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Sixth Circuit Concludes That Just Because The United Nations Convention Against Corruption Requires That American Courts Be Available To Foreign Plaintiffs In Corruption Cases Does Not Mean “That Foreign States Win In Our Courts No Matter The Merits Of Their Arguments”

Judicial Decision

As highlighted in this prior post, in 2013 Stryker resolved a $13.2 million enforcement action based on alleged conduct in Mexico, Poland, Romania, Argentina, and Greece.

As to the Mexico conduct, the SEC found: “Between March 2004 and January 2007, Stryker’s wholly-owned subsidiary in Mexico (“Stryker Mexico) made three payments totaling more than $76,000 to foreign officials employed by a Mexican governmental agency (the “Mexican Agency”) responsible for providing social security for government employees. Stryker made these payments to win bids to sell its medical products to certain public hospitals in Mexico.”

In connection with this same conduct alleged in the 2013 enforcement action, in 2019 the Mexican government (specifically Instituto Mexicano del Seguro Social (IMSS) – the Mexican Social Security Institute) filed a complaint against Stryker in the U.S. District Court for the Western District of Michigan. (See here for the prior post).

Under the heading “Effect on IMSS and IMSS’s Damages From The Corporation” the complaint alleged:

“To obtain IMSS contracts, Stryker had to represent that it was complying with all IMSS’ requirements, including that no improper inducements were being made to obtain the contract. Stryker’s false, material statements and omissions to IMSS were fraudulent.

IMSS relied on Stryker’s false, material statements and omissions to consummate business transactions with Stryker.

IMSS’ reliance lasted longer than the bribes themselves. To obtain continued business with IMSS, Stryker had to represent that it had and would comply with Mexican law. Absent the false representations, IMSS would have been legally barred from contracting with Stryker. Therefore, IMSS relied on Stryker’s representations when approving contracts for the purchase of Stryker products well after the expressly illicit conduct […].

Stryker’s unlawful conduct harmed IMSS in numerous ways.

First, Stryker conspired with individual IMSS officials to damage IMSS.

Stryker induced the breach of fiduciary duties owed by IMSS officials as governmental officials and agents, and Stryker participated in, and profited from, those breaches.

Stryker bribed IMSS officials with funds culled from the profit that Stryker was reaping on IMSS contracts Stryker illegally obtained through bribery. The contract price, therefore, was inflated at least by the amount of the bribes. At a minimum, this amount represented economic harm to IMSS.

IMSS was damaged by the modification of IMSS’ purchasing requirements to serve Stryker’s, rather than IMSS’, needs.

Additionally, Stryker’s corrupt practices did violence to IMSS’ contracting process and IMSS’ ability to impartially evaluate potential medical device providers. Because the Stryker contracts were non-competitive as a result of the bribes, IMSS paid an artificially inflated price for the goods and services provided thereunder, resulting in lost opportunities for expenditures of those funds to address Mexican citizens’ healthcare needs in other areas. The effects of these harms have reverberated throughout the organization.

The scope of IMSS’ damages is also demonstrated by the amount of Stryker’s profit. Despite its bribes and other improper payments, Stryker was still able to engender excessive profits.

Pursuant to Mexican and United States law, Stryker’s breaches of the Mexican government procurement procedures voided Stryker’s contracts, and therefore, Stryker should be required to return all proceeds received from IMSS, retaining at most the actual production cost of the equipment it delivered.

Stryker actively concealed its illegal conduct.

Stryker also subverted the fiduciary duties of the IMSS officials responsible for ensuring that IMSS’ procurement procedures were followed. The same officials who should have challenged Stryker’s illegal conduct were the officials who received Stryker’s bribes. As a result, IMSS was unable to bring this lawsuit until the recent change in governmental administration.”

Based on the above allegations, IMSS asserted four claims against Stryker: (i) Inducement of, and Participation in, Breach of Fiduciary Duty; (ii) Fraud; and (iii) Violation of the Law of Acquisitions, Leases and Services of the Public Sector (under Mexican law); and (iv) breach of contract.

As highlighted in this prior post, in 2021 the court granted Stryker’s motion to dismiss based on the application of the doctrine of forum non conveniens (a doctrine that allows a federal court to decline jurisdiction – even though the court may indeed have jurisdiction – if the convenience of the parties and the court and the interests of justice indicate that the action should be tried in another forum).

Thereafter, IMSS appealed to the Sixth Circuit and argued that “the lower court’s dismissal of IMSS’ anti-corruption lawsuit on the basis of forum non conveniens was based on a number of errors.”

Recently, the Sixth Circuit affirmed the trial court’s dismissal on the ground of forum non conveniens. (See here for the opinion).

The Court summarized IMSS’s appellate arguments as follows.

“IMSS makes two primary claims on appeal: (1) that the [United Nations Convention Against Corruption] forecloses the application of forum non conveniens here, and (2) that the district court abused its discretion in dismissing for forum non conveniens.”

