2009 International Law Update, Volume 15, Number 10
(October)
Legal Analyses published by Mike Meier,
Attorney at Law. Copyright 2017 Mike Meier. www.internationallawinfo.com.
ANTI‑SUIT INJUNCTION
Ninth Circuit remands for district court to enter anti‑suit
injunction where contract bore forum selection clause and issues in Belgian
litigation are substantially same as that in U.S. federal court
Applied Medical Distribution, Corp. (Plaintiff) is a
California corporation, and the Surgical Company BV (Defendant), is a Dutch
company. The two entered into an agreement whereby Defendant would distribute
Plaintiff’s products in Belgium, the Netherlands, and Luxembourg. In 2006, the
parties concluded a new distribution agreement (Agreement), which was to expire
in December 2007. In the summer of 2007, Plaintiff informed Defendant that it
would not renew the Agreement.
Defendant replied in November 2007 claiming that it would be
entitled to compensation under the Belgian Act of 1961. In California federal
court, Plaintiff then filed a complaint for declaratory relief and for an anti‑suit
injunction (ASI) in December 2007. Defendant then sued Plaintiff in a Belgian
court in January 2008.
At issue here is the viability of Plaintiff’s California
action. Plaintiff asked the court for an ASI to prevent Defendant from seeking
relief in the Belgian courts. The district court found, however, that
Defendant’s Belgian claims were “potentially broader” than the U.S. suit and
therefore denied the ASI. Plaintiff appealed the district court’s ruling. The
U.S. Court of Appeals for the Ninth Circuit reverses and remands.
The Court reviews the denial of the ASI for abuse of
discretion. Applying E. & J. Gallo Winery v. Andina Licores S.A., 446 F.3d
984 (9th Cir. 2006), the Court points out that “a district court, in evaluating
a request for an [ASI], must determine (1) ‘whether or not the parties and the
issues are the same, and whether or not the first action is dispositive of the
action to be enjoined’; (2) whether the foreign litigation would ‘frustrate a
policy of the forum issuing the injunction’; and (3) ‘whether the impact on
comity would be tolerable.’” [Slip op. 7]
“ ... Despite our general inclination to affirm when
feasible on matters within a district court’s discretion, we nonetheless
conclude here that the district court did abuse its discretion in denying such
relief. We in turn rest our decision primarily on the following two bases.
First, the district court applied the wrong legal standard by requiring that
the claims in the domestic and foreign action be ‘identical’ instead of
engaging in the more functional inquiry concerning dispositiveness required by
Gallo. Second, the district court relied on the clearly erroneous factual
determination that Defendant’s Belgian claims, other than goodwill indemnities,
were available apart from termination. Because all of Defendant’s claims, like
goodwill indemnities, as a practical matter depend on termination of the
Agreement, they all ‘aris[e] out of th[e] Agreement’ and are subject to the
[Agreement’s] forum selection clause (FSC). Under Gallo, the claims in the two
actions are functionally the same and the first action is dispositive of the
action to be enjoined in the sense that all of the Belgian claims fall under
the contract’s [FSC] and can be litigated and resolved in the California
action. Furthermore, we recognize California’s strong policy in favor of
enforcing [FSCs] and note the comity concerns that would arise if a party to a
contract containing a[n FSC] were permitted to proceed with duplicative
litigation challenging the rightful authority of the contractually‑designated
forum court. Accordingly, an injunction restraining Defendant from pursuing its
Belgian action is appropriate. A contrary result would effectively nullify the
forum selection and choice‑of‑law clauses, thereby eliminating the certainty of
a contractual result that is necessary to foster international trade and
commerce.” [Slip op. 9]
“[T]he ... first step of the analysis is to determine
whether the issues are the same in the sense that all the issues in the foreign
action fall under the [FSC] and can be resolved in the local action. Instead,
the district court focused too narrowly on the fact that ‘not all of the issues
are identical.’ ... Gallo did not impose such a specific requirement. ...”
[Slip op. 10‑11].
“There is no dispute that the parties are the same in this
action and [in] the Belgian action. Therefore, we turn to ‘whether or not . . .
the issues are the same, and whether or not the first action is dispositive of
the action to be enjoined.’ Gallo, supra at 991. We hold that the present
action is dispositive of the Belgian action because all of the claims in the
Belgian action ‘arise[ ] out of th[e] Agreement,’ are subject to the [FSC], and
therefore must be disposed of in the California forum if at all. Therefore, the
issues are functionally the same.”
“Interpreting the [FSC], the district court already held
that disputes concerning the applicability of the limitation‑on‑liability
provision ‘aris[e] out of th[e] Agreement.’ The proper question, however, was
whether the issues in the Belgian suit were the same as the issues before the
district court in the functional sense articulated above. So framed, it is
apparent that Defendant’s Belgian claims, like its claim for goodwill
indemnities, seek damages that occur ‘only as a result of termination,’ concern
the applicability of the limitation‑on liability provision, and therefore are
disputes ‘arising out of th[e] Agreement’ that are subject to the ‘exclusive
jurisdiction’ of ‘the federal and state courts within the State of California’
under the [FSC].” [Slip op.11‑12].
“The second step in deciding if an [ASI] is appropriate is
determining if the continuation of the foreign litigation would ‘frustrate a
policy of the forum issuing the injunction.’ Gallo, supra at 992 ... The
district court, having erroneously concluded that the threshold requirements in
Gallo were not met, declined to discuss this factor. As we noted in Gallo and
reaffirm here, there is a strong policy favoring robust [FSCs]. Id. at 992‑93.”
“But without the availability of [ASIs], the vitality of
[FSCs] would be impermissibly and improvidently jeopardized. Although a foreign
court might eventually agree that a[n FSC] controls, there is no guarantee that
such a resolution would be reached in a timely fashion or at all, and this
uncertainty would impair the parties’ ability to enforce a[n FSC]. [ASIs] may
be the only viable way to effectuate valid [FSCs] ...” [Slip op. 16]
“The third step in deciding if an [ASI] is appropriate is
determining ‘whether the impact on comity would be tolerable.’ Gallo, supra at
994. The district court summarily concluded that an injunction would undermine
the doctrine of comity. We disagree.”
