## Facts

- Saybolt International B.V., a Dutch company, owned a U.S. subsidiary, Saybolt North America, Inc., involved in commodity-testing services.
- Saybolt sought to secure a favorable lease in Panama for a petroleum-testing laboratory and became involved in arranging a payment demanded by a Panamanian official.
- Saybolt personnel consulted Philippe S.E. Schreiber (and his firm) about whether the payment would violate the Foreign Corrupt Practices Act (FCPA).
- The plaintiff alleged Schreiber advised the payment could be structured to avoid an FCPA violation if made by a non-U.S. affiliate, and Saybolt relied on that advice.
- A payment was made through an affiliate, and Saybolt obtained the lease.
- Federal prosecutors later pursued FCPA charges: Saybolt pleaded guilty in federal court, and Saybolt’s former CEO was convicted after a jury trial.
- A Dutch foundation, acting as assignee for former shareholders’ claims, sued Schreiber and his firm for malpractice in the Southern District of New York, alleging the advice caused the company to proceed under the belief its conduct was lawful.
- The district court granted summary judgment for defendants, holding the corporate guilty plea and the CEO’s conviction collaterally estopped the malpractice theory.

## Issues

1. Whether Saybolt’s guilty plea to an FCPA violation necessarily foreclosed a later malpractice claim alleging counsel’s advice caused Saybolt to believe the payment would not violate the FCPA.
2. Whether the corporation (and its assignee) was in privity with the former CEO such that the CEO’s criminal conviction collaterally estopped the corporation in the malpractice action.

## Decision

- The Second Circuit vacated the summary judgment and remanded.
- The court held the corporation’s guilty plea did not necessarily decide or admit facts that barred the malpractice theory.
- The court held the corporation was not in privity with its former CEO for purposes of binding the corporation to determinations made in the CEO’s criminal trial.
- The court stated it did not question the validity of the guilty plea or the conviction.

## Legal Principles

- Issue preclusion applies only to issues that were necessarily determined in the prior proceeding; a guilty plea precludes only those issues clearly and necessarily admitted by the plea.
- A corporate guilty plea does not automatically resolve, for later civil litigation, whether the corporation acted based on erroneous legal advice or its subjective understanding at the time of the conduct.
- Nonparty preclusion based on privity requires a relationship and litigation control sufficient to make it fair to bind the nonparty; a corporation is not automatically in privity with an officer or employee in that individual’s criminal case.
- When the individual defendant’s criminal defense protects personal interests (including liberty) and the corporation lacks control over the defense, privity is not established for collateral-estoppel purposes.

## Conclusion

The Second Circuit held that neither the corporation’s FCPA guilty plea nor the former CEO’s FCPA conviction, without more, barred a shareholder-assignee’s legal-malpractice action on collateral-estoppel grounds, and it returned the case to the district court for further proceedings.


Stichting Ter Behartiging Van de Belangen Van Oudaandeelhouders in Het Kapitaal Van Saybolt Int'l B.V. v. Schreiber, 327 F.3d 173 (2d Cir. 2003)