As to the first issue, the Court stated (certain internal citations omitted):

The Convention is a multinational treaty that attempts to unite its signatories against government corruption and encourages them to cooperate to root out such corruption. It was signed in December 2005 and ratified by the United States Senate shortly after. The relevant text of the Convention here is Article 53:

Each State Party shall, in accordance with its domestic law:

(a) Take such measures as may be necessary to permit another State Party to initiate civil action in its courts to establish title to or ownership of property acquired through the commission of an offence established in accordance with this Convention;

(b) Take such measures as may be necessary to permit its courts to order those who have committed offences established in accordance with this Convention to pay compensation or damages to another State Party that has been harmed by such offences; and

(c) Take such measures as may be necessary to permit its courts or competent authorities, when having to decide on confiscation, to recognize another State Party’s claim as a legitimate owner of property acquired through the commission of an offence established in accordance with this Convention.

IMSS uses Article 53 to ask us to do something no American court has ever done—to hold that the Convention generally prohibits federal courts from applying forum non conveniens when a foreign state sues alleging corruption. Its argument is rife with issues.

Start with the text of the Convention itself. IMSS argues that the Convention has plain language, binding on its signatories, that supersedes the doctrine of forum non conveniens. Not so. To be sure, the plain language of Article 53 requires that signatories “[t]ake such measures as may be necessary” for a foreign state to initiate an action. But those “measures” need only be taken “in accordance with [each signatory’s] domestic law[.]” Requiring that American courts be open to foreign states in cases that implicate the Convention does not require the alteration of established domestic legal frameworks that predate the Convention.

The district court did not take away IMSS’s ability to “initiate an action.” It looked at the specific facts at hand and determined that Mexico was a more adequate forum for the suit to be heard. IMSS has not lost the ability to vindicate its rights. To the contrary, it sued and had its arguments heard in the district court, precisely as the Convention requires. The requirement that American courts be available to foreign plaintiffs in corruption cases cannot be a requirement that foreign states win in our courts no matter the merits of their arguments. IMSS must play by the same rules as everyone else.

IMSS moves from the text of the Convention to selective quotations from the Senate Report discussing the Convention’s ratification. We are not convinced that legislative history has any relevance here. But if it were pertinent, that history would not support IMSS’s argument. The Senate Report does note that “Article 53 requires each Party to allow other Parties to bring civil actions in its courts to recover property and to enable courts to award damages . . . .” S. Exec. Rep. No. 109-18 at 5 (2006) (Senate Report). But the same report specifically states that the Convention does not create any private rights of action […] and explains that foreign claimants already had access to American courts before the Convention’s ratification. Indeed, the United States was “in compliance with Article 53” from the beginning. Thus, the Senate Report noted that the United States “does not construe [the Convention] to require broadening or enhancing current U.S. law and practice in any way.”

IMSS also neglects to mention that most of the Convention is explicitly non-self-executing. Id. at 10 (“The United States declares that the provisions of the Convention (with the exception of Articles 44 and 46) are non-self-executing.”). IMSS’s appeal is based on Article 53, not Article 44 or 46. And IMSS has identified no implementing statute that turns the Convention into binding federal law. So its argument that the Convention forecloses the application of forum non conveniens fails.

Even when a district court has jurisdiction and venue, it may decline to exercise jurisdiction under the common-law doctrine of forum non conveniens. We look to three factors in reviewing those decisions: “(1) whether an adequate alternative forum is available; (2) whether a balance of private and public interests suggests that trial in the chosen forum would be unnecessarily burdensome for the defendant or the court; and (3) the amount of deference to give the plaintiff’s choice of forum.” “[T]he central focus is convenience.”

Normally, “it makes sense to defer to a plaintiff’s choice of forum based on an assumption that the plaintiff knows its self-interest better than anyone else and thus will choose a convenient forum.” Deference is best viewed as a sliding scale. And a foreign plaintiff like IMSS receives less deference to its choice of forum. IMSS chose not to litigate in its home forum. In such a case, the “convenience [of the forum] cannot be presumed[.]”

that the district court abused its discretion in dismissing for forum non conveniens.”

As to the second issue – that the lower court abused its discretion in dismissing for forum non conveniens, the Court stated (certain internal citations omitted):

“IMSS argues that the district court abused its discretion by according its choice of forum little deference. Simply put, IMSS has sparse authority on its side. The district court considered both sides’ arguments and concluded that Stryker had the better of the arguments. That was not an abuse of discretion.

Even after deciding that IMSS’s choice of forum receives little deference, there must be an alternative forum in which the case can be heard. And such a forum must be “available and adequate.” We presume that a foreign court will be an adequate forum, only rendering it inadequate if a foreign legal system’s “procedures and idiosyncrasies” are “so clearly inadequate that forcing a plaintiff to bring suit there would be unjust.” A forum is “available” if the defendant is amenable to service of process there.

