CHAPTER 5 THE CONCEPT OF FORUM NON CONVENIENS IN U.S. LAWSUITS

• Jurisdiction: Derecho Internacional

MINING LAW & INVESTMENT IN LATIN AMERICA
(April 2003)
CHAPTER 5
THE CONCEPT OF FORUM NON CONVENIENS IN U.S. LAWSUITS
David W. Rivkin, Esq. ¹
Suzanne M. Grosso, Esq.
Debevoise & Plimpton
New York, New York, USA

Rocky Mountain Mineral Law Foundation

Institute on Mining Law and Investment in Latin America

April 28-30,2003

Lima, Peru

WHAT IF THINGS GO WRONG? THE CONCEPT OF FORUM NON CONVENIENS IN U.S. LAWSUITS

INTRODUCTION

This paper and related presentation address the forum non conveniens doctrine as a means of defending lawsuits filed in the United States by foreign plaintiffs. Particular emphasis is given to lawsuits filed in the United States by Latin American plaintiffs seeking damages based on the activities of U.S.-based corporate defendants. Section I provides an introduction to the forum non conveniens doctrine and its growing utility to multinational corporations with U.S. operations. Section n focuses in greater detail on the three-step forum non conveniens analysis under federal common law. Section III discusses recent federal court decisions - including one relating to a lawsuit filed by foreign plaintiffs against a U.S.-company in connection with its Peruvian mining operations - that are likely to affect the analysis in the future.

I. OVERVIEW OF DOCTRINE

A. United States Forum for International Litigation

The last decade has witnessed an increase in the number of lawsuits brought in the United States by foreign plaintiffs against U.S.-based mining companies.² The

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proliferation of this type of litigation - where the only U.S.-connection is that the defendant is incorporated in the U.S - is not limited to the mining industry, but also against all kinds of U.S.-based multinational corporations. There are many reasons why foreign plaintiffs might choose to litigate in this manner. The most common reason, however, is a perception that certain aspects of the U.S. legal system favor plaintiffs. Examples of such perceived advantages include the availability of: (1) punitive damages; (2) jury trials; (3) broader discovery provisions; (4) wider causes of action; (5) liberal pleading requirements; (6) contingency fee representations; (7) class certifications; (8) generous personal jurisdiction provisions; and (9) interpretive choice of law rules.³ These aspects of the U.S. legal system are generally not present in foreign legal systems and are thus otherwise unavailable to many foreign plaintiffs.

As a corollary, these differences suggest that it may be advantageous for defendants - even U.S. corporations - to litigate against foreign plaintiffs in foreign fora. There are several vehicles by which a defendant can seek to accomplish this. One option is to select in advance the forum in which any disputes will be heard. This can be accomplished through use of forum selection clauses (which specify a particular judicial forum) or arbitration clauses (which provide for arbitration rather than judicial resolution).⁴ Unfortunately, this option does not guarantee that the defendant will avoid U.S. litigation, because much time and money can be spent litigating the threshold question of whether such clauses are applicable, binding or enforceable. Moreover, this option cannot avoid tort claims, since evidently no contract would exist in such situations.

Another option is for the defendant to commence in a foreign forum parallel proceedings relating to the U.S. lawsuit. The defendant can seek a negative declaratory judgment in the parallel proceeding or can assert as affirmative claims any counterclaims it may have in the U.S. litigation. In addition to potentially straining the plaintiff's resources, this option provides the defendant with an opportunity to secure a favorable judgment in the foreign forum that may later have a preclusive effect in the U.S. lawsuit. Once the parallel proceeding is commenced, the defendant also has the opportunity to move the U.S. court to stay its proceedings pending resolution of the parallel proceeding.⁵ (Peru), aff'd, 113 F. 3d 540 (5th Cir. 1997); Koal Indus. Corp. v. Asland, S.A. 808 F. Supp. 1143(S.D.N.Y. 1992) (Panama). See John Fellas, International Business Litigation & Arbitration: Choice of Forum in International Litigation, PLI LIT. & ADMIN. PRAC. COURSE HANDBOOK SERIES NO. 688, at

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However, this option can be extremely costly, because it not only entails simultaneous litigation in two fora until a judgment is reached in one of them, but also the pppppossibility of protracted litigation as to the effect of that judgment.⁶

