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Litigation News

Litigation News | 2020

Court Errs by Reducing Deference to Americans' Forum Choice

William Howard Newman


  • Investing abroad does not reduce presumption in favor of domestic plaintiffs.
  • Leaders believe the decision is unlikely to dissuade businesses from transacting with Americans.
Court Errs by Reducing Deference to Americans' Forum Choice
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A domestic plaintiff is generally entitled to a presumption in favor of its chosen forum, and a trial court’s deference to that choice cannot be reduced solely because the dispute involves foreign investments, according to one federal appellate court. ABA Section of Litigation leaders believe the decision is unlikely to dissuade businesses from transacting with Americans.

District Court Had Reduced Deference Due to Foreign Investment

Citigroup, an American bank, provided cash advances, as well as trust and advisory services to Oceanografia S.A. de C.V. (Oceanografia), a Mexican oil drilling company. After Mexican bank regulators discovered that Citigroup’s cash advance program violated various Mexican laws, they criminally charged Citigroup employees for their role in the scheme. Thirty-nine plaintiffs, two of which were American, then sued Citigroup in Otto Candies, LLC v. Citigroup, Inc., alleging that they invested in or contracted with Oceanografia in reliance on Citigroup’s misrepresentations of Oceanografia’s financial condition.

Citigroup moved to dismiss the plaintiffs’ complaint on the ground of forum non conveniens, which allows courts to dismiss a case with proper jurisdiction and venue if another forum would be more appropriate. An American plaintiff’s chosen forum is typically presumed to be proper, while a foreign plaintiff receives “reduced deference” to its forum choice.

The U.S. District Court for the Southern District of Florida granted Citigroup’s motion, reasoning that “reduced deference” to the domestic plaintiffs’ forum was appropriate because the plaintiffs’ decision to invest in a Mexican company meant that they should have anticipated potentially litigating disputes abroad.

International Transactions Alone Do Not Justify Reduced Deference to Plaintiffs’ Forum

On appeal, the U.S. Court of Appeals for the Eleventh Circuit reversed and remanded. It held that the district court had incorrectly applied a standard of reduced deference based solely on the domestic plaintiffs’ foreign investment, and that “such a rule would be in tension with existing precedent.”

The appellate court explained that the plaintiffs did “not complain of conduct or injuries occurring primarily in Mexico.” Though Citigroup contended that the alleged fraud “was really perpetrated by Mexican entities in Mexico,” it failed to present any supporting evidence. Accordingly, the Eleventh Circuit reasoned that it was proper to presume that a trial in the U.S. between two American entities would be more convenient.

The Eleventh Circuit distinguished EIG Energy Fund XIV, L.P. v. Petróleo Brasileiro which the U.S. District Court for the District of Columbia had applied reduced deference to a dispute arising from the domestic plaintiffs’ foreign investment. It noted that the EIG court misread other precedent to hold that reduced deference applies in “disputes arising from international commerce.” The Eleventh Circuit observed that the cases EIG cited actually reduced deference because the alleged injuries occurred abroad, not because they concerned foreign investments.

The appellate court also rejected Citigroup’s argument that reduced deference should apply because foreign plaintiffs outnumbered domestic plaintiffs. It found no indication that the American plaintiffs had been added for the improper purpose of forum shopping. It did, however, note that a bifurcated analysis for foreign and domestic plaintiffs may be warranted in some instances.

Defendant Has Burden to Show that a U.S. Forum Is Inconvenient

By erroneously reducing deference to the plaintiffs’ forum choice, the Eleventh Circuit explained that the district court “switched the burden of persuasion and allowed Citigroup to obtain a forum non conveniens dismissal without presenting any evidence” on the factors for dismissal. This switch allowed Citigroup to prevail, even though a domestic defendant has a heavier burden to submit “positive evidence of unusually extreme circumstances” and “material injustice” to prevail on a forum non conveniens motion. It reiterated that the defendant still carries that burden even under a reduced deference standard for the foreign co-plaintiffs.

Accordingly, the appellate court concluded that, having opposed limited discovery, the defendant’s subsequent failure to submit any “positive evidence of private inconvenience” in an American forum meant it did not carry its burden. In particular, the Eleventh Circuit noted, though the defendant asserted generally that key witnesses and evidence were located in Mexico, it failed to identify any specific witnesses or records located there and how such evidence was important to the case.

Section Leaders Weigh In

“I don’t think the decision will have any significant impact on decisions about doing business in the U.S. or abroad,” observes Henry L. Parr Jr., Greenville, SC, cochair of the Section of Litigation’s International Litigation & Dispute Resolution CommitteeDavid L. Johnson, Nashville, TN, one of the leaders of the Section’s Business Torts & Unfair Competition Committee, agrees, noting that “it would be hard for an American company to be placed at an unfair disadvantage for being forced to defend a lawsuit on its home field.”

But because of this decision, defendants will “have a better idea as to the showing that is required,” Parr observes. However, some may still make a “tactical choice” not to disclose the location of important evidence early in a lawsuit since it would be “giving the plaintiffs a roadmap” for their defense, notes Bradford S. Babbitt, Hartford, CT, cochair of the Section of Litigation’s Commercial & Business Litigation Committee.