TIMBERLANE vs BOA

Four separate actions, arising from the same series of events,

were dismissed by the same district court and are
consolidated here on appeal. The principal action is
Timberlane Lumber Co. v. Bank of America (Timberlane
action), an antitrust suit alleging violations of sections 1 and 2
of the Sherman Act and the Wilson Tariff Act.This action raises
important questions concerning the application of American
antitrust laws to activities in another country, including actions
of foreign government officials. The district court dismissed the
Timberlane action under the act of state doctrine and for lack
of subject matter jurisdiction.
The basic allegation of the Timberlane plaintiffs is that officials
of the Bank of America and others located in both the United
States and Honduras conspired to prevent Timberlane,
through its Honduras subsidiaries, from milling lumber in
Honduras and exporting it to the United States, thus
maintaining control of the Honduran lumber export business in
the hands of a few select individuals financed and controlled
by the Bank. The intent and result of the conspiracy, they
contend, was to interfere with the exportation to the United
States, including Puerto Rico, of Honduran lumber for sale or
use there by the plaintiffs, thus directly and substantially
affecting the foreign commerce of the United States.
There are three affiliated plaintiffs in the Timberlane action.
Timberlane Lumber Company is an Oregon partnership
principally involved in the purchase and distribution of lumber
at wholesale in the United States and the importation of
lumber into the United States for sale and use. Danli Industrial,
S.A., and Maya Lumber Company, S. de R.L., are both
Honduras corporations, incorporated and principally owned by
the general partners of Timberlane. Danli held contracts to
purchase timber in Honduras, and Maya was to conduct the
milling operations to produce the lumber for export.
(Timberlane, Danli, and Maya will be collectively referred to as
"Timberlane.")
The primary defendants are Bank of America Corporation
(Bank), a California corporation, and its wholly-owned
subsidiary, Bank of America National Trust and Savings
Association, which operates a branch in Tegucigalpa,
Honduras.

The conspiracy sketched by Timberlane actually started before

the plaintiffs entered the scene. The Lima family operated a
lumber mill in Honduras, competing with Lamas and
Casanova, in both of which the Bank had significant financial
interests.
Lima business was in financial trouble.
Enter Timberlane, with a long history in the lumber business, in
search of alternative sources of lumber for delivery to its
distribution system on the East Coast of the United States.
After study, it decided to try Honduras. In 1971, Danli was
formed, tracts of forest land were acquired, plans for a modern
log-processing plant were prepared, and equipment was
purchased and assembled for shipment from the United States
to Danli in Honduras. Timberlane became aware that the Lima
plant might be available and began negotiating for its
acquisition. Maya was formed, purchased the Lima
employees' interest in the machinery and equipment.
Realizing that they were faced with better-financed and more
vigorous competition from Timberlane and its Honduran
subsidiaries, the defendants and others extended the antiLima conspiracy to disrupt Timberlane's efforts. The primary
weapons employed by the conspirators were the claim still
held by the Bank in the remaining assets of the Lima
enterprise under the all-inclusive mortgage Lima had been
forced to sign and another claim held by Casanova.
As a result of the conspiracy, Timberlane's complaint claimed
damages.
The defendants argue as the district court apparently held that
the injuries allegedly suffered by Timberlane resulted from acts
of the Honduran government, principally in connection with the
enforcement of the security interests in the Maya plant, which
American courts cannot review. Such an application of the act
of state doctrine seems to us to be erroneous. Even if the coup
de grace to Timberlane's enterprise in Honduras was applied
by official authorities, we do not agree that the doctrine
necessarily shelters these defendants or requires dismissal of
the Timberlane action.
A tripartite analysis seems to be indicated. As acknowledged
above, the antitrust laws require in the first instance that there
be some effect actual or intended on American foreign
commerce before the federal courts may legitimately exercise
subject matter jurisdiction under those statutes. Second, a

