Closed Memo Forum Non Conveniens

Question Presented

Should the court order a non forum conveniens dismissal of a case involving two foreign corporations licensed to do business in Florida where most of the documents and witnesses are abroad and where there was no choice of forum clause in the agreement?

Short Answer

Yes. In this case, using the Balance of Conveniences Approach or the Kinney Factors[1] show that the scale tips in favor of litigation in El Salvador. The alternative forum is adequate, the private interests favor the alternative forum in spite of the plaintiff’s choice of forum, the public interest demands that the case be litigated elsewhere and there is no apparent undue prejudice or inconvenience if the case is re-filed in El Salvador.

Statement of Facts

            Telemobile, Inc. sued Communico Corp. on November 19, 2006, for damages based on breach of fiduciary duty, unjust enrichment, fraud and breach of contract. The basis of this suit was a Technical Services Agreement (“Agreement”) that was entered into by Telemobile and Communico.

            Telemobile, Inc. (“Telemobile”) is a foreign corporation organized under the laws of El Salvador, Central America. It has its principal place of business there and provides telecommunications services in that country. Telemobile is also registered to do business in Florida and maintains an office there. It is currently the largest provider of long distance calls from El Salvador to Florida.

            Communico Corp. (“Communico”) is a foreign corporation organized under the laws of the Grand Duchy of Luxembourg. It is an international operator of cellular phone services in Latin America, including El Salvador. Communico operates in Latin America and the United States through its many subsidiaries and holding companies. One of these companies is based in Florida. The president of Communico, Joe Sanchez (“Sanchez”), owns a home in Florida where he stays for about 120 days in a year. Every other year, Communico’s board of directors meet in Miami, Florida at its Florida subsidiary, Communico Florida, LLC.

            Telemobile and Communico entered into an Agreement where Communico was to give technical advice to Telemobile on its acquisition of equipment and technology. The Agreement was written in Spanish. It stipulated that payments are to be made according to Luxembourg law and that it was to be performed exclusively in El Salvador. Nearly all of Telemobile’s documents relating to the Agreement and Communico’s services are stored in El Salvador.

            The complaint alleges that three out of five board members of Telemobile were agents of Communico: Jose Maria Coto (“Coto”), Graciela Perez (“Perez”), and John Harris (“Harris”). The other two directors were: Gustavo Diaz (“Diaz”) and Ricardo Martinez (“Martinez”).

The complaint said that Communico breached its fiduciary duty by receiving secret profits from separate agreements with Telemobile’s equipment provider, Northern Networks, Inc. (“Northern”), a Florida based company. Telemobile alleged that Coto, Perez and Harris, under the orders of Communico, were able to convince the board to enter into an agreement where Telemobile would purchase wireless loop equipment from Northern for US $100 million.

Under an alleged oral contract between Communico and Northern, Communico receive a 25% discounted rate for its equipment purchases if it manages to secure the deal between Telemobile and Northern. The complaint alleges that Communico paid Coto, Perez and Harris to influence the other directors to support the Northern-Telemobile contract.

The facts are disputed as to whether the Agreement was signed in El Salvador or in Costa Rica, but the agreement provided that the contract was to be performed in El Salvador. The Agreement was discussed during a Communico board meeting in Miami, Florida and later in Communico’s headquarters in Luxembourg. The agreement did not contain any choice of forum clause. The alleged oral agreement between Communico and Northern was discussed in Northern’s office in Coral Gables, Florida.

Communico has filed a motion to dismiss the case on the ground of forum non conveniens, saying that the case should be litigated in El Salvador because the Agreement was to be performed there and most of Telemobile’s witnesses and documents are located in Latin America. Telemobile opposes this motion, saying that El Salvador does not recognize claims for unjust enrichment (no affidavit was presented on this point). However, El Salvador recognizes claims that are the equivalent of breach of fiduciary duty, fraud and breach of contract, and additional claims that are not available in Florida.

Discussion

            The plaintiff’s choice of forum must, first and foremost, be respected. A strong presumption exists in favor of such choice. This means that the burden of proving that the alternative forum is more convenient lies with the party seeking for the dismissal. A dismissal based on Forum non conveniens[2] will be granted only if the court finds that there is a compelling reason to allow such transfer of forum based on the Balancing of Conveniences Approach or the Kinney Factors.

Kinney System, Inc. v. The Continental Insurance Company, 674 So. 2d 86 (Fla. 1996). Under this test, the court must determine if:

• An adequate alternative forum exists which possesses jurisdiction over the whole case;
• All relevant factors of private interest favor the alternative forum, weighing in the balance of a strong presumption against disturbing plaintiff’s initial forum choice;
• The balance of private interests is at or near equipoise[3], the court further finds that factors of public interest tip the balance in favor of trial in the alternative forum; and
• The plaintiffs can reinstate their suit in the alternative forum without undue inconvenience or prejudice.

 An adequate alternative forum exists which possesses jurisdiction over the whole case.