As a result, the option most frequently exercised by defendants, where a contractual clause does not provide protection, is to invoke the forum non conveniensdoctrine.⁷ The doctrine contemplates dismissal of a lawsuit brought in a plaintiff's favored forum, even though proper jurisdiction exists there, in favor of adjudication in another forum.⁸ This option has proven time and again to be a significant obstacle for foreign plaintiffs seeking to sue a U.S.-based multinational corporation in the United States.⁹ In fact, it has even been said that "[s]uccessful venue challenges under the doctrine of forum non conveniens effectively destroy claims brought by Latin Americans against American corporations."¹⁰

B. Overview of the Forum Non Conveniens Doctrine

The forum non conveniens doctrine proceeds from the principle that in certain circumstances, it is appropriate for a court to decline to exercise its jurisdiction in favor of another forum. ¹¹ The doctrine has its origins in seventeenth-century Scottish law; at that time, the doctrine was referred to as forum non competens and served as an equitable remedy in cases where jurisdiction over foreign parties was clear, but where trial in Scotland would be inconvenient.¹² The phrase forum non competens was replaced by

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Scottish courts during the late nineteenth century with the phrase forum non conveniensas a reflection of the fact that the doctrine did not actually involve any questions of jurisdiction, but rather questions of convenience.¹³

Although application of its underlying principle appears to date back to the beginning of the nineteenth century, the doctrine was apparently not referred to by any name in the United States until the early twentieth century.¹⁴ The forum non conveniens doctrine was finally brought into focus in American jurisprudence during the mid- twentieth century by two companion U.S. Supreme Court decisions, Gulf Oil Corporation v. Gilbert and Koster v. (American) Lumbermens Mutual Casualty Company.¹⁵ Both of those cases involved consideration of whether one U.S. federal district court should decline to exercise jurisdiction in favor of another. The first Supreme Court case to consider whether a federal district court should decline to exercise jurisdiction in favor of a foreign court was not decided until 1981, nearly thirty-five years later, in Piper Aircraft Company, v. Reyno.¹⁶

Under the doctrine as applied by U.S. federal courts, a district court can decline to exercise its jurisdiction if the convenience of the parties and the court together with the interests of justice indicate that the case should be tried in another forum.¹⁷ The forum non conveniens analysis performed by district courts is comprised of the following three steps, and the defendant bears the burden of proof with respect to each one:¹⁸

• First, the court must determine whether an alternate forum exists that is both available and adequate to resolve the dispute;

• Second, the court must determine the appropriate degree of deference to accord plaintiff's choice of a U.S. forum; and

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• Third, the court must balance a series of private and public interest factors (collectively referred to as the Gilbert factors)¹⁹ against the deference to be accorded the plaintiff's choice of forum.

Where a plaintiff's choice of forum is to be accorded maximum deference, the court will only dismiss where the balancing of the Gilbert factors tips decidedly in favor of the alternative forum. Where, on the other hand, the plaintiff's choice of forum is to be accorded less deference, the balancing of the Gilbert factors need not tilt as heavily in favor of the alternative forum to warrant dismissal.

The decision to grant a forum non conveniens dismissal lies wholly within the broad discretion of the district court.²⁰ This discretionary power also includes the ability to impose certain conditions for dismissal to which the defendant must agree in order to avoid unnecessary prejudice to plaintiffs.²¹ A forum non conveniens dismissal is reviewed only for clear abuse of discretion.²² An appellate court reviews for abuse of discretion by considering whether the district court misapplied the law, failed to consider a material factor, clearly erred in evaluating the factors before it, or failed to hold the parties to their burden of proof.²³ The appellate court's review should not, however, involve substituting its judgment for that of the district court or engaging in its own balancing of the relevant factors.²⁴ As a result, it is exceedingly difficult for plaintiffs to successfully appeal forum non conveniens dismissals - thereby rendering this option even more popular among defendants.

C. Recognition of the Forum Non Conveniens Doctrine

1. Within the United States

As previously noted, the three-step analysis summarized above is applied by U.S. federal courts and reflects the federal common law of forum non conveniens. U.S. state courts are not, however, bound by this federal common law and are instead free to apply

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their own analyses.²⁵ Although virtually every state recognizes the forum non conveniensdoctrine in some form, a smaller number of state courts have followed the federal jurisprudence without modification.²⁶ In addition, a handful of states do not recognize the forum non conveniens doctrine at all.²⁷ It is...