The opinion of the court was delivered by: Lamberth, District Judge.
Now before the Court are several motions to dismiss a
derivative suit filed on November 24, 1998 by W.L. Meng, S.S.
Jones, Jr., and Roy and Joan Gillison, all shareholders of Loral
Space and Communications, Ltd, ("Loral"). The plaintiffs named
over fifteen defendants, among them Loral, its CEO Bernard
Schwartz, President Clinton, Vice President Gore, and the
Democratic National Committee.*fn1
The plaintiffs allege that Schwartz bribed President Clinton
and other government officials with campaign contributions in an
effort to secure export licenses for Loral products. The
plaintiffs claim that this alleged conduct gives rise to five
causes of action: (1) breach of fiduciary duty, (2) negligence,
(3) unjust enrichment, (4) civil conspiracy, and (5) civil RICO.
The defendants all demur, and ask this Court to dismiss the
claims pursuant to Federal Rule of Civil Procedure 12(b)(6). For
the following reasons, the Court dismisses the RICO claim and
declines to exercise jurisdiction over the remaining claims.
The plaintiffs' allegations in this case chart a course of
drama and intrigue. One wonders what proof, if any, may lie
behind these charges. But this stage of the proceedings is not
designed for determining veracity; rather, it is designed to
determine whether the plaintiffs have stated an actionable
claim. To do this, the Court
must "take as true the material facts alleged in the
[plaintiffs'] amended complaint." Hospital Bldg. Co. v.
Trustees of Rex Hosp., 425 U.S. 738, 740, 96 S.Ct. 1848, 48
L.Ed.2d 338 (1976). Thus, in recounting as true many of the
plaintiffs' allegations, the Court does not suggest that the
allegations are indeed true.
Loral is one the world's top manufacturers of satellites. It
is currently in the midst of establishing a global cellular
telephone network, known as project "Globalstar." The project
requires the placement of 56 satellites in low earth orbit. To
this end, Bernard Schwartz, Loral's CEO, contracted with several
Chinese launch providers while on a trade mission sponsored by
the United States Department of Commerce in August 1994.
Before any launch could take place, Loral needed to obtain a
suspension of the Foreign Relations Authorization Act of 1990
and 1991, 22 U.S.C. § 2151 et seq. (1994). The Act, enacted in
the wake of Tiananmen square, prohibited the export of U.S.
satellites intended for launch in China. The Act provides that
the suspension may be lifted on a case by case basis if the
President determines that it is in the national interest to do
so. On February 6, 1996, President Clinton signed a waiver
permitting one of Loral's satellites to be exported. The
President did so a second time on February 18, 1998.
Between 1994, when the launch contracts were first signed, and
1998, when the last waiver was signed, Schwartz contributed over
$1.4 million of his personal funds to three organizations: the
Democratic National Committee, the Democratic Senatorial
Campaign Committee, and the Democratic Congressional Campaign
Committee. Schwartz was later reimbursed for these expenditures
by Loral. The plaintiffs allege that President Clinton and other
government officials explicitly agreed to trade export waivers
for campaign contributions.
In May 1998, three months after President Clinton signed the
second waiver, it was announced that Loral was being
investigated by the Department of Justice's Campaign Finance
Task Force. Thus began, relatively speaking, a minor political
scandal. The Washington Post and the New York Times each
covered the emerging story, while various politicians and
Schwartz himself made appearances on the Sunday morning talk
show circuit. The scandal gradually faded from the headlines
until June 1999, when the House Select Committee on U.S.
National Security and Military/Commercial Concerns with the
People's Republic of China issued the "Cox Report." The report
recounted many of Loral's dealings in the satellite industry and
made numerous suggestions of impropriety. In response, Loral
took out full page ads in several major newspapers denying any
Unpersuaded by Loral's denials, the plaintiffs brought suit.
In their derivative suit, the plaintiffs seek to have Loral
compensated for the harms visited on it by Schwartz, President
Clinton, the Democratic National Committee, and the other
The plaintiffs make one federal claim and four state law
claims. Section 1331 of title 28 grants this Court jurisdiction
over issues of federal law. See 28 U.S.C. § 1331 (1994).
Further, section 1367 permits this Court to exercise
supplemental jurisdiction over nonfederal claims that are "so
related" with the original jurisdiction claim as to be "part of
the same case or controversy." See 28 U.S.C. § 1367(a) (1994).
As the state law ...