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Other Recent Supreme Court Rebukes Of Enforcement Theories Relevant To FCPA Enforcement

U.S. v. McDonnell – the unanimous Supreme Court decision earlier this week vacating the former Virginia governor’s criminal convictions – was relevant to Foreign Corrupt Practices Act enforcement because the key issue in McDonnell , the proper meaning of the term “official action,” is term that also appears in the FCPA’s anti-bribery provisions.

In the FCPA’s nearly 40 years of existence, the Supreme Court has never addressed an FCPA issue. It is unlikely that the Supreme Court will address an FCPA topic anytime soon because of how the government has chosen to enforce the FCPA (the vast majority of corporate enforcement actions are resolved without any meaningful judicial scrutiny and the vast majority of corporate enforcement actions lack individual prosecutions)

Thus, when thinking about how the Supreme Court might address certain FCPA issues, one has to analogize to other relevant Supreme Court decisions.

This post highlights other recent Supreme Court decisions, in addition to McDonnell, to rebuke enforcement theories relevant to FCPA enforcement.

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As highlighted in this prior post [1], in 2014 the Supreme Court dived into the topic of corruption in U.S. v. McCutcheon. The specific issue before the court was whether the aggregate limits on campaign contributions found in 2 USC 441(a)(a)(1), which restricts how much money a donor may contribute in total to all political candidates or political committees, violates the First Amendment.  In a plurality opinion authored by Chief Justice Roberts and joined by Justices Scalia, Kennedy and Alito, the court held that such aggregate limits are invalid under the First Amendment and in doing so dismissed the argument that such limits served the objective of combating corruption. The opinion recognized that “while preventing corruption or its appearance is a legitimate objective, Congress may target only a specific type of corruption ‘quid pro quo’ corruption.”  As to that type of corruption, the opinion adopted a narrow view and stated: “government regulation may not target the general gratitude a candidate may feel toward those who support him or his allies, or the political access such support may afford.  Ingratiation and access are not corruption.”

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As highlighted in this prior post [2], in Daimler A.G. v. Bauman (another 2014 decision), the Supreme Court went in-depth into parent-subsidiary liability issues and held that just because a subsidiary’s services are important to a parent corporation does not mean that the subsidiary is an agent of the parent corporation for purposes of imputing liability. As noted by the Court, such an enforcement theory would “stack the deck” for it would always yield a pro-agency answer. As noted in the prior post, Daimler was relevant to FCPA enforcement given the frequency in which the enforcement agencies seemingly impute subsidiary conduct to a parent corporation.

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As highlighted in this prior post [3], in 2013 the Supreme Court unanimously rejected the SEC’s statute of limitations position in SEC v. Gabelli. As stated by the Court:

“Statute of limitations are intended to ‘promote justice by preventing surprises through the revival of claims that have been allowed to slumber until evidence has been lost, memories have faded, and witnesses have disappeared.  They provide ‘security and stability to human affairs.  [They] are ‘vital to the welfare of society [and] ‘even wrongdoers are entitled to assume that their sins may be forgotten.’ […] It ‘would be utterly repugnant to the genius of our laws if actions for penalties could ‘be brought at any distance of time.’”

The Supreme Court further stated that statute of limitations are even more important in a government enforcement action compared to a case brought by a private plaintiff.

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As highlighted in this prior post [4], in Kiobel v. Royal Dutch Shell Petroleum (also a 2013 decision) the precise issue before the court was “whether and under what circumstances courts may recognize a cause of action under the Alien Tort Statute (“ATS”), for violations of the law of nations occurring within the territory of a sovereign other than the United States.” The court held that “the presumption against exterritoriality applies to claims under the ATS, and that nothing in the statute rebuts that presumption.” As highlighted in the prior post, the logic and rationale of many justices regarding broad jurisdictional theories in enforcement actions against foreign entities and foreign nationals have direct bearing on certain aspects of FCPA enforcement. Moreover, as previously noted, many of the justices expressed concern regarding the delicate foreign policy consequences of the issue before the court – an issue that is also present when the U.S. government alleges that foreign companies bribe foreign officials on foreign lands.

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In short, in the last few years the Supreme Court has issued 5 opinions directly relevant to certain aspects of FCPA enforcement.

In all 5 opinions (several of which were unanimous decisions), the Supreme Court rebuked the enforcement theory relevant to FCPA enforcement.