“‘[T]he extent to which the United States, or any state,
honors the judicial decrees of foreign nations is a matter of choice, governed
by the comity of nations’ and the ‘[e]xtension of comity to a foreign judgment
is neither a matter of absolute obligation, on the one hand, nor of mere
courtesy and good will, upon the other.’ ... Recognizing that [ASIs] may
implicate comity concerns, we have urged that they be issued sparingly. Gallo,
supra at 989. However, Defendant and Plaintiff are both private parties that
previously agreed to litigate disputes arising out of their contract in
California.” [Slip op. 18].
Citation: Applied Medical Distribution Corp. v.
Surgical Co. BV, 587 F.3d 909 (9th Cir. 2009).
BANKING (INTERNATIONAL)
Although Canadian Bills of Exchange Act generally
invalidates checks bearing forged endorsements, Supreme Court of Canada applies
common law doctrine of mistake of fact to payments on forged check as between
two Canadian banks where honoring check rested on said mistake
The Plaintiffs, Audie Hashka (AH) and Paul Backman (PB),
owned interests in BMP Global Distribution Inc. (BMP) The Plaintiffs had a
meeting with Sunn Newman (SN) in the United States. SN was allegedly associated
with a concern called Sunrise Marketing(SM), a company operating in British
Columbia that distributed non‑stick bakeware without any formal license or
written agreement with its supplier. Eventually, upon oral agreement by long
distance telephone from the U.S. to Canada, SN offered to buy the rights to
distribute BMP’s bakeware in the United States for US$1.2 million.
AH next went to a Bank of Nova Scotia (BNS) branch , where
BMP held an account. There he deposited an unendorsed check for C$904,563 that
was payable to BMP and drawn on the account of a corporation at the Royal Bank
of Canada (RBC). This bank initially put a hold on the funds; but it ultimately
released and paid them out . The check later turned out to be counterfeit, all
endorsers’ signatures having been forged. The BNS then froze the Plaintiffs’
bank accounts and executed a charge back in favor of RBC .
The Plaintiffs next sued for the recovered amount, alleging
that BNS had breached their banking contracts. The trial judge ordered BNS to
pay the Plaintiffs the total of the amounts debited or $777,336.04 in damages.
BNS successfully appealed the trial judge’s decision and the Plaintiffs
unsuccessfully cross‑appealed, seeking punitive damages.
The Plaintiffs further appealed to the Supreme Court of
Canada and the Defendants cross‑appealed on the issue related to tracing the
amounts in the Plaintiffs’ bank accounts. In a scholarly opinion, the Court
dismisses the appeal and the cross‑appeal. In sum, the Court boils this case
down as dealing with the restitution of amounts paid by RBC under a mistake of
fact.
“The test laid down [by the English case law] for recovering
money paid under a mistake of fact is straightforward. If a person pays money
to another under a mistake of fact which causes him to make the payment, he is
prima facie entitled to recover it as money paid under a mistake of fact. His
claim may however fail if: (a) the payor intends that the payee shall have the
money at all events, whether the fact be true or false, or is deemed in law so
to intend; (b) the payment is made for good consideration, in particular if the
money is paid to discharge, and does discharge, a debt owed to the payee (or a
principal on whose behalf he is authorised to receive the payment) by the payer
or by a third party by whom he is authorised to discharge the debt; (c) the
payee has changed his position in good faith, or is deemed in law to have done
so.”
“The right of BNS to resist the claims of the Appellant and
the Cross‑respondents cannot be examined without regard to RBC’s right to ask
BNS to transfer the funds. Consequently, RBC’s position is the starting point
for the analysis.”
“On the first step of the [English] test, RBC has a prima
facie right to recover. It is common ground that payment was made on the basis
of a forged instrument. According to § 48(1) of the Bills of Exchange Act,
(BEA), a forged signature is wholly inoperative. It does not create a right to
give a discharge for the bill or to enforce payment. RBC made the payment
before discovering that the drawer’s signatures were forged. BMP no longer
disputes the fact that the instrument is a forgery, but it contends that RBC
must bear the loss and that BNS was not entitled to restrain the funds and
transfer them to RBC. This argument goes to the second step of the test. At the
first step, there is no basis for denying that RBC has a prima facie right to
recover the funds.” [¶¶ 22‑24].
“In the first enquiry, the question is whether the payor
intends (or is deemed in law to intend) the payee to receive the funds. In the
case at bar, the drawee provided the funds under the mistaken assumption that
the drawer’s signatures were genuine. It is not in dispute—and is well settled
in law—that RBC, as the drawee, had no right to pay the check out of the funds
it held to the credit of First National, the purported drawer, and that RBC
would be liable to reimburse its customer if it used the customer’s funds to
make the payment. Nor is the relationship between BNS and RBC in dispute. It is
that of a collecting bank receiving funds from the drawee in order to remit
them to the payee. The issue before the Court in this case is whether, as BMP
argues, the loss must fall on the drawee bank.”
“Where a drawee provides funds to a collecting bank on
presentation of an instrument bearing a forged signature of the drawer, the
drawee will usually—unless a specific factual context dictates otherwise—be in
a position to assert that it did not intend the payee to keep the funds. ...
The drawee in this situation pays without the authority to do so and is liable
to its customer, who has not signed as the drawer. Without such an instruction
from the drawer, the payor cannot be said to have intended the payee to keep
the money in any event. This is not a case where a party pays a debt it owes or
where other similar circumstances preclude the payor from denying that it
intended the payee to keep the funds.”
“ ...[W]hether the payor is deemed in law to intend that the
payee keep the money [however] requires further elaboration. BMP put forward
three arguments in support of its claim. The first is that the principle of
finality of payment forms part of the common law and that it prevents the
drawee bank from recovering the paid proceeds of a forged check from anyone
other than the forger. The second is that the scheme of the BEA does not allow
RBC to recover from BNS or BMP. The third is that the Service Agreement between
BNS and BMP precludes BNS from recovering such proceeds from BMP.” [¶¶ 26‑28].
