The preparedness of U.S. courts to recognize foreign judgments, even those of its closest neighbors such as Mexico, is not unbounded. Exceptions exist, including the rule that a judgment that has been obtained by “fraud,” including bribery or corruption, will not be recognized. This article explores three recent cases involving Mexico in the general framework of U.S. uniform legislation on judgment enforcement.
Pegaso. The dispute in Transportes Aereos Pegaso, S.A. de C.V. v. Bell Helicopter Textron, Inc., 623 F. Supp. 2d 518 (D. Del. 2009), began with a foiled bid by Pegaso to win an aviation services contract with Pemex, Mexico’s state-owned oil company. Pegaso sued Bell in Mexico City Civil Court alleging breach of contract and claiming that Bell had improperly communicated with Pemex during the bid process. The court found in favor of Pegaso and proceeded to hear evidence on quantification. The parties’ reports from damages experts were $10 million apart. Confronted with this disparity, the court decided to appoint an “independent expert.” After the expert solicited a bribe from Bell, which Bell refused to pay, it emerged that the manner of this expert’s appointment was irregular. Mexican law “requires an independent expert to be appointed automatically, with no role for judicial discretion,” and also requires that independent experts be appointed “sequentially from a list maintained alphabetically” by last name. The facts showed that the statutory procedure was not observed in Bell’s case. The Mexican judge had selected the expert out of the “legally required order.”
The expert rendered a damages report that “not only agreed with Pegaso’s expert, but found an amount of damages, in excess of $16 million.” Pegaso filed a lawsuit in the U.S. district court in Delaware seeking recognition and enforcement of the Mexico judgment pursuant to Delaware’s version of the 1962 Uniform Foreign Money-Judgments Recognition Act. Bell cross-moved for summary judgment based on the fraud exception, claiming that the judgment was tainted by corruption. Bell submitted evidence from its Mexican counsel, attesting both to the solicitation of a bribe by the expert, as well as expert Mexican law evidence concerning the judge’ apparent deviation from strict statutory procedures in appointing the expert. Pegaso claimed that Bell had not met its evidentiary burden of affirmatively proving by “clear and convincing” evidence that fraud had actually occurred, but had merely succeeded in raising suspicion. The court rejected this argument, holding that under the 1962 Uniform Act, a party resisting judgment only needed to present enough evidence such that the court was not “satisfied” that the judgment “was not obtained by fraud.”
The Baja Cantina case. The Baja Cantina case, Hoffman v. Greene (In re Burke), 374 B.R. 781 (Bankr. D. Colo. 2007), aff’d, 2008 U.S. Dist. LEXIS 75586 (D. Colo. Sept. 29, 2008), grew out of a business dispute between two U.S. citizens, John Burke and Richard Greene, relating to the Baja Cantina, a business venture in Cabo San Lucas, Mexico. Greene brought civil proceedings against Burke in a Mexican court, alleging that the cantina’s assets had been misappropriated. One year later, a meeting of the parties took place before the Mexican judge, which led to a “settlement agreement” and “judgment” purportedly against Burke for $990,000. Greene came to state court in Colorado, seeking to have the Mexican judgment recognized and enforced. In his answer, Burke challenged the judgment as tainted by fraud. Burke filed for bankruptcy, and the validity of the Mexican judgment became an issue to be determined by a bankruptcy judge. By now, evidence had emerged not only of the procedural irregularities associated with the settlement, but also of stark corruption within the local Mexican court. Direct firsthand testimony was presented that “the judge presiding over the Mexican lawsuit was given a cash bribe and later became an attorney for Mr. Greene.” It also emerged that judgment was obtained in unusual circumstances. It was based on a “settlement agreement” that had been negotiated and executed “after hours” in the court. Before dealing with claims of fraud, the bankruptcy court addressed the governing legal standard. The court noted that Colorado’s version of the 1962 Uniform Act did not, by its terms, apply to the dispute because it only applied to judgments from a “foreign state” that had entered into a “reciprocal agreement” with the United States, which was not the case with Mexico, or “apparently any other country.” Nevertheless, the court held that Colorado courts were also empowered to “recognize a foreign judgment” under “common law” principles of “comity,” as set forth in the Supreme Court case of Hilton v. Guyot, 159 U.S. 113 (1895), and applicable in Colorado. The court further held that the Colorado common law grounds for “nonrecognition” of a judgment were “similar” to those stated in the 1962 Uniform Act, and thus included a fraud exception—an exception that was satisfied in that case.
De Manez Lopez v. Ford. In common with Pegaso and the Baja Cantina case, the case of de Manez Lopez v. Ford Motor Co. (In re Bridgestone/Firestone, Inc. Tires Prods. Liability Litig.), 470 F. Supp. 2d 917 (S.D. Ind. 2006), featured evidence of improper conduct involving Mexican court officials, resulting in a tainted judgment. But unlike in the first two cases, the suspect judgment were against the Mexican plaintiffs. And, bizarrely, it was those same Mexican plaintiffs who were attempting to have the judgment recognized in the U.S. courts—all in an effort to keep the case in the United States.
The plaintiffs in de Manez Lopez were the family members whose son was killed in Veracruz while driving a Ford when his left-rear Firestone tire allegedly separated from the tire back, causing the vehicle to roll over. His family sued Ford and Firestone in Texas, seeking damages for wrongful death. The action was transferred to the U.S. district court in Indiana. Ford and Firestone moved to dismiss the claim on forum non conveniens grounds, arguing that Mexico was a more appropriate forum to hear the claim. The court granted the motion. The family appealed to the Seventh Circuit. Normally, the Seventh Circuit noted, the case would be “an easy candidate for a straightforward affirmance,” given the “reasonableness” of the district court’s conclusions and the deferential appellate standard of review of forum non conveniens decisions; but the Seventh Circuit found a “wrinkle.” During the pendency of the appeal, it emerged that the plaintiffs had brought proceedings against the defendants in the courts of Morelos, only to have those claims dismissed. Essentially, the Morelos court found that it did not have personal jurisdiction over defendants. Based on this new evidence, the Seventh Circuit vacated the forum non conveniens dismissal and remanded the case to the district court to “thoroughly explore the circumstances surrounding the Morelos decisions.”
On remand, it emerged that the Morelos court’s decision was obtained through improper conduct and collusion, apparently in order to fraudulently manufacture a record that Mexico was not an adequate and available forum. The district court held that its analysis of the Morelos order was governed by federal common law, including Hilton, in which the Supreme Court held that a judgment could be refused recognition based on “fraud,” as well as the Seventh Circuit’s earlier decision: “for purposes of U.S. law a forum may not become unavailable by way of fraud.” The court also noted that, to the extent the procedural law of Texas (the state in which plaintiffs had commenced the case) was relevant, the Texas version of the 1962 Uniform Act would also permit recognition to be refused based on “fraud.” Applying these principles, the court had “no difficulty or hesitancy” in finding that the Morelos orders were not entitled to recognition.
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This article is an abridged and edited version of one that originally appeared on page 897 of The International Lawyer, Summer 2010 (44:2).
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