery claim would require a finding that foreign officials were criminals, and that might embarrass the Executive Branch in its conduct of foreign relations.

The Appellate Court reversed. ETC appealed.

The US Supreme Court affirmed and allowed the case to proceed.

The US Supreme Court found that the Act of State Doctrine did not apply because nothing in the suit required a court to declare invalid the official act of a foreign sovereign.

"The Act of State Doctrine does not establish an exception for cases and controversies that may embarrass foreign governments, but merely requires that, in the process of deciding, the acts of foreign sovereigns taken within their own jurisdiction shall deemed valid."