“The assessment of
the drawee’s rights requires a more nuanced enquiry. The principle of finality
of payment underlies both the common law rules and the BEA’s provisions and
serves as a general goal, but as laudable as it is, it does not negate rights
that may otherwise accrue to a party. It cannot be raised by a payee as an
indiscriminate bar to the recovery of a mistaken payment.” [¶ 35].
“In the instant case, the drawee (RBC), in requesting
restitution from the collecting bank (BNS), was in fact denying to both the
collecting bank and the payee the genuineness of the drawer’s signatures.
Consequently, the question is whether the payee and the collecting bank were holders
in due course (HIDCs) and therefore entitled to rely on § 128(a) BEA.”
“It is another requirement for qualifying as an [HIDC] under
§ 55(1)(b) BEA that is lacking here: BMP did not take the instrument for value,
so it was not an [HIDC]. Since only an HIDC can benefit from § 128(a) BEA, even
if RBC were deemed—by payment—to have accepted the forged check, it would not
be precluded from denying to BMP the genuineness of the drawer’s signatures.”
“The other provision that is relevant to RBC’s right to
recover the money it paid by mistake from BNS is § 165(3) BEA. [It provides
that: ‘Where a check is delivered to a bank for deposit to the credit of a
person and the bank credits him with the amount of the check, the bank acquires
all the rights and powers of an HIDC] of the check.’”
“According to [BEA, § 165(3)], BNS acquired the status of an
[HIDC] by receiving the check from the payee and crediting the amount to the
payee’s account. Section 165(3) deems the collecting bank to be in the same
position as a party who has taken the bill free from any defect of title of
prior parties. It has the same right as a party who has given consideration.
Consequently, it can be argued that if BNS had chosen to do so, it could have
refused to transfer to RBC the money it held on account of the fraudulent
instrument. However, the question is not whether it could rely on the
protection of § 165(3) BEA, but whether it could restore the funds to RBC.” [¶¶
38‑41]
“Section 165(3) BEA affords protection to a bank. The bank is
not obligated to rely on this protection when restitution is claimed from it.
The payee stands as a third party with respect to the protection. He or she
cannot use the bank’s shield as a sword against it. The purpose of granting the
bank the status of an [HIDC] is not to create an entitlement for the payee of a
forged instrument. The payee may benefit from defences that are inherent in the
rules on mistake of fact, but not from the protection afforded to a bank by §
165(3) BEA.” [¶ 45].
“Today, most bank account agreements, including the Service
Agreement between BMP and BNS, are standard form contracts. However, terms may
still be implied: [Cites]. In the instant case, BMP argues that under the
Service Agreement, BNS could charge back only the credits for which it had not
received settlement. According to BNS, nothing in the Service Agreement
precluded it from returning the funds to RBC and resisting the claim for
damages.” [¶ 48].
“The right to charge back provisional credits when a customer’s
instruction to collect on a bill cannot be carried out has long been recognized
at common law. Clause 4.7 [of the Service Agreement] clarifies that right but
does not rule out other reversals of credit that are available at common law.
Clause 4.7 gives the bank an explicit right to charge back amounts credited to
the customer’s account if an instrument is not settled. In the context of the
Service Agreement, it is clear that the settlement referred to in this clause
is the receipt of the funds through the banking system, and more particularly
through the clearing mechanism available to members of the Canadian Payments
Association.” [¶ 50].
“The doctrine of mistake of fact is so ingrained in our law
that it can be seen as an implied term of the contract. This is even more true
in the case at bar, as a clause of the Service Agreement explicitly provides
that BNS retains its rights under ‘any law’. The [Service] contract does not
preclude the application of the common law where a payment has been made under
a mistake of fact. Rather, the common law is implicitly incorporated, since it
does not conflict with the explicit terms of the contract.” [¶¶ 52‑53]
“In summary, the trial judge could not rely on the clearing
rules to arrive at the conclusion that BMP had a right to the proceeds of the
forged check. Consequently, I find that ... RBC did not intend—and is not
deemed in law to have intended—that BMP receive the funds. Two other enquiries
remain: whether consideration was given and whether a change of position
occurred.”
“The question whether BMP has given consideration is easily
answered in light of the trial judge’s finding of fact that BMP gave no value
for the instrument. At the same time, BMP’s position that RBC should bear the
loss entails an implicit acknowledgment that neither itself nor BNS has given
consideration for the instrument.”
“The question in the third enquiry is whether the payee has
changed its position. To conduct the change of position enquiry, it is
necessary to determine whether the payee parted with the funds. In this case,
BNS, as the collecting bank, received the funds from RBC for the benefit of the
payee, BMP, and credited BMP’s account. Once the collecting bank receives the
funds from the drawee and credits the payee, its role as a collecting bank is
terminated. It then becomes the holder of the funds under its contract with its
customer. It is settled law that a customer is a creditor of the bank when he
or she deposits funds into an account and that the bank holds these funds as
its own until the customer asks for repayment.”
“Thus, although BNS’s role was changed from that of a
collecting bank to that of a borrower, for the purposes of the change of
position analysis, it must be concluded that BNS remained the holder of the
funds. Moreover, at the time they were restrained, the funds now claimed by BMP
were still credited to its account. Therefore neither BNS as the holder of the
funds nor the payee had changed its position.”
“In conclusion, BMP had not changed its position and the
defence was available neither to it nor to BNS. It is worth noting that cases
in which a person who is not a party to the fraud has neither given
consideration nor changed its position will be rare. However, that is what has
happened here according to the facts found by the trial judge. In these
circumstances, all the conditions for recovery of the payment made by mistake
are met.” [¶¶ 60‑65].
“The jus tertii argument the trial judge relied on could be
accepted only if RBC had no right to recover the funds from BNS. Only then
could BNS be said to have acted in RBC’s stead. Since I have concluded that BNS
was entitled to give effect to RBC’s claim for restitution of the moneys paid
under mistake of fact, the jus tertii argument fails. This is the result of the
application of the law to the highly singular facts of this case.”
