Strategies for Defending Foreign Defendants in Cross-Border Litigation

• Author: Kenneth B. Reisenfeld
• Pages: 93-112

93

CHAPTER 9

Strategies for Defending Foreign

Defendants in Cross-Border

Litigation

kenneth b. reisenfeld

In cross-border litigation, a foreign defendant has at its disposal a multitude of

weapons that may not be available in purely domestic litigation. Thi s chapter

examine s seven defense strategies that are com monly considered when defending

a foreign commerc ial entity in U.S. courts.2 First, a foreig n defendant could move

to dismiss the case on service of process grounds. Second, a foreign defendant

. Thi s chapter does not address the sp ecial considerations a nd unique strategies

involved in defend ing a foreign sovereign e ntity in U.S. courts. A for eign state or a for-

eign sovereig n-controlled-entit y sued in U.S. courts, e.g., a sovereig n wealth fund, w ill

generally at tempt to challenge t he subject matter jurisd iction of the court by mak ing a

prima fac ie showing of sovereign im munity under the Forei gn Sovereign Immun ities

Act (FSIA), 28 U.S.C. §§602–6, t hereby shiftin g the burden to the plaint iff to prove the

applicabil ity of any exception, includ ing possibly the “commercia l activity” except ion.

Among other defen ses, foreign sovereign d efendants also may seek to d ismiss the case

on grounds t hat (a) service of pro cess was not effected properly u nder the FSIA, 28 U.S.C.

§608(a); (b) the “act of state” doctrine prec ludes the court from rev iewing the public acts

of a foreign sovereig n power; (c) the case should be dismi ssed because it raises a nonju sti-

ciable “politic al question”; and (d) in the interests of comit y, the court should defer so as

not to adversely af fect foreign relations of t he United States. An ana lysis of the complex

strategie s that should be considered when repr esenting foreign sover eign defendants fa lls

outside the scope of th is chapter.

2. Wh ile this chapter pr incipally provid es guidance for repres entation of a foreign defen-

dant, we als o include practical t ips for plaintiff ’s counsel when present ing a case again st

a foreign defend ant.

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94 CHAPTER 9

simultaneously cou ld attempt to dismiss the case on grounds of lack of personal

jurisdiction. Third, a foreign defendant could try to shift the plaintiff ’s chosen

forum to another forum more favorable to the defendant, such as by having the

U.S. case dism issed on grounds of forum non convenie ns and forcing the plaint iff

to refile in a foreign jurisdiction or by removing the case from state to federal

court. Fourth, the foreign defenda nt could initiate a parallel proceeding in a for-

eign court a nd then ask the U.S. judge to stay the orig inal action or, alternatively,

seek an antisuit injunction from the foreign court enjoining continuation of the

original action. Fifth, a foreign defendant could move to dismiss certain federa l

causes of action relyi ng upon the general presumption against extraterritorial

application of U.S. laws to foreign conduct even if the conduct creates harmfu l

“effects” with in the United States. Sixt h, a foreign defendant could t ry to persuade

the U.S. court to apply foreign law, thereby potentially robbing the plaintiff of a

cause of action or a source of damages otherwise permitted under U.S. law.

Finally, as a seventh strategy, a foreign defendant could ignore the U.S. court

action entirely and force the plaintiff to obtain a default judgment and enforce it

in the foreig n defendant’s home country.3

The advantages and d isadvantages of each of these defense st rategies should

be carefully evaluated at the outset of a case. In cross-border litigation, more so

than in domest ic disputes, decisions made during the initial stages of the case

may have dramatic consequences for the ultimate outcome. Also, these defense

weapons must be properly sequenced to preserve the defendant’s rights and to

maxim ize their impact on the U.S. court pr oceeding.

H1. CHALLENGING SERVICE OF PROCESS

As an initial defense, a foreig n defendant could move to dismiss the case for

improper service.4 Proper se rvice of proce ss is a prerequ isite to establ ishing ju ris-

diction over a defendant in a U.S. court proceeding. Service of process is sig nifi-

cantly more complicated when a foreign defendant is involved. In addition to

determining the proper procedures in the forum where the suit is filed, plain-

tiff ’s counsel must also take i nto account the ser vice laws of any foreign jurisd ic-

tion in which t he judgment may ultimately be enforced . Failure to serve properly

can often be cor rected during litig ation of the initial U.S. action. At t he collection

phase, however, flawed serv ice can be fatal. Thus, if the plai ntiff intends to seek

enforcement of a U.S. judgment against asset s located abroad, plai ntiff’s counsel

3. To the extent that a di spute is covered by an applicable ar bitration clause, a foreig n

defendant al so could seek to compel arbitrat ion and to stay or dismis s the federal court

action under the Fed eral Arbitration Act , 9 U.S.C. §§, 3. See Rent-A-Center, West, Inc. v.

Antonio Jack son, 30 S. Ct. 2772, 2776, 56 U.S. ___ (200); see also Fors ythe v. Saudi Ara-

bian Airl ines, Corp., 885 F.2d 285, 287 n.2 (5th Cir. 989) (collectin g cases).

4. Whi le challengi ng service of process is not g enerally a complete defense a nd might

only buy additiona l time to answer, thi s defense is analyzed f irst in this c hapter because

it is temporal ly the first defen se that must be pled. Under F. R. C. P. 2(h)(), chal-

lenges to serv ice of process and personal jur isdiction are wa ived if not raised in a defen-

dant’s first r esponsive pleading.

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