greater showing of burden or restraint may be necessary to

demonstrate that the effect is sufficiently large to present a
cognizable injury to the plaintiffs and, therefore, a civil violation
of the antitrust laws. Third, there is the additional question
which is unique to the international setting of whether the
interests of, and links to, the United States including the
magnitude of the effect on American foreign commerce are
sufficiently strong, vis-a-vis those of other nations, to justify an
assertion of extraterritorial authority.
What we prefer is an evaluation and balancing of the relevant
considerations.
The elements to be weighed include the degree of conflict with
foreign law or policy, the nationality or allegiance of the parties
and the locations or principal places of businesses or
corporations, the extent to which enforcement by either state
can be expected to achieve compliance, the relative
significance of effects on the United States as compared with
those elsewhere, the extent to which there is explicit purpose
to harm or affect American commerce, the foreseeability of
such effect, and the relative importance to the violations
charged of conduct within the United States as compared with
conduct abroad. A court evaluating these factors should
identify the potential degree of conflict if American authority is
asserted. A difference in law or policy is one likely sore spot,
though one which may not always be present. 32 Nationality is
another; though foreign governments may have some concern
for the treatment of American citizens and business residing
there, they primarily care about their own nationals. Having
assessed the conflict, the court should then determine whether
in the face of it the contacts and interests of the United States
are sufficient to support the exercise of extraterritorial
jurisdiction.
We conclude, then, that the problem should be approached in
three parts: Does the alleged restraint affect, or was it
intended to affect, the foreign commerce of the United States?
Is it of such a type and magnitude so as to be cognizable as a
violation of the Sherman Act? As a matter of international
comity and fairness, should the extraterritorial jurisdiction of
the United States be asserted to cover it? The district court's
judgment found only that the restraint involved in the instant
suit did not produce a direct and substantial effect on
American foreign commerce. That holding does not satisfy any
of these inquiries.
The Sherman Act is not limited to trade restraints which have
both a direct and substantial effect on our foreign commerce.

Timberlane has alleged that the complained of activities were

intended to, and did, affect the export of lumber from
Honduras to the United States the flow of United States
foreign commerce, and as such they are within the jurisdiction
of the federal courts under the Sherman Act. Moreover, the
magnitude of the effect alleged would appear to be sufficient to
state a claim.

HARTFORD FIRE INSURANCE vs

CALIFORNIA
Four domestic primary insurers, domestic companies who sell
reinsurance to insurers, two domestic trade associations, a
domestic reinsurance broker, and reinsurers based in
London--violated the Sherman Act by engaging in various
conspiracies aimed at forcing certain other primary insurers to
change the terms of their standard domestic commercial
general liability insurance policies to conform with the policies
the defendant insurers wanted to sell.
District Court granted the defendants' motions to dismiss. The
Court of Appeals reversed, rejecting the District Court's
conclusion that the defendants were entitled to antitrust
immunity under 2(b) of the McCarran Ferguson Act, which
exempts from federal regulation "the business of insurance,"
except "to the extent that such business is not regulated by
State law." Although it held the conduct involved to be "the
business of insurance," the Court of Appeals ruled that the
foreign reinsurers did not fall within 2(b)'s protection because
their activities could not be "regulated by State law," and that
the domestic insurers had forfeited their 2(b) exemption when
they conspired with the nonexempt foreign reinsurers.
Finally, the court rejected the District Court's conclusion that
the principle of international comity barred it from exercising
Sherman Act jurisdiction over the three claims brought solely
against the London reinsurers.
Even assuming that a court may decline to exercise Sherman
Act jurisdiction over foreign conduct in an appriopriate case,
international comity would not counsel against exercising
jurisdiction in the circumstances alleged here. The only
substantial question in this case is whether "there is in fact a

true conflict between domestic and foreign law. That question

must be answered in the negative, since the London
reinsurers do not argue that British law requires them to act in
some fashion prohibited by United States law or claim that
their compliance with the laws of both countries is otherwise
impossible.

