Antitrust Law Daily Wrap Up, RICO—9th Cir.: Arbitration award against foreign defendants did not extinguish claim against remaining defendants, (Dec 14, 2015)

By Michael Menzhuber, J.D., LL.M.

A federal district court ruling, which dismissed a semiconductor products manufacturer’s Racketeer Influenced and Corrupt Organizations Act (RICO) claims against U.S. defendants, following an arbitration proceeding and award against foreign defendants in Singapore, was reversed by the U.S. Court of Appeals in San Francisco. The appellate court determined that the “one satisfaction” rule, which was the basis for the lower court’s decision, did not apply because Singapore law did not recognize the concept treble damages available under RICO (Uthe Technology Corp. v. Aetrium, Inc., December 11, 2015, Smith, M.).

Uthe Technology Corporation, a manufacturer and distributor of semiconductor products, filed a suit against Harry Allen and Aetrium Incorporated and a number of individuals in Singapore. Uthe alleged a conspiracy to unlawfully take over one of the company’s overseas subsidiaries in violation of RICO. The action against the foreign defendants was dismissed on the basis of forum non conveniens, because an arbitration clause in a relevant agreement required the claims against the foreign defendants to be arbitrated in a proceeding governed by Singapore law. Uthe’s suit against the U.S. defendants was stayed pending the resolution of the Singapore arbitration against the foreign defendants.

After the conclusion of the Singapore arbitration, which resulted in an award of approximately $9 million against the foreign defendants, Uthe reinstated its federal court action against Allen and Aetrium and requested relief under RICO’s treble damages provision. The district court granted dismissal on the basis that an additional award of damages would violate the “one satisfaction” rule.

One satisfaction rule. The “one satisfaction rule” reflects the equitable principle that a plaintiff who has received satisfaction of its claims from one tortfeasor generally cannot sue to recover additional damages, corresponding to the same injury, from the remaining tortfeasors. The district court determined that Uthe had received full compensation for its damages because the damage award in the Singapore arbitration roughly corresponded to the losses Uthe suffered as a result of the conspiracy.

The appellate court disagreed. It determined that the Singapore arbitration was limited in scope to those claims against the foreign defendants and, therefore, could not fully resolve Uthe’s pending legal claims against Allen and Aetrium. Specifically, the court found that Singapore law could not provide for the resolution of Uthe’s RICO claims because it does not recognize the concept of treble damages.

The court noted that a policy goal of the “one satisfaction” rule is to assure a tort victim a complete satisfaction of its claims, neither more nor less. Because the maximum amount that Uthe could have been awarded in a single lawsuit, arising from the same injury, was treble the amount of damages under RICO, the Singapore arbitration award was not a complete satisfaction of the claims.

The case is No. 13-16917.

Attorneys: Myron Moskovitz (California Appellate Law Group LLP) for Uthe Technology Corp. Ann E. Johnston (Coblentz Patch Duffy & Bass, LLP) for Aetrium, Inc.

Companies: Uthe Technology Corp.; Aetrium, Inc.

Cases: RICO CaliforniaNews