## Facts

- Ferdinand Marcos caused Arelma, S.A., a Panamanian corporation, to be formed and funded with assets invested through a Merrill Lynch account in New York.
- A certified class of human-rights victims obtained a nearly $2 billion U.S. judgment against the Marcos estate.
- The Republic of the Philippines created the Presidential Commission on Good Government (PCGG) to recover property alleged to be ill-gotten by Marcos and his associates.
- The Republic/PCGG and the human-rights judgment creditors asserted competing claims to approximately $35 million tied to the Merrill Lynch account.
- Related proceedings in a Philippine anti-corruption court sought forfeiture of certain disputed property to the Republic, and some funds were held in escrow by a Philippine bank.
- To avoid multiple liability, Merrill Lynch filed a federal statutory interpleader action naming the competing claimants, including the Republic and PCGG.
- The Republic and PCGG asserted immunity under the Foreign Sovereign Immunities Act (FSIA) and sought dismissal under Federal Rule of Civil Procedure 19(b) on the ground that the case could not proceed without them.

## Issues

1. Whether a foreign sovereign that asserts FSIA immunity and claims an interest in disputed property is a required party under Rule 19 such that, if it cannot be joined, the action should be dismissed under Rule 19(b).
2. Whether a court may allow an interpleader to proceed by discounting the absent sovereign’s interests based on a prediction that the sovereign is unlikely to prevail on the merits.

## Decision

- The Supreme Court reversed the judgment allowing distribution of the disputed assets in the absence of the Republic and PCGG.
- The Court held that where a foreign sovereign asserts immunity and advances nonfrivolous claims to the property at issue, it is a required party under Rule 19.
- Because immunity made joinder infeasible, and adjudication risked injury to the sovereign’s claimed interests, the action had to be dismissed under Rule 19(b).
- The Court rejected the approach of proceeding based on an appellate assessment that the sovereign’s claims were unlikely to succeed.
- The Court stated that a federal court may raise the absence of a required party on its own initiative and dismiss for failure to join.

## Legal Principles

- Rule 19(b)’s “in equity and good conscience” analysis must give substantial weight to a foreign sovereign’s claim of immunity when the sovereign asserts a nonfrivolous interest in the subject property.
- When sovereign immunity prevents joinder, dismissal is required if there is a realistic potential that proceeding would impair or prejudice the absent sovereign’s interests.
- Courts should not resolve (or effectively resolve) an absent sovereign’s claimed property rights by predicting the merits as a way to minimize Rule 19(b) prejudice.
- The possibility that dismissal leaves private claimants without an alternative forum does not, by itself, override the effect of foreign sovereign immunity in the Rule 19(b) balance.
- Rule 19 concerns can be considered sua sponte when necessary to protect absent required parties and the interests implicated by immunity.

## Conclusion

The Court held that a foreign sovereign asserting FSIA immunity and a nonfrivolous claim to disputed property is a required party, and when it cannot be joined, Rule 19(b) generally requires dismissal to avoid prejudicing the sovereign’s interests, even if dismissal limits private parties’ ability to obtain relief in U.S. court.


Republic of the Philippines v. Pimentel, 553 U.S. 851 (2008)