PIPER AIRCRAFT vs REYNO

Respondent, as representative of the estates of several
citizens and residents of Scotland who were killed in an
airplane crash in Scotland during a charter flight, instituted
wrongful death litigation in a California state court against
petitioners, which are the company that manufactured the
plane in Pennsylvania and the company that manufactured the
plane's propellers in Ohio. At the time of the crash, the plane
was registered in Great Britain and was owned and operated
by companies organized in the United Kingdom. The pilot and
all of the decedents' heirs and next of kin were Scottish
subjects and citizens, and the investigation of the accident was
conducted by British authorities. Respondent sought to
recover from petitioners on the basis of negligence or strict
liability (not recognized by Scottish law), and admitted that the
action was filed in the United States because its laws
regarding liability, capacity to sue, and damages are more
favorable to respondent's position than those of Scotland. On
petitioners' motion, the action was removed to a Federal
District Court in California and was then transferred to the
United States District Court for the Middle District of
Pennsylvania, pursuant to 28 U.S.C. 1404(a).
The District Court granted petitioners' motion to dismiss the
action on the ground of forum non conveniens. Analyzing the
"private interest factors" affecting the litigants' convenience
and the "public interest factors" affecting the forum's
convenience, as set forth in Gilbert, the District Court
concluded that Scotland was the appropriate forum. However,
the Court of Appeals reversed, holding that the District Court
had abused its discretion in conducting the Gilbert analysis
and that, in any event, dismissal is automatically barred where
the law of the alternative forum is less favorable to the plaintiff
than the law of the forum chosen by the plaintiff.

Under Gilbert, supra, dismissal will ordinarily be appropriate

where trial in the plaintiff's chosen forum imposes a heavy
burden on the defendant or the court, and where the plaintiff is
unable to offer any specific reasons of convenience supporting
his choice. If substantial weight were given to the possibility of
an unfavorable change in law, however, dismissal might be
barred even where trial in the chosen forum was plainly
inconvenient, and the forum non conveniens doctrine would
become virtually useless. Such an approach not only would be
inconsistent with the purpose of the forum non conveniens
doctrine, but also would pose substantial practical problems,
requiring that trial courts determine complex problems in
conflict of laws and comparative law, and increasing the flow
into American courts of litigation by foreign plaintiffs against
American manufacturers.
The District Court properly decided that the presumption in
favor of the plaintiff's forum choice applied with less than
maximum force when the plaintiff or (as here) the real parties
in interest are foreign. When the plaintiff has chosen the home
forum, it is reasonable to assume that the choice is
convenient; but when the plaintiff or real parties in interest are
foreign, this assumption is much less reasonable, and the
plaintiff's choice deserves less deference.
The forum non conveniens determination is committed to the
trial court's sound discretion, and may be reversed only when
there has been a clear abuse of discretion. Here, the District
Court did not abuse its discretion in weighing the private and
public interests under the Gilbert analysis, and thereby
determining that the trial should be held in Scotland.
In analyzing the private interest factors, the District Court did
not act unreasonably in concluding that fewer evidentiary
problems would be posed if the trial were held in Scotland, a
large proportion of the relevant evidence being located there.
The District Court also correctly concluded that the problems
posed by the petitioners' inability to implead potential Scottish
third-party defendants -- the pilot's estate, the plane's owners,
and the charter company -- supported holding the trial in
Scotland.
The District Court's review of the factors relating to the public
interest was also reasonable. Even aside from the question
whether Scottish law might be applicable in part, all other
public interest factors favor trial in Scotland, which has a very
strong interest in this litigation. The accident occurred there, all
of the decedents were Scottish, and apart from petitioners, all

potential parties are either Scottish or English. As to

respondent's argument that American citizens have an interest
in ensuring that American manufacturers are deterred from
producing defective products and that additional deterrence
might be obtained by trial in the United States where they
could be sued on the basis of both negligence and strict
liability, any incremental deterrence from trial in an American
court is likely to be insignificant and is not sufficient to justify
the enormous commitment of judicial time and resources that
would be required.

connection with the following charges (1) conspiracy to

defraud the United States and to commit certain offenses in
violation of Title 18 US Code Section 371; (2) tax evasion; (3)
wire fraud; (4) false statements; and (5) illegal campaign
contributions.
ISSUE:
Whether or not he is entitled to bail and to provisional
liberty while the extradition proceedings are pending?
RULING:

U.S. vs PURUGANAN
FACTS:
> Pursuant to the existing RP-US Extradition Treaty, the
United States Government, through diplomatic channels, sent
to the Philippine Government requesting the extradition of
Mark B. Jimenez, also known as Mario Batacan Crespo. Upon
receipt of the Notes and documents, the secretary of foreign
affairs (SFA) transmitted them to the secretary of justice (SOJ)
for appropriate action, pursuant to Section 5 of Presidential
Decree (PD) No. 1069, also known as the Extradition Law.
> Upon learning of the request for his extradition, Jimenez
sought and was granted a Temporary Restraining Order (TRO)
by the RTC. The TRO prohibited the Department of Justice
(DOJ) from filing with the RTC a petition for his extradition. The
validity of the TRO was, however, assailed by the SOJ in a
Petition before this Court -- dismissed the Petition. The SOJ
was ordered to furnish private respondent copies of the
extradition request and its supporting papers and to grant the
latter a reasonable period within which to file a comment and
supporting evidence.
> Acting on the Motion for Reconsideration -- it reconsidered
and reversed its earlier Decision. It held that private
respondent was bereft of the right to notice and hearing during
the evaluation stage of the extradition process. This
Resolution has become final and executory.
> Government of the United States of America, represented by
the Philippine DOJ, filed with the RTC the appropriate Petition
for Extradition. The Petition alleged, inter alia, that Jimenez
was the subject of an arrest warrant issued by the United
States District Court for the Southern District of Florida in

NO. Article III, Section 13 of the Constitution, is

worded as follows:
Art. III, Sec. 13. All persons, except those charged with
offenses punishable by reclusion perpetua when evidence of
guilt is strong, shall, before conviction, be bailable by sufficient
sureties, or be released on recognizance as may be provided
by law. The right to bail shall not be impaired even when the
privilege of the writ of habeas corpus is suspended. Excessive
bail shall not be required."
Respondent Mark B. Jimenez maintains that this constitutional
provision secures the right to bail of all persons, including
those sought to be extradited. Supposedly, the only exceptions
are the ones charged with offenses punishable with reclusion
perpetua, when evidence of guilt is strong. He also alleges the
relevance to the present case of Section 4 of Rule 114 of the
Rules of Court which, insofar as practicable and consistent
with the summary nature of extradition proceedings, shall also
apply according to Section 9 of PD 1069.

as well as Section 4 of Rule 114 of the Rules of Court, applies

only when a person has been arrested and detained for
violation of Philippine criminal laws. It does not apply to
extradition proceedings, because extradition courts do not
render judgments of conviction or acquittal.
Moreover, the constitutional right to bail "flows from the
presumption of innocence in favor of every accused who
should not be subjected to the loss of freedom as thereafter he
would be entitled to acquittal, unless his guilt be proved
beyond reasonable doubt." It follows that the constitutional
provision on bail will not apply to a case like extradition, where
the presumption of innocence is not at issue.
The provision in the Constitution stating that the "right to bail
shall not be impaired even when the privilege of the writ of
habeas corpus is suspended" does not detract from the rule
that the constitutional right to bail is available only in criminal
proceedings. It must be noted that the suspension of the
privilege of the writ of habeas corpus finds application "only to
persons judicially charged for rebellion or offenses inherent in
or directly connected with invasion." Hence, the second
sentence in the constitutional provision on bail merely
emphasizes the right to bail in criminal proceedings for the
aforementioned offenses. It cannot be taken to mean that the
right is available even in extradition proceedings that are not
criminal in nature.
That the offenses for which Jimenez is sought to be extradited
are bailable in the United States is not an argument to grant
him one in the present case. To stress, extradition proceedings
are separate and distinct from the trial for the offenses for
which he is charged. He should apply for bail before the courts
trying the criminal cases against him, not before the extradition
court.

On the other hand, petitioner claims that there is no provision

in the Philippine Constitution granting the right to bail to a
person who is the subject of an extradition request and arrest
warrant.