“It is worth recalling some of the extremely unusual
circumstances of this case: the sale price of the unlicensed distributorship
was arrived at by ‘pulling the number out of the air’; the check was received
without a cover letter; the names of the sender and the drawer of the check
were unknown; SN, the purchaser, could not be reached and the payee had given
no consideration. The fraud could not be clearer, nor could the origin of the
funds. In my view, since the rightful owner had a legitimate claim against the
recipient, BNS had no duty to give preference to BMP.” [¶¶ 67‑68].
“I can conceive of no policy consideration that would preclude
BNS from responding to RBC’s common law right in this case. ... There is no
rule preventing RBC or BNS from arguing that the payment to BMP was made by
mistake. The commentators find no convincing reason to establish an absolute
rule against relief in the case of payment on the drawer’s forged signature ...
[Cites].”
“At common law, the principle of finality of payment must be
balanced against the right of the owner of the funds to recover money paid
under a mistake of fact. The common law affords a defence to an innocent party
who has given consideration or changed his or her position. The person who is
still in possession of the funds, however, is in the best position to stop the
fraud.”
“To preclude means to prevent the continuation of a fraud in
order to allow a fraudulent payment to be finalized would be a strange policy.
Thus, there is no overarching policy consideration that would bar the payee’s
bank from resisting a claim based on a signature that has been proven to be
forged where the payee has not used the funds and has neither given
consideration for them nor changed his or her position.”
“The trial judge was of the view that BMP and the holders of
the related accounts had suffered a loss of their right to demand repayment
from the BNS of the BNS’ debt to them by reason of the BNS’ wrongful charge
backs against their respective bank accounts. In my view, BNS was entitled to
object that, since the check was forged, the funds could be, and were, returned
to their rightful owner. The deposit of the forged instrument could not result
in a debt to BMP in this case.”
“Therefore, BMP did not lose anything, because the funds had
to be returned to RBC. The trial judge’s conclusion that BMP had lost the right
to demand payment of a debt owed by BNS is erroneous, because the credit entry
in the account had been made by mistake.”
“I have found that RBC made a mistaken payment, that nothing
precluded it from recovering the funds and that BMP had no defence to the
claim. More particularly, BNS was entitled not to raise a defence based on §
165(3) BEA. RBC, in trying to trace the sums it had mistakenly paid, was
informed that a portion amounting to over $776,000 was being held by BNS at the
time the fraud was discovered. An amount of $350,188.65 was still in BMP’s
account. BNS also restrained funds in the related accounts.” [¶¶ 71‑74].
“Beyond the strangeness of its factual substratum, this case
involves an application of the well‑established doctrine of mistake of fact to
very unusual facts. The business of collecting banks will rarely lend itself to
the application of this doctrine because most of the time, the bank will have
changed its position, or its customer will have drawn on the credited amount,
or the funds will have been mixed in a way that precludes tracing. In this
case, however, the application of common law principles leads to a logical
conclusion. ... The appeal should be dismissed with costs and the Court of
Appeal order affirmed.” [¶¶ 93‑94].
Citation: B.M.P. Global Distribution Inc. v. Bank of
Nova Scotia, 2009 Carswell B.C. 809; 2009 S.C.C. 15 (Can. Sup. Ct. 2009).
LITIGATION COSTS (SECURITY FOR)
In reviewing lower court’s requirement that Plaintiff,
who has plausible case against Defendant but who is impecunious, post security
for costs, English Court of Appeal (Civil Division) allows Plaintiff’s appeal
from that order
This is an appeal by the Spy Company, Ltd. (Plaintiff) in
its U. K. suit against Sakar International Inc. (Defendant). Plaintiff appeals
a lower court order for security for costs made on September 15, 2008 by the
Birmingham Mercantile Court (BMC). That court ordered Plaintiff to put up a
security of £20,000 payable within two weeks. Failure to comply would result in
a judgment for the Defendant, with costs, without further order. On the
Plaintiff’s failure to comply, the judge on October 7, 2008 summarily assessed
the total costs payable to the Defendant as £15,048.
The suit arose out of a June 2006 licensing agreement. Under
it, the Plaintiff licensed to the Defendant, a large United States electronics
and optical product manufacturer, the right to use Plaintiff’s “Spy” brand to
re‑name a range of the Defendant’s products, then being marketed under the
brand name “Matrix Zone.”
The parties hoped that re‑branding with the Plaintiff’s
stories, images and other enticements for the youth market would increase sales
and bring substantial spin‑off benefits to the Plaintiff from the exposure of
its brand to a mass market. The licence was to run for 10.5 years in the United
States, and for 3 years each in Canada, Mexico and Latin America. Clause 3.6
required the Defendant to: use its reasonable endeavors artistically,
creatively and entrepreneurially to maximize the value of the products it
creates or sales under this Agreement. Under Clause 12.2.5 the Licensee will
test one of its current ‘Matrix Zone’ products using the new Plaintiff brand,
name, images and logo and will re‑brand its entire on‑going and future ‘Matrix
Zone’ range ...within 9 months from the start of the test.”
Plaintiff charges that the Defendant failed to honor its
obligations under the agreement and, without any notice to Plaintiff, announced
that it had discontinued their Spy‑branded range of products. The Plaintiff
contends that the Defendant’s prior breaches of the agreement have caused it
considerable losses, although it has limited its actual claim to just under
£50,000.
The Defendant responds that sales of the test product
referred to in clause 12.2.5 failed to reach previous levels and so its duty to
re‑brand its entire Matrix Zone range never arose. The Plaintiff has hotly
challenged this contention; he has produced e‑mails which suggest that he might
be right. In the court’s view, unchallenged by Defendant, the Plaintiff’s claim
is a perfectly bona fide claim with a perfectly reasonable prospect of success.
The present Plaintiff is an English company, set up by Mr.