Mexican courts are adequate. IMSS cannot overcome the high bar to proving a forum inadequate. Nor does the Mexican agency try to do so: “IMSS, of course, does not question the competency or integrity of Mexico’s courts.” Instead, IMSS focuses its arguments on the availability of Mexican courts to hear the dispute.

IMSS argues that “Stryker failed to provide any proof on the availability of Mexican courts to hear IMSS’s claims against Stryker[.]” But Stryker provided an affidavit from its deputy general counsel stating that Stryker would submit to jurisdiction in Mexico and would not contest service of process there. IMSS does not contest that affidavit. And Stryker submitted two other affidavits, from Guillermo Iberio Ortiz Mayagoitia, a former Chief Justice of the Mexico Supreme Court of Justice, stating his beliefs that Stryker’s consent to jurisdiction would be honored in the Mexican courts and that there are many other proceedings available for IMSS to alleviate its concerns about the Mexican court system. We cannot then see how Mexican courts would be unavailable on this evidence.

IMSS counters that “Mexican courts are historically reluctant to judge the foreign parents of Mexican corporations” and thus contends that Mexican courts are not available. This is inapt. It confuses Mexican courts’ potential view of the merits with their availability to hear the dispute. The doctrine of forum non conveniens does not require that IMSS win in the alternative forum. It requires that the forum be adequate and available. And Mexican courts are both.

We finally examine “whether the plaintiff’s choice of forum is unnecessarily burdensome.” The Supreme Court set out a list of private and public interests to consider in Gulf Oil Corp. v. Gilbert, 330 U.S. 501 (1947). The private factors include access to evidence, mechanisms for ensuring participation of unwilling witnesses, costs of obtaining testimony from willing witnesses, opportunities to view the relevant premises, and other practical concerns such as cost and expeditiousness. The public factors include the respective governments’ interests in the dispute, the location of the injury, the condition of the involved court’s docket, the location of the governing law, hesitation to apply foreign law, and avoidance of conflict-of-law problems.

IMSS spends much of its brief arguing that the district court did not balance the interests correctly. But “it is not our role to rebalance the interests.” That “a different court may have given the factors different weight” does not mean that the district court’s balancing here was unreasonable.

IMSS argues that the district court erred in balancing the public interests. We disagree. The district court thoroughly considered administrative difficulties, local interests, and the unfairness of burdening citizens in an unrelated forum with jury duty. The district court also noted that it would likely have to apply Mexican law—two of IMSS’s four claims were brought “solely under Mexican law” and the other two were brought both under “Mexican and United States law.” The court therefore agreed with Stryker’s argument that the public interest factors favored dismissal because “[v]irtually all of the relevant acts—from allegedly paid bribes to IMSS officials, to alleged misconduct by a Mexican law firm—occurred in Mexico, and almost all of the alleged actors are in Mexico[.]”

Citing the Convention, IMSS argues that the district court “misjudged the United States’ interests” and erred by concluding that the “United States has little interest in this matter.” But the district court acknowledged the United States’ “interest in policing corporate activity and preventing bribery schemes such as the one alleged.” It simply found that Mexico’s interest here is greater. Indeed, contrary to IMSS’s assertions, it is hard to imagine that Mexico’s interest in this suit would be less than that of the United States. IMSS is an arm of the Mexican government. And it is alleging violations of Mexican law from activities that occurred in Mexico and were facilitated by bribes paid to Mexican government officials. Mexico would seem to have a greater interest than the United States in rooting out corruption in Mexico and enforcing Mexican law. So the district court’s balancing of the public interests in favor of Mexico to adjudicate the dispute was not an abuse of discretion.

Nor did the district court err in its balancing of the private interests. The district court thoroughly considered the relative ease of access to sources of proof, the availability of compulsory process for unwilling witnesses, the cost of obtaining attendance of willing witnesses, the possibility of viewing the premises, and practical concerns. It then concluded that the private-interest factors also favored dismissal. IMSS devotes little time in its brief to these considerations, presumably because the district court considered the necessary factors and merely weighted them differently than IMSS would have. Mexico is the location of IMSS, the government officials alleged to have accepted bribes, most relevant witnesses, and Stryker’s Mexican subsidiary. IMSS asserts that Mexican discovery processes are limited, but former Chief Justice Ortiz supported Stryker’s claims and noted that there are multiple other avenues by which IMSS could obtain that discovery, including through administrative proceedings and the obtaining of evidence by authorities investigating corruption. The record shows that the district court did not abuse its discretion in balancing these factors.”

In conclusion, the Court held:

“The Convention does not foreclose the application of forum non conveniens. And the district court did not abuse its discretion when it concluded that IMSS’s choice of forum receives little deference, that Mexican courts are available to hear this case, and that the public and private interest factors support Stryker. We affirm.”

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