Extradition Different from Ordinary Criminal Proceedings

RODRIGUEZ vs JUDGE

We agree with petitioner. As suggested by the use of the word

"conviction," the constitutional provision on bail quoted above,

FACTS:

> Petition for extradition filed by the Government of the United

States of America (US government) through the Department of
Justice (DOJ) against the petitioners.
> After their arrest, petitioners applied for bail which the trial
court granted. Petitioners then posted cash bonds. The US
government moved for reconsideration of the grant of bail, but
the motion was denied by the trial court. Unsatisfied, the US
government filed a petition for certiorari with this Court.
> We directed the trial court to resolve the matter of bail which,
according to its November 28, 2001 Order, shall be subject to
whatever ruling that this Court may have in the similar case of
Mark Jimenez. In compliance with our directive, the trial court,
without prior notice and hearing, cancelled the cash bond of
the petitioners and ordered the issuance of a warrant of arrest.
ISSUE:
Whether or not in an extradition case, is prior notice
and hearing required before bail is cancelled?
RULING:
YES. Petitioners assert that their bail cannot be
cancelled without due process of law. By way of analogy, they
point to Rule 114, Section 21 of the Rules of Court where the
surety or bonding company is required to be notified and
allowed to show cause why the bail bond should not be
cancelled. They say that if the rules grant this opportunity to
surety and bonding companies, the more reason then that in
an extradition case the same should be afforded.
Respondents, for their part, argue that prior notice and hearing
are not required to cancel petitioners bail, and the issuance of
a warrant of arrest ex parte against an extraditee is not a
violation of the due process clause. Further, respondents

maintain that prior notice and hearing would defeat the

purpose of the arrest warrant since it could give warning that
respondents would be arrested and even encourage them to
flee.

risk, and the trial court had already exercised its sound
discretion and had already determined that under the
Constitution and laws in force, co-petitioner is entitled to
provisional release.

The issue of prior notice and hearing in extradition cases is not

new. In Secretary of Justice v. Lantion, by a vote of nine to six,
we initially ruled that notice and hearing should be afforded the
extraditee even when a possible extradition is still being
evaluated. The Court, deliberating on a motion for
reconsideration also by a vote of nine to six, qualified and
declared that prospective extraditees are entitled to notice and
hearing only when the case is filed in court and not during the
process of evaluation.

Under these premises, and with the trial courts knowledge that
in this case, co-petitioner has offered to go on voluntary
extradition; that she and her husband had posted a cash bond
of P1 million each; that her husband had already gone on
voluntary extradition and is presently in the USA undergoing
trial; that the passport of co-petitioner is already in the
possession of the authorities; that she never attempted to flee;
that there is an existing hold-departure order against her; and
that she is now in her sixties, sickly and under medical
treatment, we believe that the benefits of continued temporary
liberty on bail should not be revoked and their grant of bail
should not be cancelled, without the co-petitioner being given
notice and without her being heard why her temporary liberty
should not be discontinued.

Now, we are confronted with the question of whether a

prospective extraditee is entitled to notice and hearing before
the cancellation of his or her bail.
The issue has become moot and academic insofar as
petitioner Eduardo Rodriguez is concerned. He is now in the
USA facing the charges against him. But co-petitioner Imelda
Gener Rodriguez is here and stands on a different footing. We
agree that her bail should be restored.
In Purganan, we said that a prospective extraditee is not
entitled to notice and hearing before the issuance of a warrant
of arrest, because notifying him before his arrest only tips him
of his pending arrest. But this is for cases pending the
issuance of a warrant of arrest, not in a cancellation of a bail
that had been issued after determination that the extraditee is
a no-flight risk. The policy is that a prospective extraditee is
arrested and detained to avoid his flight from justice. On the
extraditee lies the burden of showing that he will not flee once
bail is granted. If after his arrest and if the trial court finds that
he is no flight risk, it grants him bail. The grant of the bail,
presupposes that the co-petitioner has already presented
evidence to prove her right to be on bail, that she is no flight

We emphasize that bail may be granted to a possible

extraditee only upon a clear and convincing showing (1)
that he will not be a flight risk or a danger to the
community, and (2) that there exist special, humanitarian
and compelling circumstances.
In Purganan, we held also that the grounds used by the
highest court in the requesting state for the grant of bail may
be considered, under the principle of reciprocity.
Considering that she has not been shown to be a flight risk nor
a danger to the community, she is entitled to notice and
hearing before her bail could be cancelled. Based on the
record, we find that, absent prior notice and hearing, the bails
cancellation was in violation of her right to due process.