Haydn Price, its managing director and shareholder. It serves as a special
purpose vehicle to license The Plaintiff’s intellectual property rights to the
Defendant. It had, and has, no assets apart from its claim against the
Defendant; Mr. Price has accepted that it has little or no money. Mr. Price
owns at least two other companies, Spy Holdings Limited (SHL) and Pablo Star
Limited Holdings (PSLH). Plaintiff admits that SHL has no assets and is about
to be struck off the Register. PSLH is also in a dangerous state, although it
is engaged in protracted litigation, which Mr. Price says has good prospects of
success. Mr Price is acting in person for the Plaintiff in PSLH and in this
litigation.
On June 24, 2008, the Defendant applied for the first time
for security for costs. At a hearing which neither party attended, a judge
ordered a hearing on September 15 where it would decide the security issue .
Mr. Price had previously told the court that the Plaintiff’s address for
service was Haydn Price at his Birmingham residential address. When the court
sent the above order to this address, however, it bore an addressee in the
Plaintiff’s corporate name.
The result of the error is that Mr. Price did not receive
the letter in time. Some day after August 29 he found out what had happened. So
he promptly prepared, filed and served on the court and the Defendant a
detailed background statement dated September 7.
At the September 15 hearing, the Defendant, represented by a
local solicitor, objected to the admission of Plaintiff’s statement, which the
presiding judge had neither seen nor read. Mr. Price tried to explain what had
happened but the judge apparently failed to understand. In refusing to admit
the statement, he simply said that clerk had served the prior judge’s order on
the right address.
The hearing was short
as was the judge’s ruling. He concluded simply by saying: I am satisfied that
the justice of this particular instance is that a company which is facing
another limited company without any demonstrable assets is entitled to security
for the costs of defending these fairly convoluted proceedings. It would be
very unjust on the Defendant if it fought the case over three or four days and
then found that it could not recover any of the costs of having to do so.
The judge did not refer specifically to any of the reasons
that Mr. Price briefly advanced as to why he should not have issued the above
order. Defendant submits that we should not criticize the judge’s judgment for
his assessment of the merits; so much of the evidence in Mr. Price’s statement
which dealt with the merits made no difference and had no effect on the result
of the security hearing. The Plaintiff timely appealed to the Court of Appeal
(Civil Division). The Court allows the appeal.
“I am not able to accept [Defendant’s] submission because
... it does seem to me that to say of the claim that it does not look of much
merit and that there may well be a valid defence to it does not suggest that
the judge was looking at the merits neutrally in the way which [Defendant] has
today conceded he should have done. [Defendant] also argues that, albeit
shortly, [Plaintiff] had been able to make the points which were contained in
his statement orally. All in all, he says that the judge’s decision not to
admit the statement cannot be characterised as a serious procedural error and
did not make it unjust.”
“I am afraid I cannot accept those submissions. With the
benefit of hindsight I accept, I think the judge should have admitted Mr.
Price’s statement. Through no fault of his own, Mr. Price had not received
Judge Alton’s order and, if the judge had understood this fully, which I doubt
he did, I think he would have admitted the statement. Furthermore, Mr. Price
was a litigant in person and his statement developed much more cogently his
reasons for opposing the application for security than he was able to advance
orally.”
“The impact which those oral submissions made on the judge
can, I think, be measured by the fact that he does not refer to them in the
short judgment which he gave. I am sure that if he had seen and read the
statement prepared by Mr. Price he would have referred to his objections to the
making of the order which Mr. Price had developed at some length.”
“For those reasons, I think the judge’s decision was flawed;
that his refusal to admit the statement did amount to a serious procedural
error and rendered his decision unjust. The consequence is that it now becomes
necessary for us to decide, on the information we have, whether or not an order
for security for costs should be made in this case.”
“In other words, it is for us to exercise the discretion
afresh. Obviously the precondition for making such an order (reason to believe
that the Plaintiff would be unable to pay the Defendant’s costs if ordered to
do so) is satisfied. The issue is whether, ‘having regard to all the
circumstances in the case’, it is just to make the order.”
“So far as is relevant to this case, the authorities
establish that the factors to be taken into account when exercising this
discretion include whether the claim is bona fide and not a sham, whether the
Plaintiff has a reasonably good prospect of success, whether the application
for security was being used oppressively so as to stifle a genuine claim,
whether the Plaintiff’s want of means has been brought about by any conduct by
the Defendant and whether the application for security is made at a late stage
in the proceedings. It must also, obviously, take into account the prejudice to
a Defendant who, if successful, will be faced with the prospect of recovering
nothing unless security for costs has previously been ordered.”
“ ... It seems to me, in the circumstances, that the
Plaintiff can say here that its want of means has been brought about by the
conduct of the Defendant, since it is a company formed for the sole purpose of
this transaction, which failed to generate revenue because of the Defendant’s
breaches of contract. The Plaintiff can also rely on the fact that the
application for security was not made at the outset. There may have been good
reasons for not doing so earlier, but the fact is that the proceedings had been
on foot for nine months before the application was made.”
“[Defendant] submits that the Plaintiff has not discharged
and cannot discharge the onus of establishing that it is unable to raise funds
from other sources and that therefore it cannot rely upon this factor. The
Plaintiff’s statement of 7 September 2008 dealt with this quite shortly. But in
his skeleton argument for the purposes of today’s hearing which, as we are
considering the matter afresh, we can take into account, he deals with the
matter more fully.”
“[H]e accepts that, as the Plaintiff’s managing director,
his own circumstances are relevant. Explaining that he owns the companies to
which I have referred, he says:‘I further can confirm to the court on behalf of
[the Plaintiff] that there is no prospect of funds being available and
forthcoming from any outside source to fund such security and that, as the sole
shareholder for all the relevant companies, I am personally in no position to
provide the level of security [the Defendant] seeks having only recently
finished an IVA and having no realisable assets at present. I do not own a
house and or other tangible assets.”