In this case, the courts of El Salvador clearly has jurisdiction over the case because Telemobile is a corporation established under their laws. El Salvador also has jurisdiction over the subject matter because the Telemobile-Communico Agreement was performed exclusively in El Salvador.

All relevant factors of private interest favor the alternative forum, weighing in the balance of a strong presumption against disturbing plaintiff’s initial forum choice.

            The facts show that the material witnesses are in Latin America and the documents related to the Agreement are found in El Salvador. These factors show that undue inconvenience and expenses will be suffered by both parties if the case is allowed to continue in Florida. Furthermore, Telemobile’s reason for filing the case in Florida is because El Salvador does not award money claims for unjust enrichment but it is clearly shown that El Salvador allows other similar claims that may answer for the alleged damage caused by Communico, including claims that are not available under the laws of Florida.

Unlike the case of Telemundo Network Group, LLC., appellant, v. Azteca International Corporation, # 3D05-259 (2006), the Agreement between Telemobile and Communico did not contain a choice of forum clause. There existed a clause regarding the use of Luxembourg law as to the payment but nothing was said concerning the rest of the contract. In such case, the governing law would be that of El Salvador because this was where the contract was perfected and performed.

In Del Monte Fresh Produce Co vs. Dole Food Co., Inc. # 00-1171-CIV (2001), the court did not allow a forum non convenience dismissal because the alternative forum had no authority to decide on the case involving U.S. law. This case is different because the courts of El Salvador have the jurisdiction and authority to rule on the case because the contract was entered into and performed in El Salvador. The courts of El Salvador are in the best position to decide on the case based on El Salvadoran law.

The rule set forth in Corinthian Colleges v. Philadelphia Indemnity Insurance Company, # 4D05-2200 (2006) also does not apply to this case because that case involved purely questions of law while this case between Telemobile and Communico deals involves factual determinations, which have to be decided with the use of evidence mostly found in El Salvador and Latin America. Since El Salvador is closer to Guatamala, Columbia, Argentina and Costa Rica where four material witnesses reside, it would be reasonable to assume that acquiring the testimonies of these persons will be less costly if the case is decided by an El Salvadoran forum than having the case decided by a court in Florida.

All these factors show a strong need for the allowance of the dismissal. The analysis of private interests shows that both parties will be able to litigate more conveniently in El Salvador.

The balance of private interests is at or near equipoise; the court further finds that factors of public interest tip the balance in favor of trial in the alternative forum.

            A close look at the facts shows that the party-litigants have no reasonable connection with the State of Florida. The mere fact that both Telemobile and Communico are authorized to do business in Florida does not preclude the court from allowing a dismissal of the case due to forum non conveniens. The main question to be asked is “whether the case has a general nexus with the forum sufficient to justify the forum’s commitment of judicial time and resources to it.” Kinney System, Inc. v. The Continental Insurance Company, 674 So. 2d 86 (Fla. 1996).

            Technically, the State has jurisdiction over a case that involves two corporations licensed to do business in Florida. Nevertheless, the State has little interest in the outcome of the case because it involves the private interests of the parties pursuant to an El Salvadoran contract. Although Telemobile offers telecommunication services between El Salvador and Florida, the subject matter of the case basically involves a breach of contract which does not affect the State of Florida in any substantial manner that will justify the use of the State’s resources to decide the case.

The plaintiffs can reinstate their suit in the alternative forum without undue inconvenience or prejudice.

            There was no allegation that the re-filing of the case in El Salvador will cause undue inconvenience or prejudice to the parties. It is not necessary for the court to rule on a matter not raised before it.

Cases Cited:

Corinthian Colleges v. Philadelphia Indemnity Insurance Company, # 4D05-2200 (2006).

Del Monte Fresh Produce Co vs. Dole Food Co., Inc. # 00-1171-CIV (2001).

Kinney System, Inc. v. The Continental Insurance Company, 674 So. 2d 86 (Fla. 1996).

Telemundo Network Group, LLC., appellant, v. Azteca International Corporation, # 3D05-259

(2006).

[1] The Kinney Factors are the rules set forth in the decided case of Kinney System, Inc. v. The Continental Insurance Company, 674 So. 2d 86 (Fla. 1996) and later codified in the Florida Rule of Civil Procedure 1.061(a).

[2] Forum non conveniens is a common law doctrine addressing the problem that arises when a local court technically has jurisdiction over a suit but the cause of action may be fairly and more conveniently litigated elsewhere. Forum non conveniens also serves as a brake on the tendency of some plaintiffs to shop for the “best” jurisdiction in which to bring suit – a concern of special importance in the international context. (Kinney System, Inc. v. The Continental Insurance Company, p. 3).

[3] Equipose simply means that the advantages and disadvantages of the alternative forum will not significantly undermine or favor the “private interests” of any particular party, as compared with the forum in which the suit was filed. In sum, the competing private interests are substantially in balance in either forum (Kinney System, Inc. v. The Continental Insurance Company, p. 13).