“The money [the Plaintiff] used to pay the £1550 costs order
to [the Defendant] was borrowed from a friend for 6 months and that friend now
needs her money back to pay unforeseen bills. There is an e‑mail that confirms
this. My previous investors do not want to know, my bankers have demanded their
money back and Pablo Star is also fighting off a winding up petition. I was
also evicted from my home of many years. I would like to point out that these
wider financial problems have solely been caused by the large amount of money
Pablo Star is owed ’”
“Mr. Price has produced some documents with the skeleton
argument and [Defendant] has analysed those documents with skill, making the
point that many of them do not show what the state of affairs is at the present
time and go back as long ago as 2007. But, as Mr. Price points out, it is
always difficult for a party in his position to prove a negative. Having
listened carefully to [Defendant’s] arguments on this aspect of the case, I am
not persuaded that there is any realistic chance of the Plaintiff being able to
raise money to provide security personally.”
“I appreciate that the cases show that the onus is on him to
show that he cannot, but, looking at the totality of the material which is now
before us, I think he has satisfied that onus. It follows that any worthwhile
order in favour of the Defendant would have the effect of stifling the
Plaintiff’s claim. This factor is not determinative of the matter but obviously
points strongly against making an order for security.”
“All in all, balancing the factors to which I have referred
and exercising the discretion afresh, I do not think it would be just to make
an order for security in this case. It follows that I would allow the
Plaintiff’s appeal against the judge’s order for security and set aside the
judgment given in default of compliance with that order and the consequential
orders for costs which the judge made.” My colleague concurs.
Citation: Spy Academy Ltd. v. Sakar International
Inc.,[2009] EWCA Civ 985; 2009 WL 2173244 (Ct. App. Civ. Div. 2009).
FORUM NON CONVENIENS
Eleventh Circuit affirms dismissal of United States
litigation involving alleged torture of Guatemalan union leaders on forum non
conveniens grounds as not constituting abuse of discretion since Plaintiffs are
Guatemalan citizens who escaped to U.S. while Defendants and witnesses are all
residents of Guatemala
In 2001, seven union leaders from Guatemala (Plaintiffs)
sued Del Monte Fresh Produce N.A., Inc. and related companies (Defendants) in a
Florida federal court The complaint charged that Defendants were liable for
their mistreatment by Defendants’ hired thugs in retaliation for their union
activities. Their complaint is based on the Alien Tort Claims Act (ATCA), 28
U.S.C. § 1350, and the Torture Victim Protection Act of 1991 (TVPA).
During a 1999 labor dispute, SITRABI, the Guatemalan labor
union for local plantation workers, was trying to negotiate a new collective
bargaining agreement with Defendants. When Defendants fired 918 workers during
the negotiations, SITRABI filed a complaint in the Guatemalan Labor Court.
Allegedly to intimidate the union leaders, however, Defendants hired private
“security forces” who proceeded to hold the union leaders hostage and to abuse
them for several hours. The unionists later obtained political asylum in the
U.S.
In 2003, Defendants moved to dismiss based on forum non
conveniens (FNC). The district court eventually dismissed on that basis. The
district court noted, however, that the dismissal was “without prejudice to
Plaintiffs’ right to seek reconsideration if any of the Plaintiffs are required
to appear in person in Guatemala in order to litigate their claims.” Defendants
appealed. In a 2 to 1 vote, the U.S. Court of Appeals for the Eleventh Circuit
affirms.
With respect to the adequacy of the alternative forum,
Plaintiffs argue that Guatemala is not safe for them and [that] Guatemalan
courts are corrupt and inadequate to adjudicate political cases such as this
one. The Court does not accept these arguments because the district court had
provided for reconsideration if the Plaintiffs cannot litigate without having
to return to Guatemala. As for the inadequacy of the Guatemalan courts, the
prior proceedings in Florida state court had found the Guatemalan courts
adequate. Thus, the doctrine of collateral estoppel precluded the federal court
from relitigating that issue.
As for the private interest factors: “In Gulf Oil Corp. v.
Gilbert, 330 U.S. 501 (1947), the Supreme Court outlined the relevant public
and private interest factors [in transferring litigation from one federal
district to another within the U. S]. ... We have continued to recite the same
list of private interests ever since Gilbert. ...”
“Following the state court, the district court addressed
each of the Gilbert factors. Specifically, the district court considered the
ease of access to sources of proof, noting that the alleged misconduct occurred
in Guatemala, and that the vast majority of documentary evidence was located in
Guatemala; the district court discussed the cost of obtaining the attendance of
witnesses, observing that all of the witnesses except for the [Plaintiffs] were
located in Guatemala, and that significant expense would be incurred in
transporting them to the United States; the district court examined its ability
to compel the attendance of unwilling witnesses, explaining that all of the
witnesses except for the [Plaintiffs] lived in Guatemala, and therefore an
American court could not compel them to attend the proceedings; and the
district court took account of additional practical and logistical difficulties
— for example, the need to translate documents written in Spanish, and the
linguistic barriers resulting from the fact that few of the [potential]
witnesses were able to speak English. ...”
“The district court also considered the Plaintiffs’ choice
of forum. In doing so, the district court correctly noted that its analysis of
this factor was not dictated by the state court’s analysis, because the
relevant forum for purposes of the state [FNC] analysis is the state of
Florida, whereas the relevant forum for purposes of the federal analysis is the
United States as a whole. ... On this factor, the district court recognized
that the [Plaintiffs] were not residents of the chosen forum for purposes of the
state analysis (none of them resided in Florida), but were residents of the
chosen forum for purposes of the federal analysis (since all of them resided in
the United States).”
“The trial court observed that Plaintiffs’ choice of forum
is entitled to substantial deference where the Plaintiffs are residents of the
chosen forum, and thus the district court determined that, in contrast to the
state court’s inquiry, the [Plaintiffs’] choice of forum was a significant
factor weighing in the their favor. Despite the strong presumption in favor of
the [Plaintiff’s] chosen forum, however, the district court reasoned that this
single factor was outweighed by all of the countervailing private interests
that favored a Guatemalan forum. Indeed, the district court concluded that the
private interest factors so overwhelmingly favored Guatemala that it was
unnecessary to consider the public interest factors at all. We find no clear
abuse of discretion in the district court’s [FNC] analysis.” [Slip op. 17‑19]
Finally, the district court did consider other public
interest factors “such as maintaining comity with other nations, and the
foreign sovereign’s undeniable interest in adjudicating this dispute, involving
one of Guatemala’s largest private employers in a very important economic
sector, and one of the sovereign’s most influential labor unions. Moreover, the
district court weighed these various factors in a reasonable fashion and
determined that Guatemala’s interests outweighed those of the United States.”
[Slip op. 33‑34]
Citation: Aldana v. Del Monte Fresh Produce, N. A.,
Inc., 578 F.3D 1283 (11th Cir. 2009).
PREEMPTION
In case of Iraqi detainees who suffered various forms
abuse at Abu Ghraib military prison during Iraq war, D.C. Circuit finds no liability
for acts of government contractors under common law tort theory or pursuant to
Alien Tort Claims Act , where U.S. forces had integrated said contractors into
combatant activities over which military retained command authority
Iraqi Plaintiffs brought lawsuits a federal district court
against Titan Corporation and CACI International, Inc.(Defendants) which were
“private “American military contractors that provided guard services at the Abu
Ghraib military prison, The court consolidate these lawsuits. Defendants
provided interrogation services to the U.S. military in Iraq. The contractors
served along with military personnel, but the latter retained control over the
interrogations.
The Plaintiffs claim that the Defendants abused detainees at
Abu Ghraib, and thereby violated the Alien Tort Claims Act (ATCA), the
Racketeer Influenced and Corrupt Organizations Act (RICO) and District of
Columbia tort law. The district court gave summary judgment to Titan on the
local tort claims because federal law had preempted them. The district court,
however, denied CACI’s summary judgment motion. This appeal ensued. The U.S.
Court of Appeals for the District of Columbia Circuit affirms as to Titan, but
reverses as to CACI.
The U.S. has prosecuted members of the American forces for
their alleged abuses at Abu Ghraib, but decided not to bring charges against
civilian contractors. The U.S. Army Claims Service, however, has announced that
it will compensate detainees with legitimate claims under the Foreign Claims
Act, 10 U.S.C. § 2734.
The district court dismissed all claims with the exception
of certain tort and negligence claims. The district court found that the
remaining claims against Titan were preempted because they were claims against
“contractors providing services to the military in a combat context.” The
District Court judge developed a test whereby preemption attaches only when
contract employees are “under the direct command and exclusive operational
control of the military chain of command. [Cite].”
“The district court found that Titan’s personnel were “fully
integrated into [their] military units” and were “soldiers in all but name.”
However, the district court denied summary judgment to CACI finding evidence of
“dual oversight” because its employees were expected to report abuses to
company superiors and the CACI site manager had authority to prohibit
interrogations inconsistent with the company ethics policy. In a 2 to 1 vote,
the Circuit Court agrees with the District Court’s focus on the degree of
integration, but rejects the district court’s addition of exclusive operational
control.” [Slip Op. 6‑7] .
The Appellate Court first turns to whether precedent in the
national security and foreign policy field preempt the Plaintiffs’ District of
Columbia tort law claims. “Titan and CACI had argued that they enjoyed
sovereign immunity under the Federal Tort Claims Act (FTCA). Although the FTCA
excludes ‘contractors with the United States,’ the Circuit Court finds that ‘when
a contractor’s individual employees under a service contract are integrated
into a military operational mission, the contractor should be regarded as an
extension of the military for immunity purposes.” [Slip Op. 8]
“As noted, both Defendants asserted a defense based on
sovereign immunity, which the district court has reserved. Presumably, they
would argue that, notwithstanding the exclusion of ‘contractors with the United
States’ from the definition of ‘Federal agency’ in the [FTCA]—which, of course,
waives sovereign immunity—when a contractor’s individual employees under a
service contract are integrated into a military operational mission, the
contractor should be regarded as an extension of the military for immunity
purposes. The Supreme Court in Boyle v. United Technologies Corp., 487 U.S. 500
(1992), the primary case on which Defendants rely for their preemption claim,
reserved the question whether sovereign immunity could be extended to non‑governmental
employees, id. at 505 n.1, even in a case where the contractor provided a
discrete product to the military. We agree with the Defendants (and the
district judge) that Plaintiffs’ common law tort claims are controlled by
Boyle. ...’
“Nevertheless, the [Supreme Court] acknowledged that a
significant conflict must exist for state law to be preempted. In Boyle, the
court observed that the contractor could not satisfy both the government’s
procurement design and the state’s prescribed duty of care. It looked to the
FTCA’s exemption to the waiver of sovereign immunity for claims ‘based upon the
exercise or performance or the failure to exercise or perform a discretionary
function or duty on the part of a federal agency or employee of the Government,
whether or not the discretion involved be abused,’ 28 U.S.C. § 2680(a), to find
a statutory provision that articulated the ‘outlines’ of the significant
conflict between federal interests and state law. Boyle, supra at 511.” [Slip
op. 9‑10]
Here, the relevant section to the FTCA’s waiver of sovereign
immunity is 28 U.S.C. § 2680(j). It excepts “any claim arising out of the
combatant activities of the military or armed forces ... during time of war.”
In Boyle the Supreme Court found that Virginia state law was preempted, where
the contractor had manufactured a helicopter in accordance with Department of
Defense specifications. It reasoned that “uniquely federal interests” were
implicated in the procurement of military equipment.
The Court then defines the scope of the preemption defense:
“During wartime, where a private service contractor is integrated into
combatant activities over which the military retains command authority, a tort
claim arising out of the contractor’s engagement in such activities shall be
preempted. We recognize that a service contractor might be supplying services
in such a discrete manner—perhaps even in a battlefield context—that those
services could be judged separate and apart from combat activities of the U.S.
military.” [Slip op. 16].
Finding that the contractors were integrated into combatant
activities over which the military retained command authority, the Circuit
Court held that the common law tort claims in this case were preempted. The
Court therefore reverses the district court’s denial of Summary Judgment in favor
of CACI, and affirms as to Titan.
The Dissent sees no bar to the application of state tort
law, and would reach the opposite outcome.
Citation: Saleh v. Titan Corp., 580 F.3d 1 (D.C. Cir.
2009).
EU and U.S. conclude extradition agreement and agreement
on broader mutual legal assistance in criminal matters. The Council of the
European Union (EU) has issued a decision approving the agreement on
extradition and the MLAT between the EU and the U.S. The parties developed the
agreements in the aftermath of the terrorist attacks of September 11, 2001, to
improve co‑operation between the EU member states and the U.S. in criminal
matters. Negotiations had begun in 2002, and officials had signed the
agreements on behalf of the EU on June 25, 2003. The EU Official Journal
published them on July 19, 2003. The agreements supplement the existing
bilateral agreements among the U.S. and EU member states. With this decision,
the Council approves the agreements so as to bind the EU itself. Citation: Council
Decision 2009/820/CFSP ... on the conclusion on behalf of the European Union of
the Agreement on extradition between the European Union and the United States
of America and the Agreement on mutual legal assistance ..., 2009 O.J. L (291)
40, 7 November 2009; Press Release of the Council of the European Union
14826/09 of 23 October 2009, available at
www.consilium.europa.eu/ueDocs/cms_Data/docs/pressData/en/jha/110727.pdf.
Japanese court rules on link between cigarette smoking
and disease. On January 22, the Yokohama District Court released its ruling
in a five‑year‑old civil action over the dangers of tobacco. Two of Plaintiffs
had respiratory illnesses themselves while a widow sued on behalf of her
deceased husband. They complained that smoking had caused these life‑threatening
illnesses such as cancer or pneumonia or emphysema. The Defendant was Japan
Tobacco Inc., a former monopoly which is still majority‑owned by the Japanese
government. Plaintiffs sought damages in the amount of 30 million yen ($330,000).
The lawsuit had also demanded that the court order the Defendant to place
sterner warning labels on cigarette packages, to stop marketing cigarettes
through vending machines, and to admit publicly that smoking is addictive and
harmful. The court conceded that there was a link between smoking and several
major respiratory illnesses, and that smoking may be addictive. But it rejected
these Plaintiffs’ demands, on the theory that they had kept on smoking of their
own free will, that quitting was not that difficult and that there was no
specific proof that smoking had been the chief cause of their specific
illnesses. Although smoking rates in Japan have declined drastically since the
1960s when more than 80 % of Japanese males smoked, about 40% still light up.
The ruling urged continued public discussion to shape better policies on
smoking and tobacco‑selling. Citation: The Associated Press (online),
Yokohama, Japan, Friday, January 22, 2010 at 12:35:48 GMT (byline of Yuri
Kageyama, AP Business Writer).
Paris court convicts Scientology Church of defrauding
French citizens. On Tuesday, November 24, 2009, a Paris court found the
Church of Scientology’s French office, its library and six of its leaders
guilty of fraud. Investigators testified that the group pressured its French
members into paying large amounts of money for questionable financial gain and
used “commercial harassment” against recruits. The court fined the organization
itself an amount equivalent to about $600,000 and the Scientology’s library
about $300,000. The leaders received suspended sentences of between 10 months
and two years. L. Ron Hubbard, the late science fiction writer, founded the Los
Angeles‑based Church of Scientology in 1954; it has been active for decades in
Europe, but has been waging an uphill campaign to gain status as a religion. It
claims 10 million members worldwide, including such well‑known Hollywood
members as Tom Cruise and John Travolta. The Paris prosecutors had asked the
court to dissolve the French group. The court declined this request, however,
saying that it would probably continue its activities anyway, “outside any
legal framework.” The U.S. State Department has openly found fault with
Belgium, Germany and other European countries for labeling Scientology as a
cult or sect and for passing laws to cabin its operations. Citation: The
Associated Press (online), Paris, Friday, November 27, 2009 at 10:40:48 GMT
(byline of Nicolas Vaux‑Montagny, AP Writer).
Colombia has extradited alleged pyramid schemer to New
York for trial on other offenses. The government of Columbia agreed to
extradite David Murcia to the United States where he faces indictments on money
laundering and conspiracy charges in a New York federal court. A Colombian
court has already convicted him of swindling Colombians out of hundreds of
millions of dollars in a Pyramid Scheme; his company had attracted investors
with promises of fantastic interest rates. The scheme fell apart in late 2008.
The Columbian judge says that Murcia raked in $2 billion, and has returned only
some $100 million to investors. Colombian officials surrendered him to U.S.
Drug Enforcement Agency agents in Bogota whence he boarded a plane to New York.
A Colombian court has also sentenced Murcia to more than 30 years in prison for
money laundering. Officials say they suspect that he was laundering drug money.
Citation: Associated Press (online); Bogota, Columbia, Tuesday, January
5, 2010 at 14:55:57 GMT.
EU imposes countervailing and anti‑dumping duties on
shipments of U.S. biodiesel. In April 2008, the European Biodiesel Board,
which represents the interests of many EU biodiesel producers, filed a
complaint with the EU Commission, claiming that U.S. biodiesel producers
received unfair subsidies such as federal excise and income tax credits as well
as federal grants to increase production capacity. In 2007, imports of U.S.
biodiesel amounted to 1 million tons. In March 2009, the European Union imposed
provisional countervailing duties on imports of U.S. biodiesel. The Council of
the European Union has now issued two regulations to impose a definitive anti‑dumping
duty on U.S. biodiesel. The countervailing duty rates and anti‑dumping duty
rates vary by manufacturer. The Countervailing Duty Rates range from 29.1%
(Imperium Renewables Inc.) to 41% (Peter Cremer North America LP). The Anti‑Dumping
Duties range from 0% (Cargill Inc.) to 36.2% (Peter Cremer North America LP).
Citation: Council Regulations Nos. 598/2009 & 599/2009, 2009 O .J. of
European Union (L 179) 1 & 26, 10 July 2009; EUROPA press release IP/08/936
of 13 June 2008, available at www.europa.eu.
